(20) CAPITAL RESERVE
The amount represents the negative goodwill arising from the acquisition of additional interests in Shunde Yau Lee by the Group in 1997 (see Note 14(d)).
(21) RETAINED PROFIT
The entire amount of the retained profit of the Group as at 31st March, 1999 was distributable.
(22) INVENTORIES
(23) CONSTRUCTION CONTRACTS
The aggregate amount of costs incurred plus recognised profits less recognised losses to date, included in the gross amount due from/to customers for contract work at 31st March, 1999, is approximately $6,851 million (1998 - $6,393 million).
In respect of construction contracts in progress at the balance sheet date, the amounts of retentions receivable from customers, recorded within "Long-term trade debtors" and "Trade debtors" included in current assets (Note 16) at 31st March, 1999, were approximately $21,994,000 (1998 - $9,841,000) and $83,825,000 (1998 - $172,319,000) respectively.
(24) PENSION SCHEME
A defined contribution pension scheme is provided to all employees eligible and employed by the Group in Hong Kong ("Employees"). The Group is required to make monthly contributions to the scheme at 5% of the Employees' monthly salary but the Employees are not required to contribute to the scheme. Employees under the defined contribution scheme are entitled to 100% of the employer's contribution and the accrued interest upon retirement or leaving the Group after completing 10 years of service from the date of joining the Group, or at a scale of between 30% and 90% after completing 3 to 9 years of service from the date of joining the Group.
During the year, the employer's contributions under the defined contribution scheme amounted to approximately $5,646,000 (1998 - $4,451,000).
(25) BANKING FACILITIES
As at 31st March, 1999, the Group had total banking facilities in respect of overdrafts, short-term bank loans, bank guarantees and trade financing of approximately $534 million (1998 - $620 million), of which approximately $368 million (1998 - $524 million) were utilised. As at year end, these banking facilities were secured by:
(a) time deposits of approximately $130 million (1998 - $135 million);
(b) corporate guarantees of approximately $394 million (1998 - $489 million) given by the Company; and
(c) progress billings of certain construction contracts.
(26) COMMITMENTS AND CONTINGENT LIABILITIES
As at 31st March, 1999, the Group had the following outstanding commitments and contingent liabilities:
(a) In its normal course of business, the Group is subject to various claims from its construction contracts. As at 31st March, 1999, the Group had various liquidated damages claims on certain contracts for which the Group has filed extension of time claims with the employer. The amount of the ultimate liquidated damages, if any, cannot be ascertained but the Directors are of the opinion that any resulting liability would not materially affect the financial position of the Group.
(b) During the year, a subcontractor claimed compensation from YLC, including damages and interest. In addition, the subcontractor filed a petition to the High Court against YLC for breach of contract. YLC has subsequently filed a counterclaim against the subcontractor. The maximum liabilities of the above claims to the Group were estimated by the Directors to be approximately $3 million. The Directors are of the opinion that there is no reasonable ground for the plaintiff's claims against YLC and will defend vigorously. As a result, no provision for these claims was made as at 31st March, 1999.
(c) Commitments under various contracts entered into in the normal course of business to complete construction and other contracts with a total value of approximately $2,764 million (1998 - $2,169 million) extending to various dates, the latest being December 2000.
(d) Guarantees in respect of performance bonds which amounted to approximately $36 million (1998 - $88 million) in favour of the Group's customers.
(e) Guarantees in respect of lease, hire purchase or instalment loan facilities to third parties which amounted to approximately $13 million (1998 - $39 million) in favour of certain subsidiaries.
(f) Operating lease commitments as at 31st March, 1999 amounted to approximately $57,692,000 (1998 - $58,305,000). Such operating lease commitments as at 31st March, 1999 payable in the next twelve months, analyzed according to the period in which the lease expires, were as follows:
(27) RELATED PARTY TRANSACTIONS
Parties are considered to be related if one party has the ability to control, directly or indirectly, the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.
(a) During the year, the Group subcontracted several electrical and wiring works to a wholly-owned subsidiary of Shun Cheong Holdings Limited, an associated company ("Shun Cheong"). As at 31st March, 1999, the progress billings payable to the wholly-owned subsidiary of Shun Cheong amounted to approximately $11 million (1998 - $11 million).
(b) The balances due from and to subsidiaries and related parties are unsecured, interest free and have no fixed repayment terms except for an amount due from a subsidiary of $18.9 million (1998 - $18.7 million), that bears interest at commercial rates, but is unsecured and has no fixed repayment terms.
(c) The loans to subsidiaries are unsecured, interest-free and not repayable within the next year.
(28) PRIOR YEAR COMPARATIVE FIGURES
Certain figures in the prior year's financial statements have been reclassified to conform to the current year's presentation.
1999 1998
$'000 $'000
(Deficit) Profit retained in:
Company 132,071 46,799
Subsidiaries (64,697) 70,403
Associated companies 7,221 1,476
-------- --------
Total 74,595 118,678
======== ========
1999 1998
Group Company Group Company
$'000 $'000 $'000 $'000
Raw materials 3,122 - - -
Finished goods 5,464 - 2,712 -
----- ----- ----- -----
8,586 - 2,712 -
===== ===== ===== =====
Group
1999 1998
$'000 $'000
Land and buildings
- expiring in the first year 335 200
- expiring in the second to fifth years inclusive 402 381
- expiring over the fifth year 1,187 1,187
------ ------
1,924 1,768
------ ------
Other equipment
- expiring in the first year 1,448 1,052
- expiring in the second to fifth years inclusive 48 -
------ ------
1,496 1,052
------ ------
Total 3,420 2,820
====== ======
Source: Yau Lee Holdings Limited
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