CW01388-AR.pdf

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1 EMBRY HOLDINGS LIMITED Incorporated in the Cayman Islands with limited liability Stock Code 1388 STRIVING EXCELLENCE FOR Annual Report 2014

2 Sales Network Heilongjiang Jilin Xinjiang Uygur Autonomous Region Liaoning Gansu Inner Mongolia Autonomous Region Beijing Tianjin Qinghai Sichuan Shaanxi Ningxia Hui Autonomous Region Chongqing Guizhou Shanxi Hubei Hebei Henan Jiangxi Anhui Shandong Jiangsu Zhejiang Shanghai Hunan OVER Yunnan 2,300 Guangxi Zhuang Autonomous Region Guangdong Macau Hong Kong Fujian RETAIL OUTLETS An Extensive Network Capturing Growing Opportunities in China The Group s sales points span the whole nation, with footprints in all major cities such as Beijing, Shanghai, Chongqing, Tianjin, Guangzhou, Hong Kong and Macau. Such an extensive network enables the Group to efficiently respond to customer needs and deepen its market penetration in China. Hainan As at 31 December 2014, the Group had a total of 2,317 retail outlets, comprising 2,128 concessionary counters and 189 retail shops in Mainland China, Hong Kong and Macau. 2,3172,

3 Financial Highlights 財務摘要 By Business Activities 按業務活動 By Locations 按地區 77.2% 3.2% 2% 0 0.4% 0.4% 95.2% 7 7.6% 4% % 4.4% 11.6% Concessionary Counters 銷售專櫃 Retail Stores 零售店舖 Wholesale 批發 % 76.4% 7.6% 7.5% 11.6% 11.9% Internet 網上銷售 Original Design Manufacturer ( ODM ) 原設計製造商 ( ODM ) % 3.8% Mainland China 95.2% 中國大陸 95.0% 0.4% 0.4% Hong Kong 香港 4.4% 4.6% Others 其他 0.4% 0.4% By Brands 按品牌 By Products 按產品 47.2% % 0.5% 0 5% 87.7% % % 1.5% 1.3.3% 3% 1.3% 8.0% 1. % 1.3% Embry Form 安莉芳 47.2% 48.8% Fandecie 芬狄詩 31.1% 32.3% Comfit 8.0% 8.4% Revenue 收益 % 5.2% 2% % 9.6% E-BRA 9.6% 8.3% IVU 1.5% LIZA CHENG ODM Products and Others ODM產品及其他 Lingerie 女性內衣 87.7% 88.7% 0.3% Sleepwear 睡衣 5.2% 4.9% 1.3% 1.1% Swimwear 泳衣 6.2% 5.7% 1.3% 0.8% Gross Profit 毛利 ODM Products ODM產品 0.4% 0.4% Others Products 其他產品 0.5% 0.3% Profit for the Year Attributable to Owners of the Company 本公司擁有人應佔年度溢利 CAGR 15.3% CAGR 15.9% CAGR 10.3% 複合年增長率 複合年增長率 複合年增長率 10 1,349.8M 1,695.0M 1,995.4M 2,234.8M 14 2,383.1M For the year ended December 31 截至十二月三十一日止年度 ,086.1M 1,394.4M 1,620.1M 1,796.9M 14 1,960.2M For the year ended December 31 截至十二月三十一日止年度 For the year ended December 31 截至十二月三十一日止年度

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5 As a leader in China s lingerie industry, Embry Group continued to pursue sustainable development and seized every opportunity arising from the changing business environment.

6

7 Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands Royal Bank of Canada Trust Company (Cayman) Limited 4th Floor, Royal Bank House 24 Shedden Road, George Town Grand Cayman KY Cayman Islands ipr

8 2,

9

10

11

12 E-BRA IVU 45 2, ,383,127, ,868,

13 E-BRA

14

15 , % 0.3

16

17 % 2,383,127, ,093, % % 195,868, % E-BRA IVU IVU 2014 E-BRA

18 ,317 2, COMFIT E-BRA LACE LACE LIZA CHENG IVU 61911

19 ,7309, ,717, ,032,000 2,383,127, % 2,021,136, % 7.78% 266,727, % 276,885, % 84,375,000 75,724, % 9,382, % 2,269,951, % 6.87%

20 COMFIT E-BRA IVU LIZA CHENG 3.05% 1,124,662, % 2.73% 742,175, % COMFIT 2.53% 191,360, % E-BRA 22.91% 228,771, % LIZA CHENG 20.71% 30,794,000 IVU 21,346,00034,637, % 2,090,151, % 13.33% 124,729, %15.88% 148,664, % 1,960,205, %82.25% 50.13% 37,976, % 1,485,498,0001,375,742, % 61.56%

21 % 598,334, % 24.58% 9.97% 234,932, %9.56% 188,093, % 8.88%7.89%195,868, %8.22% 180,105,000346,327, ,000, ,750,000 1,744,565,000 1,628,246, % 7.48% 406,582, ,000, ,658, %

22 ,349, ,399,000 23,846,000 94,660, ,392,000 4,166,0004,166, ,661,000416,661, ,196,000

23 E-BRA

24

25 ( ) 2014 SIUF SIUF E-BRA 2014 SIUF

26 安莉芳控股有限公司 年報 企業社會責任 安莉芳作為中國領先的內衣品牌及零售企業 三十多年來積極履行其企業責任 努力不懈地實踐其綜合價值觀 促進社 會 經濟和環境共同發展 以行動來表達對社會公益的關注與支持 二零一四年 集團繼續延續 關愛 主題 關愛女性 事務 關愛社會公益 關愛環境保護 為回饋社會不遺餘力 關懷女性 熱心公益 安莉芳已連續第八年與中國婦女發展基金會合辦 藍絲帶公益行動 集團於二零一四年捐贈總值逾人民幣 500 萬元的物 資予廣西 江西 貴州 山東 上海等地的少數民族和貧困婦女 同時 集團於年底展開名為 愛心傳承 t 美無止境 的 大型慈善公益活動 與中國婦女發展基金會工作人員及健康專家攜手走進廣西省百色市及江西省吉安市 為當地少數民 族女性舉辦健康知識講座 並探訪及慰問當地貧困家庭 切實了解其生活狀況 以實際行動幫助偏遠地區少數民族的女 性提高健康意識 重塑信心 這項由集團自行組織 與中國婦女發展基金會攜手開展的公益行動 至今足跡已遍佈國內 17 個省市自治區 集團捐贈物資的價值累計總額已達人民幣 3,078 萬元 為壯族 瑤族 滿族 苗族 侗族 朝鮮族 蒙古族 藏族 傣族等多個少數民族地區的貧困女性提供援助 協助她們實現健康 美麗的夢想

27 PH

28 Harmonious World Limited Harmonious World Limited ACCA ACCA TCL

29

30

31 (A) %

32 * 2/2 * 4/5 1/1 5/5 2/2 3/3 1/1 ** 5/5 3/3 2/2 3/3 1/1 5/5 3/3 2/2 3/3 1/1 5/5 3/3 2/2 3/3 1/1 96.3% 100% 100% 100% 100% * **

33

34 D

35 (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x)

36 ,940,000 1,518,000 4,458, (i) (ii) (iii) (iv)

37 B.1.2(c)(ii) 72 (i) (ii) (iii) (iv) (v) (vi) (vii)

38 B.1.5 2,000,0012,500, ,500,0013,000,

39 iprwww.embrygroup.com (i) (ii)(i) (ii)

40 ,383,127 2,234,763 1,995,356 1,694,987 1,349, , , , , ,684 (80,464) (75,294) (77,052) (70,985) (58,814) 188, , , , , , , , , ,870 2,409,264 2,151,480 1,901,395 1,757,214 1,539,245 (664,699) (523,234) (464,159) (483,988) (427,242) 1,744,565 1,628,246 1,437,236 1,273,226 1,112,003

41 (b) ,883,00041,666, ,883,000750,892,000 6,331,000 30% 5%

42 * * ** * **

43 % 8% 13

44 XV ,679, ,302, , ,631, , ,736, ,460, , , , , , ,

45 Harmonious World LimitedHarmonious WorldFairmout Investments LimitedFairmout Investments 275,408,367 1,271,190 Harmonious World 40.91% 59.09% Fairmout Investments50% 50% XV Harmonious World

46 % ,679, ,631, , ,302, , Harmonious World 4 275,408, FIL Limited 37,520, Harmonious World Fairmout Investments 275,408,367 1,271,190 Harmonious World Fairmout Investments XV 4. Harmonious World 336

47 % 14A (1) (2) (3) (4) 13(a)(i) (ii) (iii) (iv)

48 A.55(1)(2) (i) (ii) (iii) (1)(2) 14A A.56(1)(2) (i) (ii) (iii)

49 Independent Auditors Report To the shareholders of Embry Holdings Limited (Incorporated in the Cayman Islands with limited liability) We have audited the consolidated financial statements of Embry Holdings Limited (the Company ) and its subsidiaries (together, the Group ) set out on pages 91 to 176, which comprise the consolidated and company statements of financial position as at 31 December 2014, and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information Directors Responsibility for the Consolidated Financial Statements The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view 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, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Our report is made 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 about whether the consolidated financial statements are free from material misstatement.

50 EMBRY HOLDINGS LIMITED ANNUAL REPORT Independent Auditors Report (Continued) Auditors Responsibility (continued) An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity s preparation of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated 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 December 2014, and of the Group s profit and cash flows 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. Ernst & Young Certified Public Accountants 22/F CITIC Tower 1 Tim Mei Avenue Central, Hong Kong 24 March

51 Consolidated Income Statement Year ended 31 December Notes HK$ 000 HK$ 000 REVENUE 5 2,383,127 2,234,763 Cost of sales (422,922) (437,880) Gross profit 1,960,205 1,796,883 Other income and gains, net 6 37,976 76,147 Selling and distribution expenses (1,485,498) (1,375,742) Administrative expenses (234,932) (213,641) Other expenses 7 (6,924) (7,230) Finance costs 8 (2,270) (2,754) PROFIT BEFORE TAX 9 268, ,663 Income tax expense 12 (80,464) (75,294) PROFIT FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE COMPANY , ,369 EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY 16 Basic (HK cents) Diluted (HK cents) Details of the dividends are disclosed in note 15 to the financial statements. 15

52 EMBRY HOLDINGS LIMITED ANNUAL REPORT Consolidated Statement of Comprehensive Income Year ended 31 December HK$ 000 HK$ 000 PROFIT FOR THE YEAR 188, ,369 OTHER COMPREHENSIVE INCOME/(EXPENSE) Other comprehensive income/(expense) to be reclassified to the income statement in subsequent periods: Exchange differences arising on translation of foreign operations (14,196) 40,143 TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE COMPANY 173, ,512

53 Consolidated Statement of Financial Position 31 December Notes HK$ 000 HK$ 000 NON-CURRENT ASSETS Property, plant and equipment , ,473 Investment properties , ,054 Prepaid land lease payments 19 38,989 40,407 Deferred tax assets 29 72,129 47,111 Deposits 22 17,061 9,787 Total non-current assets 1,358,167 1,095,832 CURRENT ASSETS Inventories , ,448 Trade receivables 21 89,961 87,076 Prepayments, deposits and other receivables 22 58,412 54,797 Cash and cash equivalents , ,327 Total current assets 1,051,097 1,055,648 CURRENT LIABILITIES Trade and bills payables ,527 89,145 Interest-bearing bank borrowings 26 90,639 56,750 Tax payable 74,598 44,298 Other payables and accruals , ,126 Total current liabilities 534, ,319 NET CURRENT ASSETS 516, ,329 TOTAL ASSETS LESS CURRENT LIABILITIES 1,875,157 1,751,161 NON-CURRENT LIABILITIES Interest-bearing bank borrowings 26 94,361 65,000 Deferred liabilities 28 4,070 3,879 Deferred tax liabilities 29 32,161 30,190 Other payables 27 23,846 Total non-current liabilities 130, ,915 Net assets 1,744,565 1,628,246

54 EMBRY HOLDINGS LIMITED ANNUAL REPORT Consolidated Statement of Financial Position (Continued) 31 December Notes HK$ 000 HK$ 000 EQUITY Equity attributable to owners of the Company Issued capital 30 4,166 4,166 Reserves 32(a) 1,740,399 1,624,080 Total equity 1,744,565 1,628,246 Ngok Ming Chu Director Cheng Pik Ho Liza Director

55 2014 Consolidated Statement of Changes in Equity Year ended 31 December 2014 Issued capital Share premium account Contributed surplus Asset revaluation reserve Attributable to owners of the Company Reserves Enterprise expansion and statutory reserve funds Exchange fluctuation reserve Goodwill reserve Share option reserve Retained profits Total reserves 95 Total equity Notes HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (note 32(a)) (note 32(a)) (note 32(a)) 32(a) 32(a) 32(a) At 1 January , , ,610 3,336 74, ,790 (3,168) 34, ,225 1,624,080 1,628,246 Profit for the year 188, , ,093 Exchange differences arising on translation of foreign operations (14,196) (14,196) (14,196) Total comprehensive income for the year (14,196) 188, , ,897 Equity-settled share option arrangements Share options lapsed (2,273) 2, final and special dividends declared and paid 15 (41,666) (41,666) (41,666) 2014 interim dividend 15 (16,666) (16,666) (16,666) Transfer from retained profits 23,351 (23,351) At 31 December , , ,610 3,336 97, ,594 (3,168) 32, ,908 1,740,399 1,744,565 At 1 January , , ,610 3,336 52, ,647 (3,168) 28, ,044 1,433,070 1,437,236 Profit for the year 198, , ,369 Exchange differences arising on translation of foreign operations 40,143 40,143 40,143 Total comprehensive income for the year 40, , , ,512 Equity-settled share option arrangements 31 6,663 6,663 6,663 Share options lapsed (1,119) 1, final and special dividends declared and paid 15 (37,499) (37,499) (37,499) 2013 interim dividend 15 (16,666) (16,666) (16,666) Transfer from retained profits 22,142 (22,142) At 31 December , , ,610 3,336 74, ,790 (3,168) 34, ,225 1,624,080 1,628,246

56 EMBRY HOLDINGS LIMITED ANNUAL REPORT Consolidated Statement of Cash Flows Year ended 31 December Notes HK$ 000 HK$ 000 CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax 268, ,663 Adjustments for: Finance costs 8 2,270 2,754 Bank interest income 6 (1,708) (4,220) Depreciation 9 36,432 33,313 Amortisation of prepaid land lease payments Loss on disposal/write-off of items of property, plant and equipment Provision/(write-back of provision) for obsolete inventories, net Impairment/(write-back of impairment allowance) of trade receivables Changes in fair value of investment properties Equity-settled share option expense (4,062) 42, ,220 (47) 9 (1,000) (4,000) , , ,500 Increase in inventories (151,109) (87,484) Increase in trade receivables (4,105) (7,131) Increase in prepayments, deposits and other receivables (10,901) (14,068) Increase in trade and bills payables 57,382 50,126 Increase in other payables and accruals 12,217 35,117 Increase/(decrease) in deferred liabilities 191 (158) Cash generated from operations 207, ,902 Hong Kong profits tax paid (500) (640) Overseas taxes paid (72,944) (64,225) Net cash flows from operating activities 134, ,037

57 Year ended 31 December Consolidated Statement of Cash Flows (Continued) Notes HK$ 000 HK$ 000 CASH FLOWS FROM INVESTING ACTIVITIES Interest received 1,708 4,220 Purchases of items of property, plant and equipment 17, 27 (303,195) (199,399) Proceeds from disposal of items of property, plant and equipment Decrease in a non-pledged time deposit with original maturity of more than three months when acquired ,704 Net cash flows used in investing activities (301,282) (191,437) CASH FLOWS FROM FINANCING ACTIVITIES New bank borrowings 120,000 Repayment of bank borrowings (56,750) (56,750) Dividends paid 15 (58,332) (54,165) Interest paid (2,270) (2,754) Net cash flows from/(used in) financing activities 2,648 (113,669) NET DECREASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of year Effect of foreign exchange rate changes, net CASH AND CASH EQUIVALENTS AT END OF YEAR (164,440) (42,069) 346, ,092 (1,782) 9, , ,327 ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances , ,327

58 EMBRY HOLDINGS LIMITED ANNUAL REPORT Statement of Financial Position 31 December Notes HK$ 000 HK$ 000 NON-CURRENT ASSETS Investments in subsidiaries , ,793 CURRENT ASSETS Prepayments, deposits and other receivables Cash and cash equivalents Total current assets CURRENT LIABILITIES Other payables and accruals 27 7,593 8,517 NET CURRENT LIABILITIES (7,503) (8,105) Net assets 828, ,688 EQUITY Issued capital 30 4,166 4,166 Reserves 32(b) 824, ,522 Total equity 828, ,688 Ngok Ming Chu Director Cheng Pik Ho Liza Director

59 Notes to Financial Statements 31 December Corporate Information The Company was incorporated as an exempted company with limited liability in the Cayman Islands on 29 August 2006 under the Companies Law, Chapter 22 (Law 3 of 1961, as consolidated and revised) of the Cayman Islands. The registered office address of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, the Cayman Islands and the principal place of business of the Company is located at 7th Floor, Wyler Centre II, 200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong. The principal activity of the Company is investment holding. Details of the principal activities of the subsidiaries are set out in note 23 to the financial statements. There were no significant changes in the nature of the Group s principal activities during the year Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, the Cayman Islands The Company is a subsidiary of Harmonious World Limited ( Harmonious World ), a company incorporated in the British Virgin Islands (the BVI ), which is considered by the directors as the Company s ultimate holding company. Harmonious World Limited Harmonious World Harmonious World Harmonious World 2.1 Basis of Preparation These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ( HKASs ) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants and accounting principles generally accepted in Hong Kong. These financial statements also comply with the applicable disclosure requirements of the Hong Kong Companies Ordinance relating to the preparation of financial statements, which for this financial year and the comparative period continue to be those of the predecessor Companies Ordinance (Cap. 32), in accordance with transitional and saving arrangements for Part 9 of the Hong Kong Companies Ordinance (Cap. 622), Accounts and Audit, which are set out in sections 76 to 87 of Schedule 11 to that Ordinance. The financial statements have been prepared under the historical cost convention, except for investment properties, which have been measured at fair value. These financial statements are presented in Hong Kong dollars and all values are rounded to the nearest thousand (HK$ 000) except where otherwise indicated

60 EMBRY HOLDINGS LIMITED ANNUAL REPORT December Basis of Preparation (continued) Basis of consolidation The consolidated financial statements include the financial statements of the Company and its subsidiaries (collectively referred to as the Group ) for the year ended 31 December The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. 2.1 Profit or loss and each component of other comprehensive income are attributed to the owners of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control described in the accounting policy for subsidiaries below. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value of the consideration received, (ii) the fair value of any investment retained and (iii) any resulting surplus or deficit in the consolidated income statement. The Group s share of components previously recognised in other comprehensive income is reclassified to the consolidated income statement or retained profits, as appropriate, on the same basis as would be required if the Group had directly disposed of the related assets or liabilities. (i) (ii) (iii) (i) (ii) (iii)

61 December Changes in Accounting Policies and Disclosures The Group has adopted the following revised standards and new interpretation for the first time for the current year s financial statements. 2.2 Amendments to HKFRS 10, HKFRS 12 and HKAS 27 (2011) Investment Entities Amendments to HKAS 32 Offsetting Financial Assets and Financial Liabilities 32 Amendments to HKAS 36 Recoverable Amount Disclosures for Non-Financial Assets 36 Amendments to HKAS 39 Novation of Derivatives and Continuation of Hedge Accounting 39 HK(IFRIC)-Int 21 Levies 21 Amendment to HKFRS 2 included in Annual Improvements Cycle Definition of Vesting Condition Amendment to HKFRS 3 included in Annual Improvements Cycle Accounting for Contingent Consideration in a Business Combination Amendment to HKFRS 13 included in Annual Improvements Cycle Short-term Receivables and Payables 13 Amendment to HKFRS 1 included in Annual Improvements Cycle Meaning of Effective HKFRSs 1 1 Effective from 1 July

62 EMBRY HOLDINGS LIMITED ANNUAL REPORT December Changes in Accounting Policies and Disclosures (continued) Other than explained below regarding the impact of the amendments to HKAS 32, HKFRS 2 and HKFRS 13, the adoption of the above revised standards and new interpretation has had no significant financial effect on these financial statements (a) The HKAS 32 Amendments clarify the meaning of currently has a legally enforceable right to set off for offsetting financial assets and financial liabilities. The amendments also clarify the application of the offsetting criteria in HKAS 32 to settlement systems (such as central clearing house systems) which apply gross settlement mechanisms that are not simultaneous. The amendments have had no impact on the Group as the Group does not have any offsetting arrangement. (a) (b) The HKFRS 2 Amendment clarifies various issues relating to the definitions of performance and service conditions which are vesting conditions, including (i) a performance condition must contain a service condition; (ii) a performance target must be met while the counterparty is rendering service; (iii) a performance target may relate to the operations or activities of an entity, or to those of another entity in the same group; (iv) a performance condition may be a market or non-market condition; and (v) if the counterparty, regardless of the reason, ceases to provide service during the vesting period, the service condition is not satisfied. The amendment has had no impact on the Group. (b) 2 (i) (ii) (iii) (iv) (v) (c) The HKFRS 13 Amendment clarifies that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial. The amendment has had no impact on the Group. (c) 13

63 December New and Revised HKFRSs and New Disclosure Requirements under the Hong Kong Companies Ordinance Not Yet Adopted The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements. HKFRS 9 Financial Instruments Amendments to HKFRS 10 and HKAS 28 (2011) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (2011) 2 Amendments to HKFRS 10, HKFRS 12 and HKAS 28 (2011) Investment Entities: Applying the Consolidated Exception (2011) 2 Amendments to HKFRS 11 Accounting for Acquisitions of Interests in Joint Operations HKFRS 14 Regulatory Deferral Accounts 5 HKFRS 15 Revenue from Contracts with Customers 3 Amendments to HKAS 1 Disclosure Initiative Amendments to HKAS 16 and HKAS 38 Amendments to HKAS 16 and HKAS 41 Amendment to HKAS 19 Clarification of Acceptable Methods of Depreciation and Amortisation 2 Agriculture: Bearer Plants 2 Defined Benefit Plans: Employee Contributions Amendment to HKAS 27 (2011) Equity Method in Separate Financial Statements 2 27 (2011) 2 Annual Improvements Cycle Amendments to a number of HKFRSs 1 1 Annual Improvements Cycle Amendments to a number of HKFRSs 1 1 Annual Improvements Cycle Amendments to a number of HKFRSs Effective for annual periods beginning on or after 1 July Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January Effective for an entity that first adopts HKFRSs for its annual financial statements beginning on or after 1 January 2016 and therefore is not applicable to the Group

64 EMBRY HOLDINGS LIMITED ANNUAL REPORT December New and Revised HKFRSs and New Disclosure Requirements under the Hong Kong Companies Ordinance Not Yet Adopted (continued) The Group is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application. The Group is not yet in a position to state whether they would have a significant impact on the Group s results of operations and financial position. In addition, the Hong Kong Companies Ordinance (Cap. 622) will affect the presentation and disclosure of certain information in the consolidated financial statements for the year ending 31 December The Group is in the process of making an assessment of the impact of these changes Summary of Significant Accounting Policies Subsidiaries A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee). When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: 2.4 (a) the contractual arrangement with the other vote holders of the investee; (a) (b) rights arising from other contractual arrangements; and (b) (c) the Group s voting rights and potential voting rights. (c) The results of subsidiaries are included in the Company s income statement to the extent of dividends received and receivable. The Company s investments in subsidiaries are stated at cost less any impairment losses.

65 December Summary of Significant Accounting Policies (continued) Business combinations and goodwill Business combinations are accounted for using the acquisition method. The consideration transferred is measured at the acquisition date fair value, which is the sum of the acquisition date fair values of assets transferred by the Group, liabilities assumed by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation at fair value or at the proportionate share of the acquiree s identifiable net assets. All other components of non-controlling interests are measured at fair value. Acquisition-related costs are expensed as incurred. 2.4 When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts of the acquiree. If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in the income statement. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or a liability that is a financial instrument and within the scope of HKAS 39 is measured at fair value with changes in fair value either recognised in the income statement or as a change to other comprehensive income. If the contingent consideration is not within the scope of HKAS 39, it is measured in accordance with the appropriate HKFRS. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity

66 EMBRY HOLDINGS LIMITED ANNUAL REPORT December Summary of Significant Accounting Policies (continued) Business combinations and goodwill (continued) Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests and any fair value of the Group s previously held equity interests in the acquiree over the identifiable net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net assets acquired, the difference is, after reassessment, recognised in the income statement as a gain on bargain purchase. 2.4 After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The Group performs its annual impairment test of goodwill as at 31 December. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group s cashgenerating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. An impairment loss recognised for goodwill is not reversed in a subsequent period. Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based on the relative value of the operation disposed of and the portion of the cash-generating unit retained.

67 December Summary of Significant Accounting Policies (continued) Fair value measurement The Group measures its investment properties at fair value at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. 2.4 A fair value measurement of a non-financial asset takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 based on quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly Level 3 based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

68 EMBRY HOLDINGS LIMITED ANNUAL REPORT December Summary of Significant Accounting Policies (continued) Fair value measurement (continued) For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. Related parties A party is considered to be related to the Group if: 2.4 (a) the party is a person or a close member of that person s family and that person (a) (i) has control or joint control over the Group; (i) (ii) has significant influence over the Group; or (ii) (iii) is a member of the key management personnel of the Group or of a parent of the Group; (iii) or (b) the party is an entity where any of the following conditions applies: (b) (i) the entity and the Group are members of the same group; (i) (ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity); (ii) (iii) the entity and the Group are joint ventures of the same third party; (iii) (iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity; (iv) (v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group; (v) (vi) the entity is controlled or jointly controlled by a person identified in (a); and (vi) (a) (vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity). (vii) (a)(i)

69 December Summary of Significant Accounting Policies (continued) Impairment of non-financial assets Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, financial assets and investment properties), the asset s recoverable amount is estimated. An asset s recoverable amount is the higher of the asset s or cashgenerating unit s value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. 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. An impairment loss is charged to the income statement in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset. 2.4 An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill and financial assets is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the income statement in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

70 EMBRY HOLDINGS LIMITED ANNUAL REPORT December Summary of Significant Accounting Policies (continued) Property, plant and equipment and depreciation Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. 2.4 Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly. Changes in the values of property, plant and equipment are dealt with as movements in the asset revaluation reserve. If the total of this reserve is insufficient to cover a deficit, on an individual asset basis, the excess of the deficit is charged to the income statement. Any subsequent revaluation surplus is credited to the income statement to the extent of the deficit previously charged. On disposal of a revalued asset, the relevant portion of the asset revaluation reserve realised in respect of previous valuations is transferred to retained profits as a movement in reserves. Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows: Leasehold land and buildings Over the lease terms Leasehold improvements 4.5% to 20% Plant and machinery 10% to 20% Furniture, fixtures and 10% to 20% office equipment Motor vehicles 20% to 25% 4.5% 20% 10% 20% 10% 20% 20% 25%

71 December Summary of Significant Accounting Policies (continued) Property, plant and equipment and depreciation (continued) Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end. An item of property, plant and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the income statement in the year the asset is derecognised is the difference between the net sale proceeds and the carrying amount of the relevant asset. 2.4 Construction in progress represents buildings and equipment under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use. Investment properties Investment properties are interests in land and buildings held to earn rental income and/or for capital appreciation, rather than for use in the production or supply of goods or services or for administrative purposes; or for sale in the ordinary course of business. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the end of the reporting period. Gains or losses arising from changes in the fair value of an investment property are included in the income statement in the year in which they arise. Any gains or losses on the retirement or disposal of an investment property are recognised in the income statement in the year of the retirement or disposal.

72 EMBRY HOLDINGS LIMITED ANNUAL REPORT December Summary of Significant Accounting Policies (continued) Investment properties (continued) If a property occupied by the Group as an owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under Property, plant and equipment and depreciation up to the date of change in use, and any difference at that date between the carrying amount and the fair value of the property is accounted for as a revaluation in accordance with the policy stated under Property, plant and equipment and depreciation above. Investments and other financial assets Initial recognition and measurement Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial investments, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. When financial assets are recognised initially, they are measured at fair value plus transaction costs that are attributable to the acquisition of the financial assets, except in the case of financial assets recorded at fair value through profit or loss. All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace. 2.4 Subsequent measurement The subsequent measurement of financial assets depends on their classification as follows: Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such assets are subsequently measured at amortised cost using the effective interest rate method less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in other income and gains in the income statement. The loss arising from impairment is recognised in the income statement in finance costs for loans and in other expenses for receivables.

73 December Summary of Significant Accounting Policies (continued) Derecognition of financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group s consolidated statement of financial position) when: 2.4 expired; or flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. (a) (b) When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

74 EMBRY HOLDINGS LIMITED ANNUAL REPORT December Summary of Significant Accounting Policies (continued) Impairment of financial assets The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that occurred after the initial recognition of the asset have an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Financial assets carried at amortised cost For financial assets carried at amortised cost, the Group first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. 2.4 The amount of any impairment loss identified is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset s original effective interest rate (i.e., the effective interest rate computed at initial recognition).