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Hopson Development Holdings Limited

Notes to the Financial Statement
31st December, 1998
(Amounts expressed in Hong Kong dollars unless otherwise stated)

Note: [10] [11] [12] [13] [14] [15] [16] [17] [18] [19]

10. DIVIDENDS

                                                         1998     1997
                                                        $'000    $'000

Final proposed dividends of $0.12 (1997 - Nil) 
   per ordinary share                                 120,000        -
                                                      =======      ===


11. EARNINGS PER SHARE

The calculation of earnings per share was based on the consolidated profit attributable to shareholders of approximately $310,678,000 (1997 - $119,554,000) and the weighted average number of approximately 895,833,333 shares (1997 - 750,000,000 deemed shares) in issue during the year.

The calculation of diluted earnings per share was based on the consolidated profit attributable to shareholders of approximately $310,678,000 and the diluted weighted average number of approximately 896,750,000 shares in issue during the year. It has been calculated after taking into account of outstanding share options as of 31st December, 1998. The effect of the dilutive potential ordinary shares resulting from the outstanding share options on the weighted average number of shares in issue during the year was 916,667 shares, which were deemed to be issued at no consideration if all outstanding share options have been exercised, on the date when the options were granted. The diluted earnings per share for the year ended 31st December, 1997 was not shown as there was no outstanding share options.


12. FIXED ASSETS

a. Movements in fixed assets were:

                                                  1998                 1997
                   __________________________________________________ _____
                                            Furniture
                                         fixtures and
                    Land and    Leasehold      office     Motor
                   buildings  improvement   equipment  vehicles Total Total
                       $'000        $'000       $'000     $'000 $'000 $'000

Cost

Beginning of year     6,574          599       1,725    2,206 11,104  9,858
Additions                 -           72       1,483    3,383  4,938  1,246
___________________________________________________________________________
End of year           6,574          671       3,208    5,589 16,042 11,104
___________________________________________________________________________
Accumulated depreciation

Beginning of year       363          309         492      953  2,117  1,227
Provision for the year  130          120         430    1,008  1,688    890
___________________________________________________________________________
End of year             493          429         922    1,961  3,805  2,117
___________________________________________________________________________
Net book value

End of year           6,081          242       2,286    3,628 12,237  8,987
                      =====          ===       =====    ===== ======  =====
Beginning of year     6,211          290       1,233    1,253  8,987  8,631
                      =====          ===       =====    ===== ======  =====

b. All the land and buildings are located in Hong Kong and are held under medium-term leases.


13. INVESTMENT PROPERTIES

Movements of investment properties were:

	
                                                        1998       1997
                                                       $'000      $'000

Beginning of year                                          -          -
Transfer from properties under development
 for long-term investment                            109,134          -
Surplus on revaluation                               254,866          -
_______________________________________________________________________
End of year                                          364,000          -
                                                     =======        === 

All investment properties are located in the PRC and were held under land use rights for 40 to 50 years expiring in 2036 through 2047. They were stated at valuation on an open market basis at 31st December, 1998 as determined by C. Y. Leung & Company Limited, independent qualified valuers, with related surpluses credited to investment properties revaluation reserve.

Approximately $243 million (1997 - Nil) of the investment properties were pledged as securities for bank loans granted to the Group and two related companies, Guangdong Zhujiang Investment Company and Guangzhou Tianhe Science and Technology Enterprises Development Company Limited (Notes 3 and 24). The pledges of investment properties as securities for bank loans granted to the two related companies were released after 31st December, 1998.

Details of the investment properties as of 31st December, 1998 were as follows:

Location                     Group's interest  Existing/intended use
________                     ________________  ________________________
Phase 5A, Huajing New City                90%  Shopping mall and retail
No. 105 Zhongshan Avenue                       podium rental
Tianhe District
Guangzhou
Guangdong Province
PRC

Phase 2, Jinan Garden                     90%  Shopping mall and retail
South of Zhongshan Avenue                      podium rental
Tianhe District
Guangzhou
Guangdong Province
PRC


14. PROPERTIES UNDER DEVELOPMENT FOR LONG-TERM INVESTMENT

Movements of properties under development for long-term investment were:

                                                1998              1997
                                               $'000             $'000

Beginning of year                            100,259                 -
Additions                                    429,798           100,259
Transfer to investment properties           (109,134)                -
______________________________________________________________________
End of year                                  420,923           100,259
                                             =======           =======

All properties under development for long-term investment are located in the PRC and were held under land use rights for 40 to 50 years expiring in 2037 through 2047.

Approximately $52 million (1997 - $49 million) of the properties under development for long-term investment were pledged as securities for bank loans granted to the Group and two related companies, Guangdong Zhujiang Investment Company and Guangzhou Tianhe Science and Technology Enterprises Development Company Limited (Notes 3 and 24). The pledges of properties under development for long-term investment as securities for bank loans granted to the two related companies were released after 31st December, 1998.


15. INVESTMENT IN SUBSIDIARIES

In the balance sheet of the Company, investment in subsidiaries comprised:

                                               1998                1997
                                              $'000               $'000

Unlisted shares, at cost                     74,900                   -
Advances to subsidiaries                    348,858                   -
_______________________________________________________________________
                                            423,758                   -
                                            =======                 ===  

The advances to subsidiaries were unsecured, non-interest bearing and will not be repayable within one year.

In the opinion of the directors, the underlying value of investment in subsidiaries was not less than the carrying value in the consolidated balance sheet as of 31st December, 1998.

Details of the subsidiaries as of 31st December, 1998 were:

                                     Percentage
                                      of equity
                        Place and      interest    Issued and
                          date of  attributable    fully paid        Principal
Name                incorporation  to the Group       capital       activities

Hopson Development            BVI          100%      US$2,000       Investment
  International         4th June,                                      holding
  Limited                   1997 

Hopeson Holdings        Hong Kong          100%   $2 ordinary       Investment
   Limited              9th March,                    $10,000          holding
                             1995                  non-voting
                                                     deferred
                                                      shares*

Guangdong                     PRC           90% Rmb58,402,218       Properties
  Huajingxincheng       4th June,                                  development
  Real Estate Limited        1996


Guangdong Jinan               PRC           90% Rmb65,084,340       Properties
  Real Estate         29th March,                                  development
  Limited                    1996 

Guangzhou Hopson              PRC          100% Rmb100,655,819      Properties
  Yihui Real           6th August,                                  development
  Estate Limited             1997  

Ever New                Hong Kong          100%   $2 ordinary       Investment
  Properties        29th October,               $3 non-voting      holding and
  Limited                    1992                    deferred       properties
                                                      shares*       investment

Guangdong Huanan Real         PRC           70% Rmb41,682,421       Properties
  Estate Limited      3rd August,                                  development
                             1993  

Archibald                     BVI          100%          US$2       Investment
  Properties           11th June,                                      holding
  Limited                    1997 

Guangdong Hopson              PRC           90% Rmb16,988,133       Properties
  Minghui Real    18th September,                                  development
  Estate Limited             1997

Nambour                       BVI          100%          US$2       Investment
  Properties          29th April,                                      holding
  Limited                    1997

Guangzhou Hopson              PRC           70% Rmb78,328,681       Properties
  Keji Garden     22nd September,                                  development
  Real Estate                1997
  Limited                  

Sound Zone                    BVI          100%          US$2       Investment
  Properties          29th April,                                      holding
  Limited                    1997

Guangdong Hopson              PRC           90% Rmb16,997,572       Properties
  Yuehua Real         1st August,                                  development
  Estate Limited             1997 

Tumen Properties              BVI          100%          US$2       Investment
  Limited             21st April,                                      holding
                             1997

Timbercrest                   BVI          100%          US$2       Investment
  Properti            29th April,                                      holding
  Limited                    1997 

Pomeroy                       BVI          100%          US$2       Investment
  Properties          29th April,                                      holding
  Limited                    1997 

Guangzhou Hopson              PRC          100% Rmb17,323,994       Properties
  Qinghui Real        8th August,                                  development
  Estate Limited             1997

Solawide Properties           BVI          100%          US$2       Investment
  Limited             29th April,                                      holding
                             1997
 
Guangzhou Hopson              PRC          100% Rmb17,311,073       Properties
  Dongyu Real        21st August,                                  development
  Estate Limited             1997                     

Hopson Development      Hong Kong          100%       $10,000          General
  (Properties)          4th July,                               administration
  Limited                    1997                              and consultancy

Outward Expanse               BVI          100%          US$2       Investment
  Investments       3rd November,                                      holding
  Limited                    1997

Galloping                     BVI          100%          US$2          Dormant
  Properties        3rd November,
  Limited                    1997

Funland                       BVI          100%          US$2          Dormant
  Properties        3rd November,
  Limited                    1997

Sun Yick                      BVI          100%          US$2          Dormant
  Properties        15th October,
  Limited                    1997


16. INVESTMENT IN ASSOCIATED COMPANY

Investment in associated company comprised:

                                                       Consolidated

                                                   1998          1997
                                                  $'000         $'000

Unlisted shares, at cost                              1             1
Share of post-acquisition reserves                    -             -

Share of net assets other than goodwill               1             1
Advances to associated company                    5,867         3,777
______________________________________________________________________
                                                  5,868         3,778
                                                  =====         =====

The advances to associated company were unsecured, interest free and had no fixed repayment date.

The underlying aggregate value of the investment in associated company was, in the opinion of the directors, not less than the carrying value in the consolidated balance sheet as of 31st December, 1998.

Details of the associated company as of 31st December, 1998 were:

                                  Percentage
                                   of equity
                    Place and       interest   Issued and
                      date of   attributable   fully paid    Principal
Name            incorporation   to the Group      capital   activities

Tonking             Hong Kong            30%          $10   Investment
International     20th April,                                  holding
Limited                  1995


17. OTHER INVESTMENT

The amount represents the Group's investment in a contractual joint venture, Guangzhou Zhujiang Qiaodao Real Estate Limited ("GZQREL"). GZQREL is established to invest and develop properties located in Haizhu district, Guangzhou, PRC. According to the joint venture agreement, the Group has an equity interest of 25% in the share capital and is entitled to 17.5% of the profit or loss of this venture. As of 31st December, 1998, the capital verification procedures were still in progress, and the venture has not commenced operations.


18. CURRENT ASSETS

                                       Consolidated         Company
                                     1998       1997      1998    1997
                                    $'000      $'000     $'000   $'000

Cash and bank balances (a)        444,169     82,362   308,835       -

Properties under development
   for sale (b)                   712,017    669,744         -       -
 
Completed properties
   for sale (c)                    15,890          -         -       -

Accounts receivable               448,603    171,673         -       -

Prepayments and other assets       22,942     21,032       358     100

Amount due from a
   joint venture partner           53,738     47,036         -       -
______________________________________________________________________
                                1,697,359    991,847   309,193     100
                                =========    =======   =======     ===

a. Cash and bank balances

Approximately $43 million (1997-Nil) of the Group's bank deposits were pledged as security for the Group's banking facilities (Note 24).

b. Properties under development for sale

                                                   1998          1997
                                                  $'000         $'000

At cost                                       1,307,428     1,102,807
Add: Attributable profits on
   pre-sold properties                          449,785       433,204
_____________________________________________________________________
                                              1,757,213     1,536,011

Less: Sale instalments/deposits received       (1,045,1)     (866,267)
_____________________________________________________________________
                                                712,017       669,744
                                              =========     =========

The cost of properties under development is analysed as follows:

                                                  1998             1997
                                                 $'000            $'000

Land cost                                      486,322          685,307
Construction cost                              821,106          409,154
Interest capitalised                                 -            8,346
_______________________________________________________________________
                                             1,307,428        1,102,807
                                             =========        =========

All properties under development for sale are located in the PRC and were held under land use rights for 70 years up to 2067.

c. Completed properties for sale

Movements of completed properties for sale were:

                                                      1998     1997
                                                     $'000    $'000

Beginning of year                                        -        -
Transfer from properties
   under development for sale                      158,703        -
Less: Sale of completed
   properties during the year                     (142,813)       -
___________________________________________________________________
End of year                                         15,890        -
                                                   =======      ===

All completed properties for sale are located in the PRC and were held under land use rights for 70 years up to 2067.


19. CURRENT LIABILITIES

                                         Consolidated           Company
                                     1998         1997       1998     1997
                                    $'000        $'000      $'000    $'000

Short-term loans (a)              128,972       32,056          -        -
Accounts payable                  219,269      114,614          -        -
Bills payable                      36,449            -          -        -
Land premium                                                    -        -
   payable (Note 20)              204,662      167,931          -        -
Other payable and accruals        147,213      114,490        229        -
Amounts due to                                                          
   related companies (b)            6,808       48,029          -        -
Amounts due to                                                  -
   group companies                      -            -          -       44
Amount due to a
   joint venture partner (c)       13,903       74,814          -        -
Amounts due to directors (d)        6,631       48,667          -        -
Dividends payable                 120,000            -          -        -
Taxation                           17,677       10,343          -        -
____________________________________________________________________________

                                  901,584      610,944        229       44
                                  =======      =======        ===       ==

a. Short-term loans

                                  Consolidated           Company
                              1998        1997        1998       1997
                             $'000       $'000       $'000      $'000
 
Short-term bank loans
  -secured                 128,972      18,692           -          -
                                                         -          -
Other loans
  -unsecured                     -      13,364           -          -
_____________________________________________________________________
                           128,972      32,056           -          -
                           =======      ======         ===        ===

Refer to Note 24 for details of the Group's banking facilities.

b. Amounts due to related companies

The amounts due to related companies were unsecured, non-interest being and had no fixed repayment dates.

c. Amount due to a joint venture partner

Amount due to a joint venture partner was unsecured, non-interest bearing and had no fixed repayment dates.

d. Amounts due to directors

Amounts due to directors were unsecured, non-interest bearing and had no fixed repayment dates.


Source: Hopson Development Holdings Limited
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