annual report 2005 年報 steel supply · pdf filevan shung chong 萬順昌集團有限公司...

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萬順昌集團有限公司

VAN SHUNG CHONGHOLDINGS LIMITED

年報ANNUAL REPORT 2005

STEEL SUPPLY CHAIN鋼材供應鏈

Mission StatementVSC strives to be the best total solution provider

of materials in China through global supply chain

management and value-added processing.

Through Supply Chain Management, we will

provide quality steel and products to customers

in the construction industry.

Through Value-Added Processing, we will

provide quality industrial products and reliable

services to customers in information technology,

home appliances and automobile parts

industries.

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INFORMATION TECHNOLOGY AND TELECOMMUNICATIONS CONNECTING PEOPLE,FACILITATING GLOBALCOMMUNICATION

ENHANCING PRODUCT QUALITY TO A NEW STANDARD

Advanced information technology and

telecommunication tools have brought us

new technologies and equipment such

as mobile phone, the internet and VoIP,

making the world closer.

In light of this, the VSC Group has

developed and offered world-class

one-stop quality enclosure systems and

accessories for the telecommunication

industries including design, R&D and

production capabilities for Huawei,

Zhongxing and Emerson, etc.

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INBOUNDLOGISTICS

STEELMILLS

STEELSUPPLYCHAIN

WAREHOUSING

INVENTORYMANAGEMENT

InsuranceImport Formalities

InspectionCurrency Conversion

Custom Clearance

SOURCING

FINANCING

TOLLINGPROCESSING

OUTBOUNDLOGISTICS

ENDUSERS

SUPPLY CHAINMANAGEMENT

PROCESSING

MARKETING &SALES

CREDITFINANCING

TECHNICALADVISORYSERVICE

3

5

6

7

4

2

1

Spain

India

South Africa

Brazil

USA

Luxembourg

U.K.

Our Sourcing Network

1 Orb Electrical SteelOutokumpu

2 ALZ3 Acerinox4 North American Stainless

NUCOR5 Bhushan Steel

JindalSalemShah AlloysUttam

6 Gerdau

7 ColumbusDufercoScaw

8 Zapsib9 BMZ10 Krivorozhstal11 JFE

KobeKoyeiNSCNippon Steel & Sumikin Stainless SteelNisshin

Sumitomo Metal12 ICDAS13 Dai Yang

DongbuDongkukDongshinDoowonHyscoINIPocosPoscoUnion

10

9

8

12

11

13

14

16

15

17

UkraineBelarus

Turkey

Russia

Japan

KoreaChina

TaiwanThailand

Singapore

14 Anshan Iron & SteelBaosteelBenxi Iron & SteelChangshu XingdaoChongqing Iron & SteelGuangzhou Iron & SteelGuangdong Sino MasterHandan Iron & SteelJiangying ChangfaJinan Iron & SteelLaiwu SteelLian Yuan Iron & Steel

Maanshan Iron & SteelPingxiang Iron & SteelRizhao SteelShougangShuicheng Iron & SteelTangshan Iron & SteelUnion Steel (China)Wuhan Iron & SteelZhangjiagang Pohang Stainless SteelPanzhihua Iron & Steel

15 SUSTCS

TCR16 CSC

Great FortuneKao Hsing ChangTang EngTung HoYieh PhuiYieh United

17 Natsteel

Corporate Information

DIRECTORS

EXECUTIVE DIRECTORSMr. Andrew Cho Fai Yao (Chairman)Mr. Fernando Sai Ming Dong

NON-EXECUTIVE DIRECTORDr. Shao You Bao

INDEPENDENT NON-EXECUTIVEDIRECTORS

Dr. Chow Yei ChingMr. Kenneth Woo Shou TingMr. Harold Richard KahlerMr. Kenny King Ching Tam

COMPANY SECRETARY

Ms. Tse Sau Wai, FCS FCIS

QUALIFIED ACCOUNTANT

Mr. Paul Po-Gun Chow, FCPA(Appointed on 1st July 2005)

AUDITORS

PricewaterhouseCoopersCertified Public Accountants

SOLICITORS

K. C. Ho & Fong (on Hong Kong Laws)Conyers Dill & Pearman (on Bermuda Laws)

PRINCIPAL BANKERS

Bank of China (Hong Kong) LimitedBNP Paribas, Hong Kong BranchChina Construction Bank Corporation,

Hong Kong BranchDBS Bank (Hong Kong) LimitedHang Seng Bank LimitedHSH Nordbank, Hong Kong BranchIndustrial and Commercial

Bank of China (Asia) LimitedKBC Bank N.V., Hong Kong BranchLiu Chong Hing Bank LimitedMizuho Corporate Bank, Limited,

Hong Kong BranchShanghai Commercial Bank LimitedThe Bank of East Asia, LimitedThe Bank of Tokyo-Mitsubishi, Limited,

Hong Kong BranchThe Hongkong and Shanghai Banking

Corporation LimitedUFJ Bank Limited, Hong Kong Branch

14 < > 15Corporate Information

SHARE REGISTRARS ANDTRANSFER OFFICES

PRINCIPAL REGISTRARButterfield Fund Services (Bermuda) LimitedRosebank Centre11 Bermudiana RoadPembroke HM08Bermuda

HONG KONG REGISTRARComputershare Hong Kong Investor

Services LimitedShops 1712-1716, 17th FloorHopewell Centre183 Queen’s Road EastWanchai, Hong Kong

REGISTERED OFFICE

Clarendon House2 Church StreetHamilton HM 11Bermuda

HEAD OFFICE AND PRINCIPALPLACE OF BUSINESS

Rooms 4902-8, Hopewell Centre183 Queen’s Road EastWanchai, Hong Kong

Website : http://www.vschk.comhttp://www.isteelasia.com

E-mail Address : [email protected]

LISTED ON THE STOCKEXCHANGE OF HONG KONGLIMITED

Stock Code:1001 (shares of VSC)8080 (shares of iSteelAsia Holdings Limited)

Financial Highlights

2004 2005 %ChangeHK$ millionTurnover 3,549 4,139 +17%Gross profit 234 203 -13%Operating profit 110 66 -40%Profit attributable to shareholders 81 41 -49%Total assets 2,021 2,273 +12%Shareholders’ equity 661 694 +5%In millionNumber of shares 368 369 0%

Per Share DataHK centsBasic earnings 24.6 11.2 -54%Diluted earnings 23.6 11.1 -53%Total cash dividends 5.9 2.2 -63%HK$Shareholders’ equity 1.80 1.88 +4%

Financial RatiosGross profit margin (%) 6.60 4.90 -26%Net profit margin (%) 2.28 0.99 -57%Current ratio 1.42 1.47 +4%Quick ratio 0.86 0.82 -5%Gearing ratio 1.12 1.28 +14%Interest cover 8.23 3.70 -55%Cash dividend payout (%) 26.13 19.74 -24%

TURNOVERfor the years ended 31st MarchHK$ million

OPERATING PROFITfor the years ended 31st MarchHK$ million

0

1,000

2,000

3,000

4,000

5,000

01 02 03 04 050

50

100

200

150

300

250

350

01 02 03 04 05

(Note 2)

16 < > 17Financial Highlights

PROFIT ATTRIBUTABLE TO SHAREHOLDERSfor the years ended 31st MarchHK$ million

SHAREHOLDERS’ EQUITY PER SHAREas at 31st MarchHK$

Definitions

Basic earnings per share

Diluted earnings per share

Shareholders’ equity per share

Gross profit margin (%) x100%

Net profit margin (%) x100%

Current ratio

Quick ratio

Gearing ratio

Interest cover

Cash dividend payout (%) x100%

Profit attributable to shareholders

Weighted average number of shares


Diluted weighted average number of shares

Shareholders’ equity

Number of shares as at year end

Gross profit

Turnover


Turnover

Current assetsCurrent liabilities

Current assets excluding inventoriesCurrent liabilities

Interest bearing loans minus cash and other bank depositsShareholders’ equity

Operating profit

Finance costs

Total cash dividends proposed for the year


Notes:1. Certain prior years’ figures have been reclassified to conform with the current year’s presentation.2. For the year ended 31st March 2001, there was a gain of approximately HK$282 million resulting from distribution in specie of shares in

iSteelAsia Holdings Limited.

0

50

100

200

150

250

300

01 02 03 04 050

0.2

0.4

0.6

0.8

1.2

1.4

1.0

1.6

1.8

2.0

01 02 03 04 05

(Note 2)

Ten-year Financial Summary

CONSOLIDATED PROFIT AND LOSS ACCOUNTS

Year ended Year ended Year ended31st March 31st March 31st March

1996 1997 1998HK$’000 HK$’000 HK$’000

Turnover 1,846,543 2,002,479 2,150,961

Operating profit 101,158 111,525 103,516Finance costs (23,933) (23,281) (25,467)Share of (loss) profit of associates 1,564 1,555 (615 )

Profit before taxation 78,789 89,799 77,434Taxation (9,719) (11,188) (10,800)

Profit before minority interests 69,070 78,611 66,634Minority interests (2,573) 73 (1,238)

Profit attributable to shareholders 66,497 78,684 65,396

Dividends (Note 2) 19,487 21,323 21,387

The following is a summary of the audited consolidated accounts of Van Shung Chong HoldingsLimited (the “Company” or “VSC”) and its subsidiaries (together the “VSC Group”) for the respectiveyears as hereunder stated.

CONSOLIDATED BALANCE SHEETS

As at As at As at31st March 31st March 31st March

1996 1997 1998HK$’000 HK$’000 HK$’000

Fixed assets 30,674 45,840 92,620Investment properties 17,500 17,500 41,840Development properties 30,293 31,346 –Website development cost – – –Investment in associates 3,053 6,573 30,840Long-term investments – – 5,519Goodwill – – –Deferred tax assets – – –Current assets 787,194 873,979 779,691Current liabilities (537,705) (589,135) (527,672)Long-term bank loan,

non-current portion (4,447) (2,317) (178 )Deferred tax liabilities (611 ) (465) (128 )

Net assets 325,951 383,321 422,532

Representing:Share capital 29,580 29,616 29,704Reserves 282,637 340,679 388,174

Shareholders’ equity 312,217 370,295 417,878Minority interests 13,734 13,026 4,654

325,951 383,321 422,532

Notes:1. Certain prior years’ figures have been reclassified to conform with the current year’s presentation.

2. For the year ended 31st March 1996 and for the year ended 31st March 2000, there were bonus issues of warrant in theratio of one warrant for every five shares in addition to the cash dividends. Such warrants were expired on 16th September1998 and 16th February 2002, respectively. For the year ended 31st March 2001, dividend in specie of shares in iSteelAsiaHoldings Limited (“iSteelAsia”) of approximately HK$308 million was distributed on the basis of 1,562 shares of iSteelAsia forVSC’s shareholders holding 2,000 shares in VSC in addition to the cash dividends. For the year ended 31st March 2002,there was also a bonus issue of warrant in the ratio of one warrant for every ten shares in addition to the cash dividends.Such warrants had expired on 18th November 2004. All other dividends were settled in cash.

18 < > 19Ten-year Financial Summary

Year ended Year ended Year ended Year ended Year ended Year ended Year ended31st March 31st March 31st March 31st March 31st March 31st March 31st March

1999 2000 2001 2002 2003 2004 2005HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

1,842,262 1,900,945 2,376,451 2,137,845 2,755,769 3,549,110 4,138,621

96,807 91,714 311,953 19,888 77,049 109,792 66,321(15,358) (14,907) (11,732) (7,908) (11,144) (13,337) (17,927)

(1,980) 2 89 (88) – – –

79,469 76,809 300,310 11,892 65,905 96,455 48,394(13,610) (19,294) (15,533) (760 ) (2,164) (11,061) 4,320

65,859 57,515 284,777 11,132 63,741 85,394 52,7141,121 (2,150) 1,059 (1,022) (3,329) (4,331) (11,637)

66,980 55,365 285,836 10,110 60,412 81,063 41,077

21,387 29,930 400,391 9,230 18,111 21,180 8,114

As at As at As at As at As at As at As at31st March 31st March 31st March 31st March 31st March 31st March 31st March

1999 2000 2001 2002 2003 2004 2005HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

94,940 130,985 86,296 123,248 125,789 159,366 126,01538,480 36,800 31,340 32,500 31,000 36,448 71,100

– – – – – – –– 3,762 – – – – –

22,282 18,561 90 2 2 2 25,519 12,700 87,431 32,561 45,711 60,012 34,101

– 24,877 – 6,474 4,624 8,290 8,026– – – – – 447 13,797

636,057 1,016,311 716,257 791,401 1,211,578 1,756,709 2,019,703(335,023) (619,227) (259,665) (458,053) (871,073) (1,239,224) (1,376,754)

– – – – (20,475) (97,222) (166,667)(863) (1,497) (2,070) (250 ) (250) (104) (369)

461,392 623,272 659,679 527,883 526,906 684,724 728,954

29,704 34,088 35,529 35,498 31,226 36,778 36,861429,259 584,895 621,229 487,812 489,178 623,780 656,716

458,963 618,983 656,758 523,310 520,404 660,558 693,5772,429 4,289 2,921 4,573 6,502 24,166 35,377

461,392 623,272 659,679 527,883 526,906 684,724 728,954

Chairman’s Statement

With its unmatched supply chainmanagement complimented byexcellent value-added services, theVSC Group is set to continuemaintaining its leading position.

A high achiever


< > 21Chairman’s Statement

The burgeoning China market continues togenerate a strong demand for steel, creating avast opportunity for VSC. In light of this, CAMPenjoyed an impressive growth and profitsdespite of the turbulent steel market and thetightened macro-economic policy by the PRCgovernment in 2004. CAMP’s contribution to theGroup has become increasingly significant.

In addition to Dongguan and Guangzhou coilcentres, I am very pleased to report that Tianjincoil centre was accredited ISO 9001:2000certification by BSI for the shearing of steelsheets in September 2004. This marks anothermilestone in upholding the quality of ourproducts and services to an internationallyrecognized standard and to increase ourcustomer satisfaction.

CMG

CMG takes an upstream position in the supplychain. As a bridge between suppliers andcustomers, VSC sources materials for its customersfrom different steel mills all over the world.

As reported earlier, our Hong Kong operationfaced the unpredicted pricing volatility andresulted in a loss for the first time, mainly due tothe commitment of long-term contracts in theprevious years, under which steel was sold at aprice much lower than the historical high marketprice in 2004. To overcome the unpredictablevolatility of steel prices, we have already adjustedour strategies to have both the suppliers andcustomers sharing in the pricing risk, and usedour best effort not to enter long term fixed pricesales contract exceeding two years with priceadjustment for delivery beyond one year.Premium will also be charged for special sizedelivery. We are confident that our new strategieswill help CMG to mitigate the pricing risk. We willcontinue to expand our distribution network inChina. Geographical coverage extends to sixmajor cities including Shanghai, Beijing,Chongqing, Wuxi, Guangzhou and Shenzhen.

We successfully executed ourstrategies on CAMP andenjoyed an impressiveperformance and a stronggrowth in our Mainlandoperation.

““

Financial year 2004/05 was a year mixed withachievements and challenges. We successfullyexecuted our strategies on CAMP and enjoyedan impressive performance and a strong growthin our Mainland operation. However, theunpredictable volatility of the steel price last yearhas presented our industry with a difficultchallenge. As a result, our traditional steelstockholding business in Hong Kong hassuffered a loss for the first time in history whichimpeded the overall performance of VSC. Insummary, despite we grew 17% in consolidatedturnover to HK$4.1 billion, our profit after taxdropped by 49% to HK$41 million.

The achievements and challenges this year havegiven our management a valuable lesson. Wewill continue to execute our growth strategies,along with investment in our structure andpeople, to serve our customers and to meet theincreasing demand for steel generated by therapid growth of the China economy and weexpect our CAMP operation will continue to beour growth driver.

Let me also take the opportunity to provide anupdate on each business units:

CAMP

CAMP occupies a downstream place in thesupply chain. It provides value-added, qualityand efficient steel processing service targetinghigh growth industries, such as homeappliances, IT and telecommunications andautomobile parts, etc.

20


THE VERTICALLY INTEGRATEDMODEL

As stated in last year’s annual report, one of ourmajor tasks was to maximize the synergisticeffects brought by the VSC Group’s twocomplementary business divisions (CAMP andCMG) to provide integrated service along the valuechain and supply chain from steel mills to endusers. Our global supply chain management isbased on the solid foundation laid by CAMP andCMG which includes the global sourcing network,value-added processing, extensive distributionnetwork, loyal customer base and economies ofscale. To further strengthen our supply chain, VSChas entered into a strategic alliance with a newlyset up venture, MetalChina, offering procurementservices to overseas buyers to source China metalproducts for export. The fully integrated modelcould improve VSC’s competitiveness andanchors its significant role and position in theChina market, bringing customer satisfaction.

PROSPECTS

We are confident that the provision of GlobalSupply Chain Management Service (“GSCMS”)could help to differentiate VSC from other steelservice providers in the PRC and secure ourposition as the preferred total solution provider.Our strategy is to invest and build a world-classGSCMS. A supply chain management team hasalready been in place to fully support thedevelopment of GSCMS.

VSC will continue to expand its service centrenetwork by expanding coil centre at strategiclocations to meet the ever increasing marketdemand. Our strategies would include directinvestment, merger and acquisition, etc. In thecoming year, one of our strategies is to furtherexpand the capacity of our Guangzhou coilcentre. Furthermore, we are in the process ofconducting a feasibility study to add another linefor non-ferrous metal such as aluminum and/orstainless steel. In order to secure steel supplyand enlarge overseas customer base, we willincrease our focus on strategic alliance withoverseas steel mills or traders. During the year,VSC has entered into an agreement withMarubeni-Itochu Steel Inc. (“MISI”), a majorJapanese steel trading company, for strategicinvestment in our Tianjin operation. MetalChinawill add value to our GSCMS and one stepcloser to building a world class GSCMS.

We will continue to monitor the market andcustomer expectation and will explore otherpromising business opportunities to add value toshareholders.

GOING FORWARD – EXPANDTOWARDS CHINA

We uphold our belief of “Expand towards Chinawith a foothold in Hong Kong”. As China hasbecome the world factory and continue to grow,this will drive a strong demand for steel.To further tap opportunities in China, VSC willcontinue to grow and invest in strengthening ouroperations and services in China.

< > 23Chairman’s Statement

Van Shung ChongHoldings Limited

China AdvancedMaterials Processing

(“CAMP”)

Dongguan

ConstructionMaterials Group

(“CMG”)

CoilCentres

EnclosureSystems

Manufacturing

SteelDistribution

BuildingProducts

Tianjin Guangzhou

NanshaBaosteel

JingchangJoint Venture

Hong KongSteel

Stockholding

ChinaDistribution/iSteelAsia

Shanghai BaoShun Chang

BeijingPPGIJoint

Venture

PEOPLE

People are our key asset. We have spenttremendous resources in training. This year,we organized a training course, “OrganizationDevelopment Program” with Cheung KongGraduate School of Business to identifyemployees with high potential to becomesenior management and thus establish a talentpool for company business expansion. Ourencouragement and investment in training willorganically grow and better equip our staffwith skills and knowledge to meet thechallenges ahead.

I was appointed as an Ambassador of theYoung Industrialist Awards of Hongkong 2005. Iwill endeavour to promote manufacturingindustries from Hong Kong with a goal todemonstrate our passion, integrity, commitmentand achievements as the ultimate goal. Thishonour is an encouragement not only to me butalso to VSC as it implies the right strategies anddirection as the helm of the company.

PlasticsDistribution

70% 14% 66.7% 5%

APPRECIATION

I would like to take this opportunity to expressmy sincere appreciation to all employees, Boardof Directors, shareholders, customers, businesspartners and suppliers for their continuoussupport and commitment. I look forward tobringing you a fruitful year.

Andrew Cho Fai YaoChairman & Chief Executive Officer

15th July 2005

22

Management Discussionand Analysis

With our team’s niche expertise and marketknowledge driving the force of our future, theVSC Group will continue to open new marketsand develop value products; always staying onestep ahead of the competition.

Strategies tocontinue future success

< > 25

The VSC Group executed its strategies successfullyand 2004/05 turnover grew 17% to a record high ofHK$4.1 billion. However, profit attributable toshareholders fell by 49% to HK$41 million. Overallresults were lower than last year, mainly becauseour Hong Kong steel operation suffered lost for thefirst time in history. Overall, the VSC Group wasable to weather our adverse performance of HongKong steel operation by leveraging on its China steelprocessing and distribution businesses. The VSCGroup will continue to execute its successfulcorporate strategies, with appropriate modificationsto ensure it can handle volatile market conditions.The VSC Group’s core corporate strategies aresummarized as follows:

(1) STRENGTHEN OUR POSITION INCHINA, THE WORLD’S STRONGESTGROWING ECONOMYThe VSC Group will continue to focus ondeveloping its business potential in China, theworld’s fastest growing and emerging market.The VSC Group’s China operations generateda turnover of HK$2,988 million in 2004/05,representing 72% of the total turnover ascompared to 67% or HK$2,378 million in2003/04. Fuelled by China’s robust 9.5% GDPgrowth rate in 2004 and first quarter 2005,businesses in Shanghai, Tianjin, Shenzhen andGuangzhou focused on their niche markets.

(2) ADHERE TO HIGH GROWTH ANDPROFITABLE SECTORSThe VSC Group closely monitors the demandof steel products from high growth targetindustries. During the year under review, theinformation technology, telecommunicationsand home appliances industries generatedstrong demand for steel and various steelfinished products. The VSC Group respondsrapidly to demand pattern shifts by realigningits resources to other sectors and products.Demand growth for steel in the constructionand automobile parts industries was slowerdue to severe measures imposed by the

... the VSC Group was able toweather our adverseperformance of Hong Kongsteel operation by leveraging onits China steel processing anddistribution businesses.

““ Chinese government to limit excessiveinvestments in several overheated industriesincluding the real estate sector, coupled withkeen competition within the target industry,which consequently led to a profit marginsqueeze. Distribution of construction steel inShanghai also slowed, while part investment inthe Beijing Shougang PPGI distribution waswithdrawn in order to shift capital to otherhigher growth sectors.

(3) ENHANCE CUSTOMER SATISFACTIONAND COLLABORATIONThe VSC Group continues to adopt a long-term view towards developing customerrelationships, including building strategicalliances with reliable partners, such as largemultinational companies. Substantial efforts areplaced on improving customer relationshipsand key account management, with seniormanagement leading the effort tosystematically visit major customers, to keepup with latest market trends and to mitigaterisk of market volatility.

(4) OFFER HIGH VALUE-ADDED SERVICESAND SOLUTIONThe VSC Group consistently enhances itsproduct offering and value-added services toprovide a total solution. Capitalizing on strongsupport from various steel mills andcustomers, the core products portfolio hasexpanded to include stainless steel, aluminum,alcosta and galvalume, with plans to developinto other areas including metal productssourcing fabrication, logistics arrangement anddownstream toll rolling.

(5) ENHANCE DISTRIBUTION NETWORKAND SUPPLY CHAINThe VSC Group will continue to expand inChina to support its distribution network, andallocate resources and/or re-organizecorporate structure where necessary, includingexpansion of the new Shenzhen office, orconsolidation of market coverage in Beijingand Tianjin by the Shanghai office. Strategicalliances with reputable steel suppliers ShinshoCorporation for the Guangzhou coil centre andMISI for the Tianjin coil centre lay thefoundation for securing additional supplies ofquality steel to cater for the growingdistribution networks.

Management Discussion and Analysis24

Management Discussion and Analysis – CAMP

CHINA ADVANCED MATERIALSPROCESSING (“CAMP”)

The VSC Group’s CAMP operations comprise of threebusiness units, 1) coil centre operations in Dongguan,Tianjin, Guangzhou and Nansha, which provide rolledsteel processing services to OEM manufacturers of whitegoods, electrical appliances, computers and automobileparts; 2) manufacturing of customised enclosure systemsin Shenzhen, which focuses on a variety of precisionmetal processing and assembly services, mainly for thetelecommunications industry; 3) distribution ofengineering plastic resins to industrial manufacturers ofhousehold appliances, audio/video equipments,telecommunications applications and computers locatedin China. For 2004/05, CAMP’s turnover and segmentresults increased substantially by 91% to HK$1,289million, and 49% to HK$104 million, respectively. The coilcentres contributed impressive sales results to CAMP’soverall turnover growth. The VSC Group’s overallsegment results were derived entirely from positivecontribution from CAMP (as compared to 51% last year)due to CMG’s exceptional losses in its segment results.

The VSC Group’soverall segment

results werederived entirely

from positivecontribution

from CAMP...

“ “

CAMPChina

AdvancedMaterials

Processing

< > 27CAMP – Management Discussion and Analysis

Guangzhou Nansha Hong Kong Shenzhen Dongguan Tianjin Beijing Shanghai

CAMPServiceCentres

Engages in high profit margin,value-added physical processing,serving information technology andtelecommunications,home appliances and automobileparts industries in China

26

Coil Centre



... deliver valuepropositions...

through just-in-timedelivery, with short

order lead time,reliable supply chain

management,reduction in scrap and

materials handlingcosts, savings in

investment ofmachinery and factory

space, ensuredquality of steel, and

flexible supply ofproduct range.

“

“ COIL CENTRE OPERATIONSThe Group’s coil centre operations consist of three mainsubsidiary factories in Dongguan, Tianjin and Guangzhouand 14% investment in a joint venture company inNansha. The coil centres, which act as an essentialintermediary in the steel consumption value chainbetween upstream suppliers (i.e. steel mills) anddownstream customers (i.e. finished products/OEMmanufacturers), enjoyed impressive growth in sales andprofitability for the year under review. The centres wereable to deliver value propositions to customers includingless inventory through just-in-time delivery, with shortorder lead time, reliable supply chain management,reduction in scrap and materials handling costs, savingsin investment of machinery and factory space, ensuredquality of steel, and flexible supply of product range.

The Dongguan coil centre (DGCC), running in its 10thyear, remains the Group’s leading coil centre. Turnoversoared about 42% to a record high of approximatelyHK$500 million, and sales volume increased by 17% toover 76,000 metric tonnes. Located in Humen,Dongguan, DGCC is in strategic proximity to many HongKong and Taiwan based OEM manufacturers of electricalappliances (DVD, LCD panel) and computers (notebook,printer) in Dongguan and nearby to the Pearl River Delta.DGCC focuses on serving a group of large volume usersby capitalizing on excellence in operations, customerservice and latest machinery technology. During the year,the price of high-end rolled flat steel products remained,with minor fluctuations, at a historical high level, due torising raw material and transportation costs, and a globaldemand and supply inequality. The persistently high steelprice caused concern to industrial customers who nowfind the cost of raw materials comprising a largeproportion of their overall steel costs. Under such volatilemarket conditions, DGCC has excelled in managing priceelasticity of high-volume customers by promotingalternatives of different grades of steel from the VSCGroup’s worldwide suppliers. As a result, the grossmargin was maintained and slightly reduced to 14% from18% last year, with segment results reaching anotherrecord high of approximately HK$58 million, a 12%increase from HK$52 million last year. The managementconsiders DGCC a mature operation; able to supporthigh volume users at an acceptable margin to maximizeprofit.

28

The Tianjin coil centre (TJCC) completed its first fullyear of operations in 2004/05 and showed tremendousprogress within a relatively short start-up period. Turnoverfor 2004/05 amounted to approximately HK$156 million,up 311% from that of the 9-month period of 2003/04(commenced operations since July 2003) ofapproximately HK$38 million. Profitability was attainedwith segment results of approximately HK$9 million, ascompared to the operating loss of approximately HK$0.7million last year. Based on the DGCC operationexperience, the VSC Group could rapidly apply theoperational system, and set up TJCC, secure re-exportcustomers, and domestic markets in Bohai and northernChina. TJCC’s current key accounts include LGElectronics, Daewoo (microwave oven and air-conditioner), and Panasonic and local customers inautomobile parts, welding, and metal precision services.To further maximize TJCC’s potential, the VSC Groupentered into an agreement with MISI, a major Japanesesteel trading company, for strategic investment in TJCCoperations. Such a strategic alliance not only enablesTJCC obtain secured steel supply from MISI, but alsoleverage on MISI’s strong network with major Japanesecustomers. TJCC is now preparing further investment inmachinery and land, to enlarge production capacity tomeet anticipated demand surge.

The 70% owned Guangzhou coil centre (GZCC),acquired in late March 2004, gave an impressive first fullyear contribution in 2004/05. Situated in Huangpu,Guangzhou, GZCC is the third coil centre run andmanaged by the VSC Group. Turnover for the new fiscalyear ended 31st March 2005, amounted toapproximately HK$249 million, representing a 128% jumpover the audited turnover of approximately HK$109million for the previous fiscal year ended 31st December2003. Segment results for 2004/05 reached a historicalhigh of about HK$18 million, compared to GZCC’s resultsprior to the acquisition.

...the VSC Groupentered into anagreement withMISI... not onlyenables TJCC

obtain securedsteel supply from

MISI, but alsoleverage on MISI’s

strong networkwith majorJapanese

customers.

“

“


Segment resultsfor 2004/05reached a

historical highof about

HK$18 million

“ “

< > 31

The VSC Group’s partner, Shinsho Corporation, the coretrading arm of Kobe Steel Group, provides strongsupport in ensuring a stable and high quality supply ofsteel as well as developing a strong customer portfolio ofestablished Japanese clientele in the automobile andhome appliances sectors. GZCC focuses on serving there-export OEM home appliance manufacturers inGuangzhou and domestic customers in the Pearl RiverDelta. The VSC Group plans to further enhanceoperations and machinery at GZCC, and with ShinshoCorporation, jointly study the viability of setting upanother processing line for non-ferrous metals likealuminum and/or stainless steel. Similar to its self-run coilcentres, the VSC Group’s 14% investment in theBaosteel Jingchang joint venture in Nansha, alsodelivered strong performance. 2004/05 turnover jumpedby 33% to over RMB656 million. Annual sales volumereached a new high of over 118,000 metric tonnes. Netprofit amounted to approximately RMB10.6 million.Dividend received during the year was about RMB1.3million, together with dividend declared, based ondistributable profit of about RMB1.1 million, generating atotal dividend income of about RMB2.4 million to the VSCGroup. The Nansha JV has a reputable industry positionby offering highly competitive prices and quality service.Continuous operational improvements were driven by thewidespread use of balance scorecard approach to setspecific measurable targets in inventory turnover days,customer satisfaction index and passing of ISO9001:2000 audit. The completion of Phase 2 expansion hasequipped the JV with a larger factory premises andadditional cutting and slitting machines, while phase 3expansion is underway, with the JV in final talks with thelocal Planning Bureau for land purchase.

The VSC Group’spartner, ShinshoCorporation, thecore trading arm

of Kobe SteelGroup, provides

strong support ...

““

CAMP – Management Discussion and Analysis30


Enclosure Systems Manufacturing


...focus is to providecustomised

enclosure systemsfor the high growth

telecommunicationsindustry in

southern China...

““ ENCLOSURE SYSTEMS MANUFACTURINGThe VSC Group strategically invested in the set up of theVJY enclosure systems manufacturing (VJY) inShenzhen three years ago, to further become acomprehensive steel processing services solutionprovider, and adding to its list of offerings punching,bending, stamping, coating, assembly, technical designand quality control. VJY’s focus is to provide customisedenclosure systems for the high growthtelecommunications industry in southern China, which isdominated by a few leading domestic telecommunicationequipment providers/manufacturers such as Huawei andZhongxing. In its initial start up period, VJY had to investin substantial resources to meet the stringentrequirements, before qualifying as the approved vendorfor these customers who prefer to source from a fewreliable vendors. VJY needs to continually improve itsproduction costs and efficiency to remain competitive inwinning bidding orders and keep up with changes in thetelecommunications industry. To date, VJY hassuccessfully developed its position in the supply chain ofenclosure systems and secured its market share with topcustomers Huawei and Zhongxing. Turnover for 2004/05continued its increase by 25% to about HK$136 million,as compared to last year’s HK$109 million; more thanthree times over the HK$40 million sales recorded twoyears ago. However, segment results fell by 44% fromapproximately HK$9 million to HK$5 million due to highraw material costs and special provision for aged finishedgoods and work-in-progress. In the coming year, VJY willapply key account management in servicing corecustomers who exceed RMB200 million in sales, andimprove its technical manufacturing capability and salesforecast to lower inventory costs. Coordination amongsales and production teams will be strengthened tosecure expected orders from Huawei in respect of thewireless segment, while outsourcing of certain productionprocesses to selective reliable partners will continue tooptimise production management and expand capacity.The VSC Group’s strong steel supply chain management,will assist VJY in sourcing from local steel mills to mitigatethe impact of high raw material costs.

32

Plastics Distribution



Local sales teamsin Shenzhen andGuangzhou have

penetrated into thelocal market

around the PearlRiver Delta...

““ PLASTICS DISTRIBUTIONFor the year under review, the plastics divisionrecorded a 44% increase in turnover to approximatelyHK$248 million and a 54% growth in segment results toapproximately HK$15 million. The soaring crude oil pricedrove up the price of plastics, resulting in 44% salesgrowth in sales dollar value, while actual sales volumegrowth was at 17%. The division continues to promotethe engineering plastic resins of a wide range of suppliersincluding Samsung Total, Samsung Cheil, GE Plastics,Mitsubishi and UMG. The team offers technicalassistance to customers’ new products development andcoordination with suppliers. Local sales teams inShenzhen and Guangzhou have penetrated into the localmarket around the Pearl River Delta, targeting the hugedemand for high quality imported resins, particularly inthe home appliance, health care and medical productsmarkets.

The new wholly-owned trading company in Shenzhenalso facilitates the development of local sales with theplanned set up of a bonded warehouse in China toexpedite delivery. However, performance of themachinery division has not improved due to strongcompetition and poor sentiment for its costly high-endJapanese injection moulding machinery. As a result, theVSC Group plans to terminate the relatively small scalemachinery division at fiscal year-end, and reallocatemanpower resources.

34

CMGConstruction

MaterialsGroup

Management Discussion and Analysis – CMG

...the VSC Group remains optimistic about CMG’slong-term development, and will pursue an overall

strategy to build a steel distribution network toprovide high value-added solutions to targetcustomers across China. Leveraging on the

expertise of steel specialists who possess in-depthknowledge of the domestic steel market, CMG has

successfully expanded its coverage from HongKong to major cities in Mainland China ...

“

“

< > 37

Dominating a niche part of themarket, namely the distribution ofselected construction steel andbuilding products to reputabledealers and end users in affluentcities including Shanghai andShenzhen

CMG – Management Discussion and Analysis

CONSTRUCTION MATERIALS GROUP(“CMG”)

The VSC Group’s CMG business primarily distributessteel and building products to large reputable developersand contractors for construction work in Hong Kong andMainland China. As mentioned earlier, CMG operationswere seriously hampered by the exceptionally poorresults of its Hong Kong steel stockholding departmentand the selective macro-entrenchment measures in Chinato curb some overheated industries, in particular the steeland real estate sectors. As a result, CMG’s turnoverslightly dropped by 1% to approximately HK$2,847million, accounting for approximately 69% (last year –81%) of the VSC Group’s total turnover. CMG’s segmentresults for the first time suffered a HK$21 million loss ascompared to the profit of approximately HK$68 millionlast year. However, the VSC Group remains optimisticabout CMG’s long-term development, and will pursue anoverall strategy to build a steel distribution network toprovide high value-added solutions to target customersacross China. Leveraging on the expertise of steelspecialists who possess in-depth knowledge of thedomestic steel market, CMG has successfully expandedits coverage from Hong Kong to major cities in MainlandChina, including Shenzhen, Guangzhou, Shanghai,Beijing and Tianjin, to capture booming potential forconstruction materials.

36

Steel Distribution


< > 39CMG – Management Discussion and Analysis

...already adjustedits operating

strategies to haveboth the suppliers

and customersshare in the

pricing risk...

““ STEEL DISTRIBUTIONThe VSC Group’s CMG operations in steel distributioncomprise stockholding business of rebars, structural steeland engineering products in Hong Kong, steel distributionin Mainland China together with its investment in theiSteelAsia Group, and distribution of mainly domesticsteel products in eastern China by its 66.7% owned jointventure, Shanghai Bao Shun Chang (“BSC”). Salesrevenue from distribution of steel in China was stablefrom last year, contributing a majority of 61% of the totalsteel distribution turnover in 2004/05.

The steel stockholding business, notably its rebarsbusiness in Hong Kong suffered from an unprecedentedadverse operating environment, with its performancehitting an all-time low in over 40-year history of the VSCGroup. Turnover of the Hong Kong steel stockholdingdepartment (which consists of rebars, structural steel,soil nails and couplers) decreased by 9% as compared tolast year. The major rebars stockholding business, whichtraditionally commits to long-term (1 to 3 years) fixedprice sales contracts with major developers andcontractors for specific projects and construction sites,was hit with sales declining by 6% to about HK$894million, and a gross loss of about HK$72 million,shrinking from the gross profit of around HK$52 millionlast year. Other businesses: structural steel andengineering products were not as adversely affected asthey do not depend on long-term contracts as much andthey contributed HK$23 million gross profit to the HongKong steel stockholding department. As a result, theperformance of the Hong Kong steel stockholdingdepartment suffered a gross loss of HK$49 million for theyear.

Average selling prices were dramatically pulled downduring this period due to long-term fixed price salescontracts, entered into during 2000-03, which had yet torun their course. Construction activities in Hong Kongalso remained stagnant without much apparentimprovement from the recently recovered propertymarket. Total tonnage of all kinds of steel delivered by theentire department in 2004/05 fell to over 329,000 metrictonnes, as compared to over 444,000 metric tonnes lastyear. Sourcing of steel rebars was worsened by thevolatility of steel prices, not seen by the industry in thelast decade, due to the war in the Middle East.

38


Consequently, the VSC Group suffered tremendouspressure given its fixed low sales price commitment inHong Kong against a backdrop of soaring worldwideprices. To maintain its long-term relationships withcustomers, and to limit the potential exposure in themismatch between the sales price and purchase cost,the department concluded several unprofitable purchasesin covering its open position in the outstanding salescontracts to ensure uninterrupted delivery of steel rebarsto customers. This, as the department finally closed thebooks at year end, resulted in gross loss.

Such unsatisfactory results showed the historicallyunchallenged vulnerability of the rebars stockholdingbusiness model in Hong Kong. As endorsed bycustomers, the department already adjusted its operatingstrategies to have both the suppliers and customersshare in the pricing risk, and used our best effort not toenter into long-term fixed price sales contracts exceedingtwo years, with price adjustment for delivery of over oneyear. A premium will also be charged for special sizedelivery. The department is committed to ensuringcustomer satisfaction through healthy competition,reduced operation cost by supply chain managementand improved operation efficiency. Most of theoutstanding fixed low price sales contracts have alsobeen completed or are expiring this financial year. Themanagement is confident that, barring unforeseencircumstances, the VSC Group will leverage on itsfinancial strength and solid customer and supplier baseto restore the Hong Kong steel distribution business backto health.

Currently, the department’s contracts-on-hand totalabout HK$742 million extending to 2006. Major projectsincluding Shatin Heights Tunnel and Approaches, Route8, Eagle’s Nest Tunnel, Fanling Area 36 Phase 1 & 2,Upper Ngau Tau Kok Estate Phase 2 & 3, CyberportResidential Development Phase RIII & RIVA, Commercial/Residential Development at Yeung Uk Road, ICACHeadquarters at North Point, Wynn Resorts Macau andPark Hyatt Hotel Macau. Macau’s recent economicprosperity is likely to generate steel demand for thedepartment over the next few years, mitigating to anextent, the shrinkage in the Hong Kong market.

...the VSC Groupwill leverage on itsfinancial strength

and solid customerand supplier base to

restore theHong Kong steel

distribution businessback to health.

“

“

... committed toensuring customer

satisfaction throughhealthy competition,

reduced operationcost by supply chain

management andimproved operation

efficiency.

“

“

< > 41CMG – Management Discussion and Analysis

Inventory turn was closely monitored and minimum profitmargins were strictly adhered to as part of the measuresto combat the volatile construction steel market. Underthese conditions, the development of imported structuralsteel, mainly H-beams, into Shanghai, inevitably slowed.Turnover arising from such distribution in 2004/05 wasabout HK$208 million as compared to last year’s sales ofover HK$330 million. Coupled with other steel productsdistribution to distributors and end users in southernChina, CMG achieved an aggregate turnover of aboutHK$392 million for steel distribution in Mainland China, a40% decline from HK$654 million last year. The VSCGroup, under the purchase arrangement with theiSteelAsia Group, made steel products sales ofapproximately HK$399 million. To further realign itsfinancial resources and exercise more control over itssupply chain, the VSC Group partially called upon its putoption in its investment in the Beijing Shougang Group’smanufacturing of colour-coated steel plates or PPGI, andreduced its shareholding from 10% to 5% to repatriateUS$2 million. To mitigate vulnerability of the fluctuatingsteel price, CMG is exploring other value propositionsthat would demand less capital and yield higher return.During the year, the VSC Group formed a strategicalliance with a newly set up venture, MetalChina, todevelop the provision of a vertical chain market linkingprocurement services to overseas buyers to sourceChina-made metal products for export. Such specialisedservices not only help develop the VSC Group’s domesticsourcing capability but also lower its capital requirementsand risks associated with inventory. It further renderscross-selling opportunity of processing activities for theCAMP operations. Under a subscription agreement, theVSC Group could acquire a majority stake in the ventureshould the business model prove to work well. The66.7% joint venture company with the Shanghai BaosteelGroup, BSC, continued to deliver strong performanceand yield to the VSC Group. For 2004/05, turnoverfurther increased by 10% to approximately HK$848million, and net profit contribution before minorityinterests jumped 88% to about HK$24 million. To furtherenrich its value propositions to customers, BSC hasdecided to partner with a major domestic customer,Jiangsu Baixue Electrical Appliances to set up astamping steel service centre in Changshu, which is closeto industrial areas in Suzhou and Wuxi. Total investmentis estimated to be about US$1.2 million, and the VSCGroup will hold majority shareholding. To begin in 2006,the JV will open up a new geographic reach and capturenew demand.

...formed strategicalliance with a newly

set up venture,MetalChina, to

develop theprovision of a verticalchain market linking

procurementservices to overseas

buyers to sourceChina-made metal

products for export.

“

“

40

Building Products


< > 43

BUILDING PRODUCTSBuilding products department regained its momentumof growth and further improved its performance withturnover increasing by 13% to about HK$157 million andsegment result increased to about HK$9 million in theyear, as compared to HK$5 million in last year. Thebiggest contributor is now the project sales division,which distributes mainly sanitary wares of TOTO, Laufenand Hansgrohe, kitchen cabinets of SieMatic and Roverconglomerate marble. Despite the stagnant residentialbuilding contracts during the year, the divisionsuccessfully extended the TOTO sensor products fromhotel and commercial applications to major luxuryresidential developments. The division continued to enjoymodest sales growth in commercial office, shoppingarcade, hotel and service apartments and casino andresort sectors in Macau. The division currently hascontracts-on-hand worth around HK$11 million. Majoroutstanding projects include the supply of bathroomsanitary wares and conglomerate marble for Three PacificPlace Pedestrian Subway, Ting Kau Hotel, various hotelsin Macau and Area 31 Tin Ping Shan. To raise the salesvolume and profit margin, new products with own brandnames will be developed. As stated in last year’s annualreport, the kitchen cabinets division has beenrestructured to abandon large long-term, high risks andlow return projects. Thus, turnover from the kitcheninstallation business has continued to decline as thedivision is now focusing on small but high end individualprojects, which yield a much higher profit margin but lessdemand on human resources. Leisure Plus, the retailoutlet and showroom, with an area of over 7,000 squarefeet in Wanchai has successfully built up a superior high-end image for quality sanitary products and kitchencabinets. Its share of the retail market is enhancedthrough establishment of a wholesale network. A newbusiness model, Vendor Managed Inventory (“VMI”) hasbeen used to operate this network to better coordinatethe pricing, inventory, display quality and service levelamong all dealers. Turnover increased over 91%. Thewholly-owned trading company, Leisure PlusShanghai, recorded good progress in its wholesale andproject sales of TOTO products in Shanghai. Leisure PlusShanghai achieved a turnover of approximately HK$59million, a 91% growth over last year. It also turned aroundits loss position from last year, with segment results ofapproximately HK$1 million. The VSC Group has alsoobtained distribution rights of TOTO in Guangzhou andShenzhen areas. A new wholly-owned trading companyis being set up to handle the retail and project sales inthese areas.

CMG – Management Discussion and Analysis

...regained itsmomentum of

growth andfurther improved

its performance...

““

42

OTHER INVESTMENTThe VSC Group maintained as a long-term investment of18.9% interest in iSteelAsia Holdings Limited(“iSteelAsia”), a company listed in the GrowthEnterprise Market of The Stock Exchange of Hong KongLimited (“Stock Exchange”) since April 2000. In 2004/05,iSteelAsia and its subsidiaries (together the“iSteelAsia Group”) was adversely affected by thecentral government’s policy to limit excessive investmentsin specific overheated industries. Together with a volatilesteel price and conservative provisions for diminution invalue relating to inventories, receivables, deferred taxassets and deposits in dispute, the iSteelAsia Group’sturnover in 2004/05 decreased 40% to approximatelyHK$860 million, and a loss attributable to shareholders ofapproximately HK$10 million has been recorded.However, the VSC Group remains confident theiSteelAsia Group will be restored to profitability. The VSCGroup will, as previously agreed, continue to source andsupply steel to the iSteelAsia Group to facilitate itsexpansion of steel trading operations and obtain bulkpurchase benefit by aggregating demand of the twogroups. iSteelAsia will receive net proceeds ofapproximately HK$30,200,000 from a series of capitalrestructuring exercises given shareholders approval. TheVSC Group has also agreed to act as the underwriter forthe open offer and would subscribe new iSteelAsiashares for the maximum amount of HK$2.5 million.

KEY ELEMENTS OF GROWTH

(1) Human capitalThe VSC Group considers its staff the mostvaluable asset. Our total solution services can onlybe delivered by outstanding employees who canmeet challenges and accomplish goals. Ourtransformation from a trading business to multi-located factory operations in China also requiresour people to adjust to cultural and mentalchallenges in a new environment. Our HR systemand corporate structure have been modified toaccommodate staff from all backgrounds, andmould them into a coherent team. In particular, theHR strategy has focused on localization. Most ofthe senior executives are local professionals withwestern education and/or work experience at amultinational corporation. They understandMainland China’s best practices and also have amodern management mindset. In June 2005, theVSC Group employed 1,106 staff members, a 11%


The VSCGroup

considers itsstaff the most

valuable asset.

“ “

< > 45KEY ELEMENTS OF GROWTH – Management Discussion and Analysis

decrease over last year. The decrease in number ofemployees is mainly due to the operationalstreamlining of VJY to improve its efficiency withfewer workers.

Headcount HeadcountDepartment June 2005 May 2004

CAMP– Coil Centre 314 303– Enclosure Systems 603 731– Plastics Distribution 19 21

CMG– Steel Distribution 31 44– Building Products 25 25– Shanghai Offices 54 59

Corporate Support 60 58

Total: 1,106 1,241

The VSC Group recognises the importance ofaligning individual staff interest to the corporate goal.Tailored-made incentive schemes for bonuses andcommission with measurable targets in achievingkey success are designed with bottom-up approachfor respective business units and corporate supportfunctions. The VSC Group also believes in investingin its own people to provide the best human capitalfor supporting its high growth and improvingprofitability. The HR department launches many on-the-job training courses plus training subsidy toemployees to enhance their knowledge and skills. Asmentioned in last year’s annual report, anOrganisation Development Programme jointly heldby Cheung Kong Graduate School of Business, arenowned business school in China, and the VSCGroup, was launched during the year for over 30selected middle management staff and departmentheads. The Programme consisted of a series ofmodules covering strategic planning, finance,operations, sales and marketing as well asleadership, with particular emphasis and referenceon China businesses. The Programme was very wellreceived by the participants and follow up teamprojects were carried out to apply their learning tothe VSC Group’s businesses. The VSC Group alsostresses the need to foster good and timely

...OrganisationDevelopment

Programme jointlyheld by Cheung Kong

Graduate School ofBusiness and the VSC

Group...for over 30selected middlemanagement...

“

“

44

communication with staff. The annual visionday is held to communicate the corporatevision, mission and goals with all staff.Periodic staff forums are organised tocollect staff opinion and feedback oncompany policy. Regular newsletters inelectronic format are published to providestaff with report of the latest corporatedevelopment and recreational activities.Total staff costs including contribution toretirement benefit schemes incurred during2004/05 amounted to approximatelyHK$80 million. During the year underreview, no options have been offered and/or granted to participants under the newshare option scheme adopted since 12thNovember 2001.

(2) Finance capitalAs the VSC Group continues to evolve tofocus on PRC steel processing, the VSCGroup has also continue refined its capitalstructure with the objective of securingthe necessary funds at optimal capitalcost to finance the cash flow of itsbusiness development. In terms of equity,number of issued shares increased from247 million in 1994 to 369 million in 2005.Shareholders’ equity stood at aboutHK$694 million as at 31st March 2005.Over the past ten years, the VSC Grouphas received over HK$570 million throughdifferent financial exercises. The last shareplacement was done in November 2003for 33 million new shares at HK$1.8 pershare, bringing net proceeds of aboutHK$54.7 million to finance the continuousdevelopment of the VSC Group’s CAMPoperations in Mainland China. Anothershare placement involving placement of31.2 million existing old shares atHK$1.25 per share to institutionalinvestors was also completed in July2003. These exercises not only inject therequired capital but also improve ourshareholders’ base with reputableinstitutional investors and funds whichshould help to form a sound foundationfor further exercise in the future.

In terms of bank borrowing, the VSCGroup requires significant short-termbanking lines to finance its working capitalneed for inventory and accountsreceivable. The VSC Group has developedexcellent relationships with a number oflocal and international banks in HongKong and continues to expand its bankingprofile. Aggregate banking facilities inshort-term trade lines surged from HK$0.8billion in 1994 to over HK$1.7 billion in2005, with the number of principal banksincreasing from five to fifteen. Such tradelines consist of letter of credit and trustreceipt loans. Interest costs are levied oninter-bank borrowing rates pluscompetitive margins. As the VSC Groupestablishes more presence in China, theneed for RMB financing is expected tobecome greater. RMB term loans and billexchange facilities have been obtainedfrom domestic and foreign banks in theamount of RMB223 million. As the VSCGroup continues to grow, it will closelyadapt its group structure and financingresources to optimise the fit to its cashflow need and cost basis.

CORPORATE GOVERNANCE

The market value of Hong Kong listed companiesis positively and significantly correlated with theircorporate governance scores. This reinforces theVSC Group’s belief and commitment to ensurehigh standards of corporate governance in theinterests of its shareholders. The VSC Group hascontinued to evolve and reform its corporatepractices and structure in response to increasingdemand for better corporate governance toenhance shareholders’ value. The Listing Rules inHong Kong have recently been amended withmajor changes and new rules relating to corporategovernance. The VSC Group will comply with allthese new mandatory requirements and minimumstandards. It will also strive to adoptrecommended best practices. Efforts andprinciples adopted by the VSC Group in promotingits corporate governance are as follows:

Management Discussion and Analysis – CORPORATE GOVERNANCE

< > 47

(1) The Board and senior management –Currently, the Board consists of twoexecutive directors and five non-executivedirectors (of whom four are independent).The executive directors are responsible formanaging the overall business andformulating and executing corporatestrategies. The non-executive directors areall senior business executives who advisethe executive directors and management onbusiness strategies and development. Theexecutive directors have regular meetingswith the head of CAMP or CMG, generalmanagers of respective business units andkey staff of support units to discuss majorbusiness plans and review operation andfinancial performance.

(2) Audit committee and internal control –The audit committee has been set up sinceDecember 1998 and consists of five non-executive directors (of whom four, includingthe chairman of the audit committee, areindependent). As required by theamendment of the Rules Governing theListing of Securities on The StockExchange of Hong Kong Limited (“ListingRules”), the VSC Group has appointed anindependent non-executive director, Mr.Kenny King Ching Tam, who has therequired appropriate professional accountingqualifications and financial managementexpertise as one of the members of the auditcommittee. The audit committee meetsformally twice a year to review and discussthe various internal control and audit issuesas reported by the external auditors andinternal audit team. It also reviews the interimand final financials. To further improveinternal control environment and accountingsystem, internal audit department has beenestablished.

(3) Code of best practice – The Companyhas complied with the Code of Best Practiceas set out in Appendix 14 of the ListingRules adopted before 1st January 2005throughout the accounting year covered bythe annual report, except that the non-

executive directors are not appointed forspecific terms. However, the non-executivedirectors are subject to retirement by rotationand re-election at annual general meeting inaccordance with the Company’s Bye-laws.The Code of Best Practice has now beenrenamed and revised as the Code onCorporate Governance Practices by theStock Exchange as effective after 1stJanuary 2005. The new Code contains twotiers of recommended board practices-minimum standards and recommended bestpractices. As stated before, the VSC Groupwill ensure full compliance on the minimumrequirements and endeavour to adopt therecommended best practices.

(4) Directors’ securities transactions – VSCadopted on 31st March 2004 “Appendix10-Model Code for Securities Transactionsby Directors of Listed Issuers” as therequired standard against which Directorsmust measure their conduct regardingtransactions in securities of the Companyaccording to Appendix 10.1 of the ListingRules.

(5) Investor relations and communication –The VSC Group is committed to promotingtransparency and maintaining effectivecommunication with investors, analysts andthe press. The management periodicallymeets with existing and potential investorsto make corporate presentations. Regularplant visits to our various manufacturingfacilities are arranged for various interestedfund managers, research analysts andbankers. Our user-friendly website providesinvestors with the latest news, corporate andfinancial information includingannouncements and interim and annualreports. The VSC Group continues tomaintain a high level of transparency ininformation disclosures. The VSC Group isvery pleased to report that its 2004 annualreport has won, among five other majorlisted companies, an Honourable MentionsAward in the HKMA Best Annual ReportsAwards this year.

CORPORATE GOVERNANCE – Management Discussion and Analysis46

Directors’ Profile

EXECUTIVE

DIRECTORS

(As at 31st March 2005)

NON-EXECUTIVE

DIRECTOR


MR. ANDREWCHO FAI YAO

aged 39, is the chairmanand chief executive

officer of the Company.Mr. Yao graduated from

the University ofCalifornia, Berkeley and

Harvard GraduateSchool of Business. He

is responsible for theVSC Group’s overall

corporate strategy andobjectives. He serves as

a member of Hong KongHousing Society and the

chairman of theconstruction material for

Federation of HongKong Industries. He also

sits on the ShanghaiPeople’s Political

ConsultativeConference, deputy

chairman of ShanghaiYouths Federation,

deputy chairman of theHong Kong UnitedYouth Association

Limited and director ofthe Shanghai Fudan

University. Mr. Yao isalso the chairman ofiSteelAsia HoldingsLimited which is a

company listed on GEM.

MR. FERNANDOSAI MING DONG

aged 43, is an executivedirector of the Company

responsible for generaladministration. He hasover seventeen years’

experience ininternational trading. Mr.

Dong is extensivelyinvolved in warehouse

management, propertyinvestment and the

China operations of theVSC Group. He has

also been assisting theVSC Group to establish

new manufacturingfacilities in both Hong

Kong and MainlandChina. Mr. Dong joined

the VSC Group in 1987.

DR. SHAO YOU BAOaged 84, is the chairman

of Van Yu Trading Co.,Ltd. and Van Fung Co.,Ltd. and a director of a

number of othercompanies including

Toyoda (H.K.) Co., Ltd.Dr. Shao is also a non-

executive director ofJusco Stores (HongKong) Co., Limited.

Dr. Shao hasapproximately 50 years’

experience in bankingand finance and was acommittee member of

the ConsultativeCommittee on the Hong

Kong New Airport andRelated Projects. He

was also appointed as amember of the

Preliminary Committeeof the Hong Kong

Special AdministrativeRegion. In October

1998, he was awardedthe Silver Bauhinia Star

(SBS) Medal inrecognition of his

distinguished publicservice in Hong Kong

and of his valuablecontribution to the

preparatory work for theestablishment of theHong Kong Special

Administrative Region.Dr. Shao graduated

from Kobe University,Japan with a Master

Degree in Economics in1943 and holds an

Honorary DoctorateDegree in Law from Ohio

University in the US.

48 < > 49Directors’ Profile

MR. KENNY KINGCHING TAM

aged 55, is a Director.He joined the VSC

Group in September2004. Mr. Tam

graduated fromConcordia University,

Canada with a BachelorDegree in Commerce.

He is a qualifiedaccountant in Hong

Kong and Canada. Mr.Tam is a practicing

accountant in HongKong and is the owner

of Kenny Tam & Co.,Certified Public

Accountants. He is alsoa registered Insolvency

Practitioner of theOfficial Receiver’s Office.Mr. Tam has substantial

experience in theaccounting and

insolvency fields. Heserves on a number ofadvisory committees in

the Accountancy andInsolvency Profession

and has been active incommunity work in

Hong Kong for manyyears. Mr. Tam is also an

independentnon-executive director of

Shougang ConcordGrand (Group) Limited,

Kingmaker FootwearHoldings Limited, CCT

Telecom HoldingsLimited, Starlite Holdings

Limited and iSteelAsiaHoldings Limited.

INDEPENDENT

NON-EXECUTIVE

DIRECTORS


DR. CHOWYEI CHING

aged 69, is the founderand chairman of

Chevalier Group thatcomprises two public

listed companies inHong Kong. He is a

non-executive directorof Shaw Brothers

(Hong Kong) Limitedand Television

Broadcasts Limited. Dr.Chow is the Honorary

Consul of The Kingdomof Bahrain in Hong

Kong and a standingcommittee member ofthe Chinese People’sPolitical Consultative

Conference, Shanghai.Dr. Chow holds an

Honorary Degree ofDoctor of Laws from

The University of HongKong and an Honorary

Degree of Doctor ofBusiness

Administration fromThe Hong Kong

Polytechnic University.He also serves in a

number of positions invarious educational,charitable and trade

organisations.

MR. KENNETHWOO SHOU TING, JP

aged 62, is themanaging director ofKader Holdings Co.

Limited, a listedcompany in Hong Kong.Mr. Ting graduated from

the University of Illinoiswith a Bachelor ofScience degree in

Mechanical Engineering.He is a non-executivedirector of New lsland

Printing HoldingsLimited and a directorof a number of private

companies in HongKong. He is also the

chairman of Federationof Hong Kong

Industries. He hasextensive experience inproperty development,

industrial andinvestment businesses.

MR. HAROLDRICHARD KAHLER

aged 57, is a businessconsultant, specialised

in supportingcompanies that are

expanding theirpresence in the greater

China region. Mr. Kahlergraduated from George

Washington Universitywith a Master Degree in

Economics andreceived his Juris

Doctor fromGeorgetown University.

Mr. Kahler hasextensive Asia

experience. From 1990to mid-2002, he servedCaterpillar Inc., in Asia –

first as managingdirector of P.T. Natra

Raya, a manufacturingand assembly operation

in lndonesia; then aspresident of Caterpillar

China, where he wasresponsible for

establishing a newbusiness subsidiary to

manage Caterpillar’sgrowing interests and

investments in theregion. Other

assignments withCaterpillar and the US

Government haveprovided Mr. Kahler

experience with Japan,Vietnam and other

Asian economies. In2002, Mr. Kahler served

as chairman of theAmerican Chamber of

Commerce inHong Kong.

Financial Review

THE FOLLOWING MANAGEMENT DISCUSSION AND ANALYSISSHOULD BE READ IN CONJUNCTION WITH CONSOLIDATEDACCOUNTS AND NOTES THERETO INCLUDED ELSEWHERE HEREIN.

(Note: The financial years ended 31st March 2004 and 2005 are referred to herein as FY2004 and FY2005, respectively. Certain

comparative figures in FY2004 have been reclassified to conform with the presentation in FY2005.)

(1) CONSOLIDATED PROFIT AND LOSS ACCOUNTS

FY2005 FY2004 % ChangeRef HK$’000 HK$’000

1.1 Turnover 4,138,621 3,549,110 +17%Cost of sales (3,935,673) (3,314,790) +19%

1.1 Gross profit 202,948 234,320 –13%Other revenue– Interest income 5,059 6,310 –20%– Dividend income from an unlisted

long-term investment 2,296 374 +514%– Guaranteed return from a joint venture 2,033 4,344 –53%

1.2 Selling and distribution expenses (26,939) (21,352) +26%1.2 General and administrative expenses (145,259) (119,498) +22%1.3 Other income/expense, net 26,183 5,294 +395%

Operating profit 66,321 109,792 –40%1.4 Finance costs (17,927) (13,337) +34%

Profit before taxation and minority interests 48,394 96,455 –50%1.5 Taxation 4,320 (11,061) N/A

Minority interests (11,637) (4,331) +169%

1.6 Profit attributable to shareholders 41,077 81,063 –49%

1.7 Dividends per share HK 2.2 cents HK 5.9 cents –63%

1.8 Earnings per share– Basic HK 11.2 cents HK 24.6 cents –54%

– Diluted HK 11.1 cents HK 23.6 cents –53%

Financial Review

< > 51Financial Review

CONSOLIDATED RESULTS1.1 Turnover and gross profit

Turnover increased by 17% over last year. Theincrease in turnover was mainly derived from theCAMP operations, which recorded an encouraginggrowth of 91%, while the turnover of the CMGoperations remained at similar level as compared toFY2004. Overall gross margin, however, decreasedby 26%. The Hong Kong steel rebars stockholdingdepartment of CMG was significantly affected bysome long-term steel sales contracts committed inprevious years at a price lower than prevailing marketprice, resulting in an adverse hit to the profitability.

1.2 Operating expensesSelling and distribution expenses (“S&D expenses”)increased by 26% or approximately HK$6 million.The increase was mainly attributable to the increasein transportation expenses as a result of increase insales volume. General and administrative expenses(“G&A expenses”) also increased by 22%. Thenewly acquired Guangzhou Coil Centre in March2004 accounted for approximately HK$9 millionincrease in the expenses. Other major reasons forthe increase included the increased staff costs dueto the continuous expansion in businesses andenhanced incentive schemes for sales motivation,as well as the operating costs for the expandingheadquarters in Shanghai, PRC.

1.3 Other income/expense, netOther income/expense included (i) surplus onrevaluation and gain on disposal of investmentproperties of about HK$26 million; (ii) gain ondisposal of a director quarter of about HK$10 million;and (iii) impairment loss on a long-term investment ofabout HK$10 million.

TURNOVER BYGEOGRAPHICAL SEGMENTfor the years ended 31st March%

50

0

20

40

60

80

100

03 04 05

Mainland China

Hong Kong

Financial Review

1.4 Finance costsThe increase was the result of increase in tradefinance and term loans for the VSC Group’sexpanded businesses. Also, the VSC Group had fullydrawn down the HK$250 million three-yearsyndication loan and increased its borrowings in RMBloans for its investments and operations in China.Interest charges of these additional bank financingswere levied at higher rates than the normal short-termtrade line trust receipts loans in Hong Kong. Interestcover (operating profit divided by finance costs)reduced to about 3.7 (FY2004: 8.2) as aconsequence of the increase in finance costs anddecrease in operating profit. The VSC Group willclosely monitor the trend of interest rate and willdeploy, if necessary, appropriate financial instrumentsto hedge against any significant fluctuation.

1.5 TaxationTaxation included current taxation of about HK$9million (FY2004: HK$12 million) offset by deferredtaxation credit of about HK$13 million (FY2004:HK$1 million). Deferred taxation credit for FY2005was mainly resulted from the tax loss of our HongKong steel stockholding department.

1.6 Profit attributable to shareholdersProfit attributable to shareholders decreased 49%to approximately HK$41 million. Net profit margin(profit attributable to shareholders divided byturnover) reduced from 2.3% in FY2004 to 1.0% inFY2005. Return on equity (profit attributable toshareholders divided by shareholders’ equity)reduced to 5.9% (FY2004: 12.3%) and return tototal assets (profit attributable to shareholdersdivided by total assets) also reduced to 1.8%(FY2004: 4.0%). All these three ratios decreased asa result of decrease in profit attributable toshareholders.

INTEREST COVERfor the years ended 31st MarchMultiple

0

2

4

6

5

3

1

8

7

9

10

03 04 05


1.7 DividendDividend of HK2.2 cents per share was declared forthe year representing dividend payout (total dividendsdivided by profit attributable to shareholders X 100%)of around 20% (FY2004: 26%). It is the VSC Group’spolicy to try to pay dividends to reward itsshareholders. With its stated strategy for furtherexpansion, especially in CAMP, the management willbalance the goal to achieve an attractive yield returnfor its shareholders while through reinvestments ofcapital to maximise the VSC Group’s shareholders’value in the medium to longer term.

1.8 Earnings per shareBasic earnings per share decreased by 54% toHK11.2 cents mainly due to decrease in profitattributable to shareholders. Diluted earnings pershare decreased by a similar level of 53% to HK11.1cents. As discussed before, the Group will focus itsresources to continue to develop its CAMP operationwhich generates a much more higher margin returnto the Group. Unlike the Group’s traditional CMGoperation which are mainly shorten trade financings,the CAMP operations require fixed assets and alonger term financial commitment. As such, themanagement balancing the investment need of thecontinued growth of CAMP and providing a dividendreturn to its shareholders, has recommended a lowerdividend payout ratio to approximately 20% ofearning.

CASH DIVIDEND PER SHAREfor the years ended 31st MarchHK cents

BASIC EARNINGS PER SHAREfor the years ended 31st MarchHK cents

52

10

9

8

7

6

5

4

3

2

1

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20

15

25

30

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Financial Review

Segment results

Turnover Segment resultsFY2005 FY2004 Change FY2005 FY2004 Change

HK$’000 HK$’000 % HK$’000 HK$’000 %

CAMP– Coil centre 905,482 392,513 +131% 84,179 51,544 +63%– Enclosure systems 135,811 109,463 +24% 5,017 8,848 –43%– Plastics 248,188 172,265 +44% 14,727 9,542 +54%

CAMP total 1,289,481 674,241 +91% 103,923 69,934 +49%

CMG– Steel distribution 2,690,626 2,734,287 –2% (30,024) 62,994 -148%– Building products 156,500 138,737 +13% 9,189 4,704 +95%

CMG total 2,847,126 2,873,024 –1% (20,835) 67,698 -131%

Other operations 2,014 1,845 +9% 1,086 (644) +268%

4,138,621 3,549,110 +17% 84,174 136,988 –39%

Financial Review

TURNOVER BY BUSINESSSEGMENTfor the years ended 31st MarchHK$ million

SEGMENT RESULTS BY BUSINESSSEGMENTfor the years ended 31st MarchHK$ million

0

1,000

2,000

3,000

4,000

5,000

03 04 05

CAMP

CMG

-40

-20

0

20

40

60

80

100

120

140

03 04 05

CAMP

CMG


TURNOVER BY PRODUCT/OPERATIONfor the years ended 31st March%

54

Coil centre 11.06

Enclosure systems 3.08

Plastics 4.86

Steel distribution 77.04

Building products 3.91Other operations 0.05

2005

Coil centre 21.88

Enclosure systems 3.28

Plastics 6.00

Steel distribution 65.01

Building products 3.78Other operations 0.05

2004

TURNOVER OF CMG BYGEOGRAPHICAL SEGMENTfor the years ended 31st March%

TURNOVER OF CAMP BYGEOGRAPHICAL SEGMENTfor the years ended 31st March%

0

20

40

60

80

100

03 04 05

Mainland China

Hong Kong

0

20

40

60

80

100

03 04 05

Mainland China

Hong Kong

-40

-20

20

0

40

60

80

100

Enclosure Systems

Coil Centre

Building Products

Steel Distribution

Plastics Other Operations

SEGMENT RESULTS BYPRODUCT/OPERATIONfor the year ended 31st March 2005HK$ million

Financial ReviewFinancial Review

a) China Advanced MaterialsProcessing (“CAMP”)CAMP operations becamemore and more significantwithin the VSC Group.Turnover went up 91% toapproximately HK$1,289million representing 31% oftotal turnover of the VSCGroup. Major profitcontribution was still derivedfrom the coil centre operations.VJY and plastics departmentboth have positive contributionand CAMP finished FY2005with 49% increase in segmentresult to approximatelyHK$104 million.

All three coil centres had doneremarkably well in FY2005despite high steel price forimported quality flat steelproducts which eroded theprofit margin. Turnover andsegment result of DGCC bothrecorded a double-digit growthof 42% and 12% respectively.Gross margin dropped from18% in FY2004 to 14% inFY2005. S&D expensesincreased by 21% due toincrease in transportationexpense as a result of increasein sales volume. G&A expenseswere kept at similar level aslast year. TJCC was in itssecond year of operation andalready making about HK$9million contribution toward thesegment result. Turnoverreached about HK$156 million,

more than four times theturnover of last year. Both S&Dexpenses and G&A expensesincreased by 41% and 59%respectively because of fullyear operation of TJCC inFY2005 as compared to onlynine months operation inFY2004. GZCC was acquiredin late March 2004. Turnoverfor FY2005 was about HK$249million while segment resultwas about HK$18 million.Although the three coil centreshad slightly different operationmodel, synergy had been builtup among the three in terms ofprocurement, inventorymanagement, marketing,customer relationshipmanagement, and other areas.The three coil centres willstrengthen the synergy toimprove operating efficiency,thus profitability.

Turnover of VJY increased fromHK$109 million in FY2004 toapproximately HK$136 millionin FY2005. However, grossmargin dropped from 21% to15% due to increase inmaterial costs as well asspecific provision made foraged finished goods and work-in-progress. S&D expensesdropped 7% while G&Aexpenses increased slightly by3%. As a result of thetightened margin, segmentresult dropped fromHK$9 million to HK$5 million.


Plastics department finishedthe year with 44% increase inturnover but sales volume onlygrew by 17%. Price of plasticresins increased significantly asa result of soaring crude oilprice. However, plasticsdepartment managed to passon the price increase to itscustomer and maintained itsgross margin at the same levelas last year. S&D expensesincreased by 33% as a resultof increase in storage forincrease inventory level andincrease in transportationexpenses for increase salesvolume. G&A expensesincreased by 26% because ofthe setup of newoffice in Shenzhen. Segmentresult increased by 54% toabout HK$15 million.

b) Construction MaterialsGroup (“CMG”)CMG faced lots of challengein both Hong Kong andMainland China market.Although the buildingproducts departmentmanaged to growsatisfactorily, CMG wasseriously hampered by theperformance of steeldistribution department.Turnover dropped slightly by1% and CMG suffered lossfor the first time in its history.Segment loss of aboutHK$21 million was recordedfor FY2005 as compared toprofit of about HK$68 millionfor FY2004.

FY2005 was an extremelyhard year for steeldistribution department. TheHong Kong steel market hadbeen shrinking for the pastfew years. Sales quantity ofHong Kong steelstockholding departmentdropped from about 444,000metric tones in FY2004 toabout 329,000 metric tonesin FY2005. Increasing steelprice coupled with someunprofitable long-term steelsales contracts caused thedepartment to finish the yearwith a gross loss of aboutHK$49 million. Althoughthere are still someunprofitable contractsoutstanding, average price ofour contracts-on-hand as at30th June 2005 is above ouraverage cost of inventoryand the department shouldreturn to normal profit in thecoming year.

56

Financial Review

installation projects werepractically completed,turnover arising from theseprojects amounted to onlyHK$4 million. Turnover growthcame from project salesbusiness and retail business.Our project sales team hassuccessfully promoted theTOTO sanitary ware to theresidential sector. Theblooming hotel industry aswell as the new casino andresort in Macau boosteddemand in the hotel andcommercial sector. As aresult, turnover of the projectsales business increased24%. Leisure Plus, the retailoutlet and showroom, hadsuccessfully aligned with 12dealers to form a network ofoutlets. Promotion andadvertisement were launchedregularly to increase brandawareness. Turnover of thisbusiness increased 91% toabout HK$29 million. LeisurePlus Shanghai, ourcounterpart in Shanghai, alsodone well in FY2005. Turnoverincreased 91% to aboutHK$59 million and started tocontribute profit towards thedepartment. In January 2005,the department also obtaineddistribution right of TOTOsanitary wares in Shenzhenand Guangzhou. A newcompany was being setup to handle the business inthese areas.

Financial Review

Steel distribution in MainlandChina faced another challenge.The PRC central governmentcontinued its macro-entrenchment measures to cooldown the steel industry and realestate market. Constructionprojects were delayed anddemand for construction steelwas weak. Turnover for steeldistribution in Mainland Chinadropped 40% and decreasefrom HK$654 million last year toHK$392 million this year.However, sales to iSteelAsiaGroup under the ongoing steelsupply agreement increasedfrom about HK$156 million toabout HK$399 million. Turnoverof SHBSC also increased by10% to approximately HK$848million. Overall S&D expenses ofsteel distribution departmentincreased by 68% due to theincrease storage expense for theincrease inventory level. G&Aexpenses increase only mildly by8% and segment result loss ofabout HK$30 million wasrecorded for the year ascompared to profit of aboutHK$63 million for FY2004.

For FY2005, turnover of thebuilding products departmentincreased 13% toapproximately HK$157 million.Segment result also increasedfrom approximately HK$5million to approximately HK$9million. As all sizeable kitchen


(2) CONSOLIDATED BALANCE SHEETS

As at 31st March2005 2004 % Change

Ref HK$’000 HK$’000 HK$’000 HK$’000

2.1 Fixed assets 126,015 159,366 –21%2.2 Investment properties 71,100 36,448 +95%

Investment in associates 2 2 0%2.3 Long-term investments 34,101 60,012 –43%

Goodwill 8,026 8,290 –3%2.4 Deferred tax assets 13,797 447 +2987%

Current assets: 2,019,703 1,756,709 +15%2.5 Inventories 895,846 695,941 +29%

Due from customers on installationcontract work 14,616 11,450 +28%

2.6 Prepayments, deposits andother receivables 161,820 88,231 +83%

2.7 Accounts and bills receivable 736,758 836,357 –12%Loans receivable 6,491 6,891 –6%Pledged bank deposits 12,186 8,374 +46%

3.1 Cash and other bank deposits 191,986 109,465 +75%

Current liabilities: (1,376,754) (1,239,224 ) +11%3.1 Short-term borrowings (910,903) (798,610 ) +14%

Accounts and bills payable (364,938) (350,629 ) +4%Due to customers on

installation contract work (942) (157 ) +500%Receipts in advance (31,940) (34,168 ) –7%Accrued liabilities and other payables (55,394) (46,157 ) +20%Taxation payable (12,637) (9,503 ) +33%

3.1 Long-term bank loan,non-current portion (166,667) (97,222 ) +71%

2.3 Deferred tax liabilities (369) (104 ) +255%

Net assets 728,954 684,724 +6%

2.8 Capital and reserves:Share capital 36,861 36,778 0%Reserves 449,842 444,953 +1%Retained profit 198,765 168,529 +18%Proposed dividends 8,109 10,298 –21%

3.1 Shareholders’ equity 693,577 660,558 +5%Minority interests 35,377 24,166 +46%

728,954 684,724 +6%

58

Financial Review

2.1 Fixed assetsTotal fixed assets additions duringFY2005 amounted to approximatelyHK$30 million which included mainlyacquisition of staff quarter andequipment. The increase was offsetby (i) annual depreciation charge ofapproximately HK$22 million; (ii)transfer of a piece of land with netbook value of approximately HK$15million to investment properties; and(iii) disposal of fixed assets, mainly adirector quarter, with net book valueof approximately HK$26 million. As aresult, fixed assets decreased byapproximately HK$33 million.

2.2 Investment propertiesInvestment properties increased byapproximately HK$35 million. Twoinvestment properties ofapproximately HK$8 million weredisposed during FY2005. There wasno new acquisition but a piece of landwith net book value of approximatelyHK$15 million was transferred fromfixed assets to investment properties.All investment properties were valuedby independent surveyors on 31stMarch 2005. The open market valueof our investment propertiesincreased by approximatelyHK$28 million because of therecovery of the Hong Kong economyand good market sentiment. Out ofthis HK$28 million, HK$26 million wasrecorded as surplus on revaluation inthe profit and loss account whichrepresented write back of previousdeficit on revaluation charged to profitand loss account. The remainingHK$2 million represented revaluationabove the original cost and wasrecorded as investment propertiesrevaluation reserve.

2.3 Long-term investmentsLong-term investments decreasedby approximately HK$26 million. InFY2005, the VSC Group decided topartially exercise its put option in its

investment in the joint venture withBeijing Shougang Group andreduced the investment byapproximately HK$15 million. Theinvestments in iSteelAsia had beenrestated from approximately HK$22million to around HK$11 million withreference to market share price atyear end. The decrease of aboutHK$11 million was transferred to theasset revaluation reserve.

2.4 Deferred taxationDeferred taxation arises when thereare temporary differences betweenthe tax bases of assets and liabilitiesand their carrying amounts in theaccounts. Deferred tax assets inFY2005 were mainly resulted fromthe tax loss of our Hong Kong steelstockholding department.

2.5 InventoriesInventories increased 29% to aboutHK$896 million from last year level ofabout HK$696 million. The increasewas the result of expansion of scaleof existing operations as well ascontinuous increase in steel pricethroughout FY2005. By businesssegment, inventories of CAMP andCMG increased by approximatelyHK$128 million and HK$72 millionrespectively. For CAMP, the majorityof increase of about HK$122 millionarose from coil centre operations.For CMG, major addition came fromthe PRC steel distribution whichextended its presence toGuangzhou, Tianjin, and Beijing.Hong Kong steel stockholdingdepartment, on the other hand, wasfacing a declining market andcautiously reduced the inventorylevel by about HK$52 million. Overallinventory turnover (averageinventories divided by cost ofsales X 365 days) increased to about74 days (FY2004: 59 days).

Financial Review


2.6 Prepayments, deposits and otherreceivablesPrepayments, deposits and other receivablesincreased by about HK$74 million. Inparticular, advances to suppliers in PRCincreased by about HK$86 million. It is acommon practice in PRC to pay steel suppliersin advance for domestic purchases. As theneed for domestic steel increased substantiallyfor both CAMP and CMG, advances tosuppliers increased substantially from last year.

2.7 Accounts and bills receivableAccounts and bills receivables (“AR”), net ofprovision for doubtful debts, decreased by12% or approximately HK$100 million.AR of CAMP, with its expanding operations,increased by about HK$99 million while ARof CMG decreased by about HK$199million. Overall accounts receivable turnover(average AR divided by turnover x 365days) decreased to around 69 days(FY2004: 77 days).

During the normal course of its businesses, theVSC Group offered credit terms ranging from30 to 90 days. An ageing analysis of AR basedon delivery date was as follows:

As at As at31st March 31st March

2005 2004HK$ million HK$ million

0 to 60 days 448.2 489.861 to 120 days 171.0 120.4121 to 180 days 83.2 41.9181 to 365 days 20.1 135.3Over 365 days 27.7 61.7

750.2 849.1Less: Provision for bad and doubtful

receivables (13.5) (12.8)

736.7 836.3

60

Financial Review

The substantial improvement of agedAR in both bands of 181 days to 365days and over 365 days were relatedto the AR from the iSteelAsia Groupof which the outstanding balancereduced from about HK$206 millionto HK$119 million.

2.8 Capital and reservesIncrease in capital and reserves ofabout HK$33 million was mainlyattributable to FY2005 profit ofapproximately HK$41 million andsurplus on revaluation ofinvestment properties ofapproximately HK$2 million; offsetby approximately HK$10 milliondividend paid during FY2005.

(3) FINANCIAL RESOURCES ANDLIQUIDITY3.1 Liquidity and financing

As shown in the consolidated cashflow statement, the VSC Group’scash and cash equivalents had beenincreased from approximatelyHK$109 million to HK$192 million asat 31st March 2005. With theupwardly driven steel price andtremendous growth in business,inventories increased byapproximately HK$200 million. Thesources of financing to satisfy thecash flow were mainly from bankloans and trust receipt bank loans.Net cash inflow generated fromfinancing activities wasapproximately HK$172 million.

Financial Review

The VSC Group’s totalshareholders’ funds increased 5%to approximately HK$694 million at31st March 2005 as compared toapproximately HK$661 million at theend of last year.

At 31st March 2005, the VSCGroup’s cash and other bankdeposits totaled approximatelyHK$192 million (2004: HK$109million) of which about 19.7% weredenominated in HK dollar, 12.9% inUS dollar, 53.6% in Renminbi(RMB)12.7% in Pound Sterling and 1.1% inother currencies.

At 31st March 2005, the VSCGroup’s total borrowings amountedto approximately HK$1,078 million ofwhich 100% were interest-bearingborrowings (2004: HK$851 million).Net interest-bearing borrowings,after deducting cash and bankdeposits of about HK$192 million,amounted to approximately HK$886million (2004: HK$742 million). Theincrease in borrowings wasattributable to (i) expansion inbusiness scale in both CAMP andCMG operations; and (ii) substantialincrease in steel price.


Net gearing ratio at 31st March 2005,calculated on the basis of net interest-bearingborrowings to shareholders’ funds increasedfrom 112% to 128% and the current ratio wasslightly improved from 1.42 times to 1.47times as compared to 31st March 2004.During the Year, the VSC Group continued tomaintain most of its borrowings on anunsecured basis, with unsecured debtaccounting for approximately 96% of totalborrowings as at 31st March 2005. The VSCGroup is comfortable to maintain thesefinancial ratios at current level, after takingdue consideration of its business nature andrisk assessments on overall exposure againstindustry norm. The VSC Group’s businessoperations were generally financed by cashgenerated from its business activities andbank facilities provided by its banks. The VSCGroup is also negotiating with banks in HongKong and Mainland China for additionalfinancing to support its businessdevelopment. As at 31st March 2005, letter ofcredit and trust receipts loans facilitiesavailable were around HK$1.7 billion andHK$1.3 billion respectively. Bank loan andtrade facilities of approximately RMB223million were obtained to mitigate its exposureon its Mainland China operations. The VSCGroup will continue to obtain financing on anunsecured basis whenever possible. The VSCGroup will also continue its policy ofmaintaining gearing ratio at this higher level tocope with our business development inCAMP and PRC.

GEARING RATIOas at 31st MarchMultiple

CURRENT RATIOas at 31st MarchMultiple

62

0

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1.5

03 04 05

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0.9

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Financial ReviewFinancial Review

31st March 31st March2005 2004

HK$ million HK$ million

Repayable:Within one year 911 754After one year but within two years 42 55After two year but within three years 125 42

Total interest-bearing borrowings 1,078 851Cash and bank deposits 192 109

Net interest-bearing debts 886 742

As at 31st March 2005, the VSC Group wasin a net cash position and had cash on handof HK$0.2 billion. At present, having amplecash and taking into account unutilized bankfacilities of about HK$0.2 billion, we haveabout HK$0.4 billion financial resourcesavailable. The VSC Group is hence financiallysound and has sufficient financial resourcesto satisfy its capital commitments andongoing working capital requirements forfuture expansion.

3.2 Treasury policiesAll of the VSC Group’s financing and treasuryactivities were centrally managed andcontrolled at the corporate level. The VSCGroup’s overall treasury and funding policiesfocused on managing financial risks, includinginterest rate and foreign exchange risks, andon cost efficient funding of the VSC Groupand its group companies. The VSC Grouphad always adhered to prudent financialmanagement principles.

The maturity profile of the VSC Group’sgross interest-bearing borrowings was setout as follows:


The VSC Group’s businesses wereprimarily transacted in Hong Kongdollar, US dollar, RMB and Eurodollar. As exchange rate between HKdollars and the US dollars is fixed,together with the minimal fluctuationin exchange rate between HK dollarsand RMB, The VSC Group believes itsexposure to exchange rate risk is notmaterial. The VSC Group will continueto match RMB payments with RMBreceipts to minimise exchangeexposure. Transaction values involvingEuro dollar were relatively insignificant.

As at 31st March 2005, about 82.8%of the VSC Group’s interest-bearingborrowings were denominated in HKdollar, 11.4% in RMB, 5.7% in USdollar, and 0.1% in other currencies.Forward foreign exchange contractswere entered into when suitableopportunities arise and whenconsidered appropriate, to hedgeagainst major non-HK dollar currencyexposures. As at 31st March 2005,the VSC Group had total outstandingcurrency swaps, to hedge principalrepayment of future US dollars debtsunder letter of credit and Euro trustreceipt loans, in the amount ofapproximately HK$535 million.

All of the VSC Group’s borrowingswere subject to floating rates basis inview of the comparatively low interestrate environment. The use of financialderivative instruments was strictlycontrolled and solely for managementof the interest rate and foreigncurrency exchange rate exposures inconnection with the borrowings. Itwas the VSC Group’s policy not toenter into derivative transactions forspeculative purposes.

3.3 Contingent liabilitiesAs at 31st March 2005, the VSCGroup had outstanding performancebonds for its kitchen cabinetinstallation and sanitary wares supplyprojects amounting to approximatelyHK$6 million (2004: HK$16 million)and a guarantee for a bank loangranted to Baosteel Jingchangamounting to approximately HK$2million was expired in January 2005(2004: HK$2 million).

3.4 Charges on assetsAs at 31st March 2005, the VSCGroup had certain charges on assetswhich included (i) bank deposits ofapproximately HK$9 million pledgedfor RMB bank facilities; (ii) inventoriesof approximately HK$34 millionpledged for a RMB bank loan; (iii)land, building and equipments ofapproximately HK$9 million pledgedfor a RMB bank loan; and (iv)inventories held under short-termtrust receipts bank loan arrangementsin Hong Kong.

64

Report of the Directors

The board of directors (“Board”) of Van ShungChong Holdings Limited (“VSC”) are pleased topresent their annual report together with theaudited accounts of VSC and its subsidiaries(together the “VSC Group”) for the year ended31st March 2005.

PRINCIPAL ACTIVITIES

VSC is an investment holding company and itssubsidiaries are principally engaged in (i) ChinaAdvanced Materials Processing includingmanufacturing of industrial products such asrolled flat steel products and enclosure systemsand trading of industrial products such asengineering plastic resins and injection mouldingmachines, and (ii) Construction Materials Groupincluding trading and stockholding ofconstruction materials such as steel products,sanitary ware and kitchen cabinets and theinstallation work of kitchen cabinets.

Details of the VSC Group’s turnover andsegment results by business segment andgeographical segment are set out in Note 33 tothe accompanying accounts.

MAJOR CUSTOMERS ANDSUPPLIERS

For the year ended 31st March 2005, the fivelargest customers of the VSC Group accountedfor less than 30% of the VSC Group’s totalturnover, and the five largest suppliers of theVSC Group accounted for less than 30% of theVSC Group’s total purchases.

None of the directors, their associates, or anyshareholders (which to the knowledge of VSC’sDirectors owned more than 5% of VSC’s sharecapital) had a beneficial interest in the fivelargest suppliers of the VSC Group.

RESULTS ANDAPPROPRIATIONS

Details of the VSC Group’s results for the yearended 31st March 2005 are set out in theconsolidated profit and loss account on page 78of this annual report.

VSC has not declared any interim dividendduring the year and the Board recommend thepayment of a final cash dividend of HK2.2 centsper share. Total cash dividend payable for theyear ended 31st March 2005 will amount toHK2.2 cents or approximately HK$8,109,000(2004: HK$21,180,000).

SHARE CAPITAL, WARRANTSAND SHARE OPTIONS

Details of share capital, warrants and shareoptions of VSC are set out in Notes 28, 29 and30, respectively, to the accompanying accounts.

RESERVES AND RETAINEDPROFIT

Movements in reserves and retained profit of theVSC Group and VSC during the year are set outin Note 31 to the accompanying accounts.

As at 31st March 2005, approximatelyHK$53,986,000 (2004: HK$53,986,000) ofVSC’s reserves and approximatelyHK$13,334,000 (2004: HK$21,530,000) ofVSC’s retained profit were available fordistribution to its shareholders.

PURCHASE, SALE ORREDEMPTION OF LISTEDSECURITIES

Neither VSC nor any of its subsidiaries haspurchased, sold or redeemed any of VSC’slisted securities during the year ended 31stMarch 2005.


< > 67Report of the Directors

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rightsunder VSC’s Bye-laws and the laws of Bermuda.

FIXED ASSETS ANDINVESTMENT PROPERTIES

Details of movements of fixed assets andinvestment properties during the year are set outin Notes 13 and 14, respectively, to theaccompanying accounts.

SUBSIDIARIES ANDASSOCIATES

Particulars of VSC’s subsidiaries and associatesare set out in Notes 15 and 16, respectively, tothe accompanying accounts.

BANK LOANS

Particulars of bank loans as at 31st March 2005are set out in Notes 24 and 26 to theaccompanying accounts.

PENSION SCHEMES

Details of the pension schemes are set out inNote 36 to the accompanying accounts.

CHARITABLE DONATIONS

During the year, the VSC Group made charitabledonations of approximately HK$170,000 (2004:HK$6,000).

DIRECTORS AND DIRECTORS’SERVICE CONTRACTS

The directors of VSC (“Directors”) who heldoffice during the year and up to the date of thisreport were:

EXECUTIVE DIRECTORSMr. Andrew Cho Fai Yao, ChairmanMr. Fernando Sai Ming DongMs. Miriam Che Li Yao, Deputy Chairman

(Resigned on 11th August 2004)

Mr. Johnson Sai Hou Ho(Resigned on 28th March 2005)

NON-EXECUTIVE DIRECTORDr. Shao You Bao

INDEPENDENT NON-EXECUTIVEDIRECTORSDr. Chow Yei ChingMr. Kenneth Woo Shou TingMr. Harold Richard KahlerMr. Kenny King Ching Tam

(Appointed on 30th September 2004)

In accordance with VSC’s Bye-law 86(2) and87(1), Mr. Kenny King Ching Tam and Mr.Kenneth Woo Shou Ting will retire. Mr. KennethWoo Shou Ting will not offer himself for re-election, whereas Mr. Kenny King Ching Tambeing eligible, offer himself for re-election at theforthcoming annual general meeting.

None of the directors has a service contract withthe VSC Group which is not determinable by theVSC Group within one year without payment ofcompensation other than statutory compensation.

66


DIRECTORS’ INTERESTS ANDSHORT POSITIONS IN SHARES,UNDERLYING SHARES ANDDEBENTURES

As at 31st March 2005, the interests and shortpositions of the Directors and chief executivesof VSC in the shares of HK$0.10 each in thecapital of VSC (“Shares”), underlying sharesand debentures of VSC or any of its associatedcorporations (within the meaning of Part XV ofthe Securities and Futures Ordinance (the

“SFO”)) which (a) were required to be notified toVSC and the Stock Exchange pursuant toDivisions 7 and 8 of Part XV of the SFO(including interests and short positions whichthey were taken or deemed to have under suchprovisions of the SFO); or (b) were requiredpursuant to Section 352 of the SFO to beentered in the register referred to therein; or (c)were required pursuant to the Model Code forSecurities Transactions by Directors of ListedCompanies (the “Model Code”) to be notified toVSC and the Stock Exchange, were as follows:

Attributableinterest to Number of Approximate Number of Aggregate

Name Nature of interest the Director Shares percentage options interest(Note b)

Mr. Andrew – Corporate deemedCho Fai Yao interest held interest

by Huge Top (indirectly) 173,424,000 47.05% – 173,424,000(Note a)

– Personal 100%interest (directly) 1,614,000 0.44% – 1,614,000

175,038,000 47.49% – 175,038,000

Mr. Fernando – Personal 100%Sai Ming Dong interest (directly) 342,000 0.09% 300,000 642,000

Mr. Kenneth – Personal 100%Woo Shou Ting interest (directly) 2,402,000 0.65% – 2,402,000

Mr. Harold – Personal 100%Richard Kahler interest (directly) 66,000 0.02% – 66,000

Notes:a. As at 31st March 2005, Huge Top Industrial Ltd. (“Huge Top”) holds 173,424,000 Shares. Mr. Andrew Cho Fai Yao is

one of the two directors of Huge Top. Mr. Andrew Cho Fai Yao directly holds approximately 11.91% and indirectlythrough Perfect Capital International Corp. (“Perfect Capital”) owns approximately 42.86% of the issued shares ofHuge Top and is entitled to exercise more than one-third of the voting power at general meetings of Huge Top.

Mr. Andrew Cho Fai Yao owns the entire issued share capital of Perfect Capital. These interests of the aforesaidDirector in the Shares were corporate interests.

b. The interests of the Directors in the share options of VSC are separately disclosed in the section headed “ShareOption Scheme” below.

(I) LONG POSITIONS IN SHARES AND OPTIONS OF VSC


(II) LONG POSITIONS IN ASSOCIATED CORPORATION – HUGE TOP

Attributable interest ApproximateName Nature of interest to the Director Number of shares percentage

Mr. Andrew Cho Fai Yao – Corporate interest deemed interest(Refer to Note a in (I) above) held by Perfect (indirectly)

Capital 36 42.86%– Personal interest 100% (directly) 10 11.91%

46 54.77%

Mr. Fernando Sai Ming Dong – Personal interest 100% (directly) 5 5.95%

For the year ended 31st March 2005, VSC hadcomplied the Model Code adopted on 31stMarch 2004 as the required standard againstwhich Directors must measure their conductregarding transactions in securities of VSCaccording to Appendix 10.1 of the RulesGoverning the Listing of Securities on the StockExchange (“the Listing Rules”).

Save as disclosed above, as at 31st March2005, none of the Directors, chief executives ofVSC and their associates had any personal,family, corporate or other interests or shortpositions in the shares, underlying shares ordebentures of VSC or any of its associatedcorporations (within the meaning of Part XV ofthe SFO) which (a) were required to be notifiedto VSC and the Stock Exchange pursuant toDivisions 7 and 8 of Part XV of the SFO (includeinterests and short positions which they aretaken or deemed to have under such provisionsof SFO); or (b) were required, pursuant tosection 352 of the SFO, to be entered in theregister referred to therein; or (c) were required,pursuant to the Model Code, to be notified toVSC and the Stock Exchange.

Apart from the foregoing, at no time during theyear was VSC or any of its subsidiaries a partyto any arrangements to enable the Directors orany of their spouses or children under the 18years of age to acquire benefits by means of theacquisition of shares in or debentures of VSC orany other body corporate, and no Directors orchief executives or their respective spouses orchildren under 18 years of age had beengranted any right to subscribe for equity or debtsecurities of VSC nor exercised any such right.

DIRECTOR’S INTEREST INCONTRACTS

Save as disclosed in Note 2 to theaccompanying accounts, no contracts ofsignificance in relation to the VSC Group’sbusiness to which VSC or any of itssubsidiaries was a party and in which any ofVSC’s Directors of members of its managementhad a material interest, whether directly orindirectly, subsisted at the end of the year or atany time during the year.

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PERSONS WHO HAVEINTERESTS OR SHORTPOSITIONS WHICH AREDISCLOSEABLE UNDERDIVISIONS 2 AND 3 OF PART XVOF THE SFO

Other than interests disclosed in the sectionheaded “Directors’ Interests and Short Positionsin Shares, Underlying Shares and Debentures”above, as at 31st March 2005, according to the

register of interests kept by VSC under section336 of the SFO, the following entity has interestsor short positions in the shares and underlyingShares of VSC which fall to be disclosed underDivisions 2 and 3 of Part XV of the SFO, or whowere, directly or indirectly, interested in 10% ormore of the nominal value of any class of sharecapital carrying rights to vote in all circumstancesat general meetings of any other member of theVSC Group together with particulars of anyoptions in respect of such capital:

Number ofNature of Number of Approximate Share Aggregate

Name interest Shares percentage options interest

Huge Top DirectlyIndustrial Ltd. 173,424,000 47.05% – 173,424,000

Ms. Miriam Corporate 173,424,000 47.05% – 173,424,000Che Li Yao (Note)

Personal 2,000,000 0.54% 1,000,000 3,000,000

175,424,000 47.59% 1,000,000 176,424,000

Note: As at 31st March 2005, Huge Top held 173,424,000 Shares. Ms. Miriam Che Li Yao is one of the two directors of Huge Top

while the remaining director of Huge Top is Mr. Andrew Cho Fai Yao who is the brother of Ms. Miriam Che Li Yao andtherefore is deemed to be interested in these Shares through Huge Top.

Save as disclosed above, as at 31st March2005, the Directors are not aware of any otherpersons (other than Directors or chief executivesof VSC) who have interests or short positions inthe shares, underlying shares or debentures ofVSC or any associated corporations (within themeaning of Part XV of the SFO) which would fallto be disclosed to VSC under Divisions 2 and 3of Part XV of the SFO, or, who is, directly orindirectly, interested in 10% or more of thenominal value of any class of share capitalcarrying rights to vote in all circumstances atgeneral meetings of any other member of theVSC Group together with particulars of anyoptions in respect of such capital.

SHARE OPTION SCHEME

A share option scheme has been adopted byVSC since 12th November 2001 (the “ShareOption Scheme”) and VSC may grant options tothe participants as set out in the Share OptionScheme. The terms of the Share OptionScheme are contained in a circular sent toshareholders of VSC in October 2001. Summaryof the Share Option Scheme was as follows:

1. PURPOSE OF THE SHARE OPTIONSCHEMETo provide incentives to participants tocontribute to the VSC Group and/or toenable the VSC Group to recruit and/or toretain high-calibre employees and attracthuman resources that are valuable to theVSC Group.



2. PARTICIPANTS OF THE SHAREOPTION SCHEMEEmployee/agent/consultant orrepresentative, including any executive ornon-executive Director, of any member ofthe VSC Group or any other person whosatisfies the selection criteria as set out inthe Share Option Scheme.

3. TOTAL NUMBER OF SHARESAVAILABLE FOR ISSUE UNDER THESHARE OPTION SCHEME ANDPERCENTAGE OF ISSUED SHARECAPITAL AS AT THE DATE OF THEANNUAL REPORTVSC may initially grant optionsrepresenting 35,497,818 Shares under theShare Option Scheme (i.e. approximately10% of the issued share capital of VSC asat the date of the approval of the ShareOption Scheme and approximately 9.6%of the issued share capital of VSC as atthe date of the annual report).

The maximum number of Shares which maybe issued upon exercise of all outstandingoptions granted and yet to be exercisedunder the Share Option Scheme and anyother schemes of VSC and/or its subsidiarymust not exceed 30% of the Shares in issuefrom time to time. No options may begranted under any schemes of VSC or itssubsidiary if this would result in the 30%limit being exceeded.

4. MAXIMUM ENTITLEMENT OF EACHPARTICIPANT UNDER THE SHAREOPTION SCHEMEThe total number of Shares issued and tobe issued upon exercise of the optionsgranted to each participant (includingexercised, cancelled and outstandingoptions) within any twelve-month periodunder the Share Option Scheme and anyother share option scheme(s) of VSC and/or any subsidiary must not exceed 1% ofthe number of Shares in issue.

5. THE PERIOD WITHIN WHICH THESHARES MUST BE TAKEN UP UNDERAN OPTIONMust not be more than ten years from thedate of offer of grant of the option.

6. THE MINIMUM PERIOD FOR WHICHAN OPTION MUST BE HELD BEFOREIT CAN BE EXERCISEDNo such minimum period specified and anoption may be exercised in accordancewith the terms of the Share OptionScheme at any time during a period to benotified by the Board to each grantee.

7. THE AMOUNT PAYABLE ONAPPLICATION OR ACCEPTANCE OFTHE OPTION AND THE PERIODWITHIN WHICH PAYMENTS OR CALLSMUST OR MAY BE MADE OR LOANSFOR SUCH PURPOSES MUST BE PAIDThe acceptance of an option, if accepted,must be made within 28 days from thedate on which the offer is made with anon-refundable payment of HK$10 fromthe grantee to VSC.

8. THE BASIS OF DETERMINING THEEXERCISE PRICEThe exercise price of an option will be atleast the highest of:

a. the closing price of the Shares asstate in the Stock Exchange’s dailyquotations sheet on the date of offerof the grant of the option, whichmust be a business day;

b. the average closing price of theShares as stated in the StockExchange’s daily quotations sheetsfor the five business daysimmediately preceding the date ofoffer of the grant of the option; and

c. the nominal value of the Shares.

70


9. THE REMAINING LIFE OF THE SHAREOPTION SCHEMEThe Share Option Scheme shall be validand effective for a period of ten yearscommencing on the adoption date i.e.12th November 2001.

The share options outstanding under theShare Option Scheme during the yearwere as follows:

Number of share options

Exercise LapsedName or category Date of Exercise price Beginning during End ofof participant grant period per Share of year the year year

’000 ’000 ’000

Director:–Mr. Fernando 19th September 19th September HK$1.418 300 – 300

Sai Ming Dong 2003 2005 to 18thSeptember 2013

Sub-total 300 – 300

Employees:–In aggregate 2nd May 2003 2nd May 2003 to HK$0.98 250 – 250

1st May 2013

In aggregate 7th May 2003 7th May 2005 to HK$0.97 6,445 (545 ) 5,9006th May 2013(Note 2)

In aggregate 19th September 19th September HK$1.418 2,000 – 2,0002003 2005 to 18th

September 2013

Sub-total 8,695 (545 ) 8,150

Others:–In aggregate 2nd May 2003 2nd May 2003 to HK$0.98 7,000 – 7,000

1st May 2013

Sub-total 7,000 – 7,000

Total of ShareOption Scheme 15,995 (545 ) 15,450



Notes:

1. For the Share Option Scheme, the vesting period of the share options is from the date of the grant until the commencementof the exercise period.

2. The options to subscribe for Shares at a price of HK$0.97 per Share are to be exercisable in whole or in part in thefollowing manner:–

(i) During the period starting from 7th May 2005 to 6th May 2006, the option may be exercised up to 30% of such Shares.

(ii) During the period starting from 7th May 2006 to 6th May 2007, the option may (to the extent not exercised in accordance

with (i) above) be exercised up to 70% of such Shares.

(iii) During the period starting from 7th May 2007 to 6th May 2013, the option may (to the extent not exercised in accordance

with (i) and (ii) above) be exercised in full.

Save as disclosed above, no share options weregranted, exercised, lapsed or cancelled duringthe year.

CONNECTED TRANSACTIONS

Details of related party transactions are set outin Note 2 to the accompanying accounts.

During the year ended 31st March 2005, theVSC Group has the following continuingconnected transactions (“the Transactions”) inaccordance with Chapter 14A of the ListingRules. The Transactions had been approved bythe shareholders of VSC on 1st November 2004and the details of the Transactions had beendisclosed in the circular of VSC dated 15thOctober 2004 (“the Circular”):

Pursuant to the supply agreement (the “SupplyAgreement”) dated 17th September 2004entered into between Shinsho Corporation andVSC Shinsho Company Limited (“VSC Shinsho”,a company which is indirectly owned as to 70%by VSC and as to the remaining 30% directly byShinsho Corporation) agreed that VSC Shinshoand other subsidiaries of VSC may purchase fromShinsho Corporation and its associates (the“Shinsho Group”), from time to time, various steelproducts for a term commencing from 1st April2004 up to 31st March 2007. Under the terms ofthe Supply Agreement, Shinsho Corporation mayprocure members of the Shinsho Group to carryinto effect the transactions contemplated underthe Supply Agreement while VSC Shinsho mayprocure other subsidiaries of VSC to carry intoeffect the transactions contemplated under theSupply Agreement.

The price for each transaction contemplatedunder the Supply Agreement will be agreed fromtime to time between the parties thereto basedon the market price of the type of steel productsconcerned prevailing at the relevant time. Theannual aggregate amount payable by VSCShinsho and other subsidiaries of VSC for suchpurchases under the Supply Agreement hasbeen capped at HK$120,000,000,HK$180,000,000 and HK$210,000,000 for thethree financial years ended 31st March 2005and ending 31st March 2006 and 2007respectively according to the Circular.

The Directors, including the independent non-executive Directors, are of the view that theTransactions are essential for the efficient andcontinuous operation of the VSC Group. Giventhe Transactions will occur on a regular andcontinuing basis, the Directors consider that itwould not be practicable to announce, or ifnecessary, obtain prior approval from theshareholders of VSC on each occasion theyarise. Accordingly, VSC convened and held aspecial general meeting on 1st November 2004and the ordinary resolution to approve theTransactions and the relevant caps for a further3-year period ending 31st March 2007 wasapproved by the independent shareholders ofVSC. Details of the Transactions had beendisclosed in this annual report as described inRules 14A.45(1) to (5) of the Listing Rules.

72


The independent non-executive Directors haveconfirmed that the Transactions have beenentered into (a) in the ordinary and usual courseof business of the VSC Group; (b) on normalcommercial terms or on terms no lessfavourable to the VSC Group than termsavailable to or from independent third parties;and (c) in accordance with the relevantagreement(s) governing them on terms that arefair and reasonable and in the interests of theshareholders of VSC as a whole.

The auditors of VSC have also confirmed thatthe Transactions (a) have received the approvalof the Board; (b) are in accordance with thepricing policy of the VSC Group if thosetransactions involve the provision of goods orservices by the VSC Group; (c) have beenentered into in accordance with the relevantagreement(s) governing the Transactions; and(d) have not exceeded the respective capsagreed with the Stock Exchange.

COMPETING INTERESTS

Mr. Andrew Cho Fai Yao (“Mr. Yao”) is thechairman of the Board of VSC, and also thechairman of the board of directors of iSteelAsiaHoldings Limited (“iSA”, listed on the GrowthEnterprise Market of the Stock Exchange).

iSA is principally engaged in the trading of steelproducts, provision of procurement services forsteel products, operation of an e-commercevertical portal for the provision of online steeltrading services and ancillary services, andinvestment holding. There may be a possibilitythat the steel trading business of iSA maycompete with that of the VSC Group. However,the Directors are also of the view that theinvaluable experience of Mr. Yao in the steelindustry will complement the development of theVSC Group’s business.

The Directors are satisfied that the VSC Groupfunctions independently of and on arm’s lengthsbasis from iSA and its subsidiaries (“iSA Group”)on the basis that the majority of the executiveDirectors and the senior management areindependent of the iSA Group and operations ofthe two groups are conducted by separateteams of staff. Other than the one commonexecutive director, Mr. Yao, and a commonnewly appointed independent non-executivedirector, Mr. Kenny King Ching Tam, there is nooverlap of management personnel for theoperations within the two groups.

As Mr. Yao is a director of both VSC and iSA, incase there is any potential conflict of interests,Mr. Yao will abstain from voting in the relevantboard of directors’ meeting.

Save as disclosed above, none of the Directorsor the controlling shareholders of VSC or any oftheir respective associates has engaged in anybusiness that competes or may competedirectly or indirectly with the businesses of theVSC Group or has any other conflict of interestswith the VSC Group.

CONFIRMATION OFINDEPENDENCE OFINDEPENDENT NON-EXECUTIVEDIRECTORS

Each of the independent non-executiveDirectors has made an initial/annual confirmationof independence pursuant to Rules 3.13 or 3.15of the Listing Rules. VSC is of the view that allindependent non-executive Directors meet theindependence guidelines set out in Rule 3.13 ofthe Listing Rules and are independent inaccordance with the terms of the guidelines.



SUFFICIENCY OF PUBLIC FLOAT

Based on information publicly available to VSCand within the knowledge of the Directors as atthe date of this annual report, VSC hasmaintained the prescribed public float under theListing Rules.

SPECIFIC PERFORMANCEOBLIGATIONS ONCONTROLLING SHAREHOLDER

Reference was made to the HK$250 million termloan facility agreement dated 27th October 2003(the “Facility Agreement”) with a final maturity inOctober 2006. The Facility Agreement containsa requirement that Mr. Yao and his direct relatedfamily members (i.e. Mr. Yao, Ms. Miriam Che LiYao and Mrs. Yao Lin Shiu Mei, their spousesand their children) shall continue to remain asthe single largest shareholder of VSC with atleast 30% shareholding of the issued sharecapital of VSC and Mr. Yao shall maintain theposition of Chairman and management controlof the VSC Group. The abovementionedobligations have been complied with.

AUDITORS

Arthur Andersen & Co were auditors of VSC forthe year ended 31st March 2002.PricewaterhouseCoopers were auditors of VSCfor the three year ended 31st March 2005.

The accompanying accounts were audited byPricewaterhouseCoopers. A resolution for theirre-appointment as VSC’s auditors for theensuing year is to be proposed at theforthcoming annual general meeting.

On behalf of the BoardAndrew Cho Fai YaoChairman

Hong Kong, 15th July 2005

74

Contents目錄

1 主要會計政策 832 與關連人士之交易 903 營業額及收入 924 其他收益／支出淨額 935 經營溢利 936 財務費用 947 員工成本（包括董事酬金） 948 董事及高級行政人員酬金 949 稅項 9610 股東應佔溢利 9811 股息 9812 每股盈利 9813 固定資產 9914 投資物業 10015 於附屬公司之投資 10216 於聯營公司之投資 10517 長期投資 10618 商譽 10719 存貨 10720 應收／應付客戶之安裝合約工程 10821 預付款項、按金及其他應收賬款 10922 應收賬款及票據 10923 現金及其他銀行存款 10924 短期借貸 11025 應付賬款及票據 11026 長期銀行貸款 11127 遞延稅項 11128 股本 11229 認股權證 11330 購股權 11331 儲備 11532 綜合現金流量表附註 11933 分類資料 12234 承擔 12535 或然負債 12536 退休金計劃 12637 銀行融資及資產抵押 12638 結算日後事項 12639 賬目批准 126

核數師報告 77

綜合損益表 78

資產負債表 79

綜合現金流量表 81

綜合股東權益變動報表 82

賬目附註 831 Principal accounting policies2 Related party transactions3 Turnover and revenue4 Other income/expense, net5 Operating profit6 Finance costs7 Staff costs (including directors’ emoluments)8 Directors’ and senior executives’ emoluments9 Taxation10 Profit attributable to shareholders11 Dividends12 Earnings per share13 Fixed assets14 Investment properties15 Investment in subsidiaries16 Investment in associates17 Long-term investments18 Goodwill19 Inventories20 Due from/to customers on installation contract work21 Prepayments, deposits and other receivables22 Accounts and bills receivable23 Cash and other bank deposits24 Short-term borrowings25 Accounts and bills payable26 Long-term bank loan27 Deferred taxation28 Share capital29 Warrants30 Share options31 Reserves32 Notes to consolidated cash flow statement33 Segment information34 Commitments35 Contingent liabilities36 Pension schemes37 Banking facilities and pledge of assets38 Subsequent event39 Approval of accounts

Auditors’ Report

Consolidated Profit and Loss Account

Balance Sheets

Consolidated Cash Flow Statement

Consolidated Statement of Changes in Equity

Notes to the Accounts

< > 77Auditors’ Report核數師報告

TO THE SHAREHOLDERS OFVAN SHUNG CHONG HOLDINGS LIMITED(Incorporated in Bermuda with limited liability)

We have audited the accounts on pages 78 to 126 which have beenprepared in accordance with accounting principles generally accepted inHong Kong.

Respective Responsibilities of Directors and Auditors

The company’s directors are responsible for the preparation of accountswhich give a true and fair view. In preparing accounts which give a true andfair view it is fundamental that appropriate accounting policies are selectedand applied consistently.

It is our responsibility to form an independent opinion, based on our audit, onthose accounts and to report our opinion solely to you, as a body, inaccordance with Section 90 of the Companies Act 1981 of Bermuda, and forno other purpose. We do not assume responsibility towards or accept liabilityto any other person for the contents of this report.

Basis of Opinion

We conducted our audit in accordance with Statements of AuditingStandards issued by the Hong Kong Institute of Certified Public Accountants.An audit includes examination, on a test basis, of evidence relevant to theamounts and disclosures in the accounts. It also includes an assessment ofthe significant estimates and judgements made by the directors in thepreparation of the accounts, and of whether the accounting policies areappropriate to the circumstances of the company and of the group,consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance as to whether the accountsare free from material misstatement. In forming our opinion we also evaluatedthe overall adequacy of the presentation of information in the accounts. Webelieve that our audit provides a reasonable basis for our opinion.

Opinion

In our opinion the accounts give a true and fair view of the state of affairs ofthe company and of the group as at 31st March 2005 and of the group’sprofit and cash flows for the year then ended, and have been properlyprepared in accordance with the disclosure requirements of the Hong KongCompanies Ordinance.

PricewaterhouseCoopersCertified Public Accountants

Hong Kong, 15th July 2005

致萬順昌集團有限公司全體股東（於百慕達註冊成立之有限公司）

本核數師已完成審核刊載於第78頁至第126頁按照香港普遍採納之會計原則編製的賬目。

董事及核數師各自的責任

貴公司的董事須負責編製真實兼公平的賬目。在編製該等真實兼公平的賬目時，董事必須選擇及貫徹地採用合適的會計政策。

本核數師的責任是根據審核工作之結果，對該等賬目作出獨立意見，並按照百慕達1981年《公司法》第90條僅向整體股東報告，除此之外本報告別無其他目的。本核數師不會就本報告的內容向任何其他人士負上或承擔任何責任。

意見的基礎

本核數師已按照香港會計師公會頒佈的核數準則進行審核工作。審核範圍包括以抽查方式查核與賬目所載數額及披露事項有關的憑證，亦包括評審董事於編製該等賬目時所作之重大估計和判斷，所採用之會計政策是否適合貴公司與貴集團之具體情況，及有否貫徹應用並足夠披露該等會計政策。

本核數師在策劃和進行審核工作時，均以取得所有本核數師認為必需之資料及解釋為目標，以便獲得充份憑證，就該等賬目是否存有重大錯誤陳述，作出合理之確定。在作出意見時，本核數師已評估該等賬目所載之資料在整體上是否足夠。本核數師相信我們之審核工作已為下列意見提供合理之基礎。

意見

本核數師認為，上述之賬目足以真實兼公平地顯示貴公司與貴集團於二零零五年三月三十一日結算時之財務狀況，及貴集團截至該日止年度之溢利及現金流量，並根據香港公司條例之披露規定妥為編製。

羅兵咸永道會計師事務所香港執業會計師

香港，二零零五年七月十五日

PricewaterhouseCoopers22/F, Prince’s BuildingCentral, Hong Kong

76

Consolidated Profit and Loss Account綜合損益表For the year ended 31st March 2005截至二零零五年三月三十一日止年度

2005 2004二零零五年二零零四年

Note HK$’000 HK$’000附註千港元千港元

Turnover 營業額 3 4,138,621 3,549,110Cost of sales 銷售成本 (3,935,673) (3,314,790)

Gross profit 毛利 202,948 234,320

Other revenue 其他收入 3 9,388 11,028

Selling and distribution expenses 銷售及分銷支出 (26,939) (21,352)General and administrative expenses 一般及行政支出 (145,259) (119,498)Other income/expense, net 其他收益／支出淨額 4 26,183 5,294

Operating profit 經營溢利 5 66,321 109,792

Finance costs 財務費用 6 (17,927) (13,337)

Profit before taxation 除稅前溢利 48,394 96,455

Taxation 稅項 9 4,320 (11,061)

Profit after taxation but before 除稅後但未計少數minority interests 股東權益前溢利 52,714 85,394

Minority interests 少數股東權益 (11,637) (4,331)

Profit attributable to shareholders 股東應佔溢利 10 41,077 81,063

Dividends 股息 11 8,114 21,180

Earnings per share 每股盈利 12– Basic －基本 HK11.2 cents港仙 HK24.6 cents港仙

– Diluted －攤薄 HK11.1 cents港仙 HK23.6 cents港仙

< > 79Balance Sheets資產負債表As at 31st March 2005於二零零五年三月三十一日

Consolidated Company綜合本公司

2005 2004 2005 2004二零零五年二零零四年二零零五年二零零四年

Note HK$’000 HK$’000 HK$’000 HK$’000附註千港元千港元千港元千港元

Non-current assets 非流動資產Fixed assets 固定資產 13 126,015 159,366 – –Investment properties 投資物業 14 71,100 36,448 – –Investments in subsidiaries 於附屬公司之投資 15 – – 503,007 500,412Investments in associates 於聯營公司之投資 16 2 2 – –Long-term investments 長期投資 17 34,101 60,012 – –Goodwill 商譽 18 8,026 8,290 – –Deferred tax assets 遞延稅項資產 27 13,797 447 – –

Total non-current assets 非流動資產總額 253,041 264,565 503,007 500,412

Current assets 流動資產Inventories 存貨 19 895,846 695,941 – –Due from customers on 應收客戶之安裝

installation contract work 合約工程 20 14,616 11,450 – –Prepayments, deposits and 預付款項、按金及

other receivables 其他應收賬款 21 161,820 88,231 – 50Accounts and bills receivable 應收賬款及票據 22 736,758 836,357 – –Loans receivable 應收貸款 6,491 6,891 – –Due from a subsidiary 一間附屬公司之欠款 15 – – – 12,000Pledged bank deposits 已抵押銀行存款 23 12,186 8,374 – –Cash and other bank deposits 現金及其他銀行存款 23 191,986 109,465 98 75

Total current assets 流動資產總額 2,019,703 1,756,709 98 12,125

Current liabilities 流動負債Short-term borrowings 短期借貸 24 910,903 798,610 – –Accounts and bills payable 應付賬款及票據 25 364,938 350,629 – –Due to customers on installation 應付客戶之安裝

contract work 合約工程 20 942 157 – –Receipts in advance 預收款項 31,940 34,168 – –Accrued liabilities and other 應計負債及其他

payables 應付款項 55,394 46,157 16 30Taxation payable 應繳稅項 12,637 9,503 – –

Total current liabilities 流動負債總額 1,376,754 1,239,224 16 30

Net current assets 流動資產淨額 642,949 517,485 82 12,095

Total assets less current liabilities 總資產減流動負債 895,990 782,050 503,089 512,507

78

Balance Sheets 資產負債表



Note HK$’000 HK$’000 HK$’000 HK$’000附註千港元千港元千港元千港元

Non-current liabilities 非流動負債Long-term bank loan, 長期銀行貸款，

non-current portion 非當期部份 26 166,667 97,222 – –Deferred tax liabilities 遞延稅項負債 27 369 104 – –

Total non-current liabilities 總非流動負債 167,036 97,326 – –

Net assets 資產淨額 728,954 684,724 503,089 512,507

Representing: 包括：

Share capital 股本 28 36,861 36,778 36,861 36,778

Reserves 儲備 31 656,716 623,780 466,228 475,729

Shareholders’ equity 股東權益 693,577 660,558 503,089 512,507

Minority interests 少數股東權益 35,377 24,166 – –

728,954 684,724 503,089 512,507

Andrew Cho Fai Yao Fernando Sai Ming Dong姚祖輝唐世銘

Chairman Executive Director主席執行董事

< > 81Consolidated Cash Flow Statement綜合現金流量表For the year ended 31st March 2005截至二零零五年三月三十一日止年度



Operating activities 經營活動Net cash outflow generated from 經營產生之現金

operations 流出淨額 32(a) (96,869) (189,427)Interest received 已收利息 5,059 6,310Interest paid 已付利息 (17,927) (13,337)Hong Kong profits tax paid 已付香港利得稅 (877) (4,875)Hong Kong profits tax refunded 已退回香港利得稅 32 –Mainland China enterprise income tax paid 已付中國企業所得稅 (4,786) (3,352)

Net cash outflow from operating activities 經營活動之現金流出淨額 (115,368) (204,681)

Investing activities 投資活動Acquisition of fixed assets 添置固定資產 (30,237) (20,768)Proceeds from disposal of fixed assets 出售固定資產所得款項 36,848 1,019Acquisition of investment properties 添置投資物業 – (7,430)Payment of deposit for acquisition of an 支付添置一項投資

investment property 物業按金 – (14,150)Proceeds from disposal of investment 出售投資物業所得款項

properties 8,603 7,276Acquisition of a subsidiary 收購一間附屬公司 32(b) (4,938) (6,987)Acquisition of a long-term investment 收購一項長期投資 (585) (7,800)Proceeds from disposal of a long-term 出售一項長期投資

investment 所得款項 15,600 –Receipt of guaranteed return from 收取一間合營公司之

a joint venture 保證回報 2,033 4,344Dividend received from an unlisted 已收一項非上市長期投資

long-term investment 之股息 2,296 374(Increase)/decrease in pledged bank 已抵押銀行存款之

deposits （增加）／減少 (3,812) 4,007Translation adjustments 兌調整 105 (96)

Net cash inflow/(outflow) from investing 投資活動之現金流入／activities （流出）淨額 25,913 (40,211)

Net cash outflow before financing activities 融資活動前之現金流出淨額 (89,455) (244,892)

Financing activities 融資活動 32(c)Issue of ordinary shares 發行普通股 967 87,326Share issue expenses 股份發行支出 – (4,679)Repurchase of ordinary shares 回購普通股 – (968)New bank loans 新增銀行貸款 249,064 156,175Repayment of bank loans 償還銀行貸款 (51,403) (48,433)Net increase in trust receipts bank loans 信託收據銀行貸款之淨增加 16,845 170,280Repayment of other short-term loans 償還其他短期貸款 (32,768) (37,800)Capital contribution from a minority 一間附屬公司之一位少數股東

shareholder of a subsidiary 之資本投入 94 –Dividends paid to a minority shareholder 已付一間附屬公司之一位

of a subsidiary 少數股東之股息 (520) (225)Dividends paid to shareholders 已付股東之股息 (10,303) (28,993)

Net cash inflow from financing activities 融資活動之現金流入淨額 171,976 292,683

Increase in cash and cash equivalents 現金及現金等值項目之增加 82,521 47,791

Cash and cash equivalents, beginning of year 年初之現金及現金等值項目 109,465 61,674

Cash and cash equivalents, end of year 年終之現金及現金等值項目 32(d) 191,986 109,465

80

Consolidated Statement of Changes in Equity綜合股東權益變動報表For the year ended 31st March 2005截至二零零五年三月三十一日止年度



Balance as at beginning of year 年初之結餘 660,558 520,404

Profit attributable to shareholders 股東應佔溢利 31 41,077 81,063

Change in fair value of a long-term 一項長期投資公平價值變動investment 31 (10,896) 6,501

Investment revaluation reserve transferred 一項長期投資之確認減值虧損to profit and loss account upon 於投資重估儲備轉撥往損益表recognition of impairment loss of along-term investment 31 10,000 –

Surplus on revaluation of investment 投資物業之重估盈餘properties 31 2,069 –

Translation adjustments 兌調整 31 105 (96)

Proceeds from issue of ordinary shares, 發行普通股所得款項，扣除net of share issue expenses 股份發行支出 28 & 31 967 82,647

Repurchase of ordinary shares 回購普通股 28 & 31 – (968)

Dividends paid to shareholders 已付股東之股息 31 (10,303) (28,993)

Balance as at end of year 年終之結餘 693,577 660,558

< > 83Notes to the Accounts賬目附註

1. Principal Accounting Policies

The principal accounting policies adopted in the preparation of theseaccounts are set out below:

(a) Basis of presentation and preparationThe accounts have been prepared in accordance with accountingprinciples generally accepted in Hong Kong and comply withaccounting standards issued by the Hong Kong Institute ofCertified Public Accountants (“HKICPA”). They have been preparedunder the historical cost convention except that investmentproperties and long-term investments are stated at fair value.

The HKICPA has issued a number of new and revised Hong KongFinancial Reporting Standards and Hong Kong AccountingStandards (“new HKFRSs”) which are effective for accountingperiods beginning on or after 1st January 2005. The Company(“VSC”) and its subsidiaries (together “the VSC Group”) have notearly adopted these new HKFRSs in the accounts for the yearended 31st March 2005. The VSC Group has already commencedan assessment of the impact of these new HKFRSs but is not yetin a position to state whether these new HKFRSs would have asignificant impact on its results of operations and financial position.

(b) Basis of consolidationThe consolidated accounts include the accounts of VSC and itssubsidiaries, together with the VSC Group’s share ofpost-acquisition results and reserves of its associates under theequity method of accounting. The results of subsidiaries andassociates acquired or disposed of during the year are included inthe consolidated profit and loss account from the effective date ofacquisition or up to the effective date of disposal, as appropriate.

All significant intercompany transactions and balances within theVSC Group are eliminated on consolidation.

The gain or loss on disposal of a subsidiary represents thedifference between the proceeds of the disposal and the VSCGroup’s share of its net assets together with any unamortisedgoodwill or negative goodwill and any related cumulative foreigncurrency translation adjustments.

Minority interests represent the interests of outside shareholders inthe results of operations and net assets of subsidiaries.

(c) GoodwillGoodwill represents the excess of the fair value of theconsideration of an acquisition over the VSC Group’s share of theaggregate fair values of the identifiable net assets acquired.Goodwill is recognised as an intangible asset in the balance sheetand is amortised on a straight-line basis over its estimatedeconomic life. The carrying value of goodwill is assessedperiodically or when factors indicating an impairment are present.Any impairment of goodwill is charged to the profit and lossaccount in the period in which the impairment occurs.

1. 主要會計政策

編製本賬目時所採納的主要會計政策如下所述：

(a) 編製基準本賬目乃根據香港公認會計原則及香港會計師公會（「公會」）頒佈之會計實務標準編製。賬目乃按照歷史成本會計法編製，惟投資物業及長期投資按公平價值列賬。

公會新頒佈及修訂多項香港財務申報準則及香港會計準則（「新香港財務申報準則」），該等準則於二零零五年一月一日或之後的會計期間生效。本公司（「萬順昌」）及其附屬公司（合稱「萬順昌集團」）截至二零零五年三月三十一日止年度的賬目並無提早採用該等新香港財務申報準則。萬順昌集團已開始評估採用該等新香港財務申報準則的影響，但未能確定該等新香港財務申報準則對其經營業績及財政狀況是否有重大影響。

(b) 綜合基準綜合賬目包括萬順昌及其附屬公司之賬目，並以權益法計算萬順昌集團所佔其聯營公司之收購後業績及儲備。於本年度購入或出售之附屬公司及聯營公司，分別由收購的生效日期起或截至出售的生效日期止包括在綜合損益表。

萬順昌集團所有公司間重大交易及結餘均於綜合賬目時註銷。

出售一間附屬公司所產生的盈虧，乃指出售所得款項與萬順昌集團所佔資產淨值兩者間之差額，連同任何未攤銷商譽或負商譽，以及任何相關累計外幣兌調整。

少數股東權益指外界股東所佔附屬公司經營業績及淨資產之權益。

(c) 商譽商譽指所付代價的公平價值與萬順昌集團佔購入可識別淨資產的公平價值總額兩者之間之差額。商譽於資產負債表內確認為一項無形資產及按其預計經濟年期以直線法攤銷。商譽之賬面值會定期或於出現減值之因素時獲評估。任何商譽減值於減值期間內於損益表扣除。

82

Notes to the Accounts 賬目附註

1. Principal Accounting Policies (Cont’d)

(d) SubsidiariesSubsidiaries are those entities in which VSC, directly or indirectly,controls more than one half of the voting power; has the power togovern the financial and operating policies, to appoint or removethe majority of the members of the board of directors, or to castmajority of votes at the meetings of the board of directors.

In VSC’s balance sheet, the investments in subsidiaries are statedat cost less accumulated impairment losses, if any. The results ofsubsidiaries are accounted for by VSC on the basis of dividendsreceived and receivable.

(e) AssociatesAn associate is a company, not being a subsidiary or a jointventure, in which an equity interest is held for the long-term andsignificant influence is exercised in its management.

The consolidated profit and loss account includes the VSCGroup’s share of the results of the associates for the year, and theconsolidated balance sheet includes the VSC Group’s share of thenet assets of the associates and goodwill (net of accumulatedamortisation) on acquisition.

Equity accounting is discontinued when the carrying amount of theinvestment in an associate reaches zero, unless the VSC Grouphas incurred obligations or guaranteed obligations in respect of theassociate.

Unrealised gains on transactions between the VSC Group and itsassociates are eliminated to the extent of the VSC Group’sinterests in the associates; unrealised losses are eliminated unlessthe transaction provides evidence of an impairment of the assettransferred.

(f) Contractual joint venturesA contractual joint venture is an entity established between theVSC Group and one or more other parties for a pre-determinedperiod of time, with the rights and obligations of the joint venturepartners being governed by a contract. If the VSC Group is able togovern and control the financial and operating policies of thecontractual joint venture so as to obtain benefits from its activities,such joint venture is considered as a de facto subsidiary and isaccounted for as such.

(g) Fixed assets and depreciationFixed assets, other than investment properties, are stated at costless accumulated depreciation and accumulated impairmentlosses, if any.

Major expenditures on modifications and betterments of fixedassets which will increase their future economic benefits arecapitalised, while expenditures on repairs and maintenance areexpensed when incurred.

1. 主要會計政策（續）

(d) 附屬公司附屬公司乃該等由萬順昌直接或間接控制其半數以上投票權，控制其財務及營運政策監管權，委任或罷免董事會的大多數席位，或於董事會會議上佔大多數投票權的實體。

於萬順昌之資產負債表內，於附屬公司的投資乃以成本扣除累計減值虧損列賬。萬順昌將附屬公司之業績按已收及應收股息之基準入賬。

(e) 聯營公司聯營公司為附屬公司或合營公司以外，萬順昌集團持有其股權作長期投資，並對其管理具有重大影響力之公司。

綜合損益表包括萬順昌集團應佔聯營公司之本年度業績，而綜合資產負債表則包括萬順昌集團應佔聯營公司之資產淨值及收購產生之商譽（扣除累計攤銷）。

當在聯營公司之投資賬面值全數撇銷，便不再採用權益會計法，除非萬順昌集團就該聯營公司已產生承擔或有擔保之承擔。

萬順昌集團與其聯營公司間之交易產生之未變現收益按萬順昌集團所佔該等聯營公司之權益比例註銷；除非該交易能提供所轉讓資產減值之憑證，否則將未變現虧損註銷。

(f) 合約合營企業合約合營企業為萬順昌集團與一個或以上其他訂約方成立而預定經營期之實體，並享有及承擔受合約管制之合營企業夥伴之權利及義務。倘萬順昌集團有能力控制及管治該合約合營企業之財務及營運政策，並從其業務中獲取利益，則該合營企業被視為實際附屬公司及當作附屬公司形式入賬。

(g) 固定資產與折舊除投資物業外，固定資產按成本值減累計折舊及累計減值虧損入賬。

因修整及改善固定資產而可增加其未來經濟利益之開支轉撥資本，而維修及保養開支則於產生時作為開支。


< > 85


(g) Fixed assets and depreciation (Cont’d)Leasehold land is depreciated over the period of the lease, whileother fixed assets are depreciated on a straight-line basis at ratessufficient to write off their cost less accumulated impairment lossesover their estimated useful lives. The principal annual rates ofdepreciation are as follows:

Land 2% (lease terms)Buildings 2.5% to 4%Leasehold improvements 20% to 33% (lease terms)Furniture and equipment 15% to 33%Machinery 10% to 25%Motor vehicles 20%

The depreciation methods and useful lives are reviewedperiodically to ensure that the methods and rates of depreciationare consistent with the expected pattern of economic benefitsfrom fixed assets.

At each balance sheet date, both internal and external sources ofinformation are considered to assess whether there is anyindication that assets included in fixed assets are impaired. If anysuch indication exists, the recoverable amount of the asset isestimated and where relevant, an impairment loss is recognised toreduce that asset to its recoverable amount. Such impairmentlosses are recognised in the profit and loss account.

The gain or loss on disposal of a fixed asset, other than investmentproperties, is the difference between the net disposal proceedsand the carrying amount of the relevant asset, and is recognised inthe profit and loss account.

(h) Investment propertiesInvestment properties are interests in land and buildings in respectof which construction and development have been completed andwhich are held for their long-term investment potential, any rentalincome being negotiated at arm’s length.

Investment properties are included in the balance sheet at theiropen market value on the basis of an annual valuation byindependent qualified valuers. All changes in the value ofinvestment properties are dealt with in the investment propertyrevaluation reserve unless the balance of this reserve is insufficientto cover a deficit on a portfolio basis, in which case the net deficitis charged to the profit and loss account.

The gain or loss on disposal reported in the profit and loss accountis determined based on the net disposal proceeds less the originalcost. When an investment property is disposed of, the relevantportion of the revaluation reserve realised in respect of previousvaluations is released from the investment properties revaluationreserve to the profit and loss account.

Investment properties held on leases with unexpired periods of 20years or less are depreciated over the remaining portion of theleases.


(g) 固定資產與折舊（續）租賃土地按其租約期計算折舊，而其他固定資產按直線法於估計可用年期內撇銷其成本值減累計減值虧損計算折舊。折舊之年率如下：

土地 2%（租約年期）樓宇 2.5%至4%租賃物業裝修 20%至33%（租約年期）傢俬及設備 15%至33%機器 10%至25%汽車 20%

折舊方法及可使用年期定期被檢訂以確保折舊方法及折舊率與固定資產之預期經濟利益模式保持一致。

於每年結算日考慮內部及外界資料，以評估資產有否出現減值。倘若有跡象顯示出現減值，則會估計資產之可收回金額，於適當時確認減值虧損，以將資產扣減至可收回金額。減值虧損於損益表確認。

出售一項固定資產（投資物業除外）之盈虧乃出售所得款項淨額減有關資產當時之賬面值之基準之差額於損益表內予以確認。

(h) 投資物業投資物業指具有長期投資潛質（而任何租金收入按公平交易商討釐定）之已完成建築工程及發展之契約土地及樓宇之權益。

投資物業均按獨立合資格估值師每年進行之估值所得之公開市值列入資產負債表。投資物業價值之所有變動乃於投資物業重估儲備中處理，除非該儲備之結餘不足彌補按投資組合計算之虧絀，在此情況下，則將虧絀淨額撥入損益表。

於損益表內申報之出售盈虧乃根據出售所得款項淨額減原有成本計算。投資物業出售時，重估儲備中與先前估值有關之已變現部份，將從投資物業重估儲備撥入損益表。

以租約持有而剩餘年期為二十年或以下之投資物業按租約之剩餘年期計算折舊。

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(i) Long-term investmentsLong-term investments, which are held for non-trading purpose,are stated at fair value at the balance sheet date. Changes in thefair value of individual investments are credited or debited to theinvestment revaluation reserve until the investments are sold orotherwise disposed of or until the investments are determined tobe impaired. Upon disposal, the cumulative gain or loss,representing the difference between the net disposal proceedsand the carrying amount of the relevant investments, together withany surplus/deficit transferred from the investment revaluationreserve, is dealt with in the profit and loss account. When there isobjective evidence that individual investments are impaired, thecumulative loss recorded in the investment revaluation reserve istaken to the profit and loss account.

(j) InventoriesInventories are stated at the lower of cost and net realisable value.Cost, calculated on the first-in, first-out basis, comprises materials,direct labour and an appropriate proportion of all productionoverhead expenditure. Net realisable value is determined on thebasis of anticipated sales proceeds less estimated sellingexpenses.

(k) Installation contractsWhen the outcome of an installation contract cannot be estimatedreliably, contract revenue is recognised only to the extent ofcontract costs incurred that it is probable will be recoverable.Contract costs are recognised when incurred.

When the outcome of an installation contract can be estimatedreliably, contract revenue and contract costs are recognised overthe period of the contract, respectively, as revenues andexpenses. The VSC Group uses the percentage-of-completionmethod to determine the appropriate amount of revenue andcosts to be recognised in a given period. When it is probable thattotal contract costs will exceed total contract revenue, theexpected loss is recognised as an expense immediately.

The aggregate of the costs incurred and the profit/loss recognisedon each contract is compared against the progress billings up tothe year-end. Where costs incurred and recognised profits (lessrecognised losses) exceed progress billings, the balance is shownas due from customers on installation contract work under currentassets. Where progress billings exceed costs incurred plusrecognised profits (less recognised losses), the balance is shownas due to customers on installation contract work under currentliabilities.

(l) Accounts receivableProvision is made against accounts receivable to the extent theyare considered to be doubtful. Accounts receivable in the balancesheet are stated net of such provision.


(i) 長期投資持有作非買賣用途之長期投資按其公平價值於資產負債表中列賬。個別投資公平價值之變動均於投資重估儲備中計入或扣除，直至有關投資出售或被摒棄或有關投資被釐定出現減值為止。於出售時，累計盈虧乃指出售所得款項淨額及有關投資之賬面值之差額，連同任何轉撥自投資重估儲備之盈餘／虧絀於損益表中處理。倘有客觀證明顯示個別投資出現減值，於投資重估儲備之累計虧損乃計入損益表中。

(j) 存貨存貨按成本值與可變現淨值兩者中之較低者入賬。成本值以先入先出法計算之原材料、直接勞工工資及適當比例之所有生產費用。可變現淨值乃按預計銷售所得款項扣除估計銷售支出計算。

(k) 安裝合約倘安裝合約之結果未能可靠地估計，則僅入賬確認大有可能收回之已產生合約成本為合約收入，合約成本於產生期間確認。

倘安裝合約之結果可以可靠地估計，則合約收入及合約成本會按其合約期間，分別入賬確認為收入及開支。萬順昌集團採用完成百份比計算法按適當收入及成本金額在指定期間確認入賬。倘合約成本總額大有可能超逾合約收入總額，則其預算虧損即時入賬確認為開支。

每份合約產生之成本與已確認之損益總額，與截至年終為止之進度款項作一比較。當已發生成本與已確認之溢利（減已確認之虧損）超過進度款項之款額，有關差額將列作流動資產下之應收客戶之安裝合約工程。當進度款項之款額超過已發生成本加已確認之溢利（減已確認之虧損），差額將列作流動負債下之應付客戶之安裝合約工程。

(l) 應收賬款應收賬款按呆賬情況計提撥備。資產負債表內的應收賬款乃扣除有關撥備後列賬。


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(m) Deferred taxationDeferred taxation is provided in full, using the liability method, ontemporary differences arising between the tax bases of assets andliabilities and their carrying amounts in the accounts. Taxation ratesenacted or substantively enacted by the balance sheet date areused to determine deferred taxation.

Deferred tax assets are recognised to the extent that it is probablethat future taxable profit will be available against which thetemporary differences can be utilised.

Deferred taxation is provided on temporary differences arising oninvestments in subsidiaries and associates, except where thetiming of the reversal of the temporary difference can be controlledand it is probable that the temporary difference will not reverse inthe foreseeable future.

(n) ProvisionsProvisions are recognised when the VSC Group has a presentobligation, legal or constructive, as a result of past events and it isprobable that an outflow of resources will be required to settle theobligation, and a reliable estimate can be made of the amount ofthe obligation.

Provisions are reviewed regularly and adjusted to reflect thecurrent best estimate. Where the effect of the time value of moneyis material, the amount of provision is the present value of theexpenditure expected to be required to settle the obligation.

Where the VSC Group expects a provision to be reimbursed, thereimbursement is recognised as a separate asset only when thereimbursement is virtually certain.

(o) Contingent liabilities and contingent assetsA contingent liability is a possible obligation that arises from pastevents and whose existence will only be confirmed by theoccurrence or non-occurrence of one or more uncertain futureevents not wholly within the control of the VSC Group. It can alsobe a present obligation arising from past events that is notrecognised because it is not probable that outflow of economicresources will be required or the amount of obligation cannot bemeasured reliably. A contingent liability is not recognised but isdisclosed in the notes to accounts. When a change in theprobability of an outflow occurs so that outflow is probable, theywill then be recognised as a provision.

A contingent asset is a possible asset that arises from past eventsand whose existence will be confirmed only by the occurrence ornon-occurrence of one or more uncertain events not wholly withinthe control of the VSC Group. Contingent assets are notrecognised but are disclosed in the notes to the accounts when aninflow of economic benefits is probable. When inflow is virtuallycertain, an asset is recognised.


(m) 遞延稅項遞延稅項乃利用負債法就資產與負債之稅基與它們在賬目之賬面值兩者之短暫時差作全數撥備。於結算日所制訂或大致制訂之稅率用以釐定遞延稅項。

遞延稅項資產乃就大有可能將未來應課稅溢利與可動用之短暫時差抵銷而確認。

遞延稅項會就有關在附屬公司及聯營公司之投資所產生之短暫時差而撥備，但假若可以控制短暫時差撥回之時間，並大有可能在可預見未來不會撥回該短暫時差則除外。

(n) 撥備當萬順昌集團因以往事件而承擔現有法律或引申責任，且大有可能因承擔該等責任而導致資源外流，並能可靠估計有關承擔之數額時，將會作出撥備。

撥備會定期檢討及調整，以反映現時之最佳估值。倘貨幣之價值會隨時間出現重大變化，則撥備數額將為預計履行承擔所需開支之現值。

倘萬順昌集團預期撥備得以撥回，則只於有關撥回可在事實上可肯定時確認為獨立資產。

(o) 或然負債及或然資產或然負債乃指因過往事件而可能產生之負債，或然負債存在與否僅由出現或並無出現一項或多項萬順昌集團未能全力控制之不明朗未來事件而決定。或然負債亦可以是由過往事件產生而未予確認之現有債務，有關債務未予確認之原因為不大可能需要經濟資源流出或須承擔之款項未能可靠地計算。或然負債並不予以確認惟已於賬目附註中作出披露。倘資源流出之可能性出現變動因此大有可能導致經濟資源流出，其時或然負債將確認為撥備。

或然資產乃指因過往事件而可能產生之資產，或然資產存在與否僅由出現或並無出現一項或多項萬順昌集團未能全力控制之不明朗未來事件而決定。倘大有可能出現經濟效益流入，或然資產將不予確認，惟於賬目附註中作出披露。倘事實上可肯定會出現經濟效益流入，則有關資產須予以確認。

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(p) Revenue recognitionRevenue is recognised when the outcome of a transaction can bemeasured reliably and when it is probable that the economicbenefits associated with the transaction will flow to the VSCGroup. Revenue is recognised on the following bases:

(i) Sales revenueSales revenue is recognised on the transfer of risks andrewards of ownership, which generally coincides with thetime when the goods are delivered to customers and title haspassed.

(ii) Revenue from installation contractsRevenue from each individual installation contract isrecognised using the percentage-of-completion method byreference to the stage of completion of the contract activity,generally based on the proportion of contract costs incurredfor work performed to date to estimated total contract costs(see Note 1(k)).

(iii) Rental incomeRental income is recognised on a straight-line basis over theperiod of the relevant leases.

(iv) Dividend incomeDividend income is recognised when the right to receivepayment is established.

(v) Interest incomeInterest income is recognised on a time proportion basis,taking into account the principal amounts outstanding andthe interest rates applicable.

Advance payments received from customers prior to delivery ofmerchandise or before commencement of installation contractwork are recorded as receipts in advance.

(q) Employee benefits(i) Employee leave entitlements

Employee entitlements to annual leave are recognised whenthey accrue to employees. A provision is made for theestimated liability for annual leave as a result of servicesrendered by employees up to the balance sheet date.

Employee entitlements to sick leave and maternity leave arenot recognised until the time of the leave.

(ii) Pension obligationsThe VSC Group’s contributions to defined contributionretirement schemes are expensed as incurred.

(r) Borrowing costsBorrowing costs that are directly attributable to the acquisitions,construction or production of an asset that necessarily takes asubstantial period of time to get ready for its intended use or saleare capitalised as part of the cost of that asset. All other borrowingcosts are charged to the profit and loss account in the year inwhich they are incurred.


(p) 收入確認收入於交易結果得以可靠地衡量而該交易的經濟利益大有可能流入萬順昌集團時確認。收入按以下基準確認：

(i) 營業收入營業收入於風險及擁有權移交時確認，通常亦即為貨品付運往客戶和所有權轉讓時。

(ii) 安裝合約之收入每份個別安裝合約之收入會參照合約活動之完成階段然後以完成百分比計算法予以確認。完成百分比普遍按照已執行工作之合約成本對比預期總合約成本之比例（見附註1(k)）。

(iii) 租金收入租金收入於有關租約期內以直線法予以確認。

(iv) 股息收入股息收入乃於確定有權收取股息支付時予以確認。

(v) 利息收入利息收入以未償還本金按適用息率以時間比例作基準予以確認。

於付運貨品或安裝合約工程展開前預先向客戶收取之款項均列作預收款項入賬。

(q) 員工福利(i) 僱員應享假期

僱員的應享年假乃於應計予僱員時確認。僱員因提供服務產生的應享年假乃按截至資產負債表結算日的年假估計負債計算撥備。

僱員應享病假及分娩假期僅於支取時才確認。

(ii) 退休金責任萬順昌集團向界定供款退休金計劃作出的供款乃於產生時列作支出。

(r) 借貸成本需以長時間準備作計劃用途或出售之資產收購、建造或生產直接應計之借貸成本撥為該資產之部份成本。所有其他借貸成本乃於其產生之年度於損益表扣除。


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(s) Operating leasesLeases where substantially all the risks and rewards of ownershipof assets remain with the leasing company are accounted for asoperating leases. Payments made under operating leases net ofany incentives received from the leasing company are charged tothe profit and loss account on a straight-line basis over the leaseperiod of the relevant leases.

(t) Foreign currency translationIndividual companies within the VSC Group maintain their booksand records in the primary currencies of their respective operations(“functional currencies”). In the accounts of the individualcompanies, transactions in other currencies during the year aretranslated into the functional currencies at the applicable rates ofexchange prevailing at the time of the transaction; monetaryassets and liabilities denominated in other currencies aretranslated into the respective functional currencies at theapplicable rates of exchange in effect at the balance sheet date.Exchange gains and losses are dealt with in the profit and lossaccount of the individual companies.

The VSC Group prepares consolidated accounts in Hong Kongdollars. For the purpose of consolidation, all assets and liabilities ofsubsidiaries with functional currencies other than Hong Kongdollars are translated into Hong Kong dollars at the applicablerates of exchange in effect at the balance sheet date; all incomeand expense items are translated at the applicable averageexchange rates during the year. Exchange differences arising fromsuch translation are dealt with as movements of cumulative foreigncurrency translation adjustments.

(u) Forward foreign currency contractsForward foreign currency contracts are entered into to hedgeagainst fluctuation in currency exchange rates. When the forwardforeign currency contract is used as a hedge of a net monetaryassets or liability, the gain or loss on the contract and the discountand premium are taken into the profit and loss account. Where theforward foreign currency contract is used as a hedge of a firmcommitment, no gain or loss is recognised during the commitmentperiod; at the end of that period, any gain or loss and the discountor premium are added to, or deducted from, the amount of therelevant transaction.

(v) Segment reportingIn accordance with the VSC Group’s internal financial reporting,the VSC Group has determined that business segments bepresented as the primary reporting format and geographicalsegments as the secondary reporting format.

Unallocated costs represent corporate expenses. Segment assetsconsist primarily of all of the VSC Group’s operating assets, whilesegment liabilities consist primarily of all of the VSC Group’soperating liabilities. Capital expenditure comprises additions tofixed assets, investment properties, investment in associates andlong-term investments, including those arising from acquisition ofsubsidiaries.

In respect of geographical segment reporting, turnover is based onthe destination of delivery of goods or the location for the provisionof services. Total assets and capital expenditure are classifiedwhere the assets are located.


(s) 營業租約凡資產擁有權之絕大部份風險及回報仍屬出租公司之租約均列為營業租約。營業租約之支出在扣除自出租公司給予之任何獎勵金後，均於有關租約年期以直線法自損益表中扣除。

(t) 外幣換算萬順昌集團屬下個別公司之賬目及記錄乃以本身營運所在地之主要貨幣（「功能貨幣」）為單位。在個別公司之賬目中，於本年度以其他貨幣進行之交易乃按個別功能貨幣於交易時之適用率兌，以其他貨幣為單位之貨幣資產及負債乃按

功能貨幣於資產負債表結算日之適用率兌。兌盈虧均於個別公司之損益表內處理。

萬順昌集團編製之綜合賬目乃以港元為單位。就綜合賬目而言，所有以港元以外作為功能貨幣之附屬公司之所有資產及負債乃按資產負債表結算日之適用率兌為港元，所有收支項目均按本年度適用之平均率換算。因換算該等交易而出現之兌差額列作累積外幣兌調整變動處理。

(u) 遠期外貨幣合約遠期外貨幣合約用以對沖外幣率之波動。當遠期外貨幣合約用作對沖其淨貨幣資產或負債，合約之盈虧，以及貼現及溢價乃計入損益表中。倘遠期外貨幣合約用作對沖其肯定承擔，於承擔期間盈虧不予確認；於承擔期末時，任何盈虧、貼現或溢價乃於其有關交易金額中加進或減少。

(v) 分類資料根據萬順昌集團的內部財務報告，萬順昌集團決定以業務分類作為主要申報格式，而地區分類則為次要申報格式。

未分配成本指企業支出。分類資產主要包括萬順昌集團所有經營資產，而分類負債則主要包括萬順昌集團所有經營負債。資本支出包括添置固定資產，投資物業，於聯營公司之投資及長期投資，當中包括因收購附屬公司而添置之資產。

就地區分類申報而言，營業額乃根據貨品付運目的地及提供服務之地點而釐定。總資產及資本支出，以有關資產所在地分類。

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(w) Cash and cash equivalentsCash and cash equivalents are carried in the balance sheet atcost. For the purpose of the cash flow statement, cash and cashequivalents comprise cash on hand, deposits held at call withbanks, cash investments with a maturity of three months or lessfrom the date of investment and bank overdrafts.

2. Related Party Transactions

Parties are considered to be related if one party has the ability, directlyor indirectly, to control the other party or exercise significant influenceover the other party in making financial and operating decisions. Partiesare also considered to be related if they are subject to common controlor common significant influence.

(a) Details of significant transactions with related parties are:

Name of related party/ 2005 2004Nature of transaction 關連人士名稱／交易性質二零零五年二零零四年

HK$’000 HK$’000千港元千港元

Metal Logistics Company Limited (i) 金屬物流管理有限公司(i)– Sales made by the VSC Group －萬順昌集團所達成之銷售 399,246 155,716– Administrative service fees earned －萬順昌集團收取之行政服務費

by the VSC Group 180 180– Interest earned by the VSC Group －萬順昌集團收取之利息 3,380 5,672– Commission for procurement services －萬順昌集團支付／應付之採購

paid/payable by the VSC Group 服務佣金 2,221 1,894

iSteelAsia (Hong Kong) Limited (i) 亞洲鋼鐵電子交易所（香港）有限公司(i)– Rental income earned by the VSC Group －萬順昌集團收取之租金收入 162 198– Administrative service fees earned －萬順昌集團收取之行政服務費

by the VSC Group 180 180

Shinsho Corporation (ii) 神鋼商事株式會社(ii)– Purchases made by the VSC Group －萬順昌集團所達成之採購 104,538 28,596

Notes:(i) Metal Logistics Company Limited and iSteelAsia (Hong Kong) Limited

are wholly owned by iSteelAsia Holdings Limited, a company in whichthe VSC Group had a 18.9% equity interest as at 31st March 2005(2004: 18.9%).

(ii) Shinsho Corporation is a minority shareholder of VSC ShinshoCompany Limited, a 70% owned subsidiary of the VSC Group.


(w) 現金及現金等值現金及現金等值按成本值於資產負債表列賬。就現金流量表而言，現金及現金等值包括手頭現金、存於銀行之通知存款、現金投資（到期日為投資日期起計三個月或以內）及銀行透支。

2. 與關連人士之交易

關連人士乃指其中一方可直接或間接控制另一方或對另一方之財務及營運決策行使重大影響力。受共同控制或受共同重大影響之人士亦被視為關連人士。

(a) 與關連人士之重大交易詳情如下：

註：(i) 金屬物流管理有限公司及亞洲鋼鐵電子交易所（香

港）有限公司均由亞鋼集團有限公司全資擁有。於二

零零五年三月三十一日萬順昌集團擁有該公司18.9%股權（二零零四年：18.9%）。

(ii) 神鋼商事株式會社乃萬順昌神商有限公司（萬順昌集團擁有70%之附屬公司）之一位少數股東。


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2. Related Party Transactions (Cont’d)

(b) The amount due from a related company arising from thetransactions described in Note 2(a) was included in accounts andbills receivable. Details of such balances are as follows:

Maximumbalance

outstandingduring the

year2005 2004 於年內

Name of related party 關連公司名稱二零零五年二零零四年最高結餘千港元千港元千港元

HK$’000 HK$’000 HK$’000

Metal Logistics Company Limited (i) 金屬物流管理有限公司(i) 118,843 205,611 238,225

Note:(i) The balances, arising mainly from sales of steel, are unsecured, repayable

according to the VSC Group’s normal credit term for trading transactions,and bear interest at commercial lending rates for overdue balances.

(c) The amount due to a related company arising from thetransactions described in Note 2(a) was included in accounts andbills payable. Details of such balances are as follows:

2005 2004Name of related party 關連公司名稱二零零五年二零零四年


Shinsho Corporation (i) 神鋼商事株式會社(i) 51,762 30,902

Note:(i) The balances, arising mainly from purchases of steel, are unsecured,

repayable according to normal credit term and bore interest atcommercial lending rates.

2. 與關連人士之交易（續）

(b) 應收賬款及票據包括附註2(a)所述交易產生之應收一間關連公司款項。有關結餘詳情如下：

註：(i) 該結餘主要來自鋼材銷售，並無抵押，按萬順昌集團

貿易交易之正常信貸條款償還，且過期結餘按商業利

率計算利息。

(c) 應付賬款及票據包括附註2(a)所述交易產生之應付一間關連公司款項。有關結餘詳情如下：

註：

(i) 該結餘主要來自鋼材採購，並無抵押，按正常信貸條款償還，且按商業利率計算利息。

90


3. Turnover and Revenue

Revenues recognised are as follows:



Manufacturing of industrial products 製造工業產品– Processing of rolled flat steel products －板材產品加工 905,482 392,513– Enclosure systems －系統設備外殼 135,811 109,463

Trading of industrial products 買賣工業產品– Engineering plastic resins and injection －工程塑膠樹脂及注塑機

moulding machines 248,188 172,265Stockholding and trading of construction 存銷與買賣建築材料

materials– Steel products – steel rebars, structural －鋼材產品－鋼筋、結構鋼及

steel and flat steel products 板材產品 2,690,626 2,734,287– Sanitary ware and kitchen cabinets －潔具及廚櫃 151,943 97,350– Revenue from installation work of kitchen －安裝廚櫃之收入

cabinets 4,557 41,387Rental income 租金收入 2,014 1,845

Total turnover 總營業額 4,138,621 3,549,110

Interest income 利息收入 5,059 6,310Dividend income from an unlisted long-term 一項非上市長期投資之股息收入

investment 2,296 374Guaranteed return from a joint venture (i) 一間合營公司之保證回報(i) 2,033 4,344

9,388 11,028

Total revenues 總收入 4,148,009 3,560,138

Note:(i) During the year ended 31st March 2005, the VSC Group received a

guaranteed return of approximately HK$2,033,000 (2004: HK$4,344,000)from a joint venture.

3. 營業額及收入

收入按以下確認：

註：(i) 截至二零零五年三月三十一日止年度內，萬順昌集團收

取一間合營公司之保證回報約2,033,000港元（二零零四年：4,344,000港元）。


< > 93

4. Other Income/Expense, Net



Surplus on revaluation of investment properties 投資物業之重估盈餘 25,654 2,818Gain on disposal of investment properties 出售投資物業之收益 55 2,476Gain on disposal of a land and building 出售一項土地及樓宇之收益 10,474 –Impairment loss of a long-term investment 一項長期投資之減值虧損 (10,000) –

26,183 5,294

5. Operating Profit

Operating profit is determined after charging or (crediting) the followingitems:



After charging: 已扣除：

Staff costs (including directors’ emoluments) 員工成本（包括董事酬金）（見附註7）(see Note 7) 80,346 68,681

Operating lease rentals of premises 物業之營業租約租金 8,539 7,610Provision for bad and doubtful accounts 呆壞應收賬款撥備

receivable 1,813 609Provision for and write-off of inventories 存貨撥備及撇銷 1,845 3,116Depreciation of fixed assets 固定資產之折舊 21,844 16,791Net loss on disposal of fixed assets 出售固定資產之虧損淨額 – 5Amortisation of goodwill (including in general 商譽攤銷（包括於一般及行政支出內）

and administrative expenses) 3,969 2,359Auditors’ remuneration 核數師酬金 1,038 880

After crediting: 已計入：

Rental income, less outgoings 租金收入，扣除支出 (1,829) (1,672)Net gain on disposal of other fixed assets 出售其他固定資產之收益淨額

(excluding land and buildings) （不包括土地及樓宇） (107) –Net exchange gain 外兌換收益淨額 (2,369) (3,583)Interest income from 來自下列項目之利息收入

– bank deposits －銀行存款 (1,624) (406)– overdue accounts receivable －到期應收賬款 (3,435) (5,904)

4. 其他收益／支出淨額

5. 經營溢利

經營溢利已扣除或（計入）下列各項：

92


6. Finance Costs



Interest expense on 利息支出於– bank loans wholly repayable within －須於五年內全數償還之

five years 銀行貸款 17,740 11,832– other short-term loans wholly repayable －須於五年內全數償還之

within five years 其他短期貸款 187 1,505

17,927 13,337

7. Staff Costs (Including Directors’ Emoluments)



Salaries and allowances 薪金及津貼 72,744 60,357Bonuses 花紅 3,994 6,494Pension costs (see Note 36) 退休金成本（見附註36） 3,608 1,830

80,346 68,681

8. Directors’ and Senior Executives’ Emoluments

(a) Directors’ emoluments



Fees for independent non-executive 獨立非執行董事之董事袍金directors 571 347

Fees for non-executive directors 非執行董事之董事袍金 80 80Other emoluments for executive directors 執行董事之其他酬金

– Salaries and allowances －薪金及津貼 2,024 3,213– Discretionary bonuses (i) －酌情花紅(i) 420 2,100– Retirement contributions －退休金供款 64 77

3,159 5,817

Note:(i) The executive directors were entitled to discretionary bonuses which were

determined with reference to the financial performance of the VSC Group.

6. 財務費用

7. 員工成本（包括董事酬金）

8. 董事及高級行政人員酬金

(a) 董事酬金

註：(i) 執行董事可享有酌情花紅，此乃參照萬順昌集團之財務表

現而釐定。


< > 95

8. Directors’ and Senior Executives’ Emoluments (Cont’d)

(a) Directors’ emoluments (Cont’d)In addition to the above-mentioned emoluments, the VSC Groupprovided a residential apartment (included in land and buildings) toan executive director for his residence up to 30th November 2004,and the rateable value of the apartment during the periodoccupied by the director was approximately HK$704,000 (2004:HK$931,000).

No director waived any emolument during the year. No incentivepayment for joining the VSC Group or compensation for loss ofoffice was paid/payable to any directors during the year.

Analysis of directors’ emoluments (including the rateable value ofthe apartment used as a director’s residence) by number ofdirectors and emolument ranges is as follows:


Executive directors 執行董事– Nil to HK$1,000,000 －無至1,000,000港元 2 1– HK$1,000,001 to HK$1,500,000 －1,000,001港元至1,500,000港元 2 –– HK$1,500,001 to HK$2,000,000 －1,500,001港元至2,000,000港元 – 2– HK$3,000,001 to HK$3,500,000 －3,000,001港元至3,500,000港元 – 1

4 4

Non-executive director 非執行董事– Nil to HK$1,000,000 －無至1,000,000港元 1 1

Independent non-executive directors 獨立非執行董事– Nil to HK$1,000,000 －無至1,000,000港元 4 3

9 8

8. 董事及高級行政人員酬金（續）

(a) 董事酬金（續）除上述酬金外，直至二零零四年十一月三十日，萬順昌集團為一位執行董事提供一間住宅單位（包括於土地及樓宇內）作其寓所，該單位於董事入住期間內之應課差餉租值約為704,000港元（二零零四年：931,000港元）。

本年度內，並無董事放棄任何酬金。本年度內，並無支付／應付任何酬金予董事以作為鼓勵加入萬順昌集團或離職補償。

董事酬金（包括用作董事寓所之單位之應課差餉租值）按董事人數及酬金範圍之分析如下：

94


8. Directors’ and Senior Executives’ Emoluments (Cont’d)

(b) Five highest paid individualsThe five individuals whose emoluments were the highest in theVSC Group for the year include two (2004: three) directors whoseemoluments are reflected in the analysis presented in Note 8(a)above. The emoluments paid/payable to the remaining three(2004: two) individuals were as follows:



Salaries and allowances 薪金及津貼 5,696 2,474Retirement contributions 退休金供款 39 56

5,735 2,530


The emoluments fell within the following band: 酬金按組別分析如下：– HK$1,000,001 to HK$1,500,000 －1,000,001港元至1,500,000港元 1 2– HK$1,500,001 to HK$2,000,000 －1,500,001港元至2,000,000港元 1 –– HK$2,500,001 to HK$3,000,000 －2,500,001港元至3,000,000港元 1 –

3 2

9. Taxation

VSC is exempted from taxation in Bermuda until 2016.

Hong Kong profits tax has been provided at the rate of 17.5% (2004:17.5%) on the estimated assessable profit arising in or derived fromHong Kong.

The subsidiaries established in Mainland China are subject to MainlandChina enterprise income tax at rates ranging from 10% to 30% (2004:7.5% to 33%). However, subsidiaries engaging in manufacturing areexempted from Mainland China enterprise income tax for two yearsstarting from the first year of profitable operations after offsetting prioryears’ tax losses, followed by a 50% reduction for the next three years.

8. 董事及高級行政人員酬金（續）

(b) 五位最高薪人士於年內，萬順昌集團中五位最高薪人士其中二位（二零零四年：三位）為董事，彼等之酬金分析已載於上文附註8(a)。其餘三位（二零零四年：二位）人士之已付／應付酬金為：

9. 稅項

萬順昌獲豁免繳納百慕達稅項直至二零一六年。

香港利得稅乃根據來自或賺取自香港之估計應課稅溢利按稅率17.5%（二零零四年：17.5%）作出撥備。

於中國內地成立之附屬公司按稅率10%至30%（二零零四年：7.5%至33%）繳付中國企業所得稅。此外，從事製造業之附屬公司自首個獲利年度（經抵銷過往年度虧損）起計兩年內可豁免繳付中國企業所得稅，隨後三年則獲50%減免。


< > 97

9. Taxation (Cont’d)

The amount of taxation (credited)/charged to the consolidated profit andloss account represents:



VSC and subsidiaries – 萬順昌及附屬公司－Current taxation 當期稅項Hong Kong profits tax 香港利得稅

– Current year －本年度 2,492 5,165– (Over)/Under-provision in prior years －過往數個年度之（高估）／

低估撥備 (595) 25Mainland China enterprise income tax 中國企業所得稅 6,868 6,464Deferred taxation relating to the origination 短暫差異產生及撥回

and reversal of temporary differences 之遞延稅項– Current year －本年度 (13,262) (593)– Under-provision in prior years －過往數個年度之低估撥備 177 –

(4,320) 11,061

The taxation on the VSC Group’s profit before taxation differs from thetheoretical amount that would arise using the profits tax rate of HongKong, the home country of the VSC Group, and the reconciliation wasas follows:



Profit before taxation 除稅前溢利 48,394 96,455

Calculated at Hong Kong profits tax rate of 17.5% 按香港利得稅稅率17.5%(2004: 17.5%) （二零零四年：17.5%）計算 8,469 16,880

Effect of 影響– different tax rates in other jurisdictions －其他司法權區不同稅率 (5,231) (2,639)– income not subject to taxation －無須課稅之收入 (5,043) (458)– expenses not deductible for income tax －不可扣稅之支出

purposes 1,887 175– deferred tax assets not recognised －未確認之遞延稅項資產 145 85– reversal of previously unrecognised deferred －撥回以前未確認之遞延

tax assets 稅項資產 (4,129) (3,007)– (over)/under-provision in prior years －過往數個年度之（高估）／

低估撥備 (418) 25

Taxation (credit)/charge （計入）／扣除之稅項 (4,320) 11,061

9. 稅項（續）

於綜合損益表中（計入）／扣除之稅項包括：

萬順昌集團之除稅前溢利與按照於萬順昌集團所在國家之香港利得稅稅率計算之理論金額有所差異及對賬如下：

96


10. Profit Attributable to Shareholders

The consolidated profit attributable to shareholders includes a loss ofapproximately HK$82,000 (2004: profit of approximatelyHK$35,892,000) dealt with in the accounts of VSC.

11. Dividends



No interim dividend is paid for the year 本年度並無派發中期股息(2004: HK3.1 cents per ordinary share) （二零零四年：每股普通股3.1港仙） – 10,882

Proposed final dividend of HK2.2 cents 建議末期股息每股普通股2.2港仙(2004: HK2.8 cents) per ordinary share （二零零四年：2.8港仙） 8,109 10,298

Adjustment to final dividend for 2004 調整二零零四年末期股息 5 –

8,114 21,180

12. Earnings Per Share

The calculation of basic earnings per share for the year ended 31stMarch 2005 is based on the consolidated profit attributable toshareholders of approximately HK$41,077,000 (2004: HK$81,063,000)and the weighted average number of approximately 368,190,000ordinary shares (2004: 329,088,000 ordinary shares) in issue during theyear.

The calculation of diluted earnings per share for the year ended 31stMarch 2005 is based on the consolidated profit attributable toshareholders of approximately HK$41,077,000 (2004: HK$81,063,000)and the diluted weighted average number of approximately370,387,000 ordinary shares (2004: 344,131,000 ordinary shares) inissue after adjusting for the potential dilutive effect in respect ofoutstanding share options.

10. 股東應佔溢利

本公司之股東應佔綜合溢利中包括本公司本身之虧損約82,000港元（二零零四年：溢利約35,892,000港元）。

11. 股息

12. 每股盈利

截至二零零五年三月三十一日止年度之每股基本盈利乃根據股東應佔綜合溢利約41,077,000港元（二零零四年：81,063,000港元）及年內已發行股份之加權平均數約368,190,000普通股（二零零四年：329,088,000普通股）計算。

截至二零零五年三月三十一日止年度之每股攤薄後盈利乃根據股東應佔綜合溢利約41,077,000港元（二零零四年：81,063,000港元）及已發行股份之攤薄後加權平均數約370,387,000普通股（二零零四年：344,131,000普通股）計算，並已就具潛在攤薄作用之尚未行使的購股權作出調整。


< > 99

13. Fixed Assets

Movements were:

Consolidated綜合

2005二零零五年

Leaseholdimprove-

ments,furniture

andequipment

Land and 租賃 Motorbuildings 物業裝修、 Machinery vehicles Total

土地及樓宇傢俬及設備機器汽車總額HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

千港元千港元千港元千港元千港元

Cost 成本

Beginning of year 年初 101,894 48,076 68,329 7,040 225,339Additions 添置 18,298 7,301 1,745 2,893 30,237Disposals 出售 (32,206) (387) (1,240) (1,979) (35,812)Transfer to investment properties 轉撥往投資物業 (18,425) – – – (18,425)

End of year 年終 69,561 54,990 68,834 7,954 201,339

Accumulated depreciation 累計折舊

Beginning of year 年初 16,112 23,581 22,554 3,726 65,973Charge for the year 本年度折舊 3,465 9,307 7,708 1,364 21,844Disposals 出售 (6,280) (258) (1,240) (1,767) (9,545)Transfer to investment properties 轉撥往投資物業 (2,948) – – – (2,948)

End of year 年終 10,349 32,630 29,022 3,323 75,324

Net book value 賬面淨值

End of year 年終 59,212 22,360 39,812 4,631 126,015

Beginning of year 年初 85,782 24,495 45,775 3,314 159,366

13. 固定資產

變動為：

98


13. Fixed Assets (Cont’d)

Details of the geographical locations and tenure of land and buildingswere:

Consolidated綜合



Hong Kong 香港– leases of between 10 to 50 years －10至50年租約 – 15,477– leases over 50 years －超逾50年租約 1,702 28,153

Mainland China 中國內地– land use right of between 10 to 50 years －10至50年之土地使用權 41,253 42,152– land use right over 50 years －超逾50年之土地使用權 16,257 –

59,212 85,782

At 31st March 2005, land and buildings with net book value ofapproximately HK$9,351,000 (2004: HK$8,523,000) were pledged ascollateral for certain of the VSC Group’s short-term bank loans (seeNote 37).

14. Investment Properties

Movements were:

Consolidated綜合



Beginning of year 年初 36,448 31,000Additions 添置 – 7,430Transfer from fixed assets 自固定資產轉撥 15,477 –Disposals 出售 (8,548) (4,800)Surplus on revaluation 重估盈餘 27,723 2,818

End of year 年終 71,100 36,448

13. 固定資產（續）

土地及樓宇之地理位置及業權租賃期詳情為：

於二零零五年三月三十一日，作為萬順昌集團短期銀行貸款抵押品之土地及樓宇賬面淨值合共約9 ,351 ,000港元（二零零四年：8 ,523 ,000港元）（見附註37）。

14. 投資物業

變動為：


< > 101

14. Investment Properties (Cont’d)

Details of the geographical locations and tenure of investmentproperties were:

Consolidated綜合



Hong Kong 香港– leases of between 10 to 50 years －10至50年租約 56,000 18,500– leases of over 50 years －超逾50年租約 15,100 11,900

Mainland China 中國內地– land use right over 50 years －超逾50年之土地使用權 – 6,048

71,100 36,448

Investment properties of approximately HK$38,100,000 (2004:HK$30,400,000) were stated at open market value as at 31st March2005 as determined by Jointgoal Surveyors Limited, independentqualified valuers, while investment properties of HK$33,000,000 (2004:Nil) were stated at open market value as at 31st March 2005 asdetermined by Ian Cullen & Associates, independent qualified valuers.At 31st March 2004, an investment property of approximatelyHK$6,048,000 was stated at the amount of disposal in April 2004.

The VSC Group leases out certain investment properties underoperating leases, for an initial period of two to three years, with anoption to renew on renegotiated terms. None of the leases includescontingent rentals. During the year ended 31st March 2005, the grossrental income from investment properties amounted to approximatelyHK$1,483,000 (2004: HK$1,433,000). As at 31st March 2005, the VSCGroup’s future rental income under non-cancellable operating leaseswas as follows:

Consolidated綜合



Not later than one year 未逾1年 1,557 834Later than one year and not later than five years 逾1年及未逾5年 960 1,208

2,517 2,042

14. 投資物業（續）

投資物業之地理位置及業權租賃期詳情為：

約38,100,000港元（二零零四年：30,400,000港元）投資物業按獨立合資格估值師晉高測量師有限公司所釐定於二零零五年三月三十一日之公開市值列賬。惟33,000,000港元（二零零四年：無）投資物業按獨立合資格估值師高練賢特許測計師行所釐定於二零零五年三月三十一日之公開市值列賬。於二零零四年三月三十一日，一項約6,048,000港元投資物業以二零零四年四月出售之金額列賬。

萬順昌集團訂立營業租約租出若干投資物業，初步訂立為期2至3年，並有選擇權於再協商下續約。沒有租約為或然租約。截至二零零五年三月三十一日止年度內，由投資物業帶來之租金收入總額約為1,483,000港元（二零零四年：1,433,000港元）。於二零零五年三月三十一日，萬順昌集團訂立不可撤回之營業租約之未來租金收入如下：

100


15. Investments in Subsidiaries

Company公司



Unlisted shares, at cost 非上市股份，按成本值 71,746 71,746Due from subsidiaries 應收附屬公司 431,261 428,666

503,007 500,412

The amounts due from subsidiaries are unsecured and non-interestbearing. As at 31st March 2004, HK$12,000,000 due from a subsidiaryclassified under current assets, is unsecured, non-interest bearing andhas no pre-determined repayment terms.

Details of the principal subsidiaries as at 31st March 2005 were:

Percentage ofequity interest

Place of Issued and fully attributable to theincorporation paid share capital/ VSC Group (i)and operations registered capital 萬順昌集團

Name 註冊成立及已發行及繳足應佔之股本 Principal activities名稱經營地點股本／註冊資本權益百分比(i) 主要業務

Dongguan Van Shung Chong Steel Mainland China HK$36,190,000 100% Processing of rolledProducts Co., Ltd. (iii) 中國內地 36,190,000港元 flat steel products

東莞萬順昌鋼鐵制品有限公司(iii) 板材產品加工

Leisure Plus International Trading Mainland China US$200,000 100% Trading of sanitary(Shanghai) Co., Ltd. (iii) 中國內地 200,000美元 ware

利尚派國際貿易（上海）有限公司(iii) 買賣潔具

Senior Rich Development Limited Hong Kong HK$380 ordinary 100% Property holding先滿發展有限公司香港 HK$10,000 持有物業

non-voting deferred (ii)380港元普通股10,000港元無投票權遞延股(ii)

Shanghai Bao Shun Chang Mainland China US$600,000 66.7% Trading andInternational Trading Co., Ltd. (iii) 中國內地 600,000美元 stockholding of steel

上海寶順昌國際貿易有限公司(iii) 買賣及存銷鋼材

Guangzhou Shenchang Metal Mainland China HK$34,875,798 70% Processing of rolledProducts Co., Ltd. (formerly 中國內地 34,875,798港元 flat steel productsknown as SMC Industries Ltd.) (iii) 板材產品加工

廣州神昌金屬制品有限公司（前稱廣州蜆華實業有限公司）(iii)

Tianjin Van Shung Chong Metal Mainland China HK$23,400,000 100% Processing of rolledProducts Co., Ltd. (iii) 中國內地 23,400,000港元 flat steel products

天津萬順昌金屬制品有限公司(iii) 板材產品加工

15. 於附屬公司之投資

應收附屬公司之款項並無抵押及不計利息。於二零零四年三月三十一日，流動資產中應收一間附屬公司之12,000,000港元並無抵押，不計利息及無特定償還條款。

於二零零五年三月三十一日主要附屬公司之詳情為：


< > 103

15. Investments in Subsidiaries (Cont’d)




Tomahawk Capital Limited Hong Kong HK$10,000 100% Finance business東誠企業（香港）有限公司香港 10,000港元財務業務

Van Shung Chong (B.V.I.) Limited British Virgin Islands US$6 100% Investment holding英屬處女群島 6美元投資控股

Van Shung Chong Hong Limited Hong Kong HK$2,000 ordinary 100% Trading of steel and萬順昌行有限公司香港 HK$10,000,000 provision of

non-voting deferred (ii) management2,000港元普通股 services10,000,000港元買賣鋼材與及提供無投票權遞延股(ii) 管理服務

Vantage Godown Company Limited Hong Kong HK$200,000 100% Provision of順發貨倉有限公司香港 200,000港元 warehousing

services提供倉庫服務

VJY Telecommunication Equipment Mainland China HK$15,000,000 100% Manufacture of(Shenzhen) Company Limited (iii) 中國內地 15,000,000港元 enclosure systems

萬嘉源通訊設備（深圳）有限公司(iii) 製造系統設備外殼

VSC (Beijing) Investment Ltd. British Virgin Islands US$2 100% Investment holding英屬處女群島 2美元投資控股

VSC Building Products Company Hong Kong HK$2 100% Trading of sanitaryLimited 香港 2港元 ware and kitchen

萬順昌建築材料有限公司 cabinets and kitchencabinet installation

買賣潔具及廚櫃與及安裝廚櫃

VSC Plastics Company Limited Hong Kong HK$2 100% Trading of plastics and萬順昌塑膠有限公司香港 2港元 injection moulding

machines買賣塑膠及注塑機

VSC Shinsho Company Limited Hong Kong US$9,646,200 70% Trading of processed萬順昌神商有限公司香港 9,646,200美元 rolled flat steel

products買賣加工板材產品

VSC Steel Company Limited Hong Kong HK$38,000 ordinary 100% Trading and萬順昌鋼鐵有限公司香港 HK$20,000,000 stockholding of steel

non-voting deferred (ii) 買賣及存銷鋼材38,000港元普通股20,000,000港元無投票權遞延股(ii)

15. 於附屬公司之投資（續）

102


15. Investments in Subsidiaries (Cont’d)




VSC Steel Products Company Limited Hong Kong HK$2 100% Trading of processed萬順昌鋼鐵制品有限公司香港 2港元 rolled flat steel

products買賣加工板材產品

VSC Steel (Shanghai) Co., Ltd. (iii) Mainland China US$300,000 100% Trading and亞萬鋼國際貿易（上海）有限公司中國內地 300,000美元 stockholding of steel

買賣及存銷鋼材

Notes:(i) The shares of Van Shung Chong (B.V.I.) Limited are held directly by VSC.

The shares of other subsidiaries are held indirectly.

(ii) These non-voting deferred shares are owned by the VSC Group. Thenon-voting deferred shares have no voting rights, are not entitled to anydistributions upon winding up unless a sum of HK$2,000,000,000 pershare has been distributed to the holders of ordinary shares for Van ShungChong Hong Limited or a sum of HK$100,000,000,000,000 has beendistributed to the holders of ordinary shares for VSC Steel CompanyLimited and Senior Rich Development Limited.

(iii) Dongguan Van Shung Chong Steel Products Co., Ltd. is a contractual jointventure established in Mainland China with an operating period of 12 yearsto 2007. Leisure Plus International Trading (Shanghai) Co., Ltd. and VSCSteel (Shanghai) Co., Ltd. are wholly foreign owned enterprises establishedin Mainland China with an operating period of 20 years to 2023. ShanghaiBao Shun Chang International Trading Co., Ltd. is an equity joint ventureestablished in Mainland China with an operating period of 20 years to 2014.Guangzhou Shenchang Metal Products Co., Ltd. (formerly known as SMCIndustries Ltd.) is a co-operative joint venture established in Mainland Chinawith an operating period of 50 years to 2043. Tianjin Van Shung ChongMetal Products Co., Ltd. is a wholly foreign owned enterprise established inMainland China with an operating period of 50 years to 2052. VJYTelecommunication Equipment (Shenzhen) Company Limited is a whollyforeign owned enterprise established in Mainland China with an operatingperiod of 15 years to 2016.

The above summary lists the principal subsidiaries which principallyaffected the results or formed a substantial portion of the net assets ofthe VSC Group. To give details of other subsidiaries would, in theopinion of VSC’s Directors and the VSC Group’s management, result inparticulars of excessive length.

None of the subsidiaries had any loan capital in issue at any time duringthe year ended 31st March 2005.

15. 於附屬公司之投資（續）

註：(i) Van Shung Chong (B.V.I.) Limited之股份由萬順昌直接

持有。其他附屬公司之股份則屬間接持有。

(ii) 此等無投票權遞延股份由萬順昌集團擁有。無投票權遞延股份並無投票權，亦無權於清盆時分享股息及除非萬順昌行有限公司普通股持有人已獲分派每股普通股2,000,000,000港元之款額或萬順昌鋼鐵有限公司及先滿發展有限公司之普通股持有人已獲分派100,000,000,000,000港元之款額外。

(iii) 東莞萬順昌鋼鐵制品有限公司乃一間於中國內地成立之中外合營企業，經營期為12年，至二零零七年止。利尚派國際貿易（上海）有限公司及亞萬鋼國際貿易（上海）有限公司乃於中國內地成立之外資企業，經營期為20年，至二零二三年止。上海寶順昌國際貿易有限公司乃一間於中國內地成立之合資合營企業，經營期為20年，至二零一四年止。廣州神昌金屬制品有限公司（前稱廣州蜆華實業有限公司）乃一間於中國內地成立之中外合作企業，經營期為50年，至二零四三年止。天津萬順昌金屬制品有限公司乃一間於中國內地成立之外資企業，經營期為50年，至二零五二年止。萬嘉源通訊設備（深圳）有限公司乃一間於中國內地成立之外資企業，經營期為15年，至二零一六年止。

上述概要列出主要影響萬順昌集團之業績或組成萬順昌集團資產淨值之大部份主要附屬公司。萬順昌之董事及萬順昌集團之管理層認為提供其他附屬公司之詳情將使篇幅過於冗長。

於截至二零零五年三月三十一日止年度之任何時間內，各附屬公司概無任何已發行借貸資本。


< > 105

16. Investments in Associates

Consolidated綜合



Investment cost (i) 投資成本(i) – –Advance to an associate (ii) 借予一間聯營公司之墊款(ii) 12,534 12,534Less: Provision for doubtful receivables 減：應收呆賬撥備 (12,532) (12,532)

2 2

Notes:(i) The investment cost was written off in prior years.

(ii) The advance to an associate is unsecured and non-interest bearing.

Details of the associates as at 31st March 2005 were:

Place of Percentage ofincorporation equity interestand operations Issued and fully held indirectly

Name 註冊成立及 paid share capital 間接持有股本 Principal activity名稱經營地點已發行及繳足股本權益百分比主要業務

Dongguan Luen Tung Harbour & Mainland China HK$20,418,128 30% Provision of pierDock Co., Ltd. (i) 中國內地 20,418,128港元 services

東莞聯通港口碼頭有限公司(i) 提供碼頭服務

Steel Supreme Limited British Virgin Islands/ US$100 30% Provision of pier廣順聯合有限公司 Mainland China 100美元 services

英屬處女群島／提供碼頭服務中國內地

Note:(i) Dongguan Luen Tung Harbour & Dock Co., Ltd. is a contractual joint

venture established in Mainland China with an operating period of 20 yearsto 2015.

16. 於聯營公司之投資

註：(i) 投資成本於過往數個年度撇銷。

(ii) 借予一間聯營公司之墊款並無抵押及不計利息。

於二零零五年三月三十一日聯營公司之詳情為：

註：(i) 東莞聯通港口碼頭有限公司乃一間於中國內地成立之

合約合營企業，合營期至二零一五年止，為期20年。

104


17. Long-term Investments

Consolidated綜合



Investment in shares listed in Hong Kong 於香港上市股份之投資At cost 按成本值 42,438 42,438Change in fair value 公平價值變動 (31,601) (20,705)

10,837 21,733

Unlisted investments 非上市投資At cost 按成本值 23,361 38,376Accumulated impairment loss 累計減值虧損 (97) (97)

23,264 38,279

34,101 60,012

As at 31st March 2005, the investment in shares listed in Hong Kongrepresents approximately 18.9% (2004: 18.9%) equity interests iniSteelAsia Holdings Limited, a company incorporated in Bermuda andwhose shares are listed on the Growth Enterprise Market of The StockExchange of Hong Kong Limited.

17. 長期投資

於二零零五年三月三十一日，於香港上市股份之投資代表亞鋼集團有限公司約18.9%（二零零四年：18.9%）股權（該公司乃於百慕達註冊成立及其股份於香港聯合交易所有限公司創業板上市）。


< > 107

18. Goodwill

Movements were:

Consolidated綜合



Cost 成本

Beginning of year 年初 73,479 67,454Acquisition of subsidiaries (see Note 32(b)) 收購附屬公司（見附註32(b)） – 3,979Adjustment to purchase consideration for 調整以往年度收購附屬公司／

subsidiaries/business acquired in prior year 一項業務之代價 3,705 2,046

End of year 年終 77,184 73,479

Accumulated amortisation 累計攤銷

Beginning of year 年初 65,189 62,830Amortisation for the year 年度內攤銷 3,969 2,359

End of year 年終 69,158 65,189

Net book value 賬面淨值

End of year 年終 8,026 8,290

Beginning of year 年初 8,290 4,624

19. Inventories

Inventories consisted of steel rebars, H-piles, sheet piles, rolled flat steelproducts, enclosure systems, sanitary ware, kitchen cabinets,engineering plastic resins and machinery spare parts for tradingpurposes.

Consolidated綜合



Gross inventories 存貨總值 900,504 701,071Less: Provision for obsolete and slow-moving 減：陳舊及滯銷存貨撥備

inventories (4,658) (5,130)

895,846 695,941

18. 商譽

變動為：

19. 存貨

存貨包括作買賣用途之鋼筋、工字鋼、水閘板、板材產品、系統設備外殼、潔具、廚櫃、工程塑膠樹脂及機器零件。

106


19. Inventories (Cont’d)

As at 31st March 2005, inventories of approximately HK$73,054,000(2004: HK$15,399,000) were stated at net realisable value.

As at 31st March 2005, inventories of approximately HK$34,000,000(2004: HK$14,950,000) were pledged as collaterals for certain of theVSC Group’s short-term bank loans, and certain inventories were heldunder trust receipts bank loan arrangements (see Note 37).

20. Due from/to Customers on Installation Contract Work

Due from customers on installation contract work consisted of:

Consolidated綜合



Costs plus recognised profits less foreseeable 成本加已確認之溢利減可預見虧損losses 164,306 144,701

Less: Progress billings received and receivable 減：已收及應收之進度款項 (149,690) (133,251)

14,616 11,450

Due to customers on installation contract work consisted of:

Consolidated綜合



Costs plus recognised profits less foreseeable 成本加已確認之溢利減可預見虧損losses 689 15,328

Less: Progress billings received and receivable 減：已收及應收之進度款項 (1,631) (15,485)

(942) (157)

19. 存貨（續）

於二零零五年三月三十一日，約73,054,000港元（二零零四年：15,399,000港元）之存貨以可變現淨值列賬。

於二零零五年三月三十一日，約34,000,000港元（二零零四年：14,950,000港元）之存貨作萬順昌集團短期銀行貸款之抵押用途及若干存貨根據信託收據銀行貸款安排而持有（見附註37）。

20. 應收／應付客戶之安裝合約工程

應收客戶之安裝合約工程包括：

應付客戶之安裝合約工程包括：


< > 109

21. Prepayments, Deposits and Other Receivables

Consolidated綜合



Prepayments for purchases 預付採購款項 125,850 32,707Deposits, other prepayments and other receivables 按金，其他預付款項及其他應收賬款 35,970 55,524

161,820 88,231

22. Accounts and Bills Receivable

A major portion of the VSC Group’s turnover are transacted on an openaccount basis, with credit periods generally ranging from 15 to 90 days.

Ageing analysis of accounts and bills receivable was as follows:

Consolidated綜合



0 to 60 days 0至60日 448,247 489,80961 to 120 days 61至120日 170,993 120,418121 to 180 days 121至180日 83,219 41,907181 to 365 days 181至365日 20,124 135,342Over 365 days 超過365日 27,670 61,656

750,253 849,132Less: Provision for bad and doubtful receivables 減：呆壞賬撥備 (13,495) (12,775)

736,758 836,357

Included in accounts and bills receivable as at 31st March 2005 wereretentions from installation contract work of approximatelyHK$4,297,000 (2004: HK$5,355,000), which were not collectible untilsatisfaction of the conditions specified in the underlying contracts.

23. Cash and Other Bank Deposits

As at 31st March 2005, other bank deposits of approximatelyHK$8,574,000 (2004: HK$8,374,000) and approximatelyHK$3,612,000 (2004: Nil) were pledged as collateral for the VSCGroup’s banking facilities (see Note 37) and restricted cash for customdeposits in Mainland China, respectively.

As at 31st March 2005, cash and other bank deposits of approximatelyHK$102,647,000 (2004: HK$31,799,000) were denominated in ChineseRenminbi, which is not a freely convertible currency in the internationalmarket and its exchange rate is determined by the People’s Bank ofChina.

21. 預付款項、按金及其他應收賬款

22. 應收賬款及票據

萬順昌集團之營業額大多以記賬方式進行，信貸期一般介乎15至90日不等。

應收賬款及票據之賬齡分析如下：

於二零零五年三月三十一日，包括在應收賬款及票據內約4,297,000港元（二零零四年：5,355,000港元）為安裝合約工程之保留金，該等款項將直至達成合約所指明之條款後才可收回。

23. 現金及其他銀行存款

於二零零五年三月三十一日，作為萬順昌集團銀行信貸抵押品之其他銀行存款（見附註37）及中國內地海關保證金之限制現金分別為約8,574,000港元（二零零四年：8,374,000港元）和約3,612,000港元（二零零四年：無）。

於二零零五年三月三十一日，萬順昌集團之現金及其他銀行存款約1 0 2 , 6 4 7 , 0 0 0港元（二零零四年：31,799,000港元）為中國人民幣，該貨幣為不能在國際市場自由兌換之貨幣，其率由中國人民銀行釐定。

108


24. Short-term Borrowings

Consolidated綜合



Bank loans 銀行貸款– Trust receipts bank loans －信託收據銀行貸款 678,004 661,159– Short-term bank loans －短期銀行貸款 165,644 65,205– Long-term bank loan, current portion －長期銀行貸款，當期部份

(see Note 26) （見附註26） 55,555 27,778

899,203 754,142Other loans 其他貸款

– A minority shareholder of a subsidiary －一間附屬公司之一位少數股東 11,700 11,700– Others －其他 – 32,768

910,903 798,610

Details of the VSC Group’s banking facilities are set out in Note 37.

Other loans are unsecured and bore interest at commercial lendingrates.

25. Accounts and Bills Payable

Ageing analysis of accounts and bills payable was as follows:

Consolidated綜合



0 to 60 days 0至60日 306,357 312,09061 to 120 days 61至120日 33,015 22,712121 to 180 days 121至180日 20,524 11,342181 to 365 days 181至365日 3,671 2,986Over 365 days 超過365日 1,371 1,499

364,938 350,629

24. 短期借貸

萬順昌集團銀行融資之詳情已載列於附註37。

其他貸款均無抵押且按商業利率計算利息。

25. 應付賬款及票據

應付賬款及票據之賬齡分析如下：


< > 111

26. Long-term Bank Loan

Consolidated綜合



Amounts repayable 償還數額– within one year －1年內 55,555 27,778– in the second year －第2年 166,667 55,556– in the third to fifth year －第3年至第5年 – 41,666

222,222 125,000Less: Amount due within one year included under 減：於流動負債內需1年內

current liabilities (see Note 24) 償還數額（見附註24） (55,555) (27,778)

166,667 97,222

Details of the VSC Group’s banking facilities are set out in Note 37.

27. Deferred Taxation

Deferred taxation are calculated in full on temporary differences underthe liability method using a principal taxation rate of 17.5% (2004:17.5%).

The movement on the deferred tax assets/(liabilities) is as follows:

Consolidated綜合

Deferred Deferred Net deferredtax assets tax liabilities taxation

遞延稅項資產遞延稅項負債遞延稅項淨額HK$’000 HK$’000 HK$’000千港元千港元千港元

At 1st April 2004 於二零零四年四月一日 447 (104) 343Deferred taxation credited/(charged) to 於損益表計入／（扣除）

profit and loss account 之遞延稅項 13,350 (265) 13,085

At 31st March 2005 於二零零五年三月三十一日 13,797 (369) 13,428

As at 31st March 2005, the VSC Group had an unprovided deferred taxasset of approximately HK$6,523,000 (2004: HK$10,507,000), primarilyrepresenting the tax effect of cumulative tax losses (subject toagreement by relevant tax authorities) which can be carried forwardindefinitely.

26. 長期銀行貸款

萬順昌集團銀行融資詳情已載列於附註37。

27. 遞延稅項

遞延稅項乃按主要稅率17.5%（二零零四年：17.5%）以負債法就短暫時差作全數撥備。

遞延稅項資產／（負債）之變動如下：

於二零零五年三月三十一日，萬順昌集團有未撥備之遞延稅項資產約6 , 5 2 3 , 0 0 0港元（二零零四年：10,507,000港元），主要來自累計稅項虧損（須受有關稅務機構同意）之稅項影響，該金額可以無限期結轉後期。

110


27. Deferred Taxation (Cont’d)

The movement in deferred tax assets/(liabilities) prior to offsetting ofbalances within the same entity and same taxation jurisdiction is asfollows:

Consolidated綜合

Cumulative Accelerated Net deferredProvisions tax losses depreciation taxation

撥備累計稅項虧損加速折舊遞延稅項淨額HK$’000 HK$’000 HK$’000 HK$’000千港元千港元千港元千港元

At 1st April 2004 於二零零四年四日一日 318 870 (845) 343Credited/(charged) to profit and loss 於損益表計入／（扣除）

account 563 13,054 (532) 13,085

At 31st March 2005 於二零零五年三月三十一日 881 13,924 (1,377) 13,428

28. Share Capital


Number of Nominal Number of Nominalshares value shares value

’000 HK$’000 ’000 HK$’000股份數目面值股份數目面值

千股千港元千股千港元

Authorised (Ordinary shares of 法定（每股面值0.10港元HK$0.10 each) 之普通股） 1,000,000 100,000 1,000,000 100,000

Issued and fully paid (Ordinary shares 已發行及繳足（每股面值of HK$0.10 each): 0.10港元之普通股）：

Beginning of year 年初 367,784 36,778 312,257 31,226Issue of shares through placement 透過配售發行股份 – – 33,000 3,300Issue of shares upon exercise of 因行使認股權證而發行

warrants (see Note 29) 股份（見附註29） 821 83 8,443 844Issue of shares upon exercise of 因行使購股權而發行

share options (see Note 30) 股份（見附註30） – – 15,100 1,510Repurchase of shares 回購股份 – – (1,016) (102)

End of year 年終 368,605 36,861 367,784 36,778

27. 遞延稅項（續）

遞延稅項資產／（負債）之變動與同一實體及徵稅地區之結餘抵銷前如下：

28. 股本


< > 113

29. Warrants

Movements were:

Number of warrants認股權證數目

Subscriptionprice per Beginning

Date of issue Exercise period share of year Exercised Lapsed End of year發行日期行使期每股行使價年初行使失效年終

HK$ ’000 ’000 ’000 ’000港元千份千份千份千份

12th November 2001 19th November 2001 to二零零一年十一月十二日 18th November 2004

二零零一年十一月十九日至二零零四年十一月十八日 1.18 27,054 (821) (26,233) –

During the year ended 31st March 2005, approximately 821,000warrants (2004: 8,443,000 warrants) were exercised to subscribe forapproximately 821,000 shares (2004: 8,443,000 shares) of VSC at aconsideration of approximately HK$967,000 (2004: HK$9,962,000).

30. Share Options

VSC has a share option scheme (the “Share Option Scheme”), underwhich it may grant options to any person being an employee, agent,consultant or representative (including executive directors and non-executive directors) of the VSC Group to subscribe for shares in VSC,subject to a maximum of 30% of the nominal value of the issued sharecapital of VSC from time to time, excluding for this purpose sharesissued on the exercise of options. The exercise price will be determinedby VSC’s board of directors and shall be the highest of (i) the closingprice of VSC’s shares quoted on The Stock Exchange of Hong KongLimited on the date of grant of the options, (ii) the average closing pricesof VSC’s shares quoted on The Stock Exchange of Hong Kong Limitedon the five trading days immediately preceding the date of grant of theoptions, and (iii) the nominal value of VSC’s shares of HK$0.10 each.

29. 認股權證

變動為：

於截至二零零五年三月三十一日止年度內，約821,000份認股權證（二零零四年：8,443,000份認股權證）已獲行使以認購萬順昌約821,000股股份（二零零四年：8,443,000股股份），代價約為967,000港元（二零零四年：9,962,000港元）。

30. 購股權

根據萬順昌之購股權計劃（「購股權計劃」），萬順昌可授予萬順昌集團之任何僱員、代理人、顧問或代表（包括任何執行董事及非執行董事）以認購萬順昌之股份，而不得超過不時已發行萬順昌股份面值之30%（行使購股權所發行股份除外）。行使價將由萬順昌董事會釐定及最少將按以下列中最高者為準；(i)萬順昌股份於提出授予購股權當日香港聯合交易所有限公司所列之收市價；(ii)萬順昌股份於緊接提出授予購股權日期前五個交易日在香港聯合交易所有限公司所列之平均收市價；及(iii)萬順昌股份面值每股0.10港元。

112


30. Share Options (Cont’d)

Movement of share options were:

Subscriptionprice per Beginning

Date of grant Exercise period share of year Exercised Lapsed End of year授予日期行使期每股行使價年初行使失效年終

HK$ ’000 ’000 ’000 ’000港元千份千份千份千份

19th September 2003 19th September 2005 to二零零三年九月十九日 18th September 2013

二零零五年九月十九日至二零一三年九月十八日 1.4180 2,300 – – 2,300

2nd May 2003 2nd May 2003 to二零零三年五月二日 1st May 2013

二零零三年五月二日至二零一三年五月一日 0.9800 7,250 – – 7,250

7th May 2003 7th May 2005 to二零零三年五月七日 6th May 2013

二零零五年五月七日至二零一三年五月六日 0.9700 6,445 – (545) 5,900

15,995 – (545) 15,450

30. 購股權（續）

購股權變動如下：


< > 115

31. Reserves

Consolidated綜合

Cumulativeforeign

Capital Investment currencyredemption Statutory revaluation translation

Share reserve reserves (i) Capital reserve adjustments Retainedpremium 資本贖回法定 reserve 投資重估累計外幣 profit Total股份溢價儲備儲備(i) 資本儲備儲備兌調整保留溢利總額HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000千港元千港元千港元千港元千港元千港元千港元千港元

As at 1st April 2003 於二零零三年四月一日 236,585 76,235 301 58,355 (12,598 ) (2,656 ) 132,956 489,178

Profit attributable to shareholders 股東應佔溢利 – – – – – – 81,063 81,063Transfer from retained profit 轉撥自保留溢利 – – 5,231 – – – (5,231 ) –Premium arising from issue of 因發行股份所產生

shares upon 之溢價– placement －配售 56,100 – – – – – – 56,100– exercise of warrants －行使認股權證 9,118 – – – – – – 9,118– exercise of share options －行使購股權 16,454 – – – – – – 16,454

Share issue expenses 股份發行支出 (4,679 ) – – – – – – (4,679 )Repurchase of shares 回購股份 (866 ) 968 – – – – (968 ) (866 )Change in fair value of a 一項長期投資公平

long-term investment 價值變動 – – – – 6,501 – – 6,501Dividends paid 已付股息 – – – – – – (28,993 ) (28,993 )Translation adjustments 兌調整 – – – – – (96 ) – (96 )

As at 31st March 2004 於二零零四年三月三十一日 312,712 77,203 5,532 58,355 (6,097 ) (2,752 ) 178,827 623,780

Representing: 包括：Proposed dividend 建議股息 10,298Others 其他 168,529

178,827

The Company and subsidiaries 本公司及附屬公司 312,712 77,203 5,532 58,355 (6,097 ) (2,752 ) 180,303 625,256Associates 聯營公司 – – – – – – (1,476 ) (1,476 )

312,712 77,203 5,532 58,355 (6,097 ) (2,752 ) 178,827 623,780

31. 儲備

114


31. Reserves (Cont’d)

Consolidated綜合

CumulativeInvestment foreign

Capital Investment properties currencyredemption Statutory revaluation revaluation translation

Share reserve reserves (i) Capital reserve reserve adjustments Retainedpremium 資本贖回法定 reserve 投資重估投資物業累計外幣 profit Total股份溢價儲備儲備(i) 資本儲備儲備重估儲備兌調整保留溢利總額HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000千港元千港元千港元千港元千港元千港元千港元千港元千港元

As at 1st April 2004 於二零零四年四月一日 312,712 77,203 5,532 58,355 (6,097 ) – (2,752 ) 178,827 623,780

Profit attributable to shareholders 股東應佔溢利 – – – – – – – 41,077 41,077Transfer from retained profit 轉撥自保留溢利 – – 2,727 – – – – (2,727 ) –Premium arising from issue 因發行股份所產生

of shares upon exercise 之溢價－行使of warrants (see Note 29) 認股權證（見附註29） 884 – – – – – – – 884

Change in fair value of a 一項長期投資公平long-term investment 價值變動 – – – – (10,896 ) – – – (10,896 )

Investment revaluation 一項長期投資之確認reserve transferred to 減值虧損於投資profit and loss account 重估儲備轉撥往upon recognition of 損益表impairment loss of along-term investment – – – – 10,000 – – – 10,000

Surplus on revaluation 重估盈餘 – – – – – 2,069 – – 2,069Dividends paid 已付股息 – – – – – – – (10,303 ) (10,303 )Translation adjustments 兌調整 – – – – – – 105 – 105

As at 31st March 2005 於二零零五年三月三十一日 313,596 77,203 8,259 58,355 (6,993 ) 2,069 (2,647 ) 206,874 656,716


206,874

The Company and subsidiaries 本公司及附屬公司 313,596 77,203 8,259 58,355 (6,993 ) 2,069 (2,647 ) 208,350 658,192Associates 聯營公司 – – – – – – – (1,476 ) (1,476 )

313,596 77,203 8,259 58,355 (6,993 ) 2,069 (2,647 ) 206,874 656,716

31. 儲備（續）


< > 117


Company本公司

Capitalredemption

Share reserve Contributed Retainedpremium 資本贖回 surplus (ii) profit Total股份溢價儲備繳入盈餘(ii) 保留溢利總額HK$’000 HK$’000 HK$’000 HK$’000 HK$’000千港元千港元千港元千港元千港元

As at 1st April 2003 於二零零三年四月一日 236,585 76,235 53,986 25,897 392,703

Profit for the year 年度溢利 – – – 35,892 35,892Premium arising from issue of 因發行股份所產生

shares upon 之溢價– placement －配售 56,100 – – – 56,100– exercise of warrants －行使認股權證 9,118 – – – 9,118– exercise of share options －行使購股權 16,454 – – – 16,454

Share issue expenses for placement 配售之股份發行支出 (4,679 ) – – – (4,679 )Repurchase of shares 回購股份 (866) 968 – (968 ) (866 )Dividends paid 已付股息 – – – (28,993 ) (28,993)

As at 31st March 2004 於二零零四年三月三十一日 312,712 77,203 53,986 31,828 475,729


31,828

31. 儲備（續）

116



Company本公司

Capitalredemption

Share reserve Contributed Retainedpremium 資本贖回 surplus (ii) profit Total股份溢價儲備繳入盈餘(ii) 保留溢利總額HK$’000 HK$’000 HK$’000 HK$’000 HK$’000千港元千港元千港元千港元千港元

As at 1st April 2004 於二零零四年四月一日 312,712 77,203 53,986 31,828 475,729

Loss for the year 年度虧損 – – – (82) (82 )Premium arising from issue of 因行使認股權證而發行股份

shares upon exercise of warrants 所產生之溢價(see Note 29) （見附註29） 884 – – – 884

Dividends paid 已付股息 – – – (10,303 ) (10,303)

As at 31st March 2005 於二零零五年三月三十一日 313,596 77,203 53,986 21,443 466,228


21,443

Notes:

(i) Statutory reserves represent enterprise expansion reserve and general reservefund set up by certain subsidiaries in Mainland China. As stipulated byregulations in Mainland China, the subsidiaries established and operated inMainland China are required to appropriate a portion of their after-tax profit (afteroffsetting prior years losses) to the enterprise expansion reserve fund andgeneral reserve fund, at rates determined by their respective boards of directors.The general reserve fund may be used for making up losses and increasingcapital while the enterprise expansion reserve fund may be used for increasingcapital.

(ii) Under the Companies Act 1981 of Bermuda, contributed surplus is distributableto shareholders subject to the condition that VSC cannot declare or pay adividend, or make a distribution out of contributed surplus if (i) it is, or would afterthe payment be, unable to pay its liabilities as they become due, or (ii) therealisable value of its assets would thereby be less than the aggregate of itsliabilities and its issued share capital and share premium account.

31. 儲備（續）

註：

(i) 法定儲備乃按中國內地若干附屬公司之企業發展儲備基金

及一般儲備基金所設立。按照中國內地法規訂明，於中國內地成立及經營之附屬公司須於其除稅後溢利（經抵銷過往年度虧損）中撥出部份至企業發展儲備基金及一般儲備基

金，比率乃由各自董事會釐定。一般儲備基金可用作抵銷虧損及增加股本，而企業發展儲備基金可用作增加股本。

(ii) 根據百慕達一九八一年公司法，繳入盈餘可分派予股東，惟倘萬順昌在宣派或支付股息或從繳入盈餘作出分派後、(i)萬順昌不能或在作出支付後將不能支付到期債項，或(ii)其資產之可變現價值將會因而少於其債項及其已發行股本及股份溢價賬目的合計總額，則萬順昌不可作出上述的宣派、支付或分派。


< > 119

32. Notes to Consolidated Cash Flow Statement

(a) Reconciliation of profit before taxation to net cash outflowgenerated from operations was as follows:



Profit before taxation 除稅前溢利 48,394 96,455Interest income 利息收入 (5,059) (6,310)Interest expense 利息支出 17,927 13,337Dividend income from an unlisted 一項非上市長期投資之股息收入

long-term investment (2,296) (374)Guaranteed return from a joint venture 一間合營公司之保證回報 (2,033) (4,344)Depreciation of fixed assets 固定資產之折舊 21,844 16,791Gain on disposal of investment properties 出售投資物業之收益 (55) (2,476)Gain on disposal of a land and building 出售一項土地及樓宇之收益 (10,474) –Net (gain)/loss on disposal of other fixed 出售其他固定資產（不包括土地

assets (excluding land and buildings) 及樓宇）之淨（收益）／虧損 (107) 5Surplus on revaluation of investment 投資物業之重估盈餘

properties (25,654) (2,818)Impairment loss of a long-term investment 一項長期投資之減值虧損 10,000 –Amortisation of goodwill 商譽攤銷 3,969 2,359

Operating profit before working capital 營運資金變動前之經營溢利changes 56,456 112,625

Increase in inventories 存貨增加 (199,905) (280,650)(Increase)/decrease in due from customers 應收客戶之安裝合約工程

on installation contract work （增加）／減少 (3,166) 7,584(Increase)/decrease in prepayments, 預付款項、按金及其他應收

deposits and other receivables 賬款（增加）／減少 (73,589) 7,077Decrease/(increase) in accounts and bills 應收賬款及票據減少／

receivable （增加） 99,599 (152,999)Decrease in loans receivable 應收貸款減少 400 –Increase in accounts and bills payable 應付賬款及票據增加 14,309 101,793Increase/(decrease) in due to customers on 應付客戶之安裝合約工程

installation contract work 增加／（減少） 785 (4,433)(Decrease)/increase in receipts in advance 預收款項（減少）／增加 (2,228) 3,919Increase in accrued liabilities and other 應計負債及其他應付款項增加

payables 10,470 15,657

Net cash outflow generated from operations 經營產生之現金流出淨額 (96,869) (189,427)

32. 綜合現金流量表附註

(a) 除稅前溢利與經營產生之現金流出淨額對賬如下：

118


32. Notes to Consolidated Cash Flow Statement (Cont’d)

(b) During the year ended 31st March 2004, the VSC Group acquiredseveral subsidiaries for a consideration of approximatelyHK$30,507,000. Details of the net assets of the subsidiaries as atthe date of acquisition were:



Fixed assets 固定資產 – 30,624Inventories 存貨 – 33,814Prepayments, deposits and other receivables 預付款項、按金及其他應收賬款 – 1,638Accounts receivable 應收賬款 – 30,379Pledged bank deposits 已抵押銀行存款 – 4,424Cash and other bank deposits 現金及其他銀行存款 – 22,287Short-term borrowings 短期借貸 – (44,468)Accounts and bills payable 應付賬款及票據 – (36,816)Receipts in advance 預收款項 – (467)Accrued liabilities and other payables 應計負債及其他應付款項 – (1,329)Minority interest 少數股東權益 – (13,558)

Net assets acquired 所收購之淨資產 – 26,528Goodwill 商譽 – 3,979

Consideration for the acquisition 收購之作價 – 30,507

Analysis of net cash outflow in respect of acquisition of thesubsidiaries was as follows:



Consideration for the acquisition 收購之作價 – 30,507Less:Consideration payable as at 減：於二零零四年三月三十一日

31st March 2004 之應付作價 – (1,233)Cash and other bank deposits acquired 所收購之現金及其他銀行存款 – (22,287)

Net cash outflow 現金流出淨額 – 6,987

During the year ended 31st March 2005, the VSC Group settledoutstanding consideration payable of approximatelyHK$1,233,000 and an additional amount of approximatelyHK$3,705,000 for the acquisition of the above subsidiaries.

32. 綜合現金流量表附註（續）

(b) 於截至二零零四年三月三十一日止年度，萬順昌集團收購若干附屬公司之權益，作價約為30,507,000港元。於收購日附屬公司之淨資產詳情為：

因應收購附屬公司之現金流出淨額分析如下：

於截至二零零五年三月三十一日止年度，萬順昌集團已支付未清償之應付作價約1,233,000港元及用作收購上述附屬公司之額外金額約3,705,000港元。


< > 121

32. Notes to Consolidated Cash Flow Statement (Cont’d)

(c) Analysis of changes in financing:

Sharecapital Trust Other

and share receipts short-term Minoritypremium bank loans loans interests

股本及信託收據 Bank loans 其他少數股份溢價銀行貸款銀行貸款短期貸款股東權益HK$’000 HK$’000 HK$’000 HK$’000 HK$’000千港元千港元千港元千港元千港元

As at 1st April 2003 於二零零三年四月一日 267,811 490,879 82,463 37,800 6,502

Issue of shares 發行股份– placement (see Note 28) －配售（見附註28） 59,400 – – – –– warrants (see Note 29) －認股權證（見附註29） 9,962 – – – –– share options (see Note 30) －購股權（見附註30） 17,964 – – – –

Share issue expenses 發行股份支出 (4,679) – – – –Repurchase of shares 回購股份 (968) – – – –Net increase in trust receipts 信託收據銀行貸款之

bank loans 淨增加 – 170,280 – – –New loans 新增貸款 – – 156,175 – –Repayment of loans 償還貸款 – – (48,433) (37,800) –Share of profit by minority 附屬公司之少數股東

shareholders of subsidiaries 所佔溢利 – – – – 4,331Dividends paid to a minority 已付一間附屬公司之

shareholder of a subsidiary 一名少數股東股息 – – – – (225)Acquisition of subsidiaries 收購附屬公司 – – – 44,468 13,558

As at 31st March 2004 於二零零四年三月三十一日 349,490 661,159 190,205 44,468 24,166

Issue of shares 發行股份– warrants (see Note 29) －認股權證（見附註29） 967 – – – –

Net increase in trust receipts 信託收據銀行貸款之bank loans 淨增加 – 16,845 – – –

New loans 新增貸款 – – 249,064 – –Repayment of loans 償還貸款 – – (51,403) (32,768) –Share of profit by minority 附屬公司之少數股東

shareholders of subsidiaries 所佔溢利 – – – – 11,637Capital contribution from a 一間附屬公司之少數

minority shareholder of 股東之資本投入a subsidiary – – – – 94

Dividends paid to a minority 已付一間附屬公司之shareholder of a subsidiary 一名少數股東股息 – – – – (520)

As at 31st March 2005 於二零零五年三月三十一日 350,457 678,004 387,866 11,700 35,377

(d) Analysis of cash and cash equivalents:Cash and cash equivalents represent cash and other bankdeposits.

32. 綜合現金流量表附註（續）

(c) 融資變動分析為：

(d) 現金及現金等值項目之分析：現金及現金等值項目代表現金及其他銀行存款。

120


33. Segment Information

The VSC Group operates predominantly in Hong Kong and MainlandChina and in two business segments – (i) China Advanced MaterialsProcessing (“CAMP”) including manufacturing of industrial productssuch as rolled flat steel products and enclosure systems, and trading ofindustrial products such as engineering plastic resins and injectionmoulding machines, and (ii) Construction Materials Group (“CMG”)including trading and stockholding of construction materials such assteel products, sanitary ware and kitchen cabinets and the installationwork of kitchen cabinets.

(a) Primary segmentAnalysis of the VSC Group’s results by business segment was asfollows:

2005二零零五年

CAMP Other中國先進 CMG operations Total材料加工建築材料其他業務總額HK$’000 HK$’000 HK$’000 HK$’000

千港元千港元千港元千港元

Turnover 營業額Sales to external customers 對外客戶銷售 1,289,481 2,847,126 2,014 4,138,621

Segment results 分類業績 103,923 (20,835) 1,086 84,174

Other revenue 其他收入 2,654 255 6,479 9,388Other income/expense, net 其他收益／支出淨額 – – 26,183 26,183Unallocated corporate expenses 未分配企業開支 (53,424)

Operating profit 經營溢利 66,321

Finance costs 財務費用 (17,927)Taxation 稅項 4,320

Profit after taxation but before 除稅後但未計少數minority interests 股東權益前溢利 52,714

Assets 資產 868,590 1,262,780 141,374 2,272,744

Liabilities 負債 465,317 849,742 228,731 1,543,790

Capital expenditure 資本支出 8,128 5,834 20,565 34,527

Depreciation and amortisation 折舊及攤銷 16,985 7,181 1,647 25,813

33. 分類資料

萬順昌集團主要於香港和中國內地經營兩個業務－(i)中國先進材料加工包括製造工業產品例如板材產品及系統設備外殼與及買賣工業產品例如工程塑膠樹脂及注塑機，及(ii)建築材料包括買賣與存銷建築材料例如鋼材產品、潔具及廚櫃與及廚櫃安裝。

(a) 主要分類萬順昌集團之業績按業務分類之分析如下：


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33. Segment Information (Cont’d)

(a) Primary segment (Cont’d)

2004二零零四年

CAMP Other中國先進 CMG operations Total材料加工建築材料其他業務總額HK$’000 HK$’000 HK$’000 HK$’000千港元千港元千港元千港元

Turnover 營業額Sales to external customers 對外客戶銷售 674,241 2,873,024 1,845 3,549,110

Segment results 分類業績 69,934 67,698 (644) 136,988

Other revenue 其他收入 516 456 10,056 11,028Other income/expense, net 其他收益／支出淨額 – – 5,294 5,294Unallocated corporate expenses 未分配企業開支 (43,518)


Finance costs 財務費用 (13,337)Taxation 稅項 (11,061)

Profit after taxation but before 除稅後但未計少數minority interests 股東權益前溢利 85,394

Assets 資產 615,719 1,254,950 150,605 2,021,274

Liabilities 負債 181,620 1,025,569 129,361 1,336,550

Capital expenditure 資本支出 44,869 6,201 15,552 66,622

Depreciation and amortisation 折舊及攤銷 10,494 7,681 975 19,150

33. 分類資料（續）

(a) 主要分類（續）

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33. Segment Information (Cont’d)

(b) Secondary segmentAnalysis of the VSC Group’s results by geographical segment wasas follows:

2005二零零五年

MainlandHong Kong China Total

香港中國內地總額HK$’000 HK$’000 HK$’000

千港元千港元千港元

Turnover 營業額 1,150,722 2,987,899 4,138,621

Segment results 分類業績 (55,172) 139,346 84,174

Other revenue 其他收入 4,451 4,937 9,388Other income/expense, net 其他收益／支出淨額 26,128 55 26,183Unallocated corporate expenses 未分配企業開支 (53,424)


Assets 資產 878,213 1,394,531 2,272,744

Capital expenditure 資本支出 21,453 13,074 34,527

2004二零零四年

MainlandHong Kong China Total

香港中國內地總額HK$’000 HK$’000 HK$’000千港元千港元千港元

Turnover 營業額 1,171,303 2,377,807 3,549,110

Segment results 分類業績 43,641 93,347 136,988

Other revenue 其他收入 5,724 5,304 11,028Other income/expense, net 其他收益／支出淨額 1,500 3,794 5,294Unallocated corporate expenses 未分配企業開支 (43,518)


Assets 資產 982,069 1,039,205 2,021,274

Capital expenditure 資本支出 10,609 56,013 66,622

33. 分類資料（續）

(b) 次要分類萬順昌集團之業績按地區分類之分析如下：


< > 125

34. Commitments

(a) Commitments under operating leasesTotal commitments payable under various non-cancellableoperating lease agreements in respect of rented premises wasanalysed as follows:

Consolidated綜合



Not later than one year 未逾1年 3,194 6,059Later than one year and not later than 逾1年及未逾5年

five years – 3,651

3,194 9,710

(b) Commitments under forward foreign currency contractsAs at 31st March 2005, the VSC Group had outstanding forwardforeign currency contracts to purchase approximatelyUS$70,731,000 (2004: US$45,509,000) and approximatelyEuro404,000 (2004: Euro620,000) for approximatelyHK$534,192,000 (2004: HK$357,536,000) and to sellapproximately JPY10,300,000 (2004: Nil) for approximatelyHK$781,000 (2004: Nil), for the purpose of hedging against theVSC Group’s commitments arising from its trading activities.

35. Contingent Liabilities

Contingent liabilities not provided for in the accounts were:



HK$’000 HK$’000 HK$’000 HK$’000千港元千港元千港元千港元

Performance bonds 履約擔保書 6,293 16,283 – –Guarantee relating to a bank loan 就一間投資之公司所獲

granted to an investee company 一項銀行貸款而提供之擔保 – 2,340 – –

Guarantees provided by VSC in respect 萬順昌就其附屬公司所獲of banking facilities of its subsidiaries 銀行融資而提供之擔保(see Note 37) （見附註37） – – 2,171,204 1,569,529

6,293 18,623 2,171,204 1,569,529

The VSC’s Directors and the VSC Group’s management anticipate thatno material liabilities will arise from the above bank and otherguarantees which arose in the ordinary course of business.

34. 承擔

(a) 營業租約承擔根據租用物業之若干不可撤銷營業租約應付之承擔總額分析如下：

(b) 遠期外貨幣合約承擔於二零零五年三月三十一日，萬順昌集團尚有約534,192,000港元（二零零四年：357,536,000港元）未行使之遠期外匯貨幣合約用作採購約70,731,000美元（二零零四年：45,509,000美元）及約404,000歐元（二零零四年：620,000歐元）及約781,000港元（二零零四年：無）未行使之遠期外匯貨幣合約用作沽出約10,300,000日圓（二零零四年：無），目的為萬順昌集團於貿易活動有關之承諾作出對沖。

35. 或然負債

未有於賬目撥備之或然負債為：

萬順昌之董事及萬順昌集團之管理層預期不會因上述銀行及其他擔保（來自日常業務）而產生重大負債。

124


36. Pension Schemes

The VSC Group has arranged for its Hong Kong employees to join theMandatory Provident Fund Scheme (the “MPF Scheme”), a definedcontribution scheme managed by an independent trustee. Under theMPF Scheme, each of the VSC Group and its employees make monthlycontributions to the scheme generally at 5% of the employees’ earningsas defined under the Mandatory Provident Fund legislation, subject to aprescribed monthly cap.

As stipulated by rules and regulations in Mainland China, the VSCGroup contributes to state-sponsored retirement plans for employees ofits subsidiaries established in Mainland China. The employeescontribute up to 8% of their basic salaries, while the VSC Groupcontributes approximately 14% to 20% of such salaries and has nofurther obligations for the actual payment of pensions or post-retirementbenefits beyond these contributions. The state-sponsored retirementplans are responsible for the entire pension obligations payable toretired employees.

During the year ended 31st March 2005, the aggregate amount of theVSC Group’s contributions to the aforementioned pension schemes wasapproximately HK$3,608,000 (2004: HK$1,830,000), net of forfeitedcontributions of approximately HK$64,000 (2004: 705,000).

37. Banking Facilities and Pledge of Assets

As at 31st March 2005, the VSC Group had aggregate banking facilitiesof approximately HK$2,150,512,000 (2004: HK$1,837,879,000) foroverdrafts, loans, and trade financing. These facilities were secured by:

(i) pledge of the VSC Group’s bank deposits of approximatelyHK$8,574,000 (2004: HK$8,374,000) (see Note 23);

(ii) pledge of the VSC Group’s inventories of approximatelyHK$34,000,000 (2004: HK$14,950,000) and certain of VSCGroup’s inventories held under trust receipts bank loanarrangements (see Note 19);

(iii) pledge of land and buildings of the VSC Group of approximatelyHK$9,351,000 (2004: HK$8,523,000) (see Note 13); and

(iv) guarantees provided by VSC (see Note 35).

38. Subsequent Event

Subsequent to year end, on 19th May 2005, iSteelAsia HoldingsLimited, the VSC Group’s long-term investment, has proposed to offerto its shareholders to subscribe for new shares of HK$0.01 each at asubscription price of HK$0.1566 per share. Van Shung Chong (B.V.I.)Limited, a wholly-owned subsidiary, was interested in approximately18.9% of iSteelAsia Holdings Limited and has undertaken to apply in fullfor its assured allotment under the open offer and has agreed tounderwrite the remainder of the shares offered, involving an aggregatesum of approximately HK$2,500,000. The process of the offer has notcommenced as at the date of approval of these accounts.

39. Approval of Accounts

The accounts were approved by the board of directors on 15th July2005.

36. 退休金計劃

萬順昌集團安排其香港僱員參與一項由獨立受託人管理之強制性公積金計劃（「強積金計劃」），該計劃為一項界定供款計劃。根據強積金計劃，萬順昌集團及其僱員各自每月按僱員薪酬（定義見強制性公積金條例）之一般為5%供款，惟每月供款額有指定上限。

根據中國內地法規，萬順昌集團須為其設立於中國內地之附屬公司之僱員對國家資助退休計劃供款。僱員供款最高達其基本薪金之8%，萬順昌集團按該等薪金約14%至20%供款，除每年供款外，毋須支付任何實際退休金或退休後福利。該等國家資助退休計劃須負責向退休僱員支付全部退休金。

於截至二零零五年三月三十一日止年度，萬順昌集團對上述退休金計劃之供款總額約為3,608,000港元（二零零四年：1,830,000港元），淨沒收供款約64,000港元（二零零四年：705,000港元）。

37. 銀行融資及資產抵押

於二零零五年三月三十一日，萬順昌集團取得合共約2,150,512,000港元（二零零四年：1,837,879,000港元）之銀行融資，包括透支、貸款及貿易融資。此等授信額度以下列方式作抵押：

(i) 萬順昌集團之已抵押銀行存款約8,574,000港元（二零零四年：8,374,000港元）（見附註23）；

(ii) 萬順昌集團之存貨約34,000,000港元（二零零四年：14,950,000港元）及萬順昌集團根據信託收據銀行貸款安排持有之若干存貨（見附註19）；

(iii) 萬順昌集團已抵押土地及樓宇約9,351,000港元（二零零四年：8,523,000港元）（見附註13）；及

(iv) 由萬順昌提供之擔保（見附註35）。

38. 結算日後事項

於本年度後之二零零五年五月十九日，亞鋼集團有限公司（萬順昌集團之長期投資）建議給予其股東按認購價每股0.1566港元認購每股面值0.01港元新股。VanShung Chong (B.V.I.) Limited，萬順昌之全資附屬公司，擁有亞鋼集團有限公司約18.9%權益，已承諾將會全數申請認購公開發售下其保證配額，亦已同意包銷餘下發售之股份，所涉及之總金額約為2,500,000港元。發售之程序於審批此等賬目之日尚未開始。

39. 賬目批准

賬目於二零零五年七月十五日獲董事會批准。

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