contents - everbright · pdf filecontents corporate information 2! notice of annual general...

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Contents Corporate Information 2 ! Notice of Annual General Meeting 3 !"#$% Chairman’s Statement 4 ! Chief Executive Officer’s Report 6 !"# Report of the Directors 12 !" Directors and Senior Management 25 !"#$%& Report of the Auditors 29 !" Consolidated Profit and Loss Account 31 !" Consolidated Statement of Recognised Gains and Losses 32 !"#$%&'()* Consolidated Balance Sheet 33 !"#$ Balance Sheet 35 !" Consolidated Cash Flow Statement 36 !"#$ Notes on the Accounts 38 ! Five Year Summary 94 !"# Major Properties held by the Group 96 !"#$%&'( Summary of Major Investments 98 !"#$

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Page 1: Contents - Everbright  · PDF fileContents Corporate Information 2! Notice of Annual General Meeting 3!"#$% Chairman’s Statement 4! ... Yangpu power plant in Hainan province

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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Page 2: Contents - Everbright  · PDF fileContents Corporate Information 2! Notice of Annual General Meeting 3!"#$% Chairman’s Statement 4! ... Yangpu power plant in Hainan province

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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Page 3: Contents - Everbright  · PDF fileContents Corporate Information 2! Notice of Annual General Meeting 3!"#$% Chairman’s Statement 4! ... Yangpu power plant in Hainan province

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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.

Page 4: Contents - Everbright  · PDF fileContents Corporate Information 2! Notice of Annual General Meeting 3!"#$% Chairman’s Statement 4! ... Yangpu power plant in Hainan province

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.

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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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Page 6: Contents - Everbright  · PDF fileContents Corporate Information 2! Notice of Annual General Meeting 3!"#$% Chairman’s Statement 4! ... Yangpu power plant in Hainan province

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.

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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

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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

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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%

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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

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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

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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%

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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

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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

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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.

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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)

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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.

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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)

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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)

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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%

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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

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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%

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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

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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

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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.

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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

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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

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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

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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.

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31

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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

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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)

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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------------- -------------

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At 31 December 2000 (Expressed in Hong Kong dollars)�� !"�#$"%&'()*+,-

Consolidated Balance Sheet �� !"#$

The notes on pages 38 to 93 form part of these accounts.

�� PU�� VP�� !"#$%&�'()*

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�� �� �� ��

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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.

�� PU�� VP�� !"#$%&�'()*

35

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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 –

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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�� !"#$%&�'()*

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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)

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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)

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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)

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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)

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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)

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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)

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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)

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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)

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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)

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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)

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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)

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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)

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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)

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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)

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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

.

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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)

.

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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%

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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

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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)

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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

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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

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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)

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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)

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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)

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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

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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

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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.

.

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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.

.

#

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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)

.

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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)

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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

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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.

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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)

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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

.

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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%

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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)

.

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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%

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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

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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

.

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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

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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%

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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

.

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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

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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.

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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)

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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

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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

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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)

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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)

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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)

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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)

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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%

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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)

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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)

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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

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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

.

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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)�� !"#$

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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

�� �� �� �� ��

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�� �� �� �� ��

$’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�

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96

Major properties held by the Group �� !"#$%&'(Major properties held by the Group �� !"#$%&'(

Percentage

Location Existing use Term of lease of interest

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1. 8th Floor Commercial Long 100%

Tower I �� ��

Lippo Centre

No. 89 Queensway

Hong Kong

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Far East Finance Centre �� ��

16 Harcourt Road

Hong Kong

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Lu Shan Mansion �� ��

Kao Shan Terrace

5 Taikoo Shing Road

Taikoo Shing

Quarry Bay

Hong Kong

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Major properties held by the Group �� !"#$%&'(

Percentage

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Good View Court �� ��

No. 21 Robinson Road

Mid-Levels

Hong Kong

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Qingching South Lane �� ��

Dalian Development Zone

PRC

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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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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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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.

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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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