Report of ofthe Directorsthe Directors (continued) The directors present herewith their report together with the audited accounts for the year ended 31 December 1999. PRINCIPAL ACTIVITIES The principal activity of the Company is investment holding. Its subsidiaries are principally engaged in the export trading of consumer products. No analysis of the Group’s turnover and contribution to operating profit for the year by principal activities is provided as over 90% of the Group’s turnover and contribution to operating profit are attributable to the export trading of consumer products. An analysis of the Group’s turnover for the year by principal markets is as follows: HK$’000 Principal markets: USA 11,138,791 European Union 4,500,327 Asia Pacific 400,167 Other countries 258,216 16,297,501 No analysis of contribution to operating profit by geographical location has been prepared as no contribution to operating profit from any of the above geographical locations is substantially out of line with the normal ratio of profit to turnover. SHARE CAPITAL At a special general meeting of the Company held on 12 October 1999, an ordinary resolution was duly passed under which each of the existing issued and unissued shares of HK$0.1 each in the share capital of the Company as of that date was subdivided (the “Share Subdivision”) into two shares of HK$0.05 each (the “Share”). Details of movements in share capital and share options of the Company are set out in note 17 to the accounts. RESULTS AND APPROPRIATION The results of the Group for the year are set out in the consolidated profit and loss account on page 27. The directors have declared an interim dividend of HK$0.09 per Share, as adjusted for the effect of the Share Subdivision, totalling HK$116,355,000 which was paid on 10 September 1999. The directors recommend the payment of a final dividend of HK$0.25 per Share, totalling HK$324,650,000. Li & Fung Limited13 Annual Report 1999 Report of the Directors (continued) RESERVES Movements in the reserves of the Group and the Company during the year are set out in note 18 to the accounts. DONATIONS Donations made by the Group during the year amounted to HK$236,000. FIXED ASSETS Details of the movements in fixed assets are set out in note 10 to the accounts. FIVE YEAR FINANCIAL SUMMARY The following table summarises the results, assets and liabilities of the Group for the five years ended 31 December 1999. 1999 1998 1997 1996 1995 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Profit attributable to shareholders 574,638 455,168 375,105 300,102 225,383 Total assets 4,211,168 3,443,725 3,184,889 2,892,369 2,313,849 Total liabilities (3,392,597) (2,374,264) (2,216,273) (1,999,262) (1,855,983) Minority interests (4,460) 24,595 20,486 18,531 15,198 Shareholders’ funds 814,111 1,094,056 989,102 911,638 473,064 PRE-EMPTIVE RIGHTS There are no provisions for pre-emptive rights under the Company’s bye-laws although there are no restrictions against such rights under the laws in Bermuda. PURCHASE, SALE AND REDEMPTION OF THE COMPANY’S LISTED SECURITIES The Company has not redeemed any of its listed securities during the year. Neither the Company nor any of its subsidiaries has purchased or sold any of the Company’s listed securities during the year. SUBSIDIARIES Details of the Company’s principal subsidiaries at 31 December 1999 are set out on pages 54 to 60. ASSOCIATED COMPANIES Details of the Company’s principal associated companies at 31 December 1999 are set out on page 61. Li & Fung Limited14 Annual Report 1999 Report of the Directors (continued) BANK LOANS, OVERDRAFTS AND OTHER BORROWINGS The Group’s bank loans, overdrafts and other borrowings as at 31 December 1999 are repayable over the following periods: Bank loans Other and borrowings overdrafts HK$’000 HK$’000 On demand or not exceeding one year – 193,280 More than one year but not exceeding two years 8,970 124,663 More than two years but not exceeding five years 26,910 254,325 35,880 572,268 ANALYSIS OF GROUP’S PERFORMANCE An analysis of the Group’s performance is shown in the managing director’s report on pages 10 to 12. MAJOR CUSTOMERS AND SUPPLIERS The percentage of sales for the year attributable to the Group’s major customers are as follows: % Sales The largest customer 9.2 Five largest customers combined 30.0 No directors, their associates or shareholders (which to the knowledge of the directors own more than 5% of the Company’s issued share capital) had an interest in the customers noted above. The aggregate percentages of purchases for the year ended 31 December 1999 attributable to the Group’s five largest suppliers are less than 30% of total purchases and therefore no additional disclosure with regard to major suppliers are made. PENSION SCHEME ARRANGEMENTS The Group operates a defined contribution provident scheme (the “Scheme”) for its employees. Under the Scheme, the contribution to the defined contribution provident funds is at 5% of the employees’ basic salaries. The Scheme is funded by the Group and cover all permanent full-time employees of the Group in Hong Kong and certain countries outside Hong Kong. The Scheme is administered by independent trustees. No employee contributions are required under the Scheme. Contribution forfeited by those employees who leave the Scheme prior to vesting fully in the contributions are used by the Group to reduce the existing level of contributions. Li & Fung Limited15 Annual Report 1999 Report of the Directors (continued) PENSION SCHEME ARRANGEMENTS (CONT’D) The provident fund schemes for staff of the Group in other countries follow the local statutory requirements of the respective countries. During the year, the Group’s pension scheme contributions were as follows: 1999 1998 HK$’000 HK$’000 Contribution based on 5% of employees’ basic salaries under the defined contribution scheme 15,697 14,027 Contribution forfeited by employees used to reduce the Group’s existing level of contribution under the defined contribution scheme (1,857) (2,329) Contribution pursuant to overseas statutory requirements 8,176 6,709 22,016 18,407 At 31 December 1999 and 1998, the forfeited contributions available to offset future employer’s contributions to the Scheme are not material to the Group’s results. DISTRIBUTABLE RESERVES At 31 December 1999, the distributable reserves of the Company available for distribution as dividends amount to HK$327,541,000. Li & Fung Limited16 Annual Report 1999 Report of the Directors (continued) DIRECTORS The directors during the year were: Dr Victor FUNG Kwok King, Chairman † Mr William FUNG Kwok Lun, Managing Director Mr Henry CHAN Mr Danny LAU Sai Wing Mr Paul Edward SELWAY-SWIFT * Mr LAU Butt Farn † Mr Allan WONG Chi Yun * (appointed on 30 March 1999) Professor Franklin Warren McFARLAN * (appointed on 19 August 1999) Mr Leslie BOYD † (appointed on 13 October 1999) Mr Steven Murray SMALL † (alternate to Mr Leslie BOYD) Mr CHUNG Po Yang * (resigned on 30 June 1999) Sir Anthony HAYWARD * (resigned on 18 May 1999) Mr Paul Edward SELWAY-SWIFT and Mr LAU Butt Farn retire in accordance with bye-law 110 of the Company’s bye-laws and, being eligible, offer themselves for re-election. Professor Franklin Warren McFARLAN and Mr Leslie BOYD retire in accordance with bye-law 101 of the Company’s bye-laws and, being eligible, offer themselves for re-election. * independent non-executive directors + non-executive directors The biographical details of directors of the Company are set out as follows: Victor FUNG Kwok King Victor FUNG Kwok King, aged 54, brother of Mr William FUNG Kwok Lun, is the Group Chairman. He joined the Group in 1973 as a Manager and became the Managing Director of the Group’s export trading business in 1977. He became Group Managing Director in 1981 and Group Chairman in 1989. He holds a bachelor of science and a master of science degree in electrical engineering from the Massachusetts Institute of Technology and a doctorate from Harvard University. Dr Fung is currently the Chairman of the Hong Kong Trade Development Council and the Hong Kong Airport Authority. He is active on a number of Government advisory boards including the Judicial Officers Recommendation Commission. He is also the Chairman of Prudential Asia Investments Limited. Li & Fung Limited17 Annual Report 1999 Report of the Directors (continued) DIRECTORS (CONT’D) William FUNG Kwok Lun William FUNG Kwok Lun, OBE, JP, aged 51, brother of Dr Victor FUNG Kwok King, is the Group Managing Director. He joined the Group in 1972 and became a Director of the Group’s export trading business in 1976. He became the Group Managing Director in 1986. Mr Fung graduated from Princeton University with a bachelor of science degree in engineering and holds an MBA degree from the Harvard Graduate School of Business. He has been awarded the degree of Doctor of Business Administration, honoris causa by the Hong Kong University of Science & Technology. Mr Fung is a non-executive director of HSBC Holdings Plc and CLP Holdings Limited. He is a past Chairman of the Hong Kong General Chamber of Commerce and a past Chairman of the Hong Kong Exporters’ Association. He is the Chairman of the Hong Kong Committee for Pacific Economic Cooperation and is a member of the Economic Advisory Committee to the Financial Secretary. Mr Fung is a Hong Kong Special Administrative Region delegate to the Chinese People’s Political Consultative Conference.