Styland Holdings Limited — Proxy Solicitation & Information Statement 2007

Apr 3, 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 to be taken, you should consult a licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Tak Sing Alliance Holdings Limited, you should at once hand this circular to the purchaser or transferee, or to the bank, licensed securities dealer 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.

This circular is for information purpose only and does not constitute an invitation or offer to acquire or subscribe for shares in Tak Sing Alliance Holdings Limited.

TAK SING ALLIANCE HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 126)

PROPOSED MAJOR AND CONNECTED TRANSACTION RELATING TO PROPOSED ACQUISITION OF INTERESTS IN PRC JOINT VENTURE

Financial adviser to the Company in relation to the proposed Acquisition ICEA Capital Asia Limited

Independent financial adviser to the Independent Board Committee and the Independent Shareholders Partners Capital International Limited

A letter from the Independent Board Committee containing its recommendation to the Independent Shareholders is set out on pages 19 to 20 of this circular. A letter from Partners Capital International Limited containing its advice to the Independent Board Committee and the Independent Shareholders is set out on pages 21 to 38 of this circular.

A notice convening a special general meeting of Tak Sing Alliance Holdings Limited to be held at 26th Floor, Wyler Centre, Phase II, 200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong on Wednesday, 18 April 2007 at 11:00 a.m. is set out on pages 185 to 186 of this circular. A form of proxy for use at the meeting is enclosed. Whether or not you are able to attend the special general meeting in person, please complete and return the enclosed form of proxy in accordance with the instructions printed thereon and return the same to the Company’s branch share registrar in Hong Kong, Tengis Limited, located at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong and in any event not later than 48 hours before the time appointed for holding of the meeting or any adjourned meeting. Completion of a form of proxy will not preclude you from attending and voting in person at the special general meeting or any adjourned meeting should you so wish.

30 March 2007

CONTENTS

	Page
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
LETTER FROM THE INDEPENDENT BOARD COMMITTEE . . . . . . . . . . . . . . . . . . . .	19
LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED . . . . . . . . . . . . .	21
APPENDIX I FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . . .	39
APPENDIX II PROPERTY VALUATION REPORT . . . . . . . . . . . . . . . . . . . . . . . . . . . .	135
APPENDIX III ACCOUNTANTS’ REPORT OF THE JV CO . . . . . . . . . . . . . . . . . . . .	144
APPENDIX IV UNAUDITED PRO-FORMA STATEMENT OF ASSETS
AND LIABILITIES OF THE ENLARGED GROUP . . . . . . . . . . . .	169
APPENDIX V GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	177
NOTICE OF SPECIAL GENERAL MEETING OF THE COMPANY. . . . . . . . . . . . . . . .	185
ACCOMPANYING DOCUMENT – PROXY FORM

– i –

DEFINITIONS

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

“Acquisition”	the acquisition of the Sale Interests in accordance with the
	provisions of the Agreement
“Agreement”	a sale and purchase agreement dated 8 February 2007 between the
	Company and the Vendors in respect of the sale and purchase of
	55% of the equity interests of JV Co together with all rights and
	obligations accruing or attached thereto
“Amending Agreement”	the agreement in the form to be agreed by the Company and to be
	entered into between the Vendors, the Company and the other
	three shareholders of JV Co for the amendment and restatement
	of the JV Contract and the Articles of Association respectively, as
	a result of the Acquisition
“Approval Authority”	the authority which has the power to approve the Sale and the
	amendment and restatement of the JV Contract and the Articles
	of Association and/or which originally approved the establishment
	of JV Co, the JV Contract and the Articles of Association and all
	other transactions contemplated in this Agreement
“Articles of Association”	the articles of association of JV Co as amended from time to time
“associate(s)”	has the meaning ascribed to it under the Listing Rules
“Board”	the board of directors of the Company
“Business Day”	a day other than a Saturday, Sunday or a statutory holiday in the
	PRC or Hong Kong
“Business Development”	The residential and commercial development of the Project
“Company” or	Tak Sing Alliance Holdings Limited, an exempted company duly
the “Purchaser”	incorporated with limited liability in Bermuda and whose Shares
	are listed and traded on the Main Board of the Stock Exchange
“Completion”	completion of the Acquisition contemplated under the Agreement
“connected person”	has the meaning ascribed to it under the Listing Rules

– 1 –

DEFINITIONS

“Consideration Shares”	in aggregate 224,258,432 new Shares to be issued by the Company
	to the Vendors at issue price of HK$1.60 per share as part of the
	Consideration payable to the Vendors under the Agreement
“Controlling Shareholder”	has the meaning ascribed to it under the Listing Rules
“Cooperation and	the Overall Development and Operation Cooperation Agreement
Development Agreement”	（整體開發經營合作合同）entered into between JV Co and The
	People’s Government of Yiyang City, Hunan Province on 16
	October 2005 in relation to the development of the Zishanhu Theme
	Park on the Property
“Director(s)”	the director(s) of the Company
“Enlarged Group”	The Group as enlarged by the inclusion of JV Co
“Framework Agreement”	the Hunan Yiyang Zishanhu Zhuti Gongyuan Framework
	Agreement（湖南益陽梓山湖主題公園框架協議書）entered into
	between JV Co and The People’s Government of Yiyang City,
	Hunan Province on 9 October 2005 in relation to the development
	of the Zishanhu Theme Park on the Property
“Group”	the Company and its subsidiaries
“Guarantee”	a guarantee given by the Vendors and other shareholders of JV Co
	on a joint and several basis to Industrial and Commercial Bank of
	China to guarantee the repayment obligations of JV Co in respect
	of a banking facility of up to RMB100,000,000 granted by
	Industrial and Commercial Bank of China to JV Co
“Hong Kong”	the Hong Kong Special Administrative Region of the PRC
“Independent Board	the independent board committee of the Board, comprising Messrs.
Committee”	Lo Ming Chi, Charles, Yau Wing Keung and Lo Man Kit, Sam,
	the independent non-executive Directors
“Independent Shareholders”	Shareholders, other than the Vendors and their associates, who
	are not involved in or interested in the Acquisition
“Issue Price”	the price of HK$1.60 per Consideration Share

– 2 –

DEFINITIONS

“JV Co”	佳寧娜（湖南）實業有限公司(Carrianna (Hunan) Enterprise Co.
	Ltd.), a Chinese foreign equity joint venture enterprise established
	under the laws of the PRC on 10 October 2005 with a total
	registered capital of RMB100,000,000
“JV Contract”	the equity joint venture agreement entered into among the Vendors
	and four other individuals being the joint venture partners on 30
	September 2005 in respect of the JV Co
“Last Trading Day”	5 February, 2007, being the last trading day immediately prior to
	the date of the Agreement
“Latest Practicable Date”	28 March 2007, being the latest practicable date prior to the
	printing of this circular for ascertaining certain information
	contained herein
“Listing Committee”	has the meaning ascribed to it under the Listing Rules
“Listing Rules”	the Rules Governing the Listing of Securities on The Stock
	Exchange of Hong Kong Limited
“Mu”	畝, 1 Mu is equivalent to approximately 666.67 sq. m.
“Park Agreements”	the Framework Agreement and the Cooperation and Development
	Agreement as amended by the Supplemental Park Agreements,
	pursuant to which the JV Co has the right to develop and manage
	the Project
“Parties”	the Company, KC Ma and KY Ma
“PRC”	People’s Republic of China
“Project”	the Zishanhu Theme Park（梓山湖主題公園）Project which JV
	Co has the right to develop and manage pursuant to the terms of
	the Framework Agreement and the Cooperation and Development
	Agreement, including the development of residential and
	commercial units, a citizen square, a theme park, and the lake
	surface project

– 3 –

DEFINITIONS

“Public Development”	the public utilities portion of the Project, including the citizen
	square, theme park and the lake surface project
“Sale Interests”	the entire equity interests held by KC Ma and KY Ma being in
	aggregate 55% of the equity interests of JV Co and representing
	RMB55,000,000 of the registered capital of JV Co, together with
	all rights and obligations accruing or attached thereto
“SFO”	the Securities and Futures Ordinance (Chapter 571) of the Laws
	of Hong Kong
“SFC”	the Hong Kong Securities and Futures Commission
“SGM”	The special general meeting of the Company to be held on
	Wednesday, 18 April 2007 at 11:00 a.m. for the purpose of
	approving the Acquisition and all other transactions contemplated
	thereunder by the Independent Shareholders, the notice of which
	is set out on pages 185 to 186 of this circular
“Share(s)”	ordinary share(s) of HK$0.10 each in the share capital of the
	Company
“Shareholder(s)”	shareholder(s) of the Company
“Special Mandate”	the special mandate to be sought from Independent Shareholders
	at the SGM by a resolution in respect of the issue and allotment
	of the Consideration Shares pursuant to the Acquisition
“sq. m.”	square meter, an area measurement unit
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Substantial Shareholder”	has the meaning ascribed to it under the Listing Rules
“Supplemental Cooperation	the Memorandum to the Overall Development and Operation
and Development	Cooperation Agreement（湖南省益陽梓山湖公園整體開
Agreement”	發經營合作合同的備忘錄）entered into between JV Co and The
	People’s Government of Yiyang City, Hunan Province on 30 March
	2007 to supplement the Cooperation and Development Agreement

– 4 –

DEFINITIONS

“Supplemental Framework	the Memorandum to the Hunan Yiyang Zishanhu Zhutigonyuan
Agreement”	Framework Agreement（湖南益陽梓山湖主題公園框架協議書
	的備忘錄）entered into between JV Co and The People’s
	Government of Yiyang City, Hunan Province on 30 March 2007
	to supplement the Framework Agreement
“Supplemental Park	the Supplemental Cooperation and Development Agreement and
Agreements”	the Supplemental Framework Agreement
“The Codes”	The Codes on Takeovers and Mergers and Share Repurchases of
	the Securities and Futures Commission
“Valuer”	Vigers Appraisal & Consulting Limited, which is an independent
	third party not connected with the directors, chief executive or
	substantial shareholders of the Company or any of its subsidiaries
	or their respective associates as defined in the Listing Rules.
“RMB”	Renminbi yuan, the lawful currency of the PRC
“Vendors”	KC Ma and KY Ma
“HK$”	Hong Kong dollar, the lawful currency of Hong Kong
“%”	percentage or per centum

If there is any inconsistency between the Chinese name of the entities and their English translation in this circular, the Chinese version shall prevail.

For the purpose of this circular, unless otherwise indicated, conversion of RMB into HK$ is based on the exchange rate of RMB0.9962 = HK$1.00. This exchange rate is for the purpose of illustration only and not constitutes a representation on that any amounts have been, could have been, or may be exchanged at this or any other rate at all.

– 5 –

LETTER FROM THE BOARD

TAK SING ALLIANCE HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 126)

Executive Directors:– Mr. Ma Kai Cheung, PhD, BBS (Chairman) Mr. Ma Kai Yum, PhD Mr. Ng Yan Kwong

Registered Office:– Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda

Non-Executive Director:–

Mr. Yip Hing Chung, BBS, MBE, JP

Independent Non-executive Directors: Mr. Lo Ming Chi, Charles, JP Mr. Yau Wing Keung Mr. Lo Man Kit, Sam

Head office and Principal place of business in Hong Kong:– 26/F, Wyler Centre, Phase II, 200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong

30 March 2007

To the Shareholders

Dear Sir or Madam,

PROPOSED MAJOR AND CONNECTED TRANSACTION RELATING TO ACQUISITION OF INTEREST IN PRC JOINT VENTURE

INTRODUCTION

On 9 February 2007, the Board announced that on 8 February 2007, the Agreement was entered into by the Company with relevant parties in connection with a proposed major and connected transaction relating to acquisition of the Sale Interests in the JV Co.

The independent board committee of the Company, comprising all the independent nonexecutive Directors, has been formed to consider the terms of the Agreement and advise the Independent Shareholders as to whether the terms of the Agreement are agreed on normal commercial terms and are fair and reasonable and in the interest of the Shareholders as a whole.

– 6 –

LETTER FROM THE BOARD

Partners Capital International Limited, an independent financial adviser, has been appointed to advise the independent board committee and the Independent Shareholders as to whether the terms of the Agreement are agreed on normal commercial terms and are fair and reasonable and in the interest of Shareholders as a whole.

The purpose of this circular is to provide you with further details of the Agreement and to seek the Independent Shareholders’ approval at the SGM, a notice of which is set out in this circular.

BACKGROUND

On 9 February 2007, the Company announced that the Company entered into the Agreement with KC Ma and KY Ma on 8 February 2007 in relation to the proposed acquisition of the Sale Interests at a consideration of RMB417,450,000 (the “Consideration”) which represents a discount of 25% to the valuation figure of the Sale Interests. The Consideration will be satisfied as to RMB60,000,000 by cash and RMB357,450,000 by the issue of 224,258,432 Consideration Shares. As at the Latest Practicable Date, the authorised share capital of the Company is HK$200 million, divided into 2,000,000,000 ordinary shares of HK$0.10 each.

Since certain of the percentage ratios under Chapter 14 of the Listing Rules for the Acquisition are 25% or more but less than 100%, the Acquisition constitutes a major transaction for the Company under the Listing Rules. As KC Ma is the Controlling Shareholder of the Company and KY Ma is the Substantial Shareholder of the Company, the Acquisition also constitutes a connected transaction for the Company under the Listing Rules. Accordingly, the Acquisition is subject to the reporting, announcement and Independent Shareholders’ approval requirements, by way of poll at the SGM, as set out in the relevant provisions of Chapters 14 and 14A of the Listing Rules and the Vendors and their associates will abstain from voting at the SGM.

THE AGREEMENT

Date: 8 February 2007

Parties:

Purchaser: The Company Vendors: Mr. Ma Kai Cheung (“ KC Ma ”) and Mr. Ma Kai Yum (“ KY Ma ”)

The Proposed Acquisition

The Sale Interests are the entire equity interests held by the Vendors being in aggregate 55% of the equity interests of JV Co and representing RMB55,000,000 of the registered capital of JV Co, together with all rights and obligations accruing or attached thereto.

– 7 –

LETTER FROM THE BOARD

The JV Co is a Sino-foreign equity joint venture enterprise established under the laws of the PRC on 10 October 2005 with a total registered capital of RMB100,000,000. The Vendors and three other shareholders are the joint venture partners of the JV Co. The registered capital of RMB55,000,000 was contributed by the Vendors.

Upon Completion, the JV Co will become a subsidiary of the Company and the financial results of the JV Co will be consolidated into the accounts of the Group.

Consideration and mode of settlement

The Consideration for the Acquisition of the Sale Interests is RMB417,450,000 which shall be paid in the following manner:

• (a) the Purchaser shall pay a total of RMB24,545,454.50 in cash or by way of wire transfer of readily available funds to KC Ma or as he may direct within 30 days of Completion;

• (b) the Purchaser shall at Completion issue and allot a total of 183,484,172 new Shares (at the Issue Price) in the capital of the Purchaser to KC Ma or his nominee(s);

• (c) the Purchaser shall pay a total of RMB24,545,454.50 in cash or by way of wire transfer of readily available funds to KC Ma or as he may direct on or before the date falling on the expiry of 6 months after Completion;

• (d) the Purchaser shall pay a total of RMB5,454,545.50 in cash or by way of wire transfer of readily available funds to KY Ma or as he may direct within 30 days of Completion;

• (e) the Purchaser shall at Completion issue and allot a total of 40,774,260 new Shares (at the Issue Price) in the capital of the Purchaser to KY Ma or his nominee(s); and

• (f) the Purchaser shall pay a total of RMB5,454,545.50 in cash or by way of wire transfer of readily available funds to KY Ma or as he may direct on or before the date falling on the expiry of 6 months after Completion.

The Consideration Shares represent:

• (a) approximately 30.07% of the issued share capital of the Company as at the date of the Agreement; and

– 8 –

LETTER FROM THE BOARD

(b) approximately 23.10% of the enlarged issued share capital of the Company after the issue and allotment of the Consideration Shares upon Completion.

There will be no restriction which applies to the subsequent sale of the Consideration Shares.

The Consideration for the Acquisition has been determined after arm’s length negotiations between the Company and the Vendors by reference to the valuation figure of the Sale Interests prepared by the Valuer by means of market approach with no allowance provided for taxation that may be arisen from the revaluation surplus of the Sale Interests. Full details of a valuation report regarding the real property owned by the JV Co is included in Appendix II of this circular.

The Consideration of RMB417.45 million represents a discount of 25% to the valuation figure of the Sale Interests (i.e. RMB556.6 million).

The Directors (excluding the three independent non-executive directors of the Company) consider that the terms of the Acquisition are fair and reasonable and are in the interests of the Company and the Shareholders as a whole. The three independent non-executive directors of the Company have formed a view that the terms of the Agreement and the Acquisition are fair and reasonable and their view and advice to the Independent Shareholders are included in this circular.

Change in Shareholding Structure of the Company

Set out below is the summary of the change in shareholding structure of the Company after Completion:–

Nature of Interest KC Ma_(note 6) Personal interest Family interest (Note 1) Other interest (Note 2) KY Ma(note 6) Personal interest Family interest (Note 3) Other interest (Notes 4 and 5)_	Shareholding as at the Latest Practicable Date 3.95% 1.25% 34.71% 39.91% – 0.36% 13.55% 13.91%	Shareholding immediately after Completion 21.94% 0.96% 26.69%
		49.59%
		4.20% 0.28% 10.42%
		14.90%

– 9 –

LETTER FROM THE BOARD

Nature of Interest Sub-total for KC Ma & KY Ma and their concert parties Public Total	Shareholding as at the Latest Practicable Date 53.82% 46.18% 100.00%	Shareholding immediately after Completion 64.49%
		35.51%
		100.00%

Notes:

1. The shares are owned by Cheung Lin Kiu, the spouse of KC Ma.

2. KC Ma and his family are the objects of a discretionary trust which effectively owns the entire issued share capital of Regent World Investments Limited (“ Regent World ”) and 70% of the entire issued share capital of Bond Well Investments Limited (“ Bond Well ”). At the date of this circular, Regent World owned 184,121,625 shares and Bond Well owned 75,007,400 shares of the Company.

3. The shares are owned by Kwok Kit Mei, the spouse of KY Ma.

4. KY Ma and his family are the objects of a discretionary trust which effectively owns the entire issued share capital of Grand Wealth Investments Limited (“ Grand Wealth ”) and Peaceful World Limited (“ Peaceful World ”). At the date of this circular, Grand Wealth owned 74,651,040 shares and Peaceful World owned 19,050,000 shares of the Company.

5. Peaceful World owns the entire issued share capital of Real Potential Limited (“Real Potential”). At the date of this circular, Real Potential owned 7,500,000 shares of the Company. The interests of Real Potential in the Company are therefore deemed to be the interests of Peaceful World in which KY Ma is also deemed to have interests for the reason as stated in note 4 above.

6. KC Ma and KY Ma are siblings and are acting in concert with each other since they became the Shareholders.

– 10 –

LETTER FROM THE BOARD

Issue Price

The Issue Price of HK$1.60 per Consideration Share represents:

• (a) a discount of approximately 9.09% to the closing price of the Shares of HK$1.76 per Share on the Last Trading Day;

• (b) a premium of approximately 3.90% to the average closing price of approximately HK$1.54 per Share for the last 5 consecutive trading days up to and including the Last Trading Day;

• (c) a premium of approximately 10.34% to the average closing price of approximately HK$1.45 per Share for the last 10 consecutive trading days up to and including the Last Trading Day;

• (d) a premium of approximately 23.08% to the average closing price of approximately HK$1.30 per Share for the last 30 consecutive trading days up to and including the Last Trading Day;

• (e) a discount of approximately 10.61% to the latest published net asset value of approximately HK$1.79 per Share as of 30 September 2006 as set out in the interim report of the Company dated 15 December 2006; and

• (f) a discount of approximately 23.08% to the closing price of HK$2.08 per Share as quoted on the Stock Exchange on the Latest Practicable Date.

Special Mandate to issue Consideration Shares

The Consideration Shares will be issued under the Special Mandate to be sought from the Independent Shareholders at the SGM.

The Company will apply to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Consideration Shares.

– 11 –

LETTER FROM THE BOARD

Conditions Precedent

Completion is subject to the satisfaction of the following conditions (the “ Conditions ”):

• (a) the Purchaser obtaining the necessary approval from its Independent Shareholders by poll at a SGM of the Purchaser approving the transactions contemplated herein, including but not limited to the purchase of the Sale Interests and the issue and allotment of Consideration Shares as part payment of the Consideration;

• (b) the Stock Exchange granting its approval of the listing of, and permission to deal in, the Consideration Shares to be issued as part of the Consideration for the purchase of the Sale Interests pursuant to the terms of the Agreement;

• (c) the reorganization of the corporate structure of JV Co (“ Reorganization ”) to the effect that the PRC individual shareholders have transferred their respective interests in JV Co to their nominee companies (which shall be limited liabilities companies established under the laws of PRC and wholly-owned by such PRC individual shareholders) has been duly approved by the relevant Approval Authority, including but not limited to the State Administration of Industry and Commerce or the relevant branch thereof, and the issuance of a new business licence of JV Co reflecting the new structure has been completed;

• (d) no indication having been received from the SFC that the Vendors are not parties acting in concert under The Codes and the Acquisition and other transactions contemplated herein will trigger a mandatory offer on the part of the Vendors under The Codes;

• (e) the Vendors procuring the termination of the Guarantee and the execution of a new guarantee by the Purchaser (or its nominee) together with the other shareholders of JV Co in favour of the Industrial and Commercial Bank of China in respect of the same obligations under the Guarantee;

• (f) the listing status of the Purchaser with the Stock Exchange has not been revoked and trading of the Shares has not been suspended for more than 7 consecutive trading days for reasons other than the transactions contemplated herein;

• (g) all the shareholders of JV Co (other than the Vendors) have given their written consents to and waive each of their respective pre-emption rights or rights of first refusal arising from the Acquisition and the Reorganization;

– 12 –

LETTER FROM THE BOARD

• (h) the Purchaser is satisfied with the results of its legal, financial and operational due diligence review on JV Co;

• (i) granting of the approval of the Acquisition pursuant to the Agreement and the JV Contract and the Articles of Association as amended and restated by the Amending Agreement by the Approval Authority and the issue of a revised approval certificate issued by the Approval Authority showing the changes in equity interests as a result of the Acquisition;

• (j) all other approvals, permits, licences, consents, acknowledgements, etc. required to be obtained from the Approval Authority for the transactions contemplated herein having been obtained;

• (k) registration of the changes in equity interests as a result of the Acquisition with the State Administration for Industry and Commerce or the relevant local branch thereof and the issuance of a new business licence of JV Co having been completed; and

• (l) the Purchaser having obtained a PRC legal opinion in form and substance to its satisfaction on the transactions contemplated herein from a PRC legal adviser acceptable to the Purchaser.

Completion

Completion shall take place at or before 4:00 p.m. (Hong Kong time) on the 3rd Business Day after the conditions precedent stipulated have been fulfilled (or waived, where appropriate) or at such later date and/or a time as the Purchaser and the Vendors may agree.

REASONS FOR AND BENEFITS EXPECTED TO ACCRUE TO THE COMPANY AS A RESULT OF THE ACQUISITION

The Directors are of the view that the Acquisition provides opportunity for the Company to further strengthen its property development business activity which is one of its core businesses; and that further investment in property development is in the interest and benefit of the Company and the Shareholders.

– 13 –

LETTER FROM THE BOARD

The Project comprising, among other things, the development of residential and commercial units is located in Central District and Yiyang Hi-tech Development Zone of Yiyang City, Hunan Province（湖南省益陽市中心城區及益陽高新技術產業開發區）. Yiyang city is one of the designated cities in the “three plus five metropolitans development plan”（3+5城市群計劃）which is a major strategic initiative announced by Hunan provincial government in 2006 to promote and invest in the economic and infrastructural developments of the 8 core metropolitan city centers in the province. With growing economic activities, the Changchang Expressway（長常高速公路） provides efficient linkage between Yiyang city（益陽市）and Changsha city（長沙市）, the capital city of Hunan province which is 68 km from Yiyang city and is the major transportation hub of central mainland for air, road and water travel.

The Project will be developed to a premium residential and commercial complex to capture not only the (high end) demand from Yiyang city but also that from other parts of Hunan province and other neighbourhoods. The entire Project will be developed along the intimate circumference of Zishanhu（梓山湖）, a sizeable lake of 1,700 Mu with a blended view of blue water and green landscape, including an approximately 2,400 Mu golf course. Under the Park Agreements, the Public Development to be built will also add to the attractiveness and value of the commercial and residential units of the Project.

The Park Agreements allow the JV Co to acquire 3,000 Mu land for Business Development at a cost of approximately RMB210,000 per Mu (equivalent to approximately RMB315 per sq. m.). The city government also commits to grant under the terms of the Park Agreements exemption and reduction for various construction related tax and levy. Among other incentive payments relating to local tax, the JV Co is entitled to an incentive payment of RMB150 million from the city government out of its local tax revenue received in respect of the Project.

With a large land reserve and a development plan of up to 8 years, the Directors believe that the Project will bring in favourable and sustainable long term profit to the Company.

LISTING RULES IMPLICATIONS OF THE TRANSACTION

As certain of the percentage ratios in respect of the Acquisition is more than 25% but less than 100%, the Acquisition constitutes a major transaction of the Company under the Listing Rules.

As KC Ma is the Controlling Shareholder of the Company and KY Ma is the Substantial Shareholder of the Company, the Acquisition also constitutes a connected transaction for the Company under the Listing Rules. Accordingly, the Acquisition is subject to the reporting, announcement and Independent Shareholders’ approval requirements, by way of poll at the SGM, as set out in the relevant provisions of Chapters 14 and 14A of the Listing Rules and KC Ma, KY Ma and their associates, holding 53.82% in aggregate, will abstain from voting at the SGM.

– 14 –

LETTER FROM THE BOARD

An announcement will be made by the Company following conclusion of the SGM to inform Shareholders of the results of the poll vote in respect of the resolutions put to the Independent Shareholders at the SGM.

INFORMATION ON THE COMPANY, THE JV CO AND THE PROJECT

The Company was incorporated in Bermuda with limited liability and its Shares are listed on the Main Board of the Stock Exchange. The Group is principally engaged in investment holding, the manufacture, trading and distribution of garments, property investment and development, and the operations of hotel, restaurant and food businesses. Property development is one of the core businesses of the Company and has contributed significantly to the Company’s net profit and formed a major part of the Company’s total assets.

The JV Co is a Sino-foreign equity joint venture enterprise established under the laws of the People’s Republic of China on 10 October 2005 with a total registered capital of RMB100,000,000. The Vendors and three other shareholders are the joint venture partners of the JV Co. RMB55,000,000 of registered capital was contributed by the Vendors.

The JV Co has entered into the Park Agreements with The People’s Government of Yiyang City, Hunan Province in relation to the development of the Project, which comprises, mainly, a massive residential and commercial development as well as lake surface operations（梓山湖水面 經營）, theme park operations (being an ecological tourism area developments, 生態旅遊區）, citizen square establishment（市民廣場）, etc. The Project is located in the Central District and Yiyang Hi-tech Development Zone, Yiyang City, Hunan Province（湖南省益陽市中心城區及益 陽高新技術產業開發區） which is 68 km from Changsha, the capital city of Hunan province, and neighbours the Changchang Expressway（長常高速公路）connecting Changsha city（長沙 市）and Changde city（常德市）.

Subsequent to the announcement of the Company dated 8 February 2007 and as a result of the due diligence review conducted by the Company, the Company had requested the JV Co to enter and the JV Co had entered into the Supplemental Park Agreements to supplement and clarify ambiguities contained in the Framework Agreement and Cooperation and Development Agreement. The main purpose of entering into the Supplemental Park Agreements was to change the pricing mechanism for the acquisition of land for the Project from the original cost of approximately RMB89,000 per Mu plus an additional aggregate cost of approximately RMB369,000,000 for Public Development (comprising resettlement cost, construction costs, etc.) to approximately RMB210,000 per Mu for the 3,000 Mu land for Business Development, being the initial asking public listing price per Mu, subject to the final public listing price concluded in the conditionattached public listing（帶項目掛牌）. In addition to the condition-attached public listing price

– 15 –

LETTER FROM THE BOARD

payable by the JV Co under the Supplemental Park Agreements, the JV Co will remain responsible to put in an additional investment which is estimated to be around RMB369,000,000 for the Public Development. Nevertheless, the People’s Government of Yiyang City will in principle compensate the JV Co for an amount of not less than RMB369,000,000 within 5 years from the execution of the Cooperation and Development Agreement subject to the investment actually incurred by the JV Co in relation to the Public Development.

Even though the pricing mechanism was changed by virtue of the Supplemental Park Agreements, the effective land cost payable by JV Co for the 3,000 Mu land for Business Development remains unchanged at approximately RMB210,000 per Mu. If in case the final public listing price concluded in the condition-attached public listing is higher than RMB210,000 per Mu, the amount, if any, in excess of RMB210,000 per Mu will be indemnified by the Vendors (see below).

The JV Co has so far paid consideration for 1,000 Mu (equivalent to approximately 667,000 sq. m.) of land. Out of the 1000 Mu, JV Co has obtained land use rights certificates for 858 Mu (equivalent to approximately 572,000 sq. m.) and the land use rights certificates for the remaining 142 Mu (equivalent to approximately 95,000 sq. m.) are in the process of being issued by the relevant local government authorities.

The Project with an estimated total investment cost of around RMB3.2 billion will be developed in phases over a period of eight years. On Business Development, construction has started for the first phase of development comprising 100,000 sq.m. gross floor area of residential property, which includes villas, condominiums, duplexes and low-rise apartment buildings, and 30,000 sq. m. gross floor area of commercial property. Presale is targeted to be launched by May 2007 which will contribute cash inflow to the Project. Thus far, the JV Co has received deposits for over 40% of the total number of units in the first-phase development (i.e. with over 200 potential buyers and each paid refundable cash deposits of RMB10,000 – RMB20,000 to the JV Co).

On the Public Development front, the citizen square is near completion. The Directors believe that the Public Development will not only add to the commercial value and improve the living environment of the Project, but will also increase publicity of the Project in the Yiyang community as well as in and around the Hunan province.

The entire Project is expected to be fully financed by sales proceeds as well as bank loan facility and share capital. The Company expects that, other than its obligation together with the other shareholders of JV Co to execute a new guarantee to replace the Guarantee, there will be no funding commitment from the Company in relation to the future developments of the Project.

– 16 –

LETTER FROM THE BOARD

According to the audited accounts of the JV Co prepared according to the Hong Kong accounting standard, the net asset value of the JV Co as of 31 December 2006 and 31 December 2005 are of RMB103.6 million and RMB95.1 million respectively. Net loss (both before and after taxation) for the year ended 31 December 2006 and the year ended 31 December 2005 are of RMB6.5 million and RMB4.9 million respectively.

According to the Park Agreements, the People’s Government of Yiyang City will arrange a further 2,000 Mu of land for sale through condition-attached public listing. According to the interpretation of “condition-attached public listing”（帶項目掛牌） issued by the Land and Resources Bureau of Yiyang City（益陽市國土資源局） in relation to the development at Zishanhu:

• Zishanhu development comprises commercial developments（經營性項目）and public developments（公益性項目）;

• The carrying out of the public developments is a condition and pre-requisite to undertake the commercial developments;

• To be qualified for participating in the condition-attached public listing regarding Zishanhu commercial and residential development, the relevant party needs to demonstrate its ability and resources to complete the commercial developments and public developments collectively.

The Land and Resources Bureau of Yiyang City has acknowledged that the JV Co has the ability and resources to complete the commercial developments and public developments at Zishanhu collectively.

Given that the JV Co has secured the first 1,000 Mu of land for Business Development and has commenced construction of the Public Development, and taking into account the restrictive condition on the qualification of eligible participants in the condition-attached public listing, the Directors are of the view that the JV Co will be able to secure the remaining 2,000 Mu of land at the condition-attached public listing at RMB210,000 per Mu.

Notwithstanding the above, to better protect the Company from possible risk exposed to uncertainties involved in the condition-attached public listing, the Company requests and KC Ma and KY Ma accept to severally undertake to indemnify the Company for loss arising from (1) failure of the JV Co to acquire any portion of the 2,000 Mu land; and (2) the JV Co’s cost of acquisition of any portion of the 2,000 Mu land which is higher than RMB210,000 per Mu. The indemnity amount will be capped at RMB216 million.

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LETTER FROM THE BOARD

The Supplemental Park Agreements together with the indemnity provided by the Vendors will safeguard the Company’s acquisition of the remaining land for Business Development via the JV Co at the approximate cost of RMB210,000 per Mu or otherwise the Company will be compensated for related loss.

ADDITIONAL INFORMATION

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

Yours faithfully, By Order of the Board

Tak Sing Alliance Holdings Limited Ma Kai Cheung

Chairman

– 18 –

LETTER FROM THE INDEPENDENT BOARD COMMITTEE

TAK SING ALLIANCE HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 126)

30 March 2007

To the Independent Shareholders

Dear Sir or Madam,

PROPOSED MAJOR AND CONNECTED TRANSACTIONS

We refer to the circular issued by the Company to the Shareholders dated 30 March 2007 (the “Circular”) of which this letter forms part. Terms defined in the Circular shall have the same meanings when used in this letter unless the context otherwise requires.

We have been appointed as members of the Independent Board Committee to advise you as to whether the terms of the Agreement and the Acquisition are fair and reasonable so far as the Independent Shareholders are concerned. Partners Capital International Limited has also been appointed as the independent financial adviser to advise the Independent Board Committee in respect thereof. Details of Partners Capital International Limited ’s advice and recommendation, together with the principal factors and reasons considered in arriving at such advice and recommendation, are contained in its letter set out on pages 21 to 38 of the Circular. We urge you to read that letter carefully.

We wish to draw your attention to the “Letter from the Board” set out 6 to 18 of the Circular which contains, among other things, information of the Agreement and the Acquisition.

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LETTER FROM THE INDEPENDENT BOARD COMMITTEE

Having considered the principal factors and reasons, together with the advice and recommendation mentioned in the letter from Partners Capital International Limited, we consider that the terms of the Agreement and the Acquisition are fair and reasonable so far as the Independent Shareholders are concerned and are also in the interests of the Company and its Shareholders as a whole. Accordingly, we recommend the Independent Shareholders to vote in favour of the Agreement and the Acquisition when a Shareholders’ meeting is required to be held.

Yours faithfully, For and on behalf of the Independent Board Committee Mr. Lo Ming Chi, Charles Mr. Yau Wing Keung Mr. Lo Man Kit, Sam Independent Non-executive Director

– 20 –

LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

The following is the text of a letter of advice to the Independent Board Committee and the Independent Shareholders from Partners Capital International Limited dated 30 March 2007 prepared for the purpose of incorporation in this circular:

Partners Capital International Limited Unit 3906, 39/F, COSCO Tower 183 Queen’s Road Central Hong Kong

To the Independent Board Committee and the Independent Shareholders

30 March 2007

Dear Sirs,

PROPOSED MAJOR AND CONNECTED TRANSACTION

INTRODUCTION

We refer to our engagement to advise the Independent Board Committee and the Independent Shareholders in respect of the terms of the Agreement, particulars of which are set out in the circular (the “Circular”) dated 30 March 2007, in which this letter is reproduced. Unless the context requires otherwise, capitalised terms used in this letter shall have the same meanings as ascribed to them under the section headed “Definitions” in the Circular.

As set out in the letter from the Board (the “Letter from the Board”), the Company (as purchaser), KC Ma and KY Ma (together as the Vendors) entered into the Agreement on 8 February 2007 in relation to the proposed acquisition of the Sale Interests. KC Ma is the Controlling Shareholder of the Company and KY Ma is the Substantial Shareholder of the Company. Under the Listing Rules, the Acquisition constitutes major and connected transaction of the Company, and is subject to the approval of the Independent Shareholders at the SGM by way of poll.

In formulating our opinion, we have relied on the accuracy of the information and representations contained in the Circular and have assumed that all information and representations made or referred to in the Circular as provided by the Directors were true at the time they were made and continue to be true as at the date of the Circular. We have also relied on our discussion with the Directors regarding the Group and the Agreement including the information and representations contained in the Circular. We have also assumed that all statements of belief, opinion and intention made by the Directors and respectively in the Circular were reasonably made after due enquiry. We consider that we have reviewed sufficient information to reach an informed view, to justify our reliance on the accuracy of the information contained in the Circular and to provide a reasonable basis for our advice. We have no reason to suspect that any material facts have been omitted or withheld from the information contained or opinions expressed in the Circular

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LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

nor to doubt the truth, accuracy and completeness of the information and representations provided to us by the Directors. We have not, however, conducted an independent in-depth investigation into the business and affairs of the Group, the Sale Interests, the Vendors and their respective associates, nor have we carried out any independent verification of the information supplied to us.

PRINCIPAL FACTORS CONSIDERED FOR THE AGREEMENT

In arriving at our recommendation in respect of the terms of the Agreement, we have considered the following principal factors:

1. Reasons for the Acquisition

As set out in the Letter from the Board, the Group is principally engaged in investment holding, the manufacture, trading and distribution of garments, property investment and development, and the operations of hotel, restaurant and food businesses.

We understand that the target of the Acquisition by the Company is the aggregate of 55% of the equity interests of the JV Co, which owns the Project comprising a large land reserve for long term commercial and residential development up to eight years. As part of our due diligence exercise, we have paid a visit to the land site of the Project situated in Yiyang City, Hunan Province, the PRC. Although Yiyang City is just a third-tier city in the PRC at present, we understand from the JV Co that the competitive advantages of the Project are vested with:

• (i) the unique and premier geographical location of the Project, representing a lakeside environment to be built along the intimate circumference of Zishanhu, a sizeable lake with a blended and natural scenic view of blue water and green landscape including a golf course and which is in the Central District of Yiyang City. In turn, Yiyang City is only about one hours’ driving distance (via Changchang Expressway) from Changsha, which is the capital city of Hunan Province and the major transportation hub of central mainland for air, road and water travel. Yiyang City is one of the designated cities in the “three plus five metropolitans development plan” (3+5城市群計畫) which is a major strategic initiative announced by Hunan provincial government in 2006 to promote and invest in the economic and infrastructural developments of the 8 core metropolitan city centers in Hunan province. Yiyang City is also renowned as “小有色金屬之鄉 ”;

• (ii) the large land reserve for development over a long time horizon of up to eight years; and

• (iii) the Park Agreements signed by the JV Co and the Yiyang City government provides favourable terms for the commercial and residential development such as preferential tax treatments.

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LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

During our visit, we observed that the foundation and construction works of the first phase of the Project were in progress, of which the citizen square was near its completion. Up to the Latest Practicable Date, we understood from the JV Co that over 200 potential purchases had already paid refundable cash deposits of about RMB10,000 to RMB20,000 each to the JV Co in order to express their interests for an aggregate of over 40% of the total number of units in the residential development of the first phase of the Project (including villas, duplexes, and low-rise apartment buildings), which was targeted to be formally pre-sold around May 2007. Although the population of Yiyang City is only about 4.5 million according to 益陽市統計信息網 (www.iytj.gov.cn), we were advised by the JV Co that the potential purchasers comprised senior local government officials, ethnic high net-worth citizens working in other cities/provinces outside Yiyang City (eg. Changsha City, Shanghai City, Guangdong Province), and real estate investors from Singapore.

As set out in the Letter from the Board, the Park Agreements (together with and subject to the Indemnity Undertaking which is capped at RMB216 million) allow the Company via the JV Co to acquire 3,000 Mu of land for Business Development at a target cost of approximately RMB210,000 per Mu (approximately RMB315 per sq.m.). At the same time, the JV Co will be responsible to put in an additional RMB369,000,000 for the Public Development, but the city government will compensate the JV Co for its investments incurred in the Public Development for not less than RMB369,000,000 within 5 years of execution of the Cooperation and Development Agreement. Upon review of the Parks Agreements, we note that the said additional development costs of RMB369,000,000 approximates the sum of (i) investment of the Public Development at around RMB300 million; (ii) the resettlement costs for (a) the 404 Mu administrative land at RMB35,956,000 and (b) for the ecological tourist area at RMB25,550,000; and (iii) the resettlement charge for the lake surface at RMB8 million. In this connection, we are advised by the Company that the investment costs of the Public Development to be incurred by the JV Co shall not only be reimbursable by the city government, but also serve to add commercial value to the Project by improving the living environment of the Project, as well as increasing publicity of the Project in the Yiyang community as well as in and around Hunan province.

Based on market comparable data as circulated by the Valuer, we note that the aforesaid target land cost of RMB210,000 per Mu as allowed under the Park Agreements (together with the Indemnity Undertaking and even after accounting for the interest expenses forgone arising from the JV Co’s investments incurred in the Public Development before its reimbursement by the city government in arrears) as and to be procured under the Project is compared favourably with the actual market land prices transacted in the Yiyang City at a range of approximately RMB364,600 to RMB746,400 per Mu in recent years.

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LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

As far as the property market in Yiyang City is concerned, we note that, according to 益陽 統計信息網 (www.iytj.gov.cn), the property market price index increased by approximately 5% for 2006, with the market price of low-rise apartment buildings（小高層）reaching around RMB1,500 to 1,600 per sq.m., doubling that recorded several years ago. As an indicator of overall economic health which influences largely on property market, we note that the annual GDP growth rate of Yiyang City has been sustaining at high levels in recent years, which is illustrated in the table below together with other demographic data:

	2002	2003	2004	2005	2006
GDP Growth Rate (%)	8.5%	9.4%	11.0%	11.0%	12.0%
Nominal GDP
(RMB million)	22,967	23,987	28,733	32,920	33,619
Annual disposal income
per capita_(RMB)_	6,804	7,424	8,291	8,250	9,138
Population					4.6 million
Area (square miles)					12,144

Source: 益陽統計信息網 (http://www.iytj.gov.cn)

According to the Park Agreements, the city government also commits to grant exemption and reduction for various construction related tax and levy. Among other incentive payments relating to local tax, the JV Co is also entitled to an incentive payment of RMB150 million from the city government out of the local tax revenue in respect of the Project. Even without accounting for such incentive payments, we are confirmed by the Company and the Valuer that the capital value of the first phase of the Project when completed (based on prevailing market price) still exceeds the total development costs (including land costs, construction costs and finance costs) of the first phase of the Project.

Based on the existing business plan as circulated by the JV Co, we summarise the particulars of the Project as follows:

								Total
							development cost			Estimated
						Gross floor		expended up to		capital
		Completion				area planned		**31 December **	Outstanding cost	value when
Location	Pre-sale date	date	Site area	Plot ratio		for sale/lease		2006	to completion	completed
	(expected)	(expected)	(sq.m.)	(times)		(sq.m.)		(RMB)	(RMB)	(RMB)
Central District					First phase only
and Yiyang	mid 2007	end of 2007	about	1.0		(1) around		48,396,274	173,200,000	391,000,000
Hi-tech			136,800	(for	Business		100,000 sq.m.	(inclusive of
Development			sq.m.	Development			for residential use	land costs
Zone,				zone only)				paid of
Yiyang City,						(2) around		25,596,274)
Hunan Province							30,000 sq.m.
							for commercial use
					All phases
	mid 2007	2015	2,000,000	1.0 to	3.0	2,600,000		147,600,550	3,052,399,500	7,800,000,000
				(for	Business		(Note)	(inclusive of	(Note)	(assuming target
				Development				land costs		average selling
				zone only)				paid of		price of
								124,800,550)		RMB3,000
								(Note)		per sq.m.
										and assuming
										total saleable
										gross floor
										area of
										2,600,000 sq.m.)
										(Note)

– 24 –

LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

Note: Phases other than the first phase have not yet been in the process of being developed. In any event, for the 2,000 Mu of land to be procured under other phases of the Project, we note that the target land cost of RMB210,000 per Mu (being the initial asking public listing price per Mu, which shall be subject to the final public listing price to be concluded in the condition-attached public listing （帶項目掛牌） and any excess over which will be indemnified by the Vendors pursuant to the Indemnity Undertaking subject to a cap of RMB216 million (to be further discussed in the ensuing sections headed “Consideration” and “Risk Factors”)) compared favourably with the actual market land prices transacted in Yiyang City in recent years.

Against all the background as stated above, we agree that there is an acceptable ground for the Group to enter into the Agreement, which is to capture the growth potential of the developing property market in the PRC on a long term basis. We further note that the Acquisition (of a property development project) is in line with the core businesses of the Company, which historically has contributed significantly to the Company’s net profit and formed a major part of the Company’s total assets. Although the Group’s property business in the PRC has historically been limited to geographical presence in Guangdong Province, we note that the Group has business experience in other parts of the PRC including Wuhan, Hainan and Shanghai, Sichuan, Beijing, Yunnan, etc. (in terms of hotel/restaurant operation).

2. Terms of the Agreement

(a) Consideration

As set out in the Letter from the Board, the consideration for the Acquisition of the Sale Interests is RMB417,450,000, which will be satisfied as to RMB60,000,000 by cash and RMB357,450,000 by the issue of 224,258,432 Consideration Shares.

The consideration for the Acquisition has been determined after arm’s length negotiations between the Company and the Vendors by reference to valuation figure of the Sale Interests prepared by the Valuer by means of market approach. We have discussed with the Valuer on the valuation approach and understand that adopting an income approach would otherwise be inapplicable for valuing the Sale Interests which mostly represent properties under development and are asset-based in nature. Instead, the Valuer advises that the land use rights already obtained underlying the Sale Interests have been valued on market comparison basis, whereas the contractual rights for land use grant entitled to be obtained under the Park Agreements (approximately 1,334,000 sq.m.) have been valued by way of the difference between the market value of additional lots of lands and the initial asking public listing price per Mu.

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LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

We understand that the nature of the assets of the Sale Interests comprises (i) noncurrent assets (such as the land use rights obtained (approximately 572,000 sq.m.), the land use rights under application (approximately 95,000 sq.m.) and the contractual rights for land use grant entitled to be obtained under the Park Agreements (approximately 1,334,000 sq.m.) and (ii) current assets (such as cash). According to the Valuer, the adjusted audited net assets of the Sale Interests as at 31 December 2006 was HK$556,600,000. Upon comparison, the consideration for the Acquisition of the Sale Interests of RMB417,450,000 represents a discount of approximately 25% to the said valuation figure of the Sale Interests. From the sole perspective of such discount, and without accounting for the negative financial effects such as deferred taxations associated with the (re)valuation of an aggregate of eight pieces of land of the JV Co (the “Granted Lands”) and the contractual rights for land use grant, we are of the view that the Consideration is acceptable subject to the risk factor concerning the Indemnity Undertaking to be discussed in the ensuing section.

(b) Issue price of the Consideration Shares

For the purpose of assessing the Issue price level of the Consideration Shares, we plot the closing price level of the Shares traded on the Stock Exchange from 1 February 2006 to 5 February 2007 (being the Last Trading Day) and further up to the Latest Practicable Date (the “Review Period”) as follows:

==> picture [361 x 175] intentionally omitted <==

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

2.5
2.0
Issue Price of
HK$1.6 per Share
1.5
1.0
0.5
0 . 0
1-Feb-06 23-Feb-06 17-Mar-06 11-Apr-06 9-May-06 1-Jun-06 23-Jun-06 17-Jul-06 8-Aug-06 30-Aug-06 21-Sep-06 16-Oct-06 8-Nov-06 30-Nov-06 22-Dec-06 18-Jan-07 14-Feb-07 28-Mar-07
----- End of picture text -----

Source: Infocast

– 26 –

LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

During the Review Period, we note that the Shares were traded on the Stock Exchange within a range of a high of HK$2.40 on 1 March 2007 to a low of HK$0.32 on 1 February 2006. In essence, the Issue Price of HK$1.60 per Share represents:

• (i) a discount of approximately 9.09% to the closing price of the Shares of HK$1.76 per Share on the Last Trading Day;

• (ii) a premium of approximately 3.90% to the average closing price of approximately HK$1.54 per Share for the last 5 consecutive trading days up to and including the Last Trading Day;

• (iii) a premium of approximately 10.34% to the average closing price of approximately HK$1.45 per Share for the last 10 consecutive trading days up to and including the Last Trading Day;

• (iv) a premium of approximately 23.08% to the average closing price of approximately HK$1.30 per Share for the last 30 consecutive trading days up to and including the Last Trading Day;

• (v) a discount of approximately 10.61% to the latest published net asset value attributable to Shareholders of approximately HK$1.79 per Share as of 30 September 2006 as set out in the interim report of the Company dated 15 December 2006; and

• (vi) a discount of approximately 23.08% to the closing price of HK$2.08 per Share as quoted on the Stock Exchange on the Latest Practicable Date,

Based solely on the respective discount of the Issue Price to the latest published net asset value per Share and to the closing price per Share on the Last Trading Day, we do not consider that the Issue Price is attractive. However, on a broader perspective, taking into an overall account of:

• (i) the premium of the Issue Price over the closing price per Share over a reasonable time spectrum as listed above;

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LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

• (ii) the bulk volume of the Consideration Shares to be issued under the Agreement (representing approximately 30.07% of the issued share capital of the Company as at the date of the Agreement and approximately 23.10% of the enlarged issued share capital of the Company after the issue of the Consideration Shares upon Completion), with particular reference to the not high liquidity of Shares recorded during the Review Period (with daily turnover of about 3.8 million Shares, representing about 0.5% of a total of 745,887,219 Shares in issue as at the date of the Agreement ; and

• (iii) the reduction in the net current assets of the Group from approximately HK$101 million as at 31 March 2006 to HK$16 million as at 30 September 2006,

it is considered that the Issue Price is, on balance, acceptable so far as the Independent Shareholders are concerned.

3. Financial effect on the Group

(a) Cashflow / Liquidity

• Impact from the mode of settlement

We envisage that satisfying a majority portion of the Consideration by way of the issue of new Consideration Shares (as to RMB357,450,000 out of a total of RMB417,450,000) has the benefit of preserving the cash resources of the Group (despite the negative impact of shareholding dilution which is to be analysed in the ensuing section). However, as to the balance of RMB60,000,000 out of the total Consideration is still required to be payable in cash (as to the first tranche of RMB30,000,000) within 30 days of Completion and (as to the final tranche of RMB30,000,000) on or before the date falling on the expiry of six months after Completion.

As set out in the interim report of the Company for the six months ended 30 September 2006, we note that the unaudited cash and cash equivalents of the Group amounted to HK$64.5 million as at 30 September 2006, which still exceeded the sum of RMB60,000,000 which is required as part of the Consideration payable in cash. Despite such depletion in cash and cash equivalents of the Group upon Completion, the Directors have opined that, taking into account its internal resources and the present available banking facilities of HK$127.5 million, the Enlarged Group will have sufficient working capital for its present requirements following Completion according to Appendix I to the Circular.

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LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

• Impact from the funding requirement of the Project

We reckon that property development business is capital intensive in nature, especially regarding the Project owned by the JV Co which comprises a large land reserve for long term development up to eight years. Given that the Project has an estimated total investment cost of around RMB3.2 billion, we understood from the Directors that the entire Project is expected to be fully financed by sales proceeds as well as bank loan facility and share capital of the JV Co. According to information set out in Appendix III to the Circular and in the interim report of the Company for the six months ended 30 September 2006, we summarise the capital commitment and contingent liabilities of the JV Co and the Group as follows:

		JV Co	The Group
		(Note 1)	(Note 2)
		RMB	HK$
Capital commitment		60,449,000	9,434,000
		(Note 3)
Contingent liabilities		0	68,316,691
Notes:
1.	Audited figures as at 31 December 2006.
2.	Unaudited figures as at 30 September 2006.

1. Representing commitment contracted but not provided for properties under development, which included the construction of the Public Development at the JV Co’s own costs.

Despite the sizeable sum of estimated total investment of the JV Co, we upon enquiry have been advised by the Directors that no funding commitment on the part of the Company is expected to arise upon or after Completion for supporting the future development of the JV Co or the Project, other than the Company’s obligation together with the other shareholders of JV Co to execute the new guarantee to replace the Guarantee. Upon further enquiry, the Directors confirm to us that the JV Co or the Project can basically be self-sustained in securing its own financial resources for future development according to its existing business plan. As advised by the JV Co, there were banking facilities of approximately RMB100 million available to the JV Co (of which RMB62 million was not used up as at 31 December 2006); and presale of the first phase of the Project is targeted to be launched by May 2007, which is in a position to contribute positive cash inflow to the JV Co.

– 29 –

LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

(b) Net assets and net asset value per Share

Based on the information set out in Appendix IV to the Circular, the pro forma adjusted unaudited consolidated net (tangible) assets attributable to Shareholders immediately upon Completion are expected as follows:

		Per Share
	HK$’000	HK$
Unaudited consolidated net (tangible) assets	1,332,940	1.79
attributable to Shareholders before Completion	(1,324,219)	(1.78)
		(Note 1)
Pro forma adjusted unaudited consolidated	1,692,463	1.74
net (tangible) assets attributable to Shareholders	(1,114,638)	(1.15)
upon Completion		(Note 2)

Notes:

1. Based on 746,637,219 Shares in issue as at the date of the Latest Practicable Date

2. Based on 970,895,651 Shares as enlarged after the issue of the Consideration Shares upon Completion

As illustrated in the above summary, the consolidated net assets attributable to Shareholders would increase upon Completion, whereas both the consolidated net tangible assets attributable to Shareholders and the consolidated net (tangible) asset value per Share would reduce upon Completion. Upon discussion with the Company, we note that the increase in the net assets attributable to Shareholders can be primarily attributable to the issue of sizable tranche of new Consideration Shares to settle a majority portion of the Consideration. By contrast, the reduction in the consolidated net tangible assets attributable to Shareholders and the consolidated net (tangible) asset value per Share is primarily attributable to (i) the sizeable contractual rights to land use grant to be recognised upon Completion which are classified as an intangible asset; and/or (ii) the dilutive effect arising from the issue of sizable tranche of new Consideration Shares at the Issue Price which represents a discount of approximately 10.61% to the latest published net asset value attributable to Shareholders of approximately HK$1.79 per Share as of 30 September 2006.

– 30 –

LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

We note that, even though the consideration for the Acquisition of the Sale Interests of RMB417,450,000 represents a discount of approximately 25% to the said valuation figure of the Sale Interests, a positive goodwill of HK$42,205,000 has arisen on consolidation of the JV Co on the pro forma statements immediately upon Completion, which represents the excess of the Consideration payable over the fair value of Sale Interests from accounting perspective. According to the pro forma statements, we note that a sizeable sum of deferred tax liabilities of HK$331,145,000 is recognised in association with the (re)valuation of the Granted Lands and the contractual rights for land use grant, thereby reducing the fair value of Sale Interests to a level below the valuation figure as appraised by the Valuer which has by contrast disregarded any tax impact in the course of valuing the Sale Interests.

According to the Park Agreements, the JV Co is entitled to an incentive payment of RMB150 million from the Yiyang city government out of its local tax revenue received in respect of the project at Yiyang city. Given that such amount has not been realised as of the proforma statement date, it has not been taken into account in calculating the deferred tax liabilities. Should such incentive payment of RMB150 million be fully and instantly credited into the proforma statement, and should the PRC corporate income tax (“CIT”) rate of 25% recently announced (instead of 33% as prevailing on 30 September 2006) be adopted in calculating the CIT provision for arriving at the deferred tax liabilities in the proforma statement, we concur with the Directors that the consolidated net asset value per Share could actually increase instead immediately upon Completion.

(c) Gearing

Based on information as set out in Appendix IV to the Circular, the gearing ratio of the Group before and upon Completion is expected as follows:

	Total	Net (tangible)
	liabilities	assets	Gearing ratio
	HK$ ’million	HK$ ’million	%
Before Completion	803.9	1,332.9	60.3
	(Note 1)	(1,324.2)	(60.7)
		(Note 1)
Upon Completion	1,256.5	1,692.5	74.2
	(Note 2)	(1,114.6)	(112.7)
		(Note 2)

Notes:

1. Unaudited figures as at 30 September 2006.

2. Pro forma adjusted unaudited consolidated figures after accounting for the consolidation of the JV Co upon Completion.

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LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

The gearing ratio (based on net assets) of the Group is expected to rise from approximately 60.3% to 74.2% upon Completion. It can be envisaged that the rise in the gearing ratio of the Group upon Completion is primarily attributable to the increase in the total liabilities of the Enlarged Group upon consolidation of the liabilities of the JV Co (mainly the deferred tax liabilities) into the Group which effect is more than offsetting the enlargement of the capital base of the Company. Notwithstanding that, we were explained by the Directors that the data of net (tangible) assets adopted in arriving at the gearing ratio in the above table was based on proforma statement of 30 September 2006. Should the CIT rate of 25% recently announced (instead of 33% as prevailing on 30 September 2006) be adopted in calculating the CIT provision for arriving at the deferred tax liabilities, and should the incentive payment of RMB150 million from the city government be fully and instantly credited into the proforma statement and offsetting (partially) the deferred tax liabilities, we concur with the Directors that the gearing ratio (based on net assets) of the Enlarged Group could be subject to actual improvement immediately upon Completion.

(d) Earnings

According to the audited accounts of the JV Co prepared in accordance with the HKGAAP as set out in Appendix III to the Circular, net loss (both before and after taxation) of the JV Co for the year ended 31 December 2006 was approximately RMB6.5 million. We understand from the Directors that the Project was in its early stage of development and, accordingly, no property sales were ever recognised during the year ended 31 December 2006.

Upon Completion, the Group should, on a consolidated basis, be entitled to account for the net profits/loss of the JV Co as a 55% owned subsidiary. Assuming that the Acquisition had been completed on 1 January 2006, and taking into account of the net loss of the JV Co for the year ended 31 December 2006, it is expected that the Acquisition would have a negative effect on the earnings of the Group and the earnings per Share on a pro forma basis immediately upon Completion. However, the actual impact of the Acquisition on the Enlarged Group after Completion would largely depend on the progress and the extent of pre-sales and completion of different phases of the Project (completion targeted by end of 2007 for the first phase according to its existing business plan) due to the fact that the revenue (and hence profit) from sale of properties and pre-completion contracts for sale of development properties is not recognised until the construction thereof has been completed, the title thereof has been transferred, and relevant properties have been delivered to purchasers according to the accounting policy of the JV Co.

– 32 –

LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

4. Dilution effect on shareholding

Upon Completion, the Company will issue an aggregate of 224,258,432 new Consideration Shares to the Vendors, representing approximately 30.04% of the issued share capital of the Company as at the date of the Latest Practicable Date and approximately 23.10% of the enlarged issued share capital of the Company after the issue of the Consideration Shares upon Completion. The following table sets out the shareholding structure of the Company as at the date of the Announcement and after issue of the Consideration Shares:

KC Ma & KY Ma and their concert parties Public Shareholders Total	As at the date of the Announcement (No. of Shares) % 401,840,065 53.87 344,047,154 46.13	As at the date of the Announcement (No. of Shares) % 401,840,065 53.87 344,047,154 46.13	As at the Latest Practicable Date (No. of Shares) % 401,840,065 53.82 344,797,154 46.18	As at the Latest Practicable Date (No. of Shares) % 401,840,065 53.82 344,797,154 46.18	Consideration Shares to be issued (No. of Shares) % 224,258,432 –	Consideration Shares to be issued (No. of Shares) % 224,258,432 –	After issue of the Consideration Shares (No. of Shares) % 626,098,497 64.49 344,797,154 35.51	After issue of the Consideration Shares (No. of Shares) % 626,098,497 64.49 344,797,154 35.51
	745,887,219	100.00	746,637,219	100.00	224,258,432	30.04	970,895,651	100.00

As illustrated in the above table, the aggregate interests of the public Shareholders in the Company will be diluted from approximately 46.18% to approximately 35.51% immediately upon Completion, representing a reduction of approximately 23.1%. Notwithstanding that, in light of an acceptable ground for pursing the Acquisition by the Group (namely, to capture the growth potential of the developing property market in the PRC on a long term basis), and taking into account of the benefit of preserving the cash resources of the Group in satisfying the majority of the Consideration by way of the issue of new Shares, we consider that the dilution effect on the public Shareholders is not attractive but understandable.

– 33 –

LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

5. Risk factors relating to the Acquisition

In assessing the terms and the merits of the Agreement, we note that the Acquisition is associated with certain risk factors, which should however be commonly found to prevail in property development industry in emerging markets. Attention of the Independent Shareholders is drawn to balance these risk factors against the potential benefits expected to accrue from the Acquisition, which is to capture the growth potential of the property market in the PRC. Given that property development in the PRC has been one of the core businesses of the Company, most of the risk factors to be discussed below should be in line with the ongoing risk exposure of the Company and the risk profile of Shareholders:

(a) Legal risks

(i) Indemnity Undertaking subject to a cap of RMB216 million

To better protect the Company from possible risk exposed to uncertainties involved in the condition-attached public listing, Mr. KC Ma and Mr. KY Ma accept to undertake to indemnify the Company for loss arising from (1) failure of the JV Co to acquire any portion of the 2,000 Mu land (further to the Granted Lands); and (2) the JV Co’s cost of acquisition of any portion of such 2,000 Mu land which is higher than RMB210,000 per Mu (subject to a cap of RMB216 million).

Upon enquiry, we understand that the cap of RMB216 million was derived on the basis of, and equivalent to, such portion of the Consideration as attributable to the valuation of contractual rights for land use grant held by the JV Co . If the JV Co fails to acquire any portion of the 2,000 Mu land and accordingly the cap of RMB216 million of the Indemnity Undertaking is fully triggered, the Company should be refunded with such attributable portion of the Consideration (which essentially represents approximately 25% discount to the valuation of the contractual rights for land use grant held by the JV Co). Under such circumstance, the Company would no longer be able to capture the growth potential of the 2,000 Mu land in addition to the Granted Lands in Yiyang City, thereby losing the time/opportunity cost of such portion of Consideration paid upfront and at the same time exposing to the risk of downward revaluation of the Granted Lands as a result of failing to capture a full-scale development potential for the whole of 3,000 Mu land under the Parks Agreement.

– 34 –

LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

In any event, we are advised by the Directors that the possible risk exposed to uncertainties involved in the condition-attached public listing (and hence the ultimate trigger of the Indemnity Undertaking) may not be high because (i) Zishanhu development comprises commercial developments（經營性項目）and public developments （公益性項目）; (ii) the carrying out of the public developments is a condition and pre-requisite to undertake the commercial developments; (iii) to be qualified for participating in the condition-attached public listing regarding Zishanhu commercial and residential development, the relevant party needs to demonstrate its ability and resources to complete the commercial developments and public developments collectively; (iv) The Land and Resources Bureau of Yiyang City has acknowledged that the JV Co has the ability and resources to complete the commercial developments and public developments at Zishanhu collectively; and (v) the JV Co has secured the first 1,000 Mu of land for Business Development and has commenced construction of the Public Development.

(ii) Land appreciation tax

The Group is obliged to pay Land Appreciation Tax which is levied upon the revenue received from the sales and transfer of properties. On 28 December 2006, the State Administration of Taxation issued the Notice in Relation to the Settlement of Land Appreciation Tax levied on Real Estate Development Enterprises, which became effective on 1 February 2007. The notice sets forth, among other things, methods of calculating LAT and a time frame for settlement. No provisions nor payments for LAT have ever been made by the JV Co for the two years ended 31 December 2006 (although provisions for LAT (plus other deferred taxations) are to be made upon Completion for the Enlarged Group according to the accounting policy of the proforma statements). Subject to the actual LAT amounts to be assessed by the government in the future, the cash flows and the profitability of the JV Co could be materially adversely affected.

However, at this stage, the JV Co is still carrying on the construction on one land lot for the first phase of the Project, and no construction project had been completed up to the Latest Practicable Date. Therefore, the relevant PRC legal advisers are of the view that the JV Co is under no obligation to pay the Land Value Added Tax in the current stage according to the Notice regarding Several Issues of the Liquidation and Administration of Land Value Added Tax Applicable to Real Estate Development Enterprises issued by the State General Bureau of Tax.

– 35 –

LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

(iii) Land use rights

The JV Co has so far paid consideration for 1,000 Mu (approximately 667,000 sq.m.) of land. However, the land use right grant contracts in respect of land site of 2,000 Mu (approximately 1,334,000 sq.m.) had not been secured by the JV Co up to the Latest Practicable Date, let alone the land costs payable for obtaining the relevant land use right certificates. The actual payment of the land premium when due may cause a cash flow strain on the JV Co if internal or external financing is not available to fund the payment.

(iv) Undeveloped land

According to the “Notice Concerning the Opinion on Adjusting the Housing Supply Structure and Stabilizing the Housing Price” jointly issued by the relevant PRC Ministries and regulators in May 2006:

• (1) Land idle fee shall be imposed on land that has not been developed for one year from the contractual construction commencement date. Projects should be commenced and completed strictly on time.

• (2) The land use right of land that has not been developed for two years will be withdrawn without compensation.

• (3) If the area developed and constructed is less than 1/3 or the amount invested is less than 1/4, the land shall be deemed to be idle, even if the project commences construction in accordance with the contractual construction commencement date.

If the JV Co is in breach of the requirements of such Notice, then the JV Co may be subject to the penalty of said land idle fee or the withdrawal of land use right. We note that the relevant PRC legal advisers are of the view that the one-year period commencing from the effective dates (being 14 April 2006 and 14 March 2007) of State-Owned Land Use Right Grant Contracts in respect of the Owned Lands has not expired and hence will not be regarded as idle land as of the Latest Practicable Date.

– 36 –

LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

(b) Business risks

• (i) Availability of funding on construction

The Project is currently either in the early stages of development or has not yet commenced development for its later phases. In the event that the JV Co could not generate or obtain internal or external funding for the construction works to continue or to commence, the Project may not be completed on time and hence the development progress and the contribution potential of the Project may be jeopardised.

(ii) Construction risks

In practice, the time taken and the cost incurred in completing the construction of the Project can be adversely affected by many factors including but not limited to shortages of materials, equipment, labour disputes, accidents, acts of God, and changes of government policies, etc.. Any of these factors would give rise to delays in the completion of the property developments which may result in additional costs to be incurred by the JV Co and affect the cash flow thereof.

(iii) Selling price

The actual selling prices of the Project depend on a number of factors, amongst others, the overall markets sentiment, the GDP per capita of Yiyang City, the affordability of buyers, the demand, supply, proximity and quality of similar and competing types of properties in the market and the government policy at that time when the properties are put to the market for sale or pre-sale. In the event that the actual selling prices of the properties are materially lower than the estimated selling prices, the cash flows and the profitability of the JV Co may be affected.

(iv) Supply

A number of competing developers have committed substantial resources to property development in Yiyang City, Hunan Province, the PRC. It is anticipated that the supply for residential units, office premises and shopping arcades will be growing in Yiyang City. In the event that the supply of such properties does not match with the anticipated demand, there will be an oversupply in the market and the selling prices will therefore be affected, which, in turn, will affect the cash flows and the profitability of the JV Co.

– 37 –

LETTER FROM PARTNERS CAPITAL INTERNATIONAL LIMITED

RECOMMENDATION ON THE AGREEMENT

Having considered the above principal factors, in particular,

• (i) the reasons for the Acquisition, which is to capture the growth potential of the developing property market in the PRC on a long term basis, and which is in line with the core businesses of the Company;

• (ii) the key terms of the Agreement;

• (iii) the financial effects of the Acquisition on the Group, such as the negative impacts on the net tangible asset value per Share and the gearing position of the Group as attributable mainly to the recognition of the deferred tax liabilities, which are however to be balanced with the potential benefits expected to accrue from the Acquisition subject to the progress and the extent of pre-sales and completion of different phases of the Project; and

• (iv) the risk factors associated with the Acquisition, most of which are however in line with the ongoing risk exposure of the Company and the risk profile of Shareholders;

we consider that the terms of the Agreement are fair and reasonable so far as the Independent Shareholders are concerned and are in the interests of the Company and the Shareholders as a whole. We also consider that the Acquisition is structured on normal commercial terms and is in the ordinary and usual course of business of the Company. Accordingly, we recommend the Independent Board Committee to advise the Independent Shareholders to vote in favour of the resolutions to approve the Agreement in the SGM.

Yours faithfully, For and on behalf of

Partners Capital International Limited Alan Fung Harry Yu Managing Director Executive Director

– 38 –

FINANCIAL INFORMATION

APPENDIX I

I. FINANCIAL SUMMARY

Set out below is a summary of the consolidated financial information of the Group, as extracted from the relevant annual and interim reports, for each of the three years ended 31 March 2004, 2005 and 2006 and the six months ended 30 September 2005 and 2006.

(i) Financial results

Notes REVENUE 5 Cost of sales Gross profit Other income and gains Selling and distribution expenses Administrative expenses Other expenses Finance costs 7 Share of profits and losses of associates PROFIT BEFORE TAX 6 Tax 10 PROFIT FOR THE YEAR Attributable to: Equity holders of the parent 11 Minority interests DIVIDEND – Proposed final/interim 12 EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT 13 Basic Diluted	(audited) Year ended 31 March 2006 2005 2004 HK$’000 HK$’000 HK$’000 595,339 680,995 607,972 (406,807) (462,968) (438,797) 188,532 218,027 169,175 56,988 43,185 47,572 (88,900) (84,880) (67,078) (82,013) (97,206) (77,355) (48,738) (31,038) (26,016) (24,968) (13,946) (14,296) 69,135 19,189 (358) 70,036 53,331 31,644 (12,140) (9,645) (8,067) 57,896 43,686 23,577 56,130 40,680 23,306 1,766 3,006 271 57,896 43,686 23,577 7,436 14,772 7,386 7.60 cents 5.51 cents 3.16 7.58 cents N/A 3.16	(unaudited) Six months ended 30 September 2006 2005 HK$’000 HK$’000 342,723 381,895 (230,940) (276,560) 111,783 105,335 20,088 15,526 (40,630) (38,536) (50,035) (37,487) (4,649) (10,577) (16,240) (9,633) 293,987 14,375 314,304 39,003 (8,765) (8,799) 305,539 30,204 303,084 30,603 2,455 (399) 305,539 30,204 7,456 Nil 40.72 4.14 40.24 N/A

– 39 –

APPENDIX I

FINANCIAL INFORMATION

(ii) Financial position

Notes NON-CURRENT ASSETS Property, plant and equipment 14 Investment properties 15 Prepaid land lease payments 16 Goodwill: Goodwill 17 Negative goodwill 17 Interests in unconsolidated subsidiaries 19 Interest in a jointly-controlled entity 20 Interests in associates 21 Other financial assets Available-for-sale equity investments 22 Financial assets at fair value through profit or loss 23 Total non-current assets CURRENT ASSETS Properties held for sale Inventories 24 Debtors, deposits and prepayments 25 Pledged time deposits 26 Cash and cash equivalents 26 Total current assets CURRENT LIABILITIES Trade creditors 27 Sundry creditors, accruals and deposits received Interest-bearing bank and other borrowings 28 Finance lease payables 29 Tax payable Dividend payable Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES

(unaudited) Six months (audited) ended 30 Year ended 31 March September 2006 2005 2004 2006 HK$’000 HK$’000 HK$’000 HK$’000 174,087 202,690 155,945 175,262 974,783 931,747 876,888 989,476 1,120 1,152 – 1,120 8,721 8,721 – 8,721 – (186,539) (217,682) – – – – – – – – 102,144 36,191 20,024 432,670 – 21,902 28,229 – 16,771 – – 13,290 10,531 – – 11,671 1,288,157 1,015,864 863,404 1,632,210 107,068 106,094 107,988 99,158 46,148 39,627 24,573 59,718 242,490 215,184 258,298 301,830 7,490 19,122 28,640 7,624 115,553 62,747 73,326 64,452 518,749 442,774 492,825 532,782 (36,616) (50,811) (48,280) (49,941) (93,706) (98,743) (82,039) (94,843) (214,026) (186,025) (155,286) (275,402) (597) (789) (1,080) (364) (72,824) (78,875) (66,873) (80,978) – – – (14,892) (417,769) (415,243) (353,558) (516,420) 100,980 27,531 139,267 16,362 1,389,137 1,043,395 1,002,671 1,648,572

– 40 –

APPENDIX I

FINANCIAL INFORMATION

NON-CURRENT LIABILITIES Interest-bearing bank and other borrowings 28 Finance lease payables 29 Deferred tax 30 Total non-current liabilities Net assets EQUITY Equity attributable to equity holders of the parent Issued capital 31 Reserves 33(a) Proposed final dividend 12 MINORITY INTERESTS Total equity Notes

(294,079) (206,904) (189,097) (232,007) (612) (1,210) (912) (446) (53,328) (48,972) (38,092) (55,008) (348,019) (257,086) (228,101) (287,461) 1,041,118 786,309 774,570 1,361,111 74,359 73,859 73,859 74,559 934,309 676,064 669,983 1,258,381 7,436 14,772 7,386 – 1,016,104 764,695 751,228 1,332,940 25,014 21,614 23,342 28,171 1,041,118 786,309 774,570 1,361,111 (unaudited) Six months (audited) ended 30 Year ended 31 March September 2006 2005 2004 2006 HK$’000 HK$’000 HK$’000 HK$’000

– 41 –

FINANCIAL INFORMATION

APPENDIX I

II. AUDITED FINANCIAL STATEMENTS

Set out below is the audited financial statements of the Group for the year ended 31 March 2006 together with accompanying notes, extracted from the annual report of the Company for the year ended 31 March 2006.

CONSOLIDATED INCOME STATEMENT

Year ended 31 March 2006

Notes REVENUE 5 Cost of sales Gross profit Other income and gains Selling and distribution expenses Administrative expenses Other expenses Finance costs 7 Share of profits and losses of associates PROFIT BEFORE TAX 6 Tax 10 PROFIT FOR THE YEAR Attributable to: Equity holders of the parent 11 Minority interests DIVIDEND – Proposed final 12 EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT 13 Basic Diluted	2006 HK$’000 595,339 (406,807) 188,532 56,988 (88,900) (82,013) (48,738) (24,968) 69,135 70,036 (12,140) 57,896 56,130 1,766 57,896 7,436 7.60 cents 7.58 cents	2005 (Restated) HK$’000 680,995 (462,968) 218,027 43,185 (84,880) (97,206) (31,038) (13,946) 19,189 53,331 (9,645) 43,686 40,680 3,006 43,686 14,772 5.51 cents N/A

– 42 –

APPENDIX I

FINANCIAL INFORMATION

CONSOLIDATED BALANCE SHEET

Year ended 31 March 2006

Notes NON-CURRENT ASSETS Property, plant and equipment 14 Investment properties 15 Prepaid land lease payments 16 Goodwill: Goodwill 17 Negative goodwill 17 Interests in unconsolidated subsidiaries 19 Interest in a jointly-controlled entity 20 Interests in associates 21 Other financial assets Available-for-sale equity investments 22 Financial assets at fair value through profit or loss 23 Total non-current assets CURRENT ASSETS Properties held for sale Inventories 24 Debtors, deposits and prepayments 25 Pledged time deposits 26 Cash and cash equivalents 26 Total current assets CURRENT LIABILITIES Trade creditors 27 Sundry creditors, accruals and deposits received Interest-bearing bank and other borrowings 28 Finance lease payables 29 Tax payable Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES	2006 HK$’000 174,087 974,783 1,120 8,721 – – – 102,144 – 16,771 10,531 1,288,157 107,068 46,148 242,490 7,490 115,553 518,749 (36,616) (93,706) (214,026) (597) (72,824) (417,769) 100,980 1,389,137	2005 (Restated) HK$’000 202,690 931,747 1,152 8,721 (186,539) – – 36,191 21,902 – – 1,015,864 106,094 39,627 215,184 19,122 62,747 442,774 (50,811) (98,743) (186,025) (789) (78,875) (415,243) 27,531 1,043,395

– 43 –

APPENDIX I

FINANCIAL INFORMATION

NON-CURRENT LIABILITIES Interest-bearing bank and other borrowings 28 Finance lease payables 29 Deferred tax 30 Total non-current liabilities Net assets EQUITY Equity attributable to equity holders of the parent Issued capital 31 Reserves 33(a) Proposed final dividend 12 MINORITY INTERESTS Total equity Notes	(294,079) (612) (53,328) (348,019) 1,041,118 74,359 934,309 7,436 1,016,104 25,014 1,041,118 2006 HK$’000	(206,904) (1,210) (48,972) (257,086) 786,309 73,859 676,064 14,772 764,695 21,614 786,309 2005 (Restated) HK$’000

– 44 –

APPENDIX I

FINANCIAL INFORMATION

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 31 March 2006

Notes At 1 April 2004 As previously reported Prior year adjustments 2.4(b) As restated Exchange realignment Impairment in value of property, plant and equipment 14 Total income and expense for the year recognised directly in equity Net profit for the year (as restated) Total income and expense for the year Final 2004 dividend declared Proposed final 2005 dividend 12 At 31 March 2005				Attribut	able to equity	holders of th	eparent				Minority interests HK$’000 23,342 –	Total equity HK$’000 774,570 (2,310)
	Issued share capital HK$’000 73,859 –	Share premium account HK$’000 464,952 –	Leasehold land and building revaluation reserve HK$’000 61,159 –	Goodwill reserve HK$’000 (86,230) –	Exchange equalisation reserve HK$’000 (11,082) –	Capital redemption reserve HK$’000 316 –	Reserve funds HK$’000 581 –	Retained profits HK$’000 240,287 (2,310)	Proposed final dividend HK$’000 7,386 –	Total HK$’000 751,228 (2,310)
	73,859 – –	464,952 – –	61,159 – (14,727)	(86,230) – –	(11,082) (2,790) –	316 – –	581 – –	237,977 – –	7,386 – –	748,918 (2,790) (14,727)	23,342 (4,734) –	772,260 (7,524) (14,727)
	– –	– –	(14,727) –	– –	(2,790) –	– –	– –	– 40,680	– –	(17,517) 40,680	(4,734) 3,006	(22,251) 43,686
	– – –	– – –	(14,727) – –	– – –	(2,790) – –	– – –	– – –	40,680 – (14,772)	– (7,386) 14,772	23,163 (7,386) –	(1,728) – –	21,435 (7,386) –
	73,859	*464,952	*46,432	*(86,230)	*(13,872)	*316	*581	*263,885	14,772	764,695	21,614	786,309

– 45 –

APPENDIX I

FINANCIAL INFORMATION

At 1 April 2005 As previously reported Prior year adjustments 2.4(b) Opening adjustments 2.4(b) As restated Exchange realignment Total income and expense for the year recognised directly in equity Net profit for the year Total income and expense for the year Dividends paid to minority interests Advance from minority interests Final 2005 dividend declared Issue of shares 31 Equity-settled share option arrangements 32 Proposed final 2006 dividend 12 At 31 March 2006 Notes				Attributa	Attributa	ble to equity holders of the parent	ble to equity holders of the parent	ble to equity holders of the parent					21,614 – – Minority interests HK$’000	785,685 624 186,090 Total equity HK$’000
	73,859 – – Issued share capital HK$’000	464,952 – – Share premium account HK$’000	46,432 – – Leasehold land and building revaluation reserve HK$’000	3,016 – (3,016) – – – Investment property revaluation Share reserve of option associates reserve HK$’000 HK$’000		(86,230) (13,872) 316 – – – – – – Exchange Capital Goodwill equalisation redemption reserve reserve reserve HK$’000 HK$’000 HK$’000			581 – – Reserve funds HK$’000	260,245 3,640 186,090 Retained profits HK$’000	14,772 – – Proposed final dividend HK$’000	764,071 624 186,090 Total HK$’000
	73,859 –	464,952 –	46,432 –	– –	– –	(86,230) (13,872) 316 – 18,699 –			581 –	449,975 –	14,772 –	950,785 18,699	21,614 434	972,399 19,133
	– –	– –	– –	– –	– –	– –	18,699 –	– –	– –	– 56,130	– –	18,699 56,130	434 1,766	19,133 57,896
	– – – – 500 – –	– – – – 1,000 – –	– – – – – – –	– – – – – – –	– – – – – 3,762 –	– – – – – – –	18,699 – – – – – –	– – – – – – –	– – – – – – –	56,130 – 74,829 2,200 77,029 – – – (1,452) (1,452 – – – 2,652 2,652 – (14,772) (14,772) – (14,772 – – 1,500 – 1,500 – – 3,762 – 3,762 (7,436) 7,436 – – –
	74,359	*465,952	*46,432	–	*3,762	(86,230) 4,827		*316	*581	*498,669	7,436	1,016,104	25,014	1,041,118

* These reserve accounts comprise the consolidated reserves of HK$934,309,000 (2005: HK$676,064,000) in the consolidated balance sheet.

– 46 –

APPENDIX I

FINANCIAL INFORMATION

CONSOLIDATED CASH FLOW STATEMENT

Year ended 31 March 2006

Notes NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 36(a) CASH FLOWS FROM INVESTING ACTIVITIES Interest received Purchases of items of property, plant and equipment Purchases of investment properties Acquisitions of subsidiaries 34 Disposal of a subsidiary 35 Proceeds from disposal of items of property, plant and equipment Proceeds from disposal of available-for-sale equity investments/other financial assets Purchases of financial assets at fair value through profit or loss Decrease in pledged time deposits Net advance from associates Net cash inflow/(outflow) from investing activities	2006 HK$’000 (38,780) 2,068 (8,208) – 45 (1,521) 2,790 – (6,207) 11,632 143 742	2005 (Restated) HK$’000 46,041 1,670 (12,777) (10,378) (60,834) – 773 6,250 – 9,518 136 (65,642)

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APPENDIX I

FINANCIAL INFORMATION

CASH FLOWS FROM FINANCING ACTIVITIES New bank loans Drawdown/(repayment) of trust receipt loans Repayment of bank loans Capital element of finance lease payments Advance from/(repayment to) minority interests Proceeds from issue of new shares by the Company Interest paid Interest element of finance lease payments Net cash inflow from financing activities NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes, net CASH AND CASH EQUIVALENTS AT END OF YEAR ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances 26 Bank overdrafts 28 Notes	270,716 (3,659) (169,016) (790) 2,652 1,500 (24,862) (106) 76,435 38,397 60,365 942 99,704 115,553 (15,849) 99,704 2006 HK$’000	162,211 7,393 (135,406) (1,268) (3,797) – (13,774) (172) 15,187 (4,414) 64,587 192 60,365 62,747 (2,382) 60,365 2005 (Restated) HK$’000

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APPENDIX I

FINANCIAL INFORMATION

BALANCE SHEET

31 March 2006 Notes NON-CURRENT ASSETS Interests in subsidiaries 18 Interests in unconsolidated subsidiaries 19 Total non-current assets CURRENT ASSETS Other receivables and deposits Due from associates Pledged time deposits 26 Cash and cash equivalents 26 Total current assets CURRENT LIABILITIES Sundry creditors and accruals Interest-bearing bank borrowings 28 Total current liabilities NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank borrowings 28 Net assets EQUITY Issued capital 31 Reserves 33(b) Proposed final dividend 12 Total equity	2006 HK$’000 693,176 – 693,176 71 159 39 387 656 (4,331) (16,736) (21,067) (20,411) 672,765 (43,824) 628,941 74,359 547,146 7,436 628,941	2005 HK$’000 721,552 – 721,552 55 159 38 89 341 (5,099) (17,160) (22,259) (21,918) 699,634 (60,560) 639,074 73,859 550,443 14,772 639,074

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FINANCIAL INFORMATION

APPENDIX I

NOTES TO FINANCIAL STATEMENTS

1. Corporate information

Tak Sing Alliance Holdings Limited is a limited liability company incorporated in Bermuda. The registered office of the Company is located at Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda. The principal place of business of the Company is located at 26th Floor, Phase II Wyler Centre, 200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong.

During the year, the Group was principally engaged in investment holding, the manufacture, trading and distribution of garments, property investment and development, and the operations of hotel, restaurant and food businesses.

2.1 Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which also include Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for investment properties and certain financial assets, which have been measured at fair value. These financial statements are presented in Hong Kong dollars and all values are rounded to the nearest thousand (HK$’000) except when otherwise indicated.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended 31 March 2006. The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

The acquisition of a subsidiary during the year has been accounted for using the purchase method of accounting. This method involves allocating the cost of the business combinations to the fair value of the assets acquired, and liabilities and contingent liabilities assumed at the date of acquisition. The cost of the acquisition is measured at the aggregate of the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

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

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FINANCIAL INFORMATION

APPENDIX I

2.2 Impact of new and revised Hong Kong Financial Reporting Standards

The following new and revised HKFRSs affect the Group and are adopted for the first time for the current year’s financial statements:

HKAS 1	Presentation of Financial Statements
HKAS 2	Inventories
HKAS 7	Cash Flow Statements
HKAS 8	Accounting Policies, Changes in Accounting Estimates and Errors
HKAS 10	Events after the Balance Sheet Date
HKAS 12	Income Taxes
HKAS 14	Segment Reporting
HKAS 16	Property, Plant and Equipment
HKAS 17	Leases
HKAS 18	Revenue
HKAS 19	Employee Benefits
HKAS 21	The Effects of Changes in Foreign Exchange Rates
HKAS 23	Borrowing Costs
HKAS 24	Related Party Disclosures
HKAS 27	Consolidated and Separate Financial Statements
HKAS 28	Investments in Associates
HKAS 31	Interests in Joint Ventures
HKAS 32	Financial Instruments: Disclosure and Presentation
HKAS 33	Earnings per Share
HKAS 36	Impairment of Assets
HKAS 37	Provisions, Contingent Liabilities and Contingent Assets
HKAS 39	Financial Instruments: Recognition and Measurement
HKAS 39	Transition and Initial Recognition of Financial Assets and Financial
Amendment	Liabilities
HKAS 40	Investment Property
HKFRS 2	Share-based Payment
HKFRS 3	Business Combinations
HKFRS 5	Non-current Assets Held for Sale and Discontinued Operations
HK(SIC)-Int 21	Income Taxes – Recovery of Revalued Non-depreciable Assets
HK-Int 4	Leases – Determination of the Length of Lease Term
	in respect of Hong Kong Land Leases

The adoption of HKASs 2, 7, 8, 10, 12, 14, 16, 18, 19, 23, 27, 31, 33, 37 HKFRS 5, HK(SIC)-Int 21 and HK-Int 4 has had no material impact on the accounting policies of the Group and the Company and the methods of computation in the Group’s and the Company’s financial statements.

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FINANCIAL INFORMATION

APPENDIX I

HKAS 1 has affected the presentation of minority interests on the face of the consolidated balance sheet, consolidated income statement, consolidated statement of changes in equity and other disclosures. In addition, in prior periods, the Group’s share of tax attributable to associates was presented as a component of the Group’s total tax charge/ (credit) in the consolidated income statement. Upon the adoption of HKAS 1, the Group’s share of the post-acquisition results of associates is presented net of the Group’s share of tax attributable to associates.

HKAS 21 had no material impact on the Group. As permitted by the transitional provisions of HKAS 21, goodwill arising in a business combination prior to 1 January 2005 and fair value adjustments arising on that acquisition are deemed to be in the currency of the Company. In respect of acquisitions subsequent to 1 January 2005, any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of the assets and liabilities are treated as assets and liabilities of the foreign operation and are translated at the closing rate in accordance with HKAS 21.

HKAS 24 has expanded the definition of related parties and affected the Group’s related party disclosures.

The impact of adopting the other HKFRSs is summarised as follows:

(a) HKAS 17 – Leases

In prior years, leasehold land and buildings held for own use were stated at cost or 1995 valuation less accumulated depreciation and any impairment losses.

Upon the adoption of HKAS 17, the Group’s leasehold interest in land and buildings is separated into leasehold land and leasehold buildings. The Group’s leasehold land is classified as an operating lease, because the ownership title of the land is not expected to pass to the Group by the end of the lease term, and is reclassified from property, plant and equipment to prepaid land lease payments, while leasehold buildings continue to be classified as part of property, plant and equipment. Prepaid land premiums for land lease payments under operating leases are initially stated at cost and subsequently amortised on the straight-line basis over the lease term. When the lease payments cannot be allocated reliably between the land and buildings elements, the entire lease payments are included in the cost of the land and buildings as a finance lease in property, plant and equipment.

The effects of the above change are summarised in note 2.4 to the financial statements. The change has been adopted retrospectively from the earliest period presented and comparative amounts have been restated.

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FINANCIAL INFORMATION

APPENDIX I

(b) HKAS 28 – Investments in Associates

In prior years, the share of losses of associates is recognised to the extent of the carrying amount of the investment in the associates under the equity method of accounting. The share of losses of the associates over the carrying amount of the Group’s investments in these associates was not shared by the Group. Upon the adoption of HKAS 28, the interests in associates is the carrying amount of the investments in the associates under the equity method together with any long-term receivables and loans that, in substance, form part of the Group’s net investments in the associates.

The effect of the above changes are summarised in note 2.4(b) to the financial statements. The change has been adopted retrospectively from the earliest period presented and comparative amounts have been restated.

(c) HKAS 32 and HKAS 39 – Financial Instruments

Available-for-sale equity investments

In prior years, the Group classified its investments in equity securities as investment securities, which were held for non-trading purposes and were stated at their cost less any impairment losses on an individual basis. Upon the adoption of HKAS 39, these securities held by the Group at 1 April 2005 in the amount of HK$16,515,000 are designated as available-for-sale equity investments under the transitional provisions of HKAS 39 and accordingly are stated at fair value with gains or losses being recognised as a separate component of equity until subsequent derecognition or impairment. In the case where the available-for-sale equity investments do not have a quoted market price in an active market and whose fair value cannot be reliably measured, they are carried at cost.

The adoption of HKAS 39 has resulted in the reclassification of the Group’s investment securities as available-for-sale equity investments, and has not resulted in any change in the measurement of these equity securities.

Financial assets at fair value through profit or loss

In prior years, the Group classified its held-to-maturity investments as held-to-maturity securities which the Group had the expressed intention and ability to hold to maturity and were stated at amortised cost. Upon the adoption of HKAS 39, these securities held by the Group at 1 April 2005 in the amount of HK$4,938,000 are reclassified as financial assets at fair value through profit or loss under the transitional provisions of HKAS 39 and accordingly, are stated at fair value with gains or losses being recognised in the income statement.

The effect of the above changes are summarised in note 2.4 to the financial statements. In accordance with the transitional provisions of HKAS 39, comparative amounts have not been restated.

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APPENDIX I

(d) HKAS 40 – Investment Property

In prior years, changes in the fair values of investment properties were dealt with as movements in the asset revaluation reserve. If the total of this reserve was insufficient to cover a deficit, on a portfolio basis, the excess of the deficit was charged to the income statement. Any subsequent revaluation surplus was credited to the income statement to the extent of the deficit previously charged.

Upon the adoption of HKAS 40, gains or losses arising from changes in the fair values of investment properties are included in the income statement in the year in which they arise. In accordance with the transitional provisions of HKAS 40, the opening balance of retained profits and the results for the comparative period have been restated to reflect this change retrospectively. The effects of the above change are summarised in note 2.4 to the financial statements.

(e) HKFRS 2 – Share-based Payment

In prior years, no recognition and measurement of share-based payment transactions in which employees (including directors) were granted share options over shares in the Company were required until such options were exercised by employees, at which time the share capital and share premium were credited with the proceeds received.

Upon the adoption of HKFRS 2, when employees (including directors) render services as consideration for equity instruments (“equity-settled transactions”), the cost of the equity-settled transactions with employees is measured by reference to the fair value at the date at which the instruments are granted.

The main impact of HKRFS 2 on the Group is the recognition of the cost of these transactions and a corresponding entry to equity for employee share options. The revised accounting policy for share-based payment transactions is described in more detail in note 2.5 “Summary of significant accounting policies” below.

The Group has adopted the transitional provisions of HKFRS 2 under which the new measurement policies have not been applied to (i) options granted to employees on or before 7 November 2002; and (ii) options granted to employees after 7 November 2002 but which had vested before 1 January 2005.

As the Group did not have any employee share options which were granted during the period from 7 November 2002 to 31 December 2004 but had not yet vested as at 1 January 2005, the adoption of HKFRS 2 has had no

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FINANCIAL INFORMATION

APPENDIX I

impact on the retained profits as at 31 March 2004 and at 31 March 2005. The Group has recognised the cost of options which were granted during the year in the current year’s income statement in accordance with the revised accounting policy.

The effects of adopting HKFRS 2 are summarised in note 2.4 to the financial statements.

(f) HKFRS 3 – Business Combinations and HKAS 36 – Impairment of Assets

In prior years, goodwill and negative goodwill arising on acquisitions prior to 1 January 2001 was eliminated against the consolidated retained profits and credited to the consolidated capital reserve, respectively, in the year of acquisition and was not recognised in the income statement until disposal or impairment of the acquired businesses.

Goodwill arising on acquisitions on or after 1 January 2001 was capitalised and amortised on the straight-line basis over its estimated useful life and was subject to impairment testing when there was any indication of impairment. Negative goodwill was carried in the balance sheet and was recognised in the consolidated income statement on a systematic basis over the remaining average useful life of the acquired depreciable/amortisable assets.

The adoption of HKFRS 3 and HKAS 36 has resulted in the Group ceasing annual goodwill amortisation and commencing testing for impairment at the cash-generating unit level annually (or more frequently if events or changes in circumstances indicate that the carrying value may be impaired).

Any excess of the Group’s interest in the net fair value of the acquirees’ identifiable assets, liabilities and contingent liabilities over the cost of acquisition of subsidiaries (previously referred to as negative goodwill), after reassessment, is recognised immediately in the income statement.

The transitional provisions of HKFRS 3 have required the Group to eliminate at 1 April 2005 the carrying amounts of accumulated amortisation with a corresponding adjustment to the cost of goodwill and to derecognised at 1 April 2005 the carrying amounts of negative goodwill (including that remaining in the consolidated capital reserve) against retained profits. Goodwill previously eliminated against the retained earnings remains eliminated against the retained earnings and is not recognised in the income statement when all or part of the business to which the goodwill relates is disposed of or when a cash-generating unit to which the goodwill relates becomes impaired.

The effects of the above changes are summarised in note 2.4 to the financial statements. In accordance with the transitional provisions of HKFRS 3, comparative amounts have not been restated.

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APPENDIX I

2.3 Impact of issued but not yet effective Hong Kong Financial Reporting Standards

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements. Unless otherwise stated, these HKFRSs are effective for annual periods beginning on or after 1 January 2006:

HKAS 1 Amendment	Capital Disclosures
HKAS 19 Amendment	Actuarial Gains and Losses, Group Plans and
	Disclosures
HKAS 21 Amendment	Net Investment in a Foreign Operation
HKAS 39 Amendment	Cash Flow Hedge Accounting of Forecast Intragroup
	Transactions
HKAS 39 Amendment	The Fair Value Option
HKAS 39 & HKFRS 4	Financial Guarantee Contracts
Amendments
HKFRSs 1 & 6	First-time Adoption of Hong Kong Financial
Amendments	Reporting Standards and Exploration for and
	Evaluation of Mineral Resources
HKFRS 6	Exploration for and Evaluation of Mineral Resources
HKFRS 7	Financial Instruments: Disclosures
HK(IFRIC)-Int 4	Determining whether an Arrangement contains
	a Lease
HK(IFRIC)-Int 5	Rights to Interests arising from Decommissioning,
	Restoration and Environmental Rehabilitation
	Funds
HK(IFRIC)-Int 6	Liabilities arising from Participating in a Specific
	Market – Waste Electrical and
	Electronic Equipment
HK(IFRIC)-Int 7	Applying the Restatement Approach under
	HKAS 29 Financial Reporting in Hyperinflationary
	Economies
HK(IFRIC)-Int 8	Scope of HKFRS 2
HK(IFRIC)-Int 9	Reassessment of Embedded Derivatives

The HKAS 1 Amendment shall be applied for annual periods beginning on or after 1 January 2007. The revised standard will affect the disclosures about qualitative information about the Group’s objective, policies and processes for managing capital; quantitative data about what the Company regards as capital; and compliance with any capital requirements and the consequences of any non-compliance.

HKFRS 7 will replace HKAS 32 and has modified the disclosure requirements of HKAS 32 relating to financial instruments. This HKFRS shall be applied for annual periods beginning on or after 1 January 2007.

In accordance with the amendments to HKAS 39 regarding financial guarantee contracts, financial guarantee contracts are initially recognised at fair value and are subsequently measured at the higher of (i) the amount determined in accordance with HKAS 37 and (ii) the amount initially recognised, less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18.

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FINANCIAL INFORMATION

APPENDIX I

The HKAS 19 Amendment, HKAS 39 Amendment regarding cash flow hedge accounting of forecast intragroup transactions, HKFRSs 1 and 6 Amendments, HKFRS 6, HK(IFRIC)-Int 5 and HK(IFRIC)-Int 6 do not apply to the activities to the Group. HKAS 21 Amendment, HK(IFRIC)-Int 6 and HK(IFRIC)-Int 7 shall be applied for annual periods beginning on or after 1 December 2005. HK(IFRIC)-Int 8 and HK(IFRIC)-Int 9 shall be applied for annual periods beginning on or after 1 May 2006 and 1 June 2006, respectively.

Except as stated above, the Group expects that the adoption of other pronouncements listed above will not have any significant impact on the Group’s financial statements in the period of initial application.

2.4 Summary of the impact of changes in accounting policies

(a) Effect on the consolidated balance sheet

Effect of adopting HKASs 32 At 1 April 2005 HKAS 17 # and 39 HKAS 40 # HKFRS 3 Change in Surplus on Prepaid land classification revaluation Derecognition Effect of new policies lease of financial of investment of negative (Increase/(decrease)) payments assets properties goodwill HK$’000 HK$’000 HK$’000 HK$’000 Assets Property, plant and equipment (560) – – – Prepaid land lease payments 1,152 – – – Negative goodwill – – – 186,539 Available-for-sale equity investments – 16,515 – – Financial assets at fair value through profit or loss – 4,938 – – Other financial assets – (21,902) – – Debtors, deposits and prepayments 32 – – – Equity** Investment property revaluation reserve of associates – – (3,016) – Retained profits 624 (449) 3,016 186,539

Total HK$’000 (560) 1,152 186,539 16,515 4,938 (21,902) 32 186,714 (3,016) 189,730 186,714

* Adjustments taken effect prospectively from 1 April 2005

# Adjustments/presentation taken effect retrospectively

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APPENDIX I

FINANCIAL INFORMATION

Effect of adopting HKASs 32 At 1 March 2006 HKAS 17 and 39 HKAS 40 HKFRS 3 Change in Surplus on Prepaid classification revaluation Derecognition Effect of new policies land lease of financial of investment of negative (Increase/(decrease)) payments assets properties goodwill HK$’000 HK$’000 HK$’000 HK$’000 Assets Property, plant and equipment (1,104) – – – Prepaid land lease payments 1,120 – – – Negative goodwill – – – 155,396 Available-for-sale equity investments – 16,771 – – Financial assets at fair value through profit or loss – 10,531 – – Other financial assets – (28,366) – – Debtors, deposits and prepayments 32 – – – Equity Investment property revaluation reserve – – (39,663) – Retained profits 48 (1,064) 39,663 155,396

Total HK$’000 (1,104) 1,120 155,396 16,771 10,531 (28,366) 32 154,380 (39,663) 194,043 154,380

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APPENDIX I

(b) Effect on the balances of equity at 1 April 2004 and at 1 April 2005

Effect of new policies (Increase/(decrease)) 1 April 2004 Retained profits 1 April 2005 Investment property revaluation reserve of associates Retained profits	Effect of adopting HKFRS 3 HKAS 17 HKAS 28 HKAS 39 HKAS 40 Fair value on financial Surplus on assets at revaluation Prepaid fair value of Negative land lease Interests in through investment goodwill payments associates profit or loss properties HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 – 576 (2,886) – – – – – – (3,016) 186,539 624 – (449) 3,016	Total HK$’000 (2,310) (2,310) (3,016) 189,730 186,714

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APPENDIX I

FINANCIAL INFORMATION

(c) Effect on the consolidated income statement for the years ended 31 March 2006 and 2005

HKAS 1 Share of post-tax profits and losses Effect of new policies of associates HK$’000 Year ended 31 March 2006 Increase in administrative expenses – Decrease in other revenue – Decrease in cost of sales – Decrease in share of profits and losses of associates (13,391) Decrease in tax 13,391 Total increase/(decrease) in profit – Decrease in basic earnings per share (cents) – Decrease in diluted earnings per share (cents) –		Effect of adopting HKAS 17 HKAS 28 HKAS 40 HKFRS 2 HKFRS 3 Surplus on revaluation Recognition Prepaid of Employee of negative land lease Interests in investment share option goodwill payments associates properties scheme as income HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 – – – (3,762) – – – – – (31,143) 32 – – – – – – – – – – – – – – 32 – – (3,762) (31,143) – – – (0.51) (4.21) – – – (0.51) (4.20)	Total HK$’000 (3,762) (31,143) 32 (13,391) 13,391 (34,873) (4.72) (4.71)

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APPENDIX I

FINANCIAL INFORMATION

HKAS 1 Share of post-tax profits and losses Effect of new policies of associates HK$’000 Year ended 31 March 2005 Decrease in cost of sales – Increase/(decrease) in share of profits and losses of associates (4,076) Decrease in tax 4,076 Total increase in profit – Increase in basic earnings per share_(cents) – Increase in diluted earnings per share(cents)_ –		Effect of adopting HKAS 17 HKAS 28 HKAS 40 HKFRS 2 HKFRS 3 Surplus on revaluation Recognition Prepaid of Employee of negative land lease Interests in investment share option goodwill payments associates properties scheme as income HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 48 – – – – – 2,886 3,016 – – – – – – – 48 2,886 3,016 – – – 0.40 0.41 – – – – – – –	Total HK$’000 48 1,826 4,076
			5,950
			0.81
			–

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FINANCIAL INFORMATION

APPENDIX I

2.5 Summary of significant accounting policies

Subsidiaries

A subsidiary is an entity whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities.

The results of subsidiaries are included in the Company’s income statement to the extent of dividends received and receivable. The Company’s interests in subsidiaries are stated at cost less any impairment losses.

Unconsolidated subsidiaries

Interests in unconsolidated subsidiaries are stated at their carrying values at the date of deconsolidation less any impairment losses.

Joint ventures

A joint venture is an entity set up by contractual arrangement, whereby the Group and other parties undertake an economic activity. The joint venture operates as a separate entity in which the Group and the other parties have an interest.

The joint venture agreement between the venturers stipulates the capital contributions of the joint venture parties, the duration of the joint venture entity and the basis on which the assets are to be realised upon its dissolution. The profits and losses from the joint venture’s operations and any distributions of surplus assets are shared by the venturers, either in proportion to their respective capital contributions, or in accordance with the terms of the joint venture agreement.

A joint venture is treated as:

• (a) a subsidiary, if the Group has unilateral control, directly or indirectly, over the joint venture;

• (b) a jointly-controlled entity, if the Group does not have unilateral control, but has joint control, directly or indirectly, over the joint venture;

• (c) an associate, if the Group does not have unilateral or joint control, but holds, directly or indirectly, generally not less than 20% of the joint venture’s registered capital and is in a position to exercise significant influence over the joint venture; or

• (d) an equity investment accounted for in accordance with HKAS 39, if the Group holds, directly or indirectly, less than 20% of the joint venture’s registered capital and has neither joint control of, nor is in a position to exercise significant influence over, the joint venture.

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Associates

An associate is an entity, not being a subsidiary or a jointly-controlled entity, in which the Group has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence.

The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated income statement and consolidated reserves, respectively. The Group’s interests in associates are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

The results of associates are included in the Company’s income statement to the extent of dividends received and receivable. The Company’s interests in associates are treated as non-current assets and are stated at cost less any impairment losses.

Jointly-controlled entities

A jointly-controlled entity is a joint venture that is subject to joint control, resulting in none of the participating parties having unilateral control over the economic activity of the jointly-controlled entity.

The Group’s share of the post-acquisition results and reserves of jointlycontrolled entities is included in the consolidated income statement and consolidated reserves, respectively. The Group’s interest in jointly-controlled entities are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses.

The results of jointly-controlled entities are included in the Company’s income statement to the extent of dividends received and receivable. The company’s interest in a jointly-controlled entity is treated as non-current assets and is stated at cost less any impairment losses.

Goodwill

Goodwill arising on the acquisition of subsidiaries represents the excess of the cost of the business combination over the Group’s interest in the net fair value of the acquirees’ identifiable assets acquired, and liabilities and contingent liabilities assumed as at the date of acquisition.

Goodwill on acquisitions for which the agreement date is on or after 1 January 2005

Goodwill arising on acquisition is recognised in the consolidated balance sheet as an asset, initially measured at cost and subsequently at cost less any accumulated impairment losses.

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The carrying amount of goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cashgenerating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated:

• represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and

• is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format determined in accordance with HKAS 14 “Segment Reporting”.

Impairment is determined by assessing the recoverable amount of the cashgenerating unit (group of cash-generating units), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised.

Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

An impairment loss recognised for goodwill is not reversed in a subsequent period.

Goodwill previously eliminated against the consolidated reserves

Prior to the adoption of Statement of Standard Accounting Practice (“SSAP”) 30 “Business Combinations” in 2001, goodwill arising on acquisition was eliminated against the consolidated reserves in the year of acquisition. On the adoption of HKFRS 3, such goodwill remains eliminated against the consolidated reserves and is not recognised in profit or loss when all or part of the business to which the goodwill relates is disposed of or when a cash-generating unit to which the goodwill relates becomes impaired.

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Impairment of assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, financial assets, investment properties and goodwill), the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs to sell, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the income statement in the period in which it arises.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation), had no impairment loss been recognised for the asset in prior years. A reversal of such impairment loss is credited to the income statement in the period in which it arises.

Related parties

A party is considered to be related to the Group if:

• (a) the party, directly or indirectly through one or more intermediaries, (i) controls, is controlled by, or is under common control with, the Group; (ii) has an interest in the Group that gives it significant influence over the Group; or (iii) has joint control over the Group;

• (b) the party is an associate;

• (c) the party is a jointly-controlled entity;

• (d) the party is a member of the key management personnel of the Group or its parent;

• (e) the party is a close member of the family of any individual referred to in (a) or (d);

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FINANCIAL INFORMATION

APPENDIX I

• (f) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or

• (g) the party is a post-employment benefit plan for the benefit of the employees of the Group, or of any entity that is a related party of the Group.

Property, plant and equipment and depreciation

Property, plant and equipment are stated at cost or valuation less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property, plant and equipment, and where the cost of the item can be measured reliably, the expenditure is capitalised as an additional cost of that asset or as a replacement.

Depreciation is calculated on the straight-line basis to write off the cost or valuation of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Hotel properties	Over the lease terms
Leasehold land	Over the lease terms
Buildings	2.5% – 3%
Leasehold improvements	10% – 15%
Plant and machinery	10%
Furniture, fixtures and equipment	15% – 20%
Motor vehicles	20%

Where parts of an item of property, plant and equipment have different useful lives, the cost or valuation of that item is allocated on a reasonable basis among the parts and each part is depreciated separately.

Residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at each balance sheet date.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the income statement in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

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FINANCIAL INFORMATION

APPENDIX I

Investment properties

Investment properties are interests in land and buildings held to earn rental income and/or for capital appreciation, rather than for use in the production or supply of goods or services or for administrative purposes; or for sale in the ordinary course of business. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the balance sheet date.

Gain or losses arising from changes in the fair values of investment properties are included in the income statement in the year in which they arise.

Any gains or losses on the retirement or disposal of an investment property are recognised in the income statement in the year of the retirement or disposal.

Leases

Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect the purchase and financing. Assets held under capitalised finance leases are included in property, plant and equipment and depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the income statement so as to provide a constant periodic rate of charge over the lease terms.

Assets acquired through hire purchase contracts of a financing nature are accounted for as finance leases, but are depreciated over their estimated useful lives.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets, and rentals receivable under the operating leases are credited to the income statement on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases are charged to the income statement on the straight-line basis over the lease terms.

Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognised on the straight-line basis over the lease terms. When the lease payments cannot be allocated reliably between the land and buildings elements, the entire lease payments are included in the cost of the land and buildings as a finance lease in property, plant and equipment.

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FINANCIAL INFORMATION

APPENDIX I

Investments and other financial assets

Applicable to the year ended 31 March 2005:

The Group classified its investments, other than subsidiaries, associates and jointly-controlled entities, as investment securities and held-to-maturity securities.

Investment securities

Investment securities in listed and unlisted debt and equity securities, intended to be held for a continuing strategic or long term purpose, are stated at cost less any impairment losses, on an individual investment basis.

When a decline in the fair value of a security below its carrying amount has occurred, unless there is evidence that the decline is temporary, the carrying amount of the security is reduced to its fair value, as estimated by the directors. The amount of the impairment is charged to the income statement for the period in which it arises. When the circumstances and events which led to the impairment in value cease to exist and there is persuasive evidence that the new circumstances and events will persist for the foreseeable future, the amounts of the impairments previously charged is credited to the income statement to the extent of the amount previously charged.

Held-to-maturity securities

Held-to-maturity securities are investments in dated debt securities which the Group has the expressed intention and ability to hold to maturity, and are stated at cost adjusted for the amortisation of premiums or discounts arising on acquisition, less any impairment losses which reflect their credit risk.

The profit or loss on disposal of investment securities is accounted for in the period in which the disposal occurs as the difference between the net sales proceeds and the carrying amount of the investments.

Applicable to the year ended 31 March 2006:

Financial assets in the scope of HKAS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial assets, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at the balance sheet date.

All regular way purchases and sales of financial assets are recognised on the trade date i.e., the date that the Group commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

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FINANCIAL INFORMATION

APPENDIX I

Financial assets at fair value through profit or loss

Financial assets classified as held for trading are included in the category “financial assets at fair value through profit or loss”. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Gains or losses on investments held for trading are recognised in the income statement.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets in listed and unlisted equity securities that are designated as available for sale or are not classified in any of the other categories. After initial recognition, available-for-sale financial assets are measured at fair value, with gains or losses recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the income statement.

When the fair value of unlisted equity securities cannot be reliably measured because (a) the variability in the range of reasonable fair value estimates is significant for that investment or (b) the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such securities are stated at cost less any impairment losses.

Fair value

The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business at the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument which is substantially the same; a discounted cash flow analysis; and option pricing models.

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FINANCIAL INFORMATION

APPENDIX I

Impairment of financial assets (applicable to the year ended 31 March 2006)

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

Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through the use of an allowance account. The amount of the impairment loss is recognised in profit or loss.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

Assets carried at cost

If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses on these assets are not reversed.

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FINANCIAL INFORMATION

APPENDIX I

Available-for-sale financial assets

If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to the income statement. Impairment losses on equity instruments classified as available for sale are not reversed through profit or loss.

Derecognition of financial assets (applicable to the year ended 31 March 2006)

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where:

• the rights to receive cash flows from the asset have expired;

• the Group retains the rights to receive cash flows from the asset, but has assumed an obligation to pay in full without material delay to a third party under a “pass-through” arrangement; or

• the Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Where continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, where the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

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FINANCIAL INFORMATION

APPENDIX I

Gains and losses are recognised in net profit or loss when the liabilities are derecognised as well as through the amortisation process.

Derecognition of financial liabilities (applicable to the year ended 31 March 2006)

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in profit or loss.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in, first-out basis and in the case of work in progress and finished goods, comprised direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

Export quotas

Temporary export quotas purchased are charged to the income statement at the date when goods are shipped under that quota category or upon expiry.

Export quotas allocated by the authorities in the countries in which the Group operates are not capitalised as assets in the consolidated balance sheet.

Income arising from the sale of export quotas is credited to the income statement in the year of disposal.

Properties held for sale

Properties held for sale are stated at the lower of cost and net realisable value on an individual property basis. Cost includes all development expenditure, applicable borrowing costs and other direct costs attributable to such properties. Net realisable value is determined by reference to the prevailing market price.

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

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FINANCIAL INFORMATION

APPENDIX I

For the purpose of the balance sheets, cash and cash equivalents comprise cash on hand and at banks, including term deposits, which are not restricted as to use.

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the income statement, or in equity if it relates to items that are recognised in the same or a different period directly in equity.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

• where the deferred tax liability arises from goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with interests in subsidiaries, associates and joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except:

• where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with interests in subsidiaries, associates and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

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FINANCIAL INFORMATION

APPENDIX I

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 deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

• (a) from the sale of goods and quotas, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods and quotas sold;

• (b) income from the restaurant and food businesses, at the point of sale to customers;

• (c) income from the sale of completed properties, on the exchange of legally binding unconditional sales contracts;

• (d) rental income, in the period in which the properties are let out and on the straight-line basis over the lease terms;

• (e) hotel and other service income, in the period in which such services are rendered; and

• (f) interest income, on an accrual basis using the effective interest method by applying the rate that discounts the estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial assets.

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FINANCIAL INFORMATION

APPENDIX I

Employee benefits

Share-based payment transactions

The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. Employees (including directors) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (“equity-settled transactions”).

The cost of equity-settled transaction with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer using a binomial model, further details of which are given in note 32. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of the Company (“market condition”), if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service condition are fulfilled, ending on the date on which the relevant employee become fully entitled to the award (the “vesting date”). The cumulative expense recognised for equity-settled transactions at each balance sheet date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The charge or credit to the income statement for a period represents the movement in the cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification, which increases the total fair value of the sharebased payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and is designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.

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FINANCIAL INFORMATION

APPENDIX I

The Group had adopted the transitional provisions of HKFRS 2 in respect of equity-settled awards and has applied HKRFS 2 only to equity-settled awards granted after 7 November 2002 that had not vested on 1 January 2005 and to those granted on or after 1 January 2005.

Paid leave carried forward

The Group provides paid annual leave to its employees under their employment contracts on a calendar year basis. Under certain circumstances, such leave which remains untaken as at the balance sheet date is permitted to be carried forward and utilised by the respective employees in the following year. An accrual is made at the balance sheet date for the expected future cost of such paid leave earned during the year by the employees and carried forward.

Employment Ordinance long service payments

Certain of the Group’s employees have completed the required number of years of service to the Group in order to be eligible for long service payments under the Hong Kong Employment Ordinance (the “Employment Ordinance”) in the event of the termination of their employment. The Group is liable to make such payments in the event that such a termination of employment meets the circumstances specified in the Employment Ordinance.

A contingent liability is disclosed in respect of possible future long service payments to employees, as a number of current employees have achieved the required number of years of service to the Group, to the balance sheet date, in order to be eligible for long service payments under the Employment Ordinance if their employment is terminated in the circumstances specified. A provision has not been recognised in respect of such possible payments, as it is not considered probable that the situation will result in a material future outflow of resources from the Group.

Pension schemes

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance, for those 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 the income statement 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.

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FINANCIAL INFORMATION

APPENDIX I

The employees of the Group’s subsidiaries which operate in Mainland China are required to participate in central pension schemes (the “CP Schemes”) operated by respective local municipal governments. These subsidiaries are required to contribute a certain percentage of their covered payroll to the CP Schemes to fund their benefits. The only obligation of the Group with respect to the CP Schemes is to pay the ongoing required contributions under the CP Schemes. Contributions under the CP Schemes are charged to the income statement as they become payable in accordance with the rules of the CP Schemes.

Dividends

Final dividends proposed by the directors are classified as a separate allocation of retained profits within the equity section of the balance sheet, until they have been approved by the shareholders in a general meeting. When these dividends have been approved by the shareholders and declared, they are recognised as a liability.

Foreign currencies

These financial statements are presented in Hong Kong dollars, which is the Company’s functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions are initially recorded using the functional currency rates ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rates of exchange ruling at the balance sheet date. All differences are taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

The functional currency of certain overseas subsidiaries, associates and jointlycontrolled entities are currencies other than the Hong Kong dollars. As at the balance sheet date, the assets and liabilities of these entities are translated into the presentation currency of the Company at the exchange rates ruling at the balance sheet date and, their income statements are translated into Hong Kong dollars at the weighted average exchange rates for the year. The resulting exchange differences are included in a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in the income statement.

For the purpose of the consolidated cash flow statement, the cash flows of overseas subsidiaries are translated into Hong Kong dollars at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of overseas subsidiaries which arise throughout the year are translated into Hong Kong dollars at the weighted average exchange rates for the year.

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FINANCIAL INFORMATION

APPENDIX I

3. Significant accounting judgements and estimates

Judgements

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Operating lease commitments – Group as lessor

The Group has entered into commercial property leases on its investment property portfolio. The Group has determined that it retains all the significant risks and rewards of ownership of these properties which are leased out on operating leases.

Classification between investment properties and owner-occupied properties

The Group determines whether a property qualifies as an investment property, and has developed criteria in making that judgement. Investment property is a property held to earn rentals or for capital appreciation or both. Therefore, the Group considers whether a property generates cash flows largely independently of the other assets held by the Group.

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group accounts for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes.

Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as investment property.

Long service payments

The Group and the Company had contingent liabilities in respect of possible future long service payments to employees under the Employment Ordinance, as further explained in the accounting policy for “Employee benefits” as set out in note 2.5 to the financial statements. Management has to consider whether it is appropriate to recognise the provision for long service payments.

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FINANCIAL INFORMATION

APPENDIX I

In making its judgement, the Group considers (i) the number of current employees who have achieved the required number of years of service to the Group and the Company, as at the balance sheet date, in order to be eligible for long service payments, under the Employment Ordinance if their employment is terminated in the circumstances specified; (ii) the average age of those employees; (iii) the turnover rate of those employees; and (iv) the possibility of the termination of employment of those employees that meet circumstances specified in the Employment Ordinance based on relevant economic and other factors. Management considers that no provision for long service payments is required as it is not considered probable that the situation at the balance sheet date will result in a material future outflow of resources from the Group and the Company.

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 discussed below.

Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill at 31 March 2006 was HK$8,721,000 (2005: HK$8,721,000). More details are given in note 17.

Measurement of fair value of equity-settled transactions

The Company operates share option schemes under which employees (including directors) of the Group receive remuneration in the form of sharebased payment transactions. The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted, using assumptions including expected volatility and risk free interest rate. Such cost is recognised, together with a corresponding increase in equity, over the period in which the service conditions are fulfilled.

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FINANCIAL INFORMATION

APPENDIX I

4. Segment information

Segment information is presented by way of two segment formats: (i) on a primary segment reporting basis, by business segment; and (ii) on a secondary segment reporting basis, by geographical segment.

The Group’s operating businesses are structured and managed separately, according to the nature of their operations and the products and services they provide. Each of the Group’s business segments represents a strategic business unit that offers products and services which are subject to risks and returns that are different from those of other business segments. Summary details of the business segments are as follows:

• (a) the garment segment is engaged in the manufacture, trading and distribution of garment products;

• (b) the restaurant, food and hotel segment is engaged in restaurant and hotel operation and the provision of food and beverage services;

• (c) the property investment and development segment comprises the development and sale of properties and the leasing of commercial and residential premises; and

• (d) the “others” segment comprises, principally, the supply of LPG gas for motor vehicles, and other operations.

In determining the Group’s geographical segments, revenues and results are attributed to the segments based on the location of the customers, and assets are attributed to the segments based on the location of the assets.

Intersegment sales and transfers are transacted with reference to the selling prices used for sales made to third parties at the then prevailing market prices.

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FINANCIAL INFORMATION

APPENDIX I

(a) Business segments

The following tables present revenue, profit/(loss) and certain asset, liability and expenditure information for the Group’s business segments for the years ended 31 March 2006 and 2005.

Group

Segment revenue: Sales to external customers Intersegment sales Other revenue Total Segment results Unallocated corporate income Unallocated corporate expenses Finance costs Share of profits and losses of associates Profit before tax Tax Profit for the year	Gar 2006 HK$’000 270,946 – 7,776	ment 2005 (Restated) HK$’000 380,936 – 3,498	Restaurant, food and hotel 2006 2005 HK$’000 HK$’000 286,574 256,017 332 276 2,736 205	Restaurant, food and hotel 2006 2005 HK$’000 HK$’000 286,574 256,017 332 276 2,736 205	Property investment and development 2006 2005 HK$’000 HK$’000 37,312 39,457 8,953 1,129 39,541 36,508	Property investment and development 2006 2005 HK$’000 HK$’000 37,312 39,457 8,953 1,129 39,541 36,508	Ot 2006 HK$’000 507 – 6,209	hers 2005 HK$’000 4,585 – 1,173	Eliminations Conso 2006 2005 2006 HK$’000 HK$’000 HK$’000 – – 595,339 (9,285) (1,405) – – – 56,262	Eliminations Conso 2006 2005 2006 HK$’000 HK$’000 HK$’000 – – 595,339 (9,285) (1,405) – – – 56,262	Eliminations Conso 2006 2005 2006 HK$’000 HK$’000 HK$’000 – – 595,339 (9,285) (1,405) – – – 56,262	lidated 2005 (Restated) HK$’000 680,995 – 41,384
	278,722	384,434	289,642	256,498	85,806	77,094	6,716	5,758	(9,285) (1,405) 651,601			722,379
	*(7,059) 31,594		27,961	26,240	20,803	8,430	1,838	(1,542) –		–	43,543 64,722 726 1,801 (18,400) (18,435) (24,968) (13,946) 69,135 19,189
	–	–	–	–	69,135	20,907	–	(1,718) –		–
											70,036 53,331 (12,140) (9,645)
											57,896	43,686

* The impairment losses of property, plant and equipment and provision for doubtful debts and other receivables of HK$12,693,000 and HK$2,998,000, respectively, arising from the cessation of operation in Guatemala were included in segment result of Garment.

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APPENDIX I

FINANCIAL INFORMATION

Segment assets Interests in associates Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information: Depreciation – segment – unallocated Capital expenditure – segment – unallocated Impairment losses recognised in the income statement Provision for doubtful debts and other receivables – segment – unallocated Impairment of interests in associates Impairment of property, plant and equipments Write-down of inventories to net realisable value Change in fair value of investment properties	Gar 2006 HK$’000 117,631 18	ment 2005 (Restated) HK$’000 113,506 2,324	Restaurant, food and hotel 2006 2005 HK$’000 HK$’000 233,469 209,070 (6) 8	Restaurant, food and hotel 2006 2005 HK$’000 HK$’000 233,469 209,070 (6) 8	Property investment and development 2006 2005 HK$’000 HK$’000 1,233,725 995,705 104,317 35,181	Property investment and development 2006 2005 HK$’000 HK$’000 1,233,725 995,705 104,317 35,181	Others Cons 2006 2005 2006 HK$’000 HK$’000 HK$’000 8,563 9,114 1,593,388 (2,185) (1,322) 102,144 111,374	Others Cons 2006 2005 2006 HK$’000 HK$’000 HK$’000 8,563 9,114 1,593,388 (2,185) (1,322) 102,144 111,374	Others Cons 2006 2005 2006 HK$’000 HK$’000 HK$’000 8,563 9,114 1,593,388 (2,185) (1,322) 102,144 111,374	olidated 2005 (Restated) HK$’000 1,327,395 36,191 95,052
	27,863	41,633	53,818	58,873	41,128	43,293	7,514	5,652	1,806,906	1,458,638
									130,323 635,465	149,451 522,878
	3,321	3,713	9,544	10,913	4,799	2,947	482	65	765,788	672,329
									18,146 2,211	17,638 2,045
	1,560	1,408	3,678	8,073	599	11,893	1,682	122	20,357	19,683
									7,519 689	21,496 2,934
	10,739	1,088	1,177	17	1,205	25,489	656	–	8,208	24,430
									13,777 –	26,594 1,333
	2,306 12,693 1,225	– – –	– – –	– – –	– – –	– – –	733 – –	– – –	13,777	27,927
									3,039 12,693 1,225	– – –
	–	–	2,642	–	37,021	3,326		– –	30,734	27,927
									39,663	3,326

– 82 –

FINANCIAL INFORMATION

APPENDIX I

(b) Geographical segments

The following table presents revenue, certain asset and expenditure information for the Group’s geographical segments for the years ended 31 March 2006 and 2005.

Group

==> picture [342 x 163] intentionally omitted <==

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

America South Africa Hong Kong Mainland China Others Consolidated
2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005
(Restated) (Restated)
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Segment revenue:
Sales to external customers 113,601 159,360 131,402 186,913 43,521 56,586 288,956 247,147 17,859 30,989 595,339 680,995
Other geographical
information:
Segment assets 9,739 29,997 45,556 53,910 109,148 98,951 1,427,896 1,144,537 1,049 – 1,593,388 1,327,395
Capital expenditure:
– segment 71 639 224 71 361 202 6,863 20,584 – – 7,519 21,496
– unallocated 689 2,934
8,208 24,430
----- End of picture text -----

5. Revenue

Revenue, which is also the Group’s turnover, represents the aggregate of the net invoiced value of goods sold, after allowances for goods returned and trade discounts, the rendering of services, proceeds from the sale of properties and gross rental income received and receivable.

Revenue from the following activities is included in turnover:

Revenue Sale of goods Income from the hotel, restaurant and food businesses Gross rental income Proceeds from the sale of properties	Group 2006 2005 HK$’000 HK$’000 271,453 385,521 286,574 256,017 33,799 35,127 3,513 4,330 595,339 680,995	Group 2006 2005 HK$’000 HK$’000 271,453 385,521 286,574 256,017 33,799 35,127 3,513 4,330 595,339 680,995
		680,995

– 83 –

APPENDIX I

FINANCIAL INFORMATION

6. Profit before tax

The Group’s profit before tax is arrived at after charging:

Notes Cost of inventories sold and services provided Depreciation 14 Amortisation of goodwill 17 Impairment of goodwill arising during the year** 17 Auditors’ remuneration Employee benefits expense (excluding directors’ remuneration_(note 8)_)#: Wages and salaries Equity-settled share option expense Pension scheme contributions (defined contribution scheme)	Group 2006 2005 (Restated) HK$’000 HK$’000 406,807 462,968 20,357 19,683 – 459 3,663 – 2,252 1,810 103,932 84,953 1,320 – 744 865 105,996 85,818	Group 2006 2005 (Restated) HK$’000 HK$’000 406,807 462,968 20,357 19,683 – 459 3,663 – 2,252 1,810 103,932 84,953 1,320 – 744 865 105,996 85,818
		85,818

– 84 –

APPENDIX I

FINANCIAL INFORMATION

Notes Impairment of interests in associates Write-down of inventories to net realisable value Loss on disposal of other financial assets Fair value losses of financial assets at fair value through profit or loss Minimum lease payment under operating leases for land and buildings Provisions for doubtful debts and other receivables Impairment of items of property, plant and equipment 14 Quota expenses and after crediting: Amortisation of negative goodwill** 17 Foreign exchange differences, net Changes in fair value of investment properties 15 Gross rental income Direct operating expenses (including repairs and maintenance) arising on rental-earning investment properties Bank interest income Gain on disposal of items of property, plant and equipment Gain on disposal of a subsidiary 35 Quota income

Group 2006 2005 (Restated) HK$’000 HK$’000 3,039 – 1,225 – – 77 614 – 14,564 15,570 13,777 27,927 12,693 – – 175 – 31,143 110 1,809 39,663 3,326 33,799 35,127 (1,286) (2,070) 32,513 33,057 2,068 1,670 8 362 697 – – 13

– 85 –

APPENDIX I

FINANCIAL INFORMATION

• The movement in goodwill in the prior year amortised in the consolidated income statement was included in “Other expenses” on the face of the consolidated income statement.

• # Inclusive of an amount of HK$78,720,000 (2005: HK$73,177,000) classified under cost of inventories sold and services provided.

• ** The movement in negative goodwill in the prior year recognised in the consolidated income statement was included in “Other revenue” on the face of the consolidated income statement.

• *** The impairment of goodwill, impairment of items of property, plant and equipment and impairment of interests in associates are included in “Other expenses” on the face of the consolidated income statement.

7. Finance costs

Interest in respect of: Bank loans, overdrafts and other loans wholly repayable within five years Factoring arrangements Finance leases	Group 2006 2005 HK$’000 HK$’000 24,861 13,668 1 106 106 172 24,968 13,946	Group 2006 2005 HK$’000 HK$’000 24,861 13,668 1 106 106 172 24,968 13,946
		13,946

– 86 –

FINANCIAL INFORMATION

APPENDIX I

8. Directors’ remuneration

Directors’ remuneration for the year, disclosed pursuant to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”) and Section 161 of the Hong Kong Companies Ordinance, is as follows:

Fees Other emoluments: Salaries, allowances and benefits in kind Bonuses paid and payables Employee share option benefits Pension scheme contributions	Group 2006 2005 HK$’000 HK$’000 400 442 5,475 3,797 2,104 3,455 2,442 – 154 154 10,175 7,406 10,575 7,848	Group 2006 2005 HK$’000 HK$’000 400 442 5,475 3,797 2,104 3,455 2,442 – 154 154 10,175 7,406 10,575 7,848
		3,797 3,455 – 154
		7,406
		7,848

During the year, certain directors were granted share options, in respect of their services to the Group, under the share option schemes of the Company, further details of which are set out in note 32 to the financial statements. The fair value of such options, which has been amortised to the income statement, was determined as at the date of the grant and was included in the above directors’ remuneration disclosures.

– 87 –

FINANCIAL INFORMATION

APPENDIX I

(a) Independent non-executive directors

The fees paid to independent non-executive directors during the year were as follows:

2006 Lo Ming Chi, Charles Yau Wing Keung Lo Man Kit, Sam 2005 Lo Ming Chi, Charles Yau Wing Keung Lo Man Kit, Sam	Fees HK$’000 100 100 100 300 125 100 117 342	Employee share option benefits HK$’000 33 33 33 99 – – – –	Total HK$’000 133 133 133
			399
			125 100 117
			342

There were no other emoluments payable to the independent non-executive directors during the year (2005: Nil).

– 88 –

APPENDIX I

FINANCIAL INFORMATION

(b) Executive directors and a non-executive director

		Salaries,	Salaries,
		allowances					Employee
			and		Bonuses		share		Pension
		benefits			paid and		option		scheme		Total
	Fees		in kind		payables		**benefits **		**contributions **		remuneration
	HK$’000	HK$’000			HK$’000		HK$’000		HK$’000		HK$’000
2006
Executive directors:
Ma Kai Cheung	–		2,284			927		770	52		4,033
Ma Kai Yum	–		1,710			927		770	52		3,459
Ng Yan Kwong	–		1,251			250		770	50		2,321
	–		5,245			2,104	2,310		154		9,813
Non-executive director:
Yip Hing Chung	100		230			–		33		–	363
	100		5,475			2,104	2,343		154		10,176
			Salaries,
			allowances				Bonuses		Pension
			and	benefits			paid and		scheme		Total
		Fees		in kind			**payables **	**contributions **		remuneration
	HK$’000		HK$’000				HK$’000		HK$’000		HK$’000
2005
Executive directors:
Ma Kai Cheung		–			1,859		1,628		52		3,539
Ma Kai Yum		–			988		1,627		52		2,667
Ng Yan Kwong		–			950		200		50		1,200
		–			3,797		3,455		154		7,406
Non-executive director:
Yip Hing Chung		100			–		–		–		100
		100			3,797		3,455		154		7,506

There was no arrangement under which a director waived or agreed to waive any remuneration during the year.

– 89 –

FINANCIAL INFORMATION

APPENDIX I

9. Five highest paid employees’ remuneration

The five highest paid employees of the Group during the year included three (2005: three) directors, details of whose remuneration are set out in note 8 above. Details of the remuneration of the remaining two (2005: two) non-director, highest paid employees, for the year are as follows:

Salaries, allowances and benefits in kind Pension scheme contributions	Group 2006 2005 HK$’000 HK$’000 6,911 5,009 – – 6,911 5,009	Group 2006 2005 HK$’000 HK$’000 6,911 5,009 – – 6,911 5,009
		5,009

The number of non-director, highest paid employees whose remuneration fell within the following bands is as follows:

HK$500,000 – HK$1,000,000 HK$1,000,001 – HK$1,500,000 HK$3,500,001 – HK$4,000,000 HK$5,500,001 – HK$6,000,000	Number of employees 2006 2005 Number of Number of employees employees 1 – – 1 – 1 1 – 2 2	Number of employees 2006 2005 Number of Number of employees employees 1 – – 1 – 1 1 – 2 2
		2

– 90 –

FINANCIAL INFORMATION

APPENDIX I

10. Tax

Hong Kong profits tax has been provided at the rate of 17.5% (2005: 17.5%) on the estimated assessable profits arising in Hong Kong during the year. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

Group: Current – Hong Kong Charge for the year Underprovision/(overprovision) in prior years Current – Mainland China Current – Overseas Charge for the year Overprovision in prior years Deferred tax expense –note 30 Total tax charge for the year	Group 2006 2005 (Restated) HK$’000 HK$’000 3,657 38 (116) 2 5,329 4,466 4 3,744 (1,065) (37) 4,331 1,432 12,140 9,645

– 91 –

FINANCIAL INFORMATION

APPENDIX I

A reconciliation of the tax expense applicable to profit before tax using the statutory rates for the countries in which the Company and the majority of its subsidiaries are domiciled to the tax expense at the effective tax rates, and a reconciliation of the applicable rates (i.e. the statutory tax rates) to the effective tax rates, are as follows:

Profit before tax Tax at the statutory tax rate Lower tax rate of other countries Higher tax rate of other countries Adjustment in respect of current tax of previous periods Profits and losses attributable to an associate Income not subject to tax Expenses not deductible for tax Tax losses utilised from previous periods Tax losses not recognised Tax charge at the Group’s effective rate	Group 2006 2005 (Restated) HK$’000 % HK$’000 % 70,036 53,331 12,256 17.5 9,333 17.5 (119) (0.2) (932) (1.7) 3,100 4.4 2,866 5.4 (1,181) (1.7) (35) (0.1) (13,391) (19.1) (4,076) (7.6) (1,017) (1.5) (6,572) (12.3) 1,193 1.7 490 0.9 (1,081) (1.5) (1,965) (3.7) 12,380 17.7 10,536 19.7 12,140 17.3 9,645 18.1

The share of tax attributable to an associate amounting to HK$13,391,000 (2005: HK$4,076,000) is included in “Share of profits and losses of associates” on the face of the consolidated income statement.

– 92 –

FINANCIAL INFORMATION

APPENDIX I

11. Net profit from ordinary activities attributable to equity holders of the parent

The net profit from ordinary activities attributable to equity holders of the parent for the year ended 31 March 2006 includes net loss dealt with in the financial statements of the Company amounting to HK$623,000 (2005: HK$10,356,000) (note 33(b) ).

12. Dividend

	Group and	Company
	2006	2005
	HK$’000	HK$’000
Proposed final – HK1 cent (2005: HK2 cents)
per ordinary share	7,436	14,772

The proposed final dividend for the year is subject to the approval of the Company’s shareholders at the forthcoming annual general meeting.

13. Earnings per share attributable to ordinary equity holders of the parent

The calculation of basic earnings per share amounts is based on the net profit for the year attributable to ordinary equity holders of the parent, and the weighted average number of ordinary shares in issue during the year.

The calculation of diluted earnings per share amounts is based on the net profit for the year attributable to ordinary equity holders of the parent. The weighted average number of ordinary shares used in the calculation is the ordinary shares in issue during the year, as used in the basic earnings per share calculation and the weighted average number of ordinary shares assumed to have been issued at no consideration on the deemed exercise or conversion of all dilutive potential ordinary shares into ordinary shares.

No diluted earnings per share was presented for the year ended 31 March 2005 as no diluting events existed during that year.

– 93 –

APPENDIX I

FINANCIAL INFORMATION

The calculations of basic and diluted earnings per share are based on:

Earnings Net profit attributable to ordinary equity holders of the parent, used in the basic earnings per share calculation Shares Weighted average number of ordinary shares in issue during the year used in the basic earnings per share calculation Effect of dilution – weighted average number of ordinary shares: Share options	2006 2005 (Restated) HK$’000 HK$’000 56,130 40,680 Number of shares 2006 2005 738,751,603 738,587,219 1,480,386 – 740,231,989 738,587,219	2005 (Restated) HK$’000 40,680
		738,587,219

– 94 –

FINANCIAL INFORMATION

APPENDIX I

14. Property, plant and equipment

Group

31 March 2006 At 31 March 2005 and at 1 April 2005: Cost or valuation Accumulated depreciation and impairment Net carrying amount At 1 April 2005, net of accumulated depreciation and impairment Additions Disposals Disposal of a subsidiary_(note 35) Impairment(note 6)* Depreciation provided during the year (note 6)_ Exchange realignment At 31 March 2006, net of accumulated depreciation and impairment At 31 March 2006: Cost or valuation Accumulated depreciation and impairment Net carrying amount	Hotel properties HK$’000 66,031 (412) 65,619 65,619 – – – – – 109 65,728 67,846 (2,118) 65,728	Land and buildings HK$’000 90,199 (21,507) 68,692 68,692 – – – (9,976) (2,049) (89) 56,578 90,140 (33,562) 56,578	Leasehold Furniture, improve- Plant and fixtures and ments machinery equipment HK$’000 HK$’000 HK$’000 65,750 64,551 51,420 (44,656) (35,898) (37,353) 21,094 28,653 14,067 21,094 28,653 14,067 2,006 541 4,295 (1,109) (47) (1,489) (189) (1,760) (202) (511) (1,672) (305) (9,846) (2,287) (4,707) 601 268 310 12,046 23,696 11,969 64,621 60,718 50,841 (52,575) (37,022) (38,872) 12,046 23,696 11,969	Motor vehicles HK$’000 10,515 (5,950) 4,565 4,565 1,366 (137) (61) (229) (1,468) 34 4,070 10,938 (6,868) 4,070	Total (Restated) HK$’000 348,466 (145,776) 202,690 202,690 8,208 (2,782) (2,212) (12,693) (20,357) 1,233 174,087 345,104 (171,017) 174,087

* During the year, the Group carried out a review of the recoverable amount of its factory in Guatemala. These assets are used in the Group’s garment segment. The review led to the recognition of an impairment loss of HK$12,693,000, that has been recognised in the income statement. The recoverable amount of the relevant assets has been determined on the basis of net selling price.

– 95 –

APPENDIX I

FINANCIAL INFORMATION

Group

31 March 2005 At 1 April 2004: Cost or valuation Accumulated depreciation and impairment Net carrying amount At 1 April 2004, net of accumulated depreciation and impairment Additions Acquisitions of subsidiaries_(note 34) Disposals Impairment Depreciation provided during the year (note 6) Transfers to investment properties (note 15)_ Exchange realignment At 31 March 2005, net of accumulated depreciation and impairment At 31 March 2005: Cost or valuation Accumulated depreciation and impairment Net carrying amount	Hotel properties HK$’000 – – – – – 66,031 – – (412) – – 65,619 66,031 (412) 65,619	Land and buildings HK$’000 116,454 (25,250) 91,204 91,204 – – – (14,727) (1,469) (6,319) 3 68,692 90,199 (21,507) 68,692	Leasehold Furniture, improve- Plant and fixtures and ments machinery equipment HK$’000 HK$’000 HK$’000 63,709 57,940 47,366 (40,795) (33,203) (33,664) 22,914 24,737 13,702 22,914 24,737 13,702 7,189 2,337 1,890 650 4,379 3,208 (12) (21) (378) – – – (9,662) (2,802) (4,378) – – – 15 23 23 21,094 28,653 14,067 65,750 64,551 51,420 (44,656) (35,898) (37,353) 21,094 28,653 14,067	Motor vehicles HK$’000 9,456 (6,708) 2,748 2,748 2,636 138 – – (960) – 3 4,565 10,515 (5,950) 4,565	Total (Restated) HK$’000 294,925 (139,620) 155,305 155,305 14,052 74,406 (411) (14,727) (19,683) (6,319) 67 202,690 348,466 (145,776) 202,690

The net book value of the Group’s fixed assets held under finance leases included in the total amount of motor vehicles at 31 March 2006, amounted to HK$1,237,000 (2005: HK$1,813,000).

– 96 –

FINANCIAL INFORMATION

APPENDIX I

Certain of the Group’s leasehold land and buildings were revalued at 31 March 1995, by Vigers Appraisal & Consulting Limited, independent professionally qualified valuers, at an open market value bases on their existing use. Since 1995, no further valuations of the Group’s leasehold land and buildings have been carried out, as the Group has relied upon the exemption granted under the transitional provisions in paragraph 80A of HKAS 16, from the requirement to carry out further revaluations of its property, plant and equipment which were stated at valuation at that time.

Had these leasehold land and buildings and hotel properties been carried at historical cost less accumulated depreciation and any impairment losses, their carrying amounts would have been approximately HK$84,264,000 (2005: HK$97,691,000).

At 31 March 2006, certain of the Group’s property, plant and equipment with a total carrying value of approximately HK$117,071,000 (2005: HK$49,933,000) were pledged to secure general banking facilities granted to the Group (note 40) .

The cost/valuation of the Group’s land and buildings and hotel properties by geographical location and the terms of the leases are as follows:

Medium term leasehold land and buildings situated in Hong Kong, at 1995 valuation Medium term leasehold land and buildings situated in Mainland China, at cost Medium term hotel properties situated in Mainland China, at cost Freehold land and buildings situated overseas, at cost	Group 2006 2005 (Restated) HK$’000 HK$’000 35,245 35,245 40,930 38,882 67,846 66,031 13,965 16,072 157,986 156,230	Group 2006 2005 (Restated) HK$’000 HK$’000 35,245 35,245 40,930 38,882 67,846 66,031 13,965 16,072 157,986 156,230
		156,230

– 97 –

APPENDIX I

FINANCIAL INFORMATION

15. Investment properties

Carrying amount at 1 April, at valuation Additions during the year Arising on acquisitions of subsidiaries_(note 34) Transfer from property, plant and equipment (note 14) Net gain from a fair value adjustment(note 6)_ Exchange realignment Balance at 31 March, at valuation Analysis by geographical location: Hong Kong Mainland China	Group 2006 2005 HK$’000 HK$’000 931,747 876,888 – 10,378 – 34,836 – 6,319 39,663 3,326 3,373 – 974,783 931,747 60,268 55,394 914,515 876,353 974,783 931,747	Group 2006 2005 HK$’000 HK$’000 931,747 876,888 – 10,378 – 34,836 – 6,319 39,663 3,326 3,373 – 974,783 931,747 60,268 55,394 914,515 876,353 974,783 931,747
		931,747
		55,394 876,353
		931,747

The Group’s investment properties, of which HK$874,636,000 (2005: HK$841,721,000) are held under medium term leases and HK$100,147,000 (2005: HK$90,026,000) under long term leases, were revalued on 31 March 2006 by Vigers Appraisal & Consulting Limited, independent professional qualified valuers, on an open market, existing use basis. The investment properties are leased to third parties under operating leases, further summary details of which are included in note 38(a) to the financial statements.

At 31 March 2006, the Group’s investment properties with a value of HK$668,403,000 (2005: HK$620,295,000) were pledged to secure general banking facilities granted to the Group (note 40) .

Further particulars of the Group’s investment properties are included on pages 183 to 185.

– 98 –

APPENDIX I

FINANCIAL INFORMATION

16. Prepaid land lease payments

Carrying amount at 1 April As previously reported Effect of adopting HKAS 17_(note 2.2(a))_ As restated Recognised during the year Carrying amount at 31 March Current portion included in debtors, deposits and prepayments Non-current portion	Group 2006 2005 (Restated) HK$’000 HK$’000 – – 1,184 1,216 1,184 1,216 (32) (32) 1,152 1,184 (32) (32) 1,120 1,152

The leasehold land is held under a medium term lease and is situated in Mainland China.

– 99 –

APPENDIX I

FINANCIAL INFORMATION

17. Goodwill and negative goodwill 31 March 2006 At 1 April 2005: Cost as previously reported Effect of adopting HKFRS 3 (note 2.2(f)) Cost as restated Accumulated amortisation as previously reported Effect of adopting HKFRS 3 (note 2.2(f)) Accumulated amortisation as restated Net carrying amount Cost at 1 April 2005 Acquisition of a subsidiary_(note 34)_ Impairment during the year Cost and carrying amount as at 31 March 2006 At 31 March 2006: Cost Accumulated impairment Net carrying amount	Group Negative Goodwill Goodwill HK$’000 HK$’000 9,180 (311,645) (459) 311,645 8,721 – 459 (125,106) (459) 125,106 – – 8,721 – 8,721 – 3,663 – (3,663) – 8,721 – 12,384 – (3,663) – 8,721 –	Total HK$’000 (302,465) 311,186 8,721 (124,647) 124,647 – 8,721 8,721 3,663 (3,663) 8,721 12,384 (3,663) 8,721
	Goodwill HK$’000 9,180 (459) 8,721 459 (459) – 8,721 8,721 3,663 (3,663) 8,721 12,384 (3,663) 8,721

During the year, the Group recognised an impairment of goodwill arising from acquisition of a subsidiary (note 34) in the amount of HK$3,663,000 (2005: Nil).

– 100 –

APPENDIX I

FINANCIAL INFORMATION

31 March 2005 At 1 April 2004: Cost Accumulated amortisation Net carrying amount Cost at 1 April 2004, net of accumulated amortisation Acquisition of subsidiaries_(note 34)_ Amortisation provided/(recognised as income) during the year At 31 March 2005 At 31 March 2005: Cost Accumulated amortisation Net carrying amount	Group Negative Goodwill Goodwill HK$’000 HK$’000 – (311,645) – 93,963 – (217,682) – (217,682) 9,180 – (459) 31,143 8,721 (186,539) 9,180 (311,645) (459) 125,106 8,721 (186,539)	Total HK$’000 (311,645) 93,963 (217,682) (217,682) 9,180 30,684 (177,818) (302,465) 124,647 (177,818)
	Goodwill HK$’000 – – – – 9,180 (459) 8,721 9,180 (459) 8,721

In 2005, goodwill not previously eliminated against the consolidated reserves was amortised on the straight-line basis over its estimate useful life of five years.

As further detailed in note 2.2 to the financial statements, the Group applied transitional provisions of HKFRS 3 that permitted goodwill in respect of business combinations which occurred prior to 2001, to remain eliminated against the consolidated reserves.

The amounts of goodwill remaining in the consolidated reserves, arising from the acquisition of subsidiaries prior to the adoption of SSAP 30 in 2001 were HK$86,230,000 (2005: HK$86,230,000) as at 31 March 2006. The amount of goodwill is stated at its cost.

– 101 –

FINANCIAL INFORMATION

APPENDIX I

Impairment testing of goodwill

Goodwill acquired through business combination has been allocated to cashgenerating unit of the restaurants, food and hotel (the “Cash-generating Unit”), which is reportable segment, for impairment testing.

The recoverable amount of the Cash-generating Unit has been determined based on a value in use calculation using cash flow projections based on financial budgets covering a five-year period approved by senior management. The discount rate applied to cash flow projections is 8% (2005: 8%) and cash flows beyond the five-year period are extrapolated using a growth rate of 4% (2005: 4%).

Key assumptions were used in the value in use calculation of the Cash-generating Unit for 31 March 2006 and 31 March 2005. The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill:

Budgeted gross margins – The basis used to determine the value assigned to the budgeted gross margins is the average gross margins achieved in the year immediately before the budgeted year, increased for expected efficiency improvements.

Discount rates – The discount rates used are before tax and reflect specific risks relating to the relevant units.

18. Interests in subsidiaries

Unlisted shares, at cost Due from subsidiaries Due to subsidiaries Impairment	Company 2006 2005 HK$’000 HK$’000 61,990 61,990 733,789 764,218 (99,727) (101,780) 696,052 724,428 (2,876) (2,876) 693,176 721,552

The amounts due from/to the subsidiaries are unsecured, interest-free and have no fixed terms of repayment. The carrying amounts of these amounts due from/to subsidiaries approximate to their fair values.

– 102 –

APPENDIX I

FINANCIAL INFORMATION

Particulars of the principal subsidiaries of the Company are as follows:

			Nominal value
			of issued	Percentage of
	Place of		ordinary/	equity	interest
	incorporation/	Class of equity	**registered **	attributable to
Name	registration	interest held	share capital	**the Company **		Principal activities
				2006	2005
Amica Fashion Company	South Africa	Ordinary shares	Rand160,002	80	80	Manufacture of
(Pty) Limited						garments
Amica Properties Limited	Hong Kong	Ordinary shares	HK$10,000	100	100	Property investment
Carrianna (BVI) Ltd. *	British Virgin	Ordinary shares	US$1	100	100	Investment holding
	Islands
Carrianna (Chiu Chow)	Hong Kong	Ordinary shares	HK$8,000,000	73	73	Restaurant operations
Restaurant Limited#
Carrianna Holdings	Hong Kong	Ordinary shares	HK$25,000,000	100	100	Property development
Limited						and investment
Carrianna (Shenzhen)	Mainland China	Registered capital	HK$80,000,000	100	100	Investment holding and
Investment Co., Ltd.(1)						property development
佛山華僑大廈佳寧娜	Mainland China	Registered capital	RMB4,700,000	100	**	100 Hotel and restaurant
酒店有限公司_(2)_						operations
Goldfield Properties	Hong Kong	Ordinary shares	HK$2	100	100	Property investment
Limited
International Fashions	Canada	Ordinary shares	C$9,000	89	89	Distribution and
Group Inc.#						sale of garments
		Non-voting	C$500	–	–
		preference shares
Kunming Carrianna	Mainland China	Registered capital	HK$12,000,000	62	62	Restaurant operations
Chaozhou
Restaurant Ltd. (2)
Shenzhen Carrianna	Mainland China	Registered capital	HK$6,000,000	92	92	Restaurant operations
(Chiu Chow) Restaurant
Co., Ltd.(2)
Shenzhen Carrianna	Mainland China	Registered capital	RMB20,000,000	68	68	Restaurant operations
Friendship Square
Restaurant Co., Ltd.(2)

– 103 –

APPENDIX I

FINANCIAL INFORMATION

Nominal value of issued Percentage of Place of ordinary/ equity interest incorporation/ Class of equity registered attributable to Name registration interest held share capital the Company Principal activities 2006 2005 Tak Sing Alliance Hong Kong Ordinary shares HK$200 100 100 Manufacture and Limited distribution of – – Non-voting HK$1,000,000 garments and deferred shares property development Tak Sing (Panyu) Fashion Mainland China Registered capital HK$51,000,000 100 100 Manufacture of Company Limited [(1)] garments 上海佳寧娜餐飲 Mainland China Registered capital RMB1,500,000 74 – Restaurant operation 管理有限公司 西安佳寧娜鮑翅皇 Mainland China Registered capital RMB1,000,000 74 – Restaurant operation 酒樓有限公司

• Direct subsidiaries of the Company

• ** 55% of equity interest is directly attributable to the Company

• # Not audited by Ernst & Young Hong Kong or other Ernst & Young International member firms

• (1) Wholly-owned foreign enterprises

• (2) Sino foreign equity joint venture companies

Except for Carrianna Holdings Limited, which is incorporated in Hong Kong but operates in Mainland China, all of the above subsidiaries operate in their place of incorporation/registration.

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

– 104 –

APPENDIX I

FINANCIAL INFORMATION

19. Interests in unconsolidated subsidiaries

Group 2006 2005 HK$’000 HK$’000 Amounts due from unconsolidated subsidiaries – 9,157 Net liabilities deconsolidated – (6,967) – 2,190 Provision for non-recovery – (2,190) – –	Company 2006 2005 HK$’000 HK$’000 – 47 – – – 47 – (47) – –

Particulars of the unconsolidated subsidiaries at the balance sheet date were as follows:

		Percentage of
	Place of	indirect
	incorporation/	equity interest
	registration	attributable to	Principal
Name	and operations	the Company	activities
		2006 2005
Jeantex Holding B.V.	The Netherlands	– 63	Dormant
Jeantex B.V.	The Netherlands	– 63	Dormant
Chiori Mode GmbH	Germany	– 63	Dormant

Jeantex Holding B.V. is the holding company of Jeantex B.V. and Chiori Mode GmbH (collectively “Jeantex”), which were previously engaged in the distribution and sale of garments. During the year ended 31 March 1998, Jeantex sustained continuing operation losses due to the inability of the Company to exercise effective control over its operations and assets. The directors resolved not to provide further finance to Jeantex and to dispose of the Group’s interest therein as soon as possible.

In view of the foregoing, Jeantex was treated as abandoned subsidiaries and, therefore was deconsolidated in 1998. Furthermore, in view of the large deficiency in assets of Jeantex and its unsatisfactory results, the board of directors had made full provision against the interests in these unconsolidated subsidiaries in 1998. No guarantees had been given by the Group to Jeantex or its creditors and thus no contingent liability in respect thereof is considered likely to arise. There is no impact to the Group’s turnover and results for the year of not consolidating Jeantex as they are dormant.

The unconsolidated subsidiaries were dissolved as at 31 March 2006.

– 105 –

APPENDIX I

FINANCIAL INFORMATION

20. Interest in a jointly-controlled entity

Share of net assets Amount due to the jointly-controlled entity Provision for impairment	Group 2006 2005 HK$’000 HK$’000 1,790 1,790 (612) (612) (1,178) (1,178) – –

The balances with the jointly-controlled entity are unsecured, interest-free and are not repayable within one year from the balance sheet date.

Particulars of the Group’s interest in the jointly-controlled entity are as follows:

Place of

incorporation/ Business registration Name structure and operation Chengdu Carrianna Corporate PRC/Mainland Chaozhou China Restaurant Co., Ltd.	Percentage of Ownership Voting Profit Principal interest power sharing activity 51 50 51 Dormant

The investment in the jointly-controlled entity is indirectly held by the Company.

21. Interests in associates

Share of net assets Due from associates Due to associates Provision for impairment	Group 2006 2005 HK$’000 HK$’000 89,599 20,464 25,802 25,816 (2,629) (2,500) 112,772 43,780 (10,628) (7,589) 102,144 36,191

– 106 –

FINANCIAL INFORMATION

APPENDIX I

The amounts due from/to associates are unsecured, interest-free and have no fixed terms of repayment. The carrying amounts of these amounts due from/to associates approximate to their fair values.

The Group’s share of aggregate profits accumulated by the associates for the year amounted to HK$69,135,000 (2005: of HK$19,189,000).

The Group’s share of the net post-acquisition surplus of the associates as at 31 March 2006 amounted to HK$85,990,000 (2005: HK$16,855,000).

Particulars of the principal associates, which are all unlisted companies, are as follows:

			Place of	Percentage of	Percentage of
	Particulars of		incorporation/	equity	interest
	issued	Business	registration and	attributable		Principal
Name	share held	structure	operations	to the	Group	activities
				2006	2005
China South City	Ordinary shares	Corporate	Hong Kong/	20	20	Investment
Holdings Limited	HK$40,000		Mainland			holding
(“CSCHL”)#			China
Grandtex Investment	Ordinary shares	Corporate	Hong Kong	–	50	Investment
Limited (“Grandtex”)	HK$1					holding

# not audited by Ernst & Young Hong Kong or other Ernst & Young International member firms

The associates are indirectly held by the Company.

The above table lists the associates of the Group which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other associates would, in the opinion of the directors, result in particulars of excessive length.

During the year, the Group acquired the remaining 50% equity in Grandtex after which it has been treated as a subsidiary (note 34) .

The following table illustrates the summarised financial information of the Group’s associates extracted from their management accounts:

	2006	2005
	HK$’000	HK$’000
Assets	1,365,666	1,048,095
Liabilities	(875,294)	(939,943)
Revenue	464,331	377,311
Profit	349,861	97,689

– 107 –

APPENDIX I

FINANCIAL INFORMATION

22. Available-for-sale equity investments

	Group
	2006	2005
	HK$’000	HK$’000
Unlisted equity investments, at cost	16,771	–

The above investments consist of investments in equity securities which were designated as available-for-sale financial assets on 1 April 2005 and have no fixed maturity date or coupon rate.

Unlisted equity investments under available-for-sale investments are stated at cost because their fair values could not be reliably measured as at the balance sheet date.

23. Financial assets at fair value through profit or loss

		Group
		2006	2005
		HK$’000	HK$’000
Unlisted	investment funds, at fair value:
Hong	Kong	10,531	–

24. Inventories

Raw materials Work in progress Finished goods Food and beverages	Group 2006 2005 HK$’000 HK$’000 16,755 19,961 3,864 3,132 2,312 2,255 23,217 14,279 46,148 39,627	Group 2006 2005 HK$’000 HK$’000 16,755 19,961 3,864 3,132 2,312 2,255 23,217 14,279 46,148 39,627
		39,627

At 31 March 2006, the carrying amount of inventories of the Group pledged as security for the Group’s bank loans amounting to HK$1,419,000 (2005: HK$427,000), as further detailed in note 40 to the financial statements.

– 108 –

FINANCIAL INFORMATION

APPENDIX I

25. Debtors, deposits and prepayments

Included in the balance is an amount of HK$74,879,000 (2005: HK$71,182,000) representing the trade debtors of the Group. The aged analysis of such debtors is as follows:

Current – 30 days 31 – 60 days 61 – 90 days Over 90 days	Group 2006 2005 HK$’000 HK$’000 30,686 24,060 7,342 6,380 5,389 8,433 31,462 32,309 74,879 71,182	Group 2006 2005 HK$’000 HK$’000 30,686 24,060 7,342 6,380 5,389 8,433 31,462 32,309 74,879 71,182
		71,182

Credit terms

Trade debtors and bills receivable arose from garment business generally have credit terms of 30 to 90 days. Restaurant business is normally traded on a cash basis. For property sales, credit terms vary in accordance with the terms of the sale and purchase agreements. All trade debtors are recognised and carried at their original invoiced amounts less provision for doubtful debts which is recorded when the collection of the full amount is no longer probable. Bad debts are written off as incurred.

In view of the aforementioned and the fact that the Group’s trade debtors relate to a large number of diversified customers, there is no significant concentration of credit risk. Trade debtors are non-interest-bearing.

– 109 –

APPENDIX I

FINANCIAL INFORMATION

26. Cash and cash equivalents and pledged time deposits

Note Cash and bank balances Time deposits Less:_Pledged time deposits for bank loans _40 Cash and cash equivalents	Group 2006 2005 HK$’000 HK$’000 115,553 62,747 7,490 19,122 123,043 81,869 (7,490) (19,122) 115,553 62,747	Company 2006 2005 HK$’000 HK$’000 387 89 39 38 426 127 (39) (38 387 89	Company 2006 2005 HK$’000 HK$’000 387 89 39 38 426 127 (39) (38 387 89
			127 (38
			89

At the balance sheet date, the cash and bank balances (including time deposits) of the Group denominated in Renminbi (“RMB”) amounted to HK$71,608,000 (2005: HK$30,042,000). The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

Cash at bank earns interest at floating rates based on daily bank deposits rates. Short term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short term time deposit rates. The carrying amounts of the cash and cash equivalents and the pledged deposits approximate to their fair values.

27. Trade creditors

The aged analysis of trade creditors is as follows:

Current – 30 days 31 – 60 days 61 – 90 days Over 90 days	Group 2006 2005 HK$’000 HK$’000 19,076 29,454 5,403 5,099 6,387 5,843 5,750 10,415 36,616 50,811	Group 2006 2005 HK$’000 HK$’000 19,076 29,454 5,403 5,099 6,387 5,843 5,750 10,415 36,616 50,811
		50,811

– 110 –

APPENDIX I

FINANCIAL INFORMATION

28. Interest-bearing bank and other borrowings

Effective interest rate Maturity (%) Current Bank overdrafts – unsecured 5.5% – 8.3% on demand Bank overdrafts – secured 5.5% – 8.3% on demand Bank loans – unsecured 3.5% – 7.0% 2007 Bank loans – secured 3.0% – 7.0% 2007 Trust receipt loans – unsecured 4.8% – 5.1% June 2006 Trust receipt loans – secured 5.8% June 2006 Other loans – secured 6.5% 2007 Non-Current Bank loans – unsecured 5.5% – 8.3% 2008 Bank loans – secured 3.0% – 7.0% 2008 – 2010 Other loans – secured 6.5% 2010	Group 2006 2005 HK$’000 HK$’000 4,148 47 11,701 2,335 29,700 27,200 159,721 145,814 2,535 2,037 4,435 8,592 1,786 – 214,026 186,025 4,500 5,700 279,758 201,204 9,821 – 294,079 206,904 508,105 392,929	Company 2006 2005 HK$’000 HK$’000 – – – – 1,200 1,200 15,536 15,960 – – – – – – 16,736 17,160 4,500 5,700 39,324 54,860 – – 43,824 60,560 60,560 77,720	Company 2006 2005 HK$’000 HK$’000 – – – – 1,200 1,200 15,536 15,960 – – – – – – 16,736 17,160 4,500 5,700 39,324 54,860 – – 43,824 60,560 60,560 77,720
			17,160
			5,700 54,860 –
			60,560
			77,720

– 111 –

APPENDIX I

FINANCIAL INFORMATION

Analysed into: Bank overdrafts repayable: within one year or on demand Bank loans repayable: within one year or on demand in the second year in the third to fifth years, inclusive beyond five years Other borrowing repayable: within one year or on demand in the second year in the third to fifth years, inclusive beyond five years Trust receipt loans repayable: within one year or on demand	Group 2006 2005 HK$’000 HK$’000 15,849 2,382 189,421 173,014 79,202 49,224 194,135 135,522 10,921 22,158 473,679 379,918 1,786 – 1,786 – 5,357 – 2,678 – 11,607 – 6,970 10,629 508,105 392,929	Company 2006 2005 HK$’000 HK$’000 – – 16,736 17,160 19,824 16,736 24,000 43,824 – – 60,560 77,720 – – – – – – – – – – – – 60,560 77,720	Company 2006 2005 HK$’000 HK$’000 – – 16,736 17,160 19,824 16,736 24,000 43,824 – – 60,560 77,720 – – – – – – – – – – – – 60,560 77,720
			17,160 16,736 43,824 –
			77,720
			– – – –
			–
			–
			77,720

All interest-bearing bank and other borrowings bear interest at floating interest rates.

The carrying amounts of the Group’s and the Company’s borrowings approximate to their fair values.

A director of the Company has guaranteed certain of the Group’s banking facilities up to HK$352,433,000 (2005: HK$380,400,000).

– 112 –

FINANCIAL INFORMATION

APPENDIX I

29. Finance lease payables

The Group leases certain of its motor vehicles for its garment business. These leases are classified as finance leases and have remaining lease terms ranging from 1 to 4 years.

At 31 March 2006, the total future minimum lease payments under finance leases and their present values were as follows:

Amounts payable: Within one year In the second year In the third to fifth years, inclusive Total minimum finance lease payments Future finance charges Total net finance lease payables Portion classified as current liabilities Long term portion	Minimum lease payments 2006 HK$’000 670 321 351 1,342 (133) 1,209 (597) 612	Group Present value of Minimum minimum lease lease payments payments 2005 2006 HK$’000 HK$’000 897 597 711 293 631 319 2,239 1,209 (240) 1,999 (789) 1,210	Present value of minimum lease payments 2005 HK$’000 789 641 569
			1,999

The carrying amounts of the Group’s finance lease payables approximate to their fair values.

– 113 –

FINANCIAL INFORMATION

APPENDIX I

30. Deferred tax

The movements in deferred tax liabilities and assets during the year are as follows:

Deferred tax liabilities

Group

Fair value adjustments Accelerated arising from tax acquisitions depreciation of subsidiaries HK$’000 HK$’000 At 1 April 2005 5,541 9,180 Deferred tax charged/(credited) to the income statement during the year_(note 10) (4,136) – Exchange realignment (22) – Gross deferred tax liabilities at 31 March 2006 1,383 9,180 Deferred tax assets Group At 1 April 2005 Deferred tax charged to the income statement during the year(note 10)_ Gross deferred tax assets at 31 March 2006 Net deferred tax liabilities at 31 March 2006	2006 Revaluation of properties HK$’000 35,059 5,914 47 41,020	Undistributed profits of a subsidiary Total HK$’000 HK$’000 1,723 51,503 213 1,991 – 25 1,936 53.519 2006 Losses available for offset against future taxable profit HK$’000 2,531 (2,340) 191 53,328

– 114 –

APPENDIX I

FINANCIAL INFORMATION

Deferred tax liabilities

Group

Fair value adjustment Accelerated arising form tax acquisition depreciation of subsidiaries HK$’000 HK$’000 At 1 April 2004 7,182 – Deferred tax debited to goodwill during the year – 9,180 Deferred tax charged/(credited) to the income statement during the year_(note 10) (1,909) – Exchange realignment 268 – Gross deferred tax liabilities at 31 March 2005 5,541 9,180 Deferred tax assets Group At 1 April 2004 Deferred tax charged to the income statement during the year(note 10)_ Gross deferred tax assets at 31 March 2005 Net deferred tax liabilities at 31 March 2005	2005 Revaluation of properties HK$’000 34,926 – 133 – 35,059	Undistributed profits of a subsidiary Total HK$’000 HK$’000 672 42,780 – 9,180 1,051 (725) – 268 1,723 51,503 2005 Losses available for offset against future taxable profit HK$’000 4,688 (2,157) 2,531 48,972

The Group has tax losses arising in Hong Kong of HK$79,227,000 (2005: HK$68,526,000) that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. The Group also has tax losses arising in Mainland China of HK$Nil (2005: HK$3,893,000) and in overseas of HK$1,622,000 (2005:

– 115 –

FINANCIAL INFORMATION

APPENDIX I

HK$1,334,000) that are available for offsetting against future taxable profits of the companies in which the losses arose for a maximum of 5 years. Deferred tax assets have not been recognised in respect of these losses as it is uncertain whether sufficient future taxable profits will be generated against which the tax losses can be utilised.

There are no income tax consequences attaching to the payment of dividends by the Company to its shareholders.

31. Share capital

Authorised: 2,000,000,000 (2005: 2,000,000,000) ordinary shares of HK$0.10 each Issued and fully paid: 743,587,219 (2005: 738,587,219) ordinary shares of HK$0.10 each	Company 2006 2005 HK$’000 HK$’000 200,000 200,000 74,359 73,859	Company 2006 2005 HK$’000 HK$’000 200,000 200,000 74,359 73,859
		73,859

During the year, the subscription rights attaching to 5,000,000 share options were exercised at the subscription price of HK$0.30 per share (note 32) , resulting in the issue of 5,000,000 shares of HK$0.10 each for a total cash consideration before expenses, of HK$1,500,000.

A summary of the transaction during the year with reference to the above movement in the Company’s issued ordinary share capital is as follows:

At 1 April 2004 and 1 April 2005 Share options exercised (note 32) At 31 March 2006	Number of shares in issue 738,587,219 5,000,000 743,587,219	Issued share capital HK$’000 73,859 500 74,359	Share premium account HK$’000 464,952 1,000 465,952	Total HK$’000 538,811 1,500 540,311

Details of the Company’s share option scheme and the share options issued under the scheme are included in note 32 to the financial statements.

– 116 –

FINANCIAL INFORMATION

APPENDIX I

32. Share option scheme

The Company operates a share option scheme (the “Scheme”) for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. Eligible participants of the Scheme include the Company’s directors, including independent non-executive directors, other employees of the Group. The Scheme became effective on 10 October 2005 and, unless otherwise cancelled or amended, will remain in force for 10 years from that date.

The maximum number of unexercised share options currently permitted to be granted under the Scheme is an amount equivalent, upon their exercise, to 10% of the shares of the Company in issue at any time. The maximum number of shares issuable under share options to each eligible participant in the Scheme within any 12-month period is limited to 1% of the shares of the Company in issue at any time. Any further grant of share options in excess of this limit is subject to shareholders’ approval in a general meeting.

Share options granted to a director are subject to approval in advance by the independent non-executive directors of the Company, or to any of their associates, in excess of 0.1% of the shares of the Company in issue at any time or with an aggregate value (based on the price of the Company’s shares at the date of the grant) in excess of HK$5 million, within any 12-month period, are subject to shareholder’s approval in advance in a general meeting.

The offer of a grant of share options may be accepted within 28 days from the date of offer. The amount payable on acceptance of an option is HK$1. The exercise period of the share options granted is determinable by the directors.

The exercise price of share options is determinable by the directors and shall be at least the highest of (i) the closing price of the Shares as stated in the Stock Exchange’s daily quotations sheet on the offer date, which must be a business day; (ii) the average closing price of the shares as stated in the Stock Exchange’s daily quotations sheets for the five business days immediately preceding the offer date; and (iii) the nominal value of a share.

Share options do not confer rights on the holders to dividends or to vote at shareholders’ meeting.

– 117 –

APPENDIX I

FINANCIAL INFORMATION

The following share options were outstanding under the Scheme during the year:

		Number of	share options					Price	of Company’s shares***	of Company’s shares***
					Date of	Exercise	Exercise		Immediately
	At 1	Granted	Exercised	At 31	grant of	period of	price of	At grant	before the At exercise
	April	during	during	March	share	share	share	date of	exercise	date of
	2005	the year	the year	2006	options*	options	options**	options	date	options
							HK$	HK$	HK$	HK$
Executive Directors
Mr. Ma Kai Cheung	–	7,000,000	–	7,000,000	27/10/2005	27/10/2005 –	0.30	0.295	–	–
						26/10/2015
Mr. Ma Kai Yum	–	7,000,000	–	7,000,000	27/10/2005	27/10/2005 –	0.30	0.295	–	–
						26/10/2015
Mr. Ng Yan Kwong	–	7,000,000	–	7,000,000	27/10/2005	27/10/2005 –	0.30	0.295	–	–
						26/10/2015
	–	21,000,000	–	21,000,000
Independent Non-Executive	Directors
Mr. Lo Ming Chi, Charles	–	300,000	–	300,000	27/10/2005	27/10/2005 –	0.30	0.295	–	–
						26/10/2015
Mr. Yau Wing Keung	–	300,000	–	300,000	27/10/2005	27/10/2005 –	0.30	0.295	–	–
						26/10/2015
Mr. Lo Man Kit, Sam	–	300,000	–	300,000	27/10/2005	27/10/2005 –	0.30	0.295	–	–
						26/10/2015
	–	900,000	–	900,000
Non-Executive Directors
Mr. Yip Hing Chung	–	300,000	–	300,000	27/10/2005	27/10/2005 –	0.30	0.295	–	–
						26/10/2015
	–	300,000	–	300,000
Other employees
In aggregate	–	12,000,000	(5,000,000)	7,000,000	27/10/2005	27/10/2005 –	0.30	0.295	0.3	0.4
						26/10/2015
	–	34,200,000	(5,000,000)	29,200,000

Notes to reconciliation of share options outstanding during the year:

• The vesting period of the share options is from the date of the grant until the commencement of the exercise period.

• ** The exercise price of the share options is subject to adjustment in the case of rights or bonus issues, or other similar changes in the Company’s share capital.

– 118 –

FINANCIAL INFORMATION

APPENDIX I

• *** The price of the Company’s shares disclosed as at the date of the grant of the share options is the Stock Exchange closing price on the trading day immediately prior to the date of the grant of the options. The price of the Company’s shares disclosed immediately before the exercise date of the share options is the weighted average of the Stock Exchange closing prices immediately before the dates on which the options were exercised over all of the exercises of options within the disclosure line.

The fair value of the share options granted during the year was HK$3,762,000.

The fair value of equity-settled share options granted during the year was estimated as at the date of grant, using a binomial model, taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used for the year ended 31 March 2006:

Dividend yield (%)	6.78
Expected volatility (%)	53.82
Historical volatility (%)	53.82
Risk-free interest rate (%)	4.37
Expected life of option (year)	10
Weighted average share price (HK$)	0.298

The expected life of the options is based on the historical data over the past years and is not necessarily indicative of the exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

No other feature of the options granted was incorporated into measurement of fair value.

The 5,000,000 share options exercised during the year resulted in the issue of 5,000,000 ordinary shares of the Company and new share capital of HK$500,000 and share premium of HK$1,000,000 (before issue expenses), as further detailed in note 31 to the financial statements.

At the balance sheet date, the Company had 29,200,000 share options outstanding under the Scheme. The exercise in full of the remaining share options would, under the present capital structure of the Company, result in the issue of 29,200,000 additional ordinary shares of the Company and additional share capital of HK$2,920,000 and share premium of HK$5,840,000 (before issue expenses).

At the date of approval of these financial statements, the Company had 29,200,000 share options outstanding under the Scheme, which represented approximately 3.9% of the Company’s shares in issue as at that date.

– 119 –

FINANCIAL INFORMATION

APPENDIX I

33. Reserves

(a) Group

The amounts of the Group’s reserves and the movements therein for the current and prior years are presented in the consolidated statement of changes in equity on pages 62 to 63 of the financial statements.

Certain amount of goodwill arising on the acquisitions of subsidiaries in prior years remain eliminated against the goodwill reserve, as explained in note 17 to the financial statements.

The reserve funds of the Group represent the non-distributable statutory reserves of the Group’s subsidiaries operating in Mainland China. The transfers to these reserves are determined by the board of directors of the subsidiaries in accordance with the relevant laws and regulations of Mainland China. The reserve funds can be used to offset against future losses or to increase the capital of the subsidiaries.

(b) Company

Notes At 1 April 2004 Net loss for the year Proposed final dividend 12 At 31 March 2005 Issue of shares 31 Equity-settled share option arrangements 32 Net loss for the year Proposed final dividend 12 At 31 March 2006	Share premium account HK$’000 464,952 – – 464,952 1,000 – – – 465,952	Contributed surplus HK$’000 59,759 – – 59,759 – – – – 59,759	Capital redemption reserve HK$’000 316 – – 316 – – – – 316	Share Options reserve HK$’000 – – – – – 3,762 – – 3,762	Retained profits HK$’000 50,544 (10,356) (14,772) 25,416 – – (623) (7,436) 17,357	Total HK$’000 575,571 (10,356) (14,772) 550,443 1,000 3,762 (623) (7,436) 547,146

The contributed surplus of the Company arose as a result of the Group reorganisation on 12 August 1991 and represented the difference between the nominal value of the share capital issued by the Company and the combined net assets of the subsidiaries acquired pursuant to the Group reorganisation, less the effects of the bonus issue of shares in previous years.

Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus is distributable to shareholders under certain specific circumstances.

– 120 –

FINANCIAL INFORMATION

APPENDIX I

34. Business Combination

On 31 August 2005, the Group acquired a 50% effective interest in Grandtex Investment Limited from a third party of the Company. Grandtex Investment Limited is engaged in investment holding. The purchase consideration for the acquisition was in the form of cash, with HK$2 paid at the acquisition date on 31 August 2005.

The fair value of the identifiable assets and liabilities of Grandtex Investment Limited as at the date of acquisition and the corresponding carrying amounts immediately before the acquisition were as follows:

o Cash and bank balances Debtors, deposits and prepayments Sundry creditors and accruals Goodwill on the acquisition_(note 17)_ Satisfied by cash	Fair value recognised n acquisition HK$’000 45 134 (3,842) (3,663) 3,663 – 3,663	Carrying amount HK$’000 45 134 (3,842
		(3,663

An analysis of the net inflow of cash and cash equivalents in respect of the acquisition of a subsidiary is as follows:

Cash consideration Cash and bank balances acquired Net inflow of cash and cash equivalents in respect of the acquisition of a subsidiary	HK$’000 – 45
	45

Since its acquisition, Grandtex Investment Limited became dormant and there was no turnover and profit contributable to the Group’s consolidated profit for the year ended 31 March 2006.

Had the combination taken place at the beginning of the year, the revenue from continuing operations of the Group and the profit of the Group for the year would have been HK$486,000 and HK$888,000, respectively.

– 121 –

FINANCIAL INFORMATION

APPENDIX I

In the prior year, on 31 December 2004, the Group completed the acquisition of 100% equity interest in 佛山市華僑大廈 (now known as “佛山華僑大廈佳寧娜酒店有 限公司 ”) and (now known as “佳寧娜（佛山）企業有限公司 ”) (collectively “佛山佳寧娜 大酒店 ”) for a cash consideration of HK$64,602,000. 佛山華僑大廈佳寧娜酒店有限公 司 is engaged in the hotel and restaurant operations in the Mainland China.

The fair value of the identifiable assets and liabilities of 佛山佳寧娜大酒店 as at the date of acquisition and the corresponding carrying amounts immediately before the acquisition were as follows:

o Properties, plant and equipment_(note 14) Investment properties(note 15) Cash and bank balances Debtors, deposits and prepayments Inventories Trade creditors Sundry creditors and accruals Interest-bearing bank borrowings Tax payable Deferred tax(note 30) Goodwill on acquisition(note 17)_ Satisfied by cash	Fair value recognised n acquisition HK$’000 74,406 34,836 3,768 1,384 783 (4,002) (18,570) (20,259) (7,744) (9,180) 55,422 9,180 (64,602) (55,422)	Carrying amount HK$’000 74,406 34,836 3,768 1,384 783 (4,002) (18,570) (20,259) (7,744) (9,180) 55,422

Analysis of the net outflow of cash and cash equivalents in respect of acquisitions of a subsidiary is as follows:

Cash consideration Cash and bank balances acquired Net outflow of cash and cash equivalents in respect of acquisition of subsidiaries	HK$’000 (64,602) 3,768 (60,834)

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APPENDIX I

35. Disposal of a subsidiary

On 30 September 2005, the Group disposed of a 60% equity interest in Everbright Textile, S.A. (“Everbright”). Everbright is engaged in the laundry operations in the Republic of Guatemala. The disposal was settled by a cash consideration of HK$1,519,000.

Net liabilities disposed of: Property, plant and equipment_(note 14) Cash and bank balances Inventories Prepayments and other debtors Trade creditors Sundry creditors and accruals Gain on disposal of a subsidiary(note 6)_ Satisfied by cash	2006 HK$’000 2,212 2 329 318 (4,287) (790) (2,216) 697 1,519 1,519	2005 HK$’000 – – – – – –
		– –
		–
		–

An analysis of the net outflow of cash and cash equivalents in respect of the disposal of a subsidiary is as follows:

Cash consideration Cash and bank balances disposed of Net outflow of cash and cash equivalents in respect of the disposal of a subsidiary	2006 HK$’000 (1,519) (2) (1,521)	2005 HK$’000 – –
		–

The result of the subsidiary disposed of in the year ended 31 March 2006 had no significant impact on the Group’s consolidated turnover or profit after tax for that year.

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APPENDIX I

36. Notes to the Consolidated Cash Flow Statement

• (a) Reconciliation of profit before tax to net cash inflow/(outflow) from operating activities

Profit before tax Adjustments for: Amortisation of goodwill Bank interest income Depreciation Equity-settled share option expenses Finance costs Fair value losses on financial assets at fair value through profit or loss Gain on disposal of items of property, plant and equipment Gain on disposal of a subsidiary Loss on disposal of other financial assets Negative goodwill recognised as income Provisions for doubtful debts and other receivables Impairment of interests in associates Impairment of items of property, plant and equipment Impairment of goodwill Recognition of prepaid land lease payments Share of profits and losses of associates Changes in fair value of investment properties Operating profit before working capital changes Decrease in properties held for sale Decrease/(increase) in debtors, deposits and prepayments Increase in inventories Decrease in trade creditors Decrease in sundry creditors, accruals and deposits received Cash generated from/(used in) operations Hong Kong profits tax refunded/(paid) Mainland China tax paid Overseas taxes paid Dividend paid Dividend paid to minority shareholders Net cash inflow/(outflow) from operating activities

Group 2006 2005 (Restated) HK$’000 HK$’000 70,036 53,331 – 459 (2,068) (1,670) 20,357 19,683 3,762 – 24,968 13,946 614 – (8) (362) (697) – – 77 – (31,143) 13,777 27,927 3,039 – 12,693 – 3,663 – 32 32 (69,135) (19,189) (39,663) (3,326) 41,370 59,765 222 1,029 (22,360) 14,507 (6,315) (14,200) (11,008) (1,824) (10,015) (1,892) (8,106) 57,385 28 (41) (10,369) (506) (4,109) (3,411) (14,772) (7,386) (1,452) – (38,780) 46,041

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APPENDIX I

FINANCIAL INFORMATION

(b) Major non-cash transactions

In the prior year, the Group entered into finance lease arrangements in respect of property, plant and equipment with a total capital value at the inception of the leases of HK$1,275,000. There were no major non-cash transactions during the current year.

37. Contingent Liabilities

• (a) At the balance sheet date, contingent liabilities not provided for in the financial statements were as follows:

Bills discounted with recourse Guarantees given for mortgage loan facilities granted to purchasers of properties Guarantees given for banking facilities utilised by subsidiaries Guarantees given to a bank in connection will facilities granted to an associate	Group 2006 2005 HK$’000 HK$’000 – 10,568 65,228 89,083 – – 11,000 11,000 76,228 110,651	Company 2006 2005 HK$’000 HK$’000 – – 8,029 12,085 437,352 331,155 11,000 11,000 456,381 354,240	Company 2006 2005 HK$’000 HK$’000 – – 8,029 12,085 437,352 331,155 11,000 11,000 456,381 354,240
			354,240

(b) The Group has a contingent liability in respect of possible future long service payments to employees under the Hong Kong Employment Ordinance, with a maximum possible amount of HK$3,992,000 (2005: HK$4,808,000) as at 31 March 2006, as further explained under the heading “Employee benefits” in note 2.5 to the financial statements. The contingent liability has arisen because, at the balance sheet date, a number of current employees have achieved the required number of years of service to the Group in order to be eligible for long service payments under the Hong Kong Employment Ordinance if their employment is terminated under certain circumstances. A provision has not been recognised in respect of such possible payments, as it is not considered probable that the situation will result in a material future outflow of resources from the Group.

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FINANCIAL INFORMATION

APPENDIX I

38. Operating Lease Arrangements

(a) As lessor

The Group leases its investment properties (note 15) under operating lease arrangements, with leases negotiated for terms ranging from 1 to 6 years. The terms of the leases generally also require the tenants to pay security deposits and provide for periodic rent adjustments according to the then prevailing market conditions.

At 31 March 2006, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due as follows:

Within one year In the second to fifth years, inclusive After five years	Group 2006 2005 HK$’000 HK$’000 39,759 42,303 92,133 98,524 10,522 10,661 142,414 151,488	Group 2006 2005 HK$’000 HK$’000 39,759 42,303 92,133 98,524 10,522 10,661 142,414 151,488
		151,488

The Group leases certain of its properties under operating lease arrangements. Leases for properties are negotiated for terms ranging from 1 to 10 years and rentals are normally fixed in accordance with the respective tenancy agreements. No arrangements have been entered into for contingent rental payments.

At 31 March 2006, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Within one year In the second to fifth years, inclusive After five years	Group 2006 2005 HK$’000 HK$’000 9,725 24,016 19,977 27,805 13,944 – 43,646 51,821	Group 2006 2005 HK$’000 HK$’000 9,725 24,016 19,977 27,805 13,944 – 43,646 51,821
		51,821

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FINANCIAL INFORMATION

APPENDIX I

39. Commitments

In addition to the operating lease commitments detailed in note 38(b) above, the Group had the following commitments at the balance sheet date:

	Group
	2006	2005
	HK$’000	HK$’000
Capital commitments:
Authorised and contracted, but not provided for	1,074	206

The Company did not have any material commitments as at the balance sheet date (2005: Nil).

40. Pledge of assets

As at the balance sheet date, certain of the Group’s fixed assets, investment properties, time deposits, financial assets at fair value through profit or loss/other financial assets, properties held for sale and inventories with a total carrying value of approximately HK$826,356,000 (2005: HK$718,226,000) were pledged to secure general banking, trade finance and other facilities granted to the Group. In addition, rental income generated in respect of certain investment properties of the Group were assigned to bankers to secure loan facilities granted to the Group.

41. Related party transactions

(a) In addition to the transactions detailed elsewhere in these financial statements, the Group had the following transactions with related parties during the year:

		2006	2005
	Notes	HK$’000	HK$’000
Sale of goods to related companies	(i)	18,838	18,590
Purchase of goods from related
companies	(ii)	(60,529)	(64,246)

Notes:

(i) The directors consider that sales to related companies were made according to the published prices and conditions offered to the major customers of the Group.

(ii) The directors consider that purchase prices were determined according to the published prices and conditions similar to those offered to other customers of the related companies.

In the opinion of the directors, the above transactions were entered into by the Group in the normal course of business.

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FINANCIAL INFORMATION

APPENDIX I

• (b) Outstanding balances with related parties:

• (i) Details of the amounts due to/from its associates are included in note 21 to the financial statements.

• (ii) Included in trade creditors, the Group had outstanding payable to a related company of HK$187,000 (2005: HK$4,904,000). The payable is unsecured, interest-free and has no fixed terms of repayment.

• (c) Compensation of key management personnel of the Group:

Short term employee benefits Post-employment benefits Share-based payments Total compensation paid to key management personnel	2006 HK$’000 16,296 154 3,630 20,080	2005 HK$’000 14,016 154 –
		14,170

Further details of directors’ emoluments are included in note 8 to the financial statements.

42. Financial risk management objectives and policies

The Group’s principal financial instruments comprises bank loans and overdrafts, finance lease payables, other interest-bearing loans and cash and short term deposits. The main purpose of these financial instruments is to raise finance for the Group operations. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

It is, and has been, throughout the year under review, the Group’s policy that no trading in financial instruments shall be undertaken.

The main risks arising from the Group’s financial instruments are cash flow interest rate risk, foreign currency risk, credit risk and liquidity risk. The board reviews and agrees policies for managing each of these risks and they are summarised below.

Cash flow interest rate risk

The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s bank loans with a floating interest rate. The interest rates and terms of repayment of the Groups’ borrowings are disclosed in note 28 to the financial statements. The Group’s policy is to obtain the most favourable interest rates available for its borrowings.

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FINANCIAL INFORMATION

APPENDIX I

Except for the Group’s bank loans, the Group has no significant interest-bearing assets or liabilities. Cash at bank earns interest at floating rates based on daily bank deposits rates. Short term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earns interest at the respective short term time deposit rates.

Foreign currency risk

The Group operates in Hong Kong, America, South Africa and Mainland China and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to Renminbi, US dollars and South Africa Rand. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in operations in Mainland China. The directors consider that the exchange rates of Hong Kong dollars against Renminbi and United States dollars in the foreseeable future are expected to be relatively stable and the appreciation in Renminbi against Hong Kong dollars is expected to be mild. Hence, there is no significant exposure to fluctuation in foreign exchange rates.

The Group has certain investments in operations in America, South Africa and Mainland China, whose net assets are exposed to translation risk. Most of these investments are in Mainland China. The management does not expect any material adverse impact on the foreign exchange fluctuation, as an expected mild appreciation in Renminbi will further benefit the Group’s net assets position in the PRC.

Credit risk

The Group’s major exposure to the credit risk arising from the default of the trade receivables, with maximum exposure equal to their carrying amounts in the consolidated balance sheet. The Group trades only with recognised and creditworthy third parties. In addition, receivable balances are monitored on an ongoing basis and the Group’s exposure to bad debts is not significant.

The credit risk of the Group’s other financial assets, which comprise cash and cash equivalents, available-for-sale equity investments and financial assets at fair value through profit or loss, arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

Liquidity risk

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and finance leases.

Fair values

As at 31 March 2006, the carrying amounts of the Group’s financial assets and liabilities approximated to their fair values.

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FINANCIAL INFORMATION

APPENDIX I

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43. Comparative amounts

As further explained in notes 2.2 and 2.4 to the financial statements, due to the adoption of new HKFRSs during the current year, the accounting treatment and presentation of certain items and balances in the financial statements have been revised to comply with the new requirements. Accordingly, certain prior year and opening balance adjustments have been made and certain comparative amounts have been reclassified and restated to conform with the current year’s presentation and accounting treatment.

44. Approval of the financial statements

The financial statements were approved and authorised for issue by the board of directors on 21 July 2006.

III. INDEBTEDNESS

As at the close of business of 31 January 2007, being the latest practicable date of ascertaining certain information relating to this indebtedness statement, the Enlarged Group had outstanding borrowings of HK$595,470,000, comprising secured bank loans of approximately HK$520,568,000, unsecured bank loan of approximately HK$74,286,000 and obligations under finance leases of HK$616,000.

The Enlarged Group’s above outstanding secured bank loans were secured by the Group’s properties, plant and equipment, investment properties, time deposits, financial asset at fair value through profit or loss, properties held for sale and inventories with a total carrying value of HK$892,611,000 as at 31 January 2007 and assignment of rental income generated in respect of certain investment properties of the Group.

In addition, as at the same date, the Group and the Enlarged Group had contingent liabilities of approximately HK$41.7 million and HK$41.7 million respectively which mainly comprised of guarantees in favour of banks on mortgage arised from the Group’s and the Enlarged Group’s property sales in Shenzhen, PRC.

The Group has also given a guarantee to a bank for granting a loan to an associate in the amount of HK$11 million.

The Group has a contingent liability in respect of possible future long service payments to employees under Hong Kong Employment Ordinance, with a maximum possible amount of HK$3.3 million as at 31 January 2007.

Save as aforesaid or as otherwise disclosed herein, and apart from intra-group liabilities and normal trade payables in the ordinary course of business of the Group, at the close of business on 31 January 2007, the Enlarged Group did not have any outstanding indebtedness in respect of any mortgages, charges, debentures or other loan capital, bank loans and overdrafts, loans, debts securities or other similar indebtedness, or hire purchase commitments, finance lease commitments, guarantees or other contingent liabilities as at the close of business on 31 January 2007.

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FINANCIAL INFORMATION

APPENDIX I

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Foreign currency amounts have been translated into Hong Kong dollars at the rates of exchange prevailing at the close of business on 31 January 2007.

As at the Latest Practicable Date, the Directors were not aware of any material changes in respect of the indebtedness or other contingent liabilities of the Enlarged Group since 31 January 2007.

IV. WORKING CAPITAL

The Directors are of the opinion that the Enlarged Group will, immediately following the completion of the Acquisition, have sufficient working capital for its normal business for the next twelve months from the date of this circular.

V. MATERIAL CHANGE

As at the Latest Practicable Date, so far as is known to the Directors, the Directors are not aware of any circumstances or events that may give rise to a material adverse change in the financial and trading position or prospect of the Company since 31 March 2006, being the date to which the latest published audited accounts of the Company were made up.

VI. MANAGEMENT DISCUSSION AND ANALYSIS FOR THE YEAR ENDED 31 MARCH 2006

Business review and Prospect

Garment

Garment business passed through a volatile year of operation. Following the removal of quota, USA garment import increased significantly in the first half year of 2005. As a result of such abnormal increase, import in the second half year reduced significantly. Moreover, import price offered by customer also reduced due to excessive supplies in the market. Overall, our last year export business suffered from sales and operating profit reduction. In domestic market, our South African business focused on higher end customer products in order to maintain satisfactory gross margin. Sales to lower end customer was reduced due to lower margin caused by cheaper import products. As a result, sales and operating profit for South Africa also reduced from last year.

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APPENDIX I

FINANCIAL INFORMATION

Facing fierce competition in garment export, the garment division went through some medium term strategy changes during the year. At the end of 2005, a decision was made to cease operation in the Guatemala factories due to the year on year increase in production cost. Machinery and other movable production facilities were shipped back to the China factory where production cost is more competitive. By combining the production facilities, unit cost will be reduced and our overall export margin should be improved. On the other hand, our South African factory overhead will also be reduced to match with the smaller production scale. In the beginning of 2006, our American operation started to distribute the ‘Gener8’ brand of leisure wear in many states in the USA, including Eastern, South Eastern, Central South and Central West districts. Depending on the result of 2006 distribution, the Group will plan for its future investment to support our own garment brand distribution so as to reduce heavy reliance on private label business.

Hotel, Restaurant and Food

Hotel Restaurant and Food businesses continued to grow. Revenue for the year was HK$286,574,000, increased by 12% from last year (HK$256,017,000). Operating profit was about the same as last year due to the closure of the Tsimshatsui restaurant at the end of 2005 and relocation of the food factory in Shenzhen to expand production capacity. Excluding these two non-recurring items, operating profit of the hotel, restaurant and food division for the year was HK$32,754,000, increased by 25% from last year (HK$26,240,000).

During the year, in addition to the above two adjustments, a Carrianna Restaurant was opened in Xian in August 2005, the Carrianna Restaurant in Hainan was closed for renovation in February to April 2006 and was re-opened in May 2006. In addition, another Carrianna Restaurant was opened in Wuhan in May 2006 and a third restaurant will be opened in Shenzhen in the Futian area in August 2006. The prospect for the hotel, restaurant and food division is promising and will continue the past few years’ trend of growth and become a good profit contributor to the Group.

Property and Logistic

Associated company, China South International Industrial Materials City (Shenzhen) Co. Ltd., finished its first full year of operation with very successful results which contributed significant profit to the Group. During the year, China South City achieved good growth in shop rental and sales. Revaluation of its investment properties also contributed significantly to its operating profit, reflecting the good earning potential of these properties.

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APPENDIX I

FINANCIAL INFORMATION

For the Group’s wholly owned properties, rental rate and rent continued to be satisfactory. For the coming year, the Group is planning to build more shopping space to let to tenants such as restaurant and fast food operators in the Carrianna Friendship Square courtyard. After government approval is granted, the extension is expected to be completed by the end of 2006 and will contribute to the increase in rental income.

The Group’s investment properties are mainly located in the most developed cities in the mainland. Following the continuous economic development in China, a steady increase in property price and the gradual appreciation of the Renminbi, the Group’s asset value as well as rental income will be benefited with an optimistic outlook.

Financial review

Liquidity and financial resources

As at 31 March 2006, the Group’s net tangible assets was HK$1,032,397,000 and net tangible assets per share was HK$1.40.

The Group’s free cash and bank balances was HK$115,553,000. Netting off cash deposits pledged for borrowing, the group’s net bank borrowing was HK$500,615,000. Net bank borrowing less free cash and bank balances was HK$385,062,000, representing 37% of net tangible assets of the Group. The Group’s borrowing are principally on a floating rate basis.

Gearing Ratio

As at 31 March 2006, the Group’s gearing ratio was 75.4% which is computed on the basis of total liabilities of the Group divided by equity attributable to the shareholders of the parent.

Material acquisition and disposal

The Group had no material acquisition and disposal for the year ended 31 March 2006.

Saved for the proposed Acquisition as contained in this circular, currently, the Group does not have major plan for material acquisition and disposal in the coming year.

Contingent liabilities and future commitment

The Group has major contingent liabilities relating to guarantee given to bank for mortgage loan facilities granted to purchasers of properties of approximately HK$65,228,000. In addition, the Group has contingent liabilities relating to guarantee given to a bank in connection with facilities to an associate of approximately HK$11,000,000.

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FINANCIAL INFORMATION

APPENDIX I

Charges on the Group assets

As at the balance sheet date, certain of the Group’s properties, plant and equipment, investment properties, time deposits, financial asset at fair value through profit or loss, properties held for sale and inventories with a total carrying value of approximately HK$826,356,000 (2005 : HK$718,226,000) were pledged to secure general banking, trade finance and other facilities granted to the Group. In addition, rental income generated in respect of certain investment properties of the Group were assigned to bankers to secure loan facilities granted to the Group.

Exposure on foreign exchange fluctuations and treasury policy

Major transactions of the Group are denominated in Hong Kong dollar, Renminbi, South African Rand, Canadian dollar and United States dollar. The Group has no significant currency exposure except South African Rand and Canadian dollar. Exchange rate of the other major currencies are relatively stable throughout the year.

Discussion and analysis of the performance of the company to be acquired

The company to be acquired is a Sino-foreign equity joint venture enterprise established on 10 October 2005. The registered and paid up capital is RMB100 million and the major operating business is property development in PRC domestic market. Except for developing the Zishanhu Project, the company does not have any subsidiary, associate or other investment.

For the period from 10 October 2005 to 31 December 2005, excepting for preparing the business setup and paying premium for acquiring lands, there was no business activity thus no revenue was recognized. The company accounted for a loss of around RMB4.9 million which was mainly due to depreciation of fixed asset, employee remuneration and business setup cost, etc. The liquidity ratio (total current asset over total current liability) was about 88.2% and the gearing ratio (total liability over total equity) was around 62.2%. The company was not exposed to any currency exchange risk.

For the year ended 31 December 2006, the company started some foundation work on the land acquired. Given that no properties was completed during this period, no revenue was recognized. The loss of around RMB6.4 million was mainly due to depreciation of fixed asset, employee remuneration, and other business operating cost. A secured floating rate bank loan of RMB38 million was drawn by the company during the year. The liquidity ratio (total current asset over total current liability) was 88.6% and the gearing ratio (total liability over total equity) was around 116.6%. The company was not exposed to any currency exchange risk.

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APPENDIX II

VALUATION REPORT

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30 March 2007

The Directors Tak Sing Alliance Holdings Limited 26th Floor Wyler Centre Phase II No. 200 Tai Lin Pai Road Kwai Chung New Territories Hong Kong Dear Sirs,

In accordance with your instructions for us to value the property interests held by Carrianna (Hunan) Enterprise Co. Ltd. (“Carrianna (Hunan)”) in the People’s Republic of China (“the PRC’’), we confirm that we have carried out inspections, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of such property interests as at 31 December 2006 (“the date of valuation”) for the purpose of incorporation in the circular.

Our valuation is our opinion of the market value of the property interest which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion’’.

In valuing the property interests, which are held or contracted to be acquired by Carrianna (Hunan) for development, we have valued them on the basis that the property will be developed and completed in accordance with the information provided to us. We have assumed that approvals for development proposals will be obtained without undue time delay. In arriving at our opinion of value, we have adopted the direct comparison approach by making reference to comparable sales evidences as available in the relevant market and have also taken into account the development costs expended and the costs that will be expended to complete the development.

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VALUATION REPORT

APPENDIX II

Our valuation has been made on the assumption that the owners sell the property interests on the market without the benefit of deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements which would serve to increase the value of the property interests. In addition, no forced sale situation in any manner is assumed in our valuation. The valuation represents the value of the entire property interests described in the valuation certificate and not the value of a share of them.

We have not caused title searches to be made for the property interests at the relevant government bureau in the PRC. We have been provided with certain extracts of title documents relating to the property interests. However, we have not scrutinized the original documents to verify the ownership, encumbrances or the existence of any subsequent amendments which may not appear on the copies handed to us. In undertaking our valuation for the property interests, we have relied on the legal opinion (“the PRC Legal Opinion”) provided by the instructing party’s (“the Company”) PRC legal adviser, King & Wood.

We have relied to a considerable extent on the information provided by the Company and have accepted advice given to us on such matters as planning approvals, statutory notices, easements, tenure, occupation, lettings, site and floor areas, development plans, construction costs, identification of the properties and other relevant matters. We have also been advised by the Company that no material facts had been concealed or omitted in the information provided to us. All documents have been used for reference only.

All dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us by the Company and are approximations only. No on-site measurement has been taken.

We have carried out inspection on the property. However, no structural survey has been made and we are therefore unable to report whether the properties are free from rot, infestation or any other structural defects. No tests were carried out on any of the services.

We have not carried out investigations on site to determine the suitability of ground conditions and services etc. for any future development, nor have we undertaken any ecological or environmental surveys. Our valuation is prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during construction period.

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

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VALUATION REPORT

APPENDIX II

Our valuation is prepared in accordance with the HKIS Valuation Standards on Properties (First Edition 2005) published by the Hong Kong Institute of Surveyors (HKIS).

We enclosed herewith the valuation certificate.

Yours faithfully, For and on behalf of

Vigers Appraisal & Consulting Limited Raymond Ho Kai Kwong Registered Professional Surveyor MRICS MHKIS MSc(e-com) Executive Director

Note:

Raymond K. K. Ho, Chartered Surveyor, MRICS, MHKIS, has over nineteen years’ experience in undertaking valuations of properties in Hong Kong and Macau, and has over twelve years’ experience in valuations of properties in the PRC. Mr. Ho has been working with Vigers Group since 1989.

– 137 –

VALUATION REPORT

APPENDIX II

VALUATION CERTIFICATE

Property interests held or contracted to be acquired by Carrianna (Hunan) Enterprise Company Ltd

Capital Value in existing state

Property

Description and Tenure

Particulars of occupancy

as at 31 December 2006

Various parcels of land The property comprises land lots bounded by Yiyang Road having a total site area of to the north, Tuanyuan approximately 667,735.42 sq.m., Road to the east and of which an area of Yingbin Road to the south, 572,330.34 sq.m. has been Yiyang City, granted with land use rights Hunan Province, certificates. (see also footnotes The PRC below)

A portion of the property is currently under development and the remaining area is held by or to be granted to Carrianna (Hunan) for future development.

RMB507,000,000

According to the Company, the property is held for development into residential/commercial complexes. The construction of substructure for the first phase comprising gross floor area for residential use of around 100,000 sq.m. and commercial use of around 30,000 sq.m. in a site of about 136,800 sq.m. is in progress. The remaining site area is in the state of design planning.

For the land lots held with land use rights certificates, they have been granted with the land use rights for a term of 70 years for residential use and 40 years for commercial use commencing on 14 April 2006.

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VALUATION REPORT

APPENDIX II

Notes:

1. The land has been granted or contracted to be granted as a portion of the sites to be made available to Carrianna (Hunan) Enterprise Co., Ltd for acquisition through public listing under the Framework Agreement on the Development of Zishanhu Theme Park (the “Framework Agreement”) dated 9 October 2005, the Cooperation and Development Agreement of Zishanhu Theme Park dated 16 October 2005 and the supplemental memorandums to them dated 30 March 2007 entered into between the Government of Yiyang City (Party A) and Carrianna (Hunan) Enterprise Co., Ltd. (Party B). According to the agreements, the parties have agreed on the cooperation on the development of the undeveloped portion of Zishanhu Theme Park (the “Theme Park”). Further details are as follows:

District Concerned : Land located to the east, south and north of Zishanhu together with the water surface of the lake.

Development Projects : Commercial development together with “Public Development” comprising citizen square, ecological tourism area, lake water surface project and pubic utility facilities.

• Provisional Development : Density

Separated in 9 zones as follows:

		Area (in	Area (in	No. of	Building	Plot	Greenery
**Zone **	Development	hectare)		Storey	Density	Ratio	Ratio
					(%)
A	Citizen Square		9.34	–	–	0.2	–
B	Water Surface		115.18	Reserved for	water-fun	entertainment facilities.
C	Ecological Area		132.09	1-3	1	0.05	90
1	Zones 1 to 6 is for		7.78	3-20	25	3.0	35
2	Development		22.10	3-15	25	1.5	40
3	(“the Development		15.52	3-5	25	1.0	40
4	Zone”)		39.16	1-4	25	1.0	45
5			110.05	3-6	25	1.0	45
6			31.42	3-6	25	1.0	45

Total Investment : Public Development not less than RMB300 million. Business Development not less than RMB2.2 billion.

Land Supply Schedule : For the Business Development, 1,000 Mu in the first year; and according to the development progress carried out by Party B, within 5 years for all of the development sites.

Cooperative Clause : Party B is responsible for the overall development of the theme park and its surrounding areas in accordance with development approvals granted by Party A. Party A will grant the sites having a total area of 3,000 Mu fall within the Development Zones at approximately RMB210,000 per Mu (which being initial asking price and is subject to the final public listing price as concluded) to Party B for Business Development purposes. Party B is entitled to all the profit gained from the Business Development.

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APPENDIX II

VALUATION REPORT

The Public Development are to be developed and, when completed, operated by Party B in non-profit making basis and should be open to public free of charge. Subject to relevant laws and regulations or the approval from Party A, Party B may also built and operate commercial projects within the Theme Park.

In addition, Party B may built and operate commercial projects within the citizen square and ecological tourist area having the site areas of respectively 70 Mu and 150 Mu. This additional development should be completed within 3 years.

Costs for Public Provision : The investment on the Public Development should be at around RMB300 million. The resettlement costs for the 404 Mu administrative land is at a lump sum of RMB43,956,000 payable within two years and for the ecological tourism area at RMB25,550,000 payable in three years at a yearly amount of RMB8,500,000. In addition, a lump sum resettlement charge at RMB8 million is for the lake surface. Based on the input in the investment, construction and operation of the nonprofit-making public utilities in the Zishanhu Park, Party A should compensate an amount to Party B which is to be determined between the both parties.

Development Period : Public Development to be completed in 3 years from the date of issuance of the first land use rights certificate for the Business Development and the completion of the resettlement of the citizen square and the ecological tourism area. The citizen square should be practically completed on or before 4 March 2007. Starting from the date of issuance of the first land use rights certificate for the Business Development, land acquisition should be completed in 5 years, developments commenced in 6 years and completed in 8 years. Development Density : Permissible gross floor area should be in accordance with those mentioned in the Framework Agreement. The plot ratio for the individual site may be adjusted for planning amendments.

1. According to a Confirmation on Successful Deal of Listing and the PRC legal opinion, the Company has won in a public listing of the land to acquire the land use rights of the property with a total area of 667,735.42 sq.m. at a total premium of RMB199,280,000. The land is for commercial and residential uses respectively for the terms of 40 years and 70 years.

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APPENDIX II

VALUATION REPORT

1. According to 7 State-owned Land Use Rights Certificates Yi Guo Yong (2006) Nos.D00016 to D00018 and D00047 to D00050, the land use rights of the property having a total site area of approximately 572,330.34 sq.m. have been granted to Carrianna (Hunan) Enterprise Co., Ltd. for the terms of 70 years and 40 years commencing on 14 April 2006 respectively for residential and commercial uses. Further details are as follows:

Certificate No. Lot No. D00016 9-06-90 D00017 9-05-153 D00018 9-18-35 D00048 9-67-14 D00049 9-67-15 D00050 9-67-12 D00047 9-67-9	Site Area (in sq.m.) 29,997.44 103,584.37 59,477.86 96,390.53 96,541.40 66,298.95 120,039.79
	572,330.34

1. According to a State-owned Land Use Rights Grant Contract dated 14 March 2007, the land use rights for another land lot having a site area of approximately 94,336.59 sq.m. was agreed to be granted to Carrianna (Hunan) Enterprise Co., Ltd. for commercial and residential uses respectively for year terms of 40 years and 70 years from the date of site delivery at a land premium of RMB17,640,900.

2. According to the Company and the PRC legal opinion, Carrianna (Hunan) has paid in full the land premium of RMB124,800,550 (as at the date of valuation, the payment made was RMB93,000,000) for a land lot area of 666,666.67 sq.m. Carrianna (Hunan) has not yet entered into a State-owned Land Use Rights Grant Contract for a remaining land lot having a site area of approximately 1,068.75 sq.m. contracted to be acquired in the public listing. Carrianna (Hunan) is obliged to enter into the contract according to the Confirmation on Successful Deal of Listing. The outstanding land premium for all the land lots contracted to be acquired is RMB74,498,400. In valuing the property, we have taken into account the outstanding balance of the land premium as at the date of valuation.

3. According to 6 Planning Permits for Construction Land Nos.Yi Gui Yuan Di Zi 20060009, 20060010, 20060012, 20060013, 20060015, 20060016, the permission for the construction land planning for a total site area of 452,290.55 sq.m. has been granted.

According to Planning Permit for Construction Works No.2006106, the permission for the construction works planning having a total gross floor area of 135,589 sq.m. for commercial and residential uses has been granted.

According to Permit for Commencement of Works No.430900200606140101, the permission for the commencement of construction works having a total gross floor area of 135,589 sq.m. for a commercial and residential project has been granted.

According to the Company, Carrianna (Hunan) is in the process of applying for Planning Permit for Construction Land for the parcel of land held under the State-Owned Land Use Rights Certificate No. D00047.

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APPENDIX II

VALUATION REPORT

1. The PRC legal opinion further states, inter alia, the follows:

2. i. Carrianna (Hunan) is duly incorporated and legally operated in accordance with the applicable PRC laws and regulations. The legal shareholders and the share ratio of Carrianna (Hunan) are as follows: KC Ma (45%), KY Ma (10%), Mr. Liang Beigen (5%), Mr. Chen Qiang (5%) and Yiyang Yin Ye Fa Industrial and Trading Co. Ltd（益陽市銀業發工貿有限公司）(35%).

3. ii. Carrianna (Hunan) has obtained seven State-Owned Land Use Right Certificates for the land having a total site area of 572,330.34 sq. m. (approximately 858 Mu). According to the State-Owned Land Use Rights Certificates issued by the Land Bureau, Carrianna (Hunan) is the sole legal owner of the land use rights. Subject to a mortgage on the land use rights in favor of Industrial and Commercial Bank of China Yiyang Branch Taohualun Sub-branch, Carrianna (Hunan) may transfer, lease or mortgage the land use rights in accordance with the applicable PRC laws and regulations.

4. iii. According to the Payment Certificate of Land Premium issued by the Land Bureau on 21 March 2007, Carrianna (Hunan) has paid in full a land premium of RMB124,800,550 in total regarding the land having an area of 666,666.67 sq. m. (approximately 1,000 Mu), of which the State-Owned Land Use Rights Certificate regarding the 142 Mu (approximately 94,667 sq. m.) of land has not been obtained. Given that the StateOwned Land Use Right Grant Contract regarding the 142 Mu (approximately 94,667 sq.m.) land has been entered into and the land premium under the contract aforementioned has been fully paid up, Carrianna (Hunan) can apply for the State-Owned Land Use Rights Certificate regarding the land having an area of 142 Mu (approximately 94,667 sq. m.). There shall be no legal impediment regarding obtaining such StateOwned Land Use Rights Certificate. Upon receipt of the relevant State-Owned Land Use Rights Certificate, Carrianna (Hunan) can transfer, lease, mortgage and use the land use right regarding the 142 Mu (approximately 94,667 sq. m.) land in accordance with the applicable PRC laws and regulations.

5. iv. Carrianna (Hunan) has obtained the Permits for Construction Land Planning for six parcels of land (StateOwned Land Use Right Certificate Nos: D00016, D00017, D00018, D00048, D00049 and D00050). A Permit for Construction Project Planning and a Permit for Construction Commencement have also been issued to Carrianna (Hunan) with respect to its construction on the land lot No.2 (State-Owned Land Use Right Certificate No.: D00017). Carrianna (Hunan) can legally carry on the construction on the land lot No.2 according to the permits aforementioned.

6. v. The Framework Agreement (together with its Supplementary Memorandum) and the Cooperation and Development Agreement (together with its Supplementary Memorandum) are legal and valid under the PRC laws and regulations.

7. vi. In accordance with the Cooperation and Development Agreement and its Supplementary Memorandum, Carrianna (Hunan)’s rights in respect of land as stipulated under the Cooperation and Development Agreement and its Supplementary Memorandum are transferable after the Carrianna (Hunan) has obtained the relevant land use right certificates based on the outcome of which Carrianna (Hunan) has won the public listing of land use right grant as subject to PRC laws and regulations.

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APPENDIX II

VALUATION REPORT

• vii. According to the Cooperation and Development Agreement and its Supplementary Memorandum, the Government of Yiyang City has agreed to compensate Carrianna (Hunan) on the basis of its input in the investment, construction and operation of the non-profit-making public utilities in the Zishanhu Park within 5 years after execution of the Cooperation and Development Agreement and its Supplementary Memorandum. The exact compensation amount will be determined between Carrianna (Hunan) and Government of Yiyang with reference to the actual investment made in such non-profit-making public utilities in the Zishanhu Park, which in principle shall not be less than RMB369,456,000 in total.

• viii. According to the Cooperation and Development Agreement and its Supplementary Memorandum, Government of Yiyang City will arrange for the land use right grant of all commercial land by means of public listing with commitment on project at an estimated average upset price of RMB210,000 per Mu. The final price for acquiring such land use rights shall be subject to the outcome of the listing.

• According to the Company, the total development cost (excluding land cost) expended in the development of the Phase I as at the date of valuation was approximately RMB22,800,000. In the course of our valuation, we have taken such development cost expended into account. The outstanding cost to complete the Phase I development was estimated to be approximately RMB173,200,000. The scheduled date of completion of the development is around the end of 2007.

• The capital value of the Phase I development when completed is approximately RMB391,000,000.

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APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

==> picture [142 x 45] intentionally omitted <==

30 March 2007

The Board of Directors Tak Sing Alliance Holdings Limited

Dear Sirs,

We set out below our report on the financial information relating to Carrianna (Hunan) Enterprise Co. Ltd.（佳寧娜（湖南）實業有限公司）(the “JV Co”) for the period from 10 October 2005 (date of registration) to 31 December 2005 and for the year ended 31 December 2006 (the “Relevant Periods”) for inclusion in the circular of Tak Sing Alliance Holdings Limited (the “Company”) dated 30 March 2007 (the “Circular”) in connection with the Company’s proposed acquisition of 55% equity interest in the JV Co.

The JV Co is a Chinese foreign equity joint venture enterprise established under the laws of the People’s Republic of China (the “PRC”) on 10 October 2005 and is principally engaged in property development.

The statutory financial statements of the JV Co for the period from 10 October 2005 (date of registration) to 31 December 2005 and for the year ended 31 December 2006 were prepared in accordance with the relevant accounting principles and financial regulations applicable to enterprises in the PRC (the “PRC GAAP”) and were audited by 益陽淩雲有限責任會計師事務所 and 益陽 中天會計師事務所有限公司 , respectively, certified public accountants registered in the PRC.

For the purpose of this report, we have carried out independent audit procedures on the financial information of the JV Co for the Relevant Periods (the “Financial Information”), in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”), and have examined the Financial Information and carried out such additional procedures as we considered necessary in accordance with the Auditing Guideline 3.340 “Prospectuses and the Reporting Accountant” issued by the HKICPA.

The Financial Information has been prepared by the directors based on the PRC GAAP statutory financial statements and the unaudited management accounts of the JV Co after making adjustments as appropriate in compliance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which also include Hong Kong Accounting Standards (“HKAS”) and Interpretations) issued by the HKICPA. The preparation of the Financial Information, together with the notes thereto, is the responsibility of the directors of the JV Co. It is our responsibility to form an independent opinion on such information and to report our opinion to you.

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ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

APPENDIX III

In our opinion, the Financial Information together with the notes thereto give, for the purpose of this report, a true and fair view of the state of affairs of the JV Co as at 31 December 2005 and 2006, and of the results and cash flows of the JV Co for the Relevant Periods.

A. FINANCIAL INFORMATION

The Financial Information of the JV Co for the Relevant Periods prepared on the basis as set out in Note 3.1 is as follows:

INCOME STATEMENTS

Notes REVENUE 4 Other income 4 Administrative expenses Finance costs 6 LOSS BEFORE TAX 5 Tax 7 LOSS FOR THE YEAR/PERIOD	Period from 10 October 2005 (date of Year ended registration) to 31 December 31 December 2006 2005 RMB’000 RMB’000 – – 253 16 (6,711) (4,944) – – (6,458) (4,928) – – (6,458) (4,928)

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APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

BALANCE SHEETS

Notes NON-CURRENT ASSETS Property, plant and equipment 8 Properties under development 9 Available-for-sale investment 10 Total non-current assets CURRENT ASSETS Prepayments, deposits and other receivables 11 Due from shareholders 12 Cash and bank balances Total current assets CURRENT LIABILITIES Trade payables Other payables, accruals and deposits received Land premium payable Due to a shareholder 13 Total current liabilities NET CURRENT LIABILITIES TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank borrowing 14 Land premium payable Total non-current liabilities Net assets EQUITY Paid-in capital 15 Reserves Total equity

At 31 December 2006 2005 RMB’000 RMB’000 1,623 634 187,211 114,833 168 – 189,002 115,467 1,049 3,640 – 7,909 34,347 27,219 35,396 38,768 32 – 13,095 5,149 21,795 38,824 5,016 – 39,938 43,973 (4,542) (5,205) 184,460 110,262 38,000 – 42,848 15,190 80,848 15,190 103,612 95,072 100,000 100,000 3,612 (4,928) 103,612 95,072

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APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

STATEMENTS OF CHANGES IN EQUITY

Note Capital injection 15 Loss for the period At 31 December 2005 and 1 January 2006 Loss for the year Capital injection At 31 December 2006	Paid-in capital RMB’000 100,000 – 100,000 – – 100,000	Capital Accumulated reserve losses RMB’000 RMB’000 (Note) – – – (4,928) – (4,928) – (6,458) 14,998 – 14,998 (11,386)	Total equity RMB’000 100,000 (4,928) 95,072 (6,458) 14,998 103,612

Note: The amount represented the additional capital injected by a shareholder in excess of his share of the registered capital.

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APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

CASH FLOW STATEMENTS

Notes CASH FLOWS FROM OPERATING ACTIVITIES Loss before tax Adjustments for: Interest income 5 Depreciation 5 Additions to properties under development Increase/(decrease) in prepayments, deposits and other receivables Increase/(decrease) in amounts due from shareholders Increase in trade payables Increase in other payables, accruals and deposits received Increase in land premium payable Increase in an amount due to a shareholder Cash used in operations Interest received Net cash outflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchases of items of property, plant and equipment Purchase of an available-for-sale investment Net cash outflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from capital injections New bank loan Net cash inflow from financing activities NET INCREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year/period CASH AND CASH EQUIVALENTS AT END OF YEAR/PERIOD

Period from 10 October 2005 (date of Year ended registration) to 31 December 31 December 2006 2005 RMB’000 RMB’000 (6,458) (4,928) (253) (16) 155 – (6,556) (4,944) (72,378) (114,833) 2,591 (3,640) 7,909 (7,909) 32 – 7,946 5,149 10,629 54,014 5,016 – (44,811) (72,163) 253 16 (44,558) (72,147) (1,144) (634) (168) – (1,312) (634) 14,998 100,000 38,000 – 52,998 100,000 7,128 27,219 27,219 – 34,347 27,219

– 148 –

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

APPENDIX III

NOTES TO THE FINANCIAL INFORMATION

1. Corporate information

Carrianna (Hunan) Enterprise Co. Ltd.（佳寧娜（湖南）實業有限公司）(the “JV Co”) is a Chinese foreign equity joint venture enterprise established under the laws of the PRC on 10 October 2005 with a total registered capital of RMB100,000,000. The address of its registered office and principal place of business is 湖南省益陽市朝陽廣場益陽日報社新 聞大樓十二層 .

During the Relevant Periods, the JV Co was involved in property development. The JV Co has entered into the Framework Agreement and the Cooperation and Development Agreement respectively with The People’s Government of Yiyang City, Hunan Province in relation to the development of Zishanhu Theme Park Project（梓山湖主題公園）, which includes the development of residential and commercial units, a citizen square, a theme park and the lake surface project. The project is located in Central District and Yiyang Hi-tech Development Zone, Yiyang City, Hunan Province（湖南省益陽市中心城區及益陽高新技 術產業開發區）.

2. Net current liabilities

The JV Co had net current liabilities of HK$4,542,000 at 31 December 2006. The directors consider that it is appropriate to prepare the Financial Information on a going concern basis because: (i) the JV Co has available unutilised bank loan facility of HK$56,500,000 as at 31 December 2006 to finance its operations; and (ii) the shareholders of the JV Co have agreed to provide adequate funds for the JV Co to meet its liabilities as and when they fall due.

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APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

3.1 Basis of preparation

The Financial Information has been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which also include Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants and accounting principles generally accepted in Hong Kong. It has been prepared under the historical cost convention. The Financial Information is presented in Renminbi (“RMB”) and all values are rounded to the nearest thousand except when otherwise indicated.

3.2 Impact of issued but not yet effective Hong Kong Financial Reporting Standards

The JV Co has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in the Financial Information.

HKAS 1 Amendment	Capital Disclosures
HKFRS 7	Financial Instruments: Disclosures
HKFRS 8	Operating Segments
HK(IFRIC)-Int 7	Applying the Restatement Approach under HKAS 29
	Financial Reporting in Hyperinflationary Economies
HK(IFRIC)-Int 8	Scope of HKFRS 2
HK(IFRIC)-Int 9	Reassessment of Embedded Derivatives
HK(IFRIC)-Int 10	Interim Financial Reporting and Impairment
HK(IFRIC)-Int 11	HKFR 2 – Group and Treasury Share Transactions
HK(IFRIC)-Int 12	Service Concession Arrangements

The HKAS 1 Amendment shall be applied for annual periods beginning on or after 1 January 2007. The revised standard will affect the disclosures about qualitative information about the JV Co’s objective, policies and processes for managing capital; quantitative data about what the JV Co regards as capital; and compliance with any capital requirements and the consequences of any non-compliance.

HKFRS 7 shall be applied for annual periods beginning on or after 1 January 2007. The standard requires disclosures that enable users of the Financial Information to evaluate the significance of the JV Co’s financial instruments and the nature and extent of risks arising from those financial instruments and also incorporates many of the disclosure requirements of HKAS 32.

HKFRS 8 shall be applied for annual periods beginning on or after 1 January 2009. The standard requires the disclosure of information about the operating segments of the Group, the products and services provided by the segments, the geographical areas in which the Group operates, and revenues from the Group’s major customers. This standard will supersede HKAS14 Segment Reporting.

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APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

HK(IFRIC)-Int 7, HK(IFRIC)-Int 8, HK(IFRIC)-Int 9 and HK(IFRIC)-Int 10 shall be applied for annual periods beginning on or after 1 March 2006, 1 May 2006, 1 June 2006 and 1 November 2006, respectively.

HK(IFRIC)-Int 11, HK(IFRIC)-Int 12 and HKFRS 8 shall be applied for annual periods beginning on or after 1 March 2007, 1 January 2008 and 1 January 2009, respectively.

The JV Co is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application. So far, it has concluded that while the adoption of the HKAS 1 Amendment and HKFRS 7 may result in new or amended disclosures, these new and revised HKFRSs are unlikely to have a significant impact on the JV Co’s results of operations and financial position.

3.3 Summary of significant accounting policies

Impairment of non-financial assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than financial assets), the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs to sell, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the income statement in the period in which it arises.

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APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation), had no impairment loss been recognised for the asset in prior years. A reversal of such impairment loss is credited to the income statement in the period in which it arises.

Related parties

A party is considered to be related to the JV Co if:

• (a) the party, directly or indirectly through one or more intermediaries, (i) controls, is controlled by, or is under common control with, the JV Co; (ii) has an interest in the JV Co that gives it significant influence over the JV Co; or (iii) has joint control over the JV Co;

• (b) the party is a member of the key management personnel of the JV Co or its parent;

• (c) the party is a close member of the family of any individual referred to in (a) or (b);

• (d) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (b) or (c); or

• (e) the party is a post-employment benefit plan for the benefit of the employees of the JV Co, or of any entity that is a related party of the JV Co.

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APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

Property, plant and equipment and depreciation

Property, plant and equipment are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property, plant and equipment, and where the cost of the item can be measured reliably, the expenditure is capitalised as an additional cost of that asset or as a replacement.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Office equipment	20%
Furniture and fixtures	20%
Motor vehicles	20%

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately.

Residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at each balance sheet date.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the income statement in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

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ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

APPENDIX III

Properties under development

Properties under development are stated at cost less impairment losses and are not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction.

Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Rentals payable under the operating leases are charged to the income statement on the straight-line basis over the lease terms.

Financial assets

Financial assets of the JV Co in the scope of HKAS 39 are classified as loans and receivables and an available-for-sale financial asset, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus directly attributable transaction costs.

The JV Co determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at the balance sheet date.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the JV Co commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

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APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are subsequently carried at amortised cost using the effective interest method. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction costs. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Available-for-sale financial asset

Available-for-sale financial asset is a non-derivative financial asset in unlisted investment that is designated as available for sale or is not classified as loans and receivables. After initial recognition, the available-for-sale financial asset is measured at fair value, with gains or losses recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the income statement.

When the fair value of the unlisted investment cannot be reliably measured because (a) the variability in the range of reasonable fair value estimates is significant for that investment or (b) the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such investment is stated at cost less any impairment losses.

Impairment of financial assets

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

Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through the use of an allowance account. The amount of the impairment loss is recognised in the income statement.

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APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

The JV Co first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

Available-for-sale financial asset

If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferred from equity to the income statement. Impairment losses on the unlisted investment classified as available for sale are not reversed through the income statement.

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where:

• the rights to receive cash flows from the asset have expired;

• the JV Co retains the rights to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or

• the JV Co has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

– 156 –

APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

Where the JV Co has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the JV Co’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the JV Co could be required to repay.

Financial liabilities at amortised cost (including interest-bearing loans and borrowings)

Financial liabilities including trade and other payables and an amount due to a shareholder are initially stated at fair value less directly attributable transaction costs and are subsequently measured at amortised cost, using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation process.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the income statement.

Cash and cash equivalents

For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of change in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the JV Co’s cash management.

For the purpose of the balance sheet, cash and bank balances comprise cash on hand and at banks which are not restricted as to use.

– 157 –

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

APPENDIX III

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the income statement, or in equity if it relates to items that are recognised in the same or a different period directly in equity.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised.

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 deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the JV Co and when the revenue can be measured reliably. Interest income is recognised on an accrual basis using the effective interest method by applying the rate that discounts the estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial assets.

– 158 –

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

APPENDIX III

Employee benefits

Pension scheme

The employees of the JV Co are required to participate in a central pension scheme operated by the local municipal government. The JV Co is required to contribute 8% of its payroll costs to the central pension scheme. The contributions are charged to the income statement as they become payable in accordance with the rules of the central pension scheme.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised.

Foreign currencies

The Financial Information is presented in RMB, which is the JV Co’s functional and presentation currency.

Foreign currency transactions are initially recorded using the functional currency rates ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rates of exchange ruling at the balance sheet date. All differences are taken to the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Nonmonetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

4. Revenue and other income

The JV Co did not generate any revenue during the Relevant Periods.

Other income represented bank interest income.

– 159 –

APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

5. Loss before tax

The JV Co’s loss before tax is arrived at after charging/(crediting):

Depreciation Minimum lease payments under operating leases on land and buildings Directors’ remuneration Employee benefits expense (excluding directors’ remuneration): Wages and salaries Pension scheme contributions Foreign exchange differences, net Bank interest income 6. Finance costs Interest on bank loan wholly repayable within five years Less: amount capitalised under properties under development

Period from 10 October 2005 (date of Year ended registration) to 31 December 31 December 2006 2005 RMB’000 RMB’000 155 – 553 472 120 70 2,954 569 9 – 2,963 569 167 – (253) (16) Period from 10 October 2005 (date of Year ended registration) to 31 December 31 December 2006 2005 RMB’000 RMB’000 364 – (364) – – –

– 160 –

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

APPENDIX III

7. Tax

The JV Co is subject to the income tax law concerning enterprises in Mainland China registered as a Chinese foreign equity joint venture. According to the relevant income tax rules and regulations applicable to a Chinese foreign equity joint venture in Mainland China, corporate income tax for the JV Co is charged at a rate of 33% on the estimated assessable profit for the year/period. No provision for corporate income tax has been made as the JV Co has no estimated assessable profits arising in Mainland China generated during the year/period.

As at 31 December 2006, unused tax losses amounting to approximately RMB7,815,000 (2005: Nil) were available for offsetting against future taxable income for the next five years. Deferred tax assets have not been recognised in respect of these losses due to the unpredictability of future taxable profit streams.

There was no material unprovided deferred tax in respect of the Relevant Periods and as at the balance sheet date (2005: Nil).

8. Property, plant and equipment

31 December 2005 Additions and at 31 December 2005 At 31 December 2005: Cost and net carrying amount	Office equipment RMB’000 37 37	Motor vehicles RMB’000 597 597	Total RMB’000 634
			634

– 161 –

APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

	Office	Furniture	Motor	Motor
	**equipment **	and fixtures	vehicles		Total
	RMB’000	RMB’000	RMB’000		RMB’000
31 December 2006
At 1 January 2006, net of
accumulated depreciation	37	–		597	634
Additions	247	28		869	1,144
Depreciation provided
during the year	(30)	(6)	(119)		(155)
At 31 December 2006, net of
accumulated depreciation	254	22	1,347		1,623
At 31 December 2006:
Cost	284	28	1,466		1,778
Accumulated depreciation	(30)	(6)	(119)		(155)
Net carrying amount	254	22	1,347		1,623
Properties under development
			At 31	December
			2006		2005
		RMB’000			RMB’000
At beginning of year/period			114,833		–
Additions, at cost			72,378		114,833
At 31 December			187,211		114,833

9. Properties under development

For the year ended 31 December 2006, finance cost of HK$364,000 (2005: Nil) were capitalised (note 6) .

The above properties under development are held under long term leases and are situated in the PRC.

– 162 –

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

APPENDIX III

At 31 December 2006, the JV Co has not yet obtained the land use right titles of certain pieces of land with a carrying value of approximately RMB16,408,000 (2005: RMB114,833,000) because the related application are in the course of processing at the balance sheet date. The directors are confident that the land use right certificates of these lands can be obtained.

At 31 December 2006, certain of the JV Co’s properties under development with an aggregate carrying value of approximately RMB134,983,000 (2005: Nil) were pledged to secure the bank loan granted to the JV Co (note 14).

Particulars of the properties under development are as follows:

					Expected
			Site	Stage of	completion
Location		Use	area	completion	date
			(sq.m.)
Chaoyang Road to		Commercial/	29,997	Foundation	December
the north, Zishanhu		residential		work in	2007
to	the south			progress
（朝陽路以南梓山
湖以北）
Zishancun Reservoir		Commercial/	103,584	Foundation	December
to	the east, Yiyang	residential		work in	2007
Road to the north				progress
（梓山村水庫西側
益陽大道南側）
Tuanyuan Road		Commercial/	318,709	Land bank	–
to	the east	residential
（團圓路西側）
Yangwuling Village,		Commercial/	120,040	Land bank	–
Luciqiao Village		residential
（羊舞嶺村鸕
	橋村 ）

– 163 –

APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

10. Available-for-sale investment

	At 31 December	At 31 December
	2006	2005
	RMB’000	RMB’000
Club membership debenture, at cost	168	–

As management has considered that the variability in the range of reasonable fair value estimates for the unquoted membership investment is significant and the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, this investment is stated at cost less any impairment losses.

11. Prepayments, deposits and other receivables

Prepaid construction costs Deposits Other receivables	At 31 December 2006 2005 RMB’000 RMB’000 680 1,295 51 31 318 2,314 1,049 3,640	At 31 December 2006 2005 RMB’000 RMB’000 680 1,295 51 31 318 2,314 1,049 3,640
		3,640

The carrying amounts of prepayments, deposits and other receivables approximate to their fair values.

12. Due from shareholders

Mr. Chen Xibo Ms. Li Jing	At 31 December 2006 2005 RMB’000 RMB’000 – 2,909 – 5,000 – 7,909	At 31 December 2006 2005 RMB’000 RMB’000 – 2,909 – 5,000 – 7,909
		7,909

– 164 –

APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

The balances with shareholders were unsecured, interest-free and repayable on demand. The carrying amounts of the amounts due from shareholders approximated to their fair values.

13. Due to a shareholder

	At 31	December
	2006	2005
	RMB’000	RMB’000
Mr. Liang Beigen	5,016	–

The balance with the shareholder is unsecured, interest-free and repayable on demand. The carrying amount of the amount due to the shareholder approximates to its fair value.

14. Interest-bearing bank borrowing

	Effective		At 31 December	At 31 December
	interest rate	Maturity	2006	2005
	% p.a.		RMB’000	RMB’000
Non-current
Bank loan, secured	7.56	2009	38,000	–

Notes:

(a) The bank loan is secured by certain of the JV Co’s properties under development, which had an aggregate carrying value at the balance date of approximately RMB134,983,000 (2005: Nil).

(b) The bank loan of the JV Co bears interest at floating interest rates.

(c) The carrying amount of the JV Co’s borrowing approximate to its fair value.

15. Paid-in capital

	At 31	December
	2006	2005
	RMB’000	RMB’000
Registered and paid-in capital	100,000	100,000

– 165 –

APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

16. Operating lease arrangements

The JV Co leases certain of its office properties and staff quarters under operating lease arrangements. Leases for properties are negotiated for terms of one year.

At the balance sheet date, the JV Co’s had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Within one year 17. Commitments	At 31 December 2006 2005 RMB’000 RMB’000 417 –	At 31 December 2006 2005 RMB’000 RMB’000 417 –

In addition to the operating lease commitments detailed in note 16 above, the JV Co had the following capital commitments at the balance sheet date:

Contracted, but not provided for Properties under development – Residential Properties under development – Public Development	At 31 December 2006 2005 RMB’000 RMB’000 12,069 – 48,380 8,000 60,449 8,000	At 31 December 2006 2005 RMB’000 RMB’000 12,069 – 48,380 8,000 60,449 8,000
		8,000

In addition, the JV Co is also responsible to put in an investment which is estimated to be around RMB369,000,000 for the public utilities portion of the Project, including a citizen square, a theme park and the lake surface project (the “Public Development”), the contracted but not provided for amount of which is disclosed above. Nevertheless, the People’s Government of Yiyang City will compensate the JV Co for an amount of not less than RMB369,000,000 within 5 years from the execution of the Cooperation and Development Agreement, subject to the investment actually incurred by the JV Co in relation to the Public Development.

– 166 –

APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

18. Financial risk management objectives and policies

The JV Co’s principal financial instruments comprise cash and bank balances, other receivables, trade and other payables and balances with the shareholders, which arise directly from its operations.

The main risks arising from the JV Co’s financial instruments are cash flow interest rate risk, foreign currency risk, credit risk and liquidity risk. The board reviews and agrees policies for managing each of these risks and they are summarised below.

Cash flow interest rate risk

The Company is exposed to interest rate risks due to changes in interest rates of interest-bearing financial assets and liabilities. Interest-bearing financial assets are mainly deposits with banks which are mostly short term in nature whereas interestbearing financing liabilities are mainly bank loan with primarily floating interest rates. The Company is therefore exposed to cash flow interest rate risk. The JV Co’s policy is to obtain the most favourable interest rates available.

Foreign currency risk

The businesses of the JV Co are principally located in the PRC and are mainly transacted in Renminbi. The JV Co’s exposure to foreign currency risk is minimal.

Credit risk

The credit risk of the JV Co’s financial assets, which comprise cash and bank balances and other receivables, arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

Liquidity risk

In the management of liquidity risk, the JV Co monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the JV Co’s operations and mitigate the effects of fluctuation in cash flows. The JV Co’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank facilities in order to meet its liquidity requirements both in the short and long terms.

– 167 –

APPENDIX III

ACCOUNTANT’S REPORT ON CARRIANNA (HUNAN) ENTERPRISE CO. LTD.

Fair value

The carrying amounts of the JV Co’s financial assets and liabilities approximated to their fair values at the balance sheet date.

B. SUBSEQUENT EVENT

During the 5th Session of the 10th National People’s Congress, which was concluded on 16 March 2007, the PRC Corporate Income Tax Law (“the New Corporate Income Tax Law”) was approved and will become effective on 1 January 2008. The New Corporate Income Tax Law introduces a wide range of changes which include, but are not limited to, the unification of the income tax rate for domestic-invested and foreign-invested enterprises at 25%. Since the detailed implementation and administrative rules and regulations have not yet been announced, the financial impact of the New Corporate Income Tax Law to the JV Co cannot be reasonably estimated at this stage.

C. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of the JV Co have been made up in respect of any period subsequent to 31 December 2006.

Ernst & Young

Certified Public Accountants Hong Kong

– 168 –

APPENDIX IV

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

==> picture [142 x 45] intentionally omitted <==

30 March 2007

The Board of Directors Tak Sing Alliance Holdings Limited

Dear Sirs,

Tak Sing Alliance Holdings Limited (the “Company”) and its subsidiaries (collectively, the “Group”)

We report on the unaudited pro forma statement of assets and liabilities of the Group set out on pages 169 to 176 under the heading of “Unaudited Pro Forma Statement of Assets and Liabilities of the Enlarged Group” (the “Unaudited Pro Forma Financial Information”) in Appendix IV to the Company’s circular dated 30 March 2007 (the “Circular”) in connection with the Company’s proposed acquisition of 55% equity interest in Carrianna (Hunan) Enterprise Co. Ltd.（佳寧娜（湖 南）實業有限公司）(the “Acquisition”). The Unaudited Pro Forma Financial Information has been prepared by the directors of the Company, for illustrative purposes only, to provide information about how the Acquisition might have affected the relevant financial information of the Group. The basis of preparation of the Unaudited Pro Forma Financial Information is set out on pages 171 to 172 of 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 4.29 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 (“HKICPA”).

It is our responsibility to form an opinion, as required by paragraph 4.29(7) 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.

– 169 –

APPENDIX IV

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

Basis of Opinion

We conducted our engagement in accordance with 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 source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company. 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 4.29(1) 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 30 September 2006 or any future dates.

Opinion

In our opinion:

• (a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company 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 4.29(1) of the Listing Rules.

Yours faithfully, Ernst & Young Certified Public Accountants Hong Kong

– 170 –

APPENDIX IV

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

Basis of preparation of the unaudited pro forma statement of assets and liabilities of the Enlarged Group

The information set out below is for illustrative purpose only and does not form part of the accountants’ report prepared by the reporting accountants of the Company, Ernst & Young, Certified Public Accountants, Hong Kong, as set out in Appendix III to the Circular.

To provide additional financial information, the unaudited pro forma statement of assets and liabilities of the Enlarged Group as at 30 September 2006 have been prepared based on:

• (i) the audited financial information of Carrianna (Hunan) Enterprise Co. Ltd. (the “JV Co”) as at 31 December 2006 which have been extracted from Appendix III to the Circular;

• (ii) the unaudited financial information of the Group as at 30 September 2006 which have been extracted from the published interim report of the Group for the six months ended 30 September 2006; and

• (iii) after taking into account of the unaudited pro forma adjustments as described in the notes thereto to demonstrate the effect of the Acquisition might have affected the relevant financial information of the Group as if the Acquisition had taken place on 30 September 2006.

The unaudited pro forma statement of assets and liabilities of the Enlarged Group presented below does not purport to present what the consolidated balance sheet would actually have been if the Acquisition had taken place on 30 September 2006, or to project the financial information for any future periods and are included for illustrative purpose only.

The unaudited pro forma statement of assets and liabilities should be read in conjunction with the financial information contained in this circular and the “Accountants’ Report on Carrianna (Hunan) Enterprise Co. Ltd.” set out in Appendix III to this circular.

The unaudited pro forma statement of assets and liabilities below has been prepared for illustrative purpose only, and because of its hypothetical nature, it may not give a true picture of the financial position of the Enlarged Group as at 30 September 2006 or at any future dates.

– 171 –

APPENDIX IV

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

In particular, the corporate income tax (“CIT”) rate used in calculating deferred tax liabilities in the unaudited pro forma statement of assets and liabilities is the current CIT rate of 33%. As the acquisition of the 55% interest in the JV Co will be completed in April 2007 or later, the first consolidated financial statements of the Enlarged Group will be prepared for the year ending 31 March 2008 when the applicable CIT rate will be changed to 25% by the recent tax legislation passed by the National People’s Congress of the PRC.

Unaudited consolidated balance sheet of the Group as at 30 September 2006 HK$’000 NON-CURRENT ASSETS Properties, plant and equipment 175,262 Properties under development – Investment properties 989,476 Prepaid land lease payments 1,120 Goodwill 8,721 Other intangible asset – Interests in associates 432,670 Available-for-sale investments 13,290 Financial assets at fair value through profit and loss 11,671 Total non-current assets 1,632,210 CURRENT ASSETS Properties held for sale 99,158 Inventories 59,718 Debtors, deposits and prepayments 301,830 Pledged time deposits 7,624 Cash and cash equivalents 64,452 Total current assets 532,782	Audited balance sheet of the JV Co as at Unaudited 31 December pro forma 2006 adjustments HK$’000 HK$’000 Notes 1,632 188,297 386,662 1 – – – 42,250 3 – 526,854 1 – 169 – 190,098 – – 1,055 – 34,546 (60,348) 2 35,601	Unaudited pro forma statement of assets and liabilities of the Enlarged Group as at 30 September 2006 HK$’000 176,894 574,959 989,476 1,120 50,971 526,854 432,670 13,459 11,671
		2,778,074
		99,158 59,718 302,885 7,624 38,650
		508,035

– 172 –

APPENDIX IV

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

CURRENT LIABILITIES Trade creditors Sundry creditors, accruals and deposits received Land premium payable Interest-bearing bank borrowings Finance lease payables Tax payable Dividend payable Total current liabilities NET CURRENT ASSETS/ (LIABILITIES) TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Interest-bearing bank borrowings and other borrowings Land premium payable Finance lease payables Deferred tax Total non-current liabilities Net assets	Unaudited consolidated balance sheet of the Group as at 30 September 2006 HK$’000 49,941 94,843 – 275,402 364 80,978 14,892 516,420 16,362 1,648,572 232,007 – 446 55,008 287,461 1,361,111	Unaudited pro forma Audited statement of balance sheet assets and of liabilities of the the JV Co Enlarged Group as at Unaudited as at 31 December pro forma 30 September 2006 adjustments 2006 HK$’000 HK$’000 Notes HK$’000 32 49,973 18,216 113,059 21,921 21,921 – 275,402 – 364 – 80,978 – 14,892 40,169 556,589 (4,568) (48,554) 185,530 2,729,520 38,220 270,227 43,097 43,097 – 446 – 331,145 1 386,153 81,317 699,923 104,213 2,029,597

– 173 –

APPENDIX IV

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

EQUITY Equity attributable to equity holders of the parent Issued capital Reserves MINORITY INTERESTS Total equity	Unaudited consolidated balance sheet of the Group as at 30 September 2006 HK$’000 74,559 1,258,381 1,332,940 28,171 1,361,111	Unaudited pro forma Audited statement of balance sheet assets and of liabilities of the the JV Co Enlarged Group as at Unaudited as at 31 December pro forma 30 September 2006 adjustments 2006 HK$’000 HK$’000 Notes HK$’000 100,580 22,426 2 96,985 (100,580) 4 3,633 337,097 2 1,595,478 (3,633) 4 104,213 1,692,463 – 308,963 5 337,134 104,213 2,029,597	Unaudited pro forma Audited statement of balance sheet assets and of liabilities of the the JV Co Enlarged Group as at Unaudited as at 31 December pro forma 30 September 2006 adjustments 2006 HK$’000 HK$’000 Notes HK$’000 100,580 22,426 2 96,985 (100,580) 4 3,633 337,097 2 1,595,478 (3,633) 4 104,213 1,692,463 – 308,963 5 337,134 104,213 2,029,597
			1,692,463 337,134
			2,029,597

Notes to the unaudited pro forma statement of assets and liabilities of the Enlarged Group:

1. To record the fair value adjustments of properties under development and other intangible asset of the JV Co amounting to HK$386,662,000 and HK$526,854,000, respectively, and the corresponding deferred tax liabilities amounting to HK$331,145,000. Out of the deferred tax liabilities, HK$97,480,000 represents the PRC land appreciation tax provision and HK$233,665,000 represents the corporate income tax (“CIT”) provision.

The CIT rate of 33% was adopted in calculating the CIT provision in this pro forma statement. Subsequent to the pro forma statement date of 30 September 2006, the National People’s Congress of the PRC passed the unified tax law proposal and adopts unified enterprise tax rate of 25% for all domestic and foreign invested

– 174 –

APPENDIX IV

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

enterprises in the PRC. To this end, in the next financial statements following the completion of the Acquisition, CIT rate of 25%, instead of 33%, will be applicable to the JV Co. Should a CIT rate of 25% be adopted in this pro forma statement, deferred tax liabilities would have reduced by HK$56,647,000 to HK$274,498,000.

According to the Park Agreements, the JV Co is entitled to an incentive payment of RMB150,000,000 from the People’s Government of Yiyang City out of its local tax revenue received in respect of the Project at Yiyang city. Such amount has not been realised as of the pro forma statement date.

Other intangible asset represented contractual right arising from the difference between the market value of additional lots of lands to be acquired by the JV Co and the basis quote price under the Park Agreements.

The adjustments are made by reference to the valuation report dated 8 March 2007 prepared by Vigers Appraisal & Consulting Limited, an independent property valuer, and the carrying value of the properties under development and other intangible asset as at 31 December 2006.

1. To record the consideration for the Acquisition of HK$419,871,000, of which HK$60,348,000 is to be settled by cash and the remaining balance of HK$359,523,000 by the issue and allotment of 224,258,432 new ordinary shares of the Company of HK$0.1 each at a price of HK$1.6.

2. To record the goodwill arising on the acquisition of the 55% interest in the JV Co, which represents the difference between the consideration amounting to HK$419,871,000 and the fair value of the 55% equity interest in the JV Co amounting to HK$377,621,000 as at 31 December 2006, after the fair value adjustments as stated in note 1 above, which is calculated as:

Audited net assets as at 31/12/2006 Fair value adjustment on properties under development Fair value adjustment on other intangible asset Deferred tax liabilities Adjusted net assets Adjusted net assets in relation to 55% equity interest acquired	HK$’000 104,213 386,662 526,854 (331,145) 686,584 377,621

– 175 –

APPENDIX IV

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

Should the CIT rate of 25% be adopted in this pro forma statement, the fair value of 55% equity interest in the JV Co would have amounted to HK$408,777,000 and the goodwill arising on the acquisition of the 55% interest in the JV Co would have reduced by HK$31,156,000 to HK$11,094,000.

1. To eliminate the share capital and the pre-acquisition reserves of the JV Co upon completion of the Acquisition.

2. To record the minority interest arising on the remaining 45% interest in the JV Co of HK$308,963,000 as at 31 December 2006, after the fair value adjustments as stated in note 1 above. Should the CIT rate of 25% be adopted in this pro forma statement, the minority interest would have increased by HK$25,491,000 to HK$334,454,000.

3. Conversion of RMB into HK$ is based on the exchange rate of RMB1.00 = HK$1.0058.

– 176 –

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, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement herein misleading.

2. DISCLOSURE OF INTERESTS BY DIRECTORS AND CHIEF EXECUTIVE

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

(a) Directors’ Interests in shares of the Company

						Underlying		Percentage
		Number of ordinary		shares		shares		of the
		held and nature				pursuant		Company’s
			of interest			share		issued
Name of		Personal	Family	Other		options		share
director	Capacity	interests	interests	interests		(note 1)	Total	capital
KC Ma	Beneficial owner,	29,510,000	9,300,000	259,129,025		10,000,000	307,939,025	41.24
	interest of		(note 2)	(note 3)
	spouse,
	beneficiary of trust
KY Ma	Interest of spouse	–	2,700,000	101,201,040		10,500,000	114,401,040	15.32
	and beneficiary		(note 4)	(notes 5&6)
	of trust
Ng Yan Kwong	Beneficial	5,000,000	–		–	8,000,000	13,000,000	1.74
	owner
Yip Hing Chung	Beneficial	3,520,000	–		–	–	3,520,000	0.47
	owner

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APPENDIX V

GENERAL INFORMATION

					Underlying		Percentage
		Number of ordinary shares			shares		of the
			held and nature		pursuant		Company’s
			of interest		share		issued
Name of		Personal	Family	Other	options		share
director	Capacity	interests	interests	interests	(note 1)	Total	capital
Lo Ming Chi,	Beneficial owner	–	–	–	450,000	450,000	0.06
Charles
Yau Wing Keung	Beneficial owner	–	–	–	450,000	450,000	0.06
Lo Man Kit, Sam	Beneficial owner	–	–	–	150,000	150,000	0.02

Notes:

• (1) The underlying shares represent interests of options granted to the Directors and its associate under the share option scheme to acquire for shares of the Company.

• (2) The shares were owned by Cheung Lin Kiu, the spouse of KC Ma.

• (3) KC Ma and his family are the objects of a discretionary trust which effectively owns the entire issued share capital of Regent World Investments Limited (“Regent World”) and 70% of the entire issued share capital of Bond Well Investments Limited (“Bond Well”). At the date of this circular, Regent World owned 184,121,625 shares and Bond Well owned 75,007,400 shares of the Company.

• (4) The shares were owned by Kwok Kit Mei, the spouse of KY Ma.

• (5) KY Ma and his family are the objects of a discretionary trust which effectively owns the entire issued share capital of Grand Wealth Investments Limited (“Grand Wealth”) and Peaceful World Limited (“Peaceful World”). At the date of this circular, Grand Wealth owned 74,651,040 shares and Peaceful World owned 19,050,000 shares of the Company.

• (6) Peaceful World owns the entire issued share capital of Real Potential Limited (“Real Potential”). At the date of this circular, Real Potential owned 7,500,000 shares of the Company. The interests of Real Potential in the Company are therefore deemed to be the interests of Peaceful World in which KY Ma is also deemed to have interests for the reason as stated in note 5 above.

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APPENDIX V

GENERAL INFORMATION

(b) Subsidiaries

					Percentage
					of the
					subsidiary’s issued
Name of	Name of		Number of	Type of	share capital
subsidiaries	directors	Capacity	shares held	shares	(Ordinary shares)
Amica Development	KY Ma	Beneficial owner	10,000	Ordinary	10
Limited
Carrianna Chiu Chow	KY Ma	Beneficiary of trust	15,000	Ordinary	1.5
Restaurant (T.S.T.)
Limited
Carrianna Chiu Chow	Yip Hing Chung	Beneficial owner	100,000	Ordinary	10
Restaurant (T.S.T.)
Limited
Ginza Development	KC Ma	Beneficial owner	15	Ordinary	2.5
Company Limited
Ginza Development	KY Ma	Beneficiary of trust	18	Ordinary	3
Company Limited
Ginza Development	Yip Hing Chung	Beneficial owner	30	Ordinary	5
Company Limited
Gartrend Development	KC Ma	Beneficial owner	500,000	Non-voting	N/A
Limited				deferred
Gartrend Development	KY Ma	Beneficial owner	500,000	Non-voting	N/A
Limited				deferred
Tak Sing Alliance	KC Ma	Beneficial owner	9,000	Non-voting	N/A
Limited				deferred
Tak Sing Alliance	KY Ma	Beneficial owner	1,000	Non-voting	N/A
Limited				deferred

In addition to the above, KC Ma and KY Ma have non-beneficial personal equity interests in certain subsidiaries held for the benefit of the Group solely for the purpose of complying with their minimum company membership requirements.

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GENERAL INFORMATION

APPENDIX V

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive of the Company or their associates had any interests or short positions in the shares, underlying shares or debentures of the Company, or any associated corporations (within the meaning of Part XV of the SFO) as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

3. OTHER INTERESTS OF DIRECTORS

(a) Interests in service contracts

At as the Latest Practicable Date, none of the Directors has entered, or is proposing to enter, into a service contract with any member of the Group, excluding contracts expiring or determinable by the Group within one year without payment of compensation (other than statutory compensation).

(b) Interests in assets of the Group

Since 31 March 2006, the date to which the latest published audited accounts of the Company have been made up, none of the Directors has, or has had, any direct or indirect interest in any assets which have been acquired or disposed of by or leased to any member of the Group or are proposed to be acquired or disposed of by or leased to, any member of the Group.

(c) Interests in contracts or arrangements

Save as disclosed above, none of the Directors is materially interested in any contract or arrangement subsisting at the date of this circular which is significant in relation to the business of the Group taken as a whole.

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GENERAL INFORMATION

APPENDIX V

4. SUBSTANTIAL SHAREHOLDERS

As at the Latest Practicable Date, the following persons (other than a Director or chief executive of the Company ) had the following interests or short positions in the shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of the Part XV of SFO, or who is, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group:–

				Percentage
				of the
			Number of	Company’s
Name of			ordinary	issued
shareholder	Capacity	Notes	shares held	share capital
East Asia International	Trustee	a	360,330,065	48.26
Trustees Limited
Golden Yield Holdings	Interest in controlled	b	259,129,025	34.71
Limited	corporations
Wealthy Platform Limited	Interest in controlled	c	101,201,040	13.55
	corporations
Regent World Investments	Holding corporation	b	184,121,625	24.66
Limited
Bond Well Investments	Holding corporation	b	75,007,400	10.05
Limited
Grand Wealth Investments	Holding corporation	c	74,651,040	10.00
Limited

Notes:

a. East Asia International Trustees Limited (“EAIT”) is the trustee of a discretionary trust of which KC Ma and his family are the objects and through its wholly-owned subsidiary, Golden Yield Holdings Limited (“Golden Yield”), EAIT was indirectly interested in 259,129,025 shares of the Company. EAIT is also the trustee of a discretionary trust of which KY Ma and his family are the objects and through its whollyowned subsidiary, Wealthy Platform Limited (“Wealthy Platform”), EAIT was indirectly interested in 101,201,040 shares in the Company. As at the date of this circular, EAIT was effectively interested in a total of 360,330,065 shares of the Company.

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APPENDIX V

GENERAL INFORMATION

• b. Golden Yield owns the entire issued share capital of Regent World and 70% of the entire issued share capital of Bond Well, was indirectly interested in a total of 259,129,025 shares of the Company. The total shares held by both Regent World and Bond Well are the same block of shares as disclosed in “Other interests” of KC Ma under the section headed “Disclosure of Interests by Directors and Chief Executive” set out above.

• c. Wealthy Platform owns the entire issued share capital of Grand Wealth and Peaceful World and indirect owns the entire issued share capital of Real Potential through Peaceful World, was indirectly interested in 101,201,040 shares of the Company. The total shares held by Grand Wealth, Peaceful World and Real Potential are the same block of shares as disclosed in “Other interests” of KY Ma under the section headed “Disclosure of Interests by Directors and Chief Executive” set out above.

Save as disclosed above, as far as was known to the Directors as at the Latest Practicable Date, no other person (other than a Director or chief executive) had any interest or short positions in shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of the Part XV of SFO, or who is, directly or indirectly, interested in 5% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group.

5. COMPETING INTERESTS OF DIRECTORS AND ASSOCIATES

As at the Latest Practicable Date, the Directors were not aware that any of the Directors has interest in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group which falls to be disclosed under the Listing Rules.

6. LITIGATION

As at the Latest Practicable Date, no member of the Group was engaged in any litigation or arbitration proceedings of material importance and there was no litigation or claim of material importance known to the Directors to be pending or threatened against any member of the Group.

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GENERAL INFORMATION

APPENDIX V

7. QUALIFICATION OF EXPERT, CONSENT AND EXPERT’S INTERESTS

The following is the qualifications of the experts who have given their opinion or advice contained in this circular:

Name

Qualification

Partners Capital International Limited (the “IFA”)

a licensed corporation to perform Type 1 and Type 6 regulated activities under SFO

Vigers Appraisal & Consulting Ltd (the “Valuer”)

Independent property valuer

Ernst & Young (the “Auditor”)

Certified public accountants

Each of the IFA (an independent financial advisor), the Valuer (an independent property valuer) and the Auditor has given and has not withdrawn its written consent to the issue of this circular with the inclusion of its letter or report and references to its name in the form and context in which they appear.

Each of the IFA, the Valuer and the Auditor confirmed that as at the Latest Practicable Date it did not have any shareholding in the Company or any of its subsidiaries or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

Each of the IFA, the Valuer and the Auditor further confirmed that as at the Latest Practicable Date it did not have any interest, direct or indirect, in any assets which have been, since 31 March 2006 (being the date to which the latest published audited accounts of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

8. MATERIAL CONTRACT

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Company or its subsidiaries within two years preceding the date of this circular and which are or may be material:

• (a) The Agreement

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GENERAL INFORMATION

APPENDIX V

9. EMPLOYEE INFORMATION

As at the Latest Practicable Date, the total number of employee of the Group is approximately 2,900.

10. GENERAL

• (a) The company secretary of the Company is Mr. Ng Yan Kwong. He is a member of the Hong Kong Institute of Certified Public Accountants and the CPA Australia.

• (b) The registered office of the Company is situated at Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda.

• (c) The branch share registrar of the Company in Hong Kong is Tengis Limited at 26/F, Tesbury Centre, 28 Queen’s Road East, Hong Kong.

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

• (e) Mr. Ng Yan Kwong is the qualified accountant of the Company and he is a member of Hong Kong Institute of Certified Public Accountants and the CPA Australia.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the head office and principal place of business of the Company at 26/F., Phase II, Wyler Centre, 200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong during normal business hours on any business day from the date of this circular until 14 days hereafter:

• (a) this circular;

• (b) the Agreement;

• (c) the Memorandum of Association and Bye-Laws of the Company;

• (d) the audited accounts of the Company for each of the three financial years ended 31 March 2004, 2005 and 2006; and

• (e) the written consents referred to in the paragraph headed “ Qualification of Expert, Consent and Expert’s Interests ” in this Appendix.

– 184 –

NOTICE OF THE SPECIAL GENERAL MEETING

TAK SING ALLIANCE HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

(Stock Code: 126)

NOTICE IS HEREBY GIVEN (the “Notice”) that a special general meeting (the “Meeting”) of Tak Sing Alliance Holdings Limited (the “Company”) will be held at 26th Floor, Wyler Centre, Phase II, 200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong on Wednesday, 18 April 2007 at 11:00 a.m. for the purpose of considering and, if thought fit, passing (with or without modification) the following resolutions as ordinary resolutions of the Company.

ORDINARY RESOLUTIONS

“THAT

1. the Acquisition (as defined and more particularly described in the circular issued by Tak Sing Alliance Holdings Limited (the “Company”) to its shareholders dated 30 March 2007 (the “Circular”)) and the entering into of the Agreement (as defined in the Circular) in relation to the proposed acquisition of the Sale Interests (as defined in the Circular) at a consideration of RMB417,450,000 which represents a discount of 25% to the valuation figure of the Sale Interests and such consideration will be satisfied as to RMB60,000,000 by cash and RMB357,450,000 by the issue of 224,258,432 Consideration Shares, and the performance of the transactions contemplated by the Agreement; and

2. the Consideration Shares (as defined in the Circular) to be allotted and issued to KC Ma and KY Ma or their nominees, subject to the Listing Committee of The Stock Exchange of Hong Kong Limited granting or agreeing to grant the listing of, and permission to deal in, the Consideration Shares, and such Consideration Shares to rank pari passu in all respects with the existing issued shares of the Company,

be and are hereby approved, ratified and confirmed; and any two directors of the Company if the affixation of the common seal is necessary, be and are hereby authorized for and on behalf of the Company to execute all such other documents, instruments and agreements as are necessary and desirable and expedient in their opinion to implement and/or give effect to the terms of the Acquisition and the matters referred to above in this resolution and in the Circular or which the directors of the Company otherwise consider necessary or desirable or

– 185 –

NOTICE OF THE SPECIAL GENERAL MEETING

expedient to be done in connection with any of the foregoing and to do all such acts or things deemed by him/her to be incidental to, ancillary to or in connection with the matters contemplated in the Agreement, including but not limited to the issue of the Consideration Shares”.

Yours faithfully, By Order of the Board Tak Sing Alliance Holdings Limited Ma Kai Cheung Chairman

Hong Kong, 30 March 2007

Principal place of business: 26th Floor, Phase II Wyler Centre 200 Tai Lin Pai Road Kwai Chung, New Territories Hong Kong

Registered office: Canon’s Court, 22 Victoria Street, Hamilton HM12, Bermuda

Notes:

1. A member of the Company entitled to attend and vote at the SGM is entitled to appoint another person as his proxy to attend and vote in his stead. A member who is the holder of two or more Shares may appoint more than one proxy to represent him and vote on his behalf at the SGM. A proxy need not be a member of the Company.

2. In order to be valid, the form of proxy must be deposited at the Company’s branch share registrars, Tengis Limited, 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, together with the power or attorney or other authority (if any) under which it is signed or certified copy of such power of attorney or authority, not later than 48 hours before the time appointed for holding the SGM or any adjournment thereof.

3. Where there are joint holders of any Share, any one of such persons may vote at the SGM either personally or by proxy, in respect of such Share as if he were solely entitled thereto, but if more than one of such joint holders be present at the SGM personally or by proxy, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the register of members of the Company in respect of such joint holding.

– 186 –