sunway international holdings limited

CONTENTS

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4

5

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12

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25

27

28

30

31

33

34

Corporate Information

Financial Highlights

Chairman’s Statement

Management discussion and analysis

Biographical details of directors and senior management

Report of the directors

Report of the auditors

Audited Financial Statements

Consolidated:

Profit and loss account

Balance sheet

Summary statement of changes in equity

Cash flow statement

Company:

Balance Sheet

Notes to financial statements

SUNWAY INTERNATIONAL HOLDINGS LIMITED ANNUAL REPORT 20042

CORPORATE INFORMATION

DIRECTORS

Executive:

Wong King Ching, Helen (Chairman)Wong King Man (Deputy Chairman)Leung Chi Fai (Finance Director)

Non-executive:

Wong Choi KamWong Chun YingWong Kim SeongKuo Yen Ting *So Day Wing *Wong Kun Kim *

* Independent non-executive director

COMPANY SECRETARY

Leung Chi Fai

LEGAL ADVISERS TO THE COMPANY

As to Bermuda law:Conyers Dill & Pearman2901 One Exchange Square8 Connaught PlaceCentralHong Kong

AUDITORS

Ernst & Young

Certified Public Accountants

15th Floor

Hutchison House

10 Harcourt Road

Hong Kong

AUTHORISED REPRESENTATIVES

Wong King Ching, Helen

Leung Chi Fai

AUDIT COMMITTEE MEMBERS

Kuo Yen Ting

So Day Wing

Wong Kun Kim

REMUNERATION COMMITTEE


Leung Chi Fai

Kuo Yen Ting

So Day Wing

Wong Kun Kim

REGISTERED OFFICE

Clarendon House

2 Church Street

Hamilton HM 11

Bermuda

ANNUAL REPORT 2004 SUNWAY INTERNATIONAL HOLDINGS LIMITED3

CORPORATE INFORMATION

HEAD OFFICE AND PRINCIPAL PLACE OF

BUSINESS

Room 1708-1710

Nan Fung Centre

264-298 Castle Peak Road

Tsuen Wan

New Territories

Hong Kong

PRINCIPAL SHARE REGISTRAR AND

TRANSFER OFFICE

The Bank of Bermuda Limited

Bank of Bermuda Building

6 Front Street

Hamilton HM 11

Bermuda

HONG KONG BRANCH SHARE REGISTRAR

AND TRANSFER OFFICE

Tengis Limited

Ground Floor

Bank of East Asia Harbour View Centre

56 Gloucester Road

Wanchai

Hong Kong

PRINCIPAL BANKERS

In Hong Kong:

Bank of China (Hong Kong) Ltd.

Dah Sing Bank Ltd.

The Hong Kong and Shanghai Banking

Corporation Ltd.

DBS Bank (Hong Kong) Ltd.

In The People’s Republic of China:

Bank of China Ltd.

Industrial and Commercial Bank of China Ltd.

WEBSITE ADDRESS AND CONTACT

http://www.sunwayhk.com

http://www.irasia.com/listco/hk/sunway

Telephone : (852) 2413 6812

Fax : (852) 2413 6859

STOCK CODE

The Stock Exchange of Hong Kong Limited: 58

The Singapore Exchange Securities Trading

Limited: Sunway


FINANCIAL HIGHLIGHTS

2004 2003HK$’000 HK$’000

(Restated)

OPERATING RESULTSTurnover 899,173 691,337Net profit from ordinary activities attributable to shareholders 35,076 17,303Earnings per share-basic 3.5 cents 1.7 centsProposed final dividend per share 1.0 cent 1.0 cent

FINANCIAL POSITIONTotal assets 1,067,480 1,079,833Cash and bank balances 182,507 131,048Shareholders’ funds 884,773 859,855

FINANCIAL RATIOSCurrent ratio 3.4 2.9Gearing ratio 20.7% 25.6%

Shareholders’ Funds Turnover by Business Segments

Electronic components and parts 24%

Consumer electronic products 70%

Trading of integrated circuits and computer

components and accessories 6%

01 02 03 04

1,000

900

800

700

600

500

400

300

200

100

0

(HK$ Million)

00


CHAIRMAN’S STATEMENT

The year’s positive results have demonstrated the

value of our corporate strategies. Strong and

extensive distribution network, product

advancement, ongoing innovative designs,

operations management, research and

development efforts and maintenance of high staff

morale are critical for our continuous growth.

During the year, we have established several new

sales and representative offices which we believe a

greater reach to customers and an opportunity to

market our products. Apart from the traditional

electronic calculators, we have dedicated our

efforts in launching “S.L.T.” corded telephones and

multifunctional products incorporating (i) radio and

alarm functions, (ii) temperature measuring, (iii)

calculator and (iv) multi-languages speakers, into

the market. These new and diversified products

gained unparalleled recognitions in both local and

oversea markets like Dubai, USA, Japan and Chili

etc.

Business extension towards the computer parts and

components market by linking with integrated

circuit (“IC”) suppliers to build its total solutions

was one of the Group’s motives last year and has

proved to be achievable. We have set up related

branch offices in Hong Kong, Xiamen and Shenzhen

of Mainland China and the business has been able

to generate satisfactory revenue. It has succeeded

in building our own portable Moving Picture

Experts Group or MPEG 4 player solution and

design in several major customers by cooperating

with some IC suppliers and design houses. Our

look is optimistic and we will devote more

emphasis and efforts to this business segment.

Our product development and diverse production

technology are accredited with excellent awards

from the relevant government authorities in

Mainland China. To name a few, Sunway has been

granted the “Key High-Tech Enterprise of China”,

“Enterprise Adhering to Contracts and Observing

Credit”, “全國百家企業科教興企示範企業”,

“Advanced Enterprise of Quality and Profit”,

“質量放心品牌企業”, “AAA Grade Enterprise” and

“Technology Development Centre”. In addition, the

Company’s own-branded electronic products such

as KENKO, GAVAO and SUNWAY have been

awarded the “Fujian Famous Brand” in 2004.

Coming up on the agenda will be the launch of

Radio Control Clocks (“RCC”), MP3 and Digital

Enhanced Cordless Telecommunications (“Dect”)

phones. RCC are now particularly popular in USA,

Germany and Japan and Sunway has utilised such

outstanding time adjustment technology on its

products, which are ready to introduce to the

market in the not too distant future. The Dect

phone series, stimulated by market demands in

Asia, is undergoing final trials and is of anticipation

to contribute as a main growth driver for the Group

in the coming year.


CHAIRMAN’S STATEMENT

Possessing abundant and fundamental research and

development resources, we are also capable of

applying a higher production technology, “Chip On

Glass” (“COG”) onto our products. Followed by the

sophisticated development of high-density liquid

crystal display panels (“LCD”), Sunway has rapidly

started to capture the utilisation of such COG

technology in producing more advanced LCD

modules. We have the strong belief that the

application of these new production techniques will

elicit refinement in our business.

In light of the on-going development of the

electronic information industry and the ever-

changing global electronic product market, the

Group will strive to strengthen its existing core

product base through continuous innovations and

continue to seek for business opportunities,

targeting international markets by leveraging on its

own edges to welcome new challenges.

Finally, I would like to thank all employees for their

continuing dedication and contribution towards our

business success. Last but not least, I would also

like to extend my appreciation to all our business

partners and customers for their valuable support

throughout the years.


Chairman

Hong Kong

24 January 2005


MANAGEMENT DISCUSSION AND ANALYSIS

REVIEW OF RESULTS AND OPERATION

The current year is revival and promising year for the Group. Improved commercial environment has brought

favourable results for and positive bearing on the performance of the Group. For the year ended 30

September 2004, the Group recorded a consolidated turnover of HK$899,173,000, a double-digit of 30.1%

revenue growth from a year ago. Pretax profit for the year was HK$43,651,000, compared to HK$21,937,000

a year ago, representing a substantial increase of 99.0%. The gross profit margin remained at about 12.5%

but net profit for the year experienced a significant jump to HK$35,076,000 from HK$17,303,000 a year ago.

The Group’s results for the year added highlights to the Group’s leading position in the industry. It remained

to be one of the largest manufacturers of electronic calculators and liquid crystal displays (“LCD”) in

Mainland China. Sales of electronic calculators and LCD rose 18.3% and 71.5% respectively. These two

business categories contributed 59.5% and 9.9% respectively of the Group’s turnover for the year. The sales

rise is due to the Group’s expansion on LCD production capacity, growing applications and demand for

electronic calculators and LCD, and also the aggressive efforts by the marketing and research and

development teams. The addition of new STN-LCD production lines continued to support the increasing

demand of LCDs for the year. The Group has introduced new products such as corded telephones and

multi-functional calculators etc. and was also successful in obtaining higher penetration in areas like Dubai,

Russia, Japan, Chili and Brazil.

During the year under review, the Group has also stepped into other market segments by trading computer

components and accessories, such as Random Access Memory (RAM) and providing total solution services.

This business contributed to 3.9% of the total turnover of the Group and was able to generate stable profit.

Branch offices, which were set up in Shenzhen and Xiamen of Mainland China, have enhanced the Group’s

sales and distribution network and have captured certain market share within the region. The new business

has succeeded in building our own portable Moving Picture Experts Group or MPEG4 player solution and

design in several major customers by cooperating with some integrated circuit (“IC”) suppliers and design

houses.

Finance costs went down significantly by 56.6% to HK$2,761,000 as the Group had fully repaid all the bank

loans during the year, which has revealed the strong liquidity and financial position of the Group.



Account receivables also dropped by 16.5% with improved turnover days, on a gross basis, shortened to 81

days on average. Effective control measures have continued to monitor the debtor’s repayment time.

Improvements were also seen in the inventory level with turnover days, on a gross basis, lowered to 124 days.

Overall inventory balance lowered by 8.1% when compared to last year as the Group has tried its efforts to

maintain inventory at a reasonable level.

LIQUIDITY AND FINANCIAL RESOURCES

The Group normally finances its operations with internally generated cash flow and banking facilities provided

by its principal bankers in both Hong Kong and Mainland China. At 30 September 2004, the total

shareholders’ equity of the Group was approximately HK$884,773,000, an increase of 2.9% over last year. The

Group’s cash and bank balances stood at HK$182,507,000. The Group’s bank loans have been fully repaid

and trust receipt loans lowered to HK$11,610,000 this year. During the year, the Group did not use any

financial instruments for any hedging purposes. The gearing ratio, which was computed by dividing the

current liabilities and long term liabilities by shareholders’ equity, has been lowered from 25.6% last year to

20.7% at 30 September 2004. The Group is dedicated to maintaining a sound financial position and

improving the equity return to its shareholders.

CAPITAL STRUCTURE

No repurchases of shares were made during the year.

During the year, 6,000,000 share options lapsed automatically as the grantee of these share options has

ceased to be an eligible employee in the Group. Save for the above, no share options were granted,

exercised, cancelled, or lapsed under the share option schemes of the Company during the year.

PLEDGE OF ASSETS

The Group’s investment property, certain leasehold land and buildings of the Group and time deposits of

HK$3,087,000 of the Group, together with the corporate guarantees given by the Company are used to

secure banking facilities for the Group. At 30 September 2004, such facilities were utilised to the extent of

approximately HK$11,610,000.



APPLICATION OF PROCEEDS OF SHARE OFFER

The remaining balance of about HK$137.3 million of the net proceeds raised from the share offer in 1999 has

been allocated to the investment in the joint venture, Taiwan Communication (Fujian) Company Ltd. As

progress of the projects as implemented by Taiwan Communication (Fujian) Company Ltd. proceeded at a

slower pace than anticipated, the Directors are considering to allocate part of such proceeds to other

investment opportunities. If any specific targets are identified, the Directors will make announcement in

accordance with the applicable rules.

EMPLOYEES AND REMUNERATION POLICIES

The Group has approximately 19,000 full time management, administrative, technical and production staff in

Mainland China and Hong Kong. Their remuneration, promotion and salary review are assessed based on job

responsibilities, work performance, professional experiences and the prevailing industry practice. The Group’s

Directors and employees in Hong Kong joined the Mandatory Provident Fund Scheme. Other staff benefits

include options granted or to be granted under the share option scheme.

FOREIGN EXCHANGE AND CURRENCY RISKS

Since most of the revenue generated from the sale of products and the payment for purchases of materials,

components, equipment and salaries are either made in Hong Kong dollars, Renminbi, or Hong Kong dollars

pegged currencies, no use of financial instruments for hedging purposes is considered necessary because the

exposure to exchange rate fluctuations is minimal.

CONTINGENT LIABILITIES

At 30 September 2004, the Company had contingent liabilities in relation to corporate guarantees executed

by the Company in favour of banks for general banking facilities granted to subsidiaries of the Company

amounting to HK$111,000,000.



PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES

Neither the Company, nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed

securities during the year.

PROSPECTS

The year was challenging for the Group who succeeded in turning in a strong performance by consolidating

its industry leadership and customer base. The Group has returned to its fast track of sales growth and was

proved by the significant revenue growth. The management believes that the Group in the coming year will

even have a better business boost as our sales order books have gone as far to April 2005.

New product research and development will be continued in order to keep abreast of consumer needs and

market trends. Backed up by remarkable performance and expertise in the electronics industry, the Group is

full of confidence to achieve a favourable sales surge in the coming year, predominantly in the market

leading core operations, namely the manufacture and sale of electronic calculators and components. We are

developing new products like Digital Enhanced Cordless Telecommunications (Dect) phones, which are now

commonly used in domestic and corporate environments, Radio Control Clocks, particularly popular in USA,

Germany and Japan, and MP3 players. We anticipate that all these products will appear in the market soon.

Apart from the well-established core businesses, the Group will actively extend its business development to

the computer parts and components market by linking with IC suppliers to build its total solutions. The

management has an aggressive look on the prospect of this business that forecasts an upward sales

performance. Coping with the expansion and with an aim on exploiting the target markets, namely consumer

market, premium products and toys market, personal computer and mobile phones markets and all LCD

related market segments, sales forces in Mainland China will be accordingly enlarged for the present branch

offices and the coming new branch office to be set up in Shanghai of Mainland China.

Subsequent to year end, the Group spreaded to Chengguan and Shanghang in Fujian Province where two

new production plants have been built for the production of electronic calculators and quartz crystals,

respectively. Having possessed a dominant position in major cities in Mainland China, the Group has also

considered to further expanding its facilities inland with abundant labour force to sustain and support future

growth.



We believe that with our existing titanic production base and a further investment in expanding our

manufacturing capabilities to keep pace with the expected demand growth is critical to sustaining our

leadership advantage. Supported by wide spread of distribution network, the Group can attain another level

of corporate development in the year ahead. Given the healthy financial position of the Group, we are

optimistic about the business prospects and the long-term future of the Group.


Chairman

Hong Kong

24 January 2005


BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

DIRECTORS

Executive Directors

Ms. Wong King Ching, Helen, aged 31, is the Chairman of the Group. Ms. Wong is responsible for directing

the Group’s development, formulation of business policies and overall corporate management. She also

oversees the Group’s marketing and sales strategies and activities in Mainland China and the Asia-Pacific

markets. After completion of her studies in the United States of America, Ms. Wong joined the Group in 1996

as an Executive Director and has over 8 years of experience in corporate management in electronics industry.

Ms. Wong King Man, aged 30, is the Deputy Chairman of the Group. She is responsible for overseeing the

Group’s procurement policies and materials management. Ms. Wong graduated from The University of

Toronto with a Bachelor of Arts degree major in Economics. She has participated in the operations of the

Group for more than 7 years. She is the younger sister of Ms. Wong King Ching, Helen.

Mr. Leung Chi Fai, aged 37, is the finance director and the company secretary of the Group. He is

responsible for the finance, accounting and corporate secretarial functions. Prior to joining the Group in

1996, Mr. Leung had 5 years of working experience in an international auditing firm. Mr. Leung is a Fellow

Member of The Association of Chartered Certified Accountants and The Hong Kong Institute of Certified

Public Accountants.

Non-executive Directors

Mr. Kuo Yen Ting, aged 29, holds a Bachelor Degree in Commerce and a Master Degree in Economics from

the University of Toronto, Canada. He is a Chartered Financial Analyst and is currently the Assistant

Relationship Manager of Corporate Banking Group, Citibank, N.A. in Taiwan.

Mr. So Day Wing, aged 56, graduated with a Bachelor of Business Administration degree from the Chinese

University of Hong Kong and also holds a Postgraduate Diploma from the University of Strathclyde. He is a

Member of the Institute of Chartered Accountants of Scotland and a Member of The Hong Kong Institute of

Certified Public Accountants.

Ms. Wong Choi Kam, aged 43, has been re-designated as a non-executive director during the year. Ms. Wong

has over 21 years of experience in the electronics industry and has worked for the Group in the past years.



DIRECTORS (continued)

Non-executive Directors (continued)

Ms. Wong Chun Ying, aged 52, has been working as a manager with a wholly-owned subsidiary of the

Company for over 10 years and has accumulated rich experience in the electronics industry. She is the mother

of Ms. Wong King Ching, Helen and Ms. Wong King Man, both being executive directors of the Company.

Mr. Wong Kim Seong, aged 74, the grandfather of Ms. Wong King Ching, Helen, is the honorary chairman of

the Group. He acts as the Group’s advisor on business development. Mr. Wong has been engaged in the

electronics industry for over 22 years with extensive experience in production, marketing and sales of

electronic products.

Mr. Wong Kun Kim, aged 60, is a registered investment advisor with The Securities and Futures Commission

in Hong Kong. Mr. Wong had previously served as consultants and directors for different listed companies in

Hong Kong, Taiwan, China and United States of America. He has over 32 years of experience working as

senior executives for various multinational corporations engaged in trading, manufacturing, finance and real

estates.

SENIOR MANAGEMENT

Mr. Chen Yun Kai, aged 32, is the research and development manager, who specialises in the design of

moulds. Prior to joining the Group, he has over 10 years of experience in moulds designing.

Mr. Huang Ming Tan, aged 39, is the manager of quality assurance department and is responsible for quality

control functions in Mainland China. He graduated from Fuzhou University and has accumulated over 10 years

of experience in quality assurance and control.

Mr. Li Wei, aged 38, is the assistant technical manager who specialises in printed circuit board production

and development. He has worked for many famous companies and has accumulated over 16 years of

experience in the field.



SENIOR MANAGEMENT (continued)

Mr. Rui Jian Hua, aged 47, is the Deputy General Manager of the Group. He oversees the purchasing and

maintenance of the Group’s production facilities as well as the sales operations in Mainland China factory. Mr.

Rui holds a bachelor’s degree from The Jiangsu Television University, the Mainland China. Prior to joining the

Group in 1996, he worked for various international electronics companies at management level and has 23

years of experience in the electronics industry.

Mr. Xiang Hou Lin, aged 36, is the research and development manager. He has over 11 years of experience

in designing and developing electronic products in certain large electronics manufacturers and he specialises

in designing and developing electronic consumer products in the Group.

Mr. Xu Jian Xing, aged 33, the manager of quartz crystals production department. He has worked for the

Group for 10 years, with focus on the production planning and management of quartz crystals.

Mr. Xu Jing Xing, aged 38, is the deputy finance manager and is responsible for financial and accounting

functions in Mainland China. Prior to joining the Group, he has worked as a senior accountant for over 10

years.

Mr. Zheng Xiang Yang, aged 37, is the assistant production planning manager. He has 14 years of

experience in computing software development and internet management and materials management and

has held related position in the Group for 8 years. He is responsible for internal coordination, materials

management and production planning and control.


REPORT OF THE DIRECTORS

The directors present their annual report and the audited financial statements of the Company and the Group

for the year ended 30 September 2004.

PRINCIPAL ACTIVITIES

The principal activity of the Company is investment holding. The principal activities of the subsidiaries

comprise the design, development, manufacture and sale of a wide range of (1) electronics and related

components and parts (including principally quartz crystals, liquid crystal displays, printed circuit boards and

watch movements); and (2) consumer electronic products (including principally electronic calculators,

electronic watches and clocks and personal data assistants). They are also engaged in the trading of

electronics and related components and parts. During the year, the Group commenced trading of computer

components and accessories.

Save for the above, there were no significant changes in the nature of the principal activities of the Company

and the Group during the year.

RESULTS AND DIVIDENDS

The Group’s profit for the year ended 30 September 2004 and the state of affairs of the Company and the

Group at that date are set out in the financial statements on pages 27 to 76.

The directors recommend the payment of a final dividend of one cent per ordinary share in respect of the

year, to shareholders on the register of members on 21 February 2005. This recommendation has been

incorporated in the financial statements as an allocation of retained profits within the capital and reserves

section of the balance sheet.



SUMMARY FINANCIAL INFORMATION

A summary of the results and of the assets and liabilities of the Group for the last five financial years, as

extracted from the published audited consolidated financial statements and restated as appropriate, is set

out below. The amounts for each year in the five-year financial summary have been adjusted for the effect of

the retrospective change in accounting policy affecting the measurement, recognition and disclosures of

deferred tax assets and liabilities, as detailed in note 2 to the financial statements. This summary does not

form part of the audited financial statements.

Year ended 30 September

RESULTS 2004 2003 2002 2001 2000

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Restated) (Restated) (Restated) (Restated)

Turnover 899,173 691,337 693,260 661,622 1,094,273

Profit before tax 43,651 21,937 33,789 8,044 107,807

Tax (8,575) (4,634) (3,048) (2,574) (6,554)

Net profit from ordinary activities

attributable to shareholders 35,076 17,303 30,741 5,470 101,253



SUMMARY FINANCIAL INFORMATION (continued)

As at 30 September

ASSETS AND LIABILITIES 2004 2003 2002 2001 2000

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

(Restated) (Restated) (Restated) (Restated)

Non-current assets 468,910 465,481 490,773 479,716 391,159

Current assets 598,570 614,352 622,379 620,766 726,806

TOTAL ASSETS 1,067,480 1,079,833 1,113,152 1,100,482 1,117,965

Current liabilities 176,039 212,884 241,135 293,069 251,560

Non-current liabilities 6,668 7,094 18,619 1,438 76,485

TOTAL LIABILITIES 182,707 219,978 259,754 294,507 328,045

NET ASSETS 884,773 859,855 853,398 805,975 789,920

FIXED ASSETS AND INVESTMENT PROPERTY

Details of movements in the fixed assets and investment property of the Group during the year are set out in

note 13 to the financial statements.

SHARE CAPITAL AND SHARE OPTIONS

Details of the share capital and share options of the Company are set out in notes 27 and 28 to the financial

statements, respectively.

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the Company’s bye-laws or the laws of Bermuda which

would oblige the Company to offer new shares on a pro rata basis to existing shareholders.



PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES OF THE COMPANY

Neither the Company nor any of its subsidiaries purchased, redeemed or sold any of the Company’s listed

securities during the year.

RESERVES

Details of movements in the reserves of the Company and the Group during the year are set out in note 29 to

the financial statements and in the consolidated summary statement of changes in equity, respectively.

DISTRIBUTABLE RESERVES

As at 30 September 2004, the Company’s reserves available for distribution, comprising the contributed

surplus and retained profits, amounted to HK$315,542,000. In accordance with the Bermuda Companies Act

1981, the contributed surplus may be distributed in certain circumstances. In addition, the Company’s share

premium account of HK$177,325,000 as at 30 September 2004 may be distributed in the form of fully paid

bonus shares.

MAJOR CUSTOMERS AND SUPPLIERS

In the year under review, sales to the Group’s five largest customers accounted for 27% of the Group’s total

sales for the year and sales to the Group’s largest customer accounted for 7% of the Group’s total sales for

the year. Purchases from the Group’s five largest suppliers accounted for 19% of the Group’s total purchases

for the year and purchases from the Group’s largest supplier accounted for 5% of the Group’s total purchases

for the year.

None of the directors of the Company or any of their associates (as defined in the Rules Governing the

Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”)), or any shareholders

(which, to the best knowledge of the directors, own more than 5% of the Company’s issued share capital) had

any beneficial interest in the Group’s five largest customers or suppliers.



DIRECTORS

The directors of the Company during the year and up to the date of this report were:

Executive directors:

Ms. Wong King Ching, Helen (Chairman)

Mr. Wong Choi Ping (Deputy chairman) (Resigned on 31 May 2004)

Mr. Leung Chi Fai

Ms. Wong King Man (Deputy chairman)

Non-executive directors:

Mr. So Day Wing*

Mr. Wong Kim Seong

Mr. Wong Kun Kim*

Mr. Kuo Yen Ting* (Appointed on 30 September 2004)

Ms. Wong Chun Ying (Appointed on 30 September 2004)

Ms. Wong Choi Kam (Redesignated to become a non-executive

director with effect from 31 May 2004)

* Independent non-executive directors

In accordance with clause 111 of the Company’s bye-laws, Mr. Kuo Yen Ting, Ms. Wong Choi Kam and Ms.

Wong Chun Ying will retire by rotation and, being eligible, will offer themselves for re-election at the

forthcoming annual general meeting.

DIRECTORS’ AND SENIOR MANAGEMENT’S BIOGRAPHIES

Biographical details of the directors of the Company and the senior management of the Group are set out on

pages 12 to 14 of the annual report.



DIRECTORS’ SERVICE CONTRACTS

Ms. Wong King Ching, Helen and Mr. Leung Chi Fai entered into service contracts with the Company for an

initial term of three years commencing from 1 August 1999 which continues thereafter until terminated by not

less than three months’ notice in writing served by either party on the other. The Company has extended the

service contracts with these directors until 31 July 2005.

Apart from the foregoing, no director proposed for re-election at the forthcoming annual general meeting

has a service contract with the Company which is not determinable by the Company within one year without

payment of compensation, other than statutory compensation.

The non-executive directors are subject to retirement by rotation in accordance with the Company’s bye-laws.

DIRECTORS’ INTERESTS IN CONTRACTS

No director had a material interest, either directly or indirectly, in any contract of significance to the business

of the Group to which the Company or any of its subsidiaries was a party during the year.



DIRECTORS’ INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES

At 30 September 2004, the interests of the directors in the share capital of the Company or its associated

corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)), as

recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO, or as

otherwise notified to the Company and the Stock Exchange of Hong Kong Limited (the “Hong Kong Stock

Exchange”) pursuant to the Model Code for Securities Transactions by Directors of Listed Companies, were

as follows:

Long positions in ordinary shares of the Company:

Number of shares held, capacity and nature of interest

Directly Through Percentage of the

beneficially controlled Company’s issued

owned corporation Total share capital

Executive directors:

Ms. Wong King Ching, Helen

and Ms. Wong King Man 200,000 400,000,000 (Note 1) 400,200,000 39.4

Non-executive directors:

Mr. Wong Kim Seong 50,000,000 – 50,000,000 4.9

Ms. Wong Choi Kam – 100,000,000 (Note 2) 100,000,000 9.8

Mr. Kuo Yen Ting 4,452,000 – 4,452,000 0.4

54,652,000 500,000,000 554,652,000 54.5



DIRECTORS’ INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES (continued)

Notes:

1. 400,000,000 shares are beneficially owned by Farnell Profits Limited, the entire issued share capital of which was

previously held by the late Mr. Wong Choi Fung (“Mr. Wong”) and currently forms part of the estate of the late Mr.

Wong. Ms. Wong King Ching, Helen and Ms. Wong King Man, directors of the Company, are beneficiaries of the

said estate, whose interests in the shares of Farnell Profits Limited will not be ascertained until completion of the

administration of estate of the late Mr. Wong. 200,000 shares are directly held and owned by Ms. Wong King

Ching, Helen.

2. These shares are held by Atworth Profits Limited, a company beneficially owned by Ms. Wong Choi Kam.

The interests of the directors in the share options of the Company are separately disclosed in note 28 to the

financial statements.

Save as disclosed above, none of the directors had registered an interest or short position in the shares,

underlying shares or debentures of the Company or any of its associated corporations that was required to be

recorded pursuant to Section 352 of the SFO, or as otherwise notified to the Company and the Hong Kong

Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies.

DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES

Save as disclosed under the heading “Directors’ interests and short positions in shares and underlying shares”

above and in the share option scheme disclosures in note 28 to the financial statements, at no time during

the year were rights to acquire benefits by means of the acquisition of shares in or debentures of the

Company granted to any directors or their respective spouse or minor children, or were any such rights

exercised by them; or was the Company or any of its subsidiaries a party to any arrangement to enable the

directors to acquire such rights in any other body corporate.

SUBSTANTIAL SHAREHOLDERS’ AND OTHER PERSONS’ INTERESTS AND SHORT POSITIONS IN SHARES

AND UNDERLYING SHARES

Save as disclosed under the heading “Directors’ interests and short positions in shares and underlying shares”

above, no person had registered an interest or short position in the shares or underlying shares of the

Company that was required to be recorded pursuant to Section 336 of the SFO.



CONNECTED TRANSACTIONS

The directors have reviewed the connected transactions as defined under the Listing Rules, as set out in note

33 to the financial statements, and confirmed that such transactions were entered into in compliance with the

following conditions:

(i) The audit committee had reviewed the transactions and confirmed that:

(a) the transactions were entered into in the ordinary and usual course of business of the Group;

(b) the transactions were entered into on normal commercial terms (to the extent that there were

comparable transactions), and (where applicable) in accordance with the terms of the

agreements governing such transactions or (where there was no agreement) on terms no less

favourable than those available to or from independent third parties;

(c) the transactions were entered into on terms that are fair and reasonable so far as the

shareholders of the Company are concerned; and

(d) the transactions do not exceed the limit set out in (iii)(d) below.

(ii) Details of the transactions were set out in the Company’s annual report and financial statements as set

out in Rule 14A.45(1) to (5) of the Listing Rules;

(iii) The auditors of the Company have reviewed the transactions and confirmed that:

(a) the transactions were approved by the board of directors;

(b) the transactions were entered into in accordance with the terms of the agreements relating to

the transactions in question;

(c) the transactions were entered into in accordance with the pricing policies of the Group; and

(d) the aggregate consideration paid or received in respect of the transactions in the financial year

reported on did not exceed 3% of the consolidated turnover of the Group as shown in its

audited financial statements.



CODE OF BEST PRACTICE

In the opinion of the directors, the Company complied with the Code of Best Practice (the “Code”) as set out

in Appendix 14 of the Listing Rules throughout the accounting period covered by the annual report, except

that the independent non-executive directors of the Company were not appointed for specific terms as

required by paragraph 7 of the Code, but are subject to retirement by rotation in accordance with the

Company’s bye-laws.

AUDIT COMMITTEE

The Company’s audit committee was established on 6 August 1999 in accordance with the requirements of

the Code for the purposes of reviewing and providing supervision over the financial reporting process and

internal controls of the Group. Members of the audit committee at the date of this report comprised Mr.

Wong Kun Kim, Mr. So Day Wing and Mr. Kuo Yen Ting, the three independent non-executive directors of the

Company. The Group’s financial statements for the year ended 30 September 2004 have been reviewed by

the audit committee, who are of the opinion that such statements comply with the applicable accounting

standards, the Listing Rules and legal requirements, and that adequate disclosures have been made.

AUDITORS

Ernst & Young retire and a resolution for their reappointment as auditors of the Company will be proposed at

the forthcoming annual general meeting.

ON BEHALF OF THE BOARD


Chairman

Hong Kong

24 January 2005


REPORT OF THE AUDITORS

To the members

Sunway International Holdings Limited

(Incorporated in Bermuda with limited liability)

We have audited the financial statements on pages 27 to 76 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 1981, 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

Institute of Certified Public Accountants. An audit includes an 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 judgements made by the directors in the preparation of the financial statements,

and of whether the accounting policies are appropriate to the Company’s and the Group’s circumstances,

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.


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 of

the Group as at 30 September 2004 and of the profit 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.

Ernst & Young

Certified Public Accountants

Hong Kong

24 January 2005


CONSOLIDATED PROFIT AND LOSS ACCOUNT

Year ended 30 September 2004

2004 2003Notes HK$’000 HK$’000

(Restated)

TURNOVER 5 899,173 691,337

Cost of sales (787,311) (605,206)

Gross profit 111,862 86,131

Other revenue and gains 5 4,266 1,331Selling and distribution costs (6,722) (5,505)Administrative expenses (41,438) (42,435)Provision for doubtful debts (21,501) (9,514)Other operating expenses (1,892) (2,066)

PROFIT FROM OPERATING ACTIVITIES 6 44,575 27,942

Finance costs 7 (2,761) (6,368)

Share of profit of a jointly-controlled entity 1,837 363

PROFIT BEFORE TAX 43,651 21,937

Tax 9 (8,575) (4,634)

NET PROFIT FROM ORDINARY ACTIVITIESATTRIBUTABLE TO SHAREHOLDERS 10, 29 35,076 17,303

DIVIDEND 11 10,160 10,160

EARNINGS PER SHARE 12Basic 3.5 cents 1.7 cents

Diluted N/A N/A


CONSOLIDATED BALANCE SHEET

30 September 2004

2004 2003Notes HK$’000 HK$’000

(Restated)NON-CURRENT ASSETSFixed assets 13 426,498 437,568Interest in a jointly-controlled entity 15 16,081 16,288Long term investments 16 4,980 11,625Deferred tax assets 26 1,515 –Deposits paid for acquisition of fixed assets 17 19,836 –

468,910 465,481

CURRENT ASSETSInventories 18 240,231 261,294Accounts receivable 19 158,103 189,444Prepayments, deposits and other receivables 14,611 23,312Due from a related company 20 2,940 1,412Short term investments 21 – 7,842Tax recoverable 178 –Pledged time deposits 22 3,087 3,087Cash and cash equivalents 22 179,420 127,961

598,570 614,352

CURRENT LIABILITIESAccounts payable 23 111,721 71,102Accrued liabilities and other payables 32,563 31,316Interest-bearing bank borrowings 24 11,610 99,025Finance lease payable 25 – 94Tax payable 20,145 11,347

176,039 212,884

NET CURRENT ASSETS 422,531 401,468

TOTAL ASSETS LESS CURRENT LIABILITIES 891,441 866,949

NON-CURRENT LIABILITIESDeferred tax liabilities 26 6,668 7,094

884,773 859,855


CONSOLIDATED BALANCE SHEET

30 September 2004

2004 2003Notes HK$’000 HK$’000

(Restated)

CAPITAL AND RESERVESIssued capital 27 101,600 101,600Reserves 29 773,013 748,095Proposed final dividend 11 10,160 10,160

884,773 859,855

Director Director


CONSOLIDATED SUMMARY STATEMENT OF CHANGES IN EQUITY


2004 2003Notes HK$’000 HK$’000

(Restated)

Total equity at beginning of year:As previously reported 866,949 861,014Prior year adjustment 26 (7,094) (7,616)

As restated 859,855 853,398

Exchange differences on translation of the financialstatements of foreign subsidiaries and net gains/(losses)not recognised in the profit and loss account 29 2 (686)

Net profit for the year attributable to shareholders 29 35,076 17,303

Dividend paid (10,160) (10,160)

Total equity at end of year 884,773 859,855


CONSOLIDATED CASH FLOW STATEMENT


2004 2003Notes HK$’000 HK$’000

CASH FLOWS FROM OPERATING ACTIVITIESProfit before tax 43,651 21,937Adjustments for:

Depreciation 6 53,742 45,585Loss/(gain) on disposal of fixed assets 6 117 (19)Interest income 5 (175) (341)Revaluation deficit/(surplus) on an investment property 5,6 (550) 90Finance costs 7 2,761 6,368Provision for doubtful debts 21,501 9,514Write-off and provision for other receivables 6 – 1,768Provision for inventories 6 16,178 –Gain on revaluation of short term investments 5 (53) (42)Gain on disposal of long term investments 5 (1,089) –Share of profit of a jointly-controlled entity (1,837) (363)

Operating profit before working capital changes 134,246 84,497Decrease/(increase) in inventories 4,885 (21,837)Decrease in accounts receivable 9,840 14,515Decrease in prepayments, deposits and other receivables 8,701 6,916Decrease/(increase) in an amount due from a related company (1,528) 984Increase in accounts payable 40,619 15,041Increase in accrued liabilities and other payables 1,247 704

Cash generated from operations 198,010 100,820Interest received 175 341Interest paid (2,757) (6,353)Interest element of a finance lease rental payment (4) (15)Hong Kong profits tax paid (983) (790)Mainland China corporate income tax paid (687) (1,982)

Net cash inflow from operating activities 193,754 92,021

CASH FLOWS FROM INVESTING ACTIVITIESPurchases of fixed assets (42,279) (8,103)Proceeds from disposal of fixed assets 40 1,060Additions to construction in progress – (8,915)Deposits paid for acquisition of fixed assets (19,836) –Proceeds from disposal of short term investments 7,895 –Purchases of long term investments (4,980) (7,800)Proceeds from disposal of long term investments 12,714 –Repayment from/(advances to) a jointly-controlled entity 1,818 (4,043)

Net cash outflow from investing activities (44,628) (27,801)

Net cash inflow before financing activities – page 32 149,126 64,220


CONSOLIDATED CASH FLOW STATEMENT


2004 2003Notes HK$’000 HK$’000

Net cash inflow before financing activities – page 31 149,126 64,220

CASH FLOWS FROM FINANCING ACTIVITIESIncrease/(decrease) in trust receipt loans (1,952) 1,238Capital element of a finance lease rental payment (94) (102)New bank loans 84,545 152,735Repayment of bank loans (170,008) (211,254)Dividend paid (10,160) (10,160)

Net cash outflow from financing activities (97,669) (67,543)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 51,457 (3,323)Cash and cash equivalents at beginning of year 131,048 135,057Effect of foreign exchange rate changes, net 2 (686)

CASH AND CASH EQUIVALENTS AT END OF YEAR 182,507 131,048

ANALYSIS OF BALANCES OF CASH AND CASH EQUIVALENTSCash and bank balances 22 179,420 127,961Time deposits with original maturity of less than

three months when acquired, pledged as securityfor trust receipt loans facilities 22 3,087 3,087

182,507 131,048


BALANCE SHEET

30 September 2004

2004 2003Notes HK$’000 HK$’000

NON-CURRENT ASSETSInterests in subsidiaries 14 606,194 615,383

CURRENT ASSETSShort term investments 21 – 7,842Bank balance 22 27 52

27 7,894

CURRENT LIABILITIESAccrued liabilities and other payables 1,085 1,016

NET CURRENT ASSETS/(LIABILITIES) (1,058) 6,878

605,136 622,261

CAPITAL AND RESERVESIssued capital 27 101,600 101,600Reserves 29 493,376 510,501Proposed final dividend 11 10,160 10,160

605,136 622,261

Director Director


NOTES TO FINANCIAL STATEMENTS

30 September 2004

1. CORPORATE INFORMATION

The Company was incorporated in Bermuda with limited liability under the Bermuda Companies Act1981 as an exempted company, on 18 August 1998. The registered office of the Company is located atClarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

During the year, the Company’s principal activity was investment holding. The principal activities of thesubsidiaries comprised the design, development, manufacture and sale of a wide range of (1)electronics and related components and parts (including principally quartz crystals, liquid crystaldisplays, printed circuit boards and watch movements); and (2) consumer electronic products (includingprincipally electronic calculators, electronic watches and clocks and personal data assistants). Theywere also engaged in the trading of electronics and related components and parts. During the year,the Group commenced trading of computer components and accessories.

Save for the above, there were no significant changes in the nature of the Company’s and Group’sprincipal activities during the year.

2. IMPACT OF A REVISED HONG KONG STATEMENT OF STANDARD ACCOUNTING PRACTICE(“SSAP”)

The following revised SSAP and new Interpretation are effective for the first time for the current year’sfinancial statements and have had a significant impact thereon:

• SSAP 12 (Revised): “Income taxes”

• Interpretation 20: “Income taxes – Recovery of revalued non-depreciable assets”

The SSAP and Interpretation prescribe new accounting measurement and disclosure practices. Themajor effects on the Group’s accounting policies and on the amounts disclosed in these financialstatements of adopting the SSAP and Interpretation are summarised as follows:

SSAP 12 (Revised) prescribes the accounting for income taxes payable or recoverable, arising from thetaxable profit or loss for the current period (current tax); and income taxes payable or recoverable infuture periods, principally arising from taxable and deductible temporary differences and thecarryforward of unused tax losses (deferred tax).



30 September 2004

2. IMPACT OF A REVISED HONG KONG STATEMENT OF STANDARD ACCOUNTING PRACTICE(“SSAP”) (continued)

The principal impact of the revision of this SSAP on these financial statements is described below:

Measurement and recognition:

• deferred tax assets and liabilities relating to the differences between capital allowances for taxpurposes and depreciation for financial reporting purposes and other taxable and deductibletemporary differences are generally fully provided for, whereas previously the deferred tax wasrecognised for timing differences only to the extent that it was probable that the deferred taxasset or liability would crystallise in the foreseeable future;

• a deferred tax liability has been recognised on the revaluation of the Group’s investmentproperty, leasehold land and buildings, plant, machinery and office equipment, and motorvehicles; and

• a deferred tax asset has been recognised for tax losses arising in the current/prior periods to theextent that it is probable that there will be sufficient future taxable profits against which suchlosses can be utilised.

Disclosures:

• deferred tax assets and liabilities are presented separately on the balance sheet, whereaspreviously they were presented on a net basis; and

• the related note disclosures are now more extensive than previously required. These disclosuresare presented in notes 9 and 26 to the financial statements and include a reconciliation betweenthe accounting profit and the tax expense for the year.

Further details of these changes and the prior year adjustments arising from them are included in theaccounting policy for deferred tax in note 3 and in note 26 to the financial statements.

Interpretation 20 requires that a deferred tax asset or liability that arises from the revaluation of certainnon-depreciable assets and investment properties is measured based on the tax consequences thatwould follow from the recovery of the carrying amount of that asset through sale. This policy has beenapplied by the Group in respect of the revaluation of its investment property in the deferred taxcalculated under SSAP 12.



30 September 2004

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Statements of StandardAccounting Practice, accounting principles generally accepted in Hong Kong and the disclosurerequirements of the Hong Kong Companies Ordinance. They have been prepared under the historicalcost convention, except for the periodic remeasurement of the investment property, certain fixedassets and long term investments, and short term investments, as further explained below.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and itssubsidiaries for the year ended 30 September 2004. The results of subsidiaries acquired or disposed ofduring the year are consolidated from or to their effective dates of acquisition or disposal,respectively. All significant intercompany transactions and balances within the Group are eliminated onconsolidation.

Subsidiaries

A subsidiary is a company whose financial and operating policies the Company controls, directly orindirectly, so as to obtain benefits from its activities.

The results of subsidiaries are included in the Company’s profit and loss account to the extent ofdividends received and receivable. The Company’s interests in subsidiaries are stated at cost less anyimpairment losses.

Joint venture companies

A joint venture company is a company set up by contractual arrangement, whereby the Group andother parties undertake an economic activity. The joint venture company operates as a separate entityin which the Group and the other parties have an interest.

The joint venture agreement between the venturers stipulates the capital contributions of the jointventure parties, the duration of the joint venture and the basis on which the assets are to be realisedupon its dissolution. The profits and losses from the joint venture company’s operations and anydistributions of surplus assets are shared by the venturers, either in proportion to their respectivecapital contributions, or in accordance with the terms of the joint venture agreement.



30 September 2004

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Joint venture companies (continued)

A joint venture company is treated as:

(a) a subsidiary, if the Company has unilateral control, directly or indirectly, over the joint venturecompany;

(b) a jointly-controlled entity, if the Company does not have unilateral control, but has joint control,directly or indirectly, over the joint venture company;

(c) an associate, if the Company does not have unilateral or joint control, but holds, directly orindirectly, generally not less than 20% of the joint venture company’s registered capital and is ina position to exercise significant influence over the joint venture company; or

(d) a long term investment, if the Company holds, directly or indirectly, less than 20% of the jointventure company’s registered capital and has neither joint control of, nor is in a position toexercise significant influence over, the joint venture company.

Jointly-controlled entity

A jointly-controlled entity is a joint venture company which is subject to joint control, resulting in noneof the participating parties having unilateral control over the economic activity of the jointly-controlledentity.

The Group’s share of the post-acquisition results and reserves of the jointly-controlled entity isincluded in the consolidated profit and loss account and consolidated reserves, respectively. TheGroup’s interest in the jointly-controlled entity is stated in the consolidated balance sheet at theGroup’s share of net assets under the equity method of accounting, less any impairment losses.

Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control theother party or exercise significant influence over the other party in making financial and operatingdecisions. Parties are also considered to be related if they are subject to common control or commonsignificant influence. Related parties may be individuals or corporate entities.



30 September 2004


Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment ofany asset, or whether there is any indication that an impairment loss previously recognised for an assetin prior years may no longer exist or may have decreased. If any such indication exists, the asset’srecoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of theasset’s value in use or its net selling price.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverableamount. An impairment loss is charged to the profit and loss account in the period in which it arises,unless the asset is carried at a revalued amount, when the impairment loss is accounted for inaccordance with the relevant accounting policy for that revalued asset.

A previously recognised impairment loss is reversed only if there has been a change in the estimatesused to determine the recoverable amount of an asset, however not to an amount higher than thecarrying amount that would have been determined (net of any depreciation), had no impairment lossbeen recognised for the asset in prior years.

A reversal of an impairment loss is credited to the profit and loss account in the period in which itarises, unless the asset is carried at a revalued amount, when the reversal of the impairment loss isaccounted for in accordance with the relevant accounting policy for that revalued asset.

Fixed assets and depreciation

Fixed assets, other than investment property and construction in progress, are stated at cost orvaluation less accumulated depreciation and any impairment losses. The cost of an asset comprises itspurchase price and any directly attributable costs of bringing the asset to its working condition andlocation for its intended use. Expenditure incurred after fixed assets have been put into operation,such as repairs and maintenance, is normally charged to the profit and loss account in the period inwhich it is incurred. In situations where it can be clearly demonstrated that the expenditure hasresulted in an increase in the future economic benefits expected to be obtained from the use of thefixed asset, the expenditure is capitalised as an additional cost of that asset.

Changes in the values of fixed assets, other than the investment property, are dealt with as movementsin the revaluation reserve. If the total of this reserve is insufficient to cover a deficit, on an individualasset basis, the excess of the deficit is charged to the profit and loss account. Any subsequentrevaluation surplus is credited to the profit and loss account to the extent of the deficit previouslycharged. On disposal of a revalued asset, the relevant portion of the revaluation reserve realised inrespect of previous valuations is transferred to retained profits as a movement in reserves.



30 September 2004


Fixed assets and depreciation (continued)

Depreciation is calculated on the straight-line basis to write off the cost or valuation of each asset overits estimated useful life. The principal annual rates used for this purpose are as follows:

Leasehold land held in Mainland Chinaunder medium term land use rights Over the period of the land use rights

Leasehold land held in Hong Kongunder medium term leases Over the lease terms

Buildings 2% to 5%Leasehold improvements 10%Plant, machinery and office equipment 10%Moulds 10%Motor vehicles 10%Furniture and fixtures 10%

The gain or loss on disposal or retirement of a fixed asset recognised in the profit and loss account isthe difference between the net sales proceeds and the carrying amount of the relevant asset at thetime of disposal.

Construction in progress represents buildings and structures under construction, which is stated at costless any impairment losses, and is not depreciated. Cost comprises the direct costs of construction,and capitalised borrowing charges on related borrowed funds during the period of construction.Construction in progress is reclassified to the appropriate category of fixed assets when completedand ready for use.

Investment property

Investment property is an interest in land and building in respect of which construction work anddevelopment have been completed and which is intended to be held on a long term basis for itsinvestment potential, any rental income being negotiated at arm’s length. Such property is notdepreciated and is stated at its open market value on the basis of annual professional valuationperformed at the end of each financial year.

Changes in the value of investment property are dealt with as movements in the investment propertyrevaluation reserve. If the total of this reserve is insufficient to cover a deficit, on a portfolio basis, theexcess of the deficit is charged to the profit and loss account. Any subsequent revaluation surplus iscredited to the profit and loss account to the extent of the deficit previously charged.

On disposal of an investment property, the relevant portion of the investment property revaluationreserve realised in respect of previous valuations is released to the profit and loss account.



30 September 2004


Leased assets

Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, otherthan legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of theleased asset is capitalised at the present value of the minimum lease payments and recorded togetherwith the obligation, excluding the interest element, to reflect the purchase and financing. Assets heldunder capitalised finance leases are included in fixed assets and depreciated over the shorter of thelease terms and the estimated useful lives of the assets. The finance costs of such leases are chargedto the profit and loss account so as to provide a constant periodic rate of charge over the lease terms.

Leases where substantially all the rewards and risks of ownership of assets remain with the lessors areaccounted for as operating leases. Where the Group is the lessor, assets leased by the Group underoperating leases are included in non-current assets and rentals receivable under the operating leasesare credited to the profit and loss account on the straight-line basis over the lease terms. Where theGroup is the lessee, rentals payable under the operating leases are charged to the profit and lossaccount on the straight-line basis over the lease terms.

Long term investments

Long term investments in unlisted equity securities are intended to be held on a continuing basis foridentified long term purposes documented at the time of acquisition or change of purpose. Suchinvestments are stated at cost less any impairment losses, on an individual investment basis.

When a decline in the fair value of a security below its carrying amount has occurred, unless there isevidence that the decline is temporary, the carrying amount of the security is reduced to its fair value,as estimated by the directors. The amount of the impairment is charged to the profit and loss accountfor the period in which it arises. When the circumstances and events which led to the impairment invalue cease to exist and there is persuasive evidence that the new circumstances and events will persistfor the foreseeable future, the amount of the impairment previously charged is credited to the profitand loss account to the extent of the amount previously charged.

Long term investments in debt securities redeemable at fixed dates are intended to be held tomaturity and are stated at amortised cost less any impairment losses, on an individual investment basis.



30 September 2004


Short term investments

Certificates of deposit redeemable at fixed dates are intended to be held to maturity and are stated atamortised cost less any impairment losses, on an individual investment basis. Investments other thancertificates of deposit were stated at their fair values at the balance sheet date, on an individualinvestment basis. The gains or losses arising from changes in the fair values of such investments arecredited or charged to the profit and loss account in the period in which they arise.

Inventories

Inventories are stated at the lower of cost and net realisable value after making due allowances forobsolete or slow-moving items. Cost is determined on the first-in, first-out basis and, in the case ofwork in progress and finished goods, comprises direct materials, direct labour and an appropriateproportion of overheads. Net realisable value is based on estimated selling prices less any estimatedcosts to be incurred to completion and disposal.

Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the profit and loss account,or in equity if it relates to items that are recognised in the same or a different period directly in equity.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheetdate between the tax bases of assets and liabilities and their carrying amounts for financial reportingpurposes.

Deferred tax liabilities are recognised for all taxable temporary differences:

• except where the deferred tax liability arises from goodwill or the initial recognition of an assetor liability and, at the time of the transaction, affects neither the accounting profit nor taxableprofit or loss; and

• in respect of taxable temporary differences associated with interests in subsidiaries and ajointly-controlled entity, except where the timing of the reversal of the temporary differencescan be controlled and it is probable that the temporary differences will not reverse in theforeseeable future.



30 September 2004


Income tax (continued)

Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused taxassets and unused tax losses, to the extent that it is probable that taxable profit will be availableagainst which the deductible temporary differences, and the carryforward of unused tax assets andunused tax losses can be utilised:

• except where the deferred tax asset relating to the deductible temporary differences arises fromthe initial recognition of an asset or liability and, at the time of the transaction, affects neitherthe accounting profit nor taxable profit or loss; and

• in respect of deductible temporary differences associated with interests in subsidiaries and ajointly-controlled entity, deferred tax assets are only recognised to the extent that it is probablethat the temporary differences will reverse in the foreseeable future and taxable profit will beavailable against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to theextent that it is no longer probable that sufficient taxable profit will be available to allow all or part ofthe deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets arerecognised to the extent that it is probable that sufficient taxable profit will be available to allow all orpart of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to theperiod when the asset is realised or the liability is settled, based on tax rates (and tax laws) that havebeen enacted or substantively enacted at the balance sheet date.

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and whenthe revenue can be measured reliably, on the following bases:

(a) from the sale of goods, when the significant risks and rewards of ownership have beentransferred to the buyer, provided that the Group maintains neither managerial involvement tothe degree usually associated with ownership, nor effective control over the goods sold;

(b) rental income, on a time proportion basis over the lease terms; and

(c) interest income, on a time proportion basis taking into account the principal outstanding andthe effective interest rate applicable.



30 September 2004


Employee benefits

Employment Ordinance long service payments

Certain of the Group’s employees have completed the required number of years of service to theGroup in order to be eligible for long service payments under the Hong Kong Employment Ordinancein the event of the termination of their employment. The Group is liable to make such payments in theevent that such a termination of employment meets the circumstances specified in the EmploymentOrdinance.

A provision has not been recognised in respect of such possible payments, as it is not consideredprobable that the situation will result in a material future outflow of resources from the Group.

Pension schemes

The Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the“MPF Scheme”) under the Mandatory Provident Fund Schemes Ordinance for all of its employees.Contributions are made based on a percentage of the employees’ basic salaries and are charged to theprofit and loss account as they become payable in accordance with the rules of the MPF Scheme. Theassets of the MPF Scheme are held separately from those of the Group in an independentlyadministered fund. The Group’s employer contributions vest fully with the employees when contributedinto the MPF Scheme.

The employees of the Group’s subsidiaries which operate in Mainland China are required to participatein a central pension scheme operated by the local municipal government. The contributions arecharged to the profit and loss account as they become payable in accordance with the rules of thecentral pension scheme.

Share option scheme

The Company operates a share option scheme for the purpose of providing incentives and rewards toeligible participants who contribute to the success of the Group’s operations. The financial impact ofshare options granted under the share option scheme is not recorded in the Company’s or the Group’sbalance sheet until such time as the options are exercised, and no charge is recorded in the profit andloss account or balance sheet for their cost. Upon the exercise of share options, the resulting sharesissued are recorded by the Company as additional share capital at the nominal value of the shares, andthe excess of the exercise price per share over the nominal value of the shares is recorded by theCompany in the share premium account. Options which are cancelled prior to their exercise date, orwhich lapse, are deleted from the register of outstanding options.



30 September 2004


Dividends

Final dividends proposed by the directors are classified as a separate allocation of retained profitswithin the capital and reserves section of the balance sheet, until they have been approved by theshareholders in a general meeting. When these dividends have been approved by the shareholders anddeclared, they are recognised as a liability.

Foreign currencies

Foreign currency transactions are recorded at the applicable exchange rates ruling at the transactiondates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date aretranslated at the applicable exchange rates ruling at that date. Exchange differences are dealt with inthe profit and loss account.

On consolidation, the financial statements of overseas subsidiaries and a jointly-controlled entity aretranslated into Hong Kong dollars using the net investment method. The profit and loss accounts ofoverseas subsidiaries and the jointly-controlled entity are translated into Hong Kong dollars at theweighted average exchange rates for the year, and their balance sheets are translated into Hong Kongdollars at the exchange rates ruling at the balance sheet date. The resulting translation differences areincluded in the exchange fluctuation reserve.

For the purpose of the consolidated cash flow statement, the cash flows of overseas subsidiaries aretranslated into Hong Kong dollars at the exchange rates ruling at the dates of the cash flows.Frequently recurring cash flows of overseas subsidiaries which arise throughout the year are translatedinto Hong Kong dollars at the weighted average exchange rates for the year.

Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash onhand and demand deposits, and short term highly liquid investments which are readily convertible intoknown amounts of cash and which are subject to an insignificant risk of changes in value, and have ashort maturity of generally within three months when acquired, less bank overdrafts which arerepayable on demand and form an integral part of the Group’s cash management.

For the purpose of the consolidated balance sheet, cash and cash equivalents comprise cash on handand at banks, including term deposits, which are not restricted as to use.



30 September 2004

4. SEGMENT INFORMATION

Segment information is presented by way of two segment formats: (i) on a primary segment reportingbasis, by business segment; and (ii) on a secondary segment reporting basis, by geographical segment.

The Group’s operating businesses are structured and managed separately, according to the nature oftheir operations and the products they provide. Each of the Group’s business segments represents astrategic business unit that offers products which are subject to risks and returns that are different fromthose of the other business segments. Summary details of the business segments are as follows:

(a) the electronic components and parts segment consists of the design, development, manufactureand sale of electronic and related components and parts;

(b) the consumer electronic products segment consists of the design, development, manufactureand sale of consumer electronic products; and

(c) the trading segment consists of the trading of integrated circuits and computer components andaccessories.

In determining the Group’s geographical segments, revenues are attributed to the segments based onthe location of the customers, and assets are attributed to the segments based on the location of theassets.



30 September 2004

4. SEGMENT INFORMATION (continued)

(a) Business segments

The following tables present revenue, results and certain asset, liability and expenditureinformation for the Group’s business segments.

Group Trading ofintegrated circuits

and computerElectronic Consumer components and

components and parts electronic products accessories Consolidated2004 2003 2004 2003 2004 2003 2004 2003

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000(Restated)

Segment revenue:Sales to external

customers 217,165 163,275 628,267 488,058 53,741 40,004 899,173 691,337Other revenue 802 98 1,839 409 21 20 2,662 527

Total 217,967 163,373 630,106 488,467 53,762 40,024 901,835 691,864

Segment results 6,771 7,167 39,782 19,503 (2,663) 1,503 43,890 28,173

Interest and unallocatedother revenue and gains 1,604 804

Unallocated expenses (919) (1,035)

Profit from operatingactivities 44,575 27,942

Finance costs (2,761) (6,368)Share of profit of a

jointly-controlled entity 1,837 363

Profit before tax 43,651 21,937Tax (8,575) (4,634)

Net profit from ordinaryactivities attributableto shareholders 35,076 17,303



30 September 2004


(a) Business segments (continued)




HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Segment assets 376,536 380,459 390,196 433,620 37,454 41,333 804,186 855,412Interest in a

jointly-controlled entity 16,081 16,288Unallocated assets 247,213 208,133

Total assets 1,067,480 1,079,833

Segment liabilities 46,455 34,229 87,039 47,414 15,224 12,188 148,718 93,831Unallocated liabilities 33,989 126,147

Total liabilities 182,707 219,978

Other segment information:

Capital expenditure 25,967 2,723 14,296 14,264 – – 40,263 16,987Unallocated capital

expenditure 2,016 31

42,279 17,018

Depreciation 30,118 21,448 22,198 22,723 – – 52,316 44,171Unallocated depreciation 1,426 1,414

53,742 45,585

Provision for inventories 4,063 – 7,883 – 4,232 – 16,178 –

Provision for doubtfuldebts 4,906 3,728 15,794 4,901 801 885 21,501 9,514



30 September 2004


(a) Business segments (continued)




HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Other segment information:(continued)

Revaluation surplus/(deficit) on aninvestment property 550 (90)

(b) Geographical segments

The following table presents revenue and certain asset and expenditure information for theGroup’s geographical segments.

Group Other American European African

Hong Kong Mainland China Asian countries countries countries countries Consolidated

2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003 2004 2003

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Segment revenue:

Sales to external

customers 208,383 159,750 110,667 113,136 152,396 115,836 176,493 115,954 153,141 110,046 98,093 76,615 899,173 691,337

Other segment

information:

Segment assets 218,310 156,239 829,914 875,322 18,783 7,974 473 15,824 – 14,006 – 10,468 1,067,480 1,079,833

Capital

expenditure 1,141 31 41,138 16,987 – – – – – – – – 42,279 17,018



30 September 2004

5. TURNOVER, OTHER REVENUE AND GAINS

Turnover represents the net invoiced value of goods sold, after allowances for returns and tradediscounts. An analysis of the Group’s other revenue and gains is as follows:

2004 2003HK$’000 HK$’000

Other revenueInterest income 175 341Net rental income 283 420Sale of by-products 1,241 40Others 875 488

2,574 1,289

GainsGain on disposal of long term investments 1,089 –Gain on revaluation of short term investments 53 42Revaluation surplus on an investment property 550 –

1,692 42

4,266 1,331



30 September 2004

6. PROFIT FROM OPERATING ACTIVITIES

The Group’s profit from operating activities is arrived at after charging/(crediting):

2004 2003HK$’000 HK$’000

Cost of inventories sold 787,311 605,206Depreciation 53,742 45,585Minimum lease payments under operating leases

in respect of land and buildings 769 545Auditors’ remuneration 930 930Staff costs (excluding directors’ remuneration – note 8(a)):

Wages, salaries and allowances 137,133 111,823Pension schemes contributions (defined contribution schemes)*** 3,845 4,073

140,978 115,896

Write-off and provision for other receivables* – 1,768Provision for inventories** 16,178 –Revaluation deficit on an investment property – 90Exchange losses/(gains), net 1,725 (56)Loss/(gain) on disposal of fixed assets 117 (19)

The cost of inventories sold includes direct staff costs and depreciation of approximatelyHK$176,165,000 (2003: HK$142,337,000) which are also included in the respective total amountsdisclosed above for each of these types of expenses.

* Included in “Other operating expenses” on the face of the consolidated profit and loss account.

** Included in “Cost of sales” on the face of the consolidated profit and loss account.

*** As at 30 September 2004, the Group had no forfeited contributions available to reduce its contributions tothe pension scheme in future years (2003: Nil).



30 September 2004

7. FINANCE COSTS

Group2004 2003

HK$’000 HK$’000

Interest on bank loans wholly repayable within five years 2,757 6,353Interest on a finance lease 4 15

2,761 6,368

8. DIRECTORS’ AND FIVE HIGHEST PAID EMPLOYEES’ REMUNERATION

(a) Directors’ remuneration

Directors’ remuneration for the year, disclosed pursuant to the Rules Governing the Listing ofSecurities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and Section 161 ofthe Hong Kong Companies Ordinance, is as follows:

Group2004 2003

HK$’000 HK$’000

Fees 330 240

Other emoluments:Salaries and allowances 8,176 9,093Pension scheme contributions 42 60

8,218 9,153

8,548 9,393

Fees represent HK$330,000 (2003: HK$240,000) payable to the independent non-executivedirectors. There were no other emoluments payable to the independent non-executive directorsduring the year (2003: Nil).



30 September 2004

8. DIRECTORS’ AND FIVE HIGHEST PAID EMPLOYEES’ REMUNERATION (continued)

(a) Directors’ remuneration (continued)

The number of directors whose remuneration fell within the following bands is as follows:

Number of directors2004 2003

Nil to HK$1,000,000 8 4HK$1,000,001 to HK$1,500,000 – –HK$1,500,001 to HK$2,000,000 – 1HK$2,000,001 to HK$2,500,000 1 3HK$2,500,001 to HK$3,000,000 1 –

10 8

There was no arrangement under which a director waived or agreed to waive any remunerationduring the year (2003: Nil).

(b) Five highest paid employees’ remuneration

The five highest paid employees during the year included five (2003: five) directors, details ofwhose remuneration are set out in (a) above.



30 September 2004

9. TAXGroup

2004 2003HK$’000 HK$’000

(Restated)Current – Hong Kong

Charge for the year 405 2,208Under/(over) – provision in prior years (119) 68

Current – Mainland ChinaCharge for the year 7,794 2,880Underprovision in prior years 2,210 –

Deferred tax (note 26) (1,941) (522)

8,349 4,634

Share of tax attributable to a jointly-controlled entity 226 –

Total tax charge for the year 8,575 4,634

Hong Kong profits tax has been provided at the rate of 17.5% (2003: 17.5%) on the estimatedassessable profits arising in Hong Kong during the year. Taxes on profits assessable in Mainland Chinahave been calculated at the rates of tax prevailing in Mainland China, based on existing legislation,interpretations and practices in respect thereof.

Pursuant to a tax concession granted in prior years, the income tax rate applicable to Xinwei ElectronicIndustrial Co. Ltd., Fujian (“Fujian Xinwei”) was 15%. On 14 April 2003, an additional tax concessionwas granted by the local municipal tax bureau, under which the effective income tax rate applicable toFujian Xinwei was revised to 10% for the period from 1 January 2003 to 31 December 2003, in place ofthe previous tax arrangements resulting from the merger of Fujian Xinwei and the Group’s previousoperating subsidiary, Putian Kangarway Industrial Co. Ltd., which was dissolved immediately after itsmerger with Fujian Xinwei on 3 October 1996 (the “Previous Arrangement”). As a result, for the periodfrom 1 October 2002 to 31 December 2002, a provision for income tax had been made at theweighted average rate of 10%, based on the Previous Arrangement. For the period from 1 January2003 to 30 September 2003, a provision for income tax has been made at a tax rate of 10% for theentire assessable profit attributable to Fujian Xinwei. For the year ended 30 September 2003, theeffective corporate income tax rate applicable to Fujian Xinwei was 10% on a weighted average basis.

On 5 April 2004, a further additional tax concession has been granted by the local municipal taxbureau, under which the effective income tax rate applicable to Fujian Xinwei has remained at 10% forthe period from 1 January 2004 to 31 December 2004. As a result, for the year ended 30 September2004, a provision for income tax has been made at a tax rate of 10% for the entire assessable profitattributable to Fujian Xinwei.



30 September 2004

9. TAX (continued)

A reconciliation of the tax expense applicable to profit/(loss) before tax using the statutory rates forthe region in which the Company, its subsidiaries and jointly-controlled entity are domiciled to the taxexpense at the effective tax rates, is as follows:

Group – 2004

MainlandHong Kong China Total

HK$’000 HK$’000 HK$’000

Profit/(loss) before tax (8,386) 52,037 43,651

Tax at the statutory tax rate (1,467) 17,172 15,705Lower tax rate for specific province

or local authority – (11,922) (11,922)Adjustments in respect of current tax

of previous periods (119) 2,210 2,091Income not subject to tax (302) – (302)Expenses not deductible for tax 314 733 1,047Tax losses utilised from previous periods (335) – (335)Tax losses not recognised 2,291 – 2,291

Tax charge at the Group’s effective rate 382 8,193 8,575

Group – 2003

MainlandHong Kong China Total

HK$’000 HK$’000 HK$’000

Profit/(loss) before tax (1,144) 23,081 21,937

Tax at the statutory tax rate (201) 7,617 7,416Lower tax rate for specific province

or local authority – (5,344) (5,344)Adjustments in respect of current tax

of previous periods 68 – 68Income not subject to tax (106) – (106)Expenses not deductible for tax 481 – 481Tax losses utilised from previous periods (353) (45) (398)Tax losses not recognised 2,387 130 2,517

Tax charge at the Group’s effective rate 2,276 2,358 4,634



30 September 2004

10. NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS

The net loss from ordinary activities attributable to shareholders for the year ended 30 September2004 dealt with in the financial statements of the Company, was HK$6,965,000 (2003: HK$7,781,000)(note 29).

11. DIVIDEND

2004 2003HK$’000 HK$’000

Proposed final – 1 cent (2003: 1 cent) per ordinary share 10,160 10,160

The proposed final dividend for the year is subject to the approval of the Company’s shareholders atthe forthcoming annual general meeting.

12. EARNINGS PER SHARE

The calculation of basic earnings per share is based on the net profit from ordinary activitiesattributable to shareholders for the year of HK$35,076,000 (2003 (Restated): HK$17,303,000) and theweighted average of 1,016,001,301 (2003: 1,016,001,301) ordinary shares in issue during the year.

Diluted earnings per share amounts for the years ended 30 September 2004 and 2003 have not beendisclosed, as all share options outstanding during these years had an anti-dilutive effect on the basicearnings per share for these years.



30 September 2004

13. FIXED ASSETS

Group

Plant,Leasehold Leasehold machinery Construction

Investment land and improve- and office Motor Furniture inproperty buildings ments equipment Moulds vehicles and fixtures progress TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Cost or valuation:At beginning of year 1,600 208,722 48,897 332,920 18,977 14,421 932 1,811 628,280Additions – – 3,247 36,165 – 1,946 286 635 42,279Disposals – – – – – (610 ) – – (610 )Transfers – – 2,446 – – – – (2,446 ) –Revaluation 550 – – – – – – – 550

At 30 September 2004 2,150 208,722 54,590 369,085 18,977 15,757 1,218 – 670,499

Accumulated depreciation:At beginning of year – 8,331 10,970 145,143 15,015 10,458 795 – 190,712Provided during the year – 9,279 5,052 35,945 1,898 1,456 112 – 53,742Disposals – – – – – (453 ) – – (453 )

At 30 September 2004 – 17,610 16,022 181,088 16,913 11,461 907 – 244,001

Net book value:At 30 September 2004 2,150 191,112 38,568 187,997 2,064 4,296 311 – 426,498

At 30 September 2003 1,600 200,391 37,927 187,777 3,962 3,963 137 1,811 437,568

An analysis of cost or valuation:At cost – 6,756 54,590 41,258 18,977 2,299 1,218 – 125,098At valuation:

Open market value 2,150 7,800 – – – – – – 9,950Depreciated

replacement cost – 194,166 – 327,827 – 13,458 – – 535,451

2,150 208,722 54,590 369,085 18,977 15,757 1,218 – 670,499



30 September 2004

13. FIXED ASSETS (continued)

The Group’s investment property located in Hong Kong was revalued on 30 September 2004 byChesterton Petty Limited, independent professionally qualified valuers, at HK$2,150,000, on an openmarket, existing use basis. A revaluation surplus of HK$550,000 has been credited to the profit andloss account resulting from the revaluation. The investment property is leased to a third party under anoperating lease, further summary details of which are included in note 30(a) to the financial statements.The investment property is held under a medium term lease.

In the opinion of the directors, there had been a material difference between the fair value and thecarrying value of the Group’s leasehold land and buildings, plant, machinery and office equipment, andmotor vehicles as at 30 September 2002 and therefore professional valuation had been made on 30September 2002. The Group’s leasehold land and buildings located in Hong Kong were revalued on 30September 2002 by Chesterton Petty Limited, at HK$7,800,000, on an open market, existing use basis.The Group’s leasehold land and buildings located in Mainland China and the Group’s plant, machineryand office equipment, and motor vehicles as at 30 September 2004, other than the additions andtransfer-in in the years ended 30 September 2003 and 2004, were revalued on 30 September 2002 byChesterton Petty Limited on a depreciated replacement cost basis, at HK$194,166,000,HK$327,827,000 and HK$13,458,000, respectively.

In the opinion of the directors, there was no material movement in fair value of those revalued fixedassets. Accordingly no professional valuation of such leasehold land and buildings, plant, machineryand office equipment, and motor vehicles was made as at 30 September 2004 because the directorsare of the opinion that the fair value of such revalued fixed assets at 30 September 2004 is notsignificantly different from the carrying amount at 30 September 2002 and that a further professionalvaluation would involve expense out of proportion to the value to the shareholders of the Group.

As at 30 September 2004, the carrying values of the leasehold land and buildings, plant, machineryand office equipment, and motor vehicles arising from the additions and transfer-in in the years ended30 September 2003 and 2004, amounted to HK$6,756,000, HK$41,258,000 and HK$2,299,000,respectively. In the opinion of the directors, the value of such fixed assets at 30 September 2004 is notsignificantly different from the carrying amount at 30 September 2004. Accordingly, no professionalvaluation of the additions and transfer-in in the years ended 30 September 2003 and 2004 in respect ofleasehold land and buildings, plant, machinery and office equipment, and motor vehicles was made asat 30 September 2004.

Had the Group’s leasehold land and buildings, plant, machinery and office equipment, and motorvehicles been carried at historical cost less accumulated depreciation, their carrying amounts wouldhave been approximately HK$157,489,000 (2003: HK$166,625,000), HK$180,311,000 (2003:HK$177,140,000) and HK$4,025,000 (2003: HK$3,148,000), respectively.



30 September 2004

13. FIXED ASSETS (continued)

The Group’s leasehold land and buildings included above are held under the following lease terms:

HK$’000

Hong Kong, held under medium term leases 7,800Mainland China, held under medium term land use rights 200,922

208,722

As at 30 September 2004, no fixed asset of the Group is held under finance lease. The net book valueof the Group’s motor vehicle held under a finance lease included in total amount of fixed assets as at30 September 2003 was HK$285,000.

The investment property and certain leasehold land and buildings of the Group with a total carryingvalue of HK$9,241,000 (2003: HK$76,679,000) were pledged to secure banking facilities granted to theGroup (note 24) as at 30 September 2004. During the year, pledge of certain leasehold land andbuildings of the Group has been released.

14. INTERESTS IN SUBSIDIARIES

Company2004 2003

HK$’000 HK$’000

Unlisted shares, at cost 118,577 118,577Due from subsidiaries 487,619 496,808Due to a subsidiary (2) (2)

606,194 615,383

The balances with subsidiaries are unsecured, interest-free and are not repayable within one year fromthe balance sheet date.



30 September 2004

14. INTERESTS IN SUBSIDIARIES (continued)

Particulars of the principal subsidiaries are as follows:

Place of Nominal value Percentageincorporation/ of issued of equity

registration and ordinary/registered attributableName principal operations paid-up capital to the Company Principal activities

Direct Indirect

Sunway International British Virgin Islands US$50,000 100 – Investment holding(BVI) Holdings Limited

Sungo Holding Company Hong Kong Ordinary HK$3 – 100 Trading of electronicLimited *Non-voting deferred products

HK$6,500,000

Guidy International Limited Hong Kong Ordinary HK$3 – 100 Trading of electronic*Non-voting deferred products

HK$6,500

Xinwei Electronic Industrial People’s Republic of HK$152,000,000 – 100 Manufacture andCo. Ltd., Fujian ** China (“PRC”)/ trading of electronic

Mainland China products

Sunway Information Technology British Virgin Islands US$1 – 100 Investment holdingCompany Limited

Kenko International Hong Kong HK$10,000 – 100 Trading of electronicCompany Limited products

Regal Honour Industrial Limited Hong Kong HK$10,000 – 100 Trading of computerproducts

Putian Sunyee LCD PRC/ HK$36,000,000 – 100 Manufacture ofTechnology Co., Ltd. ** Mainland China liquid crystal

displays products



30 September 2004

14. INTERESTS IN SUBSIDIARIES (continued)

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principallyaffected the results for the year or formed a substantial portion of the net assets of the Group. To givedetails of other subsidiaries would, in the opinion of the directors, result in particulars of excessivelength.

* The holders of the non-voting deferred shares are not entitled to any dividend, have no right to vote atgeneral meetings, and only carry the right to receive the nominal amount paid-up or credited as paid-up onthe non-voting deferred shares in a return of capital on liquidation after the holders of ordinary shares havereceived the sum of HK$1,000,000,000 per ordinary share.

** The subsidiaries are registered as wholly-foreign-owned enterprises under the PRC law.

15. INTEREST IN A JOINTLY-CONTROLLED ENTITYGroup

2004 2003HK$’000 HK$’000

Share of net assets 9,132 7,521Due from a jointly-controlled entity 6,949 8,767

16,081 16,288

The amount due from a jointly-controlled entity is unsecured, interest-free and is not repayable withinone year from the balance sheet date.

Particulars of the jointly-controlled entity are as follows:Percentage

of ownershipinterest, voting

Place of power andregistration profit sharing

Business and attributableName structure operation to the Group Principal activities

Taiwan Communication Corporate PRC/ 40 Manufacture(Fujian) Company Limited Mainland China and trading of

telecommunicationproducts

Interest in the jointly-controlled entity is indirectly held by the Company.



30 September 2004

16. LONG TERM INVESTMENTS

Group2004 2003

HK$’000 HK$’000

Unlisted equity investments, outside Hong Kong, at cost – 11,625Unlisted held-to-maturity debt securities with a residual maturity

of over one year, at amortised cost 4,980 –

4,980 11,625

17. DEPOSITS PAID FOR ACQUISITION OF FIXED ASSETS

The balances represent aggregate deposits of HK$6,045,000 paid in respect of the acquisition of landuse rights of land located in the PRC and aggregate deposits of HK$13,791,000 paid in respect ofpurchases of fixed assets. The related capital commitments are set out in note 31.

18. INVENTORIES

An analysis of the inventories as at the balance sheet date, net of provision, is as follows:

Group2004 2003

HK$’000 HK$’000

Raw materials 122,296 165,693Work in progress 45,202 38,621Finished goods 72,733 56,980

240,231 261,294

No inventories were stated at net realisable value as at 30 September 2004. The inventories carried atnet realisable value included in the above balance amounted to HK$572,000 as at 30 September 2003.



30 September 2004

19. ACCOUNTS RECEIVABLE

The Group’s trading terms with its customers are mainly on credit, except for new customers, wherepayment in advance is normally required. Invoices are normally payable within 90 days of issuance,except for certain well-established customers, where the terms are extended to six months. Eachcustomer has a maximum credit limit. The Group seeks to maintain strict control over its outstandingreceivables to minimise credit risk. Overdue balances are reviewed regularly by senior management.

An aged analysis of the accounts receivable as at the balance sheet date, based on invoice date, is asfollows:

Group2004 2003

HK$’000 HK$’000

Current to 3 months 134,065 159,2514 to 6 months 23,940 22,2807 to 12 months 15,350 5,076Over 1 year 20,559 17,147

193,914 203,754Less: Provision for doubtful debts (35,811) (14,310)

158,103 189,444

20. DUE FROM A RELATED COMPANY

Particulars of the amount due from a related company, disclosed pursuant to Section 161B of the HongKong Companies Ordinance, are as follows:

Group Maximumamount

30 September outstanding 1 OctoberName 2004 during the year 2003

HK$’000 HK$’000 HK$’000

Scientek Enterprise (Hong Kong) Limited 2,940 4,711 1,412

Scientek Enterprise (Hong Kong) Limited is controlled by the spouse of Ms. Wong Choi Kam, a directorof the Company. The amount due from a related company is unsecured, interest-free and has no fixedterms of repayment.



30 September 2004

21. SHORT TERM INVESTMENTS

Company and Group2004 2003

HK$’000 HK$’000

Unlisted investment funds, at fair value – 5,617Unlisted certificates of deposit with a residual maturity of

less than one year, at amortised cost – 2,225

– 7,842

22. CASH AND CASH EQUIVALENTS AND PLEDGED TIME DEPOSITS

Group Company2004 2003 2004 2003

Note HK$’000 HK$’000 HK$’000 HK$’000

Cash and bank balances 179,420 127,961 27 52Time deposits 3,087 3,087 – –

182,507 131,048 27 52

Less: Pledged time deposits fortrust receipt loans facilities 24 (3,087) (3,087) – –

Cash and cash equivalents 179,420 127,961 27 52

At the balance sheet date, the cash and bank balances of the Group denominated in Renminbi (“RMB”)amounted to approximately HK$31,654,000 (2003: HK$25,758,000). RMB is not freely convertible intoother currencies. However, under Mainland China’s Foreign Exchange Control Regulations andAdministration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group ispermitted to exchange RMB for other currencies through banks authorised to conduct foreignexchange business.



30 September 2004

23. ACCOUNTS PAYABLE

An aged analysis of the accounts payable as at the balance sheet date, based on invoice date, is asfollows:

Group2004 2003

HK$’000 HK$’000

Current to 3 months 106,011 65,6134 to 6 months 3,423 3,4687 to 12 months 369 265Over 1 year 1,918 1,756

111,721 71,102

24. INTEREST-BEARING BANK BORROWINGS

Group2004 2003

HK$’000 HK$’000

Repayable within one year:Bank loans, secured – 85,463Trust receipt loans, secured 11,610 13,562

11,610 99,025

As at 30 September 2004, the Group’s bank borrowings are secured by time deposits amounting toHK$3,087,000 (2003: HK$3,087,000) (note 22), the investment property and certain leasehold land andbuildings held by the Group (note 13) and corporate guarantees given by the Company. As at 30September 2003, the Group’s bank borrowings were also secured by properties of a related companyand corporate guarantees given by certain related companies, which were released during the year.



30 September 2004

25. FINANCE LEASE PAYABLE

At 30 September 2004, the total future minimum lease payments under the finance lease and theirpresent value, were as follows:

Present valueMinimum lease of minimum lease

Group payments payments2004 2003 2004 2003

HK$’000 HK$’000 HK$’000 HK$’000

Total minimum finance lease paymentspayable within one year – 98 – 94

Less: Future finance charges – (4)

Total net finance lease payable – 94

26. DEFERRED TAX

The movement in deferred tax liabilities and assets during the year is as follows:

Deferred tax liabilities

Deferred tax liabilities of the Group arose from revaluation of investment property, leasehold land andbuildings, plant, machinery and office equipment, and motor vehicles.

Group2004 2003

HK$’000 HK$’000At beginning of year:

As previously reported – –Prior year adjustment:

SSAP 12 – restatement of deferred tax 7,094 7,616

As restated 7,094 7,616

Deferred tax credited to the profit and loss accountduring the year (note 9) (426) (522)

At end of year 6,668 7,094



30 September 2004

26. DEFERRED TAX (continued)

Deferred tax assets

Deferred tax assets of the Group arose from taxable and deductible temporary differences.

Group2004 2003

HK$’000 HK$’000

At beginning of year – –

Deferred tax credited to the profit and loss accountduring the year (note 9) 1,515 –

At end of year 1,515 –

The Group has tax losses arising in Hong Kong and Mainland China of HK$25.0 million (2003: HK$13.8million) and HK$0.2 million (2003: HK$0.2 million), respectively, that are available for offsetting againstfuture taxable profits of the companies in which the losses arose. Deferred tax assets have not beenrecognised in respect of these losses as they have arisen in subsidiaries that have been loss-making forsome time.

At 30 September 2004, there is no significant unrecognised deferred tax liability (2003: Nil) for taxesthat would be payable on the unremitted earnings of certain of the Group’s subsidiaries or its jointly-controlled entity as the Group has no liability to additional tax should such amounts be remitted.

There are no income tax consequences attaching to the payment of dividends by the Company to itsshareholders.

SSAP 12 (Revised) was adopted during the year, as further explained in note 2 to the financialstatements. This change in accounting policy has resulted in an increase in the Group’s deferred taxliabilities as at 30 September 2004 and 2003 by HK$6,668,000 and HK$7,094,000 respectively and anincrease in the Group’s deferred tax assets as at 30 September 2004 by HK$1,515,000. Theconsolidated net profit attributable to shareholders for the years ended 30 September 2004 and 2003have been increased by HK$1,941,000 and HK$522,000, respectively. As a consequence, theconsolidated revaluation reserve as at 1 October 2003 and 2002 has been decreased by HK$8,172,000and consolidated retained profits as at 1 October 2003 and 2002 have been increased byHK$1,078,000 and HK$556,000 respectively, as detailed in the consolidated summary statement ofchanges in equity.



30 September 2004

27. SHARE CAPITAL

2004 2003HK$’000 HK$’000

Authorised:10,000,000,000 ordinary shares of HK$0.10 each 1,000,000 1,000,000

Issued and fully paid:1,016,001,301 ordinary shares of HK$0.10 each 101,600 101,600

Details of the Company’s share option scheme and the share options issued under the scheme areincluded in note 28 to the financial statements.

28. SHARE OPTION SCHEME

On 25 February 2003, the Company terminated its then share option scheme adopted on 3 September1999 (the “Old Option Scheme”) and adopted a new share option scheme (the “New OptionScheme”). The options granted under the Old Option Scheme will remain in force and effect.

Pursuant to the Old Option Scheme, the exercise price of the share options was determinable by thedirectors, but could not be less than the higher of (i) 80% of the average of the closing prices of shareson The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) for the five tradingdays immediately preceding the date of the offer of grant of the share options; or (ii) the nominal valueof the shares of the Company.

In response to the amendments by the Hong Kong Stock Exchange in connection with Chapter 17(Share Option Schemes) of the Listing Rules, the Company terminated the Old Option Scheme andthen adopted the New Option Scheme on 25 February 2003 as follows:

The purpose of the New Option Scheme is to provide incentives and rewards to the eligibleparticipants who contribute to the Group, and to enable the Group to recruit and retain high calibreprofessionals, executives and employees who are instrumental to the growth of the Group. Eligibleparticipants of the New Option Scheme include the directors (including executive directors andnon-executive directors), employees of the Group, consultants or advisers of the Group, suppliers ofgoods or services to the Group, customers of the Group, joint venture partner or business alliance ofthe Group and shareholders of the Group. The New Option Scheme, unless otherwise terminated oramended, will remain in force for a period of 10 years from 25 February 2003.



30 September 2004

28. SHARE OPTION SCHEME (continued)

The maximum numbers of shares which may be allotted and issued upon exercise of all outstandingoptions granted and yet to be exercised under the New Option Scheme and any other share optionschemes adopted by the Company must not in aggregate exceed 30% of the shares in issue from timeto time. The total number of shares which may be allotted and issued upon exercise of all options tobe granted under the New Option Scheme and any other share option schemes of the Group must notin aggregate exceed 10% of the shares of the Company in issue as at the date of adopting the NewOption Scheme, but the Company may seek approval of its shareholders in general meeting to refreshthe 10% limit under the New Option Scheme. As at 30 September 2004, the Company had outstanding33,550,000 share options which were all granted under the Old Option Scheme and the total numberof shares issuable for options was 33,550,000. It represented approximately 3.3% of the Company’sshares in issue as at that date.

The total number of shares issued and to be issued upon exercise of the share options granted underthe New Option Scheme and any other share option scheme of the Group (including both exercisedand outstanding options) to each participant in any 12-month period up to the date of grant must notexceed 1% of the shares in issue at the date of grant. Any further grant of share options in excess ofthis limit is subject to shareholders’ approval in general meeting of the Company.

Share options granted under the New Option Scheme to a director, chief executive or substantialshareholder of the Company, or to any of their associates, are subject to approval of the independentnon-executive directors of the Company (excluding any independent non-executive director who is alsothe grantee of the options). In addition, any share options granted to a substantial shareholder or anindependent non-executive director of the Company, or to any of their associates, in excess of 0.1% ofthe shares of the Company in issue at any time or with an aggregate value (based on the closing priceof the Company’s shares at the date of each grant) in excess of HK$5 million, within any 12-monthperiod up to and including the date of such grant, are subject to shareholders’ approval in generalmeeting of the Company.

A share option may be accepted by a participant within 21 days from the date of the offer for grant ofthe option. The exercise period of the share options granted is determinable by the directors inaccordance with the terms of the New Option Scheme, and commences from the date of acceptance ofthe offer of grant of the share options and ends on a date which is not later than 10 years from thedate of grant of the share options.



30 September 2004


The exercise price of the share options is determinable by the directors of the Company, but must notbe less than the higher of (i) the closing price of the Company’s shares as stated in the Hong KongStock Exchange’s daily quotations sheet on the date of the offer for grant, which must be a businessday; (ii) the average closing price of the Company’s shares as stated in the Hong Kong StockExchange’s daily quotations sheet for the five business days immediately preceding the date of theoffer for grant, which must be a business day; and (iii) the nominal consideration of HK$1.

Share options do not confer rights on the holders to dividends or to vote at shareholders’ meeting.

During the year, 6,000,000 share options lapsed automatically as the grantee of these share optionshas ceased to be an eligible employee in the Group. Save for the above, no share options weregranted, exercised, cancelled, or lapsed under the share option schemes of the Company during theyear.

The following share options were outstanding under the share option schemes of the Company duringthe year:

Number Price ofNumber of of share Company’s

Number of share options options at Exercise price share atName or category share options at lapsed during 30 September Date of grant of Exercise period of of share date of grantof participant 1 October 2003 the year 2004 share options* share options options** of options***

HK$ HK$

Directors

Ms. Wong Choi Kam 6,000,000 – 6,000,000 25 October 1999 25 October 1999 to 1.20 1.6024 October 2009

Ms. Wong King Ching, Helen 1,500,000 – 1,500,000 25 October 1999 25 October 1999 to 1.20 1.6024 October 2009

Mr. Leung Chi Fai 1,050,000 – 1,050,000 25 October 1999 25 October 1999 to 1.20 1.6024 October 2009

8,550,000 – 8,550,000

Other employees in aggregate 31,000,000 (6,000,000 ) 25,000,000 25 October 1999 25 October 1999 to 1.20 1.6024 October 2009

39,550,000 (6,000,000 ) 33,550,000



30 September 2004


* The vesting period of the share options is from the date of the grant until the commencement of theexercise period.

** The exercise price of the share options is subject to adjustment in the case of rights or bonus issues, orother similar changes in the Company’s share capital.

*** The price of the Company’s shares disclosed as at the date of the grant of the share options is the HongKong Stock Exchange closing price on the trading day immediately prior to the date of the grant of theoptions.

At the balance sheet date, the Company had 33,550,000 share options outstanding under the shareoption schemes of the Company. The exercise in full of the share options would, under the presentcapital structure of the Company, result in the issue of 33,550,000 additional ordinary shares of theCompany and additional share capital of HK$3,355,000 and share premium of HK$36,905,000 (beforeissue expenses).



30 September 2004

29. RESERVES

GroupShare Capital Exchange

premium Contributed redemption Revaluation fluctuation Retainedaccount surplus* reserve reserve reserve profits TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 October 2002:As previously reported 177,325 56,471 509 56,454 (6,651) 465,146 749,254Prior year adjustment:

SSAP 12 – restatementof deferred tax (note 26) – – – (8,172) – 556 (7,616)

As restated 177,325 56,471 509 48,282 (6,651) 465,702 741,638

Exchange realignment ontranslation of the financialstatements of foreignsubsidiaries – – – – (686) – (686)

Net profit for the year(Restated) – – – – – 17,303 17,303

Proposed final 2003 dividend – – – – – (10,160 ) (10,160 )

At 30 September 2003 177,325 56,471 509 48,282 (7,337) 472,845 748,095

At 1 October 2003:As previously reported 177,325 56,471 509 56,454 (7,337) 471,767 755,189Prior year adjustment:

SSAP 12 – restatementdeferred tax (note 26) – – – (8,172) – 1,078 (7,094)

As restated 177,325 56,471 509 48,282 (7,337) 472,845 748,095

Exchange realignment ontranslation of the financialstatements of foreignsubsidiaries – – – – 2 – 2

Net profit for the year – – – – – 35,076 35,076Proposed final 2004 dividend – – – – – (10,160 ) (10,160 )

At 30 September 2004 177,325 56,471 509 48,282 (7,335) 497,761 773,013



30 September 2004

29. RESERVES (continued)

Group

Share Capital Exchangepremium Contributed redemption Revaluation fluctuation Retainedaccount surplus* reserve reserve reserve profits TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Reserves retained by:Company and subsidiaries 177,325 56,471 509 48,282 (7,335) 504,129 779,381Jointly-controlled entity – – – – – (6,368) (6,368)

At 30 September 2004 177,325 56,471 509 48,282 (7,335) 497,761 773,013

Company and subsidiaries(as restated) 177,325 56,471 509 48,282 (7,337) 480,824 756,074

Jointly-controlled entity – – – – – (7,979) (7,979)

At 30 September 2003(as restated) 177,325 56,471 509 48,282 (7,337) 472,845 748,095

Company

Share Capitalpremium Contributed redemption Retainedaccount surplus* reserve profits TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000

At 1 October 2002 177,325 118,377 509 232,231 528,442Net loss for the year – – – (7,781) (7,781)Proposed final 2003 dividend – – – (10,160) (10,160)

At 30 September 2003 andat 1 October 2003 177,325 118,377 509 214,290 510,501

Net loss for the year – – – (6,965) (6,965)Proposed final 2004 dividend – – – (10,160) (10,160)

At 30 September 2004 177,325 118,377 509 197,165 493,376



30 September 2004

29. RESERVES (continued)

* The contributed surplus of the Group represents the difference between the aggregate of the nominal valueof the share capital of the subsidiaries acquired at the date of acquisition, over the nominal value of theshare capital of the Company issued in exchange therefor and issued on incorporation.

The contributed surplus of the Company at the date of acquisition represents the excess of the thencombined net assets of the subsidiaries acquired at the date of acquisition over the aggregate of thenominal value of the Company’s shares issued in exchange therefor.

Under the Bermuda Companies Act 1981, the Company may make distributions to its members out of thecontributed surplus under certain circumstances.

30. OPERATING LEASE ARRANGEMENTS

(a) As lessor

The Group leases its investment property located in Hong Kong (note 13) and certain of itsleasehold land and buildings located in the PRC under operating lease arrangements, with theleases negotiated for terms ranging from one to three years.

At 30 September 2004, the Group had total future minimum lease receivables undernon-cancellable operating leases with its tenants falling due as follows:

Group2004 2003

HK$’000 HK$’000

Within one year 147 217In the second to fifth years, inclusive 19 77

166 294



30 September 2004

30. OPERATING LEASE ARRANGEMENTS (continued)

(b) As lessee

The Group and the Company lease certain of its leasehold land and buildings under operatinglease arrangements. Leases for leasehold land and buildings are negotiated for terms rangingfrom one to two years.

At 30 September 2004, the Group and the Company had total future minimum lease paymentsunder non-cancellable operating leases falling due as follows:

Group Company2004 2003 2004 2003

HK$’000 HK$’000 HK$’000 HK$’000

Within one year 280 226 57 226In the second to fifth years, inclusive – 57 – 57

280 283 57 283

31. COMMITMENTS

In addition to the operating lease commitments detailed in note 30(b) above, the Group had thefollowing capital commitments at the balance sheet date:

Group2004 2003

HK$’000 HK$’000

Contracted, but not provided for:Acquisition of fixed assets 1,211 574Capital contributions to wholly-owned subsidiaries

established in Mainland China 176,310 6,937

Authorised, but not contracted for:Acquisition of land use rights 15,500 –

193,021 7,511

The Company did not have any significant commitment at the balance sheet date (2003: Nil).



30 September 2004

32. CONTINGENT LIABILITIES

At the balance sheet date, contingent liabilities not provided for in the financial statements were asfollows:

Company2004 2003

HK$’000 HK$’000

Guarantees executed by the Company in favour of banksfor general banking facilities granted to subsidiaries 111,000 71,000

As at the balance sheet date, the banking facilities granted to subsidiaries subject to guarantees givento the banks by the Company were utilised to the extent of approximately HK$11,610,000 (2003:HK$13,562,000).

33. RELATED PARTY TRANSACTIONS

In addition to the transactions and balances detailed elsewhere in these financial statements, theGroup had the following transactions with related parties during the year:

(a) The Group sold finished goods amounting to HK$4,711,000 (2003: HK$6,176,000) to a companyof which the spouse of Ms. Wong Choi Kam, a director of the Company, is a director andcontrolling shareholder.

The sales to the related company were made according to the published prices and conditionsoffered to the major customers of the Group.

(b) As at 30 September 2003, the Group’s bank loans amounting to HK$44,545,000 were secured bythe properties of a related company and the corporate guarantees of certain related companies.These related companies were beneficially owned by the late Mr. Wong Choi Fung (a formerdirector of the Company), Ms. Wong Choi Kam (a non-executive director of the Company) andMr. Wong Kim Seong (a non-executive director of the Company). The pledge of properties andcorporate guarantees of these related companies have been released during the year and thereis no banking facility of the Group as at 30 September 2004 which is secured by the pledge ofassets or corporate guarantee of any related company.

The related party transactions in respect of (a) above also constituted connected transactions asdefined in the Listing Rules.



30 September 2004

34. COMPARATIVE AMOUNTS

As further explained in notes 2 and 26 to the financial statements, due to the adoption of a revisedSSAP during the current year, the accounting treatment and presentation of certain items and balancesin the financial statements have been revised to comply with the new requirements. Accordingly, aprior year adjustment was made and certain comparative amounts have been restated to conform withthe current year’s presentation.

35. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the board of directors on24 January 2005.

sunway international holdings limited

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