report of the directors - daiwa · report of the directors ... hong kong & mainland china...

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9

Report of the Directors

The Directors present herewith their report and the auditedaccounts for the year ended 31 March 1998.

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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1998 1997�� ! �� !

Turnover Contribution Turnover Contribution�� HK$’000 HK$’000 HK$’000 HK$’000�� !"#$ By product category

�� !" Electronic components 581,074 96,388 472,970 66,024�� !"# Electronic consumer products 57,065 3,947 58,623 8,984

638,139 100,335 531,593 75,008�� !"# Add: other income 4,434 2,755�� !"#$%& Less: general and administration

expenses (81,731) (61,908) �� ! financial expenses (10,745) (10,529)

�� !"#$ Operating profit before taxation 12,293 5,326�� ! �� !1998 1997

�� !" By geographical location�� !"#$ Hong Kong & Mainland China 530,288 448,748�� America 33,686 28,071�� Europe 34,768 24,077�� !"# Other Asian countries 38,152 28,958�� Others 1,245 1,739

638,139 531,593

There is no abnormal contribution to profit from any specificareas of operations.

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10


FIVE YEAR FINANCIAL SUMMARY

A summary of the consolidated results, assets and liabilitiesof the Group for each of the five years ended 31 March1998 is set out on pages 6 and 7.

MAJOR SUPPLIERS AND CUSTOMERS

For the year ended 31 March 1998, the five largestcustomers o f the Group together accounted forapproximately 21 percent of the Group’s total turnover, withthe largest customer accounting for 6 percent, and the fivelargest suppliers of the Group together accounted forapproximately 62 percent by value of the Group’s totalpurchases during the year, with the largest supplieraccounting for 50 percent.

None of the directors, their associates or any shareholderswhich, to the knowledge of the Directors owned more than5 percent of the Company’s share capital, had any interestin the five largest suppliers or customers.

RESULTS AND DIVIDENDS

The results of the Group for the year are set out in theconsolidated profit and loss account on page 19.

The states of affairs of the Group and of the Company asat 31 March 1998 are set out in the balance sheets onpages 20 and 21 respectively.

The cash flows of the Group for the year are set out in thestatement on pages 22 and 23.

The Directors do not recommend the payment of anydividend in respect of the year ended 31 March 1998.

DONATIONS

Donations made by the Group during the year amounted toHK$10,000.

SUBSIDIARIES

Details of the Company’s subsidiaries as at 31 March 1998are set out on pages 54 to 56.

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FIXED ASSETS

Movements in fixed assets of the Group during the year areset out in note 12 on pages 36 and 37.

BANK LOANS, OVERDRAFTS AND OTHER BORROWINGS

The Group’s bank loans, overdrafts and other borrowingsoutstanding as at 31 March 1998 are repayable over thefollowing periods:

�� ! �� !�� !" ��Short-term �� Obligationsbank loans �� ! under

and Long-term financeoverdrafts bank loans leases��

HK$’000 HK$’000 HK$’000

�� !"#$% On demand or not exceeding one year 78,243 4,150 1,872�� !"#$%&� Within a period of more than one year

but not exceeding two years – 1,050 1,617�� !"#$%&� Within a period of more than two years

but not exceeding five years – 700 56

78,243 5,900 3,545

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SHARE CAPITAL

Movements in the issued share capital of the Companyduring the year are set out in note 20 on pages 41 to 44.

RESERVES

The amounts and particulars of material transfers to andfrom reserves during the year are set out in note 21 onpages 44 and 45.

DISTRIBUTABLE RESERVES

Information related to the distributable reserves of theCompany is set out in note 21(b) on page 45.

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12


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)Mr. WAN Chor FaiMr. MAK Hon Kai, StanlyMr. NG Wan LoongDr. Tatsuyuki YAMAMOTO*Mr. Barry John BUTTIFANT*Mr. YUEN Chi Choi, Simon*

Mr. NG Wan Loong and Dr. Tatsuyuki YAMAMOTO* retire byrotation in accordance with clause 99 of the Company’sbye-laws and, being eligible, 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.

BIOGRAPHICAL DETAILS OF DIRECTORS

Executive Directors

LAU Tak Wan, aged 48, is the co-founder and the Presidentof the Group. Mr. Lau graduated from the Hong Kong BaptistCollege (now known as the Hong Kong Baptist University)in Sociology and has more than 19 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.

LEUNG Pak Ching, aged 47, is the co-founder and theManaging Director of the Group. Mr. Leung has more than20 years’ in-depth experience in manufacturing obtainedthrough working in a number of electronics companies inHong Kong. He is overseeing the Group’s production,management and new product development.

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BIOGRAPHICAL DETAILS OF DIRECTORS (Continued)

Executive Directors (Continued)

WAN Chor Fai, aged 40, is the Development and ProductionDirector of the Group. Mr. Wan graduated from the HongKong Polytechnic (now known as the Hong Kong PolytechnicUniversity) in Production and Industrial Engineering and isresponsible for the business development and manufacturingmanagement of the Group. He has more than 14 years’experience in marketing and manufacturing. Prior to joiningthe Group in 1987, he worked for an internationalconglomerate and was in charge of electronic division.

MAK Hon Kai, Stanly, aged 36, is the Sales Director of theGroup responsible for the Group’s overall marketing strategyand the distribution of electronic components. Mr. Mak joinedthe Group since 1988. He has more than 18 years’experience in the sales and marketing of electroniccomponents.

NG Wan Loong, aged 42, is the Engineering Director of theGroup. Mr. Ng graduated from the Hong Kong Polytechnic(now known as the Hong Kong Polytechnic University) inElectrical Engineering. He oversees the Group’s engineeringmanagement , 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 15 years. He joined theGroup since 1991.

Independent Non-executive Directors

Dr. Tatsuyuki YAMAMOTO, aged 43, 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 since 1994.

Barry John BUTTIFANT, aged 53, 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 since1994.

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14


BIOGRAPHICAL DETAILS OF DIRECTORS (Continued)

Independent Non-executive Directors (Continued)

YUEN Chi Choi, Simon, aged 37, 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 since1996 and has more than 10 years’ audit experience.

The directors consider that the executive directors are alsosenior management of the Company.

DIRECTORS’ SERVICE CONTRACTS

During the year, each of the executive directors renewedhis service contract with the Company. The terms of therenewed contracts are respectively three years for Mr. LAUTak Wan and Mr. LEUNG Pak Ching and two years for allthe other executive directors. The renewed service contractsfor Mr. LAU Tak Wan and Mr. LEUNG Pak Ching commencedon 1 April 1997 while the renewed service contracts for allthe other executive directors commenced on 1 April 1998.All such contracts wil l continue to be effective unti lterminated by the directors concerned or the Company givingto the other 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 terminable by the Company withinone year without payment of compensation other than undernormal statutory obligations.

DIRECTORS’ INTERESTS IN CONTRACTS

Apart from the directors’ service contracts noted above andthe transactions disclosed in note 31 on page 53, no othercontracts of significance in relation to the Group’s businessto which the Company, or any of its subsidiaries was aparty, and in which any director had a material interest,subsisted at the end of the year or at any time during theyear.

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DIRECTORS’ INTERESTS IN SHARES OR DEBT SECURITIES

Share Capital

As at 31 March 1998, 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

�� !"#$%&'Number of ordinary shares beneficially held�� ! �� ! �� !�� ! Personal Corporate Other ��

Name of directors interests interests interests Total

�� ! – – 101,736,500 101,736,500Mr. LAU Tak Wan ��1 Note 1

�� ! 8,000,000 33,637,000 – 41,637,000Mr. LEUNG Pak Ching ��2 Note 2

�� ! 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 and certain of his family members.

2. 33,637,000 shares in the Company were beneficially ownedby Brighton World Limited (“Brighton”). The entire issuedshare capital of Brighton is beneficially owned by Mr. LEUNGPak Ching.

(b) Interests in shares of the subsidiaries

Each of Dominion (see note 1 above for the interestsof Mr. LAU Tak Wan in Dominion) and Mr. LEUNG PakChing has beneficial interests in the fol lowingsubsidiaries:

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�� 1. Domin ion In ternat iona l L imi ted��Dominion�� !"#$%&'(

101,736,500��Dominion�� !"�� !"#$%&'()$%*�� !"#$%&'()*+2. Brighton World Limited��Brighton�� !"#$%& 33,637,000��

Brighton�� !"#$%&�� !"#(b) �� !"#$%&'

Dominion�� !"#1�� Dominion�� !"�� !�� !"#$%&'()*+*,

�� !"#$%&'()*Number of non-voting

deferred shares held

�� !"#$%Cosmos Wires and Connectors Manufacturing Limited 50,000

Westpac Digital Limited 1

�� !"#$%Vastpoint Industrial Limited 455,000�� !"#$%Daiwa Associate (H.K.) Limited 1,500,000

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DIRECTORS’ INTERESTS IN SHARES OR DEBT SECURITIES(Continued)

Share Capital (Continued)

(b) Interests in shares of the subsidiaries (Continued)

In addition, each of Mr. LAU Tak Wan, Mr. LEUNGPak Ching and Ms. CHAN Yuen Mei, Pinky (the spouseof Mr. LAU Tak Wan) beneficially owns 140,000,150,000 and 10,000 non-voting deferred sharesrespectively in Cosmotec Precision 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 anExtraordinary General Meeting of the Company held on 18March 1994, the Directors may, at their discretion, inviteexecutive directors and employees of the Group, to take upoptions to subscribe for shares in the Company subject tothe terms and conditions to certain directors and employeesstipulated therein. Information related to the share optionheld by the executive directors is set out in note 6(c) onpage 33.

Apart from the exercise of share option disclosed in note6(c) on page 33, at no time during the year was theCompany or any of i ts subsidiar ies a par ty to anyarrangements to enable the directors of the Company toacquire benefits by means of acquisition of shares in, ordebentures of, the Company or any other body corporate.

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 March1998 showed that no other party held 10% or more of theissued share capital of the Company.

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17


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 of The StockExchange of Hong Kong Limited throughout the financialyear except for not specifying the terms of appointment ofindependent 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

A resolution to reappoint the retiring auditors, Coopers &Lybrand, will be put at the annual general meeting.

On behalf of the BoardLAU Tak WanPresident

Hong Kong, 31 July 1998

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report of the directors - daiwa · report of the directors ... hong kong & mainland china...

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