For the year ended December 31, 2010

11. Taxation Creditopen
2010
2009
HK$’000
HK$’000
Current tax:
Hong Kong profits tax
(4,740)
(58,758)
(Under) overprovision in prior years
(11,008)
50,642
(15,748)
(8,116)
Overseas taxation
(146,950)
(100,143)
Overprovision in prior years
6,204
153,361
(140,746)
53,218
Deferred tax (Note 47):
Current year
157,042
17,582
548
62,684

Hong Kong Profits Tax is calculated at 16.5% of the estimated assessable profits for the year.

Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions.

The tax credits for the year are reconciled as follows:

2010
2010
2009
2009
HK$’000
%
HK$’000
%
Profit before taxation
746,392
429,469
Tax at Hong Kong profits tax rate
(123,155)
16.5%
(70,862)
16.5%
Effect of different tax rates of subsidiaries
operating in other jurisdictions
180,151
(24.1%)
67,037
(15.6%)
Tax effect ofexpenses not deductible for tax purposes
(35,092)
4.7%
(33,746)
7.9%
Tax effect of income not taxable for tax purposes
46,260
(6.2%)
102,679
(23.9%)
Tax effect of tax losses and deductible temporary
differences not recognised
(108,383)
14.5%
(291,399)
67.8%
Recognition of temporary differences
previously not recognised
48,217
(6.5%)
82,069
(19.1%)
(Under) overprovision in respect of prior years
(4,804)
0.6%
204,003
(47.5%)
Others
(2,646)
0.4%
2,903
(0.7%)
Tax credit for the year
548
(0.1%)
62,684
(14.6%)

Details of deferred tax are set out in Note 47.

12. Profit for the Yearopen
2010 2009
HK$’000 HK$’000
Profit for the year has been arrived at after charging (crediting):
Amortisation of intangible assets 330,646 269,246
Auditors’ remuneration 24,383 25,575
Amortisation of lease prepayments 5,717 2,267
Fair value gain on held-for-trading investments (3,100) (33,692)
Fair value gain on foreign currency forward contracts (44,257) (11,320)
Fair value loss (gain) on interest rate swap 21,695 (3,428)
Fair value gain on a warrant (4,306)
Depreciation and amortisation on property, plant and equipment
Owned assets
524,696 521,785
Assets held under finance leases
24,189 13,168
Impairment loss on trade receivables 44,645 64,054
Impairment loss on available-for-sale investment 13,363
Loss (gain) on disposal of property, plant and equipment 5,291 (27,946)
Gain on disposal of held-for-trading investments (16)
Gain on disposal of a subsidiary (2,851)
Net exchange loss 23,055 55,534
Operating lease expenses recognised in respect of:
Premises
186,755 173,221
Motor vehicles
91,290 91,643
Plant and machinery
37,240 21,806
Other assets
32,272 33,048
Write down of inventories 86,358 71,679
Staff costs
Directors’ remuneration
Fees
1,250 1,250
Other emoluments
85,741 74,361
86,991 75,611
Other staff costs
3,073,966 2,683,526
Retirement benefits scheme contributions
(other than those included in the Directors’ emoluments)
Defined contribution plans
(9,527) 29,995
Defined benefit plans (Note 46)
60,979 62,357
3,212,409 2,851,489

Staff costs disclosed above do not include an amount of HK$397,294,000 (2009: HK$469,794,000) relating to research and development activities, which is included under research and development costs.

13. Director’s Emolumentsopen

The emoluments paid or payable to each of the 11 (2009: 11) directors were as follows:

For the year ended December 31, 2010

Other emoluments
Fees
Basic salaries and allowances
Contributions to retirement benefits schemes
Bonus paid
Share-based payments
Total
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
Mr Horst Julius Pudwill
12,148
12
13,400
722
26,282
Mr Joseph Galli Jr
9,360
12
18,720
1,045
29,137
Prof Roy Chi Ping Chung JP
6,583
12
1,806
627
9,028
Mr Kin Wah Chan
4,817
12
1,351
1,045
7,225
Mr Chi Chung Chan
4,811
12
1,374
1,045
7,242
Mr Stephan Horst Pudwill
1,830
12
295
1,045
3,182
Mr Vincent Ting Kau Cheung
250
190
418
858
Mr Joel Arthur Schleicher
250
375
418
1,043
Mr Christopher Patrick Langley OBE
250
350
418
1,018
Mr Manfred Kuhlmann
250
350
418
1,018
Mr Peter David Sullivan
250
290
418
958
Total
1,250
41,104
72
36,946
7,619
86,991

For the year ended December 31, 2009

Other emoluments
Fees
Basic salaries and allowances
Contributions to retirement benefits schemes
Bonus paid
Share-based payments
Total
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
Mr Horst Julius Pudwill
12,148
12
13,399
83
25,642
Mr Joseph Galli Jr
9,360
12
14,040
138
23,550
Prof Roy Chi Ping Chung JP
6,583
12
2,306
83
8,984
Mr Kin Wah Chan
4,811
12
976
138
5,937
Mr Chi Chung Chan
4,811
12
1,101
138
6,062
Mr Stephan Horst Pudwill
1,620
12
685
138
2,455
Mr Vincent Ting Kau Cheung
250
190
55
495
Mr Joel Arthur Schleicher
250
395
55
700
Mr Christopher Patrick Langley OBE
250
370
55
675
Mr Manfred Kuhlmann
250
370
55
675
Mr Peter David Sullivan
250
131
55
436
Total
1,250
40,789
72
32,507
993
75,611

The bonus paid were based on performance of the Group.

14. Employees’ Emolumentsopen

Of the five individuals with the highest emoluments in the Group, five (2009: three) were group directors of the Company whose emoluments are included in Note 13 above. The emoluments of the remaining two individuals for the year ended December 31, 2009 were as follows:

2010
2009
HK$’000
HK$’000
Basic salaries and allowances
5,704
Contributions to retirement benefits schemes
55
Bonus paid
6,531
Share-based payments
69
12,359

The emoluments of these two highest paid individuals for the year ended December 31, 2009 were within the following band:

No. of persons
HK$ 2010 2009
6,000,001 – 6,500,000 2

During each of the two years ended December 31, 2010 and 2009, no emoluments have been 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. No director has waived any emoluments during those years.

15. Dividendsopen
2010
2009
HK$’000
HK$’000
Dividends recognised as distributions during the year: Final dividend paid:
2009: HK4.50 cents (2008: HK3.00 cents) per share
72,277
45,038
Interim dividend paid:
2010: HK3.75 cents (2009: HK3.00 cents) per share
60,231
47,737
132,508
92,775

The final dividend of HK6.25 cents per share in respect of the year ended December 31, 2010 (2009: final dividend of HK4.50 cents per share in respect of the year ended December 31, 2009) has been proposed by the directors and is subject to approval by the shareholders in the Annual General Meeting.

16. Earnings per Shareopen

The calculation of the basic and diluted earnings per share attributable to Owners of the Company is based on the following data:

2010
2009
HK$’000
HK$’000
Earnings for the purpose of basic and diluted earnings per share:
Profit for the year attributable to Owners of the Company
740,140
490,658
Weighted average number of ordinary shares for
the purpose of basic earnings per share
1,601,053,496
1,539,717,905
Effect of dilutive potential ordinary shares:
Share options
963,952
49,116
Warrants
7,807,271
Weighted average number of ordinary shares for
the purpose of diluted earnings per share
1,602,017,448
1,547,574,292

The computation of diluted earnings per share for the year ended December 31, 2010 and December 31, 2009 does not assume the conversion of the Company’s convertible bonds since their exercise would result in an increase in earnings per share and does not assume the exercise of the Company’s outstanding share options if the exercise price of those options is higher than the average market price for shares for both 2010 and 2009.

17. Property, Plant and Equipmentopen
Freehold land Office
and buildings equipment, Moulds
outside Leasehold furniture Plant and Motor and Construction
Hong Kong improvements and fixtures machinery vehicles tooling Vessels in progress Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
The Group
Cost
At January 1, 2009 1,058,619 273,495 967,128 1,927,788 35,567 1,588,855 8,373 281,559 6,141,384
Currency realignment (4,874) 1,327 12,136 3,737 502 3,613 217 16,658
Additions 922 11,552 66,603 55,268 2,456 410,938 38 148,884 696,661
Disposal of a subsidiary (494) (391) (86) (971)
Disposals (57,576) (4,686) (14,698) (80,618) (3,385) (31,867) (580) (193,410)
Reclassification 193,815 82,463 43,083 16,173 (137) 13,917 (349,314)
At December 31, 2009 1,190,412 364,151 1,073,861 1,922,348 34,917 1,985,456 8,411 80,766 6,660,322
Currency realignment (17,682) 5,143 (5,582) (21,998) 8 (37,068) 1,347 (75,832)
Additions 151,627 8,443 41,732 100,520 5,012 102,260 17,854 297,715 725,163
Acquisition of subsidiaries /
business (note 48) 1,301 42 1,343
Disposals (124) (34,484) (44,912) (189,158) (3,253) (95,423) (8,411) (15) (375,780)
Reclassification 9,724 19,149 20,774 4,548 203 25,715 (80,113)
At December 31, 2010 1,333,957 362,402 1,085,873 1,817,561 36,929 1,980,940 17,854 299,700 6,935,216
Depreciation
At January 1, 2009 386,741 82,762 705,578 1,268,751 20,755 1,314,638 7,245 3,786,470
Currency realignment (874) (73) 5,360 268 226 3,496 8,403
Provided for the year 45,010 28,802 120,654 162,806 5,806 170,748 1,127 534,953
Disposal of a subsidiary (344) (303) (47) (694)
Eliminated on disposals (20,575) (3,153) (14,031) (78,340) (2,270) (31,020) (149,389)
Reclassification (22) 1,147 (1,142) 96 (79)
At December 31, 2009 409,958 108,316 818,405 1,352,343 24,566 1,457,783 8,372 4,179,743
Currency realignment (11,804) 505 (7,072) (27,037) (169) (35,969) (81,546)
Provided for the year 45,596 30,556 95,088 131,226 5,058 239,282 2,079 548,885
Eliminated on disposals (124) (25,861) (44,160) (183,707) (2,608) (94,640) (8,376) (359,476)
At December 31, 2010 443,626 113,516 862,261 1,272,825 26,847 1,566,456 2,075 4,287,606
Carrying amounts
At December 31, 2010 890,331 248,886 223,612 544,736 10,082 414,484 15,779 299,700 2,647,610
At December 31, 2009 780,454 255,835 255,456 570,005 10,351 527,673 39 80,766 2,480,579
Buildings outside Hong Kong
Leasehold improvements
Office equipment, furniture and fixtures
Plant and machinery
Motor vehicles
Moulds and tooling
Total
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
The Company Cost
At January 1, 2009
65,945
24,690
116,684
130,757
6,747
259,774
604,597
Additions
387
6,255
7,687
53,799
68,128
Transfer to subsidiaries
(34,365)
(86,720)
(1,323)
(234,832)
(357,240)
Disposals
(34,759)
(620)
(846)
(4,558)
(35)
(40,818)
At December 31, 2009
31,186
24,457
87,728
47,166
5,389
78,741
274,667
Additions
188
9,309
154
100
4,782
14,533
Disposals
(57)
(96)
(316)
(435)
(500)
(1,404)
At December 31, 2010
31,186
24,588
96,941
47,004
5,054
83,023
287,796
Depreciation
At January 1, 2009
31,427
18,787
83,580
89,035
3,913
165,605
392,347
Provided for the year
2,522
3,980
19,761
16,670
1,157
51,096
95,186
Transfer to subsidiaries
(28,125)
(70,109)
(1,322)
(161,206)
(260,762)
Eliminated on disposals
(19,915)
(610)
(781)
(4,368)
(35)
(25,709)
At December 31, 2009
14,034
22,157
74,435
31,228
3,713
55,495
201,062
Provided for the year
1,247
1,863
7,380
6,901
1,082
11,918
30,391
Eliminated on disposals
(44)
(96)
(316)
(435)
(500)
(1,391)
At December 31, 2010
15,281
23,976
81,719
37,813
4,360
66,913
230,062
Carrying amounts







At December 31, 2010
15,905
612
15,222
9,191
694
16,110
57,734
At December 31, 2009
17,152
2,300
13,293
15,938
1,676
23,246
73,605

The above property, plant and equipment, other than construction in progress, are depreciated on a straight-line basis, at the following rates per annum:

Freehold land Nil
Buildings
4%
Leasehold improvements 623% – 25%
Office equipment, furniture and fixtures 10% – 3313%
Plant and machinery 10% – 25%
Motor vehicles 18% – 25%
Moulds and tooling 20% – 3313%
Vessels 20%

The net book values of properties shown above comprise:

The Group
The Company
2010
2009
2010
2009
HK$’000
HK$’000
HK$’000
HK$’000
Land and buildings are situated outside Hong Kong
and are analysed as follows:


Freehold
704,813
584,281
Medium-term lease
185,518
196,173
15,905
17,152
890,331
780,454
15,905
17,152

The net book values of the Group’s and the Company’s property, plant and equipment include amounts of approximately HK$62,879,000 and HK$288,000 respectively (2009: HK$88,109,000 and HK$1,647,000 respectively) in respect of assets held under finance leases.

The gross carrying amount of the Group’s and the Company’s property, plant and equipment include amounts of approximately HK$2,401,709,000 and HK$148,948,000 (2009: HK$2,376,762,000 and HK$119,808,000) respectively in respect of fully depreciated property, plant and equipment that is still in use.

18. Lease Prepaymentsopen

The Group The Company

HK$’000 HK$’000
Cost

At January 1, 2009 291,930 6,449
Currency realignment (874)
Additions 337
Disposals (7,524) (6,449)
At December 31, 2009 283,869
Currency realignment 10,325
Disposals (3,090)
At December 31, 2010 291,104
Amortisation

At January 1, 2009 8,357 2,193
Currency realignment (22)
Provided for the year 2,267 118
Elimination on disposal (2,311) (2,311)
At December 31, 2009 8,291
Currency realignment 392
Provided for the year 5,717
At December 31, 2010 14,400
Carrying amounts

At December 31, 2010 276,704
At December 31, 2009 275,578

All lease prepayments are medium-term leases outside Hong Kong.

19. Goodwillopen

The Group

HK$’000
Cost
At January 1, 2009 4,071,585
Currency realignment (7,101)
At December 31, 2009 4,064,484
Currency realignment (3,129)
Arising on acquisition of subsidiaries / business (note 48) 71,744
At December 31, 2010 4,133,099

Particulars regarding impairment testing of goodwill are disclosed in Note 21.

20. Intangible Assets open

Deferred
development
cost
Patends Trademarks Manufacturing
know-how
Retailer and
service relationships
Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
The Group



Cost





At January 1, 2009 1,140,541 233,597 1,494,280 3,510 50,570 2,922,498
Currency realignment 639 (330) (3,097) (130) (2,918)
Additions 409,841 23,047 170 433,058
Written off in the year (3,206) (1,016) (4,222)
At December 31, 2009 1,551,021 253,108 1,490,337 3,510 50,440 3,348,416
Currency realignment 2,310 638 4,941 14 130 8,033
Additions 402,284 12,959 233 415,476
Written off in the year (340) (30) (370)
Acquisition of subsidiaries /
business (note 48)
17,110 37,270 2,095 56,475
At December 31, 2010 1,972,725 303,635 1,497,576 3,524 50,570 3,828,030
Amortisation





At January 1, 2009 330,390 101,969 37,552 3,510 2,529 475,950
Currency realignment 498 (55) (26) (10) 407
Provided for the year 230,398 27,981 8,342 2,525 269,246
Eliminated on write off (3,206) (1,016) (4,222)
At December 31, 2009 561,286 126,689 44,852 3,510 5,044 741,381
Currency realignment (693) 248 23 14 16 (392)
Provided for the year 289,886 29,679 8,556 2,525 330,646
Eliminated on write off (340) (30) (370)
At December 31, 2010 850,479 156,276 53,401 3,524 7,585 1,071,265
Carrying Amounts





At December 31, 2010 1,122,246 147,359 1,444,175 42,985 2,756,765
At December 31, 2009 989,735 126,419 1,445,485 45,396 2,607,035

Deferred
development
cost
Patends Trademarks Manufacturing
know-how
Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
The Group


Cost




At January 1, 2009 552,305 66,592 110,558 71,863 801,318
Additions 7,349 7,349
Transfer to subsidiaries (21,681) (110,558) (71,863) (204,102)
At December 31, 2009 552,305 52,260 604,565
Additions 651 651
Transfer to subsidiaries (651) (651)
At December 31, 2010 552,305 52,260 604,565
Amortisation




At January 1, 2009 127,142 52,107 179,249
Provided for the year 109,296 7,663 116,959
Transfer to subsidiaries (7,563) (7,563)
At December 31, 2009 236,438 52,207 288,645
Provided for the year 111,626 21 111,647
At December 31, 2010 348,064 52,228 400,292
Carrying Amounts









At December 31, 2010 204,241 32 204,273
At December 31, 2009 315,867 53 315,920

The retailer and service relationships were acquired through business combinations which related to the relationships with retailers and service centres.

Deferred development costs are internally generated.

Included in trademarks of the Group, HK$1,378,653,000 (2009: HK$1,375,109,000) are trademarks with an indefinite useful life, considered by the management of the Group as having an indefinite useful life because they are expected to contribute to net cash inflows indefinitely. The trademarks will not be amortised until their useful life is determined to be finite. Instead they will be tested for impairment annually or whenever there is an indication that they may be impaired. Particulars of the impairment testing are disclosed in Note 21.

The above intangible assets, other than trademarks with indefinite useful lives, are amortised on a straight-line basis, at the following rates per annum:

Deferred development costs 20% – 3313%
Patents 10% – 25%
Trademarks with finite useful lives 10% – 25%
Retailer and service relationships 5%