The Directors present their report together with the audited financial statements of the Company and its subsidiaries for the year ended 31st March, 1999.
PRINCIPAL ACTIVITIES
The principal activity of the Company is investment holding. The principal activities of its major subsidiaries are contracting of building construction, maintenance and decoration projects in Hong Kong. In addition, the Group is engaged in other activities which include plumbing contracts, property investment and the manufacturing and supply of building materials.
The Group's turnover and operating profit for the year ended 31st March, 1999, which were derived principally from the contracting of building construction, maintenance and decoration projects carried out in Hong Kong, are as follows:
Contribution to
Turnover Group's results
HK$'000 HK$'000
Contracting of building construction,
maintenance and decoration projects 1,849,377 77,181
Sale of building materials 14,162 3,764
Others 11,638 3,440
Corporate expenses - (70,715)
---------- -------
1,875,177 13,670
========== =======
RESULTS AND APPROPRIATIONS
The results of the Group for the year ended 31st March, 1999 are set out in the consolidated profit and loss account on page 23.
The Directors do not recommend the payment of a final dividend for the year ended 31st March, 1999.
FIVE YEAR FINANCIAL SUMMARY
A summary of the Group's consolidated results for each of the last five years ended 31st March, 1999 and the consolidated assets and liabilities as at 31st March of each of the respective years is set out on page 54.
SUBSIDIARIES AND ASSOCIATED COMPANIES
Particulars regarding the Company's principal subsidiaries and associated companies are set out in Notes 13 and 14 respectively to the financial statements.
FIXED ASSETS
Movements in fixed assets of the Group during the year are set out in Note 9 to the financial statements.
SHARE CAPITAL AND SHARE PREMIUM
Details of the movement in share capital and share premium of the Group and the Company are set out in Notes 18(b) and 19 respectively to the financial statements.
PRE-EMPTIVE RIGHTS
There is no provision for pre-emptive rights under the Company's bye-laws and the laws in Bermuda.
BORROWINGS
Particulars of the Group's and the Company's borrowings are set out in Notes 16 and 25 to the financial statements.
MAJOR CUSTOMERS AND SUPPLIERS
For the year ended 31st March, 1999, turnover attributable to the Group's five largest customers and the largest customer amounted to 99% and 67% of the total turnover, respectively. Purchases attributable to the Group's five largest suppliers amounted to 12% of the total purchases.
None of the Directors, their associates, or shareholders who, to the knowledge of the Directors, own more than 5% of the Company's share capital has a beneficial interest in the Group's top five customers or suppliers.
YEAR 2000
The Group has adopted the Year 2000 ("Y2k") compliance standards set by the British Standards Institution which, in simple terms, mean neither performance nor functioning of computer or other electronic equipment of the Group will be affected by dates prior to, during and after the year 2000.
A Y2k Compliance Committee consisting of senior executives, representatives from different functional departments and the Information Technology Department of the Group was set up in 1997 to tackle the issue. Regular meetings were held to monitor the progress of the compliance work.
The Group's Y2k compliance work includes testing and upgrading of all mission-critical systems and equipment and contingency planning to deal with unanticipated business disruption due to the Y2k issue. Non-compliant equipment or systems identified were either upgraded or replaced. The Group is in the process of finalising the contingency plans for all mission-critical systems and equipment which are expected to be ready by September 1999.
The cost incurred by the Group for Y2k compliance was not significant. The Group is currently seeking professional and legal advice in relation to the adequacy of insurance coverage against potential losses arising from the Y2k issue.
Barring any unforeseeable circumstance which the Directors of the Group cannot control, the Directors are confident that the Group is well positioned to overcome the various anticipated Y2k problems.
DIRECTORS
The Directors who held office during the year and up to the date of this report were as follows:
Executive Directors
Mr. Wong Ip Kuen (Chairman)
Mr. Wong Tin Cheung (Vice Chairman)
Mr. Sun Chun Wai
Mr. So Yau Chi
Non-executive Directors
Dr. Yeung Tsun Man, Eric
Mr. Leong Ka Chai, O.B.E., J.P.
Mr. Wu King Cheong
In accordance with the Company's bye-laws, Mr. Wong Tin Cheung and Mr. Sun Chun Wai will retire by rotation and being eligible, offer themselves for re-election.
SHARE OPTION SCHEME AND DIRECTORS' RIGHTS TO ACQUIRE SHARES
The Company has a Share Option Scheme under which the Company may grant options to Directors and employees of the Group to subscribe for shares in the Company. Details of the Share Option Scheme are set out in Note 18(c) to the financial statements.
On 25th August, 1997, pursuant to the Share Option Scheme, the Directors were granted options to subscribe for a total of 29,000,000 shares of HK$0.05 each in the Company. Subject to the adjustment as a result of any alteration in the capital structure of the Company, the subscription price is the higher of 80% of the average closing price of the shares of the Company on The Stock Exchange of Hong Kong Limited on the five trading days immediately preceding the date of granting of the option and the nominal value of the shares. The above Directors have not exercised any of their options during the year. Details of the options granted to the Directors are as follows:
Number of shares of
Name Date of grant options granted
Mr. Wong Ip Kuen 25th August, 1997 12,000,000
Mr. Wong Tin Cheung 25th August, 1997 11,000,000
Mr. Sun Chun Wai 25th August, 1997 1,500,000
Mr. So Yau Chi 25th August, 1997 1,500,000
Dr. Yeung Tsun Man, Eric 25th August, 1997 1,000,000
Mr. Leong Ka Chai, O.B.E., J.P. 25th August, 1997 1,000,000
Mr. Wu King Cheong 25th August, 1997 1,000,000
Save as otherwise disclosed in this report, at no time during the year was the Company or any of its subsidiaries a party to any arrangements to enable any of the Company's Directors or members of its management to acquire benefits by means of acquisition of shares in, or debentures of, the Company or any other body corporate.
DIRECTORS' SERVICE AGREEMENTS
None of the Directors has a service contract with the Group which cannot be terminated within one year without payment of compensation (other than statutory compensation).
DIRECTORS' INTERESTS
As at 31st March, 1999, the following Director had or was deemed to have interests under the provisions of the Securities (Disclosure of Interests) Ordinance (Chapter 396 of the Laws of Hong Kong) (the "SDI Ordinance") in the Company or any associated corporations thereof (within the meaning of the SDI Ordinance) of which, the Company and The Stock Exchange of Hong Kong Limited had to be notified pursuant to Section 28 of the SDI Ordinance (including interests which the Director is deemed or taken to have under Section 31 or Part I of the Schedule of the SDI Ordinance) and which were required to be entered into the register kept by the Company pursuant to Section 29 of the SDI Ordinance:
Number of shares
Director Company interested
Mr. Wong Ip Kuen Yau Lee Holdings Limited 371,856,063
Note: The 371,856,063 shares of the Company referred to above were registered in the name of All Fine Investment Company Limited. Mr. Wong Ip Kuen owns the entire issued share capital of All Fine Holdings Company Limited which owns the entire issued share capital of All Fine Investment Company Limited, both of which are companies incorporated in the Cook Islands. Mr. Wong Ip Kuen is a director of both All Fine Holdings Company Limited and All Fine Investment Company Limited.
During the year ended 31st March, 1999, no right to subscribe for equity of the Company was exercised by any of the Directors or chief executives of the Company or the spouses or children under 18 years of age of such Directors and chief executives.
Save as otherwise disclosed in this report, none of the Directors or chief executives or their associates had any other interests (whether beneficial or non-beneficial) in the share capital of the Company or any other associated corporations as defined in the SDI Ordinance as at 31st March, 1999.
SUBSTANTIAL SHAREHOLDERS' INTERESTS
As at 31st March, 1999, the following persons (other than the Directors or chief executives of the Company) had or were deemed to have interests in the Company under the provisions of the SDI Ordinance which have been entered into the register kept by the Company under Section 16(1) of the SDI Ordinance:
Number of shares
Substantial shareholders interested
All Fine Investment Company Limited 371,856,063
(see Note above)
All Fine Holdings Company Limited 371,856,063
(see Note above)
DIRECTORS' INTERESTS IN CONTRACTS
No contract of significance to which the Company or any of its subsidiaries was a party and in which any of the Directors had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.
MANAGEMENT CONTRACTS
No contracts concerning the management and administration of the whole or any substantial part of the business of the Group were entered into or existed during the year.
CHARITABLE DONATIONS
Charitable donations made by the Group during the year totalled HK$128,600 (1998 - HK$40,700).
CODE OF BEST PRACTICE
None of the Directors is aware of information that would reasonably indicate that the Company is not, or was not in any part of the year, in compliance with the Code of Best Practice as set out in Appendix 14 of the Listing Rules of The Stock Exchange of Hong Kong Limited throughout the year.
AUDITORS
The financial statements have been audited by Messrs. Arthur Andersen & Co. A resolution for their reappointment as auditors for the ensuing year is to be proposed at the forthcoming annual general meeting.
On behalf of the Board
Wong Ip Kuen
Chairman
Hong Kong, 27th July, 1999
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