ITC Corporation Limited

ITC Corporation LimitedITC Corporation Limited(Incorporated in Bermuda with limited liability)(Incorporated in Bermuda with limited liability)

Annual Report 2000Annual Report 2000

Contents

PAGE(S)

CORPORATE INFORMATION 1

NOTICE OF ANNUAL GENERAL MEETING 2 – 4

CHAIRMAN’S STATEMENT 5 – 14

BIOGRAPHY OF DIRECTORS 15 – 16

DIRECTORS’ REPORT 17 – 25

AUDITORS’ REPORT 26

CONSOLIDATED INCOME STATEMENT 27

CONSOLIDATED BALANCE SHEET 28 – 29

BALANCE SHEET 30

CONSOLIDATED STATEMENT OF RECOGNISED GAINS AND LOSSES 31

CONSOLIDATED CASH FLOW STATEMENT 32 – 33

NOTES TO THE FINANCIAL STATEMENTS 34 – 72

FINANCIAL SUMMARY 73

1

Corporate Information

DIRECTORS

Chan Kwok Keung, Charles (Chairman)

Lau Ko Yuen, Tom (Deputy Chairman)

Chau Mei Wah, Rosanna (Managing Director)

Cheung Kwok Wah, Ken

Chan Kwok Hung

Chan Fut Yan

Allan Yap

Wong Kun To

Lam Shan

Dominic Lai

Cheung Hon Kit

COMPANY SECRETARY

Wong Lai Kin, Elsa

SOLICITORS

Herbert Smith (Hong Kong)

Conyers Dill & Pearman (Bermuda)

AUDITORS

Deloitte Touche Tohmatsu

PRINCIPAL BANKERS

Canadian Imperial Bank of Commerce

The Kwangtung Provincial Bank

CITIC Ka Wah Bank Limited

REGISTERED OFFICE

Clarendon House

Church Street

Hamilton HM 11

Bermuda

PRINCIPAL PLACE OF BUSINESS

33rd Floor, Paul Y. Centre

51 Hung To Road

Kwun Tong, Kowloon

Hong Kong

Tel: (852) 2831 8338

Fax: (852) 2833 1030

REGISTRARS

Bermuda:

Butterfield Corporate Services Limited

Rosebank Centre

11 Bermudiana Road

Pembroke

Bermuda

Hong Kong:

Secretaries Limited

5th Floor, Wing On Centre

111 Connaught Road Central

Hong Kong

2

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the annual general meeting of ITC Corporation Limited (the “Company”) will beheld at 33rd Floor, Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong on Wednesday, 20thSeptember, 2000 at 3:00 p.m. for the following purposes:

1. To receive and consider the audited financial statements and the reports of the directors and auditors for theyear ended 31st March, 2000.

2. To re-elect retiring directors and to fix the directors’ remuneration.

3. To re-appoint auditors and to authorise the board of directors to fix their remuneration.

4. As special business, to consider and, if thought fit, to pass the following resolutions with or without amendmentsas ordinary resolutions:

(A) “THAT:

(i) subject to sub-paragraph (iii) of this resolution, the exercise by the directors of the Companyduring the Relevant Period (as hereinafter defined) of all the powers of the Company to allot, issueand deal with additional ordinary shares in the capital of the Company and to make or grantoffers, agreements and options (including warrants, bonds and debentures convertible into ordinaryshares of the Company) which might require the exercise of such powers, subject to and inaccordance with all applicable laws and the bye-laws of the Company, be and is hereby generallyand unconditionally approved;

(ii) the approval in sub-paragraph (i) of this resolution shall authorise the directors of the Companyduring the Relevant Period to make or grant offers, agreements and options (including warrants,bonds and debentures convertible into ordinary shares of the Company) which might require theexercise of such powers after the end of the Relevant Period;

(iii) the aggregate nominal amount of the ordinary share capital of the Company allotted or agreedconditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) andissued by the directors of the Company pursuant to the approval in sub-paragraph (i) of thisresolution, otherwise than pursuant to a Rights Issue (as hereinafter defined) or upon the exerciseof rights of subscription or conversion under the outstanding warrants to subscribe for ordinaryshares of the Company or any securities which are convertible into ordinary shares of the Companyor the share option scheme of the Company or any scrip dividend in lieu of the whole or part of adividend on ordinary shares of the Company, shall not exceed 20 per cent. of the aggregatenominal amount of the ordinary share capital of the Company in issue on the date of this resolutionand the said approval shall be limited accordingly; and

(iv) for the purpose of this resolution:

“Relevant Period” means the period from the date of the passing of this resolution until whicheveris the earliest of:

(a) the conclusion of the next annual general meeting of the Company;

(b) the expiration of the period within which the next annual general meeting of the Companyis required by the bye-laws of the Company or any applicable laws to be held; and

3

Notice of Annual General Meeting (Continued)

(c) the revocation or variation of the authority given under this resolution by an ordinaryresolution of the ordinary shareholders of the Company in general meeting.

“Rights Issue” means an offer of ordinary shares open for a period fixed by the directors of theCompany to holders of ordinary shares on the register on a fixed record date in proportion to theirthen holdings of such ordinary shares (subject to such exclusion or other arrangements as thedirectors of the Company may deem necessary or expedient in relation to fractional entitlementsor having regard to any restrictions or obligations under the laws of, or the requirements of, anyrecognised regulatory body or any stock exchange in any territory outside Hong Kong).”

(B) “THAT:

(i) subject to sub-paragraph (ii) of this resolution, the exercise by the directors of the Companyduring the Relevant Period (as hereinafter defined) of all the powers of the Company to repurchaseissued ordinary shares and preference shares in the capital of the Company on The Stock Exchangeof Hong Kong Limited (the “Stock Exchange”) or on any other stock exchange on which thesecurities of the Company may be listed and recognised by the Securities and Futures Commissionand the Stock Exchange for this purpose, subject to and in accordance with all applicable laws andthe requirements of the Rules Governing the Listing of Securities on the Stock Exchange or anyother stock exchange as amended from time to time, be and is hereby generally and unconditionallyapproved;

(ii) the aggregate nominal amount of the ordinary share capital and preference share capital of theCompany which the directors of the Company is authorised to repurchase pursuant to the approvalin sub-paragraph (i) of this resolution shall not exceed 10 per cent. of the aggregate nominalamount of the ordinary share capital of the Company in issue on the date of this resolution and 10per cent. of the aggregate nominal amount of the preference share capital of the Company in issueon the date of this resolution and the said approval shall be limited accordingly; and

(iii) for the purpose of this resolution:

“Relevant Period” means the period from the date of the passing of this resolution until whicheveris the earliest of:

(a) the conclusion of the next annual general meeting of the Company;

(b) the expiration of the period within which the next annual general meeting of the Companyis required by the bye-laws of the Company or any applicable laws to be held; and

(c) the revocation or variation of the authority given under this resolution by an ordinaryresolution of the ordinary shareholders of the Company in general meeting.”

4

Notice of Annual General Meeting (Continued)

(C) “THAT conditional upon resolutions numbered 4(A) and 4(B) in the notice convening this meetingbeing passed, the aggregate nominal amount of the issued ordinary shares in the capital of the Companywhich are repurchased by the Company under the authority granted to the directors of the Company asmentioned in the said resolution numbered 4(B) above shall be added to the aggregate nominal amountof the ordinary share capital of the Company that may be allotted or agreed conditionally or unconditionallyto be allotted and issued by the directors of the Company pursuant to the resolution numbered 4(A) inthe notice convening this meeting.”

5. To transact any other ordinary business of the Company.

By Order of the Board

Wong Lai Kin, ElsaCompany Secretary

Hong Kong, 11th August, 2000

Principal Place of Business: Registered Office:33rd Floor, Paul Y. Centre Clarendon House51 Hung To Road Church StreetKwun Tong, Kowloon Hamilton HM 11Hong Kong Bermuda

Notes:

1. A member of the Company entitled to attend and vote at the above meeting is entitled to appoint one or more proxies to attend and vote in hisstead. A proxy need not be a member of the Company.

2. A form of proxy for the meeting is enclosed. In order to be valid, the form of proxy together with a power of attorney or other authority, if any,under which it is signed, or a notarially certified copy of that power or authority, must be deposited at the Company’s principal place of business at33rd Floor, Paul Y. Centre, 51 Hung To Road, Kwun Tong, Kowloon, Hong Kong not less than 48 hours before the time appointed for holding themeeting or any adjournment thereof.

5

Chairman’s Statement

I have pleasure to present to shareholders the annual report of the Group for the year ended 31st March, 2000.

RESULTS

FINANCIAL HIGHLIGHTS

During the year ended 31st March, 2000, the Group registered strong results and has achieved substantial improvement.

• Consolidated turnover from continuing operations was increased by 114.3% to HK$110.8 million, as comparedto the last corresponding year of HK$51.7 million. The increase in turnover was mainly due to increase in thesale of securities and other investments.

• Profit from operations achieved a record high of HK$128.8 million, as compared with the loss of HK$29.0million for the last corresponding year. The increase in profit from operations was mainly derived from theprofit on the sale of securities and other investments.

• Consolidated profit attributable to shareholders was improved to HK$553.8 million, as compared with the lossof HK$341.8 million for the last corresponding year. The increase in profit attributable to shareholders wasmainly derived from the profit of HK$320.5 million on the disposal of information technology and internetrelated businesses to Hanny Holdings Limited.

• Basic earnings per ordinary share for the year was HK$1.16 (1999: loss per share of HK$1.10).

• Current ratio was 1.68, an increase of more than 441% as compared to the last corresponding year of 0.31.

• Total assets of the Group grew by 31.2% to some HK$2,515.1 million and shareholders’ funds increased by42.7% to approximately HK$1,709.4 million.

FINAL DIVIDEND

The board of directors of the Company (the “Board”) does not recommend the payment of a final dividend to ordinary

shareholders for the year ended 31st March, 2000 (1999: Nil).

Preference share dividend on the 267,980,000 compulsorily convertible cumulative preference shares at HK$0.069 per

share per annum has not been accrued for the year under review.

REVIEW OF OPERATIONS

During the year ended 31st March, 2000, the principal business of the Group was the holding of significant interests in

a number of listed companies in Hong Kong and Canada and unlisted investments with high potential.

Strategic investments

Driven by the recovery of the Hong Kong economy and the improving business environment, the Group continued to

pursue its long-term strategy of exploring potential investments in an aggressive manner and to enhance the value of its

strategic investments by active participation in the management of the invested companies. As at 31st March, 2000, the

Group had the following strategic investments:

6

Chairman’s Statement (Continued)

Paul Y. - ITC Construction Holdings Limited (“Paul Y. - ITC”)

During the year ended 31st March, 2000, the Group’s interest in Paul Y. - ITC decreased from 39.9% to 37.5%. The

decrease was mainly due to placement of new shares by Paul Y. - ITC and exercise of warrants by its warrantholders.

For the year ended 31st March, 2000, Paul Y. - ITC reported a consolidated profit attributable to shareholders of

HK$288.2 million and its after tax contribution to the Group was HK$112.9 million.

Paul Y. - ITC is a public company with its securities listed in Hong Kong. The Paul Y. - ITC group’s principal

businesses include, inter alia, building construction, civil engineering, manufacturing of precast concrete products,

infrastructure services, contract drilling, contract mining, property development and investments. It has operations in

Hong Kong, the PRC, Southeast Asia, Australia, New Zealand and the South Pacific region.

As at the date of this report, the Group’s interest in Paul Y. - ITC increased to 38.9% due to purchase of shares by the Group

from the stock market.

Tin Wah Estate, Hong KongOne of the public housing construction projects of Paul Y. - ITC

Cheung Kong Center, Hong KongOne of the largest building construction projects of Paul Y. - ITC

7


Hanny Holdings Limited (“Hanny”)

During the year ended 31st March, 2000, the Group’s interest in Hanny decreased from 27.8% to 21.6%. The decrease

was mainly due to placement of new shares by Hanny and exercise of warrants by its warrantholders. For the year

ended 31st March, 2000, Hanny reported a consolidated profit attributable to shareholders of HK$258.3 million and

its after tax contribution to the Group was HK$54.5 million.

Hanny is a public company with its securities listed in Hong Kong. The Hanny group’s principal businesses include,

inter alia, the manufacturing, distribution and marketing of data storage media, the distribution and marketing of

computer peripherals and accessories and securities investment; and recently Hanny has emphasis strongly on strategic

investments in information technology and internet related businesses and the development of its e-commerce related

businesses.

A glimpse of certain Memorex products of Hanny

8


Tung Fong Hung (Holdings) Limited (“Tung Fong Hung”)

During the year ended 31st March, 2000, the Group’s interest in Tung Fong Hung increased from 12.8% to 23.6%.

The increase was mainly due to acquisition of 60 million shares in Tung Fong Hung from Hanny pursuant to the

exercise of a put option by Hanny. Following the acquisition, Tung Fong Hung has become an associated company of

the Group.

For the year ended 31st March, 2000, Tung Fong Hung reported a consolidated loss attributable to shareholders of

HK$189.2 million. The Group consolidated the share of results of Tung Fong Hung from October 1999, being the

date it became an associated company of the Group and its after tax contribution to the Group was a loss of HK$28.1

million.

The Tung Fong Hung group’s principal businesses include, inter alia, retailing and wholesale of Chinese medicine,

health products and foodstuff, manufacturing and trading of western pharmaceutical products, securities investment,properties investment and money lending. It has retail and distribution operations in Hong Kong and the PRC, andretail operations in Canada, Singapore and Taiwan.

As at the date of this report, the Group’s interest in Tung Fong Hung increased to 33.1% due to purchase of shares bythe Group from the stock market.

A selection of Tung Fong Hung’s prestigious products

9


Star East Group Limited (“Star East Group”)

As at 31st March, 2000, the Group’s interest in Star East Group was 45.0%. Star East Group was founded by a

group of well-known Asian celebrities of stage and screen. The Star East Group group is mainly engaged in theoperation of “Star East” entertainment complex at Bank of America Tower, Central, Hong Kong and retail ofmerchandise carrying the “Star East” name or character icons.

For the year ended 31st March, 2000, Star East Group reported a consolidated profit attributable to shareholders ofHK$73.9 million and its after tax contribution to the Group was HK$33.3 million.

First anniversary party of Star East Entertainment Complex

One of the karaoke rooms in Star East Entertainment Complex

10


Star East Holdings Limited (“Star East Holdings”)

In September 1999, the Group was allotted shares in Star East Holdings in consideration for the disposal of Star East

(B.V.I.) Limited to Star East Holdings through its associate, Star East Group. As at 31st March, 2000, the Group’s

interest of 17.7% in Star East Holdings was treated as investments in securities by the Group.

Star East Holdings is a public company with its shares listed in Hong Kong and is principally engaged in entertainment

related business, including franchising of entertainment complexes offering live entertainment, dancing, karaoke,

games and bistro style dining and theme cafes under the “Star East” name, licensing of the “Star East” name and logo,

the provision of media agency service and talent management services for entertainers, the production of infotainment

programmes such as movies, TV series and documentary programmes, and through its associate, STAREASTnet (BVI)

Limited, the development and operation of a global Chinese Internet website, “www.stareastnet.com” which provides

entertainment and life-style information. The Star East Holdings group is also engaged in mortgage financing, properties

investment and development business.

One of the movie productions of Star East Holdings – “Sausalito”

One of the merchandise of Star East Holdings

11


STAREASTnet (BVI) Limited (“STAREASTnet”, formerly Star East Information Technology Corp.)

During the year ended 31st March, 2000, the Group’s effective interest in STAREASTnet decreased from 62.0% to

10.2% as a result of the following disposals in STAREASTnet: 1. Disposal of an indirect interest, through the disposal

of Star East (B.V.I.) Limited, to Star East Holdings in September 1999. 2. Disposal of a direct interest and issuance of

new shares by STAREASTnet to Hikari Tsushin, Inc. and Pacific Century CyberWorks Limited as announced by the

Group on 28th September, 1999. 3. Disposal of the remaining direct interest of 27.2% to Hanny as announced by the

Group on 9th November, 1999 and under the section headed “Disposal of interest in Genius Ideas Limited” below.

STAREASTnet is one of the first Chinese-language internet media group to provide multimedia entertainment

and life-style information to the Chinese community worldwide. STAREASTnet produces and distributes original

interactive programming through its network of vertically-integrated entertainment portals. STAREASTnet was

successfully listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited on 1st June,

2000.

Home page of stareastnet.com

12


Burcon NutraScience Corporation (“Burcon”)

During the year ended 31st March, 2000, the Group’s interest in Burcon decreased from 44.4% to 28.0%. Thedecrease was mainly due to placement of new shares and issuance of new shares by Burcon as consideration for itsacquisition of 100% interest in BMW Canola Inc. (“BMW”) of Winnipeg, Manitoba. Given that Burcon was in the

stage of research and development of its business, its results and contribution to the Group for the year ended 31stMarch, 2000 were not significant.

Burcon was incorporated in Canada with its shares listed on the Canadian Venture Exchange (formerly the VancouverStock Exchange). Following the acquisition of BMW, the principal business of Burcon was the research, developmentand marketing of canola protein isolate. Burcon’s objective over the next year is to establish the commercial feasibility

of its proprietary protein extraction technology.

As at the date of this report, the Group’s interest in Burcon was 27.0% as a result of placement of new shares by

Burcon, exercise of warrants by its warrantholders and purchase of shares by the Group from the stock market.

MAJOR EVENTS

Fund raising

In April 1999, Galaxyway Investments Limited (“Galaxyway”), the single largest shareholder of the Company,

placed 48.3 million ordinary shares in the Company to independent professional investors at a price of HK$0.59

per share and simultaneously subscribed for 70 million new ordinary shares at the same price per share (equivalent

to HK$0.57195 per share after expenses). The net proceeds received by the Company under the subscription,

which was completed in May 1999, were approximately HK$40 million and were used to repay borrowings and as

additional working capital of the Company.

In October 1999, the Company raised about HK$81 million through the issuance of 26 million new ordinary

shares to Galaxyway and the placement of 58 million new ordinary shares to independent investors, both at a

price of HK$1.00 per share. At the same time, the Company also raised about HK$117.5 million through the

issuance of convertible note of HK$50 million to Galaxyway and the placement of convertible notes of a total

of HK$70 million (including an over-allotment option of an amount up to HK$20 million which was fully

exercised in November 1999) to independent investors.

In February 2000, the Company also raised about HK$452 million through the issuance of convertible note of

HK$200 million to Galaxyway and the placement of convertible notes of a total of HK$260 million (including an

over-allotment option of an amount up to HK$60 million which was fully exercised in March 2000) to independent

investors.

13


Disposal of interest in Prime Tollways Company Limited (“Prime Tollways”)

In June 1999, the Group completed the disposal of its entire interest in Prime Tollways to an independent third party

for an aggregate consideration of US$13.75 million. Prime Tollways was principally engaged in tollroad management.

The management considered that the disposal of this non-profitable business was beneficial to the Group as a whole.

Disposal of interest in Genius Ideas Limited (“Genius Ideas”)

During the year under review, the internet and information technology related businesses of the Group have grown

significantly in size and the development has proven to be a success. In view of the environment for technology

business, in particular, the internet business, the Group considered that it would be beneficial to further develop such

business and under a separate company.

In January 2000, the Group completed the disposal to Hanny of its entire interest in Genius Ideas, the beneficial

owner of a portfolio of internet and information technology related assets, including the 27.2% interest held by the

Group in STAREASTnet, at a consideration of HK$555.9 million, which was fully satisfied by the issuance of

convertible note by Hanny. As a result of the disposal, the Group derived a realised profit of HK$320.5 million and an

unrealised profit of HK$88.5 million attributable to its interest in Hanny, and ceased to have any direct interest in

STAREASTnet. The Group benefits from the disposal as the Group’s internet related business was then owned by

Hanny in which it has a significant interest and will become the single largest shareholder upon full conversion of the

convertible note.

Securities in issue

On 11th November, 1999, the subscription rights attached to the 1999 warrants to subscribe for ordinary shares at a

subscription price of HK$2.00 per share expired and lapsed. A total of 21,285,417 warrants were exercised by the

warrantholders, representing approximately 50.7% of the total number of warrants issued by the Company.

As a result of the new issue of shares under the placing and subscription and the exercise of warrants as referred to

above, the total number of issued ordinary shares of the Company as at the date of this report is 525,960,774.

PROSPECTS

With the promising results for the year, the Group will continue to enhance its fundamentals by pursuing its proven

successful strategy of exploring attractive business opportunities that will bring satisfactory returns with asset appreciation

for the Group as a whole. Building on the rock solid financial foundation and diversified investment portfolio, the

Board is confident that the Group is well positioned to take advantage of the gradual recovery of the economy in the

coming years.

14


YEAR 2000 COMPLIANCE

The Group’s Year 2000 compliance programme and progress updates were disclosed in the 1998/1999 and 1999/2000

interim reports and 1998/1999 annual report. All plans relating to the Year 2000 issue were completed on schedule

with all critical systems of the Group being Year 2000 compliant. The performance of these systems, whilst functioned

properly, was closely monitored. No business disruption has been encountered by the Group before, during and after

the turn of the century. A contingency plan to minimize the effects of possible business interruptions from Year 2000

problem has also been developed.

APPRECIATION

On behalf of the Board, I wish to thank shareholders for their continual support to the Company and extend my

appreciation to all management and staff members for their commitment and contributions throughout the year.

Chan Kwok Keung, CharlesChairman


15

Biography of Directors

Chan Kwok Keung, Charles, aged 45, is the Chairman of the Company. Dr. Chan holds an honorary degree of Doctorof Laws and a bachelor’s degree in civil engineering and has over 20 years’ international corporate managementexperience in the construction and property sectors as well as in strategic investments. He joined the Group inFebruary 1997 and is responsible for its strategic planning. Dr. Chan is the chairman of Paul Y. - ITC ConstructionHoldings Limited (“Paul Y. - ITC”) and Asia Logistics Technologies Limited (“Asia Logistics”), the managing directorof Hanny Holdings Limited (“Hanny”) and a director of New World CyberBase Limited (“New World CyberBase”). Heis also a director of Oxford Properties Group Inc. (“Oxford”), a company whose shares are listed on the Toronto StockExchange, and a non-executive director of Downer Group Limited (“Downer”), a company whose shares are listed onthe Australian Stock Exchange. He is the sole director of Chinaview International Limited and Galaxyway InvestmentsLimited which are substantial shareholders of the Company as disclosed in the section headed “Substantial shareholders”in the directors’ report. Dr. Chan is the elder brother of Mr. Chan Kwok Hung, an executive director of the Company.

Lau Ko Yuen, Tom, aged 49, is the Deputy Chairman of the Company. He has over 27 years’ international corporatemanagement experience in the construction industry. Mr. Lau joined the Group in February 1997 and is responsiblefor its general corporate development and administration. He is the deputy chairman of Paul Y. - ITC, the chairman ofDowner and a director of New World CyberBase.

Chau Mei Wah, Rosanna, aged 46, is the Managing Director of the Company. She has over 20 years’ experience inaccounting and finance. Ms. Chau holds a bachelor’s degree and a master’s degree in commerce and is a member of theHong Kong Society of Accountants, the CPA Australia and the Certified General Accountants’ Association of Canada.She joined the Group in February 1997 and is responsible for its general corporate development and administrationand overall finance activities. She is the managing director of Star East Holdings Limited (“Star East Holdings”), anexecutive director of Paul Y. - ITC, and a director of Oxford and Burcon NutraScience Corporation (“Burcon”), acompany whose shares are listed on the Canadian Venture Exchange.

Cheung Kwok Wah, Ken, aged 43, joined the Company as an executive director in February 1997. Mr. Cheung hasover 14 years’ experience in the legal and merchant banking fields. He is the vice chairman and managing director ofTung Fong Hung (Holdings) Limited (“Tung Fong Hung”) and an executive director of Hanny.

Chan Kwok Hung, aged 41, joined the Company as an executive director in November 1997. Mr. Chan holds adiploma in arts and has over 17 years’ experience in trading businesses in China. He is the chairman of Tung FongHung and an executive director of Hanny, Star East Holdings and Asia Logistics. Mr. Chan is the younger brother ofDr. Chan Kwok Keung, Charles, the Chairman of the Company.

Chan Fut Yan, aged 46, joined the Company as an executive director in December 1997. He has over 27 years’experience in the local construction field specialising in site supervision, planning of works and progress monitoring.He is the managing director of Paul Y. - ITC.

Allan Yap, aged 44, joined the Company as an executive director in March 1998. He has over 18 years’ experience infinance, investment and banking. He is the deputy managing director of Hanny and a director of Oxford and Burcon.

Wong Kun To, aged 44, joined the Company as an executive director in October 1998. Mr. Wong is a graduate ofMcMaster University, Canada with a bachelor’s degree in engineering, and has over 21 years’ experience in propertydevelopment, construction and investment. He is a qualified engineer and a member of both the Institution of CivilEngineers, United Kingdom and the Hong Kong Institution of Engineers. He is also an executive director of Star EastHoldings and STAREASTnet.com Corporation and a non-executive director of Tung Fong Hung.

16

Biography of Directors (Continued)

Lam Shan, aged 52, joined the Company as an executive director in April 2000. Mr. Lam is responsible for propertyinvestment strategy of the Company. He has over 28 years’ experience in the construction and property developmentindustry. He is also an executive director of Tung Fong Hung.

Dominic Lai, aged 53, joined the Company as an independent non-executive director in February 1997. Mr. Lai is apractising solicitor in Hong Kong and a senior partner of the Hong Kong law firm, Iu, Lai & Li. He is also director ofa number of publicly listed companies in Hong Kong.

Cheung Hon Kit, aged 47, joined the Company as an independent non-executive director in December 1999. Mr.Cheung graduated from the University of London with a bachelor’s degree in arts. He has over 22 years’ experience inreal estate development and corporate finance. He is also a director of Huey Tai International Limited, EmperorInternational Holdings Limited and Hanny.

17

Directors’ Report

The directors present their report and the audited financial statements of the Company and of the Group for the yearended 31st March, 2000.

PRINCIPAL ACTIVITIES

The Company is an investment holding company.

The principal activities of the Company’s principal subsidiaries and the Group’s principal associates as at 31st March,2000 are set out in note 40 to the financial statements.

SEGMENTAL INFORMATION

The Group’s turnover and contribution to operating results for the year ended 31st March, 2000 analysed by principalactivity and geographical location are as follows:

Continuing Discontinuedoperations operations Total

HK$’000 HK$’000 HK$’000By principal activity:

TURNOVERInvestment and finance 103,419 – 103,419Sale of building materials and machinery 7,354 – 7,354Toll revenue – 12,114 12,114

110,773 12,114 122,887

CONTRIBUTIONInvestment and finance 151,632 – 151,632Sale of building materials and machinery 1,734 – 1,734Toll revenue – 4,275 4,275

153,366 4,275 157,641Corporate expenses (27,724) (1,159) (28,883)

PROFIT FROM OPERATIONS 125,642 3,116 128,758Finance costs (52,067) (6,389) (58,456)

73,575 (3,273) 70,302

Gain on disposal of subsidiaries 314,192Gain arising from the dilution of interest in

and partial disposal of associates 3,855Share of results of associates 206,402

PROFIT BEFORE TAXATION 594,751

18

Directors’ Report (Continued)

SEGMENTAL INFORMATION (Continued)

Contributionto operating

Turnover resultsHK$’000 HK$’000

By geographical location:

Continuing operations:Hong Kong 106,844 158,755Other regions in the People’s Republic of China (the “PRC”) 133 93Others 3,796 (5,482)

110,773 153,366

Discontinued operations:PRC 12,114 4,275

122,887 157,641

Corporate expenses (28,883)

Profit from operations 128,758

RESULTS AND APPROPRIATIONS

The results of the Group for the year ended 31st March, 2000 are set out in the consolidated income statement on page27 of the annual report.

The directors do not recommend the payment of a dividend.

RESERVES

Movements in the reserves of the Group and of the Company during the year are set out in note 24 to the financialstatements.

MAJOR CUSTOMERS AND SUPPLIERS

For the year ended 31st March, 2000, the five largest suppliers in aggregate accounted for approximately 40% of thepurchases of the Group and the largest supplier accounted for approximately 10% of the purchases of the Group. Thefive largest customers in aggregate and the single largest customer of the Group for the year ended 31st March, 2000accounted for approximately 65% and 30%, respectively, of the turnover of the Group.

As far as the directors are aware, none of the directors or their associates, within the meaning of the Rules Governingthe Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) orthose shareholders which to the knowledge of the directors own more than 5% of the Company’s share capital have aninterest in any of the five largest suppliers or customers of the Group for the year ended 31st March, 2000.

19


FINANCIAL SUMMARY

A summary of the results and of the assets and liabilities of the Group for the past five financial years/periods is set outon page 73 of the annual report.

PROPERTY, PLANT AND EQUIPMENT

During the year, the Group acquired land and buildings in the PRC at a cost of approximately HK$1,491,000 anddisposed of an expressway and related buildings, through disposal of subsidiaries, with an aggregate carrying value ofapproximately HK$102,648,000.

Details of these and other movements in the property, plant and equipment of the Group during the year are set out innote 12 to the financial statements.

SUBSIDIARIES AND ASSOCIATES

Particulars of the principal subsidiaries and associates of the Company as at 31st March, 2000 are set out in note 40 tothe financial statements.

SHARE CAPITAL AND WARRANTS

Details of the movements in the share capital and in the warrants of the Company during the year are set out in notes21 and 22 to the financial statements, respectively.

SHARE OPTIONS

Details of the Company’s share option scheme are set out in note 23 to the financial statements.

BORROWINGS

Bank overdrafts and other loans repayable within one year or on demand are classified as current liabilities. Details ofand the repayment analysis of bank overdrafts and other loans of the Group and the Company as at 31st March, 2000are set out in notes 19 and 20 to the financial statements, respectively.

The Group has in issue convertible notes with an aggregate principal value of HK$730,000,000. Unless previouslyconverted, redeemed or purchased and cancelled, the convertible notes at principal value of HK$150,000,000,HK$120,000,000 and HK$460,000,000 will be redeemed on 14th February, 2002, 5th October, 2002 and 1st March,2003 (or the next following business day if it is not a business day), respectively. Further details of the convertible notesare set out in note 25 to the financial statements.

No interest was capitalised by the Group during the year.

20


DIRECTORS

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

Executive directors:

Chan Kwok Keung, Charles (Chairman)Lau Ko Yuen, Tom (Deputy Chairman)Chau Mei Wah, Rosanna (Managing Director)Cheung Kwok Wah, KenChan Kwok HungChan Fut YanAllan YapWong Kun ToLam Shan (appointed on 25th April, 2000)Tse Cho Tseung (resigned on 10th September, 1999)

Independent non-executive directors:

Dominic LaiCheung Hon Kit (appointed on 9th December, 1999)Tong Yuk Lun, Paul (resigned on 9th December, 1999)

In accordance with Clauses 98(A) and 103(B) of the Company’s bye-laws, Mr. Cheung Kwok Wah, Ken, Mr. Lam Shanand Mr. Cheung Hon Kit retire, and are eligible for re-election, at the forthcoming annual general meeting.

The term of office for each of the independent non-executive directors is the period up to his retirement by rotation inaccordance with the Company’s bye-laws.

No directors proposed for re-election at the forthcoming annual general meeting has a service contract with the Groupwhich is not determinable by the Group within one year without payment of compensation, other than statutorycompensation.

21


DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

Particulars of the emoluments of the directors and the five highest paid individuals for the year are as follows:

(a) Directors’ emolumentsHK$’000

Directors’ fees:– executive 80– independent non-executive 240

320

Other emoluments (executive directors):– salaries and other benefits 14,206– retirement benefit scheme contributions 579

14,785

15,105

Emoluments of the directors were within the following bands:

Number of directors

Nil to HK$1,000,000 5HK$1,000,001 to HK$1,500,000 3HK$2,000,001 to HK$2,500,000 2HK$2,500,001 to HK$3,000,000 2

(b) Employees’ emoluments

The five highest paid individuals in the Group for the year ended 31st March, 2000 were all directors andinformation regarding their emoluments is included in the disclosures in paragraph (a) above.

22


DIRECTORS’ INTERESTS IN SECURITIES

As at 31st March, 2000, the interests of the directors of the Company in the securities of the Company and itsassociated corporations, within the meaning of the Securities (Disclosure of Interests) Ordinance (the “SDI Ordinance”),as recorded in the register kept by the Company under Section 29 of the SDI Ordinance or as otherwise notified to theCompany and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of ListedCompanies in the Listing Rules (the “Model Code”) were as follows:

(a) Interest in the Company

Number of Amount of 1999 Amount of 2000 Number ofordinary shares convertible notes convertible notes share options

Name of director Nature of interest of the Company held of the Company held of the Company held of the Company held

Chan Kwok Keung, Charles Corporate interest 171,621,911 HK$50,000,000 HK$200,000,000 –(note) (note) (note)

Personal interest – – – 13,100,000Lau Ko Yuen, Tom Personal interest – – – 7,600,000Chau Mei Wah, Rosanna Personal interest – – – 7,600,000Chan Fut Yan Personal interest – – – 11,200,000Cheung Kwok Wah, Ken Personal interest – – – 1,400,000Chan Kwok Hung Personal interest – – – 4,200,000

Note: Dr. Chan Kwok Keung, Charles was deemed to have a corporate interest in 171,621,911 ordinary shares of the Company, the 1999convertible notes with a principal amount of HK$50,000,000 and the 2000 convertible notes with a principal amount of HK$200,000,000by virtue of his indirect shareholding in Galaxyway Investments Limited (“Galaxyway”) which owned these securities.

(b) Interest in Paul Y. - ITC Construction Holdings Limited (“Paul Y. - ITC”)

Number of Number of Number ofshares of warrants of share options of

Name of director Nature of interest Paul Y. - ITC held Paul Y. - ITC held Paul Y. - ITC held

Chan Kwok Keung, Charles Personal interest – – 19,175,098Lau Ko Yuen, Tom Personal interest – – 21,778,149Chan Fut Yan Personal interest – – 21,778,149Chau Mei Wah, Rosanna Personal interest – – 20,481,199Cheung Hon Kit Personal interest 400 80 –

(c) Interest in Hanny Holdings Limited (“Hanny”)

Number ofshare options of

Name of director Nature of interest Hanny held

Chan Kwok Keung, Charles Personal interest 50,000,000Allan Yap Personal interest 78,000,000Chan Kwok Hung Personal interest 42,400,000Cheung Kwok Wah, Ken Personal interest 9,000,000

Paul Y. - ITC and Hanny were associated corporations, within the meaning of the SDI Ordinance, of the Company.

23


DIRECTORS’ INTERESTS IN SECURITIES (Continued)

Save as disclosed above, as at 31st March, 2000, none of the directors of the Company had any interests in anysecurities of the Company or any of its associated corporations, within the meaning of the SDI Ordinance, as recordedin the register kept by the Company under Section 29 of the SDI Ordinance or as otherwise notified to the Companyand the Stock Exchange pursuant to the Model Code.

DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES

Particulars of the share option scheme of the Company are set out in note 23 to the financial statements.

Movements in share options to subscribe for ordinary shares in the Company granted by the Company to the directorsof the Company during the year were as follows:

Number of ordinary shares to be issuedupon exercise of the share options

Exercise Grantedprice Balance at during Balance at

Name of director Date of grant per share 1.4.1999 the year 31.3.2000HK$

Chan Kwok Keung, Charles 28.8.1997 4.5600 2,800,000 – 2,800,00018.12.1998 0.3792 2,600,000 – 2,600,00017.12.1999 1.0816 – 7,700,000 7,700,000

Lau Ko Yuen, Tom 28.8.1997 4.5600 1,400,000 – 1,400,00018.12.1998 0.3792 2,000,000 – 2,000,00017.12.1999 1.0816 – 4,200,000 4,200,000

Chau Mei Wah, Rosanna 28.8.1997 4.5600 1,400,000 – 1,400,00018.12.1998 0.3792 2,000,000 – 2,000,00017.12.1999 1.0816 – 4,200,000 4,200,000

Chan Fut Yan 28.8.1997 4.5600 7,000,000 – 7,000,00017.12.1999 1.0816 – 4,200,000 4,200,000

Cheung Kwok Wah, Ken 28.8.1997 4.5600 1,400,000 – 1,400,000Chan Kwok Hung 17.12.1999 1.0816 – 4,200,000 4,200,000

The outstanding options as at 31st March, 2000, other than those granted on 17th December, 1999, can be exercisedat any time during the three year period commencing on a day after their respective dates of offer, subject to certainrestrictions contained in the offer letters. The share options granted on 17th December, 1999 can be exercised at anytime during the period commencing on a day after the date of offer until 23rd January, 2002 (the expiry date of theshare option scheme of the Company).

The above directors did not exercise any of their options during the year.

Save as disclosed above, at no time during the year was the Company or any of its subsidiaries a party to anyarrangements to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, ordebt securities including debentures of, the Company or any other body corporate, and none of the directors, chiefexecutives or their spouses or children under the age of 18, had any right to subscribe for securities of the Company, orhad exercised any such right during the year.

24


DIRECTORS’ INTERESTS IN CONTRACTS OF SIGNIFICANCE

Save as disclosed in note 39 to the financial statements, no contracts of significance to which the Company or any ofits subsidiaries or associated corporations was a party and in which a director of the Company had a material interest,whether directly or indirectly, subsisted at the end of the year or at any time during the year.

DIRECTORS’ INTERESTS IN COMPETING BUSINESS

Pursuant to Rule 8.10(2) of the Listing Rules, to the best knowledge of the directors, none of the directors of theCompany is interested in any business apart from the Company’s businesses, which competes or is likely to compete,either directly or indirectly, with the businesses of the Group at any time during the year.

SUBSTANTIAL SHAREHOLDERS

As at 31st March, 2000, the register of substantial shareholders kept by the Company under Section 16(1) of the SDIOrdinance showed that the following shareholders had an interest of 10% or more in the issued ordinary share capitalof the Company:

Number of ordinary Percentage ofshares of the Company held issued ordinary

Name of shareholder Direct interest Deemed interest share capital%

Chan Kwok Keung, Charles (note) – 171,621,911 32.6Chinaview International Limited (“Chinaview”) (note) – 171,621,911 32.6Galaxyway 171,621,911 – 32.6

Note: Galaxyway was a wholly-owned subsidiary of Chinaview which was, in turn, wholly-owned by Dr. Chan Kwok Keung, Charles. Chinaview and Dr.Chan Kwok Keung, Charles were both deemed to be interested in 171,621,911 ordinary shares in the Company.

Save as disclosed above, the Company has not been notified of any other interests representing 10% or more of theissued ordinary share capital of the Company as at 31st March, 2000.

RETIREMENT BENEFIT SCHEME

Information on the Company’s retirement benefit scheme is set out in note 34 to the financial statements.

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the Company’s bye-laws, or the laws of Bermuda, which wouldoblige the Company to offer new shares on a pro-rata basis to existing shareholders.

DISCLOSURE UNDER PRACTICE NOTE 19 TO THE LISTING RULES (“PN19”)

As at 31st March, 2000, the aggregate value of financial assistance given to the Company’s affiliated companies by theGroup amounted to approximately HK$432.1 million which represented approximately 25.3% of the Group’s net assetvalue of approximately HK$1,709.4 million.

25


DISCLOSURE UNDER PRACTICE NOTE 19 TO THE LISTING RULES (“PN19”) (Continued)

The proforma combined balance sheet of the affiliated companies and the Group’s attributable interest in theseaffiliated companies are presented below pursuant to paragraph 3.10 of PN19:

Proforma Group’scombined attributable

balance sheet interestHK$’000 HK$’000

Non-current assets 5,590,787 1,877,605Current assets 9,623,102 3,131,230Current liabilities (6,151,644) (2,133,111)Non-current liabilities (3,404,125) (1,172,644)

5,658,120 1,703,080

CORPORATE GOVERNANCE

In the opinion of the directors, the Company has complied throughout the year ended 31st March, 2000 with thoseparagraphs of the Code of Best Practice, as set out in Appendix 14 of the Listing Rules, with which it is required toreport compliance.

The Company’s Audit Committee was formed on 11th December, 1998. It currently comprises two independent non-executive directors, Dominic Lai and Cheung Hon Kit. The terms of reference of the Audit Committee have beenestablished with regard to “A Guide for the Formation of an Audit Committee” issued by The Hong Kong Society ofAccountants in December 1997.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the year ended 31st March, 2000, there were no purchases, sales or redemptions by the Company, or any of itssubsidiaries, of the Company’s listed securities.

AUDITORS

A resolution will be submitted to the forthcoming annual general meeting to re-appoint Messrs. Deloitte ToucheTohmatsu as auditors of the Company.

On behalf of the Board

Chan Kwok Keung, CharlesChairman


26

Auditors’ Report

TO THE MEMBERS OF ITC CORPORATION LIMITED(Incorporated in Bermuda with limited liability)

We have audited the financial statements on pages 27 to 72 which have been prepared in accordance with accountingprinciples generally accepted in Hong Kong.

Respective responsibilities of directors and auditors

The Company’s directors are responsible for the preparation of financial statements which give a true and fair view. Inpreparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies areselected and applied consistently.

It is our responsibility to form an independent opinion, based on our audit, on those statements and to report ouropinion to you.

Basis of opinion

We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society ofAccountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in thefinancial statements. It also includes an assessment of the significant estimates and judgments made by the directors inthe preparation of the financial statements, and of whether the accounting policies are appropriate to the circumstancesof the Company and the Group, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considerednecessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financialstatements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of thepresentation of information in the financial statements. We believe that our audit provides a reasonable basis for ouropinion.

Opinion

In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Groupas at 31st March, 2000 and of the profit and cash flows of the Group for the year then ended and have been properlyprepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

Certified Public AccountantsHong Kong, 11th August, 2000

27

Consolidated Income StatementFOR THE YEAR ENDED 31ST MARCH, 2000

2000 1999Notes HK$’000 HK$’000

Turnover 4 122,887 81,947Changes in inventories of finished goods (553) (2,248)Raw materials and consumables used (4,289) (14,817)Staff costs (28,824) (26,331)Depreciation and amortisation charges (3,796) (11,124)Other operating expenses (48,389) (24,051)Gain (loss) on disposal of investments in securities 122,870 (32,328)Unrealised gain on valuation of other investments 15,647 –Unrealised loss from transfer of investment securities

to other investments (2,425) –Loss on exercise of a put option in respect of a

listed security (44,370) –

Profit (loss) from operations 5 128,758 (28,952)Finance costs 6 (58,456) (64,625)Gain on disposal of subsidiaries 314,192 –Gain (loss) arising from the dilution of interest in and

partial disposal of associates 3,855 (3,333)Warrant reserve realised on expiration of warrants – 97,783Deficit arising from valuation of properties – (4,565)Provision for permanent impairment in value of an

expressway and related buildings – (59,616)Share of results of associates 206,402 (265,648)

Profit (loss) before taxation 594,751 (328,956)Taxation 8 38,491 16,123

Profit (loss) after taxation 556,260 (345,079)Minority interests 2,437 (3,327)

Profit (loss) attributable to shareholders 9 553,823 (341,752)

Earnings (loss) per share 11Basic HK$1.16 HK$(1.10)

Diluted HK$0.97 N/A

28

Consolidated Balance SheetAT 31ST MARCH, 2000

2000 1999Notes HK$’000 HK$’000

Non-current assetsProperty, plant and equipment 12 28,090 130,923Investment property 13 1,230 1,230

Interests in associates 15 2,095,463 1,499,098Investments in securities 16 270,168 179,379

2,394,951 1,810,630

Current assetsProperty held for resale 2,491 2,413

Inventories 104 653Trade and other receivables 9,207 7,274Deposit with a securities broker – 51,425

Amounts due from associates 17 46,220 17,273Loan receivables 6,000 11,000Investments in securities 16 4,000 –

Taxation recoverable – 25Bank deposits 12,942 1,370Bank balances and cash 39,227 15,229

120,191 106,662

Current liabilitiesTrade and other payables 18 40,857 118,863Amounts due to associates 1,217 –Bank overdrafts 19 11,992 11,879

Other loans 20 17,317 210,294

71,383 341,036

Net current assets (liabilities) 48,808 (234,374)

2,443,759 1,576,256

29

Consolidated Balance Sheet (Continued)

AT 31ST MARCH, 2000

2000 1999Notes HK$’000 HK$’000

Capital and reservesShare capital

Ordinary shares 21 52,596 35,068

Compulsorily convertible cumulative preference shares 21 26,798 26,798

79,394 61,866Reserves 24 1,630,053 1,136,492

1,709,447 1,198,358

Minority interests – 5,459

Non-current liabilitiesConvertible notes 25 734,312 158,770

Loans from minority shareholders 26 – 213,669

734,312 372,439

2,443,759 1,576,256

The financial statements on pages 27 to 72 were approved by the Board of Directors on 11th August, 2000 and are

signed on its behalf by:

Chau Mei Wah, Rosanna Chan Fut YanManaging Director Director

30

Balance SheetAT 31ST MARCH, 2000

2000 1999Notes HK$’000 HK$’000

Non-current assetsInvestments in subsidiaries 14 2,588,574 2,477,730Interests in an associate 15 385,900 –

2,974,474 2,477,730

Current assetsTrade and other receivables 238 1,146Amounts due from associates 7,417 –Loan receivables – 10,000Bank deposits 12,107 1,241Bank balances and cash 29,190 11

48,952 12,398

Current liabilitiesTrade and other payables 18,942 12,613Amounts due to associates 615 –Other loans 20 17,317 120,000

36,874 132,613

Net current assets (liabilities) 12,078 (120,215)

2,986,552 2,357,515

Capital and reservesShare capital

Ordinary shares 21 52,596 35,068Compulsorily convertible cumulative preference shares 21 26,798 26,798

79,394 61,866Reserves 24 2,335,750 2,295,649

2,415,144 2,357,515

Non-current liabilitiesConvertible notes 25 571,408 –

2,986,552 2,357,515

Chau Mei Wah, Rosanna Chan Fut YanManaging Director Director

31

Consolidated Statement of Recognised Gains and LossesFOR THE YEAR ENDED 31ST MARCH, 2000

2000 1999HK$’000 HK$’000

Exchange differences arising from translation ofoverseas operations (235) 22

Deficit recognised on revaluation of property,plant and equipment – (405)

Share of reserves of associatesTranslation reserve (23,850) 14,970Warrant reserve 5,432 –

(18,653) 14,587Profit (loss) attributable to shareholders 553,823 (341,752)

535,170 (327,165)

Elimination against goodwill reservearising on acquisition of interests insubsidiaries and associates (344,831) 22,766

Share of goodwill reserve of associates (114,149) 30,838

Total recognised gains and losses 76,190 (273,561)

32

Consolidated Cash Flow StatementFOR THE YEAR ENDED 31ST MARCH, 2000

2000 1999Notes HK$’000 HK$’000

NET CASH INFLOW (OUTFLOW) FROMOPERATING ACTIVITIES 28 86,988 (75,190)

RETURNS ON INVESTMENTS ANDSERVICING OF FINANCE

Interest paid (53,637) (62,731)Dividends received from associates 12,001 5,279Dividends paid – (16,017)

Dividends paid to minority shareholders (933) (3,848)

NET CASH OUTFLOW FROM RETURNSON INVESTMENTS AND SERVICING OF FINANCE (42,569) (77,317)

TAXATIONHong Kong Profits Tax refunded 25 29

INVESTING ACTIVITIES

Acquisition of shares of associates (369,666) (326,797)Advances to associates (338,053) –Acquisition of investments in securities (264,754) (23,223)

Purchase of subsidiaries (net of cash and cash equivalents acquired) 31 (70,765) (2,332)Net consideration arising from the exercise

of a put option in respect of a listed security (44,370) –

Purchase of property, plant and equipment (5,383) (28,603)Repayments from associates 316,920 16,857Proceeds from disposal of investments in securities 191,827 157,692

Net inflow of cash and cash equivalents on disposal of subsidiaries 31 80,205 –Proceeds from partial disposal of associates 41,962 –Proceeds from disposal of property, plant and equipment 968 1,224

Release of pledged deposits – 2,550

NET CASH OUTFLOW FROM INVESTING ACTIVITIES (461,109) (202,632)

NET CASH OUTFLOW BEFORE FINANCING (416,665) (355,110)

33

Consolidated Cash Flow Statement (Continued)

FOR THE YEAR ENDED 31ST MARCH, 2000

2000 1999Notes HK$’000 HK$’000

FINANCING 32Proceeds from issue of new shares 167,871 420,218Shares and warrants issuing expenses (3,161) (10,238)

Proceeds from issue of convertible notes 580,000 –Expenditure incurred for issuance of convertible notes (9,277) –Other loans raised 95,400 244,710

Repayments of other loans (288,377) (129,450)New borrowings on margin accounts 230 362,796Repayments of amounts payable on margin accounts (92,642) (523,864)

Advances (repayments) of loans from minority shareholders 2,082 (18,683)Repayments of bank loans – (68,125)Repurchase of shares – (40)

NET CASH INFLOW FROM FINANCING 452,126 277,324

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 35,461 (77,786)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 4,720 82,474

EFFECT OF FOREIGN EXCHANGE RATE CHANGES (4) 32

CASH AND CASH EQUIVALENTS AT END OF THE YEAR 40,177 4,720

ANALYSIS OF THE BALANCES OF CASHAND CASH EQUIVALENTS

Bank deposits 12,942 1,370Bank balances and cash 39,227 15,229Bank overdrafts (11,992) (11,879)

40,177 4,720

34

Notes to the Financial StatementsFOR THE YEAR ENDED 31ST MARCH, 2000

1. GENERAL

The Company is an exempted company incorporated in Bermuda with limited liability. Its shares are listed onThe Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company is an investment holding company. The principal activities of the Company’s principal subsidiariesand the Group’s principal associates are set out in note 40.

2. ADOPTION OF NEW/REVISED STATEMENTS OF STANDARD ACCOUNTING PRACTICE

In the current year, the Group has adopted the following new/revised Statements of Standard AccountingPractice (“SSAP(s)”) issued by the Hong Kong Society of Accountants:

SSAP 1 (Revised) Presentation of financial statementsSSAP 2 (Revised) Net profit or loss for the period, fundamental errors

and changes in accounting policiesSSAP 10 (Revised) Accounting for investments in associatesSSAP 24 Accounting for investments in securities

SSAP 1 (Revised) and SSAP 2 (Revised) are concerned with the presentation and disclosure of financial information.The presentation in the current year’s financial statements has been modified in order to conform with therequirements of those SSAPs. Comparative amounts have been restated in order to achieve a consistent presentation.

In particular:

– additional analyses of income and expenses have been presented; and

– items of income and expenses that were separately identified on the face of the income statement in theprior year as ‘exceptional items’ have been reclassified within the appropriate income or expenses classification.

In addition, the description of various components in the financial statements and the terminology used havebeen updated to reflect the terminology of the new SSAPs.

None of the amendments outlined above has affected the results for the current or prior periods.

The revision of SSAP 10 has not resulted in any significant changes to the accounting treatment adopted forinvestments in associates and, accordingly, no prior period adjustment has been required. Disclosures presentedhave been modified to meet the requirements of the new SSAP.

SSAP 24 has introduced a new framework for the classification of investments in securities. In adopting SSAP24, the Group has selected the benchmark treatment for securities other than held-to-maturity securities.

Under SSAP 24, investments in securities are now classified as held-to-maturity (carried at amortised cost lessprovision for irrecoverable amounts), investment securities (carried at cost less impairment) and other investments(carried at fair value, with valuation movements dealt with in the income statement). In prior years, the Group’sinvestments were classified either as long-term (carried at cost less provision for permanent diminution in value)or short-term (carried at the lower of cost and net realisable value).

35

Notes to the Financial Statements (Continued)


3. SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention, as modified for the revaluationof certain properties and investments in securities.

The financial statements have been prepared in accordance with accounting principles generally accepted inHong Kong. The principal accounting policies adopted are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiariesmade up to 31st March for each year.

The results of subsidiaries and associates acquired or disposed of during the year are included in the consolidatedincome statement from the effective dates of acquisition or up to the effective dates of disposal, as appropriate.

All significant intercompany transactions and balances between the group enterprises are eliminated onconsolidation.

Goodwill or capital reserve

Goodwill represents the excess of the purchase consideration over the fair value ascribed to the Group’s share ofthe separable net assets at the date of acquisition of a subsidiary and is eliminated against reserves immediatelyon acquisition. Negative goodwill, which represents the excess over the purchase consideration of the fair valueascribed to the Group’s share of the separable net assets at the date of acquisition of a subsidiary, is credited toreserves.

Any premium or discount arising on the acquisition of interests in associates, representing the excess or shortfallrespectively of the purchase consideration over the fair value ascribed to the Group’s share of the separable netassets of the associates at the date of acquisition, is dealt with in the same manner as that described above forgoodwill.

On disposal of investments in subsidiaries or associates, the attributable amount of goodwill and premium ordiscount previously eliminated against or credited to reserves is included in the determination of the profit orloss on disposal.

Revenue recognition

Sales of goods are recognised when goods are delivered and title has passed.

Service revenue is recognised when services are rendered.

Sales of securities are recognised when the sale agreement becomes unconditional.

Toll revenue is recognised on a receipts basis.

Dividend income from investments is recognised when the Group’s right to receive payment has been established.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the interest rateapplicable.

36



3. SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, plant and equipment

Property, plant and equipment are stated at cost or valuation less depreciation and amortisation. The cost of anasset comprises its purchase price and any direct attributable costs of bringing the asset to working condition forits intended use. Expenditure incurred after the asset has been put into operation, such as repairs and maintenanceand overhaul costs, is normally charged to the income statement in the year in which it is incurred. In situationswhere it can be clearly demonstrated that the expenditure has resulted in an increase in the future economicbenefits expected to be obtained from the use of the asset, the expenditure is capitalised as an additional cost ofthe asset.

The gain or loss arising from the disposal or retirement of an asset is determined as the difference between thesales proceeds and the carrying amount of the asset and is recognised in the income statement.

Where the recoverable amount of an asset has declined below its carrying amount, the carrying amount isreduced to reflect the decline in value. In determining the recoverable amount of asset, expected future cashflows are not discounted to their present values.

Land and buildings are stated in the balance sheet at their revalued amount, being the fair value on the basis oftheir existing use at the date of revaluation less any subsequent accumulated depreciation. Revaluations areperformed with sufficient regularity such that the carrying amount does not differ materially from that whichwould be determined using fair values at the balance sheet date.

Any surplus arising on revaluation of land and buildings is credited to the asset revaluation reserve, except to theextent that it reverses a revaluation deficit of the same asset previously recognised as an expense, in which casethis surplus is credited to the income statement to the extent of the deficit previously charged. A decrease in netcarrying amount arising on revaluation of an asset is charged to the income statement to the extent that itexceeds the balance, if any, on the asset revaluation reserve relating to a previous revaluation of that asset. On thesubsequent disposal or retirement of a revalued asset, the attributable revaluation surplus is transferred toretained profits.

No amortisation is provided in respect of freehold land.

Amortisation is provided to write off the cost of land use rights and leasehold land over the remaining period ofthe relevant lease using the straight line method.

The cost of buildings is depreciated, using the straight line method, over their estimated useful lives of fifty yearsor the remaining period of the relevant lease, whichever is shorter.

Depreciation and amortisation is provided to write off the cost of other assets over their estimated useful lives,using the straight line method, at the following rates per annum:

Expressway and related buildings(including land use rights) Over the life of the relevant joint venture

Plant, machinery and office equipment 10 – 33%Motor vehicles 10 – 30%Furniture and fixtures 10 – 20%

37




Investment properties

Investment properties are completed properties which are held for their investment potential, any rental incomebeing negotiated at arm’s length.

Investment properties are stated at their open market values based on independent professional valuations at eachbalance sheet date. Any surplus or deficit arising on the revaluation of investment properties is credited orcharged to the investment property revaluation reserve unless the balance on this reserve is insufficient to cover adeficit, in which case the excess of the deficit over the balance on the investment property revaluation reserve ischarged to the income 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 the extent of thedeficit previously charged.

On disposal of an investment property, the balance on the investment property revaluation reserve attributable tothe property is credited to the income statement.

No depreciation is provided on investment properties except which are held on leases with an unexpired term ofless than twenty years.

Investments in subsidiaries

A subsidiary is an enterprise in which the Company, directly or indirectly, holds more than half of the issuedshare capital, or controls more than half of the voting power, or where the Company controls the composition ofits board of directors or equivalent governing body.

Investments in subsidiaries are included in the Company’s balance sheet at cost less any impairment loss. Theresults of subsidiaries are accounted for by the Company on the basis of dividends received and receivable.

Interests in associates

An associate is an enterprise over which the Group is in a position to exercise significant influence, includingparticipation in the financial and operating policy decisions of the investee.

The results and assets and liabilities of associates are incorporated in these financial statements using the equitymethod of accounting. The carrying amount of such interests is reduced to recognise any decline, other than atemporary decline, in the value of individual investments.

When a group enterprise transacts with an associate of the Group, unrealised profits and losses are eliminated tothe extent of the Group’s interest in the relevant associate, except where unrealised losses provide evidence of animpairment of the assets transferred.

Investments in securities

Investments in securities are recognised on a trade-date basis and are initially measured at cost.

Investments other than held-to-maturity debt securities are classified as investment securities and other investments.

Investment securities, which are securities held for an identified long-term strategic purpose, are measured atsubsequent reporting dates at cost, as reduced by any impairment loss that is other than temporary.

Other investments are measured at fair value, with unrealised gains and losses included in net profit or loss forthe period.

38




Properties held for resale

Properties held for resale are classified under current assets and are stated at the lower of cost and net realisablevalue. Cost consists of all expenditure directly attributable to the acquisition plus other direct costs attributableto such properties. Net realisable value is determined by reference to management estimates of the selling pricebased on prevailing market conditions, less all estimated costs to be incurred in marketing and selling.

Inventories

Inventories represent finished goods which are stated at the lower of cost and net realisable value. Cost, whichcomprises all costs of purchase and where applicable, costs of conversion and other costs that have been incurredin bringing the inventories to their present location and condition, is calculated using the first-in, first-outmethod. Net realisable value represents the estimated selling price in the ordinary course of business less theestimated costs of completion and the estimated costs necessary to make the sale.

Convertible notes

Convertible notes are separately disclosed and regarded as debts unless conversion actually occurs. The financecosts, including the premium payable upon the redemption of the convertible notes, recognised in the incomestatement in respect of the convertible notes is calculated so as to produce a constant periodic rate of charge onthe remaining balances of the convertible notes for each accounting period.

The costs incurred in connection with the issue of convertible notes are deferred and amortised on a straight linebasis over the term of the convertible notes, that is from the dates of issue of the notes to their final redemptiondates. If any of the notes are purchased and cancelled, redeemed or converted prior to the final redemption date,an appropriate portion of any remaining unamortised cost will be charged immediately to the income statement.

Taxation

The charge for taxation is based on the results for the year as adjusted for items which are non-assessable ordisallowed. Timing differences arise from the recognition for tax purposes of certain items of income andexpenses in a different accounting period from that in which they are recognised in the financial statements. Thetax effect of timing differences, computed under the liability method, is recognised as deferred taxation in thefinancial statements to the extent that it is probable that a liability or asset will crystallise in the foreseeablefuture.

Foreign currencies

Transactions in currencies other than Hong Kong dollar are initially recorded at the rates of exchange ruling onthe dates of the transactions. Monetary assets and liabilities denominated in such currencies are re-translated atthe rates ruling on the balance sheet date. Gains and losses arising on exchange are dealt with in the incomestatement.

On consolidation, the financial statements of operations which are denominated in currencies other than HongKong dollar are translated at the rates ruling on the balance sheet date. All exchange differences arising onconsolidation are dealt with in reserves.

Operating leases

Rentals payable under operating leases are charged to the income statement on a straight line basis over the termof the relevant lease.

39




Retirement benefit scheme

Payments to defined contribution plans are charged as expenses as they fall due.

Cash equivalents

Cash equivalents represent short-term, highly liquid investments which are readily convertible into knownamounts of cash and which were within three months of maturity when acquired, less advances from banksrepayable within three months from the date of the advances.

4. TURNOVER

The turnover of continuing and discontinued operations of the Group for the year is analysed as follows:

2000 1999HK$’000 HK$’000

Continuing operations:Investment and finance 103,419 28,183Sale of building materials and machinery 7,354 23,507

110,773 51,690

Discontinued operations:Toll revenue 12,114 30,257

122,887 81,947

Investment and finance comprised principally the gross revenue received and receivable from securities tradingand interest income.

5. PROFIT (LOSS) FROM OPERATIONS

2000 1999HK$’000 HK$’000

In addition to items separately disclosed in the income statement,profit (loss) from operations has been arrived at after charging:

Auditors’ remuneration 459 632Included in staff cost:

Directors’ remuneration:– fees 320 330– other emoluments 14,785 12,460

Retirement benefit scheme contributions, net of forfeitedcontributions of HK$21,000 (1999: Nil) 876 945

Loss on disposal of property, plant and equipment 75 33Rental payments in respect of land and buildings 4,557 691

40



6. FINANCE COSTS

2000 1999HK$’000 HK$’000

Interest payable on:Amortisation of deferred expenditure on issuance of convertible notes 685 –Bank borrowings wholly repayable within five years 953 2,812Convertible notes, including amortisation of premium payable

upon the redemption of the convertible notes 21,538 13,500Other borrowings wholly repayable within five years 35,280 48,313

58,456 64,625

7. DISCONTINUED OPERATIONS

In June 1999, the Group completed the disposal of its entire interest in Prime Tollways Company Limited(“Prime Tollways”).

The results of Prime Tollways for the period from the beginning of the year to the date of disposal, which havebeen included in the consolidated financial statements, were as follows:

2000 1999HK$’000 HK$’000

Turnover 12,114 30,257Operating costs (8,998) (18,170)

Profit from operation 3,116 12,087Finance costs (6,389) (30,618)

(3,273) (18,531)

8. TAXATION

No provision for Hong Kong Profits Tax has been made in the financial statements as the Group had noassessable profit for the year. The charge for each of the two years ended 31st March, 2000 represents the Group’sshare of tax on the results of associates.

Details of unprovided deferred taxation are set out in note 27.

9. PROFIT (LOSS) ATTRIBUTABLE TO SHAREHOLDERS

Of the Group’s profit attributable to shareholders for the year of approximately HK$553,823,000 (1999: loss ofHK$341,752,000), a loss of approximately HK$107,081,000 (1999: profit of HK$99,598,000) has been dealtwith in the financial statements of the Company.

41



10. DIVIDENDS

The directors do not recommend the payment of a dividend to ordinary shareholders for the year ended 31stMarch, 2000.

Preference share dividend on the 267,980,000 compulsorily convertible cumulative preference shares at HK$0.069per share per annum has not been accrued for the year in the financial statements.

11. EARNINGS (LOSS) PER SHARE

The calculation of the basic and diluted earnings (loss) per share is based on the following data:

2000 1999HK$’000 HK$’000

Profit (loss) for the year 553,823 (341,752)Dividend for preference shares (18,491) (18,491)

Profit (loss) for the purposes of basic earnings (loss) per share 535,332 (360,243)

Effect of dilutive potential ordinary shares:Adjustment to the share of results of associates

based on dilution of their earnings per share (19,195) N/AInterest on convertible notes 8,006 N/AAmortisation of deferred expenditure on issuance of

convertible notes 685 N/A

Profit (loss) for the purposes of diluted earnings (loss) per share 524,828 N/A

Number Numberof shares of shares

Weighted average number of ordinary shares for thepurposes of basic earnings (loss) per share 463,322,654 327,270,704

Effect of dilutive potential ordinary shares:Share options 7,295,955 N/AConvertible notes 72,084,309 N/A

Weighted average number of ordinary shares forthe purposes of diluted earnings (loss) per share 542,702,918 N/A

42



12. PROPERTY, PLANT AND EQUIPMENT

Plant,Expressway machinery Furniture

Land and and related and office Motor andbuildings buildings equipment vehicles fixtures TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

THE GROUP

COST OR VALUATIONAt 1st April, 1999 21,718 180,960 1,011 8,458 1,022 213,169Translation adjustments 874 1,324 6 22 29 2,255Additions 1,491 – 753 1,068 2,071 5,383Disposals (1,700) – (157) (255) (39) (2,151)On acquisition of subsidiaries – – 1,833 – 458 2,291On disposal of subsidiaries – (182,284) (2,856) (1,551) (1,425) (188,116)Adjustment arising on revaluation (41) – – – – (41)

At 31st March, 2000 22,342 – 590 7,742 2,116 32,790

Comprising:At cost – – 590 7,742 2,116 10,448At valuation – 2000 22,342 – – – – 22,342

22,342 – 590 7,742 2,116 32,790

DEPRECIATION ANDAMORTISATION

At 1st April, 1999 796 77,422 340 3,399 289 82,246Translation adjustments – 131 2 4 8 145Provided for the year 264 2,083 221 902 326 3,796Eliminated on disposals (796) – (122) (151) (39) (1,108)On acquisition of subsidiaries – – 1,299 – 125 1,424Eliminated on disposal of

subsidiaries – (79,636) (1,459) (263) (181) (81,539)Written back on revaluation (264) – – – – (264)

At 31st March, 2000 – – 281 3,891 528 4,700

NET BOOK VALUESAt 31st March, 2000 22,342 – 309 3,851 1,588 28,090

At 31st March, 1999 20,922 103,538 671 5,059 733 130,923

Land and buildings of the Group were revalued as at 31st March, 2000 on an open market value basis by RHLInternational Property Consultants, Francis Lau & Co., (Surveyors) Ltd., an independent professional propertyvaluer.

43



12. PROPERTY, PLANT AND EQUIPMENT (Continued)

The net book values of land and buildings held by the Group as at the balance sheet date comprised thefollowing:

2000 1999

Expressway ExpresswayLand and and related Land and and relatedbuildings buildings buildings buildingsHK$’000 HK$’000 HK$’000 HK$’000

Freehold properties in:Canada 20,892 – 20,019 –

Medium term leasehold properties in:Hong Kong – – 903 –The People’s Republic of China (the “PRC”) 1,450 – – 103,538

22,342 – 20,922 103,538

As at 31st March, 2000, had the Group’s land and buildings been carried at cost less accumulated depreciationand amortisation, the carrying value would have been approximately HK$25,045,000 (1999: HK$24,102,000).

13. INVESTMENT PROPERTY

THE GROUP2000 & 1999

HK$’000

Balance at the beginning and at the end of the year 1,230

The investment property of the Group was revalued as at 31st March, 2000 on an open market value basis byRHL International Property Consultants, Francis Lau & Co., (Surveyors) Ltd., an independent professionalproperty valuer.

The investment property is located in the PRC and held on a medium term land use right.

14. INVESTMENTS IN SUBSIDIARIES

THE COMPANY2000 1999

HK$’000 HK$’000

Unlisted shares, at cost 1 242Amounts due from subsidiaries 2,860,659 2,749,574

2,860,660 2,749,816Less: Impairment loss (272,086) (272,086)

2,588,574 2,477,730

Details of the Company’s principal subsidiaries as at 31st March, 2000 are set out in note 40.

44



15. INTERESTS IN ASSOCIATES

THE GROUP THE COMPANY2000 1999 2000 1999

HK$’000 HK$’000 HK$’000 HK$’000Associates being equity accounted for:

Share of net assets of associates:Listed in Hong Kong 1,691,915 1,293,333 – –Listed in Overseas 3,600 1,062 – –Unlisted 14,048 135,918 – –

1,709,563 1,430,313 – –Amounts due from associates repayable

after one year – 68,785 – –Convertible note receivable from

an associate listed in Hong Kong 385,900 – 385,900 –

2,095,463 1,499,098 385,900 –

Market value of listed securities:Hong Kong 1,208,997 325,059 – –Overseas 44,195 10,266 – –

1,253,192 335,325 – –

The amounts due from associates as at 31st March, 1999 were unsecured and bore interest at commercial rates.

The convertible note receivable from an associate listed in Hong Kong represents the remaining unconvertedamount of a convertible note of HK$555,900,000 issued by Hanny Holdings Limited (“Hanny”) on 11thJanuary, 2000 as the consideration for the acquisition from the Group of the Group’s entire interest in a wholly-owned subsidiary. The convertible note is unsecured, bears interest at prime rate and is repayable on the secondanniversary of the issue date. The noteholder has the right to convert all or part of the principal amount of theconvertible note outstanding into shares of Hanny at par value of HK$0.10 each at an initial conversion price ofHK$5.00 per share, subject to adjustment, within two years of the issue of the convertible note.

In January 2000, the shares of Hanny of HK$0.10 each were subdivided into four shares of HK$0.025 each.Accordingly, the conversion price of the convertible note has been adjusted from HK$5.00 to HK$1.25.

Extracts from the consolidated results and financial position of the Group’s significant associates, Paul Y. - ITCConstruction Holdings Limited (“Paul Y. - ITC”), Hanny and Tung Fong Hung (Holdings) Limited (“TungFong Hung”) from their respective audited financial statements for the year ended 31st March, 2000 are set outin note 41.

THE GROUP2000 1999

HK$’000 HK$’000Associates not equity accounted for:

Unlisted shares, at cost (note) 2,400 2,400Amounts due from associates 710 710

3,110 3,110Less: Impairment loss (3,110) (3,110)

– –

Note: The investments represent 50% and 30% equity interests in two PRC joint ventures, namely Spark Energy Development (Guizhou) Co.,Ltd. and Anhui Xing Chang Chemical Ind. Co., Ltd., respectively. The operating results of these two joint ventures have not been equityaccounted for and the investment costs have been fully provided for as, in the opinion of the directors, the Group cannot exercise significantinfluence through participation in the financial and operating policy decisions of these joint ventures, and these two joint ventures areunlikely to generate future benefits to the Group. The Group is not committed to provide further financial support to these joint ventures.

45



16. INVESTMENTS IN SECURITIES

THE GROUP

Investment Othersecurities investments Total

2000 1999 2000 1999 2000 1999HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Equity securities:

Listed securities:– Hong Kong 235,802 161,541 18 – 235,820 161,541– Elsewhere – 16,993 33,503 – 33,503 16,993

235,802 178,534 33,521 – 269,323 178,534Unlisted club debentures – – 845 845 845 845

Total 235,802 178,534 34,366 845 270,168 179,379

Market value of listed securities 201,547 12,110 33,521 – 235,068 12,110

Investments in securities classified as current asset represents a 100% interest in an investee company acquiredduring the year as a result of the exercise of a put option by a third party. Subsequent to the balance sheet date,the investee company was disposed to another third party. As the control over the investee company is intendedto be temporary, it is excluded from consolidation.

17. AMOUNTS DUE FROM ASSOCIATES

The amounts are unsecured and repayable on demand. Of these amounts, an amount of approximatelyHK$31,785,000 (1999: HK$9,008,000) bears interest at commercial rates and the remaining balance is interest-free.

18. TRADE AND OTHER PAYABLES

As at 31st March, 1999, amounts payable under margin accounts included in trade and other payables ofapproximately HK$92,412,000 were secured by listed shares held by the Group with an aggregate carrying valueof approximately HK$1,020,246,000. The amounts were fully settled during the year.

46



19. BANK OVERDRAFTS

THE GROUP2000 1999

HK$’000 HK$’000

Bank overdrafts, which are repayable within one year,are analysed as follows:

Secured 11,992 11,536Unsecured – 343

11,992 11,879

20. OTHER LOANS

As at 31st March, 2000, a loan of approximately HK$17,317,000 was obtained by the Group and the Companyfrom an independent third party. The loan was unsecured, bore interest at commercial rates and was repayablewithin one year.

As at 31st March, 1999, a loan of HK$12,294,000 was advanced to the Group from Dr. Chan Kwok Keung,Charles, who is a director and a substantial shareholder of the Company. The loan was unsecured, bore interestat prime rate plus 1%.

As at 31st March, 1999, another loan of HK$70,000,000 was borrowed by the Group and the Company from anindependent third party and was secured by listed shares held by the Group at a carrying value of approximatelyHK$263,275,000. The loan bore interest at commercial rates and was repayable on demand.

The remaining loans as at 31st March, 1999 totalling approximately HK$128,000,000 for the Group andHK$50,000,000 for the Company were borrowed from independent third parties. The loans were unsecured andbore interest at commercial rates. They were repayable on demand.

All of the above loans as at 31st March, 1999 were repaid during the current year.

47



21. SHARE CAPITAL

Number of shares ValueHK$’000

Authorised:

Ordinary shares of HK$0.10 eachAt 1st April, 1998 22,000,000,000 2,200,000Reduction pursuant to capital reorganisation (20,000,000,000) (2,000,000)

At 31st March, 1999 and 31st March, 2000 2,000,000,000 200,000

Compulsorily convertible cumulative preferenceshares of HK$0.10 eachAt 1st April, 1998, 31st March, 1999 and 31st March, 2000 280,000,000 28,000

Issued and fully paid:

Ordinary shares of HK$0.10 eachAt 1st April, 1998 2,801,453,820 280,145Rights issue 4,202,180,730 420,218Interim dividends for the period ended 31st March, 1998

in scrip shares 3,923,121 393Repurchase of shares (1,000,000) (100)Reduction pursuant to capital reorganisation (6,656,229,788) (665,623)Final dividends for the period ended 31st March, 1998

in scrip shares 347,474 35

At 1st April, 1999 350,675,357 35,068Placing of new shares 154,000,000 15,400Exercise of warrants 21,285,417 2,128

At 31st March, 2000 525,960,774 52,596

Compulsorily convertible cumulative preferenceshares of HK$0.10 eachAt 1st April, 1998, 31st March, 1999 and 31st March, 2000 267,980,000 26,798

Details of the changes in the Company’s share capital during the year ended 31st March, 2000 are as follows:

(i) In May 1999, the Company issued 70,000,000 new ordinary shares of HK$0.10 each at an issue price ofHK$0.59 per share (equivalent to HK$0.57195 per share after expenses) to Galaxyway Investments Limited(“Galaxyway”). The price of HK$0.59 per share represented the average closing price of the Company’sordinary shares over the five trading days from 16th April, 1999 to 22nd April, 1999 (both dates inclusive)on the Stock Exchange. Galaxyway was a wholly-owned subsidiary of Chinaview International Limited(“Chinaview”) which was, in turn, wholly-owned by Dr. Chan Kwok Keung, Charles, a director and asubstantial shareholder of the Company. The proceeds of the subscription were used to repay borrowingsand as additional working capital of the Company.

48



21. SHARE CAPITAL (Continued)

(ii) Pursuant to an ordinary resolution passed at a special general meeting of the Company held on 30thSeptember, 1999, the Company issued 58,000,000 and 26,000,000 new ordinary shares of HK$0.10 eachat an issue price of HK$1.00 per share to the institutional investors and Galaxyway, respectively. Theproceeds of the share issue were used mainly for reduction of borrowings and as additional working capitalof the Group.

(iii) During the year, 21,285,417 ordinary shares of HK$0.10 each in the Company were issued upon exerciseof warrants by its warrantholders. (note 22)

All the new ordinary shares issued by the Company during the year ranked pari passu with the then existingordinary shares of the Company in all respects.

The preference shares are non-voting, non-redeemable and are entitled to a cumulative dividend of HK$0.069per share per annum. The preference shares rank in priority to the ordinary shares in the Company as todividends and return of capital. The preference shares are convertible into ordinary shares of the Company at theoption of the holders at any time. However, the preference shares may be converted at the option of theCompany in any of the following cases:

– the closing price of the ordinary shares in the Company on the Stock Exchange is 125% or more of theadjusted conversion value of HK$21.20, subject to further adjustments, for twenty consecutive tradingdays; or

– there are less than 50,000,000 preference shares in issue.

22. WARRANTS

During the year, a total of 21,285,417 warrants were exercised by the warrantholders of the Company tosubscribe for 21,285,417 ordinary shares of HK$0.10 each in the Company at the subscription price of HK$2.00per share. The subscription rights attached to the outstanding warrants to subscribe for ordinary shares in theCompany were expired on 11th November, 1999.

23. SHARE OPTION SCHEME

Pursuant to the share option scheme of the Company adopted on 24th January, 1992, the board of directors ofthe Company may grant options to any directors or full time employees of the Company or any of its subsidiariesto subscribe for ordinary shares in the Company at a price not less than the higher of 80% of the average closingprice of the Company’s ordinary shares on the five trading days immediately preceding the offer of the optionsand the nominal value of the ordinary shares. The maximum number of ordinary shares in respect of whichoptions may be granted may not exceed 10% of the ordinary share capital of the Company in issue from time totime.

49



23. SHARE OPTION SCHEME (Continued)

The movements of share options granted by the Company to the directors and full time employees of theCompany or any of its subsidiaries during the year were as follows:

Number of ordinary shares to be issuedupon exercise of the share options

Granted LapsedExercise price Balance at during during Balance at

Date of grant per share 1.4.1999 the year the year 31.3.2000HK$

28.8.1997 4.5600 28,000,000 – (7,000,000) 21,000,00018.12.1998 0.3792 6,600,000 – – 6,600,00017.12.1999 1.0816 – 24,500,000 – 24,500,000

34,600,000 24,500,000 (7,000,000) 52,100,000

The options granted on 28th August, 1997 and 18th December, 1998 can be exercised at any time during thethree year period commencing on a day after their respective dates of offer, subject to certain restrictionscontained in the offer letters. No such options were exercised during the year.

The options granted on 17th December, 1999 can be exercised at any time during the period commencing on aday after the date of offer until 23rd January, 2002 (the expiry date of the share option scheme of the Company).

50



24. RESERVES

Capital Asset AccumulatedShare Warrant Contributed redemption revaluation Translation Goodwill (losses)

premium reserve surplus reserve reserve reserve reserve profits TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

THE GROUPAt 1st April, 1998 587,327 97,783 856,611 808 405 (46,731 ) (644,683) – 851,520Exchange differences arising from

translation of overseas operations – – – – – 22 – – 22Issue of ordinary shares under scrip

dividend scheme (428 ) – – – – – – – (428)Shares and warrants issuing

expenses (10,238 ) – – – – – – – (10,238 )Credit arising on scrip dividends – – – – – – – 449 449Transfer to capital redemption

reserve on purchase ofown ordinary shares – – – 100 – – – (100 ) –

Discount on purchase of ownordinary shares, net of expenses – – – – – – – 60 60

Warrant reserve realised onexpiration of warrants – (97,783 ) – – – – – – (97,783 )

Transfers pursuant to capitalreorganisation (570,000 ) – 1,235,623 – – – – – 665,623

Deficit arising on valuation – – – – (405) – – – (405)Reserve movements arising on

acquisition of subsidiaries – – – – – – (1,924 ) – (1,924 )Reserve movements arising on

acquisition of associates – – – – – – 24,690 – 24,690Reserve movements arising on

reduction of interest inan associate – – – – – 121 729 – 850

Share of post-acquisition reservemovements of associates – – – – – 14,970 30,838 – 45,808

Loss for the year – – – – – – – (341,752 ) (341,752 )

At 31st March, 1999 6,661 – 2,092,234 908 – (31,618 ) (590,350 ) (341,343 ) 1,136,492

Attributable to:The Company and its subsidiaries 6,661 – 2,092,234 908 – (240) (495,602 ) 83,128 1,687,089Associates – – – – – (31,378 ) (94,748 ) (424,471 ) (550,597 )

6,661 – 2,092,234 908 – (31,618 ) (590,350 ) (341,343 ) 1,136,492

At 1st April, 1999 6,661 – 2,092,234 908 – (31,618 ) (590,350 ) (341,343 ) 1,136,492Exchange differences arising from

translation of overseas operations – – – – – (235) – – (235)Issue of ordinary shares 150,343 – – – – – – – 150,343Shares issuing expenses (3,161 ) – – – – – – – (3,161 )Reserve movements arising on

acquisition of subsidiaries – – – – – – (74,625 ) – (74,625 )Reserve movements arising on

acquisition of associates – – – – – – (270,206 ) – (270,206 )Released on disposal of subsidiaries – – – – – (336) 163,299 – 162,963Reserve movements arising on

reduction of interest inan associate – – – – – 4,717 102,509 – 107,226

Share of post-acquisition reservemovements of associates – 5,432 – – – (23,850 ) (114,149 ) – (132,567 )

Profit for the year – – – – – – – 553,823 553,823

At 31st March, 2000 153,843 5,432 2,092,234 908 – (51,322 ) (783,522 ) 212,480 1,630,053

Attributable to:The Company and its subsidiaries 153,843 – 2,092,234 908 – (324) (682,982 ) 503,541 2,067,220Associates – 5,432 – – – (50,998 ) (100,540 ) (291,061 ) (437,167 )

153,843 5,432 2,092,234 908 – (51,322 ) (783,522 ) 212,480 1,630,053

51



24. RESERVES (Continued)

CapitalShare Warrant Contributed redemption Accumulated

premium reserve surplus reserve profits TotalHK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

THE COMPANYAt 1st April, 1998 587,327 97,783 882,370 808 70,080 1,638,368Issue of ordinary shares under scrip

dividend scheme (428) – – – – (428)Shares and warrants issuing expenses (10,238) – – – – (10,238)Credit arising on scrip dividends – – – – 449 449Transfers pursuant to capital

reorganisation (570,000) – 1,235,623 – – 665,623Transfer to capital redemption reserve

on purchase of own ordinary shares – – – 100 (100) –Discount on purchase of own

ordinary shares, net of expenses – – – – 60 60Warrant reserve realised on expiration

of warrants – (97,783) – – – (97,783)Profit for the year – – – – 99,598 99,598

At 1st April, 1999 6,661 – 2,117,993 908 170,087 2,295,649Issue of ordinary shares 150,343 – – – – 150,343Shares issuing expenses (3,161) – – – – (3,161)Loss for the year – – – – (107,081) (107,081)

At 31st March, 2000 153,843 – 2,117,993 908 63,006 2,335,750

Notes: The contributed surplus of the Group comprises the difference between the nominal amount of the ordinary share capital issued by theCompany in exchange for the nominal amount of the share capital of a subsidiary acquired pursuant to a corporate reorganisation on 24thJanuary, 1992 and the credits arising from the changes in the capital and reserves of the Company pursuant to the capital reorganisation.

The contributed surplus of the Company comprises the difference between the underlying net assets of the subsidiaries acquired by theCompany and the nominal amount of the Company’s ordinary share capital issued as consideration for the acquisition and the credits arisingfrom the changes in the capital and reserves of the Company pursuant to the capital reorganisation.

Under the Companies Act 1981 of Bermuda, the contributed surplus account of the Company is available for distribution. However, theCompany cannot declare or pay a dividend, or make a distribution out of contributed surplus if:

(a) it is, or would after the payment be, unable to pay its liabilities as they become due; or

(b) the realisable value of its assets would thereby be less than the aggregate of its liabilities and its issued share capital and sharepremium accounts.

In the opinion of the directors, the Company’s reserves available for distribution to shareholders were as follows:

2000 1999HK$’000 HK$’000

Contributed surplus 2,117,993 2,117,993Accumulated profits 63,006 170,087

2,180,999 2,288,080

52



25. CONVERTIBLE NOTES

THE GROUP THE COMPANY2000 1999 2000 1999

HK$’000 HK$’000 HK$’000 HK$’000

HK$150,000,000 6.25% convertiblenotes due 2002 (note a) 150,000 150,000 – –

Add: Premium payable upon theredemption of the convertible notes 12,904 8,770 – –

162,904 158,770 – –

HK$120,000,000 prime rate convertiblenotes due 2002 (note b) 120,000 – 120,000 –

Less: Unamortised deferred expenditure (1,722) – (1,722) –

118,278 – 118,278 –

HK$460,000,000 prime rate convertiblenotes due 2003 (note c) 460,000 – 460,000 –

Less: Unamortised deferred expenditure (6,870) – (6,870) –

453,130 – 453,130 –

734,312 158,770 571,408 –

Notes:

(a) The convertible notes bear interest at 6.25% per annum, are unconditionally and irrevocably guaranteed by the Company and are redeemableon 14th February, 2002 unless they are previously converted, redeemed or purchased and cancelled.

All the noteholders have an option to convert the convertible notes into ordinary shares of the Company at an adjusted conversion price ofHK$15.94 per share on or before 14th February, 2002. The ordinary shares to be issued upon such conversion are to rank pari pas su in allrespects with the ordinary shares in issue on the relevant conversion date.

The Group may redeem the whole of the convertible notes at any time after twelve months from the date of issue and at a redemption pricewhich will cause the convertible notes to provide a yield of 9% per annum up to the date of redemption to the holders of the convertiblenotes, in the event that the market price of the ordinary shares of the Company is at least 130% of the conversion price during a stipulatedperiod.

(b) Pursuant to an ordinary resolution passed at a special general meeting of the Company held on 30th September, 1999, the Company issuedon 5th October, 1999 HK$50,000,000 convertible notes to each of Galaxyway and independent investors by subscription and placement,respectively, with an over-allotment option granted to the independent investors of an amount up to HK$20,000,000. The Company furtherissued HK$20,000,000 convertible notes on 3rd November, 1999 pursuant to the over-allotment option exercised by the independentinvestors. Galaxyway was a wholly-owned subsidiary of Chinaview which was, in turn, wholly-owned by Dr. Chan Kwok Keung, Charles, adirector and a substantial shareholder of the Company.

The notes bear interest at prime rate as quoted by The Hongkong and Shanghai Banking Corporation Limited and payable semi-annually inarrears.

All the noteholders have an option to convert the convertible notes into ordinary shares of the Company at an initial conversion price ofHK$1.10 per share, subject to adjustment, on or before 5th October, 2002. The ordinary shares to be issued upon such conversion are torank pari passu in all respects with the ordinary shares in issue on the relevant conversion date.

(c) Pursuant to an ordinary resolution passed at a special general meeting of the Company held on 25th February, 2000, the Company issued on29th February, 2000 HK$200,000,000 convertible notes to each of Galaxyway and independent investors by subscription and placement,respectively, with an over-allotment option granted to the independent investors of an amount up to HK$60,000,000. The Company furtherissued HK$60,000,000 convertible notes on 30th March, 2000 pursuant to the over-allotment option exercised by the independentinvestors.

The notes bear interest at prime rate as quoted by The Hongkong and Shanghai Banking Corporation Limited and payable semi-annually inarrears.

All the noteholders have an option to convert the convertible notes into ordinary shares of the Company at an initial conversion price ofHK$1.75 per share, subject to adjustment, on or before 1st March, 2003 (or the next following business day if it is not a business day). Theordinary shares to be issued upon such conversion are to rank pari passu in all respects with the ordinary shares in issue on the relevantconversion date.

53



26. LOANS FROM MINORITY SHAREHOLDERS

As at 31st March, 1999, included in loans from minority shareholders was an amount of HK$31,855,000 whichwas non-interest bearing. The remaining balance was unsecured and bore interest at US dollar prime rate.During the year, the subsidiaries were disposed of.

27. DEFERRED TAXATION

The components of the deferred taxation credit not recognised for the year were as follows:

THE GROUP2000 1999

HK$’000 HK$’000

Tax effect of timing differences attributable to:

Tax losses 12,736 3,176Shortfall (excess) of tax allowances over depreciation 15 (70)

12,751 3,106

At the balance sheet date, the components of the net potential deferred taxation asset not recognised in thefinancial statements were as follows:

THE GROUP2000 1999

HK$’000 HK$’000

Tax effect of timing differences attributable to:

Unutilised tax losses 38,013 25,277Excess of tax allowances over depreciation (570) (585)

37,443 24,692

The net potential deferred taxation asset has not been recognised in the financial statements as realisation of thisasset in the foreseeable future is uncertain.

The Company did not have any significant unprovided deferred taxation for the year or at the balance sheet date.

54



28. RECONCILIATION OF PROFIT (LOSS) BEFORE TAXATION TO NET CASH INFLOW (OUTFLOW)FROM OPERATING ACTIVITIES

2000 1999HK$’000 HK$’000

Profit (loss) before taxation 594,751 (328,956)Share of results of associates (206,402) 265,648Interest expenses 53,637 60,500Depreciation and amortisation 3,796 11,124Amortisation of premium payable upon the redemption of the convertible notes 4,134 4,125Amortisation of deferred expenditure on issuance of convertible notes 685 –Warrant reserve realised on expiration of warrants – (97,783)(Gain) loss arising from the dilution of interest in and partial disposal of associates (3,855) 3,333Deficit arising from valuation of properties – 4,565(Gain) loss on disposal of investments in securities (122,870) 32,328Gain on disposal of subsidiaries (314,192) –Unrealised gain on valuation of other investments (15,647) –Unrealised loss from transfer of investment securities to other investments 2,425 –Loss on exercise of a put option in respect of a listed security 44,370 –Provision for permanent impairment in value of an expressway and related buildings – 59,616Loss on disposal of property, plant and equipment 75 33Decrease in inventories 553 2,336Increase in property held for resale (78) (2,747)(Increase) decrease in trade and other receivables (18,150) 1,626Decrease (increase) in deposit with a securities broker 51,425 (51,425)Increase in amounts due from associates (7,860) (5,612)Decrease (increase) in loan receivables 5,000 (11,000)Increase (decrease) in trade and other payables 14,001 (22,901)Increase in amounts due to associates 1,190 –

Net cash inflow (outflow) from operating activities 86,988 (75,190)

29. PURCHASE OF SUBSIDIARIES

2000 1999HK$’000 HK$’000

NET ASSETS PURCHASEDProperty, plant and equipment 867 890Inventories – 88Trade and other receivables 2,474 1,974Bank balances and cash 4,765 –Trade and other payables (9,904) (2,544)Bank overdrafts – (22)Amounts due to associates (27) –Minority interests 2,730 –

905 386Goodwill arising on acquisition of subsidiaries 74,625 1,924

75,530 2,310

Satisfied by:

Cash 75,530 2,310

The subsidiaries acquired during the year contributed cash inflow of HK$1,739,000 to the Group’s net operatingcash inflow, paid HK$108,410,000 in respect of investing activities and received HK$102,783,000 in respect offinancing activities.

55



30. DISPOSAL OF SUBSIDIARIES

2000 1999HK$’000 HK$’000

NET ASSETS DISPOSED OFProperty, plant and equipment 106,577 –Interests in associates 240,541 –Investments in securities 25,192 –Trade and other receivables 18,691 –Bank balances and cash 19,099 –Trade and other payables (11,358) –Loans from minority shareholders (215,751) –Minority interests (4,942) –

178,049 –Gain on disposal of subsidiaries 314,192 –Goodwill reserve released on disposal of subsidiaries 163,299 –Translation reserve released on disposal of subsidiaries (336) –

655,204 –

Satisfied by:

Cash 101,591 –Convertible notes (note 15) 555,900 –Expenses incurred (2,287) –

655,204 –

The subsidiaries disposed of during the year contributed cash outflow of HK$8,041,000 to the Group’s netoperating cash inflow, paid HK$104,549,000 in respect of investing activities and received HK$112,348,000 inrespect of financing activities.

The subsidiaries disposed of during the year did not have any significant impact on the Group’s operating results.

31. ANALYSIS OF THE NET (OUTFLOW) INFLOW OF CASH AND CASH EQUIVALENTS IN RESPECTOF THE PURCHASE/DISPOSAL OF SUBSIDIARIES

2000 1999HK$’000 HK$’000

PURCHASE OF SUBSIDIARIESCash consideration paid (75,530) (2,310)Bank balances and cash acquired 4,765 –Bank overdrafts acquired – (22)

Net outflow of cash and cash equivalents in respect ofthe purchase of subsidiaries (70,765) (2,332)

DISPOSAL OF SUBSIDIARIESCash consideration received 101,591 –Expenses incurred (2,287) –Bank balances and cash disposed of (19,099) –

Net inflow of cash and cash equivalents in respect ofthe disposal of subsidiaries 80,205 –

56



32. ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR

Amountspayable Loans from

Share capital and Convertible Bank Other under margin minorityshare premium notes loans loans accounts shareholders

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

At 1st April, 1998 894,270 154,645 68,125 95,034 253,480 232,352Proceeds from rights issue 420,218 – – – – –Shares and warrants issuing expenses (10,238) – – – – –New borrowings raised – – – 244,710 362,796 –Repayments during the year – – (68,125) (129,450) (523,864) (18,683)Consideration paid for repurchase

of own ordinary shares (40) – – – – –Balance cancelled on repurchase of

own ordinary shares (60) – – – – –Transfer to contributed surplus account (1,235,623) – – – – –Premium payable upon redemption – 4,125 – – – –

At 31st March, 1999 68,527 158,770 – 210,294 92,412 213,669Issue of ordinary shares 167,871 – – – – –Issue of convertible notes – 580,000 – – – –Expenditure incurred for

issuance of convertible notes – (9,277) – – – –Shares issuing expenses (3,161) – – – – –New borrowings raised – – – 95,400 230 –Repayments during the year – – – (288,377) (92,642) 2,082Premium payable upon redemption – 4,134 – – – –Amortisation of deferred expenditure – 685 – – – –Disposal of subsidiaries – – – – – (215,751)

At 31st March, 2000 233,237 734,312 – 17,317 – –

33. MAJOR NON-CASH TRANSACTIONS

During the year, the Group disposed of a wholly-owned subsidiary to a wholly-owned subsidiary of Hanny at aconsideration of HK$555,900,000 which was satisfied by the issue of convertible note by Hanny. During theyear, the Group converted HK$170,000,000 convertible note into Hanny’s shares. At the balance sheet date,HK$385,900,000 convertible note of Hanny was held by the Group.

34. RETIREMENT BENEFIT SCHEME

The Group has a defined contribution retirement benefit scheme for qualifying employees. The assets of thescheme are separately held in funds under the control of an authorised insurer.

The cost charged to the income statement represents contributions payable to the funds by the Group at ratesspecified in the rules of the scheme. Where there are employees who leave the scheme prior to vesting fully in thecontributions, the contributions payable by the Group are reduced by the amount of forfeited contributions.

At the balance sheet date, there were no significant forfeited contributions which arose upon employees leavingthe scheme prior to their interests in the Group’s contributions becoming fully vested and which are available toreduce the contributions payable by the Group in future years.

57



35. CONTINGENT LIABILITIES

THE COMPANY2000 1999

HK$’000 HK$’000

Guarantees given to holders of the 2002 convertiblenotes issued by a subsidiary (note 25(a)) 150,000 150,000

Guarantees given to banks and financial institutionsin respect of general credit facilities utilised by subsidiaries – 94,528

150,000 244,528

The Group did not have any significant contingent liabilities at the balance sheet date.

36. MATERIAL LITIGATION

The liquidators of Hoi Sing Construction Company Limited (“Hoi Sing”), a former wholly-owned subsidiary ofthe Company, instituted proceedings against the Company on 10th July, 1998 claiming approximatelyHK$297,441,000 plus interest pursuant to an alleged guarantee by the Company for debt owed by Hoi SingBuilders Limited to Hoi Sing. The Company does not admit the existence of the guarantee, and has put HoiSing to strict proof of its terms and the amounts claimed under it. Even if the Court upholds the allegedguarantee, the Company has a defence of “set off ” arising from a claim against Hoi Sing for approximatelyHK$308,207,000. The Company is the largest creditor of Hoi Sing and the liquidators of Hoi Sing haveadmitted a substantial portion of the Company’s claim as at 31st March, 2000. The balance is being adjudicatedby the liquidators of Hoi Sing.

37. COMMITMENTS

(a) Operating lease commitments

As at 31st March, 2000, the Group had annual commitment of approximately HK$4,656,000 (1999: Nil)in respect of a non-cancellable operating lease of premises which expires in the second to the fifth yearinclusively from the balance sheet date.

The Company did not have any significant commitments under non-cancellable operating leases at thebalance sheet date.

(b) Capital commitments

The Group and the Company did not have any significant capital commitments at the balance sheet date.

58



37. COMMITMENTS (Continued)

(c) Other commitments

During the year ended 31st March, 1999, the Group entered into various put option agreements with anassociate and third parties, under which these parties were granted the right to sell (“Put Options”) variouslisted and unlisted securities to the Group. All the Put Options were exercised by the associate and thirdparties during the current year and their financial effects have been accounted for in these financialstatements. The exercise period and the contracted values of the listed securities under these options as at31st March, 1999 are summarised as follows:

Contracted valueHK$’000

On or before 30th September, 1999 160,000Within thirty days from 30th November, 1999 46,711On 31st March, 2000 51,425

258,136

There were no similar commitments as at 31st March, 2000.

38. PLEDGE OF ASSETS

At the balance sheet date, the Group’s property for resale, land and buildings and certain investment securitieswith an aggregate carrying value of approximately HK$1,012,689,000 (1999: HK$1,305,953,000) were pledgedto banks and other financial institutions to secure general banking facilities granted to the Group.

59



39. TRANSACTIONS AND BALANCES WITH RELATED PARTIES

During the year or at the balance sheet date, the Group had transactions/balances with the following relatedparties, details of which are as follows:

2000 1999HK$’000 HK$’000

Associates:Disposal of a subsidiary (note a) 555,900 –Acquisition of an associate (note b) 195,944 –Sales (note c) 2,551 4,612Dividend income 34,501 4,879Rental income received (note d) 4,130 –Interest income received (note e) 11,639 6,681Amounts advanced and fully repaid during the year (note e) 316,920 –Balance due by the Group (note f ) 1,217 –Balance due to the Group (note g) 46,220 86,058Convertible note (note 15) 385,900 –

Directors or companies controlled by directors:Interest paid by the Group (note h) 180 1,269Interest payable on convertible notes issued by the Group (note i) 3,636 –Amount due by the Group – 12,294

In addition to the above, during the year, the Company issued convertible notes totalling HK$250,000,000 toGalaxyway, a company in which Dr. Chan Kwok Keung, Charles, a director and a substantial shareholder of theCompany has a beneficial interest. Details of the transactions are set out in note 25.

Notes:

(a) The transaction was carried out pursuant to the acquisition agreement entered into by the Group with an associate on 8th November, 1999.Details of this transaction were set out in the announcement of the Company dated 9th November, 1999.

(b) The transaction was carried out in respect of the exercise of a put option granted to Hanny in relation to 60 million shares of HK$0.10 eachin the capital of Tung Fong Hung, details of which were set out in the announcement of the Company dated 28th September, 1999.

(c) Sales were carried out by reference to the prevailing market price for comparable transactions.

(d) Rentals were charged with reference to the market price.

(e) Interest was charged at prime rate or 1% to 2% over prime rate.

(f ) The amounts are interest-free, unsecured and repayable on demand.

(g) The amounts are unsecured and repayable on demand. Approximately HK$31,785,000 out of the balance is interest bearing at 1% to 2%over prime rate. The remaining balance is interest-free.

(h) Interest was charged at prime rate plus 1%.

(i) Interest was payable based on prime rate as quoted by The Hongkong and Shanghai Banking Corporation Limited.

60



40. PARTICULARS OF PRINCIPAL SUBSIDIARIES AND ASSOCIATES

Details of the Company’s principal subsidiaries as at 31st March, 2000 are as follows:

Percentage ofIssued and issued share capital/fully paid registered capital

Place of share capital/ held by theincorporation/ registered Company*/ attributable

Name of subsidiary registration capital subsidiaries to the Group Principal activities% %

Asian Venture Limited British Virgin US$2 100 * 100 Investment holdingIslands ordinary shares

Burcon Group Limited Canada CAD1,000 100 100 Investment andClass A common property holding

share

CEF Concord (BVI) British Virgin US$1 100 * 100 Provision of financialCompany Limited Islands ordinary share services

Coxson Limited British Virgin US$1 100 100 Investment holdingIslands ordinary share

Dreyer and Company Hong Kong HK$6,424,000 99 99 Trading of buildingLimited ordinary shares materials and

machinery

Great Intelligence Limited British Virgin US$1 100 * 100 Investment holdingIslands ordinary share

Hastings Gold Limited British Virgin US$1 100 * 100 Investment holdingIslands ordinary share

Hollyfield Group Limited Western Samoa US$1 100 * 100 Investment holdingordinary share

Illuminate Investments British Virgin US$1 100 * 100 Investment holdingLimited Islands ordinary share

International Tak Hong Kong HK$2 100 100 Provision of realCheung Estate Agency ordinary shares estate agencyLimited services

61



40. PARTICULARS OF PRINCIPAL SUBSIDIARIES AND ASSOCIATES (Continued)

Percentage ofIssued and issued share capital/fully paid registered capital

Place of share capital/ held by theincorporation/ registered Company*/ attributable

Name of subsidiary registration capital subsidiaries to the Group Principal activities% %

ITC Management Limited Hong Kong HK$2 100 100 Provision ofordinary shares management and

administrativeservices

Landwin Properties Hong Kong HK$2 100 100 Property holdingLimited ordinary shares

Large Scale Investments British Virgin US$1 100 * 100 Investment holdingLimited Islands ordinary share

Mankar Assets Limited British Virgin US$1 100 * 100 Investment holdingIslands ordinary share

Mira Assets Limited British Virgin US$1 100 100 Provision of servicesIslands ordinary share

Natural Shine Limited British Virgin US$1 100 * 100 Investment holdingIslands ordinary share

Prime Capital Corporation Hong Kong HK$2 100 100 Securities tradingLimited ordinary shares

Spark Fortune Limited Hong Kong HK$2 100 100 Property holdingordinary shares

Tin Lee Management British Virgin US$1 100 100 Properties sub-leasingLimited Islands ordinary share

Wealthood Limited British Virgin US$1 100 * 100 Investment holdingIslands ordinary share

All of the above subsidiaries operate in Hong Kong with the exception of Burcon Group Limited which operatesin Canada.

Except for CEF Concord (BVI) Company Limited which has issued convertible notes with an aggregate principalvalue of HK$150 million in which the Group had no interest, none of the subsidiaries had any loan capitalsubsisting at the end of the year or at any time during the year.

62




Details of the Group’s principal associates as at 31st March, 2000 are as follows:

Percentage ofPlace of Issued and issued shareincorporation/ fully paid capital held

Name of associates registration share capital by the Group Principal activities%

Burcon NutraScience Canada CAD6,350,000 28.04 Investment holdingCorporation common shares in company engaged(Formerly known as in the development ofBurcon Capital Corp.) commercial canola protein

CU Futures Limited Hong Kong HK$12,000,000 40.00 Trading in futuresordinary shares

CU Securities Limited Hong Kong HK$11,000,000 40.00 Securities tradingordinary shares

Great Concept British Virgin HK$20 40.00 Investment holdingProfits Limited Islands ordinary shares

Hanny Holdings Limited Bermuda HK$96,728,537 21.61 Investment holding in ordinary shares companies engaged in the

manufacturing,distribution andmarketing of datastorage media,the distribution ofrelated products,securities investment andstrategic investments ininformation technologyrelated business

Paul Y. - ITC Bermuda HK$98,011,510 37.53 Investment holding inConstruction ordinary shares construction companiesHoldings Limited

Star East Cafe and Hong Kong HK$10,000 45.00 Operation of entertainmentEntertainment Limited ordinary shares complex

Star East Starmate Hong Kong HK$2 45.00 Photo sticker machine rentalLimited ordinary shares

63




Percentage ofPlace of Issued and issued shareincorporation/ fully paid capital held

Name of associates registration share capital by the Group Principal activities%

Star East Group Limited British Virgin US$10,000 45.00 Investment holdingIslands class A shares

(note)US$30 46.67

class B shares(note)

Tung Fong Hung Cayman HK$71,483,802 23.59 Retailing and wholesale of(Holdings) Limited Islands ordinary shares Chinese medicine,

health products andfoodstuff, manufacturingand trading of westernpharmaceutical products,securities investment,properties investment andmoney lending

Note: The holders of class A shares have no rights to receive notice of or attend or vote at any general meeting of the Company but are entitled todividend, as and when declared, and distribution of surplus assets upon liquidation of the Company.

The holders of class B shares have rights to receive notice of or attend or vote at any general meeting of the Company but are not entitled toany dividend and distribution of any surplus assets upon liquidation of the Company.

All of the above associates are held indirectly by the Company and operate in Hong Kong with the exception ofBurcon NutraScience Corporation which operates in Canada.

The above tables list the subsidiaries of the Company and associates of the Group which, in the opinion of thedirectors, principally affected the results for the year or formed a substantial portion of the net assets of theGroup. To give details of all other subsidiaries and associates would, in the opinion of the directors, result inparticulars of excessive length.

64



41. EXTRACTS OF THE CONSOLIDATED RESULTS AND FINANCIAL POSITION OF ASSOCIATES

The following is extracted from the audited financial statements of Paul Y. - ITC, Hanny and Tung Fong Hungfor the year ended 31st March, 2000.

Paul Y. - ITC

(a) Consolidated income statement

For the years ended 31st March, 2000 and 1999

2000 1999HK$’000 HK$’000

Turnover 11,054,854 11,680,400Cost of sales (10,352,445) (10,985,475)

Gross profit 702,409 694,925Other revenue 272,366 306,751Administrative expenses (528,929) (555,300)Other operating expenses (110,015) (105,232)

Profit from operations 335,831 341,144Finance costs (220,230) (309,611)Investment income (expenses) – net 94,379 (584,904)Gain (loss) on disposal of subsidiaries and associates 171,406 (271,988)Share of results of associates 59,688 (23,471)

Profit (loss) before taxation 441,074 (848,830)Taxation (96,303) (41,303)

Profit (loss) before minority interests 344,771 (890,133)Minority interests (56,603) 92,202

Profit (loss) for the year 288,168 (797,931)Accumulated profits brought forward 81,558 885,108Credit arising on scrip dividends 2,595 1,587

Profit available for distribution 372,321 88,764Dividends (22,127) (7,206)

Accumulated profits carried forward 350,194 81,558

Earnings (loss) per shareBasic HK$0.333 HK$(1.438)

Diluted HK$0.299 HK$(1.441)

65



41. EXTRACTS OF THE CONSOLIDATED RESULTS AND FINANCIAL POSITION OF ASSOCIATES(Continued)

Paul Y. - ITC (Continued)

(b) Consolidated balance sheet

At 31st March, 2000 and 1999

2000 1999HK$’000 HK$’000

NON-CURRENT ASSETSInvestment properties 598,130 1,454,430Property, plant and equipment 2,914,305 3,076,507Properties held under development 512,155 1,066,364Interests in associates 38,850 83,778Investments in securities 26,866 98,637Long term investments 15,968 15,968Loan to an investee company – 33,105

4,106,274 5,828,789

CURRENT ASSETSProperties under development held for resale 145,411 –Properties held for resale – 43,600Amounts due from customers for contract works 1,289,619 1,702,647Debtors, deposits and prepayments 2,533,568 2,943,540Amounts due from related companies 108,880 64,819Amounts due from associates 229,218 336,325Unsecured loans receivable 381,320 141,137Investments in securities 337,573 30,991Taxation recoverable 21,805 9,990Short term bank deposits 896,242 108,705Bank balances and cash 430,302 329,021

6,373,938 5,710,775

66




Paul Y. - ITC (Continued)

(b) Consolidated balance sheet (Continued)


2000 1999HK$’000 HK$’000

CURRENT LIABILITIESAmounts due to customers for contract works 841,665 510,161Creditors and accrued expenses 2,133,906 2,627,731Bills payable 1,118 283,041Amounts due to related companies 3,464 808Amounts due to associates 1,043 32,992Dividend payable 9,801 7,206Taxation payable 119,115 43,323Obligations under finance leases and hire purchase

contracts – due within one year 62,350 146,164Bank borrowings – due within one year 571,280 485,479Other loans – 326,213Redeemable notes – 69,884Convertible bonds – due within one year 1,066,214 –Loans from minority shareholders of subsidiaries

– due within one year 95,100 97,948

4,905,056 4,630,950

NET CURRENT ASSETS 1,468,882 1,079,825

TOTAL ASSETS LESS CURRENT LIABILITIES 5,575,156 6,908,614

MINORITY INTERESTS 605,061 698,173

NON-CURRENT LIABILITIESObligations under finance leases and hire purchase

contracts – due after one year 176,090 400,475Bank borrowings – due after one year 290,851 1,257,426Other loans 715,975 21,000Convertible bonds – due after one year – 1,047,598Convertible notes 616,425 619,645Loans from minority shareholders of subsidiaries

– due after one year 33,034 130,982Deferred taxation 216,852 223,609

2,049,227 3,700,735

NET ASSETS 2,920,868 2,509,706

CAPITAL AND RESERVESShare capital 98,011 72,054Reserves 2,822,857 2,437,652

SHAREHOLDERS’ FUNDS 2,920,868 2,509,706

67




Hanny


For the years ended 31st March, 2000 and 1999

2000 1999HK$’000 HK$’000

(As restated)

Turnover 2,819,998 2,416,143Cost of sales (2,258,713) (1,920,458)

Gross profit 561,285 495,685Other revenue (expenses) 178,682 (13,020)Distribution costs (320,963) (309,412)Administrative expenses (252,748) (162,700)

Profit from operations 166,256 10,553Finance costs (63,787) (39,668)Share of results of associates (34,386) (15,645)Gain on partial disposal of shareholding in

a subsidiary 201,665 –Warrant premium realized on expiration – 101,375

Profit before taxation 269,748 56,615Taxation 3,074 1,381

Profit before minority interests 266,674 55,234Minority interests 8,361 9,187

Profit attributable to shareholders 258,313 46,047

Dividends 16,600 14,730

Earnings per shareBasic 9.58 cents 2.29 cents

Diluted 8.78 cents 2.27 cents

68




Hanny (Continued)



2000 1999HK$’000 HK$’000

(As restated)

Non-current AssetsProperty, plant and equipment 82,642 70,750Intangible assets 178,368 189,777Interests in associates 180,265 222,938Investments in securities 766,518 8,829Deferred expenditure 6,022 30,111

1,213,815 522,405

Current AssetsInventories 396,099 307,247Trade and other receivables 728,728 590,903Investments in securities 575,240 321,039Short-term loans receivable 89,581 91,755Margin loans receivable 180,915 38,338Bills receivable 4,606 2,298Tax recoverable 1,497 –Bank balances and cash 662,882 25,886

2,639,548 1,377,466

Current LiabilitiesTrade and other payables 348,682 312,353Margin loans payable 78,429 10,971Bills payable 1,513 40,541Taxation 5,276 5,549Proposed dividend 9,886 12,277Borrowings – due within one year 502,896 384,257Obligations under finance leases and hire purchase

contracts – due within one year 2,537 2,417Bank overdrafts 22,362 1,797

971,581 770,162

Net Current Assets 1,667,967 607,304

2,881,782 1,129,709

69




Hanny (Continued)


At 31st March, 2000 and 19992000 1999

HK$’000 HK$’000(As restated)

Capital and ReservesShare capital 96,728 58,856Reserves 2,203,750 922,175

2,300,478 981,031

Minority interests 94,873 41,744

Non-current LiabilitiesBorrowings – due after one year 88,182 98,130Obligations under finance leases and hire purchase

contracts – due after one year 6,216 8,804Convertible note 385,900 –

Amounts due to minority shareholders 6,133 –

486,431 106,934

2,881,782 1,129,709

70




Tung Fong Hung


For the years ended 31st March, 2000 and 19992000 1999

HK$’000 HK$’000

Turnover 315,421 612,939Cost of sales (177,481) (450,220)

Gross profit 137,940 162,719Other revenue 27,455 49,465Distribution costs (108,020) (103,122)Administrative expenses (62,362) (76,943)Other operating expenses (186,421) (265,863)

Loss from operations (191,408) (233,744)Finance costs (5,845) (26,212)Investment income 4,558 11,491Share of results of jointly controlled entities 4,994 (24,836)

Loss before tax (187,701) (273,301)Income tax (expense) credit (1,635) 5,101

Loss before minority interests (189,336) (268,200)Minority interests (148) (599)

Net loss for the year (189,188) (267,601)

Loss per share HK$(0.40) HK$(1.36)

71




Tung Fong Hung (Continued)



2000 1999HK$’000 HK$’000

Non-current assetsInvestment properties 38,360 177,055Properties under development 94,804 59,049Property, plant and equipment 25,671 25,934Interest in an associate 32,000 –Interests in jointly controlled entities 16,057 101,169Investments in securities 10,961 451Club debenture 744 744Note receivable – 21,234

218,597 385,636

Current assetsProperties held for resale 80,000 –Inventories 46,401 54,145Trade and other receivables 42,829 67,985Deposits made on acquisition of

properties under development – 28,964Option right acquired for acquisition

of properties under development 30,000 30,000Short-term loans 65,367 179,542Note receivable 12,100 –Investments in securities 29,229 13,582Taxation recoverable 1,706 3,060Bank balances and cash 161,619 32,989

469,251 410,267

Current liabilitiesTrade and other payables 42,819 71,391Provision for guarantee given in

connection with a disposed subsidiary 42,500 42,500Margin accounts with brokers – secured – 332Obligations under finance leases

– due within one year 86 167Deposits received from disposal of

properties held for resale 58,261 58,261Taxation payable – 7,049Other long-term loans – due within one year – 28,000Short-term bank borrowings 34,224 15,336

177,890 223,036

Net current assets 291,361 187,231

Total assets less current liabilities 509,958 572,867

72




Tung Fong Hung (Continued)



2000 1999HK$’000 HK$’000

Non-current liabilitiesAmount due to a jointly controlled entity 37,449 –Convertible notes 70,000 –Obligations under finance leases

– due after one year 28 417Other long-term loans – due after one year – 146,800Long-term bank loans 8,531 8,697Deferred taxation 82 82

116,090 155,996

Minority interests 487 6,775

Net assets 393,381 410,096

Capital and reservesShare capital 71,483 9,351Reserves 321,898 400,745

Shareholders’ funds 393,381 410,096

Full details of the results and financial position of Paul Y. - ITC, Hanny and Tung Fong Hung can be found intheir annual reports dated 11th August, 2000, 11th August, 2000 and 28th July, 2000, respectively.

73

Financial Summary

RESULTS

Fifteen monthsYears ended Period ended Years ended

31st December, 31st March, 31st March,1995 1996 1998 1999 2000

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

Turnover 416,174 431,398 274,619 81,947 122,887

(Loss) profit before taxation (298,949) (278,911) (10,238) (328,956) 594,751Taxation (103) (125) 39,903 16,123 38,491

(Loss) profit after taxation (298,846) (278,786) (50,141) (345,079) 556,260Minority interests (155) 19 (12,525) (3,327) 2,437

(Loss) profit attributable toshareholders (298,691) (278,805) (37,616) (341,752) 553,823

As the year end date was changed from 31st December to 31st March in 1998. The result of the fifteen months periodended 31st March, 1998 was presented accordingly.

ASSETS AND LIABILITIES

As at 31st December, As at 31st March,1995 1996 1998 1999 2000

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

Total assets 260,061 17,910 2,061,706 1,917,292 2,515,142Total liabilities (307,901) (328,059) (903,243) (718,934) (805,695)

Surplus (deficiency) ofshareholders’ funds (47,840) (310,149) 1,158,463 1,198,358 1,709,447

ITC Corporation Limited

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