Download Correction of Exceptional Items in Interim Results

Please also refer to the published version of this announcement in the South China
Morning Post.
The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this
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disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the
whole or any part of the contents of this announcement.
(incorporated in Hong Kong under the Companies Ordinance)
CLARIFICATION OF INTERIM REPORT 2000
The Board would like to draw shareholders' and potential investors' attention to a correction
made to the Interim Report 2000 issued by the Company on 10 August 2000. The Exceptional
Item in Note 1 to the Interim Results should have shown a loss on disposal of the Group's
15.25% interest in China Southern Glass Holding Co., Ltd. of HK$84,373,000 and not a gain on
disposal of HK$29,529,000. The correction has arisen out of the accounting treatment of the
goodwill of HK$113,901,788 resulted from the Group's acquisition of the 15.25% interest in
China Southern Glass Holding Co., Ltd. which would need to be deducted in calculating the
profits made by the Group on the disposal. Such a correction is a matter of accounting treatment
and does not affect the net assets value or cash flows of the Group.
Deloitte Touche Tohmatsu, who are the auditors to the Company conducted certain informal
specific procedures on the Interim Results before they were issued. These procedures did not
constitute an audit of the Interim Results and no formal report was issued to the Board or the
Audit Committee of the Board. In advising the Company on other matters recently, Deloitte
Touche Tohmatsu carried out a more detailed analysis and came to the conclusion that the
goodwill of HK$113,901,788 is required to be deducted from the gain on disposal in accordance
with generally accepted accounting principles of Hong Kong. The Board regrets that such
discrepancy was not noted in the procedures carried out in relation to the Interim Results and the
Board conveys its sincere apologies for any confusion caused to shareholders and potential
investors of the Company.
1
CHINA MERCHANTS – Announcement
(22 December 2000)
Please also refer to the published version of this announcement in the South China
Morning Post.
Correction of Exceptional Items in Interim Results
The Board of Directors (the “Board”) of China Merchants Holdings (International) Company
Limited (the “Company”) refers to the Interim Report for the six months ended 30 June 2000,
containing the unaudited consolidated interim results of the Company and its subsidiaries (the
“Group”), issued by the Company on 10 August 2000. The Board would like to draw
shareholders' and potential investors' attention to a correction made to the Interim Report and
would like to advise that the amount for exceptional items (the “Exceptional Items”) in the profit
and loss accounts should be HK$30,430,000 instead of HK$144,332,000.
Accounting Treatment on Disposal of China Southern Glass Holding Co., Ltd.
As referred to in a Circular to Shareholders issued by the Company on 9 June 1998, the
Company acquired a 15.25 per cent. interest in China Southern Glass Holding Co., Ltd. as a
result of a series of transactions and such transactions resulted in goodwill in the aggregate
amount of HK$113,901,788 arising in the consolidated accounts of the Group (the “Goodwill”).
In July 1998, the Company obtained an order from the High Court of the Hong Kong Special
Administrative Region to reduce its share premium account by HK$2,339,984,835 and this
amount was credited to a capital (non-distributable) reserve account of the Company. The
amount in the capital reserve account was applied for, among others, the purpose of setting off
the entire Goodwill.
The Group disposed of the 15.25 per cent. interest in China Southern Glass Holding Co., Ltd. to
China Merchants Holdings (Hong Kong) Company Limited, the intermediate holding company
of the Company, for a consideration of HK$273,800,000 and such disposal was completed on 26
June 2000. The discrepancy of HK$113,901,788 between the amended figure for the Exceptional
Items and the original figure is equivalent to the Goodwill, which was not taken into account in
calculating the gain or loss made by the Group on such disposal. The write-off of the Goodwill
was made pursuant to a Court order for reduction of share premium account which was granted
specifically for the purpose of writing off goodwill arising from acquisitions by the Group. It
was on the basis of such Court order that the Goodwill had not been taken into account in
calculating the gain or loss on disposal. Deloitte Touche Tohmatsu, who are the auditors to the
Company, conducted certain informal specific procedures on the Interim Results before they
were issued by the Company. These procedures did not constitute an audit of the Interim Results
and no formal report was issued to the Board or to the Audit Committee of the Board.
In advising the Company on other matters recently, Deloitte Touche Tohmatsu carried out a more
detailed analysis and came to the conclusion that under generally accepted accounting principles
of Hong Kong, the entire Goodwill should have been deducted from the gain arising from the
disposal as a matter of accounting treatment irrespective of the Court order and the reduction of
share premium exercise carried out by the Group in 1998. As a result, the Exceptional Items in
Note 1 to the Interim Results should have shown a loss on disposal of an associate of
2
CHINA MERCHANTS – Announcement
(22 December 2000)
Please also refer to the published version of this announcement in the South China
Morning Post.
HK$84,373,000 and not a gain on disposal of an associate of HK$29,529,000. Such a correction
is a matter of accounting treatment and does not affect the net asset value or cash flows of the
Group. The Board regrets that such discrepancy was not noted in the procedures carried out in
relation to the Interim Results and the Board conveys its sincere apologies for any confusion
caused to shareholders and potential investors of the Company. A copy of this announcement will
be sent to shareholders by post as soon as practicable.
Revised Interim Results
The unaudited consolidated results of the Company and its subsidiaries for the six months ended
30 June 2000, with the amended correct figures as highlighted in bold and italics, are as follows:
Six months ended
30 June
2000
(Unaudited)
HK$'000
Turnover
741,232
Cost of sales
(488,557)
Gross profit
252,675
Other revenue
72,818
Exceptional items (Note 1)
30,430
Distribution costs
(54,440)
Administrative expenses
(35,071)
Other operating expenses
(16,433)
Profit from operations
249,979
3
CHINA MERCHANTS – Announcement
(22 December 2000)
Please also refer to the published version of this announcement in the South China
Morning Post.
Finance Costs
(49,093)
Share of profits of associates
279,903
Share of profits of a jointly controlled entity
14,084
Profit before taxation
494,873
Taxation
(44,675)
Profit after taxation
450,198
Minority interests
(52,206)
Profit attributable to shareholders
397,992
Interim dividend
(102,492)
Retained profit for the period
295,500
Earnings per share
- basic
19.51 cents
- fully diluted
19.46 cents
4
CHINA MERCHANTS – Announcement
(22 December 2000)
Please also refer to the published version of this announcement in the South China
Morning Post.
Note 1: Exceptional items include:
2000
HK$'000
Income from vessel insurance claims
49,564
Loss on disposal of an associate
(84,373)
Gain on deemed disposal of an associate
65,239
30,430
By Order of the Board
Zhao Hu Xiang
Managing Director
Hong Kong, 22 December 2000
5
CHINA MERCHANTS – Announcement
(22 December 2000)