Principal Accounting Policies

a) Basis of preparation

The Financial Statements have been prepared under the historical cost convention as modified by the revaluation of certain non-current assets, and comply with International Accounting Standards.

In 1999, the Group implemented IAS 1 (revised 1997), Presentation of Financial Statements; IAS 14 (revised 1997), Segment Reporting; IAS 17 (revised 1997), Leases; IAS 19 (revised 1998), Employee Benefits and IAS 35, Discontinuing Operations. The provisions of IAS 10 (revised 1999), Events After the Balance Sheet Date; IAS 16 (revised 1998), Property, Plant and Equipment; IAS 22 (revised 1998), Business Combinations; IAS 28 (revised 1998), Accounting for Investments in Associates; IAS 31 (revised 1998), Financial Reporting of Interests in Joint Ventures; IAS 36, Impairment of Assets; IAS 37, Provisions, Contingent Liabilities and Contingent Assets and IAS 38, Intangible Assets are applied in advance of their effective dates.

With the exception of IAS 10 (revised 1999) and IAS 19 (revised 1998) as described in more detail in k) and l) respectively below, there are no changes in accounting policy that affect profit or Shareholders' funds resulting from the adoption of the above standards as the Group was already following the recognition and measurement principles in those standards.

In view of the international nature of the Group's operations, the amounts shown in the Financial Statements are presented in United States Dollars.

b) Basis of consolidation

The consolidated Financial Statements incorporate the financial statements of the Company, its subsidiaries, associates and joint ventures on the basis set out below.

i) Subsidiaries

Subsidiaries are companies over which the Group has control. Control is the power to govern the financial and operating policies of a company so as to obtain benefits from its activities. The results of subsidiaries are included or excluded from their effective dates of acquisition or disposal respectively.

All intercompany transactions, balances and unrealised surpluses and deficits on transactions between group companies have been eliminated. Minority interests represent the proportion of the results and net assets of subsidiaries not attributable to the Group.

ii) Associates and joint ventures

Associates are companies, not being subsidiaries, over which the Group exercises significant influence.

Joint ventures are companies where the Group has a contractual arrangement with third parties to undertake an economic activity which is subject to joint control.

Associates and joint ventures are included on the equity basis of accounting. The results of associates and joint ventures are included or excluded from their effective dates of acquisition or disposal respectively, and are based on their latest financial statements.

iii) Goodwill

Goodwill represents the difference between the cost of an acquisition and the fair value of the Group's share of the net assets of the acquired subsidiary, associate or joint venture at the effective date of acquisition. Goodwill on acquisitions occurring on or after 1st January 1995 is reported in the balance sheet as an intangible asset or included within associates and joint ventures, as appropriate, and is generally amortised using the straight line method over a period not exceeding twenty years. Goodwill on acquisitions which occurred prior to 1st January 1995 was taken directly to reserves. The carrying amount of goodwill is reviewed annually and written down for permanent impairment where it is considered necessary.

The profit or loss on disposal of subsidiaries, associates and joint ventures is calculated by reference to the net assets at the date of disposal including the attributable amount of goodwill which remains unamortised but does not include any attributable goodwill previously eliminated against reserves.

iv) Own shares

The cost of shares held in the Company by a subsidiary and dividends thereon are eliminated from Shareholders' funds and the consolidated profit and loss account respectively.

c) Investments

i) Other non-current investments are stated at cost. As the investments are held for the long term, provision is only made where, in the opinion of the Directors, there is a long-term impairment in value. The results are included to the extent of dividends received.

ii) Liquid investments which are readily convertible to known amounts of cash are included in bank balances and other liquid funds and are stated at market value. Any increase or decrease in value is reflected in the consolidated profit and loss account.

d) Foreign currencies

Transactions in foreign currencies are accounted for at the exchange rates ruling at the transaction dates.

Assets and liabilities of subsidiaries, associates and joint ventures together with all other monetary assets and liabilities expressed in foreign currencies are translated into United States Dollars at the rates of exchange ruling at the year end. The results expressed in foreign currencies are translated into United States Dollars at the average rates of exchange ruling during the year.

Net exchange differences arising from the translation of the foreign currency financial statements of subsidiaries, associates and joint ventures, and exchange differences on transactions which hedge these investments are taken directly to the exchange fluctuation reserve. On the disposal of these investments, such exchange differences are recognised in the consolidated profit and loss account as part of the profit or loss on disposal. All other exchange differences are dealt with in the consolidated profit and loss account.

e) Properties

i) Investment properties

Investment properties are properties which are income producing and intended to be held for the long term. Properties held under long leases are included in the balance sheet at their then open market value on the basis of an annual independent professional valuation. Revaluation surpluses and deficits are dealt with in the property revaluation reserve, except for movements on individual properties below cost which are dealt with in the consolidated profit and loss account. Long leases are leases with more than 20 years to run. Properties having an unexpired lease term of less than 20 years are stated at the carrying value after deduction of depreciation set out in (f) below and such provisions for impairment in value as are considered necessary by the Directors.

The profit or loss on disposal of an investment property is recognised by reference to its carrying value.

The cost of maintenance, repairs and minor equipment is charged to income as incurred; the cost of major renovations and improvements is capitalised.

ii) Development properties

Development properties are stated at cost, inclusive of interest capitalised up to the date when the occupation permit or its equivalent is obtained, less such provisions for impairment as are considered necessary by the Directors. The capitalisation rate applied to funds provided for property development is arrived at by reference to the actual rate payable on borrowings for development purposes or, with regard to that part of the development cost financed out of general funds, to the average rate.

Where properties are transferred from the investment to the development portfolio, cost is deemed for this purpose to be the market value at the date of transfer.

A development property is not classified as an investment property until the earliest of:

- the date when the development becomes substantially let; or
- the date when income exceeds outgoings; or
- a date within two years of completion to allow for letting.

iii) Other properties

Other properties are stated at cost after deduction of depreciation set out in (f) below and such provisions for long-term impairment in value as are considered necessary by the Directors.

iv) Property held for sale

Property held for sale is shown at the lower of cost and net realisable value.

f) Depreciation

i) Investment properties

Investment properties are accounted for as long-term investments and accordingly no depreciation is provided except for leasehold properties having an unexpired lease term of less than 20 years, in which case the carrying value of any such property at the last balance sheet date is written off on a straight line basis over the remaining life of the lease.

ii) Other properties and assets

Depreciation is provided on a straight line basis at rates determined by the estimated useful life of the asset. No amortisation is provided where the carrying value of the leasehold properties is less than the residual value.

g) Revenue

Revenue includes gross rental income, service and management charges from properties and income from property trading. Receipts under operating leases are accounted for on an accrual basis over the lease terms.

h) Debtors

Trade debtors are carried at anticipated realisable value. An estimate is made for doubtful debts based on a review of all outstanding amounts on a regular basis. Bad debts are written off during the year in which they are identified.

i) Cash and cash equivalents

For the purpose of cash flow statement, cash and cash equivalents comprise bank balances and other liquid funds, net of bank overdrafts.

In the balance sheet, bank overdrafts are included in bank and other advances under current liabilities.

j) Deferred taxation

Deferred tax is provided, using the liability method, in respect of all temporary differences between the tax bases of assets and liabilities and their carrying values.

Provision for withholding tax which could arise on the remittance of retained earnings is only made where there is a current intention to remit such earnings.

A deferred tax asset is recognised for tax losses to the extent that it is expected to be utilised in the foreseeable future.

k) Dividends

Dividends proposed or declared after the balance sheet date are not recognised as a liability at the balance sheet date. This is a change in accounting policy as previously dividends proposed or declared after the balance sheet date were recognised as a liability at the balance sheet date.

The comparative figures for 1998 have been restated to reflect this change. The effect of this change has been to increase the Shareholders' funds at 1st January 1998 and 1999 by US$215.7 million and US$138.8 million respectively.

l) Pensions

The Group operates defined benefit and defined contribution schemes, the assets of which are held in separate trustee administered funds.

For the defined benefit scheme, pension costs are assessed using the projected unit credit method. Under this method, the costs of providing pensions are charged to the consolidated profit and loss account so as to spread the regular cost over the service lives of employees in accordance with an annual independent professional actuarial valuation. The plan assets are measured at fair value and the pension obligations are measured as the present value of the estimated future cash flows by reference to market yields on high quality corporate bonds which have terms to maturity approximating the terms of the related liability. Actuarial gains and losses to the extent of the amount in excess of 10% of the greater of the present value of the plan obligations and the fair value of plan assets are recognised in the consolidated profit and loss account over the expected average remaining service lives of the participating employees.

This is a change in accounting policy as previously pension costs were assessed using the attained age normal method and pension obligations were discounted at the expected rate of return on plan assets. The comparative figures for 1998 have been restated to reflect this change. The effect of this change has been to increase the profit after taxation and minority interests for the year ended 31st December 1998 by US$0.2 million. Shareholders' funds at 1st January 1998 and 1999 have been increased by US$7.9 million and US$8.1 million respectively.

The defined contribution scheme includes a death benefit based on final salary and funded by the Group. The Group's contributions to the defined contribution scheme and the insurance costs to cover the death benefit are charged to the consolidated profit and loss account in the year to which they relate.

m) Derivative financial instruments

The Group makes use of derivative financial instruments to hedge part of its underlying exposures.

i) Interest rate

Interest receipts and payments due under interest rate swap agreements used to manage the interest rate exposure on borrowings and investments are accrued so as to match the net costs with the related finance income and expense.

ii) Foreign exchange

Gains and losses on forward foreign exchange contracts used to hedge the Group's investments in foreign entities are taken directly to reserves to match the losses and gains on translation of these investments.

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