report of the directors - daiwa of the directors.pdf · report of the directors ... hong kong &...

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Report of the Directors

Daiwa Associate Holdings Limited12

The Directors submit their report together with the auditedaccounts for the year ended 31 March 1999.

PRINCIPAL ACTIVITIES

The Company is an investment holding Company. Itssubsidiaries are pr incipally engaged in the design,development, manufacture and distribution of electroniccomponents and the manufacture of OEM electronicconsumer products.

An analysis of the Group’s turnover and contribution totrading results by product category and geographical locationfor the year is as follows:

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1999 1998�� ! �� !

Turnover Contribution Turnover Contribution��

HK$’000 HK$’000 HK$’000 HK$’000

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505,487 61,475 638,139 100,335

�� !"# Add: other income 3,395 4,434�� !"#$%& Less: general and administration

expenses (67,937) (81,731) �� ! financial expenses (8,060) (10,745)

�� !"#$% Operating (loss)/profit excluding�� !"#$%& exceptional items (11,127) 12,293

�� ! Exceptional items (30,621) –

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�� Operating (loss)/profit (41,748) 12,293

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1999 1998�� !" By geographical location�� !"#$ Hong Kong & Mainland China 351,892 530,288�� America 57,924 33,686�� Europe 38,891 34,768�� !"# Other Asian countries 53,992 38,152�� Others 2,788 1,245

505,487 638,139

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PRINCIPAL ACTIVITIES (Continued)

No analysis of the contributions to trading results bygeographical location has been prepared as no contributionsto profit or loss from any of the above geographical locationsis substantially out of line with the normal ratio of profit/loss to turnover.

FIVE YEAR FINANCIAL SUMMARY

A summary of the consolidated results, assets and liabilitiesof the Group for each of the five years ended 31 March1999 is set out on pages 9 to 11.

MAJOR CUSTOMERS AND SUPPLIERS

For the year ended 31 March 1999, the five largestcustomers o f the Group together accounted forapproximately 23 per cent of the Group’s total turnover,with the largest customer accounting for 11 per cent, andthe five largest suppliers of the Group together accountedfor approximately 49 per cent by value of the Group’s totalpurchases during the year, with the largest supplieraccounting for 34 per cent.

None of the Directors, their associates or any shareholders(which to the knowledge of the directors owned more than5 per cent of the Company’s share capital) had any interestin the five largest customers or suppliers.

RESULTS AND APPROPRIATIONS

The results of the Group for the year are set out in theconsolidated profit and loss account on page 22.

The Directors do not recommend the payment of a dividendduring the year.

DONATIONS

Donations made by the Group during the year amounted toHK$3,000.

SUBSIDIARIES

Details of the Company’s principal subsidiaries as at 31March 1999 are set out on pages 53 to 55.

FIXED ASSETS

Movements in fixed assets of the Group during the year areset out in note 11 on pages 38 and 39.

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B A N K L OA N S , O V E R D R A F T S A N D OT H E RBORROWINGS

The repayment analysis of the Group’s bank loans,overdrafts and other borrowings outstanding as at 31 March1999 is set out in note 21 on page 46.

SHARE CAPITAL

Movements in the issued share capital of the Companyduring the year are set out in note 19 on pages 42 and 43.

RESERVES

The amounts and particulars of material transfers to andfrom reserves during the year are set out in note 20 onpages 44 and 45.

DISTRIBUTABLE RESERVES

Information related to the distributable reserves of theCompany is set out in note 20(b) on page 45.

DIRECTORS

The Directors who held office during the year and up to thedate of this report were:

Mr. LAU Tak Wan (President)Mr. LEUNG Pak Ching (Managing Director)

(resigned on 1 January 1999)Mr. WAN Chor FaiMr. MAK Hon Kai, StanlyMr. NG Wan LoongMs. CHAN Yuen Mei, Pinky (appointed on 8 December 1998)Dr. Tatsuyuki YAMAMOTO*Mr. Barry John BUTTIFANT*Mr. YUEN Chi Choi, Simon*Mr. WONG Nga Chung* (appointed on 8 December 1998)

Mr. Barry John BUTTIFANT*, Ms. CHAN Yuen Mei, Pinkyand Mr. WONG Nga Chung* retire by rotation in accordancewith clause 99 of the Company’s bye-laws and, beingeligible, offer themselves for re-election.

* Independent non-executive directors

The terms of off ice of the Directors, including theindependent non-executive directors, are subject toretirement by rotation and are eligible for re-election at theCompany’s annual general meeting in accordance with theCompany’s bye-laws.

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BIOGRAPHICAL DETAILS OF DIRECTORS

Executive Directors

LAU Tak Wan, aged 49, is the co-founder and the Presidentof the Group. Mr. Lau graduated from Hong Kong BaptistCollege (now known as Hong Kong Baptist University) inSociology and has more than 20 years’ management andproduction experience in the electronics industry. Prior tofounding the Group, Mr. Lau had over 6 years’ experiencein running his own business in the electronics industry. Heis responsible for the overall corporate planning, strategicdevelopment and marketing of the Group.

WAN Chor Fai, aged 41, is the Development and ProductionDirector of the Group. Mr. Wan graduated from Hong KongPolytechnic (now known as Hong Kong PolytechnicUniversity) in Production and Industrial Engineering and isresponsible for the business development and manufacturingmanagement of the Group. He has more than 15 years’experience in manufacturing and marketing. Prior to joiningthe Group in 1987, he worked for an internationalconglomerate and was in charge of the electronics division.

MAK Hon Kai, Stanly, aged 37, is the Sales Director of theGroup responsible for the Group’s overall marketing strategyand the distribution of electronic components. Mr. Mak joinedthe Group in 1988. He has more than 19 years’ experiencein the sales and marketing of electronic components.

NG Wan Loong, aged 43, is the Engineering Director of theGroup. Mr. Ng graduated from Hong Kong Polytechnic (nowknown as Hong Kong Polytechnic University) in ElectricalEngineering. He oversees the Group’s engineer ingmanagement , product ion p lanning, research anddevelopment of new products. Prior to joining the Group, heworked for a number of electronics companies in seniorengineering positions for more than 16 years. He joined theGroup in 1991.

CHAN Yuen Mei, Pinky, aged 42, is the spouse of Mr. LauTak Wan. She completed Certificate in Accountancy coursefrom Hong Kong Polytechnic (now known as Hong KongPolytechnic University). Ms. Chan has over 20 years ofexperience in accounting and financial management and atthe same time running her own business for more than 10years. She joined the Company in 1998.

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BIOGRAPHICAL DETAILS OF DIRECTORS (Continued)

Independent Non-executive Directors

Dr. Tatsuyuki YAMAMOTO, aged 44, is the managing directorof various electronics companies in Japan and Malaysia.Dr. Yamamoto has more than 10 years’ experience in theelectronics industry. He joined the Company in 1994.

Barry John BUTTIFANT, aged 54, is the managing directorof IDT International Limited and a director of GiordanoHoldings Limited. Both companies are listed in Hong Kong.Mr. Buttifant is a fellow member of the British Institute ofManagement, the Hong Kong Management Association, TheAssociation of Chartered Certified Accountants and the HongKong Society of Accountants. He joined the Company in1994.

YUEN Chi Choi, Simon, aged 38, is a certified publicaccountant in Hong Kong. Apart from being a fellow memberof The Association of Chartered Certified Accountants, Mr.Yuen is also an associate member of the Hong Kong Societyof Accountants and the Canadian Chartered Institute ofFinance and Accountancy. He joined the Company in 1996and has more than 10 years’ audit experience.

WONG Nga Chung, aged 48, graduated from Hong KongBaptist College (now known as Hong Kong BaptistUniversity). Mr. Wong has over 20 years of experience inthe field of electronics with more than 15 years’ experiencerunning his own business in electronics.

DIRECTORS’ SERVICE CONTRACTS

Ms. CHAN Yuen Mei, Pinky has entered into a servicecontract with the Company for a period of two yearscommencing on 8 December 1998.

Each of the other executive Directors has a service contractwith the Company with a remaining unexpired term of oneyear to 31 March 2000.

All such contracts wil l continue to be effective unti lterminated by the Directors concerned or the Companygiving to the other party not less than three months’ notice.

Apart from the above, none of the Directors proposed forre-election has an unexpired service contract with theCompany which is not determinable by the Company withinone year without payment of compensation, other thanstatutory compensation.

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DIRECTORS’ INTERESTS IN CONTRACTS

Apart from the Directors’ service contracts noted above andthe transactions disclosed in note 30 on page 52, no othercontracts of significance in relation to the Group’s businessto which the Company, or any of its subsidiaries was aparty, and in which a Director of the Company had a materialinterest, whether directly or indirectly, subsisted at the endof the year or at any time during the year.

DIRECTORS’ INTERESTS IN SHARES OR DEBT SECURITIES

Share Capital

As at 31 March 1999, the interests of Directors in the sharesof the Company or any associated corporations as recordedin the register maintained under section 29 of the Securities(Disclosure of Interests) Ordinance (the “SDI Ordinance”)and other interests of Directors in the Company were asfollows:

(a) Interests in shares of the Company

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Name of directors interests interests interests Total

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Ms. CHAN Yuen Mei, Pinky ��1 Note 1

�� ! 500,000 – – 500,000Mr. MAK Hon Kai, Stanly

�� ! 600,000 – – 600,000Mr. NG Wan Loong

Notes:

1. 101,736,500 shares in the Company were beneficially ownedby Dominion International Limited (“Dominion”). The entireissued share capital of Dominion is owned by a trustee forthe benefit of a discretionary trust the beneficiaries of whichinclude Mr. LAU Tak Wan, Ms. CHAN Yuen Mei, Pinky (thespouse of Mr. Lau) and certain of his family members.

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DIRECTORS’ INTERESTS IN SHARES OR DEBT SECURITIES(Continued)

Share Capital (Continued)

(b) Interests in shares in the subsidiaries

Dominion (see note 1 above for the interests of Mr.LAU Tak Wan and Ms. CHAN Yuen Mei, Pinky inDominion) has beneficial interests in the followingsubsidiaries:

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Westpac Digital Limited 1

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Vastpoint Industrial Limited 455,000

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Daiwa Associate (H.K.) Limited 1,500,000

In addition, each of Mr. LAU Tak Wan and Ms. CHANYuen Mei, Pinky beneficially owns 140,000 and 10,000non-voting deferred shares respectively in CosmotecPrecision Industrial Limited.

Save as disclosed above, none of the Directors or theirassociates had any beneficial or non-beneficial interests inthe share capital of the Company or its associatedcorporations at the balance sheet date required to bedisclosed pursuant to the SDI Ordinance.

DIRECTORS’ RIGHTS TO ACQUIRE SHARES ORDEBENTURES

Share Option

Pursuant to a share option scheme approved at a specialgeneral meeting of the Company held on 18 March 1994,the Directors may, at their discretion, invite executiveDirectors and employees of the Group, to take up optionsto subscribe for shares in the Company subject to the termsand conditions to certain Directors and employees stipulatedtherein.

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DIRECTORS’ RIGHTS TO ACQUIRE SHARES ORDEBENTURES (Continued)

Apart from the share option scheme disclosed above:

(a) at no time during the year was the Company or anyof its subsidiaries a party to any arrangements toenable the Directors of the Company to acquirebenefits by means of acquisition of shares in, ordebentures of, the Company or any other bodycorporate.

(b) none of the Directors (including their spouse andchildren under 18 years of age) had been granted, orexercised, any rights to subscribe for shares in theCompany.

SUBSTANTIAL SHAREHOLDERS

Other than the interests disclosed above in respect ofDirectors, the register of substantial shareholders maintainedunder section 16(1) of the SDI Ordinance as at 31 March1999 showed that no other party held 10 per cent or moreof the issued share capital of the Company.

MANAGEMENT CONTRACTS

No contracts concerning the management and administrationof the whole or any substantial part of the business of theCompany were entered into or existed during the year.

CONNECTED TRANSACTIONS

During the year, the Company and/or its subsidiaries didnot enter into any transactions which was regarded asconnected transactions discloseable by the Company underthe Rules Governing the Listing of Securities on The StockExchange of Hong Kong Limited (the “Listing Rules”).

Furthermore, with regard to the related party transactionsas disclosed in note 30 on page 52, none of thosetransactions constitutes connected transactions discloseableby the Company and its subsidiaries under the Listing Rules.

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PURCHASE, SALE AND REDEMPTION OF THECOMPANY’S LISTED SECURITIES

During the year, neither the Company nor any of itssubsidiaries had purchased, sold or redeemed any of theCompany’s listed securities.

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under theCompany’s bye-laws although there are no restrictionsagainst such rights under the laws in Bermuda.

CORPORATE GOVERNANCE

The Company has complied with the Code of Best Practiceas set out in Appendix 14 of the Listing Rules throughoutthe financial year except for not specifying the terms ofappointment of independent non-executive directors.

According to the bye-laws of the Company, independentnon-executive directors are subject to retirement by rotationand re-election at the annual general meeting.

AUDITORS

Our auditors, Coopers & Lybrand, have merged their practicewith Price Waterhouse and now practise in the name ofPricewaterhouseCoopers. They have signed the auditors’report in their new name. PricewaterhouseCoopers, beingeligible, offer themselves for re-appointment, and a resolutionto this effect will be proposed at the annual general meetingof the Company.

On behalf of the BoardLAU Tak WanPresident

Hong Kong, 6 August 1999

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