Richly Field China Development Limited - Proxy Solicitation & Information Statement 2007

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 you should take, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or otherwise transferred all your shares in United Pacific Industries Limited, you should at once pass this circular to the purchaser or the 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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(Stock Code: 00176)

website: http://www.irasia.com/listco/hk/upi/

MAJOR ACQUISITION OF MINORITY INTERESTS IN SPEAR & JACKSON, INC.

Adviser to United Pacific Industries Limited on Hong Kong Listing Rules requirements

CENTURION CORPORATE FINANCE LIMITED

A letter from the Board of Directors of United Pacific Industries Limited (“Company”) is set out from pages 4 to 19 of this circular.

15 November 2007

			Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		. . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD
1.	INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	4
2.	SUMMARY OF THE AGREEMENT AND PLAN OF MERGER . . .	. . . . . . . . . . . . . . . .	5
3.	FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	9
4.	REASONS FOR AND BENEFITS OF THE ACQUISITION . . . . . .	. . . . . . . . . . . . . . . .	9
5.	INFORMATION ON S&J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	10
6.	FINANCIAL AND TRADING PROSPECTS OF THE UPI GROUP .	. . . . . . . . . . . . . . . .	13
7.	FINANCIAL EFFECTS OF THE ACQUISITION . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	15
8.	SPECIAL GENERAL MEETING OF S&J . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	16
9.	LISTING RULES IMPLICATIONS . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	16
10.	ARTICLES OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	17
11.	DISSENTER’S RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	18
12.	INFORMATION ON THE COMPANY . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	18
13.	FURTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	19
APPENDIX I — FINANCIAL INFORMATION ON UPI GROUP		. . . . . . . . . . . . . . . .	20
APPENDIX II — FINANCIAL INFORMATION ON S&J GROUP		. . . . . . . . . . . . . . . .	79
APPENDIX III — MANAGEMENT DISCUSSION AND ANALYSIS
	RELATING TO S&J GROUP . . . . . . . . . . . . .	. . . . . . . . . . . . . . . .	134
APPENDIX IV — PRO FORMA FINANCIAL INFORMATION . . .		. . . . . . . . . . . . . . . .	151
APPENDIX V — GENERAL INFORMATION . . . . . . . . . . . . . . . .		. . . . . . . . . . . . . . . .	156

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DEFINITIONS

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

“Acquisition”

the acquisition by the Company of the outstanding 38.2% minority interests in S&J by cash merger of S&J with and into PGAC pursuant to, and in accordance with, the Agreement;

“Agreement”

the Agreement and Plan of Merger dated 22 June 2007 by and among the Company, PGHL, PGAC, and S&J in respect of the acquisition and merger more fully described in this circular;

“Announcement”
the announcement of the Company dated 5 July 2007 in respect of the Acquisition;
“associate”

“associate” has the same meaning ascribed to it in the Listing Rules; “Board” the Board of Directors of the Company for the time being; “Capitalink” Capitalink LLC, the independent financial adviser of S&J; “Closing” the closing in respect of the Acquisition;

“Closing Date” 18 October 2007;

“Company” or “UPI” United Pacific Industries Limited, a company incorporated in Bermuda with limited liability and listed on the Main Board of The Stock Exchange of Hong Kong Limited (Stock Code: 176);

“Directors” the Directors of the Company for the time being;
“Enlarged Group” the UPI Group and S&J Group after the Closing;
“HK GAAP” generally accepted accounting principles as stipulated by the Hong Kong Institute of Certified Public Accountants from time to time;
“Hong Kong” Hong Kong, Special Administrative Region of the PRC;
“Investor (Guernsey) II Ltd” a substantial UPI Shareholder holding approximately 13.43% of the Shares;
“Latest Practicable Date” 12 November 2007, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein;
“Listing Rules” the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited;

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DEFINITIONS

“Merger”	the statutory merger under Nevada laws of S&J with and into	the statutory merger under Nevada laws of S&J with and into
	PGAC pursuant to, and in accordance with, the Agreement
	and applicable Nevada laws;
“Merger Consideration”	the sum of US$1.96 (approximately HK$15.30) in cash per
	Minority Share, without interest;
“Minority Shareholders”	the shareholders of S&J holding the Minority Shares;
“Minority Shares”	the remaining approximately 38.2% of outstanding S&J
	Shares which are not held by the Company;
“Mr Beazer”	Brian C Beazer, the Chairman of the Company	and a
	substantial UPI Shareholder holding approximately 24.56% of
	the Company;
“Mr Clarke”	David H Clarke, a Vice Chairman of the Company	and a
	substantial UPI Shareholder holding approximately 22.88% of
	the Company;
“Pantene Group”	UPI, excluding the S&J Group;
“PGAC”	Pantene Global Acquisition Corp., a special purpose Nevada
	corporation formed in 2007 as a direct wholly-owned
	subsidiary of PGHL to effect a merger with S&J;
“PGHL”	Pantene Global Holdings Limited, a special purpose company
	incorporated in Hong Kong in 2006, and a direct wholly-
	owned subsidiary of the Company, which held 61.8%	of S&J
	acquired in the VSA;
“S&J”	Spear & Jackson, Inc., a Nevada corporation whose	shares
	were registered under the Exchange Act, and a	61.8%
	partially-owned subsidiary of the Company as at the date of
	the Agreement;
“S&J Group”	S&J, its subsidiaries and associates;
“S&J Shareholders”	the shareholders of S&J;
“S&J Shares”	the common stock of S&J of US$0.001 par value per	share;
“S&J UK”	the UK subsidiaries of S&J, including Spear & Jackson plc,
	Bowers Group plc, and their respective subsidiaries;
“SEC”	the U.S. Securities and Exchange Commission;
“Shares”	ordinary shares of HK$0.10 each in the share capital	of the
	Company;

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DEFINITIONS

“Shareholders”	the shareholders of the Company;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“UPI Group”	UPI, its subsidiaries and associates;
“UPI Shareholders”	the shareholders of the Company;
“USFAS”	United States Financial Accounting Standards;
“U.S. GAAP”	generally accepted accounting principles applicable in the
	U.S.;
“VSA”	the very substantial acquisition by the Company of a 61.8%
	equity interest in S&J which closed on 28 July 2006;
“GBP” or “£”	British Pound, being the lawful currency of the United
	Kingdom;
“HK$”	Hong Kong Dollar, being the lawful currency of Hong Kong
	Special Administrative Region, PRC; and
“US$”	US Dollar, being the lawful currency of the United States of
	America.

For the purpose of illustration only, throughout the general information section of this circular currency translations have been made using the following rates of exchange:

US$1 = HK$7.80 £1 = HK$15.80

The financial data of the S&J Group presented in the Appendices to this circular has been translated into Hong Kong dollars at the relevant historic rate.

No representation is made that any amounts in US$, £ or HK$ could have been or can be converted at that rate or at any other rate or at all.

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LETTER FROM THE BOARD

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(Stock Code: 00176)

website: http://www.irasia.com/listco/hk/upi/

Executive Directors:

Brian C Beazer, Executive Chairman David H Clarke, Executive Vice-Chairman Simon N Hsu, Executive Vice-Chairman

Non-executive Director: Teo Ek Tor

Independent non-executive Directors: Dr. Wong Ho Ching, Chris Henry W Lim Ramon Sy Pascual

Registered office: Clarendon House Church Street Hamilton, HM 11 Bermuda

Head Office and Principal Place of Business in Hong Kong: Unit 2705-6 Vicwood Plaza 199 Des Voeux Road Central Hong Kong

15 November 2007

To the Shareholders of the Company

Dear Shareholders,

MAJOR ACQUISITION OF MINORITY INTERESTS IN SPEAR & JACKSON, INC.

1. INTRODUCTION

The Directors announced on 5 July 2007 that the Company, Pantene Global Holdings Ltd, a Hong Kong corporation and wholly-owned subsidiary of the Company, and Pantene Global Acquisition Corp., a Nevada corporation and a wholly-owned subsidiary of PGHL, had entered into an agreement and plan of merger dated 22 June 2007 with S&J to acquire the remaining 38.2% of the outstanding shares in S&J not already owned by the Company, and thereafter to merge S&J with and into PGAC, with PGAC surviving the merger. The merger consideration is US$1.96 (approximately HK$15.30), without interest, to be paid in cash for each Minority Share, amounting to an aggregate of approximately US$4.3 million (approximately HK$33.5 million) for all Minority Shares.

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LETTER FROM THE BOARD

Pursuant to Rule 14.44 of the Listing Rules and with the consent of the Stock Exchange, in lieu of a general meeting to seek shareholders’ approval, the Company obtained written approval for the Agreement and the transactions contemplated therein in September 2007 from UPI Shareholders who hold in aggregate approximately 60.9% of Shares.

The Directors further announced on 22 October 2007 that the approval of UPI Shareholders and S&J Shareholders, respectively, having been obtained, Articles of Merger were filed in the office of the Nevada Secretary of State, and the Merger had become effective, on 18 October 2007.

With this Acquisition, the Company achieved full equity ownership of S&J, having acquired a controlling stake of 61.8% in S&J from Jacuzzi Brands, Inc. on 28 July 2006 in an acquisition which constituted a very substantial acquisition of the Company, and which was unanimously approved by independent shareholders of the Company at a special general meeting held on 28 July 2006.

The purpose of this circular is to provide Shareholders further information on the Acquisition.

2. SUMMARY OF THE AGREEMENT AND PLAN OF MERGER

Date 22 June 2007

Parties (i) The Company, being the ultimate parent of wholly-owned subsidiaries, PGHL and PGAC;

(ii) PGHL; (iii) PGAC; and (iv) S&J.

The integration of certain of the operations of the UPI Group and the S&J Group following the VSA in July 2006 resulted in sharing of certain personnel resources between the Company and the S&J Group. Mr Patrick J Dyson, the CFO of S&J, became the CFO of the enlarged UPI Group and accepted appointment as Chairman and Company Secretary of S&J. Mr Lewis Hon Ching Ho, the general manager of Pantene Electronics (Hangzhou) Co. Ltd., a wholly-owned subsidiary of UPI, accepted appointment as a director and Chief Administrative Officer of S&J. Mr Brian C Beazer, the Chairman of the Company, was also the Assistant Treasurer of S&J, and Ms Nila Ibrahim was appointed General Counsel of the Company and of S&J.

The Agreement, however, was negotiated on an arm’s-length basis between representatives of the Company and Dr J. Preston Jones, the sole independent director of S&J and the sole member of its independent Finance Committee. The other directors of S&J were Mr Patrick J Dyson and Mr Lewis Hon Ching Ho. The Board of S&J and its Finance Committee were advised by U.S. legal counsel, special Nevada counsel, and Capitalink as financial adviser, in connection with the Merger. The Company was separately represented by U.S. counsel and special Nevada counsel, but did not appoint a financial adviser.

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LETTER FROM THE BOARD

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiry, apart from Mr David H Clarke, the Executive Vice Chairman of UPI, who had an insignificant holding of 28,350 S&J Shares, representing approximately 0.49% of the outstanding S&J Shares, the Minority Shareholders and their respective ultimate beneficial shareholders were third parties independent of the Company and its connected persons.

The Merger

Under the Agreement, S&J would be merged with and into PGAC with PGAC as the surviving corporation, pursuant to and in accordance with Nevada laws. Thereupon, S&J would cease to exist while PGAC would continue the operations of S&J as a private company and a wholly-owned subsidiary of PGHL.

On consummation of the Merger, all S&J Shares would be cancelled. S&J Shares held by non-dissenting Minority Shareholders would be converted into the right to receive the Merger Consideration without interest. Minority Shareholders who validly exercised and perfected dissenter’s rights under Nevada law would receive such consideration for S&J Shares they own as may be determined to be due under Nevada law, but this would not affect the amount paid or to be paid to the non-dissenting Minority Shareholders. S&J Shares held as treasury stock at the effective time of the merger and S&J Shares held by PGHL would be canceled without payment.

Merger Consideration

The merger consideration is US$1.96 (approximately HK$15.30) in cash, without interest, for each Minority Share. On this basis, the aggregate consideration for all Minority Shares is US$4,269,869 (approximately HK$33,515,577).

The consideration was agreed after active and lengthy negotiations on an arm’s-length basis between the independent Finance Committee of S&J and the Company’s representatives. The Company considered a number of factors, principally, the Board’s continuing positive views of the business prospects of the S&J Group; the Board’s business judgment as to the future value of S&J, taking into consideration various factors, including successful realization of potential synergies between S&J and other subsidiaries of UPI; the financial interests of the UPI Shareholders; the premium payable to consolidate control; the share price of S&J Shares which traded between US$0.95 — US$1.50) (approximately HK$7.40 — HK$11.70) in the 52 weeks immediately preceding the date of the Agreement; the fact that the gross asset value of S&J was approximately US$83.3 million (approximately HK$650 million), the gross asset value attributable to the 38.2% minority interests was approximately US$31.8 million (approximately HK$247.6 million), and further, the fact that the net asset value of S&J was approximately US$21.8 million (approximately HK$169 million), representing a net asset value of approximately US$3.81 (approximately HK$29.52) per share, but taking into consideration the pension deficit and contingent liabilities associated with S&J’s defined benefit pension plan, all as reflected in S&J’s audited accounts in respect of the financial year ended 30 September 2006, and the fact that a consideration of US$1.96 (approximately HK$15.30) per share in cash would be supported by Capitalink, as being fair to the Minority Shareholders from a financial point of view. The aforesaid gross assets and net assets of US$83.3 million and US$21.8 million of

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LETTER FROM THE BOARD

S&J, if presented under HK GAAP, would be US$83.2 million (approximately HK$649 million) and US$10.4 million (approximately HK$81.1 million) respectively. These amounts presented under HK GAAP were provided for reference only as they were not part of the bases for considering the Merger Consideration.

The Merger Consideration represents:

(i) a premium of approximately 92% over the US$1.02 (approximately HK$7.96) closing sale price for the S&J Shares on 14 May 2007, the trading day immediately preceding S&J’s announcement in Form 8K filed with the SEC of the Company’s initial offer of US$1.483 (approximately HK$11.57) per share,
(ii) a premium of approximately 32% over the US$1.48 (approximately HK$11.54) closing sale price for S&J Shares on each of the five trading days preceding 14 June 2007, the day the Finance Committee of S&J determined to recommend that S&J’s Board of Directors approve the Merger under the Agreement, and
(iii) a premium of approximately 82% over the $1.08 (approximately HK$8.42) average closing sale price for the S&J Shares from 28 July 2006 when the Company first acquired the controlling block of 61.8% of S&J Shares, through 14 May 2007, the day immediately preceding the first announcement in Form 8K of the Company’s bid at US$1.483 (approximately HK$11.57).

The Board is of the view, having taken into consideration the risks and potential benefits associated with the Acquisition, that the Merger Consideration is fair and reasonable and in the interests of the Company and UPI Shareholders as a whole.

Conditions Precedent

The Agreement and the Merger are subject to a number of conditions precedent, the material conditions of which are summarised as follows:

(i) SEC approval of Proxy Statement (circular to shareholders) to be provided by S&J to S&J Shareholders;
(ii) approval by a majority of the UPI Shareholders;
(iii) approval by a majority of the S&J Shareholders, including the Company as beneficial owner through PGHL;
(iv) the opinion dated 14 June 2007 of Capitalink L.C., as independent financial adviser to S&J regarding the fair value of the S&J Shares from a financial point of view, not being withdrawn or modified in any material respect;
(v) the S&J Board not modifying or withdrawing their recommendation to S&J Shareholders to vote in favour of the Merger;

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LETTER FROM THE BOARD

(vi) no material adverse change shall have occurred which affects the business operations, financial condition or results of the S&J Group as a whole since the date of the Agreement; and
(vii) no court or Government body having jurisdiction over the parties or the transaction shall have issued any order or created any legal impediment which delays the Closing.

As at the Closing Date, all the conditions precedent have been satisfied or waived by the party entitled to the benefit thereof.

Closing

Under the Agreement, the Closing was to take place no later than the second business day after all conditions precedent are satisfied or waived by the party entitled to the benefit thereof. Prior to the closing date, the Company was required to deposit the aggregate amount of the Merger Consideration for all Minority Shares with a reputable bank or trust company reasonably acceptable to S&J to act as paying agent to distribute the Merger Consideration in exchange for S&J Shares to be submitted by the Minority Shareholders. At the Closing, S&J would deliver to the Company the duly signed Articles of Merger, as required under Nevada law. The Merger would become effective upon filing of the Articles of Merger with the office of the Nevada Secretary of State.

In fact, as the Merger had become effective as of 18 October 2007, it is the intention of the Company to consolidate its enlarged 100% holding in S&J as at 30 September 2007, subject to the agreement of the Company auditors, thereby eliminating the outstanding minority interest of 38.2% in S&J. Previously, in the financial statements of UPI for the six month periods ended 30 September 2006 and 31 March 2007, the Company had consolidated its 61.8% holding in S&J and had correspondingly made appropriate adjustments to reflect the remaining minority interest of 38.2% in S&J.

Appraisal Rights of Dissenting Minority Shareholders

Minority Shareholders are entitled to certain appraisal rights if they are dissatisfied with the Merger Consideration, as provided in Sections 92A.300 to 92A.500 of the Nevada Revised Statutes which specify rights and duties, and procedures to be followed by parties to the dispute.

Termination

The Agreement may be terminated by mutual agreement, or by either party if Closing has not occurred by 31 December 2007, or if the Merger is prohibited by order of court of Government body having jurisdiction over the matter, or if approval of the respective shareholders of S&J and UPI is not timely obtained.

The Agreement may be terminated by the Company unilaterally for a number of reasons, principally (a) withdrawal by the S&J Board of its recommendation to shareholders to vote in favour

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LETTER FROM THE BOARD

of the Merger; (b) the S&J Board recommending a competing and superior bid; (c) a third party makes a tender offer (for cash or exchange of shares) for S&J Shares and the S&J Board does not timely recommend rejection of the tender bid, or (d) if S&J is in breach of its representations, warranties or undertakings.

The Agreement may be terminated by S&J unilaterally if (a) the S&J Board withdraws its recommendation of the Merger to S&J Shareholders in the face of a competing and superior offer being made for the Minority Shares, or (b) the Company is in breach of its representations, warranties or undertakings.

3. FINANCING

The Company has obtained full financing for the Acquisition from Orix Asia Limited, a restricted license bank in Hong Kong, through an acquisition loan facility for a principal amount of HK$43 million. The loan agreement with Orix Asia Limited is on normal commercial terms.

4. REASONS FOR AND BENEFITS OF THE ACQUISITION

The Group, through its wholly-owned operating subsidiary, Pantene Industrial Co. Limited, has traditionally focused on contract manufacturing or OEM (original equipment manufacturer) services, in particular, the design and manufacture of power supply products, and electrical and electronic components. The Pantene Group has manufacturing plants in southern China, sourcing and service office in Hangzhou, Mainland China, sales and service office in Chicago, USA, and maintains a presence in Europe. However, the Group is increasingly diversifying and moving towards ODM (own design manufacturer) and OBM (own brand manufacturer) operations, and actively exploring other synergistic operational arrangements with S&J.

The Board believes that the Merger could advance the realization of potential operational synergies with S&J which could provide the economic and operating backbone for a sustained expansion of the Company’s business in the future. Since the Company’s acquisition of a controlling stake in S&J in July 2006, Pantene and S&J have been actively pursuing a number of cooperative arrangements: the Board believes acquiring full control of S&J will facilitate realization of these potential synergies and achieve other cost savings, including the following:

• Strengthen the Group’s position in the global marketplace

The Group will be able to:

Have full ownership of specialty and recognized brand name product lines that will provide growth opportunities.
Be a vertically integrated, low-cost manufacturer, owning well-known brands, with the scale, cost structure and people to compete globally.
Set up a global procurement centre for the Group and increase its bargaining power in sourcing for materials.

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LETTER FROM THE BOARD

Enjoy a global position and specialty product lines that will provide growth opportunities.

• Privatisation of S&J to reduce compliance costs

S&J will be privatized and will cease to be subject to costly reporting and other disclosure obligations under the U.S. Securities Exchange Act of 1934 (as amended) and U.S. Sarbanes Oxley Act of 2002.

• Reduce corporate overheads

The Company will also be able to streamline its organisational structure and thus reduce its overall corporate overhead costs, resulting in a lower fixed cost base. In an increasingly globalised marketplace, such cost savings will help the Company to remain competitive.

• Achieve operational efficiencies

With the consolidation of control of S&J, the Company will be able to share engineering, and management expertise freely between its UK-based and Asia-based operations, and seek to achieve operational excellence with a more efficient management structure.

For the above reasons among others, the Company believes that the Merger could help to establish UPI as a worldwide business, better able to serve all its customers.

The Board, including the independent non-executive directors, believes, having taken into consideration the risks and potential benefits associated with the Acquisition, that the terms of the Agreement are fair and reasonable and in the interests of the Company and UPI Shareholders as a whole.

5. INFORMATION ON S&J

(A) S&J

S&J was a company incorporated under the laws of Nevada. Its shares were registered under the U.S. Securities Exchange Act of 1934 and were publicly traded in the U.S. in the Over the Counter (OTC) market on Pink Sheets under the trading symbol “SJCK-PK”.

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LETTER FROM THE BOARD

The net profits/(loss) (both before and after taxation and extraordinary items) of Spear & Jackson for the two financial years ended 30 September 2006 and 2005 are set out in the following table. The information is extracted from the annual report of S&J filed in Form 10-K with the SEC in respect of its last financial year ended 30 September 2006. Based on a pro rata allocation, the net profits/(loss) attributable to the 38.2% minority interests which are the subject of the Acquisition are shown in the second column in respect of each year.

For year ended For year ended 30 September 2006 30 September 2005 Attributable to Attributable to Attributable to 38.2% Minority Attributable to 38.2% Minority 100% Interests 100% Interests US$’000 US$’000 Income/(Loss) from (6,707) (2,562) 2,034 777 continuing (approximately (approximately (approximately (approximately operations before HK$52.4 million) HK$20.0 million) HK$15.9 million) HK$6.1 million) unusual or infrequent items and income taxes Net income/(Loss) (6,479) (2,475) 3,095 1,182 after taxation and (approximately (approximately (approximately (approximately extraordinary (HK$50.7 million) HK$19.3 million) HK$24.2 million) HK$9.2 million). items

Notwithstanding the fact that S&J incurred a loss before unusual or infrequent items and income taxes and after taxation and extraordinary taxes for the year ended 30 September 2006, the Board believes that S&J management has put corrective strategies in place and consequently that the Merger should proceed as proposed. Certain plants have already been closed and the production moved to Asia, thus accelerating the trend towards greater cost efficiency. This, coupled with new products and a greatly improving balance sheet, support the Board’s decision.

Board of Directors

There are currently three directors on the board of S&J. They are Mr Patrick J Dyson, chairman of S&J and CFO of the UPI Group, Mr Lewis Ho Hon Ching, a general manager in the UPI Group, and Dr Preston Jones, an independent director appointed on 17 April 2007.

Dr Jones is the sole member of the independent Finance Committee of the S&J Board to whom the S&J Board delegated authority to analyse, review, and negotiate the Agreement, and to make a recommendation to the S&J Board whether to accept or reject the proposal. The Finance Committee recommended that the S&J Board recommend the Merger to S&J Shareholders.

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LETTER FROM THE BOARD

The S&J Board is advised by independent financial advisers, Capitalink L.C., U.S. counsel, Arnstein & Lehr LLP, and special Nevada counsel, Kummer Kaempfer Bonner Renshaw & Ferrario, on the Merger.

SEC Enforcement Proceedings and Shareholders’ Litigation

On 15 April 2004, the SEC filed suit in the U.S. District Court for the Southern District of Florida court against S&J, its then Chairman/CEO, and others alleging violations of federal securities laws. On 15 February 2005, the court approved a negotiated settlement with the SEC, without any admission of liability by the parties. S&J consented to a permanent injunction from violation of various provisions under federal securities laws.

Following the SEC action, S&J was named as one of the defendants in actions in federal district court by certain shareholders of S&J. These actions were consolidated in a shareholders’ class action in federal court in Florida (“Class Action”). The Class Action was settled by the Company and other defendants and a final order issued by the court on 11 May 2007 which permanently enjoins any further action against S&J and the settling defendants arising from the same set of circumstances.

On 6 September 2005, S&J was served with a Shareholder Derivative Complaint filed on 1 June 2004 in the Circuit Court for Palm Beach County, Florida (Case No. CA005068)(“Derivative Action”) by certain shareholders in state court in Florida against certain former and current directors and officers of S&J, and naming S&J as a nominal defendant. The complaint alleges state law claims, and breaches of fiduciary duty, among others. The Derivative Action was settled by S&J and certain defendants and a final order issued by the court on 29 May 2007 which permanently enjoins any further action against S&J and the settling defendants arising from the same set of circumstances. However, as the action continues against a non-settling defendant, S&J remains involved as a defendant in name in this Derivative Action.

(B) Spear & Jackson UK

Business

S&J operates principally through the UK sub-holding companies, Spear & Jackson plc and Bowers Group plc. The business of S&J UK is broadly divided as follows:

Tools Neill Tools and Spear & Jackson Garden tools manufacture and market hacksaws, garden and hand tools under own brand names together with Robert Sorby who specializes in high quality woodworking equipment.
Magnetics Eclipse Magnetic’s key products are magnetic tools, ranging from technically complex high value added systems to simple low-cost items.
Metrology/Measurement Moore & Wright and Bowers Metrology offer core products which range from high specification metrology instruments to hand held gauges for checking the threads, diameters and tapers of machined components.

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LETTER FROM THE BOARD

Pension

S&J UK offers a defined benefit pension plan to certain employees. The pension plan is currently underfunded. The Company, as controlling shareholder, assumes certain pension liabilities if the underfunding is not corrected. The Company believes that, under current UK pension law, any other person acquiring 30% or more of the equity in S&J, may also be required to contribute to the pension fund under certain circumstances.

In the previous agreement between S&J and the pension plan’s trustees that came to an end on 31 July 2007, employer contributions were fixed at GBP 1.9 million (approximately HK$29.7 million) per annum. In July 2007 S&J reached an interim arrangement with the Plan’s actuaries and trustees whereby it was agreed that the S&J would continue to make annual contributions of GBP 1.9 million (approximately HK$29.7 million) following a one-time special contribution of GBP 1 million (approximately HK$15,800,000) that was paid on 1 August 2007. This interim arrangement is subject to change pending further discussions between S&J and the Plan trustees.

The Company acquired a controlling stake of approximately 61.8% of the outstanding S&J Shares in the VSA which closed on 28 July 2006. Thereafter, the accounts of S&J, after exclusion of the relevant minority interests, have been included in the consolidated accounts of the Company.

6. FINANCIAL AND TRADING PROSPECTS OF THE UPI GROUP

The year to 30 September 2007 has been a year of consolidation during which time the Company’s ownership of 61.8% of S&J has been further integrated into the Company. The Company’s circular dated 13 July 2006 in connection with the VSA made reference to the desirability to acquire the S&J Shares held by Minority Shareholders. Pursuant to the Agreement, the Company acquired the remaining 38.2% of the outstanding S&J Shares, and with this acquisition, the Company achieved full ownership of S&J.

Financial Prospects

The Balance Sheet of the Enlarged Group has improved and has been enhanced by the reduction of the liability relating to S&J’s defined benefit pension plan. With this improved Balance Sheet the Board intends to seek opportunities to strengthen our operations and seek further acquisitions and investments with a view to building value for our shareholders.

Trading Prospects

The Enlarged Group is organized in four major divisions. The trading prospects of each division are described below.

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LETTER FROM THE BOARD

Contract Manufacturing

This is led by Pantene Industrial Company Limited. In the financial year 2008, to improve The Pantene Group competitiveness and profitability, efforts will continue to be made to

Rationalize the customer base, streamline the product range and seek higher value added products to optimize existing resources and current facilities;
Improve supply chain and logistics management to improve on-time delivery to customers and to lower inventory; and
Upgrade engineering and factory process capability to embark on new product ranges as low-value added products are outphased.

It is recognised that in 2008, The Pantene Group will continue to trade in a very competitive environment with thin margins which we anticipate will continue to be eroded by the weakening dollar, rising labour costs and costs of raw materials and utilities.

Hand and Garden Tools

This is led by Neill Tools, whose business has gone through a major restructuring program during 2006 and 2007. The main driver has been to reduce its operating cost base, re-align its employee skill base to provide a platform for sustainable growth moving forward. In quarter one of fiscal 2007, the garden tool plant (140-employees) was closed, and the manufacturing and assembly functions formerly carried out at this site were outsourced to overseas suppliers based in India and elsewhere. It is anticipated that this reorganization will reduce annual business costs by £800,000 (approximately HK$12,640,000).

New product development continues to be a key strategic driver and going forward the main challenges will be to reduce the manufacturing cost base and driving innovation and new product development in line with core brands and competences.

Neill Tools has successfully generated income from the UK by franchising the equity within the “Spear & Jackson” brand. It expects to generate in the region of £200,000 (approximately HK$3,160,000) of income in 2008 from further franchising opportunities with two major UK retail chains.

Magnetics Products and Services

This is led by Eclipse Magnetics. This division has completed its outsourcing program in relation to its standard-based products comprising approximately 65% of turnover. Reducing its manufacturing base in the UK allowed Eclipse Magnetics to relocate the business to the main S&J UK manufacturing site at Atlas Way during November 2006. As a result of these business changes, Eclipse Magnetics has reduced its fixed costs and now expects to achieve an improvement in operating profit, notwithstanding the increasing pressure on margins by the rising costs of primary materials, such as cobalt, nickel and neodymium, which have increased by over 50% in 2007.

— 14 —

LETTER FROM THE BOARD

Metrology and Measuring Instruments

This division is centered on the Bowers Group. Despite competitive pressures the business has remained buoyant in the year. In the division’s core 3-point bore gauge business, the main issue has been the strain on manufacturing capacity of the operation’s production plant in Bradford, England, where the order book has shown a ten-week backlog. Two of the largest orders in the Company’s history have been received in the last quarter of financial 2007, one from a major customer in the USA for hardness testing products sourced from China, and one from a large Sheffield based company in the UK for a mix of manufactured and factored products. The latter is a result of a significant insurance claim following severe flooding in the Sheffield area of the UK in June 2007.

Summary

All four divisions are trading in highly competitive and changing market circumstances. Major challenges relate to the rising cost of raw materials and other items, effective logistical control over numerous components and continuing strong competition from our worldwide competitors. We seek to meet these challenges by launching new products, improving the efficiency of our operations and by our ability to react in line with the changing market environment.

7. FINANCIAL EFFECTS OF THE ACQUISITION

(a) Assets

Based on the unaudited balance sheet of the Group as at 31 March 2007 as set out in Appendix IV to this circular, the pro forma financial effect of the Acquisition on such balance sheet is that although total assets remain unchanged at approximately HK$1,240 million on an Enlarged Group basis, net assets attributable to Shareholders will increase by approximately HK$39.2 million (15.9%) from approximately HK$247.3 million to approximately HK$286.5 million. This increase in net assets attributable to Shareholders represents the net impact on the consolidated financial statements of the Group of the elimination of minority interests of HK$82.2 million less the bank loan of HK$43.0 million taken out to finance the Acquisition. In view of such pro forma statement, the Board is of the view that the Acquisition will have a positive impact on the net assets attributable to Shareholders following Closing.

(b) Earnings

The UPI Group recorded an audited consolidated net profit after tax attributable to the equity holders of the Company of approximately HK$19 million for the 6-month period ended 30 September 2006. This profit is stated after the inclusion of HK$26 million relating to the discount on acquisition on the purchase of the 61.8% interest in S&J in July 2006, and incorporated two months of the financial results of S&J. The S&J Group recorded an audited loss from continuing operations, after the provision for income taxes, of approximately US$2.5 million (approximately HK$19.5 million) for the year ended 30 September 2006. This loss is stated after one-time costs in connection with legal settlements and deferred tax write-offs of US$3.6 million (approximately HK$28 million). Given the

— 15 —

LETTER FROM THE BOARD

track record, earnings ability, distribution network and customer base of the S&J Group, and the full consolidation that will be achieved by the UPI Group from the Acquisition, without any elimination for minority interests, the Acquisition is expected to improve the earnings of the Enlarged Group in the future.

(c) Liabilities

As 30 September 2006, the UPI Group’s net gearing ratio (bank overdraft, loans and borrowings less cash balances held expressed as a percentage of shareholders’ funds) was nil as the UPI Group had a net cash balance. After the Acquisition, based on the pro forma balance sheet as set out in Appendix IV, the net gearing ratio of the Enlarged Group will be 4.9% as the UPI Group has arranged an additional HK$43 million of bank borrowings to finance the Acquisition.

(d) Discount on Acquisition

Based on the unaudited proforma accounts, the discount on acquisition, if the Acquisition had taken place on 31 March 2007, is HK$39,186,000.

8. SPECIAL GENERAL MEETING OF S&J

The SEC approved the Proxy Statement (circular to shareholders) to be provided to S&J Shareholders on 20 September 2007.

The affirmative vote of a majority of the outstanding S&J Shares was required under Nevada Law to adopt and approve the Agreement and the Merger proposal. In September 2007, the Company gave an irrevocable undertaking to the Board of Spear & Jackson to vote the Company’s entire controlling block of 61.8% in S&J in favour of the Merger. Thereafter, Spear & Jackson proceeded to convene a special general meeting on 18 October 2007 in Florida, USA, for the purpose of considering and voting on the Agreement and the Merger proposal.

At this S&J general meeting, the Agreement and the Merger proposal were formally adopted and approved by the affirmative vote of a majority of the outstanding S&J Shares.

9. LISTING RULES IMPLICATIONS

As the applicable percentage ratios computed pursuant to Rule 14.04(9) of the Listing Rules in relation to the Acquisition exceed 25% but are less than 100%, the Acquisition constitutes a major transaction of the Company and is subject to the reporting, announcement and shareholders’ approval requirements of Chapter 14 of the Listing Rules.

No UPI Shareholder has any material interest in the Acquisition, and no UPI Shareholder is required to abstain from voting if a general meeting of the Company is convened to approve the Acquisition. Pursuant to Rule 14.44 of the Listing Rules and with the consent of the Stock Exchange, in lieu of a general meeting to seek shareholders’ approval, the Company obtained written approval for the Agreement and the transactions contemplated therein in September 2007 from UPI Shareholders who hold in aggregate approximately 60.9% of Shares.

— 16 —

LETTER FROM THE BOARD

The following persons, who are together beneficially interested in approximately 60.9% of the issued Shares, who are not related to each other, who are not acting in concert with each other but who together form a closely allied group of shareholders, have given a written shareholders’ approval in September 2007 to approve the Acquisition pursuant to Rule 14.44 of the Listing Rules:

Name Nature of interest Mr Brian C Beazer Interest in a controlled corporation (1) Mr David H Clarke Interest in a controlled corporation (2) Investor (Guernsey) II Ltd Beneficial owner Total	No. of ordinary shares held Percentage interest in Company’s issued share capital 136,427,775 24.5% 127,439,723 22.9% 74,836,000 13.4% 338,703,498 60.9%	No. of ordinary shares held Percentage interest in Company’s issued share capital 136,427,775 24.5% 127,439,723 22.9% 74,836,000 13.4% 338,703,498 60.9%
		60.9%

Notes:

(1) These shares are held by B C Beazer Asia Pte. Ltd., a company in which Mr Brian C Beazer has a 50% equity interest.
(2) These shares are held by GSB Holdings, Inc. Mr David H Clarke has a 61.4% equity interest in Great South Beach Improvement Co., which has a beneficial interest in the entire issued share capital of GSB Holdings, Inc.

10. ARTICLES OF MERGER

Pursuant to the Agreement, as all conditions precedent had been satisfied on 18 October 2007, the Merger process was successfully concluded later the same day with the filing of Articles of Merger with the office of the Nevada Secretary of State. S&J ceased to exist as a separate entity after the Merger.

By operation of Nevada law, on consummation of the Merger:

(i) the title to all real estate and other property owned by S&J, including equity interests in subsidiaries of S&J, is vested in PGAC;
(ii) PGAC has all of the rights, obligations and liabilities of S&J;
(iii) any proceeding pending against S&J may be continued as if the merger had not occurred or PGAC may be substituted in the proceeding to replace S&J.

PGAC, the surviving corporation, remains a wholly-owned subsidiary of the Company. The Company thus effectively acquired 100%-ownership of the S&J group of companies. The management of the S&J operating subsidiaries remain unchanged after the Merger, and they continue to conduct their operations in the ordinary course of business.

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LETTER FROM THE BOARD

After the Merger, S&J Shares ceased to be publicly traded on the Pink Sheets in the over the counter market in the U.S. In addition, registration of S&J Shares under the Exchange Act was terminated and PGAC, as successor corporation, will not be required to file periodic reports with the Securities and Exchange Commission. S&J Shares held by Minority Shareholders are converted into the right to receive the Merger Consideration, subject to appraisal rights of dissenting Minority Shareholders.

11. DISSENTER’S RIGHTS

Any S&J Shareholder who did not wish to accept the Merger Consideration was able to exercise dissenter’s rights and have the fair value of their shares determined by a Nevada court pursuant to, and in accordance with, Sections 92A.300 to 92A.500 of the Nevada Revised Statutes (the “NRS”). The deadline for Minority Shareholders to assert dissenters’ rights ended at the time voting commenced at the special general meeting of Spear & Jackson on 18 October 2007 (“Dissenters’ Deadline”); Minority Shareholders who failed to meet the Dissenters’ Deadline are not entitled to assert dissenter’s rights thereafter.

S&J received written notice from only a single dissenting S&J Shareholder of his intent to exercise appraisal rights before the Dissenter’s Deadline expired. The Company will seek details of the claim from the sole dissenter, and address the claim in accordance with the requirements under Nevada law. Unless the claim is settled within the timelines stipulated in Sections 92A.300 to 92A.500 of the NRS, PGAC as the survivor corporation in the Merger, must initiate an action in a Nevada court for adjudication of the claim within the prescribed period. The amount that may be awarded by the court to the claimant may be more or less than the Merger Consideration. The decision of the court will be final and binding on all parties but will not affect the Merger Consideration paid or payable to non-dissenting Minority Shareholders.

12. INFORMATION ON THE COMPANY

Prior to the Acquisition, the Company’s principal operating subsidiaries were the 61.8%-owned Spear & Jackson Group and the wholly-owned Pantene Group. The Pantene Group is principally engaged in the manufacture and sale of power supply products and electronic components, but additionally, also offers OEM (original equipment manufacturing) and EMS (electronic/electrical manufacturing) services. Information on the S&J Group is provided in the section titled “Information on Spear & Jackson” above, and elsewhere in this circular.

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LETTER FROM THE BOARD

Mr Brian C Beazer, Chairman, Mr David H Clarke, Vice Chairman, Mr Simon Hsu, Vice Chairman, and Ms Nila Ibrahim, General Counsel, are members of a sub-committee of four persons to whom the Board of the Company has delegated responsibility to take all actions in pursuit of the Merger. Mr Beazer and Mr Clarke conducted the extensive and arm’s length negotiations on the Merger with S&J. Neither Mr Beazer nor Mr Clarke had a material interest, as defined in Rule 2.16 of the Listing Rules, in the Merger. Mr Beazer was neither a shareholder nor a director of S&J, and he was not in any position to influence the decision of the S&J board on the Merger. Mr Clarke did not sit on the board of S&J and the market value of his interest in 28,350 shares of S&J, which represented only approximately 0.1% of his personal assets, was immaterial to Mr Clarke. In addition, the Merger was independent from the Company’s prior acquisition of 61.8% interest in S&J in July 2006 which constituted a very substantial acquisition for the Company.

13. FURTHER INFORMATION

Your attention is also drawn to the appendices to this circular which set out among others, financial information of the UPI Group, the S&J Group and other general information.

By order of the Board United Pacific Industries Limited Brian C Beazer Executive Chairman

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL RESULTS

Following the closing of the VSA in July 2006, the Company changed its financial year end from 31 March to 30 September, commencing from 30 September 2006, to be in alignment with the financial year end of Spear & Jackson.

The following is a summary of the audited consolidated financial information of the Company for the two financial years ended 31 March 2005 and 2006 and the financial period ended 30 September 2006, as well as the unaudited consolidated interim financial information of the Company for the six months ended 31 March 2007, which have been extracted from the annual report of the Company for the year ended 31 March 2006, the financial report of the Company for the financial period ended 30 September 2006, and the interim report of the Company for the six months ended 31 March 2007, respectively. The reports of the auditors of the Company in respect of the audited consolidated financial statements of the Company for the two financial years ended 31 March 2005 and 2006 and the financial period ended 30 September 2006 are unqualified.

— 20 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

CONSOLIDATED INCOME STATEMENT

Six months ended 31 March 2007 Six months ended 30 September 2006 HK$ HK$ (unaudited) 670,146,454 390,189,422 (496,403,612) (335,056,379)	Six months ended 31 March 2007 Six months ended 30 September 2006 HK$ HK$ (unaudited) 670,146,454 390,189,422 (496,403,612) (335,056,379)	Year ended 31 March 2006 HK$ 454,338,931 (392,598,589)	Year ended 31 March 2005 HK$ (restated) 392,136,391 (338,989,471) 53,146,920 2,982,409 (3,892,950) (36,625,184) — 1,400,000 (1,611,297) — — 15,399,898 (2,520,508) 12,879,390 12,879,390 — 12,879,390 2.31 cents 2.31 cents
173,742,842 7,012,923 (110,110,062) (47,853,607) — — (4,425,706) 594,000 2,411,018 21,371,408 (821,950)	55,133,043 4,915,819 (31,590,007) (33,599,469) — — (2,533,260) 236,000 26,200,681 18,762,807 815,228	61,740,342 2,482,262 (3,139,748) (40,043,163) 1,000,000 — (2,028,022) — — 20,011,671 (4,357,611)	53,146,920 2,982,409 (3,892,950 (36,625,184 — 1,400,000 (1,611,297 — —
			15,399,898 (2,520,508
20,549,458	19,578,035	15,654,060
13,260,516 7,288,942	19,008,950 569,085	15,654,060 —	12,879,390 —
20,549,458 2.38 cents N/A	19,578,035 3.41 cents N/A	15,654,060 2.81 cents N/A

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APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

CONSOLIDATED BALANCE SHEET

31 March 2007 30 September 2006 (unaudited) HK$ HK$ — — — — 244,050,817 230,305,040 650,836 659,217 3,678,240 3,141,750 904,234 870,250 121,106,052 116,628,250	31 March 2007 30 September 2006 (unaudited) HK$ HK$ — — — — 244,050,817 230,305,040 650,836 659,217 3,678,240 3,141,750 904,234 870,250 121,106,052 116,628,250	31 March 2006 HK$ — — 36,435,901 667,914 — — —	31 March 2005 (restated) HK$ 628,931 6,500,000 48,435,858 685,308 — — —
370,390,179 273,764,271 302,868,873 3,376,585 5,000,000 284,903,520 869,913,249 248,293,379 180,632,236 52,201,026 7,501,247 5,195,514 1,713,926 495,537,328 374,375,921 744,766,100	351,604,507 256,311,934 261,131,909 1,844,868 5,000,000 330,337,347 854,626,058 254,623,593 170,790,250 54,567,754 5,611,935 15,561,250 1,325,500 502,480,282 352,145,776 703,750,283	37,103,815 72,647,372 95,601,391 — 5,000,000 61,958,897 235,207,660 60,216,389 — 29,866,358 1,756,641 — 966,953 92,806,341 142,401,319 179,505,134	56,250,097
			71,584,518 91,177,057 3,820 — 35,272,848
			198,038,243
			65,803,417 — 27,848,892 90,433 — —
			93,742,742
			104,295,501
			160,545,598

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APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

As at: Non-current liabilities Bank borrowings - amounts due after one year Obligations under finance leases - amounts due after one year Provisions Retirement benefit obligations Deferred tax liabilities Net assets Capital and reserves Share capital Reserves Total equity attributable to equity holders of the company Minority interests Total equity	31 March 2007 30 September 2006 (unaudited) HK$ HK$ 23,364,566 22,801,193 9,068,778 4,707,724 15,525,238 15,856,250 344,681,740 411,775,750 22,632,456 21,781,530 415,272,778 476,922,447 329,493,322 226,827,836 55,705,840 55,705,840 191,602,561 127,110,916 247,308,401 182,816,756 82,185,921 44,011,080 329,494,322 226,827,836	31 March 2006 HK$ 3,087,853 2,297,265 — — 1,546,508 6,931,626 172,573,508 55,705,840 116,867,668 172,573,508 — 172,573,508	31 March 2005 (restated) HK$ 3,289,710 — — — 558,508
			3,848,218
			156,697,380
			55,705,840 100,991,540
			156,697,380 —
			156,697,380

— 23 —

FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

2. AUDITED FINANCIAL STATEMENTS OF UPI GROUP

Set out below is a reproduction of the audited consolidated income statements of the Group for the six month period ended 30 September 2006 and the year ended 31 March 2006, the audited consolidated balance sheet of the Group as at 30 September 2006 and 31 March 2006, the audited consolidated statement of recognised income and expense for the six month period ended 30 September 2006 and the year ended 31 March 2006, the audited consolidated cash flow statement for the six month period ended 30 September 2006 and the year ended 31 March 2006, together with the accompanying notes, as extracted from the financial report of the Company for the financial period ended 30 September 2006. The reports of the auditors of the Company in respect of the audited consolidated financial statements of the Company for the financial year ended 31 March 2006 and the financial period ended 30 September 2006 are unqualified.

CONSOLIDATED INCOME STATEMENT

For the period from 1 April 2006 to 30 September 2006

NOTES Turnover 6 Cost of sales Gross profit Other income 7 Distribution costs Administrative expenses Gain arising from changes in fair value of investment properties Finance costs 8 Share of result of an associate Discount on acquisition 31 Profit before taxation 9 Income tax credit (charge) 11 Profit for the period/year Attributable to: Equity holders of the Company Minority interests 29 Earnings per share 13 — Basic — Diluted	1.4.2006 to 30.9.2006 HK$ 390,189,422 (335,056,379)	1.4.2005 to 31.3.2006 HK$ 454,338,931 (392,598,589) 61,740,342 2,482,262 (3,139,748) (40,043,163) 1,000,000 (2,028,022) — — 20,011,671 (4,357,611) 15,654,060 15,654,060 — 15,654,060 2.81 cents N.A.
	55,133,043 4,915,819 (31,590,007) (33,599,469) — (2,533,260) 236,000 26,200,681 18,762,807 815,228 19,578,035 19,008,950 569,085	61,740,342 2,482,262 (3,139,748 (40,043,163
		1,000,000 (2,028,022 — —
		20,011,671 (4,357,611
		15,654,060
		15,654,060 —
	19,578,035 3.41 cents N.A.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

CONSOLIDATED BALANCE SHEET

At 30 September 2006

NOTES Non-current assets Property, plant and equipment 14 Prepaid lease payments 15 Interest in an associate 16 Available-for-sale investments 17 Deferred tax assets 27 Current assets Inventories 18 Debtors and prepayments 19 Taxation recoverable Pledged bank deposits 20 Bank balances and cash 21 Current liabilities Creditors and accrued charges 22 Bank overdrafts 23 Bank borrowings - amount due within one year 23 Obligations under finance leases - amount due within one year 24 Provisions 25 Taxation payable Net current assets Total assets less current liabilities	30.9.2006 HK$ 230,305,040 659,217 3,141,750 870,250 116,628,250	31.3.2006 HK$ 36,435,901 667,914 — — —
	351,604,507 256,311,934 261,131,909 1,844,868 5,000,000 330,337,347 854,626,058 254,623,593 170,790,250 54,567,754 5,611,935 15,561,250 1,325,500 502,480,282 352,145,776 703,750,283	37,103,815
		72,647,372 95,601,391 — 5,000,000 61,958,897
		235,207,660
		60,216,389 — 29,866,358 1,756,641 — 966,953
		92,806,341
		142,401,319
		179,505,134

— 25 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

NOTES Non-current liabilities Bank borrowings - amount due after one year 23 Obligations under finance leases - amount due after one year 24 Provisions 25 Retirement benefit obligations 26 Deferred tax liabilities 27 Net assets Capital and reserves Share capital 28 Reserves 29 Total equity attributable to equity holders of the Company Minority interests 29 Total equity	30.9.2006 HK$ 22,801,193 4,707,724 15,856,250 411,775,750 21,781,530 476,922,447 226,827,836 55,705,840 127,110,916 182,816,756 44,011,080 226,827,836	31.3.2006 HK$ 3,087,853 2,297,265 — — 1,546,508
		6,931,626
		172,573,508
		55,705,840 116,867,668
		172,573,508 —
		172,573,508

— 26 —

FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the period from 1 April 2006 to 30 September 2006

Exchange difference arising on translation of foreign operations Recognition of actuarial losses on defined benefit plan Net expenses recognised directly in equity Profit for the period/year Total income and expense recognised for the period/year Attributable to: Equity holders of the Company Minority interests	1.4.2006 to 30.9.2006 HK$ (2,822,033) (10,656,251) (13,478,284) 19,578,035 6,099,751 10,117,248 (4,017,497) 6,099,751	1.4.2005 to 31.3.2006 HK$ (28,205) — (28,205) 15,654,060 15,625,855 15,625,855 — 15,625,855

— 27 —

FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

CONSOLIDATED CASH FLOW STATEMENT

For the period from 1 April 2006 to 30 September 2006

NOTE Cash flows from operating activities Profit before taxation Adjustments for: Interest income Interests on bank borrowings Interests on obligations under finance leases Expenses on retirement benefit plan Share of result of an associate Discount on acquisition Gain on disposal of property, plant and equipment Depreciation of property, plant and equipment Release of prepaid lease payments Allowance for bad and doubtful debts Write-off of inventories Impairment loss on goodwill Gain arising from changes in fair value of investment properties Share-based payment expenses Operating cash flows before movements in working capital Increase in inventories Increase in debtors and prepayments Increase (decrease) in creditors and accrued charges Decrease in provisions Decrease in retirement benefit obligations Net cash generated from operations Income taxes paid Net cash from operating activities	1.4.2006 to 30.9.2006 HK$ 18,762,807 (1,754,357) 2,347,654 185,606 2,315,750 (236,000) (26,200,681) — 6,634,250 8,697 1,618,723 5,239,023 — — 126,000	1.4.2005 to 31.3.2006 HK$ 20,011,671 (1,330,019) 1,937,968 90,054 — — — (307,031) 11,463,004 17,394 640,697 — 628,931 (1,000,000) 250,273 32,402,942 (1,062,854) (5,065,031) (5,587,028) — — 20,688,029 (2,398,838) 18,289,191
	9,047,472 (11,800,335) (28,646,741) 70,167,953 (4,248,000) (5,029,750) 29,490,599 (1,336,821) 28,153,778	32,402,942 (1,062,854 (5,065,031 (5,587,028 — —
		20,688,029 (2,398,838
		18,289,191

— 28 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

NOTE Cash flows from investing activities Purchases of property, plant and equipment Interest received Increase in pledged bank deposits Proceeds from disposal of property, plant and equipment Net proceeds received from disposal of investment properties Acquisition of subsidiaries (net of cash and cash equivalents acquired) 31 Net cash from investing activities Cash flows from financing activities Principal repayments for obligations under finance leases Interests paid on bank borrowings Interests paid on obligations under finance leases Net cash inflow (outflow) in trust receipts and export loans Repayment of bank loans New bank loans raised Net cash from (used in) financing activities Net increase in cash and cash equivalents Effect of foreign exchange rate changes Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period Analysis of the balances of cash and cash equivalents Bank balances and cash Bank overdrafts	1.4.2006 to 30.9.2006 HK$ (5,415,696) 1,754,357 — — — 37,041,118	1.4.2005 to 31.3.2006 HK$ (5,814,367) 1,330,019 (5,000,000) 11,514,932 7,500,000 — 9,530,584 (893,108) (1,937,968) (90,054) (396,215) (5,123,426) 7,335,250 (1,105,521) 26,714,254 (28,205) 35,272,848 61,958,897 61,958,897 — 61,958,897
	33,379,779 (1,713,997) (2,347,654) (185,606) 17,692,214 (3,788,831) 30,511,353 40,167,479 101,701,036 (4,112,836) 61,958,897	9,530,584
		(893,108 (1,937,968 (90,054 (396,215 (5,123,426 7,335,250
		(1,105,521
		26,714,254 (28,205 35,272,848
	159,547,097
	330,337,347 (170,790,250)	61,958,897 —
	159,547,097

— 29 —

FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

For the period from 1 April 2006 to 30 September 2006

1. GENERAL

The Company was incorporated in Bermuda as an exempted company with limited liability with its shares listed on The Stock Exchange of Hong Kong Limited (the “SEHK”). The addresses of the registered office and principal place of business of the Company are disclosed in the Corporate Information of this Report.

The Company is an investment holding company. Its subsidiaries are principally engaged in the contract manufacturing - OEM products and rechargeable battery products. With the acquisition of a controlling stake of 61.8% of Spear & Jackson, Inc. (“S&J”) on 28 July 2006, the Group’s traditional business activities widened to encompass the activities of the S&J and its subsidiaries which are principally engaged in the manufacture and trading of tools, metrology and magnetic products.

The consolidated financial statements are presented in Hong Kong dollar, which is also the functional currency of the Company.

The consolidated financial statements for the current period cover the six-month period ended 30 September 2006. The corresponding comparative amounts shown for the consolidated income statement, consolidated statement of recognised income and expense, consolidated cash flow statement and related notes cover a year ended 31 March 2006 and therefore may not be comparable with amounts shown for the current period. The consolidated financial statements from 1 April 2006 to 30 September 2006 cover a period of less than 12 months because the directors of the Company determined to align the balance sheet date in line with that of S&J in order to facilitate the preparation and presentation of the consolidated financial statements of the Group.

2. APPLICATION HONG KONG FINANCIAL REPORTING STANDARDS

In the current period, the Group has applied, for the first time, a number of new standards, amendments and interpretations (“new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), which are effective for accounting periods beginning on or after 1 December 2005, 1 January 2006 or 1 March 2006. The adoption of the new/revised HKFRSs has resulted in the adoption of an accounting policy in relation to the actuarial gains and losses as follow:

Actuarial gains and losses

In the current year, the Group has applied HKAS 19 (Amendment) “Actuarial Gains and Losses, Group Plans and Disclosures” which is effective for annual periods beginning on or after 1 January 2006.

Prior to 1 April 2006, the Group has no defined benefit plan.

After the acquisition of S&J during the period, on the adoption of HKAS 19 (Amendment), the Group has adopted an accounting policy to recognise actuarial gains and losses in the consolidated statement of recognised income and expense. Since there was no defined benefit plan in prior periods, no prior period adjustment has been required. The effect of application of the accounting policy has resulted in a decrease in equity and an increase in retirement benefit obligations of HK$10,656,251.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

At the date of authorisation of these consolidated financial statements, the following standards and interpretations and amendments were in issue but not yet effective for the periods covered by these consolidated financial statements:

HKAS 1 (Amendment) Capital disclosures[1] HKFRS 7 Financial instruments: Disclosures[1] HK(IFRIC) — INT 8 Scope of HKFRS 2[2] HK(IFRIC) — INT 9 Reassessment of embedded derivatives[3] HK(IFRIC) — INT 10 Interim Financial Reporting and Impairment[4]

1 Effective for annual periods beginning on or after 1 January 2007.

2 Effective for annual periods beginning on or after 1 May 2006.
3 Effective for annual periods beginning on or after 1 June 2006.

4 Effective for annual periods beginning on or after 1 November 2006.

The Group has not early applied of the above HKFRSs that have been issued but are not yet effective. The directors of the Company anticipate that the application of these HKFRSs will have no material impact on the results and the financial position of the Group.

3. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared under the historical cost convention, except for certain financial instruments which are measured at fair values, as explained in the principal accounting policies set out below.

The consolidated financial statements have been prepared in accordance with HKFRSs issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures required by the Listing Rules and by the Hong Kong Companies Ordinance.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired and disposed of during the period are included in the consolidated income statement from and up to their effective dates of acquisition and disposal respectively.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the Group.

All intra-group balances, income and expenses are eliminated on consolidation.

Minority interests in the net assets of consolidated subsidiaries are presented separately from the Group’s equity therein. Minority interests in the net assets consist of the amount of those interests at the date of the original business combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the Group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

Business combinations

The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under HKFRS 3 “Business Combinations” are recognised at their fair values at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

Interest in an associate

The result and assets and liabilities of an associate are incorporated in these consolidated financial statements using the equity method of accounting. Under the equity method, investment in an associate is carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the profit or loss and of changes in equity of the associate, less any identified impairment loss. When the Group’s share of losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), the Group discontinues recognising its share of further losses. An additional share of losses is provided and a liability is recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment.

Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

Revenue recognition

Revenue is measured at fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and sales related taxes.

Sales of goods are recognised when goods are delivered and title has been passed.

Interest income from a financial asset is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial assets to that asset’s net carrying amount.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost of property, plant and equipment over their estimated useful lives, using the straight line method.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

For owner-occupied leasehold land and buildings, where the allocation between the land and buildings elements cannot be made reliably, the leasehold interests in land were accounted for as property, plant and equipment and measured using the cost model, as appropriate.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated income statement in the period in which the item is derecognised.

Financial instruments

Financial assets and financial liabilities are recognised on the balance sheet when a group entity becomes a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the profit or loss.

Financial assets

The Group’s financial assets are classified into loans and receivables, and available-for-sale financial assets. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. The accounting policies adopted in respect of each category of financial assets are set out below.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including debtors and prepayments, pledged bank deposits and bank balances) are carried at amortised cost using the effective interest method, less any identified impairment losses. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Impairment losses are reversed in subsequent periods when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets at fair value through profit or loss, loans and receivables or held-to-maturity investments. At each balance sheet date subsequent to initial recognition, available-for-sale financial assets are measured at fair value. Changes in fair value are recognised in equity, until the financial asset is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in equity is removed from equity and recognised in profit or loss. Any impairment loss on available-for-sale financial assets is recognised in profit or loss. Impairment losses on available-for-sale equity investments will not reverse in profit or loss in subsequent periods.

For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted equity instruments, they are measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition. An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired. The amount of the impairment loss is measured as the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses will not reverse in subsequent periods.

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. The accounting policies adopted in respect of financial liabilities and equity instruments are set out below.

Bank borrowings

Interest-bearing bank loans and overdrafts are initially recognised at fair value, and are subsequently measured at amortised costs, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Group’s accounting policy for borrowings costs.

Other financial liabilities

Other financial liabilities including creditors and obligations under finance leases are subsequently measured at amortised cost, using the effective interest rate method.

Equity instruments

Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised directly in equity is recognised in profit or loss.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Borrowing costs

All borrowing costs are recognised as and included in finance costs in the consolidated income statement in the period in which they are incurred.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct costs and those overhead that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in, first-out method. Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Onerous contracts

Present obligations arising under onerous contracts are recognised and measured as a provision. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

Restructuring

A restructuring provision is recognised when the Group has developed a detailed formal plan for restructuring and has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of the Group.

Impairment of assets

At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss is recognised as income immediately.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

Taxation

Taxation represents the sum of the tax paid or currently payable and deferred tax.

The tax currently paid and payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes income statement items that are never taxable or deductible.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are recognised in profit or loss in the period in which they arise. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period.

For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign operations are translated into the presentation currency of the Group (i.e. Hong Kong dollars) at the rate of exchange prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised as a separate component of equity (the translation reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

The Group as lessor

Rental income from operating leases is recognised in the consolidated income statement on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense on a straight-line basis over the lease term.

The Group as lessee

Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognised as a reduction of rental expense over the lease term on a straight-line basis.

Assets held under finance leases are recognised as assets of the Group at fair values at inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss.

Retirement benefits costs

Payments to the defined contribution retirement plan are charged as expenses when employees have rendered service entitling them to the contributions.

The Group operates a defined contribution retirement benefits scheme under the Mandatory Provident Fund Schemes Ordinance (the “MPF Scheme”), for employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries and are charged to profit and loss account as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme, except for the Group’s employer voluntary contributions, which are refunded to the Group when the employee leaves employment prior to the contributions vesting fully, in accordance with the rules of the MPF Scheme.

The employees of the Group’s subsidiaries which operate in Mainland China are required to participate in a central pension scheme operated by the local municipal government. The subsidiaries are required to contribute a certain percentage of its payroll costs to the central pension scheme. The contributions are charged to the profit and loss account as they become payable in accordance with the rules of the central pension scheme.

For defined benefit retirement benefit plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each balance sheet date. All actuarial gains and losses of defined benefit plans are recognised immediately in accumulated profits in the period in which they occur and presented in the consolidated statement of recognised income and expense. Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the amended benefits become vested.

The amount recognised in the balance sheet represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service cost, and as reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to unrecognised actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

Share-based payment transactions

Equity-settled share-based payment transactions

Share options granted to directors of the Company and employees of the Group

The fair value of services received determined by reference to the fair value of share options granted at the grant date is expensed on a straight-line basis over the vesting period, with a corresponding increase in equity (share options reserve).

At each balance sheet date, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss over the remaining vesting period, with a corresponding adjustment to share options reserve.

At the time when the share options are exercised, the amount previously recognised in share option reserve will be transferred to share premium. When the share options are forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised in share option reserve will be transferred to accumulated profits.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are disclosed below.

Inventories

Inventories are measured at lower of cost and net realisable value. The management of the Group reviews the carrying amount of the inventory at each balance sheet date, and makes allowance for inventory items identified, if any, to be carried at lower recoverable value through estimation of the expected selling prices under the current market conditions. As at 30 September 2006, the carrying amount of the inventories is HK$256,311,934 after deducting the write-off of HK$5,239,023 charged to the income statement during the period as a result of deficiency in quality control process.

Income taxes

As at 30 September 2006, a deferred tax asset of HK$116,628,250 mainly in relation to the retirement benefit obligations and unused tax losses has been recognised in the Group’s balance sheet based on estimation of future profit streams. No deferred tax asset has been recognised on the tax losses, capital losses, other temporary differences and other tax credits amounted to HK$1,076,496,000. The realisability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future. In cases where the actual future profits generated are less than expected, a material reversal of deferred tax assets may arise, which would be recognised in the consolidated income statement for the period in which such a reversal takes place. Details of the deductible temporary differences are disclosed in note 27.

Provisions

The Group’s provisions as at 30 September 2006 were HK$31,417,500. The Group has recognised provisions based on the best estimate of the expenditure required to settle the present obligation at the balance sheet date which is the amount that the Group would pay to settle the obligation at the balance sheet date or to transfer it to a third party at that time. The estimates of the outcome and the financial effect are determined by the judgement of the management

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

of the entity, supplemented by experience of similar transactions and, in some cases, reports from independent experts. The evidence considered includes any additional evidence provided by events after the balance sheet date. Uncertainties surrounding the amount to be recognised as a provision are dealt with by various means according to the circumstances. Details of the provisions are disclosed in note 25.

5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s major financial instruments include debtors, bank deposits, creditors, obligations under finance leases and bank borrowings. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Credit risk

The Group’s maximum exposure to credit risk in the event of the counterparties failure to perform their obligations as at 30 September 2006 in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated balance sheet. The Group is exposed to concentration risk as a significant portion of its business are derived from its largest customers which are mainly engaged in the business of trading and manufacture of electronic products. As at 30 September 2006, trade debtors of HK$52,180,023 (31.3.2006: HK$36,737,960) were contributed by the top five customers of the Group. In order to minimise the credit risk, the management of the Group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, the Group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of the Company consider that the Group’s credit risk is significantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by the international credit rating agencies.

Currency risk

Certain trade receivables and borrowings of the Group are denominated in foreign currencies. The Group does not have a foreign currency hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arises.

Interest rate risk

The Group’s cash flow interest rate risk primarily relates to bank balances, deposits, bank overdrafts and variable-rate bank loans.

The Group’s fair value interest rate risk relates primarily to the fixed-rate obligations under finance leases.

The Group currently does not have any risk hedging policy. However, the management monitors interest rate risk exposure and will consider hedging significant risk exposure should the use arises.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

6. SEGMENT INFORMATION

Business Segments

The Group’s principal activities are the contract manufacturing - OEM products and rechargeable battery products. With the acquisition of S&J during the period, the Group’s principal segments widened to encompass the manufacture and trading of tools, metrology and magnetic products. These five business segments are the basis on which the Group reports its primary segment information. Segment information about these businesses is presented as below:

Contract manufacturing- OEM products(1) Eliminations Consolidated HK$ HK$ HK$ For the period from 1 April 2006 to 30 September 2006 Turnover External sales 250,842,729 79,635,250 23,057,693 Inter-segment sales 17,800,389 2,817,250 734 268,643,118 82,452,500 23,058,427 Inter-segment sales are charged at prevailing market rates. Result Segment result (5,117,078) 7,360 (848,905) Unallocated corporate expenses Interest income Share of results of an associate Discount on acquisition Finance costs Profit before taxation Income tax credit Profit for the period Other information Additions of property, plant and equipment 3,764,888 1,961,750 515,058 Share-based payment expenses 126,000 — — Depreciation of property, plant and equipment 4,292,467 1,224,250 114,533	Tools Contract manufacturing- rechargeable battery products(1) HK$ HK$ 22,980,500 13,673,250 2,492,750 250,750 25,473,250 13,924,000 2,883,640 1,401,250 545,750 — — — 737,500 265,500	Metrology HK$ — (23,361,873) (23,361,873)	Magnetics HK$ 390,189,422 —
			390,189,422
			(1,673,733) (5,221,238) 1,754,357 236,000 26,200,681 (2,533,260)
			18,762,807 815,228
			19,578,035
			6,787,446 126,000 6,634,250

Note (1): These segments were previously named as voltage converters, coils and components for electronics/ electrical/mechanical products and rechargeable battery products.

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APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

Contract manufacturing- OEM products(1) Tools Contract manufacturing- rechargeable battery products(1) Metrology Magnetics HK$ HK$ HK$ HK$ HK$ As at 30 September 2006 Balance sheet Assets Segment assets 221,910,508 325,901,250 15,935,688 107,291,500 46,816,500 Unallocated corporate assets Total assets Liabilities Segment liabilities 119,800,077 222,518,500 2,515,500 43,011,000 49,235,500 Unallocated corporate liabilities Total liabilities	Combined HK$ 717,855,446 488,375,119
	1,206,230,565
	437,080,577 542,322,152
	979,402,729

Note (1): These segments were previously named as voltage converters, coils and components for electronics/ electrical/mechanical products and rechargeable battery products.

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APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

						Contract
					manufacturing-
		Contract				rechargeable
	manufacturing-					battery
	OEM products(1)		Eliminations	Consolidated		products(1)
		HK$	HK$	HK$		HK$
For the year ended 31 March 2006
Turnover
External sales	409,054,175		45,284,756	—		454,338,931
Inter-segment sales	30,410,741		5,079,490	(35,490,231)		—
	439,464,916		50,364,246	(35,490,231)		454,338,931
Inter-segment sales are charged at prevailing market rates.
Result
Segment result	21,051,363		297,331			21,348,694
Unallocated corporate expenses						(1,639,020)
Interest income						1,330,019
Gain arising from change in fair
value of investment properties						1,000,000
Finance costs						(2,028,022)
Profit before taxation						20,011,671
Income tax charge						(4,357,611)
Profit for the year						15,654,060
Other information
Additions of property, plant and equipment	10,153,713		517,235			10,670,948
Impairment loss on goodwill		—	628,931			628,931
Share-based payment expenses		250,273	—			250,273
Depreciation of property, plant and equipment	10,794,652		668,352			11,463,004
Gain on disposal of property, plant and equipment		307,031	—			307,031

Note (1): These segments were previously named as voltage converters, coils and components for electronics/ electrical/mechanical products and rechargeable battery products.

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APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

		Contract
		manufacturing-
	Contract	rechargeable
	manufacturing-	battery
	OEM products(1)	products(1)	Consolidated
	HK$	HK$	HK$
As at 31 March 2006
Balance sheet
Assets
Segment assets	195,045,096	9,335,022	204,380,118
Unallocated corporate assets			67,931,357
Total assets			272,311,475
Liabilities
Segment liabilities	58,464,773	1,484,551	59,949,324
Unallocated corporate liabilities			39,788,643
Total liabilities			99,737,967

Note (1): These segments were previously named as voltage converters, coils and components for electronics/ electrical/mechanical products and rechargeable battery products.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

Geographical Segments

The Group’s operations are mainly located in Mainland China, Hong Kong, Mainland Europe, the United Kingdom (“UK”), Australasia, Malaysia and elsewhere in Asia. The following table provides an analysis of the Group’s turnover by geographical market, irrespective of the origin of the goods:

Turnover by geographical market 1.4.2006 to 30.9.2006 1.4.2005 to 31.3.2006 HK$ HK$ The People’s Republic of China (the “PRC”) Mainland China 24,617,224 35,642,855 Hong Kong 46,921,764 77,620,445 71,538,988 113,263,300 United States of America, South America and Canada 95,460,694 166,183,443 Mainland Europe (excluding UK) 87,579,254 138,606,034 UK 70,678,826 — Australasia 20,812,250 — Malaysia 12,009,260 19,514,245 Asia (excluding the PRC and Malaysia) 15,950,754 16,771,909 Others 16,159,396 — 390,189,422 454,338,931	Turnover by geographical market 1.4.2006 to 30.9.2006 1.4.2005 to 31.3.2006 HK$ HK$ The People’s Republic of China (the “PRC”) Mainland China 24,617,224 35,642,855 Hong Kong 46,921,764 77,620,445 71,538,988 113,263,300 United States of America, South America and Canada 95,460,694 166,183,443 Mainland Europe (excluding UK) 87,579,254 138,606,034 UK 70,678,826 — Australasia 20,812,250 — Malaysia 12,009,260 19,514,245 Asia (excluding the PRC and Malaysia) 15,950,754 16,771,909 Others 16,159,396 — 390,189,422 454,338,931	Turnover by geographical market 1.4.2006 to 30.9.2006 1.4.2005 to 31.3.2006 HK$ HK$ The People’s Republic of China (the “PRC”) Mainland China 24,617,224 35,642,855 Hong Kong 46,921,764 77,620,445 71,538,988 113,263,300 United States of America, South America and Canada 95,460,694 166,183,443 Mainland Europe (excluding UK) 87,579,254 138,606,034 UK 70,678,826 — Australasia 20,812,250 — Malaysia 12,009,260 19,514,245 Asia (excluding the PRC and Malaysia) 15,950,754 16,771,909 Others 16,159,396 — 390,189,422 454,338,931
	71,538,988 95,460,694 87,579,254 70,678,826 20,812,250 12,009,260 15,950,754 16,159,396	113,263,300 166,183,443 138,606,034 — — 19,514,245 16,771,909 —
	390,189,422	454,338,931

The following is an analysis of the carrying amount of segment assets and additions to property, plant and equipment analysed by the geographical areas in which the assets are located:

Carrying amount of segment assets UK Hong Kong Mainland China Australasia Mainland Europe (excluding UK) United States of America and Canada	1.4.2006 to 30.9.2006 HK$ 323,688,750 149,397,853 97,473,876 65,829,250 69,502,000 11,963,717 717,855,446	1.4.2005 to 31.3.2006 HK$ — 125,844,269 78,442,849 — — 93,000
		204,380,118

— 44 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

1.4.2006 to 30.9.2006 HK$ Additions to property, plant and equipment Mainland China 2,225,068 Hong Kong 2,125,563 UK 1,858,500 Others 578,315 6,787,446 7. OTHER INCOME 1.4.2006 to 30.9.2006 HK$ Other income comprises: Exchange gain 1,416,068 Gain on disposal of property, plant and equipment — Interest earned on bank deposits and balances 1,754,357 Property rental income net of outgoings 840,750 Others 904,644 4,915,819 8. FINANCE COSTS 1.4.2006 to 30.9.2006 HK$ Interests on: Bank borrowings wholly repayable within five years 2,347,654 Obligations under finance leases 185,606 Total finance costs 2,533,260	1.4.2005 to 31.3.2006 HK$ 2,905,484 7,674,255 — 91,209	1.4.2005 to 31.3.2006 HK$ 2,905,484 7,674,255 — 91,209
	10,670,948
	1.4.2005 to 31.3.2006 HK$ — 307,031 1,330,019 560,953 284,259 2,482,262 1.4.2005 to 31.3.2006 HK$ 1,937,968 90,054 2,028,022
		2,028,022

— 45 —

FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

9. PROFIT BEFORE TAXATION

Profit before taxation has been arrived at after charging: Directors’ remuneration (Note 10) Staff salaries, allowances and welfare Provident fund contributions Mandatory provident fund contributions Share-based payment expenses to other employees Expenses on retirement benefit plan Direct labour costs Total staff costs Release of prepaid lease payments Impairment loss on goodwill Auditors’ remuneration Exchange loss Depreciation of property, plant and equipment Allowance for bad and doubtful debts Write-off of inventories (Note) Minimum lease payments in respect of rented premises Cost of inventories recognised as expenses	1.4.2006 to 30.9.2006 HK$ 1,130,142 44,163,523 1,293,733 473,609 39,258 2,315,750 26,908,892 76,324,907 8,697 — 3,009,330 — 6,634,250 1,618,723 5,239,023 4,132,920 329,817,356	1.4.2005 to 31.3.2006 HK$ 3,210,469 35,235,452 1,215,167 434,513 78,517 — 21,442,420
		61,616,538
		17,394 628,931 923,774 882,623 11,463,004 640,697 — 4,566,130 392,598,589

Note: During the period, raw materials and finished goods amounting to HK$5,239,023 (1.4.2005 to 31.3.2006: nil) were written off by the Group as a result of a deficiency in the quality control process.

— 46 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

10. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

The emoluments paid or payable to each of the 8 (1.4.2005 to 31.3.2006: 10) directors were as follows:

Fees Basic salaries and allowances Retirement benefits scheme contribution Share-based payment expenses Consulting fee HK$ HK$ HK$ HK$ HK$ — — — 24,783 467,400 50,000 — — 12,392 — — 240,000 6,000 49,567 — 90,000 — — — — 50,000 — — — — 50,000 — — — — — — — — — 90,000 — — — — 330,000 240,000 6,000 86,742 467,400	Fees Basic salaries and allowances Retirement benefits scheme contribution Share-based payment expenses Consulting fee HK$ HK$ HK$ HK$ HK$ — — — 24,783 467,400 50,000 — — 12,392 — — 240,000 6,000 49,567 — 90,000 — — — — 50,000 — — — — 50,000 — — — — — — — — — 90,000 — — — — 330,000 240,000 6,000 86,742 467,400	Fees Basic salaries and allowances Retirement benefits scheme contribution Share-based payment expenses Consulting fee HK$ HK$ HK$ HK$ HK$ — — — 24,783 467,400 50,000 — — 12,392 — — 240,000 6,000 49,567 — 90,000 — — — — 50,000 — — — — 50,000 — — — — — — — — — 90,000 — — — — 330,000 240,000 6,000 86,742 467,400	Fees Basic salaries and allowances Retirement benefits scheme contribution Share-based payment expenses Consulting fee HK$ HK$ HK$ HK$ HK$ — — — 24,783 467,400 50,000 — — 12,392 — — 240,000 6,000 49,567 — 90,000 — — — — 50,000 — — — — 50,000 — — — — — — — — — 90,000 — — — — 330,000 240,000 6,000 86,742 467,400	Fees Basic salaries and allowances Retirement benefits scheme contribution Share-based payment expenses Consulting fee HK$ HK$ HK$ HK$ HK$ — — — 24,783 467,400 50,000 — — 12,392 — — 240,000 6,000 49,567 — 90,000 — — — — 50,000 — — — — 50,000 — — — — — — — — — 90,000 — — — — 330,000 240,000 6,000 86,742 467,400	Total HK$ 492,183 62,392 295,567 90,000 50,000 50,000 — 90,000
					1,130,142
— 100,000 — — 180,000 100,000 100,000 — 180,000 —	— — 480,000 948,913 — — — — — —	— — 12,000 3,000 — — — — — —	49,073 24,537 98,146 — — — — — — —	934,800 — — — — — — — — —	983,873 124,537 590,146 951,913 180,000 100,000 100,000 — 180,000 —
660,000	1,428,913	15,000	171,756	934,800	3,210,469

* Independent non-executive directors

None of the directors has waived any emoluments during period.

The management considers that the directors of the Company are the key management of the Group.

— 47 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

Employees’ emoluments

The five highest paid individuals of the Group included one (1.4.2005 to 31.3.2006: two) director, details of whose emoluments are set out above. The emoluments of the four (1.4.2005 to 31.3.2006: three) highest paid employees for the period from 1 April 2006 to 30 September 2006, other than the director of the Company, were as follows:

	1.4.2006 to	1.4.2005 to
	30.9.2006	31.3.2006
	HK$	HK$
Salaries and other benefits	2,132,000	2,695,143
Mandatory provident fund contribution	24,000	36,000
	2,156,000	2,731,143

Emoluments of these employees were within the following bands:

Number of employees 1.4.2006 to 30.9.2006 1.4.2005 to 31.3.2006 Nil — HK$1,000,000 4 3 11. INCOME TAX CREDIT (CHARGE) 1.4.2006 to 30.9.2006 1.4.2005 to 31.3.2006 HK$ HK$ The credit (charge) for the period/year comprises: Current taxation Hong Kong — (1,882,042 Mainland China (116,000) (1,421,249 France 73,750 — New Zealand (44,250) — (86,500) (3,303,291 Underprovision in prior periods — (66,320 Deferred taxation (note 27) 901,728 (988,000 815,228 (4,357,611	Number of employees 1.4.2006 to 30.9.2006 1.4.2005 to 31.3.2006 Nil — HK$1,000,000 4 3 11. INCOME TAX CREDIT (CHARGE) 1.4.2006 to 30.9.2006 1.4.2005 to 31.3.2006 HK$ HK$ The credit (charge) for the period/year comprises: Current taxation Hong Kong — (1,882,042 Mainland China (116,000) (1,421,249 France 73,750 — New Zealand (44,250) — (86,500) (3,303,291 Underprovision in prior periods — (66,320 Deferred taxation (note 27) 901,728 (988,000 815,228 (4,357,611	Number of employees 1.4.2006 to 30.9.2006 1.4.2005 to 31.3.2006 Nil — HK$1,000,000 4 3 11. INCOME TAX CREDIT (CHARGE) 1.4.2006 to 30.9.2006 1.4.2005 to 31.3.2006 HK$ HK$ The credit (charge) for the period/year comprises: Current taxation Hong Kong — (1,882,042 Mainland China (116,000) (1,421,249 France 73,750 — New Zealand (44,250) — (86,500) (3,303,291 Underprovision in prior periods — (66,320 Deferred taxation (note 27) 901,728 (988,000 815,228 (4,357,611
	(86,500) — 901,728	(3,303,291 (66,320 (988,000
	815,228	(4,357,611

No provision for Hong Kong Profits Tax has been made in the financial statements as the Group did not have any assessable profit for the period. Hong Kong Profits Tax was calculated at 17.5% of the estimated assessable profit for previous year. Taxation arising from other jurisdiction is calculated at the rates prevailing in the respective jurisdictions.

— 48 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

The total credit (charge) for the period/year can be reconciled to the profit per the consolidated income statement as follows:

Profit before taxation Tax at the average income tax rate of 18.46% (1.4.2005 to 31.3.2006: 16.25%) Tax effect of expenses not deductible for tax purposes Tax effect of income not taxable for tax purposes Tax effect of tax loss not recognised Utilisation of tax losses previously not recognised Effect of different tax rate of subsidiaries operating in other jurisdictions Underprovision in the prior periods Taxation credit (charge) for the period/year	1.4.2006 to 30.9.2006 HK$ 18,762,807	1.4.2005 to 31.3.2006 HK$ 20,011,671
	(3,463,614) (747,782) 5,176,750 (260,714) 110,588 — —	(3,251,897 (1,505,730 596,272 (199,248 166,411 (97,099 (66,320
	815,228	(4,357,611

12. DIVIDEND

The directors of the Company do not recommend the payment of a dividend for the period/year.

13. EARNINGS PER SHARE

The calculation of the basic earnings per share is based on the following data:

Earnings Earnings for the purposes of basic earnings per share (profit for the period/year attributable to equity holders of the Company) Weighted average number of ordinary shares for the purpose of basic earnings per share	1.4.2006 to 30.9.2006 HK$ 19,008,950 557,058,400	1.4.2005 to 31.3.2006 HK$ 15,654,060
		557,058,400

Diluted earnings per share has not been presented because the exercise price of the Company’s share options was higher than the average market price of shares for the period/year.

— 49 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

14. PROPERTY, PLANT AND EQUIPMENT

		Furniture,
	Land and	fixtures and	Motor	Plant and
	buildings	equipment	vehicles	machinery	Total
	HK$	HK$	HK$	HK$	HK$
COST
At 1 April 2005	38,767,634	26,265,065	3,853,377	52,705,525	121,591,601
Additions	—	7,450,937	773,099	2,446,912	10,670,948
Disposals	(21,196,520)	(739,662)	—	(180,884)	(22,117,066)
At 1 April 2006	17,571,114	32,976,340	4,626,476	54,971,553	110,145,483
Currency realignment	3,331,468	558,564	316,715	2,261,593	6,468,340
Additions	—	4,136,007	1,371,750	1,279,689	6,787,446
Acquired on acquisition of subsidiaries	167,223,393	3,088,138	6,147,279	13,164,456	189,623,266
At 30 September 2006	188,125,975	40,759,049	12,462,220	71,677,291	313,024,535
DEPRECIATION, AMORTISATION
AND IMPAIRMENT
At 1 April 2005	13,402,704	17,691,985	3,779,558	38,281,496	73,155,743
Provided for the year	386,123	3,819,092	185,366	7,072,423	11,463,004
Eliminated on disposals	(10,272,779)	(541,178)	—	(95,208)	(10,909,165)
At 1 April 2006	3,516,048	20,969,899	3,964,924	45,258,711	73,709,582
Currency realignment	91,572	413,275	144,504	1,726,312	2,375,663
Provided for the period	969,938	2,407,496	933,797	2,323,019	6,634,250
At 30 September 2006	4,577,558	23,790,670	5,043,225	49,308,042	82,719,495
CARRYING VALUES
At 30 September 2006	183,548,417	16,968,379	7,418,995	22,369,249	230,305,040
At 31 March 2006	14,055,066	12,006,441	661,552	9,712,842	36,435,901

The above items of property, plant and equipment are depreciated on a straight-line basis at the following rates per annum:

Freehold land Nil Buildings Over the remaining unexpired terms of the leases or fifty periods, whichever the shorter Furniture, fixtures and equipment 10% - 25% Motor vehicles 20% - 25% Plant and machinery 10% - 33[1] ⁄3%

— 50 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

The carrying value of properties shown above comprises:

Properties outside Hong Kong held under Freehold Long term leases Medium term leases	30.9.2006 HK$ 169,300,500 2,122,884 12,125,033 183,548,417	31.3.2006 HK$ — 2,147,057 11,908,009
		14,055,066

The net book values of furniture, fixtures and equipment and motor vehicles of HK$16,968,379 (31.3.2006: HK$12,006,441) and HK$7,418,995 (31.3.2006: nil) include amounts of HK$3,944,395 (31.3.2006: HK$4,430,053) and HK$6,814,500 (31.3.2006: nil) respectively in respect of assets held under finance leases.

15. PREPAID LEASE PAYMENTS

The Group’s prepaid lease payments comprise: Medium-term land use right in the PRC INTEREST IN AN ASSOCIATE Cost of unlisted investment in an associate Currency realignment Share of post-acquisition profits	30.9.2006 HK$ 659,217 30.9.2006 HK$ 2,856,165 49,585 236,000 3,141,750	31.3.2006 HK$ 667,914
		31.3.2006 HK$ — — —
		—

16. INTEREST IN AN ASSOCIATE

As at 30 September 2006, the Group had interest in the following associate:

					Proportion of
					nominal value of	Proportion
	Form of	Place of	Principal place	Nominal value of	registered capital	of voting
Name of entity	business structure	registration	of operation	registered capital	held by the Group	power held	Principal activity
Ningbo Hi-tech	Sino-foreign joint	PRC	PRC	RMB6,559,293	25%	25%	Production of
Magnetics	venture						magnetic, plastic and
Assemblies							other materials and
Co Ltd							magnetic assemblies

— 51 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

The summarised financial information in respect of the Group’s associate is set out below:

Total assets Total liabilities Net assets Group’s share of net assets of an associate Revenue Profit for the period since acquisition Group’s share of result of an associate for the period	30.9.2006 HK$ 23,043,839 (10,476,839
	12,567,000
	3,141,750
	11,269,544
	944,000
	236,000

17. AVAILABLE-FOR-SALE INVESTMENTS

Available-for-sale investments as at 30 September 2006 comprises: Unlisted equity investments, at cost (Note (a)) Impairment loss Equity securities listed in Hong Kong, fair value at 30 September 2006 (Note (b))	30.9.2006 HK$ 1,643,700 (773,450) 870,250 —	31.3.2006 HK$ 773,450 (773,450
		—
		—

Notes:

(a) The above unlisted investments represent investments in unlisted equity securities issued by private entities incorporated in the United States of America, France and India. They are measured at cost less impairment loss at each balance sheet date because the range of reasonable fair value estimates is so significant that the directors of the Company are of the opinion that their fair values cannot be measured reliably.

Two of the investments included in unlisted equity securities above, where the Group has an investment of significance, are Bowers Metrologie SARL (“BML”) and Bipico Industries (Tools) Private Limited (“BITPL”). BML is a company incorporated and operating in France, with a carrying amount of HK$280,250 (31.3.2006: nil). The investment represents a 35% holding of the issued share capital of BML. BML is not regarded as an associate of the Group because the Group has less than one-fifth of the voting power of BML under arrangements with other investors and the Group has no right to appoint directors of BML.

BITPL is a company incorporated and operating in India, with a carrying amount of HK$590,000 (31.3.2006: nil). The investment represents a 30% holding of the issued ordinary share capital of BITPL. BITPL is not regarded as an associate of the Group because the Group has less than one-fifth of the voting power of BITPL under arrangements with other investors and the Group has no right to appoint directors of BITPL.

Both of the companies are not considered to be associates undertaking since the Group does not possess the ability to exercise significant influence over the companies.

— 52 —

FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

(b) This represents the Group’s investment in the shares of Climax International Company Limited (“CICL”), a company incorporated in Bermuda with its shares listed on The Stock Exchange, representing approximately a 1.01% (31.3.2006: 1.15%) of the issued share capital of CICL as at 30 September 2006.

In the opinion of the directors, in view of the low volume of transactions in the market for CICL’s shares, it is difficult to dispose of the entire shares in the market. Hence, the fair value of CICL’s shares held by the Group is estimated to be approximately nil.

18. INVENTORIES

Raw materials Work in progress Finished goods	30.9.2006 HK$ 75,420,419 35,407,954 145,483,561 256,311,934	31.3.2006 HK$ 39,615,425 8,596,405 24,435,542
		72,647,372

19. DEBTORS AND PREPAYMENTS

Debtors and prepayments include trade debtors of HK$248,588,278 (31.3.2006: HK$90,276,351). The aged analysis of trade debtors at the balance sheet date is as follows:

0 - 60 days 61 - 90 days 91 - 120 days > 120 days	30.9.2006 HK$ 205,848,801 13,210,178 5,667,686 23,861,613 248,588,278	31.3.2006 HK$ 65,839,235 8,782,181 6,805,168 8,849,767
		90,276,351

The Group allows an average credit period ranged from 90 to 120 days (31.3.2006: 90 to 120 days) to its trade customers.

The directors consider that the carrying amount of the debtors approximates its fair value.

20. PLEDGED BANK DEPOSITS

The amount represents deposits pledged to banks to secure banking facilities granted to the Group. Deposits amounting to HK$5,000,000 (31.3.2006: HK$5,000,000) have been pledged to secure trust receipt and export invoices financing facilities and are therefore classified as current assets.

The deposits carry interest at prevailing market rate. The directors consider the carrying value of the amount at the balance sheet date approximates its fair value.

— 53 —

FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

21. BANK BALANCES AND CASH

Bank balances and cash include short-term bank deposits carrying interest at prevailing market rates. The directors consider the carrying value of the amount at the balance sheet date approximates to the fair value.

Included in the bank balances and cash are the following amounts denominated in a currency other than functional currency of the entity to which they relate:

			30.9.2006	31.3.2006
			US$	US$
United	States	Dollars	5,314,927	3,103,884

22. CREDITORS AND ACCRUED CHARGES

Creditors and accrued charges included trade creditors of HK$166,001,588 (31.3.2006: HK$48,567,099). The aged analysis of trade creditors at the reporting date is as follows:

0 - 60 days 61 - 90 days > 90 days	30.9.2006 HK$ 160,090,742 3,719,867 2,190,979 166,001,588	31.3.2006 HK$ 45,884,180 488,964 2,193,955
		48,567,099

The directors consider that the carrying amount of the creditors and accrued charges approximates its fair value.

— 54 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

23. BANK OVERDRAFTS/BANK BORROWINGS

Bank overdrafts Bank borrowings comprise: Export invoices financing Trust receipts/import loans Other bank loans Analysed as: Secured Unsecured Bank borrowings are repayable as follows: Within one year or on demand More than one year, but not exceeding two years More than two years, but not exceeding five years Less: Amount due within one year shown under current liabilities Amount due after one year	30.9.2006 HK$ 170,790,250 27,264,682 15,880,209 34,224,056 77,368,947 248,159,197	31.3.2006 HK$ —
		25,452,677 — 7,501,534
		32,954,211
		32,954,211
	193,963,811 54,195,386	32,954,211 —
	248,159,197	32,954,211
	54,567,754 9,051,193 13,750,000 77,368,947 (54,567,754)	29,866,358 3,087,853 —
		32,954,211
		(29,866,358
	22,801,193	3,087,853

The bank borrowings denominated in Hong Kong Dollars, Sterling Pound and Euro carry variable interest rates linked to Hong Kong Dollar Prime Rate, UK bank’s Currency Base Rate and Euribor respectively.

The effective interest rates on the Group’s floating rate borrowings range from mainly 6% to 12.8% per annum (31.3.2006: 5% to 7.5% per annum).

The fair values of the Group‘s bank loans, determined based on the present value of the estimated future cash flows discounted using the prevailing market rate at balance sheet date approximate their carrying values.

— 55 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

24. OBLIGATIONS UNDER FINANCE LEASES

Minimum lease payments 30.9.2006 31.3.2006 HK$ HK$ 6,055,958 1,970,208 5,059,964 2,534,568	Minimum lease payments 30.9.2006 31.3.2006 HK$ HK$ 6,055,958 1,970,208 5,059,964 2,534,568	Present value of minimum lease payments 30.9.2006 31.3.2006 HK$ HK$ 5,611,935 1,756,641 4,707,724 2,297,265	Present value of minimum lease payments 30.9.2006 31.3.2006 HK$ HK$ 5,611,935 1,756,641 4,707,724 2,297,265
11,115,922 (796,263)	4,504,776 (450,870)	10,319,659 —	4,053,906 —
10,319,659	4,053,906	10,319,659	4,053,906
		(5,611,935)	(1,756,641)
		4,707,724	2,297,265

During the period, the Group has acquired certain motor vehicle fleet under finance lease with lease terms ranging from 4 to 5 years. Interest rates underlying all obligations under finance lease are fixed at respective contract dates ranging from 3.95% to 5.25%. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. The fair values of the Group’s finance lease obligations, determined based on the present value of the estimated future cash flows discounted using the prevailing market rate at balance sheet date approximate their carrying value.

The Group’s obligations under finance leases are secured by the lessors’ charge over the leased assets.

25. PROVISIONS

At 1 April 2006 Acquired on acquisition of subsidiaries Exchange difference Utilisation of provision At 30 September 2006 Analysed for reporting purposes as: Non-current liabilities Current liabilities	Onerous contracts Manufacturing reorganisation HK$ HK$ — — 19,181,251 15,875,638 332,999 275,612 (545,750) (3,702,250) 18,968,500 12,449,000 30.9.2006 HK$ 15,856,250 15,561,250 31,417,500	Total HK$ — 35,056,889 608,611 (4,248,000)
		31,417,500
		31.3.2006 HK$ — — —

— 56 —

FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

The provision for onerous contracts represents the present value of the future lease payments that the Group is presently obligated to make under non-cancellable onerous operating lease contracts, less revenue expected to be earned on the lease including estimated future sub-lease revenue, where applicable. The estimate may vary as a result of changes in the utilisation of the leased premises and sub-lease arrangements were applicable. The unexpired term of the leases is 5 years.

The manufacturing reorganisation costs comprise the costs in relation to the closure of the Group’s manufacturing site at Wednesbury, UK and the subsequent transfer of all warehouses and distribution operations to the Group’s principal UK manufacturing site at Atlas, Sheffield. The closure and relocation of the Wednesbury facility were completed by 30 November 2006 and the costs include employee severance payments, site closure and relocation costs. Additionally the costs include the relocation of the Group’s UK magnet production facility from leased premises in Sheffield to the principal UK site at Atlas.

26. RETIREMENT BENEFITS PLANS

Defined contribution plans

Hong Kong

With effect from 1 December 2000, the Group has joined a mandatory provident fund scheme for all employees in Hong Kong. The MPF Scheme is registered with the Mandatory Provident Fund Scheme Authority under the Mandatory Provident Fund Schemes Ordinance. The assets of the MPF Scheme are held separately from those of the Group in funds under the control of an independent trustee. Under the MPF Scheme, the employer and its employees are each required to make contributions to the MPF Scheme at rates specified in the rules. The only obligation of the Group with respect to the MPF Scheme is to make the required contributions under the MPF Scheme. During the period from 1 April 2006 to 30 September 2006, the retirement benefit scheme contributions charged to the consolidated income statement amounting to HK$479,609 (31.3.2006: HK$449,513), which represented contributions payable to the fund by the Group at rates specified in the rules of the MPF Scheme.

Mainland China

The employees of the Group’s subsidiaries in the PRC are members of a state-managed retirement benefit scheme operated by the PRC government. The subsidiaries are required to contribute 8% of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Group with respect to the retirement benefit scheme is to make the specified contributions. The total contribution incurred in this connection for the period from 1 April 2006 to 30 September 2006 was HK$1,293,733 (31.3.2006: HK$1,215,167). No forfeited contributions may be used by the employer to reduce the existing level of contributions.

Defined benefit plan

The Group operates a contributory defined benefit plan covering certain of its employees in UK based subsidiaries of S&J named James Neill Pension Plan (“the Plan”). The benefits covered by the Plan are based on years of service and compensation history. The Plan’s assets are held separately from the assets of the Group and are administered by the Plan’s trustees and are managed professionally.

The actuarial valuation of the Plan was carried out at 30 September 2006 and 28 July 2006 (date of acquisition of S&J) by PricewaterhouseCoopers LLP respectively.

The Group’s contributions for the period from 1 October 2006 to 31 July 2007 are expected to be approximately HK$23.3 million. The rate of employer contributions after that date will be determined by negotiations between the Plan‘s trustees, the Plan‘s actuary and the principal employer. If no agreement is reached by 31 July 2007, contributions will be increased to approximately HK$51.6 million per annum.

— 57 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

The principal financial assumptions used for the purpose of the actuarial valuations were as follows:

	30.9.2006	28.7.2006
Long term rate of increase in pensionable salaries	3.10%	3.10%
Rate of increase of benefits in payment (note (a))	2.80%	2.80%
Rate of increase of benefits in payment (note (b))	2.50%	2.50%
Discount rate	5.05%	5.15%
Inflation assumption	3.00%	3.00%
Expected return on equities	8.20%	8.30%
Expected return on bonds	5.05%	5.15%
Expected return on cash	4.75%	4.75%

Notes:

(a) In respect of pensions in excess of the guaranteed minimum pension in the 1999 and 2001 sections of the Plan.

(b) In respect of guaranteed minimum pension earned after 6 April 1988.

The expected return on assets assumption has been derived by considering the appropriate return for each of the main asset classes. The yields assumed on bond type investments are based on published redemption yields at the balance sheet date. The assumed return on equities reflects an assumed allowance for the out-performance of these asset classes over UK Government bonds in the long-term. The assumed return on cash reflects the UK prevailing market interest rate on bank balances. The rates of return are shown net of investment manager expenses.

The life expectancies implied by the mortality assumption used in the actuarial valuation are (making allowance for projected future improvements in mortality):

Pensioner currently aged 70:	Male 14.5 years	Female 17.3 years
Future pensioner when aged 65:	Male 19.4 years	Female 22.4 years

The amount recognised in the consolidated balance sheet in respect of the defined benefit plan is as follows:

Fair value of plan assets: Equities Bonds Cash Insurance policies Present value of funded obligations Net liability recognised in the balance sheet	30.9.2006 HK$ 740,951,500 692,261,750 7,566,750 26,830,250	28.7.2006 HK$ 715,636,088 665,312,489 10,076,319 26,415,903
	1,467,610,250 (1,879,386,000)	1,417,440,799 (1,814,201,277
	(411,775,750)	(396,760,478

— 58 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

Amount recognised in the consolidated income statement in respect of the defined benefit plan is as follows:

	28.7.2006 to
	30.9.2006
	HK$
Current service cost	1,976,500
Expected return on plan assets	(15,930,000)
Interest on obligation	16,269,250
	2,315,750

The charge for the period is included in the staff costs in the consolidated income statement. The actual return on the plan assets was HK$35.2 million.

Movements in the present value of the defined benefit obligations in the current period are as follows:

At 1 April 2006 Acquisition of subsidiaries Currency realignment Current service cost Interest cost Contributions by plan participants Benefits paid Actuarial losses At 30 September 2006	HK$ — 1,814,201,277 32,009,946 1,976,500 16,269,250 973,500 (15,664,500) 29,620,027
	1,879,386,000

Movements in the fair value of the plan assets in the current period are as follows:

At 1 April 2006 Acquisition of subsidiaries Currency realignment Contributions by employer Contributions by plan participants Expected return on plan assets Benefits paid Actuarial gains At 30 September 2006	HK$ — 1,417,440,799 24,936,925 5,029,750 973,500 15,930,000 (15,664,500) 18,963,776
	1,467,610,250

— 59 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

The amount recognised in the Consolidated Statement of Recognised Income and Expense for the period ended 30 September 2006 is as follows:

Actuarial losses The history of experience adjustments is as follows: Present value of defined benefit obligation Fair value of plan assets Deficit Experience loss adjustment on Plan liabilities over period Experience gain adjustment on Plan assets over period	HK$ 10,656,251 HK$ (1,879,386,000) 1,467,610,250	HK$ 10,656,251
	(411,775,750)
	(29,620,027)
	18,963,776

The actuarial valuation showed that the market value of plan assets was HK$1,467,610,250 and that the actuarial value of these assets represented 78% of the benefits that had accrued to members. The shortfall of HK$411,775,750 is to be cleared in accordance with current UK pensions legislation and after consultation with, and agreement by, the Trustees of the Plan. The Group currently estimates that the shortfall will be cleared in approximately 10 years, subject to agreement by the Trustees and the UK Pensions Regulator.

27. DEFERRED TAXATION

The following are the major deferred tax liabilities and assets recognised and movements thereon during the current and prior periods:

Accelerated tax depreciation Accelerated accounting depreciation Revaluation of properties HK$ HK$ HK$ At 1 April 2005 (558,508) — — Charged to consolidated income statement (988,000) — — At 31 March 2006 (1,546,508) — — Acquisition of subsidiaries — 6,669,218 (20,776,064) (Charged) credited to consolidated income statement (278,496) — 118,000 Exchange differences — 145,282 (360,686) At 30 September 2006 (1,825,004) 6,814,500 (21,018,750)	Accelerated tax depreciation Accelerated accounting depreciation Revaluation of properties HK$ HK$ HK$ At 1 April 2005 (558,508) — — Charged to consolidated income statement (988,000) — — At 31 March 2006 (1,546,508) — — Acquisition of subsidiaries — 6,669,218 (20,776,064) (Charged) credited to consolidated income statement (278,496) — 118,000 Exchange differences — 145,282 (360,686) At 30 September 2006 (1,825,004) 6,814,500 (21,018,750)	Accelerated tax depreciation Accelerated accounting depreciation Revaluation of properties HK$ HK$ HK$ At 1 April 2005 (558,508) — — Charged to consolidated income statement (988,000) — — At 31 March 2006 (1,546,508) — — Acquisition of subsidiaries — 6,669,218 (20,776,064) (Charged) credited to consolidated income statement (278,496) — 118,000 Exchange differences — 145,282 (360,686) At 30 September 2006 (1,825,004) 6,814,500 (21,018,750)	Accelerated tax depreciation Accelerated accounting depreciation Revaluation of properties HK$ HK$ HK$ At 1 April 2005 (558,508) — — Charged to consolidated income statement (988,000) — — At 31 March 2006 (1,546,508) — — Acquisition of subsidiaries — 6,669,218 (20,776,064) (Charged) credited to consolidated income statement (278,496) — 118,000 Exchange differences — 145,282 (360,686) At 30 September 2006 (1,825,004) 6,814,500 (21,018,750)	Retirement benefit obligations HK$ — —	Tax losses HK$ — —	Total HK$ (558,508) (988,000)
	(1,546,508) — (278,496) —	— 6,669,218 — 145,282	— (20,776,064) 118,000 (360,686)	— 94,601,408 — 1,642,342	— 13,338,436 1,062,224 231,564	(1,546,508) 93,832,998 901,728 1,658,502
	(1,825,004)	6,814,500	(21,018,750)	96,243,750	14,632,224	94,846,720

— 60 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

For the purposes of balance sheet presentation, certain deferred tax assets and liabilities have been offset in accordance with the Group’s accounting policy. The following is the analysis of the deferred tax balances (after offset) for financial reporting purposes:

Deferred tax liabilities Deferred tax assets	30.9.2006 HK$ (21,781,530) 116,628,250 94,846,720	31.3.2006 HK$ (1,546,508) —
		(1,546,508)

At the balance sheet date, based on the estimation of future profit streams, the Group has unrecognised deferred tax assets (before applying tax rates prevailing in the respective jurisdictions) in respect of unused tax losses, capital losses, other temporary differences and other tax credits available for offset against future profits. These are analysed as follows:

Unused tax losses Capital losses Other temporary differences Other tax credits	30.9.2006 HK$ 397,603,000 118,000,000 154,039,000 406,854,000 1,076,496,000	31.3.2006 HK$ 164,560,000 — — —
		164,560,000

The tax losses and other tax credits may be carried forward indefinitely.

28. SHARE CAPITAL

Authorised: 1,000,000,000 shares of HK$0.1 each Number of shares 30.9.2006 & 31.3.2006 Issued and fully paid: Shares of HK$0.1 each 557,058,400	30.9.2006 & 31.3.2006 HK$ 100,000,000
	Amount 30.9.2006 & 31.3.2006 HK$ 55,705,840

There was no change of the Company’s authorised, issued and fully paid share capital during both periods.

— 61 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

29. RESERVES/MINORITY INTERESTS

Share premium HK$ 13,526,924	Share option reserve Capital redemption reserve HK$ HK$ 102,358 1,442,200	Share option reserve Capital redemption reserve HK$ HK$ 102,358 1,442,200	Reserves Capital reserve Translation reserve Accumulated profits HK$ HK$ HK$ 19,870,430 1,031,567 65,018,061	Reserves Capital reserve Translation reserve Accumulated profits HK$ HK$ HK$ 19,870,430 1,031,567 65,018,061	Reserves Capital reserve Translation reserve Accumulated profits HK$ HK$ HK$ 19,870,430 1,031,567 65,018,061	Total HK$ 100,991,540	Minority interests HK$ —
— — — —	— — — 250,273	— — — —	— — — —	(28,205) — (28,205) —	— 15,654,060	(28,205) 15,654,060 15,625,855 250,273	— —
					15,654,060		—
					—		—
13,526,924	352,631	1,442,200	19,870,430	1,003,362	80,672,121	116,867,668	—
— — — — — — —	— — — — — — 126,000	— — — — — — —	— — — — — — —	(2,306,139) — (2,306,139) — (2,306,139) — —	— (2,306,139) (6,585,563) (6,585,563) (6,585,563) (8,891,702) 19,008,950 19,008,950 12,423,387 10,117,248 — — — 126,000		(515,894 (4,070,688
							(4,586,582 569,085
					12,423,387		(4,017,497
					— —		48,028,577 —
13,526,924	478,631	1,442,200	19,870,430	(1,302,777)	93,095,508	127,110,916	44,011,080

The capital reserve of the Group represented the capital reserve arising on the group reorganisation in 1994.

30. SHARE OPTIONS

(a) Pursuant to a special general meeting of the Company held in April 1994, the Company adopted an executives’ share option scheme (the “1994 Scheme”) for the primary purpose of providing incentives to the executive directors and eligible employees of the Company and its subsidiaries. According to the 1994 Scheme, the Board of Directors of the Company is authorised, at any time within ten periods after the adoption date of the 1994 Scheme, to grant options to eligible participants to subscribe for shares in the Company at a subscription price equal to the higher of the nominal value of the shares and an amount, to be determined by a committee administering the 1994 Scheme, which is not less than 80% of the average of the closing prices of the shares on The SEHK on the five trading days immediately preceding the date of the options are offered to the participant.

— 62 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

The total number of shares in respect of which options may be granted under the 1994 Scheme is not permitted to exceed 10% of the shares of the Company in issue at any point in time, 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 is not permitted to exceed 25% of the maximum number of shares that may be issued pursuant to the 1994 Scheme without prior approval from the Company’s shareholders.

The offer of a grant of share options under the 1994 Scheme may be accepted within 21 days from the date of the offer together with the payment of nominal consideration of HK$1 in total by the grantee. The exercise period shall be determined by the board of directors but not exceeding ten years from the date of grant.

Share options granted under the 1994 Scheme are fully vested immediately at the date of grant. Options granted to a participant are lapsed if the participant ceased to be an eligible participant pursuant to the 1994 Scheme before the options are vested.

		Date of grant	Exercisable period	Exercise price
				HK$
1994	Scheme	23.7.2003	23.7.2003-22.7.2013	0.36

The movements in the number of options outstanding during the period which have been granted to the directors of the Company under the 1994 Scheme were as follows:

				Number of options	Number of options
			Lapsed			Lapsed
		Outstanding	during	Outstanding		during	Outstanding
		at 1.4.2005	the year	at 1.4.2006	the	period	at 30.9.2006
1994	Scheme	6,000,000	(1,000,000)	5,000,000		—	5,000,000

(b) At a special general meeting of the Company held on 30 August 2004, a new share option scheme was adopted (the “2004 Scheme”) for the purpose of providing incentives to the executive directors and eligible employees of the Company and its subsidiaries. The Board is authorised to grant options to eligible executive directors and employees of the Company and its subsidiaries, to subscribe for shares in the Company. The number of underlying shares available under the 2004 Scheme shall not, in aggregate, exceed 5% of the issued shares as at 30 August 2004. The number of shares issued and to be issued in respect of which options granted and may be granted to any individual in any 12 months is not permitted to exceed 1% of the issued shares at such time. Options to be offered to any participants who is also an executive director, chief executive officer, substantial shareholder of the Company or any of their respective associates (“Connected Persons”) shall require prior approval from the independent non-executive directors of the Company. No option can be granted to Connected Persons in any 12 months that exceeds in aggregate over 0.1% of the issued shares and an aggregate value exceeding HK$5 million based on the closing price of the share at the date of each grant without prior approval from the Company’s shareholders.

The exercise price of the options shall be determined by a committee administering the 2004 Scheme, and shall fall within the following prescribed parameters: they should not be less than (i) the par value of the shares, (ii) the closing price of the shares on the date of grant which must be a business day, and (iii) the average closing price of the shares over 5 consecutive trading days immediately preceding the date of grant.

— 63 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

The offer of a grant of share options under the 2004 Scheme may be accepted within 30 days from the date of the offer together with the payment of nominal consideration of HK$1 in total by the grantee. Options granted are vested for a period of three years immediately after the date of grant by one-third on each anniversary. The exercise period shall be determined by the board of directors but not exceeding ten years from the date of grant. Options granted to a participant are lapsed if the participant ceased to be an eligible participant pursuant to the 2004 Scheme before the options are vested.

The movements in the number of share options under the 2004 Scheme during the current financial period are as follows:

			Number of options	Number of options	Number of options
			Granted
			during the
			period and	Lapsed
			outstanding	during the	Outstanding
	Date of grant	Exercise price	at 31.3.2006	period	at	30.9.2006
		HK$
Directors	28.9.2004	0.242	5,734,425	—		5,734,425
	20.12.2004	0.250	4,874,261	—		4,874,261
Other employees	28.9.2004	0.242	2,293,767	(327,681)		1,966,086
	20.12.2004	0.250	1,949,703	(278,529)		1,671,174
			14,852,156	(606,210)	14,245,946

The options granted on 28 September 2004 and 20 December 2004 are vested for a period of three years immediately after the date of grant by one-third on each anniversary and are fully vested on 27 September 2007 and 19 December 2007 respectively. Options granted on those dates are exercisable after one year but not exceeding ten years from the date of grant subject to vesting conditions stated above.

31. ACQUISITION OF SUBSIDIARIES

Acquisition

On 28 July 2006, the Company has entered into a stock purchase agreement with Jacuzzi Brands, Inc., a company incorporated in the State of Delaware, USA and listed on the New York Stock Exchange and acquired approximately 61.8% of the issued share capital of S&J, a company incorporated in the State of Nevada, USA and traded electronically on the Over-the-counter bulletin board of the National Association of Securities Dealers of America for a consideration of HK$38.75 million.

— 64 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

The net assets acquired in the transaction and the discount on acquisition arising are as follows:

Acquiree’s carrying amount before combination Fair value adjustments HK$ HK$ Net assets acquired: Property, plant and equipment (Note) 120,393,883 69,229,383 Available-for-sale investments 855,399 — Interest in an associate 2,856,165 — Deferred tax asset 114,609,062 — Inventories 174,081,088 — Debtors and prepayments 136,139,037 — Taxation recoverable 1,551,318 — Bank and cash balances 255,576,032 — Creditors and accrued charges (122,119,181) — Taxation payable (1,319,345) — Obligations under finance leases (6,495,238) — Bank overdrafts (167,034,914) — Provisions (35,056,889) — Deferred tax liability — (20,776,064) Retirement benefit obligation (396,760,478) — 77,275,939 48,453,319 Minority interests Discount on acquisition Legal and professional fees paid directly attributable to the acquisition Total consideration, satisfied by cash Net cash outflow arising on acquisition: Cash consideration paid Legal and professional fees paid directly attributable to the acquisition Cash and cash equivalents acquired Bank overdraft acquired	Acquiree’s carrying amount before combination Fair value adjustments HK$ HK$ Net assets acquired: Property, plant and equipment (Note) 120,393,883 69,229,383 Available-for-sale investments 855,399 — Interest in an associate 2,856,165 — Deferred tax asset 114,609,062 — Inventories 174,081,088 — Debtors and prepayments 136,139,037 — Taxation recoverable 1,551,318 — Bank and cash balances 255,576,032 — Creditors and accrued charges (122,119,181) — Taxation payable (1,319,345) — Obligations under finance leases (6,495,238) — Bank overdrafts (167,034,914) — Provisions (35,056,889) — Deferred tax liability — (20,776,064) Retirement benefit obligation (396,760,478) — 77,275,939 48,453,319 Minority interests Discount on acquisition Legal and professional fees paid directly attributable to the acquisition Total consideration, satisfied by cash Net cash outflow arising on acquisition: Cash consideration paid Legal and professional fees paid directly attributable to the acquisition Cash and cash equivalents acquired Bank overdraft acquired	Fair value HK$ 189,623,266 855,399 2,856,165 114,609,062 174,081,088 136,139,037 1,551,318 255,576,032 (122,119,181 (1,319,345 (6,495,238 (167,034,914 (35,056,889 (20,776,064 (396,760,478
77,275,939	48,453,319	125,729,258 (48,028,577 (26,200,681
		(12,750,000
		38,750,000
		(38,750,000 (12,750,000 255,576,032 (167,034,914
		37,041,118

Note: The fair value of property, plant and equipment of the subsidiaries has been arrived at based on a valuation carried out by independent valuers not connected with the Group. The valuation was determined by reference to recent market prices of similar properties.

— 65 —

FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

The discount on acquisition mainly arose from the fair value adjustment regarding the freehold land and buildings acquired. The directors of the Company also have positive views on the future business prospects of S&J.

S&J contributed HK$116.3 million to the Group’s turnover and HK$1.5 million to the Group’s profit for the period between the date of acquisition and the balance sheet date.

If the acquisition had been completed on 1 April 2006, total group revenue for the period would have been HK$651.2 million, and profit for the period would have been HK$24.1 million. The pro forma information is for illustrative purposes only and is not necessarily an indicative of the revenue and results of the Group that actually would have been achieved had the acquisition been completed on 1 April 2006, nor is it intended to be a projection of future results.

32. MAJOR NON-CASH TRANSACTIONS

During the period, the Group entered into finance lease arrangements in respect of assets with a total capital value at the inception of the leases of approximately HK$1,371,750 (1.4.2005 to 31.3.2006: HK$4,856,581).

33. PLEDGE OF ASSETS

At the balance sheet date, the Group pledged its bank deposits of HK$5,000,000 to banks to secure credit facilities granted by the banks to the extent of approximately HK$27,500,000 (31.3.2006: HK$27,500,000).

The Group has pledged land and buildings having a net book value of approximately HK$122,366,000 (31.3.2006: nil) to secure general banking facilities granted to the Group.

34. CONTINGENT LIABILITIES

On 15 April 2004, the U.S. Securities and Exchange Commission (“SEC”) filed suit in the U.S. District Court for the Southern District of Florida, against S&J and Mr Dennis Crowley, its then Chief Executive Officer / Chairman (“Crowley”), among others, alleging violations of the federal securities laws. On 15 February 2005, the court approved a negotiated settlement with the SEC, without any admission of liability by the parties. S&J consented to a permanent injunction from violation of various provisions under federal securities laws.

In connection with the SEC complaint, the court appointed a Corporate Monitor on 15 April 2004 to oversee S&J’s operations, with power to review and approve all corporate actions. The fees and disbursements of the Corporate Monitor are borne by S&J. The term of office of the Corporate Monitor will cease when the court determines the function of the Corporate Monitor is no longer necessary, or S&J and the Corporate Monitor so agree. On 9 January 2007, the Corporate Monitor applied to end his term of office as he did not consider it necessary to continue his oversight function any longer. S&J awaits the court’s ruling on this application.

Subsequent to the SEC action a number of class action lawsuits were initiated against Crowley, S&J and others (“the Class Action”), alleging essentially the same claims as in the SEC’s suit. Following settlement negotiations, a Stipulation of Settlement has now been filed in the Class Action, with a final approval hearing by the court tentatively scheduled on 16 April 2007.

A derivative action, which contained essentially the same allegations as the SEC suit, was also brought by shareholders against certain directors and officers of S&J and other defendants, naming S&J as a nominal defendant (“Derivative Action”). A Stipulation of Settlement has also been filed in the Derivative Action, with a preliminary approval hearing by the court scheduled on 2 February 2007.

— 66 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

If the Class Action and Derivative Action are not settled, the plaintiffs might pursue the litigation. The outcome of such litigation cannot be predicted at this time.

Additionally, the Company is, from time to time, subject to legal proceedings and claims arising from the conduct of its business operations, including litigation related to personal injury claims, customer contract matters, employment claims and environmental matters.

While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities including lawsuits, the directors of the Company believe that with the aggregate amount of such liabilities, if any, in excess of amounts accrued or covered by insurance, will not have a material adverse effect on the consolidated financial position or results of operations of the Group.

35. OPERATING LEASE COMMITMENTS

The Group as lessee

At the balance sheet date, the Group had commitments for future minimum lease payments under non-cancellable operating leases in respect of rented premises which fall due as follows:

Operating leases which expire: Within one year In the second to fifth years inclusive Over five years	30.9.2006 HK$ 13,344,023 39,058,685 10,575,750 62,978,458	31.3.2006 HK$ 4,728,696 12,717,824 —
		17,446,520

Operating lease payments represent rentals payable by the Group for its office properties and factories which are negotiated for an average terms of seven years.

In respect of non-cancellable operating leases commitments, the following liabilities have been recognised:

Onerous lease contracts (Note 25) Within one year In the second to fifth years inclusive Over five years Total	30.9.2006 HK$ 3,097,500 15,635,000 236,000 18,968,500	31.3.2006 HK$ — — —
		—

— 67 —

FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

The Group as lessor

At the balance sheet date, the Group had contracted with tenants for the following future minimum lease payments:

Within one year In the second to fifth years inclusive Over five years	30.9.2006 HK$ 1,180,000 2,197,750 4,248,000 7,625,750	31.3.2006 HK$ — — —
		—

Operating lease income represents the rental receivable by the Group for its leased properties under sub-lease agreements. The Group had contracted with tenants for the above future minimum lease payments.

36. PRINCIPAL SUBSIDIARIES

			Proportion of	Proportion of
	Place of	Issued and fully paid	ownership	interest
	incorporation	share capital/	held by the	Company
Name of company	or registration	registered capital	Directly	Indirectly	Principal activities
Bowers Eclipse Equipment	PRC	Ordinary	—	61.8%	Manufacture, quality control
Shanghai Co. Limited		RMB4,026,000			and distribution of
					metrology products
Bowers Group plc	UK	Ordinary	—	61.8%	Investment holding
		£50,000
		Ordinary “A”
		£10,000
Bowers Metrology Limited	UK	Ordinary	—	61.8%	Manufacturer and distributor
		£100			of precision measuring
					equipment
Coventry Gauge Limited	UK	Ordinary	—	61.8%	Manufacture of precision
		£2			gauges and associated
					metrology products
CV Instruments Europe BV	The Netherlands	Ordinary	—	61.8%	Distributor of precision
		Euro18,000			measuring equipment
CV Instruments Limited	UK	Ordinary	—	61.8%	Assembly and distributor of
		£100			precision measuring
					equipment
Eclipse Magnetics Limited	UK	Ordinary	—	61.8%	Manufacture of permanent
		£80,000			magnets, magnetic work
					holding systems and other
					associated products,
					marketing and sales of
					micrometers and other
					precision measuring tools

— 68 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

			Proportion of	Proportion of
	Place of	Issued and fully paid	ownership	interest
	incorporation	share capital/	held by the	Company
Name of company	or registration	registered capital	Directly	Indirectly	Principal activities
James Neill Holdings Limited	UK	Ordinary	—	61.8%	Investment holding
		£44,773,788
		4.2% Preference
		£300,000
Magnacut Limited	UK	Ordinary	—	61.8%	Manufacture of permanent
		£9,000			magnets and assemblies
Markbalance, plc	UK	Ordinary	—	61.8%	Investment holding
		£13,000
Neill France SA	France	Ordinary	—	61.8%	Investment holding
		Euro198,184
Neill Tools Limited	UK	Ordinary	—	61.8%	Manufacture of hacksaw
		£25,597,000			blades, other engineers
					cutting tools, micrometers
					and other precision
					measuring tools
Offertower plc	UK	Ordinary	—	61.8%	Investment holding
		£13,000
Pan Electrium Industrial Company	Hong Kong	Ordinary	—	100%	Manufacture of and trading
Limited		HK$5,000,000			in electronic/electrical
					parts and products
Pantene Global Holdings Limited	Hong Kong	Ordinary	100%	100%	Investment holding in
(Note)		HK$5,000,000			Hong Kong
Pantene Industrial Co. Limited	Hong Kong	Ordinary	—	100%	Trading in electronics
		HK$10,000			products
Pantronics Holdings Limited	British Virgin	Ordinary	100%	100%	Investment holding
(Note)	Islands	US$200
Pin Xin International Limited	Hong Kong	Ordinary	—	100%	Trading in rechargeable
		HK$10,000			battery products
Rise Up International Limited	British Virgin	Ordinary	100%	100%	Investment holding in
(Note)	Islands	US$1			Hong Kong
Spear & Jackson (Australia) Pty	Australia	Ordinary	—	61.8%	Marketing and sale of group
Limited		AUS$4,640,000			hand and garden tools and
					other related products
Spear & Jackson France SA	France	Ordinary	—	61.8%	Marketing and sale of group
		Euro1,300,000			tools and other related
					products
Spear & Jackson Garden Products	UK	Ordinary	—	61.8%	Manufacturing and sale of
Limited		£16,977,000			garden, agricultural and
					contractors’ hand tools,
					woodsaws and builders’
					tools

— 69 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

			Proportion of	Proportion of
	Place of	Issued and fully paid	ownership	interest
	incorporation	share capital/	held by the	Company
Name of company	or registration	registered capital	Directly	Indirectly	Principal activities
Spear & Jackson Holdings Limited	UK	Cumulative Preference	—	61.8%	Investment holding
		£80,000
		Ordinary
		£16,470,391
S&J	United States	Ordinary	—	61.8%	Investment holding
		US$12,000
Spear & Jackson plc	UK	Ordinary	—	61.8%	Investment holding
		£60,834,229
		Deferred
		£22,599,309
Spear & Jackson (New Zealand)	New Zealand	Ordinary	—	61.8%	Marketing and sale of group
Limited		NZ$400,000			hand and garden tools and
					other related products
Shanghai Pin Xin	PRC*	Registered	—	100%	Trading of rechargeable
		HK$28,000,000			battery products
Shenzhen Pantai Electronic	PRC*	Registered	—	100%	Manufacture of electronic
		US$700,000			products

* This subsidiary was established in the PRC as a wholly foreign-owned enterprise.

Note: Directly held by the Company.

Unless specified in the “Principal activities”, the above subsidiaries operate principally in their respective places of incorporation or registration.

The above list includes the subsidiaries of the Company which, in the opinion of the directors, principally affected the results of the period or formed a substantial portion of the assets and liabilities of the Group. To give details of all the other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

None of the subsidiaries had any debt securities subsisting at 30 September 2006 or at any time during the period.

37. RELATED PARTY TRANSACTIONS

On 28 July 2006, the Company has entered into a stock purchase agreement with Jacuzzi, a company incorporated in the State of Delaware, USA and listed on the New York Stock Exchange and acquired approximately 61.8% of the issued share capital of S&J, a company incorporated in the State of Nevada, USA and traded electronically on the Over-the-counter bulletin board of the National Association of Securities Dealers of America for a total consideration of HK$38.75 million. Mr Brian C Beazer and Mr David H Clarke, were the directors and shareholders of the Company and Jacuzzi. Details of the acquisition is referred to note 31.

Other than the above mentioned transaction and the emoluments paid to the directors of the Company as disclosed in note 10, who are also considered as the key management of the Group, the Group has not entered into any other related party transaction.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

3. MANAGEMENT DISCUSSION AND ANALYSIS OF THE UPI GROUP

Group operations Review

UPI acquired 61.8% of S&J on 28 July 2006. The financial results for the period under review include the Company’s share of the financial results of S&J from the date of acquisitionto 30 September 2006.

To align the Company’s financial year-end date with that of S&J, the Company changed its financial year end date from 31 March to 30 September with effect from 2006.

The Group recorded a turnover during the six month period of HK$390.2 million in which the Contract Manufacturing Division contributed HK$273.9 million and S&J contributed, for two months, HK$116.3 million.

The Contract Manufacturing Division’s results for the period under review were adversely affected by competitive pressures and a general rise in costs, including, labour, raw materials and foreign exchange variations.

The Group’s four principal business units and their product offerings are summarized in alphabetical order as follows:

Contract Manufacturing Division

Pantene Industrial Co. Ltd, our original contract manufacturing business, is based in Shenzhen, China. Pantene is proud of its long standing record as OEM supplier to some of the world’s best known companies and brands. We base our approach on design, quality, price, delivery and service. Now we are moving towards total design solutions for our customers, and we feel we will be able to meet the requirements of the most discerning. From our corporate office in Hong Kong, we have developed complete design and production facilities in China, employing approximately 2,500 employees. We serve a World-Wide clientele and have opened an office in Chicago and now have commercial representation in the European Union.

Our products are widespread. The development of these products is controlled by our dedicated management team. Kong Meng Lee as COO is supported by a management team with considerable depth of experience and expertise, including from engineering and design, to production to sales and marketing functions.

Pantene was founded in 1978; our core business from the outset has been electronic power supplies covering a wide product range which includes voltage converters, power tool chargers, battery chargers, high frequency transformers, coils and solenoids. Increasingly, we are utilizing new technologies including laser/optics, ultrasonic, RF (radio frequency), and magneto-electric technologies to produce more sophisticated and complex product lines such as digital laser measurement devices, laser beam units, ultrasonic detection devices, thermostat controls, RF alert systems, portable magnetic generators (Mag Gen) and Mag Gen-powered products. Pantene’s Pin Xin sells to the consumer market battery chargers with rechargeable batteries under the Powerhaus brand name.

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APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

Our Engineering Department has a multi-disciplinary engineering approach employing over 100 engineers and technicians who are involved in design, testing and qualification of new products from concept through production, transforming customer’s ideas into reality. This department is fully equipped with modern tools and facilities.

In our OEM business the competition remains intense, but our customers balance their requirements not solely on price, but against all the other factors, especially quality and delivery. We are highly competitive when working closely with our customers to assure they have the best designs manufactured to exacting standards and delivered on a timely basis.

Tools Division

Our Tools Division, with a heritage dating back to the 1760s, encompasses Spear & Jackson Garden Products Ltd and Neill Tools Ltd, with a broad range of premium-quality well known product brands.

The Tools Division manufactures hand hacksaws, hacksaws blades, hacksaw frames, builders’ tools, riveter guns, wood saws and lawn, garden and agricultural tools, all non-powered. In addition, Neill Tools has supplemented its UK manufactured products with factored products from Asian suppliers. Neill Tools’ product offering now includes a full range of hand power tools, and a portfolio of electric powered garden tools that was added in 2005. The division has facilities in Sheffield, England and St. Chamond, Cedex, France and distribution facilities in Australia and New Zealand. The division sells in over 100 countries world-wide under globally recognized brands such as Spear and Jackson, WHS and Tyzack. The Division’s policy is to support its core product offering with a pipeline of new products and range extensions. In the period under review, the new product development programme, using the power of our global procurement resources, has seen the launches of the award winning Predator Woodsaw Series, garden power and professional builders’ tools. Our new product development programme has used the power of our global procurement capability programme in the latest category launches in the award-winning Predator Woodsaw Series, Garden Power and Professional Builders tools. The senior management team, led by Lee Wells as managing director, have a vision for the future which involves the design, manufacturing and sourcing high quality long-lasting products at a cost effective price which assures the customer excellent value.

Also in the Tools Division is the independently run Robert Sorby, a niche business supplying high-quality English designed and manufactured specialty hand tools for woodworkers. Robert Sorby’s product portfolio comprises chisels and accessories for the hobbyist woodworker, whether woodturner, carver, cabinet or furniture maker, who still derives satisfaction from constructing superb-quality products by hand. Robert Sorby, led by Peter Gill, has an outstanding reputation in this unique and specialized field and is known throughout the world. The company’s thriving mail order business is supported by a recently added e-commerce site.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

Metrology/Measurement Division

Our Metrology Division falls under Bowers Group plc and consists of four principal companies; Bowers Metrology Ltd., Bowers Metrology (UK) Ltd., CV Instruments Europe BV and Bowers Eclipse Equipment Shanghai Co. Ltd. These businesses are based in Bradford UK, Bordon UK, Maastricht, The Netherlands and Shanghai, PRC respectively.

The Metrology Division, led by Steve White as Managing Director, is engaged in the design, manufacturing and distribution of precision measuring instruments for the Automotive, Aerospace and Defence markets. These products range from simple engineers’ hand tools such as gauges for checking the threads, diameters and tapers of machined components to highly sophisticated and specialized measuring systems such as precision bore gauges and hardness testing equipment. Our products are sold to industrial customers and are exported to more than 50 countries worldwide.

The main manufacturing facility in Bradford, UK is equipped with the latest in modern manufacturing machinery and techniques, and 80% of the products are exported. Industrial concerns in the United States, Germany, France and P.R. China are major customers. The core product produced from this site is the 3-point internal micrometer range, known as the “Bowers XT”, a field in which Bowers is the market leader. A Special Product and Systems division offers specialized solutions to unique measuring needs.

The UK division in Bordon is following a strategy in offering a “one-stop-shop” to the UK industrial marketplace, complementing its own manufactured products with a range of products from manufacturers in Switzerland, USA and Germany. Selling predominantly to industrial end-users, the technical sales team offers solutions to the majority of high precision measuring problems.

The Bowers business is complemented by the well-known brands of Moore & Wright and CV Instruments. Moore & Wright, which celebrated its centenary in 2006, offers a full range of precision tools from factories in the UK and Asia. CV Instruments is the Testing Instruments brand and the distribution centre in Maastricht, Netherlands offers a complete range of portable and bench instruments for testing hardness, thickness, surface roughness and coating thickness.

Started in 2006, the new Bowers Shanghai facility manufactures several of the Group’s testing instruments, while also acting as a sourcing and quality control centre for products sold internationally. In addition, Bowers Shanghai acts as a distribution centre offering in the rapidly expanding Chinese market the entire product range of the Bowers Group.

Combining these well known brands with modern manufacturing facilities in both the UK and Asia, the Group continues to build on its strategy of offering standard and specialty measuring solutions to industry. This is supported by the Group slogan of being “Partners in Precision”.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

Magnetics Division

Eclipse Magnetics has a rich history of leading edge of innovation in magnetic tool technology while maintaining its foundation in a core product range that goes back to the early 20th century. The company’s strong management team, led by Lee Wells, is accepting the many challenging which lie in their business to ensure continued growth.

Eclipse Magnetics’ key products are permanent magnets (cast alloy), magnetic tools, magnetic chucks and turnkey magnetic systems. Products range from very simple low-cost items to technically complex high value added systems. In addition, Eclipse Magnetics supplies the market with other magnetic devices, sourced from Asia. Providing both complete factored items to end-customers, as well as sales of component parts to UK manufacturers. Eclipse is also involved in applied magnetics and supplies many areas of manufacturing with products such as separators, conveyors, lifting equipment and material handling solutions. The Eclipse name represents a guarantee of quality and performance and support from a team of highly skilled engineering specialists who continue to innovate new products from the UK incorporating patented technology.

Eclipse has a fully equipped magnet testing laboratory and specialist machine tools for its engineering division. Our special applications team designs, manufactures and installs fully automated depalletizing cells for the aerosol filing industry. The team also develops and supplies nuclear waste canister handling magnets, robotic pick and place magnets and laser welding magnetic conveyor lines.

In the 1990s the Engineered Products Division was formed to focus on developing higher technology magnetic products and equipment to serve an increasingly demanding manufacturing and processing industry in a wide number of markets.

In the Separation and Filtration group we have seen a surge in new products with patented designs that lead the way in separating ferrous contamination from all powder, granulate, slurry and liquid materials in the processing industry. The Food, Pharmaceutical and Plastics industries are targeted by us as potentially large customers for our new product additions as they are developed.

The company’s products are supplied worldwide and through major industrial distribution channels within the UK, Europe and the USA being strongest markets.

Brands

A significant part of the Group’s operations is branding and brands strategy, principally through Spear & Jackson and its subsidiaries.

Spear & Jackson has held leading brand names in its core business since 1760. Neill Tools is one of the largest British based manufacturers of hand tools with leading brand names such as Neill Tools, Elliott Lucas and Spear & Jackson. In the metrology division, the Moore & Wright brand has been recognized for over 100 years for its traditional craftsmanship while the Bowers name has been at the forefront of international precision measuring equipment for over 50 years. Eclipse Magnetics is a recognized brand name in the UK manufacturing industry because of its long history of supplying quality magnetic tools. Robert Sorby is a recognized specialist in marketing its wood turning tools.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

Pin Xin manufactures a range of chargers coupled with factored rechargeable batteries which are sold worldwide under the Powerhaus brand name.

Liquidity and Capital Resources

The Group’s net cash (debt) position as at 30 September 2006 and corresponding gearing ratio are as follows:

	At 30.9.06
	HK$’million
Cash	335.3
Less: Bill financing, bank borrowings and obligations
under finance leases	(258.5)
	76.8
Shareholders’ funds	182.8
Bill financing, bank borrowings and obligations under
finance leases to shareholders’ funds	141.0%
Net debt to shareholders’ funds	N.A.

As at 30 September 2006, cash and bank balances of the Group amounted to HK$335.3 million, with bill financing, bank borrowings and obligations under finance leases amounting to HK$258.5 million (net cash of HK$76.8 million), while the Group’s net asset value as at 30 September 2006 was HK$226.8 million.

The working capital position of the Group remains healthy. As at 30 September 2006, the liquidity ratio (ratio of current assets to current liabilities) was 170.1% and a gearing ratio of nil balance (ratio of net bank debt to net asset value). It is the intention of the Group to maintain an appropriate mix of equity and debt to ensure an efficient capital structure.

Cash Flow from Operating Activities

The Group’s main source of liquidity continues to be net cash from operating activities. With the continuous implementation of prudent cash control measures, cash generated from operating activities was a positive HK$29.5 million.

Cash Flow from Financing Activities

The net cash inflow from financing activities for the period under review amounted to HK$40.2 million, which included a net increase in bank borrowing of HK$42.7 million and principal repayments of obligation under finance lease of HK$1.7 million.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

Cash Inflow on Acquisition of a subsidiary

The net cash inflow arising on acquisition of a subsidiary was:

Cash consideration paid acquisition costs Cash and cash equivalents acquired	HK$ (51,500,000) 88,541,118 37,041,118

Capital Expenditure

The Group made additional capital expenditure investments of HK$5.4 million. This was financed by internal resources and credit facilities.

Treasury Management

During the six months ended 30 September 2006, there was no material change in the Group’s funding and treasury policy. The Group had a sufficient level of cash and banking facilities for the conduct of its business in the normal course. For exchange risk management, the Group adopted cautious financial measures to manage and minimize the exchange risk exposure, and in this regard, the Group endeavored to match the currencies of sales with those of purchase in order to neutralize the effect of currency exposure. It is the Group’s policy not to engage in speculative activities. The management continues to monitor foreign exchange exposure from time to time.

Major Customers and Major Suppliers

For the period under review, sales to the largest customer and the five largest customers accounted for 16.8% and 36.6% respectively, of total sales for the period.

Purchases from the largest supplier and the five largest suppliers accounted for 3.2% and 14.2%, respectively, of total purchases for the period.

As far as the directors are aware, none of the directors of the Company; their associates, or any shareholder (which to the knowledge of the directors own more than 5% of the Company’s share capital) has any interest in the customers or suppliers of the Company disclosed above other than portfolio interests.

Employees

As at 30 September 2006, the Group employed 801 executive and clerical staff and 2,470 factory workers. The remuneration of such staff and workers is determined by overall guidelines within the

— 76 —

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

industry. The Group has also adopted certain bonus programs, share option schemes, medical insurance and personal accident insurance, and other employee welfare and benefit programs for its various categories of employees. Awards, under award programs, are determined annually based on certain criteria which relates to performance of each employee individually or business divisions.

The Group has not experienced any significant problems with its employees or disruption to its operations due to labor disputes nor has it experienced any difficulty in the recruitment and retention of experienced staff. The Group maintains a good relationship with employees.

The Group benefited from a motivated workforce. The Group is fully committed to investing in the growth and development of its people. The Group organizes training sessions in many disciplines including SAP for the benefit of its staff on a worldwide basis to upgrade staff skills.

Major Factors Affecting The Group

During the six months period under review, our trading performance was affected by the intensely competitive nature of the business environment in which we operate, exacerbated by the following specific factors:

Rise in materials and other costs;
Weakness of the US Dollar which reduces the Group’s margins;
Severe downward pricing pressure from customers.

During the period under review, Pantene gained a significant increase in sales volume although its gross profit margin was hit by the increase in labor, utility, raw material costs and currency fluctuations. Pantene continues its efforts to control costs by all available means. Pin Xin’s results were also affected by the closure of the Shanghai operations.

The Group addresses these problems by improving operational efficiencies and optimizing its financial resources through on-going cost cutting and financial control measures. Certain restructuring exercises were taken during the period to streamline business operations. S&J initiated a significant UK manufacturing reorganization program prior to UPI’s acquisition of a controlling stake in that company and these restructuring activities will continue into the next fiscal year.

4. WORKING CAPITAL OF THE ENLARGED GROUP

The Directors, after due and careful consideration, are of the opinion that upon the completion of the Acquisition, and based on available banking facilities and internal resources of the Enlarged Group, the Enlarged Group has sufficient working capital for its present requirements, that is for the next twelve months from the date of this circular.

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FINANCIAL INFORMATION ON UPI GROUP

APPENDIX I

5. STATEMENT ON THE INDEBTEDNESS OF THE ENLARGED GROUP PURSUANT TO APPENDIX 1B(28) OF THE LISTING RULES

5.1 Borrowings

As at the close of business on 30 September 2007, being the latest practicable date for the purpose of this statement of indebtedness of the Enlarged Group prior to the printing of the circular, the Enlarged Group had cash at bank balances of approximately HK$107,579,000, bank overdrafts of approximately HK$2,962,000, bank loans of approximately HK$117,585,000 and obligations under finance leases of approximately HK17,067,000.

The secured bank loans and bank overdrafts, in aggregate, amounting to approximately HK$120,547,000 were secured by corporate guarantees from the Enlarged Group of which (a) bank loans of approximately HK$17,135,000 were additionally secured by pledged deposits of approximately HK$5,000,000 and (b) bank loans of approximately HK$43,000,000 were additionally secured by plant and machinery to the value of HK$10,000,000.

As at 30 September 2007, the carrying amount of property, plant and machinery of the Enlarged Group held under finance leases amounted to approximately HK$18,799,000.

The net debt position of the Enlarged Group as at 30 September 2007 (i.e. cash and bank balances held less overdrafts, loans and other borrowings, including liabilities under finance leases), based on unaudited accounts was HK$30,035,000. Included in this net debt position is the draw down of HK$43,000,000 in connection with the purchase of the minority interest in S&J.

Amounts in foreign currency have, for the purpose of this indebtedness statement of the Enlarged Group, been translated into Hong Kong dollars at the applicable rate of exchange ruling at the close of business on 30 September 2007.

5.2 Contingent liabilities

None.

5.3 Disclaimer

Save as aforesaid, and apart from intra-group liabilities, and normal trade payables, United Pacific Industries Limited did not have any loan capital issued or agreed to be issued, bank overdrafts, loans, debt securities issued and outstanding, authorised or otherwise created but unissued term loans or other borrowings, indebtedness in nature of borrowings, liabilities under acceptances (other than trade bills) or acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, which are either guaranteed, unguaranteed, secured or unsecured, guarantees or other material contingent liabilities outstanding at the close of business on 30 September 2007.

5.4 Changes since 30 September 2007

The Directors confirm that, save as disclosed herein, there has not been any material change in the indebtedness or contingent liabilities of the Enlarged Group since 30 September 2007.

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

A. ACCOUNTANTS’ REPORT ON S&J GROUP

The following is the text of a report, prepared for the sole purpose of inclusion in this circular, received from the reporting accountants of the S&J Group, Andrew Ma DFK (CPA) Limited. As described in the paragraph headed “Documents Available for Inspection” in Appendix V, a copy of the following accountants’ report is available for inspection.

ANDREW MA DFK (CPA) LIMITED

Certified Public Accountants 19 Floor, Seaview Commercial Building 21-24 Connaught Road West Hong Kong SAR

==> picture [98 x 36] intentionally omitted <==

15 November 2007

The Board of Directors United Pacific Industries Limited

Dear Sirs,

We set out below our report on the financial information as contained in sections B to E below (the “Financial Information”) relating to Spear & Jackson, Inc. (“S&J”) and its subsidiaries (hereinafter collectively referred to as the “S&J Group”) for the three years ended 30 September 2004, 2005 and 2006 and the nine months ended 30 June 2007 (“Relevant Periods”) for inclusion in the circular dated 15 November 2007 (the “Circular”) issued by United Pacific Industries Limited (the “Company”), a company incorporated in Bermuda with its shares being listed on the main board of The Stock Exchange of Hong Kong Limited, in connection with the acquisition of 38.2% equity interest in S&J.

S&J was a corporation incorporated in Nevada and its shares were registered under the United States Securities Exchange Act of 1934 and were publicly traded on the Pink Sheets of the Over the Counter Market of the National Association of Securities Dealers of America.

Having gained a controlling stake of 61.8% in S&J through a very substantial acquisition (“VSA”) on 28 July 2006, the Company achieved full control of S&J by acquiring the remaining 38.2% of the outstanding shares in S&J not already owned by the Company pursuant to the Agreement and Plan of Merger dated 22 June 2007 (“Agreement”) entered into between the Company, Pantene Global Holdings Limited (“PGHL”, a wholly-owned subsidiary of the Company incorporated in Hong Kong and which held the 61.8% equity interest in S&J acquired in the VSA), and Pantene Global Acquisition Corporation (“PGAC”, a Nevada corporation formed in 2007 as a direct wholly-owned subsidiary of PGHL to effect a merger with S&J).

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APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

Under the Agreement, S&J will be merged with and into PGAC with PGAC as the surviving corporation. S&J will then cease and all its shares will be cancelled and S&J shares held by minority shareholders will be converted into the right to receive the merger consideration of US$1.96 per share in cash without interest. PGAC will continue the operations of S&J as a private company and a wholly-owned subsidiary of PGHL.

The S&J Group operates through its subsidiaries in the United Kingdom and in other parts of the World. S&J’s direct and indirect interests in the principal subsidiaries as at the date of this report are detailed in Note 38 to the financial information.

S&J’s statutory consolidated financial statements for the three years ended 30 September 2006 and its management consolidated financial statements for the nine months ended 30 June 2007 (the “Underlying Financial Statements”) were prepared in accordance with the relevant United States Financial Accounting Standards (“USFAS”) and financial regulations applicable to publically quoted enterprises established in the United States. Chantrey Vellacott DFK LLP, a firm of chartered accountants in the United Kingdom but having registration with the Public Company Accounting Oversight Board in the United States, was the auditor of S&J and had expressed an unqualified opinion on the statutory consolidated financial statements for each of the three years ended 30 September 2006.

The Underlying Financial Statements are the responsibility of the directors of S&J. For the purpose of this report, we have carried out independent audit procedures as considered necessary on the Underlying Financial Statements in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

We have also examined the Underlying Financial Statements in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” as recommended by the HKICPA.

The Financial Information, which is expressed in United States dollars, has been prepared in accordance with Hong Kong Financial Reporting Standards issued by the HKICPA based on the Underlying Financial Statements, after making such adjustments as are appropriate. Details of the reconciliation between the USFAS and HKFRS are set out in the statement of adjustments which is made available for public inspection.

The directors of the Company are responsible for the Financial Information and the contents of the circular in which this report is included. It is our responsibility to form an independent opinion, based on our examination, on the Financial Information and to report our opinion solely to you.

In our opinion the Financial Information gives, for the purpose of this report, a true and fair view of the state of affairs of S&J as at 30 September 2004, 30 September 2005, 30 September 2006 and 30 June 2007, and of the consolidated results and cash flows of S&J for the Relevant Periods.

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APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

For the purpose of this report, the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the nine months ended 30 June 2006, together with the notes thereon have been extracted from the unaudited consolidated financial statements of S&J (the “Comparative Financial Information”) which were prepared by the directors of S&J. We have reviewed the Comparative Financial Information in accordance with The Statement of Auditing Standards 700 “Engagements to review interim financial reports” issued by the HKICPA. Our review consisted principally of making enquiries of the management of S&J and applying analytical procedures to the Comparative Financial Information and based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the Comparative Financial Information. On the basis of our review which does not constitute an audit, we are not aware of any material modifications that should be made to the Comparative Financial Information.

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

B. FINANCIAL INFORMATION

CONSOLIDATED INCOME STATEMENTS

Year 2006 US$’000 96,993 (67,896)	ended 30 September 2005 2004 US$’000 US$’000 100,698 99,485 (67,463) (67,574)	ended 30 September 2005 2004 US$’000 US$’000 100,698 99,485 (67,463) (67,574)	Nine months ended 30 June 2007 2006 US$’000 US$’000 (Unaudited) 82,775 75,145 (54,221) (51,743) 28,554 23,402 386 271 (19,774) (17,396) (4,925) (5,276) 228 — (184) (1,820) — (650) (340) (369) 140 — 4,085 (1,838) (1,874) (1,207) 2,211 (3,045) — (101) — 12 — (89) 2,211 (3,134) 2,211 (3,134) $0.39 ($0.53) $0.00 ($0.02) $0.39 ($0.55)	Nine months ended 30 June 2007 2006 US$’000 US$’000 (Unaudited) 82,775 75,145 (54,221) (51,743) 28,554 23,402 386 271 (19,774) (17,396) (4,925) (5,276) 228 — (184) (1,820) — (650) (340) (369) 140 — 4,085 (1,838) (1,874) (1,207) 2,211 (3,045) — (101) — 12 — (89) 2,211 (3,134) 2,211 (3,134) $0.39 ($0.53) $0.00 ($0.02) $0.39 ($0.55)
29,097 420 (22,415) (6,668) 3,581 (3,478) (720) (493) 99 (577) (1,907) (2,484) (101) 48 (53)	33,235 666 (22,202) (6,898) 3,279 (1,111) — (316) — 6,653 (1,203) 5,450 (163) (476) (639)	31,911 380 (22,608) (7,386) — — — (378) — 1,919 (1,168) 751 (214) (187) (401)	28,554 386 (19,774) (4,925) 228 (184) — (340) 140 4,085 (1,874) 2,211 — — —	23,402 271 (17,396 (5,276 — (1,820 (650 (369 —
				(1,838 (1,207
				(3,045
				(101 12
				(89
(2,537) (2,537)	4,811 4,811	350 350	2,211 2,211
($0.43) ($0.01)	$0.62 ($0.08)	$0.06 ($0.03)	$0.39 $0.00	($0.53 ($0.02
($0.44)	$0.54	$0.03	$0.39

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

CONSOLIDATED BALANCE SHEETS

THE S&J GROUP

As at 30 September 2006 2005 2004 US$’000 US$’000 US$’000 15,594 17,568 21,485 — — 3,190 341 — — 167 157 160 16,752 17,400 14,354 32,854 35,125 39,189	As at 30 September 2006 2005 2004 US$’000 US$’000 US$’000 15,594 17,568 21,485 — — 3,190 341 — — 167 157 160 16,752 17,400 14,354 32,854 35,125 39,189	As at 30 September 2006 2005 2004 US$’000 US$’000 US$’000 15,594 17,568 21,485 — — 3,190 341 — — 167 157 160 16,752 17,400 14,354 32,854 35,125 39,189	As at 30 June 2007 US$’000 17,355 — 482 178 14,027 32,042 25,772 21,450 203 9,831 57,256 18,866 — 633 608 201 20,308 36,948 68,990 827 1,978 34,532 37,337 31,653 12 6,989 44,601 (56) 8,723 (28,076) (540) 31,653
22,852 17,333 213 9,929 50,327 15,628 — 489 1,971 153 18,241 32,086 64,940 418 2,008 52,155 54,581	24,999 17,764 — 7,289 50,052 16,637 752 613 1,164 88 19,254 30,798 65,923 337 1,369 42,994 44,700	21,988 20,153 — 5,090 47,231 18,692 68 803 506 22 20,091 27,140 66,329 625 1,275 37,859 39,759	25,772 21,450 203 9,831
			57,256
			18,866 — 633 608 201
			20,308
			36,948
			68,990
			827 1,978 34,532
			37,337
10,359	21,223	26,570
12 6,989 44,601 (10) 7,076 (47,769) (540)	12 6,989 44,601 (7) 6,835 (36,667) (540)	12 6,989 44,601 (61) 7,053 (31,484) (540)	12 6,989 44,601 (56 8,723 (28,076 (540
10,359	21,223	26,570

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

BALANCE SHEETS

S&J

As at 30 September 2006 2005 2004 US$’000 US$’000 US$’000 — — — — — 3,190 — — —	As at 30 September 2006 2005 2004 US$’000 US$’000 US$’000 — — — — — 3,190 — — —	As at 30 September 2006 2005 2004 US$’000 US$’000 US$’000 — — — — — 3,190 — — —	As at 30 June 2007 US$’000 — — — — 130 9,393 1,120 10,643 308 4,815 5,123 5,520 5,520 5,520 12 24,813 (18,765) (540) 5,520
— 16 9,393 1,560 10,969 420 4,641 5,061 5,908 5,908	— 16 9,393 3,819 13,228 482 5,427 5,909 7,319 7,319	3,190 3 9,393 1,389 10,785 770 5,079 5,849 4,936 8,126	—
			130 9,393 1,120
			10,643
			308 4,815
			5,123
			5,520
			5,520
5,908	7,319	8,126
12 24,813 (18,377) (540)	12 24,813 (16,966) (540)	12 24,813 (16,159) (540)	12 24,813 (18,765 (540
5,908	7,319	8,126

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APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Share capital US$’000 12 — — — —	Share premium US$’000 6,989 — — — —	Capital reserve US$’000 44,601 — — — —	Hedging reserve US$’000 (15) — (46) — —	Translation reserve US$’000 4,758 2,295 — — —	Retained earnings US$’000 (26,434) — — (5,400) 350	Treasury stock US$’000 (540) — — — —	Total US$’000 29,371 2,295 (46 (5,400 350
— 12 — — — — — 12 — — — — —	— 6,989 — — — — — 6,989 — — — — —	— 44,601 — — — — — 44,601 — — — — —	(46) (61) — 54 — — 54 (7) — (3) — — (3)	2,295 7,053 (218) — — — (218) 6,835 241 — — — 241	(5,050) (31,484) — — (9,994) 4,811 (5,183) (36,667) — — (8,565) (2,537) (11,102)	— (540) — — — — — (540) — — — — —	(2,801
							26,570
							(218 54 (9,994 4,811
							(5,347
							21,223
							241 (3 (8,565 (2,537
							(10,864
12	6,989	44,601	(10)	7,076	(47,769)	(540)	10,359
— — — — —	— — — — —	— — — — —	— (46) — — (46)	1,647 — — — 1,647	— — 17,482 2,211 19,693	— — — — —	1,647 (46 17,482 2,211
							21,294

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APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

	Share	Share	Capital	Hedging	Translation	Retained	Treasury
	capital	premium	reserve	reserve	reserve	earnings	stock	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
Unaudited
At 1 October 2005	12	6,989	44,601	(7)	6,835	(36,667)	(540)	21,223
Exchange differences arising on
translation of foreign
operations	—	—	—	—	228	—	—	228
Unrealised holding gains	—	—	—	7	—	—	—	7
Recognition of actuarial losses
on defined benefit plan (net
of tax) directly in equity	—	—	—	—	—	(7,725)	—	(7,725)
Profit for the period	—	—	—	—	—	(3,134)	—	(3,134)
Total income and expense
recognized for the period	—	—	—	7	228	(10,859)	—	(10,624)
At 30 June 2006	12	6,989	44,601	—	7,063	(47,526)	(540)	10,599

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APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

CONSOLIDATED CASH FLOW STATEMENTS

Year 2006 US$’000 (630) (272) 182 248 63 1,444 (99) (36) (3,713) 2,064 1,159	ended 30 September 2005 2004 US$’000 US$’000 6,014 1,518 (363) (78) 232 272 (146) (118) 84 106 1,686 1,536 — — 503 187 (3,273) 14 2,726 3,558 187 —	ended 30 September 2005 2004 US$’000 US$’000 6,014 1,518 (363) (78) 232 272 (146) (118) 84 106 1,686 1,536 — — 503 187 (3,273) 14 2,726 3,558 187 —	Nine months ended 30 June 2007 2006 US$’000 US$’000 4,085 (1,927 (254) (160 163 119 105 184 72 66 910 1,070 (140) — — — (232) 2 1,455 1,630 (46) 145	Nine months ended 30 June 2007 2006 US$’000 US$’000 4,085 (1,927 (254) (160 163 119 105 184 72 66 910 1,070 (140) — — — (232) 2 1,455 1,630 (46) 145
410 2,965 1,292 (123) (3,676) 868 (434) 434 (946) 272 4,965 (229) 4,062 (776) (42) (182) (63) (1,063) 3,433 (41) 6,537	7,650 (3,553) 2,099 (1,362) (10,061) (5,227) (137) (5,364) (986) 363 8,676 — 8,053 (861) — (232) (84) (1,177) 1,512 3 5,022	6,995 3,192 (2,367) (643) (2,588) 4,589 (169) 4,420 (6,956) 78 81 — (6,797) (955) (25) (272) (106) (1,358) (3,735) (130) 8,887	6,118 (1,066) (2,444) 246 (2,817) 37 (57) (20) (1,089) 254 447 — (388) (652) — (163) (72) (887) (1,295) 1,197 9,929	1,129 1,681 312 1,342 (2,595
				1,869 (402
				1,467 (738 160 86 (229
				(721 (590 (34 (119 (66
				(809 (63 (166 6,537
9,929	6,537	5,022	9,831	6,308
9,929 —	7,289 (752)	5,090 (68)	9,831 —	6,321 (13
9,929	6,537	5,022	9,831	6,308

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

C. NOTES TO THE FINANCIAL INFORMATION

1. GENERAL

Spear & Jackson, Inc. (“S&J” or “the Company”) was incorporated under the name of Megapro Tools, Inc., on 17 December 1998, under the laws of the State of Nevada, The United States of America and its shares were traded on the “Pink Sheets” of the Over the Counter market under the Stock Symbol SJCK. The registered address of S&J is 12012 Southshore Boulevard, Suite 103, Wellington, Florida 33414, The United States of America.

On 23 August 2002, USI Mayfair Limited, a corporation organised under the laws of England and a wholly owned subsidiary of USI Global Corp., S&J and S and J Acquisitions Corp., a company incorporated on 22 August 2002 under the laws of the State of Florida and a wholly owned subsidiary of S&J, executed a Stock Purchase Agreement to acquire all of the issued and outstanding shares of Spear & Jackson plc and its affiliate, Bowers Group plc, owned by USI Mayfair Limited. The purchase price comprised 3,543,281 shares of common stock of S&J and promissory notes in the principal amount of £150,000 pounds sterling (equivalent to US$232,860) (“the Transaction”). The Transaction closed on 6 September 2002. Concurrently with the closing of the transaction, and as a condition precedent thereto, Megapro closed a Private Placement pursuant to which it agreed to issue 6,005,561 shares of the common stock of Megapro to PNC Tool Holdings, LLC, a Nevada Limited liability company (“PNC”) in consideration for US$2,000,000 (the “Private Placement”). Mr Dennis Crowley, who became CEO of the Company, was the sole owner of PNC.

On 15 April 2004, the U.S. Securities and Exchange Commission (“SEC”) filed suit in the U.S. District Court of Florida, against S&J and Mr Dennis Crowley, its then Chief Executive Officer/Chairman, among others, alleging violations of the federal securities laws. These allegations arose from the alleged failure of Mr Crowley to accurately report his ownership of the Company’s stock, and his alleged manipulation of the price of the Company’s stock through dissemination of false information, allowing him to profit from sales of stock through nominee accounts.

Following extensive settlement negotiations with the SEC and Mr Crowley, the Company reached a resolution with both parties. On 28 September 2004, Mr Crowley signed a Consent to Final Judgment of Permanent Judgment with the SEC, without admitting or denying the allegations included in the complaint, which required a disgorgement and payment of civil penalties by Mr Crowley consisting of a disgorgement payment of US$3,765,777 plus prejudgment interest in the amount of US$304,014, as well as payment of a civil penalty in the amount of US$2,000,000. On 18 November 2004, the Company signed a Consent to Final Judgment of Permanent Injunction with the SEC pursuant to which the Company, without admitting or denying the allegations included in the Complaint filed by the Commission, consented to a permanent injunction from violation of various sections and rules under the Securities Act of 1933 and the Securities Exchange Act of 1934. No disgorgement or civil penalties were sought from, or ordered to be paid by the Company.

Additionally, the Company entered into a Stock Purchase Agreement with PNC Tool Holdings LLC (“PNC”) and Mr Crowley, the sole member of PNC. Under the Stock Purchase Agreement, the Company acquired, for US$100, and other good and valuable consideration, 6,005,561 common shares of the Company held by PNC, which represented approximately 51.1% of the outstanding common shares of the Company at 31 December 2004, and which constituted 100% of the common stock held by such entity. The parties also executed general releases in favor of each other subject to the fulfillment of the conditions of the Stock Purchase Agreement.

With the return of the S&J shares to the Company by PNC, the stockholders of the Company had their percentage stock interest increase correspondingly. Jacuzzi Brands, Inc. (“Jacuzzi”), which at this time was a beneficial owner of 3,543,281 shares of common stock, had its interest in the Company increased to approximately 61.8% of the outstanding common stock.

On 21 April 2005, Jacuzzi adopted a plan of disposition of the Company’s common stock. On 23 March 2006, Jacuzzi and its subsidiary undertaking, USI American Holdings, Inc. (“USI” and, together with Jacuzzi, “the Seller”) entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with United Pacific Industries Limited (“UPI”), a Bermuda Corporation, whose shares are traded on the Hong Kong Exchange, to sell its entire holding of 3,543,281 shares of the common stock (“the Shares”) of S&J to UPI for US$1.40 per share for an aggregate purchase price of US$4,960,593.

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APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

On 14 May 2007, UPI made a formal offer to the Board of the Company to acquire the remaining 38.2% of outstanding shares of common stock of US$0.001 par value per share (“S&J Shares”) not already owned by UPI for an aggregate cash consideration of US$3,251,510 representing a price of US$1.483 (“the Acquisition”).

Following extensive discussions between UPI and the Finance Committee of the Company, a revised offer price of US$1.96 per share was agreed representing a total amount due to the minority shareholders of US$4,297,343. Consequently, on 22 June 2007 the Company entered into a definitive merger agreement (the “Agreement”) with UPI, under the terms of which the Company will be merged with a newly formed Nevada corporation (the “Merger Sub”). At the effective date of the merger the separate existence of the Company will cease and the Merger Sub will continue as the surviving corporation. Accordingly, the stockholders of the Company (other than UPI, Pantene Global Holdings Limited, any of their wholly owned subsidiaries, Merger Sub and any Company stockholders who exercise their dissenter’s rights) will receive a cash payment of US$1.96 per share. Dissenters will be entitled to seek court adjudication as to the fair value of their shares.

The closing of the proposed transaction is subject to, among other things: affirmative vote of majority outstanding shares of the Company (UPI, being the Company’s majority stockholder, intends to vote its shares in favor of the merger transaction); approval of the proposed transaction by the shareholders of UPI; receipt of any regulatory approvals and third party consents; and since the date of the Agreement no Effect (as described in the Agreement) shall have occurred which has, or would be reasonably expected to have, a Company Material Adverse Effect (again, as described in the Agreement).

The Financial Information is presented in U.S. dollars (“US$”), which is the functional currency of the Company.

S&J, through its principal operating entities, manufactures and distributes a broad line of hand tools, lawn and garden tools, industrial magnets and metrology tools primarily in the United Kingdom, Europe, Australasia, North and South America, Asia and the Far East.

2. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRSs”)

The Financial Information has been prepared in accordance with HKFRSs issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). In addition, the financial information includes applicable disclosures required by the Listing Rules and by the Hong Kong Companies Ordinance.

S&J has not early applied the following new HKFRSs that have been issued but are not yet effective. The directors of S&J anticipate that the application of these HKFRSs will have no material impact on the financial statements of the Group.

HKAS 1 (Amendment) Capital disclosures[(1)] HKFRS 7 Financial instruments: Disclosures[(1)] HKFRS 8 Operating segments[(2)] HK (IFRIC) — INT 10 Interim financial reporting and impairment[(3)] HK (IFRIC) — INT 11 HKFRS 2 — Group and Treasury Share Transactions[(4)] HK (IFRIC) — INT 12 Service concession arrangements[(5)] HKAS 23 (Revised) Borrowing costs[(6)]

Notes:

1 Effective for annual periods beginning on or after 1 January 2007
2 Effective for annual periods beginning on or after 1 January 2009
3 Effective for annual periods beginning on or after 1 November 2006
4 Effective for annual periods beginning on or after 1 March 2007
5 Effective for annual periods beginning on or after 1 January 2008
6 Effective for annual periods beginning on or after 1 January 2009

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

3. SIGNIFICANT ACCOUNTING POLICIES

The Financial Information has been prepared under the historical cost convention, except for certain financial instruments which are measured at fair values, as explained in the principal accounting policies set out below.

Basis of consolidation

The Financial Information incorporates the financial statements of S&J and entities controlled by S&J (its subsidiaries). Control is achieved where S&J has the power to govern the financial and operating policies of an entity as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year/period are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the S&J Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations

The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by S&J in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under HKFRS 3 “Business Combinations” are recognized at their fair values at the acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over S&J’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, S&J’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess, or discount on acquisition, is recognised immediately in the income statement.

Interest in an associate

An associate is an entity in which S&J has significant influence and that is neither a subsidiary nor an interest in a joint venture.

The result and assets and liabilities of an associate are incorporated in the Financial Information using the equity method of accounting. Under the equity method, an investment in an associate is carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the S&J’s share of the net assets of the associate. When S&J’s share of losses of an associate equals or exceeds its interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate), S&J discontinues recognising its share of further losses. An additional share of losses is provided for and a liability is recognised only to the extent that S&J has incurred legal or constructive obligations or made payments on behalf of that associate.

Any excess of the cost of acquisition over S&J’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the S&J’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in the income statement.

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.

Revenue recognition

Sales of goods are recognised when goods are delivered and title has been passed.

Property, plant and equipment

Property, plant and equipment, other than freehold land, are stated at cost less accumulated depreciation and accumulated impairment losses.

Depreciation is provided to write off the cost of property, plant and equipment over their estimated useful lives, using the straight line method.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.

Financial instruments

Financial assets

S&J’s financial assets are classified into loans and receivables, and available-for-sale financial assets. All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace. The accounting policies adopted in respect of each category of financial assets are set out below.

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

Loans and receivables

Available-for-sale financial assets

Financial liabilities and equity

Bank borrowings

Other financial liabilities

Other financial liabilities including creditors and obligations under finance leases are subsequently measured at amortised cost, using the effective interest rate method.

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

Equity instruments

Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. Consideration paid to reacquire the Company’s own equity investments are deducted from equity. No gain or loss is recognized in the income statement.

Derecognition

Borrowing costs

All borrowing costs are recognised as and included in finance costs in the consolidated income statement in the period in which they are incurred.

Inventories

Provisions

Provisions are recognised when S&J has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Onerous contracts

Present obligations arising under onerous contracts are recognised and measured as a provision. An onerous contract is considered to exist where S&J has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

Restructuring

A restructuring provision is recognised when S&J has developed a detailed formal plan for restructuring and has raised a valid expectation that it will carry out the restructuring by starting to implement the plan or announcing its main features to those affected by it. The measurement of a restructuring provision includes only the direct expenditures arising from the restructuring, which are those amounts that are both necessarily entailed by the restructuring and not associated with the ongoing activities of S&J.

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

Impairment of assets

At each balance sheet date, S&J reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Taxation

Taxation represents the sum of the tax paid or currently payable and deferred tax.

Foreign currencies

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

period, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised as a separate component of equity (the translation reserve). Such exchange differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

Leases

The Group as lessor

The Group as lessee

Retirement benefits costs

S&J’s subsidiary company, James Neill Holdings Limited, operates a defined benefit retirement benefit plan covering certain of the employees in its UK based subsidiaries of S&J. The cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each balance sheet date. All actuarial gains and losses of defined benefit plans are recognised immediately in the consolidated statements of changes in equity. Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the amended benefits become vested. Any asset resulting from this calculation is limited to unrecognised actuarial losses and past service cost, plus the present value of available refunds and reductions in future contributions to the plan.

Segmental reporting

S&J’s principal segments for internal reporting purposes are the manufacture and distribution of a broad line of hand tools, lawn and garden tools (“Tools”), industrial magnets (“Magnetics”) and metrology tools (“Metrology”). In accordance with S&J’s internal reporting system, S&J has chosen business segment information as the primary reporting format and geographical segment information as the secondary reporting format for the purposes of these financial statements.

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

Segment revenue, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. Segment revenue, expense, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions ae between group entities within a single segment.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Unallocated items mainly comprise financial and corporate assets, tax balances, retirement benefit plans and corporate and financing expenses.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

Inventories

Inventories are measured at lower of cost and net realisable value. The management of S&J reviews the carrying amount of the inventory at each balance sheet date, and makes allowance for inventory items identified, if any, to be carried at lower recoverable value through estimation of the expected selling prices under the current market conditions.

Income taxes

S&J is required to recognize a provision for income taxes based upon the taxable income and temporary differences for each of the tax jurisdictions in which it operates and for all discrete reportable income streams within those jurisdictions. This process requires a calculation of taxes payable and an analysis of temporary differences between the book and tax bases of all assets and liabilities, including various accruals, allowances, depreciation and amortization. The tax effect of these temporary differences and the estimated tax benefit from our tax net operating losses are reported as deferred tax assets and liabilities in the consolidated balance sheet.

S&J has approximately twenty income streams within its subsidiary companies for which individual income tax computations are required. Certain of these income streams have taxable losses brought forward from earlier periods that are available for set off against current period earnings arising within those streams. Aggregating these individual income tax calculations derives the income tax charge or credit that appears in the S&J’s consolidated financial statements.

Because of the streamed approach that is applied to S&J’s earnings for the purpose of calculating its overall taxation liability, significant movements in the Company’s effective rate of income tax can arise despite consolidated pre tax earnings remaining constant between one reporting period and the next. Factors giving rise to such fluctuations include:

a) Periodic variations in the geographical location of earnings. For example, losses incurred in any of the UK subsidiaries in a period may be set off against profits arising in other UK entities in the same period. Where individual UK profit streams are in excess of UK losses, all the losses can be absorbed. If the UK taxable losses exceed UK taxable profits the excess losses cannot, however, be surrendered to non-UK companies. A situation may therefore arise whereby a reduction in the level of profitability of the UK subsidiaries from one reporting period to the next could be matched by an increase in earnings in, say, the French affiliate. Although the overall total of consolidated pre tax earnings in the two periods remains unaltered, a higher effective tax charge may result as a consequence of excess UK tax losses arising in the second period, which

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APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

cannot be offset against the French earnings. The French earnings thus remain unsheltered and attract taxation at the local statutory rate. The excess UK losses may not give rise to a taxation credit if a carry forward of the losses as a deferred tax asset cannot be justified through doubts concerning their ultimate utilization against future profits and a higher period two tax charge will follow.

b) Variations in the amount of expenses not allowed to be treated as a deduction for income tax purposes. The level of such permanently disallowable items can vary substantially period to period as a result, for example, of the incidence of substantial one-off legal and professional fees incurred on non-trading items.
c) Higher or lower levels of profit arising in entities having the benefit of taxable losses which have not been capitalized as a deferred tax asset because of doubts concerning their short term realization against future profits.

The Company has recorded significant deferred tax assets in its current and prior year/period consolidated balance sheets. A review of all available positive and negative evidence is undertaken by S&J at each balance sheet date to determine the likelihood of realizing the deferred tax benefits which potentially arise on its property, plant and equipment, the UK pension benefit plan, accruals and allowances, inventories and tax loss carry forwards.

Such reviews consider the available positive and negative evidence, and comprise all those factors believed to be relevant, including the S&J’s recent operating results and its expected future profitability, including the impact of its manufacturing restructuring strategies. Based on these reviews, S&J can then determine whether there is a reasonable expectation that it will generate sufficient future taxable income such that its gross deferred tax assets relating to property, plant and equipment, the UK pension benefit plan, accruals and allowances and inventories are likely to be realized.

S&J will continue to review the recoverability of its deferred tax assets and, based on such periodic reviews, S&J could recognize a change in the valuation allowance relating to its deferred tax assets in the future should, for example, estimates of forecast taxable income be reduced or other favorable or adverse events occur.

Provisions

S&J recognises provisions based on the best estimate of the expenditure required to settle the present obligation at the balance sheet date which is the amount that the Company would pay to settle the obligation at the balance sheet date or to transfer it to a third party at that time. The estimates of the outcome and the financial effect are determined by the judgment of the management of the Company, supplemented by experience of similar transactions and, in some cases, reports from independent experts. The evidence considered includes any additional evidence provided by events after the balance sheet date. Uncertainties surrounding the amount to be recognised as a provision are dealt with by various estimation methods.

Foreign currency translation

The functional currency of each of S&J’s foreign operations is the local currency. The consolidated financial statements of S&J are denominated in U.S. dollars.

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

The process by which each foreign subsidiary’s financial results are translated into U.S. dollars is as follows: income statement accounts are translated at average exchange rates for the period; balance sheet asset and liability accounts are translated at end of period exchange rates; and equity accounts are translated at historical exchange rates.

The US$ balance sheet and income statement financial data could therefore be subject to material fluctuation year on year as a result of significant movements in the cross rate between the US$ and the various source functional rates used in the consolidation.

Translation adjustments arising from the use of differing exchange rates from period to period are included in the translation reserve in the consolidated statements of changes in equity. Management has decided not to hedge against the impact of exposures giving rise to these translation adjustments as such hedges may impact upon the Company’s cash flow compared to the translation adjustments which do not affect cash flow in the medium term.

Retirement benefit costs

S&J operates a contributory defined benefit plan covering certain of its employees in the United Kingdom based subsidiaries of Spear & Jackson plc.

Under the United Kingdom Pensions Act 1995, schemes were required to satisfy a minimum funding test known as the Minimum Funding Requirement (MFR). This was based on the benefits which would be paid if the active members had left the plan on the valuation date. The ratio of the market value of the plan’s assets to its MFR liabilities was known as the MFR funding ratio. The last full actuarial valuation of the scheme was carried out in December 2004 and this showed an MFR of 89%.

Company pension contributions to the plan are determined by the Trustees of the plan with the agreement of the principal employer and after consultation with the actuary. Contribution levels are set with the intention of eliminating the past service deficit in the long term. The Company’s funding policy with respect to the plan is to contribute annually not less than the minimum required by applicable UK law and pension regulations.

Following the December 2004 actuarial valuation of the Plan, the rate of employer contribution fell due for re-certification on or before 31 May 2005. After discussion between the Plan trustees and the Company it was agreed that the Company would make a special contribution to the Plan of US$ 7.2 million payable in two installments of US$3.6 million in June and September 2005. It was also agreed that from June 2005 the Company’s annual rate of pension contribution would increase to US$3.8 million.

On 11 July 2007, S&J reached an interim arrangement with the plan’s trustees and actuary whereby it was agreed that a one-time special contribution of US$2 million was to be paid by 1 August 2007 and that employer contributions were to continue at the annual rate of US$3.8 million. This is an interim arrangement, pending, and without prejudice to, the conclusion of negotiations between S&J, the plan trustees and the actuary regarding to ongoing funding. These negotiations may take several months to complete. Following the recent introduction of UK pension legislation, if no agreement is reached between the parties by June 2008, the UK Pensions Regulator will then participate in all further negotiations.

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

5. FINANCIAL INSTRUMENTS

S&J’s major financial instruments include debtors, bank deposits, creditors, obligations under finance leases and bank borrowings. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Credit risk

S&J’s maximum exposure to credit risk in the event of the counterparties failure to perform their obligations as at the various balance sheet dates in relation to each class of recognised financial assets is the carrying amount of those assets as stated in the consolidated balance sheet. In order to minimise any the credit risk, the management of S&J has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow-up action is taken to recover overdue debts. In addition, S&J reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, the directors of S&J consider that the Company’s credit risk is significantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by the international credit rating agencies.

Currency risk

Certain trade receivables and borrowings of the Company are denominated in foreign currencies. However, the management monitors foreign exchange exposure and will consider hedging significant foreign currency exposure should the need arise.

Interest rate risk

The Company’s cash flow interest rate risk primarily relates to bank balances, deposits and bank overdrafts.

S&J’s fair value interest rate risk relates primarily to the fixed-rate obligations under finance leases.

The Company currently does not have any risk hedging policy as at the balance sheet date. However, the management monitors interest rate risk exposure and will consider hedging significant risk exposure should the use arises.

— 99 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

6. SEGMENT INFORMATION

Business segments

The S&J’s principal activities are the manufacturing and distribution of a broad line of hand tools, lawn and garden tools (“Tools”), industrial magnets (“Magnetics”) and metrology tools (“Metrology”). These three business segments are the basis on which the Group reports its primary segment information. Segment information about these businesses is presented below.

Tools US$’000 69,605 (1,783) 879	Metrology US$’000 16,460 1,959 709	Magnetics US$’000 10,928 809	Continuing Operations Discontinued Operations US$’000 US$’000 96,993 590 985 (53)	Continuing Operations Discontinued Operations US$’000 US$’000 96,993 590 985 (53)	Total US$’000 97,583
					932
			(971) 420 3,581 (3,478) (720) (493) 99 (577) (1,907)	— — — — — — — (53) —	(971 420 3,581 (3,478 (720 (493 99
					(630 (1,907
		7	(2,484)	(53)	(2,537
					1,595
2,538 —	251 —	228 —			3,017 206
2,538	251	228			3,223
37,547 —	17,565 —	7,391 —			62,503 20,678
37,547	17,565	7,391			83,181
12,506 —	3,023 —	3,345 —			18,874 53,948

Inter-segment sales are charged at prevailing market rates

— 100 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

Tools US$’000 74,339 1,891 1,256	Metrology US$’000 15,635 1,842 119	Magnetics US$’000 10,724 1,328	Continuing Operations Discontinued Operations US$’000 US$’000 100,698 1,627 5,061 (639)	Continuing Operations Discontinued Operations US$’000 US$’000 100,698 1,627 5,061 (639)	Total US$’000 102,325
					4,422
			(926) 666 3,279 (1,111) (316) 6,653 (1,203)	— — — — — (639) —	(926 666 3,279 (1,111 (316
					6,014 (1,203
		4	5,450	(639)	4,811
					1,379
1,662 —	530 —	474 —			2,666 247
1,662	530	474			2,913
40,003 —	14,746 —	5,525 —			60,274 24,903
40,003	14,746	5,525			85,177
13,725 —	2,881 —	2,443 —			19,049 44,905
13,725	2,881	2,443			63,954

Inter-segment sales are charged at prevailing market rates

— 101 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

Tools US$’000 76,468 927 3,726 —	Metrology US$’000 13,676 1,740	Magnetics US$’000 9,341 1,105	Continuing Operations Discontinued Operations US$’000 US$’000 99,485 1,694 3,772 (401)	Continuing Operations Discontinued Operations US$’000 US$’000 99,485 1,694 3,772 (401)	Total US$’000 101,179
					3,371
			(1,855) 380 (378) 1,919 (1,168)	— — — (401) —	(1,855 380 (378
					1,518 (1,168
			751	(401)	350
	202 —	35 —			3,963 3,228
3,726	202	35			7,191
2,604 —	421 —	281 —			3,306 252
2,604	421	281			3,558
43,130 —	14,517 —	6,942 —			64,589 21,831
43,130	14,517	6,942			86,420
15,958 —	2,801 —	2,684 —			21,443 38,407
15,958	2,801	2,684			59,850

Inter-segment sales are charged at prevailing market rates

— 102 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

Tools US$’000 58,489 2,057 1,562 —	Metrology US$’000 15,231 1,713	Magnetics US$’000 9,055 1,253	Continuing Operations Discontinued Operations US$’000 US$’000 82,775 — 5,023 —	Continuing Operations Discontinued Operations US$’000 US$’000 82,775 — 5,023 —	Total US$’000 82,775
					5,023
			(1,168) 386 140 228 (184) (340) 4,085 (1,874)	— — — — — — — —	(1,168 386 140 228 (184 (340
					4,085 (1,874
			2,211	—	2,211
	275 —	270 —			2,107 41
1,562	275	270			2,148
895 —	258 —	89 —			1,242 167
895	258	89			1,409
43,348 —	20,148 —	8,864 —			72,360 16,938
43,348	20,148	8,864			89,298
14,844 —	3,449 —	3,630 —			21,923 35,722

Inter-segment sales are charged at prevailing market rates

— 103 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

Tools US$’000 54,632 (345) 621	Metrology US$’000 12,138 1,182 583	Magnetics US$’000 8,375 970	Continuing Operations Discontinued Operations US$’000 US$’000 75,145 590 1,807 (89)	Continuing Operations Discontinued Operations US$’000 US$’000 75,145 590 1,807 (89)	Total US$’000 75,735
					1,718
			(1,077) 271 (1,820) (650) (369) (1,838) (1,207)	— — — — — (89) —	(1,077 271 (1,820 (650 (369
					(1,927 (1,207
		9	(3,045)	(89)	(3,134
					1,213
1,215 —	173 —	236 —			1,624 151
1,215	173	236			1,775
38,034 —	16,338 —	6,678 —			61,050 22,378
38,034	16,338	6,678			83,428
14,371 —	3,107 —	2,600 —			20,078 52,751
14,371	3,107	2,600			72,829

Inter-segment sales are charged at prevailing market rates

— 104 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

Geographical segments

S&J’s operations are mainly located in the United Kingdom, Mainland Europe, Australasia and China. The following provides an analysis of the S&J’s turnover by geographical market, irrespective of the origin of the goods:

Turnover by geographical market

Continuing operations: United Kingdom Europe Australasia North America Rest of the World Discontinued operations	Year 2006 US$’000 41,679 21,829 13,967 7,150 12,368	ended 30 September 2005 2004 US$’000 US$’000 42,928 43,723 21,778 18,817 15,160 17,505 6,982 6,954 13,850 12,486	ended 30 September 2005 2004 US$’000 US$’000 42,928 43,723 21,778 18,817 15,160 17,505 6,982 6,954 13,850 12,486	Nine months ended 30 June 2007 2006 US$’000 US$’000 (unaudited) 33,815 32,812 20,065 16,923 12,052 10,433 6,963 5,360 9,880 9,617	Nine months ended 30 June 2007 2006 US$’000 US$’000 (unaudited) 33,815 32,812 20,065 16,923 12,052 10,433 6,963 5,360 9,880 9,617
	96,993 590	100,698 1,627	99,485 1,694	82,775 —	75,145 590
	97,583	102,325	101,179	82,775	75,735

7. OTHER INCOME

				Nine	months
	Year	ended 30 September		ended	30 June
	2006	2005	2004	2007	2006
	US$’000	US$’000	US$’000	US$’000	US$’000
					(unaudited)
Interest earned on bank balances	272	363	78	254	160
Interest credit in retirement
benefit obligations	—	146	118	—	—
Property rental income	148	157	184	132	111
	420	666	380	386	271

— 105 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

8. GAIN ON SALE OF LAND AND BUILDINGS

										Nine months	Nine months	ended
							Year	ended 30 September		30	June
							2006	2005	2004	2007		2006
							US$’000	US$’000	US$’000	US$’000	US$’000
											(unaudited)
Gain	on	sale	of	land	and	buildings	3,581	3,279	—	228		—

On 25 January 2005 S&J completed the sale of part of its industrial site at St. Paul’s Road, Wednesbury, England and on 15 February 2005 S&J also concluded the disposal of its warehouse and office facility in Boca Raton, Florida. Details of these sales are as follows:

Wednesbury, England Boca Raton Florida US$’000 US$’000 Sale proceeds net of selling, professional and other costs 5,243 3,433 Less: net book value (2,223) (3,174) Gain on sale 3,020 259	Total US$’000 8,676 (5,397)
	3,279

On 27 July 2006 the Company completed the sale of the remaining element of its industrial site at St. Paul’s Road, Wednesbury, England. Details of the sale are as follows:

	Wednesbury,
	England
	US$’000
Sale proceeds net of selling, professional and other costs	4,756
Less: net book value	(1,175)
Gain on sale	3,581

On 27 March 2007 S&J completed the sale of land at the Company’s Atlas site in Sheffield, England that was surplus to its current requirements. Details of the sale are as follows:

	Atlas land
	England
	US$’000
Sale proceeds net of selling, professional and other costs	298
Less: net book value	(70)
Gain on sale	228

— 106 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

9. MANUFACTURING AND OTHER REORGANISATION COSTS

				Nine	months
	Year	ended 30 September		ended	30 June
	2006	2005	2004	2007	2006
	US$’000	US$’000	US$’000	US$’000	US$’000
					(unaudited)
Severance and site closure costs	2,051	924	—	60	1,675
Onerous contracts	268	—	—	170	—
Fixed asset impairments	1,159	187	—	(46)	145
	3,478	1,111	—	184	1,820

In January 2005 following the completion of part of its industrial site at St. Paul’s Road, Wednesbury, England, S&J became contractually obliged to vacate office and warehouse facilities located on those parts of the site that had been sold. Provisions were made in the accounts for the year to 30 September 2005 in connection with this obligation. Additionally, in the final quarter of 2005 S&J performed a review of its UK manufacturing operations and further costs were expensed relating to the closure and down-scaling of certain manufacturing processes at the Company’s Sheffield and Wednesbury locations in the UK. At the same time the ongoing usage and remaining asset lives of plant and machinery involved in the restructured operations were reviewed and impairment write-downs made where necessary.

In January 2006 S&J announced the closure of the remaining element of its manufacturing site at Wednesbury, England. With effect from 30 November 2006 all warehouse and distribution operations performed at the Wednesbury site were transferred to S&J’s principal UK manufacturing site at Atlas, Sheffield, England. Additionally, S&J announced in June 2006 that certain operations carried out at its Alas site would also cease. Provision was made at June 2006 and September 2006 in respect of related employee severance and move costs.

On 11 August 2006, one of S&J’s UK subsidiaries, Eclipse Magnetics Limited, announced the cessation of certain of its manufacturing activities at its leased site in Sheffield and the relocation of its business to the Atlas site in Sheffield. Provision was made at September 2006 in respect of severance, relocation and empty property rentals (onerous contracts).

Following the review of the UK manufacturing operations, as detailed above, ongoing usage and remaining asset lives was reviewed and impairment write-downs made where necessary.

10. SETTLEMENT OF CLASS AND DERIVATIVE ACTIONS

On 15 April 2004, the U.S. Securities and Exchange Commission (“SEC”) filed suit in the U.S. District Court of Florida, against S&J and Mr Dennis Crowley, its then Chief Executive Officer/Chairman, among others, alleging violations of the federal securities laws. These allegations arose from the alleged failure of Mr Crowley to accurately report his ownership of S&J’s stock, and his alleged manipulation of the price of S&J stock through dissemination of false information, allowing him to profit from sales of stock through nominee accounts.

Following extensive settlement negotiations with the SEC and Mr Crowley, S&J reached a resolution with both parties. On 28 September 2004, Mr Crowley signed a Consent to Final Judgment of Permanent Judgment with the SEC, without admitting or denying the allegations included in the complaint, which required a disgorgement and payment of civil penalties by Mr Crowley consisting of a disgorgement payment of US$3,765,777 plus prejudgment interest in the amount of US$304,014, as well as payment of a civil penalty in the amount of US$2,000,000. On 18 November 2004, S&J signed a Consent to Final Judgment of Permanent Injunction with the SEC pursuant to which the Company, without admitting or denying the allegations included in the Complaint filed by the Commission, consented to a permanent injunction from violation of various sections and rules under the Securities Act of 1933 and the Securities Exchange Act of 1934. No disgorgement or civil penalties were sought from, or ordered to be paid by S&J.

— 107 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

Subsequent to the SEC action a number of class action lawsuits were initiated in the U.S. District Court for the Southern District of Florida by Company stockholders against S&J, Sherb & Co. LLP, S&J’s former independent auditor, and certain of the S&J’s directors and officers, including Mr Crowley, the Company’s former Chief Executive Officer/Chairman, and Mr Fletcher, the Company’s former CFO and acting Chief Executive Officer. These suits alleged essentially the same claims as the SEC suit discussed above. On 7 July 2006 S&J, Dennis Crowley and the Class Plaintiff reached a Memorandum of Understanding (“MOU”) which confirmed that the plaintiffs, S&J and Dennis Crowley had reached an agreement in principle for the settlement of this litigation, subject to Court approval. According to the terms of the MOU, S&J deposited US$650,000 into a Qualified Settlement Fund, disbursement pending approval of the Court. Subsequent to this Sherb & Co. also agreed to the terms of the Settlement agreeing to contribute an additional US$125,000. On 11 May 2007, the U.S. District Court for the Southern District, sitting in West Beach, Florida, heard the Plaintiff’s motion for Final Approval of the Class Action Settlement and Plan of Approval, to which there were no objectors or class members that opted out of the settlement. On 14 May 2007, the Court signed the Final Judgment thus forever extinguishing all of the class claims against S&J and barring any claims for contribution by third parties. The Final Judgment made clear that the settlement was not an admission of wrongdoing or liability by S&J.

On 6 September 2005, S&J was served with a Shareholder Derivative Complaint filed on 1 June 2004 in the Circuit Court for Palm Beach County, Florida (Case No. CA005068). The suit named S&J, as a nominal defendant, former directors, Robert Dinerman, William Fletcher and John Harrington, in addition to Dennis Crowley and the S&J’s prior independent auditor, Sherb & Co. LLP. The suit contained essentially the same factual allegations as the SEC suit and the series of class actions claims as discussed above, but additionally alleged state law claims of breaches of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, unjust enrichment and lack of reasonable care by various or all the defendants. On 29 May 2007, the Circuit Court in Palm Beach County entered a Final Judgment and Order approving the settlement and award of attorneys’ fees and expenses of US$70,000 detailed in the Stipulation, resulting in the dismissal of the suit and the release of the S&J and certain officers and directors.

11. FINANCE COSTS

				Nine	months
	Year	ended 30 September		ended	30 June
	2006	2005	2004	2007	2006
	US$’000	US$’000	US$’000	US$’000	US$’000
					(unaudited)
Interest on:
Bank borrowings	182	232	272	163	119
Obligations under finance leases	63	84	106	72	66
Defined benefit obligations	248	—	—	105	184
	493	316	378	340	369

— 108 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

12. INCOME TAX CHARGE

Current Taxation Deferred Taxation	Year 2006 US$’000 (309)	ended 30 September 2005 2004 US$’000 US$’000 (174) (113)	ended 30 September 2005 2004 US$’000 US$’000 (174) (113)	Nine months ended 30 June 2007 2006 US$’000 US$’000 (unaudited) (136) (294)	Nine months ended 30 June 2007 2006 US$’000 US$’000 (unaudited) (136) (294)
	(309) (1,598)	(174) (1,029)	(113) (1,055)	(136) (1,738)	(294) (913)
	(1,907)	(1,203)	(1,168)	(1,874)	(1,207)

The current taxation charge arises in the New Zealand and French subsidiaries. There are no profits chargeable to Hong Kong profits tax.

The total charge for the periods can be reconciled to the (loss)/profit per the consolidated income statements as follows:

(Loss)/profit before taxation from continuing and discontinued operations Tax at U.S. federal statutory tax rate of 35% Overseas tax at rates to the effective tax rates Gain on sale of UK property covered by capital losses brought forward Permanent timing differences Adjustments to prior year estimates Deferred tax not recognised (see below) Change in effective rate of tax (see below) Other Taxation charge for the period	Year 2006 US$’000 (630)	ended 30 September 2005 2004 US$’000 US$’000 6,014 1,518	ended 30 September 2005 2004 US$’000 US$’000 6,014 1,518	Nine months ended 30 June 2007 2006 US$’000 US$’000 (unaudited) 4,085 (1,927)	Nine months ended 30 June 2007 2006 US$’000 US$’000 (unaudited) 4,085 (1,927)
	256 (84) 1,066 (127) (2) (2,985) — (31)	(2,105) 34 906 (161) 219 (143) — 47	(531) (87) — (162) 118 (536) — 30	(1,458) 300 42 (124) — 357 (991) —	674 (281) — (112) (89) (1,399) — —
	(1,907)	(1,203)	(1,168)	(1,874)	(1,207)

The deferred income tax expense or benefit is based on the changes in the asset or liability from period to period. Deferred tax assets are reduced where it is more likely than not that some portion or all of the deferred tax assets will not be realised. The Company reviews the recoverability of its deferred tax assets and, based on such periodic reviews, the Company could recognise a change in the likely realisation of its deferred tax assets in the future should, for example, estimates of forecast taxable income be reduced or other favourable or adverse events occur.

The majority of the Group’s deferred tax asset relates to temporary timing differences originating in its UK subsidiaries. Such deferred tax balances had been provided for at 30%, the effective UK tax rate. Legislation has been enacted in July 2007 which will reduce the rate to 28%. As a result, a US$991,000 charge has been made to the income statement for the nine months to 30 June 2007 to reflect this change in tax rates.

— 109 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

13. DISCONTINUED OPERATIONS

The following table presents the results of the S&J’s operations that have been reclassified as discontinued and the (loss)/income that has been recorded in connection with the disposal of these businesses:

Year 2006 US$’000 590	ended 30 September 2005 2004 US$’000 US$’000 1,627 1,694	ended 30 September 2005 2004 US$’000 US$’000 1,627 1,694	Nine months ended 30 June 2007 2006 US$’000 US$’000 (unaudited) — 590	Nine months ended 30 June 2007 2006 US$’000 US$’000 (unaudited) — 590
(101) 12 36 48	(163) 27 (503) (476)	(214) (187) — (187)	— — — —	(101)
				12 —
				12
(53)	(639)	(401)	—	(89)

(a) During the fourth quarter of 2005, S&J began marketing for sale certain assets associated with its Coventry Gauge thread gauge measuring business located in the United Kingdom. On 28 February 2006 S&J concluded the sale of these assets for a nominal consideration. The assets sold comprised plant and equipment, inventories and goodwill. The acquirer paid £1 and assumed certain liabilities in respect of the leased premises from which the trade operates. The carrying values of the assets relating to this entity were written down to the lower of depreciated cost or estimated fair value after consideration of selling costs in the quarters ended 31 March 2005, 30 June 2005 and 30 September 2005. The assets and liabilities of discontinued operations held for sale have not been reported separately in the consolidated balance sheets of the Company, as the net book amounts involved are not considered material.

— 110 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

(b) During the year ended 30 September 2003, the directors of S&J carried out a strategic review of its loss making Megapro screwdriver division (“Megapro”). It was determined that the division was no longer a core activity of the group and various divestment strategies were considered. With effect from 30 September 2003 the trade and assets of the division’s principal operating companies, Mega Tool USA, Inc. and Mega Tools Limited, were transferred by prior subsidiary management, and without prior authorisation, at their net book value of US$384,000 to the division’s former managing director. The transfer proceeds were in the form of US$284,000 of loan notes and other receivables and the discharge of a loan of US$100,000 owed by the company to the Megapro managing director.

Having considered the future financial position of Megapro, the directors of S&J provided US$97,000 against the recoverability of the balance of the sales proceeds which was outstanding at 30 September 2003. A further US$187,000 was provided against this debt in the year ended 30 September 2004. It was then agreed with Megapro that it would pay Canadian $54,000 (approximately US$41,000) in settlement of those debts and this was repaid in monthly installments of Canadian $5,000 (approximately US$4,000).

14. (LOSS)/PROFIT BEFORE TAXATION

(Loss)/profit before taxation has been arrived at after charging:

Directors’ remuneration (note 15) Staff salaries, allowances and welfare Retirement benefit plan (note 29) Direct labour costs Depreciation of property, plant and equipment Impairment write-down of property, plant and equipment Allowance for bad and doubtful debts Write-off of inventories Auditors’ remuneration Cost of inventories recognised as an expense Operating lease rentals in respect of: land and buildings	Year to 30 September 2006 2005 2004 US$’000 US$’000 US$’000 289 288 440 15,929 17,077 16,585 1,444 1,686 1,536 9,172 12,236 11,550 26,834 31,287 30,111 2,064 2,726 3,558 1,159 187 — 207 21 (150) 200 400 (300) 593 592 418 43,365 44,313 39,623 944 1,007 835	Nine months to 30 June 2007 2006 US$’000 US$’000 (unaudited) 104 177 13,286 11,714 910 1,070 6,957 7,152 21,257 20,113 1,455 1,630 (46) 145 78 — 430 180 — — 37,664 32,567 513 466	Nine months to 30 June 2007 2006 US$’000 US$’000 (unaudited) 104 177 13,286 11,714 910 1,070 6,957 7,152 21,257 20,113 1,455 1,630 (46) 145 78 — 430 180 — — 37,664 32,567 513 466
			20,113
			1,630 145 — 180 — 32,567 466

— 111 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

15. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

(a) The emoluments paid or payable to the directors were as follows:

Fees US$’000 — 18 18	Other emoluments	Other emoluments	Other emoluments
	Basic salaries and allowances Retirement Benefit scheme contributions US$’000 US$’000 165 21 — — — —			Other US$’000 17 50 —	Total US$’000 203 68 18
36		165	21	67	289
— 12 12		185 — —	61 — —	18 — —	264 12 12
24		185	61	18	288
— —		175 195	55 —	15 —	245 195
—		370	55	15	440
— 15		68 —	13 —	8 —	89 15
15		68	13	8	104
— 14 —		133 — —	16 — —	14 — —	163 14 —
14		133	16	14	177

— 112 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

(b) For the periods under review the analysis of the five individuals with the highest emoluments in the Group were as follows:

Directors Other employees	Year to 30 September 2006 2005 2004 Number Number Number 1 1 1 4 4 4 5 5 5	Nine months to 30 June 2007 2006 Number Number (unaudited) 1 1 4 4 5 5	Nine months to 30 June 2007 2006 Number Number (unaudited) 1 1 4 4 5 5
			5

The directors’ emoluments are disclosed in the table above. The emoluments of the other senior employees are as follows:

Salaries, bonuses and other allowances Retirement benefit scheme contributions	Year to 30 September 2006 2005 2004 US$’000 US$’000 US$’000 757 781 704 83 144 124 840 925 828	Nine months to 30 June 2007 2006 US$’000 US$’000 (unaudited) 795 559 60 62 855 621	Nine months to 30 June 2007 2006 US$’000 US$’000 (unaudited) 795 559 60 62 855 621
			621

16. EARNINGS PER SHARE

The calculation of the basic earnings per share attributable to the ordinary equity holders is based on the following data:

Earnings for the purpose of basic earnings per share Attributable to continuing operations: (Loss)/profit for the period Attributable to discontinued operations: (Loss)/profit for the period Total Weighted average number of ordinary shares for the purpose of basic earnings per share	Year 2006 US$’000 (2,484) (53) (2,537) 5,735,561	ended 30 September 2005 2004 US$’000 US$’000 5,450 751 (639) (401) 4,811 350 8,845,290 11,741,122	Nine months ended 30 June 2007 2006 US$’000 US$’000 (unaudited) 2,211 (3,045) — (89) 2,211 (3,134) 5,735,561 5,735,561	Nine months ended 30 June 2007 2006 US$’000 US$’000 (unaudited) 2,211 (3,045) — (89) 2,211 (3,134) 5,735,561 5,735,561
				(3,134)
				5,735,561

— 113 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

17. PROPERTY, PLANT AND EQUIPMENT

THE S&J GROUP

Land and buildings Fixtures and fittings US$’000 US$’000 13,532 2,613 6,458 22 — — 1,415 218 (3,228) —	Land and buildings Fixtures and fittings US$’000 US$’000 13,532 2,613 6,458 22 — — 1,415 218 (3,228) —	Motor vehicles Plant and machinery US$’000 US$’000 2,458 31,993 235 476 (93) (26) 228 2,658 — —	Motor vehicles Plant and machinery US$’000 US$’000 2,458 31,993 235 476 (93) (26) 228 2,658 — —	Total US$’000 50,596 7,191 (119 4,519 (3,228
18,177 — (2,223) (111) 15,843 — (1,361) — — 787	2,853 35 — (46) 2,842 26 — (441) 503 132	2,828 393 (283) (55) 2,883 649 (1,044) — — (55)	35,101 951 (115) (650) 35,287 920 (1,627) (7,410) — 2,129	58,959
				1,379 (2,621 (862
				56,855
				1,595 (4,032 (7,851 503 2,993
15,269	3,062	2,433	29,299	50,063
1,693 354 — (38) 141 2,150 324 — — (46) 2,428 261 — (186) — 109 151	2,344 201 — — 196 2,741 60 — — (46) 2,755 54 — — (441) 96 162	608 861 (19) — 51 1,501 863 — (283) (68) 2,013 688 — (1,044) — — (87)	26,390 2,142 (5) — 2,555 31,082 1,479 187 (109) (548) 32,091 1,061 1,159 (1,551) (7,410) 298 1,862	31,035 3,558 (24 (38 2,943
				37,474
				2,726 187 (392 (708
				39,287
				2,064 1,159 (2,781 (7,851 503 2,088
2,763 12,506 13,415 16,027	2,626 436 87 112	1,570 863 870 1,327	27,510 1,789 3,196 4,019	34,469
				15,594
				17,568
				21,485

— 114 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

THE S&J GROUP

Land and buildings Furniture, fixtures and fittings US$’000 US$’000 15,269 3,062 — 743 (70) — 1,129 227 16,328 4,032	Land and buildings Furniture, fixtures and fittings US$’000 US$’000 15,269 3,062 — 743 (70) — 1,129 227 16,328 4,032		Motor vehicles Plant and machinery US$’000 US$’000 2,433 29,299 1,059 346 (1,283) (6,079) 180 2,163 2,389 25,729	Motor vehicles Plant and machinery US$’000 US$’000 2,433 29,299 1,059 346 (1,283) (6,079) 180 2,163 2,389 25,729	Motor vehicles Plant and machinery US$’000 US$’000 2,433 29,299 1,059 346 (1,283) (6,079) 180 2,163 2,389 25,729	Total US$’000 50,063 2,148 (7,432 3,699
						48,478
2,763 187 — — 204	2,626 125 — — 208		1,570 579 — (1,283) 99		27,510 564 (46) (6,018) 2,035	34,469 1,455 (46 (7,301 2,546
3,154 13,174	2,959 1,073	965 24,045 1,424 1,684 Land and buildings Fixtures and fittings US$’000 US$’000 — 12 3,228 7				31,123
						17,355
						Total US$’000 12 3,235
		(3,228) — —		— 19 (19)		(3,228
						19 (19
		—		—		—
		— 38 (38) — —		6 13 — 19 (19)		6 51 (38
						19 (19
		— — — — —		— — — — —		—
						—
						—
						—
						—

— 115 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

The above items of property, plant and equipment are depreciated on a straight-line basis at the following rates per annum:

Freehold land Nil Buildings Over the remaining unexpired terms of the leases for or fifty periods, whichever is the shorter Furniture, fixtures and equipment 10% - 25% Motor vehicles 20% - 25% Plant and machinery 10% - 25%

Land and buildings comprise freehold properties, all held outside Hong Kong, as follows:

United Kingdom Rest of the World	30 September 2006 2005 US$’000 US$’000 11,503 12,396 1,003 1,019 12,506 13,415	2004 US$’000 15,046 981 16,027	30 June 2007 US$’000 12,159 1,015
			13,174

The net book values for motor vehicles at the relevant balance sheet dates relate exclusively to assets held under finance leases.

As discussed in note 9, Manufacturing and Other Reorganisation Costs, during the periods under review S&J has carried out a review of the recoverable amount of its manufacturing plant and equipment, having regard to the ongoing programme of manufacturing reorganization, modernisation and the introduction of new product lines. The review lead to the recognition of impairment losses of US$1,159,000, US$187,000 and US$145,000 in the year to 30 September 2006, the year to 30 September 2005 and the nine months to 30 June 2006 respectively. In the nine month period to 30 June 2007, US$46,000 was credited to the income statement in relation to previously provided assets being sold.

18. ASSETS HELD FOR RESALE

During 2004 the Board and management of S&J performed a detailed review of its U.S. sales and distribution strategy. As a result, the initial initiative of setting up a central distribution unit in Florida, the USA, was deferred. The Boca Raton warehouse was offered for sale and the property, with a net book value of US$3,190,000 was accordingly presented as an asset held for resale in the consolidated balance sheet at 30 September 2004.

— 116 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

19. INTEREST IN AN ASSOCIATE

THE S&J GROUP

Cost of unlisted investment Currency realignment Share of post-acquisition profits net of dividends received	2006 US$’000 229 13 99 341	30 September 2005 US$’000 — — — —	2004 US$’000 — — — —	30 June 2007 US$’000 229 14 239
				482

In January 2006, through its subsidiary undertaking, Eclipse Magnetics Limited, S&J paid US$229,000 to acquire a 25% stake in Ningbo Hi-tech Magnetic Assemblies Co. Ltd., whose principal activity is the production of magnetic, plastic and other materials and magnetic assemblies. The details are as follows:

					Proportion of	nominal
				Principal	Nominal of	value
	Form of			value of	registered	Proportion
	business	Place of	place of	registered	capital held by	of voting
Name of entity	structure	registration	operation	capital	the Group	power held
Ningbo Hi-tech Magnetic	Sino-foreign	PRC	PRC	RMB	25%	25%
Assemblies Co. Ltd.	joint venture			6,559,293

The summarised financial information in respect of S&J’s associate is set out below:

30 September 2006 US$’000 Total assets 2,677 Total liabilities (1,313) Net assets 1,364 Share of net assets of an associate 341 Revenue 2,115 Profit for the period 396 Share of result of associate 99	30 June 2007 US$’000 3,987 (2,057)
	1,930
	482
	5,177
	560
	140

No tax is payable on the profit for the relevant periods under review due to the availability of a PRC tax holiday.

— 117 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

20. AVAILABLE FOR SALE INVESTMENTS

Available for sale investments comprise:

THE S&J GROUP

					September		30 June
				2006	2005	2004	2007
				US$’000	US$’000	US$’000	US$’000
Cost	of	unlisted	investments	167	157	160	178

The above unlisted investments represent investments in unlisted equity securities issued by private entities incorporated in France, (Bowers Metrologie SARL (“BML”)) and India, (Bipico Industries (Tools) Private Limited (“BITPL”)). They are measured at cost less impairment at each balance sheet date because the range of reasonable fair value estimates is so significant that the directors of S&J are of the opinion that their fair values cannot be measured reliably.

BML is a company incorporated and operating in France. The investment represents a 35% holding of the issued share capital of BML. BML is not regarded as an associate of S&J because S&J has less than one-fifth of the voting power of BML under arrangements with other investors and S&J has no right to appoint directors of BML.

BITPL is a company incorporated and operating in India. The investment represents a 30% holding of the issued ordinary share capital of BITPL. BITPL is not regarded as an associate of S&J because S&J has less than one-fifth of the voting power of BITPL under arrangements with other investors and S&J has no right to appoint directors of BITPL.

Both of the companies are not considered to be associates undertaking since S&J does not possess the ability to exercise significant influence over the companies.

21. INVENTORIES

THE S&J GROUP

Raw materials Work in progress Finished goods Less allowance for slow moving and obsolete inventories	30 September 2006 2005 US$’000 US$’000 6,190 5,320 4,443 6,481 19,329 19,740 (7,110) (6,542) 22,852 24,999	2004 US$’000 5,944 5,211 16,779 (5,946) 21,988	30 June 2007 US$’000 6,048 4,466 22,099 (6,841)
			25,772

— 118 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

22. DEBTORS AND PREPAYMENTS

Debtors and prepayments for the relevant periods include trade debtors as shown in the aged analysis below:

THE S&J GROUP

0-60 days 61-90 days	30 September 2006 2005 US$’000 US$’000 15,855 16,241 127 207 15,982 16,448	2004 US$’000 18,371 471 18,842	30 June 2007 US$’000 19,757 341
			20,098

S&J itself did not have any trade debtors at the relevant balance sheet dates.

The Company allows credit periods ranging from 30 to 120 days to its trade customers depending on their credit status and geographical location.

The directors consider that the carrying amount of the debtors approximates its fair value.

23. AMOUNTS DUE FROM/TO SUBSIDIARIES

Amounts due from subsidiaries are unsecured, non-interest bearing and, in the opinion of the directors, are not repayable within one year subsequent to the balance sheet date. Amounts due are stated after providing US$10,032,000 against non-recoverable debtors.

Amounts due to subsidiaries are unsecured, interest bearing and repayable on demand.

— 119 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

24. BANK BALANCES AND CASH

Bank balances and cash include short-term bank deposits and carry interest at prevailing market rates. The directors consider that the carrying value of the amount at the balance sheet date approximates to the fair value.

The Company’s bank accounts held with the HSBC Bank plc by the UK subsidiaries of Spear & Jackson plc and Bowers Group plc form a pooled fund. As part of this arrangement the individual companies concerned have entered into a cross guarantee with the HSBC Bank plc to guarantee any bank overdraft of the entities within the pool. The bank balances and bank overdrafts before pooling of fund were as follows:

THE S&J GROUP

Bank balances and cash Bank overdrafts	30 September 2006 2005 US$’000 US$’000 31,561 27,689 (21,632) (20,400) 9,929 7,289	2004 US$’000 25,590 (20,500) 5,090	30 June 2007 US$’000 33,581 (23,750)
			9,831

25. CREDITORS AND ACCRUED CHARGES

Creditors and accrued charges for the relevant periods include trade creditors as shown in the aged analysis below:

THE S&J GROUP

			30 September		30 June
		2006	2005	2004	2007
		US$’000	US$’000	US$’000	US$’000
0-60	days	7,766	8,103	8,562	10,556

S&J itself did not have any trade creditors at the relevant balance sheet dates.

The directors consider that the carrying amount of the creditors and accrued charges approximates its fair value.

The average credit period allowed on trade purchases is 45 days.

26. BANK OVERDRAFTS

THE S&J GROUP

			30 September		30 June
		2006	2005	2004	2007
		US$’000	US$’000	US$’000	US$’000
Bank	overdrafts	—	752	68	—

— 120 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

With regard to the HSBC bank overdraft of US$0.75 million at 30 September 2005, this was secured by fixed and floating charges on the assets and undertakings of the UK subsidiaries of Spear & Jackson plc and Bowers Group plc. The bank overdraft was repayable on demand and carried interest at UK base rate plus 0.75%.

The bank overdraft of US$0.07 million at 30 September 2004 relates to the French subsidiary Spear & Jackson France. The overdraft was guaranteed by Spear & Jackson plc, repayable on demand and carried interest of approximately 10% per annum.

27. OBLIGATIONS UNDER FINANCE LEASES

THE S&J GROUP

2006 US$’000 526 449	30 September 2005 US$’000 659 362	2004 US$’000 863 672	30 June 2007 US$’000 681 889
975 (68)	1,021 (71)	1,535 (107)	1,570 (110
907	950	1,428	1,460
489 418	613 337	803 625	633 827
907 (489) 418	950 (613) 337	1,428 (803) 625	1,460 (633
			827

The above relates to the motor vehicle fleet under finance leases with lease terms ranging from 3 to 4 years. Interest rates underlying all obligations under finance leases are fixed at respective contract dates ranging from 5% to 7%. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments. The fair vales of the Company’s finance lease obligations, determined based on the present value of the estimated future cash flow discounted using the prevailing market rate at the balance sheet date approximate their carrying value.

— 121 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

28. PROVISIONS

THE S&J GROUP

Onerous contracts Manufacturing reorganisation US$’000 US$’000 1,475 233 — (68) 123 18	Onerous contracts Manufacturing reorganisation US$’000 US$’000 1,475 233 — (68) 123 18	Class and derivative actions US$’000 — — —	Total US$’000 1,708 (68) 141
1,598 — — (26) 1,572 473 268 — 89 2,402 170 (329) 178	183 924 (143) (3) 961 — 2,051 (1,455) 20 1,577 60 (1,589) 117	— — — — — — 720 (720) — — — — —	1,781 924 (143) (29)
			2,533 473 3,039 (2,175) 109
			3,979 230 (1,918) 295
2,421 165 30 September 2006 2005 US$’000 US$’000 1,971 1,164 2,008 1,369 3,979 2,533		— 2004 US$’000 506 1,275 1,781	2,586
			30 June 2007 US$’000 608 1,978
			2,586

The onerous contract provisions represent the present value of the future lease payments that S&J is presently obligated to make under non-cancelable onerous operating lease contracts, less revenue expected to be earned on the lease including estimated future sub-lease revenue, where applicable. The estimate may vary as a result of changes in the utilisation of the leased premises and sub-lease arrangements where applicable. The unexpired term of the leases is three to four years.

The provision for manufacturing reorganistion costs comprise costs in relation to the closure of the Group’s manufacturing site at Wednesbury, UK and the subsequent transfer of all warehouse and distribution operations to the Company’s principal UK manufacturing site at Atlas, Sheffield. The closure and relocation of the Wednesbury facility were completed by 30 November 2006 and the costs include employee severance payments, site closure and relocation costs. Additionally, provisions are also included for the relocation of the Group’s UK magnet production facility from leased premises in Sheffield, UK to the principal UK site at Atlas site. This was completed in December 2006.

— 122 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

29. RETIREMENT BENEFIT OBLIGATIONS

The Group operates a contributory defined benefit pension plan covering certain of its employees in the UK based subsidiaries of S&J, (“the James Neill Pension Plan”, “the Plan”). The benefits covered by the Plan are based on years of service and compensation history. The Plan’s assets are held separately from the assets of the Company and are administered by the Plan’s trustees and are managed professionally.

The latest formal actuarial valuation of the plan was carried out at 31 December 2004 by Pricewaterhouse Coopers LLP. Actuarial valuations, for accounts purposes, have been carried out for the various periods under review.

The Group’s contributions for the period from 1 October 2006 to 31 July 2007 are fixed at £1.9 million (approximately US$ 3.4 million). This current funding arrangement came to an end in July 2007. On 11 July 2007 S&J reached an interim arrangement with the Plan’s trustees and actuary whereby it was agreed that a one-time special contribution of £1 million (approximately US$2 million) was to be paid to the Plan by 1 August 2007 and that employer contributions are to continue at that rate of £1.9 million (approximately US$3.8 million). This is an interim arrangement pending, and without prejudice to, the conclusion of negotiations between S&J, the Plan’s trustees and actuary regarding ongoing funding. These negotiations may take several months to complete. Following the recent introduction of new UK pension legislation, if no agreement is reached between the parties by June 2008, the UK Pensions Regulator will then participate in all further negotiations.

The principal financial assumptions used for the purpose of the actuarial valuations were as follows:

		30 September		30 June
	2006	2005	2004	2007
Long term rate of increase in pensionable salaries	3.10%	2.90%	2.80%	3.40%
Rate of increase of benefits in payment - note 1	2.80%	2.70%	2.70%	3.10%
Rate of increase of benefits in payment note 2	2.50%	2.40%	2.40%	2.50%
Discount rate	5.05%	5.00%	5.50%	5.85%
Inflation assumption	3.00%	2.80%	2.80%	3.30%
Expected return on equities	8.20%	8.10%	8.75%	8.20%
Expected return on bonds	5.05%	5.00%	5.50%	5.05%
Expected return on cash	4.75%	4.50%	4.75%	4.75%
Expected return on insurace policies	5.05%	n/a	n/a	5.05%

Notes:

In respect of pensions in excess of the guaranteed minimum pension in the 1999 and 2001 sections of the Plan. 2. In respect of guaranteed minimum pension earned after 6 April 1988.

The expected return on assets assumption has been derived by considering the appropriate return for each of the main asset classes. The yields assumed on bond type investments are based on published redemption yields at the balance sheet date. The assumed return on equities reflects an assumed allowance for the out-performance of these asset classes over UK Government bonds in the long-term. The rates of return are shown net of investment manager expenses. The assumed return on cash reflects the UK prevailing market interest rate on bank balances.

The life expectancies implied by the mortality assumptions used in the pensions valuation (making allowance for projected future improvements in mortality) are:

Pensioner currently aged 70: Male 14.5 years Female 17.3 years Future pensioner when aged 65: Male 19.4 years Female 22.4 years

— 123 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

The amounts recognised in the consolidated balance sheets in respect of the defined benefit plan are as follows:

Fair value of Plan assets: Equities Bonds Cash Insurance policies Present value of funded obligations Net liability recognised in the balance sheet	2006 US$’000 93,847 87,680 958 3,398	30 September 2005 US$’000 84,290 75,524 10,296 —	2004 US$’000 67,645 69,007 4,605 —	30 June 2007 US$’000 106,406 89,499 841 3,198
	185,883 (238,038)	170,110 (213,104)	141,257 (179,116)	199,944 (234,476)
	(52,155)	(42,994)	(37,859)	(34,532)

The amounts recognised in the income statements in respect of the defined benefit plan are as follows:

Current service cost (note 14) Interest cost/ (credit) - (notes 7 and 11)	Year ended 30 September 2006 2005 2004 US$’000 US$’000 US$’000 1,444 1,686 1,536 248 (146) (118) 1,692 1,540 1,418	Nine months ended 30 June 2007 2006 US$’000 US$’000 (unaudited) 910 1070 105 184 1,015 1,254	Nine months ended 30 June 2007 2006 US$’000 US$’000 (unaudited) 910 1070 105 184 1,015 1,254
			1,254

Movements in the present value of the defined benefit obligation are as follows:

At the beginning of the period Currency realignment Current service cost Finance cost/(income) Member contributions Benefit payments Actuarial losses/(gains) At the end of the period	2006 US$’000 213,104 11,638 1,444 248 795 (10,885) 21,694 238,038	30 September 2005 US$’000 179,116 (2,716) 1,686 (146) 996 (7,875) 42,043 213,104	2004 US$’000 154,186 12,867 1,536 (118) 944 (7,499) 17,200 179,116	30 June 2007 US$’000 238,038 17,425 910 105 545 (8,157) (14,390)
				234,476

— 124 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

Changes in the fair values of the Plan’s assets are as follows:

At the beginning of the period Currency realignment Member contributions Employer contributions Reclassifications to other creditors Benefit payments Actuarial gains At the end of the period	2006 US$’000 170,110 9,286 795 3,448 — (10,885) 13,129 185,883	30 September 2005 US$’000 141,257 (2,405) 996 10,262 126 (7,875) 27,749 170,110	2004 US$’000 127,954 7,631 944 2,706 33 (7,499) 9,488 141,257	30 June 2007 US$’000 185,883 13,614 545 2,817 (96) (8,157) 5,338
				199,944

The amounts recognised in the consolidated statements of changes in equity are as follows:

					Nine	months
		Year	ended 30 September		ended	30 June
		2006	2005	2004	2007	2006
		US$’000	US$’000	US$’000	US$’000	US$’000
						(unaudited)
Actuarial	(losses)/gains	(8,565)	(14,294)	(7,712)	19,728	(7,055)

The history of experience adjustments is as follows:

Present value of defined benefit obligations Fair value of Plan assets Deficit Experience (loss) gain adjustment on Plan liabilities Experience gain adjustment on Plan assets	2006 US$’000 238,038 (185,883) 52,155 (21,694) 13,129	30 September 2005 US$’000 213,104 (170,110) 42,994 (42,043) 27,749	2004 US$’000 179,116 (141,257) 37,859 (17,200) 9,488	30 June 2007 US$’000 234,476 (199,944)
				34,532
				14,390
				5,388

The actuarial valuation showed that the market value of the Plan assets at 30 June 2007 was US$199,944,000 and that the actuarial value of these assets represented 78% of the benefits that had accrued to members. The shortfall is to be cleared in accordance with current UK pensions legislation and after consultation with, and agreement by, the Trustees of the Plan. S&J currently estimates that the shortfall will be cleared in approximately 10 years, subject to agreement by the Trustees and the UK Pensions Regulator.

— 125 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

Recognition of actuarial gains and losses:

HKAS 19 (Amendment) on “Employee Benefits — actuarial gains and losses, group plans and disclosure” became effective for annual periods beginning on or after 1 January 2006.

Under the original HKAS 19 on employees benefits, all actuarial gains and losses would have been recognised immediately as an expense or income or on a deferral basis. However, S&J, being a U.S. Corporation which operates a defined benefit plan for certain employees in its UK based subsidiaries, has always adopted the U.S. standard SFAS 132, “Employers’ disclosures about pensions and other post-retirement benefits”. In respect of the treatment of actuarial gains and losses, SFAS 132, is not significantly different from the HKAS 19 (Amendment). Accordingly, S&J has always recognized its actuarial gain and losses outside profit or loss, and for the purpose of the financial information, the adoption of HKAS 19 (Amendment) does not give rise to a change of accounting policy on employee benefits.

30. DEFERRED TAX

THE S&J GROUP

The following are the major deferred tax assets and liabilities recognised and movements thereon during the current and prior periods.

Accelerated tax depreciation Accelerated accounting depreciation Retirement benefit obligations US$’000 US$’000 US$’000 At 1 October 2003 (22) 3,362 8,713 Credited (charged) to the income statement 151 (820) (386) Reclassifications — 10 (10) Actuarial losses on the pension plan — — 2,312 Exchange differences (3) 319 728 At 30 September 2004 126 2,871 11,357 Credited (charged) to the income statement 382 1,206 (2,617) Reclassifications — 38 (38) Actuarial losses on the pension plan — — 4,300 Exchange differences (2) (119) (104) At 30 September 2005 506 3,996 12,898 Credited (charged) to the income statement 807 (1,186) (1,413) Exchange differences 21 224 705 At 30 September 2006 1,334 3,034 12,190 Credited (charged) to the income statement (456) (81) (1,201) Actuarial losses on the pension plan — — (2,246) Exchange differences 99 231 926 At 30 June 2007 977 3,184 9,669	Accelerated tax depreciation Accelerated accounting depreciation Retirement benefit obligations US$’000 US$’000 US$’000 At 1 October 2003 (22) 3,362 8,713 Credited (charged) to the income statement 151 (820) (386) Reclassifications — 10 (10) Actuarial losses on the pension plan — — 2,312 Exchange differences (3) 319 728 At 30 September 2004 126 2,871 11,357 Credited (charged) to the income statement 382 1,206 (2,617) Reclassifications — 38 (38) Actuarial losses on the pension plan — — 4,300 Exchange differences (2) (119) (104) At 30 September 2005 506 3,996 12,898 Credited (charged) to the income statement 807 (1,186) (1,413) Exchange differences 21 224 705 At 30 September 2006 1,334 3,034 12,190 Credited (charged) to the income statement (456) (81) (1,201) Actuarial losses on the pension plan — — (2,246) Exchange differences 99 231 926 At 30 June 2007 977 3,184 9,669	Accelerated tax depreciation Accelerated accounting depreciation Retirement benefit obligations US$’000 US$’000 US$’000 At 1 October 2003 (22) 3,362 8,713 Credited (charged) to the income statement 151 (820) (386) Reclassifications — 10 (10) Actuarial losses on the pension plan — — 2,312 Exchange differences (3) 319 728 At 30 September 2004 126 2,871 11,357 Credited (charged) to the income statement 382 1,206 (2,617) Reclassifications — 38 (38) Actuarial losses on the pension plan — — 4,300 Exchange differences (2) (119) (104) At 30 September 2005 506 3,996 12,898 Credited (charged) to the income statement 807 (1,186) (1,413) Exchange differences 21 224 705 At 30 September 2006 1,334 3,034 12,190 Credited (charged) to the income statement (456) (81) (1,201) Actuarial losses on the pension plan — — (2,246) Exchange differences 99 231 926 At 30 June 2007 977 3,184 9,669	Tax losses US$’000 — — — — — —	Total US$’000 12,053 (1,055 — 2,312 1,044
				14,354
382 — — (2)	1,206 38 — (119)	(2,617) (38) 4,300 (104)	— — — —	(1,029 — 4,300 (225
506	3,996	12,898	—	17,400
807 21	(1,186) 224	(1,413) 705	194 —	(1,598 950
1,334	3,034	12,190	194	16,752
(456) — 99	(81) — 231	(1,201) (2,246) 926	— — 3	(1,738 (2,246 1,259
977	3,184	9,669	197	14,027

— 126 —

APPENDIX II

FINANCIAL INFORMATION ON S&J GROUP

At the balance sheet dates, based on the estimation of future profit streams, the Company has unrecognised deferred tax assets (before applying tax rates prevailing in the respective jurisdictions) in respect of unused tax losses, capital losses, other temporary differences and other tax credits available for offset against future profits. These are analysed as follows:

Unused tax losses Other tax credits	2006 US$’000 8,729 15,459 24,188	30 September 2005 US$’000 5,529 14,636 20,165	2004 US$’000 5,380 14,875 20,255	30 June 2007 US$’000 8,094 16,603
				24,697

Based on forecast income streams and having considered potential future earnings volatility, S&J does not anticipate the utilisation of any significant proportion of its tax losses and other tax credits or the material reversal of the other deferred tax temporary timing differences in the foreseeable future. The tax losses and other tax credits principally arise in the UK, France, and Australia and can be carried forward indefinitely.

31. SHARE CAPITAL

2006 Number 25,000,000 12,011,122	30 September 2005 Number 25,000,000 12,011,122	30 September 2005 Number 25,000,000 12,011,122	2004 Number 25,000,000 12,011,122	30 June 2007 Number 25,000,000	30 June 2007 Number 25,000,000
				12,011,122
5,735,561 —	11,741,122 (6,005,561)		11,741,122 —		5,735,561 —
5,735,561 2006 US$’000 25 12		5,735,561 30 September 2005 US$’000 25 12	11,741,122 2004 US$’000 25 12		5,735,561
					30 June 2007 US$’000 25
					12

On 8 April 2005 S&J acquired, for US$100, 6,005,561 common shares of the Company that were held by PNC Tool Holdings LLC. The agreement for the purchase of this stock had been approved by the SEC on 10 February 2005, and by the U.S. District Court for the Southern District of Florida on 15 February 2005 in part settlement of the litigation captioned SEC v Dennis Crowley, S&J, International Media solutions, Inc., Yolanda Velazquez and Kermit Silva (Case No. 04-80354-civMiddlebrooks).

— 127 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

32. SHARE PREMIUM ACCOUNT

The share premium account arises on the difference between the par value of ordinary shares issued by S&J and the market value of those shares at the date of issue.

33. CAPITAL RESERVE

The capital reserve arises in the consolidated financial statements of S&J with effect from 1 October 2001 as a result of the purchase on 6 September 2002 of Spear & Jackson plc and Bowers Group plc (collectively “The S&J Group”) by Megapro Tools, Inc. (now S&J) being treated as a reverse acquisition.

In the case of reverse acquisition, the legal acquirer is deemed to be the acquiree for accounting disclosure purposes. The share capital shown in the consolidated financial statements of S&J remains that of the legal acquirer (Megapro Tools, Inc.) but the retained profits arising prior to the deemed acquisition by the S&J Group of Megapro Tools, Inc. are those of the legal acquiree, the S&J Group. The net difference between the S&J Group’s share capital and other reserves and the issued share capital of Megapro Tools, Inc. has been credited to a capital reserve account.

34. TREASURY STOCK

Re-purchase of shares: 27 August 2003 (see below) 8 April 2005 (see note 31 above) 27 August 2003 (see below) 8 April 2005 (see note 31 above)	2006 Number 270,000 6,005,561 6,275,561 US$ 540,000 100 540,100	30 September 2005 Number 270,000 6,005,561 6,275,561 US$ 540,000 100 540,100	2004 Number 270,000 — 270,000 US$ 540,000 — 540,000	30 June 2007 Number 270,000 6,005,561
				6,275,561
				US$ 540,000 100
				540,100

On 27 August 2003, the Company announced the repurchase of 270,000 shares of its Common Stock for US$540,000.

— 128 —

FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

35. CAPITAL COMMITMENTS

The following represents capital expenditure in respect of the acquisition of property, plant and equipment contracted for but not provided for in the consolidated financial statements.

THE S&J GROUP

						30 September		30 June
					2006	2005	2004	2007
					US$’000	US$’000	US$’000	US$’000
For	property,	plant	and	equipment	—	89	6	—

36. CONTINGENT LIABILITIES

S&J is, from time to time, subject to legal proceedings and claims arising from the conduct of its business operations, including litigation related to personal injury claims, customer contract matters, employment claims and environmental matters. While it is impossible to ascertain the ultimate legal and financial liability with respect to contingent liabilities including lawsuits, the Company believes that the aggregate amount of such liabilities, if any, in excess of amounts accrued or covered by insurance, will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

37. OPERATING LEASES

THE S&J GROUP

The Group as lessee:

		30 September		30 June
	2006	2005	2004	2007
	US$’000	US$’000	US$’000	US$’000
Minimum lease payments made under
operating leases during the period: Land
and Buildings	944	1,007	835	513

At the relevant balance sheet dates, S&J had commitments for future minimum lease payments under non-cancelable operating leases in respect of rented premises which fall due as follows:

		30 September		30 June
	2006	2005	2004	2007
	US$ million	US$ million	US$ million	US$ million
Operating leases which expire:
Within one year	1.1	1.0	0.9	1.3
Second to Fifth years	3.5	3.7	3.7	3.6
Over five years	1.3	2.2	2.8	1.2
	5.9	6.9	7.4	6.1

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FINANCIAL INFORMATION ON S&J GROUP

APPENDIX II

38. PRINCIPAL SUBSIDIARIES

The consolidated financial statements include the accounts of S&J and its wholly owned subsidiaries Spear and Jackson Acquisition Corp., Spear & Jackson plc and Bowers Group plc. Both Spear & Jackson plc and Bowers Group plc are sub-holding companies held directly by Spear and Jackson Acquisition Corp. and their business is carried out by the following directly and indirectly owned subsidiaries: Bowers Metrology Limited, Bowers Metrology (UK) Limited, Coventry Gauge Limited, CV Instruments Limited, Eclipse Magnetics Limited, Spear & Jackson (New Zealand) Limited, James Neill Canada Inc., James Neill Holdings Limited, James Neill U.S.A. Inc., Spear & Jackson (Australia) Pty Ltd., Magnacut Limited, Neill Tools Limited, Spear & Jackson Garden Products Limited, Spear & Jackson Holdings Limited, Spear & Jackson France S.A., Societe Neill France S.A., CV Instruments Europe BV and Bowers Eclipse Equipment Shanghai Co. Limited.

		Issued and	Proportion of
		fully paid	ownership
	Place of	share capital/	interest held
	incorporation	registered	by the
Name of company	or registration	capital	company	Principal activities
Bowers Eclipse Equipment	PRC	Ordinary RMB	100% *	Manufacture, quality control
Shanghai Co. Limited		4,026,000		and distribution of metrology
				products
Bowers Group plc	UK	Ordinary	100% *	Investment holding
		£50,000
		Ordinary “A”
		£10,000
Bowers Metrology Limited	UK	Ordinary £100	100% *	Manufacturer and distributor
				of precision measuring
				equipment
Bowers Metrology (UK)	UK	Ordinary £2	100% *	Distributor of precision
Limited				measuring equipment
Coventry Gauge Limited	UK	Ordinary £2	100% *	Manufacture of precision
				gauges and associated
				metrology products
CV Instruments Europe BV	The Netherlands	Ordinary Euro	100% *	Distributor of precision
		18,000		measuring equipment
CV Instruments Limited	UK	Ordinary £100	100% *	Assembly and distributor of
				precision measuring
				equipment
Eclipse Magnetics Limited	UK	Ordinary	100% *	Manufacture of permanent
		£80,000		magnets, magnetic work
				holding systems and other
				associated products,
				marketing and sales of
				micrometers and other
				precision measuring tools

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FINANCIAL INFORMATION ON S&J GROUP

		Issued and	Proportion of
		fully paid	ownership
	Place of	share capital/	interest held
	incorporation	registered	by the
Name of company	or registration	capital	company	Principal activities
James Neill Holdings Limited	UK	Ordinary	100% *	Investment holding
		£44,773,788
		4.2% preference
		£300,000
Magnacut Limited	UK	Ordinary £9,000	100% *	Manufacture of permanent
				magnets and assemblies
Markbalance plc	UK	Ordinary	100% *	Investment holding
		£13,000
Neill France SA	France	Ordinary Euro	100% *	Investment holding
		198,184
Neill Tools Limited	UK	Ordinary	100% *	Manufacture of hacksaw
		£25,597,000		blades, othe engineers cutting
				tools, micrometers, and othe
				precision measuring tools
Offertower plc	UK	Ordinary	100% *	Investment holding
		£13,000
Spear and Jackson	USA	Ordinary US$10	100%	Investment holding
Acquisition Corp. (see
below)
Spear & Jackson (Australia)	Australia	Ordinary	100% *	Marketing and sale of group
Pty		AUS$4,640,000		tools and other related
				products
Spear & Jackson France SA	France	Ordinary Euro	100% *	Marketing and sale of group
		1,300,000		tools and other related
				products
Spear & Jackson Garden	UK	Ordinary	100% *	Manufacture and sale of
Products limited		£16,977,000		garde, agricultural and
				contractors’ hand tools,
				woodsaws and builders’ tools
Spear & Jackson Holdings	UK	Ordinary	100% *	Investment holding
Limited		£16,470,391
		Cumulative
		Preference
		£80,000

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APPENDIX II

		Issued and	Proportion of
		fully paid	ownership
	Place of	share capital/	interest held
	incorporation	registered	by the
Name of company	or registration	capital	company	Principal activities
Spear & Jackson plc	UK	Ordinary	100% *	Investment holding
		£60,834,229
		Deferred
		£22,599,309
Spear & Jackson (New	New Zealand	Ordinary	100% *	Marketing and sale of group
Zealand) Limited		NZ$400,000		hand and garden tools and
				other related products

S&J directly owns Spear and Jackson Acquisitions Corp. The investment in Spear & Jackson Acquisition Corp. of US$10 is stated at cost.

Signifies that the investment is held indirectly.

Unless specified in the “Principal activities”, the above subsidiaries operate principally in their respective places of incorporation or registration.

None of the subsidiaries had any debt securities subsisting in the periods under review.

39. MAJOR NON-CASH TRANSACTIONS

During the periods under review, the Group entered into finance lease arrangements in respect of assets with a total capital value at the inception of the leases of approximately US$649,000, US$393,000, US$235,000, US$1,059,000, and US$475,000 in the years to 30 September 2006, 30 September 2005 and 30 September 2004 and the nine-month periods to 30 June 2007 and 30 June 2006 respectively.

40. RELATED PARTY TRANSACTIONS

Other than (i) the shares acquired by S&J from PNC Tool Holdings LLC (an entity owned by Mr Dennis Crowley, the former CEO) as disclosed in note 1, and (ii) the emoluments paid to the directors of the Company (who are also considered as the key management of S&J) as disclosed in note 15, S&J has not entered into any other related party transaction.

D. SUBSEQUENT EVENTS

On 11 July 2007 S&J reached an interim arrangement with the trustees and actuary of its UK defined benefit Pension Plan (“the Plan”) whereby it was agreed that a one-time special contribution of £1 million (approximately US$2 million) was to be paid to the Plan by 1 August 2007 and that employer contributions are to continue at that rate of £1.9 million (approximately US$3.8 million). The special contribution was duly paid on the agreed date.

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FINANCIAL INFORMATION ON S&J GROUP

The payment of the special contribution and the ongoing annual contribution rate represent an interim arrangement pending, and without prejudice to, the conclusion of negotiations between S&J, the Plan’s trustees and actuary regarding ongoing funding. These negotiations may take several months to complete. Following the recent introduction of new UK pension legislation, if no agreement is reached between the parties by June 2008, the UK Pensions Regulator will then participate in all further negotiations.

E. SUBSEQUENT FINANCIAL STATEMENTS

Audited financial statements of S&J Group have not been prepared in respect of any period subsequent to 30 June 2007.

Yours faithfully

ANDREW MA DFK (CPA) LIMITED Certified Public Accountants YAU WAI HING, STEPHEN Practising Certificate No. P03392

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MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS IN RELATION TO SPEAR & JACKSON GROUP

The following management discussion and analysis for the three years ended 30 September 2006 has been derived from the management discussion and analysis and other disclosures included in the annual reports on Forms 10-K of Spear & Jackson for the years ended 30 September 2004, 2005 and 2006 as filed with the SEC. Financial disclosures that were presented in the forms 10-K under U.S. GAAP have been restated, where necessary, to ensure conformity with HK GAAP.

FOR THE YEAR ENDED 30 SEPTEMBER 2006

Discussion of operating results

The Group made a loss on continuing operations, after the provision of income tax of US$2.5 million.

Sales for the year from continued activities decreased by US$3.7 million (3.7%) from US$100.7 million in 2005 to US$96.7 million in 2006 This was primarily due to adverse currency exchange fluctuations in the year of US$3.1 million, increased sales rebates of US$0.5 million and marginal sales volume decreases of US$0.1 million. Sales volume improvements were recorded in our Metrology, Magnetics and French divisions, but these were offset by volume decreases in our other businesses attributable to soft domestic retail demand in the UK, challenging business conditions in many of our end markets, increasing pressure from cheap, Far Eastern imports and the weak U.S. dollar.

Gross profit was 29.99% for the year ended 30 September 2006 compared to 33% in the previous year. Direct costs continued to be adversely affected by cost price increases in our principal raw materials of steel, plastic, cobalt and nickel, and increases in basic utility costs. In our Neill Tools division, margins were further diluted by a mix switch towards factored garden power tools at the expense of better margins on industrial hand tool product lines. Additionally, the Group’s margins were further eroded by one-time inventory provisions of US$1.1 million in our UK Garden Tools and Magnetics divisions following the completion of reorganization programs in those operations.

Selling, distribution and administrative expenses saw a marginal decrease in the year with general inflationary increases and one-time costs in setting up our new Chinese facility mitigated by the impact of movements in the US$/Sterling cross rates in the year, decreased head office costs and reduced non-cash pension charges.

The Group benefited in the year from the US$3.6 million gain arising on the sale of the residual element of its UK manufacturing facility at Wednesbury. The beneficial impact on pre-tax profits of this sale was reduced by a provision of US$3.5 million relating to UK manufacturing reorganization costs at the Wednesbury plant and elsewhere. With regard to Wednesbury, on 25 January 2006 the Group announced the closure of the remaining element this site with all warehouse and distribution

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APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

operations previously located at this site being transferred to the Group’s principal manufacturing site, Atlas, in Sheffield, England. Additionally, in the final quarter of the year, the Group performed a review of its remaining UK manufacturing operations and provision was made for severance costs, restructuring charges and fixed asset impairment charges relating to those initiatives.

The results for the year also include a US$0.7 million provision regarding the settlement of the class and derivative actions as described below.

Order book

The sales order book at the period end was approximately $6.2 million.

Future prospects

The various restructuring and relocation activities carried out in the year form part of the Company’s UK manufacturing reorganization program which has been initiated to regenerate and modernise key areas of the business. The closures will enable the Company to consolidate its sites and will allow the Company to develop a modern manufacturing, warehouse and distribution facility which will be well placed to meet the current and future needs of its customers. The changes made to the shape and structure of the UK business are significant and it is therefore probable that, in the short term, the cost savings that the reorganizations will deliver will be diluted whilst new procedures and processes are being established.

Management will continue to look at further initiatives to rationalize underperforming areas of the business and to monitor operational infrastructures in the United Kingdom, particularly overhead costs, to ensure that these are as cost efficient as possible and at a level appropriate to the needs of the business. Additionally, management is developing and introducing a number of new and extended ranges and promotional programs. Going forward these ranges should deliver incremental sales and margin growth.

Liquidity, financial resources and funding

Despite the cash commitments associated with the UK manufacturing operations and the payment of the class action settlement, there was an increase in cash and cash equivalents of US$3.4 million in the year from US$6.5 million at 30 September 2005 to US$9.9 million at 30 September 2006. The proceeds generated from the sale of the Wednesbury land and buildings and favourable working capital movements contributed to this increase in cash.

The Group generally finances its operations with internally generated cash flows. The Group has no bank loans but makes partial utilisation of available bank overdraft and similar facilities when required.

Bank overdraft and other facilities in the Group’s UK, French and Australian are secured, as applicable, by means of parent company guarantees, cross-company guarantees and fixed and floating charges on the assets and undertakings of the subsidiary companies involved.

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APPENDIX III

Change in majority ownership

On 23 March 2006 Jacuzzi Brands, Inc. (“Jacuzzi”) and its subsidiary undertaking, USI American Holdings, Inc. (“USI” and together with Jacuzzi, the “Seller”) entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with United Pacific Industries Limited (“UPI”), a Bermuda Corporation, to sell its entire holding of 3,543,281 shares, representing approximately 61.8% of the common stock (the “Shares”) of Spear & Jackson, Inc. (“S&J”) to UPI for US$1.40 per share for an aggregate purchase price of US$4,960,593. Such shares constituted all of the shares of S&J owned by the Seller. On 28 July 2006 the purchase was formally completed.

Settlement of legal action

A number of class action lawsuits were initiated in 2004 in the U.S. District Court for the Southern District of Florida by Company shareholders against the Company, Sherb & Co LLP, the Company’s former independent auditor, and certain of the Company’s directors and officers. These various class action suits were subsequently consolidated.

On 7 July 2006 a Memorandum of Understanding (“MOU”) was reached whereby the Group deposited US$650,000 into a Qualified Settlement Fund, disbursement pending approval of the Court. Provision was made for this in the year ended 30 September 2006 together with US$70,000 relating to an associated shareholder derivative action.

Contingent liabilities

As far as the Group was aware there were no material contingent liabilities at the period end.

Exposure to exchange rate fluctuations

The functional currency of each of the Group’s foreign operations is the relevant local currency of the entity. The consolidated financial statements of S&J are denominated in U.S. dollars.

Changes in exchange rates between UK sterling, the Euro, the Chinese Yuan, the New Zealand dollar, the Australian dollar and the U.S. dollar will affect the translation of the UK, French, Dutch, Chinese, New Zealand and Australian subsidiaries’ financial results into U.S. dollars for the purposes of reporting the consolidated financial results. The US$ Consolidated Balance Sheet and Consolidated Income Statement could therefore be subject to material fluctuation year on year as a result of significant movements in the cross rate between the US$ and the various functional currency source rates used in the consolidation. Management has decided not to hedge against the impact of exposures giving rise to these translation adjustments as such hedges may impact upon the Group’s cash flow compared to the translation adjustments which do not affect cash flow in the medium term.

The Group had $1.2 million in respect of forward exchange contracts outstanding as at 30 September 2006 in order to hedge the foreign currency risk of certain accounts receivable and accounts payable transactions. These transactions matured within four months of the period end.

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MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

APPENDIX III

Employee remuneration

The number of persons employed by the Group and its wholly owned subsidiaries at 30 September 2006 was 589. Remuneration costs for all employees, including directors, were $26.4 million, including $1.4 million relating to retirement benefit plan costs.

The Group’s remuneration policy is to align employee wages and salaries with prevalent market rates to ensure that suitably experienced employees can be recruited and retained. Annual increases are determined by inflationary and performance factors. Certain employees also participate in a range of performance related bonus schemes and receive non-cash related benefits such as personal medical insurance and the provision of company motor vehicles. S&J operates a contributory defined benefit pension plan for certain of its employees.

Gearing ratio

The net gearing ratio is nil (i.e. bank overdraft, loans and other borrowings less cash balances held expressed as a percentage of shareholders’ funds).

Disposal of subsidiaries

During the fourth quarter of 2005 the Group began marketing for sale certain assets associated with its Coventry Gauge thread gauge measuring business located in the United Kingdom. On 28 February 2006 the Group concluded the sale of these assets for a nominal consideration.

Acquisition of interest in associate

In January 2006 the Group, through its subsidiary undertaking, Eclipse Magnetics Limited, paid $0.2 million to acquire a 25% stake in a joint venture company, Ningbo Hitech Magnetic Assemblies Co. Ltd. (“Hi-tech”) whose principal activity is the production of magnetics, plastic and other materials and magnetic assemblies.

Significant investments held and details of future plans for material investments

There were no relevant items during the year.

FOR THE YEAR ENDED 30 SEPTEMBER 2005

Discussion of operating results

Overall, the results for the year ended 30 September 2005 showed both an increase in sales ($1.2 million) and an increase in profit before taxation ($4.7 million) when compared to the prior year. Income before taxes benefited significantly from the US$3.3 million gain arising on the sale of the surplus element of the Company’s manufacturing plant at Wednesbury, England and the disposal of its warehouse and office facility in Boca Raton, Florida. No similar income arose in the comparable period in 2004.

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APPENDIX III

While sales for the year increased by US$1.2 million (1.2%) this increase was primarily due to favourable currency exchange fluctuations in the year offset by sales volume decreases. Improvements in volumes were recorded in our Metrology and Magnetics divisions, but these were diluted by soft domestic demand in the UK, challenging business conditions in many of our end markets, increasing pressure from cheap, Far Eastern imports and the weak U.S. dollar.

Gross profit was 33.0% for the year ended 30 September 2005 compared to 32.08% in the previous year. Direct costs were adversely affected by increases in prices for our principal raw materials of steel, plastic, cobalt and nickel, and increases in basic utility costs. Additionally, the movement toward factored product, which has a lower contribution, in preference to our own manufactured product, had a detrimental effect on margins. Nevertheless, overall margins showed an improvement as the various divisions witnessed favourable sales mixes and benefited from both favourable exchange gains on imported factored products and the sale of obsolete inventories at prices higher than their written down value.

Selling, distribution and administrative expenses decreased by US$0.89 million (2.98%) in the year. The results for the year were negatively impacted by: US$ sterling cross rates in the year; continuing high level of UK distribution costs following the move to a “direct to market” sales approach; and general inflationary increases. These adverse effects were, however, mitigated by the release of the excess element of a provision relating to severance compensation payable to the former Managing Director of Spear & Jackson plc. In addition, the Group benefited from the local reorganization and cost cutting measures (particularly in the Group’s Australian subsidiary) which have further reduced expenses.

The Group benefited in the year from the US$3.3 million gain arising on the sale of the surplus element of its Wednesbury facility and the disposal of its warehouse facility in Boca Raton. At the same time, however, pre-tax profits were negatively impacted by a US$1.1 million charge in respect of manufacturing reorganization costs. These reorganisation costs relate to office and warehouse relocation costs arising as the result of the sale of the surplus element of the Wednesbury property. Additionally, in the final quarter of the year the Group performed a review of its UK manufacturing operations and provision was made for a number of strategies that are to be implemented to reduce its ongoing cost basis.

Such restructuring costs and other initiatives, together with planned investment in new capital equipment in the UK, were initiated to achieve improved efficiencies and reduce labour costs with corresponding improvements in the ongoing profitability of the Company in the forthcoming year.

Order book

The sales order book at the period end was approximately $5.8 million.

Future prospects

Within the hand and garden business, competition remains fierce from cheap foreign imports and the softening of demand in the UK retail sector is having an adverse effect on sales as major UK

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APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

retailers instigate aggressive inventory reduction programs to counter falling consumer interest. Demand from export markets, particularly the Far and Middle East has also begun to slacken as the intensive purchasing activity resulting from building projects in the aftermath of the Iraqi conflict has now started to decline.

In response to the poor sales performance and increased competition at ever lower price points from Far Eastern markets, the Company performed a detailed review of its UK manufacturing operations in Q4 of 2005 and has now begun implementation of a number of strategies to reduce its ongoing cost base. In addition, management plans to continue to look at initiatives to rationalise underperforming areas of the business and to monitor operational infrastructures in the United Kingdom, particularly overhead costs, to ensure that these are as cost efficient as possible and at a level appropriate to the needs of the business. In conjunction with this, an inventory reduction program has begun to reduce stock levels, especially in those divisions witnessing a softening on sales demand.

Defined benefit pension obligations

In the quarter ended 31 March 2005 the actuarial advisers to the Group’s defined benefit pension plan (“the Plan”) completed an actuarial valuation of the Plan, effective as at 31 December 2004. This valuation showed an increase in the Plan’s deficit compared to that calculated at 5 April 2002, the date of the last full actuarial valuation. Following discussions between the Group and the Trustees of the Plan regarding methods by which the asset shortfall could be reduced, it was agreed, in early May, that the Group would make a special contribution to the Plan of £4 million sterling (approximately US$7.2 million). £2 million sterling (approximately US$3.6 million) was paid to the Plan in June 2005 and the remaining £2 million sterling (approximately US$3.6 million) was paid in September 2005. In addition, from May 2005, the Group’s annual pension contributions to the Plan increased from £1.5 million sterling (approximately US$2.7 million) to £1.9 million sterling (approximately US$3.4 million). This rate of annual contribution will remain in place, subject to certain conditions, until April 2007 when it will be reviewed by the Plan actuary. This agreement with regard to the future funding commitments of the Plan will enable the Group to plan future cash flows with greater certainty and will also avoid any re-negotiation of contribution rates in September 2007 when new pension legislation is enacted in the UK.

Settlement of legal action

On 15 February 2005 an SEC legal suit, which was filed on 15 April 2004 in the U.S. District Court of the Southern District of Florida, was settled following extensive negotiations. This suit, filed against the Company and Mr Dennis Crowley, the Company’s former Chief Executive Officer and Chairman, and others, alleged violations of Federal security laws.

A number of class action lawsuits were initiated in the U.S. District Court for the Southern District of Florida by Company stockholders against the Company, Sherb & Co. LLP, the Company’s former independent auditor, and certain of the Company’s directors and officers, including Mr Dennis Crowley, the Company’s former Chief Executive Officer/Chairman, and Mr William Fletcher, the

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APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

Company’s former CFO and current acting Chief Executive Officer. These suits alleged essentially the same claims as the SEC suit that was filed on 15 April 2004 in the U.S. District Court for the Southern District of Florida as above. Lead counsel has been appointed for the class action suits and a consolidated complaint has been filed.

On 6 September 2005, the Company was served with a Shareholder Derivative Complaint filed on 1 June 2004 in the Circuit Court for Palm Beach County, Florida (Case No. CA005068). The suit named, in addition to the Company, which is a nominal defendant, present and former directors and the Company’s prior accounting firm as defendants. The suit contained essentially the same factual allegations as the SEC suit and the series of class actions claims initiated in the U.S. District Court, but alleged state law claims of breaches of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, unjust enrichment and lack of reasonable care by various or all the defendants.

Contingent liabilities

At 30 September 2005, it was not possible to definitely ascertain the ultimate legal and financial liability relating to the Class Action and Shareholder Derivative Complaint law suits referred to above, or whether they would have a material adverse effect on the Company’s financial condition and results of operations. Other than the above, the Group had no other material contingent liabilities.

Liquidity, financial resources and funding

Cash and cash equivalents increased by US$1.5million from US$5 million at 30 September 2004 to US$6.5 million at 30 September 2005.

The one-time special pension contribution of US$7.2 million, as discussed above, represented a significant cash outflow in the period but the negative impact was mitigated by sale proceeds of US$8.7 million relating to the sale of land and buildings.

Business operations during the year were funded from net operating income, supplemented, where necessary, by the utilisation of UK, French and Australian banking facilities. As a consequence of the payment of the US$7.2 million special pension contribution and the additional funding which will be required to finance restructuring initiatives, an open-ended, on demand bridging loan of US$5.3 million was secured with the Group’s UK bankers. This facility was not utilised in the year.

Exposure to exchange rate fluctuations

The functional currency of each of the Group’s foreign operations is the relevant local currency of the entity. The consolidated financial statements of S&J are denominated in U.S. dollars.

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APPENDIX III

The Group had $1.0 million in respect of forward exchange contracts outstanding as at 30 September 2005 in order to hedge the foreign currency risk of certain accounts receivable and accounts payable transactions. These transactions matured within four months of the period end.

Employee remuneration

The number of persons employed by the Group and its wholly owned subsidiaries at 30 September 2005 was 710. Remuneration costs for all employees, including directors, were $31.3 million, including $1.7 million relating to retirement benefit plan costs.

Gearing ratio

The net gearing ratio is nil (i.e. bank overdraft, loans and other borrowings less cash balances held expressed as a percentage of shareholders’ funds).

Disposal of subsidiaries

There were no relevant items during the year.

Acquisition of interest in a subsidiary

On 26 September 2005, a new subsidiary undertaking, Bowers Eclipse Equipment Shanghai Co. Limited, was incorporated in Shanghai China, to operate as a manufacturing, quality control and distribution centre. In January 2006 an initial investment of $0.7 million was made in the ordinary share capital of that company.

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APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

Significant investments held and details of future plans for material investments

There were no relevant items during the year.

FOR THE YEAR ENDED 30 SEPTEMBER 2004

Discussion of operating results

Overall, although sales for the year ended 30 September 2004 showed an increase over those recorded for the year ended 30 September 2003, there was a significant decrease in operating profitability.

Sales for the year ended 30 September 2004 increased by approximately US$7.6 million (8.3%) over the previous year, primarily attributable to favourable currency exchange fluctuations in the year offset by sales volume decreases. While improvements in sales volumes were recorded in the UK trading divisions, these were offset by the continued impact of the loss, in late 2003, of a major Australian customer, the negative impact in certain export markets of the weak U.S. dollar, soft domestic demand, lack of optimism in the capital goods manufacturing sector and fragile customer confidence following the removal from office of the Company’s former Chief Executive Officer.

Gross profit was 32.1% for the year ended 30 September 2004 compared to 31.5% for the prior year. Margins were adversely affected by increases in prices for our principal raw materials of steel, plastic, cobalt and nickel, increases in basic utility charges which form a key part of our manufacturing costs and the movement towards factored product, which has a lower contribution, in preference to own manufactured items. The negative impact of these factors was counterbalanced, however, by stronger sales mix, the flow-through benefits from the “direct to market” sales strategy and the successful disposal of slow moving inventories at amounts above written down value

Selling, distribution and administrative expenses increased by US$5.9 million (24.3%) in the year. Key factors here included: the additional costs associated with the set up of the enhanced UK and U.S. sales infrastructure; continuing UK distribution cost overruns; the impact of adverse movements in the US$/sterling cross rates in the period and general inflationary increases. As an additional factor, certain one time savings experienced in 2003 have not been repeated in 2004. These include such items as: the settlement of senior employee termination liabilities at amounts less than expected (US$0.6 million), bad debt recoveries in quarter 1 of 2003 (US$0.1 million), one-off car leasing credits (US$0.2 million) and tax dispute settlements at amounts less than anticipated (US$0.2 million).

In addition, corporate head office costs in the U.S. significantly increased as a result of the legal and professional fees, monitor costs and associated expenses incurred in connection with the U.S. Securities and Exchange Commission’s suit against the Company and its former Chief Executive Officer. Head office salary costs decreased as a result of the removal of the Company’s former CEO but this reduction was not sufficient to absorb the increases in legal fees in the period.

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MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

APPENDIX III

The Group also invested significantly in the acquisition of land and buildings in the UK in the year: in October 2003, through the UK subsidiary Spear & Jackson Garden Products Limited, the Group acquired, for US$3.2 million, the land and buildings occupied by our garden tools division in Wednesbury, England. Subsequent to this, Spear & Jackson Garden Products Limited signed, on 9 December 2004 a conditional contract for the sale, for £2.8 million (approximately US$5.3 million), of the excess element of this site. The agreement was conditional upon the buyer entering into binding contracts for the acquisition of the adjoining property. These conditions were satisfied early in 2005 and the contract for sale was formally completed on 28 January 2005.

In March 2004, warehouse premises were purchased in Boca Raton, Florida for US$3.3 million. Following the removal of the Company’s former CEO, the board, in consultation with the Corporate Monitor, performed a detailed review of its U.S. sales and distribution strategy. As a result, the original initiative of setting up a central distribution unit in Florida for the company’s North American sales operations was deferred. The warehouse was placed for sale and was accordingly presented as an asset held for resale in the Group’s consolidated balance sheet.

Order book

The sales order book at the period end was approximately $8.4 million.

Future prospects

In 2005 management plans to continue to pursue a widening of our direct sell UK customer base together with initiatives to increase our presence in mainland Europe. Such customer gains are essential in helping to absorb the additional overhead incurred in setting up the infrastructure for the “direct to market” sale route.

The management of the Company anticipates that the businesses will again face the issues of increased costs and margin erosion as a result of raw material, fuel and other utility price increases, interest rate increases and a weak dollar. This will again put pressure on our margins and overhead costs.

To mitigate the impact of these factors management plans to continue both to look at initiatives to rationalize underperforming areas of the business and to monitor the business infrastructures in the United Kingdom, particularly overhead costs, to ensure that these are as cost efficient as possible and at a level appropriate to the needs of the business.

Inevitably the removal, in April 2004, of the Company CEO by the SEC, and the initiation of legal proceedings against the Company and certain of its directors has resulted in a loss of focus on operating activities and a fragility of confidence in the long term direction of the Company. Thanks to a dedicated senior management and work force, these disruptions have been successfully overcome. The Company is now confident that the resources and expertise are in place to enable the business to move forward to achieve its short and long-term objectives.

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MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

APPENDIX III

Legal action and contingent liabilities

On 15 April 2004, the U.S. Securities and Exchange Commission filed suit in the U.S. District Court for the Southern District of Florida, against the Company and Mr Dennis Crowley, its then Chief Executive Officer/Chairman, among others, alleging violations of the federal security laws. Specifically with regard to the Company, the SEC alleged that the Company violated its registration, anti-fraud and reporting provisions. These allegations arose from the alleged failure of Mr Crowley to accurately report his ownership of the Company’s stock, and his alleged manipulation of the price of the Company’s stock through the dissemination of false information, allowing him to profit from sales of stock through nominee accounts. On 10 May 2004, the Company consented to the entry of a preliminary injunction, without admitting or denying the allegations of the SEC complaint.

In addition, the Court appointed a Corporate Monitor to oversee the Company’s operations. Further to Mr Crowley consenting to a preliminary injunction, the Court’s Order also temporarily barred Mr Crowley from serving as an officer or director of a public company and prohibited him from voting or disposing of Company stock. The Company’s Board of Directors also suspended Mr Crowley from all positions he occupied as an officer or director. The Company is cooperating with the Monitor and the continuing SEC investigation.

At the period end it is not possible to ascertain the ultimate legal and financial liability or whether this action would have a material adverse effect on the Company’s financial condition and results of operations. Other than the above, the Group had no material contingent liabilities.

Liquidity, financial resources and funding

Cash and cash equivalents decreased by US$3.9 million from US$8.9 million at 30 September 2003 to US$5 million at 30 September 2004. Outflows relate primarily to the US$6.5 million investment in land and buildings in the UK and Florida as discussed above.

Business operations during the year were funded from net operating income, supplemented, where necessary, by the utilisation of UK, French and Australian banking facilities.

Exposure to exchange rate fluctuations

The functional currency of each of the Group’s foreign operations is the relevant local currency of the entity. The consolidated financial statements of S&J are denominated in U.S. dollars.

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APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

of reporting the consolidated financial results. The US$ Consolidated Balance Sheet and Consolidated Income Statement could therefore be subject to material fluctuation year on year as a result of significant movements in the cross rate between the US$ and the various functional currency source rates used in the consolidation. Management has decided not to hedge against the impact of exposures giving rise to these translation adjustments as such hedges may impact upon the Group’s cash flow compared to the translation adjustments which do not affect cash flow in the medium term.

The Group had $1.5 million in respect of forward exchange contracts outstanding as at 30 September 2004 in order to hedge the foreign currency risk of certain accounts receivable and accounts payable transactions. These transactions matured within four months of the period end.

Employee remuneration

The number of persons employed by the Group and its wholly owned subsidiaries at 30 September 2004 was 755. Remuneration costs for all employees, including directors, were $30.1 million, including $1.5 million relating to retirement benefit plan costs.

Gearing ratio

The net gearing ratio is nil (i.e. bank overdraft, loans and other borrowings less cash balances held expressed as a percentage of shareholders’ funds).

Disposal and acquisition of subsidiaries, significant investments held and details of future plans for material investments

There were no relevant items during the year.

FOR THE NINE MONTH PERIODS ENDED 30 JUNE 2007 AND 30 JUNE 2006

The following management discussion and analysis for the nine month periods ended 30 June 2007 and 30 June 2006, has been derived from the management discussion and analysis and other disclosures included in the quarterly reports on Forms 10-Q of S&J for the periods ended 30 June 2007 and 2006 as filed with the SEC. Financial disclosures that were presented in the forms 10-Q under U.S. GAAP have been restated, where necessary, to ensure conformity with HK GAAP.

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MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

APPENDIX III

Discussion of operating results

When compared to the equivalent period in the previous year, the results for the nine months ended 30 June 2007 showed increases in sales and operating profits.

For the nine months to 30 June 2007 sales increased by US$7.7 million (10.07%) from US$75.1 million in 2006 to US$82.8 million in 2007. The increase comprised US$7.0 million relating to favourable currency exchange variations and increased sales volumes of US$0.9 million, offset by increased sales rebates of US$0.2 million.

Sales volume improvements were recorded in our Neill Tools, Metrology, Robert Sorby, Eclipse, Australia, and French divisions, with these favourable variances only slightly negated by volume shortfalls in our New Zealand business.

While soft retail demand continued in the UK and the weakening U.S. dollar had a further adverse effect on sales into US$ denominated markets, there were some encouraging signs in the quarter. The Bowers division witnessed sales gains in its UK based export facility as well as its distribution outlet in Maastricht, while Neill Tools continued to develop its UK garden centre initiatives.

For the nine months to 30 June 2007 the gross profit was US$28.6 million (34.5%) compared to US$23.40 million (31.1%) in the previous year. The improvement reflects the reduction of direct costs as a result of the extensive restructuring initiatives in our UK tool and magnetic products manufacturing operations. Own-manufactured product is being progressively replaced with factored items sourced from overseas thereby reducing costs and increasing profitability.

Selling, distribution and administrative expenses increased by US$2 million (8.9%) in the period from US$22.7 million in 2006 to US$24.7 million in 2007. After eliminating the adverse impact of movements in average US$/sterling cross rates in the period of US$2.71 million and general inflationary increases of US$0.60 million, the underlying trend is one of decreased SG&A costs.

Reorganization costs in the period to 30 June 2007 were negligible compared to the previous year (US$1.8 million). The US$1.8 million charge in 2006 relate to costs in connection with the closure of the company’s manufacturing facility in Wednesbury, England and the reorganization of its Atlas manufacturing site in Sheffield, England. Additionally, the 2006 comparatives include a US$0.65 million provision for Class Action settlement costs.

As a result of the higher gross profits, decreased reorganisation and litigation costs and higher selling, distribution and administrative costs, the Group’s profit before tax moved from a loss of US$1.8 million in 2006 to a profit of US$4.1 million in 2007.

The increases in profitability have been principally driven by the margin improvements arising from the UK reorganization programs initiated in fiscal 2006. These comprise the closure of the

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APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

Company’s manufacturing site at Wednesbury, the transfer of all warehouse and distribution operations previously carried out at that location to the Company’s Atlas site in Sheffield, the closure of certain manufacturing activities at the Atlas site and the cessation of magnet production and the relocation of the remaining operations of the Magnetics division to the Company’s Atlas site.

Order book

The sales order book at the period end was approximately $7.6 million.

Future prospects

The various reorganisation initiatives carried out in fiscal 2006 represented a significant change to the shape and structure of the Company’s UK hand tool and magnetic products business models. Given the size of the project and the changes involved it was anticipated that there may be initial teething problems as the new sourcing operation and relocated warehousing facility became fully operational. There have, indeed, been issues to resolve whilst new procedures and processes were being established with regard to supplier deliveries, quality control and distribution costs. These have diluted the savings that the reorganization should deliver. Management is currently reviewing all of these issues so that corrective measures can be implemented in order that the full earnings benefits of the restructuring can be realized as soon as possible.

Given the competitive markets in which we operate, we will continue to look at further initiatives to rationalize underperforming areas of the business and to monitor operational infrastructures in the United Kingdom, particularly overhead and sourcing costs, to ensure that these are as cost efficient as possible and at a level appropriate to the needs of the business.

Any strengthening of the U.S. dollar would impact favourably on the business, as this would ease the pressure on margins and increase our competitiveness. Current trends, however, indicate no end to a continued weakening which will place additional pressure on our sales into a number of our US$ denominated export markets.

Going forward, the success factors critical to our business include sales growth through penetration in new and existing markets; the implementation of strategies to enable us to compete against suppliers based in low cost manufacturing regimes; successful procurement of new and existing products at favourable prices, emphasis on new product development activities so that we can exploit our brand equity and technical expertise to differentiate our product offerings from cheap “me-too” imports; emphasis on promotional campaigns and demonstration tours which focus on high margin product groups and on those high added value areas of the Metrology and Magnetics businesses; continued reorganization of our existing manufacturing and overhead bases so that they are as cost efficient as possible; the successful development of our operations in China and elsewhere; and the maximization of cash resources and the negotiation of additional bank facilities, where required, so that we are able to fund new initiatives and take advantage of market opportunities.

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APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

Much, however, will continue to depend on the level of retail demand in our UK, French and Australasian markets. Softening demand and a further deterioration in consumer confidence could significantly impact on our earnings levels in subsequent periods.

The development of detailed business strategies under our new ownership structure continues. Potential synergies and areas of specific market and commercial expertise, particularly in the Far Eastern trading arena, have been identified and initiatives are being actioned which, going forward, are hoped to be of benefit to both S&J and United Pacific Industries Limited.

Defined benefit pension obligations

The Group’s current funding agreement with the Plan ended on 31 July 2007. In the ten month period ending on that date, the total Group contributions amounted to approximately US$3.1 million. On 11 July 2007 the Group reached an interim arrangement with the Plan’s trustees and actuary whereby it was agreed that a one-time special contribution of £1 million (approximately US$2.0 million) was to be paid to the Plan by 1 August 2007 and employer contributions were to continue at the rate of £1.9 million (approximately US$3.8 million) per annum. This is an interim arrangement pending, and without prejudice to, the conclusion of negotiations between the Group, the actuary and the Plan trustees. When formal agreement is reached between the parties concerning the definitive funding contributions, future annual contributions may therefore be in excess of the US$3.8 million determined by the interim arrangement explained above. Following the recent introduction of new UK pensions legislation, if no agreement is reached by the parties with regard to future Plan funding by June 2008, the UK Pensions Regulator will then become involved in all further negotiations.

Liquidity, financial resources and funding

Cash and cash equivalents decreased by US$0.1 million from US$9.9 million at 30 September 2006 to US$9.8 million at 30 June 2007. Outflows relate primarily to the US$1 million spent on plant and machinery including a US$0.7 million investment in new computer equipment at the Atlas site.

Legal action

On 11 May 2007, the U.S. District Court for the Southern District, sitting in West Beach, Florida, heard the Plaintiff’s motion for Final Approval of the Class Action Settlement and Plan of Approval,

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APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

to which there were no objectors or class members that opted out of the settlement. On 14 May 2007, the Court signed the Final Judgment thus forever extinguishing all of the class claims against the Company and barring any claims for contribution by third parties. The Final Judgment made clear that the settlement was not an admission of wrongdoing or liability by the company.

Contingent liabilities

As far as the Group was aware, there were no material contingent liabilities at the period end.

Exposure to exchange rate fluctuations

The functional currency of each of the Group’s foreign operations is the relevant local currency of the entity. The consolidated financial statements of S&J are denominated in U.S. dollars.

The Group had $1.8 million in respect of forward exchange contracts outstanding as at 30 June 2007 in order to hedge the foreign currency risk of certain accounts receivable and accounts payable transactions.

Employee remuneration

The number of persons employed by the Group and its wholly owned subsidiaries at 30 June 2007 was 560 (30 June 2006, 591). Remuneration costs for all employees, including directors, were $21.3 million, including $0.9 million relating retirement benefit plan costs for the nine month period to June 2007 For the nine month period to 30 June 2006 remuneration costs were $20.1 million including $1 million in respect of retirement benefit plan costs.

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APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS RELATING TO S&J GROUP

Gearing ratio

The net gearing ratio is nil (i.e. bank overdraft, loans and other borrowings less cash balances held expressed as a percentage of shareholders’ funds).

Disposal and acquisition of subsidiaries, significant investments held and details of future plans for material investments

There were no relevant items during the year.

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PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

A. REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of report, prepared for the sole purpose of incorporation in this circular, received from the independent reporting accountants of the Company, Andrew Ma DFK (CPA) Limited. As described under “Documents Available for Inspection” in Appendix V to this circular, a copy of the following report is available for inspection.

ANDREW MA DFK (CPA) LIMITED

Certified Public Accountants 19 Floor, Seaview Commercial Building 21-24 Connaught Road West Hong Kong SAR

==> picture [98 x 36] intentionally omitted <==

15 November 2007

The Directors United Pacific Industries Limited

Dear Sirs,

We report on the unaudited Pro Forma Financial Information which comprises the unaudited pro forma statement of assets and liabilities of United Pacific Industries Limited (the “Company”) and its subsidiaries (collectively the “Group”) and Spear & Jackson, Inc. (“S&J”) (hereinafter referred to as the “Enlarged Group”), set out on pages 153 to 155 of Appendix IV of the Company’s circular dated 15 November 2007 (the “Circular”) in connection with the acquisition of 38.2% equity interest in S&J. The unaudited Pro Forma Financial Information has been prepared by the directors of the Company (the “Directors”), for illustrative purposes only, to provide information about how the acquisition of the 38.2% equity interest in S&J might have affected the relevant financial information of the Group as at 31 March 2007. The basis of preparation of the unaudited pro forma financial information is set out in Section B of Appendix IV to the Circular.

Respective responsibilities of directors of the Company and reporting accountants

It is the responsibility solely of the Directors of the Company to prepare the unaudited Pro Forma Financial Information in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

It is our responsibility to form an opinion, as required by paragraph 29(7) of Chapter 4 of the Listing Rules, on the unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

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PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

Basis of opinion

We conducted our engagement in accordance with the Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited Pro Forma Financial Information with the Directors. This engagement did not involve independent examination of any of the underlying financial information.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma financial information has been properly compiled by the Directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

The unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgements and assumptions of the Directors of the Company, and, because of its hypothetical nature, does not provide any assurance or indication that any event will take place in future and may not be indicative of the financial position of the Group as at 31 March 2007 or any future date.

Opinion

In our opinion:

(a) the unaudited Pro Forma Financial Information has been properly compiled by the Directors on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Yours faithfully,

ANDREW MA DFK (CPA) LIMITED Certified Public Accountants YAU WAI HING, STEPHEN Practising Certificate No. P03392

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PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

B. INTRODUCTION ON THE UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES

The following unaudited pro forma statement of assets and liabilities of the Enlarged Group at 31 March 2007 has been prepared giving effect to the acquisition of the remaining 38.2% interest in S&J (the “Acquisition”).

The unaudited pro forma statement of assets and liabilities of the Enlarged Group which has been prepared by the Directors in accordance with paragraph 29 of Chapter 4 of the Listing Rules is for the purpose of illustrating the effect as if the Acquisition had taken place on 31 March 2007.

The unaudited pro forma statement of assets and liabilities of the Enlarged Group is prepared based on the unaudited consolidated balance sheet of the Group as extracted from the published interim report as at 31 March 2007 which has already consolidated S&J’s balance sheet items as at 31 March 2007 to the extent of 61.8%. Certain pro forma adjustments relating to the Acquisition that are (i) directly attributable to the transaction; and (ii) factually supportable as if the Acquisition had taken place on 31 March 2007 are also made by the Directors of the Group.

This unaudited pro forma statement of assets and liabilities has been prepared by the Directors of the Group to provide information of the Group upon completion of Acquisition. As it has been prepared for illustrative purpose only, it does not purport to give a true picture of the financial position of the Group following completion of the Acquisition.

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PRO FORMA FINANCIAL INFORMATION

APPENDIX IV

C. UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

Pro forma adjustments The Group as at 31 March 2007 (Note 1) Acquisition finance (Note 2) Acquisition of 38.2% minority interest in S&J (Note 3) HK$’000 HK$’000 HK$’000 Non-current assets Property, plant and equipment 244,051 — — Prepaid lease payment 651 — — Interest in associate 3,678 — — Available-for sale-investments 904 — — Deferred tax assets 121,106 — — 370,390 — — Current assets Inventories 273,764 — — Debtors and prepayments 302,869 — — Taxation recoverable 3,377 — — Pledged bank deposits 5,000 — — Bank balances and cash 284,903 43,000 (43,000) 869,913 43,000 (43,000) Current liabilities Creditors and accrued charges 248,293 — — Bank overdrafts 180,632 — — Bank borrowings - amounts due within one year 52,201 — — Obligations under finance leases - amounts due within one year 7,501 — — Provisions 5,196 — — Taxation payable 1,714 — — 495,537 — — Net current assets 374,376 43,000 (43,000) Total assets less current liabilities 744,766 43,000 (43,000) Non-current liabilities Bank borrowings - amounts due after one year 23,364 43,000 — Obligations under finance leases - amounts due after one year 9,069 — — Provisions 15,525 — — Retirement benefit plans 344,682 — — Deferred tax liabilities 22,632 — — 415,272 43,000 — Net assets 329,494 — (43,000)	Pro forma adjustments	Pro forma adjustments	Pro forma adjustments
	Acquisition finance (Note 2) Acquisition of 38.2% minority interest in S&J (Note 3) HK$’000 HK$’000 — — — — — — — — — — — — — — — — — — — — 43,000 (43,000) 43,000 (43,000) — — — — — — — — — — — — — — 43,000 (43,000) 43,000 (43,000) 43,000 — — — — — — — — — 43,000 —			The Enlarged Group HK$’000 244,051 651 3,678 904 121,106
370,390 273,764 302,869 3,377 5,000 284,903				370,390 273,764 302,869 3,377 5,000 284,903
869,913 248,293 180,632 52,201 7,501 5,196 1,714				869,913 248,293 180,632 52,201 7,501 5,196 1,714
495,537				495,537
374,376				374,376
744,766				744,766
23,364 9,069 15,525 344,682 22,632				66,364 9,069 15,525 344,682 22,632
415,272				458,272
329,494		—	(43,000)	286,494

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APPENDIX IV

PRO FORMA FINANCIAL INFORMATION

Pro forma adjustments The Group as at 31 March 2007 (Note 1) Acquisition finance (Note 2) Acquisition of 38.2% minority interest in S&J (Note 3) HK$’000 HK$’000 HK$’000 Capital and reserves Share capital 55,706 — — Share premium 13,527 — — Share option reserve 605 — — Capital redemption reserve 1,442 — — Capital reserve 19,870 — — Translation reserve 3,998 — — Accumulated profits 152,160 — 39,186 Total equity attributable to equity holders of the company 247,308 — 39,186 Minority interests 82,186 — (82,186) Total equity 329,494 — (43,000)	Pro forma adjustments	Pro forma adjustments	Pro forma adjustments
	Acquisition finance (Note 2) Acquisition of 38.2% minority interest in S&J (Note 3) HK$’000 HK$’000 — — — — — — — — — — — — — 39,186 — 39,186 — (82,186)			The Enlarged Group HK$’000 55,706 13,527 605 1,442 19,870 3,998 191,346
247,308 82,186				286,494 —
329,494		—	(43,000)	286,494

Notes:

Figures extracted from the Group’s published interim report as at 31 March 2007, which has already consolidated S&J’s balance sheet items to the extent of 61.8%.
Adjustment to record the loan taken out for financing the acquisition of the remaining 38.2% interest in S&J.
Adjustment to reflect the acquisition of the remaining 38.2% interest in S&J at a consideration of approximately HK$33,500,000 for the outstanding share capital of S&J and an estimated transaction cost of approximately HK$9,500,000. The discount on acquisition of approximately HK$39,186,000 has been credited to the accumulated profits of the Enlarged Group as if the Acquisition had been completed on 31 March 2007. This discount on acquisition has been calculated by comparing a 38.2% interest in the net assets of S&J (HK$82,186,000) at 31 March 2007 to the total estimated cost of acquisition (including transaction costs) of HK$43,000,000.

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GENERAL INFORMATION

APPENDIX V

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, to the best of their knowledge and belief, opinions expressed in this circular have been arrived at after due and careful consideration and there are no other facts the omission of which would make any statement herein misleading.

2. DIRECTORS’ INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES

Save as disclosed below, as at the Latest Practicable Date, none of the Directors and chief executive (if any) of the Company had interests or short positions in the shares, underlying shares or debentures of the Company and its associated companies (within the meaning of Part XV of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (“SFO”) which (a) 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 have taken or were deemed to have under the provisions of the SFO), or (b) were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or (c) 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 (together, “Discloseable Interests”):

(i) Long position in the issued shares of the Company

		Capacity in which	Number of	Percentage of
Name	of Director	the Shares are held	issued Shares	issued Shares
Brian	C Beazer	Beneficial owner	400,000
		Interest of controlled corporation(1)	136,427,775
		Total:	136,827,775	24.56%
David	H Clarke	Interest of controlled corporation(2)	127,439,723	22.88%
Simon	N Hsu	Interest of controlled corporation(3)	3,787,158	0.68%

Notes:

(1) B C Beazer Asia Pte Ltd, a company in which Mr Beazer has 50% shareholding interest, holds 136,427,775 shares.
(2) All these shares are held by GSB Holdings, Inc, a wholly-owned subsidiary of Great South Beach Improvement Co., in which Mr Clarke has 61.4% shareholding interest.
(3) All these shares are held by Strategic Planning Assets Limited which is wholly-owned by Mr Hsu.

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GENERAL INFORMATION

APPENDIX V

(ii) Long position in underlying shares of the Company

As at the Latest Practicable Date, the following Directors held outstanding share options granted under the share option scheme adopted by the Company in April 1994 entitling them to subscribe for such numbers of Shares as set out below:

			Number of Option
			Shares Outstanding
			as at the Latest
Name of Director	Date of Grant	Exercise Price	Practicable Date
		(HK$)
Mr Brian C Beazer	23 July 2003	0.36	2,000,000
Mr Simon N Hsu	23 July 2003	0.36	3,000,000
		Total	5,000,000

As at the Latest Practicable Date, the following Directors held outstanding share options granted under the share option scheme adopted by the Company on 30 August 2004 entitling them to subscribe for such numbers of Shares as set out below:

			Number of Option
			Shares Outstanding
			as at the Latest
Name of Director	Date of Grant	Exercise Price	Practicable Date
		(HK$)
Mr Brian C Beazer	28 September 2004	0.242	1,638,407
	20 December 2004	0.250	1,392,646
Mr David H Clarke	28 September 2004	0.242	819,204
	20 December 2004	0.250	696,323
Mr Simon N Hsu	28 September 2004	0.242	3,276,814
	20 December 2004	0.250	2,785,292
		Total	10,608,686

Save as disclosed above, none of the Directors had any Discloseable Interests as at the Latest Practicable Date.

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GENERAL INFORMATION

APPENDIX V

3. SUBSTANTIAL SHAREHOLDERS’ INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES

Save as disclosed below, as at the Latest Practicable Date, according to the register of interests kept by the Company pursuant to Section 336 of the SFO, and so far as was known to any Director or chief executive (if any) of the Company, no person other than a Director (as disclosed in paragraph (2) above) or chief executive (if any) of the Company or a member of the UPI Group, had any interest or short position in the shares or the 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 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 UPI Group, together with particulars of any options in respect of such capital:

Number of underlying ordinary shares Number of in the Company Total number Percentage of ordinary shares in held under equity of ordinary shareholding the Company held derivatives and shares in the to total issued Name of Substantial and capacity in capacity in which Company held share capital Shareholder which they are held they are held (long position) of the Company Investor (Guernsey) 74,836,000 Nil 74,836,000 13.43% II Ltd. (beneficial owner)

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the UPI Group since 30 September 2006, the date to which the latest audited consolidated financial statements of the UPI Group were made up.

5. LITIGATION

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

6. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with the Company or any of its subsidiaries, excluding contracts that can be terminated by the Company within one year without payment of compensation other than statutory compensation.

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GENERAL INFORMATION

APPENDIX V

7. MATERIAL CONTRACTS

The following contracts (not being contracts entered into the ordinary course of business carried on by the UPI Group) has been entered into by the Company or its subsidiaries within the two years immediately preceding the date of this circular and are or may be material:

(i) a Stock Purchase Agreement dated as of 23 March 2006 between the Company and Jacuzzi Brands, Inc., as amended as of 4 May 2006;
(ii) a Agreement and Plan of Merger dated as of 22 June 2007 between the Company, Pantene Global Holdings Ltd and Pantene Global Acquisition Corp. of one part, and S&J of the other; and
(iii) a Loan Agreement dated as of 22 August 2007 between Pantene Global Holdings Limited and Orix Asia Limited for a principal amount of HK$43 million to finance the Acquisition.

8. EXPERTS

The following is the qualification of the expert who has given opinions or advice contained in this circular:

Name Qualification

Andrew Ma DFK (CPA) Ltd (“AMDFK”) Certified Public Accountants

AMDFK, has given, and has not withdrawn its written consent to the issue of this circular with the inclusion of its report and references to its name in the form and context in which they appear.

As at the Latest Practicable Date, AMDFK was not beneficially interested in the share capital of any member of the UPI Group nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the UPI Group or any interest, either direct or indirect, in any assets which have been, since 30 September 2006, the date to which the latest published audited consolidated financial statements of the UPI Group were made up, acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the UPI Group.

9. COMPETING INTERESTS

(a) As at the Latest Practicable Date, none of the Directors or their associates had any direct or indirect interest in any assets which have been, since 30 September 2006 (being the date to which the latest published audited consolidated financial statements of the UPI Group were made up), acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the UPI Group.

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GENERAL INFORMATION

APPENDIX V

(b) As at the Latest Practicable Date, none of the Directors or their associates was materially interested in any contract or arrangement entered into by any member of the UPI Group and subsisting at the date of this circular which was significant in relation to the business of the UPI Group.
(c) As at the Latest Practicable Date, none of the Directors or their associates had any interests in a business, apart from the business of the UPI Group, which competes or is likely to compete, either directly or indirectly, with the business of the UPI Group.

10. GENERAL

The transfer office and branch share registrar of the Company in Hong Kong is Secretaries Limited, located at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.
The company secretary and qualified accountant of the Company is Nathaniel Wong. He is a qualified member of the Hong Kong Institute of Certified Public Accountants.

11. LANGUAGE

In the event of inconsistency, the English text of this circular will prevail over the Chinese text.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the office of the Company at Unit 2705-6 Vicwood Plaza, 199 Des Voeux Road Central, Hong Kong from the date of this circular up to and including 30 November 2007.

(a) the memorandum and Bye-laws of the Company;
(b) the annual reports of the Company for the two years ended 31 March 2005 and 31 March 2006 and the financial report for the 6-months ended 30 September 2006;
(c) the interim report of the Company for the six months ended 31 March 2007;
(d) Forms 10-K filed with the SEC by S&J in respect of the financial years ended 30 September 2004, 2005 and 2006, and Forms 10-Q filed with the SEC by S&J in respect of the quarter ended 30 June 2007;
(e) the material contracts referred to in the section entitled “Material Contracts” in this appendix;
(f) the accountants’ report on S&J Group, the text of which is set out in Appendix II to this circular;

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GENERAL INFORMATION

APPENDIX V

(g) the statement of adjustments, providing a reconciliation of the differences between the financial information presented in this circular which has been prepared in accordance with HK GAAP and the amounts which have been derived from Spear & Jackson public filings in the United States;
(h) the comfort letter regarding the unaudited pro forma financial information of the Enlarged Group from AMDFK, the text of which is set out in Appendix IV to this circular; and
(i) the consent letter from AMDFK referred to in the paragraph headed “Expert” in this appendix.

— 161 —

AI assistant

Richly Field China Development Limited — Proxy Solicitation & Information Statement 2007

49117_rns_2007-11-15_c4c83ff4-9935-4c08-bf1a-9208ab679569.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

MAJOR ACQUISITION OF MINORITY INTERESTS IN SPEAR & JACKSON, INC.

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

(Stock Code: 00176)

MAJOR ACQUISITION OF MINORITY INTERESTS IN SPEAR & JACKSON, INC.

1. INTRODUCTION

LETTER FROM THE BOARD

2. SUMMARY OF THE AGREEMENT AND PLAN OF MERGER

LETTER FROM THE BOARD

The Merger

Merger Consideration

LETTER FROM THE BOARD

Conditions Precedent

LETTER FROM THE BOARD

Closing

Appraisal Rights of Dissenting Minority Shareholders

Termination

LETTER FROM THE BOARD

3. FINANCING

4. REASONS FOR AND BENEFITS OF THE ACQUISITION

• Strengthen the Group’s position in the global marketplace

• Privatisation of S&J to reduce compliance costs

• Reduce corporate overheads

• Achieve operational efficiencies

5. INFORMATION ON S&J

(A) S&J

LETTER FROM THE BOARD

Board of Directors

LETTER FROM THE BOARD

SEC Enforcement Proceedings and Shareholders’ Litigation

(B) Spear & Jackson UK

Business

Pension

6. FINANCIAL AND TRADING PROSPECTS OF THE UPI GROUP

Financial Prospects

Trading Prospects

Contract Manufacturing

Hand and Garden Tools

Magnetics Products and Services

LETTER FROM THE BOARD

Metrology and Measuring Instruments

Summary

7. FINANCIAL EFFECTS OF THE ACQUISITION

(a) Assets

(b) Earnings

LETTER FROM THE BOARD

(c) Liabilities

(d) Discount on Acquisition

8. SPECIAL GENERAL MEETING OF S&J

9. LISTING RULES IMPLICATIONS

LETTER FROM THE BOARD

10. ARTICLES OF MERGER

LETTER FROM THE BOARD

11. DISSENTER’S RIGHTS

12. INFORMATION ON THE COMPANY

LETTER FROM THE BOARD

13. FURTHER INFORMATION

1. SUMMARY OF FINANCIAL RESULTS

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

CONSOLIDATED INCOME STATEMENT

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

CONSOLIDATED BALANCE SHEET

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

2. AUDITED FINANCIAL STATEMENTS OF UPI GROUP

CONSOLIDATED INCOME STATEMENT

APPENDIX I

CONSOLIDATED BALANCE SHEET

APPENDIX I

FINANCIAL INFORMATION ON UPI GROUP

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

APPENDIX I

Richly Field China Development Limited Proxy Solicitation & Information Statement 2007