ANNUAL REPORT 2002
K & P INTERNATIONALHOLDINGS LIMITED(Incorporated in Bermuda with limited liability)
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Contents
Corporate Information 2
Financial Highlights 3
Chairman’s Statement 4-6
Management Discussion and Analysis 7-8
Biographical Details of Directors and Senior Management 9-10
Notice of Annual General Meeting 11-14
Report of the Directors 15-20
Report of the Auditors 21
Consolidated Profit and Loss Account 22
Consolidated Balance Sheet 23
Consolidated Statement of Changes in Equity 24
Consolidated Cash Flow Statement 25-26
Balance Sheet 27
Notes to the Financial Statements 28-65
Five Year Financial Summary 66
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED
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Corporate Information
BOARD OF DIRECTORS
Executive directors
Lai Pei Wor (Chairman)
Chan Yau Wah
Chung Yik Cheung, Raymond
Independent non-executive directors
Tsao Kwang Yung, Peter
Kung Fan Cheong
COMPANY SECRETARY
Chung Yik Cheung, Raymond
AUDITORS
Ernst & Young
Certified Public Accountants
PRINCIPAL BANKERS
Dao Heng Bank Limited
The Bank of East Asia, Limited
Standard Chartered Bank
The Hongkong and Shanghai Banking
Corporation Limited
PRINCIPAL SHARE REGISTRARS AND TRANSFER OFFICE
Butterfield Corporate Services Limited
Rosebank Centre
14 Bermudiana Road
Pembroke
Bermuda
HONG KONG BRANCH SHARE
REGISTRARS AND TRANSFER OFFICE
Tengis Limited
Ground Floor
Bank of East Asia Harbour View Centre
56 Gloucester Road
Wanchai
Hong Kong
HONG KONG LEGAL ADVISERS
Richards Butler
BERMUDA LEGAL ADVISERS
Conyers Dill & Pearman
REGISTERED OFFICE
Clarendon House
2 Church Street
Hamilton HM 11
Bermuda
HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS
Units 2304-06
23rd Floor
Riley House
88 Lei Muk Road
Kwai Chung
New Territories
Hong Kong
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Financial Highl ights
HK$’ million
2002 2001
Turnover HK$200.7 million HK$187.0 million
Net profit/(loss) attributable to shareholders HK$1.1 million HK$(10.6) million
Basic earnings/(loss) per share HK0.42 cents HK(4.23) cents
Tangible fixed assets HK$86.3 million HK$88.3 million
Shareholders’ funds HK$101.3 million HK$100.6 million
2002 2001
Electronic and related
components and parts 55.8% 54.0%
Consumer electronic
products 44.2% 46.0%
Total 100.0% 100.0%
TURNOVER BY BUSINESS SEGMENT
2002 2001
The People’s Republic
of China 41.1% 43.8%
Other countries in Asia 17.4% 10.5%
Europe 36.1% 42.5%
North America 2.6% 2.0%
Others 2.8% 1.2%
Total 100.0% 100.0%
TURNOVER BY GEOGRAPHICAL SEGMENT
Turnover
Net profit/(loss) attributable to shareholders
TURNOVER/NET PROFIT/(LOSS)ATTRIBUTABLE TO SHAREHOLDERS
2002 2001
2002 2001
250
200
150
100
50
0
-50
1998 1999 2000 2001 2002
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED
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Chairman ’s Statement
On behalf of the Board of Directors (the “Directors”), I am pleased to report the annual results of the Company together
with the subsidiaries (collectively the “Group”) for the year ended 31 December 2002.
FINANCIAL RESULTS
For the year ended 31 December 2002, the Group’s turnover reached HK$200.7 million, representing a 7.4% increase over
the previous year. Overall gross profit margin was also improved and increased from approximately HK$29.4 million in the
previous year to approximately HK$33.0 million this year. Net profit attributable to shareholders was approximately HK$1.1
million (2001: HK$10.6 million net loss).
Basic earnings per share for the year ended 31 December 2002 amounted to HK0.42 cents (2001: HK4.23 cents loss per
share)
BUSINESS REVIEW
Electronic and related components and parts segment
The Group’s electronic and related components and parts segment comprises manufacture and sale of keypads, synthetic
rubber and plastic components and parts, and liquid crystal displays. In the year under review, sales turnover of this
segment has increased by approximately 11% as compared with the previous financial year.
During the financial year under review, the global economy remained sluggish. In spite of the poor economic situation, the
Group obtained steady orders from its established customers and has successfully secured orders from new customers. As
mentioned in the last annual report, the Group’s near term goal is to capture opportunities in Mainland China following its
accession to the World Trade Organization. Our continued marketing effort in China has resulted in increased sales turnover
to this market during the year.
The products of this segment are major critical components and parts for high value consumer products. Due to keen
market competition, the Group has faced with pressures from both customers and competitors in the market. This leads to
reduction in the gross profit margin of the existing products of this segment.
Since the previous two years, we have continued our strategy to become a global supplier of critical precision components
and parts and therefore have recruited a team of sales and marketing professionals for serving overseas customers and
multinational corporations. With broadened overseas customers base, we believe that our overseas marketing team would
start contributing profit to the Group in the coming year.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Chairman ’s Statement
Consumer electronic products segment
The consumer electronic products segment has achieved approximately 3% increase in sales turnover from the previous
year. Although the sales level remained at approximately the same level as last year, the operating results of this segment
have been improving through the continuous efforts of the management in cost reduction and development of new value
added products for customers’ selection.
European market has been the major market of the consumer electronic products segment. In the first half of the year
under review, the sales turnover of this segment to the European market was approximately 13.2% lower than the
corresponding period in the previous year. However, in the second half of the year under review, the sales to the European
market have returned to a satisfactory level and the overall sales turnover for the year is not much different from that of last
year significantly.
With the strengthening of Euro dollars, we are optimistic that the demand from the European market and hence the
growth of our sales turnover to the same would sustain.
In the past years, we have increased marketing efforts to potential customers in Asian region and have succeeded in
developing business with several large OEM Japanese customers. We are pleased to report the sales to the Japanese
market have been increased by more than 2.5 times from last year.
Investment
In April 2000, the Group made a strategic long term investment in a software development company Xteam Software
International Limited (“Xteam”) with the intention to develop certain operating software system jointly with Xteam for the
Group’s new consumer electronic product lines. Owing to changes in market condition, the Directors decided to end such
new product’s development. As a result, during the year under review, the Group disposed of all of the investment in
Xteam and has realized a net capital gain on this long term investment of approximately HK$9.3 million.
On 29 October 2002, the Group’s wholly-owned subsidiary Technology Trends International Limited (“TTI”) entered into a
memorandum of understanding with YOUEAL Electronics Co. Limited (“YouEal”) for the formation of a joint venture
company in Mainland China for the manufacture and sale of mobile phone keypads. YouEal is a Korean company with its
share listed on KOSDAQ Stock Market and is principally engaged in the design and manufacture of mobile phone keypads
and inter-connectors to transmit electric signals to LCDs.
Subsequent to the balance sheet date, on 20 February 2003, TTI finalized and entered into a shareholders’ agreement with
YouEal and You Eal (China) Ltd. to, among other matters, regulate the respective rights and obligations of the shareholders
and the arrangements between them with respect to the ownership, management and operations of the joint venture
company (the “JV”). The JV company is owned as to 41% by the Group and is treated as an associated company of the
Company. The aggregate amount to be contributed by the Group in funding the JV company would be US$4.1 million.
The JV was formed as a special vehicle to act as the holding company of a wholly foreign-owned enterprise (the “WFOE”)
established in Tianjin, the PRC. The scope of business of the WFOE is manufacturing and sale of mobile phone keypads.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED
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Chairman ’s Statement
FUTURE PLAN AND PROSPECTS
Leveraging on the experience of the Group in the manufacture and sale of electronic components and parts including
keypads, the Directors consider that the investment in the manufacture of mobile phone keypads through the JV company
would create a synergy effect to the Group’s existing business. The Directors are also of the view that the experience and
expertise in the manufacture of mobile phone keypads of YouEal would certainly be beneficial to the WFOE.
In order to enhance the profit margin of the electronic and related components and parts segment, we have been developing
products with new value added features for meeting demand from our customers. During the year, new machines were
acquired and facilities are set up for the manufacture of certain newly developed products. It is expected that the new
products would bring additional revenue and profit to the Group in year 2003.
We have also been developing consumer electronic products with new features for our customer’s selection and have
planned to launch several new products in the near future. We are confident that the performance of the consumer
electronic products segment would improve significantly in the coming year.
APPRECIATION
On behalf of the Board, I would like to express my thanks and gratitude to all our staff for their loyalty and hard work and
to our suppliers, customers and shareholders for their continued support.
Lai Pei Wor
Chairman
Hong Kong, 25 April 2003
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Management Discussion and Analysis
LIQUIDITY AND FINANCIAL RESOURCES
The Group generally finances its operations with internally generated cashflow and banking facilities provided by its principal
bankers and other financial institutions in Hong Kong.
The Group currently has aggregate composite banking facilities of approximately HK$83.9 million with various banks and
financial institutions. The total borrowings from banks and financial institutions include long term loans, finance leases,
overdraft, import and export loans, amounted to approximately HK$46.2 million as at 31 December 2002, of which
HK$37.7 million is repayable in 2003.
The Group’s financial position remains healthy. At the balance sheet date, the aggregate balance of cash, cash equivalents
and pledged deposits of the Group amounted to approximately HK$22.7 million.
The Group’s borrowings are mainly on a floating rate basis and are mainly denominated in either Hong Kong dollars or
United States dollars. These match with the principal currencies in which the Group conducts it business. Therefore, the
Group does not have any significant foreign exchange risk.
The gearing ratio on the basis of total debts to total assets as at 31 December 2002 is 46.0% (2001: 42.3%).
CHARGE ON THE GROUP ASSETS
Certain bank borrowings are secured by fixed charges over the Group’s medium term leasehold land and buildings with
aggregate net book value of HK$26.7 million and bank deposits amounting to approximately HK$8.2 million.
CONTINGENT LIABILITIES
Except for corporate guarantee given to banks and other financial institutions in relation to facilities granted to the subsidiaries,
the Company has no other contingent liabilities as at the balance sheet date.
CAPITAL STRUCTURE
As at 31 December 2002, the Company had approximately 250 million shares in issue with total shareholders’ fund of the
Group amounting to approximately HK$101.3 million.
During the prior year, on 16 March 2001, the Company issued 30 million warrants (the “Warrants”) with issue price of
HK$0.05 each to several independent investors. The Warrants entitle the holders to subscribe for new shares of the
Company at a price of HK$0.30 per share from March 2001 to March 2003. Subsequent to the balance sheet date, none of
these warrants was exercised and all of them were lapsed and cancelled on the expiry date on 15 March 2003.
Pursuant to the share option scheme (the “Old Scheme”) which was approved at a special general meeting of the Company
held on 4 December 1996, the Board of Directors granted share options to certain senior executives and employees of the
Group. Details of the share options granted are disclosed in note 30 to the financial statements. The exercise in full of these
share options would result in the issue of 15.5 million additional shares and proceeds of approximately HK$2.5 million.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED
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Management Discussion and Analysis
During the year, on 27 May 2002, the Old Scheme was terminated and replaced by a new share option scheme (the “New
Sheme”) for compliance with the amendments to the Listing Rules effective from 1 September 2002. A summary of the
Group’s share option schemes is detailed in note 30 to the financial statements. The New Scheme permits the Company
to grant options to a wider category of eligible participants.
FUND RAISING
Subsequent to the balance sheet date on 3 March 2003, the Company entered into separate subscription agreements with
several independent investors, pursuant to which these investors agreed to subscribe for unlisted convertible notes issued
by the Company with principal amount aggregating US$1,282,500 (equivalent to approximately HK$10,003,500). These
convertible notes bear interest at 2% per annum and are convertible into shares of the Company at an initial conversion
price of HK$0.40 per share, subject to adjustment, during the period commencing from the date falling 24 months after the
date of issue of the convertible notes on 17 March 2003, up to and including the day immediately prior to the maturity date
of the convertible note.
Under the same agreements, the investors have also agreed to subscribe for unlisted loan notes issued by the Company
with principal amount aggregating US$1,282,500 (equivalent to approximately HK$10,003,500). These loan notes bear
interest at 5% per annum, but are not convertible into shares of the Company.
The net proceeds of US$2,529,744 (equivalent to approximately HK$19,732,000) from the issue of these notes would be
used to finance the Group’s investment in the associate, YOUEAL TTI Limited.
The maturity dates of these convertible notes and loan notes are 27 months and 24 months, respectively, from the date of
issue on 17 March 2003. The outstanding convertible notes and loan notes, if any, will be redeemed at maturity by the
Company at 132.25% and 114%, respectively.
EMPLOYEES
As at 31 December 2002, the Group available to it a total workforce of approximately 2,340 of which approximately 60
were based in Hong Kong, approximately 20 were based in Singapore and approximately 2,260 were based in the PRC.
The Group remunerates its employees largely based on the prevailing industry practice and labor laws. Since December
1996, the Company has adopted a share option scheme (the “Old Scheme”) for the purpose of providing incentives and
rewards to the employees of the Group. The Old Scheme was terminated and replaced by a new share option scheme (the
“New Scheme”) during the year on 27 May, 2002 as mentioned in the section “Capital Structure” above.
Moreover, under the Mandatory Provident Fund Scheme Ordinance of Hong Kong, the Group operates a defined contribution
Mandatory Provident Fund retirement benefits scheme for all its Hong Kong employees. For overseas and PRC employees,
the Group is required to contribute a certain percentage of its payroll costs to the central pension scheme operated by the
respective local government.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Biographical Details of Directors and Senior Management
Biographical details of the directors and senior management of the Group are set out as follows:
EXECUTIVE DIRECTORS
Mr. Lai Pei Wor, aged 46, is the Chairman and Managing Director of the Company. He is the founder of the Group and has
over 21 years’ experience in the industry. He is responsible for the Group’s overall strategic planning, policy making and
finance.
Mr. Chan Yau Wah, aged 44, is responsible for the overall management and operation of the Group’s manufacturing
activities in the PRC. He holds a higher diploma in production and industrial engineering from The Hong Kong Polytechnic
(now known as The Hong Kong Poly technic University) and a diploma in management studies from the Hong Kong
Management Association. Mr. Chan has 21 years’ experience in the electronics industry and joined the Group in December
1990.
Mr. Chung Yik Cheung, Raymond, aged 46, is the company secretary and financial controller of the Group. He holds a
bachelor’s degree in social sciences from the University of Hong Kong and a master degree of business in electronic
business from Curtin University, Australia. He is a fellow member of The Chartered Association of Certified Accountants
and Hong Kong Society of Accountants, and a member of the Institute of Canadian Chartered Accountants. He has over 21
years’ experience in management, accounting and finance and joined the Group in December 1995.
INDEPENDENT NON-EXECUTIVE DIRECTORS
Mr. Tsao Kwang Yung, Peter, CBE, CPM, aged 69, was the former Secretary for Home Affairs of the Hong Kong Government.
He graduated from National College of Food Technology in London in 1960. In 1977, Mr. Tsao was appointed as the special
envoy to Geneva and became the head of the Trade and Industry Department in 1981. In 1983, Mr. Tsao headed the
Government Information Services and in 1988 he was appointed as the Secretary for Home Affairs from which post he
retired in February 1992. He is currently the chairman of Prima Consultants Limited and a director of a number of companies
in Hong Kong and the United Kingdom.
Mr. Kung Fan Cheong, aged 48, is a partner in the law firm of Pang, Kung & Co. and is a member of The Law Society of Hong
Kong and The Law Society of England & Wales.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED
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Biographical Details of Directors and Senior Management
SENIOR MANAGEMENT
Mr. Ong Hui Lake, Philip, aged 42, chief operations officer of the Singapore Branch of Technology Trends International
Limited, a subsidiary of the Group formed after the balance sheet date. He is responsible for the worldwide marketing and
sales office operations of the Group’s electronic and related components and parts business. Mr. Ong was educated in the
United States and has exposure to the business culture of the United States and Mexico for over ten years. He has
experience in the critical components and parts industry for over six years, in setting up manufacturing operations in
Mexico and is well versed in business between Mexico and Asia. He joined the Group in December 2000.
Mr. Wong Man Kit, aged 43, is the marketing director of Hi-Tech Silicone Rubber Manufactory Limited, a subsidiary of the
Group, and is responsible for the marketing of silicone rubber products. Mr. Wong has over 19 years’ experience in the
electronics industry.
Mr. Li Kam Keung, aged 42, is the production manager of the silicone rubber division of the Group. He has over 16 years’
experience in production and management.
Mr. Tam Ho Chuen, Thomas, aged 35, is the marketing director of Hideki Time Corporation Limited, a subsidiary of the
Group, and is responsible for the marketing and development of the Group’s consumer electronic products. He holds a
bachelor of electronic engineering from Columbia University, U.S.A., a master degree of electronic engineering from University
of New South Wales, Australia and a master degree of business administration from City University of Hong Kong. He has
over 10 years’ experience in information technology field and consumer electronic sector. He joined the Group in July
2002.
Mr. Wong Sek Hung, Lewis, aged 41, senior R & D manager, holds a master electrical engineering degree from the University
of Wisconsin (Madison) U.S.A.. He has 17 years’ experience in electronics industry and 10 years’ experience in engineering
management and project development in telecommunication, consumer electronics, electronic toys, security products,
electronic organizers and OEM products. Mr. Wong joined the Group in December 1997 and is responsible for the research
and development of the Group’s consumer electronic products.
Mr. Woo Sau Ip, aged 44, is the manager of the mould division of the Group. He joined the Group in July 1989 and has over
20 years’ experience in mould manufacturing and management.
Mr. Lim Chee Shuan, Kelvin aged 36, is the executive director of Hi-Tech Polymer Limited, a subsidiary of the Group. He
holds a bachelor of Technology in manufacturing engineering from the National University of Singapore. He has over 13
years of experience in the synthetic precision rubber components manufacturing industries.
Mr. Chung Ting Wai, aged 46, is the production manager of the plastic division of the Group. He joined the Group in April
1985 and has over 26 years’ experience in mould manufacturing.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that an Annual General Meeting of the members of the Company will be held at Ballroom B,
2nd Floor, Great Eagle Hotel, 8 Peking Road, Tsimshatsui, Kowloon, Hong Kong on Friday, 6 June 2003 at 10:00 a.m. for the
following purposes:
1. To receive and consider the Audited Financial Statements and the Reports of the Directors and of the Auditors for the
year ended 31 December 2002;
2. To re-elect Director, to authorise the Board to fix the Directors’ remuneration and to set a maximum number of
Directors;
3. To re-appoint Auditors and to authorise the Board to fix their remuneration;
4. To consider and, if thought fit, pass with or without amendments, the following resolution as an ordinary resolution:
“THAT
(a) the creation and issue of four separate series of convertible loan notes in the principal amounts of US$1,242,188,
US$3,125, US$4,687 and US$32,500, respectively (the “Notes”) by the Company convertible into new ordinary
shares of nominal value of HK$0.10 each in the capital of the Company (“Shares”) at the initial conversion
price (with conversion price is subject to adjustment upon the occurrence of certain events as specified in the
Instrument (as defined below)) of HK$0.40 per Share in accordance with the terms and conditions contained
in four separate subscription agreements each dated 3 March 2003 (the “Subscription Agreements”) entered
into between the Company (as issuer) and each of MC Capital B.V., Naomichi Komuro, Ma So Lan, Ivy and First
Idea Holdings Limited (each as subscriber), copies of which are produced to the meeting and marked “A”, “B”,
“C” and “D”, respectively and initialled by the chairman of the meeting for the purpose of identification and
subject to the terms and conditions contained in the respective instruments each dated 3 March 2003 constituting
the relevant Notes (the “Instruments”), copies of which are produced to the meeting and marked “E”, “F”, “G”
and “H” and initialled by the chairman of the meeting for the purpose of identification;
(b) upon exercise from time to time of the conversion rights attached to the Notes, the allotment and issue of
Shares pursuant to and in accordance with the terms and conditions of the Instruments and the Notes; and
(c) the entering into by the Company of the Subscription Agreements and the execution by the Company of the
Instruments,
be and are hereby approved, confirmed and ratified AND THAT any director of the Company or the directors of the
Company (the “Directors”) acting together or by committee be and are hereby authorised to do on behalf of the
Company whatever such Director and Directors (as the case may be) may, in his, her or their (as the case may be)
absolute discretion, consider necessary, desirable or expedient for the purpose of, or in connection with, the
performance and implementation by the Company of the Subscription Agreements and the Instruments, and the
allotment and issue of the Notes and of the Shares pursuant to the terms of the Instruments and the Notes.”;
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Notice of Annual General Meeting
5. To consider and, if thought fit, pass with or without amendments, the following resolution as an Ordinary Resolution:
“THAT
(a) the exercise by the Directors during the Relevant Period of all the powers of the Company to purchase its
shares, subject to and in accordance with the applicable laws, be and is hereby generally and unconditionally
approved;
(b) the total nominal amount of the shares to be purchased pursuant to the approval in paragraph (a) above shall
not exceed 10% of the total nominal amount of the share capital of the Company in issue on the date 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 earlier of:
(i) the conclusion of the next Annual General Meeting of the Company;
(ii) the revocation or variation of the authority given under this Resolution by Ordinary Resolution of the
members in general meetings; and
(iii) the expiration of the period within which the next Annual General Meeting of the Company is required by
the Bye-laws of the Company or any applicable laws to be held.”;
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notice of Annual General Meeting
6. To consider and, if thought fit, pass with or without amendments, the following resolution as an Ordinary Resolution:
“THAT
(a) the exercise by the Directors during the Relevant Period of all the powers of the Company to issue, allot and
dispose of additional shares of the Company and to make or grant offers, agreements and options which
would or might require shares to be allotted, issued or disposed of during or after the end of the Relevant
Period be and is hereby generally and unconditionally approved, provided that, otherwise than pursuant to a
rights issue where shares are offered to members on a fixed record date in proportion to their then holdings of
shares (subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in
relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the
requirements of any recognised regulatory body or any stock exchange in any territory outside Hong Kong) or
any option scheme or similar arrangement for the time being adopted for the grant or issue to officers and /or
employees of the Company and/or any of its subsidiaries and/or any eligible grantee pursuant to the scheme
of shares or rights to acquire shares of the Company, or any scrip dividend scheme 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 Bye-laws of the Company, the total nominal amount of additional shares issued, allotted,
disposed of or agreed conditionally or unconditionally to be issued, allotted or disposed of (whether pursuant
to an option or otherwise) shall not in total exceed 20% of the total nominal amount of the share capital of the
Company in issue on the date of this Resolution and the said approval shall be limited accordingly; and
(b) for the purpose of this Resolution, “Relevant Period” means the period from the passing of this Resolution until
whichever is the earlier of:
(i) the conclusion of the next Annual General Meeting of the Company;
(ii) the revocation or variation of the authority given under this Resolution by Ordinary Resolution of the
members in general meetings; and
(iii) the expiration of the period within which the next Annual General Meeting of the Company is required by
the Bye-laws of the Company or any applicable laws to be held.”; and
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED
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Notice of Annual General Meeting
7. To consider and, if thought fit, pass with or without amendments, the following resolution as an Ordinary Resolution:
“THAT the general mandate granted to the Directors of the Company and for the time being in force to exercise the
powers of the Company to issue, allot and otherwise dispose of additional shares and to make or grant offers,
agreements and options which might require the exercise of such powers be and is hereby extended by total nominal
amount of shares in the capital of the Company which has been repurchased by the Company since the granting of
such general mandate pursuant to the exercise by the Directors of the Company of the powers of the Company to
purchase such shares, provided that such amount shall not exceed 10% of the total nominal amount of the share
capital of the Company in issue on the date of this Resolution.”.
BY ORDER OF THE BOARD
Chung Yik Cheung, Raymond
Secretary
Hong Kong, 25 April 2003
Notes:
(a) The Register of Members will be closed from Tuesday, 3 June 2003 to Friday, 6 June 2003, both days inclusive, during which periodno transfer of shares can be registered. In order to qualify for attending the meeting, all transfers accompanied by the relevant sharecertificates must be lodged with the Company’s Branch Registrars in Hong Kong, Tengis Limited at G/F, Bank of East Asia HarbourView Centre, 56 Gloucester Road, Wanchai, Hong Kong not later than 4:00 p.m. on Monday, 2 June 2003.
(b) A member entitled to attend and vote at the above meeting is entitled to appoint one or more proxies to attend and, in the eventof a poll, vote on his behalf. A proxy need not be a member of the Company.
(c) The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed, or a notariallycertified copy of such power or authority, must be lodged with the Company’s Branch Registrars in Hong Kong, Tengis Limited atG/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time fixedfor holding the meeting.
(d) An explanatory statement containing further details regarding items 5 to 7 above will be sent to members together with the 2002Annual Report.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Report of the Directors
The directors herein present their report and the audited financial statements of the Company and the Group for the year
ended 31 December 2002.
PRINCIPAL ACTIVITIES
The principal activity of the Company is investment holding.
The principal activities of the subsidiaries comprise the manufacture and sale of electronic and related components and
parts (comprising keypads, synthetic rubber and plastic components and parts, and liquid crystal displays (“LCD”)), and the
design, manufacture and sale of electronic consumer products (comprising electronic calculators, alarm clocks and LCD
products). There were no significant changes in the nature of the Group’s principal activities during the year.
RESULTS AND DIVIDENDS
The Group’s profit for the year ended 31 December 2002 and the state of affairs of the Company and the Group at that
date are set out in the financial statements on pages 22 to 65.
The directors do not recommend the payment of any dividend in respect of the year ended 31 December 2002.
SUMMARY FINANCIAL INFORMATION
A summary of the published results and assets and liabilities of the Group for the last five financial years, as extracted from
the audited financial statements and reclassified as appropriate, is set out on page 66. This summary does not form part of
the audited financial statements.
FIXED ASSETS
Details of movements in the Group’s fixed assets are set out in note 14 to the financial statements.
SHARE CAPITAL, SHARE OPTIONS AND WARRANTS
Details of the Company’s share capital, share options and warrants are set out in notes 29 and 30 to the financial statements.
PRE-EMPTIVE RIGHTS
There are no provisions for pre-emptive rights under the Company’s bye-laws and there are no restrictions against such
rights under the laws of Bermuda, being the jurisdiction in which the Company is incorporated, which would oblige the
Company to offer new shares on a pro rata basis to existing shareholders.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED
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Report of the Directors
PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY
Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed securities
during the year.
RESERVES
Details of movements in the reserves of the Company and the Group during the year are set out in note 31 to the financial
statements and in the consolidated statement of changes in equity, respectively.
DISTRIBUTABLE RESERVES
At 31 December 2002, the Company’s reserves available for cash distribution and/or distribution in specie, as computed in
accordance with The Companies Act 1981 of Bermuda (as amended), amounted to HK$50,387,631 (2001: HK$41,539,710).
In addition, the Company’s share premium account, in the amount of HK$49,611,281 (2001: HK$49,611,281) may be
distributed in the form of fully paid bonus shares.
MAJOR CUSTOMERS AND MAJOR SUPPLIERS
In the year under review, sales to the Group’s five largest customers accounted for approximately 31.7% (2001: 28.6%) of
the Group’s total turnover for the year and the sales to the largest customer included therein amounted to approximately
9.2% (2001: 8.2%).
Purchases made from the Group’s five largest suppliers accounted for approximately 32.4% (2001: 28.3%) of the Group’s
total purchases for the year and the purchases from the largest supplier included therein amounted to approximately 8.5%
(2001: 7.6%).
As far as the directors are aware of, neither the directors, their associates, nor those shareholders which to the best
knowledge of the directors own more than 5% of the Company’s issued share capital, had any beneficial interest in the
Group’s five largest customers and five largest suppliers.
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17
K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Report of the Directors
DIRECTORS
The directors of the Company during the year were:
Executive directors:
Lai Pei Wor
Chan Yau Wah
Chung Yik Cheung, Raymond
Wong Kwong Ming (resigned on 30 June 2002)
Independent non-executive directors:
Tsao Kwang Yung, Peter
Kung Fan Cheong
In accordance with bye-law 87 of the Company’s bye-laws, Kung Fan Cheong will retire by rotation and, being eligible, will
offer himself for re-election at the forthcoming annual general meeting.
DIRECTORS’ SERVICE CONTRACTS
Each of the executive directors has entered into a service contract with the Company for an initial term of three years
commencing from 1 January 2000, and thereafter until terminated by either party giving to the other not less than six
months’ notice in writing.
No director proposed for re-election at the forthcoming annual general meeting has a service contract with the Company
which is not determinable by the Company within one year without payment of compensation, other than statutory
compensation.
DIRECTORS’ INTERESTS IN CONTRACTS
No director had a material interest in any contract of significance to the business of the Company and its subsidiaries to
which the Company or any of its subsidiaries was a party during the year.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED
18
Report of the Directors
DIRECTORS’ INTERESTS IN SHARES
At 31 December 2002, the interests of the directors in the share capital of the Company or its associated corporations, as
recorded in the register maintained by the Company pursuant to Section 29 of the Securities (Disclosure of Interests)
Ordinance (the “SDI Ordinance”), or otherwise notified to the Company and The Stock Exchange of Hong Kong Limited
(the “Stock Exchange”) pursuant to the Model Code for Securities Transactions by Directors of Limited Companies, were as
follows:
Ordinary shares of the Company
Nature of Number of
Name of director interest shares
Lai Pei Wor Other * 97,242,000
Chan Yau Wah Personal 5,200,000
Chung Yik Cheung, Raymond Personal 152,000
* Details of Lai Pei Wor’s other interests are set out in the section headed “Substantial shareholders” below.
The interests of the directors in the share options of the Company are separately disclosed in note 30 to the financial
statements.
Save as disclosed above, none of the directors, chief executives or their associates had any personal, family, corporate or
other interest in the equity or debt securities of the Company or any of its associated corporations as defined in Section 29
of the SDI Ordinance.
DIRECTORS’ RIGHTS TO ACQUIRE SHARES
Apart from as disclosed under the heading “Directors’ interests in shares” above and in the share option scheme disclosures
in note 30 to the financial statements, at no time during the year was the Company or any of its subsidiaries a party to any
arrangement to enable the Company’s directors, their respective spouse or children under 18 years of age to acquire
benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.
SHARE OPTION SCHEME
Due to the adoption of Statement of Standard Accounting Practice No. 34 “Employee benefits” during the year, most of the
detailed disclosures relating to the Company’s share option scheme have been moved to note 30 to the financial statements.
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19
K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Report of the Directors
SUBSTANTIAL SHAREHOLDERS
As at 31 December 2002, the following interests of 10% or more in the issued share capital of the Company were recorded
in the register of interests required to be kept by the Company pursuant to Section 16(1) of the SDI Ordinance:
Percentage
Number of the Company’s
Name of shares issued share capital
Celaya Limited (Note a) 97,242,000 38.9
Ansbacher (BVI) Limited (Note b) 97,242,000 38.9
Notes:
(a) Celaya Limited holds 97,242,000 shares in its capacity as trustee of The Lai Family Unit Trust, of which all units are held byAnsbacher (BVI) Limited in its capacity as trustee of The Lai Family Trust, a discretionary trust of which Lai Pak Hung and Lai Yee Man(both children of Lai Pei Wor and under the age of 18) and Chan Yuk Lin (wife of Lai Pei Wor) are discretionary objects.
(b) The shares referred to herein relate to the same parcel of shares referred to in note (a) above.
Save as disclosed above, the Company has not been notified of any other interest representing 10% or more in the
Company’s issued share capital as at 31 December 2002.
POST BALANCE SHEET EVENTS
Details of the significant post balance sheet events of the Group are set out in note 33 to the financial statements.
CONNECTED TRANSACTIONS
During the year, the Group had no connected transactions as defined under the Rules Governing the Listing of Securities
on the Stock Exchange (the “Listing Rules”).
CODE OF BEST PRACTICE
In the opinion of the directors, the Company complied with the Code of Best Practice (the “Code”) as set out in Appendix
14 of the Listing Rules, throughout the accounting period covered by the annual report, except that the independent non-
executive directors of the Company are not appointed for specific terms as required by paragraph 7 of the Code. The
independent non-executive directors are subject to retirement by rotation and re-election at the annual general meeting of
the Company in accordance with the provisions of the Company’s bye-laws.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED
20
Report of the Directors
AUDIT COMMITTEE
The Company has an audit committee which was established in accordance with the requirements of the Code, for the
purposes of reviewing and providing supervision over the Group’s financial reporting process and internal controls. The
audit committee comprises the two independent non-executive directors of the Company.
AUDITORS
Ernst & Young retire and a resolution for their reappointment as auditors of the Company will be proposed at the forthcoming
annual general meeting.
ON BEHALF OF THE BOARD
Lai Pei Wor
Chairman
Hong Kong
25 April 2003
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Report of the Auditors
To the members
K & P INTERNATIONAL HOLDINGS LIMITED
(Incorporated in Bermuda with limited liability)
We have audited the financial statements on pages 22 to 65 which have been prepared in accordance with accounting
principles generally accepted in Hong Kong.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
The Company’s directors are responsible for the preparation of financial statements which give a true and fair view. In
preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are
selected and applied consistently. It is our responsibility to form an independent opinion, based on our audit, on those
statements and to report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants.
An audit includes an examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates and judgements made by the directors in the
preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s and the
Group’s circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary
in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free
from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information
in the financial statements. We believe that our audit provides a reasonable basis for our opinion.
OPINION
In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group as at
31 December 2002 and of the profit and cash flows of the Group for the year then ended and have been properly prepared
in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.
Ernst & Young
Certified Public Accountants
Hong Kong
25 April 2003
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED
22
Consolidated Profit And Loss AccountYear Ended 31 December 2002
2002 2001
Notes HK$ HK$
TURNOVER 5 200,758,474 187,007,803
Cost of sales (167,799,280) (157,635,891)
Gross profit 32,959,194 29,371,912
Other revenue 5 3,761,697 2,564,847
Selling and distribution costs (22,260,978) (20,019,773)
Administrative expenses (20,156,874) (21,447,911)
Other operating income, net 6 9,280,088 2,274,175
PROFIT/(LOSS) FROM OPERATING ACTIVITIES 7 3,583,127 (7,256,750)
Finance costs 8 (2,904,978) (2,740,691)
Share of loss of an associate (45,782) –
PROFIT/(LOSS) BEFORE TAX 632,367 (9,997,441)
Tax 11 413,897 (567,795)
NET PROFIT/(LOSS) FROM ORDINARY ACTIVITIES
ATTRIBUTABLE TO SHAREHOLDERS 12 1,046,264 (10,565,236)
BASIC EARNINGS/(LOSS) PER SHARE 13 0.42 cents (4.23) cents
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Consolidated Balance Sheet31 December 2002
2002 2001Notes HK$ HK$
NON-CURRENT ASSETSFixed assets 14 86,302,426 88,337,079Intangible assets 15 2,080,572 578,502Deposit paid for purchases of leasehold land 4,720,000 –Investment in an associate 17 3,152,218 –Long term investments 18 908,450 5,623,000
97,163,666 94,538,581
CURRENT ASSETSInventories 19 25,802,395 20,888,239Prepayments, deposits and other receivables 20 9,093,835 4,918,744Trade and bills receivables 21 30,798,552 32,741,353Tax recoverable 548,489 –Pledged time deposits 8,177,287 5,049,213Cash and cash equivalents 22 15,944,237 16,245,240
90,364,795 79,842,789
CURRENT LIABILITIESInterest-bearing bank borrowings 23 32,203,604 24,612,592Trade payables 25 21,703,792 20,318,054Current portion of finance lease payables 26 5,451,879 6,623,497Accrued liabilities and other payables 27 17,214,638 14,596,150Tax payable 251,363 142,866
76,825,276 66,293,159
NET CURRENT ASSETS 13,539,519 13,549,630
TOTAL ASSETS LESS CURRENT LIABILITIES 110,703,185 108,088,211
NON-CURRENT LIABILITIESInterest-bearing bank borrowings 24 4,843,862 1,365,170Long term portion of finance lease payables 26 3,650,628 4,745,546Deferred tax 28 900,000 1,357,000
9,394,490 7,467,716
101,308,695 100,620,495
CAPITAL AND RESERVESIssued capital 29 25,000,480 25,000,480Reserves 76,308,215 75,620,015
101,308,695 100,620,495
Lai Pei Wor Chung Yik Cheung, RaymondDirector Director
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED
24
Consolidated Statement of Changes in EquityYear Ended 31 December 2002
Issued Share Warrant Fixed asset Exchange
share premium subscription Contributed revaluation fluctuation Retained
capital account reserve surplus reserve reserve profits Total
HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$
At 1 January 2001 25,000,480 49,611,281 – 660,651 4,706,140 – 29,720,899 109,699,451
Surplus on revaluation – – – – 96,805 – – 96,805
Net gains and losses not
recognised in the profit
and loss account – – – – 96,805 – – 96,805
Placement of warrants – – 1,500,000 – – – – 1,500,000
Warrant issue expenses – – (110,525) – – – – (110,525)
Net loss for the year – – – – – – (10,565,236) (10,565,236)
At 31 December 2001 25,000,480 49,611,281 1,389,475 660,651 4,802,945 – 19,155,663 100,620,495
Exchange realignment – – – – – (528,991) – (528,991)
Surplus on revaluation – – – – 170,927 – – 170,927
Net gains and losses not
recognised in the profit
and loss account – – – – 170,927 (528,991) – (358,064)
Net profit for the year – – – – – – 1,046,264 1,046,264
At 31 December 2002 25,000,480 49,611,281 1,389,475 660,651 4,973,872 (528,991) 20,201,927 101,308,695
Reserves retained by:
Company and subsidiaries 25,000,480 49,611,281 1,389,475 660,651 4,973,872 (528,991) 20,247,709 101,354,477
An associate – – – – – – (45,782) (45,782)
31 December 2002 25,000,480 49,611,281* 1,389,475* 660,651* 4,973,872* (528,991)* 20,201,927* 101,308,695
Company and subsidiaries 25,000,480 49,611,281 1,389,475 660,651 4,802,945 – 19,155,663 100,620,495
31 December 2001 25,000,480 49,611,281* 1,389,475* 660,651* 4,802,945* –* 19,155,663* 100,620,495
* These reserve accounts comprise the consolidated reserves of HK$76,308,215 (2001: HK$75,620,015) in the consolidated balancesheet.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Consolidated Cash Flow StatementYear Ended 31 December 2002
2002 2001
Notes HK$ HK$
(Restated)
CASH FLOWS FROM OPERATING ACTIVITIES
Profit/(loss) before tax 632,367 (9,997,441)
Adjustments for:
Finance costs 8 2,904,978 2,740,691
Share of loss of an associate 45,782 –
Interest income 5 (247,475) ( 354,640)
Depreciation 7 23,367,258 23,565,433
Amortisation of intangible assets 7 247,930 247,924
Loss on disposal of fixed assets 6 3,767 38,705
Gain on sale of long term investments, net 6 (9,325,422) –
Surplus on revaluation of leasehold land and buildings
charged to the profit and loss account 6 (179,706) (239,706)
Write back of provision for doubtful debts 6 (79,339) (3,140,000)
Operating profit before working capital changes 17,370,140 12,860,966
Decrease/(increase) in inventories (4,914,156) 14,175,314
Decrease/(increase) in prepayments, deposits and other receivables (3,865,877) 1,535,789
Decrease in trade and bills receivables 2,022,140 5,909,240
Increase in trade payables, accrued liabilities and other payables 3,991,108 3,239,577
Decrease in an amount due to a related company – (4,829,375)
Cash generated from operations 14,603,355 32,891,511
Interest received 254,120 469,598
Interest paid (2,222,430) (1,852,938)
Interest element on finance lease rental payments (669,430) (983,915)
Hong Kong profits tax paid (406,992) (1,914,110)
PRC income tax paid (76,103) (165,645)
Net cash inflow from operating activities 11,482,520 28,444,501
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED
26
Consolidated Cash Flow StatementYear Ended 31 December 2002
2002 2001
Notes HK$ HK$(Restated)
Net cash inflow from operating activities 11,482,520 28,444,501
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets (14,792,053) (11,142,600)Investment in an associate (3,198,000) –
Increase in amount due from an associate (315,859) –Additions to intangible assets 15 (1,750,000) –
Outstanding consideration paid in respect ofacquisition of subsidiaries in the prior year – (5,000,000)
Increase in pledged time deposits (3,128,074) (9,571)Purchases of long term investments (308,450) ( 600,000)
Proceeds from sale of long term investments 14,348,422 –Deposit paid for purchases of leasehold land (4,720,000) –
Net cash outflow from investing activities (13,864,014) ( 16,752,171)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in money market loan – 2,000,000Increase in bank and instalment loans 18,961,247 522,218
Decrease in mortgage loans (330,192) (308,828)Increase/(decrease) in trust receipt loans (8,951,198) 6,653,938
Capital element of finance lease rental payments (8,332,422) (6,286,608)Proceeds from issue of warrants – 1,500,000
Warrant issue expenses – (110,525)
Net cash inflow from financing activities 1,347,435 3,970,195
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (1,034,059) 15,662,525
Cash and cash equivalents at beginning of year 16,245,240 582,715
Effect of foreign exchange rate changes, net (656,791) –
CASH AND CASH EQUIVALENTS AT END OF YEAR 14,554,390 16,245,240
ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTSCash and bank balances 22 7,826,707 12,154,678
Time deposits 22 8,117,530 4,090,562Bank overdrafts 24 (1,389,847) –
14,554,390 16,245,240
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Balance Sheet31 December 2002
2002 2001
Notes HK$ HK$
NON-CURRENT ASSETS
Interests in subsidiaries 16 126,406,414 117,513,755
CURRENT ASSETS
Prepayments, deposits and other receivables 20 72,985 149,852
Cash and cash equivalents 22 11,321 1,139
84,306 150,991
CURRENT LIABILITIES
Accrued liabilities and other payables 27 101,853 123,800
101,853 123,800
NET CURRENT ASSETS/(LIABILITIES) (17,547) 27,191
126,388,867 117,540,946
CAPITAL AND RESERVES
Issued capital 29 25,000,480 25,000,480
Reserves 31 101,388,387 92,540,466
126,388,867 117,540,946
Lai Pei Wor Chung Yik Cheung, Raymond
Director Director
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
28
Notes to F inancial Statements31 December 2002
1. CORPORATE INFORMATION
The principal office of K & P International Holdings Limited is located at Units 2304-06, 23rd Floor, Riley House, 88 Lei
Muk Road, Kwai Chung, New Territories, Hong Kong.
During the year, the Group was involved in the following principal activities:
• manufacture and sale of electronic and related components and parts (comprising keypads, synthetic rubber
and plastic components and parts, and liquid crystal displays (“LCD”))
• design, manufacture and sale of electronic consumer products (comprising electronic calculators, alarm clocks
and LCD products)
2. IMPACT OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE (“SSAPS”)
The following new and revised SSAPs are effective for the first time for the current year’s financial statements:
• SSAP 1 (Revised): “Presentation of financial statements”
• SSAP 11 (Revised): “Foreign currency translation”
• SSAP 15 (Revised): “Cash flow statements”
• SSAP 34: “Employee benefits”
These SSAPs prescribe new accounting measurement and disclosure practices. The major effects on the Group’s
accounting policies and on the amounts disclosed in these financial statements of those SSAPs which have had a
significant effect on the financial statements are summarised as follows:
SSAP 1 prescribes the basis for the presentation of financial statements and sets out guidelines for their structure and
minimum requirements for the content thereof. The principal impact of the revision to this SSAP is that a consolidated
statement of changes in equity is now presented on page 24 of the financial statements in place of the consolidated
statement of recognised gains and losses that was previously required and in place of the Group’s reserves note.
SSAP 11 prescribes the basis for the translation of foreign currency transactions and financial statements. The principal
impact of the revision of this SSAP on the consolidated financial statements is that the profit and loss accounts of
overseas subsidiaries are now translated into Hong Kong dollars at the weighted average exchange rates for the year,
whereas previously they were translated into the exchange rates at the balance sheet date. The adoption of the
revised SSAP 11 has had no material effect on the financial statements. Further details of this change are included in
the accounting policy for “Foreign currencies” in note 3 to the financial statements.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
2. IMPACT OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE (“SSAPS”) (continued)
SSAP 15 prescribes the revised format for the cash flow statement. The principal impact of the revision of this SSAP
is that the consolidated cash flow statement now presents cash flows under three headings, cash flows from operating,
investing and financing activities, rather than the five headings previously required. In addition, cash flows from
overseas subsidiaries arising during the year are now translated into Hong Kong dollars at the exchange rates at the
dates of the transactions, or at an approximation thereto, whereas previously they were translated at the exchange
rates at the balance sheet date, and the definition of cash equivalents for the purpose of the consolidated cash flow
statement has been revised. Further details of these changes and the prior year adjustments that have resulted from
them are included in the accounting policies for “Cash and cash equivalents” and “Foreign currencies” in note 3 and
in note 32(a) to the financial statements.
SSAP 34 prescribes the recognition and measurement criteria to apply to employee benefits, together with the
required disclosures in respect thereof. The adoption of this SSAP has resulted in no material change to the previously
adopted accounting treatments for employee benefits. In addition, disclosures are now required in respect of the
Company’s share option scheme, as detailed in note 30 to the financial statements. These share option scheme
disclosures are similar to the Listing Rules disclosures previously included in the Report of the Directors, which are
now required to be included in the notes to the financial statements as a consequence of the SSAP.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
These financial statements have been prepared in accordance with Hong Kong Statements of Standard Accounting
Practice, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong
Companies Ordinance. They have been prepared under the historical cost convention, except for the periodic
remeasurement of certain fixed assets as further explained below.
Basis of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries for the
year ended 31 December 2002. The results of subsidiaries acquired or disposed of during the year are consolidated
from or to their effective dates of acquisition or disposal, respectively. All significant intercompany transactions and
balances within the Group are eliminated on consolidation.
Subsidiaries
A subsidiary is a company whose financial and operating policies the Company controls, directly or indirectly, so as to
obtain benefits from its activities.
The results of subsidiaries are included in the Company’s profit and loss account to the extent of dividends received
and receivable. The Company’s interests in subsidiaries are stated at cost less any impairment losses.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
30
Notes to F inancial Statements31 December 2002
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Associates
An associate is a company, not being a subsidiary or a jointly-controlled entity, in which the Group has a long term
interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise
significant influence.
The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated profit and
loss account and consolidated reserves, respectively. The Group’s interests in associates are stated in the consolidated
balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses.
Goodwill
Goodwill arising on the acquisition of subsidiaries represents the excess of the cost of the acquisition over the
Group’s share of the fair values of the identifiable assets and liabilities acquired as at the date of acquisition.
Goodwill arising on acquisition is recognised in the balance sheet as an asset and amortised on the straight-line basis
over its estimated useful life.
SSAP 30 “Business combinations” was adopted as at 1 January 2001. Prior to that date, goodwill arising on acquisitions
was eliminated against consolidated reserves in the year of acquisition. On the adoption of SSAP 30, the Group
applied the transitional provision of SSAP 30 that permitted such goodwill to remain eliminated against consolidated
reserves. Goodwill on acquisitions subsequent to 1 January 2001 is treated according to the SSAP 30 goodwill
accounting policy above.
On disposal of subsidiaries, the gain or loss on disposal is calculated by reference to the net assets at the date of
disposal, including the attributable amount of goodwill which remains unamortised and any relevant reserves, as
appropriate. Any attributable goodwill previously eliminated against consolidated reserves at the time of acquisition
is written back and included in the calculation of the gain or loss on disposal.
The carrying amount of goodwill, including goodwill remaining eliminated against consolidated reserves, is reviewed
annually and written down for impairment when it is considered necessary. A previously recognised impairment loss
for goodwill is not reversed unless the impairment loss was caused by a specific external event of an exceptional
nature that was not expected to recur, and subsequent external events have occurred which have reversed the effect
of that event.
Impairment of assets
An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or
whether there is any indication that an impairment loss previously recognised for an asset in prior years may no
longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An
asset’s recoverable amount is calculated as the higher of the asset’s value in use or its net selling price.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of assets (continued)
An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment
loss is charged to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued
amount, when the impairment loss is accounted for in accordance with the relevant accounting policy for that
revalued asset.
A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine
the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have
been determined (net of any depreciation/amortisation), had no impairment loss been recognised for the asset in
prior years. A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises,
unless the asset is carried at a revalued amount, when the reversal of the impairment loss is accounted for in
accordance with the relevant accounting policy for that revalued asset.
Fixed assets and depreciation
Fixed assets are stated at cost or valuation less accumulated depreciation and any impairment losses. The cost of an
asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition
and location for its intended use. Expenditure incurred after fixed assets have been put into operation, such as repairs
and maintenance, is normally charged to the profit and loss account in the period in which it is incurred. In situations
where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits
expected to be obtained from the use of the fixed asset, the expenditure is capitalised as an additional cost of that
asset.
Changes in the values of fixed assets are dealt with as movements in the revaluation reserve. If the total of this
reserve is insufficient to cover a deficit, on an individual asset basis, the excess of the deficit is charged to the profit
and loss account. Any subsequent revaluation surplus is credited to the profit and loss account to the extent of the
deficit previously charged. On disposal of a revalued asset, the relevant portion of the revaluation reserve realised in
respect of previous valuations is transferred to retained profits as a movement in reserves.
Depreciation is calculated on the straight-line basis to write off the cost or valuation of each asset over its estimated
useful life. The principal annual rates used for this purpose are as follows:
Land held under medium term leases Over the lease terms
Buildings 2.5%
Leasehold improvements 25% to 30%
Plant and machinery 12.5% to 25%
Furniture, fixtures and office equipment 20% to 30%
Motor vehicles 20% to 25%
Moulds 20% to 33.33%
The gain or loss on disposal or retirement of a fixed asset recognised in the profit and loss account is the difference
between the net sales proceeds and the carrying amount of the relevant asset.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
32
Notes to F inancial Statements31 December 2002
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Leased assets
Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title,
are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at
the present value of the minimum lease payments and recorded together with the obligation, excluding the interest
element, to reflect the purchase and financing. Assets held under capitalised finance leases are included in fixed
assets and are depreciated over the estimated useful lives of the assets. The finance costs of such leases are charged
to the profit and loss account so as to provide a constant periodic rate of charge over the lease terms.
Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for
as operating leases. Rentals applicable to such operating leases are charged to the profit and loss account on the
straight-line basis over the lease terms.
Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or
exercise significant influence over the other party in making financial and operating decisions. Parties are also considered
to be related if they are subject to common control or common significant influence. Related parties may be individuals
or corporate entities.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in, first-out basis
and, in the case of work in progress and finished goods, comprises direct materials, direct labour and an appropriate
proportion of overheads. Net realisable value is based on estimated selling prices less any estimated costs to be
incurred to completion and disposal.
Cash and cash equivalents
For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand and
demand deposits, and short term highly liquid investments which are readily convertible into known amounts of
cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within
three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the
Group’s cash management.
Prior to the adoption of the revised SSAP 15 during the year, as explained in note 2 to the financial statements, cash
equivalents in the consolidated cash flow statement also included advances from banks repayable within three
months from the date of the advance, in addition to bank overdrafts. This change in definition has resulted in a prior
year adjustment relating to trust receipt loans, further details of which are included in note 32(a) to the financial
statements.
For the purpose of the balance sheet, cash and cash equivalents comprise cash on hand and at banks, including term
deposits, and assets similar in nature to cash, which are not restricted as to use.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred tax
Deferred tax is provided, using the liability method, on all significant timing differences to the extent it is probable
that the liability will crystallise in the foreseeable future. A deferred tax asset is not recognised until its realisation is
assured beyond reasonable doubt.
Intangible assets
Technical know-how
Technical know-how is stated at cost less any impairment losses and is amortised on the straight-line basis over its
estimated useful life of five years.
Research and development costs
All research costs are charged to the profit and loss account as incurred.
Expenditure incurred on projects to develop new products is capitalised and deferred only when the projects are
clearly defined; the expenditure is separately identifiable and can be measured reliably; there is reasonable certainty
that the projects are technically feasible; and the products have commercial value. Product development expenditure
which does not meet these criteria is expensed when incurred.
Deferred development costs are stated at cost less any impairment losses and are amortised using the straight-line
basis over the commercial lives of the underlying products not exceeding five years, commencing from the date
when the products are put into commercial production.
Long term investments
Equity investments
Long term investments in listed and unlisted equity securities, intended to be held for a continuing strategic or long
term purpose, are stated at cost less any impairment losses, on an individual investment basis.
When impairments in values have occurred, the carrying amounts of the securities are reduced to their fair values, as
estimated by the directors, and the amounts of the impairments are charged to the profit and loss account for the
period in which they arise. When the circumstances and events which led to the impairments in values cease to exist
and there is persuasive evidence that the new circumstances and events will persist for the foreseeable future, the
amounts of the impairments previously charged are credited to the profit and loss account to the extent of the
amounts previously charged.
Club memberships
Long term investments in club memberships, which are intended to be held for long term purposes, are stated at
cost less any impairment losses.
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34
Notes to F inancial Statements31 December 2002
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Foreign currencies
Foreign currency transactions are recorded at the applicable exchange rates ruling at the transaction dates. Monetary
assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable
exchange rates ruling at that date. Exchange differences are dealt with in the profit and loss account.
On consolidation, the financial statements of overseas subsidiaries are translated into Hong Kong dollars using the
net investment method. The profit and loss accounts of overseas subsidiaries are translated into Hong Kong dollars
at the weighted average exchange rates for the year, and their balance sheets are translated to Hong Kong dollars at
the exchange rates ruling at the balance sheet date. The resulting translation differences are included in the exchange
fluctuation reserve.
For the purpose of the consolidated cash flow statement, the cash flows of overseas subsidiaries are translated into
Hong Kong dollars at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of
overseas subsidiaries which arise throughout the year are translated to Hong Kong dollars at the weighted average
exchange rates for the year.
Prior to the adoption of the revised SSAPs 11 and 15 during the year, as explained in note 2 to the financial statements,
the profit and loss accounts and the cash flows of overseas subsidiaries were translated into Hong Kong dollars at the
exchange rates ruling at the balance sheet date. These changes have had no material effect on the financial statements.
Revenue recognition
Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue
can be measured reliably, on the following bases:
(a) from the sale of goods and scrap, when the significant risks and rewards of ownership have been transferred to
the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated
with ownership, nor effective control over the goods sold;
(b) interest income, on a time proportion basis taking into account the principal outstanding and the effective
interest rate applicable;
(c) tooling charge income, when the services are rendered; and
(d) dividend income, when the shareholders’ right to receive payment has been established.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Employee benefits
Paid leave carried forward
The Group provides paid annual leave to its employees under their employment contracts. Under certain circumstances,
such leave which remains untaken as at the balance sheet date is permitted to be carried forward and utilised by the
respective employees in the following year. An accrual is made at the balance sheet date for the expected future cost
of such paid leave earned during the year by the employees and carried forward.
Employment Ordinance long service payments
Certain of the Group’s employees have completed the required number of years of services to the Group in order to
be eligible for long service payments under the Hong Kong Employment Ordinance in the event of the termination of
their employment. The Group is liable to make such payments in the event that such a termination of employment
meets the circumstances specified in the Employment Ordinance.
A provision is recognised in respect of the probable future long service payments expected to be made. The provision
is based on the best estimate of the probable future payments which have been earned by the employees from their
services to the Group to the balance sheet date.
Pension scheme
The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”)
under the Mandatory Provident Fund Schemes Ordinance, for all of its employees. Contributions are made based on
a percentage of the employees’ basic salaries and are charged to the profit and loss account as they become payable
in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the
Group in an independently administered fund. The Group’s employer contributions vest fully with the employees
when contributed into the MPF Scheme.
The employees of the Group’s subsidiaries which operates in Mainland China are required to participate in a central
pension scheme operated by the local municipal government. These subsidiaries are required to contribute a certain
percentage of its payroll costs to the central pension scheme. The contributions are charged to the profit and loss
account as they become payable in accordance with the rules of the central pension scheme.
Share options scheme
The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible
participants who contribute to the success of the Group’s operations. The financial impact of share options granted
under the share option scheme is not recorded in the Company’s or the Group’s balance sheet until such time as the
options are exercised, and no charge is recorded in the profit and loss account or balance sheet for their cost. Upon
the exercise of share options, the resulting shares issued are recorded by the Company as additional share capital at
the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares
is recorded by the Company in the share premium account. Options which are cancelled prior to their exercise date,
or which lapse, are deleted from the register of outstanding options.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
36
Notes to F inancial Statements31 December 2002
4. SEGMENT INFORMATION
Segment information is presented by way of two segment formats: (i) on a primary segment reporting basis, by
business segment; and (ii) on a secondary segment reporting basis, by geographical segment.
The Group’s operating businesses are structured and managed separately, according to the nature of their operations
and the products and services they provide. Each of the Group’s business segments represents a strategic business
unit that offers products and services which are subject to risks and returns that are different from those of the other
business segments. Summary details of the business segments are as follows:
(a) the electronic and related components and parts segment comprise the manufacture and sale of electronic
and related components and parts;
(b) the consumer electronic products segment comprise the design, manufacture and sale of consumer electronic
products comprising electronic calculators, alarm clocks and liquid crystal display products; and
(c) the corporate and others segment comprises the Group’s property holding activity, together with corporate
income and expense items.
In determining the Group’s geographical segments, revenues are attributed to the segments based on the location of
the customers, and assets are attributed to the segments based on the location of the assets.
Intersegment sales and transfers are transacted with reference to the cost of sales.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
4. SEGMENT INFORMATION (continued)
(a) Business segments
The following table presents revenue, profit/(loss) and certain asset, liability and expenditure information for
the Group’s business segments:
Group
Electronic and related Consumer
components and parts electronic products Corporate and others Eliminations Consolidated
2002 2001 2002 2001 2002 2001 2002 2001 2002 2001
HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$
Segment revenue:
Sales to external customers 112,053,991 100,949,411 88,704,483 86,058,392 – – – – 200,758,474 187,007,803
Intersegment sales 5,103,462 4,925,805 – 848 – – (5,103,462) (4,926,653) – –
Other revenue 3,038,627 1,971,853 473,134 236,602 2,461 1,752 – – 3,514,222 2,210,207
Total 120,196,080 107,847,069 89,177,617 86,295,842 2,461 1,752 (5,103,462) (4,926,653) 204,272,696 189,218,010
Segment results (7,741,957) (2,981,790) 2,984,910 (2,037,612) (1,232,723) (2,591,988) (5,989,770) (7,611,390)
Interest income 247,475 354,640
Gain on sale of long term
investments, net 9,325,422 –
Profit/(loss) from operating
activities 3,583,127 (7,256,750)
Finance costs (2,904,978) (2,740,691)
Share of loss of an associate (45,782) –
Profit/(loss) before tax 632,367 (9,997,441)
Tax 413,897 (567,795)
Net profit/(loss) from ordinary
activities attributable to
shareholders 1,046,264 (10,565,236)
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38
Notes to F inancial Statements31 December 2002
4. SEGMENT INFORMATION (continued)
(a) Business segments (continued)
Group
Electronic and related Consumer
components and parts electronic products Corporate and others Eliminations Consolidated
2002 2001 2002 2001 2002 2001 2002 2001 2002 2001
HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$
Segment assets 122,978,078 121,406,806 49,283,358 34,966,651 14,695,296 17,604,603 23,237 (363,453) 186,979,969 173,614,607
Unallocated assets 548,492 766,763
Total assets 187,528,461 174,381,370
Segment liabilities 24,044,572 21,100,352 14,243,271 15,234,089 635,212 1,050,065 (4,625) (1,559,999) 38,918,430 35,824,507
Unallocated liabilities 47,301,336 37,936,368
Total liabilities 86,219,766 73,760,875
Other segment information:
Depreciation and amortisation 16,512,841 18,598,952 5,836,041 3,862,545 1,266,306 1,351,860 – – 23,615,188 23,813,357
Write back of provision for
doubtful debts (8,514) – (928,805 ) (3,140,000) – – – – (937,319) (3,140,000)
Provision of doubtful debts 857,980 – – – – – – – 857,980 –
Surplus on revaluation of
leasehold land and buildings
charged to:
Fixed assets revaluation
reserve – – – – (170,927) (96,805) – – (170,927) (96,805)
Profit and loss account – – – – (179,706 ) (239,706) – – (179,706 ) (239,706)
Capital expenditure 18,810,952 14,685,356 2,002,892 1,975,442 44,095 391,040 – – 20,857,939 17,051,838
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39
K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
4. SEGMENT INFORMATION (continued)
(b) Geographical segments
The following table presents revenue, and certain asset and expenditure information for the Group’s geographical
segments.
Group
Segment revenue Other segment information
Sales to external customers Segment assets Capital expenditure
2002 2001 2002 2001 2002 2001
HK$ HK$ HK$ HK$ HK$ HK$
Hong Kong 77,752,498 76,394,750 59,361,115 55,813,826 91,363 610,589
Mainland China 4,858,468 5,462,720 108,121,825 98,271,418 20,348,312 14,159,300
Total in the PRC 82,610,966 81,857,470 167,482,940 154,085,244 20,439,675 14,769,889
Japan 25,805,906 9,806,201 4,927,603 3,435,241 – –
Other Asian countries* 9,086,398 9,817,898 6,963,523 5,788,564 418,264 2,281,949
Total in Asia 117,503,270 101,481,569 179,374,066 163,309,049 20,857,939 17,051,838
Germany 30,943,489 30,641,332 2,464,709 2,233,913 – –
Other European countries** 41,569,123 48,828,245 4,417,089 8,115,539 – –
Total in Europe 72,512,612 79,469,577 6,881,798 10,349,452 – –
North America 5,223,269 3,790,675 364,807 92,132 – –
Others*** 5,519,323 2,265,982 907,790 630,737 – –
Consolidated 200,758,474 187,007,803 187,528,461 174,381,370 20,857,939 17,051,838
* Other Asian countries mainly comprise Taiwan, Singapore, Malaysia, Thailand, Indonesia and Korea.
** Other European countries mainly comprise Italy, the United Kingdom, France, the Netherlands, Austria, Sweden andSpain.
*** Others mainly comprise South America, Australia and New Zealand.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
40
Notes to F inancial Statements31 December 2002
5. TURNOVER AND REVENUE
Turnover represents the net invoiced value of goods sold, after allowances for returns and trade discounts, during the
year.
An analysis of the Group’s turnover and other revenue is as follows:
2002 2001
HK$ HK$
Turnover
Sale of goods 200,758,474 187,007,803
Other revenue
Interest income 247,475 354,640
Tooling charge income 1,197,100 741,840
Sale of scrap 1,974,772 886,926
Others 342,350 581,441
3,761,697 2,564,847
6. OTHER OPERATING INCOME, NET
Group
2002 2001
HK$ HK$
Gain on sale of long term investments, net 9,325,422 –
Surplus on revaluation of leasehold land and buildings 179,706 239,706
Write back of provision for doubtful debts, net 79,339 3,140,000
Loss on disposal of fixed assets (3,767) (38,705)
Others (300,612) (1,066,826)
9,280,088 2,274,175
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
7. PROFIT/(LOSS) FROM OPERATING ACTIVITIES
The Group’s profit/(loss) from operating activities is arrived at after charging:
2002 2001
HK$ HK$
Cost of inventories sold 167,389,780 157,108,906
Auditors’ remuneration 869,654 904,795
Depreciation 23,367,258 23,565,433
Minimum lease payments under operating leases:
Land and buildings 3,026,520 2,699,534
Amortisation of intangible assets* 247,930 247,924
Staff costs (including directors’ other emoluments – note 9):
Wages and salaries 52,085,463 46,532,063
Pension scheme contributions 518,448 515,205
52,603,911 47,047,268
Less: Amount capitalised in deferred development costs (998,944) –
51,604,967 47,047,268
Foreign exchange losses, net 441,082 281,300
* The amortisation of intangible assets for the year is included in “Cost of sales” on the face of the consolidated profit and lossaccount.
8. FINANCE COSTS
Group
2002 2001
HK$ HK$
Interest expenses on bank loans and overdrafts
wholly repayable within five years 2,235,548 1,756,776
Interest on finance leases 669,430 983,915
2,904,978 2,740,691
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
42
Notes to F inancial Statements31 December 2002
9. DIRECTORS’ REMUNERATION
Directors’ remuneration, disclosed pursuant to the Listing Rules and Section 161 of the Hong Kong Companies
Ordinance, is as follows:
2002 2001
HK$ HK$
Fees:
Executive directors – –
Independent non-executive directors 312,000 312,000
312,000 312,000
Other emoluments paid to executive directors:
Salaries 3,860,349 4,802,980
Pension scheme contributions 30,000 36,000
Housing benefits 180,000 180,000
Other allowances 170,583 –
4,240,932 5,018,980
4,552,932 5,330,980
There was no arrangement under which a director waived or agreed to waive any remuneration during the year.
The remuneration of the directors fell within the bands set out below:
Number of directors
2002 2001
Nil – HK$500,000 2 2
HK$500,001 – HK$1,000,000 2 –
HK$1,000,001 – HK$1,500,000 2 4
6* 6
* Including remuneration as director of the director who resigned during the year.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
10. SEVEN HIGHEST PAID EMPLOYEES
The seven highest paid employees during the year included four (2001: four) executive directors, details of whose
remuneration are set out in note 9 above. Details of the remuneration of the remaining three (2001: three) non-
director, highest paid employees are as set out below:
2002 2001
HK$ HK$
Basic salaries, allowances and benefits in kind 2,693,141 2,947,767
Pension scheme contributions 76,174 59,842
2,769,315 3,007,609
The remuneration of the remaining three non-director, highest paid employees fell within the bands set out below:
Number of employees
2002 2001
HK$500,001 - HK$1,000,000 2 2
HK$1,000,001 - HK$1,500,000 1 1
3 3
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
44
Notes to F inancial Statements31 December 2002
11. TAX
Hong Kong profits tax has been provided at the rate of 16% (2001: 16%) on the estimated assessable profits arising
in Hong Kong during the year. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing
in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect
thereof.
Group
2002 2001
HK$ HK$
Hong Kong tax:
Provision for the year 146,000 925,000
Prior year’s underprovision/(overprovision) (179,000) 57,150
Deferred (note 28) (457,000) (710,000)
(490,000) 272,150
PRC tax:
Provision for the year 76,103 130,000
Prior year’s underprovision – 165,645
76,103 295,645
Tax charge/(credit) for the year (413,897) 567,795
12. NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS
The net profit from ordinary activities attributable to shareholders for the year ended 31 December 2002 dealt with
in the financial statements of the Company is HK$8,847,921 (2001: HK$2,669,712).
13. EARNINGS/(LOSS) PER SHARE
The calculation of basic earnings/(loss) per share is based on the net profit attributable to shareholders for the year
of HK$1,046,264 (2001: net loss of HK$10,565,236) and the weighted average of 250,004,800 ordinary shares in
issue throughout the two years.
Diluted earnings/(loss) per share amounts for the years ended 31 December 2002 and 2001 have not been shown
as the share options and warrants outstanding during these years had an anti-dilutive effect on the basic earnings/
(loss) per share for these years.
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45
K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
14. FIXED ASSETS
Group
Furniture,
Leasehold Leasehold fixtures
land and improve Plant and and office Motor
buildings ments machinery equipment vehicles Moulds Total
HK$ HK$ HK$ HK$ HK$ HK$ HK$
Cost or valuation:
At beginning of year 26,949,280 22,358,111 81,129,715 16,356,558 2,755,079 66,854,794 216,403,537
Additions – 4,356,155 9,014,909 1,631,885 – 5,854,990 20,857,939
Disposals – (2,866,168) (655,925) (4,759,808) – (27,636,773) (35,918,674)
Deficit on revaluation (290,773) – – – – – (290,773)
Exchange realignment – 42,713 55,947 45,439 – 26,667 170,766
At 31 December 2002 26,658,507 23,890,811 89,544,646 13,274,074 2,755,079 45,099,678 201,222,795
Accumulated depreciation:
At beginning of year – 14,113,441 47,109,412 11,098,444 1,950,593 53,794,568 128,066,458
Provided during the year 641,406 3,648,040 8,870,513 2,362,511 466,980 7,377,808 23,367,258
Disposals – (2,866,168) (655,925) (4,756,086) – (27,636,728) (35,914,907)
Written back on revaluation (641,406) – – – – – (641,406)
Exchange realignment – 12,152 6,799 14,672 – 9,343 42,966
At 31 December 2002 – 14,907,465 55,330,799 8,719,541 2,417,573 33,544,991 114,920,369
Net book value:
At 31 December 2002 26,658,507 8,983,346 34,213,847 4,554,533 337,506 11,554,687 86,302,426
At 31 December 2001 26,949,280 8,244,670 34,020,303 5,258,114 804,486 13,060,226 88,337,079
Analysis of cost or valuation:
At cost – 23,890,811 89,544,646 13,274,074 2,755,079 45,099,678 174,564,288
At 2002 valuation 26,658,507 – – – – – 26,658,507
26,658,507 23,890,811 89,544,646 13,274,074 2,755,079 45,099,678 201,222,795
Net book value held under
finance leases:
At 31 December 2002 – – 16,682,379 604,276 – – 17,286,655
At 31 December 2001 – – 20,097,385 1,017,116 446,800 – 21,561,301
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
46
Notes to F inancial Statements31 December 2002
14. FIXED ASSETS (continued)
The Group’s leasehold land and buildings are held under the following lease terms, with geographical locations asfollows:
PRCHong Kong Mainland China Total
HK$ HK$ HK$
Medium term leases 9,440,000 17,218,507 26,658,507
At 31 December 2002, the Group’s leasehold land and buildings situated in Hong Kong were revalued on an openmarket, existing use basis by Chung, Chan & Associates, a firm of independent professionally qualified propertyvaluers. The Group’s leasehold land and buildings situated in Mainland China were revalued using the depreciatedreplacement cost method by the same firm of property valuers at 31 December 2002.
Had the Group’s leasehold land and buildings been carried at historical cost less accumulated depreciation andimpairment losses, their carrying values would have been included in the financial statements at approximatelyHK$28,990,551 (2001: HK$29,751,706).
The Group’s leasehold land and buildings were pledged to secure general banking facilities granted to the Group(note 24 to the financial statements).
15. INTANGIBLE ASSETS
Group
DeferredTechnical development
know-how costs TotalHK$ HK$ HK$
Cost:At beginning of year 1,239,647 – 1,239,647Additions – 1,750,000 1,750,000
At 31 December 2002 1,239,647 1,750,000 2,989,647
Accumulated amortisation:At beginning of year 661,145 – 661,145Provided during the year 247,930 – 247,930
At 31 December 2002 909,075 – 909,075
Net book value:At 31 December 2002 330,572 1,750,000 2,080,572
At 31 December 2001 578,502 – 578,502
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47
K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
16. INTERESTS IN SUBSIDIARIES
Company
2002 2001
HK$ HK$
Unlisted shares, at cost 58,999,981 58,999,981
Due from subsidiaries 78,425,212 69,532,553
137,425,193 128,532,534
Provisions against amounts due from subsidiaries (11,018,779) (11,018,779)
126,406,414 117,513,755
The amounts due from subsidiaries are unsecured and interest-free.
Particulars of the principal subsidiaries are as follows:
Place of Nominal value Percentage of
incorporation/ of issued and equity interest
registration paid-up share/ attributable to
Company name and operations registered capital the Company Principal activities
Bistec Corporation Limited Hong Kong HK$2,000,000 100 Sale of electronic
calculators
Cokeen Development Limited Hong Kong HK$10,000 100 Property holding
E-Dotcom Limited Hong Kong HK$2 100 Investment holding
Gaiki Silicone Products Limited Hong Kong HK$10,000 100 Manufacture of
silicone rubber
products
Hideki Precision (BVI) Limited British Virgin Islands US$1 100 Intellectual property
holding
Hideki Time Corporation Limited Hong Kong HK$2,000,000 100 Sale of alarm clocks
and electronic
calculators
Hi-Tech (China) Investment Hong Kong HK$2,000,000 100 Investment holding
Limited
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
48
Notes to F inancial Statements31 December 2002
16. INTERESTS IN SUBSIDIARIES (continued)
Place of Nominal value Percentage of
incorporation/ of issued and equity interest
registration paid-up share/ attributable to
Company name and operations registered capital the Company Principal activities
Hi-Tech Investment Holdings British Virgin Islands/ US$50,000 100 Investment holding
Limited Hong Kong
Hi-Tech Polymer (China) Inc. Western Samoa/ US$1 100 Manufacture of
Mainland China synthetic rubber
products
Hi-Tech Polymer Limited Hong Kong HK$10,000 100 Sale of synthetic rubber
products
Hi-Tech Precision Plastic Limited Hong Kong HK$3,000,000 100 Sale of plastic products
Hi-Tech Property Holdings British Virgin Islands/ US$1 100 Property holding
Limited Mainland China
Hi-Tech Silicone Rubber Hong Kong HK$1,500,000 100 Sale of silicone rubber
Manufactory Limited products
K & P Group (Holdings) British Virgin Islands/ US$1,238,545 100 Investment holding
Limited Hong Kong
K. S. (China) Electronics Hong Kong HK$2 100 Investment holding
Manufactory Limited
Mars Field Limited British Virgin Islands/ US$1 100 Manufacture of
Mainland China silicone rubber
products, electronic
calculators, alarm
clocks and plastic
products
Shenzhen Jiancheng Electronic Mainland China HK$12,000,000 * Manufacture and sale
Co., Ltd. (“Shenzhen of electronic
Jiancheng”) calculators and
alarm clocks
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49
K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
16. INTERESTS IN SUBSIDIARIES (continued)
Place of Nominal value Percentage of
incorporation/ of issued and equity interest
registration paid-up share/ attributable to
Company name and operations registered capital the Company Principal activities
Technology Trends British Virgin Islands/ US$50,000 100 Sale of silicone rubber,
International Limited Republic of synthetic rubber and
Singapore plastic products and
liquid crystal displays
TQL Technology Limited Hong Kong HK$7,000,000 100 Manufacture and sale
of liquid crystal
displays
Webberton Investments British Virgin Islands/ US$1 100 Investment holding
Limited Hong Kong
Except for K & P Group (Holdings) Limited, all of the above subsidiaries are indirectly held by the Company.
* Shenzhen Jiancheng is registered as a co-operative joint venture company under the laws of the People’s Republic of China(the “PRC”). Pursuant to the co-operative joint venture contract with the PRC joint venture partner, the Group contributed allof the registered capital of Shenzhen Jiancheng. The PRC joint venture partner is entitled to certain monthly and annual feesregardless of the amount of profit or loss made by Shenzhen Jiancheng, and the Group is entitled to all of the profits, and isliable for all of the losses, of Shenzhen Jiancheng after payment of such fees to the PRC joint venture partner. The initial termof the joint venture expires on 25 January 2009 and can be extended with the consent of the joint venture partners and theapproval of the relevant PRC government authority. On expiry of the initial term of the joint venture, joint venture will revertto the PRC joint venture partner while other assets will initially be used to settle the wages of all employees and all of theliabilities of Shenzhen Jiancheng, and any remaining balance will be distributed to the Group.
The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the
results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries
would, in the opinion of the directors, result in particulars of excessive length.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
50
Notes to F inancial Statements31 December 2002
17. INVESTMENT IN AN ASSOCIATE
Group
2002 2001
HK$ HK$
Share of net assets 3,152,218 –
Particulars of the associate are as follows:
Percentage of
Nominal value equity interest
Place of of issued and attributable to
Company name incorporation paid-up share the Company Principal activities
YOUEAL TTI Limited Hong Kong US$1,000,000 41 Investment holding
The shareholding in the associate is held through a wholly-owned subsidiary.
18. LONG TERM INVESTMENTS
Group
2002 2001
HK$ HK$
At cost:
Unlisted equity investment 308,450 –
Equity investments listed in Hong Kong – 5,023,000
Club membership 600,000 600,000
908,450 5,623,000
Market value of listed equity investments included above, at cost – 21,164,459
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51
K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
19. INVENTORIES
Group
2002 2001
HK$ HK$
Raw materials 15,158,574 14,073,503
Work in progress 8,241,645 6,860,728
Finished goods 2,520,925 2,088,873
25,921,144 23,023,104
Less: Provisions for slow-moving inventories (118,749) (2,134,865)
25,802,395 20,888,239
There were no inventories carried at net realisable value at the balance sheet date.
20. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
Group Company
2002 2001 2002 2001
HK$ HK$ HK$ HK$
Prepayments 272,145 476,165 72,985 148,958
Deposits and other receivables 8,821,690 4,442,579 – 894
9,093,835 4,918,744 72,985 149,852
Included in prepayments, deposits and other receivables is an amount due from an associate of HK$315,859 (2001:
Nil), which is unsecured, interest-free and has no fixed terms of repayment.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
52
Notes to F inancial Statements31 December 2002
21. TRADE AND BILLS RECEIVABLES
An aged analysis of the trade and bills receivables as at the balance sheet date, based on invoice date and net of
provisions, is as follows:
Group
2002 2001
HK$ HK$
Within 90 days 26,199,330 27,465,627
Between 91 to 180 days 3,441,343 3,893,948
Over 180 days 1,157,879 1,381,778
30,798,552 32,741,353
The Group’s trading terms with its customers are largely on credit. Invoices are normally payable within 60 days of
issuance, except for certain well-established customers, where the terms are extended from 60 to 90 days. Each
customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables and
has a credit control policy to minimise credit risk. Overdue balances are regularly reviewed by senior management.
22. CASH AND CASH EQUIVALENTS
Group Company
2002 2001 2002 2001
HK$ HK$ HK$ HK$
Cash and bank balances 7,826,707 12,154,678 11,321 1,139
Time deposits 8,117,530 4,090,562 – –
15,944,237 16,245,240 11,321 1,139
23. INTEREST-BEARING LOANS AND BORROWINGS
Group
2002 2001
Notes HK$ HK$
Bank overdrafts 1,389,847 –
Current portion of bank loans 30,813,757 24,612,592
24 32,203,604 24,612,592
Current portion of finance lease payables 26 5,451,879 6,623,497
37,655,483 31,236,089
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53
K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
24. INTEREST-BEARING BANK LOANS AND OVERDRAFTS
Group
2002 2001
HK$ HK$
Unsecured:
Bank overdrafts 520,078 –
Trust receipt loans 2,707,817 12,521,313
Bank loans 14,054,349 1,352,339
Instalment loans – 631,067
17,282,244 14,504,719
Secured:
Bank overdrafts 869,769 –
Trust receipt loans 6,640,053 5,777,755
Money market loan 4,000,000 4,000,000
Mortgage loans 1,365,096 1,695,288
Instalment loans 6,890,304 –
37,047,466 25,977,762
Portion due within one year, classified
as current liabilities (note 23) (32,203,604) (24,612,592)
Long term portion 4,843,862 1,365,170
The bank borrowings are repayable:
Within one year or on demand 32,203,604 24,612,592
In the second year 3,628,310 347,355
In the third to fifth years, inclusive 1,215,552 1,017,815
37,047,466 25,977,762
The secured bank borrowings were secured by fixed charges over the Group’s medium term leasehold land and
buildings with a net book value of HK$26,658,507 (2001: HK$9,500,000) and over bank deposits amounting to
HK$8,177,287 (2001: HK$5,049,213).
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
54
Notes to F inancial Statements31 December 2002
25. TRADE PAYABLES
An aged analysis of the trade payables is as follows:
Group
2002 2001
HK$ HK$
Within 90 days 20,616,641 19,194,482
Between 91 to 180 days 1,062,637 714,408
Over 180 days 24,514 409,164
21,703,792 20,318,054
26. FINANCE LEASE PAYABLES
The Group leases certain of its plant and machinery and equipment for its businesses. These leases are classified as
finance leases and have remaining lease terms ranging from one to three years.
At 31 December 2002, the total future minimum lease payments under finance leases and their present values were
as follows:
Group
Present value Present value
Minimum Minimum of minimum of minimum
lease lease lease lease
payments payments payments payments
2002 2001 2002 2001
HK$ HK$ HK$ HK$
Amounts payable:
Within one year 5,848,227 7,188,378 5,451,879 6,623,497
In the second year 2,800,322 4,008,492 2,666,670 3,824,035
In the third to fifth years, inclusive 1,002,033 945,379 983,958 921,511
Total minimum finance lease payments 9,650,582 12,142,249 9,102,507 11,369,043
Future finance charges (548,075) (773,206)
Total net finance lease payables 9,102,507 11,369,043
Portion classified as current liabilities
(note 23) (5,451,879) (6,623,497)
Long term portion 3,650,628 4,745,546
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55
K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
27. ACCRUED LIABILITIES AND OTHER PAYABLES
Group Company
2002 2001 2002 2001
HK$ HK$ HK$ HK$
Accrued liabilities 14,922,259 12,630,357 96,000 64,700
Other payables 2,292,379 1,965,793 5,853 59,100
17,214,638 14,596,150 101,853 123,800
28. DEFERRED TAX
Group
2002 2001
HK$ HK$
At beginning of year 1,357,000 2,067,000
Credit for the year (note 11) (457,000) (710,000)
At 31 December 900,000 1,357,000
Deferred tax relates principally to the timing differences arising from accelerated depreciation allowances.
The principal components of the Group’s net deferred tax asset position not recognised in the financial statements
are as follows:
2002 2001
HK$ HK$
Accelerated depreciation allowances 2,847,743 4,124,267
Tax losses (6,197,355) (5,560,450)
(3,349,612) (1,436,183)
The revaluation of the Group’s leasehold land and buildings does not constitute a timing difference and, consequently,
the amount of potential tax thereon has not been quantified.
The Company did not have any significant unprovided deferred tax at the balance sheet date (2001: Nil).
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
56
Notes to F inancial Statements31 December 2002
29. SHARE CAPITAL
Shares
Group and Company
2002 2001
HK$ HK$
Authorised:
900,000,000 shares of HK$0.10 each 90,000,000 90,000,000
Issued and fully paid:
250,004,800 shares of HK$0.10 each 25,000,480 25,000,480
Share options
Details of the Company’s share option scheme are included in note 30 to the financial statements.
Warrants
On 16 March 2001, the Company issued 30,000,000 warrants at an issue price of HK$0.05 each to independent
investors. Each of these warrants entitles the holders thereof to subscribe for one new ordinary share of the Company
of HK$0.10 at a subscription price of HK$0.30 per share payable in cash and subject to adjustment, from March 2001
to March 2003. At the balance sheet date, these warrants remained outstanding. Subsequent to the balance sheet
date, none of these warrants was exercised and all of them were lapsed and cancelled on the expiry date on 15
March 2003.
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57
K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
30. SHARE OPTION SCHEME
SSAP 34 was adopted during the year, as explained in note 2 and under the heading “Employee benefits” in note 3
to the financial statements. As a result, these detailed disclosures relating to the Company’s share option scheme are
now included in the notes to the financial statements. In the prior year, these disclosures were included in the Report
of the Directors, as their disclosure is also a requirement of the Listing Rules.
On 4 December 1996, the Company adopted a share option scheme (the “Old Scheme”), which was the first share
option scheme of the Company, for the purpose of providing incentives and rewards to eligible participants who
contribute to the success of the Group’s operations. The Old Scheme was terminated and replaced by a new share
option scheme at the annual general meeting of the Company held on 27 May 2002 (the “New Scheme”). Upon
termination of the Old Scheme, no further options can be granted thereunder but in all other respects, the provisions
of the Old Scheme shall remain in force and any options granted prior to such termination shall continue to be valid
and exercisable in accordance therewith.
The maximum number of unexercised share options currently permitted to be granted under the Old Scheme and
the New Scheme must not in aggregate exceed 30% of the shares of the Company in issue at any time.
A summary of the share option schemes of the Company is as follows:
Old Scheme New Scheme
Purpose
Participants
To provide incentives and rewards to
eligible participants who contribute to the
success of the Group’s operations.
Full-time employees (including executive
directors) of the Company or any of its
subsidiaries.
To provide incentives and rewards to
eligible participants for their contributions
to the Group and/or to enable the Group to
recruit and retain high-calibre employees
and attract human resources that are
valuable to the Group and any entity in
which the Group holds an equity interest
(“Invested Entity”).
(i) any employee (whether full-time or
part-time), executive directors, non-
executive directors and independent
non-executive directors of the
Company, any of its subsidiaries or
any Invested Entity;
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
58
Notes to F inancial Statements31 December 2002
30. SHARE OPTION SCHEME (continued)
Old Scheme New Scheme
Participants
(continued)
Total number of
ordinary shares
available for issue
and the
percentage of the
issued share
capital that it
represents as at
the date of the
annual report
Maximum
entitlement of
each participant
Period within
which the
securities must be
taken up under an
option
17,300,000 ordinary shares and 6.9% of the
issued share capital.
Shall not exceed 25% of the total number
of ordinary shares in respect of the options
that may be granted in accordance with the
scheme.
An option may be exercised at any time
during the 3-year period commencing on
the expiry of six months after the date on
which the option is accepted and expiring
on the last day of the 3-year period or the
tenth anniversary of the date on which the
scheme is adopted by resolution of the
Company in a general meeting, whichever
is the earlier.
(ii) any supplier of goods or services to
any member of the Group or any
Invested Entity; any customer of the
Group or any Invested Entity; any
person or entity that provides
research, development or other
technological support to the Group or
any Invested Entity; and
(iii) any shareholder of any member of the
Group or any Invested Entity or any
holder of any securities issued by any
member of the Group or any Invested
Entity.
Not applicable.
Shall not exceed 1% of the issued share
capital of the Company in any 12-month
period.
An option may be exercised at any time
during a period to be determined and
notified by the directors to each grantee,
but shall end in any event not later than 10
years from the date of the grant of options
subject to the provisions for early
termination thereof.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
Share options do not confer rights on the holders to dividends or to vote at shareholders’ meetings.
Minimum period
for which an
option must be
held before it can
be exercised
Amount payable
on acceptance
Period within
which payments/
calls/loans must
be made/repaid
Basis of
determining the
exercise price
The remaining life
of the scheme
There is no minimum period for which an
option granted must be held before it can be
exercised.
The offer of a grant of share options may be
accepted within 28 days from the date of the
offer with a consideration of HK$1.00 being
payable by the grantee.
Not applicable.
Determined by the directors based on the
higher of (i) 80% of the average closing price
of the ordinary shares on the Stock Exchange of
the five trading days immediately preceding the
date of the grant of options; and (ii) the
nominal value of shares.
The scheme has been terminated on 27 May
2002, but the provision of the scheme shall
remain in force until 3 December 2006.
There is no minimum period for which
an option granted must be held before
it can be exercised.
The offer of a grant of share options
may be accepted within 28 days from
the date of the offer with a
consideration of HK$1.00 being payable
by the grantee.
Not applicable.
Determined by the directors but shall
not be less than the highest of (i) the
closing price of the ordinary shares as
stated in the Stock Exchange’s daily
quotation sheet on the date of offer of
grant of options, which must be a
trading day; (ii) the average closing price
of the ordinary shares as stated in the
Stock Exchange’s daily quotation sheets
for the five trading days immediately
preceding the date of grant of options;
and (iii) the nominal value of shares.
The scheme remains in force until 26
May 2012.
30. SHARE OPTION SCHEME (continued)
Old Scheme New Scheme
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
60
Notes to F inancial Statements31 December 2002
30. SHARE OPTION SCHEME (continued)
The particulars in relation to each share option scheme of the Company that are required under Rules 17.07 to 17.09
of Chapter 17 of the Listing Rules and SSAP 34 are disclosed as follows:
(a) Old Scheme
Price of
Number of share options Company’s
Date Exercise share
Name or At 1 Granted Lapsed Cancelled At 31 of grant price at grant
category of January during during during December of share Exercise period of of share date of
participant 2002 the year the year the year 2002 options* share options options** options***
HK$ HK$
Directors
Lai Pei Wor 2,500,000 – – – 2,500,000 12-1-2001 12-7-2001 to 11-7-2004 0.16 0.20
Chan Yau Wah 2,500,000 – – – 2,500,000 12-1-2001 12-7-2001 to 11-7-2004 0.16 0.20
Wong Kwong Ming 1,300,000 – (1,300,000) – – 12-1-2001 12-7-2001 to 11-7-2004 0.16 0.20
Chung Yik Cheung,
Raymond 2,500,000 – – – 2,500,000 12-1-2001 12-7-2001 to 11-7-2004 0.16 0.20
8,800,000 – (1,300,000) – 7,500,000
Other employees
In aggregate 8,500,000 – (500,000) – 8,000,000 12-1-2001 12-7-2001 to 11-7-2004 0.16 0.20
17,300,000 – (1,800,000) – 15,500,000
* The vesting period of the share options is from the date of the grant until the commencement of the exercise period.
** The exercise price of the share options is subject to adjustment in the case of rights or bonus issues, or other similar changesin the Company’s share capital.
*** The price of the Company’s shares disclosed as at the date of the grant of the share options is the Stock Exchange closingprice on the trading day immediately prior to the date of the grant of the options.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
30. SHARE OPTION SCHEME (continued)
(b) New Scheme
During the year, no options to subscribe for ordinary shares in the Company have been granted to any eligible
participants, including the directors or their respective employees of the Group, its holding company or any of
its subsidiaries under the New Scheme.
At the balance sheet date, the Company had 15,500,000 share options outstanding under the share option schemes.
The exercise in full of the remaining share options would, under the present capital structure of the Company, result
in the issue of 15,500,000 additional ordinary shares of the Company and additional share capital of HK$1,550,000
and share premium of HK$930,000 (before issue expenses).
31. RESERVES
(a) Group
The amounts of the Group’s reserves and the movements therein for the current and prior years are presented
in the consolidated statement of changes in equity on page 24 of the financial statements.
The contributed surplus of the Group arose as a result of the Group’s reorganisation and represents the difference
between the nominal value of the share capital of the former holding company of the Group, K & P Group
(Holdings) Limited, prior to the Group’s reorganisation in preparation for the listing of the Company’s shares in
1996, over the nominal value of the share capital of the Company issued in exchange therefor, less the amount
capitalised to pay up the nil-paid shares issued on the incorporation of the Company.
As detailed in note 3 to the financial statements, on the adoption of SSAP 30, the Group applied the transitional
provision of SSAP 30 that permitted goodwill in respect of acquisitions which occurred prior to 1 January 2001,
to remain eliminated against consolidated reserves or credited to the capital reserve.
Goodwill amounting to HK$11,924,221 arising on the acquisition of subsidiaries in prior years, which is stated
at its cost, remains eliminated against consolidated retained profits as explained in note 3 to the financial
statements.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
62
Notes to F inancial Statements31 December 2002
31. RESERVES
(b) Company
RetainedShare Warrant earning/
premium subscription Contributed (accumulatedaccount reserve surplus losses) Total
HK$ HK$ HK$ HK$ HK$
At 1 January 2001 49,611,281 – 49,999,981 (11,129,983) 88,481,279Placement of warrants – 1,500,000 – – 1,500,000Warrant issue expenses – (110,525) – – (110,525)Net profit for the year – – – 2,669,712 2,669,712
At 31 December 2001and at 1 January 2002 49,611,281 1,389,475 49,999,981 (8,460,271) 92,540,466
Net profit for the year – – – 8,847,921 8,847,921
At 31 December 2002 49,611,281 1,389,475 49,999,981 387,650 101,388,387
The contributed surplus of the Company represents the difference between the underlying consolidated netassets of K & P Group (Holdings) Limited and its subsidiaries at the date on which the Group’s reorganisationbecame effective, referred to in note 31(a), over the nominal value of the share capital of the Company issuedin exchange therefor, less the amount capitalised to pay up the nil-paid shares issued on the incorporation ofthe Company.
Under the Companies Act 1981 of Bermuda (as amended), the Company may make distributions to its membersout of the contributed surplus in certain circumstances.
32. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
(a) Prior year adjustmentsSSAP 15 (Revised) was adopted during the current year, as detailed in note 2 to the financial statements, whichhas resulted in a change to the layout of the consolidated cash flow statement. The consolidated cash flowstatement is now presented under three headings: cash flows from operating activities, investing activities andfinancing activities. Previously five headings were used, comprising the three headings listed above, togetherwith cash flows from returns on investments and servicing of finance and from taxes paid. The significantreclassifications resulting from the change in presentation are that interest received, interest paid and taxespaid are now included in cash flows from operating activities. The presentation of the 2001 comparativeconsolidated cash flow statement has been changed to accord with the new layout.
The definition of “cash equivalents” under the revised SSAP 15 has been revised from that under the previousSSAP 15, as explained under the heading “Cash and cash equivalents” in note 3 to the financial statements.This has resulted in trust receipt loans no longer qualifying as cash equivalents. The amount of cash equivalentsin the consolidated cash flow statement at 31 December 2001 has been adjusted to remove trust receipt loansamounting to HK$18,299,068, previously included at that date. The year’s movement in trust receipt loans isnow included in cash flows from financing activities and the comparative cash flow statement has been changedaccordingly.
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63
K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
32. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (continued)
(b) Major non-cash transactions
During the year, the Group entered into finance lease arrangements in respect of fixed assets with a total
capital value at the inception of the leases of HK$6,065,886 (2001: HK$5,909,238).
33. POST BALANCE SHEET EVENTS
(a) On 20 February 2003, the Group entered into an agreement with two shareholders of an associate of the
Group, YOUEAL TTI Limited (“YOUEAL TTI”), in order to regulate the respective rights and obligations of the
respective shareholders and the arrangements between them with respect to the ownership, management and
operations of YOUEAL TTI. Pursuant to the agreement, each of the shareholders of YOUEAL TTI will subscribe
for additional shares in YOUEAL TTI, in proportion to their existing shareholding in the company. After such
share subscription, YOUEAL TTI will have an issued capital of US$10,000,000. At 31 December 2002, the issued
capital of YOUEAL TTI amounted to US$1,000,000, and the Group had a 41% equity interest in YOUEAL TTI. The
authorised commitment in respect of the Group’s investment in YOUEAL TTI at the balance sheet date is
included in note 36 to the financial statements.
(b) On 3 March 2003, the Company entered into separate subscription agreements with several independent
investors, pursuant to which these investors agreed to subscribe for unlisted convertible notes issued by the
Company with principal amount aggregating US$1,282,500 (equivalent to approximately HK$10,003,500).
These convertible notes bear interest at 2% per annum and are convertible into shares of the Company at an
initial conversion price of HK$0.40 per share, subject to adjustment, during the period commencing from the
date falling 24 months after the date of issue of the convertible notes on 17 March 2003, up to and including
the day immediately prior to the maturity date of the convertible notes. Under the same agreements, the
investors have also agreed to subscribe for unlisted loan notes issued by the Company with principal amount
aggregating US$1,282,500 (equivalent to approximately HK$10,003,500). These loan notes bear interest at 5%
per annum, but are not convertible into shares of the Company. The maturity dates of these convertible notes
and loan notes are 27 months and 24 months, respectively, from the date of issue on 17 March 2003. Any
outstanding convertible notes and loan notes will be redeemed at maturity by the Company at 132.25% and
114%, respectively, of their face values plus accrued interest. The Group intends to use the net proceeds of
US$2,529,744 (equivalent to approximately HK$19,732,000) from the issue of these notes to finance part of its
investment in the associate as further explained in note 33(a) above.
34. CONTINGENT LIABILITIES
Group Company
2002 2001 2002 2001
HK$ HK$ HK$ HK$
Bills discounted with recourse 4,482,063 2,286,609 – –
Guarantee of loan facility
granted to subsidiaries – – 75,431,408 82,952,567
4,482,063 2,286,609 75,431,408 82,952,567
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED
64
Notes to F inancial Statements31 December 2002
35. OPERATING LEASE ARRANGEMENTS
The Group leases certain of its office properties and factories under operating lease arrangements. Leases for properties
are negotiated for terms ranging from one to two years.
At the balance sheet date, the Group had total future minimum lease payments under non-cancellable operating
leases falling due as follows:
Group
2002 2001
HK$ HK$
Within one year 846,308 488,729
In the second to fifth years, inclusive 452,434 603,552
1,298,742 1,092,281
At the balance sheet date, the Company did not have any future minimum lease payments under non-cancellable
operating leases.
36. COMMITMENTS
In addition to the operating lease commitments detailed in note 35 above, the Group had the following commitments
at the balance sheet date:
Group
2002 2001
HK$ HK$
Capital commitments contracted, but not provided for:
Land and buildings 4,650,000 –
Plant and machinery 109,275 –
4,759,275 –
Commitment authorised, but not contracted for,
in respect of investment in an associate 28,782,000 –
33,541,275 –
At the balance sheet date, the Company did not have any significant capital commitments.
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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002
Notes to F inancial Statements31 December 2002
37. RELATED PARTY TRANSACTIONS
Details of the Group’s advances to an associate are included in note 20 to the financial statements.
38. COMPARATIVE AMOUNTS
As further explained in note 2 to the financial statements, due to the adoption of certain new and revised SSAPs
during the current year, the accounting treatment and presentation of certain items and balances in the financial
statements have been revised to comply with the new requirements. Accordingly, certain prior year adjustments
have been made and certain comparative amounts have been adjusted and reclassified to conform with the current
year’s presentation.
39. APPROVAL OF THE FINANCIAL STATEMENTS
The financial statements were approved and authorised for issue by the board of directors on 25 April 2003.
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ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED
66
Five Year Financial Summary
A summary of the published consolidated results of the Group for the five years ended 31 December 2002, and the
consolidated assets and liabilities of the Group, as extracted from the published audited financial statements of the Company
and reclassified as appropriate, for the last five financial years, is set out below.
Year ended 31 December
2002 2001 2000 1999 1998
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
RESULTS
TURNOVER 200,758 187,008 213,959 186,196 181,688
PROFIT/(LOSS) BEFORE TAX 632 (9,997) 7,299 (27,582) 5,199
Tax 414 (568) (852) 118 (706)
NET PROFIT/(LOSS) FROM ORDINARY
ACTIVITIES ATTRIBUTABLE TO
SHAREHOLDERS 1,046 (10,565) 6,447 (27,464) 4,493
ASSETS AND LIABILITIES
2002 2001 2000 1999 1998
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Total assets 187,529 174,381 191,754 183,321 193,152
Total liabilities (86,220) (73,761) (82,055) (68,144) (46,710)
101,309 100,620 109,699 115,177 146,442
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