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, 2000

                                       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
--------------------------------------------------------------------------------
                     (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.

                                                  Name of each exchange
Title of each class                               on which registered
Common Shares, par value $1.00 per share          Nasdaq National Market
-----------------------------------------         ------------------------------
Redeemable Common Share Purchase Warrants         Nasdaq National Market
-----------------------------------------         ------------------------------

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

                                      NONE
--------------------------------------------------------------------------------
                                 (Title of Class
<PAGE>

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:

Common Shares, par value $ 1.00 per share:     12,700,000
                                               ---------------------------------

         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

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 Financial Data......................................2
                  Risk Factors.................................................8
    Item 4.       Information on the Company..................................22
    Item 5.       Operating and Financial Review and Prospects................45
    Item 6.       Directors, Senior Management and Employees..................51
    Item 7.       Major Shareholder and Related Party Transactions............60
    Item 8.       Financial Information.......................................61
    Item 9.       The Offer and Listing.......................................62
    Item 10.      Additional Information......................................62
    Item 11.      Quantitative and Qualitative Disclosures About Market Risk..77
    Item 12.      Description of Securities Other than Equity Securities......77

PART II.......................................................................77

    Item 13.      Defaults, Dividend Arrearages and Delinquencies.............77
    Item 14.      Material Modifications to the Rights of Security Holders
                  and Use of Proceeds.........................................77
    Item 15.      Reserved....................................................78
    Item 16.      Reserved....................................................78
    Item 17.      Financial Statements........................................78

PART III......................................................................78

    Item 18.      Financial Statements........................................78
    Item 19.      Exhibits....................................................78

                                       i

<PAGE>
                                  INTRODUCTION

         This Annual Report on Form 20-F for the fiscal year ended March 31,
2000 constitutes our initial Annual Report on Form 20-F as filed with the United
States Securities and Exchange Commission (the "Commission"). This Annual Report
on Form 20-F includes our audited consolidated financial statements as at March
31, 1998, 1999 and 2000.

         We completed the initial public offering of 2,000,000 shares of our
common stock, par value $1.00 per share (the "Common Shares") and 2,000,000
redeemable common share purchase warrants (the "Warrants") in March 2000. In
that month, we also listed our Common Shares and Warrants on the Nasdaq National
Market ("NASDAQ") under the symbols "NEWC" and "NEWCW", respectively.

International Disclosure Standards

         On September 28, 1999, the Commission adopted international disclosure
standards for foreign private issuers that will become mandatory for annual
reports relating to fiscal years ending on or after September 30, 2000. New
China Homes has voluntarily prepared this Annual Report in accordance with the
new standards.

Forward-Looking Information

         Information contained in this Annual Report contains certain
"forward-looking statements" and information relating to New China Homes 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 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 Beijing, 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 ("US GAAP") and published such
statements in Hong Kong dollars. All references to "HK$" are to Hong Kong
dollars. All references to "U.S. dollars," "dollars," "US$" or "$" are to United

                                       1
<PAGE>

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$ 7.7867 and US$ 1.00 = RMB 8.2787, the noon buying rate in New York
City for cable transfers in Hong Kong dollars and Chinese Renminbi,
respectively, as certified for customs purposes by the Federal Reserve Bank in
New York on March 31, 2000. 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.

         On consolidation, the financial statements of our joint venture
subsidiary in China are translated from Renminbi, being its functional currency,
into Hong Kong dollars. The translation of Hong Kong dollar amounts into United
States dollars within the consolidated financial statements are for convenience
only and have been made at a rate of US$ 1.00 = HK$ 7.75 and US$ 1.00 = RMB
8.246. 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.

                                     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 and 2000 and the selected balance sheet data as
of March 31, 1999 and 2000 presented below from our audited consolidated
financial statements prepared in accordance with US GAAP. We derived the
selected statement of operations data for the fiscal year ended March 31, 1996
from our unaudited consolidated financial statements which were prepared on the
same basis as our audited consolidated financial statements, and include all
adjustments which we believe are necessary to present fairly the data for such
period. 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,
                                                         -------------------------------------------------------
                                                          1996    1997       1998          1999         2000         2000
                                                         ------  -------  -----------   -----------  -----------  -----------
                                                           HK$     HK$        HK$           HK$          HK$          US$

<S>                                                      <C>     <C>       <C>          <C>          <C>           <C>
Operating revenues ....................................      --       --   74,197,884   270,830,228  174,742,842   22,547,463
                                                         ======  =======  ===========   ===========  ===========  ===========
Operating (loss) income before interest and
  income taxes ........................................  (8,985) (10,609)  (4,266,325)   47,222,053   15,057,529    1,942,907
Interest expenses .....................................      --       --    1,451,955     6,306,527    2,684,925      346,442
                                                         ------  -------  -----------   -----------  -----------  -----------
(Loss) income before income taxes .....................  (8,985) (10,609)  (5,718,280)   40,915,526   12,372,604    1,596,465
Income taxes ..........................................      --       --   (1,430,566)   15,773,365    7,508,689      968,863
                                                         ------  -------  -----------   -----------  -----------  -----------
(Loss) income before minority interests ...............  (8,985) (10,609)  (4,287,714)   25,142,161    4,863,915      627,602
Minority interests ....................................      --       --      (41,358)      570,569      263,568       34,009
                                                         ------  -------  -----------   -----------  -----------  -----------
Net (loss) income .....................................  (8,985) (10,609)  (4,246,356)   24,571,592    4,600,347      593,593
                                                         ======  =======  ===========   ===========  ===========  ===========
(Loss) earnings per share - basic .....................   (8.99)  (10.61)   (4,246.36)    24,571.59         0.44         0.06
                                                         ======  =======  ===========   ===========  ===========  ===========
(Loss) earnings per share - diluted ...................   (8.99)  (10.61)   (4,246.36)    24,571.59         0.44         0.06
                                                         ======  =======  ===========   ===========  ===========  ===========
Weighted average number of shares outstanding
- basic (See note (1)) ................................   1,000    1,000        1,000         1,000   10,538,630   10,538,630
                                                         ======  =======  ===========   ===========  ===========  ===========
Weighted average number of shares outstanding
- diluted (See note (1)) ..............................   1,000    1,000        1,000         1,000   10,575,467   10,575,467
                                                         ======  =======  ===========   ===========  ===========  ===========
</TABLE>

No dividends have been paid during the periods indicated above.



                                       3
<PAGE>

Balance Sheet Data:

<TABLE>
<CAPTION>
                                                             As of March 31,
                                                -----------------------------------------
                                                   1999           2000            2000
                                                -----------    -----------     ----------
                                                    HK$            HK$             US$
<S>                                             <C>            <C>             <C>
Total assets ...............................    221,500,707    386,945,862     49,928,497
Long-term debt .............................             --      6,090,633        785,888
Total stockholders' equity .................     22,570,734    182,027,011     23,487,356
</TABLE>

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

(2)      As of March 31, 1999 and March 31, 2000, Shanghai Chingchu had a total
         of HK$ 81 million and HK$ 76 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, 2000, Shanghai Chingchu has
         not been required to make any payment under these performance
         guarantees.



                                       4
<PAGE>

Key Operating Data:

  The following tables set forth our key operating data as of March 31, 2000:

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

<TABLE>
<CAPTION>
                                                          Fiscal year ended March 31,
                                                --------------------------------------------
                                                1998               1999               2000
                                                ----               ----               ----
                                          (in HK$ millions)  (in HK$ millions)  (in HK$ millions)
<S>                                            <C>                <C>                  <C>
Phase I...............................         73.92              35.26                 0.23
Phase II..............................             -             234.66                22.71
Phase IIA.............................             -                  -                    -
Phase III.............................             -                  -               151.13
Phase IV..............................             -                  -                    -
                                               73.92             269.92               174.07
                                               =====             ======               ======
</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
and we have received at last 90% of the purchase price, plus the amount of
deposits, or booking fees received by us for units which have not been
purchased.

a)       Total revenue:

-------------------------------------------------------------
                    Number of Units         Total Sales Value
                                                 HK$ '000
-------------------------------------------------------------
Purchased                     1,500                   519,594
-------------------------------------------------------------
Booked                          509                   193,211
-------------------------------------------------------------
Total                         2,009                   712,805
-------------------------------------------------------------

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

o        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. The term "sold"
         refers to the signing of a sales and purchase agreement and the receipt
         of 90% of all sales proceeds.

c)       When a home buyer has paid 30% 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 70%, 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.



                                       5
<PAGE>


         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.

         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 current 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>
---------------------------------------------------------------------------------------------------------------------
                       Phase I                   Phase II                  Phase III                 Total
  Category     ------------------------------------------------------------------------------------------------------
               Number      Percentage    Number      Percentage    Number      Percentage   Number      Percentage
               of Units                  of Units                  of Units                 of Units
---------------------------------------------------------------------------------------------------------------------
<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>

         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.       The Public Housing Fund does not have sufficient money to fund
                  the borrowing because of the high demand.

         3.       the delay was caused by home buyers' Personal reasons.

d)       Status of payment for homes purchased as at March 31, 2000.



                                       6
<PAGE>


<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------
                               Number of       Total Sales        Amount Paid         Amount Owing
                                 Units            Value
-----------------------------------------------------------------------------------------------------
                                               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>

Total sales value is based on the full purchase price of the home purchased. As
at March 31, 2000, Phases I, II and III 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, 2000:

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------
                            Phase I      Phase II    Phase III      Total
                          ---------------------------------------------------
     Category               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>

          Note:

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

e)       The number of homes completed but not sold as of March 31, 2000 is as
         follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                            Number of Homes    Number of         Number of
                                              Completed        Homes Sold      Homes Not Sold
----------------------------------------------------------------------------------------------
               <S>                               <C>             <C>                 <C>
               Phase I                           365             365                  -
----------------------------------------------------------------------------------------------
               Phase II                          752             744                  8
----------------------------------------------------------------------------------------------
               Phase III                         416             391                 25
----------------------------------------------------------------------------------------------
               Total                           1,533           1,500                 33
----------------------------------------------------------------------------------------------
</TABLE>



                                       7
<PAGE>

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, and 2000.

                                          Renminbi        Hong Kong Dollars
                       Fiscal Year    Average (1) (2)          Average (1) (2)
                       -----------    ---------------     --------------------
                          1996             8.3413                7.7346
                          1997             8.3342                7.7379
                          1998             8.3105                7.7428
                          1999             8.2916                7.7479
                          2000             8.2783                7.7685

================================================================================
(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.

(2)      Determined by averaging the rates on the last business day of each
         month during the relevant period.

         During the first quarter of fiscal year 2001(April 1, 2000 through June
30, 2000), the average 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 was one U.S. dollar equals HK$ 7.7929 Hong Kong dollars or
8.2784 Renminbi.

         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.

                                     Renminbi               Hong Kong Dollars
                                     --------               -----------------
         Month Ended             High        Low             High        Low
         -----------             ----        ---             ----        ---

         March 31, 2000         8.2795     8.2777           7.7867      7.7824
         April 30, 2000         8.2799     8.2785           7.7890      7.7863
         May 31, 2000           8.2799     8.2768           7.7927      7.7890
         June 30, 2000          8.2782     8.2768           7.7960      7.7910
         July 31, 2000          8.2798     8.2786           7.7987      7.7960
         August 31, 2000        8.2799     8.2788           7.8008      7.7985

         On September 27, 2000, 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 7.7983 Hong Kong dollars or 8.2795 Renminbi.

         B.       Risk Factors

RISKS RELATING TO THE 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.

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

         Shanghai Chingchu Property Development Co. Ltd., one of our operating
subsidiaries ("Shanghai Chingchu"), 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 and 2000 from the sale of units in California Gardens. Our future
results will heavily depend on the development and sale of



                                       8
<PAGE>


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, including Millennium Towers, which involve identifying
suitable development sites.

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.

         Some of our senior management have only recently joined us. Of the
employees listed in the "Directors, Senior Management and Employees" section of
this Annual Report, four 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:

         o        develop additional residential communities;
         o        increase our sales and marketing operations; and
         o        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.

         If one or more members of our senior management team or key employees,
including Michael O'Young, our President and 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 business, financial condition, liquidity
and operating results may be materially adversely affected if we cannot hire and
retain suitable personnel.

                                       9
<PAGE>

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 75% 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 needed 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, 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 AND BEIJING CHANGE ADVERSELY. OUR REVENUES MAY BE AFFECTED BY THE
FOLLOWING LOCAL BUSINESS CONDITIONS: EMPLOYMENT AND INFLATION RATES, THE
EMERGENCE OF NEW RESIDENTIAL AND COMMERCIAL PROPERTY DEVELOPMENTS, 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 employment and inflation, emergence of new
residential and commercial property developments, property values generally and
changes in local governmental regulations. We have recently expanded our
operations into Beijing and 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 particular city. However, new markets such as Beijing, 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.

                                       10
<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, 2000, we had profits of RMB 6,704,285 (HK$ 6,305,752 or
US$ 809,810) 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


                                       11
<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, 2000, the Company had a total of
HK$ 75.59 million of outstanding mortgage loans subject to performance
guarantees. As of March 31, 2000, 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
EXPECTATIONS.

         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:

                                       12
<PAGE>

         o        construction may not be completed on schedule or within budget
                  due to unforeseeable factors such as adverse weather
                  conditions;
         o        government approvals may take more time and resources to
                  obtain than expected;
         o        we may experience delays in the process of clearing and
                  resettlement of the development site; and
         o        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.

                                       13
<PAGE>

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, 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
occur, 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:

         o        the prevailing circumstances at the time of such sale;
         o        the manner of sale;
         o        the provisions of the relevant Chinese regulations which are
                  in force at the relevant time; and
         o        the profit margin on the sale of our homes.

                                       14
<PAGE>

         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.

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, significant 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, Japan, etc. 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:

         o        establishes annual production and development targets;

         o        formulates and supervises annual plans to achieve the targets;

         o        allocates resources necessary to achieve the targets; and

         o        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:

         o        decentralization of decision-making;
         o        separation of regulatory and governmental functions from
                  management functions;
         o        utilization of market forces in setting prices for many
                  commodities and services;
         o        encouragement of private economic activity and ownership,
                  including private home ownership;
         o        encouragement of foreign investment in certain sectors; and
         o        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

                                       15
<PAGE>

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 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 RECENT 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 counties have experienced significant adverse economic
developments, known as the Asian-financial crisis, including:

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

         o        increased domestic interest rates;

         o        reduced economic growth rates;

         o        increased corporate defaults and bankruptcies;

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

         o        decreases in levels of direct foreign investment; and

         o        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 we cannot assure you that the current
economic developments in 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 be difficult to predict the outcome of a dispute, as a
court's application and interpretation of the law may

                                       16
<PAGE>

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 New China Homes 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 ("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 obtain the necessary foreign exchange
registration certificates or fail to have such certificates examined

                                       17
<PAGE>

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 reached historical highs within the last 52
weeks and have reflected relative valuations substantially above historical
levels. During the same period, these companies' stocks have also been highly
volatile and have recorded lows well below such historical highs. Factors that
could cause such volatility may include, among other things:

         o        actual or anticipated variations in quarterly operating
                  results;
         o        changes in financial estimates by securities analysts;
         o        conditions or trends in China or the residential housing
                  market in China;
         o        announcements by us or our competitors of significant
                  acquisitions, strategic partnerships or joint ventures;
         o        capital commitments;
         o        additions or departures of key personnel; and
         o        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.

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:

         o        the seasonality of our revenues;

         o        the uncertain acceptance of our homes by Chinese buyers;

         o        intense competition; and

         o        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

                                       18
<PAGE>

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
(this 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.

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.

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.

                                       19
<PAGE>

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 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 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. We will attempt to maintain a
current effective registration statement relating to the Common Shares issuable
upon exercise of the Warrants. If we are unable 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.

                                       20
<PAGE>

         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, 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.

FORWARD-LOOKING INFORMATION CONTAINED IN THIS ANNUAL REPORT MAY PROVE
INACCURATE.

         Information contained in this Annual Report contains "forward-looking
statements" which can be identified by the use of forward-looking terminology
such as "believes", "expects", "may", "will", "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 financial results. The foregoing matters
constitute cautionary statements identifying important factors with respect to
such forward-looking statements and projections, including risks and
uncertainties that could cause actual results to vary materially from the future
results covered in such forward-looking statements. Other factors could also
cause actual results to vary materially from the future results covered in such
forward-looking statements.

                                       21
<PAGE>

Item 4.           Information on the Company

History and Development of the Company

         New China Homes, Ltd. was incorporated in the Cayman Islands on January
6, 1999 and it 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 and its telephone number is (852) 2850-0600. Its
agent for service of process in the United States is CT Corporation System, 1633
Broadway, New York, New York 10019.

         In March 2000, we completed the initial public offering of our Common
Shares and Warrants and listed each of those securities on NASDAQ.

Business Overview

         General

         We own 98.2% of Shanghai Chingchu which acts as one of our two
operating subsidiaries. It was founded in 1997 to become a leading developer of
large, planned residential communities in China's rapidly emerging private home
building market.

         We own 100% of Beijing Chingchu Zhichun Gardens Property Development
Co. Ltd. ("Beijing Chingchu") which acts as our second operating subsidiary. It
was founded in 2000 to develop our second major project just outside Beijing,
Millennium Towers.

         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:

         o        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;
         o        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;
         o        Close proximity to one of Shanghai's main motor transportation
                  arteries, which is located within eight miles of the city
                  center; and
         o        A wide range of amenities, making California Gardens a full
                  service residential community. These amenities include the
                  following:
                  >>       kindergartens, primary and high schools;

                                       22
<PAGE>

                  >>       full sports facilities, including swimming pools and
                           a "pitch and putt" golf area;

                  >>       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, 2000, Shanghai Chingchu had completed the construction
of, and delivered to our customers, 1,500 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 365 homes. Each home in Phase I
has been sold. The construction of Phase II, consisting of a total of 752 homes
which are being offered in two-subdivisions, was completed in June 1999, and as
of March 2000, we have delivered 744 homes in that Phase. Phase IIA which will
consist of 74 semi-detached home units is currently being constructed. The Phase
IIA units will be ready for delivery in November 2000. Construction of Phase
III, consisting of 416 homes was completed at the end of 1999 and we have
delivered 391 homes as of March 31, 2000. Phase IV, consisting of a total of
1,070 homes which are being offered in four sub-divisions, is currently
accepting deposits, or "booking fees." Construction of homes in the first
sub-division of Phase IV, which will consist of 545 homes, began in late January
2000 and we began our pre-sales in June 2000. Construction of homes in the
second sub-division of Phase IV , which will consist of 162 homes, has been
scheduled to commence in October 2000. 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 will be
completed in 2003.

Our Millennium Towers Project

         On April 18, 2000, we announced our intention to develop our second
major real estate project, Millennium Towers, on a 10-acre site in Zhong Guan
Cun, an area six miles from the center of Beijing. Millennium Towers is planned
to be a mixed-use complex consisting of both residential and commercial towers
and buildings. When completed, we expect that Millennium Towers will feature the
following:

         -        Four residential towers ranging up to 24 stories and 4 smaller
                  residential buildings consisting of 840 apartment units
                  totaling approximately 1.3 million square feet;
         -        Two 24 story commercial towers totaling approximately 550,000
                  square feet in office space;
         -        Close proximity to 17 of the most prominent universities in
                  China, including Beijing University, Chinese Peoples
                  University and the University of Aeronautics and Astronautics;
         -        The 840 apartment units will include the following modern
                  amenities:
                  -        direct internet access;
                  -        low-cost phone service;
                  -        satellite and cable television;
                  -        E-commerce access services;
                  -        security services;
                  -        tennis courts;
                  -        a swimming pool;
                  -        gymnasium;

                                       23
<PAGE>

                  -        meeting rooms; and
                  -        restaurants.
         -        The commercial towers will be "smart buildings" and utilize
                  the latest voice, video and data communications technology.

         As of September 20, 2000, we had not begun construction of Millennium
Towers. We have, however, secured land use rights to develop the proposed
10-acre site where Millennium Towers is expected to be developed and we have
also received the requisite planning approvals from the appropriate Chinese
governmental authorities to begin developing Millennium Towers. We intend to
begin pre-sales and construction of Phase I in Millennium Towers, which will
initially consist of 200 apartments, in November 2000. We intend to begin
construction on the commercial towers in March 2001.

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:

         o        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 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.

         o        TARGETING THE EMERGING CHINESE MIDDLE-INCOME CLASS AS HOME
                  BUYERS AND TECHNOLOGY COMPANIES AS COMMERCIAL TENANTS. Our
                  target residential market is the rapidly 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.

         o        PROVIDING SUBSTANTIAL BENEFITS TO HOME BUYERS. We believe that
                  our residential communities provide the following benefits to
                  home buyers:

                                       24
<PAGE>

                  >>       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.

         o        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.

         o        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:

         o        size of land;
         o        geographic location;
         o        potential financial return;
         o        potential market demand for the development;
         o        our existing property portfolio and available resources;
         o        land cost, affordability and potential financial return;
         o        overall market situation and opportunities;
         o        access to city centers;
         o        geological conditions;
         o        demolition and resettlement costs; and
         o        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.

                                       25
<PAGE>

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 great emphasis on the quality of our development projects and
implement strict 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 strict 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 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:

         o        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;

         o        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;

         o        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

                                       26
<PAGE>

         o        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:

                                                       City
                                City                 Population
                        ---------------------     ------------------
                        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



         We chose Beijing to be our next region for development because we
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 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 commercial 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.

                                       27
<PAGE>

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:

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

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

         o        our marketing and sales strategies and techniques;

         o        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;

         o        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;

         o        our targeted locations in major and populous cities;

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

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

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
4,000-5,000 RMB (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 300,000-400,000 RMB (HK$ 282,160 - 376,220 or
US$ 36,200 - 48,300), through a down payment of 30% or approximately 112,212 RMB
(HK$ 105,540 or US$ 13,550) with the balance financed by a bank mortgage having
a repayment period ranging from 10-20 years, resulting in a monthly payment of
between 1,000-2,000 RMB (HK$ 942 - 1,884 or US$ 121- 242).

                                       28
<PAGE>

         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 70% 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 365 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:

         o        offering a financing package for home buyers which
                  pre-qualifies home buyers for a 70% mortgage with only a small
                  down payment (booking fee), which is typically no more than
                  HK$ 18,800 (US$ 2,414 or RMB 20,000), and the balance of the
                  purchase price paid before delivery of the home;
         o        advertising through various media, including national and
                  regional television networks, radio, newspapers, magazines,
                  posters, billboards and advertising pamphlets to reach
                  potential purchasers;
         o        generating newspaper publicity and television coverage
                  providing wide visibility;
         o        using sales literature and brochures which describe our
                  projects and our company; and
         o        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 staff consists of 15 people.

         With respect to our proposed development of commercial properties in
Millennium Towers, we intend to attract high-technology companies as tenants.

         We have established a policy of contributing 1% of all sales revenues
to a sales commission fund, which is distributed among our employees, with the
sales staff receiving a significant proportion of the fund.

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

                                       29
<PAGE>

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 30% of the purchase price less the booking
fee upon the execution of a Sales and Purchase Agreement. The remaining 70% 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, 2000, the outstanding amount of unpaid mortgage loans made to purchasers of
homes in our California Gardens project was approximately HK$ 75.59 million (US$
9.75 million or RMB 80.43 million). There have been no payment defaults on any
of these mortgage loans. Approximately 70% of our home buyers obtain financing
at an average amount of HK$ 196,187 (US$ 25,190 or RMB 208,540).

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, buildings 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.

         Under Chinese law, if there is an existing mortgage of the land use
rights, the Company, as a mortgagor, cannot pre-sell or assign it to a buyer
until and unless the mortgage on the land concerned has been relinquished. In
the case of a foreclosure proceeding on the mortgage by the mortgagee, there are
no consequences to the buyer whose land use rights are not included in the
mortgage.

         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 grant 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

                                       30
<PAGE>

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 intend to finance 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 carefully control the timing of the launch of each of
our development projects and the phases of these projects.

Property Management Service Fees

         We may provide 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. At the present time, we do not carry out general property
maintenance services. These general maintenance services are provided to
California Gardens residents by a separately owned and independently run
company.

         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 payment form 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 leading developer of
large, planned residential communities and mixed-use projects at prime locations
within major cities in China. Our management will, therefore, 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.

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<PAGE>

Key Operating Data:

Revenues:

         Under US GAAP, we recognize revenue from the sale of homes on a
percentage of completion basis. 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:

                                      Fiscal year ended March 31,
                        --------------------------------------------------------
                              1998               1999               2000
                        (in HK$ millions)  (in HK$ millions)  (in HK$ millions)
California Gardens
            Phase I            73.92              35.26               0.23
            Phase II            -                234.66              22.71
            Phase IIA           -                  -                  -
            Phase III           -                  -                151.13
            Phase IVA           -                  -                  -
            Phase IVB           -                  -                  -
                        =================  =================  ==================
                               73.92             269.92             174.07
                        =================  =================  ==================

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
and we have received at last 90% of the purchase price, plus the amount of
deposits, or booking fees received by us for units which have not been
purchased.

a)       Total revenue:

-------------------------------------------------------------
                    Number of Units         Total Sales Value
                                                 HK$ '000
-------------------------------------------------------------
Purchased                     1,500                   519,594
-------------------------------------------------------------
Booked                          509                   193,211
-------------------------------------------------------------
Total                         2,009                   712,805
-------------------------------------------------------------

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

o        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. The term "sold"
         refers to the signing of a sales and purchase agreement and the receipt
         of 90% of all sales proceeds.

c)       When a home buyer has paid 30% 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 70%, 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.

                                       32
<PAGE>

         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.

         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 current 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>
---------------------------------------------------------------------------------------------------------------------
                       Phase I                   Phase II                  Phase III                 Total
  Category     ------------------------------------------------------------------------------------------------------
               Number      Percentage    Number      Percentage    Number      Percentage   Number      Percentage
               of Units                  of Units                  of Units                 of Units
---------------------------------------------------------------------------------------------------------------------
<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>

         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.       The Public Housing Fund does not have sufficient money to fund
                  the borrowing because of the high demand.

         3.       the delay was caused by home buyers' Personal reasons.

d)       Status of payment for homes purchased as at March 31, 2000.

                                       33
<PAGE>

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------
                               Number of       Total Sales        Amount Paid         Amount Owing
                                 Units            Value
-----------------------------------------------------------------------------------------------------
                                                   HK$                HK$                 HK$
-----------------------------------------------------------------------------------------------------
<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>

Total sales value is based on the full purchase price of the home purchased. As
at March 31, 2000, Phases I, II and III 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, 2000:

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------
                            Phase I      Phase II    Phase III      Total
                          ---------------------------------------------------
     Category               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>

          Note:

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

e)       The number of homes completed but not sold as of March 31, 2000 is as
         follows:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                                            Number of Homes    Number of         Number of
                                              Completed        Homes Sold      Homes Not Sold
----------------------------------------------------------------------------------------------
               <S>                               <C>             <C>                 <C>
               Phase I                           365             365                  -
----------------------------------------------------------------------------------------------
               Phase II                          752             744                  8
----------------------------------------------------------------------------------------------
               Phase III                         416             391                 25
----------------------------------------------------------------------------------------------
               Total                           1,533           1,500                 33
----------------------------------------------------------------------------------------------
</TABLE>

                                       34
<PAGE>

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.

Capital Expenditures

         At March 31, 2000, we had contracted for the expenditure of
approximately HK$132,490,000 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$216,541,000.

         At March 31, 2000, we entered into a co-operative joint venture
agreement with Beijing Jida Real Estate Development Company ("Beijing Jida") and
Beijing Minglihua Property Consultants Co., Ltd. ("Beijing Minglihua") and
established Beijing Chingchu to develop and sell Millennium Towers.

         At March 31, 2000, we had contracted for the aggregate expenditure
relating to Millennium Towers of approximately HK$277,688,000 in respect of the
following:

         o        HK$77,500,000 for contribution of capital of Beijing Chingchu;

         o        HK$107,143,000 for development rights to 170,000m2 of
                  residential and commercial land;

         o        HK$49,812,000 for development of 20,000m2 of office space;

         o        HK$43,233,000 for resettlement of existing occupants of the
                  land to be developed.

         Subsequent to March 31, 2000, we have made payments amounting to
HK$42,293,000 in respect of the above expenditures. Upon completion of
construction, 20,000m2 of office space and 2,000m2 of residential space will be
transferred to Beijing Minglihua.

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

                                       35
<PAGE>

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:

o        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.

o        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.

o        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.

                                       36
<PAGE>

o        IMPROVING THE REGULATION OF THE HOUSING MARKET. New regulations have
         been, and 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,
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.

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 (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

                                       37
<PAGE>

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 simply 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:

         o        manner of payment of land premium;

         o        use of land;

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

         o        construction of public facilities;

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

         o        submission of building plans and approval;

         o        deadline for completion of construction;

         o        repair obligations;

         o        responsibility for obtaining supply of utilities; and

         o        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.

                                       38
<PAGE>

         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:

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

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

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

         o        the land premium in respect of the land payable under, the
                  grant contract must be paid while 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 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.

                                       39
<PAGE>

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 Shenzen, 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 (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:

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

         o        a Construction Works Planning Permit is held;

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

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

In addition, 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.

                                       40
<PAGE>

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.

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.

                                       41
<PAGE>

         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 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 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, buildings 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.

         Under Chinese law, if there is an existing mortgage of the land use
rights, the Company, as a mortgagor, cannot pre-sell or assign it to a buyer
until and unless the mortgage on the land concerned has been relinquished. In
the case of a foreclosure proceeding on the mortgage by the mortgagee, there are
no consequences to the buyer whose land use rights are not included in the
mortgage.

         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 grant 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.

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 (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

                                       42
<PAGE>

came into effect on July 1, 1996 regarding foreign exchange control (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
("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.

         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.

                                       43
<PAGE>

Organizational Structure

[Graphic of our organizational structure indicating that "Far East Consortium
International Limited" owns 75% of New China Homes, Ltd. while "Other
Shareholders" own the remaining 25%. The Graphic also indicates that New China
Homes owns 100% of "Beijing Chingchu Zichun Gardens Property Development Co.,
Ltd." and 100% of "Far East Consortium China Investments Limited." The Graphic
further indicates that "Far East Consortium China Investments Limited" owns
98.2% of Shanghai Chingchu Property Development Company Limited."]

Property, Plants and Equipment

         Our principal executive offices are 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 (HK$ 93,440). Our
offices in the United States are located at 44 East 67th Street, New York, New
York.

         We conduct our operations for the California Gardens project in
Shanghai from a 2,000 square foot facility adjacent to the project. We conduct
our operations for the Millennium Towers project in Beijing at Ruoy Chai
International Building, No. 8 Yong An Dong Li, Jian Guo Men Wai District,
Beijing.

                                       44
<PAGE>

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.

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 reached a preliminary stage at the end of March 1999, and we began
to sell units in this Phase in April 1999.

         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, 1998, 1999 and 2000 (HK$ in
thousands):

<TABLE>
<CAPTION>
                                                                     Homes delivered

                                                               Fiscal year ended March 31,
                       ------------------------------------------------------------------------------------------------------------
                                   1998                                1999                                    2000
                                   ----                                ----                                    ----

                         Number       Aggregate             Number of         Aggregate           Number of           Aggregate
                          of         Sales Price             Homes           Sales Price             Homes           Sales Price
                         Homes       -----------             -----           -----------             -----           -----------
                         -----
<S>                        <C>            <C>                 <C>          <C>                        <C>           <C>
California
Gardens
   Phase I                 --              --                 365          HK$ 109,171                --            HK$     232
   Phase II                --              --                 --                --                    744           HK$ 258,477
   Phase IIA               --              --                 --                --                    --                --
   Phase III               --              --                 --                --                    391           HK$ 151,129
   Phase IVA               --              --                 --                --                    --                --
   Phase IVB               --              --                 --                --                    --                --
                       ------------------------------------------------------------------------------------------------------------
   Total                   --              --                 365          HK$ 109,171                1,135         HK$ 409,838
</TABLE>

<TABLE>
<CAPTION>
                                                                   New Sales Contracts

                                                               Fiscal year ended March 31,
                       ------------------------------------------------------------------------------------------------------------
                                   1998                                1999                                    2000
                                   ----                                ----                                    ----

                         Number       Aggregate             Number of         Aggregate           Number of           Aggregate
                          of         Sales Price             Homes           Sales Price             Homes           Sales Price
                         Homes       -----------             -----           -----------             -----           -----------
                         -----
<S>                        <C>            <C>                 <C>          <C>                        <C>           <C>
California
Gardens
   Phase I                 344         HK$101,071             21           HK$   105,129              --            HK$    232
   Phase II                --              --                 713          HK$   245,129              31            HK$ 12,196
   Phase IIA               --              --                 --                --                    --                --
   Phase III               --              --                 --                --                   391            HK$151,129
   Phase IVA               --              --                 --                --                    --                --
   Phase IVB               --              --                 --                --                    --                --
                       ------------------------------------------------------------------------------------------------------------
   Total                   344         HK$101,071             734          HK$   350,258             422            HK$163,557
</TABLE>

                                       45
<PAGE>

<TABLE>
<CAPTION>
                                                                      Homes Backlog

                                                               Fiscal year ended March 31,
                       ------------------------------------------------------------------------------------------------------------
                                   1998                                1999                                    2000
                                   ----                                ----                                    ----

                         Number       Aggregate             Number of         Aggregate           Number of           Aggregate
                          of         Sales Price             Homes           Sales Price             Homes           Sales Price
                         Homes       -----------             -----           -----------             -----           -----------
                         -----
<S>                        <C>            <C>                 <C>          <C>                        <C>           <C>

California Gardens

   Phase I                 16       HK$    4,704               2            HK$      690              --                --
   Phase II                348      HK$  119,350               6            HK$    2,217               1             HK$    389
   Phase IIA               --              --                 --                --                    12             HK$  7,184
   Phase III               --              --                 391           HK$  149,939               7             HK$  3,184
   Phase IVA               --              --                 293           HK$  105,129              366            HK$142,342
   Phase IVB               --              --                 --                --                    123            HK$ 48,640
                       ------------------------------------------------------------------------------------------------------------
   Total                   364      HK$  124,054              692           HK$  257,975              509            HK$201,739
</TABLE>


Note: During our fiscal year ended March 31, 2000, homes were exchanged in and
between Phases I and II by the home buyers. The amount shown represents the
total price differences of the exchanges.

         Home buyers pay an average booking fee of HK$ 18,790 per house 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 foundation. 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,
                              -----------------------------------------------------------------
                                    1998                  1999                  2000
                                   (in HK$               (in HK$               (in HK$
                                  millions)             millions)             (millions)
<S>                                  <C>                  <C>                   <C>
California Gardens
            Phase I                  73.92                 35.26                  0.23
            Phase II                  -                   234.66                 22.71
            Phase IIA                 -                     -                     -
            Phase III                 -                     -                   151.13
            Phase IVA                 -                     -                     -
            Phase IVB                 -                     -                     -
                              ==================    ==================    ==================
                                     73.92                269.92                174.07
                              ==================    ==================    ==================
</TABLE>

                                       46
<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.

         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, 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 33.16% to HK$ 139.48 million from HK$ 208.68 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 80.12% from 77.31%
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:

                                    March 31,
                      -------------------------------------------
                              2000                  1999
                              ----                  ----
                       (In HK$ millions)     (In HK$ millions)
Revenue recognized...
                           HK$ 174.07            HK$ 269.92

Cost incurred.........
                           HK$ 139.48            HK$ 208.68

Estimated costs
to completion........      HK$   0.00            HK$   6.98


         Our selling, marketing, general and administrative ("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 in the fiscal year 2000 compared to fiscal 1999. The significant
components of our SMG&A expenses during these periods were (a) wages and
employee benefits, which represented approximately 10.04% and 13.45% 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

                                       47
<PAGE>

market exposure and establishing and enhancing relationships with third parties
such as contractors, design firms and public relations, which represented
approximately 14.89% and 29.21% of our total SMG&A expenses in the fiscal year
ended March 31, 2000 and 1999, respectively, and (c) advertising expenses, which
represented approximately 12.61% and 19.22% 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.

         Fiscal year ended March 31, 1999 compared to fiscal year ended March
31, 1998.

         We delivered 365 homes during our fiscal year ended March 31, 1999
compared to 0 homes during our fiscal year ended March 31, 1998. Our revenues
from home sales for fiscal 1999 increased 265.15% to HK$ 269.92 million from HK$
73.92 million for fiscal 1998. The increase of revenues resulted primarily from
higher levels of awareness among potential Shanghai home buyers during 1999, and
because of the continued development of our marketing and sales efforts. As of
March 31, 1998 and 1999, for homes under construction, the amount of revenue
recognized, the amount of costs incurred and the estimated costs to completion
are as follows:

                                      March 31,
                      ------------------------------------------------
                               1999                    1998
                               ----                    ----
                        (In HK$ millions)        (In HK$ millions)
Revenue
recognized...                  HK$ 269.92           HK$ 73.92

Cost
incurred.........              HK$ 208.68           HK$ 67.10

Estimated costs
to completion......            HK$   6.98           HK$ 18.64


         Cost of home sales for fiscal 1999 increased approximately 211.0% to
HK$ 208.68 million from HK$ 67.10 million for fiscal 1998. This increase is due
primarily to the related increase in home sales revenues. The cost of home sales
as a percentage of home sales decreased to 77.31% for fiscal 1999 from 90.78%
for fiscal 1998 as a result of higher selling prices and lower construction
costs of Phase II as compared to that of Phase I. In fiscal 1999, 86.94% of our
revenues came from the sale of homes in Phase II. The average selling price for
homes in Phase II was RMB 2,418 per square meter, which was 10.77% higher than
the average selling price in Phase I. The average cost per home in Phase II was
RMB 1,711 per square meter, which was 5.73% lower than the average cost per home
in Phase I.

         Our SMG&A expenses during fiscal 1999, increased approximately 31.43%
to HK$ 14.93 million from HK$ 11.36 million for fiscal 1998. This increase was
primarily a result of variable selling costs associated with the greater number
of homes marketed and delivered to buyers. The significant components of our
SMG&A expenses during these periods were (a) wages and employee benefits, which

                                       48
<PAGE>

represented approximately 5.55% and 13.45% of our total SMG&A expenses in fiscal
1998 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 29.89% and 29.21% of our total SMG&A expenses in
fiscal 1998 and 1999, respectively, and (c) advertising expenses, which
represented approximately 32.09% and 19.22% of our total SMG&A expenses in
fiscal 1998 and 1999, respectively. SMG&A expenses as a percentage of total
revenues decreased to 5.51% in fiscal 1999 from 15.31% in fiscal 1998, due
primarily to economies of scale.

         As a result of the foregoing, income before income taxes and minority
interests in fiscal 1999 increased to HK$ 40.92 million from a loss of HK$ 5.72
million for fiscal 1998.

         Fiscal year ended March 31, 1998 compared to fiscal year ended March
31, 1997

         No comparison of results of operations for the fiscal year ended March
31, 1998 to the fiscal year ended March 31, 1997 has been provided because the
operations of California Gardens began in May 1997. We had SMG&A expenses of HK$
10,609 during fiscal 1997.

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 initial
public offering of Common Shares and Warrants, 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, we had outstanding homebuilding borrowings of approximately HK$
77.46 million. 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 2001. At
September 1, 2000 we had the following short-term loans outstanding:

<TABLE>
<CAPTION>
                                                Amount
                Lender                        Outstanding              Annual Interest             Maturity Dates
                                             HK$ (millions)                 Rate

  ------------------------------------  -------------------------   ------------------------- -----------------------
<S>                                               <C>                       <C>                      <C>
Bank of Communications                             2.16                      6.138%                    October 2000
Agricultural Bank of China                         4.70                      6.138%                   November 2000
Agricultural Bank of China                        15.23                      6.435%                   November 2000
Industrial & Commercial Bank of China              2.54                      6.138%                   November 2000
Bank of Shanghai                                   4.70                      6.138%                   December 2000
Industrial & Commercial Bank of China             23.50                      6.435%                    January 2001
Industrial & Commercial Bank of China              9.40                      6.435%                      April 2001
China Merchants Bank                               4.70                      6.340%                       July 2001
Po Sang Bank                                       8.20                     10.500%                       July 2002
</TABLE>

                                       49
<PAGE>

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 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

         As of September 1, 2000, scheduled and estimated maturities of our
borrowings after the extension of maturity dates of our credit facilities are
approximately HK$ 54.94 million during fiscal 2001, approximately HK$ 17.99
million in fiscal 2002 and approximately HK$ 2.20 million during fiscal 2003. 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.

Cash flows

         We experienced an increase in cash flows during fiscal 2000 of HK$
58.48 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$ 6.63 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$ 129.43 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 and 2000, China's interbank interest rate was 11.58%,
10.50%, 9.00% and 1.98%, respectively.

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

                                       50
<PAGE>

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 2001 are expected to decline
from prior year levels due to strong competition in the Shanghai housing market.
In recent months, several new housing development projects have been built which
we believe may be the cause of lagging home sales in California Gardens. We also
believe that the Chinese housing market, in general, has been negatively
impacted as a result of the recent slow down in the Chinese economy. We believe
that many home buyers have been delaying their recent home purchases as a
result of the slowed Chinese economy. We believe, however, that the Chinese
economy is strengthening and we expect that home sales in California Gardens
will increase in the second half of fiscal 2001.

Impact of Year 2000

         In our prospectus, we discussed the nature and progress of our plans to
become Year 2000 ready. As a result of those planning efforts, we experienced no
significant disruptions in mission critical information technology and
non-information technology systems and believes those systems successfully
responded to the Year 2000 date change. We are not aware of any material
problems resulting from Year 2000 issues, either our services, internal systems
or the products and services of third parties. We will continue to monitor our
mission critical computer applications and those of our suppliers and vendors
throughout the year 2000 to ensure that any latent Year 2000 matters that may
arise are addressed promptly.

Item 6.           Directors, Senior Management and Employees

Directors

         The following table presents information with respect to our directors
at March 31, 2000.

         Name                          Age               Position
         ----                          ---               --------

Charles H. Stein                       71                Chairman of the Board
Michael Chi Ning O'Young               55                Director
Trevor John Bedford                    65                Director
Jay M. Haft                            64                Director
Denny Chi Hing Chan                    36                Director
Margaret Chiu                          41                Director

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

Executive Officers

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

         Name                Age   Position
         ----                ---   --------

Michael Chi Ning O'Young     55    President and Chief Executive Officer
Denny Chi Hing Chan          36    Treasurer
Mark L. Kallan               54    Senior Vice President - Investor Relations
Veronica O'Young             56    Senior Vice President - Marketing and Sales
Gerald M. Breslauer          63    Vice President - Investor Relations
Li Wan Cai                   46    Vice President - Property Management
Henry Chen                   47    Vice President - Property Advertising

                                       51
<PAGE>

Gao Yang Zhi                 39    Vice President - Engineering
Francis Chow                 49    Secretary

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

Biographical Information

         Charles H. Stein has served as Chairman of the Board of directors since
July 1999. From January 1996 until November 1999, Mr. Stein served as Chairman
of CCA Companies Inc. (NASDAQ). 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 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.).

         Michael Chi Ning O'Young has served as President and Chief Executive
Officer of the Company since July 1999. He has served as Managing director of
Far East Consortium since June 1996. From 1992 to 1996, he was a Senior Partner
at O'Young Partners, a property consultant firm. From 1993 to 1996, he was the
project management consultant to Far East Consortium's Malaysian office. He
served as Joint Managing director of Meinhardt Partners, an international
engineering consultancy firm from 1981 to 1992. Mr. O'Young has over 25 years
experience in engineering consultancy and project management, both in Australia
and Southeast Asia. He was responsible for the structural design of some of the
more prestigious buildings, such as the High Court of Australia, QVB in Sydney
and Telecom Central in Singapore. Upon the incorporation of Shanghai Chingchu,
he was appointed Chief Executive Officer. He was primarily responsible for the
initiation and establishment of New China Homes and its business, and is in
charge of its day to day operations as President and Chief Executive Officer.
Mr. O'Young holds a Bachelor of Engineering degree from the University of
N.S.W., Australia.

                                       52
<PAGE>

         Trevor John Bedford has served as a director of the Company since
January 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 International, Ltd.,
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.

         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), NCT Group, Inc. (OTC), Thrift Management, Inc.
(OTC), Oryx Technologies, Corp. (NASDAQ Small Cap), Encore Medical Corporation
(NASDAQ), PC Service Source, Inc. (NASDAQ), and Dusa Pharmaceuticals Inc.
(NASDAQ). 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.

         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.

         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) from

                                       53
<PAGE>

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.

         Veronica O'Young has served as Senior Vice-President - Marketing and
Sales of the Company since February 1999. From April 1997 until joining the
Company, she served as Executive director of Shanghai Chingchu Property
Development Co. Ltd. From 1981 to 1997, she served as senior subtitler,
journalist, producer for TV Australia. She is of Chinese origin with Australian
citizenship, and has served as a journalist and presenter for the Australian
Special Broadcasting Services for over 15 years. As President of the Australian
Chinese Writer's Association, she has been involved in cultural exchanges
between Australia and China for many years, and she was included in the 1997
edition of "World Famous Overseas Chinese." In 1997, Ms. O'Young published a
book and won the "Distinguished Chinese Writer" award in China. She is
responsible for the advertising and promotion of New China Homes projects in
Shanghai, and has won the 1998 "Most Successful Advertising Personnel" award in
Shanghai. Ms. O'Young is married to Michael O'Young, our President and Chief
Executive Officer.

         Gerald M. Breslauer has served as Vice President - Investor Relations
since April 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). 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
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), 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.

         Li Wan Cai has served as Vice President - Property Management of the
Company since February 1999. From June 1998 until joining the Company, he served
as Deputy General Manager of Shanghai Chingchu Property Development Co. Ltd. and
Shanghai Chingchu Property Management. From March 1993 to May 1998, he served as
an assistant to the general manager of Vanke Property Development Co. From
January 1987 to February 1993, he served as the director of the President's
Office for East China Normal University. Mr. Cai holds a Master of Arts degree
from East China Normal University and a Bachelor of Arts degree from Liao Ning
University.

                                       54
<PAGE>

         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.

         Francis Chow has served as Company Secretary since March 23, 2000. Mr.
Chow is a Fellow Member of the Institute of Chartered Secretaries and
Administrators and a Fellow Member of the Hong Kong Society of Accountants. Mr.
Chow also serves as the Company Secretary for Far East Consortium International
Limited and Far East Technology International Limited, two publicly listed
companies in Hong Kong. Mr. Chow graduated from the Hong Kong Polytechnic in
Company Secretaryship and he continued his postgraduate education at the
University of Sydney in Corporate Laws, Taxation and Auditing.

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 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:

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

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

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

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

o        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:

o        establishing the salary rates of our officers and employees;

o        examining periodically our compensation structure; and

o        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 $36,000 and reimbursed
for travel expenses incurred for each board of director meeting attended. Mr.
Stein, our Chairman of the Board, is paid an additional US$ 200,000 per year for
his services.

         At March 31, 2000, our non-executive directors held an aggregate of
100,000 options, granted outside the Company's 1999 Stock Option and Restricted
Stock Purchase Plan (the "Option Plan"), in respect of our Common Shares at an
average exercise price of US$ 7.50 per share.

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$ 1.95 million (US$ 250,000) for the fiscal year ended March 31,
2000.

         At March 31, 2000, our executive officers (including Michael O'Young,
our President and Chief Executive Officer) held an aggregate of 40,000 options,
granted outside the Option Plan, in respect of our Common Shares at an average
exercise price of $ 7.50 per share.

Employment Agreements

         Michael O'Young, our President and Chief Executive Officer, is a party
to a five-year employment agreement with us providing for a base salary of
$300,000 per annum and an annual bonus of up to 1% of the net after tax profits
of the Company, payable at the discretion of the board of directors. During
fiscal year 2000, our board of directors also granted Mr. O'Young 40,000 stock
options entitling him to purchase 40,000 of our Common Shares at an average
exercise price of US$ 7.50 per share.

                                       56
<PAGE>

Management Service Agreements

         Since 1998, Messrs. Stein, Haft and Kallan and Silver Pacific Trading
Ltd. 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 Trading Ltd. Under these
agreements, Messrs. Stein, Haft and Kallan and Silver Pacific Trading Ltd. 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:

o        developing and evaluating potential acquisitions and other business
         opportunities;

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

o        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;

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

o        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 Trading Ltd. These payments were used to purchase an aggregate of
850 of our Common Shares at $1,000 per share. As a result of the 999-for-one
stock split effected in August 1999, Mr. Stein received an additional 174,825
Common Shares, Mr. Haft received an additional 199,800 Common Shares, Mr. Kallan
received an additional 74,925 Common Shares and Silver Pacific Trading Ltd.
received an additional 399,600 Common Shares. Messrs. Stein, Haft and Kallan and
Silver Pacific Trading Ltd., as well as our other pre-initial public offering
shareholder, have agreed with us that 25% of their Common Shares will be
canceled if our net income is less than US$ 10 million in the one-year period
commencing on the first day of the month following the effective date of the
Company's initial public offering, March 8, 2000, and 25% of these Common Shares
will be canceled if our net income is less than US$ 20 million in the following
one-year period.

         On September 2, 1999, Denny Chan, a director and our Treasurer, was
quoted in an article appearing in the South China Morning Post. Mr. Chan's
comments were related to the Company's Management Services Agreements, in which
he stated only that 25% of the Common Shares owned by our pre-initial public
offering shareholders would be cancelled if our net income is less than US$ 10
million (approximately HK$ 80 million) in the one-year period commencing the
first month following the closing of the offering. This Article incorrectly
reported that Mr. Chan had projected that the Company would have net profits of
US$ 10 million in fiscal 2000 as we make no assurances as to our future
profitability.

                                       57
<PAGE>

1999 Stock Option Plan

         On August 10, 1999, our board of directors and shareholders adopted the
Option Plan. As of September 15, 2000, 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
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

                                       58
<PAGE>

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.

Employees

         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 employ 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:

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

o        each director and each person who has consented to be named as a
         director (the "Named Directors");

o        each Named Executive Officer; and

o        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. Deacon Te Ken Chiu and David Chiu, however, do 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.

                                       59
<PAGE>

<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.....................................................         9,550,000                       75.20%
Charles H. Stein Trust
5345 Pine Tree Drive
Miami Beach, FL 33140.........................................           175,000                         1.41
Jay M. Haft
1001 Brickell Bay Avenue
9th Floor
Miami, FL 33131...............................................           200,000                         1.61
Mark L. Kallan
19999 Backnine Drive
Boca Raton, FL 33498..........................................            75,000                            *

All executive officers and directors a group (3 persons)......           450,000                        3.62%
</TABLE>

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

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 International Limited.
At September 20, 2000, Far East Consortium International Limited owned 9,550,000
Common Shares or approximately 75% of the issued and outstanding Common Shares.
As a result of its Common Share ownership, we consider Far East Consortium
International Limited to be our controlling shareholder.

         On March 31, 2000, we had 11 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 Trading Ltd., 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
Trading Ltd. 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".

                                       60
<PAGE>

         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 initial public offering 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 1999, we issued an additional 9,540,450 shares to Far East
Consortium. See notes 1 and 9 to our audited consolidated financial statements.

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

         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.

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.

                                       61
<PAGE>

Item 9.           The Offer and Listing

         Our Common Shares and our Warrants (the "Warrants") are listed on
NASDAQ under the symbols NEWC and NEWCW, respectively. Trading in our Common
Shares and Warrants on NASDAQ commenced on March 10, 2000.

         For the fiscal year ended March 31, 2000 (March 10, 2000 through March
31, 2000), the high and low price of our Common Shares on NASDAQ has ranged from
$ 11 to $ 7. For the fiscal year ended March 31, 2000, the high and low price of
our Warrants on NASDAQ has ranged from $ 4 to $ 1 49/64.

         During the first quarter of our fiscal year 2001 (April 1, 2000 through
June 30, 2000), the high and low price of our Common Shares on NASDAQ has ranged
from $ 8 1/2 to $ 3. During that same period, the high and low price of our
Warrants on NASDAQ has ranged from $ 3 3/4 to $ 1.

         The following table sets forth, for the month indicated, the high and
low sales prices of our Common Shares and our Warrants on NASDAQ.

<TABLE>
<CAPTION>
                                                       SALES PRICE
                              ---------------------------------------------------------------------
                                   COMMON SHARES                        WARRANTS
                              --------------------------         ---------------------------------
                               HIGH             LOW               HIGH             LOW
                              -------          ------            -------          ------
<S>                            <C>              <C>               <C>             <C>
Month of March 2000......      $ 11             $ 7               $ 4             $ 1 49/64
  (from March 10)
Month of April 2000........    $ 7 1/4          $ 3               $ 2 5/8         $   5/8
Month of May 2000........      $ 8 1/2          $ 3 3/4           $ 3 3/4         $ 1 1/8
Month of June 2000.......      $ 5 3/4          $ 3 3/8           $ 2 1/8         $ 1
Month of July 2000.........    $ 3 7/8          $ 2 13/16         $ 1 13/32       $ 1
Month of August 2000.....      $ 5 5/16         $ 2 3/4           $ 1 3/4         $   15/16
</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.

                                       62
<PAGE>

         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.

         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.

                                       63
<PAGE>

         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.

         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. 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.

                                       64
<PAGE>

         We 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 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:

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

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

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

o        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:

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

                                       65
<PAGE>

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

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

o        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):

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

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

o        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));

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

o        to wind up the company voluntarily under the Companies Law (Section
         132(a));

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

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

o        registration of a company by continuation (Section 222(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):

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

o        the reduction of share capital (Section 14);

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

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

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

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

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

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

o        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);

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

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

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

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

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

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<PAGE>

         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."

         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

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<PAGE>

Renminbi (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 (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 ("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.

         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.

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<PAGE>

         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 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 ("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

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<PAGE>

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 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. 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

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<PAGE>

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.

                  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:

o        a citizen or resident of the United States;

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

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

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<PAGE>

o        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

o        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:

o        life insurance companies;

o        tax-exempt investors;

o        banks;

o        broker-dealers;

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

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

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

         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.

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<PAGE>

         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 (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 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 use the proceeds of this offering
and 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 2000
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 December 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:

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

Under these special tax rules:

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<PAGE>

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

                                       74
<PAGE>

(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:

o        political and economic stability;

o        an effective judicial system;

o        a favorable tax system;

o        the absence of exchange control or currency restrictions; and

o        the availability of professional and support services.

         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.

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<PAGE>

         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:

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

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

o        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);

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

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

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

o        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;

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

o        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 (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

                                       76
<PAGE>

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
located at Seven World Trade Center, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. 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.

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

                                       77
<PAGE>

         The following "Use of Proceeds" information relates to the registration
statement on Form F-1 (File No. 333-10746) (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 $ 5.75 per share, subject
to adjustment under certain circumstances.

         We received net proceeds of approximately $ 10.61 million from our
initial public offering (taking into account the managing underwriter's exercise
of its over-allotment option as well as underwriting discounts of $ 1.2 million,
but not taking into account transaction expenses of approximately $ 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 net proceeds from our initial public offering
to make past payments and to fund expenses for our California Gardens and
Millennium Towers development projects.

Item 15. Reserved

         Not Applicable.

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:

         Independent auditors' report .......................................F-2
         Consolidated statements of operations for the years ended
           March 31, 1998, 1999 and 2000.....................................F-3
         Consolidated balance sheets at March 31, 1999 and 2000..............F-4
         Consolidated statements of cash flows for the years ended
           March 31, 1998, 1999 and 2000...............................F-5 - F-6
         Consolidated statements of changes in stockholders' (deficit)
           equity for the years ended March 31, 1998, 1999 and 2000..........F-7
         Notes to consolidated financial statements...................F-8 - F-27

Item 19. Exhibits

         None

                                       78
<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.

                                   /s/ MICHAEL CHI NING O'YOUNG
                                   -------------------------------
                                   Name:  Michael Chi Ning O'Young
                                   Title: President and Chief Executive
                                          Officer

                                       79
<PAGE>

                              NEW CHINA HOMES, LTD.

                    Consolidated Financial Statements
                    Years ended March 31, 1998, 1999 and 2000
                    and Independent Auditors' Report







<PAGE>

                              NEW CHINA HOMES, LTD.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S>                                                                                  <C>
Independent auditors' report ...........................................................F-2

Consolidated statements of operations for the years ended
  March 31, 1998, 1999 and 2000.........................................................F-3

Consolidated balance sheets at March 31, 1999 and 2000..................................F-4

Consolidated statements of cash flows for the years ended
  March 31, 1998, 1999 and 2000......................................................F-5 - F-6

Consolidated statements of changes in stockholders' (deficit) equity
  for the years ended March 31, 1998, 1999 and 2000.....................................F-7

Notes to consolidated financial statements...........................................F-8 - F-27
</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, 1999 and 2000, and the
related consolidated statements of operations, cash flows and changes in
stockholders' equity for each of the three years in the period ended March 31,
2000, 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 Hong Kong which do not differ in any material respects from those 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, 1999 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended March 31,
2000, 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.

Deloitte Touche Tohmatsu
Hong Kong
August 21, 2000

                                      F-2
<PAGE>

                              NEW CHINA HOMES, LTD.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                           Year ended March 31,
                                                       ---------------------------------------------------------
                                                          1998             1999          2000           2000
                                                       -----------     -----------    -----------    -----------
                                                           HK$              HK$           HK$            US$
                                                                                                       (note 2)
<S>                                                     <C>            <C>            <C>             <C>
Revenues:
  Home sales ......................................     73,915,682     269,918,839    174,073,893     22,461,147
  Interest income .................................        175,476         305,006        271,363         35,015
  Other income ....................................        106,726         606,383        397,586         51,301
                                                       -----------     -----------    -----------    -----------
  Total revenues ..................................     74,197,884     270,830,228    174,742,842     22,547,463
                                                       -----------     -----------    -----------    -----------
Cost and expenses:
  Cost of home sales ..............................     67,101,107     208,682,091    138,109,851     17,820,625
  Selling, general and administrative expenses ....     11,363,102      14,926,084     21,575,462      2,783,931
  Interest expense ................................      1,451,955       6,306,527      2,684,925        346,442
                                                       -----------     -----------    -----------    -----------
  Total cost and expenses .........................     79,916,164     229,914,702    162,370,238     20,950,998
                                                       -----------     -----------    -----------    -----------
(Loss) income before minority interests and
  income taxes ....................................     (5,718,280)     40,915,526     12,372,604      1,596,465
Income taxes (note 4) .............................     (1,430,566)     15,773,365      7,508,689        968,863
                                                       -----------     -----------    -----------    -----------
(Loss) income before minority interests ...........     (4,287,714)     25,142,161      4,863,915        627,602
Minority interest .................................        (41,358)        570,569        263,568         34,009
                                                       -----------     -----------    -----------    -----------
Net (loss) income .................................     (4,246,356)     24,571,592      4,600,347        593,593
                                                       ===========     ===========    ===========    ===========

(Loss) earnings per share - basic .................      (4,246.36)      24,571.59           0.44           0.06
                                                       ===========     ===========    ===========    ===========
(Loss) earnings per share - diluted ...............      (4,246.36)      24,571.59           0.44           0.06
                                                       ===========     ===========    ===========    ===========
Weighted average number of shares - basic .........          1,000           1,000     10,538,630     10,538,630

Effect of dilutive potential common shares:
  Warrants ........................................             --              --         36,696         36,696
  Stock options ...................................             --              --            141            141
                                                       -----------     -----------    -----------    -----------
Weighted average number of shares - diluted .......          1,000           1,000     10,575,467     10,575,467
                                                       ===========     ===========    ===========    ===========
</TABLE>

                 See notes to consolidated financial statements

                                      F-3
<PAGE>

                              NEW CHINA HOMES, LTD.

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                            At March 31,
                                                             -----------------------------------------
                                                                1999           2000           2000
                                                             -----------    -----------    -----------
                                                                 HK$            HK$            US$
                                                                                             (note 2)
<S>                                                          <C>            <C>             <C>
ASSETS

Cash and cash equivalents ...............................     15,197,211     75,929,258      9,797,323
Restricted cash (note 6) ................................      4,140,889     24,171,415      3,118,892
Trade and other accounts receivable .....................     23,454,080     12,693,542      1,637,876
Due from related parties (note 9) .......................      3,022,109     41,501,814      5,355,073
Other prepaid taxes (note 5) ............................      2,151,544      2,161,654        278,923
Advances to suppliers ...................................        825,031             --             --
Prepaid expenses and other assets .......................      2,340,207      2,999,795        387,070
Land and lots under development (note 3) ................    133,561,687    170,666,748     22,021,516
Property, equipment and construction-in-progress,
  net (note 7) ..........................................     35,959,160     52,435,353      6,765,852
Deferred consulting costs ...............................             --      4,386,283        565,972
Deferred offering costs .................................        848,789             --             --
                                                             -----------    -----------    -----------
TOTAL ASSETS ............................................    221,500,707    386,945,862     49,928,497
                                                             ===========    ===========    ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES

Bank borrowings (note 8) ................................     35,004,677     64,492,889      8,321,663
Due to related parties (note 9) .........................     96,335,274     88,388,434     11,404,959
Customer deposits .......................................     16,770,925     11,319,854      1,460,626
Trade accounts payable and accrued expenses .............     31,733,485     16,702,209      2,155,124
Income taxes payable ....................................     10,491,689     16,695,310      2,154,234
Other taxes payable .....................................      2,959,951             --             --
Deferred income taxes (note 4) ..........................      3,850,052      5,265,675        679,442
                                                             -----------    -----------    -----------
TOTAL LIABILITIES .......................................    197,146,053    202,864,371     26,176,048
                                                             -----------    -----------    -----------
MINORITY INTERESTS ......................................      1,783,920      2,054,480        265,093
                                                             -----------    -----------    -----------
COMMITMENTS AND CONTINGENCIES (note 11)

STOCKHOLDERS' EQUITY
Preferred shares US$1 par value, none
  authorized, issued and fully paid at March 31, 1999
  and authorized 5,000,000 shares and none
  issued and fully paid at March 31, 2000 (note 10) .....             --             --             --
Common shares US$1 par value, authorized
  50,000 shares, issued and fully paid 1,000 shares
  at March 31, 1999 and authorized 50,000,000 shares,
  issued and fully paid 12,700,000 shares
  at March 31, 2000 .....................................          7,750     98,425,000     12,700,000
Additional paid-in capital ..............................      1,647,000     57,697,964      7,444,899
Retained earnings .......................................     20,846,902     25,447,249      3,283,516
Cumulative translation adjustment .......................         69,082        456,798         58,941
                                                             -----------    -----------    -----------
Total stockholders' equity ..............................     22,570,734    182,027,011     23,487,356
                                                             -----------    -----------    -----------
LIABILITIES AND STOCKHOLDERS' EQUITY ....................    221,500,707    386,945,862     49,928,497
                                                             ===========    ===========    ===========
</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,
                                                             -----------------------------------------------------------
                                                                1998            1999            2000            2000
                                                             -----------     -----------     -----------     -----------
                                                                 HK$             HK$             HK$             US$
                                                                                                               (note 2)
<S>                                                           <C>             <C>              <C>               <C>
Cash flows from operating activities:
  Net (loss) income .....................................     (4,246,356)     24,571,592       4,600,347         593,593
  Adjustments to reconcile net (loss) income to
    net cash used in operating activities:
    Depreciation ........................................        131,518         588,228         727,992          93,934
    Minority interests ..................................        (41,358)        570,569         263,568          34,009
    Amortization of deferred consulting costs ...........             --              --       2,201,217         284,028
    Consultant services .................................             --       1,647,000       4,940,625         637,500
    Amortisation of consultant services .................             --              --        (554,345)        (71,588)
    Deferred income taxes ...............................     (1,431,413)      5,281,676       1,354,369         174,757
Changes in operating assets and liabilities:
  Trade and other accounts receivable ...................     (4,134,705)    (19,319,375)     11,460,653       1,478,794
  Other prepaid taxes ...................................             --      (2,151,544)             --              --
  Advances to suppliers .................................             --        (825,031)        828,908         106,956
  Prepaid expenses and other assets .....................      4,943,211        (773,971)       (648,590)        (83,689)
  Land and lots under development and
    completed homes .....................................    (75,311,455)    (58,250,232)    (34,220,585)     (4,425,559)
  Customer deposits .....................................     12,682,845       4,088,080      (5,529,882)       (713,533)
  Trade accounts payable and accrued expenses ...........     11,807,788      19,919,697     (18,154,184)     (2,342,475)
  Due to related parties ................................     20,459,065         (61,904)     10,886,728       1,404,739
  Income taxes payable ..................................             --      10,491,689       6,154,320         794,106
  Other taxes payable ...................................        120,417       2,839,534      (2,973,861)       (383,724)
                                                             -----------     -----------     -----------     -----------
  Net cash used in
    operating activities ................................    (35,020,443)    (11,383,992)    (18,662,720)     (2,408,092)
                                                             -----------     -----------     -----------     -----------
Cash flows from investing activities:
  Purchase of property, equipment and
    expenditure on construction-in-progress .............    (25,506,151)    (11,172,755)    (17,081,875)     (2,204,113)
  Placing of restricted cash ............................     (4,978,136)     (3,814,712)    (25,306,748)     (3,265,387)
  Receipt of restricted cash ............................             --       4,656,616       5,295,680         683,314
  Advances to related parties ...........................       (835,688)     (2,185,639)    (39,753,387)     (5,129,469)
                                                             -----------     -----------     -----------     -----------
  Net cash used in investing activities .................    (31,319,975)    (12,516,490)    (76,846,330)     (9,915,655)
                                                             -----------     -----------     -----------     -----------
</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,
                                                          ---------------------------------------------------------------
                                                              1998             1999             2000             2000
                                                          ------------     ------------     ------------     ------------
                                                               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       15,643,949
  Repayment of bank borrowings .......................              --      (18,709,074)     (91,916,886)     (11,860,243)
  Advances from related parties ......................      78,469,164       19,541,922       57,336,825        7,398,299
  Repayments to related parties ......................              --      (27,983,572)              --               --
  Deferred offering costs incurred ...................              --         (848,789)              --               --
  Contribution from minority shareholder .............         883,991          370,718               --               --
  Issuance of common shares and warrants .............              --               --       69,489,681        8,966,410
                                                          ------------     ------------     ------------     ------------
  Net cash provided by financing activities ..........      79,353,155       26,084,956      156,150,222       20,148,415
                                                          ------------     ------------     ------------     ------------
Effect of foreign exchange rate changes ..............              --               --           90,875           11,725

Net increase in cash and cash equivalents ............      13,012,737        2,184,474       60,641,172        7,824,668
Cash and cash equivalents, beginning of year .........              --       13,012,737       15,197,211        1,960,930
                                                          ------------     ------------     ------------     ------------
Cash and cash equivalents, end of year ...............      13,012,737       15,197,211       75,929,258        9,797,323
                                                          ============     ============     ============     ============
Supplemental cash flow information:
Cash paid during the year for:
  Income taxes .......................................              --               --               --               --
                                                          ============     ============     ============     ============

  Interest ...........................................       4,908,060        8,627,850        3,395,303          438,104
  Interest capitalized ...............................      (4,908,060)      (8,627,850)      (3,395,303)        (438,104)
                                                          ------------     ------------     ------------     ------------
  Interest (net of amount capitalized) ...............              --               --               --               --
                                                          ============     ============     ============     ============
Non cash transactions:
  Conversion of payable to holding company to
    common shares (note 1) ...........................              --               --       74,004,750        9,549,000
                                                          ============     ============     ============     ============
  Common shares issued to consultants (note 1) .......              --               --        6,587,500          850,000
                                                          ============     ============     ============     ============
</TABLE>

                 See notes to consolidated financial statements

                                      F-6
<PAGE>

                              NEW CHINA HOMES, LTD.

      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY

<TABLE>
<CAPTION>
                                                                                       (Accumulated
                                                    Common shares        Additional        loss)        Cumulative       Total
                                             --------------------------    paid-in        retained      translation   stockholder's
                                                Shares        Amount       capital        earnings      adjustment  (deficit) equity
                                             ------------  ------------  ------------   ------------   ------------   ------------
                                                                HK$          HK$             HK$            HK$            HK$
<S>                                            <C>           <C>           <C>            <C>               <C>        <C>
Balance at April 1, 1997 ..................         1,000         7,750            --        521,666             --        529,416
Net loss ..................................            --            --            --     (4,246,356)            --     (4,246,356)
Translation adjustment ....................            --            --            --             --         (2,717)        (2,717)
                                             ------------  ------------  ------------   ------------   ------------   ------------
Balance at March 31, 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 by 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
                                             ============  ============  ============   ============   ============   ============

                                                                    US$           US$            US$            US$            US$
US$ equivalent - balance at
  March 31, 2000 (note 2)..................                  12,700,000     7,444,899      3,283,516         58,941     23,487,356
                                                           ============  ============   ============   ============   ============
</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 February 23, 1999, Far East transferred all its shares in its wholly
         owned subsidiary, Far East Consortium China Investments Limited, to the
         Company for a consideration of HK$600,000. This was satisfied by an
         inter-company loan from the shareholder to the Company. The transfer of
         shares has been accounted for as a reorganization of entities under
         common control similar to a pooling of interests. The accompanying
         financial statements include the consolidated results of operations and
         financial position of the Company and its subsidiaries for all periods
         presented.

         The Company operates 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 International"), a company incorporated in the Cayman
         Islands and listed in Hong Kong.

         At March 31, 2000, 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.

              Beijing Ching Chu Zhichun Gardens Property Development Co., Ltd.
              ("Beijing Ching Chu") (incorporated in China) - 100% owned.
              Beijing Ching Chu is registered as a Sino-foreign cooperative
              joint venture with limited liability for a period of 15 years from
              March 28, 2000 to March 27, 2015.

         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 the Chingchu's
         real estate.

         Beijing Ching Chu is in the development stage and will be developing a
         mixed-use residential and commercial complex in Beijing known as
         Millennium Towers. Construction is expected to commence in late 2000.

                                      F-8
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

1.       ORGANIZATION AND BASIS OF FINANCIAL STATEMENTS - continued

         The financial statements of the Company and its subsidiaries have been
         prepared in accordance with accounting principles generally accepted in
         the United States of America ("US GAAP") whereas accounting principles
         generally accepted in Hong Kong ("HK GAAP") had been adopted in prior
         periods. All amounts have been represented using US GAAP. 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 ventures
         as established by the Ministry of Finance of China. The principal
         adjustments made to conform the statutory accounts to US GAAP are as
         follows:

         o        to recognize revenue on a percentage of completion basis and
                  the related cost of sales

         o        to record deferred income taxes and business tax as a result
                  of the differences in revenue recognition

         o        to write off pre-operating expenditure as operating expenses
                  when incurred.

         The dividends from the Company will be declared based on the profits
         reported in the statutory financial statements of the subsidiaries. The
         distributable retained earnings as at March 31, 1999 and 2000 were
         HK$5,617,000 and HK$6,305,752, respectively. The accumulated losses as
         at March 31, 1999 and 2000 of the Hong Kong operations are
         HK$10,946,000 and HK$14,034,899, respectively.

         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. The consulting
         agreements establish net income thresholds for the first and second
         years following the closing date of the public offering of the
         Company's common shares and in each of these two years 25% of the
         shares are subject to redemption and cancellation by the Company in the
         event the net income thresholds are not met. 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 an equivalent
         amount of the payable to Far East.

         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.

                                      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 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, 1998, 1999 and 2000 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$631,218 in 1998, HK$773,401
         in 1999 and HK$938,062 in 2000. 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 asseses 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, 2000.

         DEFERRED OFFERING COSTS - Deferred offering costs represent expenses
         incurred by the Company that are directly attributable to the Company's
         initial public offering. These costs were netted against the proceeds
         from the initial public offering of common stock in 2000.

         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
         an asset on 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 purchased 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.

         In December 1999, the Securities and Exchange Commission issued Staff
         Accounting Bulletin No. 101, "Revenue Recognition" (SAB 101). SAB 101
         established guidelines for revenue recognition and is effective for
         periods beginning no later than the fourth fiscal quarter of fiscal
         years beginning after December 15, 1999. Management is currently
         evaluating the impact this would have on the Company's financial
         statements.

         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 gain of HK$83,399 in 1998, a loss of HK$33,306 in 1999 and a loss
         of HK$191,672 in 2000.

         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 1998 and 1999 and 10,538,630 in 2000, after adjusting for the
         1,000 for 1 stock split discussed in note 1. Basic earnings (loss) per
         share for 1998 and 1999 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, 2000, there were 27,269 warrants that were excluded from the
         diluted weighted average number of shares as the effect were
         antidilutive.

         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.

                                      F-12
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

         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 designated as hedges of certain
         items, in certain circumstances any change in fair value is recorded in
         other comprehensive income in other circumstances in earnings for the
         period. For derivatives that are designated as hedges of certain items,
         in certain circumstances any change in fair value is recorded in other
         comprehensive income, in other circumstances in earnings for the
         period. For derivatives that are not designated as hedges, any changes
         in fair value will be reflected in earnings for the period. SFAS 133 is
         not yet mandatory and the Company is evaluating the impact this would
         have on the financial statements of the Company.

         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$7.75 to US$1, the approximate rate of exchange on
         March 31, 2000. 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.

3.       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, 2000, the Company has obtained
         the land use rights which represent the legal ownership of four plots
         of land for the development of Phases 1 through 4. This represents
         approximately 530,003 square meters.

         Sales of units in Phase 1, Phase 2 and Phase 3 commenced during the
         years ended March 31, 1998, 1999 and 2000, respectively, after
         obtaining the pre-sales certificates from the Shanghai House and Land
         Administration Bureau. Construction of Phase 4 has reached a
         preliminary stage at March 31, 2000 and the pre-sales certificate was
         obtained in June 2000.

                                      F-13
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

3.       LAND AND LOTS UNDER DEVELOPMENT AND COMPLETED HOMES - continued

         At the balance sheet dates, land and lots under development and
         completed houses comprised:
<TABLE>
<CAPTION>
                                                                             March 31,
                                                             -----------------------------------------
                                                                 1999           2000           2000
                                                             -----------    -----------    -----------
                                                                 HK$            HK$            US$
                                                                                             (note 2)
<S>                                                          <C>            <C>             <C>
Completed homes .........................................      2,575,387     12,258,967      1,581,802
Land held under 70 years lease, at cost .................     97,142,881     67,542,336      8,715,140
Construction costs of lots under development ............    197,986,933     90,865,445     11,724,574
                                                             -----------    -----------    -----------
                                                             297,705,201    170,666,748     22,021,516
Add: Attributable profit recognized .....................     68,301,687             --             --
                                                             -----------    -----------    -----------
                                                             366,006,888    170,666,748     22,021,516
Less: Sales proceeds received and receivable ............    232,445,201             --             --
                                                             -----------    -----------    -----------
                                                             133,561,687    170,666,748     22,021,516
                                                             ===========    ===========    ===========
</TABLE>

         Included above are land and lots under development of HK$32,691,300 and
         HK$27,067,669 as of March 31, 1999 and 2000, respectively, which have
         been pledged as security for long-term and short-term bank loans.

4.       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 activities conducted in Hong Kong. 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$4,197,038 in 1998, HK$13,495,942 in 1999 and HK$8,703,695 in 2000
         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.

                                      F-14
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

4.       INCOME TAXES - continued

         The components of (loss) income before minority interests and income
         taxes are as follows:
<TABLE>
<CAPTION>
                                                           March 31,
                                  -----------------------------------------------------------
                                     1998            1999             2000           2000
                                  -----------     -----------     -----------     -----------
                                      HK$             HK$              HK$            US$
                                                                                    (note 2)
         <S>                       <C>             <C>             <C>             <C>
         China ...............     (4,335,047)     47,607,574      22,083,728       2,690,223
         Hong Kong ...........     (1,383,233)     (6,692,048)     (9,711,124)     (1,093,758)
                                  -----------     -----------     -----------     -----------
                                   (5,718,280)     40,915,526      12,372,604       1,596,465
                                  ===========     ===========     ===========     ===========
</TABLE>

         The (credit) provision for income taxes consists of the following:
<TABLE>
<CAPTION>
                                                           March 31,
                                  ---------------------------------------------------------
                                      1998            1999           2000           2000
                                  -----------     -----------    -----------    -----------
                                      HK$             HK$            HK$            US$
                                                                                  (note 2)
         <S>                       <C>             <C>             <C>              <C>
         China:
           Current ...........             --      10,491,689      6,154,320        794,106
           Deferred ..........     (1,430,566)      5,281,676      1,354,369        174,757
                                  -----------     -----------    -----------    -----------
                                   (1,430,566)     15,773,365      7,508,689        968,863
                                  ===========     ===========    ===========    ===========
</TABLE>

                                      F-15
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

4.       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,
                                                  ----------------------------------------------------------
                                                      1998            1999            2000           2000
                                                  -----------     -----------     -----------    -----------
                                                      HK$             HK$              HK$            US$
                                                                                                    (note 2)
<S>                                                <C>             <C>              <C>              <C>
Standard income tax rate applied to
  (loss) income before income tax ............     (1,887,033)     13,502,124       4,082,959        526,833
Effect of no benefit attributable to
  tax loss for Hong Kong operations ..........        228,233       1,137,648       2,997,691        386,799
Interest expense not deductible in
  Hong Kong ..................................        239,573         912,193         206,980         26,707
Other expenses not deductible in Hong
  Kong .......................................             --         263,520              --             --
Expenses not deductible in China .............             --              --         193,254         24,936
Other ........................................        (11,339)        (42,120)         27,805          3,588
                                                  -----------     -----------     -----------    -----------
Income taxes .................................     (1,430,566)     15,773,365       7,508,689        968,863
                                                  ===========     ===========     ===========    ===========
</TABLE>

         Deferred income taxes represent the difference in recognition of income
         under the percentage of completion method for accounting and the
         accounting treatment applied for tax purposes in China.

         The components of deferred income taxes are as follows:

<TABLE>
<CAPTION>
                                                                      March 31,
                                                      ----------------------------------------
                                                         1999           2000           2000
                                                      ----------     ----------     ----------
                                                          HK$            HK$            US$
                                                                                     (note 2)
<S>                                                   <C>            <C>              <C>
Deferred tax asset (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)      (700,644)
Difference in recognition of pre-operating
  expenditures ...................................       231,935        164,317         21,202
                                                      ----------     ----------     ----------
                                                      (3,850,052)    (5,265,675)      (679,442)
                                                      ==========     ==========     ==========
</TABLE>

                                      F-16
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

5.       OTHER PREPAID TAXES

<TABLE>
<CAPTION>
                                                                     March 31,
                                                      ---------------------------------------
                                                        1999            2000          2000
                                                      ---------      ---------      ---------
                                                         HK$            HK$            US$
                                                                                    (note 2)
<S>                                                   <C>            <C>              <C>
Provisional land appreciation tax ................    2,151,544      2,161,654        278,923
                                                      =========      =========      =========
</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%. However, 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. As at March 31, 1999 and 2000 the Company had no
         obligations under the Land Appreciation Tax Law.

6.       RESTRICTED CASH

         Chingchu has entered into agreements with certain banks in respect of
         mortgage loans provided to house buyers of 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, 1999 and 2000, deposits of HK$4,140,889 and
         HK$5,322,758, respectively, were placed with banks to guarantee the
         above agreements.

         At March 31, 1999 and 2000, deposits of HK$nil and HK$18,848,657,
         respectively, have been pledged with banks as security for short-term
         bank borrowings.

                                      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          2000
                                                            ----------    ----------    ----------
                                                                HK$           HK$           US$
                                                                                          (note 2)
<S>                                                         <C>           <C>            <C>
At cost:
Building ...............................................            --    26,282,979     3,391,352
Construction-in-progress ...............................    31,878,237    21,290,665     2,747,183
Machinery and equipment ................................        26,661        38,064         4,911
Furniture and fixtures .................................     1,232,241     1,277,788       164,876
Motor vehicles .........................................     2,726,968     3,937,844       508,109
Electric equipment .....................................       814,922       976,443       125,993
                                                            ----------    ----------    ----------
Total ..................................................    36,679,029    53,803,783     6,942,424
Less: Accumulated depreciation and amortization ........       719,869     1,368,430       176,572
                                                            ----------    ----------    ----------
Net book value .........................................    35,959,160    52,435,353     6,765,852
                                                            ==========    ==========    ==========
</TABLE>

         Depreciation and amortisation expense for the years ended March 31,
         1998, 1999 and 2000 was HK$131,641, HK$588,228 and HK$727,992,
         respectively.

8.       BANK BORROWINGS

         At March 31, 2000 short-term bank loans totalling HK$54,511,279,
         bearing interest at 5% to 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, 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 3).
         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, 2000 as
         follows:

                                               HK$               US$
                                                               (note 2)
         Year ending March 31:

         2001                               3,890,977           502,062
         2002                               3,890,977           502,062
         2003                               2,199,656           283,826
                                            ---------         ---------
                                            9,981,610         1,287,950
                                            =========         =========

         The weighted average interest rate on borrowings was 6.95%. At March
         31, 2000, 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 and advances from Far East as mentioned in note 9 (ii)
         to the consolidated financial statements were:

<TABLE>
<CAPTION>
                                                                        Year ended March 31,
                                                              ----------------------------------------
                                                                 1999           2000           2000
                                                              ----------     ----------     ----------
                                                                  HK$            HK$            US$
                                                                                              (note 2)
<S>                                                            <C>            <C>              <C>
Interest capitalized at beginning of the year:
  Land and lots under development ........................     2,824,887      4,301,952        555,091
  Completed homes ........................................            --         70,857          9,143
  Construction-in-progress ...............................       631,218      1,404,619        181,241
                                                              ----------     ----------     ----------
  Total interest capitalization ..........................     3,456,105      5,777,428        745,475
                                                              ==========     ==========     ==========

Interest capitalized at beginning of the year ............     3,456,105      5,777,428        745,475
Plus interest incurred ...................................     8,627,850      3,395,303        438,104
Less interest expensed as cost of home sales .............    (6,306,527)    (2,684,925)      (346,442)
                                                              ----------     ----------     ----------
Interest capitalized at end of the year ..................     5,777,428      6,487,806        837,137
                                                              ==========     ==========     ==========
Interest capitalized at end of the year:
  Land and lots under development ........................     4,301,952      4,265,394        550,374
  Completed homes ........................................        70,857        257,714         33,253
  Construction-in-progress ...............................     1,404,619      1,964,698        253,510
                                                              ----------     ----------     ----------
  Total interest capitalization ..........................     5,777,428      6,487,806        837,137
                                                              ==========     ==========     ==========
</TABLE>

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        1999          2000          2000
                                                       -------    ----------    ----------    ----------
                                                                      HK$           HK$           US$
                                                                                               (note 2)
<S>                                                      <C>       <C>          <C>            <C>
Due from related parties:
  Subsidiaries of Far East Consortium ...............    (i)       1,644,292    41,501,814     5,355,073
  Parties related to the minority shareholder
    of Chingchu .....................................    (i)       1,377,817            --            --
                                                                  ----------    ----------    ----------
                                                                   3,022,109    41,501,814     5,355,073
                                                                  ==========    ==========    ==========
Due to related parties:
  Subsidiaries of Far East Consortium ...............    (i)              --    41,412,308     5,343,523
  Far East ..........................................    (ii)     75,918,974    15,578,096     2,010,077
  Party related to the minority shareholder
    of Chingchu .....................................    (iii)    20,416,300    31,398,030     4,051,359
                                                                  ----------    ----------    ----------
                                                                  96,335,274    88,388,434    11,404,959
                                                                  ==========    ==========    ==========
</TABLE>

                                      F-19
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

9.       RELATED PARTY TRANSACTIONS - continued

         (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
                  (1999: HK$7,292,626). The amount outstanding at March 31,
                  2000 is repayable on demand.

         (iii)    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
                  (1999: HK$16,434,556) and HK$6,042,356 (1999: HK$3,881,744),
                  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,
                                                ----------    ----------    ----------    ----------
                                                   1998         1999           2000          2000
                                                ----------    ----------    ----------    ----------
                                                    HK$          HK$            HK$           US$
                                                                                            (note 2)
<S>                                             <C>           <C>           <C>            <C>
Land fees and costs ........................    70,373,832    28,052,573    42,776,898     5,519,600
External infrastructure costs ..............    14,953,271    38,640,037    29,093,921     3,754,054
Penalty on late payment ....................            --       748,363            --            --
                                                ----------    ----------    ----------    ----------
                                                85,327,103    67,440,973    71,870,819     9,273,654
                                                ==========    ==========    ==========    ==========
</TABLE>

                  The average amount due to the party related to the minority
                  shareholder during the year ended March 31, 1999 and 2000 was
                  HK$26,522,571 and HK$28,043,523, respectively which
                  represented RMB28,352,628 and RMB29,838,308, respectively,
                  translated using an average exchange rate of RMB1.064 to HK$1.
                  The amount outstanding at March 31, 2000 is repayable on
                  demand. The party related to the minority shareholder did not
                  charge the Company any interest during the years ended March
                  31, 1999 and 2000 except penalty for the delayed payment of
                  land fees in 1999 as shown above.

                                      F-20
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

9.       RELATED PARTY TRANSACTIONS - continued

         (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.

         In addition, as described in note 1, the Company entered into
         consulting agreements with certain directors.

10.      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. Before March 7, 2001, the warrants will not be
         redeemable by the Company without the written consent of the
         underwriters. 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 for 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.

         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 $0.20625 per warrant. 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 are restricted from sale, transfer,
         assignment, or hypothecation for a period of twelve months from March
         8, 2000 by the holder, except (1) to officers of the managing
         underwriter and members of the selling group and officers and partners
         thereof; (2) by will; or (3) by operation of law.

         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-21
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

10.      STOCK HOLDERS' 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 effect 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.

11.      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$272,897 in 1998, HK$293,078 in 1999 and HK$175,566 in 2000. At
         March 31, 2000, the Company and its subsidiaries were committed under
         operating leases requiring minimum rentals as follows:

                                           HK$                US$
                                                           (note 2)

         2001 ....................       216,120            27,886
         2002 ....................        93,000            12,000
         2003 ....................        93,000            12,000
                                         -------            ------
                                         402,120            51,886
                                         =======            ======

                                      F-22
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

11.      COMMITMENTS AND CONTINGENCIES - continued

         Capital expenditure

         At March 31, 2000, the Company had contracted for expenditure of
         approximately HK$132,490,000 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$216,541,000.

         At March 31, 2000, the Company entered into a co-operative joint
         venture agreement with Beijing Jida Real Estate Development Company
         ("Beijing Jida") and Beijing Minglihua Property Consultants Co., Ltd.
         ("Beijing Minglihua") and established a company to be known as Beijing
         Ching Chu Zhichun Gardens Property Development Co., Ltd to develop and
         sell a mixed-use residential and commercial complex in Beijing, China.

         At March 31, 2000, the Company has contracted for aggregate expenditure
         relating to the Beijing project of approximately HK$277,688,000 in
         respect of the following:

         o        HK$77,500,000 for contribution of capital of Beijing Ching
                  Chu;

         o        HK$107,143,000 for development rights to 170,000M2 of
                  residential and commercial land;

         o        HK$49,812,000 for development of 20,000M2 of office space;

         o        HK$43,233,000 for resettlement of existing occupants of the
                  land to be developed.

         Subsequent to March 31, 2000, the Company has made payments amounting
         to HK$42,293,000 in respect of the above expenditures. Upon completion
         of construction, 20,000M2 of office space and 2,000M2 of residential
         space will be transferred to Beijing Minglihua.

         Guarantees

         The Company has given guarantees in respect of mortgage loans provided
         to the buyers of Chingchu California Gardens as disclosed in note 6 to
         the financial statements.

         At March 31, 2000 and 1999, the total amount of mortgages outstanding
         which are subject to these guarantees was HK$76 million and HK$81
         million, respectively.

                                      F-23
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

11.      COMMITMENTS AND CONTINGENCIES - continued

         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 instalments to the 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 (1999:
         HK$4,368,000) calculated at a daily rate of 0.2% on the unpaid amount
         at March 31, 2000.

12.      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, 1998, 1999 and 2000 were HK$91,735,
         HK$314,330 and HK$280,412, respectively. The Company and its Hong Kong
         subsidiary have no other pension plans or post-retirement obligations.

13.      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.

14.      FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying amount of cash and cash equivalents, accounts receivable,
         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. There is no
         quoted market price for amounts due from related companies and
         accordingly a reasonable estimate of their fair value could not be made
         without incurring excessive costs.

                                      F-24
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

15.      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 commitments 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 March 31, 1999 ........................         --                 --
  Granted ............................................    140,000               7.50
  Exercised ..........................................         --                 --
  Canceled ...........................................         --                 --
                                                          -------            -------
Outstanding at March 31, 2000 ........................    140,000               7.50
                                                          =======            =======
<CAPTION>
                                                                 March 31, 2000

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, 2000:

<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-25
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

14.      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>
                                                         Year ended March 31
                                                    --------------------------
                                                        2000            2000
                                                    -----------      ---------
                                                        HK$             US$
                                                                      (note 2)
<S>                                                  <C>              <C>
As reported
  Net income ..............................          4,600,347        593,593
  Income per share - basic ................               0.44           0.06
  Income per share - diluted ..............               0.44           0.06
Pro forma
  Net loss ................................         (1,421,403)      (183,407)
  Loss per share - basic ..................              (0.13)         (0.02)
  Loss per share - diluted ................              (0.13)         (0.02)
</TABLE>

         There were no stock options granted in the years ended March 31, 1998
         and 1999.

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

         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.
<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-26
<PAGE>

                              NEW CHINA HOMES, LTD.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

16.      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 (loss) income
         to comprehensive income is as follows:

<TABLE>
<CAPTION>
                                                                      Years ended March 31,
                                                      ------------------------------------------------------
                                                         1998           1999          2000           2000
                                                      ----------     ----------    ----------     ----------
                                                          HK$            HK$           HK$            US$
                                                                                                   (note 2)
<S>                                                   <C>            <C>            <C>              <C>
Net (loss) income ................................    (4,246,356)    24,571,592     4,600,347        593,593
Changes in other comprehensive income:
  Translation adjustments ........................        (2,717)        71,799      (387,716)       (50,028)
                                                      ----------     ----------    ----------     ----------
Total comprehensive (loss) income ................    (4,249,073)    24,643,391     4,212,631        543,565
                                                      ==========     ==========    ==========     ==========
</TABLE>

17.      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.

                                      F-27