Annual Report 2006 - 嘉年華國際控股有限公司 Interim R… · Bank of China (Hong Kong)...
Transcript of Annual Report 2006 - 嘉年華國際控股有限公司 Interim R… · Bank of China (Hong Kong)...
CASH Retail Management Group Limited
Annual Report 2006
(Stock Code #996)
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Contents
2 Corporate Information
3 Chairman’s Statement
5 Management Discussion and Analysis
10 Profiles of Directors and Senior Management
12 Corporate Governance Report
18 Directors’ Report
24 Independent Auditors’ Report
26 Consolidated Income Statement
27 Consolidated Balance Sheet
29 Consolidated Statement of Changes in Equity
31 Consolidated Cash Flow Statement
33 Notes to the Consolidated Financial Statements
86 Financial Summary
87 Notice of Annual General Meeting
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BOARD OF DIRECTORS
Executive directors:
Ms. Tin Yuen Sin Carol (Chairperson)
Mr. Choi Chiu Fai Stanley (Chief Executive Officer)
Mr. Chan Hon Ming Alan
Mr. Tse Pui To Dickson
Mr. Lam Yat Ming
Independent non-executive directors:
Mr. Ng Ka Chung Simon
Mr. Chan Wai Yip Freeman
Ms. Leung Po Ying Iris
AUDIT COMMITTEE
Mr. Chan Wai Yip Freeman (Chairman)
Mr. Ng Ka Chung Simon
Ms. Leung Po Ying Iris
REMUNERATION COMMITTEE
Mr. Chan Wai Yip Freeman (Chairman)
Mr. Ng Ka Chung Simon
Ms. Leung Po Ying Iris
Mr. Choi Chiu Fai Stanley
QUALIFIED ACCOUNTANT AND
COMPANY SECRETARY
Mr. Lee Cheuk Man
LEGAL ADVISORS
Fairbairn Catley Low & Kong
Kirkpatrick & Lockhart Preston Gates Ellis
AUDITORS
HLB Hodgson Impey Cheng
Chartered Accountants
Certified Public Accountants
REGISTERED OFFICE
Clarendon House, 2 Church Street,
Hamilton HM11 Bermuda
HEAD OFFICE AND PRINCIPAL PLACE OF
BUSINESS IN HONG KONG
Suite 3001, COSCO Tower
183 Queen’s Road Central, Hong Kong
REGISTRARS AND TRANSFER OFFICE
IN HONG KONG
Standard Registrars Limited
26/F Tesbury Centre
28 Queen’s Road East
Wanchai, Hong Kong
PRINCIPAL BANKERS
The Hongkong and Shanghai Banking Corporation Limited
Bank of China (Hong Kong) Limited
Industrial and Commercial Bank of China (Asia) Limited
Bank of Communication Co., Limited (Beijing Branch)
CONTACTS
Telephone : (852) 2877 7722
Facsimile : (852) 2877 5522
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Chairman’s Statement
The year 2006 was an important year to CASH Retail Management Group Limited (the “Company”) and its subsidiaries
(the “Group”). After the close of the offers on 30 November 2006, there was a change in control of the Company and a
change of its board composition in late October and November 2006.
For the financial year ended 31 December 2006, the Group recorded a consolidated net loss of approximately HK$95.4
million (2005: HK$76.6 million), representing an increase of approximately 24.5% over the corresponding period in 2005.
The increase in loss was mainly attributable to the impairment loss in respect of goodwill of approximately HK$144.9
million, which was non-recurrent in nature. The basic loss per share for the year was HK$0.09, which is similar to that of
last year.
During the year, the Group has changed its business development focus to the People’s Republic of China (the “PRC”)
market and implemented a significant corporate restructuring so as to align with the new business direction. In June 2006,
the Group disposed of its entire retail business in Hong Kong, including the retail chains of “Pricerite”, “LifeZtore” and
“3C Digital”, to its former substantial shareholder for a total consideration of approximately HK$130.6 million. The Group
recorded a disposal gain of approximately HK$61.7 million for such transaction.
After the disposal, the Group has ceased its retail business in Hong Kong completely and concentrated its resources on
developing the business of retail-related development planning advisory services, advertising and promotion advisory services
and operation of department store in the PRC. For the year ended 31 December 2006, the operations in the PRC have
contributed net profit of approximately HK$65.3 million to the Group.
The PRC has been experiencing a continuous and steady economic growth over the years and there is a rising trend in
personal income and spending power of the general public. The influx of foreign retailers and improving living standard of
the citizens have triggered great changes in the shopping behavior and purchase patterns of the consumers in the PRC and
created many prospective business opportunities in the retail industry. The management believes that the 2008 Olympics
will further boost the growth of the retail market in the PRC and thus the Group will accelerate its development of retail-
related business so as to ride the wave.
With the continuous favorable economic growth in the PRC, we also expect that the market fundamentals of the property
market in the PRC shall remain positive in the ensuing years. To tap into this lucrative market, the Group signed two sale
and purchase agreements on 14 April 2007 to acquire the entire equity interests in Fortune International Business Limited
and Sunny Sky Properties Limited, which hold two large-scaled commercial and residential complexes in Beijing, the PRC.
In the absence of any unforeseen adverse factors which will significant impact the property market in the PRC, we expect
that the properties to be acquired will contribute steady rental income as well as potential capital gain to the Group.
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As we move into 2007, we anticipate that the PRC market will be full of business opportunities. To further improve the
performance and profitability of the Group, we will continue to explore new investment opportunities which are expected to
provide significant growth in the future.
Tin Yuen Sin Carol
Chairperson
Hong Kong, 20 April 2007
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Management Discussion and Analysis
BUSINESS REVIEW
Development planning advisory service for shopping malls
The Group provides professional development planning advisory services to assist our clients in developing and managing
shopping malls. Advisory services offered include feasibility study, market research, market positioning, shopping mall
design and decoration, business canvass and image management. During the year, the Group signed advisory service contracts
with two shopping malls in Beijing, the PRC.
The rising prosperity in the PRC together with the policies for the relaxation of restrictions on foreign retailers entering the
PRC have caused great influx of foreign retailers in the prime cities of the PRC, especially in Beijing and Shanghai. The
competition from foreign retailers has posed great threat to the local retailers and consequently boosted the demand of
facilities development and management advisory services for the local shopping malls. Furthermore, as a consequence of
the increase in citizens’ disposable income and consumption power in the PRC, the consumers are not just looking for
stores with variety of quality merchandise, but also want to have enjoyable shopping experiences from the one-stop shopping
malls, which provide convenience and comfortable environment for them to shop, relax and gather with families and friends.
With the maturing of the retail market, it is expected that the demand for better managed retail space will further increase
and there will be an increasing needs of development planning advisory services for shopping malls to address the demand
from both tenants and end-users.
Advertising and promotion advisory services
The Group renders full advertising and promotion advisory services which include the provision of advices on marketing
strategies, brand management, commercials production and graphic designs. Moreover, the Group organizes seasonal
promotion activities to increase the customer traffic and stimulate consumer spending of the shopping malls. During the
year, successful campaigns such as co-organized with CCTV and The Beijing News,
co-organized with Mengniu Dairy, were launched with remarkable consumers’ participations.
Operation of department store
The operation of Oriental Kenzo (Beijing) Department Store ceased during the year owing to the early termination of the
tenancy agreement by the landlord. The Group was compensated by the landlord for early termination of the tenancy
agreement.
In order to capture the benefits of robust growth in the PRC’s retail industry and the business opportunities in association
with the 2008 Olympic Games in Beijing, the Group has identified several potential locations for the set up of new department
store so as to realize its advantages of having a full retail business licence which allows chain store operations throughout
the PRC.
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FINANCIAL REVIEW
Financial results
For the year ended 31 December 2006, the Group recorded a total revenue of approximately HK$552.2 million (2005:
HK$865.6 million), representing a decrease of approximately 36.2% as compared with last year. The net loss for the year
was approximately HK$95.4 million, representing an increase of approximately 24.5% as compared with the net loss of
approximately HK$76.6 million in last year.
Continuing Operations
The revenue from continuing operations for the year amounted to approximately HK$125.8 million, which accounted for
approximately 22.8% of the total revenue of the Group. The revenue from continuing operations for the year were mainly
derived from the provision of development planning advisory services for shopping malls, the provision of advertising and
promotion advisory services and the operation of department store in the PRC market. When compared with last year, the
revenue from continuing operations for the year ended 31 December 2006 has increased by approximately 100%.
The net loss from continuing operations for the year, including the impairment loss in respect of goodwill arose from the
acquisition of Oriental Kenzo of approximately HK$144.9 million, was approximately HK$116.2 million (2005:HK$3.4
million).
Discontinued Operation
The discontinued operation contributed a revenue of approximately HK$426.5 million (2005: HK$865.6 million) to the
Group for the year ended 31 December 2006, representing a decrease of approximately 50.7% when compared with last
year. On the other hand, the net loss from discontinued operation, excluding the gain on disposal of discontinued operations
amounting to approximately HK$61.7 million, has decreased by more than 44.1% from approximately HK$73.2 million in
2005 to approximately HK$40.9 million in 2006.
Capital structure, liquidity and financial resources
As at 31 December 2006, the current assets and current liabilities of the Group were approximately HK$532.4 million
(2005: HK$456.3 million) and HK$432.8 million (2005: HK$423.0 million) respectively. The liquidity ratio, which is
calculated as current assets over current liabilities, was approximately 1.2 times, which showed an improvement when
compared with that of 1.1 times at the previous year end. The Group’s total assets and total liabilities amounted to
approximately HK$612.1 million (2005: HK$931.5 million) and HK$432.8 million (2005: HK$690.7 million) respectively.
The debt ratio, which is calculated based on total liabilities over total assets, was 0.7 as at 31 December 2006, which was at
similar level of last year.
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Management Discussion and Analysis
The cash and cash equivalents as at 31 December 2006 was approximately HK$1.7 million (2005: HK$106.6 million). The
decrease was mainly attributable to the disposal of the cash rich retail business during the year.
The bank borrowings as at 31 December 2006 amounted to approximately HK$20.0 million (2005: HK$86.1 million),
representing a decrease of approximately 76.8%. The reduction was solely due to the disposal of retail businesses in Hong
Kong. All the outstanding borrowings are repayable within one year. As at 31 December 2006, the principal amount of
outstanding convertible loan notes amounted to approximately HK$273.2 million (2005: HK$257.2 million). The Group’s
gearing ratio, calculated as total interest bearing borrowings over total shareholders’ funds, was 163.5% as at 31 December
2006 as compared to 142.6% on 31 December 2005.
As at 31 December 2006, the authorized share capital of the Company was HK$60 million divided into 3,000,000,000
shares of HK$0.02 each and the issued share capital of the Company was approximately HK$21.9 million divided into
1,092,526,145 shares of HK$0.02 each.
On 9 February 2007, Fit Top Investments Limited (“Fit Top”), a substantial shareholder of the Company which is wholly-
owned by a Director of the Company, entered into a placing agreement and a top-up subscription agreement with a placing
agent and the Company respectively. Pursuant to the placing agreement, Fit Top placed through the placing agent an aggregate
of 100 million existing shares in the Company to the placees, who and whose ultimate beneficial owner(s) are independent
third parties of the Company and its connected persons, at a price of HK$0.28 per share. Pursuant to the top-up subscription
agreement, Fit Top subscribed for an aggregate of 100 million shares in the Company at a price of HK$0.28 per share.
FOREIGN EXCHANGE EXPOSURE
The Group’s transactions are mainly denominated in Hong Kong dollar and Renminbi (“RMB”). Therefore, the Group is
exposed to Renminbi exchange risk. The Group has not implemented any foreign currency hedging policy at the moment.
However, continuous monitoring on the foreign exchange exposure is carried out by the management and the management
will consider to hedge the foreign exchange exposure if it is significant to the Group.
CONTINGENT LIABILITIES AND CHARGES ON THE GROUP’S ASSETS
As at 31 December 2006, there were no material contingent liabilities or charges on the Group’s assets.
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EMPLOYEE INFORMATION
As at 31 December 2006, the Group had a total of 60 employees. The employees of the Group are remunerated in accordance
with their working experience and performance, and their salaries and benefits are kept at market level. For the year ended
31 December 2006, the total staff costs of the Group was approximately HK$62.7 million (2005: HK$98.6 million),
representing a decrease of approximately 36.4% over the previous year. The decrease in staff costs was mainly attributable
to the disposal of retail businesses in Hong Kong.
Apart from the basic salaries and employer’s contribution to Mandatory Provident Fund scheme, staff benefits also include
discretionary performance-based bonus, medical schemes, share options and sales commission.
MATERIAL ACQUISITIONS OR DISPOSALS OF SUBSIDIARIES
On 20 February 2006, the Group entered into an agreement to dispose of its entire equity interest in CASH Retail Management
(HK) Limited, whose subsidiaries are engaged in retail business in Hong Kong with brand names of Pricerite, 3C Digital
and LifeZtore, to a wholly-owned subsidiary of Celestial Asia Securities Holdings Limited, the Company’s former holding
company at a consideration of approximately HK$130.6 million. The disposal was completed on 30 June 2006.
Save for the aforementioned, no significant investments and material acquisitions or disposals of subsidiaries or affiliated
companies which had material impact on the financial results of the Group were made during the year ended 31 December
2006.
FUTURE PLANS FOR MATERIAL INVESTMENTS OR CAPITAL ASSETS
On 14 April 2007, two wholly-owned subsidiaries of the Company entered into two respective sale and purchase agreements
with an independent third party to acquire the entire equity interest in each of Fortune International Business Limited and
Sunny Sky Properties Limited and their respective shareholder’s loans at a total consideration of HK$1.6 billion, which
shall be satisfied by cash consideration of HK$1.456 billion and the issue of 400,000,000 new shares of the Company at an
issue price of HK$0.36 each. This constituted a very substantial acquisition under the Rules Governing the Listing of
Securities on the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) (the “Listing Rules”).
Fortune International Business Limited and Sunny Sky Properties Limited are investment holding companies and their
respective subsidiaries are principally engaged in property investment and development and real estate management. Major
assets owned by the acquired groups of Fortune International Business Limited and Sunny Sky Properties Limited include
two commercial and residential complexes, namely Oriental Kenzo Plaza ( ) and Shilibao ( ), in Beijing,
the PRC. The proposed acquisition is subject to shareholders’ approval at the forthcoming special general meeting and the
fulfillment or waive of the conditions precedent.
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Management Discussion and Analysis
PROSPECTS
The Directors consider that the strong growth and structural changes underway throughout the economy as well as the
expectation of the further RMB appreciation will fuel investment interest for quality properties in the PRC and keep the
medium-term to long-term prospects of the property market in the PRC remain positive. Therefore, for the year ahead, the
Group will expand its business scope to property investment and real estate management while continuing its efforts on
further developing retail business in the PRC. Given the promising market potential in the PRC property market, the Directors
expect that the commercial and residential complexes to be acquired in Beijing will contribute steady rental income as well
as upside potential gain for asset appreciation to the Group in the future.
The Board anticipates that the 2008 Olympics and the 2010 World Expo shall underpin the strong growth in the PRC retail
market in the coming years. Therefore, the Group will take active pursuit in building its department store operations and
related advisory services for retail business in the PRC. Meanwhile, the Group will also seek for new business opportunities
that may increase the Group’s profitability and shareholders’ value.
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EXECUTIVE DIRECTORS
Ms. Tin Yuen Sin Carol, aged 41, joined the Board on 1 September 2005 and has been the Chairperson of the Company
since 16 November 2006. Ms. Tin has extensive experience in Hong Kong — China trading business. She is responsible for
the overall strategic planning and policy making for the Company as well as to develop cordial relationship with business
associates in the commercial sector.
Mr. Choi Chiu Fai Stanley, aged 38, was appointed as the Chief Executive Officer of the Company and an executive
director with effect from 26 October 2006. He is responsible for the Company’s business management and operation, as
well as corporate development. Mr. Choi possesses extensive experience in business management, marketing promotion,
Hong Kong — China commercial operation and financial services including securities investment. Before joining the
Company, he worked for different sizable financial groups and corporations in Hong Kong with senior executive positions
such as managing director of Head & Shoulder Securities Limited and director of Tung Tai Securities Company Limited.
Mr. Choi graduated Magna Cum Laude in Business Administration from the Wichita State University (USA) and received
a Master of Science degree from the University of Illinois (USA). Recently, he was awarded a graduation certificate for
successfully completing a Master degree in law from the Law School of the Chinese People’s University.
Mr. Chan Hon Ming Alan, aged 47, was appointed as an executive director with effect from 26 October 2006 and is
responsible for the Company’s business management and operation, investment strategies and investor relationship
coordination. Mr. Chan has a solid background of more than 20 years of working experience in the securities industry.
Before joining the Company, he worked for several international securities corporations at senior executive positions such
as managing director of Magnum International Securities Limited and deputy managing director of China Everbright Securities
Limited. Mr. Chan was an executive director of Magnum International Holdings Limited, a company whose shares are
listed on the Main Board of the Stock Exchange, from December 1999 to June 2006. Mr. Chan graduated with a BBA
degree from The University of Texas at Arlington (USA) and received a MBA degree from the University of North Texas
(USA). He has extensive experience in corporate governance, capital market, financial services including securities investment.
Mr. Tse Pui To Dickson, aged 41, was appointed as an executive director with effect from 26 October 2006. Mr. Tse
previously worked in the banking industry for a period of more than 10 years with different international banks, including
IBA Bank, Belgian Bank and Sanwa bank, as senior manager in the corporate banking department. He possesses extensive
banking experience particularly in the corporate lending business. Currently, he is General Manager of Hong Kong Finance
Company Limited, a finance company in Hong Kong.
Mr. Lam Yat Ming, aged 47, was appointed as an executive director with effect from 26 October 2006. Mr. Lam graduated
from the University of Newcastle Upon Tyne (UK). Before joining the Company, he worked for different financial investment
services corporations in Hong Kong, including Tung Tai Group of Companies, and was responsible for company administration
and management. He possesses over 15 years of experience in the financial services industry including securities investment
and also in the retail business.
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Profiles of Directors and Senior Management
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. Ng Ka Chung Simon, aged 50, was appointed as an independent non-executive director on 28 February 2006. Mr. Ng
has extensive experience in the legal field and is currently a Barrister-At Law.
Mr. Chan Wai Yip Freeman, aged 44, was appointed as an independent non-executive director with effect from 26 October
2006. He is a Fellow member of the Association of Chartered Certified Accountants, a Fellow member of the Hong Kong
Institute of Certified Public Accountants and a Fellow member of the Taxation Institute of Hong Kong. He is a practicing
certified public accountant and possesses over 20 years of professional experience in auditing and tax consultancy services.
Ms. Leung Po Ying Iris, aged 37, was appointed as an independent non-executive director with effect from 26 October
2006. Ms. Leung graduated with a BBA degree from the University of Hong Kong and received a MBA degree from the
Hong Kong University of Science & Technology. She is a Fellow member of the Association of Chartered Certified
Accountants and an Associate member of the Hong Kong Institute of Certified Public Accountants. Ms. Leung is currently
General Manager of Growth-Link Trade Services Company Limited, a trade services company in Hong Kong, and possesses
over 14 years of professional and business experience in finance and investment services.
COMPANY SECRETARY AND QUALIFIED ACCOUNTANT
Mr. Lee Cheuk Man was appointed as the company secretary and qualified accountant of the Company with effect from 16
November 2006. Mr. Lee has extensive experience in auditing, financial management and accounting and has over 12 years
of experience with Hong Kong publicly listed companies. He is a member of the Hong Kong Institute of Certified Public
Accountants and a Fellow member of the Association of Chartered Certified Accountants.
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INTRODUCTION
The Company has all along committed to fulfill its responsibilities to its shareholders by ensuring that the proper processes
for supervision and management of the Group's businesses are duly operated and reviewed and that good corporate governance
practices and procedures, including but not limited to the Code on Corporate Governance Practices (“CG Code”) in Appendix
14 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Listing Rules”), are
established throughout the year ended 31 December 2006.
Throughout the year ended 31 December 2006, the Company meets all the code provisions as set out in the CG Code,
except for the only deviation from code provision A.2.1 of the CG Code for the period from 1 January 2006 to 25 October
2006 and the considered reasons are detailed in the Company's interim results 2006.
Save as disclosed in this report, the Company has complied with all the code provisions on CG Code.
BOARD OF DIRECTORS (THE “BOARD”) AND BOARD MEETING
Board Composition
The Board currently comprises five executive directors (“ED”), namely Ms. Tin Yuen Sin Carol (Chairperson), Mr. Choi
Chiu Fai Stanley (Chief Executive Officer), Mr. Chan Hon Ming Alan, Mr. Tse Pui To Dickson and Mr. Lam Yat Ming, and
three independent non-executive directors, namely Mr. Ng Ka Chung Simon, Mr. Chan Wai Yip Freeman and Ms. Leung Po
Ying Iris.
There is no service contract between the Company and each of the directors. Pursuant to the Bye-laws of the Company, each
of the directors will hold office and will be subject to retirement by rotation and re-election at the annual general meeting.
The Company complies with Rule 3.10 of the Listing Rules that there is sufficient number of independent non-executive
directors and each of them have appropriate professional qualifications. The Company has received from each of the
independent non-executive directors, an annual confirmation of his/her independence pursuant to Rule 3.13 of the Listing
Rules. The Company considers all of the independent non-executive directors are independent of the Company.
There is no financial, business, family or other material relationship between the Board members of the Company.
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Corporate Governance Report
Change of Board
There were the change of the Board composition in late October 2006 to November 2006 caused by the the mandatory
conditional cash offer for all the issued shares of the Company and the mandatory conditional cash offer for all outstanding
convertibles of the Company (the “Offers”) as follows:
On 11 August 2006 (as amended on 25 August 2006), Celestial Investment Group Limited entered into an agreement with
Fit Top Investments Limited (“Fit Top”) a company wholly and beneficially owned by Ms. Tin Yuen Sin Carol, to conditionally
dispose of (the “Disposal”) 294,965,087 shares of the Company to Fit Top at the consideration of HK$106,187,431.32.
Immediately prior to the said agreement, Ms. Tin Yuen Sin Carol was beneficially interested in 86,000,000 shares of the
Company, representing approximately 7.87% of the total issued shares of the Company. As all the conditions for completion
of the Disposal has been fulfilled and the completion of such Disposal took place on 19 October 2006, Fit Top and the
parties acting in concert with it owned 380,965,087 shares, representing approximately 34.87% of the total issued shares of
the Company at the date of the completion. Under the Hong Kong Code on Takeovers and Mergers, Fit Top is required to
make the Offers. The Offers became unconditional on 16 November 2006 and were closed on 30 November 2006. Reference
is made to the announcements dated 28 August 2006, 26 October 2006, 16 November 2006 and 30 November 2006 and the
above composite offer and response document dated 26 October 2006.
Rectification of deviation from the CG Code
On 26 October 2006, the Board appointed Mr. Choi Chiu Fai Stanley as the chief executive officer of the Company, since
then, the positions of the chairperson and chief executive officer are held separately by two executive directors to ensure
their respective independence, accountability and responsibility. Ms. Tin Yuen Sin Carol and Mr. Choi Chiu Fai Stanley are
the chairperson and chief executive officer of the Company respectively and each plays a distinctive role but complementing
each other. This rectifies the previous deviation from the code provision A.2.1 of the CG Code.
Operation of the Board
The Board is responsible for directing the Group's objectives and strategies, monitoring the implementation and managing
risks of the Group. Material matters are reserved for the Board's considerations. The Board has delegated the daily operational
responsibilities to the management of the Company.
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The Board held 26 meetings during the year ended 31 December 2006, of which 6 were full Board meetings and 20 were
ED meetings, and the respective attendance of each director at the board meetings are set out as follows:
Meetings Meetings
before the change after the change
of Board of Board
Attendance Attendance
No. of full Board No. of ED No. of ED
meetings: 6 meetings: 16 meetings: 4(Note 6)
Executive Directors:
Ms. Tin Yuen Sin Carol 3/6 5/16 3/4
Mr. Choi Chiu Fai Stanley (Note 1) N/A N/A 4/4
Mr. Chan Hon Ming Alan (Note 1) N/A N/A 4/4
Mr. Tse Pui To Dickson (Note 1) N/A N/A 3/4
Mr. Lam Yat Ming (Note 1) N/A N/A 4/4
Mr. Kwan Pak Hoo Bankee (Note 2) 6/6 7/16 N/A
Mr. Law Ping Wah Bernard (Note 2) 6/6 16/16 N/A
Ms. Kwok Lai Ling Elaine (Note 3) 3/3 1/3 N/A
Mr. Leung Siu Pong James (Note 2) 5/6 9/16 N/A
Mr. Li Yuen Cheuk Thomas (Note 2) 5/6 12/16 N/A
Independent Non-executive Directors:
Mr. Ng Ka Chung Simon (Note 4) 3/5 N/A N/A
Mr. Chan Wai Yip Freeman (Note 1) N/A N/A N/A
Ms. Leung Po Ying Iris (Note 1) N/A N/A N/A
Mr. Lo Ming Chi Charles (Note 2) 6/6 N/A N/A
Mr. Leung Ka Kui Johnny (Note 2) 6/6 N/A N/A
Dr. Hui Ka Wah Ronnie (Note 5) 1/1 N/A N/A
Notes:
(1) Appointed on 26 October 2006
(2) Resigned on 16 November 2006
(3) Resigned on 20 April 2006
(4) Appointed on 28 February 2006
(5) Resigned on 28 February 2006
(6) For the year ended 31 December 2006, there was no full board meetings held after the change of Board.
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Corporate Governance Report
AUDIT COMMITTEE
The audit committee of Company was established on 9 November 1999. The audit committee is chaired by Mr. Chan Wai
Yip Freeman and its members are Mr. Ng Ka Chung Simon and Ms. Leung Po Ying Iris, who are all independent non-
executive directors of the Company. The terms of reference of the audit committee had been complied since the establishment
of the audit committee and the primary role and function of the audit committee are (i) reviewing and supervising the
financial reporting system and internal control mechanism of the Company; (ii) monitoring the integrity of the financial
statements of the Group; (iii) reviewing the compliance issues with the Listing Rules and other compliance requirements;
and (iv) reviewing and consider the appointment of auditors and audit fee.
In 2006, the audit committee held 3 meetings and details of the attendance of each member of the committee are set out as
follows:
No. of meetings No. of meetings
before the change after the change
of Board: 3 of Board: 0
Members: Attendance Attendance
Mr. Ng Ka Chung Simon (Note 1) 1/3 0/0
Mr. Chan Wai Yip Freeman (Note 2) N/A 0/0
Ms. Leung Po Ying Iris (Note 2) N/A 0/0
Mr. Lo Ming Chi Charles (Note 3) 3/3 N/A
Mr. Leung Ka Kui Johnny (Note 3) 3/3 N/A
Dr. Hui Ka Wah Ronnie (Note 4) 0/3 N/A
Notes:
(1) Appointed on 28 February 2006
(2) Appointed on 26 October 2006
(3) Resigned on 16 November 2006
(4) Resigned on 28 February 2006
During the year, the audit committee has reviewed and commented on each of the interim and annual financial reports of the
Group, reviewed the Company’s internal control, reviewed and approved the terms of engagement and remuneration of the
external auditors, discussed with external auditors on the financial matters of the Group that arose during the course of the
audit and made relevant recommendations to the management of the Company.
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REMUNERATION COMMITTEE
The Company has maintained a remuneration committee throughout the year. The remuneration committee is chaired by
Mr. Chan Wai Yip Freeman and its members are Mr. Ng Ka Chung Simon and Ms. Leung Po Ying Iris, all of the remuneration
committee members are independent non-executive directors of the Company. The role and function of the remuneration
committee are (i) making recommendations to the Board on the policies and structure for the remuneration of directors; (ii)
reviewing and approving the remuneration package of each director; (iii) reviewing and approving the performance-based
remuneration; and (iv) engaging external professional advisors to assist and/or advise the remuneration committee on its
duties when necessary and reasonable.
In 2006, 2 meetings of the remuneration committee were held and details of the attendance of each member of the committee
are set out as follows:
No. of meetings No. of meetings
before the change after the change
of Board: 1 of Board: 1
Members: Attendance Attendance
Mr. Ng Ka Chung Simon (Note 1) 1/1 1/1
Mr. Chan Wai Yip Freeman (Note 2) N/A 1/1
Ms. Leung Po Ying Iris (Note 2) N/A 1/1
Mr. Lo Ming Chi Charles (Note 3) 1/1 N/A
Dr. Hui Ka Wah Ronnie (Note 4) 0/0 N/A
Mr. Kwan Pak Hoo Bankee (Note 3) 1/1 N/A
Notes:
(1) Appointed on 28 February 2006
(2) Appointed on 26 October 2006
(3) Resigned on 16 November 2006
(4) Resigned on 28 February 2006
During the year, the remuneration committee has reviewed the policy for the remuneration of directors and reviewed and
approved the remuneration package of each director, including benefits in kind, pension right, bonus payment and
compensation payment.
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Corporate Governance Report
NOMINATION OF DIRECTORS
No nomination committee was established by the Company, however, the Company has adopted a nomination policy for the
criteria, procedures and process of appointment and removal of directors. Criteria for the selection of director include
qualification, working experience and relevant provisions in the Listing Rules. Each of the directors shall possess high and
professional standard of a set of core criteria of competence.
At the meeting held by the Board, with the presence of Mr. Choi Chiu Fai Stanley, Mr. Chan Hon Ming Alan, Mr. Tse Pui
To Dickson, Mr. Lam Yat Ming, Mr. Chan Wai Yip Freeman and Ms. Leung Po Ying Iris, it was resolved that all the existing
directors shall be recommended to be retained by the Company. Moreover, with reference to the Bye-laws of the Company,
Mr. Choi Chiu Fai Stanley, Mr. Chan Hon Ming Alan, Mr. Tse Pui To Dickson, Mr. Lam Yat Ming, Mr. Ng Ka Chung
Simon, Mr. Chan Wai Yip Freeman and Ms. Leung Po Ying Iris shall retire, and being eligible, offer themselves for re-
election at the forthcoming annual general meeting of the Company.
AUDITORS’ REMUNERATION
Fee for audit services were HK$850,000 for the year ended 31 December 2006, which were charged to the Group’s income
statement. There was no non-audit services during the year.
INTERNAL CONTROL
The Board has conducted a review over the effectiveness of the Group’s internal control system, which covered the major
aspects of financial, operational, compliance and risk management to ensure that appropriate levels of protection are in
place. No significant areas of concern were identified. The Board was satisfied with the effectiveness of the Group’s internal
control procedures.
DIRECTORS' SECURITIES TRANSACTIONS
The Company has adopted a code of conduct regarding securities transactions of the directors on terms no less exacting
than the required standard set out in the Model Code for Securities Transactions by Directors of Listing Issuers (“Model
Code”) as set out in Appendix 10 to the Listing Rules. The Company have made specific enquiry of all directors and all
directors have confirmed, that they have complied with the required standard as set out in the Model Code regarding the
directors' securities transactions adopted by the Company during the year ended 31 December 2006.
FINANCIAL STATEMENTS
The directors acknowledge their responsibilities of the directors for preparing the accounts. The auditors’ reporting
responsibilities on the financial statements and other further details are set out in the auditors’ report contained in this
annual report.
Directors ’ ReportAnn
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2006 CASH Retail Management Group Limited
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The Directors are pleased to present their report and the audited consolidated financial statements of CASH Retail
Management Group Limited (the “Company”) and its subsidiaries (collectively, the “Group”) for the year ended 31 December
2006.
PRINCIPAL ACTIVITIES
The principal activity of the Company is investment holding. The principal activities and other particulars of its subsidiaries
are set out in Note 41 to the consolidated financial statements.
In prior years, the Group was also engaged in the retailing of furniture and household goods and trendy digital products in
Hong Kong. These operations were discontinued in the current year (see Note 10).
RESULTS
The results of the Group for the year ended 31 December 2006 are set out in the consolidated income statement.
PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTY
Details of the movements during the year in the property, plant and equipment and investment property of the Group are set
out in Notes 15 and 17 to the consolidated financial statements respectively.
SHARE CAPITAL
Details of the share capital of the Company are set out in Note 30 to the consolidated financial statements.
CONVERTIBLE LOAN NOTES
Details of the convertible loan notes of the Company are set out in Note 32 to the consolidated financial statements.
DISTRIBUTABLE RESERVES
At 31 December 2006, the Company’s reserves available for distribution to shareholders amounted to approximately HK$15
million, comprising contributed surplus of approximately HK$202 million less accumulated losses of approximately HK$187
million.
PRE-EMPTIVE RIGHTS
There are no provisions for pre-emptive rights under the Company’s Bye-laws or the laws of Bermuda which would oblige
the Company to offer new shares on a pro-rata basis to existing shareholders.
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2006CASH Retail Management Group Limited
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Directors ’ Report
DIRECTORS
The directors of the Company during the year and up to the date of this annual report were as follows:
Executive directors:
Ms. Tin Yuen Sin Carol (Appointed on 1 September 2005 and
become the Chairperson since 16 November 2006)
Mr. Choi Chiu Fai Stanley (Appointed on 26 October 2006
as executive director and Chief Executive Officer)
Mr. Chan Hon Ming Alan (Appointed on 26 October 2006)
Mr. Tse Pui To Dickson (Appointed on 26 October 2006)
Mr. Lam Yat Ming (Appointed on 26 October 2006)
Mr. Kwan Pak Hoo Bankee (Resigned on 16 November 2006)
Mr. Law Ping Wah Bernard (Resigned on 16 November 2006)
Mr. Leung Siu Pong James (Resigned on 16 November 2006)
Mr. Li Yuen Cheuk Thomas (Resigned on 16 November 2006)
Ms. Kwok Lai Ling Elaine (Resigned on 20 April 2006)
Independent non-executive directors:
Mr. Ng Ka Chung Simon (Appointed on 28 February 2006)
Mr. Chan Wai Yip Freeman (Appointed on 26 October 2006)
Ms. Leung Po Ying Iris (Appointed on 26 October 2006)
Mr. Lo Ming Chi Charles (Resigned on 16 November 2006)
Mr. Leung Ka Kui Johnny (Resigned on 16 November 2006)
Dr. Hui Ka Wah Ronnie (Resigned on 28 February 2006)
The following directors shall retire and, being eligible, offer themselves for re-election at the forthcoming annual general
meeting of the Company:
(i) Mr. Choi Chiu Fai Stanley, Mr. Chan Hon Ming Alan, Mr. Tse Pui To Dickson and Mr. Lam Yat Ming shall retire at
the annual general meeting of the Company in accordance with Bye-law 115 of the Company’s Bye-laws; and
(ii) Mr. Ng Ka Chung Simon, Mr. Chan Wai Yip Freeman and Ms. Leung Po Ying Iris, being independent non-executive
directors, shall retire at the annual general meeting of the Company in each year in accordance with their terms of
office of directorship.
DIRECTORS’ SERVICE CONTRACTS
No director proposed for re-election at the forthcoming annual general meeting has a service contract which is not determinable
by the Company within one year without payment of compensation (other than statutory compensation).
Directors ’ ReportAnn
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2006 CASH Retail Management Group Limited
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DIRECTORS’ INTERESTS IN CONTRACTS OF SIGNIFICANCE
There was no contract of significance to which the Company or any of its subsidiaries was a party and in which a directorof the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time duringthe year.
CONFIRMATION OF INDEPENDENCE
The Company has received, from each of the independent non-executive directors, an annual confirmation of his/herindependence pursuant to Rule 3.13 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong KongLimited (the “Stock Exchange”) (the “Listing Rules”). The Company considers all of the independent non-executive directorsare independent of the Company.
EMOLUMENT POLICY
The emolument policy of the employees of the Group is set up by the Remuneration Committee on the basis of their merit,qualifications and competence. The emoluments of the directors of the Company are decided by the Remuneration Committee,having regard to the Company’s operating results, individual performance and comparable market statistics.
Details of the Company’s share option scheme are set out in Note 31 to the consolidated financial statements.
Details of the Group’s retirement benefits schemes are set out in Note 38 to the consolidated financial statements.
DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS IN SECURITIES
As at 31 December 2006, the interests or short positions of the directors and chief executive of the Company in the shares,underlying shares and debentures of the Company and its associated corporations, within the meaning of Part XV of theSecurities and Futures Ordinance (“SFO”), as recorded in the register maintained by the Company pursuant to Section 352of SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for SecuritiesTransactions by Directors of Listed Companies, were as follows:
Long positions — Ordinary shares of HK$0.02 each of the Company
Percentage ofNumber of the issued
ordinary share capitalName of director Capacity shares held of the Company
Ms. Tin Yuen Sin Carol Beneficial owner 86,000,000 7.88%Held by a controlled corporation (Note) 531,551,354 48.65%
617,551,354 56.53%
Note: At 31 December 2006, Ms. Tin Yuen Sin Carol (“Ms. Tin”) was deemed to be interested in 531,551,354 ordinary shares of the
Company through her 100% beneficial interest in Fit Top Investments Limited (“Fit Top”).
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2006CASH Retail Management Group Limited
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Directors ’ Report
Save as disclosed above, as at 31 December 2006, none of the directors, chief executive of the Company or their associates
had any interests or short positions in any shares, underlying shares or debentures of the Company or any of its associated
corporations.
ARRANGEMENTS TO PURCHASE SHARES OR DEBENTURES
At no time during the year was the Company or any of its subsidiaries a party to any arrangements to enable the directors of
the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body
corporate.
SUBSTANTIAL SHAREHOLDERS
As at 31 December 2006, so far as is known to any director or chief executive of the Company, the persons, other than a
director or chief executive of the Company, who had interests or short positions in the shares and underlying shares of the
Company as recorded in the register required to be kept under Section 336 of the SFO were as follows:
Long positions — Ordinary shares of HK$0.02 each of the Company
Number of Number of Shareholding
Name Capacity shares underlying shares (%)
Fit Top (Note 1) Beneficial owner 531,551,354 — 48.65%
Jeffnet Inc (Note 2) Trustee of a 97,062,500 — 8.88%
discretionary trust
Cash Guardian Limited (Note 2) Interest in a controlled 97,062,500 — 8.88%
corporation
Celestial Asia Securities Interest in a controlled 94,062,500 — 8.61%
Holdings Limited (“CASH”) corporation
(Note 2)
Celestial Investment Group Beneficial owner 94,062,500 — 8.61%
Limited (“CIGL”) (Note 2)
Mr. Qian Song Wen (Note 3) Beneficial owner — 400,000,000 36.61%
Mr. Pun So (Note 4) Beneficial owner — 240,000,000 21.97%
Directors ’ ReportAnn
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2006 CASH Retail Management Group Limited
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Notes:
1. At 31 December 2006, Fit Top was a company wholly owned by Ms. Tin. Pursuant to the SFO, Ms. Tin was deemed to be
interested in the shares held by Fit Top.
2. The shares were held as to 3,000,000 shares by Cash Guardian Limited and as to 94,062,500 shares by CIGL and its subsidiaries.
At 31 December 2006, CIGL was a wholly-owned subsidiary of CASH which was owned as to approximately 37.49% by Cash
Guardian Limited (which was 100% beneficially owned by Jeffnet Inc). Jeffnet Inc held these shares as trustee of The Jeffnet
Unit Trust, units of which were held by a discretionary trust established for the benefit of the family members of Mr. Kwan Pak
Hoo Bankee (“Mr. Kwan”). Pursuant to the SFO, Mr. Kwan, Jeffnet Inc and Cash Guardian Limited were deemed to be interested
in the shares held by CIGL through CASH.
3. This refers to the convertible loan note in the outstanding amount of HK$180,000,000 held by Mr. Qian Song Wen which is
convertible into a maximum number of 400,000,000 ordinary shares of the Company at the initial conversion price of HK$0.45
per share (subject to adjustment).
4. This refers to the convertible loan note in the outstanding amount of HK$108,000,000 held by Mr. Pun So which is convertible
into a maximum number of 240,000,000 ordinary shares of the Company at the initial conversion price of HK$0.45 per share
(subject to adjustment).
Save as disclosed above, the Company has not been notified of any substantial shareholder (other than a director or chiefexecutive of the Company) who had any other relevant interests or short positions in the shares or underlying shares of theCompany at 31 December 2006 within the meaning of Part XV of SFO.
PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES
During the year ended 31 December 2006, neither the Company nor any of its subsidiaries purchased, sold or redeemed anyof the Company’s listed securities.
SUFFICIENCY OF PUBLIC FLOAT
Based on the information publicly available to the Company and within the knowledge of the Directors as at the latestpracticable date prior to the issue of this annual report, the Company has maintained a sufficient public float throughout theyear ended 31 December 2006.
MAJOR CUSTOMERS AND SUPPLIERS
In the year under review, the Group’s purchases attributable to the five largest suppliers accounted for less than 30% of theGroup’s total purchases, and the Group’s sales attributable to the five largest customers accounted for less than 30% of theGroup’s total sales.
POST BALANCE SHEET EVENTS
Details of significant events occurring after the balance sheet date are set out in Note 40 to the consolidated financialstatements.
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Directors ’ Report
AUDITORS
HLB Hodgson Impey Cheng were appointed as the Company’s auditors with effect from 11 January 2007 to fill the casual
vacancy following the resignation of Deloitte Touche Tohmatsu on 14 December 2006. There have been no other changes of
auditors for the past three financial years.
The consolidated financial statements of the Group for the year ended 31 December 2006 were audited by HLB Hodgson
Impey Cheng. A resolution will be submitted to the annual general meeting to re-appoint HLB Hodgson Impey Cheng as
auditors of the Company.
On behalf of the Board
Tin Yuen Sin Carol
Chairperson
Hong Kong, 20 April 2007
Independent Auditors ’ ReportAnn
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2006 CASH Retail Management Group Limited
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To the shareholders of
CASH Retail Management Group Limited
(Incorporated in Bermuda with limited liability)
We have audited the consolidated financial statements of CASH Retail Management Group Limited (the “Company”) and
its subsidiaries (collectively referred to as the “Group”) set out on pages 26 to 85 which comprise the consolidated balance
sheet as at 31 December 2006, and the consolidated income statement, the consolidated statement of changes in equity and
the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other
explanatory notes.
DIRECTORS’ RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The directors of the Company are responsible for the preparation and the true and fair presentation of these consolidated
financial statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of
Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility
includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation
of the consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting
and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
AUDITORS’ RESPONSIBILITY
Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our
opinion solely to you, as a body, in accordance with section 90 of the Bermuda Companies Act, and for no other purpose.
We do not assume responsibility towards or accept liability to any other person for the contents of this report. We conducted
our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public
Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance as to whether the consolidated financial statements are free from material misstatement.
31/F, Gloucester Tower
The Landmark
11 Pedder Street Central
Hong Kong
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Independent Auditors ’ Report
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of
material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments,
the auditors consider internal control relevant to the entity’s preparation and true and fair presentation of the consolidated
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the
overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OPINION
In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Group as at 31
December 2006 and of the Group’s loss and cash flows for the year then ended in accordance with Hong Kong Financial
Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong
Companies Ordinance.
HLB Hodgson Impey Cheng
Chartered Accountants
Certified Public Accountants
Hong Kong, 20 April 2007
Consol idated Income StatementFor the year ended 31 December 2006
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2006 CASH Retail Management Group Limited
26
2006 2005
Notes HK$’000 HK$’000
(Restated)
Continuing operations
Revenue 6 125,759 —
Other income 47,804 99
Changes in inventories of finished goods (3,601) —
Employee benefits expense (12,205) —
Depreciation expense (20,552) —
Impairment loss in respect of goodwill 18 (144,881) —
Finance costs 8 (17,971) (2,165)
Other operating expenses (74,028) (1,344)
Loss before tax (99,675) (3,410)
Income tax expense 9 (16,514) —
Loss for the year from continuing operations (116,189) (3,410)
Discontinued operations
Profit/(Loss) for the year from discontinued operations 10 20,771 (73,181)
Loss for the year 11 (95,418) (76,591)
Loss per share
From continuing and discontinued operations
Basic and diluted (HK$ per share) 14 (0.09) (0.09)
From continuing operations
Basic and diluted (HK$ per share) 14 (0.11) (0.004)
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Consol idated Balance SheetAt 31 December 2006
2006 2005
Notes HK$’000 HK$’000
(Restated)
Non-current assets
Property, plant and equipment 15 8,920 169,946
Prepaid lease payments 16 — 4,694
Investment property 17 — 5,000
Goodwill 18 70,800 215,681
Available-for-sale investments 19 — 1,760
Prepaid rental 20 — 38,462
Deposits paid for acquisition of leasehold improvements 20 — 23,702
Rental and utility deposits — 8,713
Deferred tax assets 21 — 7,254
79,720 475,212
Current assets
Inventories 22 — 51,464
Account receivables 23 79,787 2,132
Prepayments, deposits and other receivables 24 344,497 253,018
Amount due from Celestial Asia Securities Holdings Limited
(“CASH”) and its subsidiaries (“CASH Group”) 25 106,458 —
Listed investments held for trading 26 — 4,106
Pledged bank deposits 27 — 38,900
Bank balances and cash 27 1,671 106,645
532,413 456,265
Total assets 612,133 931,477
Current liabilities
Account payables 28 11,587 192,961
Accrued liabilities and other payables 28 108,967 139,860
Amount due to a director 28 1,237 —
Taxation payable 17,842 14,560
Bank borrowings, secured 29 20,000 75,580
Convertible loan notes — due within one year 32 273,192 —
432,825 422,961
Net current assets 99,588 33,304
Total assets less current liabilities 179,308 508,516
Consol idated Balance SheetAt 31 December 2006
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2006 CASH Retail Management Group Limited
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2006 2005
Notes HK$’000 HK$’000
(Restated)
Capital and reserves
Share capital 30 21,851 21,851
Reserves 157,457 218,891
Total equity 179,308 240,742
Non-current liabilities
Bank borrowings, secured 29 — 10,555
Convertible loan notes — due after one year 32 — 257,219
— 267,774
179,308 508,516
The consolidated financial statements on pages 26 to 85 were approved and authorized for issue by the board of directors on
20 April 2007 and were signed on its behalf by:
Tin Yuen Sin Carol Choi Chiu Fai Stanley
Director Director
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Consolidated Statement of Changes in EquityFor the year ended 31 December 2006
ConvertibleBuilding loan PRC
Share Share Contributed Capital revaluation notes equity Translation statutory Accumulated Totalcapital premium surplus reserve reserve reserve reserve reserves losses Reserves equity
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Note (a) Note (b) Note (c) Note (e)
At 1 January 2005 13,334 47,631 170,942 6,055 — — — — (94,170) 130,458 143,792
Gain on revaluation of buildings
and total income recognized
directly in equity — — — — 701 — — — — 701 701
Loss for the year — — — — — — — — (76,591) (76,591) (76,591)
Total recognized income and
expenses for the year — — — — 701 — — — (76,591) (75,890) (75,890)
Issue of new shares 8,120 127,020 — — — — — — — 127,020 135,140
Issue of new shares due to
exercise of share options 397 5,871 — — — — — — — 5,871 6,268
Share issue expenses — (1,514) — — — — — — — (1,514) (1,514)
Recognition of equity
component of convertible
loan notes — — — — — 32,946 — — — 32,946 32,946
At 31 December 2005 21,851 179,008 170,942 6,055 701 32,946 — — (170,761) 218,891 240,742
Loss for the year — — — — — — — — (95,418) (95,418) (95,418)
Exchange differences arising
on translation of foreign
operations and total income
recognized directly in equity — — — — — — 9,711 — — 9,711 9,711
Total recognized income and
expenses for the year — — — — — — 9,711 — (95,418) (85,707) (85,707)
Released on disposal of
the Retail Group — — 31,029 (6,055) (701) — — — — 24,273 24,273
Transfer — — — — — — — 15,071 (15,071) — —
At 31 December 2006 21,851 179,008 201,971 — — 32,946 9,711 15,071 (281,250) 157,457 179,308
Consolidated Statement of Changes in EquityFor the year ended 31 December 2006
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Notes:
(a) Under the Companies Act 1981 of Bermuda (as amended), the share premium of the Company can be used in paying up unissued
shares of the Company to be issued to members of the Company as fully paid bonus shares.
(b) The contributed surplus of the Group represents the net amount arising from the reduction of share premium account, capital
reduction and amounts transferred to write off the accumulated losses.
(c) The capital reserve of the Group represents the difference between the nominal value of the share capital of Pricerite BVI
Limited acquired pursuant to the Group reorganization and the nominal value of the issued share capital of the Company issued
in exchange thereof.
(d) Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus of a company is available for distribution to
shareholders. However, a company cannot declare or pay a dividend, or make a distribution out of contributed surplus, if:
(i) the company is, or would after the payment be, unable to pay its liabilities as they become due; or
(ii) the realizable value of the company’s assets would thereby be less than the aggregate of its liabilities and its issued share
capital and share premium account.
(e) The People’s Republic of China (the “PRC”) statutory reserves consist of a reserve fund and an expansion fund provided in
accordance with the articles of association of the PRC subsidiaries. Laws and regulations in the PRC allow foreign investment
enterprises to appropriate from profit after taxation, prepared in accordance with the PRC rules and regulations, an annual
amount to the reserve fund and expansion fund according to the decision of the board or the articles of association.
The reserve fund is to be used to expand the working capital of the PRC subsidiaries. When the PRC subsidiaries suffer losses,
the reserve fund may be used to make up accumulated losses under special circumstances.
The expansion fund is to be used for business expansion and, if approved, can also be used to increase the capital of the PRC
subsidiaries.
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Consol idated Cash Flow StatementFor the year ended 31 December 2006
2006 2005
Notes HK$’000 HK$’000
Operating activitiesLoss for the year (95,418) (76,591)Adjustments for:
Income tax expenses 16,514 —Interest income (7,127) (1,738)Interest expenses 20,131 5,806Gain on disposal of the Retail Group (61,695) —Release of attributable reserves on disposal
of the Retail Group 24,974 —Surplus on revaluation of buildings — (6,803)Increase in fair value of investment property — (454)Advertising and telecommunication services expenses 35 — 908Write-down of inventories 566 11,366Impairment loss in respect of account receivables 5,087 845Impairment loss in respect of other receivables — 1,488Depreciation of property, plant and equipment 33,682 25,125Amortization of prepaid lease payments 51 102Impairment loss in respect of goodwill 144,881 1,100Impairment loss (written back)/recognized in respect of
property, plant and equipment (344) 4,472(Gain)/Loss on disposal of property, plant and equipment (25,845) 1,947
Operating cash flows before movements in working capital 55,457 (32,427)Movements in working capital:
Prepaid rental 38,462 —Deposits paid for acquisition of leasehold improvements 23,702 —Rental and utility deposits (2,020) (1,695)Inventories (11,369) 687Account receivables (84,488) 4Prepayments, deposits and other receivables (133,181) (36,031)Listed investments held for trading 1,973 14,977Amounts due from fellow subsidiaries 63,003 6,920Account payables (34,835) (17,947)Accrued liabilities and other payables 6,825 16,259Amount due to a director 1,237 —
Cash used in operations (75,234) (49,253)PRC Enterprise Income Tax paid (5,778) —
Net cash used in operating activities (81,012) (49,253)
Consol idated Cash Flow StatementFor the year ended 31 December 2006
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2006 CASH Retail Management Group Limited
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2006 2005
Notes HK$’000 HK$’000
Investing activities
Interest received 1,259 1,738
Proceeds from disposal of property, plant and equipment 96,106 —
Increase in pledged bank deposits (5,500) (2,898)
Purchases of property, plant and equipment (20,780) (22,155)
Acquisition of subsidiaries (net of cash and
cash equivalents acquired) 33 (75,000) (166,979)
Disposal of the Retail Group (net of cash and
cash equivalents disposed) 34 (20,355) —
Net cash used in investing activities (24,270) (190,294)
Financing activities
Decrease in bank overdrafts — (23)
Decrease in trust receipt loans — (11,025)
Proceeds on issue of a convertible loan note — 108,000
Interest paid (4,158) (3,641)
Repayment of obligations under finance leases — (30)
Proceeds on issue of shares — 96,408
Repayment of bank loans (2,128) (5,215)
Share issue expenses — (1,514)
Net cash (used in)/generated by financing activities (6,286) 182,960
Net decrease in cash and cash equivalents (111,568) (56,587)
Cash and cash equivalents at the beginning of the year 106,645 163,232
Effects of exchange rate changes 6,594 —
Cash and cash equivalents at the end of the year 1,671 106,645
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
1. GENERAL
CASH Retail Management Group Limited ( ) (the “Company”) was incorporated in Bermuda
as an exempted company with limited liability under the Companies Act 1981 of Bermuda (as amended) and its
shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”). The
Company’s registered office is situated at Clarendon House, 2 Church Street, Hamilton HM11 Bermuda. The
Company’s principal place of business in Hong Kong is situated at Suite 3001, COSCO Tower, 183 Queen’s Road
Central, Hong Kong.
The consolidated financial statements are presented in Hong Kong dollars, which is the same as the functional
currency of the Company.
The Company and its subsidiaries (collectively, referred to as the “Group”) are principally engaged in the department
store business and the provision of retail management services such as development planning and marketing advisory
services.
At 31 December 2006, the Company was controlled by Fit Top Investments Limited, a company incorporated in the
British Virgin Islands with limited liability and wholly-owned by Ms. Tin Yuen Sin Carol, the chairperson and
executive director of the Company.
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
(“HKFRSs”)
In the current year, the Group has applied, for the first time, a number of new standard, amendments and interpretations
(the “new HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), which are
either effective for accounting periods beginning on or after 1 December 2005 or 1 January 2006. The adoption of
these new HKFRSs has had no material impact on the amounts reported for the current or prior accounting years.
The Group has not early applied the following new standards, amendment or interpretations that have been issued
but are not yet effective. The Directors anticipate that the application of these new standards, amendment or
interpretations will have no material impact on the results and the financial position of the Group.
HKAS 1 (Amendment) Capital Disclosures 1
HKFRS 7 Financial Instruments: Disclosures 1
HKFRS 8 Operating segments 8
HK(IFRIC)-Int 7 Applying the Restatement Approach under
HKAS 29 Financial Reporting in Hyperinflationary Economies 2
HK(IFRIC)-Int 8 Scope of HKFRS 2 3
HK(IFRIC)-Int 9 Reassessment of Embedded Derivatives 4
HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment 5
HK(IFRIC)-Int 11 HKFRS 2-Group and Treasury Share Transactions 6
HK(IFRIC)-Int 12 Service Concession Arrangements 7
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS
(“HKFRSs”) (Continued)
1. Effective for annual periods beginning on or after 1 January 2007
2. Effective for annual periods beginning on or after 1 March 2006
3. Effective for annual periods beginning on or after 1 May 2006
4. Effective for annual periods beginning on or after 1 June 2006
5. Effective for annual periods beginning on or after 1 November 2006
6. Effective for annual periods beginning on or after 1 January 2007
7. Effective for annual periods beginning on or after 1 January 2008
8. Effective for annual periods beginning on or after 1 January 2009
3. SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared on the historical cost basis except for certain properties
and financial instruments, which are measured at revalued amounts or fair values, as explained in the accounting
policies set out below.
The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting
Standards issued by the HKICPA. In addition, the consolidated financial statements include applicable disclosures
required by the Rules Governing the Listing of Securities on the Stock Exchange and by the Hong Kong Companies
Ordinance.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities (including
special purpose entities) controlled by the Company (its subsidiaries). Control is achieved where the Company has
the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement
from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies
into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Minority interests in the net assets of consolidated subsidiaries are presented separately from the Group’s equity
therein. Minority interests in the net assets consist of the amount of those interests at the date of the original business
combination and the minority’s share of changes in equity since the date of the combination. Losses applicable to
the minority in excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of the
Group except to the extent that the minority has a binding obligation and is able to make an additional investment to
cover the losses.
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Business combinations
The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured
at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the
business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions
for recognition under HKFRS 3 Business Combinations are recognized at their fair values at the acquisition date,
except for non-current assets (or disposal groups) that are classified as held for sale in accordance with HKFRS 5
Non-current Assets Held for Sale and Discontinued Operations, which are recognized and measured at fair value
less costs to sell.
Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost
of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities recognized. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s
identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is
recognized immediately in profit or loss.
The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair
value of the assets, liabilities and contingent liabilities recognized.
Goodwill
Goodwill arising on an acquisition of a subsidiary represents the excess of the cost of acquisition over the Group’s
interest in the fair value of the identifiable assets, liabilities and contingent liabilities of the relevant subsidiary at the
date of acquisition. Such goodwill is carried at cost less any accumulated impairment losses.
Capitalized goodwill arising on an acquisition of a subsidiary is presented separately in the consolidated balance
sheet.
For the purposes of impairment testing, goodwill arising from an acquisition is allocated to each of the relevant
cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the
acquisition. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, and
whenever there is an indication that the unit may be impaired. For goodwill arising on an acquisition in a financial
year, the cash-generating unit to which goodwill has been allocated is tested for impairment before the end of that
financial year.
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Goodwill (Continued)
When the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment
loss is allocated to reduce the carrying amount of any goodwill allocated to the unit first, and then to the other assets
of the unit pro rata on the basis of the carrying amount of each asset in the unit. Any impairment loss for goodwill is
recognized directly in the consolidated income statement. An impairment loss for goodwill is not reversed in
subsequent periods.
On subsequent disposal of a subsidiary, the attributable amount of goodwill capitalized is included in the determination
of the amount of profit or loss on disposal.
Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through continuing use. This condition is regarded as met only
when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present
condition.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of the assets’ (disposal
groups’) previous carrying amount and fair value less costs to sell.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable
for goods provided in the normal course of business, net of discounts and sales related taxes.
(i) Sales of goods are recognized when goods are delivered and title has passed.
(ii) Income from provision of retail management services is recognized when services are provided.
(iii) Income from provision of retail premises is recognized in accordance with the terms of the relevant contracts.
(iv) Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding
and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash
receipts through the expected life of the financial asset to that asset’s net carrying amount.
(v) Dividend income from investments is recognized when the shareholders’ rights to receive payment have been
established.
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, plant and equipment
Property, plant and equipment are stated at cost or fair value less subsequent accumulated depreciation and accumulated
impairment losses.
Buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in
the consolidated balance sheet at their revalued amounts, being the fair value at the date of revaluation less any
subsequent accumulated depreciation and any subsequent accumulated impairment losses. Revaluations are performed
with sufficient regularity such that the carrying amount does not differ materially from that which would be determined
using fair values at the balance sheet date.
Any revaluation increase arising on revaluation of buildings is credited to the building revaluation reserve, except to
the extent that it reverses a revaluation decrease of the same asset previously recognized as an expense, in which
case the increase is credited to the consolidated income statement to the extent of the decrease previously charged.
A decrease in net carrying amount arising on revaluation of an asset is dealt with as an expense to the extent that it
exceeds the balance, if any, on the building revaluation reserve relating to a previous revaluation of that asset. On the
subsequent sale or retirement of a revalued asset, the attributable revaluation surplus is transferred to retained profits.
Depreciation is provided to write off the cost or fair value of items of property, plant and equipment over their
estimated useful lives and after taking into account of their estimated residual value, using the straight-line method.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets
or, where shorter, the term of the relevant lease.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds and the carrying amount of the item) is included in the consolidated
income statement in the year in which the item is derecognized.
Investment properties
On initial recognition, investment properties are measured at cost, including any directly attributable expenditure.
Subsequent to initial recognition, investment properties are measured using the fair value model. Gains or losses
arising from changes in the fair value of investment property are included in profit or loss for the period in which
they arise.
An investment property is derecognized upon disposal or when the investment property is permanently withdrawn
from use or no future economic benefits are expected from its disposals. Any gain or loss arising on derecognition of
the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is
included in the consolidated income statement in the year in which the item is derecognized.
Ann
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Leasing
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards
of ownership to the lessee. All other leases are classified as operating leases.
The Group as lessor
Rental income from operating leases is recognized in the consolidated income statement on a straight-line basis over
the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added
to the carrying amount of the leased asset and recognized as an expense on a straight-line basis over the lease term.
The Group as lessee
Assets held under finance leases are recognized as assets of the Group at their fair value at the inception of the lease
or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included
in the consolidated balance sheet as a finance lease obligation. Lease payments are apportioned between finance
charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of
the liability.
Finance charges are charged directly to profit or loss, unless they are directly attributable to qualifying assets, in
which case they are capitalized in accordance with the Group’s general policy on borrowing costs (see below).
Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the
relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are recognized as a
reduction of rental expense over the lease term on a straight-line basis.
Leasehold land
Interest in leasehold land is amortized over the lease term on a straight-line basis.
Foreign currencies
In preparing the financial statements of each individual group entity, transactions in currencies other than the functional
currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the
primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the
transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the
rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign
currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary
items that are measured in terms of historical cost in a foreign currency are not retranslated.
Ann
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreign currencies (Continued)
Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are
recognized in profit or loss in the period in which they arise, except for exchange differences arising on a monetary
item that forms part of the Company’s net investment in a foreign operation, in which case, such exchange differences
are recognized in equity in the consolidated financials statements. Exchange differences arising on the retranslation
of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising
on the retranslation of non-monetary items in respect of which gains and losses are recognized directly in equity, in
which cases, the exchange differences are also recognized directly in equity.
For the purposes of presenting the consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are translated into the presentation currency of the Group (i.e. Hong Kong dollars) at the rate of exchange
prevailing at the balance sheet date, and their income and expenses are translated at the average exchange rates for
the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing
at the dates of transactions are used. Exchange differences arising, if any, are recognized as a separate component of
equity (the translation reserve). Such exchange differences are recognized in profit or loss in the period in which the
foreign operation is disposed of.
Goodwill and fair value adjustments on identifiable assets acquired arising on an acquisition of a foreign operation
are treated as assets and liabilities of that foreign operation and translated at the rate of exchange prevailing at the
balance sheet date. Exchange differences arising are recognized in the translation reserve.
Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, are capitalized
as part of the cost of those assets. Capitalization 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 eligible for capitalization.
All other borrowing costs are recognized in profit or loss in the period in which they are incurred.
Retirement benefit costs
Payments to defined contribution retirement benefit plans are charged as an expense when employees have rendered
service entitling them to the contributions.
Ann
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40
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the
consolidated income statement because it excludes items of income or expense that are taxable or deductible in
other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is recognized on differences between the carrying amounts of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for
using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary
differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the
temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of
other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries,
except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary
difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is
no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the
asset realized. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also dealt with in equity.
Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is calculated using the weighted average
method.
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments
Financial assets and financial liabilities are recognized on the consolidated balance sheet when a group entity becomes
a party to the contractual provisions of the instrument. Financial assets and financial liabilities are initially measured
at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial
liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or
deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.
Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through
profit or loss are recognized immediately in profit or loss.
Financial assets
The Group’s financial assets are classified into one of the four categories, including financial assets at fair value
through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets.
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis. Regular
way purchases or sales are purchases or sales of financial assets that require delivery of assets within the time frame
established by regulation or convention in the marketplace. The accounting policies adopted in respect of each
category of financial assets are set out below.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss has two subcategories, including financial assets held for trading
and those designated as at fair value through profit or loss on initial recognition.
A financial asset other than a financial asset held for trading may be designated as at fair value through profit or loss
upon initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise; or
• the financial asset forms part of a group of financial assets or financial liabilities or both, which is managed
and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk
management or investment strategy, and information about the grouping is provided internally on that basis;
or
• it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire
combined contract (asset or liability) to be designated as at fair value through profit or loss.
At each balance sheet date subsequent to initial recognition, financial assets at fair value through profit or loss are
measured at fair value, with changes in fair value recognized directly in profit or loss in the period in which they
arise.
Ann
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2006 CASH Retail Management Group Limited
42
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. At each balance sheet date subsequent to initial recognition, loans and receivables (including
account receivables, deposits and other receivables, amount due from the CASH Group, pledged bank deposits and
bank balances) are carried at amortized cost using the effective interest method, less any identified impairment
losses. An impairment loss is recognized in profit or loss when there is objective evidence that the asset is impaired,
and is measured as the difference between the asset’s carrying amount and the present value of the estimated future
cash flows discounted at the original effective interest rate. Impairment losses are reversed in subsequent periods
when an increase in the asset’s recoverable amount can be related objectively to an event occurring after the impairment
was recognized, subject to a restriction that the carrying amount of the asset at the date the impairment is reversed
does not exceed what the amortized cost would have been had the impairment not been recognized.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed
maturities that the Group’s management has the positive intention and ability to hold to maturity. At each balance
sheet date subsequent to initial recognition, held-to-maturity investments are measured at amortized cost using the
effective interest method, less any identified impairment losses. An impairment loss is recognized in profit or loss
when there is objective evidence that the asset is impaired, and is measured as the difference between the asset’s
carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed
on initial recognition. Impairment losses are reversed in subsequent periods when an increase in the investment’s
recoverable amount can be related objectively to an event occurring after the impairment was recognized, subject to
the restriction that the carrying amount of the asset at the date the impairment is reversed does not exceed what the
amortized cost would have been had the impairment not been recognized.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated or not classified as financial assets
at fair value through profit or loss, loans and receivables or held-to-maturity investments. At each balance sheet date
subsequent to initial recognition, available-for-sale financial assets are measured at fair value. Changes in fair value
are recognized in equity, until the financial asset is disposed of or is determined to be impaired, at which time, the
cumulative gain or loss previously recognized in equity is removed from equity and recognized in profit or loss. Any
impairment losses on available-for-sale financial assets are recognized in profit or loss. Impairment losses on available-
for-sale equity investments will not reverse in profit or loss in subsequent periods. For available-for-sale debt
investments, impairment losses are subsequently reversed if an increase in the fair value of the investment can be
objectively related to an event occurring after the recognition of the impairment loss.
Ann
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Available-for-sale financial assets (Continued)
For available-for-sale equity investments that do not have a quoted market price in an active market and whose fair
value cannot be reliably measured and derivatives that are linked to and must be settled by delivery of such unquoted
equity instruments, they are measured at cost less any identified impairment losses at each balance sheet date
subsequent to initial recognition. An impairment loss is recognized in profit or loss when there is objective evidence
that the asset is impaired. The amount of the impairment loss is measured as the difference between the carrying
amount of the asset and the present value of the estimated future cash flows discounted at the current market rate of
return for a similar financial asset. Such impairment losses will not reverse in subsequent periods.
Financial liabilities and equity
Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the
contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of
its liabilities. The Group’s financial liabilities are generally classified into financial liabilities at fair value through
profit or loss and other financial liabilities. The accounting policies adopted in respect of financial liabilities and
equity instruments are set out below.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss has two subcategories, including financial liabilities held for
trading and those designated as at fair value through profit or loss on initial recognition.
A financial liability other than a financial liability held for trading may be designated as at fair value through profit
or loss upon initial recognition if:
• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise; or
• the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed
and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk
management or investment strategy, and information about the grouping is provided internally on that basis;
or
• it forms part of a contract containing one or more embedded derivatives, and HKAS 39 permits the entire
combined contract (asset or liability) to be designated as at fair value through profit or loss.
Ann
ual
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial liabilities at fair value through profit or loss (Continued)
At each balance sheet date subsequent to initial recognition, financial liabilities at fair value through profit or loss
are measured at fair value, with changes in fair value recognized directly in profit or loss in the period in which they
arise.
Other financial liabilities
Other financial liabilities (including account payables, accrued liabilities and other payables and bank borrowings)
are subsequently measured at amortized cost, using the effective interest method.
Convertible loan notes
Convertible loan notes issued by the Company that contain both the liability and conversion option components are
classified separately into respective items on initial recognition. Conversion option will be settled by the exchange
of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity instruments is
an equity instrument.
On initial recognition, the fair value of the liability component is determined using the prevailing market interest
rate of similar non-convertible debts. The difference between the proceeds of the issue of the convertible loan notes
and the fair value assigned to the liability component, representing the conversion option for the holder to convert
the loan notes into equity, is included in equity (convertible loan notes equity reserve).
In subsequent periods, the liability component of the convertible loan notes is carried at amortized cost using the
effective interest method. The equity component, represented by the option to convert the liability component into
ordinary shares of the Company, will remain in convertible loan notes equity reserve until the conversion option is
exercised (in which case the balance stated in convertible loan notes equity reserve will be transferred to share
premium). Where the option remains unexercised at the expiry date, the balance stated in convertible loan notes
equity reserve will be released to the retained profits. No gain or loss is recognized in profit or loss upon conversion
or expiration of the option.
Transaction costs that relate to the issue of the convertible loan notes are allocated to the liability and equity components
in proportion to the allocation of the proceeds. Transaction costs relating to the equity component are charged
directly to equity. Transaction costs relating to the liability component are included in the carrying amount of the
liability component and amortized over the period of the convertible loan notes using the effective interest method.
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Consideration paid to reacquire the Company’s own equity instruments are deducted from equity. No gain or loss is
recognized in profit or loss.
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the
holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original
or modified terms of a debt instrument. A financial guarantee contract issued by the Group and not designed as at
fair value through profit or loss is recognized initially at its fair value less transaction costs that are directly attributable
to the issue of the financial guarantee contract. Subsequent to initial recognition, the Group measures the financial
guarantee contact at the higher of: (i) the amount determined in accordance with HKAS 37 Provisions, Contingent
Liabilities and Contingent Assets; and (ii) the amount initially recognized less, when appropriate, cumulative
amortization recognized in accordance with HKAS 18 Revenue.
Derecognition
Financial assets are derecognized when the rights to receive cash flows from the assets expire or, the financial assets
are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial
assets. On derecognition of a financial asset, the difference between the asset’s carrying amount and the sum of the
consideration received and receivable and the cumulative gain or loss that had been recognized directly in equity is
recognized in profit or loss.
Financial liabilities are derecognized when the obligation specified in the relevant contract is discharged, cancelled
or expires. The difference between the carrying amount of the financial liability derecognized and the consideration
paid is recognized in profit or loss.
Provisions
Provisions are recognized when the Group has a present obligation as a result of a past event, and it is probable that
the Group will be required to settle that obligation. Provisions are measured at the directors’ best estimate of the
expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the
effect is material.
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Provisions (Continued)
Contingent liabilities acquired in a business combination
Contingent liabilities acquired in a business combination are initially measured at fair value at the date of acquisition.
At subsequent balance sheet date, such contingent liabilities are measured at the higher of the amount that would be
recognized in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount
initially recognized less cumulative amortization.
Share-based payment transactions
Equity-settled share-based payment transactions
For share options granted to employees, the fair value of services received determined by reference to the fair value
of share options granted at the grant date is expensed on a straight-line basis over the vesting period, with a
corresponding increase in equity (share options reserve).
At each balance sheet date, the Group revises its estimates of the number of options that are expected to ultimately
vest. The effect of the change in estimate, if any, is recognized in profit or loss with a corresponding adjustment to
share options reserve.
At the time when the share options are exercised, the amount previously recognized in share options reserve will be
transferred to share premium. When the share options are forfeited after the vesting date or are still not exercised at
the expiry date, the amount previously recognized in share options reserve will be transferred to retained profits.
For share options granted to suppliers in exchange for goods or services, they are measured at the fair value of the
goods or services received. The fair values of the goods or services are recognized as expenses immediately, unless
the goods or services qualify for recognize as assets. Corresponding adjustments have been made to equity.
Cash-settled share-based payment transactions
For cash-settled share-based payments, the Group measures the goods or services acquired and the liability incurred
at the fair value of the liability. At each balance sheet date, the liability is remeasured at its fair value until the
liability is settled, with any changes in fair value recognized in profit or loss.
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
3. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment losses (other than goodwill)
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an
asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable
amount. An impairment loss is recognized as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate
of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would
have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment
loss is recognized as income immediately.
4. KEY SOURCES OF ESTIMATION UNCERTAINTY
The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the
balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year:
(a) Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating
units to which goodwill has been allocated. The value in use calculation requires the Group to estimate the
future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to
calculate the present value. Details of the impairment loss calculation are disclosed in Note 18.
(b) Estimated useful lives of property, plant and equipment
Management determines the estimated useful lives and related depreciation charges for its property, plant
and equipment. This estimate is based on the historical experience of the actual useful lives of property, plant
and equipment of similar nature and functions. It could change significantly as a result of technical innovations
and competitor actions in response to severe industry cycles. Management will increase the depreciation
charges where useful lives are less than previously estimated, or it will write-off or write-down technically
obsolete or non-strategic assets that have been abandoned or sold.
(c) Impairment loss of trade and other receivables
The Group’s policy for doubtful receivables is based on the on-going evaluation of the collectability and
aging analysis of the trade and other receivables and on management’s judgments. Considerable judgment is
required in assessing the ultimate realization of these receivables, including the current creditworthiness and
the past collection history of each debtor, and the present values of the estimated future cash flows discounted
at the effective interest rates. If the financial conditions of the Group’s debtors were to deteriorate, resulting
in an impairment of their ability to make payments, additional impairment loss of trade and other receivables
may be required.
Ann
ual
Rep
ort
2006 CASH Retail Management Group Limited
48
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s major financial instruments include bank balances and borrowings, account receivables, deposits and
other receivables, amount due from the CASH Group, account payables, accrued liabilities and other payables and
convertible loan notes. Details of these financial instruments are disclosed in the respective notes. The risks associated
with these financial instruments and the policies on how to mitigate these risks are set out below. The management
manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective
manner.
Credit risk
As at 31 December 2006, the Group’s maximum exposure to credit risk which will cause a financial loss to the
Group due to failure to discharge an obligation by the counterparties is arising from the carrying amount of the
respective recognized financial assets as stated in the consolidated balance sheet.
In order to minimize the credit risk, the management of the Group has delegated a team responsible for monitoring
procedures to ensure that follow up action is taken to recover overdue debts. In addition, the Group reviews the
recoverable amount of each individual trade debt and loan receivable at each balance sheet date to ensure that
adequate impairment losses are made for irrecoverable amounts. In this regard, the Directors consider that the Group’s
credit risk is significantly reduced.
Interest rate risk
The Group is exposed to both fair value interest rate risk and cash flows interest rate risk through the impact of the
rate changes on fixed interest rate borrowings and floating interest rate borrowings respectively. The Group currently
does not have an interest rate hedging policy. However, the management monitors interest rate exposure and will
consider hedging significant interest rate exposure should the need arise.
Foreign currency risk
The majority of the Group’s transactions, trade and other receivables and payables are denominated in Renminbi
and the Group is therefore exposed to foreign currency risk. The Group currently does not have a foreign currency
hedging policy. However, the management monitors foreign exchange exposure and will consider hedging significant
foreign currency exposure should the need arise.
Liquidity risk
In the management of the liquidity risk, the Group monitors and maintains a level of cash and cash equivalents
deemed adequate by the management to finance the Group’s operations and mitigate the effects of fluctuations in
cash flows. The management monitors the utilization of borrowings and ensures compliance with loan covenants.
Ann
ual
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49
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
6. REVENUE
An analysis of the Group’s revenue for the year, for both continuing and discontinued operations, is as follows:
2006 2005
HK$’000 HK$’000
Continuing operations
Operation of department store 12,679 —
Provision of retail premises 64,320 —
Provision of retail management services 48,760 —
125,759 —
Discontinued operations
Sales of furniture and household goods and trendy
digital products, net of discounts and returns 426,452 865,647
Ann
ual
Rep
ort
2006 CASH Retail Management Group Limited
50
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
7. BUSINESS AND GEOGRAPHICAL SEGMENTS
For the year ended 31 December 2005, the Group reported the geographical segments as its primary segment
information and the business segments as its secondary segment information. For the year ended 31 December 2006,
management of the Group considers it more appropriate to present the business segments as its primary segment
information and the geographical segments as its secondary segment information.
Primary segment information — Business segments
Year ended Continuing operations Discontinued operations
31 December 2006 Department store Retailing of furniture
business and and household
provision of retail goods and trendy
management services digital products Consolidated
HK$’000 HK$’000 HK$’000
REVENUE
External sales 125,759 426,452 552,211
RESULTS
Segment results 81,843 (40,924) 40,919
Interest expense on convertible loan notes (15,973)
Impairment loss in respect of goodwill (144,881)
Unallocated income 6,281
Unallocated corporate expenses (26,945)
Gain on disposal of discontinued operations 61,695
Loss before tax (78,904)
Income tax expense (16,514)
Loss for the year (95,418)
BALANCE SHEET
ASSETS
Segment assets 432,740 — 432,740
Unallocated corporate assets 179,393
Consolidated total assets 612,133
LIABILITIES
Segment liabilities 147,636 — 147,636
Unallocated corporate liabilities 285,189
Consolidated total liabilities 432,825
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ual
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2006CASH Retail Management Group Limited
51
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
7. BUSINESS AND GEOGRAPHICAL SEGMENTS (Continued)
Primary segment information — Business segments (Continued)
Year ended Continuing operations Discontinued operations
31 December 2006 Department store Retailing of furniture
business and and household
provision of retail goods and trendy
management services digital products Consolidated
HK$’000 HK$’000 HK$’000
OTHER INFORMATION
Capital expenditure 8,424 12,356 20,780
Depreciation of property,
plant and equipment 20,552 13,130 33,682
Amortization of prepaid lease payments — 51 51
Impairment loss in respect of
account receivables 5,087 — 5,087
Write-down of inventories 46 520 566
(Gain)/Loss on disposal of property,
plant and equipment (26,098) 253 (25,845)
Ann
ual
Rep
ort
2006 CASH Retail Management Group Limited
52
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
7. BUSINESS AND GEOGRAPHICAL SEGMENTS (Continued)
Primary segment information — Business segments (Continued)
Before the acquisition of Timecastle International Limited and its subsidiaries (the “Timecastle Group”) on 30
December 2005 which are engaged in the department store business and the provision of retail management services
in the PRC, the Group’s revenue was substantially derived from the retailing of furniture and household goods and
trendy digital products in Hong Kong. Accordingly, no analysis of the Group’s sales and results by business segment
is presented for the year ended 31 December 2005. Details of the acquisition of the Timecastle Group are set out in
Note 33.
The following is an analysis of assets and liabilities and other information by business segments for the year ended
31 December 2005:
Year ended Continuing operations Discontinued operations
31 December 2005 Department store Retailing of furniture
business and and household
provision of retail goods and trendy
management services digital products Consolidated
HK$’000 HK$’000 HK$’000
BALANCE SHEET
ASSETS
Segment assets 391,981 539,496 931,477
LIABILITIES
Segment liabilities 182,356 508,379 690,735
OTHER INFORMATION
Capital expenditure 88,231 22,611 110,842
Depreciation of property,
plant and equipment — 25,125 25,125
Amortization of prepaid lease payments — 102 102
Impairment loss in respect of
account receivables — 845 845
Impairment loss in respect of other receivables — 1,488 1,488
Write-down of inventories — 11,366 11,366
Loss on disposal of property,
plant and equipment — 1,947 1,947
Ann
ual
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2006CASH Retail Management Group Limited
53
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
7. BUSINESS AND GEOGRAPHICAL SEGMENTS (Continued)
Secondary segment information — Geographical segments
Year ended 31 December 2006 PRC Hong Kong Total
HK$’000 HK$’000 HK$’000
Segment revenue 125,759 426,452 552,211
Segment assets 432,740 179,393 612,133
Capital expenditure 8,424 12,356 20,780
Year ended 31 December 2005 PRC Hong Kong Total
HK$’000 HK$’000 HK$’000
Segment revenue — 865,647 865,647
Segment assets 391,981 539,496 931,477
Capital expenditure 88,231 22,611 110,842
8. FINANCE COSTS
Continuing Discontinued
operations operations Consolidated
2006 2005 2006 2005 2006 2005
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Interest on:
Bank borrowings wholly
repayable within five years 1,998 — 2,160 3,640 4,158 3,640
Finance leases — — — 1 — 1
Imputed interest expense
on convertible loan notes 15,973 2,165 — — 15,973 2,165
17,971 2,165 2,160 3,641 20,131 5,806
Ann
ual
Rep
ort
2006 CASH Retail Management Group Limited
54
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
9. INCOME TAX EXPENSE
2006 2005
HK$’000 HK$’000
Current tax:
PRC Enterprise Income Tax 9,118 —
Deferred tax (Note 21) 7,396 —
Tax charge for the year 16,514 —
No provision for Hong Kong Profits Tax has been made in the consolidated financial statements as the Company and
its subsidiaries had no assessable profits arising in Hong Kong for both years.
The provision for PRC Enterprise Income Tax is calculated based on the applicable income tax rates on the assessable
profit of each of the Group’s PRC subsidiaries as determined in accordance with the relevant income tax rules and
regulations in the PRC.
The tax charge for the year can be reconciled to the profit/(loss) before tax per the consolidated income statement as
follows:
2006 2005
HK$’000 HK$’000
Profit/(Loss) before tax
— Continuing operations (99,675) (3,410)
— Discontinued operations 20,771 (73,181)
(78,904) (76,591)
Taxation at applicable income tax rate of 33% (2005: 17.5%) (26,038) (13,403)
Tax effect of income not taxable for tax purpose (11,135) (1,537)
Tax effect of expenses not deductible for tax purpose 53,687 6,759
Tax effect of estimated tax loss not recognized — 8,181
Tax charge for the year 16,514 —
Details of the deferred tax assets are set out in Note 21.
The applicable income tax rate has been changed to 33% as the majority of the operating entities within the Group
are operating in the PRC.
Ann
ual
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ort
2006CASH Retail Management Group Limited
55
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
10. DISCONTINUED OPERATIONS
On 20 February 2006, the Company entered into a sale and purchase agreement (the “VSD Agreement”) with Celestial
Investment Group Limited (“CIGL” — a wholly owned subsidiary of CASH). Pursuant to the VSD Agreement, the
Company disposed of its entire equity interest in CASH Retail Management (HK) Limited and its subsidiaries
(collectively, the “Retail Group”) including the entire loan due from the Retail Group to the Company, at an aggregate
consideration of HK$130,590,000. The Retail Group represented all retail businesses in Hong Kong previously
carried on by the Group.
The transaction was approved by an ordinary resolution passed by the shareholders at a special general meeting held
on 12 June 2006, and the disposal was completed on 30 June 2006 and the Group ceased to carry on any retail
business in Hong Kong. Accordingly, the results attributable to the Retail Group are presented as discontinued
operations for the year ended 31 December 2006, and the comparative figures for the year ended 31 December 2005
have been reclassified as discontinued operations. Details of the assets and liabilities disposed of are disclosed in
Note 34.
Profit/(Loss) for the year from discontinued operations 2006 2005HK$’000 HK$’000
Revenue 426,452 865,647Cost of sales (287,602) (595,179)Other income 2,963 8,268Selling and distribution costs (156,881) (288,417)Administrative expenses (24,040) (59,211)Other operating expenses — (2,333)Surplus on revaluation of buildings — 6,803Increase in fair value of investment property — 454Impairment loss written back/(recognized) in respect of property,
plant and equipment 344 (4,472)Impairment loss recognized in respect of goodwill — (1,100)Finance costs (2,160) (3,641)
Loss before and after tax (40,924) (73,181)Gain on disposal of discontinued operations 61,695 —
Profit/(Loss) for the year from discontinued operations 20,771 (73,181)
Cash flows from discontinued operations 2006 2005HK$’000 HK$’000
Net cash flows from operating activities 19,788 (48,643)Net cash flows from investing activities (67,265) (26,140)Net cash flows from financing activities 1,909 (19,934)
Net cash flows from discontinued operations (45,568) (94,717)
Ann
ual
Rep
ort
2006 CASH Retail Management Group Limited
56
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
11. LOSS FOR THE YEAR
Loss for the year has been arrived at after charging/(crediting):
Continuing Discontinued
operations operations Consolidated
2006 2005 2006 2005 2006 2005
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Surplus on revaluationof buildings — — — (6,803) — (6,803)
Increase in fair value ofinvestment property — — — (454) — (454)
Impairment loss (writtenback)/recognized inrespect of property,plant and equipment — — (344) 4,472 (344) 4,472
Impairment loss in respectof goodwill 144,881 — — 1,100 144,881 1,100
Impairment loss in respectof account receivables(included in otheroperating expenses) 5,087 — — 845 5,087 845
Impairment loss in respectof other receivables(included in otheroperating expenses) — — — 1,488 — 1,488
Write-down of inventories 46 — 520 11,366 566 11,366Auditors’ remuneration 850 — — 1,500 850 1,500Amortization of prepaid
lease payments — — 51 102 51 102Depreciation of property,
plant and equipment 20,552 — 13,130 25,125 33,682 25,125(Gain)/Loss on disposal
of property, plant andequipment (26,098) — 253 1,947 (25,845) 1,947
Operating lease rentalsin respect of premises— Minimum lease
payments 10,945 — 47,072 94,975 58,017 94,975— Contingent rentals — — 2,974 5,553 2,974 5,553
10,945 — 50,046 100,528 60,991 100,528
Ann
ual
Re p
ort
2006CASH Retail Management Group Limited
57
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
11. LOSS FOR THE YEAR (Continued)
Loss for the year has been arrived at after charging/(crediting): (Continued)
Continuing Discontinued
operations operations Consolidated
2006 2005 2006 2005 2006 2005
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Employee benefits expense
(including directors’
remuneration)
— Wages and salaries 11,897 — 48,182 95,563 60,079 95,563
— Contributions to
retirement benefits
schemes 308 — 2,320 3,031 2,628 3,031
12,205 — 50,502 98,594 62,707 98,594
Net realized result on
disposal and change
in fair value of
investments held
for trading — — 70 (2,161) 70 (2,161)
Interest income (6,015) (99) (1,112) (1,639) (7,127) (1,738)
Net foreign exchange
(gain)/loss — — (16) 10 (16) 10
Ann
ual
Rep
ort
2006 CASH Retail Management Group Limited
58
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
12. DIRECTORS’ REMUNERATION
The remuneration paid or payable to every director of the Company were as follows:
Other emoluments paid toFees paid to executive directorsindependent Salaries, Contributions to
For the year ended non-executive allowances and retirement31 December 2006 directors benefits in kind benefits schemes Total
HK$’000 HK$’000 HK$’000 HK$’000
Executive directorsTin Yuen Sin Carol — 307 7 314Choi Chiu Fai Stanley
(appointed on 26 October 2006) — 108 5 113Chan Hon Ming Alan
(appointed on 26 October 2006) — 87 2 89Tse Pui To Dickson
(appointed on 26 October 2006) — 18 — 18Lam Yat Ming
(appointed on 26 October 2006) — 141 4 145Kwan Pak Hoo Bankee
(resigned on 16 November 2006) — — — —Law Ping Wah Bernard
(resigned on 16 November 2006) — — — —Kwok Lai Ling Elaine
(resigned on 20 April 2006) — 759 13 772Leung Siu Pong James
(resigned on 16 November 2006) — 386 20 406Li Yuen Cheuk Thomas
(resigned on 16 November 2006) — — — —
Independent non-executive directorsNg Ka Chung Simon
(appointed on 28 February 2006) 84 — — 84Chan Wai Yip Freeman
(appointed on 26 October 2006) 18 — — 18Leung Po Ying Iris
(appointed on 26 October 2006) 18 — — 18Lo Ming Chi Charles
(resigned on 16 November 2006) — — — —Hui Ka Wah Ronnie
(resigned on 28 February 2006) — — — —Leung Ka Kui Johnny
(resigned on 16 November 2006) — — — —
120 1,806 51 1,977
Ann
ual
Re p
ort
2006CASH Retail Management Group Limited
59
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
12. DIRECTORS’ REMUNERATION (Continued)
Other emoluments paid toFees paid to executive directorsindependent Salaries, Contributions to
For the year ended non-executive allowances and retirement31 December 2005 directors benefits in kind benefits schemes Total
HK$’000 HK$’000 HK$’000 HK$’000
Executive directors
Kwan Pak Hoo Bankee — 600 12 612
Law Ping Wah Bernard — — — —
Kwok Lai Ling Elaine — 600 30 630
Leung Siu Pong James — 440 12 452
Li Yuen Cheuk Thomas — — — —
Tin Yuen Sin Carol
(appointed on 1 September 2005) — 40 2 42
Cheng Pui Lai Majone
(resigned on 31 March 2005) — 477 3 480
Independent non-executive directors
Lai Wai Kwong Daryl
(resigned on 8 June 2005) — — — —
Lo Ming Chi Charles 100 — — 100
Hui Ka Wah Ronnie 100 — — 100
Leung Ka Kui Johnny
(appointed on 8 June 2005) 50 — — 50
250 2,157 59 2,466
During both years, no remuneration was paid by the Group to the directors as an inducement to join or upon joining
the Group or as compensation for loss of office. None of the directors has waived any remuneration during both
years.
Ann
ual
Rep
ort
2006 CASH Retail Management Group Limited
60
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
13. EMPLOYEES’ EMOLUMENTS
Of the five individuals with the highest emoluments in the Group, two (2005: three) were directors of the Company
whose emoluments are disclosed in Note 12 above. The emoluments of the remaining three (2005: two) individuals
are as follows:
2006 2005
HK$’000 HK$’000
Salaries, allowances and benefits in kind 1,188 1,434
Contributions to retirement benefits schemes — 21
1,188 1,455
Their emoluments were all within HK$1,000,000.
14. LOSS PER SHARE
The calculation of basic and diluted loss per share is based on the following data:
From continuing and discontinued operations
2006 2005
HK$’000 HK$’000
Loss for the purpose of calculating basic and diluted loss per share
— Loss for the year (95,418) (76,591)
From continuing operations
2006 2005
HK$’000 HK$’000
Loss for the purpose of calculating basic and diluted
loss per share from continuing operations
— Loss for the year from continuing operations (116,189) (3,410)
Ann
ual
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ort
2006CASH Retail Management Group Limited
61
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
14. LOSS PER SHARE (Continued)
Number of shares
2006 2005
Weighted average number of ordinary shares for
the purpose of calculating basic and diluted loss per share 1,092,526,145 879,443,040
The computation of diluted loss per share did not assume the exercise of the Company’s outstanding share options
and convertible loan notes existed during the years ended 31 December 2005 and 2006 since their exercise would
result in a decrease in loss per share.
15. PROPERTY, PLANT AND EQUIPMENT
Furniture,
Leasehold Plant and fixtures and Motor
Buildings improvements machinery equipment vehicles Total
Cost or valuation HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2005 31,856 76,394 — 141,045 3,331 252,626
Surplus on revaluation 3,744 — — — — 3,744
Additions — 18,850 — 3,305 — 22,155
Through acquisition of subsidiaries — 36,391 49,337 2,959 — 88,687
Transferred to investment property (4,600) — — — — (4,600)
Disposals — (11,254) — (8,860) — (20,114)
At 31 December 2005 31,000 120,381 49,337 138,449 3,331 342,498
Additions — 18,875 — 1,905 — 20,780
Through disposal of the Retail Group (31,000) (93,235) — (137,439) (3,331) (265,005)
Other disposals — (39,078) (50,772) (116) — (89,966)
Exchange adjustments — 1,455 1,973 100 — 3,528
At 31 December 2006, at cost — 8,398 538 2,899 — 11,835
Analysis of cost or valuation
At cost — 120,381 49,337 138,449 3,331 311,498
At valuation 31,000 — — — — 31,000
At 31 December 2005 31,000 120,381 49,337 138,449 3,331 342,498
Ann
ual
Rep
ort
2006 CASH Retail Management Group Limited
62
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
15. PROPERTY, PLANT AND EQUIPMENT (Continued)
Furniture,
Leasehold Plant and fixtures and Motor
Accumulated depreciation Buildings improvements machinery equipment vehicles Total
and impairment HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2005 1,556 59,147 — 101,822 2,411 164,936
Provided during the year 2,258 9,841 — 12,614 412 25,125
Eliminated on revaluation (3,760) — — — — (3,760)
Impairment loss recognized in the
income statement — 1,236 — 3,236 — 4,472
Eliminated on transfer to
investment property (54) — — — — (54)
Eliminated on disposals — (10,124) — (8,043) — (18,167)
At 31 December 2005 — 60,100 — 109,629 2,823 172,552
Provided during the year — 20,816 5,881 6,754 231 33,682
Impairment loss written back — (344) — — — (344)
Eliminated through disposal
of the Retail Group — (65,764) — (114,863) (3,054) (183,681)
Eliminated on other disposals — (14,076) (5,629) — — (19,705)
Exchange adjustments — 271 125 15 — 411
At 31 December 2006 — 1,003 377 1,535 — 2,915
Carrying amounts
At 31 December 2006 — 7,395 161 1,364 — 8,920
At 31 December 2005 31,000 60,281 49,337 28,820 508 169,946
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ual
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63
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
15. PROPERTY, PLANT AND EQUIPMENT (Continued)
The above items of property, plant and equipment are depreciated on a straight-line basis over their estimated useful
lives as follows:
Buildings 20 years
Leasehold improvements The shorter of the lease terms and 5 years
Plant and machinery 7 to 10 years
Furniture, fixtures and equipment 4 to 7 years
Motor vehicles 5 years
At 31 December 2005, the Group’s buildings were situated in Hong Kong and held under medium-term leases,
which were pledged to secure general banking facilities granted to the Group.
The Group’s buildings were revalued on 31 December 2005 at HK$31,000,000 by Knight Frank Hong Kong Limited,
independent qualified professional valuers not connected with the Group. Knight Frank Hong Kong Limited had
appropriate qualifications and recent experiences in the valuation of similar properties in the relevant locations. The
valuation, which conformed to Hong Kong Institute of Surveyors Valuation Standards on Properties, was arrived at
by reference to comparable market transactions. The resulting surplus of approximately HK$7,504,000 arising from
the revaluation was credited to the building revaluation reserve as to approximately HK$701,000 and to the
consolidated income statement as to approximately HK$6,803,000 for the year ended 31 December 2005.
Had the Group’s buildings been measured on a historical cost basis, their carrying amount would have been
approximately HK$32,952,000 at 31 December 2005.
During the year ended 31 December 2005, the Directors reassessed the recoverable amount of the property, plant
and equipment of those shops of which their tenancy agreements either would be terminated in the year ended 31
December 2006 and would not be renewed. Accordingly, an impairment loss of approximately HK$4,472,000 was
recognized for the year ended 31 December 2005.
During the year ended 31 December 2006, the Group disposed of certain property, plant and equipment through
disposal of the Retail Group, further details of which are disclosed in Note 34.
16. PREPAID LEASE PAYMENTS
The Group’s prepaid lease payments at 31 December 2005 represented leasehold land in Hong Kong held under
medium-term leases. The leasehold land was amortized on a straight-line basis over the remaining term of leases.
During the year ended 31 December 2006, the Group disposed of its prepaid lease payments through disposal of the
Retail Group, further details of which are disclosed in Note 34.
Ann
ual
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ort
2006 CASH Retail Management Group Limited
64
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
17. INVESTMENT PROPERTY
HK$’000
Fair value
At 1 January 2005 —
Transferred from property, plant and equipment 4,546
Increase in fair value during the year 454
At 31 December 2005 5,000
Disposed of through disposal of the Retail Group (5,000)
At 31 December 2006 —
All of the Group’s property interests held under operating leases to earn rentals or for capital appreciation purposes
are measured using the fair value model and are classified and accounted for as investment property.
The fair value of the Group’s investment property at 31 December 2005 was arrived at on the basis of a valuation
carried out on that date by Knight Frank Hong Kong Limited, independent qualified professional valuers not connected
with the Group. Knight Frank Hong Kong Limited had appropriate qualifications and recent experiences in the
valuation of similar properties in the relevant locations. The valuation, which conformed to Hong Kong Institute of
Surveyors Valuation Standards on Properties, was arrived at by reference to comparable market transactions and
rental yield for similar properties.
At 31 December 2005, the Group’s investment property was located in Hong Kong and held under medium-term
lease.
During the year ended 31 December 2006, the Group disposed of its investment property through disposal of the
Retail Group, further details of which are disclosed in Note 34.
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ual
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
18. GOODWILL
Continuingoperations
Operation ofDiscontinued operations department
Wholesale and Retailing of store andretailing furniture, provision of
of branded household retailhousehold and personal management
products care products servicesCash generating units (Unit A) (Unit B) (Unit C) Total
HK$’000 HK$’000 HK$’000 HK$’000
CostAt 1 January 2005 1,863 — — 1,863Arising on acquisition of the
Wealthy View Group (Note 33(ii)) — 1,100 — 1,100Arising on acquisition of the
Timecastle Group (Note 33(i))— as determined provisionally — — 2,375 2,375— as adjusted as a result of completing
the initial accounting — — 213,306 213,306
At 31 December 2005 (as restated) 1,863 1,100 215,681 218,644Eliminated on disposal
of the Retail Group (1,863) (1,100) — (2,963)
At 31 December 2006 — — 215,681 215,681
Accumulated impairmentAt 1 January 2005 1,863 — — 1,863Impairment loss recognized
in the income statement — 1,100 — 1,100
At 31 December 2005 1,863 1,100 — 2,963Eliminated on disposal of
the Retail Group (1,863) (1,100) — (2,963)Impairment loss recognized
in the income statement — — 144,881 144,881
At 31 December 2006 — — 144,881 144,881
Carrying amountsAt 31 December 2006 — — 70,800 70,800
At 31 December 2005 (as restated) — — 215,681 215,681
Ann
ual
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ort
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66
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
18. GOODWILL (Continued)
For the purposes of impairment testing, goodwill has been allocated to three individual cash generating units (“CGUs”).
The basis of the recoverable amounts of the CGUs and their major underlying assumptions are summarized below:
Unit A and Unit B
Due to the continuous losses incurred by the subsidiaries comprising Unit A and Unit B, the Directors reassessed the
recoverable amount of goodwill arising on the acquisition of these subsidiaries and recognized an impairment loss
of approximately HK$1,100,000 in the year ended 31 December 2005 and approximately HK$1,863,000 in the year
ended 31 December 2004 for Unit B and Unit A respectively.
Unit C
The recoverable amount of Unit C is determined from a value in use calculation. The key assumptions for the value
in use calculation are those regarding the discount rates, growth rates and expected changes on selling prices and
direct costs during the period. Management estimates discount rates using pre-tax rates that reflect current market
assessments of the time value of money and the risks specific to Unit C. The growth rates are made with reference to
industry growth forecast together with management’s estimation. Changes in selling prices and direct costs are
based on past practices and expectations of future changes in the market.
The Group prepares cash flow forecast based on financial budget approved by management for the next two years
and extrapolates cash flows for the following three years based on an estimated constant growth rate of 5%. This rate
does not exceed the long-term growth rate for the relevant markets. The rate used to discount the forecast cash flows
is 13.5%.
At 31 December 2005, before impairment testing, goodwill of approximately HK$215,681,000 was allocated to
Unit C. After the acquisition, the Group reassessed the relevant business markets and revised its cash flow forecast
for this CGU. The carrying amount of goodwill arising on the acquisition of the subsidiaries was reassessed by the
Group and an impairment loss of approximately HK$144,881,000 was recognized for the year ended 31 December
2006 for Unit C.
19. AVAILABLE-FOR-SALE INVESTMENTS
The Group’s available-for-sale investments at 31 December 2005 were stated at fair value, which were determined
by reference to bid price quoted in the secondary market.
During the year ended 31 December 2006, the Group disposed of its available-for-sale investments through disposal
of the Retail Group, further details of which are disclosed in Note 34.
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
20. PREPAID RENTAL/DEPOSITS PAID FOR ACQUISITION OF LEASEHOLD IMPROVEMENTS
Prepaid rental represents prepayments for leasing a new department store (the “New Department Store”) in the PRC
in accordance with a memorandum signed on 10 May 2004 (the “Memorandum”).
Deposits paid for acquisition of leasehold improvements represent deposits paid for acquisition of leasehold
improvements in accordance with the terms of the Memorandum, further details of which are disclosed in Note 37.
21. DEFERRED TAX ASSETS
The following is the major deferred tax balances recognized and the movements thereon during the current and prior
years:
Accelerated Depreciation
tax over tax Estimated
depreciation allowance tax losses Total
HK$’000 HK$’000 HK$’000 HK$’000
At 1 January 2005 (2,537) — 2,537 —
Credited/(Charged) to income statement (1,104) — 1,104 —
Acquisition of subsidiaries (Note 33) — 7,254 — 7,254
At 31 December 2005 (3,641) 7,254 3,641 7,254
Exchange adjustment — 142 — 142
Credited/(Charged) to income statement 3,641 (7,396) (3,641) (7,396)
At 31 December 2006 — — — —
22. INVENTORIES
2006 2005
HK$’000 HK$’000
Finished goods held for sale — 47,863
Merchandise held for resale — 3,601
— 51,464
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ual
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
23. ACCOUNT RECEIVABLES
The Group allows an average credit period of 30 to 90 days to its trade customers. The following is an aged analysis
of account receivables net of impairment losses at the balance sheet date:
2006 2005
HK$’000 HK$’000
0 — 30 days 912 1,875
31 — 60 days — 27
61 — 90 days 16,813 29
Over 90 days 62,062 201
79,787 2,132
During the year ended 31 December 2006, the Group recognized impairment losses in respect of account receivables
from third party customers amounting to approximately HK$5,087,000 (2005: HK$845,000).
The Directors consider that the carrying amounts of the Group’s account receivables approximate their fair values.
24. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
The Directors consider that the carrying amounts of the Group’s prepayments, deposits and other receivables
approximate their fair values.
25. AMOUNT DUE FROM THE CASH GROUP
As disclosed in Notes 10 and 34, during the year ended 31 December 2006, the Company disposed of its entire
equity interest in the Retail Group at an aggregate consideration of HK$130,590,000 pursuant to the VSD Agreement
entered into between the Company and CIGL (a wholly-owned subsidiary of CASH). At 31 December 2006, the
remaining balance of the consideration of HK$100,590,000 was due from the CASH Group to the Company.
The balance of unsettled consideration bears interest at the annual rate of 2% above the prime lending rate, and the
accrued interest amounted to approximately HK$5,868,000 at 31 December 2006.
The amount due from the CASH Group was fully settled subsequent to the balance sheet date.
The Directors consider that the carrying amount of the amount due from the CASH Group approximates its fair
value.
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
26. LISTED INVESTMENTS HELD FOR TRADING
2006 2005
HK$’000 HK$’000
Listed investment held for trading
Equity securities listed on the Stock Exchange — 4,106
The fair values of the Group’s listed investments held for trading at 31 December 2005 were determined based on
quoted market bid place available on the Stock Exchange.
During the year ended 31 December 2006, the Group disposed of its listed investments held for trading through
disposal of the Retail Group, further details of which are disclosed in Note 34.
27. PLEDGED BANK DEPOSITS AND BANK BALANCES AND CASH
The pledged bank deposits at 31 December 2005 were denominated in Hong Kong dollars and carried interest at
prevailing market rate.
The Directors consider that the carrying amounts of pledged bank deposits and bank balances and cash approximate
their fair values.
28. OTHER CURRENT LIABILITIES
Account payables, accrued liabilities and other payables principally comprise amounts outstanding for trade purposes
and ongoing costs.
The average credit period taken for trade purchases is 30 to 90 days. The following is an aged analysis of account
payables at the balance sheet date:
2006 2005
HK$’000 HK$’000
0 — 30 days 2,892 121,526
31 — 60 days 850 29,749
61 — 90 days 2,425 18,784
Over 90 days 5,420 22,902
11,587 192,961
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ual
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70
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
28. OTHER CURRENT LIABILITIES (Continued)
The amount due to a director was unsecured, interest-free and had no fixed terms of repayment.
The Directors consider that the carrying amounts of the other current liabilities noted above approximate their fair
values.
29. BANK BORROWINGS, SECURED
2006 2005
HK$’000 HK$’000
Trust receipt loans — 46,175
Bank loans 20,000 39,960
20,000 86,135
2006 2005
HK$’000 HK$’000
Denominated in:
Hong Kong dollars — 62,097
Renminbi 20,000 24,038
20,000 86,135
2006 2005
HK$’000 HK$’000
Carrying amount repayable:
On demand or within one year 20,000 75,580
More than one year, but not exceeding two years — 5,640
More than two years, but not exceeding five years — 4,915
20,000 86,135
Less: Amount due within one year shown under current liabilities (20,000) (75,580)
— 10,555
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
29. BANK BORROWINGS, SECURED (Continued)
At 31 December 2006, the effective interest rate on the bank loan is 7.7% per annum and the bank loan is secured by
a corporate guarantee given by a third party.
At 31 December 2005, the effective interest rates on the trust receipt loans and the bank loans were 5.7% per annum
and 5.5% per annum respectively. At 31 December 2005, the Group’s bank borrowings and other banking facilities
were secured by:
(i) pledge of the Group’s certain buildings and prepaid lease payments;
(ii) pledged bank deposits of approximately HK$38,900,000;
(iii) corporate guarantees given by the Company; and
(iv) corporate guarantee given by a third party.
The Directors consider that the carrying amounts of the bank borrowings approximate their fair values.
30. SHARE CAPITAL
Ordinary
shares of
HK$0.02 each Amount
Notes HK$’000
Authorized:
At 1 January 2005 750,000,000 15,000
Increase on 13 May 2005 (a)(i) 750,000,000 15,000
Increase on 18 July 2005 (a)(ii) 1,500,000,000 30,000
At 31 December 2005 and 2006 3,000,000,000 60,000
Issued and fully paid:
At 1 January 2005 666,692,812 13,334
Issue of subscription shares (b) 83,000,000 1,660
Issue of placing shares pursuant to the placing
agreement dated 4 April 2005 (c)(i) 223,000,000 4,460
Issue of placing shares pursuant to the placing
agreement dated 24 August 2005 (c)(ii) 100,000,000 2,000
Exercise of share options (d) 19,833,333 397
At 31 December 2005 and 2006 1,092,526,145 21,851
Ann
ual
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ort
2006 CASH Retail Management Group Limited
72
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
30. SHARE CAPITAL (Continued)
Notes:
(a) Increases in authorized share capital
(i) Pursuant to an ordinary resolution passed by the Company’s shareholders on 13 May 2005, the authorized share
capital of the Company was increased from HK$15,000,000 to HK$30,000,000 by the creation of an additional
750,000,000 shares of HK$0.02 each.
(ii) Pursuant to an ordinary resolution passed by the Company’s shareholders on 18 July 2005, the authorized share
capital of the Company was increased from HK$30,000,000 to HK$60,000,000 by the creation of an additional
1,500,000,000 shares of HK$0.02 each.
(b) Issue of subscription shares
Pursuant to two subscription agreements dated 23 March 2005, a total of 83,000,000 ordinary shares of HK$0.02 each
were issued to two subscribers at the subscription price of HK$0.28 per share on 6 April 2005. The gross proceeds of
HK$23,240,000 were used for general working capital of the Group.
(c) Issue of placing shares
(i) Pursuant to a placing agreement dated 4 April 2005, a total of 223,000,000 ordinary shares of HK$0.02 each
were issued to placees at the placing price of HK$0.30 per share on 19 May 2005, giving rise to gross proceeds
of HK$66,900,000. The fund had been applied as the first deposit under the Timecastle S&P Agreement for the
acquisition of the Timecastle Group.
(ii) Pursuant to a placing agreement dated 24 August 2005, a total of 100,000,000 ordinary shares of HK$0.02 each
were issued to placees at the placing price of HK$0.45 per share on 30 December 2005. The gross proceeds of
HK$45,000,000 were used for settlement of part of the consideration for the acquisition of the Timecastle Group
under the Timecastle S&P Agreement.
(d) Exercise of share options during the year ended 31 December 2005
In May 2005, 19,833,333 share options were exercised at the exercise price of HK$0.316 per share, resulting in the issue
of 19,833,333 ordinary shares of HK$0.02 each for a total consideration (before expenses) of approximately HK$6,268,000
on 23 May 2005.
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2006CASH Retail Management Group Limited
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
31. SHARE OPTION SCHEME
Pursuant to an ordinary resolution passed at the special general meeting of the Company held on 19 February 2002,
the Company adopted the share option scheme (“New Option Scheme”) to replace the share option scheme adopted
on 21 January 1994 (“Old Option Scheme”). All the options granted under the Old Option Scheme shall remain
valid and unchanged and shall be treated in accordance with the terms under the Old Option Scheme. The major
terms of the New Option Scheme are summarized as follows:
(a) The purpose was to provide incentives to:
(i) award and retain the participants who have made contributions to the Group; or
(ii) attract potential candidates to serve the Group for the benefit of the development of the Group.
(b) The participants included any employee, director, consultant, adviser or agent of any member of the Group.
(c) The maximum number of shares in respect of which options might be granted under the New Option Scheme
must not exceed 10% of the issued share capital of the Company as at the date of approval of the New Option
Scheme and such limit might be refreshed by shareholders in general meeting. The maximum number of
shares was 109,252,614 shares, representing 10% of the issued share capital of the Company, as at the date of
approval of these consolidated financial statements. However, the total maximum number of shares which
might be issued upon exercise of all outstanding options granted and yet to be exercised under the New
Option Scheme and any other share option scheme must not exceed 30% of the shares in issue from time to
time.
(d) The maximum number of shares in respect of which options might be granted to a participant, when aggregated
with shares issued and issuable (including exercised and outstanding options and the options cancelled)
under any option granted to the same participant under the New Option Scheme or any other share option
scheme within any 12 month period, must not exceed 1% of the shares in issue from time to time.
(e) There was no requirement for a grantee to hold the option for a certain period before exercising the option
save as determined by the board of Directors and provided in the offer of grant of option.
(f) The exercise period should be any period fixed by the board of Directors upon grant of the option but in any
event the option period should not go beyond 10 years from the date of offer for grant.
(g) The acceptance of an option, if accepted, must be made within 28 days from the date of grant with a non-
refundable payment of HK$1.00 from the grantee to the Company.
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ual
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ort
2006 CASH Retail Management Group Limited
74
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
31. SHARE OPTION SCHEME (Continued)
(h) The exercise price of an option must be the highest of:
(i) the closing price of the shares on the date of grant which day must be a trading day;
(ii) the average closing price of the shares for the 5 trading days immediately preceding the date of grant;
and
(iii) the nominal value of the share.
(i) The life of the New Option Scheme is effective for 10 years from the date of adoption until 18 February 2012.
There were no outstanding share options at 31 December 2005 and 2006. No share options were granted, exercised
or cancelled during the year ended 31 December 2006.
32. CONVERTIBLE LOAN NOTES
First Convertible Loan Note
On 15 August 2005, the Company issued a convertible loan note (the “First Convertible Loan Note”) with a principal
amount of HK$108,000,000 to AustChina Information Technology Pyt Limited. The First Convertible Loan Note
was subsequently transferred to Mr. Pun So on 10 February 2006. The First Convertible Loan Note bears zero
coupon rate. The maturity date is 31 August 2007 or any other date mutually agreed between the Company and the
noteholder. The First Convertible Loan Note shall be repaid on the maturity date if no conversion is noted. The
conversion price of the First Convertible Loan Note is HK$0.45 per share (subject to adjustment) and the conversion
right attached to the First Convertible Loan Note can be exercised at any time after the expiry of 6 months from the
issue date of the First Convertible Loan Note and ending on the maturity date.
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
32. CONVERTIBLE LOAN NOTES (Continued)
Second Convertible Loan Note
On 30 December 2005, the Company issued another convertible loan note with a principal amount of HK$180,000,000
(the “Second Convertible Loan Note”) to Mr. Qian Song Wen (the “Timecastle Vendor”) for settlement of part of the
consideration for the acquisition of the Timecastle Group under the Timecastle S&P Agreement (Note 33(i)). The
Second Convertible Loan Note bears zero coupon rate. The maturity date is 31 December 2007 or any other date
mutually agreed between the Company and the Timecastle Vendor, on which all outstanding principal amount of the
Second Convertible Loan Note shall be fully repaid. The Company has the repayment right at any time during the
conversion period. The conversion price of the Second Convertible Loan Note is HK$0.45 per share (subject to
adjustment). Pursuant to the Timecastle Supplemental Agreement (Note 33(i)), the terms of the Second Convertible
Loan Note were changed as follows: (i) the Timecastle Vendor undertook to the Group that he shall not exercise any
conversion right attached to the Second Convertible Loan Note (with principal amount as adjusted by the Group, if
any) at any time before the 7th business day after the issue of the audited accounts of the Timecastle Group for the
year ending 31 December 2006, or the date on which the Reorganization becomes effective, whichever is the later;
and (ii) the principal amount of the Second Convertible Loan Note shall be reduced by an amount of approximately
HK$1,694,000 which is equal to the Reduction Amount less the Balance, which has been included in “Prepayments,
deposits and other receivables” on the consolidated balance sheet.
The convertible loan notes contain two components, liability and equity elements. The equity element is presented
in equity heading “Convertible loan notes equity reserve”. The effective interest rate of the liability component is
6.26%.
The movement of the liability component of the convertible loan notes for the year is set out below:
First Second
Convertible Convertible
Loan Note Loan Note Total
HK$’000 HK$’000 HK$’000
Principal amount 108,000 180,000 288,000
Equity component (11,898) (21,048) (32,946)
Liability component at date of issue 96,102 158,952 255,054
Imputed interest charged 2,165 — 2,165
Liability component at 31 December 2005 98,267 158,952 257,219
Imputed interest charged 5,776 10,197 15,973
Liability component at 31 December 2006 104,043 169,149 273,192
Ann
ual
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ort
2006 CASH Retail Management Group Limited
76
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
33. ACQUISITION OF SUBSIDIARIES
(i) Acquisition of the Timecastle Group
Pursuant to the share purchase agreement dated 24 August 2005 (the “Timecastle S&P Agreement”) entered
into between Sundynasty International Limited (a wholly-owned subsidiary of the Company) and Mr. Qian
Song Wen (the “Timecastle Vendor”), the Group agreed to acquire the entire equity interest of the Timecastle
Group at a consideration of HK$500 million (subject to adjustments) to be satisfied by cash and by issue of
the Second Convertible Loan Note. Pursuant to the Timecastle S&P Agreement, the completion of the
acquisition of the Timecastle Group was subject to, inter alia, the completion of reorganization to convert
( ) , a PRC incorporated company, into a wholly foreign owned enterprise in
accordance with the PRC laws and the transfer of the entire interest of ( ) to the
wholly-owned subsidiary of Timecastle International Limited (the “Reorganization”). As the Reorganization
had not been completed by the fulfillment date of 30 November 2005, the Group entered into a series of
contractual arrangements to the effect that the Group would be able to enjoy all economic interests attributed
to the entire equity interests in ( ) and control the operations and financial policies
of the Timecastle Group. Accordingly, the Timecastle Group was consolidated by the Group with effect from
30 December 2005, and the acquisition was accounted for using the purchase method.
The Timecastle S&P Agreement allowed for adjustments to the consideration that were contingent on a profit
guarantee for the Timecastle Group for the year ended 31 December 2005. After further negotiation, the
Timecastle Vendor and the Group entered into a supplemental agreement dated 26 April 2006 (the “Timecastle
Supplemental Agreement”) to amend the terms of the Timecastle S&P Agreement, pursuant to which (i) the
Timecastle Vendor undertook to the Group that he shall not exercise any conversion right attached to the
Second Convertible Loan Note (with principal amount as adjusted by the Group, if any) at any time before
the 7th business day after the issue of the audited accounts of the Timecastle Group for the year ending 31
December 2006, or the date on which the Reorganization becomes effective, whichever is the later; and (ii) a
profit guarantee for the Timecastle Group for the year ending 31 December 2006 should be given so that the
profit guarantee was given for the year in which the Reorganization was completed instead of 2005. If the
audited net profit after tax of the Timecastle Group for the year ending 31 December 2006 prepared in
accordance with HKFRSs is less than RMB80 million (the “Profit Guarantee”), the consideration shall be
adjusted downwards by an amount equal to the shortfall of the Profit Guarantee multiplied by 6.5 (the
“Reduction Amount”). If the Reduction Amount exceeds the balance of the consideration due to the Timecastle
Vendor (the “Balance”), the Group shall not be liable to pay the Balance and the principal amount of the
Second Convertible Loan Note shall be reduced by an amount equal to the Reduction Amount less the Balance.
Accordingly, the initial accounting for the acquisition of the Timecastle Group could be determined only
provisionally by 31 December 2005 as the final consideration for the acquisition was subject to adjustment
with reference to the audited results of the Timecastle Group for the year ending 31 December 2006.
Ann
ual
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2006CASH Retail Management Group Limited
77
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
33. ACQUISITION OF SUBSIDIARIES (Continued)
(i) Acquisition of the Timecastle Group (Continued)
In accordance with the Timecastle S&P Agreement as amended by the Timecastle Supplemental Agreement,
the final consideration was determined to be approximately HK$425,306,000 (including costs directly
attributable to the acquisition of approximately HK$12,000,000).
The net assets acquired and the goodwill arising were as follows:
Acquiree’scarrying amount
before combinationand fair value
HK$’000
Property, plant and equipment 88,231Prepaid rental 38,462Deposits paid for acquisition of leasehold improvements 23,702Deferred tax assets 7,254Inventories 3,601Account receivables 894Prepayments, deposits and other receivables 147,090Bank balances and cash 7,747Account payables (41,537)Accrued liabilities and other payables (27,366)Bank borrowings (24,038)Taxation payable (14,415)
Net assets acquired 209,625Goodwill (Note 18)— as determined provisionally 2,375— as adjusted as a result of completing the initial accounting 213,306
Total consideration 425,306
Satisfied by:Cash 247,000Second Convertible Loan Note (Note 32) 180,000Reduction of principal amount of the Second Convertible Loan Note
by an amount equal to the Reduction Amount less the Balance(included in “Prepayments, deposits and other receivables”) (1,694)
425,306
Ann
ual
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ort
2006 CASH Retail Management Group Limited
78
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
33. ACQUISITION OF SUBSIDIARIES (Continued)
(i) Acquisition of the Timecastle Group (Continued)
Net cash outflow arising on acquisition of the Timecastle Group:
2006 2005
HK$’000 HK$’000
Cash consideration paid (75,000) (172,000)
Bank balances and cash acquired — 7,747
(75,000) (164,253)
(ii) Acquisition of the Wealthy View Group
On 19 April 2005, the Group acquired the entire equity interest of Wealthy View Investment Limited and its
subsidiaries (the “Wealthy View Group”) from an independent third party for a cash consideration of
HK$4,000,000. This acquisition was accounted for using the purchase method. The goodwill arising on
acquisition of the Wealthy View Group amounted to approximately HK$1,100,000 which was attributable to
the anticipated profitability of the Wealthy View Group.
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ual
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
33. ACQUISITION OF SUBSIDIARIES (Continued)
(ii) Acquisition of the Wealthy View Group (Continued)
The net assets acquired and the goodwill arising were as follows:
Acquiree’s
carrying amount
before combination
and fair value
HK$’000
Property, plant and equipment 456
Inventories 903
Account receivables 231
Prepayments, deposits and other receivables 1,556
Bank balances and cash 1,274
Account payables (1,287)
Accrued liabilities and other payables (233)
2,900
Goodwill (Note 18) 1,100
Total consideration 4,000
Satisfied by:
Cash consideration 4,000
Net cash outflow arising on acquisition of the Wealthy View Group:
Cash consideration paid (4,000)
Bank balances and cash acquired 1,274
(2,726)
The Wealthy View Group was engaged in retailing business in the PRC. However, after the acquisition, the
Group reassessed the business market of the Wealthy View Group and considered that the business principally
engaged by the Wealthy View Group was unprofitable. As a result, carrying amount of the goodwill arising
on acquisition of the Wealthy View Group was reassessed by the Directors and an impairment loss of
approximately HK$1,100,000 was recognized in the year ended 31 December 2005 upon cessation in operating
of the Wealthy View Group.
Ann
ual
Rep
ort
2006 CASH Retail Management Group Limited
80
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
34. DISPOSAL OF THE RETAIL GROUP
As disclosed in Note 10, the Group discontinued its retail businesses in Hong Kong at the time of disposal of its
entire equity interest in the Retail Group at an aggregate consideration of HK$130,590,000. The transaction was
completed on 30 June 2006. Details of the assets and liabilities disposed of are as follows:
HK$’000
Property, plant and equipment 81,324Prepaid lease payments 4,643Investment property 5,000Available-for-sale investments 1,760Rental and utility deposits 10,733Inventories 62,267Account receivables 1,746Prepayments, deposits and other receivables 41,702Amount due from CASH 11,997Listed investments held for trading 2,133Pledged bank deposits 44,400Bank balances and cash 50,355Account payables (146,539)Accrued liabilities and other payables (37,718)Taxation payable (200)Bank borrowings, secured (64,007)
69,596Release of building revaluation reserve (701)Gain on disposal of the Retail Group 61,695
Total consideration 130,590
Satisfied by:Cash consideration 30,000Amount due from the CASH Group (Note 25) 100,590
130,590
Net cash outflow arising on disposal of the Retail Group:Cash consideration received 30,000Bank balances and cash disposed of (50,355)
(20,355)
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ual
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
35. MAJOR NON-CASH TRANSACTIONS
The Group had the following major non-cash transactions during the year ended 31 December 2005:
(i) Pursuant to the agreement entered into between CASH and a third party in 2002, the third party agreed to
procure its group companies to provide advertising and telecommunication services to CASH and its
subsidiaries, including the Group. The fee for these services would be used to offset the prepayment for
advertising and telecommunication services which the Group paid. During the year ended 31 December
2005, the Group utilized advertising and telecommunication services amounting to approximately HK$908,000.
(ii) On 30 December 2005, the consideration for the acquisition of the Timecastle Group was partially settled by
issue of the Second Convertible Loan Note. Details of the Second Convertible Loan Note and the acquisition
of the Timecastle Group are set out in Notes 32 and 33 respectively.
(iii) The proceeds receivable from the placing shares issued on 30 December 2005 amounting to HK$45,000,000
were included in the Group’s prepayments, deposits and other receivables at 31 December 2005.
(iv) Property, plant and equipment amounting to approximately HK$4,546,000 was transferred to investment
property during the year ended 31 December 2005.
36. OPERATING LEASE COMMITMENTS
The Group as lessee
At 31 December 2006, the Group had commitments for future minimum lease payments under non-cancellable
operating leases in respect of rented premises which fall due as follows:
2006 2005
HK$’000 HK$’000
Within one year 41,931 128,388
In the second to fifth years inclusive 602,091 206,676
Over five years 1,232,804 —
1,876,826 335,064
Ann
ual
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ort
2006 CASH Retail Management Group Limited
82
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
36. OPERATING LEASE COMMITMENTS (Continued)
The Group as lessor
At 31 December 2006, the Group had contracted with tenants for retail premises in the PRC for the following future
minimum lease payments:
2006 2005
HK$’000 HK$’000
Within one year 53,675 347
In the second to fifth years inclusive 52,459 —
Over five years 53,410 —
159,544 347
37. CAPITAL COMMITMENTS
2006 2005
HK$’000 HK$’000
Capital expenditure in respect of acquisition of leasehold
improvements authorized but not contracted for — 120,529
On 10 May 2004, the Timecastle Group signed the Memorandum for leasing the New Department Store in the PRC.
Pursuant to the terms of the Memorandum, the landlord was responsible for the leasehold improvements of the New
Department Store on behalf of the Timecastle Group and the total cost of leasehold improvements to be incurred
should not exceed RMB150,000,000. The terms of the Memorandum relating to the responsibility for the leasehold
improvements were terminated during the year ended 31 December 2006.
38. RETIREMENT BENEFITS SCHEMES
The Group operates a Mandatory Provident Fund Scheme (the “MPF Scheme”) under rules and regulations of
Mandatory Provident Fund Schemes Ordinance for all its employees in Hong Kong. All the employees of the Group
in Hong Kong are required to join the MPF Scheme. Contributions are made based on a percentage of the employees’
salaries and are charged to the consolidated 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. The employee’s contribution to the retirement benefits scheme charged to the consolidated income
statement amounted to approximately HK$2,628,000 (2005: HK$3,031,000) for the year ended 31 December 2006.
Ann
ual
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2006CASH Retail Management Group Limited
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
38. RETIREMENT BENEFITS SCHEMES (Continued)
The Group’s PRC subsidiaries in compliance with the applicable regulations of the PRC, participate in various state-
managed retirement benefit schemes operated by the relevant municipal and provincial governments. The Group’s
PRC subsidiaries are required to contribute a specific percentage of its payroll costs to the retirement benefits
schemes to fund the benefits. The Group’s PRC subsidiaries have no other material obligation for the payment of its
staff’s retirement and other post-retirement benefits other than the contributions described above.
39. SIGNIFICANT RELATED PARTY TRANSACTIONS
Save as disclosed elsewhere in these consolidated financial statements, the Group entered into the following significant
related party transactions for the year ended 31 December 2006:
2006 2005
HK$’000 HK$’000
CASH Group
Consideration for disposal of the Retail Group (Note 10) 130,590 —
Interest income on balance of unsettled consideration (Note 25) 5,868 —
Rental expenses 3,718 3,600
Underwriting commission paid — 1,312
Compensation to key management personnel of the Group
Short-term employee benefits 1,926 3,591
Post-employment benefits 51 80
1,977 3,671
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84
Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
40. POST BALANCE SHEET EVENTS
(a) Placing of existing shares and top-up subscription of new shares
On 12 February 2007, the Company announced that Fit Top Investments Limited (the “Vendor”) entered into
the Placing Agreement and the Top-up Subscription Agreement both dated 9 February 2007 with China
Everbright Securities (HK) Limited (the “Placing Agent”) and the Company respectively. Pursuant to the
Placing Agreement, the Vendor agreed to place, through the Placing Agent, an aggregate of 100,000,000
existing ordinary shares of HK$0.02 in the share capital of the Company (the “Placing Shares”), on a best
effort basis, to not less than six individual, corporate and/or institutional investors, at a price of HK$0.28 per
Placing Share. Pursuant to the Top-up Subscription Agreement, the Vendor conditionally agreed to subscribe
for the Top-up Subscription Shares at a price of HK$0.28 per Top-up Subscription Share. The number of Top-
up Subscription Shares was equivalent to the number of Placing Shares actually placed by the Placing Agent
under the Placing Agreement, being not more than 100,000,000. The Top-up Subscription Shares will be
issued under the general mandate to allot, issue and deal with shares granted to the Directors by resolution of
the shareholders passed at the annual general meeting of the Company held on 29 May 2006. The Placing
Price or the Top-up Subscription Price of HK$0.28 represented (i) a discount of approximately 6.7% to the
closing price of HK$0.300 per share as quoted on the Stock Exchange on 8 February 2007 (the “Last Trading
Day”, being the last full trading day for the shares before the date of signing of the Placing Agreement and
the Top-up Subscription Agreement); (ii) a discount of approximately 9.7% to the average closing price per
share of HK$0.310 as quoted on the Stock Exchange for the last five trading days up to and including the Last
Trading Day; and (iii) a discount of approximately 9.4% to the average closing price per share of HK$0.309
as quoted on the Stock Exchange for the last ten trading days up to and including the Last Trading Day.
Assuming all the Placing Shares are fully placed and the Top-up Subscription Shares are fully subscribed, the
net proceeds receivable by the Company, after deducting the placing commission and all costs, fees and
expenses to be borne by the Company, are estimated to be approximately HK$27.5 million. The Directors
presently intend to use the net proceeds for the purpose of general working capital of the Group.
(b) Proposed very substantial acquisition
On 19 April 2007, the Company announced that Winner Grace International Limited and Firm Top Investments
Limited (both of which are wholly-owned subsidiaries of the Company) entered into the respective agreements
dated 14 April 2007 with an independent third party to acquire the entire equity interests in each of Fortune
International Business Limited (“FIB”) and Sunny Sky Properties Limited (“SSP”) and their respective
shareholders' loans for a total consideration of HK$1.6 billion. The principal assets of FIB and SSP and their
respective subsidiaries are two commercial and residential complexes in Beijing, the PRC. The acquisition
constitutes a very substantial acquisition for the Company under the Listing Rules and thus it is subject to the
Company's shareholders approval at a special general meeting. Further details of the acquisition are set out in
the Company's announcement dated 19 April 2007.
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Notes to the Consolidated Financial StatementsFor the year ended 31 December 2006
41. PARTICULARS OF SUBSIDIARIES AS AT 31 DECEMBER 2006
Place of Issued share Proportion of
incorporation/ capital/paid up ownership interests
Name of subsidiary establishment capital held by the Company Principal activities
Sundynasty International Limited British Virgin Islands Ordinary US$1 100% (Direct) Investment holding
Timecastle International Limited British Virgin Islands Ordinary US$1 100% (Indirect) Investment holding
Master Empire Development Limited Hong Kong Ordinary HK$1 100% (Indirect) Investment holding
( ) PRC Registered capital 100% (Indirect) Operation of department
(Note (i)) RMB45,000,000 store in the PRC
PRC Registered capital 100% (Indirect) Provision of retail
(Note (ii)) RMB500,000 management services in
the PRC
PRC Registered capital 100% (Indirect) Provision of advertising
(Note (iii)) RMB29,000,000 services in the PRC
Notes:
(i) ( ) is a wholly foreign owned enterprise established in the PRC.
(ii) is a limited liability company established in the PRC.
(iii) is a limited liability company established in the PRC.
Financia l SummaryAnn
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A summary of the consolidated results and assets and liabilities of the Group for the last five financial years as extracted
from the audited financial statements and restated as appropriate, is set out below:
RESULTS
Year ended 31 December 2006 2005 2004 2003 2002
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Restated) (Restated) (Restated)
Revenue
From continuing operations 125,759 — — — —
From discontinued operations 426,452 865,647 876,896 836,006 889,918
552,211 865,647 876,896 836,006 889,918
Loss before tax (78,904) (76,591) (85,413) (33,627) (96,856)
Income tax expenses (16,514) — (6) — —
Loss for the year (95,418) (76,591) (85,419) (33,627) (96,856)
ASSETS AND LIABILITIES
At 31 December 2006 2005 2004 2003 2002
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
(Restated) (Restated) (Restated)
Assets 612,133 931,477 411,413 463,259 460,175
Liabilities 432,825 690,735 267,621 284,629 247,918
Net assets 179,308 240,742 143,792 178,630 212,257
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Notice of Annual General Meet ing
NOTICE IS HEREBY GIVEN that the Annual General Meeting (“AGM”) of CASH Retail Management Group Limited
("Company") will be held at Level III, JW Marriot Hotel, 88 Queensway, Hong Kong on 1 June 2007, Friday, at 9:45 am for
the following purposes:
1. To receive and consider the audited Financial Statements and the Reports of the Directors and the Auditors for the
year ended 31 December 2006.
2. To re-elect the retiring Directors of the Company for the ensuing year, to determine 20 as the maximum number of
Directors, to authorise the Directors to appoint additional Directors up to the maximum number and to fix the
Directors' remuneration.
3. To re-appoint Messrs HLB Hodgson Impey Cheng as auditors of the Company for the ensuing year and to authorise
the Directors to fix their remuneration.
4. To consider and, if thought fit, to pass the following resolutions, with or without amendments, as ordinary resolutions:
A. THAT
(a) subject to paragraph A(c), the exercise by the Directors of the Company during the Relevant Period
(as hereinafter defined) of all the powers of the Company to allot, issue and deal with additional
shares in the capital of the Company and to make or grant offers, agreements and options which might
require the exercise of such power be and is hereby generally and unconditionally approved;
(b) the approval in paragraph A(a) shall authorise the Directors of the Company during the Relevant
Period (as defined hereinafter) to make or grant offers, agreements and options which might require
the exercise of such power after the end of the Relevant Period;
(c) the aggregate nominal amount of share capital allotted or agreed conditionally or unconditionally to
be allotted by the Directors of the Company pursuant to the approval in paragraph A(a), otherwise
than pursuant to a Rights Issue (as hereinafter defined) or any option scheme or similar arrangement
for the time being adopted for the grant or issue to participants of the Company and its subsidiaries of
shares or right to acquire shares in the Company shall not exceed 20% of the aggregate nominal
amount of the share capital of the Company in issue as at the date of this resolution and the said
approval shall be limited accordingly; and
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(d) for the purposes of this resolution:
"Relevant Period" means the period from the passing of this resolution until whichever is the earlier
of:
1. the conclusion of the next annual general meeting of the Company;
2. the expiration of the period within which the next annual general meeting of the Company is
required by the Bye-laws of the Company or any applicable law to be held; and
3. the revocation or variation of this resolution by an ordinary resolution of the shareholders of
the Company in general meeting.
"Rights Issue" means an offer of shares open for a period fixed by the Directors of the Company to
holders of shares on the register of members of the Company on a fixed record date in proportion to
their then holdings of such shares (subject to such exclusion or other arrangements as the Directors of
the Company may deem necessary or expedient in relation to fractional entitlements or having regard
to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory
body or any stock exchange in any territory outside Hong Kong).
B. THAT
(a) subject to paragraph B(b), the exercise by the Directors of the Company during the Relevant Period
(as hereinafter defined) of all powers of the Company to repurchase issued shares in the capital of the
Company on the Stock Exchange or on any other stock exchange on which the shares in the Company
may be listed and recognised by the Securities and Futures Commission of Hong Kong and the Stock
Exchange for this purpose, subject to and in accordance with all applicable laws and the requirements
of The Rules Governing the Listing of Securities on the Stock Exchange or on any other stock exchange
as amended from time to time be and is hereby generally and unconditionally approved;
(b) the aggregate nominal amount of shares in the Company to be repurchased or agreed conditionally or
unconditionally to be repurchased by the Company pursuant to the approval in paragraph B(a) during
the Relevant Period shall not exceed 10% of the aggregate nominal amount of the share capital of the
Company in issue as at the date of the passing of this resolution and the said approval be limited
accordingly; and
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Notice of Annual General Meet ing
(c) for the purposes of this resolution:
"Relevant Period" means the period from the passing of this resolution until whichever is the earlier
of:
1. the conclusion of the next annual general meeting of the Company;
2. the expiration of the period within which the next annual general meeting of the Company is
required by the Bye-laws of the Company or any applicable law to be held; and
3. the revocation or variation of this resolution by an ordinary resolution of the shareholders of
the Company in general meeting.
C. THAT conditional upon resolutions nos.4A and 4B above being passed, the aggregate nominal amount of the
number of shares in the capital of the Company which are repurchased by the Company under the authority
granted to the Directors as mentioned in resolution no.4B above be added to the aggregate nominal amount
of share capital that may be allotted or agreed conditionally or unconditionally to be allotted by the Directors
of the Company pursuant to resolution no.4A above.
5. To consider and, if thought fit, to pass the following resolution, with or without amendments, as ordinary resolution:
THAT conditional on the Listing Committee of the Stock Exchange granting the listing of and permission to deal in
the shares in the Company to be issued pursuant to the exercise of any options ("Options") to be granted under the
existing share option scheme and any other share option scheme(s) of the Company, the Directors be and are hereby
authorised, at their absolute discretion, to grant Options to the extent that the shares in the Company issuable upon
the full exercise of all Options shall not be more than 10% of the issued share capital of the Company as at the date
of this resolution.
By order of the Board
Tin Yuen Sin Carol
Chairperson
Hong Kong, 27 April 2007
Notice of Annual General Meet ingAnn
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Notes:
1. A shareholder of the Company entitled to attend and vote at the above meeting is entitled to appoint up to two proxies to attend
and, in the event of a poll, vote instead of him/her. A proxy need not be a shareholder of the Company.
2. In order to be valid, the form of proxy must be deposited at the principal place of business of the Company in Hong Kong at Suite
3001, COSCO Tower, 183 Queen's Road Central, Hong Kong together with a power of attorney or other authority, if any, under
which it is signed or a notarially certified copy of that power or authority, not less than 48 hours before the time for holding the
meeting or adjourned meeting.
3. The retiring directors are as follows:
The executive directors, Mr. Choi Chiu Fai Stanley, Mr. Chan Hon Ming Alan, Mr. Tse Pui To Dickson and Mr. Lam Yat Ming,
shall retire and, being eligible, offer themselves for re-election at the AGM in accordance with the Bye-law 115 of the Company's
Bye laws.
Mr. Ng Ka Chung Simon, the independent non-executive director, shall retire, and, being eligible, offer himself for re-election at
the AGM in each year in accordance with his terms of appointment. Mr. Chan Wai Yip Freeman and Ms. Leung Po Ying Iris, the
independent non-executive directors, shall retire, and, being eligible, offer themselves for re-election at the AGM in each year in
accordance with their terms of appointment and in accordance with the Bye-law 115 of the Company's Bye laws.
The biographical details of the retiring directors, being the directors proposed to be re-elected at the forthcoming annual general
meeting, are provided in the circular of the Company, "General Mandate to Repurchase Shares, Refreshment of the Scheme
Mandate Limited and the Re-election of the Retiring Directors" to be dispatched to the shareholders in due course.
4. A form of proxy for use at the meeting is enclosed.