IGG Inc — Annual Report 2012

Jun 20, 2012

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Oriental Watch hOldings limited

(Incorporated in Bermuda with limited liability)

Website: http://www.orientalwatch.com.hk

(stock code: 398)

Final results FOr the year ended 31st march, 2012

Financial highlights

• Turnover grew 0.5% to HK$3,936 million

• Profit attributable to owners of the Company decreased 25% to HK$164 million

• Profit for the year would be HK$258 million excluding the impact of share options issued during the year

• Basic earnings per share was HK28.94 cents

• Final dividend of HK5.0 cents per share

— 1 —

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, 2012 together with the comparative figures for the corresponding year in 2011 as follows:

cOnsOlidated statement OF cOmPrehensiVe incOme

FOR THE YEAR ENDED 31ST MARCH, 2012

Notes Turnover 3 Cost of goods sold Gross profit Other income 4 Distribution and selling expenses Administrative expenses Finance costs 5 Share of results of associates Share of results of jointly controlled entities 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 Reclassification adjustment relating to impairment loss on 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	2012 HK$’000 3,935,963 (3,108,451) 827,512 37,059 (269,641) (366,841) (18,247) 5,087 2,008 216,937 (52,829) 164,108 17,773 (1,101) — 249 16,921 181,029 28.94 hK cents 28.76 hK cents	2011 HK$’000 3,917,764 (3,199,185) 718,579 13,813 (195,351) (256,547) (9,546) 1,241 — 272,189 (52,760) 219,429 15,574 4,559 (249) — 19,884 239,313 43.79 HK cents 42.75 HK cents

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cOnsOlidated statement OF Financial POsitiOn

AT 31ST MARCH, 2012

Notes Non-current assets Property, plant and equipment Deposits for acquisition of property, plant and equipment Interests in associates Interests in jointly controlled entities Available-for-sale financial assets Deferred tax 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 Bank loans Net current assets Total assets less current liabilities Non-current liabilities Bank loans Deferred tax liabilities Net assets Capital and reserves Share capital 12 Reserves Total equity	2012 HK$’000 267,455 6,679 37,777 24,311 9,268 1,680 38,774 385,944 2,003,455 207,935 — 206,605 2,417,995 173,252 30,685 476,351 680,288 1,737,707 2,123,651 30,000 1,423 31,423 2,092,228 57,061 2,035,167 2,092,228	2011 HK$’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 34,702 241,375
		446,299
		1,693,054
		1,924,675
		60,000 —
		60,000
		1,864,675
		46,951 1,817,724
		1,864,675

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Notes

1. general

The Company is incorporated in Bermuda as an exempted company with limited liability and acts as an investment holding company as well as engaged in watch trading. The shares of the Company are listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The address of the registered office and principal place of business of the Company are detailed in the corporate information section of the annual report.

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

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

Amendments to HKFRSs	Improvements to HKFRSs issued in 2010
HKAS 24 (as revised in 2009)	Related party disclosures
Amendments to HK(IFRIC)	Prepayments of a minimum funding requirement
— INT 14
HK(IFRIC) — INT 19	Extinguishing financial liabilities with equity instruments

The application of the new and revised HKFRSs in the current year has had no material impact on the Group’s financial performance and positions for the current and prior years and/or on the disclosures set out in these consolidated financial statements.

— 4 —

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

Amendments to HKFRSs Annual improvements to HKFRSs 2009-2011 cycle2 Amendments to HKFRS 7 Disclosures — Transfers of financial assets1 Disclosures — Offsetting financial assets and financial liabilities2 Mandatory effective date of HKFRS 9 and transition disclosures3 HKFRS 9 Financial instruments3 HKFRS 10 Consolidated financial statements2 HKFRS 11 Joint arrangements2 HKFRS 12 Disclosure of interests in other entities2 HKFRS 13 Fair value measurement2 Amendments to HKAS 1 Presentation of items of other comprehensive income5 Amendments to HKAS 12 Deferred tax — Recovery of underlying assets4 HKAS 19 (as revised in 2011) Employee benefits2 HKAS 27 (as revised in 2011) Separate financial statements2 HKAS 28 (as revised in 2011) Investments in associates and joint ventures2 Amendments to HKAS 32 Offsetting financial assets and financial liabilities6 HK(IFRIC) — INT 20 Stripping costs in the production phase of a surface mine2

• 1 Effective for annual periods beginning on or after 1st July, 2011. 2 Effective for annual periods beginning on or after 1st January, 2013. 3 Effective for annual periods beginning on or after 1st January, 2015. 4 Effective for annual periods beginning on or after 1st January, 2012. 5 Effective for annual periods beginning on or after 1st July, 2012. 6 Effective for annual periods beginning on or after 1st January, 2014.

hKFrs 9 “Financial instruments”

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 amended in 2010 includes the requirements for the classification and measurement of financial liabilities and for derecognition.

Key requirements of hKFrs 9 are described as follows:

• HKFRS 9 requires all recognised financial assets that are within the scope of HKAS 39 “Financial instruments: Recognition and measurement” to be subsequently measured at 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 reporting periods. In addition, under HKFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income generally recognised in profit or loss.

— 5 —

• The most significant effect of HKFRS 9 regarding the classification and measurement of financial liabilities relates to the presentation of changes in the fair value of a financial liability (designated as at fair value through profit or loss) attributable to changes in the credit risk of that liability. 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 recognition 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. 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.

The directors of the Company anticipate that HKFRS 9 will be adopted in the Group’s consolidated financial statements for its annual period beginning 1st April, 2015. 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.

new and revised hKFrss on consolidation, joint arrangements, associates and disclosures

In June 2011, a package of five standards on consolidation, joint arrangements, associates and disclosures was issued, including HKFRS 10, HKFRS 11, HKFRS 12, HKAS 27 (as revised in 2011) and HKAS 28 (as revised in 2011).

Key requirements of these five standards are described below.

HKFRS 10 replaces the parts of HKAS 27 “Consolidated and separate financial statements” that deal with consolidated financial statements and HK(SIC) — INT 12 “Consolidation — Special purpose entities”. HKFRS 10 includes a new definition of control that contains three elements: (a) power over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor’s returns. Extensive guidance has been added in HKFRS 10 to deal with complex scenarios.

HKFRS 11 replaces HKAS 31 “Interests in joint ventures” and HK(SIC) — INT 13 “Jointly controlled entities — Non-monetary contributions by venturers”. HKFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified. Under HKFRS 11, joint arrangements are classified as joint operations or joint ventures, depending on the rights and obligations of the parties to the arrangements. In contrast, under HKAS 31, there are three types of joint arrangements: jointly controlled entities, jointly controlled assets and jointly controlled operations.

In addition, joint ventures under HKFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under HKAS 31 can be accounted for using the equity method of accounting or proportionate accounting. The Group is currently using equity method to account for the joint ventures.

HKFRS 12 is a disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the disclosure requirements in HKFRS 12 are more extensive than those in the current standards.

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These five standards are effective for annual periods beginning on or after 1st January, 2013. Earlier application is permitted provided that all of these five standards are applied early at the same time.

The directors anticipate that these five standards will be adopted in the Group’s consolidated financial statements for the annual period beginning 1st April, 2013. The directors anticipate that the application of these five standards will have no impact on amounts reported in the consolidated financial statements.

hKFrs 13 “Fair value measurement”

HKFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. This standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of HKFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other HKFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in HKFRS 13 are more extensive than those in the current standards. For example, quantitative and qualitative disclosures based on the threelevel fair value hierarchy currently required for financial instruments only under HKFRS 7 “Financial instruments: Disclosures” will be extended by HKFRS 13 to cover all assets and liabilities within its scope.

HKFRS 13 is effective for annual periods beginning on or after 1st January, 2013, with earlier application permitted.

The directors anticipate that HKFRS 13 will be adopted in the Group’s consolidated financial statements for the annual period beginning 1st April, 2013 and that the application of the new standard may affect the amounts reported in the consolidated financial statements and result in more extensive disclosures in the consolidated financial statements.

amendments to hKas 1 “Presentation of items of other comprehensive income”

The amendments to HKAS 1 retain the option to present profit or loss and other comprehensive income in either a single statement or in two separate but consecutive statements. However, the amendments to HKAS 1 require additional disclosures to be made in the other comprehensive income section such that items of other comprehensive income are grouped into two categories: (a) items that will not be reclassified subsequently to profit or loss; and (b) items that may be reclassified subsequently to profit or loss when specific conditions are met. Income tax on items of other comprehensive income is required to be allocated on the same basis.

The amendments to HKAS 1 are effective for annual periods beginning on or after 1st July, 2012. The presentation of items of other comprehensive income will be modified accordingly when the amendments are applied in the future accounting periods.

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.

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3. segment inFOrmatiOn

The Group’s operation is principally sales of watches. The Group’s turnover represents consideration received or 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 Share of results of jointly controlled entities Profit before taxation	segment revenue 2012 2011 HK$’000 HK$’000 2,594,648 2,638,096 1,341,315 1,279,668 3,935,963 3,917,764*	segment 2012 HK$’000 185,133 91,902 277,035 5,268 (54,214) (18,247) 5,087 2,008 216,937	profit 2011 HK$’000 216,883 100,936 317,819 4,019 (41,344) (9,546) 1,241 — 272,189

• After adjusted for HK$68,592,000 for the year ended 31st March, 2011, being commission expense which is included in distribution and selling expenses.

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 jointly controlled entities and unallocated other income and expenses. Unallocated expenses included auditor’s remuneration, 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, 2012.

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

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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 2012 HK$’000 1,483,601 1,038,842 2,522,443 281,496 2,803,939	assets 2011 HK$’000 1,056,922 660,839 1,717,761 653,213 2,370,974	segment liabilities 2012 2011 HK$’000 HK$’000 125,028 132,314 47,632 37,435 172,660 169,749 539,051 336,550 711,711 506,299	segment liabilities 2012 2011 HK$’000 HK$’000 125,028 132,314 47,632 37,435 172,660 169,749 539,051 336,550 711,711 506,299
				169,749 336,550
				506,299

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 and jointly controlled entities, available-for-sale financial assets, deferred tax assets and taxation recoverable as well as other receivables of the headquarters and bank balances and cash; and

• all liabilities are allocated to operating segments other than taxation payable, deferred tax liabilities 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 2012 2011 HK$’000 HK$’000 112,838 13,089 32,859 22,890 145,697 35,979 — — 145,697 35,979	depreciation 2012 2011 HK$’000 HK$’000 10,176 8,314 25,043 15,423 35,219 23,737 60 75 35,279 23,812	loss on disposal of property, plant and equipment 2012 2011 HK$’000 HK$’000 — 766 5 190 5 956 — — 5 956	impairment loss on available-for-sale financial assets 2012 2011 HK$’000 HK$’000 — — — — — — 249 — 249 —	increase (decrease) in non-current property rental deposits 2012 2011 HK$’000 HK$’000 15,724 (11,197) 9,073 196 24,797 (11,001) — — 24,797 (11,001)	increase (decrease) in non-current property rental deposits 2012 2011 HK$’000 HK$’000 15,724 (11,197) 9,073 196 24,797 (11,001) — — 24,797 (11,001)
						(11,001) —
						(11,001)

— 9 —

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

Hong Kong Macau and the PRC Other incOme Dividend income from available-for-sale financial assets Exchange gain Gain on disposal of available-for-sale financial assets Interest income Repairing service income Show window rental income Others Finance cOsts Interest on bank borrowings: Wholly repayable within five years Not wholly repayable within five years	carrying amount of non-current assets 2012 2011 HK$’000 HK$’000 214,394 115,930 59,740 50,176 274,134 166,106 2012 2011 HK$’000 HK$’000 — 1 2,510 2,554 — 249 2,758 1,215 5,961 5,970 23,175 2,655 2,655 1,169 37,059 13,813 2012 2011 HK$’000 HK$’000 17,807 9,546 440 — 18,247 9,546	carrying amount of non-current assets 2012 2011 HK$’000 HK$’000 214,394 115,930 59,740 50,176 274,134 166,106 2012 2011 HK$’000 HK$’000 — 1 2,510 2,554 — 249 2,758 1,215 5,961 5,970 23,175 2,655 2,655 1,169 37,059 13,813 2012 2011 HK$’000 HK$’000 17,807 9,546 440 — 18,247 9,546
		166,106
		2011 HK$’000 1 2,554 249 1,215 5,970 2,655 1,169
		13,813
		2011 HK$’000 9,546 —
		9,546

4. Other incOme

5. Finance cOsts

— 10 —

6. PrOFit BeFOre taXatiOn

Profit before taxation has been arrived at after charging: Directors’ remuneration Equity-settled share-based payment expense for other staff Other staff’s retirement benefits scheme contributions Other staff costs Auditor’s remuneration Depreciation of property, plant and equipment Equity-settled share-based payment expense for consultants (included in administrative expenses) Impairment loss recognised on available-for-sale financial assets (included in administrative expenses) Loss on disposal of available-for-sale financial assets (included in administrative expenses) Loss on disposal of property, plant and equipment Operating lease rentals in respect of rented premises incOme taX eXPense The charge (credit) comprises: Hong Kong Profits Tax Overprovision in prior years Taxation in other jurisdictions Overprovision in prior years Deferred taxation	2012 HK$’000 50,681 54,776 4,940 123,960 234,357 2,653 35,279 21,974 249 479 5 139,818 2012 HK$’000 38,569 (2,677) 35,892 19,235 (2,041) 17,194 (257) 52,829	2011 HK$’000 38,659 — 4,094 106,869 149,622 2,540 23,812 — — — 956 131,226 2011 HK$’000 29,245 (1,498) 27,747 25,021 (8) 25,013 — 52,760

7. incOme taX eXPense

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.

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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 these PRC subsidiaries was increased from 24% in the calendar year of 2011 to 25% in the calendar year of 2012 (2011: from 22% in the calendar year of 2010 to 24% in the calendar year of 2011).

8. diVidends

Dividend recognised as distribution during the year: Interim dividend for financial year ended 31st March, 2012 of 3.0 HK cents (financial year ended 31st March, 2011: 3.0 HK cents) per share on 570,610,224 (2011: 469,728,520) shares Special dividend for financial year ended 31st March, 2012 of 3.0 HK cents (2011: nil) per share on 570,610,224 shares 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 Dividend proposed after year end: Proposed final dividend for financial year ended 31st March, 2012 of 5.0 HK cents (financial year ended 31st March, 2011: 8.0 HK cents) per share on 570,610,224 (2011: 469,508,520) shares	2012 HK$’000 17,118 17,118 37,561 71,797 28,531	2011 HK$’000 14,092 — 15,579
		29,671
		37,561

A final dividend of 5.0 HK cents (2011: 8.0 HK cents) per share has been proposed by the directors and is subject to approval by the shareholders in the forthcoming annual general meeting.

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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	2012 HK$’000 164,108 2012 ’000 567,010 3,617 570,627	2011 HK$’000 219,429
		2011 ’000 (restated) 501,117 12,155
		513,272

The denominators for the purpose of calculating basic and diluted earnings per share for the year ended 31st March, 2011 have been adjusted retrospectively to reflect the bonus issue of shares in July 2011 on the basis of one new ordinary share for every five ordinary shares held.

The diluted earnings per share for the year ended 31st March, 2012 has not included the effect from the Company’s share options granted on 29th August, 2011 because the exercise price of the share option is higher than the average market price of share of the Company.

10. trade and Other receiVaBles

Trade receivables Property rental and utilities deposits Refundable deposits Advances to apparel suppliers Advances to other suppliers VAT receivables Property rental prepaid Other receivables	2012 HK$’000 143,754 11,813 9,561 1,811 237 18,176 7,569 15,014 207,935	2011 HK$’000 127,581 26,387 — 2,098 688 1,110 — 3,559
		161,423

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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	2012 HK$’000 125,044 12,953 4,809 948 143,754	2011 HK$’000 120,152 6,745 115 569
		127,581

More than 86% (2011: 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, 2012 (2011: nil).

Included in the Group’s trade receivable balances are debtors with an aggregate carrying amount of HK$18,710,000 (2011: HK$7,429,000) 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 41 days (2011: 35 days).

ageing of trade receivables which are past due but not impaired

31 to 60 days 61 to 90 days Over 90 days	2012 HK$’000 12,953 4,809 948 18,710	2011 HK$’000 6,745 115 569
		7,429

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 Advertising fee payables Interest payables Property rental fee payables Other payables	2012 HK$’000 110,531 21,892 12,096 2,802 2,968 1,389 4,937 1,778 7,172 7,687 173,252	2011 HK$’000 99,633 27,236 9,090 6,943 2,907 4,038 2,330 905 10,177 6,963
		170,222

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	2012 HK$’000 105,198 4,209 1,124 110,531	2011 HK$’000 98,539 — 1,094
		99,633

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12. share caPital

Ordinary shares of HK$0.10 each Authorised: At 1st April, 2010, 31st March, 2011 and 31st March, 2012 Issued and fully paid: At 1st April, 2010 Issue of shares upon exercise of share options_(note (a)) Issue of shares upon placement of new shares(note (b)) Repurchase of shares(note (c)) At 31st March, 2011 Bonus issue of shares(note (d)) Issue of shares upon exercise of share options(note (e))_ At 31st March, 2012	number of shares 1,000,000,000 389,478,520 30,250,000 50,000,000 (220,000) 469,508,520 93,901,704 7,200,000 570,610,224	amount HK$’000 100,000 38,948 3,025 5,000 (22) 46,951 9,390 720 57,061

Notes:

• (a) During the year ended 31st March, 2011, directors and employees of the Company exercised share options amounting to 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.

• (b) 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.

• (c) 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. These shares were cancelled upon repurchase.

• (d) By an ordinary resolution passed at the annual general meeting of the Company held on 28th July, 2011, the issued share capital was increased by way of a bonus issue by charging HK$9,390,000 to the retained profits account in payment in full at par of 93,901,704 ordinary shares of HK$0.10 each on the basis of one new ordinary share for every five ordinary shares held on 28th July, 2011.

• (e) During the year ended 31st March, 2012, consultants of the Company exercised share options amounting to 7,200,000 shares, at an adjusted exercise price of HK$3.44 per share.

— 16 —

The new bonus shares issued on 28th July, 2011 were not entitled to the final dividend for the year ended 31st March, 2011. All other shares issued during both years rank pari passu with the then existing shares in all respects.

13. share-Based Payment transactiOn

Pursuant to an ordinary resolution passed at the Company’s special general meeting held on 3rd November, 2003, the Company adopted a Share Option Scheme.

Under the Share Option Scheme, options may be granted to any director, employee, consultant, customer, supplier or advisor of the Group or a company in which the Company holds an interest or a subsidiary of such company (the “Eligible Persons”), the trustee of the Eligible Persons or a company beneficially owned by the Eligible Persons. The purpose of the Share Option Scheme is to attract and retain quality personnel and other persons to provide incentive to them to contribute to the business and operation of the Group. The total number of shares available for issue under the Share Option Scheme as at the date of this report is 23,950,852 shares. No Eligible Persons shall be granted an option in any 12-month period for such number of shares (issued and to be issued) which in aggregate would exceed 1% of the share capital of the Company in issue on the last day of such 12-month period unless approval of the shareholders of the Company has been obtained in accordance with the Rules Governing the Listing of Securities on the Stock Exchange. The exercisable period is determined by the directors of the Company, which shall not be more than 10 years from the date of grant, and may include a minimum period for which the options must be held before it can be exercised. The exercise price per share payable on the exercise of an option equals to the highest of:

• (a) the nominal value of one share;

• (b) the closing price per share as stated in the Stock Exchange’s daily quotations sheet on the date of grant; and

• (c) the average closing price per share as quoted in the Stock Exchange’s daily quotations sheet for the five business days immediately preceding the date of grant.

The Share Option Scheme will remain in force until 2nd November, 2013.

On 6th April, 2011, 32,300,000 share options were granted and on 29th August, 2011, 23,000,000 share options were granted. The options may be exercised by the grantees at any time during the option period up to the termination of employment. All share options vested immediately at the date of grant. The estimated fair values of the options granted on these dates are HK$44,855,000 and HK$48,698,000, respectively. The closing prices immediately before the date of grant were HK$3.95 and HK$4.38, respectively.

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Details of specific categories of options are as follows:

			Original	adjusted
	number of		exercise	exercise
	share options		price	price
date of grant	granted	exercisable period	per share	per share
6th April, 2011	32,300,000	6th April, 2011 to 5th April, 2021	HK$4.13	HK$3.44
	(note (a))			(note (a))
29th August, 2011	23,000,000	29th August, 2011 to 28th August, 2021	HK$4.80	N/A

The following tables disclose movements of the Company’s share options held by directors, employees and consultants during the year ended 31st March, 2012.

share options granted on 6th april, 2011

categories of participants Directors of the Company Other employees Consultants (note (b)) Total			number of shares under option granted adjustment exercised Outstanding during on bonus issue during at 31st march, the year of shares the year 2012 (note (a)) 12,100,000 2,420,000 — 14,520,000 12,000,000 2,400,000 — 14,400,000 8,200,000 1,640,000 (7,200,000) 2,640,000 32,300,000 6,460,000 (7,200,000) 31,560,000
		Outstanding at 1st april, 2011 — — — —	granted adjustment during on bonus issue the year of shares (note (a)) 12,100,000 2,420,000 12,000,000 2,400,000 8,200,000 1,640,000 32,300,000 6,460,000

share options granted on 29th august, 2011

categories of participants Other employees Consultants_(note (b))_		number	of shares under option granted Outstanding during at 31st march, the year 2012 18,000,000 18,000,000 5,000,000 5,000,000 23,000,000 23,000,000
		Outstanding at 1st april, 2011 — — —

Notes:

• (a) The number of shares under the outstanding options and the exercise price have been adjusted upon the bonus issue of shares in July 2011 on the basis of one new ordinary share for every five ordinary shares held.

• (b) The share options were granted to consultants for services rendered in exploring investment opportunities for the Group.

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During the year ended 31st March, 2012, 7,200,000 share options granted under the Share Option Scheme were exercised on 5th August, 2011, 21st September, 2011 and 7th December, 2011. The share prices at the respective dates of exercise were HK$5.58, HK$4.34 and HK$4.15. The weighted average share price at the dates of exercise was HK$4.69.

The following table disclose movement of the Company’s share options held by directors and other employees during the year ended 31st March, 2011.

number of shares under options

		exercised				exercise
	at	during	at	Vesting		price per
date of grant	31.3.2010	the year	31.3.2011	period	exercisable period	share
to directors of the company:
16.1.2004	17,820,000	(17,820,000)	—	Nil	16.1.2004 to 15.1.2014	HK$1.547
to other employees:
4.6.2007	12,430,000	(12,430,000)	—	Nil	4.6.2007 to 3.6.2017	HK$1.604

During the year ended 31st March, 2011, all the granted share options under the Share Option Scheme were exercised on 13th October, 2011, 2nd November, 2011 and 22nd November, 2011. The share prices at the respective dates of exercise were HK$3.52, HK$4.25 and HK$4.98. The weighted average share price at the dates of exercise was HK$4.25.

The fair values of share options granted during the year ended 31st March, 2012 were calculated using the Black-Scholes pricing model. The inputs into the model are as follows:

share options granted on 6th april, 2011
Share price at grant date	HK$4.13
Exercise price	HK$4.13
Expected volatility	53.41%
Expected life	3 years
Risk-free rate	1.42%
Expected dividend yield	1.69%
share options granted on 29th august, 2011
Share price at grant date	HK$4.80
Exercise price	HK$4.80
Expected volatility	45.20%
Expected life	10 years
Risk-free rate	2.25%
Expected dividend yield	1.91%

Expected volatilities were determined by using the historical volatility of the Company’s share price over the previous years.

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The variable and assumptions used in computing the fair values of the share options are based on the directors’ best estimate. The value of an option varies with different variables of certain subjective assumptions.

The Group recognised a share-based payment expense of HK$93,553,000 for the year ended 31st March, 2012 (2011: nil) in relation to share options granted by the Company.

14. OPerating lease arrangements

At the end of the reporting period, the Group had commitments 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	2012 HK$’000 155,718 122,347 278,065	2011 HK$’000 86,584 67,688
		154,272

Operating lease payments represent rentals payable by the Group for certain its shops and office premises. Leases are negotiated for an average term of 1 to 4 years (2011: 2 to 5 years) and rentals are fixed.

15. caPital cOmmitments

	2012	2011
	HK$’000	HK$’000
Capital expenditure in respect of the acquisition of property, plant
and equipment contracted for but not provided in the consolidated
financial statements	2,860	90,786

16. 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	2012 HK$’000 2,272 8,057 10,329	2011 HK$’000 1,888 6,383
		8,271

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.

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17. cOntingent liaBilities

As at 31st March, 2012, the Group issued financial guarantees to banks in respect of banking facilities granted to associates. The aggregate amount that could be required to be paid if the guarantees were called upon in entirety amounted to NT$380,000,000 (equivalent to HK$100,000,000; 2011: nil), NT$100,000,000 (equivalent to HK$26,300,000; 2011: nil) of which has been utilised by these associates. The fair value of the financial guarantee contracts at the grant date and at 31st March, 2012 is not significant.

Final diVidend

The directors proposed to pay a final dividend of 5.0 Hong Kong cents per share for the year ended 31st March, 2012 (2011: 8.0 Hong Kong cents) to the shareholders whose names appear on the register of members of the Company on 22nd August, 2012. Subject to approval at the forthcoming annual general meeting, dividend warrants will be sent to shareholders on or before 6th September, 2012.

clOsure OF register OF memBers

The register of members of the Company will be closed from 20th August, 2012 to 22nd August, 2012 (both days inclusive) during which period no transfer of shares will be effected. In order to qualify for the proposed final dividend, 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 17th August, 2012.

management discussiOn and analysis

group results

On behalf of the Board of Directors (the “Board”) of Oriental Watch Holdings Limited (the “Company”) and its subsidiaries (collectively, the “Group”), it is my pleasure to present the consolidated results of the Group for the year ended 31st March, 2012.

Turnover for the year ended 31st March, 2012 was HK$3,936 million (2011: HK$3,918 million) whilst net profit attributable to owner of the Company was HK$164 million (2011: HK$219 million). Excluding the fair value impact of HK$94 million recognized in profit or loss in relation to share options granted during the year, the adjusted net profit would have been HK$258 million, representing a growth of 17% from last year.

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The Group currently operates 106 stores (including associate stores) in Greater China region. Breakdown by geographic region is as follows:

Hong Kong Macau China Taiwan total	2012 13 3 88 2
	106

To celebrate our 50th anniversary and to reward the continual support of our shareholders, the Board has resolved to recommend a final dividend of 5.0 HK cents (2011: 8.0 HK cents). The final dividend together with the interim dividend of 3.0 HK cents and special dividend of 3.0 HK cents will represent a payout of approximately 38.0% for the year ended 31st March, 2012 (2011: 24.0%).

Business review and Prospects

Thanks to the burgeoning support of China’s luxury-seeking consumers, Hong Kong’s retail sales experienced a period of exponential growth during the course of 2011. However, amidst China’s credit tightening policies, the growth has subsided evidently in the first half of 2012. According to the latest government statistics, Hong Kong retail sales in April 2012 rose 11.4% from last year. This represented the slowest pace since 2009 as Mainland consumers curb their spending. As the economy and consumer sentiment towards the luxury market is direct, the Group’s watch sales were considerably affected during the year.

Despite softening retail sales, rental rates continued to soar and thoroughly tested Hong Kong retailers’ stamina. However, the Group remained resilient to rental pressures, as 5 out of 13 of our stores in Hong Kong are self-owned properties, thus rental as a percentage of turnover remained relatively stable during the year. In view of the above, the Group will continue to work on maximizing returns by employing prudent policies on its operating expenses and inventories, so as to keep costs to a minimum.

The Group’s expansion focus will remain on the China market. To expedite coverage, the Group acquired 40% interest in a PRC-based watch company on 19th July, 2011 and four new points of sales were introduced. The extended sales network is expected to open new growth opportunities for the Group in the China watch trading business. To effectively promote the “Oriental Watch” brand amongst Mainland consumers, the Group will also strategically increase its presence in 2nd and 3rd tier cities by opening self-owned retail stores accordingly along with strategic acquisitions to accelerate market exposure.

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Whilst remaining dedicated to our core expertise as a luxury watch retailer, the Group is currently exploring other means of business to broaden product variety and ultimately our sources of income. On 27th March, 2012, the Group entered into a cooperation agreement with Larry Jewelry International Company Limited (“Larry Jewelry”, stock code: 8351) to jointly market Larry Jewelry’s products through the retail network of Oriental Watch. The collaboration is expected to commence in the second half of 2012.

Despite increasing turbulence in the financial markets, the Group is adamant that Hong Kong will continue to be a major shopping destination for Mainland Chinese tourists, who will benefit from the city’s lower tax rates and vast product ranges. Supported by the prime location our new Oriental Watch store in Tsim Sha Tsui East at New Mandarin Plaza, which commenced its operation in April 2012 and the anticipated opening of our second Rolex boutique in Causeway Bay at Hysan Place, the Group is in the best position to capture greater sales from such key tourist groups. Moreover, the Swiss Watch Federation reported that Hong Kong and China continues to be top importers of Swiss timepieces, indicating that Chinese demand for luxury watches are still strong. Looking ahead, the Group remains cautiously optimistic on the business outlook of the luxury goods market. Leveraging on our prestigious brand image and long establishment history, the Group will strive to capitalize on viable business opportunities and to achieve satisfactory returns for our shareholders.

On behalf of the Group, we thank our customers, suppliers, staff and shareholders for their loyalty and continual support.

Financial reVieW

liquidity and financial resources

At 31st March, 2012, the Group’s total equity reached HK$2,092 million, compared with HK$1,865 million as at 31st March, 2011. The Group had net current assets of HK$1,738 million, including bank and cash balances of HK$207 million as at 31st March, 2012 compared with balances of HK$1,693 million and HK$601 million respectively as at 31st March, 2011. At 31st March, 2012, bank loans totalled HK$506 million (31st March, 2011: HK$301 million). At 31st March, 2012, the gearing ratio (defined as total bank borrowing on total equity) was 0.24 (31st March, 2011: 0.16).

Management 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 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.

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human resOurces

As at 31st March, 2012, our Group had approximately 900 employees all over HK, Macau, China and Taiwan, in which 69% of whom were Mainland Chinese whereas 28% were local staff. The total manpower had slight increment over 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 will help 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.

reVieW OF cOnsOlidated Financial statements

The Audit Committee of the Company has reviewed the consolidated financial statements of the Group for the year ended 31st March, 2012.

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

During the year ended 31st March, 2012, 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 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (“ the Listing Rules”), throughout the year ended 31st March, 2012, except the deviation from the code provision A.4.1 of the CG Code.

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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 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, 2012.

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, 2012.

reVieW OF Preliminary annOuncement

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, 2012 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.

remuneratiOn cOmmittee

The Remuneration Committee of the Company (“the Remuneration Committee”) comprises three members, a majority of whom are independent non-executive directors of the Company. The principal functions of the Remuneration Committee include reviewing the remuneration policies of the Company, assessing the performance of the directors and senior management of the Company and determining the policies in respect to their remuneration packages.

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annual general meeting

It is proposed that the Annual General Meeting will be held on 14th August, 2012. 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.hk). The 2012 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, 20th June, 2012

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