1998 1997
HK$'000 HK$'000
Authorised:
800,000,000 ordinary shares
of HK$0.10 each 80,000 80,000
====== ======
Issued and fully paid:
439,228,815 (1997: 439,228,815)
ordinary shares of HK$0.10 each 43,923 43,923
====== ======
There were no issue of new shares or repurchase of shares during the year.
Share options
Pursuant to a share option scheme approved by the shareholders on 21st July, 1995, the directors may at their discretion grant options to any employees of the Group, including executive directors of the Company and its subsidiaries to subscribe for shares in the Company. The maximum number of shares which may be granted under the scheme shall not exceed 10% of the nominal amount of the issued share capital of the Company. The subscription price of the option granted under the scheme is the higher of the amount which the directors may at their discretion determine to be not less than 80% of the average of the closing price of the Company's shares on The Stock Exchange of Hong Kong Limited, for the five business days immediately preceding the date on which an option is granted or the nominal value of the shares.
No options were granted during the year and the Company had no outstanding share options at the balance sheet date.
Warrants
In the prior period, the Company issued 86,000,000 warrants entitling the registered holders to subscribe in cash at any time on or before 31st December, 1998 for fully paid ordinary shares of HK$0.10 each in the Company at an exercise price of HK$0.65 per share (subject to adjustment) up to the aggregate amount of HK$55,900,000. The warrants were issued at HK$0.30 each for an aggregate cash consideration of HK$24,358,000, net of issue expenses of HK$1,442,000. The net proceeds were credited to the warrant subscription reserve and were used as working capital of the Group. None of these warrants were exercised during the year. Upon the expiry of these warrants on 31st December, 1998, the warrant subscription reserve of HK$24,358,000 was transferred to the retained profits account.
Warrant Exchange Capital Property
subscri- fluctua- redemp- revalua-
Share tion tion Capital tion tion Retained
Group premium reserve reserve reserve reserve reserve profits Total
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
At beginning
of year 78,340 24,358 (7) 801 77 7,530 118,107 229,206
Transfer upon
expiry
of warrants -- (24,358) -- -- -- -- 24,358 --
Arising from the
revaluation of
the land and
buildings -- -- -- -- -- (6,765) -- (6,765)
Loss for the
year -- -- -- -- -- -- (26,486) (26,486)
------- ------- ------- ------- ------- ------- ------- -------
At 31st December,
1998 78,340 -- (7) 801 77 765 115,979 195,955
======= ======= ======= ======= ======= ======= ======= =======
Reserves retained by:
Company and
subsidiaries 78,340 -- (7) 801 77 765 115,956 195,932
Associated
companies -- -- -- -- -- -- 23 23
------- ------- ------- ------- ------- ------- ------- -------
78,340 -- (7) 801 77 765 115,979 195,955
======= ======= ======= ======= ======= ======= ======= =======
Warrant Capital
subscrip- redemp-
Share tion tion Contributed Retained
Company premium reserve reserve surplus profits Total
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
At beginning
of year 78,340 24,358 77 84,917 1,022 188,714
Transfer upon
expiry of warrant -- (24,358) -- -- 24,358 --
Profit for the year -- -- -- -- 4 4
------- ------- ------- ------- ------- -------
At 31st December,
1998 78,340 -- 77 84,917 25,384 188,718
======= ======= ====== ======= ======= =======
The contributed surplus of the Company represents the excess of the fair value of the shares of the subsidiaries acquired pursuant to the Group reorganisation, over the nominal value of the Company's shares issued in exchange.
Under the Companies Act 1981 of Bermuda (as amended), the contributed surplus of the Company is distributable to shareholders in certain circumstances.
(a) Reconciliation of operating profit/(loss) to net cash inflow from operating activities
Period from
1st November,
Year ended 1996 to
31st December, 31st December,
1998 1997
HK$'000 HK$'000
Operating profit/(loss) (27,493) 13,737
Revaluation deficit 7,926 --
Interest income (1,195) (2,604)
Interest on bank borrowings 6,878 8,282
Interest on finance leases 35 78
Amortisation of deferred product
development costs 1,273 1,034
Amortisation of deferred pre-operating
expenses 1,103 1,352
Amortisation of prepaid rental 737 860
Depreciation 16,862 12,462
Loss on disposals of fixed assets 678 137
Provision for doubtful debts 14,787 16,924
Provision for inventories 2,705 910
Additions to deferred product
development costs (3,148) (1,517)
Decrease/(increase) of balances with
associated companies 716 (33)
Decrease in accounts receivable,
deposits and prepayments 9,041 116,304
Decrease/(increase) in inventories 24,913 (42,184)
Increase/(decrease) in accounts
payable and accrued liabilities 4,593 (51,882)
------ ------
Net cash inflow from operating
activities 60,411 73,860
====== ======
(b) Analysis of changes in financing during the year/period
Share Warrant Finance
capital subscrip- lease
(including tion obligat- Mortgage Minority
premium) reserve ions loan interests
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
At 1st November, 1996 119,497 -- 680 24,954 8,809
Cash inflows/(outflows) from
financing 2,766 24,358 (476) (4,313) --
Share of loss for the year -- -- -- -- (5)
Share of exchange
fluctuation reserve -- -- -- -- (2)
------- ------- ------- ------- -------
At 31st December, 1997 and
at 1st January, 1998 122,263 24,358 204 20,641 8,802
Cash outflows from
financing -- -- (204) (3,697) --
Transfer upon expiry of
warrants -- (24,358) -- -- --
Share of profit for the
year -- -- -- -- 4
------- ------- ------- ------- -------
At 31st December, 1998 122,263 -- -- 16,944 8,806
======= ======= ======= ======= =======
Group Company
1998 1997 1998 1997
HK$'000 HK$'000 HK$'000 HK$'000
Guarantees of banking
facilities granted
to subsidiaries -- -- 152,943 178,500
======= ======= ======= =======
Guarantees of banking
facilities granted
to an associated
company 2,058 2,058 2,058 2,058
======= ======= ======= =======
Group
1998 1997
HK$'000 HK$'000
Capital commitments:
Contracted for 2,995 5,441
Authorised, but not contracted for 2,298 --
----- -----
5,293 5,441
===== =====
Annual commitments under non-cancellable
operating leases in respect of land and
buildings expiring:
Within one year 98 438
In second to fifth years, inclusive -- 298
After five years 1,303 1,144
----- -----
1,401 1,880
===== =====
Commitments to contribute to a subsidiary
registered in the PRC 7,405 --
===== =====
The Company had no other significant commitments at the balance sheet date (1997: Nil).
During the year, the Group purchased finished goods amounting to HK$13,292,000 (1997: HK$14,614,000) from an associated company, Golden Bright Manufacturing Company Limited ("Golden Bright"), in which Mr. Yau Tak Wah, Paul and Mr. Tam Ping Wah, directors of the Company, were interested as common directors. The purchases of finished goods were made according to cost incurred by Golden Bright plus a 5% (1997: 5%) mark-up.
During the year, the Company executed a guarantee in respect of banking facilities granted to Golden Bright to the extent of HK$2,058,000 (1997: HK$2,058,000). These banking facilities are also secured by an unlimited guarantee executed by the major shareholder of Golden Bright.
As at 31st December, 1998, the amounts due from an associated company, Luxuriance Co., Limited ("Luxuriance"), and due to Golden Bright were HK$2,762,000 (1997: HK$2,732,000) and HK$2,422,000 (HK$1,676,000), respectively. The amount due from Luxuriance represents a shareholder loan granted to Luxuriance in proportion to the Group's shareholding interest therein.
Certain comparative amounts have been reclassified to conform with the current year presentation.
The financial statements were approved by the board of directors on 14th May, 1999.