<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 20-F
(Mark One)

   [ ]     REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
           SECURITIES EXCHANGE ACT OF 1934

                                       OR

   [X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
           EXCHANGE ACT OF 1934
           FOR THE FISCAL YEAR ENDED MARCH 31, 2001

                                       OR

   [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
           EXCHANGE ACT OF 1934

           FOR THE TRANSITION PERIOD FROM ________TO _________.

  Commission file number:    0-30304

                              NEW CHINA HOMES, LTD.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

                              New China Homes, Ltd.
--------------------------------------------------------------------------------
                 (Translation of Registrant's name into English)

                                 Cayman Islands
--------------------------------------------------------------------------------
                 (Jurisdiction of incorporation or organization)

 16/F Far East Consortium Building, 121 Des Voeux Road, Central, Hong Kong,
                         The People's Republic of China
--------------------------------------------------------------------------------
                     (Address of principal or organization)


Securities registered or to be registered pursuant to Section 12(b) of the Act.

                                      NONE
--------------------------------------------------------------------------------
                                (Title of Class)

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


Securities registered or to be registered pursuant to Section 12(g) of the Act.

                               TITLE OF EACH CLASS
               Common Shares, par value $1.00 per share, or
               Common Shares
              -----------------------------------------------------
               Redeemable Common Share Purchase Warrants, or
               Warrants
              -----------------------------------------------------

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.

                                      NONE
--------------------------------------------------------------------------------
                                (Title of Class)

Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report (October 1, 2001):

Common Shares, par value $ 1.00 per share:        10,100,000
                                                  ------------------------------

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

         [X]  Yes         [  ]  No


         Indicate by check mark which financial statement item the registrant
has elected to follow:

         [ ]  Item 17     [X ]  Item 18



<PAGE>
                                TABLE OF CONTENTS


<TABLE>
<S>                                                                                                              <C>
INTRODUCTION......................................................................................................1


PART I............................................................................................................2

    Item 1.       Identity of Directors, Senior Management and Advisors...........................................2
    Item 2.       Offer Statistics and Expected Timetable.........................................................2
    Item 3.       Key Information.................................................................................2
                  Selected Consolidated Financial And Operating Data..............................................2
                  Risk Factors....................................................................................9
    Item 4.       Information on the Company.....................................................................24
    Item 5.       Operating and Financial Review and Prospects...................................................43
    Item 6.       Directors, Senior Management and Employees.....................................................51
    Item 7.       Major Shareholders and Related Party Transactions..............................................60
    Item 8.       Financial Information..........................................................................61
    Item 9.       The Offer and Listing..........................................................................62
    Item 10.      Additional Information.........................................................................63
    Item 11.      Quantitative and Qualitative Disclosures About Market Risk.....................................78
    Item 12.      Description of Securities Other than Equity Securities.........................................78

PART II..........................................................................................................78

    Item 13.      Defaults, Dividend Arrearages and Delinquencies................................................78
    Item 14.      Material Modifications to the Rights of Security Holders and Use of Proceeds...................78
    Item 15.      Reserved.......................................................................................78
    Item 16.      Reserved.......................................................................................79
    Item 17.      Financial Statements...........................................................................79

PART III.........................................................................................................79

    Item 18.      Financial Statements...........................................................................79
    Item 19.      Exhibits.......................................................................................79
</TABLE>


                                       i


<PAGE>
                                  INTRODUCTION

         This Annual Report on Form 20-F for the fiscal year ended March 31,
2001, as filed with the United States Securities and Exchange Commission, or the
Commission, includes our audited consolidated financial statements as of March
31, 1999, 2000 and 2001. Our Common Shares and Warrants are listed on the Nasdaq
Small Cap Market under the symbols NEWC and NEWCW, respectively.

FORWARD-LOOKING INFORMATION

         Information contained in this Annual Report contains certain
forward-looking statements and information relating to New China Homes, Ltd., or
the Company, which can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "estimate," "plan," "project,"
"should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology. Such statements reflect the current views of our
management with respect to future events and are subject to numerous risks,
uncertainties and assumptions, including the risk factors described in this
Annual Report. No assurance can be given that the future results covered by the
forward-looking statements or projections will be achieved. There can be no
assurance that these assumptions will prove accurate or that future events will
not cause material changes in our business which adversely affect our financial
results. Many factors could cause our actual results, performance or
achievements to be materially different from any future results, performance or
achievements that may be expressed or implied by such forward looking
statements, including, among others, the development of the private residential
and commercial real estate markets in Shanghai and other parts of China,
interest rate and inflation fluctuations, our ability to obtain the requisite
additional financing, governmental uncertainties, general competition and price
pressures in the marketplace, our ability to control costs and expenses,
currency fluctuations and various other factors, both referenced and not
referenced in this Annual Report. Should one or more of these risks or
uncertainties materialize, or should the underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, expected, intended, planned or projected.

CURRENCY TRANSLATION

         We have prepared our financial statements in accordance with United
States generally accepted accounting principles, or US GAAP, and published such
statements in Hong Kong dollars. On consolidation, the financial statements of
our joint venture subsidiary in China are translated from Renminbi, being its
functional currency, into Hong Kong dollars. All references to "HK$" are to Hong
Kong dollars. All references to "U.S. dollars," "dollars," "US$" or "$" are to
United States dollars. All references to "RMB" are to Chinese Renminbi. For your
convenience, conversion of amounts from Hong Kong dollars and Chinese Renminbi
into United States dollars have been made at the unified exchange rate of US$
1.00 = HK$ 7.8 and US$ 1.00 = RMB 8.4786, the approximate rate of exchange on
March 31, 2001. Such translations should not be construed as representations
that the Hong Kong dollar amounts could be converted into United States dollars
at that rate or any other rate.



                                       1
<PAGE>
                                     PART I


ITEM 1.           IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS

Not Applicable


ITEM 2.           OFFER STATISTICS AND EXPECTED TIMETABLE

Not Applicable


ITEM 3.           KEY INFORMATION

         A.       SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

                  SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

We have derived the selected statement of operations data for the fiscal years
ended March 31, 1997, 1998, 1999, 2000 and 2001 and the selected balance sheet
data as of March 31, 1999, 2000 and 2001 presented below from our audited
consolidated financial statements prepared in accordance with US GAAP. You
should read the selected financial and operating data presented below together
with Operating and Financial Review and Prospects and our consolidated financial
statements and notes thereto included elsewhere in this Annual Report.



                                       2
<PAGE>
STATEMENT OF OPERATIONS DATA:


<TABLE>
<CAPTION>
                                                                                 Year ended March 31,
                                                     -----------------------------------------------------------------------------
                                                      1997        1998          1999          2000         2001           2001
                                                     -------   -----------   -----------   -----------  ------------   -----------
                                                       HK$         HK$           HK$           HK$          HK$            US$
<S>                                                  <C>       <C>           <C>           <C>          <C>            <C>
Operating revenues ................................       --    74,197,884   270,830,228   174,742,842   169,008,016    21,667,694
                                                     =======   ===========   ===========   ===========  ============   ===========

Operating (loss) income before minority interest
   and income taxes ...............................  (10,609)   (5,718,280)   40,915,526    12,372,604      (800,556)     (102,636)
Income taxes ......................................       --    (1,430,566)   15,773,365     7,508,689     5,712,188       732,332
                                                     -------   -----------   -----------   -----------  ------------   -----------

(Loss) income before minority interests ...........  (10,609)   (4,287,714)   25,142,161     4,863,915    (6,512,744)     (834,968)
Minority interests ................................       --       (41,358)      570,569       263,568       202,750        25,994
                                                     -------   -----------   -----------   -----------  ------------   -----------

Net (loss) income .................................  (10,609)   (4,246,356)   24,571,592     4,600,347    (6,715,494)     (860,962)
                                                     =======   ===========   ===========   ===========  ============   ===========

(Loss) earnings per share - basic .................   (10.61)    (4,246.36)    24,571.59          0.44         (0.53)        (0.07)
                                                     =======   ===========   ===========   ===========  ============   ===========

(Loss) earnings per share - diluted ...............   (10.61)    (4,246.36)    24,571.59          0.44         (0.53)        (0.07)
                                                     =======   ===========   ===========   ===========  ============   ===========

Weighted average number of shares outstanding
- basic (See note (1)) ............................    1,000         1,000         1,000    10,538,630    12,700,000    12,700,000
                                                     =======   ===========   ===========   ===========  ============   ===========

Weighted average number of shares outstanding
- diluted (See note (1)) ..........................    1,000         1,000         1,000    10,575,467    12,700,000    12,700,000
                                                     =======   ===========   ===========   ===========  ============   ===========
</TABLE>


No dividends have been paid during the periods indicated above.

BALANCE SHEET DATA:

<TABLE>
<CAPTION>
                                                                                      As of March 31,
                                                          -------------------------------------------------------------------
                                                              1999              2000               2001              2001
                                                          -----------        -----------        -----------        ----------
                                                              HK$                HK$                HK$               US$
<S>                                                       <C>                <C>                <C>                <C>
Total assets .....................................        221,500,707        386,945,862        343,317,913        44,015,117
Long-term debt ...................................         30,327,409          9,981,610          5,876,352           753,379
Total stockholders' equity .......................         22,570,734        182,027,011        172,201,833        22,077,158
</TABLE>

(1)      Adjusted to give effect to a 999-for-one stock split effected in August
         1999.

(2)      As of March 31, 1999, 2000 and 2001, Shanghai Chingchu Property
         Development Limited, a Sino-foreign equity joint venture organized
         under the laws of the People's Republic of China, or Shanghai Chingchu,
         one of our operating subsidiaries had a total of HK$81 million, HK$76
         million and HK$73.41 million respectively, of outstanding mortgage
         loans subject to performance guarantees. Shanghai Chingchu has agreed
         to secure the obligations of California Gardens home purchasers to make
         repayment to the mortgages of their homes. The performance guarantees
         provide that upon default by a home purchaser of its obligation to
         repay the mortgage installments for three consecutive months, the
         relevant mortgage bank may require Shanghai Chingchu to pay the
         outstanding mortgage. As of March 31, 2001, Shanghai Chingchu has not
         been required to make any payment under these performance guarantees.


                                       3
<PAGE>
KEY OPERATING DATA:

         The following tables set forth key operating data for the Company as of
March 31, 2001:

a)       Revenue recognized for the sale of homes in California Gardens:

<TABLE>
<CAPTION>
                                                  Fiscal year ended March 31,
                                      ------------------------------------------------
                                        1998         1999          2000          2001
                                      ------        ------        ------        ------
                                                     (in HK$ millions)
<S>                                    <C>           <C>            <C>           <C>
Phase I ......................         73.92         35.26          0.23          1.14
Phase II .....................            --        234.66         22.71          2.09
Phase IIA ....................            --            --            --         25.04
Phase III ....................            --            --        151.13          1.89
Phase IV .....................            --            --            --        137.69
                                      ------        ------        ------        ------
Total ........................         73.92        269.92        174.07        167.85
                                      ======        ======        ======        ======
</TABLE>

Under US GAAP, we recognize revenue from the sale of homes on a percentage of
completion basis. The tables below, however, provide information based upon the
purchase price of units for which a sales purchase agreement has been executed,
plus the amount of deposits, or booking fees received by us for units which have
not been purchased.

         a)       Total revenue:

<TABLE>
<CAPTION>
                                          AS OF MARCH 31, 2000                       AS OF MARCH 31, 2001
                                  -------------------------------------      --------------------------------------
                                  NUMBER OF UNITS     TOTAL SALES VALUE      NUMBER OF UNITS      TOTAL SALES VALUE
                                  ---------------     -----------------      ---------------      -----------------
                                                           HK$ '000                                     HK$ `000
        <S>                       <C>                 <C>                    <C>                  <C>
        Purchased                       1,500              519,594                 1,913                676,465
        Booked                            509              193,211                    90                 37,309
        Total                           2,009              712,805                 2,003                713,774
</TABLE>

         b)       During the fiscal years ended March 31, 2000 and March 31,
                  2001, we received a total of HK$9.96 million and HK$1.69
                  million in booking fees, respectively and HK$0.23 million and
                  HK$0.47 booking fees were owed to us by home buyers,
                  respectively. As of March 31, 2000 and March 31, 2001, the
                  average unit booking fee taken by us was HK$18,700 and
                  HK$18,400, respectively. As of March 31, 2000 and March 31,
                  2001, the average unit price was HK$341,000 and HK$406,400 for
                  homes sold, respectively. Average unit price is comprised of a
                  HK$18,700 booking fee and HK$322,300 for the balance of the
                  home price for the year ended March 31, 2000 and a HK$18,400
                  booking fee and HK$388,000 balance of the home price for the
                  year ended March 31, 2001.


                                       4
<PAGE>

         -        Booking fees are the refundable deposits from potential homes
                  buyers which reserve a person's right to purchase a home at a
                  later date until we have started construction and secured the
                  requisite pre-sales permits from the relevant land
                  administration bureau but before the sale purchase agreement
                  is signed. The term "sold" refers to the signing of a sales
                  and purchase agreement.

         c)       When a home buyer has paid 20% of the total purchase price
                  (inclusive of the booking fee), the home buyer is eligible to
                  execute a pre-sales agreement. When signing a pre-sales
                  agreement, a home buyer must specify the method of paying the
                  remaining 80%, which generally can be made through one or more
                  of the following options: 1) Mortgage; 2) Public housing fund;
                  3) A mixture of mortgage and public housing fund; or 4)
                  Installment.

For settlement methods one, two, or three, the balance of the purchase price is
required to be paid within two months from the date of signing the pre-sales
agreement. If a home buyer elects to pay the balance of the purchase price in
installments, 90% of the purchase price is required to be paid within two months
from the date of signing the pre-sales agreement and the remaining 10% is
required to be paid on delivery of the home unit.

Regardless of the method of settlement selected, at least 90% of the total
purchase consideration is required to be settled within 2 months from the date
of signing the pre-sales agreements. It is at the date of signing the pre-sales
agreement that a home unit is considered to be "purchased" by a home buyer
because a condition of sales under the percentage of completion method is
established. Revenue will therefore be recognized in accordance with the
percentage of completion method of accounting.

For the year ended March 31, 2000, the following table sets forth information as
to the timing of payment of the purchase price balance by home buyers who paid a
booking fee:

         A --     represents: the home buyers who made the timely payment of
                  90% of the purchase price, i.e. within 2 months from the date
                  of signing the pre-sales agreement.

         B --     represents: the home buyers who were late in paying 90% of
                  the purchase price, but paid the 90% of the purchase price as
                  at March 31, 2000.

         C --     represents: the home buyers who are currently late in their
                  payment of 90% of the purchase price, but have paid a portion
                  of the amount due, the booking fee excepted.

         D --     represents: the home buyers whose purchase price balance is
                  not currently due.

<TABLE>
<CAPTION>
Category               Phase I                      Phase II                     Phase III                         Total
                ---------------------        ----------------------       -----------------------         -------------------------
                No. of                       No. of                        No. of                         No. of
                 Units        Percent         Units         Percent        Units          Percent           Units          Percent
                ------        -------        ------         -------       -------         -------         -------         --------
<S>             <C>           <C>            <C>            <C>           <C>             <C>             <C>             <C>
A                 75           20.55%          205           27.55%          157           40.15%            437           29.13%
B                285           78.08%          517           69.49%          199           50.90%          1,001           66.73%
C                  5            1.37%           20            2.69%           33            8.44%             58            3.87%
D                 --            0.00%            2            0.27%            2            0.51%              4            0.27%
                 ---          ------           ---          ------           ---          ------           -----          ------
Total            365          100.00%          744          100.00%          391          100.00%          1,500          100.00%
                 ---          ------           ---          ------           ---          ------           -----          ------
</TABLE>


                                       5
<PAGE>

For the year ended March 31, 2001, the following table sets forth information as
to the timing of payment of the purchase price balance by home buyers who paid a
booking fee:

         E --     represents: the home buyers who made the timely payment of
                  90% of the purchase price, i.e. within 2 months from the date
                  of signing the pre-sales agreement.

         F --     represents: the home buyers who were late in paying 90% of
                  the purchase price, but paid the 90% of the purchase price as
                  at March 31, 2001.

         G --     represents: the home buyers who are currently late in their
                  payment of 90% of the purchase price, but have paid a portion
                  of the amount due, the booking fee excepted.

         H --     represents: the home buyers whose purchase price balance is
                  not currently due.
<TABLE>
<CAPTION>
Category             Phase I                      Phase II                    Phase IIA
              ----------------------       ----------------------       ---------------------
               No. of                       No. of                       No. of
               Units        Percent         Units         Percent        Units         Percent
              -------       --------       -------        -------       -------       -------
<S>           <C>           <C>            <C>            <C>           <C>           <C>
E               78           21.25%          205           27.37%          18           43.90%
F              289           78.75%          540           72.10%          10           24.39%
G                0            0.00%            4            0.53%           5           12.20%
H                0            0.00%            0            0.00%           8           19.51%
               ---          ------           ---          ------           --          ------
Total          367          100.00%          749          100.00%          41          100.00%
</TABLE>


<TABLE>
<CAPTION>

Category           Phase III                     Phase IV                 Total of all Phases
             ----------------------       ----------------------       ------------------------
               No. of                       No. of                       No. of
               Units        Percent         Units         Percent        Units          Percent
             --------      --------       --------       --------       --------       --------
<S>          <C>           <C>            <C>            <C>            <C>            <C>
E              158           40.20%          238           65.57%            697        36.43%
F              223           56.74%           79           21.76%          1,141        59.65%
G               10            2.55%            8            2.20%             27         1.41%
H                2            0.51%           38           10.47%             48         2.51%
               ---          ------           ---          ------           -----       ------
Total          393          100.00%          363          100.00%          1,913       100.00%
</TABLE>

         Delays may be caused for the following reasons:

                  1.       mortgages are new financial products in China and the
                           bankers providing such facilities to new home buyers
                           are unfamiliar with the procedure;

                  2.       delay by Chinese government (or other relevant
                           authorities) in issuing certain documents, such as
                           final grant documents for sold homes, which in turn
                           delays the disbursement of loan proceeds to our
                           Company; and

                  3.       home buyers' personal reasons.

         d)       Status of payment for homes purchased; total sales value is
                  based on the full purchase price of the home purchased:


                                       6
<PAGE>

<TABLE>
<CAPTION>
   AS OF MARCH 31, 2000      Number of       Total Sales
                               Units            Value           Amount Paid         Amount Owing
                             ---------       -----------        ------------        ------------
                                                HK$'000            HK$'000             HK$'000
<S>                            <C>           <C>                <C>                 <C>
Phase I                          365           109,987             108,973               1,013
Phase II                         744           258,478             253,104               5,374
Phase III                        391           151,129             143,065               8,064
                               -----           -------             -------              ------
Total                          1,500           519,594             505,142              14,451
</TABLE>

As at March 31, 2000, Phases I, II and III have been constructed and are
currently ready for delivery or have been delivered.


<TABLE>
<CAPTION>
   AS OF MARCH 31, 2001        Number of      Total Sales
                                 Units          Value            Amount Paid         Amount Owing
                               ---------     -----------         -----------         ------------
                                               HK$'000              HK$'000              HK$'000
<S>                            <C>           <C>                 <C>                 <C>
Phase I                             367         108,808             108,891                 -83
Phase II                            749         255,109             254,050               1,059
Phase IIA                            41          25,041              19,173               5,867
Phase III                           393         149,827             147,066               2,761
Phase IV                            363         137,680             123,866              13,814
                                  -----         -------             -------              ------
Total                             1,913         676,465             653,046              23,418
</TABLE>
As at March 31, 2001, Phases I, II, III and IV have been constructed and are
currently ready for delivery or have been delivered.

The following table sets forth a categorical analysis of the status of payment
of homes as at March 31, 2001:

<TABLE>
<CAPTION>
Category                   Phase I      Phase II     Phase III     Total
                           --------     --------     ---------    -------
                            HK$'000     HK$'000       HK$'000     HK$'000
<S>                        <C>          <C>          <C>          <C>
A                              --          125          641          766  (note below)
B                              53           67          266          281  (note below)
C                           1,066        4,608        6,780       12,455
D                              --          573          376          949
                            -----        -----        -----       ------
Total                       1,014        5,374        8,064       14,451
</TABLE>

The following table sets forth a categorical analysis of the status of payment
of homes as at March 31, 2001:

<TABLE>
<CAPTION>
Category                 Phase I       Phase II     Phase IIA    Phase III      Phase IV      Total
                         -------       --------     ---------    ---------      --------     --------
                         HK$'000        HK$'000      HK$'000      HK$'000        HK$'000      HK$'000
<S>                      <C>           <C>          <C>          <C>            <C>          <C>
E                            89            --           --            56           784          929  (note below)
F                          -172*           --          126             6         1,265        1,225  (note below)
G                            --         1,059        2,282         2,095         1,248        6,684
H                            --            --        3,459           604        10,517       14,580
                           ----         -----        -----         -----        ------       ------
Total                       -83         1,059        5,867         2,761        13,814       23,418
</TABLE>

                                       7
<PAGE>

Note:             These represent the remaining 10% of the purchase price
                  required to be paid upon the delivery of the home unit.

                  *        Reported as a negative amount because of a refund due
                           to a home buyer.

         e)       The number of homes completed but not sold is as follows:


<TABLE>
<CAPTION>
        AS AT MARCH 31, 2000               Number of Homes      Number of Homes    Number of Home Not
                                              Completed              Sold                Sold
                                           ---------------      ---------------    ------------------
        <S>                                <C>                  <C>                <C>
             Phase I                             365                 365                 --
             Phase II                            752                 744                  8
             Phase III                           416                 391                 25
                                                ----                ----                ---
             Total                              1533                1500                 33
<CAPTION>

        AS AT MARCH 31, 2001               Number of Homes      Number of Homes    Number of Home Not
                                              Completed              Sold                Sold
                                           ---------------      ---------------    ------------------
        <S>                                <C>                  <C>                <C>
             Phase I                             367                 367                 --
             Phase II                            752                 749                  3
             Phase IIA                            74                  41                 33
             Phase III                           416                 393                 23
             Phase IV                            545                 363                182
                                               -----               -----                ---
             Total                             2,154               1,913                241
</TABLE>

EXCHANGE RATE INFORMATION

         The following table sets forth the average buying rate for Renminbi and
Hong Kong dollars expressed as per one U.S. dollar for the fiscal years 1997,
1998, 1999, 2000 and 2001.

<TABLE>
<CAPTION>
                                                  Renminbi               Hong Kong Dollars
                       Fiscal Year               Average (1)                Average (1)
                       -----------               -----------             -----------------
                       <S>                       <C>                     <C>
                          1997                    8.3342                      7.7379
                          1998                    8.3105                      7.7428
                          1999                    8.2916                      7.7479
                          2000                    8.2783                      7.7685
                          2001                    8.2783                      7.7977
</TABLE>

(1)      The noon buying rate in New York for cable transfers payable in foreign
         currencies as certified for customs purposes by the Federal Reserve
         Bank in New York. Average rate is determined by averaging the rates on
         the last business day of each month during the relevant period.



                                       8
<PAGE>
         The following table sets forth the high and low exchange rates for
Renminbi and Hong Kong dollars expressed as per one U.S. dollar during the past
six months.

<TABLE>
<CAPTION>
                       Month Ended                 Renminbi             Hong Kong Dollars
                       -----------                 --------             -----------------
                                               High          Low        High          Low
                                               ----          ---        ----          ---
                     <S>                      <C>          <C>         <C>           <C>
                     March 30, 2001           8.2784       8.2768      7.8003        7.7994
                     April 30, 2001           8.2776       8.2767      7.8000        7.7986
                     May 31, 2001             8.2785       8.2709      7.8003        7.7991
                     June 30, 2001            8.2779       8.2767      7.8000        7.7990
                     July 31, 2001            8.2771       8.2767      7.8003        7.7996
                     August 31, 2001          8.2773       8.2767      7.8000        7.7992
</TABLE>


         On October 2, 2001, the noon buying rate for cable transfers as
certified for customs purposes by the Federal Reserve Bank in New York was one
U.S. dollar equals 7.7970 Hong Kong dollars or 8.2790 Renminbi.

         B.       RISK FACTORS


RISKS RELATING TO OUR COMPANY

WE HAVE LIMITED OPERATING HISTORY UPON WHICH YOU MAY EVALUATE US.

         We only commenced operations in 1997. Accordingly, our limited
operating history makes predicting our future operating results, including
operating expenses, difficult. Our revenues may not grow at the rate that we
anticipate, or may not continue at their current levels.

WE HAVE EXPERIENCED LOSSES OF HK$6,715,494, OR US$860,962 FROM OPERATIONS AND
IF WE LOSE THE FUNDING SUPPORT FROM FAR EAST CONSORTIUM, IT IS UNCERTAIN THAT
WE WILL CONTINUE AS A GOING CONCERN.

         For the year ended March 31, 2001, we have experienced a net loss of
HK$6,715,494, or US$860,962 from operations. In addition, we had net current
liabilities outstanding as of March 31, 2001. Although our major shareholder,
Far East Consortium, has agreed to provide adequate funds to enable us to meet
in full our financial obligations as they fall due until April 1, 2002, without
the addition of new funding, there is substantial uncertainty whether we will be
able to pay our debts as and when they fall due and extinguish our liabilities
in the normal course of business if the support from Far East Consortium expires
or ends for whatever reason.

TO DATE, ALL OF OUR REVENUES HAVE BEEN DERIVED FROM THE DEVELOPMENT OF
CALIFORNIA GARDENS.

         Shanghai Chingchu, one of our operating subsidiaries, began
construction of our first property development project, California Gardens, in
1997.

         We derived all of our profits for the fiscal years ended March 31,
1998, 1999, 2000 and 2001 from the sale of units in California Gardens. Our
future results will heavily depend on the development and sale of units in the
additional phases. If Shanghai Chingchu is unable to generate satisfactory sales
for these units, our business growth and prospects will be impaired.

         In addition, our future results depend on our ability to undertake new
property projects, which involves identifying suitable development sites.



                                       9
<PAGE>
WE ARE NO LONGER DEVELOPING THE MILLENNIUM TOWERS PROJECT, AS DESCRIBED IN OUR
PRIOR FILINGS WITH THE COMMISSION, AND ARE CURRENTLY FOCUSING ONLY ON SHANGHAI.

         In our prospectus dated March 8, 2000 and Annual Report on Form 20-F
for the year ended March 31, 2000, we described our expansion into Beijing,
which was to be a residential and commercial complex to be known as Millennium
Towers. Overall costs related to the Millennium Towers project, however, turned
out to be significantly more than management had originally projected and the
project has therefore been cancelled. Although we continue to seek new property
projects in Shanghai and other parts of China, feasibility of such new projects
involves identifying suitable development sites that can justify substantial
property development costs. Because we have not yet selected another suitable
site, we remain heavily dependent on the development and sales of units in our
California Gardens project.

WE ARE CURRENTLY DISPOSING OF CERTAIN PROPERTY INTERESTS RELATED TO THE
CALIFORNIA GARDENS PROJECT TO A RELATED PARTY FOR A PROMISSORY NOTE THAT HAS YET
TO BE COLLECTED.

         On March 30, 2001, the Company entered an agreement with Wonder China
Investments Limited, or Wonder China, a wholly-owned subsidiary of Far East
Consortium International Limited, a Cayman Islands corporation, or Far East
Consortium, the Company's major shareholder, disposing of its 100% interest in
Top Trend Development Limited, a British Virgin Islands corporation, or Top
Trend. Under the terms of this agreement, the Company has agreed to sell to
Wonder China (a) the entire issued share capital of Top Trend and (b) a debt in
the approximate amount of HK$18,414,717 advanced as a shareholder loan by the
Company to Top Trend, in exchange for (y) HK$1,280,000 in cash paid as of March
30, 2001 and (z) a HK$126,720,000 promissory note, or the Promissory Note. The
HK$126,720,000 Promissory Note was due originally on September 30, 2001. Due to
a recent change in Chinese law, however, a warranty contained in the agreement
regarding the commercial use of land held indirectly by Top Trend has yet to be
fulfilled and the parties have therefore agreed to extend the due date of the
Promissory Note by six months to March 31, 2002. The parties have also delayed
completion of the transaction until March 31, 2002.

         Top Trend holds a 100% interest in Chingchu (Shanghai) Real Estate. The
major asset held by Chingchu (Shanghai) Real Estate is a certain real property
interest that is part of the California Gardens development. The Company,
currently in the process of selling Top Trend to Wonder China, has exchanged a
valuable land right for a small cash deposit and a substantial Promissory Note,
which Promissory Note has yet to be collected. As discussed in the paragraph
above, however, the parties have agreed to delay completion of the sale until
March 31, 2002. Although our Board of Directors and audit committee approved the
sale of Top Trend, such approval was made with the vote of certain of our
directors who are related to Far East Consortium, our major shareholder, and
were therefore interested directors.

WE ARE GROWING RAPIDLY AND MANAGING OUR GROWTH MAY BE DIFFICULT.

         We have grown and expect to continue to grow rapidly by developing new
residential communities. This growth is likely to place a significant strain on
our resources and systems. To manage our growth, we must implement systems and
train and manage our employees.


                                       10
<PAGE>

         Some of our senior management have only recently joined us, including
our Chief Executive Officer, Mr. Ton Voon Lim , or Mr. Lim, our Vice President
of Sales and Marketing, Ms. Peggy Pui Ki Ng and one of our Directors, Mr. David
Chiu. Several of the employees listed in the Directors, Senior Management and
Employees section of this Annual Report have worked for us for less than three
years. We cannot assure you that our management will be able to effectively or
successfully manage our growth.

WE EXPECT OUR EXPENDITURES TO INCREASE.

         Some of our expenditures are fixed, including salary and office
expenses. If our revenues do not increase, we may not be able to compensate by
reducing expenses in a timely manner. In addition, we plan to significantly
increase our operating expenses to:


         -        develop additional residential communities;

         -        increase our sales and marketing operations; and

         -        purchase land for future development.

         Further, as a publicly-traded company, our expenses for professional
services have increased and we expect they will continue to increase in the
future. If increased revenues do not accompany these expenses, our business,
financial condition, liquidity and operating results will be materially
adversely affected.

OUR SUCCESS IS DEPENDENT ON OUR SENIOR MANAGEMENT TEAM AND KEY EMPLOYEES WHO WE
MAY NOT BE ABLE TO RETAIN.

         During fiscal 2001, we have experienced a significant turnover in
management. In December 2000, Mr. Trevor Bedford became Chairman of the Board of
Directors in place of Mr. Charles Stein and Gerald Breslauer replaced Francis
Chow as our Company Secretary. In March 2001, Veronica O'Young resigned as our
Senior Vice President of Marketing and Sales and was replaced by Ms. Peggy Pui
Ki Ng. In March 2001, the duties of Michael O'Young, as President and Chief
Executive Officer, were suspended and his service contract, and therefore his
duties as President and Chief Executive Officer, was formally terminated in
September 2001. In June 2001, Mr. Lim joined us as our Chief Executive Officer.
In July 2001, David Chiu joined us as one of our Directors. In March 2001, Li
Wan Cai resigned as our Vice President of Property Management and has not been
replaced. In light of these recent changes in management, our future performance
will depend in part on our ability to successfully integrate our newly hired
management and key personnel into our management team and into the Company as an
integrated unit.

         Further, if one or more members of our senior management team or key
employees, including Mr. Lim, our Chief Executive Officer, were unable or are
unwilling to continue in their present positions, our business, financial
condition and operating results could be materially adversely affected. Most
members of our senior management do not have employment agreements.

         We plan to hire additional employees to manage our anticipated growth.
Competition for personnel, particularly for employees with management and
technical expertise, is intense. Our


                                       11
<PAGE>
business, financial condition, liquidity and operating results may be materially
adversely affected if we cannot hire and retain suitable personnel.

THE INTERESTS OF FAR EAST CONSORTIUM, OUR CONTROLLING SHAREHOLDER, MAY CONFLICT
WITH OUR INTERESTS AND THE INTERESTS OF OUR SHAREHOLDERS, AND FAR EAST
CONSORTIUM MAY PLACE THEIR INTERESTS BEFORE THE INTERESTS OF OUR OTHER
SHAREHOLDERS.

         Far East Consortium owns approximately 71% of our outstanding Common
Shares. Accordingly, they have the power to elect all our directors and to
approve most matters presented to our shareholders for a vote. Far East
Consortium's ownership might discourage someone from making a significant equity
investment in us, even if we need the investment to meet our obligations and to
operate our business.

WE WILL REQUIRE ADDITIONAL CAPITAL RESOURCES TO DEVELOP ADDITIONAL PROJECTS, AND
THESE RESOURCES MAY NOT BE AVAILABLE WHEN NEEDED OR AT ALL.

         We will require additional capital resources to develop additional
residential projects. Prior to our initial public offering in March 2000, we
relied primarily on financing from Far East Consortium. We expect to derive
capital resources from internally generated funds, borrowings and the issuance
of additional equity or debt securities. We cannot assure you that we will be
able to obtain additional financing on satisfactory terms, or at all. If we are
unable to obtain additional financing, we will not be able to develop additional
real estate projects and our business development will be curtailed until such
time.

WE MAY NOT BE ABLE TO SELL OUR HOMES IF INTEREST RATES INCREASE OR OUR
PROSPECTIVE HOME BUYERS ARE NOT ABLE TO OBTAIN MORTGAGE FINANCING.

         Most of our prospective home buyers are expected to finance a
substantial portion of the purchase price of their homes with mortgage loans.
Because of the need for mortgages, demand for homes is likely to be adversely
affected by increases in interest rates or reduced availability of mortgage
financing in China.

WE MAY NOT BE ABLE TO GENERATE ADEQUATE REVENUES IF LOCAL BUSINESS CONDITIONS IN
SHANGHAI CHANGE ADVERSELY. OUR REVENUES MAY BE AFFECTED BY THE FOLLOWING LOCAL
BUSINESS CONDITIONS: UNEMPLOYMENT AND INFLATION RATES, THE EMERGENCE OF NEW
RESIDENTIAL AND COMMERCIAL PROPERTY DEVELOPMENTS, AND ADVERSE CHANGES IN
PROPERTY VALUES AND LOCAL GOVERNMENTAL REGULATIONS. AS A RESULT OF THESE
CONDITIONS, THE TRADING PRICE OF OUR COMMON SHARES MAY ALSO DECLINE IN VALUE.

         All our revenues are currently generated in Shanghai, China.
Accordingly, demand for our homes could decrease resulting in lower revenues if
there occurs an adverse change in Shanghai's local economic and other
conditions, such as rates of unemployment and inflation, emergence of new
residential and commercial property developments, property values generally and
changes in local governmental regulations. We intend to expand into other
regions in China, which we expect will reduce the overall risk of having all of
our operations concentrated in one city. However, new markets in other areas of
China may prove to be less stable than the Shanghai market and may involve
delays, problems and expenses not encountered by us in Shanghai which may
adversely affect our business.


                                       12
<PAGE>
THE MANNER IN WHICH WE RECOGNIZE PROFITS AND EXPENSES FOR ACCOUNTING PURPOSES
MAY NOT BE AN ACCURATE REFLECTION OF OUR SALES LEVELS OR OTHER IMPORTANT EVENTS
AFFECTING THE CONSTRUCTION OF OUR HOMES.

         We use the percentage of completion method to recognize income from the
development and sale of our homes when construction has progressed beyond the
preliminary stage. The amount of income that we recognize from the pre-sale of
our units is based on the proportion of construction costs incurred up to the
accounting date to the estimated total construction costs to completion, but is
limited to the amount of sales proceeds received and receivable. Accordingly,
our reported results from operations are sensitive to the progress of actual
construction of our units and the changes in our estimated total construction
costs. See note 2 of notes to consolidated financial statements.

OUR PROFITS WHICH MAY BE AVAILABLE FOR DISTRIBUTION MAY BE LIMITED.

         We mainly carry out our property development business through our
subsidiaries and Sino-foreign equity joint ventures established in China.
Profits available for distribution by these companies are determined in
accordance with accounting principles and financial regulations in China, and
profits as so determined differ from profits determined in accordance with US
GAAP in certain significant aspects, which include the use of different bases
for recognition of revenues and expenses. Under relevant Chinese foreign
investment laws and regulations, profits available for distribution are
determined after transfers to statutory reserve funds and the payment of taxes.
Under the Law of the People's Republic of China on Chinese Foreign Equity Joint
Ventures and its implementing rules, the Regulations of the People's Republic of
China Concerning Financial Administration of Foreign Investment Enterprise and
the Accounting System of the People's Republic of China for Foreign Investment
Enterprises, profits may be distributed as dividends only after the following
payments are made: (1) the enterprise income tax; (2) to cover previous years'
losses; (3) payments to the reserve fund, enterprise development fund, the bonus
and welfare fund for staff and workers (to be determined by the Company's board
of directors and, in the case of California Gardens, the amount paid out for
such funds amounts to approximately 15.5% of the payroll); and (4) compensation,
liquidated damages, late-payment penalties, penalty interest and fines. As of
March 31, 2001, we had profits of RMB 45.77 million, or HK$42.11 million or
US$5.40 million, which were available for distribution to shareholders as
dividends.

OUR OPERATIONS ARE SUBJECT TO EXTENSIVE GOVERNMENTAL REGULATIONS IN THE AREAS OF
PLANNING AND ZONING, BUILDING DESIGN AND CONSTRUCTION, HUMAN HEALTH AND THE
ENVIRONMENT. OUR DEVELOPMENT PROJECTS MAY BE DELAYED BY EXTENSIVE GOVERNMENTAL
REGULATIONS.

         We are subject to various laws and regulations concerning planning and
zoning, building design and construction. We may experience delays or other
problems in the issuance of the necessary permits and/or licenses to complete
our projects. We cannot assure you that we will be able to obtain the necessary
licenses or permits in a timely manner. We may also be subject to periodic
delays in our home building projects due to building moratoria in any of the
areas in which we operate or plan to operate.

         We are also subject to a variety of laws and regulations concerning the
protection of health and the environment. The particular environmental laws
which apply to any given home building site vary greatly according to the site's
location, the site's environmental condition, the present and former uses of the
site, as well as adjoining properties. Environmental laws and conditions may
result in delays, may


                                       13
<PAGE>
cause us to incur substantial compliance and other costs, and can prohibit or
severely restrict residential or commercial building activity in environmentally
sensitive regions or areas. See Item 4 Acquisitions of Land Use Rights and
Licensing of Foreign Investment in Property Development; Investment Structure.
See also, Item 4 Foreign Exchange Control Implications for Foreign Investors in
China.

WE ARE SUBJECT TO CLAIMS UNDER PERFORMANCE GUARANTEES FOR OUR HOME PURCHASERS.

         Shanghai Chingchu usually arranges bank financing for the purchasers of
our homes in California Gardens and provides guarantees to secure the
obligations of these purchasers to make repayment to the mortgagees of their
homes. Under the terms of the performance guarantees, upon default by the home
purchaser of his obligation to repay the mortgage installments for three
consecutive months, the relevant mortgage bank may require Shanghai Chingchu to
pay the outstanding mortgage principal together with accrued interest of the
relevant property, subject to transferring all its rights and interests in the
property to Shanghai Chingchu. As of March 31, 2001, the Company had a total of
HK$73.41 million of outstanding mortgage loans subject to performance
guarantees. As of March 31, 2001, we have not been required to make any payment
under these performance guarantees. There is no assurance that the purchasers
whose mortgage facilities are covered by these performance guarantees will
comply with all relevant provisions regarding the repayment of the mortgage
loans, and substantial costs may be incurred by Shanghai Chingchu if these
provisions are breached and the performance guarantees are invoked.

RISKS RELATING TO OUR INDUSTRY

THE PRIVATE RESIDENTIAL REAL ESTATE MARKET IN CHINA IS IN AN EARLY STAGE OF
DEVELOPMENT. WE MAY NOT BE ABLE TO DEVELOP OUR RESIDENTIAL REAL ESTATE
DEVELOPMENT BUSINESS IF THIS MARKET DOES NOT DEVELOP IN ACCORDANCE WITH OUR
EXPECTATION.

         Private ownership of property in China is still in an early stage of
development. It is therefore difficult for us to predict with certainty the
timing and the level of demand for our properties. The lack of an active
secondary market for residential properties in most regions of China and the
early stage of a market for mortgage financing in China may adversely affect
demand for our projects.

RESIDENTIAL PROPERTY DEVELOPMENT ACTIVITIES INVOLVE SIGNIFICANT RISKS, INCLUDING
MATERIAL PRE-DEVELOPMENT EXPENDITURES, UNFORESEEABLE CONSTRUCTION DELAYS,
LAGGING HOME SALES GROWTH AND THE COSTS ASSOCIATED WITH OBTAINING GOVERNMENT
APPROVALS. WE MAY NOT BE ABLE TO GENERATE ADEQUATE REVENUES TO PROPERLY OPERATE
OUR BUSINESS SHOULD THESE RISKS MATERIALIZE.

         We operate by purchasing land use rights for large tracts of
undeveloped land from municipal and provincial governments of China, which we
later develop into planned communities. Acquiring land use rights and committing
the financial and managerial resources to develop this land involves significant
risks. Before a subdivision generates any revenue, material expenditures are
required for items including acquiring land use rights and constructing
subdivision infrastructure, such as roads and utilities. Property development
also involves the following risks:

         -        construction may not be completed on schedule or within budget
                  due to unforeseeable factors such as adverse weather
                  conditions;


                                       14
<PAGE>
         -        government approvals may take more time and resources to
                  obtain than expected;

         -        we may experience delays in the process of clearing and
                  resettlement of the development site; and

         -        our properties may not achieve anticipated sales.

THE REVENUES FROM, AND MARKET VALUE OF, OUR PROPERTIES MAY BE ADVERSELY AFFECTED
BY MANY FACTORS BEYOND OUR CONTROL. THESE FACTORS INCLUDE ECONOMIC CONDITIONS,
THE REAL ESTATE MARKET GENERALLY, INTEREST AND EXCHANGE RATE FLUCTUATIONS, AND
CHANGES IN GOVERNMENTAL REGULATIONS.

         The revenues from, and market values of, our property development
projects may be affected by a number of factors, including the international,
regional and local economic climate, the local real estate market, the proximity
and quality of management, changes in market rates for comparable sales and
rentals and fluctuation in operating costs.

         Property investment projects may also be affected by factors such as
interest rates and exchange rate fluctuations, changes in government
regulations, availability of financing, changes in tax laws or rates and
environmental policies. In addition, our costs of holding unsold properties may
be significant and may result in losses in a poorly performing project or
market. In the event of significant changes in economic or market conditions, we
may not be able to dispose of certain subdivision inventories on a bulk or other
basis which may result in a loss.

OUR INVESTMENTS IN PROPERTIES MAY BE ILLIQUID.

         Due to the generally illiquid nature of property investment, it may be
difficult for us to convert real estate assets into cash upon short notice. In
addition, if we need to dispose of a property quickly, we may have to accept a
lower price than if we had the ability to hold the property until a more
opportune time. Depending on the prevailing property market conditions, we may
sometimes encounter difficulty in obtaining commercially favorable financing in
lending transactions secured by our properties.

WE MAY ENCOUNTER CONSTRUCTION DELAYS AND COST OVERRUNS.

         Property development projects that we have undertaken and expect to
undertake in the future typically require substantial capital expenditures
during the construction period, and it may take many months or years before the
project can be pre-sold and/or completed to generate positive cash flow. The
duration and the costs involved in completing a development project can be
adversely affected by many factors including shortages of materials, equipment
and labor, natural catastrophe, labor disputes, accidents and other
unforeseeable circumstances. Delays in obtaining the requisite licenses, permits
or approval from governmental agencies or authorities can also increase the
costs, delay or prevent the pre-sale or completion of a project. Construction
delays or failure to complete the construction of a project to its planned
specifications or schedule may result in liabilities, loss of revenues and less
attractive returns.

WE MAY SUFFER CAPITAL INVESTMENT LOSSES AS WELL AS LOST REVENUES IF NATURAL
DISASTERS AND OTHER EVENTS RESULT IN LOSSES IN EXCESS OF OUR INSURANCE PROCEEDS.

         The climate and geology of China present increased risk of natural
disasters as compared to many other regions in the world. Our business may be
adversely affected to the extent that hurricanes,


                                       15
<PAGE>
severe storms, earthquakes, droughts, floods, wildfires or other natural
disasters or similar events occur in an area where our projects are underway.
Although we have appropriate public liability insurance and contractors'
comprehensive insurance for our property projects, certain types of losses, such
as losses from natural disasters, are generally not insured because they are
either uninsurable or not cost justifiable. If an uninsured loss or a loss in
excess of our insured limits occurs, we may suffer losses of capital investment
which could adversely affect future revenue streams while we remain liable for
any financial obligations relating to the relevant project.

THE RESIDENTIAL REAL ESTATE MARKET IN CHINA IS SUBJECT TO INTENSE COMPETITION
FROM OTHER REAL ESTATE DEVELOPERS, INDIVIDUAL SALES IN THE SECONDARY MARKET AND
AVAILABLE RENTAL HOUSING.

         Over the last decade, a large number of property developers have
expanded their operations into China. These include a number of leading Hong
Kong and Asian real estate development and investment groups, many of whom have
greater financial, managerial, marketing and other resources than us.
Residential property developers compete not only for home buyers, but also for
desirable development sites, raw materials and skilled subcontractors. We also
compete for residential sales with individual sales of existing homes in the
secondary market and available rental housing. We also expect that continued
economic development of China will be accompanied by further property
development and expansion. Increasing competition may substantially, adversely
affect our business.

THE LAND APPRECIATION TAX MAY CONSUME BETWEEN 30 AND 60 PERCENT OF OUR PROFITS.

         Income from the transfer of state-owned land use rights, buildings and
their attachments is subject to a land appreciation tax or LAT. LAT is payable
on the balance of proceeds received on the transfer, after deducting various
prescribed items, including sums paid for acquisition of land use rights and the
costs and expenses of the development of the land and construction of buildings.
LAT is charged on gains at progressive rates ranging from 30% to 60%.

         An exemption from payment of LAT may be available if the taxpayer
constructs ordinary standard residential apartments and the appreciation amount
does not exceed 20 percent of the sum of certain deductions as allowed under
Chinese law.

         If we decide to sell any of our property interests in the future, such
sale may be subject to LAT depending on:

         -        the prevailing circumstances at the time of such sale;

         -        the manner of sale;

         -        the provisions of the relevant Chinese regulations which are
                  in force at the relevant time; and

         -        the profit margin on the sale of our homes.

         LAT could reduce the attractiveness of investment in property
development projects in China and thereby affect the prospects of the Company's
property business in China. For further information about the LAT, please refer
to note 5 of our notes to consolidated financial statements.


                                       16
<PAGE>
RISKS RELATING TO CHINA

THE EFFECT OF THE CONTINUING RAPID EVOLUTION OF CHINA'S POLITICAL AND ECONOMIC
SYSTEMS ON OUR FUTURE IS DIFFICULT TO PREDICT.

         All of our operations are in China. As a result, political and economic
uncertainties may affect our operations and assets. The political and economic
systems of China differ significantly from those of many countries you may be
familiar with, including the United States, countries of the European Union and
Japan. Compared to these countries, China's economic system is generally
characterized by a higher rate of growth, a lower level of development and a
higher level of government involvement and planning.

         Central economic planning is still a major feature of the Chinese
economy. The State Council, with the approval of the National People's Congress,
plans and manages a substantial part of the Chinese economy by means of a series
of five-year economic and social development plans, referred to as Five-Year
Plans. Each Five-Year Plan sets overall targets for development of agriculture,
industry, finance and other aspects of economic and social life. To implement
each Five-Year Plan, the State Development and Planning Commission:

         -        establishes annual production and development targets;

         -        formulates and supervises annual plans to achieve the targets;

         -        allocates resources necessary to achieve the targets; and

         -        approves all major economic projects.

         Economic reform policies are still experimental. Since the founding of
the Peoples' Republic of China, the Chinese Government has owned the majority of
all productive assets. However, since 1978, the government has been pursuing a
course of economic reform. These reforms have emphasized, at different times:

         -        decentralization of decision-making;

         -        separation of regulatory and governmental functions from
                  management functions;

         -        utilization of market forces in setting prices for many
                  commodities and services;

         -        encouragement of private economic activity and ownership,
                  including private home ownership;

         -        encouragement of foreign investment in certain sectors; and

         -        encouragement of exports.

         We cannot assure you that the Chinese government will continue to
pursue its course of reform. The government considers many of these reform
measures to be experimental, and accordingly it may refine, modify, suspend,
delay or reverse any of the measures. Factors that have caused the government to
modify or delay the implementation of certain reform measures include political
changes, and such economic factors as changes in rates of national and regional
economic growth, unemployment and inflation. We cannot assure you that the
government will not adopt changes in policy or regulations that might have an
adverse effect on us, such as changes in the rate or method of taxation,
additional restrictions on currency conversion or remittance, or others. For
further information about the political and


                                       17
<PAGE>
regulatory environment to which we are subject, please refer to the sections
entitled National Legislation and Local Legislation, in Item 4.

WE MAY NOT BE ABLE TO GENERATE ADEQUATE SALES REVENUES IF CERTAIN ECONOMIC
TRENDS IN CHINA'S ECONOMY CONTINUE. THESE TRENDS INCLUDE INCREASED INTEREST
RATES, SLOWER ECONOMIC GROWTH AND DECLINES IN MARKET VALUES OF REAL ESTATE.

         During the 1980s and generally through 1997, the Chinese economy
experienced relatively high rates of growth, which to a certain extent has been
uneven among various geographical regions of China and among various sectors of
the economy. The government responded by implementing measures to restrain the
rate of growth and control inflation, including measures to reduce availability
of credit, giving rise to systemic liquidity constraints. However, since
mid-1997, many Asian countries have experienced significant adverse economic
developments, known as the Asian-financial crisis, including:

         -        substantial deterioration in currency exchange rates between
                  the U.S. dollar and certain Asian currencies;

         -        increased domestic interest rates;

         -        reduced economic growth rates;

         -        increased corporate defaults and bankruptcies;

         -        declines in market values of real estate, listed shares and
                  other classes of assets;

         -        decreases in levels of direct foreign investment; and

         -        government-imposed austerity measures.

         China has been somewhat less affected by the Asian financial crisis
than other Asian economies, in part because of its relatively lower levels of
foreign currency borrowings and the non-convertibility of its currency, the
Renminbi yuan, for capital account transactions. In an attempt to counteract
these effects and maintain economic growth, the government has taken steps,
including increased spending on infrastructure projects, including housing
projects, intended to increase domestic demand and consumer spending. We cannot
assure you that these steps will be successful in maintaining economic growth in
China at historical rates.

         Further, over the past year global markets have been experiencing a
rapid downturn, especially in relation to the United States' capital markets,
which effect has been worsened by the terrorist attacks in New York, New York on
September 11, 2001. The recent turn of events in the United States has affected
other countries' economies on a global scale, including China, which has a
strong export relationship with the United States. We cannot assure you that the
current economic developments in the United States and other Asian countries
will not continue to have an adverse effect on the economy of China, or that
similar economic developments will not occur in China in the future, which would
have an adverse effect on our business.

CHINA'S LEGAL SYSTEM IS RELATIVELY NEW, AND THE APPLICATION, INTERPRETATION AND
ENFORCEMENT OF LAWS IS DIFFICULT TO PREDICT.

         Commencing in 1978, China began the process of modernizing its legal
system by enacting a comprehensive system of statutory law and regulations.
Under the Chinese legal system, as in civil law jurisdictions, court decisions
are based on statute law. Prior court decisions do not have binding precedential
effect in the Chinese system, as they do in common law systems. As a
consequence, it may


                                       18
<PAGE>
be difficult to predict the outcome of a dispute, as a court's application and
interpretation of the law may differ from prior interpretations. In addition,
because of the recent adoption of most laws, the amount of guidance available in
the form of published case law and judicial interpretation of laws is limited.

CHANGES IN LAND USE LAWS BY THE CHINESE GOVERNMENT MAY MAKE THE EXPANSION OF OUR
RESIDENTIAL REAL ESTATE BUSINESS DIFFICULT.

         In the past, local land bureaus had the power to approve land projects
comprising non-farmland of a size of up to 1,333,400 square meters. Pursuant to
the Land Administration Law of China adopted on August 29, 1998 and effective as
of January 1, 1999, China has adopted a policy of limiting the power of local
land bureaus to approve land projects of a size of 700,000 square meters or
below. For projects which comprise non-farmland and which exceed this size,
approval will have to be obtained from China's central government. Such a
measure is expected to have the two-fold effect of creating a barrier against
entry to China's property market by less established developers without an
existing land bank, as well as adversely affecting the ability of established
developers to obtain approvals for the acquisition of large sites to replenish
its land bank for new projects. As this land policy was introduced relatively
recently, it will take some time before its impact on China's property market in
general and on our Company in particular can be evaluated.

         Further, the Chinese government may, under special circumstances, in
the needs of public interest, repossess land or structures on land. In this
situation, the Chinese government will pay compensation taking into account the
remaining term of the land use rights, as well as the development and use of the
land and the structures on the land.

IF THE GOVERNMENT DECIDES TO DEVALUE THE RENMINBI, OUR RESULTS OF OPERATIONS
COULD BE AFFECTED IN WAYS THAT MIGHT BE POSITIVE OR NEGATIVE.

         In 1994, the People's Bank of China, or PBOC, eliminated the prior
system of fixed exchange rates for conversion of Renminbi into other currencies
in favor of a system in which published exchange rates reflect buying and
selling rates within a prescribed range quoted by foreign exchange bank
participants in an interbank market. Since that time, the exchange rates for
conversion of the Renminbi to the U.S. dollar have remained relatively stable,
with the Renminbi appreciating slightly against the dollar. Although
authoritative Chinese government sources confirm that there is no current
intention to devalue the Renminbi, many independent economists believe that with
domestic growth slowing and currency devaluations by other Asian countries
putting pressure on the competitiveness of Chinese exports, the possibility
exists of a future devaluation of the Renminbi. We have not entered into any
agreements or purchased any instruments to hedge our exchange rate risks,
although we may do so in the future.

IF WE FAIL TO OBTAIN AND MAINTAIN FOREIGN EXCHANGE REGISTRATION CERTIFICATES, WE
MAY NOT BE ABLE TO REPATRIATE OUR INCOME.

         We rely on the revenue generated by our joint venture subsidiaries.
Under Chinese law, joint venture companies must complete the procedures for
obtaining their foreign exchange registration certificates and have such
certificates annually examined by the foreign exchange administrative
authorities of China, before principal and interest income in Renminbi generated
in China can be converted into foreign currency and repatriated from the country
in foreign currency. If we are unable to


                                       19
<PAGE>
obtain the necessary foreign exchange registration certificates or fail to have
such certificates examined annually for any of our joint venture companies, we
may not be able to repatriate the Renminbi income earned by these companies in
China, which may have an adverse impact on our business operations and financial
position.


RISKS RELATING TO OUR COMMON SHARES AND WARRANTS

THE PRICE OF OUR COMMON SHARES AND WARRANTS IS LIKELY TO BE HIGHLY VOLATILE

         The market price of our Common Shares and Warrants is likely to be
highly volatile as the stock market in general, and the market for start-up
companies in particular, has been highly volatile. Investors may not be able to
resell their Common Shares and Warrants following periods of volatility because
of the market's adverse reaction to such volatility. The trading prices of many
start-up companies' stocks have been highly volatile. Within the last 52 weeks,
the market prices of these companies' stocks have both reached historical highs
with relative valuations substantially above historical levels, as well as lows
well below such historical high marks. Factors that could cause such volatility
may include, among other things:

         -        actual or anticipated variations in quarterly operating
                  results;

         -        changes in financial estimates by securities analysts;

         -        conditions or trends in China or the residential housing
                  market in China;

         -        announcements by us or our competitors of significant
                  acquisitions, strategic partnerships or joint ventures;

         -        capital commitments;

         -        additions or departures of key personnel; and

         -        sales of Common Shares or Warrants.

         Many of these factors are beyond our control. These factors may
materially adversely affect the market price of our Common Shares and Warrants,
regardless of our operating performance.

WE MAY HAVE DIFFICULTY IN MEETING MINIMUM FINANCIAL REQUIREMENTS FOR CONTINUED
LISTING ON THE NASDAQ SMALL CAP MARKET.

         Trading of our Common Stocks and Warrants on the Nasdaq National Market
commenced on March 10, 2001. Due to a general downturn in markets, we had
difficulty maintaining continued listing standards on the Nasdaq National Market
and therefore moved our Common Stock and Warrants to the Nasdaq Small Cap Market
in August 2001. Since early September 2001 until the date of this Annual Report,
the price of our Common Stock was trading below the US$1.00 minimum bid price.
In response to market conditions caused by the terrorist attack in New York, New
York on September 11, 2001, Nasdaq declared an across-the-board moratorium on
the minimum bid and public float requirements, thereby preventing delisting from
the Nasdaq markets on these bases until January 2, 2002. There can be no
assurance, however, that the price of our Common Stock will meet the US$1.00
minimum bid price after such moratorium expires.


                                       20
<PAGE>

THE MARKET PRICE OF OUR COMMON SHARES MAY DECLINE AS A RESULT OF FLUCTUATIONS IN
OUR QUARTERLY RESULTS. THE FOLLOWING FACTORS MAY AFFECT OUR QUARTERLY RESULTS:
THE SEASONALITY OF OUR REVENUES, THE GENERAL LEVEL OF MARKET ACCEPTANCE OF OUR
HOMES, INTENSE COMPETITION AND UNCERTAIN GOVERNMENTAL REGULATIONS IN THE AREA OF
REAL ESTATE.

         We expect that our quarterly operating results will fluctuate
significantly due to many factors, many of which are beyond our control,
including:

         -        the seasonality of our revenues;

         -        the uncertain acceptance of our homes by Chinese buyers;

         -        intense competition; and

         -        uncertainty surrounding the regulation of the housing market.

         Due to the limited history of the residential housing market in China,
we believe that period-to-period comparisons of our operating results are not
meaningful. Additionally, if our operating results in one or more quarters do
not meet the securities analysts' or your expectations, the price of our Common
Shares or Warrants could be materially adversely affected.

IF OUR PRE-INITIAL PUBLIC OFFERING SHAREHOLDERS SELL SHARES ELIGIBLE FOR FUTURE
SALE, THE MARKET PRICE OF OUR COMMON SHARES MAY DECLINE.

         If our pre-initial public offering shareholders sell substantial
amounts of our Common Shares, including shares issued upon the exercise of
outstanding options and warrants, in the public market, then the market price of
our Common Shares could fall. On the date of this Annual Report, no Common
Shares, other than the 2,300,000 Common Shares which were sold in the offering,
which number includes the exercise by Barron Chase Securities, Inc., our
managing underwriter, of its over-allotment option, are freely tradable. Our
directors and officers have agreed with our managing underwriter not to sell or
otherwise dispose of any of our securities for a period of 24 months from March
8, 2000, the effective date of our offering, without its prior written consent.
Sales of substantial amounts of our Common Shares or Warrants, or the potential
for such sales, in the public market could materially adversely affect the
market price of our Common Shares or Warrants.

         As described more completely in Item 4-History and Development of the
Company, below, we entered into certain agreements with certain founders of our
Company, who together control over 70% of the Company. In particular, two
cancellation agreements establish net income thresholds for the first and second
years following our initial public offering, or IPO, amounting to US$10 million
and US$20 million, respectively, whereby in each of these two years, 25% of
Messrs. Stein, Haft and Kallan, and Silver Pacific Trading Ltd. and Far East
Consortium's Common Shares are subject to redemption and cancellation by the
Company in the event the net income thresholds are not met. For the year ended
March 31, 2001, the first year following the closing date of our IPO, the
Company incurred a net loss of HK$6,715,494, or US$860,962, thereby falling
under the US$10 million threshold. As of April 1, 2001, 2.6 million Common
Shares were cancelled pursuant to these agreements. Because these shareholders
are subject to agreements that may reduce their shareholdings, there is an
increased risk that each such shareholder may desire to sell or otherwise
dispose of their Common Shares.


                                       21
<PAGE>

OUR BOARD OF DIRECTORS HAS THE AUTHORITY TO ISSUE PREFERRED SHARES HAVING RIGHTS
AND PREFERENCES WHICH ARE MORE FAVORABLE THAN OUR COMMON SHARES.

         Our board of directors has the authority, without further action by our
shareholders, to issue up to 5,000,000 preferred shares in one or more series
and to fix the designations, powers, preferences, privileges, and relative
participating, optional or special rights and the qualifications, limitations or
restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences, any or all of which may
be greater than the rights associated with our Common Shares. Our board of
directors could quickly issue preferred shares with terms calculated to delay or
prevent a change in control or make removal of management more difficult. In
addition, if the board of directors issues preferred shares, the market price of
our Common Shares may fall and the relative voting and other rights of the
holders of our Common Shares may be adversely affected. For three years after
the effective date of our offering, March 8, 2000, we may not issue preferred
shares without the prior written consent of our managing underwriter, Barron
Chase Securities, Inc. which has gone into bankruptcy recently.

BECAUSE WE ARE A CAYMAN ISLANDS COMPANY, OUR SHAREHOLDERS MAY FACE GREATER
DIFFICULTIES IN PROTECTING THEIR INTERESTS THAN WOULD SHAREHOLDERS OF A COMPANY
INCORPORATED IN THE UNITED STATES.

         Our corporate affairs are governed by our Amended and Re-stated
Memorandum and Articles of Association and by the Companies Law (1998 Revision)
of the Cayman Islands. The rights of our shareholders and the fiduciary
responsibilities of our directors under Cayman Islands law are not as clearly
established as under statutes or judicial precedent in existence in
jurisdictions in the United States. Therefore, our public shareholders may have
more difficulty in protecting their interests in the face of action by the
management, directors or our controlling shareholder than would shareholders of
a corporation incorporated in a jurisdiction in the United States. See Item 10
-- Differences in Corporate Law for a description of the differences between
U.S. and Cayman Islands law with respect to shareholders' rights and the
fiduciary responsibilities of directors. See Enforceability of Civil Liabilities
in Item 10.

YOU MAY EXPERIENCE DIFFICULTIES IN EFFECTING SERVICE OF LEGAL PROCESS AND
ENFORCING JUDGMENTS AGAINST NEW CHINA HOMES AND OUR MANAGEMENT. A MINORITY OF
OUR DIRECTORS AND OFFICERS ARE U.S. CITIZENS RESIDING IN THE STATE OF FLORIDA.

         We are a Cayman Islands company and substantially all of our assets and
our subsidiaries are located in China. In addition, a majority of our directors
and officers are non-residents of the United States, and all or a substantial
portion of the assets of such non-residents are located outside the United
States. As a result, it may not be possible to effect service of process within
the United States upon a majority of our directors and officers, including with
respect to matters arising under the U.S. federal securities laws and applicable
state securities laws. A minority of our directors and officers, however, are
U.S. nationals and live in the state of Florida. Service of process may be
effected on any of these directors and officers at their addresses in Florida as
stated in the table presented in Item 7 -- Security Ownership of Beneficial
Owners and Management. Moreover, there is doubt as to whether the courts of the
Cayman Islands or China would enforce judgments of United States courts against
us, our directors or officers predicated on the civil liability provisions of
the securities laws of the United States or any state


                                       22
<PAGE>

thereof or in original actions brought in the Cayman Islands or China,
liabilities against us or such non-residents predicated upon the U.S. federal
securities laws and applicable state securities laws. See Item 10 --
Enforceability of Civil Liabilities and Certain Foreign Issuer Considerations.

DATA ABOUT CHINA AND THE CHINESE HOUSING MARKET INCLUDED IN THIS ANNUAL REPORT
MAY PROVE TO BE INACCURATE.

         Data in this Annual Report relating to China's economy, its seven
political conditions and its property markets in various regions are derived
from or based on various official and unofficial publications. While we have
taken reasonable care to ensure that the facts presented in these statements are
accurately reproduced from such sources, such information has not been
independently verified by us. Such information may not be accurate, complete or
up-to-date. The statistical statements in this Annual Report may be incorrect or
inaccurate and they may not be comparable to the statistics produced for other
jurisdictions.

IF WE ARE UNABLE TO MAINTAIN A CURRENT REGISTRATION STATEMENT FOR COMMON SHARES
UNDERLYING THE WARRANTS OR THE WARRANTS ARE NOT REGISTERED, QUALIFIED OR EXEMPT
FROM REGISTRATION UNDER STATE SECURITIES LAWS, THE WARRANT HOLDERS WILL BE
UNABLE TO EXERCISE THE WARRANTS AND THE WARRANTS MAY BECOME VALUELESS.

         The Warrants are not exercisable unless, at the time of the exercise,
we have a current prospectus covering the Common Shares issuable upon exercise
of the Warrants, and such shares are registered, qualified or deemed to be
exempt under the applicable state securities laws. As of the date of this Annual
Report, management of the Company believed it was not prudent to maintain an
effective registration statement given current market conditions. Should
management ultimately decide not to maintain a current registration statement
because the costs render it uneconomical, or because the value of the Common
Shares underlying the Warrants is less than the exercise price, or any number of
other reasons, the Warrant holders will be unable to exercise the Warrants and
the Warrants may become valueless.

         Although we did not knowingly sell the Warrants to purchasers in
jurisdictions in which the Common Shares are not registered or otherwise
qualified for sale, purchasers who may have bought the Warrants in the
after-market or move to jurisdictions in which the Common Shares underlying the
Warrants are not registered or qualified during the period that the Warrants are
exercisable. In this event, we are unable to issue Common Shares to those
persons desiring to exercise their Warrants, whether in response to a redemption
notice or otherwise, unless and until the Common Shares could be qualified for
sale in the jurisdictions in which such purchasers now reside, or exemptions
exist in such jurisdictions from such qualification. Warrant holders would have
no choice but to attempt to sell the Warrants or allow them to expire
unexercised.

AS A CHINESE-BASED COMPANY, OUR SHAREHOLDERS MAY HAVE GREATER DIFFICULTY IN
OBTAINING INFORMATION ABOUT US ON A TIMELY BASIS THAN WOULD SHAREHOLDERS OF A
U.S.-BASED COMPANY.

         Our operations will continue to be conducted in China and shareholders
may have difficulty in obtaining information about us from sources other than
us. Information available from newspapers, trade journals, or local, regional or
national regulatory agencies such as issuance of construction permits,


                                       23
<PAGE>

contract awards for development projects, etc. will not be readily available to
shareholders. Shareholders will be dependent upon our management for reports of
our progress, development, activities and expenditure of proceeds. The current
Chinese legal system provides that the laws and regulations governing the
issuance of construction permits and construction awards for development
projects are publicly available in China. It is uncertain, however, whether the
public will have the access to obtain copies of construction permits of a
particular developer, or other information relating to contract awards for a
particular project. While it may be possible for an unrelated third party to
instruct a local attorney in China to obtain copies of the construction permits,
it is within the discretion of the local authorities to disclose such
information. With respect to other information on contract awards, it is
unlikely that any other information will be made available to the public.

ITEM 4.           INFORMATION ON THE COMPANY

HISTORY AND DEVELOPMENT OF THE COMPANY

         New China Homes, Ltd., formerly known as China Homes Limited until its
name change in August 1999, was incorporated in the Cayman Islands on January 6,
1999 and operates under the Cayman Islands Companies Law (Revised 2000). Its
principal place of business is 16/F, Far East Consortium Building, 121 Des Voeux
Road, Central, Hong Kong, the People's Republic of China and its telephone
number is (852) 2850-0600. Its registered office is Walker House, Mary Street,
George Town, Grand Cayman, Cayman Islands. Its agent for service of process in
the United States is CT Corporation System, 1633 Broadway, New York, New York
10019.

         On April 2, 1999, we entered into consulting agreements with Messrs.
Stein, Haft and Kallan, who are currently directors or officers of the Company,
and Silver Pacific Trading Ltd., or Silver Pacific, all of whom are now
shareholders of the Company. On September 29, 1999, we entered into a share
cancellation agreement with Far East Consortium. In March 2000, we completed the
initial public offering of our Common Shares and Warrants, or the IPO, and
listed each of those securities on the Nasdaq National Market. The two
cancellation agreements establish net income thresholds for the first and second
years following our IPO amounting to US$10 million and US$20 million,
respectively, whereby in each of these two years, 25% of Messrs. Stein, Haft and
Kallan, Silver Pacific and Far East Consortium's Common Shares are subject to
redemption and cancellation by the Company in the event the net income
thresholds are not met. For the year ended March 31, 2001, the first year
following the closing date of our IPO, the Company incurred a net loss of HK$
6,715,494, or US$ 860,962, thereby falling under the US$10 million threshold. As
of April 1, 2001, 2.6 million Common Shares were cancelled pursuant to these
agreements.

         On December 9, 1999, the Company formed Chingchu (Shanghai) Real Estate
Development Company Limited by contributing certain commercial land interests to
Chingchu (Shanghai) Real Estate Development Company Limited.

         At March 31, 2000, we entered into a co-operative joint venture
agreement with Beijing Jida Real Estate Development Company, or Beijing Jida,
and Beijing Minglihua Property Consultants Co., Ltd., or Beijing Minglihua, and
established Beijing Chingchu to develop and sell Millennium Towers. Due to
overall cost considerations, we have cancelled the Millennium Towers project.
Therefore, during the year ended March 31, 2001, the Company withdrew from its
100% interest in Beijing Ching Chu Zhichun


                                       24
<PAGE>
Gardens Property Development Co., Ltd., or Beijing Ching Chu, a Sino-foreign
cooperative joint venture organized under the People's Republic of China.
Pursuant to such withdrawal, the Company's original contribution of capital to
Beijing Ching Chu has been returned to the Company.

         The Company formed Top Trend on September 22, 2000. On March 12, 2001,
the Company contributed to Top Trend its shares in Chingchu (Shanghai) Real
Estate Development Company Limited, whose major asset is a commercial land
interest that is part of the California Gardens project.

         On March 30, 2001, the Company entered an agreement with Wonder China
Investments Limited, or Wonder China, a wholly-owned subsidiary of Far East
Consortium, the Company's major shareholder, to dispose of its 100% interest in
Top Trend. Under the terms of this agreement, the Company will sell to Wonder
China (a) the entire issued share capital of Top Trend and (b) a debt in the
approximate amount of HK$18,414,717 advanced as a shareholder loan by the
Company to Top Trend, in exchange for (y) HK$1,280,000 in cash paid as of March
30, 2001 and (z) a HK$126,720,000 Promissory Note of Wonder China. The HK$
126,720,000 Promissory Note was due originally on September 30, 2001. Due to a
recent change in Chinese law, however, a warranty contained in the agreement
regarding the commercial use of land held indirectly by Top Trend has yet to be
fulfilled and the parties have therefore agreed to extend the due date of the
Promissory Note by six months to March 31, 2002. The parties have also delayed
completion of the transaction until March 31, 2002.

         In August 2001, the Company moved its Common Stock and Warrants from
the Nasdaq National Market to the Nasdaq Small Cap Market.

BUSINESS OVERVIEW

         GENERAL

         We own 98.2% of Shanghai Chingchu which is our operating subsidiary. It
was founded in 1997 to become a developer of large, planned residential
communities in China's emerging private home building market.

         We design, develop, construct, market and sell spacious, high-quality,
affordable homes in planned residential communities, which are targeted at
Chinese middle income families. We also design, develop, construct, market and
sell these homes in mixed-use development projects.

     OUR CALIFORNIA GARDENS PROJECT

         In May 1997, Shanghai Chingchu began construction of our first planned
residential community, called California Gardens. California Gardens is located
on a 350-acre site just inside the northwestern corner of the outer ring road
surrounding the city of Shanghai. When completed, our development will feature
the following:

         -        A projected 4,485 townhouses, configured in rows of 6-13
                  contiguous homes, and 1,280 apartments, representing a total
                  of approximately 10 million square feet;


                                       25
<PAGE>
         -        Townhouses which provide average floor space of approximately
                  1,600 square feet, and feature front yards convertible to
                  carports and back yards. Our apartments will provide an
                  average floor space of approximately 1,000 square feet and
                  will have available parking facilities;

         -        Close proximity to one of Shanghai's main motor transportation
                  arteries, which is located within eight miles of the city
                  center; and

         -        A wide range of amenities, making California Gardens a full
                  service residential community. These amenities include the
                  following:

                  >>       kindergartens, primary and high schools;

                  >>       a meeting and conference facility;

                  >>       a 24-hour medical clinic;

                  >>       an on-site motel; and

                  >>       retail shopping, restaurants and a country club.

         As of March 31, 2001, Shanghai Chingchu had completed the construction
of 2,154 homes and sold 1,913 homes. Shanghai Chingchu is developing and
marketing our homes at California Gardens in five phases consisting of a
specified number of homes. Phase I consists of 375 homes. Each home in Phase I
has been sold. The construction of Phase II, consisting of a total of 752 homes
which was offered in two-subdivisions, was completed in June 1999 and we have
delivered all homes in that Phase. Phase IIA consists of 74 semi-detached home
units that have been completed and delivered. Construction of Phase III,
consisting of 416 homes was completed at the end of 1999, and we have delivered
all homes within that Phase. The first sub-division of Phase IV consists of 545
homes that have been completed. Construction of homes in the second sub-division
of Phase IV , which will consist of 160 homes, has been scheduled to commence in
October 2001. Shanghai Chingchu presently has land use rights only for Phases I,
II, IIA, III and three of the sub-divisions of Phase IV. The remaining homes at
California Gardens are in different stages of planning and pre-development
processing. We anticipate that development of Phase IV will be completed in
2003.

OUR BUSINESS STRATEGY

         Our objective is to complete the development and sale of homes at the
California Gardens project and to develop and market other major development
projects in other principal cities in China. Key elements of our business
strategy include:

         -        Focusing on key urban markets in China for the development of
                  residential communities. We believe that the size and growth
                  potential of key Chinese commercial centers coupled with the
                  ongoing liberalization of the real estate markets offer us
                  considerable growth opportunities. We intend to construct
                  additional residential communities and mixed-use developments
                  within reasonable commuting distance to Shanghai and other key
                  Chinese population centers that have:

                  >>       A population of more than five million where the
                           economic development and infrastructure are
                           established;

                  >>       a significant level of unsatisfied demand for high
                           quality, yet affordable homes;

                  >>       a regulatory environment that encourages the
                           development of our residential communities, in terms
                           of enabling us to obtain necessary permits and
                           approvals to engage in our business


                                       26
<PAGE>
                           without undue difficulty or expense, and encourages
                           individual home ownership through the use of
                           subsidies or otherwise; and

                  >>       available real estate development rights at
                           attractive prices.

         -        Targeting the emerging Chinese middle-income class as home
                  buyers and technology companies as commercial tenants. Our
                  target residential market is the growing Chinese middle income
                  population. China's home builders have traditionally targeted
                  the upper and lower income market, and largely ignored the
                  middle-income class. Because of banking reforms permitting
                  wider availability of home mortgage loans and the positive
                  effects of China's economic reforms, we believe that the home
                  building market for the middle-income class represents
                  substantial growth opportunities for us. Further, we intend to
                  market our commercial properties to the vast growing number of
                  high-technology companies entering the Chinese marketplace.

         -        Providing substantial benefits to home buyers. We believe that
                  our residential communities provide the following benefits to
                  home buyers:

                  >>       affordable living space to support large families,
                           which frequently include three
                           generations--grandparents, parents and children;

                  >>       amenities within or adjacent to residential
                           communities, which may include schools, shopping
                           centers, athletic facilities, retail shops, medical
                           facilities, motel and country club facilities;

                  >>       the ability to live in an environment of similar
                           families who have also chosen to live in a planned
                           residential community, and whose values tend to
                           closely parallel those of the home buyer;

                  >>       living within close proximity to public
                           transportation to city centers; and

                  >>       quality building management services including
                           security, landscape and maintenance.

         -        Continuing our commitment to quality leadership. We seek to
                  construct buildings having a high quality of construction and
                  workmanship. Because of our emphasis on quality home
                  construction, our California Gardens project received the
                  Shanghai Home of the Year Award in 1997.

         -        Entering markets early. We will continue to enter markets
                  early where we can acquire land use rights at reasonable
                  prices and develop residential communities in key commercial
                  centers. We have successfully implemented this strategy in
                  Shanghai, where we are one of the first home builders to
                  construct a residential community targeted at middle income
                  families. We believe that early entry into markets will
                  continue to enable us to establish ourselves in these markets
                  before the onset of widespread competition.

SITE SELECTION AND PROJECT APPRAISAL

         We believe that securing a good location is a major factor in the
success of a property development project. We consider the following factors
when we evaluate our property development sites:

         -        size of land;

         -        geographic location;

         -        potential financial return;

         -        potential market demand for the development;


                                       27
<PAGE>
         -        our existing property portfolio and available resources;

         -        land cost, affordability and potential financial return;

         -        overall market situation and opportunities;

         -        access to city centers;

         -        geological conditions;

         -        demolition and resettlement costs; and

         -        infrastructure support.

During the site selection process, we will evaluate and research the political,
economic and social situation of the relevant region, the market demand for and
potential returns from a proposed project and the funding and manpower
requirements. Once we have selected a site, we formulate a comprehensive
development plan.

DEVELOPMENT AND CONSTRUCTION

         We act as the general contractor for the construction of our
residential developments. Our employees monitor the construction of each
project, participate in all material design and building decisions, coordinate
the activities of subcontractors and suppliers, subject their work to quality
and cost controls and monitor compliance with zoning and building codes. The
selection of our subcontractors is conducted through a competitive process, and
several subcontractors are invited to participate. The main criteria for
selecting subcontractors are cost, qualifications, the quality of completed
projects and of work done, if any, on our existing or prior projects. Once the
selection process is completed, we will normally negotiate a fixed price
contract with the contractor which includes terms relating to time for
completion of construction, quality of materials used and warranty periods.

         We do not maintain significant inventories of construction materials
except for work in process, materials for homes under construction and a limited
amount of other construction materials. Generally, the construction materials
used in our operations are readily available from numerous sources.

QUALITY CONTROL

         We place emphasis on the quality of our development projects and
implement quality control procedures at different construction stages to ensure
that the work done by our contractors meets our standards and requirements and
those of the relevant governmental authorities.

         We impose quality control on our home building materials. Our on-site
management team conducts regular quality inspections of the construction work.
When a particular section of construction work is completed, our on-site
management team will inspect the work to ensure that the work is in compliance
with our quality standards and the relevant governmental regulations. We require
our contractors to promptly remedy all defects, and we then make a further
inspection of their work.

PROJECT MANAGEMENT

         Our project management is undertaken by a team of architects,
engineers, project managers and other support staff. The project management team
is responsible for the overall management of all of our


                                       28
<PAGE>

         development projects. For each project, there is a team responsible for
         the day-to-day management. Project management covers all major stages
         of a development project, as follows:

         -        FEASIBILITY STUDY. Conducting a detailed geological study and
                  market study, formulating a master timetable, and preparing
                  preliminary proposals for the type and class of property to be
                  constructed;

         -        DESIGN. Completing a preliminary design layout and obtaining
                  approvals from relevant authorities, commencing site
                  preparation, selecting construction materials, modifying the
                  design layout, producing a construction blue-print and
                  establishing a construction management team;

         -        CONSTRUCTION. Obtaining, evaluating and selecting contractor
                  bids, finalizing the design layout and construction
                  blue-print, monitoring construction progress compared to our
                  timetable and introducing and implementing quality and cost
                  control procedures; and

         -        COMPLETION. Establishing a property management team,
                  submitting a completion and inspection report to the
                  governmental authorities, obtaining required government
                  approvals and settling payments.

OTHER PROJECTS

         Our future developments will seek to apply the successful techniques of
the California Gardens community, and we will target several of China's largest
cities. A listing of those cities follows, including their approximate city
population:

<TABLE>
<CAPTION>
                                                  CITY
                          CITY                  POPULATION
                  ---------------------     ------------------
                  <S>                       <C>
                  Chongqing                     15,200,000
                  Shanghai                      14,500,000
                  Beijing                       10,700,000
                  Chengdu                        9,700,000
                  Tianjin                        8,900,000
                  Shijiazhuang                   8,600,000
                  Wuhan                          7,100,000
                  Qingdao                        6,800,000
                  Shenyang                       6,700,000
                  Changchun                      6,700,000
                  Xian                           6,500,000
                  Guangzhou                      6,500,000

</TABLE>

         We are in the process of choosing an area for our next region of
development. For example, although we have cancelled the Millennium Tower
project for cost reasons, we still believe that Beijing will be the site of one
of China's largest middle income housing booms, as there is presently a
significant shortage of affordable residential housing for this segment of the
population. This housing shortfall is projected to intensify with the continuing
shift to privatized housing, and Beijing already enjoys the lowest vacancy rate
for recently built homes. Additionally, the Beijing city government has set a
target of 140 square feet of living space for each individual, and the present
level is approximately 90 square feet. The


                                       29
<PAGE>

Beijing government expects the population of Beijing to quickly rise from its
present level to about 15,000,000 people, which will create the need for more
than 500 million square feet of living area, which can represent more than
500,000 new homes.

         Recently, we noticed an upward trend in the real estate market in
China. Our surveys indicated that the commercial real estate markets in
Guangzhou, Shanghai and Beijing showed especially good potential for real estate
development. We believe that low interest rates and the availability of bank
mortgage financing will allow small to medium businesses to purchase real estate
rather than lease it. On this basis, we expect that the demand for quality
office space in regions such as Beijing will be strong.

         We are currently conducting research with regard to a number of
additional potential development sites in cities other than Beijing, including
Chongqing, Chengdu, Tianjin, and Shenyang. Our goal is to develop a California
Gardens-type planned community in several or all of these cities.

COMPETITION

         The residential and commercial real estate markets in China are subject
to intense competition. Over the last decade, a large number of property
developers have expanded their operations into China. These include a number of
leading Hong Kong and Asian real estate development and investment groups, many
of whom have greater financial, managerial, marketing and other resources than
us. Residential and commercial property developers compete not only for property
buyers, but also for desirable properties, raw materials and skilled
subcontractors. We also compete for residential sales with individual sales of
existing homes in the secondary market and available rental housing. We also
expect that continued economic development of China will be accompanied by
further property development and expansion. We believe that our principal
competitive strengths are as follows:

         -        the extensive experience and in-depth knowledge of our
                  management team in the Chinese and Asian real estate markets;

         -        our emphasis on developing high-quality residential properties
                  for middle income families;

         -        our marketing and sales strategies and techniques;

         -        our relationship with Far East Consortium, including the
                  experience and relationships developed by our management team
                  in the course of developing properties on behalf of Far East
                  Consortium before joining New China Homes;

         -        our focus on development projects which are compatible with
                  China's policies of encouraging private home ownership and
                  shifting away from a system of subsidized housing;

         -        our targeted locations in major and populous cities;

         -        our project management team, which effectively and actively
                  controls every stage of the development of our projects; and

         -        our close working relationships with local business partners
                  in China.


                                       30
<PAGE>
SALES AND MARKETING

         Our target market for residential customers is Chinese middle income
families in key urban markets who want to become home owners in a planned
community. The principal purchasers of our Shanghai California Gardens project
are from the middle income sector. We classify a typical family income of RMB
4,000-5,000, or HK$ 3,760-4,700 or US$ 483-604, per month as middle income
earners. We believe that families earning this income will be able to purchase
our houses costing approximately RMB 400,000-500,000, or HK$ 367,985 - 459.982
or US$ 47,178 - 58,972, through a down payment of 20% or RMB 80,000-100,000, HK$
73,597 - 91,996 or US$ 9,436-11,794, with the balance financed by a bank
mortgage having a repayment period ranging from 10-20 years, resulting in a
monthly payment of between RMB 2,500 - 4000, or HK$ 2,300 - 3680 or US$ 295-
472.

         For each development project, our sales and marketing division forms a
special team to handle the related sales and marketing activities. Subject to
market conditions and government approval by the relevant land administration
bureau, we seek to pre-sell our development projects at an early stage. We also
arrange with one or more banks to provide mortgage loan facilities to home
purchasers for up to 80% of the home purchase price, substantially all of which
is guaranteed by New China Homes until the homes are delivered to the buyers. In
the case of California Gardens, we establish relationships with banks to provide
mortgage loans to customers prior to the launch of each phase. For Phase I,
mortgages for 375 homes were provided by Construction Bank. For Phase II,
mortgages for 752 homes were provided by the Construction Bank and the
Industrial and Commercial Bank. For Phases III and IVA, the Bank of Shanghai,
the Bank of Communications and Agricultural Bank have been added as lenders. Our
sales and marketing strategy involves the following key elements:

         -        offering a financing package for home buyers which
                  pre-qualifies home buyers for a 80% mortgage with only a small
                  down payment, or booking fee, which is typically no more than
                  RMB 20,000, or HK$ 18,400 or US$ 2359, and the balance of the
                  purchase price paid over a staggered period between 15 days to
                  two months;

         -        advertising through various media, including national and
                  regional television networks, radio, newspapers, magazines,
                  posters, billboards and advertising pamphlets to reach
                  potential purchasers;

         -        generating newspaper publicity and television coverage
                  providing wide visibility;

         -        using sales literature and brochures which describe our
                  projects and our company; and

         -        operating sales centers in high-traffic downtown areas and
                  on-site, with billboard advertising visible to large numbers
                  of city residents.

         We have established a high level of visibility in Shanghai for our
California Gardens project, and our development has received a substantial
amount of local media coverage. We also believe that local awareness of our
project has been facilitated through word of mouth. Sales of our homes are
normally made at our sales centers situated either in the city center or at our
development site. Our sales and marketing staff consists of 29 people.

         We have established a policy of contributing 0.35% of all sales
revenues to a sales commission fund, which is distributed among our sales staff.


                                       31
<PAGE>
PRE-SALE OF OUR HOMES

         We normally seek to pre-sell homes in the several phases in our
development as early as possible, subject to market conditions and regulatory
constraints. Pre-sales occur when units of a project are sold while the project
is still under construction. Under Chinese law, pre-sale is only permitted if a
pre-sale permit has been granted by the relevant land administration bureau to
the project which is still under construction. Pre-selling allows us to begin
marketing our development before we would otherwise be able to do so, and
shorten the time during which we have market exposure for the construction and
other expenses of our developments. Pre-sales also allow us to improve our
working capital management by accelerating our cash inflow and to minimize
market risks associated with our development projects.

         In a pre-sale, the first step is that the home buyer pays an initial
booking fee. The home buyer then pays 20% of the purchase price less the booking
fee upon the execution of a sales and purchase agreement. The remaining 80% must
be paid within 60 days although, in most instances, it is paid by the bank
providing the mortgage financing upon execution of the sales and purchase
agreement.

FINANCING FOR OUR HOME PURCHASERS

         As part of our pre-sale activities, we may arrange for commercial banks
to provide purchaser financing in the sale of our developments. Unlike mortgage
financing in the United States, banks will typically look to the developer and
the planned development to determine whether to make a commitment to provide
purchaser mortgages. However, the banks retain the right to approve or reject
mortgages on an individual basis based upon the perceived credit-worthiness of
the home purchaser and other factors that it considers appropriate. We guarantee
a customer's mortgage until the home is handed over to the customer. As of March
31, 2001, the outstanding amount of unpaid mortgage loans made to purchasers of
homes in our California Gardens project was approximately HK$ 73.41 million, or
US$ 9.41 million or RMB 79.79 million. There have been no payment defaults on
any of these mortgage loans. Approximately 80% of our home buyers obtain
financing at an average amount of HK$ 230,124, or US$ 29,503 or RMB 220,800.

MORTGAGES

         The grant of mortgages in China is governed by the Security Law of
China and by the laws regulating real estate. Under the Security Law, any
mortgage agreement or security agreement must include various specified
provisions. If land use rights are mortgaged, the structures and other fixtures
erected on the mortgaged land at the time the mortgage agreement is signed will
also be subject to the mortgage. If buildings are built on the mortgaged land
after the mortgage agreement has been signed, the buildings will not be subject
to the pre-existing mortgage. When structures and other fixtures on the land are
mortgaged, the land use right relevant to such structures and other fixtures
shall also be mortgaged.

         For the assignment of real property for which the land use right was
obtained by allocation, the application for the assignment shall be submitted to
and approved by the relevant authority. Upon such approval of the assignment,
the assignee shall go through the procedures for the grant of a land use right
and pay the grant fee according to the laws of the People's Republic of China.
in a few rare cases, this


                                       32
<PAGE>
procedure may be avoided provided that the parties seek approval of the relevant
authorities; however, gain from the land use right must still be paid
accordingly.

         Where a real property mortgage is created over an allocated land use
right and such real property is subsequently lawfully auctioned off, the
mortgagee may enjoy priority in receiving compensation only after an amount
equivalent to the land use right grant fee has been paid in full from the
proceedings of such auction.

         The validity of a mortgage depends on, among other things, the validity
of the main contract, and whether the mortgagor has the certificates of property
ownership and/or certificates of land use rights obtained by allocation or
assignment for value. Registration with appropriate authorities is also
necessary to make a mortgage effective. If a loan is not duly repaid, the
mortgagee may foreclose or sell the collateral by auction where the mortgagor
and mortgagee have reached an agreement in this respect. In the absence of such
an agreement, the mortgagee will have to bring an action before a competent
court in China in order to enforce its rights under the mortgage agreement.

         Further, the Chinese government may, under special circumstances, in
the needs of public interest, repossess land or structures on land. In this
situation, the Chinese government will pay compensation taking into account the
remaining term of the land use rights, as well as the development and use of the
land and the structures on the land.

PROJECT FINANCE

         We have financed the development of our California Gardens project to
date through loans provided by Far East Consortium which were converted to
Common Shares in April 1999. We have also financed our development projects with
proceeds from our initial public offering, bank borrowings, proceeds from the
pre-sale of portions of our development projects, credits provided by our
contractors and through our internally generated funds. Because each development
project will require a substantial amount of capital to finance its construction
cost, it is our policy to control the timing of the launch of each of our
development projects and the phases of these projects.

PROPERTY MANAGEMENT SERVICE FEES

         One of our operating subsidiaries provides property management services
to each homeowner of California Gardens for a monthly general maintenance fee
which is currently US$ 24 per unit. These services include garbage collection,
security, maintenance services, bus transportation to and from local, mass
transit locations and landscaping. These property management costs will likely
increase over time. Should the costs increase, we will be required to obtain
approval from the proper authority prior to instituting any increase in the
monthly general maintenance fee. Our operating subsidiary also provides general
property maintenance services.

         The aforementioned US$ 24 monthly general maintenance service fee,
however, does not cover the costs of major repairs, which may include
significant work required to fix or replace the roof or facade. Residents of
California Gardens must contribute RMB 3,600 to a sinking fund prior to moving
in. The sinking fund covers maintenance of the roof and outside wall as well as
all other major repairs that may be required within the development. The
California Gardens resident's association can seek further


                                       33
<PAGE>
payment from unit owners if the cost of any major repair exceeds the amount in
the sinking fund. We are not responsible, however, once a standard one-year
warranty has expired. Relatively minor repairs will be paid by unit owners on a
job-to-job basis after the standard one-year warranty has expired.

FUTURE PLANS AND PROSPECTS

         Our long-term business objective is to become a developer of large,
planned residential communities and mixed-use projects at prime locations within
major cities in China. Our management will be devoting significant efforts to
identifying and securing further suitable locations for future expansion. We
believe that, with continued economic growth and the improvement in living
standards in China, there will be sustained demand for quality and well-managed
residential and mixed-use developments which have well-equipped ancillary
facilities.

REVENUES:

         Under US GAAP, we recognize revenue from the sale of homes on a
percentage of completion basis. The Company's revenues for the fiscal years
ended March 31, 1999, 2000, and 2001, all of which was derived in the People's
Republic of China from our California Gardens project, is as follows:

<TABLE>
<CAPTION>
                                               Fiscal year ended March 31,
                                        ---------------------------------------
                                         1999            2000            2001
                                        ------          ------          -------
                                                   (in HK$ millions)
<S>                                     <C>             <C>             <C>
Phase I ......................           35.26            0.23            1.14
Phase II .....................          234.66           22.71            2.09
Phase IIA ....................              --              --           25.04
Phase III ....................              --          151.13            1.89
Phase IV .....................              --              --          137.69
                                        ------          ------          ------
Total ........................          269.92          174.07          167.85
                                        ======          ======          ======
</TABLE>

SEASONALITY

         The revenues we recognize may fluctuate on a seasonal basis. Because we
recognize revenues utilizing the percentage of completion method, construction
schedules play a critical role. As a result, we may not recognize significant
revenues during the winter months because of poor weather conditions hindering
our construction schedule.

RECENT TRENDS

         As at March 31, 2001, we had contracted for the expenditure of
approximately HK$86.64 million in respect of land and lots under development
relating to California Gardens. We expect to expend this amount within the next
two years. We have also authorized but not yet contracted for additional
expenditures on California Gardens of approximately HK$211.97 million.


                                       34
<PAGE>
OVERVIEW OF THE LEGAL FRAMEWORK REGULATING CHINA'S REAL ESTATE MARKET

GENERAL

         Private land ownership in China was abolished in the 1950s and was
replaced by a centrally planned and managed land resources allocation system,
which legally prohibited the transfer or lease of land in China. With China's
economy moving towards a more liberalized market-oriented system, reforms have
been introduced in its property sector. Under land reform legislation, while the
transfer of land ownership is still restricted, land use rights may be granted,
transferred, leased or mortgaged in accordance with stipulated legal procedures
and requirements.

NATIONAL LEGISLATION

         General

         In 1988, the Seventh National People's Congress passed an amendment to
the constitution of China which paved the way for reforms of the legal regime
governing the use of land and transfer of land use rights. In 1990, the State
Council enacted the Provisional Regulations of China Concerning the Grant and
Assignment of the Right to Use State Land in Urban Areas, which are generally
referred to as the Urban Land Regulations. The Urban Land Regulations formalized
the process of the grant and transfer of land use rights for consideration.
Under this system, the State retains the ultimate ownership of the land.
However, the right to use the land can be granted by the State and local
governments in its capacity as land owner for a maximum period of 70 years for
residential development, upon the payment to the State of a land premium for the
grant of the land use right. As a result of these reforms, local and foreign
companies, enterprises, other economic organizations and individuals may apply
for and be granted land use rights. The Urban Land Regulations provide that the
right to use land may be granted by agreement with the land grant authority, by
invitation for bids or by auction and that a land grant contract should be
entered into upon the grant of a land use right. Subject to compliance with the
terms of a land grant contract, a holder of land use rights may exercise
substantially the same rights as a land owner during the grant term, including
holding, leasing, transferring, mortgaging and developing the land for sale.
Upon expiration of the term of grant, renewal is possible subject to the payment
of a new land premium and execution of a new land grant contract. If the term of
grant is not renewed, the land use rights and the ownership of any homes or
buildings on the land will become the property of the government without
compensation.

         Recent Developments

         Upon becoming the Premier of China in March 1998, Zhu Rongji renewed
efforts for structural economic reform by announcing, among other initiatives, a
new housing reform program. The program directs employers to stop distributing
free housing to employees beginning July 1, 1998, which was deferred until
January 1999, and instead to increase cash wages so that employees can buy
housing or pay higher rents. According to a bulletin distributed by the U.S.
Department of State in April 1999, the principal policies of this new housing
initiative are as follows:


                                       35
<PAGE>
         -        ESTABLISHING A NEW URBAN HOUSING SYSTEM ADAPTED TO THE
                  SOCIALIST MARKET ECONOMIC SYSTEM AND THE SPECIFIC NATIONAL
                  SITUATION OF CHINA. The principal element of this policy
                  involves the termination of employee housing benefits and an
                  increase in cash wages to encourage home ownership.
                  Historically, employees of the government and State-owned
                  enterprises received a small salary and a generous benefits
                  package, including low rent or free housing. Under the new
                  policy, wages are expected to increase and a cash housing
                  allowance will be provided or a provident fund will be
                  established for employees. Employees are able to use the cash
                  allowance to pay rent or make mortgage payments. The fund
                  would serve primarily to assist individuals in securing loans
                  to purchase homes.

         -        CREATING A MULTI-LEVEL HOUSING SUPPLY SYSTEM. A multi-level
                  housing supply system has been introduced to accommodate the
                  needs of families of different income levels. This system is
                  designed to gradually abolish subsidized, or welfare housing,
                  establish settlement and low margin housing for low income
                  families and define commercial housing for middle and high
                  income families.

         -        EXPANDING THE SCOPE OF HOME FINANCING. Under the new policy,
                  commercial banks in all cities can issue individual mortgage
                  loans for the purchase of government-directed and sanctioned
                  housing. The People's Bank of China has reduced its interest
                  rates, and a number of foreign banks have obtained the
                  necessary licenses to conduct retail banking operations in
                  China. We expect this to result in a more competitive mortgage
                  market which will benefit new home buyers. In order to ensure
                  the effectiveness of housing loans, efforts will be made to
                  improve the housing property rights mortgage registration
                  system. In June 1998, the government announced a Personal
                  Housing Loan Management Regulation, which addressed different
                  aspects of personal housing loans.

         -        IMPROVING THE REGULATION OF THE HOUSING MARKET. New
                  regulations are being developed to insure the stability and
                  safety of China's housing reforms and programs.

LOCAL LEGISLATION

         While the Urban Land Regulations set out a general framework for
transactions governing land use rights, regulations adopted by local governments
control specific transactions within their respective jurisdictions. Local
regulations contain provisions and have implemented procedures which differ from
the national legislation. National land authorities, however, take the position
that any inconsistencies should be resolved in favor of the national
legislation.

U.S.-CHINA HOUSING INITIATIVE

         On July 1, 1998 the day China's housing reform program was implemented,
Former President Clinton visited a housing site in Shanghai to demonstrate U.S.
support for China's home ownership program. The President announced the
establishment of a U.S.-China housing initiative at that time, including the
formation of a U.S.-China Residential Building Council of which we have been
invited to be a member.

         The housing initiative will address finance and construction issues and
is intended to support China's social reform efforts by providing
sector-specific guidance and cooperation to China as it pursues housing reform
measures.


                                       36
<PAGE>
ACQUISITION OF LAND USE RIGHTS

         Grant

         The grant of land use rights from the State is often referred to as the
first tier market by Chinese developers. Under the law of the People's Republic
of China on the Administration of Urban Real Estate, or the Urban Real Estate
Law, land use rights may be granted by way of auction, invitation of tenders or
by agreement between the State and the land user. It requires that the prices of
land granted by way of agreement must not be below the minimum land premium set
by the State. Beijing, Guangzhou and Shanghai have already issued formulae for
calculating land premium, with reference to location, transportation and
infrastructure. These formulae are expected to be reviewed periodically in order
to reflect the market supply and demand. Local governments at or above the
county level may grant land use rights. Their scope of authority varies in
accordance with their position in the administrative hierarchy. Central
government approval must be obtained for any grant of any arable land which is
designated as basic cropland by the State, other arable land over 35 acres and
non-arable land over 70 acres.

         In the case of a grant by agreement, the local land bureau will provide
information on the land and the basic terms upon which land use rights will be
granted. Once the terms have been agreed on, a grant contract will be signed by
the local land bureau and the land user. Normally, land use rules will be
attached to the grant contract. A deposit is normally required to be paid and a
time schedule will be specified for the payment of the balance of the land
premium. Upon payment of the land premium and subject to the other requirements
of the local land bureau, a State Land Use Rights Certificate will be issued to
the land user.

         A land bureau setting out the terms of the grant can also send
invitation of tenders, and bidders are asked to submit sealed bids together with
the payment of a security deposit. A bid evaluation committee formed by the land
bureau is responsible for opening the bids and deciding on the successful bidder
who shall then sign the grant contract with the land bureau and pay the balance
of the land premium before obtaining the State Land Use Rights Certificate and
effecting registration.

         In an auction, the grant is awarded to the highest bidder. The land
bureau will then sign a grant contract and the usual registration requirements
have to be complied with.

         Several local governments have stipulated standard terms for inclusion
in grant contracts. For example, the standard form grant contracts promulgated
by the State Land Bureau list the following items for inclusion in grant
contracts:

         -        manner of payment of land premium;

         -        use of land;

         -        building restrictions: site coverage, total gross floor area
                  and height limitations;

         -        construction of public facilities;


                                       37
<PAGE>

         -        easement and repair rights to be reserved by the government;

         -        submission of building plans and approval;

         -        deadline for completion of construction;

         -        repair obligations;

         -        responsibility for obtaining supply of utilities; and

         -        restrictions against alienation before payment of land premium
                  and completion of prescribed development.

         If a land user wishes to change the specified use of the land after the
execution of a grant contract, then approval must first be obtained from the
land bureau and the urban planning department and a new grant contract may have
to be signed where the land premium will be adjusted.

         If the land user fails to develop and invest in the land within the
period of time specified in the grant contract, the land bureau has the right to
impose various penalties ranging from fines to withdrawal of the grant without
consideration.

         Assignment from Current Land Users

         In addition to a direct grant from the government, an investor may also
acquire land use rights by entering into an assignment contract with an existing
land user who holds granted land use rights or by entering into a joint
development agreement with such a land user. Local Chinese entities very often
enjoy the right to use land allocated by the State without payment of any
consideration. This type of land use right is generally referred to as allocated
land use right. The Urban Land Regulations state that assignment or mortgage of
allocated land use right in urban areas and any buildings or attachments
situated on the land is subject to the approval of the relevant land and real
estate departments. The conditions for approval include the following:

         -        the existing land user must be an individual or a company,
                  enterprise or other economic organization;

         -        the existing land user must hold a State Land Use Rights
                  Certificate and the relevant real estate ownership
                  certificates for the buildings and attachments;

         -        a formal grant contract must be entered into with the relevant
                  land department; and

         -        the land premium in respect of the land payable was, the grant
                  contract must be paid [payment may be made from the proceeds
                  of development].

         The assignment or joint development is subject to terms and conditions
specified in the land use rights grant contract. For housing construction
projects, Chinese law requires that at least 25% of total


                                       38
<PAGE>
construction costs, excluding land premium costs, be expended and the
construction schedule and date of completion and delivery of the project have
been determined before assignment can take place. A higher minimum construction
and investment fee may be provided in land use rights grant contracts made
between the local land administration bureau and the land user. All rights and
obligations of the current holder under a land use rights grant contract will be
transferred contemporaneously to the assignee of the land use rights. The
relevant local government has the right to acquire the land use rights to be
assigned if the assignment price is obviously lower than the market price.
Relevant local governments may also acquire the land use rights from a land user
in the event of redevelopment of the area under a revised town planning. The
land user will then be compensated for the loss of his land use rights.

         Leasing

         The Urban Land Regulations and the Urban Real Estate Law both permit
leasing of granted land use rights and the buildings or homes situated on the
land. Leasing of properties situated in urban areas is governed by the Measures
for the Administration of Leasing of Urban Real Estate, which were promulgated
by China's Ministry of Construction in June 1995. These regulations permit
property owners to lease their properties to others for residential or
commercial uses except as otherwise prohibited by relevant laws. Parties to a
property lease transaction are required to enter into a lease contract that
should specify all of the terms of the lease arrangement as required by statute,
and to register the contract with the local real property authorities. Local
governments may impose rent control. Subject to the consent of the landlord, a
tenant may assign or sublease the leased property to a sub-tenant.

REGISTRATION OF REAL ESTATE INTERESTS

         Real estate registries have been established in all cities in China. In
most cities, there are separate registries for land use rights and buildings.
However, in Shenzhen, Shanghai, Guangdong and some other major cities, the two
registries have been combined. In places where there are separate registries,
the holder of a land use right will be issued a Real Estate Ownership
Certificate for its ownership of the property and a Land Use Rights Certificate
for its land use rights of the underlying property. The holder of a land use
right who is issued a Real Estate Ownership Certificate holds the land use
rights and owns the property erected on the land. In the other places where
registries have been combined, the holder of a land use right will be issued
only a Land and Real Estate Certificate. All entities and individuals must
register all their lawful state-owned land use rights and rights to own and use
of collectively-owned land as well as other rights in respect of land. Further,
the mortgage of a land use right must be registered in the land registration
departments. Duly registered land interests which are legally protected
constitute notice to all other persons of the interests of the registrant.

PRE-SALE

         The sale of interests in buildings under construction but which have
not been completed is permitted subject to the fulfillment of the requirements
set forth in the Measures for the Administration of the Pre-Sale of Urban
Commodity Premises, promulgated by China's Ministry of Construction and
effective from January 1, 1995, or the Pre-Sale Measures. In addition, most of
the major cities in China have promulgated local regulations governing pre-sales
of commodity premises. According to the Pre-Sale Measures, a developer must
obtain a Pre-Sale Permit before it may proceed to sell the uncompleted commodity
units. To qualify for the Pre-Sale Permit, the following conditions must be
satisfied:

                                       39
<PAGE>

         -        the land premium has been paid in full and a State Land Use
                  Rights Certificate has been obtained;

         -        a Construction Works Planning Permit is held;

         -        at least 25% of the total investment for the project
                  development and construction of the units under pre-sale must
                  be paid; and

         -        the construction schedule and the date of project completion
                  have been determined.

         In addition to the foregoing, local Shanghai law stipulates more
stringent pre-conditions for the pre-sale of commodity premises including (i)
for commodity premises of less than six stories, the ceilings of all stories
must be completed and (ii) for commodity premises of more than six stories, the
ceilings of two-thirds of all stories must be completed.

         Further, the developer is required to execute pre-sale contracts in the
form approved by the local land and real estate administration authorities with
the purchaser, and must also file and register the executed pre-sale contracts
with the local land and real estate administration authorities. The proceeds
from the pre-sale of the commodity units may only be used for funding the
relevant construction works.

         Pre-sales conducted outside China are generally subject to approval by
the local government in which the property is situated.

DESIGN AND CONSTRUCTION

         A Chinese design institute must be engaged for the design of a foreign
investment property project in China to facilitate compliance with local
regulations concerning urban planning, architectural design and fire safety.

         Foreign contractors are generally required to work together with a
Chinese construction unit on construction projects. Foreign contractors are also
required to obtain a qualification certificate to engage in project construction
work.

WARRANTY OF BUILDING CONSTRUCTION

         The owner and builder of any building construction project must specify
the warranty scope, term and responsibilities for the project subject to
relevant national regulations. Normally, the minimum warranty period varies
depending on the area of construction and type of fixtures. For example, for a
decoration project, the warranty period must be for no less than two years. By
way of further example, a roof leakage warranty period must be for no less than
five years.

         If any defect is discovered during the warranty period, the builder
must either repair it or have it repaired at the expense of the party
responsible for the defect. The party responsible for the defect shall also be
liable for any losses and injuries resulting from such defect. New losses and
injuries resulting from any delay of repair shall be the liability of the party
causing such delay.


                                       40
<PAGE>
LICENSING OF FOREIGN INVESTMENT IN PROPERTY DEVELOPMENT; INVESTMENT STRUCTURE

         The Urban Land Regulations state that foreign entities may acquire land
use rights in China unless the law otherwise provides. However, in order to
develop the land acquired, foreign investment enterprises, in the form of equity
or co-operative joint ventures or wholly foreign-owned enterprises, need to be
established. Establishment of a foreign investment enterprise engaged in
property development, commonly referred to as a development company, is subject
to approval by the relevant departments of China's government in accordance with
the following procedure. First, the Chinese party to a joint venture project or
the foreign investor, in the case of a wholly foreign-owned project, will submit
a project proposal to the local planning commission for project proposal
approval. If the local planning commission considers the proposed property
development project to be consistent with the prevailing national and local
economic plans, it will grant a project proposal approval to the applicant. The
State Development and Planning Commission has been given the authority to
regularly promulgate guidelines for direction of foreign investment.

         Once the project proposal has been approved, the Chinese party and the
foreign investor may proceed to prepare a joint feasibility study report that
reflects their assessment of the overall economic viability of the proposed
development company. At the same time, the parties may proceed to negotiate and
execute the joint venture contract and articles of association for the
establishment of a development company. In the case of a wholly foreign-owned
project, the foreign investor may then prepare and sign the articles of
association. The joint feasibility study report, the joint venture contract
and/or articles of association will then be submitted to the local foreign
economic and trade commission for approval. If the local foreign economic and
trade commission finds the application documents to be in compliance with
Chinese law, it will issue an approval certificate for the establishment of the
development company. With this approval certificate, the foreign investor and/or
the Chinese party can apply to the local administration for industry and
commerce for a foreign investment enterprise business license for the
development company.

         Upon the issuance of the business license, the development company is
established as a Chinese legal person and is licensed to engage in property
development activities as described in the business license. Under the
Regulations for the Administration of Real Estate Development Enterprises,
promulgated by China's Ministry of Construction and effective from December 1,
1993, all property development companies, including foreign investment
enterprises, are also required to apply for a property development enterprise
qualification certificate from the local construction commission. The
qualification certificates are classified into grade 1 to grade 5 based upon the
type of business enterprise created. We have been accorded a grade 3 standard by
the local construction commission. Sole ownerships, joint ventures, and
co-operations are generally referred to as grade 3 enterprises. A grade 3
enterprise is not disadvantageous.

         Property development projects in China are generally divided into
so-called single projects and large tract development projects. In single
projects, buildings are constructed on a plot of land and the individual units
in the buildings are sold to purchasers. Large tract development projects
involve comprehensive development and construction after procurement of land use
rights: the land is leveled and facilities for water, electricity and heat
supply, roads, communications, etc. are constructed, thus


                                       41
<PAGE>
forming an area for industrial or other use. Thereafter, the developer either
assigns the land use rights or further develops the land for sale or leasing.

MORTGAGES

         The grant of mortgages in China is governed by certain laws of the
People's Republic of China, as previously discussed in this subsection, Business
Overview - Mortgages, above.

UNIFIED SALES OF COMMODITY HOUSING TO DOMESTIC AND FOREIGN PARTIES

         In some Chinese cities, including Shanghai, there are no longer
distinctions between domestic (PRC) and foreign parties that restrict to whom
housing can be sold and leased. Prior restrictions creating foreign and domestic
distinctions have recently been canceled; housing can now be sold or leased
regardless of whether the housing (and attendant land use rights) was built or
obtained before or after this change in the law. Domestic and foreign
enterprises, organizations and individuals may all purchase or rent such
housing.

         There has also been a unification of domestic and foreign distinctions
in connection with the land premium system, land income and distribution
methods, procedures and model contracts. These cities now call for tender
invitation and auctioning as the methods used for granting land.

FOREIGN EXCHANGE CONTROL IMPLICATIONS FOR FOREIGN INVESTORS IN CHINA

         China's government imposes control over the convertibility of Renminbi
into foreign currencies. Under the current unified floating exchange rate
system, the PBOC publishes a daily exchange rate for Renminbi, or the PBOC
Exchange Rate, based on the previous day's dealings in the inter-bank foreign
exchange market. Financial institutions authorized to deal in foreign currency
may enter into foreign exchange transactions at exchange rates within an
authorized range above or below the PBOC Exchange Rate according to market
conditions.

         Pursuant to the Foreign Exchange Control Regulations issued by the
State Council on April 1, 1996 and the Administration of Settlement, Sale and
Payment of Foreign Exchange Regulations which came into effect on July 1, 1996
regarding foreign exchange control, or the Regulations, conversion of Renminbi
into foreign exchange by foreign investment enterprises for current account
items, including the distribution of dividends and profits to foreign investors
of joint ventures, is permissible. Foreign investment enterprises are permitted
to remit foreign exchange from their foreign exchange bank account in China on
the basis of, inter alia, the terms of the relevant joint venture contracts and
the board resolutions declaring the distribution of the dividend and payment of
profits. Conversion of Renminbi into foreign currencies and remittance of
foreign currencies for capital account items, including direct investment,
loans, security investment, is still subject to the approval of the State
Administration of Foreign Exchange, or SAFE, in each such transaction. On
January 14, 1997, the State Council amended the Foreign Exchange Control
Regulations and added, among other things, an important provision, as Article 5
provides that the State shall not impose restrictions on recurring international
payments and transfers.


                                       42
<PAGE>
         Under the Regulations, foreign investment enterprises are required to
open and maintain separate foreign exchange accounts for different types of
foreign exchange transactions, and the permitted scope of receipts and
expenditures for such accounts is limited to the type of foreign exchange
transactions designated for such accounts. In addition, foreign investment
enterprises may only buy, sell and/or remit foreign currencies at those banks
authorized to conduct foreign exchange business upon the production of valid
commercial documents and, in the case of capital account item transactions,
document approval from the SAFE.

         Currently, foreign investment enterprises are required to apply to SAFE
for foreign exchange registration certificates for foreign investment
enterprises. With such foreign exchange registration certificates, which are
granted to foreign investment enterprises, upon fulfilling specified conditions
and which are subject to review and renewal by SAFE on an annual basis, or with
the foreign exchange sales notices from the SAFE. which are obtained on a
transaction-by-transaction basis, FIEs may enter into foreign exchange
transactions at banks authorized to conduct foreign exchange business to obtain
foreign exchange for their needs.

ORGANIZATIONAL STRUCTURE

         As of March 31, 2001, our major shareholder was Far East Consortium,
who owns 75% of our issued and outstanding share capital. The remaining 25% of
our Company was held by other shareholders. As of March 31, 2001, the Company
held a 100% interest in Far East Consortium China Investments Limited, a Hong
Kong corporation, or Far East Investments, which holds a 98.2% interest in
Shanghai Chingchu. As of March 31, 2001, the Company held a 100% interest in Top
Trend, which held a 100% interest in Chingchu (Shanghai) Real Estate Company
Limited, although the Company has entered into an agreement to sell Top Trend,
which sale is to be completed on March 31, 2002. The Company's financial
statements therefore still show the Company owing 100% of Top Trend. See Item 4
- History and Development for more information on the Company's sale of Top
Trend to Wonder China and note 1 to the consolidated financial statements
included elsewhere in this Annual Report.

PROPERTY, PLANTS AND EQUIPMENT

         Our principal executive offices, a 300 square feet office facility, is
currently located at 16/F Far East Consortium Building, 121 Des Voeux Road,
Central, Hong Kong. We are leasing our principal executive offices at an annual
rent of US$ 12,000, or HK$ 93,440. We also lease an office in the United States
which is located at 2255 Glades Road Boca Raton, Florida, 33437.

         We conduct our operations for the California Gardens project in
Shanghai from a 2,000 square feet leased facility adjacent to the project.

ITEM 5.           OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     The following discussion of our financial condition and results of
operations is based upon and should be read in conjunction with our consolidated
financial statements and their related notes included in this Annual Report on
Form 20-F. Note that figures reported in this Annual Report supercede figures
reported in last year's Annual Report on Form 20-F for the year ended March 31,
2000.


                                       43
<PAGE>
OVERVIEW

         We commenced construction of Phase I of the California Gardens project
in June 1997. Home sales in Phase I began in September 1997, and home sales in
Phase II began in July 1998, in each case after obtaining a pre-sales
certificate from the Shanghai House and Land Administration Bureau. Construction
of Phase III with 416 homes was completed in December 1999 and construction of
Phase IVA with 545 homes was completed in March 2001. Construction of Phase IVB
with 160 homes has been scheduled to commence in November 2001 with completion
expected by the end of calendar year 2002. Subsequent phases of California
Gardens include Phase IVC, with 120 homes and Phase V (District 11) with 630
homes and 36 single-story commercial shops nearby the California Gardens
clubhouse facilities, all of which are scheduled for completion by first quarter
2004.

         The following tables set forth information relating to homes delivered
to buyers, the aggregate purchase price under new sales contracts, and sales
backlog for the fiscal years ended March 31, 1999, 2000 and 2001 (HK$ in
thousands):
                                 HOMES DELIVERED

<TABLE>
<CAPTION>
                                                                  FISCAL YEAR ENDED MARCH 31,
                       -----------------------------------------------------------------------------------------------------------
                                   1999                                2000                                  2001
                                   ----                                ----                                  ----

                        NUMBER OF      AGGREGATE           NUMBER OF      AGGREGATE SALES                        AGGREGATE SALES
                          HOMES       SALES PRICE             HOMES            PRICE           NUMBER OF HOMES        PRICE
                       -----------   --------------        -----------    ----------------    -----------------  ---------------
<S>                    <C>           <C>                   <C>            <C>                 <C>                <C>
California Gardens
   Phase I                   365       HK$ 109,171                 --         HK$     232                  2       HK$   1,144
   Phase II                   --                --                744         HK$ 258,477                  5       HK$   2,090
   Phase IIA                  --                --                 --                  --                 41       HK$  25,041
   Phase III                  --                --                391         HK$ 151,129                  2       HK$   1,891
   Phase IVA                  --                --                 --                  --                363       HK$ 137,680
   Phase IVB                  --                --                 --                  --                 --                --
                       ---------      -----------          ----------        ------------       ------------      ------------
   TOTAL                     365       HK$ 109,171              1,135         HK$ 409,838                413       HK$ 167,845


</TABLE>

                               NEW SALES CONTRACTS

<TABLE>
<CAPTION>
                                                                   FISCAL YEAR ENDED MARCH 31,
                          --------------------------------------------------------------------------------------------------------
                                     1999                              2000                                2001
                                     ----                              ----                                 ----

                           NUMBER OF    AGGREGATE SALES      NUMBER OF     AGGREGATE SALES        NUMBER OF       AGGREGATE SALES
                             HOMES           PRICE             HOMES            PRICE                HOMES             PRICE
                          -----------   ---------------      ---------     ---------------        ----------      ---------------
<S>                       <C>           <C>                  <C>           <C>                    <C>             <C>
California Gardens
   Phase I                      21       HK$ 105,129              --        HK$      232                 2          HK$   1,144
   Phase II                    713       HK$ 245,129              31        HK$   12,196                 5          HK$   2,090
   Phase IIA                    --                --              --                  --                41          HK$  25,041
   Phase III                    --                --             391        HK$  151,129                 2          HK$  1,891*
   Phase IVA                    --                --              --                  --               363          HK$ 137,680
   Phase IVB                    --                --              --                  --                --                   --
                          --------       -----------          ------        ------------            ------          -----------
   TOTAL                       734       HK$ 350,258             422        HK$  163,557               413          HK$ 167,845
</TABLE>



                                       44
<PAGE>

*Note: During the year ended March 31, 2001, homes were exchanged in and between
Phases by the home buyers. The amount shown represents the total price
differences of the exchanges together with the new sales.


                                  HOMES BACKLOG
<TABLE>
<CAPTION>

                                                               FISCAL YEAR ENDED MARCH 31,
                       -----------------------------------------------------------------------------------------------------
                                1999                              2000                                   2001
                                ----                              ----                                   ----
                       NUMBER OF    AGGREGATE SALES    NUMBER OF       AGGREGATE SALES         NUMBER OF     AGGREGATE SALES
                         HOMES           PRICE           HOMES              PRICE                HOMES            PRICE
                       ---------    ----------------   ----------      ---------------         ---------     ---------------
<S>                    <C>          <C>                <C>             <C>                     <C>           <C>
California Gardens
   Phase I                  2       HK$          690           --                    --                --              --
   Phase II                 6       HK$        2,217            1        HK$         389               --              --
   Phase IIA               --                     --           12        HK$       7,184               11    HK$     6,705
   Phase III              391       HK$      149,939            7        HK$       3,184                8    HK$     3,762
   Phase IVA              293       HK$      105,129          366        HK$     142,342               35    HK$    13,622
   Phase IVB               --                     --          123        HK$      48,640               18    HK$     7,535
                       ------       ----------------    ---------        ---------------         --------    -------------
   TOTAL                  692       HK$      257,975          509        HK$     201,739               72    HK$    31,624
</TABLE>

         Home buyers pay an average booking fee of HK$ 18,700 per house for the
year ended March 31 2000 and HK$18,400 for the year ended March 31, 2001 and may
cancel their purchase with a full refund at any time before they sign a sales
contract. The sales contract is signed upon the completion of the roof
structure. The booking fee is included in our backlog upon receipt. We estimate
that the average period between the execution of a sales contract for a home and
delivery of that home is approximately 12 to 15 months.

         Under US GAAP, we recognize revenue from the sale of homes on a
percentage of completion basis. This accounting basis differs, however, from the
accounting basis we used when we calculated aggregate sales prices in the tables
above. In those tables, we indicate the full amount of the purchase price of
each home upon the execution and delivery of a sales contract. Revenues
recognized under the percentage of completion basis with respect to the sale of
our homes in the several Phases of the California Gardens project for the
periods indicated are as follows:


<TABLE>
<CAPTION>

                                                   Fiscal year ended March 31,
                                              ----------------------------------
                                                1999         2000          2001
                                              --------     ---------     -------
                                                        (in HK$ millions)
<S>                                           <C>          <C>           <C>
Phase I..............................            35.26          0.23        1.14
Phase II.............................           234.66         22.71        2.09
Phase IIA............................               --            --       25.04
Phase III............................               --        151.13        1.89
Phase IV.............................               --            --      137.69
                                              --------     ---------     -------
Total                                           269.92        174.07      167.85
                                              ========     =========     =======
</TABLE>

                                       45
<PAGE>

         Our backlog decreased 21.80%, or 26.45% based on bookings, to HK$
201.74 million, 509 bookings, during fiscal 2000 from HK$ 257.97 million, 692
bookings, as of March 31, 1999. Our backlog decreased 84.33%, or 85.85% based on
bookings, to HK$ 31.62 million, 72 bookings, during fiscal 2001 from HK$201
million, 509 bookings, as of March 31, 2000.

         We will continue to develop and sell homes at the California Gardens
project and seek to develop and market similar residential communities in other
principal cities in China. Please refer to Item 4 Information on The Company -
Our Business Strategy for the details of our business strategy.

RESULTS OF OPERATIONS

Fiscal year ended March 31, 2001 compared to fiscal year ended March 31, 2000.

         Our revenues from sales for the fiscal year ended March 31, 2001
decreased by 3.57% to HK$167.85 million from HK$ 174.07 million for the fiscal
year ended March 31, 2000. The average selling price of homes delivered
increased 19.18% to HK$ 406,400 during the fiscal year ended March 31, 2001 from
HK$ 341,000 per unit during the fiscal year ended March 31, 2000, as a result of
strategic upward price revision for our homes. The decrease in revenue is due to
the lesser number of homes sold during fiscal 2001.

         Cost of sales for the fiscal year ended March 31, 2001 decreased by
approximately 2.34% to HK$ 137.49 million from HK$ 140.79 million for the fiscal
year ended March 31, 2000. This decrease is primarily due to the related
decrease in home sales revenues. The cost of home sales as a percentage of home
sales for the fiscal year ended March 31, 2001 increased to 81.91% from 80.88%
for the fiscal year ended March 31, 2000 as a result of higher land and
foundation costs in Phase 4. As of March 31, 2001 and 2000, for homes under
construction, the amount of revenue recognized, costs incurred and estimated
costs to completion are as follows:

<TABLE>
<CAPTION>
                                                          March 31,
                                                -------------------------------
                                                     2001              2000
                                                     ----              ----
                                                   (In HK$            (In HK$
                                                   millions)          millions)
<S>                                               <C>                 <C>
Revenue recognized .....................          HK$ 167.85          HK$ 174.07

Cost incurred ..........................          HK$ 137.49          HK$ 140.79

Estimated costs to completion ..........          HK$   0.00          HK$   0.00
</TABLE>


         Our selling, marketing, general and administrative, or SMG&A, expenses
for the fiscal year ended March 31, 2001 increased by approximately 49.77% to
HK$32.32 million from HK$21.58 million for the fiscal year ended March 31, 2000.
This increase is primarily a result of amortization of assets and higher general
and administrative expenses incurred during the year. The significant components
of our SMG&A expenses during these periods were (a) wages and employee benefits,
which represented approximately 18.97% and 12.15% of our total SMG&A expenses in
the fiscal year ended March 31, 2001 and 2000, respectively, (b) travel and
entertainment expenses related to increasing our market exposure and
establishing and enhancing relationships with third parties such as contractors,
design firms and public relations, which represented approximately 14.85% and
14.51% of our total SMG&A expenses in the fiscal year ended March 31, 2001 and
2000, respectively, and (c) advertising expenses, which represented
approximately 14.65% and 12.34% of our total SMG&A expenses in the fiscal year
ended March 31, 2001 and 2000,


                                       46
<PAGE>
respectively. Overall, SMG&A expenses as a percentage of total revenues
increased to 19.12% in the fiscal year ended March 31, 2001 from 12.35% in the
fiscal year ended March 31, 2000, primarily due to economies of scale.

         As a result of the foregoing, loss before income taxes and minority
interest for the fiscal year ended March 31, 2001 was HK$0.8 million compared to
a profit of HK$ 12.37 million for the fiscal year ended March 31, 2000, a
decline in profitability of 106.47%.

Fiscal year ended March 31, 2000 compared to fiscal year ended March 31, 1999.

         The number of homes delivered during our fiscal year ended March 31,
2000 increased 211% to 1,135 from 365 during the fiscal year ended March 31,
1999. However, our revenues from home sales for the fiscal year ended March 31,
2000 decreased 35.51% to HK$ 174.07 million from HK$ 269.92 million for the
fiscal year ended March 31, 1999. We believe our revenues decreased because we
delivered a majority of our homes in fiscal year 2000, but recognized the
revenues for such deliveries during fiscal 1999. The average sales price of
homes delivered increased 14.05% to HK$ 341,000 per unit during the fiscal year
ended March 31, 2000 from HK$ 299,000 per unit during the fiscal year ended
March 31, 1999.

         Cost of home sales for the fiscal year ended March 31, 2000 decreased
approximately 34.51% to HK$ 140.79 million from HK$ 214.99 million for the
fiscal year ended March 31, 1999. This decrease is due primarily to the related
decrease in home sales revenues. The cost of home sales as a percentage of home
sales for the fiscal year ended March 31, 2000 increased to 80.88% from 79.65%
for the fiscal year ended March 31, 1999. This increase in cost of home sales as
a percentage of home sales is due primarily to increased construction costs
caused by unforeseen ground conditions. As of March 31, 2000 and 1999, for homes
under construction, the amount of revenue recognized, costs incurred and
estimated costs to completion are as follows:

<TABLE>
<CAPTION>
                                                            March 31,
                                               ------------------------------------
                                                      2000                1999
                                                      ----                ----
                                               (In HK$ millions)  (In HK$ millions)
<S>                                            <C>                <C>
Revenue recognized .....................          HK$ 174.07          HK$ 269.92

Cost incurred ..........................          HK$ 140.79          HK$ 214.99

Estimated costs to completion ..........          HK$   0.00          HK$  6.98
</TABLE>


         Our SMG&A expenses for the fiscal year ended March 31, 2000 increased
approximately 44.54% to HK$ 21.58 million from HK$ 14.93 million for the fiscal
year ended March 31, 1999. This increase is primarily a result of the sale of a
greater number of homes marketed to buyers in the fiscal year 2000 compared to


                                       47
<PAGE>
fiscal 1999. The significant components of our SMG&A expenses during these
periods were (a) wages and employee benefits, which represented approximately
12.15% and 11.25% of our total SMG&A expenses in the fiscal year ended March 31,
2000 and 1999, respectively, (b) travel and entertainment expenses related to
increasing our market exposure and establishing and enhancing relationships with
third parties such as contractors, design firms and public relations, which
represented approximately 14.51% and 26.44% of our total SMG&A expenses in the
fiscal year ended March 31, 2000 and 1999, respectively, and (c) advertising
expenses, which represented approximately 12.34% and 18.88% of our total SMG&A
expenses in the fiscal year ended March 31, 2000 and 1999, respectively.
Overall, SMG&A expenses as a percentage of total revenues increased to 12.35% in
the fiscal year ended March 31, 2000 from 5.51% in the fiscal year ended March
31, 1999, due primarily to decreased revenues recorded in fiscal 2000, combined
with required expenses associated with the delivery of a larger number of homes
in fiscal 2000 and expenses related to consulting services.

         Income before income taxes and minority interest for the fiscal year
ended March 31, 2000 decreased 69.77% to HK$ 12.37 million from HK$ 40.92
million for the fiscal year ended March 31, 1999.

                                       48
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

General

         Our financing needs depend upon our construction volume, cost of sales
and land activities in regard to future developments. Prior to our IPO in March
2000, our most significant sources of funds were loans from our principal
shareholder, Far East Consortium, of which HK$ 74 million was converted to
Common Shares in April 1999. Additionally, at March 31, 2000 and March 31, 2001,
we had outstanding homebuilding borrowings of approximately HK$ 64.49 million
and HK$ 75.47 million, respectively. We believe that funds generated from
operations and expected borrowing availability under existing and future bank
credit facilities will be sufficient to fund our working capital requirements
during fiscal 2002. At March 31, 2001 we had the following loans outstanding:

<TABLE>
<CAPTION>
                                      AMOUNT OUTSTANDING     ANNUAL INTEREST
            LENDER                        HK$ (MILLIONS)             RATE           MATURITY DATES
---------------------------------     ------------------     ---------------      ------------------
<S>                                   <C>                    <C>                  <C>
  Industrial & Commercial                   11.68                   6.372%               April 2001
    Bank of China
  Bank of Communication                      1.19                   6.138%                 May 2001
  China Merchants Bank                       4.60                   6.340%                July 2001
  Industrial & Commercial Bank of           18.40                   6.435%              August 2001
    China
  Bank of Shanghai                           4.60                   6.435%             October 2001
  Agricultural Bank of China                19.05                   6.435%            November 2001
  Bank of Communication                     10.07                   6.435%             January 2002
  Po Sang Bank                               5.88                  10.500%                July 2002
</TABLE>

Funds borrowed under these facilities were generally used for land acquisition,
start-up operations, and the building of homes, as well as for working capital
and other general corporate purposes. We have no additional fund availability
under these credit facilities. We intend to fund our cash needs through funds
generated from operations, and, if necessary, future equity or debt offerings or
additional bank


                                       49
<PAGE>

borrowings. Further, we intend to seek extensions of the maturity dates of our
existing credit facilities, although no assurance can be given that we will be
able to do so on commercially acceptable terms or at all. If we are unable to
obtain additional financing, our development plans will be materially curtailed
until such time, if any, as we are able to obtain such financing.

DEBT SERVICE

         Scheduled and estimated maturities of our borrowings after the recent
extension of maturity dates of our credit facilities are approximately HK$ 15.95
million during fiscal 2002. We believe that we will fund the maturities of debt
and required expenditures relating to our developments primarily with cash flow
from operations and existing credit lines, new or renewed credit lines or term
loans or through the sale of equity or debt. For further information, see note 8
to our consolidated financial statements included elsewhere in this Annual
Report.

CASH FLOWS

         We experienced a decrease in cash flows during fiscal 2001 of HK$ 70.4
million from fiscal 2000 primarily due to more cash used for operating
activities and less cash provided by financing activities. The decrease was
partially offset by less cash used in investing activities. Cash flows
required by operating activities increased by HK$ 93.14 million in fiscal 2001
from fiscal 2000 primarily due to repayment of advances to related parties. Cash
flows required by investing activities decreased by HK$ 68.04 million in fiscal
2001 from fiscal 2000, primarily due to the decrease in advances made to related
parties. Cash flows from financing activities decreased by HK$ 105.99 million in
fiscal 2001 from fiscal 2000, primarily due to our initial public offering in
2000.

         We experienced an increase in cash flows during fiscal 2000 of HK$
60.64 million from fiscal 1999 due primarily to more cash provided by financing
activities. The increase was partially offset by more cash used in operating
activities and used in investing activities. Cash flows required by operating
activities increased by HK$ 7.28 million in fiscal 2000. Cash flows required by
investing activities increased by HK$ 64.33 million in fiscal 2000 from fiscal
1999, due primarily to higher advances to related parties. Cash flows from
financing activities increased by HK$ 130.06 million in fiscal 2000 from fiscal
1999, due primarily to our initial public offering.

INTEREST RATES

         Our business is sensitive to fluctuations in interest rates. Overall
housing demand is adversely affected by increases in interest rates. If mortgage
interest rates increase significantly, this may negatively impact the ability of
a home buyer to secure adequate financing. Higher interest rates may adversely
affect our revenues, gross margins and net income. According to the State
Statistical Bureau, Monthly Bulletin of Statistics -- China, Beijing, as of
March 31, 1997, 1998, 1999, 2000, China's interbank interest rate was 11.58%,
10.50%, 9.00% and 1.98%, respectively.


                                       50
<PAGE>
INFLATION

         We believe that we, as well as the homebuilding industry in general,
may be adversely affected during periods of high inflation, primarily because of
higher land and construction costs. In addition, higher mortgage interest rates
may significantly affect the affordability of permanent mortgage financing to
prospective purchasers. Inflation also increases interest costs and costs of
labor and materials. We attempt to pass through any increases in costs through
increased home selling prices and, to date, inflation has not had a material
impact on our operating results. However, there is no assurance that inflation
will not have a material adverse impact on our business in the future. According
to the State Statistical Bureau, Monthly Bulletin of Statistics -- China,
Beijing, as of March 31, 1997, 1998, 1999, and 2000, China's inflation rate was
4.00%, 0.70%, -1.80%, and -.2%, respectively.

RECENT TRENDS

         Home sales in the first half of fiscal 2002 are expected to be
approximately the same level as the prior year levels. Although several new
housing development projects competitive with California Gardens have been
developed, due to a continued strength in demand among the local Chinese to move
to better housing commensurate with their growing economic stature, we believe
that the Chinese housing market will continue to show strength in line with the
generally strong economy in China. We expect that home sales in California
Gardens in the fiscal 2002 will either stay at the same levels of second half of
fiscal 2001 or will show an upward trend.

         In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was
issued. The provisions of this statement are required to be applied starting
with fiscal years beginning after December 15, 2001. This statement is required
to be applied at the beginning of an entity's fiscal year and to be applied to
all goodwill and other intangible assets recognized in its financial statements
at that date. The statement requires that goodwill and certain other intangibles
with an indefinite life, as defined in the standard, no longer be amortized.
However, goodwill and such intangibles would have to be assessed each year to
determine whether an impairment loss has occurred. Any impairment recognized
upon adoption would be recorded as a change in accounting principle. Future
impairments would be recorded in income from continuing operations. The
statement provides specific guidance for testing goodwill for impairment. The
Company has not yet determined the impact that SFAS No. 142 will have on its
financial position or results of operations.

ITEM 6.           DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

DIRECTORS

         The following table presents information with respect to our directors
at October 1, 2001.

<TABLE>
<CAPTION>
         NAME                      AGE        POSITION
         ----                      ---        --------
<S>                                <C>        <C>
Trevor John Bedford                66         Director/Chairman of the Board
Charles H. Stein                   72         Director
Jay M. Haft                        65         Director
Denny Chi Hing Chan                38         Director
Margaret Chiu                      43         Director
David Chiu                         47         Director
</TABLE>

         All of the members of our board of directors serve for a period ending
at each annual meeting of shareholders.



                                       51
<PAGE>
EXECUTIVE OFFICERS

         The following sets forth the names, ages and positions of each of our
executive officers:

<TABLE>
<CAPTION>
         NAME                  AGE         POSITION
         ----                  ---         --------
<S>                            <C>         <C>
Ton Voon Lim                   50          Chief Executive Officer
Denny Chi Hing Chan            38          Treasurer
Mark L. Kallan                 55          Senior Vice President - Investor Relations
Peggy Pui Ki Ng                38          Senior Vice President - Marketing and Sales
Gerald M. Breslauer            64          Vice President - Investor Relations and Secretary
Henry Chen                     48          Vice President - Property Advertising
Gao Yang Zhi                   40          Vice President - Engineering
</TABLE>

         Our executive officers are appointed by and serve at the discretion of
our board of directors.

BIOGRAPHICAL INFORMATION

         TREVOR JOHN BEDFORD has served as a director of the Company since
January 2000 and Chairman of the Board since December 2000. He is currently the
Governor of the Royal Grammar School, High Wycombe in the United Kingdom. Mr.
Bedford also currently serves as Chairman and/or director of eight companies
located in the United Kingdom, Europe, the United States, Malaysia and
Australia. These companies include Leisure Development Holdings S.A., Royal Oak
Hotel, Winsford, Industrial Development Holdings Ltd., Aviata Resources Inc.,
Far East Consortium, Northrock Group of Companies, Fortune Oil (OTC bb Foreign),
and Hanson Green. Mr. Bedford is the former Chairman and Chief Executive Officer
of the Hong Kong Land Group which was the second largest public company in Hong
Kong and the largest property group in the world. Mr. Bedford also served as a
member of the board of directors of the Hong Kong bank, Hong Kong Electric
Holdings and the Hong Kong Telephone Company. He also served as the Commandant
of the Royal Hong Kong Auxiliary Police Force, an honorary appointment by the
Governor of Hong Kong. Mr. Bedford was also made a member of the British Empire
in 1972. Mr. Bedford was educated in India from 1939-1946 and later at the
Colchester Royal Grammar School.

         CHARLES H. STEIN has served as Chairman of the Board of directors since
July 1999. During 2001, Mr. Stein stepped down as Chairman of the Board but
continues to serve as one of our directors. From January 1996 until November
1999, Mr. Stein served as Chairman of CCA Companies Inc. (Nasdaq National
Market). From June 1990 until December 1996, Mr. Stein was a private investor
and consultant. From 1994 until June 1996, Mr. Stein served as Special Trade
Representative to Europe for the state of Florida. From 1984 to 1989, Mr. Stein
was the President and Chief Executive Officer of Nighthawk Resources, an oil,
natural gas and gold mining company listed on the Vancouver Stock Exchange. Mr.
Stein was Chairman and CEO of Hardwicke Companies Inc., which employed several
thousand people worldwide, and which built, developed, or operated more than 50
restaurants (Tavern on the Green, Maxwell's Plum and others), health spas, theme
parks in North America, Europe and Asia (including Great Adventure in New
Jersey), and duty-free shops from 1970 to 1984. Mr. Stein served as President
and Chief Executive Officer of Kitchens of Sara Lee, the world's largest bakery
from 1962 to


                                       52
<PAGE>
1967. He was also a director, Member of the Executive Committee, and a Vice
President of Consolidated Foods, the parent company of Sara Lee, and one of the
top 30 companies of the Fortune 500 from 1962 to 1967. Mr. Stein has also served
as director or advisor to a wide range of American and International public
companies including: General Host Corporation (NYSE), Ward Foods (NYSE),
Consolidated Foods Corporation (NYSE), Goldfleld Corp. (AMEX), Tokyu
Corporation, Land Development Division (Tokyo Stock Exchange) and Watney Mann,
Ltd. (London Stock Exchange), a British-based brewer and hotel company. He was
also president of Benihana of Tokyo, an international restaurant chain from 1973
to 1978. Originally, Mr. Stein pioneered the concept of fresh orange juice in
milk-type cartons when he developed unique and innovative packaging and
presentation of other chilled and frozen citrus products. He started his
business in Florida and then sold it to Kraft Foods. Subsequently, he served for
nine years as a division manager with several thousand employees, and was one of
five senior executives reporting to the CEO of Kraft from 1953 to 1962. Mr.
Stein has served as a Governor of the American Bakers Association, a member of
the Grocery Manufacturers Association, and a past member of the Young
Presidents' Organization (Y.P.O.).

         JAY M. HAFT has served as a director of the Company since August 1999.
He has served as a Managing General Partner of Gen Am "1" Venture fund, an
international venture capital fund since 1998. He has served as Chairman of the
Board of NCT Group, Inc, and as Vice-Chairman of Decap Group, Inc. Mr. Haft has
been of counsel to Parker Duryee Rosoff & Haft, in New York since 1994. He was
previously a senior corporate partner of that firm from 1989 to 1994, and before
that, a founding partner of Wofsey, Certilman, Haft, et al. from 1966 to 1989.
He is a strategic consultant for growth stage companies. He is active in
international corporate finance, mergers and acquisitions, as well as in the
representation of emerging growth companies. He has actively participated in
strategic planning for many high-tech companies, leading medical technology
companies and technical product service and marketing companies. Mr. Haft is
also a director of numerous public and private corporations, including Robotic
Vision Systems, Inc. (Nasdaq National Market), NCT Group, Inc. (OTC), Thrift
Management, Inc. (OTC), Oryx Technologies, Corp. (Nasdaq Small Cap), Encore
Medical Corporation (Nasdaq National Market), PC Service Source, Inc. (Nasdaq
National Market), and Dusa Pharmaceuticals Inc. (Nasdaq National Market). He is
a graduate of Yale College and Yale Law School. He is currently treasurer of the
Miami City Ballet, a trustee of Florida International University and a former
member of the Florida State Commission for Government Accountability to the
People.

         MARGARET CHIU has served as a director of the Company since July 1999.
She has served as a director of Far East Holdings International Limited since
December, 1995. She has also served as a director of Far East Hotel and
Entertainment Ltd. since April 1989. For the past five years, Ms. Chiu has
served as a management consultant for the Sung Dynasty City theme park in Hong
Kong and the Tang Dynasty theme park in Singapore. Ms. Chiu holds a L.L.B.
Degree from the University of Buckingham, U.K. and has extensive experience in
the entertainment, television and motion picture business in Hong Kong, China
and overseas.

         DAVID CHIU has served as a director of the Company since July 2001. Mr.
Chiu also serves as deputy chairman of Far East Consortium, director of Far East
Technology International Limited and non-executive director of Far East Hotels
and Entertainment Limited. Mr. Chiu is also the vice-chairman and substantial
shareholder of Malaysia Land Holdings Berhad, Malaysia and chairman of both Mori
Denko Mfg. Co. Ltd and Tokai Kanko Ltd., both of which are listed on the Tokyo
stock exchange. Mr. Chiu is a member of the Guangxi Chinese People's Political
and Consultative Conference in China and honorary


                                       53
<PAGE>
chairman of the Food, Biscuit and Beverage Association in Hong Kong. In July
1997, Mr. Chiu was conferred an honorary award with the title "Dato" by the King
of Malaysia. Mr. Chiu received a double degree of Bachelor of Science in
Business Administration and Economics from Sophia University, Japan. Mr. Chiu is
the brother of one of our directors, Margaret Chiu.

         DENNY CHI HING CHAN has served as a director of the Company since July
1999. He has served as the Group Chief Accountant for Far East Consortium since
October 1990. He is responsible for the Group's financial and accounting
functions. He has extensive experience in accounting and auditing of Hong Kong
listed companies.

         TON VOON LIM has served as Chief Executive Officer of the Company since
June 2001. Mr. Lim has also served as General Manager of Shanghai Ching Chu
since June 2001. From August 1993 until June 2001, Mr. Lim was executive
director of numerous subsidiary companies of Kemayan Corporation Berhad, a
publicly-listed company in Malaysia. Mr. Lim was then responsible for the
development and construction of large residential projects, condominium and
commercial buildings such as hotels and shopping malls. Mr. Lim is a registered
professional civil engineer in Malaysia and a chartered engineer in the United
Kingdom.

         MARK L. KALLAN has served as Senior Vice-President - Investor Relations
of the Company since August 1999. He served as Senior Vice President of CCA
Companies Incorporated (Nasdaq National Market) from 1996 to 1998 and was
previously Chairman and Chief Executive Officer of Helbros Watches Inc., from
1982 to 1992, a major American wristwatch manufacturer and distributor. Mr.
Kallan was a self employed marketing consultant between September 1994 and
January 1996. During 1996, Mr. Kallan served as a director of CCA Companies
Incorporated. Before that, Mr. Kallan held Senior Account Management positions
at several of America's leading advertising agencies, including divisions of
William Esty, Young & Rubicam, and N.W. Ayer from 1972 to 1984. Mr. Kallan
served as Executive Vice President of Professional Technical Symposia, Inc., and
Project Marketing Corporation, an American marketing consulting organization
from 1969 to 1972. He has served as consultant and advisor to emerging companies
in the United States, United Kingdom, and Europe. He was responsible for a wide
variety of advertising accounts which included American Telephone & Telegraph
(AT&T), MGM, Polydor, Philips, and JVC, as well as a variety of consumer and
specialty products, hotels and convention centers, and travel trade
publications.

         PEGGY PUI KI NG has served as Senior Vice-President - Marketing and
Sales of the Company since March 2001. Prior to this appointment, Ms. Ng was a
senior manager for Far East Consortium. Ms. Ng has been involved in management
and operations of amusement parks and residential properties for the past 10
years. From 1983 to 1997, Ms. Ng was responsible for operations of Sung Dynasty
Village, a tourist attraction in Hong Kong.

         GERALD M. BRESLAUER has served as Vice President - Investor Relations
since April 2000 and as our Company Secretary since December 2000. From January
1998 until March 2000, Mr. Breslauer was District Manager of Health Watch
Corporation (OTC). From August 1996 until December 1998 he was Vice President
and Secretary of CCA Companies Incorporated (Nasdaq National Market). From 1991
until 1996 Mr. Breslauer was a financial advisor with the Equitable Assurance
Company. From 1988 to 1991 he was President of Sterling Financial, Inc., a
financial consulting company. Mr. Breslauer was Executive Vice President of
Mayfair Affiliates, Ltd. a developer, manufacturer and marketer of innovative


                                       54
<PAGE>
new products for the consumer, from 1985 until 1988. From 1969 until 1984 he was
Executive Vice President and Secretary of Hardwicke Companies Incorporated
(Nasdaq National Market), which built, developed, or operated more than 50
restaurants (Tavern on the Green, Maxwell's Plum, Samurai Japanese Steak Houses
and others), health spas, theme parks in North America, Europe and Asia
(including Great Adventure in New Jersey), and duty free shops. Mr. Breslauer is
an attorney, and graduated from New York University and Brooklyn Law School.

         HENRY CHEN has served as Vice-President - Property Advertising of the
Company since February 1999. From 1997 until joining the Company, he served as
Deputy General Manager of Shanghai Chingchu. From 1995 to 1997, he served as
General Manager of Asian-Australian Culture and Technology International
Promotions. He served as Deputy Chief Editor of the Australian Chinese Herald
from 1991 to 1994. Mr. Chen holds a Master of Arts degree from the Australian
School of Film, Television & Radio.

         GAO YANG ZHI has served as Vice-President-Engineering of the Company
since February 1999. From June 1998 until joining the Company, he served as Vice
President - Engineering of Shanghai Chingchu. Before joining New China Homes, he
was Vice President of Shenzhen University Design Institute from March 1995 to
March 1998. Between August 1994 and March 1995, Mr. Gao was a design engineer
with the Shenzhen University Design Institute. He is a Chinese national and is
an honor graduate of Tung Zhi University, Shanghai. Mr. Gao is in charge of the
day to day operations of the engineering department.

COMMITTEES OF THE BOARD OF DIRECTORS

         The board of directors has established two committees--the Audit
Committee and the Compensation Committee. These committees have the
responsibilities and authority described below.

         Audit Committee. On June 13, 2000, our board of directors adopted the
New China Homes, Ltd. Audit Committee Charter. The board of directors adopted
this plan pursuant to the Nasdaq National Market listing rules requiring each
listed company to adopt a formal audit committee charter specifying the scope of
a company's audit committee and the means by which its members are to carry out
its responsibilities. Pursuant to the New China Homes Ltd. Audit Committee
Charter, our audit committee has the following purpose and responsibilities:

-        review the Company's auditing, accounting and financial processes;

-        monitor the Company's internal controls regarding accounting, finance,
         legal compliance, and ethics;

-        review and evaluate the Company's outside auditors and internal
         auditing function;

-        reviewing with management and the independent public accountants the
         Company's financial statements and exercising general oversight of our
         financial reporting process; and

-        provide an open avenue of communication among the outside auditors,
         financial and senior management, the internal auditing function, and
         the board of directors.


                                       55
<PAGE>

     The members of our audit committee are Mr. Haft, Ms. Chiu and Mr. Bedford.

                  Compensation Committee. Our compensation committee has the
                  following responsibilities:

-        establishing the salary rates of our officers and employees;

-        examining periodically our compensation structure; and

-        supervising our welfare and pension plans and compensation plans.

         The members of our Compensation Committee are Messrs. Stein, Haft, Chan
and Ms. Chiu.

DIRECTOR COMPENSATION

         Each outside director is paid an annual fee of US$36,000 and reimbursed
for travel expenses incurred for each board of director meeting attended.

         At March 31, 2001, our non-executive directors held an aggregate of
100,000 options, granted outside the Company's 1999 Stock Option and Restricted
Stock Purchase Plan, or the Option Plan, in respect of our Common Shares at an
average exercise price of US$ 7.50 per share.

         No options were granted during fiscal 2001.

DIRECTORS' AND OFFICERS' LIABILITY INSURANCE

         We have obtained directors' and officers' liability insurance on behalf
of our directors and officers who are residents of the United States.

EXECUTIVE COMPENSATION

         The aggregate amount of compensation paid by us to all our executive
officers was HK$ 2.64 million, or US$ 339,000, for the fiscal year ended March
31, 2001.

EMPLOYMENT AGREEMENTS

         None of our officers or directors is under employment agreement.

MANAGEMENT SERVICE AGREEMENTS

         Since 1998, Messrs. Stein, Haft and Kallan and Silver Pacific have been
serving us as strategic advisors. On April 2, 1999, we formalized these
relationships by entering into three-year management service agreements with
Messrs. Stein, Haft and Kallan and Silver Pacific. Under these agreements,
Messrs. Stein, Haft and Kallan and Silver Pacific have agreed to provide advice
and assistance concerning our business strategy and corporate activities. Among
the services that these advisors will provide are the following:


                                       56
<PAGE>

-        developing and evaluating potential acquisitions and other business
         opportunities;

-        providing financial, marketing and business advice on particular land
         development and home building projects;

-        working with our management to monitor our financial affairs and
         initiating and maintaining relationships with potential financing
         sources including commercial banks and investment banking firms;

-        providing advice in all areas involving the execution of our business
         plan; and

-        coordinating our relationships with our accountants, attorneys and
         other professionals.

         In anticipation of the continued relationship that we will have with
Messrs. Stein, Haft and Kallan, on April 2, 1999 we paid US$ 175,000 to Mr.
Stein, US$ 200,000 to Mr. Haft, US$ 75,000 to Mr. Kallan and US$ 400,000 to
Silver Pacific. These payments were used to purchase an aggregate of 850 of our
Common Shares at US$ 1,000 per share. As a result of the 999-for-one stock split
effected in August 1999, Mr. Stein received an additional 174,825 Common Shares,
Mr. Haft received an additional 199,800 Common Shares, Mr. Kallan received an
additional 74,925 Common Shares and Silver Pacific received an additional
399,600 Common Shares. Messrs. Stein, Haft and Kallan and Silver Pacific, as
well as our other pre-initial public offering shareholder, have agreed with us
that 25% of their Common Shares will be cancelled if our net income is less than
US$ 10 million in the one-year period commencing on the first day of the month
following the effective date of the Company's IPO, March 8, 2000, and 25% of
their Common Shares will be canceled if our net income is less than US$ 20
million in the following one-year period. Because we incurred a net loss as of
March 31, 2001, the first year following our IPO, 25% of Messrs. Stein, Haft and
Kallan, Silver Pacific and Far East Consortium, amounting to 2.6 million Common
Shares, were cancelled as of April 1, 2001.

1999 STOCK OPTION PLAN

         On August 10, 1999, our board of directors and shareholders adopted the
Option Plan. As of September 30, 2001, the Company has authorized for granting
600,000 options to purchase our Common Shares under the Option Plan. The purpose
of the Option Plan is to attract and retain qualified personnel, to provide
additional incentives to our employees, officers and advisors and to promote the
success of our business. The Option Plan is administered by the Compensation
Committee of the board of directors. The Compensation Committee has complete
discretion to determine which eligible individuals are to receive option grants,
the number of shares subject to each such grant, the status of any granted
option as either an incentive stock option or a non-statutory option, the
vesting schedule to be in effect for the option grant and the maximum term for
which any granted option is to remain outstanding.

         Each option granted under the Option Plan has a maximum term of ten
years, subject to earlier termination following the optionee's cessation of
service with New China Homes. Options granted under the Option Plan may be
exercised only for fully vested Common Shares. The exercise price of incentive
stock options and non-statutory stock option granted under the Option Plan must
be at least 100% and 85% of the fair market value of the stock subject to the
option on the date of grant, respectively (or 110% with respect to incentive
stock options granted to holders of more than 10% of the voting power of the


                                       57
<PAGE>
Company's outstanding Common Shares). The board of directors or the Compensation
Committee has the authority to determine the fair market value of the shares.
The purchase price is payable immediately upon the exercise of the option. Such
payment may be made in cash, in outstanding Common Shares held by the
participant, through a promissory note payable in installments over a period of
years or any combination of the foregoing. The maximum number of Common Shares
subject to the Options granted to a single person shall not exceed 25% of the
total number of Common Shares subject to the Options granted under the Option
Plan. Each Option, other than a restricted stock award, shall not be
transferable, otherwise than by will or the laws of descent and distribution.
Each Option, other than a restricted stock award, during lifetime shall only be
exercisable by the grantee. If a grantee of an Option, other than a restricted
stock award, leaves the service of the Company or any of its subsidiaries for
any reason other than for cause, death, or disability, the unexercised portion
of the Option, other than a restricted stock award, may only be exercised within
three months after the date on which the grantee ceased to be so employed, and
only to the extent that the grantee could have otherwise exercised such Option,
other than a restricted stock award, as of the date on which he ceased to be so
employed. If a grantee of an Option, other than a restricted stock award, ceases
to be an employee of the Company or any of its subsidiaries by reason of death,
the unexercised portion of the Option may only be exercised within one year
after the date of the grantee's death, and only to the extent that the grantee
could have otherwise exercised the Option, other than a restricted stock award,
at the time of his death. In such case, the Option, other than a restricted
stock award, may be exercised by the executor or administrator or by any person
or persons who shall have acquired the Option, other than a restricted stock
award, from the grantee's estate. If a grantee of an Option, other than a
restricted stock award, ceases to be an employee of the Company or any of its
subsidiaries as a result of termination of employment for cause or if a grantee
terminates his employment for any reason other than as a result of his death or
disability, the unexercised portion of his Option, other than a restricted stock
award, may only be exercised within one month after the date on which the
grantee ceased to be so employed, and only to the extent that the grantee could
have otherwise exercised such Option, other than a restricted stock award, as of
the date which he ceased to be so employed. If a grantee of an Option, other
than a restricted stock award, ceases to be an employee of the Company or any of
its subsidiaries by reason of a disability, the unexercised portion of his
Option, other than a restricted stock award, may only be exercised within one
year after the date on which the grantee ceased to be so employed, and only to
the extent that the grantee could have otherwise exercised such Option, other
than a restricted stock award, as of the date which he ceased to be so employed.

         The Company's board of directors shall make adjustments to the number
of Common Shares ,and the Option price per share, subject to the unexercised
portion of any outstanding Option, to the nearest possible full share, held by
the grantees in the case that the Company's outstanding Common Shares are
increased, decreased or exchanged for a different number or kind of shares or
other securities through a reorganization, merger or consolidation.

         If there is any capital reorganization or reclassification of the
capital stock of the Company or consolidation or merger of the Company with
another entity, or sale of substantially all of the Company's assets, and the
holders of the Common Shares become entitled to receive stock, securities or
assets in exchange for the Common Shares, such shares may be issued or payable
with respect to or in exchange for a number of outstanding shares of the common
stock equal to the number of Common Shares immediately theretofore so receivable
had such reorganization, reclassification, merger or sale not taken place.


                                       58
<PAGE>

EMPLOYEES

         As of March 31, 2001, we had 83 full-time employees, including 29
employees in sales and marketing, 27 employees in engineering, estimating and
construction management, 9 in finance and accounting and 18 in general
administration. In addition, we employed two full-time employees in the United
States to handle investor relations. As of March 31, 2000, we had 78 full-time
employees, including 21 employees in sales and marketing, 25 employees in
engineering, estimating and construction management, 10 in finance and
accounting and 15 in general administration. In addition, we employed two
full-time employees in the United States to handle investor relations. We have
not experienced any labor-related work stoppages and we consider the relations
with our employees to be good. We are not subject to any collective bargaining
agreements.

SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of the date of this Annual Report,
information which is known by us with respect to the ownership of Common Shares
as to:

-        all persons who are expected to be the beneficial owners of 5% or more
         of our outstanding Common Shares;

-        each director and each person who has consented to be named as a
         director, or the Named Directors;

-        each Named Executive Officer; and

-        all executive officers and directors of New China Homes as a group.

         No beneficial owners of the Company own any shares of Far East
Consortium. However, Deacon Te Ken Chiu and David Chiu, one of our directors and
brother of one of our directors, Margaret Chiu, each own more than 10% of Far
East Consortium.

         Unless otherwise indicated, each of the following persons may be deemed
to have sole voting and dispositive power with respect to such shares.
Information set forth in the table with respect to beneficial ownership of the
Common Shares has been provided to New China Homes by such holders.


<TABLE>
<CAPTION>
                                                               Amount and
                                                               Nature of
                                                               Beneficial         Percent of
                                                              Ownership of        Outstanding
                                                              Common Shares      Common Shares
                                                              -------------      --------------
<S>                                                           <C>                <C>
Far East Consortium International Limited
16/F Far East Consortium Building,
121 Des Voeux Road, Central
Hong Kong ..............................................       7,162,500                70.9%
Charles H. Stein Trust
5345 Pine Tree Drive
Miami Beach, FL 33140 ..................................         131,250                1.30
Jay M. Haft
1001 Brickell Bay Avenue
9th Floor
Miami, FL 33131 ........................................         150,000                1.48
Mark L. Kallan
19999 Backnine Drive
Boca Raton, FL 33498 ...................................          56,250                0.56

All executive officers and directors a group (3 persons)         337,500                3.34%

</TABLE>

---------
  * Beneficially owns less than 1% of the outstanding Common Shares.


                                       59
<PAGE>
ITEM 7.           MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS


         We are aware of only one major shareholder, a shareholder owning in
excess of 5% of our Common Shares, Far East Consortium. As of October 1, 2000,
Far East Consortium owned 7,162,500 Common Shares or approximately 70.9% of the
issued and outstanding Common Shares. As a result of its Common Share ownership,
we consider Far East Consortium to be our controlling shareholder.

         As of October 1, 2001, we had 1513 shareholders of record and 2,750,000
of our Common Shares and 2,300,000 of our Warrants were held in the United
States.

TRANSACTIONS INVOLVING OFFICERS, DIRECTORS AND PRINCIPAL SHAREHOLDERS

         Messrs. Stein and Haft, who are directors, Mr. Kallan, who is an
executive officer, and Silver Pacific, which is a principal shareholder of New
China Homes, have been rendering management services to us since 1998. On April
2, 1999, Messrs. Stein, Haft and Kallan and Silver Pacific entered into
management service agreements with us in which they agreed to continue to
provide management services to us until April 2, 2002. See Item 6 Directors,
Senior Management and Employees -- Management Service Agreements. Under these
agreements, Messrs. Stein, Haft and Kallan and Silver Pacific were each required
to use the cash received for services to purchase an aggregate total of 850
Common Shares at a price of US$1,000 per share, which shares were also issued on
April 2, 1999,

         On April 2, 1999, the Company issued 9,549 Common Shares at US$ 1,000
per share to Far East Consortium, the Company's major shareholder, for cash in
the amount of US$ 9,549,000, which amount was used to offset a debt payable to
Far East Consortium, which amounted to US$ 9,795,997 as at March 31, 1999.

         Far East Consortium, our principal shareholder, has entered into a
non-competition agreement with us under which it agreed not to compete with us
in the residential property development business in China, excluding Hong Kong.
In addition, prior to our IPO we were financed by advances from Far East
Consortium. As of March 31, 1999, the aggregate amount of these advances was US$
9,795,997. In April 1999, we issued 9,549 Common Shares to Far East Consortium
in exchange for the reduction of US$ 9,549,000 of indebtedness. As of March 31,
2000, the aggregate amount of advances from Far East Consortium was reduced to
US$ 2,000,000. As a result of a 999-for-one stock split effected in August


                                       60
<PAGE>
1999, we issued an additional 9,540,450 shares to Far East Consortium. See notes
1 and 9 to our audited consolidated financial statements.

         On March 30, 2001, the Company entered an agreement with Wonder China,
a wholly-owned subsidiary of Far East Consortium, the Company's major
shareholder, disposing of its 100% interest in Top Trend. Under the terms of
this agreement, the Company will sell to Wonder China (a) the entire issued
share capital of Top Trend and (b) a debt in the approximate amount of
HK$18,414,717 advanced as a shareholder loan by the Company to Top Trend, in
exchange for (y) HK$1,280,000 in cash paid as of March 30, 2001 and (z) a
HK$126,720,000 promissory note of Wonder China. The HK$ 126,720,000 Promissory
Note was due originally on September 30, 2001. Due to a recent change in Chinese
law, however, a warranty contained in the agreement regarding the commercial use
of land held indirectly by Top Trend has yet to be fulfilled and the parties
have therefore agreed to extend the due date of the Promissory Note by six
months to March 31, 2002. The parties have also delayed completion of the
transaction until March 31, 2002.

         In addition, the Company has a number of amounts due and from related
companies representing unsecured advances which are interest free and repayable
on demand. For more information, see note 9 to our audited consolidated
financial statements found elsewhere in this Annual Report.

         ITEM 8.           FINANCIAL INFORMATION.

FINANCIAL STATEMENTS

         See Item 18 -- Financial Statements for our audited consolidated
financial statements filed as part of this Annual Report.

LEGAL PROCEEDINGS

         In July 2001, Shanghai Chingchu was sued by a contractor working for us
to develop Phase III of the California Gardens project. The contractor alleges
that the Shanghai Chingchu owes it RMB 15,063,068 for contracting work performed
for Phase III. Shanghai Chingchu has counter-sued the contractor in connection
with the contractor's poor work quality, road and sewer pipe work, which failed
to comply with certain specifications and delays in work. Both the contractor's
suit and Shanghai Chingchu's counter-suit are pending in a Chinese court, which
is expected to be heard by the end of calendar year 2001, at the earliest.
Pending a decision, the Chinese court has ordered that certain assets be frozen,
including 43 units in the California Gardens project as well as approximately
RMB 1.79 million in cash.

         Other than as disclosed here, we are not a party to any material legal
proceedings, nor are there any material legal proceedings pending with respect
to any of our properties. We also are not aware of any legal proceedings
contemplated by any governmental authorities involving either us or our
property. None of our directors, officers or affiliates is an adverse party in
any legal proceedings involving New China Homes or its subsidiaries, or has an
interest in any such proceeding which is adverse to New China Homes or its
subsidiaries.


                                       61
<PAGE>
DIVIDEND POLICY

         We have never declared or paid any cash dividends on our Common Shares.
We do not anticipate paying any cash dividends in the foreseeable future. We
currently intend to retain future earnings, if any, to finance operations and
the expansion of our business. Any future determination to pay cash dividends
will be at the discretion of the board of directors and will be dependent upon
our financial condition, operating results, capital requirements and such other
factors as the board of directors deems relevant.

SIGNIFICANT CHANGES

         We have not experienced any significant changes since the date of our
audited consolidated financial statements included in this Annual Report.


ITEM 9            THE OFFER AND LISTING

         Our Common Shares and our Warrants are listed on Nasdaq Small Cap under
the symbols NEWC and NEWCW, respectively. Trading in our Common Shares and
Warrants commenced on the Nasdaq National Market on March 10, 2000 and moved to
the Nasdaq Small Cap in August 2001.

         For the fiscal year ended March 31, 2001, the high and low price of our
Common Shares on the Nasdaq National Market has ranged from US $8.75 to US$
1.00. For the fiscal year ended March 31, 2000, the high and low price of our
Warrants on the Nasdaq National Market has ranged from US$3.75 to US$ 0.125.

         The following table sets forth, for the quarter indicated, the high and
low sales prices of our Common Shares and our Warrants on the Nasdaq National
Market and the Nasdaq Small Cap Market as of August 2001.

<TABLE>
<CAPTION>
                                                           SALES PRICE
                                        ---------------------------------------------------
                                            COMMON SHARES                   WARRANTS
                                        --------------------         ----------------------
                                        HIGH            LOW           HIGH            LOW
                                        ----           -----         ------          ------
<S>                                     <C>            <C>           <C>             <C>
Q1 2001 (Apr May June 2000)              8.75           3.00           3.75          0.625
Q2 2001 (July Aug Sept 2000)            5.313          2.188           1.75           0.75
Q3 2001 (Oct Nov Dec 2000)              2.438           1.00          0.906          0.125
Q4 2001 (Jan Feb Mar 2001)              2.375          1.125          0.844          0.313
Q1 2002 (Apr, May June 2001             1.813           1.03           0.49           0.23
Q2 2002 (July, Aug, Sept 2001)           1.69           0.73           0.47           0.11
</TABLE>


                                       62
<PAGE>

         The following table sets forth, for the month indicated, the high and
low sales prices of our Common Shares and our Warrants on the Nasdaq National
Market and the Nasdaq Small Cap Market as of August 2001.

<TABLE>
<CAPTION>
                                      SALES PRICE
                    ---------------------------------------------------
                         COMMON SHARES                   WARRANTS
                    ----------------------        ---------------------
                     HIGH            LOW           HIGH           LOW
                    -------         ------        ------          ----
<S>                 <C>             <C>           <C>             <C>
April 2001           1.813           1.03          0.49           0.23
May 2001              1.49           1.04          0.36           0.23
June 2001             1.57           1.12          0.38           0.26
July 2001             1.69           1.18          0.47           0.20
August 2001           1.45           0.99          0.37           0.19
Sept 2001             1.16           0.73         0.275           0.11
</TABLE>

ITEM 10.          ADDITIONAL INFORMATION

MEMORANDUM AND ARTICLES OF ASSOCIATION

         The following presents a description of the terms and provisions of our
Restated Memorandum and Articles of Association.

         GENERAL

         We were incorporated in the Cayman Islands on January 6, 1999 and
operate under the Cayman Islands Companies Law (2000 Revision).

         Our corporate objectives and purpose are unrestricted.

         DIRECTORS

         There are no membership qualifications for directors unless so fixed by
the Company in a general meeting. Further, there are no share ownership
qualifications for directors.

         A director who is in any way, whether directly or indirectly,
interested in a contract or proposed contract with the Company shall declare the
nature of his interest at a meeting of the directors. A general notice given to
the directors by any director to the effect that he is a shareholder of any
specified company or firm and is to be regarded as interested in any contract
which may thereafter be made with that company or firm shall be deemed a
sufficient declaration of interest in regard to any contract so made. A director
may vote in respect of any contract or proposed contract or arrangement
notwithstanding that he may be interested therein and if he does so, his vote
shall be counted and he may be counted in the quorum at any meeting of the
directors at which any such contract or proposed contract or arrangement shall
come before the meeting for consideration.


                                       63
<PAGE>
         The directors may exercise all the powers of the Company to borrow
money and to mortgage or change its undertaking, property and uncalled capital
or any part thereof, to issue debentures, debenture stock and other securities
whenever money is borrowed or as security for any debt, liability, or obligation
of the Company or of any third party.

         RIGHTS, PREFERENCES AND RESTRICTIONS OF EACH CLASS OF SHARES

         All Common Shares have one vote on all matters to be voted on by the
shareholders. Directors do not stand for reelection at staggered intervals and
cumulative voting is not required. Subject to preferences that may be applicable
to any issued preferred share, the holders of Common Shares are entitled to
receive ratably such dividend, if any, as may be declared from time to time by
the directors out of funds legally available under the Cayman Island Companies
Law (1998 Revision). There is no provision for the lapse of any dividend
entitlement. Holders of Common Shares have no pre-emptive, conversion or other
registration or subscription rights. There are no redemption or sinking fund
provisions available to Common Shares. In the event of liquidation, dissolution
or winding up of the Company, the holders of Common Shares are entitled to share
ratably in all assets remaining after payment of liabilities, subject to the
prior distribution right of Preferred Shares, if any.

         The board has authority, without further action by the shareholders, to
issue preferred Shares in one or more series and to fix the designations,
rights, preferences, privileges, and relative participating, optional or special
rights and the qualifications, limitations or restrictions thereof, including
dividend rights, conversion rights, voting rights, terms of redemption and
liquidation preferences, any or all of which may be greater than the rights
associated with Common Shares. The board may not issue preferred shares for
three years after the effective date of the offering without the consent of the
underwriter.

         CHANGE IN THE RIGHTS OF SHAREHOLDERS

         The rights attached to any class, unless otherwise provided by the
terms of issue of the shares of that class, may be varied with the consent in
writing of the holders of two-thirds of the issued shares of that class, or with
the sanction of a special resolution passed at a separate general meeting of the
holders of the shares of the class.

         GENERAL MEETINGS OF SHAREHOLDERS

         The directors may, whenever they think fit, convene a general meeting
of the Company. General meetings may also be convened upon the written request
of Shareholders holding a majority of the outstanding Common Shares generally
entitled to vote. General meetings shall also be convened on the written request
of any two of our Shareholders deposited at our Registered Office specifying the
objects of the meeting and signed by the requisitionists; and if the directors
do not within twenty-one days from the date of deposit of the requisition
proceed duly to convene the meeting, the requisitionists themselves may convene
the general meeting in the same manner, as nearly as possible, as that in which
meetings may be convened by the directors, and all reasonable expenses incurred
by the requisitionists as a result of the failure of the directors shall be
reimbursed to them by the Company.


                                       64
<PAGE>
         LIMITATIONS ON THE RIGHT TO OWN SHARES

         There are no limitations on the right to own our shares.

         LIMITATIONS ON TRANSFER OF SHARES

         There are no provisions in our Memorandum or Articles of Association,
that would have an effect of delaying, deferring or preventing a change in
control and that would operate only with respect to a merger, acquisition or
corporate restructuring involving. Please see Risk Factors - Our Board of
Directors has the authority to issued preferred shares having rights and
preferences which are more favorable than our Common Shares.

         DISCLOSURE OF SHAREHOLDER OWNERSHIP

         There are no provisions within our charter documents governing the
ownership threshold above which shareholder ownership must be disclosed.

         CHANGES IN CAPITAL

         We may from time to time by Ordinary Resolution increase the share
capital by such sum, to be divided into shares of such amount, as the resolution
shall prescribe. The new shares shall be subject to the same provisions with
reference to the payment of calls, lien, transfer, transmission, forfeiture and
otherwise as the shares in the original share capital. The Company may by
Ordinary Resolution:

         (a)      consolidate and divide all or any of its share capital into
                  shares of larger amount than its existing shares;

         (b)      sub-divide its existing shares, or any of them into shares of
                  smaller amount than is fixed by the Memorandum of Association,
                  subject nevertheless to the provisions of Section 12 of the
                  Cayman Islands Companies Law (2000 Revision);

         (c)      cancel any shares which, at the date of the passing of the
                  resolution, have not been taken or agreed to be taken by any
                  person.

     The Company may by Special Resolution reduce its share capital and any
capital redemption reserve in any manner authorized by law.

DIFFERENCES IN CORPORATE LAW

         The Cayman Islands Companies Law (2000 Revision) is modeled after that
of England but does not follow recent United Kingdom statutory enactments and
differs from laws applicable to United States corporations and their
shareholders. Set forth below is a summary of the significant differences
between the provisions of the Companies Law (2000 Revision) applicable to New
China Homes and the laws applicable to companies incorporated in the United
States and their shareholders.

         Mergers and Similar Arrangements. Cayman Islands law does not provide
for mergers as that expression is understood under United States corporate law.
However, there are statutory provisions that facilitate the reconstruction and
amalgamation of companies, provided that the arrangement in question is


                                       65
<PAGE>
approved by a majority in number of each class of shareholders and creditors
with whom the arrangement is to be made, and who must in addition represent
three-fourths in value of each such class of shareholders or creditors, as the
case may be, that are present and voting either in person or by proxy at a
meeting, or meetings convened for that purpose. The convening of the meetings
and subsequently the arrangement must be sanctioned by the Grand Court of the
Cayman Islands. While a dissenting shareholder would have the right to express
to the court the view that the transaction ought not to be approved, the court
can be expected to approve the arrangement if it satisfies itself that:

-        the statutory provisions as to majority vote have been complied with;

-        the shareholders have been fairly represented at the meeting in
         question;

-        the arrangement is such as a businessman would reasonably approve; and

-        the arrangement is not one that would more properly be sanctioned under
         some other provision of the Companies Law (2000 Revision).

         When a take-over offer is made and accepted by holders of 90% of the
shares within four months, the offeror may, within a two month period, require
the holders of the remaining shares to transfer such shares on the terms of the
offer. An objection can be made to the Grand Court of the Cayman Islands but
this is unlikely to succeed unless there is evidence of fraud, bad faith or
collusion.

         If the arrangement and reconstruction is thus approved, the dissenting
shareholder would have no rights comparable to appraisal rights, which would
otherwise ordinarily be available to dissenting shareholders of United States
corporations, providing rights to receive payment in cash for the judicially
determined value of the shares.

         Shareholders' Suits. Our Cayman Island's counsel is not aware of any
reported class action or derivative action having been brought in a Cayman
Islands court. In principle, the Company itself will normally be the proper
plaintiff and a derivative action may not be brought by a minority shareholder.
However, based on English authorities, which would in all likelihood be of
persuasive authority in the Cayman Islands, exceptions to the foregoing
principle apply in circumstances in which:

-        a company is acting or proposing to act illegally or ultra vires;

-        the act complained of, although not ultra vires, could be effected only
         if authorized by more than a simple majority vote;

-        the individual rights of the plaintiff shareholder have been infringed
         or are about to be infringed; or

-        those who control the company are perpetrating a fraud on the minority.

         Issues Requiring Ordinary Resolutions. The following actions in respect
of exempted companies incorporated under the Companies Law are required by the
Companies Law to be passed by ordinary resolution, simple majority:

-        the alteration of conditions of the memorandum of association in
         respect of share capital (Section 13(1));

-        the power of a company to issue shares at a discount (Section
         35(1)(a));

-        if the Articles of Association do not authorize the manner of purchase,
         the manner of purchase on redemption or repurchase of shares (Section
         37(d));

-        power to direct where an inspector's report be sent (Section 66(3));


                                       66
<PAGE>
-        to wind up the company voluntarily under the Companies Law (Section
         132);

-        appointment of liquidator of voluntary winding up and sanctioning of
         the continuance of powers of directors following the appointment of a
         liquidator (Section 136);

-        disposal of company books, accounts and documents on a voluntary
         winding up (Section 158); and

-        registration of a company by continuation (Section 220(2)).

         Issues for which Cayman Islands law requires approval by a super
majority of votes by Shareholders. The following actions in respect of exempted
companies incorporated under the Companies Law are required by the Companies Law
to be passed by special resolution, as such phrase is defined in the Law and
varied by the articles of association of each such company:

-        the alteration of the memorandum of association (Section 10);

-        the reduction of share capital (Section 14);

-        the alteration or addition to the articles of association (Section 24);

-        the changing of the name of the company (Section 31);

-        the adoption and effect of Articles of Association (Section 25(2));

-        the appointment, pursuant to the provisions of Sections 64 to 68, of an
         inspector to examine the affairs of the company (Section 67);

-        requiring the court to wind up the company under the Law (Section 94);

-        to wind the company up voluntarily under the Law (Section 132(b));

-        to, inter alia, delegate to creditors the power to appoint a liquidator
         in a voluntary winding up, filling any vacancy among liquidators and
         entry into arrangements in respect of a liquidator's powers in a
         voluntary winding up (Section 138);

-        to sanction arrangements between a company being voluntarily wound up
         and its creditors (Section 139);

-        the sanctioning of any general scheme of liquidation proposed by a
         liquidator (Section 163);

-        the sanctioning of any compromise proposed by a liquidator (Section
         164);

-        the sanctioning of certain other matters proposed by a liquidator of
         the Law (Section 165); and

-        the making of amendments to Memorandum and Articles of Association upon
         registration by way of continuation (Section 222).

         With respect to the super majority percentage under Cayman Islands law
for the purposes of passing special resolutions, Section 60 of the Companies Law
provides that a resolution is a special resolution when:

(a)      "it has been passed by a majority of not less than two-thirds (or such
         greater number as may be specified in the articles of association of
         the company) of such members as, being entitled to do so, vote in
         person or, whether proxies are allowed, by proxy at a general meeting
         of which notice specifying the intention to propose the resolution as a
         special resolution has been duly given; or

(b)      if so authorized by its articles of association, it has been approved
         in writing by all of the members entitled to vote at a general meeting
         of the company in one or more instruments each signed by one or more of
         the members aforesaid, and the effective date of the special resolution
         so adopted shall be the date on which the instrument or the last of
         such instruments, if more than one, is executed."


                                       67
<PAGE>
         In relation to whether there are matters which require approval by a
majority of shareholders in excess of two thirds, Section 86(2) of the Companies
Law requires that where a members meeting has been convened by the court to
approve a court sanctioned compromise or arrangement between a company and its
members, or of a class of member, as the case may be, a majority in number of
the members representing seventy-five percent in value of the members, or of a
class of member, as the case may be, must approve such compromise or
arrangement. Additionally Section 88(1) of the Law requires that in certain
circumstances the power to acquire shares of dissentient shareholders may be
given where approved by the holders of not less than ninety percent in value of
the shares affected.

         Indemnification. Cayman Islands law does not, other than as set forth
hereafter, limit the extent to which a company's organizational documents may
provide for indemnification of officers and directors, except to the extent any
such provision may be held by the Cayman Islands courts to be contrary to public
policy, such as to provide indemnification against civil fraud or the
consequences of committing a crime. Our organizational documents provide for
indemnification of officers and directors for losses, damages, costs and
expenses incurred in their capacities as such, except if they acted in a
willfully negligent manner or defaulted in any action against them.

         Insofar as indemnification or liability arising under the Securities
Act may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, we have been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.

         Inspection of Books and Records. Holders of our Common Shares will have
no general right under Cayman Islands law to inspect or obtain copies of our
list of shareholders or our corporate records. However, we will provide our
shareholders with annual audited financial statements.

EXCHANGE CONTROLS

         China's government imposes control over the convertibility of Renminbi
into foreign currencies. Under the current unified floating exchange rate
system, the PBOC publishes a daily exchange rate for Renminbi, or the PBOC
Exchange Rate, based on the previous day's dealings in the inter-bank foreign
exchange market. Financial institutions authorized to deal in foreign currency
may enter into foreign exchange transactions at exchange rates within an
authorized range above or below the PBOC Exchange Rate according to market
conditions.

         Pursuant to the Foreign Exchange Control Regulations issued by the
State Council on April 1, 1996 and the Administration of Settlement, Sale and
Payment of Foreign Exchange Regulations which came into effect on July 1, 1996
regarding foreign exchange control, or the Regulations, conversion of Renminbi
into foreign exchange by foreign investment enterprises for current account
items, including the distribution of dividends and profits to foreign investors
of joint ventures, is permissible. Foreign investment enterprises are permitted
to remit foreign exchange from their foreign exchange bank account in China on
the basis of, inter alia, the terms of the relevant joint venture contracts and
the board resolutions declaring the distribution of the dividend and payment of
profits. Conversion of Renminbi into foreign currencies and remittance of
foreign currencies for capital account items, including direct investment,
loans, security investment, is still subject to the approval of the State
Administration of Foreign Exchange, or SAFE, in each such transaction. On
January 14, 1997, the State Council amended


                                       68
<PAGE>
the Foreign Exchange Control Regulations and added, among other things, an
important provision, as Article 5 provides that the State shall not impose
restrictions on recurring international payments and transfers.

         Under the Regulations, foreign investment enterprises are required to
open and maintain separate foreign exchange accounts for different types of
foreign exchange transactions, and the permitted scope of receipts and
expenditures for such accounts is limited to the type of foreign exchange
transactions designated for such accounts. In addition, foreign investment
enterprises may only buy, sell and/or remit foreign currencies at those banks
authorized to conduct foreign exchange business upon the production of valid
commercial documents and, in the case of capital account item transactions,
document approval from the SAFE.

         Currently, foreign investment enterprises are required to apply to SAFE
for foreign exchange registration certificates for foreign investment
enterprises. With such foreign exchange registration certificates, which are
granted to foreign investment enterprises, upon fulfilling specified conditions
and which are subject to review and renewal by SAFE on an annual basis, or with
the foreign exchange sales notices from the SAFE, which are obtained on a
transaction-by-transaction basis, FIEs may enter into foreign exchange
transactions at banks authorized to conduct foreign exchange business to obtain
foreign exchange for their needs.

TAXATION

         The following is a summary of the tax laws of China, the Cayman Islands
and the United States which are material to our business and are relevant to the
purchase, ownership or sale of your Common Shares. This summary does not take
into account or discuss the tax laws of any jurisdiction other than China, the
Cayman Islands or the United States. We recommend that you consult with your own
professional advisers if you have any doubt as to the tax implications of
purchasing, holding or disposing your Common Shares.

         The following statements disclose the material tax consequences
relating to your purchase of our Common Shares. This discussion, however, is not
intended to be exhaustive or to be a complete statement of the relevant laws. It
is based on the laws in force as of the date of this Annual Report and subject
to any changes in law occurring after that date, which changes could be made on
a retroactive basis.

TAXATION IN CHINA RELEVANT TO THE COMPANY

                  Income Tax

         Any foreign investment enterprise, which may be in the form of any
equity joint venture, co-operative joint venture or wholly foreign-owned
enterprise, carrying on business in China will be subject to China Foreign
Investment Enterprise and Foreign Enterprise Income Tax Law.

         Foreign investment enterprises which have their head offices in China
are regarded as Chinese residents for income tax purposes and all income from
sources both within and outside China is subject to income tax in China. This
tax is levied on net income and operating costs and expenses may be


                                       69
<PAGE>
deducted in the calculation of the taxable income. Moreover, foreign investment
enterprises may, when paying tax on their consolidated income, deduct from the
tax payable the income tax that they have paid outside China on income derived
from sources outside China subject to limitations imposed by the relevant tax
law. Foreign investment enterprises, including enterprises involved in property
development in China, are therefore generally required to pay income tax at a
flat rate of 30% plus a local income tax rate of 3%, on their taxable income.
However, foreign investment enterprises established and carrying on the business
of property development in Special Economic Zones of China, or SEZs, are
entitled to be taxed at a reduced rate of 15% on income derived from property
development within the SEZs. We currently have no income other than from sources
in China.

         The profits or dividends received by us from a foreign investment
enterprise are free from income tax in our hands, since profits of foreign
investment enterprises remitted from China enjoy total exemption from income
tax. We currently have no income from any foreign investment enterprises.

         Chinese-sourced income directly received by foreign companies which do
not have a legal establishment in China, including gains from the transfer of
property, is subject to an income tax of 20% which is collected on a withholding
basis. Gains derived from the transfer of property, such as building structures,
attached facilities and land use rights located in China are deemed to be
Chinese-sourced income. The 20% withholding tax" is reduced to 10% if the income
is received from sources in the SEZs, the Economic and Technological Development
Zones or the Old Districts in the 14 Coastal Port Cities. However, as a property
developer established in China, we are not subject to this withholding tax.

                  Business Tax

         Chinese business tax is payable in respect of certain business
activities in China as set out in the Provisional Regulations of People's
Republic of China Concerning Business Tax. The activities to which the business
tax applies include construction, leases and sales of real estate properties in
China. The tax is a turnover tax charged on gross revenue. No deduction of the
tax incurred on purchased services or materials is allowed. However, deductions
from gross revenue are allowed for subcontracting fees paid among the
transportation, tourism and construction industries. The rate of business tax
payable by our property sale and leasing business is 5% multiplied by the
proceeds from the sale of our real estate/immovable properties in China.

                  Land Appreciation Tax

         Land appreciation tax is applicable to those entities or individuals
upon the transfer of land use rights and its attachment where a gain is
generated. This tax is calculated based on the appreciated portion of the real
estate property. The applicable marginal tax rate progresses from 30% to 60%
based on the ratio of appreciated portion to the original cost. A full exemption
is available for individual owners that assign their personal residence of five
years or more. For personal residence of more than three years but less than
five years, a 50 percent reduction of the land appreciation tax is available.

         For property developers, an additional 20% of deductible expenses may
be further deducted in the calculation of land appreciation amount. Deductible
expenses include the land use right fee incurred and other costs associated with
acquiring such right, costs associated with property development, such as a
removal fee, construction cost, basic infrastructure cost, and indirect
development cost, as well as


                                       70
<PAGE>
sales expenses, management expenses and finance expenses. Land appreciation tax
is assessed on a completion basis. Net profit is assessed after the completion
of each phase to derive the tax liability.

                  Registration Fees

         There are several registration procedures a house buyer has to go
through to complete the home buying process. Each involves a small fee payable
by the home buyer, including a stamp duty of 0.05% of the purchasing price, a
transfer fee of 0.5% of the house price and a deed tax of 3% of the purchasing
price. On July 22, 1999, the deed tax was reduced to 1.5% of the purchase
price. Paying these fees secure the proper registration of the real estate title
to the purchaser and thus is borne entirely by the home buyers and has no effect
on us.

                  Personal Tax Rebate

         Shanghai has adopted a personal income tax rebate program. During the
period from June 1, 1998 to May 31, 2003, qualified home buyers may use the
purchase amount of their commodity residence units to offset their individual
taxable income. This tax rebate program requires the taxpayer to first pay off
their income tax without considering the effect of the rebate program based on
their total taxable income. The designated taxation department then refunds the
rebatable portion of individual income tax to the qualified home buyers. The
maximum amount of the taxable income that can be offset may not exceed the net
amount paid by the home buyer in the purchase or exchange of commodity residence
units, inclusive of mortgage loan interest.

                  Urban Real Estate Tax

         Foreign investment enterprises engaged in the development of and
investment in real estate in China are required to pay urban real estate tax on
land and buildings owned by them in urban areas in China. The tax is charged at
a rate of 1.2% based on the original value of the property discounted by 10% to
30%. If no original value is available, the tax chargeable is determined by the
relevant local tax authorities with reference to the value of the other
properties of a similar nature. Where the property is rented, the tax may be
charged at a rate of 12% of the rental income received in respect of such
property, depending on local regulations. We understand this tax will soon be
replaced by a real estate tax which is of a similar nature and is currently paid
by domestic Chinese companies.

                  Land Use Fees

         According to local government regulations and provisions specified in
the contract for the grant of state-owned land use rights, land users may be
required to pay for using the state-owned land in the form of land use fees.

                  Urban Land Use Tax

         Urban land use tax is charged to residential, agricultural and business
land users. The land use tax rate is determined based on the land area involved
and is assessed by the local tax authorities on an annual basis. This tax is
currently not applicable to foreign investment enterprises.


                                       71
<PAGE>
                  Stamp Duty

         Persons who have executed or received dutiable documents within China
are subject to stamp tax. Dutiable documents include contracts or documents of a
contractual nature, for the sale of goods, the undertaking of processing work,
the contracting of construction and engineering projects, the lease of property,
and technology, as well as transfer of property. A stamp tax by each party to
the stampable documents at the rate of 0.05% is payable in respect of transfer
of properties based on the contractual price of the property transferred and at
the rate of 0.1% of the total amount of rent in respect of the leasing of
properties.

TAXATION IN THE CAYMAN ISLANDS

         The Cayman Islands currently levy no taxes on individuals or companies
based upon profits, income, gains or appreciations and there is no taxation in
the nature of inheritance tax or estate duty. There are no other taxes levied by
the Government of the Cayman Islands except stamp duties which may be
applicable, from time to time, on instruments executed in or brought within the
jurisdiction of the Cayman Islands. The Cayman Islands is not party to any
double tax treaties.

UNITED STATES FEDERAL INCOME TAXATION

         The following discussion addresses the material United States federal
income tax consequences of the ownership of Common Shares held as a capital
asset by a "U.S. Investor." A "U.S. Investor" means a person who is any of the
following:

-        a citizen or resident of the United States;

-        a corporation or partnership created or organized in or under the laws
         of the United States or any political subdivision thereof;

-        an estate the income of which is subject to U.S. federal income
         taxation regardless of its source;

-        a trust that is subject to the supervision of a court within the United
         States and the control of one or more U.S. persons; or

-        a trust that had a valid election in effect under applicable U.S.
         Treasury regulations to be treated as a U.S. person.

         The summary does not address the United States federal income tax
treatment of the following types of investors:

-        life insurance companies;

-        tax-exempt investors;

-        banks;

-        broker-dealers;

-        U.S. investors who own or that hold 10% or more of our voting shares;

-        investors who hold our Common Shares as part of straddles, hedging,
         integrated or conversion transaction; and

-        persons whose "functional currency" is not the U.S. dollar.


                                       72
<PAGE>
         Each type of investor listed above may be subject to tax rules that
differ significantly from those summarized below. You are advised to consult
your own tax adviser with respect to your particular circumstances and with
respect to the effects of state, local or foreign tax laws to which you may be
subject.

         Dividends. Subject to the discussion in Passive Foreign Investment
Company Status below, in the event that a U.S. Investor receives a distribution
other than pro rata distributions of Common Shares or rights with respect to
Common Shares, on the Common Shares, such U.S. Investor will be required to
include the distribution in gross income as a taxable dividend to the extent
such distribution is paid from current or accumulated earnings and profits of
the Company as determined for United States federal income tax purposes.
Distributions in excess of the current and accumulated earnings and profits of
the Company will first be treated, for United States federal income tax
purposes, as a nontaxable return on capital to the extent of the U.S. Investor's
basis in the Common Shares and thereafter as gain from the sale or exchange of a
capital asset. Dividends paid by the Company will not be eligible for the
corporate dividends received deduction. The amount of any distribution of
property other than cash will be the fair market value of such property on the
date of distribution.

         Dividends will constitute foreign source income for foreign tax credit
limitation purposes. The limitation on foreign taxes eligible for credit is
calculated separately with respect to specific classes of income. For this
purpose, dividends distributed by the Company with respect to Common Shares will
be "passive income" or "financial services income." Special rules apply to
individuals whose foreign source income during the taxable year consists
entirely of "qualified passive income" and whose creditable foreign taxes paid
or accrued during the taxable year do not exceed $300 ($600 in the case of a
joint return). Further, in particular circumstances, a U.S. Investor that (i)
has held Common Shares for less than a specified minimum period during which it
is not protected from risk of loss, (ii) is obligated to make payments related
to the dividends or (iii) holds the Common Shares in arrangements in which the
U.S. Investor's expected economic profit, after non-U.S. taxes, is insubstantial
will not be allowed a foreign tax credit for foreign taxes imposed with respect
to dividends paid on Common Shares.

         Disposition of Shares. Subject to the discussion on Passive Foreign
Investment Company Status below, gain or loss realized by a U.S. Investor on the
sale or other disposition of the Common Shares will be subject to United States
federal income tax as capital gain or loss in an amount equal to the difference
between such U.S. Investor's basis in the Common Shares and the amount realized
on the disposition. Such capital gain or loss will be long-term capital gain or
loss if the U.S. Investor has held the Common Shares for more than one year at
the time of the sale or exchange. Gain or loss realized by a U.S. Investor will
be treated as U.S. source gain or loss for U.S. foreign tax credit purposes.

         Passive Foreign Investment Company Status. We may be a passive foreign
investment company, or a PFIC, for our 2000 taxable year or for future taxable
years. We will be classified as a PFIC if, after the application of "look
through" rules, either (1) 75% or more of the gross income of the Company in a
taxable year is passive income, or (2) the average percentage of assets by value
of the Company in a taxable year which produce or are held for the production of
passive income (which includes cash) is at least 50%. The determination of
whether or not we are a PFIC will be made annually based upon the composition of
our income and assets, including goodwill, from time to time. In calculating
goodwill, we will value our total assets based on our total market value
determined using the then share trading price of our Common Shares and will make
a number of assumptions regarding the amount of this value


                                       73
<PAGE>
allocable to goodwill. Because the determination of goodwill will be based on
the price of our shares, it is subject to change. We believe our valuation
approach is reasonable. However, it is possible that the Internal Revenue
Service will challenge the valuation of our goodwill, which may result in us
being classified as PFIC. In addition, the composition of our income and assets
will be affected by the extent to which we spend the cash we have raised (which
is a passive asset for purposes of the PFIC asset test discussed above) on
acquisitions and capital expenditures. We intend, however, to conduct our
business activities in an effort to reduce the risk of our classification as a
PFIC.

         Because the PFIC determination is made at the end of each taxable year,
we cannot determine in advance whether we will be considered a PFIC for the 2001
taxable year or for any future taxable year. If we become a PFIC at any time, we
will notify all U.S. Investors who have been at any time a record shareholder by
mail within 60 days of the end of our taxable year ending March 31.

         Special U.S. tax rules apply to U.S. Investors of interest in a PFIC.
Subject to the discussion of the mark-to-market election and Qualified Electing
Fund election below, if we were a PFIC for any taxable year during which a U.S.
Investor held Common Shares, such U.S. Investor would be subject to special tax
rules regardless of whether the Common Shares continue to constitute stock in a
PFIC with respect to:

-        any "excess distribution" by us to the U.S. Investor, which means any
         distributions received by the U.S. Investor on the Common Shares in a
         taxable year that are greater than 125% of the average annual
         distributions received by the U.S. Investor in the three preceding
         taxable years, or the U.S. Investor's holding period for the Common
         Shares, if shorter; and

-        any gain realized on the sale or other disposition, including a pledge,
         of Common Shares.

Under these special tax rules:

-        the excess distribution or gain would be allocated ratably over the
         U.S. Investor's holding period for the Common Shares;

-        the amount allocated to the current taxable year and any taxable year
         prior to the first taxable year in which the Company is a PFIC would be
         treated as ordinary income;

-        the amount allocated to each of the other years would be taxed as
         ordinary income at the highest tax rate in effect for that year; and

-        the interest charge applicable to underpayments of tax would be imposed
         with respect to the resulting tax attributable to each prior year in
         which the Company was a PFIC to recover the deemed benefit from the
         deferred payment of the tax attributable to each year.

         If the Company is a PFIC in any year, a U.S. Investor would be required
to make an annual return on Internal Revenue Service Form 8621 regarding
distributions received with respect to the Common Shares and any gain realized
on the disposition of the Common Shares.

         Under the Tax Legislation enacted in 1997, a U.S. Investor of a PFIC is
allowed to make a mark-to-market election with respect to the stock of the PFIC,
provided that such stock is "marketable" within the meaning of the Code. The
Common Shares will be "marketable" as long as it remains listed on the Nasdaq
National Market or Nasdaq Small Cap Market. If the election is made a U.S.
Investor would be required to mark-to-market the stock each taxable year and
recognize ordinary gain for any increase in


                                       74
<PAGE>
market value for such taxable year and would be allowed to recognize an ordinary
loss for any decrease in such market value to the extent of prior gain. The
adjusted basis in the stock of the PFIC would be adjusted to reflect such gain
or loss. The mark-to-market election will be effective for the taxable year for
which the election is made and all subsequent taxable years, unless the Common
Shares cease to be regularly traded on a designated exchange or the IRS consents
to the revocation of the election.

         Alternatively, a U.S. Investor can make an election to include annually
its pro rata share of a PFICs earnings and net capital gains currently in income
each year. This election is referred to as a "Qualified Electing Fund" or "QEF"
election. To make a QEF election you will need to have an annual information
statement from the PFIC setting forth the earnings and capital gains for the
year. If we were to become a PFIC, we would supply the PFIC annual information
statement to any shareholder or former shareholder who requests it. In general,
a U.S. Investor must make a QEF election on or before the due date for filing
its income tax return for the first year to which the QEF election will apply.
Under temporary U.S. treasury regulations effective January 2, 1998, U.S.
Investors will be permitted to make retroactive elections in particular
circumstances, including if the U.S. Investor had a reasonable belief that the
foreign corporation was not a PFIC and filed a protective election. As discussed
above, we will notify U.S. Investors if we become a PFIC within 60 days of the
end of our taxable year ending on December 31. This notice should provide U.S.
Investors with a calendar tax year with sufficient time to make the QEF
election. However, U.S. Investors (in particular those with a tax year other
than the calendar year) should consult their own tax advisors as to the
consequences of making a protective QEF election or other consequences of the
QEF election.

         If we are a PFIC in any year, you should consult with your tax adviser
as to whether to make a mark-to-market or QEF election.

         Information Reporting and Backup Withholding. Dividends paid in the
United States may be subject to the information reporting requirements of the
U.S. Internal Revenue Code of 1986, as amended, or the Code. Under existing
regulations, such dividends are not subject to backup withholding. Under
proposed regulations, however, such dividends are subject to backup withholding
at the rate of 31% unless the holder provides a taxpayer identification number
on a properly completed Form W-9 or otherwise establishes an exemption. Any
amounts withheld under the backup withholding rules from a payment to a U.S.
Investor will be refunded or credited against such U.S. Investor's U.S. federal
income tax liability, if any, provided that the required information is
furnished to the Internal Revenue Service.

ENFORCEABILITY OF CIVIL LIABILITIES AND CERTAIN FOREIGN ISSUER CONSIDERATIONS

     We are a Cayman Islands company. We are incorporated in the Cayman Islands
because of the following benefits associated with being a Cayman Islands
company:

         -        political and economic stability;

         -        an effective judicial system;

         -        a favorable tax system;

         -        the absence of exchange control or currency restrictions; and

         -        the availability of professional and support services.


                                       75
<PAGE>
         However, the Cayman Islands has a less developed body of securities
laws as compared to the United States and provides protections for investors to
a lesser extent. In addition, Cayman Islands companies do not have standing to
sue before the federal courts of the United States.

         A substantial majority of our assets are located outside the United
States. In addition, a majority of our directors and officers are nationals
and/or residents of countries other than the United States, and all or a
substantial portion of our or such persons' assets are located outside the
United States. As a result, it may be difficult for you to effect service of
process within the United States upon us or such persons or to enforce against
them or against us, judgment obtained in United States courts, including
judgments predicated upon the civil liability provisions of the securities laws
of the United States or any state thereof. We have appointed CT Corporation
System, 1633 Broadway, New York, New York 10019, as our agent for service of
process in the United States.

         Our legal counsel has advised us that there is uncertainty as to
whether the courts of the Cayman Islands or China would (1) recognize or enforce
judgments of United States courts obtained against us or such persons predicated
upon the civil liability provisions of the securities laws of the United States
or any state thereof; or (2) be competent to hear original actions brought in
each respective jurisdiction, against us or such persons predicated upon the
securities laws of the United States or any state thereof.

         Our legal counsel has advised us that the recognition and enforcement
of foreign judgments are provided for in China Civil Procedures Law. A Chinese
court may recognize and enforce foreign judgments based on treaties between
China and the country where the judgment is made, or if reciprocity exits
between the jurisdictions.

         Our legal counsel has further advised us that a final and conclusive
judgment in federal or state courts of the United States under which a sum of
money is payable, other than a sum payable in respect of taxes, fines, penalties
or similar charges, may be subject to enforcement proceedings as a debt in the
Courts of the Cayman Islands under the common law doctrine of obligation.

         There are no treaties between China or the Cayman Islands and the
United States providing for the reciprocal enforcement of foreign judgments.
However, the courts of China and the Cayman Islands may accept a foreign
judgment as evidence of a debt due. An action may be commenced in China or the
Cayman Islands for recovery of this debt. A Cayman Islands court will only
accept a foreign judgment as evidence of a debt due, if:

         -        the judgment is for a settled amount in a civil matter;

         -        the judgment is final and conclusive and has not been stayed
                  or satisfied in full;

         -        the judgment is not directly or indirectly for the payment of
                  foreign taxes, penalties, fines or charges of a like nature
                  (in this regard, a Cayman Islands court is unlikely to accept
                  a judgment of an amount obtained by doubling, trebling or
                  otherwise multiplying a sum assessed as compensation for the
                  loss or damages sustained by the person in whose favor the
                  judgment was given);

         -        the judgment was not obtained by actual or constructive fraud
                  or duress;

         -        the foreign court has taken jurisdiction on grounds that are
                  recognized by common law rules as to conflict of laws in the
                  Cayman Islands;


                                       76
<PAGE>

         -        the proceedings in which the judgment was obtained were not
                  contrary to natural justice (i.e., the concept of fair
                  adjudication);

         -        the proceedings in which the judgment was obtained, the
                  judgment itself and the enforcement of the judgment are not
                  contrary to the public policy of the Cayman Islands;

         -        the person against whom the judgment is given is subject to
                  the jurisdiction of the Cayman Islands courts; and

         -        the judgment is not on a claim for contribution in respect of
                  damages awarded by a judgment that does not satisfy the
                  foregoing.

         In addition, a Chinese court will only accept a foreign judgment as
evidence of a debt due if it concludes, after reviewing the judgment in
accordance with the international treaties concluded or acceded to by China or
with the principle of reciprocity, that the judgment does not contradict with
the basic principles of the Chinese law and does not violate any state
sovereignty, security and social and public interests of China.

         Enforcement of a foreign judgment in the Cayman Islands or China may
also be limited or otherwise affected by applicable bankruptcy, insolvency,
liquidation, arrangement, moratorium or similar laws relating to or affecting
creditors' rights generally and will be subject to a statutory limitation of
time within which proceedings may be brought.

DOCUMENTS ON DISPLAY

         We have previously filed with the Commission our registration statement
on Form F-1 and prospectus under the Securities Act of 1933, as amended, with
respect to our Common Shares and Warrants.

         We are subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended, or the Exchange
Act. Under the Exchange Act, we are required to file reports and other
information with the Securities and Exchange Commission. Specifically, we will
be required to file annually a Form 20-F no later than six months after the
close of each fiscal year, which is March 31. Copies of reports and other
information, when so filed, may be inspected without charge and may be obtained
at prescribed rates at the public reference facilities maintained by the
Securities and Exchange Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Securities and
Exchange Commission in New York, New York and Chicago, Illinois. The public may
obtain information regarding the Washington, D.C. Public Reference Room by
calling the Commission at 1-800-SEC-0330. The public may also view this Annual
Report and our prospectus at the Commission's web site at www.sec.gov. As a
foreign private issuer, we are exempt from the rules under the Exchange act
prescribing the furnishing and content of quarterly reports and proxy
statements, and officers, directors and principal shareholders are exempt from
the reporting and short-swing profit recovery provisions contained in Section 16
of the Exchange Act.

         Our financial statements have been prepared in accordance with US GAAP.

         We will furnish our shareholders with annual reports, which will
include a review of operations and annual audited consolidated financial
statements prepared in conformity with US GAAP.


                                       77
<PAGE>

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         See Item 5 Operating and Financial Review and Prospects - Interest
Rates and Inflation Rates.

         We do not currently hedge against currency exchange transaction risks,
but could in the future engage in such activities. We may enter into these types
of transactions, however, because uncertainties involving exchange rate
movements could affect our future financial condition and results.

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable

                                     PART II


ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

Not Applicable

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF
         PROCEEDS

USE OF PROCEEDS

         The following Use of Proceeds information relates to the registration
statement on Form F-1 (File No. 333-10746), or the Registration Statement, for
our initial public offering of 2,000,000 Common Shares and 2,000,000 Warrants.
Our Registration Statement was declared effective by the Commission on March 8,
2000. Barron Chase Securities, Inc., our managing underwriter, exercised its
over-allotment option in full, 300,000 Common Shares and 300,000 Warrants, on
March 22, 2000.

         Each Warrant entitles the registered holder to purchase, at any time
through March 8, 2005, one Common Share at a price of US$ 5.75 per share,
subject to adjustment under certain circumstances.

         We received net proceeds of approximately US$ 10.61 million from our
IPO, taking into account the managing underwriter's exercise of its
over-allotment option as well as underwriting discounts of US$ 1.2 million, but
not taking into account transaction expenses of approximately US$ 1.6 million.

         From the effective date of the Registration Statement to March 31,
2000, we did not use any of the proceeds from our initial public offering. Since
March 31, 2000, we have used the approximately US$ 10.61 million net proceeds
from our initial public offering to make past payments, to fund expenses for our
California Gardens and development project, and for working capital.

ITEM 15. RESERVED

         Not Applicable.


                                       78
<PAGE>

ITEM 16. RESERVED

         Not Applicable

ITEM 17. FINANCIAL STATEMENTS

         Not Applicable

                                            PART III

ITEM 18. FINANCIAL STATEMENTS

         The following consolidated financial statements for New China Homes,
Ltd. and its subsidiaries are included at the end of this Annual Report:

<TABLE>
         <S>                                                                                    <C>
         Independent auditors' report..................................................................F-2
         Consolidated statements of operations for the years ended
            March 31, 1999, 2000 and 2001..............................................................F-3
         Consolidated balance sheets at March 31, 2000 and 2001........................................F-4
         Consolidated statements of cash flows for the years ended
            March 31, 1999, 2000 and 2001........................................................F-5 - F-6
         Consolidated statements of changes in stockholders' (deficit)
            equity for the years ended March 31, 1999, 2000 and 2001...................................F-7
         Notes to consolidated financial statements.............................................F-8 - F-28
</TABLE>

ITEM 19. EXHIBITS

Exhibit           10.1 Sales and Purchase Agreement dated March 30, 2001 by and
                  between New China Homes Limited and Wonder China Investments
                  Limited in connection with the sale of Top Trend Developments
                  Limited, with (i) letter extending completion date to
                  March 31, 2002 and (ii) letter extending maturity date of
                  promissory note to March 31, 2002.


                                       79
<PAGE>


                                   SIGNATURES

         The registrant hereby certifies that it meets all of the requirements
for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this Annual Report on its behalf.


                                                NEW CHINA HOMES, LTD.

October 15, 2001                                /s/
                                                -------------------------------
                                                Name:  Ton Voon Lim
                                                Title: Chief Executive Officer


                                       80
<PAGE>



                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS





<TABLE>
<S>                                                                                  <C>
Independent auditors' report ............................................................F-2

Consolidated statements of operations for the years ended
  March 31, 1999, 2000 and 2001..........................................................F-3

Consolidated balance sheets at March 31, 2000 and 2001...................................F-4

Consolidated statements of cash flows for the years ended
  March 31, 1999, 2000 and 2001.......................................................F-5 - F-6

Consolidated statements of changes in stockholders' equity
  for the years ended March 31, 1999, 2000 and 2001......................................F-7

Notes to consolidated financial statements...........................................F-8 - F-28
</TABLE>

                                      F-1
<PAGE>


         INDEPENDENT AUDITORS' REPORT

         To the Board of Directors and Shareholders of
         New China Homes, Ltd.

         We have audited the accompanying consolidated balance sheets of New
         China Homes, Ltd. (the "Company") and subsidiaries as of March 31, 2000
         and 2001, and the related consolidated statements of operations, cash
         flows and changes in stockholders' equity for each of the three years
         ended March 31, 2001, all expressed in Hong Kong dollars. These
         financial statements are the responsibility of the Company's
         management. Our responsibility is to express an opinion on these
         financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
         accepted in the United States of America. Those standards require that
         we plan and perform the audit to obtain reasonable assurance about
         whether the financial statements are free of material misstatement. An
         audit includes examining, on a test basis, evidence supporting the
         amounts and disclosures in the financial statements. An audit also
         includes assessing the accounting principles used and significant
         estimates made by management, as well as evaluating the overall
         financial statement presentation. We believe that our audits provide a
         reasonable basis for our opinion.

         In our opinion, such consolidated financial statements present fairly,
         in all material respects, the financial position of New China Homes,
         Ltd. and subsidiaries as of March 31, 2000 and 2001, and the results of
         their operations and their cash flows for each of the three years ended
         March 31, 2001, in conformity with accounting principles generally
         accepted in the United States of America.

         Our audits also comprehended the translation of Hong Kong dollar
         amounts into U.S. dollar amounts and, in our opinion, such translation
         has been made in conformity with the basis stated in Note 2. Such U.S.
         dollar amounts are presented solely for the convenience of readers in
         the United States of America.


         /s/

         Deloitte Touche Tohmatsu
         Hong Kong
         August 20, 2001 (October 12, 2001 as to note 19)


                                      F-2
<PAGE>


                              NEW CHINA HOMES, LTD.


                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                         Year ended March 31,
                                                            ------------------------------------------------------------------
                                                               1999              2000             2001                2001
                                                               ----              ----             ----                ----
                                                                HK$               HK$              HK$                 US$
                                                                                                                    (note 2)
<S>                                                         <C>               <C>               <C>                <C>
Revenues:
  Home sales .........................................      269,918,839       174,073,893        167,845,159        21,518,610
  Interest income ....................................          305,006           271,363             23,446             3,006
  Other income .......................................          606,383           397,586          1,139,411           146,078
                                                            -----------       -----------       ------------       -----------

  Total revenues .....................................      270,830,228       174,742,842        169,008,016        21,667,694
                                                            -----------       -----------       ------------       -----------

Cost and expenses:
  Cost of home sales (includes interest
  capitalized and released upon sales of homes
  1999: HK$6,306,527; 2000: HK$2,684,925;
  2001: HK$3,840,479) ................................      214,988,618       140,794,776        137,486,290        17,626,447
  Selling, general and administrative expenses .......       14,926,084        21,575,462         32,322,282         4,143,883
                                                            -----------       -----------       ------------       -----------

  Total cost and expenses ............................      229,914,702       162,370,238        169,808,572        21,770,330
                                                            -----------       -----------       ------------       -----------

Income (loss) before minority interests and
  income taxes .......................................       40,915,526        12,372,604           (800,556)         (102,636)
Income taxes (note 3) ................................       15,773,365         7,508,689          5,712,188           732,332
                                                            -----------       -----------       ------------       -----------

Income (loss) before minority interests ..............       25,142,161         4,863,915         (6,512,744)         (834,968)
Minority interest ....................................          570,569           263,568            202,750            25,994
                                                            -----------       -----------       ------------       -----------

Net income (loss) ....................................       24,571,592         4,600,347         (6,715,494)         (860,962)
                                                            ===========       ===========       ============       ===========


Earnings (loss) per share - basic ....................        24,571.59              0.44              (0.53)            (0.07)
                                                            ===========       ===========       ============       ===========

Earnings (loss) per share - diluted ..................        24,571.59              0.44              (0.53)            (0.07)
                                                            ===========       ===========       ============       ===========

Weighted average number of shares - basic ............            1,000        10,538,630         12,700,000        12,700,000

Effect of dilutive potential common shares:
  Warrants ...........................................               --            36,696                 --                --
  Stock options ......................................               --               141                 --                --
                                                            -----------       -----------       ------------       -----------

Weighted average number of shares - diluted ..........            1,000        10,575,467         12,700,000        12,700,000
                                                            ===========       ===========       ============       ===========
</TABLE>


                 See notes to consolidated financial statements

                                      F-3
<PAGE>



                             NEW CHINA HOMES, LTD.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                       Year ended March 31,
                                                            ------------------------------------------------------------------
                                                               1999              2000              2001                2001
                                                               ----              ----              ----                ----
                                                                HK$               HK$               HK$                 US$
                                                                                                                      (note 2)
<S>                                                         <C>              <C>               <C>               <C>
ASSETS


Cash and cash equivalents ............................       15,197,211        75,929,258          5,064,469           649,291
Restricted cash (notes 4 and 19) .....................        4,140,889        24,171,415          8,945,022         1,146,798
Trade and other accounts receivable ..................       23,454,080        12,693,542         40,978,692         5,253,678
Due from related parties (note 9) ....................        3,022,109        41,501,814          2,759,831           353,824
Other prepaid taxes (note 5) .........................        2,151,544         2,161,654          2,116,000           271,282
Advances to suppliers ................................          825,031                --                 --                --
Prepaid expenses and other assets ....................        2,340,207         2,999,795          6,028,141           772,839
Land and lots under development and
  completed homes (notes 6 and 19) ...................      133,561,687       170,666,748        203,248,529        26,057,504
Property, equipment and construction-in-progress,
  net (note 7) .......................................       35,959,160        52,435,353         71,999,076         9,230,651
Deferred consulting costs ............................               --         4,386,283          2,178,153           279,250
Deferred offering costs ..............................          848,789                --                 --                --
                                                            -----------       -----------       ------------       -----------

TOTAL ASSETS .........................................      221,500,707       386,945,862        343,317,913        44,015,117
                                                            ===========       ===========       ============       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY


LIABILITIES


Bank borrowings (note 8) .............................       35,004,677        64,492,889         75,474,353         9,676,199
Due to related parties (note 9) ......................       96,335,274        88,388,434         13,899,849         1,782,032
Customer deposits ....................................       16,770,925        11,319,854          2,315,445           296,852
Trade accounts payable and accrued expenses
  (note 10) ..........................................       34,693,436        16,702,209         50,004,010         6,410,771
Income taxes payable .................................       10,491,689        16,695,310         22,142,547         2,838,788
Deferred income taxes (note 3) .......................        3,850,052         5,265,675          5,063,341           649,146
                                                            -----------       -----------       ------------       -----------

TOTAL LIABILITIES ....................................      197,146,053       202,864,371        168,899,545        21,653,788
                                                            -----------       -----------       ------------       -----------

MINORITY INTERESTS ...................................        1,783,920         2,054,480          2,216,535           284,171
                                                            -----------       -----------       ------------       -----------

COMMITMENTS AND CONTINGENCIES (NOTE 12)


Stockholders' equity
Preferred shares US$1 par value, authorized
  5,000,000 shares and none issued and fully paid
  at March 31, 2000 and 2001 (note 11) ...............               --                --                 --                --
Common shares US$1 par value, authorized
  50,000,000 shares, issued and fully paid
  12,700,000 shares at March 31, 2000 and 2001 .......            7,750        98,425,000         98,425,000        12,618,590
Additional paid-in capital ...........................        1,647,000        57,697,964         57,697,964         7,397,175
Retained earnings ....................................       20,846,902        25,447,249         18,731,755         2,401,507
Cumulative translation adjustment ....................           69,082           456,798         (2,652,886)         (340,114)
                                                            -----------       -----------       ------------       -----------

Total stockholders' equity ...........................       22,570,734       182,027,011        172,201,833        22,077,158
                                                            -----------       -----------       ------------       -----------

LIABILITIES AND STOCKHOLDERS' EQUITY .................      221,500,707       386,945,862        343,317,913        44,015,117
                                                            ===========       ===========       ============       ===========
</TABLE>


                 See notes to consolidated financial statements

                                      F-4
<PAGE>

                              NEW CHINA HOMES, LTD.


                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                      Year ended March 31,
                                                            ------------------------------------------------------------------
                                                               1999              2000               2001               2001
                                                               ----              ----               ----               ----
                                                                HK$               HK$                HK$                US$
                                                                                                                     (note 2)
<S>                                                         <C>               <C>               <C>                <C>
Cash flows from operating activities:
  Net income (loss) ..................................       24,571,592         4,600,347         (6,715,494)         (860,962)
  Adjustments to reconcile net income (loss) to
    net cash used in operating activities:
    Depreciation .....................................          588,228           727,992          1,505,194           192,974
    Loss on disposal of property, equipment
      and construction-in-progress ...................               --                --            110,005            14,103
    Minority interests ...............................          570,569           263,568            202,750            25,994
    Amortization of deferred consulting costs ........               --         2,201,217          2,208,130           283,094
    Consultant services ..............................        1,647,000         4,940,625                 --                --
    Amortization of consultant services ..............               --          (554,345)                --                --
    Deferred income taxes ............................        5,281,676         1,354,369            (87,654)          (11,238)
Changes in operating assets and liabilities:
  Trade and other accounts receivable ................      (19,319,375)       11,460,653        (29,238,133)       (3,748,479)
  Other prepaid taxes ................................       (2,151,544)               --                 --                --
  Advances to suppliers ..............................         (825,031)          828,908                 --                --
  Prepaid expenses and other assets ..................         (773,971)         (648,590)        (3,102,860)         (397,802)
  Land and lots under development and
    completed homes ..................................      (58,250,232)      (34,220,585)       (34,927,078)       (4,477,831)
  Customer deposits ..................................        4,088,080        (5,529,882)        (8,765,334)       (1,123,761)
  Trade accounts payable and accrued expenses ........       19,919,697       (18,154,184)        33,653,977         4,314,612
  Due to/from related parties ........................          (61,904)       10,886,728        (72,444,590)       (9,287,768)
  Income taxes payable ...............................       10,491,689         6,154,320          5,799,842           743,571
  Other taxes payable ................................        2,839,534        (2,973,861)                --                --
                                                            -----------       -----------       ------------       -----------

  Net cash used in
    operating activities .............................      (11,383,992)      (18,662,720)      (111,801,245)      (14,333,493)
                                                            -----------       -----------       ------------       -----------

Cash flows from investing activities:
  Purchase of property, equipment and
    expenditure on construction-in-progress ..........      (11,172,755)      (17,081,875)       (23,984,753)       (3,074,968)
  Proceeds from disposal of property, equipment
    and construction-in-progress .....................               --                --            467,400            59,923
  Placing of restricted cash .........................       (3,814,712)      (25,306,748)                --                --
  Receipt of restricted cash .........................        4,656,616         5,295,680         14,715,893         1,886,653
  Advances to related parties ........................       (2,185,639)      (39,753,387)                --                --
                                                            -----------       -----------       ------------       -----------

  Net cash used in investing activities ..............      (12,516,490)      (76,846,330)        (8,801,460)       (1,128,392)
                                                            -----------       -----------       ------------       -----------
</TABLE>


                 See notes to consolidated financial statements

                                      F-5
<PAGE>


                             NEW CHINA HOMES, LTD.

                CONSOLIDATED STATEMENTS OF CASH FLOWS - continued

<TABLE>
<CAPTION>
                                                                                  Year ended March 31,
                                                            ------------------------------------------------------------------
                                                               1999              2000             2001                2001
                                                               ----              ----             ----                ----
                                                                HK$               HK$              HK$                 US$
                                                                                                                     (note 2)
<S>                                                         <C>               <C>               <C>                <C>
Cash flows from financing activities:
  Increase in bank borrowings ........................       53,713,751       121,240,602        122,084,000        15,651,795
  Repayment of bank borrowings .......................      (18,709,074)      (91,916,886)      (109,740,445)      (14,069,288)
  Advances from related parties ......................       19,541,922        57,336,825         37,819,215         4,848,617
  Repayments to related parties ......................      (27,983,572)               --                 --                --
  Deferred offering costs incurred ...................         (848,789)               --                 --                --
  Contribution from minority shareholder .............          370,718                --                 --                --
  Issuance of common shares and warrants .............               --        69,489,681                 --                --
                                                            -----------       -----------       ------------       -----------

  Net cash provided by financing activities ..........       26,084,956       156,150,222         50,162,770         6,431,124
                                                            -----------       -----------       ------------       -----------

Net increase (decrease) in cash and
  cash equivalents ...................................        2,184,474        60,641,172        (70,439,935)       (9,030,761)
Effect of foreign exchange rate changes ..............               --            90,875           (424,854)          (54,468)
Cash and cash equivalents, beginning of year .........       13,012,737        15,197,211         75,929,258         9,734,520
                                                            -----------       -----------       ------------       -----------

Cash and cash equivalents, end of year ...............       15,197,211        75,929,258          5,064,469           649,291
                                                            ===========       ===========       ============       ===========

Supplemental cash flow information:
Cash paid during the year for:
  Income taxes .......................................               --                --                 --                --
                                                            ===========       ===========       ============       ===========


  Interest ...........................................        8,627,850         3,395,303          5,111,192           655,281
  Interest capitalized ...............................       (8,627,850)       (3,395,303)        (5,111,192)         (655,281)
                                                            -----------       -----------       ------------       -----------

  Interest (net of amount capitalized) ...............               --                --                 --                --
                                                            ===========       ===========       ============       ===========

Non cash transactions:
  Conversion of payable to holding company to
    common shares (note 1) ...........................               --        74,004,750                 --                --
                                                            ===========       ===========       ============       ===========

  Common shares issued to consultants (note 1) .......               --         6,587,500                 --                --
                                                            ===========       ===========       ============       ===========
</TABLE>


                 See notes to consolidated financial statements

                                      F-6
<PAGE>


                              NEW CHINA HOMES, LTD

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                              Common shares          Additional                      Cumulative        Total
                                        -------------------------      paid-in        Retained       translation    stockholders'
                                          Shares         Amount        capital        earnings       adjustment        equity
                                        ----------     ----------    -----------     ----------      ----------     -------------
                                                            HK$          HK$            HK$              HK$             HK$
<S>                                     <C>            <C>           <C>             <C>             <C>            <C>
Balance at April 1, 1998 ..........          1,000          7,750             --     (3,724,690)         (2,717)      (3,719,657)
Net income ........................             --             --             --     24,571,592              --       24,571,592
Translation adjustment ............             --             --             --             --          71,799           71,799
Contribution of services of
  consultants .....................             --             --      1,647,000             --              --        1,647,000
                                        ----------     ----------     ----------     ----------      ----------      -----------

Balance at March 31, 1999 .........          1,000          7,750      1,647,000     20,846,902          69,082       22,570,734
Shares issued to Far East (note 1)       9,549,000     74,004,750             --             --              --       74,004,750
Shares issued to consultants
  (note 1) ........................        850,000      6,587,500      4,386,283             --              --       10,973,783
Shares and warrants issued in
  conjunction with initial public
  offering net of offering costs of
   HK$21,863,444 ..................      2,300,000     17,825,000     51,664,681             --              --       69,489,681
Net income ........................             --             --             --      4,600,347              --        4,600,347
Translation adjustment ............             --             --             --             --         387,716          387,716
                                        ----------     ----------     ----------     ----------      ----------      -----------

Balance at March 31, 2000 .........     12,700,000     98,425,000     57,697,964     25,447,249         456,798      182,027,011
Net loss ..........................             --             --             --     (6,715,494)             --       (6,715,494)
Translation adjustment ............             --             --             --             --      (3,109,684)      (3,109,684)
                                        ----------     ----------     ----------     ----------      ----------      -----------

Balance at March 31, 2001 .........     12,700,000     98,425,000     57,697,964     18,731,755      (2,652,886)     172,201,833
                                        ==========     ==========     ==========     ==========      ==========      ===========

<CAPTION>

                                                          US$            US$            US$            US$             US$
 <S>                                                    <C>           <C>            <C>             <C>             <C>
US$ equivalent - balance at
  March 31, 2001 (note 2)........                      12,618,590      7,397,175      2,401,507        (340,114)      22,077,158
                                                       ==========     ==========     ==========      ==========      ===========
</TABLE>


                 See notes to consolidated financial statements


                                      F-7
<PAGE>

                             NEW CHINA HOMES, LTD.


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS

         New China Homes, Ltd (the "Company") was incorporated in the Cayman
         Islands on January 6, 1999 as a wholly owned subsidiary of Far East
         Consortium Limited ("Far East").

         On April 2, 1999, the Company entered into management service
         agreements with four consultants for a three year period effective on
         that date. In consideration, these parties were paid a total of
         US$850,000 in cash which was required under these agreements to be used
         in exchange for the issuance of a total of 850 shares at a price of
         US$1,000 per share, which were also issued on that date.

         On April 2, 1999 the Company also issued 9,549 shares at US$1,000 per
         share to Far East for cash of US$9,549,000, which has been used to
         offset the payable to Far East, which amounted to US$9,795,997 at March
         31, 1999.

         In preparation for the initial public offering of common shares by the
         Company, on August 10, 1999 the Company effected a recapitalization
         whereby the common shares and preferred shares authorized were
         increased to 50,000,000 and 5,000,000, respectively, from 50,000 common
         shares and no preferred shares, respectively. The Company further
         allotted and credited as fully paid 9,540,450 common shares to Far East
         and a total of 849,150 common shares to the above mentioned consultants
         at a par value of US$1.00 each by utilizing the additional paid-in
         capital recorded in the April 1999 issues of shares and US$999 from
         retained earnings. This stock split is reflected in the accompanying
         financial statements for each period presented and earnings per share
         has been computed after adjusting for the stock split. On the same
         date, the Company changed its name from China Homes, Limited to New
         China Homes, Ltd.

         On March 10, 2000, the Company was listed on Nasdaq National Market
         with a total offering of 2,300,000 common shares and 2,300,000
         warrants.

         The consulting agreements between the Company and the four consultants
         (the "Consultants") dated April 2, 1999 and the share cancellation
         agreement dated September 29, 1999 between the Company and Far East
         establish net income thresholds for the first and second years
         amounting to US$10 million and US$20 million, respectively, following
         the closing date of the public offering of the Company's common shares
         and in each of these two years 25% of the Company's shares held by the
         Consultants and Far East are subject to redemption and cancellation by
         the Company in the event the net income thresholds are not met. For the
         year ended March 31, 2001, being the first year following the closing
         date of the public offering of the Company's common shares, the Company
         incurred a net loss amounting to HK$6,715,494 (US$860,962) ; therefore,
         the income threshold was not met. As at April 1, 2001, 25% of the
         Company's common shares, being 2.6 million common shares, held by the
         Consultants and Far East were cancelled. The income and earnings per
         share for the year ending March 31, 2002 will be affected by the
         cancellation of the Company's common shares.

         The Company operates principally through a subsidiary incorporated in
         the Hong Kong Special Administrative Region ("Hong Kong") of the
         People's Republic of China ("China") and a subsidiary in Shanghai,
         China. Its ultimate holding company is Far East Consortium
         International Limited ("Far East Consortium"), a company incorporated
         in the Cayman Islands and listed in Hong Kong.


                                      F-8

<PAGE>
                             NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


1.       ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS - continued

         At March 31, 2001, the Company had the following subsidiaries:

              Far East Consortium China Investments Limited (incorporated in
              Hong Kong) - 100% owned.

              Shanghai Chingchu Property Development Company Limited
              ("Chingchu") (incorporated in China) - 98.2% owned by Far East
              Consortium China Investments Limited. Chingchu is registered as a
              Sino-foreign equity joint venture with limited liability for a
              period of 70 years from April 24, 1997 to April 23, 2067.

              Top Trend Development Limited ("Top Trend") (incorporated in
              the British Virgin Island) - 100% owned by the Company and
              principally engaged in investment holding.

              Chingchu (Shanghai) Read Estate Co., Ltd. ("Real Estates")
              (incorporate in China) - 100% owned by the Top Trend. Real
              Estates is registered as a wholly foreign owned investment
              with limited liability for a period of 15 years from January
              20, 2000 to January 19, 2015.

         Beijing Ching Chu Zhichun Gardens Property Development Co., Ltd.
         ("Beijing Ching Chu") (incorporated in China) was 100% owned. Beijing
         Ching Chu was registered as a Sino-foreign cooperative joint venture
         with limited liability for a period of 15 years from March 28, 2001 to
         March 27, 2015. During the year, the Company withdrew its investment in
         Beijing Ching Chu.

         On March 30, 2001, the Company entered an agreement with Wonder China
         Investments Limited ("Wonder China"), a wholly-owned subsidiary of Far
         East, disposing of its 100% interest in Top Trend. Under the terms of
         this agreement, the Company has agreed to sell to Wonder China the
         entire issued share capital of Top Trend and a debt in the approximate
         amount of HK$18,414,717 advanced as a shareholder loan by the Company
         to Top Trend, in exchange for HK$1,280,000 in cash paid as of March
         30, 2001 and a HK$126,720,000 promissory note (the "Promissory Note").
         The HK$126,720,000 Promissory Note was due originally on September 30,
         2001. Due to a recent change in Chinese law, however, a warranty
         contained in the agreement regarding the commercial use of land held
         indirectly by Top Trend has yet to be fulfilled and the parties have
         therefore agreed to extend the due date of the Promissory Note by six
         months to March 31, 2002. The parties have also delayed completion of
         the transaction until March 31, 2002.

         Top Trend holds a 100% interest in Chingchu (Shanghai) Real Estate. The
         major asset held by Chingchu (Shanghai) Real Estate is a certain real
         property interest that is part of the California Gardens development.
         The Company, currently in the process of selling Top Trend to Wonder
         China, has exchanged a valuable land right for a small cash deposit and
         a substantial Promissory Note, which Promissory Note has yet to be
         collected. As discussed in the paragraph above, however, the parties
         have agreed to delay completion of the sale until March 31, 2002.

         The Company, through its Hong Kong subsidiary, owns Chingchu which is
         developing a property in Shanghai for the sale of residential housing
         in a development known as Chingchu California Gardens. The Company is
         currently dependent on this project for its earnings and its revenues
         and profitability may be affected by a number of factors including
         local market conditions, regulatory approvals, availability of
         financing to the Company and prospective purchasers of Chingchu's real
         estate.

         US GAAP differs from those used in the statutory accounts of its
         subsidiary in China, which is prepared in accordance with the
         accounting principles and the relevant financial regulations applicable
         to the joint venture as established by the Ministry of Finance of
         China.

         The dividends from the Company will be declared based on the profits
         reported in the statutory financial statements of the subsidiaries. No
         dividends had been declared for the years ended March 31, 1999, 2000
         and 2001.


                                      F-9
<PAGE>

                             NEW CHINA HOMES, LTD.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Basis of consolidated financial statements - The accompanying financial
         statements have been prepared in conformity with US GAAP.

         Principles of consolidation - The consolidated financial statements
         include the assets, liabilities, revenues and expenses of all
         subsidiaries. All material intercompany transactions and balances have
         been eliminated.

         Cash and cash equivalents - Cash and cash equivalents include cash on
         hand, cash accounts, interest bearing savings accounts, and time
         certificates of deposit with maturity of three months or less when
         purchased.

         Land and lots under development and completed homes - Land and lots
         under development and completed homes comprise of land at cost,
         construction costs, interest costs and attributable profit to date,
         less sales proceeds received and receivable and provision for possible
         losses to write down to fair value. The estimates utilized in
         calculating fair value of land, lots under development and completed
         homes require significant judgment relating to the level of sales
         prices, rate of new home sales, amount of marketing costs and price
         discounts needed in order to stimulate sales, rate of increase in the
         cost of building materials and labor, introduction of building code
         modifications, and level of consumer confidence in the economy.
         Accordingly, it is likely that changes in estimates will occur.
         However, these changes in estimates are not expected to be material.
         During the years ended March 31, 1999, 2000 and 2001 there were no
         provisions made for impairment of these assets.

         Costs related to development of land or construction are capitalized.
         The cost of land and construction is allocated to sales based on area
         methods such as specific identification as allocation based on relative
         value is impracticable. Construction costs include all subcontractors,
         direct material and labor costs, and utility connection rights as well
         as indirect costs related to subcontract or performance, such as
         indirect labor and supplies. Indirect costs that do not clearly relate
         to development or construction, including general and administrative
         expenses, are charged to expense as incurred. Real estate taxes,
         insurance and interest are capitalized only during the period in which
         activities necessary to get the property ready for its intended use are
         in progress.

         Completed homes are held for sale and stated at the lower of cost or
         fair value less costs to sell and are reported net of valuation
         reserves.


                                      F-10

<PAGE>

                             NEW CHINA HOMES, LTD.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

         Property, equipment and construction-in-progress - Property and
         equipment are stated at cost. Depreciation and amortization is provided
         using the straight line method based on the estimated useful lives of
         the property and equipment, after taking into account their residual
         value, being 5 to 15 years. Assets held under capital leases are
         depreciated over their estimated useful lives on the same basis as
         owned assets. There were no assets held under capital leases for any of
         the periods presented.

         Construction-in-progress represents the common facilities of Chingchu
         California Gardens which are currently under construction. These
         facilities will be retained by the Company as fixed assets upon
         completion of the construction. The cost includes interest arising from
         borrowings used to finance these assets during the period of
         construction. Interest capitalized was HK$773,401 in 1999, HK$938,062
         in 2000 and HK$730,495 in 2001. The Company intends to retain ownership
         of the common facilities and either operate them or eventually sell the
         amenities. This has yet to be decided. The Company assesses the need,
         if any, for an impairment adjustment based on the fair value of the
         amenities using an undiscounted cash flow model. Upon completion, the
         common facilities will be depreciated over a period of 15 years. No
         impairment existed at March 31, 2001.

         Deferred consulting costs - Deferred consulting costs represents those
         costs paid to four consultants in respect of management service
         agreements as discussed in note 1. These costs shall be recognized over
         the periods of the service and any unearned portion shall be shown as a
         component of stockholders in the balance sheet.

         Income taxes - The charge for income taxes is based on the results for
         the year as adjusted for items which are non-assessable or disallowed.
         Temporary differences arise from the recognition for tax purposes of
         certain items of income and expense in a different accounting period
         from that in which they are recognized in the financial statements. The
         tax effect of temporary differences, computed under the liability
         method, is recognized as deferred taxation in the financial statements.
         A valuation allowance is provided to the extent realisation of deferred
         tax assets is not considered more likely than not.

         Allowance for warranties - Homes sold are provided with a two-year
         warranty against certain building defects as stipulated in China
         building regulations. This is covered by a warranty from the
         contractors who have built the homes. The Company does not record any
         warranty costs. A portion of the amounts to be paid to the contractors
         is withheld by the Company to cover any potential liability under this
         warranty. Historically, excess cash withheld by the Company was
         adequate to cover the warranty liabilities.


                                      F-11

<PAGE>

                             NEW CHINA HOMES, LTD.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

         Recognition of revenue - When homes are sold in advance of completion,
         profit recognized is calculated under a percentage of completion method
         when construction has progressed beyond the preliminary stage. The
         percentage used is the proportion of construction cost incurred at the
         balance sheet date to estimated total construction cost. Revenues
         recognized on this basis are limited to the amount of sales proceeds
         received and receivable.

         During the year ended March 31, 2001, the Company has entered into a
         sales and purchase agreement to dispose Top Trend to Wonder China. Top
         Trend, through Real Estates, owns a shopping centre under development
         located within Chingchu California Garden. As the Company has only
         received an amount of HK$1,280,000 from Wonder China out of a total
         consideration of HK$128,000,000 as of March 31, 2001, the transaction
         has been accounted for using the deposit method. The Company did not
         recognize any revenue or profit on the sale, did not record notes
         receivable and continues to report in the financial statements as the
         property of Top Trend. Cash received from Wonder China is reported as a
         deposit received included in due to related parties on the balance
         sheet.


         Foreign currency translation - Assets and liabilities denominated in
         currencies other than the respective functional currency are translated
         at year end exchange rates, while revenues and expenses are translated
         at average exchange rates during the year. Gains or losses from such
         foreign currency transactions are included in net income and amounted
         to a loss of HK$33,306 in 1999, a loss of HK$191,672 in 2000 and a gain
         of HK$55,655 in 2001.

         On consolidation, the financial statements of the Chinese operations
         are translated from Renminbi, the functional currency, into Hong Kong
         dollars. Accordingly, all assets and liabilities are translated at the
         exchange rate prevailing at the balance sheet date and all income and
         expenditure items are translated at the average rates for each of the
         years. Adjustments arising from translating the foreign currency
         financial statements are reported as a separate component of
         stockholders' equity.

         Earnings (loss) per share - Basic earnings (loss) per share was
         computed based on a weighted average number of shares outstanding of
         1,000 in 1999,10,538,630 in 2000 and 12,700,000 in 2001, after
         adjusting for the 1,000 for 1 stock split discussed in note 1. Basic
         earnings (loss) per share for 1999 and 2001 is equal to diluted
         earnings per share. For 2000, diluted earnings per share reflects
         potential dilution that could occur if the warrants and stock options
         issued were converted into common shares, unless the effects are
         antidilutive. For the year ended March 31, 2001, there was 140,000
         share options that were excluded from the diluted weighted average
         number of shares as their effect was antidilutive. For the year ended
         March 31, 2000 and 2001, there were 27,269 warrants that were excluded
         from the diluted weighted average number of shares as their effect were
         antidilutive.


                                      F-12

<PAGE>

                             NEW CHINA HOMES, LTD.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

         Use of estimates - The preparation of financial statements in
         conformity with generally accepted accounting principles requires
         management to make estimates and assumptions that affect the reported
         amounts of assets and liabilities and disclosures of contingent assets
         and liabilities at the date of the financial statements and the
         reported amounts of revenues and expenses during the reporting period.
         Actual results could differ from those estimates.

         Business risk - Any substantial change in economic conditions, interest
         rates, currency exchange rates or significant price fluctuation related
         to the real estate industry could affect the Company's operations and
         have a material impact on the Company's business. In addition, the
         Company is subject to competition from other entities engaged in the
         business of building homes throughout China.

         Derivatives - US GAAP has recently been amended by Statement of
         Financial Accounting Standards ("SFAS") No. 133, "Accounting for
         Derivative Instruments and Hedging Activities", which broadly defines
         derivatives and requires them to be recorded as assets or liabilities
         at fair value. For derivatives that are not designated as hedges, any
         changes in fair value will be reflected in earnings for the period.
         Management has completed the analysis of the impact and concluded that
         there was no significant effect on the consolidated financial
         statements of the Company on adoption of SFAS No. 133 on April 1, 2001.

         In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was
         issued. The provisions of this statement are required to be applied
         starting with fiscal years beginning after December 15, 2001. This
         statement is required to be applied at the beginning of an entity's
         fiscal year and to be applied to all goodwill and other intangible
         assets recognized in its financial statements at that date. The
         statement requires that goodwill and certain other intangibles with an
         indefinite life, as defined in the standard, no longer be amortized.
         However, goodwill and such intangibles would have to be assessed each
         year to determine whether an impairment loss has occurred. Any
         impairment recognized upon adoption would be recorded as a change in
         accounting principle. Future impairments would be recorded in income
         from continuing operations. The statement provides specific guidance
         for testing goodwill for impairment. The Company has not yet determined
         the impact that SFAS No. 142 will have on its financial position or
         results of operations.

         Convenience translation into United States Dollars - The consolidated
         financial statements of the Company are expressed in Hong Kong Dollars.
         The translations of Hong Kong dollar amounts into United States dollar
         are included solely for the convenience of the readers and have been
         made at a rate of HK$7.8 to US$1, the approximate rate of exchange on
         March 31, 2001. Such translations should not be construed as
         representations that the Hong Kong dollar amounts could be converted
         into United States dollars, at that rate or any other rate.


                                      F-13


<PAGE>

                             NEW CHINA HOMES, LTD.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


3.       INCOME TAXES

         CAYMAN ISLANDS:

         The Company is not taxed in the Cayman Islands where it is
         incorporated.

         HONG KONG:

         The Company's subsidiary incorporated in Hong Kong is subject to Hong
         Kong taxation on its trading activities conducted in Hong Kong at 16%.
         Under the current Hong Kong laws, dividends and capital gains arising
         from the realization of investments are not subject to income taxes and
         no withholding tax is imposed on payments of dividends by Hong Kong
         incorporated subsidiaries to the Company.

         CHINA:

         Under the existing China tax regulations, the sale of real estate in
         advance of completion is subject to provisional business tax and
         provisional income tax. Provisional business tax amounted to
         HK$13,495,942 in 1999, HK$8,703,695 in 2000 and HK$9,289,257 in 2001
         calculated at 5% of the sales receivable. Provisional income tax is
         calculated at 33% of deemed profit which is based on 10% of
         instalments received. Upon the completion of the real estate, income
         tax will be re-assessed and calculated at 33% of the actual taxable
         profit and, if any, excessive provisional income tax will be refunded.

         The components of income (loss) before minority interests and income
         taxes are as follows:

<TABLE>
<CAPTION>
                                                                           March 31,
                                          -----------------------------------------------------------------------
                                             1999                2000                2001                2001
                                          -----------         -----------         -----------         -----------
                                              HK$                 HK$                 HK$                  US$
                                                                                                         (note 2)
          <S>                             <C>                 <C>                 <C>                 <C>
          China ..................         47,607,574          22,083,728          15,969,458           2,047,366
          Hong Kong ..............         (6,692,048)         (9,711,124)        (16,770,014)         (2,150,002)
                                          -----------         -----------         -----------         -----------

                                           40,915,526          12,372,604            (800,556)           (102,636)
                                          ===========         ===========         ===========         ===========
</TABLE>


         The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                                         March 31,
                                          -----------------------------------------------------------------------
                                             1999                2000                2001                2001
                                          -----------         -----------         -----------         -----------
                                              HK$                 HK$                 HK$                 US$
                                                                                                        (note 2)
          <S>                             <C>                 <C>                 <C>                 <C>
          China:
            Current ..............         10,491,689           6,154,320           5,914,522             758,272
            Deferred .............          5,281,676           1,354,369            (202,334)            (25,940)
                                          -----------         -----------         -----------         -----------

                                           15,773,365           7,508,689           5,712,188             732,332
                                          ===========         ===========         ===========         ===========
</TABLE>


                                      F-14



<PAGE>

                             NEW CHINA HOMES, LTD.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


3.       INCOME TAXES - continued

         A reconciliation between the provision for income taxes computed by
         applying the China statutory tax rate of 33% for each period to income
         before taxes and the actual provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                                                                            March 31,
                                                              -------------------------------------------------------------------
                                                                 1999               2000              2001               2001
                                                              -----------        -----------       -----------        -----------
                                                                  HK$                HK$               HK$                US$
                                                                                                                        (note 2)
          <S>                                                 <C>                <C>               <C>                <C>
          Standard income tax rate applied to
            income (loss) before income tax ...........        13,502,124          4,082,959          (264,813)           (33,950)
          Effect of no benefit attributable to
            tax loss for Hong Kong operations .........         1,137,648          2,997,691         5,534,734            709,581
          Interest expense not deductible in
            Hong Kong .................................           912,193            206,980           277,950             35,635
          Other expenses not deductible in Hong
            Kong ......................................           263,520                 --                --                 --
          Expenses not deductible in China ............                --            193,254           164,317             21,066
          Other .......................................           (42,120)            27,805                --                 --
                                                              -----------        -----------       -----------        -----------

          Income taxes ................................        15,773,365          7,508,689         5,712,188            732,332
                                                              ===========        ===========       ===========        ===========
</TABLE>


         The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
                                                                                            March 31,
                                                              -------------------------------------------------------------------
                                                                 1999               2000              2001               2001
                                                              -----------        -----------       -----------        -----------
                                                                  HK$                HK$               HK$                US$
                                                                                                                        (note 2)
          <S>                                                 <C>                <C>               <C>                <C>
          Deferred tax liability:

          Difference in recognition of income
            under the percentage of completion
            method and the accounting treatment
            applied for tax purposes in China .........        (4,081,987)        (5,429,992)       (5,063,341)          (649,146)
          Difference in recognition of
            pre-operating expenditures ................           231,935            164,317                --                 --
                                                              -----------        -----------       -----------        -----------

                                                               (3,850,052)        (5,265,675)       (5,063,341)          (649,146)
                                                              ===========        ===========       ===========        ===========
</TABLE>


                                      F-15


<PAGE>

                             NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


4.       RESTRICTED CASH

         Chingchu has entered into agreements with certain banks in respect of
         mortgage loans provided to house buyers of Chingchu California Gardens.
         In accordance with those agreements, Chingchu deposits either 10% of
         the consideration of the properties sold and financed under the
         mortgage loans or between 10% and 20% of the amount of financing
         provided as a guarantee for settlement of the mortgage installments.
         Should mortgagors fail to pay mortgage installments, the bank can draw
         down the deposits up to the amount of mortgage installments not paid
         during the period from the mortgage drawdown to the date of releasing
         such guarantees. The guarantees will be released when the property
         title deeds are passed to banks as security for the respective mortgage
         loans. At March 31, 2000 and 2001, deposits of HK$5,322,758 and
         HK$4,511,030, respectively, were placed with banks to guarantee the
         above agreements.

         At March 31, 2000 and 2001, deposits of HK$18,848,657 and HK$4,433,992
respectively, had been pledged with banks as security for short-term bank
borrowings.


5.       OTHER PREPAID TAXES

<TABLE>
<CAPTION>
                                                                                      March 31,
                                                              -------------------------------------------------------------------
                                                                  1999              2000              2001               2001
                                                              -----------        -----------       -----------        -----------
                                                                  HK$                HK$               HK$                US$
                                                                                                                        (note 2)
          <S>                                                 <C>                <C>               <C>                <C>
          Provisional land appreciation tax ...........         2,151,544          2,161,654         2,116,000            271,282
                                                              ===========        ===========       ===========        ===========
</TABLE>

         In accordance with the Land Appreciation Tax Law of China, all legal
         entities and individuals receiving income from the transfer of
         state-owned land use rights or buildings and their attached facilities
         are subject to land appreciation tax.

         Land appreciation tax is charged on the appreciated amount at the
         applicable rate. The amount of appreciation is calculated on the basis
         of sales proceeds received less deductible items. Deductible items
         include fees for land use rights acquisition, development costs and
         expenses for new buildings and facilities and other deductions as
         prescribed by the Ministry of Finance in China. The applicable rates
         are progressive ranging from 30% to 60% depending on the percentage of
         the appreciated amount over deductible costs.

         In accordance with the Land Appreciation Tax Law, the Company, being a
         taxpayer involved in real estate development, is entitled to an
         additional deduction equal to 20% of the aggregate of land use rights
         acquisition costs and land development costs, as defined in the law, in
         computing the land appreciation tax.

         In addition, as the Company sells ordinary standard residential
         apartments, as defined in the relevant regulations, the Company is
         exempted from land appreciation tax if the appreciated amount over the
         deductible cost is less than 20%. If the amount of the appreciated
         amount exceeds the deductible costs by more than 20%, the entire amount
         of the appreciation will be subject to land appreciation tax as stated
         above. The Company had made a provisional payment to the relevant Tax
         Bureau in 1999. The amount will be refunded after the amount of the
         appreciation is finalized. As at March 31, 2000 and 2001 the Company
         had no obligations under the Land Appreciation Tax Law.


                                      F-16


<PAGE>

                             NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


6.       LAND AND LOTS UNDER DEVELOPMENT AND COMPLETED HOMES

         In May 1997, the Company's subsidiary, Chingchu, commenced construction
         of a residential community called Chingchu California Gardens on a site
         in Shanghai, China. The project is being developed and sold on a phase
         basis and a total of 7 phases are planned for development. The planned
         development period spans from 1997 to 2002 during which approximately
         8,000 units are to be constructed in a planned area of approximately
         1,334,000 square meters. As at March 31, 2001, the Company has obtained
         the land use rights which represent the legal ownership of five plots
         of land for the development of Phases 1 through 5. This represents
         approximately 530,000 square meters.

         After obtaining the pre-sales certificates from the Shanghai House and
         Land Administration Bureau, sales of units in Phase 2 and Phase 3
         commenced during the years ended March 31, 1999, 2000, respectively,
         and sales of units in Phases 4 and 5 commenced during the year ended
         March 31, 2001.

         At the balance sheet dates, land and lots under development and
         completed houses comprised:

<TABLE>
<CAPTION>
                                                                                            March 31,
                                                              -------------------------------------------------------------------
                                                                 1999               2000              2001               2001
                                                              -----------        -----------       -----------        -----------
                                                                 HK$                 HK$               HK$                US$
                                                                                                                       (note 2)
          <S>                                                 <C>                <C>               <C>                <C>
          Completed homes .............................         2,575,387         12,258,967        79,986,412         10,254,668
          Land held under 70 years lease,
            at cost ...................................        97,142,881         67,542,336        44,785,684          5,741,754
          Construction costs of lots under
            development ...............................       197,986,933         90,865,445        78,476,433         10,061,082
                                                              -----------        -----------       -----------        -----------

                                                              297,705,201        170,666,748       203,248,529         26,057,504
          Add: Attributable profit recognized .........        68,301,687                 --                --                 --
                                                              -----------        -----------       -----------        -----------

                                                              366,006,888        170,666,748       203,248,529         26,057,504
          Less: Sales proceeds received and
            receivable ................................       232,445,201                 --                --                 --
                                                              -----------        -----------       -----------        -----------

                                                              133,561,687        170,666,748       203,248,529         26,057,504
                                                              ===========        ===========       ===========        ===========
</TABLE>

         As common in the construction industry, contractor may from time to
         time make additional claims for work done beyond the amounts specified
         in the construction contracts. The Company has received such additional
         claims amounting to approximately HK$ 28.9 million relating to
         construction work carried out by contractors prior to March 31, 2001
         (inclusive of the amounts set out in note 19). Such claims are subject
         to negotiation between the Company and the contractors, and failing
         negotiation, arbitration by an independent quantity surveyor.
         Accordingly, as of March 31, 2001, additional accrual for construction
         cost of approximately HK$ 28.9 million is reasonably possible, of which
         HK$ 7.6 million would be capitalized to land and lots under development
         and completed houses and HK$ 21.3 million be charged to cost of home
         sales.

         Included above are land and lots under development of HK$27,067,669 as
         of March 31, 2000 and 2001, respectively, which have been pledged as
         security for the long-term bank loan (note 8).


                                      F-17
<PAGE>

                             NEW CHINA HOMES, LTD.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


7.       PROPERTY, EQUIPMENT, AND CONSTRUCTION-IN-PROGRESS, NET


         Property, equipment and construction-in-progress consists of the
         following:

<TABLE>
<CAPTION>
                                                                                           March 31,
                                                              -------------------------------------------------------------------
                                                                 1999               2000              2001               2001
                                                              -----------        -----------       -----------        -----------
                                                                 HK$                 HK$              HK$                 US$
                                                                                                                        (note 2)
          <S>                                                 <C>                <C>               <C>                <C>
          At cost:
          Building ....................................                --         26,282,979        34,362,242          4,405,416
          Construction-in-progress ....................        31,878,237         21,290,665        33,770,017          4,329,489
          Machinery and equipment .....................            26,661             38,064            37,260              4,777
          Furniture and fixtures ......................         1,232,241          1,277,788         1,349,641            173,031
          Motor vehicles ..............................         2,726,968          3,937,844         4,107,200            526,564
          Electric equipment ..........................           814,922            976,443         1,115,838            143,056
                                                              -----------        -----------       -----------        -----------

          Total .......................................        36,679,029         53,803,783        74,742,198          9,582,333
          Less: Accumulated depreciation and
             amortization .............................           719,869          1,368,430         2,743,122            351,682
                                                              -----------        -----------       -----------        -----------

          Net book value ..............................        35,959,160         52,435,353        71,999,076          9,230,651
                                                              ===========        ===========       ===========        ===========
</TABLE>


         Depreciation and amortisation expense for the years ended March 31,
         1999, 2000 and 2001 was HK$588,228, HK$727,992 and HK$1,505,194,
         respectively.


8.       BANK BORROWINGS

         At March 31, 2000 and 2001, short-term bank loans totalling
         HK$54,511,279 (US$7,033,713) and HK$69,598,000 (US$8,922,820),
         respectively, bearing interest at approximately 6% per annum, have been
         guaranteed at no cost by the holding company of the minority
         shareholder of Chingchu. The long-term bank loan of HK$9,981,610 and
         HK$5,876,353 as of March 31, 2000 and 2001, respectively, which bears
         interest at US dollar prime lending rate plus 2% per annum is secured
         by the land use rights of California Gardens and certain lots under
         development (see note 6). A subsidiary of Far East has also guaranteed
         this loan at no cost to the Company. The long-term loan has maturities
         at March 31, 2001 as follows:

<TABLE>
<CAPTION>
                                                                       HK$                    US$
                                                                                           (note 2)
         Year ending March 31:

         <S>                                                        <C>                    <C>
         2002                                                       3,900,031               500,004
         2003                                                       1,976,322               253,375
                                                                    ---------               -------
                                                                    5,876,353               753,379
                                                                    =========               =======
</TABLE>

         The weighted average interest rate on borrowings was 6.95% as of March
         31, 2001. At March 31, 2001, the Company and its subsidiaries did not
         have any unutilized facilities.


                                      F-18

<PAGE>

                             NEW CHINA HOMES, LTD.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


8.       BANK BORROWINGS - continued

         Total interest costs incurred, expensed and capitalized relating to
         bank borrowings were:

<TABLE>
<CAPTION>
                                                                                             March 31,
                                                              -------------------------------------------------------------------
                                                                 1999               2000              2001               2001
                                                              -----------        -----------       -----------        -----------
                                                                 HK$                HK$               HK$                 US$
                                                                                                                        (note 2)
          <S>                                                 <C>                <C>               <C>                <C>
          Interest capitalized at beginning of the year:
              Land and lots under development .........         2,824,887          4,301,952         4,265,394            546,845
              Completed homes .........................                --             70,857           257,714             33,040
              Construction-in-progress ................           631,218          1,404,619         1,964,698            251,885
                                                              -----------        -----------       -----------        -----------

              Total interest capitalization ...........         3,456,105          5,777,428         6,487,806            831,770
                                                              ===========        ===========       ===========        ===========


          Interest capitalized at beginning
            of the year ...............................         3,456,105          5,777,428         6,487,806            831,770
          Plus interest incurred ......................         8,627,850          3,395,303         5,111,192            655,281
          Less interest expensed as cost of
            home sales ................................        (6,306,527)        (2,684,925)       (3,840,479)          (492,369)
          Less interest transferred to property,
            plant and equipment .......................                --                 --          (768,340)           (98,505)
                                                              -----------        -----------       -----------        -----------

          Interest capitalized at end of the year .....         5,777,428          6,487,806         6,990,179            896,177
                                                              ===========        ===========       ===========        ===========


          Interest capitalized at end of the year:
            Land and lots under development ...........         4,301,952          4,265,394         2,656,924            340,631
            Completed homes ...........................            70,857            257,714         1,720,700            220,603
            Construction-in-progress ..................         1,404,619          1,964,698         2,612,555            334,943
                                                              -----------        -----------       -----------        -----------

            Total interest capitalization .............         5,777,428          6,487,806         6,990,179            896,177
                                                              ===========        ===========       ===========        ===========
</TABLE>


                                      F-19

<PAGE>

                             NEW CHINA HOMES, LTD.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


9.       RELATED PARTY TRANSACTIONS

         At the balance sheet dates the Company and its subsidiaries had
         balances with the following parties:

<TABLE>
<CAPTION>
                                                                                  March 31,
                                                               ---------------------------------------------
                                                   Notes          2000              2001             2001
                                                 ----------    ----------        ---------         ---------
                                                                   HK$               US$
                                                                                                    (note 2)
         <S>                                     <C>           <C>               <C>               <C>
         Due from related parties:
           Subsidiaries of Far East
            Consortium.........................   (i)          41,501,814         2,759,831          353,824
                                                               ==========        ==========        =========

         Due to related parties:
           Subsidiaries of Far East
             Consortium........................   (i)          41,412,308         1,653,900          212,038
           Far East............................  (ii)          15,578,096         5,312,661          681,110
           Party related to the minority
            shareholder  of Chingchu...........  (iii)         31,398,030         6,933,288          888,884
                                                               ----------        ----------        ---------

                                                               88,388,434        13,899,849        1,782,032
                                                               ==========        ==========        =========
</TABLE>


         (i)      The amounts due from/to related companies represent unsecured
                  advances which are interest free and repayable on demand.

         (ii)     On April 2, 1999, as explained in note 1, the Company issued
                  shares to Far East for cash of US$9,549,000 which was used to
                  offset the payable to Far East, which amounted to US$9,795,997
                  at March 31, 1999. There was no interest charged in 2000 and
                  2001; interest charged in 1999 was HK$7,292,626 (1999:
                  HK$7,292,626). The amount outstanding at March 31, 2000 and
                  2001 is payable on demand.


                                      F-20

<PAGE>

                              NEW CHINA HOMES, LTD.


             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


9.       RELATED PARTY TRANSACTIONS - continued

         (iii)    At March 31, 2001, the amount due to the party related to the
                  minority shareholder of Chingchu represented payables for land
                  fees amounting to HK$6,933,288. At March 31, 2000, the amount
                  due to the party related to the minority shareholder of
                  Chingchu represented payables for land fees and infrastructure
                  costs amounting to HK$25,355,674 and HK$6,042,356,
                  respectively. Transactions in each year with this party, which
                  are included in the land and construction costs of Chingchu
                  California Gardens, are as follows.

<TABLE>
<CAPTION>
                                                                                              March 31,
                                                              ------------------------------------------------------------------
                                                                 1999               2000              2001               2001
                                                              -----------        -----------       -----------        -----------
                                                                  HK$                HK$               HK$                 US$
                                                                                                                        (note 2)
          <S>                                                  <C>                <C>               <C>                 <C>
          Land fees and costs .........................        28,052,573         42,776,898        20,187,321          2,588,118
          External infrastructure costs ...............        38,640,037         29,093,921         9,782,091          1,254,114
          Penalty on late payment .....................           748,363                 --                --                 --
                                                              -----------        -----------       -----------        -----------
                                                               67,440,973         71,870,819        29,969,412          3,842,232
                                                              ===========        ===========       ===========        ===========
</TABLE>


                  The average amount due to the party related to the minority
                  shareholder during the year ended March 31, 2000 and 2001 was
                  HK$28,043,523 and HK$13,361,396, respectively which
                  represented RMB29,838,308 and RMB14,523,837, respectively,
                  translated using an average exchange rate of RMB1.064 to HK$1
                  and RMB1.087 to HK$1, respectively. The party related to the
                  minority shareholder did not charge the Company any interest
                  during the years ended March 31, 1999, 2000 and 2001 except
                  for penalty on the delayed payment of land fees in 1999 as
                  shown above.

         (iv)     During the year ended March 31, 2000, unsecured advances were
                  made to minority shareholder of Chingchu at an interest rate
                  of 6.44% per annum. The advances were fully repaid prior to
                  March 31, 2000.


10.      TRADE ACCOUNTS PAYABLE AND ACCRUED EXPENSES

         Components of trade accounts payable and accrued expenses are as
         follows:

<TABLE>
<CAPTION>
                                                                                         March 31,
                                                             --------------------------------------------------------------
                                                                1999             2000              2001              2001
                                                             ----------       ----------        ----------        ---------
                                                                 HK$              HK$               HK$               US$
                                                                                                                    (note 2)

         <S>                                                 <C>              <C>               <C>               <C>
         Trade accounts payable........................      29,860,034       10,597,897        37,268,496        4,778,012
         Business tax payable..........................       2,959,951        3,769,629         4,771,968          611,791
         Accrued expenses..............................       1,873,451        2,334,683         7,963,546        1,020,968
                                                             ----------       ----------        ----------        ---------
                                                             34,693,436       16,702,209        50,004,010        6,410,771
                                                             ==========       ==========        ==========        =========
</TABLE>


                                      F-21
<PAGE>

                             NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


11.      STOCKHOLDERS' EQUITY

         Warrants

         In conjunction with the initial public offering of its shares, the
         Company issued 2,300,000 warrants. Each warrant entitles the holder
         thereof to purchase, at any time up to March 7, 2005, one common share
         at a price of US$5.75 per share, after which date the warrants will
         expire.

         The warrants are subject to redemption by the Company, at the option of
         the Company, at US$0.25 per warrant, upon 30 days' prior written
         notice, if the closing bid price, as reported on the Nasdaq National
         Market, or the closing sale price, as reported on a national or
         regional securities exchange, as applicable, of the common shares for
         30 consecutive trading days ending within ten days of the notice of
         redemption of the warrants averages in excess of US$10.00 per share,
         subject to adjustment. In the event the Company exercises the right to
         redeem the warrants, such warrants will be exercisable until the close
         of business on the date of redemption fixed in such notice. If any
         warrant called for redemption is not exercised by such time, it will
         cease to be exercisable and the holder will be entitled only to the
         redemption price. No warrants were redeemed during 2000 or 2001.

         In addition to the warrants issued in conjunction with the initial
         public offering, the Company issued to the managing underwriter and/or
         persons related to the managing underwriter, for nominal consideration,
         warrants to purchase up to 200,000 common shares at an exercise price
         of $8.25 per share and warrants to purchase up to 200,000 additional
         warrants at an exercise price of $0.20625 per warrants (collectively
         refer to as "Underwriter warrants"). Both warrants are exercisable for
         a five-year period commencing on March 8, 2000. Each warrant to
         purchase warrants is exercisable for a five-year period commencing on
         March 8, 2000 to purchase the common shares at an exercise price of
         $9.4875 per share.

         The Underwriter Warrants contain net issuance provisions permitting the
         holders thereof to elect to exercise the Underwriter Warrants in whole
         or in part and instruct the Company to withhold from the securities
         issuable upon exercise, a number of securities, valued at the current
         fair market value on the date of exercise, to pay the exercise price.
         Such net exercise provision has the effect of requiring the Company to
         issue common shares without a corresponding increase in capital. A net
         exercise of the Underwriter Warrants will have the same dilutive effect
         on interests of our shareholders as will a cash exercise. The
         Underwriter Warrants do not entitle the holders thereof to any rights
         as a shareholder of the Company until the Underwriter Warrants are
         exercised and common shares are purchased thereunder.


                                      F-22
<PAGE>

                             NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


11.      STOCKHOLDERS' EQUITY - continued

         Preferred Shares

         The Company has the authority without further vote or action by the
         shareholders to issue up to 5,000,000 preferred shares in one or more
         series and to fix the number of preferred shares constituting any such
         series, the voting powers, designations, preferences and relative
         participation, optional or other special rights and qualifications,
         limitations or restrictions thereof, including the dividend rights and
         dividend rate, terms of redemption (including sinking fund provisions),
         redemption price or prices, and conversion rights and liquidation
         preferences of the preferred shares constituting any series. The
         issuance of preferred shares by the Company could adversely affect the
         rights of the holders of common shares. For example, such issuance
         could result in a class of securities outstanding that would have
         preferences with respect to voting rights and dividends, and in
         liquidation, over the common shares, and could (upon conversion or
         otherwise) enjoy all of the rights of the common shares.

         The Company may issue preferred shares with voting or conversion rights
         that could adversely affect the voting power of the holders of common
         shares. There are no agreements or understandings for the issuance of
         preferred shares and the Company has no present intention to issue
         preferred shares. The Company has agreed for three years from March 8,
         2000 not to issue any preferred shares without the underwriter's
         consent.


12.      COMMITMENTS AND CONTINGENCIES

         OPERATING LEASES

         The Company and its subsidiaries lease office and employee
         accommodation under various operating leases which do not contain any
         renewal or escalation clauses. Rental expense under operating leases
         was HK$293,078 in 1999, HK$175,566 in 2000 and HK$279,748 in 2001. At
         March 31, 2001, the Company and its subsidiaries were committed under
         operating leases requiring minimum rentals as follows:

<TABLE>
<CAPTION>
                                                                                      HK$                    US$
                                                                                                          (note 2)

         <S>                                                                         <C>                  <C>
         2002...................................................................     240,943                30,890
         2003...................................................................     187,550                24,045
         2004...................................................................     196,928                25,247
                                                                                     -------               -------

                                                                                     625,421                80,182
                                                                                     =======               =======
</TABLE>


                                      F-23
<PAGE>

                             NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


12.      COMMITMENTS AND CONTINGENCIES - continued

         CAPITAL EXPENDITURE

         At March 31, 2001, the Company had contracted for expenditure of
         approximately HK$86,642,000 in respect of land and lots under
         development relating to Chingchu California Gardens which is expected
         to be expended within the next two years. The Company has authorized
         but not yet contracted for additional expenditure on Chingchu
         California Gardens of approximately HK$211,968,000.

         GUARANTEES

         The Company has given guarantees in respect of mortgage loans provided
         to the buyers of Chingchu California Gardens as disclosed in note 4 to
         the financial statements.

         At March 31, 2000 and 2001, the total amount of mortgages outstanding
         which are subject to these guarantees was approximately HK$76 million
         and HK$74 million, respectively.

         PROVISIONAL TAX PAYMENTS

         The Company has pre-sold part of the real estate development project
         and has accrued the full amount of provisional foreign enterprises
         income tax on the deemed profits arising from the pre-sales pursuant to
         the relevant tax regulations. The Company, however, has not made
         instalment payments on account of the provisional tax liability based
         on the informal understanding that it has reached with the competent
         tax authority allowing the instalment to be delayed until the project
         is completed. In the absence of such approval, the Company may be
         liable for delinquent charges approximating HK$13,439,000 and
         HK$23,256,000 calculated at a daily rate of 0.2% on the unpaid amount
         at March 31, 2000 and 2001, respectively.




                                      F-24
<PAGE>

                             NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


13.      EMPLOYEE BENEFITS

         In accordance with local government regulations, Chingchu is required
         to make contributions to a defined contribution retirement fund which
         is administered by the Labour Bureau of the local government. Chingchu
         is required to contribute 25.5% of the total salary. Chingchu has no
         obligation for the pension payments or any post-retirement benefits
         beyond the annual contributions described above. Chingchu contributions
         for the years ended March 31, 1999, 2000 and 2001 were HK$314,330,
         HK$280,412 and HK$280,891, respectively.

         According to the Mandatory Provident Fund ("MPF") legislation regulated
         by the Mandatory Provident Fund Scheme Authority in Hong Kong, with
         effect from December 1, 2000, the Company is required to participate in
         an MPF Scheme operated by approved trustees in Hong Kong and to make
         contributions for its eligible employees. The contributions borne by
         the Company are calculated at 5% of the salaries and wages (monthly
         contribution is limited to 5% of HK$20 for each eligible employee) as
         calculated under the MPF legislation. The contributions made for the
         year ended March 31, 2001 amounted to HK$4,000.


14.      CONCENTRATION OF CREDIT RISK

         The Company maintains its cash and cash equivalents with banks and
         financial institutions in China. All sales are made to Chinese domestic
         home buyers. As the Company does not have any major customers, it does
         not consider itself exposed to significant credit risk with regards to
         collection of related receivables. No credit losses have been recorded
         since commencement of operation.


15.      FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying amount of cash and cash equivalents, accounts receivable,
         short-term bank borrowings, customer deposits and accounts payable,
         accrued expenses and amounts due to/from related companies approximate
         fair value because of the short maturities of these instruments. The
         carrying value of long-term bank borrowings approximates their fair
         value as the related interest rate is equivalent to current market
         rates.


                                      F-25
<PAGE>

                             NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


16.      STOCK OPTION PLAN

         In August 1999, the Company adopted a 1999 Stock Option and Restricted
         Stock Purchase Plan (the "Plan") conditioned upon the shareholders of
         Far East approving the terms of the Plan and subject to the review of
         the Stock Exchange of Hong Kong Limited ("SEHK"). In December 1999, the
         shareholders of Far East approved the terms of the Plan. To date no
         adverse comments were received from the SEHK. Under the Plan, the
         compensation committee of the board of directors has complete
         discretion to determine which eligible individuals are to receive
         option grants, the number of shares subject to each grant, the status
         of any granted option, the vesting schedule to be in effect for the
         option grant and maximum term for which any granted option is to remain
         outstanding. Each option granted under the Plan has a maximum term of
         10 years.

         A summary of stock option activity follows:

<TABLE>
<CAPTION>
                                                                                                                 Weighted
                                                                                             Number               average
                                                                                            of shares         exercise price
                                                                                            ---------         --------------
                                                                                                                    US$
         <S>                                                                                <C>               <C>
         Outstanding at April 1, 1999.................................................             --                  --
           Granted....................................................................        140,000                7.50
           Exercised..................................................................             --                  --
           Cancelled..................................................................             --                  --
                                                                                              -------               -----

         Outstanding at March 31, 2000 and 2001.......................................        140,000                7.50
                                                                                              =======               =====
</TABLE>

<TABLE>
<CAPTION>
                                                                                                          March 31, 2001
                                                                                                          --------------
         <S>                                                                                              <C>
         Options available for grant.............................................................             600,000
         Options exercisable.....................................................................             140,000
         Options exercisable weighted average exercise price.....................................             US$7.50
</TABLE>

         The following table summarizes information on outstanding and
         exercisable stock options as of March 31, 2001:

<TABLE>
<CAPTION>
                                                                Options outstanding                  Options exercisable
                                                    ------------------------------------------  -----------------------------
                                                                       Weighted     Weighted                       Weighted
                                                         Number         average      average         Number         average
                                                       outstanding    contractual   exercise       exercisable     exercise
         Range of exercisable prices                 (in thousands)  life (years)     price      (in thousands)      price
         ---------------------------                 --------------  ------------     -----      --------------      -----
         <S>                                         <C>             <C>            <C>          <C>               <C>
         US$7.50.................................           140             10      US$7.50             140         US$7.50
                                                          =====          =====       =======          =====         =======
</TABLE>


                                      F-26
<PAGE>

                             NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


16.      STOCK OPTION PLAN - continued

         Additional stock plan information

         In accordance with Statement of Financial Accounting Standard ("SFAS")
         No. 123, Accounting for Stock-Based Compensation, the Company applied
         Accounting Principles Board Opinion 25 and related interpretations in
         accounting for its stock option plans, and accordingly does not record
         compensation costs unless the exercise price is less than the fair
         market value of shares at the grant date. If the Company had elected,
         to recognize compensation cost based on the fair value of the option
         granted at the grant date as prescribed by SFAS No. 123, net income and
         income per share would have been reduced to the pro forma amounts shown
         below:

<TABLE>
<CAPTION>
                                                                                          March 31, 2000
                                                                ---------------------------------------------------------
                                                                     2000                    2001                  2001
                                                                     ----                    ----                  ----
                                                                      HK$                     HK$                   US$
                                                                                                                  (note 2)
         <S>                                                       <C>                     <C>                  <C>
         As reported
           Net income (loss)..................................      4,600,347              (6,715,494)          (860,962)
           Income (loss) per share - basic....................           0.44                   (0.53)             (0.07)
           Income (loss) per share - diluted..................           0.44                   (0.53)             (0.07)
         Pro forma
           Net loss...........................................     (1,421,403)                     --                 --
           Loss per share - basic.............................          (0.13)                     --                 --
           Loss per share - diluted...........................          (0.13)                     --                 --
</TABLE>

         There were no stock options granted in the years ended March 31, 1999
         and 2001. Under SFAS No. 123, the fair value of stock-based awards to
         employees is calculated using option pricing models, even though such
         models were developed to estimate the fair value of freely tradable,
         fully transferable options without vesting restrictions, which
         significantly differ from the Company's stock option awards. These
         models also require subjective assumptions, including future stock
         price volatility and expected time to exercise, which greatly affect
         the calculated values.

         The Company's calculations were made using the minimum value method and
         Black-Scholes option pricing models with the following weighted average
         assumptions:

<TABLE>
<CAPTION>
                                                                                              Year ended March 31, 2000
                                                                                              -------------------------

         <S>                                                                                  <C>
         Dividend yield......................................................                             --
         Expected volatility.................................................                             57%
         Risk-free interest rate.............................................                           6.44%
         Expected life of option following vesting (in months)...............                            120
</TABLE>

         The Company's calculations are based on a multiple option valuation
         approach and forfeitures are recognized as they occur. The valuations
         of the computed weighted average fair values of option grants under
         SFAS No. 123 in fiscal 2000 was US$5.55.


                                      F-27

<PAGE>
                             NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued


17.      COMPREHENSIVE INCOME

         Statement of Financial Accounting Standards No. 130, Reporting
         Comprehensive Income, requires that an enterprise report, by major
         components and as a single total, the change in net assets during the
         period from non-owner sources. The reconciliation of net income (loss)
         to comprehensive income is as follows:

<TABLE>
<CAPTION>
                                                                                   Years ended March 31,
                                                             --------------------------------------------------------------
                                                                1999              2000              2001            2001
                                                             ----------        ---------         ---------       ----------
                                                                HK$               HK$              HK$               US$
                                                                                                                   (note 2)

         <S>                                                 <C>               <C>              <C>               <C>
         Net income (loss)...........................        24,571,592        4,600,347        (6,715,494)        (860,962)
         Changes in other comprehensive
           income:
           Translation adjustments...................            71,799         (387,716)        3,109,684          398,678
                                                             ----------        ---------        ----------        ---------

         Total comprehensive income (loss)...........        24,643,391        4,212,631        (3,605,810)        (462,284)
                                                             ==========        =========        ==========        =========
</TABLE>


18.      SEGMENT INFORMATION

         The Company operates in one business segment, which is the sale of real
         estate developments and sales are from one geographical region, China.

19.      SUBSEQUENT EVENT

         In July, 2001, Chingchu was sued by a contractor working for it to
         develop Phase III of Chingchu California Garden. The contractor alleges
         that Chingchu owes it approximately Rmb 15 million (HK$14 million) for
         work performed. Of this amount, approximately Rmb6 million related to
         work encompassed by the construction contract which has not been paid
         by Chingchu, which has been recorded as a liability in the accompanying
         financial statement as of March 31, 2001. The remaining Rmb 9.0 million
         relates to additional charges sought by the contractors. In August,
         2001 Chingchu filed a counter-suit seeking approximately Rmb9.7 million
         (HK$8.9 million) from the contractors, asserting that it failed to
         comply with certain specifications of the construction contract and
         sought damages for the contractor's delay in completing the project.
         Both the contractor's suit and Chingchu's counter-suit are pending in a
         PRC court, which is expected to be heard by the end of the calendar
         year 2001. In the meantime, the PRC court has ordered that certain
         assets of the Company be frozen, including 43 units in the Chingchu
         California Garden Project as well as approximately RMB 1.8 million
         (HK$1.6 million) in cash. The ultimate outcome of these matters is
         uncertain.


                                      F-28
<PAGE>

                             NEW CHINA HOMES, LTD.

                      SELECTED CONSOLIDATED FINANCIAL DATA


We have derived the selected statement of operations data for the fiscal years
ended March 31, 1997, 1998, 1999, 2000 and 2001 and the selected balance sheet
data as of March 31, 2000 and 2001 presented below from our audited consolidated
financial statements prepared in accordance with US GAAP. You should read the
selected financial and operating data presented below together with "Operating
and Financial Review and Prospects" and our consolidated financial statements
and notes thereto included elsewhere in this Annual Report.

STATEMENT OF OPERATIONS DATA:

<TABLE>
<CAPTION>
                                                                                    Year ended March 31,
                                               -----------------------------------------------------------------------------------
                                                  1997           1998           1999          2000          2001           2001
                                               -----------    -----------    -----------   -----------   -----------    -----------
                                                  HK$            HK$             HK$          HK$           HK$             US$
<S>                                            <C>             <C>           <C>           <C>           <C>            <C>
Operating revenues .........................            --     74,197,884    270,830,228   174,742,842   169,008,016     21,667,694
                                               ===========    ===========    ===========   ===========   ===========    ===========

Operating (loss) income before minority
  interest and income taxes ................       (10,609)    (5,718,280)    40,915,526    12,372,604      (800,556)      (102,636)
Income taxes ...............................            --     (1,430,566)    15,773,365     7,508,689     5,712,188        732,332
                                               -----------    -----------    -----------   -----------   -----------    -----------

(Loss) income before minority interests ....       (10,609)    (4,287,714)    25,142,161     4,863,915    (6,512,744)      (834,968)
Minority interests .........................            --        (41,358)       570,569       263,568       202,750         25,994
                                               -----------    -----------    -----------   -----------   -----------    -----------

Net (loss) income ..........................       (10,609)    (4,246,356)    24,571,592     4,600,347    (6,715,494)      (860,962)
                                               ===========    ===========    ===========   ===========   ===========    ===========

(Loss) earnings per share - basic ..........        (10.61)     (4,246.36)     24,571.59          0.44         (0.53)         (0.07)
                                               -----------    -----------    -----------   -----------   -----------    -----------

(Loss) earnings per share - diluted ........        (10.61)     (4,246.36)     24,571.59          0.44         (0.53)         (0.07)
                                               ===========    ===========    ===========   ===========   ===========    ===========

Weighted average number of shares outstanding
- basic (See note (1)) .....................         1,000          1,000          1,000    10,538,630    12,700,000     12,700,000
                                               ===========    ===========    ===========   ===========   ===========    ===========

Weighted average number of shares outstanding
- diluted (See note (1)) ...................         1,000          1,000          1,000    10,575,467    12,700,000     12,700,000
                                               ===========    ===========    ===========   ===========   ===========    ===========
</TABLE>


No dividends have been paid during the periods indicated above.


                                      F-29


<PAGE>

                             NEW CHINA HOMES, LTD.

                      SELECTED CONSOLIDATED FINANCIAL DATA


BALANCE SHEET DATA:

<TABLE>
<CAPTION>
                                                                                         March 31,
                                                            ---------------------------------------------------------------
                                                             1999              2000             2001               2001
                                                             ----              ----             ----               ----
                                                              HK$               HK$              HK$                US$

<S>                                                         <C>              <C>               <C>               <C>
Total assets.........................................       221,500,707      386,945,862       343,317,913       44,015,117
Long-term debt.......................................        30,327,409        9,981,610         5,876,353          753,379
Total stockholders' equity...........................        22,570,734      182,027,011       172,201,833       22,077,158
</TABLE>

(1)      Adjusted to give effect to a 1000-for-one stock split effected in
         August 2000.

(2)      As of March 31, 2000 and March 31, 2001, Shanghai Chingchu had a total
         of HK$76 million and HK$74 million, respectively, of outstanding
         mortgage loans subject to performance guarantees. Shanghai Chingchu has
         agreed to secure the obligations of California Gardens home purchasers
         to make repayment to the mortgages of their homes. The performance
         guarantees provide that upon default by a home purchaser of its
         obligation to repay the mortgage instalments for three consecutive
         months, the relevant mortgage bank may require Shanghai Chingchu to pay
         the outstanding mortgage. As of March 31, 2001, Shanghai Chingchu has
         not been required to make any payment under these performance
         guarantees.


                                      F-30