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CONTENTS
FINANCIAL HIGHLIGHTS
02 Five-Year Financial Summary
03 Financial Highlights Charts
04 Market Price Movement and Market Capitalization
BUSINESS REVIEW
06 Chairman’s Statement
14 Report of Directors
25 Liu Chong Hing Group Simplified Corporate Structure Chart
26 Schedule of Major Properties Held by the Group and Associates
CORPORATE & FINANCIAL INFORMATION
28 Corporate Information
30 Biographical Details of Directors and Senior Management
34 Notice of Annual General Meeting
37 Financial Calendar
FINANCIAL REPORT
38 Auditors’ Report
39 Consolidated Income Statement
40 Balance Sheets
42 Consolidated Statement of Changes in Equity
43 Consolidated Cash Flow Statement
45 Notes to the Financial Statements
80 Double Haven & Le Palais Supplement
FIVE-YEAR FINANCIAL SUMMARY
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1998 1999 2000 2001 2002HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Total assets (adjusted) 7,480,549 8,431,323 8,994,648 9,418,555 8,974,833
Total liabilities (adjusted) 2,109,329 2,708,784 2,925,118 3,327,848 3,303,328
Total net assets (adjusted) 5,371,220 5,722,539 6,069,530 6,090,707 5,671,505
Net profit for the year (adjusted) 358,745 367,166 370,576 188,106 80,362
Earnings per share (adjusted) HK$0.94 HK$0.97 HK$0.98 HK$0.50 HK$0.21
Dividend per share HK$0.35 HK$0.35 HK$0.35 HK$0.20 HK$0.16
Net assets value per share
(adjusted) HK$14.15 HK$15.10 HK$16.01 HK$16.07 HK$14.98
Notes: (1) The total assets, total net assets, net profit for the year, earnings per share and net assets value per share were adjusted dueto the adoption of SSAP 24 “Accounting for investments in securities” for the year ended 31st December, 1998.
(2) The total liabilities, total net assets, net assets value per share were adjusted due to the adoption of SSAP 9 (Revised)“Events after the Balance Sheet Date” for the three years ended 31st December, 2000.
FINANCIAL HIGHLIGHTS Charts F I N A N C I A L H I G H L I G H T S
03
TOTAL ASSETS(HK$ IN MILLION)
TOTAL NET ASSETS(HK$ IN MILLION)
EARNINGS PER SHARE(HK$)
TOTAL LIABILITIES(HK$ IN MILLION)
NET PROFIT FOR THE YEAR(HK$ IN MILLION)
DIVIDEND PER SHARE(HK$)
098 99 00 01 02
2,000
4,000
6,000
8,000
10,000
098 99 00 01 02
500
1,000
1,500
2,000
2,500
3,000
3,500
098 99 00 01 02
2,000
3,000
1,000
4,000
5,000
6,000
7,000
098 99 00 01 02
50
100
150
200
250
300
350
400
98 99 00 01 020
98 99 00 01 02
0.20
0.40
0.60
0.80
1.00
0
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
MARKET PRICE MOVEMENT & Market Capitalization
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Closing price Market CapitalizationLast trading date of each month (HK$) (HK$ in million)
31/01/01 4.925 1,867
28/02/01 4.975 1,886
30/03/01 4.950 1,876
27/04/01 4.975 1,886
31/05/01 5.100 1,933
29/06/01 5.050 1,914
31/07/01 4.950 1,876
31/08/01 4.550 1,725
28/09/01 3.950 1,497
31/10/01 4.075 1,544
30/11/01 4.200 1,592
31/12/01 4.350 1,648
31/01/02 4.500 1,705
28/02/02 4.575 1,734
28/03/02 4.325 1,639
30/04/02 4.375 1,658
31/05/02 4.350 1,648
28/06/02 4.425 1,677
31/07/02 4.050 1,535
30/08/02 4.050 1,535
30/09/02 3.775 1,431
31/10/02 3.775 1,429
29/11/02 3.975 1,505
31/12/02 3.925 1,486
05
FIN
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L H
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LIG
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CLO
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PRIC
E PER SH
AR
E January 2001 – Decem
ber 2002(H
K$)
0 1 2 3 4 5 6
4.97528/02/01
4.95030/03/01
4.97527/04/01
5.10031/05/01
5.05029/06/01
4.95031/07/01
4.55031/08/01
3.95028/09/01
4.07531/10/01
4.20030/11/01
4.35031/12/01
4.50031/01/02
4.57528/02/02
4.32528/03/02
4.37530/04/02
4.35031/05/02
4.42528/06/02
4.05031/07/02
4.05030/08/02
3.77530/09/02
3.77531/10/02
3.97529/11/02
3.92531/12/02
4.925 31/01/01
0
400
800
1,200
1,600
2,000
1,88628/02/01
1,87630/03/01
1,88627/04/01
1,93331/05/01
1,91429/06/01
1,87631/07/01
1,72531/08/01
1,49728/09/01
1,54431/10/01
1,59230/11/01
1,64831/12/01
1,70531/01/02
1,73428/02/02
1,63928/03/02
1,65830/04/02
1,64831/05/02
1,67728/06/02
1,53531/07/02
1,53530/08/02
1,43130/09/02
1,42931/10/02
1,50529/11/02
1,48631/12/02
1,867 31/01/01
MA
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ET CA
PITALIZ
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N January 2001 – D
ecember 2002
(HK
$ IN M
ILLION
)
CHAIRMAN’S STATEMENT
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A
B C D
707
Double HavenA. Deluxe living roomB. External view of single
houseC. Dinning roomD. Inner view of single
house
I have the pleasure in presenting to the shareholders
the operating results for the year 2002.
BUSINESS RESULTS
For the financial year ended 31st December, 2002,
audited net profit attributable to shareholders
amounted to HK$80,362,000 (earnings per share:
HK$0.21), representing a 57.3% decrease. One of
the main reasons was due to weak economy
prevailing in Hong Kong, coupled with economic
and political uncertainties around the world. Both
investment sentiments and consumer spending
continued to shrink, further affecting the withering
property market.
DIVIDEND
The Board of Directors has proposed to recommend
at the forthcoming Annual General Meeting to be
held on 23rd April, 2003 the payment of final cash
dividend of HK$0.06 per share. Together with the
interim cash dividend of HK$0.10 per share paid
on 18th September, 2002, the total cash dividend
for the year of 2002 amounts to HK$0.16 per
share.
BUSINESS REVIEW
BANKING
The Hong Kong economy remained stagnant in
last year as influenced by both worldwide economic
recession and the anti-terrorism war. While our
deflationary scene was still serious, statistics for
bankruptcy and unemployment continued to climb.
Thanks to the weakening United States dollars, the
export trades in the fourth quarter of the year 2002
saw a mild revival, resulting a turnaround of the
local economy. Total gross domestic product
recorded a heartened increase of 2.3%. On the
other hand, total number of visitor arrivals grew
vigorously due to the slackened policy adopted by
immigration authority in China permitting large
number of nationals travelling abroad. The
occasional influx of tourists through several long
vacations could only help to maintain shortlived
business rendezvous but not the general consumer
market. On the stock-market front, slow trading
phenomenon prevailed due to lack of investment
sentiments. This was inevitably given unfavourable
market conditions all over the world. The local
property market however, experienced ideal sales
demand for both luxurious estates of $10 million
up and those economical units of under $1.5
million. For the in-between or more notably the
medium-range properties, demand had been weak
with average price gradually dropping. Although
the Government introduced some nine measures
late last year intending to stimulate the market, it
evidently confined to help revitalizing the first hand
new developments. The re-sale activities in
secondary market, however, remained flagging.
Pertaining to the banking industry in last year, no
sign of breakthrough could be seen with ever fierce
competitions. Loan demand continued to diminish
and interest spread narrowing. The surging bad
debts added further impact to the Bank’s results.
The consolidated net profit of Liu Chong Hing Bank
Limited and its subsidiaries for 2002, after taking
provisions for bad and doubtful loans and deducting
taxes, amounted to HK$309,494,000, a decrease of
10.52% over the previous year. Total customers’
deposits and certificates of deposit amounted to
HK$32,492,000,000, slightly down 0.59%. Total
THE BOARD OF DIRECTORS HAS PROPOSED TO RECOMMEND AT THE FORTHCOMING ANNUAL GENERAL
MEETING TO BE HELD ON 23RD APRIL, 2003 THE PAYMENT OF FINAL CASH DIVIDEND OF HK$0.06 PER
SHARE. TOGETHER WITH THE INTERIM CASH DIVIDEND OF HK$0.10 PER SHARE PAID ON 18TH SEPTEMBER,
2002, THE TOTAL DIVIDEND FOR THE YEAR OF 2002 AMOUNTS TO HK$0.16 PER SHARE.
B U S I N E S S R E V I E W
CHAIRMAN’S STATEMENT
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A
loans to customers (after provisions for bad and
doubtful debts) was HK$19,155,000,000, up 3.54%.
Total assets stood at HK$39,189,000,000, a marginal
decrease of 0.69%. Total shareholders’ funds (before
final dividend) amounted to HK$5,726,000,000, an
increase of 1.06%.
The Bank had completed its management
organization restructure last year through unceasing
improvements. In a reinforcement exercise, several
banking experts had been recruited to strengthen
the Bank’s management team in order to render a
more competitive position.
PROPERTY
Highlights of the Group’s property portfolio are as
follows:–
PROPERTY FOR LEASE
Chong Hing Square, 593 - 601 Nathan Road,
Mongkok, Kowloon.
Chong Hing Square is a 20-storey retail and
entertainment building with 2 basement levels
totalling 183,728 sq. ft. in lettable area. Completed
in March 1994, it is situated in the heart of
Mongkok. Although both restaurant and retail
business operations were still difficult in the year
2002, occupancy increased slightly from 97% to
99%.
Western Harbour Centre, 181 - 183 Connaught
Road West, Hong Kong.
This is a 28-storey grade one office building with
full sea-view. It was completed at the end of 1995
with total lettable area of 140,116 sq. ft. It is
located adjacent to the entrance/exit of the Western
Harbour Tunnel which links directly to the West
Kowloon Expressway to New Territories and the
airport, in an area with substantial commercial
potentials. Occupancy rate had been maintained at
90%.
Chong Yip Shopping Centre, 402 - 404 Des Voeux
Road West, Hong Kong.
This shopping centre, with a lettable area of 41,467
sq. ft., is located in the most densely populated
area of the Western District. In view of sustained
weak consumer sentiment, small retailers had to
struggle for their living as deflation still persistent.
The occupancy rate was increased from 78% to
86% after renovation and improvement work.
Fairview Court, 94 Repulse Bay Road, Hong Kong.
This 3-storey luxury apartment building, with a site
area of 30,000 sq. ft. comprises of 6 units, with a
total gross floor area of 20,755 sq. ft. and a garden
area of 3,300 sq. ft. It is situated in a scenic area
near the beaches. The Group owns 5 units of this
development and are fully let.
PROPERTY INVESTMENT AND FOR SALE
Double Haven, 52 Ma Lok Path, Kau To Shan,
Shatin, New Territories.
Located in the mid-level luxury residential area of
Shatin, Double Haven with a site area of 141,700
sq. ft., contains 14 single and 18 semi-detached
houses, each with 2 underground car parks. With a
total gross floor area of 178,000 sq. ft., this
development provides luxury clubhouse facilities,
swimming pool, and beautiful landscapes.
B U S I N E S S R E V I E W
909
Double HavenA. Furnished bed roomB. External viewC. Luxurious SPAD. Swimming pool
B C
D
Construction has been completed in April 2002.
Sales commenced in the later part of last year and
so far, 25 houses have been sold, cashing in
$383,600,000.
The Belcher’s, Pokfulam, Hong Kong.
This site is located at Pokfulam Road in the
Western mid-level district, with a site area of
324,000 sq. ft. This re-development includes 6
blocks of residential/commercial buildings, ranging
from 43 to 47 storeys, with a total of 2,136 units
and a total gross floor area of 2,446,400 sq. ft. In
addition, there are residents’ clubhouse, swimming
pool, tennis court, government centres, senior
citizen centre, kindergarten, public park, and a
215,200 sq. ft. shopping mall. On completion the
development will have over 3,000,000 sq. ft. gross
floor area. Launched in mid-1999, sales of Phase
One has been led by Shun Tak Holdings limited
and Sun Hung Kai Properties Limited with excellent
response. Record shows 609 units have been sold
for Phase One, representing 89%. Completed in
April 2002, 693 units in Phase Two have been sold
upto present, equivalent to 62%. As of the end of
December last year, the Joint Venture yielded a
total sales proceeds of $9,238,800,000. The Group
owns 10% of this project.
CHAIRMAN’S STATEMENT
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A CB
CHINA OPERATION
1. SHANGHAI
This prime site is located in the district of Nanjing
Xilu with a site area of 55,000 sq. ft. A 38-storey
modern commercial building with a gross floor
area of 600,000 sq. ft. will be built at a total
investment of Renminbi 800 million. The piling
work has been completed and construction of the
superstructure has scheduled to commence. The
Group owns 95% of this project, with the remaining
5% owned by Cun Xin Jiang Enterprise Company,
Head Office, a wholly-owned subsidiary of the
Peoples’ Government of Huang Po District,
Shanghai.
2. GUANGZHOU
“Le Palais” is located at No.1 Yong Sheng Shang
Sha, Donghu Road in the prestigious residential
area of Dongshan District in Guangzhou City. With
a site area of 139,000 sq. ft., it comprises 4 blocks
of highrise residential building with 844 luxury
units, together with residents clubhouse, swimming
pool, arcade and car parks at a total gross floor
area of 1,571,500 sq. ft. At a total investment cost
of Renminbi 800 million, it is one of the highest
residential buildings in Guangzhou. The
superstructure has been completed and decorated.
Sales campaign has been launched and as at 31st
December, 2002, 198 units have been sold fetching
$183,000,000 cash proceeds and 39 units has
been let.
INSURANCE
The Group’s wholly-owned subsidiary, Liu Chong
Hing Insurance Company Limited was established
in 1960. With its over 40 years history, the
company has always acted prudently. It underwrites
fire, marine, theft, accident, motor car, workers’
compensation, contractor’s all risk, and shipment
for import and export cargoes. It is also an agent for
life insurance and staff retirement provident fund
insurance. Due to sustained business failures and
high unemployment rate throughout the whole of
last year, turnover has reduced by 8.8%.
PROPERTY MANAGEMENT
Established in 1976, Liu Chong Hing Property
Management and Agency Limited, our wholly
owned subsidiary, was responsible for managing
commercial/industrial and residential properties
B U S I N E S S R E V I E W
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Le PalaisA. Duplex penthouseB. External viewC. Furnished living roomD. High ceiling dinning
room
Ddeveloped by our Group. In recent years, it began
to provide property management services to other
properties as well with remarkable results. Through
a recent application process for ISO 9001: 2000
quality management certificate, the Company was
awarded the honour within six months by one
single attempt. This should prove that the Company’s
property management quality would be in full
compliance with international standard.
REDEVELOPMENT OF BANK HEADOFFICE BUILDING
Situated in Central District for over 40 years, the Liu
Chong Hing Bank Building is scheduled to be
demolished for redevelopment in mid this year. The
new building shall contain 27 storeys with gross
floor area of some 110,000 sq. ft. Redevelopment
cost is estimated at $200 million and takes about
three years to complete. When ready in mid 2006,
the new building shall remain housing Liu Chong
Hing Bank as its Head Office.
PROSPECTS
In the wake of the possible military confrontation in
the Middle East, world economy has almost been
held standstill. Hong Kong’s superiority in economic
development has placed the city among Asia’s four
little dragons. Nevertheless, it is gradually losing its
lustre when merchants in the Mainland begin to
deal directly with foreign enterprises. Though the
Government has been unceasingly promoting the
economic transformation, Hong Kong has yet
succeeded in nurturing a pillar industry. As such,
investment appetite fades out causing outflow of
capital. In response to prevailing economic
globalization model, Hong Kong perhaps finds a
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A better way out by merging with the Pearl River
Delta. With the formation of a much larger
economy, comprising Guangdong, Hong Kong and
Macau, we should aim at the leading role as pivot
by capitalizing on the better geographical attributes,
laissez-faire monetary policies, widely-developed
international business network as well as abundant
strengths in shipping and communications facilities.
In addition, Pearl River Delta cities renowned for
manufacturing capacities and ample supplies of
basic materials, coupled with Macau’s existing
tourist and entertainment amenities, would make
the tripartite alliance a winning proposition. The
three places should work well together since their
merits are complementary without unnecessary
competition on each other. The proposed alliance
shall create new business opportunities to Hong
Kong and neighbouring areas in order for Hong
B U S I N E S S R E V I E W
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Group’s major propertiesA. Lui Chong Hing Financial
Centre, Huang PuDistrict, Shanghai
B. Western Harbour CentreC. Chong Hing SquareD. The Belcher’sE. Chong Yip Shopping
CentreF. Fairview Court
B D
E
F
C
Kong to stand a chance of maintaining its leading
role in the region.
The fiscal deficit issue in Hong Kong is becoming a
serious problem. Financial officials of the
Government have been striving to lay down
appropriate objectives in the implementation of
cost-cutting measures in reducing public expenditure
and streamlining government structure. It is expected
that the fiscal budget shall be balanced in a few
years’ time and our currency shall be kept stable. In
light of this critical moment, the Government
should exert best efforts to curb expenses while the
general public should be more cooperative with
one mind to hope for a gradually improving
economic environment.
Lastly, on behalf of the Board of Directors, I would
like to thank all our shareholders for their trust and
support, and all our employees for their dedication
and most diligent work.
LIU LIT MAN
Chairman
Hong Kong, 13th March, 2003
REPORT OF DIRECTORS
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The Directors of Liu Chong Hing Investment
Limited (the “Directors”) have pleasure in presenting
to the Shareholders their annual report together
with the audited financial statements for the year
ended 31st December, 2002.
PRINCIPAL ACTIVITIES
The principal activities of the Company are property
investment and investment holding. The principal
activities of the subsidiaries and associates are
shown in Note 15 and Note 16 to the financial
statements respectively. There was no significant
change in the principal activities of the Company
and the Group during the year.
RESULTS AND STATE OF AFFAIRS
The results of the Group for the year ended 31st
December, 2002 and the state of the Company’s
and the Group’s affairs at that date are set out on
pages 39 to 79 of this annual report.
DIVIDENDS
An interim cash dividend of HK$0.10 per share was
paid to shareholders on 18th September, 2002. The
Directors now recommend a final cash dividend of
HK$0.06 per share making a total cash dividend of
HK$0.16 per share for the year.
COMMENTARY ON ANNUALRESULTS
The directors announce that the consolidated net
profit for the year of 2002 is HK$80,362,000
representing a decrease of 57.3% over the previous
year.
B U S I N E S S R E V I E W
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BANKING OPERATION
For the year 2002 the Group’s banking associate,
Liu Chong Hing Bank Limited (the “Bank”) reported
a profit after taxation of $309,494,000, representing
a 10.5% decrease over the previous year.
The decrease in profit reflected Hong Kong’s
declining economy over the course of 2002.
Persistent deflation, poor consumer sentiment, and
lower business investment activities all added up to
a grim economic picture. On top of all this, lower
profit margins resulting from increasing competition
and falling interest rates put further pressure on the
Bank’s profitability.
Looking ahead, 2003 looks like it will be another
challenging year as uncertainty remains over the
course of the global economic picture. Looming
threats of war in the Middle East and poor
investment sentiment weigh heavily on businesses
in most sectors. In addition, the ever increasing
competition within the banking industry remains
and this will inevitably put a lid on profit margins.
We expect the Bank to continue to perform
consistently over the next year.
PROPERTY INVESTMENT ANDDEVELOPMENT
INVESTMENT PROPERTIES
The year 2002 continued to be another relatively
quiet year for Hong Kong’s property market. Both
prices and rentals have succumbed to the forces of
deflation. Despite this market environment, the
Group has managed to maintain a high occupancy
rate in its investment properties during the year.
Overall rental revenue decreased by 2.9% for the
year 2002.
Chong Hing Square, a popular ginza-type retail
development situated in the heart of Mongkok,
Kowloon, offers 184,000 sq. ft. of retail and
recreational space. This 20-storey building has been
99% let, and its rental revenue has decreased by
3.1% when compared with last year.
REPORT OF DIRECTORS
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Le PalaisA, B, C Promotion
activities ofLe Palais
For our Chong Yip Shopping Centre located in
Western District, Hong Kong, rental revenue has
decreased by 2.3%. This is arguably the best
located shopping centre in Western District, with
41,000 sq. ft. of retail and recreational area. The
property in year 2002 was 86% let, we expect to
maintain the present occupancy rate.
Western Harbour Centre, an office building at No.
181, Connaught Road West, Hong Kong, is
conveniently located close to the entrance/exit of
the Western Harbour Tunnel. This 28-storey building
offers 140,000 sq. ft. of office space with stunning
harbour view. It has been 90% let, and its rental
revenue has decreased by 7.1% over the previous
year.
The Group also received rental income from
Fairview Court, a 6-unit luxury low-rise apartment
building at No. 94, Repulse Bay Road, Hong Kong
and it has been fully let at present.
Liu Chong Hing Bank Building, which the Group
has a 45.11% interests, has been vacated in
preparation for re-development. Situated in the
heart of Central on 24, Des Voeux Road Central,
Hong Kong, this is the flagship property of the
Group. Demolition works for this building is due to
commence in the 2nd quarter of 2003.
DEVELOPMENT PROPERTIES
The Group’s other PRC development project is Le
Palais, a 1,500,000 sq. ft. gross floor area residential
complex located at Donghu Road in the scenic
Dongshan District of Guangzhou. This project has
now completed which provides 844 luxury
apartments plus 300 car parks and full clubhouse
recreational facilities. Sale of this prestigious
development has already begun and 214 units have
been sold so far, with another 39 units leased out.
The Belcher’s, the Group’s joint venture project with
Shun Tak Holdings Limited, Sun Hung Kai Properties
Limited, and New World Development Company
Limited, continued to be sold. 70% flat units has
been sold up to 31st December, 2002. The Group
owns 10% of this development.
The Group’s redevelopment project, Double Haven
in Kau To Shan, Shatin, provides 14 single and 18
semi-detached luxury houses with clubhouse and
A
B C
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Double HavenD, E, F Activities jointly run
with MetroBroadcast forpromoting DoubleHaven
G Double Haven’spromotion activities
swimming pool facilities. So far 25 houses has been
sold up to present fetching total cash proceeds of
HK$383.6 million.
The Group’s development of a grade-A commercial
office building in Nanjing Xilu, Shanghai, has
finished piling works and superstructure will begin
soon. The project is expected to be completed by
2006. The property will provide 594,300 sq. ft. of
commercial and office space in a prime business
location.
INSURANCE BUSINESS
The Group’s insurance business reported a 15%
decrease in profit over the previous year. Despite
increasing competition within the industry, we
expect it will make steady progress in the year
ahead.
ISO9001: 2000 CERTIFICATEACHIEVEMENT
Liu Chong Hing Property Management and Agency
Limited, a wholly owned subsidiary of the Company,
has successfully been awarded ISO9001: 2000
Certificate in 2003. This management and agency
company has always been the objective of providing
quality property management services to our client
with the main theme of ”Professional Management,
Quality Services, Enterprise and Customers’
Satisfaction”.
REDEVELOPMENT OF LIU CHONGHING BANK BUILDING
Liu Chong Hing Bank Building located at 24 Des
Voeux Road Central, Hong Kong, owned by Liu
Chong Hing Bank Limited (the “Bank”), has been
decided to re-develop in 2003. The operations of
D
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REPORT OF DIRECTORS
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the Company together with the Bank will move to
New World Tower in Central until the new building
has been completed.
The construction cost of the re-development project
is estimated approximately HK$200 million. The
proposed building is a 27-storey commercial building
with a gross floor area of 110,000 sq. ft. The whole
project is expected to complete at the end of 2006.
A. Liu Chong Hing BankBuilding
CAPITAL STRUCTURE
The group’s shareholders’ funds as at 31st December,
2002 amounted to HK$5,672 million, representing
a decrease of HK$419 million when compared with
last year. The decrease in shareholders’ funds was
mainly due to the increase in net profit of HK$80
million for the year and the movement of reserve
comprising of dividend payment of HK$76 million,
release of revaluation surplus to income statement
of HK$324 million and revaluation deficits of
HK$85 million against the investment property
revaluation reserve.
FINANCE AND TREASURYOPERATIONS
As at 31st December, 2002, the group’s consolidated
net debt being the bank borrowing less cash and
bank balances were decreased by HK$220 million
to HK$2,242.7 million. On the other hand, the total
cash deposits and bank balances were increased by
HK$51.9 million to HK$335.5 million.
The improvement of cash flow was mainly due to
the net cash inflow from the sale of Double Haven,
Le Palais and the repayment of shareholder loan
from The Belcher’s. The total cash proceeds from the
sale of Double Haven and Le Palais for the year was
about HK$384 million and HK$87 million
respectively. A total of HK$136.5 million being the
repayment of shareholders loan was returned from
the investment in The Belcher’s project.
In such, the group’s debt ratio had been improved
and its debt-to-equity ratio maintained at 40% as of
the balance sheet date.
A
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B. ISO 9001: 2000 AwardPresentation Ceremony
C. ISO 9001: 2000 Certificatepresented by BSI PacificLimited
D. Chong Hing SquareChinese New Yearactivities
E. Chong Hing SquareChristmas decoration
The management is well aware that a higher
gearing level will not only undermine the Company’s
long-term stability but also will restrict its flexibility
for any new business venture. Given that the
management do not intend to make any significant
investment within the near future until completion
and sale of various major development projects.
Almost all of the group’s borrowings are in Hong
Kong dollars and the interest rates are set on
floating rate basis. For this reason, the Company’s
interest expenses had been reduced in line with the
global reduction of interest rate. As at 31st December,
2002, about one-fifth of total bank borrowings are
entered into interest hedging instrument so as to
avoid interest rate volatility and uncertainty. Given
the above arrangement, the group’s management is
confident about the management of currency and
interest rate risk.
LIQUIDITY AND FUNDING
The Group has maintained a prudent policy in
regard to liquidity and funding. The Directors are
confident that the Group will maintain flexible and
adequate sources of funding to support all the
Group’s investment and development projects.
LOOKING AHEAD
The Group will continue to act prudently in the
year ahead and to look for new and profitable
opportunities.
MAJOR CUSTOMERS ANDSUPPLIERS
During the year, 64% of the Group’s purchases
attributable to the Group’s five largest suppliers was
less than 30% and the Group’s turnover attributable
B
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to the Group’s five largest customers was less than
30%. None of the directors, their associates or any
shareholder (which to the knowledge of the Directors
owns more than 5% of the Company’s issued share
capital) has any interest in the Group’s five largest
suppliers.
INVESTMENT PROPERTIES ANDPROPERTY, PLANT ANDEQUIPMENT
Movements in investment properties and property,
plant and equipment during the year are set out in
Notes 12 and 13 to the financial statements.
PURCHASE, SALE OR REDEMPTIONOF SHARES IN THE COMPANY
During the year, the Company repurchased certain
of its own shares through The Stock Exchange of
Hong Kong Limited, details of which are set out in
Note 24 to the financial statements. The Directors
considered that the repurchases would increase the
net asset value per share of the Company.
Save as disclosed above, neither the Company nor
any of its subsidiaries purchased, sold or redeemed
any of the Company’s listed securities during the
year.
SHARE OPTION SCHEME
The Company’s share option scheme (the “Scheme”),
was adopted pursuant to a resolution passed on
25th April, 2002, which replace the previous share
option scheme, for the primary purpose of providing
incentives to directors and eligible employees, and
will expire on 24th April, 2012. Under the Scheme,
the Company may grant options to eligible
employees, including executive directors of the
Company and its subsidiaries, to subscribe for
shares in the Company. Additionally, the Company
may, from time to time, grant share options to
outside eligible third parties at the discretion of the
Board of Directors.
The total number of shares in respect of which
options may be granted under the Scheme is not
permitted to exceed 10% of the shares of the
Company in issue at any point in time, without
prior approval from the Company’s shareholders.
The number of shares in respect of which options
may be granted to any individual is not permitted to
exceed 10% of the shares of the Company in issue
at any point in time, without prior approval from
the Company’s shareholders.
Options may be exercised at any time from the date
of grant of the share option to the 5th anniversary of
the date of grant. The exercise price is determined
by the directors of the Company, and will not be
less than the higher of the nominal value of the
Company’s share on the date of grant, the average
closing price of the shares for the five business days
immediately preceding the date of grant, or the
closing price of the shares on the date of grant.
No options have been granted under the above-
mentioned scheme since the Scheme was adopted.
SUBSIDIARIES AND ASSOCIATES
Particulars relating to the subsidiaries and associates
are set out in Notes 15 and 16 to the financial
statements respectively.
RESERVES
Movements in reserves of the Group during the year
are set out in Consolidated Statement of changes in
B U S I N E S S R E V I E W
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equity and the movements in reserves of the
Company during the year are set out in Note 25 to
the financial statements.
DIRECTORS
The Directors of the Company during the year are
shown on page 28 of this annual report.
The term of office of each non-executive director is
the period up to his retirement by rotation in
accordance with the Company’s Articles of
Association.
Mr. Woo Pak Chuen, Mr. Peter Alan Lee Vine,
Mr. Liu Chun Ning, Wilfred and Mr. Liu Kam Fai,
Winston shall retire by rotation in accordance with
Article 99 of the Company’s Articles of Association
and, being eligible, offer themselves for re-election.
DIRECTORS’ INTERESTS IN SHARECAPITAL OF THE COMPANY ANDITS ASSOCIATED CORPORATIONS
At 31st December, 2002, the beneficial interests of
the Directors and Chief Executives of the Company
and of their associates in the shares of the Company
and its associated corporations as recorded in the
register maintained under Section 29 of the Securities
(Disclosure of Interests) Ordinance (the “SDI
Ordinance”) were as follows:
(a) The Company
Personal Family Corporate Total
Name of Director interests interests interests interests
Number of ordinary shares held
Mr. Liu Lit Man, 4,991,200 – 171,600,000 176,591,200
Chairman (Note 1)
Mr. Liu Lit Mo, 7,580,000 – 174,600,000 182,180,000
Managing Director (Notes 1 and 2)
Mr. Liu Lit Chi 141,668 – 216,864,222 217,005,890
(Notes 1 and 3)
Mr. Peter Alan Lee Vine 24,000 – – 24,000
Mr. Peter Ng Ping Kin 36,000 – – 36,000
Mr. Liu Lit Chung – – 171,600,000 171,600,000
(Note 1)
Mr. Andrew Liu 600,000 – – 600,000
Mr. Winston Liu Kam Fai 2,244,607 – – 2,244,607
REPORT OF DIRECTORS
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Notes:
1. 171,600,000 shares in the Company are beneficially
held by Liu’s Holdings Limited, of which Mr. Liu Lit
Man, Liu Lit Mo, Liu Lit Chi and Liu Lit Chung are
amongst its shareholders. The above numbers of
shares are duplicated for each of these directors.
2. Eternal Wealth Ltd., of which Mr. Liu Lit Mo and his
associates are shareholders, beneficially holds
3,000,000 shares in the Company, and thus is
included in the corporate interests of Mr. Liu Lit Mo.
3. Alba Holdings Limited, of which Mr. Liu Lit Chi and
his associates are shareholders, beneficially holds
45,264,222 shares in the Company, and thus is
included in the corporate interests of Mr. Liu Lit Chi.
(b) Associates
Liu Chong Hing Bank Limited
Personal Family Corporate Total
Name of Director interests interests interests interests
Number of ordinary shares held
Mr. Liu Lit Man, 3,447,928 – 236,233,628 239,681,556
Executive Chairman (Note 1)
Mr. Liu Lit Mo, 1,009,650 – 236,233,628 237,243,278
Vice Chairman (Note 1)
Mr. Liu Lit Chi 313,248 – 238,496,839 238,810,087
Managing Director & (Notes 1 and 2)
Chief Executive Officer
Mr. Peter Alan Lee Vine 1,200 – – 1,200
Mr. Liu Lit Chung 173,000 – 236,233,628 236,406,628
(Note 1)
Mr. Andrew Liu 60,000 – – 60,000
Notes:
1. The corporate interests in 236,233,628 shares are
attributed as follows:
(i) 196,233,628 shares held by the Company’s wholly-
owned subsidiary, Liu Chong Hing Estate Company,
Limited (“Liu Chong Hing Estate”), in which each of
B U S I N E S S R E V I E W
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Mr. Liu Lit Man, Liu Lit Mo, Liu Lit Chi and Liu Lit
Chung is deemed under the SDI Ordinance to be
interested through Liu’s Holdings Limited, a private
company holding approximately 45% of the
Company’s issued and fully-paid share capital; and
(ii) 40,000,000 shares held by The Bank of Tokyo-
Mitsubishi, Limited (“Bank of Tokyo-Mitsubishi”).
Pursuant to an agreement in 1994, Bank of Tokyo-
Mitsubishi has granted an option to Liu Chong
Hing Estate exercisable at any time during the term
of that agreement to purchase all such shares and
Bank of Tokyo-Mitsubishi is required to offer to sell
all such shares to Liu Chong Hing Estate in certain
circumstances. By virtue of the interests of Mr. Liu
Lit Man, Liu Lit Mo, Liu Lit Chi and Liu Lit Chung in
Liu Chong Hing Estate through Liu’s Holdings
Limited, each of them is deemed under the SDI
Ordinance to be interested in such shares.
2. 2,263,211 shares are held by Alba Holdings Limited,
shareholders of which include Mr. Liu Lit Chi and
his associates. Accordingly, Mr. Liu Lit Chi is
deemed under the SDI Ordinance to be interested
in such shares.
CONNECTED PARTYTRANSACTIONS
The connected party transactions between the
Group and the Liu Chong Hing Bank Group during
the year are described as follows:
A. The Bank handled routine banking transactions
for the Group. Services provided by the Bank
are cheque clearing, current, savings and
deposit accounts, remittances, and other banking
facilities.
B. Members of the Bank Group provided securities
and futures brokerage, nominee and data
processing services to members of the Group.
C. The Company leased the 5th floor and a
portion of the 14th floor of the Liu Chong Hing
Bank Building from the Bank. On the other
hand, the Bank and its subsidiaries leased
several floors of Western Harbour Centre from
the Company.
D. The Company through its wholly-owned
subsidiary, Liu Chong Hing Insurance Company
Limited, provided insurance agency and
underwriting services to members of the Group.
In addition, the Company’s another wholly-
owned subsidiary, Liu Chong Hing Property
Management and Agency Limited, has provided
property management, property consultant and
property maintenance services to the Bank
Group.
Messrs. Liu Lit Man, Liu Lit Mo, Liu Lit Chi, Peter
Alan Lee Vine, Peter Ng Ping Kin, Liu Lit Chung,
Andrew Liu and Winston Liu Kam Fai are interested,
directly or indirectly, in the respective share capitals
of the Company and/or the Bank.
In the opinion of the Directors who do not have any
interest, whether directly or indirectly, in the above
transactions, the transactions were conducted in the
ordinary course of business of the Group on normal
commercial terms.
DIRECTORS’ INTERESTS INCONTRACTS
No contracts of significance in relation to the
Group’s business, to which the Company or any of
the Company’s subsidiaries was a party and in
which a Director of the Company had, whether
directly or indirectly, a material interest, subsisted at
the end of the year or at any time during the year.
REPORT OF DIRECTORS
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At no time during the year was the Company or any
of the Company’s 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.
None of the Directors proposed for re-election at
the forthcoming annual general meeting has a
service contract with the Company which is not
terminable within one year without payment of
compensation (other than statutory compensation).
SUBSTANTIAL SHAREHOLDERS
The register of substantial shareholders maintained
under Section 16(1) of the SDI Ordinance shows
that at 31st December, 2002, the Company had not
been notified of interest, being ten per cent or more
of the issued share capital of the Company, save
and except as disclosed under Directors’ interests in
share capital of the Company and its associated
corporations.
GROUP BORROWINGS ANDINTEREST CAPITALISED
Details of bank loans, overdrafts and other
borrowings repayable within five years are set out in
Note 22 to the financial statements.
Interest capitalised to properties under development
during the year amounted to HK$69,789,000 (2001:
HK$153,698,000).
AUDIT COMMITTEE
The members of the Audit Committee are shown on
page 28. The principal duties of the Audit Committee
are reviewing the internal controls and the financial
reporting requirements of the Group. The Committee
is satisfied with the Company’s internal control
procedures and the financial reporting disclosures.
CODE OF BEST PRACTICE
The Company has complied throughout the year
ended 31st December, 2002 with the Code of Best
Practice as set out in Appendix 14 of the Rules
Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited.
AUDITORS
The financial statements for the year have been
audited by Messrs. Deloitte Touche Tohmatsu who
have expressed their willingness to continue in
office. Accordingly, a resolution will be submitted
to the forthcoming annual general meeting to re-
appoint Messrs. Deloitte Touche Tohmatsu as auditors
of the Company.
On behalf of the Board
Liu Lit Mo
Managing Director
Hong Kong, 13th March, 2003
liu chong hing groupSimplified Corporate Structure Chart AS AT 13TH MARCH, 2003
B U S I N E S S R E V I E W
25
* The securities of which are listed on The stock Exchange of Hong Kong Limited
100%
50% 45%
45.33%
45.11%
60% 100% 100%
16.86%
100% 100% 100%
LIU’S HOLDINGSLIMITED
LIU’S FAMILY
Liu Chong Hing Data Processing Limited
Provision of Electronic Data Processing Services
Chong HingSecurities Limited
Stock Broking
Liu Chong Hing Finance Limited
Deposit Taking
Shanghai Huang Pu Liu Chong Hing Property
Development Co., Ltd.Property Development
*LIU CHONG HING BANK LIMITEDBanking Business
*LIU CHONG HING INVESTMENT LIMITED
Investment Holding,Property Investment
Liu Chong Hing Insuarance
Co., Ltd.Insurance Business
GuangzhouChong Hing Property
Dev. Co., Ltd.Property Development
Liu Chong Hing Property Management
and Agency Ltd.Property Management
and Agency
OtherSubsidiaries
Investment and Trading Business
26
SCHEDULE OF MAJOR PROPERTIES
Held by the Group and AssociatesAs at 31st December, 2002
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Interest in
the property Approximate Total gross
attributable site area floor area Existing
Description to the Group (sq. ft.) (sq. ft.) use
Investment properties held under long lease
Hong Kong:
1. Western Harbour Centre 100% 11,500 200,000 O/P
181 – 183 Connaught Road West
2. Chong Yip Shopping Centre 100% 32,400 73,400 C/P
402 – 404 Des Voeux Road West
3. Fairview Court 100% 30,000 26,000 R/P
94 Repulse Bay Road
4. Liu Chong Hing Bank Building 45.1% 7,100 99,500 O/C
24 Des Voeux Road Central
Kowloon and New Territories:
5. Double Haven 100% 141,700 178,250 R/P
52 Mak Lok Path, Kau To Shan
Shatin, New Territories
6. Chong Hing Square 100% 12,300 184,000 C
593 – 601 Nathan Road, Mongkok
7. Bonsun Industrial Building 100% 18,000 46,860 I/P
364 – 366 Sha Tsui Road, Tsuen Wan
8. Fung Shun Commercial Building 45.1% 2,200 33,000 O
591 Nathan Road, Mongkok
255,200 841,010
B U S I N E S S R E V I E W
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Interest in
the property Approximate Total gross Expected
attributable site area floor area Main completion
Description to the Group (sq. ft.) (sq. ft.) usage date Status
Properties under development
Hong Kong:
1. The Belcher’s 10% 324,000 2,446,000 R 2002 Completed
Inland Lot No. 8880 215,000 C
Pokfulam 77,600 S
Hong Kong 524,300 P
3,262,900
People’s Republic of China:
1. Liu Chong Hing Financial Centre 70.3% 55,000 115,500 C 2006 Piling work
No. 23 Lot A Nanjing Xilu 361,300 O completed
Huang Pu District 117,500 P
Shanghai
594,300
2. Le Palais 60% 139,000 1,222,962 R 2002 Completed
No. 1 Yong Sheng Shang Sha 36,600 C Subject to issuance
Donghu Road 138,294 S of occupation
Dongshan District 135,626 P permit
Guangzhou
1,533,482
It provides 844 flat units with gross floor areas from 1,200 sq. ft. to 2,360 sq. ft. each and also provides
approximately 300 carparking spaces.
C=Commercial I=Industrial P=Car Park R=Residential O=Office S=Clubhouse and recreational facilities
G=Garden area
CORPORATE INFORMATION
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BOARD OF DIRECTORS
CHAIRMAN
✝ # Liu Lit Man, GBS, J.P., F.I.B.A.
DIRECTORS
✝ # Liu Lit Mo, M.B.E., J.P. (Managing Director)✝ # Liu Lit Chi
* The Hon. Woo Pak Chuen,
C.B.E., LLD (Hon), LLB, PhD, J.P.
* Leo Lee Tung Hai, GBS, J.P.
* Peter Alan Lee Vine,
O.B.E., V.R.D., LLD (Hon), LLB, J.P.
* Peter Ng Ping Kin, MSc., J.P.
* Cheng Mo Chi, Moses, LLB (HK), J.P.
# Liu Lit Chung, MB, BS (London), MRCP(UK)
# Andrew Liu# Liu Chun Ning, Wilfred
✝ # Liu Kam Fai, Winston✝ Lee Wai Hung
Wai Chun Sing, Terence
(appointed on 14th March, 2002)# Liu Kwun Shing, Christopher
(alternate director to Dr. Liu Lit Chung)
✝ Executive directors
* Independent non-executive directors# Members of Liu’s family
COMPANY SECRETARY
Lee Wai Hung
AUDIT COMMITTEE
The Hon. Woo Pak Chuen
C.B.E., LLD (Hon), LLB, PhD, J.P.
Leo Lee Tung Hai, GBS, J.P.
Peter Ng Ping Kin, MSc., J.P.
Cheng Mo Chi, Moses, LLB (HK), J.P.
SENIOR MANAGERS
Eva Liu
Luk Chi Chung
MANAGERS
Cavior Liu
Ngan Luen Hing
Lam Shiu Cheung
Wong Yuk Chi
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C O R P O R AT E & F I N A N C I A L I N F O R M AT I O N
SOLICITORS
Gallant Y.T. Ho & Co.
P.C. Woo & Co.
Fung & Liu
Anthony Chiang & Partners
AUDITORS
Deloitte Touche Tohmatsu
Certified Public Accountants
SHARE REGISTRARS &
TRANSFER OFFICE
Computershare Hong Kong Investor Services Limited
17th Floor, Hopewell Centre
183 Queen’s Road East
Wanchai, Hong Kong
BANKERS
Liu Chong Hing Bank Limited
ABN • AMRO Bank
Bangkok Bank Public Company Limited
Bank of China
Bank of Communications
Dao Heng Bank
Hang Seng Bank Limited
Industrial and Commercial Bank of
China (Asia) Limited
Nanyang Commercial Bank, Limited
Standard Chartered Bank
The Bank of Tokyo-Mitsubishi, Limited
Sumitomo Mitsui Banking Corporation
Wing Hang Bank, Limited
REGISTERED OFFICE
5th Floor, Liu Chong Hing Bank Building
24 Des Voeux Road Central, Hong Kong
With effect from 22nd April, 2003,
the Company’s business office
will move to:
7th Floor, New World Tower Two
18 Queen’s Road Central
Hong Kong
Tel: (852) 2841 7255
Fax: (852) 2868 5294
E-mail: [email protected]
Website: http://www.lchi.com.hk
GUANGZHOU OFFICE
Room B, 18th Floor
Guangdong International Building, Tower A
339 Huanshi Dong Lu
Guangzhou, China
Tel: 8620-83313616
Fax: 8620-83311002
SHARE LISTING
The Company’s shares are listed on
The Stock Exchange of Hong Kong Limited
STOCK CODE
0194
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BOARD OF DIRECTORS
MR. LIU LIT MAN, GBS, J.P., F.I.B.A.
aged 73, the Chairman of both Liu Chong Hing
Investment Limited and Liu Chong Hing Insurance
Company Limited since 1972. Mr. Liu is the
Executive Chairman of Liu Chong Hing Bank
Limited. His other directorships include those in
The Hong Kong and China Gas Company Limited,
Asia Commercial Bank Limited and COSCO Pacific
Limited. Mr. Liu was a Director of Tung Wah Group
of Hospitals, the President of the Hong Kong Chiu
Chow Chamber of Commerce (presently Permanent
Honorary President), as well as the founder and the
first Chairman of Teochew International Convention
(now Permanent Honorary Chairman). Presently he
is a Standing Committee Member of The Chinese
General Chamber of Commerce, Hong Kong. Mr.
Liu is also the Supervisor of Liu Po Shan Memorial
College, a Director of New Asia College of the
Chinese University of Hong Kong, a founding
member of the Court of the Hong Kong Polytechnic
University, and the founder and Supervisor of Chiu
Chow Association Secondary School. In 1975, he
was appointed a Justice of the Peace and was
elected Fellow of the International Banker
Association. He had been a Member of the
Consultative Committee for the Basic Law from
1985 to 1990 and was a Member of the Selection
Committee of the First Government of the Hong
Kong Special Administrative Region. He was
awarded Gold Bauhinia Medal from the HKSAR in
July 2001.
MR. LIU LIT MO, M.B.E., J.P.
aged 65, is the Managing Director of Liu Chong
Hing Investment Limited since 1972. Mr. Liu is also
the Vice Chairman and Executive Director of Liu
Chong Hing Bank Limited. He was a Deputy
Managing Director of the Liu Chong Hing Bank
Limited from 1961 to 1973. He is a Director of
China Motor Bus Company Limited. As for
community service, Mr. Liu was the Chairman of
Tung Wah Group of Hospitals in 1967 and is now
serving as an Adviser of the Group. He had also
been President of the Hong Kong Chiu Chow
Chamber of Commerce, Chairman of Hong Kong
Football Association and District Governor of
District 3450, Rotary International. Presently, he is
a Member of the Board of Trustees of the Lord
Wilson Heritage Trust, a Member of the Board of
Trustee of United College, the Chinese University
of Hong Kong and a Manager of Liu Po Shan
Memorial College. He was awarded Silver Jubilee
Medal by Her Majesty the Queen in 1977.
MR. LIU LIT CHI
aged 64, is a director of Liu Chong Hing Investment
Limited and Managing Director and Chief Executive
Officer of Liu Chong Hing Bank Limited. Mr. Liu
also holds directorships in a number of other public
and private companies.
THE HON. WOO PAK CHUEN,
C.B.E., LLD (HON), LLB, PhD, J.P.
aged 93, an independent non-executive director of
the Company, Consultant and Notary Public of
Messrs. P C Woo & Co., Solicitors. Also Chairman
of Hong Kong Yakult Co., Ltd. and Director of
Kowloon Motor Bus, Co., Ltd. Former Member of
the Hong Kong Legislative Council (1964-73) and
Executive Council (1972-76) (Permitted by Her
Majesty the Queen to retain the title “Honourable”
after leaving the Executive Council); Life Member
of the Court of the University of Hong Kong and of
the Council of the Chinese University of Hong
Kong.
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C O R P O R AT E & F I N A N C I A L I N F O R M AT I O N
DR. LEO LEE TUNG HAI, GBS, J.P.
aged 81, has been appointed as independent non-
executive director of the Company since August
1999. Dr. Lee is the Chairman of Tung Tai Group of
Companies and a director or non-executive director
of several publicly listed companies in Hong Kong,
including Beijing Enterprises Holdings Limited, etc.
He is a member of a number of public services
committees and heads many social service
organizations, including as an advisor of the
Advisory Board of the Tung Wah Group of Hospitals,
Chairman of the Association of Chairmen of the
Tung Wah Group of Hospitals, Chairman of Friends
of Hong Kong Association and President of the
Italian Cultural Society of Hong Kong. Presently, he
is Vice President of the China Overseas Friendship
Association. He served as a Standing Committee
Member of the eighth and ninth National Committee
of the Chinese People’s Political Consultative
Conference; an Adviser on Hong Kong Affairs to
Hong Kong & Macau Affairs Office of the State
Council and Xinhua News Agency, Hong Kong
Branch; a member of the Preparatory Committee
for the Hong Kong Special Administrative Region;
and a member of the Selection Committee of the
First Government of Hong Kong Special
Administrative Region. Dr. Lee has been honoured
with awards by four different governments, which
include Cavaliere di Gran Croce of Italy, O.B.E. of
Great Britain, Chevalier Legion d’Honneur of
France and Commandeur de l’Ordre de Leopold II
of Belgium. In 1999, he was conferred Gold
Bauhinia Star by the Hong Kong Special
Administrative Region Government of the People’s
Republic of China. Dr. Lee has over 40 years of
experience in business management.
MR. PETER ALAN LEE VINE,
O.B.E., V.R.D., LLD (HON), LLB, J.P.
aged 81, is a solicitor who has practised in Hong
Kong since 1947. He has been an independent
non-executive director of Liu Chong Hing Investment
Limited and Liu Chong Hing Bank Limited since
1972. He also holds directorship in many public
and private companies.
MR. PETER NG PING KIN, MSC., J.P.
aged 74, non-executive director and Vice Chairman
of Lam Soon (Hong Kong) Limited. Also non-
executive director and Vice Chairman of Lam Soon
Food Industries Limited. Mr. Ng is an architect by
profession and has held numerous offices within
his profession and in relation to his public service
activities. He was an appointed Member of the
Urban Council for ten years and served as Chairman
of the Food and Food Premises Select Committee.
He was appointed as District Advisor to the Hong
Kong Branch of Xinhua News Agency in 1994.
Appointed an independent non-executive director
of the Company.
MR. CHENG MO CHI, MOSES, LLB (HK), J.P.
aged 53, has become an independent non-executive
director of the Company since August 1999. Mr.
Cheng is a senior partner of Messrs. P.C. Woo &
Co., a firm of solicitors and notaries in Hong Kong.
Mr. Cheng was a member of the Legislative Council
of Hong Kong between 1991 and 1995. He is
currently the Chairman of the Hong Kong Institute
of Directors and the Committee on the Promotion
of Civic Education. Mr. Cheng also serves on the
boards of many other listed companies as
independent non-executive director.
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DR. LIU LIT CHUNG, MB, BS (LONDON), MRCP (UK)
aged 53, became a Director in 1979 and also the
Deputy Managing Director of the Company for
over ten years. He holds a medical degree from
King’s College Hospital, London University and is a
Member of the Royal College of Physicians of the
United Kingdom. He is also the Director of Liu
Chong Hing Bank Limited and the senior partner of
a medical practice in Hong Kong.
MR. ANDREW LIU
aged 47, has been a Director since 1979. He is the
Chief Executive Officer of JP Morgan Partners Asia.
Mr Liu, holder of a Master of Arts degree from the
Oxford University in England, was a solicitor with
Slaughter and May in London before joining
Morgan Stanley & Co Inc in New York in 1981. Mr
Liu was promoted to Managing Director in 1990
before relocating to Morgan Stanley Asia Limited in
Hong Kong, where he assumed the position of
President and Managing Director until his resignation
in September 1997. Mr Liu remains associated with
Morgan Stanley as an Advisory Director. He is the
son of Mr. Liu Lit Man.
MR. LIU CHUN NING, WILFRED, BSC.
aged 41, appointed as Director in 1997. He holds a
bachelor degree in economics from University of
Newcastle-upon-Tyne (UK). Mr. Liu is also an
Executive Director of Liu Chong Hing Bank Limited
and is in charge of the securities department.
MR. LIU KAM FAI, WINSTON, BA., MSC., MACP
aged 36, appointed as Director in 1997. He holds a
master degree from University of London and is an
associate member of computer professionals MACP.
He is in charge of the property department. He is
the son of Mr. Liu Lit Mo.
MR. LEE WAI HUNG,
LLB, FCCA, FHKSA, ATIHK, MBA, CPA
aged 40, is an Executive Director and Company
Secretary. Mr. Lee is a professional accountant and
has over ten years of experience in corporate
finance and accounting. Mr. Lee joined the
Company in 1992 and was appointed Director in
1994. Mr. Lee is in charge of finance and secretarial
departments.
MR. WAI CHUN SING, TERENCE,
MHKIS, MCIH, RPS
aged 37, has been appointed as director of the
Company since March 2002 and he is also a Senior
Property Manager of the Company. Mr. Wai is a
Chartered Surveyor and holds a Master of Housing
Management Degree from The University of Hong
Kong. He joined the Company in 1996 and is in
charge of property department.
MR. LIU KWUN SHING, CHRISTOPHER
aged 27, has been appointed as alternate director
to Dr. Liu Lit Chung in 2000. He is a qualified
solicitor in both England & Wales and Hong Kong,
and holder of a Master of Arts degree in
Jurisprudence from the University of Oxford. Mr.
Liu is currently a practising solicitor with Deacons
in Hong Kong. He is the son of Dr. Liu Lit Chung.
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C O R P O R AT E & F I N A N C I A L I N F O R M AT I O N
SENIOR MANAGERS
MS. EVA LIU, MA (CANTAB), DIPARCH (KINGSTON), MA
(CITY), ARB (UK), RIBA
aged 39, Senior Project Manager. Ms. Liu is a
Chartered Architect (UK), holding Master of Arts
Degrees in Architecture from the University of
Cambridge and Property Valuation And Law from
The City University in London. She was in
architectural practice in England before joining the
Company in 1999. She is the daughter of Mr. Liu
Lit Mo.
MR. LUK CHI CHUNG, FCCA, AHKSA, CPA
aged 35, Senior Accounting Manager. Mr. Luk is a
professional accountant and has over ten years of
experience in finance and accounting. Mr. Luk
joined the Company in 1995 and is in charge of
accounting department.
NOTICE of Annual General Meeting
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NOTICE IS HEREBY GIVEN that the annual general
meeting of Liu Chong Hing Investment Limited (the
“Company”) will be held at the Conference Room,
16th Floor, Liu Chong Hing Bank Building, 24 Des
Voeux Road Central, Hong Kong on Wednesday,
23rd April, 2003 at 11:30 a.m for the following
purposes:
1. To receive and consider the audited Financial
Statements together with Reports of the
Directors and Auditors of the Company for
the year ended 31st December, 2002.
2. To approve the payment of the final dividend
for the year ended 31st December, 2002.
3. To re-elect Directors and fix their
remuneration.
4. To re-appoint Deloitte Touche Tohmastsu as
Auditors for the ensuring year and authorize
the Board of Directors to fix their
remuneration.
As special business to consider and, if thought fit,
pass with or without modifications the following
ordinary resolutions:
ORDINARY RESOLUTIONS
5. “THAT
(a) subject to paragraph (b) below, the
exercise by the directors of the Company
during the Relevant Period (as
hereinafter defined) of all the powers of
the Company to repurchase shares of
the Company on The Stock Exchange
of Hong Kong Limited (“Stock
Exchange”) or on any other stock
exchange on which the shares of the
Company may be listed and which is
recognized by the Securities and Futures
Commission in 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 of any other
stock exchange (as amended from time
to time), be and is hereby generally and
unconditionally approved;
(b) the aggregate nominal amount of the
shares of the Company which the
Company is authorized to repurchase
pursuant to the approval in paragraph
(a) above shall not exceed 10% of the
aggregate nominal amount of the share
capital of the Company in issue as at
the date of passing of this resolution,
and the said approval shall be limited
accordingly; and
(c) for the purpose of this resolution:
“Relevant Period” means the period
from the passing of this resolution until
whichever is the earliest of:–
(i) the conclusion of the next annual
general meeting of the Company;
(ii) the expiration of the period within
which the next annual general
meeting of the Company is
required by the articles of
association of the Company or
the Companies Ordinance
(Chapter 32 of the Laws of Hong
Kong) to be held; or
(iii) the date on which the authority
set out in this resolution is
revoked, renewed or varied by
an ordinary resolution of the
shareholders of the Company in
general meeting.”
6. “THAT
(a) subject to paragraph (c) below, 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
35
C O R P O R AT E & F I N A N C I A L I N F O R M AT I O N
with additional shares in the capital of
the Company and to make or grant
offers, agreements and options
(including bonds, warrants, debentures,
notes and any securities which carry
rights to subscribe for or are convertible
into shares of the Company) which
would or might require the exercise of
such power be and is hereby generally
and unconditionally approved;
(b) the approval in paragraph (a) above
shall authorize the directors of the
Company during the Relevant Period
(as hereinafter defined) to make or
grant offers, agreements and options
(including bonds, warrants, debentures,
notes and any securities which carry
rights to subscribe for or are convertible
into shares of the Company) which
would or 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
(whether pursuant to an option or
otherwise) and issued by the directors
of the Company pursuant to the
approval in paragraph (a) above,
otherwise than pursuant to (i) a Rights
Issue (as hereinafter defined); (ii) the
exercise of any rights of subscription or
conversion under any warrants, bonds,
debentures, notes and any securities of
the Company which carry rights to
subscribe for or are convertible into
shares of the Company; (iii) an issue of
shares of the Company upon the
exercise of the subscription rights
attaching to any options granted under
any share option scheme adopted by
the Company; (iv) an issue of shares as
scrip dividends or similar arrangement
providing for the allotment of shares in
lieu of the whole or part of a dividend
on shares of the Company in
accordance with the Company’s
Memorandum and Art icles of
Association from time to time; or v)
specific authority granted by the
shareholders of the Company in general
meeting, shall not exceed 20% of the
aggregate nominal amount of the share
capital of the Company in issue at the
date of passing of this resolution, and
the said approval shall be limited
accordingly; and
(d) for the purpose of this resolution,
“Relevant Period” means the period
from the passing of this resolution until
whichever is the earliest of:–
(i) the conclusion of the next annual
general meeting of the Company;
or
(ii) the expiration of the period within
which the next annual general
meeting of the Company is
required by the articles of
association of the Company or
the Companies Ordinance
(Chapter 32 of the Laws of Hong
Kong) to be held; or
(iii) the date on which the authority
set out in this resolution is
revoked, renewed or varied by
an ordinary resolution of the
shareholders of the Company in
general meeting; and
“Rights Issue” means an offer of shares
open for a period fixed by the directors
of the Company to holders of shares or
any class of shares of the Company
whose names appear on the register of
members of the Company on a fixed
NOTICE of Annual General Meeting
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record date in proportion to their then
holdings of such shares as at that date
(subject to such exclusions 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
recognized regulatory body or any
stock exchange in, any territory
applicable to the Company).”
7. “THAT conditional upon Ordinary Resolutions
Nos. 5 and 6 set out in the notice convening
this meeting being passed, the general
mandate granted to the directors of the
Company to exercise the powers of the
Company to allot, issue and deal with
additional shares pursuant to Ordinary
Resolution No. 6 set out in the notice
convening this meeting be and is hereby
extended by the addition thereto of an
amount representing the aggregate nominal
amount of the share capital of the Company
repurchased by the Company under the
authority granted pursuant to Ordinary
Resolution No. 5 set out in the notice
convening this meeting, provided that such
extended amount of shares so repurchased
shall not exceed 10% of the aggregate
nominal amount of the share capital of the
Company in issue at the date of passing of
this resolution.”
8. To transact any other business.
By Order of the Board
Liu Lit Mo
Managing Director
Hong Kong, 13th March, 2003
Notes:
1. A member of the Company entitled to attend and
vote at the meeting is entitled to appoint another
person as his proxy to attend and vote in his
stead. A member who is the holder of two or
more shares may appoint more than one proxy to
attend on the same occasion. A proxy need not
be a member of the Company.
2. To be valid, a form of proxy, together with any
power of attorney or other authority (if any) under
which it is signed, or a notarially certified copy
thereof, must be lodged with the registered office
of the Company at 5th Floor, Liu Chong Hing
Bank Building, 24 Des Voeux Road Central, Hong
Kong not less than 48 hours before the time
appointed for holding the meeting or any
adjournment thereof.
3. The Register of Members of the Company will be
closed from Monday, 14th April, 2003 to Thursday,
17th April, 2003, (both dates inclusive) during
which period no transfer of shares will be
effected. In order to qualify for the final dividend,
all completed transfer forms accompanied by the
relevant share certificates must be lodged for
registration with the Company’s Share Registrars,
Computershare Hong Kong Investor Services
Limited, 17th Floor, Hopewell Centre, 183 Queen’s
Road East, Hong Kong for registration not later
than Friday, 11th April, 2003.
FINANCIAL Calendar C O R P O R AT E & F I N A N C I A L I N F O R M AT I O N
37
At 13th March, 2003
Interim Results : Announced on 19th August, 2002
for six-month ended 30th June, 2002
Annual Results : Announced on 13th March, 2003
for year ended 31st December, 2002
Annual General Meeting : To be held on 23rd April, 2003
Dividends
Interim cash dividend : HK$0.10 per share
Paid on : 18th September, 2002
Proposed final cash dividend : HK$0.06 per share
Payable on : 24th April, 2003
Ex-dividend date of final dividend : 10th April, 2003
Closure of Register of Members : From 14th April, 2003 to 17th April, 2003
(both days inclusive)
AUDITORS’ Report
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TO THE MEMBERS OF LIU CHONG HING INVESTMENT LIMITED(incorporated in Hong Kong with limited liability)
We have audited the financial statements on pages 39 to 79 which have been prepared in accordance withaccounting principles generally accepted in Hong Kong.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Companies Ordinance requires the directors to prepare financial statements which give a true and fair view. Inpreparing financial statements which give a true and fair view it is fundamental that appropriate accounting policiesare selected and applied consistently.
It is our responsibility to form an independent opinion, based on our audit, on those statements and to report ouropinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society ofAccountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures inthe financial statements. It also includes an assessment of the significant estimates and judgements made by thedirectors in the preparation of the financial statements, and of whether the accounting policies are appropriate to thecircumstances of the Company and of the Group, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considerednecessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financialstatements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of thepresentation of information in the financial statements. We believe that our audit provides a reasonable basis for ouropinion.
OPINION
In our opinion the financial statements give a true and fair view of the state of affairs of the Company and of theGroup as at 31st December, 2002 and of the profit and cash flows of the Group for the year then ended and havebeen properly prepared in accordance with the Companies Ordinance.
Deloitte Touche Tohmatsu
Certified Public Accountants
Hong Kong, 13th March, 2003
CONSOLIDATED INCOME StatementFor the year ended 31st December, 2002
F I N A N C I A L R E P O RT
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2002 2001Notes HK$’000 HK$’000
Turnover 4 & 5 474,461 283,913
Direct costs (332,711) (130,138)
141,750 153,775
Unrealised holding (loss) gain on other investments (2,528) 20,421
Other operating income 2,260 2,171
Administrative and other operating costs (99,985) (84,301)
Profit from operations 6 41,497 92,066
Finance costs 7 (68,451) (67,464)
Share of results of associates 166,044 173,381
Profit before tax 139,090 197,983
Taxation 9 (43,580) (40,828)
Profit after tax 95,510 157,155
Minority interest (15,148) 30,951
Net profit for the year 80,362 188,106
Dividends 10 60,609 75,797
Earnings per share 11 HK$0.21 HK$0.50
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BALANCE SheetsAs at 31st December, 2002
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THE GROUP THE COMPANY
2002 2001 2002 2001NOTES HK$’000 HK$’000 HK$’000 HK$’000
Non-current assets
Investment properties 12 2,873,849 2,623,849 680,000 680,000
Property, plant and equipment 13 28,871 30,215 2,630 3,480
Properties under development 14 2,005,758 2,701,144 – –
Investments in subsidiaries 15 – – 2,910,270 3,579,670
Investments in associates 16 2,642,450 2,605,159 3 3
Investments in securities 17 328,418 321,088 27,906 28,371
Advances to investee companies 18 606,605 690,145 – –
Loan receivable – due after one year 19 20,843 – – –
8,506,794 8,971,600 3,620,809 4,291,524
Current assets
Inventories 20 8,968 12,195 691 1,283
Properties held for sale 6,506 6,506 2,808 2,808
Trade and other receivables 21 115,307 123,857 42,191 63,935
Investments in securities 17 1,746 20,785 1,746 20,785
Tax recoverable – – – 4,729
Bank accounts with LCH Bank Group 66,150 70,808 43,602 58,450
Other bank balances and cash 269,362 212,804 151,363 137,879
468,039 446,955 242,401 289,869
Current liabilities
Borrowings 22 1,144,617 853,974 1,144,617 771,547
Trade and other payables 23 259,998 149,418 17,951 19,139
Provision for taxation 6,052 1,382 – –
1,410,667 1,004,774 1,162,568 790,686
Net current liabilities (942,628) (557,819) (920,167) (500,817)
Non-current liabilities
Borrowings 22 (1,873,415) (2,318,922) (1,293,399) (1,895,009)
Non-interest bearing advances
from subsidiaries – – (77,109) (116,436)
(1,873,415) (2,318,922) (1,370,508) (2,011,445)
Minority interest (19,246) (4,152) – –
Net assets 5,671,505 6,090,707 1,330,134 1,779,262
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F I N A N C I A L R E P O RT
THE GROUP THE COMPANY
2002 2001 2002 2001NOTES HK$’000 HK$’000 HK$’000 HK$’000
Capital and reserves
Share capital 24 378,583 378,943 378,583 378,943
Reserves 25 5,292,922 5,711,764 951,551 1,400,319
5,671,505 6,090,707 1,330,134 1,779,262
The financial statements on pages 39 to 79 were approved and authorised for issue by the Board of Directors on 13th
March, 2003 and are signed on its behalf by:
Liu Lit Man Woo Pak Chuen
Chairman Director
CONSOLIDATED STATEMENT of Changes in EquityFor the year ended 31st December, 2002
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Investment OtherCapital General property property Investment Capital
Share reserve reserve Inner revaluation revaluation revaluation redemption Exchange Dividend Accumulatedcapital (Note ) (Note ) reserve reserve reserve reserve reserve reserve reserve profits Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
THE GROUP
At 1st January, 2001 379,025 430,600 704,047 79,448 616,433 2,041,485 27,996 2,510 (6,434 ) 79,595 1,714,825 6,069,530
Share of deficit on revaluationof investments of associates – – – – – – (16,446 ) – – – – (16,446 )
Exchange differences arising ontranslation of overseas operations – – – – – – – – (1,725 ) – – (1,725 )
Net (deficit) surplus on revaluation – – – – (20,000 ) 7 – – – – – (19,993 )
Share of deficit on revaluationof properties of associates – – – – – (10,880 ) – – – – – (10,880 )
Share of exchange translationdifferences of associates – – – – – – – – (60 ) – – (60 )
Net losses not recognisedin the income statement – – – – (20,000 ) (10,873 ) (16,446 ) – (1,785 ) – – (49,104 )
Net profit for the year – – – – – – – – – – 188,106 188,106
Dividend declared – – – – – – – – – 75,797 (75,797 ) –
Dividend paid – – – – – – – – – (117,498 ) – (117,498 )
Cancellation on repurchase ofown shares (82 ) – – – – – – 82 – – (327 ) (327 )
At 1st January, 2002 378,943 430,600 704,047 79,448 596,433 2,030,612 11,550 2,592 (8,219 ) 37,894 1,826,807 6,090,707
Exchange differences arising ontranslation of overseas operations – – – – – – – – (99 ) – – (99 )
Net (deficit) surplus on revaluation – – – – (84,575 ) 7 – – – – – (84,568 )
Share of deficit on revaluationof properties of associates – – – – – (6,939 ) – – – – – (6,939 )
Share of deficit on revaluationof investments of associates – – – – – – (7,373 ) – – – – (7,373 )
Share of exchange translationdifferences of associates – – – – – – – – 10 – – 10
Net gains (losses) not recognisedin the income statement – – – – (84,575 ) (6,932 ) (7,373 ) – (89 ) – – (98,969 )
Release of revaluation surplus tothe income statement – – – – (323,506 ) – – – – – – (323,506 )
Net profit for the year – – – – – – – – – – 80,362 80,362
Dividend declared – – – – – – – – – 60,609 (60,609 ) –
Dividend paid – – – – – – – – – (75,788 ) – (75,788 )
Cancellation on repurchase ofown shares (360 ) – – – – – – 360 – – (1,301 ) (1,301 )
At 31st December, 2002 378,583 430,600 704,047 79,448 188,352 2,023,680 4,177 2,952 (8,308 ) 22,715 1,845,259 5,671,505
Share of reserves of associatesincluded above
At 31st December, 2002 – 345,886 659,047 79,448 30,197 492,555 4,177 – 2,690 – 865,865 2,479,865
At 31st December, 2001 – 345,886 659,047 79,448 30,197 499,494 11,550 – 2,680 – 813,038 2,441,340
Note: Capital reserve mainly represent goodwill arising on consolidation of subsidiaries and associates.
General reserve represent distributable reserve set aside by the Company’s subsidiaries and associates for future developments.
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CONSOLIDATED CASH FLOW StatementFor the year ended 31st December, 2002
F I N A N C I A L R E P O RT
2002 2001HK$’000 HK$’000
OPERATING ACTIVITIES
Profit before taxation 139,090 197,983
Adjustment for:
Depreciation 3,867 5,117
Dividends paid (75,788) (117,498)
Dividends received from an associate 88,305 98,118
Gain on disposal of other investments (4,762) (1,640)
Gain on disposal of associates (679) –
Gain on disposal of property, plant and equipment – (71)
Interest expenses 68,451 67,464
Impairment loss on properties under development – 66,667
Proceeds from disposal of investments in securities 22,141 4,118
Share of results of associates (166,044) (173,381)
Surplus on revaluation of leasehold land and buildings (84) (82)
Unrealised holding loss (gain) on other investment 2,528 (20,421)
Operating cash flows before movements in working capital 77,025 126,374
Decrease (increase) in properties under development 107,094 (195,362)
Decrease in amount due from a former subsidiary – 15,322
Decrease in inventories 3,227 371
Decrease in trade and other receivables 17,174 6,323
Increase in trade and other payables 110,580 25,408
Cash generated from (used in) operations 315,100 (21,564)
Hong Kong Profits Tax paid (15,342) (13,942)
Overseas tax paid – (2,031)
Hong Kong Profits Tax refunded 4,729 172
NET CASH FROM (USED IN) OPERATING ACTIVITIES 304,487 (37,365)
INVESTING ACTIVITIES
Repayment from (advance to) an investee company 83,540 (102,106)
Repayment of loan advices from third parties 48,829 –
Decrease in advance to associates 517 683
Loan advance to third parties (78,296) –
Purchase on investments in securities (8,198) (6,078)
Purchase of property, plant and equipment (2,432) (7,228)
Proceeds from disposal of property, plant and equipment – 305
CASH FROM (USED IN) INVESTING ACTIVITIES 43,960 (114,424)
CONSOLIDATED CASH FLOW StatementFor the year ended 31st December, 2002
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2002 2001HK$’000 HK$’000
FINANCING ACTIVITIES
Repayments of borrowings (938,421) (812,773)
Interest paid (140,189) (225,811)
Repurchase of own shares (1,301) (327)
New borrowings raised 784,447 1,220,888
NET CASH (USED IN) FROM FINANCING (295,464) 181,977
INCREASE IN CASH AND CASH EQUIVALENTS 52,983 30,188
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR 281,853 254,541
EFFECT OF FOREIGN EXCHANGE RATE CHANGES (191) (2,876)
CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR 334,645 281,853
ANALYSIS OF THE BALANCES OF CASH
AND CASH EQUIVALENTS
Bank balances and cash 335,512 283,612
Bank overdrafts (867) (1,759)
334,645 281,853
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NOTES to the Financial StatementsFor the year ended 31st December, 2002
F I N A N C I A L R E P O RT
1. GENERAL
The Company is a public listed limited company incorporated in Hong Kong and its shares are listed onThe Stock Exchange of Hong Kong Limited (“Hong Kong Stock Exchange”).
The principal activities of the Company are property investment and investment holding. The principalactivities of the principal subsidiaries and associates are shown in notes 15 and 16 respectively.
2. ADOPTION OF NEW AND REVISED STATEMENTS OF STANDARDACCOUNTING PRACTICE
In the current year, the Group has adopted, for the first time, a number of new and revised Statements ofStandard Accounting Practice (“SSAP(s)”) issued by the Hong Kong Society of Accountants, which hasresulted in the adoption of the new and revised accounting policies. The adoption of these new and revisedstandards resulted in a change in the format of presentation of the cash flow statement and the disclosureof a statement of changes in equity, but has had no material effect on the results for the current or prioraccounting periods. Accordingly, no prior period adjustment has been required.
FOREIGN CURRENCIES
The revisions to SSAP 11 Foreign Currency Translation have eliminated the choice of translating the incomestatements of overseas operations at the closing rate for the period. They are now required to be translatedat an average rate. This change in accounting policy has not had any material effect on the results for thecurrent or prior accounting years.
CASH FLOW STATEMENTS
In the current year, the Group has adopted SSAP 15 (Revised) Cash Flow Statements. Under SSAP 15(Revised), cash flows are classified under three headings - operating, investing and financing, rather thanthe previous five headings. Interest and dividends, which were previously presented under a separateheading, are classified as financing and operating cash flows respectively. Cash flows arising from taxes onincome are classified as operating activities, unless they can be separately identified with investing orfinancing activities. Cash flows of overseas operations have been re-translated at the rates prevailing at thedates of the cash flows rather than the rate of exchange ruling on the balance sheet date.
EMPLOYEE BENEFITS
In the current year, the Group has adopted SSAP 34 Employee Benefits, which introduces measurementrules for employee benefits, including retirement benefit plans. The adoption of SSAP 34 has not had anymaterial impact on the financial statements.
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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3. SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared under the historical cost convention, as modified for therevaluation of certain properties and investments in securities, and in accordance with accountingprinciples generally accepted in Hong Kong. The principal accounting policies adopted are as follows:
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and itssubsidiaries made up to 31st December each year.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated incomestatement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
All significant intercompany transactions and balances within the Group are eliminated on consolidation.
GOODWILL
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interestin the fair value of the identifiable assets and liabilities of a subsidiary or an associate at the date ofacquisition.
Goodwill arising on acquisitions after 1st January, 2001 is capitalised and amortised on a straight-line basisover its useful economic life. Goodwill arising on the acquisition of an associate is included within thecarrying amount of the associate. Goodwill arising on the acquisition of subsidiaries is presented separatelyin the balance sheet.
Goodwill arising on acquisitions prior to 1st January, 2001 continues to be held in reserves, and will becharged to the income statement at the time of disposal of the relevant subsidiary or associate or at suchtime as the goodwill is determined to be impaired.
On disposal of a subsidiary or associate, the attributable amount of goodwill previously eliminated againstor credited to reserves is included in the determination of the profit or loss on disposal.
NEGATIVE GOODWILL
Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiable assetsand liabilities of a subsidiary or associate at the date of acquisition over the cost of acquisition.
Negative goodwill arising on acquisitions after 1st January, 2001 is presented as deduction from assets andwill be released to income based on an analysis of the circumstances from which the balance resulted.
Negative goodwill arising on acquisitions prior to 1st January, 2001 continues to be held in reserves andwill be credited to income at the time of disposal of the relevant subsidiary or associate.
To the extent that the negative goodwill is attributable to losses or expenses anticipated at the date ofacquisition, it is released to income in the period in which those losses or expenses arise. The remainingnegative goodwill is recognised as income on a straight-line basis over the remaining average useful life ofthe identifiable acquired depreciable assets. To the extent that such negative goodwill exceeds theaggregate fair value of the acquired identifiable non-monetary assets, it is recognised in incomeimmediately.
Negative goodwill arising on the acquisition of an associate is deducted from the carrying value of thatassociate. Negative goodwill arising on the acquisition of subsidiaries is presented separately in thebalance sheet as a deduction from assets.
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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS IN SUBSIDIARIES
Investments in subsidiaries are included in the Company’s balance sheet at cost less any identifiedimpairment loss.
INVESTMENTS IN ASSOCIATES
The consolidated income statement includes the Group’s share of the post-acquisition results of itsassociates for the year. In the consolidated balance sheet, interests in associates are stated at the Group’sshare of the net asset of the associates, less any identified impairment loss.
When a group enterprise transacts with an associate of the Group, unrealised profits and losses areeliminated to the extent of the Group’s interest in the relevant associate, except where unrealised lossesprovide evidence of an impairment of the asset transferred.
The results of associates are accounted for by the Company on the basis of dividends received andreceivable during the year. In the Company’s balance sheet, investments in associates are stated at cost, asreduced by any identified impairment loss.
REVENUE RECOGNITION
(i) Property development
When properties are developed for sale, income is recognised only when the sale agreement isunconditional or when the relevant occupation permit is issued by the relevant authority, whicheveris the later. Payments received from purchasers prior to this stage are recorded as receipt in advanceand is included in trade and other payables.
(ii) Premium income
Premiums are recognised as income over the insurance coverage period.
(iii) Return on investments
Dividends from investee companies are recognised as income when the Group’s right to receive therelevant payment is established, whilst interest income is recognised on a time basis that takes intoaccount the effective yield on the relevant deposits.
(iv) Operating lease income
Rentals receivable under operating leases are credited to the income statement on a straight-linebasis over the relevant lease term.
(v) Sales of goods
Sales of goods are recognised when goods are delivered and title has passed.
(vi) Management fee
Management fee income is recognised when services are rendered.
(vii) Sales of securities
Sales of investments in securities are recognised when the title to the investments are transferred andthe buyer takes legal possession of the investments.
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENT PROPERTIES
Investment properties are completed properties which are held for their investment potential, any rentalincome being negotiated at arm’s length.
Investment properties are stated at their open market value. Any revaluation surplus or deficit arising on therevaluation of investment properties is credited or charged to the investment property revaluation reserveunless the balance of this reserve is insufficient to cover a revaluation deficit, in which case the excess ofthe revaluation deficit over the balance on the investment property revaluation reserve is charged to theincome statement. Where a deficit has previously been charged to the income statement and a revaluationsurplus subsequently arises, this surplus is credited to the income statement to the extent of the deficitpreviously charged.
On disposal of an investment property, the balance on the investment property revaluation reserveattributable to that property is transferred to the income statement.
No depreciation is provided on investment properties except where the unexpired term of the relevantlease is 20 years or less.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment other than properties under development are stated at cost or valuation lessdepreciation and accumulated impairment losses.
Land and buildings are stated in the balance sheet at their revalued amount, being the fair value at the dateof revaluation less any subsequent accumulated depreciation and any subsequent impairment losses.Revaluations are performed with sufficient regularity such that the carrying amount does not differmaterially from that which would be determined using fair values at the balance sheet date.
Any revaluation surplus arising on the revaluation of land and buildings is credited to the other propertyrevaluation reserve, except to the extent that it reverses a revaluation deficit of the same asset previouslyrecognised as an expense, in which case the surplus is credited to the income statement to the extent of thedeficit previously charged. A deficit in net carrying amount arising on revaluation of an asset is dealt withas an expense to the extent that it exceeds the balance, if any, on the revaluation reserve relating to aprevious revaluation of that asset. On the subsequent sale or retirement of a revalued asset, the attributablerevaluation surplus is transferred to accumulated profits.
Depreciation is provided to write off the cost or valuation of property, plant and equipment, other thanproperties under development, over their estimated useful lives and after taking into account theirestimated residual value, using the straight-line method, as follows:
Leasehold land Over the term of the lease
Buildings Over the shorter of the lease term or 3%
Plant and machinery 10%
Furniture, fixtures, motor vehicles and computer equipment 10 – 20%
The gain or loss arising on the disposal or retirement of an asset is determined as the difference betweenthe sales proceeds and the carrying amount of the asset and is recognised in the income statement.
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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
IMPAIRMENT
At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whetherthere is any indication that those assets have suffered an impairment loss. If the recoverable amount of anasset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to itsrecoverable amount. Impairment losses are recognised as an expense immediately, unless the relevantasset is carried at a revalued amount under another standard, in which case the impairment loss is treatedas a revaluation decrease under that standard.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to therevised estimate of its recoverable amount, but so that the increased carrying amount does not exceed thecarrying amount that would have been determined had no impairment loss been recognised for the asset inprior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant assetis carried at a revalued amount under another standard, in which case the reversal of the impairment loss istreated as a revaluation increase under that other standard.
PROPERTIES UNDER DEVELOPMENT
Land for properties under development is stated at cost less accumulated impairment losses. Where a pieceof land is transferred from another class, it is stated at its carrying value at the time of the transfer and thevalue is treated as the deemed cost of the land. No further valuation of the land will be carried outsubsequent to its reclassification. Development expenditure is stated at the aggregate amount of costs,including interest expenses capitalised during the development period. Provision for anticipated losses ismade, where appropriate. No depreciation is provided on properties under development.
PROPERTIES HELD FOR SALE
Properties held for sale are stated at the lower of cost and the estimated market value.
INVESTMENTS IN SECURITIES
Investments in securities are recognised on a trade-date basis and are initially measured at cost.
Investments other than held-to-maturity debt securities are classified as investment securities and otherinvestments.
Investment securities, which are securities held for an identified long-term strategic purpose, are measuredat subsequent reporting dates at cost, as reduced by any impairment loss that is other than temporary.
Other investments are measured at fair value, with unrealised gains and losses included in net profit or lossfor the year.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Cost is calculated using weightedaverage cost method.
TAXATION
The charge for taxation is based on the results for the year as adjusted for items which are non-assessableor disallowed. Timing differences arise from the recognition for tax purposes of certain items of income andexpense in a different accounting period from that in which they are recognised in the financial statements.The tax effect of timing differences, computed using the liability method, is recognised as deferred taxationin the financial statements to the extent that it is probable that a liability or an asset will crystallise in theforeseeable future.
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OPERATING LEASES
Rentals receivable and payable under operating leases are credited and charged, respectively, to theincome statement on a straight-line basis over the relevant lease term.
BORROWING COSTS
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets arecapitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assetsare substantially ready for their intended use or sale.
All other borrowing costs are recognised as an expense in the period in which they are incurred.
RETIREMENT BENEFITS SCHEME
The Group operates a defined contribution retirement benefits scheme for qualifying staff of certaincompanies in the Group, the assets of which are held in a separate trustee administered fund. Payments tothe scheme are charged as an expense as they fall due.
Certain of the Group’s employees have been enrolled in a Mandatory Provident Fund scheme. Thecontributions payable in respect of the current year to the fund are charged as an expense as they fall due.
FOREIGN CURRENCIES
Transactions in foreign currencies are initially recorded at the rates of exchange prevailing on the dates ofthe transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated at therates prevailing on the balance sheet date. Profits and losses arising on exchange are included in net profitor loss for the year.
On consolidation, the assets and liabilities of the Group’s overseas operations are translated at exchangerates prevailing on the balance sheet date. Income and expense items are translated at the averageexchange rates for the year. Exchange differences arising, if any, are classified as equity and transferred tothe Group’s translation reserve. Such translation differences are recognised as income or as expenses in theperiod in which the operation is disposed of.
4. TURNOVER
Turnover represents the aggregate of the following amounts received and receivable during the year:
2002 2001HK$’000 HK$’000
Proceeds from disposal of properties 195,563 –
Gross rental income 128,302 132,201
Interest income 43,019 61,414
Sales of goods 37,359 33,882
Gross insurance premium 28,992 31,777
Proceeds from disposal of listed investments 22,141 4,118
Property management fees 15,734 16,530
Dividend income from listed investments 3,351 3,991
474,461 283,913
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5. BUSINESS AND GEOGRAPHICAL SEGMENTS
BUSINESS SEGMENTS
The Group is currently engaged in six business activities - property investment, property development,property management, treasury investment and banking, insurance business and trading and manufacturing.These activities are the basis on which the Group reports its primary segment information.
Segment information about these business is presented below:
Year ended 31st December, 2002Treasury
Property Property Property investment Insurance Trading andinvestment development management and banking business manufacturing Eliminations Consolidated
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
REVENUE
External sales 128,302 195,563 15,734 68,511 28,992 37,359 – 474,461
Inter-segment sales 880 – 4,635 170,305 961 – (176,781 ) –
Total revenue 129,182 195,563 20,369 238,816 29,953 37,359 (176,781 ) 474,461
Inter-segment sales are charged at prevailing market rates.
RESULT
Segment result 93,395 (55,898 ) 4,910 (7,247 ) 6,084 253 – 41,497
Finance costs (68,451 )
Share of results of
associates 94 – – 165,950 – – – 166,044
Profit before tax 139,090
Taxation (43,580 )
Profit after tax 95,510
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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5. BUSINESS AND GEOGRAPHICAL SEGMENTS (CONTINUED)
BALANCE SHEET
As at 31st December, 2002Treasury
Property Property Property investment Insurance Trading andinvestment development management and banking business manufacturing Consolidated
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
ASSETS
Segment assets 2,899,668 2,150,255 1,627 1,148,190 11,917 49,444 6,261,101
Investments in associates 2,924 – – 2,639,526 – – 2,642,450
Unallocated corporate assets 71,282
Consolidated total assets 8,974,833
LIABILITIES
Segment liabilities 49,453 726,976 3,307 71 17,669 18,818 816,294
Unallocated corporate
liabilities 2,461,736
Provision for taxation 6,052
Consolidated total liabilities 3,284,082
OTHER INFORMATION
Year ended 31st December, 2002Treasury
Property Property Property investment Insurance Trading andinvestment development management and banking business manufacturing Others Consolidated
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Capital additions 131,378 131,360 – – 49 255 427 263,469
Depreciation and
amortisation 1,254 119 – – 122 1,087 1,285 3,867
Unrealised holding
loss on other
investments – – – 9,805 – – – 9,805
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5. BUSINESS AND GEOGRAPHICAL SEGMENTS (CONTINUED)
Year ended 31st December, 2001Treasury
Property Property Property investment Insurance Trading andinvestment development management and banking business manufacturing Eliminations Consolidated
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
REVENUE
External sales 132,201 – 16,530 69,523 31,777 33,882 – 283,913
Inter-segment sales 929 – 4,486 192,048 784 – (198,247 ) –
Total revenue 133,130 – 21,016 261,571 32,561 33,882 (198,247 ) 283,913
Inter-segment sales are charged at prevailing market rates.
RESULT
Segment result 107,844 (66,667 ) 6,230 38,291 7,166 (798 ) – 92,066
Finance costs (67,464 )
Share of results of
associates – – – 173,381 – – – 173,381
Profit before tax 197,983
Taxation (40,828 )
Profit after tax 157,155
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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5. BUSINESS AND GEOGRAPHICAL SEGMENTS (CONTINUED)
BALANCE SHEET
As at 31st December, 2001
TreasuryProperty Property Property investment Insurance Trading and
investment development management and banking business manufacturing ConsolidatedHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
ASSETS
Segment assets 2,648,091 2,795,962 1,238 1,277,305 9,990 51,536 6,784,122
Investments in associates – – – 2,605,159 – – 2,605,159
Unallocated
corporate assets 29,274
Consolidated total assets 9,418,555
LIABILITIES
Segment liabilities 51,668 583,616 2,614 61 15,398 5,726 659,083
Unallocated corporate
liabilities 2,663,231
Provision for taxation 1,382
Consolidated total
liabilities 3,323,696
OTHER INFORMATION
Year ended 31st December, 2001
TreasuryProperty Property Property investment Insurance Trading and
investment development management and banking business manufacturing Others ConsolidatedHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Capital additions 4,731 349,077 – – 293 200 1,987 356,288
Depreciation and
amortisation 924 240 – – 253 2,095 1,605 5,117
Provision for
impairment loss – 66,667 – – – – – 66,667
Unrealised holding loss
on other investments – – – 15,404 – – – 15,404
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5. BUSINESS AND GEOGRAPHICAL SEGMENTS (CONTINUED)
GEOGRAPHICAL SEGMENTS
The Group’s operations are located in Hong Kong and other parts of the People’s Republic of China (the“PRC”). Certain of the Group’s property development and trading and manufacturing business are locatedin the PRC. Others are located in Hong Kong.
The following table provides an analysis of the Group’s sales by geographical market, irrespective of theorigin of the goods/services:
Sales revenue by Contribution togeographical market profit before tax
Year ended Year ended Year ended Year ended31.12.2002 31.12.2001 31.12.2002 31.12.2001
HK$’000 HK$’000 HK$’000 HK$’000
Hong Kong 449,974 265,590 (25,318) 94,287
PRC 24,487 18,323 (1,636) (69,685)
474,461 283,913 (26,954) 24,602
Share of results of associates 166,044 173,381
Profit before tax 139,090 197,983
The following is an analysis of the carrying amount of segment assets, and additions to property, plant andequipment and property under development, analysed by the geographical area in which the assets arelocated:
Additions to property,plant and equipment
Carrying amount and propertyof segment assets under development
As at As at As at As at31.12.2002 31.12.2001 31.12.2002 31.12.2001
HK$’000 HK$’000 HK$’000 HK$’000
Hong Kong 6,793,842 7,400,516 131,854 114,296
PRC 2,179,072 2,017,242 131,615 241,992
Others 1,919 797 – –
8,974,833 9,418,555 263,469 356,288
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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6. PROFIT FROM OPERATIONS
2002 2001HK$’000 HK$’000
Profit from operations has been arrived at after charging:
Directors’ emoluments (Note 8) 13,052 14,271
Other staff costs 31,771 35,307
Staff retirement scheme contributions, net of nil
(2001: Nil) forfeited contributions 1,716 2,620
Total staff costs 46,539 52,198
Auditors’ remuneration 1,068 998
Depreciation 3,867 5,117
Loss on disposal of investments properties 10,140 –
Operating lease rentals in respect of land and buildings 3,143 3,379
Impairment loss recognised in respect of properties
under development – 66,667
and after crediting:
Net rental income from properties 117,253 130,400
Realised gain on disposal of other investments 4,762 1,640
Surplus on revaluation of land and buildings 84 82
Gain on disposal of property, plant and equipment – 71
7. FINANCE COSTS
2002 2001HK$’000 HK$’000
Interest on borrowings wholly repayable within five years:
Bank loans and overdrafts 135,998 200,220
Other borrowings 2,242 20,942
138,240 221,162
Less: Amount capitalised as cost of properties under
development at a capitalisation rate of 2.26%
(2001: 5.25%) per annum (69,789) (153,698)
68,451 67,464
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8. DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS
2002 2001HK$’000 HK$’000
Directors’ fees 760 800
Other emoluments:
Salary and other benefits 11,717 12,568
Retirement scheme contributions 575 903
13,052 14,271
The amounts disclosed above include emoluments of HK$400,000 (2001: HK$400,000) payable toindependent non-executive directors.
Notes:
(a) Emoluments of Directors were within the following bands:
Range No. of directors
2002 2001
Nil to HK$1,000,000 10 10
HK$1,000,001 to HK$1,500,000 1 1
HK$1,500,001 to HK$2,000,000 1 –
HK$2,000,001 to HK$2,500,000 1 1
HK$2,500,001 to HK$3,000,000 – 1
HK$5,500,001 to HK$6,000,000 1 –
HK$6,000,001 to HK$6,500,000 – 1
(b) The five highest paid employees are all executive directors of the Company. Their emoluments have been disclosedand included in the above.
(c) During the year, no emoluments were paid by the Group to the five highest paid directors as an inducement to joinor upon joining the Group or as compensation for loss of office. None of the directors has waived any emolumentsduring the year.
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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9. TAXATION
2002 2001HK$’000 HK$’000
Hong Kong Profits Tax:
The Company and its subsidiaries
Current year 15,047 16,547
Underprovision in prior years 236 370
15,283 16,917
Associates 27,288 21,880
42,571 38,797
Overseas tax:
The Company and its subsidiaries – 2,031
Associates 1,009 –
1,009 2,031
43,580 40,828
Hong Kong Profits Tax is calculated at 16% of the estimated assessable profits for the year.
Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.
Details of the potential deferred tax not provided for in the year are set out in note 26.
10. DIVIDENDS
2002 2001HK$’000 HK$’000
Interim dividend paid at HK$0.10
(2001: HK$0.10) per share 37,894 37,903
Proposed final dividend at HK$0.06
(2001: HK$0.10) per share 22,715 37,894
60,609 75,797
The final cash dividend of HK$0.06 (2001: HK$0.10) per share has been proposed by the Board of
Directors and is subject to approval by the shareholders in the forthcoming general meeting.
11. EARNINGS PER SHARE
The calculation of earnings per share is based on the net profit for the year of HK$80,362,000 (2001:HK$188,106,000) and on the weighted average number of 378,860,591 (2001: 379,001,923) shares inissue during the year.
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12. INVESTMENT PROPERTIES
THE THEGROUP COMPANY
HK$’000 HK$’000
VALUATION
At 1st January, 2002 2,623,849 680,000
Transfer from properties under development 334,575 –
Deficit on revaluation (84,575) –
At 31st December, 2002 2,873,849 680,000
The investment properties were revalued as at 31st December, 2002 on an open market value basis byVigers Hong Kong Ltd., an independent firm of professional valuers. The resulting deficit of the Group ofapproximately HK$84,575,000 (2001: HK$20,000,000) arising on revaluation have been charged to theinvestment property revaluation reserve.
There is no surplus nor deficit of the Company for the year ended 31st December, 2002 arising onrevaluation. The deficit of the Company of approximately HK$20,000,000 for the year ended 31stDecember, 2001 arising on revaluation was charged to the investment property revaluation reserve.
All investment properties are held for rental income or intended to be held for rental income underoperating leases.
A summary of the carrying values of investment properties, which are all situated in Hong Kong, is asfollow:
THE GROUP THE COMPANY
2002 2001 2002 2001HK$’000 HK$’000 HK$’000 HK$’000
Held under:
Long leases 2,606,849 2,606,849 680,000 680,000
Medium-term leases 267,000 17,000 – –
2,873,849 2,623,849 680,000 680,000
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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13. PROPERTY, PLANT AND EQUIPMENT
Furniture,fixtures,
Leasehold motor vehiclesland and Plant and and computerbuildings machinery equipment TotalHK$’000 HK$’000 HK$’000 HK$’000
THE GROUP
COST/VALUATION
At 1st January, 2002 3,874 27,072 29,254 60,200
Additions – 255 2,177 2,432
Disposals – – (36) (36)
At 31st December, 2002 3,874 27,327 31,395 62,596
COMPRISING:
At cost – 27,327 31,395 58,722
At valuation 3,874 – – 3,874
3,874 27,327 31,395 62,596
ACCUMULATED DEPRECIATION
At 1st January, 2002 – 8,752 21,233 29,985
Charge for the year 91 1,088 2,688 3,867
Eliminations on disposals – – (36) (36)
Surplus on revaluation (91) – – (91)
At 31st December, 2002 – 9,840 23,885 33,725
NET BOOK VALUES
At 31st December, 2002 3,874 17,487 7,510 28,871
At 31st December, 2001 3,874 18,320 8,021 30,215
A summary of the net book values of land and buildings held by the Group, which are all situated in thePRC, is as follows:
2002 & 2001HK$’000
Held under:
Long leases 364
Medium-term leases 3,510
3,874
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13. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Land and Furniture, fixtures,building held motor vehiclesin PRC under and computer
long lease equipment TotalHK$’000 HK$’000 HK$’000
THE COMPANY
COST/VALUATION
At 1st January, 2002 364 14,190 14,554
Additions – 427 427
At 31st December, 2002 364 14,617 14,981
COMPRISING:
At cost – 14,617 14,617
At valuation 364 – 364
364 14,617 14,981
ACCUMULATED DEPRECIATION
At 1st January, 2002 – 11,074 11,074
Charge for the year 7 1,277 1,284
Surplus on revaluation (7) – (7)
At 31st December, 2002 – 12,351 12,351
NET BOOK VALUES
At 31st December, 2002 364 2,266 2,630
At 31st December, 2001 364 3,116 3,480
The land and buildings were revalued as at 31st December, 2002 on an open market value basis by VigersHong Kong Ltd., an independent firm of professional valuers. The resulting surplus arising on revaluation ofthe Group amounting to HK$91,000 has been dealt with as follows:
(i) a surplus of HK$7,000 has been credited to the other property revaluation reserve; and
(ii) a surplus of HK$84,000 has been credited to the income statement.
The resulting surplus arising on revaluation of the Company amounting to HK$7,000 has been credited toother property revaluation reserve.
The amount of land and buildings of the Group and of the Company that would have been included in thefinancial statements at the balance sheet date had the assets been carried at cost less accumulateddepreciation is approximately HK$4,661,000 and HK$185,000 (2001: HK$4,775,000 and HK$189,000),respectively.
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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14. PROPERTIES UNDER DEVELOPMENT
THE GROUP2002 2001
HK$’000 HK$’000
Land situated in Hong Kong and held under medium-term
lease, at cost less impairment loss – 520,070
Land situated in the PRC and held under medium-term
lease, at cost less impairment loss 587,070 587,070
587,070 1,107,140
Development expenditure to date 1,418,688 1,594,004
2,005,758 2,701,144
Included in properties under development is net interest capitalised of approximately HK$476,547,000(2001: HK$636,321,000).
15. INVESTMENTS IN SUBSIDIARIES
THE COMPANY2002 2001
HK$’000 HK$’000
Unlisted shares/capital contribution, at cost 286,409 286,433
Less: Impairment loss recognised (34,372) (34,372)
252,037 252,061
Amounts due from subsidiaries, less allowance
for doubtful debt (note) 2,658,233 3,327,609
2,910,270 3,579,670
Note: Included in the balance is an amount of HK$570,668,000 (2001: HK$734,498,000) due from a subsidiary, therepayment of which had been subordinated to a bank.
In the opinion of the Company’s directors, the amounts due from subsidiaries will not be repayable in thenext twelve months of the balance sheet date and, accordingly, the amounts have been classified as non-current assets.
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15. INVESTMENTS IN SUBSIDIARIES(CONTINUED)
Particulars of the Company’s principal subsidiaries as at 31st December, 2002 are as follows:
Proportion ofnominal value
of issuedcapital/registered
Place of Issued capital heldincorporation ordinary by the Companyor registration/ share capital/ Directly Indirectly
Name of subsidiary operations registered capital % % Principal activity
Liu Chong Hing Estate Hong Kong HK$10,000,000 100 – Investment holding
Company, Limited
Liu Chong Hing Godown Hong Kong HK$72,000,000 100 – Property investment
Company, Limited
Liu Chong Hing Insurance Hong Kong HK$50,000,000 100 – Insurance business
Company Limited
Liu Chong Hing Property Hong Kong HK$1,000,000 100 – Property management
Management and Agency and agency
Limited
Abaleen Enterprises Limited Hong Kong HK$100,000 100 – Property investment
Alain Limited Hong Kong HK$9,500 52.6 21.4 Investment holding
Bonsun Enterprises Limited Hong Kong HK$2,000,000 100 – Property investment
Chong Yip Finance Limited Hong Kong HK$1,000,000 100 – Money lending
Devon Realty Limited Hong Kong HK$200 100 – Property investment
Donington Company Limited Hong Kong HK$200 100 – Property investment
Gem Gain Enterprises Hong Kong HK$30 100 – Investment holding
Limited
Great Earnest Limited Hong Kong HK$200 100 – Property investment
Great Fun Company Limited Hong Kong HK$200 100 – Investment holding
Heng Kin Investment Limited Hong Kong HK$2 100 – Property investment
Jacot Limited Hong Kong HK$2 100 – Investment holding
Joyful Nice International Hong Kong HK$2 100 – Investment holding
Investment Limited
Ko Yew Company Limited Hong Kong HK$200 100 – Property investment
Luxpolar Limited Hong Kong HK$2 – 100 Property investment
Marble Kingdom Limited Hong Kong HK$2 100 – Investment holding
Oriental Victory Investment Hong Kong HK$2 100 – Property investment
Limited
Queen Profit International Hong Kong HK$61,540 83.75 – Investment holding
Investment Limited
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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15. INVESTMENTS IN SUBSIDIARIES (CONTINUED)
Proportion ofnominal value
of issuedcapital/registered
Place of Issued capital heldincorporation ordinary by the Companyor registration/ share capital/ Directly Indirectly
Name of subsidiary operations registered capital % % Principal activity
Sino Pink Development Hong Kong HK$2 100 – Property development
Limited
Speed World Investment Hong Kong HK$100 – 60 Investment holding
Limited
Top Team Limited Hong Kong HK$200 100 – Investment holding
Wealth Good Investment Hong Kong HK$2 100 – Investment holding
Limited
Yue Tung Ching Kee Hong Kong HK$2,000,000 100 – Property investment
Company Limited
Guangzhou Chong Hing PRC RMB170,000,000 – 60 Property development
Property Development
Company Limited
(“Guangzhou Chong Hing”)
Maanshan Gaoke PRC RMB41,000,000 – 51.5 Manufacturing of
Magnetic Material magnetic materials
Company Limited
(“Maanshan Gaoke”)
Shanghai Huang Pu PRC US$27,000,000 – 70.3 Property development
Liu Chong Hing
Property Development
Company Limited
(“Shanghai Huang Pu”)
China Link Technologies British Virgin US$100 100 – Investment holding
Limited Islands/
Hong Kong
Determined Resources British Virgin US$1,000 100 – Share investment
Limited Islands/
Hong Kong
Linktime Int’l Development British Virgin US$10 – 60 Consultancy services
Limited Islands/
PRC
Terryglass Limited British Virgin US$1,000 100 – Investment holding
Islands/
Thailand
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15. INVESTMENTS IN SUBSIDIARIES (CONTINUED)
Guangzhou Chong Hing is a sino-foreign cooperative enterprise while Maanshan Gaoke and ShanghaiHuang Pu are sino-foreign equity joint ventures.
None of the subsidiaries had any debt security subsisting at 31st December, 2002 or at any time during theyear.
The Company’s directors are of the opinion that a complete list of the particulars of all subsidiaries will beof excessive length and therefore the above list contains only the particulars of subsidiaries whichprincipally affect the results or net assets of the Group.
16. INVESTMENTS IN ASSOCIATES
THE GROUP THE COMPANY
2002 2001 2002 2001HK$’000 HK$’000 HK$’000 HK$’000
Unlisted shares, at cost – – 3 3
Share of net assets of associates
which are
– listed in Hong Kong 2,639,526 2,602,476 – –
– unlisted 2,924 2,166 – –
2,642,450 2,604,642 3 3
Amounts due from associates – 517 – –
2,642,450 2,605,159 3 3
Market value of listed shares
at 31st December 1,373,635 1,412,882 – –
In the opinion of the Company’s directors, the amounts due from associates will not be repayable in thenext twelve months of the balance sheet date and, accordingly, the amounts have been classified as non-current assets.
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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16. INVESTMENTS IN ASSOCIATES (CONTINUED)
Particulars of the Group’s principal associates at 31st December, 2002 are as follows:
Proportion ofnominal value
of issued capital/registered capital
Form of Place of held by the Companybusiness incorporation/ Class of Directly Indirectly Principal
Name of associate structure operations share held % % activity
Liu Chong Hing Bank Incorporated Hong Kong Ordinary – 45.1 Banking
Limited (listed in business
Hong Kong) (“LCH Bank”)
Falconmate Limited Incorporated Hong Kong Ordinary 50.0 – Property
investment
Pelham Hill Limited Incorporated Hong Kong Ordinary 25.0 – Investment
holding
The Company’s directors are of the opinion that a complete list of the particulars of all associates will be ofexcessive length and therefore the above list discloses only the particulars of those associates whichprincipally affect the results or net assets of the Group.
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16. INVESTMENTS IN ASSOCIATES (CONTINUED)
The following details have been extracted from the audited financial statements of the Group’s principalassociate, LCH Bank, and its subsidiaries (hereinafter collectively referred to as the “LCH Bank Group”).
Consolidated results of LCH Bank Group for the year ended 31st December, 2002 are as follows:
2002 2001HK$’000 HK$’000
Interest income 1,248,660 1,979,195
Interest expenses (499,289) (1,182,514)
Net interest income 749,371 796,681
Other operating income 200,846 156,494
Operating income 950,217 953,175
Operating expenses (439,261) (423,682)
Operating profit before provisions and disposal of
long-term assets 510,956 529,493
Charge for bad and doubtful debts (129,027) (136,437)
Net losses from disposal of property and equipment (231) (843)
Gains less losses from disposal of other securities – 15,926
Gains less losses from disposal of held-to-maturity securities – 5,088
Profit from operations 381,698 413,227
Share of results of jointly controlled entities (9,510) (18,882)
Profit from ordinary activities before taxation 372,188 394,345
Taxation (62,694) (48,458)
Net profit for the year 309,494 345,887
LCH Bank Group has selected the alternative treatment for securities other than held-to-maturity securitiesupon adoption of SSAP 24 “Accounting for investments in securities” issued by the Hong Kong Society ofAccountants, under which the valuation movements of non-trading securities are dealt with in equity whilethose of trading securities are dealt with in the income statement.
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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16. INVESTMENTS IN ASSOCIATES (CONTINUED)
Consolidated financial position of LCH Bank Group as at 31st December, 2002:
2002 2001HK$’000 HK$’000
Assets
Cash and short-term funds 12,388,484 14,269,839
Placements with banks and other financial institutions
maturing between one and twelve months 2,223,465 3,201,738
Trading securities 185,994 172,335
Advances and other accounts 19,589,201 18,931,110
Held-to-maturity securities 1,557,144 494,874
Certificates of deposit held 1,337,768 476,194
Other securities 256,312 288,152
Interest in an associate 362,777 360,139
Interest in jointly controlled entities 69,033 75,668
Investment properties 47,868 47,868
Property and equipment 1,170,950 1,145,313
Total assets 39,188,996 39,463,230
Liabilities
Deposits and balances of banks and other financial
institutions 420,845 544,206
Current, fixed, savings and other deposits of customers 32,492,252 32,685,720
Other accounts and provisions 390,182 436,519
Taxation 7,694 803
Total liabilities 33,310,973 33,667,248
Net tangible assets 5,878,023 5,795,982
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17. INVESTMENTS IN SECURITIES
Investment securities Other investments Total
2002 2001 2002 2001 2002 2001HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
THE GROUP
Equity securities:
Listed in Hong Kong – – 48,705 67,362 48,705 67,362
Listed overseas – – 1,919 797 1,919 797
Unlisted 88,909 88,390 190,631 185,324 279,540 273,714
88,909 88,390 241,255 253,483 330,164 341,873
Market value of listed
securities:
Listed in Hong Kong – – 48,705 67,362 48,705 67,362
Listed overseas – – 1,919 797 1,919 797
– – 50,624 68,159 50,624 68,159
Carrying amount analysed
for reporting purposes as:
Current – – 1,746 20,785 1,746 20,785
Non-current 88,909 88,390 239,509 232,698 328,418 321,088
88,909 88,390 241,255 253,483 330,164 341,873
THE COMPANY
Equity securities:
Listed in Hong Kong – – 1,746 20,785 1,746 20,785
Listed overseas – – 391 162 391 162
Unlisted 1,725 1,725 25,790 26,484 27,515 28,209
1,725 1,725 27,927 47,431 29,652 49,156
Market value of listed
securities:
Listed in Hong Kong – – 1,746 20,785 1,746 20,785
Listed overseas – – 391 162 391 162
– – 2,137 20,947 2,137 20,947
Carrying amount analysed
for reporting purposes as:
Current – – 1,746 20,785 1,746 20,785
Non-current 1,725 1,725 26,181 26,646 27,906 28,371
1,725 1,725 27,927 47,431 29,652 49,156
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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18. ADVANCES TO INVESTEE COMPANIES
The advances are unsecured, bear interests at market interest rates and have no fixed repayment terms. Inthe opinion of the Company’s directors, the investee companies will not repay the advance in the nexttwelve months of the balance sheet date and, accordingly, the amounts have been classified as non-currentassets. In 2001, included in the advances was an amount of approximately HK$623,809,000 which wassubordinated to the repayment of bank loans of one of the investee companies. The subordination wasreleased during the year.
19. LOAN RECEIVABLE
2002 2001HK$’000 HK$’000
Loan receivable 29,467 –
Less: Amount due within one year
included in trade and other receivable (8,624) –
20,843 –
The Group offers loans to third parties and buyers of properties sold by the Group and the repayment of theloans is specified in the respective loan agreements.
20. INVENTORIES
THE GROUP THE COMPANY
2002 2001 2002 2001HK$’000 HK$’000 HK$’000 HK$’000
Raw materials 1,405 2,065 – –
Work in progress 1,179 1,479 – –
Finished goods 6,384 8,651 691 1,283
8,968 12,195 691 1,283
The cost of inventories recognised as an expense during the year amounted to approximatelyHK$34,639,000 (2001: HK$30,336,000).
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21. TRADE AND OTHER RECEIVABLES
The Group operates a controlled credit policy and allows an average credit period of 30 – 90 days to itstrade customers who satisfy the credit evaluation. The aging analysis of trade receivables ofHK$55,206,000 (2001: HK$64,480,000) which are included in trade and other receivables are as follows:
2002 2001HK$’000 HK$’000
Current 42,255 53,927
Over 30 days 6,101 4,366
Over 90 days 6,850 6,187
55,206 64,480
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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22. BORROWINGS
THE GROUP THE COMPANY
2002 2001 2002 2001HK$’000 HK$’000 HK$’000 HK$’000
Bank loans
Secured 462,384 402,215 320,000 320,000
Unsecured 1,865,000 1,985,000 1,865,000 1,985,000
Secured loan from LCH Bank Group 250,000 358,000 250,000 358,000
Secured bank overdrafts granted by
LCH Bank Group 867 1,759 867 1,547
Total bank borrowings 2,578,251 2,746,974 2,435,867 2,664,547
Amount due to an associate (note) 428,669 411,605 2,149 2,009
Amounts due to minority
shareholders (note) 11,112 14,317 – –
3,018,032 3,172,896 2,438,016 2,666,556
The maturity of borrowings is as
follows:
Bank borrowings
On demand or within one year 1,144,617 853,974 1,144,617 771,547
More than one year but not
exceeding two years 1,114,884 1,298,000 1,172,500 1,298,000
More than two years but not
exceeding five years 318,750 595,000 118,750 595,000
Total bank borrowings 2,578,251 2,746,974 2,435,867 2,664,547
Less: Amount due within one year
shown under current
liabilities (1,144,617) (853,974) (1,144,617) (771,547)
1,433,634 1,893,000 1,291,250 1,893,000
Amount due to associates (note) 428,669 411,605 2,149 2,009
Amounts due to minority
shareholders (note) 11,112 14,317 – –
Amounts due after one year 1,873,415 2,318,922 1,293,399 1,895,009
Note: These borrowings are unsecured, bear interests at market interest rates and have no fixed repayment terms. In theopinion of the Company’s directors, the respective creditors will not demand repayment in the next twelve monthsof the balance sheet date and, accordingly, the amounts have been classified as non-current liabilities.
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23. TRADE AND OTHER PAYABLES
At balance sheet date, included in trade and other payables are trade payable of HK$44,139,000 (2001:HK$25,711,000) and the aging analysis are as follows:
2002 2001HK$’000 HK$’000
Current 33,460 15,457
Over 30 days 8,367 7,697
Over 90 days 2,312 2,557
44,139 25,711
24. SHARE CAPITAL
2002 2001HK$’000 HK$’000
Ordinary shares of HK$1 each
Authorised:
At 1st January and 31st December 600,000 600,000
Issued and fully paid:
At 1st January 378,943 379,025
Shares repurchased and cancelled (360) (82)
At 31st December 378,583 378,943
During the year, the Company repurchased a total 360,000 shares (2001: 82,000 shares) of HK$1 each inthe Company through the Hong Kong Stock Exchange. All such shares have been cancelled and the totalconsideration was charged to accumulated profits as follows:
Trading Number of shares Price Aggregatemonth/year repurchased per share consideration paid
HK$ HK$’000
October 2002 360,000 3.60 1,301
Save as disclosed above, neither the Company nor any of its subsidiaries purchased, sold or redeemed anyof the Company’s shares during the year.
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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25. RESERVES
Investment Otherproperty property Capital
Capital revaluation revaluation redemption Dividend Accumulatedreserve reserve reserve reserve reserve profits Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
THE COMPANY
At 1st January, 2001 3 316,387 170 2,510 79,595 981,383 1,380,048
Profit for the year – – – – – 158,007 158,007
Dividend declared – – – – 75,797 (75,797 ) –
Dividend paid – – – – (117,498 ) – (117,498 )
(Deficit) surplus on revaluation – (20,000 ) 7 – – – (19,993 )
Cancellation on repurchase of
own shares – – – 82 – (327 ) (245 )
At 31st December, 2001 3 296,387 177 2,592 37,894 1,063,266 1,400,319
Reclassification (3 ) – – 3 – – –
Loss for the year – – – – – (372,046 ) (372,046 )
Dividend declared – – – – 60,609 (60,609 ) –
Dividend paid – – – – (75,788 ) – (75,788 )
(Deficit) surplus on revaluation – – 7 – – – 7
Cancellation on repurchase of
own shares – – – 360 – (1,301 ) (941 )
At 31st December, 2002 – 296,387 184 2,955 22,715 629,310 951,551
The Company’s reserves available for distribution to shareholders at 31st December, 2002 amounted toHK$652,025,000 (2001: HK$1,101,160,000), being its accumulated profits and dividend reserve at thatdate.
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26. UNRECOGNISED DEFERRED TAXATION
The components of unrecognised deferred tax assets (liabilities) at the balance sheet date are as follows:
THE GROUP THE COMPANY
2002 2001 2002 2001HK$’000 HK$’000 HK$’000 HK$’000
Tax effect of timing differences
because of:
Tax losses 47,431 50,257 9,257 34,582
Excess of tax allowances over
depreciation (613) (288) (619) (369)
46,818 49,969 8,638 34,213
The components of unprovided deferred tax credit (charge) for the year are as follows:
THE GROUP THE COMPANY
2002 2001 2002 2001HK$’000 HK$’000 HK$’000 HK$’000
Tax effect of timing differences
because of:
Tax losses (325) 8,089 (25,325) 4,229
Excess of tax allowances over
depreciation (2,805) 29 (250) (42)
(3,130) 8,118 (25,575) 4,187
The net deferred tax assets have not been recognised in the financial statements as it is not certain that thetax benefits will be realised in the foreseeable future.
Deferred taxation has not been provided on the revaluation surplus arising on the Group’s properties andthe non-trading investments of its associates because profits arising on future disposal of these assets wouldnot be subject to taxation. Accordingly, the surplus arising on revaluation does not constitute a timingdifference for tax purpose.
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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27. SHARE OPTION SCHEME
The Company’s share option scheme (the “Scheme”), was adopted pursuant to a resolution passed on 25thApril, 2002, which replace the previous share option scheme, for the primary purpose of providingincentives to directors and eligible employees, and will expire on 24th April, 2012. Under the Scheme, theCompany may grant options to eligible employees, including executive directors of the Company and itssubsidiaries, to subscribe for shares in the Company. Additionally, the Company may, from time to time,grant share options to outside eligible third parties at the discretion of the Board of Directors.
The total number of shares in respect of which options may be granted under the Scheme is not permittedto exceed 10% of the shares of the Company in issue at any point in time, without prior approval from theCompany’s shareholders. The number of shares in respect of which options may be granted to anyindividual is not permitted to exceed 10% of the shares of the Company in issue at any point in time,without prior approval from the Company’s shareholders.
Options may be exercised at any time from the date of grant of the share option to the 5th anniversary ofthe date of grant. The exercise price is determined by the directors of the Company, and will not be lessthan the higher of the nominal value of the Company’s share on the date of grant, the average closing priceof the shares for the five business days immediately preceding the date of grant, or the closing price of theshares on the date of grant.
No options have been granted under the above-mentioned scheme since the Scheme was adopted.
28. PLEDGE OF ASSETS
THE GROUP
At the balance sheet date, certain investment properties of the Group with an aggregate carrying amount ofHK$1,337,000,000 (2001: properties under development and investment properties of HK$1,904,000,000)were pledged to banks to secure general banking facilities made available to the Group. In addition, theGroup had also executed a share mortgage of its investment in an investee company with a carryingamount of HK$138,102,000 (2001: HK$132,102,000) in favour of banks against facilities granted to thatinvestee company.
THE COMPANY
At the balance sheet date, the investment properties of the Company with an aggregate carrying amount ofHK$680,000,000 (2001: HK$680,000,000) were pledged to banks to secure general banking facilitiesmade available to the Company. In addition, the Company also pledged the shares of a subsidiary in favourof a bank against facilities granted to that subsidiary.
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29. CONTINGENT LIABILITIES
At 31st December, 2001, the Group and the Company had given a corporate guarantee to a bank forbanking facilities amounting to HK$70,000,000 granted to an investee company. The guarantee wasreleased during the year.
In addition, at the balance sheet date the Company had given corporate guarantees to bank for bankingfacilities amounting to HK$300,000,000 (2001: HK$150,000,000) granted to a subsidiary.
In addition, during the year and subsequent to the balance sheet date, the following litigations have takenplace:
i. In October 2002, the Group had issued a writ (“Writ”) dated 15th October, 2002, to claim against aminority shareholder of a subsidiary (the “Minority Shareholder”) for, inter alia, a right to terminate ashareholders’ agreement (the “Agreement”) dated 16th February, 1995, specific performance inaccordance to the clause of the Agreement and consequential costs (the “Claim”).
The Claim is still in process and the directors are of the opinion that the outcome of the Claim willnot have material adverse effect to the Group.
ii. Subsequent to the balance sheet date, the Minority Shareholder petitioned to the High Court forwinding up of two 60%-owned subsidiaries of the Company (the “Subsidiaries”). The directorsconsider that it is not possible to determine the possible outcome with reasonable certainty at thistime. The Group, after obtaining legal advice, is strongly contesting the above winding-up petitionsand, accordingly, no provision for any potential liabilities in connection with this matter has beenmade in the financial statements.
30. CAPITAL COMMITMENTS
THE GROUP THE COMPANY
2002 2001 2002 2001HK$’000 HK$’000 HK$’000 HK$’000
Capital expenditure in respect of
property development expenditure
contracted for but not provided in
the financial statements 54,900 180,079 – –
Capital expenditure in respect of the
contributions to the capital of an
investee company contracted for
but not provided in the financial
statements 77,000 83,087 77,000 83,087
Capital expenditure in respect of the
renovation works of investment
properties contracted for but not
provided in the financial statements – 191 – –
131,900 263,357 77,000 83,087
NOTES to the Financial StatementsFor the year ended 31st December, 2002
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31. OPERATING LEASE COMMITMENTS
THE GROUP AS LESSEE
At the balance sheet date, the Group and the Company has commitments for future minimum leasepayments under non-cancellable operating leases in respect of land and buildings which fall due asfollows:
THE GROUP THE COMPANY
2002 2001 2002 2001HK$’000 HK$’000 HK$’000 HK$’000
Within one year 1,950 1,359 852 794
In the second to fifth year inclusive 1,179 – 630 –
3,129 1,359 1,482 794
Operating lease payments represent rentals for certain of its office properties. Leases are negotiated for anaverage of two years and rentals are fixed throughout the leases period.
THE GROUP AS LESSOR
Property rental income earned during the year for the Group amounted to approximately HK$128 million(2001: HK$132 million). Most of the properties held have committed tenants for the next one to five yearsexcept that one of the leases was signed for a term of sixty years, the monthly rent of which is to bereviewed every five years. The future minimum lease payments for the remaining period of the lease termfrom this tenant is calculated based on the existing monthly rental payment.
At the balance sheet date, the Group and the Company had contracted with tenants for the followingfuture minimum lease payments:
THE GROUP THE COMPANY
2002 2001 2002 2001HK$’000 HK$’000 HK$’000 HK$’000
Within one year 73,711 95,275 12,469 15,695
In the second to fifth year inclusive 50,784 51,339 8,786 13,542
After five years 61,490 61,618 – –
185,985 208,232 21,255 29,237
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32. RETIREMENT BENEFITS SCHEME
The Group operates a defined contribution retirement benefits scheme (the “ORSO Scheme”) for thequalifying employees of certain companies in the Group and in December 2000, enrolled all other eligibleemployees into a Mandatory Provident Fund (“MPF”) Scheme. The ORSO Scheme is registered under theOccupation Retirement Schemes Ordinance. The assets of both schemes are held separately from those ofthe Group in funds under the control of trustees.
The contributions payable to the fund by the Group are charged to income statement at rates specified inthe rules of the ORSO Scheme. Where there are employees who leave the ORSO Scheme prior to vestingfully in the contributions, the contributions payable by the Group are reduced by the amount of forfeitedcontributions. At the balance sheet date, there was no forfeited contributions (2001: Nil) arising uponemployees leaving the ORSO Scheme which are available to reduce the contributions payable in the futureyears.
The retirement benefit cost for the MPF charged to the income statement represents contributions payableto the fund by the Group at rates specified in the rules of the MPF Scheme.
33. RELATED PARTY DISCLOSURES
During the year, the Group entered into the following significant transactions with related parties:
2002 2001HK$’000 HK$’000
Income receivable from an associate
Rental income 7,759 6,631
Management and other service fee income 3,415 3,119
Interest income 1,298 1,707
Insurance income 3,470 2,806
15,942 14,263
Expenses payable to an associate
Interest expenses 8,270 16,931
Rental expenses 1,870 2,100
10,140 19,031
The prices of the above transactions were determined by the directors with reference to market prices orprices for similar transactions with unrelated third parties.
In addition, at 31st December, 2002, the Group and the Company had outstanding balances with relatedparties, details of which are set out in the balance sheets, notes 15, 16, 18 and 22 respectively.
Furthermore, at 31st December, 2002, certain investment properties of the Group with an aggregate netbook value of HK$407 million (2001: HK$407 million) have been pledged to the LCH Bank Group tosecure banking facilities granted to the Group.
