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Contents
Corporate Information 2
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Notice of Annual General Meeting 3
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Chairman’s Statement 4
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Chief Executive Officer’s Report 6
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Report of the Directors 12
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Directors and Senior Management 25
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Report of the Auditors 29
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Consolidated Profit and Loss Account 31
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Consolidated Statement of
Recognised Gains and Losses 32
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Consolidated Balance Sheet 33
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Balance Sheet 35
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Consolidated Cash Flow Statement 36
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Notes on the Accounts 38
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Five Year Summary 94
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Major Properties held by the Group 96
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Summary of Major Investments 98
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2
Corporate Information �� !
Directors
WANG Mingquan (Chairman)ZHU Yanlan (Chief Executive Officer)FAN Yan Hok, Philip (General Manager)YI ZhenqiuZHANG WeiguoYEUNG Chi Wai, JasonWANG ZhongzeSir David AKERS-JONES (independent non-executive)LEE Ka Sze, Carmelo (independent non-executive)LI Kwok Sing, Aubrey (independent non-executive)
Secretary
POON Yuen Ling
Registered office
Room 2703, 27th FloorFar East Finance Centre16 Harcourt Road, Hong Kong
Principal bankers
The China & South Sea Bank Ltd.International Bank of Asia Ltd.The Bank of East Asia Ltd.
Solicitors
Messrs. Woo, Kwan, Lee & Lo
Auditors
KPMG
Registrars
Tengis Limited4th Floor, Hutchison House10 Harcourt Road, Hong Kong
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NOTICE IS HEREBY GIVEN that the annual general meeting of the
Company will be held at Coral Room 1, 3rd Floor, Furama Hotel
Hong Kong, 1 Connaught Road Central, Hong Kong on Thursday, 28
June 2001 at 3:00 p.m. for the following purposes:–
1. To receive and consider the audited financial sta tements and
reports of the directors and auditors for the year ended 31
December 2000.
2. To re-elect directors and to fix the directors’ remuneration.
3. To re-appoint auditors and to fix their remunera tion.
By Order of the Board
POON Yuen Ling
Company Secretary
Hong Kong, 25 May 2001
Notes:–
1. Any member of the Company entitled to attend and vote at the meeting
is entitled to appoint a proxy to attend and, on a poll, vote instead of
him. A proxy need not be a member of the Company.
2. To be valid, a proxy f orm, to gether with any power of attorney or
other authority (if any) under which it is signed, or a notarially certified
copy thereof must be lodged with the r eg istered office of the Company
at Room 2703, 27th Floor, Far East Finance Centre, 16 Harcourt Road,
Hong Kong not less than 48 hours before the time appointed for holding
the meeting or any adjournment thereof.
3. T he reg ister of members will be closed from T hursday, 21 June 2001
to Thursday, 28 June 2001, both days inc lusive, during which period
no tr ansfer of shares will be effected . In order to qualify for the
attendance of the annual general meeting, all transfers accompanied by
the relevant share cer tificates m ust be lodged with the Company’s
share r egistrars, Tengis Limited at 4th Floor, Hutchison House, 10
Harcour t Road, Hong Kong by not later than 4:00 p.m. on Wednesday,
20 June 2001.
4
Chairman’s Statement �� !
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In the year under review, Hong Kong economy was recovering and
mainland China enjoyed steady economic growth. The Company and
its subsidiaries (collectively the “Group”) achieved better results in
infrastructure, property investments as well as timber business.
However, mainly due to the huge loss and prudent provisions from an
associate, Hong Kong Construction (Holdings) Limited, the Group
recorded a consolidated loss of HKD947 million.
In the past year the Group made every effort to restructure the current
portfolio of business, improve operations management and create good
business models; these efforts will continue. Hopefully continuing
effor ts of the Board and all employees will establish a strong and
healthy ground for the Group’s future development. In the meantime,
we are watching worldwide economic changes and China’s imminent
entry into World Trade Organiza tion. The Chinese government has
placed environmental protection issues at the forefront of their five-
year plan, set out an impressive environmental strategy for the next
ten years and allocated massive budgets for environmental projects.
Riding on global trend and domestic development, green and
environment business, which deals with sustainable use of natural
resources and environmental protection, prospers in China.
5
Chairman’s Statement �� !
With a leading position in the timber industry and abundant experience
in infrastructure investments, the Group is poised to move into the
related business of sustainable use of natural resources, green and
environment business, and related infr astructure. The Group is well
positioned to capture and capitalize on recent exciting and challenging
development in green and environment business. With c lear stra tegy
and sound management, the Group will gradually build a portfolio of
core business and strive to develop into a successful conglomerate
with world class competency in green and environment business.
Hereby I would like to express my gratitude for the support of all
investors, members of the Board, members of the management and all
staff of the Group. I believe that, with our continuing effor ts, the
Group will grow and prosper in the future.
Wang Mingquan
Chairman
Hong Kong, 25 May 2001
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6
Chief Executive Officer’s Report Chief Executive Officer’s Report
4.71.66
9.478.88
1.2 385
37
203.47
4.264.53
;
5.43
5318 3%
11% 267% 5933
2617
9 35%19
34%33 ,
1.24
BUSINESS REVIEW
In Year 2000 the Company and its subsidiaries (collectively the
“Group”) has achieved improvement in operations, especially in
infrastructure and property business. Nonetheless, Hong Kong
Construction (Holdings) Limited (“HK Construction”), an associate of
the Group, incurred a significant loss and drew the Group’s bottom
line into red.
In Year 2000 the Group had a turnover of HKD470 million, a decrease
of HKD166 million from that of 1999, and recorded a consolidated
loss of HKD947 million, compared with the loss of HKD888 million
in 1999. Infrastructure investments recorded a profit of HKD120
million, compared with HKD38 million in 1999; property development
and investment recorded a profit of HKD5 million, compared with the
loss of HKD37 million in 1999. The Group’s share of Everbright Timber
Industry (Shenzhen) Company Limited’s (“SETI”) operating loss and
various provisions amounted to a loss of HKD20 million, significantly
reduced from the loss of HKD347 million in 1999. The Group’s share
of HK Construction’s operating loss and various provisions amounted
to HKD426 million, compared with the loss of HKD453 million in
1999. Meanwhile, to be cautious and taking into account uncertainties
over HK Construction, the Board of Directors made a provision of
HKD543 million.
The Group delightedly witnessed an improvement in operation
effectiveness after restructuring current portfolio of business and the
enhancement of operational, financial, and risk management. In Year
2000 the Group had a gross profit of HKD53 million, compared with
HKD18 million in 1999, and a 267% gross profit margin improvement
to 11% from 3% in 1999. Other income was HKD59 million, an increase
of HKD26 million from HKD33 million in 1999, mainly due to the
profits on the disposal of Xiazhang Toll Road; distribution expense
was HKD17 million, a decrease of HKD9 million or 35% from that of
1999. Administration expense had a reduction of 34% or HKD19 million
from that of 1999. The Group recorded a profit from operations of
HKD33 million in Year 2000, compared with a loss of HKD124 million
in Year 1999.
7
Chief Executive Officer’s Report
HK CONSTRUCTION
HK Construction reported a loss of HKD1,153 million of which
HKD314 million is operating loss, HK$294 million is finance costs,
and HKD564 million represents its share of loss of associates and
jointly controlled entities, losses on revaluation of assets, projects,
and provisions for associates. The Group’s share of the loss amounted
to HKD426 million, without which and the provision for HK
Construction of HKD543 million, the Group could have had a profit
before tax of HKD15 million in 2000.
HK Construction has since 1998 embarked on a business restructuring
to focus on its core construction business. The process involves the
disposal of non-core assets, one of which is a large investment in the
Yangpu power plant in Hainan province. On 29 November 2000, KPMG
Corporate Finance was appointed to review the company’s financial
and trading position and assist in negotiation for a standstill agreement
with its banks and note-holding creditors.
HK Construction had in hand many valuable construction contracts at
the end of 2000, including two government contracts for the
construction of five schools in the territory, one government joint
venture contract for Penny’s Bay reclamation stage I, three West Rail
projects, the widening of Tolo Highway, improvement works at Tuen
Mun Wong Chu Road, design and construction of Shatin Government
Offices, Island Harbourview development at Olympic Station,
Polytechnic University phase VI development, residential development
at 41C Stubbs Road, the Qingzhou Min River Bridge in Fuzhou, and a
Chinese government joint venture contract for main construction of
the National Grand Theatre in Beijing. The directors of HK
Construction are confident all projects will be completed; provisions
have been made for those where losses may be incurred due to delays.
The Group has announced that since mid-February 2001, discussion
has taken place between the Group and an independent third party, an
unlisted state-owned enterprise in PRC and a subsidiary of which is
listed on the stock exchange of Shanghai, in relation to a possible
acquisition by such an independent third party of certain shareholding
interest in HK Construction. The discussion is still in progress.
11.533.14 2.94
5.64
4.265.43
15
41 C
8
Chief Executive Officer’s Report
TIMBER BUSINESS
Even though the competition for timber products was fierce, the Group
managed an operating loss substantially lower than the year before.
SETI recorded a loss of HKD26 million in 2000, a significant reduction
from the loss of HKD173 million in 1999. The loss included an
operating loss of HKD18 million and an inventory provision of HKD8
million.
Sales dropped 27% to HKD455 million compared with HKD621 million
in 1999, mainly due to a shift to sophisticated timber products from
simple timber commodities without competitive advantages. Despite a
decreased sale in 2000, gross profit margin had improved to 8% from
2% in 1999.
The management however has reassessed its business strategy and is
developing oversea markets, possible strategic alliances, and new
business models. The manufacturing unit has developed new products
and implemented further cost control measures. The management also
intends to restructure timber assets and develop the related business of
sustainable use of natural resources.
INFRASTRUCTURE INVESTMENT
Shenzhen Mawan Power Co. Ltd had an excellent year and generated
3.32 billion kilowatt hour of electricity in 2000. Turnover was HKD1.8
billion, and profit after tax (after adjustments made in accordance
with accounting principles generally accepted in Hong Kong) was
HKD503 million, an increase of HKD240 million or 91% over 1999.
The Group’s share of profit was HKD75 million.
In connection with Fuzhou Qingzhou Bridge project the Group recorded
a profit of HKD13 million compared to a loss of HKD17 million last
year. The bridge will be complete by the end of 2001. Related
construction of Fuzhou Airport Expressway was halted last year and
necessary provisions were then booked.
261.73
18 8
27%4.55 6.21
2% 8%
33.218 20%
5.03 2.4091%
75
1317
9
Chief Executive Officer’s Report
INFRASTRUCTURE INVESTMENT (Continued)
The Group disposed of its interest in Xiamen Xiazhang Toll Road
during the year for HKD250 million, the sale proceed has been received
in Hong Kong dollars, and a gain of HKD54 million was recorded.
The sale has considerably strengthened the cash position of the Group.
PROPERTY DEVELOPMENT AND INVESTMENT
Sino Villa Holdings Ltd. holds a four-storey commercial property in
Shenzhen Zhongshan Garden and generates a steady annual rental
income and cash flow for the Group. The approximate area of 14,900
square meters were leased to Wal-Mart Department Store, Park’N Shop,
McDonald’s Restaurant and a domestic airline ticketing office. The
property’s car parking space was sold back to China Everbright
Holdings Company Ltd., the ultimate holding company, since relevant
ownership registration certificate could not be obtained from the
government.
.
Shanghai Kerry Everbright City, of which the Group owns 25%,
comprised two office towers and a shopping mall. Gross floor area
sold remains the same as last year, i.e. 7.65% in Tower I and 30.17%
in Tower II. Leased floor area has improved to 80% in Tower I and
42% in Tower II, from 67.15% and 32.81% respectively in 1999. It
appeared that property market in Shanghai has begun to rebound slowly
following China’s imminent entry into World Trade Organisation
(“WTO”).
Shanghai Trade Square & International Apartments, of which the Group
owns 15%, demonstrated operating results similar as that of 1999. At
Shanghai Trade Square the leased or sold gross floor area for office
was 96% (1999: 86%) and for retail shops sold or leased gross floor
area was 100%, same as 1999. As for International Apartments the
lease or sold gross floor area for apartments was 99%, same as 1999,
and for retail shop it was 40% (1999: 97 %).
2.554
Sino Villa Holdings Limited
14,900
25%
1 7.65% 2 30.17%1 67.15%
80% 232.81% 42%
15%
96%86%
100%
99% 40%97%
10
Chief Executive Officer’s Report
BUSINESS PROSPECT
Looking into the future, the Group will continue to restructure current
portfolio of business, increase operation effectiveness, enhance
corporate governance, improve business and management models, and
formulate standard investment appraisal and decision-making
procedures. Meanwhile, the Group will be watchful for worldwide
economic changes and China’s imminent entry into WTO, make full
use of its own advantages including a leading position in the timber
industry and abundant experience in infrastructure investments, to
penetrate into the related business of sustainable use of natural resources
and urban environmental infrastructure. The Group will gradually build
a portfolio of core business and strive to develop into a successful
conglomerate with world class competency in green and environment
business.
FINANCIAL POSITION
As at 31 December 2000, the Group’s consolidated net assets were
approximately HKD950 million, representing a decrease of 47% as
compared to those at 31 December 1999. The consolidated net asset
value per share was about HKD0.37 at the end of 2000. Total bank
loans were 70% of the shareholders’ funds and 27% of total assets,
compared to 37% and 21% respectively last year.
CONTINGENT LIABILITIES
At 31 December 2000, guarantee given to banks by the Group in
respect of banking facilities extended by banks to third parties
amounting to HK$54 million (1999: HK$80 million). On the other
hand, the Group was guaranteed by the third parties in respect of
banking facilities amounting to HK$47 million (1999: HK$56 million).
9.547%
0.3770%
27% 37% 21%
54 80
47 56
11
Chief Executive Officer’s Report
PLEDGE OF ASSETS
At 31 December 2000, the Group pledged listed, unlisted investment
and fixed assets with an aggregate net book value of approximately
HK$1,027 million (1999: HK$1,809 million) to secure general banking
facilities granted to the Group.
By Order of the Board
Zhu Yanlan
Chief Executive Officer
Hong Kong, 25 May 2001
10.2718.09
12
Report of the Directors Report of the Directors
The directors submit herewith their annual report together with the
audited accounts for the year ended 31 December 2000.
PRINCIPAL ACTIVITIES
The principal activity of the Company is investment holding. The
principal activities and other particulars of the subsidiaries are set out
in note 13 on the accounts.
The analysis of the principal activities and geographical locations of
the operations of the Company and its subsidiaries (the “Group”) during
the financial year are set out in note 3 on the accounts.
MAJOR CUSTOMERS AND SUPPLIERS
The information in respect of the Group’s sales and purchases
attributable to the major customers and suppliers respectively during
the financial year is as follows:
Percentage of
the Group’s total
Sales Purchases
The largest customer 33%
Five largest customers in aggregate 51%
The largest supplier 56%
Five largest suppliers in aggregate 93%
Two of the major suppliers, Sino State Industries Limited and China
Everbright Trading Development Co Ltd, are wholly owned subsidiaries
of China Everbright Holdings Company Limited (“CEH”, the ultimate
holding company). Save as the above, at no time during the year have
the directors, their associates or any shareholder of the Company (which
to the knowledge of the directors owns more than 5% of the Company’s
share capital) had any interests (as defined in the Rules Governing the
Listing of Securities on the Stock Exchange (“Listing Rules”)) in these
major customers and suppliers.
5%
13
Report of the Directors
CONNECTED TRANSACTIONS
(a) On 29 November 2000, the Group entered into an agreement
with , a connected party
of the Company. Pursuant to the agreement, the Group disposed
of its entire 80% equity interest in Xiamen Xiazhang
Expressway Company Limited (“Xiazhang Expressway”) for a
cash consideration of RMB268 million (approximately
HK$250.4 million). Xiazhang Expressway is principally engaged
in the development, construction, investment, management and
operation of the toll road linking between Xiamen and
Zhangzhou in the PRC. The transaction was completed in
December 2000.
This transaction constituted a connected transaction as defined
by the Listing Rules and was announced by way of a press
announcement by the Company on 29 November 2000. Details
of the transaction have been included in the circular to
shareholders dated 14 December 2000.
(b) In accordance with the terms of a discloseable and connected
transaction duly approved by the shareholders of the Company
at an extraordinary general meeting on 29 June 1999, the Group
acquired the entire issued share capital of, and the shareholder’s
loan to, Sino Villa Holdings Limited (“Sino Villa”) at a
consideration of HK$142 million from CEH. Sino Villa holds
certain commercial properties and carparks in the PRC. The
transaction was completed in December 1999.
As CEH was unable to obtain a real estate ownership certificate
in respect of the carparking spaces under the name of Sino
Villa, the Company has exercised the option to transfer the
interest of the carparking spaces to CEH at the agreed price of
HK$9.7 million in accordance with the agreement. The
transaction constituted a connected transaction as defined by
the Listing Rules and was announced by way of a press
announcement by the Company on 15 March 2001.
(a)
80%
268,000,000 250,400,000
(b)
Sino VillaHoldings Limited Sino Villa
142,000,000 Sino Villa
Sino Villa
9,700,000
14
Report of the Directors
ACCOUNTS
The loss of the Group for the year ended 31 December 2000 and the
state of the Company’s and the Group’s affairs as at that date are set
out in the accounts on pages 31 to 93.
The directors do not recommend the payment of any dividend in respect
of the year ended 31 December 2000.
FIXED ASSETS
The movements in fixed assets during the year are set out in note 12
on the accounts.
SHARE CAPITAL
Details of share capital of the Company are set out in note 24 on the
accounts.
RESERVES
The movements in reserves of the Group and of the Company during
the year are set out in note 25 on the accounts.
31 93
15
Report of the Directors
DIRECTORS
The directors during the financial year and up to the date of this report
were:
Executive directors
Wang Mingquan, Chairman
(appointed on 15 June 2000)
Zhu Yanlan, Chief Executive Officer
Fan Yan Hok, Philip, General Manager
Yi Zhenqiu
Zhang Weiguo
Yeung Chi Wai, Jason
Wang Zhongze
(appointed on 17 March 2000)
Xu Jian Jun
(resigned on 17 March 2000)
Liu Mingkang
(resigned on 15 June 2000)
Kong Dan
(resigned on 15 June 2000)
Wang Xiangfei
(resigned on 30 June 2000)
Chen Dagang
(resigned on 11 August 2000)
Independent non-executive directors
Sir David Akers-Jones
Lee Ka Sze, Carmelo
Li Kwok Sing, Aubrey
In accordance with articles 77, 78 and 79 of the Company’s articles of
association, Messrs Zhang Weiguo, Yeung Chi Wai, Jason and Sir David
Akers-Jones retire from the board by rotation at the forthcoming annual
general meeting and, being eligible, offer themselves for re-election.
16
Report of the Directors
DIRECTORS (continued)
The independent non-executive directors are subject to retirement in
accordance with the Company’s Articles of Association as indicated
above.
DIRECTORS’ SERVICE CONTRACTS
No director proposed for re-election at the forthcoming annual general
meeting has an unexpired service contract which is not determinable
by the Company or any of its subsidiaries within one year without
payment of compensation, other than normal statutory obligations.
DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS IN
SHARES
At 31 December 2000, no directors nor chief executives of the Company
had any beneficial interests in the issued share capital of the Company,
its holding company, subsidiaries and other associated corporations
(within the meaning of the Securities (Disclosure of Interests)
Ordinance) as recorded in the register required to be kept under section
29 of the Securities (Disclosure of Interests) Ordinance.
ARRANGEMENT TO PURCHASE SHARES
(a) The Company
Pursuant to an ordinary resolution passed on 30 September 1993,
a share option scheme was adopted whereby the directors of
the Company, at their discretion, are authorised to invite
employees of any member of the Group, including directors of
any member of the Group, to take up options to subscribe for
shares not exceeding 10% of the issued share capital of the
Company. The options are exercisable for a period up to ten
years following the date of grant or 29 September 2003,
whichever is earlier.
29
(a)
17
Report of the Directors
ARRANGEMENT TO PURCHASE SHARES (continued)
(a) The Company (continued)
At 31 December 2000, the following directors of the Company
had personal interests in options to subscribe for shares of the
Company (market value per share is HK$0.295 at the balance
sheet date) granted under this scheme. Each option gives the
holder the right to subscribe for one share.
Total number of
shares issuable
under the options
as at 31 December
Number of 2000
share options
granted Exercise
Name of Director Date granted price
(HK$)
Yi Zhenqiu 6 September 1997 6,417,000 5.22 6,417,000
Fan Yan Hok, Philip 1 November 1997 2,000,000 2.23 2,000,000
Yeung Chi Wai, Jason 6 September 1997 926,900 5.22 926,900
2 February 1998 2,000,000 0.758 2,000,000
(a)
0.295
1
1
17,825,000 9,269,000
5,704,000
The consideration paid by each director for the options granted
was HK$1. There has not been any grant or exercise of the
above options during the year. The options of 17,825,000 and
9,269,000 shares previously granted to Mr Kong Dan (a director
resigned on 15 June 2000) and Mr Wang Xiangfei (a director
resigned on 30 June 2000) respectively were cancelled during
the year. The options of 5,704,000 shares previously granted to
Mr Chen Dagang (a director resigned on 11 August 2000) were
cancelled in February 2001.
18
Report of the Directors
ARRANGEMENT TO PURCHASE SHARES (continued)
(b) Associated corporations
At 31 December 2000, the following director of the Company
had personal interests in options to subscribe for shares of China
Everbright Limited, a fellow subsidiary of the Company. The
shares of China Everbright Limited are listed on The Stock
Exchange of Hong Kong Limited.
As at
As at Exercised Granted Cancelled 31 December
1 January during during during 2000
2000 the year the year the year
Yeung Chi Wai, Jason 1,500,000 800,000 2,000,000 – 2,700,000
Details of the above options are disclosed in the accounts of
China Everbright Limited for the year ended 31 December 2000.
Apart from the foregoing, at no time during the year was the
Company or any of its holding companies, subsidiaries or fellow
subsidiaries a party to any arrangement to enable the directors
or chief executives of the Company or any of their spouses or
children under eighteen years of age to acquire benefits by
means of the acquisition of shares in or debentures of the
Company or any other body corporate.
(b)
19
Report of the Directors
SUBSTANTIAL INTERESTS IN THE SHARE CAPITAL OF THE
COMPANY
The Company had been notified of the following interests in the
Company’s issued shares at 31 December 2000 amounting to 10% or
more of the ordinary shares in issue:
Ordinary Percentage of total
shares held issued shares
CEH (Note) 1,758,595,910 approximately 69.01%
69.01%
Note: Out of the 1,758,595,910 shares, 1,758,215,910 shares are held by
Guildford Limited (“Guildford”). Guildford is owned as to 55% by
Datten Investments Limited (“Datten”) and the remaining 45% by CEH.
Datten is wholly-owned by CEH. The remaining 380,000 shares are
held by Everbright Investment & Management Limited (“EIM”) a
wholly-owned subsidiary of CEH. Accordingly, CEH is deemed to be
interested in the 1,758,215,910 shares held by Guildford and the 380,000
shares held by EIM.
Save for the shares referred to above, no person or corporation had
any interest in the share capital of the Company as recorded in the
registers required to be kept under section 16(1) of the Securities
(Disclosure of Interests) Ordinance.
DIRECTORS’ INTEREST IN CONTRACTS
No contract of significance to which the Company, or any of its holding
companies or subsidiaries or fellow subsidiaries was a party, in which
a director of the Company had a material interest subsisted at the end
of the year or at any time during the year.
Woo, Kwan, Lee & Lo, a firm of solicitors of which Lee Ka Sze
Carmelo is a partner, rendered professional services to the Group during
the year and received normal remuneration for such services.
1 , 7 5 8 , 5 9 5 , 9 1 01,758,215,910 Guildford LimitedGuildford Guildford Datten
Investments Limited Datten 55%45% Datten
380,000
Guildford 1,758,215,910380,000
16(1)
20
Report of the Directors
PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S
LISTED SECURITIES
During the year, neither the Company nor any of its subsidiaries has
purchased, sold or redeemed any of the Company’s listed securities.
BANK LOANS AND OTHER BORROWINGS
Particulars of bank loans and other borrowings of the Company and
the Group as at 31 December 2000 are set out in notes 20, 21 and 22
on the accounts.
FIVE YEAR SUMMARY
A summary of the results and of the assets and liabilities of the Group
for the last five financial years is set out on pages 94 and 95 of the
annual report.
PROPERTIES
Particulars of the major properties of the Group are shown on pages
96 and 97 of the annual report.
RETIREMENT SCHEMES
The Company provides retirement benefits to all local eligible
employees under an approved defined contribution provident fund (the
“ORSO Scheme”). The ORSO Scheme is administered by trustees, the
majority of which are independent, with its assets held separately from
those of the Company. The ORSO Scheme is funded by contributions
from employees and employers at 5% each based on the monthly
salaries of employees. Forfeited contribution may be used to reduce
the existing level of contribution by the Company.
94 95
96 97
5%
21
Report of the Directors
RETIREMENT SCHEMES (continued)
On 1 December 2000, the Group established Mandatory Provident
Fund Scheme (“the MPF Scheme”) for employees not previously
covered by the ORSO Scheme. Contributions to MPF Scheme are based
on 5% of the relevant income of the relevant staff and in accordance
with the requirement of Mandatory Provident Fund Scheme Ordinance
(“MPF Scheme Ordinance”) and related guidelines. Members of the
ORSO Scheme were given an option to join the MPF Scheme or to
stay in the ORSO Scheme.
The Group obtained a certificate of exemption under MPF Scheme
Ordinance in this regard during the year.
The employees of the subsidiaries in the PRC are members of the
retirement schemes operated by the local authorities. The subsidiaries
are required to contribute a certain percentage of their payroll to these
schemes to fund the benefits. The only obligation of the Group with
respect to these schemes is the required contributions under the
schemes.
The Group’s total contributions to these schemes charged to profit and
loss account during the year ended 31 December 2000 amounted to
HK$2,995,000.
5%
2,995,000
22
Report of the Directors
FINANCIAL ASSISTANCE TO ASSOCIATE AND JOINTLY
CONTROLLED ENTITY
At 31 December 2000, the Group provided the following financial
assistance to associate and jointly controlled entity:
Outstanding
committed
Corporate capital
Advances Guarantee injection
Name of company
HK$’000 HK$’000 HK$’000
Fuzhou Guang Min Road and
Bridge Construction &
Development Company
Limited (“FGM”) (Note 1) 277,685 Nil 991,434
Hong Kong Shanghai
Development Company
Limited (“HKSD”) (Note 2) 486,909 95,621 Nil
Notes:
(1) FGM is a sino-foreign co-operative joint venture between GreenwayVenture Limited (a 80% owned subsidiary of the Company) and a PRCparty. Under the relevant sino-foreign co-operative joint venturecontract, Greenway Venture Limited is responsible for makingcontribution to FGM all the total investment (including FGM’sregistered capital) for the construction of a toll road and bridge inFuzhou whilst the PRC party is only responsible for providing variousservices and assistance to FGM.
(2) HKSD, a company incorporated in Western Samoa with limited liability,is a joint venture company between the Company and three otherindependent third parties. The Group made the above advances andguarantee to HKSD in the proportion to the Group’s interest in HKSD,i.e. 25% of the issued share capital of HKSD.
(3) The Group’s advances to FGM and HKSD are unsecured and interestfree.
80%Greenway Venture Limited
Greenway Venture Limited
25%
23
Report of the Directors
FINANCIAL ASSISTANCE TO ASSOCIATE AND JOINTLY
CONTROLLED ENTITY (continued)
The above advance made to HKSD was for its working capital purposes
and has no maturity date for repayment. The corporate guarantee given
were in respect of banking facilities utilised by HKSD for working
capital purposes.
The source of funding for such advances and for the committed capital
injection is by way of the Group’s internal funding and bank
borrowings.
Save as disclosed above, the Group has no other matters to disclose
under the provisions of Practice Note 19 of the Listing Rules.
Proforma unaudited combined balance sheet of FGM and HKSD is set
out as follows:
HK$’000
Fixed assets (Note 1) 2,848,351
Current assets 81,804
Current liabilities (319,132)
Long term liabilities (Note 2) (2,583,696)
Minority interests (11,400)
Net assets 15,927
Notes:
(1) Fixed assets mainly comprise investment properties, property under
development and construction in progress.
(2) Long term liabilities mainly comprise bank loans and loans from
shareholders.
19
24
Report of the Directors
COMPLIANCE WITH THE CODE OF BEST PRACTICE
The Company has complied throughout the year with the Code of Best
Practice as set out by the Stock Exchange of Hong Kong Limited in
Appendix 14 to the Listing Rules except that non-executive directors
are not appointed for a specific term as they are subject to retirement
in accordance with the Company’s Articles of Association.
AUDITORS
KPMG retire and, being eligible, offer themselves for reappointment.
A resolution for the reappointment of KPMG as auditors of the
Company is to be proposed at the forthcoming annual general meeting.
By Order of the Board
Zhu Yanlan
Chief Executive Officer
Hong Kong, 25 May 2001
14
25
Directors and Senior Management Directors and Senior Management
54
44
51
Directors
WANG MINGQUAN – CHAIRMAN
aged 54, is the Chairman and President of China Everbright Holdings
Company Limited, China Everbright Group Limited and Honorary
Chairman of China Everbright Bank Company Limited. He is also
Chairman of Everbright Securities Company Limited, Shenyin &
Wanguo Securities Company Limited, Standard Life (Asia) Limited as
well as China Everbright Limited, China Everbright Technology
Limited, China Everbright Pacific Limited and Hong Kong Construction
(Holdings) Limited. Prior to joining the Everbright Group, he was the
Vice-chairman and Governor of Bank of Communications in China
and Chairman of China Pacific Insurance Company Limited and has
also been the Deputy Mayor of Wuhan City. Mr. Wang holds a Master’s
degree in Economics from Zhongnan University of Finance and
Economics. He has extensive knowledge and experience in the fields
of banking, securities, insurance and business administration. He joined
the Board in June 2000.
ZHU YANLAN – CHIEF EXECUTIVE OFFICER
aged 44, is presently the executive director and chief executive officer
of the Company. She was formerly General Manager of Everbright
International Investment Consulting Company and Everbright Assets
Valuation Company. Ms. Zhu holds a Doctorate’s degree in the field
of International Political Economics from the University of Chicago,
U.S.A.. She has extensive experience in financial advisory, investment
and asset valuation work in the PRC. Ms. Zhu joined the Board in
October 1999.
FAN YAN HOK, PHILIP – GENERAL MANAGER
aged 51, is the general manager of the Group and presently director of
Hong Kong Construction (Holdings) Limited. Mr. Fan holds a
Bachelor’s degree in Industrial Engineering, a Master’s degree in
Operations Research from Stanford University and a Master’s degree
in Management Science from Massachusetts Institute of Technology.
Prior to joining the Group, Mr. Fan had been an Executive Director of
CITIC Pacific Limited in charge of industrial projects in China. He
joined the Board in November 1997.
26
Directors and Senior Management
Directors (continued)
YI ZHENQIU
aged 57, is presently a director and chief investment officer of China
Everbright Holdings Company Limited, vice-chairman of China
Everbright Technology Limited, director of RNA Holdings Limited,
Silver Grant International Industries Limited and Chevalier iTech
Holdings Limited. Mr. Yi was previously Supervisor of the State
Commission for Restructuring of the Economic System of Guangdong
Province, the Securities Regulatory Commission of Guangdong
Province and the Futures Regulatory Commission of Guangdong
Province. He joined the Board in June 1997.
ZHANG WEIGUO
aged 43, is a director of China Everbright Holdings Company Limited.
Prior to joining the China Everbright Group, he was vice director of
the Open Market Operation Office of the People’s Bank of China and
vice president of the Shanghai branch of China Merchants Bank. Mr.
Zhang graduated from Fudan University and holds a Master’s degree
in Economics from Shanghai Finance University. He joined the Board
in October 1998.
YEUNG CHI WAI, JASON
aged 46, is presently a director of China Everbright Holdings Company
Limited and China Everbright Limited and independent non-executive
director of Benefun International Holdings Limited. Mr. Yeung holds
a Bachelor of Social Sciences degree from the University of Hong
Kong and a Bachelor of Laws degree from the University of Western
Ontario, Canada. He is a consultant of Messrs. Woo, Kwan, Lee & Lo.
Mr. Yeung joined the Board in February 1998.
57
43
46
27
Directors and Senior Management
Directors (continued)
WANG ZHONGZE
aged 38, is presently assistant general manager of the Group and
executive director of Hong Kong Construction (Holdings) Limited.
Prior to joining the Group, he was the Division Director of China
Development Bank. Mr. Wang holds a Doctorate’s degree in the field
of Engineering from the Tsinghua University. He joined the Board in
March 2000.
SIR DAVID AKERS-JONES, K.B.E., C.M.G. – INDEPENDENT
NON-EXECUTIVE DIRECTOR
aged 74, chairman and non-executive director of a number of Hong
Kong companies and a member of many community organizations. He
has been an independent non-executive director of the Company since
March 1995.
LEE KA SZE, CARMELO – INDEPENDENT NON-EXECUTIVE
DIRECTOR
aged 41, has been an independent non-executive director of the
Company since November 1994. He holds a Bachelor of Laws degree
from the University of Hong Kong. He is a practising solicitor and is a
partner of Messrs. Woo, Kwan, Lee & Lo, Solicitors & Notaries.
LI KWOK SING, AUBREY – INDEPENDENT NON-EXECUTIVE
DIRECTOR
aged 51, is director of Management Capital Limited, a Hong Kong-
based direct investment and financial advisory firm, and has over 25
years’ experience in merchant banking and commercial banking. He is
also a non-executive director of The Bank of East Asia, Limited, Café
de Coral Holdings Limited, Chinney Alliance Group Limited and CNPC
(Hong Kong) Limited. Mr. Li has a Master of Business Administration
from Columbia University and a Bachelor of Science in Civil
Engineering from Brown University. He joined the Board in November,
1998.
38
K.B.E., C.M.G.
74
41
51
28
Directors and Senior Management
Senior Management
ZHAO WEIMAOaged 43, is the General Manager of Everbright Timber Industry(Shenzhen) Co., Ltd., a subsidiary of the Company; and the Directorof a number of subsidiaries. He holds a Master Degree of WoodProcessing in Timber Processing and a Bachelor Degree of ForestEngineering from Beijing Forest University. He joined the Group inMarch 1989 with over 10 years timber processing and businessmanagement experience.
IO CHEOK KEI, Rudyaged 40, is the Financial Controller of the Company. He holds a Masterof Business Degree in Information Technology from Curtin Universityof Technology, Western Australia, and an Honours Bachelor Degree inAdministrative Studies from York University of Toronto, Canada. Heis a Canadian Chartered Accountant and an associate member of TheHong Kong Society of Accountants. He joined the Group in March,2001 with over 16 years of experience in the accounting, auditing andbanking fields.
LIU HUAIYU, Georgeaged 29, is the Manager of Business Development & ManagementDepartment of the Company and the secretary of the Board of Directorswho assists and co-ordinates the daily work of the Board. He holds aMaster of Business Administration Degree from Cornell University,USA, and a Bachelor of Economics Degree in Industrial Managementfrom Shenzhen University, PRC. Prior to joining the Group, Mr. Liuused to work for Hutchison Whampoa and The Industrial andCommercial Bank of China. He joined the Group in March, 2001.
POON YUEN LING, Sandyaged 33, is the Company Secretary of the Company. She is an associatemember of The Hong Kong Institute of Company Secretaries and TheInstitute of Chartered Secretaries and Administrators. She joined theGroup in April, 1994 with over 10 years of experience in companysecretarial and administrative areas.
HO SUI LING, Florenceaged 37, is the Manager of the Administration and Human ResourcesDepartment of the Company. Ms Ho holds a Master of Science Degreein Human Resources from The University of Manchester, U.K., and aBachelor of Business Administration Degree in Accounting from HongKong Baptist University. She is an associate member of The Instituteof Financial Accountants, U.K., and an associate member of HongKong Institute of Human Resources Management. She joined the Groupin March, 2001 with over 10 years experience in human Resources,administration and accounting areas.
43
40Curtin University of Technology
29
33
37
29
Report of the Auditors �� !"
AUDITORS’ REPORT TO THE SHAREHOLDERS OF
CHINA EVERBRIGHT INTERNATIONAL LIMITED
(Incorporated in Hong Kong with limited liability)
We have audited the accounts on pages 31 to 93 which have been
prepared in accordance with accounting principles generally accepted
in Hong Kong.
Respective responsibilities of directors and auditors
The Hong Kong Companies Ordinance requires the directors to prepare
accounts which give a true and fair view. In preparing accounts which
give a true and fair view it is fundamental that appropriate accounting
policies are selected and applied consistently, that judgements and
estimates are made which are prudent and reasonable and that the
reasons for an y significant departure from applicable accounting
standards are stated.
It is our responsibility to form an independent opinion, based on our
audit, on those accounts and to report our opinion to you.
Basis of opinion
We conducted our audit in accordance with Statements of Auditing
Standards issued by the Hong Kong Society of Accountants. An audit
inc ludes examina tion, on a test basis, of evidence relevant to the
amounts and disclosures in the accounts. It also includes an assessment
of the significant estimates and judgements made by the directors in
the preparation of the accounts, and of whether the accounting policies
are appropr iate to the Company’s and the Gr oup’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information
and explanations which we considered necessary in order to provide
us with sufficient evidence to give reasonable assurance as to whether
the accounts are free from material misstatement. In forming our
opinion we also evalua ted the overall adequacy of the presentation of
information in the accounts. We believe that our audit provides a
reasonable basis for our opinion.
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30
Report of the Auditors �� !"
Fundamental uncertainty
The Group has a 35% equity interest in Hong Kong Construction
(Holdings) Limited (“HK Construction”) which is engag ed in
construction, and property development and investment. The accounts
of HK Construction and its subsidiaries (the “HK Construction group”)
for the year ended 31 December 2000, on which the amounts of the
Group’s share of the associate’s loss for the year ended 31 December
2000 and net assets as at that date were based, have been prepared on
a going concern basis, the validity of which depends upon the ongoing
support of the HK Construction group’s bankers and the successful
outcome of its restructuring plan. The accounts of the HK Construction
group do not inc lude any adjustments that would result fr om a failure
to obtain such support and to implement the restructuring plan. As
there is an indication of impairment in value of the Group’s interest in
HK Construction, a provision has been made to r educe the carrying
value of such interest to its estimated recoverable amount on the basis
that the HK Construction group will be able to continue in business as
a going concern. No adjustments relating to the HK Construction group
not being able to contin ue in business as a going concern have been
made to the estimated recoverable amount. Details of the circumstances
relating to this fundamental uncertainty relating to HK Construction
are described in note 14(a) on the accounts. In forming our opinion,
we have considered the adequacy of the disclosures made in the
accounts in this connection. We consider tha t the fundamental
uncertainty has been adequately accounted for and disclosed in the
accounts and our opinion is not qualified in this respect.
Opinion
In our opinion, the accounts give a true and fair view of the state of
affairs of the Company and of the Group as at 31 December 2000 and
of the Group’s loss and cash flows for the year then ended and have
been properly prepared in accordance with the Hong Kong Companies
Ordinance.
KPMG
Certified Public Accountants
Hong Kong, 25 May 2001
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Consolidated Profit and Loss Account �� !"
2000 1999���� ����
Note $’000 $’000�� �� ��
Turnover �� 2 & 3 469,692 635,251Cost of sales �� ! (416,731) (616,821)
52,961 18,430Other reven ue �� ! 4 59,351 33,434Distribution costs �� ! (17,319) (26,266)Administrative expenses �� ! (35,866) (54,418)Other operating expenses �� !"# (26,536) (95,529)
Profit/(loss) from operations �� !"#$%& 32,591 (124,349)Finance costs �� ! 5 (114,430) (99,068)Provision for impairment of fixed assets �� !"#$% – (289,697)
(81,839) (513,114)
Share of results of associates �� !"#$% 6Share of net loss before taxation �� !"#$% EPORITUN F EPUOIPOQ FShare of deficit on revaluation of �� !"#
investment proper ties �� ! (16,297) (64,020)
Provision for interest in associate �� !"#$% 14 (543,042) –
Share of prof its/(losses) of jointly �� !"#controlled entity �� !"#$ 13,176 (16,750)
Loss from ordinary activities �� !"#$%&before taxation 3 & 5 (953,783) (976,208)
Taxation �� 7 (409) (14,203)
Loss from ordinary activities �� !"#$%&after taxation (954,192) (990,411)
Minority interests �� !"# 6,806 102,818
Loss for the year �� !" 10 (947,386) (887,593)
Loss per share �� !
Basic �� 11 (37) cents� (38) cents�
Loss for the year is analysed �� !"#$%&'as follows:
Retained by the Company and its subsidiaries �� !"#$% !&' (619,097) (410,542)Retained by associates �� !"#$ (341,465) (460,301)Retained by jointly controlled entity �� !"#$ 13,176 (16,750)
(947,386) (887,593)
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)�� !!!"# $%#&'(")*+,-./0
The notes on pages 38 to 93 form part of these accounts.
�� PU�� VP�� !"#$%&�'()*
31
32
Consolidated Statement of Recognised Gains and Losses�� !"#$%&'()*
2000 1999
���� ����
$’000 $’000
�� ��
Share of exchange reserve of associates �� !"#$%&' (2,219) (2,187)
Exchange dif ferences on translation of �� !"#$%&"#
the accounts of subsidiaries, associates �� !"#$
and jointly controlled entity �� !"#$ 1,772 477
Net loss not recognised in the profit �� !"#$%
and loss account �� ! (447) (1,710)
Net loss for the year �� !"# (947,386) (887,593)
Exchange reserve realised on disposal of �� !"#$%&"#
subsidiaries and associates �� !"#$% – (61)
Total recognised loss �� !"#$ (947,833) (889,364)
Adjustment of goodwill taken directly to �� !"#$%&'
reserves 109,129 9,018
(838,704) (880,346)
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)�� !!!"# $%#&'(")*+,-./0
The notes on pages 38 to 93 form part of these accounts.
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32
33
At 31 December 2000 (Expressed in Hong Kong dollars)�� !"�#$"%&'()*+,-
Consolidated Balance Sheet �� !"#$
The notes on pages 38 to 93 form part of these accounts.
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Consolidated Balance Sheet �� !"#$At 31 December 2000 (Expressed in Hong Kong dollars)
�� !"�#$"%&'()*+,-
2000 1999���� ����
Note $’000 $’000 $’000 $’000�� �� �� �� ��
Non-current assets �� !"Fixed assets �� !– Investment properties �� !" 245,699 249,873– Other property, plant and �� !"#$%
equipments �� 385,504 408,262
12 631,203 658,135Interest in associates �� !"# 14 959,114 1,792,270Interest in jointly controlled �� !"#
entity 15 334,272 130,735Other financial assets �� !"# 16 44,960 242,187
1,969,549 2,823,327
Current assets �� !Listed securities in Hong Kong �� !"# 1,562 3,938Inventories �� 17 68,545 92,442Debtors, other receivables, �� !"#$��
deposits and prepayments �� !"�� !" 18 123,670 169,522
Amounts due from fellow �� !"#$%subsidiaries �� 57,286 31,121
Cash and cash equivalents �� ��!"# 19 262,518 22,899
513,581 319,922------------- -------------
Current liabilities �� !Bank loans �� !– secured �� ! 313,962 295,616– unsecured �� ! 354,290 302,526
20 668,252 598,142
Loan from ultimate �� !"#$%holding company 21 47,241 –
Other loans �� ! 22 47,143 46,944Amount due to ultimate �� !"#$%
holding company �� 56,571 16,542Creditors and accrued expenses �� !"�#$% 23 73,989 89,392Taxation �� 89 –
893,285 751,020------------- -------------
34
At 31 December 2000 (Expressed in Hong Kong dollars)�� !"�#$"%&'()*+,-
Consolidated Balance Sheet �� !"#$
The notes on pages 38 to 93 form part of these accounts.
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2000 1999���� ����
Note $’000 $’000�� �� ��
Net current liabilities �� !"# (379,704) (431,098)
Total assets less current �� !"#$%&liabilities 1,589,845 2,392,229
Non-current liabilities �� !"
Bank loans �� ! 20 – (60,727)
Loans from ultimate holding �� !"#$%company 21 (627,862) (523,102)
Minority interests �� !"# (11,714) (19,427)
NET ASSETS �� ! 950,269 1,788,973
CAPITAL AND RESERVES �� !"
Share capital �� 24 254,831 254,831
Reserves �� 25 695,438 1,534,142
950,269 1,788,973
Approved by the board of directors on 25 May 2001. �� !"#$$%&'(#)'*+,-
Zhu Yanlan Fan Yan Hok, PhilipDirector Director�� �� �� ��
35
Balance Sheet �� !"At 31 December 2000 (Expressed in Hong Kong dollars)
�� !"�#$"%&'()*+,-
2000 1999���� ����
Note $’000 $’000 $’000 $’000�� �� �� �� ��
Non-current assets �� !"
Fixed assets �� ! 12 1,652 2,135Interest in subsidiaries �� !"# 13 1,109,543 1,740,967Interest in associates �� !"# 14 652,491 652,491Other financial assets �� !"# 16 21,885 219,126
Current assets �� !
Listed securities in Hong Kong �� !"# 58 60Debtors, other receivable , �� !"#$��!%
deposits and prepayments �� !"#$% 2,958 21,873Cash and cash equivalents �� ��!"# 19 11,434 1,034
14,450 22,967-------------- --------------
Current liabilities �� !
Secured bank loans �� !"#$ 20 295,105 274,022Loan from ultimate �� !"#$%
holding company 21 47,241 –Amount due to ultimate �� !"#
holding company �� ! 32,727 3,586Creditors and accrued expenses �� !"�#$% 3,696 12,905
378,769 290,513-------------- --------------
Net current liabilities �� !"# (364,319 ) (267,546)
Non-current liabilities �� !"
Loans from ultimate holding �� !"#$%company 21 (469,529 ) (420,164)
951,723 1,927,009
CAPITAL AND RESERVES �� !"
Share capital �� 24 254,831 254,831
Reserves �� 25 696,892 1,672,178
951,723 1,927,009
Approved by the board of directors on 25 May 2001.
Zhu Yanlan Fan Yan Hok, PhilipDirector Director�� �� �� ��
�� !"#$$%&'(#)'*+,-
The notes on pages 38 to 93 form part of these accounts.
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35
36
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)�� !!!"# $%#&'(")*+,-./0
Consolidated Cash Flow Statement �� !"#$Consolidated Cash Flow Statement �� !"#$For the year ended 31 December 2000 (Expressed in Hong Kong dollars)�� !!!"# $%#&'(")*+,-./0
2000 1999���� ����
Note $’000 $’000 $’000 $’000�� �� �� �� ��
Net cash outflow from �� !"operating activities �� !"# 26(a) (132,658) (123,231)
Returns on investments �� !"and servicing of finance �� !
Interest received �� ! 776 6,432Interest paid �� ! (62,573) (110,989)Income from listed and �� !��
unlisted investments �� ! 5 26,145Dividends received from �� !"#$
associates and jointly �� !"#controlled entity 28,168 58,959
Dividend paid to minority �� !"#"$shareholders (944) (4,350)
Net cash outflow from returns �� !"on investments and �� !"servicing of finance �� !"# (34,568) (23,803)
Taxation ��
Hong Kong profits tax �� !"#$%refund – 164
PRC income tax paid �� !"#$% (933) (706)
(933) (542)
Investing activities �� !
Purchase of fixed assets �� !"# (3,025) (4,192)Sale of an associate �� !"# – 1,620Sale of fixed assets �� !"# 6,285 960Purchase of additional �� !"#$
interest in associate �� ! – (3,183)Purchase of additional �� !"#$
interest in subsidiary �� ! (5,633) –Sale of other financial assets �� !
�� ! 250,400 –
37
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)�� !!!"# $%#&'(")*+,-./0
Consolidated Cash Flow Statement �� !"#$
2000 1999���� ����
Note $’000 $’000 $’000 $’000�� �� �� �� ��
Net cash inflow/(outflow) �� !"#$from investing activities �� !�"#$% 248,027 (4,795)
Net cash inflow/(outflow) �� !"before financing �� !�"#$% 79,868 (152,371)
---------------- ----------------
Financing ��
Repayment of bank loans and �� !"#other loans �� !" 26(b) (245,461) (1,110,104)
New bank loans and other �� !"#loans �� !" 26(b) 375,212 1,194,773
Net cash inflow from �� !"financing �� ! 129,751 84,669
Increase/(decrease) in cash �� ��!"#and cash equivalents �� !"#$ 209,619 (67,702)
Cash and cash equivalents �� �!"#at 1 Jan uary �� !"# 22,899 90,601
Cash and cash equivalents �� !"�#$at 31 December �� ��!"# 232,518 22,899
Analysis of the balances of �� ��!"#cash and cash equivalents �� !"
Cash at bank and in hand �� !"#$ 257,518 22,899Deposits with banks maturing �� !"#$%
within three months of the �� !"#balance sheet date �� 5,000 –
Bank loans repayable within �� !"#$%&three months from the date of �� !"#the advance �� (30,000) –
232,518 22,899
The notes on pages 38 to 93 form part of these accounts.
�� PU�� VP�� !"#$%&�'()*
38
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of compliance
These accounts have been prepared in accordance with
all applicable Statements of Standard Accounting
Practice and Interpretations issued by the Hong Kong
Society of Accountants, accounting principles generally
accepted in Hong Kong and the requirements of the Hong
Kong Companies Ordinance. These accounts also comply
with the applicable disclosure provisions of the Rules
Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited. A summary of the
significant accounting policies adopted by the Group is
set out below.
(b) Basis of preparation of the accounts
The measurement basis used in the preparation of the
accounts is historical cost modified by the revaluation
of investment properties, and the marking to market of
certain investments in securities as explained in the
accounting policies set out below.
.
(a)
(b)
39
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Basis of consolidation
(i) The consolidated accounts include the accounts
of the Company and all its subsidiaries made up
to 31 December each year. The results of
subsidiaries acquired or disposed of during the
year are included in the consolidated profit and
loss account from or to the date of their
acquisition or disposal, as appropriate. All
material intercompany transactions and balances
are eliminated on consolidation.
(ii) Capital reserve or goodwill on consolidation
representing the excess or deficit respectively of
the Group’s share of the fair value of the
separable net tangible assets of subsidiaries,
associates and jointly controlled entities at the
respective acquisition dates over the cost of
investments in these companies, is taken to capital
reserve in the year in which it arises. On disposal
of a subsidiary, an associate or a jointly
controlled entity during the year, the attributable
amount of capital reserve or goodwill is included
in the calculation of the profit or loss on disposal.
(d) Investment in subsidiaries
A subsidiary is a company in which the Group, directly
or indirectly, holds more than half of the issued share
capital, or controls more than half of the voting power,
or controls the composition of the board of directors.
.
(c)
(i)
(ii)
(d)
40
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Investment in subsidiaries (continued)
Investment in subsidiaries in the Company’s balance
sheet are stated at cost less any provisions for diminution
in value which is other than temporary as determined
by the directors for each subsidiary individually. Any
such provisions are recognised as an expense in the profit
and loss account.
(e) Associates and jointly controlled entities
An associate is an entity in which the Group or Company
has significant influence, but not control or joint control,
over its management, including participation in the
financial and operating policy decisions.
A jointly controlled entity is an entity which operates
under a contractual arrangement between the Group or
Company and other parties, where the contractual
arrangement establishes that the Group or Company and
one or more of the other parties share joint control over
the economic activity of the entity.
Unless the interest in the associate or the jointly
controlled entity is acquired and held exclusively with a
view to subsequent disposal in the near future, an
investment in an associate or a jointly controlled entity
is accounted for in the consolidated accounts under the
equity method and is initially recorded at cost and
adjusted thereafter for the post acquisition change in
the Group’s share of the associate’s or the jointly
controlled entity’s net assets. The consolidated profit
and loss account reflects the Group’s share of the post-
acquisition results of the associates and jointly controlled
entities for the year.
.
(d)
(e)
41
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(e) Associates and jointly controlled entities (continued)
The carrying amount of the Group’s interest in associates
is reviewed periodically in order to assess whether there
is any indication that the interest in associates may be
impaired. If such an indication exists, the carrying
amount is reduced to the recoverable amount. The
amount of the reduction is recognised as an expense in
the profit and loss account.
Where the jointly controlled entity has a limited life,
the Group’s share of post-acquisitions results is adjusted
for the amortisation of the original cost on a systematic
basis over the joint venture period to the extent the
original cost is considered recoverable. Where the
carrying value of the interest is not thought to be
recoverable, provision is made to reduce the carrying
value to its recoverable amount.
Unrealised profits and losses resulting from transactions
between the Group and its associates and jointly
controlled entities are eliminated to the extent of the
Group’s interest in the associate or jointly controlled
entity, except where unrealised losses provide evidence
of an impairment of the asset transferred, in which case
they are recognised immediately in the profit and loss
account.
The results of the associates and jointly controlled
entities are included in the Company’s profit and loss
account to the extent of dividends received and
receivable, providing the dividend is in respect of a
period ending on or before that of the Company and the
Company’s right to receive the dividend is established
before the accounts of the Company are approved by
the directors. In the Company’s balance sheet, its
investments in associates and jointly controlled entities
are, stated at cost less any provisions for diminution in
value which is other than temporary as determined by
the directors for each associate or jointly controlled
entity individually. Any such provisions are recognised
as an expense in the profit and loss account.
.
(e)
42
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(f) Other investments in securities
The Group’s and the Company’s policies for investments
in securities other than investments in subsidiaries,
associates and jointly controlled entities are as follows:
(i) Investments held on a continuing basis for an
identified long-term purpose are classified as
“investment securities”. Investment securities are
stated in the balance sheet at cost less any
provisions for diminution in value. Provisions are
made when the fair values have declined below
the carrying amounts, unless there is evidence
that the decline is temporary, and are recognised
as an expense in the profit and loss account, such
provisions being determined for each investment
individually.
(ii) All other securities (whether held for trading or
otherwise) are stated in the balance sheet at fair
value. Changes in fair value are recognised in
the profit and loss account as they arise.
Securities are presented as trading securities
when they were acquired principally for the
purpose of generating a profit from short term
fluctuations in price or dealer’s margin.
(iii) Profits or losses on disposal of investments in
securities are determined as the difference
between the estimated net disposal proceeds and
the carrying amount of the investments and are
accounted for in the profit and loss account as
they arise.
.
(f)
(i)
(ii)
(iii)
43
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Fixed assets
(i) Fixed assets are carried in the balance sheets on
the following bases:
– investment properties with an unexpired
lease term of more than 20 years are stated
in the balance sheet at their open market
value which is assessed annually by
external qualified valuers; and
– other fixed assets are stated in the balance
sheet at cos t less accumula ted
depreciation.
(ii) Changes arising on the revaluation of investment
properties are generally dealt with in reserves.
The only exceptions are as follows:
– when a deficit arises on revaluation, it
will be charged to the profit and loss
account, if and to the extent that it exceeds
the amount held in the reserve in respect
of the portfolio of investment properties,
immediately prior to the revaluation; and
– when a surplus arises on revaluation, it
will be credited to the profit and loss
account, if and to the extent that a deficit
on revaluation in respect of the portfolio
of investment properties, had previously
been charged to the profit and loss
account.
.
(g)
(i)
(ii)
44
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Fixed assets (continued)
(iii) The carrying amount of fixed assets (other than
investment properties with an unexpired lease
term of more than 20 years) is reviewed
periodically in order to assess whether the
recoverable amount has declined below the
carrying amount. When such a decline has
occurred, the carrying amount is reduced to the
recoverable amount. The amount of the reduction
is recognised as an expense in the profit and loss
account. In determining the recoverable amount,
expected future cash flows generated by the fixed
assets are not discounted to their present values.
When the circumstances and events that led to
the write-down or write-off cease to exist, any
subsequent increase in the recoverable amount
of an asset is written back to the profit and loss
account. The amount written back is reduced by
the amount that would have been recognised as
depreciation had the write-down or write-off not
occurred.
(iv) Subsequent expenditure relating to a fixed asset
that has already been recognised is added to the
carrying amount of the asset when it is probable
that future economic benefits, in excess of the
originally assessed standard of performance of
the existing asset, will flow to the enterprise. All
other subsequent expenditure is recognised as an
expense in the period in which it is incurred.
.
(g)
(iii)
(iv)
45
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Fixed assets (continued)
(v) Gains or losses arising from the retirement or
disposal of a fixed asset are determined as the
difference between the estimated net disposal
proceeds and the carrying amount of the asset
and are recognised in the profit and loss account
on the date of retirement or disposal. On disposal
of an investment property, the related portion of
surpluses or deficits previously taken to the
investment properties revaluation reserve is also
transferred to the profit and loss account for the
year.
(h) Amortisation and depreciation
(i) No depreciation is provided on investment
properties with an unexpired lease term of over
20 years.
(ii) Depreciation is calculated to write off the cost
of other fixed assets over their estimated useful
lives as follows:
– leasehold land is depreciated on a straight
line basis over the remaining term of the
lease;
– buildings are depreciated on a straight line
basis over the shorter of their estimated
useful lives, being 50 years from the date
of completion, and the unexpired terms
of the leases; and
.
(g)
(v)
(h)
(i)
(ii)
46
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(h) Amortisation and depreciation (continued)
(ii) (continued)
– other fixed assets are depreciated on a
straight line basis over their estimated
useful lives as follows:
Leasehold 10 years or over
improvements the remaining term
of the lease,
if shorter
Machinery and
equipment 5 to 15 years
Furniture and fixtures 5 to 10 years
Motor vehicles 4 to 12 years
Electronic equipment
and other fixed assets 10 years
(iii) No depreciation is provided in respect of
construction in progress.
.
(h)
(ii)
10
5 15
5 10
4 12
10
(iii)
47
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Revenue recognition
Provided it is probable that the economic benefits will
flow to the Group and the revenue and costs, if
applicable, can be measured reliably, revenue is
recognised in the profit and loss account as follows:
(i) Sale of goods
Revenue is recognised when goods are delivered
at the customers’ premises which is taken to be
the point in time when the customer has accepted
the goods and the related risks and rewards of
ownership. Revenue excludes value added or
other sales taxes and is after deduction of any
trade discounts.
(ii) Rental income from operating leases
Rental income receivable under operating leases
is recognised in the profit and loss account in
equal instalments over the accounting periods
covered by the lease term, except where an
alternative basis is more representative of the
pattern of benefits to be derived from the leased
asset. Lease incentives granted are recognised in
the profit and loss account as an integral part of
the aggregate net lease payments receivable.
Contingent rentals are recognised as income in
the accounting period in which they are earned.
.
(i)
(i)
(ii)
48
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Revenue recognition (continued)
(iii) Income from securities dealing transactions
Income arising from securit ies dealing
transactions is recognised in the profit and loss
account on a trade date basis when the relevant
transactions are executed.
(iv) Dividends
– d iv idend income f rom un l i s t ed
investments other than associates and
jointly controlled entities is recognised
when the shareholder’s right to receive
payment is established.
– dividend income from listed investments
is recognised when the share price of the
investment goes ex-dividend.
(v) Interest income
Interest income from bank deposits is accrued
on a time-apportioned basis on the principal
outstanding and at the rate applicable.
.
(i)
(iii)
(iv)
(v)
49
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(j) Inventories
Inventories are carried at the lower of cost and net
realisable value.
Cost is calculated using the weighted average cost
formula and comprises all costs of purchase, costs of
conversion and other costs incurred in bringing the
inventories to their present location and condition.
Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make
the sale.
When inventories are sold, the carrying amount of those
inventories is recognised as an expense in the period in
which the related revenue is recognised. The amount of
any write-down of inventories to net realisable value
and all losses of inventories are recognised as an expense
in the period the write-down or loss occurs. The amount
of any reversal of any write-down of inventories, arising
from an increase in net realisable value, is recognised
as a reduction in the amount of inventories recognised
as an expense in the period in which the reversal occurs.
(k) Deferred taxation
Deferred taxation is provided using the liability method
in respect of the taxation effect arising from all material
timing differences between the accounting and tax
treatment of income and expenditure, which are expected
with reasonable probability to crystallise in the
foreseeable future.
Future deferred tax benefits are not recognised unless
their realisation is assured beyond reasonable doubt.
.
(j)
(k)
50
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(l) Translation of foreign currencies
Foreign currency transactions during the year are
translated into Hong Kong dollars at the exchange rates
ruling at the transaction dates. Monetary assets and
liabilities denominated in foreign currencies and the
accounts of those subsidiaries, associates and jointly
controlled entities whose books and records are
maintained in currencies other than Hong Kong dollars
are translated into Hong Kong dollars at the exchange
rates ruling at the balance sheet date. Exchange gains
and losses are dealt with in the profit and loss account,
except those arising from the translation at closing rates
of net investments in subsidiaries, associates and jointly
controlled entities, which are taken directly to reserve.
(m) Operating leases
Rentals payable under operating leases are accounted
for in the profit and loss account on a straight line basis
over the periods of the respective leases.
(n) Retirement costs
The Group operates a defined contribution scheme for
all eligible employees in Hong Kong and participates in
the retirement schemes operated by the relevant
authorities for the employees of the subsidiaries in the
PRC and the cost of these schemes is charged to the
profit and loss account. In addition, the Company also
participates in a master trust scheme provided by an
independent Mandatory Provident Fund service provider
to comply with the requirements under the Mandatory
Provident Fund Scheme Ordinance. Contributions paid
and payable by the Company to the scheme are charged
to the profit and loss account.
.
(l)
(m)
(n)
51
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
(o) Borrowing costs
Borrowing costs are expensed in the profit and loss
account in the period in which they are incurred, except
to the extent that they are capitalised as being directly
attributable to the acquisition, construction or production
of an asset which necessarily takes a substantial period
of time to get ready for its intended use.
The capitalisation of borrowing costs as part of the cost
of a qualifying asset commences when expenditures for
the asset are being incurred, borrowing costs are being
incurred and activities that are necessary to prepare the
asset for its intended use or sale are in progress.
Capitalisation of borrowing costs is suspended or ceases
when substantially all the activities necessary to prepare
the qualifying asset for its intended use or sale are
interrupted or complete.
(p) Related parties
For the purposes of these accounts, parties are considered
to be related to the Group if the Group has the ability,
directly or indirectly, to control the party or exercise
significant influence over the party in making financial
and operating decisions, or vice versa, or where the
Group and the party are subject to common control or
common significant influence. Related parties may be
individuals or other entities.
(q) Cash equivalents
Cash equivalents are short-term, highly liquid
investments which are readily convertible into known
amounts of cash without notice and which were within
three months of maturity when acquired. For the
purposes of the cash flow statement, cash equivalents
would also include advances from banks repayable within
three months from the date of the advance.
.
(o)
(p)
(q)
52
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
2. TURNOVER
The principal activity of the Company is investment holding.
The principal activities of the subsidiaries are set out in note
13 on the accounts.
Turnover represents the invoiced value of goods supplied to
customers and rental income and securities trading. The amount
of each significant category of revenue recognised in turnover
during the year is as follows:
2000 1999
$’000 $’000
Sale of timber products 454,564 621,199
Property rental 14,483 5,624
Securities trading 645 8,428
469,692 635,251
.
53
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
3. SEGMENTAL INFORMATION
The analysis of the principal activities of the operations of the
Company and its subsidiaries during the financial year are as
follows:
Profit/(loss) from ordinary
activities before taxation
Group turnover
2000 1999 2000 1999
$’000 $’000 $’000 $’000
Principal activities
Manufacture and sale
of timber products 454,564 621,199 (27,213) (450,270)
Property rental 14,483 5,624 3,194 1,721
Securities trading 645 8,428 (1,759) 1,877
469,692 635,251 (25,778) (446,672)
Head office and others (56,061) (66,442)
(81,839) (513,114)
Share of net loss
before taxation of associates (325,781) (382,324)
Share of deficit on revaluation
of investment properties
of associates (16,297) (64,020)
Provision for interest in associate (543,042) –
Share of profits/(losses) of jointly
controlled entity 13,176 (16,750)
(953,783) (976,208)
.
54
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
3. SEGMENTAL INFORMATION (continued)
In view of the fact that the Group operates mainly in the People’s
Republic of China (“PRC”), no geographical segmental
information is presented.
4. OTHER REVENUE
.
.
2000 1999
$’000 $’000
Gain on disposal of other investment (Note) 53,622 –
Gain on disposal of fixed assets 2,216 –
Interest income 776 6,432
Dividend income from unlisted securities 5 25,987
Dividend income from listed securities – 157
Others 2,732 858
59,351 33,434
Note: The amount represents the gain on disposal of an 80% interestin a sino-foreign joint venture engaged in the operation of atoll road in the PRC.
80%
55
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
5. LOSS FROM ORDINARY ACTIVITIES BEFORE
TAXATION
Loss from ordinary activities before taxation is arrived at after
charging/(crediting):
2000 1999
$’000 $’000
(a) Finance costs: (a)
Interest on bank advances
and other borrowings 114,430 99,068
(b) Other items: (b)
Cost of inventories* * 416,608 609,471
Staff costs (including retirement costs
of $2,995,000 (1999: $2,751,000)) 2,995,000
2,751,000 48,783 63,013
Amortisation and write off
of pre-operating expenses
and development costs – 20,917
Amortisation of non-current financial
assets 7,300 8,000
Amortisation of investment in jointly
controlled entity 2,377 2,377
Exchange loss 655 3,705
Auditors’ remuneration 1,334 1,351
Depreciation 23,094 39,749
Operating lease charges for premises 3,997 4,519
Rentals receivable from investment
properties less outgoings 1,006,000of $1,006,000 (1999: $313,000) 313,000 (13,477) (5,311)
Loss on sale of fixed assets – 7,594
.
* Cost of inventories include $43,219,000 (1999: $72,712,000)relating to staff costs, depreciation expenses and operating leasecharges, which amount is also included in the respective totalamounts disclosed separately above for each of these types ofexpenses.
* 43,219,00072,712,000
56
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
6. SHARE OF RESULTS OF ASSOCIATES
2000 1999
$’000 $’000
Share of net loss before taxation
– Listed associate (410,198) (427,412)
– Unlisted associates 84,417 45,088
(325,781) (382,324)---------------- ----------------
Share of deficit on revaluation of investment
properties
– Listed associate (16,297) (25,328)
– Unlisted associates – (38,692)
(16,297) (64,020)---------------- ----------------
(342,078) (446,344)
7. TAXATION
(a) Taxation in the consolidated profit and loss account
represents:
2000 1999
$’000 $’000
Overprovision of Hong Kong Profits Tax
in respect of prior years – 8
Provision for PRC income tax on the
estimated taxable profits for the year (1,022) (254)
(1,022) (246)
Share of associates’ taxation 613 (13,957)
(409) (14,203)
.
.
(a)
57
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
7. TAXATION (continued)
(a) (continued)
No provision for Hong Kong Profits Tax has been made
in the accounts as the Group sustained a loss for Hong
Kong Profits Tax purposes during the year. Taxation for
PRC operations is charged at the appropriate current
rates of taxation ruling in the PRC.
(b) None of the taxation payable in the consolidated balance
sheet is expected to be settled after more than 1 year.
(c) At the balance sheet date, the Group (excluding its
subsidiaries in the PRC) had an unrecognised deferred
tax asset of $940,000 (1999: $910,000) which represents
the tax effect of timing differences arising as a result of
tax losses available to set off future assessable profits.
In addition, the Group’s PRC subsidiary had an
unrecognised deferred tax asset of approximately
$4,555,000 (1999: $3,530,000) representing the
maximum benefit from unutilised tax losses which can
be carried forward up to five years from the year in
which the loss was originated to offset future taxable
profits. These deferred tax assets have not been
recognised in the accounts as it is not certain that the
benefit will be realised in the foreseeable future. The
Group had no significant unprovided deferred taxation
for the year or at the balance sheet date.
.
(a)
(b)
(c)940,000
910,000
4,555,0003,530,000
58
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
8. DIRECTORS’ REMUNERATION
Directors’ remuneration disclosed pursuant to section 161 of
the Hong Kong Companies Ordinance is as follows:
2000 1999
$’000 $’000
Fees 245 245
Salaries and other emoluments 6,804 10,209
Retirement scheme contributions 109 161
7,158 10,615
Included in the directors’ remuneration were fees of $245,000
(1999: $245,000) paid to independent non-executive directors
during the year.
The remuneration of the directors is within the following bands:
Number of directors
2000 1999
$0 – $1,000,000 0 1,000,000 12 10
$1,000,001 – $1,500,000 1,000,001 1,500,000 – 1
$1,500,001 – $2,000,000 1,500,001 2,000,000 3 2
$3,000,001 – $3,500,000 3,000,001 3,500,000 – 1
15 14
.
161
245,000245,000
59
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
9. INDIVIDUALS WITH HIGHEST EMOLUMENTS
Of the five individuals with the highest emoluments, four (1999:
all) are directors whose emoluments are disclosed in note 8.
The emoluments in respect of the other one (1999: Nil)
individual are as follows:
.
2000 1999
$’000 $’000
Salaries and other emoluments 469 –
Discretionary bonuses 107 –
Retirement scheme contributions 222 –
798 –
10. LOSS FOR THE YEAR
The loss for the year includes a loss of $975,286,000 (1999:
$749,493,000) which has been dealt with in the accounts of the
Company.
11. LOSS PER SHARE
(a) Basic loss per share
The calculation of basic loss per share is based on the
loss for the year of $947,386,000 (1999: $887,593,000)
and the weighted average of 2,548,311,700 ordinary
shares (1999: 2,360,551,543 ordinary shares) in issue
during the year.
(b) Diluted loss per share
Diluted loss per share is not shown as all the potential
ordinary shares are anti-dilutive.
.
975,286,000749,493,000
.
(a)
947,386,000887,593,000
2,548,311,7002,360,551,543
(b)
60
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
12. FIXED ASSETS
(a) The Group
Motor
Leasehold vehicles,
improve- electronic
ments, equipment
furniture and other
Machinery and fixtures fixed assets
Land and and Construction Investment
buildings equipment in progress Sub-total properties Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Cost or valuation:
At 1 January 2000 479,853 352,413 9,182 54,278 1,471 897,197 249,873 1,147,070
Exchange adjustments 922 1,009 (85) 184 6 2,036 1,326 3,362
Additions – 349 75 988 1,613 3,025 – 3,025
Transfer 134 198 – 27 (359) – – –
Disposals (3,895) (2,526) – (3,013) – (9,434) – (9,434)
Deficit on revaluation (note d) d – – – – – – (5,500) (5,500)
At 31 December 2000 477,014 351,443 9,172 52,464 2,731 892,824 245,699 1,138,523- - - -- - -- - - -- - - - -- - -- - - -- - - - -- - -- - - -- - - - -- - -- - - -- - - - -- - -- - - -- - - - -- - -- - - -- - - - -- - -- - - -- - - - -- - -- - - --
Representing:
Cost (note f) f 477,014 351,443 9,172 52,464 2,731 892,824 2,341 895,165
Valuation – 2000 (note d and e) d e – – – – – – 243,358 243,358
477,014 351,443 9,172 52,464 2,731 892,824 245,699 1,138,523
Aggregate depreciation:
At 1 January 2000 246,661 209,474 2,375 30,425 – 488,935 – 488,935
Exchange adjustments 183 407 (18) 84 – 656 – 656
Charge for the year 7,628 12,100 239 3,127 – 23,094 – 23,094
Written back on disposal (1,057) (1,805) – (2,503) – (5,365) – (5,365)
At 31 December 2000 253,415 220,176 2,596 31,133 – 507,320 – 507,320- - - -- - -- - - -- - - - -- - -- - - -- - - - -- - -- - - -- - - - -- - -- - - -- - - - -- - -- - - -- - - - -- - -- - - -- - - - -- - -- - - -- - - - -- - -- - - --
Net book value:
At 31 December 2000 223,599 131,267 6,576 21,331 2,731 385,504 245,699 631,203
At 31 December 1999 233,192 142,939 6,807 23,853 1,471 408,262 249,873 658,135
.
(a)
61
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
12. FIXED ASSETS (continued)
(b) The Company
Machinery Furniture
Leasehold and and
improvements equipment fixtures Motor
vehicles Total
$’000 $’000 $’000 $’000 $’000
Cost:
At 1 January 2000
1,523 1,343 511 260 3,637
Additions – 17 – – 17
Disposals – (3) – – (3)
At 31 December 2000
1,523 1,357 511 260 3,651------------ ------------ ------------ ------------ ------------
Aggregate
depreciation:
At 1 January 2000
350 674 316 162 1,502
Charge for the year 153 230 49 65 497
At 31 December 2000
503 904 365 227 1,999------------ ------------ ------------ ------------ ------------
Net book value:
At 31 December 2000
1,020 453 146 33 1,652
At 31 December 1999
1,173 669 195 98 2,135
.
(b)
62
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
12. FIXED ASSETS (continued)
(c) The analysis of net book value of properties is as follows:
The Group
2000 1999
$’000 $’000
In the PRC
Hong Kong:
Long leases 170,447 177,993
Other parts in the PRC:
Medium leases 268,298 270,573
Long leases 30,553 34,499
469,298 483,065
(d) Investment properties of the Group situated in Hong
Kong were revalued at 31 December 2000 by AA
Property Services Ltd., who have among their staff
Associates of Hong Kong Institute of Surveyors, on an
open market value basis calculated on net rental income
allowing for reversionery potential. The revaluation
deficit of investment properties of $5,500,000 has been
charged to the profit and loss account. The carrying
value of these investment properties at 31 December
2000 is $92,500,000.
.
(c)
(d)
5,500,000
92,500,000
63
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
12. FIXED ASSETS (continued)
(e) An investment property situated in the PRC held on
medium lease was revalued at 31 December 2000 by
DTZ Debenham Tie Leung Limited, who have among
their staff Associates of Hong Kong Institute of
Surveyors, on an open market value basis calculated on
net rental income allowing for reversionery potential.
The valuation is the same as the cost of this investment
property in the amount of $150,858,000.
(f) The other investment property situated in the PRC held
on medium lease was not revalued as at 31 December
2000 by independent professional valuers since the
directors considered that any surplus or deficit on
revaluation will not be significant to the Group and the
costs involved would outweigh the benefits. The
investment property is stated in the accounts at its cost
of $2,341,000.
.
(e)
150,858,000
(f)
2,341,000
64
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
13. INTEREST IN SUBSIDIARIES
The Company
2000 1999
$’000 $’000
Unlisted shares, at cost 751,077 648,158
Amounts due from subsidiaries 2,297,680 2,103,855
3,048,757 2,752,013
Provision (1,920,000) (1,000,000)
1,128,757 1,752,013
Amounts due to subsidiaries (19,214) (11,046)
1,109,543 1,740,967
Amounts due from/(to) subsidiaries are unsecured, interest free
and have no fixed repayment terms.
.
65
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
13. INTEREST IN SUBSIDIARIES (continued)
The following list contains only the particulars of subsidiaries
which principally affected the results, or assets or liabilities of
the Group. The class of shares held is ordinary unless otherwise
stated.
Proportion of ownership interest
Place of
incorporation/ Issued/ Group’s held by held by
establishment registered effective the the Principal
Name of company and operation capital holding Company Subsidiaries activity
Everbright Timber PRC US$45,525,860 77.12% – 100% Manufacture
Industry (Shenzhen) 45,525,860 and sale
Co. Ltd. # of timber
products
#
On Land Limited Hong Kong $2 100% – 100% Property
2 investment
Sino Villa Holdings British Virgin US$1 100% 100% – Property
Limited Islands(“BVI”)/PRC 1 investment
(“Sino Villa”)
# Registered under the laws of the PRC as foreign investmententerprise.
.
#
66
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
14. INTEREST IN ASSOCIATES
The Group The Company
2000 1999 2000 1999
$’000 $’000 $’000 $’000
Listed investment (note 14(a)) (a) 150,979 1,142,781 – –
Unlisted investments (note 14(b)) (b) 808,135 649,489 652,491 652,491
959,114 1,792,270 652,491 652,491
The following list contains only the particulars of associates,
which principally affected the results or assets of the Group.
Proportion of ownership interest
Place of
incorporation/ Group’s held by held
establishment effective the by Principal
Name of company and operation interest Company Subsidiaries activity
Hong Kong Construction Hong Kong/ 35% – 35% Construction
(Holdings) Limited PRC and property
(“HK Construction”) development/
(note i) investment
i
Hong Kong Shanghai Western 25% 25% – Investment
Development Co Ltd Samoa/PRC holding
(“HK Shanghai”)
(note ii)
ii
Newton Industrial BVI/PRC 44.12% 44.12% – Investment
Limited (“Newton”) holding
(note iii)
(iii)
.
67
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
14. INTEREST IN ASSOCIATES (continued)
Notes:
(i) HK Construction is listed on The Stock Exchange of HongKong Limited.
(ii) HK Shanghai holds an 99% equity interest in Shanghai GangHu Properties Co., Ltd, a sino-foreign joint venture establishedin the PRC which is engaged in property development projectsin the PRC.
(iii) Newton holds a 34% equity interest in Shenzhen Mawan PowerCo. Ltd, a sino-foreign joint venture established in the PRCwhich currently operates two power plants in Shenzhen, thePRC.
(a) Listed investment
The Group
2000 1999
$’000 $’000
Shares listed in Hong KongShare of net assets 733,248 1,154,615Less: Provision (543,042) –
190,206 1,154,615Amount due to an associate (39,227) (11,834)
150,979 1,142,781
Market value of listed shares 190,206 502,180
.
(i)
(ii)99%
(iii) Newton34%
(a)
68
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
14. INTEREST IN ASSOCIATES (continued)
Notes: (continued)
(a) Listed investment (continued)
HK Construction and its subsidiaries (the “HK Constructiongroup”) incurred a loss of $1,153 million (1999: $1,213 million)for the year ended 31 December 2000 and had net currentliabilities of $1,812 million as at that date. As a result, the HKConstruction group is having liquidity problems and is indefault under the terms of its various loan and banking facilityagreements. A 40% associate of the HK Construction grouphas agreed with a third party for the disposal of its interest ina power plant in the PRC for a consideration of $1,000 million.Deposits totalling $555 million have been received subsequentto the year end subject to the completion of a formal sale andpurchase agreement. The directors of HK Construction areconfident that the sale of the power plant will be completedresulting in substantial external funding to the HK Constructiongroup. The directors of HK Construction are currently in activenegotiations with their bankers to formalise a standstillarrangement, to restructure the repayment of the HKConstruction group’s indebtedness and to agree a plan togradually dispose of certain of its property interests. Thedirectors of HK Construction believe that ongoing support fromtheir bankers will be forthcoming and the disposal of the above-mentioned interest in power plant will be finalised and thebalance of the proceeds will be received in full. They areconfident that the funds generated from the said disposaltogether with the other measures to be taken under the debtrestructuring plan will enable the HK Construction group tocontinue in operational existence in the foreseeable future.Accordingly the accounts of the HK Construction group forthe year ended 31 December 2000, on which the amounts ofthe share by the Group of the associate’s loss for the yearended 31 December 2000 and net assets as at that date werebased, have been prepared on a going concern basis. Shouldthe HK Construction group be unable to continue in businessas a going concern, adjustments would have to be made torestate the values of the assets to their recoverable amounts, toprovide for any further liabilities which might arise and toreclassify non-current assets and liabilities as current. The effectof these adjustments have not been reflected in the accounts ofthe HK Construction group and thus not been reflected in theGroup’s share of the associate’s loss for the year ended 31December 2000 and net assets as at that date.
The Group is currently negotiating with an independent thirdparty in connection with a possible disposal of its interest inHK Construction. The negotiation is still progressing and it isnot certain as to whether an agreement will be reached.
.
(a)
11.5312.13
18.12
40%
105.55
69
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
14. INTEREST IN ASSOCIATES (continued)
Notes: (continued)
(a) Listed investment (continued)
Having regard to the above circumstances, the directors of theCompany consider that there is an indication of an impairmentin the value of the Group’s interest in HK Construction andhave made a provision of $543 million to reduce the carryingvalue of such interest to its estimated recoverable amount onthe basis that the HK Construction group will be able tocontinue in business as a going concern. In estimating therecoverable amount of the Group’s interest in HK Construction,the directors of the Company have also considered thepossibility of HK Construction’s successful debt restructuring,the possible results of the recent negotiation on the proposeddisposal and the market price of HK Construction’s shares asat 31 December 2000. Should the HK Construction group beunable to continue in business as a going concern, adjustmentswould have to be made to the estimated recoverable amount.
(b) Unlisted investments
The Group The Company
2000 1999 2000 1999
$’000 $’000 $’000 $’000
Unlisted shares, at cost – – 432,085 432,085Share of net assets 321,226 162,580 – –Amount due from associate 486,909 486,909 486,909 486,909Provision – – (266,503) (266,503)
808,135 649,489 652,491 652,491
.
(a)
5.43
(b)
Amount due from associate is unsecured, interest free and hasno fixed terms of repayment.
70
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
14. INTEREST IN ASSOCIATES (continued)
(c) Additional financial information in respect of the Group’sassociates is given as follows:
2000 1999
$’000 $’000
(i) Operating results (i)Turnover 1,950,519 3,059,964Depreciation 4,466 4,422Loss before taxation (975,496) (1,087,507)Loss after taxation (970,160) (1,123,975)
Group’s share of net loss aftertaxation for the year attributableto associates (325,168) (396,281)
Group’s share of deficit on revaluationof investment properties (16,297) (64,020)
(ii) Balance sheet (ii)Long term assets 7,321,966 7,647,107Current assets 2,325,749 3,772,129Current liabilities (4,165,707) (3,327,383)Long term liabilities (2,605,805) (4,389,744)Minority interests (78,300) (63,486)
Net assets 2,797,903 3,638,623
Group’s share of net assetsattributable to associates 1,054,474 1,317,195
.
(c)
71
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
15. INTEREST IN JOINTLY CONTROLLED ENTITY
The Group
2000 1999
$’000 $’000
Share of net assets 63,365 49,808
Amount due from jointly controlled
entity (net) 277,685 85,328
Less: Amortisation (6,778) (4,401)
334,272 130,735
The net amount due from jointly controlled entity is unsecured,
interest-free and not expected to be settled within one year.
Details of the Group’s interest in jointly controlled entity are
as follows:
Form of Particulars Proportion
business Country of of registered of ownership Principal
Name of joint venture structure incorporation capital interest activity
Fuzhou Guang Min Incorporated PRC Rmb472,910,000 Notes Development,
Road and Bridge construction,
Construction & 472,910,000 operation and
Development Co., maintenance of
Ltd (“FZGM”) a toll road and
a toll bridge
.
72
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
15. INTEREST IN JOINTLY CONTROLLED ENTITY (continued)
Notes:
(1) Pursuant to the co-operative joint venture agreement, FZGMwas established under the laws of PRC to develop, construct,operate and maintain a toll bridge and a toll road and relatedfacilities in Fuzhou, the PRC. FZGM has an operating periodof 28 years commencing from May 1998. The total developmentand construction costs of the project are estimated to beRMB1,419 million (approximately $1,326 million).
Greenway Venture Limited (“Greenway”), the foreign jointventure partner of FZGM is committed to contribute to the fullamount of the total development and construction costs whilst
(“the PRC joint venturepartner”) will contribute the relevant toll road and toll bridgerights. The Group owns an 80% equity interest in Greenway.
(2) Under the joint venture agreement and the Articles ofAssociation of FZGM, neither the Group nor the PRC jointventure partner has the required number of representatives inFZGM’s board of directors in order for either one of them tocontrol FZGM. In view of the above, FZGM is considered tobe a jointly controlled entity.
(3) In 1999, the construction work of the toll road was suspendedas a result of a change in project plan. The construction of thetoll bridge is expected to be completed by the end of year2001. The Group is currently negotiating new terms of co-operation with the PRC joint venture partner. However, theexisting terms of the agreement were still valid at 31 December2000.
(4) According to the agreement, FZGM agreed to enter into anoperation and management agreement with the PRC jointventure partner whereby the PRC joint venture partner willalso be the operating company of the toll bridge and the tollroad (“Operating Company”). According to the agreement, theOperating Company agreed to pay FZGM an annual operatingright fee at approximately 18% of the investment made by theGroup from the 1st year to the 13th year of the joint ventureperiod. On the other hand, FZGM agreed to distribute its returnfrom the Operating Company to the Group at a fixed sumequals to approximately 18% of the investment made by theGroup during the first 3 years of the joint venture period. Forthe period from the 4th year to the 13th year of the jointventure period, the Group will annually receive an agreed sumtogether with 20% of any portion of the distributable incomeof FZGM in excess of the said agreed sum, with the remaining80% of the excess portion to be distributed to the PRC jointventure partner. For the period from the 14th year to the 28thyear of the joint venture period, the Group will receive anannual return of 72% of the distributable income of FZGM,with the remaining 28% to be distributed to the PRC jointventure partner.
.
(1)
14.19 13.26
Greenway VentureLimited Greenway 80%Greenway
(2)
(3)
(4)
18%
18%
20%80%
72% 28%
73
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
15. INTEREST IN JOINTLY CONTROLLED ENTITY (continued)
Notes: (continued)
(5) As the Group is not entitled to share the net assets of FZGM atthe end of joint venture period, amortisation is made on asystematic basis to write off the carrying value over the jointventure period.
16. OTHER FINANCIAL ASSETS
The Group The Company
2000 1999 2000 1999
$’000 $’000 $’000 $’000
Unlisted equity securities
– in Hong Kong 27,920 27,920 8,145 8,145
– outside Hong Kong 17,040 230,267 13,740 226,981
Amortisation – (16,000) – (16,000)
44,960 242,187 21,885 219,126
(a) Unlisted equity securities in (a)Hong Kong
Investments, at cost 8,420 8,420 8,145 8,145
Amount due from investee 19,500 19,500 – –
27,920 27,920 8,145 8,145
(b) Unlisted equity securities (b)outside Hong Kong
Investments, at cost 16,949 137,514 13,649 134,235
Less: Amortisation – (16,000) – (16,000)
Loan to investee – 88,823 – 88,823
Amounts due from investee 91 3,930 91 3,923
17,040 214,267 13,740 210,981
.
(5)
.
74
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
16. OTHER FINANCIAL ASSETS (continued)
The loan to and amounts due to/from investees are unsecured,
interest free and has no fixed terms of repayment.
Unlisted equity securities outside Hong Kong in 1999 included
an equity interest of 90% in Mowbary Resources Limited
(“Mowbary”) at a carrying value of approximately $193,000,000
including cost of investment and amount due from investee
(net of amortisation). Mowbary holds an 80% interest in a sino-
foreign joint venture engaged in the operation of a toll road in
the PRC. According to the sale and purchase agreement dated
29 September 1997 for the acquisition by the Group in Mowbary
from the then shareholders of Mowbary (the “Vendor”), the
Group is guaranteed by the Vendor a fixed return of 15% per
annum on the total purchase consideration regardless of the
operating results of Mowbary for the joint venture period. The
Group does not participate in the management of the joint
venture. As the joint venture has a limited life, the original cost
of acquisition is amortised on a systematic basis over the joint
venture period. In view of the above income arrangement, it
was considered more appropriate to account for such investment
as other non-current financial assets and stated at cost less
amortisation. The Group disposed of its entire 80% interest in
the sino-foreign joint venture during the year.
.
Mowbary ResourcesLimited Mowbary 90%
193,000,000
Mowbary80%
MowbaryMowbary
15%Mowbary
80%
75
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
17. INVENTORIES
The Group
2000 1999
$’000 $’000
Raw materials 30,517 46,470
Work in progress 8,139 14,499
Finished goods 29,701 31,473
Goods in transit 188 –
68,545 92,442
Included in raw materials, work in progress and finished goods
are inventories of $62,549,000 (1999: $58,592,000) stated net
of a general provision, made in order to state those inventories
at the lower of their cost and estimated net realisable value.
18. DEBTORS, OTHER RECEIVABLES, DEPOSITS AND
PREPAYMENTS
The amounts are expected to be recovered within one year
except for the deposits of $2,900,000 (1999: $2,700,000) which
are expected to be recovered after more than one year.
.
62,549,00058,592,000
.
2,900,000 2,700,000
76
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
18. DEBTORS, OTHER RECEIVABLES, DEPOSITS AND
PREPAYMENTS (continued)
Included in debtors, other receivables, deposits and prepayments
are trade debtors (net of provisions for bad and doubtful debts)
with the following ageing analysis:
The Group
2000 1999
$’000 $’000
Current 73,453 93,886
1 to 6 months overdue 1 6 16,132 11,938
More than 6 months but less than 612 months overdue 12 1,882 4,400
More than 12 months overdue 12 901 3,456
92,368 113,680
Debts are usually due within 30 days from the date of billing.
19. CASH AND CASH EQUIVALENTS
The Group The Company
2000 1999 2000 1999
$’000 $’000 $’000 $’000
Deposits with banks 5,000 – 5,000 –
Cash at banks and in hand 257,518 22,899 6,434 1,034
262,518 22,899 11,434 1,034
.
30
.
77
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
20. BANK LOANS
At 31 December 2000, the bank loans were repayable as follows:
At 31 December 2000, the bank loans were analysed as follows:
The Group The Company
2000 1999 2000 1999
$’000 $’000 $’000 $’000
Bank loans
– secured 313,962 295,616 295,105 274,022
– unsecured 354,290 363,253 – –
668,252 658,869 295,105 274,022
Certain bank facilities of the Group are secured by mortgages
on land and buildings, listed shares of an associate and first
floating charges on certain assets of the Group.
.
The Group The Company
2000 1999 2000 1999
$’000 $’000 $’000 $’000
Within 1 year or on demand 668,252 598,142 295,105 274,022
After 1 year but within 2 years – 60,727 – –
668,252 658,869 295,105 274,022
78
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
21. LOANS FROM ULTIMATE HOLDING COMPANY
At 31 December 2000, the loans from ultimate holding company
were repayable as follows:
The Group The Company
2000 1999 2000 1999
$’000 $’000 $’000 $’000
Within 1 year 47,241 – 47,241 –
After 1 year but within 2 years 627,862 523,102 469,529 420,164
675,103 523,102 516,770 420,164
The loans are unsecured and bear interest from 7.5% to 9.3%
per annum. The interest rates are generally based on Hong
Kong Interbank Offering Rate or London Interbank Offering
Rate plus 2%.
22. OTHER LOANS
The loans are unsecured, bear interest at 8.5% per annum and
are repayable on demand.
.
7.5%9.3%
2%
.
8.5%
79
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
23. CREDITORS AND ACCRUED EXPENSES
Included in creditors and accrued expenses are trade creditors
with the following ageing analysis:
The Group
2000 1999
$’000 $’000
Due within 1 month or on demand 15,107 31,027
Due after 1 month but within 3 months 6,027 –
21,134 31,027
.
24. SHARE CAPITAL
2000 1999
No. of No. of
shares shares
’000 $’000 ’000 $’000
Authorised:
Ordinary shares of 0.10$0.10 each 5,000,000 500,000 5,000,000 500,000
Issued and fully paid:
At 1 January 2,548,312 254,831 2,356,344 235,634
New shares issued – – 191,968 19,197
At 31 December 2,548,312 254,831 2,548,312 254,831
.
80
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
24. SHARE CAPITAL (continued)
(a) Pursuant to an ordinary resolution passed on 30
September 1993, a share option scheme was approved
and the directors may, at their discretion, invite any
employee or director of the Group, including directors
of any company in the Group, to take up options to
subscribe for ordinary shares of the Company. The
exercise price of options are determined by the board
and will not be less than 80 per cent of the average of
the closing prices of the ordinary shares on the Stock
Exchange on the five trading days immediately preceding
the date of offer of the option granted to such grantee
or the nominal value of the shares, whichever is the
higher.
The maximum number of ordinary shares in respect of
which options may be granted under the scheme may
not exceed 10% of the issued capital of the Company,
excluding any shares issued on exercise of options from
time to time.
At 31 December 2000, the outstanding share options
granted under the share option scheme to subscribe for
18,474,800 ordinary shares (1999: 74,196,200 shares)
are exercisable during the period from 2 May 1994 to
29 September 2003. The price per share to be paid on
exercise of these options ranges from $0.48 to $5.22.
.
(a)
18 ,474 ,80074,196,200
0.48 5.22
81
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
24. SHARE CAPITAL (continued)
(a) (continued)
A summary of the share options granted under the share
option scheme is follows:
Number of Number of
share options share options
outstanding as at outstanding as at
1 January 2000 31 December 2000
Granted Cancelled
Exercise price during during
per share the year the year
$5.22 69,446,200 – (55,471,400) 13,974,800
$2.23 2,000,000 – – 2,000,000
$0.86 750,000 – (750,000) –
$0.758 2,000,000 – – 2,000,000
$0.48 – 500,000 – 500,000
74,196,200 500,000 (56,221,400) 18,474,800
.
(a)
No option was exercised during the year.
82
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
25. RESERVES
(a) The Group
.
(a)
Reserve/(goodwill) Exchange Revaluationarising on differences Capital reserves
consolidation arising on redemption of land andShare translation reserve buildings Accumulated
premium losses Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000
At 1 January 1999 2,694,420 (302,411) (3,796) 70 243 (96,897) 2,291,629Premium arising from issue of
shares, net of expenses 122,859 – – – – – 122,859Share of goodwill of an associate – 1,683 – – – – 1,683Capital reserve arising from
acquisition of a subsidiary – 7,335 – – – – 7,335Exchange reserve written back
on disposal of an associate – – (61) – – – (61)Share of exchange reserve of
associates – – (2,187) – – – (2,187)Exchange differences on
translation of accounts ofsubsidiaries, associates andjointly controlled entity – – 477 – – – 477
Loss for the year – – – – – (887,593) (887,593)
At 31 December 1999 2,817,279 (293,393) (5,567) 70 243 (984,490) 1,534,142
At 1 January 2000 2,817,279 (293,393) (5,567) 70 243 (984,490) 1,534,142Adjustment of goodwill of an
associate – 109,129 – – – – 109,129Share of exchange reserve of
associates – – (2,219) – – – (2,219)Exchange differences on
translation of accounts ofsubsidiaries, associates andjointly controlled entity – – 1,772 – – – 1,772
Loss for the year – – – – – (947,386) (947,386)
At 31 December 2000 2,817,279 (184,264) (6,014) 70 243 (1,931,876) 695,438
Accumulated loss of the Group can be analysed as follows:
2000 1999
$’000 $’000
Company and its subsidiaries (887,188) (296,259)Associates (1,041,114) (671,481)Jointly controlled entity (3,574) (16,750)
(1,931,876) (984,490)
83
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
25. RESERVES (continued)
(a) The Group (continued)
(i) The application of the share premium account is
governed by Section 48B of the Hong Kong
Companies Ordinance.
(ii) The capital reserves, exchange reserves and
revaluation reserves have been set up and will be
dealt with in accordance with the accounting
policies adopted for goodwill arising on
subsidiaries, associates and jointly controlled
entity, foreign currency translation and the
revaluation of investment properties.
(iii) In accordance with the relevant PRC rules and
regulations applicable to foreign investment
enterprises established in the PRC, the Group’s
PRC subsidiaries are required to transfer 10 per
cent of profits reported in its accounts prepared
in accordance with accounting principles
generally accepted in the PRC to a statutory
reserve account. Statutory reserve can be used to
make good previous years’ losses, provided that
the balance after such offset is not less than 25
per cent of the registered capital. This reserve is
non-distributable other than in liquidation. At 31
December 2000, the accumulated losses of the
Group include statutory reserve of PRC
subsidiaries amounting to $12,329,000 (1999:
$12,329,000).
.
(a)
(i) 48B
(ii)
(iii)
10%
25%
12,329,00012,329,000
84
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
25. RESERVES (continued)
(b) The Company
Capital
redemption
Share reserve Accumulated
premium losses Total
$’000 $’000 $’000 $’000
At 1 January 1999 2,694,420 70 (395,678) 2,298,812
Premium arising from issue
of shares, net of expenses 122,859 – – 122,859
Loss for the year – – (749,493) (749,493)
At 31 December 1999
2,817,279 70 (1,145,171) 1,672,178
At 1 January 2000 2,817,279 70 (1,145,171) 1,672,178
Loss for the year – – (975,286) (975,286)
At 31 December 2000
2,817,279 70 (2,120,457) 696,892
The application of the share premium account is
governed by Section 48B of the Hong Kong Companies
Ordinance.
The aggregate amount of reserves available for
distribution to shareholders of the Company at 31
December 2000 was nil (1999: $nil).
.
(b)
48B
85
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
26. NOTES TO THE CONSOLIDATED CASH FLOWSTATEMENT
(a) Reconciliation of operating loss to net cash outflowfrom operating activities
2000 1999
$’000 $’000
Operating loss (81,839) (513,114)Provision for impairment
of fixed assets – 289,697Deficit on revaluation of investment
properties 5,500 2,000Interest income (776) (6,432)Interest expenses 114,430 99,068Income from listed and unlisted
investments (5) (26,144)Depreciation of fixed assets 23,094 39,749(Gain)/loss on sale of fixed assets (2,216) 7,594Amortisation and write off
of intangible assets – 20,917Amortisation of other non-current
financial assets 7,300 8,000Amortisation of investment in jointly
controlled entity 2,377 2,377Provision for diminution in value
of unlisted investment – 16(Gain)/loss on disposal
of subsidiaries, associatesand non-current financial assets(net) (53,622) 476
Decrease in inventories 23,897 94,927Decrease/(increase) in listed
securities in Hong Kong 2,376 (118)Increase in amount due from a jointly
controlled entity (192,357) (85,328)Decrease in debtors, other receivables,
deposits and prepayments 45,852 185,051Decrease/(increase) in amounts due
(to)/from associates 27,393 (129,275)Decrease in creditors and accrued
expenses (67,260) (49,234)Increase in amounts due from fellow
subsidiaries (26,165) (62,601)Exchange adjustment (4,505) (423)Decrease in amounts due
from investees 3,839 1,673Increase/(decrease) in amounts
due to ultimate holding company 40,029 (2,107)
Net cash outflow from operatingactivities (132,658) (123,231)
.
(a)
86
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
26. NOTES TO THE CONSOLIDATED CASH FLOW
STATEMENT (continued)
(b) Analysis of changes in financing
Bank loans
Share Share and other
capital premium borrowings
$’000 $’000 $’000
At 1 January 1999 235,634 2,694,420 1,144,128
Issue of shares as total
consideration of the Sino Villa 100%acquisition of a 100%
interest in Sino Villa 19,197 122,859 –
New bank loans and
other borrowings – – 1,194,773
Repayments during the year – – (1,110,104)
Effect of foreign exchange
rate changes – – 118
At 31 December 1999 254,831 2,817,279 1,228,915
At 1 January 2000 254,831 2,817,279 1,228,915
New bank loans and
other borrowings – – 375,212
Repayments during the year – – (245,461)
Effect of foreign exchange
rate changes – – 1,832
At 31 December 2000 254,831 2,817,279 1,360,498
.
(b)
87
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
26. NOTES TO THE CONSOLIDATED CASH FLOW
STATEMENT (continued)
(c) Material non-cash items
The Group had the following material non-cash items
during the year:
2000 1999
$’000 $’000
Issue of new shares
Full consideration for the Sino Villaacquisition of Sino Villa – 142,056
27. MATERIAL RELATED PARTY TRANSACTIONS
There were the following material transactions with related
parties during the year:
(a) The Group has the following related parties transactions
with CEH:
2000 1999
$’000 $’000
(i) Interest expenses paid (i) 53,594 36,997
(ii) Consideration for the (ii)acquisition of the entire Sino Villashare capital in
and shareholder’s loan
to Sino Villa from CEH – 142,056
.
(c)
.
(a)
88
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
27. MATERIAL RELATED PARTY TRANSACTIONS
(continued)
(b) On Land Limited, a subsidiary of the Group, entered
into the following related party transactions with
subsidiaries of CEH:
2000 1999
$’000 $’000
Rental income for the provision
of office premises 820 887
(c) SETI, a subsidiary, purchased certain of its imported
raw materials through Sino State Industries Limited
(“Sino State”) and China Everbright Trading
Development Company Limited (“CE Trading”),
subsidiaries of CEH and act as major purchasing agents
of SETI.
(i) during the year ended 31 December 2000
purchases of raw timber logs and veneer by SETI
from the above purchasing agents were
$110,723,000 (1999: $243,477,000).
(ii) the independent non-executive directors of the
Company have reviewed these connected
transactions and confirmed that such transactions
were entered into:
– by SETI in the ordinary and usual course
of its business;
.
(b)
(c)
(i)
110,723,000243,477,000
(ii)
89
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
27. MATERIAL RELATED PARTY TRANSACTIONS
(continued)
(c) (continued)
(ii) (continued)
– in accordance with the terms of
arrangements governing such transactions,
or where there was no such arrangement,
on normal commercial terms, or on terms
no less favourable than terms available to
SETI from independent third parties;
– on terms that are fair and reasonable so
far as the shareholders of the Company
taken as a whole are concerned; and
– within the limit of 70% of the Group’s
total purchases in monetary terms of raw
materials related to its plywood and
timber products manufacturing businesses.
.
(c)
(ii)
70%
90
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
27. MATERIAL RELATED PARTY TRANSACTIONS
(continued)
(d) In 1998, the jointly controlled entity, FZGM, entered
into an agreement with an associate of the Group for
the construction of a bridge in Fuzhou, the PRC. The
contracted sum of the bridge amounted to $427,000,000
(1999: $385,000,000) of which $249,000,000 was paid
up to 31 December 2000 (1999: $162,000,000) in
accordance with the progress of construction work. The
remaining $28,000,000 (1999: $146,000,000) and
$150,000,000 (1999: $77,000,000) represent FZGM’s
outstanding commitment in the contract and the
construction cost payable to the associate respectively.
In the opinion of the directors of the Company, the
transaction was carried out on normal commercial terms
and in the ordinary course of business.
(e) Included in the balance sheets are the following balances
with related parties:
The Group The Company
2000 1999 2000 1999
$’000 $’000 $’000 $’000
Amount due from
fellow subsidiary 57,286 31,121 – –
Amount due to ultimate
holding company (56,571) (16,542) (32,727) (3,586)
Loans from ultimate
holding company (675,103) (523,102) (516,770) (420,164)
Amount due from
associate 486,909 486,909 486,909 486,909
Amount due to
associate (39,227) (11,834) – –
.
(d)
427,000,000385,000,000
249,000,0001 6 2 , 0 0 0 , 0 0 028,000,000146,000,000 150,000,000
77,000,000
(e)
91
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
28. CAPITAL AND LEASE COMMITMENTS
(a) Capital commitments outstanding at 31 December 2000
not provided for in the accounts were as follows:
The Group
2000 1999
$’000 $’000
Contracted for 991,434 1,179,662
The above commitments related to the Group’s
commitments to fund the jointly controlled entity (note
15) based on the original joint venture agreement and
will be financed by existing bank facilities and loan
facilities provided by the ultimate holding company.
.
(a)
92
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
28. CAPITAL AND LEASE COMMITMENTS (continued)
(b) At 31 December 2000, the Group had commitments to
make payments under contractual agreements to sub-
contract of certain of the Group’s PRC operations in the
next year as follows:
2000 1999
$’000 $’000
After 1 year but within 5 years 943 939
After 5 years – 7,323
943 8,262
29. CONTINGENT LIABILITIES
At 31 December 2000, there were contingent liabilities in respect
of the following:
(a) Guarantees given to banks by the Company in respect
of banking facilities extended by banks to certain wholly
owned subsidiaries of the Company amounting to
$38,000,000 (1999: $38,000,000).
(b) Guarantees given to banks by the Company in respect
of its 25% share for banking facilities extended by banks
to an associate amounting to $95,621,000 (1999:
$98,693,000).
.
(b)
.
(a)
38,000,00038,000,000
(b)25%
95,621,00098,693,000
93
For the year ended 31 December 2000 (Expressed in Hong Kong dollars)
Notes on the Accounts
29. CONTINGENT LIABILITIES (continued)
(c) Guarantee given to banks by the Group in respect of
banking facilities extended by banks to third parties
amounting to $54,215,000 (1999: $80,274,000). On the
other hand, the Group is guaranteed by the third parties
in respect of banking facilities amounting to $46,569,000
(1999: $55,657,000). The Company has also given
guarantee to one of the third parties in respect of
guarantee extended to a subsidiary of the Company
amounting to $18,043,000 (1999: Nil).
30. PLEDGE OF ASSETS
At 31 December 2000, the Group pledged listed, unlisted
investments and fixed assets with an aggregate net book value
of approximately $1,027,000,000 (1999: $1,809,000,000) to
secure general banking facilities granted to the Group.
31. ULTIMATE HOLDING COMPANY
The directors consider the ultimate holding company at 31
December 2000 to be China Everbright Holdings Company
Limited, which is incorporated in Hong Kong.
.
(c)
54,215,00080,274,000
46,569,00055,657,000
18,043,000
.
1,027,000,0001,809,000,000
.
94
Five Year Summary �� !"#
(Expressed in Hong Kong dollars)�� !"#$
Five Year Summary �� !"#
At 31 At 31 At 31 At 31 At 31
December December December December December
1996 1997 1998 1999 2000
�� !" �� !" �� !" �� ! �� !
�� !�"# �� !�"# �� !�"# �� !�"# �� !�"#
$’000 $’000 $’000 $’000 $’000
�� �� �� �� ��
Assets and liabilities �� !"
Fixed assets �� ! 405,690 952,866 843,552 658,135 631,203
Intangible assets �� ! – 30,620 20,917 – –
Interest in associates �� !"# 420,004 1,529,547 2,163,297 1,792,270 959,114
Interest in jointly �� !"#
controlled entity – – 82,969 130,735 334,272
Other non-current �� !"
financial assets �� ! 185,632 446,986 251,860 242,187 44,960
Net current assets/ �� !"
(liabilities) �� !"# 512,047 (257,528) (80,388) (431,098) (379,704)
1,523,373 2,702,491 3,282,207 2,392,229 1,589,845
Long term liabilities �� ! – (80,788) (628,349) (583,829) (627,862)
Minority interests �� !"# (52,059 ) (192,986) (126,595) (19,427 ) (11,714)
1,471,314 2,428,717 2,527,263 1,788,973 950,269
Share capital �� 159,520 208,803 235,634 254,831 254,831
Reserves �� 1,311,794 2,219,914 2,291,629 1,534,142 695,438
1,471,314 2,428,717 2,527,263 1,788,973 950,269
(Expressed in Hong Kong dollars)�� !"#$
95
Five Year Summary �� !"#
(Expressed in Hong Kong dollars)�� !"#$
Year ended Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December 31 December
1996 1997 1998 1999 2000
�� �� �� �� ��
��� ! ��� ! ��� ! ���� ����
�� !�"# �� !�"# �� !�"# �� !�"# �� !�"#
�� �� �� �� ��
$’000 $’000 $’000 $’000 $’000
�� �� �� �� ��
Results ��
Turnover �� 260,977 1,066,011 728,476 635,251 469,692
Profit/(loss) from operations �� !"#$%& 64,422 198,697 (12,068) (124,349 ) 32,591
Finance costs �� ! (31,265) (73,301) (99,600) (99,068 ) (114,430)
Provision for impairment �� !"#$%
of fixed assets – – (30,000) (289,697 ) –
Share of profits less �� !"#$%
losses of associates �� (25,670) (26,752) (216,137) (446,344 ) (342,078)
Provision for interest in �� !"#$%
associate – – – – (543,042)
Share of profit/(loss) of �� !"#
jointly controlled entity �� !"#$ – – 18,435 (16,750 ) 13,176
Profit from ordinary �� !
activities before �� !"
taxation 7,487 98,644 (339,370) (976,208 ) (953,783)
Taxation �� (1,137) (16,677) 20,563 (14,203 ) (409)
Minority interests �� !"# (2,757) (20,979) 20,699 102,818 6,806
Profit/(loss) attributable �� !"#$%&'(
to shareholders 3,593 60,988 (298,108) (887,593 ) (947,386)
Earnings/(loss) per share �� !"#$%& 0.23 cent� 3.18 cents� (13.90) cents� (38) cents� (37) cents�
96
Major properties held by the Group �� !"#$%&'(Major properties held by the Group �� !"#$%&'(
Percentage
Location Existing use Term of lease of interest
�� �� ! �� ! �� !"#
1. 8th Floor Commercial Long 100%
Tower I �� ��
Lippo Centre
No. 89 Queensway
Hong Kong
��
�� !"#$
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2. Units 2703 and 2704, 27th Floor Commercial Long 100%
Far East Finance Centre �� ��
16 Harcourt Road
Hong Kong
�� !"#$%
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3. Flat F on 19th Floor Residential Long 100%
Lu Shan Mansion �� ��
Kao Shan Terrace
5 Taikoo Shing Road
Taikoo Shing
Quarry Bay
Hong Kong
�� !"#$%
�� !"#
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97
Major properties held by the Group �� !"#$%&'(
Percentage
Location Existing use Term of lease of interest
�� �� ! �� ! �� !"#
4. Flat A on 22nd Floor Residential Long 100%
Good View Court �� ��
No. 21 Robinson Road
Mid-Levels
Hong Kong
�� !"
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5. Units 3 and 4, 11th Floor Residential Medium 100%
Qingching South Lane �� ��
Dalian Development Zone
PRC
�� !"#$%&'(NN�
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6. Sections 1 & 3 of Lower Ground Commercial Medium 100%
Level 1, Levels 1 & 2, Office �� ��
on Level 3 of the commercial
podium, 109 Car parks on
Lower Ground Level 2
Zhongshan Garden, Shenzhen
Guangdong Province, PRC
�� !"
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98
Summary of Major Investments �� !"#$�
98
Summary of Major Investments �� !"#$�
XIAMEN XIAZHANG EXPRESSWAY
Xiamen Xiazhang Expressway Co. Ltd. (“Xiamen Xiazhang
Expressway”) mainly developed and manages the expressway between
Xiamen and Zhangzhou. The Group invested US$27 million in this
project. This whole expressway is 10 kilometers long and commenced
operations as planned. The Group disposed of its entire 80% equity
interest in Xiazhang Expressway during the year.
SHENZHEN MAWAN POWER CO. LTD.
Shenzhen Mawan Power Co. Ltd. (“Mawan”) is a sino-foreign joint
venture, which mainly engaged in power plant development and power
generation. With registered capital of RMB560 million and total
investment of nearly RMB5 billion. It owns Mawan Power and
Yueliangwan Power Plant, with genera tion capacity totaling 800 MW.
Mawan has become the largest electric power generation enterprise in
Shenzhen with cumulative profits of nearly RMB1.4 billion. The Group
holds 15% share of this project.
FUZHOU QINGZHOU BRIDGE AND AIRPORT EXPRESSWAY
Fuzhou Qingzhou Bridge and Airport Expressway is a sino-foreign co-
operative joint venture project which the Group has invested to
construct and operate a toll bridge and expressway system in Fuzhou.
It is the largest bridge on Minjiang River in Fuzhou City and is expected
to be part of a national trunk route (Tungshan trunk line). The
investment for the bridge portion is RMB750 million and the bridge is
expected to be operational in 2001.
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99
Summary of Major Investments �� !"#$�
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EVERBRIGHT TIMBER INDUSTRY (SHENZHEN) CO. LTD.
Established in 1988, Everbright Timber Industry (Shenzhen) Co. Ltd.
is a wholly foreign owned enterprise. It is principally engaged in the
production and sale in the PRC of plywood products and other timber
boards such as chipboard, blockboard, medium density fibre board
and decora ting board. It is also one of the largest timber products
manufacturer in China. The Group has a controlling shareholding of
77.12%.
SHANGHAI KERRY EVERBRIGHT CITY
Shanghai Kerry Everbright City, located at Tianmu Road West in the
Zhabei District of Shanghai, PRC, is a property development project.
It comprises a total site area of approximately 691,845 sq.ft. and has
office, commercial and residential space. Gross floor area sold remains
the same as last year, i.e. 7.65% in Tower I and 30.17% in Tower II.
Leased floor area has improved to 80% in Tower I and 42% in Tower
II, from 67.15% and 32.81% respectivel y in 1999.
SHANGHAI TRADE SQUARE AND INTERNATION AL
APARTMENT (IN HONGKOU)
Kerry Shanghai (Hongkou) Limited is a property development company
owned by the Group, Kerry Properties (China) Ltd, Leecorp Investment
Ltd. and Cheung Kong (China Proper ty Development) Ltd. The main
business is the Shanghai Trade Square and International Apartment
development project. At Shanghai Trade Square the leased or sold
gross floor area for off ice was 96% (1999: 86%) and for retail shops
sold or leased gross f loor area was 100%, same as 1999. As for
International Apartments the lease or sold gross f loor area for
apartments was 99%, same as 1999, and for retail shop it was 40%
(1999: 97 %). The Group holds 15% share of this project.
100
Summary of Major Investments �� !"#$�
SHENZHEN ZHONGSHAN GARDEN
In December, 1999, the Group acquired the entire shareholding of
Sino Villa Holdings Ltd (“Sino Villa”) from China Everbright Holdings
Company Limited (“CEH”). The sole asset of Sino Villa is certain
commercial properties and car parking spaces at Zhongshan Garden in
Shenzhen. The commercial properties are currently leased to Walmart
Department Store, Park’N Shop, McDonald’s Restaurant and a domestic
air line ticketing agent.
In early 2001, the Group disposed of the car parking spaces to CEH as
CEH was unable to obtain a real estate ownership certificate in respect
of the car parking spaces under the name of Sino Villa.
HONG KONG INVESTMENT PROPERTIES
The Group holds pr operties at 8th floor of Lippo Center Tower I and
two units of 27th floor of Far East Finance Centre, which are mainly
used for lease and self-use.
HONG KONG CONSTRUCTION (HOLDINGS) LIMITED
Hong Kong Construction (Holdings) Limited (“HK Construction”) is
one of the largest construction contractors listed in Hong Kong, it is
35% owned by the Group. The main businesses of Hong Kong
Construction include construction contracting and property
development. HK Construction had in hand many valuable constr uction
contracts at the end of 2000, including two government contracts for
the construction of five schools in the terr itory, one government joint
venture contract for Penny’s Bay reclamation stage I, three West Rail
projects, the widening of Tolo Highway, improvement works at Tuen
Mun Wong Chu Road, design and construction of Shatin Government
Offices, Island Harbourview development a t Olympic Station,
Polytechnic University phase VI development, residential development
at 41C Stubbs Road, the Qingzhou Min River Bridge in Fuzhou, and a
Chinese government joint venture contract for main construction of
the National Grand Theatre in Beijing.
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