Transcription

1 2016 ANNUAL REPORT

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4 Cricket Square Hutchins Drive P.O. Box 2681 Grand Cayman KY Cayman Islands 70 B Maples Fund Services (Cayman) Limited P.O. Box 1093, Boundary Hall Cricket Square, Grand Cayman KY Cayman Islands Eagle Nice (International) Holdings Limited Annual Report 2016

5 1,535 1, ,559 1, ,099 1, , ,535 1, ,484 1, Annual Report 2016 Eagle Nice (International) Holdings Limited 33

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7 % ,900,000442,300, % Annual Report 2016 Eagle Nice (International) Holdings Limited 35

8 % 1,534,600,000 20% %1.3% 8.2%19.0% 125,100, NIKE The North Face Nike The North Face Eagle Nice (International) Holdings Limited Annual Report 2016

9 (Eagle Nice-er) Annual Report 2016 Eagle Nice (International) Holdings Limited 37

10 36.5% 13.4% 28.8% Eagle Nice (International) Holdings Limited Annual Report 2016

11 1,534,600,000 1,517,100, % 306,900,000266,000, %2.5% 20%16.8% 152,200, ,300,0008.6% 1.3% 9.9% 1,000, % 1.2% 1.2% 8,300, % 600, % 21,900, % 1,900, % 17.8% 19.3%1.5% 11,100,0008,900,000 2,500,000 1,800,000 1,400,0001,800,000 4,700,000 2,800,000 10,000,000 2,600,000 5,200, ,100, ,200, % 6.9%1.3% 8.2% % 59% Annual Report 2016 Eagle Nice (International) Holdings Limited 39

12 255,400, ,400, ,400, ,900, ,500, ,700, ,035 1, , ,252 4,675 29,091 1,550 20,584 4,462 12,595 62,270 6, ,400, ,900, ,500, ,700, Eagle Nice (International) Holdings Limited Annual Report 2016

13 8,8008, ,800, ,500,000 Annual Report 2016 Eagle Nice (International) Holdings Limited 41

14 World Friendship Company Limited 42 Eagle Nice (International) Holdings Limited Annual Report 2016

15 Annual Report 2016 Eagle Nice (International) Holdings Limited 43

16 ,534,592 1,517,109 1,483,774 1,443,994 1,445, , ,311 37,232 94, ,335 (27,057) (25,128) (15,362) (21,568) (32,148) 125, ,183 21,870 73, , , , , , , , , , , ,033 (439,152) (462,019) (526,636) (607,638) (632,731) 340, , , , ,302 (20,017) (19,871) (16,999) (16,528) (21,592) 1,099,350 1,087,531 1,011,917 1,015,482 1,022, Eagle Nice (International) Holdings Limited Annual Report 2016

17 751,751,000751,751, ,674, %55.6% 42.2%13.1% 5% Annual Report 2016 Eagle Nice (International) Holdings Limited 45

18 87(1) Eagle Nice (International) Holdings Limited Annual Report 2016

19 571 XV XV ,650, ,038, ,100, ,450, Time Easy Investment Holdings LimitedTime EasyTime Easy 352 Annual Report 2016 Eagle Nice (International) Holdings Limited 47

20 XV Time Easy 72,650, ,000, Wealthplus Holdings Limited ( Wealthplus ) 192,000, ,000, Pou Hing Industrial Co. Ltd. ( Pou Hing ) 192,000, Great Pacific Investments Limited ( Great Pacific ) 192,000, Time Easy ,000,000Great PacificPou HingGreat PacificPou HingWealthplus Win Fortune Investment Ltd. Win Fortune46.89% 3.09%Wealthplus Win FortunePou Hing Wealthplus Win Fortune Great Pacific192,000, % 48 Eagle Nice (International) Holdings Limited Annual Report 2016

21 Din Tsun Holding Co., Ltd. Din Tsun2 Faith Year Investments Limited Faith Year2 Pro Kingtex Industrial Co., (HK) Ltd. Pro Kingtex Din Tsun Din TsunFaith Year70% 30%Faith YearPro Kingtex Din TsunDin Tsun Pro KingtexDin TsunDin Tsun Din Tsun Faith Year Pro Kingtex Din TsunPro KingtexDin Tsun Din Tsun Pro KingtexDin Tsun Pro Kingtex 14 Annual Report 2016 Eagle Nice (International) Holdings Limited 49

22 ( (i)(ii) (iii) 50 Eagle Nice (International) Holdings Limited Annual Report 2016

23 Annual Report 2016 Eagle Nice (International) Holdings Limited 51

24 1. a. 7/7 1/1 6/6 1/1 6/6 1/1 6/6 1/1 7/7 1/1 7/7 1/1 7/7 0/1 b A Eagle Nice (International) Holdings Limited Annual Report 2016

25 1. c. d. A.2.1 e. f. 10 g. h. Annual Report 2016 Eagle Nice (International) Holdings Limited 53

26 1. h. A,C A,C A,C A,B,C A,B,C A,C A,C A: B: C: i. 14 j k. 54 Eagle Nice (International) Holdings Limited Annual Report 2016

27 2. a. B.1.2(c)(ii) 5/5 5/5 5/5 B.1.5 1,000, ,000,0011,500, ,500,0012,000, ,000,0012,500, ,500,0013,000, ,000,0013,500, b. Annual Report 2016 Eagle Nice (International) Holdings Limited 55

28 2. b. i) ii) iii) iv) 3/3 3/3 3/3 c. (i) (ii) (iii) (iv) 56 Eagle Nice (International) Holdings Limited Annual Report 2016

29 2. c. 1/1 1/1 1/1 3. a. 59 b. c. 2, ,552 Annual Report 2016 Eagle Nice (International) Holdings Limited 57

30 4. a. 58 b. c Eagle Nice (International) Holdings Limited Annual Report 2016

31 Annual Report 2016 Eagle Nice (International) Holdings Limited 59

32 Consolidated Income Statement Year ended Notes REVENUE 5 1,534,592 1,517,109 Cost of sales (1,227,650) (1,251,158) Gross profit 306, ,951 Other income and gains 5 11,052 8,925 Selling and distribution expenses (18,651) (17,698) Administrative expenses (129,129) (120,794) Fair value changes on derivative financial instruments, net (9,980) (2,578) Loss on deregistration of a subsidiary (5,169) Finance costs 6 (2,879) (3,495) PROFIT BEFORE TAX 7 152, ,311 Income tax expense 10 (27,057) (25,128) PROFIT FOR THE YEAR ATTRIBUTABLE TO OWNERS OF THE COMPANY 125, ,183 EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY 12 HK cents HK cents Basic Diluted Eagle Nice (International) Holdings Limited Annual Report 2016

33 Consolidated Statement of Comprehensive Income Year ended PROFIT FOR THE YEAR 125, ,183 OTHER COMPREHENSIVE INCOME/(EXPENSE) Other comprehensive income/(expense) not to be reclassified to profit or loss in subsequent periods: Actuarial gain/(loss) on a defined benefit plan 666 (277) Other comprehensive income/(expense) may be reclassified to profit or loss in subsequent periods: Exchange differences on translation of foreign operations Realisation of exchange fluctuation reserve upon deregistration of a subsidiary (28,490) 688 6,955 (21,535) 688 OTHER COMPREHENSIVE INCOME/(EXPENSE) FOR THE YEAR, NET OF TAX (20,869) 411 TOTAL COMPREHENSIVE INCOME FOR THE YEAR AND ATTRIBUTABLE TO OWNERS OF THE COMPANY 104, ,594 Annual Report 2016 Eagle Nice (International) Holdings Limited 61

34 Consolidated Statement of Financial Position Notes NON-CURRENT ASSETS Property, plant and equipment , ,335 Prepaid land lease payments 14 65,587 72,407 Goodwill 16 26,112 26,112 Deposits 15 23,367 Total non-current assets 778, ,854 CURRENT ASSETS Inventories , ,899 Accounts and bills receivables , ,192 Prepayments, deposits and other receivables 15 52,952 47,327 Available-for-sale investments 19 63,750 Cash and cash equivalents , ,399 Total current assets 779, ,567 CURRENT LIABILITIES Accounts payable , ,090 Accrued liabilities and other payables 23 84,304 86,612 Derivative financial instruments 24 9,110 Interest-bearing bank borrowings , ,621 Tax payable 23,525 23,586 Total current liabilities 439, ,019 NET CURRENT ASSETS 340, ,548 TOTAL ASSETS LESS CURRENT LIABILITIES 1,119,367 1,107,402 NON-CURRENT LIABILITIES Pension scheme obligation 26 6,239 4,446 Deferred tax liabilities 27 13,778 15,425 Total non-current liabilities 20,017 19,871 Net assets 1,099,350 1,087,531 EQUITY Equity attributable to owners of the Company Issued capital 28 4,997 4,997 Reserves 29 1,094,353 1,082,534 Total equity 1,099,350 1,087,531 CHUNG YUK SING Director CHEN HSIAO YING Director 62 Eagle Nice (International) Holdings Limited Annual Report 2016

35 Consolidated Statement of Changes in Equity Year ended Attributable to owners of the Company Note Issued capital Share premium account Capital reserve Statutory surplus reserve Exchange fluctuation reserve Retained profits Total (Note 29) (Note 29) At 1 April , ,586 (229) 37, , ,438 1,011,917 Profit for the year 105, ,183 Other comprehensive income/(expense) for the year: Actuarial loss on a defined benefit plan (277) (277) Exchange differences on translation of foreign operations Total comprehensive income for the year , ,594 Transfer to reserve 8,158 (8,158) Interim 2015 dividend 11 (29,980) (29,980) At 31 March , ,586* (229)* 45,886* 112,085* 452,206* 1,087,531 At 1 April , ,586 (229) 45, , ,206 1,087,531 Profit for the year 125, ,129 Other comprehensive income/(expense) for the year: Actuarial gain on a defined benefit plan Exchange differences on translation of foreign operations (28,490) (28,490) Realisation of exchange fluctuation reserve upon deregistration of a subsidiary (note 30) 30 6,955 6,955 Total comprehensive income/(expense) for the year (21,535) 125, ,260 Transfer to reserve 13,571 (13,571) Transfer to statutory reserve upon deregistration of a subsidiary (809) 809 Final 2015 dividend 11 (32,479) (32,479) Interim 2016 dividend 11 (59,962) (59,962) At 4, ,586* (229)* 58,648* 90,550* 472,798* 1,099,350 * These reserve accounts comprise the consolidated reserves of HK$1,094,353,000 (31 March 2015: HK$1,082,534,000) in the consolidated statement of financial position. * 1,094,353,000 1,082,534,000 Annual Report 2016 Eagle Nice (International) Holdings Limited 63

36 Consolidated Statement of Cash Flows Year ended Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax 152, ,311 Adjustments for: Finance costs 6 2,879 3,495 Bank interest income 5 (2,497) (1,821) Write-off of items of property, plant and equipment 7 26 Fair value losses on derivative financial instruments, net 7 9,980 2,578 Depreciation 7 52,454 60,539 Amortisation of prepaid land lease payments 7 2,285 2,337 Gain on disposal of items of property, plant and equipment 5 (773) (268) Gain on disposal of prepaid land lease payments 5 (1,159) Loss on deregistration of a subsidiary 7 5, , ,197 Increase in inventories (94,053) (5,624) Decrease in accounts and bills receivables 12,669 10,071 Increase in prepayments, deposits and other receivables (5,894) (19,463) Increase in accounts payable 28,333 8,978 Increase/(decrease) in accrued liabilities and other payables (1,499) 5,246 Increase in pension scheme liabilities 2,502 2,271 Settlement of pension scheme liabilities (32) Cash generated from operations 162, ,676 Interest paid (2,879) (3,495) Dividends paid (92,441) (29,980) Hong Kong profits tax paid (14,487) (1,928) Overseas tax paid (12,250) (8,311) Net cash flows from operating activities 40, ,962 CASH FLOWS FROM/(USED IN) INVESTING ACTIVITIES Proceeds from disposal of items of property, plant and equipment, net 1, Proceeds from disposal of prepaid land lease payments 2,861 Purchases of items of property, plant and equipment (24,758) (18,931) Movements in derivative financial instruments, net (19,090) 6,532 Movements in available-for-sale investments 63,750 (63,750) Interest received 2,497 1,821 Increase in non-current portion of deposits (23,367) Net cash flows from/(used in) investing activities 3,722 (73,895) 64 Eagle Nice (International) Holdings Limited Annual Report 2016

37 Consolidated Statement of Cash Flows (Continued) Year ended Notes CASH FLOWS USED IN FINANCING ACTIVITY Repayment of bank loans, net (39,721) (101,775) Net cash flows used in financing activity (39,721) (101,775) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 4,494 (20,708) Cash and cash equivalents at beginning of year 255, ,565 Effect of foreign exchange rate changes, net (4,480) (458) CASH AND CASH EQUIVALENTS AT END OF YEAR 255, ,399 ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTS Cash and bank balances , ,619 Non-pledged time deposits with original maturity of less than three months when acquired 20 14,824 58,780 Cash and cash equivalents 255, ,399 Annual Report 2016 Eagle Nice (International) Holdings Limited 65

38 Notes to Financial Statements 1. CORPORATE AND GROUP INFORMATION The Company is a limited liability company incorporated in the Cayman Islands. The registered office address of the Company is Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, the Cayman Islands. The principal place of business of the Company is located at Units and , 9/F, Tower B, Regent Centre, 70 Ta Chuen Ping Street, Kwai Chung, New Territories, Hong Kong. The Group s principal activities are the manufacture and trading of sportswear and garments. Information about subsidiaries Particulars of the Company s principal subsidiaries are as follows: 1. Cricket Square, Hutchins Drive, P.O. Box 2681, Grand Cayman KY1-1111, the Cayman Islands 70B Name Place of incorporation/ registration and business Issued share/ paid-up registered capital Percentage of equity attributable to the Company Principal activities Eagle Nice (EAG) Limited Hong Kong Ordinary HK$2; Non-voting deferred HK$10,000 (Note (a)) (2015: Ordinary HK$2; Non-voting deferred HK$10,000) 2 10,000(a) 2 10, Investment holding ( YM (Shantou) ) (Notes (b) and (c)) (b) (c) ( YY (Shantou) ) (Notes (b) and (c)) (b) (c) The People s Republic of China ( PRC )/ Mainland China PRC/ Mainland China US$23,500,000 (2015: US$23,500,000) 23,500,000 23,500,000 HK$15,000,000 (2015: HK$15,000,000) 15,000,000 15,000, Manufacture and trading of sportswear and garments Manufacture and trading of sportswear and garments 66 Eagle Nice (International) Holdings Limited Annual Report 2016

39 1. CORPORATE AND GROUP INFORMATION (Continued) Information about subsidiaries (Continued) 1. Name Place of incorporation/ registration and business Issued share/ paid-up registered capital Percentage of equity attributable to the Company Principal activities Eagle Nice Development Limited Hong Kong HK$1 (2015: HK$1) Manufacture and trading of sportswear and garments Yue Mei (HK) Garment Limited Hong Kong HK$1 (2015: HK$1) Manufacture and trading of sportswear and garments Maitex (EAG) Limited Hong Kong HK$1,000 (2015: HK$1,000) 1,000 1, Manufacture and trading of sportswear and garments ( Maitex PRC ) (Notes (b) and (c)) (b) (c) PRC/Mainland China HK$40,000,000 (2015: HK$40,000,000) 40,000,000 40,000, Manufacture and trading of sportswear and garments King Eagle (EAG) Limited Hong Kong HK$1 (2015: HK$1) Manufacture and trading of sportswear and garments ( KE (Shantou) ) (Notes (b), (c) and (d)) (b) (c) (d) PRC/Mainland China US$2,680,000 (2015: US$2,680,000) 2,680,000 2,680, Manufacture and trading of sportswear and garments ( Hung Eagle Garment ) (Notes (b) and (c)) (b) (c) PRC/Mainland China US$4,000,000 (2015: US$4,000,000) 4,000,000 4,000, Manufacture and trading of sportswear and garments Annual Report 2016 Eagle Nice (International) Holdings Limited 67

40 1. CORPORATE AND GROUP INFORMATION (Continued) Information about subsidiaries (Continued) 1. Name Place of incorporation/ registration and business Issued share/ paid-up registered capital Percentage of equity attributable to the Company Principal activities Eagle Nice (Indonesia) Holdings Limited Hong Kong HK$1 (2015: HK$1) Investment holding P.T. Eagle Nice Indonesia ( EN Indonesia ) Indonesia US$30,000,000 (2015: US$30,000,000) 30,000,000 30,000, Manufacture and trading of sportswear and garments Eagle Nice (Jiangxi) Garment Limited Hong Kong HK$10,000 (2015: HK$10,000) 10,000 10, Investment holding ( EN (Yifeng) ) (Notes (b) and (c)) (b) (c) PRC/Mainland China US$25,000,000 (2015: US$25,000,000) 25,000,000 25,000, Manufacture and trading of sportswear and garments Notes: (a) The non-voting deferred shares carry no rights to dividends, no rights to attend or vote at general meetings and no rights to receive any surplus assets in a return of capital in a winding-up (other than the nominal amount paid up or credited as paid-up on such shares, after the sum of HK$100,000,000,000,000 per ordinary share has been distributed to the holders of the ordinary shares of the company in such winding-up). (a) 100,000,000,000,000 (b) YM (Shantou), YY (Shantou), Maitex PRC, KE (Shantou), Hung Eagle Garment and EN (Yifeng) are registered as wholly-foreign-owned enterprises under PRC law. (b) (c) The statutory financial statements of these entities are not audited by Ernst & Young, Hong Kong or another member firm of the Ernst & Young global network. (c) (d) Pursuant to an approval of deregistration issued by the local authority, KE (Shantou) was deregistered during the year. Details of the deregistration was set out in note 30. (d) 30 All of the above subsidiaries are indirectly held by the Company. 68 Eagle Nice (International) Holdings Limited Annual Report 2016

41 1. CORPORATE AND GROUP INFORMATION (Continued) Information about subsidiaries (Continued) The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length BASIS OF PREPARATION These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ( HKASs ) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. These financial statements have been prepared under the historical cost convention, except for derivative financial instruments which have been measured at fair value. These financial statements are presented in Hong Kong dollars ( HK$ ) and all values are rounded to the nearest thousand except when otherwise indicated. Basis of consolidation The consolidated financial statements include the financial statements of the Company and its subsidiaries (collectively referred to as the Group ) for the year ended. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee). When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: 2.1 (a) the contractual arrangement with the other vote holders of the investee; (a) (b) rights arising from other contractual arrangements; and (b) (c) the Group s voting rights and potential voting rights. (c) Annual Report 2016 Eagle Nice (International) Holdings Limited 69

42 2.1 BASIS OF PREPARATION (Continued) Basis of consolidation (Continued) The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the noncontrolling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control described in the accounting policy for subsidiaries above. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value of the consideration received, (ii) the fair value of any investment retained and (iii) any resulting surplus or deficit in profit or loss. The Group s share of components previously recognised in other comprehensive income is reclassified to profit or loss or retained profits, as appropriate, on the same basis as would be required if the Group had directly disposed of the related assets or liabilities. 2.1 (i) (ii) (iii)(i) (ii) (iii) 2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES The Group has adopted the following revised standards for the first time for the current year s financial statements. Amendments to HKAS 19 Defined Benefit Plans: Employee Contributions Annual Improvements to HKFRSs Cycle Annual Improvements to HKFRSs Cycle Eagle Nice (International) Holdings Limited Annual Report 2016

43 2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES (Continued) The adoption of the above revised standards has had no significant financial effect on these financial statements other than as described below: 2.2 (a) Amendments to HKAS 19 apply to contributions from employees or third parties to defined benefit plans. The amendments simplify the accounting for contributions that are independent of the number of years of employee service, for example, employee contributions that are calculated according to a fixed percentage of salary. If the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction of service cost in the period in which the related service is rendered. The amendments have had no impact on the Group as the Group does not have contributions from employees or third parties to its defined benefit plan. (a) 19 (b) Annual Improvements to HKFRSs Cycle: HKAS 24 Related Party Disclosures: Clarifies that a management entity (i.e., an entity that provides key management personnel services) is a related party subject to related party disclosure requirements. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. The amendment has had no impact on the Group as the Group does not receive any management services from other entities. (b) 24 In addition, the Company has adopted the amendments to the Rules Governing the Listing of Securities (the Listing Rules ) on The Stock Exchange of Hong Kong Limited (the Stock Exchange ) issued by the Stock Exchange 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. 622 Annual Report 2016 Eagle Nice (International) Holdings Limited 71

44 2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements. 2.3 HKFRS 9 Financial Instruments 2 Amendments to HKFRS 10 and HKAS 28 (2011) Amendments to HKFRS 10, HKFRS 12 and HKAS 28 (2011) Amendments to HKFRS 11 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 5 Investment Entities: Applying the Consolidation Exception 1 Accounting for Acquisitions of Interests in Joint Operations 1 HKFRS 14 Regulatory Deferral Accounts 4 HKFRS 15 Revenue from Contracts with Customers 2 HKFRS 16 Leases 3 Amendments to HKAS 1 Disclosure Initiative 1 Amendments to HKAS 16 and HKAS 38 Amendments to HKAS 16 and HKAS 41 Amendments to HKAS 27 (2011) Annual Improvements Cycle Clarification of Acceptable Methods of Depreciation and Amortisation 1 Agriculture: Bearer Plants 1 Equity Method in Separate Financial Statements 1 Amendments to a number of HKFRSs Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January Effective for an entity that first adopts HKFRSs for its annual financial statements beginning on or after 1 January 2016 and therefore is not applicable to the Group 5 No mandatory effective date yet determined but available for adoption Eagle Nice (International) Holdings Limited Annual Report 2016

45 2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS (Continued) HKFRS 15 establishes a new five-step model to account for revenue arising from contracts with customers. Under HKFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in HKFRS 15 provide a more structured approach for measuring and recognising revenue. The standard also introduces extensive qualitative and quantitative disclosure requirements, including disaggregation of total revenue, information about performance obligations, changes in contract asset and liability account balances between periods and key judgements and estimates. The standard will supersede all current revenue recognition requirements under HKFRSs. In September 2015, the HKICPA issued an amendment to HKFRS 15 regarding a one-year deferral of the mandatory effective date of HKFRS 15 to 1 January The Group expects to adopt HKFRS 15 on 1 April 2018 and is currently assessing the impact of HKFRS 15 upon adoption. The Group is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application but is not yet in a position to state whether these new and revised HKFRSs would have a significant impact on the Group s results of operations and financial position SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business combinations and goodwill Business combinations are accounted for using the acquisition method. The consideration transferred is measured at the acquisition date fair value which is the sum of the acquisition date fair values of assets transferred by the Group, liabilities assumed by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation at fair value or at the proportionate share of the acquiree s identifiable net assets. All other components of noncontrolling interests are measured at fair value. Acquisition-related costs are expensed as incurred. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts of the acquiree. 2.4 Annual Report 2016 Eagle Nice (International) Holdings Limited 73

46 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Business combinations and goodwill (Continued) If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in the income statement. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability is measured at fair value with changes in fair value recognised in the income statement. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity. Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests and any fair value of the Group s previously held equity interests in the acquiree over the identifiable net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net assets acquired, the difference is, after reassessment, recognised in the income statement as a gain on bargain purchase. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The Group performs its annual impairment test of goodwill as at 31 March. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cashgenerating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. An impairment loss recognised for goodwill is not reversed in a subsequent period. Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based on the relative value of the operation disposed of and the portion of the cash-generating unit retained Eagle Nice (International) Holdings Limited Annual Report 2016

47 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fair value measurement The Group measures its derivative financial instruments at fair value at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: Level 1 based on quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly Level 3 based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. 2.4 Annual Report 2016 Eagle Nice (International) Holdings Limited 75

48 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment of non-financial assets Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than inventories, financial assets and goodwill), the asset s recoverable amount is estimated. An asset s recoverable amount is the higher of the asset s or cash-generating unit s value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the income statement in the period in which it arises in those expense categories consistent with the function of the impaired asset. An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the income statement in the period in which it arises. Related parties A party is considered to be related to the Group if: 2.4 (a) the party is a person or a close member of that person s family and that person (a) (i) has control or joint control over the Group; (i) (ii) has significant influence over the Group; or (ii) (iii) is a member of the key management personnel of the Group or of a parent of the Group; (iii) or 76 Eagle Nice (International) Holdings Limited Annual Report 2016

49 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Related parties (Continued) (b) the party is an entity where any of the following conditions applies: 2.4 (b) (i) the entity and the Group are members of the same group; (i) (ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity); (ii) (iii) the entity and the Group are joint ventures of the same third party; (iii) (iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity; (iv) (v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group; (v) (vi) the entity is controlled or jointly controlled by a person identified in (a); (vi) (a) (vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and (vii) (a)(i) (viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the parent of the Group. (viii) Annual Report 2016 Eagle Nice (International) Holdings Limited 77

50 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property, plant and equipment and depreciation Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. 2.4 Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly. Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows: Leasehold land under finance Over the lease terms leases Buildings Over the lease terms Leasehold improvements Over the shorter of the lease terms or 20% Plant and machinery 10% to 20% Furniture, fixtures, equipment 20% and motor vehicles 20% 10% 20% 20% Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end. 78 Eagle Nice (International) Holdings Limited Annual Report 2016

51 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property, plant and equipment and depreciation (Continued) An item of property, plant and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the income statement in the year the asset is derecognised is the difference between the net sale proceeds and the carrying amount of the relevant asset. Construction in progress represents a building under construction, which is stated at cost less any impairment losses, and is not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use. Leases Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at the present value of the minimum lease payments and recorded together with the obligation, excluding the interest element, to reflect the purchase and financing. Assets held under capitalised finance leases, including prepaid land lease payments under finance leases, are included in property, plant and equipment, and depreciated over the shorter of the lease terms and the estimated useful lives of the assets. The finance costs of such leases are charged to the income statement so as to provide a constant periodic rate of charge over the lease terms. Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets, and rentals receivable under the operating leases are credited to the income statement on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under operating leases net of any incentives received from the lessor are charged to the income statement on the straight-line basis over the lease terms. Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognised on the straight-line basis over the lease terms. 2.4 Annual Report 2016 Eagle Nice (International) Holdings Limited 79

52 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments and other financial assets Initial recognition and measurement Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial investments, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. When financial assets are recognised initially, they are measured at fair value plus transaction costs that are attributable to the acquisition of the financial assets, except in the case of financial assets recorded at fair value through profit or loss. All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace. Subsequent measurement The subsequent measurement of financial assets depends on their classification as follows: Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such assets are subsequently measured at amortised cost using the effective interest rate method less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in other income in the income statement. The loss arising from impairment is recognised in the income statement in finance costs for loans. Available-for-sale financial investments Available-for-sale financial investments are non-derivative financial assets in listed and unlisted equity investments and debt securities. Equity investments classified as available for sale are those which are neither classified as held for trading nor designated as at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in market conditions Eagle Nice (International) Holdings Limited Annual Report 2016

53 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments and other financial assets (Continued) Subsequent measurement (Continued) Available-for-sale financial investments (Continued) After initial recognition, available-for-sale financial investments are subsequently measured at fair value, with unrealised gains or losses recognised as other comprehensive income in the available-for-sale investment revaluation reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in the income statement in other income, or until the investment is determined to be impaired, when the cumulative gain or loss is reclassified from the available-for-sale investment revaluation reserve to the income statement in other gains or losses. Interest and dividends earned whilst holding the available-for-sale financial investments are reported as interest income and dividend income, respectively and are recognised in the income statement as other income in accordance with the policies set out for Revenue recognition below. When the fair value of unlisted equity investments cannot be reliably measured because (a) the variability in the range of reasonable fair value estimates is significant for that investment or (b) the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such investments are stated at cost less any impairment losses. The Group evaluates whether the ability and intention to sell its available-for-sale financial assets in the near term are still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets, the Group may elect to reclassify these financial assets if management has the ability and intention to hold the assets for the foreseeable future or until maturity. For a financial asset reclassified from the available-for-sale category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on that asset that has been recognised in equity is amortised to the income statement over the remaining life of the investment using the effective interest rate. Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using the effective interest rate. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the income statement. 2.4 (a) (b) Annual Report 2016 Eagle Nice (International) Holdings Limited 81

54 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Derecognition of financial assets A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group s consolidated statement of financial position) when: the rights to receive cash flows from the asset have expired; or the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay. 2.4 (a) (b) 82 Eagle Nice (International) Holdings Limited Annual Report 2016

55 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment of financial assets The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that occurred after the initial recognition of the asset have an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Financial assets carried at amortised cost For financial assets carried at amortised cost, the Group first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment. The amount of any impairment loss identified is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. 2.4 Annual Report 2016 Eagle Nice (International) Holdings Limited 83

56 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Impairment of financial assets (Continued) Financial assets carried at amortised cost (Continued) If, in a subsequent period, the amount of the estimated loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to the income statement. Available-for-sale financial investments For available-for-sale financial investments, the Group assesses at the end of each reporting period whether there is objective evidence that an investment or a group of investments is impaired. If an available-for-sale asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is removed from other comprehensive income and recognised in the income statement. In the case of equity investments classified as available for sale, objective evidence would include a significant or prolonged decline in the fair value of an investment below its cost. Significant is evaluated against the original cost of the investment and prolonged against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement is removed from other comprehensive income and recognised in the income statement. Impairment losses on equity instruments classified as available for sale are not reversed through the income statement. Increases in their fair value after impairment are recognised directly in other comprehensive income. The determination of what is significant or prolonged requires judgement. In making this judgement, the Group evaluates, among other factors, the duration or extent to which the fair value of an investment is less than its cost Eagle Nice (International) Holdings Limited Annual Report 2016

57 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial liabilities Initial recognition and measurement Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs. The Group s financial liabilities include accounts payable, financial liabilities included in accrued liabilities and other payables, derivative financial instruments and interest-bearing bank borrowings. Subsequent measurement The subsequent measurement of financial liabilities depends on their classification as follows: Financial liabilities at fair value through profit or loss Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of repurchasing in the near term. This category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by HKAS 39. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the income statement. The net fair value gain or loss recognised in the income statement does not include any interest charged on these financial liabilities. Financial liabilities designated upon initial recognition as at fair value through profit or loss are designated at the date of initial recognition and only if the criteria in HKAS 39 are satisfied Annual Report 2016 Eagle Nice (International) Holdings Limited 85

58 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial liabilities (Continued) Subsequent measurement (Continued) Loans and borrowings After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in the income statement. Derecognition of financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires. When 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 a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the income statement. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously Eagle Nice (International) Holdings Limited Annual Report 2016

59 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Derivative financial instruments and hedge accounting Initial recognition and subsequent measurement The Group uses derivative financial instruments, such as foreign currency forward contracts, to hedge its foreign currency risk. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Any gains or losses arising from changes in fair value of derivatives are taken directly to the income statement, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income and later reclassified to the income statement when the hedged item affects the income statement. Current versus non-current classification Derivative instruments that are not designated as effective hedging instruments are classified as current or non-current or separated into current and non-current portions based on an assessment of the facts and circumstances (i.e., the underlying contracted cash flows). Where the Group expects to hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond 12 months after the end of the reporting period, the derivative is classified as non-current (or separated into current and non-current portions) consistently with the classification of the underlying item. Embedded derivatives that are not closely related to the host contract are classified consistently with the cash flows of the host contract. Derivative instruments that are designated as, and are effective hedging instruments, are classified consistently with the classification of the underlying hedged item. The derivative instruments are separated into current portions and non-current portions only if a reliable allocation can be made Annual Report 2016 Eagle Nice (International) Holdings Limited 87

60 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in, first-out basis and, in the case of work in progress and finished goods, comprises direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal. Cash and cash equivalents For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group s cash management. For the purpose of the consolidated statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, which are not restricted as to use. Provisions A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation. When the effect of discounting is material, the amount recognised for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the income statement. Income tax Income tax comprises current and deferred tax. Income tax relating to items recognised outside the income statement is recognised outside the income statement, either in other comprehensive income or directly in equity Eagle Nice (International) Holdings Limited Annual Report 2016

61 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income tax (Continued) Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Group operates. Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences, except: when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and in respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. 2.4 Annual Report 2016 Eagle Nice (International) Holdings Limited 89

62 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income tax (Continued) Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, the carryforward of unused tax credits and unused tax losses can be utilised, except: when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority Eagle Nice (International) Holdings Limited Annual Report 2016

63 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Government grants Government grants, including a subsidy for the expenditure incurred in the construction cost of an infrastructure project, are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the costs, which it is intended to compensate, are expensed. Where the grant relates to an asset, the fair value is deducted from the carrying amount of the asset and released to the income statement by way of a reduced depreciation charge. Revenue recognition Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases: 2.4 (i) from the sale of goods and samples, when the significant risks and rewards of ownership have been transferred to the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the goods sold; and (i) (ii) interest income, on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset. (ii) Annual Report 2016 Eagle Nice (International) Holdings Limited 91

64 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Employee benefits 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 those employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees basic salaries and are charged to the income statement as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group s employer contributions vest fully with the employees when contributed into the MPF Scheme. In addition, the Group operates a defined contribution retirement benefit scheme (the Retirement Scheme ) for those employees who are eligible to participate in the Retirement Scheme. Contributions to the Retirement Scheme are charged to the income statement as incurred. The Retirement Scheme operates in a similar way to the MPF Scheme, except that when an employee leaves the Retirement Scheme before his/her interest in the Group s employer contributions vests fully, the ongoing contributions payable by the Group are reduced by the relevant amount of the forfeited employer contributions. 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 certain percentage of their payroll costs to the central pension scheme for their employees who are registered as permanent residents in Mainland China. The contributions are charged to the income statement as they become payable in accordance with the rules of the central pension scheme Eagle Nice (International) Holdings Limited Annual Report 2016

65 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Employee benefits (Continued) Defined benefit plan The cost of providing benefits under the defined benefit plan is determined using the projected unit credit actuarial valuation method. Remeasurements arising from a defined benefit pension plan, comprising actuarial gains and losses, the effect of the asset ceiling (excluding net interest) and the return on plan assets (excluding net interest), are recognised immediately in the consolidated statement of financial position with a corresponding debit or credit to retained profits through other comprehensive income in the period in which they occur. Remeasurements are not reclassified to the income statement in subsequent periods. Past service costs are recognised in the income statement at the earlier of: the date of the plan amendment or curtailment; and the date that the Group recognises restructuring-related costs. Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognises the following changes in the net defined benefit obligation under cost of sales and administrative expenses in the income statement by function: service costs comprising current service costs, past service costs, gains and losses on curtailments and non-routine settlements; and net interest expense or income. 2.4 Annual Report 2016 Eagle Nice (International) Holdings Limited 93

66 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds. Foreign currencies These financial statements are presented in Hong Kong dollars, which is the Company s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions recorded by the entities in the Group are initially recorded using their respective functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange ruling at the end of the reporting period. Differences arising on settlement or translation of monetary items are recognised in the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation difference on the item whose fair value gain or loss is recognised in other comprehensive income or the income statement is also recognised in other comprehensive income or the income statement, respectively) Eagle Nice (International) Holdings Limited Annual Report 2016

67 2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Foreign currencies (Continued) The functional currencies of certain overseas subsidiaries are currencies other than the Hong Kong dollar. As at the end of the reporting period, the assets and liabilities of these entities are translated into Hong Kong dollars at the exchange rates prevailing at the end of the reporting period and their income statements are translated into Hong Kong dollars at the weighted average exchange rates for the year. The resulting exchange differences are recognised in other comprehensive income and accumulated in the exchange fluctuation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the income statement. For the purpose of the consolidated statement of cash flows, the cash flows of overseas subsidiaries are translated into Hong Kong dollars at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of overseas subsidiaries which arise throughout the year are translated into Hong Kong dollars at the weighted average exchange rates for the year SIGNIFICANT ACCOUNTING JUDGEMENT AND ESTIMATES The preparation of the Group s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, their accompanying disclosures and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future. 3. Annual Report 2016 Eagle Nice (International) Holdings Limited 95

68 3. SIGNIFICANT ACCOUNTING JUDGEMENT AND ESTIMATES (Continued) Judgement In the process of applying the Group s accounting policies, management has made the following judgement, apart from those involving estimations, which has the most significant effect on the amounts recognised in the financial statements: Withholding taxes arising from the distributions of dividends In estimating the withholding taxes on dividends expected to be distributed by those subsidiaries established in Mainland China in respect of earnings generated from 1 January 2008, the directors have made an assessment based on the factors included the dividend policy and the level of capital and working capital required for the Group s operations in the foreseeable future. Estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units 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 cash-generating units and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill at 31 March 2016 was HK$26,112,000 (2015: HK$26,112,000). Further details are given in note ,112,000 26,112, Eagle Nice (International) Holdings Limited Annual Report 2016

69 3. SIGNIFICANT ACCOUNTING JUDGEMENT AND ESTIMATES (Continued) Estimation uncertainty (Continued) Impairment allowance for doubtful debts The Group makes impairment allowance for doubtful debts based on an assessment of the recoverability of accounts and bills receivables. Allowances are applied to accounts and bills receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of doubtful debts requires the use of judgements and estimates. Where the actual outcome or expectation in future is different from the original estimate, such differences will have an impact on the carrying value of the receivables and impairment/write-back of impairment in the period in which such estimate has been changed OPERATING SEGMENT INFORMATION For management purposes, the Group determines that there are five reportable operating segments, based on the location of customers (the destination of sales), including the United States of America (the USA ), Mainland China, Europe, Japan and others. These segments are managed separately as each segment is subject to risks and returns that are different from one another. Management monitors the results of the Group s operating segments separately for the purpose of making decisions about resources allocation and performance assessment. Segment performance is evaluated based on reportable segment profit, which is a measure of adjusted profit before tax. The adjusted profit before tax is measured consistently with the Group s profit before tax except that interest income and other unallocated income and gains, fair value changes on derivative financial instruments, loss on deregistration of a subsidiary and unallocated expenses are excluded from such measurement. Segment assets exclude unallocated assets as these assets are managed on a group basis. Segment liabilities exclude unallocated liabilities as these liabilities are managed on a group basis. 4. Annual Report 2016 Eagle Nice (International) Holdings Limited 97

70 4. OPERATING SEGMENT INFORMATION (Continued) USA Mainland China Europe Japan Others Consolidated Segment revenue: Sales to external customers 560, , ,106 65, ,759 1,534,592 Segment results 101,490 73,273 35,607 9,241 37, ,635 Interest income and other unallocated income and gains 11,052 Fair value changes on derivative financial instruments, net (9,980) Loss on deregistration of a subsidiary (5,169) Unallocated expenses (100,352) Profit before tax 152,186 Income tax expense (27,057) Profit for the year attributable to owners of the Company 125,129 Segment assets 457, , ,069 54, ,491 1,224,644 Unallocated assets 333,875 1,558,519 Segment liabilities 80,905 73,001 32,174 9,722 40, ,810 Unallocated liabilities 223, ,169 Other segment information: Depreciation and amortisation 16,119 8,906 5,105 1,798 6,540 38,468 Unallocated amounts 16,271 54,739 Capital expenditure* * 9,920 4,286 3,040 1,079 3,797 22,122 Unallocated amounts 2,781 24,903 * Capital expenditure represents additions to property, plant and equipment. * 98 Eagle Nice (International) Holdings Limited Annual Report 2016

71 4. OPERATING SEGMENT INFORMATION (Continued) USA Mainland China Europe Japan Others Consolidated Segment revenue: Sales to external customers 499, , , , ,974 1,517,109 Segment results 70,147 44,037 44,220 16,553 49, ,498 Interest income and other unallocated income and gains 8,925 Fair value changes on derivative financial instruments, net (2,578) Unallocated expenses (100,534) Profit before tax 130,311 Income tax expense (25,128) Profit for the year attributable to owners of the Company 105,183 Segment assets 407, , ,838 62, ,268 1,185,722 Unallocated assets 383,699 1,569,421 Segment liabilities 61,442 44,773 43,956 16,588 47, ,928 Unallocated liabilities 267, ,890 Other segment information: Depreciation and amortisation 16,001 8,934 7,782 2,633 8,516 43,866 Unallocated amounts 19,010 62,876 Capital expenditure* * 7,725 3,538 2, ,040 17,810 Unallocated amounts 1,121 18,931 * Capital expenditure represents additions to property, plant and equipment. * Annual Report 2016 Eagle Nice (International) Holdings Limited 99

72 4. OPERATING SEGMENT INFORMATION (Continued) Geographical information non-current assets Hong Kong 16,962 17,238 Mainland China 600, ,851 Indonesia 161, , , ,854 The non-current assets information above is based on the locations of the assets. Information about major customers Revenue of HK$853,077,000 (2015: HK$874,385,000) and HK$594,865,000 (2015: HK$441,759,000) were derived from sales to the largest customer and the second largest customer of the Group, respectively. The above amounts include sales to group of entities which are known to be under common control with these customers. 853,077, ,385, ,865, ,759, Eagle Nice (International) Holdings Limited Annual Report 2016

73 5. REVENUE AND OTHER INCOME AND GAINS Revenue represents the net invoiced value of goods sold, after allowances for returns and trade discounts. An analysis of revenue and other income and gains is as follows: Revenue Sale of goods 1,534,592 1,517,109 Other income and gains Bank interest income 2,497 1,821 Income derived from available-for-sale investments 1,442 1,834 Government grants* * 4,725 2,820 Gain on disposal of items of property, plant and equipment Gain on disposal of prepaid land lease payments 1,159 Others 456 2,182 11,052 8,925 * There are no unfulfilled conditions or contingencies relating to these grants. * 6. FINANCE COSTS Interest on bank loans 2,879 3,495 Annual Report 2016 Eagle Nice (International) Holdings Limited 101

74 7. PROFIT BEFORE TAX The Group s profit before tax is arrived at after charging/(crediting): Cost of inventories sold 1,227,650 1,251,158 Auditors remuneration 2,492 2,446 Depreciation (note 13)* 13 * 52,454 60,539 Amortisation of prepaid land lease payments (note 14)* 14 * 2,285 2,337 Employee benefit expenses (excluding directors remuneration note 8): 8 Wages and salaries 344, ,457 Pension contributions, including a pension cost for a defined benefit plan of HK$2,502,000 (2015: HK$2,271,000) (note 26) 2,502,000 2,271, ,242 50,793 Less: Forfeited contributions (439) (1,442) Net pension contributions 56,803 49,351 Total employee benefit expenses* * 400, ,808 Foreign exchange differences, net 2,615 1,921 Write-off of items of property, plant and equipment 26 Gain on disposal of items of property, plant and equipment (773) (268) Gain on disposal of prepaid land lease payments (1,159) Income derived from available-for-sale investments (1,442) (1,834) Fair value losses/(gains), net, Derivative financial instruments transactions not qualified as hedges: matured during the year 9,980 (6,532) not yet matured 9,110 Loss on deregistration of a subsidiary (note 30) 30 5,169 * Included in the respective balances are the following amounts which are also included in the cost of inventories sold disclosed above: * Depreciation 36,636 41,996 Amortisation of prepaid land lease payments 1,832 1,870 Employee benefit expenses 345, , Eagle Nice (International) Holdings Limited Annual Report 2016

75 8. DIRECTORS AND CHIEF EXECUTIVE S REMUNERATION Directors and chief executive s remuneration for the year, disclosed pursuant to the Listing Rules, section 383(1)(a), (b), (c) and (f) of the Hong Kong Companies Ordinance and Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation, is as follows: (1)(a) (b) (c) (f) Fees Other emoluments: Salaries, allowances and benefits in kind 7,926 5,470 Discretionary bonuses 4,800 2,300 Pension scheme contributions ,650 8,320 14,010 8,680 (a) Independent non-executive directors The fees paid to independent non-executive directors during the year were as follows: (a) Mr. Chan Cheuk Ho Mr. Lu Chi Chant Mr. Cheng Yung Hui, Tony There were no other emoluments payable to the independent non-executive directors during the year (2015: Nil). Annual Report 2016 Eagle Nice (International) Holdings Limited 103

76 8. DIRECTORS AND CHIEF EXECUTIVE S REMUNERATION (Continued) (b) Executive directors 8. (b) Fees Salaries, allowances and benefits in kind Discretionary bonuses Pension scheme contributions Total remuneration 2016 Executive directors: Mr. Chung Yuk Sing ( Mr. Chung )* * 2,816 2, ,700 Mr. Chen Hsiao Ying 2,671 2, ,331 Mr. Kuo Tai Yu Ms. Chen Fang Mei, Christina 2, , ,926 4, ,650 Executive directors: Mr. Chung Yuk Sing* * 1,664 1, ,044 Mr. Chen Hsiao Ying 1,560 1, ,926 Mr. Kuo Tai Yu Ms. Chen Fang Mei, Christina 2, ,350 5,470 2, ,320 * Mr. Chung is also the Chairman and the Chief Executive Officer of the Company. * There was no arrangement under which a director waived or agreed to waive any remuneration during the year. The directors remuneration shown above does not include the estimated monetary value of the Group s owned premises provided rent-free to an executive director, Mr. Chung, during the year. The estimated rental value of such accommodation was HK$124,000 (2015: HK$120,000) for the year ended 31 March , , Eagle Nice (International) Holdings Limited Annual Report 2016

77 9. FIVE HIGHEST PAID EMPLOYEES The five highest paid employees during the year included three (2015: three) directors, details of whose remuneration are set out in note 8 above. Details of the remuneration of the remaining two (2015: two) non-director, highest paid employees for the year ended 31 March 2016 are set out below: Salaries, allowances and benefits in kind 4,196 4,517 Discretionary bonuses 1,600 Pension scheme contributions ,110 4,855 The number of non-director, highest paid employees whose remuneration fell within the following bands is as follows: Number of employees HK$1,000,001 to HK$1,500,000 1,000,0011,500,000 1 HK$1,500,001 to HK$2,000,000 1,500,0012,000,000 HK$2,000,001 to HK$2,500,000 2,000,0012,500,000 HK$2,500,001 to HK$3,000,000 2,500,0013,000,000 1 HK$3,000,001 to HK$3,500,000 3,000,0013,500, During the year, no emoluments were paid by the Group to the directors or any of the five highest paid individuals as an inducement to join or upon joining the Group or as compensation for loss of office (2015: Nil). Annual Report 2016 Eagle Nice (International) Holdings Limited 105

78 10. INCOME TAX Hong Kong profits tax has been provided at the rate of 16.5% (2015: 16.5%) on the estimated assessable profits arising in Hong Kong during the year. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates. Pursuant to the Corporate Income Tax Law of the PRC being effective on 1 January 2008, the corporate income tax rate for all enterprises in Mainland China is 25%. Moreover, under the relevant tax laws and regulations in Mainland China, a company may set off losses incurred by it in a financial year against profits made by it in the succeeding financial year or years, subject to a maximum of five financial years % 16.5% 25% Current tax charge for the year: Hong Kong 11,057 11,889 Elsewhere 14,370 11,200 Overprovision of current tax in respect of prior years (302) Deferred (note 27) 27 1,630 2,341 Total tax charge for the year 27,057 25, Eagle Nice (International) Holdings Limited Annual Report 2016

79 10. INCOME TAX (Continued) A reconciliation of the tax expense applicable to profit before tax using the statutory rates for the tax jurisdictions in which the Company and the majority of its subsidiaries are domiciled to the tax expense at the effective tax rate is as follows: Profit before tax 152, ,311 Tax at the applicable rates to profit in the tax jurisdictions concerned Adjustments in respect of current tax of previous years 33,499 26,715 (302) Income not subject to tax (1,152) (1,022) Expenses not deductible for tax 4,064 2,286 Effect of withholding tax on the distributable profits of the Group s PRC subsidiaries 1,630 2,341 Tax loss utilised from previous periods (10,984) (4,890) Tax charge at the Group s effective rate 27,057 25,128 Annual Report 2016 Eagle Nice (International) Holdings Limited 107

80 11. DIVIDENDS Dividends paid during the year: Final in respect of the financial year ended 31 March 2015 HK6.5 cents per ordinary share (2015: Nil) Interim HK12 cents (2015: HK6 cents) per ordinary share , ,962 29,980 92,441 29,980 Proposed final dividend HK5 cents (2015: HK6.5 cents) per ordinary share ,984 32,479 The proposed final dividend for the year is based on the number of shares in issue as at the reporting date, and is subject to the approval of the Company s shareholders at the forthcoming annual general meeting. These financial statements do not reflect the final dividend payable. 12. EARNINGS PER SHARE ATTRIBUTABLE TO OWNERS OF THE COMPANY The calculation of basic earnings per share is based on the profit for the year attributable to owners of the Company for the year of HK$125,129,000 (2015: HK$105,183,000) and 499,680,000 (2015: 499,680,000) ordinary shares in issue during the year. No adjustment has been made to the basic earnings per share amounts presented for the years ended and 2015 as the Group had no potentially dilutive ordinary shares in issue during those years ,129, ,183, ,680,000499,680, Eagle Nice (International) Holdings Limited Annual Report 2016

81 13. PROPERTY, PLANT AND EQUIPMENT 13. Leasehold land and buildings Furniture, fixtures, equipment and motor vehicles Leasehold improvements Plant and machinery Total Cost: At beginning of year 726, , ,568 72,682 1,148,284 Additions 193 4,305 17,227 3,178 24,903 Disposals (1,825) (1,101) (1,765) (4,691) Write-offs (294) (780) (86) (630) (1,790) Exchange realignment (23,168) (4,319) (4,333) (1,776) (33,596) At 701, , ,376 71,689 1,133,110 Accumulated depreciation: At beginning of year 108,268 99, ,358 62, ,949 Provided during the year 23,914 8,237 14,899 5,404 52,454 Disposals (352) (1,089) (1,536) (2,977) Write-offs (294) (780) (86) (630) (1,790) Exchange realignment (3,690) (3,763) (3,151) (1,535) (12,139) At 127, , ,020 64, ,497 Net book value: At 573,282 16,394 66,356 7, , March 2015 Cost: At beginning of year 721, , ,409 73,532 1,132,241 Additions 4,169 5,118 8,008 1,636 18,931 Disposals (961) (1,711) (2,672) Write-offs (171) (171) Exchange realignment (604) (45) At 31 March , , ,568 72,682 1,148,284 Accumulated depreciation: At beginning of year 84,027 89, ,252 57, ,444 Provided during the year 24,197 10,584 18,959 6,799 60,539 Disposals (937) (1,570) (2,507) Write-offs (145) (145) Exchange realignment (581) (382) At 31 March ,268 99, ,358 62, ,949 Net book value: At 31 March ,954 20,894 65,210 10, ,335 Annual Report 2016 Eagle Nice (International) Holdings Limited 109

82 13. PROPERTY, PLANT AND EQUIPMENT (Continued) As at 31 March 2015, the Group had undertaken not to charge one of its buildings (the Undertaking ) with a net carrying amount of HK$71,041,000. During the year, the Undertaking has been released by a bank upon repayment of the respective bank loan by the Group ,041, PREPAID LAND LEASE PAYMENTS Carrying amount at beginning of year 74,744 77,013 Amortisation recognised during the year (note 7) 7 (2,285) (2,337) Disposals (1,702) Exchange realignment (2,962) 68 Carrying amount at 31 March 67,795 74,744 Current portion included in prepayments, deposits and other receivables (note 15) 15 (2,208) (2,337) Non-current portion 65,587 72,407 One of the Group s prepaid land lease payments with a net book value of HK$1,476,000 (2015: HK$1,568,000), together with the leasehold buildings thereon, has been provided as rent-free accommodation to Mr. Chung, an executive director of the Company during the year. 1,476,000 1,568, PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES 15. Note Prepaid land lease payments 14 2,208 2,337 Prepayments 34,898 27,164 Deposits and other receivables 39,213 17,826 76,319 47,327 Less: Non-current portion of deposits for purchases of items of property, plant and equipment (23,367) 52,952 47, Eagle Nice (International) Holdings Limited Annual Report 2016

83 15. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES (Continued) None of the financial assets included in the above balances is either past due or impaired. The financial assets included in the above balances relate to receivables for which there was no recent history of default GOODWILL Cost and carrying amount: At beginning and end of year 26,112 26,112 The Group s goodwill was wholly allocated to a cash-generating unit engaged in the manufacture and trading of sportswear and garments (the Unit ). The recoverable amount of the Unit has been determined from the value in use, which is calculated with reference to cash flow projections based on a five-year period financial budget approved by senior management. The financial budgets are prepared reflecting actual and prior year performance and development expectations. The key assumptions for the cash flow projections are the budgeted gross margin which is the average gross profit margin achieved in the year immediately before budgeted years and the discount rate of 14% (2015: 14%), which is before tax and reflects specific risks relating to the Unit. The cash flow projections are prepared based on the assumption that the Unit will have revenue based on the actual sales order amount and revenue forecasted by the head of the sales department for the first year, and then maintain a 3% (2015: 5%) growth rate thereafter. The directors believe that any reasonably possible change in any of these assumptions would not cause the aggregate carrying amount of the Unit to exceed the aggregate recoverable amount. Since the recoverable amount of the Unit is higher than its carrying amount, the directors consider there was no impairment of the goodwill at the end of the reporting period. 14% 14% 3% 5% Annual Report 2016 Eagle Nice (International) Holdings Limited 111

84 17. INVENTORIES Raw materials 168, ,572 Work in progress 90,662 70,932 Finished goods 101,045 82, , , ACCOUNTS AND BILLS RECEIVABLES The Group s accounts and bills receivables mainly relate to a few recognised and creditworthy customers. The credit period is generally for a period of 30 to 45 days (2015: 30 to 45 days). The Group seeks to maintain strict control over its outstanding receivables to minimise the credit risk. Overdue balances are regularly reviewed by the management of the Group. The accounts and bills receivables are non-interest-bearing. At the end of the reporting period, 67% (2015: 76%) and 25% (2015: 18%) of the total accounts and bills receivables were due from the Group s largest customer and the second largest customer, respectively. An aged analysis of the accounts and bills receivables as at the end of the reporting period, based on the invoice date, is as follows: % 76%25% 18% Within 30 days 30 89,233 79, to 60 days ,614 37, to 90 days ,132 2,592 Over 90 days 90 2,544 4, , , Eagle Nice (International) Holdings Limited Annual Report 2016

85 18. ACCOUNTS AND BILLS RECEIVABLES (Continued) An aged analysis of the accounts and bills receivables that are not considered to be impaired is as follows: Neither past due nor impaired 101,598 89,694 Past due: Within 30 days 30 4,881 29, to 60 days , to 90 days ,236 2,196 Over 90 days , , ,192 Receivables that are neither past due nor impaired relate to customers for whom there was no recent history of default. Receivables that were past due but not impaired relate to a number of customers that have a good track records with the Group. Based on past experience, the directors of the Company are of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still considered fully recoverable. 19. AVAILABLE-FOR-SALE INVESTMENTS Unlisted investment funds, at cost 63,750 The unlisted investment funds represented short-term wealth management products offered by certain commercial banks in the PRC. As at 31 March 2015, unlisted investment funds with an aggregate carrying amount of HK$63,750,000 were stated at cost less impairment because these funds did not have quoted market price in an active market and whose fair values cannot be measured reliably. 63,750,000 Annual Report 2016 Eagle Nice (International) Holdings Limited 113

86 20. CASH AND CASH EQUIVALENTS Cash and bank balances 240, ,619 Non-pledged time deposits with original maturity of less than three months 14,824 58,780 Cash and cash equivalents 255, ,399 At the end of the reporting period, the cash and bank balances of the Group denominated in Renminbi ( RMB ) amounted to HK$218,745,000 (2015: HK$198,844,000). RMB is not freely convertible into other currencies. However, under Mainland China s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business. Cash at banks earns interest at floating rates based on daily bank deposit rates. Short term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short term time deposit rates. The bank balances are deposited with creditworthy banks with no recent history of default. 218,745, ,844, ACCOUNTS PAYABLE An aged analysis of the accounts payable as at the end of the reporting period, based on the invoice date, is as follows: Within 90 days ,546 97, to 180 days to 365 days Over 365 days 365 3,744 6, , ,090 The accounts payable are non-interest-bearing and are normally settled on 45-day terms Eagle Nice (International) Holdings Limited Annual Report 2016

87 22. BANKING FACILITIES As at, the Group s banking facilities were supported by the corporate guarantees executed by the Company and certain subsidiaries of the Company to the extent of HK$597,375,000, of which an aggregate amount of HK$197,900,000 was utilised. As at 31 March 2015, the Group s banking facilities were supported by the corporate guarantees executed by the Company and a subsidiary of the Company to the extent of HK$339,521,000, of which an aggregate amount of HK$171,746,000 was utilised, and the Undertaking (note 13) ,375, ,900, ,521, ,746, ACCRUED LIABILITIES AND OTHER PAYABLES Other payables 28,566 41,985 Accruals 55,738 44,627 84,304 86,612 Other payables of the Group as at included a subsidy of HK$3,280,000 (2015: HK$3,552,000) received from the People s Government of Yifeng County, Jiangxi Province, the PRC for the construction cost of basic infrastructure by the Group for the development of the investment project in Jiangxi (the Jiangxi Project ). During the year, an amount of HK$272,000 (2015: HK$422,000) was utilised and has been offset against the construction cost. 3,280,000 3,552, , ,000 Annual Report 2016 Eagle Nice (International) Holdings Limited 115

88 24. DERIVATIVE FINANCIAL INSTRUMENTS Foreign currency forward contracts 9,110 During the year ended 31 March 2015, the Group had entered into various foreign currency forward contracts to manage its foreign currency risk. These foreign currency forward contracts were designated upon initial recognition as fair value through profit or loss. Changes in the fair value of these non-hedging currency derivatives, net, amounting to a loss of HK$9,980,000 (2015: HK$2,578,000), were charged to the income statement during the year ended 31 March The above transactions including derivative financial instruments were conducted with creditworthy financial institutions without recent history of default. The aggregate monthly notional amount of the outstanding contracts as at 31 March 2015 was US$5 million. The major terms of the contracts were as follows: 9,980,0002,578,000 5,000,000 (i) The Group shall sell US$1 million or US$0.5 million for RMB at the contracted rates ranging from US$1 for RMB6.30 to 6.38 or receive the gain where the spot rate on the fixing date is below the contracted rate. (i) ,000,000500,000 (ii) Where the spot rate on the fixing date is above the upper contract rates ranging from US$1 for RMB6.35 to 6.43, the Group shall sell double the amount of US$ for RMB at the contracted rate or pay for the loss. (ii) (iii) Where the spot rate on the fixing date falls within the upper contract rates and contracted rates, no settlement will be required. (iii) (iv) The contracts are settled at monthly intervals. (iv) (v) The contracts will be terminated when either the cumulative positive gain reaches a specific amount at any fixing date set out in the relevant agreements or the spot rate on the fixing date is equal to or below the lower contract rates ranging from US$1 for RMB6.12 to in the period specified in the relevant agreements. (v) Eagle Nice (International) Holdings Limited Annual Report 2016

89 25. INTEREST-BEARING BANK BORROWINGS 25. Effective interest rate Maturity (%) (%) (Note) Current Bank loans 1.18% to 1.53% (2015: 1.14% to 1.28%) 1.18% 1.53% 1.14% 1.28% On demand 197, ,621 Note: As at, all of the bank borrowings of HK$197,900,000 were supported by corporate guarantees executed by the Company and certain subsidiaries of the Company. As at 31 March 2015, HK$144,621,000 out of the bank borrowings of HK$237,621,000 was supported by corporate guarantees executed by the Company and a subsidiary of the Company and the Undertaking (note 13). As at, HK$105,400,000 (2015: HK$146,475,000) of the bank borrowings were denominated in US$. Based on the maturity terms of the bank borrowings, the amounts repayable in respect of the bank borrowings are analysed as follows: 197,900, ,621,000144,621, ,400,000146,475, Analysed into: Within one year 197, ,621 Annual Report 2016 Eagle Nice (International) Holdings Limited 117

90 26. PENSION SCHEME OBLIGATION The Group provides benefits for its employees of its subsidiary in Indonesia who achieve the requirement age of 55 years based on the provisions of the Indonesian Labour Law. The plan is exposed to interest rate risk and the risk of changes in life expectancy. The most recent actuarial valuations of the present value of the defined benefit obligations were carried out at by Biro Pusat Aktuaria, an independent actuary with a licence from the Indonesia Ministry of Finance, using the projected unit credit method. These obligations are not funded by the Group. The principal actuarial assumptions used as at the end of the reporting period are as follows: Biro Pusat Aktuaria Discount rate (%) (%) Expected rate of salary increases (%) (%) A quantitative sensitivity analysis for significant assumptions as at the end of the reporting period is shown below: Increase in rate Increase/ (decrease) in net defined benefit obligation Decrease in rate Increase/ (decrease) in net defined benefit obligation % % 2016 Discount rate 1 (1,139) 1 1,449 Future salary increase 1 1,450 1 (1,158) 2015 Discount rate 1 (855) 1 1,100 Future salary increase 1 1,093 1 (864) 118 Eagle Nice (International) Holdings Limited Annual Report 2016

91 26. PENSION SCHEME OBLIGATION (Continued) The sensitivity analysis above has been determined based on a method that extrapolates the impact on net defined benefit obligation as a result of reasonable changes in key assumptions occurring at the end of the reporting period. The sensitivity analysis is based on a change in a significant assumption, keeping all other assumptions constant. The sensitivity analysis may not be representative of an actual change in the defined benefit obligations as it is unlikely that changes in assumptions would occur in isolation of one another. The total expenses recognised in the consolidated income statement in respect of the plan are as follows: Current service cost 2,179 2,071 Past service cost 8 Interest cost Net benefit expenses 2,502 2,271 Recognised in cost of sales 2,096 1,916 Recognised in administrative expenses ,502 2,271 The movements in the present value of the defined benefit obligations are as follows: At 1 April 4,446 2,425 Current service cost 2,179 2,071 Past service cost 8 Interest cost Actuarial losses/(gains) (666) 277 Benefits paid (32) Exchange differences (11) (527) At 31 March 6,239 4,446 Annual Report 2016 Eagle Nice (International) Holdings Limited 119

92 26. PENSION SCHEME OBLIGATION (Continued) The movements in the defined benefit obligations are as follows: Pension cost charged to the income statement Remeasurement (gains)/losses in other comprehensive income 1 April 2015 Service cost Net interest Sub-total included in the income statement Benefits paid Actuarial changes arising from changes in financial assumptions Actuarial changes arising from changes in experience adjustments Sub-total included in other comprehensive income Exchange differences 31 on a foreign March plan 2016 Defined benefit obligations 4,446 2, ,502 (32) (514) (152) (666) (11) 6, Pension cost charged to the income statement Remeasurement (gains)/losses in other comprehensive income 1 April 2014 Service cost Net interest Sub-total included in the income statement Benefits paid Actuarial changes arising from changes in financial assumptions Actuarial changes arising from changes in experience adjustments Sub-total included in other comprehensive income Exchange differences on a foreign plan 31 March 2015 Defined benefit obligations 2,425 2, , (155) 277 (527) 4, Eagle Nice (International) Holdings Limited Annual Report 2016

93 26. PENSION SCHEME OBLIGATION (Continued) The major categories of the fair value of the total plan assets are as follows: Equity instruments N/A N/A Debt instruments N/A N/A Property N/A N/A Expected contributions to be made in the future years out of the defined benefit obligations are as follows: Within the next 12 months 12 Between 2 and 5 years Between 5 and 10 years Over 10 years , ,493 Total expected payments 739, ,992 The average duration of the defined benefit obligation at the end of the reporting period is years (2015: years) Annual Report 2016 Eagle Nice (International) Holdings Limited 121

94 27. DEFERRED TAX LIABILITIES 27. Accelerated tax depreciation Asset revaluation Withholding taxes on undistributed profits of PRC subsidiaries Total At 1 April ,817 4,577 14,574 Deferred tax charged to the consolidated income statement during the year (note 10) Withholding tax on repatriation of earnings from subsidiaries in the PRC 10 2,341 2,341 (1,500) (1,500) Exchange realignment At 31 March ,827 5,418 15,425 At 1 April ,827 5,418 15,425 Deferred tax charged to the consolidated income statement during the year (note 10) Withholding tax on repatriation of earnings from subsidiaries in the PRC 10 1,630 1,630 (2,879) (2,879) Exchange realignment (398) (398) At 180 9,429 4,169 13, Eagle Nice (International) Holdings Limited Annual Report 2016

95 27. DEFERRED TAX LIABILITIES (Continued) Pursuant to the PRC Tax Law, a 10% withholding tax is levied on dividends declared to foreign investors from the foreign investment enterprises established in Mainland China. The requirement is effective from 1 January 2008 and applies to earnings accrued after 31 December A lower withholding tax rate may be applied if there is a tax treaty between Mainland China and the jurisdiction of the foreign investors. For the Group, the applicable rates is 5% (2015: 5%). In estimating the withholding taxes on dividends expected to be distributed by those subsidiaries established in Mainland China in respect of earnings generated from 1 January 2008, the directors have made an assessment based on the factors which included the dividend policy and the level of capital and working capital required for the Group s operations in the foreseeable future. The aggregate amount of temporary differences associated with the investments in subsidiaries in Mainland China for which deferred tax liabilities have not been recognised totalled approximately HK$28,805,000 (2015: approximately HK$37,237,000). The Group has estimated tax losses arising in Mainland China and Indonesia of HK$73,596,000 (2015: HK$107,623,000) and HK$23,270,000 (2015: HK$33,959,000), respectively, that will expire in five years for offsetting against future taxable profits. Deferred tax assets have not been recognised in respect of those losses as the directors consider that it is uncertain whether sufficient taxable profits will be available against which the tax losses can be utilised. There are no income tax consequences attaching to the payment of dividends by the Company to its shareholders % 5% 5% 28,805,000 37,237,000 73,596, ,623,000 23,270,000 33,959,000 Annual Report 2016 Eagle Nice (International) Holdings Limited 123

96 28. ISSUED CAPITAL Authorised: 10,000,000,000 ordinary shares of HK$0.01 each Issued and fully paid: 499,680,000 ordinary shares of HK$0.01 each 10,000,000, , , ,680, ,997 4, RESERVES The amounts of the Group s reserves and the movements therein for the current and prior years are presented in the consolidated statement of changes in equity of the financial statements. The capital reserve of the Group represents the difference between the aggregate of the nominal value of the share capital of the subsidiaries acquired by the Company pursuant to a group reorganisation (the Reorganisation ) in August 2003, and the nominal value of the share capital of the Company issued in exchange therefor and the existing 1,000,000 shares of HK$0.01 each credited as fully paid, at par. In accordance with the relevant PRC regulations, subsidiaries registered in the PRC are required to transfer a certain of their profits after tax, as determined under the PRC accounting regulations, to the statutory surplus reserve, until the balance of the reserve reaches 50% of their respective registered capital. Subject to certain restrictions as set out in the relevant PRC regulations, the statutory surplus reserve may be used to offset against accumulated losses ,000, % 124 Eagle Nice (International) Holdings Limited Annual Report 2016

97 30. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS Major non-cash transactions (i) Deregistration of a subsidiary 30. (i) 2016 Net assets/liabilities disposed of: Prepayments, deposits and other receivables 653 Accrued liabilities and other payables (809) Tax payable (1,630) (1,786) Realisation of exchange fluctuation reserve 6,955 Loss on deregistration of a subsidiary (note 7) 7 5,169 There was no net inflow/outflow of cash and cash equivalents in respect of the deregistration of a subsidiary during the year. (ii) During the year, the Group purchased a motor vehicle at a consideration of HK$695,000 (2015: Nil) which was settled by cash of HK$550,000 (2015: Nil) and disposal of a motor vehicle at a consideration of HK$145,000 (2015: Nil). (ii) 695, , ,000 (iii) As at, HK$513,000 (2015: Nil) out of the aggregate considerations for disposal of items of property, plant and equipment of HK$2,191,000 (2015: Nil) remained unsettled and recorded in prepayments, deposits and other receivables in the consolidated statement of financial position. (iii) 2,191, ,000 Annual Report 2016 Eagle Nice (International) Holdings Limited 125

98 31. CONTINGENT LIABILITIES The Group did not have any significant contingent liabilities not provided for at the end of the reporting period (2015: Nil). As at, corporate guarantees to banks to the extent of HK$597,375,000 were given by the Company and certain subsidiaries of the Company (2015: HK$339,521,000 were given by the Company and a subsidiary of the Company and the Undertaking (note 13)) for banking facilities granted to certain subsidiaries of the Company, which were utilised to the extent of HK$197,900,000 (2015: HK$171,746,000) at the end of the reporting period (note 22) ,375, ,521, ,900, ,746, COMMITMENTS The Group had the following capital commitments at the end of the reporting period: 32. Contracted, but not provided for: Construction of factories and purchases of machinery and equipment for the Jiangxi Project Construction of factories and purchases of machinery and equipment for the investment project in Indonesia (the Indonesia Project ) ,035 1,488 Purchases of items of machinery and equipment 863 2,916 Renovation of factories ,252 4,675 Authorised, but not contracted for: Investment in the Jiangxi Project 29,091 1,550 Investment in the Indonesia Project 20,584 4,462 Renovation of factories and purchases of items of machinery and equipment 12,595 62,270 6, Eagle Nice (International) Holdings Limited Annual Report 2016

99 33. RELATED PARTY TRANSACTIONS The directors are the key management personnel of the Group. Details of their remuneration are disclosed in note 8 to the financial statements FINANCIAL INSTRUMENTS BY CATEGORY The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows: 2016 Financial assets 34. Loans and receivables Accounts and bills receivables 111,523 Financial assets included in prepayments, deposits and other receivables 5,477 Cash and cash equivalents 255, ,413 Financial liabilities Financial liabilities at amortised cost Accounts payable 133,423 Financial liabilities included in accrued liabilities and other payables 21,442 Interest-bearing bank borrowings 197, ,765 Annual Report 2016 Eagle Nice (International) Holdings Limited 127

100 34. FINANCIAL INSTRUMENTS BY CATEGORY (Continued) 2015 Financial assets 34. Loans and receivables Available-forsale financial assets Total Accounts and bills receivables 124, ,192 Financial assets included in prepayments, deposits and other receivables 8,056 8,056 Available-for-sale investments 63,750 63,750 Cash and cash equivalents 255, , ,647 63, ,397 Financial liabilities Financial liabilities at fair value through profit or loss held for trading Financial liabilities at amortised cost Total Accounts payable 105, ,090 Financial liabilities included in accrued liabilities and other payables 32,213 32,213 Derivative financial instruments 9,110 9,110 Interest-bearing bank borrowings 237, ,621 9, , , Eagle Nice (International) Holdings Limited Annual Report 2016

101 35. FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS The fair values of the Group s financial instruments, other than those with carrying amounts that reasonably approximate to fair values, are as follows: Liabilities measured at fair value: 35. Fair value measurement using significant observable inputs (Level 2) Derivative financial instruments 9,110 As at, the Group had no financial instruments measured at fair value under Level 1 (2015: Nil), Level 2 (2015: HK$9,110,000) or Level 3 (2015: Nil). During the years ended and 2015, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3 for both financial assets and financial liabilities. 12 9,110, Annual Report 2016 Eagle Nice (International) Holdings Limited 129

102 36. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES The Group s principal financial instruments comprise interest-bearing bank borrowings, and cash and cash equivalents. The main purpose of these financial instruments is to raise finance for the Group s operations. The Group has various other financial assets and liabilities such as accounts and bills receivables, financial assets included in prepayments, deposits and other receivables, available-for-sale investments, cash and cash equivalents, accounts payable, financial liabilities included in accrued liabilities and other payables, derivative financial instruments and interest-bearing bank borrowings which arise directly from its operations. The main risks arising from the Group s financial instruments are interest rate risk, foreign currency risk, liquidity risk and credit risk. The board of directors reviews and agrees policies for managing each of these risks and they are summarised below. Interest rate risk The Group s exposure to the risk of changes in market interest rates relates primarily to the Group s interest-bearing bank borrowings with floating interest rates. The Group regularly reviews and monitors the floating interest rate borrowings in order to manage its interest rate risk. The interestbearing bank borrowings, and cash and cash equivalents are stated at amortised cost and not revalued on a periodic basis. Floating rate interest income and expenses are credited/charged to the income statement as earned/incurred. The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group s net profit (through the impact on floating rate borrowings). 36. Increase in interest rate (basis points) Decrease in net profit , , Eagle Nice (International) Holdings Limited Annual Report 2016

103 36. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued) Foreign currency risk The Group has transactional currency exposures. Such exposures arise from a substantial portion of sales or purchases by operating units in United States Dollars ( US$ ) and RMB. As the foreign currency risks arising from sales and purchases can be set off with each other given that the Hong Kong dollars are pegged to US$, the Group believes its exposure to exchange rate risk is minimal. It is the policy of the Group to continue maintaining the balance of its sales and purchases in the same currency. During the year ended 31 March 2015, considering the appreciation of RMB, the Group had entered into foreign currency forward contracts to manage the foreign currency risk arising from the Group s operations. As the functional currency of the PRC subsidiaries is RMB and the Group s financial statements are reported in Hong Kong dollars, there will be a translation credit/(debit) to the exchange fluctuation reserve as a result of RMB appreciation/(depreciation). The majority of the Group s operating assets are located in Mainland China and denominated in RMB. The following table demonstrates the sensitivity at the end of the reporting period to a reasonably possible change in the RMB exchange rate, with all other variables held constant, of the Group s net profit (due to changes in the fair value of monetary assets and liabilities). 36. (i) Sensitivities analysis on monetary items denominated in RMB: (i) Increase/ (decrease) in exchange rate Increase/ (decrease) in net profit 2016 If HK$ strengthens against RMB 3% (451) If HK$ weakens against RMB (3%) If HK$ strengthens against RMB 3% (690) If HK$ weakens against RMB (3%) 690 Annual Report 2016 Eagle Nice (International) Holdings Limited 131

104 36. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued) Foreign currency risk (Continued) (ii) Sensitivities analysis on foreign currency forward contracts: 36. (ii) Increase/ (decrease) in exchange rate Increase/ (decrease) in net profit 2015 If US$ strengthens against RMB 3% (33,257) If US$ weakens against RMB (3%) 9,123 As at, no foreign currency forward contracts were outstanding, so no sensitivity analysis was presented as at. Liquidity risk The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool. This tool considers the maturity of both its financial instruments and financial assets (e.g., accounts and bills receivables) and the projected cash flows from operations. The Group maintains a balance between continuity of funding and flexibility through the use of interest-bearing bank borrowings and other banking facilities. The directors have reviewed the Group s working capital and capital expenditure requirements and determined that the Group has no significant liquidity risk. 132 Eagle Nice (International) Holdings Limited Annual Report 2016

105 36. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued) Liquidity risk (Continued) The maturity profile of the Group s financial liabilities as at the end of the reporting period, based on the contractual undiscounted payments, was as follows: On demand or within one year 0 Accounts payable 133,423 Financial liabilities included in accrued liabilities and other payables 21,442 Interest-bearing bank borrowings 198, , On demand or within one year 0 Accounts payable 105,090 Financial liabilities included in accrued liabilities and other payables 32,213 Derivative financial instruments 9,110 Interest-bearing bank borrowings 238, ,307 Annual Report 2016 Eagle Nice (International) Holdings Limited 133

106 36. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (Continued) Credit risk The Group trades only 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. Since the Group trades only with recognised and creditworthy third parties, there is generally no requirement for collateral. The credit risk of the Group s other financial assets, which comprise cash and cash equivalents and financial assets included in prepayments, deposits and other receivables, arises from default of the counterparty, with a maximum exposure equal to the carrying amounts of these instruments. Capital management The primary objectives of the Group s capital management are to safeguard the Group s ability to continue as a going concern and to maintain 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 and the risk characteristics of the underlying assets. 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 for managing capital during the years ended and The Group monitors capital using a current ratio, which is total current assets divided by total current liabilities. The Group s policy is to keep the current ratio above Eagle Nice (International) Holdings Limited Annual Report 2016

107 37. STATEMENT OF FINANCIAL POSITION OF THE COMPANY Information about the statement of financial position of the Company at the end of the reporting period is as follows: NON-CURRENT ASSETS Investments in subsidiaries 43,368 43,368 CURRENT ASSETS Due from subsidiaries 1,374,034 1,219,747 Loan to a subsidiary 61, ,400 Prepayments Cash and cash equivalents 575 9,270 Total current assets 1,436,435 1,447,547 CURRENT LIABILITIES Due to subsidiaries 660, ,768 Accrued liabilities 15 2 Derivative financial instruments 7,523 Interest-bearing bank borrowings 61,675 96,875 Tax payable 1,251 1,431 Total current liabilities 723, ,599 NET CURRENT ASSETS 713, ,948 Net assets 756, ,316 EQUITY Issued capital 4,997 4,997 Reserves (note) 751, ,319 Total equity 756, ,316 Annual Report 2016 Eagle Nice (International) Holdings Limited 135

108 37. STATEMENT OF FINANCIAL POSITION OF THE COMPANY (Continued) Note: A summary of the Company s reserves is as follows: 37. Notes Share premium account Capital reserve Retained profits Total At 1 April ,586 43, , ,974 Profit and total comprehensive income for the year 135, ,325 Interim 2015 dividend 11 (29,980) (29,980) At 31 March 2015 and 1 April 2015 Profit and total comprehensive income for the year 472,586 43, , , , ,873 Final 2015 dividend 11 (32,479) (32,479) Interim 2016 dividend 11 (59,962) (59,962) At 472,586 43, , ,751 The capital reserve of the Company represents the excess of the then consolidated net assets of the subsidiaries acquired by the Company pursuant to the Reorganisation over the nominal value of the share capital of the Company issued in exchange thereof. Under the Companies Law of the Cayman Islands, the capital reserve may be distributed to the shareholders of the Company, provided that immediately following the date on which the dividend is proposed to be distributed, the Company will be in a position to pay off its debts as and when they fall due in the ordinary course of business. 38. APPROVAL OF THE FINANCIAL STATEMENTS The financial statements were approved and authorised for issue by the board of directors of the Company on 24 June Eagle Nice (International) Holdings Limited Annual Report 2016

109 Eagle Nice (International) Holdings Limited (Incorporated in the Cayman Islands with limited liability)