corporate informationtime watch investments limited (“time watch” or “the group”, bloomberg...

T I M E W A T C H I N V E S T M E N T S L I M I T E D | A N N u A L r E p o r T 2 0 0 8

Timeless Perfection

TIME WATCH INVESTMENTS LIMITED

17 Carpenter Street, #02-01

Singapore 059906

Tel : (65) 6536 6564

Fax : (65) 6536 7243

Http : //www.timewatch.com.sg

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CoNTENTS

CorporATE proFILE 1

CHAIrMAN’S STATEMENT 4

BoArD oF DIrECTorS 6

Group STruCTurE 10

FINANCIAL HIGHLIGHTS 12

CorporATE GoVErNANCE 13

rEporT oF DIrECTorS 22

INDEpENDENT AuDITorS’ rEporT 26

BALANCE SHEETS 27

CoNSoLIDATED proFIT AND LoSS STATEMENT 29

STATEMENTS oF CHANGES IN EquITy 30

CoNSoLIDATED CASH FLoW STATEMENT 35

NoTES To THE FINANCIAL STATEMENTS 37

STATEMENT oF DIrECTorS 90

STATISTICS oF SHArEHoLDINGS 91

NoTICE oF THIrTEENTH ANNuAL GENErAL MEETING 93

NoTICE oF BookS CLoSurE 96

proxy ForM 99

CorporATE INForMATIoN

Corporate InformationBoard of directors

Mr Tung koon Ming

Chairman & CEo

Mr Dennis Tung koon kwok

Executive Director

Mr Tung Wai kit

Executive Director

Mr Hoon Tai Meng

Independent Director

Mr Tan Song koon


Mr Meyrick Wong Wing keung


audit committee

Mr Hoon Tai Meng (Chairman)

Mr Tan Song koon


nominating committee

Mr Meyrick Wong Wing keung (Chairman)

Mr Hoon Tai Meng

Mr Tan Song koon

remuneration committee


Mr Hoon Tai Meng

Mr Tan Song koon

company secretaries

Ms Dorothy Ho

Ms Wong Juar Ming

registered office


Singapore 059906

Tel : (65) 6536 6564

Fax : (65) 6536 7243

Website: http://www.timewatch.com.sg

share registrar

Lim Associates (pte) Ltd

3 Church Street, #08-01 Samsung Hub

Singapore 049483

auditors

Deloitte & Touche LLp

Certified public Accountants

6 Shenton Way, #32-00

DBS Building Tower Two

Singapore 066809

partner-in-charge: Mr xu Jun

(Appointed since financial year ended

June 30, 2007)

principal Bankers

DBS Bank Limited

oversea-Chinese Banking

Corporation Limited

Hang Seng Bank Limited

Time Watch Investments Limited (“Time Watch” or “the Group”, Bloomberg Code: TWIN.SP)

is a leading manufacturer and retailer of branded watches in the People’s Republic of China

(“PRC”).

Time Watch’s proprietary brand “Tian Wang” has been established in the PRC since 1988

and is currently the largest watch brand in the PRC by sales volume, as ranked by the Chinese

National Commercial Information Centre.

Time Watch’s other in-house watch brand “Balco”, is introduced in 2001 and caters to middle

upper PRC consumers who are willing to pay a premium for the precision and prestige of Swiss-

made timepieces.

Adopting a vertically integrated business model, “Tian Wang” watches are designed,

manufactured and assembled in the Group’s manufacturing operations in Shenzhen, PRC.

“Balco” watches are imported into PRC from Switzerland.

Both brands are sold through 749 retail outlets in more than 35 cities throughout the PRC. In

addition, the Group is also the PRC distributor of watches and accessories for the renowned

Italian brand “Police”, opening 15 stores in FY2008 to kick start this prestigious tie-up.

The Group is also the original equipment manufacturer for international brands such as Aigner,

Marie Claire and POLICE through its 2 manufacturing subsidiaries, East Base Limited (Hong

Kong) and Tick Tack AG (Switzerland).

Supporting the Group’s manufacturing and retailing operations, the Group has an operating

subsidiary, Winning Metal Products Manufacturing Company Limited (“WMP”) that has a

successful track record as a major trader of watch movements in Hong Kong since 1980. WMP

currently distributes over 700 models of watch movements from major global manufacturers

including Seiko, Citizen, Timex, Swatch, Epoch and ISA. WMP’s established customer base

comprises of over 230 watch manufacturers and distributors from all across the world.

For more information, please refer to the corporate website, www.timewatch.com.sg

Corporate Profile

01

”Time is the most precious element of human existence.

The successful person knows how to put energy into time

and how to draw success from time.”

- Denis Waitley

Instruments of Success

02 TIME WATCH INVESTMENTS LIMITED

annual report 2008

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present to you the Group’s annual report for the financial year ended 30 June 2008.

This year, Time Watch has recorded yet another year of sterling performance. The Group’s revenue increased by 10% to a record HK$944.4 million despite a strategic shift away from the Group’s high volume Watch Movement Trading business. Net profit attributable to equity holders for the year, excluding change in fair value of investment properties net of related deferred tax of HK$4.3 million, grew by 21.1% to HK$55.0 million.

In view of the Group’s strong performance, and to reward shareholders for their continuous support, the Board is pleased to recommend a final dividend of SGD 0.55 cents per share. Subject to shareholders’ approval in the forthcoming Annual General Meeting on 28 October 2008, the final dividend is payable on 20 November 2008.

BuSineSS Review

Growing affluence in China drives demand for timepieces in the PRC. Despite drastic corrections in China’s financial markets and the ensuing economic uncertainties, retail sales in the country remained resilient, showing no noticeable sign of a slowdown. According to economic research agency CEIC, China’s retail sales for the first six months of 2008 rose 13.4% year-on-year in real terms. In addition, demand for luxury goods was strong, with retail sales of gold, silver and jewellery surging 55% year-on-year. More relevant to our business, imports of Swiss watches surged 64% year-on-year as well. For the period under review, domestic stock-market corrections have had no adverse impact on the consumption of luxury goods in China.

Our revenue growth was mainly driven by strong contributions from the high margin retail segment which saw an increase in revenue of 69.7% to HK$306.0 million. This is realised through improved local demand in the PRC retail market, as we added new point of sales (“POS”) while enhancing average sales per POS by 15%. This year, 104 Tian Wang POS, 30 Balco POS and 15 Police POS were added to make up a total of 764 POS. With our growing retail network as well as intensive brand-building, advertisement and promotional activities, I am pleased to report that our flagship “Tian Wang” brand has emerged top among all PRC and foreign watch brands, in terms of sales volume1 for the first six months of 2008.

To capitalise on the strong market demand for timepieces in the PRC, we have successfully secured the distribution rights of the renowned Italian brand “Police” for the PRC market in early FY2008. We have opened 15 stores to kick-start this very promising relationship, retailing “Police” branded watches, sunglasses, leather goods, jewellery and other accessories.

In Hong Kong, a flagship retail store was opened in Tshimshatsui which retails our proprietary “Tian Wang” and “Balco” brands as well as other watch brands such as Surich, Perrelet, Juvenia, Enicar and Chronotech to capitalise on the strong PRC tourism spending in Hong Kong.

1 According to the China National Commercial Information Centre, an agency governed by the Commercial Department of the PRC Government. Figures are computed based on the aggregate of the 6 months statistics.

Chairman’s Statement04 TIME WATCH INVESTMENTS LIMITED

annual report 2008

We also benefitted from strong demand for OEM watches including but not limited to Police, Aigner and Swiss Military, which resulted in a 20.7% increase in revenue to HK$274.7 million.

Our investment in Zijingshan Department Store has contributed revenue of HK$10.9 million. Spanning over 21,000 square feet and set at the cross juncture of major roads in the commercial hub of Jinshui District, Zhengzhou City in Henan Province, this department store serve as a strategic platform for us to showcase our watches, reinforcing our market and brand positioning.

Looking FoRwaRD

While we are cognizant of the risks of slowing global growth, volatile stock markets, dampening consumer sentiments and discretionary spending, we remain cautiously confident that watch demand in China would be resilient over the next few years. We intend to use this period of economic uncertainty to consolidate and further develop our presence in China’s retail market. In this respect, we expect to have at least 850 point of sales by the end of FY2009. Included in this growth strategy are plans to introduce new store formats in the form of multi-brand shops.

A key initiative would be in the city of Suzhou in Jiangsu Province where we have commenced a joint venture in August 2008 to set up multi-brand shops which will carry mid-to-high-end level timepieces, including but not limited to Rolex, IWC, Rada and Tag Heuer. We are confident of the potential for growth in the Suzhou market because of measures taken by the government to develop the local economy. This includes the introduction of a high-speed train system which would substantially reduce travelling time between Suzhou and Shanghai to half an hour. This joint venture will allow us to establish a foothold in this fast developing PRC city. We will continue to explore other markets in China for expansion opportunities.

We are also on the lookout for acquisitions that will integrate well with and complement our portfolio of brands, to leverage on our ever-growing retail network in the PRC.

a note oF appReciation

Finally, it is my pleasure to record a note of appreciation to our shareholders, customers and business partners for their continued support and contributions to the success of the Time Watch Group. I would also like to express my gratitude to my fellow Board members for their invaluable insights and counsel. Last but not least, I would like to thank our management and staff for their dedication and teamwork, which I am confident, will again steer us through another successful year.

tung koon MingCHAIRMAN AND CEOTIME WATCH INVESTMENTS LIMITED

05

Board of DirectorsMR tung koon Ming Chairman & CEO

Following the completion of the reverse take-over of WMP on November 8, 2005, he was appointed Chairman and CEO of Time Watch Investments Limited. He is responsible for the overall management, strategic planning and business development of the Group. Mr Tung has been the Chairman and CEO of Winning Metal Products Manufacturing Company Limited (“WMP”) since its incorporation on May 30, 1980. He has more than 25 years of experience in the business of manufacturing and trading of watches. He was awarded the “Most Outstanding Foreign Investor” by the Guangdong Provincial Government in 1996. He was also a member of both the 8th and 9th Hunan Provincial Committees.

MR DenniS tung koon kwok Executive Director

Mr Tung was appointed Executive Director of the Group on November 8, 2005. He has been involved in the manufacturing and trading of watches for more than 25 years. His responsibilities include overseeing the trading of watch movements as well as assisting the Chairman in the overall operations of the Group. He was a former director of the Federation of Hong Kong Watch Trades & Industries Limited.

MR tung wai kit Executive Director

Mr Tung was appointed Executive Director on November 8, 2005. He is currently the General Manager responsible for the overall operations and business development of “Balco” brand of watches. He has been holding position as the Manager of Marketing Watch Division of WMP since 2002. He is a director of the Federation of Hong Kong Watch Trades & Industries Limited. Mr Tung will stand for re-election at this forthcoming AGM.


annual report 2008

MR Hoon tai Meng Independent Director

Mr Hoon was appointed Independent Director on December 15, 2004. He is the Chairman of the Audit Committee and sits on the Nominating and Remuneration Committees. He was last re-elected as Independent Director on October 26, 2006.

An advocate and solicitor by training, he is currently a partner with M/s KhattarWong. Besides having more than 12 years of experience in law practice, Mr Hoon also has some 20 years of experience in financial planning and management, audit, tax and corporate secretarial functions. He has a Bachelor of Commerce degree in accountancy from the Nanyang University and a LLB (Honours) from the University of London. He is a Fellow of the Chartered Institute of Management Accountants (United Kingdom), a Fellow of the Association of Chartered Certified Accountants (United Kingdom), a Fellow Certified Public Accountant (Singapore) and a Barrister-at-Law (Middle Temple). Mr Hoon also holds directorships in Chip Eng Seng Corporation Ltd, Federal International (2000) Ltd, Intraco Limited, Equation Corp Limited, Middle East Development Singapore Ltd and Sin Ghee Huat Corporation Ltd.

MR tan Song koon Independent Director

Mr Tan has been an Independent Director of the Group since February 15, 2001. He is a member of the Audit Committee, Nominating Committee and Remuneration Committee. He was last re-elected as Independent Director on October 26, 2006.

He has been an Executive Director of Fuji Offset Manufacturing Limited (FOPM) since 1988, with main responsibilities in marketing and business development as well as overseeing finance, corporate planning, new business set-ups and investments at the holding company level. He currently holds directorships in the subsidiaries of FOPM, Super Multi Vending Pte Ltd and Super Vending Pte Ltd. Mr Tan also holds directorships in Middle East Development Singapore Ltd, Fujian Zhenyun Plastics Industry Co Ltd and Jurong Technologies Industrial Corpn Ltd. He holds a Bachelor of Commerce from Nanyang University in Singapore, majoring in Economics, Banking and Finance.

MR MeyRick wong wing keungIndependent Director

Mr Wong was appointed Independent Director on November 8, 2005 upon the completion of the reverse take-over exercise. He is the Chairman of the Nominating Committee and Remuneration Committee and a member of the Audit Committee.

He holds a Bachelor of Laws from the University of London. Since 1990, Mr Wong has been practising as Barrister-at-law in Hong Kong. He passed the Council of Engineering and Electrical Engineering in 1980 and 1982 respectively. His professional qualifications include Chartered Engineer, Member of the Energy Institute, Member of the Institution of Mechanical Engineers, Member of the Institution of Electrical Engineers and Member of the Hong Kong Bar Association. He is currently a board member of Grace Name Limited, Worldwin Asia Company Limited and China Linkage Company Limited. Mr Wong will stand for re-election at this forthcoming AGM.

07


annual report 2008

All great achievements require time.”

- David J. Schwartz

09

Fine Movement

Group Structure10 TIME WATCH INVESTMENTS LIMITED

annual report 2008

100% Wee Fong Construction Pte Ltd

Singapore

100% Columbia Education & Consultancy

Services Pte LtdSingapore

100% Grand Ocean

Industrial Limited

Hong Kong

100% Perfect Fame Investments

LimitedBVI

100% Stategrace

Group LimitedBVI

100% Win Ford (BVI) Investments

LimitedBVI

100% Aimfar Holdings

LimitedBVI

100% Tian Wang Electronics Company Limited

PRC

100% Goldford

International Limited

BVI

100% Balco Electronic

(Zhuhai) Co. Ltd.

PRC

100% China City

Trading LimitedHong Kong

51%East Base Limited

Hong Kong

51%Semtek Limited

Hong Kong

51%Tick Tack AGSwitzerland

100% Ye Guang Li Electronics (Meizhou)

Company LimitedPRC

100% Goldford

International (Malaysia) Limited

Malaysia

tiMe watcH inveStMentS LiMiteDSingapore

11

100% Winning Metal Products Manufacturing

Company LimitedHong Kong

100% Time Watch Singapore Pte Ltd

Singapore

100% Win Sun


Hong Kong

100% Sky Sun

Investments Limited

Hong Kong

100% Fine Jade


BVI

100% Winning Asia

Holdings Group Ltd.BVI

100% Master Wave

LimitedBVI

100% Gold Joy

Investments Ltd.Hong Kong

51%Fortune Silver

Holding LimitedHong Kong

100% Skyrex

Investment Limited

Hong Kong

100% Tian Wang Electronics (Shenzhen)

Co Ltd.PRC

100%Time Watch (Zhengzhou)

Business Consultancy

Co., Ltd.PRC

Financial Highlights12 TIME WATCH INVESTMENTS LIMITED

annual report 2008

pRoFit anD LoSS StateMent (HKD’’000) BaLance SHeet (HKD’’000)

net aSSetS

2006 2007 2008

68,253

202,561

292,504

tuRnoveR

2006 2007 2008

721,730

855,859

944,380

pRoFit attRiButaBLe to SHaReHoLDeRS

2006 2007 2008

35,192

45,376

54,985

(excluding change in fair value of investment properties and impairment of goodwill)

HkD’’000 Fy2006 Fy2007 Fy2008

profit and Loss Statement

HkD’’000 HkD’’000 HkD’’000

(Loss)/profit before tax (47,077) 101,616 82,988

Profit after tax (50,378) 83,061 70,162

Balance Sheet HkD’’000 HkD’’000 HkD’’000

Current assets 233,902 355,209 497,880

Current liabilities 144,931 219,769 348,749

Net current assets 88,971 135,440 149,131

Financial Ratios

Gross margin (%) 15.9% 21.2% 30.5%

Net margin (%) (7.0%) 9.7% 7.4%

Net margin (%) (excluding change in fair value of investment properties and impairment of goodwill)

4.6% 6.4% 7.0%

EPS (cents)

- Basic (15.44) 20.92 15.84

- diluted - 20.77 15.38

Net assets per share (cents) 20.07 54.15 78.20

Revenue By SegMent

37.4% Trading watch

movements

1.1% Leasing of a shopping mall

32.4% Manufacturing &

trading of watches

29.1% Manufacturing & resale of OEM watches


annual report 2008

13Corporate Governance

The board of directors (the “Board”) of Time Watch Investments Limited is committed to maintaining high standards of corporate governance to safeguard the interest of its shareholders. Whilst no effort had been spared in ensuring compliance with the Code of Corporate Governance (the “Code”), the Board endeavours to continuously seek and put in place those processes and procedures to ensure full compliance with the Code.

This report describes the company’s Corporate Governance processes and practices that were in place throughout the financial year, with specific reference made to each of the principles of the Code. In areas where the company deviates from the Code, the rationale has been provided.

1. THE BOARD’S CONDUCT OF ITS AFFAIRS

The company is headed by an effective Board which leads and controls the company. Apart from their statutory duties, the Board is responsible for the Corporate Governance and also for the setting of business direction for the group, monitoring and reviewing the financial performance of the group, safeguarding the group’s assets, overseeing internal controls and setting and approving the group’s strategic plans. These functions are carried out either directly by the Board or through the various Board committees that have been set up to cover specific functions of the Board, namely the Audit Committee, the Nominating Committee and the Remuneration Committee. Each of these Board committees is chaired by an Independent director.

The company has in place programs to provide appropriate training for new directors (including his or her duties as a director and how to discharge those duties). The training also includes orientation program to ensure that the incoming directors are familiar with the company’s business and governance practices. The existing directors are updated on relevant new laws, regulations and changing commercial risks from time to time. Additional training for the directors will be provided as and when necessary.

The Board conducts regular meetings. Ad-hoc meetings are convened when circumstances require. The attendance of the directors at Board meetings during the financial year ended June 30, 2008 (“FY2008”) are disclosed below. There are a total of 3 meetings held during FY2008.

Name of DirectorNumber of meetings held

(during the tenure of office) Attendance

Tung Koon Ming 3 3

Dennis Tung Koon Kwok 3 1

Tung Wai Kit 3 0

Hoon Tai Meng 3 3

Tan Song Koon 3 3

Meyrick Wong Wing Keung 3 2


annual report 2008

14

2. BOARD COMPOSITION AND BALANCE

The Board comprises six directors with the Independent directors making up half of the Board.

The current Directors are:

Tung Koon Ming, Chairman & Chief Executive Officer Dennis Tung Koon Kwok, Executive Director Tung Wai Kit, Executive Director Hoon Tai Meng, Independent Director Tan Song Koon, Independent Director Meyrick Wong Wing Keung, Independent Director

Presently, half of the Board is independent. As a group, the Board comprises directors with core competencies essential to the company and the group, such as, finance and accounting, business and management experience, industry knowledge and strategic planning experience.

The Non-Executive directors who are also the Independent directors have participated actively to help develop proposals on the Group’s strategy, business and corporate affairs. They have reviewed the performance of the management (“Management”) in meeting goals and objectives of the group, and help to monitor the reporting of performance.

The Board, taking into account the nature of operations of the group, considers its current size and composition appropriate for the nature and scope of the group’s operations. The profile and key information of the directors as at the date of this report are set out on pages 6 and 7 of the Annual Report.

3. CHAIRMAN AND CHIEF EXECUTIVE OFFICER (“CEO”)

The Chairman leads the Board to ensure its effectiveness on all aspects of its role. The Chairman is also responsible for the scheduling of meetings to enable the Board to perform its duties effectively, setting meeting agenda in consultation with the directors and company Secretary, exercising control over the accuracy, flow and timeliness of the information between Management and the Board, and ensuring compliance with the company’s guidelines on corporate governance.

The Chairman is also the CEO who is responsible for the implementation of the Board’s strategic directions and day-to-day management of the group’s operations. The roles of the Chairman and CEO are assumed by Mr Tung Koon Ming. This deviates from the Code which states that the roles of Chairman and CEO should in principle be separate to ensure appropriate balance of power, increased accountability and greater capacity of the Board for independent decision making. The Board however feels that the separation of the roles of Chairman and CEO is not necessary as Mr Tung is able to discharge his roles and responsibilities as Chairman and CEO effectively. Furthermore the Board feels that there are adequate safeguards to ensure a balance of power and authority such that no individual represents a concentration of power. All major decisions made by Mr Tung are reviewed by the AC which consists wholly of the Independent directors.

Corporate Governance


annual report 2008

15

4. BOARD MEMBERSHIP

Key information of the Board and Committee Appointments:

Director Board Audit Nominating Remuneration

Date firstappointed as aDirector

Datere-elected as a Director

Tung Koon Ming Executive Chairman

– – – Nov 8, 2005 Oct 30, 2007

DennisTung Koon Kwok

Executive – – – Nov 8, 2005 Oct 30, 2007

Tung Wai Kit Executive – – – Nov 8, 2005

Hoon Tai Meng Independent Director

Chairman Member Member Dec 15, 2004 Oct 26, 2006

Tan Song Koon IndependentDirector

Member Member Member Feb 15, 2001 Oct 26, 2006

Meyrick Wong Wing Keung


Member Chairman Chairman Nov 8, 2005

The Nominating Committee (“NC”) comprises three Independent directors. They are Meyrick Wong Wing Keung as the Chairman of the NC, Hoon Tai Meng and Tan Song Koon as members.

The NC’s key responsibilities include:

(a) making recommendations on appointments and re-nomination of directors, having regard to the directors’ contribution and performance;

(b) determining annually whether or not a director is independent, bearing in mind the circumstances set forth in Guidance Note 2.1 of the Code and any other salient factors; and

(c) considering whether or not a director who has multiple board representations is able to and has been carrying out his or her duties as a director of the company.

New directors are appointed by the Board after the recommendation by the NC. All new directors must submit themselves for re-nomination and re-election at the next Annual General Meeting (“AGM”) of the company following their appointment. Pursuant to the company’s Articles of Association, at least one-third of the directors for the time being shall retire from office by rotation at each AGM provided that all the directors shall retire from office at least once every three (3) years. A retiring director shall be eligible for re-election.


Committees served on


annual report 2008

16

4. BOARD MEMBERSHIP (Cont’d)

The number of NC meetings held and attendance at the meetings during FY2008 are set out below:

Number of meetings held

Name of Director Appointment (during the tenure of office) Attendance

Meyrick Wong Wing Keung Chairman 1 1

Hoon Tai Meng Member 1 1

Tan Song Koon Member 1 1

5. BOARD PERFORMANCE

The Board has adopted a system for assessing the effectiveness of the Board as a whole. The assessment process adopts a comprehensive set of criteria, both quantitative and qualitative, and considers, among other things, the company’s share price performance, return on assets and return on equity as criteria for assessment of the Board’s performance.

NC, in considering the re-nomination of any director for appointment, evaluates the director’s performance and contributions, including his attendance and participation at meetings of the Board and Board committees (where applicable), and any other special considerations.

6. ACCESS TO INFORMATION

In order to ensure that the Board is able to fulfill its responsibilities, Management has provided adequate and timely information to the Board on the affairs of the company and the group in the form of on-going reports relating to the operational and financial performance of the group.

The Board has separate and independent access to the company’s senior management and the Company Secretary. The Company Secretary attends all the Board and the Board committee meetings and is responsible to ensure that Board procedures are followed and in compliance with applicable rules and regulations including the Companies Act, Cap. 50 and the Singapore Exchange’s Listing Manual.

The Board, either individually or collectively, in the furtherance of their duties, has access to independent professional advice, if necessary, at the company’s expense.



annual report 2008

17

7. PROCEDURES FOR DEVELOPING REMUNERATION POLICIES

The Remuneration Committee (“RC”) comprises three Independent directors, namely, Meyrick Wong Wing Keung as Chairman of the RC, Hoon Tai Meng and Tan Song Koon.

The RC’s main responsibilities include:

(a) recommending to the Board a formal and transparent procedures for determining the remuneration packages of the Board members and key executives;

(b) reviewing the specific remuneration packages for executive directors and the CEO;

(c) reviewing the appropriateness of the remuneration of non-executive directors, taking into consideration the level of their contribution and responsibilities;

(d) reviewing the terms of service agreements of executive directors; and

(e) considering the disclosure requirements for the remuneration of directors and key executives as required by the Singapore Exchange.

The RC’s recommendations are made in consultation with the Chairman of the Board and submitted for endorsement by the entire Board. The members of the RC do not participate in any decisions concerning their own remuneration. The RC has the authority to seek expert advice inside and/or outside the company on remuneration of all directors.

The number of RC meetings held and attendance at the meetings during the FY2008 are set out below:

Number of meetings heldName of Director Appointment (during the tenure of office) Attendance

Meyrick Wong Wing Keung Chairman 1 1

Hoon Tai Meng Member 1 1


8. LEVEL AND MIX OF REMUNERATION

The RC assists the Board in ensuring that the executive directors and the key executives of the company and group are fairly remunerated for their performance and individual contribution to the overall performance of the group, taking into account the performance of the group and the individual directors respectively. The performance related elements of compensation are designed to align the interests of the executive directors with those of the shareholders. In the furtherance of their duties, the RC may obtain independent legal and other professional advice as it deems necessary, at the expense of the company.

All independent and non-executive directors have no service agreements with the company. They are paid directors’ fees, which is recommended by the RC based on effort, time spent and responsibilities of each individual Director. The fees are subject to approval by the shareholders at the AGM.

The annual review of the compensation of directors are carried out by the RC to ensure that the remuneration of the executive directors and senior management commensurate with their performance.



annual report 2008

18

9. DISCLOSURE ON REMUNERATION

The directors’ remuneration for FY2008 is set out below:

Fees % Salary % Bonuses % Other Benefits %

Above S$500,000

Tung Koon Ming 35 7 58 –

Below S$250,000

Dennis Tung Koon Kwok 26 65 10 –

Tung Wai Kit 38 62 – –

Hoon Tai Meng 100 – – –

Tan Song Koon 100 – – –

Meyrick Wong Wing Keung 100 – – – Top 5 Executives within each band of remuneration are as follows:

Remuneration Band No. of Executives

S$250,000 and Above 0

Below S$250,000 5

In FY2008, none of the employees who are immediate family members of a director or the CEO has received remuneration exceeding S$150,000.

Currently the company does not have any employees’ share option or share scheme and there were no options granted

by the company to subscribe for unissued shares in the company during FY2008.

10. ACCOUNTABILITY

The Board is responsible for presenting a balanced and understandable assessment of the company’s performance, position and prospects.

The Management provides all members of the Board with management accounts which present a balanced and understandable assessment of the company’s performance, position and prospects on a regular basis.



annual report 2008

19

11. AUDIT COMMITTEE

The Audit Committee (“AC”) comprises three directors, all of whom are independent. As of the date of this report, the members of the AC are Hoon Tai Meng as the Chairman of the AC, Meyrick Wong Wing Keung and Tan Song Koon.

The main functions of the Audit Committee are to: (a) review with the external auditors, their audit plans, evaluation of the accounting controls, audit reports and any

matters which the external auditors wish to discuss;

(b) review the assistance given by the company’s officers to the external auditors;

(c) review the adequacy of the internal control procedures and evaluates the effectiveness of the overall internal control system, including financial, operational and compliance controls and risk management;

(d) review the effectiveness of the company’s internal audit function;

(e) review the significant financial reporting issues and judgements so as to ensure the integrity of the financial statements of the Company and any formal announcements relating to the company’s financial performance and affairs released to the shareholders and SGX-ST;

(f) review the interested person transactions and ensure the company complies with the listing rules with respect to announcements, disclosures and seeking shareholders’ approval;

(g) review the independence and objectivity of the external auditors, and the nature and extent of the non-audit services provided by the external auditors, if any;

(h) make recommendations to the Board on the appointment, re-appointment and removal of the external auditors, and reviewing their fees and terms of engagement;

(i) review any whistle-blowing; and

(j) report to the Board on all AC meetings and the AC’s decisions and recommendations made during these meetings.

The AC has explicit authority to investigate any matter within its terms of reference, and has full access to and cooperation by the Management. The AC has full discretion to invite any director or executive officer to attend its meetings, and access to reasonable resources to enable it to discharge its functions properly.

The AC meets with the external auditors at least once annually, without the presence of the Management.

The company has established a whistle-blowing policy for the Group as reviewed and recommended by the AC.

The number of AC meetings held and attendance at the meetings during FY2008 are set out below:

Name of Director Appointment Number of meetings held Attendance

Hoon Tai Meng Chairman 3 3

Meyrick Wong Wing Keung Member 3 2




annual report 2008

20

12. INTERNAL CONTROLS

The Board has put in place a system of internal controls for the company and group to reasonably safeguard the shareholders’ investments and the company’s assets.

The AC is responsible for the adequacy and effectiveness of the company’s internal controls, including financial, operational and compliance controls, and risk management policies and systems established by Management (collectively “internal controls”).

The AC has reviewed the internal controls. The Board is satisfied with the adequacy of the internal control system put in place for the company and group.

13. INTERNAL AUDIT

Since an Internal Audit team has not been formally established, the Audit Committee with the assistance from Management undertook this function during FY2008. In order to comply with the requirements of the Code, the Board has taken steps to outsource the internal audit function to a professional firm of public accountants.

14. COMMUNICATION WITH SHAREHOLDERS

The company endeavours to provide material information to its shareholders in a timely manner. It provides the shareholders with a detailed and balanced explanation and analysis of the company’s and group’s performance, position and prospects via its quarterly and full-year results announcements on SGXNET. The Board is also mindful of the obligation to provide shareholders with updates of all major developments that affect the group in accordance with the Singapore Exchange Listing Rules and the Singapore Companies Act, Cap.50. All material and price-sensitive information is publicly released via the SGXNET promptly.

At AGMs, all shareholders are given the opportunity to air their views and raise questions regarding the company and the group to the Board. The chairpersons of the various Board committees and the external auditors will be present at the AGM to address, or to assist the directors in addressing, any relevant queries by the shareholders. To promote greater shareholders’ participation, the Company’s Articles of Association provide that a member entitled to attend and vote may appoint a proxy to attend and vote on his or her behalf. The proxy so appointed need not be a member of the company.

15. DEALING WITH SECURITIES

The company has adopted Singapore Exchange’s Best Practices Guide in relation to dealings in the company’s securities. All employees, including directors, are reminded of appropriate times that they are prohibited from trading in the company’s securities during the one month period before the announcement of the company’s half-year and full-year results (2 weeks for quarterly results announcement) and ending on the date of the announcement of the results, or if they are in possession of unpublished material price-sensitive information of the group.



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16. INTERESTED PERSON TRANSACTIONS AND MATERIAL CONTRACTS

The company has adopted an internal policy in respect of any transactions with interested person and has set out the procedures for review and approval of the company’s interested person transactions. All interested person transactions are presented and reviewed by the AC.

The company has also set up procedures governing entry into material contracts to ensure that they are carried out at arm’s length basis, on normal commercial terms, and will not prejudice the interests of the company and its shareholders.

Except as disclosed in Notes 6 and 7 to the financial statements, there were no interested person transactions which are required to be disclosed under the SGX-ST Listing Manual during FY2008.

17. STATEMENT OF COMPLIANCE

In the opinion of the Board, the company has complied substantially with the Code.



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The directors present their report together with the audited consolidated financial statements of the group and balance sheet and statement of changes in equity of the company for the financial year ended June 30, 2008.

1 DIRECTORS

The directors of the company in office at the date of this report are:

Tung Koon Ming Dennis Tung Koon Kwok Tung Wai Kit Meyrick Wong Wing Keung Hoon Tai Meng Tan Song Koon

2 ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES

Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose object is to enable the directors of the company to acquire benefits by means of the acquisition of shares or debentures in the company or any other body corporate.

3 DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The directors of the company holding office at the end of the financial year had no interests in the share capital and debentures of the company and related corporations as recorded in the register of directors’ shareholdings kept by the company under Section 164 of the Singapore Companies Act except as follows:

Shareholdings registeredin the name of directors

Shareholdings in whichdirectors are deemedto have an interest

Names of directors and company in which interests are held

At beginning of year

At endof year

At July21, 2008

At beginning of year

At endof year

At July21, 2008

Time Watch Investments Limited– the company(Ordinary shares)

Tung Koon Ming (1) – – – 215,494,320 217,960,320 217,960,320

Winning International Limited– the holding company(Ordinary shares)

Tung Koon Ming 9,545 9,545 9,545 – – –

Dennis Tung Koon Kwok 455 455 455 – – –

(1) By virtue of Section 7 of the Singapore Companies Act, the director is deemed to have an interest in the company and all the related corporations of the company.

Report of the Directors


annual report 2008

23Report of the Directors (cont’d)

4 DIRECTORS’ RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS

Since the beginning of the financial year, no director has received or become entitled to receive a benefit which is required to be disclosed under Section 201(8) of the Singapore Companies Act, by reason of a contract made by the company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except for salaries, bonuses and other benefits as disclosed in the financial statements. Certain directors received remuneration from related corporations in their capacity as directors and/or executives of those related corporations.

5 SHARE OPTIONS

a) Options to take up unissued shares

(i) Call Option

In 2006, in connection with the loan facilities granted by a bank to a subsidiary of the company, the company had also entered into a call option agreement with the bank pursuant to which the company had granted the bank a right (the “Call Option”) from time to time for a period of three years beginning from January 2, 2006 (“Availability Date”) to subscribe for such number of shares of the company as determined by dividing the S$ equivalent of US$3,000,000 with the exercise price of S$0.015 each, subject to the maximum of 600,000,000 new shares. On January 24, 2007, the company restructured the share capital such that every 50 ordinary shares in the capital of the company were consolidated into one share. As such, the exercise price has changed to S$0.75 per share, subject to the maximum of 12,000,000 new shares (“Availability Option Shares”).

According to the call option agreement, during the period commencing on, and including, the Availability Date and expiring on the market date (a day on which the Singapore Exchange Securities Trading Limited is open for trading in securities) falling immediately before the first anniversary of the Availability Date (“First Option Period”), the maximum number of share which can be allotted and issued upon the exercise of the Call Option shall be 50% of the total Available Option Shares.

The unexercised Call Option during the First Option Period may be exercised any time after the first anniversary of the date of the Availability Date.

As at June 30, 2008 and 2007, the Call Option remained unexercised.

(ii) Convertible Loan Notes

On April 4, 2007, the company issued S$5 million convertible loan notes to a financial institution. The notes are convertible into ordinary shares of the company at any time after six months from the issue date to their settlement date (April 3, 2010) at the option of the holder. On issue, the loan notes can be converted to 18,181,818 shares at the exercise price of S$0.275 per share.

As at June 30, 2008 and 2007, the loan notes remained unconverted.

Except for the above mentioned (i) and (ii), during the financial year, no other options to take up unissued shares of the company or any corporation in the group were granted.

b) Options exercised

During the financial year, there were no shares of the company or any corporation in the group issued by virtue of the exercise of an option to take up unissued shares.


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5 SHARE OPTIONS (Cont’d)

c) Unissued shares under options

At the end of the financial year, there were no unissued shares of the company or any corporation in the group under options except as described in paragraph 5(a) above.

6 AUDIT COMMITTEE

The Audit Committee (“AC”) comprises three directors, all of whom are independent directors. As of the date of this report, they are Hoon Tai Meng as the Chairman of the AC, Tan Song Koon and Meyrick Wong Wing Keung as members. The AC has met three times since the last Annual General Meeting.

The main functions of the AC are to:

a) review the annual audit plan and reports of the company’s external auditors;

b) review the cooperation given by the company’s officers to the external auditors;

c) review and evaluate the adequacy of the system of internal controls, including accounting controls;

d) review the financial statements of the company and the consolidated financial statements of the group before their submission to the Board for approval for release of the results on SGXNET;

e) review the quarterly, half year and full year results announcements as well as related press releases on the results and financial position of the company and the group;

f) review all interested person transactions to ensure that they have been conducted at arm’s length basis, if any;

g) review the independence of the external auditors and to make recommendations to the Board regarding the nomination of the external auditors for re–appointment; and

h) consider other matters as requested by the Board.

The AC is authorised to investigate any matter in its terms of reference, and has full access to and cooperation of the management. The AC has full discretion to invite any director or executive officer to attend its meetings, as well as reasonable resources to enable it to discharge its functions properly.

Annually, the AC meets with the external auditors separately, without the presence of the management to review the adequacy of audit arrangements of the auditors, the scope and quality of their audits and the independence and objectivity of the auditors.

The AC meets with the external auditors at least twice a year.

The AC has recommended to the directors the nomination of Deloitte and Touche LLP for re–appointment as external auditors of the group at the forthcoming Annual General Meeting of the company.

Report of the Directors (cont’d)


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7 AUDITORS

The auditors, Deloitte & Touche LLP, have expressed their willingness to accept re–appointment.

ON BEHALF OF THE DIRECTORS

Tung Koon Ming

Dennis Tung Koon Kwok

SingaporeSeptember 29, 2008

Report of the Directors (cont’d)


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We have audited the accompanying financial statements of Time Watch Investments Limited (the company) and its subsidiaries (the group) which comprise the balance sheets of the group and the company as at June 30, 2008, the profit and loss statement, statement of changes in equity and cash flow statement of the group and the statement of changes in equity of the company for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 27 to 89.

MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes: devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss account and balance sheet and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

AUDITORS’ RESPONSIBILITY

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OPINION

In our opinion,

a) the consolidated financial statements of the group and the balance sheet and statement of changes in equity of the company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the group and of the company as at June 30, 2008 and of the results, changes in equity and cash flows of the group and changes in equity of the company for the year ended on that date; and

b) the accounting and other records required by the Act to be kept by the company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Deloitte & Touche LLPPublic Accountants andCertified Public AccountantsSingapore


Independent Auditors’ Reportto the Members of Time Watch Investments Limited


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Group CompanyNote 2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000ASSETS

Current assets

Cash and bank balances 8 64,760 51,821 1,993 349

Pledged bank deposits 9 6,246 464 – –

Trade receivables 10 164,665 112,704 – –

Other receivables, deposits

and prepayments 11 31,035 26,333 43,568 42,707

Inventories 12 231,174 163,887 – –

Total current assets 497,880 355,209 45,561 43,056

Non–current assetsGoodwill 13 15,182 14,766 – –

Intangible assets 14 580 768 – –

Investments in subsidiaries 15 – – 381,668 376,953

Deposits paid for investment 16 3,000 – – –

Pledged fixed deposits 9 – 6,376 – –

Other receivables 11 6,981 – – –

Property, plant and equipment 17 36,810 21,208 164 150

Investment properties 18 166,666 136,000 – –

Total non–current assets 229,219 179,118 381,832 377,103

Total assets 727,099 534,327 427,393 420,159

LIABILITIES AND EQUITY

Current liabilities

Borrowings 19 179,185 78,660 – –

Trade payables 20 108,784 86,944 – –

Other payables and accruals 21 54,226 47,330 5,351 6,298

Current portion of finance leases 22 114 81 – –

Income tax payable 6,440 6,754 – –

Total current liabilities 348,749 219,769 5,351 6,298

Balance SheetsJune 30, 2008


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Group CompanyNote 2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

Non–current liabilitiesBorrowings 19 8,941 56,475 – –

Convertible loan notes 23 28,596 25,262 28,596 25,262

Finance leases 22 275 – – –

Provision for long service

payments 1,031 251 – –

Deferred tax liabilities 24 14,004 10,362 – –

Total non–current liabilities 52,847 92,350 28,596 25,262

Capital and reserves

Share capital 25 570,051 570,051 570,051 570,051

Capital reserve 2 (432,677) (432,677) – –

Other reserve 26 116 116 116 116

Shareholder’s contribution 26 544 544 – –

Property revaluation reserve 26 5,430 4,301 – –

Currency translation reserve 44,828 5,382 – –

Accumulated profits (losses) 104,212 54,844 (176,721) (181,568)

Equity attributable to equity holders

of the company 292,504 202,561 393,446 388,599

Minority interests 32,999 19,647 – –

Total equity 325,503 222,208 393,446 388,599

Total liabilities and equity 727,099 534,327 427,393 420,159

See accompanying notes to financial statements.

Balance Sheets (cont’d)June 30, 2008


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GroupNote 2008 2007

HK$’000 HK$’000

Revenue 27 944,380 855,859Cost of sales (656,019) (674,667)Gross profit 288,361 181,192

Other operating income 29 4,285 4,194

Change in fair value of investment properties 18 5,700 37,308

Distribution costs (123,879) (62,114)

Administrative expenses (83,052) (52,086)

Finance costs 30 (8,427) (6,878)

Profit before tax 82,988 101,616

Income tax expense 31 (12,826) (18,555)

Profit for the year 32 70,162 83,061

Attributable to:

Equity holders of the company 59,260 73,357

Minority interests 10,902 9,704

70,162 83,061

Earning per share (cents) 34

Basic 15.84 20.92

Diluted 15.38 20.77


Consolidated Profit and Loss StatementYear ended June 30, 2008


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AttributableProperties Currency to equity

Share Capital Other Shareholder’s revaluation translation Accumulated holders of MinorityNote capital reserve reserve contribution reserve reserve profits (losses) the company interest Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000Group

Balance as at July 1, 2006 513,836 (432,677) – 544 3,255 1,874 (18,579) 68,253 5,009 73,262

Gain on revaluation of leasehold land

and building 17 – – – – 1,112 – – 1,112 – 1,112

Realisation of properties

revaluation reserve – – – – (66) – 66 – – –

Exchange differences arising on

translation of foreign operations – – – – – 3,508 – 3,508 – 3,508

Net income recognised

directly in equity – – – – 1,046 3,508 66 4,620 – 4,620

Profit for the year – – – – – – 73,357 73,357 9,704 83,061

Total recognised income for the year – – – – 1,046 3,508 73,423 77,977 9,704 87,681

Issue of shares 25 57,245 – – – – – – 57,245 – 57,245

Shares issue expenses 25 (1,030) – – – – – – (1,030) – (1,030)

Recognition of equity component of

convertible loan notes 23 – – 116 – – – – 116 – 116

Acquisition of subsidiaries 35 – – – – – – – – 9,920 9,920

Acquisition of the remaining

interest in a subsidiary – – – – – – – – (4,986) (4,986)

Balance as at June 30, 2007 570,051 (432,677) 116 544 4,301 5,382 54,844 202,561 19,647 222,208

Statements of Changes in EquityYear ended June 30, 2008


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HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000Group

Balance as at July 1, 2006 513,836 (432,677) – 544 3,255 1,874 (18,579) 68,253 5,009 73,262


and building 17 – – – – 1,112 – – 1,112 – 1,112

Realisation of properties







Total recognised income for the year – – – – 1,046 3,508 73,423 77,977 9,704 87,681

Issue of shares 25 57,245 – – – – – – 57,245 – 57,245

Shares issue expenses 25 (1,030) – – – – – – (1,030) – (1,030)

Recognition of equity component of

convertible loan notes 23 – – 116 – – – – 116 – 116

Acquisition of subsidiaries 35 – – – – – – – – 9,920 9,920

Acquisition of the remaining

interest in a subsidiary – – – – – – – – (4,986) (4,986)


Statements of Changes in Equity (cont’d)Year ended June 30, 2008


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HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000Group – continued

Balance as at July 1, 2007 570,051 (432,677) 116 544 4,301 5,382 54,844 202,561 19,647 222,208


and buildings 17 – – – – 1,237 – – 1,237 – 1,237

Realisation of property







Total recognised income

for the year – – – – 1,129 39,446 59,368 99,943 10,902 110,845

Contribution from minority

shareholders to a non–wholly

owned subsidiary (Note) – – – – – – – – 2,450 2,450

Dividends 33 – – – – – – (10,000) (10,000) – (10,000)


Note: The amount represents the share capital contributed by the minority shareholders of a newly incorporated subsidiary, Fortune Silver Holdings Limited.



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HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000Group – continued

Balance as at July 1, 2007 570,051 (432,677) 116 544 4,301 5,382 54,844 202,561 19,647 222,208


and buildings 17 – – – – 1,237 – – 1,237 – 1,237

Realisation of property







Total recognised income

for the year – – – – 1,129 39,446 59,368 99,943 10,902 110,845

Contribution from minority

shareholders to a non–wholly

owned subsidiary (Note) – – – – – – – – 2,450 2,450

Dividends 33 – – – – – – (10,000) (10,000) – (10,000)


Note: The amount represents the share capital contributed by the minority shareholders of a newly incorporated subsidiary, Fortune Silver Holdings Limited.



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Share Other AccumulatedNote capital reserve losses Total

HK$’000 HK$’000 HK$’000 HK$’000Company

Balance as at July 1, 2006 513,836 – (196,741) 317,095

Issue of shares 25 57,245 – – 57,245

Shares issue expenses 25 (1,030) – – (1,030)

Profit for the year – – 15,173 15,173

Recognition of equity component

of convertible loan notes 23 – 116 – 116

Balance as at June 30, 2007 570,051 116 (181,568) 388,599

Profit for the year – – 14,847 14,847

Dividends 33 – – (10,000) (10,000)

Balance as at June 30, 2008 570,051 116 (176,721) 393,446




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Note 2008 2007HK$’000 HK$’000

Operating activities

Profit before income tax 82,988 101,616

Adjustments for:

Depreciation of property, plant and equipment 6,804 4,896

Amortisation expense on convertible loan notes 132 122

Amortisation of intangible assets 188 172

Allowance for bad and doubtful debts (trade) 221 656

Allowance for bad and doubtful debts (non–trade) – 436

Allowance for obsolete inventories 4,302 1,584

Loss on disposal of plant and equipment 1,082 1,210

Change in fair value of investment properties (5,700) (37,308)

Unrealised exchange difference arising from convertible loan notes 3,202 –

Increase in provision for long services payments 780 –

Interest income (638) (1,193)

Interest expense 8,427 6,878

Operating cash flows before movements in working capital 101,788 79,069

Trade receivables (43,981) 25,833

Other receivables, deposits and prepayments (11,371) (13,555)

Inventories (63,400) (31,576)

Trade payables 21,840 (21,210)

Other payables and accruals 7,237 (3,975)

Cash generated from operations 12,113 34,586

Interest received 638 1,193

Income tax paid (11,906) (12,039)

Net cash from operating activities 845 23,740

Investing activities

Purchase of investment properties (Note a) (5,926) (88,015)

Purchase of plant and equipment (Note b) (19,939) (9,759)

Proceeds on disposal of plant and equipment 5 283

Increase in pledged bank deposits 594 12,551

Deposits paid for investment in a subsidiary (3,000) –

Acquisition of subsidiaries 35 – (10,792)

Acquisition of remaining interest in a subsidiary – (9,156)

Net cash used in investing activities (28,266) (104,888)

Consolidated Cash Flow StatementYear ended June 30, 2008


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Note 2008 2007HK$’000 HK$’000

Financing activities

Interest paid (8,427) (6,878)

Dividends paid (10,000) –

Repayment of bank borrowings (367,229) (337,729)

Proceeds from bank borrowings 420,228 372,640

Capital contribution from minority shareholders of a subsidiary (Note c) 2,450 –

Proceeds on issue of convertible loan notes – 25,255

Proceeds on issue of shares – 56,215

Repayment to minority shareholder of a subsidiary – (2,745)

Repayment of obligations under finance lease (148) (97)

Net cash from financing activities 36,874 106,661

Net increase in cash and bank balances 9,453 25,513

Cash and cash equivalents at beginning of the year 51,814 22,677

Effect of exchange rate changes on the balance of cash held in foreign currencies 3,493 3,624Cash and cash equivalents at end of the year (Note d) 64,760 51,814

Notes:

a) As at June 30, 2008, an amount of RMB10,677,000 (equivalent to HK$12,172,000) [2007 : RMB10,677,000 (equivalent to HK$10,677,000)] pertaining to the purchase of investment properties remained unpaid (Note 21).

b) During the financial year, the group acquired plant and equipment with an aggregate cost of HK$20,393,000 (2007 : HK$9,759,000) whereby plant and equipment with an aggregate cost of HK$454,000 (2007 : HK$Nil) were financed via finance leases. The cash outflow of acquisition of plant and equipment amounted to HK$19,939,000 (2007 : HK$9,759,000).

c) The amount represents the share capital contributed by the minority shareholders of a newly incorporated subsidiary, Fortune Silver Holdings Limited.

d) Cash and cash equivalents consist of:

2008 2007HK$’000 HK$’000

Cash at bank (Note 8) 63,160 50,801

Cash on hand (Note 8) 1,600 1,020

Bank overdrafts (Note 19) – (7)

64,760 51,814


Consolidated Cash Flow Statement (cont’d)Year ended June 30, 2008


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37

1 GENERAL

The company (Registration No. 199502355R) is incorporated in Singapore with its principal place of business and registered office at 17 Carpenter Street, #02–01, Singapore 059906. The company was previously listed on Singapore Stock Exchange (“SGX”) Dealing and Automated Quotation System (“SESDAQ”). During the current year, the company has obtained a in–principle approval from SGX to be listed on the Main Board of SGX. The financial statements are expressed in Hong Kong dollars.

The principal activity of the company is that of an investment holding company. The principal activities of the subsidiaries are disclosed in Note 15 to the financial statements.

The consolidated financial statements of the group and balance sheet and statement of changes in equity of the company for the year ended June 30, 2008 were authorised for issue by the Board of Directors on September 29, 2008.

2 REVERSE ACQUISITION IN PRIOR YEAR

On November 8, 2005, the company acquired the entire share capital of Winning Metal Products Manufacturing Company Limited (“WMP”), a company incorporated in Hong Kong, for a consideration of S$68 million (equivalent to HK$318 million) satisfied by the issuance of 13.6 billion ordinary shares in the capital of the company at an issue price of S$0.005 per share to the former shareholder of WMP.

Due to the relative values of the companies, the former shareholder of WMP became the majority shareholder, controlling approximately 80% of the enlarged share capital of the company at that time. Further, the company’s operations and executive management were substantially those of WMP. Accordingly, the substance of the business combination is that WMP acquired the company in a reverse acquisition under FRS 103 “Business Combinations”. WMP became the parent of the enlarged group for accounting purposes.

The amount recognised as issued equity (share capital and capital reserve) in the consolidated financial statements immediately after the business combination was determined by adding to the issued equity of WMP, the legal subsidiary immediately before the business combination, and the cost of the combination amounting to HK$79,065,000. However, the equity structure appearing in the consolidated financial statements (i.e. the number and type of equity instruments issued) reflects the equity structure of the company, the legal parent, including the equity instruments issued by the company to effect the combination. Accordingly, a capital reserve of HK$432,677,000 (debit balance) was created in the shareholders’ equity in the accounting for the reverse acquisition.

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING – The financial statements have been prepared in accordance with the historical cost basis, except as disclosed in the accounting policies below, and are drawn up in accordance with the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards (“FRS”).

ADOPTION OF NEW AND REVISED STANDARDS – In the current financial year, the group and the company have adopted all the new and revised FRSs and Interpretations of FRS (“INT FRS”) that are relevant to its operations and effective for annual periods beginning on or after July 1, 2007. The adoption of these new/revised FRSs and INT FRSs does not result in change to the group’s and company’s accounting policies and has no material effect on the amounts reported for the current or prior year except as disclosed below and in the notes to the financial statements.

Notes to Financial StatementsJune 30, 2008


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38

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

FRS 107 – Financial Instruments: Disclosures and amendments to FRS 1 Presentation of Financial Statements relating to capital disclosures

The group and the company have adopted FRS 107 with effect from annual periods beginning on or after July 1, 2007. The new Standard has resulted in an expansion of the disclosures in these financial statements regarding the group’s and the company’s financial instruments. The group and the company have also presented information regarding its objectives, policies and processes for managing capital (see Note 5) as required by the amendments to FRS 1 which are effective from annual periods beginning on or after January 1, 2007.

At the date of authorisation of these financial statements, the following FRSs, INT FRSs and amendments to FRS that are relevant to the group and the company were issued but not effective:

FRS 23 – Borrowing Costs (Revised) FRS 108 – Operating Segments FRS 1 – Presentation of Financial Statements (Revised)

Consequential amendments were also made to various standards as a result of these new/revised standards.

Management anticipates that the adoption of these FRSs, INT FRSs and the amendments to FRSs in future periods will not have a material impact on the financial statements of the company and of the group in the period of their initial adoption.

BASIS OF CONSOLIDATION – The consolidated financial statements incorporate the financial statements of WMP, the parent of the enlarged group for accounting purpose and entities controlled by WMP (its subsidiaries for accounting purposes). Control is achieved where WMP has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and loss statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the group.

All intra–group transactions, balances, income and expenses are eliminated on consolidation.

Minority interests in the net assets of consolidated subsidiaries are identified separately from the group’s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination (see below) and the minority’s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the group except to the extent that the minority has a binding obligation and is able to make an additional investment to cover its share of those losses.

In the company’s financial statements, investments in its subsidiaries are carried at cost less any impairment in net recoverable value that has been recognised in the profit and loss statement.

Notes to Financial Statements (cont’d)June 30, 2008


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BUSINESS COMBINATIONS – The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the group in exchange for the control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 103 are recognised at their fair values at the acquisition date, except for non–current assets (or disposal groups) that are classified as held for sale in accordance with FRS 105 Non–Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the consolidated profit and loss statement.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.

FINANCIAL INSTRUMENTS – Financial assets and financial liabilities are recognised on the group’s and the company’s balance sheet when the group and the company become a party to the contractual provisions of the instrument.

Financial assets

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period. Income and expense are recognised on an effective interest rate basis for debt instruments.

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and cash at bank net of bank overdrafts that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Loans and receivables

Trade and other receivables that have fixed or determinable payments are initially measured at fair value and are subsequently measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate method, except for short–term receivables when the recognition of interest would be immaterial.



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FINANCIAL INSTRUMENTS (cont’d)

Impairment of financial assets

Financial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of receivables where the carrying amount is reduced through the use of an allowance account. When a receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to the allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent the carrying amount of the financial asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Derecognition of financial assets

The group and the company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or they transfer the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the group and the company neither transfer nor retain substantially all the risks and rewards of ownership and continue to control the transferred asset, the group and the company recognise its retained interest in the asset and an associated liability for amounts they may have to pay. If the group and the company retain substantially all the risks and rewards of ownership of a transferred financial asset, the group and the company continue to recognise the financial asset and also recognise a collateralised borrowing for the proceeds received.

Financial liabilities and equity instruments

Classification as debt or equity

Financial liabilities and equity instruments issued by the group and the company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.



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Other financial liabilities

Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, using the effective interest method, with interest expense recognised on an effective yield basis.

Interest–bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the group’s accounting policy for borrowing costs (see below).

Financial guarantee contract liabilities are measured initially at their fair values and subsequently at the higher of the amount of obligation under the contract recognised as a provision in accordance with FRS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation in accordance with FRS 18 Revenue.

Convertible loan notes

Convertible loan notes are regarded as compound instruments, consisting of a liability component and an equity component. The component parts of compound instruments are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangement. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for a similar non–convertible instrument. This amount is recorded as a liability on an amortised cost basis until extinguished upon conversion or at the instrument’s maturity date. The equity component is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently remeasured.

Derecognition of financial liabilities

The group and the company derecognise financial liabilities when, and only when, the group’s and the company’s obligations are discharged, cancelled or they expire.

LEASES – Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The group as lessor

Rental income from operating leases is recognised on a straight–line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight–line basis over the lease term.



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LEASES (cont’d)

The group as lessee

Assets held under finance leases are recognised as assets of the group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalised in accordance with the group’s general policy on borrowing costs (see below). Contingent rentals are recognised as expenses in the periods in which they are incurred.

Rentals payable under operating leases are charged to profit or loss on a straight–line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight–line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Leasehold land and buildings

The land and buildings elements of a lease of land and buildings are considered separately for the purpose of lease classification, leasehold land which title is not expected to pass to the lessee by the end of the lease term is classified as an operating lease unless the lease payments cannot be allocated reliably between the land and buildings elements, in which case, the entire lease is classified as a finance lease.

INVENTORIES – Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first–in, first–out method. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

PROPERTY, PLANT AND EQUIPMENT – Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date.

Any revaluation increase arising on the revaluation of land and buildings is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised in profit or loss, in which case the increase is credited to profit or loss to the extent of the decrease previously charged to the profit and loss statement. A decrease in carrying amount arising on the revaluation of such land and buildings is charged to profit or loss to the extent that it exceeds the balance, if any, held in the property revaluation reserve relating to a previous revaluation of that asset.



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Depreciation on revalued buildings is charged to profit or loss. On subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the property revaluation reserve is transferred directly to retained earnings.

Plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.

Depreciation is charged so as to write off the cost or valuation of assets over their estimated useful lives, using the straight–line method, on the following bases:

Number of years

Leasehold land and buildings Over the estimated useful lives of 50 years or terms of the lease, whichever is shorter Leasehold improvements 5 to 10 years or terms of the lease, whichever is shorter Plant and machinery 5 to 10 Furniture, fixtures and equipment 5 to 10 Motor vehicles 5 to 10 Light box 3

The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis.

Construction in progress includes property, plant and equipment in the course of construction for production or for its own use purposes as well as self–constructed investment property. Property that is being constructed or developed for future use as an investment property is classified as property, plant and equipment and carried at cost less recognised impairment loss until construction or development is complete, at which time it is reclassified to and subsequently accounted for as investment property. Any difference between the fair value of the property at that date and its previous carrying amount is recognised in profit or loss.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, if there is no certainty that the lessee will obtain ownership by the end of the lease term, the asset shall be fully depreciated over the shorter of the lease term and its useful life.

The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amounts of the asset and is recognised in the profit and loss statement.

INVESTMENT PROPERTIES – Investment properties held to earn rentals and for capital appreciation are stated at periodic valuation on an open market value for existing use basis.

On initial recognition, investment properties are measured at cost, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured using the fair value model. Gains or losses arising from changes in the fair value of investment property are included in the profit or loss for the period in which they arise.

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use or no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the consolidated profit and loss statement in the year in which the item is derecognised.



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GOODWILL – Goodwill arising on the acquisition of a subsidiary represents the excess of the cost of acquisition over the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment losses.

For the purpose of impairment testing, goodwill is allocated to each of the group’s cash–generating units expected to benefit from the synergies of the combination. Cash–generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash–generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro–rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period.

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

INTANGIBLE ASSETS – Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at the acquisition date.

Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and accumulated impairment losses.

Intangible assets with definite useful lives are amortised on a straight–line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate being accounted for on a prospective basis.

IMPAIRMENT OF TANGIBLE AND INTANGIBLE ASSETS EXCLUDING GOODWILL – At each balance sheet date, the group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash–generating unit to which the asset belongs.

Intangible assets with indefinite useful lives are tested for impairment annually, and whenever there is an indication that the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre–tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

If the recoverable amount of an asset (or cash–generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash–generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit and loss statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.



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Where an impairment loss subsequently reverses, the carrying amount of the asset (cash–generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash–generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the profit and loss statement, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

PROVISIONS – Provisions are recognised when the group and the company have a present obligation (legal or constructive) as a result of a past event, it is probable that the group and the company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

REVENUE RECOGNITION – Revenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for estimated customer returns, rebates and other similar allowances.

Sale of goods

Revenue from the sale of goods is recognised when all the following conditions are satisfied:

• thegrouphastransferredtothebuyerthesignificantrisksandrewardsofownershipofthegoods;

• thegroupretainsneithercontinuingmanagerialinvolvementtothedegreeusuallyassociatedwithownershipnoreffective control over the goods sold;

• theamountofrevenuecanbemeasuredreliably;

• itisprobablethattheeconomicbenefitsassociatedwiththetransactionwillflowtotheentity;and

• thecostsincurredortobeincurredinrespectofthetransactioncanbemeasuredreliably.

Rental income

Rental income under operating lease is recognised on a straight line basis over the respective lease term.



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REVENUE RECOGNITION (cont’d)

Dividend income

Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.

Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

BORROWING COSTS – All borrowing costs are recognised in the profit and loss statement in the period in which they are incurred.

RETIREMENT BENEFIT COSTS – Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments made to state–managed retirement benefit schemes, such as the Singapore Central Provident Fund and Hong Kong Mandatory Provident Fund Scheme, are dealt with as payments to defined contribution plans where the group’s obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.

The group’s PRC subsidiaries and a Switzerland subsidiary are required to make contributions to the state–managed retirement schemes operated by respective local governments based on certain percentage of the monthly salaries of their current employees to fund the benefits. The employees are entitled to retirement pension calculated with reference to their basic salaries on retirement and their length of service in accordance with the relevant government regulations. The only obligation of these subsidiaries with respect to the state–managed schemes is to make the specified contributions.

EMPLOYEE LEAVE ENTITLEMENT – Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

INCOME TAX – Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the profit and loss statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the company and subsidiaries operate at the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.



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Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantially enacted by the balance sheet date. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.

FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION – The individual financial statements of each group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the group and the financial statements of the company are presented in Hong Kong dollar, which is the functional currency of the company, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non–monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non–monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in profit or loss for the period. Exchange differences arising on the retranslation of non–monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non–monetary items in respect of which gains and losses are recognised directly in equity. For such non–monetary items, any exchange component of that gain or loss is also recognised directly in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the group’s foreign operations (including comparatives) are expressed in Hong Kong dollar using exchange rates prevailing on the balance sheet date. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the group’s translation reserve. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of.



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FOREIGN CURRENCY TRANSACTIONS AND TRANSLATION (cont’d)

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

4 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the group’s and the company’s accounting policies, which are described in Note 3, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the entity’s accounting policies

Management is of the opinion that there are no critical judgements involved that have a significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which are dealt with below).

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below:

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash–generating unit to which goodwill has been allocated. The value in use calculation requires the group to estimate the future cash flows expected to arise from the cash–generating unit (“CGU”) and a suitable discount rate in order to calculate the present value. Where the actual future cash flows are less than expected, an impairment loss may arise. As at June 30, 2008, the carrying amount of goodwill was HK$15,182,000 (2007: HK$14,766,000). Details of the recoverable amount calculation are disclosed in Note 13.

Allowances for inventories

The management of the group reviews the inventory aging analysis at each balance sheet date and identifies the slow–moving inventory items that are no longer suitable for use in production or sales. The management estimates the net realisable value for such inventories based primarily on the latest invoice prices and current market conditions. In addition, the group carries out an inventory review on a product–by–product basis at balance sheet date and makes the necessary allowance if the net realisable value is below the cost. The carrying amount of inventories is disclosed in Note 12.



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4 CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (cont’d)

Allowances for bad and doubtful debts

The allowance policy for bad and doubtful debts of the group is based on the evaluation of collectibility and aging analysis of accounts and on management’s judgment. A considerable amount of judgment is required in assessing the ultimate realisation of these receivables, including the current credit worthiness and the past collection history of each customer. If the financial conditions of customers of the group were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. The carrying amount of trade and other receivables are disclosed in Note 10 and 11 respectively.

Estimation of fair value of investment properties

Certain investment properties were revalued at the balance sheet date on market value existing use basis by an independent professional valuer. Such valuation was based on certain assumptions, which are subject to uncertainty and might materially differ from the actual results. In making the judgement, the group considers information from current prices in an active market for similar properties and uses assumptions that are mainly based on market conditions existing at each balance sheet date. Details of the valuation of investment properties are disclosed in Note 18.

Convertible loan notesAt inception, in deriving the fair value of liability component of convertible loan notes, management used the discount rate of 4.3837% per annum to discount the future cashflows of convertible loan notes, which was the rate approximately to the market interest rate for a similar loan without conversion feature at the date of grant. Details of convertible loan notes are disclosed in Note 23.

Financial guarantee contracts

The company provided the financial guarantees to the banks for certain financing facilities granted to its subsidiaries. Amendment to FRS 39 relating to financial guarantee contracts requires certain financial guarantee contracts to be recognised in accordance with FRS 39 and measured initially at fair value. Management used the rate of 1.5% of the financing facilities amount to calculate the fair value of financial guarantee contracts. The rate used is deemed reasonable by management.

Useful lives of property, plant and equipment

As described in Note 3, the group reviews the estimated useful lives and residual values of property, plant and equipment at the end of each annual reporting period. During the financial year, the directors determined that there was no change in useful lives from last year.



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5 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT

(a) Categories of financial instruments

The following table sets out the financial instruments as at the balance sheet date:

Group Company2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

Financial Assets

Loans and receivables (including

cash and cash equivalents) 267,926 193,160 45,542 43,010

Financial liabilities

Amortised cost 385,933 299,385 33,947 31,560

(b) Financial risk management policies and objectives

The group’s major financial instruments include trade receivables, other receivables, deposits, pledged bank deposits, bank balances and cash, trade and other payables, borrowings, obligations under finance leases and convertible loan notes. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. Management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

(i) Foreign exchange risk management

The group transacts business in various foreign currencies, including the United States dollar, Swiss franc, Singapore dollar, Chinese renminbi, Euro dollar and Japanese yen and therefore is exposed to foreign exchange risk.



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5 FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (cont’d)

(b) Financial risk management policies and objectives (cont’d)

(i) Foreign exchange risk management (cont’d)

At the reporting date, the carrying amounts of monetary assets and monetary liabilities denominated in currencies other than the respective group entities’ functional currencies are as follows:

Group CompanyAssets Liabilities Assets Liabilities

2008 2007 2008 2007 2008 2007 2008 2007HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

United States dollar 78,744 50,088 43,617 46,141 – – – –

Swiss franc 37 193 6,837 – – – – –

Singapore dollar 2,055 668 33,947 31,560 2,194 656 33,947 31,560

Chinese renminbi 1,895 6,545 839 2,727 – – – –

Euro dollar 304 – – – – – – –

Japanese yen – – 5,799 – – – – –

The company has a number of investments in foreign subsidiaries, whose net assets are exposed to currency translation risk. The group does not currently designate its foreign currency denominated debt as a hedging instrument for the purpose of hedging the translation of its foreign operations.

Foreign currency sensitivity

The following table details the sensitivity to a 5% increase and decrease in the relevant foreign currencies against the functional currency of each group entity. 5% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 5% change in foreign currency rates. The sensitivity analysis includes external loans as well as loans to foreign operations within the group where they gave rise to an impact on the group’s profit or loss. Since the exchange rates of Hong Kong dollar is pegged with United States dollar, there is no currency risk on the balances denominated in the United States dollar.

If the relevant foreign currency weakens by 5% against the functional currency of each group entity, profit will increase (decrease) by:

Euro dollarimpact

Swissfranc impact

Singaporedollar impact

Chineserenminbi impact

Japaneseyen impact

2008 2007 2008 2007 2008 2007 2008 2007 2008 2007HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Profit or loss

– group (15) – 340 (10) (i) 1,595 1,545 (ii) (53) (191) 290 –

– company – – – – 1,588 1,545 (ii) – – – –



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(i) Foreign exchange risk management (cont’d)

Foreign currency sensitivity (cont’d)

If the relevant foreign currency strengthens by 5% against the functional currency of each group entity, profit will increase (decrease) by:

Euro dollarimpact

Swissfranc impact

Singaporedollar impact

Chineserenminbi impact

Japaneseyen impact

2008 2007 2008 2007 2008 2007 2008 2007 2008 2007HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Profit or loss

– group 15 – (340) 10(i) (1,595) (1,545) (ii) 53 191 (290) –

– company – – – – (1,588) (1,545) (ii) – – – –

(i) This mainly pertains to the foreign currency denominated borrowings at the year end in the group.

(ii) This is mainly attributable to the exposure outstanding on receivables, payables and convertible loan notes at year end in the group.

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposure does not reflect the exposure during the year.

(ii) Interest rate risk management

Summary quantitative data of the group’s interest–bearing financial instruments can be found in section (iv) of this Note. The group has not used any interest rate swaps in order to mitigate its exposure associated with fluctuations relating to interest cash flows. However, management will consider hedging significant interest rate exposure should the need arise.

Interest rate sensitivity

The sensitivity analysis below have been determined based on the exposure to interest rates for non–derivative instruments at the balance sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates.

If interest rates had been 50 basis points higher or lower and all other variables were held constant, the group's and the company’s profit for the year ended 30 June 2008 would decrease/increase by HK$912,000 (2007 : HK$769,000) and HK$135,000 (2007 : HK$46,000) respectively. This is mainly attributable to the group's and the company’s exposure to interest rates on its variable rate borrowings.



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(iii) Credit risk management

The carrying amount of financial assets recorded in the financial statements, grossed up for all allowances for losses, represents the group’s maximum exposure to credit risk without taking account of the value of any collateral obtained.

In order to minimise the credit risk, the management of the group has delegated a team responsible for determination of credit limits, credit approvals and other monitoring procedures to ensure that follow–up action is taken to recover overdue debts. In addition, the group reviews the recoverable amount of each individual trade debt at each balance sheet date to ensure that adequate impairment losses are made for irrecoverable amounts. In this regard, management considers that the group’s credit risks are significantly reduced.

The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit–rating agencies.

Other than concentration of credit risk on liquid funds which are deposited with several banks with high credit rating, the group does not have any other significant concentration of credit risk. Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas.

The company does not have any significant concentration of credit risk except for the significant balance due from the subsidiaries as disclosed in Note 11.

(iv) Liquidity risk management

In the management of the liquidity risk, the group monitors and maintains a level of cash and cash equivalents deemed adequate by management to finance the group’s operations and mitigate the effects of fluctuations in cash flows. Management monitors the utilisation of bank borrowings and ensures compliance with loan covenants.

Liquidity and interest risk analysis

Non–derivative financial liabilities

The following tables detail the remaining contractual maturity for non–derivative financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the group and company can be required to pay. The table includes both interest and principal cash flows. The adjustment column represents the possible future cash flows attributable to the instrument included in the maturity analysis which is not included in the carrying amount of the financial liability on the balance sheet.



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(iv) Liquidity risk management (cont’d)

Weighted average effective

interest rate

On demand or within

1 yearWithin 2 to

5 yearsAfter

5 years Adjustment Total% HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Group

2008

Non–interest bearing – 168,822 – – – 168,822

Finance lease

liability (fixed rate) 3.25 129 310 – (50) 389

Variable interest

rate instruments 3.78 186,251 40,033 – (9,562) 216,722

355,202 40,343 – (9,612) 385,933

2007


Finance lease

liability (fixed rate) 3.25 92 – – (11) 81

Variable interest

rate instruments 5.28 84,213 88,142 – (11,958) 160,397

223,212 88,142 – (11,969) 299,385

Company

2008


Variable interest rate

instruments 3.48 – 30,740 – (2,144) 28,596

5,351 30,740 – (2,144) 33,947

2007


Variable interest rate

instruments 4.28 – 27,680 – (2,418) 25,262

6,298 27,680 – (2,418) 31,560



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(v) Fair value of financial assets and financial liabilities

The carrying amounts of cash and cash equivalents, trade and other current receivables and payables, borrowings, convertible loan notes and other liabilities approximate their respective fair values due to the relatively short–term maturity of these financial instruments. The fair values of other classes of financial assets and liabilities are disclosed in the respective notes to financial statements.

The fair values of financial assets and financial liabilities are determined as follows:

• thefairvalueoffinancialassetsandfinancialliabilitieswithstandardtermsandconditionsandtradedon active liquid markets are determined with reference to quoted market bid prices and ask prices respectively; and

• thefairvalueofotherfinancialassetsandfinancialliabilitiesaredeterminedinaccordancewithgenerallyaccepted pricing models based on discounted cash flow analysis using prices from observable current market transactions and dealer quotes for similar instruments.

Management considers that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the consolidated financial statements approximate their fair value.

(c) Capital risk management policies and objectives

The group manages its capital to ensure that entities in the group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance.

The capital structure of the group consists of debt, which includes the borrowings disclosed in Notes 19, 22 and 23, and equity attributable to equity holders of the parent, comprising issued capital, reserves and accumulated profits.

The group’s management reviews the capital structure on a continuous basis taking into account the cost of capital and the risk associated with the capital. The group will balance its overall capital structure through new share issues, payment of dividends and the raise of bank borrowings or the repayment of the existing bank borrowings.

The group’s overall strategy remains unchanged during the year.

6 HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS

Following the reverse acquisition on November 8, 2005, the company became a subsidiary of Winning International Limited, incorporated in British Virgin Islands, which is also the company’s ultimate holding company. Related companies in these financial statements refer to members of the holding company’s group of companies.

Some of the group’s transactions and arrangements are between members of the group and the effect of these on the basis determined between the parties is reflected in these financial statements. The intercompany balances are unsecured, interest–free and repayable on demand unless otherwise stated.

Transactions between the company and its subsidiaries, which are related companies of the company, have been eliminated on consolidation and are not disclosed in this note. There are no transactions between the group and other related companies.



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7 RELATED PARTY TRANSACTIONS

Related parties are entities with common direct or indirect shareholders and/or directors. Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions.

Some of the group’s transactions and arrangements are with related parties and the effect of these on the basis determined between the parties is reflected in these financial statements. The balances are unsecured, interest–free and repayable on demand unless otherwise stated.

(i) During the current financial year, the group paid consultancy fee and salary remuneration to a minority shareholder of a subsidiary of approximately HK$1,200,000 (2007 : HK$1,100,000) and HK$1,344,000 (2007 : HK$976,000) respectively.

(ii) During the current financial year, the group paid rental expense to a director amounting to HK216,000 (2007 : HK$198,000) in respect of the lease of office building.

(iii) During the current financial year, the group incurred legal fee to a legal firm amounting to HK$2,031,798 (2007 : HK$65,288), where a director is the partner of the legal firm, in respect of handling the claims on behalf of the company as disclosed in Note 36(a).

(iv) On July 31, 2006, Win Ford (BVI) Investments Limited, a wholly owned subsidiary of the company, entered into an agreement with a minority shareholder of Balco Electronic (Zhuhai) Company Limited (“Balco”) in relation to the acquisition of the remaining 40% equity interests of Balco at a consideration of HK$9,155,813, thereafter, Balco becomes a wholly–owned subsidiary of the group.

Compensation of directors and key management personnel

The remuneration of directors during the year was as follows:

Group2008 2007

HK$’000 HK$’000

Short–term benefits 7,140 5,706

Post–employment benefits 24 50

7,164 5,756

The remuneration of directors is determined by the Remuneration Committee having regard to the performance of individuals and market trends.

The management is of the opinion that there are no other key members of management except for the directors of the company.



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8 CASH AND BANK BALANCES

Group Company2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

Cash at bank 63,160 50,801 1,991 346

Cash on hand 1,600 1,020 2 3

64,760 51,821 1,993 349

At June 30, 2008, the group’s cash and bank balances of HK$40,065,265 (2007 : HK$22,546,468) was denominated in Chinese renminbi, which is not freely convertible into other currencies.

The group’s and company’s cash and bank balances that are not denominated in the functional currencies of the respective entities are as follows:

Group Company2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

United States dollar 12,752 9,563 – –

Swiss franc 37 193 – –

Chinese renminbi 63 – – –

Euro dollar 304 – – –

Hong Kong dollar 25 – – –

Singapore dollar 1,987 349 1,987 349

9 PLEDGED BANK DEPOSITS

Group2008 2007

HK$’000 HK$’000

Current portion 6,246 464

Non–current portion – 6,376

6,246 6,840

The amounts represent deposits pledged to banks to secure banking facilities granted to the group.

Bank deposits bear interest at rates ranging from 2.45% to 5.21% (2007 : 1.65% to 5.45%) per annum and for a tenure of approximately 61 days (2007 : 61 days).

As at June 30, 2007, pledged bank deposit amounting to HK$464,000 was pledged to a bank for guarantees provided by the bank to a subsidiary. The pledged bank deposit was released during the year.

As at June 30, 2008, pledged bank deposits amounting to HK$6,246,000 (2007: HK$6,376,000) have been pledged to banks to secure banking facilities granted to the group, of which, HK$Nil (2007: HK$6,376,000) have been pledged for bank borrowings repayable after one year. Accordingly, the amount was classified as non–current asset in 2007. The pledged bank deposits will be released upon the settlement of the relevant bank borrowings.



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9 PLEDGED BANK DEPOSITS (cont’d)

The group’s pledged bank deposits that are not denominated in the functional currencies of the respective entities are as follows:

Group2008 2007

HK$’000 HK$’000

United States dollar 6,246 6,376

10 TRADE RECEIVABLES

Group2008 2007

HK$’000 HK$’000

Outside parties 167,364 115,507

Less: Allowance for doubtful trade receivables (2,699) (2,803)

164,665 112,704

The average credit period on the sales of goods is 30 to 60 days (2007 : 30 to 60 days). No interest is charged on the amounts overdue. Trade receivables are provided for based on estimated irrecoverable amounts from the sale of goods, determined by reference to past default experience.

Before accepting any new customer, the group assess the potential customer’s credit quality and defines credit limits by customer. Limits are reviewed on an ongoing basis.

Included in the group’s trade receivable balance are debtors with a carrying amount of $8,138,000 (2007 : $14,497,000) which are past due at the reporting date for which the group has not provided as there has been subsequent settlement or no historical default of payments by the respective customers and the amounts are still considered recoverable. The group does not hold any collateral over these balances. The average age of these receivables are 85 days (2007 : 95 days).

Aging of receivables that are past due but not impaired

Group2008 2007

HK$’000 HK$’000

60 to 90 days 3,992 8,160

Over 90 days 4,146 6,337

8,138 14,497



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10 TRADE RECEIVABLES (cont’d)

Movement in the allowance for doubtful debts

Group2008 2007

HK$’000 HK$’000

Balance at beginning of the year 2,803 2,343

Amounts written off during the year (479) (213)

Increase in allowance recognised in profit or loss 221 656

Exchange differences 154 17

Balance at end of the year 2,699 2,803

In determining the recoverability of a trade receivable the group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the directors believe that there is no further credit provision required in excess of the allowance for doubtful debts.

The group’s trade receivables that are not denominated in the functional currencies of the respective entities are as follows:

Group2008 2007

HK$’000 HK$’000


Chinese renminbi 543 6,545

Singapore dollar – 78

11 OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Group Company2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

Other receivables (1) 16,112 17,936 11 214

Amount owing by subsidiaries (2) – – 45,069 48,057

Less: Allowance – – (1,569) (5,644)

– – 43,500 42,413

Deposits 9,162 3,859 38 34

Prepayments (3) 5,761 5,194 19 702

Less: Allowance – (656) – (656)

5,761 4,538 19 46

Total 31,035 26,333 43,568 42,707



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11 OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS (cont’d)

Movement in the allowance for doubtful debts

Group Company2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

Balance at beginning of the year 656 206 6,300 5,211

Amounts written off during the year (656) – (6,300) –

Increase in allowance recognised

in profit or loss – 436 1,483 1,092

Exchange differences – 14 86 (3)

Balance at end of the year – 656 1,569 6,300

(1) Before the group entered into the Restructuring Agreement with Zhengzhou Government in FY2007, the former owners of the Department Store (“Former Owner”) made loans of HK$13,244,200 to certain tenants (“Borrowers”). According to the Restructuring Agreement, the group, the Former Owner and the Borrowers compromised to transfer the title of these loans from the Former Owner to the group and the group agreed to pay the Former Owner the equal amounts. The group, the Former Owner and the Borrowers have entered into loan transfer agreements to formalise this arrangements. As at June 30, 2008, the loan receivables from the Borrowers was HK$10,007,000 (2007 : HK$13,244,000) and the amounts payable to the Former Owner of HK$Nil (2007 : HK$13,244,000) were recorded in other payables (Note 20). The loan receivables are interest free, except for HK$990,660 which is interest bearing at 8% per annum.

The loan receivables are classified as follows:

Group2008 2007

HK$’000 HK$’000

Non–current portion 6,981 –

Current portion 3,026 13,244

10,007 13,244

(2) Included in amount owing by subsidiaries was an amount of HK$18 million (2007 : HK$20 million) pertaining to the dividend receivable from WMP.

(3) As at June 30, 2007, tax reserve certificate of HK$2,572,235 was included in other receivables, as a local tax authority claimed that a subsidiary of the group had an underprovision of taxation of HK$2,572,235 and required this subsidiary to purchase tax reserve certificate of the same amount. The tax dispute had been settled during the year ended June 30, 2007 and the tax reserve certificate was subsequently refunded.



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11 OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS (cont’d)

The group’s and company’s other receivables that are not denominated in the functional currencies of the respective entities are as follows:

Group Company2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

Chinese renminbi 1,289 – – –

Singapore dollars 68 241 207 307

12 INVENTORIES

Group2008 2007

HK$’000 HK$’000

Raw materials 42,150 29,394

Work–in–progress 15,253 10,760

Finished goods 173,771 123,733

231,174 163,887

During the current financial year, an allowance of HK$4,302,000 (2007 : HK$1,584,000) was made by management due to the slow–moving of these inventories.

13 GOODWILL

GroupHK$’000

Cost:

At July 1, 2006 83,499

Arising from acquisition of subsidiaries (Note 35) 10,749

Arising from acquisition of remaining interest in a subsidiary 4,017

At June 30, 2007 98,265

Exchange differences 416

At June 30, 2008 98,681

Impairment:

At July 1, 2006, June 30, 2007 and 2008 83,499

Carrying amount:

At June 30, 2008 15,182

At June 30, 2007 14,766

The group tests goodwill annually for impairment, or more frequently if there are indications that the goodwill might be impaired.



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13 GOODWILL (cont’d)

The goodwill of HK$83,499,270 arising on the reverse acquisition was written off to the profit and loss statement in prior year as the directors were of the opinion that there were no future benefits accruing from the goodwill arising from the reverse acquisition.

As explained in Note 28, the group uses business segments as its primary segment for reporting segment information. For the purposes of impairment testing, goodwill amounting to HK$15,181,862 (2007 : HK$14,765,666) has been allocated to three individual cash generating units (“CGUs”). The directors of the company considered that each subsidiary represents a separate CGU, one in manufacturing and trading of own branded watches segment (“Unit 1”) and two are in manufacturing and resales of original equipment manufacturer (“OEM”) watches segment (“Units 2 & 3”). Details of the respective carrying amounts are stated as follows:

Group2008 2007

HK$’000 HK$’000

Manufacturing and trading of own branded watches – Unit 1 4,017 4,017

Manufacturing and resales of OEM watches – Units 2 & 3 11,165 10,749

Balance at end of the year 15,182 14,766

During the year ended June 30, 2008, management of the group determined that there is no impairment of any of its CGUs (Unit 1 and Units 2 & 3) containing goodwill with indefinite useful lives.

The recoverable amount of these units has been determined based on a value in use calculation. That calculation uses cash flow projections of Unit 1 and Units 2 & 3 based on financial budgets approved by management covering a three–year period based on estimated growth rate of 5.00% (2007 : 3.00%) and 5.00% (2007 : 3.00%) respectively and discount rates of 10.82% (2007 : 7.00%) and 10.82% (2007 : 7.00%) respectively. Cash flows for future years are extrapolated at the same growth rate. The growth rates used do not exceed the average long–term growth rate for the relevant market.



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14 INTANGIBLE ASSETS

Group2008

HK$’000

Cost:

At July 1, 2006 –

Acquisition of subsidiaries (Note 35) 940

At June 30, 2007 and 2008 940

Accumulated amortisation:

At July 1, 2006 –

Charge for the year 172

At June 30, 2007 172

Charge for the year 188

At June 30, 2008 360

Carrying amounts:

At June 30, 2008 580

At June 30, 2007 768

The intangible assets pertain to the customer base arising from the acquisition of subsidiaries in the financial year 2007 (Note 35) and is amortised on a straight–line method over the period of 5 years.

15 INVESTMENTS IN SUBSIDIARIES

Company2008 2007

HK$’000 HK$’000

Unquoted equity shares, at cost 375,985 375,985

Deemed investment 9,010 4,295

Accumulated allowance for impairment (3,327) (3,327)

381,668 376,953

The above investment represents the company’s investment in Winning Metal Products Manufacturing Company Limited, Columbia Education & Consultancy Services Pte Ltd, Wee Fong Construction Pte Ltd and Time Watch Singapore Pte Ltd.

The deemed investment arose from fair value adjustment on the financial guarantee contracts provided by the company to various banks in respect of loans borrowed by certain subsidiaries.



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15 INVESTMENTS IN SUBSIDIARIES (cont’d)

The lisiting of the subsidiaries including Winning Metal Products Manufacturing Company Limited and its subsidiaries at June 30, 2008 are as follows:

Name of subsidiary

Country of incorporation

(or registration) and operation

Proportion ofownership interest/voting power held Principal activities2008 2007

% %

Held by WMP

Time Watch Investments Singapore 100 100 Investment holding

Limited (1)

Grand Ocean Industrial Hong Kong 100 100 Investment holding

Limited (2)

Goldford International British Virgin 100 100 Investment holding

Limited (2) (4) Islands/

Hong Kong

Goldford International Malaysia 100 100 Trading of own branded

(Malaysia) Limited (2) (4) electronic watches

Stategrace Group British Virgin 100 100 Investment holding


Hong Kong

Ye Guang Li Electronics PRC 100 100 Trading of own branded

(Meizhou) Company electronic watches

Limited (2) (4)

Win Ford (BVI) British Virgin 100 100 Investment holding

Investments Limited (2) (4) Islands/

Hong Kong

Tian Wang Electronics PRC 100 100 Assembling of own

(Shenzhen) Company branded electronic

Limited (2) (4) watches

Tian Wang Electronics PRC 98.17 98.17 In process of striking off

Company Limited (2) (4)

Balco Electronic (Zhuhai) PRC 100 100 Trading of own branded

Company Limited (2) (4) electronic watches



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Name of subsidiary




% %

Tick Tack AG (2) (4) Switzerland 51 51 Assembling and resale of

OEM watches

East Base Limited (2) (4) Hong Kong 51 51 Assembling and resale

of OEM watches

Fine Jade International British Virgin 100 100 Investment holding


Hong Kong

Master Wave Limited (2) (4) British Virgin 100 100 Investment holding

Islands/

Hong Kong

Skyrex Investment Limited (2) (4) Hong Kong 100 100 Investment holding

Time Watch (Zhengzhou) PRC 100 100 Property investment

Business Consultancy

Co., Ltd (2) (4)

China City Trading Limited (2) (4) Hong Kong 100 100 Trading of watches

Aimfar Holdings Limited (2) (4) Hong Kong 100 100 Inactive

Perfect Fame Investments British Virgin 100 100 Investment holding


Hong Kong

Fortune Silver Holdings Hong Kong 51 – Trading of

Limited (2) watches

Win Sun International Hong Kong 100 – Trading of own branded

Limited (2) (4) watches

Sky Sun Investments Hong Kong 100 – Inactive

Limited (2) (4)

Winning Asia Holdings BVI 100 – Inactive

Group Limited (2) (4)



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Name of subsidiary




% %

Gold Joy Investments Hong Kong 100 – Inactive

Limited (2) (4)

Held by Time Watch Investments Limited

Columbia Education & Singapore 100 100 Dormant

Consultancy Services

Pte Ltd (1) (4)

Wee Fong Construction Singapore 100 100 Infrastructure

Pte Ltd (1) construction works

Time Watch Singapore

Pte Ltd (3) Singapore 100 – Trading of watches

Notes:

(1) Audited by Deloitte & Touche LLP, Singapore.

(2) Audited by overseas practice of Deloitte Touche Tohmatsu.

(3) Audited by Goh Ngiap Suan & Company, Singapore. The AC has reviewed the size, availability and experience of the professional staff of the auditors and considers them as suitable pursuant to Rule 716 of the SGX-ST’s Listing Manual.

(4) Audited for consolidated purpose.

16 DEPOSITS PAID FOR INVESTMENT IN A SUBSIDIARY

The amount represented the deposit of HK$3,000,000 paid for the potential contribution of 51% registered capital of jointly controlled entity Suzhou Bao Li Chen Watch Trading Company Limited. The joint venture agreement was signed on August 11, 2008.



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17 PROPERTY, PLANT AND EQUIPMENT

Leasehold land and buildings

Construction in progress

Leasehold improvements

Plant and machinery

Furniture, fixtures

and equipment

Motorvehicles Light box Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Group

Cost or valuation:

At July 1, 2006 9,490 – 2,822 2,361 4,551 5,339 10,537 35,100

Acquisition of subsidiaries (Note 35)

– – 326 310 602 61 – 1,299

Additions – – 2,852 583 1,003 651 4,670 9,759

Exchange differences – – 14 7 40 28 420 509

Disposals – – – (585) (2,135) (1,198) (4,574) (8,492)

Revaluation increase 1,112 – – – – – – 1,112

At June 30, 2007 10,602 – 6,014 2,676 4,061 4,881 11,053 39,287

Additions – 386 5,141 373 4,456 4,238 5,799 20,393

Exchange differences – – 642 197 538 248 1,485 3,110

Disposals – – (1,471) (1,228) (1,350) (281) (6,626) (10,956)

Revaluation increase 1,237 – – – – – – 1,237

At June 30, 2008 11,839 386 10,326 2,018 7,705 9,086 11,711 53,071

Comprising:

At June 30, 2007

At cost – – 6,014 2,676 4,061 4,881 11,053 28,685

At valuation 10,602 – – – – – – 10,602

10,602 – 6,014 2,676 4,061 4,881 11,053 39,287

At June 30, 2008

At cost – 386 10,326 2,018 7,705 9,086 11,711 41,232

At valuation 11,839 – – – – – – 11,839

11,839 386 10,326 2,018 7,705 9,086 11,711 53,071

Accumulated depreciation:

At July 1, 2006 3,000 – 1,538 2,207 3,323 2,926 6,862 19,856

Charge for the year 152 – 558 344 736 511 2,595 4,896

Exchange differences – – 9 3 18 15 281 326

Disposals – – – (584) (1,751) (884) (3,780) (6,999)

At June 30, 2007 3,152 – 2,105 1,970 2,326 2,568 5,958 18,079

Charge for the year 186 – 1,350 347 905 810 3,206 6,804

Exchange differences – – 157 90 154 157 689 1,247

Disposals – – (1,250) (1,208) (1,309) (281) (5,821) (9,869)

At June 30, 2008 3,338 – 2,362 1,199 2,076 3,254 4,032 16,261

Carrying amount:

At June 30, 2008 8,501 386 7,964 819 5,629 5,832 7,679 36,810

At June 30, 2007 7,450 – 3,909 706 1,735 2,313 5,095 21,208



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17 PROPERTY, PLANT AND EQUIPMENT (cont’d)

a) The fair value of the group’s leasehold land and buildings at June 30, 2008 has been arrived at on the basis of a valuation carried out at that date by Knight Frank Hong Kong Limited, an independent qualified professional valuer not connected with the group. The valuation, which conforms to Hong Kong Institute of Surveyors Valuation Standards on Properties, was arrived at by reference to comparable market transactions and rental yield for similar properties. During the year ended June 30, 2008, surplus of HK$1,237,000 (2007 : HK$1,112,000) was credited to properties revaluation reserve for the fair value change on leasehold land and building.

b) The allocation between the land and buildings elements cannot be made reliably according to the valuation report issued by Knight Frank Hong Kong Limited.

c) At June 30, 2008, had the above leasehold land and buildings been carried at historical cost less accumulated depreciation, their carrying amount would have been approximately HK$3,069,000 (2007 : HK$3,148,000).

d) At June 30, 2008, the carrying amount of the group’s motor vehicles includes an amount of HK$417,000 (2007 : HK$288,000) in respect of assets held under finance leases.

e) Details of the group’s leasehold land and buildings are as follows:

Gross floorSite area area

Location Description (sq ft) (sq ft) Tenure

Units D–G & P–R, 5th Floor, Car Parking Space No. 1 and Lorry Parking Space No. 19, 1st Floor, Wah–Lik Industrial Centre, 459–469 Castle Peak Road, Tsuen Wan, New Territories, Hong Kong

Office buildingand warehouse

9,916 9,562 50 years fromyear 1997



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17 PROPERTY, PLANT AND EQUIPMENT (cont’d)

Furniture,Leasehold fixtures

improvements and equipment TotalHK$’000 HK$’000 HK$’000

Company

Cost:

At July 1, 2006 – 87 87

Additions 16 132 148

Disposals – (28) (28)

Exchange differences – 5 5

At June 30, 2007 16 196 212

Additions 1 50 51

Exchange differences 2 27 29

At June 30, 2008 19 273 292

Accumulated depreciation:

At July 1, 2006 – 51 51

Depreciation 2 30 32

Disposals – (23) (23)

Exchange differences – 2 2

At June 30, 2007 2 60 62

Depreciation 6 49 55

Exchange differences 1 10 11

At June 30, 2008 9 119 128

Carrying amounts:

At June 30, 2008 10 154 164

At June 30, 2007 14 136 150

18 INVESTMENT PROPERTIES

Group2008

HK$’000

At July 1, 2006 –

Additions 98,692

Fair value gain 37,308

At June 30, 2007 136,000

Additions 5,926

Exchange differences 19,040

Fair value gain 5,700

At June 30, 2008 166,666



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18 INVESTMENT PROPERTIES (cont’d)

On April 27, 2007, the group entered into a restructuring agreement (“Restructuring Agreement”) with Zhengzhou Bureau of Commerce and State–owned Assets Supervision and Administration Committee of Zhengzhou Municipal People’s Government (collectively referred to as “Zhengzhou Government”) to purchase investment properties (the “Department Store”) comprising a basement, bicycle parking, 1st to 5th floors [excluding gross floor area of 1,703.14 sqm of the 1st floor (“Remaining Portion”)], the respective land use rights, together with the equipment for the maintenance of the Department Store. The Department Store is situated inside Zijingshan Department Store Building, located in Zhengzhou City of the PRC, which was declared to be bankrupt by the Zhengzhou Intermediate People’s Court of the PRC on November 30, 2005 (the “Bankruptcy”). Total consideration for the purchase of the Department Store was RMB96,000,000, which will be used by the Zhengzhou Government to settle the existing and contingent liabilities arising from the Bankruptcy.

The fair value of the group’s investment properties at June 30, 2008 have been arrived at on the basis of a valuation carried out on that date by LCH (Asia–Pacific) Surveyors Limited, independent qualified professional valuers not connected with the group. The valuation, which conforms to Hong Kong Institute of Surveyors (“HKIS”) Valuation Standards on Properties was arrived at by reference to comparable market transactions and rental yield for similar properties. During the year ended June 30, 2008, HK$5,700,000 (2007 : HK$37,308,422) was credited to the profit and loss statement as fair value change on investment properties.

All of the group’s property interests held under operating leases to earn rentals or for capital appreciation purposes are measured using the fair value model and are classified and accounted for as investment properties. The tenure of the land use right is for a period of 40 years.

Details of the group’s investment properties are as follows:

Location DescriptionSite area

(sq meter)Gross floor area

(sq meter)

Portion of level 1, whole of levels 2 to 5 and whole of basement,Zijingshan Department Store,No.1 Zijingshan Road,Jinshui District, Zhengzhou City,Henan ProvinceThe People’s Republic of China

Department Store 36,409 20,667



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19 BORROWINGS

Group2008 2007

HK$’000 HK$’000

Bank overdrafts – 7

Trust receipts loans 73,170 29,165

Bank loans 114,956 95,963

Other borrowings – 10,000

188,126 135,135

Secured 42,765 90,306

Unsecured 145,361 44,829

188,126 135,135

The borrowings are repayable as follows:

On demand or within one year 179,185 78,660

In the second year 8,941 7,050

In the third year – 49,425

188,126 135,135

Less: Amount due for settlement within 12

months (shown under current liabilities) (179,185) (78,660)

Amount due for settlement after 12 months 8,941 56,475

The group’s borrowings that are not denominated in the functional currencies of the respective entities are as follows:

Group2008 2007

HK$’000 HK$’000


Swiss franc 6,837 –

Japanese yen 5,799 –

The group obtained general banking facilities from various banks upon the following securities:

i) pledged bank deposits of WMP group (Note 9); and

ii) corporate guarantees by the company and WMP group.

The average effective interest rates per annum were as follows:

Group2008 2007

Bank overdrafts – 5.5%

Trust receipts loans and bank loans 3.83% 5.5%

Other borrowings – 5.0%



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19 BORROWINGS (cont’d)

All bank borrowings (bank overdrafts, trust receipt loans and bank loans) were arranged at floating rates, thus exposing the group to cash flow interest rate risk. The directors estimate that the carrying values of the group’s bank borrowings approximate their fair values.

As at June 30, 2007, other borrowings represented borrowing from an independent third party bearing fixed interest of 5% per annum, unsecured and had no fixed repayable terms.

The group’s principal bank borrowings comprise:

a) A loan of HK$42,765,042 (2007 : HK$47,259,400). The loan was raised on December 20, 2005. Quarterly repayments commenced on April 3, 2006 and will continue until January 5, 2009. The loan is secured. In connection with this loan, the company has granted a call option to the bank. Details are set out in Note 39.

b) Loans of HK$5,000,000 and HK$4,000,000. These loans were raised on November 9, 2007 and December 17, 2007 respectively. These are revolving loans and unsecured.

c) Loans of HK$2,000,000, HK$3,000,000 and HK$10,000,000. These loans were raised on November 9, 2007, December 17, 2007 and March 31, 2008 respectively. These are revolving loans and unsecured.

d) Loans of HK$3,000,000 and HK$4,000,000. These loans were raised on January 21, 2008 and May 9, 2008 respectively. These are revolving loans and unsecured.

e) A loan of HK$13,658,019 (2007: HK$20,000,000). The loan was raised on June 8, 2007. It is a term loan and unsecured. The loan will be paid by 36 equal and consecutive monthly instalments.

f) Loans of HK$5,000,000 (2007: HK$5,000,000) and HK$5,000,000 (2007: HK$5,000,000). These loans was raised on July 31, 2006 and August 11, 2006 respectively. These are revolving loans and unsecured.

g) A loan of HK$3,000,000 (2007: HK$5,000,000). The loan was raised on June 29, 2006. It is a revolving loan and unsecured.

h) At June 30, 2007, a revolving and unsecured loan of HK$5,000,000, which was raised on June 19, 2006 was fully repaid during the current year.

i) At June 30, 2007, a revolving and unsecured loan of HK$15,000,000, which was raised on June 20, 2007, was fully repaid during the year.

20 TRADE PAYABLES

Group2008 2007

HK$’000 HK$’000

Outside parties 108,784 86,944

The average credit period on the purchases of the goods ranges from 30 to 60 days (2007 : 30 to 60 days). No interest is charged on the amounts overdue.

The group’s trade payables that are not denominated in the functional currencies of the respective entities are as follows:

Group2008 2007

HK$’000 HK$’000

Chinese renminbi 839 2,727



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21 OTHER PAYABLES AND ACCRUALS

Group Company2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

Amount due to ultimate holding

company (Note 6) 3 3 3 3

Amount due to subsidiaries – – 60 53

Deposits received 1,080 3,033 – –

Amount due to Former Owners of the

Department Store (1) – 13,244 – –

Advance received from customers 628 2,121 – –

Value added tax payable 7,248 3,745 – –

Accrued expenses - advertising 4,006 – – –

Accrued expenses - staff costs 4,649 2,141 – –

Accrued expenses - Urban Real Estate tax 1,045 – – –

Accrued expenses - sub-contractor fee 1,525 378 – –

Accrued expenses - others 13,474 6,287 5,288 6,133

Investment property payable (2) 12,172 10,677 – –

Other payables 8,396 5,701 – 109

54,226 47,330 5,351 6,298

(1) This pertains to the amount owing to the Former Owners of the Department Store. Details of these payables are set out in Note 11. The amount was fully settled during the current year.

(2) This pertains to the unpaid consideration in respect of the purchase of investment properties (Note 18).

The group’s and company’s other payables and accruals that are not denominated in the functional currencies of the respective entities are as follows:

Group Company2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

United States dollar 852 – – –

Singapore dollar 5,351 6,298 5,351 6,298



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22 OBLIGATIONS UNDER FINANCE LEASES

GroupMinimum

lease paymentsPresent value

of minimum lease payments2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

Amounts payable under finance leases:

Within one year 129 92 114 81

In the second to fifth year inclusive 310 – 275 –

439 92 389 81

Less: Future finance charges (50) (11) – –

Present value of lease obligations 389 81 389 81

Less: Amount due for settlement within

12 months (shown as current

liabilities) (114) (81)

Amounts due for settlement after 12 months 275 –

The group has leased certain of its motor vehicles under finance leases. The average lease term is 3.6 years. For the year ended June 30, 2008, the average effective borrowing rate was 3.25% (2007 : 3.25%) per annum. Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and do not contain contingent rental payments. All lease obligations are denominated in Hong Kong dollars.

The fair value of the group’s lease obligations approximates their carrying amount.

The group’s obligations under finance leases are secured by the lessor’s charge over the leased assets (see Note 17).

23 CONVERTIBLE LOAN NOTES

The convertible loan notes were issued to a financial institution on April 4, 2007. The notes are convertible into ordinary shares of the company at any time after six months from the issued date to their settlement date (April 3, 2010) at the option of the holder. On issue, the loan notes can be converted to 18,181,818 million shares at S$0.275 per share.

If the notes are not converted, they will be redeemed on April 3, 2010 at par. Interest at the floating rate of Singapore Dollars Swap Rate (“SOR”) plus 1.25% per annum will be paid quarterly until settlement date.



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23 CONVERTIBLE LOAN NOTES (cont’d)

The net proceed received from the issue of the convertible loan notes have been split between the liability element and an equity component, representing the fair value of the embedded option to convert the liability into equity of the group, as follows:

Group and Company

2008HK$’000

Nominal value of convertible loan notes issued 25,510

Less: Transaction cost (255)

Net amount 25,255

Equity component (116)

Liability component at date of issue 25,139

Interest charged 379

Interest paid (256)

At June 30, 2007 25,262

Interest charged 1,069

Interest paid (937)

Exchange differences 3,202

At June 30, 2008 28,596

The interest charge for the year is calculated by applying an effective interest rate of 3.48% (2007 : 4.28%) to the liability component.

Management estimates the fair value of the liability component of the convertible loan notes at June 30, 2008 to be approximately HK$28,596,000 (2007 : HK$25,262,000). This fair value has been calculated by discounting the future cash flows at the market rate prevailing at balance sheet date.

24 DEFERRED TAX LIABILITIES

The following are the deferred tax liabilties recognised by the group and the movements thereon, during the current and prior year:

Accelerated Revaluationtax of investment

depreciation properties TotalHK$’000 HK$’000 HK$’000

At July 1, 2006 525 – 525

Charged to profit and loss statement

for the year (Note 31) 510 9,327 9,837

At June 30, 2007 1,035 9,327 10,362

Exchange differences – 1,306 1,306

Charged to profit and loss statement

for the year (Note 31) 911 1,425 2,336

At June 30, 2008 1,946 12,058 14,004



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25 SHARE CAPITAL

Group and Company2008 2007 2008 2007

Number of ordinary shares HK$’000 HK$’000

Issued and paid up:

At beginning of year 374,061,627 17,003,085,852 570,051 513,836

Share consolidation – (16,663,024,225) – –

Shares issued for private placement issues – 34,000,000 – 57,245

Shares issue expenses – – – (1,030)

At end of year 374,061,627 374,061,627 570,051 570,051

The company has one class of ordinary shares which carries no right to fixed income.

During the prior financial year, the movement in company’s share capital are as follows:

i) On January 24, 2007, the company restructured the share capital such that every 50 ordinary shares in the capital of the company were consolidated into one share. As such, the 17,003,085,852 ordinary shares in the capital of the company were consolidated into 340,061,627 ordinary shares in the capital of the company.

ii) On February 15, 2007, 34,000,000 shares (the “Placement Shares”) were issued at a price of S$0.33 each.

26 OTHER RESERVE, SHAREHOLDER’S CONTRIBUTION AND PROPERTY REVALUATION RESERVE

Other reserve

This pertains to equity component of convertible loan notes, see details in Note 23.

Shareholder’s contribution

This pertains to the acquisition of additional equity interest in a subsidiary which was owned by the spouse of a director in prior year. The consideration paid was lower than the amount of net assets acquired thus the difference was credited to shareholder’s contribution.

Property revaluation reserve

The property revaluation pertains to the revaluation of leasehold land and buildings. Where revalued leasehold land or buildings are sold, the portion of the property revaluation reserve that relates to the asset, and is effectively realised, is transferred to retained earnings.

27 REVENUE

Group2008 2007

HK$’000 HK$’000

Sales of goods 933,487 855,675

Leasing of a shopping mall 10,882 –

Project revenue 11 184

944,380 855,859



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28 BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

For management purposes, the group is currently organised into four operating divisions – i) trading watch movements; ii) manufacturing and trading of watches; iii) manufacturing and resales of OEM watches and (iv) leasing of a shopping mall. These divisions are the basis on which the group reports its primary segment information.

Segment revenue and expense: Segment revenue and expense are the operating revenue and expense reported in the group’s profit and loss statement that are directly attributable to a segment and the relevant portion of such revenue and expense that can be allocated on a reasonable basis to a segment.

Segment assets and liabilities: Segment assets include all operating assets used by a segment and consist principally of operating receivables, inventories and property, plant and equipment, net of allowances and provisions. Capital additions include the total cost incurred to acquire property, plant and equipment, and intangible assets directly attributable to the segment. Segment liabilities include all operating liabilities and consist principally of accounts payable and accruals.

Inter–segment transfers: Segment revenue and expenses included transfers between business segments. Inter–segment sales are charged at prevailing market prices. These transfers are eliminated on consolidation.

Profit and loss statement for the year ended June 30, 2008:

Tradingwatch

movements

Manufacturingand tradingof watches

Manufacturingand resales ofOEM watches

Leasing of a shopping

mall Others Eliminations Consolidated

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Revenue

External sales 352,797 305,979 274,711 10,882 11 – 944,380

Inter–segment sales 18,497 9,551 31,171 – – (59,219) –

Total revenue 371,294 315,530 305,882 10,882 11 (59,219) 944,380

Result

Segment result 2,947 66,434 28,488 5,015 (176) – 102,708

Change in fair value of

investment properties – – – 5,700 – – 5,700

Unallocated expense (16,993)

Finance costs (8,427)

Profit before taxation 82,988

Taxation (12,826)

Profit for the year 70,162



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28 BUSINESS AND GEOGRAPHICAL SEGMENTS (cont’d)

Balance sheet as at June 30, 2008:

Tradingwatch

movements



Leasing of a shopping mall Others Consolidated

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

AssetsSegment assets 97,663 219,080 140,199 186,308 501 643,751

Unallocated assets 83,348

Consolidated total assets 727,099

LiabilitiesSegment liabilities 37,098 44,668 52,875 21,728 59 156,428

Unallocated liabilities 245,168

Consolidated total liabilities 401,596

Other information for the year ended 30 June 2008:

Additions of property, plant and equipment 583 15,742 969 3,049 50 20,393

Additions of investment properties – – – 5,926 – 5,926

Depreciation of property plant and equipment 729 5,311 533 176 55 6,804

Loss on disposal of property, plant and equipment 271 811 – – – 1,082

Amortisation of intangible assets – – 188 – – 188

Allowance for bad and doubtful debts (trade) – – 221 – – 221

Allowance for obsolete inventories 1,000 2,957 345 – – 4,302



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Profit and loss statement for the year ended June 30, 2007:

Tradingwatch

movements



Leasing of a shopping

mall Others Elimination Consolidated

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Revenue

External sales 447,842 180,265 227,568 – 184 – 855,859

Inter–segment sales 19,596 – – – – (19,596) –

Total revenue 467,438 180,265 227,568 – 184 (19,596) 855,859

Result

Segment result 8,043 52,290 26,068 – (61) – 86,340

Change in fair value of

investment properties – – – 37,308 – – 37,308

Unallocated expense (15,154)

Finance costs (6,878)

Profit before taxation 101,616

Taxation (18,555)

Profit for the year 83,061

Balance sheet as at June 30, 2007:

Tradingwatch

movements




HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

AssetsSegment assets 81,918 143,111 96,230 149,244 810 471,313

Unallocated assets 63,014

Consolidated total assets 534,327

LiabilitiesSegment liabilities 35,421 28,219 38,065 22,455 309 124,469

Unallocated liabilities 187,650

Consolidated total liabilities 312,119



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Tradingwatch

movements




HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Other information for the year ended June 30, 2007:

Additions of property, plant and equipment 494 8,592 1,825 – 147 11,058

Additions of investment properties – – – 98,692 – 98,692

Depreciation of property, plant and equipment 694 3,395 775 – 32 4,896

Loss on disposal of property, plant and equipment 58 1,147 – – 5 1,210

Amortisation of intangible assets – – 172 – – 172

Allowance for bad and doubtful debts (trade) – 18 638 – – 656

Allowance for bad and doubtful debts (non–trade) – – – – 436 436

Allowance for obsolete inventories 700 729 155 – – 1,584

Geographical segments

For the activities of trading watch movements, manufacturing and trading of own branded watches and leasing of a shopping mall, they are mainly based in the PRC and the revenue of these activities are substantially derived from the PRC. The manufacturing and resales of OEM watches are mainly based in the PRC and Western Europe and the relevant revenue for both years are derived mainly from the PRC and Western Europe.

The following table provides an analysis of the group’s sales by geographical market.

2008 2007HK$’000 HK$’000

Hong Kong and PRC 765,496 699,145

Western Europe 178,632 156,530

Singapore 252 184

944,380 855,859



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The following is an analysis of the carrying amount of segment assets, additions to property, plant and equipment and investment properties analysed by the geographical area in which the assets are located.

Carrying amountof segment assets

Additions to property,plant and equipment and

investment properties2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

Hong Kong and PRC 568,661 408,039 25,088 108,346

Western Europe 73,292 62,464 897 1,257

Singapore 1,798 810 334 147

643,751 471,313 26,319 109,750

29 OTHER OPERATING INCOME

Group2008 2007

HK$’000 HK$’000

Bank interest income 638 1,193

Watch repair 694 522

Design fee income – 339

Foreign exchange gain 1,883 1,183

Others 1,070 957

4,285 4,194

30 FINANCE COSTS

Group2008 2007

HK$’000 HK$’000Interest expense on:

Bank overdrafts and loans 8,408 6,865

Finance leases 19 13

8,427 6,878



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31 INCOME TAX EXPENSE

Group2008 2007

HK$’000 HK$’000

Current tax 11,597 8,893

Deferred tax (Note 24) 2,336 9,837

Overprovision in prior years (1,107) (175)

Income tax expense for the year 12,826 18,555

Domestic income tax is based on the Hong Kong tax rate of 16.5% (2007 : 17.5%) of the estimated net assessable profit for the year. Taxation for other jurisdiction is calculated at the rates prevailing in the relevant jurisdictions.

The total charge for the year can be reconciled as follows:

Group2008 2007

HK$’000 HK$’000

Profit before taxation 82,988 101,616

Tax at the domestic income tax rate of 16.5% (2007 : 17.5%) 13,693 17,783

Tax effect of expenses not deductible for tax purposes 5,196 6,094

Tax effect of income not taxable for tax purposes (4,920) (4,840)

Effect of different tax rates of subsidiaries operating in other jurisdictions 6,060 4,547

Income tax concession (6,476) (5,674)

Deferred tax benefits not recognised 372 820

Overprovision of income tax in prior years (1,107) (175)

Others 7 –

Tax charge for the year 12,825 18,555

The group has tax loss carryforwards available for offsetting against future taxable income as follows:

Group2008 2007

HK$’000 HK$’000

Amount at beginning of year 23,504 18,852

Adjustment on opening balance 1,118 –

24,622 18,852

Amount in current year 2,064 4,652

Exchange differences 7,311 –

Amount at end of year 33,997 23,504

Deferred tax benefit on above unrecorded 6,119 4,230



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31 INCOME TAX EXPENSE (cont’d)

No deferred tax asset has been recognised in respect of the above due to the unpredictability of future profit streams for the entities within the group which have tax losses carried forward.

The realisation of the future income tax benefits from tax loss carryforwards is available for an unlimited future period subject to the conditions imposed by law including the retention of majority shareholders as defined.

Pursuant to the relevant laws and regulations in the PRC, three subsidiaries, Tian Wang Electronics (Shenzhen) Company Limited (“TW”), Balco and Ye Guang Li Electronics (Meizhou) Company Limited (“Ye Guang Li”) are entitled to an exemption from PRC income tax for the two years starting from their first profit–making year, followed by a 50% tax relief for the next three years. The tax charge provided has been made after taking these tax incentives into account. TW and Balco commenced their first profit making year for the financial year ended December 31, 2004. Ye Guang Li commenced their first profit making year for the financial year ended December 31, 2007. The applicable tax rate for TW and Balco for the period from January 1, 2007 to December 31, 2007 is 7.5%. The applicable tax rate for TW & Balco for the period from January 1, 2008 to December 31, 2008 is 9%.

On March 16, 2007, the PRC promulgated the Law of PRC on Enterprise Income Tax (the “New Law”) by Order No. 63

of the President of the PRC. On December 6, 2007, the State Council of the PRC issued Implementation Regulations of the New Law. The New Law and Implementation Regulations changes the PRC Enterprise Income Tax rate to 25% and will affect the PRC subsidiaries of the Group from January 1, 2008.

32 PROFIT FOR THE YEAR

Profit for the year has been arrived after charging (crediting):

Group2008 2007

HK$’000 HK$’000

Directors’ remuneration:

Of the company 1,435 1,218

Of the subsidiaries 5,729 4,538

Employees benefit expense (including directors’ remuneration) 74,267 45,558

Audit fees:

Paid to auditors of the company 420 378

Underprovision of audit fee – 78

Paid to other auditors 1,430 1,102

Non–audit fees:

Paid to other auditors 114 490

Loss on disposal of plant and equipment 1,082 1,210

Allowance for bad and doubtful debts (trade) 221 656

Allowance for bad and doubtful debts (non–trade) – 436

Cost of inventories recognised as expense 723,306 648,148

Allowance for obsolete inventories 4,302 1,584

Net foreign exchange gain (1,897) (1,183)

Depreciation of property, plant & equipment 6,804 4,896

Amortisation expense on convertible loan notes 132 122

Amortisation of intangible assets 188 172

Provision for long service payments 780 –



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33 DIVIDENDS

On November 23, 2007, a first and final dividend of 0.6 Singapore cents per ordinary share less 18% tax for the financial year ended June 30, 2007 (total dividends of HK$10 million) was paid to shareholders.

In respect of the current year, the directors propose a one–tier tax–exempt first and final dividend of 0.55 Singapore cents (equivalent to HK$3.16 cents) per share. This dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The proposed dividend is payable to all shareholders at the Register of members on November 7, 2008. The total estimated dividend to be paid is HK$11,823,787.

34 EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share attributable to the ordinary equity holders of the company is based on the following data:

Group2008 2007

HK$’000 HK$’000

Earnings

Profit for the year attributable to equity holders

of the company for the purpose of basic earnings per share 59,260 73,357

Effect of dilutive potential ordinary shares:

Interest on convertible loan notes 1,069 379

Earnings for the purpose of diluted earnings per share 60,329 73,736

Number of shares

Group2008 2007’000 ’000

Weighted average number of ordinary shares for

the purpose of basic earnings per share 374,062 350,681

Effect of dilutive potential ordinary shares from

convertible loan notes 18,182 4,334

Weighted average number of ordinary shares for

the purpose of diluted earnings per share 392,244 355,015

The outstanding Call Options have no potential dilution effect on basic earning per share.



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35 ACQUISITION OF SUBSIDIARIES

On July 31, 2006, the group acquired 51% equity interests in each of East Base and Tick Tack at a total consideration of HK$21,073,920 pursuant to the sale and purchase agreements (“S&P Agreements”) signed with respective shareholders of East Base and Tick Tack (“Vendors”). These acquisitions have been accounted for using the purchase method. The amount of goodwill arising as a result of the acquisitions was HK$10,748,620.

Acquiree’scarryingamountbefore Fair value

combination adjustments Fair valueHK$’000 HK$’000 HK$’000

NET ASSETS ACQUIRED

Intangible assets – 940 940

Property, plant and equipment 1,299 – 1,299

Inventories 28,391 – 28,391

Trade receivables 57,489 – 57,489

Other receivables, deposits and prepayments 2,534 – 2,534

Bank balances and cash 2,294 – 2,294

Trade payables and bills payables (55,824) – (55,824)

Other payables and accrued charges (11,352) – (11,352)

Bank borrowings (145) – (145)

Bank overdraft (3,012) – (3,012)

Taxation (2,369) – (2,369)

19,305 940 20,245

Minority interests (9,920)

10,325

Goodwill 10,749

SATISFIED BY

Cash consideration (note) 21,074

NET CASH OUTFLOW ARISING ON ACQUISITION

Cash consideration paid (10,074)

Bank balances and cash acquired 2,294

Bank overdraft acquired (3,012)

(10,792)

Note: The amount included a cash consideration of HK$11,000,000 which was paid for the acquisition of East Base and Tick Tack during the year ended June 30, 2006 and recorded as deposit paid for investments in subsidiaries as at June 30, 2006.



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35 ACQUISITION OF SUBSIDIARIES (cont’d)

These subsidiaries acquired are engaged in manufacturing and resales of OEM watches. The goodwill arising on the above acquisitions is attributable to the anticipated profitability of manufacturing and trading of watches businesses of these companies.

According to the S&P Agreements, the Vendors have irrevocably undertaken to the group that the aggregate net profit after tax of the subsidiaries acquired shall not be less than US$1,600,000 in each of the financial years ending December 31, 2006, 2007 and 2008 (“Guaranteed Years”). The Vendors shall compensate the group in cash for any shortfall of net profit after tax during the Guaranteed Years. The aggregate net profit after tax for the years ended December 31, 2006 and 2007 exceeded the guaranteed amount of US$1,600,000 in each year and management is confident that the aggregate net profit after tax for the year ending December 31, 2008 will exceed the guaranteed amount.

The subsidiaries acquired during the year ended June 30, 2007 contributed HK$227,567,587 to the group’s revenue, and a profit of HK$25,036,837 to the group’s profit before taxation.

If the acquisition had been completed on July 1, 2006, the group’s revenue (unaudited) and the group’s net profit (unaudited) for the year ended June 30, 2007 would have been HK$876,547,000 and HK$103,897,000 respectively. The proforma information is presented for illustrative purposes only and is not necessarily an indication of the revenue and results of operations of the group that actually would have been achieved had the acquisition been completed on July 1, 2006, and is not intended to be a projection of future results.

36 CONTINGENT LIABILITIES

a) During the prior financial year, in connection with the disposal of Wee Poh Construction Co. (Pte.) Ltd (“WPC”), the purchaser exercised the option to require Time Watch Investments Limited to purchase WPC’s equity interest in certain companies at a price of S$361,000. The purchaser has also claimed S$525,531 for the alleged breach of certain warranties the company had provided under the sale and purchase agreement (the “Warranties”). Management made a full provision in prior year.

Warranties

During the financial year, the legal suit of the Warranties has been settled at an amount of S$299,000 (equivalent to HK$1,625,000) being paid to the purchaser.

Put options

Clause 3.2 of Put Option Agreement (“POA”) states that the option shall allow the Grantee (“WPC”) at any time within the next 12 months from completion (but no earlier than two months after completion) to sell the Grantee’s equity interests in O.V.M. Prestress Co. Pte Ltd, ThaiSing Training Centre Co. Limited and Wee Poh International Inc. (the “Option Companies) to the Grantor (Wee Poh Holdings Limited, now known as Time Watch Investments Limited) at their respective audited net book values as at June 30, 2004 set out in the audited accounts of the Grantee for the financial year ended June 30, 2004.

Management is of the opinion that the net book values of the Option Companies were not stated in the audited accounts of Grantee for the financial year ended June 30, 2004. Due to above ambiguous clause in POA, the High Court of Singapore has requested that an independent expert (a CPA Firm) to be appointed and agreed by both parties to look at this clause.



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36 CONTINGENT LIABILITIES (cont’d)

Per letter from Singapore High Court dated January 16, 2008, if the independent expert determines that the purchase price is not set out in the audited accounts of WPC for the financial year ended June 30, 2004 (‘WPC Accounts”), WPC shall not transfer and the group shall not be required to accept any transfer of the Option Companies, and no payment shall be made by the group to Ho Lee or WPC. If the independent expert determines that the purchase price is set out in WPC Accounts, WPC shall transfer the Option Companies to the group, and the group shall pay to WPC the purchase price up to and not exceeding S$271,282.50. The information usually required by FRS 37 Provisions, Contingent Liabilities and Contingent Assets is not disclosed by the company on grounds that it can be expected to prejudice seriously the outcome of the claims.

b) Company2008 2007

HK$’000 HK$’000

Indemnity for issuance of performance bonds and temporary

occupational license of the subsidiaries, unsecured – 1,462

In prior year, upon the completion of the disposal of WPC in July 2005, the purchaser had provided an indemnity letter to the company in relation to the performance bond issued by Wee Fong Construction Pte Ltd (“Wee Fong”)amounting to HK$1,462,103.

As at June 30, 2008, there were no outstanding commitments pertaining to performance bonds as the projects of Wee Fong have been completed in prior year and final payment was made during the year.

37 OPERATING LEASE ARRANGEMENTS

Group Company2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

The group and the company as lessee

Minimum lease payments under operating leases

recognised as an expense in the year 7,078 3,596 199 300

At the balance sheet date, the group and the company have outstanding commitments under non–cancellable operating leases, which fall due as follows:

Group Company2008 2007 2008 2007

HK$’000 HK$’000 HK$’000 HK$’000

Within one year 6,166 1,975 207 184

In the second to fifth year inclusive 11,213 3,077 129 298

After five years 71 – – –

17,450 5,052 336 482

Operating lease payments represent rental payable by the group and the company for its office premises. Leases are negotiated for an average term of two to six years with fixed rentals.



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88

37 OPERATING LEASE ARRANGEMENTS (cont’d)

The group as lessor

At the balance sheet date, the group has contracted with tenants for the following minimum lease payments.

Group2008 2007

HK$’000 HK$’000

Within one year 6,840 –

The group leases its investment properties under operating lease arrangements. The investment properties are leased to the lessee who then sublets to other tenants for a term of one year and five months. According to the signed lease agreement, the fixed rental from the lease in the investment properties is RMB4,166,500 for the five months ended December 31, 2007 and RMB12,000,000 for the year ending December 31, 2008. The group is also entitled to a contingent rental if the net subletting rental generated by the lessee exceeded the fixed rental.

38 COMMITMENTS

(i) On June 8, 2007, the group entered into a cooperation agreement (“Cooperation Agreement”) with the owner of the Remaining Portion of the Department Store (“Minority Owner”). Pursuant to the Cooperation Agreement, through a series of arrangements to be agreed by the group and the Minority Owner, the Minority Owner will sell the Remaining Portion of the Department Store to a subsidiary of the group.

(ii) Capital commitments

2008 2007HK$’000 HK$’000

Capital expenditure in respect of property, plant

and equipment contracted for but not provided

in the consolidated financial statements 1,046 –



annual report 2008

89

39 SHARE OPTIONS

On December 20, 2005, WMP entered into a US$7,000,000 multi–currency term and revolving facilities agreement with a bank to finance WMP’s long–term funding requirements and for working capital purposes.

In connection with the above agreement, the company has also entered into a call option agreement with the bank during the prior financial year pursuant to which the company has granted the bank a right (the “Call Option”) from time to time for a period of three years beginning from January 2, 2006 (“Availability Date”) to subscribe such number of shares of the company as determined by dividing the S$ equivalent of US$3,000,000 with the exercise price of S$0.015 each, subject to the maximum of 600,000,000 new shares. On January 24, 2007, the company restructured the share capital such that every 50 ordinary shares in the capital of the company were consolidated into one share. As such, the exercise price has changed to S$0.75 per share, subject to the maximum of 12,000,000 new shares (“Availability Option Shares”).

According to the call option agreement, during the period commencing on, and including, the Availability Date and expiring on the market date (a day on which the SGX is open for trading in securities) falling immediately before the first anniversary of the Availability Date (“First Option Period”), the maximum number of shares which can be allotted and issued upon the exercise of the Call Option shall be 50% of the total Available Option Shares.

The unexercised Call Options during the First Option Period may be exercised any time after the first anniversary of the date of the Availability Date.

The directors were of the opinion that the fair value of the Call Options was insignificant at the date of grant.

As at June 30, 2008 and 2007, the Call Option remained unexercised.

40 EVENT AFTER THE BALANCE SHEET DATE

Subsequent to the year end, an independent third party, injected cash of total RMB18,200,000 as registered capital to Time Watch (Zhengzhou) Business Consultancy Co., Ltd (“Time Watch Zhengzhou”). The proportion of ownership interest of Time Watch Zhengzhou held by the group decreased from 100% to 84%.

It is impracticable to disclose the impact on the dilution of the group interest in Time Watch Zhengzhou as the relevant financial information were not available at the date when the group’s financial statements were authorised for issue on September 29, 2008.



annual report 2008

90

In the opinion of the directors, the consolidated financial statements of the group and the balance sheet and statement of changes in equity of the company as set out on pages 27 to 89 are drawn up so as to give a true and fair view of the state of affairs of the group and of the company as at June 30, 2008, and of the results, changes in equity and cash flows of the group and changes in equity of the company for the financial year then ended and at the date of this statement there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due.

ON BEHALF OF THE DIRECTORS

Tung Koon Ming

Dennis Tung Koon Kwok


Statement of Directors


annual report 2008

91Statistics of Shareholdingsas at 18 September 2008

DISTRIBUTION OF SHAREHOLDINGS

SIZE OF SHAREHOLDINGS

NO. OF SHAREHOLDERS % NO. OF SHARES %

1 – 999 2,662 39.98 653,544 0.17

1,000 – 10,000 2,806 42.14 10,579,831 2.83

10,001 – 1,000,000 1,175 17.64 65,557,632 17.53

1,000,001 AND ABOVE 16 0.24 297,270,620 79.47

TOTAL : 6,659 100.00 374,061,627 100.00

Based on information available to the company as at 18 September 2008, approximately 28.62% of the issued ordinary shares of the company is held by the public and the company has complied with Rule 723 of the Listing Manual issued by the Singapore Exchange Securities Trading Limited.

TWENTY LARGEST SHAREHOLDERS

NO. NAME NO. OF SHARES %

1. CIMB-GK SECURITIES PTE. LTD. 215,789,940 57.69

2. UNITED OVERSEAS BANK NOMINEES PTE LTD 33,240,748 8.89

3. HSBC (SINGAPORE) NOMINEES PTE LTD 8,804,102 2.35

4. TUNG LEE FONG 8,420,000 2.25

5. UOB KAY HIAN PTE LTD 7,229,678 1.93

6. OCBC SECURITIES PRIVATE LTD 4,823,010 1.29

7. HONG LEONG FINANCE NOMINEES PTE LTD 3,877,000 1.04

8. KIM ENG SECURITIES PTE. LTD. 2,806,705 0.75

9. DBS NOMINEES PTE LTD 2,310,503 0.62

10. MAYBAN NOMINEES (S) PTE LTD 1,997,727 0.53

11. HO LEE CONSTRUCTION PTE LTD 1,699,222 0.45

12. CHIA ENG KOON 1,481,000 0.40

13. PHILLIP SECURITIES PTE LTD 1,317,516 0.35

14. TAY CHANG MONG 1,295,960 0.35

15. OVERSEA-CHINESE BANK NOMINEES PTE LTD 1,168,379 0.31

16. PIAK BOON SENG 1,009,130 0.27

17. KOH WEE MENG 1,000,000 0.27

18. DBS VICKERS SECURITIES (S) PTE LTD 929,030 0.25

19. CITIBANK NOMINEES SINGAPORE PTE LTD 846,002 0.23

20. OCBC NOMINEES SINGAPORE PTE LTD 837,945 0.22

TOTAL : 300,883,597 80.44


annual report 2008

92

SUBSTANTIAL SHAREHOLDERS AS AT 18 SEPTEMBER 2008

Number of Ordinary Shares

Direct Interest % Deemed Interest %

Winning International Limited 215,960,320 57.73 NIL 0.00

Tung Koon Ming NIL 0.00 217,960,320 58.27

United Overseas Bank Limited NIL 0.00 40,630,368 10.86

UOB Asset Management Ltd NIL 0.00 38,000,000 10.16

Notes :

(1) By virtue of Section 7 of the Companies Act, Cap. 50, Mr Tung Koon Ming is deemed to be interested in 215,960,320 shares held by Winning International Limited and 2,000,000 shares held by Worthpro Investments Limited in the company.

(2) United Overseas Bank Limited’s interest includes 38,000,000 shares held by UOB Asset Management Ltd. The shares of United Overseas Bank Limited and UOB Asset Management Ltd are registered in Discretionary Funds managed by UOB Asset Management.

Statistics of Shareholdings (cont’d)as at 18 September 2008


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93

NOTICE IS HEREBY GIVEN that the Thirteenth Annual General Meeting of TIME WATCH INVESTMENTS LIMITED (the “Company”) will be held on Tuesday, 28 October 2008 at 10.00 a.m. at Suntec Singapore International Convention & Exhibition Centre, Meeting Room 310, Level 3, 1 Raffles Boulevard, Suntec City, Singapore 039593 for the following purposes:

AS ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and Accounts for the year ended 30 June 2008 together with the Auditors’ Report thereon. (Resolution 1)

2. To approve the payment of Directors’ Fees of S$225,000/- for the year ended 30 June 2008 (2007: S$ 224,000/-). (Resolution 2)

3. To re-elect the following Directors retiring pursuant to Article 103 of the Articles of Association of the Company:

i) Mr Tung Wai Kit (Resolution 3) ii) Mr Wong Wing Keung, Meyrick (Resolution 4)

Mr Wong Wing Keung, Meyrick will, upon re-election as a Director of the Company, remain as the Chairman of the Nominating and Remuneration Committees as well as a member of the Audit Committee. Mr Wong is considered as independent for the purpose of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”).

4. To declare a First and Final Dividend of 0.55 Singapore cents per ordinary share for the year ended 30 June 2008. (Resolution 5)

5. To re-appoint Deloitte & Touche LLP as Auditors and to authorise the Directors to fix their remuneration. (Resolution 6)

AS SPECIAL BUSINESS

6. To consider and, if thought fit, to pass the following resolution as an Ordinary Resolution, with or without any modifications:

Authority to issue shares

That authority be and is hereby given to the Directors of the Company to:

(a) i) issue shares in the capital of the Company (“shares”) whether by way of rights, bonus or otherwise; and/or

ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit; and

(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors while this Resolution was in force,

Notice of Thirteenth Annual General Meeting


annual report 2008

94 Notice of Thirteenth Annual General Meeting (cont’d)

PROVIDED THAT:

(1) the aggregate number of shares to be issued pursuant to this Resolution (including shares to be issued in pursuance of Instruments made or granted to this Resolution) does not exceed 50 per cent of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares to be issued other than on a pro rata basis to shareholders of the Company (including shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not exceed 20 per cent of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below)

(2) (subject to such manner of calculation as may be prescribed by the Singapore Exchange Securities Trading Limited (“SGX-ST”)) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the percentage of issued shares shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time this Resolution is passed, after adjusting for:

(i) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time this Resolution is passed; and

(ii) any subsequent bonus issue or consolidation or subdivision of shares;

(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the Monetary Authority of Singapore) and the Articles of Association for the time being of the Company; and

(4) (unless revoked or varied by the Company in general meeting) the authority conferred by this Resolution shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier. (Resolution 7)

7. To transact any other ordinary business which may be properly transacted at an Annual General Meeting.

By Order Of The Board

Dorothy Ho/Wong Juar MingCompany Secretaries

Singapore: 10 October 2008

Notes :

(1) A shareholder of the Company entitled to attend and vote at the Annual General Meeting (“AGM”) is entitled to appoint not more than two proxies to attend and vote on his behalf. A shareholder of the Company which is a corporation is entitled to appoint its authorised representative or proxy to vote on its behalf. A proxy need not be a shareholder of the Company.

(2) The Proxy Form must be deposited at the registered office of the Company at 17 Carpenter Street #02-01, Singapore 059906 not less than 48 hours before the time fixed for holding the AGM in order to be entitled to attend and to vote at the AGM.

(3) A Depositor’s name must appear on the Depository Register maintained by The Central Depository (Pte) Limited as at 48 hours before the time fixed for holding the AGM in order to be entitled to attend and vote at the AGM.


annual report 2008

95

Explanatory Notes :

Ordinary Resolution 7 is to empower the Directors to issue shares in the capital of the Company and to make or grant instruments (such as warrants or debentures) convertible into shares, and to issue shares in pursuance of such instruments, up to a number not exceeding 50 per cent of the total number of issued shares (excluding treasury shares) in the capital of the Company (the “50% Limit”), with a sub-limit (“Sub-Limit”) of 20 per cent for issues other than on a pro rata basis to shareholders. For the purpose of determining the aggregate number of shares that may be issued, the percentage of issued shares shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time that Ordinary Resolution 7 is passed, after adjusting for (a) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of shares awards which are outstanding or subsisting at the time that Ordinary Resolution 7 is passed, and (b) any subsequent bonus issue or consolidation or sub-division of shares.

Notice of Thirteenth Annual General Meeting (cont’d)


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96

NOTICE IS HEREBY GIVEN that the Share Transfer Books and Register of Members of the Company will be closed on 7 November 2008 for the purpose of determining Members’ entitlements to the First and Final Dividend to be proposed at the Annual General Meeting of the Company to be held on 28 October 2008.

Duly completed registrable transfers of shares in the Company (the “Shares”) received up to the close of business at 5.00 p.m. on 6 November 2008 by the Company’s Share Registrar, Boardroom Limited, 3 Church Street #08-01 Samsung Hub, Singapore 049483, will be registered to determine Members’ entitlements to the proposed Dividend. Subject to the aforesaid, Members whose Securities Accounts with The Central Depository (Pte) Ltd are credited with the shares as at 7 November 2008 will be entitled to the proposed Dividend.

The proposed First and Final Dividend, if approved at the Annual General Meeting, will be paid on 20 November 2008.

BY ORDER OF THE BOARD

Dorothy Ho/Wong Juar Ming Company Secretaries

Dated: 10 October 2008

Notice of Books Closure


annual report 2008

97

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annual report 2008

99

TIME WATCH INVESTMENTS LIMITEDCompany Registration No.: 199502355R

PROXY FORMAnnual General Meeting to be held on 28 October 2008

Important

1. For investors who have used their CPF monies to buy the Company‘s shares, this Annual Report is forwarded to them at the request of CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

I/We

of (full address) being a shareholder/shareholders of Time Watch Investments Limited (the “Company”) hereby appoint:

Name Address NRIC/Passport No.Proportion of

Shareholdings (%)

and/or (delete as appropriate)

or failing him, the Chairman of the Meeting, as my/our proxy/proxies to vote for me/us on my/our behalf and if necessary to demand a poll at the Annual General Meeting of the Company to be held at Suntec Singapore International Convention & Exhibition Centre, Meeting Room 310, Level 3, 1 Raffles Boulevard, Suntec City, Singapore 039593 on Tuesday, 28 October 2008 at 10.00 a.m. and at any adjournment thereof.

If you wish your proxy/proxies to vote for or against the resolutions set out in the Notice of Meeting of the Thirteenth Annual General Meeting (the “Meeting”) and summarised below, please indicate with an “X” in an appropriate box. If no specific direction as to voting is given, the proxy/proxies will vote or abstain from voting at his/her discretion, as he/she will on any other matters arising at the Meeting and at any adjournment thereof.

No. Resolution For* Against*1. Directors’ Report and Accounts

2. Approval of Directors’ Fees

3. Re-election of Mr Tung Wai Kit

4. Re-election of Mr Wong Wing Keung, Meyrick

5. Declaration of First and Final Dividend

6. Re-appointment of Auditors

7. Special Business :Authority to issue shares

* If you wish to exercise all your votes “For” or “Against”, please indicate with an “X” within the box provided. Alternatively, please indicate the number of votes as appropriate.

Dated this day of 2008

Signature(s) of member(s)/Common Seal

Total Number of Shares in : No. of Shares

(a) CDP Register

(b) Register of Members

Total

Important : Please Read Notes Overleaf


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100

Notes :

1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50) you should insert that number of shares. If you have shares registered in your name in the Register of Members of the Company, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares. If no number is inserted, this form of proxy shall be deemed to relate to all the shares held by you.

2. A shareholder entitled to attend and vote at the above meeting of the Company is entitled to appoint not more than two proxies to attend and vote on his behalf. A proxy need not be a member of the Company.

3. The instrument appointing a proxy or proxies must be deposited at the Company’s Registered Office at 17 Carpenter Street #02-01, Singapore 059906 not less than 48 hours before the time appointed for holding the above meeting.

4. Where a shareholder appoints two proxies, the appointments shall be invalid unless he specifies the proportion (expressed as a percentage of the whole) of his holding to be represented by each proxy. If no such proportion or number is specified, the first-named proxy may be treated as representing 100% of the shareholding and any second-named proxy as alternate to the first-named.

5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its common seal or under the hand of its duly authorised officer or attorney duly authorized.

6. Where an instrument appointing a proxy or proxies is signed on behalf of the appointor by an attorney, the power of attorney (or other authority) or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

7. A corporation which is a shareholder may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the meeting, in accordance with Section 179 of the Companies Act, Chapter 50.

8. The Company shall be entitled to reject the instrument of proxy if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument of proxy. In addition, in the case of shareholders whose shares are deposited with The Central Depository (Pte) Limited (“CDP”), the Company may reject any instrument of proxy lodged if such shareholders are not shown to have shares entered against their names in the Depository Register 48 hours before the time appointed for holding the meeting as certified by CDP to the Company.

CoNTENTS

CorporATE proFILE 1

CHAIrMAN’S STATEMENT 4

BoArD oF DIrECTorS 6

Group STruCTurE 10

FINANCIAL HIGHLIGHTS 12

CorporATE GoVErNANCE 13

rEporT oF DIrECTorS 22

INDEpENDENT AuDITorS’ rEporT 26

BALANCE SHEETS 27

CoNSoLIDATED proFIT AND LoSS STATEMENT 29

STATEMENTS oF CHANGES IN EquITy 30

CoNSoLIDATED CASH FLoW STATEMENT 35

NoTES To THE FINANCIAL STATEMENTS 37

STATEMENT oF DIrECTorS 90

STATISTICS oF SHArEHoLDINGS 91

NoTICE oF THIrTEENTH ANNuAL GENErAL MEETING 93

NoTICE oF BookS CLoSurE 96

proxy ForM 99

CorporATE INForMATIoN

Corporate InformationBoard of directors

Mr Tung koon Ming

Chairman & CEo

Mr Dennis Tung koon kwok

Executive Director

Mr Tung Wai kit

Executive Director

Mr Hoon Tai Meng


Mr Tan Song koon




audit committee

Mr Hoon Tai Meng (Chairman)

Mr Tan Song koon


nominating committee


Mr Hoon Tai Meng

Mr Tan Song koon

remuneration committee


Mr Hoon Tai Meng

Mr Tan Song koon

company secretaries

Ms Dorothy Ho

Ms Wong Juar Ming

registered office


Singapore 059906

Tel : (65) 6536 6564

Fax : (65) 6536 7243

Website: http://www.timewatch.com.sg

share registrar

Lim Associates (pte) Ltd

3 Church Street, #08-01 Samsung Hub

Singapore 049483

auditors

Deloitte & Touche LLp

Certified public Accountants

6 Shenton Way, #32-00

DBS Building Tower Two

Singapore 066809

partner-in-charge: Mr xu Jun

(Appointed since financial year ended

June 30, 2007)

principal Bankers

DBS Bank Limited

oversea-Chinese Banking

Corporation Limited

Hang Seng Bank Limited

T I M E W A T C H I N V E S T M E N T S L I M I T E D | A N N u A L r E p o r T 2 0 0 8

Timeless Perfection



Singapore 059906

Tel : (65) 6536 6564

Fax : (65) 6536 7243

Http : //www.timewatch.com.sg

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