CMB_2001 — Page 11

Report of the Directors (Continued)

CONNECTED TRANSACTION

Purchase of property from a connected person

A sale and purchase agreement was signed on 7th February, 2001 between a wholly-owned subsidiary of the company, Prosperous Orient Limited ("POL") and Madam Ngan Kit-ling, a substantial shareholder and a director of the company. Pursuant to the agreement, the remaining portion of Kowloon Inland Lot No. 1300 (No. 3 Jordan Road, Kowloon) was purchased by POL for a consideration of HK$68,000,000.

As Madam Ngan Kit-ling is a substantial shareholder and a director of the company, the sale and purchase agreement constituted a connected transaction for the company under the Listing Rules of the Stock Exchange of Hong Kong Limited. However, as the purchase price represented less than 3% of the book value of the consolidated net tangible assets of the company as disclosed in the audited accounts for the year ended 30th June, 2000, no independent shareholders' approval was required.

The purchase price was agreed after arm's length negotiations and with reference to an independent valuation of the market

open value of the property as at 2nd February, 2001 of HK$68,500,000 by C.N. Brooke, B.B.S., J.P., FRICS, FHKIS, RPS of Insignia Brooke (Hong Kong) Limited. The directors, including the independent non-executive directors, consider that the terms of the sale and purchase agreement are normal commercial terms and are fair and reasonable.

The

consider group is engaged in property investment and development in Hong Kong and overseas. The directors of the company that the property, given its central location in the Jordan area, Kowloon, is a high quality asset. It is the intention of the group to demolish the existing building on the property and redevelop the property into a 26 storey building comprising serviced apartments and retail accommodation with a total gross floor area of approximately 2,776 sq.m. The directors consider that the transaction is in the interest of the shareholders of the company and, upon completion of the redevelopment, the property is expected to generate steady rental income. for the group.

AUDITORS

KPMG retire and, being eligible, offer themselves for re-appointment. A resolution for the re-appointment of KPMG as auditors of the Company is to be proposed at the forthcoming Ordinary Yearly Meeting.

Hong Kong, 19th October, 2001

By order of the board

NGAN Kit-ling Chairman