REPORT OF THE DIRECTORS

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

PRINCIPAL ACTIVITIES

The Company is an investment holding company.

The activities of the principal subsidiaries and associates as at 31st March, 2000 are set out in note 50 to the financial statements.

SEGMENTAL INFORMATION

Analyses of the Group’s turnover and contribution to profit from operations for the year ended 31st March, 2000 by geographical market and by principal activity are as follows:

Contribution to profit from Turnover operations HK$’000 HK$’000

Geographical market: Hong Kong 6,289,724 46,424 Australia 2,262,553 126,260 New Zealand 1,644,626 68,006 Singapore and Indonesia 503,821 22,572 Others 354,130 72,569

11,054,854 335,831

Principal activity: Construction and other contracting businesses 11,054,854 293,731 Property letting – 42,100

11,054,854 335,831

RESULTS AND APPROPRIATIONS

The results of the Group and appropriations of the Company for the year ended 31st March, 2000 are set out in the consolidated income statement on page 28 of the annual report and in the accompanying notes to the financial statements.

The directors recommend the payment of a final dividend of 1.0 cent per share in scrip form with a cash option to shareholders whose names appear on the register of members on 11th October, 2000, amounting to approximately HK$9,801,000. The recommended final dividend has been incorporated in the financial statements. The final dividend together with the interim dividend of 1.0 cent per share, which was also in scrip form with a cash option, paid during the year makes a total dividend of 2.0 cents per share for the year. Details of the dividends are set out in note 11 to the financial statements.

15 REPORT OF THE DIRECTORS (Continued)

RESERVES Movements in the reserves of the Group and of the Company during the year are set out in note 38 to the financial statements.

MAJOR CUSTOMERS AND SUPPLIERS For the year ended 31st March, 2000, the five largest customers and the single largest customer of the Group accounted for approximately 47% and 31% of the turnover of the Group, respectively. The aggregate purchases attributable to the five largest suppliers of the Group during the year were less than 30% of the purchases of the Group.

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

LIQUIDITY AND CAPITAL RESOURCES The Group currently maintains a variety of credit facilities to meet its working capital requirements. As at 31st March, 2000, the Group’s total borrowings amounted to approximately HK$3,627,319,000 with approximately HK$1,794,944,000 repayable within one year, approximately HK$791,049,000 repayable between one to two years, approximately HK$454,466,000 repayable between two to five years and approximately HK$586,860,000 repayable after five years. Cash, bank balances and deposits at 31st March, 2000 amounted to approximately HK$1,326,544,000. The Group’s current ratio was 1.30 and the long term debts to equity ratio was 0.63 as at 31st March, 2000.

FINANCIAL SUMMARY A summary of the results and of the assets and liabilities of the Group for each of the five years ended 31st March, 2000 is set out on page 92 of the annual report.

INVESTMENT PROPERTIES The investment properties of the Group were revalued on 31st March, 2000 by an independent professional valuer on an open market value basis and the resulting deficit on revaluation of these properties amounting to approximately HK$5,000,000 has been charged to the income statement.

Details of these and other movements in investment properties of the Group during the year are set out in note 13 to the financial statements.

PROPERTY, PLANT AND EQUIPMENT AND PROPERTIES HELD UNDER DEVELOPMENT During the year, the Group incurred expenditure of approximately HK$18,980,000 on properties held under development in Hong Kong and spent approximately HK$293,239,000 on plant and machinery to expand and upgrade its operating capacity.

Details of these and other movements in the property, plant and equipment and properties held under development of the Group during the year are set out in notes 14 and 15 to the financial statements, respectively.

MAJOR PROPERTIES Particulars regarding major properties of the Group as at 31st March, 2000 are set out on page 93 of the annual report.

16 REPORT OF THE DIRECTORS (Continued)

SUBSIDIARIES AND ASSOCIATES

During the year, the Group has significantly reduced its interest in the following subsidiary:

(a) In August 1999, New World CyberBase Limited (“New World CyberBase”) (formerly known as Paul Y. Properties Group Limited), a then subsidiary of the Company, acquired an interactive multimedia communication business from New World Telephone Limited for an aggregate consideration of HK$300,000,000, of which HK$100,000,000 was satisfied by the issue of 100,000,000 new shares in New World CyberBase at HK$1.0 per share and the balance of HK$200,000,000 was satisfied by the issue of a convertible note by New World CyberBase. Pursuant to this transaction and, inter alia, the placing of new shares by New World CyberBase, the Group’s equity interest in New World CyberBase was reduced to 25.6%.

(b) In September 1999 and November 1999, the Group disposed of 170,000,000 and 60,000,000 ordinary shares of HK$0.02 each in New World CyberBase to independent third parties at a price of HK$2.525 and HK$2.0 per share, respectively. The proceeds were used to repay borrowings of and to provide additional working capital for the Group. Pursuant to these transactions, the Group’s equity interest in New World CyberBase was further reduced to 10.6%.

Particulars of the principal subsidiaries and associates as at 31st March, 2000 are set out in note 50 to the financial statements.

SHARE CAPITAL AND WARRANTS

On 20th August, 1999, the Company issued 143,000,000 new shares of HK$0.10 each in the Company to Hollyfield Group Limited, a substantial shareholder of the Company, at an issue price of HK$0.90 each in accordance with the terms of the subscription agreement dated 27th July, 1999. The proceeds were used to repay borrowings of and to provide additional working capital for the Group.

The rights attached to each of the warrants (the “1999 Warrants”) to subscribe in cash at a price of HK$0.97 each, adjusted as a result of the issue of shares, for one new ordinary share of the Company expired on 30th September, 1999 and the listing of the 1999 Warrants was withdrawn from the Stock Exchange at the close of business on 30th September, 1999. Accordingly, approximately HK$25,217,000 1999 Warrants lapsed on 30th September, 1999.

Bonus warrants (the “2000 Warrants”) were issued to shareholders whose names appeared on the register of members on 8th October, 1999 on the basis of one 2000 Warrant for every five shares of HK$0.10 each in the Company held. The 2000 Warrants conferring rights to the holders thereof to subscribe for up to HK$140,615,388 in cash for ordinary shares of HK$0.10 each in the Company at an initial subscription price of HK$0.72 per share, subject to adjustment, at any time from 25th October, 1999 up to and including 22nd December, 2000.

Details of these and other movements in the issued share capital and in the warrants of the Company during the year are set out in notes 35 and 36 to the financial statements, respectively.

SHARE OPTIONS Information on the Company’s share option scheme is set out in note 37 to the financial statements.

17 REPORT OF THE DIRECTORS (Continued)

BORROWINGS AND INTEREST CAPITALISED During the year, the Group redeemed the balance of the compulsorily redeemable notes with an aggregate principal amount of US$9,031,000 (equivalent to approximately HK$69,884,000).

As at 31st March, 2000, the Group had outstanding 5% and 5.5% convertible bonds which are redeemable on 3rd February, 2001 unless previously converted, redeemed or purchased and cancelled. The Group also had outstanding 6% secured convertible redeemable note and 8.5% convertible notes which are redeemable on or before 17th April, 2001 and on 31st January, 2009, respectively.

Details of the compulsorily redeemable notes, convertible bonds and convertible notes are set out in notes 30, 31 and 32 to the financial statements, respectively.

Bank overdrafts, loans and other borrowings repayable within one year or on demand are classified as current liabilities. Details of the obligations under finance leases and hire purchase contracts, bank borrowings and other loans of the Group as at 31st March, 2000 are set out in notes 27, 28 and 29 to the financial statements, respectively.

During the year, the Group capitalised borrowing costs, including the amortisation of premium payable upon the final redemption of the convertible bonds, of approximately HK$47,135,000 in respect of properties under development held for resale and contracts in progress.

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

Executive directors Chan Kwok Keung, Charles (Chairman) Lau Ko Yuen, Tom (Deputy Chairman) Chan Fut Yan (Managing Director) Chau Mei Wah, Rosanna Chow Yan On, Peter (resigned on 1st July, 1999)

Non-executive directors George Colin Magnus Fok Kin Ning, Canning Ip Tak Chuen, Edmond (also alternate director to Fok Kin Ning, Canning) Cheung Ting Kau, Vincent Kwok Shiu Keung, Ernest Wong Kam Cheong, Stanley Donald Bruce Conway (resigned on 12th July, 1999)

In accordance with Clauses 87(1) and 87(2) of the Company’s bye-laws, Mr. Ip Tak Chuen, Edmond and Mr. Kwok Shiu Keung, Ernest retire by rotation, and are eligible for re-election, at the forthcoming annual general meeting.

The term of office of each non-executive director is the period from the date of appointment up to his retirement by rotation in accordance with the Company’s bye-laws.

18 REPORT OF THE DIRECTORS (Continued)

DIRECTORS’ SERVICE CONTRACTS

None of the directors proposed for re-election at the forthcoming annual general meeting has a service contract with the Group which is not determinable by the Group within one year without payment of compensation, other than statutory compensation.

DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS

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

(a) Directors’ emoluments

HK$’000 Fees: Executive directors 40 Non-executive directors 60

100

Other emoluments: Executive directors Salaries and other benefits 17,477 Discretionary bonus 735 Retirement benefit scheme contributions 915 Non-executive directors Salaries and other benefits 1,000

20,127

20,227

The amounts disclosed above include directors’ fee of HK$20,000 and other emoluments of HK$1,000,000 payable to independent non-executive directors.

The emoluments of the directors were within the following bands:

Number of directors

Nil to HK$1,000,000 8 HK$3,500,001 to HK$4,000,000 1 HK$4,000,001 to HK$4,500,000 2 HK$6,000,001 to HK$6,500,000 1

19 REPORT OF THE DIRECTORS (Continued)

DIRECTORS’ AND EMPLOYEES’ EMOLUMENTS (Continued) (b) Employees’ emoluments The five highest paid individuals in the Group for the year ended 31st March, 2000 included 4 directors, details of whose emoluments are included in paragraph (a) above. Particulars of the emoluments of the remaining 1 individual are as follows:

HK$’000

Salaries and other benefits 3,975 Discretionary bonus 13,157

17,132

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

Number of shares of the Company to be issued Number of upon exercise of Number of shares of 2000 Warrants of the share options Name of director Nature of interest the Company held the Company held of the Company

Chan Kwok Keung, Charles Personal interest – – 19,175,098 Lau Ko Yuen, Tom Personal interest – – 21,778,149 Chan Fut Yan Personal interest – – 21,778,149 Chau Mei Wah, Rosanna Personal interest – – 20,481,199 Wong Kam Cheong, Stanley Personal interest 30,000 6,000 –

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

20 REPORT OF THE DIRECTORS (Continued)

DIRECTORS’ RIGHTS TO ACQUIRE SHARES OR DEBENTURES Particulars of the share option scheme of the Company are set out in note 37 to the financial statements.

At 31st March, 2000, the following directors of the Company had share options granted by the Company to subscribe for its shares:

Number of shares to be issued upon Exercise price exercise of the Name of director Date of grant per share share options HK$

Chan Kwok Keung, Charles 27.8.1997 3.3042 9,587,797 18.12.1998 0.6048 9,587,301 Lau Ko Yuen, Tom 27.8.1997 3.3042 7,190,848 18.12.1998 0.6048 9,587,301 17.12.1999 0.5552 5,000,000 Chan Fut Yan 27.8.1997 3.3042 7,190,848 18.12.1998 0.6048 9,587,301 17.12.1999 0.5552 5,000,000 Chau Mei Wah, Rosanna 27.8.1997 3.3042 4,793,898 18.12.1998 0.6048 9,587,301 17.12.1999 0.5552 6,100,000

During the year, the exercise prices of the share options granted on 27th August, 1997 and 18th December, 1998 were adjusted from HK$3.9600 and HK$0.7248 per share to HK$3.3042 and HK$0.6048 per share, respectively, and the number of shares to be issued upon the exercise of the share options was also adjusted as a result of the issue of shares in the Company. Details of the issue of shares of the Company are set out in note 35 to the financial statements.

The share options can be exercised at any time during a period of three years commencing on the expiry of six months after the date of acceptance of the options.

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

In addition, Mr. Chow Yan On, Peter had share options granted by the Company on 27th August, 1997 to subscribe for 4,000,000 shares in the Company at an exercise price of HK$3.9600 per share, prior to the adjustment for the issue of shares in the Company as mentioned above. No option was exercised by him during the period prior to his resignation as a director of the Company.

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

21 REPORT OF THE DIRECTORS (Continued)

DIRECTORS’ INTERESTS IN COMPETING BUSINESSES Interests of directors of the Company in competing businesses as at 31st March, 2000 required to be disclosed pursuant to Rule 8.10 of the Listing Rules were as follows:

Name of director Name of company Nature of competing business Nature of interest

Chan Kwok Keung, New World CyberBase Property business in As a director of New World Charles and its subsidiaries Hong Kong and Mainland CyberBase China

Chau Mei Wah, Star East Holdings Property business in As the managing director of Rosanna Limited (“Star East”) Hong Kong and Mainland Star East and its subsidiaries China

Fok Kin Ning, Cheung Kong Property development As a director of Canning (Holdings) Limited and investment Cheung Kong (“Cheung Kong”) and its subsidiaries

Hutchison Whampoa Property development As the group Limited (“Hutchison and investment managing director of Whampoa”) Hutchison Whampoa and its subsidiaries

Cheung Kong Development, investment As the deputy chairman of Infrastructure and operation of infrastructure Cheung Kong Holdings Limited business in Hong Kong, Infrastructure (“Cheung Kong Mainland China and Infrastructure”) other countries in the and its subsidiaries Asia Pacific Region

Ip Tak Chuen, Cheung Kong and Property development As a director of Edmond its subsidiaries and investment Cheung Kong

Cheung Kong Development, investment and As a director of Infrastructure and operation of infrastructure Cheung Kong its subsidiaries business in Hong Kong, Infrastructure Mainland China and other countries in the Asia Pacific Region

Lau Ko Yuen, New World CyberBase Property business in As a director of New Tom and its subsidiaries Hong Kong and Mainland World CyberBase China

22 REPORT OF THE DIRECTORS (Continued)

DIRECTORS’ INTERESTS IN COMPETING BUSINESSES (Continued) Name of director Name of company Nature of competing business Nature of interest

George Cheung Kong and Property development As the deputy chairman Colin Magnus its subsidiaries and investment of Cheung Kong

Hutchison Whampoa Property development As a director of and its subsidiaries and investment Hutchison Whampoa

Cheung Kong Development, investment and As the deputy chairman Infrastructure and operation of infrastructure of Cheung Kong its subsidiaries business in Hong Kong, Infrastructure Mainland China and other countries in the Asia Pacific Region

Having considered the nature, size and scope of the above businesses, the directors of the Company believe that there is unlikely to be any significant competition with the businesses of the Group.

Save as disclosed above, none of the directors is interested in any business apart from the Group’s businesses which competes or is likely to compete, either directly or indirectly, with the businesses of the Group.

DIRECTORS’ INTERESTS IN CONTRACTS OF SIGNIFICANCE Save as disclosed under the section headed “Connected Transactions” below, no contracts of significance to which the Company or any of its subsidiaries was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.

CONNECTED TRANSACTIONS During the year, the Group entered into the following transactions:

(a) With ITC Corporation Limited (“ITC”) and its associates:

Name of party Nature of transactions Amount HK$’000

Dreyer and Company Limited Purchase of building materials and related 2,551 installation works by the Group Rentals and related building management 152 fee charged by the Group

ITC Management Limited Rentals and related building management 296 fee charged by the Group

Star East IT Management Limited Rentals and related building management 342 fee charged by the Group

Prime Tollways Limited Rentals and related building management fee charged by the Group 126

23 REPORT OF THE DIRECTORS (Continued)

CONNECTED TRANSACTIONS (Continued) The above companies are associates, within the meaning of the Listing Rules, of ITC, a substantial shareholder of the Company. Dr. Chan Kwok Keung, Charles, Mr. Lau Ko Yuen, Tom, Mr. Chan Fut Yan and Ms. Chau Mei Wah, Rosanna, directors of the Company, are also directors of ITC. Star East IT Management Limited and Prime Tollways Limited ceased to be the associates, within the meaning of the Listing Rules, of ITC in November 1999 and June 1999, respectively.

(b) With Hutchison Whampoa and its associates:

Name of party Nature of transactions Amount HK$’000

Asia Stone Company, Limited Purchase of concrete and related products 108 by the Group

Bonntile Industries (H.K.) Limited Purchase of building materials and related 1,802 installation works by the Group

Green Island Cement Company Purchase of concrete and related products 11,073 Limited by the Group

Hongkong International Terminals Limited Construction works charged by the Group 3,725

Hongkong Electric Co. Limited Construction works charged by the Group 624,868

Hutchison Enterprises (Chong Qing) Limited Construction works charged by the Group 15,248

Hutchison Telecommunications Limited Construction works charged by the Group 465

Hutchison Whampoa Properties Limited Construction works charged by the Group 4,504

Livia Winbo Limited Construction works charged by the Group 3,835

Promotal Limited Construction works charged by the Group 598

Ready Mixed Concrete (H.K.) Limited Purchase of concrete and related products 230,542 by the Group

Turbo Top Limited Construction works charged by the Group 383,271

Contracts of construction works entered into with Hutchison Whampao during the year:

Name of party Value of contracts HK$’000

Hongkong Electric Co. Limited 566,331

Hutchison Whampao Properties Limited 6,180

Hongkong International Terminals Limited 11,949

24 REPORT OF THE DIRECTORS (Continued)

CONNECTED TRANSACTIONS (Continued) The above companies are associates, within the meaning of the Listing Rules, of Hutchison Whampoa, a substantial shareholder of a subsidiary of the Company. Mr. Fok Kin Ning, Canning and Mr. George Colin Magnus, directors of the Company, are also directors of Hutchison Whampoa.

(c) With Huey Tai International Limited (“Huey Tai”) and its associates:

Name of party Nature of transactions Amount HK$’000

Ever Top Company Ltd. Rentals and related building management fee charged by the Group 3,038

The above company is an associate, within the meaning of the Listing Rules, of Huey Tai, a substantial shareholder of the Company. Mr. Wong Kam Cheong, Stanley, a director of the Company, is also a director of Huey Tai.

The independent non-executive directors confirm that the transactions were entered into by the Group in the ordinary course of its businesses and in accordance with the terms of the agreement, if any, governing such transactions.

SUBSTANTIAL SHAREHOLDERS As at 31st March, 2000, according to the register of substantial shareholders maintained by the Company under Section 16(1) of the SDI Ordinance and so far as is known to the directors of the Company, the following shareholders had an interest of 10% or more in the issued share capital of the Company:

Number of ordinary Percentage shares of the Company held of issued Name of shareholder Direct interest Deemed interest share capital Notes %

ITC – 367,843,987 37.5 1 Hollyfield Group Limited 367,843,987 – 37.5 1 Chan Boon Ho, Peter – 214,414,112 21.9 2 Huey Tai – 214,414,112 21.9 2 Huey Tai Holdings Limited – 214,414,112 21.9 2 Asean Resources Holdings Limited – 197,947,806 20.2 2 Asean Resources Limited – 197,947,806 20.2 2 Conington Limited 183,763,893 – 18.7 2

Notes:

1. Hollyfield Group Limited, a wholly-owned subsidiary of ITC, owned 367,843,987 shares in the Company. ITC was deemed to be interested in the above shares in the Company by virtue of its shareholding in Hollyfield Group Limited.

2. Conington Limited, a wholly-owned subsidiary of Asean Resources Limited, owned 183,763,893 shares in the Company. Asean Resources Holdings Limited, through its wholly-owned subsidiary, Asean Resources Limited, was deemed to be interested in a total of 197,947,806 shares in the Company by virtue of its shareholdings in companies including, inter alia, Conington Limited of which it was entitled to exercise or control the exercise of one-third or more of the voting power at general meetings.

Huey Tai, through its wholly-owned subsidiary, Huey Tai Holdings Limited, was deemed to be interested in a total of 214,414,112 shares in the Company by virtue of its shareholdings in companies including, inter alia, Asean Resources Holdings Limited of which it was entitled to exercise or control the exercise of one-third or more of the voting power at general meetings. Mr. Chan Boon Ho, Peter was deemed to be interested in the same pancel of shares since he was entitled to exercise or control the exercise of one- third or more of the voting power at general meetings of Huey Tai. 25 REPORT OF THE DIRECTORS (Continued)

SUBSTANTIAL SHAREHOLDERS (Continued) Save as disclosed above, the Company has not been notified of any other interests representing 10% or more in the issued share capital of the Company as at 31st March, 2000.

RETIREMENT BENEFIT SCHEMES Information on the Group’s retirement benefit schemes is set out in notes 5(b) and 44 to the financial statements.

PRE-EMPTIVE RIGHTS There are no provisions for pre-emptive rights under the Company’s bye-laws, or the laws of Bermuda, which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders although there are no restrictions against such rights under the laws of Bermuda.

CORPORATE GOVERNANCE In the opinion of the directors, the Company has complied throughout the year with the Code of Best Practice as set out in Appendix 14 of the Listing Rules.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES During the year, there were no purchases, sales or redemptions by the Company, or any of its subsidiaries, of the Company’s listed securities.

DONATIONS During the year, the Group made charitable and other donations of approximately HK$475,000.

AUDITORS Messrs. Deloitte Touche Tohmatsu have acted as auditors of the Company for the past three years. A resolution will be submitted to the annual general meeting to re-appoint Messrs. Deloitte Touche Tohmatsu as auditors of the Company.

On behalf of the Board

Chan Kwok Keung, Charles Chairman

Hong Kong, 11th August, 2000

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