SUMMARY OF RESULTS
The Board of Directors of CITIC Bank International Limited (the "Bank") announces the audited consolidated results of the Bank and its subsidiaries (the "Group") for the year ended 31 December 1999 as follows:-
1999 1998 Variance
---------- ---------- --------
HK$'000 HK$'000 %
Interest income 3,167,111 3,169,261 (0.07)
Interest expense (2,269,518) (2,293,280) (1.04)
---------- ----------
Net interest income 897,593 875,981 2.47
Other operating income 252,293 301,643 (16.36)
---------- ----------
Operating income 1,149,886 1,177,624 (2.36)
Operating expenses (480,614) (480,649) (0.01)
---------- ----------
Operating profit before provisions 669,272 696,975 (3.97)
Charge for bad and doubtful debts (937,588) (571,116) 64.17
---------- ----------
Operating (loss)/profit (268,316) 125,859
Net profit/(loss) on disposal of
tangible fixed assets 188 (449)
Profit on disposal of interest
in subsidiaries 396,909 -
Provision on held-to-maturity
securities and investment securities (18,737) -
---------- ----------
Profit from ordinary activities
before taxation 110,044 125,410 (12.25)
Tax on profit from ordinary activities
(Note 2)
- Hong Kong (786) (21,695) (96.38)
- Overseas (697) (443) 57.34
---------- ----------
Profit attributable to shareholders 108,561 103,272 5.12
Appropriation: Dividends (25,945) (25,927) 0.07
---------- ----------
Retained profit for the year 82,616 77,345 6.81
========== ==========
Earnings Per Share
- Basic (Note 3) 4.19 4.33?
========== ==========
- Diluted (Note 4) 4.18 4.33?
========== ==========
Notes:
(1) The Group adopted the new Statement of Standard Accounting Practice 2.124 "Accounting for Investments in Securities" commencing from 1 January 1999 which resulted in a change of accounting policy with respect to treasury bills, certificates of deposit, securities held for dealing purposes and investment securities. Debt securities intended to be held to maturity are accounted for as held-to-maturity securities. Other securities are accounted for using the benchmark treatment.
The opening retained earnings for 1999 were not restated as the effect of the change of the accounting policy was considered by the Directors to be immaterial. As a result of the adoption of this accounting policy, the Group's profit for the year ended 31 December 1999 was increased by HK$837,000 with the net assets at the year end increased by HK$837,000. Comparative figures for the year ended 31 December 1998 were reclassified to conform with the current year's presentation.
(2) The provision for Hong Kong profits tax is based on an estimate of the assessable profits for the year ended 31 December 1999 at 16% (1998: 16%). Taxation for overseas branches and subsidiaries is charged at the appropriate current rates of taxation ruling in the countries in which they operate.
No provision for deferred tax is made as there are no material timing differences which would result in a liability payable or an asset receivable in the foreseeable future.
(3) The calculation of basic earnings per share is based on the profit attributable to shareholders of HK$108,561,000 (1998: HK$103,272,000) and on the weighted average of 2,593,248,423 (1998: 2,383,580,927) ordinary shares in issue during the year.
(4) The calculation of diluted earnings per share is based on the profit attributable to shareholders of HK$108,561,000 (1998: HK$103,272,000) and on the weighted average number of ordinary shares of 2,595,460,815 (1998: 2,387,421,342) after adjusting for the effects of all dilutive potential ordinary shares.
FINANCIAL INFORMATION
(1) Summary of financial position
The Group
------------------------------------
31/12/1999 31/12/1998 Variance
---------- ---------- --------
HK$'000 HK$'000 %
Loans and advances 28,320,335 25,904,650 9.33
Loans loss provision 1,033,786 1,023,680 0.99
Total assets 48,783,089 44,110,038 10.59
Total interest earning assets 46,448,474 42,384,993 9.59
Total deposits 41,704,606 37,246,325 11.97
Shareholders' funds 5,361,889 5,276,421 1.62
Financial ratios
Capital adequacy 19.16% 20.57%
Average liquidity 39.45% 50.69%
Loans to deposits 67.91% 69.55%
Loans to total assets 58.05% 58.73%
General provision coverage 1.12% 1.04%
Property lending 45.02% 40.15%
Cost to income 41.80% 40.82%
Return on assets 0.23% 0.26%
Return on shareholders' funds 2.04% 2.10%
Payout ratio 23.90% 25.11%
(2) Advances and other accounts
The Group
---------------------------------
31/12/1999 31/12/1998 Variance
---------- ---------- --------
HK$'000 HK$'000 %
Advances to customers 27,603,561 25,046,550 10.21
Advances to banks and other
financial institutions 639,817 697,869 (8.32)
Accrued interest and other accounts 1,844,839 1,393,031 32.43
Provisions for bad and doubtful debts
- Specific (723,969) (735,608) (1.58)
- General (308,854) (261,412) 18.15
---------- ----------
29,055,394 26,140,430 11.15
========== ==========
(3) Advances to customers - by industry sectors
The Group
--------------------------------------------
31/12/1999 31/12/1998 Variance
----------------- ----------------- --------
HK$'000 % HK$'000 % %
Loans for use in Hong Kong
Industrial, commercial and financial
- property development 1,393,313 5.05 1,534,407 6.13 (9.20)
- property investment 1,801,952 6.53 2,110,585 8.43 (14.62)
- financial concerns 1,177,542 4.26 1,440,590 5.75 (18.26)
- stockbrokers 192,440 0.70 26,297 0.10 631.79
- wholesale and retail trade 1,137,820 4.12 1,296,166 5.18 (12.22)
- manufacturing 885,096 3.20 546,289 2.18 62.02
- transport and transport equipment 1,271,654 4.61 984,235 3.93 29.20
- others 6,045,662 21.90 5,418,176 21.63 11.58
Individuals
- loans for the purchase of flats
in the Home Ownership Scheme
and Private Sector
Participation Scheme 24,108 0.09 34,693 0.14 (30.51)
- loans for the purchase of other
residential properties 8,798,674 31.88 6,048,762 24.15 45.46
- others 675,206 2.45 510,642 2.04 32.23
Trade finance 1,852,329 6.71 2,548,376 10.17 (27.31)
Loans for use outside Hong Kong 2,347,765 8.50 2,547,332 10.17 (7.83)
---------- ------ ---------- ------
TOTAL 27,603,561 100.00 25,046,550 100.00 10.21
========== ====== ========== ======
(4) Loans on which interest is placed in suspense
The Group
---------------------------------------------------
Specific
Pledge provision
Total amount amount in respect
of loans for loans of loans
on which on which on which Amount of
interest interest interest interest
is placed is placed is placed placed in
in suspense in suspense in suspense suspense
-------------- ----------- ----------- ---------
HK$'000 %* HK$'000 HK$'000 HK$'000
As at 31 December 1999 1,555,450 5.49 763,536 514,767 152,711
As at 31 December 1998 2,118,669 8.18 657,514 679,389 108,979
* Based on total loans and advances
There were no advances to banks and other financial institutions on which interest is being placed in suspense or on which interest accrual has ceased as at 31 December 1999 and 31 December 1998, nor were there any specific provisions made for them on these two days.
(5) Overdue loans and advances
The Group
-------------------------------------------------------------
31/12/1999
-------------------------------------------------------------
Amount of Amount of
Overdue gross collateral specific
advances to held in provisions
customers respect of made against
(net of overdue Amount of Amount of overdue
suspended advances to secured unsecured advances to
interest) customers balance balance customers
-------------- ----------- --------- --------- ------------
HK$'000 %* HK$'000 HK$'000 HK$'000 HK$'000
Three to six months
overdue 409,613 1.45 205,124 75,939 333,674 51,662
Six months to one
year overdue 447,459 1.58 168,563 99,293 348,166 53,755
Over one year overdue 1,104,267 3.90 642,972 489,537 614,730 411,175
--------- ---- --------- ------- --------- -------
TOTAL 1,961,339 6.93 1,016,659 664,769 1,296,570 516,592
========= ==== ========= ======= ========= =======
The Group
-------------------------------------------------------------
31/12/1998
-------------------------------------------------------------
Amount of Amount of
Overdue gross collateral specific
advances to held in provisions
customers respect of made against
(net of overdue Amount of Amount of overdue
suspended advances to secured unsecured advances to
interest) customers balance balance customers
-------------- ----------- --------- --------- ------------
HK$'000 %* HK$'000 HK$'000 HK$'000 HK$'000
Three to six months
overdue 521,645 2.01 395,185 221,500 300,190 63,411
Six months to one
year overdue 709,420 2.74 333,272 277,958 431,417 260,518
Over one year overdue 555,359 2.14 310,079 201,651 353,708 257,156
--------- ---- --------- ------- --------- -------
TOTAL 1,786,424 6.89 1,038,536 701,109 1,085,315 581,085
========= ==== ========= ======= ========= =======
* Based on total loans and advances
There were no advances to banks and other financial institutions which were overdue for over 3 months as at 31 December 1999 and 31 December 1998.
Reconciliation
31/12/1999 31/12/1998
---------- ----------
HK$'000 HK$'000
Advances to customers overdue for more than 3 months 1,961,339 1,786,424
Less: Amount overdue for more than 3 months and
on which interest is still being accrued (892,161) (425,613)
Add: Amount overdue for 3 months or less and on
which interest is being placed in suspense
or on which interest accrual has ceased 37,839 191,550
Add: Rescheduled advances on which interest
is being placed in suspense or on which
interest accrual has ceased 413,852 458,126
Add: Amount not in overdue and on which interest
is being placed in suspense or on which
interest accrual has ceased 34,581 108,182
---------- ----------
Advances to customers on which interest is
being placed in suspense or on which
interest accrual has ceased 1,555,450 2,118,669
========== ==========
(6) Rescheduled loans
The Group
----------------------------------
31/12/1999 31/12/1998
-------------- --------------
HK$'000 %* HK$'000 %*
Rescheduled loans 738,981 2.61 776,994 3.00
* Based on total loans and advances
There were no advances to banks and other financial institutions which were rescheduled as at 31 December 1999 and 31 December 1998.
(7) Off-balance sheet exposures
(a) Contingent liabilities and commitments
The following is a summary of the contractual amounts of each significant class of contingent liabilities and commitments:
The Group
-----------------------
31/12/1999 31/12/1998
---------- ----------
HK$'000 HK$'000
Direct credit substitutes 435,501 253,892
Trade-related contingencies 613,922 678,546
Other commitments:
with an original maturity of under 1 year or
which are unconditionally cancellable 7,668,932 5,958,535
with an original maturity of 1 year and over 326,672 47,249
---------- ----------
9,045,027 6,938,222
========== ==========
The above amounts include the following guarantees:
(i) continuing guarantees to a wholly owned subsidiary, Ka Wah International Merchant Finance Limited ("KWIMF"), to secure the collectibility of principal and related interest in respect of loans granted by KWIMF to third parties. As at 31 December 1999, the balances due from these companies amounted to HK$468 million (31 December 1998: HK$621 million).
(ii) guarantees for credit facilities granted by third parties to certain subsidiaries amounting to HK$43 million as at 31 December 1999 (31 December 1998: HK$43 million).
(b) Derivatives
Derivatives refer to financial contracts whose value depends on the value of one or more underlying assets or indices.
The following is a summary of the notional amounts of each significant type of derivatives entered into by:
The Group
------------------------------------------------------------
31/12/1999 31/12/1998
----------------------------- -----------------------------
Trading Hedging Total Trading Hedging Total
------- ---------- ---------- ------- ---------- ----------
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Exchange rate
contracts
Forwards 428,400 489,698 918,098 55,744 207,465 263,209
Swaps - 17,484,727 17,484,727 147,937 22,489,114 22,637,051
Interest rate
contracts
Swaps - 427,679 427,679 - 464,752 464,752
------- ---------- ---------- ------- ---------- ----------
428,400 18,402,104 18,830,504 203,681 23,161,331 23,365,012
======= ========== ========== ======= ========== ==========
REVIEW
Since the end of 1997, the Hong Kong economy has been operating in the mist of the Asian financial crisis, enclosed by problems including negative economic growth, high unemployment rate, contracting trade volume, as well as plummeting stock and property markets. These transpired, loan demand across-the-board shrunk and the banking business was hard hit. The financial turmoil also led to the deterioration of the Bank's loan assets, to the extent that out of the approximately HK$20 billion loans at the end of 1997, HK$6.9 billion gradually became problematic. To respond, the new management has since 1998 adopted a progressive business development strategy while concurrently implemented reforms and dealt with the inherited issues. Highly experienced and qualified professionals were recruited to strengthen the management team. The strategy was proved to be successful, with satisfactory business performance registered in many divisions of the Bank's businesses.
In 1999, Hong Kong still found its economy in a difficult stage. Amidst a most critical operating environment, the Bank continued to pursue the proven strategy of progressive business development and prudent internal transformation. Through two years of solid work, the Bank ultimately succeeded in overcoming challenges and achieved satisfactory profit growth, enabling significant provisions to be made against problem loans. A platform has also been laid for further business expansion and profit growth in 2000. The Bank believes that the worst is now being put behind and the year 2000 shall be a year of rich return.
Progress
1. Loans and deposits recorded high growth rates. According to statistics from the Hong Kong Monetary Authority ("HKMA"), total loans and advances in Hong Kong reduced by 19.8% in 1998, when that for the Bank grew 29.6%, or HK$5.92 billion in value. Total loans and advances in Hong Kong dropped another 15% in 1999, and in contrast, the Bank's loans recorded another year of improvement, by 9.3%, or an increase of HK$2.42 billion. As a result of cumulative growth of 41.7% in two years, or HK$8.34 billion, total loans of the Bank stood at HK$28.3 billion at the end of 1999.
In 1998, the Bank's total deposits rose by 35.4%, or HK$9.75 billion. 1999 was another year of satisfactory growth as far as deposit is concerned. During the year HK$4.46 billion of deposits, or 12.0%, were added, bringing the 1999 year end figure to HK$41.71 billion. Taking into account that HK$1.6 billion of certificates of deposit that matured during 1999, the effective growth in total deposits was put at 16.3%. Comparing the year end figures of 1997 and 1999, deposits increased by HK$14.20 billion, or 51.6%, in two years.
Total assets grew 27.4%, or HK$9.48 billion, in 1998. As at 31 December 1999, total assets were recorded at HK$48.78 billion, reflecting an increase of HK$4.67 billion, or 10.6% over 1998. After experiencing two successive years of relatively rapid growth, the Bank's total assets increased significantly by HK$14.15 billion, or 40.9%, from approximately HK$35 billion in the beginning of 1998 to approaching the HK$50 billion mark.
2. Asset quality improved. The Bank's strategy is to gradually acquire new quality assets, bringing down continuously the lending risk exposure (Table 1). Since 1998 the Bank has developed a robust credit system through centralising the credit processes. All newly booked loans are ensured to be subjected to stringent credit scrutiny. As a result, the delinquency ratio for new corporate loans booked since 1998 was at a low level of 0.4%.
Table 1
1999 1998 1997
------ ------ ------
Total loans and advances (HK$ billion) 28.32 25.90 19.98
- Lending to Listed Companies (%) 28.8 25.8 10.1
- Top 20 Customers Exposure (%) 30.2 33.7 -
- Mainland Exposure (%)* 28.3 36.5 -
- Mortgage Loans (%) 31.1 23.3 18.1
* Mainland exposure is stated in accordance with the guideline issued by the HKMA.
3. Problem loans issue under control. In 1999, the Bank made a recovery of HK$1.94 billion in problem loans, broken down as HK$696 million from cash recovery, HK$658 million from debt restructuring, HK$278 million from collateral realisation and HK$310 million of additional collateral. This was achieved on top of the HK$1.83 billion already dealt with in 1998, putting total recovery in the two years to HK$3.77 billion. The Bank has written off respective amount of HK$390 million and HK$1,080 million of problem loans in 1998 and 1999. After two years of vigorous tackling and write-off, the problem loan issue is now basically under control.
Table 2
1999 1998 Total
------------ ------------ ------------
HK$ million HK$ million HK$ million
Cash Recovery 696 789 1,485
Collateral Realisation 278 353 631
New Collateral 310 - 310
Debt Restructuring 658 686 1,344
------ ------ ------
Total 1,942 1,828 3,770
====== ====== ======
As at the end of 1999, classified exposure, comprising substandard and doubtful loans, amounted to HK$2.38 billion, representing 8.4% of the Bank's total loans. Specific provision made against this classified exposure was HK$720 million, with collateral amounted to HK$960 million. This represents a coverage ratio of 70.6% and an uncovered exposure of HK$700 million. In September 1999, the Bank set up the Risk Assets Management Department for the handling of problem loans. It is believed that the problem loans issue could be wholly resolved in 2000.
4. Profit growth maintained. Despite intensifying competition in the local banking industry, most notably in the mortgage sector, profit attributable to shareholders rose by 5.1% in 1999. Although non-interest income fell by 16.4%, operating profit before provision only fell by 4.0%. This is attributable to the fall in operating expenses as a result of stringent cost control and the satisfactory performance recorded by various business divisions which drove net income up by 2.5%. As a result of satisfactory profit growth, and a windfall gain of approximately HK$400 million from disposing 49% of shareholding in each of Cargary Securities Limited ("Cargary") and Ka Wah Capital Limited ("Capital") in late 1999, the Bank has ample capital to lift its provisioning level that far exceeded HKMA's requirements as well as to support future business growth to enhance profitability.
Table 3
1999 1998 Change
------------ ------------ ------
HK$ million HK$ million %
Net Interest Income 898 876 2.5
Non-interest Income 252 302 -16.4
Operating Expenses 481 481 -
Operating Profit Before Provision 669 697 -4.0
Charge for Bad and Doubtful Debts 938 571 64.2
Profit on Disposal of Interest in
Subsidiaries 397 - -
Profit Attributable to Shareholders 109 103 5.1
It is worth pointing out that the Bank's profit level started to make a breakthrough since the fourth quarter of 1999, with the average monthly operating profit before provision exceeded HK$60 million. As this trend sustains in early 2000 and a sharply lower provision figure is expected, the Bank anticipates that profit in 2000 will reach a record level.
5. Continuous reform and development is vital to sustain business development. Two years ago, many difficulties and issues confronted the Bank. Not only was problem loans standing at a relatively high level, the Bank also lagged behind the market in many facets, from its management systems, operating principles, to the quality of senior management. To support business development, therefore, it was imperative for the Bank to undertake a comprehensive program of reform and adjustments.
The first step of reform involved strengthening the management team. Two years ago, the Bank's management team was entirely comprised of mainland bankers. In early 1998, the Bank recruited Mrs Doreen Chan to head the Retail Banking Group. Mrs Chan worked in Standard Chartered Bank for many years and is a veteran retail banker. Under her leadership, the Retail Banking Group was completely transformed and revitalised. This includes the setting up of a new organisation structure, revamping of the branch network, formation of a direct sales force and establishment of an efficient operating platform. For the past two years, the Retail Banking Group has actively participated in the mortgage market, resulting in a HK$5.2 billion growth in the Bank's mortgage portfolio, which represents one and a half times of the total mortgage loans acquired during the last ten or more years.
In May 1999, the Bank appointed Mr Kenneth Kong, a well experienced banker, to lead the Corporate Banking Group. A comprehensive business reform program was put into place, which led to the establishment of new lending policies and a new group structure. Relationships with local corporates were enhanced, new product development programme was strengthened, and operational efficiency streamlined. The business reform has started to make a positive impact on the Bank's corporate loans, from volume, to return and interest margins, the combination of which has contributed toward raising the quality of the Bank's loan portfolio.
The Bank engaged Mr Kelvin Lo, a qualified solicitor with extensive China experience, in problem loan recovery. A specialised Risk Assets Management Department was established in September 1999. Under Mr Lo's leadership, the Bank has, in the past two years, made considerable progress in the recovery of problem loans.
The Bank, at the same time, boldly appointed Ms Nancy Leung, who has been working for Jardine Fleming for many years, to the position of Head of Human Resources Department to spearhead reforms in human resources management. Ms Leung applied a set of standards which are highly transparent, systematic and professional, to revamp the Bank's human resources system. This has led to the recruitment of a number of professionals with international experience as well as gradually establishing a corporate culture that is open, international and contemporary.
At the end of 1997, Mr Simon Lee, who had a long career with Chase Manhattan Bank, joined the Bank to be in charge of credit. Subsequently, the Bank's credit approval processes were refined and reformed, and new approval authority matrix established. Overall awareness of the importance of credit risk management was reinforced within the entire Bank. This has resulted in enhanced efficiency for credit approval and improved asset quality.
Recently, the Bank recruited Mr Kane G. Gong, who has a long professional career with Citibank N.A. and ING Bank, to be responsible for overseeing finance and operations. Mr Gong will focus on enhancing the back office operations and finance function, with emphasis on lifting the Bank's capabilities in finance management, research and analysis, and processing procedures.
6. Financial soundness gained recognition. The Bank's strong financial position was reflected in the first-ever international ratings secured in December 1999. Moody's Investors Service rated the Bank's long- and short-term foreign currency deposit at Baa2 and Prime-3 respectively. The Bank's financial strength was rated at D while the rating outlook is stable. The ratings recognise the Bank's ample capital strength and a newly invigorated marketing drive in the wake of its business development and reforms. As at the end of December 1999, the capital adequacy ratio, the loan to deposit ratio were 19.2% and 67.9% respectively, while average liquidity ratio for the year was 39.5%, which served as solid proofs for its strong capital base and stable financial position.
MAJOR INITIATIVES FOR 2000
Management's unwavering commitment to a strategy of progressive business development and reform has demonstrably been successful, as illustrated by the Bank's past two years' performance. In 2000, this strategy will be persistently applied, together with the continued efforts on problem loan recovery and consolidating our mainland exposure. As far as business initiatives are concerned, focus will be put on two major initiatives:
1. Launch of e-finance. Management recognizes the pivotal role that internet technology is playing in the future development and delivery of financial services. Therefore, the Bank has since 1999 started putting together a web-enabled infrastructure and invested in the installation and establishment of a state-of-the-art IT systems and software. This e-initiative is already underway and the Bank has recently commissioned PricewaterhouseCoopers to develop an e-business strategy as well as a market positioning strategy. Completion of the report is scheduled in the first quarter of 2000. The preliminary concept points to the development of a completely new e-finance business model embracing the future needs of the Bank as well as those of CITIC's financial services and telecommunications businesses. The plan is to launch internet securities trading services initially and the long-term goal is to develop a regional e-finance coverage.
2. Focus on capital market activities. Both Cargary and Capital went through a process of reforms and expansion in 1999. As a result, the 1999 profit rose 86% and 242% respectively, compared to 1998. In December 1999, the Bank sold 49% shareholding interest each in Cargary and Capital to CITIC. The purpose of the transaction is to strengthen the co-operation between the Bank and CITIC in the areas of securities brokerage and investment banking. Both Cargary and Capital are expected to benefit from a closer affiliation with CITIC through business referrals, sharing of customer base and a more visible identity, which is expected to boost the recognition and market standing of the two companies in both the mainland as well as the Hong Kong markets. While leveraging on CITIC's strengths, the Bank's capital market activities are expected to experience steady expansion in their scale of operations.
BUILDING STRENGTH FOR THE FUTURE
Under the direction of a professional management team and the profound support from staff members and customers, the Bank has, in the past two years, successfully undergone a series of transformation and expansion. Tremendous progress has been made in resolving the problem loan issue through significant recoveries and prudent provisioning. The Bank has successfully arrested the problems triggered off by the Asian financial crisis and inherited issues. As Hong Kong economy gradually recovers, the Bank's pace of business development will be shifted to high gears, entering into this hi-tech era free of baggage. For the Bank, the worst is over and 2000 will be a year of rich harvest.
FINAL DIVIDEND
At the forthcoming annual general meeting, the Board proposes to recommend a final dividend of HK$0.01 (1998: HK$0.01) per share which, if approved, will be paid on or about 9 May 2000 to shareholders whose names appear on the Register of Members on 3 May 2000.
CLOSURE OF REGISTER OF MEMBERS
The Register of Members of the Bank will be closed from Tuesday, 25 April 2000 to Wednesday, 3 May 2000, both days inclusive. In order to qualify for the dividend, all transfers of shares must be lodged for registration with the Bank's Share Registrars, Central Registration Hong Kong Limited at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen's Road East, Hong Kong by no later than 4:00 p.m. on Thursday, 20 April 2000.
PURCHASE, SALE OR REDEMPTION OF SECURITIES
The Bank has not redeemed any of its listed securities during the year. Neither the Bank nor any of its subsidiaries has purchased or sold any of the Bank's listed securities during the year.
YEAR 2000 COMPLIANCE
The Bank successfully made the transition to the Year 2000. All computer systems were operating smoothly during and subsequent to the millennium transition. All tasks relating to Year 2000 transition have been completed on schedule.
The Bank had established a Business Resumption Plan in which the Year 2000 Contingency Plan was embedded. Testing of this Year 2000 Contingency Plan was completed before 30 June 1999. Periodical review and revision of the Contingency Plan to accommodate changes in situation will be our normal practice.
The total costs of the Year 2000 project which amounted to approximately HK$10,400,000, have been fully expensed to the profit and loss accounts during the financial years from 1997 to 1999.
| By Order of the Board CAI ZHONGZHI President and Chief Executive Officer |
Hong Kong, 25 February 2000