cafe de coral holdings limited · directors and corporate information 2 financial highlights and...

Directors and Corporate Information 2

Financial Highlights and Calendar 3

Chairman’s Statement 5

Managing Director’s Operational Review 10

Biography of Directors and Senior Management 17

Report of the Directors 20

Consolidated Income Statement 30

Consolidated Statement of Recognised Gains and Losses 31

Balance Sheets 32

Consolidated Cash Flow Statement 34

Notes to the Financial Statements 36

Principal Subsidiaries 66

Report of the Auditors 70

Five Year Summary 71

Contents

Café de Coral Holdings Limited

DIRECTORS AND CORPORATE INFORMATION

2

BOARD OF DIRECTORS

Mr. Chan Yue Kwong, Michael (Chairman)

Mr. Lo Hoi Kwong, Sunny (Managing Director)

Mr. Lo Tang Seong, Victor

Mr. Lo Hoi Chun

Ms. Lo Pik Ling, Anita

Mr. Lo Tak Shing, Peter

Ms. Leung Sau Lai, Kathy

Mr. Hui Tung Wah, Samuel

Mr. Choi Ngai Min, Michael

Mr. Li Kwok Sing, Aubrey

COMPANY SECRETARIES

Ms. Li Oi Chun, Helen

Mr. To Hon Fai, Alfred

REGISTERED OFFICE

Cedar House

41 Cedar Avenue

Hamilton HM12

Bermuda

HEAD OFFICE

10th Floor

Café de Coral Centre

5 Wo Shui Street

Fo Tan, Shatin

New Territories

Hong Kong

AUDITORS

Messrs. PricewaterhouseCoopers

SOLICITORS

Messrs. Johnson Stokes & Master

PRINCIPAL BANKERS

ABN AMRO Bank

The Agricultural Bank of China

Banco Bilbao Vizcaya Argentaria, S.A.

Bank of China (Hong Kong) Ltd.

The Bank of Nova Scotia

The Bank of Tokyo-Mitsubishi, Ltd.

BNP Paribas

Citibank, N.A.

Credit Agricole Indosuez

Credit Lyonnais

DZ Bank AG Deutsche Zentral

– Genossenschaftsbank

The Hongkong and Shanghai Banking

Corporation Ltd.

Mizuho Corporate Bank, Ltd.

Standard Chartered Bank

The Sumitomo Mitsui Banking Corporation

UFJ Bank Ltd.

BERMUDA SHARE REGISTRARS

The Bank of Bermuda Limited

HONG KONG BRANCH SHARE REGISTRARS

Computershare Hong Kong Investor Services Limited

WEB SITE

http://www.cafedecoral.com

Café de Coral Holdings Limited 3

FINANCIAL HIGHLIGHTS AND CALENDAR

FINANCIAL HIGHLIGHTS

Year ended 31st March, 2002 2001 Change

HK$’000 HK$’000 %

Turnover 2,613,547 2,540,326 2.88

Profit attributable to shareholders 280,000 251,574 11.30

Total assets 1,905,379 1,840,302 3.54

Net assets 1,430,711 1,268,524 12.79

Basic earnings per share 51.24 cents 45.84 cents 11.78

Dividend per share 21.50 cents 19.50 cents 10.26

Net assets per share $2.62 $2.32 12.93

FINANCIAL CALENDAR

Half year results Announcement on 11th December, 2001

Full year results Announcement on 9th July, 2002

Annual Report Despatched to shareholders in late July, 2002

Share register closed 10th September, 2002 to 17th September, 2002

Annual General Meeting 17th September, 2002

Dividends Interim : 4.4 cents per share paid on 4th January, 2002

Final : 17.1 cents per share to be paid on 24th September, 2002


FINANCIAL HIGHLIGHTS AND CALENDAR

4

• The Group profit attained new heights to HK$280 million with earnings per shareincreased by 12%, our long term shareholders’ value are further enhanced on a yearon year basis.

• The Group recorded an encouraging net profit growth of 11%, being the seventhconsecutive year of double-digits operating profit growth.

• The acquisition of a 20-shops Asian restaurant chain in California has created asizable platform of over 200 restaurant units outside Asia.

• Continuous profit growth is achieved through embracing new initiatives in newmarkets, new images and new business management processes.

• We are honoured that the Group’s Chairman was awarded with the “DHL/SCMPExecutive of the Year” and that the Group was recognized by Forbes Global, for the4th consecutive year, as one of the “World’s 200 Best Small Companies”.

Financial Growth TrendsGroup Net Profits & EPS Growth

Café de Coral GroupStrategic Businesses

Fast FoodInstitutional

CateringSpecialty

RestaurantFood Processing& Distribution

Property &Development

Café de Coral(HK)

Café de Coral(China)

Manchu Wok(Canada)

Manchu Wok(USA)

China Inn(USA)

Fan Ting(USA)

Luncheon Star

Asia PacificCatering House

The Spaghetti

Ah Yee LengTong

Bravo le Café

Super SuperCongee & Noodles

Noodles Plus

Bistro M

Dai Bai Dang(USA)

Denny’s

Scanfoods Franchising

Property

0

50

100

150

200

250

300

350

95 96 97 98 99 00 01 020.0

10.0

20.0

30.0

40.0

50.0

60.0

Net ProfitsEPS

Net

Pro

fits

(H

K$M

M)

EPS

(HK

$ ce

nts

)

17.7

23.927.9 26.9

32.8

39.6

45.851.2

93124

145 139

172

219

252280

Total No. of Operating Units: 411(as of 9/7/2002)

Asia PacificCatering

11

169

114

35 29

11

7

0

40

80

120

160

200

240

Café de Coral SpecialtyRestaurants

New ShopsTotal : 204

Total : 125

Total : 46Total : 36

North AmericanQSR

35

Systemwide Sales Distribution

SpecialtyRestaurants

9%

North American QSR21%

InstitutionalCatering

10%

FoodProcessing

3%

Café de Coral57%

Highlights


CHAIRMAN’S STATEMENT

ENHANCING SHAREHOLDERS’ VALUE:Attaining New Heights Through New Initiatives

In my last year’s statement to the shareholders, I

have asserted that the company is committed to

enhance shareholders’ value through clear business

strategies and targeted business goals. This year,

our commitment drive continues unabated,

attaining new heights of profitability of HK$280

million, which represents a healthy net profit growth

of 11% as compared with last year. I am pleased to

report that this is the seventh consecutive year of

double-digits operating profit growth and marks

another milestone for the Group to go forward.

As the Group continues to deliver encouraging

results with earnings per share increases, by another

12%, our long term shareholders’ value are further

enhanced on a year on year basis. With this, the

Board would like to recommend an increase of final

dividend to 17.1 cents per share. Together with

the interim dividend of 4.4 cents per share, the

total dividend of 21.5 cents per share for the entire

year amounts to HK$117 million, representing a

respectable investment return.

Having said that however, I must say that year 2001

was not without its challenges. 2001 was the fourth

straight years of deflation in the local economy.

Rising unemployment and corporate retrenchment

further pushed the local retail market into a tailspin.

The implementation of the Mandatory Provident

Fund put on new costing burden to the local

business community and also dampened the already

sluggish consumer market. The September 911

incident in US gave rise to new global economic

challenges. These new business difficulties prevailed

throughout the year and continue to impact onto

the first quarter of 2002.

Continuous profit growth on an enlarged base was

no easy task. With all these local and global

119 Café de Coral

6 Café de Coral(PRC & Macau)

184 Manchu Wok

4 Super SuperCongee & Noodles

3 Bravo le Café

46 Institutional Catering

2 Ah Yee Leng Tong

24 The Spaghetti House

1 Noodles Plus

1 Bistro M

17 China Inn (USA)

1 Fan Ting (USA)

1 Dai Bai Dang (USA)

2 Oishii Kitchen (USA)



6

uncertainties, the Group and its management team

have dedicated themselves to reach for new

markets, to attend to well-defined business

strategies, to break away from traditional business

processes, and to pursue effective business initiatives

in managing our business.

REACHING NEW MARKETS

As I reported last year, the Group has embarked on

a timely globalization strategy, which was being

carefully and successfully implemented by way of a

joint-venture acquisition of the Manchu Wok chain

of restaurants in North America. The post-acquisition

business performance of Manchu Wok was

satisfactory, which not only contributed immediate

benefit to the Group’s bottom line during the year

but also added strength and confidence to our

globalization program.

So far the Manchu Wok performance has proven

resilient to the 911 incident and the creeping

economic recession occurred in United States. With

its 183 corporate and franchised restaurants in

Canada and United States, the total system sales

during the year amounted to C$131 mill ion

(HK$655 million) establishing a solid business

foothold outside Asia.

In February of this year, we have again made an

exciting move in our exploration for new markets.

At one stroke, we have stepped into the lucrative

California market by acquiring a 20-shops Asian

restaurant chain in California. This acquisition

marked another important strategic step of our

expansion plan in North America by branching out

onto the West coast of United States. Following

the acquisition, Café de Coral Group will have a

sizable platform of over 200 restaurant units outside

Asia. More significantly, the acquisit ion also

presented the Group with excellent business

opportunities to roll-out in North America in the

not too distant future with its various multiple

restaurant concepts and brands.

On the As ian f ront, The Spaghetti House

f ranchis ing business was further expanded

during the year. Two new The Spaghetti House

restaurants were opened in April and November

2001 respectively in Indonesia, bringing the total

number of res taurants to 6 in th i s reg ion

including the one to be added dur ing the

current fiscal year.

I am pleased on the gradual expansion of our

globalization initiative executed in the past year.

The Group will continue to prudently roll-out our

various restaurant concepts in the global market

with the aim to build Café de Coral Group as the

largest and leading Chinese Quick Service

Restaurant group around the world.



BUILDING NEW CUSTOMERS’ VALUE

As the local economy outlook is not expected to

turnaround considerably in the year ahead, I believe

forthcoming business growth will come from driving

production efficiency and maximizing value to our

customers.

For our customers, our

strategy has been simple

and basic. We continue to

del iver value for their

money. We managed this

c h a l l e n g i n g m a r k e t

th rough a cus tomer-

focused strategy. We strengthen our branding

power continuously to balance out the adverse

pricing pressures by way of new and vigorous

marketing campaign and refreshing new image

injected onto our new and renovated restaurant.

We aimed at consistently delivering total dining

experience and exceptional value for their money.

Given that these initiatives are so important for the

Group to stay ahead of the pack, I personally have

attended to the execut ion detai ls of their

implementation.

So far we have worked out a series of new

advertising campaigns during the year to strengthen

our brand image and to augment the various new

products introduced. We have also invested HK$35

million in renovating 15 Café de Coral restaurants,

and 2 The Spaghetti House to enhance and

create a totally new dining experiences to our

customers of various segments.

On the strength of these initiatives, we once again

managed to outrival our competitors in this

extremely difficult environment and continued to

lead our competitive edge in this ever-increasingly

crowded market.

EXPANDING NEW FRONTIERS

Although our various strategic business

units including Asia Pacific Catering, Luncheon

Star and Scanfoods, have continued to deliver

growing profit stream and maintain a leading

position in their respective arena, we are relentless

in our search for new frontiers of growth.

During the year, Asia Pacific Catering gradually

build up the institutional catering business portfolio

in Southern China, with major clients in Guangzhou

and Shenzhen. At the same time, Asia Pacific

Catering won a new catering contract from

Ruttonjee Hospital. As of 31st March, 2002, Asia

Pacific Catering operated 40 catering units and

continue to maintain our market leadership in the

health-care and educational segments in Hong Kong.



8

On another front, our Scanfoods food processing

business continue to generate consistent profit

growth and expand its business horizon by

venturing into the smoked bacon and sausage line

of products, in addition to its traditional ham

processing business. With an

expanding market, Scanfoods has

recently also allocated capital

resources to develop a new food

processing plant adjacent to its

present premises in Dongguan.

On the local arena, our student

lunch box catering business,

Luncheon Star , has been

growing steadily during the year.

As the business grew, we doubled

the production capacity in 2001

and opened 2 new re-heating centers. This extension

of service networks will definitely enhance Luncheon

Star’s competitiveness and improve operating

efficiency in the forthcoming years.

EMBRACING NEW PROCESSES

I did mention in my previous reports to you that

the key to ride out the economic storm is the ability

to change. All business enterprises must have the

adaptability to break away from old practices and

to embrace new business process.

During the year, with a focused objective and a

committed HK$65 million budget, the Group has

drawn on the latest broadband IP network

technologies and communication infrastructure to

create a most effective and efficient operation and

information business management system there is

to be in the food and beverage industry. All our

restaurant out lets have now been

seamlessly integrated electronically to

interface with the Head Office.

In today’s ever-changing market, the

management of Café de Coral foresee that

such Business Management System not

on ly wou ld enhance opera t iona l

eff iciencies in the front-end in meeting the

sophisticated customers’ needs, but would also help

to expedite more effective strategic planning, more

timely information update and more powerful data

analysis, with substantial savings delivered in manpower

and administrative expenses at the back office.

RECOGNIZING OUR STRENGTH

The Group continues to receive recognition for our

management excellence on a local and international

level. I myself am particularly gratified and honoured

for being awarded the “Executive of the Year –

Hong Kong Business Award” in December, 2001

by the highly regarded South China Morning Post

and DHL Group. In addition, for the 4th consecutive

year, our group was being honoured in 2001 as

one of “World’s 200 Best Small Companies” by

Forbes Global.



At the same time, our Asia Pacific Catering and

Luncheon Star have both been awarded with

the internationally accredited “ISO 9001” and

“HACCP Integrated System” Certificates, and

our Café de Coral Fast Food and The Spaghetti

House have also both been awarded with the

“Quality Service Award” by Hong Kong Tourism

Board.

During the year, our strong balance sheet further

strengthened with net assets of the Group expanded

to HK$1,431 million. As of 31st March, 2002, the

Group’s net cash reached HK$400 million and market

capitalization exceeded HK$3,100 million.

With the strong balance sheet and cash flow

position, the Group continued to buy back about

2,622,000 shares at an average pr ice of

approximately HK$4 per share during the year,

cumulating to a total of 29,038,000 shares in our

share repurchase program.

Of course, all our distinguished milestones and

recognitions would not have been attained without

the unyielding commitments from our dedicated

staff in these tough environments. On this, I would

like to thank our 7,500 employees for their devoted

performances during the year.

I know that the task for continuous profit growth is

particularly challenging on an expanded base. I

am convinced that we would come out ahead of

the pack. I believe our core business presents a

solid business model. Our global vision will continue

to be pursued in the years ahead in a disciplined

phase, and our operating experience in the PRC

would definitely be valuable for us to take our

business forward in this region. With new markets

opened, new frontiers explored, and new processes

embraced, we would be able to achieve what we

have set out to do, enhancing customers’ and

shareholders’ value at home and abroad.

Chan Yue Kwong, Michael

Chairman

Hong Kong, 9th July, 2002


MANAGING DIRECTOR’S OPERATIONAL REVIEW

10

INSTITUTIONALCatering

INTRODUCTION

This year is our seventh straight year to achieve

double digit growth in operating profit. This was

achieved in spite of the persistent deflationary

pressure with record high unemployment in Hong

Kong and difficult economic conditions globally.

The unprecedented economic difficulties and

continuous corporate downsizing in Hong Kong

caused rising unemployment and substantial

contraction in the retail and restaurant business.

Due to influx of new entrants, the restaurant

number actually surged by an astounding 2,233

units during the period of 1998-2001 to 10,899

units in 2001. This has created an extremely

competitive environment.

The Group boldly faced these challenges and firmly

attached to our proven business philosophy through

the implementation of innovative business and

operational strategies. Key focused was in balancing

the value equation to our customers, driving up

productivity and developing new business growth

drivers. With this, we successfully sustained our

long-term profitability in this extremely challenging

time.

FAST FOOD BUSINESS

Café de Coral fast food business continued its

strong foothold in Hong Kong. As of 31st March,

2002, there were 117 Café de Coral quick service

restaurants in operation. During the year, Café de

Coral opened 8 new restaurants in the prime

locations of Tsimshatsui, Kwun Tong and North Point

districts for providing convenient food services to

our target customers. These new shops generated

immediate profit contribution to the Group.

While our competitors concentrated in short term

price only competition, Café de Coral focused on

a strategy that enhances customer value and builds

strong brand equity. This included introducing

innovative product with high perceived value at an

affordable price in the dinner segment, re-packaging

popular items into value meals to serve our frequent

customers during lunch segment and launching

various short-time “special promotion products” to

create short-term market noisiness and generate

customer visits.

We have successfully re-negotiated favourable

purchasing and rental terms with our suppliers and

landlords respectively. During the year, we invested

HK$18 million to upgrade and expand the central

cafe de coral



cafe de coral

kitchen which resulted substantial improvement

in the production lead time and production

cost. Saving from these initiatives provided more

rooms to adjust our price without hurting

bottom line.

In the shop front, we have invested over HK$32

million to renovate 15 Café de Coral shops for

enhancing the dining experience to our

customers. We also provided new trainings to

our front line staff under a “100% customer

satisfaction” program.

To further strengthen Café de Coral brand,

we init iated an enlightening advertising

campaign “See You in Café de Coral” with a light-

hearted theme to capture the targeted audience

attention and proven successful after launching.

With all these marketing initiatives and campaigns,

Café de Coral fast food was able to sustain our

profitability and enhance our “most preferred brand”

ranking during the year.

Super Super Congee and Noodles delivered a

promis ing return within the management

expectation during the year. Two new outlets were

opened in two major shopping malls in Tuen Mun

and Tin Shui Wai which enable this new concept

to further penetrate into the mass market. With

this experience gained, the management believe

that this brand will capture more patronage and

has great potential to develop into a sizable chain

in the years to come.

INSTITUTIONAL CATERING

As of 31st March, 2002, Asia Pacific Catering managed

40 operating units in Hong Kong and Southern China,

which include, 21 units in the health-care sector, 7 units

in the educational sector and 12 units in the commercial

manufacturing sector.



12

The SPAGHETTIHOUSE

During the year, Asia Pacific Catering further won

two new catering contracts in the education sector

to provide catering services to Hong Kong University

of Science & Technology and St. Stephen’s Girls

College. In the health-care segment, a new contract

was signed with Ruttonjee Hospital. After the year

end, we have signed up three new catering service

contracts with Open University of Hong Kong,

Queen Elizabeth Hospital and Hong Kong Science

Park respectively.

In the Southern China, institutional catering business

progressively established its presence with a total

of 4 operating units in Shenzhen and Guangzhou.

We continue to explore future business development

opportunities in the Southern China and to expand

our business presence in this market.

Our student catering business, Luncheon Star, has

been performing satisfactorily during the year. With

the existing production facilities having been

upgraded and 2 new reheating centers at Kwun

Tong and Tai Wai being in full operation in

addition to its 3 existing facilities, management

expects Luncheon Star to pave a solid new

income stream to the Group in future.

SPECIALTY

RESTAURANT

The Spaghetti House

continued to perform well

a m i d t h e s e v e r e l y

competitive environment.

During the year, 2 new

outlets were opened at

M a t h e s o n C e n t r e ,

Causeway Bay and Metroplaza, Kwai Fong.

Continuous efforts have been focused on new shop

image and new menu development. Customer

feedback on these two areas is encouraging and

positive, resulting in increased patronage and

enlarged customer base. Apart from this, the brand

image of The Spaghetti House was further

strengthened through launching of a new television

advertising campaign which projected a trendy and

stylish image.

The Spaghetti House was elected as “The Top 3

Most Popular Dining Venues” among competitors

as per the research undertaken by Hong Kong

Polytechnic University in 2001. Being recognized

for its service standard, The Spaghetti House was

awarded the “Quality Service Award” by Hong

Kong Tourism Board.

Management continues exploring the opportunities

to franchise The Spaghetti House in the South

East Asia region and in the PRC. This expedition



BistroM

has well been encouraged by the successful

experience in opening 5 franchise stores in

Indonesia and our recent entry to the China market.

The first The Spaghetti House franchise restaurant

in PRC, will be opened in Beijing, by the end of

this year.

Ah Yee Leng Tong continued to consolidate and

another under-performing store was closed during

the year. With the remaining 2 Ah Yee Leng Tong

restaurants located in the prime tourist districts of

Tsimshatsui and Cityplaza, the Ah Yee Leng Tong

brand still attract customer visit, particularly the

tourists, albeit in the competitive environment.

Bravo le Café has been gradually solidifying its

position as an appealing quick service restaurant

concept over the years since we first introduced

this house-owned brand in 1997. A large variety of

Chinese, Japanese and Western cuisines have been

served in our existing 4 Bravo le Café restaurants

during the year.

The Group continued its expansion of its specialty

restaurant business in Hong Kong and launched

an upscale new concept restaurant named

Bistro M in April, 2002. This cosmopolitan styled

restaurant, located at Metroplaza, Kwai Fong, is an

ideal place for business and social dining. Initial

response is overwhelming as it does fill up a long

outstanding market void in the area.

SCANFOODS

The performance of Scanfoods has been steady

and healthy during the year. This proven business

demonstrated its ability to generate consistent profit

contribution to the Group after acquisition in 1997.

Scanfoods expanded its product line by developing

smoked bacon and various kinds of sausage and

extended its distribution channels to hyper-market

in China.

A new extension has been under construction next

to the existing premises in Dongguan to expand

the food processing plant catering for in-house

consumption and outside customers. The new

capacities will replace some of the more labor

intensive production processes currently operating

in Hong Kong as well as to cope with the increasing

demand in China.



14

ManchuWok

CAFÉ DE CORAL IN THE PRC AND MACAU

The performance in this market has been most

encouraging. As of 31st March, 2002, there were

5 operating units in Southern China and 1 unit in

Macau. This year marked the first year of profit

making in each and every Café de

Coral outlets in the PRC. The strategies

on marketing, pricing, product and

localization of the management and purchasing

team finally pay off. During the year, we have

renovated 2 outlets. The improved environment

enhanced the dining experience of our customers

and brought in extra sales.

After investing and learning for the past 10 years,

our existing Café de Coral in PRC already operated

profitably during the year. We believed that we

have successfully developed a viable operating

business model in the PRC and with confidence to

resume our expansion program by development

new outlets in the South China region.

MANCHU WOK & CHINA INN

Acquisition of Manchu Wok has been proven very

successful and has delivered the planned cash flow

to the Group immediately after acquisition with

earnings before interest, tax, depreciation and

amortization amounts to approximately HK$36

million.

To further widen the business horizon in North

America, we have recently

a c q u i re d a 2 0 A s i a n

restaurant chain operating

under the brand name of

China Inn, Oishii Kitchen

and Dai Bai Dang . The

acqu i s i t i on was made

through a joint venture entity

with the same partnership

and shareholding of an

about 48% equity interest as the Group’s existing

joint venture company, Manchu Wok Enterprises

Inc. The total consideration of the acquisition

amounted to C$20.7 million, which was partly

satisfied by internal funds and largely financed by

debts financing. Following the acquisition, Café de

Coral Group will have a sizable platform of over

200 restaurant units in North America.

Through the acquisition of China Inn, we have

successfully expanded our geographical coverage

to the major cities in California, including Los

Angeles, San Francisco and Sacramento. China Inn

and Oishii Kitchen, which operated under similar

mode as in Manchu Wok, will be assimilated to

the Manchu Wok system in due course. Dai Bai

Dang, on the other hand, presented a new growth

opportunity in the fast casual full service sector.

Currently there is 1 Dai Bai Dang operating in

Fresno, California since 1999 and the Group is

planning to roll this concept out in year 2003.



NOODLESPLUS

During this year, Manchu Wok has initiated a

development plan for a stand alone street store

concept and the first store will be opened by the

end of year 2002 in new market, Ontario. Through

acquisition and internal development of new

concept restaurant, Manchu Wok has developed

into a sizable scale, with multiple restaurant

concepts and brands for expansion in the future.

NEW BUSINESS PROCESSES

With a total expected investment of HK$65 million,

the Group’s Business Process Re-engineering project

reached its final phase and will gradually be

integrated into our existing operating system in

coming months, for enhancing productivity and

information efficiency.

Drawing on the latest broadband IP network

technologies and communication

infrastructure, together with

leading-edge hardware and

software products with regard to

database server, application servers,

and touch-screen POS terminals, all

our restaurant outlets have now

been seamlessly integrated to

interface with the Head Office.

Such a robust, flexible and user-

friendly system would mean all

cr i t ica l bus iness informat ion

exchange, including sales and marketing, inventory,

accounting, human resources, menu changes,

ordering and even delivery schedules, can now be

instantly, accurately and timely transmitted between

branches and Head Office in a private, secure and

reliable environment.

STRATEGIC PROPERTIES HOLDINGS

During the year, the Group completed the purchase

of shops at Admiralty Centre, Harcourt Road at the

purchase price of HK$58 million. This acquisition of

the property at strategic location with proximity to

MTR station, commercial centers and shopping malls

strengthened the real estate

portfolio of the Group housing its

Café de Coral fast food operation.

Such investment will bring along

decent return to the Group, both

on a rental yield and operating

yield at a combined return of more

than 14%. After this acquisition, the

Group currently owns 18 properties

for our restaurant use.

FINANCIAL REVIEW

As of 31st March, 2002, the Group’s total

borrowings was HK$230 million and maintained a

healthy gearing (being total borrowings over

shareholders’ funds) of 16%. The loan maturity

profile spread over a period of 3 years with HK$150

million repayable within one year.



16

BRAVO

The Group had g iven guarantees tota l ly

approximately HK$861 million as of 31st March,

2002 to financial institutions in connection with

their loans granted to the subsidiaries and jointly-

controlled entities.

HUMAN RESOURCES

As of 31st March, 2002, the Group employed 7,500

employees. Remuneration packages are generally

structured by reference to market terms and

individual qualifications and experience. With a

unique Employee Share Option Scheme together

with profit sharing bonus and performance incentive

system, employees are allowed to share in the

growth of the Group.

During the year, various training activities have been

conducted to improve the front-end services quality

as well as to ensure the smooth and effective

implementation of the Group’s Business Process Re-

engineering project.

CONCLUSION

Management anticipates the retai l business

environment continues to be very challenging in

2002. The Group will strive to sustain its dominant

market position by delivering innovative and value-

added products with quality service to our

customers. We will reiterate our commitment to

improve our product range and quality, customer

services, rendering differentiated catering services

to our customers who always support us in good

or bad time. Apart from these, we will continuously

leverage on our strong cash flow and balance sheet

to continuously grow our new business and to look

for new acquisition opportunities in the PRC and

North America. With a well defined business strategy

to diversify, our business portfolio shall be more

balanced, leading us to deliver consistent business

growth in future.

Lo Hoi Kwong, Sunny

Managing Director



BIOGRAPHY OF DIRECTORS AND SENIOR MANAGEMENT

CHAIRMAN

Mr. Chan Yue Kwong, Michael, aged 50, is the

Executive Chairman of the Company. He joined the

Company in 1984 and was appointed as Director

in 1988. He has been the Managing Director of

the Group since 1989 and is now the Executive

Chairman of the Group. Having worked as a

professional town planner for various Government

bodies in Hong Kong and Canada, he has

cons iderable exper ience in p lanning and

management. He holds a Degree in Sociology and

Political Science, a Master Degree in City Planning

from the University of Manitoba, Canada and an

Honorary Doctora te Degree in Bus iness

Administration. He is currently an Executive

Committee Members of the Hong Kong Retail

Management Association, Council Member of the

Employers’ Federation of Hong Kong, a Full member

of the Canadian and the Hong Kong Institute of

Planners, Honorary President of Hong Kong

Foodstuffs Association, Honorary Adviser of the

Hong Kong Institute of Marketing and the Institute

of Business Administrants. In recent years, Mr. Chan

was recognized by BusinessWeek in 1999 with “The

Stars of Asia Awards”, and also won the “Executive

of the Year Award” in the DHL/SCMP Hong Kong

Business Awards 2001. He is the son-in-law of Mr.

Lo Tang Seong, Victor, another Director of the

Company.

MANAGING DIRECTOR

Mr. Lo Hoi Kwong, Sunny, aged 47, is the

Managing Director of the Company. He is

responsible for business development in Hong Kong

and overseas, marketing, operation and food

processing functions of the Group. He joined the


in 1985. He holds a Master Degree in Chemical

Engineering from Stanford University. He is the son

of Mr. Lo Tang Seong, Victor, another Director of

the Company.

EXECUTIVE DIRECTORS

Ms. Lo Pik Ling, Anita, aged 50, is the General

Manager (Fast Food and Institutional Catering) of

the Company. She joined the Company as Director

in 1980 and is responsible for the sales and

marketing of the Hong Kong Fast Food, Contract

Catering Business and School Lunch-Box Catering

Business. She holds a Degree in Social Sciences

from the University of Hong Kong. She is the

daughter of Mr. Lo Tang Seong, Victor, another

Director of the Company.

Mr. Lo Tak Shing, Peter, aged 40, is the Director

of Business Logistics of the Company. He joined

the Company in 1996 and was appointed as

Director in 1998. He is responsible for central food

processing, central purchasing and project

management functions of the Group. He holds a

Degree in Electronic Engineering & Physics from

the Loughborough University of Technology, a

Master Degree in Medical Physics from the University

of Surrey and a Doctor of Philosophy in Medical

Physics from the University of London. He is the

great-nephew of Mr. Lo Tang Seong, Victor, another

Director of the Company. He is a director of Wandels

Investment Limited which has discloseable interests

under the provisions of Part II of the Securities

(Disclosure of Interests) Ordinance in the Company.



18

NON-EXECUTIVE DIRECTORS

Mr. Lo Tang Seong, Victor, aged 87, is the

founder and Director of the Company. He had

considerable experience in the food and beverage

industry. Prior to founding the Company, he was in

charge of the production management in The Hong

Kong Soya Bean Products Company, Limited for 17

years.

Mr. Lo Hoi Chun, aged 64, joined the Company

in 1976 and was appointed as Director in 1977.

Prior to joining the Company, he had considerable

experience in the food and beverage industry. He

is the nephew of Mr. Lo Tang Seong, Victor, another

Director of the Company.

Ms. Leung Sau Lai, Kathy, aged 48, joined the


in 1980. She has been a Non-executive Director of

the Company since July 1994. She is a director of

Tsang Fook Piano Co., Ltd. She holds a Degree in

Business Administration from the University of San

Francisco.

Mr. Hui Tung Wah, Samuel, aged 48, joined the


in 1988. He has been a Non-executive Director

since March 1997. He is an executive director of

Omnitech Group Limited. He holds a Degree in

Social Sciences from the University of Hong Kong

and a Master Degree in Business Administration from

the Brunel University.

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. Choi Ngai Min, Michael, aged 45, was

appointed as an Independent Non-executive

Director of the Company in 1994. He is the

chairman of Land Power International Holdings

Limited. He holds a Master Degree in Business

Administration from the University of East Asia,

Macau.

Mr. Li Kwok Sing, Aubrey , aged 52, was

appointed as an Independent Non-executive

Director of the Company in 1994. He is director of

Management Capital Limited, a direct investment

and financial advisory firm, non-executive director

of The Bank of East Asia, Limited, China Everbright

International Limited, Chinney Alliance Group

Limited, CNPC (Hong Kong) Limited, Kowloon

Development Co. Ltd. and Value Partners China

Greenchip Fund, and also non-executive Chairman

of Atlantis Asian Recovery Fund plc. Mr. Li has a

Master of Business Administration from Columbia

University and a Bachelor of Science in Civil

Engineering from Brown University.



SECRETARY

Ms. Li Oi Chun, Helen, aged 44, joined the

Company in 1981. She is currently the Group

Company Secretary and Director of Professional

Logistics of the Company. She is responsible for

finance and accounting, company secretarial and

information technology function of the Group. She

holds a Master Degree in Business Administration

from the University of Surrey in United Kingdom

and a Master Degree in Marketing Management

from the Macquarie University in Australia. She is

currently a Fellow member of both the Hong Kong

Institute of Company Secretaries and The Institute

of Chartered Secretaries and Administrators in United

Kingdom and also holds a Postgraduate Diploma

in Corporate Administration from The Hong Kong

Polytechnic University.

SENIOR MANAGEMENT

Ms. Lau Lee Fong, Rosa, aged 47, joined the

Company in 1979 and is currently the General

Manager (Western Restaurants) of the Company.

She i s respons ib le for deve lopment and

management of the chain of the Spaghetti House

Restaurants, Bravo le Café, Noodles Plus and Bistro

M. She holds a Master Degree in Business

Administration from the University of East Asia,

Macau and a Master of Science in Hotel & Tourism

Management from The Hong Kong Polytechnic

University. She is currently a member of the Hotel

& Catering International Management Association

(U.K.).

Mr. Wong Yau Kwong, aged 47, joined the

Company in 1983 and is the General Manager of

the Food Manufacturing and Distribution – China.

He is responsible for development and management

of the Scanfoods Group of business and the central

food processing functions in the PRC. He is a

graduate of Business Management Department,

Baptist University.

Mr. Leung Cho Shing, Joe, aged 46, joined the

Company in 1983 and is currently the General

Manager of Asia Pacific Catering Corporation

Limited. He is responsible for development and

management of the institutional catering business.

He holds a Degree in Hotel and Cater ing

Management from The Hong Kong Polytechnic

University.


REPORT OF THE DIRECTORS

20

(Amounts expressed in Hong Kong dollars)

The directors are pleased to present their annual report together with the audited financial statements of

Café de Coral Holdings Limited (the “Company”) and its subsidiaries (together with the Company hereinafter

as the “Group”) for the year ended 31st March, 2002.

PRINCIPAL ACTIVITIES

The Company is an investment holding company. The Group is principally engaged in the operation of quick

service restaurants, fast casual dining, institutional catering and specialty restaurant chains, and the food

manufacturing business.

An analysis of the Group’s turnover by geographical area together with their respective contributions to the

results for the year is as follows:

Profit before

Turnover taxation

$’000 $’000

Hong Kong 2,565,996 304,574

The People’s Republic of China (the “PRC”) 47,551 11,181

The United States and Canada (See Notes below) – 6,948

2,613,547 322,703

Notes:

(a) Manchu Wok Enterprises, Inc (“MWEI”), a 48%-owned jointly controlled entity acquired in 2001, generated systemwidesales of approximately $654,572,000 in the United States and Canada. The earnings before interest, tax, depreciation andamortisation of MWEI amounted to approximately $35,957,000.

(b) During the year, the Group acquired an approximately 48% equity interest in Manchu Wok Enterprises II Inc (“MWEII”), ajointly controlled entity. Since the date of acquisition, MWEII has generated systemwide sales of approximately $49,898,000in the United States. The earnings before interest, tax, depreciation and amortisation of MWEII amounted to approximately$7,252,000.

MAJOR CUSTOMERS AND SUPPLIERS

For the year ended 31st March, 2002, the percentage of sales or purchases attributable to the Group’s five

largest customers or suppliers was less than 30%.




RESULTS, APPROPRIATIONS AND RESERVES

The results of the Group for the year ended 31st March, 2002 and the state of affairs of the Company and of

the Group as at 31st March, 2002 are set out on pages 30, 32 and 33 of the accompanying financial

statements.

The details of dividends for the year ended 31st March, 2002 are set out in Note 9 to the accompanying

financial statements. An interim dividend of 4.4 cents per share was paid, and the directors recommend the

payment of a final dividend of 17.1 cents per share.

The increase in retained profits of the Company amounted to $107,004,000 for the year ended 31st March,

2002. Other movements in the reserves of the Group and the Company are shown in Note 23 to the

accompanying financial statements.

As at 31st March, 2002, reserves of approximately $182,605,000 of the Company were available for distribution

to shareholders.

PRINCIPAL SUBSIDIARIES

Particulars of the Company’s principal subsidiaries as at 31st March, 2002 are set out on pages 66 to 69.

ASSOCIATE

Particulars of the Company’s associate as at 31st March, 2002 are set out in Note 14 to the accompanying

financial statements.

JOINTLY CONTROLLED ENTITIES

Particulars of the Company’s jointly controlled entities as at 31st March, 2002 are set out in Note 15 to the


FIXED ASSETS

Details of the movements in fixed assets are set out in Note 11 to the accompanying financial statements.

BANK LOANS AND OVERDRAFTS

Particulars of bank loans and overdrafts as at 31st March, 2002 are set out in Notes 19 and 20 to the




22


SHARE CAPITAL

Details of the movements in share capital of the Company are set out in Note 22a to the accompanying

financial statements.

SHARE OPTIONS

Details of the share options of the Company are set out in Note 22b to the accompanying financial

statements.

PURCHASE, SALE OR REDEMPTION OF SHARES

During the year, the Company purchased and cancelled 2,622,000 shares of $0.10 each in the Company on

The Stock Exchange of Hong Kong Limited (“SEHK”) with details as follows:

Total cash paid

Price per share (including

Month and year Number of shares Highest Lowest related

of purchase purchased price paid price paid expenses)

$ $ $’000

July 2001 1,592,000 3.850 3.825 6,155

September 2001 84,000 4.000 4.000 337

November 2001 166,000 4.500 4.500 750

December 2001 778,000 4.500 4.500 3,516

January 2002 2,000 4.500 4.500 9

2,622,000 10,767

Therefore, an amount of approximately $10,767,000 was transferred from contributed surplus to capital

redemption reserve.

Other than the above purchase of shares, neither the Company nor any of its subsidiaries purchased, sold or

redeemed any listed securities of the Company for the year ended 31st March, 2002.

The directors considered that the purchase of shares would be to the benefit of the Company and would

lead to an enhancement of earnings per share and liquidity of shares.




PRE-EMPTIVE RIGHTS

There is no provision for pre-emptive rights under the Company’s Bye-Laws and the laws in Bermuda.

DIRECTORS AND DIRECTORS’ SERVICE CONTRACTS

The directors who held office during the year and up to the date of this report are:

Executive directors

Mr. Chan Yue Kwong, Michael (Chairman)

Mr. Lo Hoi Kwong, Sunny (Managing Director)

Ms. Lo Pik Ling, Anita

Mr. Lo Tak Shing, Peter

Non-executive directors

Mr. Lo Tang Seong, Victor

Mr. Lo Hoi Chun

Ms. Leung Sau Lai, Kathy

Mr. Hui Tung Wah, Samuel

Independent non-executive directors

Mr. Choi Ngai Min, Michael

Mr. Li Kwok Sing, Aubrey

All non-executive directors and independent non-executive directors have been appointed for a term of 2-3

years subject to retirement by rotation as required by the Company’s Bye-Laws.

In accordance with Section 109(A) of the Company’s Bye-Laws, Mr. Lo Tang Seong, Victor, Mr. Lo Hoi Chun

and Mr. Choi Ngai Min, Michael retire by rotation at the forthcoming Annual General Meeting and, being

eligible, offer themselves for re-election.

None of the directors has an unexpired service contract with the Company which cannot be terminated by

the Company within one year without payment of compensation (other than statutory compensation).



24


DIRECTORS’ INTERESTS IN SHARES AND SHARE OPTIONS

As at 31st March, 2002, interest of directors of the Company in the equity and debt securities of the

Company and its associated corporations (within the meaning of the Securities (Disclosure of Interests)

Ordinance (the “SDI Ordinance”) as recorded in the register kept by the Company pursuant to Section 29 of

the SDI Ordinance or as otherwise notified to the Company and SEHK pursuant to Section 28 of the SDI

Ordinance and the Model Code for Securities Transactions by Directors of Listed Companies (the “Model

Code”) were shown below. Details of the interests of the directors of the Company in respect of share

options granted under the Company’s share option schemes are set out in the “Share Option Schemes”

section below.

Personal Family Corporate Other

Mr. Chan Yue Kwong, Michael 3,121,407 1,189,400 – (a)

Mr. Lo Hoi Kwong, Sunny 3,120,000 – – (a) & (b)

Ms. Lo Pik Ling, Anita 10,606,339 – – (a)

Mr. Lo Tak Shing, Peter – – – (c)

Mr. Lo Tang Seong, Victor 1,520,000 – – –

Mr. Lo Hoi Chun 132,000 – – (d) & (e)

Ms. Leung Sau Lai, Kathy 3,107,000 – – –

Mr. Hui Tung Wah, Samuel 25,837 – – –

Mr. Choi Ngai Min, Michael – – – –

Mr. Li Kwok Sing, Aubrey 55,000 – – –

Notes:

(a) 49,800,000 shares were held under a family trust of which the beneficiaries included associates of Mr. Chan Yue Kwong,Michael, Mr. Lo Hoi Kwong, Sunny and his associates, Ms. Lo Pik Ling, Anita and her associates.

(b) 37,383,394 shares were held under a family trust of which associates of Mr. Lo Hoi Kwong, Sunny were the beneficiaries.

(c) 87,626,213 shares were held under a family trust of which Mr. Lo Tak Shing, Peter and his associates were the beneficiaries.

(d) 31,911,701 shares were held under a family trust of which Mr. Lo Hoi Chun and his associates were the beneficiaries.

(e) 35,969,133 shares were held under a family trust of which associates of Mr. Lo Hoi Chun were the beneficiaries.

Other than certain nominee shares in subsidiaries held by directors in trust for the Company or the intermediate

holding companies of subsidiaries, no directors held any interest in the share capital of the Company’s

subsidiaries.




DIRECTORS’ INTERESTS IN SHARES AND SHARE OPTIONS (Cont’d)

Save as otherwise disclosed in this report, the Company has no notice of any interests to be recorded under

Section 29 of the SDI Ordinance as at 31st March, 2002 or as otherwise notified to the Company and the

SEHK pursuant to Section 28 of the SDI Ordinance and the Model Code, and at no time during the year was

the Company or any of its subsidiaries a party to any arrangements to enable any of the Company’s

directors, their respective spouse or children under 18 years of age to acquire benefits by means of the

acquisition of shares in, or debentures of, the Company or any other body corporate.

SUBSTANTIAL SHAREHOLDERS’ INTERESTS

As at 31st March, 2002, the following entities had or were deemed to have interests in the Company under

the provisions of the SDI Ordinance as recorded in the register kept by the Company under Section 16(1) of

the SDI Ordinance:

Number of

shares held Percentage

in the Company of holding

Wandels Investment Limited (a) 87,626,213 16.06%

GZ Trust Corporation (b) 117,680,834 21.56%

(a) It held the shares for the family trust disclosed in Note (c) under “Directors’ Interests in Shares and Share Options” section(with Barclays Private Bank & Trust Limited, the trustee of the said family trust, holding the entire share capital of WandelsInvestment Limited).

(b) It held the shares for the family trusts disclosed in Notes (a), (d) and (e) under “Directors’ Interests in Shares and ShareOptions” section.

Save as disclosed above, the Company has no notice of any interests to be recorded under Section 16(1) of

the SDI Ordinance as at 31st March, 2002.

SHARE OPTION SCHEMES

Pursuant to a share option scheme adopted by the Company on 30th January, 1991 (the “Previous Scheme”),

the Company has granted certain options to executives and employees of the Group including executive

directors employed by the Group to subscribe for ordinary shares in the Company subject to the terms and

conditions stipulated therein. The Previous Scheme was terminated upon the passing of a shareholders’

resolution for adoption of a new share option scheme on 19th September, 2000 (the “Scheme”). Accordingly,

no options can be granted under the Previous Scheme as at the date of this report. However, for the

outstanding options granted and yet to be exercised under the Previous Scheme, the existing rights of the

grantees are not affected.



26


SHARE OPTION SCHEMES (Cont’d)

Pursuant to the Scheme, the Company may grant options to executive directors and employees of the

Group to subscribe for ordinary shares in the Company subject to the terms and conditions stipulated

therein.

Summary of details of the Scheme is as follows:

Purpose To give incentive and retain eligible participants who

contribute to the business and development of the Group

Participants Full-time employees (including full-time executive directors)

of the Company or any of its subsidiaries

Total number of ordinary shares available for 54,582,603 ordinary shares and 10% of the issued

issue and the percentage of the issued share capital

share capital that it represents as at the

date of the annual report

Maximum entitlement of each participant 25% of the aggregate number of shares for the time being

issued and issuable under the Scheme

Period within which the securities must be 5 years commencing on the date on which an option

taken up under an option becomes exercisable and expiring on the last day of the 5

years period save that such period shall not expire later

than 10 years from the commencement date on which the

option is deemed to be granted and accepted in accordance

with the Scheme

Minimum period for which an option must be Not applicable

held before it can be exercised

Amount payable on acceptance of the option $1.00

Period within which payments/calls/loans 28 days from the date of the offer

must be made/repaid

Basis of determining the exercise price The higher of (i) the nominal value of a share or (ii) an

amount which is not less than 80% nor more than 100%

of the average of the closing price of the shares as stated

in the SEHK’s daily quotations sheets for the 5 business

days immediately preceding the date of offer of the option

The remaining life of the Scheme The Scheme remains in force until 18th September, 2010

unless otherwise terminated under terms of the Scheme





The SEHK has introduced a number of changes to the Listing Rules on share option schemes. These new

rules came into effect on 1st September, 2001. No share options have been granted by the Company under

the Scheme since its adoption on 19th September, 2000. However, any option to be granted under the

Scheme shall be subject to the new rules which include, inter alia, the following:

(a) The maximum number of shares issuable upon the exercise of the options granted to each eligible

participant within any 12-month period is limited to 1% of the shares in issue at any time. Any further

grant of share options in excess of this limit is subject to shareholders’ approval in advance in a general

meeting;

(b) The exercise price of the share options is determined by the directors, but may not be less than the

higher of (i) the closing price of the Company’s shares as stated in the SEHK’s daily quotations sheets on

the date of grant; and (ii) the average closing price of the Company’s shares as stated in the SEHK’s

daily quotations sheets for the 5 business days immediately preceding the date of grant.

Details of the movements of share options granted under the Previous Scheme are as follows:

OptionsOptions Options cancelled as Optionsheld at exercised Options a result of outstanding at

1st April, during lapsed termination of 31st March,Type of grantees 2001 the year on expiry employment 2002

Executive directorsMr. Chan Yue Kwong,

Michael (i) 1,500,000 – – – 1,500,000

Mr. Lo Hoi Kwong, Sunny (i) 1,500,000 – – – 1,500,000

Ms. Lo Pik Ling, Anita (i) 400,000 – – – 400,000

Mr. Lo Tak Shing, Peter (i) 350,000 – – – 350,000

Continuous contractemployees (i) 21,750,000 – – (1,100,000) 20,650,000

(ii) 820,000 (720,000) (iv) – – 100,000

(iii) 740,000 (740,000) (v) – – –

27,060,000 (1,460,000) – (1,100,000) 24,500,000



28



Notes:

(i) The share options were granted on 4th November, 1999 and are exercisable at $2.950 per share during the period from1st April, 2003 to 31st March, 2013.

(ii) The share options were granted on 1st November, 1994 and are exercisable at $2.232 per share during the period from3rd November, 1997 to 23rd November, 2006.

(iii) The share options were granted on 1st August, 1992 and are exercisable at $2.820 per share during the period from 8thAugust, 1995 to 7th August, 2002.

(iv) The weighted average closing price of the Company’s shares immediately before the dates on which the share optionswere exercised during the year was $4.234.

(v) The weighted average closing price of the Company’s shares immediately before the dates on which the share optionswere exercised during the year was $4.098.

Save as disclosed above, no share options were granted, exercised, lapsed or cancelled during the year.

DIRECTORS’ INTERESTS IN CONTRACTS

On 11th April, 2000, Weli Company Limited (“Weli”), a wholly-owned subsidiary of the Company, as tenant

entered into a tenancy agreement with Tinway Investments Limited (“Tinway”) as landlord in respect of a

premises for the operation of a fast food restaurant. Tinway was controlled by Ms. Lo Pik Ling, Anita, an

associate of Mr. Chan Yue Kwong, Michael and Ardley Enterprises Limited, a company wholly and beneficially

owned by the family members of Mr. Lo Hoi Kwong, Sunny. Under the tenancy agreement, Weli was

required to pay a monthly rental of $170,000 from 12th April, 2000 to 11th April, 2003.

On 23rd December, 1999, each of Yumi Yumi Caterers Limited (“Yumi”) and Very Nice Fast Food Limited

(“Very Nice”), the two indirect wholly-owned subsidiaries of the Company, as tenants entered into tenancy

agreements with LBK Trustee Holding Corporation (“LBK”) as landlord renewing the existing tenancies in

respect of two premises at 77 Tung Choi Street and 108 Prince Edward Road West for the operation of fast

food restaurants. LBK was wholly and beneficially owned by the family members of Mr. Lo Hoi Chun, a non-

executive director of the Company. Mr. Lo Hoi Chun and his associates were directors of LBK. Mr. Lo Hoi

Chun was also a director of Yumi. Under the agreements, Yumi and Very Nice were required to pay a

monthly rental of $61,000 and $110,000 respectively from 1st January, 2000 to 31st December, 2002.

Except as disclosed above, no contracts of significance in relation to the Group’s business to which the

Company or any of its subsidiaries was a party and in which any of the Company’s directors or members of

its management had a material interest subsisted at the end of the year or at any time during the year.

None of the directors have interests in a competing business.




CODE OF BEST PRACTICE

In the opinion of the directors, the Company has complied with the Code of Best Practice as set out in

Appendix 14 of the Listing Rules of the SEHK throughout the year ended 31st March, 2002.

AUDIT COMMITTEE

In April 1999, the Company established an audit committee consisting of two independent non-executive

directors of the Company, Mr. Choi Ngai Min, Michael and Mr. Li Kwok Sing, Aubrey, with written terms of

reference which deal clearly with its authority and duties. Amongst the committee’s principal duties is to

review and supervise the Company’s financial reporting process and internal controls.

AUDITORS

Arthur Andersen & Co. acted as auditors of the Company up to and including the year ended 31st March,

2001. Arthur Andersen & Co. resigned during the year and the directors appointed PricewaterhouseCoopers

to fill the casual vacancy. A resolution for the reappointment of PricewaterhouseCoopers as the Company’s

auditors for the ensuing year is to be proposed at the forthcoming Annual General Meeting.

On behalf of the Board of Directors,

CHAN YUE KWONG, MICHAEL

Chairman



FOR THE YEAR ENDED 31ST MARCH, 2002(Amounts expressed in Hong Kong dollars)

CONSOLIDATED INCOME STATEMENT

30

2002 2001

Note $’000 $’000

(Note 27)

Turnover 4 2,613,547 2,540,326

Cost of sales (2,219,469) (2,167,477)

Gross profit 394,078 372,849

Administrative expenses (119,501) (115,730)

Other revenue, net 4 61,096 54,540

Profit from operations 335,673 311,659

Finance costs (21,417) (25,987)

314,256 285,672

Share of profit of an associate 1,499 731

Share of profit of jointly controlled entities 6,948 3,141

Profit before taxation 5 322,703 289,544

Taxation 7 (42,703) (37,970)

Profit attributable to shareholders 8 280,000 251,574

Dividends 9 117,380 106,751

Basic earnings per share 10 51.24 cents 45.84 cents

Diluted earnings per share 10 50.50 cents 45.78 cents

31

CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES



2002 2001

Note $’000 $’000

(Note 27)

Deficit on revaluation of investment properties 23 (4,050) (705)

Exchange differences arising on consolidation 23 (167) 2,365

Net (losses) gains not recognised in the

income statement (4,217) 1,660

Profit attributable to shareholders

(2001 – As previously reported) 280,000 254,278

Effect of changes in accounting policies 2b – (2,704)

Profit attributable to shareholders

(2001 – As restated) 280,000 251,574

Net recognised gains 275,783 253,234

Goodwill eliminated directly against reserves 23 – (14,174)

275,783 239,060

Cumulative effect of change in accounting policy

on amortisation of trademarks to opening

retained profits as at 1st April, 2000 (31,408)

BALANCE SHEETS

32 Café de Coral Holdings Limited

AS AT 31ST MARCH, 2002(Amounts expressed in Hong Kong dollars)

Consolidated Company

2002 2001 2002 2001

Note $’000 $’000 $’000 $’000

(Note 27) (Note 27)

ASSETS

Non-current assets

Fixed assets 11 953,846 890,154 – –

Trademarks 12 25,458 28,162 – –

Investment in subsidiaries 13 – – 407,091 413,734

Investment in an associate 14 836 1,614 – –

Investment in jointly controlled

entities 15 25,717 14,339 – –

Other investments 16 18,533 18,547 – –

1,024,390 952,816 407,091 413,734

Current assets

Stocks, at cost 48,836 49,375 – –

Prepayments and deposits 148,163 122,154 112 109

Trade and other debtors 17 26,561 25,475 – –

Short-term investments 18 6,448 9,169 – –

Cash and bank placements 650,981 681,313 85 15

880,989 887,486 197 124

Current liabilities

Short-term bank borrowings 19 150,000 236,541 – –

Trade creditors 17 57,096 58,198 – –

Other creditors and accrued liabilities 164,610 153,232 38 16

Taxation payable 6,727 12,428 – –

378,433 460,399 38 16

Net current assets 502,556 427,087 159 108

Total assets less current liabilities 1,526,946 1,379,903 407,250 413,842

Non-current liabilities

Non-current bank loans 20 80,000 100,000 – –

Deferred taxation 21 16,235 11,379 – –

96,235 111,379 – –

NET ASSETS 1,430,711 1,268,524 407,250 413,842

33

BALANCE SHEETS


AS AT 31ST MARCH, 2002(Amounts expressed in Hong Kong dollars)

Consolidated Company

2002 2001 2002 2001

Notes $’000 $’000 $’000 $’000

(Note 27) (Note 27)

CAPITAL AND RESERVES

Share capital 22 54,573 54,689 54,573 54,689

Reserves 23 1,282,802 1,131,145 259,341 276,463

Proposed dividends 9, 23 93,336 82,690 93,336 82,690

Shareholders’ equity 1,430,711 1,268,524 407,250 413,842

Approved by the Board of Directors on 9th July, 2002 and signed on behalf of the Board by

CHAN YUE KWONG, MICHAEL LO HOI KWONG, SUNNY

Chairman Managing Director

CONSOLIDATED CASH FLOW STATEMENT



2002 2001

$’000 $’000 $’000 $’000

(Note 27) (Note 27)

Operating activities

Profit before taxation 322,703 289,544

Interest expense 21,417 25,987

Interest income (31,244) (39,698)

Depreciation of fixed assets 116,029 114,524

Amortisation of trademarks 2,704 2,704

Net (gain)/loss on disposals of fixed assets (14,479) 6,141

Provision for impairment of trademarks – 420

Realised gain on short-term investments (1,280) –

Unrealised loss on short-term investments 1,065 611

(Gain)/Loss on disposal of other investments (1) 5

Share of profit of an associate (1,499) (731)

Share of profit of jointly controlled entities (6,948) (3,141)

Decrease in stocks 539 4,813

Increase in prepayments and deposits (26,009) (20,785)

Increase in trade and other debtors (1,086) (9,383)

Increase in amount due from an associate (60) –

(Decrease)/Increase in trade creditors (1,102) 6,069

Increase in other creditors and accrued

liabilities 11,378 6,452

392,127 383,532

Returns on investments and

servicing of finance

Interest received 31,244 39,698

Interest paid (21,417) (25,987)

Dividends received from an associate 1,240 –

Dividends paid (106,523) (94,333)

(95,456) (80,622)

Taxation

Hong Kong profits tax refunded 1,451 2,156

Hong Kong profits tax paid (41,851) (38,214)

Overseas profits tax paid (248) (261)

(40,648) (36,319)

Cash inflow before investing activities 256,023 266,591

35

CONSOLIDATED CASH FLOW STATEMENT



2002 2001

$’000 $’000 $’000 $’000

(Note 27) (Note 27)

Cash inflow before investing activities 256,023 266,591

Investing activities

Additions of fixed assets (226,457) (158,878)

Proceeds from disposals of fixed assets 57,165 14,105

Acquisition of an associate – (1,000)

Acquisition of a jointly controlled entity (7,157) (24,086)

Proceeds from repayment of loan to

an associate 800 –

Proceeds from disposals of other

investments 15 10

Proceeds from disposal of short-term

investments 2,936 –

Purchase of short-term investments – (9,780)

(172,698) (179,629)

Cash inflow before financing 83,325 86,962

Financing (Note 26)

Net proceeds from issue of shares on

exercise of share options 3,694 4,715

Payment for repurchase of shares (10,767) (18,718)

Borrowing of bank loans 550,000 646,000

Repayment of bank loans (661,541) (642,273)

(118,614) (10,276)

(Decrease)/Increase in cash and

cash equivalents (35,289) 76,686

Effect of foreign exchange rate changes (43) (87)

Cash and cash equivalents, beginning of year 536,313 459,714

Cash and cash equivalents, end of year 500,981 536,313

Analysis of cash and cash equivalents

Cash and bank placements 650,981 681,313

Bank overdrafts and loans (150,000) (145,000)

500,981 536,313

NOTES TO THE FINANCIAL STATEMENTS


31ST MARCH, 2002(Amounts expressed in Hong Kong dollars unless otherwise stated)

1. ORGANISATION AND OPERATIONS

Café de Coral Holdings Limited (the “Company”) was incorporated in Bermuda as an exempted companyunder the Companies Act, 1981 of Bermuda with limited liability on 1st October, 1990.

The Company is an investment holding company. The Company’s subsidiaries are principally engagedin the operation of quick service restaurants, fast casual dining, institutional catering and specialtyrestaurant chains, and the food manufacturing business.

2. PRINCIPAL ACCOUNTING POLICIES

a. Basis of presentation

The financial statements of the Company and its subsidiaries (the “Group”) have been preparedunder the historical convention as modified by the revaluation and valuation of investment propertiesand short-term investments, and in accordance with Statements of Standard Accounting Practice(“SSAPs”) issued by the Hong Kong Society of Accountants, accounting principles generally acceptedin Hong Kong, the disclosure requirements of the Hong Kong Companies Ordinance and the RulesGoverning The Listing of Securities on The Stock Exchange of Hong Kong Limited.

b. Adoption of Statements of Standard Accounting Practice

In the current year, the Group has adopted, for the first time, the following SSAPs issued by theHong Kong Society of Accountants:

SSAP 9 (revised) Events after the balance sheet dateSSAP 26 Segment reportingSSAP 28 Provisions, contingent liabilities and contingent assetsSSAP 29 Intangible assetsSSAP 30 Business combinationsSSAP 31 Impairment of assetsSSAP 32 Consolidated financial statements and accounting for investments in

subsidiaries

In accordance with revised SSAP 9 (revised) “Events after the balance sheet date”, dividendsproposed or declared after the balance sheet date are not recognised as a liability at the balancesheet date while dividend income proposed or declared by the subsidiaries after the balance sheetdate is no longer recognised as income. This change has been applied retrospectively and hasincreased retained profits of the Group at 31st March, 2000 and 2001 by approximately $70,547,000and $82,690,000 respectively. In addition, the retained profits of the Company at 31st March,2000 and 2001 have decreased by approximately $453,000 and $310,000 respectively. Dividendsproposed after the balance sheet date are now separately disclosed on the face of the balancesheet within shareholders’ equity.

37




2. PRINCIPAL ACCOUNTING POLICIES (Cont’d)

b. Adoption of Statements of Standard Accounting Practice (Cont’d)

Pursuant to the new SSAP 29 “Intangible assets”, trademarks are considered intangible assets andare amortised over their estimated useful lives. This change has been applied retrospectively andhas decreased the retained profits of the Group at 31st March, 2000 and 2001 by approximately$31,408,000 and $34,112,000 respectively. The profit attributable to shareholders of the Groupfor the year ended 31st March, 2001 was decreased by approximately $2,704,000.

In accordance with the new SSAP 30 “Business combinations”, goodwill arising from acquisitionsoccurring on or after 1st April, 2001 is reported in the balance sheet as a separate asset or, asapplicable, included within investments in associate and jointly controlled entities, and is amortisedusing the straight line method over its estimated useful life. This is a change in accounting policysince in previous years, goodwill on acquisitions was written off directly to reserves in the year ofacquisition. The transition provisions under SSAP 30 encourage but do not require the Group torestate goodwill that was previously written off directly to reserves. Accordingly, the Group haschosen not to restate goodwill that was previously written off directly to reserves. However, theGroup will review, at each balance sheet date, the carrying value of goodwill in accordance withSSAP 31 “Impairment of assets” and recognise or reverse impairment losses, if any.

The adoption of SSAP 26, SSAP 28, SSAP 31 and SSAP 32 had no material impact on the reportedfinancial results of the Group.

In addition to the adoption of the above standards, the Group has adopted the consequentialchanges made to SSAP 10 “Accounting for investments in associates”, SSAP 17 “Property, plant andequipment”, SSAP 18 “Revenue” and SSAP 21 “Accounting for interests in joint ventures”. Otherthan those disclosed in the respective notes to the financial statements, the Group considers thatthe consequential changes made to the above SSAPs do not have any material impact on thefinancial statements of the Group.

Unless otherwise stated, the 2001 comparative figures presented herein have incorporated theeffect of adjustments, where applicable, resulting from the adoption of the new accountingstandards above.

c. Basis of consolidation

The consolidated financial statements of the Group include the accounts of the Company and theenterprises that it controls. The results of subsidiaries acquired or disposed of during the year areconsolidated from or to their effective dates of acquisition or disposal. The equity and net incomeattributable to minority shareholders’ interests are shown separately in the Group’s balance sheetand income statement respectively.

Intragroup balances and transactions and resulting unrealised profits are eliminated in full. Unrealisedlosses resulting from intragroup transactions are eliminated unless cost cannot be recovered.Consolidated financial statements are prepared using uniform accounting policies for like transactionsand other events in similar circumstances.





d. Goodwill

Goodwill represents the excess of the cost of an acquisition over the Group’s interest in the fairvalue of the net identifiable assets and liabilities acquired as at the date of the acquisition.

For acquisitions prior to 1st April, 2001, goodwill was eliminated against reserves in the year ofacquisition. The Group has taken advantage of the transitional provision in SSAP 30 “Businesscombinations” and such goodwill has not been restated.

For acquisitions on or after 1st April, 2001, goodwill is recognised as an asset in the balancesheet. With respect to investments in associate and jointly controlled entities accounted for underthe equity method of accounting, goodwill is included in the carrying amount of the investments.Goodwill is carried at cost less accumulated amortisation and accumulated impairment losses, andis amortised on a straight-line basis over its useful life of 20 years.

On disposal of subsidiaries, associate and jointly controlled entities, the gain or loss on disposal iscalculated by reference to the net assets of the subsidiaries, associate and jointly controlled entitiesat the date of disposal, including the attributable amount of goodwill which has not been chargedto the consolidated income statement.

The carrying amount of goodwill is reviewed annually by the directors and an impairment loss isrecognised where considered necessary.

e. Fixed assets and depreciation

Initial purchases of utensils, cutlery and glassware are capitalised at original historical cost and areincluded in restaurant equipment. Costs of subsequent replacements are charged to the incomestatement in the year of expenditure.

Fixed assets, other than utensils, cutlery, glassware and investment properties, are stated at costless accumulated depreciation and accumulated impairment losses. The cost of an asset comprisesits purchase price and any directly attributable costs of bringing the asset to its working conditionand location for its intended use. Expenditure incurred after the fixed assets have been put intooperation, such as repairs and maintenance and overhaul costs, is normally charged to theincome statement in the period in which it is incurred. In situations where it can be clearlydemonstrated that the expenditure has resulted in an increase in the future economic benefitsexpected to be obtained from the use of the fixed assets, the expenditure is capitalised as anadditional cost of the fixed assets.

39





e. Fixed assets and depreciation (Cont’d)

Depreciation is calculated on the straight-line basis at annual rates estimated to write off the costof each asset over its expected useful life. The annual rates are as follows:

Leasehold improvements Over the unexpired period of the leaseLeasehold land Over the remaining period of the leaseBuildings 2.5%Furniture, restaurant and other equipment 12.5% to 20%

The useful lives of assets and depreciation methods are reviewed periodically.

When assets are sold or retired, their cost and accumulated depreciation are eliminated from theaccounts and any gain or loss resulting from their disposal is included in the income statement.

f. Investment properties

Investment properties are interests in land and buildings in respect of which construction workand development have been completed and which are held for their long-term investment potential.

Investment properties are included in the balance sheet at open market value, on the basis of anannual valuation by independent professional valuers. Increases in the carrying amount of investmentproperties are credited to the property revaluation reserve in shareholders’ equity. Decreases arefirst offset against increases on earlier valuations in the property revaluation reserve, unless thetotal of this reserve is insufficient to cover a deficit on a portfolio basis, in which case the amountby which the deficit exceeds the total amount in the property revaluation reserve is charged to theincome statement. Where a deficit has previously been charged to the income statement and arevaluation surplus subsequently arises, this surplus is credited to the income statement to theextent of the deficit previously charged.

Upon the disposal of an investment property, the relevant portion of the revaluation reserverealised in respect of previous valuations is released from the property revaluation reserve to theincome statement as part of the profit or loss on disposal of the investment property.

No depreciation is provided on investment properties unless the unexpired lease term is 20 yearsor less, in which case depreciation is provided on the carrying value over the unexpired leaseterm.





g. Trademarks

Trademarks acquired are measured initially at cost. Trademarks are recognised if it is probable thatthe future economic benefits that are attributable to the trademarks will flow to the Group, andthe cost of the trademarks can be measured reliably.

After initial recognition, trademarks are stated at cost less accumulated amortisation and anyaccumulated impairment losses. Trademarks are amortised on a straight-line basis over their estimateduseful lives of 10 to 20 years. The amortisation period and the amortisation method are reviewedannually at each financial year end. The carrying amount of trademarks is reviewed annually bythe directors and an impairment loss is recognised where considered necessary.

h. Subsidiaries

A subsidiary is a company which the Company controls. Control is normally evidenced when theGroup has the power to govern the financial and operating policies of an enterprise so as tobenefit from its activities. In the financial statements of the Company, investment in subsidiaries iscarried at cost less provision for impairment in value where considered necessary by the directors.The results of the subsidiaries are included in the Company’s income statement to the extent ofdividends declared by the subsidiaries.

i. Associate

An associate is an enterprise over which the Group has significant influence, but not control orjoint control, and thereby has the ability to participate in its financial and operating policy decisions.

In the consolidated financial statements, investment in an associate is accounted for under theequity method of accounting, whereby the investment is initially recorded at cost and the carryingamount is adjusted to recognise the Group’s share of the post-acquisition profits or losses of theassociate, distributions received from the associate and other necessary alterations in the Group’sproportionate interest in the associate arising from changes in the equity of the associate that havenot been included in the income statement and less any accumulated impairment losses. TheGroup’s share of post-acquisition results of associates is included in the consolidated incomestatement.

41





j. Jointly controlled entities

A jointly controlled entity is an entity under a contractual arrangement where the Group andother parties undertake an economic activity which is subject to joint control and none of theparticipating parties has unilateral control over the economic activity.

In the consolidated financial statements, the Group’s interest in jointly controlled entities is initiallyrecorded at cost and adjusted thereafter for the post-acquisition change in the Group’s share ofthe net assets of the jointly controlled entities, distributions received from the jointly controlledentities and other necessary alterations in the Group’s proportionate interest in the jointly controlledentities arising from changes in the equity of the jointly controlled entities that have not beenincluded in the income statement and less any accumulated impairment losses. The Group’s shareof post-acquisition results of the jointly controlled entities is included in the consolidated incomestatement.

k. Other investments

Other investments, which include both equity and club debentures, intended to be held for anidentified long term purpose on a continuing basis, are included in the balance sheet at cost lessany provision for impairment in value.

The carrying amounts of other investments are reviewed at each balance sheet date to assesswhether the fair values have declined below the carrying amounts. When such a decline hasoccurred, the carrying amounts are reduced and the reduction is recognised as an expense in theincome statement unless there is evidence that the decline is temporary.

Provisions against the carrying value of other investments are reversed to the income statementwhen the circumstances and events that led to the write-downs or write-offs cease to exist andthere is persuasive evidence that the new circumstances and events will persist for the foreseeablefuture.

Upon disposal of other investments, any profit or loss thereon is accounted for in the incomestatement.

l. Short-term investments

Short-term investments are listed shares carried at fair value in the balance sheet. Any unrealisedholding gain or loss on short-term investments is recognised in the income statement in the periodwhen it arises.

Upon disposal of short-term investments, any profit or loss thereon is accounted for in the incomestatement.





m. Stocks

Stocks comprise mainly food and consumable stores. Stocks are stated at the lower of cost and netrealisable value. Cost is based on the first-in, first-out cost formula and comprises all costs ofpurchase, costs of conversion and other costs incurred in bringing the stocks to their presentlocation and condition. Net realisable value is the estimated selling price in the ordinary course ofbusiness less the estimated costs of completion and the estimated costs necessary to make thesale. Provision is made for obsolete, slow-moving or defective items where appropriate.

n. Cash and cash equivalents

Cash represents cash on hand and placements with banks or other financial institutions which arerepayable on demand.

Cash equivalents represent short-term, highly liquid investments which are readily convertible intoknown amounts of cash with original maturities of three months or less and that are subject to aninsignificant risk of change in value.

o. Turnover

Turnover comprises (i) the value of sales in the normal course of the restaurant and cateringbusinesses and (ii) rental income.

p. Revenue recognition

Provided it is probable that the economic benefits associated with a transaction will flow to theGroup and the revenue and costs, if applicable, can be measured reliably, turnover and otherrevenue are recognised on the following bases:

(i) Sales of goods and services

Sales of goods and services are recognised when the significant risks and rewards of ownershipof the goods have been transferred or services are rendered.

(ii) Rental income

Rental income is recognised when rentals become due and receivable.

43





p. Revenue recognition (Cont’d)

(iii) Interest income

Interest income from bank placements is recognised on a time proportion basis on theprincipal outstanding and at the rate applicable.

q. Cost of sales

Cost of sales represents costs which vary directly or indirectly with the level of sales of the Group. Itcomprises cost of stocks and operating costs incurred to generate sales of goods and services, andrental income. The operating costs include mainly operating lease rentals, staff costs, utility costsand depreciation of fixed assets incurred by quick service restaurants, fast casual dining, institutionalcatering and specialty restaurant chains, and outgoings for rental income.

r. Deferred taxation

Deferred taxation is provided under the liability method in respect of timing differences betweenprofit as computed for taxation purposes and profit as stated in the financial statements to theextent that it is probable that a liability or an asset will crystallise.

s. Operating leases

Leases where substantially all the risks and rewards of ownership of the leased assets remain withthe lessors are accounted for as operating leases. Rentals applicable to such leases are charged tothe income statement on a straight-line basis over the period of the relevant leases.

t. Foreign currencies

Companies within the Group maintain their books and records in the primary currencies of theirrespective countries (the “functional currencies”).

In the financial statements of the individual companies, monetary assets and liabilities denominatedin other currencies at the balance sheet date are translated into the respective functional currenciesat rates of exchange in effect at the balance sheet date. Transactions in other currencies duringthe year are translated into the respective functional currencies at rates of exchange in effect atthe time of the transactions. Exchange differences are dealt with in the income statements of theindividual companies.





t. Foreign currencies (Cont’d)

For the purpose of consolidation, all assets and liabilities of subsidiaries other than those originallyfunded in Hong Kong dollars are translated into Hong Kong dollars at rates of exchange in effectat the balance sheet date; those originally funded by Hong Kong dollars are translated at historicalrates. All income and expense items are translated at the monthly average rates of exchange overthe year. Exchange differences arising on such translation are credited or charged to the exchangetranslation reserve.

u. Provisions

A provision is recognised when the Group has a present obligation (legal or constructive) as aresult of a past event and it is probable (i.e. more likely than not) that an outflow of resourcesembodying economic benefits will be required to settle the obligation, and a reliable estimate canbe made of the amount of the obligation. Provisions are reviewed at each balance sheet date andadjusted to reflect the current best estimate. Where the effect of the time value of money ismaterial, the amount of a provision is the present value of the expenditures expected to berequired to settle the obligation.

v. Impairment of assets

Fixed assets (other than investment properties), trademarks, investments in subsidiaries, associateand jointly controlled entities are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not be recoverable. Wheneverthe carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognisedin the income statement. The recoverable amount is the higher of an asset’s net selling price andvalue in use. The net selling price is the amount obtainable from the sale of the asset in an arm’slength transaction while value in use is the present value of estimated future cash flows expectedto arise from the continuing use of the asset and from its disposal at the end of its useful life.Recoverable amounts are estimated for individual assets or, if it is not possible, for the cash-generating unit to which the assets belong.

Reversal of impairment losses recognised in prior years is recorded when the impairment lossesrecognised for the asset no longer exist or have decreased. The reversal is recorded in the incomestatement.

45





w. Contingencies

Contingent liabilities are not recognised in the financial statements. They are disclosed unless thepossibility of an outflow of resources embodying economic benefits is remote.

A contingent asset is not recognised in the financial statements but disclosed when an inflow ofeconomic benefits is probable.

x. Subsequent events

Post-year-end events that provide additional information about the Group’s position at the balancesheet date or those that indicate the going concern assumption is not appropriate (“AdjustingEvents”) are reflected in the financial statements. Post-year-end events that are not AdjustingEvents are disclosed in the notes when material.

y. Use of estimates

The preparation of financial statements in conformity with accounting principles generally acceptedin Hong Kong requires management to make estimates and assumptions that affect certain reportedamounts and disclosures. Accordingly, actual results could differ from those estimates.

3. SEGMENT INFORMATION

No segment information is provided as over 90% of the turnover and contribution to the Group’sresults are attributable to the restaurants and catering services in Hong Kong.

4. TURNOVER AND OTHER REVENUE, NET2002 2001$’000 $’000

Sales of goods and services 2,588,338 2,522,033Rental income 25,209 18,293

Total turnover 2,613,547 2,540,326

Interest income 31,244 39,698Management and service fee income 4,697 4,075Net gain/(loss) on disposals of fixed assets 14,479 (6,141)Sundry income 10,676 16,908

Total other revenue, net 61,096 54,540

2,674,643 2,594,866




5. PROFIT BEFORE TAXATION

The consolidated profit before taxation was determined after charging and crediting the following:

2002 2001$’000 $’000

(Note 27)

After charging

Operating lease rentals in respect of rented premises 290,789 275,963Interest expense on bank overdrafts and loans wholly

repayable within five years 21,417 25,987Depreciation of fixed assets 116,029 114,524Unrealised loss on short-term investments 1,065 611Realised loss on disposal of other investments – 5Cost of stocks sold 803,818 796,299Amortisation of trademarks 2,704 2,704Amortisation of premium on acquisition of a jointly

controlled entity 570 –Staff costs (including directors’ emoluments) 698,889 681,163Auditors’ remuneration 1,737 2,037

After crediting

Gross rental income from investment properties 9,718 6,679Less: Outgoings (108) (188)

9,610 6,491Other rental income less outgoings 8,856 6,725Exchange gain, net 30 55Realised gain on disposals of short-term investments 1,280 –Realised gain on disposals of other investments 1 –

47




6. DIRECTORS’ AND FIVE HIGHEST PAID INDIVIDUALS’ EMOLUMENTS

a. Details of directors’ emoluments pursuant to Section 161 of the Companies Ordinance and theListing Rules of The Stock Exchange of Hong Kong Limited (the “SEHK”) are as follows:

2002 2001$’000 $’000

Fees– Executive directors 200 200– Non-executive directors and independent

non-executive directors 400 400

Other emoluments for executive directors– Basic salaries, gratuities and other allowances 5,011 3,715– Benefits from share options exercised – 1,846– Contributions to pension scheme 422 475– Discretionary bonuses 6,667 6,284

12,700 12,920

No directors waived any emoluments during the year.

Analysis of the emoluments of the executive directors by number of directors and emolumentranges is as follows:

2002 2001

Nil to $1,000,000 1 1$1,000,001 to $1,500,000 1 –$1,500,001 to $2,000,000 – 1$4,500,001 to $5,000,000 1 1$5,000,001 to $5,500,000 1 1

4 4

The emoluments of all non-executive directors were below $1,000,000.




6. DIRECTORS’ AND FIVE HIGHEST PAID INDIVIDUALS’ EMOLUMENTS (Cont’d)

b. Details of emoluments earned by the five highest paid individuals (including directors and employees)are as follows:

2002 2001$’000 $’000

Directors’ fees 150 150Basic salaries, gratuities and other allowances 5,293 3,985Benefits from share options exercised 765 2,378Contributions to pension scheme 486 593Discretionary bonuses 6,797 6,827

13,491 13,933

Three (2001 – Three) of the five highest paid individuals were directors of the Company, and theiremoluments have been included in Note 6a.

During the year, no emoluments were paid by the Group to the five highest paid individuals(including directors and employees) as inducement to join or as compensation for loss of office.

Analysis of the emoluments earned by the five highest paid individuals (including directors andemployees) by number of individuals and emolument ranges is as follows:

2002 2001

Nil to $1,000,000 2 1$1,000,001 to $1,500,000 1 1$1,500,001 to $2,000,000 – 1$4,500,001 to $5,000,000 1 1$5,000,001 to $5,500,000 1 1

5 5

49




7. TAXATION

The Company is exempted from taxation in Bermuda until 2016. Hong Kong profits tax has beenprovided at the rate of 16% (2001 – 16%) on the estimated assessable profits for the year. Overseastaxation has been calculated on the estimated assessable profits for the year at the tax rates prevailingin the respective jurisdictions of countries in which the Group operates.

Taxation in the consolidated income statement comprises:

2002 2001$’000 $’000

Company and subsidiaries:Hong Kong profits tax 34,298 37,062Overseas taxation 649 261Deferred taxation (Note 21) 4,856 (636)

39,803 36,687Associate:

Hong Kong profits tax 297 117

Jointly controlled entities:Overseas taxation 2,603 1,166

42,703 37,970

8. PROFIT ATTRIBUTABLE TO SHAREHOLDERS

The consolidated profit attributable to shareholders includes a profit of approximately $107,004,000(2001 (as restated) – $94,043,000) dealt with in the financial statements of the Company.




9. DIVIDENDS2002 2001$’000 $’000

(Note 27)Dividends declared or proposed in respect of the year:

– Interim dividend paid: 4.4 cents per share(2001 – 4.4 cents per share) 24,044 24,061

– Final dividend proposed: 17.1 cents per share(2001 – 15.1 cents per share) (i) 93,336 82,690

117,380 106,751

Dividends declared or proposed during the year:– Final dividend for 2001 paid: 15.1 cents per share

(2001 – final dividend for 2000 paid: 12.8 cents per share) 82,690 70,547– Adjustment to final dividend in respect of share options

exercised and shares purchased prior to the dividend payment date (211) (275)– Interim dividend for 2002 paid: 4.4 cents per share

(2001 – interim dividend for 2001 paid: 4.4 cents per share) 24,044 24,061

106,523 94,333

(i) The dividends amounting to approximately $93,336,000 (2001 – $82,690,000) have been declaredor proposed after the balance sheet date but before the financial statements approval date andaccordingly are not recognised as a liability as at the balance sheet date.

10. EARNINGS PER SHARE

Basic earnings per share was calculated based on the consolidated profit attributable to shareholders ofapproximately $280,000,000 (2001 (as restated) – $251,574,000) divided by the weighted averagenumber of ordinary shares outstanding during the year of 546,397,803 shares (2001 – 548,795,754shares).

Diluted earnings per share was calculated based on the consolidated profit attributable to shareholdersof approximately $280,000,000 (2001 (as restated) – $251,574,000) divided by the weighted averagenumber of ordinary shares outstanding during the year adjusted for the effects of all dilutive potentialordinary shares. The weighted average number of ordinary shares used to compute diluted earningsper share was 554,462,694 (2001 – 549,554,693).

Reconciliation of the number of ordinary shares for calculation of basic and diluted earnings per share:

2002 2001Weighted average number of ordinary shares used in

calculating basic earnings per share 546,397,803 548,795,754Deemed issue of ordinary shares for no consideration 8,064,891 758,939

Weighted average number of ordinary shares used incalculating diluted earnings per share 554,462,694 549,554,693

51




11. FIXED ASSETS

a. Movements in fixed assets (consolidated) were as follows:

2002

Furniture,restaurant

Investment Land and Leasehold and otherproperties buildings improvements equipment Total

$’000 $’000 $’000 $’000 $’000

Cost or valuation

Beginning of year 97,350 560,847 235,705 711,782 1,605,684Revaluation (4,050) – – – (4,050)Additions 22,500 37,818 19,143 146,996 226,457Disposals – (43,639) (10,074) (38,200) (91,913)

End of year 115,800 555,026 244,774 820,578 1,736,178

Representing

At cost – 555,026 244,774 820,578 1,620,378At professional valuation

in 2002 115,800 – – – 115,800

115,800 555,026 244,774 820,578 1,736,178

Accumulated depreciation

Beginning of year – 84,701 170,928 459,901 715,530Charge for the year – 10,339 16,918 88,772 116,029Disposals – (10,507) (9,455) (29,265) (49,227)

End of year – 84,533 178,391 519,408 782,332

Net book value

End of year 115,800 470,493 66,383 301,170 953,846

Beginning of year 97,350 476,146 64,777 251,881 890,154




11. FIXED ASSETS (Cont’d)

b. Details of investment properties and land and buildings

The carrying amount of investment properties and land and buildings (consolidated) comprised:

Investment properties Land and buildings2002 2001 2002 2001$’000 $’000 $’000 $’000

Situated in Hong Kong 115,800 97,350 405,628 409,455Situated in the PRC – – 47,766 49,486Situated in Macau – – 17,099 17,205

115,800 97,350 470,493 476,146

Investment properties and land and buildings situated in Hong Kong and Macau are held underlong-term leases. Land and buildings situated in the PRC are held under land use rights for aperiod of 50 years expiring between January 2031 and February 2041.

The investment properties were revalued as at 31st March, 2002 on an open market value basis byFPD Savills (Hong Kong) Limited, independent professional valuers, on 10th April, 2002. As a resultof the appraisal, a decrease in value of the Group’s investment properties of $4,050,000 as at 31stMarch, 2002 (2001 – $705,000) was charged to the revaluation reserve.

53




12. TRADEMARKS

Movements in trademarks (consolidated) were as follows:

2002 2001$’000 $’000

(Note 27)

Cost

Beginning and end of year 64,694 64,694

Accumulated amortisation and impairment losses

Beginning of year 36,532 33,408Amortisation for the year 2,704 2,704Provision for impairment losses – 420

End of year 39,236 36,532

Net book value

End of year 25,458 28,162

Beginning of year 28,162 31,286

The trademarks mainly represent the intellectual properties relating to the ‘Ah Yee Leng Tong’ and ‘TheSpaghetti House’ operations.

The directors are of the opinion that the fair values of the trademarks were not less than their carryingvalues as at 31st March, 2002.




13. INVESTMENT IN SUBSIDIARIES

In the Company’s balance sheet, investment in subsidiaries comprised:

2002 2001$’000 $’000

Unlisted shares, at cost 331,802 331,802Due from subsidiaries 75,289 81,932

407,091 413,734

Details of principal subsidiaries as at 31st March, 2002 are set out on pages 66 to 69. None of thesubsidiaries had any loan capital in issue at any time during the year ended 31st March, 2002.

The amounts due from subsidiaries are unsecured, non-interest bearing and not repayable within thenext twelve months.

The directors are of the opinion that the underlying value of the subsidiaries was not less than thecarrying value as at 31st March, 2002.

14. INVESTMENT IN AN ASSOCIATE

Investment in an associate (consolidated) represented:2002 2001$’000 $’000

Share of net assets of the associate 776 814Due from the associate 60 –Loan to the associate – 800

836 1,614

a. Details of the associate as at 31st March, 2002 were as follows:

Particulars of Equity interest PrincipalPlace and date issued shares attributable activities/Place

Name of incorporation held to the Group of operation

Miracle Time Hong Kong/ Ordinary shares 20% Operation ofEnterprises Limited 21st February, 2000 of $1 each a restaurant/

Hong Kong

b. The amount due from the associate is unsecured, non-interest bearing and has no fixed repaymentterms.

c. The directors are of the opinion that the underlying value of the associate was not less than itscarrying amount as at 31st March, 2002.

55




15. INVESTMENT IN JOINTLY CONTROLLED ENTITIES

Investment in jointly controlled entities (consolidated) represented:

2002 2001$’000 $’000

Share of net (liabilities)/assets of the jointly controlled entities (6,615) 13,549Premium on acquisition of a jointly controlled entity less amortisation 29,823 –Due from jointly controlled entities 2,509 790

25,717 14,339

a. On 22nd November, 2001, the Group acquired an interest in a jointly controlled entity whichmanages and operates fast food and casual dining restaurants known as “China Inn”, “OishiiKitchen” and “Dai Bai Dang” in the United States for approximately $7,157,000. The excess of thepurchase consideration over the Group’s share of net identifiable assets and liabilities is recognisedas an asset and amortised over 20 years.

b. Details of the jointly controlled entities as at 31st March, 2002 were as follows:

Percentage ofinterest in

ownership/Place and date voting power/ Principal activities/

Name of incorporation profit sharing Place of operation

Manchu Wok Enterprises, Inc Canada/ 48% Operation of restaurants/(“MWEI”) 28th July, 2000 The United States and

Canada

Manchu Wok Enterprises II Inc Canada/ 48% Operation of restaurants/(“MWEII”) 22nd November, 2001 The United States

c. The amounts due from the jointly controlled entities are unsecured, non-interest bearing and notrepayable within the next twelve months.

d. The directors are of the opinion that the underlying value of the jointly controlled entities was notless than the carrying amount as at 31st March, 2002.




16. OTHER INVESTMENTS

Other investments (consolidated) represented:2002 2001$’000 $’000

Listed shares, at cost– listed in Hong Kong* 18,183 18,197

Club debentures, at cost 350 350

18,533 18,547

*Quoted market value of listed investments 10,496 9,822

17. TRADE DEBTORS AND CREDITORS

The Group’s sales to customers are mainly on a cash basis. The Group also grants a credit period whichis usually less than 90 days to certain customers of the Group’s institutional catering services and foodmanufacturing businesses.

As at 31st March, 2002, approximately 87% (2001 – 90%) of the Group’s trade debtors were aged lessthan 60 days while over 99% (2001 – 99%) of the trade creditors were aged less than 60 days.

18. SHORT-TERM INVESTMENTS

Short-term investments (consolidated) represented:2002 2001$’000 $’000

Listed shares, at market value– listed in Hong Kong 6,448 9,169

19. SHORT-TERM BANK BORROWINGS

Short-term bank borrowings (consolidated) comprised:2002 2001$’000 $’000

Bank overdrafts and loans– with original maturity within three months 150,000 145,000– with original maturity more than three months – 90,000

Current portion of non-current bank loans (Note 20) – 1,541

150,000 236,541

Secured – 166,541Unsecured 150,000 70,000

150,000 236,541

57




20. NON-CURRENT BANK LOANS

Non-current bank loans (consolidated) comprised:2002 2001$’000 $’000

Secured bank loans repayable within a period– not exceeding one year – 1,541– of more than one year but not exceeding two years – 40,000

– 41,541Less: Amounts repayable within one year included

under short-term bank borrowings (Note 19) – (1,541)

– 40,000Unsecured bank loans repayable within a period of

– more than one year but not exceeding two years 30,000 60,000– more than two years but not exceeding five years 50,000 –

80,000 100,000

21. DEFERRED TAXATION

Deferred taxation (consolidated) resulted from the following:2002 2001$’000 $’000

Accelerated depreciation allowances for taxation purposes 16,235 11,379

Movements in deferred taxation (consolidated) were as follows:2002 2001$’000 $’000

Beginning of year 11,379 12,015Provision for (Write-back of) net timing differences (Note 7) 4,856 (636)

End of year 16,235 11,379

There was no significant unprovided deferred taxation.

Deferred taxation is not provided on the property revaluation surplus because the realisation of thesurplus will not be subject to taxation.




22. SHARE CAPITAL AND SHARE OPTIONS

a. Share capital2002 2001

Number of Nominal Number of Nominalshares value shares value

’000 $’000 ’000 $’000AuthorisedOrdinary shares of $0.10 each 1,000,000 100,000 1,000,000 100,000

Issued and fully paidBeginning of year 546,888 54,689 550,658 55,066Shares issued under the share option

schemes (Note 22b) 1,460 146 2,440 244Shares purchased and cancelled by

the Company (Note i) (2,622) (262) (6,210) (621)

End of year 545,726 54,573 546,888 54,689

(i) During the year, the Company purchased and cancelled 2,622,000 (2001 – 6,210,000) of itsordinary shares of $0.10 each on the SEHK at a price range of $3.825 to $4.500 (2001 –$2.800 to $3.250) per share for total consideration of approximately $10,767,000 (2001 –$18,718,000) including related expenses.

b. Share options

As at 31st March, 2002, the share options outstanding under the share option scheme adopted on30th January, 1991 were exercisable at $2.232 to $2.950 per share during the period from 24thNovember, 1997 to 31st March, 2013.

Details of share options are as follows:Number of share options

Cancelled as

Exercised a result of

Subscription Beginning during Lapsed termination of

Date of grant price of year the year on expiry employment End of year

1st August, 1992 $2.820 740,000 (740,000) – – –

1st November, 1994 $2.232 820,000 (720,000) – – 100,000

4th November, 1999 $2.950 25,500,000 – – (1,100,000) 24,400,000

27,060,000 (1,460,000) – (1,100,000) 24,500,000

No share options have been granted by the Company under the new share option scheme sinceits adoption on 19th September, 2000.

59




23. RESERVES

Movements in reserves were as follows:

Capital Exchange Property

Share redemption translation Capital revaluation Contributed Retained

premium reserve reserve reserve reserve surplus profits Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Consolidated

At 1st April, 2000, as previously

reported 125,958 35,212 (1,186) 11,704 7,807 202,019 662,081 1,043,595

Effect of adopting SSAP 9

(revised) (Note 2b) – – – – – – 70,547 70,547


(Note 2b) – – – – – – (31,408) (31,408)

At 1st April, 2000, as restated 125,958 35,212 (1,186) 11,704 7,807 202,019 701,220 1,082,734

Premium on shares issued on

exercise of share options 4,471 – – – – – – 4,471

Premium on repurchase of

shares (18,097) – – – – – – (18,097)

Transfer of reserves on

repurchase of shares – 18,718 – – – (18,718) – –

Deficit on revaluation of

investment properties – – – – (705) – – (705)

Goodwill arising on acquisition

of a jointly controlled entity – – – (14,174) – – – (14,174)

Exchange differences arising on

consolidation – – 2,365 – – – – 2,365

Profit attributable to

shareholders, as restated – – – – – – 251,574 251,574

Dividends, as restated (i) – – – – – – (94,333) (94,333)

At 31st March, 2001, as restated 112,332 53,930 1,179 (2,470) 7,102 183,301 858,461 1,213,835

Representing:

Reserves 1,131,145

2001 final dividends proposed 82,690

1,213,835

The Company and subsidiaries 112,332 53,930 (1,273) (2,470) 7,102 183,301 855,873 1,204,573

Associates – – – – – – 614 614

Jointly controlled entities – – 2,452 – – – 1,974 8,648

112,332 53,930 1,179 (2,470) 7,102 183,301 858,461 1,213,835




23. RESERVES (Cont’d)

Capital Exchange Property

Share redemption translation Capital revaluation Contributed Retained

premium reserve reserve reserve reserve surplus profits Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Consolidated

At 1st April, 2001, as previously

reported 112,332 53,930 1,179 (2,470) 7,102 183,301 809,883 1,165,257


(revised) (Note 2b) – – – – – – 82,690 82,690


(Note 2b) – – – – – – (34,112) (34,112)

At 1st April, 2001, as restated 112,332 53,930 1,179 (2,470) 7,102 183,301 858,461 1,213,835

Premium on shares issued on

exercise of share options 3,548 – – – – – – 3,548

Premium on repurchase of

shares (10,505) – – – – – – (10,505)

Transfer of reserves on

repurchase of shares – 10,767 – – – (10,767) – –

Deficit on revaluation of

investment properties – – – – (4,050) – – (4,050)

Goodwill arising on acquisition

of a jointly controlled entity – – – – – – – –

Exchange differences arising

on consolidation – – (167) – – – – (167)

Profit attributable to

shareholders – – – – – – 280,000 280,000

Dividends (i) – – – – – – (106,523) (106,523)

At 31st March, 2002 105,375 64,697 1,012 (2,470) 3,052 172,534 1,031,938 1,376,138

Representing:

Reserves 1,282,802

Proposed dividends 93,336

1,376,138

The Company and subsidiaries 105,375 64,697 (1,316) (2,470) 3,052 172,534 1,025,043 1,366,915

Associates – – – – – – 575 575

Jointly controlled entities – – 2,328 – – – 6,320 8,648

105,375 64,697 1,012 (2,470) 3,052 172,534 1,031,938 1,376,138

61





CapitalShare redemption Contributed Retained

premium reserve surplus profits Total$’000 $’000 $’000 $’000 $’000

Company

At 1st April, 2000, as previously restated 125,958 35,212 211,289 1,063 373,522Effect of adopting SSAP 9 (revised) (Note 2b) – – – (453) (453)

At 1st April, 2000, as restated 125,958 35,212 211,289 610 373,069

Premium on shares issued on exercise ofshare options 4,471 – – – 4,471

Premium on repurchase of shares (18,097) – – – (18,097)Transfer of reserves on repurchase of shares – 18,718 (18,718) – –Profit attributable to shareholders, as

previously reported – – – 106,043 106,043Effect of adopting SSAP 9 (revised) – – – (12,000) (12,000)

Profit attributable to shareholders, as restated – – – 94,043 94,043

Dividends, as previously reported – – – (106,476) (106,476)Effect of adopting SSAP 9 (revised) – – – 12,143 12,143

Dividends, as restated (i) – – – (94,333) (94,333)

At 31st March, 2001, as restated 112,332 53,930 192,571 320 359,153

At 1st April, 2001, as previously reported 112,332 53,930 192,571 630 359,463Effect of adopting SSAP 9 (revised) (Note 2b) – – – (310) (310)

At 1st April, 2001, as restated 112,332 53,930 192,571 320 359,153

Premium on shares issued on exercise ofshare options 3,548 – – – 3,548

Premium on repurchase of shares (10,505) – – – (10,505)Transfer of reserves on repurchase of shares – 10,767 (10,767) – –Profit attributable to shareholders – – – 107,004 107,004Dividends – – – (106,523) (106,523)

At 31st March, 2002 105,375 64,697 181,804 801 352,677





(i) This amount includes dividends declared or proposed in the financial year. Dividends declared orproposed after the balance sheet date are not recognised as a liability and accordingly are notincluded in this amount.

Under the Companies Act of Bermuda, contributed surplus is distributable to shareholders, subject tothe condition that the Company cannot declare or pay a dividend, or make a distribution out ofcontributed surplus if (i) it is, or would after the payment be, unable to pay its liabilities as they becomedue, or (ii) the realisable value of its assets would thereby be less than the aggregate of its liabilities andits issued share capital and share premium account.

24. PENSION SCHEME

The Mandatory Provident Fund Scheme (“MPF”) and a defined benefit scheme are provided to allemployees eligible and employed by the Group in Hong Kong.

On 1st December, 2000, the Group arranged for its employees in Hong Kong to join the MPF, adefined contribution scheme managed by an independent trustee. Under the MPF, each of the Groupand the eligible employees in Hong Kong make monthly mandatory contributions to the scheme at 5%of the employees’ relevant income as defined under the Mandatory Provident Fund Schemes Ordinance.The mandatory contributions by each party are subject to a maximum of $1,000 per month.

The Group’s contribution to the defined benefit scheme is calculated on an actuarial basis. The benefitentitlement under the scheme is calculated based on the final salary of the staff and the length ofservice with the Group. The scheme was approved by the Government of HKSAR and continued afterthe implementation of MPF.

The pension schemes which cover the PRC employees are defined contribution schemes at variousapplicable rates of monthly salary that are in accordance with the local practice and regulations.

63




24. PENSION SCHEME (Cont’d)

The aggregate employer’s contributions, net of forfeited contributions, amounted to:

2002 2001$’000 $’000

Employer’s contribution under the defined contribution schemes 903 4,195

Less: forfeited contributions utilised to offset employer’s contribution to the defined contribution schemes – (745)

903 3,450

Employer’s contribution under the defined benefit scheme 5,893 6,841

Employer’s contribution under the MPF 27,234 8,738

34,030 19,029

The contributions by the Group were charged to the income statement on an accrual basis.

The latest actuarial report on the defined benefit scheme was prepared by Ms. Kim Wong and Mr.Calvin Wu, Fellows of the Society of Actuaries, whose report dated 8th September, 2000 showed thatthe scheme was fully funded on a variation of the aggregate method. The market value of the schemeassets as at 31st March, 2000 was approximately $106,559,000, representing 123% of the fund’sdiscontinuance liabilities at that date. The actuarial assumptions used included rate of return, salaryescalation rate, withdrawal rates, mortality rates and rate of ill health.




25. COMMITMENTS AND CONTINGENT LIABILITIES

a. Lease commitments

The Group’s total future minimum lease commitments under operating leases, were as follows:

2002 2001$’000 $’000

Land and buildings– Not later than one year 258,992 238,857– Later than one year and not later than five years 389,081 337,906– Later than five years 9,571 16,945

657,644 593,708

The above lease commitments only include commitments for basic rentals, and do not includecommitments for additional rentals payable, if any, when turnover of individual restaurants exceedsa pre-determined level as it is not possible to determine in advance the amount of such additionalrentals.

b. Capital commitments

The Group had the following capital commitments which have not been provided in the consolidatedfinancial statements:

2002 2001$’000 $’000

Authorised and contracted for 6,943 6,336Authorised but not contracted for 122,843 149,934

129,786 156,270

c. Guarantees

As at 31st March, 2002, the Company had given guarantees totalling approximately $861,000,000(2001 – $1,103,000,000) to financial institutions in connection with loans granted to its subsidiariesand jointly controlled entities.

65




26. NOTE TO CONSOLIDATED CASH FLOW STATEMENT

Analysis of changes in financing during the year is as follows:

2002

Share Bankcapital loans with

and share maturity overpremium three months Total

$’000 $’000 $’000

At 1st April, 2000 181,024 187,814 368,838

Net cash outflow from financing (14,003) 3,727 (10,276)

At 1st April, 2001 167,021 191,541 358,562

Net cash outflow from financing (7,073) (111,541) (118,614)

At 31st March, 2002 159,948 80,000 239,948

27. COMPARATIVE FIGURES

The 2001 comparative figures presented incorporate the effect of adjustments resulting from the changein accounting policies for dividends proposed or declared after the balance sheet date and amortisationof trademarks (see Note 2b).



The following is a list of the principal subsidiaries whose operations and assets materially affect the results orassets of the Group.

Country of Class of Percentageincorporation Issued shares of shares Principal

Name of subsidiary and operation share capital held held * activities

Ah Yee Leng Tong Hong Kong HK$600,000 Ordinary 100% CateringRestaurants Limited

Amigo Mio Limited Hong Kong HK$20 Ordinary 100% Catering

Ashlone Limited Hong Kong HK$1,320,000 Ordinary 100% Catering

Asia Pacific Catering Hong Kong HK$20 Ordinary 100% CateringCorporation Limited

Bamburgh Limited Hong Kong HK$20 Ordinary 100% Catering

Barneston Limited Hong Kong HK$20 Ordinary 100% Investmentholding

Barson Development Hong Kong HK$10,000 Ordinary 100% PropertyLimited investment

Birgitta Limited Hong Kong HK$900,000 Ordinary 100% Investmentholding

Bloomcheer Limited Hong Kong HK$500,000 Ordinary 100% Catering

Bravo le Café Limited Hong Kong HK$2 Ordinary 100% Catering

Brilliantwin Limited Hong Kong HK$2 Ordinary 100% Catering

Café de Coral Assets British Virgin US$1 Ordinary 100% InvestmentLimited Islands holding

Café de Coral Central Hong Kong HK$20 Ordinary 100% FoodProcessing Limited processing

Café de Coral (China) Hong Kong HK$40,000,000 Ordinary 100% InvestmentLimited holding

Café de Coral (Denmark) Denmark DKK125,000 Ordinary 100% InvestmentApS holding

Café de Coral Development British Virgin US$1 Ordinary 100% InvestmentLimited* Islands holding

67





Café de Coral Fast Food Hong Kong HK$20 Ordinary 100% CateringLimited

Café de Coral Group Hong Kong HK$44,894,967 Ordinary 100% CateringLimited

Café de Coral (Guangzhou) The PRC HK$21,000,000 Ordinary 100% CateringCatering CompanyLimited

Café de Coral (Macau) Macau MOP300,000 Ordinary 70% CateringLimited

Café de Coral Overseas British Virgin US$1 Ordinary 100% InvestmentLimited Islands holding

Café de Coral Properties British Virgin US$1 Ordinary 100% InvestmentLimited Islands holding

Charley’s Chicken Limited Hong Kong HK$2 Ordinary 100% Catering

City Energy Limited Hong Kong HK$200,000 Ordinary 100% Propertyinvestment

Dai Lo Foo (Holdings) Hong Kong HK$1,340,000 Ordinary 100% CateringLimited

Diners Court Management Hong Kong HK$2 Ordinary 100% CateringLimited

Dongguan Continental The PRC RMB13,000,000 Ordinary 100% FoodFoods Limited processing

Eldoon Limited Hong Kong HK$10,000 Ordinary 100% Catering

Exo Enterprises Limited Hong Kong HK$4,000,000 Ordinary 100% Catering

Foshan Café de Coral The PRC HK$6,000,000 Ordinary 100% CateringCatering CompanyLimited

Gateway City Limited Hong Kong HK$20 Ordinary 100% Catering





Glory Congee and Noodles Hong Kong HK$2 Ordinary 100% InvestmentFood Limited holding

(securities)

Goodton Development Hong Kong HK$10,000 Ordinary 100% InvestmentLimited holding

Grand Seasons (Central) Hong Kong HK$10,000 Ordinary 100% CateringFood and BeveragesCaterers CompanyLimited

Interface Consultants British Virgin US$1 Ordinary 100% Provision ofLimited Islands consultancy

services

Invol Resources Limited Hong Kong HK$6,125,000 Ordinary 100% Property(incorporation)/ investmentThe PRC(operation)

Jiangmen Café de Coral The PRC HK$5,000,000 Ordinary 100% CateringCatering CompanyLimited

Kolink Enterprises Limited Hong Kong HK$2 Ordinary 100% Leasing ofpremisesspace

Maradona Limited Hong Kong HK$20 Ordinary 100% Catering

Paramount Success Limited Hong Kong HK$2 Ordinary 100% Catering

Radeberg Limited Hong Kong HK$20 Ordinary 100% Investmentholding

Roberto Assets Limited British Virgin US$1 Ordinary 100% InvestmentIslands holding

Samworth Investments British Virgin US$1 Ordinary 100% InvestmentLimited Islands holding

Scanfoods International S.A. The Republic of US$3,000,000 Ordinary 100% InvestmentPanama holding

69





Scanfoods Limited Hong Kong HK$2,100,000 Ordinary 100% Food trading

Shenzhen Café de Coral The PRC HK$12,000,000 Ordinary 100% CateringCatering CompanyLimited

Sheriafort Assets Limited British Virgin US$1 Ordinary 100% InvestmentIslands holding

(securities)

Sparango Limited Hong Kong HK$20 Ordinary 100% Catering

Speedy Chef Limited Hong Kong HK$2 Ordinary 100% Catering

Sturgate Investments British Virgin US$1 Ordinary 100% InvestmentLimited Islands holding

The Spaghetti House Hong Kong HK$10,000,000 Ordinary 100% InvestmentRestaurants Limited holding

Very Nice Fast Food Hong Kong HK$17,025,000 Class A 100% CateringLimited HK$5,675,000 Class B 100%

Weli Company Limited Hong Kong HK$1,000,000 Ordinary 100% Catering

Winfast Holdings Limited Hong Kong HK$10,000 Ordinary 100% Property(incorporation)/ investmentThe PRC(operation)

Worldway Limited Macau MOP300,000 Ordinary 100% Propertyinvestment

Yumi Yumi Caterers Hong Kong HK$6,701,560 Class A 100% CateringLimited HK$2,872,100 Class B 100%

Zhuhai Café de Coral The PRC HK$4,000,000 Ordinary 100% CateringCatering CompanyLimited

* Café de Coral Development Limited is held directly by the Company. All other subsidiaries are held indirectly.

REPORT OF THE AUDITORS


AUDITORS’ REPORT TO THE SHAREHOLDERS OFCAFÉ DE CORAL HOLDINGS LIMITED(Incorporated in Bermuda with limited liability)

We have audited the financial statements on pages 30 to 69 which have been prepared in accordance withaccounting principles generally accepted in Hong Kong.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORSThe company’s directors are responsible for the preparation of financial statements which give a true and fairview. In preparing financial statements which give a true and fair view it is fundamental that appropriateaccounting policies are selected and applied consistently.

It is our responsibility to form an independent opinion, based on our audit, on those financial statementsand to report our opinion to you.

BASIS OF OPINIONWe conducted our audit in accordance with Statements of Auditing Standards issued by the Hong KongSociety of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amountsand disclosures in the financial statements. It also includes an assessment of the significant estimates andjudgements made by the directors in the preparation of the financial statements, and of whether theaccounting policies are appropriate to the circumstances of the company and the group, consistentlyapplied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which weconsidered necessary in order to provide us with sufficient evidence to give reasonable assurance as towhether the financial statements are free from material misstatement. In forming our opinion we alsoevaluated the overall adequacy of the presentation of information in the financial statements. We believethat our audit provides a reasonable basis for our opinion.

OPINIONIn our opinion the financial statements give a true and fair view of the state of affairs of the company andthe group as at 31st March, 2002 and of the profit and cash flows of the group for the year then ended andhave been properly prepared in accordance with the disclosure requirements of the Hong Kong CompaniesOrdinance.

PricewaterhouseCoopersCertified Public Accountants


71

FIVE YEAR SUMMARY


FOR THE FIVE YEARS ENDED 31ST MARCH, 2002(Amounts expressed in Hong Kong dollars)

CONSOLIDATED INCOME STATEMENTS

2002 2001 2000 1999 1998

$’000 $’000 $’000 $’000 $’000

Turnover 2,613,547 2,540,326 2,408,822 2,350,904 2,181,544

Cost of sales (2,219,469) (2,167,477) (2,039,906) (2,048,894) (1,894,753)

Gross profit 394,078 372,849 368,916 302,010 286,791

Administrative expenses (119,501) (115,730) (125,225) (116,930) (108,076)

Other revenue, net 61,096 54,540 49,604 55,806 42,424

Profit from operations 335,673 311,659 293,295 240,886 221,139

Finance costs (21,417) (25,987) (39,514) (52,441) (52,587)

314,256 285,672 253,781 188,445 168,552

Share of profit of an associate 1,499 731 – – –

Share of profit of jointly controlled entities 6,948 3,141 – – –

Profit before taxation 322,703 289,544 253,781 188,445 168,552

Taxation (42,703) (37,970) (34,963) (16,005) (29,371)

Profit attributable to shareholders 280,000 251,574 218,818 172,440 139,181

Dividends (106,523) (94,333) (78,992) (71,300) (71,083)

Retained profit for the year 173,477 157,241 139,826 101,140 68,098

Retained profit brought forward 858,461 701,220 561,394 460,254 392,156

Retained profit carried forward 1,031,938 858,461 701,220 561,394 460,254

Basic earnings per share 51.24 cents 45.84 cents 39.63 cents 32.81 cents 26.92 cents

Diluted earnings per share 50.50 cents 45.78 cents 39.55 cents 32.75 cents 26.91 cents

CONSOLIDATED BALANCE SHEETS

2002 2001 2000 1999 1998

$’000 $’000 $’000 $’000 $’000

ASSETSNon-current assetsFixed assets 953,846 890,154 861,413 873,269 921,383

Construction in progress – – 5,338 3,364 1,423

Trademarks 25,458 28,162 31,286 34,590 38,313

Notes receivable – – – – 232,687

Investment in an associate 836 1,614 – – –

Investment in jointly controlled entities 25,717 14,339 – – –

Other investments 18,533 18,547 18,562 18,562 12,992

1,024,390 952,816 916,599 929,785 1,206,798

FIVE YEAR SUMMARY


FOR THE FIVE YEARS ENDED 31ST MARCH, 2002(Amounts expressed in Hong Kong dollars)

CONSOLIDATED BALANCE SHEETS (Cont’d)

2002 2001 2000 1999 1998

$’000 $’000 $’000 $’000 $’000

Current assetsStocks, at cost 48,836 49,375 54,188 49,866 54,107

Prepayments and deposits 148,163 122,154 101,369 97,087 100,162

Trade and other debtors 26,561 25,475 16,092 15,903 19,225

Short-term investment in promissory notes – – – 257,119 24,432

Short-term investments 6,448 9,169 – – –

Cash and bank placements 650,981 681,313 524,714 419,757 141,318

880,989 887,486 696,363 839,732 339,244

Current liabilitiesShort-term bank borrowings 150,000 236,541 221,278 481,294 141,182

Trade creditors 57,096 58,198 52,129 53,367 47,039

Other creditors and accrued liabilities 164,610 153,232 146,780 138,301 133,743

Taxation payable 6,727 12,428 11,424 10,314 7,352

378,433 460,399 431,611 683,276 329,316

Net current assets 502,556 427,087 264,752 156,456 9,928

Total assets less current liabilities 1,526,946 1,379,903 1,181,351 1,086,241 1,216,726

Non-current liabilitiesNon-current bank loans 80,000 100,000 31,536 62,893 389,091

Deferred taxation 16,235 11,379 12,015 9,983 20,683

96,235 111,379 43,551 72,876 409,774

NET ASSETS 1,430,711 1,268,524 1,137,800 1,013,365 806,952

CAPITAL AND RESERVESShare Capital 54,573 54,689 55,066 55,179 50,873

Share Premium 105,375 112,332 125,958 129,707 28,867

Capital Redemption Reserve 64,697 53,930 35,212 27,633 26,785

Exchange Translation Reserve 1,012 1,179 (1,186) (1,007) (1,134)

Capital Reserve (2,470) (2,470) 11,704 11,704 11,704

Property Revaluation Reserve 3,052 7,102 7,807 19,157 19,157

Contributed Surplus 172,534 183,301 202,019 209,598 210,446

Retained Profits 1,031,938 858,461 701,220 561,394 460,254

Total Reserves 1,376,138 1,213,835 1,082,734 958,186 756,079

Shareholders’ equity 1,430,711 1,268,524 1,137,800 1,013,365 806,952

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