The directors present their annual report and the audited financial statements for the year ended 31st March, 1999.
PRINCIPAL ACTIVITIES
The Company acts as an investment holding company and provides corporate management services. Its subsidiaries, jointly controlled entities and associated company are principally engaged in the manufacture and marketing of mould bases and the trading of metal and parts, machinery and industrial use oil.
The Group's head office is in Hong Kong and nearly all of its products are manufactured in Hong Kong, Shanghai, Guangzhou, Heyuan and Dongguan, the People's Republic of China (the "PRC"). The Group's turnover and contribution to operating profit for the year ended 31st March, 1999 analysed by principal activity are as follows:
Contribution
to operating
Turnover profit
HK$'000 HK$'000
Manufacture of mould bases 471,667 73,577
Trading of metal and parts, machinery
and industrial use oil 214,460 25,021
-------- --------
686,127 98,598
========
Interest income 6,191
Interest expense and finance charges (10,061)
--------
94,728
========
A geographical analysis of the Group's turnover for the year ended 31st March, 1999, by location of customers, is as follows:
HK$'000 %
Hong Kong and elsewhere in the PRC 607,851 89
Other countries 78,276 11
-------- --------
686,127 100
======== ========
Contribution to operating profit by geographical location of customers has not been presented as the contribution to operating profit in each market is substantially in line with the overall Group ratio of operating profit to turnover.
SUBSIDIARIES AND JOINTLY CONTROLLED ENTITY
Details of the Company's subsidiaries and the Group's jointly controlled entity at 31st March, 1999 are set out in notes 30 and 12 to the financial statements, respectively. The shares of Lung Kee Metal Holdings Limited ("LKMH"), a subsidiary of the Company, are listed on Stock Exchange of Singapore Limited.
RESULTS AND APPROPRIATIONS
The results of the Group and appropriations of the Company for the year are set out in the consolidated profit and loss account on page 21.
An interim dividend of 3 cents per share amounting to HK$11,386,781 was paid to shareholders during the year. The directors now recommend the payment of a final dividend of 7 cents per share payable to shareholders registered on 23rd July, 1999, amounting to a total of HK$26,569,157 and the retention of the remaining profit of the Group for the year of HK$28,412,917.
RESERVES
Details of the movements in the reserves of the Group and the Company during the year are set out in note 19 to the financial statements.
FINANCIAL SUMMARY
A summary of the results and of the assets and liabilities of the Group for the past five financial years is set out on page 59.
FIXED ASSETS
During the year, the Group constructed factory premises and staff quarters amounting to approximately HK$46 million. The Group continued its plant expansion policy and expended approximately HK$32 million on new plant and machinery during the year. Details of these and other movements during the year in the fixed assets of the Group are set out in note 10 to the financial statements.
MAJOR PROPERTIES
Details of the major properties of the Group at 31st March, 1999 are set out on page 61 of the annual report.
SHARE CAPITAL AND SHARE OPTIONS
Details of the share option scheme and the movement in the number of share options during the year are set out in note 18 to the financial statements.
During the year, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities.
MAJOR CUSTOMERS AND SUPPLIERS
Since the Group has a very wide customer base, the aggregate sales attributable to the Group's five largest customers were less than 30% of the Group's total turnover for the year.
The Group's largest supplier contributed 27% to the total purchases for the year. The Group's five largest suppliers accounted for 65% of the total purchases for the year.
At no time during the year did a director, an associate of a director or any shareholder (which to the knowledge of the directors own more than 5% of the Company's share capital) have an interest in any of the Group's five largest suppliers.
BORROWINGS AND INTEREST CAPITALISED
Bank and other borrowings repayable within one year or on demand are classified as current liabilities as set out in note 15 to the financial statements. Analyses of the repayment terms of borrowings and obligations under finance leases are set out in notes 21 and 22 to the financial statements, respectively.
No interest was capitalised by the Group during the year.
COMPLIANCE WITH CODE OF BEST PRACTICE
The Company has complied throughout the year ended 31st March, 1999 with those paragraphs of the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited with which it is required to state compliance. During the year, the Company established an audit committee consisted of Messrs. Liu Wing Ting, Stephen, Chan Chun Sing, Colin and Lee Tat Yee, independent non-executive directors. In establishing the terms of reference for this committee, the directors have had regard to the "Guide for the Formation of an Audit Committee" issued by the Hong Kong Society of Accountants in December 1997.
DIRECTORS AND SERVICE CONTRACTS
The directors of the Company during the year and up to the date of this report were:
Executive directors
Siu Tit Lung (Chairman)
Siu Yuk Lung (Managing Director)
Mak Koon Chi
Wai Lung Shing
Fung Wai Hing
Independent non-executive directors
Liu Wing Ting, Stephen
Chan Chun Sing, Colin
Lee Tat Yee
In accordance with Clauses 87(1) and 169(2) of the Company's Bye-Laws, Messrs. Mak Koon Chi and Wai Lung Shing retire from office by rotation and, being eligible, offer themselves for re-election.
The term of office for each independent non-executive director is the period up to his retirement by rotation in accordance with the Company's Bye-Laws.
None of the directors being proposed for re-election at the forthcoming annual general meeting has a service contract with the Company or any of its subsidiaries which is not determinable by the Group within one year without payment of compensation (other than statutory compensation).
BRIEF DETAILS OF DIRECTORS AND SENIOR MANAGEMENT
Executive directors
Mr. Siu Tit Lung, aged 49, elder brother of Mr. Siu Yuk Lung, has been the chairman of the Company since December 1992 and is a co-founder of the Group. Mr. Siu is responsible for the overall strategic planning and corporate development of the Group. He has over 30 years of experience in metal trading and mould base manufacturing. He was awarded the Young Industrialist Award of Hong Kong in 1993. He is also a honorary citizen of Dongguan City, PRC.
Mr. Siu Yuk Lung, aged 46, brother of Mr. Siu Tit Lung, has been the managing director of the Company since December 1992 and is a co-founder of the Group. Mr. Siu is responsible for policy making and the corporate management of the Group. He has over 27 years of experience in metal trading and mould base manufacturing. He has, since 1995, been serving as a member of the Executive Committee of the Hong Kong Mould Association.
Mr. Mak Koon Chi, aged 41, has been an executive director of the Company since December 1992 and is a senior member and past Chairman of the Society of Manufacturing Engineers (Hong Kong Chapter). Mr. Mak is responsible for policy making and marketing and manufacturing of the Group and has many years of experience in mould base manufacturing. Mr. Mak graduated from Murdoch University with a Master of Business Administration Degree.
Mr. Wai Lung Shing, aged 38, has been an executive director of the Company since December 1992 and is responsible for the policy making and the finance and administration functions of the Group. Mr. Wai graduated from the Hong Kong Polytechnic University with a Bachelor of Arts (Hons.) Degree in Accountancy and from the University of Warwick with a Master of Business Administration Degree. He is a fellow of both the Hong Kong Society of Accountants and the Chartered Association of Certified Accountants. He has extensive experience in accounting, finance and management with both international accounting firms and commercial organisations.
Mr. Fung Wai Hing, aged 46, has been an executive director of the Company since August 1997 and is responsible for policy making and trading business of the Group. Mr. Fung graduated from the University of Birmingham with a Master of Science Degree in Industrial Management and from the University of Hong Kong with a Master of Business Administration Degree. He is a member and past president of the Institute of Industrial Engineers (Hong Kong Chapter). He is also a senior member of the Society of Manufacturing Engineers (Hong Kong Chapter). He has extensive experience in the trading business, especially machinery trading.
Independent non-executive directors
Mr. Liu Wing Ting, Stephen, Badge of Honour, aged 47, has been practising as a certified public accountant for many years and is a founder director of Hong Kong Aids Foundation Limited and a member of the Tung Wah Eastern Hospital Governing Committee of the Hospital Authority. He is a fellow of both the Hong Kong Society of Accountants and the Chartered Association of Certified Accountants. He has wide experience in auditing, taxation and financial management in various fields and industries. He has been an independent non-executive director of the Company since December 1992 and is the Chairman of the audit committee.
Mr. Chan Chun Sing, Colin, aged 45, graduated from the University of Toronto with a Bachelor of Science (Hons.) Degree in Engineering and from the Chinese University of Hong Kong with a Master of Business Administration Degree. He has many years of experience in the data communications industry. He has been an independent non-executive director of the Company since December 1992.
Dr. Lee Tat Yee, aged 49, obtained his doctorate degree from the University of Queensland and is a Chartered Engineer of the Engineering Council in the United Kingdom. Dr. Lee is currently a Director of the University Industrial Centre of the University of Hong Kong specialising in quality assurance management systems. He has been an independent non-executive director of the Company since December 1992.
Others
Mr. Chng Hee Kok, aged 51, is an independent non-executive director of LKMH. Mr. Chng obtained a Bachelor of Engineering (Mechanical), First Class Honours Degree and a Master of Business Administration Degree from the National University of Singapore in 1972 and 1984 respectively. He has also received several merit awards, including the Institution of Engineers, Singapore, Gold Medal (1972) and the Distinguished Engineering Alumni Award (1991). He is the Chief Executive Officer of NTUC Club Investment Pte. Ltd. He is also a Member of Parliament for the East Coast GRC, Singapore.
Mr. Lee Joo Hai, aged 43, is an independent non-executive director of LKMH. Mr. Lee is a member of the Institute of Chartered Accountants in England and Wales, the Malaysian Institute of Accountants and the Institute of Certified Public Accountants of Singapore. He has extensive experience in accounting, auditing, taxation, company secretarial work, investigation and share valuations with exposure to US, Japan, UK and other EC countries' accounting and auditing reporting requirements. He is presently a partner in a public accounting firm.
DIRECTORS' INTERESTS IN CONTRACTS OF SIGNIFICANCE
No contract of significance, to which the Company or any of its subsidiaries was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.
DIRECTORS' INTERESTS IN SHARES AND SHARE OPTIONS
At 31st March, 1999, the interests of the directors and their associates in the share capital of the Company and its associated corporations, within the meaning of the Securities (Disclosure of Interests) Ordinance (the "SDI Ordinance"), as recorded in the register maintained by the Company pursuant to Section 29 of the SDI Ordinance or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited pursuant to the Model Code for Securities Transactions by Directors of Listed Companies and in the share options of the Company were as follows:
Number of ordinary shares held
-------------------------------------------------
Personal Family Corporate Other
Name of director interests interests interests interests
Siu Tit Lung
(Notes 1, 2 and 4) 8,706,875 - - 196,875,000
Siu Yuk Lung
(Notes 1, 3 and 4) 8,706,875 - - 196,875,000
Mak Koon Chi 2,000,000 - - -
Wai Lung Shing 2,000,000 - - -
Fung Wai Hing 312,500 - - -
Notes
(1) Siu Tit Lung and Siu Yuk Lung jointly held 7,144,375 shares in the Company and each owned a further 1,562,500 shares in the Company registered in their own name.
(2) Rickdee Investments Limited, which is wholly-owned by a discretionary trust in which Siu Tit Lung and his family members are beneficiaries, held 37,500,000 shares in the Company.
(3) Robin Hill Investments Limited, which is wholly-owned by a discretionary trust in which Siu Yuk Lung and his family members are beneficiaries, held 37,500,000 shares in the Company.
(4) Pan Island Investments Limited, which is wholly-owned by a discretionary trust in which Siu Tit Lung and Siu Yuk Lung and certain members of their families are beneficiaries, held 159,375,000 shares in the Company.
(5) At 31st March, 1999, certain directors had personal interests in options to subscribe for shares in the Company granted under the share option scheme of the Company as follows:
Number of share options
---------------------------
At 1st Granted At 31st Exercise
April during March Exercisable price per
Name of director 1998 the year 1999 period share
HK$
Siu Tit Lung 300,000 - 300,000 1st May,
1998 to
30th April,
2001 1.865
300,000 - 300,000 3rd September,
1998 to
2nd September,
2001 1.205
- 300,000 300,000 29th September,
1999 to
28th September,
2002 0.550
-------- -------- --------
600,000 300,000 900,000
======== ======== ========
Siu Yuk Lung 300,000 - 300,000 1st May,
1998 to
30th April,
2001 1.865
300,000 - 300,000 3rd September,
1998 to
2nd September,
2001 1.205
- 300,000 300,000 29th September,
1999 to
28th September,
2002 0.550
-------- -------- --------
600,000 300,000 900,000
======== ======== ========
Mak Koon Chi 300,000 - 300,000 1st May,
1998 to
30th April,
2001 1.865
300,000 - 300,000 3rd September,
1998 to
2nd September,
2001 1.205
- 300,000 300,000 29th September,
1999 to
28th September,
2002 0.550
-------- -------- --------
600,000 300,000 900,000
======== ======== ========
Wai Lung Shing 300,000 - 300,000 1st May,
1998 to
30th April,
2001 1.865
300,000 - 300,000 3rd September,
1998 to
2nd September,
2001 1.205
- 300,000 300,000 29th September,
1999 to
28th September,
2002 0.550
-------- -------- --------
600,000 300,000 900,000
======== ======== ========
Fung Wai Hing 300,000 - 300,000 1st May,
1998 to
30th April,
2001 1.865
300,000 - 300,000 3rd September,
1998 to
2nd September,
2001 1.205
- 300,000 300,000 29th September,
1999 to
28th September,
2002 0.550
-------- -------- --------
600,000 300,000 900,000
======== ======== ========
Details of the Company's share option scheme are set out in note 18 to the financial statements.
(6) At 31st March, 1999, certain directors had personal interests in options to subscribe for shares in LKMH, a subsidiary of the Company, granted under the share option scheme of LKMH as follows:
Number of share options
--------------------------
At 1st Granted At 31st Exercise
April during March Exercisable price per
Name of director 1998 the year 1999 period share
US$
Mak Koon Chi 450,000 - 450,000 15th January,
1999 to
14th January,
2003 0.42
- 450,000 450,000 14th August,
1999 to
13th August,
2003 0.13
-------- -------- --------
450,000 450,000 900,000
======== ======== ========
Wai Lung Shing 450,000 - 450,000 15th January,
1999 to
14th January,
2003 0.42
- 450,000 450,000 14th August,
1999 to
13th August,
2003 0.13
-------- -------- --------
450,000 450,000 900,000
======== ======== ========
In addition, Siu Tit Lung and Siu Yuk Lung hold non-voting deferred shares in certain of the Company's subsidiaries as set out in note 30 to the financial statements.
Save as disclosed above, and other than certain nominee shares in subsidiaries held in trust for the Group, at 31st March, 1999, (i) none of the directors or their associates had any interests in any securities of the Company or any of its associated corporations as defined in the SDI Ordinance; and (ii) none of the directors or their spouses or children under 18 had any right to subscribe for the securities of the Company, or had exercised any such right during the year.
DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBT SECURITIES
Other than the share option schemes disclosed above, at no time during the year was the Company or any of its subsidiaries a party to any arrangements to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debt securities (including debentures) of the Company or any other body corporate.
SUBSTANTIAL SHAREHOLDERS
Other than the interests disclosed above in respect of certain directors, the register of substantial shareholders maintained by the Company pursuant to Section 16(1) of the SDI Ordinance discloses no person as having an interest in 10% or more in the issued share capital of the Company as at 31st March, 1999.
CHARITABLE DONATIONS
During the year, the Group made charitable donations totalling approximately HK$50,000.
PRE-EMPTIVE RIGHTS
There are no provisions for pre-emptive rights under the Company's Bye-Laws, or Laws of Bermuda, which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders.
AUDITORS
A resolution will be submitted to the annual general meeting of the Company to re-appoint Messrs. Deloitte Touche Tohmatsu as auditors.
On behalf of the Board
Siu Yuk Lung
DIRECTOR
Hong Kong, 25th June, 1999
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