GROUP PROJECTS Distribution Map
Sheung Shui
Yuen Long
NEW TERRITORIES 9 Shatin
Tuen Mun Tsuen Wan 8 KOWLOON
Lai King Kowloon Tong Tsing Yi
Chek Lap Kok 7 Mong Kok Tseung Kwan O 6 Kowloon Discovery Bay Sheung Wan
Tung Chung 3 4 Quarry Bay Mui Wo 5 2 Central LANTAU ISLAND Chai Wan HONG KONG ISLAND
1
CHINA HONG KONG
1 Le Palais, Guangzhou 1 Fairview Court
2 Liu Chong Hing Financial 2 The Belcher’s Centre, Shanghai 3 Chong Yip Shopping Centre
4 Western Harbour Centre
CHINA 5 Liu Chong Hing Bank Building
6 2 Fung Shun Commercial Building
7 Chong Hing Square
8 1 Bonsun Industrial Building
9 Double Haven CONTENTS
Liu Chong Hing Investment Limited Annual Report 2001
FINANCIAL HIGHLIGHTS
02 Five-Year Financial Summary 03 Financial Highlights Charts 04 Market Price Movement and Market Capitalization
BUSINESS REVIEW
06 Chairman’s Statement 14 Report of Directors 25 Liu Chong Hing Group Simplified Corporate Structure Chart 26 Schedule of Major Properties Held by the Group and Associates
CORPORATE AND FINANCIAL INFORMATION
28 Corporate Information 30 Biographical Details of Directors and Senior Management 34 Notice of Annual General Meeting 39 Financial Calendar
FINANCIAL REPORT
40 Auditors’ Report 41 Consolidated Income Statement 42 Balance Sheets 44 Consolidated Statement of Recognised Gains and Losses 45 Consolidated Cash Flow Statement 47 Notes to the Financial Statements FIVE-YEAR Financial Summary
1997 1998 1999 2000 2001 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Total assets (adjusted) 8,201,234 7,480,549 8,431,323 8,994,648 9,418,555
Total liabilities (adjusted) 1,965,538 2,109,329 2,708,784 2,925,118 3,327,848
Total net assets (adjusted) 6,235,696 5,371,220 5,722,539 6,069,530 6,090,707
Net profit for the year (adjusted) 590,299 358,745 367,166 370,576 188,106
Earnings per share (adjusted) HK$1.55 HK$0.94 HK$0.97 HK$0.98 HK$0.50
Dividend per share HK$0.50 HK$0.35 HK$0.35 HK$0.35 HK$0.20
Net assets value per share (adjusted) HK$16.40 HK$14.15 HK$15.10 HK$16.01 HK$16.07
Notes: (1) The total assets, total net assets, net profit for the year, earnings per share and net assets value per share were adjusted due to the adoption of SSAP 24 “Accounting for investments in securities” for the two years ended 31st December 1998.
(2) The total liabilities, total net assets, net assets value per share were adjusted due to the adoption of SSAP 9 (Revised) “Events after the Balance Sheet Date” for the four years ended 31st December 2000.
02
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED FINANCIAL HIGHLIGHTS Charts
FINANCIAL HIGHLIGHTS
Total Assets Total Liabilities (HK$ in million) 9,419 (HK$ in million) 3,328
8,995 2,925 8,431 10,000 3,500 2,709 8,201 7,481 3,000 8,000 2,109 2,500 1,966 6,000 2,000
1,500 4,000
01 1,000 01 2,000 00 00 99 500 99 98 98 0 97 0 97
Total Net Assets Net Profit for the Year (HK$ in million) (HK$ in million) 6,091 6,070 590 5,723 600 7,000 6,236 5,371 371 500 367 6,000 359 5,000 400 188
4,000 300
3,000 200
2,000 01 01 00 00 100 99 1,000 99 98 98 97 0 97 0
Earnings Per Share Dividend Per Share 03 (HK$) (HK$)
0.50
2.0 0.5 0.35 0.35 1.55 0.35 0.4 0.98 1.5 0.20 0.97 0.94 0.50 0.3 1.0 0.2
0.5 01 01 00 0.1 00 99 99 98 98 0.0 97 0.0 97 MARKET PRICE MOVEMENT and Market Capitalization
Closing price Market Capitalization Last trading date of each month (HK$) (HK$ in million)
31/01/00 4.900 1,857
29/02/00 4.375 1,658
31/03/00 4.650 1,762
28/04/00 4.600 1,744
31/05/00 3.900 1,478
30/06/00 4.050 1,535
31/07/00 4.400 1,668
31/08/00 4.900 1,857
29/09/00 4.400 1,668
31/10/00 4.300 1,630
30/11/00 4.250 1,661
29/12/00 4.675 1,772
31/01/01 4.925 1,867
28/02/01 4.975 1,886
30/03/01 4.950 1,876
27/04/01 4.975 1,886
31/05/01 5.100 1,933
29/06/01 5.050 1,914
31/07/01 4.950 1,876
04 31/08/01 4.550 1,725 28/09/01 3.950 1,497
31/10/01 4.075 1,544
30/11/01 4.200 1,592
31/12/01 4.350 1,648
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED FINANCIAL HIGHLIGHTS
Closing Price Per Share (January 2000 – December 2001) (HK$)
5.5
5.0
4.5
4.0
3.5
3.0 4.900 4.375 4.650 4.600 3.900 4.050 4.400 4.900 4.400 4.300 4.250 4.675 4.925 4.975 4.950 4.975 5.100 5.050 4.950 4.550 3.950 4.075 4.200 4.350 2.5 31/01/00 29/02/00 31/03/00 28/04/00 31/05/00 30/06/00 31/07/00 31/08/00 29/09/00 31/10/00 30/11/00 29/12/00 31/01/01 28/02/01 30/03/01 27/04/01 31/05/01 29/06/01 31/07/01 31/08/01 28/09/01 31/10/01 30/11/01 31/12/01
Market Capitalization (January 2000 – December 2001) (HK$ in million)
2,000
1,800
1,600 05
1,400
1,200 1,857 1,658 1,762 1,744 1,478 1,535 1,668 1,857 1,668 1,630 1,661 1,772 1,867 1,886 1,876 1,886 1,933 1,914 1,876 1,725 1,497 1,544 1,592 1,648 1,000 31/01/00 29/02/00 31/03/00 28/04/00 31/05/00 30/06/00 31/07/00 31/08/00 29/09/00 31/10/00 30/11/00 29/12/00 31/01/01 28/02/01 30/03/01 27/04/01 31/05/01 29/06/01 31/07/01 31/08/01 28/09/01 31/10/01 30/11/01 31/12/01 CHAIRMAN’S Statement
For the financial year ended 31st December I have the pleasure in presenting to the shareholders the operating results for the year 2001. 2001, audited net profit for the year Business Results amounted to HK$188,106,000 (earnings per For the financial year ended 31st December 2001, share: HK$0.50) representing a 49.2% audited net profit for the year amounted to HK$188,106,000 (earnings per share: HK$0.50) decrease. representing a 49.2% decrease. Due to external factors, Hong Kong is now experiencing a period of economic adjustment. Consumer and investment The Board of Directors has proposed to sentiments are low, resulting a remarkable shrinkage recommend at the forthcoming Annual in overall profit from last fiscal year. General Meeting to be held on 25th April Dividend The Board of Directors has proposed to recommend 2002 the payment of final cash dividend of at the forthcoming Annual General Meeting to be HK$0.10 per share. Together with the held on 25th April 2002 the payment of final cash dividend of HK$0.10 per share. Together with the interim cash dividend of HK$0.10 per share interim cash dividend of HK$0.10 per share paid on paid on 19th September 2001, the total 19th September 2001, the total cash dividend for the whole year of 2001 amounts to HK$0.20 per cash dividend for the whole year of 2001 share.
amounts to HK$0.20 per share. Business Review
Last year the US economy was still sluggish even 06 after frequent interest reductions in the first half. The 911 series of terrorist attack brought further calamity to the country and thus recession sustained. While the European and Japanese economic scene were also stagnant, it hard hit the Hong Kong economy which would depend largely on foreign ANNUAL REPORT 2001 trades and financial services. In 2001, transit and export trades reduced by 4.6% and 5.8% respectively as compared to a year earlier. Although total number of visitor arrivals grew by 5.1%, this sector alone could hardly build up sufficient momentum to contribute in the doldrums. With increasing LIU CHONG HING INVESTMENT LIMITED unemployment, consumer spending was inevitably
A BUSINESS REVIEW
diminishing. The situation worsened when local restaurant and retail business continued to wither, causing further drop in rental income of commercial properties. Pertaining to the property development front, a few new projects wrapped up with attractive package as well as fringe benefits offered by developers, seemed to have great demand from buyers, the average selling price was actually lower than before. On the other hand, secondary market was relatively quiet under pressure of the new developments. The local stock market however, turned unsteady and the year-end Hang Seng Index lost almost 24.5% over the previous year with low C turnover. In a move to curb the huge deficit in current financial year, the Government of the Hong Kong Special Administrative Region would adopt a conservation policy with acute reduction in public expenditures. In summarizing last year’s economic performance, one could only say that it had been a very disappointing year! D
E
Le Palais – the Group’s prestigious residential project in Guangzhou A. Furnished showflat; B. Luxurious clubhouse entrance; C. Beauty salon in clubhouse; D. Architectural symbol; E. Showflat for penthouse duplex; F. Le Palais’s night view.
B F CHAIRMAN’S Statement
Banking Chong Hing Square is a 19-storey retail and entertainment building with 2 basement levels The consolidated net profit of Liu Chong Hing Bank totalling 183,728 sq.ft. in lettable area. Limited and its subsidiaries for 2001, after taking Completed in March 1994, it is situated in the provisions for bad and doubtful loans and deducting heart of Mongkok. As both restaurant and taxes, amounted to HK$346,000,000, a decrease of retail business were unsteady in the year 2001, 24.25% over the previous year. Total customers’ occupancy dropped slightly from 99% to 93%. deposits and certificates of deposit amounted to As basic rental rate had an upward adjustment, HK$32,686,000,000, up 4.99%. Total loans to total annual rental income increased by 9. 15% customers (after provisions for bad and doubtful over the previous year. debts) dropped 1.94% to HK$18,500,000,000. Total assets stood at HK$39,463,000,000, an increase of 1.21%. Total shareholders’ funds (before final dividend) amounted to HK$5,796,000,000, an increase of 1.19%.
In the second half of last year, the Bank had restructured its management organisation in order to keep pace with changes in the market. Existing staffs had been given thorough training to upgrade their skills and ample opportunities had been granted for appropriate promotions. In a reinforcement exercise, several banking experts had 08 been recruited to strengthen the Bank’s management team.
Property
Highlights of the Group’s property
ANNUAL REPORT 2001 portfolio are as follows:–
1. Property for lease
Chong Hing Square, 593 - 601 Nathan Road, Mongkok, Kowloon.
LIU CHONG HING INVESTMENT LIMITED
A BUSINESS REVIEW
2. Property for lease 98% with rental income fell by 3%.
Western Harbour Centre, 181 - 183 Connaught 3. Property for lease Road West, Hong Kong. Chong Yip Shopping Centre, 402 - 404 Des This is a 28-storey grade one office building Voeux Road West, Hong Kong. with full sea-view. It was completed at the end This shopping centre, with a lettable area of of 1995 with total lettable area of 140,116 41,467 sq. ft., is located in the most densely sq.ft. It is located adjacent to the entrance/exit populated area of the Western District. In view of the Western Harbour Tunnel which links of sustained weak consumer sentiment, small directly to the West Kowloon Expressway to retailers had to struggle for their living as New Territories and the airport, in an area with deflation was still persistent. However, the substantial commercial potentials. Occupancy occupancy rate increased from 73% to 83%, rate decreased from previous year’s 99% to while total rental income grew by 1%. B
F
C D 09
Le Palais – the Group’s prestigious residential project in Guangzhou A. High ceiling dining room; B. Hotel style main entrance; C. Lift lobby; D & E. External view; F. Well-equipped gym room; G. Spacious café lounge.
G E CHAIRMAN’S Statement
4. Property for lease parks. With a total gross floor area of 178,000 sq. ft., this development will provide luxury Fairview Court, 94 Repulse Bay Road, Hong clubhouse facilities, swimming pool, and beautiful Kong. landscapes. Construction will completed in April This 3-storey luxury apartment building, with a this year. This development is wholly-owned by site area of 30,000 sq. ft. comprises of 6 units, the Group. with a total gross floor area of 20,755 sq. ft. 6. Property under development and a garden area of 3,300 sq. ft. It is situated in a scenic area near the beaches. The Group The Belcher’s, Pokfulam, Hong Kong. owns 5 units of this development and all of This site is located at Pokfulam Road in the them have been let. Western mid-level district, with a site area of 5. Property under development 324,000 sq. ft. This re-development includes 6 blocks of residential/commercial buildings, Double Haven, 52 Ma Lok Path, Kau To Shan, ranging from 43 to 47 stories, with a total of Shatin, New Territories. 2,214 units and a total gross floor area of Located in the mid-level luxury residential area 2,446,000 sq. ft. In addition, there are residents’ of Shatin, Double Haven with a site area of clubhouse, swimming pool, tennis court, 141,700 sq. ft. will have 32 duplex garden government centres, senior citizen centre, houses built, each with 2 underground car kindergarten, public park, and a 215,000 sq. ft.
10
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED
A BUSINESS REVIEW
shopping mall. On completion the development will have a 3,000,000 sq. ft. gross floor area. Launched in mid-1999, sales of Phase One has been led by Shun Tak Holdings Limited and coordinated by Sun Hung Kai Properties Limited with excellent response. The record shows 541 units, approximately 80%, have been sold at the Phase One. At present, 597 units, approximately 53%, have been sold at Phase Two since in the mid-year. The Group owns 10% of this project.
China Operation
1. Shanghai
This prime site is located in the district of D Nanjing Xilu with a site area of 55,000 sq. ft.. A 38-storey modern commercial building with a gross floor area of 600,000 sq. ft. will be built at a total investment of Renminbi 800 million. The foundation has been completed and it is in the tendering process for the superstructure, which should commence soon. The Group owns F 95% of this project, with the remaining 5% owned by Cun Xin Jiang Enterprise Company, Head Office, a wholly-owned subsidiary of the Peoples’ Municipal Government of Huang Po District, Shanghai. E
Double Haven – residential project in Kau To Shan, Shatin A & B. Pleasant view of property’s environment; C, D & E. Mediterranean-style houses and architectural features; F. Project logo.
C
B CHAIRMAN’S Statement
2. Guangzhou
“Le Palais” is located at No.1 Yong Sheng Shang Sha, Donghu Road in the prestigious residential area of Dongshan District in Guangzhou City. With a site area of 139,000 sq. ft., it comprises 4 blocks of 47-storey residential building with 844 luxury units, together with residents clubhouse, swimming pool, shopping arcade and car parks at a total gross floor area of 1,500,000 sq. ft. Estimated at a total investment cost of Renminbi 800 million the superstructure has been completed and decorated. It will be one of the highest residential buildings in Guangzhou. The presale has been launched since the end of last year.
Insurance
The Group’s wholly-owned subsidiary, Liu Chong Hing Insurance Company Limited was established in 1960. With its over 40 years history, the company has always acted prudently. It underwrites fire, marine, theft, accident, motor car, workers’ compensation, contractor’s all risk, and shipment for import and export cargoes. It is also an agent for life insurance and staff retirement provident fund 12 insurance. Due to depressed market situation in last year, both turnover and net profit have reduced by A 9% and 13% respectively. good news that The US Federal Reserve Bureau has Prospects finally decided by the end of January this year to
In light of the worldwide economic recession in hold the current interest rate after some 11 reductions
ANNUAL REPORT 2001 2001, most multinational corporations announced within one year. The decision hinted that low interest unfavourable business results reflecting considerable period would be drawing close to the end and reduction in profitability. Operational down size, economy had bottomed out. With revival around the employees lay off and salary cut were the common corner in the US, this economic locomotive would be language of most employers. It was at last a piece of the starter to bring recovery to the world.
LIU CHONG HING INVESTMENT LIMITED BUSINESS REVIEW
Hong Kong economy after experiencing various in coming years. difficulties, is expected to be stabilized by the second Lastly, on behalf of the Board of Directors, I would half of the year. With China entering World Trade like to thank all our shareholders for their trust and Organization and Beijing to hold the Olympic Games support, and all our employees for their dedication in 2008, Hong Kong shall be able to restore its and most diligent work. liveliness through the conceptual umbrella. Factories shall receive new procurement orders and business will turn around for the better. Unemployment is Liu Lit Man expected to be off from the peak and gradually back Chairman to norm in a few months’ time. Hong Kong, 14th March 2002 The Group shall make good use of this slow growing period to consolidate all existing projects on hand, in the hope to achieve better returns for our shareholders
D
B E
Group’s major properties A. Liu Chong Hing Financial Centre, Huang Pu District, Shanghai; B. Chong Yip Shopping Centre; C. Western Harbour Centre; D. Fairview Court; E. The Belcher’s; F. Chong Hing Square.
C F REPORT of Directors
The Directors of Liu Chong Hing Investment Limited the Group’s affairs at that date are set out on pages (the “Directors”) have pleasure in presenting to the 41 to 81 of this annual report. Shareholders their annual report together with the audited financial statements for the year ended 31st Dividends December 2001. An interim cash dividend of HK$0.10 per share was paid to shareholders on 19th September 2001. The Principal Activities Directors now recommend a final cash dividend of The principal activities of the Company are property HK$0.10 per share making a total cash dividend of investment and investment holding. The principal HK$0.20 per share for the year. activities of the subsidiaries and associates are shown in Note 16 and Note 17 to the financial Commentary on Annual Results statements respectively. There was no significant The directors announce that the consolidated net change in the principal activities of the Company profit for the year of 2001 is HK$188,106,000 and the Group during the year. representing a decrease of 49.2% over the previous year. Results and State of Affairs Set out below is a diagrammatic illustration of the The results of the Group for the year ended 31st relative weight of the Group’s main business activities December 2001 and the state of the Company’s and and the net profit over the past five years.
Year 1997 1998 1999 2000 2001
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Net profit for the year 590,299 358,745 367,166 370,576 188,106
14 Further details of the results and the assets and liabilities of the Group for the past five years are set out on pages 2 and 3 of this annual report.
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED BUSINESS REVIEW
(Amount expressed in HK$’000)
Investments and Property 14.05% 26,429 (HK$’000) 2001 Insurance Business 3.00% 5,643 (HK$’000) 188,106 Banking Operations 82.95% 156,034 (HK$’000)
Investments and Property 42.81% 158,642 (HK$’000)
2000 Insurance Business 1.61% 5,958 (HK$’000) 370,576 Banking Operations 55.58% 205,976 (HK$’000)
Investments and Property 54.25% 199,171 (HK$’000)
1999 Insurance Business 1.91% 7,016 (HK$’000) 367,166 Banking Operations 43.84% 160,979 (HK$’000)
Investments and Property 55.34% 198,521 (HK$’000) 15 1998 Insurance Business 1.96% 7,041 (HK$’000) 358,745 Banking Operations 42.70% 153,183 (HK$’000)
Investments and Property 49.24% 290,662 (HK$’000)
1997 Insurance Business 1.15% 6,801 (HK$’000) 590,299 Banking Operations 49.61% 292,836 (HK$’000) REPORT of Directors
Banking Operation challenging year with China in WTO and a U.S. recovery on the way, this should boost sentiment and For the year 2001, the Group’s banking associate, pave way for a more active business environment. Liu Chong Hing Bank Limited (the “Bank”) reported However, the ever increasing competition within the a profit after taxation of HK$345,887,000, banking industry remains and this will inevitably put representing a 24% decrease over the previous year. a lid on profit margins. We expect the Bank to The decrease in profit reflected Hong Kong’s declining continue to perform consistently over the next year. economy over the course of 2001. Persistent deflation, poor consumer sentiment, and lower business Property Investment and investment activities all added up to a grim economic Development picture. On top of all this, lower profit margins Investment Properties resulting from increasing competition and falling interest rates put further pressure on the Bank’s The year 2001 has been a relatively quiet year for profitability. Hong Kong’s property market. Both prices and rentals have succumbed to the forces of deflation. Looking ahead, 2002 looks like it will be another Despite this market environment, the Group has managed to maintain a high occupancy rate in its investment properties during the year. Overall rental revenue increased by 2.3% for the year 2001.
Chong Hing Square, a popular ginza-type retail development situated in the heart of Mongkok, Kowloon, offers 184,000 sq.ft. of retail and recreational space. This 20-storey building has been 93% let, rental revenue has increased by 9%.
For our Chong Yip Shopping Centre located in 16 Western District, Hong Kong, rental revenue increased by 1%. This is arguably the best located shopping centre in Western District, with 41,000 sq.ft. of retail and recreational area. The property in year 2001 was 83% let, we expect its occupancy rate can be gradually improved.
ANNUAL REPORT 2001
A
LIU CHONG HING INVESTMENT LIMITED BUSINESS REVIEW
Western Harbour Centre, an office building at No. Liu Chong Hing Bank Building, which the Group has 181, Connaught Road West, is conveniently located a 45.11% interest, has been 70% let and contributed close to the entrance/exit of the Western Harbour further rental income. Situated in the heart of Tunnel. This 28-storey building offers 140,000 sq.ft. Central on 24, Des Voeux Road Central, Hong Kong, of office space with stunning harbour view. It has this is the flagship property of the Group. This been 98% let, and its rental revenue has decreased building is scheduled to be re-developed, the by 3% over the previous year. demolition works will be commenced in the winter of 2002. The Group also received rental income from Fairview Court, a 6-unit luxury low-rise apartment building at No. 94, Repulse Bay Road and it has been fully let at present.
B
C
E 17
A. Liu Chong Hing Bank Building; B, C & D. Le Palais sales campaign and activities; E & F. Double Haven press conference; F
D REPORT of Directors
Development Properties Insurance Business
The Group’s other PRC development project is Le The Group’s insurance business reported a 13% Palais, a 1,500,000 sq.ft. gross floor area residential decrease in profit over the previous year. Despite complex located on Donghu Road in the scenic increasing competition within the industry, we expect Dongshan District of Guangzhou. This project is now it will make steady progress in the year ahead. completed which provides 844 luxury apartments plus 300 car parks and full clubhouse recreational Capital Structure facilities. Pre-sale of selected units from this The Group’s shareholders’ funds at 31st December prestigious development has already begun and over 2001 amounted to HK$6,091 million, representing a hundred units have been sold so far. an increase of HK$21 million when compared with
The Belcher’s, the Group’s joint venture project with last year. The increase in shareholders’ funds was due Shun Tak Holdings Ltd, Sun Hung Kai Properties to the increase of net profit for the year of HK$188 Ltd, and New World Development Company Ltd, million and after deducting revaluation deficits of continued to be sold. The Group owns 10% of this HK$50 million and dividend payment of HK$117 development. million made during the year.
The Group’s redevelopment project, Double Haven in Finance and Treasury Operations Kau To Shan, Shatin, consists of 14 single and 18 As at 31st December 2001, the Group’s consolidated semi-detached luxury houses with clubhouse and net debts being bank borrowings less cash and bank swimming pool facilities. It is due for completion by deposits, amounted to HK$2,463.30 million. The the middle of 2002, and the Group intends to hold increase of total bank borrowings was applied to the part of this development for long term rental construction cost of various development projects. purpose. However, the Group continued to maintain a low The Group’s development of a grade-A commercial debt-to-equity ratio of 40% as of the balance sheet office building in Nanjing Xilu, Shanghai, has date. finished foundation works. The project is expected to 18 The management believed that the total bank be completed by 2004. The property will provide borrowings will be substantially reduced following 476,800 sq.ft. of commercial and office space in a the completion and sale of the three properties prime business location. under development projects namely, Le Palais, The Belcher’s and Double Haven.
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED BUSINESS REVIEW
On the other hand, almost all of the Group’s Property, Plant and Equipment and borrowings are in Hong Kong dollars and the Investment Property interest rates are set on floating rate basis. As at Movements in property, plant and equipment and 31st December 2001, less than one-fifth of total investment property during the year are set out in bank borrowings was entered into interest hedging Notes 13 and 14 to the financial statements. instrument so as to avoid interest volatility and uncertainty. Given the above arrangement, the Group’s Purchase, Sale or Redemption of management are confident about the management of currency and interest rate risks. Shares in the Company During the year, the Company repurchased certain of Liquidity and Funding its own shares through The Stock Exchange of Hong
The Group has maintained a prudent policy in Kong Limited, details of which are set out in Note regard to liquidity and funding. The Directors are 25 to the financial statements. The Directors confident that the Group will maintain flexible and considered that the repurchases would increase the adequate sources of funding to support all the net asset value per share of the Company. Group’s investment and development projects. Save as disclosed above, neither the Company nor any of its subsidiaries purchased, sold or redeemed Looking Ahead any of the Company’s listed securities during the The Group will continue to act prudently in the year year. ahead and to look for new and profitable opportunities. Share Option Scheme The Company’s share option scheme (the “Scheme”), Major Customers and Suppliers was adopted pursuant to a resolution passed on During the year, 64% of the Group’s purchases were 10th June 1994 for the primary purpose of providing attributable to the Group’s five largest suppliers incentives to directors and eligible employees, and with the largest supplier accounting for 34% of the will expire on 9th June 2004. Under the Scheme, the 19 Group’s purchases and the Group’s turnover Company may grant options to eligible employees, attributable to the Group’s five largest customers including executive directors of the Company and its was less than 30%. None of the directors, their subsidiaries, to subscribe for shares in the Company. associates or any shareholder (which to the knowledge of the Directors owns more than 5% of the Company’s issued share capital) has any interest in the Group’s five largest suppliers. REPORT of Directors
The total number of shares in respect of which Reserves options may be granted under the Scheme is not Movements in reserves during the year are set out in permitted to exceed 10% of the shares of the Note 26 to the financial statements. Company in issue at any point in time, without prior approval from the Company’s shareholders. The Directors number of shares in respect of which options may be The Directors of the Company during the year are granted to any individual is not permitted to exceed shown on page 28 of this annual report. 5% of the shares of the Company in issue at any point in time, without prior approval from the The term of office of each non-executive director is Company’s shareholders. the period up to his retirement by rotation in accordance with the Company’s Articles of Options granted must be taken up within 28 days of Association. the date of grant, upon payment of HK$10 per option. Options may be exercised at any time from Mr. Liu Lit Chung, Peter Ng Ping Kin, Leo Lee Tung the date of grant of the share option to the 5th Hai and Cheng Mo Chi, Moses shall retire by anniversary of the date of grant. The exercise price is rotation in accordance with Article 99 of the determined by the directors of the Company, and will Company’s Articles of Association and, being eligible, not be less than the higher of the nominal value of offer themselves for re-election. the Company’s shares on the date of grant, or 80% of the average closing price of the shares for the five Directors’ Interests in Share Capital business days immediately preceding the date of of the Company and Its Associated grant. Corporations
No options have been granted under the above- At 31st December 2001, the beneficial interests of mentioned scheme since the Scheme was adopted. the Directors and Chief Executives of the Company and of their associates in the shares of the Company Subsidiaries and Associates and its associated corporations as recorded in the 20 Particulars relating to the subsidiaries and associates register maintained under Section 29 of the Securities are set out in Notes 16 and 17 to the financial (Disclosure of Interests) Ordinance (the “SDI statements respectively. Ordinance”) were as follows:
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED BUSINESS REVIEW
(a) The Company
Personal Family Corporate Total Name of Director interests interests interests interests Number of ordinary shares held Mr. Liu Lit Man, 4,991,200 – 171,600,000 176,591,200 Chairman (Note 1) Mr. Liu Lit Mo, 11,518,000 – 171,600,000 183,118,000 Managing Director (Note 1) Mr. Liu Lit Chi 141,668 – 216,864,222 217,005,890 (Notes 1 and 2) Mr. Peter Alan Lee Vine 24,000 ––24,000 Mr. Peter Ng Ping Kin 36,000 ––36,000 Mr. Liu Lit Chung ––171,600,000 171,600,000 (Note 1) Mr. Andrew Liu 600,000 ––600,000 Mr. Winston Liu Kam Fai 244,607 ––244,607
Notes:
1. 171,600,000 shares in the Company are beneficially 2. Alba Holdings Limited, of which Mr. Liu Lit Chi and held by Liu’s Holdings Limited, of which Mr. Liu Lit his associates are shareholders, beneficially holds Man, Liu Lit Mo, Liu Lit Chi and Liu Lit Chung are 45,264,222 shares in the Company, and thus is amongst its shareholders. The above numbers of included in the corporate interests of Mr. Liu Lit Chi. shares are duplicated for each of these directors.
21 REPORT of Directors
(b) Associates
Liu Chong Hing Bank Limited
Personal Family Corporate Total Name of Director interests interests interests interests Number of ordinary shares held Mr. Liu Lit Man, 3,447,928 – 236,233,628 239,681,556 Chairman and Managing Director (Note 1) Mr. Liu Lit Mo, 1,009,650 – 236,233,628 237,243,278 Vice Chairman (Note 1) Mr. Liu Lit Chi 313,248 – 238,496,839 238,810,087 (Notes 1 and 2) Mr. Peter Alan Lee Vine 1,200 ––1,200 Mr. Liu Lit Chung 173,000 – 236,233,628 236,406,628 (Note 1) Mr. Andrew Liu 60,000 ––60,000
Notes: virtue of the interests of Mr. Liu Lit Man, Liu Lit Mo, Liu Lit Chi and Liu Lit Chung in Liu 1. The corporate interests in 236,233,628 shares are Chong Hing Estate through Liu’s Holdings attributed as follows: Limited, each of them is deemed under the SDI (i) 196,233,628 shares held by the Company’s Ordinance to be interested in such shares. wholly-owned subsidiary, Liu Chong Hing Estate 2. 2,263,211 shares are held by Alba Holdings Limited, Company, Limited (“Liu Chong Hing Estate”), shareholders of which include Mr. Liu Lit Chi and his in which each of Mr. Liu Lit Man, Liu Lit Mo, associates. Accordingly, Mr. Liu Lit Chi is deemed Liu Lit Chi and Liu Lit Chung is deemed under under the SDI Ordinance to be interested in the SDI Ordinance to be interested through Liu’s such shares. Holdings Limited, a private company holding approximately 45% of the Company’s issued and 22 fully-paid share capital; and Connected Party Transactions
(ii) 40,000,000 shares held by The Bank of Tokyo- The connected party transactions between the Group Mitsubishi, Limited (“Bank of Tokyo-Mitsubishi”). and the Liu Chong Hing Bank Group during the year Pursuant to an agreement in 1994, Bank of are described as follows: Tokyo-Mitsubishi has granted an option to Liu A. The Bank handled routine banking transactions Chong Hing Estate exercisable at any time
ANNUAL REPORT 2001 during the term of that agreement to purchase for the Group. Services provided by the Bank all such shares and Bank of Tokyo-Mitsubishi is are cheque clearing, current, savings and required to offer to sell all such shares to Liu deposit accounts, remittances, and other Chong Hing Estate in certain circumstances. By banking facilities.
LIU CHONG HING INVESTMENT LIMITED BUSINESS REVIEW
B. Members of the Bank Group provided securities a Director of the Company had, whether directly or and futures brokerage, nominee and data indirectly, a material interest, subsisted at the end of processing services to members of the Group. the year or at any time during the year.
C. The Company leased the 5th floor and a At no time during the year was the Company or any portion of the 14th floor of the Liu Chong of the Company’s subsidiaries a party to any Hing Bank Building from the Bank. On the arrangements to enable the Directors of the Company other hand, the Bank and its subsidiaries to acquire benefits by means of the acquisition of leased several floors of Western Harbour shares in, or debentures of, the Company or any Centre from the Company. other body corporate.
D. The Company through its wholly-owned None of the Directors proposed for re-election at the subsidiary, Liu Chong Hing Insurance Company forthcoming annual general meeting has a service Limited, provided insurance agency and contract with the Company which is not terminable underwriting services to members of the Group. within one year without payment of compensation In addition, the Company’s another wholly- (other than statutory compensation). owned subsidiary, Liu Chong Hing Property Management and Agency Limited, has provided Substantial Shareholders property management, property consultant and The register of substantial shareholders maintained property maintenance services to the Bank under Section 16(1) of the SDI Ordinance shows Group. that at 31st December 2001, the Company had not
Mr. Liu Lit Man, Liu Lit Mo, Liu Lit Chi, Peter Alan been notified of interest, being ten per cent or more Lee Vine, Peter Ng Ping Kin, Liu Lit Chung, Andrew of the issued share capital of the Company, save and Liu and Winston Liu Kam Fai are interested, except as disclosed under Directors’ interests in directly or indirectly, in the respective share capitals share capital of the Company and its associated of the Company and/or the Bank. corporations.
In the opinion of the Directors who do not have any Group Borrowings and Interest 23 interest, whether directly or indirectly, in the above Capitalised transactions, the transactions were conducted in the ordinary course of business of the Group on normal Details of bank loans, overdrafts and other borrowings commercial terms. repayable within five years are set out in Note 23 to the financial statements.
Directors’ Interests in Contracts Interest capitalised to properties under development No contracts of significance in relation to the during the year amounted to HK$153,698,000 Group’s business, to which the Company or any of (2000: HK$171,622,000). the Company’s subsidiaries was a party and in which REPORT of Directors
Audit Committee Auditors
The members of the Audit Committee are shown on The financial statements for the year have been page 28. The principal duties of the Audit Committee audited by Messrs. Deloitte Touche Tohmatsu who are reviewing the internal controls and the financial have expressed their willingness to continue in office. reporting requirements of the Group. The Committee Accordingly, a resolution will be submitted to the is satisfied with the Company’s internal control forthcoming annual general meeting to re-appoint procedures and the financial reporting disclosures. Messrs. Deloitte Touche Tohmatsu as auditors of the Company. Code of Best Practice
The Company has complied throughout the year On behalf of the Board ended 31st December 2001 with the Code of Best Liu Lit Mo Practice as set out in Appendix 14 of the Rules Managing Director Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. Hong Kong, 14th March 2002
24
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED LIU CHONG HING GROUP Simplified Corporate Structure Chart
As at 14th March 2002 BUSINESS REVIEW
LIU’S HOLDINGS LIU’S FAMILY LIMITED
45.28% 19.36%
*LIU CHONG HING INVESTMENT LIMITED Investment Holding, Property Investment
100% 60% 100% 100%
Liu Chong Hing Liu Chong Hing Guangzhou Property Management Other Insuarance Chong Hing Property and Agency Ltd. Subsidiaries Co., Ltd. Dev. Co., Ltd. Property Management Investment and Insurance Business Property Development and Agency Trading Business
45.11%
*LIU CHONG HING BANK LIMITED Banking Business 25
50% 45% 100% 100% 100%
Shanghai Huang Pu Liu Chong Hing Chong Hing Liu Chong Hing Property Liu Chong Hing Data Processing Limited Securities Limited Development Co., Ltd. Finance Limited Provision of Deposit Taking Stock Broking Electronic Data Property Development Processing Services
* The securities of which are listed on The stock Exchange of Hong Kong Limited SCHEDULE OF MAJOR PROPERTIES Held by the Group and Associates As at 31st December 2001
Interest in the property Approximate Total gross attributable site area floor area Existing Description to the Group (sq.ft.) (sq.ft.) use
Investment properties held under long lease
Hong Kong:
1. Western Harbour Centre 100% 11,500 200,000 O/P 181 – 183 Connaught Road West
2. Chong Yip Shopping Centre 100% 32,400 73,400 C/P 402 – 404 Des Voeux Road West
3. Fairview Court 100% 30,000 26,000 R/P 94 Repulse Bay Road
4. Liu Chong Hing Bank Building 45.1% 7,100 99,500 O/C 24 Des Voeux Road Central
Kowloon and New Territories:
5. Chong Hing Square 100% 12,300 184,000 C 593 – 601 Nathan Road, Mongkok
6. Bonsun Industrial Building 100% 18,000 46,860 I/P 364 – 366 Sha Tsui Road, Tsuen Wan
7. Fung Shun Commercial Building, 45.1% 2,200 33,000 O 591 Nathan Road, Mongkok
113,500 662,760 26
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED BUSINESS REVIEW
Interest in Approx- the property imate Total gross Expected attributable site area floor area Main completion Description to the Group (sq. ft.) (sq. ft.) usage date Status
Properties under development
Hong Kong:
1. Double Haven 100% 141,700 106,150 R 2002 Internal 52 Ma Lok Path, Kau To Shan 9,600 S furnishing Shatin, New Territories 39,200 G in progress 23,300 P
178,250
It consists of 14 single and 18 semi-detached luxury houses with gross floor area from 2,300 sq. ft. to 3,100 sq. ft. each.
2. The Belcher’s 10% 324,000 2,446,000 R 2002 1st phase Inland Lot No. 8880 215,000 C completed Pokfulam 77,600 S 2nd phase Hong Kong 524,300 P super- structure in progress
3,262,900
The People’s Republic of China:
1. Liu Chong Hing Financial Centre 70.3% 55,000 115,500 C 2004 Foundation No. 23 Lot A Nanjing Xilu 361,300 O completed Huang Pu District 117,500 P Shanghai 27
594,300
2. Le Palais 60% 139,000 1,222,962 R 2002 Completed No. 1 Yong Sheng Shang Sha 36,600 C Donghu Road 138,294 S Dongshan District 135,626 P Guangzhou
1,533,482
It provides 844 residential flat units with gross floor areas from 1,200 sq. ft. to 2,360 sq. ft. each and also provides approximately 300 carparking spaces.
C=Commercial I=Industrial P=Car Park R=Residential O=Office S=Clubhouse and recreational facilities G=Garden area CORPORATE Information
Board of Directors Audit Committee
Chairman The Hon. Woo Pak Chuen
✝ C.B.E., LLD (Hon), LLB, PhD, J.P. # Liu Lit Man, J.P., F.I.B.A. (Chairman)
Directors Leo Lee Tung Hai, GBS, J.P. Peter Ng Ping Kin, MSc., J.P. ✝ # Liu Lit Mo, M.B.E., J.P. (Managing Director) Cheng Mo Chi, Moses, LLB (HK), J.P. ✝ # Liu Lit Chi * The Hon. Woo Pak Chuen,
C.B.E., LLD (Hon), LLB, PhD, J.P. Senior Managers
* Leo Lee Tung Hai, GBS, J.P. Eva Liu * Peter Alan Lee Vine, Wai Chun Sing O.B.E., V.R.D., LLD (Hon), LLB, J.P. Luk Chi Chung
* Peter Ng Ping Kin, MSc., J.P. * Cheng Mo Chi, Moses, LLB (HK), J.P. Managers # Liu Lit Chung, MB, BS (London), MRCP(UK) Cavior Liu # Andrew Liu Ngan Luen Hing # Liu Chun Ning, Wilfred Lam Shiu Cheung ✝ # Liu Kam Fai, Winston Wong Yuk Chi ✝ Lee Wai Hung Luk Kit Wing # Liu Kwun Shing, Christopher Mo Kin Hung (alternate director to Dr. Liu Lit Chung)
✝ Executive directors * Independent non-executive directors # Members of Liu’s family 28 Company Secretary
Lee Wai Hung
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED CORPORATE AND FINANCIAL INFORMATION
Solicitors Registered Office
Gallant Y.T. Ho & Co. 5th Floor, Liu Chong Hing Bank Building P.C. Woo & Co. 24 Des Voeux Road Central, Hong Kong Fung & Liu Tel: (852) 2841 7255 Anthony Chiang & Partners Fax: (852) 2868 5294 E-mail: [email protected] Auditors Website: http://www.lchi.com.hk
Deloitte Touche Tohmatsu Certified Public Accountants Guangzhou Office Room B, 18/F Share Registrars & Transfer Office Guangdong International Building, Tower A 339 Huanshi Dong Lu Central Registration Hong Kong Limited Guangzhou, China 17th Floor, Hopewell Centre Tel: 8620-83313616 183 Queen’s Road East Fax: 8620-83311002 Wanchai, Hong Kong
Chaozhou Office Bankers Room 202, Block 3, Kaiming Building Liu Chong Hing Bank Limited Kaiyuan Road ABN • AMRO Bank Chaozhou, China Bangkok Bank Public Company Limited Tel: 86768-2221773 Bank of China Fax: 86768-2259756 Bank of Communications Dao Heng Bank Hang Seng Bank Limited Share Listing 29 Industrial and Commercial Bank of The Company’s shares are listed on China (Asia) Limited The Stock Exchange of Hong Kong Limited Nanyang Commercial Bank, Limited Standard Chartered Bank Stock Code The Bank of Tokyo-Mitsubishi, Limited 0194 Sumitomo Mitsui Banking Corporation Wing Hang Bank, Limited BIOGRAPHICAL DETAILS of Directors and Senior Management
Board of Directors the Vice Chairman and Executive Director of Liu Chong Hing Bank Limited. He was a Deputy Mr. Liu Lit Man, J.P., F.I.B.A. Managing Director of the Liu Chong Hing Bank aged 72, the Chairman of both Liu Chong Hing Limited from 1961 to 1973. He is a Director of Investment Limited and Liu Chong Hing Insurance China Motor Bus Company Limited. As for Company Limited since 1972. Mr. Liu is also the community service, Mr. Liu was the Chairman of Chairman and Managing Director of Liu Chong Tung Wah Group of Hospitals in 1967 and is now Hing Bank Limited. His other directorships include serving as an Adviser of the Group. He had also been those in The Hong Kong and China Gas Company President of the Hong Kong Chiu Chow Chamber of Limited, Asia Commercial Bank Limited and COSCO Commerce, Chairman of Hong Kong Football Pacific Limited. Mr. Liu was a Director of Tung Wah Association and District Governor of District 3450, Group of Hospitals, the President of the Hong Kong Rotary International. Presently, he is a Member of Chiu Chow Chamber of Commerce (presently the Board of Trustees of the Lord Wilson Heritage Permanent Honorary President), as well as the Trust, a Member of the Board of Trustee of United founder and the first Chairman of Teochew College, the Chinese University of Hong Kong and a International Convention (now Permanent Honorary Manager of Liu Po Shan Memorial College. He was Chairman). Presently he is a Standing Committee awarded Silver Jubilee Medal by Her Majesty the Member of The Chinese General Chamber of Queen in 1977. Commerce, Hong Kong. Mr. Liu is also the Supervisor of Liu Po Shan Memorial College, a Director of Mr. Liu Lit Chi New Asia College of the Chinese University of Hong aged 63, is a director of Liu Chong Hing Investment Kong, a founding member of the Court of the Hong Limited and a Deputy Managing Director of Liu Kong Polytechnic University, and the founder and Chong Hing Bank Limited. Mr. Liu also holds Supervisor of Chiu Chow Association Secondary directorships in a number of other public and private School. In 1975, he was appointed a Justice of the companies. Peace and was elected Fellow of the International
30 Banker Association. He had been a Member of the The Hon. Woo Pak Chuen, Consultative Committee for the Basic Law from C.B.E., LLD (Hon), LLB, PhD, J.P. 1985 to 1990 and was a Member of the Selection aged 92, an independent non-executive director of Committee of the First Government of the Hong the Company, Solicitor and Notary Public, Messrs. P Kong Special Administrative Region. He was awarded C Woo & Co., Solicitors. Also Chairman of Hong Gold Bauhinia Medal from the HKSAR in 2001. ANNUAL REPORT 2001 Kong Yakult Co., Ltd. and Director of Kowloon
Mr. Liu Lit Mo, M.B.E., J.P. Motor Bus, Co., Ltd. Former Member of the Hong Kong Legislative Council (1964-73) and Executive aged 64, is the Managing Director of Liu Chong Council (1972-76) (Permitted by Her Majesty the Hing Investment Limited since 1972. Mr. Liu is also
LIU CHONG HING INVESTMENT LIMITED CORPORATE AND FINANCIAL INFORMATION
Queen to retain the title “Honourable” after leaving Gold Bauhinia Star by the Hong Kong Special the Executive Council); Life Member of the Court of Administrative Region Government of the People’s the University of Hong Kong and of the Council of Republic of China. Dr. Lee has over 40 years of the Chinese University of Hong Kong. experience in business management.
Dr. Leo Lee Tung Hai, GBS, J.P. Mr. Peter Alan Lee Vine, O.B.E., V.R.D., LLD (Hon),
LLB, J.P. aged 80, has been appointed as independent non- executive director of the Company since August aged 80, is a solicitor who has practised in Hong 1999. Dr. Lee is the Chairman of Tung Tai Group of Kong since 1947. He has been an independent non- companies and a director or non-executive director executive director of Liu Chong Hing Investment of several publicly listed companies in Hong Kong, Limited and Liu Chong Hing Bank Limited since including Beijing Enterprises Holdings Limited, etc. 1972. He also holds directorship in many public and He is a member of a number of public services private companies. committees and heads many social service organizations, including as an advisor of the Advisory Mr. Peter Ng Ping Kin, MSc., J.P.
Board of the Tung Wah Group of Hospitals, Chairman aged 73, non-executive director and Vice Chairman of the Association of Chairmen of the Tung Wah of Lam Soon (Hong Kong) Limited. Also non- Group of Hospitals and President of the Italian executive director and Vice Chairman of Lam Soon Cultural Society of Hong Kong. Presently, he is a Food Industries Limited. Mr. Ng is an architect by member of the Standing Committee of the National profession and has held numerous offices within his Committee of The Chinese People’s Political profession and in relation to his public service Consultative Conference and is Vice President of the activities. He was an appointed Member of the China Overseas Friendship Association. He served as Urban Council for ten years and served as Chairman an Adviser on Hong Kong Affairs to Hong Kong & of the Food and Food Premises Select Committee. Macau Affairs Office of the State Council and He was appointed as District Advisor to the Hong Xinhua News Agency, Hong Kong Branch; a member Kong Branch of Xinhua News Agency in 1994. 31 of the Preparatory Committee for the Hong Kong Appointed an independent non-executive director of Special Administrative Region; and a member of the the Company. Selection Committee of the First Government of
Hong Kong Special Administrative Region. Dr. Lee Mr. Cheng Mo Chi, Moses, LLB (HK), J.P. has been honoured with awards by four different aged 52, has been appointed as independent non- governments, which include Cavaliere di Gran Croce executive director of the Company since August of Italy, O.B.E. of Great Britain, Chevalier Legion 1999. Mr. Cheng is a senior partner of Messrs. P.C. d’Honneur of France and Commandeur de l’Ordre de Woo & Co., a firm of solicitors and notaries in Hong Leopold II of Belgium. In 2000, he was conferred Kong. Mr. Cheng was a member of the Legislative BIOGRAPHICAL DETAILS of Directors and Senior Management
Council of Hong Kong between 1991 and 1995. He Mr. Liu Chun Ning, Wilfred, BSc. is currently the Chairman of the Hong Kong aged 40, appointed as Director in 1997. He holds a Institute of Directors, the Board of Education and bachelor degree in economics from University of the Committee on the Promotion of Civic Education. Newcastle-upon-Tyne (UK). Mr. Liu is also an Mr. Cheng also serves on the boards of many other Executive Director of Liu Chong Hing Bank Limited listed companies as independent non-executive and is in charge of the securities department. director.
Mr. Liu Kam Fai, Winston, BA., MSc., MACP Dr. Liu Lit Chung, MB, BS (London), MRCP (UK) aged 35, appointed as Director in 1997. He holds a aged 52, became a Director in 1979 and also the master degree from University of London and is an Deputy Managing Director of the Company for over associate member of computer professionals MACP. ten years. He holds a medical degree from King’s He is in charge of the property department. He is College Hospital, London University and is a Member the son of Mr. Liu Lit Mo. of the Royal College of Physicians of the United
Kingdom. He is also the Director of Liu Chong Hing Mr. Lee Wai Hung, LLB, FCCA, AHKSA, ATIHK, MBA, CPA Bank Limited and the senior partner of a medical aged 39, is Director and Company Secretary. Mr. practice in Hong Kong. Lee is a professional accountant and has over ten
Mr. Andrew Liu years of experience in corporate finance and accounting. Mr. Lee joined the Company in 1992 aged 46, has been a Director since 1979. Mr Liu, and was appointed Director in 1994. Mr. Lee is in holder of a Master of Arts degree from the Oxford charge of finance and secretarial departments. University in England, was a solicitor with Slaughter
and May in London before joining Morgan Stanley Mr. Liu Kwun Shing, Christopher & Co Inc in New York in 1981. Mr Liu was aged 26, has been appointed appointed as alternate promoted to Managing Director in 1990 before director to Dr. Liu Lit Chung in 2000. He is a relocating to Morgan Stanley Asia Limited in Hong 32 qualified solicitor in both England & Wales and Kong, where he assumed the position of President Hong Kong, and holder of a Master of Arts degree and Managing Director until his resignation in in Jurisprudence from the University of Oxford. Mr. September 1997. Mr Liu remains associated with Liu is currently a practising solicitor with Deacons Morgan Stanley as an Advisory Director. He is the in Hong Kong. He is the son of Dr. Liu Lit Chung. son of Mr. Liu Lit Man.
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED CORPORATE AND FINANCIAL INFORMATION
Senior Managers
Ms. Eva Liu, MA (Cantab), DipArch (Kingston), MA (City),
ARB (UK), RIBA aged 38, Senior Project Manager. Ms. Liu is a Chartered Architect (UK), holding Master of Arts Degrees in Architecture from the University of Cambridge and Property Valuation And Law from The City University in London. She was in architectural practice in England before joining the Company in 1999. She is the daughter of Mr. Liu Lit Mo.
Mr. Wai Chun Sing, Terence, MHousMan, MRICS,
AHKIS, RPS, MCIH aged 36, Senior Property Manager, Mr. Wai is a Chartered Surveyor and holds a Master of Housing Management Degree from The University of Hong Kong. He joined the Company in 1996 and is in charge of property department.
Mr. Luk Chi Chung, FCCA, AHKSA, CPA aged 34, Senior Accounting Manager. Mr. Luk is a professional accountant and has over ten years of experience in finance and accounting. Mr. Luk joined the Company in 1995 and is in charge of accounting 33 department. NOTICE of Annual General Meeting
NOTICE IS HEREBY GIVEN that the annual the rules of which are contained in the document general meeting of Liu Chong Hing Investment marked “A” produced to the meeting and for Limited (the “Company”) will be held at the the purposes of identification signed by the Conference Room, 16th Floor, Liu Chong Hing Bank Chairman thereof, Building, 24 Des Voeux Road Central, Hong Kong on (a) the New Scheme be and is hereby approved Thursday, 25th April 2002 at 12:00 noon for the and adopted and the directors of the following purposes: Company be and are hereby authorised to 1. To receive and consider the audited Financial do all such acts and to enter into all such Statements together with Reports of the transactions, arrangements and agreements Directors and Auditors of the Company for the as may be necessary or expedient in order year ended 31st December 2001. to give full effect to the New Scheme including but without limitation: 2. To approve the payment of the final dividend for the year ended 31st December 2001. (i) to administer the New Scheme under which Options may be granted to 3. To re-elect Directors and fix their remuneration. participants eligible under the New 4. To re-appoint Auditors and authorize the Board Scheme to subscribe for Shares in the of Directors to fix their remuneration. capital of the Company;
As special business to consider and, if thought fit, (ii) to modify and/or amend the New pass with or without modification the following Scheme from time to time provided ordinary resolutions: that such modification and/or ORDINARY RESOLUTIONS amendment is effected in accordance with the provisions of the New Scheme 5. “THAT subject to and conditional upon the relating to modification and/or Listing Committee of The Stock Exchange of amendments and of the Rules Governing Hong Kong Limited (the “Stock Exchange”) the Listing of Securities on the Stock 34 granting approval for the listing of and Exchange (the “Listing Rules”) from permission to deal in the shares (i.e. shares of time to time in force; HK$1.00 each (or of such other nominal amount as shall result from a sub-division, (iii) to allot and issue from time to time consolidation, reclassification or reconstruction such number of Shares in the capital of such shares from time to time of the of the Company as may be required to
ANNUAL REPORT 2001 Company) (the “Shares”)) to be issued pursuant be issued pursuant to the exercise of to the exercise of any options (the “Options”) to the Options under the New Scheme be granted pursuant to the new share option provided always that the maximum scheme of the Company (the “New Scheme”), number of Shares to be issued upon
LIU CHONG HING INVESTMENT LIMITED CORPORATE AND FINANCIAL INFORMATION
exercise of all options to be granted (v) to consent to such conditions, pursuant to the New Scheme and any modifications and/or variations as may other schemes shall not exceed 10 per be required or imposed by the relevant cent of the Shares in issue as at the authorities and/or the Listing Rules in date of passing this Resolution relation to the New Scheme; and (excluding any lapsed options) but the (b) upon the New Scheme becoming Company may seek approval of its unconditional, the operation of the existing shareholders in general meeting for share option scheme of the Company refreshing the 10 per cent limit under adopted on 10th June 1994 (“Existing the New Scheme (but, for the purpose Scheme”) be terminated such that no of calculating the 10 per cent limit as further options will be granted under the “refreshed”, excluding all options Existing Scheme but in all other respects, previously granted under the New the provisions of the Existing Scheme shall Scheme or any other schemes of the remain in full force and effect in respect of Company, whether exercised, any options granted prior to the adoption outstanding, cancelled, or lapsed); and of the New Scheme and any such options the maximum number of Shares which shall continue to be exercisable in may be issued upon exercise of all accordance with their terms of issue.” outstanding options granted and yet to be exercised under the New Scheme 6. “THAT and any other schemes of the Company (a) subject to paragraph (b) below, the exercise shall not exceed 30 per cent of the by the directors of the Company during the Shares in issue from time to time; Relevant Period (as hereinafter defined) of
(iv) to make application at the appropriate all the powers of the Company to repurchase time or times to the Stock Exchange, shares of HK$1.00 each in the share capital of the Company on The Stock and any other stock exchanges upon 35 which the issued shares of the Company Exchange of Hong Kong Limited (“Stock may for the time being be listed, for Exchange”) or on any other stock exchange listing of and permission to deal in any on which the shares of the Company may Shares which may hereafter from time be listed and which is recognized by the to time be allotted and issued pursuant Securities and Futures Commission in Hong to the exercise of the Options under the Kong and the Stock Exchange for this New Scheme; purpose, subject to and in accordance with all applicable laws and the requirements of NOTICE of Annual General Meeting
the Rules Governing the Listing of Securities 7. “THAT on the Stock Exchange or of any other (a) subject to paragraph (c) below, the exercise stock exchange (as amended from time to by the directors of the Company during the time), be and is hereby generally and Relevant Period (as hereinafter defined) of unconditionally approved; all the powers of the Company to allot, (b) the nominal amount of shares of the issue and deal with the additional shares of Company which the Company is authorized HK$1.00 each in the capital of the Company to repurchase pursuant to the approval in and to make or grant offers, agreements paragraph (a) above shall not exceed 10% and options (including bonds, warrants, of the aggregate nominal amount of the debentures, notes and any securities which share capital of the Company in issue at carry rights to subscribe for or are the date of passing this resolution, and the convertible into shares of the Company) said approval shall be limited accordingly; which would or might require the exercise and of such power be and is hereby generally and unconditionally approved; (c) for the purpose of this resolution: (b) the approval in paragraph (a) above shall “Relevant Period” means the period from authorize the directors of the Company the passing of this resolution until whichever during the Relevant Period (as hereinafter is the earliest of:- defined) to make or grant offers, agreements (i) the conclusion of the next annual and options (including bonds, warrants, general meeting of the Company; debentures, notes and any securities which (ii) the expiration of the period within carry rights to subscribe for or are which the next annual general meeting convertible into shares of the Company) of the Company is required by the which would or might require the exercise Companies Ordinance (Chapter 32 of of such power after the end of the Relevant 36 the Laws of Hong Kong) or the Period;
Company’s Articles of Association to (c) the aggregate nominal amount of share be held; or capital allotted or agreed conditionally or (iii) the date on which the authority set out unconditionally to be allotted (whether in this resolution is revoked, renewed pursuant to an option or otherwise) and
ANNUAL REPORT 2001 or varied by an ordinary resolution of issued by the directors of the Company the shareholders of the Company in pursuant to the approval in paragraph (a) general meeting.” above, otherwise than pursuant to (i) a Rights Issue (as hereinafter defined); (ii)
LIU CHONG HING INVESTMENT LIMITED CORPORATE AND FINANCIAL INFORMATION
the exercise of any rights of subscription or (ii) the expiration of the period within conversion under any existing warrants, which the next annual general meeting bonds, debentures, notes and any securities of the Company is required by the of the Company which carry rights to Articles of Association of the Company subscribe for or are convertible into shares or the Companies Ordinance (Chapter of the Company; (iii) an issue of shares 32 of the Laws of Hong Kong) to be under the Existing Scheme (as defined in held; or Ordinary Resolution No.5 set out in the (iii) the date on which the authority set out notice convening the meeting), the New in this resolution is revoked, renewed Scheme (also as defined in Ordinary or varied by an ordinary resolution of Resolution No.5 set out in the notice the shareholders of the Company in convening the meeting) and any other general meeting; and schemes or similar arrangement for the time being adopted for the grant or issue of “Rights Issue” means an offer of shares shares or rights to acquire shares of the open for a period fixed by the directors of Company; or (iv) an issue of shares as the Company to the holders of shares or scrip dividends or similar arrangement any class of shares of the Company whose providing for the allotment of shares in lieu names appear on the register of members of the whole or part of a dividend on shares of the Company on a fixed record date in of the Company in accordance with the proportion to their holdings of such shares Company’s Articles of Association from as at that date (subject to such exclusions time to time, shall not exceed 20% of the or other arrangements as the directors of aggregate nominal amount of the share the Company may deem necessary or capital of the Company in issue at the date expedient in relation to fractional of passing this resolution, and the said entitlements or having regard to any approval shall be limited accordingly; and restrictions or obligations under the law of, or the requirements of any recognized 37 (d) for the purpose of this resolution, regulatory body or any stock exchange in, “Relevant Period” means the period from any territory applicable to the Company).” the passing of this resolution until whichever is the earliest of:–
(i) the conclusion of the next annual general meeting of the Company; NOTICE of Annual General Meeting
8. “THAT conditional upon Ordinary Resolutions Notes:
Nos.6 and 7 set out in the notice convening this 1. A member of the Company entitled to attend and vote meeting being passed, the general mandate at the meeting is entitled to appoint another person as granted to the directors of the Company to his proxy to attend and vote in his stead. A member exercise the powers of the Company to allot, who is the holder of two or more shares may appoint more than one proxy to attend on the same occasion. issue and deal with additional shares pursuant A proxy need not be a member of the Company. to Ordinary Resolution No.7 set out in the notice convening this meeting be and is hereby 2. To be valid, a form of proxy, together with the power of attorney or other authority (if any) under which it extended by the addition thereto of an amount is signed, or a notarially certified copy thereof, must representing the nominal amount of the share be lodged with the registered office of the Company capital of the Company repurchased by the at 5th Floor, Liu Chong Hing Bank Building, 24 Des Company under the authority granted pursuant Voeux Road Central, Hong Kong not less than 48 to Ordinary Resolution No.6 set out in the hours before the time appointed for holding the notice convening this meeting, provided that meeting or any adjournment thereof. such extended amount of shares so repurchased 3. The register of members of the Company will be shall not exceed 10% of the aggregate nominal closed from Monday, 15th April 2002 to Friday, 19th amount of the share capital of the Company in April 2002, (both days inclusive) during which period no transfer of shares will be effected. In order to issue at the date of passing this resolution.” qualify for the final dividend, all completed transfer 9. To transact any other business. forms accompanied by the relevant share certificates must be lodged for registration with the Company’s Share Registrars, Central Registration Hong Kong By Order of the Board Limited, 17th Floor, Hopewell Centre, 183 Queen’s Liu Lit Mo Road East, Hong Kong for registration not later than 4:00 pm on Friday, 12th April 2002. Managing Director
Hong Kong, 14th March 2002 38
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED FINANCIAL Calendar
CORPORATE AND FINANCIAL INFORMATION
At 14th March 2002
Interim Results : Announced on 16th August 2001 for six-month ended 30th June 2001
Annual Results : Announced on 14th March 2002 for year ended 31st December 2001
Annual General Meeting : To be held on 25th April 2002
Dividends
Interim cash dividend : HK$0.10 per share
Paid on : 19th September 2001
Proposed final cash dividend : HK$0.10 per share
Payable on : 26th April 2002
Ex-dividend date of final dividend : 11th April 2002
Closure of Register of Members : From 15th April 2002 to 19th April 2002 (both days inclusive)
39 AUDITORS’ Report
TO THE MEMBERS OF LIU CHONG HING INVESTMENT LIMITED (incorporated in Hong Kong with limited liability)
We have audited the financial statements on pages 41 to 81 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.
Respective responsibilities of directors and auditors The Companies Ordinance requires the directors to prepare financial statements which give a true and fair view. 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 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 circumstances of the Company and of the Group, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we 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 of the Group as 40 at 31st December 2001 and of the profit and cash flows of the Group for the year then ended and have been properly prepared in accordance with the Companies Ordinance.
Deloitte Touche Tohmatsu Certified Public Accountants
ANNUAL REPORT 2001 14th March 2002
LIU CHONG HING INVESTMENT LIMITED CONSOLIDATED INCOME Statement For the year ended 31st December 2001
FINANCIAL REPORT
2001 2000 Notes HK$’000 HK$’000
Turnover 4 & 5 283,913 392,102 Direct costs (130,138) (94,655) 153,775 297,447 Unrealised holding gain on other investments 20,421 14,039 Other revenue 2,171 3,829 Administrative expenses (84,301) (73,874) Profit from operations 6 92,066 241,441 Finance costs 7 (67,464) (56,420) Share of results of associates 173,381 242,741 Profit before tax 197,983 427,762 Taxation 9 (40,828) (58,666) Profit after tax 157,155 369,096 Minority interest 30,951 1,480 Net profit for the year 10 188,106 370,576 Dividends 11 75,797 132,659 Earnings per share 12 HK$0.50 HK$0.98
41 BALANCE Sheets As at 31st December 2001
The Group The Company 2001 2000 2001 2000 Notes HK$’000 HK$’000 HK$’000 HK$’000 (As restated) (As restated)
Non-current assets Investment properties 13 2,623,849 2,643,849 680,000 700,000 Property, plant and equipment 14 30,215 28,249 3,480 3,091 Properties under development 15 2,701,144 2,418,751 – – Investments in subsidiaries 16 – – 3,579,670 3,092,427 Investments in associates 17 2,605,159 2,575,196 3 3 Investments in securities 18 321,088 292,216 28,371 50,826 Advances to investee companies 19 690,145 588,039 – – Amount due from a former subsidiary 20 – 29,614 – 29,614 8,971,600 8,575,914 4,291,524 3,875,961 Current assets Inventories 21 12,195 12,566 1,283 2,373 Properties held for sale 6,506 6,506 2,808 2,808 Trade and other receivables 22 123,857 115,888 63,935 61,477 Investments in securities 18 20,785 25,636 20,785 25,636 Tax recoverable – 1,765 4,729 4,729 Bank accounts with LCH Bank Group 70,808 126,087 58,450 91,739 Other bank balances and cash 212,804 130,286 137,879 100,816 446,955 418,734 289,869 289,578 Current liabilities Borrowings 23 853,974 831,832 771,547 831,832 Trade and other payables 24 149,418 124,010 19,139 28,687 Provision for taxation 1,382 – – – 1,004,774 955,842 790,686 860,519 42 Net current liabilities (557,819) (537,108) (500,817) (570,941) Non-current liabilities Borrowings 23 (2,318,922) (1,933,022) (1,895,009) (1,426,794) Non-interest bearing advances from subsidiaries – – (116,436) (119,153) (2,318,922) (1,933,022) (2,011,445) (1,545,947)
ANNUAL REPORT 2001 Minority interest (4,152) (36,254) – – Net assets 6,090,707 6,069,530 1,779,262 1,759,073
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
The Group The Company 2001 2000 2001 2000 Notes HK$’000 HK$’000 HK$’000 HK$’000 (As restated) (As restated)
Capital and reserves Share capital 25 378,943 379,025 378,943 379,025 Reserves 26 5,711,764 5,690,505 1,400,319 1,380,048 6,090,707 6,069,530 1,779,262 1,759,073
The financial statements on pages 41 to 81 were approved and authorised for issue by the Board of Directors on 14th March 2002 and are signed on its behalf by:
Liu Lit Man Woo Pak Chuen Chairman Director
43 CONSOLIDATED STATEMENT of Recognised Gains and Losses For the year ended 31st December 2001
2001 2000 HK$’000 HK$’000
Gains (losses) not recognised in income statement Net (deficit) surplus on revaluation of investment properties (20,000) 78,608 Net surplus on revaluation of land and buildings 7 170 Exchange differences arising on translation of overseas operations (1,725) (662) Share of (deficit) surplus on revaluation of properties of associates (10,880) 10,666 Share of (deficit) surplus on revaluation of investments of associates (16,446) 23,147 Share of exchange translation differences of associates (60) 929 Net (losses) gains not recognised in the consolidated income statement (49,104) 112,858 Net profit for the year 188,106 370,576 Total recognised gains and losses 139,002 483,434 Elimination against reserves of goodwill arising on acquisition of additional interest in a subsidiary – (1,664) 139,002 481,770 Prior year adjustment arising from the effect of change in accounting policy (see note 2) – increase in dividend reserve at 1st January 2000 79,595
44
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED CONSOLIDATED CASH FLOW Statement For the year ended 31st December 2001
FINANCIAL REPORT
2001 2000 Note HK$’000 HK$’000
Net Cash (Outflow) Inflow from Operating Activities 28 (6,302) 56,291 Returns on Investments and Servicing of Finance Interest paid (225,811) (231,672) Dividends paid (117,498) (132,659) Dividends received from an associate 98,118 88,305 Dividends paid to minority shareholders – (151) Net Cash Outflow from Returns on Investments and Servicing of Finance (245,191) (276,177) Taxation Hong Kong Profits Tax paid (13,942) (14,227) Overseas tax paid (2,031) (1,489) Hong Kong Profits Tax refunded 172 2,237 Net Tax paid (15,801) (13,479) Investing Activities Increase in advance to an investee company (102,106) (57,392) Purchase of property, plant and equipment (7,228) (1,677) Purchase of investments in securities (6,078) (77,684) Proceeds from disposal of investments in securities 4,118 1,034 Decrease in advance to associates 683 – Proceeds from disposal of property, plant and equipment 305 1,072 Acquisition of additional interest in a subsidiary – (1,650) Additions to investment properties – (692) Net Cash Outflow from Investing Activities (110,306) (136,989) Net Cash Outflow before Financing carried forward (377,600) (370,354)
45 CONSOLIDATED CASH FLOW Statement For the year ended 31st December 2001
2001 2000 Note HK$’000 HK$’000
Net Cash Outflow before Financing brought forward (377,600) (370,354) Financing 29 New borrowings raised 1,220,888 983,295 Repayments of borrowings (812,773) (778,000) Repurchase of own shares (327) (278) Net Cash Inflow from Financing 407,788 205,017 Increase (Decrease) in Cash and Cash Equivalents 30,188 (165,337)
Cash and Cash Equivalents at 1st January 254,541 421,154
Effect of Foreign Exchange Rate Changes (2,876) (1,276) Cash and Cash Equivalents at 31st December 281,853 254,541 Analysis of the balances of Cash and Cash Equivalents Bank balances and cash 283,612 256,373 Bank overdrafts (1,759) (1,832) 281,853 254,541
46
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED NOTES to the Financial Statements For the year ended 31st December 2001
FINANCIAL REPORT
1. General The Company is a public listed limited company incorporated in Hong Kong and its shares are listed on The Stock Exchange of Hong Kong Limited (“Hong Kong Stock Exchange”).
The principal activities of the Company are property investment and investment holding. The principal activities of the principal subsidiaries and associates are shown in notes 16 and 17 respectively.
2. Adoption of new and revised statements of standard accounting practice In the current year, the Group has adopted for the first time a number of new and revised Statements of Standard Accounting Practice (“SSAP”(s)) issued by the Hong Kong Society of Accountants. Adoption of these standards has led to a number of changes in the Group’s accounting policies. The revised accounting policies are set out in note 3. In addition, the new and revised standards have introduced additional and revised disclosure requirements which have been adopted in these financial statements. Comparative amounts for the prior year have been restated in order to achieve a consistent presentation.
The adoption of these new and revised standards has resulted in the following changes to the Group’s accounting policies that have affected the amounts reported for the current or prior periods.
Dividends proposed or declared after the balance sheet date In accordance with SSAP 9 (Revised) “Events after the Balance Sheet Date”, dividends proposed or declared after the balance sheet date are not recognised as a liability at the balance sheet date, but are disclosed as a separate component of equity in the notes to the financial statements. This change in accounting policy has been applied retrospectively, resulting in a prior year adjustment which increases the dividend reserve of the Group and of the Company as at 1st January 2000 by HK$79,595,000 and as at 1st January 2001 by the same amount. Accordingly, dividend income received from subsidiaries after balance sheet date is not recognised in the income statement, resulting in a prior year adjustment which decreases the Company’s accumulated profit as at 1st January 2000 by HK$273,200,000 and as at 1st January 2001 by HK$75,800,000.
Leases SSAP 14 (Revised) “Leases” has introduced some amendments to the basis of accounting for finance and operating leases, and to the disclosures specified for the Group’s leasing arrangements. These changes have not had any effect on the results for the current or prior accounting periods and, accordingly, no prior year adjustment has been required. Disclosures for all of the Group’s leasing arrangements have been modified so as to comply with the requirements of SSAP 14 (Revised). Comparative amounts have been restated in order to achieve a consistent presentation. 47
Goodwill In the current year, the Group has adopted SSAP 30 “Business Combinations” and has elected not to restate goodwill (negative goodwill) previously eliminated against (credited to) reserves. Accordingly, goodwill arising on acquisitions prior to 1st January 2001 is held in reserves and will be charged to the income statement at the time of disposal of the relevant subsidiary or associate, or at such time as the goodwill is determined to be impaired. Negative goodwill arising on acquisitions prior to 1st January 2001 will be credited to income at the time of disposal of the relevant subsidiary or associate.
Any goodwill arising on acquisitions after 1st January 2001 will be capitalised and amortised over its estimated useful life. Any negative goodwill arising on acquisitions after 1st January 2001 will be presented as a deduction from assets and will be released to income based on an analysis of the circumstances from which the balance resulted. NOTES to the Financial Statements For the year ended 31st December 2001
3. Significant accounting policies The financial statements have been prepared under the historical cost convention, as modified for the revaluation of certain properties and investments in securities, and in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are as follows:
Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31st December each year.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
All significant intercompany transactions and balances within the Group are eliminated on consolidation.
Goodwill Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary or associate at the date of acquisition.
Goodwill arising on acquisitions after 1st January 2001 is capitalised and amortised on a straight-line basis over its useful economic life. Goodwill arising on the acquisition of an associate is included within the carrying amount of the associate. Goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet.
Goodwill arising on acquisitions prior to 1st January 2001 continues to be held in reserves, and will be charged to the income statement at the time of disposal of the relevant subsidiary or associate or at such time as the goodwill is determined to be impaired.
On disposal of a subsidiary or associate, the attributable amount of goodwill previously eliminated against or credited to reserves is included in the determination of the profit or loss on disposal.
Negative goodwill Negative goodwill represents the excess of the Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary or associate at the date of acquisition over the cost of acquisition.
Negative goodwill arising on acquisitions after 1st January 2001 is presented as deduction from assets and will be released to income based on an analysis of the circumstances from which the balance resulted.
Negative goodwill arising on acquisitions prior to 1st January 2001 continues to be held in reserves and will be credited to income at the time of disposal of the relevant subsidiary or associate. 48 To the extent that the negative goodwill is attributable to losses or expenses anticipated at the date of acquisition, it is released to income in the period in which those losses or expenses arise. The remaining negative goodwill is recognised as income on a straight-line basis over the remaining average useful life of the identifiable acquired depreciable assets. To the extent that such negative goodwill exceeds the aggregate fair value of the acquired identifiable non-monetary assets, it is recognised in income immediately.
Negative goodwill arising on the acquisition of an associate is deducted from the carrying value of that associate. Negative goodwill arising on the acquisition of subsidiaries is presented separately in the balance sheet as a deduction from assets.
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
3. Significant accounting policies (Continued) Investments in subsidiaries A subsidiary is an enterprise in which the Company, directly or indirectly, holds more than half of the issued share capital, or controls more than half of the voting power, or where the Company controls the composition of its board of directors or equivalent governing body.
Investments in subsidiaries are included in the Company’s balance sheet at cost less any identified impairment loss.
Investments in associates An associate is an enterprise over which the Group is in a position to exercise significant influence, including participation in financial and operating policy decisions of the investee.
The consolidated income statement includes the Group’s share of the post-acquisition results of its associates for the year. In the consolidated balance sheet, interests in associates are stated at the Group’s share of the net asset of the associates, less any identified impairment loss.
When a group enterprise transacts with an associate of the Group, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant associate, except where unrealised losses provide evidence of an impairment of the asset transferred.
The results of associates are accounted for by the Company on the basis of dividends received and receivable during the year. In the Company’s balance sheet, investments in associates are stated at cost, as reduced by any identified impairment loss.
Revenue recognition (i) Property trading When properties are developed for resale, income is recognised only when a building or any portion of it contracted for sale is 100% completed and the relevant occupation permit is granted by the relevant government authority. Where properties are disposed of through the disposal of those subsidiaries which hold the titles of these properties, income is recognised when the ownership of the subsidiaries is transferred to the buyer. Payments received from the purchasers prior to this stage are recorded as customers’ deposits included in trade and other payables under current liabilities.
(ii) Premium income Premiums are recognised as income over the insurance coverage period.
(iii) Return on investments Dividends from investee companies are recognised as income when the Group’s right to receive the relevant payment is established, whilst interest income is recognised on a time basis that takes into 49 account the effective yield on the relevant deposits.
(iv) Operating lease income Rentals receivable under operating leases are credited to the income statement on a straight-line basis over the relevant lease term.
(v) Sales of goods Sales of goods are recognised when goods are delivered and title has passed.
(vi) Management fee Management fee income is recognised when services are rendered.
(vii) Sales of securities Sales of investments in securities are recognised when the title to the investments are transferred and the buyer takes legal possession of the investments. NOTES to the Financial Statements For the year ended 31st December 2001
3. Significant accounting policies (Continued) Investment properties Investment properties are completed properties which are held for their investment potential, any rental income being negotiated at arm’s length.
Investment properties are stated at their open market value. Any revaluation surplus or deficit arising on the revaluation of investment properties is credited or charged to the investment property revaluation reserve unless the balance of this reserve is insufficient to cover a revaluation deficit, in which case the excess of the revaluation deficit over the balance on the investment property revaluation reserve is charged to the income statement. Where a deficit has previously been charged to the income statement and a revaluation surplus subsequently arises, this surplus is credited to the income statement to the extent of the deficit previously charged.
On disposal of an investment property, the balance on the investment property revaluation reserve attributable to that property is transferred to the income statement.
No depreciation is provided on investment properties except where the unexpired term of the relevant lease is 20 years or less.
Property, plant and equipment Property, plant and equipment other than properties under development are stated at cost or valuation less depreciation and accumulated impairment losses.
Land and buildings are stated in the balance sheet at their revalued amount, being the fair value at the date of revaluation less any subsequent accumulated depreciation and any subsequent impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date.
Any revaluation surplus arising on the revaluation of land and buildings is credited to the other property revaluation reserve, except to the extent that it reverses a revaluation deficit of the same asset previously recognised as an expense, in which case the surplus is credited to the income statement to the extent of the deficit previously charged. A deficit in net carrying amount arising on revaluation of an asset is dealt with as an expense to the extent that it exceeds the balance, if any, on the revaluation reserve relating to a previous revaluation of that asset. On the subsequent sale or retirement of a revalued asset, the attributable revaluation surplus is transferred to accumulated profits.
Depreciation is provided to write off the cost or valuation of property, plant and equipment, other than properties under development, over their estimated useful lives and after taking into account their estimated residual value, using the straight-line method, at the following rates per annum:
Leasehold land Over the term of the lease 50 Buildings Over the shorter of the lease term or 3% Plant and machinery 10% Furniture, fixtures, motor vehicles and 10 – 20% computer equipment
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the income statement.
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
3. Significant accounting policies (Continued) Impairment At each balance sheet date, the Group reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another standard, in which case the impairment loss is treated as a revaluation decrease under that standard.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generated unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount under another standard, in which case the reversal of the impairment loss is treated as a revaluation increase under that other standard.
Properties under development Land for properties under development is stated at cost less accumulated impairment losses. Where a piece of land is transferred from another class, it is stated at its carrying value at the time of the transfer and the value is treated as the deemed cost of the land. No further valuation of the land will be carried out subsequent to its reclassification. Development expenditure is stated at the aggregate amount of costs, including interest expenses capitalised during the development period. Provision for anticipated losses is made, where appropriate. No depreciation is provided on properties under development.
Properties held for sale Properties held for sale are stated at the lower of cost and the estimated market value.
Investments in securities Investments in securities are recognised on a trade-date basis and are initially measured at cost.
Investments other than held-to-maturity debt securities are classified as investment securities and other investments.
Investment securities, which are securities held for an identified long-term strategic purpose, are measured at subsequent reporting dates at cost, as reduced by any impairment loss that is other than temporary.
Other investments are measured at fair value, with unrealised gains and losses included in net profit or loss for the year. 51 Inventories Inventories are stated at the lower of cost and net realisable value.
Taxation The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. Timing differences arise from the recognition for tax purposes of certain items of income and expense in a different accounting period from that in which they are recognised in the financial statements. The tax effect of timing differences, computed using the liability method, is recognised as deferred taxation in the financial statements to the extent that it is probable that a liability or an asset will crystallise in the foreseeable future. NOTES to the Financial Statements For the year ended 31st December 2001
3. Significant accounting policies (Continued) Operating leases Rentals receivable and payable under operating leases are credited and charged, respectively, to the income statement on a straight-line basis over the relevant lease term.
Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised as an expense in the period in which they are incurred.
Retirement benefits scheme The Group operates a defined contribution retirement benefits scheme for qualifying staff of certain companies in the Group, the assets of which are held in a separate trustee administered fund. Payments to the scheme are charged as an expense as they fall due.
Certain of the Group’s employees have been enrolled in a Mandatory Provident Fund scheme. The contributions payable in respect of the current year to the fund are charged as an expense as they fall due.
Foreign currencies Transactions in foreign currencies other than Hong Kong dollars are translated at the rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rates ruling on the balance sheet date. Profits and losses arising on exchange are dealt with in the income statement.
On consolidation, the financial statements of the Group’s overseas operations which are denominated in currencies other than Hong Kong dollar are translated at rates ruling on the balance sheet date. All exchange differences arising on consolidation are dealt with in reserves and are recognised as income or as expenses in the period in which the operation is disposed of.
4. Turnover Turnover represents the aggregate of the following amounts received and receivable during the year: 2001 2000 HK$’000 HK$’000
52 Gross rental income 132,201 129,269 Interest income 61,414 84,355 Sales of goods 33,882 49,200 Gross insurance premium 31,777 34,805 Property management fees 16,530 17,420
ANNUAL REPORT 2001 Proceeds from disposal of listed investments 4,118 1,034 Dividend income from listed investments 3,991 2,326 Proceeds from disposal of properties – 73,693 283,913 392,102
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
5. Business and geographical segments Business Segments The Group is currently engaged in six business activities – property investment, property development, property management, treasury investment and banking, insurance business and trading and manufacturing. These activities are the basis on which the Group reports its primary segment information.
Segment information about these businesses is presented below:
Year ended 31.12.2001 Treasury Trading Property Property Property investment Insurance and manu- Elimin- Con- investment development management and banking business facturing ations solidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
REVENUE External sales 132,201 – 16,530 69,523 31,777 33,882 – 283,913 Inter-segment sales 929 – 4,486 192,048 784 – (198,247) – Total revenue 133,130 – 21,016 261,571 32,561 33,882 (198,247) 283,913 Inter-segment sales are charged at prevailing market rates.
RESULT Segment result 107,844 (66,667) 6,230 38,291 7,166 (798) – 92,066 Finance costs (67,464) Share of results of associates – – – 173,381 – – – 173,381 Profit before tax 197,983 Taxation (40,828) Profit after tax 157,155
53 NOTES to the Financial Statements For the year ended 31st December 2001
5. Business and geographical segments (Continued) Balance Sheet As at 31.12.2001 Treasury Trading Property Property Property investment Insurance and manu- investment development management and banking business facturing Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
ASSETS Segment assets 2,648,091 2,795,962 1,238 1,277,305 9,990 51,536 6,784,122 Investments in associates – – – 2,605,159 – – 2,605,159 Unallocated corporate assets 29,274 Consolidated total assets 9,418,555 LIABILITIES Segment liabilities 51,668 583,616 2,614 61 15,398 5,726 659,083 Unallocated corporate liabilities 2,663,231 Provision for taxation 1,382 Consolidated total liabilities 3,323,696
Other Information Year ended 31.12.2001 Treasury Trading Property Property Property investment Insurance and manu- investment development management and banking business facturing Others Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Capital additions 4,731 349,077 – – 293 200 1,987 356,288 54 Depreciation and amortisation 924 240 – – 253 2,095 1,605 5,117 Provision for impairment loss – 66,667 – – – – – 66,667 Unrealised holding loss on other
ANNUAL REPORT 2001 investments – – – 15,404 – – – 15,404
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
5. Business and geographical segments (Continued) Year ended 31.12.2000 Property Property Property Treasury Trading invest- develop- manage- investment Insurance and manu- ment ment ment and banking business facturing Eliminations Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
REVENUE External sales 129,269 73,693 17,420 87,715 34,805 49,200 – 392,102 Inter-segment sales 843 – 4,593 219,749 813 – (225,998) – Total revenue 130,112 73,693 22,013 307,464 35,618 49,200 (225,998) 392,102 Inter-segment sales are charged at prevailing market rates.
RESULT Segment result 100,836 59,980 6,593 60,163 8,315 5,554 – 241,441 Finance costs (56,420) Share of results of associates – – – 242,741 – – – 242,741 Profit before tax 427,762 Taxation (58,666) Profit after tax 369,096
Balance Sheet As at 31.12.2000 Property Property Property Treasury Trading invest- develop- manage- investment Insurance and manu- ment ment ment and banking business facturing Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
ASSETS Segment assets 2,661,067 2,454,695 2,529 1,193,284 10,974 56,874 6,379,423 Investments in associates – – – 2,575,196 – – 2,575,196 55 Unallocated corporate assets 40,029 Consolidated total assets 8,994,648 LIABILITIES Segment liabilities 61,972 550,095 3,404 53 15,638 2,157 633,319 Unallocated corporate liabilities 2,255,545 Consolidated total liabilities 2,888,864 NOTES to the Financial Statements For the year ended 31st December 2001
5. Business and geographical segments (Continued) Other Information Year ended 31.12.2000 Property Property Property Treasury Trading invest- develop- manage- investment Insurance and manu- ment ment ment and banking business facturing Others Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Capital additions 724 296,399 – – 31 – 654 297,808 Depreciation and amortisation 197 337 – – 642 2,006 1,531 4,713 Unrealised holding loss on other investments – – – 17,961 – – – 17,961
Geographical Segments The Group’s operations are located in Hong Kong and other parts of the People’s Republic of China (the “PRC”). Certain of the Group’s property development and trading and manufacturing business are located in the PRC. Others are located in Hong Kong.
The following table provides an analysis of the Group’s sales by geographical market, irrespective of the origin of the goods/services:
Sales revenue by Contribution to geographical market profit before tax Year ended Year ended Year ended Year ended 31.12.2001 31.12.2000 31.12.2001 31.12.2000 HK$’000 HK$’000 HK$’000 HK$’000
Hong Kong 265,590 295,415 94,287 112,326 PRC 18,323 96,687 (69,685) 72,695 283,913 392,102 24,602 185,021 Share of results of associates 173,381 242,741 Profit before tax 197,983 427,762
The following is an analysis of the carrying amount of segment assets, and additions to property, plant and 56 equipment and property under development analysed by the geographical area in which the assets are located: Additions to property, Carrying amount plant and equipment and of segment assets property under development As at As at As at As at 31.12.2001 31.12.2000 31.12.2001 31.12.2000 HK$’000 HK$’000 HK$’000 HK$’000
ANNUAL REPORT 2001 Hong Kong 7,400,516 7,184,734 114,296 65,446 PRC 2,017,242 1,809,220 241,992 232,362 Others 797 694 – – 9,418,555 8,994,648 356,288 297,808
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
6. Profit from operations 2001 2000 HK$’000 HK$’000
Profit from operations has been arrived at after charging: Directors’ emoluments (Note 8) 14,271 11,828 Other staff costs 35,307 31,812 Staff retirement scheme contributions, net of nil (2000: HK$149,000) forfeited contributions 2,620 879 Total staff costs 52,198 44,519 Auditors’ remuneration 998 827 Depreciation 5,117 4,713 Realised loss on disposal of other investments – 458 Operating lease rentals in respect of land and buildings 3,379 5,793 Provision for impairment loss on properties under development 66,667 –
and after crediting: Gross rental income from investment properties 132,201 129,269 Less: Outgoings (1,801) (6,160) Net rental income from properties 130,400 123,109 Realised gain on disposal of other investments 1,640 – Surplus on revaluation of land and buildings 82 80 Gain on disposal of property, plant and equipment 71 –
7. Finance costs 2001 2000 HK$’000 HK$’000
Interest on borrowings wholly repayable within five years: Bank loans and overdrafts 200,220 203,890 57 Other borrowings 20,942 24,152 221,162 228,042 Less: Amount capitalised as cost of properties under development at a capitalisation rate of 5.25% (2000: 6.71%) per annum (153,698) (171,622) 67,464 56,420 NOTES to the Financial Statements For the year ended 31st December 2001
8. Directors’ and employees’ emoluments 2001 2000 HK$’000 HK$’000
Directors’ fees 800 800 Other emoluments: Salary and other benefits 12,568 10,883 Retirement scheme contributions 903 145 14,271 11,828
The amounts disclosed above include emoluments of HK$400,000 (2000: HK$400,000) payable to independent non-executive directors.
Notes: (a) Emoluments of Directors were within the following bands: Range No. of directors 2001 2000
Nil to HK$1,000,000 10 11 HK$1,000,001 to HK$1,500,000 1 1 HK$2,000,001 to HK$2,500,000 1 2 HK$2,500,001 to HK$3,000,000 1 – HK$4,500,001 to HK$5,000,000 – 1 HK$6,000,001 to HK$6,500,000 1 –
(b) The five highest paid employees are all executive directors of the Company. Their emoluments have been disclosed and included in the above. (c) During the year, no emoluments were paid by the Group to the five highest paid directors as an inducement to join or upon joining the Group or as compensation for loss of office. None of the directors has waived any emoluments during the year.
58
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
9. Taxation 2001 2000 HK$’000 HK$’000
Hong Kong Profits Tax: The Company and its subsidiaries Current year 16,547 10,993 Underprovision in prior years 370 2,192
16,917 13,185 Associates 21,880 43,923 38,797 57,108 Overseas tax: The Company and its subsidiaries 2,031 1,146 Associates – 412 2,031 1,558 40,828 58,666
Hong Kong Profits Tax is calculated at 16% of the estimated assessable profits for the year.
Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.
Details of the potential deferred tax credit (charge) not provided for in the year are set out in note 27.
10. Net profit for the year Of the Group’s net profit for the year, HK$158,007,000 (2000: HK$290,661,000) has been dealt with in the financial statements of the Company.
11. Dividends 2001 2000 HK$’000 HK$’000
Interim dividend paid at HK$0.10 (2000: HK$0.14) per share 37,903 53,064 59 Proposed final dividend at HK$0.10 (2000: HK$0.21) per share 37,894 79,595 75,797 132,659
The final dividend of HK$0.10 (2000: HK$0.21) per share has been proposed by the directors and is subject to approval by the shareholders in the forthcoming general meeting.
12. Earnings per share The calculation of earnings per share is based on the net profit for the year of HK$188,106,000 (2000: HK$370,576,000) and on the weighted average number of 379,001,923 (2000: 379,026,974) shares in issue during the year. NOTES to the Financial Statements For the year ended 31st December 2001
13. Investment properties The Group The Company HK$’000 HK$’000
VALUATION At 1st January 2001 2,643,849 700,000 Deficit on revaluation (20,000) (20,000) At 31st December 2001 2,623,849 680,000
The investment properties were revalued as at 31st December 2001 on an open market value basis by Vigers Hong Kong Ltd., a firm of independent professional valuers. The resulting deficit of the Group and of the Company of approximately HK$20,000,000 (2000: surplus of HK$78,608,000 and deficit of HK$692,000 respectively) arising on revaluation have been charged to the investment property revaluation reserve respectively.
All investment properties are held for rental income under operating leases.
A summary of the carrying values of investment properties, which are all situated in Hong Kong, is as follow:
The Group The Company 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000
Held under: Long leases 2,606,849 2,626,849 680,000 700,000 Medium-term leases 17,000 17,000 – – 2,623,849 2,643,849 680,000 700,000
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ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
14. Property, plant and equipment Furniture, fixtures, Leasehold motor vehicles land and Plant and and computer buildings machinery equipment Total HK$’000 HK$’000 HK$’000 HK$’000
THE GROUP COST/VALUATION At 1st January 2001 3,874 26,895 23,786 54,555 Additions – 504 6,724 7,228 Disposals – (327) (1,256) (1,583) At 31st December 2001 3,874 27,072 29,254 60,200 COMPRISING: At cost – 27,072 29,254 56,326 At valuation 3,874 – – 3,874 3,874 27,072 29,254 60,200 ACCUMULATED DEPRECIATION At 1st January 2001 – 6,750 19,556 26,306 Charge for the year 89 2,095 2,933 5,117 Eliminations on disposals – (93) (1,256) (1,349) Surplus on revaluation (89) – – (89) At 31st December 2001 – 8,752 21,233 29,985 NET BOOK VALUES At 31st December 2001 3,874 18,320 8,021 30,215 At 31st December 2000 3,874 20,145 4,230 28,249
A summary of the net book values of land and buildings held by the Group, which are all situated in the PRC, is as follows:
2001 & 2000 HK$’000 61
Held under: Long leases 364 Medium-term leases 3,510 3,874 NOTES to the Financial Statements For the year ended 31st December 2001
14. Property, plant and equipment (Continued) Furniture, Land and fixtures, building held motor vehicles in PRC under and computer long lease equipment Total HK$’000 HK$’000 HK$’000
THE COMPANY COST/VALUATION At 1st January 2001 364 13,459 13,823 Additions – 1,987 1,987 Disposals – (1,256) (1,256) At 31st December 2001 364 14,190 14,554 COMPRISING: At cost – 14,190 14,190 At valuation 364 – 364 364 14,190 14,554 ACCUMULATED DEPRECIATION At 1st January 2001 – 10,732 10,732 Charge for the year 7 1,598 1,605 Elimination on disposals – (1,256) (1,256) Surplus on revaluation (7) – (7) At 31st December 2001 – 11,074 11,074 NET BOOK VALUES At 31st December 2001 364 3,116 3,480 At 31st December 2000 364 2,727 3,091
The land and buildings were revalued as at 31st December 2001 on an open market value basis by Vigers Hong Kong Ltd., an independent firm of professional valuers. The resulting surplus arising on revaluation of the Group amounting to HK$89,000 has been dealt with as follows: 62 (i) a surplus of HK$7,000 has been credited to the other property revaluation reserve; and (ii) a surplus of HK$82,000 has been credited to the income statement.
The resulting surplus arising on revaluation of the Company amounting to HK$7,000 has been credited to other property revaluation reserve.
The amount of land and buildings of the Group and of the Company that would have been included in the financial statements at the balance sheet date had the assets been carried at cost less accumulated depreciation
ANNUAL REPORT 2001 is approximately HK$4,775,000 and HK$189,000 (2000: HK$4,900,000 and HK$194,000), respectively.
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
15. Properties under development The Group 2001 2000 HK$’000 HK$’000
Land situated in Hong Kong and held under long lease, at cost 520,070 520,070 Land situated in the PRC and held under medium-term lease, at cost less impairment loss 587,070 653,737 1,107,140 1,173,807 Development expenditure to date 1,594,004 1,244,944 2,701,144 2,418,751
Included in properties under development is net interest capitalised of approximately HK$636,321,000 (2000: HK$482,623,000).
16. Investments in subsidiaries The Company 2001 2000 HK$’000 HK$’000
Unlisted shares/capital contribution, at cost 286,433 286,433 Less: Impairment loss (34,372) (34,372) 252,061 252,061 Amounts due from subsidiaries, less impairment loss (note) 3,327,609 2,840,366 3,579,670 3,092,427
Note: Included in the balance is an amount of HK$734,498,000 (2000: HK$644,519,000) due from a subsidiary, the repayment of which had been subordinated to a bank.
In the opinion of the Company’s directors, the amounts due from subsidiaries will not be repayable in the next twelve months of the balance sheet date and, accordingly, the amounts have been classified as non- current assets. 63 NOTES to the Financial Statements For the year ended 31st December 2001
16. Investments in subsidiaries (Continued) Particulars of the Company’s principal subsidiaries as at 31st December 2001 are as follows:
Proportion of nominal value of issued capital/registered Place of Issued capital held incorporation ordinary by the Company or registration/ share capital/ Directly Indirectly Name of subsidiary operations registered capital % % Principal activity
Liu Chong Hing Estate Hong Kong HK$10,000,000 100 – Investment holding Company, Limited
* Liu Chong Hing Godown Hong Kong HK$72,000,000 100 – Property investment Company, Limited
Liu Chong Hing Insurance Hong Kong HK$50,000,000 100 – Insurance business Company Limited
Liu Chong Hing Property Hong Kong HK$1,000,000 100 – Property management Management and and agency Agency Limited
Abaleen Enterprises Limited Hong Kong HK$100,000 100 – Property investment
Alain Limited Hong Kong HK$9,500 52.6 21.4 Investment holding
Bonsun Enterprises Limited Hong Kong HK$2,000,000 100 – Property investment
* Chong Yip Finance Limited Hong Kong HK$1,000,000 100 – Money lending
Devon Realty Limited Hong Kong HK$200 100 – Property investment
Donington Company Limited Hong Kong HK$200 100 – Property investment
64 Gem Gain Enterprises Hong Kong HK$30 100 – Investment holding Limited
Great Earnest Limited Hong Kong HK$200 100 – Property investment
Great Fun Company Limited Hong Kong HK$200 100 – Investment holding
Heng Kin Investment Hong Kong HK$2 100 – Property investment
ANNUAL REPORT 2001 Limited
Jacot Limited Hong Kong HK$2 100 – Investment holding
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
16. Investments in subsidiaries (Continued) Proportion of nominal value of issued capital/registered Place of Issued capital held incorporation ordinary by the Company or registration/ share capital/ Directly Indirectly Name of subsidiary operations registered capital % % Principal activity
Joyful Nice International Hong Kong HK$2 100 – Investment holding Investment Limited
Ko Yew Company Limited Hong Kong HK$200 100 – Property investment
Luxpolar Limited Hong Kong HK$2 – 100 Property investment
Marble Kingdom Limited Hong Kong HK$2 100 – Investment holding
Oriental Victory Investment Hong Kong HK$2 100 – Property investment Limited
Queen Profit International Hong Kong HK$61,540 83.75 – Investment holding Investment Limited
Sino Pink Development Hong Kong HK$2 100 – Property development Limited
Speed World Investment Hong Kong HK$100 – 60 Investment holding Limited
Top Team Limited Hong Kong HK$200 100 – Investment holding
Wealth Good Investment Hong Kong HK$2 100 – Investment holding Limited
* Yue Tung Ching Kee Hong Kong HK$2,000,000 100 – Property investment 65 Company Limited
* Guangzhou Chong Hing PRC RMB170,000,000 – 60 Property development Property Development Company Limited
* Maanshan Gaoke PRC RMB41,000,000 – 51.5 Manufacturing of Magnetic Material magnetic materials Company Limited NOTES to the Financial Statements For the year ended 31st December 2001
16. Investments in subsidiaries (Continued) Proportion of nominal value of issued capital/registered Place of Issued capital held incorporation ordinary by the Company or registration/ share capital/ Directly Indirectly Name of subsidiary operations registered capital % % Principal activity
Shanghai Huang Pu PRC US$27,000,000 – 70.3 Property development Liu Chong Hing Property Development Company Limited
China Link Technologies British Virgin US$100 100 – Investment holding Limited Islands/ Hong Kong
Determined Resources British Virgin US$1,000 100 – Share investment Limited Islands/ Hong Kong
Linktime International British Virgin US$10 – 60 Consultancy services Development Limited Islands/ PRC
Terryglass Limited British Virgin US$1,000 100 – Investment holding Islands/ Thailand
None of the subsidiaries had any loan capital subsisting at 31st December 2001 or at any time during the year.
The Company’s directors are of the opinion that a complete list of the particulars of all subsidiaries will be of excessive length and therefore the above list contains only the particulars of subsidiaries which principally 66 affect the results or net assets of the Group.
* The financial statements of these subsidiaries for the year ended 31st December 2001 are not audited by Messrs. Deloitte Touche Tohmatsu
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
17. Investments in associates The Group The Company 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000
Unlisted shares, at cost – – 3 3 Share of net assets of associates which are – listed in Hong Kong 2,602,476 2,571,946 – – – unlisted 2,166 2,050 – – 2,604,642 2,573,996 3 3 Amounts due from associates 517 1,200 – – 2,605,159 2,575,196 3 3 Market value of listed shares at 31st December 1,412,882 1,775,914 – –
In the opinion of the Company’s directors, the amounts due from associates will not be repayable in the next twelve months of the balance sheet date and, accordingly, the amounts have been classified as non- current assets.
Particulars of the Group’s principal associates at 31st December 2001 are as follows:
Proportion of nominal value of issued capital/ registered capital Place of held by the Company incorporation/ Class of Directly Indirectly Name of associate operations share held % % Principal activity
Liu Chong Hing Bank Hong Kong Ordinary – 45.1 Banking business Limited (listed in Hong Kong) (“LCH Bank”)
Falconmate Limited Hong Kong Ordinary 50.0 – Property investment 67 Pelham Hill Limited Hong Kong Ordinary 25.0 – Investment holding
The Company’s directors are of the opinion that a complete list of the particulars of all associates will be of excessive length and therefore the above list discloses only the particulars of those associates which principally affect the results or net assets of the Group. NOTES to the Financial Statements For the year ended 31st December 2001
17. Investments in associates (Continued)
The following details have been extracted from the audited financial statements of the Group’s principal associate, LCH Bank, and its subsidiaries (hereinafter collectively referred to as the “LCH Bank Group”).
Consolidated results of LCH Bank Group for the year ended 31st December 2001 are as follows:
2001 2000 HK$’000 HK$’000
Interest income 1,979,195 2,608,729 Interest expenses (1,182,514) (1,668,593) Net interest income 796,681 940,136 Other operating income 156,494 177,113 Operating income 953,175 1,117,249 Operating expenses (423,682) (404,568) Operating profit before provisions and disposal of long-term assets 529,493 712,681 Charge for bad and doubtful debts (136,437) (171,533) Net (losses) gains from disposal of property and equipment (843) 40 Gains less losses from disposal of other securities 15,926 13,641 Gains less losses from disposal of held-to-maturity securities 5,088 – Profit from operations 413,227 554,829 Share of results of jointly controlled entities (18,882) – Profit from ordinary activities before taxation 394,345 554,829 Taxation (48,458) (98,231) Net profit for the year 345,887 456,598
LCH Bank Group has selected the alternative treatment for securities other than held-to-maturity securities upon adoption of SSAP 24 “Accounting for investments in securities” issued by the Hong Kong Society of Accountants, under which the valuation movements of non-trading securities are dealt with in equity while those 68 of trading securities are dealt with in the income statement.
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
17. Investments in associates (Continued)
Consolidated financial position of LCH Bank Group as at 31st December 2001: 2001 2000 HK$’000 HK$’000
Assets Cash and short-term funds 14,269,839 14,558,320 Placements with banks and other financial institutions maturing between one and twelve months 3,201,738 2,780,442 Trading securities 172,335 169,790 Advances and other accounts 18,931,110 19,380,420 Held-to-maturity securities 494,874 110,573 Certificates of deposit held 476,194 128,449 Other securities 288,152 290,434 Interest in an associate 360,139 344,767 Interest in jointly controlled entities 75,668 51,800 Investment properties 47,868 34,700 Property and equipment 1,145,313 1,142,105 Total assets 39,463,230 38,991,800 Liabilities Deposits and balances of banks and other financial institutions 544,206 1,158,721 Current, fixed, savings and other deposits of customers 32,685,720 31,108,597 Certificates of deposit issued – 23,398 Other accounts and provisions 436,519 889,607 Taxation 803 83,173 Total liabilities 33,667,248 33,263,496 Net tangible assets 5,795,982 5,728,304 69 NOTES to the Financial Statements For the year ended 31st December 2001
18. Investments in securities Investment securities Other investments Total 2001 2000 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
THE GROUP Equity securities: Listed in Hong Kong – – 67,362 66,469 67,362 66,469 Listed overseas – – 797 694 797 694 Unlisted 88,390 72,888 185,324 177,801 273,714 250,689 88,390 72,888 253,483 244,964 341,873 317,852 Market value of listed securities: Listed in Hong Kong – – 67,362 66,469 67,362 66,469 Listed overseas – – 797 694 797 694 – – 68,159 67,163 68,159 67,163 Carrying amount analysed for reporting purposes as: Current – – 20,785 25,636 20,785 25,636 Non-current 88,390 72,888 232,698 219,328 321,088 292,216 88,390 72,888 253,483 244,964 341,873 317,852 THE COMPANY Equity securities: Listed in Hong Kong – – 20,785 25,636 20,785 25,636 Listed overseas – – 162 141 162 141 Unlisted 1,725 1,725 26,484 48,960 28,209 50,685 1,725 1,725 47,431 74,737 49,156 76,462 Market value of listed securities: Listed in Hong Kong – – 20,785 25,636 20,785 25,636 70 Listed overseas – – 162 141 162 141 – – 20,947 25,777 20,947 25,777 Carrying amount analysed for reporting purposes as: Current – – 20,785 25,636 20,785 25,636
ANNUAL REPORT 2001 Non-current 1,725 1,725 26,646 49,101 28,371 50,826 1,725 1,725 47,431 74,737 49,156 76,462
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
19. Advances to investee companies The advances are unsecured, bear interests at market interest rates and have no fixed repayment terms. In the opinion of the Company’s directors, the investee companies will not repay the advance in the next twelve months of the balance sheet date and, accordingly, the amounts have been classified as non-current assets. Included in the advances is an amount of approximately HK$623,809,000 (2000: HK$584,539,000) which is subordinated to the repayment of bank loans of one of the investee companies.
20. Amount due from a former subsidiary The balance represents the amount due from a former subsidiary which was engaged in property development. This subsidiary was sold by the Company to a third party in 2000. This amount is interest-free and is secured by a share charge on the former subsidiary’s entire share capital and a first floating charge on certain of its assets. The maturity of the amounts is as follows: 2001 2000 HK$’000 HK$’000
Amount due within one year, included in trade and other receivables 40,232 25,940 Amount due after one year – 29,614 40,232 55,554
21. Inventories The Group The Company 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000
Raw materials 2,065 1,372 – – Work in progress 1,479 869 – – Finished goods 8,651 10,325 1,283 2,373 12,195 12,566 1,283 2,373
The cost of inventories recognised as an expense during the year amounted to approximately HK$30,336,000 (2000: HK$42,950,000). 71 22. Trade and other receivables The Group operates a controlled credit policy and allows an average credit period of 30 – 90 days to its trade customers who satisfy the credit evaluation. The aging analysis of trade receivable of HK$64,480,000 (2000: HK$52,238,000) which are included in trade and other receivables are as follows:
2001 2000 HK$’000 HK$’000
Current 53,927 39,086 Over 30 days 4,366 6,364 Over 90 days 6,187 6,788 64,480 52,238 NOTES to the Financial Statements For the year ended 31st December 2001
23. Borrowings The Group The Company 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000
Bank loans Secured 402,215 384,868 320,000 320,000 Unsecured 1,985,000 1,635,000 1,985,000 1,635,000 Secured loan from LCH Bank Group 358,000 300,000 358,000 300,000 Secured bank overdrafts granted by LCH Bank Group 1,759 1,832 1,547 1,832 Total bank borrowings 2,746,974 2,321,700 2,664,547 2,256,832 Amount due to an associate (note) 411,605 376,064 2,009 1,794 Amounts due to minority shareholders (note) 14,317 67,090 – – 3,172,896 2,764,854 2,666,556 2,258,626 The maturity of borrowings is as follows: Bank borrowings On demand or within one year 853,974 831,832 771,547 831,832 More than one year but not exceeding two years 1,298,000 724,868 1,298,000 660,000 More than two years but not exceeding five years 595,000 765,000 595,000 765,000 2,746,974 2,321,700 2,664,547 2,256,832 Less: Amount due within one year shown under current liabilities (853,974) (831,832) (771,547) (831,832) Total bank borrowings 1,893,000 1,489,868 1,893,000 1,425,000 Amount due to associates (note) 411,605 376,064 2,009 1,794 72 Amounts due to minority shareholders (note) 14,317 67,090 – – Amounts due after one year 2,318,922 1,933,022 1,895,009 1,426,794
Note: These borrowings are unsecured, bear interest at market interest rates and have no fixed repayment terms. In the opinion of the Company’s directors, the respective creditors will not demand repayment in the next twelve months of the balance sheet date and, accordingly, the amounts have been classified as non-current liabilities.
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
24. Trade and other payables At balance sheet date, included in trade and other payables are trade payable of HK$25,711,000 (2000: HK$33,664,000) and the aging analysis are as follows: 2001 2000 HK$’000 HK$’000
Current 15,457 23,860 Over 30 days 7,697 7,931 Over 90 days 2,557 1,873 25,711 33,664
25. Share capital 2001 2000 HK$’000 HK$’000
Ordinary shares of HK$1 each Authorised: At 1st January and 31st December 600,000 600,000 Issued and fully paid: At 1st January 379,025 379,081 Shares repurchased and cancelled (82) (56) At 31st December 378,943 379,025
During the year, the Company repurchased a total 82,000 shares (2000: 56,000 shares) of HK$1 each in the Company through the Hong Kong Stock Exchange. All such shares have been cancelled and the total consideration was charged to accumulated profits as follows:
Trading Number of shares Price per share Aggregate month/year repurchased Highest Lowest consideration paid HK$ HK$ HK$’000
September 2001 82,000 4.075 3.950 327
Save as disclosed above, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s shares during the year. 73 NOTES to the Financial Statements For the year ended 31st December 2001
26. Reserves Investment Other Capital General property property Investment Capital reserve reserve Inner revaluation revaluation revaluation redemption Exchange Dividend Accumulated (Note) (Note) reserve reserve reserve reserve reserve reserve reserve profits Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
THE GROUP At 1st January 2000 – as originally stated 432,349 704,047 79,448 537,825 2,030,649 4,849 2,454 (4,944 ) – 1,477,186 5,263,863 – prior year adjustment (see note 2) ––––––––79,595–79,595 As restated 432,349 704,047 79,448 537,825 2,030,649 4,849 2,454 (4,944 ) 79,595 1,477,186 5,343,458 Share of surplus on revaluation of investments of associates –––––23,147––––23,147 Exchange differences arising on translation of overseas operations –––––––(662 ) – – (662 ) Goodwill arising on acquisition of additional interest in a subsidiary (1,664 ) –––––––––(1,664) Net surplus on revaluation – – – 78,608 170 – – – – – 78,778 Share of surplus on revaluation of properties of associates––––10,666–––––10,666 Share of exchange translation differences of associates –––––––929––929 Eliminated on disposal of a subsidiary(85)––––––(1,757)––(1,842) Net profit for the year –––––––––370,576 370,576 Dividend declared ––––––––132,659 (132,659 ) – Dividend paid ––––––––(132,659 ) – (132,659 ) Cancellation on repurchase of own shares ––––––56––(278 ) (222 ) At 1st January 2001 430,600 704,047 79,448 616,433 2,041,485 27,996 2,510 (6,434 ) 79,595 1,714,825 5,690,505 Share of deficit on revaluation of investments of associates –––––(16,446 ) – – – – (16,446 ) 74 Exchange differences arising on translation of overseas operations –––––––(1,725)––(1,725) Net (deficit) surplus on revaluation – – – (20,000 ) 7 – – – – – (19,993 ) Share of deficit on revaluation of properties of associates––––(10,880 ) – – – – – (10,880 ) Share of exchange translation differences of associates –––––––(60)––(60)
ANNUAL REPORT 2001 Net profit for the year –––––––––188,106 188,106 Dividend declared ––––––––75,797(75,797 ) – Dividend paid ––––––––(117,498 ) – (117,498 ) Cancellation on repurchase of own shares ––––––82––(327 ) (245 ) At 31st December 2001 430,600 704,047 79,448 596,433 2,030,612 11,550 2,592 (8,219 ) 37,894 1,826,807 5,711,764 Share of reserves of associates
LIU CHONG HING INVESTMENT LIMITED included above 345,886 659,047 79,448 30,197 499,494 11,550 – 2,680 – 813,038 2,441,340 FINANCIAL REPORT
26. Reserves (Continued) Investment Other Capital General property property Investment Capital reserve reserve Inner revaluation revaluation revaluation redemption Exchange Dividend Accumulated (Note) (Note) reserve reserve reserve reserve reserve reserve reserve profits Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
THE COMPANY At 1st January 2000 – as originally stated 3 – – 317,079 – – 2,454 – – 1,096,859 1,416,395 – prior year adjustment (see note 2) – – – – – – – – 79,595 (273,200 ) (193,605 ) As restated 3 – – 317,079 – – 2,454 – 79,595 823,659 1,222,790 Profit for the year – – – – – – – – – 290,661 290,661 Dividend declared – – – – – – – – 132,659 (132,659 ) – Dividend paid – – – – – – – – (132,659 ) – (132,659 ) (Deficit) surplus on revaluation – – – (692 ) 170 – ––––(522 ) Cancellation on repurchase of own shares – – – – – – 56 – – (278 ) (222 ) At 1st January 2001 3 – – 316,387 170 – 2,510 – 79,595 981,383 1,380,048 Profit for the year – – – – – – – – – 158,007 158,007 Dividend declared – – – – – – – – 75,797 (75,797 ) – Dividend paid – – – – – – – – (117,498 ) – (117,498 ) (Deficit) surplus on revaluation – – – (20,000 ) 7 – ––––(19,993 ) Cancellation on repurchase of own shares – – – – – – 82 – – (327 ) (245 ) At 31st December 2001 3 – – 296,387 177 – 2,592 – 37,894 1,063,266 1,400,319
The Company’s reserves available for distribution to shareholders at 31st December 2001 amounted to HK$1,101,160,000 (2000: HK$1,060,978,000), being its accumulated profits and dividend reserve at that date.
Note: Capital reserve represent goodwill/reserve arising on consolidation of subsidiaries and associates.
General reserve represent distributable reserves set aside by the Company’s subsidiaries and associates for future development.
75 NOTES to the Financial Statements For the year ended 31st December 2001
27. Unrecognised deferred taxation
The components of unrecognised deferred tax assets (liabilities) at the balance sheet date are as follows:
The Group The Company 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000
Tax effect of timing differences because of: Taxation losses 50,257 42,168 34,582 30,353 Excess of tax allowances over depreciation (288) (317) (369) (327) 49,969 41,851 34,213 30,026
The components of unprovided deferred tax credit (charge) for the year are as follows:
The Group The Company 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000
Tax effect of timing differences because of: Taxation losses 8,089 3,899 4,229 1,299 Excess of tax allowances over depreciation 29 225 (42) 121 8,118 4,124 4,187 1,420
The net deferred tax assets have not been recognised in the financial statements as it is not certain that the tax benefits will be realised in the foreseeable future.
Deferred taxation has not been provided on the revaluation surplus arising on the Group’s properties and the non-trading investments of its associates because profits arising on future disposal of these assets would not be subject to taxation. Accordingly, the surplus arising on revaluation does not constitute a timing difference for tax purpose.
76
ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
28. Reconciliation of profit before tax to net cash (outflow) inflow from operating activities 2001 2000 HK$’000 HK$’000
Profit before tax 197,983 427,762 Share of results of associates (173,381) (242,741) Interest expenses 67,464 56,420 Depreciation 5,117 4,713 Provision for impairment loss on properties under development 66,667 – Unrealised holding gain on other investment (20,421) (14,039) (Gain) loss on disposal of other investments (1,640) 458 Gain on disposal of property, plant and equipment (71) – Reserves eliminated on disposal of a subsidiary – (1,842) Surplus on revaluation of leasehold land and buildings (82) (80) Increase in properties under development (195,362) (124,509) Decrease (increase) in amount due from a former subsidiary 15,322 (55,554) Decrease (increase) in inventories 371 (2,169) Decrease in properties held for sale – 1,544 Decrease (increase) in trade and other receivables 6,323 (3,614) Increase in trade and other payables 25,408 9,942 Net cash (outflow) inflow from operating activities (6,302) 56,291
77 NOTES to the Financial Statements For the year ended 31st December 2001
29. Analysis of changes in financing during the year Borrowings (excluding cash and cash Share equivalents) capital HK$’000 HK$’000
At 1st January 2000 2,557,727 379,081 New borrowings raised 983,295 – Repayments (778,000) – Cash outflow for repurchase of own shares – (278) Repurchase of own shares paid out of accumulated profits – 278 Nominal value of shares cancelled transferred to capital redemption reserve – (56) At 1st January 2001 2,763,022 379,025 New borrowings raised 1,220,888 – Repayments (812,773) – Cash outflow for repurchase of own shares – (327) Repurchase of own shares paid out of accumulated profits – 327 Nominal value of shares cancelled transferred to capital redemption reserve – (82) At 31st December 2001 3,171,137 378,943
30. Share option scheme The share option scheme of the Company provides that the directors of the Company may offer to any employees (including executive directors) of the Company on any of its subsidiaries options to subscribe for shares in the Company in accordance with the terms of the share option scheme. However, no options were granted during the year or outstanding at the balance sheet date.
78 31. Pledge of assets The Group At the balance sheet date, certain properties under development and investment properties of the Group with an aggregate carrying amount of HK$1,904,000,000 (2000: HK$1,816,000,000) were pledged to banks to secure general banking facilities made available to the Group. In addition, the Group had also executed a share mortgage of its investment in an investee company with a carrying amount of HK$132,102,000 (2000: HK$102,102,000) in favour of banks against facilities granted to that investee company.
ANNUAL REPORT 2001 The Company At the balance sheet date, the investment properties of the Company with an aggregate carrying amount of HK$680,000,000 (2000: HK$700,000,000) were pledged to banks to secure general banking facilities made available to the Company. In addition, the Company also pledged the shares of a subsidiary in favour of a bank against facilities granted to that subsidiary.
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
32. Contingent liabilities At the balance sheet date, the Group and the Company had given a corporate guarantee to a bank for banking facilities amounting to HK$70,000,000 (2000: Nil) granted to an investee company.
In addition, the Company had given corporate guarantees to bank for banking facilities amounting to HK$150,000,000 (2000: HK$150,000,000) granted to a subsidiary.
33. Capital commitments The Group 2001 2000 HK$’000 HK$’000
Capital expenditure in respect of property development expenditure contracted for but not provided in the financial statements 180,079 227,758 Capital expenditure in respect of the contributions to the capital of an investee company contracted for but not provided in the financial statements 83,087 70,701 Capital expenditure in respect of the renovation works of investment properties contracted for but not provided in the financial statements 191 2,250 263,357 300,709
The Company did not have any capital commitments at the balance sheet date.
34. Operating lease commitments The Group as lessee At the balance sheet date, the Group and the Company has commitments for future minimum lease payments under non-cancellable operating leases in respect of land and buildings which fall due as follows:
The Group The Company 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000 79 Within one year 1,359 2,142 794 1,011 In the second to fifth year inclusive – 1,409 – 844 1,359 3,551 794 1,855
Operating lease payments represent rentals for certain of its office properties. Leases are negotiated for an average of two years and rentals are fixed throughout the leases period. NOTES to the Financial Statements For the year ended 31st December 2001
34. Operating lease commitments (Continued) The Group as lessor Property rental income earned during the year for the Group amounted to approximately HK$132 million (2000: HK$129 million). Most of the properties held have committed tenants for the next one to five years except that one of the leases was signed for a term of sixty years, the monthly rent of which is to be reviewed every five years. The future minimum lease payments for the remaining period of the lease term from this tenant is calculated based on the existing monthly payment.
At the balance sheet date, the Group and the Company had contracted with tenants for the following future minimum lease payments:
The Group The Company 2001 2000 2001 2000 HK$’000 HK$’000 HK$’000 HK$’000
Within one year 95,275 97,752 15,695 17,850 In the second to fifth year inclusive 51,339 110,975 13,542 25,784 After five years 61,618 62,938 – – 208,232 271,665 29,237 43,634
35. Retirement benefits scheme The Group operates a defined contribution retirement benefits scheme (the “ORSO Scheme”) for the qualifying employees of certain companies in the Group and in December 2000, enrolled all other eligible employees into a Mandatory Provident Fund (“MPF”) Scheme. The ORSO Scheme is registered under the Occupation Retirement Schemes Ordinance. The assets of both schemes are held separately from those of the Group in funds under the control of trustees.
The contributions payable to the fund by the Group are charged to income statement at rates specified in the rules of the ORSO Scheme. Where there are employees who leave the ORSO Scheme prior to vesting fully in the contributions, the contributions payable by the Group are reduced by the amount of forfeited contributions. At the balance sheet date, there was no forfeited contributions (2000: HK$149,000) arising upon employees leaving the ORSO Scheme which are available to reduce the contributions payable in the future years.
The retirement benefit cost for the MPF charged to the income statement represents contributions payable to the fund by the Group at rates specified in the rules of the MPF Scheme.
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ANNUAL REPORT 2001
LIU CHONG HING INVESTMENT LIMITED FINANCIAL REPORT
36. Related party disclosures During the year, the Group entered into the following significant transactions with related parties:
2001 2000 HK$’000 HK$’000
Income receivable from an associate Rental income 6,631 5,435 Management and other service fee income 3,119 2,547 Interest income 1,707 2,804 Insurance income 2,806 2,426 14,263 13,212 Expenses payable to an associate Interest expenses 16,931 22,696 Rental expenses 2,100 2,160 19,031 24,856
The prices of the above transactions were determined by the directors with reference to market prices or prices for similar transactions with unrelated third parties.
In addition, at 31st December 2001, the Group and the Company had outstanding balances with related parties, details of which are set out in the balance sheets, notes 16, 17, 19 and 23 respectively.
Further, at 31st December 2001 certain investment properties of the Group with an aggregate net book value of HK$407 million (2000: HK$407 million) have been pledged to the LCH Bank Group to secure banking facilities granted to the Group.
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