k & p international holdings limited

ANNUAL REPORT 2002

K & P INTERNATIONALHOLDINGS LIMITED(Incorporated in Bermuda with limited liability)

Brought to you by Global Reports

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K & P INTERNATIONAL HOLDINGS LIMITED • ANNUAL REPORT 2002

Contents

Corporate Information 2

Financial Highlights 3

Chairman’s Statement 4-6

Management Discussion and Analysis 7-8

Biographical Details of Directors and Senior Management 9-10

Notice of Annual General Meeting 11-14

Report of the Directors 15-20

Report of the Auditors 21

Consolidated Profit and Loss Account 22

Consolidated Balance Sheet 23

Consolidated Statement of Changes in Equity 24

Consolidated Cash Flow Statement 25-26

Balance Sheet 27

Notes to the Financial Statements 28-65

Five Year Financial Summary 66


ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDI NGS LIMITED

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Corporate Information

BOARD OF DIRECTORS

Executive directors

Lai Pei Wor (Chairman)

Chan Yau Wah

Chung Yik Cheung, Raymond

Independent non-executive directors

Tsao Kwang Yung, Peter

Kung Fan Cheong

COMPANY SECRETARY


AUDITORS

Ernst & Young

Certified Public Accountants

PRINCIPAL BANKERS

Dao Heng Bank Limited

The Bank of East Asia, Limited

Standard Chartered Bank

The Hongkong and Shanghai Banking

Corporation Limited

PRINCIPAL SHARE REGISTRARS AND TRANSFER OFFICE

Butterfield Corporate Services Limited

Rosebank Centre

14 Bermudiana Road

Pembroke

Bermuda

HONG KONG BRANCH SHARE

REGISTRARS AND TRANSFER OFFICE

Tengis Limited

Ground Floor

Bank of East Asia Harbour View Centre

56 Gloucester Road

Wanchai

Hong Kong

HONG KONG LEGAL ADVISERS

Richards Butler

BERMUDA LEGAL ADVISERS

Conyers Dill & Pearman

REGISTERED OFFICE

Clarendon House

2 Church Street

Hamilton HM 11

Bermuda

HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS

Units 2304-06

23rd Floor

Riley House

88 Lei Muk Road

Kwai Chung

New Territories

Hong Kong


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Financial Highl ights

HK$’ million

2002 2001

Turnover HK$200.7 million HK$187.0 million

Net profit/(loss) attributable to shareholders HK$1.1 million HK$(10.6) million

Basic earnings/(loss) per share HK0.42 cents HK(4.23) cents

Tangible fixed assets HK$86.3 million HK$88.3 million

Shareholders’ funds HK$101.3 million HK$100.6 million

2002 2001

Electronic and related

components and parts 55.8% 54.0%

Consumer electronic

products 44.2% 46.0%

Total 100.0% 100.0%

TURNOVER BY BUSINESS SEGMENT

2002 2001

The People’s Republic

of China 41.1% 43.8%

Other countries in Asia 17.4% 10.5%

Europe 36.1% 42.5%

North America 2.6% 2.0%

Others 2.8% 1.2%

Total 100.0% 100.0%

TURNOVER BY GEOGRAPHICAL SEGMENT

Turnover

Net profit/(loss) attributable to shareholders

TURNOVER/NET PROFIT/(LOSS)ATTRIBUTABLE TO SHAREHOLDERS

2002 2001

2002 2001

250

200

150

100

50

0

-50

1998 1999 2000 2001 2002



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Chairman ’s Statement

On behalf of the Board of Directors (the “Directors”), I am pleased to report the annual results of the Company together

with the subsidiaries (collectively the “Group”) for the year ended 31 December 2002.

FINANCIAL RESULTS

For the year ended 31 December 2002, the Group’s turnover reached HK$200.7 million, representing a 7.4% increase over

the previous year. Overall gross profit margin was also improved and increased from approximately HK$29.4 million in the

previous year to approximately HK$33.0 million this year. Net profit attributable to shareholders was approximately HK$1.1

million (2001: HK$10.6 million net loss).

Basic earnings per share for the year ended 31 December 2002 amounted to HK0.42 cents (2001: HK4.23 cents loss per

share)

BUSINESS REVIEW

Electronic and related components and parts segment

The Group’s electronic and related components and parts segment comprises manufacture and sale of keypads, synthetic

rubber and plastic components and parts, and liquid crystal displays. In the year under review, sales turnover of this

segment has increased by approximately 11% as compared with the previous financial year.

During the financial year under review, the global economy remained sluggish. In spite of the poor economic situation, the

Group obtained steady orders from its established customers and has successfully secured orders from new customers. As

mentioned in the last annual report, the Group’s near term goal is to capture opportunities in Mainland China following its

accession to the World Trade Organization. Our continued marketing effort in China has resulted in increased sales turnover

to this market during the year.

The products of this segment are major critical components and parts for high value consumer products. Due to keen

market competition, the Group has faced with pressures from both customers and competitors in the market. This leads to

reduction in the gross profit margin of the existing products of this segment.

Since the previous two years, we have continued our strategy to become a global supplier of critical precision components

and parts and therefore have recruited a team of sales and marketing professionals for serving overseas customers and

multinational corporations. With broadened overseas customers base, we believe that our overseas marketing team would

start contributing profit to the Group in the coming year.


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Consumer electronic products segment

The consumer electronic products segment has achieved approximately 3% increase in sales turnover from the previous

year. Although the sales level remained at approximately the same level as last year, the operating results of this segment

have been improving through the continuous efforts of the management in cost reduction and development of new value

added products for customers’ selection.

European market has been the major market of the consumer electronic products segment. In the first half of the year

under review, the sales turnover of this segment to the European market was approximately 13.2% lower than the

corresponding period in the previous year. However, in the second half of the year under review, the sales to the European

market have returned to a satisfactory level and the overall sales turnover for the year is not much different from that of last

year significantly.

With the strengthening of Euro dollars, we are optimistic that the demand from the European market and hence the

growth of our sales turnover to the same would sustain.

In the past years, we have increased marketing efforts to potential customers in Asian region and have succeeded in

developing business with several large OEM Japanese customers. We are pleased to report the sales to the Japanese

market have been increased by more than 2.5 times from last year.

Investment

In April 2000, the Group made a strategic long term investment in a software development company Xteam Software

International Limited (“Xteam”) with the intention to develop certain operating software system jointly with Xteam for the

Group’s new consumer electronic product lines. Owing to changes in market condition, the Directors decided to end such

new product’s development. As a result, during the year under review, the Group disposed of all of the investment in

Xteam and has realized a net capital gain on this long term investment of approximately HK$9.3 million.

On 29 October 2002, the Group’s wholly-owned subsidiary Technology Trends International Limited (“TTI”) entered into a

memorandum of understanding with YOUEAL Electronics Co. Limited (“YouEal”) for the formation of a joint venture

company in Mainland China for the manufacture and sale of mobile phone keypads. YouEal is a Korean company with its

share listed on KOSDAQ Stock Market and is principally engaged in the design and manufacture of mobile phone keypads

and inter-connectors to transmit electric signals to LCDs.

Subsequent to the balance sheet date, on 20 February 2003, TTI finalized and entered into a shareholders’ agreement with

YouEal and You Eal (China) Ltd. to, among other matters, regulate the respective rights and obligations of the shareholders

and the arrangements between them with respect to the ownership, management and operations of the joint venture

company (the “JV”). The JV company is owned as to 41% by the Group and is treated as an associated company of the

Company. The aggregate amount to be contributed by the Group in funding the JV company would be US$4.1 million.

The JV was formed as a special vehicle to act as the holding company of a wholly foreign-owned enterprise (the “WFOE”)

established in Tianjin, the PRC. The scope of business of the WFOE is manufacturing and sale of mobile phone keypads.



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FUTURE PLAN AND PROSPECTS

Leveraging on the experience of the Group in the manufacture and sale of electronic components and parts including

keypads, the Directors consider that the investment in the manufacture of mobile phone keypads through the JV company

would create a synergy effect to the Group’s existing business. The Directors are also of the view that the experience and

expertise in the manufacture of mobile phone keypads of YouEal would certainly be beneficial to the WFOE.

In order to enhance the profit margin of the electronic and related components and parts segment, we have been developing

products with new value added features for meeting demand from our customers. During the year, new machines were

acquired and facilities are set up for the manufacture of certain newly developed products. It is expected that the new

products would bring additional revenue and profit to the Group in year 2003.

We have also been developing consumer electronic products with new features for our customer’s selection and have

planned to launch several new products in the near future. We are confident that the performance of the consumer

electronic products segment would improve significantly in the coming year.

APPRECIATION

On behalf of the Board, I would like to express my thanks and gratitude to all our staff for their loyalty and hard work and

to our suppliers, customers and shareholders for their continued support.

Lai Pei Wor

Chairman

Hong Kong, 25 April 2003


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Management Discussion and Analysis

LIQUIDITY AND FINANCIAL RESOURCES

The Group generally finances its operations with internally generated cashflow and banking facilities provided by its principal

bankers and other financial institutions in Hong Kong.

The Group currently has aggregate composite banking facilities of approximately HK$83.9 million with various banks and

financial institutions. The total borrowings from banks and financial institutions include long term loans, finance leases,

overdraft, import and export loans, amounted to approximately HK$46.2 million as at 31 December 2002, of which

HK$37.7 million is repayable in 2003.

The Group’s financial position remains healthy. At the balance sheet date, the aggregate balance of cash, cash equivalents

and pledged deposits of the Group amounted to approximately HK$22.7 million.

The Group’s borrowings are mainly on a floating rate basis and are mainly denominated in either Hong Kong dollars or

United States dollars. These match with the principal currencies in which the Group conducts it business. Therefore, the

Group does not have any significant foreign exchange risk.

The gearing ratio on the basis of total debts to total assets as at 31 December 2002 is 46.0% (2001: 42.3%).

CHARGE ON THE GROUP ASSETS

Certain bank borrowings are secured by fixed charges over the Group’s medium term leasehold land and buildings with

aggregate net book value of HK$26.7 million and bank deposits amounting to approximately HK$8.2 million.

CONTINGENT LIABILITIES

Except for corporate guarantee given to banks and other financial institutions in relation to facilities granted to the subsidiaries,

the Company has no other contingent liabilities as at the balance sheet date.

CAPITAL STRUCTURE

As at 31 December 2002, the Company had approximately 250 million shares in issue with total shareholders’ fund of the

Group amounting to approximately HK$101.3 million.

During the prior year, on 16 March 2001, the Company issued 30 million warrants (the “Warrants”) with issue price of

HK$0.05 each to several independent investors. The Warrants entitle the holders to subscribe for new shares of the

Company at a price of HK$0.30 per share from March 2001 to March 2003. Subsequent to the balance sheet date, none of

these warrants was exercised and all of them were lapsed and cancelled on the expiry date on 15 March 2003.

Pursuant to the share option scheme (the “Old Scheme”) which was approved at a special general meeting of the Company

held on 4 December 1996, the Board of Directors granted share options to certain senior executives and employees of the

Group. Details of the share options granted are disclosed in note 30 to the financial statements. The exercise in full of these

share options would result in the issue of 15.5 million additional shares and proceeds of approximately HK$2.5 million.



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Management Discussion and Analysis

During the year, on 27 May 2002, the Old Scheme was terminated and replaced by a new share option scheme (the “New

Sheme”) for compliance with the amendments to the Listing Rules effective from 1 September 2002. A summary of the

Group’s share option schemes is detailed in note 30 to the financial statements. The New Scheme permits the Company

to grant options to a wider category of eligible participants.

FUND RAISING

Subsequent to the balance sheet date on 3 March 2003, the Company entered into separate subscription agreements with

several independent investors, pursuant to which these investors agreed to subscribe for unlisted convertible notes issued

by the Company with principal amount aggregating US$1,282,500 (equivalent to approximately HK$10,003,500). These

convertible notes bear interest at 2% per annum and are convertible into shares of the Company at an initial conversion

price of HK$0.40 per share, subject to adjustment, during the period commencing from the date falling 24 months after the

date of issue of the convertible notes on 17 March 2003, up to and including the day immediately prior to the maturity date

of the convertible note.

Under the same agreements, the investors have also agreed to subscribe for unlisted loan notes issued by the Company

with principal amount aggregating US$1,282,500 (equivalent to approximately HK$10,003,500). These loan notes bear

interest at 5% per annum, but are not convertible into shares of the Company.

The net proceeds of US$2,529,744 (equivalent to approximately HK$19,732,000) from the issue of these notes would be

used to finance the Group’s investment in the associate, YOUEAL TTI Limited.

The maturity dates of these convertible notes and loan notes are 27 months and 24 months, respectively, from the date of

issue on 17 March 2003. The outstanding convertible notes and loan notes, if any, will be redeemed at maturity by the

Company at 132.25% and 114%, respectively.

EMPLOYEES

As at 31 December 2002, the Group available to it a total workforce of approximately 2,340 of which approximately 60

were based in Hong Kong, approximately 20 were based in Singapore and approximately 2,260 were based in the PRC.

The Group remunerates its employees largely based on the prevailing industry practice and labor laws. Since December

1996, the Company has adopted a share option scheme (the “Old Scheme”) for the purpose of providing incentives and

rewards to the employees of the Group. The Old Scheme was terminated and replaced by a new share option scheme (the

“New Scheme”) during the year on 27 May, 2002 as mentioned in the section “Capital Structure” above.

Moreover, under the Mandatory Provident Fund Scheme Ordinance of Hong Kong, the Group operates a defined contribution

Mandatory Provident Fund retirement benefits scheme for all its Hong Kong employees. For overseas and PRC employees,

the Group is required to contribute a certain percentage of its payroll costs to the central pension scheme operated by the

respective local government.


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Biographical Details of Directors and Senior Management

Biographical details of the directors and senior management of the Group are set out as follows:

EXECUTIVE DIRECTORS

Mr. Lai Pei Wor, aged 46, is the Chairman and Managing Director of the Company. He is the founder of the Group and has

over 21 years’ experience in the industry. He is responsible for the Group’s overall strategic planning, policy making and

finance.

Mr. Chan Yau Wah, aged 44, is responsible for the overall management and operation of the Group’s manufacturing

activities in the PRC. He holds a higher diploma in production and industrial engineering from The Hong Kong Polytechnic

(now known as The Hong Kong Poly technic University) and a diploma in management studies from the Hong Kong

Management Association. Mr. Chan has 21 years’ experience in the electronics industry and joined the Group in December

1990.

Mr. Chung Yik Cheung, Raymond, aged 46, is the company secretary and financial controller of the Group. He holds a

bachelor’s degree in social sciences from the University of Hong Kong and a master degree of business in electronic

business from Curtin University, Australia. He is a fellow member of The Chartered Association of Certified Accountants

and Hong Kong Society of Accountants, and a member of the Institute of Canadian Chartered Accountants. He has over 21

years’ experience in management, accounting and finance and joined the Group in December 1995.

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. Tsao Kwang Yung, Peter, CBE, CPM, aged 69, was the former Secretary for Home Affairs of the Hong Kong Government.

He graduated from National College of Food Technology in London in 1960. In 1977, Mr. Tsao was appointed as the special

envoy to Geneva and became the head of the Trade and Industry Department in 1981. In 1983, Mr. Tsao headed the

Government Information Services and in 1988 he was appointed as the Secretary for Home Affairs from which post he

retired in February 1992. He is currently the chairman of Prima Consultants Limited and a director of a number of companies

in Hong Kong and the United Kingdom.

Mr. Kung Fan Cheong, aged 48, is a partner in the law firm of Pang, Kung & Co. and is a member of The Law Society of Hong

Kong and The Law Society of England & Wales.



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Biographical Details of Directors and Senior Management

SENIOR MANAGEMENT

Mr. Ong Hui Lake, Philip, aged 42, chief operations officer of the Singapore Branch of Technology Trends International

Limited, a subsidiary of the Group formed after the balance sheet date. He is responsible for the worldwide marketing and

sales office operations of the Group’s electronic and related components and parts business. Mr. Ong was educated in the

United States and has exposure to the business culture of the United States and Mexico for over ten years. He has

experience in the critical components and parts industry for over six years, in setting up manufacturing operations in

Mexico and is well versed in business between Mexico and Asia. He joined the Group in December 2000.

Mr. Wong Man Kit, aged 43, is the marketing director of Hi-Tech Silicone Rubber Manufactory Limited, a subsidiary of the

Group, and is responsible for the marketing of silicone rubber products. Mr. Wong has over 19 years’ experience in the

electronics industry.

Mr. Li Kam Keung, aged 42, is the production manager of the silicone rubber division of the Group. He has over 16 years’

experience in production and management.

Mr. Tam Ho Chuen, Thomas, aged 35, is the marketing director of Hideki Time Corporation Limited, a subsidiary of the

Group, and is responsible for the marketing and development of the Group’s consumer electronic products. He holds a

bachelor of electronic engineering from Columbia University, U.S.A., a master degree of electronic engineering from University

of New South Wales, Australia and a master degree of business administration from City University of Hong Kong. He has

over 10 years’ experience in information technology field and consumer electronic sector. He joined the Group in July

2002.

Mr. Wong Sek Hung, Lewis, aged 41, senior R & D manager, holds a master electrical engineering degree from the University

of Wisconsin (Madison) U.S.A.. He has 17 years’ experience in electronics industry and 10 years’ experience in engineering

management and project development in telecommunication, consumer electronics, electronic toys, security products,

electronic organizers and OEM products. Mr. Wong joined the Group in December 1997 and is responsible for the research

and development of the Group’s consumer electronic products.

Mr. Woo Sau Ip, aged 44, is the manager of the mould division of the Group. He joined the Group in July 1989 and has over

20 years’ experience in mould manufacturing and management.

Mr. Lim Chee Shuan, Kelvin aged 36, is the executive director of Hi-Tech Polymer Limited, a subsidiary of the Group. He

holds a bachelor of Technology in manufacturing engineering from the National University of Singapore. He has over 13

years of experience in the synthetic precision rubber components manufacturing industries.

Mr. Chung Ting Wai, aged 46, is the production manager of the plastic division of the Group. He joined the Group in April

1985 and has over 26 years’ experience in mould manufacturing.


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Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that an Annual General Meeting of the members of the Company will be held at Ballroom B,

2nd Floor, Great Eagle Hotel, 8 Peking Road, Tsimshatsui, Kowloon, Hong Kong on Friday, 6 June 2003 at 10:00 a.m. for the

following purposes:

1. To receive and consider the Audited Financial Statements and the Reports of the Directors and of the Auditors for the

year ended 31 December 2002;

2. To re-elect Director, to authorise the Board to fix the Directors’ remuneration and to set a maximum number of

Directors;

3. To re-appoint Auditors and to authorise the Board to fix their remuneration;

4. To consider and, if thought fit, pass with or without amendments, the following resolution as an ordinary resolution:

“THAT

(a) the creation and issue of four separate series of convertible loan notes in the principal amounts of US$1,242,188,

US$3,125, US$4,687 and US$32,500, respectively (the “Notes”) by the Company convertible into new ordinary

shares of nominal value of HK$0.10 each in the capital of the Company (“Shares”) at the initial conversion

price (with conversion price is subject to adjustment upon the occurrence of certain events as specified in the

Instrument (as defined below)) of HK$0.40 per Share in accordance with the terms and conditions contained

in four separate subscription agreements each dated 3 March 2003 (the “Subscription Agreements”) entered

into between the Company (as issuer) and each of MC Capital B.V., Naomichi Komuro, Ma So Lan, Ivy and First

Idea Holdings Limited (each as subscriber), copies of which are produced to the meeting and marked “A”, “B”,

“C” and “D”, respectively and initialled by the chairman of the meeting for the purpose of identification and

subject to the terms and conditions contained in the respective instruments each dated 3 March 2003 constituting

the relevant Notes (the “Instruments”), copies of which are produced to the meeting and marked “E”, “F”, “G”

and “H” and initialled by the chairman of the meeting for the purpose of identification;

(b) upon exercise from time to time of the conversion rights attached to the Notes, the allotment and issue of

Shares pursuant to and in accordance with the terms and conditions of the Instruments and the Notes; and

(c) the entering into by the Company of the Subscription Agreements and the execution by the Company of the

Instruments,

be and are hereby approved, confirmed and ratified AND THAT any director of the Company or the directors of the

Company (the “Directors”) acting together or by committee be and are hereby authorised to do on behalf of the

Company whatever such Director and Directors (as the case may be) may, in his, her or their (as the case may be)

absolute discretion, consider necessary, desirable or expedient for the purpose of, or in connection with, the

performance and implementation by the Company of the Subscription Agreements and the Instruments, and the

allotment and issue of the Notes and of the Shares pursuant to the terms of the Instruments and the Notes.”;



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5. To consider and, if thought fit, pass with or without amendments, the following resolution as an Ordinary Resolution:

“THAT

(a) the exercise by the Directors during the Relevant Period of all the powers of the Company to purchase its

shares, subject to and in accordance with the applicable laws, be and is hereby generally and unconditionally

approved;

(b) the total nominal amount of the shares to be purchased pursuant to the approval in paragraph (a) above shall

not exceed 10% of the total nominal amount of the share capital of the Company in issue on the date of this

Resolution, and the said approval shall be limited accordingly; and

(c) for the purpose of this Resolution, “Relevant Period” means the period from the passing of this Resolution until

whichever is the earlier of:

(i) the conclusion of the next Annual General Meeting of the Company;

(ii) the revocation or variation of the authority given under this Resolution by Ordinary Resolution of the

members in general meetings; and

(iii) the expiration of the period within which the next Annual General Meeting of the Company is required by

the Bye-laws of the Company or any applicable laws to be held.”;


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“THAT

(a) the exercise by the Directors during the Relevant Period of all the powers of the Company to issue, allot and

dispose of additional shares of the Company and to make or grant offers, agreements and options which

would or might require shares to be allotted, issued or disposed of during or after the end of the Relevant

Period be and is hereby generally and unconditionally approved, provided that, otherwise than pursuant to a

rights issue where shares are offered to members on a fixed record date in proportion to their then holdings of

shares (subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in

relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the

requirements of any recognised regulatory body or any stock exchange in any territory outside Hong Kong) or

any option scheme or similar arrangement for the time being adopted for the grant or issue to officers and /or

employees of the Company and/or any of its subsidiaries and/or any eligible grantee pursuant to the scheme

of shares or rights to acquire shares of the Company, or any scrip dividend scheme or similar arrangement

providing for the allotment of shares in lieu of the whole or part of a dividend on shares of the Company in

accordance with the Bye-laws of the Company, the total nominal amount of additional shares issued, allotted,

disposed of or agreed conditionally or unconditionally to be issued, allotted or disposed of (whether pursuant

to an option or otherwise) shall not in total exceed 20% of the total nominal amount of the share capital of the

Company in issue on the date of this Resolution and the said approval shall be limited accordingly; and

(b) for the purpose of this Resolution, “Relevant Period” means the period from the passing of this Resolution until

whichever is the earlier of:

(i) the conclusion of the next Annual General Meeting of the Company;

(ii) the revocation or variation of the authority given under this Resolution by Ordinary Resolution of the

members in general meetings; and

(iii) the expiration of the period within which the next Annual General Meeting of the Company is required by

the Bye-laws of the Company or any applicable laws to be held.”; and



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“THAT the general mandate granted to the Directors of the Company and for the time being in force to exercise the

powers of the Company to issue, allot and otherwise dispose of additional shares and to make or grant offers,

agreements and options which might require the exercise of such powers be and is hereby extended by total nominal

amount of shares in the capital of the Company which has been repurchased by the Company since the granting of

such general mandate pursuant to the exercise by the Directors of the Company of the powers of the Company to

purchase such shares, provided that such amount shall not exceed 10% of the total nominal amount of the share

capital of the Company in issue on the date of this Resolution.”.

BY ORDER OF THE BOARD


Secretary

Hong Kong, 25 April 2003

Notes:

(a) The Register of Members will be closed from Tuesday, 3 June 2003 to Friday, 6 June 2003, both days inclusive, during which periodno transfer of shares can be registered. In order to qualify for attending the meeting, all transfers accompanied by the relevant sharecertificates must be lodged with the Company’s Branch Registrars in Hong Kong, Tengis Limited at G/F, Bank of East Asia HarbourView Centre, 56 Gloucester Road, Wanchai, Hong Kong not later than 4:00 p.m. on Monday, 2 June 2003.

(b) A member entitled to attend and vote at the above meeting is entitled to appoint one or more proxies to attend and, in the eventof a poll, vote on his behalf. A proxy need not be a member of the Company.

(c) The instrument appointing a proxy and the power of attorney or other authority, if any, under which it is signed, or a notariallycertified copy of such power or authority, must be lodged with the Company’s Branch Registrars in Hong Kong, Tengis Limited atG/F, Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong not less than 48 hours before the time fixedfor holding the meeting.

(d) An explanatory statement containing further details regarding items 5 to 7 above will be sent to members together with the 2002Annual Report.


15


Report of the Directors

The directors herein present their report and the audited financial statements of the Company and the Group for the year

ended 31 December 2002.

PRINCIPAL ACTIVITIES

The principal activity of the Company is investment holding.

The principal activities of the subsidiaries comprise the manufacture and sale of electronic and related components and

parts (comprising keypads, synthetic rubber and plastic components and parts, and liquid crystal displays (“LCD”)), and the

design, manufacture and sale of electronic consumer products (comprising electronic calculators, alarm clocks and LCD

products). There were no significant changes in the nature of the Group’s principal activities during the year.

RESULTS AND DIVIDENDS

The Group’s profit for the year ended 31 December 2002 and the state of affairs of the Company and the Group at that

date are set out in the financial statements on pages 22 to 65.

The directors do not recommend the payment of any dividend in respect of the year ended 31 December 2002.

SUMMARY FINANCIAL INFORMATION

A summary of the published results and assets and liabilities of the Group for the last five financial years, as extracted from

the audited financial statements and reclassified as appropriate, is set out on page 66. This summary does not form part of

the audited financial statements.

FIXED ASSETS

Details of movements in the Group’s fixed assets are set out in note 14 to the financial statements.

SHARE CAPITAL, SHARE OPTIONS AND WARRANTS

Details of the Company’s share capital, share options and warrants are set out in notes 29 and 30 to the financial statements.

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the Company’s bye-laws and there are no restrictions against such

rights under the laws of Bermuda, being the jurisdiction in which the Company is incorporated, which would oblige the

Company to offer new shares on a pro rata basis to existing shareholders.



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PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY

Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed securities

during the year.

RESERVES

Details of movements in the reserves of the Company and the Group during the year are set out in note 31 to the financial

statements and in the consolidated statement of changes in equity, respectively.

DISTRIBUTABLE RESERVES

At 31 December 2002, the Company’s reserves available for cash distribution and/or distribution in specie, as computed in

accordance with The Companies Act 1981 of Bermuda (as amended), amounted to HK$50,387,631 (2001: HK$41,539,710).

In addition, the Company’s share premium account, in the amount of HK$49,611,281 (2001: HK$49,611,281) may be

distributed in the form of fully paid bonus shares.

MAJOR CUSTOMERS AND MAJOR SUPPLIERS

In the year under review, sales to the Group’s five largest customers accounted for approximately 31.7% (2001: 28.6%) of

the Group’s total turnover for the year and the sales to the largest customer included therein amounted to approximately

9.2% (2001: 8.2%).

Purchases made from the Group’s five largest suppliers accounted for approximately 32.4% (2001: 28.3%) of the Group’s

total purchases for the year and the purchases from the largest supplier included therein amounted to approximately 8.5%

(2001: 7.6%).

As far as the directors are aware of, neither the directors, their associates, nor those shareholders which to the best

knowledge of the directors own more than 5% of the Company’s issued share capital, had any beneficial interest in the

Group’s five largest customers and five largest suppliers.


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DIRECTORS

The directors of the Company during the year were:

Executive directors:

Lai Pei Wor

Chan Yau Wah


Wong Kwong Ming (resigned on 30 June 2002)

Independent non-executive directors:

Tsao Kwang Yung, Peter

Kung Fan Cheong

In accordance with bye-law 87 of the Company’s bye-laws, Kung Fan Cheong will retire by rotation and, being eligible, will

offer himself for re-election at the forthcoming annual general meeting.

DIRECTORS’ SERVICE CONTRACTS

Each of the executive directors has entered into a service contract with the Company for an initial term of three years

commencing from 1 January 2000, and thereafter until terminated by either party giving to the other not less than six

months’ notice in writing.

No director proposed for re-election at the forthcoming annual general meeting has a service contract with the Company

which is not determinable by the Company within one year without payment of compensation, other than statutory

compensation.

DIRECTORS’ INTERESTS IN CONTRACTS

No director had a material interest in any contract of significance to the business of the Company and its subsidiaries to

which the Company or any of its subsidiaries was a party during the year.



18


DIRECTORS’ INTERESTS IN SHARES

At 31 December 2002, the interests of the directors in the share capital of the Company or its associated corporations, as

recorded in the register maintained by the Company pursuant to Section 29 of the Securities (Disclosure of Interests)

Ordinance (the “SDI Ordinance”), or otherwise notified to the Company and The Stock Exchange of Hong Kong Limited

(the “Stock Exchange”) pursuant to the Model Code for Securities Transactions by Directors of Limited Companies, were as

follows:

Ordinary shares of the Company

Nature of Number of

Name of director interest shares

Lai Pei Wor Other * 97,242,000

Chan Yau Wah Personal 5,200,000

Chung Yik Cheung, Raymond Personal 152,000

* Details of Lai Pei Wor’s other interests are set out in the section headed “Substantial shareholders” below.

The interests of the directors in the share options of the Company are separately disclosed in note 30 to the financial

statements.

Save as disclosed above, none of the directors, chief executives or their associates had any personal, family, corporate or

other interest in the equity or debt securities of the Company or any of its associated corporations as defined in Section 29

of the SDI Ordinance.

DIRECTORS’ RIGHTS TO ACQUIRE SHARES

Apart from as disclosed under the heading “Directors’ interests in shares” above and in the share option scheme disclosures

in note 30 to the financial statements, at no time during the year was the Company or any of its subsidiaries a party to any

arrangement to enable the Company’s directors, their respective spouse or children under 18 years of age to acquire

benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

SHARE OPTION SCHEME

Due to the adoption of Statement of Standard Accounting Practice No. 34 “Employee benefits” during the year, most of the

detailed disclosures relating to the Company’s share option scheme have been moved to note 30 to the financial statements.


19



SUBSTANTIAL SHAREHOLDERS

As at 31 December 2002, the following interests of 10% or more in the issued share capital of the Company were recorded

in the register of interests required to be kept by the Company pursuant to Section 16(1) of the SDI Ordinance:

Percentage

Number of the Company’s

Name of shares issued share capital

Celaya Limited (Note a) 97,242,000 38.9

Ansbacher (BVI) Limited (Note b) 97,242,000 38.9

Notes:

(a) Celaya Limited holds 97,242,000 shares in its capacity as trustee of The Lai Family Unit Trust, of which all units are held byAnsbacher (BVI) Limited in its capacity as trustee of The Lai Family Trust, a discretionary trust of which Lai Pak Hung and Lai Yee Man(both children of Lai Pei Wor and under the age of 18) and Chan Yuk Lin (wife of Lai Pei Wor) are discretionary objects.

(b) The shares referred to herein relate to the same parcel of shares referred to in note (a) above.

Save as disclosed above, the Company has not been notified of any other interest representing 10% or more in the

Company’s issued share capital as at 31 December 2002.

POST BALANCE SHEET EVENTS

Details of the significant post balance sheet events of the Group are set out in note 33 to the financial statements.

CONNECTED TRANSACTIONS

During the year, the Group had no connected transactions as defined under the Rules Governing the Listing of Securities

on the Stock Exchange (the “Listing Rules”).

CODE OF BEST PRACTICE

In the opinion of the directors, the Company complied with the Code of Best Practice (the “Code”) as set out in Appendix

14 of the Listing Rules, throughout the accounting period covered by the annual report, except that the independent non-

executive directors of the Company are not appointed for specific terms as required by paragraph 7 of the Code. The

independent non-executive directors are subject to retirement by rotation and re-election at the annual general meeting of

the Company in accordance with the provisions of the Company’s bye-laws.



20


AUDIT COMMITTEE

The Company has an audit committee which was established in accordance with the requirements of the Code, for the

purposes of reviewing and providing supervision over the Group’s financial reporting process and internal controls. The

audit committee comprises the two independent non-executive directors of the Company.

AUDITORS

Ernst & Young retire and a resolution for their reappointment as auditors of the Company will be proposed at the forthcoming

annual general meeting.

ON BEHALF OF THE BOARD

Lai Pei Wor

Chairman

Hong Kong

25 April 2003


21


Report of the Auditors

To the members

K & P INTERNATIONAL HOLDINGS LIMITED

(Incorporated in Bermuda with limited liability)

We have audited the financial statements on pages 22 to 65 which have been prepared in accordance with accounting

principles generally accepted in Hong Kong.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The Company’s directors are responsible for the preparation of financial statements which give a true and fair view. In

preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are

selected and applied consistently. It is our responsibility to form an independent opinion, based on our audit, on those

statements and to report our opinion to you.

BASIS OF OPINION

We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants.

An audit includes an examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial

statements. It also includes an assessment of the significant estimates and judgements made by the directors in the

preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s and the

Group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary

in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free

from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information

in the financial statements. We believe that our audit provides a reasonable basis for our opinion.

OPINION

In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group as at

31 December 2002 and of the profit and cash flows of the Group for the year then ended and have been properly prepared

in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

Ernst & Young

Certified Public Accountants

Hong Kong

25 April 2003



22

Consolidated Profit And Loss AccountYear Ended 31 December 2002

2002 2001

Notes HK$ HK$

TURNOVER 5 200,758,474 187,007,803

Cost of sales (167,799,280) (157,635,891)

Gross profit 32,959,194 29,371,912

Other revenue 5 3,761,697 2,564,847

Selling and distribution costs (22,260,978) (20,019,773)

Administrative expenses (20,156,874) (21,447,911)

Other operating income, net 6 9,280,088 2,274,175

PROFIT/(LOSS) FROM OPERATING ACTIVITIES 7 3,583,127 (7,256,750)

Finance costs 8 (2,904,978) (2,740,691)

Share of loss of an associate (45,782) –

PROFIT/(LOSS) BEFORE TAX 632,367 (9,997,441)

Tax 11 413,897 (567,795)

NET PROFIT/(LOSS) FROM ORDINARY ACTIVITIES

ATTRIBUTABLE TO SHAREHOLDERS 12 1,046,264 (10,565,236)

BASIC EARNINGS/(LOSS) PER SHARE 13 0.42 cents (4.23) cents


23


Consolidated Balance Sheet31 December 2002

2002 2001Notes HK$ HK$

NON-CURRENT ASSETSFixed assets 14 86,302,426 88,337,079Intangible assets 15 2,080,572 578,502Deposit paid for purchases of leasehold land 4,720,000 –Investment in an associate 17 3,152,218 –Long term investments 18 908,450 5,623,000

97,163,666 94,538,581

CURRENT ASSETSInventories 19 25,802,395 20,888,239Prepayments, deposits and other receivables 20 9,093,835 4,918,744Trade and bills receivables 21 30,798,552 32,741,353Tax recoverable 548,489 –Pledged time deposits 8,177,287 5,049,213Cash and cash equivalents 22 15,944,237 16,245,240

90,364,795 79,842,789

CURRENT LIABILITIESInterest-bearing bank borrowings 23 32,203,604 24,612,592Trade payables 25 21,703,792 20,318,054Current portion of finance lease payables 26 5,451,879 6,623,497Accrued liabilities and other payables 27 17,214,638 14,596,150Tax payable 251,363 142,866

76,825,276 66,293,159

NET CURRENT ASSETS 13,539,519 13,549,630

TOTAL ASSETS LESS CURRENT LIABILITIES 110,703,185 108,088,211

NON-CURRENT LIABILITIESInterest-bearing bank borrowings 24 4,843,862 1,365,170Long term portion of finance lease payables 26 3,650,628 4,745,546Deferred tax 28 900,000 1,357,000

9,394,490 7,467,716

101,308,695 100,620,495

CAPITAL AND RESERVESIssued capital 29 25,000,480 25,000,480Reserves 76,308,215 75,620,015

101,308,695 100,620,495

Lai Pei Wor Chung Yik Cheung, RaymondDirector Director



24

Consolidated Statement of Changes in EquityYear Ended 31 December 2002

Issued Share Warrant Fixed asset Exchange

share premium subscription Contributed revaluation fluctuation Retained

capital account reserve surplus reserve reserve profits Total

HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$

At 1 January 2001 25,000,480 49,611,281 – 660,651 4,706,140 – 29,720,899 109,699,451

Surplus on revaluation – – – – 96,805 – – 96,805

Net gains and losses not

recognised in the profit

and loss account – – – – 96,805 – – 96,805

Placement of warrants – – 1,500,000 – – – – 1,500,000

Warrant issue expenses – – (110,525) – – – – (110,525)

Net loss for the year – – – – – – (10,565,236) (10,565,236)

At 31 December 2001 25,000,480 49,611,281 1,389,475 660,651 4,802,945 – 19,155,663 100,620,495

Exchange realignment – – – – – (528,991) – (528,991)

Surplus on revaluation – – – – 170,927 – – 170,927

Net gains and losses not

recognised in the profit

and loss account – – – – 170,927 (528,991) – (358,064)

Net profit for the year – – – – – – 1,046,264 1,046,264

At 31 December 2002 25,000,480 49,611,281 1,389,475 660,651 4,973,872 (528,991) 20,201,927 101,308,695

Reserves retained by:

Company and subsidiaries 25,000,480 49,611,281 1,389,475 660,651 4,973,872 (528,991) 20,247,709 101,354,477

An associate – – – – – – (45,782) (45,782)

31 December 2002 25,000,480 49,611,281* 1,389,475* 660,651* 4,973,872* (528,991)* 20,201,927* 101,308,695

Company and subsidiaries 25,000,480 49,611,281 1,389,475 660,651 4,802,945 – 19,155,663 100,620,495

31 December 2001 25,000,480 49,611,281* 1,389,475* 660,651* 4,802,945* –* 19,155,663* 100,620,495

* These reserve accounts comprise the consolidated reserves of HK$76,308,215 (2001: HK$75,620,015) in the consolidated balancesheet.


25


Consolidated Cash Flow StatementYear Ended 31 December 2002

2002 2001

Notes HK$ HK$

(Restated)

CASH FLOWS FROM OPERATING ACTIVITIES

Profit/(loss) before tax 632,367 (9,997,441)

Adjustments for:

Finance costs 8 2,904,978 2,740,691

Share of loss of an associate 45,782 –

Interest income 5 (247,475) ( 354,640)

Depreciation 7 23,367,258 23,565,433

Amortisation of intangible assets 7 247,930 247,924

Loss on disposal of fixed assets 6 3,767 38,705

Gain on sale of long term investments, net 6 (9,325,422) –

Surplus on revaluation of leasehold land and buildings

charged to the profit and loss account 6 (179,706) (239,706)

Write back of provision for doubtful debts 6 (79,339) (3,140,000)

Operating profit before working capital changes 17,370,140 12,860,966

Decrease/(increase) in inventories (4,914,156) 14,175,314

Decrease/(increase) in prepayments, deposits and other receivables (3,865,877) 1,535,789

Decrease in trade and bills receivables 2,022,140 5,909,240

Increase in trade payables, accrued liabilities and other payables 3,991,108 3,239,577

Decrease in an amount due to a related company – (4,829,375)

Cash generated from operations 14,603,355 32,891,511

Interest received 254,120 469,598

Interest paid (2,222,430) (1,852,938)

Interest element on finance lease rental payments (669,430) (983,915)

Hong Kong profits tax paid (406,992) (1,914,110)

PRC income tax paid (76,103) (165,645)

Net cash inflow from operating activities 11,482,520 28,444,501



26

Consolidated Cash Flow StatementYear Ended 31 December 2002

2002 2001

Notes HK$ HK$(Restated)

Net cash inflow from operating activities 11,482,520 28,444,501

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of fixed assets (14,792,053) (11,142,600)Investment in an associate (3,198,000) –

Increase in amount due from an associate (315,859) –Additions to intangible assets 15 (1,750,000) –

Outstanding consideration paid in respect ofacquisition of subsidiaries in the prior year – (5,000,000)

Increase in pledged time deposits (3,128,074) (9,571)Purchases of long term investments (308,450) ( 600,000)

Proceeds from sale of long term investments 14,348,422 –Deposit paid for purchases of leasehold land (4,720,000) –

Net cash outflow from investing activities (13,864,014) ( 16,752,171)

CASH FLOWS FROM FINANCING ACTIVITIES

Increase in money market loan – 2,000,000Increase in bank and instalment loans 18,961,247 522,218

Decrease in mortgage loans (330,192) (308,828)Increase/(decrease) in trust receipt loans (8,951,198) 6,653,938

Capital element of finance lease rental payments (8,332,422) (6,286,608)Proceeds from issue of warrants – 1,500,000

Warrant issue expenses – (110,525)

Net cash inflow from financing activities 1,347,435 3,970,195

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (1,034,059) 15,662,525

Cash and cash equivalents at beginning of year 16,245,240 582,715

Effect of foreign exchange rate changes, net (656,791) –

CASH AND CASH EQUIVALENTS AT END OF YEAR 14,554,390 16,245,240

ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTSCash and bank balances 22 7,826,707 12,154,678

Time deposits 22 8,117,530 4,090,562Bank overdrafts 24 (1,389,847) –

14,554,390 16,245,240


27


Balance Sheet31 December 2002

2002 2001

Notes HK$ HK$

NON-CURRENT ASSETS

Interests in subsidiaries 16 126,406,414 117,513,755

CURRENT ASSETS

Prepayments, deposits and other receivables 20 72,985 149,852

Cash and cash equivalents 22 11,321 1,139

84,306 150,991

CURRENT LIABILITIES

Accrued liabilities and other payables 27 101,853 123,800

101,853 123,800

NET CURRENT ASSETS/(LIABILITIES) (17,547) 27,191

126,388,867 117,540,946

CAPITAL AND RESERVES

Issued capital 29 25,000,480 25,000,480

Reserves 31 101,388,387 92,540,466

126,388,867 117,540,946

Lai Pei Wor Chung Yik Cheung, Raymond

Director Director


ANNUAL REPORT 2002 • K & P INTERNATIONAL HOLDINGS LIMITED

28

Notes to F inancial Statements31 December 2002

1. CORPORATE INFORMATION

The principal office of K & P International Holdings Limited is located at Units 2304-06, 23rd Floor, Riley House, 88 Lei

Muk Road, Kwai Chung, New Territories, Hong Kong.

During the year, the Group was involved in the following principal activities:

• manufacture and sale of electronic and related components and parts (comprising keypads, synthetic rubber

and plastic components and parts, and liquid crystal displays (“LCD”))

• design, manufacture and sale of electronic consumer products (comprising electronic calculators, alarm clocks

and LCD products)

2. IMPACT OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE (“SSAPS”)

The following new and revised SSAPs are effective for the first time for the current year’s financial statements:

• SSAP 1 (Revised): “Presentation of financial statements”

• SSAP 11 (Revised): “Foreign currency translation”

• SSAP 15 (Revised): “Cash flow statements”

• SSAP 34: “Employee benefits”

These SSAPs prescribe new accounting measurement and disclosure practices. The major effects on the Group’s

accounting policies and on the amounts disclosed in these financial statements of those SSAPs which have had a

significant effect on the financial statements are summarised as follows:

SSAP 1 prescribes the basis for the presentation of financial statements and sets out guidelines for their structure and

minimum requirements for the content thereof. The principal impact of the revision to this SSAP is that a consolidated

statement of changes in equity is now presented on page 24 of the financial statements in place of the consolidated

statement of recognised gains and losses that was previously required and in place of the Group’s reserves note.

SSAP 11 prescribes the basis for the translation of foreign currency transactions and financial statements. The principal

impact of the revision of this SSAP on the consolidated financial statements is that the profit and loss accounts of

overseas subsidiaries are now translated into Hong Kong dollars at the weighted average exchange rates for the year,

whereas previously they were translated into the exchange rates at the balance sheet date. The adoption of the

revised SSAP 11 has had no material effect on the financial statements. Further details of this change are included in

the accounting policy for “Foreign currencies” in note 3 to the financial statements.


29



2. IMPACT OF NEW AND REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE (“SSAPS”) (continued)

SSAP 15 prescribes the revised format for the cash flow statement. The principal impact of the revision of this SSAP

is that the consolidated cash flow statement now presents cash flows under three headings, cash flows from operating,

investing and financing activities, rather than the five headings previously required. In addition, cash flows from

overseas subsidiaries arising during the year are now translated into Hong Kong dollars at the exchange rates at the

dates of the transactions, or at an approximation thereto, whereas previously they were translated at the exchange

rates at the balance sheet date, and the definition of cash equivalents for the purpose of the consolidated cash flow

statement has been revised. Further details of these changes and the prior year adjustments that have resulted from

them are included in the accounting policies for “Cash and cash equivalents” and “Foreign currencies” in note 3 and

in note 32(a) to the financial statements.

SSAP 34 prescribes the recognition and measurement criteria to apply to employee benefits, together with the

required disclosures in respect thereof. The adoption of this SSAP has resulted in no material change to the previously

adopted accounting treatments for employee benefits. In addition, disclosures are now required in respect of the

Company’s share option scheme, as detailed in note 30 to the financial statements. These share option scheme

disclosures are similar to the Listing Rules disclosures previously included in the Report of the Directors, which are

now required to be included in the notes to the financial statements as a consequence of the SSAP.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

These financial statements have been prepared in accordance with Hong Kong Statements of Standard Accounting

Practice, accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong

Companies Ordinance. They have been prepared under the historical cost convention, except for the periodic

remeasurement of certain fixed assets as further explained below.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the

year ended 31 December 2002. The results of subsidiaries acquired or disposed of during the year are consolidated

from or to their effective dates of acquisition or disposal, respectively. All significant intercompany transactions and

balances within the Group are eliminated on consolidation.

Subsidiaries

A subsidiary is a company whose financial and operating policies the Company controls, directly or indirectly, so as to

obtain benefits from its activities.

The results of subsidiaries are included in the Company’s profit and loss account to the extent of dividends received

and receivable. The Company’s interests in subsidiaries are stated at cost less any impairment losses.



30


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Associates

An associate is a company, not being a subsidiary or a jointly-controlled entity, in which the Group has a long term

interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise

significant influence.

The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated profit and

loss account and consolidated reserves, respectively. The Group’s interests in associates are stated in the consolidated

balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses.

Goodwill

Goodwill arising on the acquisition of subsidiaries represents the excess of the cost of the acquisition over the

Group’s share of the fair values of the identifiable assets and liabilities acquired as at the date of acquisition.

Goodwill arising on acquisition is recognised in the balance sheet as an asset and amortised on the straight-line basis

over its estimated useful life.

SSAP 30 “Business combinations” was adopted as at 1 January 2001. Prior to that date, goodwill arising on acquisitions

was eliminated against consolidated reserves in the year of acquisition. On the adoption of SSAP 30, the Group

applied the transitional provision of SSAP 30 that permitted such goodwill to remain eliminated against consolidated

reserves. Goodwill on acquisitions subsequent to 1 January 2001 is treated according to the SSAP 30 goodwill

accounting policy above.

On disposal of subsidiaries, the gain or loss on disposal is calculated by reference to the net assets at the date of

disposal, including the attributable amount of goodwill which remains unamortised and any relevant reserves, as

appropriate. Any attributable goodwill previously eliminated against consolidated reserves at the time of acquisition

is written back and included in the calculation of the gain or loss on disposal.

The carrying amount of goodwill, including goodwill remaining eliminated against consolidated reserves, is reviewed

annually and written down for impairment when it is considered necessary. A previously recognised impairment loss

for goodwill is not reversed unless the impairment loss was caused by a specific external event of an exceptional

nature that was not expected to recur, and subsequent external events have occurred which have reversed the effect

of that event.

Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or

whether there is any indication that an impairment loss previously recognised for an asset in prior years may no

longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An

asset’s recoverable amount is calculated as the higher of the asset’s value in use or its net selling price.


31




Impairment of assets (continued)

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment

loss is charged to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued

amount, when the impairment loss is accounted for in accordance with the relevant accounting policy for that

revalued asset.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine

the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have

been determined (net of any depreciation/amortisation), had no impairment loss been recognised for the asset in

prior years. A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises,

unless the asset is carried at a revalued amount, when the reversal of the impairment loss is accounted for in

accordance with the relevant accounting policy for that revalued asset.

Fixed assets and depreciation

Fixed assets are stated at cost or valuation less accumulated depreciation and any impairment losses. The cost of an

asset comprises its purchase price and any directly attributable costs of bringing the asset to its working condition

and location for its intended use. Expenditure incurred after fixed assets have been put into operation, such as repairs

and maintenance, is normally charged to the profit and loss account in the period in which it is incurred. In situations

where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits

expected to be obtained from the use of the fixed asset, the expenditure is capitalised as an additional cost of that

asset.

Changes in the values of fixed assets are dealt with as movements in the revaluation reserve. If the total of this

reserve is insufficient to cover a deficit, on an individual asset basis, the excess of the deficit is charged to the profit

and loss account. Any subsequent revaluation surplus is credited to the profit and loss account to the extent of the

deficit previously charged. On disposal of a revalued asset, the relevant portion of the revaluation reserve realised in

respect of previous valuations is transferred to retained profits as a movement in reserves.

Depreciation is calculated on the straight-line basis to write off the cost or valuation of each asset over its estimated

useful life. The principal annual rates used for this purpose are as follows:

Land held under medium term leases Over the lease terms

Buildings 2.5%

Leasehold improvements 25% to 30%

Plant and machinery 12.5% to 25%

Furniture, fixtures and office equipment 20% to 30%

Motor vehicles 20% to 25%

Moulds 20% to 33.33%

The gain or loss on disposal or retirement of a fixed asset recognised in the profit and loss account is the difference

between the net sales proceeds and the carrying amount of the relevant asset.



32



Leased assets

Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than legal title,

are accounted for as finance leases. At the inception of a finance lease, the cost of the leased asset is capitalised at

the present value of the minimum lease payments and recorded together with the obligation, excluding the interest

element, to reflect the purchase and financing. Assets held under capitalised finance leases are included in fixed

assets and are depreciated over the estimated useful lives of the assets. The finance costs of such leases are charged

to the profit and loss account so as to provide a constant periodic rate of charge over the lease terms.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for

as operating leases. Rentals applicable to such operating leases are charged to the profit and loss account on the

straight-line basis over the lease terms.

Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or

exercise significant influence over the other party in making financial and operating decisions. Parties are also considered

to be related if they are subject to common control or common significant influence. Related parties may be individuals

or corporate entities.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on the first-in, first-out basis

and, in the case of work in progress and finished goods, comprises direct materials, direct labour and an appropriate

proportion of overheads. Net realisable value is based on estimated selling prices less any estimated costs to be

incurred to completion and disposal.

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand and

demand deposits, and short term highly liquid investments which are readily convertible into known amounts of

cash and which are subject to an insignificant risk of changes in value, and have a short maturity of generally within

three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the

Group’s cash management.

Prior to the adoption of the revised SSAP 15 during the year, as explained in note 2 to the financial statements, cash

equivalents in the consolidated cash flow statement also included advances from banks repayable within three

months from the date of the advance, in addition to bank overdrafts. This change in definition has resulted in a prior

year adjustment relating to trust receipt loans, further details of which are included in note 32(a) to the financial

statements.

For the purpose of the balance sheet, cash and cash equivalents comprise cash on hand and at banks, including term

deposits, and assets similar in nature to cash, which are not restricted as to use.


33




Deferred tax

Deferred tax is provided, using the liability method, on all significant timing differences to the extent it is probable

that the liability will crystallise in the foreseeable future. A deferred tax asset is not recognised until its realisation is

assured beyond reasonable doubt.

Intangible assets

Technical know-how

Technical know-how is stated at cost less any impairment losses and is amortised on the straight-line basis over its

estimated useful life of five years.

Research and development costs

All research costs are charged to the profit and loss account as incurred.

Expenditure incurred on projects to develop new products is capitalised and deferred only when the projects are

clearly defined; the expenditure is separately identifiable and can be measured reliably; there is reasonable certainty

that the projects are technically feasible; and the products have commercial value. Product development expenditure

which does not meet these criteria is expensed when incurred.

Deferred development costs are stated at cost less any impairment losses and are amortised using the straight-line

basis over the commercial lives of the underlying products not exceeding five years, commencing from the date

when the products are put into commercial production.

Long term investments

Equity investments

Long term investments in listed and unlisted equity securities, intended to be held for a continuing strategic or long

term purpose, are stated at cost less any impairment losses, on an individual investment basis.

When impairments in values have occurred, the carrying amounts of the securities are reduced to their fair values, as

estimated by the directors, and the amounts of the impairments are charged to the profit and loss account for the

period in which they arise. When the circumstances and events which led to the impairments in values cease to exist

and there is persuasive evidence that the new circumstances and events will persist for the foreseeable future, the

amounts of the impairments previously charged are credited to the profit and loss account to the extent of the

amounts previously charged.

Club memberships

Long term investments in club memberships, which are intended to be held for long term purposes, are stated at

cost less any impairment losses.



34



Foreign currencies

Foreign currency transactions are recorded at the applicable exchange rates ruling at the transaction dates. Monetary

assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable

exchange rates ruling at that date. Exchange differences are dealt with in the profit and loss account.

On consolidation, the financial statements of overseas subsidiaries are translated into Hong Kong dollars using the

net investment method. The profit and loss accounts of overseas subsidiaries are translated into Hong Kong dollars

at the weighted average exchange rates for the year, and their balance sheets are translated to Hong Kong dollars at

the exchange rates ruling at the balance sheet date. The resulting translation differences are included in the exchange

fluctuation reserve.

For the purpose of the consolidated cash flow statement, the cash flows of overseas subsidiaries are translated into

Hong Kong dollars at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of

overseas subsidiaries which arise throughout the year are translated to Hong Kong dollars at the weighted average

exchange rates for the year.

Prior to the adoption of the revised SSAPs 11 and 15 during the year, as explained in note 2 to the financial statements,

the profit and loss accounts and the cash flows of overseas subsidiaries were translated into Hong Kong dollars at the

exchange rates ruling at the balance sheet date. These changes have had no material effect on the financial statements.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue

can be measured reliably, on the following bases:

(a) from the sale of goods and scrap, when the significant risks and rewards of ownership have been transferred to

the buyer, provided that the Group maintains neither managerial involvement to the degree usually associated

with ownership, nor effective control over the goods sold;

(b) interest income, on a time proportion basis taking into account the principal outstanding and the effective

interest rate applicable;

(c) tooling charge income, when the services are rendered; and

(d) dividend income, when the shareholders’ right to receive payment has been established.


35




Employee benefits

Paid leave carried forward

The Group provides paid annual leave to its employees under their employment contracts. Under certain circumstances,

such leave which remains untaken as at the balance sheet date is permitted to be carried forward and utilised by the

respective employees in the following year. An accrual is made at the balance sheet date for the expected future cost

of such paid leave earned during the year by the employees and carried forward.

Employment Ordinance long service payments

Certain of the Group’s employees have completed the required number of years of services to the Group in order to

be eligible for long service payments under the Hong Kong Employment Ordinance in the event of the termination of

their employment. The Group is liable to make such payments in the event that such a termination of employment

meets the circumstances specified in the Employment Ordinance.

A provision is recognised in respect of the probable future long service payments expected to be made. The provision

is based on the best estimate of the probable future payments which have been earned by the employees from their

services to the Group to the balance sheet date.

Pension scheme

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”)

under the Mandatory Provident Fund Schemes Ordinance, for all of its employees. Contributions are made based on

a percentage of the employees’ basic salaries and are charged to the profit and loss account as they become payable

in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the

Group in an independently administered fund. The Group’s employer contributions vest fully with the employees

when contributed into the MPF Scheme.

The employees of the Group’s subsidiaries which operates in Mainland China are required to participate in a central

pension scheme operated by the local municipal government. These subsidiaries are required to contribute a certain

percentage of its payroll costs to the central pension scheme. The contributions are charged to the profit and loss

account as they become payable in accordance with the rules of the central pension scheme.

Share options scheme

The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible

participants who contribute to the success of the Group’s operations. The financial impact of share options granted

under the share option scheme is not recorded in the Company’s or the Group’s balance sheet until such time as the

options are exercised, and no charge is recorded in the profit and loss account or balance sheet for their cost. Upon

the exercise of share options, the resulting shares issued are recorded by the Company as additional share capital at

the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares

is recorded by the Company in the share premium account. Options which are cancelled prior to their exercise date,

or which lapse, are deleted from the register of outstanding options.



36


4. SEGMENT INFORMATION

Segment information is presented by way of two segment formats: (i) on a primary segment reporting basis, by

business segment; and (ii) on a secondary segment reporting basis, by geographical segment.

The Group’s operating businesses are structured and managed separately, according to the nature of their operations

and the products and services they provide. Each of the Group’s business segments represents a strategic business

unit that offers products and services which are subject to risks and returns that are different from those of the other

business segments. Summary details of the business segments are as follows:

(a) the electronic and related components and parts segment comprise the manufacture and sale of electronic

and related components and parts;

(b) the consumer electronic products segment comprise the design, manufacture and sale of consumer electronic

products comprising electronic calculators, alarm clocks and liquid crystal display products; and

(c) the corporate and others segment comprises the Group’s property holding activity, together with corporate

income and expense items.

In determining the Group’s geographical segments, revenues are attributed to the segments based on the location of

the customers, and assets are attributed to the segments based on the location of the assets.

Intersegment sales and transfers are transacted with reference to the cost of sales.


37



4. SEGMENT INFORMATION (continued)

(a) Business segments

The following table presents revenue, profit/(loss) and certain asset, liability and expenditure information for

the Group’s business segments:

Group

Electronic and related Consumer

components and parts electronic products Corporate and others Eliminations Consolidated

2002 2001 2002 2001 2002 2001 2002 2001 2002 2001

HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$

Segment revenue:

Sales to external customers 112,053,991 100,949,411 88,704,483 86,058,392 – – – – 200,758,474 187,007,803

Intersegment sales 5,103,462 4,925,805 – 848 – – (5,103,462) (4,926,653) – –

Other revenue 3,038,627 1,971,853 473,134 236,602 2,461 1,752 – – 3,514,222 2,210,207

Total 120,196,080 107,847,069 89,177,617 86,295,842 2,461 1,752 (5,103,462) (4,926,653) 204,272,696 189,218,010

Segment results (7,741,957) (2,981,790) 2,984,910 (2,037,612) (1,232,723) (2,591,988) (5,989,770) (7,611,390)

Interest income 247,475 354,640

Gain on sale of long term

investments, net 9,325,422 –

Profit/(loss) from operating

activities 3,583,127 (7,256,750)

Finance costs (2,904,978) (2,740,691)

Share of loss of an associate (45,782) –

Profit/(loss) before tax 632,367 (9,997,441)

Tax 413,897 (567,795)

Net profit/(loss) from ordinary

activities attributable to

shareholders 1,046,264 (10,565,236)



38



(a) Business segments (continued)

Group

Electronic and related Consumer

components and parts electronic products Corporate and others Eliminations Consolidated

2002 2001 2002 2001 2002 2001 2002 2001 2002 2001

HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$

Segment assets 122,978,078 121,406,806 49,283,358 34,966,651 14,695,296 17,604,603 23,237 (363,453) 186,979,969 173,614,607

Unallocated assets 548,492 766,763

Total assets 187,528,461 174,381,370

Segment liabilities 24,044,572 21,100,352 14,243,271 15,234,089 635,212 1,050,065 (4,625) (1,559,999) 38,918,430 35,824,507

Unallocated liabilities 47,301,336 37,936,368

Total liabilities 86,219,766 73,760,875

Other segment information:

Depreciation and amortisation 16,512,841 18,598,952 5,836,041 3,862,545 1,266,306 1,351,860 – – 23,615,188 23,813,357

Write back of provision for

doubtful debts (8,514) – (928,805 ) (3,140,000) – – – – (937,319) (3,140,000)

Provision of doubtful debts 857,980 – – – – – – – 857,980 –

Surplus on revaluation of

leasehold land and buildings

charged to:

Fixed assets revaluation

reserve – – – – (170,927) (96,805) – – (170,927) (96,805)

Profit and loss account – – – – (179,706 ) (239,706) – – (179,706 ) (239,706)

Capital expenditure 18,810,952 14,685,356 2,002,892 1,975,442 44,095 391,040 – – 20,857,939 17,051,838


39




(b) Geographical segments

The following table presents revenue, and certain asset and expenditure information for the Group’s geographical

segments.

Group

Segment revenue Other segment information

Sales to external customers Segment assets Capital expenditure

2002 2001 2002 2001 2002 2001

HK$ HK$ HK$ HK$ HK$ HK$

Hong Kong 77,752,498 76,394,750 59,361,115 55,813,826 91,363 610,589

Mainland China 4,858,468 5,462,720 108,121,825 98,271,418 20,348,312 14,159,300

Total in the PRC 82,610,966 81,857,470 167,482,940 154,085,244 20,439,675 14,769,889

Japan 25,805,906 9,806,201 4,927,603 3,435,241 – –

Other Asian countries* 9,086,398 9,817,898 6,963,523 5,788,564 418,264 2,281,949

Total in Asia 117,503,270 101,481,569 179,374,066 163,309,049 20,857,939 17,051,838

Germany 30,943,489 30,641,332 2,464,709 2,233,913 – –

Other European countries** 41,569,123 48,828,245 4,417,089 8,115,539 – –

Total in Europe 72,512,612 79,469,577 6,881,798 10,349,452 – –

North America 5,223,269 3,790,675 364,807 92,132 – –

Others*** 5,519,323 2,265,982 907,790 630,737 – –

Consolidated 200,758,474 187,007,803 187,528,461 174,381,370 20,857,939 17,051,838

* Other Asian countries mainly comprise Taiwan, Singapore, Malaysia, Thailand, Indonesia and Korea.

** Other European countries mainly comprise Italy, the United Kingdom, France, the Netherlands, Austria, Sweden andSpain.

*** Others mainly comprise South America, Australia and New Zealand.



40


5. TURNOVER AND REVENUE

Turnover represents the net invoiced value of goods sold, after allowances for returns and trade discounts, during the

year.

An analysis of the Group’s turnover and other revenue is as follows:

2002 2001

HK$ HK$

Turnover

Sale of goods 200,758,474 187,007,803

Other revenue

Interest income 247,475 354,640

Tooling charge income 1,197,100 741,840

Sale of scrap 1,974,772 886,926

Others 342,350 581,441

3,761,697 2,564,847

6. OTHER OPERATING INCOME, NET

Group

2002 2001

HK$ HK$

Gain on sale of long term investments, net 9,325,422 –

Surplus on revaluation of leasehold land and buildings 179,706 239,706

Write back of provision for doubtful debts, net 79,339 3,140,000

Loss on disposal of fixed assets (3,767) (38,705)

Others (300,612) (1,066,826)

9,280,088 2,274,175


41



7. PROFIT/(LOSS) FROM OPERATING ACTIVITIES

The Group’s profit/(loss) from operating activities is arrived at after charging:

2002 2001

HK$ HK$

Cost of inventories sold 167,389,780 157,108,906

Auditors’ remuneration 869,654 904,795

Depreciation 23,367,258 23,565,433

Minimum lease payments under operating leases:

Land and buildings 3,026,520 2,699,534

Amortisation of intangible assets* 247,930 247,924

Staff costs (including directors’ other emoluments – note 9):

Wages and salaries 52,085,463 46,532,063

Pension scheme contributions 518,448 515,205

52,603,911 47,047,268

Less: Amount capitalised in deferred development costs (998,944) –

51,604,967 47,047,268

Foreign exchange losses, net 441,082 281,300

* The amortisation of intangible assets for the year is included in “Cost of sales” on the face of the consolidated profit and lossaccount.

8. FINANCE COSTS

Group

2002 2001

HK$ HK$

Interest expenses on bank loans and overdrafts

wholly repayable within five years 2,235,548 1,756,776

Interest on finance leases 669,430 983,915

2,904,978 2,740,691



42


9. DIRECTORS’ REMUNERATION

Directors’ remuneration, disclosed pursuant to the Listing Rules and Section 161 of the Hong Kong Companies

Ordinance, is as follows:

2002 2001

HK$ HK$

Fees:

Executive directors – –

Independent non-executive directors 312,000 312,000

312,000 312,000

Other emoluments paid to executive directors:

Salaries 3,860,349 4,802,980


Housing benefits 180,000 180,000

Other allowances 170,583 –

4,240,932 5,018,980

4,552,932 5,330,980

There was no arrangement under which a director waived or agreed to waive any remuneration during the year.

The remuneration of the directors fell within the bands set out below:

Number of directors

2002 2001

Nil – HK$500,000 2 2

HK$500,001 – HK$1,000,000 2 –

HK$1,000,001 – HK$1,500,000 2 4

6* 6

* Including remuneration as director of the director who resigned during the year.


43



10. SEVEN HIGHEST PAID EMPLOYEES

The seven highest paid employees during the year included four (2001: four) executive directors, details of whose

remuneration are set out in note 9 above. Details of the remuneration of the remaining three (2001: three) non-

director, highest paid employees are as set out below:

2002 2001

HK$ HK$

Basic salaries, allowances and benefits in kind 2,693,141 2,947,767


2,769,315 3,007,609

The remuneration of the remaining three non-director, highest paid employees fell within the bands set out below:

Number of employees

2002 2001

HK$500,001 - HK$1,000,000 2 2

HK$1,000,001 - HK$1,500,000 1 1

3 3



44


11. TAX

Hong Kong profits tax has been provided at the rate of 16% (2001: 16%) on the estimated assessable profits arising

in Hong Kong during the year. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing

in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect

thereof.

Group

2002 2001

HK$ HK$

Hong Kong tax:

Provision for the year 146,000 925,000

Prior year’s underprovision/(overprovision) (179,000) 57,150

Deferred (note 28) (457,000) (710,000)

(490,000) 272,150

PRC tax:

Provision for the year 76,103 130,000

Prior year’s underprovision – 165,645

76,103 295,645

Tax charge/(credit) for the year (413,897) 567,795

12. NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS

The net profit from ordinary activities attributable to shareholders for the year ended 31 December 2002 dealt with

in the financial statements of the Company is HK$8,847,921 (2001: HK$2,669,712).

13. EARNINGS/(LOSS) PER SHARE

The calculation of basic earnings/(loss) per share is based on the net profit attributable to shareholders for the year

of HK$1,046,264 (2001: net loss of HK$10,565,236) and the weighted average of 250,004,800 ordinary shares in

issue throughout the two years.

Diluted earnings/(loss) per share amounts for the years ended 31 December 2002 and 2001 have not been shown

as the share options and warrants outstanding during these years had an anti-dilutive effect on the basic earnings/

(loss) per share for these years.


45



14. FIXED ASSETS

Group

Furniture,

Leasehold Leasehold fixtures

land and improve Plant and and office Motor

buildings ments machinery equipment vehicles Moulds Total

HK$ HK$ HK$ HK$ HK$ HK$ HK$

Cost or valuation:

At beginning of year 26,949,280 22,358,111 81,129,715 16,356,558 2,755,079 66,854,794 216,403,537

Additions – 4,356,155 9,014,909 1,631,885 – 5,854,990 20,857,939

Disposals – (2,866,168) (655,925) (4,759,808) – (27,636,773) (35,918,674)

Deficit on revaluation (290,773) – – – – – (290,773)

Exchange realignment – 42,713 55,947 45,439 – 26,667 170,766

At 31 December 2002 26,658,507 23,890,811 89,544,646 13,274,074 2,755,079 45,099,678 201,222,795

Accumulated depreciation:

At beginning of year – 14,113,441 47,109,412 11,098,444 1,950,593 53,794,568 128,066,458

Provided during the year 641,406 3,648,040 8,870,513 2,362,511 466,980 7,377,808 23,367,258

Disposals – (2,866,168) (655,925) (4,756,086) – (27,636,728) (35,914,907)

Written back on revaluation (641,406) – – – – – (641,406)

Exchange realignment – 12,152 6,799 14,672 – 9,343 42,966

At 31 December 2002 – 14,907,465 55,330,799 8,719,541 2,417,573 33,544,991 114,920,369

Net book value:

At 31 December 2002 26,658,507 8,983,346 34,213,847 4,554,533 337,506 11,554,687 86,302,426

At 31 December 2001 26,949,280 8,244,670 34,020,303 5,258,114 804,486 13,060,226 88,337,079

Analysis of cost or valuation:

At cost – 23,890,811 89,544,646 13,274,074 2,755,079 45,099,678 174,564,288

At 2002 valuation 26,658,507 – – – – – 26,658,507

26,658,507 23,890,811 89,544,646 13,274,074 2,755,079 45,099,678 201,222,795

Net book value held under

finance leases:

At 31 December 2002 – – 16,682,379 604,276 – – 17,286,655

At 31 December 2001 – – 20,097,385 1,017,116 446,800 – 21,561,301



46


14. FIXED ASSETS (continued)

The Group’s leasehold land and buildings are held under the following lease terms, with geographical locations asfollows:

PRCHong Kong Mainland China Total

HK$ HK$ HK$

Medium term leases 9,440,000 17,218,507 26,658,507

At 31 December 2002, the Group’s leasehold land and buildings situated in Hong Kong were revalued on an openmarket, existing use basis by Chung, Chan & Associates, a firm of independent professionally qualified propertyvaluers. The Group’s leasehold land and buildings situated in Mainland China were revalued using the depreciatedreplacement cost method by the same firm of property valuers at 31 December 2002.

Had the Group’s leasehold land and buildings been carried at historical cost less accumulated depreciation andimpairment losses, their carrying values would have been included in the financial statements at approximatelyHK$28,990,551 (2001: HK$29,751,706).

The Group’s leasehold land and buildings were pledged to secure general banking facilities granted to the Group(note 24 to the financial statements).

15. INTANGIBLE ASSETS

Group

DeferredTechnical development

know-how costs TotalHK$ HK$ HK$

Cost:At beginning of year 1,239,647 – 1,239,647Additions – 1,750,000 1,750,000

At 31 December 2002 1,239,647 1,750,000 2,989,647

Accumulated amortisation:At beginning of year 661,145 – 661,145Provided during the year 247,930 – 247,930

At 31 December 2002 909,075 – 909,075

Net book value:At 31 December 2002 330,572 1,750,000 2,080,572

At 31 December 2001 578,502 – 578,502


47



16. INTERESTS IN SUBSIDIARIES

Company

2002 2001

HK$ HK$

Unlisted shares, at cost 58,999,981 58,999,981

Due from subsidiaries 78,425,212 69,532,553

137,425,193 128,532,534

Provisions against amounts due from subsidiaries (11,018,779) (11,018,779)

126,406,414 117,513,755

The amounts due from subsidiaries are unsecured and interest-free.

Particulars of the principal subsidiaries are as follows:

Place of Nominal value Percentage of

incorporation/ of issued and equity interest

registration paid-up share/ attributable to

Company name and operations registered capital the Company Principal activities

Bistec Corporation Limited Hong Kong HK$2,000,000 100 Sale of electronic

calculators

Cokeen Development Limited Hong Kong HK$10,000 100 Property holding

E-Dotcom Limited Hong Kong HK$2 100 Investment holding

Gaiki Silicone Products Limited Hong Kong HK$10,000 100 Manufacture of

silicone rubber

products

Hideki Precision (BVI) Limited British Virgin Islands US$1 100 Intellectual property

holding

Hideki Time Corporation Limited Hong Kong HK$2,000,000 100 Sale of alarm clocks

and electronic

calculators

Hi-Tech (China) Investment Hong Kong HK$2,000,000 100 Investment holding

Limited



48


16. INTERESTS IN SUBSIDIARIES (continued)





Hi-Tech Investment Holdings British Virgin Islands/ US$50,000 100 Investment holding

Limited Hong Kong

Hi-Tech Polymer (China) Inc. Western Samoa/ US$1 100 Manufacture of

Mainland China synthetic rubber

products

Hi-Tech Polymer Limited Hong Kong HK$10,000 100 Sale of synthetic rubber

products

Hi-Tech Precision Plastic Limited Hong Kong HK$3,000,000 100 Sale of plastic products

Hi-Tech Property Holdings British Virgin Islands/ US$1 100 Property holding

Limited Mainland China

Hi-Tech Silicone Rubber Hong Kong HK$1,500,000 100 Sale of silicone rubber

Manufactory Limited products

K & P Group (Holdings) British Virgin Islands/ US$1,238,545 100 Investment holding

Limited Hong Kong

K. S. (China) Electronics Hong Kong HK$2 100 Investment holding

Manufactory Limited

Mars Field Limited British Virgin Islands/ US$1 100 Manufacture of

Mainland China silicone rubber

products, electronic

calculators, alarm

clocks and plastic

products

Shenzhen Jiancheng Electronic Mainland China HK$12,000,000 * Manufacture and sale

Co., Ltd. (“Shenzhen of electronic

Jiancheng”) calculators and

alarm clocks


49



16. INTERESTS IN SUBSIDIARIES (continued)





Technology Trends British Virgin Islands/ US$50,000 100 Sale of silicone rubber,

International Limited Republic of synthetic rubber and

Singapore plastic products and

liquid crystal displays

TQL Technology Limited Hong Kong HK$7,000,000 100 Manufacture and sale

of liquid crystal

displays

Webberton Investments British Virgin Islands/ US$1 100 Investment holding

Limited Hong Kong

Except for K & P Group (Holdings) Limited, all of the above subsidiaries are indirectly held by the Company.

* Shenzhen Jiancheng is registered as a co-operative joint venture company under the laws of the People’s Republic of China(the “PRC”). Pursuant to the co-operative joint venture contract with the PRC joint venture partner, the Group contributed allof the registered capital of Shenzhen Jiancheng. The PRC joint venture partner is entitled to certain monthly and annual feesregardless of the amount of profit or loss made by Shenzhen Jiancheng, and the Group is entitled to all of the profits, and isliable for all of the losses, of Shenzhen Jiancheng after payment of such fees to the PRC joint venture partner. The initial termof the joint venture expires on 25 January 2009 and can be extended with the consent of the joint venture partners and theapproval of the relevant PRC government authority. On expiry of the initial term of the joint venture, joint venture will revertto the PRC joint venture partner while other assets will initially be used to settle the wages of all employees and all of theliabilities of Shenzhen Jiancheng, and any remaining balance will be distributed to the Group.

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the

results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries

would, in the opinion of the directors, result in particulars of excessive length.



50


17. INVESTMENT IN AN ASSOCIATE

Group

2002 2001

HK$ HK$

Share of net assets 3,152,218 –

Particulars of the associate are as follows:

Percentage of

Nominal value equity interest

Place of of issued and attributable to

Company name incorporation paid-up share the Company Principal activities

YOUEAL TTI Limited Hong Kong US$1,000,000 41 Investment holding

The shareholding in the associate is held through a wholly-owned subsidiary.

18. LONG TERM INVESTMENTS

Group

2002 2001

HK$ HK$

At cost:

Unlisted equity investment 308,450 –

Equity investments listed in Hong Kong – 5,023,000

Club membership 600,000 600,000

908,450 5,623,000

Market value of listed equity investments included above, at cost – 21,164,459


51



19. INVENTORIES

Group

2002 2001

HK$ HK$

Raw materials 15,158,574 14,073,503

Work in progress 8,241,645 6,860,728

Finished goods 2,520,925 2,088,873

25,921,144 23,023,104

Less: Provisions for slow-moving inventories (118,749) (2,134,865)

25,802,395 20,888,239

There were no inventories carried at net realisable value at the balance sheet date.

20. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES

Group Company

2002 2001 2002 2001

HK$ HK$ HK$ HK$

Prepayments 272,145 476,165 72,985 148,958

Deposits and other receivables 8,821,690 4,442,579 – 894

9,093,835 4,918,744 72,985 149,852

Included in prepayments, deposits and other receivables is an amount due from an associate of HK$315,859 (2001:

Nil), which is unsecured, interest-free and has no fixed terms of repayment.



52


21. TRADE AND BILLS RECEIVABLES

An aged analysis of the trade and bills receivables as at the balance sheet date, based on invoice date and net of

provisions, is as follows:

Group

2002 2001

HK$ HK$

Within 90 days 26,199,330 27,465,627

Between 91 to 180 days 3,441,343 3,893,948

Over 180 days 1,157,879 1,381,778

30,798,552 32,741,353

The Group’s trading terms with its customers are largely on credit. Invoices are normally payable within 60 days of

issuance, except for certain well-established customers, where the terms are extended from 60 to 90 days. Each

customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables and

has a credit control policy to minimise credit risk. Overdue balances are regularly reviewed by senior management.

22. CASH AND CASH EQUIVALENTS

Group Company

2002 2001 2002 2001

HK$ HK$ HK$ HK$

Cash and bank balances 7,826,707 12,154,678 11,321 1,139

Time deposits 8,117,530 4,090,562 – –

15,944,237 16,245,240 11,321 1,139

23. INTEREST-BEARING LOANS AND BORROWINGS

Group

2002 2001

Notes HK$ HK$

Bank overdrafts 1,389,847 –

Current portion of bank loans 30,813,757 24,612,592

24 32,203,604 24,612,592

Current portion of finance lease payables 26 5,451,879 6,623,497

37,655,483 31,236,089


53



24. INTEREST-BEARING BANK LOANS AND OVERDRAFTS

Group

2002 2001

HK$ HK$

Unsecured:

Bank overdrafts 520,078 –

Trust receipt loans 2,707,817 12,521,313

Bank loans 14,054,349 1,352,339

Instalment loans – 631,067

17,282,244 14,504,719

Secured:

Bank overdrafts 869,769 –

Trust receipt loans 6,640,053 5,777,755

Money market loan 4,000,000 4,000,000

Mortgage loans 1,365,096 1,695,288

Instalment loans 6,890,304 –

37,047,466 25,977,762

Portion due within one year, classified

as current liabilities (note 23) (32,203,604) (24,612,592)

Long term portion 4,843,862 1,365,170

The bank borrowings are repayable:

Within one year or on demand 32,203,604 24,612,592

In the second year 3,628,310 347,355

In the third to fifth years, inclusive 1,215,552 1,017,815

37,047,466 25,977,762

The secured bank borrowings were secured by fixed charges over the Group’s medium term leasehold land and

buildings with a net book value of HK$26,658,507 (2001: HK$9,500,000) and over bank deposits amounting to

HK$8,177,287 (2001: HK$5,049,213).



54


25. TRADE PAYABLES

An aged analysis of the trade payables is as follows:

Group

2002 2001

HK$ HK$

Within 90 days 20,616,641 19,194,482

Between 91 to 180 days 1,062,637 714,408

Over 180 days 24,514 409,164

21,703,792 20,318,054

26. FINANCE LEASE PAYABLES

The Group leases certain of its plant and machinery and equipment for its businesses. These leases are classified as

finance leases and have remaining lease terms ranging from one to three years.

At 31 December 2002, the total future minimum lease payments under finance leases and their present values were

as follows:

Group

Present value Present value

Minimum Minimum of minimum of minimum

lease lease lease lease

payments payments payments payments

2002 2001 2002 2001

HK$ HK$ HK$ HK$

Amounts payable:

Within one year 5,848,227 7,188,378 5,451,879 6,623,497

In the second year 2,800,322 4,008,492 2,666,670 3,824,035

In the third to fifth years, inclusive 1,002,033 945,379 983,958 921,511

Total minimum finance lease payments 9,650,582 12,142,249 9,102,507 11,369,043

Future finance charges (548,075) (773,206)

Total net finance lease payables 9,102,507 11,369,043

Portion classified as current liabilities

(note 23) (5,451,879) (6,623,497)

Long term portion 3,650,628 4,745,546


55



27. ACCRUED LIABILITIES AND OTHER PAYABLES

Group Company

2002 2001 2002 2001

HK$ HK$ HK$ HK$

Accrued liabilities 14,922,259 12,630,357 96,000 64,700

Other payables 2,292,379 1,965,793 5,853 59,100

17,214,638 14,596,150 101,853 123,800

28. DEFERRED TAX

Group

2002 2001

HK$ HK$

At beginning of year 1,357,000 2,067,000

Credit for the year (note 11) (457,000) (710,000)

At 31 December 900,000 1,357,000

Deferred tax relates principally to the timing differences arising from accelerated depreciation allowances.

The principal components of the Group’s net deferred tax asset position not recognised in the financial statements

are as follows:

2002 2001

HK$ HK$

Accelerated depreciation allowances 2,847,743 4,124,267

Tax losses (6,197,355) (5,560,450)

(3,349,612) (1,436,183)

The revaluation of the Group’s leasehold land and buildings does not constitute a timing difference and, consequently,

the amount of potential tax thereon has not been quantified.

The Company did not have any significant unprovided deferred tax at the balance sheet date (2001: Nil).



56


29. SHARE CAPITAL

Shares

Group and Company

2002 2001

HK$ HK$

Authorised:

900,000,000 shares of HK$0.10 each 90,000,000 90,000,000

Issued and fully paid:

250,004,800 shares of HK$0.10 each 25,000,480 25,000,480

Share options

Details of the Company’s share option scheme are included in note 30 to the financial statements.

Warrants

On 16 March 2001, the Company issued 30,000,000 warrants at an issue price of HK$0.05 each to independent

investors. Each of these warrants entitles the holders thereof to subscribe for one new ordinary share of the Company

of HK$0.10 at a subscription price of HK$0.30 per share payable in cash and subject to adjustment, from March 2001

to March 2003. At the balance sheet date, these warrants remained outstanding. Subsequent to the balance sheet

date, none of these warrants was exercised and all of them were lapsed and cancelled on the expiry date on 15

March 2003.


57



30. SHARE OPTION SCHEME

SSAP 34 was adopted during the year, as explained in note 2 and under the heading “Employee benefits” in note 3

to the financial statements. As a result, these detailed disclosures relating to the Company’s share option scheme are

now included in the notes to the financial statements. In the prior year, these disclosures were included in the Report

of the Directors, as their disclosure is also a requirement of the Listing Rules.

On 4 December 1996, the Company adopted a share option scheme (the “Old Scheme”), which was the first share

option scheme of the Company, for the purpose of providing incentives and rewards to eligible participants who

contribute to the success of the Group’s operations. The Old Scheme was terminated and replaced by a new share

option scheme at the annual general meeting of the Company held on 27 May 2002 (the “New Scheme”). Upon

termination of the Old Scheme, no further options can be granted thereunder but in all other respects, the provisions

of the Old Scheme shall remain in force and any options granted prior to such termination shall continue to be valid

and exercisable in accordance therewith.

The maximum number of unexercised share options currently permitted to be granted under the Old Scheme and

the New Scheme must not in aggregate exceed 30% of the shares of the Company in issue at any time.

A summary of the share option schemes of the Company is as follows:

Old Scheme New Scheme

Purpose

Participants

To provide incentives and rewards to

eligible participants who contribute to the

success of the Group’s operations.

Full-time employees (including executive

directors) of the Company or any of its

subsidiaries.

To provide incentives and rewards to

eligible participants for their contributions

to the Group and/or to enable the Group to

recruit and retain high-calibre employees

and attract human resources that are

valuable to the Group and any entity in

which the Group holds an equity interest

(“Invested Entity”).

(i) any employee (whether full-time or

part-time), executive directors, non-

executive directors and independent

non-executive directors of the

Company, any of its subsidiaries or

any Invested Entity;



58


30. SHARE OPTION SCHEME (continued)


Participants

(continued)

Total number of

ordinary shares

available for issue

and the

percentage of the

issued share

capital that it

represents as at

the date of the

annual report

Maximum

entitlement of

each participant

Period within

which the

securities must be

taken up under an

option

17,300,000 ordinary shares and 6.9% of the

issued share capital.

Shall not exceed 25% of the total number

of ordinary shares in respect of the options

that may be granted in accordance with the

scheme.

An option may be exercised at any time

during the 3-year period commencing on

the expiry of six months after the date on

which the option is accepted and expiring

on the last day of the 3-year period or the

tenth anniversary of the date on which the

scheme is adopted by resolution of the

Company in a general meeting, whichever

is the earlier.

(ii) any supplier of goods or services to

any member of the Group or any

Invested Entity; any customer of the

Group or any Invested Entity; any

person or entity that provides

research, development or other

technological support to the Group or

any Invested Entity; and

(iii) any shareholder of any member of the

Group or any Invested Entity or any

holder of any securities issued by any

member of the Group or any Invested

Entity.

Not applicable.

Shall not exceed 1% of the issued share

capital of the Company in any 12-month

period.

An option may be exercised at any time

during a period to be determined and

notified by the directors to each grantee,

but shall end in any event not later than 10

years from the date of the grant of options

subject to the provisions for early

termination thereof.


59



Share options do not confer rights on the holders to dividends or to vote at shareholders’ meetings.

Minimum period

for which an

option must be

held before it can

be exercised

Amount payable

on acceptance

Period within

which payments/

calls/loans must

be made/repaid

Basis of

determining the

exercise price

The remaining life

of the scheme

There is no minimum period for which an

option granted must be held before it can be

exercised.

The offer of a grant of share options may be

accepted within 28 days from the date of the

offer with a consideration of HK$1.00 being

payable by the grantee.

Not applicable.

Determined by the directors based on the

higher of (i) 80% of the average closing price

of the ordinary shares on the Stock Exchange of

the five trading days immediately preceding the

date of the grant of options; and (ii) the

nominal value of shares.

The scheme has been terminated on 27 May

2002, but the provision of the scheme shall

remain in force until 3 December 2006.

There is no minimum period for which

an option granted must be held before

it can be exercised.

The offer of a grant of share options

may be accepted within 28 days from

the date of the offer with a

consideration of HK$1.00 being payable

by the grantee.

Not applicable.

Determined by the directors but shall

not be less than the highest of (i) the

closing price of the ordinary shares as

stated in the Stock Exchange’s daily

quotation sheet on the date of offer of

grant of options, which must be a

trading day; (ii) the average closing price

of the ordinary shares as stated in the

Stock Exchange’s daily quotation sheets

for the five trading days immediately

preceding the date of grant of options;

and (iii) the nominal value of shares.

The scheme remains in force until 26

May 2012.





60



The particulars in relation to each share option scheme of the Company that are required under Rules 17.07 to 17.09

of Chapter 17 of the Listing Rules and SSAP 34 are disclosed as follows:

(a) Old Scheme

Price of

Number of share options Company’s

Date Exercise share

Name or At 1 Granted Lapsed Cancelled At 31 of grant price at grant

category of January during during during December of share Exercise period of of share date of

participant 2002 the year the year the year 2002 options* share options options** options***

HK$ HK$

Directors

Lai Pei Wor 2,500,000 – – – 2,500,000 12-1-2001 12-7-2001 to 11-7-2004 0.16 0.20

Chan Yau Wah 2,500,000 – – – 2,500,000 12-1-2001 12-7-2001 to 11-7-2004 0.16 0.20

Wong Kwong Ming 1,300,000 – (1,300,000) – – 12-1-2001 12-7-2001 to 11-7-2004 0.16 0.20

Chung Yik Cheung,

Raymond 2,500,000 – – – 2,500,000 12-1-2001 12-7-2001 to 11-7-2004 0.16 0.20

8,800,000 – (1,300,000) – 7,500,000

Other employees

In aggregate 8,500,000 – (500,000) – 8,000,000 12-1-2001 12-7-2001 to 11-7-2004 0.16 0.20

17,300,000 – (1,800,000) – 15,500,000

* The vesting period of the share options is from the date of the grant until the commencement of the exercise period.

** The exercise price of the share options is subject to adjustment in the case of rights or bonus issues, or other similar changesin the Company’s share capital.

*** The price of the Company’s shares disclosed as at the date of the grant of the share options is the Stock Exchange closingprice on the trading day immediately prior to the date of the grant of the options.


61




(b) New Scheme

During the year, no options to subscribe for ordinary shares in the Company have been granted to any eligible

participants, including the directors or their respective employees of the Group, its holding company or any of

its subsidiaries under the New Scheme.

At the balance sheet date, the Company had 15,500,000 share options outstanding under the share option schemes.

The exercise in full of the remaining share options would, under the present capital structure of the Company, result

in the issue of 15,500,000 additional ordinary shares of the Company and additional share capital of HK$1,550,000

and share premium of HK$930,000 (before issue expenses).

31. RESERVES

(a) Group

The amounts of the Group’s reserves and the movements therein for the current and prior years are presented

in the consolidated statement of changes in equity on page 24 of the financial statements.

The contributed surplus of the Group arose as a result of the Group’s reorganisation and represents the difference

between the nominal value of the share capital of the former holding company of the Group, K & P Group

(Holdings) Limited, prior to the Group’s reorganisation in preparation for the listing of the Company’s shares in

1996, over the nominal value of the share capital of the Company issued in exchange therefor, less the amount

capitalised to pay up the nil-paid shares issued on the incorporation of the Company.

As detailed in note 3 to the financial statements, on the adoption of SSAP 30, the Group applied the transitional

provision of SSAP 30 that permitted goodwill in respect of acquisitions which occurred prior to 1 January 2001,

to remain eliminated against consolidated reserves or credited to the capital reserve.

Goodwill amounting to HK$11,924,221 arising on the acquisition of subsidiaries in prior years, which is stated

at its cost, remains eliminated against consolidated retained profits as explained in note 3 to the financial

statements.



62


31. RESERVES

(b) Company

RetainedShare Warrant earning/

premium subscription Contributed (accumulatedaccount reserve surplus losses) Total

HK$ HK$ HK$ HK$ HK$

At 1 January 2001 49,611,281 – 49,999,981 (11,129,983) 88,481,279Placement of warrants – 1,500,000 – – 1,500,000Warrant issue expenses – (110,525) – – (110,525)Net profit for the year – – – 2,669,712 2,669,712

At 31 December 2001and at 1 January 2002 49,611,281 1,389,475 49,999,981 (8,460,271) 92,540,466

Net profit for the year – – – 8,847,921 8,847,921

At 31 December 2002 49,611,281 1,389,475 49,999,981 387,650 101,388,387

The contributed surplus of the Company represents the difference between the underlying consolidated netassets of K & P Group (Holdings) Limited and its subsidiaries at the date on which the Group’s reorganisationbecame effective, referred to in note 31(a), over the nominal value of the share capital of the Company issuedin exchange therefor, less the amount capitalised to pay up the nil-paid shares issued on the incorporation ofthe Company.

Under the Companies Act 1981 of Bermuda (as amended), the Company may make distributions to its membersout of the contributed surplus in certain circumstances.

32. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

(a) Prior year adjustmentsSSAP 15 (Revised) was adopted during the current year, as detailed in note 2 to the financial statements, whichhas resulted in a change to the layout of the consolidated cash flow statement. The consolidated cash flowstatement is now presented under three headings: cash flows from operating activities, investing activities andfinancing activities. Previously five headings were used, comprising the three headings listed above, togetherwith cash flows from returns on investments and servicing of finance and from taxes paid. The significantreclassifications resulting from the change in presentation are that interest received, interest paid and taxespaid are now included in cash flows from operating activities. The presentation of the 2001 comparativeconsolidated cash flow statement has been changed to accord with the new layout.

The definition of “cash equivalents” under the revised SSAP 15 has been revised from that under the previousSSAP 15, as explained under the heading “Cash and cash equivalents” in note 3 to the financial statements.This has resulted in trust receipt loans no longer qualifying as cash equivalents. The amount of cash equivalentsin the consolidated cash flow statement at 31 December 2001 has been adjusted to remove trust receipt loansamounting to HK$18,299,068, previously included at that date. The year’s movement in trust receipt loans isnow included in cash flows from financing activities and the comparative cash flow statement has been changedaccordingly.


63



32. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (continued)

(b) Major non-cash transactions

During the year, the Group entered into finance lease arrangements in respect of fixed assets with a total

capital value at the inception of the leases of HK$6,065,886 (2001: HK$5,909,238).

33. POST BALANCE SHEET EVENTS

(a) On 20 February 2003, the Group entered into an agreement with two shareholders of an associate of the

Group, YOUEAL TTI Limited (“YOUEAL TTI”), in order to regulate the respective rights and obligations of the

respective shareholders and the arrangements between them with respect to the ownership, management and

operations of YOUEAL TTI. Pursuant to the agreement, each of the shareholders of YOUEAL TTI will subscribe

for additional shares in YOUEAL TTI, in proportion to their existing shareholding in the company. After such

share subscription, YOUEAL TTI will have an issued capital of US$10,000,000. At 31 December 2002, the issued

capital of YOUEAL TTI amounted to US$1,000,000, and the Group had a 41% equity interest in YOUEAL TTI. The

authorised commitment in respect of the Group’s investment in YOUEAL TTI at the balance sheet date is

included in note 36 to the financial statements.

(b) On 3 March 2003, the Company entered into separate subscription agreements with several independent

investors, pursuant to which these investors agreed to subscribe for unlisted convertible notes issued by the

Company with principal amount aggregating US$1,282,500 (equivalent to approximately HK$10,003,500).

These convertible notes bear interest at 2% per annum and are convertible into shares of the Company at an

initial conversion price of HK$0.40 per share, subject to adjustment, during the period commencing from the

date falling 24 months after the date of issue of the convertible notes on 17 March 2003, up to and including

the day immediately prior to the maturity date of the convertible notes. Under the same agreements, the

investors have also agreed to subscribe for unlisted loan notes issued by the Company with principal amount

aggregating US$1,282,500 (equivalent to approximately HK$10,003,500). These loan notes bear interest at 5%

per annum, but are not convertible into shares of the Company. The maturity dates of these convertible notes

and loan notes are 27 months and 24 months, respectively, from the date of issue on 17 March 2003. Any

outstanding convertible notes and loan notes will be redeemed at maturity by the Company at 132.25% and

114%, respectively, of their face values plus accrued interest. The Group intends to use the net proceeds of

US$2,529,744 (equivalent to approximately HK$19,732,000) from the issue of these notes to finance part of its

investment in the associate as further explained in note 33(a) above.

34. CONTINGENT LIABILITIES

Group Company

2002 2001 2002 2001

HK$ HK$ HK$ HK$

Bills discounted with recourse 4,482,063 2,286,609 – –

Guarantee of loan facility

granted to subsidiaries – – 75,431,408 82,952,567

4,482,063 2,286,609 75,431,408 82,952,567



64


35. OPERATING LEASE ARRANGEMENTS

The Group leases certain of its office properties and factories under operating lease arrangements. Leases for properties

are negotiated for terms ranging from one to two years.

At the balance sheet date, the Group had total future minimum lease payments under non-cancellable operating

leases falling due as follows:

Group

2002 2001

HK$ HK$

Within one year 846,308 488,729

In the second to fifth years, inclusive 452,434 603,552

1,298,742 1,092,281

At the balance sheet date, the Company did not have any future minimum lease payments under non-cancellable

operating leases.

36. COMMITMENTS

In addition to the operating lease commitments detailed in note 35 above, the Group had the following commitments

at the balance sheet date:

Group

2002 2001

HK$ HK$

Capital commitments contracted, but not provided for:

Land and buildings 4,650,000 –

Plant and machinery 109,275 –

4,759,275 –

Commitment authorised, but not contracted for,

in respect of investment in an associate 28,782,000 –

33,541,275 –

At the balance sheet date, the Company did not have any significant capital commitments.


65



37. RELATED PARTY TRANSACTIONS

Details of the Group’s advances to an associate are included in note 20 to the financial statements.

38. COMPARATIVE AMOUNTS

As further explained in note 2 to the financial statements, due to the adoption of certain new and revised SSAPs

during the current year, the accounting treatment and presentation of certain items and balances in the financial

statements have been revised to comply with the new requirements. Accordingly, certain prior year adjustments

have been made and certain comparative amounts have been adjusted and reclassified to conform with the current

year’s presentation.

39. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on 25 April 2003.



66

Five Year Financial Summary

A summary of the published consolidated results of the Group for the five years ended 31 December 2002, and the

consolidated assets and liabilities of the Group, as extracted from the published audited financial statements of the Company

and reclassified as appropriate, for the last five financial years, is set out below.

Year ended 31 December

2002 2001 2000 1999 1998

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

RESULTS

TURNOVER 200,758 187,008 213,959 186,196 181,688

PROFIT/(LOSS) BEFORE TAX 632 (9,997) 7,299 (27,582) 5,199

Tax 414 (568) (852) 118 (706)

NET PROFIT/(LOSS) FROM ORDINARY

ACTIVITIES ATTRIBUTABLE TO

SHAREHOLDERS 1,046 (10,565) 6,447 (27,464) 4,493

ASSETS AND LIABILITIES

2002 2001 2000 1999 1998

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Total assets 187,529 174,381 191,754 183,321 193,152

Total liabilities (86,220) (73,761) (82,055) (68,144) (46,710)

101,309 100,620 109,699 115,177 146,442


k & p international holdings limited

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