31. Held-for-Trading Investmentsopen

The Group’s and the Company’s held-for-trading investments at December 31, 2011 and 2010 are carried at fair value using the market bid prices on the closing date method.

Held for trading investments include:


The Group The Company

2011
2010
2011
2010

US$’000
US$’000
US$’000
US$’000
Equity securities:
 

 

- Unlisted fund with quoted market price
36
- Listed in US
8,288
10,696
8,288
10,696

8,288
10,732
8,288
10,696

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 0.07% to 0.18% (2010: 0.11% to 0.23%). Bank overdrafts carry interest at market rates which range from 3.25% to 5.00% (2010: 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

2011 2010 2011 2010

US$’000 US$’000 US$’000 US$’000
0 to 60 days 259,435 216,963 20,580
61 to 120 days 93,376 52,300 13,764
121 days or above 7,048 7,655 1,027 3,237
Total trade payables 359,859 276,918 1,027 37,581
Other payables 259,004 206,347 13,874 9,436

618,863 483,265 14,901 47,017

The credit period on the purchase of goods ranges from 30 days to 120 days (2010: 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, 2011 and 2010 are due within 120 days.

35. Warranty Provisionopen

The Group
The Company

2011
2011

US$’000
US$’000
At January 1, 2011
47,702
2,444
Currency realignment
(152)
Additional provision in the year
77,266
(310)
Utilisation of provision
(80,068)
(1,889)
At December 31, 2011
44,748
245

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 is payable within one year.

37. Restructuring Provisionopen

2011
HK$’000
At January 1, 2011
22,981
Currency realignment
(311)
Utilisation of provision
(18,927)
At December 31, 2011
3,743

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 2012 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 the future.

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
2011
US$’000
2010
US$’000
2011
US$’000
2010
US$’000
2011
US$’000
2010
US$’000
2011
US$’000
2010
US$’000
Amounts payable under finance leases:                
Within one year
2,169 3,518 1,730 2,963 40 39
In more than one year but not more than two years
1,360 1,941 1,032 1,565
In more than two years but not more than three years
1,143 1,121 890 825
In more than three years but not more than four years
1,072 933 890 699
In more than four years but not more than five years
689 933 570 758
More than five years
1,695 2,307 1,373 1,867
8,128 10,753 6,485 8,677 40 39
Less: future finance charges (1,643) (2,076) (1)
Present value of lease obligations 6,485 8,677 6,485 8,677 39 39
Less: Amount due within one year shown under current liabilities   (1,730) (2,963)   (39)
Amount due after one year   4,755 5,714  

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 1.72% per annum (2010: 1.78% 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 ratioThe 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 2011 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:


2011 2010

US$’000 US$’000
Debt (i) 1,198,457 1,325,144
Bank balances, deposits and cash (459,650) (512,893)
Net debt 738,807 812,251
Equity (ii) 1,245,576 1,114,759
Net debt to equity ratio 59.31% 72.86%
(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 26, 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.