I BRING to your attention a few points in the report 'Director payments soak up earnings' on Page 2 of Business Post on August 2: Breakdown of the directors' emoluments. Van Shung Chong executive directors' basic salary allowance was increased by 16.45 per cent.
Average salary per director is about $490,000 per annum.
The bonus to an executive director is based on the policy that executive directors are entitled to about five per cent of the group's operating profit if the group's net profit after tax exceeds $40 million. This policy has been clearly disclosed in the company's listing prospectus at the time of its listing in February last year.
The bonus system is designed to support a performance environment.
The increase in operating profit from the group's core business was 62 per cent, not 23.9 per cent.
An exceptional item of about $10.3 million was included in fiscal 1993-94 profits because of group re-organisation prior to the listing.
This item was not normal or recurrent and it is unfair to compare the group's performance by including this exceptional item.
There was no director's bonus in 1993-94 since the operating profit before exceptional items was $33.6 million.
This indicates that such an exceptional item is not considered in determining the directors' bonus.
The decline in fully diluted earnings per share is mainly because the weighted average number of shares in fiscal 1993-94 was much lower.
The group was listed for only 11/2 months in fiscal 1993-94, whereas it was listed for the whole of the fiscal 1994-95, despite the fact that there has been no substantial change in the share capital during the period.
Moreover, if the exceptional item is excluded, the basic earnings per share for fiscal 1993-94 would be 17.9 cents and fully diluted earnings per share would be 17.9 cents.
This means there should be an increase of 22.9 per cent and 7.47 per cent in fiscal 1994-95 instead of a decline in earnings per share.
The bonus amounted to $2.7 million, not $2.7 billion as stated.
We hope we have clarified any misunderstandings arising from your article.
Andrew Yao Managing Director Van Shung Chong Holdings