IGG Inc — Annual Report 2011

Jun 15, 2011

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its 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 this announcement.

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Oriental Watch hOldings limited

(Incorporated in Bermuda with limited liability)

Website: http://www.orientalwatch.com

(stock code: 398)

Final results FOr the year ended 31st march, 2011

The Board of Directors of Oriental Watch Holdings Limited (the “Company”) is pleased to announce the audited consolidated results of the Company and its subsidiaries (the “Group”) for the year ended 31st March, 2011 together with comparative figures for the previous year as follows:

cOnsOlidated statement OF cOmPrehensiVe incOme

FOR THE YEAR ENDED 31ST MARCH, 2011

Notes Turnover Cost of goods sold Gross profit Other income 4 Distribution and selling expenses Administrative expenses Finance costs 5 Share of results of associates Profit before taxation 6 Income tax expense 7 Profit for the year attributable to owners of the Company Other comprehensive income Exchange difference arising on translation of foreign operations Change in fair value of available-for-sale financial assets Reclassification adjustment upon sale of available-for-sale financial assets Other comprehensive income for the year Total comprehensive income for the year attributable to owners of the Company Earnings per share Basic 9 Diluted 9	2011 HK$’000 3,849,172 (3,199,185) 649,987 13,813 (126,759) (256,547) (9,546) 1,241 272,189 (52,760) 219,429 15,574 4,559 (249) 19,884 239,313 52.55 hK cents 51.06 hK cents	2010 HK$’000 3,242,643 (2,748,804) 493,839 15,185 (126,816) (221,981) (13,970) — 146,257 (33,710) 112,547 1,588 (806) (616) 166 112,713 30.42 HK cents 30.42 HK cents

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cOnsOlidated statement OF Financial POsitiOn

AT 31ST MARCH, 2011

Notes Non-current assets Property, plant and equipment Deposits for acquisition of property, plant and equipment Interests in associates Available-for-sale financial assets Property rental deposits Current assets Inventories Trade and other receivables 10 Taxation recoverable Bank balances and cash Current liabilities Trade and other payables 11 Taxation payable Current-portion of secured long-term bank loans Short-term bank loans Net current assets Total assets less current liabilities Non-current liabilities Secured long-term bank loans Net assets Capital and reserves Share capital 12 Reserves Total equity	2011 HK$’000 155,531 10,575 32,990 18,548 13,977 231,621 1,377,076 161,423 30 600,824 2,139,353 170,222 34,702 30,000 211,375 446,299 1,693,054 1,924,675 60,000 1,864,675 46,951 1,817,724 1,864,675	2010 HK$’000 142,883 — — 43,694 24,978
		211,555
		1,247,838 132,221 397 224,881
		1,605,337
		101,466 12,921 30,000 186,862
		331,249
		1,274,088
		1,485,643
		90,000
		1,395,643
		38,948 1,356,695
		1,395,643

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Notes:

1. Basis of preparation

The consolidated financial statements are presented in Hong Kong dollars which is also the functional currency of the Company.

The consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments, which are measured at fair values.

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

2. application of new and revised hong Kong Financial reporting standards (“hKFrss”)

In the current year, the Group has applied the following new and revised Standards, Amendments and Interpretations (“new and revised HKFRSs”) issued by the HKICPA.

HKFRS 2 (Amendments)	Group cash-settled share-based payment transactions
HKFRS 3 (as revised in 2008)	Business combinations
HKAS 27 (as revised in 2008)	Consolidated and separate financial statements
HKAS 32 (Amendments)	Classification of rights issues
HKAS 39 (Amendments)	Eligible hedged items
HKFRSs (Amendments)	Improvements to HKFRSs issued in 2009
HKFRSs (Amendments)	Amendments to HKFRS 5 as part of improvements to HKFRSs issued
	in 2008
HK(IFRIC) — INT 17	Distributions of non-cash assets to owners
HK Interpretation 5	Presentation of financial statements: Classification by the borrower
	of a term loan that contains a repayment on demand clause

Except as described below, the application of the new and revised HKFRSs has had no material effect on the consolidated financial statements for the current or prior accounting periods.

HKFRS 3 (as revised in 2008) “Business combinations”

HKFRS 3 (as revised in 2008) has been applied in the current year prospectively to business combinations of which the acquisition date is on or after 1st April, 2010 in accordance with the relevant transitional provisions. Its application has affected the accounting for business combinations in the current year.

• HKFRS 3 (as revised in 2008) allows a choice on a transaction-by-transaction basis for the measurement of non-controlling interests at the date of acquisition (previously referred to as ‘minority’ interests) either at fair value or at the non-controlling interests’ share of recognised identifiable net assets of the acquiree.

• HKFRS 3 (as revised in 2008) changes the recognition and subsequent accounting requirements for contingent consideration. Previously contingent consideration was recognised at the acquisition date only if payment of the contingent consideration was probable and it could be measured

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reliably; any subsequent adjustments to the contingent consideration were always made against the cost of the acquisition. Under the revised standard, contingent consideration is measured at fair value at the acquisition date; subsequent adjustments to the consideration are recognised against the cost of acquisition only to the extent that they arise from new information obtained within the measurement period (a maximum of 12 months from the acquisition date) about the fair value at the acquisition date. All other subsequent adjustments to contingent consideration classified as an asset or a liability are recognised in profit or loss.

• HKFRS 3 (as revised in 2008) requires the recognition of a settlement gain or loss when the business combination in effect settles a pre-existing relationship between the Group and the acquiree.

• HKFRS 3 (as revised in 2008) requires acquisition-related costs to be accounted for separately from the business combination, generally leading to those costs being recognised as an expense in profit or loss as incurred, whereas previously they were accounted for as part of the cost of the acquisition.

As there was no transaction during the current year to which HKFRS 3 (Revised) is applicable, the application of HKFRS 3 (as revised in 2008) has had no effect on the consolidated financial statements.

Amendments to HKAS 17 “Leases”

As part of “Improvements to HKFRSs” issued in 2009, HKAS 17 “Leases” has been amended in relation to the classification of leasehold land. Before the amendments to HKAS 17, the Group was required to classify leasehold land as operating leases and to present leasehold land as prepaid lease payments in the consolidated statement of financial position. The amendments to HKAS 17 have removed such a requirement. The amendments require that the classification of leasehold land should be based on the general principles set out in HKAS 17, that is, whether or not substantially all the risks and rewards incidental to ownership of a leased asset have been transferred to the lessee.

In accordance with the transitional provisions set out in the amendments to HKAS 17, the Group reassessed the classification of unexpired leasehold land as at 1st April, 2010 based on information that existed at the inception of the leases. As at 1st April, 2010, the Group’s owner-occupied leasehold land has been included in the property, plant and equipment as the lease payments would not be allocated reliably between the land and building element. Accordingly, the application of the amendments to HKAS 17 has had no impact on the consolidated financial statements.

Hong Kong Interpretation 5 “Presentation of financial statements: Classification by the borrower of a term loan that contains a repayment on demand clause”

Hong Kong Interpretation 5 “Presentation of financial statements: Classification by the borrower of a term loan that contains a repayment on demand clause” (“HK INT 5”) clarifies that term loans that include a clause that gives the lender the unconditional right to call the loans at any time (“repayment on demand clause”) should be classified by the borrower as current liabilities. The Group has applied HK INT 5 for the first time in the current year. Hong Kong Interpretation 5 requires retrospective application.

In order to comply with the requirements set out in HK INT 5, the Group has changed its accounting policy on classification of term loans with a repayment on demand clause. In the past, the classification of such term loans were determined based on the agreed scheduled repayment dates set out in the loan

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agreements. Under HK INT 5, term loans with a repayment on demand clause are classified as current liabilities.

The application of HK INT 5 has had no impact on the reported financial position of the Group as at 31st March, 2010 and 2011, as bank loans of the Group that are repayable more than one year after the end of the reporting period do not contain a repayment on demand clause.

New and revised standards and interpretations issued but not yet effective

The Group has not early applied the following new and revised Standards, Amendments and Interpretations that have been issued but are not yet effective:

HKFRSs (Amendments) Improvements to HKFRSs issued in 20101 HKFRS 7 (Amendments) Disclosures: Transfers of financial assets4 HKFRS 9 Financial instruments6 HKAS 12 (Amendments) Deferred tax: Recovery of underlying assets5 HKAS 24 (as revised in 2009) Related party disclosures3 HK (IFRIC) — INT 14 (Amendments) Prepayments of a minimum funding requirement3 HK (IFRIC) — INT 19 Extinguishing financial liabilities with equity instruments2

• 1 Effective for annual periods beginning on or after 1st July, 2010 or 1st January, 2011, as appropriate.

• 2 Effective for annual periods beginning on or after 1st July, 2010.

• 3 Effective for annual periods beginning on or after 1st January, 2011.

• 4 Effective for annual periods beginning on or after 1st July, 2011.

• 5 Effective for annual periods beginning on or after 1st January, 2012.

• 6 Effective for annual periods beginning on or after 1st January, 2013.

HKFRS 9 “Financial instruments” (as issued in November 2009) introduces new requirements for the classification and measurement of financial assets. HKFRS 9 “Financial instruments” (as revised in November 2010) adds requirements for financial liabilities and for derecognition.

• Under HKFRS 9, all recognised financial assets that are within the scope of HKAS 39 “Financial instruments: Recognition and measurement” are subsequently measured at either amortised cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortised cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair values at the end of subsequent accounting periods.

• In relation to financial liabilities, the significant change relates to financial liabilities that are designated as at fair value through profit or loss. Specifically, under HKFRS 9, for financial liabilities that are designated as at fair value through profit or loss, the amount of change in the fair value of the financial liability that is attributable to changes in the credit risk of that liability is presented in other comprehensive income, unless the presentation of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. Previously, under HKAS 39, the entire amount of the change in the fair value of the financial liability designated as at fair value through profit or loss was presented in profit or loss.

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HKFRS 9 is effective for annual periods beginning on or after 1st January, 2013, with earlier application permitted.

The directors of the Company anticipate that HKFRS 9 will be adopted in the Group’s consolidated financial statements for financial year ending 31st March, 2014. The directors are in the process of assessing the impact on application of HKFRS 9 and the directors anticipate that these amendments to HKFRS 9 will have an impact on classification and measurement of the Group’s available-for-sale financial assets but not on financial liabilities.

The directors of the Company anticipate that the application of the other new and revised Standards, Amendments or Interpretations will have no material impact on the consolidated financial statements.

3. segment information

The Group’s operation is principally sales of watches. The Group’s turnover represents consideration received and receivable from sales of watches.

The Group has two operating segments, which are analysed based on geographical markets of the goods sold, being (a) Hong Kong, and (b) Macau and the PRC, which is also the basis of organisation of the Group for managing the business operations. The Group determines its operating segments based on the internal reports reviewed by the Managing Director of the Group that are used to allocate resources and assess performance.

The following is an analysis of the Group’s segment revenue and results by operating segments.

Hong Kong Macau and the PRC Unallocated other income Unallocated corporate expenses Finance costs Share of results of associates Profit before taxation	segment revenue 2011 2010 HK$’000 HK$’000 2,638,096 2,233,812 1,211,076 1,008,831 3,849,172 3,242,643	segment 2011 HK$’000 216,883 100,936 317,819 4,019 (41,344) (9,546) 1,241 272,189	profit 2010 HK$’000 135,786 51,398 187,184 3,128 (30,085) (13,970) — 146,257

The accounting policies used to determine segment revenue and results are the same as the accounting policies adopted in the Group’s consolidated financial statements. Segment profit represents the profit earned by each segment without allocation of directors’ salaries, finance costs, share of results of associates and unallocated other income and expenses. Unallocated expenses included auditor’s remunerations, directors’ emoluments and operating expenses of inactive companies. This is the measure reported to the Managing Director of the Group for the purposes of resources allocation and performance assessment.

The Group has no customer who contributed over 10% of the total revenue of the Group for any of the two years ended 31st March, 2011.

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All segment revenue is generated from external customers for both years.

The following is an analysis of the Group’s assets and liabilities by operating segments.

Hong Kong Macau and the PRC Segment total Unallocated Group’s total	segment 2011 HK$’000 1,056,922 660,839 1,717,761 653,213 2,370,974	assets 2010 HK$’000 954,529 590,995 1,545,524 271,368 1,816,892	segment liabilities 2011 2010 HK$’000 HK$’000 132,314 83,729 37,435 17,248 169,749 100,977 336,550 320,272 506,299 421,249	segment liabilities 2011 2010 HK$’000 HK$’000 132,314 83,729 37,435 17,248 169,749 100,977 336,550 320,272 506,299 421,249
				100,977 320,272
				421,249

The segment assets by location of assets are the same as by location of markets of the goods sold.

For the purposes of monitoring segment performance and allocating resources between segments:

• all assets are allocated to operating segments other than interests in associates, available-for-sale financial assets and taxation recoverable as well as other receivables and bank balances and cash of the headquarters; and

• all liabilities are allocated to operating segments other than taxation payable and bank loans as well as other payables of the headquarters. Bank loans are classified as unallocated corporate liabilities because they are managed centrally by the treasury function of the Group.

Other segment information

Amounts included in the measure of segment results or segment assets:

Hong Kong Macau and the PRC Segment total Unallocated Group’s total	additions of property, plant and equipment 2011 2010 HK$’000 HK$’000 13,089 11,126 22,890 23,278 35,979 34,404 — — 35,979 34,404	depreciation 2011 2010 HK$’000 HK$’000 8,314 7,596 15,423 18,430 23,737 26,026 75 94 23,812 26,120	loss on disposal of property, plant and equipment 2011 2010 HK$’000 HK$’000 766 194 190 — 956 194 — — 956 194	(decrease) increase in non-current property rental deposits 2011 2010 HK$’000 HK$’000 (11,197) 7,232 196 950 (11,001) 8,182 — — (11,001) 8,182	(decrease) increase in non-current property rental deposits 2011 2010 HK$’000 HK$’000 (11,197) 7,232 196 950 (11,001) 8,182 — — (11,001) 8,182
					8,182 —
					8,182

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Information about the Group’s non-current assets (excluding available-for-sale financial assets, property rental deposits and interests in associates) by geographical location of the assets are detailed below:

Hong Kong Macau and the PRC 4. Other income Interest income Dividend income from available-for-sale financial assets Gain on disposal of available-for-sale financial assets Exchange gain Repairing service income Show window rental income Others 5. Finance costs Interest on bank borrowings wholly repayable within five years 6. Profit before taxation Profit before taxation has been arrived at after charging: Directors’ remuneration Other staff’s retirement benefits scheme contributions Other staff costs Auditor’s remuneration Depreciation of property, plant and equipment Loss on disposal of property, plant and equipment Operating lease rentals in respect of rented premises	carrying amount of non-current assets 2011 2010 HK$’000 HK$’000 115,930 101,503 50,176 41,380 166,106 142,883 2011 2010 HK$’000 HK$’000 1,215 429 1 2,000 249 616 2,554 77 5,970 6,018 2,655 5,105 1,169 940 13,813 15,185 2011 2010 HK$’000 HK$’000 9,546 13,970 2011 2010 HK$’000 HK$’000 38,659 27,764 4,094 3,940 106,869 92,166 149,622 123,870 2,540 2,180 23,812 26,120 956 194 131,226 115,564	carrying amount of non-current assets 2011 2010 HK$’000 HK$’000 115,930 101,503 50,176 41,380 166,106 142,883 2011 2010 HK$’000 HK$’000 1,215 429 1 2,000 249 616 2,554 77 5,970 6,018 2,655 5,105 1,169 940 13,813 15,185 2011 2010 HK$’000 HK$’000 9,546 13,970 2011 2010 HK$’000 HK$’000 38,659 27,764 4,094 3,940 106,869 92,166 149,622 123,870 2,540 2,180 23,812 26,120 956 194 131,226 115,564
		142,883
		2010 HK$’000 429 2,000 616 77 6,018 5,105 940
		15,185
		2010 HK$’000 13,970
		2010 HK$’000 27,764 3,940 92,166
		123,870
		2,180 26,120 194 115,564

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7. income tax expense

The charge (credit) comprises: Hong Kong Profits Tax (Over) underprovision in prior years Taxation in other jurisdictions (Over) underprovision in prior years Deferred taxation	2011 HK$’000 29,245 (1,498) 27,747 25,021 (8) 25,013 — 52,760	2010 HK$’000 19,310 467 19,777 13,463 655 14,118 (185) 33,710

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profits for both years.

Taxation in other jurisdictions is calculated at the rates prevailing pursuant to the relevant laws and regulations.

Under the Law of the PRC on Enterprise Income Tax (the “EIT Law”) and Implementation Regulation of the EIT Law, the tax rate of the PRC subsidiaries is 25% from 1st January, 2008 onwards. Certain subsidiaries that enjoyed a preferential tax rate prior to 1st January, 2008 will be gradually transitioned to the new tax rate over five years from 1st January, 2008. Therefore, the Enterprise Income Tax rate of the PRC subsidiaries was increased from 22% in the calender year of 2010 to 24% in the calender year of 2011 (2010: from 20% in the calender year of 2009 to 22% in the calender year of 2010).

8. dividends

Dividend recognised as distribution during the year: Interim dividend for financial year ended 31st March, 2011 of 3.0 HK cents (financial year ended 31st March, 2010: 1.5 HK cents) per share on 469,728,520 (2010: 389,478,520) shares Final dividend for financial year ended 31st March, 2010 of 4.0 HK cents (financial year ended 31st March, 2009: 3.5 HK cents) per share on 389,478,520 (2009: 332,253,200) shares Dividend proposed after year end: Proposed final dividend for financial year ended 31st March, 2011 of 8.0 HK cents (financial year ended 31st March, 2010: 4.0 HK cents) per share on 469,508,520 (2010: 389,478,520) shares	2011 HK$’000 14,092 15,579 29,671 37,561	2010 HK$’000 5,842 11,629 17,471 15,579

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A final dividend of 8.0 HK cents (2010: 4.0 HK cents) per share has been proposed by the directors and is subject to approval by the shareholders in the forthcoming annual general meeting.

9. earnings per share

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

earnings Earnings for the purposes of basic and diluted earnings per share (Profit for the year attributable to owners of the Company) number of shares Weighted average number of ordinary shares for the purpose of basic earnings per share Effect of dilutive potential ordinary shares — share options Weighted average number of ordinary shares for the purpose of diluted earnings per share During the year ended 31st March, 2011, all the granted share options under were exercised.	2011 2010 HK$’000 HK$’000 219,429 112,547 2011 2010 ’000 ’000 417,597 369,955 12,155 — 429,752 369,955 the Share Option Scheme	2010 HK$’000 112,547
		2010 ’000 369,955 —
		369,955

The diluted earnings per share for the year ended 31st March, 2010 has not included the effect from the Company’s share options because the exercise prices of these share options were higher than the average market price of share of the Company in prior year.

10. trade and other receivables

Trade receivables Balance of consideration receivable from sale of available-for-sale financial assets Property rental and utilities deposits Advances to apparel suppliers Advances to other suppliers VAT receivables Other receivables	2011 HK$’000 127,581 — 26,387 2,098 688 1,110 3,559 161,423	2010 HK$’000 93,523 1,500 16,570 1,272 336 16,591 2,429
		132,221

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The Group maintains a general credit policy of not more than 30 days for its wholesales customers. Sales made to retail customers are made on a cash basis. The following is an aged analysis of trade receivables based on the invoice date at the end of the reporting period:

age 0 to 30 days 31 to 60 days 61 to 90 days Over 90 days	2011 HK$’000 120,152 6,745 115 569 127,581	2010 HK$’000 88,354 3,863 1,187 119
		93,523

More than 94% (2010: 94%) of the trade receivables that are neither past due nor impaired are recovered within one month after the end of the reporting period. No provision has been made for trade receivables as at 31st March, 2011 (2010: nil).

Included in the Group’s trade receivable balances are debtors with aggregate carrying amount of HK$7,429,000 (2010: HK$5,169,000) which are past due at the reporting date for which the Group has not provided for impairment loss. The Group does not hold any collateral over these balances. The average age of these receivables is 35 days (2010: 38 days).

Ageing of trade receivables which are past due but not impaired

31 to 60 days 61 to 90 days Over 90 days	2011 HK$’000 6,745 115 569 7,429	2010 HK$’000 3,863 1,187 119
		5,169

The Group will provide fully for any receivables over 365 days because historical experience is such that receivables that are past due beyond 365 days are generally not recoverable.

The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

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11. trade and other payables

Trade payables Payroll and welfare payables Commission payables Advances from customers Renovation work payables VAT payables Interest payables Property rental payables Other payables	2011 HK$’000 99,633 27,236 9,090 6,943 2,907 4,038 905 10,177 9,293 170,222	2010 HK$’000 61,294 14,807 7,433 4,559 1,620 1,923 1,088 128 8,614
		101,466

The following is an aged analysis of trade payables presented based on the invoice date at the end of the reporting period:

age 0 to 60 days 61 to 90 days Over 90 days	2011 HK$’000 98,539 — 1,094 99,633	2010 HK$’000 58,795 1,883 616
		61,294

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12. share capital

Ordinary shares of HK$0.10 each Authorised: At 1st April, 2009 Increase on 26th August, 2009_(note (a)) At 31st March, 2010 and 2011 Issued and fully paid: At 1st April, 2009 Issue of shares upon exercise of warrants(note (b)) Bonus issue of shares(note (a)) At 31st March, 2010 Issued of shares upon exercise of share options(note (c)) Issue of shares upon placement of new shares(note (d)) Repurchase of shares(note (e))_ At 31st March, 2011	number of shares 500,000,000 500,000,000 1,000,000,000 323,253,200 33,000,000 33,225,320 389,478,520 30,250,000 50,000,000 (220,000) 469,508,520	amount HK$’000 50,000 50,000 100,000 32,325 3,300 3,323 38,948 3,025 5,000 (22) 46,951

Notes:

• (a) By an ordinary resolution passed at the annual general meeting of the Company held on 26th August, 2009, authorised share capital of the Company was increased from HK$50,000,000 to HK$100,000,000 by the creation of 500,000,000 ordinary shares of HK$0.10 each.

By another ordinary resolution passed at the same annual general meeting, the issued share capital was increased by way of a bonus issue by charging HK$3,323,000 to the retained profits account in payment in full at par of 33,225,320 ordinary shares of HK$0.10 each on the basis of one new ordinary share for every ten ordinary shares held on 26th August, 2009.

• (b) During the year ended 31st March, 2010 and prior to the bonus issue of shares set out in (a) above, 9,000,000 warrants were issued at a subscription price of HK$1.81 per share, resulting in the issue of 9,000,000 ordinary shares of HK$0.10 each in the Company.

Subsequent to the bonus issue of shares set out in (a) above, 24,000,000 warrants were issued at an adjusted subscription price of HK$1.65 per share, resulting in the issue of 24,000,000 ordinary shares of HK$0.10 each in the Company.

• (c) During the year ended 31st March, 2011, directors and employees of the Company exercised share options amounting 17,820,000 shares and 12,430,000 shares, at an adjusted exercise price of HK$1.547 per share and HK$1.604 per share, respectively.

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• (d) On 22nd November, 2010, the Company entered into a subscription agreement for the issue of 50,000,000 new ordinary shares of HK$0.10 each under a top-up placing at a price of HK$4.38 per share, which represented a discount of approximately 12% to the closing market price of the Company’s shares of HK$4.98 per share quoted on the Stock Exchange on 22nd November, 2010, the last trading date prior to the entering into of the subscription agreement. The new shares were issued on 3rd December, 2010 under the general mandate granted to the board of directors on 24th August, 2010.

• (e) During the year ended 31st March, 2011, 100,000 shares and 120,000 shares were repurchased by the Company on 11th January, 2011 and 24th February, 2011, respectively, at prices ranging from HK$3.63 per share to HK$4.12 per share.

The new bonus shares issued on 26th August, 2009 were not entitled to the final dividend for the year ended 31st March, 2009. All other shares issued during both years rank pari passu with the then existing shares in all respects.

13. Operating lease arrangements

At the end of the reporting period, the Group had committed for future minimum lease payments under non-cancellable operating leases which fall due as follows:

Within one year In the second to fifth years inclusive Over five years	2011 HK$’000 86,584 67,688 — 154,272	2010 HK$’000 95,574 53,715 799
		150,088

Operating lease payments represent rentals payable by the Group for certain its office premises. Leases are negotiated for an average term of 2 to 5 years (2010: 1 to 6 years) and rentals are fixed.

14. capital commitments

	2011	2010
	HK$’000	HK$’000
Capital expenditure in respect of the acquisition of property, plant and
equipment contracted for but not provide in the consolidated
financial statements	90,786	—

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15. Other commitments

At the end of the reporting period, the Group was committed to pay royalties for the usage of a fashion brand for manufacture and trading of apparels with a minimum guarantee royalties payment as follows:

Within one year In the second to fifth years inclusive	2011 HK$’000 1,888 6,383 8,271	2010 HK$’000 1,646 8,249
		9,895

The Group was also subject to pay royalties at 6% on total net wholesales made per annum on top of the above minimum guarantee royalties.

Final diVidend

The directors have proposed to pay a final dividend of 8.0 Hong Kong cents per share for the year ended 31st March, 2011 (2010: 4.0 Hong Kong cents) to shareholders whose names appear on the register of members of the Company on 28th July, 2011. Subject to approval at the forthcoming annual general meeting, dividend warrants will be sent to shareholders on or before 26th August, 2011.

BOnus issue OF shares

The directors of the Company propose a bonus issue of shares of the Company to the shareholders of the Company detailed in a separate announcement of the Company of today.

clOsure OF register OF memBers

The register of members of the Company will be closed from 25th July, 2011 to 28th July, 2011 (both days inclusive) during which period no transfer of shares will be registered. In order to qualify for the proposed final dividend and the bonus issue, all transfers accompanied by the relevant share certificates must be lodged with the Company’s Branch Share Registrars, Tricor Secretaries Limited at 26/F., Tesbury Centre, 28 Queen’s Road East, Hong Kong not later than 4:30 p.m. on 22nd July, 2011.

management discussiOn and analysis

Financial results

For the year ended 31st March, 2011, Oriental Watch Holdings Limited has recorded a total turnover of HK$3,849 million and a net profit of HK$219 million. This showed an increase of 19% and 95% respectively, over the previous period. The Board of Directors of the company is appreciative of these results as they represent the company’s highest growth rate to date.

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Business review

During the course of last year, the retail business for luxury products experienced a sharp and fruitful rebound from the previous period’s downturn. This rebound is mainly the result of the continued exponential growth in luxury-seeking Mainland Chinese customers. As the middle class of China begins to grow, this appetite for luxury goods has just been unleashed.

The Company is now operating 12 shops in Hong Kong, 2 shops in Macau, 37 shops in the PRC and 2 associate shops in Taiwan.

Hong Kong and Macau

Our shops in Hong Kong and Macau performed very well this period. The high rental prices in both districts are still a large factor in putting pressure on the company’s expenses, as the company continues to work on controlling costs for better margins.

PRC

Our current businesses in the PRC are operating successfully and have also seen an increase in turnover this period. The company will be opening a new Rolex shop in Shanghai, which will be located in the House of Roosevelt building in the prestigious Bund district.

Taiwan

The company’s acquired partnership with Yung Hsin Watch Co. during the period has generated and contributed positive returns. As the Taiwan market slowly opens to the Chinese tourist market, we anticipate continued positive results.

Prospects

Further to supporting this past period’s growth and to paving the road for continued growth in the future, the company works to maximize its returns while controlling its expenditures. We employ in-house inventory control measures which help to keep inventory costs to a minimum. Staff members continue to benefit from training to increase and keep service standards at a high level, resulting in a higher return customer base. These and other measures are steps the company is taking to continuously improve.

This year marks the company’s 50th anniversary as a successful watch retailer in Hong Kong and the PRC. It will be a year marked by celebration and continued dedication to our customers and business. We thank our customers, staff, and shareholders for their continued support and efforts on the company’s behalf.

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Financial reVieW

liquidity and financial resources

At 31st March, 2011, the Group’s total equity reached HK$1,865 million, compared with HK$1,396 million as at 31st March, 2010. The Group had net current assets of HK$1,693 million, including bank and cash balances of HK$601 million as at 31st March, 2011 compared with balances of HK$1,274 million and HK$225 million respectively as at 31st March, 2010. At 31st March, 2011, bank loans and overdrafts totalled HK$301 million (31st March, 2010: HK$307 million). At 31st March, 2011, the gearing ratio (defined as total bank borrowing on total equity) was 0.16 (31st March, 2010: 0.22).

Management still considers that financial position of the Group is healthy with adequate funds and unused banking facilities. The Group’s sales and purchase transactions are primarily denominated in Hong Kong dollars and Renminbi. The Group did not face significant risk from exposure to foreign exchange fluctuations.

Foreign exchange exposure

The Group’s sale and purchase transactions are primarily denominated in Hong Kong dollars and Renminbi. The Group did not face significant risk from exposure to foreign exchange fluctuations.

human resOurces

As at 31st March, 2011, our Group had approximately 870 employees all over Hong Kong, Macau and the PRC, in which approximately 70% of whom were in Mainland China. The total manpower is around the same as last year.

The Group’s compensation package, which includes basic salary, commission, annual bonus, medical insurance, and other common benefits, is structured by reference to the marketplace and individual merits, and is reviewed on an annual basis based on the Group policy’s performance system and objective specification performance appraisal.

We deeply believe every customer does have expectations on the service they obtained. Thus, we must always strive to provide service beyond their expectations in order to maintain the most excellent quality and comprehensive of service. As such, more resources have been allocated to the Staff Training and Development aspect. Since January 2009, we commissioned an independent consulting firm to conduct a continuous “Mystery Shoppers Programme (MSP)”. This programme has helped the management to gauge and monitor the overall service performance of our sales team. By analyzing the results of MSP, we are able to identify the areas for improvements in a more specific way such that our future training programme could be tailor-made to specific shop/individual level. All the effort is to align with the company’s philosophy of providing “Service Excellence” to customers, with the aim of impelling the Group’s business and making great strides forward unceasingly.

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Purchase, sale Or redemPtiOn OF the cOmPany’s listed securities

During the year ended 31st March, 2011, 100,000 shares and 120,000 shares were repurchased by the Company on 11th January, 2011 and 24th February, 2011, respectively, at share prices ranging from HK$3.63 per share to HK$4.12 per share.

Save as disclosed above, neither the Company nor any of its subsidiaries had purchased, redeemed or sold any of the Company’s listed securities on The Stock Exchange of Hong Kong Limited.

cOrPOrate gOVernance

The Company is committed to the establishment of good governance practices and procedures. The Company has met the code provisions set out in the Code on Corporate Governance Practices (“CG Code”) in Appendix 14 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“the Listing Rules”), throughout the year ended 31st March, 2011, except the deviation from the Code Provision A.4.1 of the CG Code.

Under the Code Provision A.4.1, Non-executive Directors should be appointed for a specific term, subject to re-election. However, the Independent Non-executive Directors were not appointed for a specific term but are subject to retirement by rotation in annual general meeting of the Company in accordance with the Bye-laws of the Company. The management of the Company considered that there is no imminent need to revise the letter of appointment of the Independent Non-executive Directors by adding a specific term in the letter of appointment.

mOdel cOde FOr securities transactiOns By directOrs

The Company has adopted the Model Code set out in Appendix 10 of the Listing Rules as its own code of conduct regarding Directors’ securities transactions. Enquiry has been made with all Directors and all Directors have confirmed that they have complied with the required standard set out in the Model Code throughout the year ended 31st March, 2011.

audit cOmmittee

The Audit Committee comprises three Independent Non-executive Directors of the Company. Terms of reference of the Audit Committee have been updated in compliance with the CG Code.

The Audit Committee, together with the management of the Company, have reviewed the accounting principles and practices adopted by the Group and discussed internal control and financial reporting matters including the review of audited consolidated financial statements for the year ended 31st March, 2011.

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scOPe OF WOrK OF messrs. delOitte tOuche tOhmatsu

The figures in respect of the Group’s consolidated statement of financial position, consolidated statement of comprehensive income and the related notes thereto for the year ended 31st March, 2011 as set out in the Preliminary Announcement have been agreed by the Group’s auditor, Messrs. Deloitte Touche Tohmatsu, to the amounts set out in the Group’s audited consolidated financial statements for the year. The work performed by Messrs. Deloitte Touche Tohmatsu in this respect did not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants and consequently no assurance has been expressed by Messrs. Deloitte Touche Tohmatsu on the Preliminary Announcement.

annual general meeting

It is proposed that the Annual General Meeting of the Company for the year will be held on 28th July, 2011. The Notice of Annual General Meeting will be published and dispatched to the shareholders in due course.

PuBlicatiOn OF Final results and disPatch OF annual rePOrt

The final results announcement is published on the websites of The Stock Exchange of Hong Kong Limited at (www.hkex.com.hk) and the Company at (www.orientalwatch.com). The 2011 annual report containing all information required by the Listing Rules will be dispatched to the Company’s shareholders and available on the above websites in due course.

memBers OF the BOard OF directOrs

As at the date of this announcement, the Board comprises Mr. Yeung Ming Biu, Mr. Yeung Him Kit, Dennis, Mr. Fung Kwong Yiu, Madam Yeung Man Yee, Shirley, Mr. Lam Hing Lun, Alain and Mr. Choi Kwok Yum as Executive Directors and Dr. Sun Ping Hsu, Samson, Dr. Li Sau Hung, Eddy and Mr. Choi Man Chau, Michael as Independent Non-executive Directors.

By order of the Board yeung ming Biu Chairman

Hong Kong, 15th June, 2011

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