G-Vision International (Holdings) Limited

Transcription

1 G-Vision International (Holdings) Limited

2 ANNUAL REPORT CONTENTS Page Corporate Information 2 Chairman s Statement 3-5 Report of the Directors 6-13 Report of the Auditors Consolidated Income Statement 16 Consolidated Balance Sheet 17 Balance Sheet 18 Consolidated Statement of Changes in Equity 19 Consolidated Cash Flow Statement 20 Notes to the Financial Statements Financial Summary 55 Summary of Investment Properties 56 1

3 CORPORATE INFORMATION G-VISION INTERNATIONAL (HOLDINGS) LIMITED DIRECTORS Cheng Hop Fai (Chairman and Managing Director) Cheng Kwok Kwan Yuk Cheng Pak Ming, Judy Mark Yiu Tong, William Law Toe Ming Chan Ming Fai COMPANY SECRETARY Chu Ka Yee PRINCIPAL BANKERS The Hongkong and Shanghai Banking Corporation Limited Hang Seng Bank Limited International Bank of Asia Limited AUDITORS Deloitte Touche Tohmatsu SOLICITORS Jones Day REGISTERED OFFICE Clarendon House Church Street Hamilton HM11 Bermuda PRINCIPAL OFFICE Units , 1st Floor East Ocean Centre, 98 Granville Road Tsimshatsui East Kowloon Hong Kong PRINCIPAL REGISTRAR Butterfield Fund Services (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke Bermuda BRANCH REGISTRAR Computershare Hong Kong Investor Services Limited Shops , 17th Floor Hopewell Centre 183 Queen s Road East Hong Kong 2

4 ANNUAL REPORT CHAIRMAN S STATEMENT RESULTS The audited consolidated loss attributable to shareholders of the Company and its subsidiaries ( the Group ) for the year ended 31 March 2004 was approximately HK$12,713,000. Loss per share based on 484,853,527 shares amounted to 2.6 cents. DIVIDENDS The Directors do not recommend the payment of a final dividend for the year ended 31 March 2004 (2003: Nil). REVIEW OF OPERATIONS, the Group recorded an annual turnover of approximately HK$115 million, a decline of approximately HK$17 million or 13% over last year. In contrast, the net loss for the year reduced by 67% to approximately HK$13 million. The decline for the annual turnover was attributable to the persistent effect of the outbreak of the Severe Acute Respiratory Syndrome ( SARS ) in March While the increased number of mainland visitors has contributed to turnover, such increment was not able to offset the Group s unprecedented drop in sales in the first quarter of this reporting period. Other factors that have led to the decline in turnover during the reporting period include the renovation of Cheung Sha Wan outlet and the closure of Kwun Tong outlet. Following the successful renewal of the tenancy agreement with the landlord and in order to minimize the impact of SARS on business, the Cheung Sha Wan outlet was closed for approximately one month for a major renovation in June The Kwun Tong outlet, which was closed in September 2002, had contributed approximately HK$9.5 million to the annual turnover in the previous corresponding reporting period. The Group is experiencing a steady growth of demand for the environmental friendly paper tableware worldwide. In view of the favorable response from customers, the Group has identified several geographical areas and market segments which the Directors believe will have promising market potential. The Group is considering forming strategic business alliances with selective customers to explore the potential markets identified as well as tapping into niche markets. The manufacturing plant located in Dongguan, the PRC has applied for the ISO9001: 2000 Quality Management System Certification, with the aim of delivering high quality products and efficient service to customers. The Directors believe that the environmental friendly paper tableware business will soon provide an impetus to broaden the income base of the Group s business. 3

5 CHAIRMAN S STATEMENT G-VISION INTERNATIONAL (HOLDINGS) LIMITED LIQUIDITY AND FINANCIAL RESOURCES As at 31 March 2004, the Group had in aggregate approximately HK$5.8 million unsecured bank borrowings. The Group s cash and bank balances (including pledged bank deposits) amounted to approximately HK$7.9 million as at 31 March The Group s gearing ratio as at 31 March 2004 was 10.3% (2003: 12.7%), based on bank borrowings of HK$5.8 million (2003: HK$8.8 million) and the shareholders fund of HK$56.5 million (2003: HK$69.2 million). With the cash generated from the Group s operation in its ordinary course of business and the existing unutilised banking and credit facilities, the Directors consider that the Group has sufficient working capital for its operation. PROSPECTS The Hong Kong economy has showed positive signs of recovery. With the strong growth of the Chinese economy as well as the increasing number of mainland tourists visiting Hong Kong, the Directors believe that its business will benefit from the gradual recovery of the retail market as a whole. Looking ahead, the Directors are confident that the production and sales of the environmental friendly paper tableware will provide the Group with great growth potential. Leveraging on its well-established customer relationships as well as the connection with its strategic business partners, the Group is well positioned to capture on any future business opportunities and to further explore the potential markets identified. EMPLOYEES At 31 March 2004, the total number of staff of the Group was 685. Total staff costs including Director s emoluments amounted to HK$36.8 million for the year under review. The Group continued to review remuneration packages of employees with reference to the level and composition of pay, the general market condition and individual performance. Staff benefits include contributions to the Mandatory Provident Fund Scheme and a discretionary bonus payment which is linked both to the Group s and individual employee s performance. PURCHASE, SALE OR REDEMPTION OF SHARES There was no purchase, sale or redemption of the Company s shares by the Company or any of its subsidiaries during the year. 4

6 ANNUAL REPORT CHAIRMAN S STATEMENT CODE OF BEST PRACTICE The Company has complied throughout the year ended 31 March 2004 with the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, except that all the non-executive directors of the Company are not appointed for specific terms but are subject to retirement by rotation and re-election at Annual General Meeting of the Company in accordance with the Company s Bye-Laws. ACKNOWLEDGEMENTS I would like to express my gratitude to the management and staff members of the Group for their dedication and invaluable efforts and contributions to the Group during the year. By Order of the Board Cheng Hop Fai Chairman Hong Kong, 15 July

7 REPORT OF THE DIRECTORS G-VISION INTERNATIONAL (HOLDINGS) LIMITED The directors present their annual report and the audited financial statements of the Company for the year ended 31 March PRINCIPAL ACTIVITIES The Company is an investment holding company. Its subsidiaries are principally engaged in the operation of a chain of Chinese restaurants in Hong Kong and elsewhere in the People s Republic of China (the PRC ) which specialise in Chiu Chow cuisine, the operation of a hotel in the PRC, and the manufacture and sales of environmental friendly paper tableware. RESULTS The results of the Group for the year are set out in the consolidated income statement on page 16. No dividend was paid during the year. The directors do not recommend the payment of a final dividend for the year. MAJOR SUPPLIERS AND CUSTOMERS The aggregate purchases attributable to the five largest suppliers of the Group was less than 30% of the Group s purchases for the year under review. The aggregate turnover attributable to the five largest customers of the Group was less than 30% of the Group s turnover for the year under review. SHARE CAPITAL Details of the Company s share capital are set out in note 19 to the financial statements. There were no movements in the Company s share capital during the year. PROPERTY, PLANT AND EQUIPMENT During the year, the Group spent approximately HK$6.5 million on property, plant and equipment. Details of the movements in property, plant and equipment of the Group during the year are set out in note 11 to the financial statements. INVESTMENT PROPERTIES The Group s investment properties were valued at 31 March 2004 by RHL Appraisal Ltd., a firm of independent profession property valuers, on an open market existing use basis, and the resulting deficit of HK$4,300,000 was charged to the income statement. Details of the valuation and of the investment properties at 31 March 2004 are set out in note 12 to the financial statements. PRINCIPAL SUBSIDIARIES The details of the Company s principal subsidiaries at 31 March 2004 are set out in note 13 to the financial statements. 6

8 ANNUAL REPORT REPORT OF THE DIRECTORS ASSOCIATES The details of the Group s associates at 31 March 2004 are set out in note 14 to the financial statements. DIRECTORS The directors of the Company during the year and up to the date of this report were: Executive directors: Mr. Cheng Hop Fai (Chairman and Managing Director) Mrs. Cheng Kwok Kwan Yuk Ms. Cheng Pak Ming, Judy Independent non-executive directors: Mr. Law Toe Ming Mr. Chan Ming Fai (appointed on 1 March 2004) Mr. Tse Tai Lam (deceased on 29 January 2004) Non-executive director: Mr. Mark Yiu Tong, William In accordance with Clauses 86(1) and 87(1) of the Company s Bye-laws, Ms. Cheng Pak Ming, Judy and Mr. Chan Ming Fai retire and, being eligible, offer themselves for re-election. None of the directors proposed for re-election has a service contract which is not determinable by the Group within one year without payment of compensation (other than statutory compensation). The term of office of each non-executive director is the period up to his retirement by rotation in accordance with the Company s Bye-laws. 7

9 REPORT OF THE DIRECTORS G-VISION INTERNATIONAL (HOLDINGS) LIMITED DIRECTORS INTERESTS IN SHARES, UNDERLYING SHARES AND CONVERTIBLE BONDS At 31 March 2004, the interests of the directors and their associates in the shares, underlying shares and convertible bonds of the Company and its associated corporations, as recorded in the register maintained by the Company pursuant to Section 352 of the Securities and Futures Ordinance (the SFO ), or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited pursuant to the Model Code for Securities Transactions by Directors of the Listed Companies, were as follows: Long positions Ordinary shares of HK$0.10 each of the Company Number Percentage of of issued the issued ordinary share capital Name of director Capacity shares held of the Company Mr. Cheng Hop Fai Held by controlled 339,397,470 70% corporation (note) Mrs. Cheng Kwok Kwan Yuk Held by controlled 339,397,470 70% corporation (note) Ms. Cheng Pak Ming, Judy Held by controlled 339,397,470 70% corporation (note) Mr. Law Toe Ming Beneficial owner 500, % Note: Golden Toy Investments Limited ( Golden Toy ) and Kong Fai International Limited ( Kong Fai ) held 43,217,445 shares (or 8.91% interest) and 296,180,025 shares (or 61.09% interest) of the Company, respectively. Golden Toy and Kong Fai are wholly-owned by two discretionary trusts of which family members of Mr. Cheng Hop Fai, including Mr. Cheng Hop Fai, Mrs. Cheng Kwok Kwan Yuk and Ms. Cheng Pak Ming, Judy, are discretionary objects. Save as disclosed above, at 31 March 2004, none of the directors nor their associates had any interests or short positions in any shares, underlying shares or debentures of the Company or any of its associated corporations. SUBSTANTIAL SHAREHOLDERS Other than the interests and short positions disclosed above in respect of certain directors, the register of substantial shareholders maintained by the Company pursuant Section 336 of the SFO discloses no person as having a notifiable interest or short position in the issued share capital of the Company as at 31 March

10 ANNUAL REPORT REPORT OF THE DIRECTORS DIRECTORS RIGHTS TO ACQUIRE SHARES OR DEBENTURES Details of the Company s share option scheme, which was approved and adopted on 22 August 2002, are set out in note 20 to the financial statements. No option has been granted under the share option scheme since its adoption. The total number of shares available for issue under the share option scheme as at the date of this report is 48,485,352, representing approximately 10% of the issued share capital of the Company as at that date. Save as disclosed above, at no time during the year was the Company, its holding company, or any of its subsidiaries a party to any arrangements to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debt securities (including debentures) of, the Company or any other body corporate. DIRECTORS INTEREST IN CONTRACTS AND CONNECTED TRANSACTIONS (a) On 13 June 2001, the Group entered into a sub-tenancy agreement with Hung Yick Metal Company Limited ( Hung Yick ) for sub-leasing from Hung Yick several units of a commercial building for a period of two years commencing 9 April 2001 to 8 April 2003 at a monthly rental of HK$57, (exclusive of rates, air-conditioning and management fees) with the rent-free periods from 9 April 2001 to 8 June 2001 and from 22 February 2003 to 8 April 2003, and a rental deposit of HK$173, On 19 May 2003, the Group renewed the sub-tenancy agreement with Hung Yick for a further period of two years commencing 9 April 2003 to 8 April 2005 at a monthly rental of HK$42, (exclusive of rates, air-conditioning and management fees) with the rent-free period from 9 April 2003 to 22 April 2003 and a rental deposit of HK$127, Rental charged by Hung Yick during the year under these agreements amounted to HK$478, The monthly rental was determined by both parties with reference to the rental charged by Hung Yick s landlord and the approximate floor area occupied by Hung Yick and the Group. Mr. Cheng Hop Fai, Mrs. Cheng Kwok Kwan Yuk and Ms. Cheng Pak Ming, Judy are deemed to be beneficially interested in Hung Yick. 9

11 REPORT OF THE DIRECTORS G-VISION INTERNATIONAL (HOLDINGS) LIMITED DIRECTORS INTEREST IN CONTRACTS AND CONNECTED TRANSACTIONS (continued) (b) On 6 May 2002, the Group entered into a tenancy agreement with Homley Development Limited ( Homley ) for leasing of Homley s premises for certain of the Group s restaurant operations for a period of three years commencing 1 May 2002 to 30 April 2005 at a monthly rental of HK$250,000 (exclusive of rates, management fees and air-conditioning charges) and a rental deposit of HK$750,000. The monthly rental was negotiated with Homley with reference to the market rent as at 23 April 2002 as advised by RHL Appraisal Ltd., a firm of independent professional property valuers. Rentals charged by Homley during the year under the tenancy agreement amounted to HK$3,000,000. At 31 March 2004, accrued rental payable to Homley amounted to HK$750,000. Mr. Cheng Hop Fai, Mrs. Cheng Kwok Kwan Yuk and Ms. Cheng Pak Ming, Judy are deemed to be beneficially interested in Homley. (c) On 1 April 2003, the Group entered into a tenancy agreement with Hover City Industrial Limited ( Hover City ) for leasing from Hover City a unit of commercial building for a period of two years commencing 1 April 2003 to 31 March 2005 at a monthly rental of HK$20,000 and a rental deposit of HK$40,000. Rental charged by Hover City during the year under this agreement amounted to HK$240,000. The monthly rental was determined by both parties with reference to market rental. Mr. Cheng Hop Fai, Mrs. Cheng Kwok Kwan Yuk and Ms. Cheng Pak Ming, Judy are deemed to be beneficially interested in Hover City. (d) On 25 April 2003, the Group entered into a loan agreement with Hover City for a loan facility to the extent of HK$10,000,000 offered to the Group by Hover City. The sum drawn down by the Group will bear interest at 3% below the best lending rate quoted by a bank in Hong Kong and shall be repaid in one lump sum (including accrued interest) by 24 April On 9 July 2004, the Group renewed the terms of the loan agreement with Hover City. The loan facility is extended to HK$15,000,000 and the final repayment date to 30 June Interest expense charged to the income statement during the year amounted to HK$109,759. At 31 March 2004, accrued interest payable to and the principal sum outstanding of the loans from Hover City amounted to HK$109,759 and HK$8,300,000, respectively. (e) During the year, the Group made rental payments of HK$604,800, under a joint venture agreement, to the PRC joint venture partner of an indirect non wholly-owned subsidiary of the Company,. 10

12 ANNUAL REPORT REPORT OF THE DIRECTORS DIRECTORS INTEREST IN CONTRACTS AND CONNECTED TRANSACTIONS (continued) In the opinion of the independent non-executive directors of the Company, these transactions were carried out on normal commercial terms and in the ordinary course of business of the Group. Other than as disclosed above, there was no other contract of significance, to which the Company, its holding company, or any of its subsidiaries was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisting at the end of the year or at any time during the year. PURCHASE, SALE OR REDEMPTION OF SHARES There was no purchase, sale or redemption of the Company s shares by the Company or any of its subsidiaries during the year. CORPORATE GOVERNANCE The Company has complied throughout the year ended 31 March 2004 with the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, except that all the non-executive directors of the Company are not appointed for specific terms but are subject to retirement by rotation and re-election at Annual General Meeting of the Company in accordance with the Company s Bye-Laws. PRE-EMPTIVE RIGHTS There are no provisions for pre-emptive rights under the Company s Bye-laws although there are no restrictions against such rights under the laws in Bermuda. AUDITORS A resolution will be submitted at the annual general meeting of the Company to re-appoint Messrs. Deloitte Touche Tohmatsu as auditors of the Company. On behalf of the Board Cheng Kwok Kwan Yuk DIRECTOR Hong Kong, 15 July

13 REPORT OF THE DIRECTORS G-VISION INTERNATIONAL (HOLDINGS) LIMITED DETAILS OF EXECUTIVE DIRECTORS AND NON-EXECUTIVE DIRECTORS EXECUTIVE DIRECTORS Mr. Cheng Hop Fai, aged 60, is the Chairman and Managing Director of the Company. He is one of the founders of the Group and has over 20 years experience in the restaurant business. He has been instrumental in the formulation and implementation of the business policies of the Group and is responsible for the general management and strategic planning of the Group. Mrs. Cheng Kwok Kwan Yuk, aged 58, is the wife of Mr. Cheng and an Executive Director of the Company. She is one of the founders of the Group and has over 20 years experience in the restaurant business. She is, with Mr. Cheng, responsible for the general management of the Group. Ms. Cheng Pak Ming, Judy, aged 33, is a daughter of Mr. and Mrs. Cheng. She holds a Bachelor degree in Economics from the University of Sydney. She is a Certified Practising Accountant of CPA Australia and an Associate Member of the Hong Kong Society of Accountants. She is an Executive Director of the Company and oversees the accounting functions of the Group. INDEPENDENT NON-EXECUTIVE DIRECTORS Mr. Law Toe Ming, aged 62, was appointed as Non-executive Director of the Group on 1 December He is also a director of Texful Textile Limited. Mr. Chan Ming Fai, aged 42, was appointed as an Independent Non-executive Director on 1 March He is also an independent non-executive director of Sino Technology Investments Company Limited. Mr. Chan is currently a business consultant. He holds a Bachelor degree in Social Sciences from the University of Hong Kong. He was a former director of Jardine Fleming Investment Management Services and one of the founding directors of KGI Group. He has substantial experience in unit trusts, pension funds, asset and investment management. NON-EXECUTIVE DIRECTOR Mr. Mark Yiu Tong, William, aged 68, is a renowned food critic and a regular contributor to many newspapers and magazines in Hong Kong and overseas. He writes under the pen name of in Chinese newspapers and magazines and is the author of several books on Chinese cookery. He holds many awards in the food industry. 12

14 ANNUAL REPORT REPORT OF THE DIRECTORS SENIOR MANAGEMENT Miss Cheng Pak Man, Anita, aged 32, is a daughter of Mr. and Mrs. Cheng. She holds a Bachelor of Commerce degree from the University of New South Wales and a Master of Applied Finance degree from Macquarie University, Sydney. She is a Certified Practising Accountant of CPA Australia and an Associate Member of the Hong Kong Society of Accountants. She has over 5 years experience in the banking and accounting field in Hong Kong. She is responsible for the business development and the marketing function of the Group. Mr. Cheng Kwun Hung, Peter, aged 30, is a son of Mr. and Mrs. Cheng. He holds a Bachelor degree in Commerce and a Bachelor degree in Laws from the University of New South Wales and is an Associate member of CPA Australia. He is responsible for the strategic planning and financial functions of the Group. Ms. Chu Ka Yee, aged 37, is the Chief Financial Officer and Company Secretary of the Group. She holds a Bachelor degree in Business Administration from the Chinese University of Hong Kong and is a Fellow Member of the Association of Chartered Certified Accountants. She is responsible for the financial and company secretarial functions of the Group. Mr. Li Chit, Justin, aged 37, is the Business Development Manager of the Group. He holds a Bachelor of Science (Honours) degree from the University of Hong Kong and a Master of Applied Finance degree from Macquarie University, Sydney. He has over 8 years working experience in China and previously worked for a multi-national petroleum company. He is responsible for the business development of the environmental friendly paper tableware business of the Group. 13

15 REPORT OF THE AUDITORS G-VISION INTERNATIONAL (HOLDINGS) LIMITED TO THE SHAREHOLDERS OF G-VISION INTERNATIONAL (HOLDINGS) LIMITED (incorporated in Bermuda with limited liability) We have audited the financial statements on pages 16 to 54 which have been prepared in accordance with accounting principles generally accepted in Hong Kong. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS The Company s directors are responsible for the preparation of financial statements which give a true and fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently. It is our responsibility to form an independent opinion, based on our audit, on those financial statements and to report our opinion solely to you, as a body, in accordance with Section 90 of the Bermuda Companies Act, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. BASIS OF OPINION We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the circumstances of the Company and the Group, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion. 14

16 ANNUAL REPORT REPORT OF THE AUDITORS OPINION In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31 March 2004 and of the loss and cash flows of the Group for the year then ended and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance. Deloitte Touche Tohmatsu Certified Public Accountants Hong Kong 15 July

17 CONSOLIDATED INCOME STATEMENT G-VISION INTERNATIONAL (HOLDINGS) LIMITED NOTES HK$ 000 HK$ 000 Turnover 4 114, ,978 Other operating income 1,023 1,033 Cost of inventories consumed (46,501) (54,989) Restaurant and hotel operation expenses (67,064) (85,017) Administrative expenses (12,356) (13,381) Deficit arising on revaluation of investment properties (4,300) (2,500) Loss on disposal of leasehold land and buildings (16,109) Loss from operations 6 (14,273) (38,985) Finance costs 7 (262) (529) Loss before taxation (14,535) (39,514) Taxation Loss before minority interests (14,534) (39,471) Minority interests 1,821 1,224 Net loss for the year (12,713) (38,247) Loss per share Basic 10 (2.6) cents (7.9) cents 16

18 ANNUAL REPORT CONSOLIDATED BALANCE SHEET At 31 March NOTES HK$ 000 HK$ 000 Non-current assets Property, plant and equipment 11 26,261 26,784 Investment properties 12 60,700 65,000 Interests in associates 14 86,961 91,784 Current assets Inventories 15 4,517 3,595 Trade and other receivables 16 6,203 6,679 Tax recoverable Pledged bank deposits Bank balances and cash 7,098 9,231 18,855 20,721 Current liabilities Trade and other payables 17 16,667 14,321 Tax payable Bank loans amount due within one year 18 5,800 3,000 22,481 17,336 Net current (liabilities) assets (3,626) 3,385 83,335 95,169 Capital and reserves Share capital 19 48,485 48,485 Reserves 8,050 20,763 56,535 69,248 Minority interests 22 (21,844) (20,023) Non-current liabilities Bank loans amount due after one year 18 5,800 Loans from minority shareholders 22 40,234 40,144 Loans from a related company 23 8,410 48,644 45,944 83,335 95,169 The financial statements on pages 16 to 54 were approved and authorised for issue by the Board of Directors on 15 July 2004 and are signed on its behalf by: Cheng Hop Fai DIRECTOR Cheng Kwok Kwan Yuk DIRECTOR 17

19 BALANCE SHEET At 31 March 2004 G-VISION INTERNATIONAL (HOLDINGS) LIMITED NOTES HK$ 000 HK$ 000 Non-current assets Interests in subsidiaries 13 56,838 67,001 Current assets Bank balances Current liabilities Other payables Tax payable Net current liabilities (3) (3) 56,835 66,998 Capital and reserves Share capital 19 48,485 48,485 Reserves 21 8,350 18,513 56,835 66,998 Cheng Hop Fai DIRECTOR Cheng Kwok Kwan Yuk DIRECTOR 18

20 ANNUAL REPORT CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Share Capital Accumulated capital premium reserve losses Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 (note 21(c)) (note 21(d)) At 1 April ,485 90,676 84,123 (115,789) 107,495 Net loss for the year (38,247) (38,247) At 31 March ,485 90,676 84,123 (154,036) 69,248 Net loss for the year (12,713) (12,713) At 31 March ,485 90,676 84,123 (166,749) 56,535 19

21 CONSOLIDATED CASH FLOW STATEMENT G-VISION INTERNATIONAL (HOLDINGS) LIMITED HK$ 000 HK$ 000 CASH FLOWS FROM OPERATING ACTIVITIES Loss before taxation (14,535) (39,514) Adjustments for: Interest income (21) (86) Interest expense Allowance for doubtful debts Depreciation 7,037 5,886 Deficit arising on revaluation of investment properties 4,300 2,500 Loss on disposal of leasehold land and buildings 16,109 Loss on disposal of property, plant and equipment other than leasehold land and buildings 824 Operating loss before working capital changes (2,712) (13,590) (Increase) decrease in inventories (922) 398 Decrease in trade and other receivables 231 3,044 Increase (decrease) in trade and other payables 2,346 (4,936) Net cash used in operations (1,057) (15,084) Interest paid (152) (529) Hong Kong Profits Tax refunded (paid) 46 (67) NET CASH USED IN OPERATING ACTIVITIES (1,163) (15,680) CASH FLOWS FROM INVESTING ACTIVITIES Decrease in pledged bank deposits Interest received Acquisition of property, plant and equipment (6,514) (2,664) Proceeds from disposal of property, plant and equipment 18,000 NET CASH (USED IN) FROM INVESTING ACTIVITIES (6,360) 15,664 CASH FLOWS FROM FINANCING ACTIVITIES Advance from a related company 8,300 Advance from minority shareholders Repayment of bank loans (3,000) (9,143) New bank loan raised 8,800 NET CASH FROM (USED IN) FINANCING ACTIVITIES 5,390 (193) NET DECREASE IN CASH AND CASH EQUIVALENTS (2,133) (209) CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 9,231 9,440 CASH AND CASH EQUIVALENTS AT END OF THE YEAR, REPRESENTED BY BANK BALANCES AND CASH 7,098 9,231 20

22 ANNUAL REPORT GENERAL The Company is incorporated in Bermuda as an exempted company with limited liability. Its shares are listed on The Stock Exchange of Hong Kong Limited (the Stock Exchange ). The ultimate holding company of the Company is Kong Fai International Limited, a company incorporated in the British Virgin Islands. The Company is an investment holding company. Its subsidiaries are principally engaged in the operation of a chain of Chinese restaurants in Hong Kong and elsewhere in the People s Republic of China (the PRC ) which specialise in Chiu Chow cuisine, the operation of a hotel in the PRC, and the manufacture and sales of environmental friendly paper tableware. 2. ADOPTION OF HONG KONG FINANCIAL REPORTING STANDARDS In the current year, the Group has adopted, for the first time, Hong Kong Financial Reporting Standards ( HKFRS ) Statement of Standard Accounting Practice ( SSAP ) 12 (Revised) Income taxes issued by the Hong Kong Society of Accountants ( HKSA ). The term of HKFRS is inclusive of SSAPs and Interpretations approved by the HKSA. The principal effect of the implementation of SSAP 12 (Revised) is in relation to deferred tax. SSAP 12 (Revised) requires the adoption of a balance sheet liability method, whereby deferred tax is recognised in respect of all temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, with limited exceptions. In the absence of any specific transitional requirements in SSAP 12 (Revised), the new accounting policy has been applied retrospectively. The adoption of SSAP 12 (Revised) has no significant effect on the results for the current or prior accounting periods. 3. SIGNIFICANT ACCOUNTING POLICIES The financial statements have been prepared under the historical cost convention, as modified for the revaluation of the investment properties, and have been prepared in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are set out below. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to 31 March each year. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from or up to the effective date of acquisition or disposal as appropriate. All significant intercompany transactions and balances within the Group are eliminated on consolidation. 21

23 G-VISION INTERNATIONAL (HOLDINGS) LIMITED 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Investment in subsidiaries Investment in subsidiaries is included in the Company s balance sheet at cost less any identified impairment loss. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable. Interests in associates The results and assets and liabilities of associates are incorporated in the consolidated financial statements using the equity method of accounting. The carrying amount of such interests is reduced to recognise any identified impairment loss in the value of individual investments. Revenue recognition Revenue from restaurant and hotel operations is recognised when goods are sold and services are rendered. Sales of goods are recognised when goods are delivered and title has passed. Rental income, including rental invoiced in advance for properties under operating leases, is recognised on a straight line basis over the lease terms. Interest income is accrued on a time basis by reference to the principal outstanding and at the interest rate applicable. Impairment At each balance sheet date, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately. 22

24 ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (continued) Property, plant and equipment Property, plant and equipment are stated at cost less depreciation and any identified impairment loss. Depreciation is provided to write off the cost of property, plant and equipment over their estimated useful lives and after taking into account their estimated residual value, using the straight line method, at the following rates per annum: Leasehold land Over the unexpired term of lease Buildings Over the duration of the leases or fifty years, whichever is the shorter Furniture and restaurant equipment 12.5% 50% Plant and equipment 20% Motor vehicles 15% 20% The gain or loss arising from the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the income statement. Investment properties Investment properties are completed properties which are held for their investment potential, any rental income derived therefrom being negotiated at arm s length. Investment properties are stated at their open market values based on independent professional valuation at the balance sheet date. Any surplus or deficit arising on revaluation of investment properties is credited or charged to the investment property revaluation reserve unless the balance in the reserve is insufficient to cover a deficit on a portfolio basis, in which case the excess of the deficit over the balance in the investment property revaluation reserve is charged to the income statement. Where a deficit has previously been charged to the income statement and a revaluation surplus subsequently arises, this surplus is credited to the income statement to the extent of the deficit previously charged. On disposal of an investment property, any balance in the investment property revaluation reserve which is attributable to that property is credited to the income statement and included in the determination of the gain or loss on disposal. No depreciation is provided on investment properties which are held on leases with an unexpired term of more than twenty years. 23

25 G-VISION INTERNATIONAL (HOLDINGS) LIMITED 3. SIGNIFICANT ACCOUNTING POLICIES (continued) Inventories Inventories are stated at the lower of cost and net realisable value. Cost of food and beverage items is calculated using the first-in, first-out method. Cost of other items is calculated using the weighted average method. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. 24

26 ANNUAL REPORT SIGNIFICANT ACCOUNTING POLICIES (continued) Foreign currencies Transactions in foreign currencies are translated at the rates ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rates ruling on the balance sheet date. Gains and losses arising on exchange are dealt with in the income statement. Translation of foreign currency financial statements On consolidation, the assets and liabilities of the Group s overseas operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences arising, if any, are classified as equity and transferred to the Group s translation reserve. Such translation differences are recognised as income or as expenses in the period in which the operation is disposed of. Operating leases Rental expenses under operating leases are charged to the income statement on a straight line basis over the terms of the relevant leases. Retirement benefits costs Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. 4. TURNOVER Turnover represents the aggregate of the revenue from restaurant and hotel operations, including service charge and gratuity income, revenue from sales of environmental friendly paper tableware, and rental income received and receivable during the year HK$ 000 HK$ 000 The amount comprises: Restaurant and hotel operations 111, ,452 Sales of environmental friendly paper tableware 3,894 4,215 Rental income , ,978 25

27 G-VISION INTERNATIONAL (HOLDINGS) LIMITED 5. BUSINESS AND GEOGRAPHICAL SEGMENTS Business segments For management purposes, the Group is currently organised into three main operating divisions restaurant and hotel operations, environmental friendly paper tableware and property investment. Segment information about these businesses is presented below. (a) Year 2004: (i) Income statement Restaurant Environmental and hotel friendly paper Property operations tableware investment Consolidated HK$ 000 HK$ 000 HK$ 000 HK$ 000 TURNOVER 111,031 3, ,925 RESULTS Segment results (5,163) (4,285) (4,591) (14,039) Unallocated corporate expenses (234) Loss from operations (14,273) Finance costs (262) Loss before taxation (14,535) Taxation 1 Loss before minority interests (14,534) Minority interests 1,821 Net loss for the year (12,713) 26

28 ANNUAL REPORT BUSINESS AND GEOGRAPHICAL SEGMENTS (continued) Business segments (continued) (a) Year 2004: (continued) (ii) Balance sheet Restaurant Environmental and hotel friendly paper Property operations tableware investment Consolidated HK$ 000 HK$ 000 HK$ 000 HK$ 000 ASSETS Segment assets 35,005 9,813 60, ,520 Unallocated corporate assets 296 Consolidated total assets 105,816 LIABILITIES Segment liabilities 14,157 2, ,395 Loans from minority shareholders 5,000 35,234 40,234 Loans from a related company 8,410 Unallocated corporate liabilities 6,086 Consolidated total liabilities 71,125 (iii) Other information Restaurant Environmental and hotel friendly paper Property operations tableware investment Consolidated HK$ 000 HK$ 000 HK$ 000 HK$ 000 Capital additions 5, ,514 Depreciation 5,258 1,779 7,037 Allowance for doubtful debts Deficit arising on revaluation of investment properties 4,300 4,300 27

29 G-VISION INTERNATIONAL (HOLDINGS) LIMITED 5. BUSINESS AND GEOGRAPHICAL SEGMENTS (continued) Business segments (continued) (b) Year 2003: (i) Income statement Environmental Restaurant friendly and hotel paper Property operations tableware investment Eliminations Consolidated HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 TURNOVER External 127,452 4, ,978 Inter-segment 1,200 (1,200) Total 127,452 4,215 1,511 (1,200) 131,978 RESULTS Segment results (14,526) (3,956) (20,291) (38,773) Unallocated corporate expenses (212) Loss from operations (38,985) Finance costs (529) Loss before taxation (39,514) Taxation 43 Loss before minority interests (39,471) Minority interests 1,224 Net loss for the year (38,247) Inter-segment sales are charged at prevailing market price. 28

30 ANNUAL REPORT BUSINESS AND GEOGRAPHICAL SEGMENTS (continued) Business segments (continued) (b) Year 2003: (continued) (ii) Balance sheet Restaurant Environmental and hotel friendly paper Property operations tableware investment Consolidated HK$ 000 HK$ 000 HK$ 000 HK$ 000 ASSETS Segment assets 37,291 9,827 65, ,160 Unallocated corporate assets 345 Consolidated total assets 112,505 LIABILITIES Segment liabilities 12,122 1, ,147 Loans from minority shareholders 5,000 35,144 40,144 Unallocated corporate liabilities 8,989 Consolidated total liabilities 63,280 29

31 G-VISION INTERNATIONAL (HOLDINGS) LIMITED 5. BUSINESS AND GEOGRAPHICAL SEGMENTS (continued) Business segments (continued) (b) Year 2003: (continued) (iii) Other information Restaurant Environmental and hotel friendly paper Property operations tableware investment Consolidated HK$ 000 HK$ 000 HK$ 000 HK$ 000 Capital additions 1,356 1,308 2,664 Depreciation 4,143 1, ,886 Loss on disposal of leasehold land and buildings 16,109 16,109 Loss on disposal of property, plant and equipment other than leasehold land and buildings Allowance for doubtful debts Deficit arising on revaluation of investment properties 2,500 2,500 30

32 ANNUAL REPORT BUSINESS AND GEOGRAPHICAL SEGMENTS (continued) Geographical segments An analysis of the Group s turnover by geographical market is as follows: Turnover HK$ 000 HK$ 000 Hong Kong 98, ,426 The PRC 16,720 16, , ,978 An analysis of the carrying amount of segment assets, and additions to property, plant and equipment, analysed by the geographical area in which the assets are located is as follows: Carrying amount of segment assets Additions to property, plant and equipment HK$ 000 HK$ 000 HK$ 000 HK$ 000 Hong Kong 20,714 20,203 5, The PRC 85,102 92,302 1,124 2, , ,505 6,514 2,664 31

33 G-VISION INTERNATIONAL (HOLDINGS) LIMITED 6. LOSS FROM OPERATIONS HK$ 000 HK$ 000 Loss from operations has been arrived at after charging: Directors remuneration (note 8) 3,396 3,450 Other staff costs, including retirement benefits costs 33,427 44,103 Total staff costs 36,823 47,553 Allowance for doubtful debts Auditors remuneration Depreciation 7,037 5,886 Loss on disposal of property, plant and equipment other than leasehold land and buildings 824 and after crediting: Interest income FINANCE COSTS HK$ 000 HK$ 000 Interest on borrowings wholly repayable within five years: Bank borrowings Loans from a related company

34 ANNUAL REPORT DIRECTORS AND EMPLOYEES EMOLUMENTS (a) Information regarding directors emoluments HK$ 000 HK$ 000 Directors fees: Executive Independent non-executive Non-executive Other emoluments paid to executive directors: Salaries and other benefits 3,150 3,198 Retirement benefits costs ,186 3,234 Total directors emoluments 3,396 3,450 The emoluments of the directors fall within the following bands: Number of directors Nil to HK$1,000, HK$1,000,001 to HK$1,500,

35 G-VISION INTERNATIONAL (HOLDINGS) LIMITED 8. DIRECTORS AND EMPLOYEES EMOLUMENTS (continued) (b) Information regarding employees emoluments The five highest paid individuals of the Group in both years included two executive directors. The emoluments of the remaining three highest paid individuals, not being directors, are as follows: HK$ 000 HK$ 000 Salaries and other benefits 1,667 1,659 Retirement benefits costs ,703 1,695 The emoluments of each of the aforesaid employees were less than HK$1,000,000. During both years, no emoluments were 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. In addition, during both years, no director waived any emoluments. 34

36 ANNUAL REPORT TAXATION No provision for taxation has been made in the financial statements as the Company and its subsidiaries have no assessable profit for the year. The credit is attributable to the Company and its subsidiaries and represents overprovision of Hong Kong Profits Tax in prior years. PRC subsidiaries are subject to Enterprise Income Tax at prevailing rates in the PRC. The tax credit for the year can be reconciled to the results per the consolidated income statement as follows: HK$ 000 HK$ 000 Loss before taxation (14,535) (39,514) Tax credit of Hong Kong Profits Tax at 17.5% (2003: 16%) (2,544) (6,322) Tax effect of expenses not deductible for tax purpose 1,253 2,768 Tax effect of income not taxable for tax purpose (123) (149) Tax effect of utilisation of tax losses previously not recognised (290) (3) Tax effect of tax losses not recognised 1,651 4,079 Overprovision in prior years (1) (43) Others 53 (373) Tax credit for the year (1) (43) At 31 March 2004, the Group has unused tax losses of approximately HK$113,700,000 (2003: HK$107,100,000) available for offset against future profits. No deferred tax asset has been recognised in respect of such unused tax losses due to the unpredictability of future profit streams. Included in the unrecognised tax losses are losses of approximately HK$20,600,000 that will expire in year 2009 (2003: HK$15,700,000 expiring in year 2008). Other losses may be carried forward indefinitely. There were no other significant temporary differences arising during the year or at the balance sheet date. The Company had no significant unrecognised deferred tax during the year and at the balance sheet date. 35

37 G-VISION INTERNATIONAL (HOLDINGS) LIMITED 10. LOSS PER SHARE The calculation of basic loss per share is based on the net loss for the year of HK$12,713,000 (2003: HK$38,247,000) and on the 484,853,527 shares (2003: 484,853,527 shares) in issue during the year. No diluted loss per share has been presented for the year ended 31 March 2004 as there were no potential ordinary shares during the year. No diluted loss per share has been presented for the year ended 31 March 2003 as the exercise of the share options would result in a decrease in the loss per share. 11. PROPERTY, PLANT AND EQUIPMENT Furniture Leasehold and Plant land and restaurant and Motor buildings equipment machinery vehicles Total HK$ 000 HK$ 000 HK$ 000 HK$ 000 HK$ 000 THE GROUP COST At 1 April ,033 56,496 6,551 3,933 87,013 Additions 280 5, ,514 Disposals (4,491) (4,491) At 31 March ,313 57,459 7,331 3,933 89,036 DEPRECIATION At 1 April ,560 50, ,637 60,229 Provided for the year 1,334 4,246 1, ,037 Eliminated on disposals (4,491) (4,491) At 31 March ,894 49,826 2,316 3,739 62,775 NET BOOK VALUE At 31 March ,419 7,633 5, ,261 At 31 March ,473 6,425 5, ,784 The Group s leasehold land and buildings are held under medium-term leases and are situated in the PRC. 36

38 ANNUAL REPORT INVESTMENT PROPERTIES THE GROUP HK$ 000 AT VALUATION At 1 April ,000 Revaluation deficit (4,300) At 31 March ,700 The Group s investment properties were revalued at 31 March 2004 by RHL Appraisal Ltd., a firm of independent professional property valuers, on an open market existing use basis. The revaluation deficit of HK$4,300,000 has been charged to the income statement. The Group s investment properties are situated in the PRC and are held under leases as follows: THE GROUP HK$ 000 HK$ 000 Long leases (note (a)) 51,200 55,500 Medium-term leases (note (b)) 9,500 9,500 60,700 65,000 Notes: (a) The investment properties were held for a term of seventy years expiring in May They were vacant as at 31 March (b) The investment properties are held for a term of fifty years expiring in January They were vacant as at 31 March The Group is in the process of applying for the relevant land use rights certificate. 37