ZO Future Group - Capital/Financing Update 2007

THIS PROSPECTUS IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this document or as to the action to be taken, you should consult a licensed securities dealer, a bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your Shares, you should at once hand the Prospectus Documents to the purchaser or transferee or to the bank, the licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. Dealings in the existing Shares and the Offer Shares may be settled through CCASS established and operated by HKSCC. You should consult your licensed securities dealer, bank manager, solicitor, professional accountant or other professional adviser for details of the settlement arrangements and how such arrangements may affect your rights and interests.

A copy of each of the Prospectus Documents, together with copies of the documents specified in the paragraph headed “Documents delivered to the Registrar of Companies” in Appendix III to this Prospectus, have been registered with the Registrar of Companies in Hong Kong as required by Section 342C of the Companies Ordinance. The Registrar of Companies in Hong Kong takes no responsibility as to the contents of any of these documents.

The Stock Exchange and HKSCC take no responsibility for the contents of the Prospectus Documents, make no representation as to their accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of the Prospectus Documents. Subject to the granting of listing of, and permission to deal in, the Offer Shares on the Stock Exchange, the Offer Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Offer Shares or such other dates as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and the CCASS Operational Procedures in effect from time to time.

GRANDTOP INTERNATIONAL HOLDINGS LIMITED 泓鋒國際控股有限公司 **[*]**

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 2309)

OPEN OFFER OF 192,000,000 OFFER SHARES AT A PRICE OF HK$0.20 PER OFFER SHARE ON THE BASIS OF ONE OFFER SHARE FOR EVERY TWO SHARES HELD ON THE RECORD DATE

Financial adviser to Grandtop International Holdings Limited

KINGSTON CORPORATE FINANCE LIMITED

Underwriter to the Open Offer

KINGSTON SECURITIES LIMITED

The latest time for acceptance of and payment for the Offer Shares is 4:00 p.m. on Monday, 4 June 2007. The procedures for acceptance and transfer of the Offer Shares is set out on pages 19 to 20 of this Prospectus.

Shareholders should note that, if, prior to the Latest Time for Termination:

(1) in the reasonable opinion of Kingston Securities, the success of the Open Offer would be materially and adversely affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the reasonable opinion of Kingston Securities materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Open Offer; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreements) of a political, military, financial, economic, or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the reasonable opinion of Kingston Securities materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(2) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the reasonable opinion of Kingston Securities is likely to materially or adversely affect the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(3) there is any change in the circumstances of the Company or any member of the Group which in the reasonable opinion of Kingston Securities will adversely affect the prospects of the Company, including without limiting the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group; or
(4) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than seven consecutive business days, excluding any suspension in connection with the clearance of this announcement or the Prospectus Documents or other announcements or circulars in connection with the Open Offer,

Kingston Securities shall be entitled by notice in writing to the Company, served prior to the Latest Time for Termination, to terminate the Underwriting Agreements.

Kingston Securities shall be entitled by notice in writing to rescind the Underwriting Agreements if prior to the Latest Time for Termination:

(1) any material breach of any of the representations, warranties or undertakings contained in the Underwriting Agreements comes to the knowledge of the Underwriter; or

(2) any Specified Event comes to knowledge of the Underwriter, then and, in such case, Kingston Securities may, by notice in writing given to the Company prior to the Latest time for Termination, rescinds the Underwriting Agreements and thereupon the obligations of all parties under the Underwriting Agreements shall terminate forthwith and no party shall have any claim against any other party in respect of any matter or thing arising out of and in connection with the Underwriting Agreements (save for any antecedent breaches thereof) and the Open Offer shall not proceed.

Shareholders and potential investors of the Company should note that the Open Offer is conditional upon the Underwriting Agreements having become unconditional and the Underwriter not having terminated the Underwriting Agreements in accordance with the terms thereof (a summary of which is set out in the sub-paragraph headed “Termination of the Underwriting Agreements” in the section headed “Underwriting Arrangements”). Accordingly, the Open Offer may or may not proceed.

Shareholders and potential investors of the Company should therefore exercise extreme caution when dealing in the Shares, and if they are in any doubt about their position, they should consult their professional advisers.

Shareholders should note that the Shares have been dealt in on an ex-entitlement basis commencing from Thursday, 10 May 2007 and that dealing in Shares will take place while the conditions to which the Underwriting Agreements are subject remain unfulfilled. Any Shareholder or other person dealing in Shares up to the date on which all conditions to which the Open Offer is subject to are fulfilled (which is expected to be on Thursday, 7 June 2007), will accordingly bear the risk that the Open Offer cannot become unconditional and may not proceed. Any Shareholder or other person contemplating selling or purchasing Shares, who is in any doubt about his/her/its position, is recommended to consult his/her/its own professional advisers.

18 May 2007

* For identification purpose only

	Page
Expected timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Termination of the Underwriting Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Open Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Reasons for the Open Offer and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Underwriting Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
Warning of the Risk of Dealing in the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	17
Shareholding Structure of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Fund Raising Activities in the Last Twelve Months . . . . . . . . . . . . . . . . . . . . . . . . .	19
Business Review and Future Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Procedures for Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	21
Appendix I — Financial Information on the Group . . . . . . . . . . . . . . . . . . . . . . . . .	22
Appendix II — Pro forma Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . .	88
Appendix III — General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	93

— i —

EXPECTED TIMETABLE

2007

Last day of dealings in Shares on a cum-entitlement basis. . . . . . . . . . . . . . Wednesday, 9 May First day of dealings in Shares on an ex-entitlement basis . . . . . . . . . . . . . . . Thursday, 10 May Latest time for lodging transfers of Shares in order to be qualified for the Open Offer . . . . . . . . . . 4:00 p.m. on Friday, 11 May Register of member of the Company closes . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 14 May to Wednesday, 16 May (both dates inclusive) Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 16 May Register of members of the Company reopens . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 17 May Despatch of the Prospectus Documents . . . . . . . . . . . . . . . . . . . . . . on or before Friday, 18 May Latest time for acceptance of and payment for Offer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m on Monday, 4 June Latest time for the Open Offer to become unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Thursday, 7 June Announcement of the results of the Open Offer. . . . . . . . . . . . . . . . . . . . . . . . . Monday, 11 June Despatch of share certificates for Offer Shares and refund cheques (if any) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . on or before Tuesday, 12 June Dealings in full-paid Offer Shares commence . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 14 June

Dates stated in this Prospectus for events in the timetable are indicative only and may be extended or varied. Any changes to the anticipated timetable for the Open Offer will be announced as appropriate.

Shareholders should note that completion of the Underwriting Agreements is conditional and may or may not proceed. Shareholders and potential investors of the Company should exercise extreme caution when dealing in the Shares.

— 1 —

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE OPEN OFFER

The latest time for acceptance of and payment for the Open Offer will not take place if there is:

a tropical cyclone warning signal number 8 or above, or
a “black” rainstorm warning
(i) in force in Hong Kong at any local time before 12:00 noon and no longer in force after 12:00 noon on Monday, 4 June 2007. Instead the latest time of acceptance of and payment for the Open Offer will be extended to 5:00 p.m. on the same business day;
(ii) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on Monday, 4 June 2007. Instead the latest time of acceptance of and payment for the Open Offer will be rescheduled to 4:00 p.m. on the following business day which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m.

If the latest time for acceptance of and payment for the Open Offer does not take place on Monday, 4 June 2007, the dates mentioned in the section headed “Expected timetable” in this Prospectus may be affected. A press announcement will be made by the Company in such event.

— 2 —

TERMINATION OF THE UNDERWRITING AGREEMENTS

If, prior to the Latest Time for Termination:

(1) in the reasonable opinion of Kingston Securities, the success of the Open Offer would be materially and adversely affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the reasonable opinion of Kingston Securities materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Open Offer; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreements) of a political, military, financial, economic, or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the reasonable opinion of Kingston Securities materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(2) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the reasonable opinion of Kingston Securities is likely to materially or adversely affect the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(3) there is any change in the circumstances of the Company or any member of the Group which in the reasonable opinion of Kingston Securities will adversely affect the prospects of the Company, including without limiting the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group; or
(4) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than seven consecutive business days, excluding any suspension in connection with the clearance of this announcement or the Prospectus Documents or other announcements or circulars in connection with the Open Offer,

— 3 —

TERMINATION OF THE UNDERWRITING AGREEMENTS

Kingston Securities shall be entitled by notice in writing to the Company, served prior to the Latest Time for Termination, to terminate the Underwriting Agreements.

Kingston Securities shall be entitled by notice in writing to rescind the Underwriting Agreements if prior to the Latest Time for Termination:

(1) any material breach of any of the representations, warranties or undertakings contained in the Underwriting Agreements comes to the knowledge of the Underwriter; or
(2) any Specified Event comes to knowledge of the Underwriter,

then and, in such case, Kingston Securities may, by notice in writing given to the Company prior to the Latest time for Termination, rescinds the Underwriting Agreements and thereupon the obligations of all parties under the Underwriting Agreements shall terminate forthwith and no party shall have any claim against any other party in respect of any matter or thing arising out of and in connection with the Underwriting Agreements (save for any antecedent breaches thereof) and the Open Offer shall not proceed.

— 4 —

DEFINITIONS

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

“Announcement”	the announcement of the Company dated 23 April 2007
	in relation to the Open Offer
“Application Form(s)”	the application form(s) for use by the Qualifying
	Shareholders to apply for the Offer Shares
“associates”	has the meaning ascribed thereto under the Listing Rules
“Board”	board of Directors
“business day”	a day, other than Saturday, on which banks in Hong
	Kong are open for business
“CCASS”	the Central Clearing and Settlement System established
	and operated by HKSCC
“Companies Ordinance”	Companies Ordinance (Chapter 32 of the Laws of Hong
	Kong)
“Company”	Grandtop International Holdings Limited, a company
	incorporated in the Cayman Islands with limited liability,
	the issued Shares of which are listed on the Main Board
	of the Stock Exchange
“Director(s)”	director(s) of the Company
“Excluded Shareholder(s)”	those Overseas Shareholders to whom the Board, after
	obtaining relevant advice, considers it necessary or
	expedient not to offer to them Offer Shares
“Group”	the Company and its subsidiaries
“HKSCC”	Hong Kong Securities Clearing Company Limited
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC
“Irrevocable Undertakings”	the irrevocable undertakings given by Premier Rise and
	Ms. Leung, under which Premier Rise and Ms. Leung
	have irrevocably undertaken to subscribe for their full
	assured entitlements pursuant to the Open Offer

— 5 —

DEFINITIONS

“Kingston Securities”	Kingston Securities Limited, a licensed corporation to
	carry on business in type 1 (dealing in securities)
	regulated activity under the SFO
“Latest Practicable Date”	16 May 2007, being the latest practicable date prior to
	the printing of this Prospectus for ascertaining certain
	information contained herein
“Last Trading Date”	11 April 2007, being the last trading date of the Shares
	prior to the release of the Announcement
“Latest Lodging Date”	being 4:00 p.m. on Friday, 11 May 2007 as the latest
	time for lodging transfers of Shares in order to qualify
	for the Open Offer
“Latest Time for Acceptance”	4:00 p.m. on Monday, 4 June 2007 or such later time or
	date as may be agreed between the Company and
	Kingston Securities, being the latest time for acceptance
	of and payment for the Offer Shares
“Latest Time for Termination”	4:00 p.m. on the third business day after the Latest Time
	for Acceptance or such later time or date as may be
	agreed between the Company and Kingston Securities,
	being the latest time to terminate the Underwriting
	Agreements
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange
“Ms. Leung”	Ms. Leung Choi Fan, spouse of Mr. Hui Ho Luek who
	wholly and beneficially owns Premier Rise
“Offer Share(s)”	192,000,000 new Shares to be offered to the Qualifying
	Shareholders for subscription on the basis of one Offer
	Share for every two existing Shares held on the Record
	Date and payable in full on acceptance pursuant to the
	Open Offer
“Open Offer”	the issue of the Offer Shares by way of Open Offer to
	the Qualifying Shareholders on the terms to be set out in
	the Prospectus Documents and summarised herein

— 6 —

DEFINITIONS

“Overseas Shareholders”	the Shareholders with registered address and
	correspondence address on the register of members of
	the Company outside Hong Kong at the close of business
	on the Record Date
“PRC”	the People’s Republic of China (excluding Hong Kong,
	the Macau Special Administrative Region of the People’s
	Republic of China and Taiwan)
“Premier Rise”	Premier Rise Investments Limited, a company
	incorporated in the British Virgin Islands and a
	substantial Shareholder as at the Latest Practicable Date,
	and wholly and beneficially owned by Mr. Hui Ho Luek
“Prospectus”	this prospectus in connection with the Open Offer
“Prospectus Documents”	the Prospectus and the Application Form
“Qualifying Shareholders”	the Shareholders, whose names appear on the register of
	members of the Company as at the close of business on
	the Record Date, other than the Excluded Shareholders
“Record Date”	Wednesday, 16 May 2007, being the date by reference
	to which entitlements to the Open Offer have been
	determined
“Registrar”	Tengis Limited, 26/F, Tesbury Centre, 28 Queen’s Road
	East, Wanchai, Hong Kong, the Company’s Hong Kong
	branch share registrar
“SFO”	the Securities and Futures Ordinance (Chapter 571 of
	the Laws of Hong Kong)
“Share(s)”	ordinary share(s) of HK$0.01 each in the issued share
	capital of the Company
“Shareholder(s)”	holder(s) of the Shares

— 7 —

DEFINITIONS

“Specified Event”	an event occurring or matter arising on or after the date
	of the Underwriting Agreements and prior to the Latest
	Time for Termination which if it had occurred or arisen
	before the date of the Underwriting Agreements would
	have rendered any of the warranties contained in the
	Underwriting Agreements untrue or incorrect in any
	material respect
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Subscription Price”	the subscription price of HK$0.20 per Offer Share
“Underwriter”	Kingston Securities
“Underwriting Agreements”	the underwriting agreement dated 23 April 2007 entered
	into among the Company, Premier Rise and Kingston
	Securities in relation to the Open Offer and the
	supplemental agreement dated 9 May 2007 entered into
	among the Company, Premier Rise, Ms. Leung and
	Kingston Securities
“HK$”	Hong Kong dollars, the lawful currency of Hong Kong
“%”	per cent.

— 8 —

LETTER FROM THE BOARD

GRANDTOP INTERNATIONAL HOLDINGS LIMITED 泓鋒國際控股有限公司 **[*]**

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 2309)

Executive Directors: Ms. Bessie Siu Mr. Lee Yiu Tung

Non-Executive Director:

Mr. Fu Wing Kwok, Ewing

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

Independent Non-Executive Directors:

Mr. Chang Kin Man Mr. Ip Wing Lun Mr. Zhou Han Ping

Principal place of business in Hong Kong: No. 1, 1st Floor, Pei Ho Building 115-117 Fuk Wa Street Sham Shui Po, Kowloon Hong Kong

18 May 2007

To the Qualifying Shareholders

Dear Sir or Madam,

OPEN OFFER OF 192,000,000 OFFER SHARES AT A PRICE OF HK$0.20 PER OFFER SHARE ON THE BASIS OF ONE OFFER SHARE FOR EVERY TWO SHARES HELD ON THE RECORD DATE

INTRODUCTION

It was announced on 23 April 2007 that the Board proposed to raise approximately HK$38.4 million, before expenses, by issuing 192,000,000 Offer Shares at a price of HK$0.20 per Offer Share by way of Open Offer, on the basis of one Offer Share for every two Shares held on the Record Date and payable in full on acceptance.

* For identification purpose only

— 9 —

LETTER FROM THE BOARD

This Prospectus sets out further information on the Open Offer, including information on dealing in and transfers and acceptances of the Offer Shares and financial and other information in respect of the Group.

OPEN OFFER

Issue statistics

Basis of the Open Offer : One Offer Share for every two existing Shares held on the Record Date

Subscription Price

: HK$0.20 per Offer Share
Number of Shares in : 384,000,000 Shares issue as at the Latest Practicable Date
Number of Offer Shares : 192,000,000 Offer Shares
Number of Offer Shares undertaken to be taken up by Premier Rise and Ms. Leung
: Pursuant to the Irrevocable Undertakings, Premier Rise and Ms. Leung have irrevocablly undertaken to subscribe for an aggregate of 38,325,000 Offer Shares (as to 32,000,000 Offer Shares by Premier Rise and 6,325,000 Offer Shares by Ms. Leung), being the full assured entitlements to them or their nominee(s) pursuant to the Open Offer.
Number of Offer : Pursuant to the Underwriting Agreements, the Underwriter Shares underwritten has conditionally agreed to underwrite in aggregate of by the Underwriter 153,675,000 Shares (excluding the Offer Shares undertaken to be taken up by Premier Rise and Ms. Leung pursuant to the Irrevocable Undertakings) on a fully underwritten basis.

Number of Shares in issue : 576,000,000 Shares upon completion of the Open Offer

The Offer Shares to be allotted and issued pursuant to the terms of the Open Offer represent 50% of the entire issued share capital of the Company as at the Latest Practicable Date and approximately 33.33% of the entire issued share capital of the Company as enlarged by the issue of the Offer Shares.

— 10 —

LETTER FROM THE BOARD

As at the Latest Practicable Date, the Company has no derivatives, options, warrants and conversion rights or other similar rights which are convertible or exchangeable into Shares and, save for the Offer Shares, has no intention to issue any new Share or any of the above securities before the Latest Time for Acceptance.

Qualifying Shareholders

The Open Offer is only available to the Qualifying Shareholders. The Company will send the Prospectus Documents to the Qualifying Shareholders. To qualify for the Open Offer, the Shareholders must at the close of business on the Record Date:

(i) be registered on the register of members of the Company; and
(ii) not being Excluded Shareholders.

In order to be registered as members of the Company on the Record Date, the Shareholders must lodge any transfer of the Shares (with the relevant share certificates) for registration with the Registrar by 4:00 p.m. on Friday, 11 May 2007. The address of the Registrar is:

Tengis Limited

26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong

The invitation to subscribe for the Offer Shares to be made to the Qualifying Shareholders will not be transferable. There will not be any trading in nil-paid entitlements on the Stock Exchange and the Qualifying Shareholders will not be entitled to subscribe for any Offer Shares in excess of their respective assured entitlements. In the view that each Qualifying Shareholder will be given equal and fair opportunities to participate in the Company’s future development and thereby entitling to subscribe for his/her/its respective Offer Shares without discrimination at the same price at a discount to the Share price as at the Last Trading Date in proportion to his/her/its existing shareholding of the Company, the Directors are of the opinion that the Company will not attempt to incur additional effort and extra administration work to consider the allocation basis to accommodate any Offer Shares not validly applied for by the Shareholders in the event that the Open Offer is under-subscribed.

Rights of the Excluded Shareholders

Based on the register of members of the Company on the Record Date, there are no Overseas Shareholders. As such, there are no Excluded Shareholders.

Closure of register of members

The register of members of the Company has been closed from Monday, 14 May 2007 to Wednesday, 16 May 2007, both dates inclusive, to determine the eligibility of the Shareholders to the Open Offer. No transfer of Shares has been registered during this period.

— 11 —

LETTER FROM THE BOARD

Subscription Price

The Subscription Price for the Offer Shares is HK$0.20 per Offer Share, payable in full on application. The Subscription Price represents:

(i) a discount of approximately 28.57% to the closing price of HK$0.28 per Share as quoted on the Stock Exchange on the Last Trading Date;
(ii) a discount of approximately 30.31% to the average closing prices of HK$0.287 per Share for the last five consecutive trading days up to and including the Last Trading Date;
(iii) a discount of approximately 30.56% to the average closing prices of HK$0.288 per Share for the last ten consecutive trading days up to and including the Last Trading Date; and
(iv) a discount of approximately 20.95% to the theoretical ex-entitlement price of approximately HK$0.253 per Share based on the closing price of HK$0.28 as quoted on the Stock Exchange on the Last Trading Date.
(v) a discount of approximately 43.66% to the closing price of HK$0.355 per Share as quoted on the Stock Exchange as at the Latest Practicable Date.

The Subscription Price was arrived at after arm’s length negotiation between the Company and the Underwriter after having taken into account, among other things, (i) the recent price performance of the Shares and (ii) the potential investment opportunity to the Shareholders. The Directors consider that the terms of the Open Offer are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

Status of the Offer Shares

The Offer Shares (when allotted, fully paid and issued) will rank pari passu in all respects with the Shares in issue on the date of allotment and issue of the Offer Shares. Holders of the Offer Shares will be entitled to receive all future dividends and distributions which are declared, made or paid on or after the date of allotment and issue of the Offer Shares.

Fraction of Offer Shares

The Company will not allot fractions of the Offer Shares.

— 12 —

LETTER FROM THE BOARD

Certificates of the Offer Shares

Subject to fulfillment of the conditions of the Open Offer, share certificates for the Offer Shares are expected to be posted on or before Tuesday, 12 June 2007 to those entitled thereto by ordinary post at their own risk.

Requirements under the Cayman Islands laws

According to the Cayman Islands legal adviser of the Company, under the Cayman Islands laws and in accordance with the articles of association of the Company, (i) the Prospectus is not required to be registered in the Cayman Islands; (ii) there is no requirement for the Company to obtain any permission relating to the Open Offer from any authority or regulatory body in the Cayman Islands; and (iii) there is no requirement for the Open Offer to be approved by the Shareholders.

Application for listing and dealings in the Offer Shares

Application has been made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Offer Shares. Dealings in the Offer Shares will commence on Thursday, 14 June and will be subject to the payment of stamp duty in Hong Kong.

None of the securities of the Company is listed or dealt in on any other stock exchange other than the Stock Exchange and no such listing or permission to deal is being or is proposed to be sought.

Subject to the granting of listing of, and permission to deal in, the Offer Shares on the Stock Exchange, the Offer Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from the commencement date of dealings in the Offer Shares on the Stock Exchange or such other date as determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

Irrevocable Undertakings

Premier Rise, which is wholly owned by Mr. Hui Ho Luek, a substantial Shareholder, and Ms. Leung are interested in an aggregate of 76,650,000 Shares (in which Premier Rise is interested in 64,000,000 Shares and Ms. Leung is interested in 12,650,000 Shares) as at the Latest Practicable Date, representing approximately 19.96% of the existing issued share capital of the Company. Pursuant to the Irrevocable Undertakings, Premier Rise and Ms. Leung have irrevocably undertaken to subscribe for an aggregate of 38,325,000 Offer Shares (as to 32,000,000 Offer Shares by Premier Rise and 6,325,000 Offer Shares by Ms. Leung), being the full assured entitlements to them or their nominee(s) pursuant to the Open Offer.

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LETTER FROM THE BOARD

REASONS FOR THE OPEN OFFER AND USE OF PROCEEDS

The Group is principally engaged in the business of (i) apparel sourcing, (ii) apparel trading, and (iii) sale support services. The Group has no turnover derived from apparel sourcing services but is keen to establish its own apparel sourcing business if the opportunity exists.

The estimated net proceeds from the Open Offer will be approximately HK$37.0 million (net of expenses of approximately HK$1.4 million). The Board intends to apply the net proceeds for future investments, to expand the Company’s business and as general working capital before any suitable investment opportunities are identified and invested accordingly. The allocation of the net proceeds has not yet been determined. As at the Latest Practicable Date, no such investment has been identified by the Group.

The estimated expense in relation to the Open Offer of approximately HK$1.4 million will be borne by the Company. The Board has considered various fund raising methods apart from the Open Offer, including banking finance and issue of convertible securities, and concludes that the Open Offer is in the best interests of the Company and its Shareholders as a whole as it offers all the Qualifying Shareholders an equal opportunity to participate in the enlargement of the capital base of the Company and enables the Qualifying Shareholders to maintain their proportionate interests in the Company and continue to participate in the future development of the Company should they wish to do so. However, those Qualifying Shareholders who do not take up the Offer Shares to which they are entitled should note that their shareholdings in the Company will be diluted.

UNDERWRITING ARRANGEMENTS

Underwriting Agreements

Dates	:	23 April 2007 and 9 May 2007
Underwriter	:	Kingston Securities
Number of Offer Shares	:	Pursuant to the Underwriting Agreements, the Underwriter
underwritten		has conditionally agreed to underwrite in an aggregate of
		153,675,000 Offer Shares on a fully underwritten basis
Commission	:	2% of the aggregate Subscription Price in respect of the
		number of Offer Shares agreed to be underwritten by the
		Underwriter

Pursuant to the Underwriting Agreements, the Underwriter has conditionally agreed to underwrite all the Offer Shares not being taken up (excluding the Offer Shares undertaken to be taken up by Premier Rise and Ms. Leung pursuant to the Irrevocable Undertakings). Accordingly, the Open Offer is fully underwritten. To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, Kingston Securities and its respective ultimate beneficial owners are third parties independent of and not connected with the Company and its connected persons.

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LETTER FROM THE BOARD

The 2% commission payable to the Underwriter was determined after arm’s length negotiations between the Company and the Underwriter based on normal commercial terms and with reference to the market rates.

Termination of the Underwriting Agreements

If, prior to the Latest Time for Termination:

(1) in the reasonable opinion of Kingston Securities, the success of the Open Offer would be materially and adversely affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may in the reasonable opinion of Kingston Securities materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or is materially adverse in the context of the Open Offer; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreements) of a political, military, financial, economic, or other nature (whether or not ejusdem generis with any of the foregoing), or in the nature of any local, national or international outbreak or escalation of hostilities or armed conflict, or affecting local securities markets which may, in the reasonable opinion of Kingston Securities materially and adversely affect the business or the financial or trading position or prospects of the Group as a whole or materially and adversely prejudice the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(2) any adverse change in market conditions (including without limitation, any change in fiscal or monetary policy, or foreign exchange or currency markets, suspension or material restriction or trading in securities) occurs which in the reasonable opinion of Kingston Securities is likely to materially or adversely affect the success of the Open Offer or otherwise makes it inexpedient or inadvisable to proceed with the Open Offer; or
(3) there is any change in the circumstances of the Company or any member of the Group which in the reasonable opinion of Kingston Securities will adversely affect the prospects of the Company, including without limiting the generality of the foregoing the presentation of a petition or the passing of a resolution for the liquidation or winding up or similar event occurring in respect of any of member of the Group or the destruction of any material asset of the Group; or

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LETTER FROM THE BOARD

(4) any suspension in the trading of securities generally or the Company’s securities on the Stock Exchange for a period of more than seven consecutive business days, excluding any suspension in connection with the clearance of this announcement or the Prospectus Documents or other announcements or circulars in connection with the Open Offer,

Kingston Securities shall be entitled by notice in writing to the Company, served prior to the Latest Time for Termination, to terminate the Underwriting Agreements.

Kingston Securities shall be entitled by notice in writing to rescind the Underwriting Agreements if prior to the Latest Time for Termination:

(1) any material breach of any of the representations, warranties or undertakings contained in the Underwriting Agreements comes to the knowledge of the Underwriter; or
(2) any Specified Event comes to knowledge of the Underwriter,

Conditions of the Open Offer

The Open Offer is conditional upon:

(1) the delivery to the Stock Exchange for authorisation and the registration with the Registrar of Companies in Hong Kong respectively of one copy of each of the Prospectus Documents duly signed by two Directors (or by their agents duly authorised in writing) as having been approved by resolution of the Directors (and all other documents required to be attached thereto) and otherwise in compliance with the Listing Rules and Companies Ordinance not later than the despatch of the Prospectus;
(2) the posting of the Prospectus Documents to the Qualifying Shareholders on or before the date of the Prospectus; and
(3) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment) and not having withdrawn or revoked listing of and permission to deal in the Offer Shares.

— 16 —

LETTER FROM THE BOARD

In the event of the said conditions not being fulfilled before the Latest Time for Termination or the respective dates aforesaid (or such other time or date as the Company and Kingston Securities may agree), the Underwriting Agreements shall terminate and all obligations and liabilities of the parties thereunder shall forthwith cease and determine and no party shall have any claim against the others (save for any antecedent breaches thereof).

WARNING OF THE RISK OF DEALING IN THE SHARES

— 17 —

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE OF THE COMPANY

The following illustrates the shareholding structure of the Company (i) as at the Latest Practicable Date and (ii) immediately after completion of the Open Offer:

Huge Gain Development Limited_(Note 1) Premier Rise(Note 2) Ms. Leung(Note 3) Kingston Securities (Note 4)_ Other public Shareholders Total	As atthe Latest Practicable Date Shares % 96,000,000 25.00% 64,000,000 16.67% 12,650,000 3.29% — — 211,350,000 55.04% 384,000,000 100.00%	Immediately after completion of the Open Immediately Offer (assuming no after completion Shareholders take up of the Open their respective Offer (assuming entitlements except all Shareholders for Premier Rise and take up Ms. Leung’s Irrevocable their respective Undertakings) entitlements) Shares % Shares % 96,000,000 16.67% 144,000,000 25.00% 96,000,000 16.67% 96,000,000 16.67% 18,975,000 3.29% 18,975,000 3.29% 153,675,000 26.68% — — 211,350,000 36.69% 317,025,000 55.04% 576,000,000 100.00% 576,000,000 100.00%	Immediately after completion of the Open Immediately Offer (assuming no after completion Shareholders take up of the Open their respective Offer (assuming entitlements except all Shareholders for Premier Rise and take up Ms. Leung’s Irrevocable their respective Undertakings) entitlements) Shares % Shares % 96,000,000 16.67% 144,000,000 25.00% 96,000,000 16.67% 96,000,000 16.67% 18,975,000 3.29% 18,975,000 3.29% 153,675,000 26.68% — — 211,350,000 36.69% 317,025,000 55.04% 576,000,000 100.00% 576,000,000 100.00%
			100.00%

Notes:

(1) The entire issued share capital of Huge Gain Development Limited is owned by Nerine Trust Company Limited (“Nerine Trust”) which is the trustee of SB Unit Trust and holds properties for the benefit of holders of units issued by SB Unit Trust. All the units issued by SB Unit Trust were held by the family members of Mr. Siu Ban, co-founder of the Company and its subsidiaries and the discretionary objects. Ms. Bessie Siu and Ms. Tsai Lai Wa, Jenny have indirect interest in Nerine Trust.
(2) Premier Rise, a company incorporated in the British Virgin Islands and wholly owned by Mr. Hui Ho Luek, a substantial Shareholder.
(3) Ms. Leung, spouse of Mr. Hui Ho Luek who wholly and beneficially owns Premier Rise.
(4) To the best of the Directors’ knowledge, information and belief and having made all reasonable enquiries, Kingston Securities and its respective ultimate beneficial owners are third parties independent of and not connected with the Company and its connected persons.

— 18 —

LETTER FROM THE BOARD

FUND RAISING ACTIVITIES IN THE LAST TWELVE MONTHS

The following table summaries the fund raising activities of the Company in the last 12 months immediately before the date of the Announcement and up to the Latest Practicable Date:

Actual use of proceeds as at Date of Net proceeds Intended use of the date of this announcement Event (approximately) proceeds Prospectus 6 February 2007 Issue of HK$7,744,000 For general HK$3,093,000 has 64,000,000 working capital been used for new Shares of the Group general working at a price capital of the of HK$0.121 Group and per Share the remaining balance has not yet been utilized

BUSINESS REVIEW AND FUTURE PROSPECTS

The Group faced tremendous challenges in the trading of apparel business in Hong Kong and Macau. The rising trend of rising price of supplies, rental and labour costs has continued to rise and the pace of the increment has also accelerated. In particular, the price of rental and labour costs rose steeply due to the recent growth in market. The lowered the sales quantities and gross margins and contribution from the trading business to the Group had dropped remarkably. The Group has formulated plans including enhancing the quality and service standard to cope with the adverse market conditions. The Group has devoted more resources and efforts in cost cutting measures to the trading business. This would enable the Group to maintain steady operations while competing with our rivals.

In the years ahead, the Group will continue to explore business opportunities in order to expand its business.

PROCEDURES FOR ACCEPTANCE

An Application Form is enclosed with this Prospectus which entitles you to accept any number of Offer Shares up to the number of Offer Shares as set out in the Application Form. If you are a Qualifying Shareholder and you wish to accept your assured allotment of Offer Shares to which you are entitled as specified in the enclosed Application Form or you wish to accept any number less than your assured entitlement, you must complete, sign and lodge the Application Form in accordance with the instructions printed thereon, together with remittance

— 19 —

LETTER FROM THE BOARD

for the aggregate Subscription Price in respect of such number of Offer Shares you have accepted with the Registrar, Tengis Limited, 26/F Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, by not later than 4:00 p.m. on Monday, 4 June 2007. All remittances must be made in Hong Kong dollars and cheques or cashier’s orders must be drawn on a bank account in Hong Kong and made payable to “Grandtop International Holdings Limited — Open Offer Account” and crossed “Account Payee Only”.

It should be noted that unless the Application Form, together with the appropriate remittance, have been lodged with the Registrar by not later than 4:00 p.m. on Monday, 4 June 2007, that assured entitlement and all rights thereunder will be deemed to have been declined and will be cancelled.

If the conditions of the Underwriting Agreements are not fulfilled or the Underwriting Agreements are terminated in accordance with their terms and conditions, the subscription monies will be refunded, without interest, by sending a cheque made out to the relevant Shareholder named on the Application Form (or in the case of joint Shareholders, to the firstnamed Shareholder) and crossed “Account Payee Only”, through ordinary post at the risk of the relevant Shareholder(s) to the address specified in the register of members of the Company.

The Application Form contains full information regarding the procedures to be followed if you wish to accept only part of your assured entitlements under the Open Offer.

All cheques or cashier’s orders will be presented for payment upon receipt and all interest earned on such moneys (if any) will be retained for the benefit of the Company. Any Application Form in respect of which the cheque or cashier’s order is dishonoured on first presentation is liable to be rejected, and in that event the assured entitlement and all rights thereunder will be deemed to have been declined and will be cancelled.

The Application Form is for use only by the person(s) named therein and is not transferable.

Subject to fulfillment of the conditions of the Open Offer as set out under section headed “Underwriting Arrangements”, share certificates for the Offer Shares are expected to be despatched on or before Tuesday, 12 June 2007.

No receipt will be issued in respect of any acceptance monies received.

TAXATION

Qualifying Shareholders are recommended to consult their professional advisers if they are in any doubt as to the taxation implications of holding, disposing of or dealing in the Offer Shares. It is emphasized that none of the Company, the Directors or any other parties involved in the Open Offer accepts responsibility of any tax effects or liabilities of holders of the Offer Shares resulting from the purchase, holding, disposal of, or dealing in the Offer Shares.

— 20 —

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

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

Yours faithfully,

By order of the Board Grandtop International Holdings Limited Bessie Siu

Executive Director

— 21 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

The following information has been extracted from the audited consolidated financial statements of the Group for each of the three years ended 31 March 2006. HLB Hodgson Impey Cheng, being the Company’s auditors, has issued qualified opinion on the Group’s financial statements for the year ended 31 March 2006. Save for the above, the Company’s auditors, has not issued any qualified opinion or modified opinion on the Group’s financial statements for the three years ended 31 March 2006.

Turnover Cost of sales Gross profit Other revenue Selling expenses Administrative expenses Impairment loss on trade receivables Impairment loss on goodwill Impairment loss on prepayments, deposits and other receivables Impairment loss on available-for-sale financial assets (Loss)/profit from operations Finance costs Gain/(loss) on disposal of a subsidiary (Loss)/profit before taxation Taxation (Loss)/profit for the year Attributable to: Equity holders of the Company Minority interests Dividend (Loss)/earnings per share for (loss)/profit attributable to the equity holders of the Company during the year Basic Diluted	2006 HK$’000 48,428 (38,892) 9,536 431 (2,911) (19,413) (4,685) (5,524) (4,745) (33,245) (60,556) (149) 1,098 (59,607) (20,003) (79,610) (79,610) — (79,610) — (HK$0.249) N/A	2005 HK$’000 (Restated) 101,974 (73,674) 28,300 380 (4,636) (10,092) — — — — 13,952 (193) (2,585) 11,174 (1,293) 9,881 2,160 7,721 9,881 — HK$0.007 N/A	2004 HK’000 119,410 (75,686) 43,724 99 (7,960) (6,587) — — — — 29,276 (188) (72) 29,016 (781) 28,235 23,497 4,738 28,235 — HK$0.073 N/A

— 22 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Set out below are the qualified opinion for preparing the Group’s financial statements for the year ended 31 March 2006 issued by the Company’s auditors as extracted from the Company’s annual report 2006. Save for the qualified opinion referred below, the Company’s auditors have not issued any qualified or modified opinion on the Group’s financial statements for the three years ended 31 March 2006.

==> picture [193 x 72] intentionally omitted <==

31/F, Gloucester Tower The Landmark 11 Pedder Street Central Hong Kong

Auditors’ report to the Shareholders of Grandtop International Holdings Limited

(incorporated in the Cayman Islands with limited liability)

We have audited the financial statements on pages 25 to 75 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.

Respective Responsibilities of Directors and Auditors

The Company’s directors are responsible for the preparation of financial statements which give a true and fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently.

It is our responsibility to form an independent opinion, based on our audit, on those financial statements and to report our opinion solely to you, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Basis of Opinion

We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s and the Group’s circumstances, consistently applied and adequately disclosed.

— 23 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

We planned our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion, we have considered the adequacy of the disclosure made in note 2 to the financial statements which explains that the circumstances giving rise to the fundamental uncertainties relating to the net loss and net current liability position of the Group and possible obligation arising from tax liabilities (the “Tax Obligations”) imposed by the Inlands Revenue Department of the Hong Kong Special Administrative Region (the “HKIRD”). These financial statements have been prepared on a going concern basis, the validity of which depends upon the outcome of the Tax Obligations on the Group and upon the continuing financial support from the controlling shareholder of the Company. The financial statements do not include any adjustments that if the Group failed to obtain the necessary financial support from its controlling substantial shareholder. We have considered that appropriate disclosures have been made in the financial statements concerning this situation, but the evidence available to us was limited. In the absence of sufficient documentary evidence, we were unable to ascertain as to whether the assumption made by the directors of the Company in preparing the financial statements on a going concern basis, as set out in note 2 to the financial statements, are fair and reasonable. There were no other satisfactory audit procedures that we could adopt to satisfy ourselves as to the appropriateness of the going concern basis, which may have a consequential significant effect on the results for the year and its liquidity Annual Report 2006 position as at 31 March 2006. These fundamental uncertainties relating to whether the going concern basis is appropriate is so extreme that we have disclaimed our opinion.

In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion.

Qualified Opinion: Disclaimer on View Given by the Financial Statements

Because of the significance of the possible effect of the limitation in the evidence available to us relating to the matter referred to above, we are unable to form an opinion as to whether the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31 March 2006 and of its loss and cash flows of the Group for the year then ended and as to whether the financial statements have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

— 24 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

In respect alone of the limitation on our work relating to the matter referred to above, we have not obtained all the information and explanation that we considered necessary for the purpose of our audit.

HLB Hodgson Impey Cheng

Chartered Accountants Certified Public Accountants Hong Kong, 26 July 2006

— 25 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

2. CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2006.

The following are the audited consolidated accounts of the Group for the two years ended 31 March 2006 as extracted from the 2006 annual report of the Company.

Consolidated Balance Sheet

At 31 March 2006

Note Non-current assets Property, plant and equipment 9 Leasehold land 10 Goodwill 11 Available-for-sale financial assets 13 Current assets Inventories 14 Trade receivables 15 Prepayments, deposits and other receivables 16 Cash and cash equivalents Total assets Equity Capital and reserves attributable to the equity holders of the Company Share capital 17 Reserves 18 Minority interests Non-current liabilities Interest-bearing bank borrowings, secured 19 Deferred tax liabilities 20	2006 *HK$’000* 12,103 5,757 — 2,695 20,555 8,951 5,392 4,038 2,488 20,869 41,424 3,200 51 3,251 — 3,251 5,689 167 5,856	2005 HK$’000 (Restated) 16,479 6,241 5,524 35,940
		64,184
		11,303 8,969 10,871 4,246
		35,389
		99,573

		3,200 79,661
		82,861 2,262
		85,123
		5,950 167
		6,117

— 26 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Note Current liabilities Interest-bearing bank borrowings, secured 19 Trade and other payables 21 Amount due to a director 22 Tax payables Total equity and liabilities Net current (liabilities)/assets Total assets less current liabilities	2006 *HK$’000* 261 3,345 8,261 20,450 32,317 41,424 (11,448) 9,107	2005 HK$’000 (Restated) 250 6,909 — 1,174
		8,333
		99,573

		27,056

		91,240

Approved by the Board of Directors on 26 July 2006 and signed on its behalf by:

Bessie Siu Fu Wing Kwok, Ewing Director Director

The accompanying notes form an integral part of these financial statements.

— 27 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Balance Sheet

At 31 March 2006

Note Non-current assets Property, plant and equipment 9 Interests in subsidiaries 12 Current assets Prepayments, deposits and other receivables 16 Cash and cash equivalents Total assets Equity Capital and reserves attributable to the equity holders of the Company Share capita 17 Reserves 18 Current liabilities Trade and other payables 21 Amount due to a director 22 Amounts due to subsidiaries 12 Total equity and liabilities Net current liabilities Total assets less current liabilities	2006 *HK$’000* 145 15,274 15,419 226 31 257 15,676 3,200 731 3,931 469 2,792 8,484 11,745 15,676 (11,488) 3,931	2005 HK$’000 (Restated) 228 71,197 71,425 85 11 96 71,521 3,200 42,258 45,458 403 — 25,660 26,063 71,521 (25,967) 45,458

Approved by the Board of Directors on 26 July 2006 and signed on its behalf by:

Bessie Siu Fu Wing Kwok, Ewing Director Director

The accompanying notes form an integral part of these financial statements.

— 28 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Income Statement

For the year ended 31 March 2006

Note Turnover 6 Cost of sales Gross profit Other revenue 23 Selling expenses Administrative expenses Impairment loss on trade receivables 15 Impairment loss on goodwill 11 Impairment loss on prepayments, deposits and other receivables Impairment loss on available-for-sale financial assets 13 (Loss)/profit from operations 24 Finance costs 26 Gain/(loss) on disposal of a subsidiary (Loss)/profit before taxation Taxation 27 (Loss)/profit for the year Attributable to: Equity holders of the Company Minority interests Dividend 29 (Loss)/earnings per share for (loss)/profit attributable to the equity holders of the Company during the year Basic 30 Diluted	2006 *HK$’000* 48,428 (38,892) 9,536 431 (2,911) (19,413) (4,685) (5,524) (4,745) (33,245) (60,556) (149) 1,098 (59,607) (20,003) (79,610) (79,610) — (79,610) — (HK$0.249) N/A	2005 HK$’000 (Restated) 101,974 (73,674) 28,300 380 (4,636) (10,092) — — — — 13,952 (193) (2,585) 11,174 (1,293) 9,881 2,160 7,721 9,881 — HK$0.007 N/A

All of the Group’s activities are classified as continuing.

The accompanying notes form an integral part of these financial statements.

— 29 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Statement Of Changes In Equity

At 31 March 2006

Attributable to the equity holders of the Company

Share capital HK$’000 3,200 —	Share Contributed premium surplus account HK$’000 HK$’000 (84) 25,146 — —	(Accumulated losses)/ retained profits Sub-total HK$’000 HK$’000 52,440 80,702 — —	(Accumulated losses)/ retained profits Sub-total HK$’000 HK$’000 52,440 80,702 — —	Minority interests HK$’000 — 9,240
	(84) 25,146 (1) — — —	52,440 — 2,160	80,702 9,240 (1) (14,699 2,160 7,721
3,200 — —	(85) 25,146 — — — —
3,200	(85) 25,146	(25,010) 3,251		—

The accompanying notes form an integral part of these financial statements.

— 30 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated Cash Flow Statement

At 31 March 2006

Note CASH FLOWS FROM OPERATING ACTIVITIES (Loss)/profit before taxation Adjustments for: Depreciation 9 Impairment of property, plant and equipment 9 Provision on obsolete inventories 14 Impairment loss on loan receivables Impairment loss on investment deposits Impairment of goodwill 11 Amortisation of leasehold land 10 Impairment loss on available-for-sale financial assets 13 Amortisation of goodwill Impairment of provision for trade receivables 15 Dividend income received from available-for-sale financial assets 23 (Gain)/loss on disposal of a subsidiary Interest income Finance costs Operating cash flows before movements in working capital Increase in inventories Increase in trade receivables Decrease in prepayments, deposits and other receivables (Decrease)/increase in trade and other payables Cash (used in)/generated from operations Interest received Profits tax paid Net cash (used in)/generated from operating activities	2006 *HK$’000* (59,607) 3,147 169 6,689 2,000 2,745 5,524 484 33,245 — 4,685 (191) (1,098) (240) 149 (2,299) (4,337) (1,108) 2,029 (3,060) (8,775) 240 (727) (9,262)	2005 HK$’000 (Restated) 13,952 1,098 — — — — — 119 — 271 — (159) 2,585 (200) 192 17,858 (10,759) (4,867) 1,816 3,805 7,853 200 (801) 7,252

— 31 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Note CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Loan to third party Dividend income received from available-for-sale financial assets Payment to acquire available-for-sale financial assets Cash effect on acquisition of a subsidiary Cash effect on disposal of a subsidiary Net cash used in investing activities FINANCING ACTIVITIES Repayment of mortgage loan Advance from a director Finance costs Net cash generated from/(used in) financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at the end of the year	2006 *HK$’000* (723) — 191 — — 174 (358) (250) 8,261 (149) 7,862 (1,758) 4,246 2,488	2005 HK$’000 (Restated) (4,614) (2,000) 159 (4,680) (3,480) 2,792 (11,823) (159) — (192) (351) (4,922) 9,168 4,246

The accompanying notes form an integral part of these financial statements.

— 32 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes To The Financial Statements

At 31 March 2006

1. General

The Company is incorporated in the Cayman Islands as an exempted company with limited liability and its shares are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The registered office of the Company is located at Cricket Square, Hutchins Drive, P.O. Box 2681 Grand Cayman, KY1-1111, Cayman Islands.

The directors of the Company consider that the ultimate holding Company is Huge Gain Development Limited, which is incorporated in the British Virgin Islands.

The principal place of business in Hong Kong is located at No. 1, 1st Floor, Pei Ho Building, 115117 Fuk Wa Street, Sham Shui Po, Kowloon, Hong Kong.

The principal activity of the Company is investment holding. The principal activities of the subsidiaries are engaged in the provision of apparel sourcing services, sales support services and apparel trading.

2. Basis Of Preparation

The consolidated financial statements of Grandtop International Holdings Limited have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), which is a collective term that includes all applicable individual HKFRSs, Hong Kong Accounting Standards (“HKASs”), and Interpretations (“Int”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance and applicable disclosure provisions of The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

The measurement basis used in the preparation of the financial statements is historical cost convention and modified the revaluation of available-for-sale financial assets, which are carried at fair value.

In preparing the financial statements, the directors of the Company (the “Directors”) have given consideration to the future liquidity of the Group in light of the following:

(i) As at 31 March 2006, the Group has net current liabilities of approximately HK$11,448,000. The Group also incurred a net loss from ordinary activities attributable to the equity holders amounted to approximately HK$79,610,000 for the year ended 31 March 2006; and
(ii) Tax liabilities in relation to the estimated assessments issued by the Hong Kong Inland Revenue Department of approximately HK$19,918,000 in respect of non-taxable claim of non-Hong Kong sourced income for the years of assessments of 1998/1999 to 2003/2004. Detail of which has been set out in note 27 to the financial statements.

These financial statements have been prepared on a going concern basis, the validity of which depends upon the outcome of the Tax Obligations on the Group and the financial support of the controlling shareholder, at a level sufficient to finance the working capital requirement of the Group. The controlling shareholder has agreed to provide adequate funds for the Group to meet its liabilities as they fall due. If the going concern basis is not used, adjustments would have to be made to the financial statements to reduce the value of the Group’s assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify non-current assets and liabilities as current assets and liabilities, respectively.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The Adoption of new/revised HKFRSs

From the beginning of the financial year ended 31 March 2006, the Group adopted the new/revised standards and interpretations of HKFRSs below, which are relevant to its operations. The comparatives figures for the financial year ended 31 March 2005 have been restated as required, in accordance with the relevant requirements. A summary of the new and revised HKFRSs is set out as below:—

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 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 38 Intangible Assets HKAS 39 Financial Instruments: Recognition and Measurement HKAS 39 Transitional and Initial Recognition of Financial Assets and Financial Liabilities (Amendment) HKAS-Int 4 Lease — Determination of the Length of Lease Term in respect of Hong Kong Land Leases HKAS-Int 15 Operating Leases — Incentives HKFRS 2 Share-based Payments HKFRS 3 Business Combinations

The adoption of new and revised HKASs 1, 2, 7, 8, 10, 12, 14, 16, 18, 19, 21, 23, 24, 27, 33, 37, HKAS-Int 4 and 15 did not result in substantial changes to the Group’s accounting policies. In summary:

HKAS 1 has affected the presentation of minority interests, share of net after-tax results of associates and other disclosures. In the consolidated balance sheet, minority interests are now shown within total equity. In the consolidated income statement, minority interests are presented as an allocation of the total profit or loss for the year.
HKASs 2, 7, 8, 10, 12, 14, 16, 18, 19, 23, 27, 33, 37, HKAS-Int 4 and 15 had no material effect on the Group’s policies. — HKAS 21 had no material effect on the Group’s policy. The functional currency of each of the consolidated entities has been re-evaluated based on the guidance to the revised standard. All the Group entities have the same functional currency as the presentation currency for respective entity financial statements.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

HKAS 24 has affected the identification of related parties and some other related-party disclosures. The adoption of revised HKAS 17 has resulted in a change in the accounting policy relating to the reclassification of leasehold land from property, plant and equipment to operating leases. The up-front prepayments made for the leasehold land are expensed in the income statement on a straight-line basis over the period of the lease or when there is impairment, the impairment is expensed in the income statement. A lease of land and building is split into a lease of land and a lease of building in proportion to the relative fair values of the leasehold interests in land element and the building element of the lease at the inception of the lease. The lease of land is stated at cost and amortised over the period of the lease whereas the building is stated at cost less accumulated depreciation. In prior years, leasehold land was classified under property, plant and equipment at cost less impairment.

The adoption of HKAS 32 and 39 has resulted in a change in the accounting policy relating to the classification of financial assets at fair value through profit or loss and available-for-sale financial assets. It has also resulted in the recognition of derivative financial instruments at fair value and the change in the recognition and measurement of hedging activities.

The adoption of HKFRS 2 has resulted in a change in the accounting policy for share-based payments. With effect from 1 April 2005, the Group recognises the fair value of share options granted as an expense in the income statement over the vesting period with a corresponding increase being recognised in share-based payment reserve. The share-based payment reserve is transferred to share capital and share premium, together with the exercise price, when the option holder exercises its rights.

The adoption of HKFRS 3, HKAS 36 and HKAS 38 results in a change in the accounting policy for positive goodwill prospective application is required. Until 31 March 2005, positive goodwill was capitalised and amortised on a straight-line basis over its useful economic life of 15 years and was subject to impairment testing when there were indications of impairment.

In accordance with the provisions of HKFRS 3:

the Group ceased amortisation of goodwill from 1 April 2005;
accumulated amortisation as at 31 March 2005 has been eliminated with a corresponding decrease in the cost of goodwill;
from the year ended 31 March 2006 onwards, goodwill is tested annually for impairment, as well as when there is indication of impairment;

The Group has reassessed the useful lives of its intangible assets in accordance with the provisions of HKAS 38. No adjustment resulted from this reassessment.

All changes in the accounting policies have been made in accordance with the transition provisions in the respective standards, wherever applicable. All standards adopted by the Group require retrospective application other than:

HKAS 16 — the initial measurement of an item of property, plant and equipment acquired in an exchange of assets transaction is accounted at fair value prospectively only to future transactions;
HKAS 21 — prospective accounting for goodwill and fair value adjustments as part of foreign operations;

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

HKAS 39 — does not permit to recognise, derecognise and measure financial assets and liabilities in accordance with this standard on a retrospective basis. The Group applied the previous SSAP 24 “Accounting for investments in securities” to investments in securities and also to hedge relationships for the 2005 comparative information. The adjustments required for the accounting differences between SSAP 24 and HKAS 39 are determined and recognised at 1 April 2005.
HKFRS 3 — prospectively after 1 April 2005.

The effect on the adoption of the new accounting policies in consolidated balance sheet and consolidated income statement were summarised as follow:—

Consolidated balance sheet

As at 31 March 2006

Decrease in property, plant and equipment Increase in leasehold land Decrease in investment in securities Increase in available-for-sale financial assets Decrease in goodwill Decrease in trade receivables Decrease in prepayments, deposits and other receivables Decrease in reserve	HKAS 17 HK$’000 (5,757) 5,757 — — — — — — —	HKFRS 3, HKAS 36 and 38 HK$’000 — — — — (5,524) — — (5,524) (5,524)	HKAS 39 HK$’000 — — (35,940) 2,695 — (4,685) (4,745) (42,675) (42,675)	Total HK$’000 (5,757) 5,757 (35,940) 2,695 (5,524) (4,685) (4,745) (48,199) (48,199)

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Consolidated income statement

For the year ended 31 March 2006

Decrease in depreciation Increase in amortisation of leasehold land Impairment of goodwill Impairment loss on available-for-sale financial assets Impairment loss on trade receivables Impairment loss on prepayments, deposits and other receivables Increase in loss attributable to equity holders of the Company Increase in loss per shares (HK$) Consolidated balance sheet As at 31 March 2005 Decrease in property, plant and equipment Increase in leasehold land	HKAS 17 HK$’000 (484) 484 — — — — — — HKAS 17 HK$’000 (6,241) 6,241 —	HKFRS 3, HKAS 36 and 38 HK$’000 — — 5,524 — — — 5,524 0.017 HKFRS 3, HKAS 36 and 38 HK$’000 — — —	HKAS 39 HK$’000 — — — 33,245 4,685 4,745 42,675 0.133 HKAS 39 HK$’000 — — —	Total HK$’000 (484) 484 5,524 33,245 4,685 4,745 48,199 0.150 Total HK$’000 (6,241) 6,241 —

There was no impact on the reserves from the adoption of HKAS 17 as at 31 March 2005.

Consolidated income statement

For the year ended 31 March 2005

For the year ended 31 March 2005
		HKFRS 3,
		HKAS 36
	HKAS 17	and 38	HKAS 39	Total
	HK$’000	HK$’000	HK$’000	HK$’000
Decrease in depreciation	(119)	—	—	(119)
Increase in amortisation of
leasehold land	119	—	—	119

There was no impact on earnings per share from the adoption of HKAS 17 for the year ended 31 March 2005.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

With effect from 1 April 2005, in order to comply with HKAS 1 and HKAS 27, minority interests at the balance sheet date are presented in the consolidated balance sheet as part of equity, separately from interests attributable to the equity shareholders of the Company. Minority interests in the results of the Group are presented on the face of the consolidated income statement as an allocation of the total profit or loss for the year between minority interests and the equity shareholders of the Company. These changes in presentation have been applied retrospectively with comparatives figures restated.

No early adoption of the following new Standards or Interpretations that have been issued but are not yet effective. 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)	Employee Benefits — Actuarial Gains and Losses,
	Group Plans and Disclosures
HKAS 21 (Amendment)	The Effects of Changes in Foreign Exchange Rates —
	Net Investment in a Foreign Operation
HKAS 39 (Amendment)	Cash Flow Hedge Accounting of
	Forecast Intragroup Transaction
HKAS 39 (Amendment)	The Fair Value Option
HKFRS 39 & HKFRS 4	Financial Guarantee Contracts
(Amendment)
HKFRS 1 (Amendment)	First-time Adoption of Hong Kong Financial
	Reporting Standards
HKFRS 7	Financial Instruments: Disclosure
HK(IFRIC)-Int 4	Determining whether an Arrangement contain a Lease
HK(IFRIC)-Int 7	Applying the Restatement Approach under HKAS 29
	Financial Report 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 April 2007. The revised standard will affect the disclosure about qualitative information about the Group’s objective, policies and processes for managing capital; quantitative data about what company regards as capital; and compliance with any capital requirements and the consequences of any noncompliance.

HKAS 39 (Amendment) Cash Flow Hedge Accounting of Forecast Intragroup Transactions allows the foreign currency risk of a highly probable forecast intragroup transaction to qualify as a hedged item in the consolidated accounts, provided that: (a) the transaction is denominated in a currency other than the functional currency of the entity entering into that transaction; and (b) the foreign currency risk will affect consolidated profit and loss. This amendment is not relevant to the Group’s operations, as the Group does not have any intragroup transactions that would qualify as a hedged item in the consolidated accounts as at 31 March 2006 and 2005.

HKAS 39 (Amendment) The Fair Value Option changes the definition of financial instruments classified at fair value through profit or loss and restricts the ability to designate financial instruments as part of this category. The Group believes that this amendment should not have a significant impact on the classification of financial instruments, as the Group should be able to comply with the amended criteria for the designation of financial instruments at fair value through profit or loss. The Group will comply this amendment from accounting periods beginning on 1 April 2006.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

HKAS 39 and HKFRS 4 (Amendment) Financial Guarantee Contracts requires issued financial guarantees, other than those previously asserted by the entity to be insurance contracts, to be initially recognised at their fair value, and subsequently measured at the higher of (a) the unamortised balance of the related fees received and deferred, and (b) the expenditure required to settle the commitment at the balance sheet date. The Company regards its financial guarantees provided to its subsidiaries as insurance contracts.

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 period beginning on or after 1 April 2007.

Except as stated above, the Group expects that the adoption of the other pronouncements listed above will not have any significant impact on the Group’s financial statements in the period of initial application. A summary of significant accounting policies followed by the Group and the Company in the preparation of the financial statements is set out below:

3. Summary Of Significant Accounting Policies

(a) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 March each year.

(i) Subsidiaries

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

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

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

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

In the Company’s balance sheet the investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted by the Company on the basis of dividend received or receivables.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(b) Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of subsidiaries, associates and jointly controlled entities at the date of acquisition. In the case of jointlycontrolled entities and associates, goodwill is included in the carrying amount rather than as a separate identifiable asset on the consolidated balance sheet.

Goodwill arising on acquisition is recognised in the consolidated balance sheet as an asset. Prior to the adoption of the new HKFRS, goodwill is amortised on a straight-line basis over its estimated useful life of a period up to a maximum of 15 years. Following the adoption of HKFRS 3, goodwill ceased to be amortised from 1 April 2005 in which it will be tested annually for impairment. The goodwill is therefore carried at cost less accumulated impairment losses and any accumulated amortisation brought forward has been eliminated against the cost of goodwill.

On disposal of subsidiaries, jointly-controlled entities and associates, the gain or loss on disposal is calculated by reference to the net assets at the date of disposal, including the attributable amount of goodwill which remains unamortised and any relevant reserves, as appropriate. Any attributable goodwill previously eliminated against consolidated reserves at the date of acquisition is written back and included in the calculation of the gain and loss on disposal.

(c) Segment reporting

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

(d) Foreign currency translation

(i) Functional and presentation currency

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

(ii) Transactions and balances

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

Translation difference on non-monetary items, such as equities classified as availablefor-sale financial assets, are included in the fair value reserve in equity.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(iii) Group companies

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

assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and
all resulting exchange differences are recognised as a separate component of equity.

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

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

(e) Property, plant and equipment

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

The cost of an asset 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 the 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 the property, plant and equipment, the expenditure is capitalised as an additional cost of that asset.

Depreciation is provided to write off the cost of property, plant and equipment, using the straight-line method, over their estimated useful lives. The principal annual rates are as follows:

Buildings	2.5%
Leasehold improvements	20%
Office equipment	20%
Furniture and fixtures	20%
Motor vehicles	20%

The gain or loss arising from disposal of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the income statement.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(f) Leasehold land

Leasehold land represents prepaid lease payment made for leasehold land. Interest in leasehold land is stated at cost less subsequent accumulated amortisation and any accumulated impairment losses. The cost of leasehold land is amortised on a straight-line basis over the unexpired lease terms.

(g) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries and jointly controlled entities is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing.

(h) Investment

Before adoption of new HKFRSs, the Group classified the investment in listed equity securities as investment in securities.

From 1 April 2005 onward, the Group classifies its investments in the following categories depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at every reporting date.

(i) Financial assets at fair value through profit and loss

A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within twelve months of the balance sheet date.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except for maturities greater than twelve months after the balance sheet date. These are classified as non-current assets. Loans and receivables are included in trade and other receivables in the balance sheet.

(iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. During the year, the Group did not hold any investments in this category.

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(iv) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Purchases and sales of investments are recognised on trade-date — the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Realised and unrealised gains and losses arising from changes in the fair value of the “financial assets at fair value through profit or loss’ category are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of non-monetary securities classified as available-for-sale are recognised in equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains or losses from investment securities.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances.

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss — measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the income statement — is removed from equity and recognised in the income statement.

Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.

(i) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the first-in, first-out method. Work in progress and finished goods comprises 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.

(j) Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.

(k) Cash and cash equivalents

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

(l) Impairment of assets

Internal and external sources of information are reviewed at each balance sheet date to determine whether there is any indication of impairment of assets, or whether there is any indication that an impairment loss previously recognised no longer exists or may have decreased. If any such indication exists, the recoverable amount of the asset is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the income statement in the year in which it arises, unless the asset is carried at a revalued amount, when the impairment loss is accounted for in accordance with the relevant policy for that revalued asset.

(i) Calculation of recoverable amount

The recoverable amount of an asset is the higher of its net selling price and value in use. The net selling price is the amount obtainable from the sale of an asset in an arm’s length transaction while value in use is the present value of estimated future cash flows expected to arise from the continuing use of any asset and from its disposal at the end of its useful life. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of asset that generates cash inflows independently (i.e. a cash-generating unit).

(ii) Reversals of impairment losses

In respect of assets other than goodwill, an impairment loss is reversed if there has been change in the estimates used to determine the recoverable amount. An impairment loss of goodwill is reversed only if the loss was caused by a specific external event of an exceptional nature that is not expected to recur, and the increase in recoverable amount relates the reversal effect of that specific event.

A reversal of impairment loss is limited to the asset’s carrying amount that would have been determined in prior years. Reversals of impairment losses are credited to the income statement in the year in which the reversals are recognised.

(m) Impairment of financial assets

The Group 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 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

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (ie. 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 and loss.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are significant, and individually or collectively for financial assets that are not individual significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial assets, 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 impairment was recognised, the previous recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognsied in the income statement, to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date.

Assets carried at cost

If there is objective that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, 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.

(n) Provision

A provision is recognised when the Group has a present legal or constructive obligation, as a result of a past event and it is probable hat an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. Where the effect of the time value money is material, the amount of a provision is the present value at the balance sheet date of the expenditures expected to be required to settle the obligation.

(o) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability, including fees and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and securities exchanges, and transfer taxes and duties. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

(p) 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 realiably, on the following bases:—

(i) Revenue derived from the provision of sales support services are recognised when services are performed and upon each shipment made by the Group’s Hong Kong garment and fashion manufacturing clients to the US;

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FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(ii) Service income is recognised when services are provided;
(iii) Sales of merchandise are recognised when goods are delivered and title is passed;
(iv) Interest income, is recognised on a time proportion basis taking into account the principal outstanding and the effective interest rate applicable; and
(v) Dividend income from available-for-sale financial assets are recognised when the shareholder’s right to receive payment is established.

(q) Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit is the profit for the year, determined in accordance with the rules established by the taxation authorities, upon which income taxes are payable.

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

Deferred tax liabilities are recognised for taxable temporary differences arising on investment in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

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

(r) Foreign currencies

Transactions in foreign currencies are initially recorded at the rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rates ruling on the balance sheet date. Profits and losses arising on exchange are dealt with in the income statement.

On consolidation, the assets and liabilities of the Group’s operations outside Hong Kong are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the year. Exchange differences arising, if any are classified as equity and transferred to the Group’s exchange reserve. Such translation differences are recognised as income or as expenses in the year in which the operation is disposed of.

— 46 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(s) Operating leases

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

(t) Employee benefits

(i) Bonuses

The Group recognises a liability for bonuses when there is a contractual obligation and the amount can be estimated reliably.

(ii) Retirement benefit obligations

The Group has a defined contribution retirement benefits scheme (“the Scheme”) for its qualified employees, which was registered under the Occupational Retirement Scheme Ordinance (Chapter 426 of Laws of Hong Kong) and exempted from registration requirements of Section 5 of the Mandatory Provident Fund Schemes Ordinance (Chapter 485 of the Laws of Hong Kong). Contributions are made based on a percentage of the employees’ basic salaries and are charged to the combined income statement as they become payable in accordance with rules of the Scheme. The assets of the 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 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 Scheme.

(iii)

Termination benefits

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

(iv) Share-based compensation

The fair value of the employee services received in exchange for the grant of the share options and restricted share awards are recognised as an expense in the income statement.

The total amount to be expensed over the vesting period is determined with reference to the fair value of the share options and restricted share awards granted. At each balance sheet date, the Company revises its estimates of the number of share options that are expected to become exercisable and the number of restricted share awards that become vested. It recognises the impact of the revision of original estimates, if any, in the profit and loss account, and a corresponding adjustment to equity in the balance sheet will be made over the remaining vesting periods.

— 47 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The proceeds received, net of any directly attributable transaction costs, are credited to share capital and share premium accounts when the share options are exercised and when the restricted share awards are vested.

(u) Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably. A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognised as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. A contingent asset is not recognised but is disclosed in the notes to the financial statements when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.

(v) Related parties transactions

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 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);
(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 or the employees of the Group, or of any entity that is related party of the Group.

A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

— 48 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

4. Financial Risk Management

4.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (foreign exchange risk), credit risk, liquidity risk and cash flow and fair value interest-rate risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group’s treasury function operates as a centralised service for managing financial risks and for providing cost efficient funding to the Group.

(a) Market risk — Foreign exchange risk

The Group operates mainly in both the Macau and Hong Kong and majority of transactions are dominated in Hong Kong dollars and Renminbi. Therefore, the foreign exchange risk of the Group is minimal. In addition, the Group does not have any foreign currency investments which has been hedged by currency borrowings and other hedging investments.

(b) Credit risk

The Group’s credit risk is primarily attributable to trade or other receivables. The Group has no significant concentrations of credit risk. It has policies in place to ensure that sales of products are made to customers with appropriate credit history. The exposures to these credit risks are monitored on an ongoing basis.

(c) Liquidity risk

The Group manages its liquidity risk by regularly monitoring current and expected liquidity requirements and ensuring sufficient liquid cash and readily realisable marketable securities and adequate committed lines of funding from major financial institutions to meet the Group’s liquidity requirements in the short and long term.

(d) Cash flow and fair value interest rate risk

Borrowings at variable interest rates expose the Group to cash flow interest rate risk and those at fixed rates expose the Group to fair value interest rate risk.

The Group monitors the interest rate risk exposure on a continuous basis and adjusts the portfolio of borrowings where necessary.

4.2 Fair value estimation

The carrying amounts of the following other investments/financial assets and liabilities approximate their fair value including cash and cash equivalent, trade receivables, prepayment, deposit and other receivables, trade and other payables and amount due to a director.

— 49 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

5. Critical Accounting Estimates And Judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

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

(a) Estimated impairment of goodwill

The Group performs annual tests on whether there has been impairment of intangible assets in accordance with the accounting policy stated in note 3(g). The recoverable amounts of cashgenerating units are determined based on value-in-use calculations. These calculations require the use of estimates and assumptions made by management on the future operation of the business, pre-tax discount rates, and other assumptions underlying the value-in-use calculations.

(b) Provision for impairment of receivables

The aged debt profile of trade debtors is reviewed on a regular basis to ensure that the trade debtor balances are collectible and follow up actions are promptly carried out if the agreed credit periods have been exceeded. However, from time to time, the Group may experience delays in collection. Where recoverability of trade debtor balances are called into doubts, specific provisions for bad and doubtful debts are made based on credit status of the customers, the aged analysis of the trade receivable balances and write-off history. Certain receivables may be initially identified as collectible, yet subsequently become uncollectible and result in a subsequent write-off of the related receivable to the income statement. Changes in the collectibility of trade receivables for which provisions are not made could affect our results of operations.

(c) Useful lives of property, plant and equipment

In accordance with HKAS 16, the Group estimates the useful lives of property, plant and equipment that to determine the amount of depreciation expenses to be recorded. The useful lives are estimated at the time the asset is acquired based on historical experience, the expected usage, wear and tear of the assets, and technical obsolescence arising from changes in the market demands or service output of the assets. The Group also performs annual reviews on whether the assumptions made on useful lives continue to be valid.

(d) Net realisable of inventories

Net realisable value of inventories is the estimated selling price in the ordinary course of business, less estimated costs of completion and selling expenses. These estimates are based on the current market condition and the historical experience and selling goods of similar nature. It could change significantly as a result of change in market condition. Management will reassess the estimations at the balance sheet date.

— 50 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

6. Turnover

The Group’s turnover comprised of the followings:

Apparel sourcing services Apparel trading	2006 *HK$’000* 4,524 43,904 48,428	2005 HK$’000 (Restated) 81,984 19,990
		101,974

Turnover represents the net invoiced value of goods sold, after allowances for returns and trade discounts. All significant transactions among the companies comprising the Group have been eliminated on consolidation.

7. Segment Information

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different form those of other segments.

In accordance with the Group’s internal financial reporting system, the Group has determined that business segments as the primary reporting because this is more relevant to the Group in making operating and financial decisions.

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

Analysis of assets and liabilities by business segments and by geographical segments have not been prepared as most of the group’s assets and liabilities were unable to be allocated in view of the nature of the Group’s business.

— 51 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Business segments

The following table provides an analysis of the Group’s revenues, results and certain assets, liabilities and expenditure information by business nature:

	Continuing	operations			Consolidated Total 2006 2005 *HK$’000* HK$’000 (Restated) 48,428 101,974 (17,488) 13,572 431 380 (43,499) — (60,556) 13,952 1,098 (2,585) (149) (193) (59,607) 11,174 (20,003) (1,293) (79,610) 9,881 (79,610) 2,160 — 7,721 (79,610) 9,881 29,230 45,999 12,194 53,574 41,424 99,573
Apparel sourcing services 2006 2005 *HK$’000* HK$’000 (Restated) 4,524 81,984 (3,252) 8,823 3,654 28,642	Apparel trading 2006 2005 *HK$’000* HK$’000 (Restated) 43,904 19,990 (14,236) 7,734 25,524 17,030	Sales support services 2006 2005 *HK$’000* HK$’000 (Restated) — — — — 52 327	Subtotal 2006 2005 *HK$’000* HK$’000 (Restated) 48,428 101,974 (17,488) 16,557 29,230 45,999
				16,557	13,572
				45,999	380 —
					13,952 (2,585) (193)
					11,174 (1,293)
					9,881

					2,160
					7,721 9,881

					45,999 53,574
					99,573

— 52 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Segment liabilities Unallocated liabilities Total liabilities Other segment information: Capital expenditure Unallocated capital expenditure Depreciation and amortisation Unallocated depreciation and amortisation Impairment loss on property, plant and equipment Other non-cash expenses Unallocated other non-cash expenses	Continuing operations	Discontinued operation Marketing and compliance monitoring services 2006 2005 *HK$’000* HK$’000 (Restated) — — — — — — — — — —	Consolidated Total 2006 2005 *HK$’000* HK$’000 (Restated) 12,138 8,083 26,035 6,367 38,173 14,450 439 4,614 284 — 723 4,614 2,972 1,028 659 189 3,631 1,217 169 — 15,005 1,028 43,514 3,989 58,519 5,017	Consolidated Total 2006 2005 *HK$’000* HK$’000 (Restated) 12,138 8,083 26,035 6,367 38,173 14,450 439 4,614 284 — 723 4,614 2,972 1,028 659 189 3,631 1,217 169 — 15,005 1,028 43,514 3,989 58,519 5,017
	Apparel Sales sourcing services Apparel trading support services Subtotal 2006 2005 2006 2005 2006 2005 2006 2005 *HK$’000* HK$’000 *HK$’000* HK$’000 *HK$’000* HK$’000 *HK$’000* HK$’000 (Restated) (Restated) (Restated) (Restated) 2,821 5,053 9,317 3,030 — — 12,138 8,083 — 1,672 439 2,942 — — 439 4,614 722 320 1,824 453 426 255 2,972 1,028 — — — — 169 — 169 — 3,595 320 11,241 453 169 255 15,005 1,028
				14,450

				4,614 —
				4,614

				1,028 189
				1,217

				—

				1,028 3,989
				5,017

— 53 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Geographical segments

	Segment revenue	Segment revenue	Total 2006 2005 *HK$’000* HK$’000 (4,653) 339 (253) 2,024 (1,541) 1,625 (562) 1,654 (1,428) 4,268 (1,062) 2,541 (7,989) 1,121 (17,488) 13,572 431 380 (43,499) — (60,556) 13,952 (149) (193) 1,098 (2,585) (59,607) 11,174 (20,003) (1,293) (79,610) 9,881 (79,610) 2,160 — 7,721 (79,610) 9,881 29,995 9,331 8,178 5,119 38,173 14,450
Continuing operations 2006 2005 *HK$’000* HK$’000 (Restated) 13,202 6,106 1,052 31,872 1,545 29,203 1,006 8,901 1,421 12,008 8,954 9,532 21,248 4,352 48,428 101,974 31,692 91,032 9,732 8,541 41,424 99,573	Discontinued Continuing operations Total operations 2006 2005 2006 2005 2006 2005 *HK$’000* HK$’000 *HK$’000* HK$’000 *HK$’000* HK$’000 (Restated) (Restated) (Restated) (Restated) — — 13,202 6,106 (4,653) 339 — — 1,052 31,872 (253) 2,024 — — 1,545 29,203 (1,541) 1,625 — — 1,006 8,901 (562) 1,654 — — 1,421 12,008 (1,428) 4,268 — — 8,954 9,532 (1,062) 2,541 — — 21,248 4,352 (7,989) 1,121 — — 48,428 101,974 (17,488) 13,572 — — 31,692 91,032 29,995 9,331 — — 9,732 8,541 8,178 5,119 — — 41,424 99,573 38,173 14,450
		13,572	13,572 380 —

		9,331 5,119
			13,952 (193) (2,585)
			11,174 (1,293)
			9,881

			2,160 7,721
			9,881

			9,331 5,119
		14,450	14,450

— 54 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

8. Discontinued Operation

On 20 October 2004, the Group entered into a sale and purchase agreement to dispose of its entire interest in Dragon City Limited (“Dragon City”) at a total consideration of HK$2,800,000. Dragon City was principally engaged in the provision of marketing and compliance monitoring services. Upon disposal of Dragon City, the Group discontinued its marketing and compliance monitoring operation. Loss on disposal of the aforesaid discontinued operation of approximately HK2,585,000 was charged to the income statement. No income tax expenses or credit arose from the disposal.

The turnover, results, cash flow, total assets and total liabilities of the marketing and compliance monitoring operation were as follows:

Turnover Selling expenses Administrative expenses Loss from operations Taxation Net loss for the year Total assets Total liabilities, including amount due to the Group of approximately HK$8,286,000 Net assets Net cash used in operating activities Net cash used in investing activities Total net cash outflow	2006 *HK$’000* — — — — — — — — — — — —	2005 HK$’000 — (2,752) (232) (2,984) — (2,984) 13,679 (8,294) 5,385 (6) (2,984) (2,990)

— 55 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

9. Property, Plant And Equipment

The Group

At cost: At 1 April 2004, as previously reported z Effect on adoption of HKAS 17 At 1 April 2004, as restated Additions Acquisition of a subsidiary At 31 March 2005 and At 1 April 2005 Additions Disposal of a subsidiary At 31 March 2006 Accumulated depreciation: At 1 April 2004, as previously reported Effect on adoption of HKAS 17 At 1 April 2004, as restated Charge for the year Acquisition of a subsidiary At 31 March 2005 and At 1 April 2005 Charge for the year Disposal of a subsidiary At 31 March 2006 Impairment: At 1 April 2004 and 31 March 2005 Charge for the year At 31 March 2006 Net book value: At 31 March 2006 At 31 March 2005	At cost: At 1 April 2004, as previously reported z Effect on adoption of HKAS 17 At 1 April 2004, as restated Additions Acquisition of a subsidiary At 31 March 2005 and At 1 April 2005 Additions Disposal of a subsidiary At 31 March 2006 Accumulated depreciation: At 1 April 2004, as previously reported Effect on adoption of HKAS 17 At 1 April 2004, as restated Charge for the year Acquisition of a subsidiary At 31 March 2005 and At 1 April 2005 Charge for the year Disposal of a subsidiary At 31 March 2006 Impairment: At 1 April 2004 and 31 March 2005 Charge for the year At 31 March 2006 Net book value: At 31 March 2006 At 31 March 2005	Buildings HK$’000 (Restated) 14,130 (7,115) 7,015 — — 7,015 — — 7,015 1,088 (755) 333 70 — 403 175 — 578 — — — 6,437 6,612	Leasehold improvements HK$’000 2,663 — 2,663 3,782 1,361 7,806 383 (2,043) 6,146 82 — 82 264 280 626 2,065 (1,192) 1,499 — — — 4,647 7,180		Furniture and fixtures HK$’000 1,489 — 1,489 302 457 2,248 284 (859) 1,673 274 — 274 410 35 719 522 (382) 859 — 49 49 765 1,529		Office equipment HK$’000 1,059 — 1,059 530 238 1,827 56 (836) 1,047 288 — 288 336 45 669 385 (381) 673 — 120 120 254 1,158		Motor vehicles HK$’000 753 — 753 — — 753 — — 753 735 — 735 18 — 753 — — 753 — — — — —		Total HK$’000 (Restated) 20,094 (7,115)
											12,979 4,614 2,056
											19,649 723 (3,738)
											16,634
											2,467 (755)
											1,712 1,098 360
											3,170 3,147 (1.955)
											4,362
											— 169
											169
											12,103

											16,479

— 56 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

As 31 March 2006, the Group’s buildings are situated in Hong Kong under long term lease.

As at 31 March 2006, the Group’s buildings with carrying amount of HK$4,612,000 (2005: HK$4,650,000) were pledged to secure a mortgage loan granted to the Group (note 19).

Cost: At 1 April 2004 Additions At 31 March 2005 and at 31 March 2006 Accumulated depreciation: At 1 April 2004 Charge for the year At 31 March 2005 and at 1 April 2005 Charge for the year At 31 March 2006 Net book value: At 31 March 2006 At 31 March 2005 10. Leasehold Land The Group Cost: At 1 April 2005/2004 as previously reported Effect on adoption of HKAS 17 At 1 April 2005/2004, as restated and at 31 March 2006/2005 Accumulated amortisation: At 1 April 2005/2004, as previously reported Effect on adoption of HKAS 17 At 1 April 2005/2004, as restated Charge for the year As at 31 March 2006/2005 Net Book Value: At 31 March 2006/2005	Furniture and fixtures HK$’000 — 157 157 — 31 31 52 83 74 126	Furniture and fixtures HK$’000 — 157 157 — 31 31 52 83 74 126	Office equipment HK$’000 — 127		Total HK$’000 — 284
			127		284
			— 25		— 56
			25 31		56 83
			56		139
			71		145

			102		228

			2006 *HK$’000* — 7,115 7,115 — 874 874 484 1,358 5,757		2005 HK$’000 (Restated) — 7,115
					7,115
					— 755
					755 119
					874
					6,241

— 57 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The Group’s interests in leasehold land represents prepaid operating lease payments in respect of leasehold land in Hong Kong under long-term lease and their net book value is analysed as follows:

Land in Hong Kong, held on: Long-term leases	2006 *HK$’000* 5,757	2005 HK$’000 (Restated) 6,241

As at 31 March 2006, the Group’s leasehold land with carrying amount of HK$4,606,000 (2005: HK$4,639,000) were pledged to secure a mortgage loan granted to the group (note 19).

11. Goodwill

The Group Cost: At 1 April 2004 and at 31 March 2005 Elimination of accumulated amortisation upon adoption of HKFRS 3 At 31 March 2006 Accumulated amortisation: At 1 April 2004 Charge for the year At 31 March 2005 and at 1 April 2005 Elimination of accumulated amortisation upon adoption of HKFRS 3 At 31 March 2006 Impairment: At 1 April 2004 and at 31 March 2005 Impairment loss recognised At 31 March 2006 Carrying amount: At 31 March 2006 At 31 March 2005	HK$’000 5,913 (389
	5,524
	118 271
	389 (389
	—
	— 5,524
	5,524
	—

	5,524

(i) In prior years, Goodwill is amortised over a period of 15 years. Following the adoption of HKFRS 3, amortisation of goodwill has ceased since 1 April 2005. The accumulated amortisation of goodwill as at 1 April 2005 has been eliminated against the cost of goodwill as at that date. Annual impairment review was performed.

— 58 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(ii) Goodwill is allocated to the Group’s cash generating unit (“CGU”) identified according to country of operation at business segment as follows:—

Provision of apparel sourcing, quality assurance and social compliance monitoring services	2006 *HK$’000* —	2005 HK$’000 5,524

The recoverable amount of CGU is determined based on the value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by the management covering a fiveyear period. Cash flow beyond five-year period is extrapolated using the estimated rate stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.

Key assumptions used for value-in-use calculations:

Gross margin	35%
Growth rate	20%
Discount rate	7%

Management determined the budget gross margin based on past performance and its expectations for the market development. The weighted average growth rates used are calculated in accordance with the total amounts and terms of signed contracts. The discount rates used are pre-tax and reflect specific risks relating to the relevant segments.

(iii) Due to operating loss incurred by the subsidiary, the director reassessed the recoverable amount of the goodwill and made impairment loss approximately HK$5,524,000.

12. Interests In Subsidiaries

The Company Unlisted shares, at cost Less: Impairment loss on interests in subsidiaries Amounts due from subsidiaries Less: Impairment loss on amounts due from subsidiaries	2006 *HK$’000* 22,316 (7,042) 15,274 22,641 (22,641) — 15,274	2005 HK$’000 32,916 —
		32,916
		38,281 —
		38,281
		71,197

— 59 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

			Percentage	Percentage
		Particular of	and of equity
	Place of	issued and	attributable to		Principal
Name	incorporation	paid up capital	the Company		activities
			2006	2005
			%	%
Directly held
Sun Ace Group	British Virgin	US$1	100	100	Investment holding
Limited	Islands (“BVI”)	Ordinary
Fair Good Limited	BVI	US$1	100	100	Investment holding
		Ordinary
Indirectly held
Sun Tai Hing	Hong Kong	HK$115,000	100	100	Provision of sales
Garment Making		Ordinary			support services
Company Limited
Easy Billion	Hong Kong	HK$10,000	100	100	Investment holding
International		Ordinary
Enterprise Limited
East Step Trading	Hong Kong	HK$1	100	100	Apparel trading
Limited		Ordinary			(Hong Kong based)
Gala Consultants	BVI	US$1	100	100	Apparel trading
Group Limited		Ordinary			(Overseas based)
Elite Team Inc.	BVI	US$1	100	100	Investment holding
		Ordinary
Fanlink Far East	BVI	US$1	100	100	Investment holding
Limited		Ordinary

The above table listed the subsidiaries of the Company which, in the opinion of the directors of the Company, principally affected the results or assets of the Group. To give details of other subsidiaries would, in the opinion of the directors of the Company, result in particulars of excessive length.

The amounts due from/(to) subsidiaries are unsecured, non-interest bearing and recoverable/ (repayable) on demand.

— 60 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

13. Available-for-sale Financial Assets

As mentioned in note 2 to the financial statements, from 1 April 2005, the Group’s investment in securities have been reclassified to available-for-sale financial assets in accordance with HKAS 39. The details of the Group’s available-for-sale financial assets as at 31 March 2006 and at 31 March 2005 have been summarised below:—

Held for non-trading purpose: Listed equity securities — Hong Kong, at cost Listed equity securities — outside Hong Kong, at cost Impairment loss on available-for-sale financial assets At 31 March 14. Inventories The Group Finished goods Less: Provision for obsolete inventories Note: The movement of provision on obsolete inventories were a Balance as at 1 April 2005/2004 Provision on obsolete inventories Balance as at 31 March 2006/2005	The Group 2006 2005 *HK$’000* HK$’000 (Restated) 31,260 31,260 4,680 4,680 35,940 35,940 (33,245) — 2,695 35,940 2006 2005 *HK$’000* HK$’000 15,640 11,303 (6,689) — 8,951 11,303 s follows:— 2006 2005 *HK$’000* HK$’000 — — 6,689 — 6,689 —	The Group 2006 2005 *HK$’000* HK$’000 (Restated) 31,260 31,260 4,680 4,680 35,940 35,940 (33,245) — 2,695 35,940 2006 2005 *HK$’000* HK$’000 15,640 11,303 (6,689) — 8,951 11,303 s follows:— 2006 2005 *HK$’000* HK$’000 — — 6,689 — 6,689 —
		35,940 —
		35,940

		2005 HK$’000 11,303 —
		11,303

		2005 HK$’000 — —
		—

— 61 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

15. Trade Receivables

The Group

The Group’s general credit terms granted to its customers ranged form 0 — 60 days (2005: 0 — 60 days).

The following is an aged analysis of the trade receivables at the balance sheet date.

Within 30 days Between 31 to 60 days Between 61 days to 1 year Less: Impairment loss on trade receivables	2006 *HK$’000* 3,586 1,806 4,685 10,077 (4,685) 5,392	2005 HK$’000 8,485 484 —
		8,969 —
		8,969

Notes:

i. The carrying amount of trade receivables approximately to their fair value.
ii. The movements in Impairment loss on trade receivables were as follows:

At 1 April 2005/2004 Impairment loss on trade receivables At 31 March 2006/2005	2006 *HK$’000* — 4,685 4,685	2005 HK$’000 — —
		—

16. Prepayments, Deposits And Other Receivables

Prepayments Rental and utility deposits Other receivables Loan receivables Investment deposits	The Group 2006 2005 *HK$’000* HK$’000 2,096 3,689 1,910 2,437 32 — — 2,000 — 2,745 4,038 10,871	The 2006 *HK$’000* 226 — — — — 226	Company 2005 HK$’000 85 — — — —
			85

The fair value of the Group’s prepayments, deposits and other receivables as at 31 March 2006 approximately to the corresponding carrying amount.

— 62 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

17. Share Capital

The Company

The Company
Authorised: 10,000,000,000 ordinary shares of HK$0.01 each Issued and fully paid: 320,000,000 ordinary shares of HK$0.01 each	2006 *HK$’000* 100,000 3,200	2005 HK$’000 100,000

		3,200

18. Reserves

The Group

At 1 April 2004 Release upon disposal of a subsidiary Net profit for the year At 31 March 2005 and At 1 April 2005 Net loss for the year At 31 March 2006 The Company At 1 April 2004 Release upon disposal of a subsidiary Net loss for the year At 31 March 2005 and At 1 April 2005 Net loss for the year At 31 March 2006	Contributed surplus HK$’000 (Note i) (84) (1) — (85) — (85) Contributed surplus HK$’000 (Note ii) 22,117 (1) — 22,116 — 22,116	Share premium account HK$’000 25,146 — — 25,146 — 25,146 Share premium account HK$’000 25,146 — — 25,146 — 25,146	(Accumulated losses)/ retained profits HK$’000 52,440 — 2,160 54,600 (79,610) (25,010) Accumulated losses HK$’000 (905) — (4,099) (5,004) (41,527) (46,531)	Total HK$’000 77,502 (1) 2,160
				79,661 (79,610)
				51

				Total HK$’000 46,358 (1) (4,099)
				42,258 (41,527)
				731

— 63 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

Contributed surplus

(i) The contributed surplus of the Group represents the difference between the nominal value of the shares of the subsidiaries acquired pursuant to the Group Reorganisation on 22 October 2002 over the nominal value of the Company’s shares issued in exchange thereof.
(ii) The contributed surplus of the Company represents the difference between the fair value of the shares of Sun Ace Group Limited acquired pursuant to the Group Reorganisation on 22 October 2002 over the nominal value of the Company’s share issued in exchange thereof.
Under the Companies Law (2001 Second Revision) of the Cayman Islands, the contributed surplus account is distributable to the shareholders of the Company under certain circumstances.
(iii) In the opinion of the directors, the Company did not have any reserves available for distribution to shareholders at 31 March 2006. As at 31 March 2005, the Company’s reserves available for cash distribution and/or distribution in specie, calculated in accordance with the Companies Law (2001 Second Revision) of the Cayman Islands, amounted to HK$47,262,000.

19. Interest-bearing Bank Borrowings — Secured

The Group

Mortgage loan repayable: Within one year or on demand In the second year In the third to fifth years, inclusive Beyond five years Portion classified as current liabilities Long term portion	2006 *HK$’000* 261 264 827 4,598 5,950 (261) 5,689	2005 HK$’000 250 255 792 4,903
		6,200 (250
		5,950

The Group’s mortgage loan was secured by the followings:

(i) legal charge over the leasehold land and buildings of the Group with an aggregate net book value of approximately HK$4,606,000 and HK$4,612,000 respectively (2005: HK$4,639,000 and HK$4,650,000) (note 9 and 10); and
(ii) personal guarantee executed by a director of the Company.

20. Deferred Taxation

Deferred tax liabilities arising from accelerated tax depreciation is as follows:

				The Group
				2006	2005
				*HK$’000*	HK$’000
At	31	March	2006/2005	167	167

— 64 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

At 31 March 2006, there was no significant unrecognised deferred tax liabilities (2005: HK$Nil) for taxes that would have been payable on the unremitted earnings of certain of the Group’s subsidiaries as the Group had no liabilities to additional tax should amounts be remitted.

21. Trade And Other Payables

Trade payables: Within 90 days Within 91 days to 180 days Accrued expenses due within 30 days or on demand	The Group 2006 2005 *HK$’000* HK$’000 1,628 5,498 727 482 2,355 5,980 990 929 3,345 6,909	The 2006 *HK$’000* — — — 469 469	Company 2005 HK$’000 — —
			— 403
			403

The carrying amount of trade and other payables approximately to their fair value.

22. AMOUNT DUE TO A DIRECTOR

The amount due to a director is unsecured, non-interest bearing and repayable on demand.

The amount due to a director was secured by the corporate guarantee executed by the Company.

23. OTHER REVENUE

The Group

The Group
Bank interest income Dividend income received from available-for-sale financial assets Sundry income	2006 *HK$’000* 240 191 — 431	2005 HK$’000 200 159 21
		380

— 65 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

24. (Loss)/Profit From Operations

Expenses included in cost of goods sold, selling expenses and administrative expenses are analysed as follows:—

		The Group	The Group
		2006	2005
		*HK$’000*	HK$’000
			(Restated)
	Cost of inventories expensed	38,892	73,674
	Employee benefit expenses (Note 25)	3,172	2,640
	Depreciation	3,147	1,098
	Amortisation of intangible assets	—	233
	Amortisation of goodwill	—	271
	Amortisation of leasehold land	484	119
	Auditors’ remuneration	660	500
	Impairment loss on loan receivable	2,000	—
	Impairment loss on investment deposits	2,745	—
	Provision for obsolete inventories	6,689	—
	Operating lease rental in respect of
	rental premises	1,163	516
	Irrecoverable bad debts	—	3,800

25.	Employee Benefit Expenses
	The Group
		2006	2005
		*HK$’000*	HK$’000
			(Restated)
	(a) Employee benefit expenses are analysed as follows:
	Wages, salaries and allowance	2,981	2,467
	Retirement benefit contributions	191	173
		3,172	2,640

— 66 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(b) Directors and senior management emoluments

			Salaries,	Salaries,	Pension	Pension
			bonus	and	scheme
	Fee		other benefits		contributions		Total
	2006	2005	2006	2005	2006	2005	2006	2005
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Name of
directors
Executive
directors
Tsai Lai Wa,
Jenny	—	—	—	129	—	—	—	129
Edmund Siu	—	—	120	120	6	—	126	120
Mao Yue	—	—	240	20	12	—	252	20
	—	—	360	269	18	—	378	269
Independent
non-executive
directors
Lo Wing Yan,
Emmy	100	100	—	—	—	—	100	100
Fu Wing Kwok,
Ewing	100	30	—	—	—	—	100	30
Liang Kwong Lim	100	20	—	—	—	—	100	20
	300	150	—	—	—	—	300	150
	300	150	360	269	18	—	678	419

The remuneration of all of the director fell within the nil to HK$500,000 band for the two years ended 31 March 2005 and 2006.

The five individuals whose emoluments were the highest in the Group for the year include one (2005: one) directors whose emoluments are set out in note 25(b) above. The emoluments of the remaining four (2005: four) individuals were follows.

Wages, salaries and allowance Retirement benefit contributions	2006 *HK$’000* 580 21 601	2005 HK$’000 492 17
		509

— 67 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The emoluments on each of the remaining four highest paid individuals fell within the followings bands:

	Number of individual
	2006	2005
Emolument bands:
Nil to HK$500,000	4	4

26. Finance Costs

The Group

Bank charges Mortgage loan interest wholly repayable over five years	2006 *HK$’000* 15 134 149	2005 HK$’000 21 172
		193

27. Taxation

The Group

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. Tax 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.

Current — Hong Kong Charge for the year Provision for estimated assessments of tax liabilities_(Note (i))_ Current — Elsewhere Charge for the year Over provision in prior year Total tax charge for the year	2006 *HK$’000* 85 19,918 — — 20,003	2005 HK$’000 60 — 1,254 (21
		1,293

— 68 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes:

(i) During the year, the Hong Kong Inland Revenue Department (“IRD”) issued certain estimated assessments for tax liabilities of approximately HK$19,918,000 to a subsidiary on the nontaxable claim of non-Hong Kong sourced income for the years of assessment of 1998/1999, 1999/2000, 2000/2001, 2001/2002, 2002/2003 and 2003/2004 (“Estimated Assessments”). The concerned subsidiary has formally filed objections to the IRD against the Estimated Assessments and the concerned subsidiary is still in the process of answering queries from the IRD. The directors considered that full provision on the tax liabilities of the Estimated Assessments was required as the result of the objections regarding the Estimated Assessments is uncertain.
(ii) A reconciliation of the tax expense applicable to profit/(loss) before tax using the statutory rates for the countries in which the Company and majority of its subsidiaries are domiciled to the tax expense/(income) 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:

The Group — for the year ended 31 March 2006

Loss before taxation Tax at the statutory tax rate Tax effect of expenses that are not deductible in determining taxable profit Tax effect of income that is not taxable in determining taxable profit Provision for tax liabilities Effect of tax losses not recognised Tax charge for year	Hong Kong HK$’000 % (49,322) (8,631) (17.5) 8,791 17.8 (75) (0.1) 19,918 40.4 — — 20,003 40.6	HK$’000 (10,285) (1,543) 1,063 — — 480 —	Others % (15) 10.3 — — 4.7 —	HK$’000 (59,607) (10,174) 9,854 (75) 19,918 480 20,003	Total % (17.1) 16.5 (0.1) 33.4 0.8
					33.5

— 69 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

The Group — for the year ended 31 March 2005

Profit/(loss) before taxation Tax at the statutory tax rate Tax effect of expenses that are not deductible in determining taxable profit Tax effect of income that is not taxable in determining taxable profit Over provision in previous year Tax charge for year	HK$’000 (654) (114 ) 258 (63) (21) 60	Hong Kong % (17.5 ) 39.4 (9.6) (3.2) 9.1	HK$’000 11,828 1,774 127 (668) — 1,233	Others % 15 1.0 (5.6) — 10.4	HK$’000 11,174 1,660 385 (731) (21) 1,293	Total % 14.8 3.4 (6.5 ) (0.1) 11.6

28. Loss From Ordinary Activities Attributable To Shareholders

The Group’s consolidated loss attributable to shareholders is approximately HK$79,610,000 (2005: profit of HK$2,160,000) of which net loss of approximately HK$41,527,000 (2005: HK$4,099,000) is dealt with in the financial statements of the Company.

29. Dividend

The directors do not recommend the payment of any dividend in respect for the year ended 31 March 2006 (2005: Nil).

30. (Loss)/Earnings Per Share

The calculation of the basic (loss)/earnings per share is based on the (loss)/profit attributable to the Company’s equity holders of HK$79,610,000 (2005: profit of HK$2,160,000) and on 320,000,000 (2005: 320,000,000) shares in issue during the year.

There were no potential shares in existence for the year ended 31 March 2006 and 2005, and, accordingly, no diluted loss per share has been presented.

— 70 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

31. Acquisition Of A Subsidiary

Net assets acquired: Property, plant and equipment Inventories Prepayment, deposits and other receivables Cash and cash equivalent Trade and other payables Purchase consideration settled in cash	The Group 2006 2005 *HK$’000* HK$’000 — 730 — 201 — 2,930 — 20 — (381) — 3,500 — 3,500

Analysis of the net cash outflow in respect of the acquisition of a subsidiary is set out below:

Cash consideration paid Cash and cash equivalent acquired Net cash outflow in respect of the acquisition of a subsidiary	2006 *HK$’000* — — —	2005 HK$’000 3,500 (20) 3,480

During the year ended 31 March 2005, the Group acquired 100% interest in Gala Consultants Group Limited which is principally engaged in apparel trading.

The subsidiary acquired in 2005 contributed approximately HK$13,884,000 to the Group’s turnover and contributed to the Group’s profit of approximately HK$4,790,000 for the year. The subsidiary acquired contributed approximately HK$2,692,000 to the Group’s net operating cash flows for the year ended 31 March 2005.

32. Employee Retirement Benefits

— 71 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

33. Share Option Scheme

The Company’s existing share option scheme (“Share Option Scheme”) became effective on 22 October 2002. The major terms of the Share Option Scheme, in conjunction with the requirements of Chapter 17 of the Listing Rules on the Stock Exchange, are set out as follows:

(a) Purpose

The purpose of Share Option Scheme is providing incentives and rewards to full-time employees of the Group in recognition of their contribution to the Group.

(b) Participants of the Share Option Scheme

Subject to the terms of the share Option Scheme, the Directors may, at its absolute discretion, invite full-time employees of the Group including executive directors of the Company or any of its subsidiaries (“Eligible Persons”) to take up options to subscribe for Shares.

(c) Total number of shares available for issue under the Share Option Scheme

The total number of Shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option scheme and any other scheme of the Company must not exceed 30% of the total issued share capital of the Company from time to time.

(d) Maximum entitlement of each Eligible Persons

The total number of shares issued and to be issued on the exercise of options granted and to be granted (including both exercised and outstanding options) in any 12-month period up to the date of grant to each Eligible Person shall not exceed 1% of the total issued share capital of the Company in issue unless (i) a shareholders’ circular is dispatched to the shareholders; (ii) the shareholders approve the grant of the options in excess of the limit referred to herein; and (iii) the relevant Eligible Person and its associates abstain from voting on the resolution.

(e) Time of acceptance and exercise of the Share Option Scheme

An offer of the grant of an option shall be made to Eligible Persons by letter in such form as the Board may from time to time determine and shall remain open for acceptance by the Eligible Person concerned for a period of 28 days from the date upon which it is made provided that no such offer shall be open for acceptance after the 10th anniversary of the Adoption Date or after the Share Option Scheme has been terminated.

(f) Amount payable upon acceptance of the option

A non-refundable nominal consideration of $1.00 is payable by the grantee upon acceptance of an option. An option shall be deemed to have been accepted when the duplicate letter comprising acceptance of the option duly signed by the Eligible Person together with the said consideration of $1.00 is received by the Company.

— 72 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(g) Basis of determining the exercise price of the option

The exercise price for Shares under the Share Option Scheme may be determined by the Board at its absolute discretion but in any event will not be less than the higher of:

(i) the closing price of the shares as stated in the daily quotations sheet of the Stock Exchange on the date of grant, which must be a business day, and
(ii) the average closing price of the Shares as stated in daily quotations sheets of the Stock Exchange for the five business days immediately preceding the date of grant, and
(iii) nominal value of Shares

(h) Period of the Share Option Scheme

Unless otherwise provided in the terms of the Share Option Scheme, an option may be exercised at any time during the period commencing on the expiry of six calendar months after the date on which the option is deemed to be granted and accepted and expiring on a date to be determined and notified by the Board to each grantee, but in any event not later than 10 years from the date of grant of option but subject to the early termination of the Share Option Scheme.

(i) Details of option granted

During the year under review and up the date of this report, no share option was granted or agreed to be granted under the Share Option Scheme.

34. Disposal Of A Subsidiary

The Group

Net assets disposed of: Intangible assets Property, plant and equipment Agency costs Prepayments, deposits and other receivables Cash and cash equivalent Assignment of amount due to fellow subsidiaries Trade and other payables Minority interests Gain/(loss) on disposal of a subsidiary attributable to discontinued operation Consideration satisfied by cash	2006 *HK$’000* — 1,783 — 59 26 — (504) (2,262) (898) 1,098 200	2005 HK$’000 3,835 — 9,827 9 8 (8,286) (8) — 5,385 (2,585) 2,800

— 73 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

For the year ended 31 March 2006

On 19 January 2006, the Group disposed of the 51% interests in View Joy Limited to an independent third party for a cash consideration of approximately HK$200,000, the principal activities of which is engaged in the provision of apparel sourcing, quality assurance and social compliance monitoring services. The gain on disposal of View Joy Limited amounted to approximately HK$1,098,000 has been credited to the income statement for the year.

For the year ended 31 March 2005

During the year ended of 31 March 2005, the Group disposed of the entire interests in Dragon City Limited which is principally engaged in the provision of marketing and compliance monitoring services for a consideration of HK2,800,000.

Analysis of the net cash inflow in respect of the disposal of a subsidiary is set out below:

Cash consideration received Cash and cash equivalent disposed of Net cash inflow in respect of the disposal of a subsidiary	2006 *HK$’000* 200 (26) 174	2005 HK$’000 2,800 (8
		2,792

The subsidiary disposed of during both years ended 31 March 2006 and 2005 did not contribute significantly to the Group’s cash and did not have material impact on the Group’s results as a whole.

35. Commitments

Operating lease commitments

The Group leases certain of its properties under operating lease arrangements. Leases for properties are negotiated for terms ranging from one to three years.

As 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	The Group 2006 2005 *HK$’000* HK$’000 842 303 1,096 329 1,938 632	The Group 2006 2005 *HK$’000* HK$’000 842 303 1,096 329 1,938 632
		632

— 74 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

36. Material Related Party Transactions

(a) Key management personnel

Compensation for key management personnel, including amount paid to the Company’s directors and certain of the highest paid employee, as disclosed in note 25, is as follows:—

Salaries and other short-term benefits Pension scheme contributions	2006 *HK$’000* 660 18 678	2005 HK$’000 (Restated) 419 —
		419

(b) The amount due to a director amounted to approximately HK$8,261,000 as at 31 March 2006 was secured by the corporate guarantee provided by the Company. The director has been resigned on 12 July 2006.

37. Contingent Liabilities

Apart from the Tax Obligations imposed by the IRD against to a subsidiary of the Group amounted to approximately HK$19,918,000 as set out in note 27, the Group does not have any material contingent liabilities as at 31 March 2006.

38. Subsequent Event

On 2 June 2006, the Group entered into a disposal agreement with an independent third party for the disposal of the entire interests in Fair Good Limited, Elite Team Inc. and Easy Billion International Enterprise Limited (“Easy Billion”) for a total cash consideration of approximately HK$120,000.

39. Comparative Figures

Following the adoption of new HKASs and 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 comparative amounts have been reclassified/ restated to conform with the current year’s presentation and accounting treatment.

40. Approval Of Financial Statements

The financial statements were approved by the board of directors on 26 July 2006.

— 75 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. INTERIM RESULTS (UNAUDITED)

Set out below is the unaudited condensed consolidated financial statements of the Group for the six months ended 30 September 2006, together with the unaudited comparative figures for the corresponding periods in 2005, which extracted from the interim report of the Company for the six months ended 30 September 2006.

Condensed Consolidated Income Statement

For the six months ended 30th September 2006

Notes Turnover 3 Cost of sales Gross profit Other revenue Selling expenses Administrative expenses Impairment of available-for-sale financial assets Loss from operations 4 Finance costs 5 Loss before tax Tax 6 Loss for the period Attributable to: Equity holders of the Company Minority interests Interim dividend 7 Loss per share Basic, HK cents 8 Diluted	Unaudited Six months ended 30th September 2006 2005 *HK$’000* HK$’000 22,760 29,429 (20,784) (23,224) 1,976 6,205 59 248 (453) (3,749) (4,801) (5,591) — (28,655) (3,219) (31,542) (58) (116) (3,277) (31,658) — (169) (3,277) (31,827) (3,277) (31,537) — (290) (3,277) (31,827) — — (1.0) (9.9) N/A N/A

— 76 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Condensed Consolidated Balance Sheet

At 30th September 2006

As at 30th September 2006 *HK$’000* Notes (Unaudited) Non-current assets Property, plant and equipment 9 7,135 Leasehold land and land use rights 9 1,150 Available-for-sale financial assets 1,320 9,605 Current assets Inventories 7,801 Trade receivables 10 5,997 Prepayments, deposits and other receivables 3,292 Cash and bank balances 1,943 19,033 Total assets 28,638 Equity Capital and reserves attributable to the Equity holders of the Company Share capital 3,200 Reserves (3,226) (26) Non-current liabilities Interest-bearing bank borrowings, secured — Deferred taxation 167 167 Current liabilities Trade and accruals 11 3,158 Interest-bearing bank borrowings, secured — Other payables 4,889 Tax payable 20,450 28,497 Total equity and liabilities 28,638 Net current liabilities 9,464 Total assets less current liabilities 141	As at 31st March 2006 HK$’000 (Audited) 12,103 5,757 2,695
	20,555
	8,951 5,392 4,038 2,488
	20,869
	41,424
	3,200 51
	3,251
	5,689 167
	5,856
	3,345 261 8,261 20,450
	32,317
	41,424

	11,448

	9,107

— 77 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30th September 2006

Unaudited

Attributable to shareholders

Balance at 1st April 2005, as previously reported, as equity Balance at 1st April 2005, as previous separately reported as minority interest Loss for the period Share of net loss by Minority interest Balance at 30th September 2005 Balance at 1st April 2006 Loss for the period Balance at 30th September 2006		To the Company	To the Company	Retained profits HK$’000 54,601 — (31,827) 290 23,064 (25,010) (3,277) (28,287)	Minority Interest HK$’000 — 2,262 — (290) 1,972 — — —	Total HK$’000 82,862 2,262 (31,827) — 53,297 3,251 (3,277) (26)
	Share Capital HK$’000 3,200 — — — 3,200 3,200 — 3,200	Contributed Surplus HK$’000 (85) — — — (85) (85) — (85)	Share premium account HK$’000 25,146 — — — 25,146 25,146 — 25,146

— 78 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Condensed Consolidated Cash flow Statement

For the six months ended 30th September 2006

		Unaudited	Unaudited
	Six	months ended
	30th September
	2006		2005
	*HK$’000*		HK$’000
Net cash outflow from operating activities	(2,268)		(730)
Net cash inflow from investing activities	7,673		2,776
Net cash (outflow)/inflow from financing activities	(5,950)		2,019
(Decrease)/increase in cash and cash equivalents	(545)		4,065
Cash and cash equivalents at beginning of the period	2,488		4,246
Cash and cash equivalents at end of the period	1,943		8,311

Analysis of the balances of cash and cash equivalents
— Cash and bank balances	1,943		8,311

— 79 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Notes to the Condensed Consolidated Financial Statements

For the six months ended 30th September 2006

1. Basis of preparation and accounting policies

The condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and with the Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

2. Significant Accounting Policies

The accounting policies used in the condensed consolidated financial statements are consistent with those followed in the preparation of the annual consolidated financial statements of the Company and its subsidiaries (the “Group”) for the year ended 31st March 2006 except in relation to the following new/revised Hong Kong Financial Reporting Standards (“HKFRSs”), HKASs and Interpretations (hereinafter collectively referred to as the “new/revised HKFRSs”), which have become effective for accounting periods beginning on or after 1st January 2006, that are adopted for the first time for the current period’s financial statements:

HKAS 21 (Amendment) The Effects of Changes in Foreign Exchanges Rates — Net Investment in a Foreign Operation HKAS 39 (Amendment) The Fair Value Option HK(IFRIC) — Int 4 Determining whether an Arrangement contains a lease

The adoption of the above new/revised HKFRSs has no material impact on the accounting policies of the Group and the methods of computation in Group’s condensed consolidated interim financial statements.

The following new/revised HKFRSs relevant to the Group’s operations have been issued but are not effective for 2006 and have not been early adopted:

HKAS 1 (Amendment) Capital Disclosures HKFRS 7 Financial Instruments: Disclosures 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

— 80 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

3. Segment information

The principal activity of the Company is investment holding. The principal activities of its subsidiaries are provision of (i) apparel sourcing (ii) apparel trading and (iii) sales support services.

An analysis of the Group’s turnover and operating results by segments during the period is shown as follows:

(i) Primary segment

Unaudited

Apparel sourcing Six months ended 30th September 2006 2005 *HK$’000* HK$’000 Segment revenue — 3,298 Segment results — (3,307) Impairment of available-for-sales financial assets Finance costs Taxation Profit after taxation Attributable to: Equity holders of the Company Minority interests		Continuing operations	Sales support services Six months ended 30th September 2006 2005 *HK$’000* HK$’000 — — — (609)	Consolidated Six months ended 30th September 2006 2005 *HK$’000* HK$’000 22,760 29,429 (3,219) (2,887) (28,655) (58) (116) — (169) (3,277) (31,827) (3,277) (31,537) — (290) (3,277) (31,827)	Consolidated Six months ended 30th September 2006 2005 *HK$’000* HK$’000 22,760 29,429 (3,219) (2,887) (28,655) (58) (116) — (169) (3,277) (31,827) (3,277) (31,537) — (290) (3,277) (31,827)
		Apparel trading Six months ended 30th September 2006 2005 *HK$’000* HK$’000 22,760 26,131 (3,219) 1,029

					(2,887) (28,655) (116) (169)
					(31,827)

					(31,537) (290)
					(31,827)

— 81 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

(ii) Secondary segment

Unaudited	Unaudited	Unaudited
Turnover Six months ended 30th September 2006 2005 *HK$’000* HK$’000 4,012 11,202 — 5,908 18,748 9,020 — 581 — 1,098 — 510 — 1,110 22,760 29,429	Operating results
	Six months ended 30th September 2006 2005 *HK$’000* HK$’000 (1,134) 501 — 108 (2,085) 1,029 — (1,106) — (1,129) — (728) — (1,562) (3,219) (2,887)
		(2,887)

There are no material sales between the geographical segments.

No analysis of capital expenditure by geographical location is presented as majority of the Group’s capital assets acquired during the period are located in Hong Kong and Macau.

4. Loss from operations

The Group’s loss from operations is arrived at after charging/(crediting):

		Unaudited
	Six	months ended
	30th September
	2006	2005
	*HK$’000*	HK$’000
Cost of inventories sold	20,784	23,224
Depreciation of owned fixed assets	678	724
Operating leases in respect of land and buildings	669	468
Interest income	(11)	(201)
Dividend income from investment securities	(31)	(31)

5. Finance costs

Interest expenses on: Mortgage loan not wholly repayable within five years Bank charges	Unaudited Six months ended 30th September 2006 2005 *HK$’000* HK$’000 58 112 — 4 58 116	Unaudited Six months ended 30th September 2006 2005 *HK$’000* HK$’000 58 112 — 4 58 116
		116

— 82 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

6. Taxation

Hong Kong profits tax has been provided at the rate of 17.5% (2005: 17.5%) on the estimated assessable profits for the period. Taxation on overseas profits has been calculated on the estimated assessable profit for the period at the rates of taxation prevailing in the countries in which the Group operates.

The amount of taxation charged to the consolidated income statement represents:

Current taxation: — Hong Kong profit tax — Overseas taxation	Unaudited Six months ended 30th September 2006 2005 *HK$’000* HK$’000 — 59 — 110 — 169	Unaudited Six months ended 30th September 2006 2005 *HK$’000* HK$’000 — 59 — 110 — 169
		169

7. Interim dividend

The directors do not recommend the payment of interim dividend for the six months ended 30th September 2006 (2005: Nil).

8. Loss per share

The calculation of basic loss per share is based on the Group’s net loss attributable to shareholders for the period ended 30th September 2006 of HK$3,277,000 (2005: 31,537,000) and the weighted average of 320,000,000 (2005: 320,000,000) ordinary shares in issue during the period.

There were no potential dilutive shares in existence for the two periods ended 30th September 2006 and 2005, accordingly, no diluted earnings per share has been presented.

— 83 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

9. Capital expenditure

Six months ended 30 September 2006 Opening net book amount as at 1 April 2006 Additions Disposals Depreciation and amortisation Closing net book amount as at 30 September 2006 Six months ended 30 September 2005 Opening net book amount as at 1 April 2005 Additions Disposals Depreciation and amortisation Closing net book amount as at 30 September 2005	Property, plant and equipment HK$ 12,103 1,878 (6,192) (654) 7,135 16,556 165 (732) (503) 15,486	Leasehold land and land use rights HK$ 5,757 — (4,583) (24) 1,150 6,164 — — (221) 5,943	Total HK$ 17,860 1,878 (10,775) (678) 8,285 22,720 165 (732) (724) 21,429

10. Trade receivables

General credit terms granted by the Group to its customers ranged from 0 — 60 days (2005: 0 — 60 days). The following is an aged analysis of the trade receivables at the balance sheet date.

Within 30 days Between 31 — 60 days Between 61 days to 1 year _Less:_Impairment loss on trade receivables	As at 30th September 2006 (Unaudited) *HK$’000* 1,346 3,783 5,553 10,682 (4,685) 5,997	As at 31st March 2006 (Audited) HK$’000 3,586 1,806 4,685 10,077 (4,685) 5,392

— 84 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

11. Trade and accruals

An aged analysis of the trade and accruals as at the balance sheet date is as follows:

Trade creditors Within 90 days Within 91 days to 180 days Accrued expenses due within 30 days or on demand 12. Share capital Authorised: 1,000,000,000 shares of HK$0.01 each Issued and fully paid: 320,000,000 shares of HK$0.01 each 13. Commitments and contingent liabilities	As at 30th September 2006 (Unaudited) *HK$’000* 1,657 207 1,864 1,294 3,158 As at 30th September 2006 (Unaudited) *HK$’000* 10,000 3,200	As at 31st March 2006 (Audited) HK$’000 1,628 727
		2,355 990
		3,345

		As at 31st March 2006 (Audited) HK$’000 10,000

		3,200

Operating lease commitments

As at 30th September 2006, the total future minimum lease payments under non-cancellable operating leases in respect of rented premises are payable as follows:

Amounts payable: — within one year — within two to five years	As at 30th September 2006 (Unaudited) *HK$’000* 618 981 1,599	As at 31st March 2006 (Audited) HK$’000 842 1,096
		1,938

— 85 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

Contingent liabilities

A writ has been filed against the Company in respect of a claim for reimbursement of expenses paid on behalf of the Company and its subsidiary amounting to approximately HK$3 million on 26 July 2006. The Company is not aware of such alleged payments and has instructed lawyers to deal with the matter. Up to the date of this report, the Company is reviewing information supplied by the Plaintiff in respect of the allegation. The Board of Directors is in the opinion the claim is not justifiable and without merit. Hence, no provision has been made in the interim financial statements.

14. Material Related Party Transactions

(a) A former director of the Company has advanced funds to the Group amounting to approximately HK$1,367,000 for the six months period ended 30 September 2006. (six months ended 30 September 2005: HK$2,019,000); and
(b) The Group has remunerated to key management compensation amounting approximately HK$166,000 for the six months period ended 30 September 2006 (six months period ended 30 September 2005: HK$63,000).

15. Pledge of Assets

As at September 2006, none of the Group’s assets has been pledged (31st March 2006: Nil)

16. Approval of Interim Report

The Interim Report was approved by the Board of Directors on 27 December 2006.

— 86 —

FINANCIAL INFORMATION ON THE GROUP

APPENDIX I

4. INDEBTEDNESS STATEMENT

Borrowings

As at the close of business on 31 March 2007 (being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this Prospectus), the Group does not have any outstanding borrowings.

Save as aforesaid and apart from intra-group liabilities and normal accounts payable in the ordinary course of business of the Group, none of the companies comprising the Group had outstanding at the close of business on 31 March 2007 any mortgages, term loans, charges or debentures, loan capital, bank loans and overdrafts, debt securities or other similar indebtedness, finance leases or hire purchase commitments, liabilities under acceptance (other than normal trade bills) or acceptance credits or any guarantees.

Contingent liabilities

(a) A writ has been filed against the Company in respect of a claim for reimbursement of expenses paid on behalf of the Company and its subsidiary amounting to approximately HK$3 million on 26 July 2006. The Company is not aware of such alleged payments and has instructed lawyers to deal with the matter. The Board of Directors is in the opinion the claim is not justifiable and without merit. Details of which are set out in the section head “Litigation” in Appendix III to this Prospectus.
(b) The Inland Revenue Department imposed a tax obligations against a subsidiary of the Group amounted to approximately HK$19,918,000.

Apart from the contingent liabilities set out above, the Group does not have any material contingent liabilities as at 31 March 2007.

The Directors have confirmed that there has been no material change in the indebtedness or contingent liabilities of the Group since 31 March 2007.

5. WORKING CAPITAL

The Directors are of the opinion that, based on the present available facilities, internal resources of the Group, the estimated net proceeds from the Open Offer and in the absence of unforeseeable circumstances, the Group will have sufficient working capital to satisfy its requirement for the next twelve months from the date of the Prospectus.

6. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 March 2006, the date to which the latest audited financial statements of the Company were made up.

— 87 —

PRO FORMA FINANCIAL INFORMATION

APPENDIX II

1. THE STATEMENT OF UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The following is the statement of unaudited pro forma adjusted consolidated net tangible assets of the Group which has been prepared to illustrate the effect of the open offer of 192,000,000 offer shares at the subscription price of HK$0.20 on the basis of one offer share for every two shares held on the Record Date (the “Open Offer”) on the net liabilities of the Group as if the Open Offer had been completed on 30 September 2006. As it is prepared for illustrative purposes only, and because of its nature, it may not give a true picture of the financial position of the Group upon completion of the Open Offer and any future financial periods.

The statement of unaudited pro forma adjusted consolidated net tangible assets of the Group is prepared based on the net liabilities of the Group as at 30 September 2006 as extracted from the published unaudited interim report of the Group for the six months ended 30 September 2006 and is adjusted for the effect of the Open Offer.

			Unaudited
		Unaudited	Pro forma
		pro forma	adjusted
		adjusted	consolidated
		consolidated	net tangible
		net tangible	assets
Unaudited		assets	per share
consolidated	Add:	of the Group	immediately
net liabilities	Estimated	after	after
as at	net proceeds	completion	completion
30 September	from the	of the	of the
2006	Open Offer	Open Offer	Open Offer
HK$’000	HK$’000	HK$’000	HK$
(Note 1)	(Note 2)		(Note 3)
(26)	37,000	36,974	0.07

Notes:

The unaudited consolidated net liabilities of the Group as at 30 September 2006 is extracted from the unaudited consolidated balance sheet of the Company as at 30 September 2006 as extracted from the published unaudited interim report of the Group for the six months ended 30 September 2006.

— 88 —

PRO FORMA FINANCIAL INFORMATION

APPENDIX II

This reflects the estimated net proceeds of approximately HK$37,000,000 from the Open Offer approximately HK$38,400,000 after deducting estimated expenses of approximately HK$1,400,000 attributable to the Open Offer.
The unaudited pro forma adjusted consolidated net tangible assets of the Group per share immediately after the Open Offer is calculated based on the assumption that 512,000,000 ordinary shares in issue as at the Record Date which consists of 320,000,000 ordinary shares in issue as at 30 September 2006 together with 192,000,000 Offer Shares will be issued upon completion of the Open Offer.

— 89 —

PRO FORMA FINANCIAL INFORMATION

APPENDIX II

2. REPORT ON THE STATEMENT OF UNAUDITED PRO FORMA ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The following is the text of the report, prepared for the purpose of incorporation in this Prospectus, from the reporting accountants of the Company, M.C. Ng & Co., Certified Public Accountants (Practising) in connection with the statement of unaudited pro forma adjusted consolidated net tangible assets of the Group:

==> picture [47 x 80] intentionally omitted <==

M. C. Ng & Co.

Certified Public Accountants (Practising) Room 1502, Double Building 22 Stanley Street Central, Hong Kong

The Board of Directors

Grandtop International Holdings Limited No. 1, 1st Floor, Pei Ho Building 115-117 Fuk Wa Street Sham Shui Po Kowloon, Hong Kong

18 May 2007

Dear Sirs,

We report on the statement of unaudited pro forma adjusted consolidated net tangible assets of Grandtop International Holdings Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”), which has been prepared by the directors of the Company for illustrative purposes only, to provide information about how the open offer of 192,000,000 shares at the subscription price of HK$0.20 on the basis of one offer share for every two existing shares held on the record date might have affected the consolidated net tangible assets of the Group presented, for inclusion in Section 1 of Appendix II of the prospectus of the Company dated 18 May 2007 (the “Prospectus”). The basis of preparation of the statement of unaudited pro forma adjusted consolidated net tangible assets is set out in Section 1 of Appendix II of the Prospectus.

— 90 —

PRO FORMA FINANCIAL INFORMATION

APPENDIX II

Respective Responsibilities of Directors of the Company and Reporting Accountants

It is the responsibility solely of the directors of the Company to prepare the statement of unaudited pro forma adjusted consolidated net tangible assets 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 (the “HKICPA”).

It is our responsibility to form an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the statement of unaudited pro forma adjusted consolidated net tangible assets 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 statement of unaudited pro forma adjusted consolidated net tangible assets beyond that owed to those to whom those reports were addressed by us at the date of their issue.

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 Investments 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 statement of unaudited pro forma adjusted consolidated net tangible assets 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 statement of unaudited pro forma adjusted consolidated net tangible assets 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 statement of unaudited pro forma adjusted consolidated net tangible assets as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

The statement of unaudited pro forma adjusted consolidated net tangible assets is for illustrative purposes only, based on the judgments 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 the future and may not be indicative of the financial position of the Group as at 30 September 2006 or any future date.

— 91 —

PRO FORMA FINANCIAL INFORMATION

APPENDIX II

Opinion

In our opinion:

(a) the statement of unaudited pro forma adjusted consolidated net tangible assets 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 statement of unaudited pro forma adjusted consolidated net tangible assets as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

Yours faithfully,

M. C. Ng & Co.

Certified Public Accountants (Practising) Hong Kong, 18 May 2007

— 92 —

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This Prospectus 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 document 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. SHARE CAPITAL

The authorised and issued share capital of the Company as at the Latest Practicable Date were, and immediately following completion of the Open Offer will be, as follows:

As at the Latest Practicable Date

The issued and paid up share capital

Ordinary shares:

Authorised: 10,000,000,000 Shares Issued and fully paid: 384,000,000 Shares in issue	HK$ 100,000,000.00

	3,840,000.00

Upon completion of the Open Offer

The issued and paid up share capital, taking into account of the Open Offer will be as follows:

Ordinary shares:

Authorised: 10,000,000,000 Shares Issued and fully paid or credited as fully paid: 384,000,000 Shares in issue 192,000,000 Offer Shares to be issued pursuant to the Open Offer 576,000,000 Shares in issue immediately upon completion of the Open Offer	HK$ 100,000,000.00

	3,840,000.00 1,920,000.00
	5,760,000.00

— 93 —

GENERAL INFORMATION

APPENDIX III

None of the securities of the Company is listed or dealt in on any other stock exchange other than the Stock Exchange and no such listing or permission to deal is being or is proposed to be sought.

The Company did not have any other options, warrants and other convertible securities or rights that are exchangeable or convertible into Shares or conferring any right to subscribe for the Shares as at the Latest Practicable Date.

3. DISCLOSURE OF DIRECTOR’S INTERESTS

(a) Director’s interests and short positions in the securities of the Company and its associated corporations

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

	Number or		Approximate
	attributable		percentage
	number of		or attributable
	Shares held		percentage of
Name of Director	or short positions	Nature of interests	shareholding
			(%)
Bessie Siu	96,000,000 (L)	Other Interests	25
	(Note 1)

L: Long Position

Note:

(1) These shares were indirectly owned by a discretionary trust of which certain family members of Ms. Bessie Siu were eligible beneficiaries.

— 94 —

GENERAL INFORMATION

APPENDIX III

Save as disclosed above, as at the Latest Practicable Date, none of the Directors nor the chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO, to be entered in the register referred to therein; or (iii) which 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 contained in the Listing Rules.

4. SUBSTANTIAL SHAREHOLDERS

So far as is known to the Directors and the chief executive of the Company, as at the Latest Practicable Date, the following persons (not being Directors or chief executive of the Company) had, or were deemed to have, interests or short positions in the Shares or underlying Shares which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or recorded in the register kept by the Company pursuant to Section 336 of the SFO, or who were, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying the right to vote in all circumstances at general meetings of the Company or any member of the Group:

	Number or		Approximate
	attributable		percentage
	number of		or attributable
Name of	Shares held		percentage of
shareholder	or short positions	Nature of interests	shareholding
			(%)
Kingston Securities	153,675,000 (L)	Held by	26.68
Limited	(Note 1)	controlled
		Corporation
Chu Yuet Wah	153,675,000 (L)	Beneficial	26.68
	(Note 1)	Owner
Ma Siu Fong	153,675,000 (L)	Beneficial	26.68
	(Note 1)	Owner

— 95 —

GENERAL INFORMATION

APPENDIX III

	Number or		Approximate
	attributable		percentage
	number of		or attributable
Name of	Shares held		percentage of
shareholder	or short positions	Nature of interests	shareholding
			(%)
Huge Gain	96,000,000 (L)	Beneficial	25
Development	(Note 2)	Owner
Limited
Nerine Trust	96,000,000 (L)	Held by	25
Company Limited	(Note 2)	controlled
		corporation
Hui Ho Luek	76,650,000 (L)	Beneficial	19.96
		Owner
Premier Rise	64,000,000 (L)	Held by	16.67
Investments Limited		controlled
		Corporation

L: Long Position

Notes:

(1) 153,675,000 Shares represent the maximum number of Offer Shares Kingston Securities as underwriter is required to subscribe or procure to subscribe for pursuant to the Underwriting Agreements. As such, Kingston Securities is deemed to be interested in 153,675,000 Shares under the SFO. The entire issued shares capital of Kingston Securities is owned as to 51% by Chu Yuet Wah and 49% by Ma Siu Fong. Chu Yuet Wah and Ma Siu Fong are therefore deemed to be interested in 153,675,000 Shares under the SFO.
(2) These shares are registered in the name of Huge Gain Development Limited (“Huge Gain”). The entire issued share capital of Huge Gain is owned by Nerine Trust Company Limited (“Nerine Trust”). Nerine Trust is the trustee of SB Unit Trust and holds properties for the benefit of holders of units issued by SB Unit Trust. All the units issued by SB Unit Trust were held by family members of Mr. Siu Ban, co-founder of the Group.

Save as disclosed herein, according to the register of interests kept by the Company under Section 336 of the SFO and so far as was known to the Directors, as at the Latest Practicable Date, there was no other person known to the Directors (other than the Directors or chief executives of the Company as disclosed in the above), who had interests or short position in the shares or underlying shares of the Company which would fall to be disclosed to the Company under provisions of Divisions 2 and 3 of Part XV of the SFO, or recorded in the register kept by the Company pursuant to Section 336 of the SFO, or who were, directly or indirectly interested in 10% or more of the nominal value of any class of share capital carrying the right to vote in all circumstances at general meetings of the Company or any member of the Group.

— 96 —

GENERAL INFORMATION

APPENDIX III

5. DIRECTORS’ INTERESTS IN CONTRACTS AND ASSETS

Save for the Underwriting Agreements, there is no contract or agreement entered into by any member of the Group, subsisting at the date of this Prospectus in which any of the Directors is materially interested and which is significant in relation to the business of the Group as a whole.

As at the Latest Practicable Date, none of the Directors had any interests, direct or indirect, 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 since 31 March 2006, the date to which the latest published audited consolidated financial statements of the Group were made up.

6. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group and associated companies (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

7. EXPERT AND CONSENT

The following is the qualification of the expert who has given opinions or advice which are contained in this Prospectus:

Name

Qualification

M. C. Ng & Co.

Certified Public Accountants

M. C. Ng & Co. has given and has not withdrawn its written consent to the issue of this Prospectus with the inclusion herein of its letter and report and references to its name in the form and context in which it appears.

— 97 —

GENERAL INFORMATION

APPENDIX III

As at the Latest Practicable Date, M. C. NG & Co. did not have any shareholding in any member of the Group nor did it have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group nor did it have any interest, direct or indirect, in any assets which have been, since 31 March 2006, the date to which the latest published audited financial statements of the Company were made up, acquired or disposed of by or leased to or are proposed to be acquired or disposed of by or leased to any member of the Group.

8. MATERIAL CONTRACTS

Save for the Underwriting Agreements, within the two years immediately preceding the date of this Prospectus and up to the Latest Practicable Date, the Company and its subsidiaries have not entered into any contract outside its ordinary course of business and is or may be material.

9. LITIGATION

A writ has been filed by the plaintiff (the “Plaintiff”) against the Company in respect of a claim for reimbursement of expenses allegedly paid on behalf of the Company and Sun Tai Hing Garment Making Company Ltd. (the “Subsidiary”), the Company’s subsidiary, amounting to approximately HK$3 million on 26 July 2006. Out of the expenses claimed, over HK$2.5 million was allegedly incurred on behalf of the Subsidiary and a sum of approximately HK$463,000 constituted expenses allegedly incurred on behalf of the Company. The Company is not aware of such alleged payments and has instructed lawyers to deal with the matter. The Plaintiff is the sister of the father of Ms. Bessie Siu, an executive Director. The Plaintiff is a director of the Subsidiary and the person responsible to run the daily affairs of the Subsidiary. The Plaintiff was never a director of the Company. Up to the date of this Prospectus, the Company is reviewing information supplied by the Plaintiff in respect of the allegation. The Board is of the opinion the claim is not justifiable and without merit. Hence, no provision has been made in respect of the allegation.

Save as disclosed above, as at the Latest Practicable Date, neither the Company nor any member of the Group is engaged in any litigation or arbitration of material importance and, so far as the Directors are aware, no litigation or arbitration of material importance is pending or threatened against the Company or any member of the Group.

10. COMPETING BUSINESS

As at the Latest Practicable Date, so far as the Directors were aware, none of the Directors or their respective associates were considered to have interest in any business which competes or may compete, either directly or indirectly, with the business of the Group or have or may have any other conflicts of interest with the Group pursuant to the Listing Rules.

— 98 —

GENERAL INFORMATION

APPENDIX III

11. PARTICULARS OF THE DIRECTORS AND SENIOR MANAGEMENT

(a) Name Address Executive Directors

Ms. Bessie Siu Flat E, 31/F, Block 21 South Horizons Ap Lei Chau Hong Kong Mr. Lee Yiu Tung Flat A, 7/F., Tower 6 Grand Regent Ville Fanling New Territories Hong Kong Non-Executive Director Mr. Fu Wing Kwok, Ewing Flat B, 6th Floor 17 Humbert Street Mei Foo Sun Chuen Lai Chi Kwok Kowloon Hong Kong Independent Non-Executive Directors Mr. Chang Kin Man 27A Ko Nga Court 9 High Street Sai Ying Pun Hong Kong Mr. Ip Wing Lun Flat H, 18/F., Tower 8 Aegean Coast 2 Kwun Tsing Road Tuen Mun New Territories Hong Kong Mr. Zhou Han Ping 7-403 Fu Ting Yuan Nan Shan District Shenzhen People’s Republic of China

— 99 —

GENERAL INFORMATION

APPENDIX III

(b) Qualifications

Ms. Bessie Siu , aged 30, has several years of experience in marketing management, general administration works and trading business. Ms. Siu holds a bachelor degree in Science, Master of Marketing Management and Master of Business Administration. She was appointed as an executive Director on 25 April 2006.

Mr. Lee Yiu Tung , aged 43, is a registered architect in Hong Kong with extensive working experiences related to PRC property development, project management and development consultant services. Mr. Lee is a member of Royal Institute of British Architects and Hong Kong Institute of Architects. He holds a Bachelor of Arts in Architectural Studies with Honours, a Bachelor of Architecture and a Master of Science degree in Real Estate all from the University of Hong Kong. He also holds a qualification of Real Estate Planner recognized by the Ministry of Labor and Social Security, PRC. He was appointed as an executive Director 13 June 2006.

Mr. Fu Wing Kwok , Ewing aged 35, is the financial controller and the company secretary of Sino Union Petroleum & Chemical International Limited, which is listed on the Main Board of the Stock Exchange of Hong Kong Limited. Mr Fu Wing Kwok is also responsible for the planning and supervising the implementation of the management information system. He holds a bachelor degree in science with major in accounting Bemidji State University, USA and is a member of both American Institute of Certified Public Accountants and Hong Kong Institute of Certified Public Accountants. He has over 10 years of experience in auditing and accounting field. He was re-designated from an Independent Non-executive Director to a Non-executive Director with effect from 12 July 2006.

Mr. Chang Kin Man , aged 42, is a certified public accountant in Hong Kong and a fellow member of the Association of Chartered Certified Accountants and an associate member of the Hong Kong Institute of Chartered Certified Accountants. Mr. Chang holds a Bachelor of Science Degree in Economics and a Master’s degree in Applied Finance.

Mr. Chang has extensive experience in corporate finance and in accounting field. He worked for an international accounting firm and a number of public listed companies for more than 15 years. During the past three years, Mr. Chang acted as an independent non-executive director of Haywood Investments Limited (Stock code 905), a company listed on the Main Board of the Stock Exchange of Hong Kong (the “Stock Exchange”). He resigned from the company on 24 May 2005. He is currently an independent non-executive director of Sunlink International Holdings Limited (stock code 2336), China Energy Development Holdings Limited (stock code 228) and China Water Industry Group Ltd. (stock code 1129), all are listed company on the Main Board of the Stock Exchange. He was appointed as an Independent Non-executive Director on 13 July 2006.

— 100 —

GENERAL INFORMATION

APPENDIX III

Mr. Ip Wing Lun , aged 38, is a Certified Public Accountant (Practising) in Hong Kong. Mr. Ip is currently an independent non-executive director of China Energy Development Holdings Limited which is listed on the Main Board of the Stock Exchange. Mr. Ip holds a Master degree of Business Administration and is a fellow member of Hong Kong Institute of Certified Public Accountants and the Association of International Accountants of the United Kingdom, an associate member of the Institute of Chartered Secretaries and Administrator, the Hong Kong Institute of Chartered Secretaries and the Taxation Institute of Hong Kong. He has over 10 years of experience in auditing, taxation and provision of financial consultancy services of companies in Hong Kong and the PRC. Mr. Ip is presently a sole practitioner of Allan Ip & Co., Certified Public Accountants (Practising).

Mr. Zhou Han Ping , aged 37, graduated in Guangzhou Institute of Foreign Trade in 1994. Mr. Zhou was an Export & Import Manager of China National Packaging Import & Export Corporation)（中國包裝進出口總公司）. Mr. Zhou was a Manager of South China Region of CIMC (China International Marine Container Holding Limited)（中國國際海運集裝箱（集團）股份有限公司）. He had over 10 years experience in International Trade Settlement. Now, Mr. Zhou is Managing Director of Shenzhen Miao Fang Development Company Limited （深圳市苗方科技有限公司）since 2002.

12. CORPORATE INFORMATION

Registered Office Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands Principal place of business No. 1, 1st Floor in Hong Kong Pei Ho Building 115-117 Fuk Wa Street Sham Shui Po, Kowloon Hong Kong

— 101 —

GENERAL INFORMATION

APPENDIX III

Authorised representatives	Mr. Edmund Siu
	Mr. Lee Yiu Tung
Company secretary	Mr. Edmund Siu_CA (Aust), CPA_
Qualified accountant	Mr. Edmund Siu_CA (Aust), CPA_
Principal share registrar in	Bank of Bermuda (Cayman) Limited
the Cayman Islands	P.O. Box 513 G.T.
	3rd Floor, 36C Bermuda House
	Dr. Roy’s Drive, George Town
	Cayman Islands, British West Indies
Branch share registrar in Hong Kong	Tengis Limited
	26th Floor, Tesbury Centre
	28 Queen’s Road East
	Wanchai
	Hong Kong
Legal advisers to the Company	As to Hong Kong law:
	Robertsons
	57th Floor, The Centre,
	99 Queen’s Road Central
	Hong Kong
Auditors	HLB Hodgson Impey Cheng
	Chartered Accountants
	Certified Public Accountants
	31st Floor, Gloucester Tower
	The Landmark
	11 Pedder Street, Central
	Hong Kong
Principal bankers	Standard Chartered Bank
	The Bank of East Asia

13. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

A copy of the Prospectus Documents and the consent letter referred to in the paragraph headed “Expert and Consent” in this appendix have been registered with the Registrar of Companies in Hong Kong pursuant to Section 342C of the Companies Ordinance.

— 102 —

GENERAL INFORMATION

APPENDIX III

14. LEGAL EFFECT

This Prospectus, the Application Forms, and all acceptances of any offer or application contained in or made on such documents, are governed by and shall be construed in accordance with the laws of Hong Kong. Where an application is made in pursuance of any such documents, the relevant document(s) shall have the effect of rendering all persons concerned bound by the provisions, other than the panel provisions, of Section 44A and 44B of the Companies Ordinance, so far as applicable.

15. MISCELLANEOUS

(a) The office of Kingston Securities is Suite 2801, 28th Floor, One International Finance Centre, 1 Habour View Street, Central, Hong Kong.
(b) The English texts of the Prospectus and the accompanying Application Form shall prevail over their Chinese text for the purpose of interpretation.

16. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be made available for inspection during normal business hours at the office of Robertsons, 57th Floor, The Center, 99 Queen’s Road Central, Hong Kong from the date of this Prospectus up to and including Monday, 4 June 2007:

(a) the memorandum and articles of association of the Company;
(b) the annual report of the Company for each of the three financial years ended 31 March 2006;
(c) the material contracts referred to in the paragraph headed “Material Contracts” in this appendix;
(d) the written consent of the expert referred to in the paragraph headed “Expert and Consent” in this appendix;
(e) the report on the unaudited pro forma adjusted consolidated net tangible assets of the Group, the text of which is set out in Appendix II to this Prospectus; and
(f) the Underwriting Agreements.

— 103 —

AI assistant

ZO Future Group — Capital/Financing Update 2007

50510_rns_2007-05-22_aaa082b5-1ff3-469d-af26-6b22342949f9.pdf

GRANDTOP INTERNATIONAL HOLDINGS LIMITED 泓 鋒 國 際 控 股 有 限 公 司 [*]

OPEN OFFER OF 192,000,000 OFFER SHARES AT A PRICE OF HK$0.20 PER OFFER SHARE ON THE BASIS OF ONE OFFER SHARE FOR EVERY TWO SHARES HELD ON THE RECORD DATE

Financial adviser to Grandtop International Holdings Limited

KINGSTON CORPORATE FINANCE LIMITED

Underwriter to the Open Offer

KINGSTON SECURITIES LIMITED

CONTENTS

EXPECTED TIMETABLE

EFFECT OF BAD WEATHER ON THE LATEST TIME FOR ACCEPTANCE OF AND PAYMENT FOR THE OPEN OFFER

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

GRANDTOP INTERNATIONAL HOLDINGS LIMITED 泓 鋒 國 際 控 股 有 限 公 司 [*]

(Stock Code: 2309)

OPEN OFFER OF 192,000,000 OFFER SHARES AT A PRICE OF HK$0.20 PER OFFER SHARE ON THE BASIS OF ONE OFFER SHARE FOR EVERY TWO SHARES HELD ON THE RECORD DATE

INTRODUCTION

OPEN OFFER

Issue statistics

LETTER FROM THE BOARD

Qualifying Shareholders

Tengis Limited

Rights of the Excluded Shareholders

Closure of register of members

Subscription Price

Status of the Offer Shares

Fraction of Offer Shares

Certificates of the Offer Shares

Requirements under the Cayman Islands laws

Application for listing and dealings in the Offer Shares

Irrevocable Undertakings

REASONS FOR THE OPEN OFFER AND USE OF PROCEEDS

UNDERWRITING ARRANGEMENTS

Underwriting Agreements

Termination of the Underwriting Agreements

If, prior to the Latest Time for Termination:

Conditions of the Open Offer

LETTER FROM THE BOARD

WARNING OF THE RISK OF DEALING IN THE SHARES

SHAREHOLDING STRUCTURE OF THE COMPANY

FUND RAISING ACTIVITIES IN THE LAST TWELVE MONTHS

BUSINESS REVIEW AND FUTURE PROSPECTS

PROCEDURES FOR ACCEPTANCE

TAXATION

ADDITIONAL INFORMATION

1. SUMMARY OF FINANCIAL INFORMATION OF THE GROUP

Auditors’ report to the Shareholders of Grandtop International Holdings Limited

Respective Responsibilities of Directors and Auditors

Basis of Opinion

APPENDIX I

Qualified Opinion: Disclaimer on View Given by the Financial Statements

HLB Hodgson Impey Cheng

2. CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 MARCH 2006.

Consolidated Balance Sheet

Balance Sheet

Consolidated Income Statement

Consolidated Statement Of Changes In Equity

Attributable to the equity holders of the Company

Consolidated Cash Flow Statement

Notes To The Financial Statements

1. General

2. Basis Of Preparation

The Adoption of new/revised HKFRSs

Consolidated balance sheet

Consolidated income statement

Consolidated income statement

3. Summary Of Significant Accounting Policies

(a) Basis of consolidation

(i) Subsidiaries

(b) Goodwill

(c) Segment reporting

(d) Foreign currency translation

(i) Functional and presentation currency

(ii) Transactions and balances

(iii) Group companies

(e) Property, plant and equipment

(f) Leasehold land

ZO Future Group Capital/Financing Update 2007

GRANDTOP INTERNATIONAL HOLDINGS LIMITED 泓鋒國際控股有限公司 **[*]**

GRANDTOP INTERNATIONAL HOLDINGS LIMITED 泓鋒國際控股有限公司 **[*]**