Major Shareholder:

• Fong Kit Wah, Alan ¡V 46.79% interest
• China National Aviation Corporation ¡V 17.5%

Company Subsidiaries:

• Yardway Limited (100%): sale and distribution of coaches, airport ground support equipment and railway maintenance equipment and the provision of engineering services to coaches
• Yardley Motors Limited (100%): sale and distribution of trucks, commercial vehicles and related spare parts, and provision of engineering services to trucks and commercial vehicles
• Prosperity Resources Limited (100%): trading of airport ground support equipment and railway maintenance equipment
• Yardley Equipment Limited (100%): sale and distribution of construction equipment
• Yardley Marine Limited (100%): design and trading of luxury yachts

The Group specialises in the distribution of transport related equipment in Hong Kong and the PRC. It is principally engaged in the sale and distribution of vehicles and equipment covering most major transport sectors with a specialisation in railway maintenance equipment, airport ground support equipment and coaches and trucks. The Group is also engaged in the provision of engineering services for coaches and trucks.

The Group is the exclusive distributor in the Greater China region of a wide range of transport related equipment of renowned global brand names. It has focused on the development of alliances with renowned suppliers of railway maintenance equipment, airport ground support equipment and coaches and trucks, which the Directors have identified as among the fastest growing areas in the transport related equipment industry. Leveraging on the core competence of the Group in the transport related equipment industry and the experience and skill in marketing and distributing specialised equipment for the transport sectors, the Group has established and extensive network of suppliers and customers.

The Group entered into distribution agreements with various worldwide suppliers of railway maintenance equipment, including Palfinger, Partner, Plasser & Theurer, Reeves, Rotamag, Sagen and Speno and various worldwide suppliers of airport ground support equipment including BF Goodrich, Electricars, Fresia, Neoplan, Rohr and Trepel. It is the exclusive distributor of Neoplan single and double deck buses and airport apron buses in the Greater China region. The Group is also the exclusive distributor of Iveco's trucks and other Iveco commercial vehicles in Hong Kong and Macau and the non-exclusive distributor of Iverco's trucks and other Iveco commercial vehicles in the PRC.

Based on the distribution agreements entered into by the Group with the respective suppliers, the nature of the Group's distribution can be broadly categorised into "trading" basis and "commission" basis. For the distribution conducted on "trading" basis, the Group is a principal acquiring the distributed products for resale to the end-purchasers, i.e. its own customersm and generates profit from such resale. For the distribution conducted on "commission" basis, the Group acts as an agent of a manufacturer or supplier and receives commission calculated at an agreed rate based on the contract value of individual transaction from the manufacturer or supplier.

The Group's sale and distribution arm has a customer base of over 200. Its customers for its distributed coaches and trucks are mainly based in Hong Kong while those for the railway maintenance equipment and airport ground support equipment are mainly cased in the PRC.

An efficient transport system is conducive to the economic development of a geographical region while a region¡¦s economic growth will pave the way for further expansion of its transport networks. With the infrastructure development of the PRC and Hong Kong, the Directors believe that there will be immense business opportunities for the Group. The urbanisation plans in the PRC, in particular, in the western PRC, and the anticipated increase in trading activities after the accession of the PRC to the WTO are expected to call for the establishment of more sophisticated transport and logistics networks which in turn will generate substantial demands for transport related products.

The Directors attribute the success of the Group of the following principal factors:

• its management¡¦s experience and expertise in the specialised transport related equipment industry in Hong Kong and the PRC
• its strong alliances with renowned global suppliers in various sectors of the transport related equipment industry, including Neoplan and Iveco, that provide the Group access to a comprehensive range of advanced and reliable equipment
• its strong service support capability which has enabled the Group to provide timely and quality services to its customers
• its well-established relations with its customers
• its specialisation in the supply of transport related equipment in various sectors of the industry which enriches the Group¡¦s offerings and allows it to capture a broad client base

RISK FACTORS

• Failure to capture future demand in transport related equipment
• Reliance on major customers
• Profit sustainability
• Reliance on key personnel
• Defective products and product liability
• Competition
• Economic and currency consideration
• Legal and regulatory considerations

The Group intends to expand its network of representative offices to other selected regions in the PRC, including Dalian in Liaoning Province and Chengdu in Sichuan Province. While the set-up and operating costs of these representative offices will not be significant, they will serve as valuable conduit between the Group and its existing and potential customers.

The Group also plans to enhance its service support capability in the PRC through the recruitment of more engineering technicians. It has always put strong emphasis on the training and re-training of its technicians and will continue to allocate resources to this direction.

To further extend its scope of business in the transport related equipment industry, the Group intends to set up a joint venture with a machinery manufacturer in the PRC to manufacture, assemble and integrate railway maintenance equipment and related systems. The Directors believe that based on the Group¡¦s experience in the distribution of railway maintenance equipment sector accumulated in the past 10 years and its expertise in the complicated functions of various specialised railway maintenance equipment, the Group is well-positioned to expand into the manufacturing, assembling and integrating business in this sector.

The net proceeds from the share offer, after deducting the related expenses, are estimated to amount to approximately HK$31 million. The Group at present intends to apply the net proceeds as follows: