For the year ended December 31, 2010

31. Held-for-Trading Investmentsopen

The Group’s and the Company’s held-for-trading investments at December 31, 2010 and 2009 are carried at fair value using the market bid prices on the closing date method.

Held-for-trading investments include:


The Group The Company

2010
2009
2010
2009

HK$’000
HK$’000
HK$’000
HK$’000
Equity securities:
 

 

- Unlisted fund with quoted market price
279
- Listed in US
83,427
75,677
83,427
75,677

83,706
75,677
83,427
75,677

The Group and the Company hold more than 20 per cent of the voting power in the equity securities of a company listed in the US but it has no significant influence over the investee. In making their assessment, the directors considered the definition of significant influence in HKAS 28 Investment in Associates and, in particular, whether the Group has the power to participate in the financial and operating policy decisions of the investee. Considering that the Group has no representative on the investee’s board of directors and no right to appoint or remove a director to the board of directors, no exchange of management personnel with the investee nor any participation in the investee’s policy-making process, the directors of the Company concluded that the Group and the Company have no significant influence over the investee.

32. Bank Balances, Deposits and Cash/Bank Overdraftsopen

Bank balances carry interest at market rates which range from 0.11% to 0.23% (2009: 0.11% to 0.44%). Bank overdrafts carry interest at market rates which range from 3.25% to 5.00% (2009: 3.25% to 5.00%).

33. Trade and other Payablesopen

The aged analysis of trade payables presented based on the invoice date at the end of the reporting period is as follows:


The Group
The Company

2010 2009 2010 2009

HK$’000 HK$’000 HK$’000 HK$’000
0 to 60 days 1,692,314 1,769,545 160,527 123,334
61 to 120 days 407,937 554,294 107,356 86,065
121 days or above 59,707 148,124 25,249 34,758
Total trade payables 2,159,958 2,471,963 293,132 244,157
Other payables 1,609,509 1,384,872 73,603 105,982

3,769,467 3,856,835 366,735 350,139

The credit period on the purchase of goods is ranging from 30 days to 120 days (2009: 30 days to 120 days). The Group has financial risk management policies in place to ensure that all payables are settled within the credit time frame.

34. Bills Payableopen

All the Group’s and Company’s bills payable at December 31, 2010 and 2009 are due within 120 days.

35. Warranty Provisionopen

The Group
The Company

2010
2010

HK$’000
HK$’000
At January 1, 2010
385,903
86,923
Currency realignment
(1,821)
Additional provision in the year
787,787
25,315
Utilisation of provision
(799,796)
(93,177)
At December 31, 2010
372,073
19,061

The warranty provision represents management’s best estimate of the Group’s outstanding liabilities on products sold, based on prior experience and industry averages for defective products. It is expected that the majority of this expenditure will be incurred in the next financial year.

36. Trade Payable to an Associateopen

The trade payable to an associate is aged of less than 120 days and payable within one year.

37. Restructuring Provisionopen

2010

HK$’000
At January 1, 2010
9,020
Currency realignment
(6,705)
Charge for the year
207,890
Utilisation of provision
(30,955)
At December 31, 2010
179,250

The provision relates to the restructuring of the Group’s manufacturing facilities in Germany. The balance of the provision is expected to be utilised in 2011 and there are no significant uncertainties regarding the amounts or timing of these cash flows.

The management of the Group expects that after the completion of the restructuring plan, there will be substantial savings in 2011 and afterwards.

38. Obligations under Finance Leasesopen

It is the Group’s policy to lease certain of its plant and machinery, fixtures and equipment and motor vehicles under finance leases, with lease terms ranging from 3 years to 20 years. Interest rates underlying all obligations under finance leases are fixed at the respective contract dates. No arrangements have been entered into for contingent rental payments.

The maturity of obligations under finance leases is as follows:

The Group
The Company
Minimum lease
payments
Present value
of minimum
lease payments
Minimum lease
payments
Present value
of minimum
lease payments
2010
HK$’000
2009
HK$’000
2010
HK$’000
2009
HK$’000
2010
HK$’000
2009
HK$’000
2010
HK$’000
2009
HK$’000
Amounts payable under finance leases:                
Within one year
27,442 28,512 23,110 21,119 314 579 308 548
In more than one year
       
but not more than two years
15,143 27,885 12,210 20,927 431 424
In more than two years
       
but not more than three years
8,742 24,120 6,436 18,017
In more than three years
       
but not more than four years
7,279 7,260 5,454 5,021
In more than four years
       
but not more than five years
7,279 7,260 5,909 5,440
More than five years
17,992 25,206 14,564 20,421
83,877 120,243 67,683 90,945 314 1,010 308 972
Less: future finance charges (16,194) (29,298) (6) (38)
Present value of lease obligations 67,683 90,945 67,683 90,945 308 972 308 972
Less: Amount due within one year        
shown under current liabilities
  (23,110) (21,119)   (308) -548
Amount due after one year   44,573 69,826   424

The Group’s obligations under finance leases are secured by charges over the leased assets.

39. Discounted Bills with Recourseopen

Bills discounted with a bank at an effective interest rate of 1.78% per annum (2009: 2.40% per annum) have a maturity profile of less than 120 days.

40. Capital Risk Managementopen

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximizing the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior years.

The capital structure of the Group consists of net debt (which includes borrowings, discounted bills with recourse, convertible bonds and obligations under finance leases), net of cash and cash equivalents and equity attributable to owners of the Company, comprising issued share capital, reserves and retained profits.

Gearing ratio

The Group’s management reviews the capital structure on a semi-annual basis. As part of this review, the management considers the cost of capital and the risks associated with each class of capital. The Group has a target gearing ratio of 35% determined as the proportion of net debt to equity. Based on the management’s recommendations, the Group expects to decrease its gearing ratio comparable to that of the 2009 level within the next 18 months through the continued generation of cash inflows by growth of the business.

The gearing ratio at the year end was as follows:


2010 2009

HK$’000 HK$’000
Debt (i) 10,336,124 8,874,807
Cash and cash equivalents (4,000,566) (3,322,753)
Net debt 6,335,558 5,552,054
Equity (ii) 8,695,105 8,081,962
Net debt to equity ratio 72.86% 68.70%
(i)
Debt comprises bank overdrafts, obligations under finance leases, discounted bills with recourse, unsecured borrowings and convertible bonds but excludes bank advance from factored trade receivables as detailed in Notes 32, 38, 39, 42 and 43 respectively.

(ii)
Equity includes all capital and reserves attributable to the owners of the Company.

In addition, based on management recommendations, the Group will balance its overall capital structure through the payment of dividends, new share issues and share repurchases as well as the issue of new debt or the redemption of existing debt.