C O R P O R A T E I N F O R M A T I O N

Directors
Sir Sidney Gordon, GBM, CBE, JP (Chairman)
Y C Wang (Senior Managing Director)
H C Yung, JP (Managing Director and General Manager)
Lincoln Yung, JP (Deputy Managing Director)
Michael Wang
C F Ying
Rudolf Bischof

Company Secretary
A H Philp

Registrars and Transfer Agent

The Bank of Bermuda Limited
6 Front Street
P.O. Box HM 1020
Hamilton, HM, DX
Bermuda

Branch Registrars and Registration Office

Central Registration Hong Kong Limited
17/F, Hopewell Centre, Wanchai
Hong Kong

Auditors
PricewaterhouseCoopers
22/F, Prince’s Building
Central, Hong Kong

Bankers
The Hongkong & Shanghai Banking Corporation Ltd
Citibank NA
Shanghai Commercial Bank Ltd

2
G R O U P F I N A N C I A L
H I G H L I G H T S

2000 1999 Variance

HK$’000 HK$’000

Turnover 11,652 161,294 -93%

Operating (loss)/profit (27,011) 97,061 -128%

Finance costs (29) (173)
Share of profits of jointly
controlled entities 9,820 10,916

(Loss)/profit before taxation (17,220) 107,804 -116%

Taxation (2,656) (1,489)

(Loss)/profit for the year (19,876) 106,315 -119%

Shareholders’ funds 923,491 1,032,347 -11%

HK$ HK$

(Loss)/earnings per share (0.42) 2.25 -119%

Dividend per share 0.10 0.55 -82%
Net asset value per share 19.75 22.01 -10%

3
F I V E Y E A R S U M M A R Y

2000 1999 1998 1997 1996

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Consolidated Profit
and Loss Account
Turnover 11,652 161,294 121,971 111,769 108,534

Operating (loss)/profit (27,011) 97,061 62,945 55,602 266,436

Finance costs (29) (173) (974) (2,484) (19,095)
Share of profits of jointly
controlled entities 9,820 10,916 14,580 21,923 18,803

(Loss)/profit before
taxation (17,220) 107,804 76,551 75,041 266,144
Taxation (2,656) (1,489) (1,922) (2,685) (153)

(Loss)/profit for the year (19,876) 106,315 74,629 72,356 265,991

Dividends 4,603 25,663 23,770 25,847 58,565

Consolidated
Balance Sheet
Fixed assets 390,428 439,958 640,287 688,349 740,978
Loan receivable - - - 8,969 9,049
Jointly controlled entities 71,541 72,683 74,155 64,727 53,646
Non-trading investments 52,924 95,907 112,910 131,071 89,355
Net current assets 408,598 423,799 345,420 303,834 334,667

Employment of capital 923,491 1,032,347 1,172,772 1,196,950 1,227,695

Share capital 4,675 4,690 4,770 4,501 4,946

Reserves 918,816 1,027,657 1,168,002 1,192,449 1,220,003

Shareholders’ funds 923,491 1,032,347 1,172,772 1,196,950 1,224,949

Long term liabilities - - - - 2,746
-------------------------------------
Capital employed 923,491 1,032,347 1,172,772 1,196,950 1,227,695

4
N O T I C E O F A N N U A L
G E N E R A L M E E T I N G

N OTICE IS HEREBY GIVEN that the Annual General Meeting of the

Members of Nanyang Holdings Limited will be held at 21st Floor, St. George’s
Building, 2 Ice House Street, Central, Hong Kong on Monday, 28th May
2001 at 12:00 noon for the following purposes:-

1 To receive and consider the reports of the Directors and the Auditors
together with the Statement of Accounts for the year ended 31st
December 2000;

2 To approve the payment of a final dividend;

3 To re-elect a Director;

4 To re-appoint Auditors and fix their remuneration.

As special business to consider and, if thought fit, pass with or without

modification the following Resolutions:

As Ordinary Resolutions:-

5 THAT:

(a) subject to paragraph (b) below the exercise by the Directors of the
Company during the Relevant Period of all the powers of the
Company to purchase shares of the Company be generally and
unconditionally approved;

(b) the aggregate nominal amount of shares which may be purchased

on The Stock Exchange of Hong Kong Limited or any other stock
exchange recognised for this purpose by the Securities and Futures
Commission of Hong Kong and The Stock Exchange of Hong Kong
Limited under the Hong Kong Code on Share Repurchases
pursuant to the approval in paragraph (a) above shall not exceed
10 per cent. of the aggregate nominal amount of the share capital of
the Company in issue at the date of passing this Resolution, and the
said approval shall be limited accordingly;

(c) for the purposes of this Resolution “Relevant Period” means the
period from the passing of this Resolution until whichever is the
earlier of:-

5
N O T I C E O F A N N U A L
G E N E R A L M E E T I N G (con’t)

(i) the conclusion of the next Annual General Meeting of the

Company; and

(ii) the revocation or variation of the authority given under this

Resolution by ordinary resolution of the shareholders in
general meeting.

6 THAT:

(a) subject to paragraph (c), the exercise by the Directors of the

Company during the Relevant Period of all the powers of the
Company to allot, issue and deal with additional shares in the
capital of the Company and to make or grant offers, agreements
and options which might require the exercise of such power be
generally and unconditionally approved;

(b) the approval in paragraph (a) shall authorise the Directors of the
Company during the Relevant Period to make or grant offers,
agreements and options which might require the exercise of such
power after the end of the Relevant Period;

(c) the aggregate nominal amount of share capital allotted or agreed

conditionally or unconditionally to be allotted (whether pursuant
to an option or otherwise) by the Directors of the Company
pursuant to the approval in paragraph (a), otherwise than pursuant
to (i) a Rights Issue or (ii) any scrip dividend or similar arrangement
providing for the allotment of shares in lieu of the whole or part of
a dividend on shares of the Company in accordance with the
Bye-Laws of the Company, shall not exceed the aggregate of (aa)
20 per cent. of the aggregate nominal amount of the share capital of
the Company in issue at the date of passing this Resolution plus
(bb) (if the Directors of the Company are so authorised by a
separate ordinary resolution of the shareholders of the Company)
the nominal amount of share capital of the Company repurchased
by the Company subsequent to the passing of this Resolution (up
to a maximum equivalent to 10 per cent. of the aggregate nominal
amount of the share capital of the Company in issue at the date of
passing this Resolution), and the said approval shall be limited
accordingly; and

6
N O T I C E O F A N N U A L
G E N E R A L M E E T I N G (con’t)

(d) for the purposes of this Resolution:-

“Relevant Period” means the period from the passing of this

Resolution until whichever is the earlier of:-

(i) the conclusion of the next Annual General Meeting of the

Company; and

(ii) the revocation or variation of the approval given by this

Resolution by ordinary resolution of the shareholders in
general meeting; and

“Rights Issue” means an offer of shares open for a period fixed by

the Directors of the Company to holders of shares of the Company
or any class thereof on the register on a fixed record date in
proportion to their then holdings of such shares or class thereof
(subject to such exclusion or other arrangements as the Directors of
the Company may deem necessary or expedient in relation to
fractional entitlements or having regard to any restrictions or
obligations under the laws of, or the requirements of any recognised
regulatory body or any stock exchange in, any territory outside
Hong Kong).

7 THAT the Directors of the Company be authorised to exercise the

powers of the Company referred to in paragraph (a) of the resolution
set out as resolution 6 in the notice of this meeting in respect of the
share capital of the Company referred to in sub-paragraph (bb) of
paragraph (c) of such resolution.

By Order of the Board

A. H. Philp
Company Secretary

Hong Kong, 2nd April 2001

7
N O T I C E O F A N N U A L
G E N E R A L M E E T I N G (con’t)

Notes:

1 The transfer books of the Company will be closed from 22nd May
2001 to 28th May 2001, both days inclusive. To qualify for dividend,
transfers should be lodged with the Company’s branch registrars,
Central Registration Hong Kong Limited, Rooms 1712-16, 17th Floor,
Hopewell Centre, 183 Queen’s Road East, Hong Kong, not later than
4:00 p.m. on Monday, 21st May 2001.

2 A Member entitled to attend, act and vote is entitled to appoint one or

more proxies to attend, act and vote instead of him. A proxy need not
be a member of the Company. To be valid, an instrument appointing
a proxy together with the power of attorney or other authority (if
any) under which it is signed or a notarially certified copy of that
power or authority shall be deposited at the principal place of
business of the Company, Room 1808 St. George’s Building, 2 Ice
House Street, Hong Kong not less than 48 hours before the time
appointed for the holding of the meeting or any adjourned meeting,
and in default thereof the instrument of proxy shall not be treated as
valid. No instrument appointing a proxy shall be valid after the
expiration of 12 months from the date of its execution.

Delivery of an instrument appointing a proxy shall not preclude a

member from attending and voting in person at the meeting concerned,
and in such event the instrument appointing a proxy shall be deemed
to be revoked.

3 Corporate representatives shall before the meeting commences

produce the relevant resolution of directors or other governing body
or the power of attorney under which they are authorized to attend,
act and vote at the meeting.

If a member which is a corporation wishes to appoint a proxy to

attend and vote at the meeting, Note 2 above shall be applicable.

4 In relation to the general mandate referred to in Resolution 6 above,

the Directors have no specific proposal in mind but wish to be in a
position to take advantage of any opportunities which may arise.

8
D I R E C T O R S ’ P R O F I L E

Length of service
with the group Business
Name Age (in years) experience

# Sir Sidney Gordon, GBM, CBE, JP 83 11 Finance and

(Chairman) accountancy

* Yun Cheng Wang 90 53 Electricity, textiles

(Senior Managing Director) and investment

* Hung Ching Yung, JP 78 53 Banking,

(Managing Director and insurance
General Manager) and textiles

* Lincoln C. K. Yung, JP 55 24 Textiles, banking,

(Deputy Managing Director) accountancy,
finance and
investment

Michael C. M. Wang 57 24 Textiles

C. F. Ying 64 41 Textiles

# Rudolf Bischof 59 3 Banking and

investment
management

* Executive Directors

# Independent non-executive directors and Audit Committee members

Mr. Y. C. Wang and Mr. Michael C. M. Wang are related as father and son
and same for Mr. H. C. Yung and Mr. Lincoln C. K. Yung.

9
R E P O R T O F T H E
D I R E C T O R S

T he directors submit their report together with the audited accounts for the
year ended 31st December 2000.

Principal Activities and Geographical Analysis of Operations

The principal activity of the Company is investment holding. The activities
of its jointly controlled entities and subsidiaries are shown in notes 13 and
25 to the accounts respectively.

An analysis of the Group’s turnover and contribution to Group loss before

taxation for the year by principal activities and markets is set out in note 2
to the accounts.

Results and Appropriations

The results of the Group for the year ended 31st December 2000 are set
out in the consolidated profit and loss account on page 19 of the accounts.

The directors recommend the payment of a final dividend of HK$0.10 per

share totalling approximately HK$4,675,000. Subject to the approval at the
Annual General Meeting, the final dividend will be paid on 28th May 2001.

Reserves
Movements in the reserves of the Group and the Company during the year
are set out in note 19 to the accounts.

Distributable Reserves
Distributable reserves of the Company at 31st December 2000, calculated
in accordance with the Companies Act 1981 of Bermuda (as amended),
amounted to HK$414,920,000 (1999: HK$415,443,000).

Fixed Assets
Details of the movements in fixed assets are set out in note 11 to the
accounts.

Principal Properties
Details of the principal properties of the Group are set out on page 49.

Share Capital
Details of the movements in share capital of the Company are set out in
note 18 to the accounts.

10
R E P O R T O F T H E
D I R E C T O R S (con’t)

Five Year Financial Summary

A summary of the results and of the assets and liabilities of the Group for
the last five financial years is set out on page 4.

Directors
The names of the directors of the Company who held office during the
year and up to the date of this report are set out on page 2. The
biographical details of the directors are set out on page 9.

Mr. C. F. Ying retires by rotation in accordance with Bye-Law 109(A) of the

Bye-Laws of the Company and, being eligible, offers himself for re-election.

The non-executive directors are subject to rotation in accordance with

Bye-Law 109(A) of the Bye-Laws of the Company.

None of the directors has a service contract with the Company which is not
determinable by the Company within one year without payment of
compensation, other than statutory compensation.

Directors’ Interests
As at 31st December 2000, the interests of the directors and chief executive
in the share capital of the Company as recorded in the Register of
Directors’ Interests maintained under Section 29 of the Securities (Disclosure
of Interests) Ordinance were as follows:

Shares of HK$0.10 each of the Company

Personal Family Corporate
Name interests interests interests Total

Yun Cheng Wang 3,625,446 - - 3,625,446

Hung Ching Yung 5,201,944 30,000 11,000,000 16,231,944
(Note)
Lincoln C. K. Yung 2,250,000 - - 2,250,000
Sir Sidney Gordon 11,000 - - 11,000
Rudolf Bischof 50,000 - - 50,000

Note : As stated below, Mr Hung Ching Yung is taken to be interested in

the same 11,000,000 shares owned by a substantial shareholder,
Tankard Shipping Co. Inc., pursuant to Section 8(2), (3) and (4) of
the Securities (Disclosure of Interests) Ordinance.

11
R E P O R T O F T H E
D I R E C T O R S (con’t)

Directors’ Interests (con’t)

The Company has not granted to any directors, chief executive or their
respective spouses and children under 18 years of age any rights to
subscribe for shares of the Company.

No contracts of significance in relation to the business of the Group to

which the Company or 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.

At no time during the year was the Company or its subsidiaries a party to
any arrangements to enable the directors or chief executive or any of their
spouses or children under 18 years of age to acquire benefits by means of
the acquisition of shares in, or debentures of, the Company or any other
body corporate.

Substantial Shareholders
As at 31st December 2000, the Register of Substantial Shareholders
maintained under Section 16(1) of the Securities (Disclosure of Interests)
Ordinance shows that the following person, in addition to those directors
disclosed above, was interested in ten per cent or more of the issued share
capital of the Company as follows:

No. of shares
Tankard Shipping Co. Inc. 11,000,000
(Note)

Note : Mr. Hung Ching Yung is taken to be interested in the same

11,000,000 shares owned by Tankard Shipping Co. Inc. pursuant
to Section 8(2), (3) & (4) of the Securities (Disclosure of Interests)
Ordinance.

12
R E P O R T O F T H E
D I R E C T O R S (con’t)

Purchase, Sale or Redemption of Shares

During the year, the Company repurchased 150,000 of its shares on The
Stock Exchange of Hong Kong Limited. The directors consider that the
repurchase of shares will benefit the shareholders by enhancing the net
assets per share. Details of the shares repurchased are as follows:

Price per share Aggregate

Number of Highest Lowest price
Month of repurchase shares HK$ HK$ HK$’000

2000

January 10,000 6.60 6.60 66

May 10,000 7.20 7.15 72
June 9,500 7.30 7.30 69
July 20,000 6.50 6.50 130
September 39,000 6.10 6.00 237
October 26,000 5.70 5.60 146
November 16,000 6.10 5.80 95
December 19,500 6.25 6.25 122

150,000 937

Except as disclosed above, neither the Company nor any of its subsidiaries
has purchased or sold any of the Company’s shares during the year.

Pre-emptive Rights
No pre-emptive rights exist under Bermuda law in relation to issues of
new shares by the Company.

Management Contracts
No contracts concerning the management and administration of the whole
or any substantial part of the business of the Company were entered into
or existed during the year.

13
R E P O R T O F T H E
D I R E C T O R S (con’t)

Major Suppliers and Customers

The percentages of purchases and sales for the year attributable to the
Group’s major suppliers and customers are as follows:

Purchases
- the largest supplier 54.5%
- five largest suppliers combined 85.3%

The five largest customers for the year are tenants of the Group’s
investment properties. Income from the largest and five largest
customers combined constitutes 16% and 30% of the Group’s total
income from investment properties for the year.

None of the directors, their associates or any shareholder (which to the

knowledge of the directors owns more than 5% of the Company’s share
capital) had an interest in the major suppliers or customers noted above.

Corporate Governance
Throughout the year, the Company was 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, except that the non-executive directors
have not been appointed for a specific term but are subject to retirement
by rotation in accordance with the Bye-Laws of the Company.

14
R E P O R T O F T H E
D I R E C T O R S (con’t)

Audit Committee
Pursuant to the Listing Rules, an audit committee, comprising two
independent non-executive directors, namely Sir Sidney Gordon and Mr.
Rudolf Bischof, was established on 25th September 1998.

By reference to “A Guide for The Formation of An Audit Committee”

published by the Hong Kong Society of Accountants, written terms of
reference which describe the authority and duties of the audit committee
were prepared and adopted by the Board of the Company on the same
date. The principal activities of the Audit Committee include the review
and supervision of the Group’s financial reporting process and internal
controls.

Related Party Transactions

Details of related party transactions are set out in note 23 to the accounts.
None of the transactions constitute a connected transaction as defined in
the Listing Rules.

Auditors
The accounts have been audited by PricewaterhouseCoopers who
retire and, being eligible, offer themselves for re-appointment.
PricewaterhouseCoopers replaced Price Waterhouse in June 1999
following their merger with Coopers & Lybrand.

On behalf of the Board

Sir Sidney Gordon

Chairman

Hong Kong, 2nd April 2001

15
T H E C H A I R M A N ’ S
S T A T E M E N T

T he Board of Directors of Nanyang Holdings Limited announces that for

the year ended 31st December 2000 the Group reported a loss after
taxation of HK$19.9 million (1999: profit of HK$106.3 million). Current
year’s loss was due mainly to a decline in the market value of financial
investments. The change in accounting policy for investment in
securities which came into effect on 1st January 1999 increased
volatility to the Group’s results as the unrealised losses as well as gains
from changes in market value of securities are now recognised in the
profit and loss account. Loss per share is HK$0.42 (1999: earnings per
share is HK$2.25).

The Directors recommend the payment of a final dividend of HK$0.10

per share, representing a dividend distribution of approximately
HK$4.7 million (1999: final dividend of HK$0.55 per share representing a
dividend distribution of HK$25.8 million).

Textile Operations
Earnings at the Company’s 64.7% joint venture in Shanghai, Shanghai Sung
Nan Textile Company Limited (Sung Nan), declined due to slowing
demand in the U.S. and competition from other low cost denim producing
countries. Sung Nan exports 90% of its denim production. In 2001,
earnings are unlikely to improve if Sung Nan is not able to obtain import
permits from the Central Government for cotton purchases. Domestically
grown cotton is selling at prices higher than imported cotton.

Southern Textile Company Limited, the Company’s 45% joint venture in

Shenzhen, continued to report good earnings and contributed to the Group’s
results. Its main asset, a factory building, is leased to third parties.

Real Estate
As the local economy continues to recover, leasing activities of industrial/
office (I/O) premises in the Kwun Tong area have become more active.
Of the 290,000 sq.ft. of I/O space the Company holds at Nanyang Plaza,
98.5% is currently occupied. However, due to the current supply situation,
rental rates which showed signs of improvement in 2000 are expected to
consolidate. The building should provide the Company with steady rental
income.

16
T H E C H A I R M A N ’ S
S T A T E M E N T ( con’t )

Repurchase of the Company’s Shares

Pursuant to the mandate given by shareholders at the Annual General
Meeting held on 27th June 2000, authorizing the Directors to repurchase
shares up to 10% of the issued share capital of the Company, during the
year ended 31st December 2000 the Company repurchased 150,000 of its
own shares representing 0.32% of the issued share capital of the Company
for a total consideration of approximately HK$937,000. Since the beginning of
2001, we have repurchased a further 62,000 shares, for a total consideration of
approximately HK$400,000. The Directors believe that the repurchases
will be beneficial to the shareholders as the shares are traded at a
substantial discount to its net asset value per share.

Business Review and Prospects

In recent years, the Company’s funds were invested mainly in the United
States. In spite of the severe correction in equity markets worldwide, the
investment portfolios declined less than the broader market. At the time of
writing, the prospects for global equity markets are uncertain. Accordingly,
some of the funds have been diverted to Alternative Investments and the
cash component of the portfolios has been increased.

At present, the Company maintains a healthy financial position and for the
time being has no bank debt.

On behalf of the Board of Directors, I would like to take this opportunity

to thank all the staff for their contribution to the Company.

Sir Sidney Gordon

Chairman

Hong Kong, 2nd April 2001

17
A U D I T O R S ’ R E P O R T T O T H E
S H A R E H O L D E R S O F
N A N Y A N G H O L D I N G S L I M I T E D
(Incorporated in Bermuda with limited liability)

We have audited the accounts on pages 19 to 48 which have been prepared in

accordance with accounting principles generally accepted in Hong Kong.

Respective Responsibilities of Directors and Auditors

The Company’s directors are responsible for the preparation of accounts
which give a true and fair view. In preparing accounts which give a true
and fair view it is fundamental that appropriate accounting policies are
selected and applied consistently.

It is our responsibility to form an independent opinion, based on our

audit, on those accounts and to report our opinion to you.

Basis of Opinion
We conducted our audit in accordance with Statements of Auditing
Standards issued by the Hong Kong Society of Accountants. An audit
includes examination, on a test basis, of evidence relevant to the amounts
and disclosures in the accounts. It also includes an assessment of the
significant estimates and judgements made by the directors in the
preparation of the accounts, and of whether the accounting policies are
appropriate to the circumstances of the Company and the Group, consistently
applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information

and explanations which we considered necessary in order to provide us
with sufficient evidence to give reasonable assurance as to whether the
accounts are free from material misstatement. In forming our opinion we
also evaluated the overall adequacy of the presentation of information in
the accounts. We believe that our audit provides a reasonable basis for our
opinion.

Opinion
In our opinion the accounts give a true and fair view of the state of affairs
of the Company and the Group as at 31st December 2000 and of the loss
and cash flows of the Group for the year then ended and have been properly
prepared in accordance with the disclosure requirements of the Hong Kong
Companies Ordinance.

PricewaterhouseCoopers
Certified Public Accountants

Hong Kong, 2nd April 2001

18
C O N S O L I D A T E D P R O F I T
A N D L O S S A C C O U N T
For the Year ended 31st December 2000

Note 2000 1999

HK$’000 HK$’000

Turnover 2 11,652 161,294

Direct costs (15,270) (23,967)

Gross (loss)/profit (3,618) 137,327

Administrative expenses (30,420) (33,377)

Other operating income/(expenses) 7,027 (6,889)

Operating (loss)/profit 3 (27,011) 97,061

Finance costs 4 (29) (173)

Share of profits of jointly controlled entities 9,820 10,916

(Loss)/profit before taxation (17,220) 107,804

Taxation 7 (2,656) (1,489)

(Loss)/profit for the year 8,19 (19,876) 106,315

(Loss)/earnings per share 10 (HK$0.42) HK$2.25

19
C O N S O L I D A T E D B A L A N C E S H E E T
As at 31st December 2000

Note 2000 1999

HK$’000 HK$’000
Non-current Assets
Fixed assets 11 390,428 439,958
Investments in jointly controlled entities 13 71,541 72,683
Non-trading investments 14 52,924 95,907

514,893 608,548

Current Assets
Trade and other receivables 15 8,530 14,411
Trading investments 16 367,491 437,319
Tax recoverable 151 -
Cash and bank balances 80,629 47,451

456,801 499,181

Current Liabilities
Trade and other payables 17 40,983 47,282
Taxation 2,545 2,305
Proposed dividend 9 4,675 25,795

48,203 75,382

Net Current Assets 408,598 423,799

Net Assets 923,491 1,032,347

Financed by:
Share Capital 18 4,675 4,690
Reserves 19 918,816 1,027,657

Y C Wang
Director

H C Yung
Director

Shareholders’ Funds 923,491 1,032,347

20
B A L A N C E S H E E T
As at 31st December 2000

Note 2000 1999

HK$’000 HK$’000
Non-current Assets
Investments in subsidiaries 12 417,937 415,744

Current Assets
Trade and other receivables 15 189 187
Amount due from a subsidiary 6,000 30,000
Bank balances 879 794

7,068 30,981

Current Liabilities
Trade and other payables 17 735 797
Proposed dividend 9 4,675 25,795

5,410 26,592

Net Current Assets 1,658 4,389

Net Assets 419,595 420,133

Financed by:
Share Capital 18 4,675 4,690
Reserves 19 414,920 415,443

Y C Wang
Director

H C Yung
Director

Shareholders’ Funds 419,595 420,133

21
C O N S O L I D A T E D C A S H F L O W
S T A T E M E N T
For the Year ended 31st December 2000

Note 2000 1999

HK$’000 HK$’000

Net Cash Inflow/(Outflow) from

Operating Activities 22(a) 45,436 (36,293)

Returns on Investments and

Servicing of Finance
Interest received 1,621 1,730
Interest paid (29) (173)
Dividend paid (25,723) (23,717)
Dividends received from jointly
controlled entities 5,521 7,107
Dividends received from non-trading
investments 2,009 -

Net Cash Outflow from Returns on

Investments and Servicing of Finance (16,601) (15,053)

Taxation
Hong Kong profits tax paid (1,967) (464)
10% 1997/98 Hong Kong profits tax rebate - 40

Net taxation paid (1,967) (424)

Investing Activities
Purchase of fixed assets (88) (332)
Sale of fixed assets 1 -
Purchase of non-trading investments (4,322) -
Redemption of non-trading investments 11,781 -
Increase in bank deposits with maturity
beyond three months (959) -

Net Cash Inflow/(Outflow) from

Investing Activities 6,413 (332)

Net Cash Inflow/(Outflow) before

Financing 33,281 (52,102)

22
C O N S O L I D A T E D C A S H F L O W
S T A T E M E N T (con’t)
For the Year ended 31st December 2000

Note 2000 1999

HK$’000 HK$’000
Financing
Repurchase of own shares (937) (5,525)

Net Cash Outflow from Financing 22(b) (937) (5,525)

Increase/(decrease) in cash and cash

equivalents 32,344 (57,627)
Cash and cash equivalents at 1st January 47,451 104,813
Effect of foreign exchange rate changes (125) 265

Cash and Cash Equivalents

at 31st December 79,670 47,451

Analysis of cash and cash equivalents:

Cash and bank balances 80,629 47,451
Less: Bank deposits with maturity
beyond three months (959) -

79,670 47,451

23
C O N S O L I D A T E D S T A T E M E N T O F
R E C O G N I S E D G A I N S A N D L O S S E S
For the Year ended 31st December 2000

Note 2000 1999

HK$’000 HK$’000
Gains and losses recognised directly
in equity

Revaluation deficit on investment

properties 19 (48,600) (199,600)

Recognised losses arising from

changes in fair value of non-trading
investments 19 (35,646) (16,366)

Exchange differences on translation

of the accounts of subsidiaries 19 806 414

Net losses not recognised in the

consolidated profit and loss account (83,440) (215,552)

(Loss)/profit for the year (19,876) 106,315

Total recognised losses for the year (103,316) (109,237)

24
N O T E S T O T H E A C C O U N T S

1 Principal Accounting Policies

(a) Basis of preparation
The accounts are prepared under the historical cost convention as
modified by the revaluation of investment properties and
investments in securities, in accordance with accounting principles
generally accepted in Hong Kong and comply with accounting
standards issued by the Hong Kong Society of Accountants.

(b) Consolidation
The consolidated accounts include the accounts of the Company
and all its subsidiary companies made up to 31st December. All
significant intercompany transactions and balances within the Group
are eliminated on consolidation.

(c) Investments in subsidiaries

A company is a subsidiary if more than 50 per cent of the issued
voting capital is held for the long term. In the Company’s balance
sheet the investments in subsidiaries are stated at cost less provision,
if necessary, for any diminution in value other than temporary in
nature. The results of subsidiaries are accounted for by the
Company on the basis of dividends received and receivable.

(d) Investments in jointly controlled entities

A jointly controlled entity is an entity which through
contractual arrangements is subject to joint control by the Group
and other parties, and none of the participating parties has
unilateral control over the entity. The consolidated profit and
loss account includes the Group’s share of the results of jointly
controlled entities for the year. The consolidated balance sheet
includes the Group’s share of the net assets of the jointly
controlled entities.

25
N O T E S T O T H E A C C O U N T S (con’t)

1 Principal Accounting Policies (con’t)

(e) Investment properties
Investment properties are interests in land and buildings in
respect of which construction work and development have been
completed and which are held for their investment potential,
any rental income being negotiated at arm’s length.

Investment properties held on leases with unexpired periods of

greater than 20 years are valued annually by independent valuers.
The valuations are on an open market value basis related to
individual properties and separate values are not attributed to land
and buildings. The valuations are incorporated in the annual
accounts. Increases in valuation are credited to the investment
properties revaluation reserve. Decreases in valuation are first set
off against increases on earlier valuations on a portfolio basis and
thereafter are debited to operating profit. Any subsequent increases
are credited to operating profit up to the amount previously debited.

Investment properties held on leases with unexpired periods of 20

years or less are depreciated over the remaining portion of the
leases.

Upon the disposal of an investment property, the relevant portion

of the revaluation reserve realised in respect of previous valuations
is released from the investment properties revaluation reserve to
the profit and loss account.

26
N O T E S T O T H E A C C O U N T S (con’t)

1 Principal Accounting Policies (con’t)

(f) Other fixed assets
Other fixed assets are stated at cost less accumulated depreciation.
Leasehold land is depreciated over the period of the leases while
other fixed assets are depreciated to write off their costs over their
estimated useful lives on a straight line basis at the following
annual rates:-

Buildings 2.5% to 5%
Others 20%

Major costs incurred in restoring fixed assets to their normal

working condition are charged to the profit and loss account.
Improvements are capitalised and depreciated over their expected
useful lives to the Group.

The carrying amounts of fixed assets are reviewed regularly to

assess whether their recoverable amounts have declined below
their carrying amounts. Expected future cash flows have not been
discounted in determining the recoverable amount.

The gain or loss on disposal of fixed assets other than investment

properties is the difference between the net sales proceeds and the
carrying amount of the assets and is recognised in the profit and
loss account.

(g) Investments in securities

(i) Non-trading investments
Non-trading investments are stated at fair value at the balance
sheet date. Fair value represents the quoted market price for
securities which are listed or actively traded in a liquid market.
For securities which are unlisted and not actively traded, fair
value is determined with reference to recent transaction prices
and estimated net realisable value. Changes in the fair value of
individual investments are credited or debited to the
investments revaluation reserve until the investment is sold, or
is determined to be impaired.

27
N O T E S T O T H E A C C O U N T S (con’t)

1 Principal Accounting Policies (con’t)

(g) Investments in securities (con’t)
(i) Non-trading investments (con’t)
Upon the disposal of an investment, the cumulative gain or
loss, representing the difference between the net sales
proceeds and the carrying amount of the relevant investment,
together with any surplus/deficit transferred from the
investments revaluation reserve, is dealt with in the profit and
loss account.

Individual investments are reviewed regularly to determine

whether they are impaired. When an investment is considered
to be impaired, the cumulative loss recorded in the revaluation
reserve is taken to the profit and loss account.

(ii) Trading investments

Trading investments are carried at fair value at the balance sheet
date. Fair value represents the quoted market price for
securities which are listed or actively traded in a liquid market.
For securities which are unlisted and not actively traded, fair
value is determined with reference to recent transaction prices
and estimated net realisable value.

At each balance sheet date, the net unrealised gains or losses

arising from the changes in fair value of trading investments are
recognised in the profit and loss account. Profits or losses on
disposal of trading investments, representing the difference
between the net sales proceeds and the carrying amounts, are
recognised in the profit and loss account as they arise.

(h) Revenue recognition

(i) Realised and unrealised gains and losses on trading investments
Realised gains and losses on trading investments are recognised
on conclusion of sales contracts. Unrealised gains and losses
on trading investments are recognised on the basis set out in
note 1(g)(ii).

28
N O T E S T O T H E A C C O U N T S (con’t)

1 Principal Accounting Policies (con’t)

(h) Revenue recognition (con’t)
(ii) Rental and management fee income
Rental and management fee income on operating leases are
recognised on a straight line basis over the lease periods.

(iii) Dividend income

Dividend income is recognised when the right to receive
payment is established.

(iv) Interest income

Interest income is recognised on an accruals basis.

(v) Commission income

Commission income is recognised upon rendering of the
services.

(i) Operating leases

Leases where substantially all the rewards and risks of ownership
of the assets remain with the leasing company are accounted for as
operating leases. Payments made under operating leases net of
any incentives received from the leasing company are charged to
the profit and loss account on a straight line basis over the lease
periods.

(j) Deferred taxation

Deferred taxation is accounted for at the current tax rate in respect
of timing differences between profit as computed for taxation
purposes and profit as stated in the accounts to the extent that a
liability or an asset is expected to be payable or recoverable in the
foreseeable future.

(k) Borrowing costs

Borrowing costs are charged to the profit and loss account in the
year in which they are incurred.

29
N O T E S T O T H E A C C O U N T S (con’t)

1 Principal Accounting Policies (con’t)

(l) Foreign currencies
Transactions in foreign currencies are translated at exchange rates
ruling at the transaction dates. Monetary assets and liabilities
expressed in foreign currencies at the balance sheet date are
translated at rates of exchange ruling at the balance sheet date.
Exchange differences arising in these cases are dealt with in the
profit and loss account.

The accounts of subsidiary companies and jointly controlled

entities expressed in foreign currencies are translated at the rates
of exchange ruling at the balance sheet date. Exchange
differences are dealt with as a movement in reserves.

2 Turnover and Segment Information

The Group is principally engaged in property investment, investment
holding and trading, and textile trading. Turnover recognised during
the year comprises the following:

2000 1999
HK$’000 HK$’000
Gross rental income from investment
properties 37,893 40,295
Net realised and unrealised (losses)/
gains on trading investments (52,507) 96,758
Dividend income from listed investments 1,971 1,828
Dividend income from unlisted investments 2,009 -
Interest income 6,020 5,548
Management fee income from investment
properties 8,596 8,507
Commission income (Note 23) 7,670 8,358

11,652 161,294

30
N O T E S T O T H E A C C O U N T S (con’t)

2 Turnover and Segment Information (con’t)

An analysis of the Group’s turnover and contribution to loss/profit
before taxation by principal activities and markets is as follows:

Turnover (Loss)/profit before taxation

2000 1999 2000 1999
HK$’000 HK$’000 HK$’000 HK$’000
Principal activities:
Textile trading
-Group 7,670 8,358 1,025 1,139
-jointly controlled entity - - 7,226 7,179
Property invesment
-Group 46,489 48,802 9,106 5,001
-jointly controlled entity - - 2,594 3,737
Investment holding and trading
-Group (42,507) 104,134 (37,171) 90,748

11,652 161,294 (17,220) 107,804

Principal markets:
People’s Republic of China
(including Hong Kong)
-Group 52,946 66,650 15,695 13,662
-jointly controlled entities - - 9,820 10,916
United States of America-Group (26,882) 75,334 (28,210) 64,858
Europe-Group (4,589) 7,365 (4,638) 6,993
Australia and New Zealand-Group(1,515) 1,812 (1,534) 1,728
Others-Group (8,308) 10,133 (8,353) 9,647

11,652 161,294 (17,220) 107,804

31
N O T E S T O T H E A C C O U N T S (con’t)

3 Operating Loss/Profit
2000 1999
HK$’000 HK$’000
Operating loss/profit is stated after crediting and
charging the following:

Crediting
Net exchange gain 1,183 -

Charging
Auditors’ remuneration 852 812
Depreciation 1,016 1,056
Management fee expense in respect of
investment properties 8,316 8,316
Outgoings in respect of investment
properties 494 1,238
Operating leases - land and buildings 2,593 2,605
Retirement benefit costs (Note 6) 729 711
Staff costs 22,588 22,489
Net exchange loss - 230

4 Finance Costs
2000 1999
HK$’000 HK$’000

Interest on bank loans and overdrafts 29 173

32
N O T E S T O T H E A C C O U N T S (con’t)

5 Directors’ and Senior Management’s Emoluments

(a) Directors’ emoluments

The aggregate amounts of emoluments payable to the directors of

the Company during the year are as follows:

2000 1999
HK$’000 HK$’000
Fees 180 180
Other emoluments
Salaries, housing and other allowances
and benefits in kind 11,106 10,859
Discretionary bonuses 3,071 3,246
Contributions to pension schemes 540 529

14,897 14,814

The emoluments of the directors fell within the following bands:

Emoluments bands Number of directors

2000 1999
Nil - HK$1,000,000 4 4
HK$4,500,001 - HK$5,000,000 2 2
HK$5,000,001 - HK$5,500,000 1 1

Emoluments paid to independent non-executive directors for the

year represented only directors’ fees amounting to HK$60,000
(1999: HK$60,000).

33
N O T E S T O T H E A C C O U N T S (con’t)

5 Directors’ and Senior Management’s Emoluments (con’t)

(b) Emoluments of the five highest paid individuals
Details of the emoluments of the five highest paid individuals in
the Group including 3 (1999: 3) directors are as follows:

2000 1999
HK$’000 HK$’000
Fees 72 72
Salaries, housing and other allowances,
benefits in kind 13,304 12,988
Pensions 729 711
Bonuses 3,512 3,690

17,617 17,461

The emoluments of the five highest paid individuals fell within

the following bands:

Emoluments bands Number of individuals

2000 1999
Nil - HK$1,000,000 1 1
HK$1,500,001 - HK$2,000,000 1 1
HK$4,500,001 - HK$5,000,000 2 2
HK$5,000,001 - HK$5,500,000 1 1

6 Retirement Benefit Costs

The Group contributes to a defined contribution retirement scheme
which is available to certain Hong Kong senior employees (“Senior
Staff Scheme”). With effect from 1st December 2000, a mandatory
provident fund scheme has been set up for the other eligible
employees of the Group in Hong Kong. Contributions to the schemes
by the Group are made at a certain percentages of basic monthly
salary. The assets of the schemes are held separately from those of the
Group in independently administered funds. The Group’s
contributions to these schemes are expensed as incurred.
Contributions to the Senior Staff Scheme may be reduced by
contributions forfeited by those employees who leave the scheme prior
to vesting fully in the contributions and there was no contribution
forfeited during the year (1999: Nil). Contributions totalling HK$22,000
(1999:Nil) were payable to the schemes at the year end, which are
included in trade and other payables.

34
N O T E S T O T H E A C C O U N T S (con’t)

7 Taxation
Hong Kong profits tax has been provided at the rate of 16% (1999:
16%) on the estimated assessable profit for the year. Taxation on
overseas profits has been calculated on the estimated assessable profit
for the year at the rates of taxation prevailing in the countries in which
the Group operates.

The amount of taxation charged to the consolidated profit and loss

account represents:
2000 1999
HK$’000 HK$’000
Company and subsidiaries:

Hong Kong profits tax 796 340

Under provision in prior years 1,255 -
10% 1997/98 Hong Kong profits tax rebate - (40)

2,051 300
Share of overseas taxation attributable
to jointly controlled entities 605 1,189

2,656 1,489

8 Loss/Profit for the Year

Included in the loss/profit for the year is a profit of HK$5,002,000
(1999: HK$28,850,000) which is dealt with in the accounts of the
Company.

9 Dividends
2000 1999
HK$’000 HK$’000
Final, proposed, of 10 HK cents
(1999: 55 HK cents) per share 4,675 25,795
Overprovision of prior year final
dividend on cancelled shares due to
repurchase of shares before closure
of the Register of Members (72) (132)

4,603 25,663

35
N O T E S T O T H E A C C O U N T S (con’t)

10 Loss/Earnings per Share

The calculation of loss/earnings per share is based on the loss for the
year of HK$19,876,000 (1999: profit of HK$106,315,000) and the
weighted average number of shares in issue during the year of
46,851,182 (1999: 47,248,515).

11 Fixed Assets

Group
Investment Other
properties properties Others Total
HK$’000 HK$’000 HK$’000 HK$’000
Cost or valuation

At 1st January 2000 430,900 12,030 3,705 446,635

Additions - - 88 88
Revaluation deficit (48,600) - - (48,600)
(Note 19)
Disposals - - (10) (10)

At 31st December 2000 382,300 12,030 3,783 398,113

Accumulated depreciation

At 1st January 2000 - 5,054 1,623 6,677

Charge for the year - 360 656 1,016
Disposals - - (8) (8)

At 31st December 2000 - 5,414 2,271 7,685

Net book value

At 31st December 2000 382,300 6,616 1,512 390,428

At 31st December 1999 430,900 6,976 2,082 439,958

36
N O T E S T O T H E A C C O U N T S (con’t)

11 Fixed Assets (con’t)

Investment properties are stated at valuation and were revalued as at
31st December 2000 and 1999 by Prudential Surveyors International
Limited, an independent professional valuer, on an open market value
basis. Other fixed assets are stated at cost.

The Group’s interests in investment properties and other properties at

their net book value are analysed as follows:

Investment properties Other properties

2000 1999 2000 1999
HK$’000 HK$’000 HK$’000 HK$’000
In Hong Kong, held on:

Leases of over 50 years 12,300 14,900 - -

Leases of between 10 to
50 years 370,000 416,000 2,506 2,720

Outside Hong Kong, held on:

Leases of over 50 years - - 560 581

Leases of between 10 to
50 years - - 3,550 3,675

382,300 430,900 6,616 6,976

The Group’s investment properties with an aggregate carrying value

of HK$370,000,000 (1999: HK$416,000,000) have been mortgaged
to banks to secure general banking facilities. None of the facilities
was utilised as at 31st December 2000 and 1999.

37
N O T E S T O T H E A C C O U N T S (con’t)

12 Investments in Subsidiaries
Company
2000 1999
HK$’000 HK$’000

Unlisted shares, at cost 378,782 378,782

Amount due from a subsidiary 39,155 36,962

417,937 415,744

The amount due from a subsidiary is unsecured, interest free and has
no fixed terms of repayment.

Particulars of subsidiaries are included in note 25.

13 Investments in Jointly Controlled Entities

Group
2000 1999
HK$’000 HK$’000

Share of net assets 74,891 71,197

Amount due from a jointly controlled entity - 1,501
Amounts due to jointly controlled entities (3,350) (15)

71,541 72,683

The amounts due from/to jointly controlled entities are unsecured,

interest free and have no fixed terms of repayment.

The following is a list of the jointly controlled entities as at

31st December 2000 and 1999:
Place of establishment
Name and operation Principal activities

Shanghai Sung Nan People’s Republic Textile

Textile Co Ltd (Note a) of China manufacturing

Southern Textile People’s Republic Property

Company Limited of China investment
(Note b) and investment
holding

38
N O T E S T O T H E A C C O U N T S (con’t)

13 Investments in Jointly Controlled Entities (con’t)

(a) The Group has a 64.68% interest in ownership and profit sharing
and a 57% interest in voting power in Shanghai Sung Nan Textile
Co Ltd.

A summary of its audited financial information for the years ended

31st December 2000 and 1999 is as follows:

Results for the year

2000 1999
HK$’000 HK$’000

Turnover 107,853 121,414

Operating profit 3,718 5,121

Taxation (81) (1,133)

Profit after taxation 3,637 3,988

Net assets
2000 1999
HK$’000 HK$’000

Fixed assets 96,512 101,459

Current assets 59,659 67,402
Current liabilities (6,774) (29,765)
Long term liabilities (18,763) (9,295)

130,634 129,801

(b) The Group has a 45% interest in ownership and profit sharing and
a 43% interest in voting power in Southern Textile Company Limited.

14 Non-trading Investments
Group
2000 1999
HK$’000 HK$’000

Equity securities, at fair value

Listed in Hong Kong 6,826 8,030
Unlisted 46,098 87,877

52,924 95,907

39
N O T E S T O T H E A C C O U N T S (con’t)

15 Trade and Other Receivables

Group Company
2000 1999 2000 1999
HK$’000 HK$’000 HK$’000 HK$’000

Trade receivables (Note a) 1,127 1,446 - -

Prepayments and deposits 6,195 6,075 189 187
Other receivables 1,208 6,890 - -

8,530 14,411 189 187

(a) The Group does not grant any credit to its customers. As at
31st December 2000 and 1999, all trade receivables are aged within
30 days.

16 Trading Investments
Group
2000 1999
HK$’000 HK$’000

Equity securities, at fair value

Listed in Hong Kong 16,684 23,748
Listed outside Hong Kong 272,658 323,595

289,342 347,343

Debt securities, at fair value

Listed outside Hong Kong 78,149 77,532
Unlisted - 12,444

78,149 89,976

367,491 437,319

40
N O T E S T O T H E A C C O U N T S (con’t)

17 Trade and Other Payables

Group Company
2000 1999 2000 1999
HK$’000 HK$’000 HK$’000 HK$’000

Trade payables (Note a) 8,933 3,599 - -

Rental and management
fee deposits 10,679 10,236 - -
Accruals and provisions 21,371 33,447 735 797

40,983 47,282 735 797

(a) At 31st December 2000 and 1999, the aging analysis of the trade
payables are as follows:
Group
2000 1999
HK$’000 HK$’000

Within 30 days 7,940 2,696

31 - 60 days 729 393
61 - 90 days 264 510

8,933 3,599

18 Share Capital
2000 1999
HK$’000 HK$’000
Authorised:
60,000,000 shares of HK$0.10 each 6,000 6,000

Issued and fully paid:

46,749,799 shares (1999: 46,899,799 shares)
of HK$0.10 each 4,675 4,690

During the year, the Company repurchased a total number of

150,000 (1999: 798,500) of its own shares on The Stock Exchange
of Hong Kong Limited, all of which were then cancelled. The
aggregate price of HK$937,000 (1999: HK$5,525,000) paid was
charged against retained profits and the nominal value of the
shares repurchased of HK$15,000 (1999: HK$80,000) was
transferred to capital redemption reserve.

41
N O T E S T O T H E A C C O U N T S (con’t)

19 Reserves
Group
Investment
properties Investments Capital Exchange Capital
Contributed revaluation revaluation reserve on General Retained Statutory fluctuation redemption
surplus reserve reserve consolidation reserve profits reserves reserve reserve Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1st January 2000 20,000 169,630 57,203 1,000 76,000 695,743 6,084 1,687 310 1,027,657
Loss for the year - - - - - (19,876) - - - (19,876)
Transfer to statutory
reserves of jointly
controlled entities - - - - - (758) 758 - - -
Shares repurchased and
cancelled (Note 18) - - - - - (937) - - 15 (922)
Revaluation deficit - (48,600) (35,646) - - - - - - (84,246)
Exchange translation
differences - - - - - - - 806 - 806
Dividends (Note 9) - - - - - (4,603) - - - (4,603)

At 31st December 2000 20,000 121,030 21,557 1,000 76,000 669,569 6,842 2,493 325 918,816

Retained by:

Company and subsidiaries 20,000 121,030 21,557 1,000 76,000 647,415 - 2,493 325 889,820
Jointly controlled entities - - - - - 22,154 6,842 - - 28,996

At 31st December 2000 20,000 121,030 21,557 1,000 76,000 669,569 6,842 2,493 325 918,816

At 1st January 1999 20,000 369,230 73,569 1,000 76,000 620,892 5,808 1,273 230 1,168,002
Profit for the year - - - - - 106,315 - - - 106,315
Transfer to statutory
reserves of jointly
controlled entities - - - - - (276) 276 - - -
Shares repurchased and
cancelled (Note 18) - - - - - (5,525) - - 80 (5,445)
Revaluation deficit - (199,600) (16,366) - - - - - - (215,966)
Exchange translation
differences - - - - - - - 414 - 414
Dividends (Note 9) - - - - - (25,663) - - - (25,663)

At 31st December 1999 20,000 169,630 57,203 1,000 76,000 695,743 6,084 1,687 310 1,027,657

Retained by:

Company and subsidiaries 20,000 169,630 57,203 1,000 76,000 676,525 - 1,687 310 1,002,355
Jointly controlled entities - - - - - 19,218 6,084 - - 25,302

At 31st December 1999 20,000 169,630 57,203 1,000 76,000 695,743 6,084 1,687 310 1,027,657

42
N O T E S T O T H E A C C O U N T S (con’t)

19 Reserves (con’t)

Company

Capital
Contributed Retained redemption
surplus profits reserve Total
HK$’000 HK$’000 HK$’000 HK$’000

At 1st January 2000 373,782 41,351 310 415,443

Profit for the year - 5,002 - 5,002
Shares repurchased
and cancelled - (937) 15 (922)
Dividends (Note 9) - (4,603) - (4,603)

At 31st December 2000 373,782 40,813 325 414,920

At 1st January 1999 373,782 43,689 230 417,701

Profit for the year - 28,850 - 28,850
Shares repurchased
and cancelled - (5,525) 80 (5,445)
Dividends (Note 9) - (25,663) - (25,663)

At 31st December 1999 373,782 41,351 310 415,443

Pursuant to a group reorganisation in 1989, the Company acquired all

the issued shares of Nanyang Cotton Mill Limited (“NCML”) in
exchange for the Company’s new shares issued. The Group’s
contributed surplus represents the difference between the nominal
value of NCML’s shares and the nominal value of the Company’s shares
issued pursuant to the group reorganisation. The Company’s
contributed surplus represents the difference between the nominal
value of the Company’s shares issued and the consolidated net assets
of NCML acquired under the group reorganisation as at the date of
acquisition.

43
N O T E S T O T H E A C C O U N T S (con’t)

19 Reserves (con’t)
Statutory reserves are created in accordance with the terms of the joint
venture agreements of jointly controlled entities established in the
People’s Republic of China and are required to be retained in the
accounts of the entities for specific purposes. The statutory reserves at
31st December 2000 comprise statutory surplus reserve of
HK$3,421,000 (1999: HK$3,042,000) and enterprise development
reserve of HK$3,421,000 (1999: HK$3,042,000) which are
appropriated from the profits of jointly controlled entities.

General reserve arose from transfers from retained profits and has no
specific purposes.

44
N O T E S T O T H E A C C O U N T S (con’t)

20 Deferred Taxation
Unprovided deferred tax credit for the year in respect of tax losses
amounts to HK$421,000 (1999: deferred tax charge of HK$61,000). In
addition, unprovided deferred tax asset amounting to HK$873,000 (1999:
HK$937,000) for tax losses brought forward expired during the year.

As at 31st December 2000, the potential asset for deferred taxation in

respect of unutilised tax losses which has not been accounted for
amounts to HK$25,013,000 (1999: HK$25,465,000), of which
HK$786,000 (1999: HK$1,616,000) will expire in the next three years
from the balance sheet date.

The revaluation of investment properties and non-trading investments

does not constitute a timing difference and therefore deferred tax has
not been quantified.

21 Commitments under Operating Leases

At 31st December the Group had commitments to make payments in
the next twelve months under operating leases for office premises
which expire as follows:

Group
2000 1999
HK$’000 HK$’000

Within one year 285 -

In the second to fifth years inclusive - 2,283

285 2,283

44
N O T E S T O T H E A C C O U N T S (con’t)

22 Notes to the Consolidated Cash Flow Statement

(a) Reconciliation of operating loss/profit to net cash inflow/outflow
from operating activities:

2000 1999
HK$’000 HK$’000

Operating (loss)/profit (27,011) 97,061

Interest income (1,617) (1,691)
Dividend income from non-trading
investments (2,009) -
Depreciation 1,016 1,056
Loss on disposal of fixed assets 1 5
Decrease/(increase) in trade and
other receivables 5,877 (6,320)
Decrease/(increase) in trading investments 69,828 (137,312)
(Decrease)/increase in trade and
other payables (6,299) 6,030
Change in balances with jointly controlled
entities 4,836 4,093
Exchange translation differences 814 785

Net cash inflow/(outflow) from

operating activities 45,436 (36,293)

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N O T E S T O T H E A C C O U N T S (con’t)

22 Notes to the Consolidated Cash Flow Statement (con’t)

(b) Analysis of changes in financing:

Retained profits
2000 1999
HK$’000 HK$’000

At 1st January 695,743 620,892

Net cash outflow from financing (937) (5,525)
Dividends (4,603) (25,663)
Transfer to statutory reserves (758) (276)
(Loss)/profit for the year (19,876) 106,315

At 31st December 669,569 695,743

23 Significant Related Party Transactions

During the year, agency commission income of HK$7,670,000 (1999:
HK$8,358,000) was received by a subsidiary from a jointly controlled
entity for handling sales of textile products for the jointly controlled
entity. These transactions were entered into in the normal course of
business of the Group and the commission income has been
calculated at certain fixed percentages of the value of sales handled by
the subsidiary.

24 Approval of Accounts
The accounts were approved by the board of directors on 2nd April
2001.

46
N O T E S T O T H E A C C O U N T S (con’t)

25 Subsidiaries
Details of subsidiaries as at 31st December 2000 and 1999 are as follows:

Particulars Group
Place of Place of Principal of issued equity
Name incorporation operation activities share capital interest
2000 1999

Astral Investments Co Liberia Hong Kong Investment trading 1 share without par 100% 100%
value issued at
US$10,000

Bostitch Investments Co SA Panama * Dormant 200 shares issued at 100% 100%

US$10 each

Bravery Co Inc Liberia Hong Kong Investment holding 1 share without par 100% 100%
value issued at
US$1,000

Commonwealth Garment Hong Kong * Dormant 58,000 ordinary 100% 100%

Co Ltd shares of HK$100
each

Cottage Investments Co SA Panama Hong Kong Investment holding 100 common shares 100% 100%
without par value
issued at US$10
each and 100
common shares
of US$10 each

+ Culvert Investments Ltd British Virgin Hong Kong Investment holding 100 shares of 100% 100%
Islands US$1 each

East Coast Investments Ltd Hong Kong Hong Kong Investment trading 2 ordinary shares of 100% 100%
US$1 each

Highriver Estates Ltd Hong Kong Hong Kong Property holding 2 ordinary shares of 100% 100%
HK$1 each

Homestead Investments Inc Liberia Hong Kong Investment holding 1 share without par 100% 100%
and trading value issued at
US$10,000

Kamunting Garments Sdn Bhd Malaysia * Dormant 4,250,000 shares 100% 100%
issued at M$1
each

Lodewijk Corporation United States * Dormant 1,000 shares of 100% 100%

of America US$1 each

Makefast Investments Co SA Panama Hong Kong Investment holding 100 common shares 100% 100%
without par value
issued at
US$30,000 each

47
N O T E S T O T H E A C C O U N T S (con’t)

25 Subsidiaries (con’t)

Particulars Group
Place of Place of Principal of issued equity
Name incorporation operation activities share capital interest
2000 1999

Mepal International Ltd Hong Kong Hong Kong Property investment 3 ordinary shares of 100% 100%
HK$1 each

Merry Co Inc Liberia The People’s Property and 1 share without par 100% 100%
Republic investment value issued at
of China holding US$1,000

Nanyang Cotton Mill Ltd Hong Kong Hong Kong Investment holding 25,000,000 ordinary 100% 100%
and property shares of HK$1
investment each

Nanyangtextile.com Limited Hong Kong * Dormant 2 ordinary shares of 100% -

HK$1 each

Olympia Overseas United States United States Investment holding 1,000 ordinary 100% 100%
Investments Corporation of America of America shares of US$1
each

Peninsular Inc Liberia Hong Kong Investment holding 1 share without par 100% 100%
value issued at
HK$10,000

Peninsular Yarn & Fabric Hong Kong Hong Kong Textile sales agency 1,000 shares of 100% 100%
Merchandising Ltd HK$1 each

Velden Ltd British Virgin Hong Kong Investment holding 10,000 ordinary 100% 100%
Islands and trading shares of US$1
each

* Place of operation is not applicable as these companies are dormant.

+ Subsidiary held directly by the Company.

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S C H E D U L E O F
P R I N C I P A L P R O P E R T I E S
As at 31st December 2000 and 1999

(a) Investment properties

Group's
Description Lot number Type Lease term interest

Units 2005-2008, IL 8416 Commercial Long term 100%

20/F, Fortress Hong Kong leasehold
Tower, 250
King’s Road

Nanyang Plaza KTIL 46 Commercial/ Medium term 100%

57 Hung To Road Industrial leasehold
(Various units
with a total floor
area of 289,375 sq ft
and all car parks)

(b) Other properties

Group’s
Description Lot number Type Lease term interest

Units A-D, 5/F, DD 11 Lot Industrial Medium term 100%

Block 1, Tai No.1637 leasehold
Ping Industrial
Centre, 57 Ting
Kok Road, Tai Po

49