IGG Inc — Annual Report 2014

Jun 19, 2014

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Oriental Watch hOldings limited

(Incorporated in Bermuda with limited liability)

(stock code: 398)

Website: http://www.orientalwatch.com

Final results FOr the year ended 31st march, 2014

Financial highlights

• Turnover declined 7% to HK$3,477 million

• Profit attributable to owners of the Company decreased 76% to HK$21 million excluding the net gain of HK$76 million in relation to the disposal of property, plant and equipment in last year

• Profit for the year would be HK$20 million

• Basic earnings per share was 3.61 HK cents

• Final dividend of 0.25 HK 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, 2014 together with the comparative figures for the corresponding year in 2013 as follows:

cOnsOlidated statement OF PrOFit Or lOss and Other cOmPrehensiVe incOme

FOR THE YEAR ENDED 31sT MARcH, 2014

Notes Turnover 3 Cost of goods sold Gross profit Other income, gains and losses 4 Distribution and selling expenses Administrative expenses Finance costs 5 Share of results of associates Share of results of joint ventures Profit before taxation 6 Income tax expense 7 Profit for the year Other comprehensive (expense) income Items that may be reclassified subsequently to profit or loss: Exchange difference arising on translation of foreign operations Change in fair value of available-for-sale financial assets Other comprehensive (expense) income for the year Total comprehensive income for the year	2014 HK$’000 3,476,513 (2,864,093) 612,420 29,330 (233,920) (360,659) (22,407) (257) 5,457 29,964 (9,516) 20,448 (951) 764 (187) 20,261	2013 HK$’000 3,732,925 (3,032,500) 700,425 113,254 (246,473) (353,344) (31,269) 677 2,693 185,963 (23,366) 162,597 8,321 4,747 13,068 175,665

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Notes Profit (loss) for the year attributable to: Owners of the Company Non-controlling interests Total comprehensive income (expense) attributable to: Owners of the Company Non-controlling interests Earnings per share Basic 9 Diluted 9	2014 HK$’000 20,605 (157) 20,448 20,483 (222) 20,261 3.61 hK cents 3.61 hK cents	2013 HK$’000 162,597 —
		162,597
		175,665 —
		175,665
		28.50 HK cents
		28.50 HK cents

— 3 —

cOnsOlidated statement OF Financial POsitiOn

AT 31sT MARcH, 2014

Notes Non-current assets Property, plant and equipment Deposits for acquisition of property, plant and equipment Interests in associates Interests in joint ventures 10 Available-for-sale financial assets Deferred tax assets Property rental deposits Current assets Inventories Trade and other receivables 11 Taxation recoverable Bank balances and cash Current liabilities Trade and other payables 12 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 13 Reserves Equity attributable to owners of the Company Non-controlling interests Total equity	2014 HK$’000 280,179 530 35,969 145,541 14,779 807 36,925 514,730 1,787,924 123,470 7,884 425,099 2,344,377 145,171 2,640 288,924 436,735 1,907,642 2,422,372 202,500 1,857 204,357 2,218,015 57,061 2,159,401 2,216,462 1,553 2,218,015	2013 HK$’000 292,244 238 37,965 95,067 14,015 1,387 30,509
		471,425
		2,060,287 167,923 9,236 373,221
		2,610,667
		159,251 6,964 393,451
		559,666
		2,051,001
		2,522,426
		292,500 1,976
		294,476
		2,227,950
		57,061 2,170,889
		2,227,950 —
		2,227,950

— 4 —

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.

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 HKFRSs issued by the Hong Kong Institute of Certified Public Accountants.

Amendments to HKFRSs	Annual improvements to HKFRSs 2009 — 2011 cycle
Amendments to HKFRS 7	Disclosures — Offsetting financial assets and financial liabilities
Amendments to HKFRS 10,	Consolidated financial statements, joint arrangements and disclosure
HKFRS 11 and HKFRS 12	of interests in other entities: Transition guidance
HKFRS 10	Consolidated financial statements
HKFRS 11	Joint arrangements
HKFRS 12	Disclosure of interests in other entities
HKFRS 13	Fair value measurement
HKAS 19 (as revised in 2011)	Employee benefits
HKAS 27 (as revised in 2011)	Separate financial statements
HKAS 28 (as revised in 2011)	Investments in associates and joint ventures
Amendments to HKAS 1	Presentation of items of other comprehensive income
HK(IFRIC*) — INT 20	Stripping costs in the production phase of a surface mine

• IFRIC represents the International Financial Reporting Interpretations Committee.

Except as described below, 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.

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

In the current year, the Group has applied for the first time the package of five standards on consolidation, joint arrangements, associates and disclosures comprising HKFRS 10 “Consolidated financial statements”, HKFRS 11 “Joint arrangements”, HKFRS 12 “Disclosure of interests in other entities”, HKAS 27 (as revised in 2011) “Separate financial statements” and HKAS 28 (as revised in 2011) “Investments in associates and joint ventures”, together with the amendments to HKFRS 10, HKFRS 11 and HKFRS 12 regarding transitional guidance.

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HKAS 27 (as revised in 2011) is not applicable to the Group as it deals only with separate financial statements.

The impact of the application of these standards is set out below.

impact of the application of hKFrs 10

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 changes the definition of control such that an investor has control over an investee when (a) it has power over the investee, (b) it is exposed, or has rights, to variable returns from its involvement with the investee and (c) has the ability to use its power to affect its returns. All three of these criteria must be met for an investor to have control over an investee. Previously, control was defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Additional guidance has been included in HKFRS 10 to explain when an investor has control over an investee. Some guidance included in HKFRS 10 that deals with whether or not an investor that owns less than 50% of the voting rights in an investee has control over the investee is relevant to the Group.

As a result of the adoption of HKFRS 10, the Group has changed its accounting policy with respect to determining whether it has control over an investee. The adoption does not change any of the control conclusions reached by the Group in respect of its involvement with other entities as at 1st April, 2013.

impact of the application of hKFrs 11

HKFRS 11 replaces HKAS 31 “Interests in joint ventures”, and the guidance contained in a related interpretation, HK(SIC) — INT 13 “Jointly controlled entities — Non-monetary contributions by venturers”, has been incorporated in HKAS 28 (as revised in 2011). HKFRS 11 deals with how a joint arrangement of which two or more parties have joint control should be classified and accounted for. Under HKFRS 11, there are only two types of joint arrangements — joint operations and joint ventures. The classification of joint arrangements under HKFRS 11 is determined based on the rights and obligations of parties to the joint arrangements by considering the structure, the legal form of the arrangements, the contractual terms agreed by the parties to the arrangement, and, when relevant, other facts and circumstances. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint operators) have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement (i.e. joint venturers) have rights to the net assets of the arrangement. Previously, HKAS 31 contemplated three types of joint arrangements — jointly controlled entities, jointly controlled operations and jointly controlled assets. The classification of joint arrangements under HKAS 31 was primarily determined based on the legal form of the arrangement (e.g. a joint arrangement that was established through a separate entity was accounted for as a jointly controlled entity).

— 6 —

The initial and subsequent accounting of joint ventures and joint operations is different. Investments in joint ventures are accounted for using the equity method (proportionate consolidation is no longer allowed). Investments in joint operations are accounted for such that each joint operator recognises its assets (including its share of any assets jointly held), its liabilities (including its share of any liabilities incurred jointly), its revenue (including its share of revenue from the sale of the output by the joint operation) and its expenses (including its share of any expenses incurred jointly). Each joint operator accounts for the assets and liabilities, as well as revenues and expenses, relating to its interest in the joint operation in accordance with the applicable standards.

As a result of the adoption of HKFRS 11, the Group has re-evaluated its involvement in its joint arrangements. The Group has reclassified the investment from jointly controlled entity to joint venture. The investment continues to be accounted for using equity method and therefore this reclassification does not have any material impact on the financial position and the financial result of the Group.

impact of the application of hKFrs 12

HKFRS 12 is a new disclosure standard and is applicable to entities that have interests in subsidiaries, joint arrangements, associates and/or unconsolidated structured entities. In general, the application of HKFRS 12 has resulted in more extensive disclosures in the consolidated financial statements.

hKFrs 13 “Fair value measurement”

The Group has applied HKFRS 13 for the first time in the current year. HKFRS 13 establishes a single source of guidance for, and disclosures about, fair value measurements. The scope of HKFRS 13 is broad: the fair value measurement requirements of HKFRS 13 apply 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 for share-based payment transactions that are within the scope of HKFRS 2 “Share-based payment”, leasing transactions that are within the scope of HKAS 17 “Leases”, and measurements that have some similarities to fair value but are not fair value (e.g. net realisable value for the purposes of measuring inventories or value in use for impairment assessment purposes).

HKFRS 13 defines the fair value of an asset as the price that would be received to sell an asset (or paid to transfer a liability, in the case of determining the fair value of a liability) in an orderly transaction in the principal (or most advantageous) market at the measurement date under current market conditions. Fair value under HKFRS 13 is an exit price regardless of whether that price is directly observable or estimated using another valuation technique. Also, HKFRS 13 includes extensive disclosure requirements.

In accordance with the transitional provisions of HKFRS 13, the Group has applied the new fair value measurement and disclosure requirements prospectively.

— 7 —

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

The Group has applied the amendments to HKAS 1 “Presentation of items of other comprehensive income”. Upon the adoption of the amendments to HKAS 1, the Group’s “statement of comprehensive income” is renamed as the “statement of profit or loss and 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. Furthermore, 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 do not change the option to present items of other comprehensive income either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of items of other comprehensive income has been modified to reflect the changes. Other than the above mentioned presentation changes, the application of the amendments to HKAS 1 does not result in any impact on profit or loss, other comprehensive income and total comprehensive income.

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

Amendments to HKFRSs	Annual improvements to HKFRSs 2010 — 2012 cycle	4
Amendments to HKFRSs	Annual improvements to HKFRSs 2011 — 2013 cycle	2
Amendments to HKFRS 10,	Investment entities 1
HKFRS 12 and HKAS 27
Amendments to HKFRS 11	Accounting for acquisition of interests in joint operations			6
Amendments to HKAS 16	Clarification of acceptable methods of depreciation and		amortisation				6
and HKAS 38
Amendments to HKAS 19	Defined benefit plans: Employee contributions 2
Amendments to HKFRS 9 and	Mandatory effective date of HKFRS 9 and transition disclosures					3
HKFRS 7
Amendments to HKAS 32	Offsetting financial assets and financial liabilities 1
Amendments to HKAS 36	Recoverable amount disclosures for non-financial assets		1
Amendments to HKAS 39	Novation of derivatives and continuation of hedge accounting				1
HKFRS 9	Financial instruments 3
HKFRS 14	Regulatory deferral accounts 5
HK(IFRIC) — INT 21	Levies 1

• 1 Effective for annual periods beginning on or after 1st January, 2014.

• 2 Effective for annual periods beginning on or after 1st July, 2014.

• 3 Available for application — the mandatory effective date will be determined when the outstanding phases of HKFRS 9 are finalised.

4 Effective for annual periods beginning on or after 1st July, 2014, with limited exceptions.

5 Effective for first annual HKFRS financial statements beginning on or after 1st January, 2016.

6 Effective for annual periods beginning on or after 1st January, 2016.

— 8 —

hKFrs 9 “Financial instruments”

HKFRS 9 issued in 2009 introduces new requirements for the classification and measurement of financial assets. HKFRS 9 was subsequently amended in 2010 to include the requirements for the classification and measurement of financial liabilities and for derecognition, and further amended in 2013 to include the new requirements for hedge accounting.

Key requirements of HKFRS 9 are described as follows:

• All recognised financial assets that are within the scope of HKAS 39 “Financial instruments: Recognition and measurement” are 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.

• With regard to the measurement of financial liabilities designated as at fair value through profit or loss, HKFRS 9 requires that 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 of financial liabilities attributable to changes in the financial liabilities’ 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 fair value through profit or loss was presented in profit or loss.

The new general hedge accounting requirements retain the three types of hedge accounting. However, greater flexibility has been introduced to the types of transactions eligible for hedge accounting, specifically broadening the types of instruments that qualify for hedging instruments and the types of risk components of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled and replaced with the principle of an “economic relationship”. Retrospective assessment of hedge effectiveness is also no longer required. Enhanced disclosure requirements about an entity’s risk management activities have also been introduced.

The directors of the Company anticipate that the application of HKFRS 9 will not have significant impact on the amounts reported in respect of the Group’s financial assets and financial liabilities based on the Group’s financial instruments reported at the end of the reporting period.

The directors of the Company anticipate that the application of the other new and revised HKFRSs will have no material effect 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) Taiwan, 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 chief operating decision maker, being the Managing Director of the Group, that are used to allocate resources and assess performance. No operating segments identified by the chief operating decision maker have been aggregated in arriving at the reportable segments of the Group.

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

Hong Kong Taiwan, Macau and the PRC Unallocated other income Unallocated corporate expenses Finance costs Share of results of associates Share of results of joint ventures Profit before taxation	segment revenue 2014 2013 HK$’000 HK$’000 2,365,929 2,553,928 1,110,584 1,178,997 3,476,513 3,732,925	segment 2014 HK$’000 80,885 (11,732) 69,153 1,300 (23,282) (22,407) (257) 5,457 29,964	profit 2013 HK$’000 222,959 24,800 247,759 3,393 (37,290) (31,269) 677 2,693 185,963

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 finance costs, share of results of associates and joint ventures and unallocated other income and expenses. Unallocated expenses include auditor’s remuneration, directors’ emoluments, exchange loss, impairment loss recognised in respect of goodwill 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, 2014.

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

— 10 —

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

Hong Kong Taiwan, Macau and the PRC Segment total Unallocated Group’s total	segment 2014 HK$’000 1,267,683 960,491 2,228,174 630,933 2,859,107	assets 2013 HK$’000 1,478,959 1,071,173 2,550,132 531,960 3,082,092	segment liabilities 2014 2013 HK$’000 HK$’000 90,078 111,129 54,580 47,425 144,658 158,554 496,434 695,588 641,092 854,142	segment liabilities 2014 2013 HK$’000 HK$’000 90,078 111,129 54,580 47,425 144,658 158,554 496,434 695,588 641,092 854,142
				158,554 695,588
				854,142

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 joint ventures, available-for-sale financial assets, deferred tax assets, amount due from a joint venture, taxation recoverable as well as assets 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 Taiwan, Macau and the PRC Segment total Unallocated Group’s total	additions of property, plant and equipment 2014 2013 HK$’000 HK$’000 13,063 36,518 22,510 37,831 35,573 74,349 — — 35,573 74,349	depreciation 2014 2013 HK$’000 HK$’000 16,833 14,209 29,331 24,975 46,164 39,184 214 268 46,378 39,452	loss (gain) on disposal of property, plant and equipment 2014 2013 HK$’000 HK$’000 783 (76,917) 697 610 1,480 (76,307) — — 1,480 (76,307)	impairment loss recognised in respect of goodwill 2014 2013 HK$’000 HK$’000 — — — — — — 1,623 — 1,623 —	increase (decrease) in non-current property rental deposits 2014 2013 HK$’000 HK$’000 7,374 (3,263) (958) (5,002) 6,416 (8,265) — — 6,416 (8,265)	increase (decrease) in non-current property rental deposits 2014 2013 HK$’000 HK$’000 7,374 (3,263) (958) (5,002) 6,416 (8,265) — — 6,416 (8,265)
						(8,265) —
						(8,265)

— 11 —

Information about the Group’s non-current assets (excluding available-for-sale financial assets, deferred tax assets, property rental deposits, amount due from a joint venture and interests in associates and joint ventures) by geographical location of the assets is detailed below:

Hong Kong Taiwan, Macau and the PRC 4. Other incOme, gains and lOsses Exchange (loss) gain Gain on disposal of available-for-sale financial assets (Loss) gain on disposal of property, plant and equipment Impairment loss recognised in respect of goodwill Interest income Repairing service income Show window rental income Others 5. Finance cOsts Interest on bank borrowings: Wholly repayable within five years Not wholly repayable within five years	carrying amount of non-current assets 2014 2013 HK$’000 HK$’000 215,879 220,379 64,830 72,103 280,709 292,482 2014 2013 HK$’000 HK$’000 (339) 1,767 197 — (1,480) 76,307 (1,623) — 1,640 1,626 2,084 5,285 21,027 24,229 7,824 4,040 29,330 113,254 2014 2013 HK$’000 HK$’000 21,786 30,578 621 691 22,407 31,269	carrying amount of non-current assets 2014 2013 HK$’000 HK$’000 215,879 220,379 64,830 72,103 280,709 292,482 2014 2013 HK$’000 HK$’000 (339) 1,767 197 — (1,480) 76,307 (1,623) — 1,640 1,626 2,084 5,285 21,027 24,229 7,824 4,040 29,330 113,254 2014 2013 HK$’000 HK$’000 21,786 30,578 621 691 22,407 31,269
		292,482
		2013 HK$’000 1,767 — 76,307 — 1,626 5,285 24,229 4,040
		113,254
		2013 HK$’000 30,578 691
		31,269

— 12 —

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 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 Underprovision in prior years Deferred taxation	2014 HK$’000 20,209 7,039 131,704 158,952 2,780 46,378 225,164 2014 HK$’000 9,459 (2,746) 6,713 1,966 365 2,331 472 9,516	2013 HK$’000 34,185 7,253 134,105 175,543 2,780 39,452 190,194 2013 HK$’000 18,098 (2,725) 15,373 6,923 207 7,130 863 23,366

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.

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%.

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8. diVidends

Dividend recognised as distribution during the year: Interim dividend for financial year ended 31st March, 2014 of 0.75 HK cents (financial year ended 31st March, 2013: 2.0 HK cents) per share on 570,610,224 (2013: 570,610,224) shares Final dividend for financial year ended 31st March, 2013 of 5.0 HK cents (financial year ended 31st March, 2012: 5.0 HK cents) per share on 570,610,224 (2012: 570,610,224) shares Dividend proposed after year end: Proposed final dividend for financial year ended 31st March, 2014 of 0.25 HK cents (financial year ended 31st March, 2013: 5.0 HK cents) per share on 570,610,224 (2013: 570,610,224) shares	2014 HK$’000 4,280 28,531 32,811 1,426	2013 HK$’000 11,412 28,531
		39,943
		28,531

A final dividend of 0.25 HK cents (2013: 5.0 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 Number of ordinary shares for the purpose of basic earnings per share Effect of dilutive potential ordinary shares — share options Number of ordinary shares for the purpose of diluted earnings per share	2014 HK$’000 20,605 2014 ’000 570,610 — 570,610	2013 HK$’000 162,597
		2013 ’000 570,610 —
		570,610

The diluted earnings per share for both years has not included the effect from the Company’s share options because the exercise prices of the share options are higher than the average market price of the shares of the Company.

— 14 —

10. interests in JOint Ventures

Cost of investments in unlisted joint ventures Exchange adjustment Share of post-acquisition profits Amount due from a joint venture_(note)_	2014 HK$’000 21,807 837 10,158 32,802 112,739 145,541	2013 HK$’000 21,807 820 4,701
		27,328 67,739
		95,067

• Note: The amount is unsecured, interest free and has no fixed repayment term. The Group expects the amount would be settled after twelve months from the end of the reporting period and therefore classifies the amount as a non-current asset. The amount at 31st March, 2013 was presented in the consolidated statement of financial position as a separate line item.

11. trade and Other receiVaBles

Trade receivables Receivable from a joint venture_(note)_ Property rental and utilities deposits Advances to apparel suppliers Advances to other suppliers VAT recoverable Other receivables	2014 HK$’000 88,637 1,981 21,534 — 2,701 2,868 5,749 123,470	2013 HK$’000 111,656 — 36,625 1,413 3,736 10,065 4,428
		167,923

• Note: The amount represents reimbursements receivable from a joint venture under a procurement arrangement.

— 15 —

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 12. trade and Other PayaBles Trade payables Payroll and welfare payables Commission payables Advances from customers Renovation work payables VAT and other taxes payables Advertising fee payables Interest payables Property rental fee payables Other payables	2014 HK$’000 82,647 2,988 764 2,238 88,637 2014 HK$’000 88,398 7,866 8,492 13,597 2,625 9,921 2,259 1,027 2,057 8,929 145,171	2013 HK$’000 104,287 5,169 511 1,689
		111,656
		2013 HK$’000 81,453 22,274 11,979 13,630 7,793 1,463 1,296 2,867 7,779 8,717
		159,251

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	2014 HK$’000 79,691 972 7,735 88,398	2013 HK$’000 75,965 179 5,309
		81,453

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13. share caPital

Ordinary shares of HK$0.10 each Authorised: At 1st April, 2012, 31st March, 2013 and 31st March, 2014 Issued and fully paid: At 1st April, 2012, 31st March, 2013 and 31st March, 2014	number of shares 1,000,000,000 570,610,224	amount HK$’000 100,000
		57,061

14. share-Based Payment transactiOn

(a) 2003 share Option scheme

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 (the “2003 Share Option Scheme”). The 2003 Share Option Scheme was valid for a period of ten years commencing on the adoption date on 3rd November, 2003.

Under the 2003 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 trustee of the eligible persons or a company beneficially owned by the eligible persons. The purpose of the 2003 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. 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 “Listing Rules”). 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.

— 17 —

On 6th April, 2011, 32,300,000 share options were granted and on 29th August, 2011, 23,000,000 share options were granted under the 2003 Share Option Scheme. 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.

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 granted under the 2003 Share Option Scheme held by directors, employees and consultants during the years ended 31st March, 2013 and 31st March, 2014.

share options granted on 6th april, 2011

	number of
	shares under option
	outstanding at
	1st april, 2012,
	31st march, 2013
	and
categories of participants	31st march, 2014
Directors of the Company	14,520,000
Other employees	14,400,000
Consultants_(note (b))_	2,640,000
Total	31,560,000

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share options granted on 29th august, 2011

	number of
	shares under option
	outstanding at
	1st april, 2012,
	31st march, 2013
	and
categories of participants	31st march, 2014
Other employees	18,000,000
Consultants_(note (b))_	5,000,000
	23,000,000

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.

The 2003 Share Option Scheme expired on 2nd November, 2013.

No share option was granted, exercised or forfeited during the years ended 31st March, 2013 and 2014 up to its expiry on 2nd November, 2013.

(b) 2013 share Option scheme

Pursuant to an ordinary resolution passed at the annual general meeting of the Company held on 13th August, 2013, a new share option scheme was adopted with effect on 3rd November, 2013 (the “2013 Share Option Scheme”) after the expiry of the 2003 Share Option Scheme.

Under the 2013 Share Option Scheme, options may be granted to (i) any director, employee or consultant of the Group or a company in which the Company holds an equity interest or a subsidiary of such company (“Affiliate”); or (ii) any discretionary trust whose discretionary objects include any director, employee or consultant of the Group or an Affiliate; or (iii) a company beneficially owned by any director, employee or consultant of the Group or an Affiliate; or (iv) any customer, supplier or adviser whose service to the Group or business with the Group contributes or is expected to contribute to the business or operation of the Group. The purpose of the 2013 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 2013 Share Option Scheme as at the date of this report is 57,061,022 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 Listing Rules. The

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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 2013 Share Option Scheme will remain in force until 2nd November, 2023.

No option was granted, exercised or lapsed under the 2013 Share Option Scheme during the year since its effective date on 3rd November, 2013 and there was no outstanding share option as at 31st March, 2014.

No share-based payment expense was recognised for the years ended 31st March, 2013 and 2014 in relation to share options granted by the Company.

15. cOntingent liaBilities

As at 31st March, 2014, 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$200,000,000 (equivalent to HK$50,860,000; 2013: NT$250,000,000 and equivalent to HK$64,950,000), NT$200,000,000 (equivalent to HK$50,860,000; 2013: NT$200,000,000 and equivalent to HK$51,960,000) of which has been utilised by these associates. The fair value of the financial guarantee contracts at the grant date and at 31st March, 2013 and 2014 is not significant. In the opinion of the directors, the default risk of associates is considered as low.

16. 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 Over five years	2014 HK$’000 208,357 155,797 90,818 454,972	2013 HK$’000 219,062 167,581 —
		386,643

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 10 years (2013: 1 to 4 years). Some group entities are required to pay lease charges based on a fixed percentage of net sales.

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17. caPital cOmmitments

	2014	2013
	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	132	268

18. Other cOmmitments

At 31st March, 2013, 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:

	2014	2013
	HK$’000	HK$’000
Within one year	—	1,800

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 proposed to pay a final dividend of 0.25 Hong Kong cents per share for the year ended 31st March, 2014 (2013: 5.0 Hong Kong cents) to the shareholders whose names appear on the register of members of the Company on 21st August, 2014. Subject to approval at the forthcoming annual general meeting, dividend warrants will be sent to shareholders on or before 4th September, 2014.

clOsure OF register OF memBers

The register of members of the Company will be closed from 19th August, 2014 to 21st August, 2014 (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 Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong not later than 4:00 p.m. on 18th August, 2014.

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”), I hereby present the audited consolidated results of the Group for the year ended 31st March 2014 (the “Year”).

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Turnover for the year ended 31st March 2014 declined significantly by 7% to HK$3,477 million (2013: HK$3,733 million). Gross profit declined by 13% to HK$612 million (2013: HK$700 million) whilst gross profit margin dropped to 17.6% from 18.8% last year. Net profit attributable to owners of the Company was HK$21 million, representing a decrease of 87% from the previous corresponding year (2013: HK$162 million). Excluding the one-off net gain of HK$76 million recognised last year in relation to the disposal of property, plant and equipment, mainly comprised the gain on disposal on a shop premises, the adjusted net profit decrease from our core retailing business would have been 76%. Due to the adverse effect of the slowdown in China’s economy, the significant decline in both the Group’s revenue and net profit was mainly attributable to: (1) the consumers’ shift away from luxury consumption which has affected the Group’s sales volume during the Year, (2) this led to a year-on-year 1% decrease in the Group’s average selling price, and (3) the rising rental costs in Macau, Hong Kong and China, respectively.

The Board has resolved to recommend a final dividend of 0.25 HK cents per share for the year ended 31st March 2014 (2013: 5.0 HK cents). The final dividend together with the interim dividend of 0.75 HK cents per share, represented a dividend payout of approximately 28% for the year ended 31st March 2014 (2013: 25%).

Business review

As at 31st March 2014, the Group operates 97 retail and wholesale points (including associate retail stores) in the Greater China region. Breakdown by geographic region is as follows:

Hong Kong Macau China Taiwan Total	as at 31st march 2014 14 3 77 3 97

The on-going economic instability continued to dampen the prospect for high-end consumption in China. According to Bain & Company, a global management consulting firm, growth specifically in China’s luxury market has slowed from 7% in 2012 to a mere 2% in 2013, reflecting the country’s weakening consumer sentiment and lower demand for high-ticket items. This is further supported by statistics from the Federation of the Swiss Watch Industry, which indicated that Hong Kong and China’s overall Swiss watch exports value in 2013 has declined by 5.6% and 12.5% respectively. As one of the key luxury watch distributors in Greater China, Oriental Watch was inevitably affected by the above market factors. Facing the above factors, the Group acknowledges that the unfavourable market trend is expected to continue into 2014, and has since focused its efforts in improving internal efficiency and cost management during the Year, so as to maintain a stable financial position during times of uncertainty.

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One of the major costs the Group remained adamant in tackling during the Year was rental expenses. Amidst a sluggish economic background, the Group’s aggregate rental costs (excluding related property management fees) for the year ended 31st March 2014 increased by approximately 18% to 225 million, accounting 36% of the Group’s overall operating expenses. The increase was mainly due to the lease renewal of 4 shops during the Year, namely in retail hotspots such as Tsimshatsui, Mongkok and Causeway Bay which commands a relatively higher rental rate. With the leases of approximately one-third of our Hong Kong retail stores to be renewed in the next fiscal year, the Group is cautiously assessing the performance its retail network to create best practices in managing rental expenditure. As such, the Group will consider closing low performing retail stores after the lease expiration in the coming year. Better resources allocation will ultimately help the Group optimize operating performance and same-store sales in the long-run.

The Group also remained disciplined in its inventory management and has lowered the replenishment rate of high-ticket items considerably during the Year. Together with the dedicated efforts of our front-line staff in accelerating inventory turnover, the Group’s overall inventory level declined by 8% from HK$1,944 million at 30th September 2013 to HK$1,788 million at 31st March, 2014. On a year to-year basis, inventory has in fact declined by 13% from HK$2,060 million at 31st March 2013. Since the beginning of the fiscal year, the Group has also progressively closed a number of investment accounts in China, which mainly comprised of concession counters in department stores, so as to control inventory flow and alleviate the risks of overstocking. In the coming year, the Group will continue to put effort in its inventory management and is confident that such initiatives will further improve the Group’s cash position for future business development.

Despite the Chinese luxury market normalizing to a more sustainable rate of growth during the Year, the Group believes that the demand for luxury goods will remain evident amongst Chinese consumers in the long term. According to Bain & Company, Chinese consumers remain the largest nationality of luxury buyers, accounting for 29% of the global market share in 2013, representing a 4 percentage point increase versus last year. This was mainly driven by an expanding Chinese middle class and their growing awareness for niche and exclusive brands. Looking ahead, the Group will continue to deploy appropriate strategies to elevate the productivity of existing stores, strengthen cost management and optimize its inventory profile, as well as enrich its product portfolio to capture opportunities within this particular consumer threshold.

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

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Financial reVieW

liquidity and financial resources

At 31st March 2014, the Group’s total equity reached HK$2,218 million, compared with HK$2,228 million as at 31st March, 2013. The Group had net current assets of HK$1,908 million, including bank and cash balances of HK$425 million as at 31st March, 2014 compared with balances of HK$2,051 million and HK$373 million respectively as at 31st March, 2013. At 31st March, 2014, bank loans of HK$491 million (31st March, 2013: HK$686 million). At 31st March, 2014, the gearing ratio (defined as total bank borrowing on total equity) was 0.22 (31st March, 2013: 0.30).

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.

human resOurces

As at 31st March, 2014, our Group employed approximately 790 employees all over Hong Kong, Macau, China and Taiwan, of which 60% of whom were located in Mainland China. The total manpower is slightly lower than previous 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 have 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 efforts 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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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, 2014.

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

During the year ended 31st March, 2014, 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, 2014, 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 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, 2014.

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, 2014.

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scOPe OF WOrK OF messers. delOitte tOuche tOhmatsu

The figures in respect of the Group’s consolidated statement of financial position, consolidated statement of profit or loss and other comprehensive income and the related notes thereto for the year ended 31st March, 2014 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.

annual general meeting

It is proposed that the Annual General Meeting will be held on 12th August, 2014. 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 2014 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 Dr. 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, 19th June, 2014

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