Annual Report 2011/12 - International Entertainment Corporation

Notes to the Consolidated Financial StatementsFor the year ended 31 March 201228. DEFERRED TAXATION (Continued)The remaining tax losses will be expired as follows:2012 2011HK$’000 HK$’000Year 2011 – 21,561Year 2012 29,453 30,946Year 2013 6,608 3,636Year 2014 913 876Year 2015 708 –No deferred tax liability has been recognised in respect of the temporary differences associated with undistributedearnings of subsidiaries operating in the Philippines because the Group is in a position to control the timing of thereversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.29. CONVERTIBLE NOTE AND CONVERSION OPTION DERIVATIVEOn 11 October 2007, the Company issued a convertible note of HK$400 million due in three years, which wasbeneficially owned by Cross-Growth Co., Ltd., a company wholly-owned by CTF, as part of the consideration inthe acquisition of the entire equity interest of Fortune Gate. Details of the acquisition are set out in the circular of theCompany dated 29 June 2007.The convertible note was denominated in HK$ and was unsecured. The convertible note entitled the holder to convertinto ordinary shares of the Company in amounts or integral multiples of HK$4,000,000 at any time after the date ofissue of the convertible note until the business day immediate prior to the maturity date of the convertible note at aninitial conversion price of HK$2 per share subject to customary adjustments for, among other things, subdivision orconsolidation of shares, bonus issues, rights issues and other events which had diluting effects on the issued sharecapital of the Company. If the whole amount of the convertible note was converted at the conversion price of HK$2 pershare, 200,000,000 ordinary shares of the Company would be issued. If the convertible note had not been converted,it would be repaid on the maturity date at its outstanding principal amount. Interest of 1% per annum would be paidannually in arrear up to the maturity date of the convertible note. Neither the Company nor the holder had the rightsto redeem the convertible note prior to its maturity date. The fair values of conversion option derivative as at the issuedate of 11 October 2007 and as at the end of each reporting period were determined by the valuation performed byan independent valuer. The convertible note was fully repaid during the year ended 31 March 2011.International Entertainment Corporation - Annual Report 2011/12 79