시베리안마이닝그룹 재정보고서 2007

( Stock Code : 1142 )
Annual Report 2007
For identification only
CONTENTS
Corporate Information Chairmans Statement Management Discussion and Analysis Report of the Directors Corporate Governance Report Independent Auditors Report Consolidated Income Statement Consolidated Balance Sheet Balance Sheet Consolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the Financial Statements Five-Year Financial Summary 2 3 4 7 15 20 22 23 25 26 28 30 78
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Annual Report 2007
CORPORATE INFORMATION
DIRECTORS
Executive Directors Cheung Keng Ching (Chairman) Chou Mei Chan Ching Kee, William (appointed on 25 October 2006 and resigned on 19 January 2007) Chung Kam Fung, Kennis (appointed on 25 October 2006 and resigned on 26 March 2007) Independent Non-executive Directors Lo Siu Tong, Alfred Wong Lai Wah, Ada Tam Tak Wah Wan Ngar Yin, David
AUDITOR
Horwath Hong Kong CPA Limited
PRINCIPAL BANKERS
The Hong Kong and Shanghai Banking Corporation Limited Standard Chartered Bank
REGISTERED OFFICE
Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY1-1111 Cayman Islands
(appointed on 11 June 2007) (resigned on 30 March 2007)
COMPANY SECRETARY AND QUALIFIED ACCOUNTANT
HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS

23rd Floor Chun Wo Commercial Centre 23 - 29 Wing Wo Street Central Hong Kong
02
Cheung Yiu Fai Hung Chung Wah
Chan Hung Kwan
Lo Suet Fan
(resigned on 8 May 2006) (appointed on 1 June 2006 and resigned on 31 July 2006) (appointed on 31 July 2006 and resigned on 4 April 2007) (appointed on 4 April 2007)
PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Bank of Bermuda (Cayman) Limited P.O. Box 513 G.T. Strathvale House North Church Street George Town Grand Cayman KY1-1106 Cayman Islands British West Indies
AUTHORISED REPRESENTATIVES
Cheung Keng Ching Hung Chung Wah (appointed on 1 June 2006 and resigned on 31 July 2006) (appointed on 31 July 2006 and resigned on 4 April 2007) (appointed on 4 April 2007)
Chan Hung Kwan
Lo Suet Fan
AUDIT COMMITTEE
Lo Siu Tong, Alfred Wong Lai Wah, Ada Tam Tak Wah Wan Ngar Yin, David
HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE

Tengis Limited 26/F., Tesbury Centre 28 Queens Road East Wanchai Hong Kong
(appointed on 11 June 2007) (resigned on 30 March 2007)
REMUNERATION COMMITTEE
Cheung Keng Ching Lo Siu Tong, Alfred Wan Ngar Yin, David
HKEX STOCK CODE

1142
(resigned on 30 March 2007)
Rontex International Holdings Limited
CHAIRMANS STATEMENT
On behalf of the board of directors (the Board) of Rontex International Holdings Limited (the Company), I am pleased to present to the shareholders the annual results of the Company and its subsidiaries (together the Group) for the year ended 31 March 2007. The year under review is a challenging year for the Group. The Group has continued to focus on garments and premium products trading. While the market competition remains keen, the Group has undergone a number of changes to preserve its competitive edge, such as to implement stringent cost control; to reinforce its sales and marketing team and to geographically diversify to Europe, South America and North America markets. In addition, the Group will continue to seek for business opportunities with a view to improve the competitiveness of the Group. The Group envisages that any new businesses, if takes place, will be complementary to the existing core businesses and/or are individually self-sustained with prospects. The Group believes that such a strategy would provide a long-term growth and will ultimately create value to the shareholders of the Company. The Group will constantly review its financial resources and will consider various plans to enhance its financial capabilities. The Group believes that to broaden its shareholders base would provide a solid ground for the Group to grow. During the year under review, the Company has issued 260,000,000 unlisted warrants to independent investors which will raise in total approximately HK$11 million assuming that all warrants will be exercised by the investors. On behalf of the Board, I would like to take this opportunity to thank our board of directors, shareholders, business partners and for the dedication and hardwork of our staff members during the fiscal years.
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Cheung Keng Ching Chairman Hong Kong, 31 July 2007
Annual Report 2007
MANAGEMENT DISCUSSION AND ANALYSIS

FINANCIAL REVIEW
For the year ended 31 March 2007, the Group recorded a turnover of approximately HK$166.4 million (2006: HK$194.3 million), representing a decrease of approximately 14.4% as compared to the previous year. Despite the decrease in turnover, the Group was able to maintain the gross profit margin as compared with the previous year. The gross profit margin for the year under review was approximately HK$26.4 million or 15.8% of the turnover of the year while the corresponding amount in the preceding year was approximately HK$30.1 million or 15.5% of the turnover of the preceding year. The operating loss was approximately HK$1.7 million (2006: HK$10.4 million) which was mainly attributable to (i) the relatively low profit margin of our PRC joint ventures in Ningbo and Huzhou, as both production plants were facing a higher cost of production in terms of raw materials, fuel and labor; (ii) the increase in costs of sales as a result of the appreciation in Renminbi and (iii) the general falling trend in selling prices of garment products under keen competition. Nevertheless, the loss for the year was improved as compared to the previous year. During the year under review, the Group recorded a loss attributable to equity holders of the Company of approximately HK$38.6 million (2006: HK$36.9 million). This was mainly due to an impairment loss on goodwill of approximately HK$19.5 million and the agreed settlement with the Inland Revenue Department of the additional profits tax assessments, tax penalties and surcharges for the previous years for certain subsidiaries of the Group in an aggregate amount of approximately HK$11.1 million.
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OPERATION REVIEW
Garment products Garment products business has continued to be the major source of revenue of the Group. For the year ended 31 March 2007, garment products accounted for approximately 95.9% (2006: 95.9%) of the Groups turnover. Revenue derived from garment product businesses decreased by approximately 14.3% to approximately HK$160 million. The decrease in turnover was mainly due to the change in accounting treatment as a result of the change of status of Rontex Co., Ltd. from a subsidiary into a jointly-controlled entity since 1 October 2006. Thus, the turnover of Rontex Co. Ltd. was not incorporated in the Groups turnover since then. Loss attributable to garment products was approximately HK$2.6 million (2006: HK$9.3 million). This was mainly due to the low profit margin in the PRC joint ventures, the general increase in cost of sales and the keen competition which drove down the selling prices of garment products. Premium products For the year ended 31 March 2007, the revenue of premium products accounted for approximately 4.1% (2006: 4.1%) of the turnover of the Group. The revenue and operating profit of premium products were approximately HK$6.9 million (2006: HK$8.1 million) and HK$0.9 million (2006: loss HK$1.0 million) respectively. Geographical Chile continues to be the Groups major market segment which accounted for approximately 56.1% (2006: 48.1%) of the total revenue. China market being the second largest market of the Group attributed to approximately 14.7% (2006: 10.0%) of total revenue. Other markets include various countries located in Europe, North America, South America and Australia.

PROSPECTS
In view of the sustaining growth of the PRC market and the recovery of the global economy, the Directors have to reap the emerging opportunities by expanding to new markets. During the year under review, the Group has progressively developed in markets like Argentina, Brazil, Mexico and Poland etc. The Group will try to build up a close trading relationship in these newly explored markets and continue to explore other new markets such as the United States of America and Greece. The Directors have noticed the high operating costs in both Hong Kong and the PRC which are eroding our profit margin. The Group will continue to carry out and reinforce stringent control measures so as to improve the efficiency in operation and to minimize the operating costs. The Group will also implement conservative strategies on new investments and assess the prospects of the existing investments in light of the current market environment.
LIQUIDITY AND FINANCIAL RESOURCES

As at 31 March 2007, the Group had net current liabilities of approximately HK$8.5 million (2006: HK$15.4 million). The Groups current ratio, being a ratio of current assets to current liabilities, was approximately 78.1% (2006: 60.4%) and the Groups gearing ratio, being a ratio of total interest-bearing borrowings to total assets, was maintained at a level of approximately 21.5% (2006: 10.6%). The Group generally finances its operations with internally generated cash flow, facilities provided by its banks in Hong Kong and the PRC and the capital market in Hong Kong available for listed companies. During the year under review, the Group recorded a net cash inflow of approximately HK$0.4 million (2006: HK$1.0 million), which increased the total cash and cash equivalents to approximately HK$4.0 million as at the balance sheet date.
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EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND RELATED HEDGES

Interest-bearing bank borrowings of the Group as at 31 March 2007 include bank loans of approximately HK$5.8 million (2006: HK$7.8 million), which were denominated in Renminbi. The bank borrowings are at interest rates of 5.58% to 7.26% per annum. As the Groups transactions are mostly settled by Hong Kong dollars, Renminbi and United States dollars and the existing currency peg of Hong Kong dollars with United States dollars will likely to remain steady in the near future; the exposure to foreign exchange fluctuations is limited, however, the use of financial instruments for hedging purposes will be considered when necessary.
INVESTMENTS, ACQUISITIONS AND DISPOSALS

During the year under review, the Group did not acquire or dispose of any material investments or subsidiaries.
CONTINGENT LIABILITIES
As at 31 March 2007, the Group had contingent liabilities arising from long service payment of approximately HK$0.2 million (2006: HK$0.1 million).
Annual Report 2007

CAPITAL COMMITMENT
As at 31 March 2007, the Group had no material capital commitment.
PLEDGE OF ASSETS
The Groups banking facilities are secured by the Groups land and buildings located in Hong Kong and the PRC with a total carrying value of approximately HK$21.3 million (2006: HK$27.9 million) as at 31 March 2007.
SHARE OPTION SCHEME

The Group has adopted share option schemes whereby Directors, employees and consultants of the Group may be granted options to subscribe for the shares of the Company. Details of the share option scheme are set out in note 28 to the financial statements.
EMPLOYEES AND REMUNERATION POLICIES

As at 31 March 2007, the Group had approximately 150 staff and workers in Hong Kong and the PRC.
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The Group remunerates its employees largely based on industry practice. Remuneration packages comprise salary, commissions and bonuses based on individual performance.
REPORT OF THE DIRECTORS

The board of directors (the Board) of Rontex International Holdings Limited (the Company) presents their report together with the audited financial statements of the Company and its subsidiaries (hereinafter collectively referred to as the Group) for the year ended 31 March 2007.
PRINCIPAL ACTIVITIES
The principal activity of the Company is investment holding. Details of the principal activities of the subsidiaries are set out in note 16 to the financial statements. There were no significant changes in the nature of the Groups principal activities during the year.
RESULTS AND APPROPRIATION

The results of the Group for the year ended 31 March 2007 and the state of affairs of the Group and the Company as at 31 March 2007 are set out on pages 22 to 77. The Board does not recommend the payment of a dividend (2006: Nil).
SEGMENT INFORMATION
An analysis of the Groups turnover and contribution to results by principal activities and geographical segments of operations for the year ended 31 March 2007 is set out in note 6 to the financial statements.
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FIVE-YEAR FINANCIAL SUMMARY

A summary of the published results and of the assets and liabilities of the Group is set out on page 78.
RESERVES
Details of movements in the reserves of the Company and the Group during the year are set out in note 27 to the financial statements and consolidated statement of changes in equity respectively. As at 31 March 2007, the Companys reserves available for cash distribution and/or distribution in specie, calculated in accordance with the Companies Law (2001 Second Revision) of the Cayman Islands, amounted to HK$15,126,000 (2006: HK$71,741,000). Under the laws of the Cayman Islands, a company may make distributions to its members out of the contributed surplus account under certain circumstances. In addition, the Companys share premium account amounted to HK$22,594,000 (2006: HK$15,294,000) may be distributed in the form of fully paid bonus shares.
PROPERTY, PLANT AND EQUIPMENT

Movements in property, plant and equipment of the Group during the year are set out in note 15 to the financial statements.
Annual Report 2007

SHARE CAPITAL, SHARE OPTIONS AND UNLISTED WARRANTS
Details of movements in the Companys share capital, share options and outstanding unlisted warrants are set out in notes 26, 28 and 29 respectively to the financial statements.
DONATION
The Group did not make any charitable donation during the year.
PRE-EMPTIVE RIGHTS
There are no provisions for pre-emptive rights under the Companys articles of association or the laws of the Cayman Islands, being the jurisdiction in which the Company is incorporated, which would oblige the Company to offer new shares on a pro rata basis to existing shareholders.
PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY

The Company has not redeemed any of its shares during the year. Neither the Company, nor any of its subsidiaries
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purchased, redeemed or sold any of the Companys listed securities during the year.
MAJOR CUSTOMERS AND SUPPLIERS

Sales to the Groups five largest customers accounted for approximately 42.4% of the Groups total turnover for the year. In particular, sales to the largest customer of the Group accounted for approximately 14% of the Groups total turnover for the year. Purchases from the Groups five largest suppliers accounted for approximately 50.9% of the Groups total purchases for the year. In particular, purchases from the Groups largest supplier accounted for approximately 14.4% of the Groups total purchases for the year. None of the directors of the Company, their associates (as defined in the Listing Rules) or any shareholder (which, to the knowledge of the directors of the Company own more than 5% of the Companys issued share capital) had any beneficial interests in the Groups five largest customers or suppliers.

DIRECTORS
The directors of the Company during the year and up to the date of this report were: Executive directors Mr. Cheung Keng Ching (Chairman) Ms. Chou Mei Mr. Chan Ching Kee, William (appointed on 25 October 2006 and resigned on 19 January 2007) Ms. Chung Kam Fung, Kennis (appointed on 25 October 2006 and resigned on 26 March 2007) Independent non-executive directors Mr. Lo Siu Tong, Alfred Ms. Wong Lai Wah, Ada Mr. Tam Tak Wah (appointed on 11 June 2007) Mr. Wan Ngar Yin, David (resigned on 30 March 2007) In accordance with the Companys articles of association, Mr. Cheung Keng Ching, Ms. Chou Mei and Mr. Tam Tak Wah shall retire and being eligible, offer themselves for re-election at the forthcoming annual general meeting.
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DIRECTORS SERVICE CONTRACTS

Each of the current executive directors of the Company has entered into a service contract with the Company for an initial fixed term of three years commencing from 19 October 2002 and which will continue thereafter until the contract is terminated by not less than three months notice in writing served by either party to the other. All independent non-executive directors of the Company have no fixed terms of appointment. No service agreement has been or will be entered into between the Company and either of them. Save as disclosed above, no director of the Company proposed for re-election at the forthcoming annual general meeting has a service contract with the Company which is not determinable by the Company within one year without payment of compensation, other than statutory compensation.
DIRECTORS INTERESTS IN CONTRACTS

No contracts of significance in relation to the Groups business to which the Company, its holding company or any of its subsidiaries was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.
Annual Report 2007

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT
Executive directors Mr. Cheung Keng Ching, aged 55, is the founder of the Group and chairman of the Group. Prior to the establishment of the Group in 1987, he was the merchandising manager of a trading company. Mr. Cheung has over 18 years experience in trading of garment and premium products. He is responsible for the overall business strategy and merchandising functions of the Group. He is the spouse of Ms. Chou Mei. Ms. Chou Mei, aged 47, is the co-founder of the Group and an executive director. Ms. Chou has over 18 years experience in trading of garment and premium products. She is responsible for the procurement functions of the Group. Prior to establishing the Group in 1987, she was an executive secretary of a trading company in Taiwan. She is the spouse of Mr. Cheung Keng Ching. Independent non-executive directors Mr. Lo Siu Tong, Alfred, aged 58, is a fellow member of the Institute of Housing, the United Kingdom. Mr. Lo has been a senior civil servant of the Hong Kong Government and has valuable experience in the field of management of more than 27 years. Mr. Tam Tak Wah, aged 41, is a fellow member of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants of the United Kingdom. He has over 18 years of experience in accounting, corporate finance and corporate development. He is currently an independent non-executive director of Vertex Group Limited, a company listed on the GEM Board of the Stock Exchange. Ms. Wong Lai Wah, Ada, aged 59, is a merchant. She has more than 26 years experience in the field of trading. Senior management Mr. Han Shen Jun, aged 41, is the director and general manager of Beijing Rontex Garments Co, Ltd. (Rontex (Beijing)). He is responsible for the overall financial control and administration of Rontex (Beijing). He has over 10 years of experience in the textile and garment industry. Mr. Niu Teng, aged 38, is the general manager of Rontex Co., Ltd. in Ningbo of the PRC. He is responsible for its overall daily operations and management. He has 12 years of experience in textile and trading industries. Ms. Lo Suet Fan, aged 41, is the financial controller, company secretary, authorised representative and qualified accountant of the Company. She is an associate member of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Association of Chartered Certified Accountants of the United Kingdom. She has extensive experience in accounting and financial management.
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DIRECTORS INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES OF THE COMPANY
At 31 March 2007, the interests and short positions of the directors of the Company in the shares and underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the SFO)), as recorded in the register required to be kept by the Company under Section 352 of the SFO, or as notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, were as follows: (i) Shares of HK$0.01 each in the Company Number of Issued ordinary Name Executive directors: Mr. Cheung Keng Ching (Mr. Cheung) (Note1 & 2) Ms. Chou Mei (Ms. Chou) (Note1 & 3) Beneficial Owner Corporate Corporate 982,800,000 Long position 982,800,000 Long position 5,500,000 Long position Independent non-executive director: Mr. Lo Siu Tong, Alfred Beneficial Owner 96,000 Long position
Note 1: These shares held by Mr. Cheung and Ms. Chou respectively refer to the same parcel of shares which are registered in the name of Star Master International Limited (Star Master). The entire issued share capital of Star Master is legally and beneficially owned by Mr. Cheung and Ms. Chou as to 50% and 50% respectively. As spouse, Mr. Cheung and Ms. Chou are respectively deemed to be interested in the shares held by each other in the Company. Note 2: Mr. Cheung also owns 12,900,000 share options under the share option scheme of the Company which have the rights to acquire 12,900,000 shares, details of which are separately disclosed in note 28 to the financial statements. Note 3: Ms. Chou also owns 7,400,000 share options under the share option scheme of the Company which have the rights to acquire 7,400,000 shares, details of which are separately disclosed in note 28 to the financial statements.
Percentage of the Issued share capital of the Company
Capacity
Shares held
54.37%
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54.37%
0.3%
0.005%
Annual Report 2007

(ii) Shares of US$1.00 each in Star Master, the associated corporation of the Company Number of Name Executive directors: Mr. Cheung Keng Ching Corporate (Note) 982,800,000 Long position 54.37% Capacity shares held Percentage of shareholding
Ms. Chou Mei
Corporate (Note)
982,800,000 Long position
54.37%
Note: These shares held by Mr. Cheung and Ms. Chou respectively refer to the same parcel of shares. Each of Mr. Cheung and Ms. Chou legally and beneficially owns 500 shares each of Star Master. As spouse, Mr. Cheung and Ms. Chou are respectively deemed to be interested in the shares held by each other in the Star Master.
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Save as disclosed above, and save for nominee shares in certain subsidiaries held in trust for the Group at 31 March 2007, neither the directors of the Company, nor any of their associates, had any interest or short positions in any shares and underlying shares or debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO), as recorded in the register required to be kept by the Company under Section 352 of the SFO, or as notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies. DIRECTORS RIGHTS TO ACQUIRE SHARES OR DEBENTURES Save as disclosed in the share option scheme in note 28 to the financial statements, at no time during the year were rights to acquire benefits by means of the acquisition of shares in or debentures of the Company granted to any director of the Company or their respective spouse or children under 18 years of age, or were any such rights exercised by them, or was the Company, its holding company or any of its subsidiaries a party to any arrangement to enable the directors of the Company to acquire such rights in any other body corporate.
SHARE OPTION SCHEME

On 19 October 2002, the Company had adopted a share option scheme (the Scheme). Further details of the Scheme and share options granted during the year to the directors of the Company, and employees and consultants of the Group are set out in note 28 to the financial statements.

SUBSTANTIAL SHAREHOLDERS
At 31 March 2007, the following interests of 5% or more in the share capital of the Company were recorded in the register of interests required to be kept by the Company pursuant to Section 16(1) of the SDI Ordinance: Percentage of the Number of Name of shareholder Star Master Capacity Beneficial owner Shares held 982,800,000 Long position
Note: The entire issued share capital of Star Master is legally and beneficially owned by Mr. Cheung and Ms. Chou as to 50% and 50% respectively.
Issued share capital of the Company 54.37%
Save as disclosed above, no other party was recorded in the register of interests in shares and short positions of substantial shareholders kept pursuant to section 336 of SFO as having an interest in 5% or more of the nominal value of the issued ordinary shares that carry a right to vote in all circumstances at general meetings of the Company.
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CORPORATE GOVERNANCE
The Company is committed to maintaining a high standard of corporate governance practices. Information on the corporate governance practices adopted by the Company is set out in the Corporate Governance Report on pages 15 to 19 to the annual report.
POST BALANCE SHEET EVENTS

Details of the significant post balance sheet events of the Group are set out in note 36 to the financial statements.
SUFFICIENCY OF PUBLIC FLOAT

Based on information that is publicly available to the Company and within the knowledge of its Directors as at the latest practicable date prior to the issue of this report, there is sufficient public float of more than 25% of the issued share capital of the Company as required under the Listing Rules.
Annual Report 2007

AUDITOR
During the year, Messrs HLB Hodgen Imprey Cheng resigned and Horwath Hong Kong CPA Limited was appointed as auditor of the Company. The financial statements have been audited by Horwath Hong Kong CPA Limited who retire and, being eligible, offer themselves for re-appointment. A resolution for the re-appointment of Horwath Hong Kong CPA Limited as auditor of the Company will be proposed at the forthcoming annual general meeting.
On behalf of the Board
Cheung Keng Ching Chairman Hong Kong, 25 July 2007
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CORPORATE GOVERNANCE REPORT

INTRODUCTION
Maintaining high standards of business ethics and corporate governance practices has always been one of the Companys goals. The corporate governance principles of the Company emphasize a quality board, sound internal control, transparency and accountability to all shareholders. This report describes its corporate governance practices, explains the applications of the principles of the Code on Corporate Governance (the Code) as set out in Appendix 14 of the Listing Rules. The board of directors (the Board) has reviewed the Companys corporate governance practices and is of the opinion that the Company has met the provisions set out in the Code except that: (i) the roles of chairman and chief executive officer are not separate and are performed by the same individual, (ii) the non-executive directors are not appointed for a specific term but are subject to retirement by rotation and re-election pursuant to the Companys articles of association (the Articles), and (iii) pursuant Rules 3.10 and 3.21 of the Listing Rules, the Board and Audit Committee must include at least one independent non-executive director who must have appropriate professional qualifications or accounting or related financial management expertise. The Company was unable to comply with these rules during the period when Mr. Wan Ngar Yin, David resigned on 30 March 2007 until the appointment of Mr. Tam Tak Wah on 11 June 2007.
CORPORATE GOVERNANCE PRACTICES

Save as disclosed in this report, the Company has complied with the provisions of the Code. The Company believes that by achieving high standard of corporate governance, the corporate value and accountability of the Company can be enhanced and the shareholders interests can be maximized. The Board has continued to monitor and review the Companys progress in respect of corporate governance practices to ensure compliance. Meetings were held throughout the year and where appropriate, circulars and other guidance notes were issued to Directors and senior management of the Company to enhance their awareness of good corporate governance practices and keep them abreast of the latest development of the Listing Rules and other regulatory requirements.
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DIRECTORS SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code) set out in Appendix 10 of the Listing Rules. Following specific enquiry by the Company, all Directors confirmed that they have complied with the required standards as set out in the Model Code throughout the year under review.
BOARD OF DIRECTORS
The Board comprises five Directors, of whom two are executive Directors and three are independent nonexecutive Directors (the INED). The Board believes that as the number of INEDs exceeds the number of executive Directors, the composition of the Board is adequate to provide checks and balances that safeguard the interests of shareholders and the Group. The INEDs provide the Group with different expertise and experience. Their participation in Board meetings could bring independent judgment on issues relating to the Groups strategy, internal control and performance to ensure the interests of the shareholders are taken into account. The Company has received from each of the INEDs an annual confirmation of their independence and considers that all the INEDs are independent under the guidelines set out in Rule 3.13 of the Listing Rules.
Annual Report 2007

The Company has set out the respective functions and responsibilities reserved to the Board and those delegated to management. The Board delegated day-to-day operations of the Group to executive Directors and senior management while reserving certain key matters for its approval. The Board is responsible for approving and monitoring the Companys overall strategies and policies, overseeing the financial position of the Group, approving business plans, evaluating the performance of the Company and supervising the performance of the management. Decisions of the Board are communicated to the management through executive Directors who have attended Board meetings. The members of the Board during the year under review were: Executive Directors: Cheung Keng Ching (Chairman) Chou Mei Chan Ching Kee, William Chung Kam Fung, Kennis (appointed on 25 October 2006 and resigned on 19 January 2007) (appointed on 25 October 2006 and resigned on 26 March 2007)
Independent Non-Executive Directors:
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Lo Siu Tong, Alfred Wong Lai Wah, Ada Tam Tak Wah Wan Ngar Yin, David (appointed on 11 June 2007) (resigned on 30 March 2007)
Brief biographical details of the Directors are set out in the Biographical Details of Directors and Senior Management section in the Report of the Directors on page 10 of this annual report. The Board meets regularly to discuss the overall strategy as well as the operation and financial performance of the Group, in addition to the meetings for reviewing and approving the Groups annual and interim results. During the year under review, 38 Board meetings were held and attendance of each Director at the Board meetings is set out as follows: Directors Executive Directors Cheung Keng Ching Chou Mei Chan Ching Kee, William Chung Kam Fung, Kennis (resigned) (resigned) 38/38 38/38 6/6 25/27 Attendance
Independent non-executive Directors Lo Siu Tong, Alfred Tam Tak Wah Wong Lai Wah, Ada Wan Ngar Yin, David (resigned) 12/38 0/0 13/38 16/38

Under the code provision A4.1 of the Code, non-executive should be appointed for a specific term and subject to re-election. However, all of the INEDs have not been appointed for a specific term and they are subject to retirement by rotation and re-election at the annual general meeting of the Company in accordance with the Articles. Pursuant to the Rule 3.10 of the Listing Rules, the Board must include at least three independent non-executive directors and one of them must have appropriate professional qualifications or accounting or related financial management expertise. The Company was unable to comply with this rule during the period when Mr. Wan Ngar Yin, David resigned on 30 March 2007 until the appointment of Mr. Tam Tak Wah on 11 June 2007.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Under code provision A.2.1 of the Code, the roles of chairman and chief executive officer should be separate and should not be performed by the same individual. Mr. Cheung Keng Ching has combined the role of chairman and chief executive officer. The Board considers that as Mr. Cheung is the founder of the Group, the appointment of Mr. Cheung as the chairman and chief executive officer of the Group is beneficial to the Group as he has indepth understanding of the operation of the Group and considerable experience in the industry. The Board considers that this structure will not impair the balance of power and authority between Board and the management of the Company. The balance of power and authority is ensured by the composition of the Board which comprises experienced and professional INEDs and experienced management team. Given the fact that Mr. Cheung is the founder of the Group, the Board considers that appointing Mr. Cheung as the chairman and chief executive officer will maximize the effectiveness of its operations. However, the Board will review the existing structure from time to time.
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APPOINTMENT AND RE-ELECTION OF DIRECTORS

The Board is responsible for the appointment of any potential new directors and the nomination of directors for re-election by shareholders at the annual general meeting of the Company. In accordance with the Articles, the Directors shall have the power from time to time and at any time to appoint any person as a director either to fill a casual vacancy on the Board or as an addition to the existing Board, whom is subject to retirement and reelection at the first annual general meeting after his appointment and shall then be eligible for re-election. Furthermore, every Director shall retire from office no later than the third annual general meeting after he was last elected or re-elected.
REMUNERATION COMMITTEE
The Remuneration Committee was established in December 2005. The chairman of the committee was Mr. Cheung Keng Ching (executive Director) and other members included Mr. Wan Ngar Yin, David (resigned on 30 March 2007) and Mr. Lo Siu Tong, Alfred. The Remuneration Committee is responsible for formulating and recommending the Board in relation to the remuneration policy, determining the remuneration of executive Directors and members of the senior management of the Company, and reviewing and making recommendations on the Companys share option scheme, other compensation-related issues and performance based remuneration.
Annual Report 2007

Individual attendance of each remuneration committee member during the year under review is as follows: Members Cheung Keng Ching Lo Siu Tong, Alfred Wan Ngar Yin, David (resigned on 30 March 2007) Attendance 2/2 2/2 2/2
The Remuneration Committee is provided with resources enabling it to discharge its duties including access to relevant and timely information, support of independent professional advice if and when necessary. During the year under review, the Remuneration Committee held two meetings. Regular meetings of the Remuneration Committee will be held to discuss remuneration and compensation related issues.
AUDIT COMMITTEE
The Audit Committee comprises three INEDs of the Company, namely Mr. Tam Tak Wah (Chairman, appointed on 11 June 2007), Mr. Lo Siu Tong, Alfred and Ms. Wong Lai Wah, Ada. Mr. Wan Ngar Yin, David has been the chairman of the Audit Committee from 3 January 2006.until he resigned on 30 March 2007. The Committee is responsible for appointing external auditors, reviewing the Groups financial information and overseeing the Groups financial reporting system and internal control procedures. It is also responsible for reviewing the interim and final results of the Group prior to recommending them to the Board for approval. Management of the Company provides the Board with all relevant information the Committee needs for it to discharge its responsibilities. The Committee meets regularly to review financial reporting and internal control matters and has unrestricted access to the support of both the Companys management and auditors. The Audit Committee held four meetings in the year under review, in which the committee reviewed with management the accounting principles and practices adopted by the Group and discussed auditing, internal controls and financial reporting matters so as to ensure that an effective control environment is maintained. Individual attendance of each audit committee member during the year under review is as follows: Members Lo Siu Tong, Alfred Tam Tak Wah Wan Ngar Yin, David Wong Lai Wah, Ada (appointed on 11 June 2007) (resigned on 30 March 2007) Attendance 3/4 0/0 4/4 4/4
18
Pursuant to the Rule 3.21 of the Listing Rules, the Audit Committee must comprise a minimum of three members, at least one of whom is an INED with appropriate professional qualifications or accounting or related financial management expertise. The Company was unable to comply with this rule during the period when Mr. Wan Ngar Yin, David resigned on 30 March 2007 until the appointment of Mr. Tam Tak Wah on 11 June 2007.

AUDITORS REMUNERATION
During the year under review, total auditors remuneration charged in relation to statutory audit work of the Group amounted to HK$680,000 (2006: HK$449,000)and non-audit services rendered amounted to HK$Nil (2006: HK$Nil). During the year, Messrs HLB Hodgen Imprey Cheng resigned and Horwath Hong Kong CPA Limited was appointed as the auditor of the Company.
NOMINATION OF DIRECTORS
The Board has the power to appoint Directors pursuant to the Articles. During the year ended 31 March 2007, the Board has appointed two (2) Directors to enhance the management functions.
ACCOUNTABILITY AND INTERNAL CONTROL

The Directors acknowledge that they are responsible for (i) preparing financial statements for each financial year which give a true and fair view of the state of affairs of the Group, and (ii) presenting a clear, balanced and understandable assessment of the Groups performance and prospects in the Companys annual and interim report, price-sensitive announcements and other financial disclosures required under the Listing Rules and such other matters as the regulators may request. Except for those stated in note 2 to the financial statements, the Board is not aware of any material uncertainties relating to the events or condition that might cast doubt upon the Companys ability to continue as a going concern. Accordingly, the Board has prepared the financial statements of the Company on a going concern basis. The Board has overall responsibility for monitoring the internal control of the Group and reviewing its effectiveness. The Board is committed to implement an effective and sound internal control system to safeguard the interest of shareholders and the Groups assets. The Board has delegated to the management the implementation of the internal control system within an established framework.
19
INVESTORS RELATIONS
To foster effective communications, the Company provided all necessary information to its shareholders in its annual report, interim report and announcements. The Directors host annual general meeting each year to meet the shareholders so as to ensure that the shareholders view is communicated to the Board. Directors will make efforts to attend the annual general meetings so that they could communicate with the shareholders and answer their questions.
Annual Report 2007
INDEPENDENT AUDITORS REPORT
Horwath Hong Kong CPA Limited

2001 Central Plaza 18 Harbour Road Wanchai, Hong Kong Telephone : (852) 2526 2191 Facsimile : (852) 2810 0502 horwath@horwath.com.hk www.horwath.com.hk
TO THE SHAREHOLDERS OF RONTEX INTERNATIONAL HOLDINGS LIMITED (Incorporated in the Cayman Islands with limited liability) We have audited the consolidated financial statements of Rontex International Holdings Limited (the company) and its subsidiaries (collectively referred to as the group) set out on pages 22 to 77, which comprise the consolidated and company balance sheets as at 31 March 2007, and the consolidated income statement, the consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.
20
DIRECTORS RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The directors are responsible for the preparation and the true and fair presentation of these financial statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; 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 and to report our opinion solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.
INDEPENDENT AUDITORS REPORT

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors 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 entitys preparation and true 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 entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, 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, the consolidated financial statements give a true and fair view of the state of affairs of the company and of the group as at 31 March 2007 and of the loss and cash flows of the group for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. Without qualifying our opinion, we draw attention to note 2 to the financial statements which indicates that the group incurred consolidated loss before minority interest of approximately HK$39,354,000 during the year ended 31 March 2007 and, as of that date, the group reported consolidated net current liabilities of approximately HK$8,515,000. These conditions indicate the existence of a material uncertainty which may cast significant doubt on the groups ability to continue as a going concern. The financial statements have been prepared on a going concern basis, the validity of which depends upon the measures undertaken by the group to improve its working capital and the financial support of the companys substantial shareholders in providing adequate funds to finance the working capital requirements of the group. Our opinion is not qualified in this respect. Without qualifying our opinion, we draw attention to the fact that the auditors report dated 25 July 2006 on the groups financial statements for the year ended 31 March 2006, which form the basis for the comparatives presented in the current years financial statements, was qualified on account of the limitation on the scope to the fundamental uncertainties relating to the going concern basis.
21
HORWATH HONG KONG CPA LIMITED Certified Public Accountants 25 July 2007 Shiu Hong Ng Practising Certificate number P03752
2001 Central Plaza 18 Harbour Road Wanchai Hong Kong
Annual Report 2007
CONSOLIDATED INCOME STATEMENT

For the year ended 31 March 2007 (Expressed in Hong Kong dollars)
Note
2007 $000
2006 $000 194,281 (164,221) 30,060 654 (4,831) (858) (11,108) (24,301)
Turnover Cost of sales Gross profit Other revenue and gains Impairment loss on property, plant and equipment Impairment loss on trade and other receivables Selling and distribution costs Administrative expenses
166,429 (140,060) 26,369
801 (354) (11,517) (16,958)
Operating loss Finance costs 8 11(ii) 19 Tax penalties and surcharges Impairment loss on available-for-sale investments Impairment loss on goodwill Share of results of associates Share of results of a jointly-controlled entity Loss before taxation Income tax Loss for the year Attributable to: Equity holders of the Company Minority interest 9 11
(1,659) (2,728) (3,759) (19,458) (1,480) (2,439) (31,523) (7,831) (39,354)
(10,384) (3,651) (23,657) (915) (38,607) (38,607)
22
(38,684) (670) (39,354)
(36,945) (1,662) (38,607)
Loss per share attributable to equity holders of the Company Basic (HK cents) Diluted (HK cents) 13 13 2.353 N/A 2.267 N/A
CONSOLIDATED BALANCE SHEET

At 31 March 2007 (Expressed in Hong Kong dollars)
Note
2007 $000
2006 $000
ASSETS AND LIABILITIES Non-current assets Leasehold land and land use rights Property, plant and equipment Interests in associates Interest in a jointly-controlled entity Goodwill Available-for-sale investments 14 15 17 18 19 20 12,646 12,146 15,110 2,631 1,573 44,106 Current assets Inventories Trade receivables Other receivables, deposits and prepayments Current tax recoverable Amounts due from related parties Cash and cash equivalents 11(ii), 34(c) 23 21 22 2,961 14,401 5,169 2,490 5,426 30,447 Current liabilities Interest-bearing bank borrowings, secured Trade payables Other payables, accrued expenses and trade deposits received Current tax payable Tax penalty and surcharge payables Amounts due to related parties 34(b) 7,657 3,833 2,939 4,256 38,962 Net current liabilities Net assets (8,515) 35,591 8,201 5,387 39,018 (15,443) 63,048 24 25 16,064 4,213 10,806 14,624 5,365 7,831 4,580 1,083 4,716 23,575 12,444 29,109 16,792 19,458 688 78,491
23
Annual Report 2007
CONSOLIDATED BALANCE SHEET

Note
2007 $000
2006 $000
EQUITY Share capital Reserves Equity attributable to equity holders of the Company Minority interest Total equity 26 18,075 15,028 33,103 2,488 35,591 16,295 39,143 55,438 7,610 63,048
24
These financial statements were approved and authorised for issue by the board of directors on 25 July 2007.
Cheung Keng Ching Director The accompanying notes form part of these financial statements.
Chou Mei Director
BALANCE SHEET
Note
2007 $000
2006 $000
ASSETS AND LIABILITIES Non-current assets Interests in subsidiaries Current assets Other receivables, deposits and prepayments Cash and cash equivalents 23 4,242 3,232 7,474 Current liabilities Other payables and accured expenses Due to subsidiaries 16 328 23,152 23,480 Net current liabilities Net assets EQUITY Share capital Reserves Total equity 26 27 18,075 15,126 33,201 16,295 71,741 88,036 (16,006) 33,201 19 23,144 23,163 (23,079) 88,036 60 24 84 16 49,207 111,115
25
These financial statements were approved and authorised for issue by the board of directors on 25 July 2007.
Cheung Keng Ching Director The accompanying notes form part of these financial statements.
Chou Mei Director
Annual Report 2007
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Availablefor-sale (Accumulated investment Share capital $000 (note 26) At 1 April 2005 Issue of new shares on exercise of bonus warrants Exchange differences arising on translation of overseas operations Net loss for the year At 31 March 2006 1,069 (36,945) 1,069 (36,945) (551) (1,662) 518 (38,607) 1 12 13 13 16,294 15,282 Share premium $000 Contributed surplus $000 (note a) 918 (7) Translation reserve $000 Capital reserve $000 (note b) 58,814 91,301 9,823 101,124 revaluation reserve $000 losses)/ retained profits $000 Sub-total $000 Minority interest $000 Total equity $000
26
and 1 April 2006 Contributions from equity holders of the company (note 11(ii)) Premium received on issue of warrants (note 29(a)) Issue of new shares on exercise of warrants Issue of share options (note 28) Issue of new shares on exercise of share options Reclassification of interest in a subsidiary into a jointly-controlled entity (note 31) Change in fair value of available-for-sale investments Exchange differences arising on translation of overseas operations Net loss for the year At 31 March 2007
16,295
15,294
918
1,062
21,869
55,438
7,610
63,048
4,233
4,233
4,233
900
3,765
2,296 (795) 800
2,296 3,870 800
2,296 3,870 800
880
3,535
(543)
3,872
3,872
(4,544)
(4,544)
885
885
885
18,075
22,594
918
393 1,455
5,991
885
(38,684) (16,815)
393 (38,684) 33,103
92 (670) 2,488
485 (39,354) 35,591
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

Note a:
As at the balance sheet date, the contributed surplus of the group represented the difference between the nominal value of share capital of the subsidiaries acquired pursuant to the group reorganisation during the year ended 31 March 2003, over the nominal value of the shares of the company issued in exchange therefor. As at the balance sheet date, the capital reserve of the group represented (i) the contributions from the equity holders of the company for indemnity of additional taxation liabilities penalties, surcharges and other relevant costs of the group in respect of any accounting period ended or before 31 March 2002, details of which are set out in note 11(ii) to the financial statements; (ii) premium received in respect of the outstanding warrants of the company; and (iii) the fair value at respective grant dates in respect of the outstanding share options of the company.
Note b:
The accompanying notes form part of these financial statements.
27
Annual Report 2007
CONSOLIDATED CASH FLOW STATEMENT

2007 $000 Operating activities Loss before taxation Adjustments for: Interest income Share option expense Depreciation Amortisation on leasehold land and land use rights Finance costs Share of results of associates Share of results of a jointly-controlled entity Loss on disposal of property, plant and equipment Taxation penalties and surcharges Impairment loss on inventories Impairment loss on property, plant and equipment Impairment loss on trade and other receivables Impairment loss on available-for-sale investments Impairment loss on goodwill Operating cash inflows/(outflows) before working capital changes (Increase)/decrease in inventories (Increase)/decrease in trade receivables (Increase)/decrease in other receivables, deposits and prepayments Decrease in trade payables (Decrease)/increase in other payables, accrued expenses and trade deposits received (Decrease)/increase in amounts due to related companies Cash (used in)/generated from operations Hong Kong profits tax paid Interest and bank charges paid Taxation penalties and surcharges paid Net cash (used in)/generated from operating activities (544) (1,131) (14,848) (2,915) (2,728) (820) (21,311) (1,737) (1,148) 1,742 (368) (11,662) (44) 800 1,452 248 2,728 1,480 2,439 127 3,759 464 354 19,458 (31,523)
2006 $000
(38,607) (133) 1,845 121 3,651 915 713 4,831 858 23,657
28
(2,149) 823 4,894 5,471 (2,271) 4,213 1,000 11,981 (440) (3,651) 7,890
CONSOLIDATED CASH FLOW STATEMENT (continued)

Note
2007 $000
2006 $000
Investing activities Reclassification of interest in a subsidiary into a jointly-controlled entity Interest received Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Purchase of land use rights Net cash used in investing activities Financing activities Proceeds from inception of bank loans and import and export loans Proceeds from issue of warrants Repayment of bank loans Capital element of finance lease rental payments Proceeds from issue of new shares on exercise of warrants Proceeds from issue of new shares on exercise of share options Contribution received from equity holders of the company (note 11(ii)) Net cash generated from/(used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes Cash and cash equivalents at end of year Analysis of the balances of cash and cash equivalents Cash and bank balances Bank overdrafts 5,426 (1,462) 3,964 The accompanying notes form part of these financial statements. 4,716 (939) 3,777 1,743 34,084 426 3,777 (239) 3,964 (2,470) 967 2,394 416 3,777 3,872 3,870 29,608 2,296 (7,305) 13 (2,404) (79) 55 (783) (12,347) (4,453) 31 (4,504) 44 (7,159) 133 (4,586)
29
Annual Report 2007
NOTES TO THE FINANCIAL STATEMENTS

(Expressed in Hong Kong dollars)
1.
ORGANISATION AND OPERATIONS

The company is a public limited company incorporated in the Cayman Islands and its shares are listed on The Stock Exchange of Hong Kong Limited (the Stock Exchange). The registered office of the company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, Cayman Islands. The company is an investment holding company. The principal activities of its principal subsidiaries are set out in note 16 to the financial statements.
2.
BASIS OF PRESENTATION
The financial statements have been prepared on a going concern basis notwithstanding the fact that the group incurred consolidated loss before minority interest of approximately $39,354,000 during the year ended 31 March 2007 and, as of that date, the group reported consolidated net current liabilities of approximately $8,515,000. As disclosed in note 36 to the financial statements, the company raised working capital of $6,126,000 in aggregate by way of issue of its new shares on exercise of certain warrants and share options of the company after the balance sheet date. In April and May 2007, the groups available-for-sale investments with an aggregate carrying value of $1,573,000 as at 31 March 2007 have been disposed of to independent third parties at a cash consideration of approximately $2,220,000. The substantial shareholders of the company have agreed to provide adequate funds to the group to meet its liabilities as they fall due. The groups unutilised banking facilities as at 30 June 2007 amounted to approximately $3,500,000. Based on the above, the directors of the company are satisfied that it is appropriate to prepare the groups consolidated financial statements on a going concern basis.
30

3.
ADOPTION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

In the current year, the group has adopted all the new and revised Hong Kong Financial Reporting Standards (HKFRSs) (which also include Hong Kong Accounting Standards (HKASs) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants that are relevant to its operations and effective for annual reporting periods beginning on or after 1 April 2006. The adoption of the new and revised HKFRSs did not result in substantial changes to the accounting policies of the company and the group nor have affected the amounts reported for the current or prior years, except for HKAS 39 & HKFRS 4 (Amendments). This amendment has revised the scope of HKAS 39 to require financial guarantee contracts issued that are not considered insurance contracts, to be recognised initially at fair value and to be remeasured at the higher of the amount determined in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18 Revenue. During the current and prior years, the company provided a guarantee to a bank in connection with bank loans and other banking facilities granted to its subsidiaries. The adoption of this amendment has had no material impact on these financial statements. At the date of authorisation of these financial statements, the following HKFRSs relevant to the group were in issue but not yet effective: Effective for annual periods beginning on or after HKAS 1 (Amendment) HKFRS 7 HK(IFRIC) Int 8 HK(IFRIC) Int 9 HK(IFRIC) Int 10 HK(IFRIC) Int 11 Capital Disclosures Financial Instruments: Disclosures Scope of HKFRS 2 Reassessment of Embedded Derivatives Interim Financial Reporting and Impairment HKFRS 2 Group and Treasury Share Transactions The group is in the process of making an assessment of what the impact of these new or revised HKFRSs is expected to be in the period of initial application. 1 January 2007 1 January 2007 1 May 2006 1 June 2006 1 November 2006 1 March 2007
31
Annual Report 2007

4.
PRINCIPAL ACCOUNTING POLICIES

(a) Statement of compliance These financial statements have been prepared in accordance with all applicable HKFRSs, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on the Stock Exchange (the Listing Rules). (b) Basis of preparation of financial statements The consolidated financial statements have been prepared under the historical cost convention, as modified for the revaluation of available-for-sale investments which are carried at fair value. (c) Consolidation The consolidated financial statements incorporate the financial statements of the company and its subsidiaries made up to 31 March each year.
32
The results of subsidiaries acquired and disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. All significant intercompany transactions, balances and unrealised gains on transactions between group enterprises are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment on the asset transferred. Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with those used by other members of the group. Minority interest in the net assets of consolidated subsidiaries is identified separately from the groups equity therein. Minority interest consists of the amount of the interest at the date of the original business combination and the minoritys share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minoritys interest in the subsidiarys 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 the losses.

4.
PRINCIPAL ACCOUNTING POLICIES (continued)

(d) 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 control of the acquiree, plus any costs directly attributable to the business combination. The acquirees identifiable assets, liabilities and contingent liabilities assumed in a business combination are recognised at their fair values at the acquisition date. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the acquisition over the groups interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the groups interest in the net fair value of the acquirees identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss. (e) Subsidiaries A subsidiary is an entity whose financial and operating policies the company controls, directly or indirectly, so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another enterprise. Interests in subsidiaries are included in the companys balance sheet at cost less any impairment losses. The results of subsidiaries are accounted for by the company on the basis of dividends received and receivable. (f) Associates An associate is an enterprise, not being a subsidiary nor an interest in a joint venture, over which the group is in a position to exercise significant influence, through participation in the financial and operating policy decisions of the investee. The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Under the equity method, interests in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the groups share of the net assets of the associates, less impairment in the value of individual investments. Losses of an associate in excess of the groups interest in that associate are not recognised. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Where a group enterprise transacts with an associate of the group, unrealised gains and losses are eliminated to the extent of the groups interest in the relevant associate, except where unrealised losses provide evidence of an impairment of the assets transferred.
33
Annual Report 2007

4.

(g) Joint venture A joint venture is a contractual arrangement whereby the group and other parties undertake an economic activity which is subject to joint control, that is when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control. Joint venture arrangement which involves the establishment of a separate entity in which each venturer has an interest is referred to as a jointly-controlled entity. The group reports its interest in a jointly-controlled entity using the equity method of accounting. Under the equity method, investment in a jointly-controlled entity is carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the groups share of the net assets of the jointly-controlled entity, less impairment in the value of individual investments. Losses of a jointly-controlled entity in excess of the groups interest in that jointly-controlled entity are not recognised. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Where a group enterprise transacts with a jointly-controlled entity of the group, unrealised gains and losses are eliminated to the extent of the groups interest in the joint venture, except where unrealised losses provide evidence of an impairment of the assets transferred. (h) Goodwill Goodwill represents the excess of the cost of acquisition over the groups 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. Goodwill on acquisitions of subsidiaries is presented separately. For the purpose of impairment testing, goodwill is allocated to each of the groups 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 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. Gain or loss on the disposal of a subsidiary or its underlying business includes the carrying amount of goodwill relating to the subsidiary or its underlying business sold.
34

4.

(i) Property, plant and equipment Buildings held for use in production or supply of goods or services, or for administrative purposes, are stated in the balance sheet at their historical cost, less any subsequent accumulated depreciation and accumulated impairment losses. Other property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Properties in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, are carried at cost less any recognised impairment losses. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the groups accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Historical cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and location for its intended use. Expenditure incurred after the asset has been put into operation, such as repairs and maintenance and overhaul costs, is charged to profit or loss in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of the assets, the expenditure is capitalised as an additional cost of the asset or a separate asset. Depreciation is charged so as to write off the cost of assets, other than properties under construction, over their estimated useful lives, using the straight-line method. The useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. The principal annual rates are as follows: Buildings Leasehold improvements Plant and machinery Furniture and fixtures Office equipment Motor vehicles 2% to 5% 20% 6.67% 20% 10% to 20% 10% to 30%
35
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the profit and loss.
Annual Report 2007

4.

(j) Impairment of assets excluding goodwill Assets that have an indefinite useful life are not subject to amortisation and tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment 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. 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 (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cashgenerating 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 (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the profit and loss, 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. (k) Inventories Inventories are stated at the lower of cost and net realisable value. Cost includes cost of purchase of materials computed using the first-in-first-out method and, in the case of work in progress and finished goods, direct labour and an appropriate proportion of production overheads. Net realisable value is determined by reference to the anticipated sales proceeds of items sold in the ordinary course of business less estimated selling expenses after the balance sheet date or to management estimates based on prevailing market conditions.
36

4.

(l) Financial instruments Financial assets and financial liabilities are recognised on the groups balance sheet when the group becomes a party to the contractual provisions of the instrument. (i) Trade and other receivables Receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Appropriate provisions for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. The provision recognised is measured as the difference between the assets carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. (ii) Investments Investments are recognised and derecognised on a trade date basis where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus directly attributable transaction costs. Investments other than held-to-maturity debt securities are classified as either investments held for trading or as available-for-sale, and are measured at subsequent reporting dates at fair value. For available-for-sale investments, gains and losses arising from changes in fair value are recognised directly in equity, until the security is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the profit or loss for the period. Impairment losses recognised in profit or loss for equity investments classified as available-for-sale are not subsequently reversed through profit or loss. (iii) Cash and cash equivalents Cash and cash equivalents comprise cash on hand and deposits held at call with banks, and other short-term highly liquid investments with original maturities of three months or less that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Bank overdrafts that are repayable on demand and form an integral part of the groups cash management are also included as a component of cash and cash equivalents for the purpose of the cash flow statement. (iv) Financial liabilities and equity Financial liabilities and equity instruments issued by the group are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity instruments are set out below.
37
Annual Report 2007

4.

(l) Financial instruments (continued) (v) Borrowings Interest-bearing bank loans, import and export loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate 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 groups accounting policy for borrowing costs. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. (vi) Warrants The premium received on issue of warrants is included in capital reserve under equity of the company until the warrants expire when it is released directly to accumulated losses.
38
(vii) Trade and other payables Payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. (viii) Equity instruments Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs. (m) Operating leases Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. The cost of acquiring land held under an operating lease is amortised on a straight-line basis over the period of the lease term.

4.

(n) Provisions and contingent liabilities Provisions are recognised for liabilities of uncertain timing or amount when the group has a legal or constructive obligation arising as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. (o) Taxation 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 income statement because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The groups liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax liabilities are provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised. However, 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. Taxation rates enacted or substantively enacted by the balance sheet date are used to determine deferred taxation. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, associates and joint-controlled entity, 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. 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.
39
Annual Report 2007

4.

(p) Translation of foreign currencies The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (functional currency). The consolidated financial statements are expressed in Hong Kong dollars 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, foreign currency transactions are translated into Hong Kong dollars, being the functional currency at the rates of exchange prevailing on the dates of the transactions. 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 the 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 groups foreign operation (including comparatives) are expressed in Hong Kong dollars using exchange rates prevailing on the balance sheet date. Income and expenses items (including comparatives) are translated at the average exchange rates at the dates of the transactions. Exchange differences arising, if any, are classified as equity and transferred to the groups translation reserve. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of. 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. (q) Employees benefits i) Short term benefits Employee entitlements to annual leave and long service payment 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.
40

4.

ii) Pension obligations Contributions to the Mandatory Provident Fund scheme as required under the Hong Kong Mandatory Provident Fund Schemes Ordinance are charged to profit or loss when incurred. The group has no further payment obligations once the contribution has been made. The employees of the groups subsidiary which operates in the Peoples Republic of China (the PRC) are required to participate in a central pension scheme operated by the local municipal government. This subsidiary is required to contribute certain percentage of its payroll costs to the central pension scheme. The contributions are charged to the profit or loss as they become payable in accordance with the rules of the central pension scheme. iii) Share-based payments The group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the groups estimate of the shares that will eventually vest and adjusted for the effect of non market-based vesting conditions. Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based on managements best estimate, for the effects of nontransferability, exercise restrictions and behavioural considerations. (r) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. (s) Related parties Two parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals (being members of key management personnel, significant shareholders and/or their close family members) or other entities and include entities which are under the significant influence of related parties of the group where those parties are individuals, and post-employment benefit plans which are for the benefit of employees of the group or of any entity that is a related party of the group.
41
Annual Report 2007

4.

(t) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods and services provided in the normal course of business, net of discounts and exclude value added tax. i) Revenue from the sale of products is recognised when the group entity has delivered products to the customer; the customer has accepted the products and collectibility of the related receivable is reasonably assured. ii) Interest income is accrued on a time-apportioned basis by reference to the principal outstanding using the effective interest rate method.
5.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In determining whether an asset including goodwill is impaired or the event previously causing the impairment no longer exists, the group has to exercise judgment in the area of asset impairment, particularly in assessing: (1) whether an event has occurred that may effect the asset value or such event affecting the asset value has not been in existence; (2) whether the carrying value of an asset can be supported by net present value of future cash flows which are estimated based upon the continued use of the asset or derecognition; and (3) the appropriate key assumptions to be applied in preparing cash flow projections including whether these cash flow projections are discounted using an appropriate rate. Changing the assumptions selected by management to determine the level of impairment, including the discount rates or the growth rate assumptions in the cash flow projections, could materially affect the net present value used in the impairment test.
42

5.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS (continued)

Estimation uncertainty The group also makes estimates and assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are in relation to share option expense. Share option expense is subject to the limitations of the option pricing models adopted and the uncertainty in estimates used by management in the assumptions. Should the estimates including limited early exercise behaviour, expected interval and frequency of open exercise periods in the share option life and the relevant parameters of the share option model be changed, there would be material changes in the amount of share option benefits recognised in the income statement and capital reserve.
6.
SEGMENT INFORMATION
Segment information is presented by way of two segment formats: (i) on a primary segment reporting basis, by business segment; and (ii) on a secondary segment reporting basis, by geographical segment. The groups operating businesses are structured and managed separately according to the nature of their operations and the products they provide. Each of the groups business segments represents a strategic business unit that offers products which are subject to risks and returns that are different from those of the other business segments. The business segments of the group are businesses of woven wear, knitwear, sweaters and premium products. In determining the groups geographical segments, revenues are attributed to the segments based on the location of the customers, and assets are attributed to the segments based on the location of the assets. Intersegment sales and transfers are transacted with reference to the selling prices used for sales made to third parties at the then prevailing market prices.
43
Annual Report 2007

6.
SEGMENT INFORMATION (continued)

(a) Business segments The following tables present revenue, results and certain assets, liabilities and expenditure information for the groups business segments for the years ended 31 March 2007 and 2006. Woven wear $000 SEGMENT REVENUE SEGMENT RESULTS Finance costs Tax penalties and surcharges Impairment loss on goodwill Share of results of associates Share of results of a jointly-controlled entity 71,333 (224) For the year ended 31 March 2007 Consolidated Knitwear Sweaters Premium total $000 $000 $000 $000 52,949 (632) 35,283 (1,704) 6,864 901 166,429 (1,659) (2,728) (3,759) (19,458) (1,480) (2,439) (31,523) (7,831) (39,354) (38,684) (670) (39,354) Woven Wear $000 Assets and liabilities: Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information: Deprecation Amortisation Impairment loss on inventories Impairment loss on trade and other receivables Impairment loss on goodwill Capital expenditure Loss on disposal of property, plant and equipment 575 6,996 675 162 464 70 892 127 202 86 284 19,458 54 2,787 1,578 10,592 13 23,992 10,065 Knitwear $000 2,421 Sweaters $000 15,779 Premium $000 25 Others $000 46,263 Consolidated total $000 28,290 46,263 74,553 14,970 23,992 38,962 1,452 248 464 354 19,458 7,942 127
44
Loss before taxation Income tax Loss for the year Attributable to: Equity holders of the Company Minority interest

6.

(a) Business segments (continued) For the year ended 31 March 2006 Woven wear $000 SEGMENT REVENUE SEGMENT RESULTS Finance costs Impairment loss on available-for-sale investments Share of results of associates Loss before taxation Income tax Loss for the year Attributable to: Equity holders of the Company Minority interest 73,264 (8,194) Knitwear $000 100,526 (149) Sweaters $000 12,431 (1,002) Premium $000 8,060 (1,039) Consolidated total $000 194,281 (10,384) (3,651) (23,657) (915) (38,607) (38,607) (36,945) (1,662) (38,607) Woven wear $000 Assets and liabilities Segment assets Unallocated assets Total assets Segment liabilities Uallocated liabilities Total liabilities Other segment information: Deprecation Amortisation Impairment loss on property, plant and equipment Impairment loss on inventories Impairment loss of trade and other receivables Impairment loss on available-for-sale investments Capital expenditure 679 35 713 858 4,309 23,657 276 675 491 86 4,831 5,354 18,181 5,962 1,778 7,743 3,744 Knitwear $000 30,054 Sweaters $000 11,788 Premium $000 462 Others $000 56,018 Consolidated total $000 46,048 56,018 102,066 31,275 7,743 39,018 1,845 121 4,831 713 858 23,657 4,585
45
Annual Report 2007

6.

(b) Geographical segments For the year ended 31 March 2007 Chile $000 Segment revenue Segment results Other segment information: Segment assets Unallocated assets 7,035 14,588 52,930 21,623 52,930 74,553 7,888 54 7,942 93,322 (1,034) PRC $000 24,492 (1,789) Others $000 48,615 1,164 Consolidated $000 166,429 (1,659)
46
Total assets Capital expenditure
For the year ended 31 March 2006 Chile $000 Segment revenue Segment results Other segment information: Segment assets Unallocated assets Total assets Capital expenditure 4,309 276 2,455 41,548 58,063 44,003 58,063 102,066 4,585 93,396 (5,058) PRC $000 19,387 (1,586) Others $000 81,498 (3,740) Consolidated $000 194,281 (10,384)

7.
TURNOVER, OTHER REVENUE AND GAINS

Turnover represents the net invoiced value of goods sold, after allowances for returns and trade discounts. An analysis of the groups turnover, other revenue and gains is as follows: 2007 $000 Turnover: Sale of goods Other revenue and gains: Interest income Sale of scrap inventories, net Sundry Income Net exchange gains 44 470 269 18 801 133 145 376 654 166,429 194,281 2006 $000
47
8.
FINANCE COSTS
2007 $000 Interest expense: Bank loans and overdrafts wholly repayable within five years Import and export loans wholly repayable within five years Amount due to a related party 551 120 1,325 Bank charges 1,403 2,728 212 40 1,495 2,156 3,651 654 1,243 2006 $000
Annual Report 2007

9.
LOSS BEFORE TAXATION

2007 $000 Loss before taxation is arrived at after charging: Employees benefit expenses (excluding directors remuneration (note 10(a))): Wages and salaries Pension fund contributions Share option expense 3,881 158 281 4,320 Depreciation 1,452 248 680 346 127 464 5,476 340 5,816 1,845 121 449 582 713 2006 $000
48
Amortisation of leasehold land and land use rights Auditors remuneration Rental payment in respect of premises under operating leases Loss on disposal of property, plant and equipment Impairment loss on inventories (included in cost of sales)

10. DIRECTORS REMUNERATION AND FIVE HIGHEST PAID INDIVIDUALS

(a) Directors remuneration Directors remuneration for the year, disclosed pursuant to the Listing Rules and Section 161 of the Hong Kong Companies Ordinance, is as follows: Salaries and Name of directors Fees 2007 $000 Executive directors Cheung Keng Ching Chou Mei Lau Ka Man, Kevin Chan Ching Kee, William Chung Kam Fung, Kennis Independent non-executive directors Chow Chi Kit To Yan Ming, Edmond Hung Muk Ming Wong Lai Fong Wong Kin Tak Lo Siu Tong, Alfred Wan Ngar Yin, David Wong Lai Wah, Ada 12 78 72 162 162 9 9 66 48 48 3 19 8 210 1,321 2,911 382 31 31 9 9 126 12 87 72 171 3,230 9 9 66 48 48 3 19 8 210 1,734 520 260 331 1,111 1,430 1,170 115 196 2,911 216 166 382 12 12 2 5 31 12 12 7 31 34 34 49 117 1,476 1,216 117 250 3,059 748 438 338 1,524 2006 $000 allowances 2007 $000 2006 000 Pension fund contributions 2007 $000 2006 000 Employee benefits share options 2007 $000 2006 000 Total 2007 $000 2006 000
49
Annual Report 2007

10. DIRECTORS REMUNERATION AND FIVE HIGHEST PAID INDIVIDUALS (continued)

(a) Directors remuneration (continued) During the year, certain directors were granted share options, in respect of their services to the group, under the share option scheme of the company, further details of which are set out in note 28 to the financial statements. The fair value of such options which has been expensed the income statement over the vesting period, was determined as at the date of grant and the amount included in the financial statements for the current year is included in the above directors remuneration disclosures. During the year, no remuneration was paid by the group to the directors as an inducement to join or upon joining the group or as compensation for loss of office. There was no arrangement under which a director waived or agreed to waive any remuneration during the year. (b) Five highest paid individuals The five highest paid employees during the year included two (2006: three) directors, details of whose remuneration are set out in note (a) above. Details of the remuneration of the remaining three (2006: two) non-director, highest paid employees for the year are as follows: 2007 $000 Salaries and other benefits Pension fund contributions 752 32 784 2006 $000 567 11 578
50
The number of non-director, highest paid individuals whose remuneration fell within the following band is as follows: 2007 Nil to $1,000,000 3 2006 2

11. INCOME TAX

2007 $000 Current year provision for Hong Kong profits tax Under provision in prior years (note ii) 474 7,357 7,831 2006 $000
Provision for Hong Kong profits tax is calculated at 17.5% on the estimated assessable profits for the year ended 31 March 2007. In prior year, no provision had been made for Hong Kong profits tax as the group companies sustained losses during the year ended 31 March 2006. Taxation for overseas subsidiaries is similarly charged at the appropriate current rates of taxation ruling in the relevant countries. (i) Taxation for the year can be reconciled to the accounting loss as follows: For the year ended 31 March 2007 Hong Kong $000 Loss before taxation Tax calculated at the statutory tax rate Tax effect of expenses not deductible for taxation purposes Tax effect of income not taxable for taxation purposes Profits and losses attributable to associates and a jointly controlled entity Under provision in prior years Tax effect of tax losses not recognised Income tax for the year 7,357 769 7,831 1,337 460 1,337 7,357 1,229 7,831 (3) (3) 4,272 4,272 (26,080) (4,564) The PRC $000 (5,443) (1,797) Total $000 (31,523) (6,361)
51
Annual Report 2007

11. INCOME TAX (continued)

(i) Taxation for the year can be reconciled to the accounting loss as follows: (continued) For the year ended 31 March 2006 Hong Kong $000 Loss before taxation Tax calculated at the statutory tax rate Tax effect of expenses not deductible for taxation purposes Tax effect of income not taxable for taxation purposes (2,998) 2,175 1,038 (2,998) 3,213 Tax effect of tax losses and other deferred tax assets not recognised Income tax for the year 6,822 6,822 (34,282) (5,999) The PRC $000 (4,325) (1,038) Total $000 (38,607) (7,037)
52
At 31 March 2007, the group has unused tax losses of $22,300,000 (2006: $16,512,000) available for offset against future profits and temporary differences of $4,831,000 (2006: $4,831,000). No deferred tax asset has been recognised as at 31 March 2006 and 2007 in respect of such losses and temporary differences due to the unpredictability of future profit streams.

11. INCOME TAX (continued)

(ii) Since December 2002, Rontex Holdings Limited (RHL) and Ronco Trading Company Limited (Ronco), subsidiaries of the company, had been queried by the Inland Revenue Department of the Hong Kong Special Administrative Region Government (the IRD) in respect of sales and marketing support service expenses claimed by RHL and Ronco as deductible expenses in their profits tax computations. As at 31 March 2006, the IRD raised queries to RHL and Ronco for the years of assessments 2000/2001, 2001/2002, 2002/2003, and 2003/2004. During the year ended 31 March 2007, IRD disallowed certain deduction of sales and marketing support services expenses of RHL and Ronco in their profits tax computations for the aforementioned years of assessment and raised additional tax assessments of $6,903,000 and $454,000 respectively. Moreover, tax penalties and surcharges of $3,559,000 and $200,000 were imposed by IRD on RHL and Ronco respectively. The above amounts were agreed to be settled by instalments until fully settled in October 2007. Pursuant to a deed of indemnity dated 25 October 2002 from Star Master International Limited, Cheung Keng Ching and Chou Mei, shareholders of the company (collectively referred as the Indemnifiers), who agreed to indemnify, on a joint and several basis, the group against all additional taxation liabilities, penalties, surcharges and other relevant costs falling on any members of the group in respect of any accounting period ended or before 31 March 2002, which amounted to $4,233,000. The indemnified amount of $4,233,000 obligated by the Indemnifiers is accounted for as contributions from equity holders of the company, and credited to capital reserve of the group during the year. During the year ended 31 March 2007, the Indemnifiers had settled $1,743,000. Accordingly, as at 31 March 2007, the groups receivable from the Indemnifiers amounted to $2,490,000, which was unsecured, interest free and fully settled by 31 May 2007.
53
12. LOSS FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
The consolidated loss from ordinary activities attributable to equity holders of the company for the year ended 31 March 2007 includes a loss of $65,673,000 (2006: a profit of $16,037,000) which has been dealt with in the financial statements of the company (note 27).
Annual Report 2007

13. LOSS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

The calculation of basic loss per share is based on the loss for the year attributable to equity holders of the Company of $38,684,000 (2006: $36,945,000) and the weighted average number of ordinary shares in issue during the year of 1,644,208,433 shares (2006: 1,629,468,661 shares). Diluted loss per share for the years ended 31 March 2006 and 2007 have not been disclosed, as the warrants and the share options outstanding during these years had an anti-dilutive effect on the basic loss per share for both years.
14. LEASEHOLD LAND AND LAND USE RIGHTS

The group 2007 Note Cost: $000 2006 $000
54
At beginning of year Reclassified from property plant and equipment Additions Reclassification of interest in a subsidiary into a jointly-controlled entity Exchange realignment At end of year Accumulated amortisation: At beginning of year Charge for the year Reclassification of interest in a subsidiary into a jointly-controlled entity Exchange realignment At end of year Net book value: At 31 March Current portion included in other receivables, deposits and prepayments Non-current portion 31 31 15
13,509 1,073 783 (1,747) 49 13,667
13,476 33 13,509
783 248 (138) 4 897
662 121 783
12,770
12,726
124 12,646 12,770
282 12,444 12,726

14. LEASEHOLD LAND AND LAND USE RIGHTS (continued)

The groups leasehold land and land use rights represent prepaid operating lease payments and their net book value is analysed as follows: 2007 $000 Current portion Located in Hong Kong, held under long-term leases Located in PRC, held under medium-term leases 86 161 247 Non-current portion Located in Hong Kong, held under long-term leases Located in PRC, held under medium-term leases 10,944 1,579 12,770 11,030 1,575 12,726 86 35 121 2006 $000
55
At 31 March 2007, certain of the groups leasehold land and land use rights with an aggregate net book value of approximately $11,030,000 (2006: $12,726,000) were pledged to secure banking facilities granted to the group (notes 24 and 32(a)).
Annual Report 2007

15. PROPERTY, PLANT AND EQUIPMENT

Construction Leasehold in progress improvements $000 $000 Plant and machinery $000 Furniture and fixtures $000 Office equipment $000 Motor vehicles $000
The group At cost: At 1 April 2005 Additions Transfer from construction in progress Exchange realignment At 31 March 2006 and 1 April 2006 Additions Reclassified to leasehold land and land use rights (note 14) Disposal Reclassification of interest in a subsidiary into a jointlycontrolled entity (note 31) Exchange realignment At 31 March 2007 Accumulated depreciation and impairment: At 1 April 2005 Charge for the year Impairment Exchange realignment At 31 March 2006 and 1 April 2006 Charge for the year Written back on disposal Reclassification of interest in a subsidiary into a jointlycontrolled entity (note 31) Exchange realignment At 31 March 2007 Net book value: At 31 March 2007 At 31 March 2006
Buildings $000
Total $000
22,638 535 386 331
2,019 3,363 (386 ) 53
5,871 100 112
3,526 411 119
2,185 129 46
947 47
2,415 51
39,601 4,585 712
23,890 142
5,049 3,678
6,083
4,056 2,399
2,360 11
994 367
2,466 562
44,898 7,159
56
(1,073 )
(217 )
(1,073 ) (217 )
(4,510) 360 18,809
(8,799 ) 72
(2,997 ) 60 3,146
(5,364 ) 94 968
(1,434 ) 25 962
(312 ) 2 1,051
(2,084 ) 36 980
(25,500 ) 649 25,916
3,101 801 4,830 23
2,578 270 8
513 283 11
1,035 247 8
935 11
895 233 7
9,057 1,845 4,830 57
8,755 700
2,856 131
807 359 (35 )
1,290 53
946 50
1,135 159
15,789 1,452 (35 )
(949 ) 45 8,551
(550 ) 8 2,445
(903 ) 17 245
(533 ) 10 820
(33 ) 963
(560 ) 12 746
(3,528 ) 92 13,770
10,258 15,135
5,049
701 3,227
723 3,249
142 1,070
88 48
234 1,331
12,146 29,109

15. PROPERTY, PLANT AND EQUIPMENT (continued)

As at 31 March 2007, the groups buildings with a carrying amount of approximately $10,258,000 (2006: $15,135,000) were pledged to banks under fixed charges for banking facilities granted to the group (notes 24 and 32(a)).
16. INTERESTS IN SUBSIDIARIES

The company 2007 $000 Unlisted shares, at cost Amounts due from subsidiaries 42,779 68,728 111,507 Less: Impairment loss (62,300) 49,207 Amounts due to subsidiaries (23,152) 26,055 2006 $000 42,769 68,346 111,115 111,115 (23,144) 87,971
57
The amounts due from subsidiaries are unsecured, interest free and are not repayable within twelve months after the balance sheet date. The carrying amount of the amounts due from subsidiaries approximates their fair value and in substance represents the companys interests in the subsidiaries in the form of quasi-equity loans. The amounts due to subsidiaries are unsecured, interest free and have no fixed terms of repayment. The carrying amount of the amounts due to subsidiaries approximates their fair value.
Annual Report 2007

16. INTERESTS IN SUBSIDIARIES (continued)

Particulars of the principal subsidiaries during the year ended 31 March 2007 are as follows:
Place of incorporation/ establishment and operation Particulars of issued and paid-up share capital/ registered capital
Name of company
Percentage of equity attributable to the company 2007 2006 100 100
Principal activities
Falcon Vision Limited
The British Virgin Islands Hong Kong
Ordinary US$1,000
Investment holding
Keen Choice Technology Limited Rontex Apparel Limited
Ordinary HK$10,000
100
100
Investment holding
Hong Kong
Ordinary HK$1
100
100
58
Rontex Holdings Limited Hong Kong Ordinary HK$100,000 100 100
Trading of garment and premium products Trading of garment products Trading of garment and premium products and investment holding Property holding and investment holding Investment holding
Ronco Trading Company Limited
Hong Kong
Ordinary HK$1,000,000
100
100
Take Luck Development Limited Wisefull International Limited (Wisefull)
Hong Kong
Ordinary HK$10,000
100
100
Hong Kong
Ordinary HK$10,000
100
100
The PRC (Rontex Co., Ltd.) The PRC (Huzhou Ronco Sweater Co., Ltd.) (Note 2)
USD1,209,100
51 (Note 1) 52
51
Manufacture and sale of garment products Manufacture and sale of garment products
USD1,380,000
52

16. INTERESTS IN SUBSIDIARIES (continued)

Notes: 1. Commencing from 1 October 2006, the group has lost its unilateral control over Rontex Co., Ltd., a 51%owned subsidiary of the company as at 31 March 2006 and 30 September 2006 but has joint control over it. Accordingly, Ronco Co., Ltd. became a jointly-controlled entity of the group since 1 October 2006. Further details are set out in notes 18 and 31 to the financial statements. Huzhou Ronco Sweater Co., Ltd. (Huzhou Ronco) was established as a Sino-foreign equity joint venture in the PRC.
2.
Except for Falcon Vision Limited and Valuepoint Holdings Limited, which are directly held by the company, all other subsidiaries are indirectly held. The above table lists the subsidiaries of the company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.
59
17. INTERESTS IN ASSOCIATES
The group 2007 $000 Share of net assets Advance to an associate 14,053 1,057 15,110 2006 $000 15,735 1,057 16,792
Advance to the associate is unsecured, interest free and in substance represents the groups interest in the associate in the form of a quasi-equity loan. The carrying amount of the advance to the associate approximates to its fair value.
Annual Report 2007

17. INTERESTS IN ASSOCIATES (continued)

Particulars of the groups associates, all of which are unlisted entities, are as follows:
Percentage of Form of business Name of company structure Corporate (Beijing Rontex Garments Co., Ltd.) Corporate (Beijing Longkun Garments Co., Ltd. The PRC 30 Place of establishment and operation The PRC equity interest attributable to the company 40
Percentage of voting power held by the company 40 Principal activities Manufacture and sale of garment products
30
Manufacture and sale of garment products
60
(Beijing Longkun))
The above companies are not audited by Horwath Hong Kong CPA Limited. Summarised financial information in respect of the groups associates is set out below: 2007 $000 Turnover Loss for the year Loss attributable to the group Total assets Total liabilities Net assets Net assets attributable to the group 117,760 (3,108) (1,480) 116,560 (66,075) 50,485 14,053 2006 $000 83,788 (2,966) (915) 108,429 (54,836) 53,593 15,735

18. INTEREST IN A JOINTLY-CONTROLLED ENTITY

The group 2007 $000 Share of net assets Particulars of the groups jointly-controlled entity are as follows: Percentage of Place of Form of Name of company Rontex Co., Ltd. business structure Corporate establishment and operation The PRC equity interest indirectly held by the company 51 Principal activity Manufacture and sale of garment products The above company is not audited by Horwath Hong Kong CPA Limited. Summarised financial information on jointly controlled entity groups effective interest is as follows: 2007 $000 Non-current assets Current assets Current liabilities Net assets Income Expenses Loss for the year 14,634 7,964 (19,967) 2,631 10,589 (13,028) (2,439) 2,631 2006 $000
61
Commencing from 1 October 2006, Rontex Co., Ltd., a 51%-owned subsidiary of the company as at 31 March 2006 and 30 September 2006, became a jointly-controlled entity of the group. In the opinion of the directors of the company, the group could no longer exercise unilateral control over the financial and operating activities of Rontex Co., Ltd. following the loss of its controlling voting power over Rontex Co., Ltd., whereas the group has joint control thereon since 1 October 2006. Further details are set out in note 31 to the financial statements.
Annual Report 2007

19. GOODWILL
2007 $000 Cost: At beginning of year Acquisition of a subsidiary Impairment during the year At end of year The goodwill arose from the acquisition of Wisefull in previous year. The directors reassessed the recoverable amount of goodwill as at 31 March 2007 by reference to the valuation as at 31 March 2007 performed by BMI Appraisals Limited, an independent firm of professional valuers. The recoverable amount of the cash generating unit (CGU) of Wisefull are determined by the 19,458 (19,458) 19,458 19,458 2006 $000
62
professional valuers based on the present value of the expected future revenue arising from the operation of the underlying assets of the CGU. These calculations resulted a nil value-in-use amount on the value of goodwill. The CGU has therefore been reduced to its nil recoverable amount through recognition of a full impairment loss on goodwill of $19,458,000. The directors believe that due to increasing competition in the textile industry in the PRC, the growth rate for Beijing Longkun is expected to be levelled off, resulting in the significant impairment loss for the year. Key assumptions used for value-in-use calculation: 2007 % Growth rate Discount rate 10 11.12 2006 % 22.3 17.65

20. AVAILABLE-FOR-SALE INVESTMENTS

The group 2007 $000 Listed equity securities Hong Kong, at fair value 1,573 2006 $000 688
The investments included above represented investments in listed equity securities that offered the group the opportunity for return through dividend income and fair value gains. They had no fixed maturity or coupon rate and were disposed of after the year end. The fair values of these securities were based on quoted market prices.
21. INVENTORIES
The group 2007 $000 Inventories comprise: Raw materials Work in progress Finished goods 1,552 1,065 344 2,961 1,561 1,799 2,005 5,365 2006 $000
63
22. TRADE RECEIVABLES

An aged analysis of trade receivables as at the balance sheet date, based on the invoice date, is as follows: The group 2007 $000 Within 30 days 31 to 60 days 61 to 90 days Over 90 days 2,278 6,828 4,071 1,578 14,755 (354) 14,401 2006 $000 7,049 41 103 1,330 8,523 (692) 7,831
Less: Impairment loss on trade receivables
The directors consider that the carrying amount of the groups trade receivables approximates their fair value.
Annual Report 2007

23. CASH AND CASH EQUIVALENTS

The group 2007 $000 Cash and bank balances Time deposits 5,426 5,426 2006 $000 3,573 1,143 4,716 The company 2007 $000 3,232 3,232 2006 $000 24 24
At the balance sheet date, the cash and cash equivalents of the group denominated in Renminbi (RMB) amounted to $914,000 (2006: $732,000). The RMB is not freely convertible into other currencies; However, under Mainland Chinas Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.
64
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the group, and earn interest at the respective short term time deposit rates. The carrying amount of the cash and cash equivalents approximates their fair value.
24. INTEREST-BEARING BANK BORROWINGS, SECURED

The following bank borrowings are repayable on demand or within one year: 2007 $000 Bank loans Import and export loans Bank overdrafts 5,767 8,835 1,462 16,064 2006 $000 7,843 2,024 939 10,806

24. INTEREST-BEARING BANK BORROWINGS, SECURED (continued)

All the bank borrowings are floating-rate borrowings, thus exposing the group to cash flow interest rate risk. The effective interest rates range from 5.58% to 7.26% (2006: 5.22% to 7.40%) per annum. The groups bank loans, import and export loans and overdrafts are denominated in RMB, United States
dollars and Hong Kong dollars, respectively. The directors consider that the carrying amount of the bank
borrowings approximates their fair value. The groups bank borrowings are secured by the leasehold land and buildings held by the group with carrying values of approximately $11,030,000 (2006: $12,726,000) (note 14) and $10,258,000 (2006: $15,135,000) (note 15), respectively.
25. TRADE PAYABLES

An aged analysis of trade payables of the group at the balance sheet date, based on the invoice date, is as follows:
65
The group 2007 $000 Within 30 days 31 to 60 days 61 to 90 days Over 90 days 1,161 1,358 427 1,267 4,213 The trade payables are interest free and normally settled on 90-day terms. The directors consider that the carrying amount of the groups trade payables approximates their fair value. 2006 $000 7,569 2,519 4,256 280 14,624
Annual Report 2007

26. SHARE CAPITAL

2007 $000 Authorised: 10,000,000,000 ordinary shares of $0.01 each Issued and fully paid: 1,807,497,200 (2006: 1,629,497,200) ordinary shares of $0.01 each 18,075 16,295 100,000 100,000 2006 $000
A summary of the movements in the issued and fully paid share capital of the company during the year is as follows:
66
Number of shares 2007 2006
Nominal value 2007 $000 2006 $000
Ordinary shares of $0.01 each: Authorised Issued and fully paid: At beginning of the year Exercise of bonus warrants Exercise of warrants (note (i)) Exercise of share options (note (ii)) At end of the year 88,000,000 1,807,497,200 1,629,497,200 880 18,075 16,295 90,000,000 900 133,200 1 1,629,497,200 1,629,364,000 16,295 16,294 10,000,000,000 10,000,000,000 100,000 100,000
All shares issued by the company rank pari passu with the then existing shares in all respects.

26. SHARE CAPITAL (continued)

Note: (i) During the year ended 31 March 2007, 90,000,000 new ordinary shares of par value $0.01 each were issued at a subscription price of $0.043 each on exercise of 90,000,000 warrants with an aggregate consideration of $3,870,000, of which $900,000 was credited to share capital and the remaining balance of $2,970,000 was credited to the share premium account. In addition, the related net premium of $795,000 received on issue of warrants has been transferred from capital reserve to the share premium account (note 29(b)). During the year ended 31 March 2007, 88,000,000 new ordinary shares of par value $0.01 each were issued at a subscription price of $0.044 each on exercise of 88,000,000 share options at an aggregate consideration of $3,872,000, of which $880,000 was credited to share capital and the remaining balance of $2,992,000 was credited to the share premium account. In addition, amount of $543,000 attributable to the related share options of $543,000 has been transferred from capital reserve to the share premium account.
(ii)
27. RESERVES
(Accumulated losses)/ retained profits $000
67
Total $000
Share premium $000
Contributed surplus $000 (note a)
Capital reserve $000 (note b)
The company At 1 April 2005 Issue of shares on exercise of bonus warrants Profit for the year (note 12) At 31 March 2006 and 1 April 2006 Premium received on issue of warrants (note 29(a)) Issue of new shares on exercise of warrants Issue of share options (note 28) Issue of new shares on exercise of share options Loss for the year (note 12) At 31 March 2007 15,282 12 42,569 (2,159) 16,037 55,692 12 16,037
15,294
42,569
13,878
71,741
3,765 3,535 22,594
42,569
2,296 (795) 800 (543) 1,758
(65,673) (51,795)
2,296 2,970 800 2,992 (65,673) 15,126
Annual Report 2007

27. RESERVES (continued)

Note a: At the balance sheet date, the contributed surplus of the company represents the excess of the fair value of the subsidiaries acquired pursuant to the group reorganisation over the nominal value of the shares of the company issued in exchange therefor. Under the Companies Law (2001 Second Revision) of the Cayman Islands, the contributed surplus account is distributable to the shareholders of the company under certain circumstances. Note b: At the balance sheet date, the capital reserve of the company represents (i) premium received in respect of the outstanding warrants of the company; and (ii) the fair value at respective grant dates in respect of the outstanding share options of the company.
28. SHARE OPTION SCHEME

The company operates a share option scheme (the Scheme) for the purpose of providing incentives or rewards to eligible persons for their contributions to the group. Eligible persons of the Scheme include any full-time or part-time employees of the company or any member of the group, including any directors,
68
advisors or consultants of the group. The Scheme became effective upon the listing of the companys shares on the Stock Exchange on 8 November 2002, and unless otherwise cancelled or amended, will remain in force for a period of 10 years from that date. The maximum number of unexercised share options currently permitted to be granted under the Scheme must not exceed 30% of the shares in issue from time to time. Share options granted to a director, chief executive or substantial shareholder of the company, or to any of their associates (as defined under the Listing Rule), are subject to approval by all independent nonexecutive directors. In addition, any share options granted to a substantial shareholder or an independent non-executive director of the company, or to any of their associates, in excess of 0.1% of the shares of the company in issue at any time or with an aggregate value (based on the closing price of the companys shares at the date of the grant) in excess of $5 million, within any 12-month period, are subject to shareholders approval in advance in a general meeting. The offer of a grant of share options may be accepted for a period of 28 days from the date of the offer, upon payment of a nominal consideration of $1 in total by the grantee. The exercisable period of the share options granted is determined by the directors, which the share options must be exercised in any event not later than 10 years or a shorter period as specified, from the date of grant. The Scheme does not require a minimum period for which the share options must be held or a performance target which must be achieved before the share options can be exercised.

28. SHARE OPTION SCHEME (continued)

The exercise price of the share options granted is not recorded in the balance sheet of the company nor the group until such time as the options are exercised. Upon the exercise of the share options, the resulting shares issued are recorded by the company as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded by the company in the share premium account. Options which are cancelled prior to their exercisable date are deleted from the register of outstanding options. Share options do not confer rights on the holders to dividends or to vote at shareholders meetings. The following is the movement of share options outstanding under the Scheme during the period from 1 April 2006 to 31 March 2007:
Adjusted closing price of the companys share on 3 November 2003 immediately before grant date of share options HK$ (note 4)
69
Name or category of participant
At 01/04/2006 Number
Granted during the year Number
Exercised during the year Number
Lapsed during the year Number (note 1)
At 31/03/2007 Number
Date of grant of share options (note 2)
Exercise period of share options
Adjusted exercise price of share option HK$ (note 3)
Directors Cheung Keng Ching (Mr Cheung) 7,400,000 Chou Mei (Mrs Cheung) 7,400,000 Chung Kam Fung, Kennis Wan Ngar Yin, David Employees other than directors In aggregate 19,224,000 Consultants In aggregate (5,520,000) 13,704,000 04/11/2003 20/01/2007 04/11/2003 to 03/11/2008 20/01/2007 to 19/01/2010 20/01/2007 to 19/01/2010 0.3325 0.044 0.35 N/A 5,500,000 5,500,000 8,000,000 1,500,000 (5,500,000) (8,000,000) (1,500,000) 7,400,000 5,500,000 7,400,000 04/11/2003 20/01/2007 04/11/2003 20/01/2007 20/01/2007 20/01/2007 01/11/2003 to 03/11/2008 20/01/2007 to 19/01/2010 04/11/2003 to 03/11/2008 20/01/2007 to 19/01/2010 20/01/2007 to 19/01/2010 20/01/2007 to 19/01/2010 0.3325 0.044 0.3325 0.044 0.044 0.044 0.35 N/A 0.35 N/A N/A N/A
25,000,000 (25,000,000)
84,000,000 (48,000,000)
36,000,000
20/01/2007
0.044
N/A
34,024,000 129,500,000 (88,000,000) (5,520,000)
70,004,000
Annual Report 2007


Note: 1. 2. Options lapsed during the year refer to share options held by employees who resigned during the year. The vesting period of the share options is from the date of grant until the commencement of the exercise period. The number of issuable shares and the exercise price of the share options are subject to adjustment in the case of capitalisation issue, rights issue, sub-division or consolidation of the companys shares or reduction of capital of the company. On 20 February 2004, an ordinary resolution was passed in an extraordinary general meeting in connection with the bonus issue of shares on the basis of three bonus shares for every one existing share. The exercise price before adjustments was $1.33 per share. Before the adjustment for the bonus issue of shares on 20 February 2004, the closing price of the companys share immediately before the grant date of the share option was $1.40 per share.
3.
4.
At 31 March 2007, the company has 70,004,000 share options outstanding under the Scheme. The
70
exercise of the entire outstanding share options would, under the capital structure of the company as at 31 March 2007, result in the issue of 70,004,000 additional ordinary shares of $0.01 each of the company and additional share capital of $700,040 and share premium account of $3,010,000 (before issue expense). Valuation of share options In respect of the share options granted before 1 April 2006, the directors do not consider it appropriate to disclose a theoretical value of the options granted, because a number of factors crucial for the valuation cannot be determined. Accordingly, the directors believe that any valuation of the share options based on various speculative assumptions would be meaningless and misleading the shareholders of the company. The fair value of the share options granted during the year ended 31 March 2007 was estimated at $800,000 which was recognised as a share option expense during the year.


Valuation of share option (continued) The above fair value was estimated as at the date of grant, using a Black Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used: Exercise price Expected volatility (%) Risk-free interest rate (%) Expected life of option (year) $0.044 74.57 3.795 0.24
The expected life of the options is based on the historical data over the past three years and is not necessarily indicative of the exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other feature of the options granted was incorporated into the measurement of fair value.
71
29. WARRANTS
On 23 January 2007, the Company entered into a placing agreement with VC Brokerage Limited, the placing agent to procure no less than six Placees to subscribe for an aggregate of 320,000,000 unlisted warrants (Warrants), on a best effort basis, at the issue price. Each Warrant was issued at a premium price of $0.01 in registered form and entitles the holder thereof to subscribe for fully-paid new shares at the initial subscription price of $0.043 per share, subject to adjustment from the date of issue, which was on 12 February 2007, to the date of expiry of one year from the date of issue, which is 11 February 2008 (both days inclusive in accordance with the terms of Warrants). The movements of the Warrants during the year are set out as follows: (a) On 1 February 2007, 260,000,000 Warrants were issued and subscribed by independent investors at a premium price of $0.01 each and the aggregate premium, net of issue expense, of approximately $2,296,000 was received. The amount was credited to capital reserve. (b) During the year ended 31 March 2007, 90,000,000 Warrants were exercised for 90,000,000 ordinary shares of $0.01 each at a subscriptions price of $0.043 per share and a net premium of $795,000 was transferred from capital reserve to the share premium account (note 26(i)). At the balance sheet date, the company has 170,000,000 Warrants outstanding. As disclosed in note 36(a)to the financial statements, 100,000,000 Warrants have been exercised subsequent to the balance sheet date.
Annual Report 2007

30. ACQUISITION OF A SUBSIDIARY

In August 2005, the group acquired 10,000 shares of $1.00 each in the issued share capital of Wisefull from independent vendors. Wisefull is an investment holding company and holds 30% interest in the issued share capital of Beijing Longkun which is principally engaged in the manufacture and sales of mens suits. This transaction was accounted for by the acquisition method of accounting. The fair value of the net assets acquired on the date of the transaction, and the goodwill arising, were as follows: $000 Net assets acquired: Investment in an associate Amounts due to shareholders Goodwill 12,479 (4,216) 19,458 27,721 Satisfied by: Deposits 27,721
72
An analysis of the net outflow of cash and cash equivalents in respect of the acquisition of subsidiary was as follows: 2006 $000 Deposits and prepayment under non-current assets Net outflow of cash and cash equivalents in respect of the acquisition of subsidiary 27,721
Since the acquisition, Wisefull and Beijing Longkun had no turnover and contributed $1,255,000 to the groups loss after tax and minority interest for the year ended 31 March 2006.

31. RECLASSIFICATION OF INTEREST IN RONTEX CO., LTD. FROM A SUBSIDIARY INTO A JOINTLY-CONTROLLED ENTITY
As disclosed in notes 16 and 18 to the financial statements, the group accounted for the interest in Rontex Co., Ltd. as an interest in a jointly-controlled entity with effect from 1 October 2006. Accordingly, the group ceased to consolidate its results, assets and liabilities as a subsidiary since that date. The net assets of Rontex Co., Ltd. as at 30 September 2006 were as follows: Note Net assets reclassified: Land use rights Property, plant and equipment Inventories Trade receivables Other receivables Cash and cash equivalents Interest-bearing bank borrowings Trade payables Minority interest $000
14 15
1,609 21,972 2,342 4,738 990 4,504 (17,568) (9,263) (4,544) 4,780
73
Reclassified as an interest in a jointly-controlled entity
(4,780)
Analysis of the net cash outflow: Cash and cash equivalents
(4,504)
32. PLEDGE OF ASSETS

As at 31 March 2007, the groups banking facilities were secured by the following: (a) Pledge of certain of the groups leasehold land and buildings with aggregate net book values of approximately $11,030,000 (2006: $12,726,000) (note 14) and $10,258,000 (2006: $15,135,000) (note 15), respectively; (b) (c) (d) (e) Cross guarantees among the subsidiaries of the company; Assignment of documentary credit issued in favour of a subsidiary; Corporate guarantee executed by a third party; and Corporate guarantee executed by the company.
Annual Report 2007

33. CONTINGENT LIABILITIES

As at 31 March 2007, there were contingent liabilities in respect: 2007 $000 Long service payment 204 2006 $000 195
The group is liable to make long service payments upon the termination of employment of certain employees who have completed the required number of years of services and met the required circumstances under the Employment Ordinance. No provision has been made therefor in the financial statements as it is not probable that the amount will crystallise in the foreseeable future.
34. RELATED PARTY TRANSACTIONS
74
(a)
During the year and in the ordinary course of business, the group had the following material transaction with its jointly-controlled entity: 2007 $000 Purchase of goods 5,308 2006 $000
(b)
As at 31 March 2007, the group has aggregate amounts due to directors and their close family member of approximately $4,256,000 (2006: $5,387,000). The amounts are unsecured, interest free and have no fixed terms of repayment except for an amount of $1,000,000 due to the directors close family member as at 31 March 2006 bore interest at the rate of 12% per annum which was fully repaid during the year ended 31 March 2007. Interest expense paid to this related party during the year amounted to approximately $120,000 (2006: $40,000) (note 8).
(c)
During the year, the group enforced the tax indemnity of $4,233,000 from the Indemnifiers and amounts due from the Indemnifiers were approximately $2,490,000 as at 31 March 2007, details of which are set out in note 11(ii) to the financial statements.
(d)
Members of key management during the year comprised only of the executive directors whose remuneration is set out in note 9 to the financial statements.

35. FINANCIAL RISK MANAGEMENT

The main risks arising from the groups financial instruments in the normal course of the groups business are credit risk, liquidity risk, interest rate risk and currency risk. These risks are limited by the groups financial management policies and practices described below. Generally, the group introduces conservative strategies on its risk management. The group has not used any derivatives and other instruments for hedging purposes nor does it hold or issue derivative financial instruments for trading purposes. (a) Credit risk The groups principal financial assets are cash and cash equivalents, trade receivables, prepayments, deposits and other receivables, and available-for-sale investments. The groups credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of provisions for doubtful receivables. A provision for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows. (b) Liquidity risk The group will consistently maintain a prudent financial policy and ensure that it maintains sufficient cash to meet its liquidity requirements. Details of the measures undertaken by the group to improve its working capital are set out in note 2 to the financial statements. (c) Fair value and cash flow interest rate risk Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate because of changes in market interest rates. Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. As the group has no significant interest-bearing assets, the groups income and operating cash flows are substantially independent of changes in market interest rates. The groups interest-rate risk arises from its borrowings which are issued at variable rates, thus exposing the group to cash flow interest rate risk. The group considers that its exposure to interest rate risk is normal.
75
Annual Report 2007

35. FINANCIAL RISK MANAGEMENT (continued)

(d) Foreign exchange risk The groups monetary assets and transactions are principally denominated in Hong Kong dollars (HKD), United States dollars (USD) and RMB. The group is exposed to foreign exchange risk arising from the exposure of HKD against USD and RMB, respectively. Considering that the exchange rate between HKD and USD is pegged, and that there is insignificant fluctuation in the exchange rate between HKD and RMB, the group believes its exposure to exchange rate risk is normal. At present, the group does not intend to seek to hedge its exposure to foreign exchange risk profile, and will consider appropriate hedging measure in future as may be necessary. The group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the groups operations in the PRC is managed primarily through borrowings denominated in RMB. (e) Fair values estimation All financial instruments are carried at amounts not materially different from their fair values as at 31 March 2007. Fair value of securities is based on quoted market prices at the balance sheet date without any deduction from transaction costs. Fair values for the unlisted equity investments are estimated using the applicable price/earning ratios for similar listed companies adjusted for the specific circumstances of the issuer. The fair value of interest-bearing loans and borrowings is estimated as the present value of future cash flows, discounted at current market interest rates for similar financial instruments.
76

36. SIGNIFICANT POST BALANCE SHEET EVENTS

(a) In April, June and July 2007, a total of 100,000,000 new ordinary shares of par value $0.01 each were issued at a subscription price of $0.043 each on exercise of 100,000,000 Warrants at an aggregate consideration of $4,300,000 of which $1,000,000 was credited to share capital and the remaining balance of $3,300,000 was credited to the share premium account. In addition, the related net premium of $883,000 received on issue of Warrants has been transferred from capital reserve to the share premium account. At the date of this report, the company has 70,000,000 Warrants outstanding. (b) In May 2007, 41,500,000 new ordinary shares of par value $0.01 each were issued at a subscription price of $0.044 each on exercise of 41,500,000 share options at an aggregate consideration of $1,826,000 of which $415,000 was credited to share capital and the remaining balance of $1,411,000 was credited to the share premium account. In addition, the amount attributable to the related share options of $256,000 has been transferred from the capital reserve to the share premium account. At the date of this report, the company has 28,504,000 share options outstanding.
37. COMPARATIVE FIGURES

Certain comparative amounts have been reclassified to conform with the current years presentation.
77
Annual Report 2007
FIVE-YEAR FINANCIAL SUMMARY

The following is a summary of the published results and of the assets and liabilities of the group for the five years ended 31 March 2007. Results Year ended 31 March 2007 $000 Turnover (Loss)/profit before tax and minority interest Income tax (Loss)/profit after tax and before minority interest (39,354) 670 (38,607) 1,662 (7,868) 1,371 14,044 209 30,235 (31,523) (7,831) (38,607) (7,428) (440) 15,479 (1,435) 32,901 (2,666) 166,429 2006 $000 194,281 2005 $000 162,122 2004 $000 144,561 2003 $000 163,112
78
Minority interest (Loss)/profit attributable to equity holders of the Company Assets and liabilities
(38,684)
(36,945)
(6,497)
14,253
30,235
As at 31 March 2007 $000 Non-current assets Current assets Current liabilities Non-current liabilities Minority interest Net assets 44,106 30,447 (38,962) (2,488) 33,103 2006 $000 78,491 23,575 (39,018) (7,610) 55,438 2005 $000 100,972 33,979 (32,315) (1,512) (9,823) 91,301 2004 $000 93,065 38,840 (19,111) (4,198) (11,194) 97,402 2003 $000 66,289 35,484 (18,155) (225) 83,393

시베리안마이닝그룹 재정보고서 2007

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시베리안마이닝그룹 재정보고서 2007

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( Stock Code : 1142 )

Annual Report 2007

For identification only

Annual Report 2007

(appointed on 11 June 2007) (resigned on 30 March 2007)

COMPANY SECRETARY AND QUALIFIED ACCOUNTANT

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS

Cheung Yiu Fai Hung Chung Wah

Chan Hung Kwan

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Chan Hung Kwan

HONG KONG BRANCH SHARE REGISTRAR AND TRANSFER OFFICE

(appointed on 11 June 2007) (resigned on 30 March 2007)

HKEX STOCK CODE

(resigned on 30 March 2007)

Rontex International Holdings Limited

Cheung Keng Ching Chairman Hong Kong, 31 July 2007

Annual Report 2007

MANAGEMENT DISCUSSION AND ANALYSIS

Rontex International Holdings Limited

MANAGEMENT DISCUSSION AND ANALYSIS

LIQUIDITY AND FINANCIAL RESOURCES

EXPOSURE TO FLUCTUATIONS IN EXCHANGE RATES AND RELATED HEDGES

INVESTMENTS, ACQUISITIONS AND DISPOSALS

Annual Report 2007

MANAGEMENT DISCUSSION AND ANALYSIS

SHARE OPTION SCHEME

EMPLOYEES AND REMUNERATION POLICIES

Rontex International Holdings Limited

REPORT OF THE DIRECTORS

RESULTS AND APPROPRIATION

FIVE-YEAR FINANCIAL SUMMARY

PROPERTY, PLANT AND EQUIPMENT

Annual Report 2007

REPORT OF THE DIRECTORS

PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY

MAJOR CUSTOMERS AND SUPPLIERS

Rontex International Holdings Limited

REPORT OF THE DIRECTORS

DIRECTORS SERVICE CONTRACTS

DIRECTORS INTERESTS IN CONTRACTS

Annual Report 2007

REPORT OF THE DIRECTORS

Rontex International Holdings Limited

REPORT OF THE DIRECTORS

Percentage of the Issued share capital of the Company

Annual Report 2007

REPORT OF THE DIRECTORS

Ms. Chou Mei

982,800,000 Long position

SHARE OPTION SCHEME

Rontex International Holdings Limited

REPORT OF THE DIRECTORS

Issued share capital of the Company 54.37%

POST BALANCE SHEET EVENTS

SUFFICIENCY OF PUBLIC FLOAT

Annual Report 2007

REPORT OF THE DIRECTORS

On behalf of the Board

Cheung Keng Ching Chairman Hong Kong, 25 July 2007

Rontex International Holdings Limited

CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE PRACTICES

DIRECTORS SECURITIES TRANSACTIONS