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    Tandem Group plc

    Annual Report and Accounts2006

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    Contents

    Directors and advisers

    Financial calendar

    Directors

    G Waldron Chairman

    M P J Keene Finance Director

    S J Grant Commercial Director (appointed 9 June 2005)

    Company Secretary

    M P J Keene

    Annual General Meeting 27 June 2006

    Interim results for 6 months to 31 July 2006 September 2006

    Annual results for year ending 31 January 2007 May 2007

    Directors and advisers inside front coverFinancial calendar inside front coverChairmans statement 1Directors report 2Independent Auditors report 5Consolidated profit and loss account 6Consolidated balance sheet 7Company balance sheet 8

    Registered office9a South Street, Crowland, Peterborough, PE6 0AH

    RegistrationRegistered in England No. 616818

    Nominated Adviser and BrokerKBC Peel Hunt Ltd4th Floor, 111 Old Broad Street, London, EC2N 1PH

    AuditorsDeloitte & Touche LLP1 Woodborough Road, Nottingham, NG1 3FG

    SolicitorsEversheds LLP1 Royal Standard Place, Nottingham, NG1 6FZ

    RegistrarsCapita RegistrarsNorthern House, Woodsome Park, Fenay Bridge,Huddersfield, HD8 0LA

    Statement of movements on reserves 9Reconciliation of movements in shareholders funds 9Statement of total recognised gains and losses 9Consolidated cash flow statement 10Notes to the financial statements 11Notice of Annual General Meeting 26Form of proxy 27

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    Chairmans statement

    Turnover was 42,760,000 compared to 52,683,000 last year.The operating profit, after including the trading losses fromPot Black and before exceptional costs of 1,382,000 andgoodwill amortisation and impairment of 640,000, was226,000 compared to 1,725,000 in the prior year. Afterdeducting exceptional costs and goodwill amortisation andimpairment the operating loss was 1,796,000. There was aloss before taxation of 2,157,000 compared to a profit lastyear of 1,179,000.

    Falcon and DawesTurnover in the bicycle business, with the well-known brandsof Falcon, Dawes, Claud Butler, Shogun, British Eagle andOptima, was lower than the previous year as we maintain thepolicy of withdrawing from low margin business withquestionable profitability. Although there are no reliablestatistics produced it was generally believed that sales in theUK of lower priced bikes in 2005 were down on the previousyear in line with the difficult market conditions. Our continuingpolicy of reducing costs resulted in an increase in profitability.

    With our reputation for product design and service ourcustomer base continues to grow, from which we shouldbenefit as the retail environment improves. Further salesresources have been added. Production at the Groupsmanufacturing facilities in the UK has been reducing over thelast few years and has been concentrating on the highervalue bikes. This will cease in the summer of 2006 asproduction is moved abroad. Overhead savings will be madewhich, together with a reduction in working capital, shouldlead to increased profitability.

    MV SportsMV distributes a range of products featuring high profilebrand and character licences including Barbie, Groovy Chick,Bang on the Door Baby, Thomas the Tank Engine, Bob theBuilder and a range of football training equipment under theKickmaster brand.

    Following a record year to 31 January 2005, turnover for theyear to 31 January 2006 was somewhat lower. A significantcatalogue shop customer closed. There was increasedcompetition against some of our longer established licencesand a challenging retail sector. Sales opportunities with lowmargins were not pursued. Lower overheads failed tocompensate for the reduced turnover.

    The success of the MV business is down to having the rightbrands and licences and product innovation. More resourceshave been placed in these areas. New ranges includingBarbie Fairytopia, Barbie Mermaidia, Barbie 12 DancingPrincesses, Fireman Sam and Winx Club have beendeveloped for 2006.

    Pot BlackThe management of Pot Black failed to deal with theincreased competition from unbranded imports and thechanges required following the introduction of new BritishStandards on outdoor play products safety regulations. Itwas decided that, with losses mounting, the Devonoperations should be closed. Exceptional costs of 1,382,000were incurred in closing down the operations of which410,000 was cash outflow for employee severancepayments, lease terminations and removal costs. Thebalance of 972,000 was in respect of writing down the bookvalue of plant and machinery, stock and debtors to theirrecoverable amount. In view of the losses, a provision of434,000 has been made against the goodwill of Pot Black inaccordance with Financial Reporting Standard 11.

    The profitable products within the Pot Black range are beingcontinued and further developed to meet market requirementsto contribute a useful margin within the MV business.

    Ben SayersAlthough Ben Sayers is our smallest business, the brand isone of the oldest in golf, having been established in 1876.

    We have withdrawn from low margin business and turnoverwas slightly down on the previous year but with a muchimproved customer base. The results were better than lastyear but still not up to the potential.

    New systems have been put in place to ensure improvedproduct availability and customer service. The new M Seriesrange for 2006 has received good trade and consumer presscoverage and has been enthusiastically received by retailers.

    PensionsAs required by Financial Reporting Standard 17 (FRS 17) wehave included the actuarial deficits on the Groups pensionschemes defined benefit sections on the balance sheet forthe first time. We have restated the previous years figuresaccordingly.

    The Group operates two pension schemes that have definedbenefit liabilities. There is only one active member receivingdefined benefit pension accruals and new members of bothschemes can join the defined contribution sections, where nodeficit can be incurred. In accordance with the advice fromthe schemes actuaries, payments totalling 188,000 per annumare currently being made to reduce the deficit of theschemes. The schemes actuaries calculate the deficit usingguidelines that the government and Institute of Actuariesagree could be inappropriate and which consequently arebeing withdrawn. Nevertheless, we are obliged to makethese payments which deplete funds available for investmentto grow the business.

    The two schemes had funds invested totalling 10.6 million at31 January 2006 compared with 9.2 million at 31 January2005. Investment income and growth during the year was 1.8million. Pensions and transfer payments paid out totalled443,000, representing 4.2% of the funds invested at 31 January 2006.

    SummaryThe losses at Pot Black and the cost of stopping them arenow behind us. We have reviewed our forecastingprocedures to ensure that any loss-making activities areswiftly dealt with so that in the future we do not incur similarproblems such as those experienced at Pot Black. Reportingcontrols, particularly those relating to stock, have beenimproved. Whilst these events have clearly had an adverseeffect on our balance sheet, careful control of workingcapital has increased net funds.

    Current tradingTrading in the first quarter of the current financial year is inline with budget on a reduced turnover following thewithdrawal from low margin or unprofitable business. As inprevious years our profits will be concentrated in the secondhalf of the financial year.

    Your Board and the management in the businesses are fullyaware of the need to return to the level of progress that theGroup made in previous years.

    Graham WaldronChairman16 May 2006

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    Directors report

    The Directors submit their annual report with the auditedfinancial statements for the year ended 31 January 2006.

    Principal activitiesThe principal activity of the Group is the manufacture anddistribution of sports and leisure equipment.

    The Chairmans Statement on page 1 should be read inconjunction with this report.

    Results and dividendThe results for the year ended 31 January 2006 are set out onpage 6. The Directors do not recommend the payment of adividend (2005 nil). Movements on reserves are set out onpage 9.

    Share CapitalThere were no changes in the authorised and issued sharecapital of the Group during the year.

    Significant shareholdersAs at 1 May 2006 Directors have been notified of the followinginterests representing 3% or more of the issued ordinaryshare capital.

    Ordinary shares of 4p %

    Jupiter Asset Management 3,794,000 10.1Venaglass Limited 3,170,267 8.4Frvaltnings AB Bronsstdet 1,369,970 3.7Credit Agricole Cheuvreux International Limited 1,150,000 3.1

    DirectorsThe present Directors are listed on the inside front cover.

    The interests of the Directors who served during the year andtheir immediate families (as defined by the Companies Act1985) in the shares of the Company are shown below:

    Held beneficially and fully paid

    31 January 2006 1 February 20054p ordinary shares 4p ordinary shares

    G Waldron 365,270 365,270M P J Keene 476,511 476,511S J Grant 66,018 66,018

    Share options

    31 January 2006 1 February 20054p ordinary shares 4p ordinary shares

    G Waldron M P J Keene 260,000 260,000S J Grant 180,000 180,000

    A P Vicary, who resigned as a director on 30 June 2005, andhis immediate family held 463,81