Employment of Capital Share Capital Reserves Shareholders Funds Minority Interest Loan Stock Long term Liability Deferred

Item

90458 904 57935 58839 5333 26174 112 31619 90458 Debt

Capital Employed

Long term Liabilities Total Liabilities Bank Loan Beyond 5 years Other Loan Beyond 5 years Convertible Debt due in more than 5years % Liabilities payable more than 5years is

26174 31503 5110 8106 13216 50%

By maintain current capital structure.. Based on current level of debt, no sufficient portion of long term debt remaining to investment next capital commitments. Because.. 50% of debt is payable within period of 5years and remaining long term debt isn't wholly payable within period of 5 years.. but HWL needs financing for atleast 10 years or beyond.. so it is not possible to fulfill the capital commitments with reallocation of current debt. HWL needs to change current debt structure and needs new financing for longer period.

Total Assets

Capital Commitments Already Contracted for Authorized for Total Capital Commitments Authorized for Operating Cashflows for 1995

Equity

Debt Total Equity and Liabilities Two types of debt: 1.Payable in 5years 2.Not wholly payable in 5years Current Capital Structure Equity Debt 65% 35%

Year1 Year2 Year3

Sources to fulfill the future need of capital: 1. Internal Generated Cash by Cashflows by Reallocation of Debt

Internal Generated Cash 1 Not enough cashflow to investment in up coming capital comm 2 Current years operating cashflows are 8552 million not in posi

nt portion of ext capital

1 2 3 4 5

Bank Loans Other constraints to obtain Bank Loan Not feasible because company needs the finance for more 10 y And syndication of local and foreign banks are offering loans fo And also syndicated loans are at floating rate of interest, not fa Another problem to get bank loan is.. Limited loan to one grou And Hutchison needs atleast 5 Billion US$ in next 5 years to ma

able within

ger period.

l Commitments 6468.9 23736.2 30205.1 HK$ Million 23736 HK$ Million 8552 HK$ Million + 23736 15184 6632 -1920

US$ HK$

1 7.73485 3905.07 US$ Million

8552 8552 8552

Based on current cashflows it is impossible to maintain the present growth and to fulfill the next years capital commitments and investments.

HWL relied heavily on internally generated funds to fuel growth. This method of funding and capital structure perfect and sufficient when capital commitments invesment.. no longer duration, such as HWL needs funds for more than 10 years. HWL needs fully guaranteed funds for long-term projects, and its current capital structure cannot support this growth.

the future need of capital: Not sufficient Not possible

to investment in up coming capital commitment ng cashflows are 8552 million not in position to fulfill the capital commitments

cant take due to restriction of current capital structure btain Bank Loan ompany needs the finance for more 10 years at fix rate of interest al and foreign banks are offering loans for 5 years to max. 7 years ans are at floating rate of interest, not favorable for company et bank loan is.. Limited loan to one group or related subsidiary companies atleast 5 Billion US$ in next 5 years to maintain current growth rate

1 2 3 4 5 6 7 8

HWL should issue Eurobonds to obtain Debt Maturity varies from 3 years to 15 years or more Less statutory issues and regulations required in issuance of eurobonds No need to report the financial statements according to GAAP Investors need diversification of investment and eurobond fulfill this need Investors and banks can use these bonds for swap which means investors hold and invest in these eurobonds othe Eurobonds can be traded in all capital markets around the world More tax benefits for the investors More Demand

HWL needs very effective and appropriate capital structure to funding the next financial investments. HWL shou issuing bonds but also by considering the credit rating and has to maintain the acceptable credit rating. If HWL lo more interest in form of risk premium to the investors due to increase in risk.

And HWL also needs to raise some portion capital from debt.. because by issuing bonds due to the impact of tax decreases which increases the shareholder wealth and corporate value.. and also wants to reduce the threat of

HWL make sure to keep BBB credit rating because.. to fulfill to future need of funds and current peformance are credit rating better than BBB.. because companies profits and cashflow ratios are falling in the BBB rating overal

If HWL is can approve its rating from BBB to A.. it can saves only 0.4% Nd lose the opportunity using more debt.. So HWL must issue the bonds (to take debt) up to maximium level by maintaining the BBB rating

After issuing the bonds.. some portion of future financing fulfilled and so remaining portion of financing should r in market.. by this company can maintain its credit rating up to standard and also by issuing bonds the threat of issue less share than absence of debt.

nd invest in these eurobonds other than yield purposes.. Result is various sort investors can invest in this product

t financial investments. HWL should raise some portion of future fund needed by acceptable credit rating. If HWL loses the credit rating.. company has to pay

ng bonds due to the impact of tax shield.. HWL cost of capital WACC also lso wants to reduce the threat of diluting ownership

funds and current peformance aren't supporting the company to maintain the are falling in the BBB rating overall..

the opportunity using more debt.. tax shield and lose returns

ing the BBB rating

aining portion of financing should raise via equity financing by issuing new shares lso by issuing bonds the threat of diluting control minimize and company has to