1999 Annual R

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acific Century C

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Pacific Century

CyberWorks1999

Pacific Century

CyberWorks

Our shares are traded on The Stock Exchange of Hong Kong Limited (stock code:1186)

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Pacific Century CyberWorks Limited �

1999 Annual Report �Chairman’s Statement�Financial Highlights and Analysis��Review of Operations �Biographical Details of Directors � and Senior Management Corporate Information�Financial Information��About this Annual Report�

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Pacific Century CyberWorks is involved primarily in technology businesses related to the Internet and the delivery of broadband isp - enabling services and technologies to local access operators through an innovative system for satellite-to-broadband ground distribution. This system includes hfc(Hybrid Fiber Coaxial) cable systems, dsl(Digital Subscriber Line) and wireless transmission networks. We are building on our expertise and knowledge of digital technology and new media, and on that of our partners and stakeholders, to become a leader in Internet infrastructure, content and services. The year 2000 will see us launching a complementary combination of businesses that together form an interactive broadband platform for offering and enabling a wide variety of consumer and enterprise services through the Internet and television.�Our venture capital subsidiary, CyberWorks Ventures, is a leadingdeveloper of Internet businesses in the Asia-Pacific region. It takes strategic positions in young companies that can benefit from cooperation with our company and have direct synergies with our core operating business. CyberWorks Ventures’portfolio includes more than forty investee companies.�We are developing the Cyberport for the Government of the Hong Kong Special Administrative Region. The Cyberport is an important information infrastructure project to attract a strategic cluster of leading global and regional it and it-related companies to Hong Kong. This confluence of technology companies will provide a fertile environment for the generation of innovative, valuable, world-class services and technologies applicable to the Asia-Pacific marketplace and beyond.��Pacific Century CyberWorks is, effective 1 June 2000, a constituent of the msci Hong Kong Index. This brings us closer to our goal of becoming the pre-eminent channel for prudent institutional investment in Asia’s rapidly expanding Internet economy.

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Create the world’s largest broadband Internet business.

Become Asia’s preferred Internet partner.

Facilitate the entry of the best international Internet brands into Asia.

Establish our company as the pre-eminent channel for prudent institutional investment in Asia’s Internet economy.��Be the employer of choice �of top Internet talent.

Mission Statements

2

To our Shareowners

Solid Foundations in Internet TimeOur first annual report as Pacific Century CyberWorks is as much a consideration of the economic and technological evolution of the Asia-Pacific region, and the region’s place in a networked world, as it is a review of one company’s activities. Moreover, while this is our first reportable financial year as Pacific Century CyberWorks, our management team has been cultivating this business, and refining the vision -- of a truly connected regional community -- on which it’s founded, for a decade.�In the last half of that decade, economic growth around the world has been driven -- more noticeably in the West than in the East -- by the convergence of computing and communications and the inevitable digitalization of all things analog. �Andy Grove noted, on the Internet evolutionary time scale “five years is not five years” but “a substantial period of time.” A decade is not ten years.�In just the last few years of the old century, Asia has also been recomposing itself, following the regional financial crisis, providing even more fertile ground for a New Economy to take root and flourish in the East. �Indeed, Asia’s most developed economies -- with their modern, broadband-friendly telecom networks, their willing consumers of on-line applications and their well-developed payment and fulfillment systems, have already reshaped themselves along digital lines. �Take China and India -- two of Asia’s fastest-developing it markets, the world’s two most populous nations and arguably the world’s two deepest pools of computer engineering talent: the near-term prospects are inviting and the long-term picture is dazzling, with improving communications infrastructures, nascent consumer demand, fast-expanding local content offerings, ample it-literate workforces and enthusiastic official support for the development of the Internet.�Asia’s Very-New Economy has been playing catch-up with the us and Europe -- idc estimates that in 2004 the Asia-Pacific region, including Japan, will surpass North America and Western Europe in total number of Internet users. You don’t need to be a rocket scientist to figure out that the high-growth game has been moving onto a new playing field. The boundaries of this new playing field might be defined by the footprint under Asia’s communications satellites. �Here, in an area stretching from Japan to Russia to the Middle East to Australasia, representing most of the world’s population, you have a relatively young and readily upgradable cable and telecom infrastructure…and 130 million-plus connected cable tv homes (among some 850 million tv owning households) �who have, for the most part, yet to experience some form of interactivity. �Their first interactive experience -- which our company intends to provide in the coming year via AsiaSat iii – will be a high-speed broadband one. We will offer that experience over the world’s first true converged digital media network. �

5

Chairman’s Statement �continued

The early and sustainable success of this network is at the very heart of our long-term business strategy, detailed in this report’s Review of Operations. We are wholly committed to its realization.�In 1999, we filled out the ranks of our senior management team and promptly assigned them several incredibly difficult -- some might say impossible -- missions. They, and the talented and committed business divisions they are building, have wasted no time in setting about accomplishing them:�we’ve become the leading Internet entity in Asia, the largest outside Japan; our CyberWorks Ventures team has built a portfolio of strategic stakes in, �to date, more than 40 Internet-related companies, many of which will play important roles in our core broadband business;�we’ve become a preferred partner for international companies seeking to participate in the expected phenomenal growth of Asia’s Internet industry and to extend their brands to the region, having already teamed up with several global leaders in our industry, including Intel and cmgi;�we’ve positioned Pacific Century CyberWorks as a pre-eminent channel for prudent institutional investment in Asia’s Internet economy; and,�we’ve broken ground on the infrastructure for the landmark Cyberport project, the focal point of the sar Government's initiative to make Hong Kong the region’s it and information services hub.�This new year sees our growing company positioning itself to achieve yet �one more, longer-range mission: to become the world’s leading provider of broadband interactive services. Our team is on its way. They’ve laid the groundwork -- and, literally, the spacework – for the launch of the first phase of our broadband service later this year. We believe that, if the proposed merger with Cable & Wireless hkt is successfully completed, the enlarged company would significantly enhance and accelerate the rollout of our broadband program.�Our diversified but mutually reinforcing activities -- our imminent broadband service, our strategic investments, our commitment to the Cyberport – �all naturally enhance the Pacific Century CyberWorks value proposition. �More fundamentally, all are poised to take a leading role in what we consider will prove to be one of the world’s most significant business opportunities -- the rise of the Internet and e-commerce in Asia and the convergence of the New Economies of the East and West.

R i c h a r d L i Executive ChairmanHong Kong, 20 March 2000

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6

Financial Highlights & Analysis

Financial Highlights�

Group�

TurnoverProfit (Loss) before TaxProfit (Loss) after Tax and Minority InterestsProfit (Loss) after Tax and Extraordinary Items Shareholders’ EquityNet Assets

Per Share DataEarnings (Loss) per Share (hk cents)���The Group’s business was substantially restructured in the period under review, as a result of which the consolidated turnover of the Group of approximately hk$152.0 million was 46.7% less than 1998’s consolidated turnover of approximately hk$285.1 million. A consolidated profit of approximately hk$346.8 million was recorded, compared to a loss of approximately hk$62.0 million for the year ended 31st December 1998. Following diversification of the Group’s businesses, reliance on service-based projects was significantly reduced and gains of approximately hk$574.3 million (both realized and unrealized) on certain listed securities which are classified as Other Investments made a significant contribution to the Group’s profit for the year.��Liquidity and Financial ResourcesCash and bank balances of the Group increased from approximately hk$10.3 million to hk$5,053.9 million by the end of the year.�Approximately hk$960.0 million of the Group’s banking facilities of approximately hk$1,522.0 million were utilized as at 31st December 1999. The banking facilities were secured by fixed charges on certain land and buildings and other assets of the Group.

1999�hk$’000�

�152,033�352,573�346,805�346,805�

11,351,138�11,356,077�

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1998 �hk$’000 �

�285,080 �(61,457)�(62,308)�(62,308)�113,665 �117,044 �

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(13.44)��

Review of Operations

Our broadband proposition�While Internet growth has been rapid, Internet use in Asia has lagged behind that of the us and Europe due to the absence of a well-developed wireline infrastructure and a relatively lower pc penetration rate. While traditional dial-up access and localized content may be lacking, use of the Internet is growing rapidly in Asia. Continued strong growth in Asia will be dependent upon, among other things, enablement through the availability of connectivity and access to the Internet, and desire driven by the lure of compelling content.

The overall rapid growth of the Internet has driven the demand for faster connectivity, continuous access and greater bandwidth to facilitate �more complex applications and enriched content. Currently, broadband Internet access in the us and Europe is provided through existing wireline infrastructure, cable tv infrastructure with cable modem services, and satellite and wireless services. Broadband Internet access in Asia has, �by comparison, been limited by the lack of both well-developed wireline infrastructures (except in more advanced markets such as Hong Kong and Singapore) and cable tv-based Internet access services, and the early stage of development of the wireless broadband market.

Television is the prime electronic delivery system to the consumer markets of Asia, and is far more pervasive than the telephone -- an estimated 70% of the region receives television, while teledensity is estimated to be less than 5%.

The number of cable tv subscribers in the Asia-Pacific region is currently �in excess of 130 million. We believe that this subscriber base represents the most attractive market segment for our planned broadband service.

Due to the relatively recent rollout of cable services to the region (where most of the existing cable infrastructure has been constructed in the past eight years), a significant portion of the cable infrastructure has been built with hfc (Hybrid Fiber Coaxial) cable technology, which is well suited for rapid upgrading to interactive broadband capability.

The number of dsl (Digital Subscriber Line) customers is also growing rapidly. dsl technology enables broadband Internet access over existing fixed line networks.

The number of digital wireless subscribers in the Asia-Pacific region is expected to grow from 187 million in 1999 to 481 million by the end of 2003. wap (Wireless Application Protocol), gprs (General Packet Radio System) and other wireless data technologies will enable a multitude of mobile network appliances to connect to the Internet, creating an environment conducive to cross-platform interactive services.��We intend to fully capitalize on all of these trends through three main vehicles: our broadband infrastructure, interactive services and applications;

9

CyberWorks Ventures’ portfolio investments; and strategic regional and international partnerships with leading, innovative Internet companies.

Pacific Convergence Corporation (pcc) is the cornerstone of our model.

In 1999, Pacific Century CyberWorks (pccw) and Intel announced initiatives to enable broadband Internet deployment in the region and to consolidate a key partnership between the Pacific Century Group and Intel, begun in early 1998 through pcc. In September 1999, Intel acquired shares worth hk$389 million (us$50 million) in pccw and the Pacific Century Group and Intel allowed pccw to acquire pcc, at the time a joint venture between the two companies. Intel also agreed to supply comprehensive set-top and server-based solutions, using Intel architecture, to help deliver broadband interactive services. As of 31 December 1999, Intel held approximately an 8% stake, on a fully-diluted basis, in pccw.

During 2000, we will begin rolling out isp-enabling services and technologies, �in stages of increasing functionality, to local access operators, and creating a branded service -- described more fully in the following pages -- that takes full advantage of our broadband infrastructure and unique customer base.

These services will offer consumers and enterprises broadband Internet connectivity, specific broadband content and service offerings in a number of languages, combined with a supporting infrastructure which will enable electronic transactions and commerce. We will offer customers �a comprehensive range of content, entertainment and consumer and business applications. Our services are intended to be accessible through various Internet access devices, including pcs, digital Internet access devices that display on tvs and wireless devices. �Content will be delivered in multiple formats via satellite through cable systems, dial-up isps, dsl and wireless devices – including wap and 3g (third generation) technology. now’s pc-based architecture is technology- and device-agnostic, using ubiquitous Internet protocol.

Interactive broadband access through existing communications infrastructures will enable us to provide consumers with high-quality access, even in locations where traditional dial-up connectivity is unavailable, and a highly competitive service offering in regions where connectivity is better developed.

By deploying a satellite to cable head-end or telecoms earth station infrastructure, we will be able to rapidly establish contact and connectivity with local access operators across the AsiaSat iii footprint.

We will enable operators who adopt our system to provide full broadband Internet access to their consumer and enterprise customers. To this end, �in March 2000 we formed Pacific Century SoftNet, a 50-50 Hong Kong-based joint venture with Nasdaq-listed SoftNet Systems, Inc., one of the

1110

Review of Operations�continued

three largest broadband Internet providers over cable in the us. In 1999, we invested us$129 million to become SoftNet’s largest shareholder. George Chan, an Executive Director of pccw, was appointed to SoftNet’s board of directors and pccw expects to appoint a second member to SoftNet’s board in 2000.

Network of the World (NOW)�We are developing a global brand, Network of the World (now), for this compelling consumer proposition.

now will be the world’s first true converged Internet and digital video content service, combining the unique capabilities of television, the pc and the World Wide Web. now will integrate television programming with synchronized multimedia content available on the Internet; the level of tight integration we are achieving is unprecedented. Users will be able to view linear content and simultaneously tap the resources of the Internet to “drill down” for more detailed information or interact at any number of levels, including e-commerce.

After a successful demonstration during Hong Kong’s millennium celebrations, now’s broadcast service over the Web and satellite will be rolled out in phases during 2000. The commencement of the rollout of the now service will be in English, and will be achieved through an alliance�with London-based Trans World International (twi), the programming division of International Management Group (img). The partnership gives now access to twi’s library of 100,000 hours of program material and �to the more than 5,000 hours of new program material which twi produces annually.

twi is providing initial production services for now English-language programs and Web services. The choice of London, home to a generation of inventive young it and new-media professionals who are pushing back �the frontiers of the Internet and defining convergence, as now’s English-language production center recognizes the city’s global leadership in all the creative professions relevant to building content for a new medium.��pcc’s London studio and production center occupy 75,000 square feet �in three buildings, equipped to a high it specification, located at the Hogarth Business Park. The facility is a state-of-the-art, completely tapeless, fully digital, object-based environment. All material produced – both audio and visual – is stored as an object on now’s servers and can be manipulated electronically.

Pacific Century Group announces �

it will operate through a Hong Kong -

listed flagship by undertaking the

acquisition of Tricom Holdings, a

telecommunications service provider.

5.1999Milestones

Pacific Century Group acquires

control of Tricom and changes the

name of its flagship to

Pacific Century CyberWorks.

8.1999

Content will be channeled through a number of “vortals” (vertical portals), each covering a particular subject, such as sports, education, music and lifestyle. Content will grow in a viral fashion based on viewer interest.

Already some 300 staff, primarily drawn from the worlds of television, film, computing, telecommunications, games and music, are in place.

In Hong Kong, pccw has constructed a 40,000 square-foot office, production and technical center, which currently also serves as pcc’s headquarters.

now’s vortals will subsequently be produced in Chinese and Japanese. �The sequence and timing of the rollouts of service in other languages will be dictated by market demand.

With respect to Chinese services, in March 2000, pccw announced a wide-ranging agreement with Legend Holdings Ltd., China’s largest manufacturer and distributor of pcs. The alliance has three components: the co-development of a high-speed broadband Internet service for China; the manufacture �of co-branded Legend-now pcs with built-in cable modems giving exclusive broadband Internet access; and the bundling of the now service with Legend pcs. Legend’s r&d team, with input from pccw, will also develop set-top boxes for the Chinese market.

In India, pcc has entered into an agreement to acquire a 49% stake in �Data Access, a Delhi-based Internet service provider. Data Access has an isp license for Delhi, which is being upgraded to an all-India license, and has the in-principle approval of the Indian government to construct and operate an international isp gateway in India (and is awaiting the issue of the formal international Internet gateway license). Through CyberWorks Ventures, we have also acquired a 5% stake in Rediff www.rediff.com, �India’s largest Internet portal, with 560,000 registered e-mail users and �57 million page views per month as of January 2000.��In March 2000, we announced the strategic acquisition of key media rights to international cricket matches played in India through 2004. �Indian cricket is of enormous importance to the more than one billion members of the Indian community spread throughout Asia. We will exclusively build, maintain and operate, in association with the Indian state broadcaster, Doordarshan, the official Web site of Indian cricket. The Web site address will be exclusively promoted in all broadcasts worldwide �of Indian cricket matches played in India. We also acquired the rights to broadcast, via satellite and cable throughout Asia, a daily two-hour

12

Pacific Century CyberWorks

acquires Pacific Convergence

Corporation from Intel and the

Pacific Century Group. Intel invests

US$50 million (HK$389 million)

in Pacific Century CyberWorks.

9.1999

Review of Operations�continued

This production environment enables the now team to break down the barriers between the traditional disciplines of print, the Web and television. The production center includes graphics, applications and systems, it and networking. Teams develop unique and compelling cross-platform content for tv and the Web.� �

14

Review of Operations�continued

peak viewing time highlights program of each match, to be hosted by internationally renowned broadcasters and cricketers. �In April 2000, we announced two additional important content partnerships.We agreed to form a joint venture with the Chicago-based independent financial information firm, Morningstar, to develop an Asian version of Morningstar to provide high-quality financial information, analytics tools and investment guidance to investors in the Asian region. pccw and Pacific Century Insurance will jointly own 50.1% and Morningstar will own 49.9% of the proposed joint venture, which will be named Morningstar Asia. We also entered into a joint venture with Hong Kong-based Commercial Radio Productions Limited (crp) to create multimedia Internet content for the global Chinese community. A pccw subsidiary will contribute working capital and will have an equity interest of 60% in the joint venture, called pcc Skyhorse Holdings, and crp will have an equity interest of 40%.

now will provide high-speed two-way broadband access at a cost affordable to mass markets. Agreements have already been reached with a number of cable operators serving several million households. Where new cabling is needed to deliver the broadband service, it is being installed through pcc’s Head-End Franchise Network.�While we intend to offer broadband access services at locally affordable prices, we believe that our branded services will command premium prices by offering compelling content, value-added features and high speed. Our set of enabling services will allow existing network operators to rapidly and cost-effectively transform themselves into fully integrated broadband Internet service providers. We plan to attract a large subscriber base by mobilizing the cable and network operators throughout each targeted region to sell our branded services, essentially turning these operators into Internet service providers. The now service will enable consumers to customize the information and services they receive. In conjunction with automated profiling and demographic analysis, this personalization will provide our distribution channels with targeted information that in turn will enhance customer satisfaction, usage, and retention; it will allow us to maximize value for our �advertising and e-commerce partners and maximize advertising and e-commerce revenues.

B2B e-commerce Business-to-consumer (b2c) and, more significantly, business-to-business (b2b) e-commerce serving the small-, medium- and large-sized enterprise�community is expected to be an important long-term source of revenue for our broadband business. We believe that the advent of b2b e-commerce will have more profound implications for Asia, with its reliance on export-led manufacturing, its relatively lengthy and inefficient supply chains and

414 million shares are placed, raising

net proceeds of approximately

HK$2.2 billion (US$295 million).

9.1999

its fragmented markets and myriad regulatory frameworks, than for North America or Europe.

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In December 1999, pccw and Hong Kong-based NetCel Limited (NetCel) formed Total E-commerce Limited (Total e-Com), a 50-50 joint venture to provide comprehensive b2b e-commerce services and acquire, develop, manage and operate a network of b2b e-commerce companies. pccw is contributing us$30 million in cash in exchange for its stake in Total e-Com, while NetCel is contributing its shareholding in NetCel360 Holdings Limited (NetCel360), the first pan-Asian e-business service provider for businesses operating in the Asia-Pacific region, making Total e-Com the controlling shareholder in NetCel360. Total e-Com is also forming two new companies, enow! and eworks, which will provide end-to-end business and project management services to pcc and to CyberWorks Ventures portfolio companies.�Through CyberWorks Ventures, we have also acquired stakes in a number�of other b2b-focused companies such as iMerchants, a Hong Kong-listed �e-commerce solutions provider, iAsiaWorks, a pan-Asian provider of Internet connectivity, Web hosting, co-location and other related services primarily for small- to medium-sized business customers, Equinix, which operates open Internet business exchanges, and iLink.net, a Hong Kong-based data center and facilities management company. iLink’s management team is setting new standards in data center and network management in Hong Kong.

The proposed merger with Cable & Wireless hkt, discussed in the following section of this Review, would create additional opportunities to serve the �Asia-Pacific b2b e-commerce market, from logistics and fulfillment solutions to systems integration to data centers.��

Proposed merger with Cable & Wireless HKT

In February 2000, we announced our conditional offer to merge with �Hong Kong-listed Cable & Wireless hkt Limited (hkt), one of Asia’s largest communications companies and Hong Kong’s leading provider of integrated communications services. hkt supplies a full array of local and international telecommunications services, including fixed and wireless voice services, data services and leased circuits, as well as narrowband and broadband Internet access, interactive multimedia services, call centers, �applications provision and systems integration services, backed by a fully-digital fiber optic broadband network in Hong Kong and extensive international network facilities.

hkt’s regional connectivity assets comprise 44 gbps of total capacity, with direct links to all countries in the region, including 425 mbps of dedicated�Internet backbone into the us and 71 mbps into China. hkt also operates two of the largest commercial satellite earth stations in Asia, potentially eliminating the need to develop new uplinks for our satellite-based services.

Approximately 669 million shares

are placed, raising net proceeds

of approximately HK$4 billion

(US$525 million).

10.1999

hkt’s most valued asset is, naturally, its extensively trained and highly skilled workforce. We look forward to welcoming them into the pccw family and creating myriad new professional opportunities in their areas of expertise,from networking and it to telecommunications and support functions such as billing and customer relationship management.

The significant potential benefits of the proposed merger -- which would propel our broadband infrastructure and services buildout -- are numerous.

Upon completion of the proposed merger, our enlarged company would embrace: a multi-disciplinary management team with expertise across the Internet and telecommunications industries; a significant multimedia content creation team in London and Asia; world-class partners who will further enhance the enlarged company’s position in the Internet space; market leadership in Hong Kong, Asia’s most closely watched early adopter market; differentiated scaleable content and distribution assets for deployment in Hong Kong, elsewhere in Asia and the Middle East; compelling single-brand content delivered across multiple languages, geographies, and delivery platforms; and a multi-access portal.�Upon completion of the proposed merger, the enlarged company would own a distinctive brand which we would leverage from Hong Kong across the region and, ultimately, globally. The proposed merger would add over 6 million addressable customers across multiple platforms to our initial target market of 130 million cable-enabled homes and another 12 million readily upgradable homes. It would also add approximately 3.3 million telephony customers, 1 million wireless customers, 400,000 Internet users, 90,000 interactive television users and 22,000 broadband customers to our initial target market. hkt is the leading Internet service provider in Hong Kong, and hkt’s broadband optical fiber and dsl network reaches 80% of households in Hong Kong capable of accessing broadband services.

Online entertainment, online applications and mobile communications will, we expect, emerge as high-end, proprietary products, and local voice services and raw bandwidth will become commoditized as stand-alone offerings. Speed to market with bundled services and content is the key to creating sustainable value. The enlarged company would allow the bundling of proprietary content across multiple narrowband and broadband online�services. We intend to quickly expand this across China, Asia, the Middle East and, ultimately, around the globe.

In Asia, where penetration of varied broadband technologies is low and fragmented, a single brand can distribute content and services through the�most appropriate single or multiple platforms in each market. In order to achieve scale, we would develop a single brand of Internet content and

16

Review of Operations�continued

18

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service (with multiple channels) across a range of delivery platforms, simultaneously. hkt’s leading position in Hong Kong makes it the ideal base in Asia from which to roll-out an extensive range of services across multiple platforms. Moreover, Hong Kong has one of the largest media-rich customer bases in Asia; it has high penetration rates across various narrowband and broadband technologies and will serve as the ideal platform for the distribution of localized and customized content across China and the rest of Asia.

Review of Operations�continued

Pacific Century CyberWorks and

CMGI complete a US$350 million

(HK$2.7 billion) equity swap.

11.1999

hkt also has its own portfolio of Internet investments which would add incremental scale to CyberWorks Ventures. The proposed merger would help our strategic Internet business partnerships achieve scale and pursue new business opportunities. Increasing the size of our network of partners and our portfolio multiplies the opportunities for synergy between them.�

Strategic alliance with TelstraIn April 2000, pccw and Telstra Corporation (Telstra), the leading fully integrated, full service electronic communications and information services provider in Australia and a top tier global carrier with annual revenue of a$18.2 billion (us$11billion; hk$85.6 billion), signed a memorandum of understanding to form a strategic alliance, subject to the conclusion of pccw’s proposed merger with hkt, creating a regional Internet, data, ip backbone, wireless and business services group. The proposed alliance comprises a total cash investment of approximately us$3 billion (hk$23.4 billion) by Telstra, the creation of two new joint venture companies, a commitment to jointly pursue opportunities in value-added telecommunications services and an agreement to facilitate commercial arrangements for the now service. Telstra would directly invest us$1.5 billion (hk$11.7 billion) in pccw in the form of a convertible note.

Conditional upon completion of the proposed merger with hkt, pccw and Telstra would first form a joint venture data/ip company which would operate a wholesale backbone business in the Asia-Pacific region and, ultimately, globally. A second company would be formed which would focus on mobile communications and the development of wap and 3g technologies. The third element of the strategic alliance would focus on such areas as network and facilities management and b2b e-commerce. The fourth element is an agreement to facilitate commercial arrangements to deliver now content in Australia, via Telstra. pccw and Telstra plan to deliver the now service across multiple platforms including Telstra’s cable tv, fixed line and wireless services, and to create converged content in Australia. In such circumstances, Telstra and pccw would then each contribute relevant operating assets and businesses into the new companies.

CyberWorks VenturesCyberWorks Ventures (cwv) is one of the foremost developers of Internet businesses in the world and a leader in the Asia-Pacific region. cwv invests in, incubates and operates these businesses. cwv’s investment strategies are: to foster rapid growth and industry leadership across pccw’s network and the Asian Internet economy; to aggregate investee companies’ technologies into turnkey server operating system solutions which provide a one-stop-shop for businesses that plan to migrate onto the Web; and to build the largest, most diverse network of Internet companies in Asia.

cwv’s investments, which can take the form of any combination of cash, advertising inventory or equity in pccw, greatly enhance pcc’s value proposition. cwv invests across all the technology and infrastructure layers of the Internet economy and targets companies that can provide pcc’s now and our partners with cutting-edge infrastructure services, content, e-commerce solutions and connectivity. Investee companies are often positioned to take advantage of pcc’s broadband platform and tap its potentially massive captive customer base.

The ‘Ventures’ team, comprising over twenty executives with diverse technical, financial and consulting backgrounds, works out of offices in Hong Kong, China, India, Japan, Singapore and the us. The team proactively identifies key areas for investment, takes equity stakes in promising Internet businesses, takes steps to maximize investee companies’ growth potential and leverages their technical expertise and worldwide locations.�cwv has invested in more than 40 companies since pccw’s inception. �We have formed joint venture operations with several investee companies, sit on 16 investee company boards and have invested in 13 companies which have filed for or intend, in the near future, to file for initial public offerings.

cwv investments in 1999 include:�a 10% stake in Action Ace.com www.actionace.com, headquartered in Richmond, California with its sourcing office in Hong Kong. Action Ace is a developer and provider of proprietary interactive multi-user software applications and services for the Internet. Its proprietary 3d technology, 3d Groove, enables a diverse base of Internet businesses to enrich their Web users’ experience. The group also owns ActionAce.com, an e-commerce and community Web site intended to be an incubator for content and talent.a 5% stake in Creditland.com www.creditland.com, the Internet’s firstfinancial super-store to offer consumers an unbiased choice of the best financial products from trusted brands, such as Bank of America, Chase and mbna, in a one-stop comparison shopping environment.�

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A platform for the development of Asia's Internet economy

20

a 1.3% stake in ELetter www.eletter.com, the leading online directmail service provider. The company is funded by Artemis Ventures, �Bowman Capital, Canaan Partners and Trident Capital. Current strategic partners include Microsoft Direct Mail Manager, Intuit Quickbooks, �Dell, Office Depot, HotOffice, infousa, iMall and iNiku.�a 2% stake in Equinix www. equinix.com, which designs, builds andoperates the first open Internet Business Exchanges (ibxs). Its first ibx, �in the Washington, d.c. area, became operational in July 1999. Equinix intends to deploy an additional eleven ibxs in the us, Europe and Asia.�a 1.4% stake in iAsiaWorks www.iasiaworks.com, a pan-Asian providerof Internet connectivity, Web hosting, co-location and other related services primarily for small- to medium-sized business customers. �an 80% stake in iLink.net www.ilink.net, a Hong Kong-based data centerand facilities management company. iLink provides clients with “mission-critical” grade data center facilities incorporating the latest high security, fire-prevention, uninterrupted power supply, and 24x7 non-stop network operations control systems. �a 1% stake in Orama Partners www.oramapartners.com, the first Israeliinvestment bank to be established in the us, focusing on high-technology investment opportunities. Founded as a subsidiary of The Israel Discount Bank, Orama provides global reach as an advisor to emerging Israeli technology companies seeking to fuel their international expansion efforts through access to us capital markets.a 20% stake (increased to 46.2% in February 2000) in Hong Kong-based Outblaze www.outblaze.com, a pioneer in the development and provision of multilingual integrated Internet community solutions for Websites offering their own private-label portal services. The Outblaze business model is to provide these instant portal services to Websites at no cost. Outblaze handles all technical management of the service and the Website partner handles the marketing of the service. Instead of receiving a licensing fee, Outblaze and the Website partner co-own the co-branded portal service and share incremental advertising revenue. As of April 2000, Outblaze had signed up over 20,000 Websites, and achieved an audited average of 7 million daily page views and at least 3.9 million active users.�a 5% stake in Rediff www.rediff.com, India’s largest Internetportal, with 560,000 registered e-mail users and 57 million page views per month as of January 2000. Founded in 1996, Mumbai-based Rediff delivers news, information, free e-mail, chat, personal home pages and online shopping for books, music and hotel reservations to the domestic market and Indians worldwide. Rediff is also the largest Website builder in India and builds high-end Websites for customers in India and worldwide. Rediff has been rated by cnn as one of the top 50 news-sites in the world and is the preferred site for Indians worldwide. Rediff has filed for a Nasdaq listing. �

Review of Operations�continued

NOW service is successfully �

demonstrated to a global �

audience during Hong Kong's �

millennium celebrations.

12.1999

a 9% stake in Sinomd www.sinomd.com, a planned Hong Kong-based healthcare Website serving professionals and consumers. Sinomd is developing content from a database developed by the Chinese Academy of Traditional Chinese Medicine.�a 20% stake in stareastnet www.stareastnet.com, a Hong Kong-based entertainment content provider. stareastnet is jointly owned by a number �of regional and international film and music industry personalities including Jackie Chan, Alan Tam, Eric Tsang, Natalie Chan, Wong Jing, Christie Chung and Leong Ka Fei.a 1.5% stake in ugo Network, www.ugo.com, a leading onlineentertainment destination catering to the 18 to 34 year-old male market.a 10% stake in Vicus www.vicus.com, a us-based healthcare Websiteoffering information and editorial perspective on alternative medicine. �The company intends to establish its Website as the premier portal for professionals and consumers seeking information on alternative medicine.��We also acquired a stake in divine interVentures www.divine.com, �a Chicago-based b2b e-commerce solutions provider and incubator.

In the current year, 2000, we have:�acquired a 1.3% stake in Beatnik www.beatnik.com, a provider ofinteractive music and sound -- ‘sonification’ -- to the Web. Beatnik’s solution includes a line of applications, production music, sound content and software technologies that enables the integration of interactive audio content into the Web experience. Beatnik develops, markets and sells its interactive audio solution to creative professionals, potential licensees �of its technology and consumers, enabling them to build and interact with music and sound over the Web, on computers and other digital devices.�acquired a 12.5% stake in privately-held, Oakland-based DigiScents www.digiscents.com, the pioneer of digital scent technology. DigiScentsis partnering with leading Web sites and interactive media companiesto scent-enable the Internet. �

a 25% stake (with an option for a further 4.9%) in SilkRoute Holdingswww.silkroute.com, a Singapore-based Internet holding company that is pioneering online businesses across Asia. Through its venture arm, SilkRoute Ventures, SilkRoute is presently incubating several early-stage ventures that have the potential to become exceptional online businesses. Its company, Advanced Manufacturing Online, is a leading b2b e-commerce provider. SilkRoute also operates its Web-development business as a separate subsidiary, Latitude Web, whose blue-chip roster of clients includes Singapore Airlines, Asia Pacific Breweries’ Tiger Beer brand, the Singapore Tourism Board and the Singapore Economic Development Board.�a 1.4% stake in Sina.com www.sina.com, a leading Internet destinationsite for Chinese communities worldwide, combining the largest registered user base and the highest number of page views in its demographic segment from China, Hong Kong, Taiwan and the us. Sina.com completed its ipo in April 2000.

Review of Operations�continued

Pacific Century CyberWorks and

London-based TWI, the programming

arm of IMG, announce a strategic

sports and digital media production

partnership.

12.1999

22 23

acquired a 5.6% stake in Dotcast www.dotcast.com, a Silicon Valley-�based broadband communications company which enables rich-media content, e-commerce and communication service providers to more effectively deliver digital products and services to businesses and consumers. Its patent-pending, state-of-the art dntsc technology will allow tv stations �to deliver high-quality video to pcs over their analog channels at speeds �of 4.5 megabits per second.�acquired a 2% stake in Escrow.com www.escrow.com, an online escrow �service based on the Fidelity transaction engine, which manages nearly us$100 billion in transactions annually.acquired a 2% stake in etnet www.etnet.com.hk, a Hong Kong-based financial portal spun off from the Hong Kong Economic Times.�acquired a 20% stake in Hikari Tsushin International www.hikari.co.jp, the Hong Kong- listed flagship of Hikari Tsushin Inc., one of Japan’s largest Internet companies and a leading retailer of mobile phones and services.acquired a 10% stake in iMerchants www.imerchants.com, an e-commerce solutions provider which listed its shares on Hong Kong’s Growth Enterprise Market (gem) board in March 2000, consequent to which cwv’s stake was reduced to 8%. acquired an 8% stake in Intelligenesis www.intelligenesis.net, �a development-stage software company pioneering an artificial intelligence software architecture, Webmind, for the Internet that understands �the meaning of concepts expressed in text, speech, and numerical data patterns. By transforming documents and databases into a dynamic �mind-like network of associations, WebMind can distinguish meaning �in unstructured text, where the bulk of human knowledge is stored. �The company intends to use the WebMind engine to develop a portfolio �of advanced Web-based financial and information products and services. Two of these products are in advanced stages of development�and are expected to be released in 2000.acquired a 12.5% equity stake in Magically www.magicaldesk.com, �a privately-held Redwood City-based developer of an Internet-based “virtual desktop”, MagicalDesk, a suite of Web-based applications which includes �e-mail, address books, calendars, task lists, Internet bookmarks, file storage, document viewing and file synchronization. Magically makes its virtual desktop available to Internet portals, content providers, application service providers, Internet service providers and original equipment manufacturers. acquired a 21% stake (with options for a further 20%) in the property portal! www.pp.com, Hong Kong’s first independent vertical portal forthe Asian residential property industry. Headquartered in Hong Kong and with operations in Beijing, Guangzhou and Shanghai, pp.com plans to open offices in Singapore, Japan and Taiwan in 2000.��

Overleaf: now London production center

Pacific Century CyberWorks and �

Hong Kong-based NetCel agree

to form Total e-Com, positioned

to be the premier B2B services

group in the Asia-Pacific region.

12.1999

acquired a 4.65% stake in Sohu.com www.sohu.com, China’s first andlargest Web portal with over six million daily page views and over 850,000 registered e-mail users. Sohu.com offers a proprietary directory that �has helped shape the searching habits of mainland Chinese Internet users. �In addition to a free search service, Sohu.com provides 20 high-quality branded content channels, free e-mail and bulletin board services.acquired a 1.6% stake in Taste for Living www.tasteforliving.com, an on-line health and wellness company that originated from the highly acclaimed Taste For Living Cookbook by Michael Milken and empowers people to educate themselves about nutrition and nutrition’s role in cancer prevention.acquired a 22.4% stake in 3Fusion www.3fusion.com, whose networkede-Commerce Infrastructuretm enables manufacturers, distributors, suppliers and content providers to leverage content and community to drive commerce. 3Fusion’s easy-to-implement e-commerce platform and embedded content catalog enables content providers to integrate commerce in their sites and gives merchants direct access to target markets.

2726

Review of Operations�continued

CMGI

In September 1999, pccw and Nasdaq-listed cmgi, the world’s largest and most diversified network of Internet companies, agreed to a us$350 million (hk$2.7 billion) equity swap.

In January 2000, the two companies agreed to form cmgi Asia, a joint venture to create and operate Internet-related businesses throughout the Asia-Pacific region. The new company will be headquartered in Hong Kong and will establish regional joint venture operations for cmgi’s 18 majority-owned operating companies; cmgi Asia will hold 60% or more of each of these new regional operations. The first four cmgi companies to be brought �to Asia will be AltaVista, the premier media and commerce network, Engage Technologies, a leading provider of Internet marketing solutions, icast, a multimedia-rich online entertainment company and 1ClickCharge, the pioneering single-click Internet payment service.

@Ventures Global Partnerspccw is forming a us$1.5 billion (hk$11.7 billion) venture capital fund, @Ventures Global Partners, together with cmgi and Hicks, Muse, Tate & Furst (Hicks Muse), to invest in emerging Internet businesses in Europe, Asia and the Americas. This alliance leverages each partner’s assets, advances our shared vision for online and traditional media convergence on a global scale and seeks to tap the valuable synergies between Hicks Muse’s existing traditional-media holdings with the new-media and infrastructure assets within pccw and cmgi.

Hicks Muse is the largest lbo firm in the us and is a major force in the North and Latin American media industries, with investments in radio, tv, outdoor advertising and movie theater chains. It will be the largest shareholder in Clear Channel Communications, which, following its merger with amfm, Inc., will be the world’s largest radio broadcaster. Its Latin American media holdings include cei Citicorp, the Argentinian media company with exclusive soccer rights for the country, Grupo mvs sa, the Mexican pay tv provider and radio broadcaster, Pan-American Sports Network, with 7 million cable subscribers, and Brazil’s Traffic, which has exclusive tv rights to Brazilian soccer.��Subject to completion of our proposed merger with hkt, cmgi has agreed to acquire from Cable & Wireless plc, the majority shareholder in hkt, �shares in pccw valued at us$500 million (hk$3.9 billion), while Hicks Muse has agreed to acquire us$500 million worth of pccw convertible preference shares.

Pacific Century CyberWorks and �

CMGI agree to form CMGI Asia, a

joint venture which will create and

operate Internet businesses in Asia.

1.2000

acquired a 4.25% stake in tom.com www.tom.com, a vertical portallaunched in December 1999 and listed on Hong Kong’s gem board in March, 2000, consequent to which our stake was reduced to 4.11%. tom.com aims to be the premier Chinese content aggregator by developing information and entertainment-related businesses serving global Chinese and mainland Web users. tom.com’s content-providing partners include China Travel Network Co., China National Publications Import and Export Corp. and the Chinese Academy of Sciences.took a 3.4% stake in Weave Innovations www.weaveinnovations.com,developers of the StoryBox, a distribution platform for digital images, �digital picture frames and personalized content. Other investors include Maveron llc, Eastman Kodak, Phoenix Partners, Peterson Ventures and Ridge Ventures.��We have also acquired a stake in TurboLinux www.turbolinux.com, a leading, San Francisco-based international provider of Linux operating software. Founded in 1992, TurboLinux is the world’s fastest-growing Linux company and a market leader in Linux software clustering solutions and Linux internationalization, with investment backing from more than 20 global hardware, software and services companies. TurboLinux offers its Linux workstation and server software in Japanese, Chinese, and English versions. TurboLinux is the Linux Operating System market leader in Japan and in the growing Chinese market.�� �

�

Strategic partnerships and other investments

As part of our ongoing strategy, we are building partnerships with leading international Internet and Internet-related companies.� �

Overleaf : Architect’s rendering of the Cyberport.

A total of 583 million shares are �

placed, raising net proceeds �

of approximately HK$11.5 billion

(US$1.5 billion).

2.2000

Bowman CapitalIn February 2000, pccw and Bowman Capital, a premier Silicon Valley-�based investment management firm with over us$5 billion (hk$38.9 billion)in assets and specializing in both public and private technology growth� companies, agreed to co-invest in selected expansion-stage privately-held technology companies with significant growth potential in Asia. Bowman Capital is taking primary responsibility for identifying investment candidates while pccw assists investee companies in the formulation and implementation of their Asian business strategies. Asia Java FundIn October 1999, pccw took a 20.8% stake in the hk$375 million Asia �Java Fund, managed by leading venture capital firm, AsiaTech Ventures. �The Fund aims to accelerate the development of Asia’s Internet economy by making investments dedicated to Internet entrepreneurs using Java in Asia.

The Cyberport, a project that pccw is developing for the Government of the Hong Kong Special Administrative Region, is an integral part of our broadband proposition. The Cyberport will be a campus-style, multi-use environment designed to foster the development of Hong Kong’s information technology and services sector and to strengthen Hong Kong’s position as Asia’s information, multimedia and telecommunications hub.

With a total gross floor area of about 540,000 square meters, the Cyberport �is being built on about 26 hectares of reclaimed land at Telegraph Bay on the south-western coast of Hong Kong Island, offering a low-density environment close to Hong Kong’s central business and financial district. �The Cyberport will provide a first-class working and living environment, tailored to the requirements of a strategic cluster of leading-edge information technology and services companies and multimedia content creators. Fifteen Internet industry leaders -- Cisco, cmgi, Hewlett-Packard, Hikari Tsushin, Huawei, ibm, Legend, Microsoft, Oracle, Pacific Convergence Corporation, Portal Software, Silicon Graphics, Softbank, Sybase and Yahoo! -- have signed Letters of Intent to become anchor tenants.

The Cyberport offers a carefully planned mix of commercial, business, educational and recreational facilities to be completed in stages during 2002-2003, with Phase One due for completion at the end of 2001/early 2002. Owned by the Government of the Hong Kong Special Administrative Region, the office premises will be leased to occupants at rental levels competitive with those of similar facilities overseas.

The residential portion will be completed in phases during 2004-2007. These units will be for sale. The proceeds, after development and financing costs of the whole project, are to be shared by pccw and the Government.�

In September 1999, entrustment works for the Cyberport’s engineering infrastructure commenced. Construction of Phase One starts in June 2000.�The core Cyberport portion of the development is being designed by Arquitectonica, based in Miami and New York. Founded in 1977, Arquitectonica has developed an international practice recognized for excellence and innovation. The firm is best known for its creative ability �to design with memorable imagery and regional identity. It has won numerous American Institute of Architects and Progressive Architecture Design Awards.

The Southern California-based urban planning and architecture firm The Jerde Partnership International, Inc., also founded in 1977, �is designing the CyberCenter, the interactive retail section of the development. Jerde’s projects include master-planning of the 425-acre Universal City and Universal CityWalk, an urban, entertainment-oriented, mixed-use pedestrian promenade in the us, and numerous acclaimed large-scale, mixed-use projects in Japan, Australia and The Netherlands. �Hong Kong-based Wong Tung and Partners Limited have been engaged as project architects.�

pccw is currently engaged in the development of and investment in commercial and residential real estate projects in China and Hong Kong, and is engaged in the customer premises equipment business in Hong Kong, acting principally as a systems integrator for office telecommunications systems.��These businesses provide asset backing and positive cash flows to pccw �during the buildout of our core information technology and Internet activities, acting as a store of value and potential source of financing.

Pacific Century Place in Beijing is a mixed-use complex located adjacent �to the Third Ring Road, a major artery in the heart of Chaoyang District, home to the majority of the capital city’s foreign embassies and international five-star hotels. Pacific Century Place is generally regarded as the city’s top-ranked location for multinational corporations and international institutions. The Embassies of France and Botswana recently joined ibm, Boeing, Johnson & Johnson, Alcatel, Mitsubishi Electric and Nokia as office tower occupants. Thirty-six apartments, representing one half of residential Tower “d”, were sold to the us Government in 1998 for use by senior us Embassy staff. After extensive redesign work, residential Tower “c” was completed in 1999. The retail podium is scheduled for completion in summer 2000. Discussions are underway with a number of international retail and consumer services groups keen to occupy substantial space.

3130

Review of Operations�continued

Pacific Century CyberWorks and �

Legend, China's largest manufacturer �

and distributor of PCs, announce a�

strategic alliance to offer broadband �

service and content in China.

3.2000

Cyberport

Other development and systems integration activities

Pacific Century CyberWorks and �

Australia's Telstra enter into a �

memorandum of understanding �

to form a strategic alliance, subject �

to the conclusion of Pacific Century

CyberWorks' proposed merger with

Cable & Wireless HKT.

4.2000

One of the greatest challenges faced by our company – indeed, the greatest obstacle to the sustainable growth of it and the Internet worldwide – is a scarcity of professional “bandwidth”. Our near term staffing requirements in every area of our business are substantial. pccw’s workforce totals approximately 900 as of May 2000; including pccw offices in Hong Kong and Japan, startups under the cmgi Asia umbrella, the growing now production operation in London and overseas offices opening in India, Singapore and the us, this is projected to increase to approximately 1,500 by the end of the year.

Recruiting, retaining and rewarding skilled professionals, and attracting the best and brightest graduates, remains our single highest priority.

In addressing this challenge, we have at the same time identified �a substantial business opportunity. In March 2000, we started up People now.com, a Web-based search firm in which we hold a majority stake and which will serve the recruitment needs of our core operations, our subsidiaries and our strategic partners, as well as the it industry at large.

We foresee People now.com, headquartered in Hong Kong, and its people.now.com Website growing to become one of the largest it-industry recruitment portals. Plans call for People now.com offices to be established in markets where pccw, pcc and our joint ventures are active or have �a significant presence, such as the us, uk, China, India and Singapore.

32

Review of Operations�continued

Pacific Century CyberWorks

becomes a constituent of the

MSCI Hong Kong Index.

6.2000

Net net: People

3534Above: Peter To, Francis Yuen, Alexander Arena

Richard Li, aged 33, is Executive Chairman

of the Company, Chairman and Chief

Executive of the Pacific Century Group

and Chairman of Pacific Century Regional

Developments Limited. Before founding

the Pacific Century Group, Mr. Li built

star tv, Asia’s first satellite-delivered

cable service. In the three years under his

leadership, star tv grew to a subscriber

base of over 53 million homes across Asia,

the Middle East and Europe. The sale �

of Star tv to News Corp in 1993 provided

the capital to launch the Pacific Century

Group in October that year. Mr. Li was

born in Hong Kong in 1966. He was

educated at Stanford University in the us.

Mr. Li is a member of the Center �

for Strategic and International Studies’

International Councillors Group in

Washington, d.c., a member of the World

Economic Forum and a member of the

International Advisory Board of the

Center for International Development at

Harvard University.�

Francis Yuen, aged 47, is a Deputy

Chairman of the Company, Deputy

Chairman of the Pacific Century Group,

Chairman of Pacific Century Insurance

Holdings Limited and Deputy Chairman

of Pacific Century Regional Developments

Limited. He joined the Pacific Century

Group in 1996 after an extensive career in

investment banking and financial

regulatory affairs that spanned Asia. From

1988 to 1991, he was Chief Executive of

The Stock Exchange of Hong Kong

Limited. Mr. Yuen was also a founding

director of Hong Kong Securities Clearing

Company Limited. Mr. Yuen served from

1992 to 1994 as a member of the

International Markets Advisory Board of

Nasdaq in the United States, the second

largest stock market in the world. He was

made the Managing Director of Citicorp

Scrimgeour Vickers Hong Kong Limited

in October 1986, and was appointed to

the firm’s main board in London in 1987.

Mr. Yuen worked for Wardley, a merchant

bank, from 1977 to 1985. Mr. Yuen is the

Chairman of the Board of Trustees of the

Hong Kong Centre for Economic

Research, a member of the Shanghai

People’s Political Consultative Committee,

and a member of the Board of Trustees of

Fudan University in Shanghai. �

He received a Bachelor of Arts degree in

Economics from the University of Chicago

and is presently a member of the Board �

of Trustees of the University.�

Peter To, aged 52, is a Deputy Chairman

of the Company and Managing Director

and Chief Executive Officer of Pacific

Century Regional Developments Limited.

He has been active in property

development and investment for more

than 27 years. Mr. To obtained a

Certificate of Housing Management from

the University of Hong Kong and is a

Fellow of both the Chartered Institute of

Housing (uk) and Hong Kong Institute of

Housing. Prior to joining the Pacific

Century Group in September 1997, �

he was Managing Director of the

Hutchison Whampoa Property Group.

From 1983 until July 1997, Mr. To was

mainly responsible for the development,

marketing and management of all

development and investment properties

in the Hutchison Whampoa Property

Group’s portfolio, which included a wide

range of industrial and warehousing,

commercial and residential development

projects in Hong Kong and in major cities

in the People’s Republic of China with a

total floor area of over 2.5 million square

meters. Mr. To is responsible for the

overall strategy of the property

development business of the Company

and the Cyberport Project.��

Alexander Arena, aged 49, is the

Managing Director of the Company and

is also a Director of Pacific Century Regional

Developments Limited. He joined the

Pacific Century Group in 1998. He was

a Special Policy Adviser to the Government

of Hong Kong from 1997 to 1998. From

1993 to 1997, Mr. Arena was the Director-

General of Telecommunications in

the Office of the Telecommunications

Authority of Hong Kong as well as a

member of the Broadcasting Authority.

Prior to his appointment as Director-

General, Mr. Arena was recruited to

Hong Kong to plan a reform program for

the liberalization of Hong Kong’s

telecommunications sector. Prior to his

appointment to the Government of Hong

Kong, he was an inaugural member

of The Australian Telecommunications

Authority and had served in that capacity

for four years. Mr. Arena has had an

extensive career in public administration,

specializing in high technology and

infrastructure industries. From a practicing

radio/communications engineer to a public

policy maker, his experience spans such

diverse areas as the commercialization of

government-owned business enterprises

and deregulation in the aviation,

transport, telecommunications and postal

industries. Mr. Arena graduated from the

University of New South Wales, Australia

with a Bachelor’s degree in Electrical

Engineering and completed an mba

degree at Melbourne University, Australia. ��

Peter Allen, aged 44, is an Executive

Director and Chief Financial Officer of

the Company. He is also the Chief

Financial Officer of Pacific Century

Regional Developments Limited. He was

educated in England and has a degree in

Economics from Sussex University,

England. He is a Fellow of the Institute of

Chartered Accountants in England and

Wales and a member of the Institute of

Certified Public Accountants of

Singapore. Mr. Allen joined kpmg Peat

Marwick in 1976 and in 1980 joined

Occidental Petroleum Corporation. �

In 1983, Mr. Allen joined Schlumberger

Limited and worked in various countries

holding key finance positions. In 1989,

Mr. Allen moved to Singapore as Regional

Financial Director of the Vestey Group.

He later joined Bousteadco Singapore

Limited as Group Operations Controller

in 1992 and Morgan Grenfell Investment

Management (Asia) Limited as director

and Chief Operating Officer in 1995. �

He joined the Pacific Century Group and

moved to Hong Kong in 1997.

Mico Chung, aged 39, is the Executive

Director of the Company responsible for

CyberWorks Ventures. He is a qualified

solicitor by profession. Mr. Chung

graduated from the University College,

University of London, England with a law

degree in 1983. He qualified as a solicitor

in Hong Kong in 1986, after which he

worked in the commercial department �

of a law firm in Hong Kong for two years.

He joined the corporate finance

department of Standard Chartered Asia

Limited, the investment banking arm of

Standard Chartered Bank, in 1988. �

He became a director and the general

manager of Bond Corporation

International Ltd. in 1990 and left to join

China Strategic Holdings Limited �

in January 1992. Mr. Chung joined the

Pacific Century Group in March 1999. ��

Nicholas Colfer, aged 40, is an Executive

Director of the Company and the Chief

Operating Officer of pccw Properties

Limited. He is also the Chief Operating

Officer of Pacific Century Regional

Developments Limited. From 1986 to

1989, Mr. Colfer was the Leasing/

Developments Manager of the Hongkong

Land Co. Ltd. involved in leasing

commercial and retail space and

evaluation assignments on investment

opportunities. From 1989 to 1994, �

Mr. Colfer worked for k.k. Halifax

Associates in Tokyo as Managing Director,

responsible for property development �

and advisory services in Japan. In 1994, �

Mr. Colfer was assigned to the Jardine

Engineering Corp., Ltd. in Hong Kong

as Managing Director from 1994 to 1996

and as Executive Director from 1997 until

he joined the Pacific Century Group in

June 1998. Mr. Colfer was educated in

England and received a ma Honours degree �

in Modern Languages (German) and

History from St. Peter’s College, University

of Oxford, England.�

Todd Bonner, aged 33, is an Executive

Director of the Company and Chief

Executive Officer of Pacific Century

CyberWorks Japan Limited. Mr. Bonner

joined the Pacific Century Group in �

Hong Kong in 1994 and was promoted to

head of business development in 1996. �

Mr. Bonner worked in the investment

banking division of Alex Brown & Sons

between 1991 and 1994. He received

a Bachelor of Science degree in Biological

Science with emphasis in Neurobiology

from Stanford University.�

George Chan, aged 47, is an Executive

Director of the Company. Mr. Chan has

extensive experience in Asian

broadcasting, including both terrestrial

and cable television, and home-video

distribution. Prior to joining the Pacific

Century Group in 1993, Mr. Chan was

one of the founders and an Executive Vice

President of star tv. From 1975 to 1989,

Mr. Chan worked for Hong Kong’s

leading terrestrial broadcaster, Television

Broadcasts Ltd (tvb), where he started �

as an Administrative Assistant and rose to

the position of Controller of Marketing

and Sales. From 1980 to 1988, Mr. Chan

served on tvb’s Executive Management

Committee. He also headed tvbi,

an associated company responsible for

worldwide home-video and broadcasting

distribution of all tvb programs. Mr. Chan

received his Bachelor of Science degree

from the University of Hong Kong and �

his mba degree from the University of �

San Francisco.

Executive �Directors

3736

Avram Miller, aged 55, is a Non-Executive

Director of the Company. He also serves

as a director of several high-technology

companies, including cmgi, Inc. and

AltaVista. He joined Intel Corporation in

1984 and held a number of executive

positions. His most recent position was a

Corporation Vice President of Business

Development. In April 1999, he left Intel

to start The Avram Miller Company, a

strategy and business development

company where he is the Chief Executive

Officer. Mr. Miller is also active in a

number of non-profit making organizations

including Plugged In and is a Trustee of

the California Institute of the Arts.

He resides in San Francisco, California.

Sir Roger Lobo, aged 76, is an

Independent Non-Executive Director of

the Company. He is also a director of

several organizations including Shun Tak

Holdings Ltd., Johnson & Johnson (hk)

Ltd., Kjeldsen & Co. (hk) Ltd., p. j. Lobo

& Co. Ltd., Pictet (Asia) Ltd., Melco

International Development Ltd. and

Martell Far East Ltd. His extensive record

of public service includes serving on the

Hong Kong Housing Authority, Urban

Council, as Member of the Executive

Council, Senior Member of the Legislative

Council, Commissioner of Civil Aid

Services, Chairman of the Hong Kong

Broadcasting Authority and Chairman �

of the Advisory Committee on Post-

retirement Employment. He currently

serves as Chairman (Board of Trustees) �

of Vision 2047 Foundation, Vice-Patron of

the Community Chest of Hong Kong and

the Society for the Rehabilitation of

Offenders, and Advisory Board member

of the Hong Kong Aids Foundation. �

Sir Roger has been the recipient of several

awards and honors from the British

Crown and the Vatican.�

�

�

�

�

Dr. Paul Cheung, aged 46, is an

Independent Non-Executive Director of

the Company. He received his B.Sc.(Eng)

degree with first class honours and his

Ph.d. degree from the Imperial College of

Science and Technology, University of

London in 1973 and 1978 respectively.

Currently he is the Dean of Engineering

at the University of Hong Kong. Prior to

joining the University of Hong Kong, he

worked for Queen’s University of Belfast

and the Hong Kong Polytechnic. �

He joined the University of Hong Kong as

lecturer in 1980 and was promoted to

Senior Lecturer/Associate Professor in

1987. He served as the Associated Dean of

Engineering from 1991 to 1994 and has

served as the Dean of Faculty of

Engineering since 1994. He was elected

the Asia Pacific Region Director of the

Institute of Electrical and Electronics

Engineers, Inc. (ieee) in 1995-96 and in

1997 became the first person from Hong

Kong to serve as the Institute’s Secretary.

He is currently a Charter Engineer and a

Senior Member of the ieee. Over the

years, he has graduated over 20 research

students. His research includes parallel

computer architecture, Internet

computing, vlsi design, signal processing

and pattern recognition. He has

published over 60 research papers in

international journals and refereed

conference proceedings. He is also a

Director of Versitech, a technology

transfer company of the University of

Hong Kong, and a Director of the

Information Technology Entrepreneur

Association, a non-profit organization to

promote it entrepreneurs.

Non-Executive Directors

Senior Management

Hubert Ng joined the Company in 1999

and is Chief Executive Officer of Pacific

Convergence Corporation (pcc). �

Mr. Ng has more than 25 years of

experience in the technology industry

and brings to pcc over 15 years of senior

management telecommunications

expertise in business planning and

development, operations, and sales and

marketing. Prior to joining pcc, he was

the Chief Executive Officer of SmarTone

Mobile Communications Limited, and

before that, the Managing Director of

Hongkong Telecom csl Mobile. Mr. Ng �

is Chairman of the Telecom Association of

Hong Kong, which promotes the further

development of the telecommunications

industry in Hong Kong. In 1996, he was

appointed by the Government of Hong

Kong to serve as a member of its Business

Advisory Group. �

Steve Moss joined the Company in 1999 �

as the Chief Operating Officer of Pacific

Convergence Corporation. He has over

30 years of media start-up experience,

including star tv where he was Executive

Vice President during its formative years.

Additionally, Mr. Moss has held key

positions and responsibilities for a

number of the Pacific Century Group’s

trans-national communications

businesses. Prior to joining the Pacific

Century Group, he was managing partner

of a new media consultancy and led the

development of several cable television

franchises in North America and Europe.

Mr. Moss received his education at the

London School of Economics and the

Harvard Graduate School of Business

Administration.

John Latter is the Project Director of

the Cyberport Project. Mr. Latter started

his career with Binnie & Partners as

an engineer in London and Northern

Ireland. In 1979, he was posted to

Hong Kong. In 1984, Mr. Latter joined

Leighton Contractors (Asia) Ltd.

as Senior Engineer responsible for major

infrastructure projects such as the Tuen

Mun – Yuen Long Light Railway Transit

System. From 1989 to 1999, Mr. Latter

worked on property developments,

including Robinson Place, Cityplaza,

Taikoo Shing, Taikoo Place and Festival

Walk, for Swire Properties Limited. �

Mr. Latter has been involved in high level

negotiations with the Government of

Hong Kong over the mtr and kcr

interchanges, complex road re-routing

and infrastructure developments as well as

the conceptual design and

implementation of the reclamation of

Telegraph Bay. He received his Bachelor

of Science (Hons) degree in Civil

Engineering from the Imperial College of

Science and Technology, University of

London in 1976.

W. Michael Verge joined the Company in

1999 as the Chief Financial Officer of the

Cyberport Project and in December 1999

was appointed Treasurer of the Company.

Mr. Verge started his career as an

Investment Officer at Canada Permanent

Trust Co. in 1974, and from 1975 to 1981

was a Corporate Banker with the

Continental Bank of Canada. Between

1981 and 1987, Mr. Verge worked for

gatx Canada. During this period, �

Mr. Verge was posted to Malaysia for three

years as Managing Director of a joint

venture company and returned as Chief

Executive Officer of all Canadian

operations. Between 1988 and 1992, �

Mr. Verge was a Vice President, Domestic

Business Head in the Structured Finance,

Equity Syndication and Specialized

Leasing Division of Citibank, Toronto. �

In 1992, Mr. Verge returned to Southeast

Asia and held senior positions with a

treasury management software company

and Merrill Lynch. Prior to joining the

Company, Mr. Verge was Chief Financial

Officer of a large pulp and paper

company in Jakarta. He received his

Bachelor’s degree in Commerce and

Economics from McMaster University,�

Canada in 1973.��

3938�

Michael Johnson is Senior Advisor to the

Executive Chairman of the Company. �

He founded the AsiaSat satellite consortium

in 1985. Previously, Mr. Johnson spent

twenty years in the recording, film and

television industries as a writer, director

and producer. Mr. Johnson began

working with Hutchison

Telecommunications Ltd. (htl) in 1985,

was appointed a Director of Hutchison

Satellite Systems in 1986 and Operations

Director of htl in 1988. In these

capacities, he oversaw the development of

htl’s cellular, paging, ct2, mobile data,

value added network services and satellite

services businesses throughout the Asia

region. Mr. Johnson was the first member

of the HutchVision team which founded

star tv in 1990 and was Executive

Producer of the star tv service launch in

1991. He served as Senior Advisor to star

tv from its inception to May 1993. In July

1996, after a two year sabbatical, he was

appointed Senior Advisor to the

Chairman of the Pacific Century Group,

focusing on digital media, satellite and

Internet activities. He attended the Film

School of Visual Arts and New York

University.

Lawrence Lam is the Chief Executive

Officer of the Company’s customer

premises equipment (cpe) business.

Between 1978 and 1985, Mr. Lam was a

Director of Carrian Properties Investment

Limited responsible for property

management and investment. In 1985,

Mr. Lam joined Tricom Holdings Limited

as General Manager. Mr. Lam was

transferred to Tricom Telephone Limited

in 1990 and to Tricom Telecom Limited

in 1996. He received his Bachelor’s

degree in Business Commerce from the

University of Toronto in 1978.

Dr. Liang T. Wu is Executive Vice President,

Technology, for Pacific Convergence

Corporation. He has over 20 years of

research and development experience in

the United States’ telecommunications

and advanced technology industry. Prior

to joining pcc in 1999, Dr. Wu was

Executive Director, Internet Service

Management Research at Bellcore/saic

where he was responsible for a newly

created department focused on Internet

services research and development.

Dr. Wu worked from 1985 to 1996 with

Bellcore Applied Research in New Jersey

as a Director and District Manager

supervising various research groups.

While working in 1996 at Pacific Bell in

California as the Director of Broadband

Systems Engineering, he supervised four

groups responsible for systems

engineering support for new product

development in high-speed Internet

access, frame relay and atm services. �

He then moved in 1997 to sbc

Communications Inc. in California as the

Director of Data Networking Technology

and Strategy. At sbc, he participated in

the sbc Datacomm Task Force for the

development of a growth strategy

blueprint. Dr. Wu received his Ph.d. in

Computer and Communications Sciences

from the University of Michigan.

Augustine Chui, CBE, JP, is Senior

Advisor to the Company. He has a

distinguished record in public service. �

He served in a wide range of departments

and bureaus with the Government of

Hong Kong before being promoted to the

rank of Policy Secretary in 1986. �

His schedules in various postings included

constitutional development, analysis of

public opinion, translation services, new

town development, food hygiene,

environmental protection, recreation,

culture, sports, performing arts,

broadcasting and television licensing. �

Mr. Chui was appointed Chairman of the

Public Service Commission in 1991,

where he served until joining the Pacific

Century Group in 1996. He began his

career in the civil service in 1952 with the

Education Department of Hong Kong, �

as a teacher at Queen's College and

subsequently as an inspector of schools

and as Regional Education Officer. �

In 1991, Mr. Chui was awarded a cbe in

the New Year Honours, and, in 1996, �

he was made an Honorary Fellow by the

Hong Kong Academy for Performing Arts

for distinguished service to Hong Kong.

Mr. Chui received his tertiary education at

the University of London and Trinity

College at the University of Oxford. �

In 1979, he attended, by nomination, the

Royal College of Defence Studies, London.

Winnie Siu Morrison is Executive Vice

President, Corporate Development and

General Counsel, in charge of legal

matters and major transactions of the

Company. She is also a Non-Executive

Director of Pacific Century Regional

Developments Limited. Prior to joining

the Pacific Century Group in 1993, �

Mrs. Morrison was Group Director and

General Counsel of Hutchison

Telecommunications Limited. Previously,

Mrs. Morrison was a partner with the

international law firm of Baker &

McKenzie in Hong Kong. She is a

graduate of the University of Hong Kong

with a llb honors degree.

John Colmey joined the Company as

Head of Research in December 1999.

Prior to joining the Company, he was with

time Magazine which he joined in 1994

and where he served as Hong Kong

Bureau Chief in charge of planning and

coordinating the magazine’s political and

economic reporting in Hong Kong,

Taiwan and Southeast Asia. From 1989 to

1993, he reported for Fortune, Asiaweek,

the Independent, the Christian Science

Monitor, the South China Morning Post,

the Asian Wall Street Journal Report

(television) and other media. From 1985

to 1989, Mr. Colmey served as a Special

Assistant to the Director General of the

International Irrigation Management

Institute, based in Sri Lanka and affiliated

with the World Bank. Mr. Colmey has a

Graduate diploma in Economic

Development from the London School

of Economics, and a Masters of Science in

Journalism from Columbia University

in New York.

Rebecca Leung is an Executive Vice

President and has been with the Pacific

Century Group since its inception in

1993. Mrs. Leung is also one of the

founding team members of star tv. �

She has over 18 years of media experience

in Hong Kong and abroad. Educated in

the uk, she started her journalism career

with the bbc. Mrs. Leung has published

three books in Hong Kong and her work

appears regularly in journals and

periodicals in Hong Kong, Taiwan and the

People’s Republic of China. She is a

member of the Composers and Authors

Society of Hong Kong (cash) and the

Hong Kong Writers’ Association.

Helen Chu is the Company Secretary.

She received her Professional Diploma �

in Company Secretaryship and

Administration in 1987 and Bachelor of

Arts degree in Accountancy from the City

University of Hong Kong in 1992.

Ms. Chu is a chartered secretary and has

over 10 years of experience in the

company secretarial profession. She joined

the Pacific Century Group in 1994.

John Menster joined the Company as

Senior Vice President of Human

Resources in February 2000. He leads the

Company’s global human resources

initiatives. Mr. Menster has 14 years’

experience in human resources in the it

and banking sectors, the past six years in

Asia. He founded and is Chief Executive

Officer of People now.com, an Internet

recruiting firm majority owned by the

Company. Prior to joining the Company,

Mr. Menster was an Asia Pacific Human

Resources leader at General Electric. �

His expertise includes mergers and

acquisitions, organizational development,

compensation and benefits, pensions,

recruiting, union relations and employee

relations. Mr. Menster holds a Master’s

degree from Columbia University and

Bachelor of Science degree in Business

from Virginia Tech.

Senior Management �continued

Board of DirectorsE x e c u t i v e D i r e c t o r sLi Tzar Kai, Richard Executive ChairmanYuen Tin Fan, Francis Deputy ChairmanPeter To Deputy ChairmanAlexander Anthony Arena Managing DirectorPeter Anthony Allen Chief Financial OfficerChung Cho Yee, MicoNicholas Timothy James ColferJohn Todd BonnerChan Ching Cheong, George�N o n - E x e c u t i v e D i r e c t o r sAvram Miller Sir Roger Lobo Independent Dr. Cheung Ying Sheung, Paul Independent �Company SecretaryChu Mee Lai, Helen�Registered Office38/f, Citibank Tower, Citibank Plaza3 Garden Road, Central, Hong Kong�AuditorsArthur Andersen & Co21/f, Edinburgh Tower, The Landmark15 Queen’s Road Central, Hong Kong�Legal AdvisorsBaker & McKenzie14/f, Hutchison House10 Harcourt Road, Hong Kong��Woo, Kwan, Lee & Lo27/f, Jardine House1 Connaught Place, Hong Kong�Share RegistrarsCentral Registration Hong Kong LimitedRooms 1712 -1716, 17/f, Hopewell Centre183 Queen’s Road East, Hong Kong�Principal BankersThe Hongkong and Shanghai Banking Corporation LimitedBank of America, n.a.Bank of China, Hong Kong BranchBanque Nationale de ParisBarclays Bank plcCitibank, n.a., Hong Kong Branch40

Corporate Information

FinancialInformation

�

Report of the Directors�Report of the Auditors�Consolidated Income Statement�Consolidated Statement of Recognised Gains and Losses �Consolidated Balance Sheet�Balance Sheet�Consolidated Cash Flow Statement�Notes to the Financial Statements ��Schedule of Principal Properties��Five Year Financial Summary �

42��

54��

55��

56��

57��

58��

59��

60��

96��

98�

41

42 43

Report of the Directors

The directors present their annual report together with the audited financial statements of Pacific Century CyberWorks Limited (referred to as the “Company” or “Pacific Century CyberWorks”) (formerly known as “Tricom Holdings Limited”) and its subsidiaries (the “Group”) for the year ended 31 December 1999.�Change of Company NameOn 13 August 1999, the name of the Company was changed from Tricom Holdings Limited to Pacific Century CyberWorks Limited.�Principal ActivitiesThe principal activities of the Company and its major subsidiaries are investment in and development of technology-related businesses; investment �in and development of a project to provide essential infrastructure �for the formation of a strategic cluster of it and it-related companies �(the “Cyberport Project”) and investment in and development of properties �in the Hong Kong Special Administrative Region (“Hong Kong”) and the People’s Republic of China (the “prc”).�Segmental Information�An analysis of the Group’s turnover and contribution to operating profit before taxation by principal activity and geographical location is as follows:���

�

�����������������������������������

�

Results and AppropriationsThe results of the Group for the year ended 31 December 1999 are �set out in the accompanying financial statements on page 55.�No interim dividend was paid during the year. The directors do not recommend the payment of a final dividend for the year ended �31 December 1999.�Financial SummaryA summary of the consolidated results and of the assets and liabilities of �the Group for the last five financial years is set out on pages 98 and 99.��Subsidiaries and AssociatesParticulars of the Company’s principal subsidiaries and associates are set out in Notes 15 and 16 to the financial statements.�Fixed AssetsDetails of movements in the fixed assets of the Group and the Company during the year are set out in Note 11 to the financial statements.�Borrowings and Convertible BondsParticulars of the Group’s and the Company’s borrowings and convertible bonds are set out in Notes 18, 19, 20 and 29 to the financial statements.��Major Customers and SuppliersFor the year ended 31 December 1999, turnover attributable to the Group’s largest customer and the five largest customers in aggregate amounted to 5% and 13% of total turnover respectively. Purchases attributable to the Group’s largest supplier and the five largest suppliers in aggregate amounted to 11% and 29% of total purchases respectively.�None of the directors, their associates, or any shareholders (which, to the knowledge of the directors, own more than 5% of the Company’s share capital) had any interest in the Group’s five largest customers or suppliers.�Share CapitalDetails of the movements in the share capital of the Company during the year are set out in Note 21 to the financial statements.�Share Option SchemeDetails of the Company’s share option scheme are set out in Note 22 to �the financial statements.��Reserves�Details of the movements in reserves of the Group and the Company during the year are set out in Note 23 to the financial statements.

By principal activity :�

Investment income from Internet-related business

Sales of customer premises equipment,

provision of related maintenance services and

sales of infrastructure communication systems

Property related income (expenses)

Commission income and others

�

By geographical location:

Overseas

Hong Kong

�Turnover�hk$’000�

--

133,154�

18,248�

631�

�

�

16,923

135,110�

Other �income �

(expenses)�hk$’000 �

575,099

-- �

(8,435)�

82,139 �

�

�

551,139

97,664 �

Contribution�to operating�

resultshk$’000�

322,246

(37,697)�

(29,931)�

82,139�

�

�

268,355

68,402

44 45

DirectorsThe directors who held office during the year and up to the date of this report were:�Executive DirectorsLi Tzar Kai, Richard Executive Chairman (appointed on 3 August 1999)Yuen Tin Fan, Francis Deputy Chairman (appointed on 3 August 1999)Peter To Deputy Chairman (appointed on 3 August 1999)Alexander Anthony Arena Managing Director (appointed on 3 August 1999)Peter Anthony Allen Chief Financial Officer (appointed on 3 August 1999)Chung Cho Yee, MicoNicholas Timothy James Colfer (appointed on 3 August 1999)John Todd Bonner (appointed on 3 August 1999)Chan Ching Cheong, George (appointed on 13 September 1999)Sum Mun Kid, Frederick (resigned on 24 February 1999)Oei Hong Leong (resigned on 3 August 1999)Lau Ka Fai, Joseph (resigned on 3 August 1999)Chu Chih Lin, Simon (resigned on 3 August 1999)Wong Yin Tai, Anna (resigned on 3 August 1999)Ma Wai Man, Catherine (resigned on 3 August 1999)�Non-Executive DirectorsSir Roger Lobo* (appointed on 3 August 1999)Dr. Cheung Ying Sheung, Paul* (appointed on 3 August 1999)Avram Miller (appointed on 14 January 2000)To Wai Keung, Vincent* (resigned on 3 August 1999)Xie Xiao An* (resigned on 3 August 1999)

*Independent

In accordance with Article 92 of the Company’s Articles of Association, �Li Tzar Kai, Richard, Yuen Tin Fan, Francis, Peter To, Alexander Anthony Arena, Peter Anthony Allen, Nicholas Timothy James Colfer, John Todd Bonner, Chan Ching Cheong, George, Sir Roger Lobo, Dr. Cheung Ying Sheung, Paul, and Avram Miller shall retire and, being eligible, offer themselves for re-election at the forthcoming annual general meeting.�Directors’ Service ContractsAvram Miller was appointed as a director of the Company on 14 January 2000. Prior to his appointment, he entered into a consulting agreement with the Company on 17 August 1999 which is not terminable by the Company within one year without payment of compensation. �Save as disclosed above, no director proposed for re-election at the forthcoming annual general meeting has an unexpired service contract with the Company or any of its subsidiaries which is not terminable by the Group within one year without payment of compensation (other than statutory compensation).

Directors’ Interests in SecuritiesAs at 31 December 1999, the interests of the directors and the chief executive of the Company in the equity or debt securities of the Company and its associates (within the meaning of the Securities (Disclosure of Interests) Ordinance (the “sdi Ordinance”)) as recorded in the register required to be kept pursuant to Section 29 of the sdi Ordinance or as otherwise notified to the Company and The Stock Exchange of �Hong Kong Limited pursuant to Section 28 of the sdi Ordinance and the Model Code for Securities Transactions by Directors of Listed Companies (the “Model Code”) were as follows:

1. i n t e r e s t s i n t h e c o m pa n y(a) Ordinary Shares

Number of ordinary shares held in the Company

�(b) Convertible Bonds

Convertible bonds of an aggregate principal amount of

hk$881,999,900

Report of the Directors �continued

Name of director/chief executive�

�

Li Tzar Kai, Richard (Note 1)

Yuen Tin Fan, Francis

Peter To

Alexander Anthony Arena

Peter Anthony Allen

Chung Cho Yee, Mico

Nicholas Timothy James Colfer

John Todd Bonner

Chan Ching Cheong, George

Personalinterests

--�

--�

--�

--�

--�

--�

--�

--�

--�

Familyinterests

--�

--�

--�

--�

--�

--�

--�

--�

--�

Corporateinterests

5,842,625,171

--�

--�

--�

--�

--�

--�

--�

--�

Otherinterests�

--�

--�

--�

--�

--�

--�

--�

--�

--�

Number ofshare options�

--�

32,000,000�

32,000,000�

16,000,000�

2,360,000�

28,476,000�

1,080,000�

6,080,000�

32,489,000�

Name of director/chief executive�

Li Tzar Kai, Richard (Note 1)

46 47

2. i n t e r e s t s i n a s s o c i at e si. Pacific Century Regional Developments Limited (“pcrd”)(a) Ordinary Shares

Number of ordinary shares held in pcrd

�

(b) Redeemable Cumulative Preference Shares

Number of preference shares held in pcrd

�ii. Pacific Century Insurance Holdings Limited (“pcihl”)Ordinary Shares

Number of ordinary shares held in pcihl

��Other than as disclosed above, none of the directors, the chief executive �or their associates had any personal, family, corporate or other interests �in the securities of the Company or any of its associates as defined in the sdi Ordinance as at 31 December 1999.��

Notes:1. Li Tzar Kai, Richard holds the entire issued share capital of Pacific�

Century Group Holdings Limited (“pcg”). pcg holds the entire issued share capital of Pacific Century International Limited (“pcil”). pcil holds the entire issued share capital of Pacific Century Group (Cayman Islands) Limited (“pcg(ci)”). pcg(ci) holds the entire issued share capital of Anglang Investments Limited (“Anglang”). Anglang and pcg(ci) hold 116,906,718 shares and 116,242,105 shares in pcrd (an aggregate of 233,148,823 shares), which constitute approximately 38.1% and approximately 37.9% (an aggregate of 76.0%) of the entire issued share capital of pcrd respectively.�pcrd holds 4,654,838,903 shares, which constitutes approximately 51.3% �of the entire issued share capital of the Company. pcg holds 435,484,000 shares, which constitutes approximately 4.8% of the entire issued share capital of the Company. Li Tzar Kai, Richard also holds the entire issued share capital of Chiltonlink Limited which holds the entire issued share capital of Pacific Century Diversified Limited (“pcd”). pcd holds 752,302,268 shares, which constitutes approximately 8.3% of the entire issued share capital of the Company. Accordingly, Li Tzar Kai, Richard is interested in an aggregate of 5,842,625,171 shares (held by pcg, pcrd and pcd) of the Company. Li Tzar Kai, Richard is also deemed to be interested in the convertible bonds issued to pcg and pcrd respectively.

2. Anglang and pcg(ci) hold 57,826,950 and 30,121,412 redeemable�cumulative preference shares in pcrd (an aggregate of 87,948,362 redeemable cumulative preference shares) respectively. Accordingly, Li Tzar Kai, Richard is interested in 233,148,823 ordinary shares of pcrd and 87,948,362 redeemable cumulative preference shares in pcrd.

3. Yuen Tin Fan, Francis holds 1,000,000 ordinary shares of pcrd. �Yuen Tin Fan, Francis is also deemed to be interested in 2,355,000 ordinary shares of pcrd by virtue of being a beneficiary under a discretionary trust. Accordingly, Yuen Tin Fan, Francis is interested in an aggregate of 3,355,000 ordinary shares of pcrd.

4. pcrd is beneficially interested in 281,423,250 shares in the share capital �of pcihl, a subsidiary of pcrd. Accordingly, Li Tzar Kai, Richard is deemed to be interested in these shares of pcihl.

Name of director/chief executive

�

Li Tzar Kai, Richard (Notes 1 and 2)

Yuen Tin Fan, Francis (Note 3)

Peter To

Alexander Anthony Arena

Peter Anthony Allen

Chung Cho Yee, Mico

Nicholas Timothy James Colfer

John Todd Bonner

Chan Ching Cheong, George

Report of the Directors �continued

Personalinterests

--�

Familyinterests

--�

Corporateinterests

87,948,362

Otherinterests

--�

Personalinterests

--�

1,000,000�

--�

--�

1,000�

--�

--�

--�

--

Familyinterests

--�

--�

--�

--�

--�

--�

--�

--�

--

Corporateinterests

233,148,823�

--�

--�

--�

--�

--�

--�

--�

--

Otherinterests

--�

2,355,000�

--�

--�

--�

--�

--�

--�

--

Number ofshare options

--�

--�

1,000,000�

1,530,000�

500,000�

800,000�

300,000�

500,000�

1,196,000

Personalinterests

--�

--�

--�

--�

--

Familyinterests

--�

--�

--�

--�

--

Corporateinterests

281,423,250�

790,000�

--�

--�

--

Otherinterests

--�

--�

--�

--�

--

Number ofshare options

--�

16,200,000�

500,000�

1,900,000�

13,800,000

Name of director/chief executive

Li Tzar Kai, Richard (Notes 1 and 2)

Name of director/chief executive

�

Li Tzar Kai, Richard (Notes 1 and 4)

Yuen Tin Fan, Francis

Peter Anthony Allen

Chung Cho Yee, Mico

John Todd Bonner

Directors’ Rights to Acquire Shares(a) The Company has a share option scheme, under which it may grant options to employees (including executive directors) of the Company to subscribe for ordinary shares in the Company. Details of the scheme are set out in Note 22 to the financial statements. A summary of the movements �of directors’ options during the year is as follows:

Name of director�

�

Wong Yin Tai, Anna�

�

Yuen Tin Fan, Francis�

Peter To�

Alexander Anthony Arena�

Peter Anthony Allen�

Chung Cho Yee, Mico�

Nicholas Timothy James

Colfer�

John Todd Bonner�

Chan Ching Cheong, �

George

Date�of grant

8.11.1996

�

28.8.1999

28.8.1999

28.8.1999

28.8.1999

28.8.1999

28.8.1999

28.8.1999

13.11.1999

23.11.1999

Exerciseprice hk$

0.480

�

2.356

�

2.356

�

2.356

�

2.356

�

2.356

�

2.356

�

2.356

�

4.552

�

4.552

Exercisable�period

8.11.1997 to

8.11.2006

17.8.2000 to

17.8.2009

17.8.2000 to

17.8.2009

17.8.2000 to

17.8.2009

17.8.2000 to

17.8.2009

17.8.2000 to

17.8.2009

17.8.2000 to

17.8.2009

17.8.2000 to

17.8.2009

25.10.2000 to

25.10.2009

25.10.2000 to

25.10.2009

Outstanding�at 1.1.1999

500,000�

�

--�

�

--�

--�

--�

--�

--�

--�

--�

--�

Outstandingat 31.12.1999

--�

�

32,000,000

�

32,000,000

�

16,000,000

�

2,360,000

�

28,476,000

�

1,080,000

�

1,080,000

�

5,000,000

�

32,489,000

Granted�during

the year

--

�

32,000,000

�

32,000,000

�

16,000,000

�

2,360,000

�

28,476,000

�

1,080,000

�

1,080,000

�

5,000,000

�

32,489,000

Exercisedduring

the year

500,000�

�

--�

�

--�

--�

--�

--�

--�

--�

--�

--�

Lapsed/�cancelled

during the year

--�

�

--�

--�

--�

--�

--�

--�

--�

--�

--�

(b) Certain of the Company’s directors have options to subscribe for �shares in pcrd. Details of the outstanding options granted to directors of the Company by pcrd are summarised as follows:

�

(c) Certain of the Company’s directors have options to subscribe for �shares in pcihl. Details of the outstanding options granted to directors �of the Company by pcihl are summarised as follows:

����������

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

48 49

Report of the Directors �continued

Number of share options�

Number of share options�

Number of share options�

Date�of grant

1.10.1998

�

1.10.1998

24.11.1999

1.10.1998

15.4.1999

1.10.1998�

24.11.1999

24.11.1999

Exerciseprice s$

1.00�

�

1.00�

�

7.584�

�

1.00�

�

1.43�

�

1.00�

�

7.584�

�

9.48

Exercisable�period

1.10.1999 to

30.9.2003

1.10.1999 to

30.9.2003

25.10.2001to

24.10.2009

1.10.2000 to

30.9.2003�

15.4.2001to

14.4.2004

1.10.2000 to

30.9.2003

25.10.2001to

24.10.2009

25.10.2000 to

24.10.2009

Outstanding�at 1.1.1999

1,000,000�

�

1,000,000�

�

--�

�

500,000�

�

--�

�

300,000�

�

--�

--�

Outstandingat 31.12.1999

--�

1,000,000

�

1,530,000

�

500,000

�

800,000

�

300,000

�

500,000

�

1,196,000

Granted�during

the year

--�

�

--�

�

1,530,000

�

--�

�

800,000

�

--�

�

500,000

�

1,196,000

Exercisedduring

the year

1,000,000�

�

--�

--�

--�

--�

--�

--�

--�

�

Lapsed/�cancelled

during the year

--�

�

--�

--�

--�

--�

--�

--�

--�

Name of director�

�

Yuen Tin Fan, Francis�

Peter To�

Alexander Anthony Arena�

Peter Anthony Allen�

Chung Cho Yee, Mico�

Nicholas Timothy James

Colfer�

John Todd Bonner�

Chan Ching Cheong, �

George

Date�of grant

7.7.1999

�

7.7.1999�

�

7.7.1999�

�

7.7.1999

Exerciseprice hk$

6.28�

�

6.28�

�

6.28�

�

6.28

Exercisable�period

7.7.2000 to

6.7.2009

7.7.2000 to

6.7.2009

7.7.2000 to

6.7.2009

7.7.2000 to

6.7.2009

Outstanding�at 1.1.1999

--�

--�

--�

--�

Outstandingat 31.12.1999

16,200,000

�

500,000

�

1,900,000

�

13,800,000

Granted�during

the year

16,200,000

�

500,000

�

1,900,000

�

13,800,000

Exercisedduring

the year

--�

--�

--�

--�

Lapsed/�cancelled

during the year

--�

--�

--�

--�

Name of director�

�

Yuen Tin Fan, Francis�

Peter Anthony Allen�

Chung Cho Yee, Mico�

John Todd Bonner�

50 51

Substantial Shareholders As at 31 December 1999, the register of substantial shareholders �maintained under Section 16(1) of the sdi Ordinance showed that, �other than the interests disclosed above in respect of certain directors, �the following shareholders had a beneficial interest of 10% or more �in the issued share capital of the Company:

Notes:1. pcrd holds 4,654,838,903 shares in the Company. Approximately 38.1%

and approximately 37.9% of the issued share capital of pcrd are held by Anglang and pcg(ci) respectively. The entire issued share capital of Anglang is held by pcg(ci). In turn, the entire issued share capital of pcg(ci) is held by pcil and the entire issued share capital of pcil is held by pcg. All the shares referred to herein relate to the same parcel of shares held by pcrd.�

2. The shares referred to herein include the 435,484,000 shares held by pcg and the 4,654,838,903 shares held by pcrd.�Directors’ Interests in Contracts of SignificanceNo contract of significance to which the Company, its subsidiaries, its holding companies or any of its fellow subsidiaries was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.

Directors’ Interests in Competing BusinessInterests of directors of the Company in competing businesses as at 31 December 1999 required to be disclosed pursuant to Rule 8.10 of the Listing Rules were as follows:

During the year, the Group acquired equity interests in a number of �Internet-related companies where the Group is entitled to appoint director(s) to the boards of these companies. As at 31 December 1999, the interests �of directors of the Company in these investee companies required to be disclosed were as follows:����������������

�Other than as disclosed above, none of the directors is interested in any business apart from the Company’s business which competes or is likely to compete, either directly or indirectly, with the Company’s business.��Charitable DonationsDuring the year, the Group made charitable donations and other donations totalling hk$4,000,000.

Post Balance Sheet EventsDetails of significant post balance sheet events are set out in Note 30 to the financial statements.�Purchase, Sale and Redemption of SharesDuring the year, the Company repurchased on The Stock Exchange of Hong Kong Limited a total of 34,784,000 shares of hk$0.05 each in the share capital of the Company for an aggregate consideration of hk$187,618,000 (including transaction costs). Details of the repurchases are set out in Note 21 to the financial statements. All of these shares were cancelled by the Company. The directors believe such repurchases benefited the Company and its shareholders. ��Save as disclosed above, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company’s listed securities during the year.

%

51.3

51.3

51.3

51.3

56.1

Number of shares

4,654,838,903

4,654,838,903

4,654,838,903

4,654,838,903

5,090,322,903

Name of shareholder

Pacific Century Regional Developments Limited (“pcrd”)

Anglang Investments Limited (“Anglang”)

Pacific Century Group (Cayman Islands) Limited (“pcg(ci)”)

Pacific Century International Limited (“pcil”)

Pacific Century Group Holdings Limited (“pcg”)

Notes�

�

1 �

1 �

1 �

1 �

2

Report of the Directors �continued

Name of director�

�

Li Tzar Kai, Richard

Name of companies�

�

Hutchison Whampoa Limited(“hwl”)

and its subsidiaries

Nature of competing business�

�

Property business and satellite

transmission in Asia

Nature of interest

As a director and having

certain personal and

deemed interests in hwl

Name of director�

�

Chan Ching Cheong, George

Chung Cho Yee, Mico�

Chung Cho Yee, Mico�

�

Li Tzar Kai, Richard�

Yuen Tin Fan, Francis

Chung Cho Yee, Mico�

Peter Anthony Allen�

Li Tzar Kai, Richard

Name of investee companies�

�

SoftNet Systems, Inc.

Outblaze Limited

stareastnet (bvi) Limited

(formerly Star East Information �

Technology Corp.)�

SilkRoute Holdings Pte Ltd. �

and subsidiaries

�

MediaRing.com Limited

Nature of business�

�

Broadband Internet provider

Developer of products and services to

support Internet portals and provider

of technical and advisory services

Chinese language celebrity

entertainment portal

�

Internet investor which identifies,

nurtures and funds

Asian e-commerce ventures

�

Internet telephony

Nature of interest

As a director�

As a director�

As a director�

�

As directors/�

alternate directors

�

As a director

52 53

Connected Party TransactionsDuring the year, the Group recorded transactions with connected parties as defined by the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The transactions with connected parties during the year were as follows:�Pursuant to a group reorganisation in 1999, the Pacific Century Group (“pc Group”) transferred certain property interests and activities in �Hong Kong and the prc to pccw Properties Limited (formerly known �as “Daily Link Developments Limited”). The Company then issued 4,838,710,000 ordinary shares and convertible bonds in the principal amount of hk$959,999,900 to acquire all the issued shares of pccw Properties Limited from the pc Group for a consideration of approximately hk$2,460,000,000. Except for its customer premises equipment (“cpe”) business in Hong Kong, the Company disposed of all of its businesses together with the related indebtedness to China Online (Bermuda) Limited (“China Online”, formerly “Star Telecom International Holding Limited”), �the controlling shareholder of the Company before completion of the reorganisation. The aggregate consideration for the disposals to China Online was approximately hk$67,784,000, which was satisfied by offsetting an amount owing by the Company to China Online at the time of the disposal, less hk$10 million. The balance of hk$10 million is due in August 2000 and is included in short-term borrowings as an interest bearing loan.In July 1999, Intel Corporation, a 40% shareholder of Pacific Convergence Corporation, Ltd. (“pcc”) entered into a non-exclusive Technology Agreement with pcc which provides for the supply by Intel Corporation of comprehensive set-top and server-based solutions that will help deliver the combined content broadcast and Internet services generated by pcc. The total contract sum for the Technology Agreement is us$11.1 million. During the year, the Group paid us$4 million to Intel Corporation pursuant to the Technology Agreement.pcrd, a controlling shareholder of the Company, has provided a rental guarantee on each of Towers a and b and the 6-storey commercial podium of Pacific Century Place, Beijing, the prc. The two-year rental guarantee on Tower a of not less than us$7,527,367 (approximately hk$58,337,094) commenced in August 1999 and the two-year rental guarantee on Tower b of not less than us$3,573,549 (approximately hk$27,695,005) per annum will commence in May 2000. The two-year rental guarantee on the commercial podium is not less than us$13,437,454 (approximately hk$104,140,269) per annum and will commence six months from the date of the issuance of the completion certificate (which is expected to be in or before June 2000). The guaranteed rental income received and receivable from pcrd in the current year is approximately hk$4 million.

In September 1999, the Company issued 752,302,268 ordinary shares to pcd, a company incorporated in the Cayman Islands and wholly-owned by Li Tzar Kai, Richard, in exchange for pcd’s 60% effective holding in pcc.�Year 2000 ComplianceThe Company gave high priority to the formulation and implementation of comprehensive plans to deal with the Year 2000 (“y2k”) issue which could have arisen from computer programs and equipment with embedded date-sensitive circuitry unable to manage the date change from 1999 to 2000.�All business-critical programs and equipment of the Company migrated from 1999 to 2000 smoothly and there were no business interruptions resulting from the y2k issue.

Code of Best PracticeThe Company has complied throughout the year ended 31 December 1999 with the Code of Best Practice as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited save that the non-executive directors are not appointed for a specific term of office.

An audit committee comprising Sir Roger Lobo (Chairman) and Dr. Cheung Ying Sheung, Paul continues to operate with reference to “A Guide for the Formation of an Audit Committee” issued by the �Hong Kong Society of Accountants.

AuditorsDuring the year, the Company appointed Arthur Andersen & Co as auditors of the Company following the resignation of its previous auditors, Deloitte Touche Tohmatsu. Deloitte Touche Tohmatsu were the auditors of the Company for the years ended 31 December 1997 and 1998. A resolution for the reappointment of Arthur Andersen & Co as auditors for the ensuing year is to be proposed at the forthcoming annual general meeting.

On behalf of the Board

�F r a n c i s Y u e nDeputy ChairmanHong Kong, 20 March 2000

Report of the Directors �continued

54 55

To the Shareholders of Pacific Century CyberWorks Limited(formerly known as “Tricom Holdings Limited”) �Incorporated in Hong Kong with limited liability

We have audited the accompanying financial statements of Pacific Century CyberWorks Limited (the “Company”) (formerly known as “Tricom Holdings Limited”) and its subsidiaries (“the Group”) as at 31 December 1999 on pages 55 to 95 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.

Respective responsibilities of directors and auditorsThe Companies Ordinance requires the directors to prepare financial statements which give a true and fair view. In preparing financial statements which give a true and fair view, it is fundamental that appropriate accounting policies are selected and applied consistently.

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

Basis of opinionWe conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the circumstances of the Company and 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 necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion, we also evaluated the overall adequacy of the presentation of information �in the financial statements. We believe that our audit provides a reasonable basis for our opinion.

OpinionIn our opinion, the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 31 December 1999 and of the profit and cash flows of the Group for the year then ended and have been properly prepared in accordance with the Companies Ordinance.

�A r t h u r A n d e r s e n & C o �Certified Public AccountantsHong Kong, 20 March 2000

Report �of the Auditors

For the year ended 31 December 1999�Amounts expressed in thousands �of Hong Kong dollarsexcept for earnings (loss) per share�

Consolidated Income Statement

����

�TurnoverContinuing operationsDiscontinued operations �Cost of salesContinuing operationsDiscontinued operations

�Gross profit

Investment incomeOther income (expenses) General and administrative expenses Finance costs

Profit (loss) from operations�Gain on disposal of � discontinued operations�Share of results of associates

Profit (loss) from ordinary activities before taxation �Taxation

Profit (loss) from ordinary activities after taxation �Minority interests �Profit (loss) for the year

Earnings (loss) per share - basic

Earnings per share - diluted

1999

$ 131,35420,679�

�152,033�

(50,519)(15,710)

(66,229)

85,804

574,30474,499

(376,787)(21,063)

336,757��

21,294�

(5,478)

�352,573

(7,250)

345,323

1,482

$ 346,805

9.99 cents

7.05 cents

������ ��

4

553

3, 5

��

8

5

7

9

10

10

Note(s) 1998�

$ 114,704�170,376

�285,080

� (30,896)

(152,854)

(183,750)

101,330

�(2,199)

(149,130)(12,283)

(62,282)��

--�

825���

(61,457)

(2,403)

(63,860)

1,822

$(62,038)�

(13.44 cents)

n/a

--

Notes 1,31

56 57

Consolidated Statement of Recognised Gains & Losses

�

���

Surplus (deficit) on revaluation of investment� properties�Write-down of fixed assets�Transfer of the excess of depreciation of revalued fixed assets from revaluation surplus�Exchange differences on translation of the financial statements of foreign entities �Net gains not recognised in the consolidated income statement�Net profit (loss) for the year�Total recognised gains and losses�Goodwill arising from acquisitions of subsidiaries eliminated directly against reserves�Goodwill arising from acquisitions of associates eliminated directly against reserves

Consolidated Balance �Sheet

Assets and LiabilitiesNon-current assetsFixed assetsProperties held for developmentProperties under development Development costsTerm loan receivableInvestment in associatesInvestments

Current assetsProperties held for saleProperties under development for saleInventories Accounts receivable, prepayments, deposits and � other current assetsAmounts due from related companiesOther investmentsCash and bank balances

�Current liabilitiesShort-term borrowingsBills payableAccounts payable and accrualsAmounts due to minority shareholders of subsidiariesAmounts due to related companiesLoan from a shareholderAdvances from customers Taxation

Net current assets (liabilities)

Total assets less current liabilities

Non-current liabilitiesLong-term liabilitiesAmounts due to minority shareholders of subsidiariesConvertible bondsLong-term loan from a shareholderDeferred taxation

Net assets

RepresentingShare capitalReserves

Shareholders’ funds

Minority interests

Approved by the Board of Directors on 20 March 2000 �and signed on behalf of the Board by�F r a n c i s Y u e n P e t e r A l l e nDirector Director

For the year ended 31 December 1999�Amounts expressed in thousands �of Hong Kong dollars

As at 31 December 1999�Amounts expressed in thousands �of Hong Kong dollars

1999�

$123,931

�(39,187)

�--

�(2,368)

�82,376

�346,805

429,181

�(3,733,656)

��

(412,805)

$(3,717,280)

1998

�

$(892)�

--

�892

�500

��

500�

(62,038)�

(61,538)��

--���

--

$(61,538)

1999�

�

$ 1,198,07870,925

1,519,34117,299

38610,908

4,543,410

7,360,347

553,097341,529

20,284

298,4385,249

273,8865,053,887

6,546,370�

�(975,967)

�(302,689)

(4,878)(21,191)

�(170,725)

(4,038)

(1,479,488)

5,066,882

12,427,229

(158,904)(28,704)

(882,000) �

(1,544)

(1,071,152)

$ 11,356,077

$ 453,35210,897,786

11,351,138

4,939

$ 11,356,077

--

--

--

1998�

Notes 1,31

$ 166,880--------

9,2127,249

183,341

----

67,953

87,097120

--10,320

165,490

�(39,597)

(9,305)(104,994)

�(5,892)

(52,200)�

(718)

(212,706)

(47,216)

136,125

------

(18,000)(1,081)

(19,081)

$ 117,044

$ 23,09390,572

113,665

3,379

$ 117,044

--

--

11121314

1617

18(a)13

18(b)

317

17(c), 18(c)

�18(c)

33

3(b)

193

20

24

2123

Note(s)

Notes 1,31

58

Assets and Liabilities

Non-current assets

Fixed assets

Investment in subsidiaries

Investment in associates

Investments

Current assets

Accounts receivable, prepayments, deposits

and other current assets

Amounts due from holding company

Cash and bank balances

Current liabilities

Short-term borrowings

Accounts payable and accruals

Amounts due to related companies

Loan from a shareholder

Net current assets (liabilities)

Total assets less current liabilities

Non-current liabilities

Convertible bonds

Long-term loan from a shareholder

Deferred taxation

Net assets

Representing:

Share capital

Reserves

Shareholders’ funds

Approved by the Board of Directors on 20 March 2000

and signed on behalf of the Board by

F r a n c i s Y u e n P e t e r A l l e nDirector Director

59

Consolidated Cash Flow Statement

Net Cash (Outflow) Inflow from Operating � Activities

Returns on Investments and Servicing of FinanceInterest paidInterest receivedDividends received from other investmentsDividends received from associates

Net Cash Inflow (Outflow) from Returns on � Investments and Servicing of Finance

TaxationHong Kong profits tax paidOverseas tax paid

Tax Paid

Investing ActivitiesProceeds from disposal of fixed assetsProceeds from disposal of investmentsPurchase of fixed assetsNet cash outflow from associatesDevelopment costs incurredPurchase of subsidiaries net of cash and cash equivalents acquired)Disposal of subsidiaries net of cash and cash equivalents disposed of)Increase in short-term bank deposits non-cash equivalent portion)Increase in properties held for developmentIncrease in properties under development for investmentIncrease in term loan receivableIncrease in restricted cashPurchase of investments and investments in associates

Net Cash (Outflow) Inflow from Investing Activities

Net Cash (Outflow) Inflow before Financing Activities

Financing Proceeds from issue of ordinary shares, net of issuing expensesRepurchase of ordinary shares (including transaction costs)New bank loan raisedNew loans raised from a shareholderIncrease in long-term liabititiesRepayment of borrowingsContributions from minority shareholders of former subsidiariesReduction of minority interests due to disposal of subsidiaries

Net Cash Inflow (Outflow) from Financing

Increase (Decrease) in Cash and Cash Equivalents

Cash and Cash EquivalentsBeginning of year

End of year

�

25(a)

25(b)

25(c)

17(c)

25(d)

25(e)

BalanceSheet

For the year ended 31 December 1999�Amounts expressed in thousands �of Hong Kong dollars

As at 31 December 1999�Amounts expressed in thousands �of Hong Kong dollars

1999�

$ 709

11,178,519

--

300

11,179,528

72,862

5,184

4,867,403

4,945,449

(168,745)

(41,191)

(4,926)

--

(214,862)

4,730,587

15,910,115

(882,000)

--

(460)�

(882,460)�

$ 15,027,655

$ 453,352

14,574,303

$ 15,027,655

1998�

Notes 1,31

�

$ 13,248

185,969

2,396

7,249

208,862

1,054

--

1,213

2,267

(16,200)

(4,712)

(5,892)

(52,200)

(79,004)

(76,737)

132,125

--

(18,000)

(460)�

(18,460)�

$ 113,665

$ 23,093

90,572

$ 113,665

1998�

Notes 1,31

$ 14,067

(7,415)522428200

(6,265)

(715)(93)

(808)

12,2102,458

(5,783)(1,635)

(445)

--

--

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

6,805

13,799

356----

70,200--

(95,176)

872

--

(23,748)

(9,949)

20,266

$ 10,317

(

(

(

1999��

$ (414,054)

(8,456)42,859

--200

34,603

(4,269)--

(4,269)

--80,875

(78,440)�

(17,299)

53,163

(14,976)

(263,368)(2,082)

(154,972)(386)

(669,000)(1,793,842)

(2,860,327)

(3,244,047)

6,846,206(187,618)372,620

7,584158,904(39,597)

--

(3,379)

7,154,720

3,910,673

10,317

$ 3,920,990

--

�

11

15

16

17

3

17(c), 18(c)

18(c)

3

20

24

21

23

Note(s) Note(s)

61

Notes to the FinancialStatements

31 December 1999Amounts expressed in Hong Kong dollars unless otherwise stated���

1. Group Reorganisation and Basis of Presentation of the Financial Statements

Pacific Century CyberWorks Limited (the “Company”) was incorporated in Hong Kong

and its shares have been listed on The Stock Exchange of Hong Kong Limited since

18 October 1994. On 13 August 1999, it changed its name from Tricom Holdings Limited

(“Tricom”) to Pacific Century CyberWorks Limited.

Pursuant to a group reorganisation in 1999, Pacific Century Group Holdings Limited and

Pacific Century Regional Developments Limited (“pcrd”), both controlled by Li Tzar Kai,

Richard (hereinafter collectively referred to as the “pc Group”) transferred certain property

interests and activities in Hong Kong and the People’s Republic of China (the “prc”) to

pccw Properties Limited. The Company then issued 4,838,710,000 ordinary shares and

convertible bonds in the principal amount of $959,999,900 to acquire all the issued shares

of pccw Properties Limited from the pc Group for a consideration of approximately

$2,460,000,000. On completion of the transaction on 3 August 1999, the Company became

a subsidiary of pcrd.�

Prior to the acquisition of pccw Properties Limited, except for its customer premises

equipment (“cpe”) business in Hong Kong, the Company disposed of all of its businesses

together with the related indebtedness to China Online (Bermuda) Limited (“China Online”,

formerly “Star Telecom International Holding Limited”), the controlling shareholder of the

Company before the acquisition from the pc Group described in the preceding paragraph.

In September 1999, the Company issued 752,302,268 ordinary shares to Pacific Century

Diversified Limited (“pcd”), a company incorporated in the Cayman Islands and wholly-owned

by Li Tzar Kai, Richard in exchange for pcd’s 60% effective holding in Pacific Convergence

Corporation, Ltd. (“pcc”). The acquisition was completed on 15 September 1999.

In addition to the above acquisitions and disposals, the Company and its subsidiaries

(collectively referred to as the “Group”) have made several investments in companies

engaged in Internet-related businesses during the current year. Details of these investments

are presented in Notes 15, 16 and 17 to the Company's financial statements.

The directors consider Pacific Century Group Holdings Limited, a company incorporated

in the British Virgin Islands (“bvi”), to be the ultimate holding company.

The principal activities of the Company and its major subsidiaries are investment in and

development of technology-related businesses, investment in and development of a project

to provide essential infrastructure for the formation of a strategic cluster of it and it-related

companies (the “Cyberport Project”) and investment in and development of properties

in Hong Kong Special Administrative Region (“Hong Kong”) and the People's Republic

of China (the“prc”).�

2. Principal Accounting Policies

The financial statements have been prepared in accordance with Statements of Standard

Accounting Practice issued by the Hong Kong Society of Accountants, accounting principles

generally accepted in Hong Kong (“hk gaap”), the disclosure requirements of the

Hong Kong Companies Ordinance and the Rules Governing the Listing of Securities on

The Stock Exchange of Hong Kong Limited. Principal accounting policies are summarised

in the following sections.

(a) b a s i s o f c o n s o l i d a t i o n

The consolidated financial statements incorporate the financial statements of the Company

and its subsidiaries. All significant intra-group transactions and balances are eliminated

on consolidation.

The results of subsidiaries acquired or disposed of during the year are included in the

consolidated income statement from or up to their effective dates of acquisition or disposal,

as appropriate.

(b) t u r n o v e r

Turnover represents (i) amounts received and receivable in respect of goods sold,

services provided or sales of properties, (ii) amounts received and receivable from rental

of investment properties, and (iii)commission income and dividend income received or

receivable during the year.

(c) r e v e n u e r e c o g n i t i o n

Provided that the economic benefits associated with a transaction probably will flow to the

Group and the revenue and costs, if applicable, can be measured reliably, turnover and other

revenue are recognised on the following bases:

i. Sales of goods are recognised when the significant risks and rewards of ownership of the

goods have been transferred to customers.

ii. Service income is recognised as services are rendered.��

iii. Sales of properties. Income arising from sales of completed properties is recognised upon

completion of the sale when title passes to purchaser.

Income arising from the pre-sale of properties under development is recognised when legally

binding unconditional sales contracts are signed and exchanged, provided that construction

work has progressed to a stage where the ultimate realisation of profit can be reasonably

determined and on the basis that the total estimated profit is apportioned over the

entire period of construction to reflect the progress of the development. On this basis,

profit recognised on properties pre-sold during the year was calculated by reference to the

proportion of construction costs incurred up to the end of the year to the estimated total

construction costs to completion, limited to the amounts of sales deposits received

with due allowances for contingencies.

iv. Rental income from investment properties is recognised on a straight-line basis over the

respective terms of leases.

v. Interest income from bank deposits is recognised on a time apportioned basis on the

principal outstanding and at the rate applicable.

vi. Commission income is recognised when entitlement to the income is ascertained.

vii. Dividend income is recognised when the right to receive payment is established.

(d) o p e r a t i n g l e a s e s

Leases where substantially all the rewards and risks of ownership remain with the leasing

company are accounted for as operating leases. Rental payments under operating leases are

charged to the income statement on a straight-line basis over the period of the relevant leases.��

(e) g o o d w i l l o r c a p i t a l r e s e r v e

Goodwill or capital reserve arising on acquisition of a subsidiary or an associate represents,

respectively, the excess or shortfall of the purchase consideration over the Group’s share of

the fair value ascribed to the separable assets and liabilities of the subsidiary or associate at the

date of acquisition.

Positive goodwill is written off directly against and negative goodwill is credited directly to

reserves when an acquisition is recorded.

On disposal of a subsidiary or an associate, the attributable amount of goodwill or capital

reserve previously written off against or credited to reserves is included in the determination

of the gain or loss on disposal.

62 63

(f) fi x e d a s s e t s a n d d e p r e c i a t i o n

Fixed assets are stated at cost (or valuation) less accumulated depreciation. The cost of an

asset comprises its purchase price and any directly attributable costs of bringing the asset to its

working condition and location for its intended use. Expenditure incurred after a fixed asset

has been put into operation, such as repairs and maintenance and overhaul costs, is normally

charged to the income statement in the period in which it is incurred. In situations where it

can be clearly demonstrated that the expenditure has resulted in an increase in the future

economic benefits expected to be obtained from the use of the fixed asset, the expenditure is

capitalised as an additional cost of the fixed asset.

Certain of the Group’s properties were revalued in 1994 and the surplus arising from

revaluation of properties was credited to the property revaluation reserve. The Group has

taken advantage of the transitional provisions set out in paragraph 72 of Statement of

Standard Accounting Practice Number 17 “Property, plant and equipment” (ssap 17) issued

by the Hong Kong Society of Accountants, with the effect that land and buildings are stated

at a revalued amount which was determined in 1994 and which has not been updated to

reflect their fair value at the balance sheet date, and accordingly, no further revaluation of

these properties will be carried out. Any future decrease in the net carrying amount of these

properties will be charged to the income statement to the extent that it exceeds the surplus,

if any, held in the property revaluation reserve relating to a previous revaluation of that

particular asset. Upon the subsequent sale of these assets, the attributable revaluation surplus

not yet transferred to retained profits in prior years will be transferred to retained profits

at that time.

Depreciation is calculated on the straight-line basis at annual rates estimated to write off the

cost of fixed assets over their expected useful lives. The annual rates are as follows:

Land and buildings Over the shorter of the lease term or expected useful life

Leasehold improvementsOver the shorter of the lease term or expected useful life

Office equipment 20% to 50%

Furniture and fixtures 20% to 50%

Computer and system software 20%

Should system software, completed or under development, become technologically obsolete

or commercially not viable, its carrying value is written off immediately to the income statement.

A write down is made if the recoverable amount of fixed asset is below the carrying amount.

The write down is charged to the income statement as an expense unless it reverses a previous

revaluation increase, in which case, it is charged directly against any related revaluation

reserve to the extent that the reduction does not exceed the amount held in the revaluation

reserve in respect of the same item.

A subsequent increase in the recoverable amount of an asset carried at depreciated cost

is written back when the circumstances that led to the write down cease to exist. The amount

written back is reduced by the amount that would have been recognised as depreciation had

the write down not occurred.

(g) i n v e s t m e n t p r o p e r t i e s

Investment properties are interests in land and buildings in respect of which construction work

and development have 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 annual valuation by professionally qualified executives of the Group and by

independent valuers at intervals of not more than three years. Changes in the value of

investment properties are dealt with as movements in the property revaluation reserve.

If the total of this reserve is insufficient to cover a reduction in the open market value on a

portfolio basis, the excess is charged to the income statement. Where a deficit has previously

been charged to the income statement and a revaluation surplus subsequently arises, this

surplus is credited to the income statement to the extent of the deficit previously charged.��

Upon disposal of an investment property, the relevant portion of the revaluation reserve

realised in respect of previous valuations is released from the property revaluation reserve to

the income statement as part of the gain 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, in which case depreciation is provided on their carrying value over the

unexpired lease term.

(h) p r o p e r t i e s h e l d f o r d e v e l o p m e n t

Properties held for development represent interests in land where construction has not

yet commenced. Properties held for development are stated at cost less permanent

diminution in value, if any. Costs include original land acquisition costs, costs of land

use rights and direct development costs attributable to such properties.

(i) p r o p e r t i e s u n d e r d e v e l o p m e n t

Properties under development represent interests in land and buildings under construction.

Properties under development for long-term purposes are stated at cost less permanent

diminution in value, if any. Properties under development for sale, for which pre-sales have

not yet commenced, are carried at the lower of cost or net realisable value. Properties under

development for sale which have been pre-sold are stated at cost plus attributable profits

less sale deposits, instalments received and receivable and any foreseeable losses.

Cost includes original land acquisition costs, costs of land use rights, construction

expenditure incurred and other direct development costs attributable to such properties,

including interest and other expenses relating to marketing and sales of the properties

prior to the completion of construction and sales of the properties developed.

Properties under development for long-term purposes, on completion, are transferred

to fixed assets or investment properties.

Properties under development which have either been pre-sold or are intended for sale

and in respect of which occupation permits are expected to be granted within one year from

the balance sheet date are classified under current assets.��

(j) d e v e l o p m e n t c o s t s

Development costs which represent costs directly attributable to the development of content

and facilities to provide high-speed Internet services are deferred when (i) technical feasibility

of the services can be demonstrated, (ii)the services under development are expected to

be launched and (iii) recoverability can be foreseen with reasonable assurance. Development

costs attributable to the development of content and facilities to provide high-speed Internet

services will be amortised over their estimated useful life commencing in the year of

commercial launch of the services.

The unamortised balance of development costs is periodically reviewed and is written off to

the extent that the unamortised balance, taken together with further development and other

directly related costs, is no longer likely to be recoverable.

Notes to the Financial Statements �continued

64 65

(k) s u b s i d i a r i e s

A company is a subsidiary company if more than 50% of the issued voting capital is held long-

term, directly or indirectly. Investments in subsidiaries are carried at cost in the Company’s

balance sheet less provision for impairment in value where considered necessary by the

directors. The results of subsidiaries are included in the income statement of the Company

only to the extent of dividends declared.

(l) a s s o c i a t e s

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, investments in associates are accounted for under

the equity method of accounting, whereby investments are initially recorded at cost and the

carrying amounts are adjusted to recognise the Group’s share of post-acquisition profits or

losses of the associates, distributions received from associates and other necessary alterations

in the Group’s proportionate interest in associates arising from changes in the equity of

associates that have not been included in the consolidated income statement.

Where, in the opinion of the directors, there is impairment in the value of an associate, or the

market value has fallen below the carrying value over a sustained period, a provision is made

for impairment in value.��

In the Company’s financial statements, investments in associates are carried at cost less

provision for impairment in value, other than temporary, where considered necessary by the

directors. The results of associates are included in the Company’s income statement to the

extent of dividends declared.

(m) j o i n t v e n t u r e s

The Group’s investments in joint ventures in the prc are in the form of Sino-foreign

co-operative joint ventures in respect of which the partners’ profit-sharing ratios and share

of net assets upon the expiration of the joint venture periods may not be in proportion to

their equity ratio, but are as defined in the respective joint venture contracts.

Where the Group’s investments are made in the form of jointly controlled entities, such

investments are accounted for using the equity method in the Group’s consolidated financial

statements. A jointly controlled entity is a contractual arrangement whereby the Company

and other parties undertake an economic activity which is subject to joint control and over

which none of the participating parties has unilateral control. Investments made by means of

joint venture structures which do not result in the Group having joint control with other

venturers are accounted for as subsidiaries where the Group controls the board of directors

or equivalent governing body and/or is in a position to exercise control over the financial

and operating policies of the joint ventures.

(n) i n v e s t m e n t s i n s e c u r i t i e s

Investment securities

Securities, which include both debt and equity securities, intended to be held on a

continuing basis, are classified as investment securities and are included in the balance

sheet at cost less any provision for impairment in value.

The carrying amounts of investment securities are reviewed at each balance sheet date to

assess whether fair values have declined below carrying amounts. When such a decline has

occurred, the carrying amount is reduced and the reduction is recognised as an expense in

the income statement unless there is evidence that the decline is temporary.

Notes to the Financial Statements �continued

Provisions against the carrying value of investment securities are reversed to the income

statement when the circumstances and events that led to the write-down or write-off cease to

exist and there is persuasive evidence that the new circumstances and events will persist for the

foreseeable future.

Upon disposal of investment securities, any profit or loss thereon is accounted for in

the income statement.

Other investments

Securities other than investment securities are classified as other investments and are carried

at fair value in the balance sheet. Any unrealised holding gain or loss for other investments

is recognised in the income statement in the period when it arises. Upon disposal of other

investments, any profit or loss representing the difference between the carrying value of the

investment and net sales proceeds is accounted for in the income statement.

The transfer of securities between categories of investments is accounted for at fair value.

For a security transferred into the other investment security category, the unrealised holding

gain or loss at the date of transfer is recognised in net profit or loss immediately. Securities

are transferred from the other investment category at the fair value at the date of transfer.

Previously recognised unrealised holding gains or losses on such securities are not reversed.

(o) p r o p e r t i e s h e l d f o r s a l e

Properties held for sale are stated at the lower of cost and net realisable value. Cost includes �

development and construction expenditure incurred, interest and other direct costs

attributable to such properties. Net realisable value is estimated by the directors based on

prevailing market prices, on an individual property basis, less any further costs expected

to be incurred on disposal.

(p) i n v e n t o r i e s

Inventories are carried at the lower of cost and net realisable value.

Cost is based on the weighted average cost formula and comprises all costs of purchase,

costs of conversion and other costs incurred in bringing inventories to their present location

and condition.

Net realisable value is the estimated selling price in the ordinary course of business less

the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of such inventories is recognised as an

expense in the period in which the related revenue is recognised. The amount of any

write-down of inventories to net realisable value and all losses of inventories are recognised

as an expense in the period when the write-down or loss occurs. The amount of any reversal

of any write-down of inventories arising from an increase in net realisable value, is recognised

as a reduction in the amount of inventories recognised as an expense in the period in which

the reversal occurs.

(q) c a s h a n d c a s h e q u i v a l e n t s

Cash and cash equivalents represent short-term highly liquid investments which are readily

convertible into known amounts of cash and which were within three months of maturity

when acquired, less advances from banks repayable within three months from the dates

of advances.��

(r) b o r r o w i n g c o s t s

Interest is expensed as incurred, except for interest directly attributable to the construction

or acquisition of property under development that necessarily involves a substantial period

of time before the property is ready for its intended use or sale, which is capitalised as part

of the cost of that property.

66

1999�hk$’000�

�

�

139,147�

15,500�

1998�hk$’000�

�

Note 31�

--�

--�

Other borrowing costs, including amortisation of discounts or premiums relating to

borrowings, amortisation of ancillary costs incurred in connection with arranging

borrowings and exchange differences arising from foreign currency borrowings to the extent

that they are regarded as an adjustment to interest costs, are recognised as expenses over the

period of borrowing.

(s) d e f e r r e d t a x a t i o n

Deferred taxation is provided under the liability method, at the current tax rate, in respect

of timing differences between profit as computed for taxation purposes and profit as stated in

the financial statements, except where it is considered that no liability will arise in the

foreseeable future.

A deferred tax asset is not recognised unless the related benefits are expected to crystallise in

the foreseeable future.

(t) f o r e i g n c u r r e n c i e s

Companies comprising the Group maintain their books and records in the primary

currencies of their operations (“respective functional currencies”).

In the financial statements of individual companies, transactions in other currencies during

the year are translated into respective functional currencies at applicable rates of exchange

prevailing at the time of the transactions. Monetary assets and liabilities denominated in

other currencies are translated into respective functional currencies at applicable rates of

exchange in effect at the balance sheet date. All exchange differences are dealt with in the

income statement.

For the purpose of preparing consolidated financial statements, the financial statements

of the individual companies with functional currencies other than Hong Kong dollars are

translated into Hong Kong dollars using the closing rate method. Under this method,

assets and liabilities of these individual companies are translated into Hong Kong dollars

at applicable rates of exchange in effect at the balance sheet date. Income and expenses

are translated at the average exchange rates for the year. Share capital and other reserves

are translated into Hong Kong dollars at historical rates. Exchange differences arising on

translation are dealt with as movements in reserves.

3. Related Party Transactions

Companies are considered to be related if one company has the ability, directly or indirectly,

to control the other company or exercise significant influence over the other company in

making financial and operating decisions. Companies are also considered to be related if they

are subject to common control or common significant influence.

These transactions were carried out after negotiations between the Group and the

related parties in the ordinary course of business and on the basis of estimated market

value as determined by the directors.��

(b) Included in the consolidated balance sheet are the following

balances with related parties:

Included in advances from customers (i)

Included in development costs (ii)

(i) The balance represents prepaid advertising fees received from investee companies,

including associates, for advertising space on the broadband Internet network

to be provided by the Group.

(ii) The balance represents an amount charged by a minority shareholder of one of the

Group's subsidiaries for the development of certain products for use in its future broadband

Internet network.��

(c) In September 1999, the Company issued 752,302,268 ordinary shares of $0.05 each to

pcd, a company incorporated in the Cayman Islands and wholly-owned by Li Tzar Kai,

Richard, in exchange for pcd’s 60% effective holding in pcc.

(d) The aggregate consideration for the disposal of the majority of the Company's businesses

together with the related indebtedness, prior to the acquisition of pccw Properties Limited,

to China Online was approximately $67,784,000, which was satisfied by offsetting an amount

owing by the Company to China Online at the time of the disposal less $10 million. The balance

of $10 million is due in August 2000 and is included in short-term borrowings as an interest

bearing loan. China Online also guaranteed that the net assets of the remaining business

in the Company after the disposal would not be less than $40 million. Any shortfall would

be made up by China Online injecting an equivalent amount of cash or other assets into the

Group. The Group has recorded a receivable of approximately $34.5 million from China

Online in satisfaction of the guarantee. The gain from the disposal of the businesses, including

the effect of the $40 million guarantee given by China Online, was approximately $21 million.

Balances with other related parties are unsecured, non-interest bearing and have no fixed

repayment terms, except for amounts due to minority shareholders of subsidiaries, which

bear interest at 12% per annum.

1999�hk$’000�

�

�

12,103

533

15,500

6,000

1,154

577

4,042

1,225

2,068

�

1998�hk$’000�

�

Note 31�

--�

--�

--�

--�

--�

--�

--�

--�

--�

�

(a) During the year, the Group had the following significant transactions with related

companies:

�

Convertible bond interest charged by intermediate holding companies

Interest charged by a minority shareholder of a subsidiary

Consultancy fee charged by a minority shareholder of a subsidiary

Provision of connectivity services

Land use right transfer fees charged by a related company

Consultancy service fees charged to a related company

Guaranteed rental income from pcrd

Purchase of fixed assets from a fellow subsidiary

Purchase of fixed assets from a related company

Notes to the Financial Statements �continued

1999�hk$’000�

�

112,475

18,248

631� �

131,354

20,679

152,033

1998�hk$’000

Note 31�

106,618

1,067

7,019 �

114,704

170,376

285,080�

Consolidated Consolidated

4. Turnover

An analysis of turnover is set out below:

� �

Continuing operations:

Sales of customer premises equipment and provision

of related maintenance services

Rental income

Commission income and others �Discontinued operations:

Sales of infrastructure communication systems

Total

69

(b) Information Regarding Pension Scheme Contributions

Pension scheme contributions payable to the Group’s �

defined contribution scheme

Less: Forfeited contributions�

�

The Group operates a defined contribution pension scheme for its qualifying employees.

The assets of the scheme are held separately from those of the Group in funds under

the control of an independent trustee.

The pension cost charged to the income statement represents contributions payable by the

Group at rates specified under the rules of the scheme. Where employees leave the scheme

prior to the full vesting of their contributions, the amount of forfeited contributions is used

to reduce the contributions payable by the Group.

At the balance sheet date, the amount of forfeited contributions arising from employees

leaving the scheme before becoming fully vested and which are available to reduce the

contributions payable by the Group in future was approximately $100,000 (1998 : $203,000).

(c) Profit (Loss) from Operations

The profit attributable to continuing operations was approximately $372,757,000

(1998 : $15,335,000) whereas the loss attributable to discontinued operations was

approximately $36,000,000 (1998 : $77,617,000).

1999 �hk$’000

3,730 �

(733)� �

2,997 �

�

1998 �hk$’000

2,857 �

(2,470)� �

387 �

68

Consolidated Consolidated

1999�hk$’000�

�

�

�

796�

200�

21,294�

--

77,466�

�

537,157�

37,147�

574,304�

�

12,669�

�

--�

--

24,003�

--�

107,539�

66,229�

5,516�

21,029�

6,000

8,435

3,469�

1,301�

9,153�

2,997

1998�hk$’000

Note 31��

�

--�

--�

--�

2,266

522

--�

--�

--�

�

13,309�

3,313�

749�

212�

16,487�

79,439�

183,750�

--�

12,167�

--�

--

--�

762�

5,420�

387

Consolidated Consolidated

Notes to the Financial Statements �continued

5. Profit (Loss) from Ordinary Activities Before Taxation

Profit (loss) from ordinary activities before taxation was

determined after charging and crediting the following:

�

Crediting: �

Dividend income on:

Listed investment securities and other investments

Unlisted investment securities and other investments

Gain on disposal of discontinued operations

Gain on disposal of fixed assets

Interest income on bank deposits recorded as other income

Investment income:

Unrealised holding gain on other investments

Realised gain on disposal of other investments�

�

Charging:

Depreciation

Write-off/amortisation of

Pre-opening expenditures

Technical know-how

Write-down of fixed assets to recoverable amount

Write-off of intangible assets

Staff costs

Cost of inventories

Loss on disposal of fixed assets

Interest expense (Note A )

Provision for connectivity services

Provision on disposal of land

Exchange loss, net

Auditors’ remuneration

Operating lease rental

Pension scheme contributions (Note B )

Bank loans and overdrafts wholly repayable within 5 years

Other loans wholly repayable within 5 years

Less: Interest capitalised in properties under

development for investment

During the year, the capitalisation rates used to determine the amount of interest eligible �

for capitalisation were 4.825% to 12%.

1999 �hk$’000 �

25,789 �

36,458 � �

62,247 �

�

(41,218)� �

21,029

1998 �hk$’000

7,415 �

4,752 � �

12,167 �

�

-- � �

12,167 �

Consolidated Consolidated(a) Interest Expense

6. Directors’ and Senior Executives’ Emoluments�

(a) Details of directors’ emoluments are set out below:

Independent non-executive directors:

Fees

Executive directors:

Fees

Salaries and allowances

Pension scheme contributions

Bonuses paid and payable ��Total�

1999�hk$’000� �

�

288�

�

--�

8,203�

333�

5,801� �

14,337� �

14,625� �

1998�hk$’000� �

�

240�

�

--�

7,239�

175�

--� �

7,414� �

7,654�

Consolidated Consolidated

The emoluments of the directors analysed by the number �of directors and emolument ranges were as follows:�

�

Up to $1,000,000

$1,000,001 - $1,500,000

$1,500,001 - $2,000,000

$2,000,001 - $2,500,000

$2,500,001 - $3,000,000

$3,000,001 - $3,500,000

$3,500,001 - $4,000,000 �

�

No directors waived the right to receive emoluments during the year.

(b) Details of senior executives’ emoluments are set out below:

Of the five individuals with the highest emoluments in the Group, two (1998 : three) were

directors of the Company whose emoluments are included in the disclosure in Note 6(a)

above. The emoluments of the remaining three (1998 : two) individuals were as follows:

Salaries and other benefits

Pension scheme contributions

Bonuses paid and payable

Their emoluments were within the following bands:

��Up to $1,000,000

$1,000,001 - $1,500,000

$1,500,001 - $2,000,000

$2,000,001 - $2,500,000

$2,500,001 - $3,000,000

$3,000,001 - $3,500,000

$3,500,001 - $4,000,000

�

During the year, no emoluments were paid to the five highest paid individuals

(including directors, members and employees) as an inducement to join the Group

or as compensation for loss of office.

Consolidated�1999�

hk$’000�

�

4,351

204�

3,100� �

7,655��

�Consolidated�

1999�

��

--�

--�

1�

1�

--�

--�

1� �

3�

Consolidated�1998�

hk$’000�

�

2,355

94�

--� �

2,449�

�Consolidated�

1998�

��

--�

2�

--�

--�

--�

--�

--� �

2�

Number of senior executives

1999

14�

2�

1�

--�

1�

--�

1� �

19

1998�

9�

1�

--�

2�

--�

--�

--� �

12�

Number of directorsConsolidated Consolidated

7. Taxation

Hong Kong profits tax has been provided at the rate of 16% (1998 : 16%) on the estimated

assessable profits for the year. Overseas taxation has been calculated on the estimated

assessable profits for the year at the rates prevailing in jurisdictions where profits arose.

The Company and subsidiaries:

Current taxation:

Hong Kong profits tax :

Provision for current year

Overprovision in prior years

Overseas income tax :

Provision for current year

Provision for (write-back of) deferred taxation (Note 24 ) :

Hong Kong

Overseas

Associates:

Current taxation:

Hong Kong profits tax :

Provision for current year

Overseas income tax :

Provision for current year

Consolidated �1999 �

hk$’000 �

�

� �

6,349 �

(258)�

�

696 �

�

463 �

-- � �

7,250 �

�

�

�

-- �

�

-- � �

7,250

Consolidated �1998 �

hk$’000 �

�

2,775 �

(212)�

�

93 �

�

(337)�

-- � �

2,319 �

�

�

�

84 �

�

-- � �

2,403

8. Gain on Disposal of Discontinued Operations

During the year, the Group disposed of all its non-cpe businesses to China Online.

The gain from the disposal, including the effect of the $40 million guarantee given by China

Online, was approximately $21 million.

9. Profit (Loss) Attributable to Shareholders

A loss of $40,763,000 (1998 : loss $32,687,000) included in the consolidated profit (loss)

attributable to shareholders was dealt with in the financial statements of the Company. A loss

of $5,478,000 (1998 : profit $741,000) was attributable to associates.

10. Earnings (Loss) Per Share

The calculation of basic earnings per share is based on the consolidated profit attributable

to shareholders for the year of $346,805,000 (1998 : loss $62,038,000).�

The calculation of diluted earnings per share for the year is based on the consolidated profit

or losses attributable to shareholders for the year of $346,805,000 adjusted for the income

effect of $11,463,000 of the assumed conversions of all dilutive potential ordinary shares.�

The basic earnings per share is based on the weighted average of 3,472,364,370 shares

(1998 : 461,712,603 shares) in issue during the year.�

The diluted earnings per share is based on 5,082,868,958 shares which is the weighted average

number of shares in issue during the year plus the weighted average of 1,610,504,588 shares

deemed to be issued at certain agreed exercise prices as if all outstanding share options and

convertible bonds had been exercised and converted. There were no dilutive potential

ordinary shares in existence during 1998.�

The weighted average number of ordinary shares in 1998 for the purposes of calculating the

basic loss per share has been retrospectively adjusted for the one-for-five share consolidation

which took place in 1999.

Notes to the Financial Statements �continued

70

72

Computers and System

software hk$’000

�

�

�

23,111

3,137

23,687

--

--

--

(724)

--

49,211

49,211

--

49,211

10,879

1,151

3,068

--

(146)

--

--

14,952

34,259

12,232

Total hk$’000

�

�

�

227,180

956,962

78,440

123,931

--

(54,290)

(100,419)

357

1,232,161

136,308

1,095,853

1,232,161

60,300

4,324

12,669

(11,430)

(21,347)

(10,366)

(67)

34,083

1,198,078

166,880

Furniture and fixtures

hk$’000

�

�

�

9,615

2,462

1,990

--

--

(3,593)

(4,455)

(153)

5,866

5,866

--

5,866

6,747

519

931

(1,261)

(4,346)

--

(45)

2,545

3,321

2,868

1999

�Office

equipment hk$’000

�

�

�

35,543

6,714

37,107

--

--

(16,155)

(10,646)

(409)

52,154

52,154

--

52,154

23,957

2,147

3,728

(8,081)

(9,267)

--

(89)

12,395

39,759

11,586

Leasehold improvements

hk$’000

�

�

�

22,527

4,287

6,499

--

(3,996)

(6,742)

(11,038)

(278)

11,259

11,259

--

11,259

9,763

291

2,691

(1,761)

(7,588)

--

55

3,451

7,808

12,764

Land and buildings hk$’000

�

�

�

136,384

17,818

--

--

--

(27,800)

(73,556)

972

53,818

17,818

36,000

53,818

8,954

216

2,251

(327)

--

(10,366)

12

740

53,078

127,430

InvestmentProperties

hk$’000

�

�

�

--

922,544

9,157

123,931

3,996

--

--

225

1,059,853

--

1,059,853

1,059,853

--

--

--

--

--

--

--

--

1,059,853

--

1998

�

Total hk$’000

�

�

�

234,445

--

5,783

--

--

--

(13,378)

330

227,180

132,180

95,000

227,180

50,186

--

13,309

--

(3,222)

--

27

60,300

166,880

184,259

Computers and System

software hk$’000

20,694

445

(21,139)

--

8,900

1,628

(10,528)

--

--

11,794

Total hk$’000

33,018

445

(31,926)

1,537

19,770

1,965

(20,907)

828

709

13,248

1999

Furniture and fixtures

hk$’000

4,439

--

(4,439)

--

4,418

8

(4,426)

--

--

21

Office equipment

hk$’000

6,389

--

(6,347)

42

5,837

137

(5,952)

22

20

552

Leasehold improvements

hk$’000

1,496

--

(1)

1,495

615

192

(1)

806

689

881

1998

Total hk$’000

31,054

3,119

(1,155)

33,018

18,046

2,493

(769)

19,770

13,248

13,008

The Group

Cost or Valuation

Beginning of year

Additions:

Through acquisition

of subsidiaries

Others

Valuation surplus

Transfers

Disposal of subsidiaries

Write-offs/write-down

Exchange Difference

End of year

Representing

At Cost

At Valuation

Accumulated depreciation

Beginning of year

Acquisition of subsidiaries

Charge for the year

Disposal of subsidiaries

Write-offs

Write down

Exchange difference

End of year

Net book value

End of year

Beginning of year

The Company

Cost

Beginning of year

Additions

Disposals

End of year

Accumulated depreciation

Beginning of year

Charge for the year

Disposals

End of year

Net book value

End of year

Beginning of year�

�

Had land and buildings of the Group carried at valuation been carried at cost less accumulated depreciation and any reductions in carrying

value to recoverable amounts, the carrying value of the land and buildings of the Group as at 31 December 1999 would have been

approximately $48,211,000 (1998 : $49,266,000).

Land and buildings with an aggregate carrying value of approximately $35,688,000 were pledged as security for certain bank

borrowings of the Group.

The carrying amount of investment properties and land and buildings is analysed as follows:�

�

� �

�

�

�

�

�

�

�

�

�

�

�

�

Investment properties were revalued as at 31 December 1999 by an independent valuer, cb Richard Ellis Limited.

Approximately $672,005,000 (1998:$122,487,000) of investment properties are mortgaged as collateral for banking facilities of the Group.

�

�

�

�

�

�

�

�

11. Fixed Assets

1998hk$’000

--

--

--

--

--

--

--

--

1999hk$’000

--

282,153

--

--

777,700

--

--

1,059,853

1998hk$’000

--

88,453

--

--

--

38,977

--

127,430

1999hk$’000

--

35,688

--

--

17,390

--

--

53,078

Investment properties Land and buildings

Held in Hong Kong :

On long lease (over 50 years)

On medium-term lease (10 - 50 years)

On short lease (less than 10 years)

Held outside Hong Kong :

Freehold

Leasehold:

On long lease

On medium-term lease

On short lease

Notes to the Financial Statements �continued

74

12. Properties held for Development

Leasehold land, at cost:

Located in Hong Kong

Located in the prc

Less: Provision for diminution in value

�

As at 31 December 1999, none of the properties held for development were pledged.

13. Properties under Development

Properties under development comprise:

Properties under development for investment (a)

Properties under development for sale

Less: Properties under development for sale �

classified as current assets

Properties under development for investment with an aggregate carrying value of

approximately $1,255,937,000 were pledged as security for certain bank borrowings

of the Group.

(a) On 5 November 1998, a subsidiary of the Group entered into an agreement with an

independent third party to construct an industrial building in the prc for leasing to that

party. Under the agreement, the subsidiary is responsible for the construction of the building

and the third party will pay the subsidiary a lease payment in advance covering the whole

lease period. As of 31 December 1999, approximately $167,161,000 had been advanced by

that third party to the subsidiary.

�1999 �

hk$’000 �

�

�

22,470 �

48,455

--

70,925 �

�

�

�

�

�

�

1999 hk$’000 �

1,505,518

355,352

1,860,870

(341,529)

1,519,341

�1998�

hk$’000�

�

�

--

--

--

--�

�

�

�

�

�

�

1998hk$’000�

--

--

--

--

--�

�

�

�

�

�

�

�

The Group

The Group

15. Investment in Subsidiaries

Unlisted shares, at cost

Amounts due from subsidiaries

Less: Provision for impairment in value

Amounts due to subsidiaries�

�

�

�

�

Balances with subsidiaries are unsecured, non-interest bearing and have no fixed terms of

repayment, except for an amount due to a subsidiary, which bears interest at commercial rates.�

Dividends from prc joint ventures are declared based on the profits in the statutory financial

statements of these prc joint ventures. Such profits will be different from the amounts reported

under accounting principles generally accepted in Hong Kong.�

As at 31 December 1999, the Group has financed the operations of certain of its prc joint

ventures in the form of shareholders’ loans amounting to approximately us$44 million

(hk$342 million) which have not been registered with the State Administration of Foreign

Exchange. As a result, remittances in foreign currency outside the prc may be restricted.

Particulars of the principal subsidiaries of the Company as at 31 December 1999

are presented in Note 33.

None of the subsidiaries had any outstanding loan capital subsisting at 31 December 1999

or at any time during the year.

�1999 �

hk$’000 �

�

6,224,956

4,954,174

11,179,130

--

11,179,130

(611)

11,178,519

�

�

�

�

�

�

�1998 �

hk$’000 �

�

21,521

219,322

240,843

(43,098)

197,745

(11,776)

185,969

�

�

�

The Company

75

Notes to the Financial Statements �continued

The Group�1999�

hk$’000�

--

17,299

--�

17,299�

14. Development Costs

�

Cost and net book value

Beginning of year

Additions

Write-off

End of year

76

16. Investment in Associates

Share of net assets of associates

Investments, at cost:

Unlisted shares

Shares listed overseas

Less: Provision for impairment loss

Amounts due from associates

Amounts due to associates

Balances with associates are unsecured, non-interest bearing and have no fixed terms

of repayment.

Particulars of the Group's principal associates are presented in Note 32.

(a) During the year ended 31 December 1999, the Group disposed of those associates held

as at 31 December 1998 as part of the disposal of all its businesses, except the cpe business,

prior to acquisition of all the issued shares of pccw Properties Limited from the pc Group.

The gain on disposal of these associates has been included in calculating the gain on disposal

of businesses during the year. (See Note 8)

(b) During the year ended 31 December 1999, the Group acquired interests in

SilkRoute Holdings Pte. Ltd., Star East Information Technology Management Co. Limited

and Outblaze Limited for approximately $428,480,000. The consideration for

these acquisitions was settled by cash of approximately $184,040,000 with the remaining

$244,440,000 being settled through the issuance of 36,696,597 shares of the Company.

Goodwill arising from these acquisitions of approximately $412,805,000 has been written off

directly to reserves.

(c) Subsequent to 31 December 1999, the Company acquired an additional 26.19% interest

in Outblaze Limited from one of the other shareholders of that company for approximately

$208,334,000 in cash.

17. InvestmentsInvestments are analysed as follows:

Investment securities (a), (d)

Other investments (b), (d)

�1999�

hk$’000� �

3,578,666

964,744

4,543,410

�

�

�

�1998�

hk$’000��

7,249

-

7,249

�

�

The Group

During the year, certain listed securities were transferred from investment securities to

other investments. The transfer was effected at fair value. The excess of fair value at the

date of tranfer over the cost of the securities of $404,437,000 (1998 : nil) was recognised

in the income statement immediately.

(b) Other investments

Listed, at quoted market value:

Hong Kong

Overseas (c)

Less: Current portion

�1999 �

hk$’000 �

204,932

1,033,698

1,238,630

(273,886)

964,744

�

�

�

�1998�

hk$’000�

�

-

-

-

-

-

The Group

1998 hk$’000

10,821

-

-

10,821

-

38

(1,647)

9,212

1999hk$’000

10,908

-

-

10,908

-

-

-

10,908

1998 hk$’000

-

3,597

-

3,597

(1,200)

2

(3)

2,396

1999hk$’000

-

-

-

-

-

-

-

-

The Group The Company

77

(a) Investment securities

Unlisted, at cost

Less: Provision for impairment in value

Listed, at cost

Less: Provision for impairment in value

Quoted market value of listed investments as at

31 December 1999

�1999 �

hk$’000 �

319,947

(167)

319,780

3,258,886

-

3,258,886

3,578,666

8,337,857

�

�

�

�1998 �

hk$’000 �

�

7,667

(418)

7,249

-

-

-

7,249

-

The Group

Notes to the Financial Statements �continued

As at 31 December 1999, the Group holds approximately 3.3% of the common stock of

us$0.01 each in cmgi, Inc., a company incorporated in Delaware, u.s.a. and listed on the

National Association of Securities Dealers Automated Quotations System. The book value

of the shares exceeds one tenth of the Group’s assets at the balance sheet date.��

78

(c) In 1999, the Group entered into certain derivative contracts with a third party with

the effect of fixing the Group’s gains on certain quoted other investments within

specified ranges. The derivative contracts have terms of up to four years from the date

of the contracts and will be settled in 2003. Accordingly, the gains from changes in the

fair market value of the related other investments as at 31 December 1999 have been

determined with reference to the effect of the derivative instruments and have been

limited to the specified range dictated by the terms of the derivative instruments. The

counterparty has the right to call for collateralisation of gains in the values of underlying

securities in excess of the range of the derivative instruments. The Company had

provided collateralisation in the form of a cash deposit at the year end in the amount of

approximately $669 million. This collateralised cash was released subsequent to year end

and alternative collateral has been provided through pledging the shares of a subsidiary

holding investments with a carrying value of approximately $3,175,916,000.

(d) Certain of the investment securities and other investments with a carrying value of

approximately $3.5 billion are subject to restrictions on sale (i) for a period of six months

to three years from the date of purchase, (ii) for a period of six months subsequent to the

initial public offering of the investees' shares on a recognised stock exchange, or (iii)

unless the securities are registered with the Securities and Exchange Commission of the

United States or exemption from registration is obtained.

Please refer to Note 29 to the financial statements for details of the Group’s banking facilities.

Certain investment properties and properties under development with an aggregate

carrying value of $1,927,942,000, bank deposit of approximately $50,149,000 as well

as certain land and buildings in Hong Kong with an aggregate carrying amount of

approximately $35,688,000 were pledged to secure bank borrowings.

18. Current Assets and Liabilities

(a) Properties held for sale

Properties held for sale:

Located in Hong Kong

Located in the prc

Less: Provision for diminution in value

�

(b) Inventories

As at 31 December 1999, inventories of the Group are comprised of finished goods

and are carried at net realisable value.

�

1999�hk$’000�

--

553,097

--

553,097

�

�

�

�

�

�

�

1998�hk$’000�

--

--

--

--

The Group

19. Long-Term Liabilities

Repayable within a period:

not exceeding one year

over one year, but not exceeding two years

over two years, but not exceeding five years

over five years

Less: Amounts repayable within one year

included under current liabilities (Note 18 )

Secured

Unsecured

The amount due is unsecured and interest-free (see Note 13(a)).

Consolidated �

1999 �hk$’000 �

8,363

11,151

33,454

114,299

167,267

(8,363)

158,904

-

158,904

Consolidated�

1998�hk$’000�

-

-

-

-

-

-

-

-

-

20. Convertible Bonds

Beginning of year

Issuance

Conversion

Balance, end of the year

The convertible bonds are convertible to shares of the Company at a conversion price

of $0.31 per share before 12 September 2002 and bear interest at 3% per annum, payable

semi-annually in arrears. The outstanding principal is repayable upon maturity on

12 September 2002 if not converted to shares before that date.

The Group and The Company

1998 �hk$’000 �

-

-

-

-

1999 �hk$’000 �

-

960,000

(78,000)

882,000

79

(c) Short-term borrowings

Bank loans and overdrafts

Loan from a shareholder (Note 3(D))

Current portion of long-term loans (Note 19 )

Secured

Unsecured

Consolidated�1999�

hk$’000�

957,604

10,000

8,363

975,967

798,859

177,108

�

�

�

�

�

�

Consolidated�1998�

hk$’000�

39,597

-

-

39,597

39,597

-

Notes to the Financial Statements �continued

80

21. Share Capital

The Company

Number of shares �

32,000,000,000

461,852,000

4,838,710,000

752,302,268

580,000

(34,784,000)

2,311,719,000

485,043,704

251,612,903

9,067,035,875

Authorised:

Ordinary shares of $0.05 each

(1998 - $0.01 each )

Issued and fully paid ordinary

shares of $0.05 each (1998 - $0.01 each):

Beginning of year (a)

Issued for acquisition of pccw

Properties Limited (b)

Issued for acquisition of 60%

effective holding in pcc (d)

Exercise of options (Note 22)

Repurchased and cancelled (f)

Issued for cash (c), (d), (e), (g)

Issued for acquisition of

investments (h), (i), (k)

Conversion of convertible bonds (j)

End of year

Nominal value �hk$’000

1,600,000

23,093

241,935

37,615

29

(1,739)

115,586

24,252

12,581

453,352

1999

Number of shares(a) �

3,000,000,000

2,305,860,000

-

-

3,400,000

-

-

-

-

2,309,260,000

Nominal value�hk$’000

30,000

23,059

-

-

34

-

-

-

-

23,093

1998

(a) Pursuant to the resolutions passed at an extraordinary general meeting on 29 July 1999:

(i) the authorised share capital was increased from $30,000,000 to $1,600,000,000 by

the creation of 157,000,000,000 new shares of $0.01 each; and

(ii) the issued and unissued shares of $0.01 each were consolidated on the basis of every

five issued shares being consolidated into one share (the “Share Consolidation”) of $0.05

each effective 3 August 1999. All the consolidated shares rank pari passu in all respects;

The number of issued shares as at 31 December 1998 has been restated retroactively

reflect the effect of the one-for-five consolidation;

(b) On 3 August 1999, 4,838,710,000 shares of $0.05 each were issued in settlement

of approximately $1,500,000,000 of the consideration for the acquisition of pccw

Properties Limited (see Note 1 );

(c) On 6 August 1999, 1,151,056,000 shares of $0.05 each were issued at $0.31 per

share for cash;

(d) On 15 September 1999, 752,302,268 shares of $0.05 each were issued in settlement

of approximately $3,762,000,000 in consideration for the acquisition of 60% effective

holding in pcc. In addition, 77,800,000 shares of $0.05 each were issued to a minority

shareholder of the Company at $5 per share for cash;

(e) On 24 September 1999, 414,000,000 shares of $0.05 each were issued at $5.55 per

share for cash;

(f) In October 1999, the Company repurchased 34,784,000 shares of $0.05 each at

prices ranging from $5.20 to $5.55 per share for a total consideration of approximately

$187,618,000 (including transaction costs) which was paid for in cash. The shares

repurchased were cancelled upon repurchase and accordingly, the issued share capital of

the Company was reduced by the nominal value of these shares. The premium payable

on repurchase was paid out of the Company’s share premium account;

(g) On 26 October 1999, 668,863,000 shares of $0.05 each were issued at $6.10 per

share for cash;

(h) On 8 November 1999, 11,719,994 shares of $0.05 each were issued at $6.98

per share as part of the consideration for the purchase of 100 shares of us$1.00 each

in stareastnet (bvi) Limited (formerly known as Star East Information Technology

Corp.), a company incorporated in the British Virgin Islands with limited liability;

(i) On 17 November 1999, 24,976,603 shares of $0.05 each were issued at $6.50 per

share as part of the consideration for the purchase of 30,565 shares of s$1.00 each in

SilkRoute Holdings Pte. Ltd., a company incorporated in Singapore;

( j) On 29 November 1999, 251,612,903 shares of $0.05 each were issued as a result

of the conversion of convertible bonds in the principal amount of $78,000,000 at a

conversion price of $0.31 per share;

(k) On 29 November 1999, 448,347,107 shares of $0.05 each were issued in settlement

of the total consideration of approximately $2,712,500,000 for the acquisition of

4,057,971 shares of common stock of us$0.01 each in cmgi, Inc.;

All shares issued rank pari passu in all respects with existing issued shares.

Notes to the Financial Statements �continued

22. Share Options

(a) s t a f f s h a r e o p t i o n s c h e m e

On 20 September 1994, the Company approved a share option scheme under which

the directors may, at their discretion, at any time during the ten years from the date of

approval of the scheme, invite employees of any member company of the Group,

including directors, to take up share options of the Company. The maximum number of

shares on which options may be granted may not exceed 10% of the issued share capital

of the Company excluding any shares issued on the exercise of options from time to time.

The exercise price in relation to each option offer shall be determined by the directors at

their absolute discretion, but in any event shall not be less than the greater of (i) 80% of

the average of the official closing price of the shares on The Stock Exchange of Hong

Kong Limited ("sehk") for the five trading days immediately preceding the relevant offer

date or (ii) the nominal value of the shares. The scheme became effective upon the

listing of the Company’s shares on the sehk on 18 October 1994 and was amended by

the directors on 22 December 1995 and was further amended by the shareholders on

29 July 1999. The terms of the scheme provide that an option may be exercised under

the scheme at any time during the period commencing on the date upon which such

option is deemed to be granted and accepted. The directors may determine and adjust

the period within which the relevant grantee may exercise his or her option and the

proportion of the option to be exercised in each period, so long as the period within

which the option must be taken up is not more than ten years from the date of grant

of the option.

81

82

Accumulated deficits

hk$’000

(38,912)

-

-

(3,733,656)

(412,805)

-

-

-

346,805

(3,838,568)

Total

hk$’000

90,572

14,712,112

(187,618)

(3,733,656)

(412,805)

(39,187)

123,931

(2,368)

346,805

10,897,786

Capital redemption

reserve

hk$’000

100

-

-

-

-

-

-

-

-

100

Currency translation

reserve

hk$’000

381

-

-

-

-

-

-

(2,368)

-

(1,987)

Property revaluation

reserve

hk$’000

39,187

-

-

-

-

(39,187)

123,931

-

-

123,931

Share premium

hk$’000

89,816

14,712,112

(187,618)

-

-

-

-

-

-

14,614,310

The Group

Beginning of year

Premium on issue of ordinary

shares or exercise of options,

net of issuing expenses

Share repurchases

(including transaction costs)

Goodwill arising from

acquisitions of subsidiaries

Goodwill arising from

acquisitions of associates

Write-down of revaluation surplus

on fixed assets

Surplus on revaluation of

investment properties

Translation exchange differences

Profit for the year

End of year

23. Reserves

$4.712per share

-

1,080,000

-

-

1,080,000

�

$4.552 per share

-

75,403,000

-

(188,000)

75,215,000

$2.356 per share

-

207,904,000

-

(1,720,000)

206,184,000

$0.705 per share

Note 1

80,000

-

(80,000)

-

-

$0.48 per share

Note 1

500,000

-

(500,000)

-

-

�

Total

580,000

284,387,000

(580,000)

(1,908,000)

282,479,000

At beginning of the year

Granted during the year

Exercised during the year

Cancelled/lapsed

during the year

At the end of the year

Note:

(1)Options outstanding at the beginning of the year were granted at initial exercise prices

of $0.96 per share and $1.41 per share. During the year, the exercise prices of the

outstanding share options were adjusted to $0.48 per share and $0.705 per share as a

result of the share subdivision in 1998 and the share consolidation described in Note 21 (a).

A summary of the movements of share options granted under the scheme during

the year is as follows:

(b) o t h e r o p t i o n s

In September 1999, as part of the acquisition of pcc from pcd, the Company entered into

an agreement with the minority shareholder of pcc. Under the agreement, the minority

shareholder can exchange its effective 40% shareholding in pcc Holdings Ltd.,

the holding company of pcc, for 1,003,070,000 new shares of the Company at no

further consideration. The option is exercisable for a period of 10 years from the date of

completion of the acquisition of pcc. The Company has the right to require the minority

shareholder to exercise the option at the end of the ten years option period to the extent

it has not already been exercised. As at 31 December 1999, the minority shareholder had

not exchanged any of its shareholdings in pcc Holdings Ltd. for shares of the Company.

In December 1999, certain subsidiaries of the Company signed a legally binding Heads

of Agreement (“Agreement”) with a supplier for the provision of production and sales

consultancy services and the rights to use all archive, visual, audio-visual and/or audio

materials owned by the supplier for ten years. Under the terms of the Agreement,

the supplier will be granted options to subscribe for up to 5% in the issued share capital

of pcc at par value. As at 31 December 1999, the options had not yet been granted and

final definitive agreements had not yet been signed, except for a production

services agreement.

Accumulated deficits

hk$’000

(3,420,997)

(417,571)

(3,838,568)

656

-

-

(40,763)

(40,107)

Total

hk$’000

11,315,357

(417,571)

10,897,786

90,572

14,712,112

(187,618)

(40,763)

14,574,303

Capitalredemption

reserve

hk$’000

100

-

100

100

-

-

-

100

Currency translation

reserve

hk$’000

(1,987)

-

(1,987)

-

-

-

-

-

Propertyrevaluation

reserve

hk$’000

123,931

-

123,931

-

-

-

-

-

Share premium

hk$’000

14,614,310

-

14,614,310

89,816

14,712,112

(187,618)

-

14,614,310

Attributable to:

The Company and subsidiaries

Associates

The Company

Beginning of year

Premium on issuance of

shares or exercise of options,

net of issuing expenses

Share repurchases

(including transaction costs)

Loss for the year

End of year

Notes to the Financial Statements �continued Consolidated 1999

84

1999�

hk$’000

1,081

463

-

1,544

Beginning of year

Provision (Write-back) for net timing differences

Translation adjustments

End of year

1998 �

hk$’000

1,422

(337)

(4)

1,081

The Group

1999�

hk$’000

460

-

-

460

1998

hk$’000

600

(140)

-

460

The Company

Deferred taxation represents the taxation effect of the following timing differences:

1999 �

hk$’000

1,977

(433)

1,544

Accelerated depreciation allowances

Tax losses

1998 �

hk$’000

1,572

(491)

1,081

The Group

1999 �

hk$’000

893

(433)

460

1998 �

hk$’000

893

(433)

460

The Company

The potential net deferred taxation asset which is not included in the financial

statements amounts to:

24. Deferred Taxation

1999 �

hk$’000

(5,498)

36,213

208

30,923

Accelerated depreciation allowances

Tax losses

Others

1998

hk$’000

(257)

8,480

(36)

8,187

The Group

1999�

hk$’000

-

-

-

-

1998�

hk$’000

-

-

-

-

The Company

The above net deferred taxation asset has not been recognised in the financial

statements as it is not certain that the benefit will be realised in the foreseeable future.

In addition, deferred taxation was not provided in respect of the property revaluation

surpluses recorded by the Group as the realisation of the surpluses will not be subject to

taxation or the deferred taxation is not expected to crystallise in the foreseeable future.

Notes to the Financial Statements �continued

25. Notes to the Consolidated Cash Flow Statement

(a) Reconciliation of profit (loss) from ordinary activities before taxation to net cash

(outflow) inflow from operating activities

�

Profit (loss) from ordinary activities before taxation

Provision for slow moving inventories

Write-off of intangible assets

Interest income

Interest expense

Depreciation

Investment income

Gain on disposal of discontinued operations

Loss (Gain) on disposal of fixed assets

Loss on disposal of long-term assets

Write down of fixed assets to recoverable amount

Write-off/amortisation of :

pre-opening expenditures

technical know-how

Provision for loss on disposal of land

Provision for connectivity services

Dividend income

Share of results of associates

Decrease (Increase) in operating assets:

properties held for sale

properties under development for sale

inventories

accounts receivable, prepayments, deposits

and other current assets

amounts due from related companies

Increase (Decrease) in operating liabilities:

bills payable

accounts payable and accruals

amounts due to minority shareholders

amounts due to related companies

amounts due to a shareholder

advances from customers

Exchange differences

Net cash (outflow) inflow from operating activities

1999 �hk$’000 �

�

�

352,573

-- �

-- �

(77,466)

21,029

12,669

(574,304)

(21,294)

5,516

-- �

24,003

--

--

8,435

6,000

(996)

5,478

(239,586)

(16,451)

7,951

(275,530)

(5,129)

(9,305)

209,977

(3,331)

15,299

-- �

142,709

(2,301)

(414,054)

1998 �hk$’000

(Note 31)�

(61,457)

8,816

16,487

(522)

12,167

13,309

13

-- �

(2,266)

50

212

3,313

749

--

-- �

-- �

(825)

-- �

-- �

13,775

20,290

(120)

(4,925)

(6,282)

-- �

-- �

1,140

-- �

143

14,067

85

The Group

(c) Disposal of subsidiaries

�

Net liabilities disposed of:

Fixed assets

Investment in associates

Investments

Inventories

Accounts receivables, prepayments, deposits �

and other current assets

Cash and bank balances

Accounts payable and accruals

Advances from customers

Taxation

Long-term liabilities

Deferred taxation

Waiver of amount receivable from subsidiaries disposed of

Gain on disposal of discontinued operations

Satisfied by:

Waiver of a loan from a former shareholder

Receivable from a former shareholder

Analysis of the net outflow of cash and cash equivalents in respect of the disposition

of subsidiaries:

Cash consideration

Cash and bank balances disposed of

Net cash outflow in respect of disposal of subsidiaries

1999 �hk$’000 �

�

�

42,860

4,664

780

39,718

�

66,192

14,976

(263,244)

(18,820)

843

(135)

(41)

(112,207)

193,247

81,040

21,294

102,334

67,784

34,550

102,334 �

�

�

�

�

-- �

(14,976)

(14,976)

1998�hk$’000

�

--�

--�

--

--�

--�

--�

--�

--�

--�

--�

--�

--�

--�

--

--�

--�

�

�

--�

--�

--�

�

�

�

�

--�

--�

--�

86 87

(b) Acquisition of subsidiaries

�

�

Net assets acquired:

Fixed assets

Properties held for development

Properties under development for investment

Properties held for sale

Properties under development for sale

Accounts receivable, prepayments, deposits �

and other current assets

Cash and bank balances

Accounts payable and accruals

Advances from customers

Long-term liabilities

Due to a minority shareholder

Minority interest

Goodwill arising on acquisition

Satisfied by:

Ordinary shares issued as consideration

Convertible bonds issued as consideration

Cash

Analysis of the net inflow of cash and cash equivalents in respect of the purchase

of subsidiaries:

Cash consideration

Cash and bank balances acquired

Net cash inflow in respect of acquisition of subsidiaries

1999 �hk$’000 �

�

�

952,638

96,373

1,442,814

183,238

361,479

�

104,410

55,655

(232,048)

(46,836)

(392,953)

(28,544)

(2,760)

2,493,466

3,730,537

6,224,003

5,261,511

960,000

2,492

6,224,003 �

�

�

�

�

(2,492)

55,655

53,163

1998�hk$’000

�

--�

--�

--

--�

--�

�

--�

--�

--�

--�

--�

--�

--�

--�

--�

--�

--�

--�

--�

--�

�

�

�

�

--�

--�

--�

The Group The GroupNotes to the Financial Statements �continued

88 89

(d) Analysis of changes in financing�

�

�

�

�

�

�

�

�

�

�

�

�

�

��

�

(e) Analysis of cash and cash equivalents�

�

�

�

�Cash and bank balances

Bank loans and overdrafts�

�

�

�

�

26. Major Non-cash Transactions

During the year, the Company issued approximately 6,076,056,000 ordinary shares of �

$0.05 each and convertible bonds in the principal amount of approximately $960,000,000 �

for acquisitions of interests in subsidiaries, associates, investment securities and other

investments, in full or partial settlement of the consideration for these acquisitions of

approximately $9,178,165,000.

�

�

�

�

Beginning of year

Cash inflow (outflow) from financing

Reduction of minority interests due to

disposal of subsidiaries

Shares issued for non-cash consideration

Reclassification of loans

Waiver of loans

Loans to subsidiaries acquired during the year

Loans to subsidiaries disposed of during the year

Minority interests in the losses of subsidiaries

End of year

Share capitaland premium�

hk$’000

112,909

6,658,588

--

8,296,165

--

--�

--�

--�

--

15,067,662

Borrowings other than

bank overdrafts �hk$’000

39,594

491,927

--

-- �

10,000

-- �

392,953

(135)

--

934,339

Borrowings from former shareholders �

hk$’000

70,200

7,584

--

-- �

(10,000)

(67,784)

-- �

-- �

--

-- �

Minority interests �hk$’000

3,379

--

(3,379)

-- �

-- �

-- �

-- �

-- �

--

�

-- �

Total �hk$’000

226,082

7,158,099

(3,379)

8,296,165

-- �

(67,784)

392,953

(135)

--

16,002,001

Total �hk$’000

251,652

(23,748)

--

--

-- �

--

--

--

(1,822)

226,082

1999 �hk$’000 �

�

4,121,519

(200,529)

3,920,990

1998 �hk$’000

10,320

(3)

10,317

The Group

The Group The Company

27. Commitments

(a) Capital�

�

�

�

�

Authorised and contracted for

Authorised but not contracted for�

�

�

An analysis of the above capital commitments by nature is as follows: �

�

�

Investments

Property development

Development of Internet business

Others

(b) Operating leases

Land and buildings

As at 31 December 1999, the Group and the Company had outstanding commitments under

non-cancellable operating leases in respect of land and buildings amounting to $13,749,000

of which $3,711,000 is payable in the next twelve months. The amount payable in the �

next twelve months, analysed according to the period in which leases expire, is as follows:

1999�hk$’000�

�

--�

--�

--

1998�hk$’000

2,632

--�

2,632

1999�hk$’000�

�

2,570,809

348,579

2,919,388

1998�hk$’000

2,632

15,252

17,884

The Company1999�

hk$’000�

�--�

--�

--�

--�

�

--

1998�hk$’000

2,632

--�

--�

--

�

2,632

1999�hk$’000�

�501,021

1,064,494

1,349,714

4,159

2,919,388

1998�hk$’000

17,884

--�

--�

--

�

17,884

The Group

The Company1999�

hk$’000�

�

--�

�

--�

--�

�

--

1998�hk$’000

10

�

--�

--�

10

1999�hk$’000�

�

699

�

3,012

--�

3,711

1998�hk$’000

1,181

�

3,894

--�

5,075

The Group

Expiring within one year

Expiring after one year and �

before five years

Expiring after the five years

Notes to the Financial Statements �continued 1999 1998

90 91

The Company28. Contingent Liabilities

���

Performance bonds

Guarantees given to banks and a third party

in respect of credit facilities granted to:

Subsidiaries

Others

Guarantee in lieu of cash deposit

Counter indemnity to a bank for �

guarantees given to customers�

�

�

�

�

As at 31 December 1999, certain bank borrowings of the Group were secured by land and

buildings and other assets with an aggregate carrying value of approximately $2,013,779,000

(1998 : $122,487,000).��

29. Banking Facilities

Aggregate banking facilities as at 31 December 1999 were $1,522,012,000 of which

unused facilities as at the same date amounted to $562,076,000. Security for these facilities

consists of:

(a) a fixed deposit of $50,149,000. Subsequent to 31 December 1999, the charge on the

fixed deposit was released;

(b) certain investment properties and properties under development in the prc with an

aggregate carrying amount of $1,927,942,000 (1998 : nil); and

(c) certain land and buildings in Hong Kong with an aggregate carrying amount of

$35,688,000 (1998 : $122,487,000).

30. Post Balance Sheet Events

Save as disclosed elsewhere in these financial statements, the following events occurred

subsequent to 31 December 1999 up to the date of approval of these financial statements

by the Board of Directors:

(a) The Company issued a total of 583,000,000 shares of $0.05 each on 8 February 2000

at $15.80 and on 28 February 2000 at $23.50 per share for cash.

(b) On 29 February 2000, Cable & Wireless plc. (“c&w”) announced that the Company

had made an offer to acquire the entire issued share capital of Cable and Wireless hkt

Limited (“hkt”), a company incorporated in Hong Kong with its shares listed on The Stock

Exchange of Hong Kong Limited and the London Stock Exchange. The proposed

acquisition is to be implemented by way of a scheme of arrangement sanctioned by the

Companies Ordinance or through a general offer governed by the Hong Kong Code on

Takeovers and Mergers. The Group has already reached an agreement with c&w, the major

shareholder of hkt, to acquire its entire interest in hkt. The Company has offered two

payment alternatives to the shareholders of hkt. Under the share alternative, each hkt share

can be exchanged for 1.10 new shares of the Company. Under the combination alternative,

each hkt share can be exchanged for us$0.9290 in cash and 0.7116 new shares of the

Company. The maximum aggregate amount of cash to be paid out under the combination

alternative is approximately us$11.3 billion (hk$88.0 billion).

1999�hk$’000�

�

8,525

�

�

82,763

--�

267

�

--�

91,555

1998�hk$’000

--

�

74,018

5,850

--�

�

637

80,505

1999�hk$’000�

�

8,525

�

�

--�

--�

617

--�

9,142

1998�hk$’000

--�

�

--�

5,850

--�

�

637

6,487

The GroupNotes to the Financial Statements �continued

Country ofincorporation

�

Singapore

bvi

Hong Kong

Name of company�

SilkRoute Holdings Pte. Ltd.

Star East Information Technology

Management Co. Limited

Outblaze Limited

Principal activities��

Internet Incubator

Entertainment Portal

Instant Portal

Attributable equity interestto the Group

Indirectly�

�

25.1%

50%

20%

Directly�

�

-

-

-

32. Associates

As at 31 December 1999, particulars of the Group’s principal associates are as follows:

To finance the proposed acquisition, the Group has obtained credit facilities from a syndicate

of banks totaling approximately us$12 billion (hk$93.3 billion). Up to the date of approval

of these financial statements by the directors, none of the facilities has been utilised.

(c) On 9 March 2000, an associate and the Group agreed to modify an advertising contract

to reduce the prepaid deposit for advertising space on the broadband Internet network by

approximately $9 million. The Group agreed to refund the prepaid deposit of approximately

$9 million to the associate. In addition, on the same day, two other advertising contracts with

the same associate, totalling approximately $31 million, were cancelled.�

(d) The Group has disposed of a portion of its other investments with an aggregate cost �

of approximately hk$182 million.

(e) The Group has made additional investments in various Internet-related businesses

totalling hk$1.5 billion.

31. Comparative Figures

The financial statements as at and for the year ended 31 December 1998 were audited and

reported on by certified public accountants other than Arthur Andersen & Co, whose report

dated 18 May 1999 expressed an unqualified opinion on those statements.

Certain of the 1998 comparative figures have been reclassified to conform with the

provisions of the revised Statement of Standard Accounting Practice (“ssap“) Number 1

“Presentation of Financial Statements”, ssap Number 2 “Net Profit or Loss for the Period,

Fundamental Errors and Changes in Accounting Policies” and ssap Number 24

“Accounting for Investments in Securities” issued by the Hong Kong Society of Accountants.

92 93

Country of incorporation/operations�

Hong Kong

bvi

bvi

bvi

bvi

bvi

The prc�

The prc

Hong Kong

Hong Kong

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

Bermuda

bvi

Hong Kong

Bermuda

Bermuda

bvi

bvi

bvi

Isle of Man

Cayman Islands

bvi

bvi

bvi

Hong Kong

The prc

Hong Kong

bvi

Hong Kong

� �

hk$

2

8

8

8

8

8

370,540,018�

1,165,375

2

2

8

77

77

8

8

8

8

8�

8

8

8

8

8

8

93,600

8

2

93,600

93,600

8

8

8

25

77

8

8

8

2

20,196,318

10,000

8

2

Particulars of the principal subsidiaries of the Company are as follows: Name of company�

acca Investment Limited

Advanced Internet Ventures Limited

Asian Motion Limited

Asianet System Group Limited

Atkins Developments Limited

Beijing Jing Wei House and Land Estate Development Co. Ltd.

Beijing Jing Wei House and Land Estate Development Co., Ltd.

Beijing Jingwei Property Management Co. Ltd.

Carlyle International Limited

Carmay Investment Limited

Caudell Group Limited

Century Pacific Group Limited

Century Pacific Property Holdings Limited

Century Power Group Limited

Cosmos Network Limited

Cyber Advance Limited

Cyber Century Development Limited

Cyber Control Development Limited

Cyber Convergence Limited

Cyber Media Limited

Cyber Net Technologies Limited

Cyber Star Investment Limited

Cyber Tech Asset Management Limited

Cyber-Tech Group Limited

Cyber Ventures (Bermuda) Limited

Cybernet Holdings Group Limited

Cyber-Port Limited

CyberWorks Internet Ventures Limited

CyberWorks Ventures Limited

East Cyber Holdings Limited

Edmonton Group Limited

eh Facilities Limited

eh Services Limited

Event Horizon Limited

Eureka Investments Group Limited

Extra Lite International Limited

Gain Score Limited

Green Haven Limited

Guangzhou Huaxin Property Development Co. Ltd.

Hoover Express Limited

Hyperlink Investments Group Limited

iLink.net Limited (formerly known as Verona Limited)

Principal activity�

Property holding

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Property development

Property management

Entrustment work

Property holding

Investment holding

Dormant

Dormant

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Technology know-how, library, rights, ip owning & licensing

Investment holding

Investment holding

Property development

Investment holding

Investment holding

Investment holding

Property investment

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Corporate services

Property development

Property development

Investment holding

Data Centre

Equity interest attributableto the Group

Indirectly�

-

100%

-

100%

100%

100%

100%�

80%

100%

-

100%

100%

100%

-

100%

100%

100%

100%

100%

100%

-

100%

100%

100%

100%

100%

100%

100%

100%

100%

-

60%

60%

60%

100%

100%

100%

-

85%

80%

100%

80%

Directly�

100%

-

100%

-

-

-�

-�

-

-

100%

-

-

-

100%

-

-

-

-

-

-

100%

-

-

-

-

-

-

-

-

-

100%

-

-

-

-

-

-

100%

-

-

-

-

33. Principal Subsidiaries

Nominal value of issued capital/�registered capital

Notes to the Financial Statements �continued

94 95

Country of incorporation/operations�

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

bvi

Singapore

Cayman Islands

India

Hong Kong

bvi

bvi

Hong Kong

Cayman Islands/Hong Kong

u.s.a.

bvi

Cayman Islands

bvi

bvi

Hong Kong

bvi

Hong Kong

bvi

Singapore

Hong Kong

The prc

bvi

bvi

Hong Kong

Hong Kong

bvi

bvi

bvi

India

The prc

� �

hk$

8

8

8

8

8

8

8

8

77

77

8

8

77

8

549

78

149

2

8

8

1,000,000

9,166

7,700

8

19,479

8

8

2

776

2

8

422

10

49,569,951

8

8

100

10

8

8

8

145

29,080,350

Name of company�

Internet Advance Limited

Internet Elite Limited

Internet Initiatives Limited

Internet Innovations Limited

Internet Networks Limited

Internet Now Limited

Media Touch Group Limited

Millennium Standard Limited

Millennium International Holdings Limited

Millennium Pacific Holdings Limited

Millennium System Trading Limited

Millennium Vocal Limited

NetFort Offshore Limited

Nordic Media Limited

Ocean Fine Pte Limited

Pacific Century Asia Technologies Limited

Pacific Century CyberWorks India Private Limited

Pacific Century Engineering Services Limited (formerly known as Tricom Engineering Company Limited)

Pacific Century Internet Ventures Limited

Pacific Century Regional Services Limited

Pacific Century Systems Limited (formerly known as Tricom Telecom Limited)

Pacific Convergence Corporation, Ltd.

Pacific Convergence Group, Inc.

Pacific Legend Group Limited

pcc Holdings Ltd.

pccw International Marketing Limited

pccw International Services Limited

pccw Properties (hk) Limited (formerly known as Dynamite Dragon International Limited)

pccw Properties Limited (formerly known as Daily Link Developments Limited)

pccw Services Limited

Powernet Offshore Limited

Quinliven Pte Ltd.

Ripley Investments Limited

Shanghai Kecheng Parking Management Co. Ltd.

Spectorlite Limited

Splendid Stars Group Limited

Stable King Development Company Limited

Starbucks (hk) Limited

Superider Investments Company Limited

Tolmezzo Limited

Tricom International (bvi) Limited

Variegate Commercial and Agencies Private Limited

Yinggao Real Estate Development (Shenzhen) Co., Ltd.

Principal activities�

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Dormant

Dormant

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

Investment holding

cpe business

Investment holding

Investment holding

cpe business

Broadband service developer

Broadband service developer

Investment holding

Investment holding

Marketing

Management services

Management services

Investment holding

Management services

Investment holding

Investment holding

Property investment

Car park construction & management

Investment holding

Investment holding

Property development

Satellite television uplink & downlink licence holder

Investment holding

Investment holding

Investment holding

Investment holding

Property investment

Equity interest attributableto the Group

Indirectly�

-

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

80%

100%

85%

100%

85%

-

100%

100%

-

60%

60%

100%

-

-

-

100%

-

-

-

75%

100%

74.4%

100%

100%

80%

-

100%

100%

-

71%

100%

Directly�

100%

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

100%

-

-

100%

-

-

-

60%

100%

100%

-

100%

100%

100%

-

-

-

-

-

-

100%

-

-

100%

-

-

Nominal value of issued capital/�registered capital

Notes to the Financial Statements �continued

33. Principal Subsidiaries continued

96

Property

The PRC

Pacific Century Place, Beijing �

2a Worker’s Stadium Road �

North Chaoyang District, Beijing

Tower A

Tower B

Tower C

Tower D

Carpark Block

Podium

Lot No. b105-32

Futian Free Trade Zone, Shenzhen

Guangzhou Local Housing Development (Phase 1)

Huangjinwei, Shijingzhen, Guangzhou

Shanghai Underground Parkade South Plaza,

Basement, Shanghai Railway Station, Shanghai

Group

interest

100%

100%

100%

100%

100%

100%

100%

85%

74.4%

GrossSite Area(sq. m)

29,323

19,387

96,526

11,948

GrossFloor Area(sq. m)

41,717

20,104

21,718

10,946

452 spaces

73,889

22,073

154,161

23,436

Lease term*

Medium

Medium

Long

Long

Medium

Medium

Medium

Medium

Medium

Classification

Investment properties

Properties under

development for sale

Properties held for sale

Properties held for sale

Investment properties

Properties under

development for investment

Properties under

development for investment

Properties held

for development

Properties under

development for investment

Status

Existing

Be completed in 2000

Existing

Existing

Existing

Be completed in 2000

Be completed in 2000

Vacant site

Be completed in 2000

Existing/Intend Use

Office for lease

Office for lease

Residential for sale

Residential for sale

For lease

Shopping mall for lease

Industrial for lease

Residential premises

development

For lease

Schedule ofPrincipalProperties

Hong Kong

The Broadway, 54-62 Lockhart Road

Wanchai, Hong Kong

Section a of Lot No.3054

The Remaining Portion of Lot No. 3087

Lot Nos. 3199, 3203 & 3205

Demarcation District No. 104

Mai Po, Yuen Long, New Territories

18/f & 20/f �

the roof thereabove & Parking Space

Nos. 5, 6, 7, 8, l3, l4 & L5 on 1/f

Paramount Building, 12 Ka Yip Street

Chai Wan, Hong Kong

100%

100%

100%

395

29,931

Not

applicable

6,062

Not

applicable

4,489

Long

Medium

Medium

Investment properties

Properties held

for development

Land and buildings

Existing

Vacant agricultural land

Existing

Office/shop for lease

Land bank

Office premises

for own use

* Lease term:

Long term: Lease not less than 50 years

Medium term: Lease less than 50 years but not less than 10 years

97

98

�

Turnover by Principal Activity

Continuing operations:

Sales of customers premises

equipment and provision

of related maintenance services

Rental income

Commission income and others

Discontinued operations:

Sales of infrastructure

communication systems

Total turnover

Turnover by Geographical Area

Hong Kong

Overseas

Total turnover

Profit (loss) from operations

Gain (loss) on disposal of discontinued �

operations

Share of results of associates

Profit (loss) from ordinary activities �

before taxation

Taxation

Profit (loss) from ordinary activities �

after taxation

Minority interests

Profit (loss) for the year

1996 � hk$’000 �

�

�

�

�

190,044

-- �

474

190,518

134,314

134,314

324,832

244,787

80,045

324,832

21,595

(2,493)

(2,561)

16,541

(3,811)

12,730

83

12,813

1995�hk$’000

168,133

-- �

1,159

169,292

241,505

241,505

410,797

371,252

39,545

410,797

22,887

-- �

(55)

22,832

(2,321)

20,511

(108)

20,403

1998 �hk$’000 �

�

�

�

�

106,618

1,067

7,019

114,704

170,376

170,376

285,080

208,717

76,363

285,080

(62,282)

-- �

825

(61,457)

(2,403)

(63,860)

1,822

(62,038)

1999 �hk$’000

�

�

�

112,475

18,248

631

131,354

20,679

20,679

152,033

135,110

16,923

152,033

336,757

21,294

(5,478)

352,573

(7,250)

345,323

1,482

346,805

1997 � hk$’000

190,504

--

15,747

206,251

146,328

146,328

352,579

232,032

120,547

352,579

(6,244)

-- �

2,119

(4,125)

(1,394)

(5,519)

498

(5,021)

Five YearFinancial �Summary

ResultsConsolidated

Assets and Liabilities

Non-current assets

Fixed assets

Properties held for development

Properties under development

Deposit for property acquisition

Intangible assets

Term loan receivable

Investment in associates

Investments

�

Current assets

Properties held for sale

Properties under development for sale

Inventories

Accounts receivable, prepayments, �

deposits and other current assets

Amount due from related companies

Other investments

Cash and bank balances

Current liabilities

Short - term borrowings

Bills payable

Accounts payable and accruals

Amount due to minority �

shareholders of subsidiaries

Amount due to related companies

Loan from a shareholder�

Advances from customers

Dividend payable

Taxation

Net current assets (liabilities)

Total assets less current liabilities

Non-current liabilities

Long-term liabilities

Amount due to minority �

shareholders of subsidiaries

Convertible bonds

Long-term loan from �

a shareholder

Deferred taxation

Net assets

Consolidated�1999�

hk$’000�

�

1,198,078

70,925

1,519,341

--�

17,299

386

10,908

4,543,410

7,360,347

�

553,097

341,529

20,284

298,438

5,249

273,886

5,053,887

6,546,370

(975,967)

--�

(302,689)

(4,878)

(21,191)

--�

(170,725)

--�

(4,038)

(1,479,488)

5,066,882

12,427,229

(158,904)

(28,704)

(882,000)

--�

(1,544)

(1,071,152)

11,356,077

�1998�

hk$’000

166,880

--�

--�

--�

--�

--

9,212

7,249

183,341

--�

--�

67,953

87,097

120

--�

10,320

165,490�

�

(39,597)

(9,305)

(104,994)

--�

(5,892)

(52,200)

--�

--�

(718)

(212,706)

(47,216)

136,125

--�

--�

--�

(18,000)

(1,081)

(19,081)

117,044

�1997�

hk$’000

184,259

--�

--�

--�

20,054

--�

7,036

8,262

219,611

--�

--�

90,544

110,421

--�

32

21,824

222,821�

�

(103,897)

(14,230)

(111,276)

--�

--�

--�

--

--�

--�

(229,403)

(6,582)

213,029

(32,431)

--�

--�

--�

(1,422)

(33,853)

179,176

�1996�

hk$’000

129,686

--�

--�

35,276

--�

--�

8,283

2,792�

176,037

--�

--�

56,596

69,352

--�

49

22,993

148,990�

(34,049)

--�

(81,468)

--�

--�

--�

--�

(6,880)

(1,297)

(123,694)

25,296

201,333

(13,000)

--�

--�

--�

(2,116)

(15,116)

186,217

�1995�

hk$’000

111,034

--�

--�

--�

--�

--�

15,559

2,666

129,259

--�

--�

56,990

96,153

--�

12,550

17,160

182,853�

(7,623)

--�

(98,037)

--�

--�

--�

--�

(6,679)

(6,725)

(119,064)

63,789

193,048

(19,800)

--�

--�

--�

(620)

(20,420)

172,628

99

This annual report, our first as Pacific Century CyberWorks, will give readers a handle on our fast-growing company’s activities and on the remarkable Internet-related opportunities in the Asia-Pacific region and beyond. We hope you will also share our view of the Internet, illustrated in these pages, as an entirely natural, comfortable and welcome extension of workaday life, and our vision of weaving broadband interactivity into the fabric of everyday experience across the vast area covered by our satellite delivery footprint -- as comfortable as pajamas (an Eastern innovation and, as visualized, an apt symbol of the ‘last mile’ to the home), �or as familiar as a sofa’s edge, an image which encapsulates the dual, �

“lean forward-lean back” nature of convergence and suggests the anticipation surrounding the launch of our broadband operation. A traditional helix of firecrackers appears to celebrate the endless possibilities of networked information. And so on.�

100

About this Annual Report

Colophon�Concept and art direction : Steiner&Co. Design : Sandy Choi �Images : Arthur Schulten, principal photography ; Munshi Ahmed, Joan Boivin, Phil Sayer;image on pages 28-29 : Government of the Hong Kong Special Administrative Region��Printed in Hong Kong on partially recycled and fully recyclable papers

Copyright © 2000 Pacific Century CyberWorks Limited, Hong Kong