Financials - Notes to the Consolidated Financial Statements

11. Taxation (Charge) Creditopen

	2011	2010
	US$’000	US$’000
Current tax:
Hong Kong profits tax	(1,275)	(608)
Underprovision in prior years	(1,440)	(1,411)
	(2,715)	(2,019)
Overseas taxation	(14,876)	(18,840)
Overprovision in prior years	8,753	795
	(6,123)	(18,045)
Deferred tax (Note 47):
Current year	(404)	20,134
	(9,242)	70

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

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

The tax (charges) credits for the year are reconciled as follows:

	2011	2011	2010	2010
	US$’000	%	US$’000	%
Profit before taxation	160,174		95,691
Tax at Hong Kong Profits Tax rate	(26,429)	16.5%	(15,789)	16.5%
Effect of different tax rates of subsidiaries operating in other jurisdictions	36,301	(22.7%)	23,096	(24.1%)
Tax effect of expenses not deductible for tax purposes	(9,529)	6.0%	(4,499)	4.7%
Tax effect of income not taxable for tax purposes	9,876	(6.2%)	5,930	(6.2%)
Tax effect of deductible temporary differences not recognised	(27,685)	17.3%	(13,895)	14.5%
Recognition of temporary differences previously not recognised	983	(0.6%)	6,182	(6.5%)
Over (underprovision) in respect of prior years	7,313	(4.6%)	(616)	0.6%
Others	(72)	0.1%	(339)	0.4%
Tax (charge) credit for the year	(9,242)	5.8%	70	(0.1%)

Details of deferred tax are set out in Note 47.

12. Profit for the Yearopen

	2011	2010
	US$’000	US$’000
Profit for the year has been arrived at after charging (crediting):
Amortisation of intangible assets	49,084	42,391
Auditors’ remuneration	3,369	3,126
Amortisation of lease prepayments	765	733
Fair value loss (gain) on held-for-trading investments	2,444	(397)
Fair value loss (gain) on foreign currency forward contracts	3,314	(5,674)
Fair value loss on interest rate swap	2,425	2,781
Fair value loss (gain) on a warrant	330	(552)
Depreciation and amortisation on property, plant and equipment
Owned assets	66,977	67,269
Assets held under finance leases	2,920	3,101
Impairment loss on trade receivables	2,992	5,724
Impairment loss on available-for-sale investments	—	1,713
(Gain) loss on disposal of property, plant and equipment	(4,990)	678
Net exchange loss	672	2,956
Operating lease expenses recognised in respect of:
Premises	24,959	23,943
Motor vehicles	12,343	11,704
Plant and machinery	4,191	4,774
Other assets	3,931	4,137
Unconditional government grants	252	863
Write down of intangible assets	11	—
Write down of inventories	8,259	11,072
Staff costs
Directors’ remuneration
Fees	176	160
Other emoluments	18,786	10,993
	18,962	11,153
Other staff costs	398,330	385,763
Retirement benefits scheme contributions
(other than those included in the Directors’ emoluments)
Defined contribution plans	3,282	(1,221)
Defined benefit plans (Note 46)	6,958	8,335
	427,532	404,030

Staff costs disclosed above do not include an amount of US$67,434,000 (2010: US$57,162,000) relating to research and development activities.

13. Director’s Emolumentsopen

The emoluments paid or payable to each of the 11 (2010: 11) directors were as follows:

For the year ended December 31, 2011

		Other emoluments
	Fees	Basic salaries and allowances	Contributions to retirement benefits schemes	Bonus paid	Share-based payments	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
Mr Horst Julius Pudwill	—	1,557	2	2,051	141	3,751
Mr Joseph Galli Jr	—	1,200	2	7,900	42	9,144
Mr Kin Wah Chan	—	634	2	226	42	904
Mr Chi Chung Chan	—	633	2	235	42	912
Mr Stephan Horst Pudwill	—	296	2	88	42	428
Prof Roy Chi Ping Chung BBS JP	16	661	1	2,558^(Note)	25	3,261
Mr Vincent Ting Kau Cheung	32	22	—	—	46	100
Mr Joel Arthur Schleicher	32	38	—	—	46	116
Mr Christopher Patrick Langley OBE	32	25	—	—	46	103
Mr Manfred Kuhlmann	32	42	—	—	46	120
Mr Peter David Sullivan	32	45	—	—	46	123
Total	176	5,153	11	13,058	564	18,962

Note: Amount shown above included a retirement gratuity

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
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
Mr Horst Julius Pudwill	—	1,557	2	1,718	92	3,369
Mr Joseph Galli Jr	—	1,200	2	2,400	134	3,736
Mr Kin Wah Chan	—	617	2	173	134	926
Mr Chi Chung Chan	—	617	2	176	134	929
Mr Stephan Horst Pudwill	—	234	2	37	134	407
Prof Roy Chi Ping Chung BBS JP	—	844	2	231	80	1,157
Mr Vincent Ting Kau Cheung	32	24	—	—	54	110
Mr Joel Arthur Schleicher	32	48	—	—	54	134
Mr Christopher Patrick Langley OBE	32	45	—	—	54	131
Mr Manfred Kuhlmann	32	45	—	—	54	131
Mr Peter David Sullivan	32	37	—	—	54	123
Total	160	5,268	12	4,735	978	11,153

The bonuses paid were based on performance of the Group.

14. Employees’ Emolumentsopen

Of the five individuals with the highest emoluments in the Group, three (2010: five) were directors of the Company whose emoluments are included in Note 13 above. The emoluments of the remaining two (2010: zero) individuals for the year ended December 31, 2011 were as follows:

	2011	2010
	US$’000	US$’000
Basic salaries and allowances	982	—
Contributions to retirement benefits schemes	64	—
Bonus paid	909	—
Other benefit	842	—
Share-based payments	57	—
	2,854	—

The emoluments of these two (2010: zero) highest paid individuals for the year ended December 31, 2011 were within the following band:

	No. of persons
US$	2011	2010
1,000,001 to 1,500,000	1	—
1,500,001 to 2,000,000	1	—

During each of the two years ended December 31, 2011 and 2010, 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

	2011	2010
	US$’000	US$’000
Dividends recognised as distributions during the year:
Final dividend paid:
2010: HK6.25 cents (approximately US0.80 cent)
(2009: HK4.50 cents (approximately US0.58 cent)) per share	12,907	9,266
Interim dividend paid:
2011: HK5.00 cents (approximately US0.64 cent)
(2010: HK3.75 cents (approximately US0.48 cent)) per share	10,347	7,722
	23,254	16,988

The final dividend of HK7.75 cents (approximately US1.00 cent) per share in respect of the year ended December 31, 2011 (2010: final dividend of HK6.25 cents (approximately US0.80 cent) per share in respect of the year ended December 31, 2010) 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:

	2011	2010
	US$’000	US$’000
Earnings for the purpose of basic and diluted earnings per share:
Profit for the year attributable to Owners of the Company	150,826	94,890
Effect of dilutive potential ordinary shares:
Effective interest on convertible bonds	18,040	—
Earnings for the purpose of diluted earnings per share	168,866	94,890
Weighted average number of ordinary shares for the purpose of basic earnings per share	1,605,594,626	1,601,053,496
Effect of dilutive potential ordinary shares:
Share options	3,391,650	963,952
Convertible bonds	223,557,000	—
Weighted average number of ordinary shares for
the purpose of diluted earnings per share	1,832,543,276	1,602,017,448

The computation of diluted earnings per share for the year ended December 31, 2010 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 certain of the Company’s outstanding share options when the exercise price of those options was higher than the average market price for shares for both 2011 and 2010.

17. Property, Plant and Equipmentopen

	Freehold land and buildings outside Hong Kong (note)	Leasehold improvements	Office equipment, furniture and fixtures	Plant and machinery	Motor vehicles	Moulds and tooling	Vessels	Construction in progress	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
The Group
Cost
At January 1, 2010	152,617	46,686	137,674	246,455	4,476	254,546	1,078	10,355	853,887
Currency realignment	(2,267)	659	(715)	(2,820)	1	(4,752)	—	173	(9,721)
Additions	19,439	1,082	5,350	12,887	643	13,110	2,289	38,168	92,968
Acquisition of subsidiaries / business	—	—	—	167	5	—	—	—	172
Disposals	(16)	(4,421)	(5,758)	(24,251)	(417)	(12,234)	(1,078)	(2)	(48,177)
Reclassification	1,247	2,455	2,663	583	26	3,297	—	(10,271)	—
At December 31, 2010	171,020	46,461	139,214	233,021	4,734	253,967	2,289	38,423	889,129
Currency realignment	(511)	907	16	1,325	(61)	396	9	362	2,443
Additions	—	1,630	12,279	15,709	709	16,879	—	48,235	95,441
Disposals	(28,320)	(1,394)	(10,335)	(58,088)	(797)	(70,078)	—	(508)	(169,520)
Reclassification	473	4,362	3,259	4,483	89	12,272	—	(24,938)	—
At December 31, 2011	142,662	51,966	144,433	196,450	4,674	213,436	2,298	61,574	817,493
Depreciation
At January 1, 2010	52,559	13,887	104,924	173,377	3,149	186,895	1,073	—	535,864
Currency realignment	(1,513)	64	(907)	(3,466)	(22)	(4,611)	—	—	(10,455)
Provided for the year	5,845	3,918	12,191	16,824	648	30,677	267	—	70,370
Eliminated on disposals	(16)	(3,316)	(5,662)	(23,552)	(334)	(12,133)	(1,074)	—	(46,087)
At December 31, 2010	56,875	14,553	110,546	163,183	3,441	200,828	266	—	549,692
Currency realignment	(351)	132	(86)	(90)	(12)	(315)	1	—	(721)
Provided for the year	5,426	5,827	12,287	15,033	654	30,211	459	—	69,897
Eliminated on disposals	(22,174)	(1,351)	(9,157)	(57,999)	(708)	(70,068)	—	—	(161,457)
At December 31, 2011	39,776	19,161	113,590	120,127	3,375	160,656	726	—	457,411
Carrying amounts
At December 31, 2011	102,886	32,805	30,843	76,323	1,299	52,780	1,572	61,574	360,082
At December 31, 2010	114,145	31,908	28,668	69,838	1,293	53,139	2,023	38,423	339,437

Note: Buildings with carrying amount of US$22,460,000 are erected on leasehold land that is presented as lease prepayments on the consolidated statement of financial position.

	Buildings outside Hong Kong	Leasehold improvements	Office equipment, furniture and fixtures	Plant and machinery	Motor vehicles	Moulds and tooling	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
The Company Cost
At January 1, 2010	3,998	3,136	11,247	6,047	690	10,095	35,213
Additions	—	24	1,194	20	13	613	1,864
Disposals	—	(7)	(12)	(40)	(56)	(64)	(179)
At December 31, 2010	3,998	3,153	12,429	6,027	647	10,644	36,898
Additions	—	—	533	—	—	—	533
Disposals	—	(245)	(342)	(1,512)	(83)	(1,050)	(3,232)
Transfer (to) from subsidiaries	—	—	(79)	(1,161)	83	(4,343)	(5,500)
At December 31, 2011	3,998	2,908	12,541	3,354	647	5,251	28,699
Depreciation
At January 1, 2010	1,799	2,841	9,543	4,004	476	7,115	25,778
Provided for the year	160	239	946	885	138	1,528	3,896
Eliminated on disposals	—	(6)	(12)	(40)	(56)	(64)	(178)
At December 31, 2010	1,959	3,074	10,477	4,849	558	8,579	29,496
Provided for the year	152	33	946	490	89	—	1,710
Eliminated on disposals	—	(239)	(342)	(1,512)	(83)	(1,050)	(3,226)
Transfer (to) from subsidiaries	—	—	(37)	(823)	83	(2,278)	(3,055)
At December 31, 2011	2,111	2,868	11,044	3,004	647	5,251	24,925
Carrying amounts
At December 31, 2011	1,887	40	1,497	350	—	—	3,774
At December 31, 2010	2,039	79	1,952	1,178	89	2,065	7,402

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	2¹⁄₅% - 6²⁄₃%
Leasehold improvements	6²⁄₃% - 25%
Office equipment, furniture and fixtures	10% - 33¹⁄₃%
Plant and machinery	9% - 33%
Motor vehicles	10% - 33%
Moulds and tooling	18% - 33¹⁄₃%
Vessels	20%

The net book values of properties shown above comprise:

	The Group		The Company
	2011	2010	2011	2010
	US$’000	US$’000	US$’000	US$’000
Land and buildings are situated outside Hong Kong and are analysed as follows:
Freehold	80,426	90,361	—	—
Medium-term lease	22,460	23,784	1,887	2,039
	102,886	114,145	1,887	2,039

The net book values of the Group’s and the Company’s property, plant and equipment include amounts of approximately US$5,922,000 and nil respectively (2010: US$8,061,000 and US$37,000 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 US$233,721,000 and US$19,997,000 (2010: US$307,911,000 and US$19,096,000) respectively in respect of fully depreciated property, plant and equipment that is still in use.

18. Lease Prepaymentsopen

	The Group
	US$’000
Cost
At January 1, 2010	36,394
Currency realignment	1,323
Disposals	(396)
At December 31, 2010	37,321
Currency realignment	1,827
At December 31, 2011	39,148
Amortisation
At January 1, 2010	1,063
Currency realignment	50
Provided for the year	733
At December 31, 2010	1,846
Currency realignment	105
Provided for the year	765
At December 31, 2011	2,716
Carrying amounts
At December 31, 2011	36,432
At December 31, 2010	35,475

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

19. Goodwillopen

	The Group
	US$’000
At January 1, 2010	521,088
Currency realignment	(402)
Arising on acquisition of subsidiaries/business	9,198
At December 31, 2010	529,884
Currency realignment	972
At December 31, 2011	530,856

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

20. Intangible Assets open

	Deferred development cost	Patents	Trademarks	Manufacturing know-how	Retailer and service relationships	Total
	US$’000	US$’000	US$’000	US$’000	US$’000	US$’000
The Group
Cost
At January 1, 2010	198,848	32,450	191,069	450	6,467	429,284
Currency realignment	296	82	633	2	17	1,030
Additions	51,575	1,661	30	—	—	53,266
Written off in the year	—	(43)	(4)	—	—	(47)
Acquisition of subsidiaries/business	2,194	4,777	269	—	—	7,240
At December 31, 2010	252,913	38,927	191,997	452	6,484	490,773
Currency realignment	1,502	111	373	1	16	2,003
Additions	61,784	4,344	—	—	—	66,128
Written off in the year	(463)	(107)	—	—	—	(570)
At December 31, 2011	315,736	43,275	192,370	453	6,500	558,334
Amortisation
At January 1, 2010	71,960	16,242	5,750	450	647	95,049
Currency realignment	(88)	31	3	2	1	(51)
Provided for the year	37,164	3,805	1,097	—	325	42,391
Eliminated on write off	—	(43)	(4)	—	—	(47)
At December 31, 2010	109,036	20,035	6,846	452	973	137,342
Currency realignment	1,098	64	27	1	2	1,192
Provided for the year	43,722	3,913	1,124	—	325	49,084
Eliminated on write off	(452)	(107)	—	—	—	(559)
At December 31, 2011	153,404	23,905	7,997	453	1,300	187,059
Carrying Amounts
At December 31, 2011	162,332	19,370	184,373	—	5,200	371,275
At December 31, 2010	143,877	18,892	185,151	—	5,511	353,431

	Deferred development costs	Patents	Total
	US$’000	US$’000	US$’000
The Company
Cost
At January 1, 2010	70,808	6,700	77,508
Additions	83	—	83
Transfer to subsidiaries	(83)	—	(83)
At December 31, 2010 and December 31, 2011	70,808	6,700	77,508
Amortisation
At January 1, 2010	30,313	6,693	37,006
Provided for the year	14,311	3	14,314
At December 31, 2010	44,624	6,696	51,320
Provided for the year	11,476	2	11,478
At December 31, 2011	56,100	6,698	62,798
Carrying Amounts
At December 31, 2011	14,708	2	14,710
At December 31, 2010	26,184	4	26,188

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, US$177,555,000 (2010: US$177,197,000) 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	6²⁄₃% - 25%
Retailer and service relationships	5%