Financials - Notes to the Consolidated Financial Statements - 11-20

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	6²⁄₃% – 25%
Office equipment, furniture and fixtures	10% – 33¹⁄₃%
Plant and machinery	10% – 25%
Motor vehicles	18% – 25%
Moulds and tooling	20% – 33¹⁄₃%
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% – 33¹⁄₃%
Patents	10% – 25%
Trademarks with finite useful lives	10% – 25%
Retailer and service relationships	5%