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2001 ANNUAL REPORT CAFÉ DE CORAL HOLDINGS LIMITED (Incorporated in Bermuda with limited liability)

CAFÉ DE CORAL HOLDINGS LIMITED A… · and new interior design breakthrough. After a successful market re-positioning strategy implemented two years ago, The Spaghetti House chain

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Page 1: CAFÉ DE CORAL HOLDINGS LIMITED A… · and new interior design breakthrough. After a successful market re-positioning strategy implemented two years ago, The Spaghetti House chain

2001A N N U A L R E P O R T

CAFÉ DE CORAL HOLDINGS LIMITED(Incorporated in Bermuda with limited liability)

CAFÉ DE CORAL HOLDINGS LIMITED(Incorporated in Bermuda with limited liability)

CA

FÉ DE C

ORA

L HO

LDIN

GS LIM

ITEDA

NN

UA

L RE

PO

RT

20

01

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Contents

2 Directors and Corporate Information

4 Financial Highlights and Calendar

6 Chairman’s Statement

16 Managing Director’s Operational Review

25 Biography of Directors and Senior Management

28 Report of the Directors

37 Consolidated Income Statement

38 Consolidated Statement of Recognised Gains and Losses

39 Balance Sheets

41 Consolidated Cash Flow Statement

43 Notes to the Financial Statements

66 Principal Subsidiaries

70 Report of the Auditors

71 Five Year Summary

Page 3: CAFÉ DE CORAL HOLDINGS LIMITED A… · and new interior design breakthrough. After a successful market re-positioning strategy implemented two years ago, The Spaghetti House chain

Directors and Corporate Information (cont’d)

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Board of Directors Mr. Chan Yue Kwong, Michael (Chairman)

Mr. Lo Hoi Kwong, Sunny (Managing Director)

Mr. Lo Tang Seong, Victor

Mr. Lo Hoi Chun

Ms. Lo Pik Ling, Anita

Mr. Lo Tak Shing, Peter

Ms. Leung Sau Lai, Kathy

Mr. Hui Tung Wah, Samuel

Mr. Choi Ngai Min, Michael

Mr. Li Kwok Sing, Aubrey

Company Secretaries Ms. Li Oi Chun, Helen

Mr. To Hon Fai, Alfred

Registered Office Cedar House

41 Cedar Avenue

Hamilton HM12

Bermuda

Head Office 10th Floor

Café de Coral Centre

5 Wo Shui Street

Fo Tan, Shatin

New Territories

Hong Kong

Auditors Messrs. Arthur Andersen & Co

Solicitors Messrs. Johnson Stokes & Master

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Directors and Corporate Information (cont’d)

Principal Bankers ABN AMRO Bank

The Agricultural Bank of China

Banco Bilbao Vizcaya Argentaria, S.A.

The Bank of East Asia, Ltd.

The Bank of Nova Scotia

The Bank of Tokyo-Mitsubishi, Ltd.

BNP Paribas

The China & South Sea Bank, Ltd.

Credit Agricole Indosuez

Credit Lyonnais

The Dai-Ichi Kangyo Bank, Ltd.

Deutsche Genossenschaftsbank AG

The Fuji Bank, Ltd.

The Hongkong and Shanghai Banking Corporation Ltd.

Rabobank Nederland

The Sanwa Bank Ltd.

Standard Chartered Bank

The Sumitomo Mitsui Banking Corporation

Tai Fung Bank Ltd.

Bermuda Share Registrars The Bank of Bermuda Limited

Hong Kong Branch Central Registration Hong Kong Limited

Share Registrars

Web Site http://www.cafedecoral.com

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Financial Highlights and Calendar

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FINANCIAL HIGHLIGHTS

Year ended 31st March, 2001 2000 Change

HK$’000 HK$’000 %

Turnover 2,540,326 2,408,822 5.46

Profit attributable to shareholders 254,278 220,542 15.30

Total assets 1,874,414 1,644,370 13.99

Net assets 1,219,946 1,098,661 11.04

Basic earnings per share 46.33 cents 39.94 cents 16.00

Dividend per share 19.50 cents 16.80 cents 16.07

Net assets per share $2.23 $2.00 11.50

FINANCIAL CALENDAR

Half year results Announcement on 12th December, 2000

Full year results Announcement on 5th July, 2001

Annual Report Despatched to shareholders in late July 2001

Share register closed 4th September, 2001 to 11th September, 2001

Annual General Meeting 11th September, 2001

Dividends Interim : 4.4 cents per share paid on 5th January, 2001

Final : 15.1 cents per share to be paid on 18th September, 2001

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Chairman’s Statement (cont’d)

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Café de Coral GroupStrategic Businesses

SpecialtyRestaurant

Food Processing& Distribution

Fast Food InstitutionalCatering

Property &Development

The SpaghettiHouse

Ah Yee LengTong

Bravo le Café

Super SuperCongee & Noodles

Noodles Plus

Luncheon Star

Asia PacificCatering

Café de Coral(China)

Café de Coral(HK)

Denny’s

Scanfoods

Manchu Wok(USA)

Manchu Wok(Canada)

Property

Franchising

183

106

30 260

20

40

60

80

100

120

140

160

180

200

Manchu Wok Café de Coral Asia PacificCatering

SpecialtyRestaurants

New Shops

14

9

Total : 120

Total : 39 Total : 33

Total : 183

7

(As of 5/7/2001)

Total No. of Operating Units : 375

Financial Growth TrendsGroup Net Profits & EPS Growth

0

50

100

150

200

250

300

95 96 97 98 99 00 010

5

10

15

20

25

30

35

40

45

50

Net ProfitsEPS

Net

Pro

fits

(H

K$M

M)

EPS

(H

K$

cent

s)

21%8%

2%

60%

9%

Systemwide Sales Distribution

Manchu WokSpecialtyRestaurants

InstitutionalCatering

FoodProcessing

Café de Coral

176

221

254

102

128149 143

27.628.6

20.4

33.5

39.9

46.3

24.6

HIGHLIGHTS

• The Group profit again recorded an encouraging gain of 15%, being the sixth consecutive year of

double-digits operating profit growth.

• Specialty restaurants have reported another year of outstanding result, doubling its profit from

that of last year.

• The joint venture acquisition of Manchu Wok has elevated the Group’s vision to globalise into a

world-leading Chinese Quick Service Restaurant chain. With 375 restaurant units globally, it

further enhances our position as the world’s largest Chinese Quick Service Restaurant Group.

• We are honoured that the Group was recognised by Forbes Global, for the third consecutive year,

as one of the “World’s 300 Best Small Companies”.

• Earnings per share increased 16% from last year, once again generating year-on-year value

enhancement to our shareholders.

• Our long term shareholders’ value enhancement is achieved through strategic business

management, global business alliance and disciplined productivity efficiencies.

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Chairman’s Statement (cont’d)

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ENHANCING

SHAREHOLDERS’ VALUE

GLOBALISATION AND

PROFITABILITY

INTRODUCTION

T h i s y e a r ’s p e r f o r m a n c e i s

particularly encouraging given that

the local economy is still recovering

from a lengthy recession. During the

year, the local business enterprises

continued to operate in a deflation

economy, high unemployment

persisted, consumer purchasing

power remained sluggish, and the

implementation of the Mandatory

Provident Fund scheme at the

beginning of the year put on new

costing burdens to the business

community.

Riding on the back of a breakthrough

profit record of HK$220 million last

year, our operating profit continued

into the sixth straight consecutive

years of double-digits growth. The

Group is pleased to report sales

achievement of HK$2,540 million

and net profits record of HK$254

million during the year, which

represented once again, a net profit

growth of 15% in comparison with

the last year. Earnings per share

increased 16%, generating year-on-

year value enhancement to our

shareholders. Given the increasingly

difficult business environment, such

admirable year-on-year unabated

profits growth was no easy task. The

Board and the management teams

have dedicated themselves to make

it happen, by our commitment to

targeted business goals and clear

business strategies in the right

direction.

With such encouraging results in the

year, coupled with a solid net cash

financial position, the Board would

like to appreciate the continuing

support from our shareholders and is

delighted to recommend a final

dividend of 15.1 cents per share.

Together with the enhanced interim

dividend of 4.4 cents per share paid

on 5th January, 2001, the total

dividend of 19.5 cents per share for

114 Café de Coral fast foodrestaurants (Hong Kong)6 Café de Coral fast foodrestaurants (PRC & Macau)

22 Spaghetti House restaurants

3 Ah Yee Leng Tong restaurants

39 Institutional Catering restaurants

183 Manchu Wok

Chairman’s Statement

4 Bravo le Café restaurants

3 Super Super Congee & Noodles

1 Noodles Plus

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Chairman’s Statement (cont’d)

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the entire year amounted to HK$106

million, representing a distinguished

return when compared to its peers in

Hong Kong’s food industry.

As the Group continues to deliver

e n c o u r a g i n g r e s u l t s t o o u r

shareholders, the management is

determined to further enhance our

long-term shareholders’ values

t h r o u g h s t r a t e g i c b u s i n e s s

management , g loba l bus iness

alliance and disciplined productivity

efficiencies.

VALUE ENHANCEMENT

THROUGH BUSINESS

MANAGEMENT

Fast Food Business

The quick service restaurant market

faced increased competition. The

number of individual operators

continued to increase drastically,

coupled with the shift of local

consumption to the Mainland, there

has been little room for price

adjustment. Our Café de Coral Fast

Food managed to continue to grow

and expand by way of appealing new

product development, continuous

shop environment revitalisation, and

continuing focus in profitable store

openings, without resorting to the

vicious pr ice-cut t ing game as

adopted by many of our competitors

in the market.

During the year, Café de Coral Fast

Food totally opened 12 new stores in

Hong Kong and in l ine wi th

e x p e c t a t i o n , c o n t r i b u t i n g

encouraging profit results to the

Group . In add i t ion , we have

renovated 13 of our fast food outlets

with a totally brand new design

image. The facelift program not only

has won tremendous praise among

our customers but has set new

industry standard among all operators

t o e n h a n c e t h e t o t a l d i n i n g

experience. In all of our renovated

stores, enhancement in business

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Chairman’s Statement (cont’d)

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Specialty Restaurant Business

It is another high performance year

for The Spaghetti House chain.

D u r i n g t h e y e a r , t h e p r o f i t

contribution from the chain almost

doubled in comparison with last year.

This remarkable result was

largely attributable to an

effective marketing strategy;

innovative menu development

and new in ter ior des ign

breakthrough.

After a successful market

r e - p o s i t i o n i n g s t r a t e g y

implemented two years ago, The

Spaghetti House chain of 18

outlets has been gaining wide

acceptance as a popular western

concept restaurant by the local

higher-spending younger generation.

More encouragingly, the chain’s new

store image is such a successful

breakthrough that i t has been

constantly attracting new customers

in addition to successful retention of

existing customers.

Aside from good business results

achieved, The Spaghetti House

chain won a distinguished service

award namely “Hong Kong Award

for Services : Customer Services

2000” from the Hong Kong Retail

performance, customers volume and

bot tom- l ine cont r ibu t ion was

immediately delivered.

I am also pleased to report on our 2

Mega store concepts launched during

the year, “The Centro” of 16,000 sq.

ft. and “Pier Marina” at Maritime

Square of Tsing Yi with 14,000 sq.

ft., both together accommodate 4 of

our exciting restaurant concepts. The

mega store concept has been proven

viable, in terms of third party rental

income and operational revenue, to

encourage us in exploring similar

opportunities at suitable locations in

future.

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Chairman’s Statement (cont’d)

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Another important milestone during

the year was the geographic business

expansion across the territory border.

Three new catering contracts in

Shenzhen were secured with major

conglomerates. Together with the

HSBC contract at Guangzhou , we

now have 4 institutional catering

restaurants operating in China. This

b reak th rough ach ievement i s

promising and is going to lead the

Group in building a meaningful

market presence in the Southern

China region in future.

VALUE ENHANCEMENT

THROUGH BUSINESS

DEVELOPMENT

Globa l i sa t ion and Bus ines s

Alliance

As I reported to our shareholders last

year, the Group is strategically

aiming to capture a greater share of

the food business in the domestic and

Management Association during the

year.

Institutional Catering Business

Despite increase competition from

existing operators and new entrants,

Asia Pacific Catering continued to

sign up new hospital and commercial

catering contracts during the year. A

major achievement was our success

in winning the institutional catering

contract with the University of Hong

Kong. With this , Asia Pacific

Catering is now operating a total of

39 catering units and is by far the

largest operators in the institutional

catering sector in Hong Kong.

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Chairman’s Statement (cont’d)

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assist the Group in achieving our

globalisation mission in the years

ahead.

By this Manchu Wok acquisition, the

Group now has around 375 restaurant

units under our ownership throughout

the world. This strategic move further

enhances the position of Café de

Coral Group as the largest Chinese

Quick Service Restaurant Group in

the world. Over the six months

operation up to the end of March

2001 since acquisition, both the

system sales and operating earnings

are ahead of budget and last year’s

figures. The total system sales during

Canada and 2 stores in Poland.

Manchu Wok is currently the second

largest Chinese Quick Service

Restaurant chain in the United States

and the largest in Canada, which has

a t rack record of s t rong and

consistent cashflow.

This acquisition is a landmark

accomplishment of the Group in

leveraging on our core business’s

financial strength to make strategic

acquisitions for enhancing long-term

shareholder values. At one stroke, the

acquisition benefits the Group in

establishing a solid foothold in the

Nor th Amer ica qu ick se rv ice

restaurant business. As the Chinese

cuis ine has long been widely

accepted by the local western

customers in the North America,

the growth potential of

Manchu Wok chain is

tremendous. The proven

business track record and

e x p e r i e n c e o f t h e

M a n c h u W o k

management team would

international market and ultimately

to become a leading global market

player. During the year, we have

made an exciting move towards

globalisation and have taken its first

step outside Asia. The Group invested

a cash amount of approximately

HK$24 million for acquisition of an

about 48% equity interest in Manchu

Wok chain in North America. The

total consideration of the entire

a c q u i s i t i o n a m o u n t s t o

approximately HK$167 million. The

current operations comprise 183

restaurant outlets, with 105 stores in

the United States, 76 stores across

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the 6 months period since our

investment amounted to C$70 million

(approximately HK$350 million).

Locally, the Group is also driving our

value enhancement through business

alliances. In this regard, we formed

an alliance with Tao Heung Seafood

Hotpot Restaurant Group to own and

manage a Chinese seafood hotpot

restaurant with satisfactory business

results attained. We also teamed up

with Four Seas Mercantile Group’s

distribution network for selling

Denny’s quality bread in major

supermarkets and convenience store

chains.

We reckon the benefits of leveraging

the business network, be it locally or

internationally, for enhancing the

value of the Group and without strain

on the capital resources

employed. We believe

the business alliance

strategy is effective to expand our

business portfolio and will continue

to work on it should opportunities

arise in future.

New Business Dynamic

Scanfoods, our ham processing

business, continued to contribute

satisfactory profits during the year.

In spi te of pr ic ing pressures ,

Scanfoods still managed to grow the

sales volumes and most of all, to

consistently generating satisfactory

profit contribution to the Group. This

p r o f i t a t t a i n m e n t i s l a rg e l y

attributable to the continuous product

quality improvement efforts. During

the year, Scanfoods successfully

obtained the ISO9001 Quali ty

Certificate.

It is also a fruitful and rewarding year

for the newly established Luncheon

Star operation. Since its operation

commencement in September 1999,

the Luncheon Star captured a

meaningful market share of the

student lunch box business in Hong

Kong. Its operation currently include

a central kitchen and 3 re-heat centres

located in different parts of Hong

Kong. During the year, the student

lunch box market has been attracting

new entrants and compet i t ion

intensified. Nevertheless, the Group

would fur ther expand on our

production capacity in this area, and

we are confident our Luncheon Star

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Chairman’s Statement (cont’d)

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will continue to grow healthily in the

forthcoming year.

For the two home-grown concept

restaurants, Bravo le Café and

Super Super Congee and Noodles,

the business performance has been

satisfactory with addition of one new

Bravo le Café in the central business

core and 2 more Super Super

Congee and Noodles in private and

public housing estates.

VALUE

ENHANCEMENT

THROUGH

PRODUCTIVITY

EFFICIENCIES

B u s i n e s s P r o c e s s

Efficiency

Consistent with previous

years, we continue on our

e f f o r t s i n p u r s u i n g

re-engineering initiatives.

We are in the final phase

of our business process

re-engineering implementation. By

the implementation of a chain-wide

intelligent Branch Management

System including the adoption of new

Point of Sales System for a l l

restaurant outlets, we are confident

of our productivity enhancement. The

success of this re-engineering task

w i l l d e f i n i t e l y i n c r e a s e t h e

competitive edge of the Group and

bring in significant gains in terms of

e f f i c i e n cy, p r o d u c t iv i t y a n d

ultimately margin improvement.

Production Efficiency

The Group has dedicated HK$18

million in the modernisation of

production capabilities and capacities

at our Central Processing Facilities.

Such material appropriation of

resources signifies the Group’s

c o m m i t m e n t i n s t r e a m l i n i n g

workflow, improving economies of

scale and food quality and increasing

productivity. We believe these

changes will further improve the

Group’s competitive advantage and

profit margin for the benefit of the

shareholders.

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Operational Efficiency

Also, with the implementation of the

MPF scheme, the increased costs to

the Group have been considerable. To

alleviate the impact of this cost, the

Group undertook proactive measures

such as operational efficiency

enhancement and the extension of

working hours at the shop level.

Financial Efficiency

The Group continued to maintain a

healthy, solid financial position with

reliable liquidity, sound financial

return on assets and robust capital

structure. At present, the Group has

a net cash of HK$345 million and

available banking facil i t ies of

HK$1,025 million. As at 31st March,

2001, the Group’s net asset value

amounted to HK$1,220 million, an

increase of 11% compared with that

of last year. Net asset value per share

was HK$2.23, a 12% increase from

last year.

Trademarks of Ah Yee Leng Tong,

The Spaghetti House and Manchu

Wok represented valuable intangible

assets to the Group. In

accordance with the newly

i s s u e d a c c o u n t i n g

standards to be adopted

next year, these trademarks

wi l l be appropr ia te ly

amortised such that the

return on assets will be further

enhanced. There will be no material

adverse effect on the Group’s

financial position.

To leverage our potent cash position

to our shareholders, the Group

established a share repurchase

program in previous year. We believe

such share buy-back program plainly

demonstrated the management’s

explicit belief on the unrealised

intrinsic values of our shares and on

the future prospect of the Group.

During the year, the Group bought

back approximately 6,210,000 shares

at an average cost of HK$3 per share.

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Chairman’s Statement (cont’d)

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PROSPECTS FOR FURTHER

VALUE ENHANCEMENT

The persistent deflation economy in

our domestic market and uncertain

global slowdown will present a

subs t an t ive cha l l enge t o t he

management in the forthcoming year.

Still, we are confident to grow our

business steadily in the year ahead

just as we have been successfully

riding out all economic cycles in the

past three decades. The key is our

ability to adapt to change.

Customer Focus

Our restaurant business will continue

i n a d d i n g

values to our existing loyal customers

by developing & re-packaging new

products and creatively upgrading the

in-store environment. We wil l

continue to open new shops and

launching new restaurant concepts

for expanding our presence in the

restaurant segment.

A s i a P a c i f i c C a t e r i n g a n d

Luncheon Star are expected to do

well in an increasingly competitive

market. With their established track

records and brand image, we are

confident that these two strategic

business units of the Group would

continue to be a leading market

player in their respective arenas.

Managing Efficiency

In the year ahead, our newly installed

Point of Sales System and Branch

Management System will be in full

operation throughout our restaurants

in Hong Kong. The associated

benefits will gradually be reflected in

our customer services, information

management and cost control arenas.

We anticipate that the return on this

investment will not only amount to a

productivity increase, but would

bring in long term benefits to the

G r o u p b y w a y o f d r a m a t i c

improvements in its revitalised

business logistics.

Going Global

The Manchu Wok acquisition is a

milestone breakthrough for the

G r o u p . We b e l i eve w e h ave

established a solid entry into the

North America food business market.

Our globalisation vision in the years

ahead will continue to be pursued in

a disciplined pace through further

acquisition and franchising.

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PRC poses another interesting market

for the Group to revisit in the year

ahead. In view of the latest revival of

China’s economy and its anticipated

entry into the WTO in the near future,

and with our chain of 6 restaurants

in South China now achieving

positive cashflow, the Group will

closely look into new store openings

or acquisition opportunities in the

PRC. Our previous opera t ing

experience has been valuable for the

Group in taking this business

forward.

As The Spaghetti House chain

opened up its fourth franchisee store

in Indonesia in April 2001, our

international franchising focus will

be expanded into the other South East

Asia region. Given our many well-

recognised restaurant brands, we

believe the international franchising

business offers long-term growth

potentials for the Group.

APPRECIATION

The Group continues to receive

highly respected recognition on a

worldwide basis. This year is no

exception. I am honoured that the

Group has been recognised by Forbes

Global, for the third consecutive year,

as one of the “World’s 300 Best

Small Companies”. In addition, our

Café de Coral Fast Food as well as

the specialty restaurants of Ah Yee

Leng Tong and The Spaghetti

House have also been granted

“Quality Tourism Services” award

from the Hong Kong Tourism Board.

Our accomplishment would not have

been accomplished without our

staff ’s tireless dedication in this

demanding year. On this, we owe our

colleagues a very special word of

thanks.

It is not an easy task to grow and it is

even harder to grow on an expanded

base. Given the depth of the resources

we have, the management calibre we

possess, and the robustness of the

business model we have so far

demonstrated, the Group is strongly

posit ioned to take our various

business concepts to new frontiers of

growth at home and abroad, and to

create greater values to our customers

and shareholders as a whole.

Chan Yue Kwong, Michael

Chairman

Hong Kong, 5th July, 2001

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Managing Director’s Operational Review (cont’d)

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INTRODUCTION

As we are relentlessly working in the

various business and operational

initiatives in the past year, the Group

is pleased to report our s ixth

consecutive double-digits operating

profit growth in this fiscal year. This

result would not have attained if the

Group were not firmly stay in tune

with our management goals and

s t r a t eg i e s . I t i s p a r t i c u l a r l y

chal lenging to managing in a

persistent deflation environment

when the customers are cautious with

their spending.

During the year, the sales

and net profits attributable

to shareholders increased

b y 5 . 5 % a n d 1 5 %

respectively. This sales and

profit expansion were mainly

attributable by our profitable

store opening programs; on-

going shop renovation and new menu

development. Undoubtedly, this is also the

fruitful result of the dedicated efforts of

our management and staff in committing

our business goals.

FAST FOOD BUSINESS

During the year, Café de Coral fast

food business continues to grow

satisfactory in a competitive market.

The pricing competition intensified

as there was many more new

independent operators entered the

market and undercut pricing for

attracting customer patronage.

Nevertheless, the Group persisted to

maintain a stable pricing level for our

products . We bel ieve that our

customers are demanding good

product with the right price instead

of low-price inferior products. With

our thirty years of experiences in

managing a diversified customer

base, we have also cumulated years

of experience in optimizing the price/

value equation.

Still, we have been proactively

pursuing various customer value-

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added initiatives in enhancing our

product and service standards.

During the year, Café de Coral

opened 12 new restaurants in the

prime locations, such as Admiralty,

Mongkok, Tsimshatsui East and Tuen

Mun, for providing convenient food

services to our targeted customers.

These new shops are all making profit

contributions to the Group.

As a continuing effort to enhancing

our service quality, the Group has

renovated 13 of our fast food outlets

with a totally brand new design image

to enrich the dining experience of our

cus tomers . We have inves ted

approximately HK$20 million in this

facelift program.

Throughout the year, Café de Coral

quick service restaurant developed

and launched over 20 new menu

products, for instance Pumpkin &

Chicken Burger Breakfast Set,

Shanghai Vegetable Rice, Twin

Baked Dishes and Lobster Soup &

Sizzling Plate Dinner Set, all with

satisfactory sales results achieved.

We continue to stay tune with our

a d ve r t i s i n g a n d p r o m o t i o n a l

activities for generating the customer

visits to our shops. In order to better

serve the needs of our diverse

customer segment, we introduced a

“Two-pronged Product Launching”

campaign with the intention of

increas ing repea ted cus tomer

patronage on our core products and

attracting new customers with

innovative premium products.

A series of promotional programs and

television advertisement were rolled

ou t on a month ly bas i s . The

promotional activities were tailored

for new product launch as well as

joint promotions for our wide variety

of core products. Our core product

campaigns enhanced our quality

brand image “100% Excellence”

whi le our tac t ica l campaigns

emphasised on the premium and

innovative ingredients. The tactical

campaigns successfully delivered the

message of “Value for Money” to the

customers, which did attract a new

group of customers . With the

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implementation of effective and

efficient product and communication

strategies, supported by strong

promotional activities and mass

media advertisements, the two-

pronged campaigns were able to drive

sales growth.

In capturing the existing depressed

property market, we also opened two

Megastores in the prime locations,

“The Centro” of 16,000 sq.ft. and

“Pier Marina” at Maritime Square of

Tsing Yi with 14,000 sq.ft., both

t o g e t h e r a c c o m m o d a t e f o u r

restaurants, including Bravo le Café,

The Spaghetti House, Super Super

Congee and Noodles and “Pier 88”,

all operated satisfactory within the

management expectation.

By the end of 31st March, 2001, there

are 112 Café de Coral quick service

restaurants in operation.

INSTITUTIONAL CATERING

Following our success in securing

three hospital contracts last year and

strengthened our presence in the

medical institution segment, Asia

Pacific Catering won another

important catering contract with the

University of Hong Kong during the

year. This further fortified Asia

Pacific Catering’s branding in the

educational institution segment.

Asia Pacific Catering’s

e x p a n s i o n e f f o r t s i n

b u i l d i n g t h e m a r k e t

presence in the Southern

China region has also been

progressing well during the

year. Three new catering

contracts in Shenzhen were secured

and they have been in full operation.

As of 31st March, 2001, Asia Pacific

Catering managed 39 operating units

in Hong Kong and South China,

which include 20 units of hospital

sector, 5 units of educational sector

and 14 units of commercial sector.

This has been and will continue to be

a promising growth arena of the

Group in the years ahead.

It has been an exciting year for

Luncheon Star, our new student

ca t e r i ng bus ine s s . S ince t he

launching of this new business in

September 1999, Luncheon Star has

been performing within management

expectation and profitable. As a

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result, the Group carried out the

planned expansion program to re-

engineer the existing production

facilities of 3 re-heat centres located

in Fotan, Yuen Long and Chai Wan

and to open 2 more re-heat centres at

Kwun Tong and Ta i Wa i fo r

accommodating new business growth

in future.

With less than two years of business

records, Luncheon Star has attained

10% market share and fi rmly

established a trustworthy brand for

expansion.

SPECIALTY RESTAURANTS

Building on an expanded base, The

Spaghetti House chain’s profit

almost doubled during the

y e a r. O u r e f f o r t s i n

designing new shop image

and developing new product

menu, such as Australia

Deep Sea Red Rock Lobster

& Fresh Fruit Salad, Boston

Lobster Au Gratin served

with Linguine, Squid Ink

Seafood Risotto and Creamy New

Zealand Mussel, have been paid off

handsomely in terms of the customer

growth and building branded core

products for future growth. To

capture on this encouraging

results, The Spaghetti House

chain opened two new restaurants

in Maritime Square and Telford

Plaza in July 2000 and December

2000 respectively.

The Ah Yee Leng Tong consolidation

program rendered the closure of

another low-performance restaurant

during the year. As of 31st March,

2001, there are 3 Ah Yee Leng Tong

restaurants located in the prime

tourist districts of Tsimshatsui,

Jordan and Cityplaza. The local

Chinese restaurant sector remained

weak in a deflation economy. Despite

the adversities, the competitive

strength of Ah Yee Leng Tong brand

cont inues to command s t rong

followings in the tourist segment.

Over the years, Bravo le Café has

successfully built up its customer

loyalty and enlarged its market share

since its introduction in 1997. In July

2000, a new outlet was added in the

central business core. This up-market

outlet at the Central serves Chinese,

Japanese as well as Western cuisine

to the white-collars. Another new

outlet was established in Hong Kong

International Airport serving both

local customers and tourists. We now

have 4 Bravo le Café in the territory.

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SCANFOODS

During the year, Scanfoods has been

delivering satisfactory profit growth

in a tough falling price market

environment. This performance was

attributable to the continuous product

improvement and our ability to

generate genuine sales volume

growth. New products manufactured

out of this plant included smoked

sausage and turnip pudding. We are

confident that Scanfoods offers a

strong food processing business

platform for further development in

the years ahead.

CAFÉ DE CORAL IN THE PRC

AND MACAU

Having accumulated years’ of

experience in China and Macau,

w e h a v e s t r a t e g i c a l l y

streamlined the China operation

by closing 3 shops during the

year. Currently, we are running

5 outlets in South China and 1

in Macau. In the past couple of

years, we started repositioning

our fa s t food shops and

modifying the pricing and

marketing strategies in order to

adapt to the local spending power and

taste. The Group’s crucial tactics in

localising the management and

purchasing teams to support such

revitalisation have been proven to be

effective in reducing the overhead

expenses and in turning around the

China operation to a profitable

direction. We continue to closely

monitor the progressive improvement

of our businesses in such a massive

consumer food market and look for

fu tu re bus ines s deve lopmen t

opportunities in the years ahead.

With the anticipated entry of the PRC

into the World Trade Organisation,

the Group reckons the huge growth

potentials of this market and has set

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an unambiguous management focus

through exploring new operating

concepts, careful site selection and

joint venture franchising to expand

our business presence in th is

emerging new market.

MANCHU WOK

As the Group has strongly established

Café de Coral quick serv ice

restaurant as a leading brand in Hong

Kong, we are also taking bold steps

for expanding globally. In September

2000, the Group made our first

important international acquisitions

through an equity investment in the

Manchu Wok restaurant chain in

North America.

With a well-established brand name,

extensive 183 restaurant networks

and supported by an experienced

management team, we are confident

that the Manchu Wok restaurant

chain will be a valuable growth

engine of the Group in the years

ahead. Over the six months operation

up to the end of March 2001 since

acquisition, both the system sales and

operating profit in Canada, the United

States and Poland have outperformed

budgeted and last year’s figures.

Manchu Wok have genera ted

systemwide sales of approximately

HK$350 million and earnings before

interest, tax, depreciation, and

amortisat ion of approximately

HK$22 million since acquisition. As

well, the Manchu Wok operation

offered a good franchising business

model for the Group to replicate in

future.

NEW BUSINESS

During the year, our new restaurant

concepts, Super Super Congee and

Noodles and Noodles Plus, were

making expected satisfactory profit

contributions to the Group.

Super Super Congee and Noodles

has been proven its business model

is sustainable and good growth

potentials exist. During the year, two

new Super Super Congee and

Noodles shops were opened in two

major shopping malls, namely,

Maritime Square, Tsing Yi and

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Sheung Tak Shopping Centre, Tseung

Kwan O. Since its first restaurant in

1999, Super Super Congee and

Noodles has successfully established

its niche position in a competitive

mass customer market and captured

good brand recognition. Under the

current economic conditions, Super

S u p e r C o n g e e a n d N o o d l e s

demonstrated a great potential to

capture an increasing patronage and

to explore another market segment

for the Group.

Noodles Plus commenced i t s

business in Causeway Bay in

November 1999 serving Japanese

food. During the year, new products

launched including Jumbo Topical

Noodle. This new Japanese style

restaurant is well received by the

m a r ke t a n d m a ke i m m e d i a t e

contribution to the Group.

Denny’s bakery, acquired in prior

year, was successfully re-launched in

t h e r e t a i l m a r k e t t h r o u g h

supermarkets and convenience stores.

The packaging was re-designed to

uplift the brand image. We foresee

that Denny’s bakery will bring

synergistic benefits to the Group.

LOGISTIC SUPPORTS

The unrelenting efforts of the current

management team is crucial to the

G r o u p ’s a c h i eve m e n t i n t h e

admirable growth of both sales and

net profit. To improve operational

e f f i c i e n cy, p r o d u c t iv i t y a n d

streamlining of work flows, various

Business Process Re-engineering

programs have been commenced

since last year. A new Branch

Management System and Point of

Sales System would be set up to

e n h a n c e t h e p r o g r e s s . T h e

implementation of these systems will

undoubtedly increase the competitive

edge of the Group in terms of

efficiency and productivity.

Moreover, the Group has dedicated

HK$18 million in the modernisation

of production capabil i t ies and

capacities at our Central Processing

Facilities. We believe these changes

will streamline workflow, improve

efficiency and food quality, increase

productivity and further improve the

Group’s profit margin for the benefit

of the shareholders.

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HUMAN RESOURCES

The Group has 7,200 employees as

at 31st March, 2001. We believe in

rewarding employees by allowing

them to share in the growth of the

Group. Hence, an unique Employee

Share Option Scheme coupled with

profit sharing bonus and performance

incentive system are innovatively

s t ructured as a mean of s taff

remuneration as well as enabling

them to share in the Group’s success.

Meanwhile, quality people is an

essence of success in catering

businesses. The opening of Café de

Coral Management Academy

provided an excellent venue

and facilities for all internal

t r a i n i n g a c t iv i t i e s a n d

improved the front-end quality of

services. This will also guarantee the

smooth and effective implementation

of management plans in business

process re-engineering.

BUSINESS OUTLOOK

With our proven business models

operating successfully in the past

three decades, we are also open-

minded in adapting changes to

embrace for bigger success in the

years ahead. On th is , we are

positioning the Group from three

dimensions namely scale, size and

scope.

Using Scale To Drive Sales And

Cost Efficiency

Our Café de Coral quick service

restaurant business definitely reaches

an operation scale whereby it creates

distinctive competitive advantages

for the Group to grow further. Despite

another challenging year ahead, we

believe the Group can use the

expanding scale of our core business

to further strengthen the central

kitchen operating system and the

bargaining posi t ions with our

suppliers. All these will generate

substantial cost efficiency which can

pass on to our customers and

ultimately, enhance the sales volume

of our core business.

Leveraging On Financial Size To

Expand Globally

As we have successfully attained a

strong presence in the territory, the

Group is also exploring new global

markets for growth. Our strong

balance sheet allowed us to make the

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Manchu Wok acquisition in North

America last year and definitely the

Group is financially capable to make

further acquisitions for attaining

bigger share of the international

restaurant business should the

opportunities arise.

Expanding Scope For Balanced

Growth

As the Group expands our quick

service restaurant business locally

and internationally, we are committed

to further develop Luncheon Star,

Bravo le Café, Super Super Congee

and Noodles and Scanfoods

operations. We believe that the

continuing expansion of these new

ideas is paramount for the Group in

attaining a desired balanced business

portfolio in the long term.

CONCLUSION

Over the years, the Group has not

only delivered quality services but

also innovative and ingenious

products to our customers. The Group

has successfully built up customer

loyalty and is striving for continuous

growth of customer patronage. We

are devoted to continuously improve

our product range and quality, to

render distinct catering services and

to implement customer-oriented

promotion campaigns.

We a r e p roud o f t h i s yea r ’s

exceptional results among our peers

and we t reasure the t rust and

invaluable relationship with our

customers.

It is going to be challenging in the

for thcoming year and yet our

diversified business portfolio shall

lead us to consistently delivering

steady growth in future.

Lo Hoi Kwong, Sunny

Managing Director

Hong Kong, 5th July, 2001

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Biography of Directors and Senior Management (cont’d)

EXECUTIVE DIRECTORS

Mr. Chan Yue Kwong, Michael, aged 49, is the Executive Chairman of the Company. He joined the Company in 1984

and was appointed as Director in 1988. He has been the Managing Director of the Group since 1989 and is now the

Executive Chairman of the Group. Having worked as a professional town planner for various Government bodies in

Hong Kong and Canada, he has considerable experience in planning and management. He holds a Degree in Sociology

and Political Science, a Master Degree in City Planning from the University of Manitoba, Canada and an Honorary

Doctorate Degree in Business Administration. He is currently the Honorary President of Hong Kong Foodstuffs Association,

the Honorary Adviser of the Hong Kong Institute of Marketing and the Institute of Business Administrants, and a full

member of the Canadian and Hong Kong Institute of Planners. He is the son-in-law of Mr. Lo Tang Seong, Victor, another

Director of the Company.

Mr. Lo Hoi Kwong, Sunny, aged 46, is the Managing Director of the Company. He is responsible for business development

in Hong Kong and overseas, marketing, operation and food processing functions of the Group. He joined the Company in

1982 and was appointed as Director in 1985. He holds a Master Degree in Chemical Engineering from Stanford University.

He is the son of Mr. Lo Tang Seong, Victor, another Director of the Company.

Ms. Lo Pik Ling, Anita, aged 49, is the General Manager (Fast Food and Institutional Catering) of the Company. She

joined the Company as Director in 1980 and is responsible for the sales and marketing of the Hong Kong Fast Food,

Contract Catering Business and School Lunch-Box Catering Business. She holds a Degree in Social Sciences from the

University of Hong Kong. She is the daughter of Mr. Lo Tang Seong, Victor, another Director of the Company.

Mr. Lo Tak Shing, Peter, aged 39, is the Director of Business Logistics of the Company. He joined the Company in 1996

and was appointed as Director in 1998. He is responsible for central food processing, central purchasing and project

management functions of the Group. He holds a Degree in Electronic Engineering & Physics from the Loughborough

University of Technology, a Master Degree in Medical Physics from the University of Surrey and a Doctor of Philosophy

in Medical Physics from the University of London. He is the great-nephew of Mr. Lo Tang Seong, Victor, another Director

of the Company. He is a director of Wandels Investment Limited which has discloseable interests under the provisions of

Part II of the Securities (Disclosure of Interests) Ordinance in the Company.

Biography of Directors and Senior Management

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NON-EXECUTIVE DIRECTORS

Mr. Lo Tang Seong, Victor, aged 86, is the founder and Director of the Company. He had considerable experience in the

food and beverage industry. Prior to founding the Company, he was in charge of the production management in The Hong

Kong Soya Bean Products Company, Limited for 17 years.

Mr. Lo Hoi Chun, aged 63, joined the Company in 1976 and was appointed as Director in 1977. Prior to joining the

Company, he had considerable experience in the food and beverage industry. He is the nephew of Mr. Lo Tang Seong,

Victor, another Director of the Company.

Ms. Leung Sau Lai, Kathy, aged 47, joined the Company in 1977 and was appointed as Director in 1980. She has been

a Non-executive Director of the Company since July 1994. She is a director of Tsang Fook Panio Co., Ltd. She holds a

Degree in Business Administration from the University of San Francisco.

Mr. Hui Tung Wah, Samuel, aged 47, joined the Company in 1984 and was appointed as Director in 1988. He has been

a Non-executive Director since March 1997. He is a director of Wui Loong Scaffolding Works Co., Ltd. He holds a

Degree in Social Sciences from the University of Hong Kong and a Master Degree in Business Administration from the

Brunel University.

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. Choi Ngai Min, Michael, aged 44, was appointed as an Independent Non-executive Director of the Company in

1994. He is the chairman of Land Power International Holdings Limited. He holds a Master Degree in Business

Administration from the University of East Asia, Macau.

Mr. Li Kwok Sing, Aubrey, aged 51, was appointed as an Independent Non-executive Director of the Company in 1994.

He is director of Management Capital Limited, a direct investment and financial advisory firm, and non-executive director

of The Bank of East Asia, Limited, China Everbright International 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.

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Biography of Directors and Senior Management (cont’d)

SECRETARY

Ms. Li Oi Chun, Helen, aged 43, joined the Company in 1981. She is currently the Group Company Secretary and

Director of Professional Logistics of the Company. She is responsible for finance and accounting, company secretarial

and information technology function of the Group. She holds a Master Degree in Business Administration from the

University of Surrey in United Kingdom and a Master Degree in Marketing Management from the Macquarie University

in Australia. She is currently a Fellow member of both the Hong Kong Institute of Company Secretaries and The Institute

of Chartered Secretaries and Administrators in United Kingdom and also holds a Postgraduate Diploma in Corporate

Administration from The Hong Kong Polytechnic University.

SENIOR MANAGEMENT

Ms. Lau Lee Fong, Rosa, aged 46, joined the Company in 1979 and is currently the General Manager (Western Restaurants)

of the Company. She is responsible for development and management of the chain of the Spaghetti House Restaurants as

well as Bravo le Café. She holds a Master Degree in Business Administration from the University of East Asia, Macau

and a Master of Science in Hotel & Tourism Management from The Hong Kong Polytechnic University. She is currently

a member of the Hotel & Catering International Management Association (U.K.).

Mr. Wong Yau Kwong, aged 46, joined the Company in 1983 and is the General Manager of the Food Manufacturing

and Distribution - China. He is responsible for development and management of the Scanfoods Group of business and the

central food processing functions in the PRC. He is a graduate of Business Management Department, Baptist University.

Mr. Leung Cho Shing, Joe, aged 45, joined the Company in 1983 and is currently the General Manager of Asia Pacific

Catering Corporation Limited. He is responsible for development and management of the institutional catering business.

He holds a Degree in Hotel and Catering Management from The Hong Kong Polytechnic University.

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The directors are pleased to present their annual report together with the audited financial statements of Café de Coral

Holdings Limited (the “Company”) and Subsidiaries (the “Group”) for the year ended 31st March, 2001.

PRINCIPAL ACTIVITIES

The Company is an investment holding company. The Group is principally engaged in the operation of quick service

restaurants, fast casual dining, institutional catering and specialty restaurant chains, and the food manufacturing business.

An analysis of the Group’s turnover by geographical area together with their respective contributions to trading results

for the year is as follows:

Profit beforeTurnover taxation

$’000 $’000

Hong Kong 2,496,216 285,512

The People’s Republic of China (“the PRC”) 44,110 3,595

The United States, Canada and Poland (See Note below) — 3,141

2,540,326 292,248

Note:

During the year, the Group acquired an approximately 48% equity interest in Manchu Wok Enterprises, Inc (“MWEI”), a

jointly controlled entity. Since the date of acquisition, MWEI has generated systemwide sales of approximately $350,242,000

in the United States, Canada and Poland and earnings before interest, tax, depreciation and amortisation of approximately

$21,985,000.

MAJOR CUSTOMERS AND SUPPLIERS

For the year ended 31st March, 2001, the percentage of sales or purchases attributable to the Group’s five largest customers

or suppliers was less than 30%.

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Report of the Directors (cont’d)

(Amounts expressed in Hong Kong dollars)

RESULTS AND DIVIDENDS

The results of the Group for the year ended 31st March, 2001 and the state of affairs of the Company and of the Group as

at 31st March, 2001 are set out on pages 37, 39 and 40 of the accompanying financial statements.

The details of dividends for the year ended 31st March, 2001 are set out in Note 6 to the accompanying financial statements.

An interim dividend of 4.4 cents per share was paid, and the directors recommend the payment of a final dividend of 15.1

cents per share.

PRINCIPAL SUBSIDIARIES

Particulars of the Company’s principal subsidiaries as at 31st March, 2001 are set out on pages 66 to 69.

FIXED ASSETS

Details of the movement in fixed assets are set out in Note 8 to the accompanying financial statements.

BANK LOANS AND OVERDRAFTS

Particulars of bank loans and overdrafts as at 31st March, 2001 are set out in Notes 15 and 16 to the accompanying

financial statements.

SHARE CAPITAL

Details of the movement in share capital of the Company are set out in Note 18.a to the accompanying financial statements.

SHARE OPTIONS

Details of the share option schemes of the Company are set out in Note 18.b to the accompanying financial statements.

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Report of the Directors (cont’d)

(Amounts expressed in Hong Kong dollars)

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RESERVES

Movements in reserves of the Group and the Company during the year are set out in Note 19 to the accompanying

financial statements. As at 31st March, 2001, reserves of approximately $193,201,000 of the Company were available for

distribution to shareholders.

PURCHASE, SALE OR REDEMPTION OF SHARES

During the year, the Company purchased and cancelled 6,210,000 shares of $0.10 each in the Company on The Stock

Exchange of Hong Kong Limited with details as follows:

Price per share Total cash paidMonth and year Number of shares Highest Lowest (Including related of purchase purchased price paid price paid expenses)

$ $ $’000

August 2000 2,194,000 2.975 2.900 6,483October 2000 1,894,000 3.000 2.800 5,554November 2000 756,000 3.000 2.850 2,242December 2000 750,000 3.250 3.100 2,428January 2001 148,000 3.250 3.250 483February 2001 468,000 3.250 3.250 1,528

6,210,000 18,718

Therefore, an amount of approximately $18,718,000 was transferred from contributed surplus to capital redemption reserve.

Other than the above purchase of shares, neither the Company nor any of its subsidiaries purchased, sold or redeemed any

listed securities of the Company for the year ended 31st March, 2001.

The directors considered that the purchase of shares would be to the benefit of the Company and would lead to an

enhancement of the net assets, earnings per share and liquidity of shares.

PRE-EMPTIVE RIGHTS

There is no provision for pre-emptive rights under the Company’s Bye-Laws and the laws in Bermuda.

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Report of the Directors (cont’d)

(Amounts expressed in Hong Kong dollars)

DIRECTORS AND DIRECTORS’ SERVICE CONTRACTS

The directors who held office during the year and up to the date of this report are:

Executive directors

Mr. Chan Yue Kwong, Michael (Chairman)

Mr. Lo Hoi Kwong, Sunny (Managing Director)

Ms. Lo Pik Ling, Anita

Mr. Lo Tak Shing, Peter

Non-executive directors

Mr. Lo Tang Seong, Victor

Mr. Lo Hoi Chun

Ms. Leung Sau Lai, Kathy

Mr. Hui Tung Wah, Samuel

Independent non-executive directors

Mr. Choi Ngai Min, Michael

Mr. Li Kwok Sing, Aubrey

All non-executive directors and independent non-executive directors have been appointed for a term of 2-3 years subject

to retirement by rotation as required by the Company’s Bye-Laws.

In accordance with Section 109(A) of the Company’s Bye-Laws, Ms. Lo Pik Ling, Anita, Mr. Lo Tak Shing, Peter and

Mr. Li Kwok Sing, Aubrey retire by rotation at the forthcoming Annual General Meeting and, being eligible, offer

themselves for re-election.

None of the directors has an unexpired service contract with the Company which cannot be terminated by the Company

within one year without payment of compensation (other than statutory compensation).

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Report of the Directors (cont’d)

(Amounts expressed in Hong Kong dollars)

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DIRECTORS’ INTERESTS IN SHARES AND SHARE OPTIONS

As at 31st March, 2001, the following directors of the Company had or were deemed to have interests under the provisions

of the Securities (Disclosure of Interests) Ordinance (the “SDI Ordinance”) in the Company or any associated corporations

thereof (within the meaning of the SDI Ordinance) as recorded in the register kept by the Company pursuant to Section

29 of the SDI Ordinance:

Personal Family Corporate Other

Mr. Chan Yue Kwong, Michael 3,121,407 1,189,400 — (a) & (f)

Mr. Lo Hoi Kwong, Sunny 3,120,000 — — (a), (b) & (f)

Ms. Lo Pik Ling, Anita 12,104,339 — — (a) & (f)

Mr. Lo Tak Shing, Peter — — — (c) & (f)

Mr. Lo Tang Seong, Victor 1,520,000 — — —

Mr. Lo Hoi Chun 132,000 — — (d) & (e)

Ms. Leung Sau Lai, Kathy 3,257,000 — — —

Mr. Hui Tung Wah, Samuel 25,837 — — —

Mr. Choi Ngai Min, Michael — — — —

Mr. Li Kwok Sing, Aubrey 55,000 — — —

Notes:

(a) 49,800,000 shares were held under a family trust of which the beneficiaries included associates of Mr. Chan Yue Kwong,

Michael, Mr. Lo Hoi Kwong, Sunny and his associates, Ms. Lo Pik Ling, Anita and her associates.

(b) 37,383,394 shares were held under a family trust of which associates of Mr. Lo Hoi Kwong, Sunny were the beneficiaries.

(c) 87,626,213 shares were held under a family trust of which Mr. Lo Tak Shing, Peter and his associates were the beneficiaries.

(d) 35,997,701 shares were held under a family trust of which Mr. Lo Hoi Chun and his associates were the beneficiaries.

(e) 36,169,133 shares were held under a family trust of which associates of Mr. Lo Hoi Chun were the beneficiaries.

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Report of the Directors (cont’d)

(Amounts expressed in Hong Kong dollars)

DIRECTORS’ INTERESTS IN SHARES AND SHARE OPTIONS (Cont’d)

(f) During the year, the movements of the executive share options of the directors were as follows:

Number of shares included in executive share options

Beginning Exercised during

Name Note of year the year End of year

Mr. Chan Yue Kwong, Michael (i) 1,500,000 — 1,500,000

(ii) 600,000 (600,000) —

Mr. Lo Hoi Kwong, Sunny (i) 1,500,000 — 1,500,000

(ii) 500,000 (500,000) —

Ms. Lo Pik Ling, Anita (i) 400,000 — 400,000

(ii) 300,000 (300,000) —

Mr. Lo Tak Shing, Peter (i) 350,000 — 350,000

5,150,000 (1,400,000) 3,750,000

Notes:

(i) As at 31st March, 2001, the executive share options, which were granted on 4th November, 1999, are exercisable at $2.95

per share during the period from 1st April, 2003 to 31st March, 2013.

(ii) The executive share options, which were granted on 21st February, 1991, were brought forward from the prior year and

fully exercised during the year.

Other than certain nominee shares in subsidiaries held by directors in trust for the Company or the intermediate holding

companies, no directors held any interest in the share capital of the Company’s subsidiaries.

Save as disclosed above, the Company has no notice of any interests to be recorded under Section 29 of the SDI Ordinance

as at 31st March, 2001 and at no time during the year was the Company or any of its subsidiaries a party to any arrangements

to enable any of the Company’s directors or members of its management to acquire benefits by means of the acquisition

of shares in, or debentures of, the Company or any other body corporate.

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Report of the Directors (cont’d)

(Amounts expressed in Hong Kong dollars)

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SUBSTANTIAL SHAREHOLDERS’ INTERESTS

As at 31st March, 2001, the following entities had or were deemed to have interests in the Company under the provisions

of the SDI Ordinance as recorded in the register kept by the Company under Section 16(1) of the SDI Ordinance:

Number ofshares held in Percentage ofthe Company holding

Wandels Investment Limited (a) 87,626,213 16.02%

GZ Trust Corporation (b) 121,966,834 22.30%

(a) It held the shares for the family trust disclosed in Note (c) under Directors’ Interests in Shares and Share Options (with Barclays

Private Bank & Trust Limited, the trustee of the said family trust, holding the entire share capital of Wandels Investment Limited).

(b) It held the shares for the family trusts disclosed in Note (a), (d) and (e) under Directors’ Interests in Shares and Share Options.

Save as disclosed above, the Company has no notice of any interests to be recorded under Section 16(1) of the SDI

Ordinance as at 31st March, 2001.

DIRECTORS’ INTERESTS IN CONTRACTS

The Group had two franchise agreements (the “Franchise Agreements”) with Furanka Limited (“Furanka”), a company

in which Ms. Lo Pik Ling, Anita and an associate of Mr. Chan Yue Kwong, Michael had beneficial interests. Under the

Franchise Agreements, the Group has to provide management services to Furanka and has to grant licences to Furanka to

operate two restaurants under the name ‘Café de Coral’ (the “Restaurants”), until 11th April, 2000.

On 11th April, 2000, Weli Company Limited (“Weli”), a wholly owned subsidiary of the Company, entered into a sale

and purchase agreement and a tenancy agreement with Furanka and Tinway Investments Limited (“Tinway”) respectively.

Under the sale and purchase agreement, Weli agreed to purchase the assets relating to the operation of the Restaurants at

a cash consideration of $2,572,827. Under the tenancy agreement, Weli agreed to rent the premises at which Furanka

operated one of the Restaurants from Tinway for a monthly rental of $170,000 from 12th April, 2000 to 11th April, 2003.

Tinway was controlled by Ms. Lo Pik Ling, Anita, an associate of Mr. Chan Yue Kwong, Michael and Ardley Enterprises

Limited, a company wholly and beneficially owned by the family members of Mr. Lo Hoi Kwong, Sunny. Details of the

transactions were announced on 11th April, 2000.

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Report of the Directors (cont’d)

(Amounts expressed in Hong Kong dollars)

DIRECTORS’ INTERESTS IN CONTRACTS (Cont’d)

On 23rd December, 1999, each of Yumi Yumi Caterers Limited (“Yumi”) and Very Nice Fast Food Limited (“Very Nice”),

the two indirect wholly-owned subsidiaries of the Company, as tenants entered into tenancy agreements with LBK Trustee

Holding Corporation (“LBK”) as landlord renewing the existing tenancies in respect of two premises at 77 Tung Choi

Street and 108 Prince Edward Road West for the operation of fast food restaurants (collectively the “Premises”). LBK

was wholly and beneficially owned by the family members of Mr. Lo Hoi Chun, a non-executive director of the Company.

Mr. Lo Hoi Chun and his associates were directors of LBK. Mr. Lo Hoi Chun was also a director of Yumi. Under the

agreements, Yumi and Very Nice were required to pay a monthly rental of $61,000 and $110,000 respectively from 1st

January, 2000 to 31st December, 2002.

Except as disclosed above, no contracts of significance in relation to the Group’s business to which the Company or any

of its subsidiaries was a party and 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.

Other than the operation of Furanka as disclosed above, none of the directors have interests in a competing business.

CODE OF BEST PRACTICE

In the opinion of the directors, the Company has complied with the Code of Best Practice as set out in Appendix 14 of the

Listing Rules of The Stock Exchange of Hong Kong Limited for the year ended 31st March, 2001.

AUDIT COMMITTEE

In April 1999, the Company established an audit committee consisting of two independent non-executive directors of the

Company, Mr. Choi Ngai Min, Michael and Mr. Li Kwok Sing, Aubrey, with written terms of reference which deal

clearly with its authority and duties. Amongst the committee’s principal duties is to review and supervise the Company’s

financial reporting process and internal controls.

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Report of the Directors (cont’d)

(Amounts expressed in Hong Kong dollars)

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AUDITORS

The accompanying financial statements have been audited by Messrs. Arthur Andersen & Co. A resolution for the

reappointment of Messrs. Arthur Andersen & Co as the Company’s auditors for the ensuing year is to be proposed at the

forthcoming Annual General Meeting.

On behalf of the Board of Directors,

CHAN YUE KWONG, MICHAEL

Chairman

Hong Kong, 5th July, 2001

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Consolidated Income StatementFor the year ended 31st March, 2001

(Amounts expressed in Hong Kong dollars)

Note 2001 2000$’000 $’000

Turnover 2,540,326 2,408,822

Cost of sales (2,164,773) (2,038,182)

Gross profit 375,553 370,640

Administrative expenses (115,730) (125,225)

Other revenue, net 54,540 49,604

Profit from operations 314,363 295,019

Finance costs (25,987) (39,514)

288,376 255,505

Share of profit of an associate 731 —

Share of profit of a jointly controlled entity 3,141 —

Profit before taxation 2 292,248 255,505

Taxation 4 (37,970) (34,963)

Profit attributable to shareholders 5 254,278 220,542

Dividends 6 (106,476) (92,685)

Retained profit for the year 147,802 127,857

Basic earnings per share 7 46.33 cents 39.94 cents

Diluted earnings per share 7 46.27 cents 39.86 cents

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Consolidated Statement of Recognised Gains and LossesFor the year ended 31st March, 2001

(Amounts expressed in Hong Kong dollars)

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2001 2000$’000 $’000

Deficit on revaluation of investment properties (705) (11,350)

Exchange differences arising on consolidation 2,365 (179)

Net gains (losses) not recognised in the income statement 1,660 (11,529)

Net profit for the year 254,278 220,542

Net recognised gains 255,938 209,013

Goodwill eliminated directly against reserves (14,174) —

241,764 209,013

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Balance Sheets (cont’d)

As at 31st March, 2001

(Amounts expressed in Hong Kong dollars)

Consolidated CompanyNote 2001 2000 2001 2000

$’000 $’000 $’000 $’000

ASSETSNon-current assetsFixed assets 8 890,154 861,413 — —Construction in progress — 5,338 — —Trademarks 9 62,274 62,694 — —Investment in subsidiaries 10 — — 413,734 428,595Investment in an associate 11 1,614 — — —Investment in a jointly

controlled entity 12 14,339 — — —Other investments 13 18,547 18,562 — —

986,928 948,007 413,734 428,595

Current assetsStocks 49,375 54,188 — —Prepayments and deposits 122,154 101,369 109 111Trade and other debtors 14 25,475 16,092 — —Dividend receivable from

a subsidiary — — 83,000 71,000Short-term investments 9,169 — — —Cash and bank placements 681,313 524,714 15 25

887,486 696,363 83,124 71,136

Current liabilitiesShort-term bank borrowings 15 236,541 221,278 — —Trade creditors 14 58,198 52,129 — —Other creditors and

accrued liabilities 153,232 146,780 16 596Taxation payable 12,428 11,424 — —Proposed final dividend 6 82,690 70,547 82,690 70,547

543,089 502,158 82,706 71,143

Net current assets (liabilities) 344,397 194,205 418 (7)

Total assets less current liabilities 1,331,325 1,142,212 414,152 428,588

Non-current liabilitiesNon-current bank loans 16 100,000 31,536 — —Deferred taxation 17 11,379 12,015 — —

111,379 43,551 — —

NET ASSETS 1,219,946 1,098,661 414,152 428,588

Balance SheetsAs at 31st March, 2001

(Amounts expressed in Hong Kong dollars)

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Balance Sheets (cont’d)

As at 31st March, 2001

(Amounts expressed in Hong Kong dollars)

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Consolidated CompanyNote 2001 2000 2001 2000

$’000 $’000 $’000 $’000

CAPITAL AND RESERVESShare capital 18 54,689 55,066 54,689 55,066Reserves 19 1,165,257 1,043,595 359,463 373,522

Shareholders’ equity 1,219,946 1,098,661 414,152 428,588

Approved by the Board of Directors on 5th July, 2001 and signed on behalf of the Board by

CHAN YUE KWONG, MICHAEL LO HOI KWONG, SUNNYChairman Managing Director

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Consolidated Cash Flow Statement (cont’d)

For the year ended 31st March, 2001

(Amounts expressed in Hong Kong dollars)

2001 2000$’000 $’000 $’000 $’000

Operating activitiesProfit before taxation 292,248 255,505Interest expense 25,987 39,372Interest income (39,698) (29,593)Accretion of discount on investment

in promissory notes — (12,012)Depreciation of fixed assets 114,524 118,265Net loss on disposals of fixed assets 6,141 17,196Provision for impairment of trademarks 420 2,000Unrealised loss on short-term investments 611 —Loss on disposal of other investments 5 —Share of profit of an associate (731) —Share of profit of a jointly controlled entity (3,141) —Decrease (Increase) in stocks 4,813 (4,322)Increase in prepayments and deposits (20,785) (4,282)Increase in trade and other debtors (9,383) (189)Increase (Decrease) in trade creditors 6,069 (1,238)Increase in other creditors and

accrued liabilities 6,452 8,479

383,532 389,181

Returns on investmentsand servicing of finance

Interest received 39,698 29,593Interest paid (25,987) (39,372)Proceeds from redemption

of a promissory note — 19,131Dividends paid (94,333) (78,992)

(80,622) (69,640)

TaxationHong Kong profits tax refunded 2,156 911Hong Kong profits tax paid (38,214) (32,593)Overseas profits tax paid (261) (139)

(36,319) (31,821)

Cash inflow before investing activities 266,591 287,720

Consolidated Cash Flow StatementFor the year ended 31st March, 2001

(Amounts expressed in Hong Kong dollars)

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Consolidated Cash Flow Statement (cont’d)

For the year ended 31st March, 2001

(Amounts expressed in Hong Kong dollars)

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2001 2000$’000 $’000 $’000 $’000

Cash inflow before investing activities 266,591 287,720

Investing activitiesAdditions of fixed assets (158,878) (132,109)Proceeds from disposals of fixed assets 14,105 518Additions of construction in progress — (5,338)Addition of a trademark — (420)Acquisition of an associate (1,000) —Acquisition of a jointly controlled entity (24,086) —Proceeds from repayment of a

promissory note — 250,000Proceeds from disposal of other

investments 10 —Purchase of short-term investments (9,780) —

(179,629) 112,651

Cash inflow before financing 86,962 400,371

Financing (Note 23)Net proceeds from issue of shares

on exercise of share options 4,715 3,717Payment for repurchase of shares (18,718) (7,579)Net borrowing (repayment) of bank loans 3,727 (266,373)

(10,276) (270,235)

Increase in cash and cash equivalents 76,686 130,136Effect of foreign exchange rate changes (87) (179)Cash and cash equivalents,

beginning of year 459,714 329,757

Cash and cash equivalents, end of year 536,313 459,714

Analysis of cash and cash equivalentsCash and bank placements 681,313 524,714Bank overdrafts and loans (145,000) (65,000)

536,313 459,714

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

1. PRINCIPAL ACCOUNTING POLICIES

a. Basis of presentation

The financial statements of the Company and its subsidiaries (the “Group”) have been prepared under thehistorical convention as modified by the revaluation and valuation of investment properties and short-terminvestments, and in accordance with Statements of Standard Accounting Practice issued by the Hong KongSociety of Accountants, the accounting principles generally accepted in Hong Kong, the disclosure requirementsof the Hong Kong Companies Ordinance and the Rules Governing The Listing of Securities on The StockExchange of Hong Kong Limited.

b. Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries.All significant intra-group transactions and balances have been eliminated on consolidation.

Goodwill arising on consolidation (representing the excess of the fair value of the consideration given overthe fair value of the Group’s share of separable net assets of the subsidiaries acquired) is amortised to theincome statement over a period of five years unless it is not considered by the directors to be of future benefit,in which case it is eliminated immediately against available reserves.

c. Fixed assets and depreciation

Initial purchases of utensils, cutlery and glassware are capitalised at original historical cost and are includedin restaurant equipment. Costs of subsequent replacements are charged to the income statement in the year ofexpenditure.

Fixed assets, other than utensils, cutlery, glassware and investment properties, are stated at cost or valuationless accumulated depreciation. The cost of an asset comprises its purchase price and any directly attributablecosts of bringing the asset to its working condition and location for its intended use. Expenditure incurredafter the fixed assets have been put into operation, such as repairs and maintenance and overhaul costs, isnormally charged to the income statement in the period in which it is incurred. In situations where it can beclearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expectedto be obtained from the use of the fixed assets, the expenditure is capitalised as an additional cost of the fixedassets.

Depreciation is calculated on the straight-line basis at annual rates estimated to write off the cost of each assetover its expected useful life. Leasehold land is amortised over the remaining period of the respective lease.The annual rates are as follows:

Leasehold improvements Over the unexpired period of the leaseLand Over the remaining period of the leaseBuildings 2.5%Furniture and restaurant equipment 15% to 20%

When assets are sold or retired, their cost and accumulated depreciation are eliminated from the accounts andany gain or loss resulting from their disposal is included in the income statement.

Notes to the Financial Statements31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

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1. PRINCIPAL ACCOUNTING POLICIES (Cont’d)

d. Investment properties

Investment properties are interests in land and buildings in respect of which construction work and developmenthave been completed and which are held for their investment potential and for the long-term.

Investment properties are included in the balance sheet at their open market value, on the basis of an annualvaluation by professionally qualified executives of the Group and by independent valuers at intervals of notmore than three years. Changes in the value of investment properties are dealt with as movements in theproperty revaluation reserve. If the total of this reserve is insufficient to cover a reduction in the open marketvalue on a portfolio basis, the excess is charged to the income statement.

Upon the disposal of an investment property, the relevant portion of the revaluation reserve realised in respectof previous valuations is released from the property revaluation reserve to the income statement as part of theprofit or loss on disposal of the investment property.

No depreciation is provided on investment properties unless the unexpired lease term is 20 years or less, inwhich case depreciation is provided on their carrying value over the unexpired lease term.

e. Trademarks

Trademarks acquired are included in the balance sheet at the lower of cost and fair value as determined by thedirectors of the Company and no amortisation is provided. Where appropriate, provision is made for anyimpairment in value.

f. Subsidiaries

A company is a subsidiary company if more than 50% of the issued voting capital is held long-term, directlyor indirectly.

In the Company’s balance sheet, investment in subsidiaries is stated at cost less provision for impairment invalue where considered necessary by the directors. The results of the subsidiaries are included in the Company’sincome statement to the extent of dividends declared by the subsidiaries.

g. Associates

An associate is an enterprise over which the Group has significant influence, but not control or joint control,and thereby has the ability to participate in its financial and operating policy decisions.

In the consolidated financial statements, investment in an associate is accounted for under the equity methodof accounting, whereby the investment is initially recorded at cost and the carrying amount is adjusted torecognise the Group’s share of the post-acquisition profits or losses of the associate, distributions receivedfrom the associate and other necessary alterations in the Group’s proportionate interest in the associate arisingfrom changes in the equity of the associate that have not been included in the income statement.

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

1. PRINCIPAL ACCOUNTING POLICIES (Cont’d)

h. Jointly controlled entity

A jointly controlled entity is an entity under a contractual arrangement where the Group and other partiesundertake an economic activity which is subject to joint control and none of the participating parties hasunilateral control over the economic activity.

In the consolidated financial statements, the Group’s interest in a jointly controlled entity is initially recordedat cost and adjusted thereafter for the post-acquisition change in the Group’s share of the net assets of thejointly controlled entity. The Group’s share of post-acquisition results of the jointly controlled entity is includedin the consolidated income statement.

Goodwill arising from the acquisition of the jointly controlled entity (representing the excess of the fair valueof the consideration given over the fair value of the Group’s share of separable net assets of the jointly controlledentity acquired) is eliminated immediately against available reserves.

i. Other investments

Other investments, intended to be held on a continuing basis, are included in the balance sheet at cost less anyprovision for impairment in value.

The carrying amounts of other investments are reviewed at each balance sheet date to assess whether the fairvalues have declined below the carrying amounts. When such a decline has occurred, the carrying amounts arereduced and the reduction is recognised as an expense in the income statement unless there is evidence that thedecline is temporary.

Provisions against the carrying value of other investments are reversed to the income statement when thecircumstances and events that led to the write-downs or write-offs cease to exist and there is persuasive evidencethat the new circumstances and events will persist for the foreseeable future.

Upon disposal or transfer of the other investments, any profit and loss thereon is accounted for in the incomestatement.

j. Short-term investments

Short-term investments are listed shares carried at fair value in the balance sheet. Any unrealised holding gainor loss on short-term investments is recognised in the income statement in the period when it arises.

Upon disposal or transfer of short-term investments, any profit or loss thereon is accounted for in the incomestatement.

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

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1. PRINCIPAL ACCOUNTING POLICIES (Cont’d)

k. Stocks

Stocks comprise mainly food and consumable stores.

Stocks are stated at the lower of cost and net realisable value.

Cost is based on the first-in, first-out cost formula and comprises all costs of purchase, costs of conversion andother costs incurred in bringing the stocks to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs ofcompletion and the estimated costs necessary to make the sale. Provision is made for obsolete, slow-movingor defective items where appropriate.

l. Cash and cash equivalents

Cash represents cash on hand and placements with banks or other financial institutions which are repayable ondemand.

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

m. Turnover

Turnover comprises (i) the value of sales in the normal course of business and (ii) rental income.

n. Revenue recognition

Provided it is probable that the economic benefits associated with a transaction will flow to the Group and therevenue and costs, if applicable, can be measured reliably, turnover and other revenue are recognised on thefollowing bases:

(i) Sales of goods and services

Sales of goods and services are recognised when the significant risks and rewards of ownership of thegoods have been transferred or services are rendered.

(ii) Rental income

Rental income is recognised when rentals become due and receivable.

(iii) Interest income

Interest income from bank placements is recognised on a time proportion basis on the principal outstandingand at the rate applicable.

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

1. PRINCIPAL ACCOUNTING POLICIES (Cont’d)

o. Cost of sales

Cost of sales represents costs which vary directly or indirectly with the level of sales of the Group. It comprisescost of stocks and operating costs incurred for generating sales of goods and services, and rental income. Theoperating costs include mainly operating lease rentals, staff costs, utility costs and depreciation of fixed assetsincurred by quick service restaurants, fast casual dining, institutional catering and specialty restaurant chains,and outgoings for rental income.

p. Deferred taxation

Deferred taxation is provided under the liability method, at the current tax rate, in respect of significant timingdifferences between profit as computed for taxation purposes and profit as stated in the financial statements,except when it is considered that no liability will arise in the foreseeable future. Deferred tax assets are notrecognised unless the related benefits are expected to crystallise in the foreseeable future.

q. Operating leases

Leases where substantially all the risks and rewards of ownership of the leased assets remain with the lessorsare accounted for as operating leases. Rentals applicable to such leases are charged to the income statement ona straight-line basis over the period of the relevant leases.

r. Foreign currencies

Companies within the Group maintain their books and records in the primary currencies of their respectivecountries (the “functional currencies”).

In the financial statements of the individual companies, monetary assets and liabilities denominated in othercurrencies at the balance sheet date are translated into the respective functional currencies at rates of exchangein effect at the balance sheet date. Transactions in other currencies during the year are translated into therespective functional currencies at rates of exchange in effect at the time of the transactions. Exchangedifferences are dealt with in the income statements of the individual companies.

For the purpose of consolidation, all assets and liabilities of subsidiaries other than those originally funded inHong Kong dollars are translated into Hong Kong dollars at rates of exchange in effect at the balance sheetdate; those originally funded by Hong Kong dollars are translated at historical rates. All income and expenseitems are translated at the monthly average rates of exchange over the year. Exchange differences arising onsuch translation are credited or charged to the cumulative translation reserve.

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

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2. PROFIT BEFORE TAXATION

The consolidated profit before taxation was determined after charging and crediting the following:

2001 2000$’000 $’000

After charging

Operating lease rentals in respect of rented premises 275,963 276,712Interest expense on bank overdrafts and loans wholly

repayable within five years 25,987 39,514Depreciation of fixed assets 114,524 118,265Net loss on disposals of fixed assets 6,141 17,196Unrealised loss on short-term investments 611 —Realised loss on disposal of other investments 5 —Cost of stocks 796,299 717,941Provision for impairment of trademarks (Note 9) 420 2,000Staff costs (including directors) 681,163 630,120Auditors’ remuneration 2,037 1,803

After crediting

Gross rental income from investment properties 6,679 7,392Less: Outgoings (188) (71)

6,491 7,321Other rental income less outgoings 6,725 5,010Interest income 39,698 29,593

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

3. DIRECTORS’ AND SENIOR EXECUTIVES’ EMOLUMENTS

a. Details of directors’ emoluments are as follows:

2001 2000$’000 $’000

Fees— Executive directors 200 200— Non-executive directors and independent

non-executive directors 400 300

Other emoluments for executive directors— Basic salaries, gratuity and other allowances 3,715 4,055— Benefits from share options exercised 1,846 1,189— Contributions to pension scheme 475 474— Discretionary bonuses 6,284 6,733

12,920 12,951

No directors waived any emoluments during the year.

Analysis of the emoluments of the executive directors by number of directors and emolument ranges is asfollows:

2001 2000

Nil to $1,000,000 1 1$1,500,001 to $2,000,000 1 1$4,500,001 to $5,000,000 1 1$5,000,001 to $5,500,000 1 1

4 4

The emoluments of all non-executive directors were below $1,000,000.

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

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3. DIRECTORS’ AND SENIOR EXECUTIVES’ EMOLUMENTS (Cont’d)

b. Details of emoluments earned by the five highest paid individuals (including directors and employees) are asfollows:

2001 2000$’000 $’000

Directors’ fees 150 150Basic salaries, gratuity and other allowances 3,985 4,370Benefits from share options exercised 2,378 1,337Contributions to pension scheme 593 511Discretionary bonuses 6,827 7,264

13,933 13,632

Three (2000 - Three) of the five highest paid individuals were directors of the Company, and their emolumentshave been included in Note 3.a.

During the year, no emoluments were paid by the Group to the five highest paid individuals (including directorsand employees) as inducement to join or as compensation for loss of office.

Analysis of the emoluments earned by the five highest paid individuals (including directors and employees)by number of individuals and emolument ranges is as follows:

2001 2000

Nil to $1,000,000 1 2$1,000,001 to $1,500,000 1 —$1,500,001 to $2,000,000 1 1$4,500,001 to $5,000,000 1 1$5,000,001 to $5,500,000 1 1

5 5

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

4. TAXATION

The Company is exempted from taxation in Bermuda until 2016. Hong Kong profits tax has been provided at therate of 16% (2000 - 16%) on the estimated assessable profits for the year. Overseas taxation has been calculated onthe estimated assessable profits for the year at the rates prevailing in the respective jurisdictions of countries inwhich the Group operated.

Taxation in the consolidated income statement comprised:

2001 2000$’000 $’000

Company and subsidiaries:Hong Kong profits tax 37,062 32,792Overseas taxation 261 139Deferred taxation (Note 17) (636) 2,032

36,687 34,963

Associate:Hong Kong profits tax 117 —

Jointly controlled entity:Overseas taxation 1,166 —

37,970 34,963

5. PROFIT ATTRIBUTABLE TO SHAREHOLDERS

The consolidated profit attributable to shareholders included a profit of approximately $106,043,000(2000 - $93,030,000) dealt with in the financial statements of the Company.

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

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6. DIVIDENDS

Dividends comprised:

2001 2000$’000 $’000

Interim dividend paid: 4.4 cents per share(2000 - 4.0 cents per share) 24,059 22,096

Final dividend proposed: 15.1 cents per share(2000 - 12.8 cents per share) 82,690 70,547

Interim dividend for current year in respectof share options exercised and sharespurchased prior to the dividend payment date 2 —

Final dividend for preceding year in respectof share options exercised and sharespurchased prior to the dividend payment date (275) 42

106,476 92,685

7. EARNINGS PER SHARE

Basic earnings per share was calculated based on the consolidated profit attributable to shareholders of approximately$254,278,000 (2000 - $220,542,000) and the weighted average number of 548,795,754 shares (2000 - 552,193,498shares) in issue during the year.

Diluted earnings per share was calculated based on the consolidated profit attributable to shareholders ofapproximately $254,278,000 (2000 - $220,542,000) and the weighted average number of 549,554,693 shares(2000 - 553,336,830 shares) in issue having been adjusted to reflect the effects of all dilutive potential ordinaryshares during the year.

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

8. FIXED ASSETS

a. Movements

Movements in fixed assets (consolidated) were as follows:

2001 2000

Furniture andInvestment Land and Leasehold restaurantproperties buildings improvements equipment Total Total

$’000 $’000 $’000 $’000 $’000 $’000

Cost or valuation

Beginning of year 89,450 570,531 249,881 625,973 1,535,835 1,495,551Revaluation (705) — — — (705) (11,350)Additions — 9,898 21,866 132,452 164,216 135,473Reclassification

(see Note (i)) 8,605 (9,700) — — (1,095) —Disposals — (9,882) (36,042) (46,643) (92,567) (83,839)

End of year 97,350 560,847 235,705 711,782 1,605,684 1,535,835

Representing

At cost — 560,847 235,705 711,782 1,508,334 1,446,385At professional

valuation in2001 97,350 — — — 97,350 —2000 — — — — — 89,450

97,350 560,847 235,705 711,782 1,605,684 1,535,835

Accumulateddepreciation

Beginning of year — 75,371 190,851 408,200 674,422 622,282Charges for the year — 10,425 15,649 88,450 114,524 118,265Reclassification

(see Note (i)) — (1,095) — — (1,095) —Disposals — — (35,572) (36,749) (72,321) (66,125)

End of year — 84,701 170,928 459,901 715,530 674,422

Net book value

End of year 97,350 476,146 64,777 251,881 890,154 861,413

Beginning of year 89,450 495,160 59,030 217,773 861,413 873,269

(i) During the year, certain land and buildings with a cost of approximately $9,700,000 and accumulateddepreciation of approximately $1,095,000 were reclassified as investment properties at net book value. As at31st March, 2001, such investment properties were revalued on an open market value basis. (See alsoNote 8.b)

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31st March, 2001

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8. FIXED ASSETS (Cont’d)

b. Details of investment properties and land and buildings

The carrying amount of investment properties and land and buildings (consolidated) comprised:

Investment properties Land and buildings2001 2000 2001 2000

$’000 $’000 $’000 $’000

Situated in Hong Kong 97,350 89,450 409,455 426,591Situated in the PRC — — 49,486 51,274Situated in Macau — — 17,205 17,295

97,350 89,450 476,146 495,160

Investment properties and land and buildings situated in Hong Kong and Macau are held under long-termleases. Land and buildings situated in the PRC are held under land use rights for a period of 50 years expiringbetween January 2031 and February 2041.

The investment properties were revalued as at 31st March, 2001 on an open market value basis by FPD Savills(Hong Kong) Limited, professional valuers.

Certain of the Group’s investment properties and land and buildings with carrying amounts of approximately$198,145,000 (2000 - $195,695,000) were mortgaged to secure certain of the Group’s banking facilities (seeNote 21).

9. TRADEMARKS

Trademarks (consolidated) comprised:

2001 2000$’000 $’000

TrademarksBeginning of year 64,694 64,274Additions — 420

End of year 64,694 64,694

Less: Provision for impairment in value (2,420) (2,000)

62,274 62,694

The trademarks mainly represented the intellectual properties relating to the ‘Ah Yee Leng Tong’ and ‘The SpaghettiHouse’ operations. They were valued by professional valuers on 30th June, 1991 and 29th February, 1992, respectively,at their fair value, and the valuations were equal to the costs of acquisition of these trademarks.

The directors are of the opinion that the fair value of the trademarks was less than the book value. Accordingly, aprovision of approximately $420,000 (2000 - $2,000,000) was made for the impairment in value and was nettedagainst other revenue, net, in the income statement (see Note 2).

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

10. INVESTMENT IN SUBSIDIARIES

In the Company’s balance sheet, investment in subsidiaries comprised:

2001 2000$’000 $’000

Unlisted shares, at cost 331,802 331,802Due from subsidiaries 81,932 96,793

413,734 428,595

Details of principal subsidiaries as at 31st March, 2001 are set out on pages 66 to 69. None of the subsidiaries hadany loan capital in issue at any time during the year ended 31st March, 2001.

The amounts due from subsidiaries were unsecured, non-interest bearing and not repayable within the next twelvemonths.

The directors are of the opinion that the underlying value of the subsidiaries is not less than the carrying value at31st March, 2001.

11. INVESTMENT IN AN ASSOCIATE

Investment in an associate (consolidated) represents:

2001 2000$’000 $’000

Share of net assets of the associate 814 —Loan to the associate 800 —

1,614 —

a. Details of the associate as at 31st March, 2001 were as follows:

Issued and Equity interestPlace and date of fully paid attributable to Principal activities/

Name incorporation share capital the Group Place of operation

Miracle Time Enterprises Hong Kong/ $1,000,000 20% Operating a restaurant/Limited 21st February, 2000 Hong Kong

b. The loan to the associate was unsecured, bore interest at commercial bank rate and was not repayable withinthe next twelve months.

c. The directors are of the opinion that the underlying value of the associate was not less than its carryingamount as at 31st March, 2001.

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31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

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12. INVESTMENT IN A JOINTLY CONTROLLED ENTITY

Investment in a jointly controlled entity (consolidated) represents:

2001 2000$’000 $’000

Share of net assets of the jointly controlled entity 13,549 —Due from jointly controlled entity 790 —

14,339 —

a. On 28th September, 2000, the Group acquired an interest in a jointly controlled entity which manages andoperates a quick service restaurant chain known as “Manchu Wok” in the United States, Canada and Poland ata consideration of approximately $24,086,000 including goodwill of approximately $14,174,000 which waseliminated immediately against available reserves.

b. Details of the jointly controlled entity as at 31st March, 2001 were as follows:

Issued and Equity interestPlace and date of fully paid attributable to Principal activities/

Name incorporation share capital the Group Place of operation

Manchu Wok Enterprises, Canada/ Redeemable preference 48% Restaurants/Inc (“MWEI”) 28th July, 2000 shares: The United States,

Class A — Canada, PolandCDN$2,865,000(see Note (i));Class B —CDN$3,435,000(see Note (ii)); and

Ordinary shares:Class C —CDN$1,000(see Note (iii))

(i) As at 31st March, 2001, the Group held all of the Class A shares which are non-voting. The Group is entitled toreceive a cumulative dividend and, upon dissolution, any unpaid dividends plus its stated capital prior to any returnof such amounts to the Class B and Class C shareholders.

(ii) As at 31st March, 2001, the Group held approximately 44% of the Class B shares which are non-voting. The Groupis entitled to receive a cumulative dividend and, upon dissolution, any unpaid dividends plus its stated capital, afterthe return of such amounts to the Group itself (as the Class A shareholder) but before any distributions to the ClassC shareholders.

(iii) As at 31st March, 2001, the Group held approximately 48% of the Class C voting shares.

c. The amount due from the jointly controlled entity was unsecured, non-interest bearing and not repayablewithin the next twelve months.

d. The directors are of the opinion that the underlying value of the jointly controlled entity was not less than itscarrying amount as at 31st March, 2001.

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

13. OTHER INVESTMENTS

Other investments (consolidated) represented:

2001 2000$’000 $’000

Listed shares, at cost— listed in Hong Kong* 18,197 18,212

Club debenture, at cost 350 350

18,547 18,562

* Quoted market value of listed investments 9,822 13,843

14. TRADE DEBTORS AND CREDITORS — CREDIT POLICY AND AGING ANALYSIS

The Group’s sales to customers are mainly on a cash basis. The Group also grants a credit period which is usuallyless than 90 days to certain customers for the sales of the Group’s institutional catering services and foodmanufacturing businesses.

As at 31st March, 2001, approximately 90% of the Group’s trade debtors was aged less than 60 days while over99% of the trade creditors was aged less than 60 days.

15. SHORT-TERM BANK BORROWINGS

Short-term bank borrowings (consolidated) comprised:

2001 2000$’000 $’000

Bank overdrafts and loans— with maturity within three months 145,000 65,000— with maturity more than three months 90,000 155,000

Current portion of non-current bank loans (Note 16) 1,541 1,278

236,541 221,278

Secured 166,541 106,278

Unsecured 70,000 115,000

Details of the Group’s banking facilities and pledged assets are set out in Note 21.

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31st March, 2001

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16. NON-CURRENT BANK LOANS

Non-current bank loans (consolidated) comprised:

2001 2000$’000 $’000

Secured bank loans repayable within a period— not exceeding one year 1,541 1,278— of more than one year but not exceeding two years 40,000 1,536

41,541 2,814

Less: Amounts repayable within one year included under short-term bank borrowings (Note 15) (1,541) (1,278)

40,000 1,536

Unsecured bank loans repayable within a period of— more than one year but not exceeding two years 60,000 30,000

100,000 31,536

Details of the Group’s banking facilities and pledged assets are set out in Note 21.

17. DEFERRED TAXATION

Deferred taxation (consolidated) resulted from the following:

2001 2000$’000 $’000

Accelerated depreciation allowances for taxation purposes 11,379 12,015

Movements in deferred taxation (consolidated) were as follows:

2001 2000$’000 $’000

Beginning of year 12,015 9,983(Write-back of) Provision for net timing differences (Note 4) (636) 2,032

End of year 11,379 12,015

There was no significant unprovided deferred taxation.

Deferred taxation was not provided for the property revaluation surplus because such surplus would not constitutea timing difference for taxation purposes and the realisation of the surplus would not be subject to taxation.

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

18. SHARE CAPITAL AND SHARE OPTIONS

a. Share capital

2001 2000Number of Number of

shares Nominal value shares Nominal value’000 $’000 ’000 $’000

Authorised

Ordinary shares of $0.10 each 1,000,000 100,000 1,000,000 100,000

Issued and fully paid

Beginning of year 550,658 55,066 551,788 55,179Shares issued under the share

option schemes (Note 18.b) 2,440 244 1,910 191Shares purchased and cancelled

by the Company (i) (6,210) (621) (3,040) (304)

End of year 546,888 54,689 550,658 55,066

(i) During the year, the Company purchased and cancelled 6,210,000 (2000 - 3,040,000) of its ordinaryshares of $0.10 on The Stock Exchange of Hong Kong Limited at a price range of $2.800 to $3.250 pershare with a total consideration of approximately $18,718,000 (2000 - $7,590,000) including relatedexpenses.

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31st March, 2001

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18. SHARE CAPITAL AND SHARE OPTIONS (Cont’d)

b. Share options

The Company has share option schemes, pursuant to which it may grant options to executive directors andemployees of the Group to subscribe for shares in the Company, subject to a maximum of 10% of the issuedshare capital of the Company from time to time excluding for this purpose shares issued on the exercise ofoptions. The subscription price per share will be determined by the Company’s directors, and (i) will not beless than 80% nor more than 100% of the average of the closing price of the shares quoted on The StockExchange of Hong Kong Limited on the five business days immediately preceding the date of offer of theoption or (ii) the nominal value of a share (whichever is the greater). As at 31st March, 2001, the share optionswere exercisable at $2.232 to $2.95 per share during the period from 8th August, 1997 to 31st March, 2013.

Details of executive share options are as follows:

Number of shares

CancelledExercised as a result of

Subscription Beginning during Lapsed on termination ofDate of grant price of year the year expiry employment End of year

21st February, 1991 $1.820 2,060,000 (2,060,000) — — —

1st August, 1992 $2.820 1,700,000 (200,000) (460,000) (300,000) 740,000

1st November, 1994 $2.232 1,000,000 (180,000) — — 820,000

4th November, 1999 $2.950 27,300,000 — — (1,800,000) 25,500,000

32,060,000 (2,440,000) (460,000) (2,100,000) 27,060,000

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

19. RESERVES

Movements in reserves (consolidated) were as follows:

2001 2000

Capital Cumulative PropertyShare redemption translation Capital revaluation Contributed Retained

premium reserve reserve reserve reserve surplus profits Total Total$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Consolidated

Beginning of year 125,958 35,212 (1,186) 11,704 7,807 202,019 662,081 1,043,595 931,016Premium on shares issued

on exercise of shareoptions 4,471 — — — — — — 4,471 3,526

Premium on repurchaseof shares (18,097) — — — — — — (18,097) (7,275)

Transfer of reserveson repurchase of shares — 18,718 — — — (18,718) — — —

Deficit on revaluationof investment properties — — — — (705) — — (705) (11,350)

Goodwill arising onacquisition of a jointlycontrolled entity — — — (14,174) — — — (14,174) —

Exchange differencesarising on consolidation — — 2,365 — — — — 2,365 (179)

Profit attributable toshareholders — — — — — — 254,278 254,278 220,542

Dividends — — — — — — (106,476) (106,476) (92,685)

End of year 112,332 53,930 1,179 (2,470) 7,102 183,301 809,883 1,165,257 1,043,595

Company

Beginning of year 125,958 35,212 — — — 211,289 1,063 373,522 376,926Premium on shares issued

on exercise of shareoptions 4,471 — — — — — — 4,471 3,526

Premium on repurchaseof shares (18,097) — — — — — — (18,097) (7,275)

Transfer of reserveson repurchase of shares — 18,718 — — — (18,718) — — —

Profit attributable toshareholders — — — — — — 106,043 106,043 93,030

Dividends — — — — — — (106,476) (106,476) (92,685)

End of year 112,332 53,930 — — — 192,571 630 359,463 373,522

Under the Companies Act of Bermuda, contributed surplus is distributable to shareholders, subject to the conditionthat the Company cannot declare or pay a dividend, or make a distribution out of contributed surplus if (i) it is, orwould after the payment be, unable to pay its liabilities as they became due, or (ii) the realisable value of its assetswould thereby be less than the aggregate of its liabilities and its issued share capital and share premium account.

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31st March, 2001

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20. PENSION SCHEME

Pension schemes are provided to all the employees eligible and employed by the Group in Hong Kong. Certaineligible employees enjoyed either one of the two defined contribution schemes while all other eligible employeeswere under a defined benefit scheme.

The Group’s contribution to the two defined contribution schemes was 5% of monthly salary. Employees under thetwo schemes were entitled to 100% of the employer’s contribution and the accrued interest upon retirement orleaving the Group after completing 9 and 10 years of service respectively counting from the date of joining theschemes, or at a reduced scale from 30% to 90% and from 20% to 90% after completing 2 to 8 years and 2 to 9 yearsof service respectively counting from the date of joining the schemes.

On 1st December, 2000, the Group and the eligible employees under the above two schemes terminated their liabilityto make the contributions. The two schemes were replaced by the Mandatory Provident Fund Scheme (“MPF”), adefined contribution scheme managed by an independent trustee. Under the MPF, each of the Group and the eligibleemployees in Hong Kong make monthly mandatory contributions to the scheme at 5% of the employees’ relevantincome as defined under the Mandatory Provident Fund Schemes Ordinance. The mandatory contributions by eachparty are subject to a maximum of $1,000 per month.

As for the defined benefit scheme, the Group’s contribution to the scheme was calculated on an actuarial basis. Thebenefit entitlement under the scheme is calculated based on the final salary of the staff and the length of servicewith the Group. The scheme was approved by the Government of HKSAR and could be continued after theimplementation of MPF.

The pension schemes which covered the PRC employees were defined contribution schemes at various applicablerates of monthly salary that were in accordance with the local practice and regulations.

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

20. PENSION SCHEME (Cont’d)

The aggregate employer’s contributions, net of forfeited contributions, amounted to:

2001 2000$’000 $’000

Employer’s contribution under the defined contribution schemes 4,195 5,418

Less: forfeited contributions utilised to offset employer’s contribution to the defined contribution schemes (745) (1,107)

3,450 4,311

Employer’s contribution under the defined benefit scheme 6,841 8,561

Employer’s contribution under the MPF 8,738 —

19,029 12,872

The contributions by the Group were charged to the income statement on an accrual basis.

The latest actuarial report on the defined benefit scheme was prepared by Ms. Kim Wong and Mr. Calvin Wu,Fellows of the Society of Actuaries, whose report dated 8th September, 2000 showed that the scheme was fullyfunded on a variation of the aggregate method. The market value of the scheme assets as at 31st March, 2000 wasapproximately $106,559,000, representing 123% of the fund’s discontinuance liabilities at that date. The actuarialbasis used included rate of return, salary escalation rate, withdrawal rates, mortality rates and rate of ill health.

21. BANKING FACILITIES AND PLEDGED ASSETS

As at 31st March, 2001, the banking facilities of the Group were covered by:

a. mortgages of certain investment properties and land and buildings of the Group with carrying amounts ofapproximately $198,145,000 (2000 - $195,695,000) (see Note 8.b);

b. corporate guarantees given by the Company.

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

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22. COMMITMENTS AND CONTINGENT LIABILITIES

a. Lease commitments

The Group’s total future minimum lease payment commitments under operating leases, were as follows:

2001 2000$’000 $’000

(Note 25)Land and buildings

— Not later than one year 238,857 196,263— Later than one year and not later than five years 337,906 249,034— Later than five years 16,945 5,277

593,708 450,574

The above lease commitments only include commitments for basic rentals, and do not include commitmentsfor additional rentals payable, if any, when turnover of individual restaurants exceeds a pre-determined levelas it is not possible to determine in advance the amount of such additional rentals.

b. Capital commitments

The Group had the following capital commitments which have not been provided in the consolidated financialstatements:

2001 2000$’000 $’000

Authorised and contracted for 6,336 7,146Authorised but not contracted for 149,934 83,287

156,270 90,433

c. Guarantees

As at 31st March, 2001, the Group had given guarantees totalling approximately $1,103,000,000 (2000 -$1,050,000,000) to financial institutions in connection with their loans granted to its subsidiaries and jointlycontrolled entity.

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Notes to the Financial Statements (cont’d)

31st March, 2001

(Amounts expressed in Hong Kong dollars unless otherwise stated)

23. NOTE TO CONSOLIDATED CASH FLOW STATEMENT

Analysis of changes in financing during the year is as follows:

2001 2000

Share capital Bank loans withand share maturity overpremium three months Total Total

$’000 $’000 $’000 $’000

Beginning of year 181,024 187,814 368,838 639,073

Issue of shares upon exerciseof share options 4,715 — 4,715 3,717

Repurchase of shares (18,718) — (18,718) (7,579)

Net borrowing (repayment)of bank loans — 3,727 3,727 (266,373)

End of year 167,021 191,541 358,562 368,838

24. SUBSEQUENT EVENTS

On 3rd July, 2001, the Group cancelled certain banking facilities amounting to $220,000,000 which were not utilizedas of 31st March, 2001.

25. COMPARATIVE FIGURES

Certain of the 2000 comparative figures have been reclassified to conform to the current year’s presentation due tothe adoption of Statement of Standard Accounting Practice Number 14 “Leases” issued by the Hong Kong Societyof Accountants.

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Principal Subsidiaries (cont’d)

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The following is a list of the principal subsidiaries whose operations and assets materially affect the results or assets ofthe Group.

Country of Percentage

incorporation and Issued share Class of of shares Principal

Name of subsidiary operation capital shares held held * activities

Ah Yee Leng Tong Hong Kong HK$600,000 Ordinary 100% Catering

Restaurants Limited

Amigo Mio Limited Hong Kong HK$20 Ordinary 100% Catering

Ashlone Limited Hong Kong HK$1,320,000 Ordinary 100% Catering

Asia Pacific Catering Hong Kong HK$20 Ordinary 100% Catering

Corporation Limited

Bamburgh Limited Hong Kong HK$20 Ordinary 100% Catering

Barneston Limited Hong Kong HK$20 Ordinary 100% Investment holding

Barson Development Limited Hong Kong HK$10,000 Ordinary 100% Property investment

Birgitta Limited Hong Kong HK$900,000 Ordinary 100% Investment holding

Bloomcheer Limited Hong Kong HK$500,000 Ordinary 100% Catering

Bravo le Café Limited Hong Kong HK$2 Ordinary 100% Catering

Brilliantwin Limited Hong Kong HK$2 Ordinary 100% Catering

Café de Coral Assets Limited British Virgin Islands US$1 Ordinary 100% Investment holding

Café de Coral Central Hong Kong HK$20 Ordinary 100% Food processing

Processing Limited

Café de Coral (China) Limited Hong Kong HK$40,000,000 Ordinary 100% Investment holding

Café de Coral (Denmark) ApS Denmark DKK125,000 Ordinary 100% Investment holding

Café de Coral British Virgin Islands US$1 Ordinary 100% Investment holding

Development Limited*

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Principal Subsidiaries (cont’d)

Country of Percentage

incorporation and Issued share Class of of shares Principal

Name of subsidiary operation capital shares held held * activities

Café de Coral Fast Food Limited Hong Kong HK$20 Ordinary 100% Catering

Café de Coral Group Limited Hong Kong HK$44,894,967 Ordinary 100% Catering

Café de Coral (Guangzhou)

Catering Company Limited The PRC HK$21,000,000 Ordinary 100% Catering

Café de Coral (Macau) Limited Macau MOP300,000 Ordinary 70% Catering

Café de Coral Overseas Limited British Virgin Islands US$1 Ordinary 100% Investment holding

Café de Coral Properties Limited British Virgin Islands US$1 Ordinary 100% Investment holding

Charley’s Chicken Limited Hong Kong HK$2 Ordinary 100% Catering

City Energy Limited Hong Kong HK$200,000 Ordinary 100% Property investment

Dai Lo Foo (Holdings) Limited Hong Kong HK$1,340,000 Ordinary 100% Catering

Diners Court Management Hong Kong HK$2 Ordinary 100% Catering

Limited

Dongguan Continental Foods The PRC RMB13,000,000 Ordinary 100% Food processing

Limited

Eldoon Limited Hong Kong HK$10,000 Ordinary 100% Catering

Exo Enterprises Limited Hong Kong HK$4,000,000 Ordinary 100% Catering

Foshan Café de Coral The PRC HK$6,000,000 Ordinary 100% Catering

Catering Company Limited

Gateway City Limited Hong Kong HK$20 Ordinary 100% Catering

Glory Congee and Noodles Hong Kong HK$2 Ordinary 100% Investment holding

Food Limited (securities)

Goodton Development Limited Hong Kong HK$10,000 Ordinary 100% Investment holding

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Principal Subsidiaries (cont’d)

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Country of Percentage

incorporation and Issued share Class of of shares Principal

Name of subsidiary operation capital shares held held * activities

Grand Seasons (Central) Food Hong Kong HK$10,000 Ordinary 100% Catering

and Beverages Caterers

Company Limited

Interface Consultants Limited British Virgin Islands US$1 Ordinary 100% Provision of

consultancy services

Invol Resources Limited Hong Kong HK$6,125,000 Ordinary 100% Property investment

(incorporation)/

The PRC (operation)

Jiangmen Café de Coral The PRC HK$5,000,000 Ordinary 100% Catering

Catering Company Limited

Kolink Enterprises Limited Hong Kong HK$2 Ordinary 100% Leasing of premises

space

Maradona Limited Hong Kong HK$20 Ordinary 100% Catering

Paramount Success Limited Hong Kong HK$2 Ordinary 100% Catering

Radeberg Limited Hong Kong HK$20 Ordinary 100% Investment holding

Roberto Assets Limited British Virgin Islands US$1 Ordinary 100% Investment holding

Samworth Investments Limited British Virgin Islands US$1 Ordinary 100% Investment holding

Scanfoods International S.A. The Republic US$3,000,000 Ordinary 100% Investment holding

of Panama

Scanfoods Limited Hong Kong HK$2,100,000 Ordinary 100% Food trading

Shenzhen Café de Coral The PRC HK$12,000,000 Ordinary 100% Catering

Catering Company Limited

Sheriafort Assets Limited British Virgin Islands US$1 Ordinary 100% Investment holding

(securities)

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Principal Subsidiaries (cont’d)

Country of Percentage

incorporation and Issued share Class of of shares Principal

Name of subsidiary operation capital shares held held * activities

Sparango Limited Hong Kong HK$20 Ordinary 100% Catering

Speedy Chef Limited Hong Kong HK$2 Ordinary 100% Catering

Sturgate Investments Limited British Virgin Islands US$1 Ordinary 100% Investment holding

The Spaghetti House Hong Kong HK$10,000,000 Ordinary 100% Investment holding

Restaurants Limited

Very Nice Fast Food Limited Hong Kong HK$17,025,000 Class A 100% Catering

HK$5,675,000 Class B 100%

Weli Company Limited Hong Kong HK$1,000,000 Ordinary 100% Catering

Winfast Holdings Limited Hong Kong HK$10,000 Ordinary 100% Property investment

(incorporation)/

The PRC (operation)

Worldway Limited Macau MOP300,000 Ordinary 100% Property investment

Yumi Yumi Caterers Limited Hong Kong HK$6,701,560 Class A 100% Catering

HK$2,872,100 Class B 100%

Zhuhai Café de Coral The PRC HK$4,000,000 Ordinary 100% Catering

Catering Company Limited

* Café de Coral Development Limited is held directly by the Company. All other subsidiaries are held indirectly.

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Report of the Auditors

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Arthur Andersen & Co

21st Floor, Edinburgh Tower

The Landmark

15 Queen’s Road Central

Hong Kong

AUDITORS’ REPORTTO THE SHAREHOLDERS OF CAFÉ DE CORAL HOLDINGS LIMITED(Incorporated in Bermuda with limited liability)

We have audited the financial statements on pages 37 to 69 which have been prepared in accordance with accountingprinciples generally accepted in Hong Kong.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

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

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

BASIS OF OPINION

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

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

OPINION

In our opinion the financial statements give a true and fair view of the state of affairs of the company and of the group asat 31st March, 2001 and of the profit and cash flows of the group for the year then ended, and have been properlyprepared in accordance with the accounting principles generally accepted in Hong Kong and the disclosure requirementsof the Hong Kong Companies Ordinance.

Arthur Andersen & CoCertified Public Accountants

Hong Kong, 5th July, 2001

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Five Year Summary (cont’d)

For the five years ended 31st March, 2001

(Amounts expressed in Hong Kong dollars)

CONSOLIDATED INCOME STATEMENTS

2001 2000 1999 1998 1997$’000 $’000 $’000 $’000 $’000

Turnover 2,540,326 2,408,822 2,350,904 2,181,544 2,037,417Cost of sales (2,164,773) (2,038,182) (2,045,171) (1,891,028) (1,799,216)

Gross profit 375,553 370,640 305,733 290,516 238,201Administrative expenses (115,730) (125,225) (116,930) (108,076) (106,880)Other revenue, net 54,540 49,604 55,806 42,424 91,176

Profit from operations 314,363 295,019 244,609 224,864 222,497Finance costs (25,987) (39,514) (52,441) (52,587) (49,584)

288,376 255,505 192,168 172,277 172,913

Share of profit of an associate 731 — — — —Share of profit of a jointly

controlled entity 3,141 — — — —

Profit before taxation 292,248 255,505 192,168 172,277 172,913Taxation (37,970) (34,963) (16,005) (29,371) (24,163)

Profit attributable to shareholders 254,278 220,542 176,163 142,906 148,750Dividends (106,476) (92,685) (77,305) (69,817) (70,355)

Retained profit for the year 147,802 127,857 98,858 73,089 78,395Retained profit brought forward 662,081 534,224 435,366 362,277 283,882

Retained profit carried forward 809,883 662,081 534,224 435,366 362,277

Basic earnings per share 46.33cents 39.94cents 33.52cents 27.64cents 28.58cents

Diluted earnings per share 46.27cents 39.86cents 33.46cents 27.63cents 28.50cents

CONSOLIDATED BALANCE SHEETS

ASSETSNon- current assetsFixed assets 890,154 861,413 873,269 921,383 904,647Construction in progress — 5,338 3,364 1,423 2,451Trademarks 62,274 62,694 64,274 64,274 65,203Notes receivable — — — 232,687 232,687Investment in an associate 1,614 — — — —Investment in a jointly

controlled entity 14,339 — — — —Other investments 18,547 18,562 18,562 12,992 350

986,928 948,007 959,469 1,232,759 1,205,338

Five Year SummaryFor the five years ended 31st March, 2001

(Amounts expressed in Hong Kong dollars)

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Five Year Summary (cont’d)

For the five years ended 31st March, 2001

(Amounts expressed in Hong Kong dollars)

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CONSOLIDATED BALANCE SHEETS (Cont’d)

2001 2000 1999 1998 1997$’000 $’000 $’000 $’000 $’000

Current assetsStocks 49,375 54,188 49,866 54,107 38,193Prepayments and deposits 122,154 101,369 97,087 100,162 109,063Trade and other debtors 25,475 16,092 15,903 19,225 12,179Short-term investment

in promissory notes — — 257,119 24,432 24,432Taxation recoverable — — — — 3,419Short-term investments 9,169 — — — —Cash and bank placements 681,313 524,714 419,757 141,318 208,215

887,486 696,363 839,732 339,244 395,501

Current liabilitiesShort-term bank borrowings 236,541 221,278 481,294 141,182 205,943Trade creditors 58,198 52,129 53,367 47,039 49,081Other creditors and accrued liabilities 153,232 146,780 138,301 133,743 242,580Taxation payable 12,428 11,424 10,314 7,352 922Proposed final dividend 82,690 70,547 56,854 50,849 52,115

543,089 502,158 740,130 380,165 550,641

Net current assets (liabilities) 344,397 194,205 99,602 (40,921) (155,140)

Total assets less current liabilities 1,331,325 1,142,212 1,059,071 1,191,838 1,050,198

Non-current liabilitiesNon-current bank loans 100,000 31,536 62,893 389,091 334,909Deferred taxation 11,379 12,015 9,983 20,683 18,494

111,379 43,551 72,876 409,774 353,403

NET ASSETS 1,219,946 1,098,661 986,195 782,064 696,795

CAPITAL AND RESERVESShare Capital 54,689 55,066 55,179 50,873 52,095

Share Premium 112,332 125,958 129,707 28,867 46,153Capital Redemption Reserve 53,930 35,212 27,633 26,785 7,731Cumulative Translation Reserve 1,179 (1,186) (1,007) (1,134) (961)Capital Reserve (2,470) 11,704 11,704 11,704 —Property Revaluation Reserve 7,102 7,807 19,157 19,157 —Contributed Surplus 183,301 202,019 209,598 210,446 229,500Retained Profits 809,883 662,081 534,224 435,366 362,277

Total reserves 1,165,257 1,043,595 931,016 731,191 644,700

Shareholders’ equity 1,219,946 1,098,661 986,195 782,064 696,795