Tomson Group Limited

(Incorporated in the Cayman Islands with limited liability)

(Stock Code: 258)

ANNOUNCEMENT OF ANNUAL RESULTS FOR THE YEAR ENDED 31ST DECEMBER, 2005

The board of directors (the “Board”) of Tomson Group Limited (the “Company”) is pleased to announce the audited consolidated results of the Company and its subsidiaries (altogether the “Group”) for the year ended 31st December, 2005 together with comparative figures for the corresponding year in 2004 as follows:

CONSOLIDATED INCOME STATEMENT

Notes Turnover 5 Cost of sales Gross profit Other income Selling expenses Administrative expenses Other expenses Surplus on revaluation of investment properties Finance costs 7 Profit on disposal of an associate Discount on acquisition released to income 8 Share of results of associates Share of results of jointly controlled entities Profit before taxation 6 Taxation 9 Profit for the year Attributable to: Shareholders of the Company Minority interests Dividend 10 Earnings per share (HK cents) 11 – Basic – Diluted	Year ended 2005 *HK$’000* 496,657 (184,482) 312,175 34,354 (93,009) (86,619) (63,361) – (17,392) – 124,784 210,932 1,182 21,878 233,992 (28,166) 205,826 203,664 2,162 205,826 65,874 17.98 N/A	31st December 2004 HK$’000 (Restated) 765,349 (320,889) 444,460 34,494 (91,571) (75,048) (36,632) 168,665 (9,016) 408 – 435,760 2,419 12,485 450,664 (74,658) 376,006 363,332 12,674 376,006 113,358 32.64 30.29

CONSOLIDATED BALANCE SHEET

Notes Non-Current Assets Fixed Assets – Investment properties – Property, plant and equipment Lease premium for land Properties under development Goodwill Deferred tax assets Interests in associates Interests in jointly controlled entities Investments in securities Available-for-sale investments Other assets Pledged deposits Current Assets Lease premium for land Properties held for sale Trade and other receivables and prepayments 12 Investments held for trading Inventories Tax recoverable Cash and bank balances Current Liabilities Trade and other payables 13 Deferred revenue Convertible bonds 2009 Provision for taxation Current portion of long-term bank borrowings Amount due to a jointly controlled entity Net Current Assets Total Assets Less Current Liabilities Capital and Reserves Share capital Reserves Equity attributable to shareholders of the Company Minority interests Total Equity	As at 31st December 2005 2004 *HK$’000* HK$’000 (Restated) 1,010,480 1,010,480 310,781 313,258 871,172 868,039 1,004,174 505,182 33,288 33,288 5,626 4,241 6,051 5,680 117,568 93,358 – 123,903 112,409 – 4,033 23,395 9,024 9,288 3,484,606 2,990,112 25,809 25,195 196,541 311,739 177,459 250,062 8,354 – 18,392 15,680 6 – 827,253 1,531,041 1,253,814 2,133,717 314,807 359,528 10,197 14,937 322,675 – 19,841 31,866 192,215 – 16,223 – 875,958 406,331 377,856 1,727,386 3,862,462 4,717,498 588,731 556,625 3,044,226 2,997,121 3,632,957 3,553,746 150,812 245,117 3,783,769 3,798,863	As at 31st December 2005 2004 *HK$’000* HK$’000 (Restated) 1,010,480 1,010,480 310,781 313,258 871,172 868,039 1,004,174 505,182 33,288 33,288 5,626 4,241 6,051 5,680 117,568 93,358 – 123,903 112,409 – 4,033 23,395 9,024 9,288 3,484,606 2,990,112 25,809 25,195 196,541 311,739 177,459 250,062 8,354 – 18,392 15,680 6 – 827,253 1,531,041 1,253,814 2,133,717 314,807 359,528 10,197 14,937 322,675 – 19,841 31,866 192,215 – 16,223 – 875,958 406,331 377,856 1,727,386 3,862,462 4,717,498 588,731 556,625 3,044,226 2,997,121 3,632,957 3,553,746 150,812 245,117 3,783,769 3,798,863
		2,990,112
		25,195 311,739 250,062 – 15,680 – 1,531,041
		2,133,717
		359,528 14,937 – 31,866 – –
		406,331
		1,727,386
		4,717,498
		556,625 2,997,121
		3,553,746 245,117
		3,798,863

Non-Current Liabilities Convertible bonds 2009 Long-term bank borrowings Deferred tax liabilities Amount due to a jointly controlled entity	– – 78,693 – 3,862,462	385,764 441,895 76,105 14,871
		4,717,498

Notes:–

1. The Audit Committee of the Company has reviewed the audited consolidated financial statements of the Group for the year ended 31st December, 2005.

2. BASIC OF PREPARATION OF FINANCIAL STATEMENTS

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”). In addition, the consolidated financial statements include applicable disclosures required by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and by the Hong Kong Companies Ordinance.

3. APPLICATION OF HONG KONG FINANCIAL REPORTING STANDARDS

In the current year, the Group has applied, for the first time, a number of new Hong Kong Financial Reporting Standards (“HKFRS(s)”), Hong Kong Accounting Standards (“HKAS(s)”) and Interpretations (hereinafter collectively referred to as “new HKFRSs”) issued by the HKICPA that are effective for accounting periods beginning on or after 1st January, 2005. The application of the new HKFRSs has resulted in a change in the presentation of the consolidated income statement, the consolidated balance sheet and the consolidated statement of recognised income and expense. In particular, the presentation of minority interests and share of taxation of associates or jointly controlled entities have been changed. The changes in presentation have been applied retrospectively. The adoption of the new HKFRSs has resulted in changes to the Group’s accounting policies in the following areas that have an effect on how the results for the current or prior accounting periods are prepared and presented:

(a) Business combinations

In the current year, the Group has applied HKFRS 3 “Business Combinations” which is effective for business combinations for which the agreement date is on or after 1st January, 2005. The principal effects of the application of HKFRS 3 to the Group are summarised below:

(i) Goodwill

In previous years, goodwill arising on acquisitions was capitalised and amortised over its estimated useful life. The Group has applied the relevant transitional provisions in HKFRS 3. With respect to goodwill previously capitalised on the balance sheet, the Group on 1st January, 2005 eliminated the carrying amount of the related accumulated amortisation of HK$58,906,000 with a corresponding decrease in the cost of goodwill. The Group has discontinued amortising such goodwill from 1st January, 2005 and goodwill will be tested for impairment at least annually and in the financial year in which the acquisition takes place. Goodwill arising on acquisitions on or after 1st January, 2005 is measured at cost less accumulated impairment losses (if any) after initial recognition. As a result of this change in accounting policy, no amortisation of goodwill has been charged in the current year. Comparative figures for 2004 have not been restated.

(ii) Excess of the Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost (previously known as “negative goodwill”)

In accordance with HKFRS 3, any excess of the Group’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost of acquisition (“discount on acquisition”) is recognised immediately in the income statement in the year in which the acquisition takes place. In previous years, negative goodwill arising on acquisitions was presented as a deduction from assets and released to income based on an analysis of the circumstances from which the balance resulted.

Discount on acquisition of approximately HK$124,784,000 was credited to the consolidated income statement in relation to the increase of shareholding in a subsidiary by the Group during the year.

(b) Financial instruments

In the current year, the Group has applied HKAS 32 “Financial Instruments: Disclosure and Presentation” and HKAS 39 “Financial Instruments: Recognition and Measurement”. HKAS 32 requires retrospective application. HKAS 39, which is effective for annual year beginning on or after 1st January, 2005, generally does not permit the recognition, derecognition or measurement of financial assets and liabilities on a retrospective basis. The adoption of HKAS 32 had no material impact to the Group. The principal effects resulting from the implementation of HKAS 39 are summarised below:

(i) Convertible bonds

Previously, the convertible bonds denominated in United States dollars were classified as liabilities and recorded at the proceeds received, net of premium payable on redemption and direct issue costs, on the balance sheet. Such convertible bonds contain a liability component and an embedded conversion option, which are required to be accounted for separately in accordance with HKAS 39. On 1st January, 2005, the Group designated such convertible bonds as financial liabilities comprising a liability component and an embedded conversion option in accordance with the transitional provisions in HKAS 39. The fair value of the convertible bonds at 1st January, 2005 and 31st December, 2005 was assessed by a professional valuer.

The liability component of convertible bonds is measured at amortised cost using the effective interest method. The embedded conversion option is measured at fair value at balance sheet date and the changes in fair value was recognised to the income statement.

On 1st January, 2005, the gain on fair value adjustment on the embedded conversion option of HK$32,019,000 has been recognised with a corresponding adjustment to the Group’s retained earnings.

(ii) Classification and measurement of financial assets and financial liabilities

The Group has applied the relevant transitional provisions in HKAS 39 with respect to classification and measurement of financial assets and financial liabilities that are within the scope of HKAS 39.

Up to 31st December, 2004, the Group classified and measured its equity securities in accordance with the benchmark treatment of Statement of Standard Accounting Practice (“SSAP”) 24 “Accounting for Investment in Securities”. Under SSAP 24, investments in debt or equity securities are classified as “investment in securities”, “other investments” or “held-to-maturity investments” as appropriate. “Investment in securities” are carried at cost less impairment losses (if any) while “other investments” are measured at fair value, with unrealised gains or losses included in the income statement. “Held-to-maturity investments” are carried at amortised cost less impairment losses (if any). From 1st January, 2005 onwards, the Group classifies and measures its equity securities in accordance with HKAS 39. Under HKAS 39, financial assets are classified as “financial assets at fair value through profit or loss”, “available-for-sale financial assets”, “loans and receivables”, or “held-to-maturity financial assets”. The classification depends on the purpose for which the assets are acquired. “Financial assets at fair value through profit or loss” and “available-for-sale financial assets” are carried at fair value, with changes in fair values recognised in the income statement and equity respectively. Available-for-sale equity investments that do not have quoted market prices in an active market and whose fair value cannot be reliably measured are stated at cost less impairment after initial recognition.

On 1st January, 2005, the Group classified and measured its debt and equity securities in accordance with the requirements of HKAS 39. Certain investments in securities of HK$49,537,000 as at 1st January, 2005 are classified as “available-for-sale investments” and stated at cost less impairment losses (if any) where their fair values cannot be reliably measured. Other investment of HK$74,366,000 are classified as available-for-sale investments and carried at fair value. Hence, a gain on fair value adjustment of HK$16,619,000 has been recognised on 1st January, 2005 with a corresponding adjustment to the Group’s retained earnings.

(iii) Financial assets and financial liabilities other than debt and equity securities

From 1st January, 2005 onwards, the Group classifies and measures its financial assets and financial liabilities other than debt and equity securities (which were previously outside the scope of SSAP 24) in accordance with the requirements of HKAS 39. As mentioned above, financial assets under HKAS 39 are classified as “financial assets at fair value through profit or loss”, “available-for-sale financial assets”, “loans and receivables” or “held-tomaturity financial assets”. Financial liabilities are generally classified as “financial liabilities at fair value through profit or loss” or “financial liabilities other than financial liabilities at fair value through profit or loss (other financial liabilities)”. “Other financial liabilities” are carried at amortised cost using the effective interest method.

(c) Owner-occupied leasehold interests in land

In previous years, owner-occupied leasehold land and buildings and leasehold land under construction were included in property, plant and equipment and properties under development, respectively, and measured using the cost model. In the current year, the Group has applied HKAS 17 “Leases”. Under HKAS 17, the land and buildings elements of a lease of land and buildings are considered separately for the purposes of lease classification, unless the lease payments cannot be allocated reliably between the land and buildings elements, in which case, the entire lease is generally treated as a finance lease. To the extent that the allocation of the lease payments between the land and buildings elements can be made reliably, the leasehold interests in land are reclassified to lease premium for land under operating leases, which are carried at cost and amortised over the lease term on a straight-line basis. This change in accounting policy has been applied retrospectively

and an amount of HK$89,615,000 and HK$803,619,000 had been reclassified from property, plant and equipment and properties under development, respectively, to lease premium for land as at 31st December, 2004 (see Note 4 for the financial impact). Alternatively, where the allocation between the land and buildings elements cannot be made reliably, the leasehold interests in land continue to be accounted for as property, plant and equipment.

(d) Investment properties

In the current year, the Group has, for the first time, applied HKAS 40 “Investment Property”. The Group has elected to use the fair value model to account for its investment properties which requires gains or losses arising from changes in the fair value of investment properties to be recognised directly in the income statement for the year in which they arise. In previous year, investment properties under SSAP 13 “Accounting for Investment Properties” were measured at open market values, with revaluation surplus or deficits credited or charged to investment properties revaluation reserve unless the balance on this reserve was insufficient to cover a revaluation decrease, in which case the excess of the revaluation decrease over the balance on the investment properties revaluation reserve was charged to the income statement. Where a decrease had previously been charged to the income statement and revaluation subsequently arose, that increase was credited to the income statement to the extent of the decrease previously charged. The Group has applied HKAS 40 retrospectively. An amount of HK$119,735,000 had been transferred to the Group’s retained earnings as at 31st December, 2004 (see Note 4 for the financial impact). Comparative figures for 2004 have been restated.

(e) Share-based payments

In the current year, the Group has applied HKFRS 2 Share-based Payment which requires an expense to be recognised where the Group buys goods or obtains services in exchange for shares or rights over shares (“equity-settled transactions”), or in exchange for other assets equivalent in value to a given number of shares or rights over shares (“cash-settled transactions”). The principal impact of HKFRS 2 on the Group is in relation to the expensing of the fair value of share options granted to directors and employees of the Company, determined at the date of grant of the share options, over the vesting period. Prior to the application of HKFRS 2, the Group did not recognise the financial effect of these share options until they were exercised. The Group has applied HKFRS 2 to share options granted on or after 1st January, 2005. In relation to share options granted before 1st January, 2005, the Group chooses not to apply HKFRS 2 with respect to share options granted on or before 7th November, 2002 and vested before 1st January, 2005. However, the Group is still required to apply HKFRS 2 retrospectively to share options that were granted after 7th November, 2002 and had not yet vested on 1st January, 2005. Because there were no unvested share options at 1st January, 2005, comparative figures for 2004 need not be restated.

The Group has not early applied the following new standards or interpretations that have been issued but are not yet effective. The Directors of the Company has commenced considering the potential impact of these standards or interpretations but are not yet in a position to determine whether these Standards and Interpretations would have a significant impact on how the Group’s results of operations and financial position are presented.

HKAS 1 (Amendment)	Capital Disclosures1
HKAS 19 (Amendment)	Actuarial Gains and Losses, Group Plans and Disclosures2
HKAS 21 (Amendment)	Net Investment in a Foreign Operation2
HKAS 39 (Amendment)	Cash Flow Hedge Accounting of Forecast Intragroup Transactions2
HKAS 39 (Amendment)	The Fair Value Option2
HKAS 39 & HKFRS 4
(Amendments)	Financial Guarantee Contracts2
HKFRS 6	Exploration for and Evaluation of Mineral Resources2
HKFRS 7	Financial instruments: Disclosures1
HK(IFRIC)-Int 4	Determining whether an Arrangement Contains a Lease2
HK(IFRIC)-Int 5	Rights to Interests Arising from Decommissioning, Restoration and Environmental
	Rehabilitation Funds2
HK(IFRIC)-Int 6	Liabilities arising from Participating in a Specific Market-Waste Electrical and Electronic
	Equipment3
HK(IFRIC)-Int 7	Applying the Restatement Approach under HKAS 29 Financial Reporting in Hyperinflationary
	Economies4

1 Effective for annual periods beginning on or after 1st January, 2007 2 Effective for annual periods beginning on or after 1st January, 2006

3 Effective for annual periods beginning on or after 1st December, 2005 4 Effective for annual periods beginning on or after 1st March, 2006

4. SUMMARY OF THE EFFECTS OF THE CHANGES IN ACCOUNTING POLICIES

An analysis of increase(decrease) in profit for the year by line items is presented according to their nature:

Increase in fair value of investment properties Increase in share of results of jointly controlled entities Increase in share option expenses Decrease in amortisation of goodwill Increase in effective interest expense on the liability component of convertible bonds Increase in loss arising from changes in fair value of convertible bond embedded conversion option Transaction cost on issuance of convertible bonds 2009 amortised using effective interest method Recognition of discount on acquisition released to income Increase in taxation Increase in profit for the year	Year ended 2005 *HK$’000* – 2 (4,442) 24,133 (16,144) (38,010) 2,373 124,784 (2) 92,694	31st December 2004 HK$’000 141,047 361 – – – – – – (21,518)
		119,890

The cumulative effects of the application of the new HKFRSs as at 31st December, 2004 and 1st January, 2005 are summarised below:

As at 31st December 2004 Adjustments (restated) HK$’000 HK$’000 (89,615) 313,258 (803,619) 505,182 893,234 893,234 – 123,903 – – – (385,764) – 1,449,813 119,735 1,022,947 (119,735) – 245,117 245,117 245,117 1,268,064 (245,117) – – 1,268,064	As at 1st January 2005	As at 1st January 2005
Adjustments HK$’000 (89,615) (803,619) 893,234 – – – – 119,735 (119,735) 245,117 245,117 (245,117) –	Adjustments HK$’000 – – – (123,903) 140,522 (34,126) (17,507) (17,507) – – (17,507) – (17,507)	(restated) *HK$’000* 313,258 505,182 893,234 – 140,522 (419,890)
		1,432,306
		1,005,440 – 245,117
		1,250,557
		–
		1,250,557

The financial effects of the application of the new HKFRSs to the Group’s equity at 1st January, 2004 are summarised as below:

Minority interests	As originally stated HK$’000 –	Adjustment HK$’000 243,587	As restated HK$’000 243,857

5. BUSINESS AND GEOGRAPHICAL SEGMENTS

Turnover represents the aggregate of revenue under the following headings :

(i) Property investment
represents revenue from property management and net rental income
(ii) Property development and trading
represents gross revenue received and receivable from sales of properties
(iii) Industrial operations
represents the gross revenue from sale of PVC pipes
(iv) Leisure
represents the income from golf club operations and its related services
(v) Securities trading
represents the gross revenue received and receivable from trading of securities

Business segments

For the year ended 31st December, 2005

Property Investment HK$’000 58,225 248	Property Development and Trading HK$’000 282,483 –	Industrial Operations HK$’000 58,479 722	Leisure HK$’000 78,695 –	Securities Trading HK$’000 18,775 –	Others HK$’000 – –	Elimination Total HK$’000 HK$’000 – 496,657 (970) – (970) 496,657 – 159,281 34,354 (90,095) 103,540 (17,392) – 124,784 – 1,182 – 21,878 233,992 (28,166) 205,826	Elimination Total HK$’000 HK$’000 – 496,657 (970) – (970) 496,657 – 159,281 34,354 (90,095) 103,540 (17,392) – 124,784 – 1,182 – 21,878 233,992 (28,166) 205,826
58,473	282,483	59,201	78,695	18,775	–	(970)	496,657
	90,457	5,625	26,125	(2,145)	–	–	159,281 34,354 (90,095)
– – –	124,784 – 37	– – –	– (280) 21,841	– – –	– 1,462 –	– – –
							103,540 (17,392) 124,784 1,182 21,878
							233,992 (28,166)
							205,826

6. PROFIT BEFORE TAXATION

For the year ended 31st December, 2004 (Restated)

Property Investment HK$’000 56,557 83	Property Development and Trading HK$’000 598,109 –	Industrial Operations HK$’000 55,783 943	Leisure HK$’000 54,685 –	Securities Trading HK$’000 215 –	Others HK$’000 – –	Elimination Total HK$’000 HK$’000 – 765,349 (1,026) – (1,026) 765,349 – 435,408 34,494 (25,534) 444,368 (9,016) – 408 – 2,419 – 12,485 450,664 (74,658) 376,006	Elimination Total HK$’000 HK$’000 – 765,349 (1,026) – (1,026) 765,349 – 435,408 34,494 (25,534) 444,368 (9,016) – 408 – 2,419 – 12,485 450,664 (74,658) 376,006
56,640	598,109	56,726	54,685	215	–	(1,026)	765,349
	210,382	1,969	10,819	(18)	–	–	435,408 34,494 (25,534)
– – –	– – 290	– – –			408 3,104 –	– – –
							444,368 (9,016) 408 2,419 12,485
							450,664 (74,658)
							376,006

Geographical segments

The Group’s operations and assets are principally situated in mainland China. Accordingly, no geographical analysis of information is presented.

Profit before taxation has been arrived at after charging: Depreciation of property, plant and equipment Amortisation of lease premium for land Changes in fair value of investments held for trading Unrealised loss on investments in securities and after crediting: Interest income Share of tax credit of jointly controlled entities (included in share of results of jointly controlled entities) Net gain on disposal of property, plant and equipment, net of written off Net gain on disposal of investments held for trading	Year ended 2005 *HK$’000* 21,508 5,211 3,585 – 22,779 2 636 1,035	31st December 2004 HK$’000 22,460 5,071 – 19
		14,244 361 891 –

7. FINANCE COSTS

Interest on bank loans wholly repayable within five years _Less:_interest capitalised Finance cost of convertible bonds due 2009	Year ended 2005 *HK$’000* 27,536 (27,536 ) – 17,392 17,392	31st December 2004 HK$’000 (Restated) 20,143 (19,906) 237 8,779 9,016

8. DISCOUNT ON ACQUISITION RELEASED TO INCOME

In March 2005, the Group acquired a 20% interest in the issued share capital of Bonton Co. Ltd. (“Bonton”), a then 80% indirect owned subsidiary of the Company which holds a subsidiary engaged in property development, at a consideration of approximately HK$140,395,000, while the fair value of the Company’s share of the identifiable assets, liabilities and contingent liabilities of Bonton at the date of acquisition, in aggregate, amounted to approximately HK$265,179,000. The excess of the fair value over the cost of acquisition represented the discount on acquisition credited to the consolidated income statement for the year.

9. TAXATION

The charge comprises: Overseas tax calculated at tax rates prevailing in the respective jurisdictions where the relevant individual group companies operate Underprovision (overprovision) in prior years – Overseas profits tax Deferred taxation charge	Year ended 2005 *HK$’000* 27,896 86 184 28,166	31st December 2004 HK$’000 (Restated) 47,959 (1,400) 28,099 74,658

10. DIVIDEND

The Directors recommend the payment of a final dividend of HK$0.05 per share for the year ended 31st December, 2005 (2004: HK$0.10 per share).

11. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share attributable to the ordinary shareholders of the Company is based on the following data:

Earnings Profit for the year attributable to shareholders of the Company for the purposes of basic earnings per share Adjustment of finance costs on convertible bonds due 2009 Profit for the year attributable to shareholders of the Company for the purposes of diluted earnings per share Number of shares Weighted average number/number of ordinary shares for the purposes of basic earnings per share Effect of dilutive potential ordinary shares – Convertible bonds due 2009 Weighted average number of ordinary shares for the purposes of diluted earnings per share	Year ended 2005 *HK$’000* 203,664 1,133,017,699	31st December 2004 HK$’000 (Restated) 363,332 8,779
		372,111
		1,113,249,112 115,152,725
		1,228,401,837

Diluted earnings per share for the year ended 31st December, 2005 is not applicable as the effect is anti-dilutive.

Impact of changes in accounting policies

Changes in the Group’s accounting policies during the year are described in detail in note 4. To the extent that those changes have had an impact on results reported for 2005 and 2004, they have had an impact on the amounts reported for earnings per share. The following table summaries that impact on both basic and diluted earnings per share:

Figures before adjustments Adjustments arising from changes in accounting policies As reported/restated	Impact on basic earnings per share Year ended Year ended 2005 2004 HK cents HK cents 9.80 21.88 8.18 10.76 17.98 32.64	Impact on diluted earnings per share Year ended Year ended 2005 2004 HK cents HK cents N/A 20.55 N/A 9.74 N/A 30.29	Impact on diluted earnings per share Year ended Year ended 2005 2004 HK cents HK cents N/A 20.55 N/A 9.74 N/A 30.29
			30.29

12. TRADE AND OTHER RECEIVABLES AND PREPAYMENTS

The general credit terms of the Group given to trade customers range from cash on delivery to one month. A longer credit period may be granted to customers with long business relationship.

Included in trade and other receivables and prepayments are trade receivables and their aged analysis as at the balance sheet date is as follows:

Aged analysis of trade receivables: 0 – 3 months 4 – 6 months 7 – 12 months over 1 year	2005 *HK$’000* 20,465 8,684 1,849 35 31,033	2004 HK$’000 46,813 8,369 1,410 115
		56,707

13. TRADE AND OTHER PAYABLES

Included in trade and other payables are trade payables and their aged analysis as at the balance sheet date is as follows:

Aged analysis of trade payables: 0 – 3 months 4 – 6 months 7 – 12 months over 1 year	2005 *HK$’000* 4,208 74 5 53,665 57,952	2004 HK$’000 55,321 351 2,027 49,261
		106,960

FINAL DIVIDEND

The Board recommends the payment of a final dividend of HK$0.05 per share for the year ended 31st December, 2005 (2004: HK$0.10 per share) to shareholders whose names appear on the register of members of the Company on Friday, 26th May, 2006. Dividend warrants are expected to be despatched on Monday, 5th June, 2006.

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from Tuesday, 23rd May, 2006 to Friday, 26th May, 2006, both days inclusive, during which period no transfer of shares of the Company will be effected.

In order to qualify for the 2005 final dividend, all transfer documents accompanied by the relevant share certificates must be lodged with the Company’s share registrars in Hong Kong, Secretaries Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Hong Kong not later than 4:00 p.m. on Monday, 22nd May, 2006 for registration.

MANAGEMENT DISCUSSION AND ANALYSIS

General Overview

The Board of the Company would like to report a consolidated net profit after taxation attributable to shareholders of the Company of approximately HK$203.66 million (2004: HK$363.33 million (restated)) and a basic earnings per share of 17.98 HK cents (2004: 32.64 HK cents (restated)) for the year ended 31st December, 2005. The fall in results for the year was mainly attributable to a drop in sales revenue of the property development segment of the Group in Shanghai as fewer properties were marketed. In addition, a loss arising from changes in fair value of embedded conversion option of the convertible bonds issued by the Company in 2004 was charged to the consolidated income statement of the Group for the year under review due to an adoption of new Hong Kong Accounting Standards effective from 1st January, 2005.

On the other hand, in March 2005, the Group has completed an acquisition of a minority interest in a subsidiary which indirectly holds Tomson Riviera, the landmark property development project of the Group in Pudong along Huangpu River. As the fair value of the Company’s share of the net assets of the said subsidiary at the date of acquisition was more than the consideration paid, in accordance with a newly adopted Hong Kong Financial Reporting Standard effective in 2005, a discount on acquisition of approximately HK$124.78 million was recognized in and credited to the consolidated income statement of the Group for the year under review.

Operations Review

The Group’s operations and assets are now principally situated in mainland China. Having confidence in the development of mainland China, the Group goes on keeping its business focus in Shanghai, especially Pudong.

During the year under review, property development and trading remained the major revenue generator for the Group and made a contribution of HK$90.46 million to its operating results while a steady recurrent income generated from property investment delivered an operating profit of approximately HK$39.22 million to the Group. In addition, leisure activities showed an impressive performance in 2005, with a contribution to the Group’s operating results increased by 1.41 times to approximately HK$26.13 million and the Group also shared a profit of approximately HK$21.84 million from the hotel operations for 2005.

Property Development and Investment

Property development and investment is the core business of the Group and accounted for approximately 69% of the turnover of the Group for the year ended 31st December, 2005 while Tomson Golf Villas is the major source of operating revenue of the Group.

Tomson Golf Villas and Garden

Tomson Golf Villas and Garden is a principal property development project of the Group. The project comprises seven phases of golf villas and a development of apartment houses around the periphery of Tomson Shanghai Pudong Golf Club in Pudong.

Up to the end of the year under review, of the latest three phases of Tomson Golf Villas of a total gross floor area of over 93,000 square meters, a sale of over 90% was recorded while the saleable area of the first four phases of the development has already been sold out. For Tomson Golf Garden, nearly 97% of its total gross floor area was concluded sales. This residential property project accounted for about 48% of the gross profit of the Group during the year under review.

Tomson Riviera

The Group has completed an acquisition of the remaining 20% interest in the issued capital of a subsidiary at a consideration of US$18 million (equivalent to approximately HK$140.40 million) in March 2005 and now holds the entire interest in the luxurious residential development of the Group in Pudong along the Huangpu River. The development project is now formally named as Tomson Riviera and is expected for completion in mid 2006. There will be altogether four residential towers of 40 to 44 storeys and a clubhouse with a total gross floor area of nearly 142,000 square meters. The management is seriously contemplating the selling and/or leasing strategies of the property.

Other Residential Property Projects

Tomson Garden is composed of a series of apartment houses of a total gross floor area of approximately 141,000 square meters in Zhangjiang Hi-Tech Park of Pudong and next to Tomson Shanghai Pudong Golf Club. Of a total of around 660 residential units, all but 4 units were sold.

Xingguo Garden is now the sole property development of the Group in Puxi and reported a sale of about 85% of its total gross floor area of 10,000 square meters as at 31st December, 2005.

Commercial and Industrial Buildings

Rental income and management fee from the commercial and industrial property portfolio of the Group in Pudong, being Tomson Financial Building, Tomson International Trade Building, Tomson Waigaoqiao Industrial Park and the commercial podium of Tomson Business Centre, provided a steady income of HK$58.23 million to the Group for the year under review.

Land Bank

The Group has prudently reviewed the development of its land bank of over 900,000 square meters in Pudong, Shanghai and is now planning a development of a series of villas plus auxiliary facilities of a total gross floor area of approximately 152,000 square meters on a site near Tomson Shanghai Pudong Golf Club. The property project will be developed by phases. It is expected that the construction works of the first phase will commence in mid 2006 and complete by 2008.

Hospitality and Leisure Industry

Tomson Shanghai Pudong Golf Club

Sale of membership debentures boost up the operating revenue of Tomson Shanghai Pudong Golf Club which has reported a nearly 44% increase in its turnover for the year ended 31st December, 2005 as compared with last corresponding year. The operation made a contribution of HK$26.13 million to the operation results of the Group for the year and was the third largest contributor of the Group following property development and trading, and property investment.

It is the third year for BMW Asian Open held in the Golf Club. The successful organization of the tournament not only enhanced the popularity of the Golf Club but also was a driving force to an increase in sale of its club membership.

Hotel Inter-Continental Pudong Shanghai

Though under sever competition, the hotel operation, in which the Group holds a 50% interest, kept up its improvement in operating results. The Group shared a profit of approximately HK$21.84 million from the hotel operation during the year under review, an increase of nearly 80% from that for last year. The average occupancy rate of the hotel for 2005 was 77%.

Industrial Operations

To complement its principal business in property development, the Group has invested in 58% interest in an operation of manufacturing PVC pipes and fittings in Shanghai. The industrial operation made sound improvement in its gross profit margin during the year ended 31st December, 2005 and contributed an amount of HK$5.63 million to the operating results of the Group for the year. The PVC products of the operation were honoured as one of the “Top 100 Brands of Products in Shanghai” and the management will devote to further improvement of the product quality and client services so as to reinforce its competitive power.

Investment Holding

In addition to its own property development projects, the Group has an indirect investment in the property sector in Pudong by holding a 9.8% interest in the issued capital of Rivera (Holdings) Limited (“RHL”), a listed company in Hong Kong, and a 13.5% interest in the registered capital of an associated company of RHL established in mainland China. Both RHL and its associated company are principally engaged in property development and investment in Zhangjiang Hi-Tech Park, Pudong, Shanghai.

Financial Review

Liquidity and Financing

The Group’s capital expenditure and investments for the year were funded by cash on hand and operating revenue.

At the balance sheet date, the cash and cash equivalents of the Group amounted to approximately HK$827.25 million. During the year under review, the Group generated a net cash inflow of approximately HK$257.43 million from its operations. After taking into account a net cash outflow of approximately HK$575.60 million and HK$409.52 million from the Group’s investing activities and financing activities respectively, the Group recorded a net cash outflow of approximately HK$727.69 million (2004: net cash inflow of HK$823.68 million) for the year under review. The net cash outflow was attributable to not only a reduction of property sales but also a dividend payment and a partial repayment of long-term bank borrowings during the year.

The Group’s borrowings as at 31st December, 2005 amounted to approximately HK$531.11 million (2004: HK$842.53 million), equivalent to 14.62% (2004: 23.71%) of the equity attributable to the shareholders of the Company at the same date. All those borrowings were due for repayment within one year from the balance sheet date and on the other hand, in view of the nature, 60.75% was arisen from the convertible bonds issued and 36.19% was bank loans under security. The remaining 3.06% of the total borrowings was an unsecured advance from a jointly controlled entity of the Company and had no fixed terms of repayment.

At the balance sheet date, the Group’s capital commitments in relation to expenditure on properties under development, which were contracted but not provided for, amounted to approximately HK$995.73 million (2004: HK$952.98 million). The Group anticipates funding those commitments from its future operating revenue, bank borrowings and other sources of finance where appropriate.

The Group recorded a current ratio of 1.43 times (2004: 5.25 times (restated)) and a gearing ratio (total liabilities to equity attributable to the shareholders of the Company) of 26.28% (2004: 37.28%) as at 31st December, 2005. The drop in current ratio in 2005 was mainly resulted from the dividend payment by the Company, the repayment of a longterm bank loan and a classification of the convertible bonds as current liabilities at the balance sheet date since all or some of the bonds might be redeemed at the option of the holders in the first half of 2006 according to the terms.

Charge on Assets

As at 31st December, 2005, assets of the Group with an aggregate carrying value of approximately HK$1,366.67 million (2004: HK$878.72 million) were pledged to banks to secure general banking facilities of the Group and mortgage finance granted to buyers of properties developed by the Group or its jointly controlled entity.

Foreign Exchange Exposure

The majority of the Group’s assets and liabilities are denominated in Renminbi, therefore, the management expects that the change in value of Renminbi will not have any adverse effect to the Group since Renminbi has generally been perceived as having appreciation in value relative to Hong Kong Dollars. On the other hand, all of the other assets and liabilities of the Group are denominated in either Hong Kong Dollars or United States Dollars, hence, the Group does not anticipate any material foreign exchange exposure.

Contingent Liabilities

As at 31st December, 2005, the Group had contingent liabilities in the following aspects:

(a) a provision of a guarantee to indemnify the management company of Hotel Inter-Continental Pudong Shanghai for the renovation fund;
(b) a provision of undertaking to various banks in relation to mortgage finance granted to buyers of properties developed by the Group and its jointly controlled entity; and
(c) a possible levy of land appreciation tax by the tax authorities in mainland China in respect of the Group’s sale of properties there.

The Board is of the opinion that it would be unlikely for the Group to suffer any material financial loss owing to the provision of the aforesaid guarantee and undertaking and the chance that the land appreciation tax might be levied is less than probable.

Zero Coupon Convertible Bonds Due 2009

On 4th June, 2004, the Company issued zero coupon convertible bonds due 2009 in an aggregate principal amount of US$50 million (the “Bonds”) at par to professional investors. The Bonds are listed on the Stock Exchange as selectively marketed securities and do not bear any interest. Unless previously redeemed, converted or purchased and cancelled, all or some of the Bonds might be redeemed at the option of their relevant holders on 4th June, 2006 at 106.66% of their principal amount. Otherwise, the Bonds would be redeemed on their maturity on 4th June, 2009 at 117.49% of their principal amount. The bondholders had the right to convert the Bonds into fully paid ordinary shares of HK$0.50 each in the capital of the Company at an initial conversion price of HK$1.95 per share (subject to adjustment) during the period from 4th July, 2004 to 20th May, 2009. The conversion price was subsequently adjusted to HK$1.85 per share with effect from 27th May, 2005 upon declaration of a final dividend of the Company for 2004.

During 2005, a US$16.75 million aggregate principal amount of the Bonds were converted into fully paid ordinary shares in the capital of the Company while a further US$33.25 million aggregate principal amount of the Bonds were converted in 2006. Hence, the Bonds were converted in full and none of the Bonds have been redeemed or purchased since its issue. As at the date hereof, the Company has a total of 1,317 million ordinary shares in issue, of which 209.41 million shares were issued upon conversion of the Bonds.

Prospects

The Group has participated in the property sector in Shanghai since early 1990’s and the Board is satisfied with its development and has confidence in its long-term prospect. Property development and trading in Shanghai would definitely continue to be the key business of the Group while the management is considering any proposal of retaining certain quality properties as long-term investments to increase the asset base of and provide a recurrent rental income to the Group. Besides, in order to diversify the business portfolio of the Group, the Board would also explore any other potential investment opportunities in any other business lines.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES

During the year ended 31st December, 2005, the Company purchased a total of 7,684,000 shares of HK$0.50 each in its issued capital on the Stock Exchange at an aggregate consideration of approximately HK$14.33 million.

The repurchases of the Company’s shares were made pursuant to general mandates granted to the Board by the shareholders at the annual general meetings of the Company for 2004 and 2005 and all of the aforesaid repurchased shares have been duly cancelled.

Save as disclosed above, neither the Company nor any of its subsidiaries has purchased, sold or redeemed any of the Company’s listed securities during the year under review.

CODE ON CORPORATE GOVERNANCE PRACTICES

The Board has reviewed the Company’s corporate governance practices and considers that the Company has compiled with all the code provisions as set out in the Code on Corporate Governance Practices (the “Code”) contained in Appendix 14 to the Rules Governing the Listing of Securities on the Stock Exchange throughout the year ended 31st December, 2005, except that:

(a) in contrast to the Code Provisions A.4.1 and A.4.2 of the Code, none of the existing independent non-executive Directors of the Company is appointed for a specific term and the Articles of Association of the Company do not prescribe to have the Directors of the Company retired by rotation at least once every three years. However, one-third (or the number nearest thereto) of all the Directors of the Company (including the independent nonexecutive Directors) for the time being shall retire by rotation at the Company’s annual general meeting and shall be eligible for re-election in accordance with the Articles of Association of the Company; and
(b) there is neither any chairman of the Board nor any chief executive officer in the Company. In view of the Company’s nature of operations and the composition of the Board (being three executive Directors and three independent non-executive Directors), the Board believes that the present structure of the Board enables it to make and implement decisions promptly and efficiently. The responsibilities of the chairman of the Board stated in the code provisions of the Code are shared amongst the Directors of the Company. On the other hand, the Company has established an executive committee under the Board with specific terms of reference for dealing with day-to-day management of the Company’s business. Hence, no power is concentrated in any one individual of the Board.

PUBLICATION OF ANNUAL RESULTS ON THE WEBSITE OF THE EXCHANGE

This annual results announcement is published on the website of Hong Kong Exchanges and Clearing Limited at http://www.hkex.com.hk . The Annual Report 2005 of the Company will also be published on the aforesaid website in due course.

On behalf of the Board of TOMSON GROUP LIMITED Hsu Feng Managing Director

Hong Kong, 18th April, 2006

As at the date of this announcement, the Board of the Company comprises three executive directors, Madam Hsu Feng (Managing Director), Mr Chuang Hsiao Chen and Mr Tong Albert, and three independent non-executive directors, Madam Tung Wai Yee, Mr Cheung Siu Ping, Oscar and Mr Lee Chan Fai.

Please also refer to the published version of this announcement in The Standard.

AI assistant

Tomson Group Limited — Annual Report 2005

49075_rns_2006-04-19_0b355a52-d902-4c49-a255-a8051c368acf.pdf