Sparkle Roll_B_AR.indb

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1 Sparkle Roll Group Limited 耀 萊 集 團 有 限 公 司 (Incorporated in Bermuda with limited liability 於百慕達註冊成立之有限公司) (Stock Code 股份代號: 970) 970 Annual Report 2016 年 報 2016 年報 Annual Report * for identification purpose only 僅供識別

2 Content Corporate Information 2 Financial Highlights 4 Chairman s Statement 7 Management Discussion and Analysis 10 Report of the Directors 18 Corporate Governance Report 42 Biographies of Directors and Senior Management 60 Independent Auditor s Report 70 Consolidated Statement of Comprehensive Income 72 Consolidated Statement of Financial Position 74 Consolidated Statement of Cash Flows 76 Consolidated Statement of Changes in Equity 78 Notes to the Financial Statements 79 Financial Summary 180 SPARKLE ROLL GROUP LIMITED 1

3 Corporate Information BOARD OF DIRECTORS Tong Kai Lap (Chairman) Zheng Hao Jiang (Deputy Chairman and Chief Executive Officer) Zhu Lei (appointed with effect from 1 January 2016) Zhang Si Jian* Gao Yu* Qi Jian Wei* Choy Sze Chung, Jojo** Lam Kwok Cheong** Lee Thomas Kang Bor** * * * ** ** ** * Non-Executive Director ** Independent Non-Executive Director * ** AUDIT COMMITTEE Choy Sze Chung, Jojo (Chairman) Lam Kwok Cheong Lee Thomas Kang Bor REMUNERATION COMMITTEE Lam Kwok Cheong (Chairman) Choy Sze Chung, Jojo Lee Thomas Kang Bor Tong Kai Lap Zheng Hao Jiang NOMINATION COMMITTEE Lee Thomas Kang Bor (Chairman) Lam Kwok Cheong Choy Sze Chung, Jojo LEGAL ADVISERS Chiu & Partners F. Zimmern & Co. King & Wood Mallesons COMPANY SECRETARY Li Yat Ming, FCPA, MHKSI FCPA, MHKSI 2 SPARKLE ROLL GROUP LIMITED

4 Corporate Information PRINCIPAL BANKERS Bank of Beijing Co., Ltd. Bank of East Asia, Limited China CITIC Bank Corporation Limited Ping An Bank Co., Ltd Shanghai Pudong Development Bank Co., Ltd. Standard Chartered Bank (Hong Kong) Limited AUDITOR BDO Limited (Certified Public Accountants) REGISTERED OFFICE Clarendon House 2 Church Street Hamilton HM11 Bermuda Clarendon House 2 Church Street Hamilton HM11 Bermuda PRINCIPAL OFFICE Rooms , 20/F Sun Hung Kai Centre 30 Harbour Road Wanchai Hong Kong REGISTRAR (in Hong Kong) Tricor Secretaries Limited Level 22, Hopewell Centre 183 Queen s Road East Hong Kong REGISTRAR (in Bermuda) MUFG Fund Services (Bermuda) Limited The Belvedere Building 69 Pitts Bay Road Pembroke HM08 Bermuda MUFG Fund Services (Bermuda) Limited The Belvedere Building 69 Pitts Bay Road Pembroke HM08 Bermuda STOCK CODE WEBSITE SPARKLE ROLL GROUP LIMITED 3

5 Financial Highlights Revenue for the financial year ended 31 March 2016 decreased by 8.8% from HK$2,605,701,000 to HK$2,376,904,000 when compared with the last financial year. 2,605,701, % 2,376,904,000 Gross profit for this financial year slightly increased from HK$188,427,000 to HK$189,103, ,427, ,103,000 Other income for this financial year decreased significantly from HK$208,651,000 to HK$122,379, ,651, ,379,000 Selling, general and administration expenses for this financial year decreased by 17.8% as compared with the same in the last financial year. 17.8% Net loss attributable to owners of the Company for the financial year ended 31 March 2016 was HK$32,328,000 as compared with net loss attributable to owners of the Company of HK$455,685,000 recorded for the year ended 31 March ,328, ,685,000 Losses per share attributable to owners of the Company were HK1.1 cents for this financial year as compared with HK15.3 cents losses per share in the last financial year No dividend was declared for this financial year (2015: nil). 4 SPARKLE ROLL GROUP LIMITED

6 Financial Highlights Revenue (HK$ 000) 5,000,000 4,427,423 4,000,000 3,000,000 3,015,555 3,161,848 2,605,701 2,376,904 2,000,000 1,000,000 0 FY2012 FY2013 FY2014 FY2015 FY2016 Gross Profit and Gross Profit Margin (HK$ 000) 600, % 500, , % 451, % 6.7% 7.2% 8.0% 10.0% 8.0% 300, , % 200, , , , % 100, % 0 FY2012 FY2013 FY2014 FY2015 FY % SPARKLE ROLL GROUP LIMITED 5

7 Financial Highlights Financial Position: HK$ 000 HK$000 Total Assets 1,735,506 2,410,514 Total Liabilities 651,780 1,280,169 Net Assets 1,083,726 1,130,345 Net Tangible Worth 877, ,546 Financial Ratios: HK$ 000 HK$000 Gross profit margin 8.0% 7.2% Return on equity -3.1% -41.0% Current ratio Gearing ratio 45.1% 101.3% 6 SPARKLE ROLL GROUP LIMITED

8 Chairman s Statement Due to the collapse in commodity prices and slow global trade, the 2015 global economy experienced deflationary pressure. According to the National Bureau of Statistics, China s economy grew 6.9% in 2015, the weakest in a quarter century, and the quarterly level undershot market expectations, posting its lowest reading since the financial crisis and signalling weakening economic momentum. In mid-april 2016, the International Monetary Fund raised its forecast for China s growth in 2016 to 6.5 percent, which increased by 0.2 percentage from its January predictions. 6.9% 6.5%0.2% During this financial year, the Group s revenue decreased by 8.8%, reaching HK$2.377 billion, compared with HK$2.606 billion in the previous financial year. Gross profit for the financial year increased by 0.4%, reaching HK$189.1 million, compared with HK$188.4 million in the previous financial year. The automobile business was a major income driver, accounting for approximately 91.7% of our business. Net loss attributable to owners of the Company of HK$32.3 million was recorded in this financial year compared with a net loss of HK$455.7 million in the last financial year. 8.8% 2,377,000,000 2,606,000, % 189,100, ,400, % 32,300, ,700,000 In view of the economic slowdown during the financial year under review, the Board estimated to record a loss and had issued a profit warning statement on 21 April SPARKLE ROLL GROUP LIMITED 7

9 Chairman s Statement China s Luxury Goods & Automobiles Markets There are quite a few ongoing updates and research reports from reputable authorities, investment banks and global research houses mentioning the slowdown of the China luxury goods market. According to the 2015 China Luxury Market Study issued by Bain & Company on 20 January 2016, China s luxury market dipped 2 percent to RMB113 billion in 2015, driven by a decline in watches, men s wear and leather goods. Bain s research, with a survey of nearly 1,500 Chinese consumers, found a sizable shift in shopper s geographic preferences for luxury shopping in The report reveals overseas luxury purchases grew 10 percent with consumers flocking to Japan, where their spending increased more than 200 percent. South Korea, Europe and Australia were also popular shopping destinations due to favourable exchange rates and competitive pricing on luxury goods in these markets. However, luxury spending of mainland Chinese in Hong Kong and Macau dropped by one-quarter. Furthermore, overseas travels among Chinese shoppers increased by an estimate of 32 percent from Daigou, the growing channel choice in 2014 decreased to approximately RMB43 billion market last year. Bain attributes the drop to several factors including price adjustments by key brands that reduced Daigou margins, government efforts to tighten control over imports, including Daigou, a weakened RMB, and an increase in reliance on other purchase channels notably cross-border and overseas websites, which accounted for RMB48 billion of RMB293 billion luxury overseas spending. (Bain & Company) 2015 (2015 China Luxury Market Study) 2% 113,000,000,000 1,500 10% 200% 32% 43,000,000, ,000,000,000 48,000,000,000 According to a report released on 21 March 2016 by the World Travel & Tourism Council ( WTTC ), a London-based nonprofit organization that researches the global effect of Tourism, reported that mainland Chinese spent US$215 billion when travelling abroad in 2015, representing an increase by 53 percent as compared with the same in 2014, despite a slowing economy and stock market turmoil. The number of Chinese tourists travelling overseas has increased by 200% to 120 million people over the last five years, according to data from the China National Tourist Office and WTTC. That means that one in ten international travellers now comes from China. (World Travel & Tourism Council) 215,000,000,000 53% 200% 120,000,000 8 SPARKLE ROLL GROUP LIMITED

10 Chairman s Statement Despite the slowdown of the China luxury goods market, China remains the world s number one auto market in 2015, selling 24.6 million units compared to 17.2 million vehicles sold in the US. According to the data reported by the China Automobile Association on 12 January 2016, sales rose a respectable 4.7%, beating analyst expectations of a 3% spike this year amidst a record slowdown in growth and sentiment in the Chinese economy. The growth marked the slowest pace in three years, following the 6.9 percent rise in 2014 and 13.9 percent gain in ,600,000 17,200, % 3% 6.9% 13.9% Mr. Yale Zhang, Managing Director of Automotive Foresight (Shanghai), a market and industry consultancy firm, commented that the top luxury automakers in China began performing poorly in 2015 according to an article named Luxury Auto Market Feels the Sting of China s slowdown dated 2 February 2016 on ChinaDaily.com.cn. Yale also stated there were sales drops for the top luxury vehicles in China adding that officials and the wealthy were not willing to flaunt their wealth. Additionally, the premium auto market in China, on the other hand, is healthy and will continue to grow by double digits, although it, too, is under pressure by the country s economic slowdown. Based on the figures revealed by LMC Automotive Consulting (Shanghai), the leading provider of automotive production, sales and powertrain forecasts and automotive industry market intelligence, China sold 1,921,050 premium cars throughout the year of 2015 and sold 1,786,902 units over the same period of (ChinaDaily.com.cn) (Luxury Auto Market Feels the Sting of China s slowdown) Automotive Foresight (Shanghai) (LMC Automotive Consulting (Shanghai)) 1,921,050 1,786,902 SPARKLE ROLL GROUP LIMITED 9

11 Management Discussion and Analysis BUSINESS REVIEW Automobile Dealerships During the year, revenue of the ultra-luxury automobile distributorships of Bentley, Lamborghini and Rolls-Royce recorded a decrease of approximately 11.6% to HK$2.042 billion, compared with HK$2.309 billion in the previous financial year. Of our 3 brands, Bentley and Rolls-Royce recorded sales drop while Lamborghini recorded sales growth. Lamborghini had performed the best among the Group s other brands with total sales of HK$182.7 million, representing a 45.7% increase in sales compared with HK$125.4 million during the previous financial year. A total of 40 units of Lamborghini were sold, representing an increase of 73.9% compared with 23 units sold in the last financial year. 2,042,000,000 2,309,000, % 182,700, ,400, % % According to the articles titled Automobili Lamborghini Makes 2015 the Best Year in Company History under Volkswagen official website issued on 3 March 2016, global sales of Lamborghini super sports cars increased by 28.3% from 2,530 units to 3,245 units during the fiscal year The growth represents not only an increase in volume compared to the previous year but a considerable gain. Five new models were introduced in 2015 alone. The brand s President and CEO, Stephen Winkelmann, has a very positive outlook for 2016 due to a decision to produce new third model series to bring with it doubling the production space and creation of new jobs by (Volkswagen) (Automobili Lamborghini Makes 2015 the Best Year in Company History) 2, % 3,245 (Stephen Winkelmann) Bentley recorded a decline in sales during this financial year with a total of HK$1,125.5 million, representing a significant 14.8% drop compared with that of HK$1,321.2 million recorded in the previous financial year. A total of 322 units of Bentley were sold, representing a drop of 10.1% compared with 358 in the last corresponding financial year. 1,125,500,000 1,321,200, % % Rolls-Royce recorded a 14.9% drop in sales to HK$733.4 million during this financial year, compared with HK$862.1 million in the last financial year. At the same time, a total of 126 units of Rolls-Royce were sold, representing a decrease of 7.4% compared with 136 units sold in the last financial year. 733,400, ,100, % % 10 SPARKLE ROLL GROUP LIMITED

12 Management Discussion and Analysis Gross profit margins of Bentley and Lamborghini improved but that of Rolls-Royce recorded a decline, while the Group continued enjoying bonus from the brands. Revenue of after-sales services remained about the same recording an increase of 0.3% during this financial year as compared with the previous financial year. Regarding the gross profit margin, we noted an increase from 40.1% to 46.6% in this financial year. The increase in gross profit margin was due to a substantial reduction of one-off gifts to our customers in this financial year. 0.3% 40.1%46.6% Watch Dealerships & Jewellery Distributorships During the year, the sales performance of our super deluxe branded watch division performed satisfactorily with an increase in revenue of 26.9% to HK$113.1 million as compared with HK$89.1 million in the last financial year. 26.9% 113,100,000 89,100,000 Sales of top-tier branded jewellery division decreased by 54.1% in terms of both quantity and sales amount and recorded sales revenue of HK$14.1 million as compared with HK$30.7 million in the last financial year. 54.1% 14,100,000 30,700, pieces of watches were sold in this financial year compared with 246 pieces in the last financial year. Brands included Richard Mille, Parmigiani, DeWitt, DelaCour and Buben & Zorweg Richard Mille Parmigiani DeWitt DelaCour Buben & Zorweg 419 pieces of jewellery were sold during this financial year compared with 514 pieces in the last financial year. Brands included Boucheron and Royal Asscher Boucheron Royal Asscher Gross profit margin of watch division declined during the current financial year from 28.4% in the last financial year to 18.8% in the current financial year while gross profit margin of jewellery division increased from 32.4% in the last financial year to 43.1% in the current financial year. 28.4%18.8% 32.4% 43.1% Among the watches and jewellery brands under our Group, Richard Mille performed the best in terms of revenue contribution. Richard Mille SPARKLE ROLL GROUP LIMITED 11

13 Management Discussion and Analysis Others During the current financial year, the sales performance of this division performed satisfactorily with revenue recorded an 75.7% increase to HK$70.8 million, as compared with HK$40.3 million in the last financial year. 75.7% 70,800,000 40,300,000 The brands under this division include fine wine, audio equipment, menswear apparel and accessories and cigars and smoker s accessories. B&O performed the best in terms of revenue contribution, particularly attributable to e-commerce sales of B&O PLAY. FINANCIAL REVIEW B&O B&O PLAY Revenue The revenue of the Group for the year ended 31 March 2016 was approximately HK$2,376.9 million, representing a decrease of approximately 8.8% as compared with approximately HK$2,605.7 million recorded in the last year. The decrease was due to the PRC government s continuing anti-extravagance policies and weak economic momentum which adversely impacted the demand for the Group s luxury products. The table below sets out the Group s revenue for the year indicated: 2,376,900,000 2,605,700,0008.8% FY2016 FY2015 Changes Contribution Contribution HK$ 000 (%) HK$ 000 (%) HK$ 000 % Revenue Source (%) (%) % Sales of automobiles 2,041, % 2,308, % -266, % Income from provision of after-sales services 137, % 136, % % Sub-total 2,178, % 2,445, % -266, % Sales of branded watches and jewelleries 127, % 119, % 7, % Others 70, % 40, % 30, % TOTAL 2,376, % 2,605, % -228, % 12 SPARKLE ROLL GROUP LIMITED

14 Management Discussion and Analysis Gross Profit and Gross Profit Margin The gross profit of the Group for the year ended 31 March 2016 slightly increased by 0.4% to approximately HK$189.1 million (2015: HK$188.4 million). The increase was mainly due to the increase in the gross profit from provision of automobile after-sales services, sales of audio equipments and menswear apparel by approximately 16.5%, 119% and 11 times respectively, but offset by the decrease in gross profit from sales of automobile, watches and jewelleries. The menswear apparel business was commenced since January 2015 and fully operated during this financial year. 0.4%189,100, ,400, % 119% 11 The gross profit margin of the Group for the year ended 31 March 2016 increased from 7.2% in the last financial year to 8.0%. Such increase was mainly due to the increase in gross profit margin on provision of after-sales services and the surging contribution from audio equipments and menswear apparel business. 7.2% 8.0% Other Income Other income was HK$122.4 million for the year ended 31 March 2016, a 41.4% decrease from HK$208.7 million in the last financial year. The decrease was mainly due to the fact that the Group did not provide any training services or generate any income from training services in respect of initiating knowledge and skill of distributorship of branded automobiles during the financial year and that the bonus from suppliers for marketing purpose decreased by approximately 47.7%. 208,700, % 122,400, % Operating Expenses The selling and distribution costs and administrative expenses decreased by 17.8% and 18.1% respectively. The decreases were mainly due to the decrease in marketing and promotions and depreciation. The depreciation decreased significantly because impairment losses on leasehold improvement for watch, jewellery and fine wine segments were recognised in the last financial year. 17.8% 18.1% SPARKLE ROLL GROUP LIMITED 13

15 Management Discussion and Analysis Finance Cost Finance cost slightly increased by 2.3% from HK$48.2 million to HK$49.3 million. The increase was mainly due to the increase in average balance of borrowings but offset by the reduction of interest rates by the People s Bank of China during the financial year. LIQUIDITY AND FINANCIAL RESOURCES 48,200,0002.3% 49,300,000 The Group s total assets as at 31 March 2016 were approximately HK$1,735.5 million (2015: HK$2,410.5 million) which were mainly financed by the owners equity and total liabilities of approximately HK$1,056.2 million (2015: HK$1,112.6 million) and HK$651.7 million (2015: HK$1,280.2 million) respectively. 1,735,500,000 2,410,500,000 1,056,200,000 1,112,600, ,700,000 1,280,200,000 Cash Flow The Group s bank balances and cash as of 31 March 2016 were approximately HK$157.2 million (2015: HK$63.4 million) which were mainly denominated in Hong Kong dollars ( HK$ ) and Renminbi ( RMB ). 157,200,000 63,400,000 The Group s primary uses of cash are to repay the Group s borrowings, to pay for purchases of inventories and to fund the Group s working capital and normal operating costs. Such increase was mainly attributable to the significant decrease in pledged deposit for banking facilities during the year. The Directors consider that the Group will have sufficient working capital for its existing operations and financial resources for financing future business expansion and capital expenditures. Borrowings The Group s borrowings as at 31 March 2016 were approximately HK$488.7 million, representing a decrease of 57.3% from approximately HK$1,145.4 million as at 31 March The decrease was mainly due to substantial repayment of borrowings during the year. 488,700,000 1,145,400, % 14 SPARKLE ROLL GROUP LIMITED

16 Management Discussion and Analysis Gearing Ratio The Group s gearing ratio computed as total borrowings over the total equity decreased to 45.1% as at 31 March 2016 (2015: 101.3%). 45.1% 101.3% Inventories As at 31 March 2016, the Group s inventories decreased by 33.3% from approximately HK$1,499.6 million as at 31 March 2015 to HK$1,000.2 million, primarily due to the decrease in automobile inventories which comprised approximately 59% of the inventories of the Group. 1,499,600, % 1,000,200,000 59% The Group s average inventory turnover days increased from 184 days in the year ended 31 March 2015 to 209 days in the year ended 31 March 2016, primarily due to decrease in cost of sales resulting from the challenging retail condition The average inventory turnover days mentioned above was defined as average inventory over cost of sales multiplied by 365 days, and the average inventory was the median value of the inventories as at the year end of the current and previous financial years. 365 Exposure To Foreign Exchange Risk The revenue and expenses of the Group are mainly denominated in RMB and HK$ while the production cost and purchases are mainly denominated in RMB, HK$, Euro ( EUR ) and Swiss Franc ( CHF ). The Group did not enter into any foreign currency forward contract for this financial year under review. At 31 March 2016, the Group did not have any unrealised loss in respect of the foreign currency forward contracts (31 March 2015: HK$3.9 million). 3,900,000 SPARKLE ROLL GROUP LIMITED 15

17 Management Discussion and Analysis Contingent Liabilities And Capital Commitment The Group did not have any significant capital commitment as at 31 March 2016 (2015: nil) in respect of acquisition of property, plant and equipment. The board of Directors of the Company considered that the Group had no material contingent liabilities as at 31 March 2016 (2015: nil). Charges On Assets As at 31 March 2016, pledged deposits and inventories of the Group with aggregate carrying amounts of approximately HK$55.7 million (2015: HK$230.5 million) and approximately HK$424.6 million (2015: HK$793.9 million) respectively were pledged to secure general banking facilities and other facilities granted to the Group. 55,700, ,500, ,600, ,900,000 Human Resources As at 31 March 2016, the Group had 485 (2015: 477) employees. Staff costs (including directors emoluments) charged to profit or loss amounted to approximately HK$44.1 million for the year (2015: HK$51.3 million) ,100,00051,300,000 The Group provided benefits, which included basic salary, commission, discretionary bonus, medical insurance and retirement funds, to employees to sustain competitiveness of the Group. The package was reviewed on an annual basis based on the Group s performance and employees performance appraisal. The Group also provided training to the employees for their future advancement. RECENT DEVELOPMENT AND PROSPECT China s luxury car sales suffered slowdown in 2015 despite the fact that it is still the world s biggest auto market. Nevertheless, one of our automobile brands, Bentley has high expectation for its sales total in 2016, especially with the Bentayga, its newly released SUV. The brand s spokeswoman told China Daily on 20 January 2016 that pre-orders of Bentayga have exceeded the quota for the Chinese market according to an article titled Luxury Auto Market Feels the Sting of China s Slowdown issued by Chinadaily.com.cn on 2 February Bentayga Bentayga 16 SPARKLE ROLL GROUP LIMITED

18 Management Discussion and Analysis As mentioned in our last interim report of 2015, the Group intended to analyze and plan a large scale e-commerce business. An announcement was issued further on 8 December 2015 stating that the Group has decided to commence its investment in establishing an e-commerce platform, namely Sparkle Roll Online, to capture the e-commerce market. It is intended that such e-commerce platform will be accessible through internet and mobile apps. To leverage the experience of the Group as the leading distributor and dealers of top-tier luxury goods, there will be different categories of online channels for ultra-luxury cars, super deluxe branded watches, top-tier branded jewelleries, fine wines, niche luxury goods, high-end tours, investment and finance, dream mansion, celebrity club and the wonderland respectively. Although Sparkle Roll Online belongs to an e-commerce platform with channels, the Group will comprehensively rely on the existing physical stores of Sparkle Roll Group and the physical stores of online cooperative luxury brand flagship stores and top products flagship stores due to the high value characteristics of online products in order to fully satisfy the offline experience expectations of luxury brands and clients, complete the final delivery and service process of products and achieve the combination of traditional high-end consumption experience and fashionable online browsing transactions, a combination of Internet+O2O and traditional luxury business. The Group targets to launch the online project in or about the end of the second quarter of 2016 and tentatively expects that to be launched in five stages and to be fully operated by the end of We plan to invest approximately RMB30 million in staff and set-up costs in the upcoming financial year up to 31 March 2017 which will be financed by internal resources. +O2O 30,000,000 Looking ahead, given the present challenges, we are confident and still committed to maintain our leading roles in the luxury goods market in the PRC. Meanwhile, the Group continues to target destocking of our non-auto inventory and we will adopt a prudent and, to a certain extent, innovative approach to maintain a healthy level of inventory. SPARKLE ROLL GROUP LIMITED 17

19 Report of the Directors PRINCIPAL ACTIVITIES The Company is an investment holding company. Its subsidiaries are principally engaged in distributorships of luxury goods. The operations are mainly based in Hong Kong, the People s Republic of China (the PRC ) and Malaysia. Details of the principal activities of the principal subsidiaries are set out in note 36 to the financial statements. BUSINESS REVIEW 36 A fair review of the Group s business, including the Group s segmental analysis, the important events affecting the Group that have occurred since the end of 31 March 2016 and the likely future developments, is set out in the Chairman s Statement and Management Discussion and Analysis sections of this Annual Report. Details about the principal risks and uncertainties facing the Group, is set out in the Risk Management and Internal Controls section of the Corporate Governance Report. Details about the Group s financial risk management are set out in note 38 to the financial statements. DIVIDEND 38 The directors do not recommend the payment of a final dividend for the year ended 31 March 2016 (2015: nil), while no interim dividend (2015: nil) had been distributed during the year. SHARE OPTION SCHEME The Company s share option scheme (the Scheme ) was adopted pursuant to an ordinary resolution passed at a special general meeting of the Company held on 7 October 2002 for the primary purpose of providing incentives to directors and eligible employees. The Scheme was expired on 6 October Pursuant to an ordinary resolution passed at an annual general meeting of the Company held on 20 August 2012, the Company s new share option scheme (the New Scheme ) was adopted and the Scheme was terminated. The New Scheme shall be valid and effective for a term of ten years commencing on 20 August There are approximately 6 years remaining life of the New Scheme. 18 SPARKLE ROLL GROUP LIMITED

20 Report of the Directors The total number of shares in respect of which options may be granted under the New Scheme as at 31 March 2016 was 297,982,885 shares (including options for nil share that have been granted but not yet lapsed or exercised), representing 10% of the issued share capital of the Company as at 31 March ,982,885 10% The Company operates the New Scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group s business. Eligible participants of the New Scheme include any director (including executive, non-executive and independent non-executive director), any employee, or any consultant, advisor, customer and business associates. There was no outstanding share to be issued under the New Scheme as at 31 March 2016 (as at 31 March 2015: nil). MAJOR CUSTOMERS AND SUPPLIERS For the year ended 31 March 2016, the largest and the top five suppliers of the Group accounted for 53.4% and 99.5% of the Group s total purchases respectively. The largest and the top five customers of the Group accounted for less than 10% of the Group s total revenue. 53.4% 99.5% 10% At no time during the year under review did a director, an associate of a director or a shareholder of the Company (which to the knowledge of the directors owns more than 5% of the Company s share capital) had a beneficial interest in any of the Group s five largest suppliers or customers for the year. RESULTS AND APPROPRIATIONS 5% The results of the Group for the year ended 31 March 2016 are set out in the consolidated statement of comprehensive income on pages 72 and The directors do not recommend the payment of any dividend in respect of the year. SPARKLE ROLL GROUP LIMITED 19

21 Report of the Directors RESERVES Details of the movements in the reserves of the Group and the Company during the year are set out in the consolidated statement of changes in equity on page 78 and note 40(b) to the financial statements respectively. DISTRIBUTABLE RESERVES 78 40(b) In addition to retained profits, under the Bermuda Companies Act, the contributed surplus account of the Company is also available for distribution to its shareholders. However, the Company cannot declare or pay a dividend, or make a distribution, out of contributed surplus if: (a) it is, or would after the payment be, unable to pay its liabilities as they become due; or (a) (b) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium accounts. (b) In the opinion of the directors, the distributable reserve accounts comprise the reserves of the Company of approximately HK$10,471,000 (2015: HK$24,410,000) in surplus. SHARE CAPITAL 10,471,000 24,410,000 Details of the movements during the year in the share capital of the Company are set out in note 30 to the financial statements. BORROWINGS 30 Particulars of borrowings of the Group as at 31 March 2016 are set out in note 28 to the financial statements SPARKLE ROLL GROUP LIMITED

22 Report of the Directors FINANCIAL SUMMARY A summary of the published results and of the assets and liabilities of the Group for the past five financial years is set out on page 180 of this report. PROPERTY, PLANT AND EQUIPMENT 180 Details of the movements during the year in the property, plant and equipment of the Group are set out in note 16 to the financial statements. DIRECTORS AND SERVICE CONTRACTS 16 The directors of the Company during the year and up to the date of this report were as follow: Executive directors: Mr. Tong Kai Lap Mr. Zheng Hao Jiang Mr. Zhu Lei (appointed with effect from 1 January 2016) Mr. Zhao Xiao Dong (resigned with effect from 1 January 2016) Non-executive directors: Mr. Gao Yu Mr. Qi Jian Wei Mr. Zhang Si Jian Independent non-executive directors: Mr. Choy Sze Chung, Jojo Mr. Lam Kwok Cheong Mr. Lee Thomas Kang Bor In accordance with bye-law no. 86(2) of the Company s Byelaws, any Director appointed by the Board to fill a casual vacancy shall hold office until the first general meeting of Members after his appointment and be subject to re-election at such meeting. 86(2) SPARKLE ROLL GROUP LIMITED 21

23 Report of the Directors In accordance with bye-law no. 87(1) of the Company s Bye-laws, every director should be subject to retirement by rotation at the annual general meeting at least once every three years and are eligible for re-election. 87(1) No director proposed for re-election at the forthcoming annual general meeting has a service contract with the Company or its subsidiaries which is not determinable by the Group within one year without payment of compensation (other than statutory compensation). The term of office of each independent non-executive director is for the period of two years and renewable for one year up to his retirement by rotation in accordance with the Company s Bye-laws. In accordance with bye-law no. 86(2) of the Company s Bye-laws, Mr. Zhu Lei was appointed as Executive Director during the year and will hold office until the forthcoming general meeting. Mr. Zhu Lei will offer himself for re-election at the forthcoming annual general meeting. 86(2) In accordance with bye-law no. 87(1) of the Company s Bye-laws, Mr. Zheng Hao Jiang, Mr. Zhang Si Jian and Mr. Lam Kwok Cheong will retire by rotation and, being eligible, for re-election. 87(1) Details of directors emoluments are set out in note 12 to the financial statements. 12 The biographical details of directors and senior management are set out on pages 60 to 69. CONFIRMATION OF INDEPENDENCE OF INDEPENDENT NON-EXECUTIVE DIRECTORS The Company has received, from each of the independent nonexecutive Directors, an annual confirmation of his independence pursuant to Rule 3.13 of the Listing Rules. The Company considers that all independent non-executive Directors are independent SPARKLE ROLL GROUP LIMITED

24 Report of the Directors DIRECTORS INTERESTS IN TRANSACTIONS, ARRANGEMENTS OR CONTRACTS OF SIGNIFICANCE Except as disclosed in note 35 and elsewhere in the financial statements, there are no transactions, arrangements or contracts of significance to which the 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. DIRECTORS INTEREST IN A COMPETING BUSINESS 35 Pursuant to Rule 8.10 of the Listing Rules, the Company disclosed that no directors of the Company is considered to have interests in any business which is likely to compete directly or indirectly with the business of the Group. MANAGEMENT CONTRACTS 8.10 No contract concerning the management and administration of the whole or any substantial part of the business of the Company was entered into or existed during the year. PERMITTED INDEMNITY Pursuant to the bye-law no. 168(1) of the Company s Bye-Laws, the directors, secretary or other officers of the Company shall be entitled to be indemnified out of the assets and profits of the Company from and against all losses or damages which he may sustain or incur in or about the execution of the duties of his office, or otherwise in relation thereto. 168(1) The Company has arranged appropriate directors and officers liability insurance coverage for the directors and officers of the Group. SPARKLE ROLL GROUP LIMITED 23

25 Report of the Directors DIRECTORS INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ITS ASSOCIATED CORPORATIONS As at 31 March 2016, the interests and short positions of the directors and/or the chief executives of the Company in the shares, underlying shares and debentures of the Company and its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the SFO )) which were required to be (i) notified to the Company and The Stock Exchange of Hong Kong Limited (the Stock Exchange ) pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which he was taken or deemed to have under such provisions of the SFO); or (ii) as recorded in the register required to be maintained by the Company pursuant to Section 352 of the SFO; or (iii) as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out in Appendix 10 to the Rules Governing the Listing of Securities on the Stock Exchange (the Listing Rules ), were as follows: Long position in the shares, underlying shares and debentures of the Company XV (i) XV78 (ii) 352 (iii) Name of director Capacity Number of shares held Approximate percentage of interest (Note 2) 2 Mr. Tong Kai Lap Founder of discretionary trust (Note 1) 10,274, % 1 Beneficial owner 9,760, % Subtotal 20,034, % Mr. Zheng Hao Jiang Beneficial owner 10,640, % Mr. Choy Sze Chung, Jojo Beneficial owner 1,000, % Mr. Lam Kwok Cheong Beneficial owner 4, % Mr. Lee Thomas Kang Bor Beneficial owner 1,256, % 24 SPARKLE ROLL GROUP LIMITED

26 Report of the Directors Notes: (1) These 10,274,400 shares were held by Rapid Alert International Limited, a company controlled by a discretionary trust of which Mr. Tong is the founder. Accordingly, Mr. Tong was deemed to be interested in these shares. (1) 10,274,400 Rapid Alert International Limited (2) The denominator used is 2,979,828,850 shares, being the total number of shares in issue as at 31 March (2) 2,979,828,850 SHARE OPTIONS The New Scheme was adopted pursuant to an ordinary resolution passed at a general meeting of the Company held on 20 August SPARKLE ROLL GROUP LIMITED 25

27 Report of the Directors SUBSTANTIAL SHAREHOLDERS INTERESTS IN SHARES AND UNDERLYING SHARES OF THE COMPANY As at 31 March 2016, the register maintained by the Company pursuant to Section 336 of the SFO shows that, other than a director or chief executive of the Company, the following shareholders had notified the Company of relevant interests and short positions in the shares and underlying shares of the Company: 336 Long position in the shares and underlying shares of the Company Name of shareholder Capacity Number of shares Approximate percentage of interest (Note 5) 5 Substantial shareholders Sparkle Roll Holdings Limited ( SRHL ) Beneficial owner 843,440, % Mr. Qi Jian Hong ( Mr. Qi ) Beneficial owner 4,960, % Interest of controlled corporation (Note 1) 1 843,440, % Ms. Zhu Shuang ( Ms. Zhu ) Interest of spouse (Note 1) 848,400, % 1 Street Smart Properties Limited ( Street Smart ) Street Smart Properties Limited Street Smart Beneficial owner (Note 2) 304,016, % 2 26 SPARKLE ROLL GROUP LIMITED

28 Report of the Directors Name of shareholder Capacity Number of shares Approximate percentage of interest (Note 5) 5 Mr. Wang Qiang ( Mr. Wang ) Beneficial owner (Note 2) 200, % 2 Interest of controlled corporation (Note 2) 2 304,016, % Ms. Gao Hong ( Ms. Gao ) Interest of spouse (Note 2) 304,216, % 2 Mega Choice (International) Limited ( Mega Choice ) Mega Choice (International) Limited Mega Choice Beneficial owner (Note 3) 83,656, % 3 Mr. Liu Qiang ( Mr. Liu ) Beneficial owner (Note 3) 196,584, % 3 Interest of controlled corporation (Note 3) 3 83,656, % Ms. Shi Qi ( Ms. Shi ) Interest of spouse (Note 3) 280,240, % 3 Hua Lang Limited ( Hua Lang ) Beneficial owner 170,704, % Mr. Jiang Hairong ( Mr. Jiang ) Interest of controlled corporation (Note 4) 4 170,704, % Ms. Yang Lili ( Ms. Yang ) Interest of spouse (Note 4) 170,704, % 4 LC Fund V, L.P. Beneficial owner 149,048, % SPARKLE ROLL GROUP LIMITED 27

29 Report of the Directors Notes: (1) These 843,440,000 Shares were held by SRHL. SRHL is a company wholly owned by Mr. Qi. Accordingly, Mr. Qi was deemed to be interested in the Shares held by SRHL. Ms. Zhu is the wife of Mr. Qi. Accordingly, Ms. Zhu was deemed to be interested in the Shares held by SRHL and Mr. Qi. (1) 843,440,000 (2) These 304,216,000 shares were held by Street Smart. Street Smart is a company wholly owned by Mr. Wang. Accordingly, Mr. Wang was deemed to be interested in the Shares held by Street Smart. Ms. Gao is the wife of Mr. Wang. Accordingly, Ms. Gao was deemed to be interested in the Shares held by Street Smart and Mr. Wang. (2) 304,216,000 Street Smart Street Smart Street Smart Street Smart (3) These 83,656,000 shares were held by Mega Choice. Mega Choice is a company wholly owned by Mr. Liu. Accordingly, Mr. Liu was deemed to be interested in the Shares held by Mega Choice. Ms. Shi is the wife of Mr. Liu. Accordingly, Ms. Shi was deemed to be interested in the Shares held by Mega Choice and Mr. Liu. (3) 83,656,000 Mega Choice Mega Choice Mega Choice Mega Choice (4) These 170,704,000 shares were held by Hua Lang. Hua Lang is a company wholly owned by Mr. Jiang. Accordingly, Mr. Jiang was deemed to be interested in the shares held by Hua Lang. Ms. Yang is the wife of Mr. Jiang. Accordingly, Ms. Yang was deemed to be interested in the shares held by Hua Lang and Mr. Jiang. (4) 170,704,000 (5) The denominator used is 2,979,828,850 shares, being the total number of shares in issue as at 31 March (5) 2,979,828, SPARKLE ROLL GROUP LIMITED

30 Report of the Directors ARRANGEMENTS TO PURCHASE SHARES OR DEBENTURES Other than as disclosed in the section headed Share Options above, at no time during the year was the Company, fellow subsidiaries or any of its subsidiaries a party to any arrangements to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. PURCHASE, SALE OR REDEMPTION OF THE COMPANY S LISTED SECURITIES Neither the Company, nor any of its subsidiaries purchased, sold or redeemed any of the Company s listed securities during the year. PRE-EMPTIVE RIGHTS There are no provisions for pre-emptive rights under the Company s Bye-laws or the laws of Bermuda, which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders. EMOLUMENT POLICY The emolument policy of the employees of the Group is set up by the Remuneration Committee on the basis of their merit, qualifications and competence. The Board has the general power of determining the Directors remuneration, subject to authorization of the shareholders of the Company at the annual general meeting each year. The emoluments of the executive Directors are subject to review by the Remuneration Committee, and their remuneration is determined with reference to the Directors qualifications, experience, duties, responsibilities, performance, results of the Group and comparable market information. The Company has adopted the New Scheme as an incentive to directors and eligible participants. SPARKLE ROLL GROUP LIMITED 29

31 Report of the Directors CONTINUING CONNECTED TRANSACTIONS The directors of the Company are responsible for the completeness and accuracy of disclosures of continuing connected transactions ( CCT ) and the Company s compliance with the Listing Rules in respect of such transactions. The independent non-executive directors of the Company had reviewed all CCT as shown on pages 31 to 39 and confirmed in this annual report and accounts that the transactions have been entered into: (1) in the ordinary and usual course of business of the Group; (1) (2) on normal commercial terms; and (2) (3) in accordance with the relevant agreements governing them on terms that are fair and reasonable and in the interests of the shareholders of the Company as a whole. (3) 30 SPARKLE ROLL GROUP LIMITED

32 Report of the Directors CONTINUING CONNECTED TRANSACTIONS (Continued) BDO Limited, the Company s auditor, was engaged to report on the Group s continuing connected transactions in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) Assurance Engagements Other Than Audits or Reviews of Historical Financial Information and with reference to Practice Note 740 Auditor s Letter on Continuing Connected Transactions under the Hong Kong Listing Rules issued by the Hong Kong Institute of Certified Public Accountants. BDO Limited has issued an unqualified letter containing its findings and conclusions in respect of the continuing connected transactions in accordance with Rule 14A.56 of the Listing Rules and confirmed that: A.56 (a) nothing has come to their attention that causes them to believe (a) that the disclosed continuing connected transactions have not been approved by the board of the Company; (b) for transactions involving the provision of services by the (b) Group, nothing has come to their attention that causes them to believe that the transactions were not, in all material respects, in accordance with the pricing policies of the Group; (c) nothing has come to their attention that causes them to (c) believe that the transactions were not entered into, in all material respects, in accordance with the relevant agreements governing such transactions; and (d) nothing has come to their attention that causes them to believe (d) that the disclosed continuing connected transactions have exceeded the relevant annual caps as set by the Company. A copy of the auditor s letter has been provided by the Company to The Stock Exchange of Hong Kong Limited. SPARKLE ROLL GROUP LIMITED 31

33 Report of the Directors CONTINUING CONNECTED TRANSACTIONS (Continued) Showroom Rental Agreement On 31 December 2010, Tianjin Xin Chang Tai Fu Trading Development Limited ( TJXC ), an indirect subsidiary of the Company, entered into a showroom rental agreement (the Showroom Rental Agreement ) with Mr. Qi, a substantial shareholder of the Company, for a term commencing from 1 January 2011 to 31 December 2013, in respect of the office rental, management fees and office expenses in relation to a showroom and office of a gross floor area of approximately 365 square metres at Zeng No. 4, No. 162 Zhang Zi Zhong Road, Heping District, Tianjin, the PRC and subject to an annual cap of RMB2,640, ,640,000 A supplemental agreement (the Supplemental Agreement ) was entered into between TJXC and Mr. Qi dated 30 June 2011 for extension of the duration of the Showroom Rental Agreement from its original terms of 3 years from 1 January 2011 inclusive to 10 years from 1 January 2011 inclusive. For the year ended 31 March 2016, the total rental charge paid by TJXC to Mr. Qi amounted to RMB2,640,000 or approximately HK3,220,000. 2,640,0003,220,000 Beijing Leasing Agreement I I On 30 June 2011, Sparkle Roll Xin Tian Di Commerce Development Limited ( SRXTD ), an indirect wholly-owned subsidiary of the Company, entered into a lease agreement (the Beijing Leasing Agreement I ) with Mr. Qi, a substantial shareholder of the Company, for a 10-year term from 1 July 2011 to 30 June 2021, for leasing a portion of warehouse for exhibition purpose, of a portion of warehouse having a gross floor area of approximately 2,150 square metres at portions of Basement Level 1 of Towers A and B, International Wonderland No.40 Xing Fu Er Chun, San Li Tun, Choyang District, Beijing, the PRC. SRXTD I 40AB1 2, SPARKLE ROLL GROUP LIMITED

34 Report of the Directors CONTINUING CONNECTED TRANSACTIONS (Continued) Beijing Leasing Agreement I (Continued) I For the year ended 31 March 2016, the total rental charge paid by SRXTD to Mr. Qi amounted to RMB2,400,000 or approximately HK$2,927,000. SRXTD 2,400,0002,927,000 An agreement was entered into between SRXTD and Sparkle Roll Retail Net Development Limited ( SRRND ), a wholly owned subsidiary of the Company, dated 6 July 2011 pursuant to which the tenant of the Beijing Leasing Agreement I was transferred from SRXTD to SRRND, with the same agreement terms. SRXTD SRRND I SRXTDSRRND An amended Beijing Leasing Agreement I was entered into among SRXTD, SRRND and Mr. Qi under which portions of Basement Level 1 of Tower B, International Wonderland No. 40 Xing Fu Eu Chun, San Li Tun, Choyang District, Beijing, the PRC were surrendered to Mr. Qi (with no liability on the part of SRRND and SRXTD) with effect from 1 July The lease in respect of the retained portion would continue under the same terms save for rental reduction on account of the partial surrender. SRXTD SRRND I 40B1 SRRND SRXTD Beijing Leasing Agreement II II On 30 June 2011, Beijing Mei He Zhen Yong Motors Trading Limited ( BJMH ), an indirect wholly-owned subsidiary of the Company, entered into a lease agreement (the Beijing Leasing Agreement II ) with Mr. Qi, a substantial shareholder of the Company, for a 10-year term from 1 July 2011 to 30 June 2021, for leasing a showroom for luxury automobiles dealership business, of a portion of showroom having a gross floor area of approximately 1,135 square metres at portions of Level 1 of Tower A, International Wonderland No. 40 Xing Fu Er Chun, San Li Tun, Choyang District, Beijing, the PRC. II 40A1 1,135 SPARKLE ROLL GROUP LIMITED 33

35 Report of the Directors CONTINUING CONNECTED TRANSACTIONS (Continued) Beijing Leasing Agreement II (Continued) II For the year ended 31 March 2016, the total rental charge paid by BJMH to Mr. Qi amounted to RMB11,040,000 or approximately HK$13,463, ,040,00013,463,000 An agreement was entered into between BJMH and SRRND, a wholly owned subsidiary of the Company, dated 6 July 2011 pursuant to which the tenant of the Beijing Leasing Agreement II was transferred from BJMH to SRRND, with the same agreement terms. SRRND II SRRND Beijing Leasing Agreement III III On 30 June 2011, Sparkle Roll Oriental (Beijing) Trading Development Limited ( SROBJ ), an indirect wholly-owned subsidiary of the Company, entered into a lease agreement (the Beijing Leasing Agreement III ) with Mr. Qi, a substantial shareholder of the Company, for a 10-year term from 1 July 2011 to 30 June 2021, for leasing a showroom for distribution of fine wines, watches and jewelleries, of a portion of showroom having a gross floor area of approximately 2,148 square metres at portions of Level 1 and 2 of Tower A, International Wonderland No. 40 Xing Fu Er Chun, San Li Tun, Choyang District, Beijing, the PRC. III 40A1 2 2,148 For the year ended 31 March 2016, the total rental charge paid by SROBJ to Mr. Qi amounted to RMB13,560,000 or approximately HK$16,537, ,560,00016,537,000 An agreement was entered into between SROBJ and SRRND, a wholly owned subsidiary of the Company, dated 6 July 2011 pursuant to which the tenant of the Beijing Leasing Agreement III was transferred from SROBJ to SRRND, with the same agreement terms. SRRND III SRRND 34 SPARKLE ROLL GROUP LIMITED

36 Report of the Directors CONTINUING CONNECTED TRANSACTIONS (Continued) Beijing Leasing Agreement IV IV On 30 June 2011, Beijing De Te Motors Trading Limited ( BJDT ), an indirect wholly-owned subsidiary of the Company, entered into a lease agreement (the Beijing Leasing Agreement IV ) with Mr. Qi, a substantial shareholder of the Company, for a 10-year term from 1 July 2011 to 30 June 2021, for leasing an office, of a portion of office having a gross floor area of approximately 1,280 square metres at Level 3 of Tower A and portion of Level 7 of Tower B, International Wonderland No.40 Xing Fu Er Chun, San Li Tun, Choyang District, Beijing, the PRC. IV 40 A3B7 1,280 For the year ended 31 March 2016, the total rental charge paid by BJDT to Mr. Qi amounted to RMB4,560,000 or approximately HK$5,561,000. 4,560,0005,561,000 An agreement was entered into between BJDT and SRRND, a wholly owned subsidiary of the Company, dated 6 July 2011 pursuant to which the tenant of the Beijing Leasing Agreement IV was transferred from BJDT to SRRND, with the same agreement terms. SRRND IV SRRND Beijing Leasing Agreement V V On 26 June 2013, SRRND, an indirect wholly-owned subsidiary of the Company, entered into a lease agreement (the Beijing Leasing Agreement V ) with Mr. Qi, a substantial shareholder of the Company, for a 10-year term from 1 July 2013 to 30 June 2023, for leasing a showroom for luxury automobiles dealership, of a portion of showroom having a gross floor area of approximately 1,429.2 square metres at portions of Levels 1 and 2 of Tower B, International Wonderland, 40 Xing Fu Er Chun, San Li Tun, Chaoyang District, Beijing, the PRC. SRRND V 40B1 21,429.2 For the year ended 31 March 2016, the total rental charge paid by SRRND to Mr. Qi amounted to RMB13,200,000 or approximately HK$16,098,000. SRRND 13,200,00016,098,000 SPARKLE ROLL GROUP LIMITED 35

37 Report of the Directors CONTINUING CONNECTED TRANSACTIONS (Continued) Beijing Leasing Agreement VI VI On 26 June 2013, SRRND, an indirect wholly-owned subsidiary of the Company, entered into a lease agreement (the Beijing Leasing Agreement VI ) with Mr. Qi, a substantial shareholder of the Company, for a 10-year term from 1 July 2013 to 30 June 2023, for leasing an office, of a portion of office having a gross floor area of approximately 840 square metres at portions of Level 3 of Tower B, International Wonderland, 40 Xing Fu Er Chun, San Li Tun, Chaoyang District, Beijing, the PRC. SRRND VI 40B3 840 For the year ended 31 March 2016, the total rental charge paid by SRRND to Mr. Qi amounted to RMB3,360,000 or approximately HK$4,098,000. SRRND 3,360,0004,098,000 Tianjin Leasing Agreement I I On 30 June 2011, Tianjin Heng Ying Tai Fu Trading Development Limited ( TJHY ), an indirect subsidiary of the Company, entered into a lease agreement (the Tianjin Leasing Agreement I ) with Mr. Qi, a substantial shareholder of the Company, for a 10-year term from 1 July 2011 to 30 June 2021, for leasing a showroom for luxury automobiles dealership, having a gross floor area of approximately square metres at Zeng No. 2 and Zeng No. 3, No. 162 Zhang Zi Zhong Road, Heping District, Tianjin, the PRC. I For the year ended 31 March 2016, the total rental charge paid by TJHY to Mr. Qi amounted to RMB3,000,000 or approximately HK$3,659,000. 3,000,0003,659,000 An agreement was entered into between TJHY and SRRND, a wholly owned subsidiary of the Company, dated 6 July 2011 pursuant to which the tenant of the Tianjin Leasing Agreement I was transferred from TJHY to SRRND, with the same agreement terms. SRRND I SRRND 36 SPARKLE ROLL GROUP LIMITED

38 Report of the Directors CONTINUING CONNECTED TRANSACTIONS (Continued) Tianjin Leasing Agreement II II On 30 June 2011, TJXC, an indirect subsidiary of the Company, entered into a lease agreement (the Tianjin Leasing Agreement II ) with Mr. Qi, the largest substantial shareholder of the Company, for a 10-year term from 1 July 2011 to 30 June 2021, for leasing a showroom for distribution of fine wines, watches and jewelleries, of a portion of showroom having a gross floor area of approximately square metres at Commercial Units No and No , No. 162 Zhang Zi Zhong Road, Heping District, Tianjin, the PRC. II For the year ended 31 March 2016, the total rental charge paid by TJXC to Mr. Qi amounted to RMB3,840,000 or approximately HK$4,683,000. 3,840,0004,683,000 An agreement was entered into between TJXC and SRRND, a wholly owned subsidiary of the Company, dated 6 July 2011 pursuant to which the tenant of the Tianjin Leasing Agreement II was transferred from TJXC to SRRND, with the same agreement terms. SRRND II SRRND Management Agreement On 12 May 2014, SRXTD, an indirect subsidiary of the Company, entered into a management agreement (the Management Agreement ) with Beijing Sparkle Roll Golden Bond Liquor Ltd. ( BJSRGB ), an indirect subsidiary of Mr. Qi, a substantial shareholder of the Company, pursuant to which SRXTD agreed to provide management services to BJSRGB for a term of two years and eleven months commencing from 1 May 2014 and up to 31 March SRXTD SRXTD SPARKLE ROLL GROUP LIMITED 37

39 Report of the Directors CONTINUING CONNECTED TRANSACTIONS (Continued) As stipulated in the Management Agreement, SRXTD shall be entitled to receive a management fee from BJSRGB calculated as follows: SRXTD (i) For each financial year where the total revenue of (i) BJSRGB is RMB200,000,000 (equivalent to approximately 200,000,000251,400,000 HK$251,400,000) or below, management fee receivable by SRXTD SRXTD shall be equivalent to 2% of the total revenue generated in that financial year. 2% (ii) For each financial year where the total revenue of BJSRGB (ii) is over RMB200,000,000 (equivalent to approximately 200,000,000251,400,000 HK$251,400,000), management fee receivable by SRXTD shall SRXTD be equivalent to (a) 2% of the first RMB200,000,000 (equivalent (a) to approximately HK$251,400,000) of the total revenue 200,000,000 generated in that year; and (b) 3% of the remaining balance of 251,400,000 2% (b) the total revenue over that initial RMB200,000,000 (equivalent (a) to approximately HK$251,400,000) referred to in (a) above 200,000,000251,400,000 generated in that year. 3% For the year ended 31 March 2016, the total management fee receivable by SRXTD amounted to RMB1,482,000 or approximately HKD1,808,000. SRXTD1,482,000 1,808,000 Advisory Service Agreement On 27 November 2015, the Company entered into an advisory service agreement with Mr. Qi, substantial shareholder of the Company, relating to his appointment as the Company s Honorary Advisor at a monthly consultancy fee of HK$10,000 for a term of three years commencing from 1 December As all the percentage ratios (as defined in Rule 14.04(9) of the Listing Rules) are less than 0.1%, the transaction is exempt from the reporting, annual review, announcement and independent shareholders approval requirements under Chapter 14A of the Listing Rules. 10, (9)0.1% A For the year ended 31 March 2016, the total advisory fee paid by the Company to Mr. Qi amounted to HK$40, , SPARKLE ROLL GROUP LIMITED

40 Report of the Directors CONTINUING CONNECTED TRANSACTIONS (Continued) Consultancy Agreement On 22 December 2015, the Company entered into a consultancy agreement with Mr. Zhao Xiao Dong ( Mr. Zhao ), a director of the Company in the last 12 months, in respect of his appointment as a consultant of the watch and jewellery business of the Group at a monthly consultancy fee of HK$20,000 for a term of three years commencing from 1 January As all the percentage ratios (as defined in Rule 14.04(9) of the Listing Rules) are less than 0.1%, the transaction is exempt from the reporting, annual review, announcement and independent shareholders approval requirements under Chapter 14A of the Listing Rules. 20, (9)0.1% A For the year ended 31 March 2016, the total consultancy fee paid by the Company to Mr. Zhao amounted to HK$60,000. RELATED PARTY TRANSACTIONS 60,000 Details of the related party transactions of the Group are set out in note 35 to the financial statements. In relation to those related party transactions that also constituted continuing connected transactions under Chapter 14A of the Listing Rules, they have compiled with applicable requirements under Chapter 14A of the Listing Rules and are reported in this annual report in accordance with the Listing Rules. SUFFICIENCY OF PUBLIC FLOAT 35A A The Company has maintained a sufficient public float throughout the year ended 31 March SPARKLE ROLL GROUP LIMITED 39

41 Report of the Directors AUDITOR The financial statements for the year ended 31 March 2016 was audited by BDO Limited ( BDO ). There has been no change of auditor in the preceding three years. A resolution will be proposed at the forthcoming annual general meeting of the Company to re-appoint BDO as auditor of the Company. ENVIRONMENTAL POLICIES DEVELOPMENT The board has overall responsibility for an issuer s Environmental, Social and Governance ( ESG ) strategy and reporting. To enhance the transparency of the business and operation of the Group to the shareholders and meet the ESG Reporting requirements, the Group will perform an ESG report in the next financial year, in which the environmental policies will be included. COMPLIANCE WITH LAWS AND REGULATIONS ESG ESG ESG The Company itself is listed on the Main Board of the Stock Exchange and the operations of the Group are mainly carried out by its subsidiaries in Hong Kong, the PRC and Malaysia. Our operations shall comply with relevant laws and regulations in Hong Kong, China and Malaysia. During the year ended 31 March 2016 and up to the date of this report, we have complied with all the relevant laws and regulations in Hong Kong, the PRC and Malaysia. CORPORATE GOVERNANCE The Company had complied with the Corporate Governance Code set out in Appendix 14 to the Listing Rules throughout the year ended 31 March Details of the corporate governance of the Group are set out in the section headed Corporate Governance Report on page 42 to 59 in this Annual Report SPARKLE ROLL GROUP LIMITED

42 Report of the Directors ANNUAL GENERAL MEETING The forthcoming annual general meeting of the Company will be held at 4:30 p.m. on 8 September 2016 (Thursday) at The Hong Kong Bankers Club, 43/F, Gloucester Tower, The Landmark, Central, Hong Kong and a notice of annual general meeting will be published and despatched in due course. CLOSURE OF REGISTER OF MEMBERS 43 The register of members of the Company will be closed from 7 September 2016 (Wednesday) to 8 September 2016 (Thursday) (both days inclusive) during which period, no transfer of shares will be registered. In order to qualify for attending and voting at the forthcoming annual general meeting, all share transfer documents, accompanied by the relevant share certificates, must be lodged with the Company s branch share registrar and transfer office in Hong Kong, Tricor Secretaries Limited, at Level 22, Hopewell Centre, 183 Queen s Road East, Hong Kong not later than 4:30 p.m. on 6 September 2016 (Tuesday) On behalf of the Board Tong Kai Lap Chairman Hong Kong, 23 June 2016 SPARKLE ROLL GROUP LIMITED 41

43 Corporate Governance Report CORPORATE GOVERNANCE PRACTICES Sparkle Roll Group Limited (the Company ) and its subsidiaries (together the Group ) is committed to maintaining a high standard of corporate governance. The board of Directors of the Company (the Board ) agrees that corporate governance practices are increasingly important for maintaining and promoting investor confidence. Corporate governance requirements keep changing, therefore the Board reviews its corporate governance practices from time to time to ensure that all practices can be met with legal and statutory requirements. Throughout the financial year ended 31 March 2016, the Group has adopted the principles and code provisions in the Corporate Governance Code and Corporate Governance Report (the Code ) contained in Appendix 14 to the Listing Rules. The Company has been in compliance with the Code throughout the financial year ended 31 March MODEL CODE OF CONDUCT FOR SECURITIES TRANSACTIONS The Company has adopted the Model Code for Securities Transaction by Directors of Listed Issuers (the Model Code ) contained in Appendix 10 to the Listing Rules to govern securities transactions by the Directors. After having made specific enquiry of all Directors, all Directors confirmed that they have complied with the Model Code during the year and up to the date of this report. The Company also adopted the Model Code as guidelines for its relevant employees who are likely to be in possession of unpublished inside information of the Company in respect of their dealings in securities of the Company. No incident of non-compliance of the Model Code by the relevant employees was noted by the Company. BOARD OF DIRECTORS The Board currently comprises three executive, three non-executive and three independent non-executive Directors. 42 SPARKLE ROLL GROUP LIMITED

44 Corporate Governance Report Executive Directors Mr. Tong Kai Lap (Chairman) Mr. Zheng Hao Jiang (Deputy Chairman and Chief Executive Officer) Mr. Zhao Xiao Dong (Deputy Chairman and Chief Operating Officer) (resigned with effect from 1 January 2016) Mr. Zhu Lei (appointed with effect from 1 January 2016) Non-executive Directors Mr. Zhang Si Jian Mr. Gao Yu Mr. Qi Jian Wei Independent Non-executive Directors Mr. Choy Sze Chung, Jojo Mr. Lam Kwok Cheong Mr. Lee Thomas Kang Bor The biographical details are set out in the Biographies of Directors and Senior Management section. The Company has three independent non-executive Directors, representing one-third of the Board. At least one of the independent non-executive Directors has appropriate professional qualifications or accounting or related financial management expertise under Rule 3.10 of the Listing Rules. All the independent non-executive Directors have signed the annual confirmation of independence pursuant to Rule 3.13 of the Listing Rules to confirm their independence Under the Company s Bye-laws, every Director is subject to retirement by rotation at least once every three years. SPARKLE ROLL GROUP LIMITED 43

45 Corporate Governance Report The Board s primary responsibilities are to determine the overall strategies, monitor and control operating and financial performance and set appropriate policies to manage risks in pursuit of the Groups strategic objectives. Matters reserved for the Board are those affecting the Group s overall strategic policies, dividend policy, significant changes in accounting policies, material contracts and major investments. Day-to-day management of the Group s business is delegated to the Executive Director or officer in charge of each department. The functions and power that are so delegated are reviewed periodically to ensure that they remain appropriate. Directors are provided with monthly updates on the Group s performance, status and updates on the latest developments in order to enable the Directors to discharge their duties. All Directors have recourse to external legal counsel and other professionals for independent advice at the Group s expense upon their request. During the year under review, Mr. Tong Kai Lap, Mr. Zhao Xiao Dong (resigned with effect from 1 January 2016) and Mr. Lee Thomas Kang Bor retired and were re-elected as the Directors at the annual general meeting held on 8 September CHAIRMAN AND CHIEF EXECUTIVE OFFICER The Group has a clear division of responsibilities for its top management and separates leadership structure where the role of Chairman is segregated from that of Chief Executive Officer. Mr. Tong Kai Lap is the Chairman and is responsible for providing leadership for the Board, ensuring that good corporate governance practices and procedures are established and that the Board acts in the best interests of the Company. Mr. Zheng Hao Jiang is the Chief Executive Officer and is responsible for the day-to-day business of the Group. 44 SPARKLE ROLL GROUP LIMITED

46 Corporate Governance Report NON-EXECUTIVE AND INDEPENDENT NON- EXECUTIVE DIRECTORS There are currently six Non-executive Directors of whom three are independent. Each of the non-executive Directors and independent non-executive Directors has entered into a letter of appointment for a term of two years and then renewable for one year. Under the Byelaws of the Company, every Director, including the non-executive and independent Non-executive Directors, shall be subject to retirement by rotation at least every three years. The Company has received, from each of the independent nonexecutive Directors, an annual confirmation of his independence pursuant to Rule 3.13 of the Listing Rules. The Company considers that all of the independent non-executive Directors are independent Pursuant to the code provision A.4.3 of the Code, serving more than 9 years could be relevant to the determination of a non-executive directors independence. If an independent non-executive director serves more than 9 years, his further appointment should be subject to a separate resolution to be approved by shareholders. The circular to shareholders accompanying that resolution will include the reasons why the Board believes he is still independent and should be re-elected. A SPARKLE ROLL GROUP LIMITED 45

47 Corporate Governance Report MEETINGS AND ATTENDANCE The Board meets regularly to review the financial and operating performance of the Group and approve business plan. 4 Board meetings were held in 2015/2016. Individual attendance of each Director at the Board meetings, the Audit Committee meetings, Remuneration Committee meetings and Nomination Committee meeting during 2015/2016 and the annual general meeting of the Company held on 8 September 2015 ( 2015 AGM ) is set out below: 4 Board Attendance/Number of Meetings Audit Committee Remuneration Committee Nomination Committee Director 2015 AGM Executive Director Mr. Tong Kai Lap 4/4 N/A 2/2 N/A 1/1 Mr. Zheng Hao Jiang 4/4 N/A 2/2 N/A 1/1 Mr. Zhao Xiao Dong (resigned with effect from 1 January 2016) 3/4 N/A N/A N/A 0/1 Mr. Zhu Lei (appointed with effect from 1 January 2016) 1/4 N/A N/A N/A 0/1 Non-executive Director Mr. Zhang Si Jian 4/4 N/A N/A N/A 1/1 Mr. Qi Jian Wei 4/4 N/A N/A N/A 0/1 Mr. Gao Yu 4/4 N/A N/A N/A 1/1 Independent Non-executive Director Mr. Choy Sze Chung, Jojo (Chairman of the Audit Committee) Mr. Lam Kwok Cheong (Chairman of the Remuneration Committee) Mr. Lee Thomas Kang Bor (Chairman of the Nomination Committee) 4/4 2/2 2/2 1/1 1/1 4/4 2/2 2/2 1/1 1/1 4/4 2/2 2/2 1/1 1/1 46 SPARKLE ROLL GROUP LIMITED

48 Corporate Governance Report Board and committee minutes are recorded in appropriate detail. Draft minutes are circulated to Directors for comments within reasonable time after each meeting and the final version is open for Directors inspection. INDUCTION, DEVELOPMENT AND TRAINING OF DIRECTORS Every Board member has received a guidance book on Directors duties and liabilities upon joining the Group, which also lays down the guidelines on conduct for the Board and Board committee members and other key governance issues, including but not limited to Board procedures and all applicable laws, rules and regulations that they are required to observe during their service in the Board. The updated guidelines will be provided from time to time as and when appropriate. A formal and tailored induction programme will be arranged for each new Director, which includes a briefing on the Group s structure, businesses and governance practices by the senior management. To seek continuous improvement, the Directors are encouraged to attend relevant training sessions, particularly on corporate ethics and integrity matters, risk management, and relevant new laws and regulations, from time to time. SPARKLE ROLL GROUP LIMITED 47

49 Corporate Governance Report To ensure the Directors contribution to the Board remains informed and relevant and in compliance with code provision A.6.5 of the Code, the Company shall arrange and fund suitable training for Directors to develop and refresh their knowledge and skills. During the year under review, the Directors participated in the kinds of training as follows: A.6.5 Director Kind of Training Executive Directors Mr. Tong Kai Lap (Chairman) A, B Mr. Zheng Hao Jiang A, B (Deputy Chairman and Chief Executive Officer) Mr. Zhu Lei A, B Non-executive Directors Mr. Zhang Si Jian A, B Mr. Gao Yu A, B Mr. Qi Jian Wei A, B Independent Non-executive Directors Mr. Choy Sze Chung, Jojo A, B Mr. Lam Kwok Cheong A, B Mr. Lee Thomas Kang Bor A, B A: Reading materials on legal and regulatory updates. B: Attending training seminar organised by Chiu & Partners relating to connected transaction/continuing connected transactions rules updates, pricing policies for continuing connected transactions, trading halts in light of inside information, false market and unusual share price/volume movement and new amendments to the listing rules regarding environmental, social and governance. A B 48 SPARKLE ROLL GROUP LIMITED

50 Corporate Governance Report BOARD DIVERSITY POLICY Based on the business needs of the Group, the Nomination Committee has recommended and the Board has adopted the following measurable objectives: (i) a prescribed proportion of Board members shall be nonexecutive Directors or independent non-executive Directors; (i) (ii) a prescribed proportion of Board members shall have attained bachelor s degree or above; (ii) (iii) a prescribed proportion of Board members shall have obtained accounting or other professional qualifications; (iii) (iv) a prescribed proportion of Board members shall have Chinarelated work experience. (iv) The Nomination Committee shall monitor the implementation of the board diversity policy and review the progress of its measurable objectives from time to time. Based on its review, the Nomination Committee considers that the current Board is well-balanced and of a diverse mix appropriate for the business development of the Company. CORPORATE GOVERNANCE FUNCTIONS The Board is responsible for performing the corporate governance duties and has adopted a written guideline on corporate governance functions in compliance with the Code. The duties of the Board in respect of corporate governance functions are summarised as follows: (i) to develop and review the Company s policies and practices on corporate governance; (i) (ii) to review and monitor the training and continuous professional development of Directors and senior management; (ii) SPARKLE ROLL GROUP LIMITED 49

51 Corporate Governance Report (iii) to review and monitor the Company s policies and practices on compliance with legal and regulatory requirements; (iii) (iv) to review the Company s compliance with the code provisions as set out in the Code and its disclosure requirements in the Corporate Governance Report. (iv) During the year, the Board reviewed and monitored the training of the Directors, and the Company s policies and practices on compliance with legal and regulatory requirements. REMUNERATION COMMITTEE According to the Code, the Company established the Remuneration Committee in March The principal role of the Remuneration Committee is to exercise the power of the Board to determine and review the remuneration package of individual directors and key executives, including salaries, bonuses and benefits in kind, considering factors such as time commitment and responsibilities of the Directors and key executive, employments conditions elsewhere in the Group and desirability of performance based remuneration so as to align management incentives with shareholders interests. The Remuneration Committee is also considering all relevant remuneration data and market conditions in addition to considering the performance and responsibility of individual directors and officers by linking their compensation with performance and will measure it against corporate goals. During the year, the Remuneration Committee reviewed and approved the remuneration package of the Executive Directors and senior management. The Remuneration Committee shall consult the Chairman and/ or the Chief Executive Officer of the Company about its proposals relating to remuneration of Executive Directors and have access to professional advice if considered necessary. After reviewing all relevant information, the Remuneration Committee made recommendations to the Board for the remuneration of the Directors and senior management. 50 SPARKLE ROLL GROUP LIMITED

52 Corporate Governance Report The Remuneration Committee comprises three independent nonexecutive Directors and two executive Directors. Its present members are: Independent Non-executive Director Mr. Lam Kwok Cheong Chairman Mr. Choy Sze Chung, Jojo Mr. Lee Thomas Kang Bor Executive Director Mr. Tong Kai Lap Mr. Zheng Hao Jiang The Remuneration Committee held 2 meetings in 2015/2016 to review and approve directors and senior management s remuneration. The directors fee paid to the Non-executive and Independent Non-executive Directors are subject to annual review and approval by the Remuneration Committee. The emoluments of each of the Directors of the Company for 2015/2016 are set out in note 12 to the financial statements Below is a summary of principal work performed by the Remuneration Committee during 2015/2016: Review of the remuneration of Executive Directors and senior management and approval of the same. Review of the remuneration of Non-executive Directors (including Independent Non-executive Directors), with recommendations to the Board for approval. Review the existing share option scheme with recommendations to the Board for approval. Review of the compensation arrangement and remuneration packages relating to executive directors and senior management in connection with termination of their office or appointment, with recommendations to the Board for approval. SPARKLE ROLL GROUP LIMITED 51

53 Corporate Governance Report The annual remuneration of the members of the current senior managements of the Group by band is set out below: Emoluments band Number of individuals HK$Nil to HK$1,000, ,000,000 HK$1,000,000 to HK$1,500, ,000,0001,500,000 NOMINATION COMMITTEE The Nomination Committee was established on 6 October 2008 and comprises three independent non-executive Directors ( INED ), namely, Mr. Lee Thomas Kang Bor (chairman of the Nomination and Committee), Mr. Choy Sze Chung, Jojo, and Mr. Lam Kwok Cheong. The principal responsibilities of the Nomination Committee include reviewing the structure, size and composition (including the skills, knowledge and experience) of the Board on a regular basis and make recommendations to the Board regarding any proposed changes, identifying individuals suitably qualified to become Board member, assessing the independence of INED; and making recommendations to the Board on relevant matters relating to the appointment or re-appointment of Directors and succession planning for Directors in particular the chairman and the chief executive officer. The Nomination Committee has adopted written nomination procedures specifying the process and criteria for selection of candidates for directorship of the Company. The Nomination Committee shall, based on criteria such as skills, experience, professional knowledge, personal integrity and time commitments of such individuals, the Company s needs and other relevant statutory requirements and regulations, identify and recommend the proposed candidate to the Board for approval of appointment. All Non-executive Directors and INED are appointed for a specific term of two years and renewable for additional one year, and are required to retire and eligible for re-election at the Annual General Meeting of the Company in every three years in accordance with the Company s Bye-laws. 52 SPARKLE ROLL GROUP LIMITED

54 Corporate Governance Report The Nomination Committee held 1 meeting in 2015/2016. Below is a summary of principal work performed by the Nomination Committee during 2015/2016: 1 Recommendation to the Board on the appointment or reappointment of directors. Review of the structure, size and composition of the Board and the Board Committee. Assessment and confirmation of the independence of the INED according to the criteria set out in Rule 3.13 of the Listing Rules. AUDIT COMMITTEE 3.13 The Company established an Audit Committee in compliance with the Listing Rules for the purposes of reviewing and providing supervision over the Group s financial reporting process and internal controls and discussing with the external auditor for the nature and scope of audit. Written terms of reference of the Audit Committee were formulated and adopted in March The Audit Committee comprises three Independent non-executive Directors. The chairman of the Audit Committee is an independent non-executive Director. Its present members are: Independent Non-executive Director Mr. Choy Sze Chung, Jojo Chairman Mr. Lam Kwok Cheong Mr. Lee Thomas Kang Bor The Chairman of the Audit Committee, Choy Sze Chung, Jojo, has appropriate professional qualification in accounting and extensive experience in accounting and auditing matters. Senior management and external auditor shall normally attend the meetings. The Audit Committee held 2 meetings in 2015/2016 with representatives from BDO Limited, the external auditor of the Company, for the purpose of discharging the aforesaid duties. 2 SPARKLE ROLL GROUP LIMITED 53

55 Corporate Governance Report Below is a summary of principal work performed by the Audit Committee during 2015/2016: Review of annual financial statements of the Group for the year ended 31 March 2015 and interim financial statements of the Group for the six months ended 30 September 2015, with recommendations to the Board for approval. Review and approval of the engagement letters of BDO Limited, the nature and scope of the audit and their reporting obligations. Review of internal controls and risk management systems of the Group. Review reports from BDO Limited to Audit Committee. Review of connected transactions (including continuing connected transactions) carried out during the year. There was no disagreement between the Board and the Audit Committee on the selection, appointment, resignation or dismissal of the external auditors. The Company s annual results for the year ended 31 March 2016 have been reviewed by the Audit Committee. AUDITOR S REMUNERATION Each year, the auditor is appointed by resolution at the annual general meeting of the Company and the Directors are authorised to fix the remunerations for the auditing services. The fee paid/payable to our auditor for annual audit for the year ended 31 March 2016 amounted to approximately HK$1.24 million (2015: HK$1.29 million). 1,240,0001,290, SPARKLE ROLL GROUP LIMITED

56 Corporate Governance Report The auditor has performed other non-auditing services during the year with aggregate service fee of approximately HK$0.31 million (2015: HK$0.31 million). Non-auditing services include mainly review of interim financial statements of the Company, and review over continuing connected transactions of the Company. The Audit Committee has considered based on the policy developed by them in this regard and made recommendations to the Board for these non-auditing services conducted by our auditor. COMPANY SECRETARY 310, ,000 The Company Secretary supports the Board and Board committees by ensuring good information flow within the Board and that Board policy and procedures are followed. The Company Secretary also plays an essential role in the relationship between the Company and its shareholders, and facilitates induction and professional development of directors. The company secretary is responsible for ensuring that the Board is fully briefed on all legislative, regulatory and corporate governance developments and that it has regard to them when making decisions. The Company Secretary also advises the Directors on their obligations for disclosure of interests in securities, connected transactions and inside information and ensures that the standards and disclosures required by the Listing Rules are observed and, where required, reflected in the annual report of the Company. The Company Secretary is a full time employee of the Company and has day-to-day knowledge of the Company s affairs. The Company Secretary is appointed by the Board and reports to the chairman and the chief executive officer. Mr. Li Yat Ming, Financial Controller of the Group, has been appointed by the Company as the company secretary. He is also the primary contact person of the Company. For the year under review, Mr. Li has taken no less than 15 hours of relevant professional trainings to update his skills and knowledge. The biographical details of Mr. Li are set out in the section of Biographical Details of Directors and Senior Management of this annual report. 15 SPARKLE ROLL GROUP LIMITED 55

57 Corporate Governance Report INVESTOR RELATIONS AND SHAREHOLDERS RIGHTS CONVENING OF GENERAL MEETING To promote investor relations and communications, meetings with fund managers and potential investors are held frequently. Shareholders are encouraged to attend the annual general meeting for which at least 21 days notice is given. The Chairman and Directors are available to answer question on the Group s businesses at the meeting. An annual general meeting of the Company shall be held every year within a period of not more than fifteen (15) months after the holding of the last preceding annual general meeting. Shareholders shall have the right to request the Board to convene a general meeting of the Company and put forward agenda items for consideration by shareholders. Each general meeting, other than an annual general meeting, shall be called a special general meeting. Shareholders holding an aggregate of not less than one-tenth (10%) of the paid up capital of the Company carrying the right of voting at general meetings of the Company shall at all times have the right, by written requisition to the Board or the Secretary of the Company, to require a special general meeting to be called by the Board for the transaction of any business specified in such requisition; and such meeting shall be held within two (2) months after the deposit of such requisition. If within twenty-one (21) days of such deposit the Board fails to proceed to convene such meeting the requisitionists themselves may do so in accordance with the provisions of Section 74 of the Companies Act 1981 of Bermuda. Pursuant to rule 13.39(4) of the Listing Rules, any vote of shareholders at a general meeting must be taken by poll. Accordingly, all the resolutions put to vote at the annual general meetings will be taken by way of poll. The chairman of the annual general meetings will explain the detailed procedures for conducting a poll at the commencement of the Annual General Meeting. After the conclusion of the annual general meetings, the poll results will be published on the respective websites of the Stock Exchange and the Company. The Board is committed to providing clear and full performance information of the Group to shareholders through the publication of interim and annual reports. In additional to dispatching circulars, notices, financial reports to shareholders, addition information is also available to shareholders from the Group s website. 21 (15) (10%) (2) (21) (4) 56 SPARKLE ROLL GROUP LIMITED

58 Corporate Governance Report A resolution in respect of certain proposed changes to Bye-laws of the Company was passed in the 2012 AGM held on 20 August An updated constitutional document of the Company was published on 22 August SHAREHOLDERS RIGHTS ENQUIRIES TO THE BOARD Shareholders may make enquiries with the Board at the general meetings of the Company or at any time send their enquiries and concerns to the Board in writing through the company secretary whose contact details are as follows: Sparkle Roll Group Limited Rooms , 20th Floor, Sun Hung Kai Centre, 30 Harbour Road, Wanchai, Hong Kong Telephone: (852) Fax: (852) RISK MANAGEMENT AND INTERNAL CONTROLS (852) (852) The Board has an on ongoing responsibility for maintaining the Group s system of internal control and for the assessment and management of risk and reviewing their effectiveness to safeguard shareholders investment and the Company s assets. In meeting its responsibility, the Board has entrusted the Audit Committee and appointed professional internal control consultant with the responsibility to assess risk of the Group and review the internal control systems of the Group, which include financial, operational and compliance controls functions. The risk assessment report documented the major business risk while the internal review report provided a factual findings of whether the internal control procedures, systems and controls of the Group are suitably designed to achieve specified control objectives; have been placed in operation; and are operating effectively, in which the specific control objectives are achieved during a specified period from the testing and review. SPARKLE ROLL GROUP LIMITED 57

59 Corporate Governance Report During the year, the Board has conducted review on the effectiveness of the internal control system of the Group through discussion with the Audit Committee on audit findings and control issues. The internal control review report for the year listed out the findings of the weaknesses in respect of the relevant cycles and procedures with recommendations proposed for the Company to further improve its internal control system. The results of the review and the risk assessment report have been reported to the Board and areas of improvement, if any, have been identified and appropriate measures have been put in place to manage the risks. The Board based on the review of audit committee, considers that the Group s internal control system is effective and the resources, staff qualifications and experience, training programmes and budget of the accounting and financial reporting functions, are adequate for the period in review. The Company has reviewed the inside information policy from time to time and kept its content up to date. The updated inside information policy for the handling and dissemination of inside information has been circulated to the Directors, the senior management and the relevant employees when they are employed. DIRECTORS RESPONSIBILITY FOR THE FINANCIAL STATEMENTS The Directors acknowledge their responsibility for the preparation of the financial statements of the Company and that the financial statements are prepared in accordance with statutory requirements and applicable accounting standards. It is also the responsibility of the Directors to ensure the timely publication of the financial statements of the Company. During the year, the management has provided sufficient explanation and information to the Board to enable it to make an informed assessment of the financial and other information put before it for approval including the updates on the Company s performance, position and prospects. A discussion and analysis of the Group s performance, an explanation of the basis on which the issuer generates or preserves value over the longer term and the strategy for delivering the Company s objectives have been prepared and included in the Chairman s Statement and Management Discussion and Analysis sections of this Annual Report. 58 SPARKLE ROLL GROUP LIMITED

60 Corporate Governance Report The Directors confirm that they are not aware of any material uncertainties relating to events or conditions that may cast significant doubt upon the Group s ability to continue as a going concern. FINANCIAL REPORTING The Board recognises its responsibility to prepare consolidated financial statements which give a true and fair view and are in accordance with Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations (hereafter collectively referred to as HKFRSs ) issued by the Hong Kong Institute of Certified Public Accountants. Appropriate accounting policies are selected and applied consistently. Judgements and estimates made are prudent and reasonable. The Group has changed some of its accounting policies following the adoption of the new or amended HKFRSs which are relevant to and effective for the Group s financial statements for the year. The accounting policies adopted by the Group are set out in the Summary of Significant Accounting Policies of the note 3 to the financial statements. The Directors use their best endeavours to ensure a balanced, clear and understandable assessment of the Group s performance, position and prospects in financial reporting. The Directors, having made appropriate enquiries, consider that the Group has adequate resources to continue in operational existence for the foreseeable future and that, for this reason, it is appropriate to adopt the going concern basis in preparing the consolidated financial statements. 3 The responsibilities of the auditor with respect to financial reporting are set out on pages 70 to 71 in the Independent Auditor s Report For and on behalf of the Board of Directors Sparkle Roll Group Limited Tong Kai Lap Chairman & Executive Director SPARKLE ROLL GROUP LIMITED 59

61 Biographies of Directors and Senior Management EXECUTIVE DIRECTORS TONG KAI LAP (Chairman) Aged 56, Mr. Tong graduated from The Chinese University of Hong Kong in 1982 with a Bachelor s Degree in Business Administration. Since graduation, he worked in various international banks in the commercial, corporate and investment banking areas. Mr. Tong is the past president of the Rotary Club of Tsim Sha Tsui, a fellow member of the Hong Kong Institute of Directors and a founding member of Hong Kong Professionals and Senior Executives Association. Mr. Tong joined the Group in August Mr. Tong has an interest in such number of shares under Part XV of the SFO as disclosed in the section headed Report of the Directors Directors interests in shares, underlying shares and debentures of the Company and its associated corporations of this annual report. XV ZHENG HAO JIANG (Deputy Chairman and Chief Executive Officer) Aged 49, Mr. Zheng graduated in the Law Department (Economic Law Speciality) of Peking University in 1990 with a Bachelor degree in Law. Mr. Zheng has nearly 15 years experience in Beijing in the areas of equity portfolio management, capital market analysis management and financial advisory. Mr. Zheng is a Standing Director of China Automobile Dealers Association and a Director of China High-Tech Industrialization Association. He is a founding member of Hong Kong Professionals and Senior Executives Association and a fellow member of the Hong Kong Institute of Directors. Mr. Zheng joined the Group in October Mr. Zheng has an interest in such number of shares under Part XV of the SFO as disclosed in the section headed Report of the Directors Directors interests in shares, underlying shares and debentures of the Company and its associated corporations of this annual report. XV 60 SPARKLE ROLL GROUP LIMITED

62 Biographies of Directors and Senior Management ZHU LEI Aged 41, Mr. Zhu obtained a Bachelor of Arts degree in Russian from the Department of Foreign Languages and Literatures of Beijing Normal University in He has over 17 years of experience in management and sales of watches and jewelry and management and operation of golf clubs. Mr. Zhu joined the Group in May 2011 and has since held several positions in the Group, including but not limited to the executive director of the marketing department of our Beijing headquarter, the operating director of Sparkle Roll Xin Tian Di Commerce Development Limited, the director of the fine wine business of the Group and the general manager of Sparkle Roll Online (Beijing) Business Service Limited Mr. Zhu is the brother-in-law of Mr. Qi Jian Hong who is a substantial shareholder of the Company. Mr. Qi Jian Hong is also the younger brother of Mr. Qi Jian Wei, a Non-executive Director of the Company. NON-EXECUTIVE DIRECTORS GAO YU Aged 42, Mr. Gao is currently a Managing Director of the Private Equity Division of Morgan Stanley Asia Limited, primarily focusing on private equity investment activities in China. He had also been a non-executive director of Belle International Holdings Ltd (HK stock code: 1880) from August 2006 to August 2014 and then has been re-designated as an independent non-executive director of Belle International Holdings Limited from 5 August 2014 to present. He had also been a non-executive director of China Dongxiang (Group) Co., Ltd. (HK stock code: 3818) ( China Dongxiang ) from July 2007 to May 2013 and then has been re-designated as an independent non-executive director of China Dongxiang from 24 May 2013 to present Mr. Gao was also a director of Tongkun Group Co., Ltd. (Shanghai stock code: ) until his resignation on 30 March SPARKLE ROLL GROUP LIMITED 61

63 Biographies of Directors and Senior Management Prior to joining Morgan Stanley Asia Limited, Mr. Gao worked in Citigroup s Investment Banking Division in Asia for about five years. He also worked in Donaldson, Lufkin & Jenrette s Debt Capital Markets Group in New York. Mr. Gao graduated from Stanford University with a Master s degree in engineering-economic systems and operations research as well as from Tsinghua University in Beijing with dual Bachelor s degrees in engineering and economics. Mr. Gao joined the Group in September Donaldson, Lufkin & Jenrette QI JIAN WEI Aged 61, Mr. Qi has over 15-year experience in the jewellery business in China including trading management, development of distribution channels and production operations. He graduated from machineries profession of Beijing Open University in He is the elder brother of Mr. Qi Jian Hong, the sole beneficial owner of Sparkle Roll Holdings Limited. Mr. Qi joined the Group in September ZHANG SI JIAN Aged 50, Mr. Zhang is currently a director of Calor Capital. He was a Managing Director of Sequoia Capital China focusing on growth capital investments for about seven years. Prior to joining Sequoia Capital China in 2007, he worked with Baring Private Equity Asia in Hong Kong and Shanghai, and Doughty Hanson in London. Prior to joining private equity in 2000, he worked for Deutsche Bank in its Investment Banking division where he advised international companies in their IPO, block trade, debt and convertible bond offerings. He has a Bachelor s Degree of Science from Shanghai Jiao Tong University, a Master Degree of Science from University of Minnesota and a Master Degree of Business Administration from The Wharton School of The University of Pennsylvania. Mr. Zhang joined the Group in December Doughty Hanson 62 SPARKLE ROLL GROUP LIMITED

64 Biographies of Directors and Senior Management INDEPENDENT NON-EXECUTIVE DIRECTORS CHOY SZE CHUNG, JOJO Aged 57, Mr. Choy is the Vice Chairman of National Resources Securities Limited. He has extensive experience in the securities industry and business management. Mr. Choy obtained Master of Business Administration Degree from University of Wales, Newport and Master of Business Law Degree from Monash University. Mr. Choy is an independent non-executive director of Chengdu Putian Telecommunications Cable Company Limited (HK stock code: 1202), Luye Pharma Group Limited (HK stock code: 2186) and Zhaojin Mining Industry Company Limited (HK stock code: 1818) Mr. Choy had also been an independent non-executive director of Wison Engineering Services Co., Ltd. (HK stock code: 2236) and Orient Securities International Holdings Limited (HK stock code: 8001) from November 2012 to September 2013 and from March 2010 to May 2016, respectively Mr. Choy is also the Vice Chairman of the Institute of Securities Dealers Limited, fellow member of Hong Kong Institute of Directors, fellow member of Institute of Financial Accountants, fellow member of the Institute of Compliance Officers, the Securities Panel Coordinator of the Hong Kong Mediation Alliance, fellow member of the Institute of Public Accountants, member of Society of Registered Financial Planner Limited, member of the HKSAR Election Committee (financial services subsector), member of Shantou Chinese People s Political Consultative Committee, honorary president of Shantou Overseas Friendship Association, an honorary president of Shantou Overseas Exchange Association, an honorary principal of Chen Po Sum School, committee member of Rotary Club Kowloon West, member of Cash Market Consultative Panel of the HKEx Board and a director of Federation of Hong Kong Chiu Chow Community Organizations. Mr. Choy joined the Group in October Mr. Choy has an interest in such number of shares under Part XV of the SFO as disclosed in the section headed Report of the Directors Directors interests in shares, underlying shares and debentures of the Company and its associated corporations of this annual report. XV SPARKLE ROLL GROUP LIMITED 63

65 Biographies of Directors and Senior Management LAM KWOK CHEONG Aged 62, Mr. Lam holds Bachelor of Laws degree from the University of Hong Kong. He is an independent non-executive director of Southwest Securities International Securities Limited (HK stock code: 812) and Prosten Technology Holdings Limited (HK stock code: 8026) Mr. Lam was an independent non-executive director of GCL New Energy Holdings Limited (formerly known as Same Time Holdings Limited) (HK stock code: 451) until his resignation on 9 May He was also a non-executive director of Sky Forever Supply Chain Management Group Limited (HK stock code: 8047) from 17 June 2015 to 27 July He was also an independent non-executive director of Mega Medical Technology Limited (formerly known as Wing Tai Investment Holdings Limited) (HK stock code: 876) from September 2004 to June 2014 and then re-designated as a nonexecutive director from 20 June 2014 to 30 June Same Time Holdings Limited Mr. Lam is a Justice of the Peace with Bronze Bauhinia Star (BBS) and a solicitor of the High Court of the Hong Kong Special Administrative Region. Mr. Lam is currently a China-appointed Attesting Officer, a fellow member of the Hong Kong Institute of Directors, Ex-Officio Member of Heung Yee Kuk New Territories, member of Panel of Adjudicators, Obscene Articles Tribunal, member of Buildings Ordinance Appeal Tribunal Panel and a Civil Celebrant of Marriages. Mr. Lam joined the Group in October Mr. Lam has an interest in such number of shares under Part XV of the SFO as disclosed in the section headed Report of the Directors Directors interests in shares, underlying shares and debentures of the Company and its associated corporations of this annual report. XV 64 SPARKLE ROLL GROUP LIMITED

66 Biographies of Directors and Senior Management LEE THOMAS KANG BOR Aged 62, Mr. Lee is an independent non-executive director and chairman of the audit committee and the remuneration committee and a member of the nomination committee of CIG Yangtze Ports PLC (HK stock code: 8233) He was also a non-executive director of Man Sang International Limited (HK stock code: 938) from April 2011 to July He was also appointed as an independent non-executive director and the chairman of the audit committee of Fittec International Group Limited (HK stock code: 2662) on 21 January 2016 and 4 February 2016 respectively, and resigned with effect from 31 May Mr. Lee is a member of the Society of Trust and Estate Practitioners, the Hong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries and Administrators, a fellow member of the Hong Kong Institute of Certified Public Accountants, the Association of Chartered Certified Accountants and the Taxation Institute of Hong Kong. Mr. Lee graduated from the University of London with a bachelor s and master s degrees in laws and was called to the Bar of the Lincoln s Inn of United Kingdom. He served as president of the Taxation Institute of Hong Kong from 1999 to 2002, president of the Asia-Oceania Tax Consultants Association from 2012 to 2014 and is now its honorary advisor, and he is also vice president of Hong Kong Professionals and Senior Executives Association. Mr. Lee is the chairman of Thomas Lee & Partners Limited, Certified Tax Advisers. Mr. Lee joined the Group in August (the Society of Trust and Estate Practitioners) Mr. Lee has an interest in such number of shares under Part XV of the SFO as disclosed in the section headed Report of the Directors Directors interests in shares, underlying shares and debentures of the Company and its associated corporations of this annual report. DIRECTORS BIOGRAPHICAL DETAILS UPDATE XV The Directors biographical details update, which is required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules, has been reflected in the above section B(1) SPARKLE ROLL GROUP LIMITED 65

67 Biographies of Directors and Senior Management HONORARY ADVISOR QI JIAN HONG Aged 49, Mr. Qi is the Honorary Advisor of the Company. He has over 20 years experience in the areas of wholesale and retail management of luxury goods in China. Mr. Qi is also the sole beneficial owner of Sparkle Roll Holdings Limited, a substantial shareholder of the Company. He is the younger brother of Mr. Qi Jian Wei, a non-executive Director Mr. Qi was the President of the automobile dealership division and watch distributorship division and was regarded as a senior management of the Group from June 2008 to November Mr. Qi is currently a General Manager of Cultural Investment Holdings Co., Ltd (formerly known as Song Liao Automotive Co., Ltd) (Shanghai stock code: ) Mr. Qi has an interest in such number of shares under Part XV of the SFO as disclosed in the section headed Report of the Directors Substantial shareholders interests in shares and underlying shares of the Company of this annual report. CONSULTANT XV ZHAO XIAO DONG Aged 48, Mr. Zhao is the Consultant in respect of the watch and jewellery business of the Group. He has over 15 years experience in the areas of wholesale and retail management of luxury goods in Beijing Mr. Zhao was the executive director, the Deputy Chairman and the Chief Operating Officer of the Company from September 2008 to December Mr. Zhao is currently a Member of Supervisory Board of Cultural Investment Holdings Co., Ltd (formerly known as Song Liao Automotive Co., Ltd) (Shanghai stock code: ) SPARKLE ROLL GROUP LIMITED

68 Biographies of Directors and Senior Management SENIOR MANAGEMENT LI YAT MING Aged 36, Mr. Li is the Financial Controller, Company Secretary and Authorised Representative of the Company and he joined the Group in July He has over 10 years of experience in accounting, auditing, financial management, taxation and company secretarial fields. Prior to joining the Group, he had served in an international accounting firm. Mr. Li holds a Bachelor of Arts (Honours) in Accountancy from The Hong Kong Polytechnic University. He is a Fellow of the Hong Kong Institute of Certified Public Accountants, and also is a member of Hong Kong Securities and Investment Institute and Hong Kong Investor Relations Association LEUNG KWOK NING Aged 54, Mr. Leung is the General Manager of Bentley Tianjin and Head of branded automobile after-sales service division of the Group. Mr. Leung has over 30 years of experience in managing the automobile aftersales service businesses and sales management particularly for Bentley since Mr. Leung joined the Group in June 2008 and he was responsible for managing the sales of Bentley and aftersales service The following persons were assigned as senior management with effect from 1 July ZHANG YUN LEI Aged 49, Mr. Zhang graduated from the undergraduate programme in decorationof the Academy of Arts & Design, Tsinghua University in 1992 and is the General Manager of Bentley Beijing of the Group. Mr. Zhang has been engaging in public relations planning, advertising and media and design for over 20 years since 1993 and has extensive experience in product management and marketing. He joined the Group in August SPARKLE ROLL GROUP LIMITED 67

69 Biographies of Directors and Senior Management JIA HAI TAO Aged 48, Mr. Jia graduated from the master s programme in business economicsof the Graduate School of Chinese Academy of Social Sciences in 1998 and is the General Manager of Rolls-Royce Beijing of the Group. Mr. Jia has held various senior management positions since 1998 in the fields of sales and marketing, and in these positions, he was responsible for the marketing of computer equipment at KeHai Group*, consultancy and marketing of life insurance at Sino-US MetLife Insurance Co., Ltd.* and film studio marketing at Beijing Sparkle Roll International Film Studio Management Limited*. Mr. Jia joined the Group in September 2012 and has served in various capacities, including deputy general manager of the automobile dealership division, deputy general manager of Rolls-Royce Beijing, deputy general manager and general manager of Bentley Beijing of the Group. 48 LIU JING JING Aged 42, Ms. Liu graduated from the Beijing University of Technology in 1997 with a Bachelor of Engineering in air-conditioning and coolingand is the Head of automobile dealership division and deputy general manager and sales manager of Lamborghini Beijing of the Group. Since 1997, Ms. Liu had been working in the area of public relations with Beijing Dongan Group*, Shidu Mall*and Zhongshang Department Store*. She joined the Bentley Beijing Group in 2001 as assistant to president and was responsible for handling commercial vehicle orders, vehicle purchase and liaison with foreign vehicle manufacturers for nearly 6 years. Ms. Liu joined the Group in July 2008 and has served as assistant to president and purchasing manager of the automobile dealership division of the Group * for identification purpose only * 68 SPARKLE ROLL GROUP LIMITED

70 Biographies of Directors and Senior Management CHEN LING Aged 37, Mr. Chen graduated from the Beijing Institute of Technology in 2001 with a Bachelor of Engineering in computer science and from the University of Wollongong in Australia in 2009 with a Master in Information Technology Management. He is the General Manager of B&O play at Balanorm Beo (Beijing) Trading Development Limited, a subsidiary of the Group, and Head of the e-commerce division of the Group. Mr. Chen has been engaging, and has accumulated rich experience, in corporate management and information technology management since Mr. Chen joined the Group in July 2013 and was assistant to president of the automobile dealership division of the Group and training manager of B&O play at Balanorm Beo (Beijing) Trading Development Limited. 37 (University of Wollongong) B&O play B&O play QU JING Aged 35, Ms. Qu graduated from the undergraduate programme in fashion design and performance of the Beijing Institute of Fashion Technology in 2001 and is the General Manager of the Group s Sparkle Roll Honor Club. Ms. Qu has been engaging in the sale of Bentley vehicles for various years after graduation and later joined the Group in June Prior positions at the Group include Head of the sales department of the wine division, Beijing Sparkle Roll Luxury World (Hua Mao) and Rolls-Royce Beijing of the Group. She has extensive experience in cross-selling of various product lines of the Group and handling VIP relations. 35 VIP CHENG BIN Aged 45, Ms. Cheng graduated from the Kwantlen Polytechnic University in Canada in 2008 with a Bachelor of Business Administration in Accounting and obtained the chartered professional accountant and certified general accountant (CPA, CGA) qualification in May She is the Head of the watches and jewelry division and the Head of the marketing and media division of the Group. Ms. Cheng had served as auditor and financial controller at BDO Canada and Canada JinBi International Limited* since She has been working with the Group in the posts mentioned above from March (Kwantlen Polytechinc University) (CPA, CGA) BDO * for identification purpose only * SPARKLE ROLL GROUP LIMITED 69

71 Independent Auditor s Report TO THE SHAREHOLDERS OF SPARKLE ROLL GROUP LIMITED (incorporated in Bermuda with limited liability) We have audited the consolidated financial statements of Sparkle Roll Group Limited (the Company ) and its subsidiaries (together the Group ) set out on pages 72 to 179, which comprise the consolidated statement of financial position as at 31 March 2016, and the consolidated statement of comprehensive income, the consolidated statement of cash flows and the consolidated statement of changes in equity 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. AUDITOR S RESPONSIBILITY Our responsibility is to express an opinion on these consolidated financial statements based on our audit. This report is made solely to you, as a body, in accordance with Section 90 of the Bermuda Companies Act 1981, 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 SPARKLE ROLL GROUP LIMITED

72 Independent Auditor s Report AUDITOR S 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 auditor s 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 auditor considers internal control relevant to the entity s preparation of the 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 financial position of the Group as at 31 March 2016 and of its financial performance and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance. BDO Limited Certified Public Accountants Lui Chi Kin Practising Certificate Number P06162 P06162 Hong Kong, 23 June 2016 SPARKLE ROLL GROUP LIMITED 71

73 Consolidated Statement of Comprehensive Income For the year ended 31 March Notes HK$ 000 HK$ 000 Revenue 7 2,376,904 2,605,701 Cost of sales (2,187,801) (2,417,274) Gross profit 189, ,427 Other income and net gains 8 122, ,651 Selling and distribution costs (229,577) (279,131) Administrative expenses (65,772) (80,299) Other operating expenses 9 (9,622) Impairment loss on goodwill 17 (374,508) Impairment loss on property, plant and equipment 16 (43,767) Impairment loss on other intangible asset 18 (19,821) Operating profit/(loss) 9 16,133 (410,070) Finance costs 10 (49,326) (48,233) Loss before income tax (33,193) (458,303) Income tax expense 11 (487) (319) Loss for the year (33,680) (458,622) Other comprehensive income, net of tax Item that may be reclassified subsequently to profit or loss: Exchange differences on translation of financial statements of foreign operations (24,541) (5,545) Total comprehensive income for the year (58,221) (464,167) 72 SPARKLE ROLL GROUP LIMITED

74 Consolidated Statement of Comprehensive Income (Continued) For the year ended 31 March Notes HK$ 000 HK$ 000 Loss for the year attributable to: Owners of the Company (32,328) (455,685) Non-controlling interests (1,352) (2,937) (33,680) (458,622) Total comprehensive income attributable to: Owners of the Company (56,386) (461,007) Non-controlling interests (1,835) (3,160) (58,221) (464,167) Losses per share attributable to owners of the Company 15 Basic and diluted HK(1.1) cents HK(15.3) cents SPARKLE ROLL GROUP LIMITED 73

75 Consolidated Statement of Financial Position As at 31 March Notes HK$ 000 HK$ 000 ASSETS AND LIABILITIES Non-current assets Property, plant and equipment , ,227 Goodwill , ,171 Other intangible asset Amount due from a non-controlling interest 19(a) 2,320 Rental deposits paid to a related party 19(b) 17,554 18, , ,207 Current assets Inventories 21 1,000,203 1,499,550 Trade receivables 22 8, Deposits, prepayments and other receivables , ,324 Amounts due from related parties 19(c) 18,677 19,410 Amount due from a non-controlling interest 19(a) 9,281 Pledged deposits 24 55, ,470 Cash at banks and in hand ,164 63,417 1,401,888 2,034,307 Current liabilities Trade payables 25 27,444 24,065 Receipts in advance, accrued charges and other payables , ,783 Amount due to a non-controlling interest 19(a) 1,284 Derivative financial instruments 27 3,880 Provision for taxation 3,458 4,636 Borrowings ,740 1,145, ,471 1,278,728 Net current assets 751, ,579 Total assets less current liabilities 1,085,035 1,131, SPARKLE ROLL GROUP LIMITED

76 Consolidated Statement of Financial Position (Continued) As at 31 March Notes HK$ 000 HK$ 000 Non-current liabilities Other payables Deferred tax liabilities 29 1,036 1,046 1,309 1,441 Net assets 1,083,726 1,130,345 EQUITY Share capital 30 5,959 5,959 Reserves 31 1,050,219 1,106,605 Equity attributable to owners of the Company 1,056,178 1,112,564 Non-controlling interests 27,548 17,781 Total equity 1,083,726 1,130,345 The consolidated financial statements on pages 72 to 179 were approved and authorised for issue by the board of directors on 23 June 2016 and signed on its behalf by: Tong Kai Lap Director Zheng Hao Jiang Director SPARKLE ROLL GROUP LIMITED 75

77 Consolidated Statement of Cash Flows For the year ended 31 March Notes HK$ 000 HK$ 000 Cash flows from operating activities Loss before income tax (33,193) (458,303) Adjustments for: Bank interest income 8 (1,869) (1,637) Gain on disposals of property, plant and equipment 8 (2,679) (700) Amortisation of other intangible asset ,766 Depreciation of property, plant and equipment 9 26,560 44,556 Net realised and unrealised (gains)/losses on derivative financial instruments 8,9 (368) 9,622 Interest expenses 10 49,326 48,233 Impairment loss on goodwill ,508 Impairment loss on property, plant and equipment 16 43,767 Impairment loss on other intangible asset 18 19,821 Write-down of inventories 9 2,963 Operating profit before working capital changes 40,818 82,633 Decrease in financial assets at fair value through profit or loss 549 Decrease/(increase) in inventories 451,108 (565,327) (Increase)/decrease in trade receivables (8,610) 4,855 Decrease/(increase) in deposits, prepayments and other receivables 61,098 (16,116) Decrease/(increase) in amounts due from related parties 706 (1,085) Increase/(decrease) in trade payables 4,325 (4,093) Increase/(decrease) in receipts in advance, accrued charges and other payables 33,954 (25,481) Cash generated from/(used in) operations 583,399 (524,065) Hong Kong Profits Tax paid (454) Other jurisdictions tax paid (1,033) (524) Net cash generated from/(used in) operating activities 581,912 (524,589) 76 SPARKLE ROLL GROUP LIMITED

78 Consolidated Statement of Cash Flows (Continued) For the year ended 31 March Notes HK$ 000 HK$ 000 Cash flows from investing activities Decrease/(increase) in pledged bank deposits 168,399 (143,486) Purchases of property, plant and equipment (3,787) (33,227) Proceeds from disposals of property, plant and equipment 17,346 1,622 Settlement of derivative financial instruments, net (3,512) (5,742) Interest received 1,869 1,637 Net cash generated from/(used in) investing activities 180,315 (179,196) Cash flows from financing activities Capital contribution from a non-controlling interest of a subsidiary 3,063 Advances from a non-controlling interest of a subsidiary 1,315 New borrowings raised 2,278,038 3,412,383 Repayments of borrowings (2,884,879) (2,944,185) Bank interest paid (49,326) (48,233) Net cash (used in)/generated from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year (654,852) 423, ,375 (280,757) 52, ,298 Effect of foreign exchange rate changes, net (2,830) (922) Cash and cash equivalents at end of the year 157,164 52,619 Analysis of balances of cash and cash equivalents Cash at banks and in hand 157,164 63,417 Bank overdrafts 28 (10,798) 157,164 52,619 SPARKLE ROLL GROUP LIMITED 77

79 Consolidated Statement of Changes in Equity For the year ended 31 March 2016 Noncontrolling Attributable to owners of the Company interests Total equity Share capital Share premium* Capital reserve* Share option reserve* Special reserve* Contributed surplus* Exchange reserve* Other reserve* Statutory reserve* Retained profits* Total * * * * * * * * * HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 April , ,335 3,508 1,309 (36,810) 27,535 40,061 30,575 12, ,629 1,573,571 17,878 1,591,449 Capital contribution from non-controlling interests of a subsidiary 3,063 3,063 Transactions with owners 3,063 3,063 Loss for the year (455,685) (455,685) (2,937) (458,622) Other comprehensive income Exchange differences on translation of foreign operations (5,322) (5,322) (223) (5,545) Total comprehensive income for the year (5,322) (455,685) (461,007) (3,160) (464,167) Transfer to statutory reserve 33 (33) Lapse of share options (1,309) 1,309 At 31 March 2015 and 1 April , ,335 3,508 (36,810) 28,844 34,739 30,575 12, ,911 1,112,564 17,781 1,130,345 Capital contribution from a non-controlling interest of a subsidiary 11,602 11,602 Transactions with owners 11,602 11,602 Loss for the year (32,328) (32,328) (1,352) (33,680) Other comprehensive income Exchange differences on translation of foreign operations (24,058) (24,058) (483) (24,541) Total comprehensive income for the year (24,058) (32,278) (56,386) (1,835) (58,221) Transfer to statutory reserve 7 (7) At 31 March , ,335 3,508 (36,810) 28,844 10,681 30,575 12, ,576 1,056,178 27,548 1,083,726 * These reserve accounts comprise the consolidated reserves of HK$1,050,219,000 (2015: HK$1,106,605,000) in the consolidated statement of financial position. * 1,050,219,000 1,106,605, SPARKLE ROLL GROUP LIMITED

80 Notes to the Financial Statements For the year ended 31 March GENERAL INFORMATION 1. Sparkle Roll Group Limited (the Company ) is a limited liability company incorporated in Bermuda. The address of its registered office is Clarendon House, 2 Church Street, Hamilton HM11, Bermuda and its principal place of business is in Hong Kong. The Company s shares are listed on The Stock Exchange of Hong Kong Limited (the Stock Exchange ). Clarendon House, 2 Church Street, Hamilton HM11, Bermuda The principal activities of the Company and its subsidiaries (together the Group ) are distributorships of luxury goods. The Group s operations are mainly based in Hong Kong, Mainland China and Malaysia. 2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) 2. (a) Adoption of new and revised HKFRSs First (a) effective on 1 April 2015 In the current year, the Group has applied for the first time the following new standards, amendments and interpretations issued by the Hong Kong Institute of Certified Public Accountants (the HKICPA ), which are relevant to and effective for the Group s financial statements for the annual period beginning on 1 April 2015: HKFRSs Annual Improvements (Amendments) Cycle HKFRSs Annual Improvements (Amendments) Cycle SPARKLE ROLL GROUP LIMITED 79

81 For the year ended 31 March ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) (Continued) 2. (a) Adoption of new and revised HKFRSs First effective on 1 April 2015 (Continued) (a) The adoption of these new and revised HKFRSs had no material impact on how the results and financial positions for the current and prior years have been prepared and presented. In addition, the Company has adopted the amendments to the Rules Governing the Listing of Securities on the 622 Stock Exchange (the Listing Rules ) relating to the disclosure of financial information with reference to the Hong Kong Companies Ordinance, Cap. 622, during the current financial year. The main impact to the financial statements is on the presentation and disclosure of certain information in the financial statements. (b) New and revised HKFRSs in issue but not yet effective (b) The following new and revised HKFRSs, potentially relevant to the Group s financial statements, have been issued but are not yet effective and have not been early adopted by the Group. HKFRSs Annual Improvements (Amendments) Cycle 1 Amendments to Disclosure Initiative 1 HKAS 1 Amendments Clarification of Acceptable to HKAS 16 and Method of Depreciation and HKAS 38 Amortisation 1 HKFRS 9 (2014) Financial Instruments 2 HKFRS 15 Revenue from Contracts with Customers 2 HKFRS 16 Leases SPARKLE ROLL GROUP LIMITED

82 For the year ended 31 March ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) (Continued) 2. (b) New and revised HKFRSs in issue but not yet (b) effective (Continued) 1 Effective for annual periods beginning on or after 1 1 January Effective for annual periods beginning on or after 1 2 January Effective for annual periods beginning on or after 1 3 January 2019 HKFRS 9 (2014) Financial Instruments 9 HKFRS 9 (2014) introduces new requirements for the classification and measurement of financial assets. Debt instruments that are held within a business model whose objective is to hold assets in order to collect contractual cash flows (the business model test) and that have contractual terms that give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (the contractual cash flow characteristics test) are generally measured at amortised cost. Debt instruments that meet the contractual cash flow characteristics test are measured at fair value through other comprehensive income ( FVTOCI ) if the objective of the entity s business model is both to hold and collect the contractual cash flows and to sell the financial assets. Entities may make an irrevocable election at initial recognition to measure equity instruments that are not held for trading at FVTOCI. All other debt and equity instruments are measured at fair value through profit or loss ( FVTPL ). 9 SPARKLE ROLL GROUP LIMITED 81

83 For the year ended 31 March ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) (Continued) 2. (b) New and revised HKFRSs in issue but not yet (b) effective (Continued) HKFRS 9 (2014) Financial Instruments (Continued) 9 HKFRS 9 (2014) includes a new expected loss 9 impairment model for all financial assets not measured at FVTPL replacing the incurred loss model in HKAS 39 and new general hedge accounting requirements to allow entities to better reflect their risk management activities in 39 financial statements. HKFRS 9 (2014) carries forward the recognition, 9 classification and measurement requirements for financial 39 liabilities from HKAS 39, except for financial liabilities designated at FVTPL, where the amount of change in fair value attributable to change in credit risk of the liability is recognised in other comprehensive income unless that would create or enlarge an accounting mismatch. In addition, HKFRS 9 (2014) retains the requirements in HKAS 39 for derecognition of financial assets and financial liabilities SPARKLE ROLL GROUP LIMITED

84 For the year ended 31 March ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) (Continued) 2. (b) New and revised HKFRSs in issue but not yet (b) effective (Continued) HKFRS 15 Revenue from Contracts with 15 Customers The new standard establishes a single revenue recognition framework. The core principle of the framework is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange 15 for those goods and services. HKFRS 15 supersedes existing revenue recognition guidance including HKAS Revenue, HKAS 11 Construction Contracts and 11 related interpretations. HKFRS 15 requires the application of a 5 steps approach 15 to revenue recognition: Step 1: Identify the contract(s) with a customer Step 2: Identify the performance obligations in the contract Step 3: Determine the transaction price Step 4: Allocate the transaction price to each performance obligation Step 5: Recognise revenue when each performance obligation is satisfied HKFRS 15 includes specific guidance on particular 15 revenue related topics that may change the current approach taken under HKFRSs. The standard also significantly enhances the qualitative and quantitative disclosures related to revenue. SPARKLE ROLL GROUP LIMITED 83

85 For the year ended 31 March ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) (Continued) 2. (b) New and revised HKFRSs in issue but not yet (b) effective (Continued) HKFRS 16 Leases 16 HKFRS 16, which upon the effective date will supersede 16 HKAS 17 Leases and related interpretations, introduces 17 a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying 12 asset is of low value. Specifically, under HKFRS 16, a lessee is required to recognise a right-of-use asset representing its right to use the underlying leased asset 16 and a lease liability representing its obligation to make lease payments. Accordingly, a lessee should recognise depreciation of the right-of-use asset and interest on the lease liability, and also classifies cash repayments of the lease liability into a principal portion and an interest portion and presents them in the statement of cash flows. Also, the right-of-use asset and the lease liability are initially measured on a present value basis. The measurement includes non-cancellable lease payments and also includes payments to be made in optional periods if the lessee is reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease. This accounting treatment is significantly different from the lessee accounting for leases that are classified as operating leases under the predecessor standard, HKAS SPARKLE ROLL GROUP LIMITED

86 For the year ended 31 March ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) (Continued) 2. (b) New and revised HKFRSs in issue but not yet (b) effective (Continued) HKFRS 16 Leases (Continued) 16 In respect of the lessor accounting, HKFRS 16 substantially carries forward the lessor accounting 16 requirements in HKAS 17. Accordingly, a lessor continues 17 to classify its leases as operating leases or finance leases, and to account for those two types of leases differently. The Group will apply the above new standards and amendments to standards when they become effective. The Group is in the process of making an assessment of the impact of the above new standards and amendments to standards. Except as described above, the directors do not anticipate that the application of other new and revised HKFRSs will have a material impact on the Group s consolidated financial statements. SPARKLE ROLL GROUP LIMITED 85

87 For the year ended 31 March BASIS OF PREPARATION 3. The financial statements have been prepared in accordance with HKFRSs which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ( HKASs ) and Interpretations issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance. The financial statements also include the applicable disclosure requirements of the Listing Rules. The financial statements have been prepared on the historical cost basis except for certain financial instruments at FVTPL which are stated at fair values. It should be noted that accounting estimates and assumptions are used in preparation of the financial statements. Although these estimates are based on management s best knowledge and judgement of current events and actions, actual results may ultimately differ from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 5. 5 The financial statements are presented in Hong Kong dollars ( HK$ ), which is also the functional currency of the Company. All values are rounded to the nearest thousand except when otherwise indicated. 86 SPARKLE ROLL GROUP LIMITED

88 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 4. The significant accounting policies that have been used in the preparation of these financial statements are summarised below. These policies have been consistently applied to all the years presented unless otherwise stated. 4.1 Business combination and basis of consolidation 4.1 The consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Inter-company transactions and balances between group companies together with unrealised profits are eliminated in full in preparing the consolidated financial statements. Unrealised losses are also eliminated unless the transaction provides evidence of impairment on the asset transferred, in which case the loss is recognised in profit or loss. The results of subsidiaries acquired or disposed of during the year are included in the consolidated statement of comprehensive income from the dates of acquisition or up to the dates of disposal, as appropriate. 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. SPARKLE ROLL GROUP LIMITED 87

89 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Business combination and basis of consolidation (Continued) 4.1 Acquisition of subsidiaries or businesses is accounted for using the acquisition method. The cost of an acquisition is measured at the aggregate of the acquisition-date fair value of assets transferred, liabilities incurred and equity interests issued by the Group, as the acquirer. The identifiable assets acquired and liabilities assumed are principally measured at acquisition-date fair value. The Group s previously held equity interest in the acquiree is re-measured at acquisition-date fair value and the resulting gains or losses are recognised in profit or loss. The Group may elect, on a transaction-by-transaction basis, to measure the non-controlling interests that represent present ownership interests in the subsidiary either at fair value or at the proportionate share of the acquiree s identifiable net assets. All other non-controlling interests are measured at fair value unless another measurement basis is required by HKFRSs. Acquisitionrelated costs incurred are expensed unless they are incurred in issuing equity instruments in which case the costs are deducted from equity. Any contingent consideration to be transferred by the acquirer is recognised at acquisition-date fair value. Subsequent adjustments to consideration are recognised against goodwill only to the extent that they arise from new information obtained within the measurement period (a maximum of 12 months from the acquisition date) about the fair value at the acquisition date. All other subsequent adjustments to contingent consideration classified as an asset or a liability are recognised in profit or loss. 88 SPARKLE ROLL GROUP LIMITED

90 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Business combination and basis of consolidation (Continued) 4.1 Contingent consideration balances arising from business combinations whose acquisition dates preceded 1 January 2010 (i.e. the date the Group first applied HKFRS 3 (2008)) have been accounted for in accordance with the transition requirements in the standard. Such balances are not adjusted upon first application of the standard. Subsequent revisions to estimates of such consideration are treated as adjustments to the cost of these business combinations and are recognised as part of goodwill. 3 Changes in the Group s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amounts of the Group s interest and the non-controlling interest are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company. When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any noncontrolling interest. Amounts previously recognised in other comprehensive income in relation to the subsidiary are accounted for in the same manner as would be required if the relevant assets or liabilities were disposed of. (i) (ii) SPARKLE ROLL GROUP LIMITED 89

91 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Business combination and basis of consolidation (Continued) 4.1 Subsequent to acquisition, the carrying amount of noncontrolling interests that represent present ownership interests in the subsidiary is the amount of those interests at initial recognition plus such non-controlling interest s share of subsequent changes in equity. Total comprehensive income is attributed to such noncontrolling interests even if this results in those noncontrolling interests having a deficit balance. 4.2 Subsidiaries 4.2 A subsidiary is an investee over which the Company is able to exercise control. The Company controls an investee if all three of the following elements are present: power over the investee, exposure, or rights, to variable returns from the investee, and the ability to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. In the Company s statement of financial position, investments in subsidiaries are stated at cost less impairment loss, if any. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable. 90 SPARKLE ROLL GROUP LIMITED

92 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Foreign currency 4.3 Transactions entered into by the group entities in currencies other than the functional currency (i.e. the currency of the primary economic environment in which it operates) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the end of reporting period. 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 translation of monetary items, are recognised in profit or loss in the period in which they arise. 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 in other comprehensive income, in which case, the exchange differences are also recognised in other comprehensive income. SPARKLE ROLL GROUP LIMITED 91

93 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Foreign currency (Continued) 4.3 On consolidation, income and expense items of foreign operations are translated into the presentation currency of the Group (i.e. HK$) at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the rates approximating to those ruling when the transactions took place are used. All assets and liabilities of foreign operations are translated at the rate ruling at the end of reporting period. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity as exchange reserve (attributed to non-controlling interests as appropriate). Exchange differences recognised in profit or loss of group entities separate financial statements on the translation of long-term monetary items forming part of the Group s net investment in the foreign operation concerned are reclassified to other comprehensive income and accumulated in equity as foreign exchange reserve. On disposal of a foreign operation, the cumulative exchange differences recognised in the foreign exchange reserve relating to that operation up to the date of disposal are reclassified to profit or loss as part of the profit or loss on disposal. Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation on or after 1 January 2005 are treated as assets and liabilities of that foreign operation and translated at the rate of exchange prevailing at the end of reporting period. Exchange differences arising are recognised in the foreign exchange reserve. 92 SPARKLE ROLL GROUP LIMITED

94 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property, plant and equipment 4.4 Property, plant and equipment 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. Depreciation on property, plant and equipment is provided to write off the cost less their estimated residual values over their estimated useful lives, using the straight-line method, as follows: Furniture and equipment 3 to 10 years 3 10 Fixtures 5 to 10 years or over the 5 10 term of lease, whichever is shorter Motor vehicles 4 to 5 years 4 5 The assets estimated residual values, depreciation methods and estimated useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. The gain or loss arising on retirement or disposal is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other costs, such as repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. SPARKLE ROLL GROUP LIMITED 93

95 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Goodwill 4.5 Goodwill is initially recognised at cost being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests in the acquiree and the acquisition date fair value of the acquirer s previously held equity interest in the acquiree over the fair value of identifiable assets and liabilities acquired. Where the fair value of identifiable assets and liabilities exceed the aggregate of the fair value of consideration paid, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of the acquirer s previously held equity interest in the acquiree, the excess is recognised in profit or loss on the acquisition date, after re-assessment. Goodwill is measured at cost less impairment losses. For the purpose of impairment testing, goodwill arising from an acquisition is allocated to each of the relevant cash-generating units (the CGUs ) that are expected to benefit from the synergies of the acquisition. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. A CGU to which goodwill has been allocated is tested for impairment annually, by comparing its carrying amount with its recoverable amount (see note 4.18), and whenever there is an indication that the unit may be impaired SPARKLE ROLL GROUP LIMITED

96 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Goodwill (Continued) 4.5 For goodwill arising on an acquisition in a financial year, the CGU to which goodwill has been allocated is tested for impairment before the end of that financial year. When the recoverable amount of the CGU is less than the carrying amount of the unit, the impairment loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other assets of the unit pro-rata on the basis of the carrying amount to each asset in the unit. However, the loss allocated to each asset will not reduce the individual asset s carrying amount to below its fair value less cost of disposal (if measurable) or its value in use (if determinable), whichever is the higher. Any impairment loss for goodwill is recognised in profit or loss and is not reversed in subsequent periods. On subsequent disposal of a subsidiary, the attributable amount of goodwill capitalised is included in the determination of the amount of gain or loss on disposal. 4.6 Other intangible asset (other than goodwill) 4.6 Acquired intangible asset is recognised initially at cost. After initial recognition, intangible asset with finite useful life is carried at costs less accumulated amortisation and any impairment losses. Amortisation for intangible asset with finite useful life is provided on a straight-line basis over its estimated useful life. Amortisation commences when the intangible assets are available for use. The following useful life is applied: Trademark 10 years 10 Other intangible asset is tested for impairment as described in note SPARKLE ROLL GROUP LIMITED 95

97 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial assets 4.7 The Group classifies its financial assets at initial recognition, depending on the purpose for which the financial assets were acquired. Financial assets are initially measured at fair value plus transaction costs that are directly attributable to the acquisition of the financial assets. Regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis. A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset within the time frame established generally by regulation or convention in the marketplace concerned. All financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the instruments. Derecognition of financial assets occurs when the contractual rights to receive cash flows in relation to the financial asset expire or are transferred and substantially all of the risks and rewards of ownership have been transferred and the transfer meets the criteria for derecognition in accordance with HKAS Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade debtors), and also incorporate other types of contractual monetary asset. Loans and receivables are subsequently measured at amortised cost using the effective interest method, less any impairment losses. Amortised cost is calculated taking into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate and transaction cost. 96 SPARKLE ROLL GROUP LIMITED

98 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial assets (Continued) 4.7 Impairment of financial assets At the end of each reporting period, financial assets other than financial assets at FVTPL are reviewed to determine whether there is any objective evidence of impairment. Objective evidence of impairment of individual financial assets includes observable data that comes to the attention of the Group about one or more of the following loss events: significant financial difficulty of the debtor; a breach of contract, such as a default or delinquency in interest or principal payments; it becoming probable that the debtor will enter bankruptcy or other financial reorganisation; and significant changes in the technological, market, economic or legal environment that have an adverse effect on the debtor. Loss events in respect of a group of financial assets include observable data indicating that there is a measurable decrease in the estimated future cash flows from the group of financial assets. Such observable data includes but not limited to adverse changes in the payment status of debtors in the group and, national or local economic conditions that correlate with defaults on the assets in the group. SPARKLE ROLL GROUP LIMITED 97

99 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial assets (Continued) 4.7 Impairment of financial assets (Continued) If any such evidence exists, the impairment loss is measured and recognised as follows: Financial assets carried at amortised cost If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss 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 been incurred) discounted at the financial asset s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The amount of the loss is recognised in profit or loss of the period in which the impairment occurs. If, in subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that it does not result in a carrying amount of the financial asset exceeding what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss of the period in which the reversal occurs. 98 SPARKLE ROLL GROUP LIMITED

100 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial assets (Continued) 4.7 Impairment of financial assets (Continued) Financial assets carried at amortised cost (Continued) Financial assets other than trade receivables that are stated at amortised cost, impairment losses are written off against the corresponding assets directly. Where the recovery of trade receivables is considered doubtful but not remote, the impairment losses for doubtful receivables are recorded using an allowance account. When the Group is satisfied that recovery of trade receivables is remote, the amount considered irrecoverable is written off against trade receivables directly and any amounts held in the allowance account in respect of that receivable are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit or loss. 4.8 Inventories 4.8 Inventories are stated at the lower of cost and net realisable value. Costs of automobiles, watches and jewelleries included in the inventories are determined using the first-in, first-out method while the other inventories with different nature are determined using the weighted average basis. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and applicable selling expenses. SPARKLE ROLL GROUP LIMITED 99

101 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Derivative financial instruments 4.9 Derivative financial instruments, in individual contracts or separated from hybrid financial instruments, are initially recognised at fair value on the date the derivative contract is entered into and subsequently remeasured at fair value. Derivatives that are not designated as hedging instruments are accounted for as financial assets or financial liabilities at FVTPL. Gains or losses arising from changes in fair value are taken directly to profit or loss for the year Cash and cash equivalents 4.10 Cash and cash equivalents include cash at banks and in hand, demand deposits with banks and short-term highly liquid investments with original maturities of three months or less that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. For the purpose of cash flows presentation, cash and cash equivalents include bank overdrafts which are repayable on demand and form an integral part of the Group s cash management Financial liabilities 4.11 The Group s financial liabilities include trade and other payables, accrued charges, amounts due to subsidiaries and a non-controlling interest and borrowings. Financial liabilities are recognised when the Group becomes a party to the contractual provisions of the instruments. All interest related charges are recognised in accordance with the Group s accounting policy for borrowing costs (see note 4.17) SPARKLE ROLL GROUP LIMITED

102 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial liabilities (Continued) 4.11 A financial liability is derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amount is recognised in profit or loss. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least twelve months after the end of the reporting period. Other financial liabilities These include trade and other payables, accrued charges and amounts due to subsidiaries and a non-controlling interest and are recognised initially at their fair value and subsequently measured at amortised cost, using the effective interest method. SPARKLE ROLL GROUP LIMITED 101

103 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial guarantees issued 4.12 A financial guarantee contract is a contract that requires the issuer (or guarantor) to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. A financial guarantee contract issued by the Group and not designated as at FVTPL is recognised initially as a liability at its fair value, adjusted for transaction costs that are directly attributable to the issue of the financial guarantee contract. Subsequent to initial recognition, the Group measures the financial guarantee contact at the higher of: (i) the amount determined in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets ; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18 Revenue. (i)37 (ii) Leases 4.13 An arrangement, comprising a transaction or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease. Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases. 102 SPARKLE ROLL GROUP LIMITED

104 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Leases (Continued) 4.13 (a) Operating lease charges as the lessor (a) Assets leased out under operating leases are measured and presented according to the nature of the assets. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as rental income. Rental income receivable from operating leases is recognised in profit or loss on the straight-line method over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised in profit or loss as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognised as income in the accounting period in which they are earned. (b) Operating lease charges as the lessee (b) Where the Group has the right to use the assets held under operating leases, payments made under the leases are charged to profit or loss on a straight-line basis over the lease terms except where an alternative basis is more representative of the time pattern of benefits to be derived from the leased assets. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments made. Contingent rental are charged to profit or loss in the accounting period in which they are incurred. SPARKLE ROLL GROUP LIMITED 103

105 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Provisions, contingent liabilities and contingent assets 4.14 Provisions are recognised when the Group has a present obligation (legal or constructive) 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. All provisions are reviewed at the end of each reporting period and adjusted to reflect the current best estimate. 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 uncertain events not wholly within the control of the Group are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote Share capital 4.15 Ordinary shares are classified as equity. Share capital is determined using the nominal value of shares that have been issued. Any transaction costs associated with the issuing of shares are deducted from share premium (net of any related income tax benefit) to the extent they are incremental costs directly attributable to the equity transaction. 104 SPARKLE ROLL GROUP LIMITED

106 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue recognition 4.16 Revenue comprises the fair value of the consideration received and receivable for the sale of goods, rendering of services and the use by others of the Group s assets yielding interest and dividends, net of returns and discounts. Provided it is probable that the economic benefits will flow to the Group and the revenue and costs, if applicable, can be measured reliably, revenue is recognised as follows: Sale of goods is recognised upon transfer of the significant risks and rewards of ownership to customer. This is usually taken as the time when the goods are delivered and the customer has accepted the goods. Services income is recognised when services are rendered. Interest income is recognised on a time-proportion basis using the effective interest method. Rental income receivable from operating leases is recognised in profit or loss on the straight-line method over the periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the use of the leased asset. Lease incentives granted are recognised in profit or loss as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognised as income in the accounting period in which they are earned. SPARKLE ROLL GROUP LIMITED 105

107 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Borrowing costs 4.17 Borrowing costs attributable directly to the acquisition, construction or production of qualifying assets which require a substantial period of time to be ready for their intended use or sale, are capitalised as part of the cost of those assets. Income earned on temporary investments of specific borrowings pending their expenditure on those assets is deducted from borrowing costs capitalised. All other borrowing costs are recognised in profit or loss in the period in which they are incurred Impairment of non-financial assets 4.18 Goodwill arising from acquisition of subsidiaries, other intangible asset, property, plant and equipment and the Company s interests in subsidiaries are subject to impairment testing. Goodwill is tested for impairment at least annually, irrespective of whether there is any indication that they are impaired. All other assets are tested for impairment whenever there are indications that the asset s carrying amount may not be recoverable. An impairment loss is recognised as an expense immediately for the amount by which the asset s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of fair value, reflecting market conditions less costs of disposal, 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 assessment of time value of money and the risk specific to the asset. 106 SPARKLE ROLL GROUP LIMITED

108 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment of non-financial assets (Continued) 4.18 For the purposes of assessing impairment, where an asset does not generate cash inflows largely independent from those from other assets, the recoverable amount is determined for the smallest group of assets that generate cash inflows independently (i.e. a CGU). As a result, some assets are tested individually for impairment and some are tested at CGU level. Goodwill in particular is allocated to those CGUs that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which the goodwill is monitored for internal management purpose. Impairment loss recognised for a CGU, to which goodwill has been allocated, is credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the CGU, except that the carrying amount of an asset will not be reduced below its individual fair value less costs of disposal, or value-in-use, if determinable. An impairment loss on goodwill is not reversed in subsequent periods. In respect of other assets, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the asset s recoverable amount and only to the extent that the asset s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. Impairment losses recognised in an interim period in respect of goodwill are not reversed in a subsequent period. This is the case even if no loss, or a smaller loss, would have been recognised had the impairment been assessed only at the end of the financial year to which the interim period relates. SPARKLE ROLL GROUP LIMITED 107

109 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Employee benefits 4.19 (a) Retirement benefits (a) Retirement benefits to employees are provided through defined contribution plans. The Group operates a defined contribution Mandatory Provident Fund retirement benefit scheme (the MPF Scheme ) under the Mandatory Provident Fund Schemes Ordinance, for all of its employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees basic salaries. The employees of the Group s subsidiaries which operate in Mainland China are required to participate in a central pension scheme operated by the local municipal government. These subsidiaries are required to contribute a percentage of their payroll costs to the central pension scheme. Contributions are recognised as an expense in profit or loss as employees render services during the year. The Group s obligations under these plans are limited to the fixed percentage contributions payable. (b) Short-term employee benefits (b) Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period. Non-accumulating compensated absences such as sick leave and maternity leave are not recognised until the time of leave. 108 SPARKLE ROLL GROUP LIMITED

110 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Employee benefits (Continued) 4.19 (c) Share-based employee compensation (c) The Group operates equity-settled share- based compensation plans for remuneration of its employees. All employee services received in exchange for the grant of any share-based compensation are measured at their fair values. These are indirectly determined by reference to the equity instruments awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). All share-based compensation is recognised as an expense in profit or loss over the vesting period if vesting conditions apply, or recognised as an expense in full at the grant date when the equity instruments granted vest immediately unless the compensation qualifies for recognition as asset, with a corresponding increase in the share option reserve in equity. If vesting conditions apply, the expense is recognised over the vesting period, based on the best available estimate of the number of equity instruments expected to vest. Non-market vesting conditions are included in assumptions about the number of equity instruments that are expected to vest. Estimates are subsequently revised, if there is any indication that the number of equity instruments expected to vest differs from previous estimates. SPARKLE ROLL GROUP LIMITED 109

111 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Employee benefits (Continued) 4.19 (c) Share-based employee compensation (Continued) (c) At the time when the share options have exercised, the amount previously recognised in share option reserve is transferred to share premium. After vesting date, when the vested share options have forfeited or still have not been exercised at the expiry date, the amount previously recognised in share option reserve is transferred to contributed surplus Accounting for income taxes 4.20 Income tax comprises current tax and deferred tax. Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the end of the reporting period. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in profit or loss. 110 SPARKLE ROLL GROUP LIMITED

112 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounting for income taxes (Continued) 4.20 Deferred tax is calculated using the liability method on temporary differences at the end of the reporting period between the carrying amounts of assets and liabilities in the financial statements and their respective tax bases. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, tax losses available to be carried forward as well as other unused tax credits, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither taxable nor accounting profit or loss. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax is calculated, without discounting, at tax rates that are expected to apply in the period the liability is settled or the asset is realised, provided they are enacted or substantively enacted at the end of the reporting period. SPARKLE ROLL GROUP LIMITED 111

113 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounting for income taxes (Continued) 4.20 Changes in deferred tax assets or liabilities are recognised in profit or loss, or in other comprehensive income or directly in equity if they relate to items that are charged or credited to other comprehensive income or directly in equity. Current tax assets and current tax liabilities are presented in net if, and only if, (a) the Group has the legally enforceable right to set off (a) the recognised amounts; and (b) intends either to settle on a net basis, or to realise (b) the asset and settle the liability simultaneously. The Group presents deferred tax assets and deferred tax liabilities in net if, and only if, (a) the entity has a legally enforceable right to set off (a) current tax assets against current tax liabilities; and (b) the deferred tax assets and the deferred tax (b) liabilities relate to income taxes levied by the same taxation authority on either: (i) the same taxable entity; or (i) (ii) different taxable entities which intend either to (ii) settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered. 112 SPARKLE ROLL GROUP LIMITED

114 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Segment reporting 4.21 The Group identifies operating segments and prepares segment information based on the regular internal financial information reported to the executive directors for their decisions about resources allocation to the Group s business components and for their review of the performance of those components. The business components in the internal financial information reported to the executive directors are determined following the Group s major product and service lines. The measurement policies the Group uses for reporting segment results under HKFRS 8 are the same as those used in its financial statements prepared under HKFRSs, except bank interest income, income tax expense, finance costs, net realised and unrealised gains or loss on derivative financial instruments and corporate income and expenses which are not directly attributable to the business activities of any operating segment are not included in arriving at the operating results of the operating segment. 8 Segment assets exclude corporate assets which are not directly attributable to the business activities of any operating segment are not allocated to a segment, which primarily applies to the Group s headquarter. Segment liabilities exclude corporate liabilities which are not directly attributable to the business activities of any operating segment and are not allocated to a segment. These include provision for taxation, deferred tax liabilities and borrowings. No asymmetrical allocations have been applied to reportable segments. SPARKLE ROLL GROUP LIMITED 113

115 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Related parties 4.22 For the purposes of these financial statements, a party is considered to be related to the Group if: (i) A person or a close member of that person s family (i) is related to the Group if that person: (a) has control or joint control over the Group; (a) (b) has significant influence over the Group; or (b) (c) is a member of key management personnel of (c) the Group or the Company s parent. (ii) An entity is related to the Group if any of the (ii) following conditions apply: (a) The entity and the Group are members of the (a) same group (which means that each parent, subsidiary and fellow subsidiary is related to the others). (b) One entity is an associate or joint venture (b) of the other entity (or an associate or joint venture of a member of a group of which the other entity is a member). (c) Both entities are joint ventures of the same (c) third party. (d) One entity is a joint venture of a third entity (d) and the other entity is an associate of the third entity. 114 SPARKLE ROLL GROUP LIMITED

116 For the year ended 31 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Related parties (Continued) 4.22 (ii) (Continued) (ii) (e) The entity is a post-employment benefit plan (e) for the benefit of the employees of the Group or an entity related to the Group. (f) The entity is controlled or jointly controlled by (f) (i) a person identified in (i). (g) A person identifies in (i)(a) has significant (g) (i)(a) influence over the entity or is a member of key management personnel of the entity (or of a parent of the entity). (h) The entity, or any member of a group of (h) which it is a part, provides key management personnel services to the Group or to the parent of the Group. Close members of the family of a person are those family members who may be expected to influence, or be influence by, that person in their dealings with the entity and include: (a) that person s children and spouse or domestic (a) partner; (b) children of that person s spouse or domestic (b) partner; and (c) dependents of that person or that person s spouse (c) or domestic partner. SPARKLE ROLL GROUP LIMITED 115

117 For the year ended 31 March CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS 5. Estimates and judgements 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. The Group makes estimates and assumptions concerning the future. 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 discussed below: (a) Impairment of goodwill (a) The Group tests annually whether goodwill has suffered 4.18 any impairment in accordance with the accounting policy stated in note This requires an estimate of the value-in-use of the cash-generating unit to which the goodwill is allocated. Estimating the value-in-use requires the Group to make an estimate of the expected future cash flows from the CGUs and also to choose a suitable discount rate in order to calculate the present value of those cash flows. 116 SPARKLE ROLL GROUP LIMITED

118 For the year ended 31 March CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued) 5. (b) Impairment of other non-financial assets (b) The Group assesses at the end of each reporting period whether there is any indication that other non-financial assets with definite lives may be impaired. If any such indication exists, the Group estimates the recoverable 4.18 amount of the assets in accordance with the accounting policy stated in note In assessing whether there is any indication that other non-financial assets may be impaired, the Group considers indications from both internal and external sources of information such as evidence of obsolescence or decline in economic performance of the assets, changes in market conditions, economic environment and customers tastes. These assessments are subjective and require management s judgements and estimations. (c) Impairment of receivables (c) The policy for making allowance for impairment of receivables of the Group is based on the evaluation of collectability and ageing analysis of the receivables and on management s judgement. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including the current creditworthiness and the past collection history of each customer/debtor. If the financial conditions of the customers/debtors of the Group deteriorate thus resulting in impairment as to their ability to make payments, additional allowance for impairment may be required. If the financial conditions of the customers/debtors of the Group, on whose account allowance for impairment has been made, were improved and no impairment of their ability to make payments were noted, reversal of allowance for impairment may be required. SPARKLE ROLL GROUP LIMITED 117

119 For the year ended 31 March CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued) 5. (d) Provision for inventories (d) The management reviews the inventories at the end of each reporting period, and makes allowance for impairment of obsolete, slow-moving and impaired items. The management estimates the net realisable value for such inventories based primarily on the expected future market conditions and the estimated selling price. The Group makes allowance for impairment if the net realisable value is below the carrying amount. (e) Income taxes (e) The Group is subject to income taxes in Hong Kong and other jurisdictions in which the Group operates. Significant judgement is required in interpreting the relevant tax rules and regulations and determining the amount of the provision for income taxes and the timing of payment of related taxes. There could have transactions and calculations for which the ultimate tax determination is uncertain in the ordinary course of business. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. 118 SPARKLE ROLL GROUP LIMITED

120 For the year ended 31 March SEGMENT INFORMATION 6. Operating segments are reported in a manner consistent with internal reporting provided to executive directors of the Company who are responsible for allocating resources and assessing performance of the operating segments. In prior years, the executive directors have identified the reportable and operating segments by major product and service lines. During the year ended 31 March 2016, the Group has reorganised its internal reporting structure by simplifying the segmental classification based on revenue contribution from its product and service lines so as to enhance operational efficiency. Accordingly, the comparative segment information has been re-presented to conform to current year s presentation. The Group s reportable and operating segments for financial reporting purposes have been reorganised as follows: Automobiles Distribution of branded automobiles, namely Bentley, Lamborghini and Rolls-Royce, provision of related after-sale services and provision of training of initiating knowledge and skill of distributorship of branded automobiles; Branded watches and jewelleries Distribution of branded watches, namely Richard Mille, DeWitt, Parmigiani, DeLaCour and Buben & Zorweg, and distribution of branded jewelleries, namely Boucheron and Royal Asscher; and Richard Mille DeWitt Parmigiani DeLaCour Buben & Zorweg Boucheron Royal Asscher Others Distribution of fine wines, distribution of audio equipment, distribution of menswear apparels and accessories and distribution of cigars and smoker s accessories. Each of these operating segments is managed separately as each of the product and service lines requires different resources as well as marketing approaches. Inter-segment transactions are priced with reference to prices charged to external parties for similar order. SPARKLE ROLL GROUP LIMITED 119

121 For the year ended 31 March SEGMENT INFORMATION (Continued) 6. Automobiles 2016 Branded watches and jewelleries Others Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 Revenue from external customers 2,178, ,197 70,845 2,376,904 Other income and net gains 64,430 12,746 14,095 91,271 Reportable segment revenue 2,243, ,943 84,940 2,468,175 Reportable segment results 53,185 (22,282) (14,023) 16,880 Amortisation of other intangible asset (78) (78) Depreciation of property, plant and equipment (24,289) (421) (1,035) (25,745) Write-down of inventories (2,963) (2,963) Operating lease payments in respect of rented premises (45,334) (38,784) (30,186) (114,304) Sub-lease income 10,871 10,445 21,316 Reportable segment assets 1,155, , ,934 1,722,237 Deposits, prepayments and other receivables 3,846 Corporate assets: financial assets 5,484 non-financial assets 3,939 Consolidated total assets 1,735,506 Additions to non-current segment assets during the year 3, ,787 Reportable segment liabilities 105,044 23,912 27, ,614 Borrowings 488,740 Corporate liabilities: financial liabilities 1,932 non-financial liabilities 4,494 Consolidated total liabilities 651, SPARKLE ROLL GROUP LIMITED

122 For the year ended 31 March SEGMENT INFORMATION (Continued) Automobiles Branded watches and jewelleries Others Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 (Re-presented) (Re-presented) Revenue from external customers 2,445, ,819 40,368 2,605,701 Other income and net gains 137,535 19,978 15, ,794 Reportable segment revenue 2,583, ,797 55,649 2,778,495 Reportable segment results (293,625) (71,700) (37,107) (402,432) Amortisation of other intangible assets (2,766) (2,766) Depreciation of property, plant and equipment (24,899) (12,385) (7,102) (44,386) Fair value gains on financial assets at fair value through profit or loss 5 5 Impairment loss on goodwill (374,508) (374,508) Impairment loss on property, plant and equipment (27,762) (16,005) (43,767) Impairment loss on other intangible asset (19,821) (19,821) Income from training services 51,300 51,300 Operating lease payments in respect of rented premises (44,199) (41,718) (23,142) (109,059) Sub-lease income 13,310 12,788 26,098 Reportable segment assets 1,846, , ,627 2,367,104 Deposits, prepayments and other receivables 18,324 Corporate assets: financial assets 20,174 non-financial assets 4,912 Consolidated total assets 2,410,514 SPARKLE ROLL GROUP LIMITED 121

123 For the year ended 31 March SEGMENT INFORMATION (Continued) 6. Additions to non-current segment assets during the year 2015 Automobiles Branded watches and jewelleries Others Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 (Re-presented) (Re-presented) 27,827 3,140 2,250 33,217 Reportable segment liabilities 97,016 10,023 16, ,591 Borrowings 1,145,364 Derivative financial instruments 3,880 Corporate liabilities: financial liabilities 1,652 non-financial liabilities 5,682 Consolidated total liabilities 1,280,169 Unallocated corporate income and expenses mainly comprised income from advertising, exhibitions and other services, consultancy and referral fee income and other corporate income and expenses of the Group s headquarter which are not directly attributable to the business activities of any operating segment. 122 SPARKLE ROLL GROUP LIMITED

124 For the year ended 31 March SEGMENT INFORMATION (Continued) 6. A reconciliation between the reportable segment results and the Group s loss before income tax is as follows: HK$ 000 HK$ 000 Reportable segment results 16,880 (402,432) Bank interest income 1,869 1,637 Unallocated corporate income 28,871 34,220 Net realised and unrealised gains/ (losses) on derivative financial instruments 368 (9,622) Unallocated corporate expenses (31,855) (33,873) Finance costs (49,326) (48,233) Loss before income tax (33,193) (458,303) The Group s revenue from external customers are divided into the following geographical areas: HK$ 000 HK$ 000 Mainland China and Hong Kong (domicile) 2,255,102 2,497,543 Malaysia 121, ,158 2,376,904 2,605,701 SPARKLE ROLL GROUP LIMITED 123

125 For the year ended 31 March SEGMENT INFORMATION (Continued) 6. The geographical location of customers is based on the location where the services were provided or the goods were delivered. The geographical location of goodwill and other intangible asset is based on the entities area of operation while that of other non-current assets is based on the physical location of the assets. Substantial portion of the Group s noncurrent assets are located in Mainland China and Hong Kong at the end of the reporting period. Management determines that the Group is domiciled in Mainland China and Hong Kong, which are the Group s principal operating locations. 7. REVENUE 7. The Group s principal activities are sale of automobiles, branded watches and jewelleries and other merchandised goods and provision of automobile related after-sale services. Revenue from the Group s principal activities recognised during the year is as follows: HK$ 000 HK$ 000 (Re-presented) Sale of automobiles 2,041,611 2,308,608 Sale of branded watches and jewelleries 127, ,819 Sale of other merchandised goods 70,845 40,368 Income from provision of after-sale services 137, ,906 2,376,904 2,605, SPARKLE ROLL GROUP LIMITED

126 For the year ended 31 March OTHER INCOME AND NET GAINS HK$ 000 HK$ 000 Bank interest income 1,869 1,637 Bonus from suppliers 26,378 50,402 Net realised gains on derivative financial instruments 368 Fair value gains on financial assets at fair value through profit or loss (Note 20) 20 5 Gain on disposals of property, plant and equipment 2, Income from advertising, exhibitions and other services 14,481 10,241 Income from insurance brokerage 31,468 35,657 Income from training services* * 51,300 Sub-lease income 21,316 26,098 Consultancy and referral fee income^ ^ 19,512 27,000 Management fee income 1,808 2,488 Others 2,500 3, , ,651 * Income from training services represented income from provision of training of initiating knowledge and skill of distributorship of branded automobiles for the year ended 31 March There were no such training activities conducted in the current financial year. * ^ The amount for the current year represented income from provision of consultancy and referral services in relation to an overseas distribution right of a motion picture. The amount for the year ended 31 March 2015 represented income from provision of consultancy service in relation to an investment project referred by the Group. ^ SPARKLE ROLL GROUP LIMITED 125

127 For the year ended 31 March OPERATING PROFIT/(LOSS) 9. Operating profit/(loss) is arrived at after charging/(crediting): HK$ 000 HK$ 000 Amortisation of other intangible asset # # 78 2,766 Auditor s remuneration 1,550 1,600 Cost of inventories recognised as expense, including 2,187,801 2,417,274 Write-down of inventories 2,963 Depreciation of property, plant and ## equipment ## 26,560 44,556 Exchange differences, net 945 (940) Net realised and unrealised (gains)/ losses on derivative financial instruments ### (Note 27) ### 27 (368) 9,622 Gain on disposals of property, plant and equipment (2,679) (700) Operating lease payments in respect of rented premises 127, ,498 Employee benefit expense (Note 13) 13 44,128 51,321 # Amortisation of other intangible asset has been included in # administrative expenses. ## Depreciation of approximately HK$22,560,000 and HK$4,000,000 (2015: HK$36,484,000 and HK$8,072,000) have been included in selling and distribution costs and administrative expenses respectively. ## 22,560,0004,000,000 36,484,000 8,072,000 ### The amount has been included in other income and net gains (2015: other operating expenses). ### 126 SPARKLE ROLL GROUP LIMITED

128 For the year ended 31 March FINANCE COSTS HK$ 000 HK$ 000 Interest on bank loans and overdraft 31,309 33,261 Interest on other loans 18,017 14,972 49,326 48, INCOME TAX EXPENSE 11. Hong Kong Profits Tax has been provided at the rate of 16.5% (2015: 16.5%) on the estimated assessable profit for the year. 16.5% 16.5% Income tax of certain subsidiaries of the Company in Mainland China is charged at 25% (2015: 25%) on estimated assessable profit in accordance with relevant tax regulations in Mainland China. 25% 25% Income tax of certain subsidiaries of the Company in Malaysia is charged at 3% on the assessable profit for the year or a fixed amount of Malaysian Ringgit 20,000, whichever is lower. 3% 20, HK$ 000 HK$ 000 Current tax Hong Kong Charge for the year Other jurisdictions Charge for the year Under-provision in prior year Total current tax Deferred tax (Note 29) 29 (10) (193) Total income tax expense SPARKLE ROLL GROUP LIMITED 127

129 For the year ended 31 March INCOME TAX EXPENSE (Continued) 11. Reconciliation between income tax expense and accounting loss at applicable tax rates: HK$ 000 HK$ 000 Loss before income tax (33,193) (458,303) Tax calculated at the Hong Kong Profits Tax rate of 16.5% (2015: 16.5%) 16.5% 16.5% (5,477) (75,620) Effect of different tax rates of subsidiaries operating in other jurisdictions 3,760 (2,002) Tax effect of non-taxable revenue (18) (69) Tax effect of non-deductible expenses 1,651 66,651 Tax effect of unused tax losses not recognised 3,470 3,025 Tax effect of temporary differences not recognised 741 9,860 Tax effect of utilisation of tax losses previously not recognised (644) (1,663) Tax effect of utilisation of deductible temporary differences previously not recognised (3,045) Under-provision of other jurisdictions income tax in prior years Income tax expense SPARKLE ROLL GROUP LIMITED

130 For the year ended 31 March DIRECTORS EMOLUMENTS 12. Year ended 31 March 2016 Directors fees Salaries and allowances Retirement benefit scheme contributions Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 Executive directors: Tong Kai Lap 180 1, ,058 Zheng Hao Jiang 1,980 1,980 Zhu Lei (appointed with effect from 1 January 2016) Zhao Xiao Dong (resigned with effect from 1 January 2016) Non-executive directors: Zhang Si Jian Gao Yu Qi Jian Wei Independent non-executive directors: Choy Sze Chung, Jojo Lam Kwok Cheong Lee Thomas Kang Bor Total 4,350 1, ,228 SPARKLE ROLL GROUP LIMITED 129

131 For the year ended 31 March DIRECTORS EMOLUMENTS (Continued) 12. Year ended 31 March 2015 Directors fees Salaries and allowances Retirement benefit scheme contributions Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 Executive directors: Tong Kai Lap 180 1, ,058 Zheng Hao Jiang 1,980 1,980 Zhao Xiao Dong 1,200 1,200 Non-executive directors: Zhang Si Jian Gao Yu Qi Jian Wei Independent non-executive directors: Choy Sze Chung, Jojo Lam Kwok Cheong Lee Thomas Kang Bor Total 4,440 1, ,318 During both years, no emoluments were paid by the Group to the directors as an inducement to join or upon joining the Group or as compensation for loss of office. None of the directors has waived or agreed to waive any emoluments during both years. 130 SPARKLE ROLL GROUP LIMITED

132 For the year ended 31 March EMPLOYEE BENEFIT EXPENSE 13. Employee costs, including directors emoluments Defined retirement benefit scheme contributions for employees HK$ 000 HK$ ,198 41,333 8,930 9,988 Total employee costs 44,128 51,321 (a) Five highest paid individuals (a) Of the five individuals with the highest emoluments in the Group, three (2015: three) were directors of the Company whose emoluments are disclosed in note 12 above. The emoluments payable to the remaining two (2015: two) individuals during the year were as follows: HK$ 000 HK$ 000 Salaries and other benefits 2,245 2,805 Retirement benefit scheme contributions ,275 2,840 The emoluments payable to the non-director highest paid individuals fell within the following bands: Number of individuals Number of individuals HK$1,000,001 to HK$1,500,000 HK$1,500,001 to HK$2,000,000 1,000,001 1,500, ,500,001 2,000, SPARKLE ROLL GROUP LIMITED 131

133 For the year ended 31 March EMPLOYEE BENEFIT EXPENSE (Continued) 13. (b) The emoluments for senior management fell within (b) the following bands: Number of Number of individuals individuals Nil to HK$1,000,000 1,000, HK$1,000,001 to HK$1,500,000 1,000,001 1,500, HK$1,500,001 to HK$2,000,000 1,500,001 2,000, DIVIDEND 14. No dividend was paid, declared or proposed by the Group in respect of the years ended 31 March 2015 and LOSSES PER SHARE 15. Basic losses per share is calculated by dividing the loss attributable to owners of the Company of approximately HK$32,328,000 (2015: HK$455,685,000) by the weighted average of 2,979,828,850 (2015: 2,979,828,850) ordinary shares in issue during the year ended 31 March ,328, ,685,000 2,979,828,850 2,979,828,850 Diluted losses per share are the same as basic losses per share as there were no dilutive potential ordinary shares in existence during the years. 132 SPARKLE ROLL GROUP LIMITED

134 For the year ended 31 March PROPERTY, PLANT AND EQUIPMENT 16. Furniture, fixtures and equipment Motor vehicles Total HK$ 000 HK$ 000 HK$ 000 At 1 April 2014 Cost 269,083 51, ,246 Accumulated depreciation (92,692) (17,741) (110,433) Net carrying amount 176,391 33, ,813 Year ended 31 March 2015 Opening net carrying amount 176,391 33, ,813 Exchange differences (2,150) (418) (2,568) Additions 15,309 17,918 33,227 Disposals (36) (886) (922) Depreciation (35,109) (9,447) (44,556) Impairment (43,767) (43,767) Closing net carrying amount 110,638 40, ,227 At 31 March 2015 and 1 April 2015 Cost 264,301 66, ,042 Accumulated depreciation and impairment (153,663) (26,152) (179,815) Net carrying amount 110,638 40, ,227 SPARKLE ROLL GROUP LIMITED 133

135 For the year ended 31 March PROPERTY, PLANT AND EQUIPMENT (Continued) 16. Furniture, fixtures and equipment Motor vehicles Total HK$ 000 HK$ 000 HK$ 000 Year ended 31 March 2016 Opening net carrying amount 110,638 40, ,227 Exchange differences (5,002) (1,762) (6,764) Additions 3,787 3,787 Disposals (14,667) (14,667) Depreciation (18,141) (8,419) (26,560) Closing net carrying amount 91,282 15, ,023 At 31 March 2016 Cost 255,818 33, ,618 Accumulated depreciation and impairment (164,536) (18,059) (182,595) Net carrying amount 91,282 15, ,023 The Group carried out reviews of the recoverable amounts of the property, plant and equipment under the relevant CGUs of the Group as at the reporting period. For the year ended 31 March 2016: No provision for impairment of property, plant and equipment has been made. The recoverable amount of property, plant and equipment under the CGU of the business of trading of branded watches (the Watches CGU ), branded jewelleries (the Jewelleries CGU ) and fine wines (the Fine Wines CGU ) were based on fair value less costs of disposal. Details of impairment testing of the CGU of the automobiles business (the Automobiles CGU ) are disclosed in note SPARKLE ROLL GROUP LIMITED

136 For the year ended 31 March PROPERTY, PLANT AND EQUIPMENT (Continued) 16. For the year ended 31 March 2015: In light of the impairment indicators identified for each of the relevant CGUs of the Group where the revenue generated from the Group s luxury products were adversely impacted by the unfavourable market conditions and the anti-extravagance policies implemented by the government of Mainland China, the directors reviewed the recoverability of the relevant carrying amounts of these CGUs as at 31 March Since the recoverable amounts of these property, plant and equipment are lower than their carrying amounts, impairment losses of HK$11,746,000, HK$16,016,000 and HK$16,005,000, all of which are allocated to furniture, fixtures and equipment under the Watches CGU, the Jewelleries CGU and the Fine Wines CGU respectively, have been recognised in profit or loss to write down the carrying amounts to the respective recoverable amounts of HK$819,000, HK$564,000 and HK$894,000 as at the end of reporting period. The recoverable amounts of the property, plant and equipment under these CGUs have been determined by the directors with reference to professional valuation reports issued by an independent and professionally qualified valuer which were based on the fair value less costs of disposal calculation on an individual basis using direct comparison approach by making reference to the recent transactions of similar assets (Level 3 hierarchy). 11,746,00016,016,000 16,005, , ,000894,000 SPARKLE ROLL GROUP LIMITED 135

137 For the year ended 31 March GOODWILL 17. The net carrying amount of goodwill can be analysed as follows: HK$ 000 HK$ 000 Gross carrying amount 580, ,679 Accumulated impairment (374,508) (374,508) Net carrying amount 206, ,171 The carrying amount of goodwill, net of any allowance for impairment, is allocated to the Automobiles CGU. The Group had originally anticipated that there would be significant growth in the revenue and profitability of the Automobiles CGU as at the date of acquisition. As a result of the slowdown of the retail business of the luxury products in the PRC and the anti-extravagance policies from the government of Mainland China, the demand for the Group s luxury products was adversely impacted and the prospect of the business was significantly challenged. These led to the growth rates of revenue and profitability of Automobiles CGU being significantly lower than expected during the year ended 31 March In view of the above, the Group revised its cash flow forecasts of this CGU for the year ended 31 March Based on the expected future market conditions and management s latest business plan, an impairment of goodwill of HK$374,508,000 was recognised during the year ended 31 March ,508, SPARKLE ROLL GROUP LIMITED

138 For the year ended 31 March GOODWILL (Continued) 17. During the year ended 31 March 2016, the growth rates of revenue and profitability of the Automobiles CGU had been consistent with the Group s expectation made in prior year, and accordingly, the directors of the Company are of the opinion that, based on the value-in-use calculation, goodwill and property, plant and equipment associated with the Automobiles CGU were not further impaired during the year ended 31 March The recoverable amount for the Automobiles CGU, which amounts to approximately HK$412,000,000 (2015: HK$348,000,000) as at 31 March 2016, was determined based on the value-in-use calculation using pre-tax cash flow projections from formally approved budgets, covering a detailed five-year budget plan, followed by an extrapolation of expected cash flows at zero percent growth, which do not exceed the long-term growth rate for the business in which the Automobiles CGU operates. The growth rate reflects the longterm estimated average growth rates for the product lines of the CGU. 412,000, ,000,000 0% The key assumptions for the value-in-use calculations are: Growth rate after five-year period 0% 0% Discount rate 14.73% 11.98% The key assumptions have been determined based on past performance and its expectations for the market s share after taking into consideration published market forecast and research. The discount rates used are pre-tax and reflect specific risks relating to the Automobiles CGU. Apart from the considerations described in determining the value-in-use of the Automobiles CGU above, the Group s management is not currently aware of any other possible changes that would necessitate changes in its key estimates. SPARKLE ROLL GROUP LIMITED 137

139 For the year ended 31 March OTHER INTANGIBLE ASSET 18. Trademark HK$ 000 At 1 April 2014 Gross carrying amount 33,163 Accumulated amortisation (9,948) Net carrying amount 23,215 Year ended 31 March 2015 Opening net carrying amount 23,215 Amortisation charge (2,766) Impairment (19,821) Closing net carrying amount 628 At 31 March 2015 and 1 April 2015 Gross carrying amount 33,163 Accumulated amortisation and impairment (32,535) Net carrying amount 628 Year ended 31 March 2016 Opening net carrying amount 628 Amortisation charge (78) Closing net carrying amount 550 At 31 March 2016 Gross carrying amount 33,163 Accumulated amortisation and impairment (32,613) Net carrying amount SPARKLE ROLL GROUP LIMITED

140 For the year ended 31 March OTHER INTANGIBLE ASSET (Continued) 18. During the year ended 31 March 2015, in light of the impairment indicators identified for the Jewelleries CGU where the revenue generated from the Group s luxury products under the CGU were adversely impacted by the unfavourable market conditions and the anti-extravagance policies implemented by the government of Mainland China, the directors reviewed the recoverability of the carrying amount of the trademark as at 31 March Since the recoverable amount of the trademark is lower than its carrying amount, impairment loss of HK$19,821,000 has been recognised in profit or loss for the year ended 31 March 2015 to write down the carrying amount of trademark to its recoverable amount of approximately HK$628,000. The recoverable amount of the trademark under the Jewelleries CGU had been determined by the directors with reference to the professional valuation report issued by an independent and professionally qualified valuer which were based on the fair value less costs of disposal calculation using relief-from-royalty income approach based on the cash flow projection, royalty rate and discount rate adopted by the management (Level 3 hierarchy). The values assigned to the key assumptions represent management s assessment of future trends and are based on both external sources and internal sources (historical data) and are summarised below. 19,821, ,000 A pre-tax discount rate of 13.68% was used which reflects the specific risks associated with the trademark % Revenue was based on anticipated selling prices and projected based on the historical operating results, the five-year forecasts and royalty rates with reference to similar licensing agreement of comparable trademark. The cash flows beyond the five-year period until the expiry of trademark is extrapolated using a growth rate of 0%, which is the long-term estimated average growth rate for the related CGU. 0% SPARKLE ROLL GROUP LIMITED 139

141 For the year ended 31 March OTHER INTANGIBLE ASSET (Continued) 18. During the year ended 31 March 2016, the growth rate of revenue of the Jewelleries CGU had been consistent with the Group s expectation made in prior year, and accordingly, the directors are of the opinion that, based on the fair value less costs of disposal calculation, the trademark was not further impaired during the year ended 31 March BALANCES WITH NON-CONTROLLING INTERESTS/RELATED PARTIES 19. (a) Amount due from/to non-controlling interests (a) The amount due from a non-controlling interest, representing capital contributions receivable from the non-controlling interest of Sparkle Roll Cigars Holding Limited ( Sparkle Roll Cigars ), is unsecured and interest- free. The capital contribution from the non-controlling 9,281,000 interest of Sparkle Roll Cigars of HK$9,281,000 is 2,320,000 receivable within one year from the reporting date, while the remaining balance of HK$2,320,000 is receivable in September The amount due to the non-controlling interest of ( Fu Sheng ) is unsecured, interest- free and repayable on demand. (b) Rental deposits paid to a related party (b) The Group entered into several agreements with Mr. Qi Jian Hong ( Mr. Qi ), a substantial shareholder of the Company, for leasing of properties as office premises, warehouse and showrooms in Mainland China to the Group. The rental deposits to Mr. Qi of approximately HK$17,554,000 (2015: HK$18,181,000) have been 17,554,000 recognised as non-current assets as at 31 March ,181, SPARKLE ROLL GROUP LIMITED

142 For the year ended 31 March BALANCES WITH NON-CONTROLLING INTERESTS/RELATED PARTIES (Continued) 19. (c) Amounts due from related parties (c) As at 31 March 2016 Maximum balance outstanding during the year As at 31 March 2015 and 1 April 2015 Maximum balance outstanding during the prior year As at 1 April 2014 Notes HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Mr. Qi (i) 17,561 18,000 18,000 18,325 18,325 ( BJSRGB ) (ii) 1,116 1,410 1,410 1,410 18,677 19,410 18,325 Notes: (i) The amount due from Mr. Qi, resulting from prepaid rental (i) expenses for leasing of properties as office premises, bonded warehouse and showrooms in Mainland China to the Group is unsecured, interest-free and will be utilised through setting off future rental expenses payable to Mr. Qi within one year. (ii) The amount due from BJSRGB (a company controlled by (ii) Mr. Qi), resulting from provision of management services, is unsecured, interest-free and repayable on demand. SPARKLE ROLL GROUP LIMITED 141

143 For the year ended 31 March FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 20. The Group had in prior year acquired certain wine futures which are classified as financial assets at fair value through profit or loss. During the year ended 31 March 2015, the Group had exercised all these wine futures and a gain of approximately HK$5,000 arising from the exercise of wine futures had been recognised in profit or loss for the year ended 31 March 2015 and included in other income as disclosed in note 8. The Group does not own any wine futures as at 31 March 2015 and ,000 8 Financial assets at fair value through profit or loss are presented within the section of operating activities as part of changes in working capital in the consolidated statement of cash flows. 21. INVENTORIES HK$ 000 HK$ 000 Raw materials and consumables 22,742 30,586 Merchandised goods 977,461 1,468,964 1,000,203 1,499,550 As at 31 March 2016, merchandised goods of approximately HK$424,569,000 (2015: HK$793,944,000) have been pledged to secure the loan facilities (Note 28). 424,569, ,944, SPARKLE ROLL GROUP LIMITED

144 For the year ended 31 March TRADE RECEIVABLES 22. The Group s trading terms with its retail customers are mainly receipts in advance from customers or cash on delivery, except for certain transactions with creditworthy customers where the credit period is extendable up to 21 months, whereas the trading terms with wholesale customers are generally one to two months. In addition, the Group generally provides a credit term of two to three months to automobile manufacturers for the in-warranty after-sale services. The Group seeks to maintain strict control over its outstanding trade receivables and has a credit control policy to minimise credit risk. Overdue balances are reviewed regularly by the management. 21 An ageing analysis of trade receivables at the end of the reporting period, based on the invoice dates, and net of impairment losses, is as follows: HK$ 000 HK$ days , days ,077 Over 120 days 120 5,714 8, SPARKLE ROLL GROUP LIMITED 143

145 For the year ended 31 March TRADE RECEIVABLES (Continued) 22. The ageing analysis of the Group s trade receivables that are not individually nor collectively considered to be impaired is as follows: HK$ 000 HK$ 000 Neither past due nor impaired 7, Not more than 1 month past due 1,077 8, Trade receivables that were neither past due nor impaired related to certain customers from whom there was no recent history of default. Trade receivables that were past due but not impaired relate to certain independent customer which owns a good financial background. The directors of the Company are of the opinion that no provision for impairment is necessary in respect of these balances as the balances were settled subsequently and there has been no recent history of default. 23. DEPOSITS, PREPAYMENTS AND OTHER RECEIVABLES HK$ 000 HK$ 000 Deposits 23,360 31,776 Prepayments 39,767 18,972 Other receivables 89, , , , SPARKLE ROLL GROUP LIMITED

146 For the year ended 31 March PLEDGED DEPOSITS AND CASH AT BANKS AND IN HAND 24. Cash at banks earns interest at floating rates based on daily bank deposit rates. Certain of the Group s deposits have been pledged to secure loan facilities granted to the Group (Note 28). As at 31 March 2016, the deposits bore interest rates ranging from 0.01% to 0.35% per annum (2015: ranging from 0.01% to 2.90% per annum) which are close to the market interest rates. The pledged deposits will be released upon the settlement of the relevant borrowings % 0.35% 0.01% 2.90% Included in cash at banks and in hand of the Group is approximately HK$95,490,000 (2015: HK$61,329,000) of bank balances denominated in RMB and is placed with banks in Mainland China. RMB is not a freely convertible currency. Under Mainland China s Foreign Exchange Control Regulations and Administration of Settlement and Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for foreign currencies through banks that are authorised to conduct foreign exchange business. 25. TRADE PAYABLES 95,490,000 61,329, The following is an ageing analysis of trade payables which based on the invoice dates as at the end of the reporting period: HK$ 000 HK$ days ,865 3, days , days ,206 6,885 Over 90 days 90 9,421 10,320 27,444 24,065 SPARKLE ROLL GROUP LIMITED 145

147 For the year ended 31 March RECEIPTS IN ADVANCE, ACCRUED CHARGES AND OTHER PAYABLES HK$ 000 HK$ 000 Current portion: Receipts in advance from customers 104,297 84,015 Accrued charges 1,709 2,556 Other payables 23,539 14, , ,783 Non-current portion: Other payables DERIVATIVE FINANCIAL INSTRUMENTS 27. The Group used foreign currency forward contracts to mitigate exchange rate exposure of Euros ( EUR ) against HK$. The foreign currency forward contracts are not designated for hedge purposes and are measured at fair value through profit or loss as described in note All these forward contracts were settled during the current year. The Group did not enter into any new foreign currency forward contracts during the current year. Realised gains on foreign currency forward contracts amounting to HK$368,000 were credited to profit or loss during the current year (2015: realised and unrealised losses of HK$9,622,000) ,000 9,622, SPARKLE ROLL GROUP LIMITED

148 For the year ended 31 March BORROWINGS HK$ 000 HK$ 000 Current portion: Bank loans, secured and guaranteed 323, ,410 Bank loans, secured 46, ,444 Bank loans, guaranteed 4, ,726 Other loans, secured and guaranteed 115, ,649 Other loans, secured 143,337 Bank overdrafts, secured and guaranteed 10, ,740 1,145,364 Effective interest rates per annum in the range of: fixed rate borrowings 4.35% 8.00% 5.7% 8.3% variable rate borrowings 2.75% 3.20% 2.01% 3.43% At the end of the reporting period, all the borrowings were repayable on demand or scheduled to repay within one year. As at 31 March 2015 and 2016, certain inventories (Note 21) and bank deposits (Note 24) were pledged to secure the loan facilities granted to the Group SPARKLE ROLL GROUP LIMITED 147

149 For the year ended 31 March BORROWINGS (Continued) 28. The borrowings were also subject to corporate guarantees executed by the Company and certain subsidiaries during the years ended 31 March 2015 and The carrying amounts of the borrowings are denominated in the following currencies: HK$ 000 HK$ 000 RMB 484,233 1,115,912 HK$ 2,960 14,074 EUR 1,547 2,230 Swiss Franc ( CHF ) 10,445 US$ 2, ,740 1,145, DEFERRED TAX 29. Deferred taxation is calculated in full on temporary differences under the liability method at rates of taxation applicable when the temporary differences are expected to reverse. The movement on the deferred tax liabilities during the year is as follows: HK$ 000 HK$ 000 At beginning of the year 1,046 1,239 Deferred tax credited to profit or loss (Note 11) 11 (10) (193) At end of the year 1,036 1, SPARKLE ROLL GROUP LIMITED

150 For the year ended 31 March DEFERRED TAX (Continued) The movement in deferred tax liabilities recognised in the consolidated statement of financial position during the year is as follows: 29. Accelerated tax depreciation Temporary difference on inventories Total HK$ 000 HK$ 000 HK$ 000 At 1 April ,033 1,239 Credited to profit or loss (193) (193) At 31 March 2015 and 1 April ,046 Credited to profit or loss (10) (10) At 31 March ,036 As at 31 March 2016, the Group has deductible temporary differences of HK$35,562,000 (2015: HK$43,767,000) mainly arising from impairment losses recognised in respect of property, plant and equipment and from inventories. No deferred tax asset has been recognised in relation to such deductible temporary difference as it is unpredictable whether taxable profit will be available against which the deductible temporary differences can be utilised. At the end of the reporting period, the Group has estimated unused tax losses of approximately HK$47,685,000 (2015: HK$35,259,000) available for offset against future taxable profits. No deferred tax asset has been recognised due to the unpredictability of future profit streams of those subsidiaries which incurred these estimated unused tax losses as at the end of the reporting period. The estimated unused tax losses arising in Mainland China of approximately HK$8,400,000 (2015: HK$15,132,000) will be expired if they are not utilised to set off against the taxable profits within five years from the year in which they arose under the current tax legislation in Mainland China. 35,562,000 43,767,000 47,685,000 35,259,000 8,400,000 15,132,000 SPARKLE ROLL GROUP LIMITED 149

151 For the year ended 31 March DEFERRED TAX (Continued) 29. Deferred tax liabilities have not been established for the withholding tax that would be payable on the unremitted earnings of certain subsidiaries because the Company controls the dividend policy of these subsidiaries and it is not probable that the temporary differences will reverse in the foreseeable future. Such unremitted earnings associated with investments in subsidiaries totalled approximately HK$769,054,000 (2015: HK$746,047,000) as at 31 March SHARE CAPITAL 769,054, ,047, Number of ordinary shares Amount HK$ 000 Authorised: Ordinary shares of HK$0.002 each At 1 April 2014, 31 March 2015, 1 April 2015 and 31 March ,000,000, ,000 Issued and fully paid: Ordinary shares of HK$0.002 each At 1 April 2014, 31 March 2015, 1 April 2015 and 31 March ,979,828,850 5, SPARKLE ROLL GROUP LIMITED

152 For the year ended 31 March RESERVES 31. Special reserve The special reserve of the Group represents the difference between the nominal amount of the shares of the subsidiaries at the date on which they were acquired by the Company and the nominal amount of the shares issued for the acquisition under a group reorganisation in Contributed surplus The contributed surplus of the Group consists of: (i) Pursuant to a special resolution passed at the annual (i) general meeting of the Company on 10 August 2004, the Company reduced its share premium by an amount of approximately HK$286,300,000 in accordance with the 46 provisions of Section 46 of the Bermuda Companies Act 286,300, and transferred the same amount to the contributed surplus account of the Company. On the same date, the Company applied an amount of approximately 236,906,000 HK$236,906,000 from the contributed surplus account against the accumulated losses; (ii) Pursuant to a special resolution passed at the annual (ii) general meeting of the Company on 31 July 2009, the Company reduced its share premium by an amount of approximately HK$260,000,000 and transferred the 260,000,000 same amount to the contributed surplus account of the Company. On the same date, the Company applied an amount of approximately HK$206,327,000 from the 206,327,000 contributed surplus account against the accumulated losses; (iii) Dividends paid out of contributed surplus in prior years (iii) for a total of approximately HK$76,999,000; and 76,999,000 (iv) Transfers of approximately HK$1,467,000 and (iv) HK$1,309,000 from share option reserve due to forfeiture/lapse of share options during the years ended 31 March 2014 and 2015 respectively. 1,467,0001,309,000 SPARKLE ROLL GROUP LIMITED 151

153 For the year ended 31 March RESERVES (Continued) 31. Other reserve Other reserve represents the difference between the consideration and (i) the carrying amount of the partial interests in subsidiaries disposed of and (ii) the carrying amount of the non-controlling interests acquired. (i) (ii) Statutory reserve The Group s statutory reserve represents appropriations of profits retained by the Company s PRC subsidiaries. In accordance with the respective articles of association of the Company s PRC subsidiaries, they are required to appropriate amount not less than 10% of their profits after income tax to statutory reserve each year, until the reserve balance reaches 50% of its registered capital. Such a reserve may be used to reduce any losses incurred or for capitalisation as paid-up capital. 32. SHARE-BASED EMPLOYEE COMPENSATION 10% 50% 32. The Company s share option scheme (the Scheme ) was adopted pursuant to an ordinary resolution passed at a special general meeting of the Company held on 7 October 2002 for the primary purpose of providing incentives to directors and eligible employees. The Scheme was expired on 6 October Pursuant to an ordinary resolution passed at an annual general meeting of the Company held on 20 August 2012, the Company s new share option scheme (the New Scheme ) was adopted and the Scheme was terminated. 152 SPARKLE ROLL GROUP LIMITED

154 For the year ended 31 March SHARE-BASED EMPLOYEE COMPENSATION (Continued) 32. Under the New Scheme, the board of directors of the Company may, at its discretion, grant options to eligible employees, including executive directors, suppliers, customers, advisers or consultants and joint venture partners or business alliances of the Company or any of its subsidiaries to subscribe for shares in the Company. The total number of shares in respect of which options may be granted under the Scheme is not permitted to exceed 10% of the shares of the Company in issue at any point in time, without prior approval from the Company s shareholders. The number of shares in respect of which options may be granted to any individual in any one year is not permitted to exceed 1% of the shares of the Company in issue at any point in time, without prior approval from the Company s shareholders. Options granted to substantial shareholder or independent non-executive directors in excess of 0.1% of the Company s share capital or with a value in excess of HK$5,000,000 must be approved in advance by the Company s shareholders. 10% 1% 0.1% 5,000,000 Options granted must be taken up within 21 days of the date of grant, upon payment of HK$1 per each grant of options. Options may be exercised from the date of grant of the share option to the tenth anniversary of the date of grant. The exercise price is determined by the directors of the Company and will not be less than the highest of the closing price of the shares on the Stock Exchange on the date of grant, the average closing prices of the shares on the Stock Exchange on the five trading days immediately preceding the date of grant of the options or the nominal value of the shares The New Scheme shall remain valid and effective for a period of ten years commencing from 20 August 2012, being the date on which the scheme was deemed to take effect in accordance with the terms. SPARKLE ROLL GROUP LIMITED 153

155 For the year ended 31 March SHARE-BASED EMPLOYEE COMPENSATION (Continued) 32. All share-based employee compensation will be settled in equity. The Group has no legal or constructive obligation to repurchase or settle the options other than by issuing the Company s ordinary shares. Details of the share options granted by the Company pursuant to the Scheme and the share options outstanding as at the reporting dates were as follows: Type of grantee Date of grant Exercisable period Exercise price HK$ Balance at 1 April 2014 Number of options Lapsed during the prior year Balance at 31 March 2015 and 2016 Employees 4 July July 2011 to 3 July ,456,000 (4,456,000) The weighted average exercise price for the lapsed share options were HK$1.52 per share during the year ended 31 March There was no share option outstanding under the New Scheme as at 31 March 2015 and SPARKLE ROLL GROUP LIMITED

156 For the year ended 31 March OPERATING LEASE COMMITMENTS 33. (a) Group as lessor (a) In prior periods, the Group sub-leases out a number of rented premises under operating leases. These leases run for an initial non-cancellable period of 5 years. The rentals on these leases are calculated based on a percentage of the relevant sales of the tenants pursuant to the lease agreements. Contingent rents recognised in profit or loss during the year amounted to approximately 21,316,000 HK$21,316,000 (2015: HK$26,098,000). All these lease 26,098,000 agreements were terminated during the year upon mutual agreement between the parties involved. As at 31 March 2016, the Group does not have any operating lease commitment in which the Group acts as a lessor. (b) Group as lessee (b) At the end of the reporting period, the total future minimum lease payments payable by the Group under non-cancellable operating leases, including operating 35(b) lease commitment to related parties as disclosed in note 35(b), are as follows: HK$ 000 HK$ 000 Within one year 93, ,853 In the second to fifth years inclusive 295, ,839 After five years 39, , , ,154 SPARKLE ROLL GROUP LIMITED 155

157 For the year ended 31 March OPERATING LEASE COMMITMENTS (Continued) 33. The Group leases a number of office premises, bonded warehouse, showrooms and staff quarters under operating leases. The leases run for an initial period of one to ten years (2015: one to ten years). The actual payments in respect of certain operating leases are calculated at the higher of the minimum commitments as noted in the table above and the amounts determined based on a percentage of the sales of the related retail shops. 34. CAPITAL COMMITMENTS 34. Contracted but not provided for in respect of purchase of property, plant and equipment HK$ 000 HK$ RELATED PARTY DISCLOSURES 35. (a) Related party transactions (a) During the year, except as disclosed elsewhere in these financial statements, the Group also had the following significant transactions with related parties: HK$ 000 HK$ 000 Rental expense to Mr. Qi 70,246 72,480 Consultancy fee paid to Mr. Qi 40 Management fees income from BJSRGB 1,808 2, SPARKLE ROLL GROUP LIMITED

158 For the year ended 31 March RELATED PARTY DISCLOSURES (Continued) 35. (a) Related party transactions (Continued) (a) The above related party transactions are conducted in the ordinary course of business with reference to the terms mutually agreed between the parties. These related party transactions also constitute connected transactions or A continuing connected transactions as defined in Chapter 14A of the Listing Rules. The Group defines directors of the Company as key management personnel and their remunerations are set 12 out in note 12. (b) Operating lease commitment to related parties (b) At the end of the reporting period, the total future minimum lease payments payable by the Group to Mr. Qi under non-cancellable operating leases were as follows: HK$ 000 HK$ 000 Within one year 68,571 72,000 In the second to fifth years inclusive 272, ,000 After five years 39, , , ,750 SPARKLE ROLL GROUP LIMITED 157

159 For the year ended 31 March PARTICULARS OF PRINCIPAL SUBSIDIARIES 36. Particulars of the Company s principal subsidiaries as at 31 March 2016 are as follows: Name of subsidiary Carnaby Group Limited Place/country of incorporation/ establishment and kind of legal entity British Virgin Islands ( BVI ), limited liability company Class of capital held Ordinary share Issued/paid-up capital United States Dollar ( US$ ) 1 Percentage of effective interest held by the Company Principal activities and place of operations 100%* Investment holding, BVI 1 100%* Sparkle Roll (France) Limited BVI, limited liability Ordinary share US$1 100% Investment holding, BVI company 1 100% Sparkle Roll Fine Wine Limited BVI, limited liability Ordinary share US$1 100% Trading of fine wines, Hong Kong company 1 100% Sparkle Roll Motors Limited BVI, limited liability Ordinary share US$1 100% Investment holding, BVI company 1 100% Sparkle Roll (Hong Kong) Limited Hong Kong, limited liability company Ordinary share HK$1 100% Trading of branded jewelleries and provision of management service, Hong Kong 1 100% Sparkle Roll Aerial Advertising Multi-Media Limited Hong Kong, limited liability company Ordinary share HK$1 100% Publications of magazines and provision of advertising services, Hong Kong 1 100% Sparkle Roll Auto Parts Limited # Hong Kong, limited Ordinary share HK$95,000, % Dormant, Hong Kong liability company # 95,000, % Sparkle Roll Cigars Holding Limited Hong Kong, limited Ordinary share US$3,000, % Trading of cigars and smoker s liability company accessories, Hong Kong 3,000, % Sparkle Roll International Distributions Limited Hong Kong, limited Ordinary share HK$ % Trading of branded watches, fine wines liability company and wine futures, Hong Kong % Sparkle Roll Watch & Jewelry Limited Hong Kong, limited Ordinary share HK$1 100% Trading of branded watches and liability company branded jewelleries, Hong Kong 1 100% 158 SPARKLE ROLL GROUP LIMITED

160 For the year ended 31 March PARTICULARS OF PRINCIPAL SUBSIDIARIES (Continued) 36. Name of subsidiary Place/country of incorporation/ establishment and kind of legal entity Class of capital held Issued/paid-up capital Percentage of effective interest held by the Company Principal activities and place of operations Sparkle Roll Brands Market Management Malaysia, limited liability Ordinary share US$ % Investment holding, Malaysia Limited company % Sparkle Roll Retail Net Development Limited Malaysia, limited liability company Ordinary share US$1 100% Trading of branded watches and branded jewelleries and fine wines, Malaysia 1 100% Balanorm Beo (Beijing) Trading Development Limited ( Balanorm Beo ) Mainland China, limited liability company Paid-up capital Renminbi ( RMB ) 50,000,000 50,000,000 51% Sales and distribution of audio and visual consumer electronics products, Mainland China 51% Beijing De Te Motors Trading Limited Mainland China, limited liability company 101,400,000 Beijing Mei He Zhen Yong Motors Trading Limited Mainland China, limited liability company 194,800,000 Paid-up capital RMB101,400, % Trading of automobiles and related parts and accessories and provision of after-sale services, Mainland China 100% Paid-up capital RMB194,800, % Trading of automobiles and related parts and accessories and provision of after-sale services, Mainland China 100% Beijing Sparkle Roll Aerial Advertising Multi-media Limited Mainland China, limited liability company Paid-up capital RMB49,500, % Provision of marketing and advertising services, Mainland China 49,500, % Beijing Sparkle Roll Fu Sheng Trading Mainland China, limited Paid-up capital RMB5,000,000 51% Sales and distribution of apparel and Company Limited liability company accessories, Mainland China 5,000,000 51% Beijing Sparkle Roll Goldence Saga International Exhibition Limited Mainland China, limited liability company Paid-up capital RMB64,600, % Provision of consultancy services, Mainland China 64,600, % SPARKLE ROLL GROUP LIMITED 159

161 For the year ended 31 March PARTICULARS OF PRINCIPAL SUBSIDIARIES (Continued) 36. Name of subsidiary Place/country of incorporation/ establishment and kind of legal entity Class of capital held Issued/paid-up capital Percentage of effective interest held by the Company Principal activities and place of operations Beijing Sparkle Roll Honor Remit Business Club Limited Mainland China, limited liability company Paid-up capital RMB17,600, % Provision of exhibition and advertising services, Mainland China 17,600, % Beijing Sparkle Roll Motors Insurance Agency Limited Mainland China, limited liability company Paid-up capital RMB10,000, % Provision of insurance agency services, Mainland China 10,000, % Beijing Sparkle Roll Xin Gai Nian Business Management Limited Mainland China, limited liability company 49,950,000 Paid-up capital RMB49,950, % Provision of corporate management and consultancy services, Mainland China 100% Beijing Sparkle Roll Xin Jing Jie Public Relation Planning Limited Mainland China, limited liability company Paid-up capital RMB49,700, % Provision of public relation and marketing services, Mainland China 49,700, % Richmile (Shanghai) Commerce & Trading Limited Mainland China, limited liability company 10,000,000 Sparkle Roll Bo Ce Trading Development Limited Mainland China, limited liability company 51,900,000 Paid-up capital RMB10,000, % Trading of branded watches and branded jewelleries and provision of consultancy services, Mainland China 100% Paid-up capital RMB51,900, % Providing corporate management and consultancy services, Mainland China 100% Sparkle Roll Ding Sheng (Beijing) Trading Development Limited Mainland China, limited liability company Paid-up capital RMB10,000, % Sales and distribution of merchandised goods, Mainland China 10,000, % Sparkle Roll Online (Beijing) Business Service Limited Mainland China, limited liability company Paid-up capital RMB49,900, % Provision of e-commerce platform operation, Mainland China 49,900, % 160 SPARKLE ROLL GROUP LIMITED

162 For the year ended 31 March PARTICULARS OF PRINCIPAL SUBSIDIARIES (Continued) 36. Name of subsidiary Sparkle Roll Oriental (Beijing) Trading Development Limited Place/country of incorporation/ establishment and kind of legal entity Mainland China, limited liability company (wholly foreign-owned enterprise) Class of capital held Issued/paid-up capital Percentage of effective interest held by the Company Principal activities and place of operations Paid-up capital HK$40,000, % Trading of branded watches, branded jewelleries and fine wines and provision of consultancy services, Mainland China 40,000, % Sparkle Roll Xin Fa Xian International Artwork Limited Mainland China, limited liability company 49,300,000 Paid-up capital RMB49,300, % Trading of artwork and provision of culture and art exchange activities services, Mainland China 100% Sparkle Roll Xin Tian Di Commerce Development Limited Mainland China, limited liability company Paid-up capital RMB49,000, % Property investment for rental purpose, Mainland China 49,000, % Tianjin Heng Ying Tai Fu Trading Development Limited Mainland China, limited liability company Paid-up capital RMB10,000,000 ## 100% Trading of automobiles and related parts and accessories and provision of after-sale services, Mainland China 10,000,000 ## 100% Tianjin Xin Chang Tai Fu Trading Development Limited Mainland China, limited liability company 45,000,000 Paid-up capital RMB45,000, % Trading of automobiles and related parts and accessories and provision of after-sale services, Mainland China 100% SPARKLE ROLL GROUP LIMITED 161

163 For the year ended 31 March PARTICULARS OF PRINCIPAL SUBSIDIARIES (Continued) 36. The English names of these subsidiaries established in Mainland China represent management s best effort at translating the Chinese names of these subsidiaries as no official English names have been registered. * Directly held by the Company * # On 26 April 2016, Sparkle Roll Auto Parts Limited has changed its name to Sparkle Roll Global Motors Holding Limited. # ## On 19 April 2016, the registered capital has been increased from RMB10,000,000 to RMB38,700,000. ## 10,000,000 38,700,000 The above table lists the subsidiaries of the Company which, in the opinion of the directors of the Company, 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 of the Company, result in particulars of excessive length. 162 SPARKLE ROLL GROUP LIMITED

164 For the year ended 31 March SUBSIDIARIES WITH MATERIAL NON- CONTROLLING INTERESTS 37. Details of the Group s subsidiaries that have material noncontrolling interests and their summarised financial information are set out below. The amounts disclosed are before any intercompany eliminations. Balanorm Beo Fu Sheng Sparkle Roll Cigars HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 As at 31 March Percentage of equity interest held by non-controlling interests 49% 49% 49% 49% 49.9% Current assets 41,196 43,707 21,173 6,664 19,689 Non-current assets ,396 2,118 4,650 Current liabilities (10,442) (12,655) (19,274) (3,642) (2,634) Net assets 30,820 31,146 3,295 5,140 21,705 Carrying amount of non-controlling interests 15,102 15,262 1,615 2,519 10,831 For the year ended 31 March Revenue 49,363 28,613 10, ,077 Profit/(loss) for the year 454 (4,885) (1,640) (1,109) (1,544) Total comprehensive income (328) (4,885) (1,846) (1,109) (1,544) Profit/(loss) allocated to non-controlling interests 223 (2,394) (804) (543) (771) Cash flows generated from/ (used in) operating activities Cash flows generated from/ (used in) investing activities Cash flows generated from financing activities 6,004 (3,185) (733) (3,880) (61) (2,235) 1,316 6,247 Net cash inflows/(outflows) 6,036 (3,146) SPARKLE ROLL GROUP LIMITED 163

165 For the year ended 31 March FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS 38. The Group is exposed to financial risks through its use of financial instruments in its ordinary course of operations. The financial risks included market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. Financial risk management is coordinated at the Group s headquarters, in close co-operation with the board of directors. The overall objectives in managing financial risks focus on securing the Group s short to medium term cash flows by minimising its exposure to financial markets. It is not the Group s policy to engage in the trading of financial instruments for speculative purposes. 164 SPARKLE ROLL GROUP LIMITED

166 For the year ended 31 March FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS (Continued) Categories of financial instruments 38.1 The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows: HK$ 000 HK$ 000 Financial assets Loans and receivables Rental deposits paid to a related party 17,554 18,181 Trade receivables 8, Other receivables 89, ,576 Amounts due from related parties 18,677 19,410 Amount due from a non-controlling interest 11,601 Pledged deposits 55, ,470 Cash at banks and in hand 157,164 63, , ,190 SPARKLE ROLL GROUP LIMITED 165

167 For the year ended 31 March FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS (Continued) Categories of financial instruments (Continued) HK$ 000 HK$ 000 Financial liabilities Financial liabilities at fair value through profit or loss Derivative financial instruments 3,880 Financial liabilities measured at amortised cost: Trade payables 27,444 24,065 Accrued charges and other payables 25,521 17,163 Amount due to a non-controlling interest 1,284 Borrowings 488,740 1,145, ,989 1,190, SPARKLE ROLL GROUP LIMITED

168 For the year ended 31 March FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS (Continued) Foreign currency risk 38.2 Foreign currency risk refers to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group mainly operates in Hong Kong, Mainland China and Malaysia with most of the transactions denominated and settled in HK$, EUR, CHF, RMB and US$. The Group s exposure to foreign currency risk primarily arises from certain financial instruments including trade and other receivables, rental deposits paid to a related party, amount due from a related party, trade and other payables, derivative financial instruments and borrowings which are denominated in currencies other than the functional currency of the respective group entities, including EUR, CHF, RMB and US$. During both years, the Group did not have foreign currency hedging policy but management continuously monitors foreign exchange exposure. SPARKLE ROLL GROUP LIMITED 167

169 For the year ended 31 March FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS (Continued) Foreign currency risk (Continued) 38.2 Foreign currency denominated financial assets and financial liabilities, translated into HK$ at the prevailing closing rates at the end of the reporting period, are as follows: Financial assets Financial liabilities Net exposure Financial assets Financial liabilities Notional amounts of derivative financial instruments Net exposure HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 EUR 20 (2,673) (2,653) 34 (3,266) 20,538 17,306 CHF 168 (2,634) (2,466) 44 (12,478) (12,434) RMB 83,376 83,376 21,697 21,697 US$ 12,791 12, (2,703) (2,491) Sensitivity analysis As US$ is pegged to HK$, the Group does not expect any significant movement in the HK$/US$ exchange rate. No sensitivity analysis in respect of the Group s financial assets and financial liabilities denominated in US$ is disclosed as in the opinion of directors of the Company, such sensitivity analysis does not give additional value in view of insignificant movement in the US$/HK$ exchange rates at the end of the reporting period. The following table illustrates the sensitivity of the Group s results for the years and retained profits in regards to a 5% (2015: 5%) appreciation in HK$ against EUR, CHF and RMB respectively. The 5% is the rate used when reporting foreign currency risk internally to key management personnel and represents management s best assessment of the possible change in foreign exchange rates. 5% 5%5% 168 SPARKLE ROLL GROUP LIMITED

170 For the year ended 31 March FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS (Continued) Foreign currency risk (Continued) 38.2 Sensitivity analysis (Continued) Results for the year and retained profits HK$ 000 HK$ 000 EUR 111 (865) CHF RMB (3,771) (1,055) The sensitivity analysis of the Group s exposure to foreign currency risk at the end of the reporting period has been determined based on the assumed percentage changes in foreign currency exchange rates taking place at the beginning of the financial years and held constant throughout the year. A 5% depreciation in HK$ against EUR, CHF, and RMB would have the same magnitude on the Group s results for the year and retained profits but of opposite effect. 5% Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nevertheless, the analysis above is considered to be representative of the Group s exposure to foreign currency risk. SPARKLE ROLL GROUP LIMITED 169

171 For the year ended 31 March FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS (Continued) Interest rate risk 38.3 Interest rate risk relates to the risk that the fair value or cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group s interest rate risk arises primarily from bank deposits (Note 24) and borrowings (Note 28). The Group has not used any derivative contracts in order to hedge its exposure to interest rate risk. The Group has not formulated a policy to manage the interest rate risk The following table illustrates the sensitivity of the Group s results for the year ended 31 March 2016 to a possible change in interest rates of +/-0.5% (2015: +/-0.5%), with effect from the beginning of the year. The calculations are based on the Group s financial assets and financial liabilities held at the end of the reporting period. All other variables are held constant. +/-0.5% +/-0.5% Results for the year and retained profits HK$ % -0.5% (628) (967) 170 SPARKLE ROLL GROUP LIMITED

172 For the year ended 31 March FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS (Continued) Credit risk 38.4 Credit risk refers to the risk that the counterparty to a financial instrument would fail to discharge its obligation under the terms of the financial instrument and cause a financial loss to the Group. The Group s exposure to credit risk mainly arises from granting credit to its customers and other counterparties in the ordinary course of its operation. The Group trades mainly with recognised and creditworthy third parties. It is the Group s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group s exposure to bad debts is not significant. Further detailed exposure to credit risk on trade receivables of the Group is disclosed in note All the Group s bank balances are deposited with major banks located in Hong Kong, Malaysia and Mainland China. None of the financial assets of the Group are secured by collateral or other credit enhancements. There are no significant concentrations of credit risk within the Group as at 31 March 2015 and The Group s concentration of credit risk by geographical locations is mainly in Mainland China and Hong Kong as at both year-ends. SPARKLE ROLL GROUP LIMITED 171

173 For the year ended 31 March FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS (Continued) Liquidity risk 38.5 Liquidity risk relates to the risk that the Group will not be able to meet its obligations associated with its financial liabilities. The Group is exposed to liquidity risk in respect of settlement of trade payables and its financing obligations, and also in respect of its cash flow management. The Group s objective is to maintain an appropriate level of liquid assets and committed lines of funding to meet its liability requirements in the short and longer term. The Group manages the liquidity needs on a consolidated basis by carefully monitoring scheduled debt servicing payments for long term financial liabilities as well as forecast cash inflows and outflows due in day to day business. Analysed below is the Group s remaining contractual maturities for the non-derivative financial liabilities at the end of the reporting period. When the creditor has a choice of when the liability is settled, the liability is included on the basis of the earliest date on which the Group can be required to pay. Where the settlement of the liability is in instalments, each instalment is allocated to the earliest period in which the Group is committed to pay. 172 SPARKLE ROLL GROUP LIMITED

174 For the year ended 31 March FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS (Continued) Liquidity risk (Continued) 38.5 The analysis is based on the undiscounted cash flows of the financial liabilities. At 31 March 2016 Non-derivative financial instruments: Carrying amount Total contractual undiscounted cash flow Less than one year or repayable on demand One year or above HK$ 000 HK$ 000 HK$ 000 HK$ 000 Trade payables 27,444 27,444 27,444 Accrued charges and other payables Amount due to a noncontrolling interest 25,521 25,521 25, ,284 1,284 1,284 Borrowings 488, , , , , , At 31 March 2015 Non-derivative financial instruments: Trade payables 24,065 24,065 24,065 Accrued charges and other payables 17,163 17,163 16, Borrowings 1,145,364 1,164,096 1,164,096 1,186,592 1,205,324 1,204, SPARKLE ROLL GROUP LIMITED 173

175 For the year ended 31 March FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS (Continued) Fair value measurements recognised in the consolidated statement of financial position 38.6 The fair values of rental deposits paid to a related party, trade and other receivables, balances with related parties and subsidiaries, pledged deposits, cash at banks and in hand, trade payables, accrued charges and other payables and borrowings approximate to their carrying amounts largely due to the short term maturities of these instruments. The fair values of other payables have been calculated by discounting the expected future cash flows using the rates currently available for instruments on similar terms, credit risk and remaining maturities. As at 31 March 2015, the Group had foreign currency forward contracts with a creditworthy bank in Hong Kong. These foreign currency forward contracts are measured using valuation techniques similar to a forward pricing model, with the resulting value discounted back to present value. The models incorporate various market observable inputs including the credit quality of counterparties, and foreign exchange spot and forward rates. The carrying amounts of these foreign currency forward contracts are the same as their fair values. The derivatives entered into by the Group are included in Level SPARKLE ROLL GROUP LIMITED

176 For the year ended 31 March FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS (Continued) Fair value measurements recognised in the consolidated statement of financial position (Continued) 38.6 Fair value hierarchy The following table presents financial liabilities measured at fair value in the consolidated statement of financial position in accordance with the fair value hierarchy. The hierarchy groups financial liabilities into three levels based on the relative reliability of significant inputs used in measuring the fair value of these financial liabilities. The fair value hierarchy has the following levels: Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). The level in the fair value hierarchy within which the financial liability is categorised in its entirety is based on the lowest level of input that is significant to the fair value measurement. SPARKLE ROLL GROUP LIMITED 175

177 For the year ended 31 March FINANCIAL RISK MANAGEMENT AND FAIR VALUE MEASUREMENTS (Continued) Fair value measurements recognised in the consolidated statement of financial position (Continued) 38.6 Fair value hierarchy (Continued) Valuation for the financial instruments is prepared at the end of each reporting period and is reviewed and approved by the directors. The financial liabilities measured at fair value in the consolidated statement of financial position are grouped into the fair value hierarchy as follows: Level 1 Level 2 Level 3 Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 As at 31 March 2015 Liabilities Derivative financial instruments 3,880 3,880 There have been no significant transfers between Levels 1 and 2 and no transfers into or out of Level 3 during the years. The methods and valuation techniques used for the purpose of measuring fair value are unchanged compared to previous reporting periods. 176 SPARKLE ROLL GROUP LIMITED

178 For the year ended 31 March CAPITAL MANAGEMENT 39. The primary objective of the Group s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholders value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year. The Group monitors capital using a gearing ratio, which is total debt divided by total capital. Total debt is calculated as borrowings, as shown in the consolidated statement of financial position. Total capital is calculated as total equity, as shown in the consolidated statement of financial position. The Group aims to maintain the gearing ratio at a reasonable level HK$ 000 HK$ 000 Total debt Borrowings 488,740 1,145,364 Total capital 1,083,726 1,130,345 Gearing ratio 45.1% 101.3% SPARKLE ROLL GROUP LIMITED 177

179 For the year ended 31 March STATEMENT OF FINANCIAL POSITION OF THE COMPANY HK$ 000 HK$ 000 ASSETS AND LIABILITIES Non-current assets Interests in subsidiaries Current assets Amounts due from subsidiaries 819, ,280 Deposits and other receivable Pledged deposits 3,664 Cash at banks , ,628 Current liabilities Accrued charges and other payables 1,523 1,470 Amounts due to subsidiaries 10,859 Provision for taxation 87 1,523 12,416 Net current assets 819, ,212 Total assets less current liabilities 819, ,212 Net assets 819, ,212 EQUITY Share capital (note (a)) (a) 5,959 5,959 Reserves (note (b)) (b) 813, ,253 Total equity 819, ,212 Approved and authorised for issue by the board of directors on 23 June 2016 and signed on its behalf by: Tong Kai Lap Director Zheng Hao Jiang Director 178 SPARKLE ROLL GROUP LIMITED

180 For the year ended 31 March STATEMENT OF FINANCIAL POSITION OF THE COMPANY (Continued) Notes: 40. (a) Particulars and movement of the Company s share capital for both years have been set out in note 30 (a) 30 (b) A summary of the Company s reserves is as follows: (b) Share Capital Share option Contributed Accumulated premium reserve reserve surplus* losses Total * HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 At 1 April ,335 3,508 1,309 78,821 (66,635) 816,338 Profit and total comprehensive income for the year 10,915 10,915 Lapse of share options (1,309) 1,309 At 31 March 2015 and 1 April ,335 3,508 80,130 (55,720) 827,253 Loss and total comprehensive income for the year (13,939) (13,939) At 31 March ,335 3,508 80,130 (69,659) 813,314 * The contributed surplus of the Company consists of (i) HK$51,286,000 being the difference between the underlying consolidated net assets of Global Food Culture Group Limited and its subsidiaries and the nominal value of the Company s shares which were issued under a group reorganisation in 1997; and (ii) those as described in the sub-note headed Contributed Surplus under note 31. * (i)global Food Culture Group Limited 51,286,000 (ii)31 SPARKLE ROLL GROUP LIMITED 179

181 Financial Summary RESULTS HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Revenue 4,427,423 3,015,555 3,161,848 2,605,701 2,376,904 Profit/(loss) for the year attributable to owners of the Company 214,188 66,304 18,951 (455,685) (32,328) ASSETS AND LIABILITIES HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 Total assets 1,922,865 2,373,296 2,433,612 2,410,514 1,735,506 Total liabilities (465,891) (727,762) (842,163) (1,280,169) (651,780) 1,456,974 1,645,534 1,591,449 1,130,345 1,083,726 Equity attributable to owners of the Company 1,452,227 1,605,501 1,573,571 1,112,564 1,056,178 Non-controlling interests 4,747 40,033 17,878 17,781 27,548 1,456,974 1,645,534 1,591,449 1,130,345 1,083, SPARKLE ROLL GROUP LIMITED

182 Sparkle Roll Group Limited 耀 萊 集 團 有 限 公 司 (Incorporated in Bermuda with limited liability 於百慕達註冊成立之有限公司) (Stock Code 股份代號: 970) 970 Annual Report 2016 年 報 2016 年報 Annual Report * for identification purpose only 僅供識別