For the year ended December 31, 2010

51. Contingent Liabilitiesopen
The Group The Company
2010 2009 2010 2009
HK$’000 HK$’000 HK$’000 HK$’000
Guarantees given to banks in respect of credit
facilities utilised by associates
73,154 61,137 73,154 61,137

In addition, the Company has given guarantees to banks and independent third parties in respect of general facilities granted to its subsidiaries. The extent of such facilities utilised by the subsidiaries as at December 31, 2010 amounted to HK$3,407,199,000 (2009: HK$4,741,583,000).

52. Share Optionsopen
Scheme adopted on March 28, 2002 (“Scheme C”) and terminated on March 27, 2007
Scheme C was adopted pursuant to a resolution passed on March 28, 2002 for recognition of the contribution to the development and growth of the Group by the eligible persons. This scheme expired on March 27, 2007. Under Scheme C, the Board of Directors of the Company may grant share options to the following eligible persons (and their wholly owned companies) of the Company, its subsidiaries and any companies in which the Group holds any equity interest, to subscribe for shares in the Company:

  1. employees; or
  2. Non-executive Directors (including Independent Non-executive Directors); or
  3. suppliers or customers; or
  4. any person or entity that provides research, development or other technological support; or
  5. shareholders.

Share options granted must be taken up within 21 days of the date of grant, upon payment of HK$1 in cash by way of consideration for the grant thereof. Share options may be exercised at any time, subject to vesting conditions from the date of grant to the fifth anniversary thereof. The subscription price is set at the highest of: the closing price of the shares on the date of offer of the share option; or the average closing price of shares as stated in the daily quotations sheets issued by the Stock Exchange for the five trading days immediately preceding the date of offer; or the nominal value of shares on the date of offer.

The maximum number of shares in respect of which share options may be granted under Scheme C is not permitted to exceed
30% of the issued share capital of the Company from time to time or 10% of shares in issue as at the adoption date of Scheme C. No person shall be granted an option which exceeds 1% of the shares in issue as at the date of offer in any 12-month period up to the date thereof.

Scheme adopted on May 29, 2007 (“Scheme D”)
Following the termination of Scheme C, a new share option scheme was adopted pursuant to a resolution passed on May 29, 2007 for recognition of the contribution to the development and growth of the Group by the eligible persons. This scheme will expire on May 28, 2017. Under Scheme D, the Board of Directors of the Company may grant share options to the following eligible persons (and their wholly owned companies) of the Company, its subsidiaries and any companies in which the Group holds any equity interest, to subscribe for shares in the Company:

  1. employees; or
  2. Non-executive Directors (including Independent Non-executive Directors); or
  3. secondees; or
  4. business partners, agents, consultants; or
  5. suppliers or customers; or
  6. any person or entity that provides research, development or other technological support; or
  7. shareholders.

Share options granted must be taken up within 21 days of the date of grant, upon payment of HK$1 in cash by way of consideration for the grant thereof. Share options may be exercised at any time, subject to vesting conditions from the date of grant to the tenth anniversary thereof. The subscription price is set at the highest of: the closing price of the shares on the date of offer of the share option; or the average closing price of shares as stated in the daily quotation sheets issued by the Stock Exchange for the five trading days immediately preceding the date of offer; or the nominal value of shares on the date of offer.

The maximum number of shares in respect of which share options may be granted under Scheme D is not permitted to exceed
30% of the issued share capital of the Company from time to time or 10% of shares in issue as at the adoption date of Scheme D. No person shall be granted an option which exceeds 1% of the shares in issue as at the date of offer in any 12-month period up to the date thereof.

The following table discloses movements in the Company’s share options during the year:

Share option holders Date of share options granted Share option scheme category Outstanding at beginning of the year Granted during the year Exercised during the year Lapsed during the year Outstanding at end of the year Subscription price Exercise period
HK$
Directors
Mr Horst Julius Pudwill 16.11.2009 D 600,000 600,000 6.770 16.11.2009 – 15.11.2019
26.11.2010 D 600,000 600,000 8.310 26.11.2010 – 25.11.2020
Prof Roy Chi Ping Chung JP 16.11.2009 D 600,000 600,000 6.770 16.11.2009 – 15.11.2019
Mr Joseph Galli Jr 1.11.2006 C 1,500,000 1,500,000 11.252 1.11.2006 – 31.10.2011
6.3.2007 C 1,000,000 1,000,000 10.572 6.3.2007 – 5.3.2012
16.11.2009 D 1,000,000 1,000,000 6.770 16.11.2009 – 15.11.2019
Mr Kin Wah Chan 16.11.2009 D 1,000,000 1,000,000 6.770 16.11.2009 – 15.11.2019
Mr Chi Chung Chan 16.11.2009 D 1,000,000 1,000,000 6.770 16.11.2009 – 15.11.2019
Mr Stephan Horst Pudwill 16.11.2009 D 1,000,000 1,000,000 6.770 16.11.2009 – 15.11.2019
Mr Vincent Ting Kau Cheung 16.11.2009 D 400,000 400,000 6.770 16.11.2009 – 15.11.2019
Mr Joel Arthur Schleicher 16.11.2009 D 400,000 400,000 6.770 16.11.2009 – 15.11.2019
Mr Christopher Patrick Langley OBE 16.11.2009 D 400,000 400,000 6.770 16.11.2009 – 15.11.2019
Mr Manfred Kuhlmann 7.2.2005 C 100,000 (100,000) 17.750 7.2.2005 – 6.2.2010
16.11.2009 D 400,000 400,000 6.770 16.11.2009 – 15.11.2019
Mr Peter David Sullivan 16.11.2009 D 400,000 400,000 6.770 16.11.2009 – 15.11.2019
Total for directors 9,800,000 600,000 (100,000) 10,300,000
Employees 7.4.2005 C 200,000 (200,000) 17.210 7.4.2005 – 6.4.2010
17.6.2005 C 250,000 (250,000) 17.950 17.6.2005 – 16.6.2010
1.1.2006 C 50,000 50,000 18.690 1.1.2006 – 31.12.2010
1.3.2006 C 2,315,000 (431,000) 1,884,000 13.970 1.3.2006 – 28.2.2011
15.6.2006 C 200,000 200,000 10.270 15.6.2006 – 14.6.2011
17.6.2006 C 350,000 350,000 10.550 17.6.2006 – 16.6.2011
4.10.2006 C 75,000 75,000 11.628 4.10.2006 – 3.10.2011
8.11.2006 C 30,000 30,000 12.200 8.11.2006 – 7.11.2011
4.12.2006 C 150,000 150,000 10.952 4.12.2006 – 3.12.2011
13.12.2006 C 20,000 20,000 10.560 13.12.2006 – 12.12.2011
1.1.2007 C 150,000 150,000 10.080 1.1.2007 – 31.12.2011
6.3.2007 C 4,835,000 (510,000) 4,325,000 10.572 6.3.2007 – 5.3.2012
20.7.2007 D 200,000 200,000 10.060 20.7.2007 – 19.7.2017
24.8.2007 D 2,310,000 (250,000) 2,060,000 8.390 24.8.2007 – 23.8.2017
16.10.2007 D 75,000 75,000 8.810 16.10.2007 – 15.10.2017
7.11.2007 D 40,000 40,000 8.088 7.11.2007 – 6.11.2017
23.11.2007 D 500,000 500,000 7.578 23.11.2007 – 22.11.2017
14.1.2008 D 1,320,000 (300,000) 1,020,000 7.566 14.1.2008 – 13.1.2018
17.4.2008 D 1,925,000 (100,000) 1,825,000 7.780 17.4.2008 – 16.4.2018
14.5.2008 D 240,000 240,000 7.500 14.5.2008 – 13.5.2018
30.5.2008 D 640,000 640,000 7.546 30.5.2008 – 29.5.2018
1.9.2008 D 150,000 150,000 7.450 1.9.2008 – 31.8.2018
2.9.2008 D 300,000 (300,000) 7.388 2.9.2008 – 1.9.2018
11.9.2008 D 50,000 50,000 7.430 11.9.2008 – 10.9.2018
2.10.2008 D 75,000 75,000 7.068 2.10.2008 – 1.10.2018
1.12.2008 D 100,000 100,000 2.340 1.12.2008 – 30.11.2018
16.11.2009 D 7,570,000 (145,000) (90,000) 7,335,000 6.770 16.11.2009 – 15.11.2019
7.12.2009 D 100,000 100,000 6.790 7.12.2009 – 6.12.2019
21.12.2009 D 300,000 (25,000) (50,000) 225,000 6.350 21.12.2009 – 20.12.2019
28.12.2009 D 30,000 30,000 6.390 28.12.2009 – 27.12.2019
13.9.2010 D 1,050,000 1,050,000 7.390 13.9.2010 – 12.9.2020
Total for employees 24,550,000 1,050,000 (470,000) (2,181,000) 22,949,000
Total for all categories 34,350,000 1,650,000 (470,000) (2,281,000) 33,249,000

The following table discloses details of the Company’s share options held by employees (including directors) and movements in such holdings during the year:

  Outstanding at January 1, Granted during Exercised during Lapsed or cancelled during Outstanding at December 31,
Option type 2010 the year the year the year 2010
Scheme C 11,225,000 (1,491,000) 9,734,000
Scheme D 23,125,000 1,650,000 (470,000) (790,000) 23,515,000
34,350,000 1,650,000 (470,000) (2,281,000) 33,249,000
Exercisable at the end of the year 23,784,000
  Outstanding at January 1, Granted during Exercised during Lapsed or cancelled during Outstanding at December 31,
Option type 2009 the year the year the year 2009
Scheme C 21,615,000 (10,390,000) 11,225,000
Scheme D 9,000,000 15,200,000 (1,075,000) 23,125,000
30,615,000 15,200,000 (11,465,000) 34,350,000
Exercisable at the end of the year 16,508,333

Details of the share options held by the directors included in the above table are as follows:

Outstanding at Granted during Exercised during Lapsed during Outstanding at
January 1 the year the year the year December 31
2,010 9,800,000 600,000 (100,000) 10,300,000
Outstanding at Granted during Exercised during Lapsed during Outstanding at
January 1 the year the year the year December 31
2,009 6,200,000 7,200,000 (3,600,000) 9,800,000

The following significant assumptions were used to derive the fair values using the Black-Scholes option pricing model:

  Exercise price Expected life of share options Expected volatility based on historical volatility of share Hong Kong Exchange Fund Expected annual dividend
Date of grant HK$ options prices Notes rate yield
For the year ended December 31, 2010
13.9.2010 7.390 3 years 41% 0.578% 1.5%
26.11.2010 8.310 3 years 41% 0.755% 1.5%
For the year ended December 31, 2009
16.11.2009 6.770 3 years 41% 0.793% 1.5%
7.12.2009 6.790 3 years 41% 0.817% 1.5%
21.12.2009 6.350 3 years 41% 0.947% 1.5%
28.12.2009 6.390 3 years 41% 1.101% 1.5%

The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the volatility of the share price. Because changes in subjective input assumptions can materially affect the fair value estimate, in the directors’ opinion, the existing model does not necessarily provide a reliable single measure of the fair value of the share options.

The weighted average closing price of the Company’s shares on various dates of grant was HK$7.49 (2009: HK$6.84) per option.

Expected volatility was determined by using the historical volatility of the Company’s share price over the previous three years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations.

The Group recognised a total expense of HK$17,190,000 for the year ended December 31, 2010 (2009: HK$10,800,000) in relation to share options granted by the Company.

The fair values of the share options granted in the current year measured as at various dates of grant ranged from HK$1.89 to HK$2.14 (2009: ranged from HK$1.65 to HK$1.75) per option. The weighted average fair value of the share options granted in the current year was HK$1.98 (2009: HK$1.75) per option.

The share options are vested in whole or in parts over 3 years from the date of grant.

53. Capital Commitmentsopen
The Group The Company
2010 2009 2010 2009
HK$’000 HK$’000 HK$’000 HK$’000
Capital expenditure in respect of the purchase of
property, plant and equipment and a licence:
Contracted for but not provided
101,277 68,744 11,774 7,092
Authorised but not contracted for
6,565 13,773
54. Event After The Reporting Periodopen

On February 25, 2011, the Company has entered into an up to US$160,000,000 dual-tranche term loan. Tranche A, represents 62.5% of the loan with a final maturity in 2015. Tranche B, representing the balance of 37.5%, with a final maturity in 2013. Both tranches will be used to refinance existing borrowings.

55. Related Party Transactionsopen

During the year, the Group entered into the following transactions with associates:

2010 2009
HK$’000 HK$’000
Management fee expenses 70
Sales income 155 248
Equipment charge income 1,034 1,917
Purchases 170,074 61,616

The remuneration of directors and other members of key management during the year was as follows:

2010 2009
HK$’000 HK$’000
Short-term benefits 158,218 141,025
Post-employment benefits 937 1,142
Share-based payments 11,797 1,374
170,952 143,541

Details of the balances with related parties are set out in the consolidated statement of financial position Note 22, 23, 28, 29 and 36.

56. Particulars of Principal Subsidiariesopen

Particulars of the principal subsidiaries of the Company as at December 31, 2010 and December 31, 2009 are as follows:

Name of subsidiary Place of incorporation/ operation Issued and fully paid share capital Proportion of nominal value of issued capital held by the Company Principal activities
Directly Indirectly
% %
A&M Industries S.à.r.l. Luxembourg EUR 412,600 100 Investment holding
AC (Macao Commercial Offshore) Limited Macau MOP 780,000 100 Trading of power equipment and floor care products
AEG Electric Tools GmbH Germany EUR 20,452,500 100 Trading and manufacture of power equipment products
Baja, Inc. US US$17.36 100 Trading of outdoor power equipment products
Digiwireless Limited Hong Kong HK$2 100 Investment holding
DreBo Werkzeugfabrik GmbH * Germany EUR 1,000,000 100 Trading and manufacture of power equipment products
Homelite Asia Limited British Virgin Islands (“BVI”) US$1 100 Trading of outdoor power equipment products
Homelite Consumer Products, Inc. US US$10 100 Trading of outdoor power equipment products
Hoover Inc. US US$1 100 Trading and manufacture of floor care products
MacEwen Property Co., Inc. US US$100 100 Property holding
Marco Polo Industries &
Merchandising Company Limited
Hong Kong HK$100,000 100 Trading of household electronic and electrical products
Milwaukee Electric Tool Corporation US US$1,000 100 Trading and manufacture of power equipment products
One World Technologies, Inc. US US$10 100 Investment holding
OWT France S.A.S. France EUR 1,750,000 100 Investment holding
OWT Industries, Inc. US US$10 100 Manufacture of electric components and power equipment products
Royal Appliance International GmbH Germany EUR 2,050,000 100 Trading of household electronic and electrical products
Royal Appliance Mfg. Co. US US$1 100 Trading and manufacture of floor care products
Sang Tech Industries Limited Hong Kong HK$1,000,000 100 Manufacture of plastic parts
Santo Industries Limited Hong Kong HK$2,000,000 100 Manufacture of metallic parts
Solar Wide Industrial Limited Hong Kong HK$2,000,000 75.725 Manufacture of electronic products
Techtronic Appliances International Ltd. BVI US$1 100 Investment holding
Techtronic Floor Care Technology Limited BVI US$1 100 Investment and intellectual properties holding
Techtronic Industries (Dongguan) Co. Ltd. PRC US$47,000,000 100 Manufacture of power equipment, floor care and outdoor power equipment products
Techtronic Industries (Taiwan) Co. Ltd. Taiwan NT$5,000,000 100 Provision of inspection services
Techtronic Industries (UK) Ltd (formerly known
as Ryobi Technologies (UK) Ltd)
United Kingdom GBP 4,000,000 100 Trading of electric power equipment products
Techtronic Industries Australia Pty. Limited Australia AU$ 19,400,000 100 Trading of electric power equipment products
Techtronic Industries Central Europe GmbH* Germany EUR 25,600 100 Trading of electric power equipment products
Techtronic Industries ELC GmbH* Germany EUR 25,000 100 Trading of electric power equipment products and outdoor power equipment products
Techtronic Industries France SAS France EUR 14,919,832 100 Trading of electric power equipment products
Techtronic Industries Germany Holding GmbH Germany EUR 25,000 100 Investment holding
Techtronic Industries Mexico, S.A. de C.V. Mexico MXN 50,000 (Serie I)
MXN 722,095 (Serie II)
100 Trading of power equipment, floor care and outdoor power equipment products
Techtronic Industries N.Z. Limited New Zealand NZ$ 1,165,500 100 Trading of electric power equipment products
Techtronic Industries North America, Inc. US US$10 98.4 1.6 Investment holding
Techtronic Outdoor Products Technology Limited Bermuda US$12,000 100 Investment and intellectual properties holding
Techtronic Power Tools Technology Limited BVI US$1 100 Investment and intellectual properties holding
Techtronic Trading Limited (formerly known
as Homelite Far East Company Limited)
Hong Kong HK$2 100 Trading of outdoor power equipment products
TTI Investments (Dongguan) Company Limited Hong Kong HK$2 100 Investment holding
Vax Appliances (Australia) Pty. Ltd. Australia AU$ 3,200,008 (ordinary shares) AU$13,900,000 (Class A Redeemable Preference Shares) 100 Investment holding
Vax Limited United Kingdom GBP 30,000 (Ordinary A shares)
GBP 2,500
(Ordinary B shares)
100 Assembly, procurement and distribution of floor care products
* Exempt from the obligation to publish local financial statements.

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results or assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

None of the subsidiaries had any debt securities outstanding at the end of the year, or at any time during the year.

57. Particulars of Associatesopen

Particulars of the associates as at December 31, 2010 and December 31, 2009 are as follows:

Name of associate Place of incorporation/operation Issued and fully paid share capital Proportion of nominal value of issued capital held by the Company Directly % Principal activities
Gimelli International (Holdings) Limited The Cayman Islands US$6,250 40.8 Investment holding
Precision Technology Industries Limited Bermuda US$12,000,000 25.0 Manufacture of power equipment products
58. Presentation and Functional Currenciesopen

The functional currency of the Company is United States dollars. The presentation currency of the Group is Hong Kong dollars as the Company is a public limited company incorporated in Hong Kong. The financial statements include the consolidated statement
of comprehensive income, consolidated statement of financial position and consolidated statement of cash flows which are presented in the functional currency of the Company for reference only which have been arrived at based on the fixed exchange
rate of HK$7.8 to US$1.0.