| 1. |
GENERAL The Company was incorporated in Bermuda as an exempted company with limited liability. The shares of the Company are listed on The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). | ||||||
| 2. |
BASIS OF PREPARATION OF FINANCIAL STATEMENTS
During the year, the Group changed its reporting currency for the preparation of the financial statements from Hong Kong dollars to United States dollars ("USD"). USD is the currency in which the majority of the Group's transactions are denominated and the directors consider that the change will result in a more appropriate presentation of the Group's transactions in the financial statements. Comparative figures have been restated as if the financial statements had always been presented in USD. This change in reporting currency has no significant impact on the financial position of the Group or the Company either at 30th September, 1996 or 30th September, 1997, or on the results or cash flows of the Group for the years then ended. | ||||||
| 3. |
SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies which have been adopted in preparing these financial statements, and which conform with accounting principles generally accepted in Hong Kong, are as follows: Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 30th September each year. The results of subsidiaries and associated companies which are acquired or disposed of during the year are included in the consolidated profit and loss account from the effective date of acquisition or up to the effective date of disposal, as appropriate. All significant inter-company transactions and balances within the Group are eliminated on consolidation. Goodwill/capital reserve Goodwill or capital reserve arising on the acquisition of a subsidiary or an associated company, representing the excess or shortfall of the purchase consideration over the Group's share of the fair value ascribed to the separable net assets of the subsidiary or associated company at the date of acquisition, is written off against or credited directly to reserves immediately on acquisition. On disposal of a subsidiary or an associated company, the attributable amount of goodwill previously written off against or credited to reserves is included in the determination of the profit or loss on disposal. Investment in subsidiary Investment in subsidiary is stated at cost less provision for permanent diminution in value, if necessary. Associated company An associated company is a company, other than a subsidiary, in which the Group has a long-term equity interest and over which the Group is in a position to exercise significant influence in management, including participation in commercial and financial policy decisions. The consolidated profit and loss account includes the Group's share of the post-acquisition results of its associated companies for the year and the consolidated balance sheet includes the Group's share of the net assets of the associated companies. Turnover Turnover represents the net amounts received and receivable for goods sold by the Group to outside customers during the year. Revenue recognition Sales of goods are recognised when goods are delivered and title has passed. Rental income, including rental invoiced in advance, from properties let under operating leases is recognised on a straight line basis over the period of the leases. Interest income is accrued on a time basis, by reference to the principal outstanding and at the interest rate applicable. Dividend income from investments is recognised when the shareholders' right to receive payment has been established. Investment properties Investment properties are completed properties which are held for their investment potential, any rental income being negotiated at arm's length. No depreciation is provided in respect of investment properties which are held on leases with unexpired terms of more than 20 years. Investment properties are stated at open market value based on annual professional valuation at the balance sheet date. Any surplus or deficit arising on the revaluation of investment properties is credited or charged to the investment properties revaluation reserve unless the balance on this reserve is insufficient to cover a deficit on a portfolio basis, in which case the excess of the deficit over the balance on the investment properties revaluation reserve is charged to the profit and loss account. On disposal of investment properties, any balance in the investment properties revaluation reserve attributable to the disposed properties are included in the determination of the profit or loss on disposal. Fixed assets and depreciation and amortisation Fixed assets, other than investment properties and buildings under construction, are stated at cost or valuation less depreciation and amortisation at the balance sheet date. 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 the fixed asset has been put into operation, such as repairs and maintenance and overhaul costs, is normally charged to the profit and loss account. 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 the fixed asset. When the assets are sold or retired, their costs or valuation and accumulated depreciation and amortisation are eliminated from the accounts and any gain or loss resulting from their disposal is included in the profit and loss account. The Group has adopted the transitional relief provided in paragraph 72 of SSAP 17 with regard to the requirement to make regular revaluations of its land and buildings, other than investment properties, carried at 1995 revalued amounts, even if the carrying value of the revalued assets is materially different from the assets' fair values. On subsequent sale of revalued assets, any attributable revaluation surplus is transferred to retained profits. The cost or valuation of leasehold land is amortised over the period of the lease using the straight line method. The cost or valuation of land use rights is amortised over the period of the right using the straight line method. The cost or valuation of buildings is depreciated over 20 years or 50 years, where appropriate, using the straight line method. The cost of leasehold improvements is depreciated at 10% per annum using the reducing balance method or, if the remaining period of the relevant lease is shorter than 10 years, on a straight line basis over the remaining period of the lease. Buildings under construction are stated at cost which includes all construction costs and other direct costs, including borrowing costs capitalised, attributable to the buildings under construction. They are not depreciated or amortised until completion of construction. Costs of completed buildings under construction are transferred to the appropriate categories of fixed assets. Depreciation is provided to write off the cost of other fixed assets over their estimated useful lives, at the following rates per annum:
Capitalisation of borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e. assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised. Stocks Stocks are stated at the lower of cost and net realisable value. Cost, which comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition, is calculated using the weighted average method. Net realisable value is calculated as the actual or estimated selling price less all further costs of production and the related costs of marketing, selling and distribution. Cash equivalents Cash equivalents represent short-term, highly liquid investments which are readily convertible into known amounts of cash and which are within three months of maturity when acquired, less advances from banks which are repayable within three months from the dates of the advances. Taxation The charge for taxation is based on the results for the year after adjusting for items which are non-assessable or disallowed. Certain items of income and expense are recognised for tax purposes in a different accounting period from that in which they are recognised in the financial statements. The tax effect of the resulting timing differences, computed under the liability method, is recognised as deferred taxation in the financial statements to the extent that it is probable that a liability or asset will crystallise in the foreseeable future. Foreign currencies Transactions in foreign currencies are translated at the rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the rates ruling on the balance sheet date. Gains and losses arising on exchange are dealt with in the profit and loss account. Operating leases Rentals payable under operating leases are charged to the profit and loss account on a straight line basis over the period of the leases. Retirement benefits scheme contributions Contributions payable by the Group to its defined contribution retirement benefits scheme are charged to the profit and loss account. Donations Donations are charged to the profit and loss account in the year in which they are committed. | ||||||
| 4. |
OPERATING PROFIT
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| 5. |
DIRECTORS' EMOLUMENTS AND EMPLOYEES' EMOLUMENTS
The directors' emoluments disclosed above include the rateable value of a property which is owned by the Group and occupied by an executive director of the Company. The rateable value of the residential accommodation provided to the director is US$17,000 (1996: US$13,000). The emoluments of the directors were within the following bands:
The five highest paid employees of the Group were five executive directors who held office during the year. During the year, no emoluments were paid by the Group to the five highest paid individuals, including directors, as an inducement to join or upon joining the Group or as compensation for loss of office. None of the directors has waived any emoluments during the year. | ||||||
| 6. |
TAXATION A substantial portion of the Group's profits neither arose in, nor was derived from, Hong Kong and therefore was not subject to Hong Kong Profits Tax. Overseas taxation is calculated at the rates prevailing in the respective jurisdictions. The Group had no significant unprovided deferred taxation for the year. | ||||||
| 7. |
PROFIT ATTRIBUTABLE TO SHAREHOLDERS The Group's profit attributable to shareholders includes profit of US$47,824,000 (1996: US$43,298,000) which has been dealt with in the financial statements of the Company and profits of US$588,000 (1996: US$1,643,000) are retained by the associated companies. | ||||||
| 8. |
DIVIDENDS * The dividend per share figure for 1996 has been restated to reflect the effect of the consolidation of shares as described in note 18. The amount of the final dividend proposed for the year ended 30th September, 1997 has been calculated by reference to 670,382,953 shares in issue as at the date of this report. | ||||||
| 9. |
EARNINGS PER SHARE The calculation of the basic earnings per share is based on the profit attributable to shareholders of US$157,670,000 (1996: US$98,762,000) and the weighted average of 667,807,648 (1996: 501,948,965) shares in issue during the year after adjusting for the effect of the consolidation of shares as described in note 18. The calculation of the fully diluted earnings per share is based on the adjusted profit attributable to shareholders of US$160,493,000 (1996: US$100,271,000) and on the assumption that all outstanding share options, details of which are set out in note 19, were exercised at the beginning of the year or the date of grant, if later, and that the subscription proceeds had been placed on fixed deposits with a leading bank to earn interest and on the adjusted weighted average of 718,061,985 (1996: 537,148,965) shares in issue and issuable after adjusting for the effect of the consolidation of shares as described in note 18. The earnings per share figure for 1996 has been restated to reflect the effect of the consolidation of shares as described in note 18 | ||||||
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