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ANNUAL REPORT 2020

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	Page
Corporate Information	2
Chairman’s Statement	3
Report of the Directors	4
Corporate Governance Report	21
Risk Management Report	32
Environmental, Social and Governance Report	39
Independent Auditor’s Report	53
Consolidated Statement of Profit or Loss	58
Consolidated Statement of Comprehensive Income	59
Consolidated Statement of Financial Position	60
Consolidated Statement of Changes in Equity	62
Consolidated Statement of Cash Flows	63
Notes to the Financial Statements	64
Particulars of Principal Subsidiaries	142
Particulars of Principal Associates	145
Particulars of Principal Joint Ventures	146
Schedule of Major Properties	147
Summary of Financial Information	149
Supplementary Financial Information	150

Corporate Information

BOARD OF DIRECTORS

Executive Directors

Dr Stephen Riady (Chairman) Mr John Luen Wai Lee, BBS, JP (Chief Executive Officer)

PRINCIPAL BANKERS

Bank of China (Hong Kong) Limited China CITIC Bank International Limited The Bank of East Asia, Limited

SOLICITORS

Non-executive Director

Howse Williams

Mr Leon Nim Leung Chan

PRINCIPAL SHARE REGISTRAR AND

Independent non-executive Directors

Mr Victor Ha Kuk Yung Mr King Fai Tsui Mr Edwin Neo

COMMITTEES

Audit Committee

Mr King Fai Tsui (Chairman) Mr Leon Nim Leung Chan Mr Victor Ha Kuk Yung Mr Edwin Neo

Remuneration Committee

Mr King Fai Tsui (Chairman) Dr Stephen Riady Mr Leon Nim Leung Chan Mr Victor Ha Kuk Yung Mr Edwin Neo

Nomination Committee

Mr King Fai Tsui (Chairman) Dr Stephen Riady Mr Leon Nim Leung Chan Mr Victor Ha Kuk Yung Mr Edwin Neo

SECRETARY

TRANSFER OFFICE

MUFG Fund Services (Bermuda) Limited 4th Floor North Cedar House 41 Cedar Avenue Hamilton HM 12 Bermuda

HONG KONG BRANCH SHARE REGISTRAR

AND TRANSFER OFFICE

Tricor Tengis Limited Level 54, Hopewell Centre 183 Queen’s Road East Hong Kong

REGISTERED OFFICE

Clarendon House Church Street Hamilton HM 11 Bermuda

PRINCIPAL PLACE OF BUSINESS

40th Floor, Tower Two Lippo Centre 89 Queensway Hong Kong

Mr Kelsch Woon Kun Wong

STOCK CODE

AUDITOR

Ernst & Young Certified Public Accountants Registered Public Interest Entity Auditor

655

WEBSITE

www.hkchinese.com.hk

2 Hongkong Chinese Limited 2020 Annual Report

Chairman’s Statement

I am pleased to present the annual report of the Company (together with its subsidiaries, the “Group”) for the nine months ended 31 December 2020 (the “Period”).

The Period was full of challenges to the operations of the Group and its joint ventures (led by OUE Limited in Singapore (“OUE”), together with its subsidiaries, the “OUE Group”) primarily due to the COVID-19 coronavirus pandemic (the “Pandemic”) across the world, coupled with global and regional economic and political situations.

Despite the adverse business environment, the Group implemented its strategy of rationalising non-core assets in the financial services sector by the disposal of its remaining 20% interest in The Macau Chinese Bank Limited (“MCB”) for approximately MOP322 million (approximately HK$312 million) during the Period.

The OUE Group completed the acquisition of plots of land with a total area of approximately 8,000 sq.m. in a prime location in the central business district in South Jakarta, Indonesia and the disposal of U.S. Bank Tower in Los Angeles, California, the United States of America (the “US”). OUE Commercial Real Estate Investment Trust (“OUE C-REIT”), one of the largest diversified Singapore REITS, also announced in January 2021 the divestment of a 50% interest in OUE Bayfront as part of its active portfolio management to enhance value to unitholders.

OUE Lippo Healthcare Limited (“OUELH”) and its subsidiaries (collectively the “OUELH Group”) continued to strengthen its joint venture relationship with the China Merchants group as part of its three-pronged growth strategy by securing a long term lease for operation of a new obstetrics and gynaecology hospital in Changshu city, Jiangsu Province, the People’s Republic of China (the “PRC”), in addition to other hospital undertakings in the PRC as well as hospital and clinic operations and nursing homes in certain other Asian countries.

The PRC is the only major economy in the world reporting an economic growth in 2020 after successfully controlling the Pandemic, while Singapore and other Asian countries in which the Group and its joint ventures have operations are at varying degrees of lockdown, relaxation of control measures and economic recovery on the back of vaccine rollout. However, as the Pandemic is widely expected to persist in 2021, the Group and its joint ventures will continue to exercise prudence in capital and expenditure management as well as new business opportunities.

The Directors have proposed a final cash dividend of HK0.75 cents per share for the Period. Together with the interim dividend of HK1 cent per share, the total dividends for the Period will be HK1.75 cents per share.

I would like to extend my gratitude to my fellow Directors, our management and staff for their contributions and dedicated work during the unusual Period.

Stephen Riady Chairman

30 March 2021

2020 Annual Report Hongkong Chinese Limited

Report of the Directors

The Directors hereby present their report together with the audited financial statements for the Period.

BUSINESS REVIEW

Overview

Businesses across the world experienced the far-reaching, devastating impacts of the Pandemic during the Period. Against this backdrop, the Group and its joint ventures were able to effect disposal of certain assets resulting in the strengthening of their financial position to weather the ongoing challenging situation.

Results for the Period

The Group recorded a consolidated loss attributable to shareholders of approximately HK$830 million for the Period, as compared to a consolidated profit of approximately HK$425 million for the year ended 31 March 2020. The loss was largely due to share of loss of joint ventures (which loss was mainly attributable to overall net fair value losses on investment properties and impairment losses on fixed assets) while partially offset by the profit arising from the disposal by the Group of a joint venture during the Period.

Property investment and development businesses contributed to 96% (Previous Year – 96%) of total revenue from continuing operations for the Period. Revenue from continuing operations for the Period increased to approximately HK$83 million (Previous Year – approximately HK$71 million). The increase was mainly attributable to the completion of sale of the Group’s properties held for sale during the Period.

In September 2020, the Group disposed of its remaining 20% interest in MCB for an aggregate consideration of approximately MOP322 million (approximately HK$312 million). After the disposal, the Group has ceased its banking business. Accordingly, the results of the banking business were classified as discontinued operation. The Group recognised a gain on disposal of joint venture of approximately HK$182 million for the Period. After accounting for the fair value loss on derecognition of the put option to sell its 20% interest to the majority shareholder of MCB (the “Put Option”) of approximately HK$47 million, as the Put Option ceased to have effect upon completion of the disposal, profit arising from the disposal of the joint venture amounted to approximately HK$135 million. Together with the share of loss of MCB of approximately HK$0.3 million for the Period (Previous Year – approximately HK$5 million), the net profit of the banking business was approximately HK$135 million for the Period (Previous Year – loss of approximately HK$7 million).

The Group’s other operating expenses mainly included legal and professional fees and consultancy and service fees. Other operating expenses from continuing operations amounted to approximately HK$29 million for the Period (Previous Year – approximately HK$38 million).

Property Investment

Segment revenue from the property investment business was mainly attributable to recurrent rental income from the Group’s investment properties and interest income from the loans to joint ventures of the Company. Segment revenue for the Period amounted to approximately HK$50 million (Previous Year – approximately HK$68 million). Segment profit for the Period before accounting for the share of results from the Group’s joint ventures amounted to approximately HK$39 million (Previous Year – approximately HK$48 million).

Lippo ASM Asia Property Limited (“LAAPL”, together with its subsidiaries, the “LAAPL Group”), a principal joint venture of the Company, is the vehicle holding a controlling stake of approximately 70.1% equity interest in OUE as at 31 December 2020. OUE is listed on the Mainboard of Singapore Exchange Securities Trading Limited (the “SGX-ST”). The OUE Group is principally engaged in developing and managing assets across the commercial, hospitality, retail, residential and healthcare sectors. It directly owns Downtown Gallery, a lifestyle retail mall in Singapore of approximately 14,000 sq.m.

4 Hongkong Chinese Limited 2020 Annual Report

Report of the Directors (continued)

BUSINESS REVIEW (continued)

Results for the Period (continued)

Property Investment (continued)

In June 2020, the OUE Group completed the acquisition of plots of land with a total area of approximately 8,000 sq.m. in a prime location in the central business district in South Jakarta, Indonesia for a consideration of IDR1,316 billion (approximately HK$684 million). In September 2020, it completed the disposal of U.S. Bank Tower in Los Angeles, California, the US for a consideration of US$430 million (approximately HK$3.3 billion).

The LAAPL Group had in aggregate an approximately 48.9% interest in OUE C-REIT which is listed on the Mainboard of the SGX-ST (including the OUE Group’s 48.0% interest therein) as at 31 December 2020. OUE C-REIT’s portfolio of 7 high-quality prime properties includes OUE Bayfront, One Raffles Place, OUE Downtown Office, 1,077-room Mandarin Orchard Singapore, the adjoining Mandarin Gallery and the 563-room Crowne Plaza Changi Airport in Singapore as well as the properties at Lippo Plaza in Shanghai, the PRC with more than 200,000 sq.m. of office and retail space and 1,640 upscale hotel rooms. It is one of the largest diversified REITs listed on the Mainboard of the SGX-ST and had total assets of approximately S$6.8 billion (approximately HK$39.7 billion) as at 31 December 2020. The Pandemic significantly impacted the OUE Group’s operating performance across all its businesses during the Period. While its office segment remained resilient, leasing demand was inhibited by weak economic outlook, business uncertainties and the containment measures imposed by the Singapore Government. The OUE Group provided rental and other relief to tenants across its portfolio in order to support them in difficult times and to foster long-term relationships. The office segment committed occupancy and the retail segment committed occupancy of OUE C-REIT’s portfolio were 92.7% and 91.1% respectively as at 31 December 2020. The room rates and occupancy as well as food and beverage sales of the hospitality business declined significantly due to travel and mobility restrictions and containment measures as compared to the Previous Year.

In January 2021, OUE C-REIT announced the divestment of a 50% interest in OUE Bayfront which has an agreed value of S$1,267.5 million (approximately HK$7.4 billion). Such divestment will enable OUE C-REIT to realise the value of capital appreciation of the property over time and to increase its financial flexibility. Mandarin Orchard Singapore will commence the phased asset enhancement works for adding new income generating spaces and refreshed food & beverage offerings as well as transformational re-branding to Hilton Singapore Orchard so as to tap on Hilton’s strong branding and global sales and distribution network for the higher yielding leisure and corporate travellers.

The OUE Group had, as at 31 December 2020, an approximately 64.4% equity interest in OUELH in Singapore which is listed on the Catalist Board of the SGX-ST. The OUELH Group with a three-pronged growth strategy provides high-quality and sustainable healthcare solutions through the acquisition, development, management and operations of healthcare facilities across Asia. It owns 12 quality nursing homes in Japan which continued to provide stable rental revenue. It has been focusing on improving and enhancing Wuxi Lippo Xi Nan Hospital’s operations, services and marketing efforts as well as refurbishment. In December 2020, its 50:50 joint venture with the China Merchants group secured a 19.5 years’ lease on premises with a total gross floor area of about 25,000 square metres in Changshu city, Jiangsu Province, the PRC for setting up and operating a hospital to be named as Changshu China Merchants-Lippo Obstetrics & Gynaecology Hospital which is expected to be commissioned in 2023. The joint venture hospital with the China Merchants group under development in Prince Bay, Shenzhen, the PRC is expected to be commissioned in 2024. The OUELH Group’s joint ventures in Myanmar which own and operate 3 hospitals and 4 clinics remained in operation throughout 2020 despite the Pandemic. It also owns a piece of land in Chengdu, the PRC which is planned for an integrated hospital development, land and building in Wuxi, the PRC, as well as a strategically located site in Kuala Lumpur, Malaysia.

2020 Annual Report Hongkong Chinese Limited 5

Report of the Directors (continued)

BUSINESS REVIEW (continued)

Results for the Period (continued)

Property Investment (continued)

As at 31 December 2020, the OUE Group, through the OUELH Group and First REIT Management Limited (formerly Bowsprit Capital Corporation Limited, the manager of First Real Estate Investment Trust (“First REIT”) which is listed on the Mainboard of the SGX-ST) had an approximately 19.7% interest in First REIT. First REIT is a healthcare real estate investment trust which invests in a diversified portfolio of income-producing real estate and/or real estate-related assets in Asia that are primarily used for healthcare and/or healthcare related purposes. As at 31 December 2020, First REIT had 20 properties comprising 16 in Indonesia, 3 in Singapore and 1 in South Korea. During the Period, it provided rental and other relief to its tenants in light of the Pandemic. It has also restructured the master leases for its Indonesian hospital assets for future sustainable growth. The OUE Group’s interest in First REIT was increased to approximately 27.3% on 24 February 2021 following its participation in First REIT’s rights issue of units carried out for facilitating First REIT’s refinancing and stable capital structure.

The Group recorded a share of loss of joint ventures of approximately HK$958 million from its investment in LAAPL for the Period (Previous Year – share of profit of approximately HK$440 million). The loss was mainly resulted from overall net fair value losses on investment properties and impairment losses on fixed assets during the Period. Due to the appreciation of the Singapore dollar during the Period, the Group shared an increase in exchange reserve on translation of LAAPL’s investment of approximately HK$698 million. Besides, the Group recorded an increase in interest in LAAPL of approximately HK$158 million as a result of the share buyback of OUE during the Period. As a result, the Group’s total interests in LAAPL as at 31 December 2020 decreased to approximately HK$10.0 billion (31 March 2020 – approximately HK$10.1 billion).

Property Development

The Group managed to sell part of the remaining properties at Lippo Plaza in Beijing, the PRC during the Period. Segment revenue was approximately HK$29 million (Previous Year – Nil). Before accounting for the share of results from the Group’s associates and joint ventures, the segment recorded a profit of approximately HK$15 million for the Period (Previous Year – loss of approximately HK$4 million).

Sale of some of the remaining units of the luxurious Marina Collection in Sentosa, Singapore (in which the Group has a 50% interest) was completed during the Period. A portion of the remaining units is leased out. The Group shared a profit of associate of approximately HK$7 million (Previous Year – approximately HK$25 million) from the investment.

Treasury and Securities Investments

The Group managed its investment portfolio and looked for opportunities to enhance yields. Total revenue from treasury and securities investments businesses for the Period amounted to approximately HK$0.5 million (Previous Year – approximately HK$2 million). The treasury and securities investments businesses recorded a net profit of approximately HK$1 million for the Period (Previous Year – loss of approximately HK$2 million).

Financial Position

The Group’s financial position remained healthy. As at 31 December 2020, its total assets amounted to approximately HK$11.1 billion (31 March 2020 – approximately HK$11.2 billion). Property-related assets amounted to approximately HK$10.9 billion as at 31 December 2020 (31 March 2020 – approximately HK$10.8 billion), representing approximately 98% (31 March 2020 – approximately 97%) of total assets. Total liabilities as at 31 December 2020 decreased to approximately HK$401 million (31 March 2020 – approximately HK$589 million), mainly due to the reduction of borrowings during the Period. Total cash and cash equivalents as at 31 December 2020 increased to approximately HK$198 million (31 March 2020 – approximately HK$135 million). Current ratio as at 31 December 2020 was 1.3 (31 March 2020 – 3.3).

6 Hongkong Chinese Limited 2020 Annual Report

Report of the Directors (continued)

BUSINESS REVIEW (continued)

Financial Position (continued)

As at 31 December 2020, the Group’s bank and other borrowings amounted to approximately HK$275 million (31 March 2020 – approximately HK$492 million), which included bank loans of approximately HK$145 million (31 March 2020 – approximately HK$492 million) and loan from a holding company of approximately HK$130 million (31 March 2020 – Nil). The bank loans were denominated in Hong Kong dollars and carried interest at floating rate. The loan from a holding company was an unsecured fixed rate loan denominated in Hong Kong dollars. Where appropriate, the Group would use interest rate swaps to modify the interest rate characteristics of its borrowings to limit interest rate exposure. As at 31 December 2020, approximately 53% (31 March 2020 – Nil) of the bank and other borrowings were repayable within one year. The gearing ratio (measured as total borrowings to equity attributable to equity holders of the Company) was 2.6% as at 31 December 2020 (31 March 2020 – 4.7%).

The net asset value attributable to equity holders of the Company remained satisfactory and amounted to approximately HK$10.7 billion as at 31 December 2020 (31 March 2020 – approximately HK$10.6 billion). This was equivalent to HK$5.3 per share (31 March 2020 – HK$5.3 per share).

The Group monitors the relative foreign exchange position of its assets and liabilities to minimise foreign currency risk. When appropriate, hedging instruments including forward contracts, swaps and currency loans would be used to manage the foreign exchange exposure.

The Group had neither material contingent liabilities outstanding nor charges on the Group’s assets at the end of the Period (31 March 2020 – Nil).

The Group’s commitments amounted to approximately HK$0.1 million as at 31 December 2020 (31 March 2020 – approximately HK$0.6 million). The investments or capital assets will be financed by the Group’s internal resources and/or external bank financing, as appropriate.

Staff and Remuneration

The number of employees of the Group increased to 41 as at 31 December 2020 (31 March 2020 – 39 employees). Staff costs (including Directors’ emoluments) charged to the statement of profit or loss during the Period amounted to approximately HK$23 million (Previous Year – approximately HK$24 million). The Group ensures that its employees are offered competitive remuneration packages. The Group also provides benefits such as medical insurance and retirement funds to employees to sustain competitiveness of the Group.

PROSPECTS

The global rollout of vaccination programmes shows signs of positive effects on curtailing the prolonged Pandemic. Governments are gradually relaxing travel and mobility restrictions aiming at revitalisation of individual economies and businesses. However, it will still take some time for the Pandemic to be subdued and the global and local economic activities to recover to pre-Pandemic levels, besides other persistent economic and political uncertainties. As a result, the Group and its joint ventures remain cautious towards the outlook of their businesses in different sectors in the near term.

The Group and its joint ventures will continue to take proactive measures to mitigate unprecedented adverse impacts on their businesses. They will also continue to prudently manage financial resources and expenditure and implement business strategies for long-term sustainability and growth.

2020 Annual Report Hongkong Chinese Limited

Report of the Directors (continued)

BUSINESS STRATEGY

The business activities of the Group are diversified. The Group is committed to achieve long term sustainable growth of its businesses in preserving and enhancing shareholder value. The Group is focused on selecting attractive investment opportunities to strengthen and extend its business scope and has maintained prudent and disciplined financial management to ensure its sustainability.

CHANGE OF FINANCIAL YEAR END DATE

In September 2020, the Directors approved the change of the Company’s financial year end date from 31 March to 31 December. The reasons for the change were stated in the Company’s announcement dated 18 September 2020.

PRINCIPAL ACTIVITIES

The principal activity of the Company is investment holding. Its subsidiaries, associates and joint ventures are principally engaged in investment holding, property investment, property development, hotel operation, healthcare services, project management, securities investment, treasury investment and money lending.

The activities and other particulars of the principal subsidiaries, principal associates and principal joint ventures are set out in the financial statements on pages 142 to 144, page 145 and page 146, respectively.

In September 2020, the Group disposed of its interest in a bank in Macau and thereafter, ceased to engage in banking and other related financial services.

Apart from the above, there were no significant changes in the nature of these activities during the Period.

RESULTS AND DIVIDENDS

The results of the Group for the Period and the financial position of the Group and the Company as at 31 December 2020 are set out in the financial statements on pages 58 to 146.

An interim dividend of HK1 cent per share for the Period (Previous Year — HK1 cent per share) was paid in January 2021. The Directors have resolved to recommend the payment of a final dividend of HK0.75 cents per share (Previous Year — a final dividend of HK1 cent per share and a special dividend of HK1 cent per share) amounting to approximately HK$15 million for the Period (Previous Year — approximately HK$40 million). Total dividends for the Period will be HK1.75 cents per share (Previous Year — HK3 cents per share) amounting to approximately HK$35 million (Previous Year — approximately HK$60 million).

SUMMARY OF FINANCIAL INFORMATION

A summary of the published results and of the assets, liabilities and non-controlling interests of the Group for the last five financial years is set out on page 149.

SHARE CAPITAL

Details of the share capital of the Company are set out in Note 29 to the financial statements.

DISTRIBUTABLE RESERVES

Details of the distributable reserves of the Company are set out in Note 40 to the financial statements.

INVESTMENT PROPERTIES

Details of movements in the investment properties during the Period are set out in Note 17 to the financial statements.

8 Hongkong Chinese Limited 2020 Annual Report

Report of the Directors (continued)

DONATIONS

During the Period, the Group made charitable and other donations of HK$100,000 (Previous Year — HK$980,000).

DIRECTORS

The Directors of the Company during the Period and up to the date of this report were as follows:

Executive Directors

Dr Stephen Riady (“Dr Riady”) (Chairman) Mr John Luen Wai Lee (“Mr Lee”), BBS, JP (Chief Executive Officer)

Non-executive Director

Mr Leon Nim Leung Chan (“Mr Chan”)

Independent non-executive Directors

Mr Victor Ha Kuk Yung (“Mr Yung”) Mr King Fai Tsui (“Mr Tsui”) Mr Edwin Neo (“Mr Neo”)

In accordance with Bye-law 87 of the Company’s Bye-laws (the “Bye-laws”), Dr Riady and Mr Neo will retire from office by rotation and, being eligible, will offer themselves for re-election at the forthcoming annual general meeting.

Each of Mr Chan and Mr Neo entered into a letter agreement with the Company for his appointment as a Director of the Company for a term of two years commencing from 1 January 2020. Following the expiry of the term under their respective former letter agreements with the Company, each of Mr Yung and Mr Tsui entered into a new letter agreement with the Company for his appointment as a Director of the Company for a term of two years commencing from 30 September 2020, and each of Dr Riady and Mr Lee entered into a new letter agreement with the Company for his appointment as a Director of the Company for a term of two years commencing from 1 January 2021. All the above letter agreements are terminable by either party by giving three months’ prior written notice. The term of office of the Directors is also subject to the provisions of the Bye-laws. In accordance with the Bye-laws, one-third of the Directors must retire from office at each annual general meeting and their re-election is subject to a vote of shareholders. In addition, every Director is subject to retirement by rotation at least once every three years notwithstanding that the total number of Directors to retire at the relevant annual general meeting would as a result exceed one-third of the Directors.

In addition, Dr Riady entered into an employment agreement for his employment as an Executive President of the Company with effect from 1 January 2015. Mr Lee also entered into an employment agreement for his employment as the Chief Executive Officer of the Company with effect from 1 January 2015. The above employment agreements are terminable by either party by giving three months’ prior written notice.

None of the Directors proposed for re-election at the forthcoming annual general meeting has a service contract with the Company or any of its subsidiaries which is not determinable by the employing company within one year without payment of compensation, other than statutory compensation.

The Company has received from each independent non-executive Director an annual confirmation of his independence pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), and the Company considers such Directors to be independent.

2020 Annual Report Hongkong Chinese Limited 9

Report of the Directors (continued)

DIRECTORS (continued)

Under the Bye-laws, every Director or other officer of the Company acting in relation to any of the affairs of the Company shall be entitled to be indemnified out of the assets of the Company against all costs, charges, expenses, losses or liabilities which he may sustain or incur in or about the execution of the duties of his office or otherwise in relation thereto. A Directors’ and officers’ liability insurance is in place to protect the Directors and officers of the Group against any potential liability arising from the Group’s activities which such Directors and officers may be held liable.

BRIEF BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

Dr Stephen Riady (former name: Stephen Tjondro Riady), aged 60, was appointed a Director of the Company in September 1992 and is the Chairman of the Board of Directors of the Company (the “Board”). Dr Riady is also an executive director and the Chairman of the board of directors of each of Lippo Limited (“Lippo”) and Lippo China Resources Limited (“LCR”), both being public listed companies in Hong Kong. He has been the Executive President of each of the Company, Lippo and LCR since January 2015. He is a member of the Remuneration Committee and the Nomination Committee of each of the Company, Lippo and LCR. He also holds directorships in certain subsidiaries of the Company, Lippo and LCR. He is the Executive Chairman and the Group Chief Executive Officer of OUE, a company listed on the Mainboard of the SGX-ST. He is a non-executive non-independent director of Healthway Medical Corporation Limited, a company listed on the Catalist Board of the SGX-ST. He is a director of Lippo Capital Group Limited (“Lippo Capital Group”), Lippo Capital Holdings Company Limited (“Lippo Capital Holdings”) and Lippo Capital Limited (“Lippo Capital”) which, together with Lippo, have discloseable interests in the Company under the provisions of the Securities and Futures Ordinance (the “SFO”). He is a graduate of the University of Southern California, the US and holds a Master of Business Administration from Golden Gate University, the US and an Honorary Degree of Doctor of Business Administration from Edinburgh Napier University, United Kingdom. He is one of the first Honorary University Fellows installed by the Hong Kong Baptist University in September 2006. He is the spouse of Madam Shincee Leonardi (“Madam Leonardi”) and a brother of Mr James Tjahaja Riady (“Mr James Riady”). Madam Aileen Hambali (“Madam Hambali”) is the spouse of Mr James Riady. The interests of Madam Leonardi, Mr James Riady and Madam Hambali in the Company are disclosed in the section headed “Interests and short positions of shareholders discloseable under the SFO” below.

Mr John Luen Wai Lee , BBS, JP, aged 72, was appointed a Director of the Company in September 1992 and is the Chief Executive Officer of the Company. Mr Lee is the Managing Director and the Chief Executive Officer of Lippo and an executive director and the Chief Executive Officer of LCR, as well as an independent non-executive director of New World Development Company Limited and UMP Healthcare Holdings Limited, both being public listed companies in Hong Kong. He is a director of Prime Success Limited (“Prime Success”) and Hennessy Holdings Limited (“Hennessy”) which have discloseable interests in the Company under the provisions of the SFO. He is an authorised representative of the Company, Lippo and LCR. In addition, he holds directorships in certain subsidiaries of the Company, Lippo and LCR. He is a Fellow of The Institute of Chartered Accountants in England and Wales, the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants. He was a partner of Price Waterhouse (now known as PricewaterhouseCoopers) in Hong Kong and has extensive experience in corporate finance and capital markets. He is an Honorary Fellow of the City University of Hong Kong, a Justice of Peace in Hong Kong and an awardee of the Bronze Bauhinia Star by the Government of the Hong Kong Special Administrative Region. He is active in public service. Over the years, he has served as a member or chairman of different government boards and committees in Hong Kong, including a member of the Hong Kong Hospital Authority and the Chairman of the Hospital Governing Committee of the Queen Elizabeth Hospital. Currently, he serves as the Chairman of the Hospital Governing Committee of Hong Kong Children’s Hospital, a member of the Public Service Commission and a member of the Investment Committee of the Hospital Authority Provident Fund Scheme.

10 Hongkong Chinese Limited 2020 Annual Report

Report of the Directors (continued)

BRIEF BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT (continued)

Mr Leon Nim Leung Chan , aged 65, was appointed a Director of the Company in September 1992 and was redesignated from independent non-executive Director to non-executive Director of the Company in September 2004. Mr Chan is a practising lawyer and presently the principal partner of Messrs Y.T. Chan & Co. He was admitted as a solicitor of the Supreme Court of Hong Kong in 1980 and was also admitted as a solicitor in England in 1984 and in Victoria, Australia in 1985. He was a member of the Solicitors Disciplinary Tribunal from May 1993 to April 2008. He is also a non-executive director of Lippo and LCR. He is a member of the Audit Committee, the Remuneration Committee and the Nomination Committee of each of the Company, Lippo and LCR.

Mr Victor Ha Kuk Yung , aged 67, was appointed an independent non-executive Director of the Company in September 2004. Mr Yung is a professional accountant with over 30 years of working experience in the financial and accounting fields, and served in management positions in various multinational companies in Asia. He holds a Master of Science Degree in Corporate Governance and Directorship from the Hong Kong Baptist University, and is a member of the Hong Kong Institute of Certified Public Accountants. He is also an independent nonexecutive director of Lippo and LCR. He is a member of the Audit Committee, the Remuneration Committee and the Nomination Committee of the Company. He is also the Chairman of the Audit Committee and a member of the Remuneration Committee and the Nomination Committee of each of Lippo and LCR. He is an independent non-executive director of Travel Expert (Asia) Enterprises Limited, a public listed company in Hong Kong.

Mr King Fai Tsui , aged 71, was appointed an independent non-executive Director of the Company in September 2004. Mr Tsui is an independent non-executive director of Vinda International Holdings Limited, China Aoyuan Group Limited and Newton Resources Ltd, all being public listed companies in Hong Kong. He has over 40 years of extensive experience in accounting, finance and investment management, particularly in investments in mainland China. He worked for two of the Big Four audit firms in the US and Hong Kong and served in various public listed companies in Hong Kong in a senior capacity. He is a Fellow of the Hong Kong Institute of Certified Public Accountants, a member of the Chartered Accountants Australia and New Zealand and a member of the American Institute of Certified Public Accountants. He graduated from the University of Houston, Texas, the US and holds a Master of Science in Accountancy and a Bachelor of Business Administration with first class honours. He is an independent non-executive director of Lippo and LCR. He is the Chairman of the Audit Committee, the Remuneration Committee and the Nomination Committee of the Company. He is also a member of the Audit Committee and the Chairman of the Remuneration Committee and the Nomination Committee of each of Lippo and LCR.

Mr Edwin Neo , aged 71, was appointed an independent non-executive Director of the Company in January 2018. Mr Neo was admitted as a solicitor of the Supreme Court of Hong Kong in 1976 and of the Supreme Court of England and Wales in 1993. He is a practising lawyer and a notary public and is presently the senior partner of Hoosenally & Neo, Solicitors & Notaries. He holds a Bachelor of Laws degree with honours and Postgraduate Certificate in Laws from The University of Hong Kong. He is also an independent non-executive director of Lippo and LCR. He is a member of the Audit Committee, the Remuneration Committee and the Nomination Committee of each of the Company, Lippo and LCR. He was an independent non-executive Director of the Company from 16 January 1995 to 10 March 1998.

2020 Annual Report Hongkong Chinese Limited 11

Report of the Directors (continued)

BRIEF BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT (continued)

Details of the interests of the Directors in the Company are disclosed in the section headed “Directors’ and chief executive’s interests and short positions in shares, underlying shares and debentures of the Company and associated corporations” below.

Save as disclosed herein and in the section headed “Directors’ and chief executive’s interests and short positions in shares, underlying shares and debentures of the Company and associated corporations” below, the Directors do not have any other relationships with any Directors, senior management or substantial or controlling shareholders of the Company.

DIRECTORS’ AND FIVE HIGHEST PAID EMPLOYEES’ EMOLUMENTS

Details of the emoluments of the Directors on a named basis and the five highest paid employees in the Group are set out in Notes 8 and 9 to the financial statements, respectively.

The emoluments of the Directors are determined by reference to the market rates, time commitment and their duties and responsibilities as well as employment conditions elsewhere in the Group.

The emoluments of the Directors for the Period have been covered by their respective letter agreements and/or employment agreements (as applicable) with the Company and/or paid under the relevant statutory requirement save for the following:

(a) The discretionary bonus of HK$5,000,000 to Dr Riady; and
(b) The discretionary bonus of HK$2,000,000 to Mr Lee.

Dr Riady and Mr Lee are entitled to receive salaries, discretionary bonuses and other fringe benefits for the executive roles in the Company under their respective employment agreements with the Company.

Further details of the above Directors’ emoluments are disclosed in Note 8 to the financial statements.

Each of the Directors is entitled to receive a director’s fee from the Company. The director’s fee paid to each of the Directors was HK$184,500 for the Period. A non-executive Director will also receive additional fees for duties assigned to and services provided by him as Chairmen and/or members of various Board committees. The fees paid to the non-executive Directors for serving as the Chairmen and/or members of various Board committees for the Period were as follows:

	HK$
Chairman	61,200
Member	39,600

12 Hongkong Chinese Limited 2020 Annual Report

Report of the Directors (continued)

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ASSOCIATED CORPORATIONS

As at 31 December 2020, the interests or short positions of the Directors and chief executive of the Company in the shares and underlying shares of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) (the “Associated Corporations” and each an “Associated Corporation”), as recorded in the register required to be kept by the Company under Section 352 of the SFO or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers under the Listing Rules (the “Model Code”), were as follows:

Interests in shares and underlying shares of the Company and Associated Corporations

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----- Start of picture text -----

Personal Corporate Approximate
interests Family interests percentage of
(held as interests (interest of total interests
beneficial (interest of controlled Total in the
Name of Director owner) spouse) corporations) interests issued shares
----- End of picture text -----

Number of ordinary shares in the	Company
Stephen Riady	–	–	1,477,715,492	1,477,715,492	73.95
			Notes (i) and (ii)
John Luen Wai Lee	2,000,270	270	–	2,000,540	0.10
King Fai Tsui	600,000	75,000	–	675,000	0.03
Number of ordinary shares in Lippo
Stephen Riady	–	–	369,800,219	369,800,219	74.98
			Note (i)
John Luen Wai Lee	1,031,250	–	–	1,031,250	0.21
Number of ordinary shares in LCR
Stephen Riady	–	–	6,890,184,389	6,890,184,389	74.99
			Notes (i) and (iii)

Notes:

(i) As at 31 December 2020, Lippo Capital, an Associated Corporation, and through its wholly-owned subsidiary, J & S Company Limited (“J & S”), was directly and indirectly interested in an aggregate of 369,800,219 ordinary shares in Lippo, representing approximately 74.98% of the issued shares thereof. Lippo Capital was a 60% owned subsidiary of Lippo Capital Holdings, an Associated Corporation, which in turn was a whollyowned subsidiary of Lippo Capital Group, an Associated Corporation. Dr Riady was the beneficial owner of one ordinary share in Lippo Capital Group, representing the entire issued share capital thereof.
(ii) As at 31 December 2020, Lippo, through its wholly-owned subsidiaries, was indirectly interested in 1,477,715,492 ordinary shares in the Company, representing approximately 73.95% of the issued shares thereof.
(iii) As at 31 December 2020, Lippo, through its wholly-owned subsidiaries, was indirectly interested in 6,890,184,389 ordinary shares in LCR, representing approximately 74.99% of the issued shares thereof.

2020 Annual Report Hongkong Chinese Limited 13

Report of the Directors (continued)

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ASSOCIATED CORPORATIONS (continued)

Interests in shares and underlying shares of the Company and Associated Corporations (continued) Through Dr Riady’s interest in Lippo Capital Group, he was also interested or taken to be interested (through controlled corporations) in the issued shares of the following Associated Corporations as at 31 December 2020:

==> picture [483 x 60] intentionally omitted <==

----- Start of picture text -----

Approximate
Number of percentage of
Name of shares interest in the
Associated Corporation Note Class of shares interested issued shares
----- End of picture text -----

Abital Trading Pte. Limited	(a)	Ordinary shares	2	100
Auric Pacific Group Limited (“Auric”)	(b)	Ordinary shares	80,618,551	65.48
Bentham Holdings Limited	(c)	Ordinary shares	1	100
Boudry Limited	(a)	Ordinary shares	10	100
	(a)	Non-voting deferred shares	1,000	100
Brimming Fortune Limited	(a)	Ordinary shares	1	100
Broadwell Overseas Holdings Limited	(a)	Ordinary shares	1	100
First Tower Corporation	(d)	Ordinary shares	1	100
Gainmate Hong Kong Limited	(e)	Ordinary shares	100	100
Grand Peak Investment Limited	(a)	Ordinary shares	2	100
Greenorth Holdings Limited	(a)	Ordinary shares	1	100
Hennessy Holdings Limited	(d)	Ordinary shares	1	100
HKCL Investments Limited	(a)	Ordinary shares	1	100
International Realty (Singapore) Pte.	(a)	Ordinary shares	2	100
Limited
J & S Company Limited	(a)	Ordinary shares	1	100
Lippo Assets (International) Limited	(a)	Ordinary shares	1	100
	(a)	Non-voting deferred shares	15,999,999	100
Lippo Capital Holdings Company	(f)	Ordinary shares	1	100
Limited
Lippo Capital Limited	(c)	Ordinary shares	423,414,001	60
Lippo Finance Limited	(a)	Ordinary shares	6,176,470	82.35
Lippo Investments Limited	(a)	Ordinary shares	2	100
Lippo Realty Limited	(a)	Ordinary shares	2	100
MG Superteam Pte. Ltd.	(a)	Ordinary shares	1	100
Multi-World Builders & Development	(a)	Ordinary shares	4,080	51
Corporation
Prime Success Limited	(d)	Ordinary shares	1	100
Skyscraper Realty Limited	(d)	Ordinary shares	10	100
Superfood Retail Limited	(g)	Ordinary shares	10,000	100
(“Superfood”)
The HCB General Investment	(a)	Ordinary shares	100,000	100
(Singapore) Pte Ltd
Valencia Development Limited	(a)	Ordinary shares	800,000	100
	(a)	Non-voting deferred shares	200,000	100
Winroot Holdings Limited	(a)	Ordinary shares	1	100

14 Hongkong Chinese Limited 2020 Annual Report

Report of the Directors (continued)

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ASSOCIATED CORPORATIONS (continued) Interests in shares and underlying shares of the Company and Associated Corporations (continued) Notes:

(a) Such share(s) was/were 100% held directly or indirectly by Lippo Capital.
(b) Of these shares, 4,999,283 ordinary shares were held by Jeremiah Holdings Limited (“Jeremiah”), an indirect 60% owned subsidiary of LCR; 20,004,000 ordinary shares were held by Nine Heritage Pte Ltd (“Nine Heritage”), a direct 80% owned subsidiary of Jeremiah; 36,165,052 ordinary shares were held by Pantogon Holdings Pte Ltd (“Pantogon”), an indirect wholly-owned subsidiary of LCR and 759,000 ordinary shares were held by Max Turbo Limited (“Max Turbo”), an indirect wholly-owned subsidiary of LCR. In addition, as at 31 December 2020, 18,691,216 ordinary shares were held by Silver Creek Capital Pte. Ltd. (“Silver Creek”). Dr Riady, through companies controlled by him, is the beneficial owner of all the issued shares in Silver Creek. Accordingly, Dr Riady was taken to be interested in an aggregate of 80,618,551 ordinary shares in Auric, representing approximately 65.48% of the issued shares thereof.
(c) Such share(s) was/were held directly by Lippo Capital Holdings.
(d) Such share(s) was/were 100% held directly or indirectly by Lippo.
(e) 50 ordinary shares were held by Oddish Ventures Pte. Ltd. (“Oddish”), an indirect wholly-owned subsidiary of OUE. OUE was indirectly owned as to approximately 70.11% by Fortune Crane Limited (“FCL”). The Company, through its 50% joint venture, LAAPL, held approximately 92.05% interest in FCL. 50 ordinary shares were held by Raising Fame Ventures Limited, an indirect wholly-owned subsidiary of LCR.
(f) Such share was 100% held directly by Lippo Capital Group.
(g) 406, 1,625, 2,937, 62 and 4,970 ordinary shares were held by Jeremiah, Nine Heritage, Pantogon, Max Turbo and Oddish respectively. Accordingly, Dr Riady was taken to be interested in an aggregate of 10,000 ordinary shares in Superfood, representing all the issued shares thereof.

As at 31 December 2020, none of the Directors or chief executive of the Company had any interests in the underlying shares in respect of physically settled, cash settled or other equity derivatives of the Company or any of its Associated Corporations.

All the interests stated above represent long positions. Save as disclosed herein, as at 31 December 2020, none of the Directors or chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its Associated Corporations which were required to be recorded in the register kept by the Company under Section 352 of the SFO or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

As at 31 December 2020, none of the Directors or chief executive of the Company nor their spouses or minor children (natural or adopted) were granted or had exercised any rights to subscribe for any equity or debt securities of the Company or any of its Associated Corporations.

ARRANGEMENTS TO ACQUIRE SHARES OR DEBENTURES

At no time during the Period was the Company or any of its subsidiaries, holding companies or fellow subsidiaries a party to any arrangement to enable a Director of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

PERMITTED INDEMNITY PROVISION

The Bye-laws provide that the Directors shall be indemnified and secured harmless out of the assets and profits of the Company from and against all actions, costs, charges, losses, damages and expenses which they or any of them, their or any of their heirs, executors or administrators, shall or may incur or sustain by or by reason of any act done, concurred in or omitted in or about the execution of their duty, or supposed duty, in their respective offices or trusts. The Directors of the Company and its subsidiaries have been covered by Directors’ and officers’ liability insurance.

2020 Annual Report Hongkong Chinese Limited 15

Report of the Directors (continued)

INTERESTS AND SHORT POSITIONS OF SHAREHOLDERS DISCLOSEABLE UNDER THE SFO

As at 31 December 2020, so far as is known to the Directors, the following persons (other than the Directors or chief executive of the Company) had interests or short positions in the shares and underlying shares of the Company as recorded in the register required to be kept by the Company under Section 336 of the SFO as follows:

Interests of substantial shareholders in shares of the Company

Name of substantial shareholder	Number of ordinary shares	Approximate percentage of the issued shares
Hennessy Holdings Limited	1,477,715,492	73.95
Prime Success Limited	1,477,715,492	73.95
Lippo Limited	1,477,715,492	73.95
Lippo Capital Limited	1,477,715,492	73.95
Lippo Capital Holdings Company Limited	1,477,715,492	73.95
Lippo Capital Group Limited	1,477,715,492	73.95
Madam Shincee Leonardi	1,477,715,492	73.95
PT Trijaya Utama Mandiri (“PT TUM”)	1,477,715,492	73.95
Mr James Tjahaja Riady	1,477,715,492	73.95
Madam Aileen Hambali	1,477,715,492	73.95

Notes:

Hennessy, the immediate holding company of the Company, as beneficial owner, directly held 1,477,715,492 ordinary shares in the Company, representing approximately 73.95% of the issued shares thereof.
Hennessy is wholly owned by Prime Success which in turn is wholly owned by Lippo.
Lippo Capital, and through its wholly-owned subsidiary, J & S, was directly and indirectly interested in approximately 74.98% of the issued shares of Lippo.
Lippo Capital Holdings owned 60% of the issued shares in Lippo Capital. Lippo Capital Group owned the entire issued share capital of Lippo Capital Holdings. Dr Riady was the beneficial owner of the entire issued share capital of Lippo Capital Group. Madam Leonardi is the spouse of Dr Riady.
PT TUM owned the remaining 40% of the issued shares in Lippo Capital. PT TUM was wholly owned by Mr James Riady who is a brother of Dr Riady. Madam Hambali is the spouse of Mr James Riady.
Hennessy’s interests in the ordinary shares of the Company were recorded as the interests of Prime Success, Lippo, Lippo Capital, Lippo Capital Holdings, Lippo Capital Group, Madam Leonardi, PT TUM, Mr James Riady and Madam Hambali. The above 1,477,715,492 ordinary shares in the Company related to the same block of shares that Dr Riady was interested, details of which are disclosed in the above section headed “Directors’ and chief executive’s interests and short positions in shares, underlying shares and debentures of the Company and associated corporations”.

All the interests stated above represent long positions. Save as disclosed herein, as at 31 December 2020, none of the substantial shareholders or other persons (other than the Directors or chief executive of the Company) had any interests or short positions in the shares or underlying shares of the Company as recorded in the register required to be kept by the Company under Section 336 of the SFO.

16 Hongkong Chinese Limited 2020 Annual Report

Report of the Directors (continued)

DIRECTORS’ INTERESTS IN COMPETING BUSINESS

The Lippo Group (a general reference to the companies in which Dr Riady and his family members have a direct or indirect interest) is not a legal entity and does not operate as one. Each of the companies in the Lippo Group operates within its own legal, corporate and financial framework. As at 31 December 2020, the Lippo Group might have had or developed interests in business in Hong Kong and other parts in Asia similar to those of the Group and there was a chance that such businesses might have competed with the businesses of the Group.

All the Directors of the Company are also directors of Lippo and LCR. Further details of the Directors’ interests in Lippo and LCR are disclosed in the above section headed “Directors’ and chief executive’s interests and short positions in shares, underlying shares and debentures of the Company and associated corporations”. Subsidiaries of Lippo and LCR are also engaged in property investment and property development.

The Directors are fully aware of, and have been discharging, their fiduciary duty to the Company. The Company and its Directors would comply with the relevant requirements of the Bye-laws and the Listing Rules whenever a Director has any conflict of interest in the transaction(s) with the Company.

Save as disclosed herein, during the Period and up to the date of this report, none of the Directors are considered to have interest in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group required to be disclosed under the Listing Rules.

DISCLOSURE PURSUANT TO RULE 13.20 OF THE LISTING RULES

The Group has granted financial assistance to FCL, a subsidiary of LAAPL which in turn is a principal joint venture of the Group. The relevant advances that remained outstanding as at 31 December 2020 were granted as follows:

(i) a loan agreement dated 29 May 2015 between FCL and Pacific Landmark Holdings Limited (“PLH”), a then subsidiary of the Company, pursuant to which PLH agreed to advance a loan of S$53,920,839.43 (the “Loan”) to FCL;
(ii) a loan agreement dated 28 August 2015 between FCL and PLH pursuant to which PLH agreed to make available a loan facility of S$7,000,000 (the “Interim Loan”) to FCL;
(iii) a loan agreement dated 28 August 2015 between FCL and PLH pursuant to which PLH agreed to advance a further loan of S$100,000,000 (the “Further Loan”) to FCL;
(iv) a loan agreement dated 12 October 2015 between FCL and PLH pursuant to which PLH agreed to make available a loan facility of S$2,000,000 (the “Second Interim Loan”) to FCL;
(v) a loan agreement dated 30 November 2015 between FCL and PLH pursuant to which PLH agreed to make available a new loan facility of S$38,000,000 (the “New Loan”) to FCL;
(vi) a loan agreement dated 19 July 2016 between FCL and PLH pursuant to which PLH agreed to make available a loan facility of approximately S$14,959,000 (the “July 2016 Loan”) to FCL; and

2020 Annual Report Hongkong Chinese Limited 17

Report of the Directors (continued)

DISCLOSURE PURSUANT TO RULE 13.20 OF THE LISTING RULES (continued)

(vii) a loan agreement dated 20 October 2016 between FCL and Polar Step Limited (“PSL”), a subsidiary of the Company, pursuant to which PSL agreed to make available a loan facility in the maximum principal amount of S$155,000,000 (the “October 2016 Facility”) to FCL. The October 2016 Facility was first drawn on 4 January 2017 (the “October 2016 Facility Drawdown Date”) and is unsecured, subject to an interest rate of 2.25% per annum and repayable on demand.

In addition, an unsecured loan of approximately S$10,314,000 (the “June 2013 Loan”) was advanced by PLH to FCL on 20 June 2013.

On 20 October 2016, PLH assigned all of its rights, interests, benefits and title in the June 2013 Loan, the Loan, the Further Loan and the July 2016 Loan to PSL. Pursuant to an amended and restated loan agreement dated 20 October 2016 between, inter alia, PSL and FCL, with effect from the October 2016 Facility Drawdown Date, the interest rate of each of the June 2013 Loan, the Loan, the Further Loan and the July 2016 Loan was amended from 6.5% per annum to 2.25% per annum and the repayment date was amended to repayable on demand.

On 4 January 2017, PLH assigned all of its rights, interests, benefits and title in the Interim Loan, the Second Interim Loan and the New Loan to PSL. Pursuant to an amended and restated loan agreement dated 4 January 2017 between, inter alia, PSL and FCL, with effect from 4 January 2017, the interest rate of each of the Interim Loan, the Second Interim Loan and the New Loan was amended from 6.5% per annum to 2.25% per annum and such loans will be repayable on demand.

All the above advances to FCL are unsecured. As at 31 December 2020, the outstanding balance of the above advances amounted to approximately S$374,521,000 (approximately HK$2,196,265,000).

DIRECTORS’ AND CONTROLLING SHAREHOLDERS’ INTERESTS IN CONTRACTS

Save as disclosed above and in Note 35 to the financial statements, there were no other contracts of significance in relation to the Company’s business, to which the Company or any of its subsidiaries, holding companies or fellow subsidiaries was a party, subsisting at the end of the Period or at any time during the Period, and in which any Director or the controlling shareholders or any of their respective subsidiaries, directly or indirectly, had a material interest.

During the Period, no contract of significance for the provision of services to the Group by any controlling shareholder or any of its subsidiaries has been made.

MANAGEMENT CONTRACTS

No contracts concerning the management and/or administration of the whole or any substantial part of the business of the Company were entered into or existed during the Period.

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

During the Period, there was no purchase, sale or redemption of the Company’s listed securities by the Company or any of its subsidiaries.

18 Hongkong Chinese Limited 2020 Annual Report

Report of the Directors (continued)

MAJOR SUPPLIERS AND CUSTOMERS

During the Period, the percentage of revenue attributable to the Group’s five largest customers combined was 92% of the Group’s aggregate revenue and revenue attributable to the largest customer included therein amounted to 46%. During the Period, the percentage of purchases attributable to the Group’s five largest suppliers combined was less than 30% of the Group’s aggregate purchases.

None of the Directors, their close associates, or any shareholder (which to the best knowledge and belief of the Directors own more than 5% of the Company’s issued share capital) had any beneficial interest in the Group’s five largest suppliers and customers.

RELATIONSHIPS WITH EMPLOYEES, SUPPLIERS AND CUSTOMERS

The Group understands that employees are valuable assets. The Group provides competitive remuneration package to attract and motivate employees. The Group regularly reviews the remuneration package of employees and makes necessary adjustments to conform to the market standard.

The Group also understands that it is important to maintain good relationship with its suppliers and customers to fulfil its immediate and long-term goals. To maintain its brand competitiveness and status, the Group aims at delivering high standards of quality in the products and services to its customers. During the Period, there was no material and significant dispute between the Group and its suppliers and/or customers.

RETIREMENT BENEFITS SCHEME

Details of the retirement benefits scheme of the Group and the employer’s retirement benefits costs charged to the consolidated statement of profit or loss for the Period are set out in Notes 2.4(v) and 7 to the financial statements, respectively.

CORPORATE GOVERNANCE

The Company is committed to maintaining a high standard of corporate governance practices. The Company’s Corporate Governance Report is set out on pages 21 to 31.

KEY RISKS AND UNCERTAINTIES

The Group’s financial condition, results of operation, businesses and prospects may be affected by a number of risks and uncertainties. Key risks and uncertainties were identified by the Group, details of which are disclosed in the Company’s Risk Management Report as set out on pages 32 to 38. There may be other risks and uncertainties in addition to those shown in the above report which are not known to the Group or which may not be material now but could turn out to be material in the future.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORT

Environmental, social and governance (“ESG”) issues are fundamental to the Group’s sustainability. The conscientious use of resources and adoption of good practices across the Group’s businesses underlie its commitment to safeguarding the environment. The Company’s ESG Report is set out on pages 39 to 52.

As far as the Company is aware, it has complied in material respects with the relevant laws and regulations that have a significant impact on the business and operations of the Company.

2020 Annual Report Hongkong Chinese Limited 19

Report of the Directors (continued)

SUFFICIENCY OF PUBLIC FLOAT

Based on information that is publicly available to the Company and within the knowledge of the Directors, as at the date of this report, the Company has maintained sufficient public float as required under the Listing Rules.

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the Bye-laws or the laws of Bermuda which would oblige the Company to offer new shares on a pro-rata basis to existing shareholders.

AUDITOR

The financial statements for the Period were audited by Ernst & Young who will retire at the conclusion of the forthcoming annual general meeting and, being eligible, will offer itself for re-appointment.

On behalf of the Board John Luen Wai Lee Chief Executive Officer

30 March 2021

20 Hongkong Chinese Limited 2020 Annual Report

Corporate Governance Report

CORPORATE GOVERNANCE PRACTICES

The Company is committed to ensuring a high standard of corporate governance practices. The Board believes that good corporate governance practices are increasingly important for maintaining and promoting investor confidence. Corporate governance requirements keep changing, therefore the Board reviews its corporate governance practices from time to time to ensure they meet public and shareholders’ expectation, comply with legal and professional standards and reflect the latest local and international developments. The Board will continue to commit itself to achieving a high quality of corporate governance so as to safeguard the interests of shareholders and enhance shareholder value.

During the Period, the Company continued to take measures to closely monitor and enhance its corporate governance practices so as to comply with the requirements of the code provisions of the Corporate Governance Code (the “CG Code”) contained in Appendix 14 of the Listing Rules.

To the best knowledge and belief of the Directors, the Directors consider that the Company has complied with the code provisions of the CG Code for the Period.

DIRECTORS’ SECURITIES TRANSACTIONS

The Company has adopted the Model Code contained in Appendix 10 of the Listing Rules as the code for securities transactions by the Directors. Having made specific enquiry of all the Directors, all the Directors have fully complied with the required standard set out in the Model Code throughout the Period.

To enhance corporate governance, the Company has also established written guidelines no less exacting than the Model Code for the employees of the Group in respect of their dealings in the Company’s securities.

BOARD OF DIRECTORS

The Board currently comprises six members (the composition of the Board is shown on page 9), including two executive Directors and four non-executive Directors of whom three are independent as defined under the Listing Rules (brief biographical details of the Directors are set out on pages 10 to 12). A list containing the names of the Directors and their roles and functions can also be found on the Company’s website (www.hkchinese.com.hk) (the “Company Website”) and Hong Kong Exchanges and Clearing Limited (“HKEX”)’s website (www.hkexnews.hk) (collectively the “Websites”). To the best knowledge of the Directors, the Board members have no financial, business, family or other material/relevant relationships with each other.

The Company’s three independent non-executive Directors represent more than one-third of the Board. They have appropriate professional qualifications or accounting or related financial management expertise under rule 3.10 of the Listing Rules, and have signed the annual confirmation of independence pursuant to rule 3.13 of the Listing Rules to confirm their independence. The Company considers that all independent non-executive Directors have met the independence guidelines of rule 3.13 of the Listing Rules.

Mr Yung and Mr Tsui have served as independent non-executive Directors of the Company for more than nine years. In addition to their confirmation of independence in accordance with rule 3.13 of the Listing Rules, each of them continues to demonstrate the attributes of an independent non-executive Director by providing independent views and advice and there is no evidence that their tenure have had any impact on their independence. The Directors are of the opinion that Mr Yung and Mr Tsui remain independent notwithstanding the length of their service and they believe that their valuable knowledge and experience in the Group’s business and their external experience continue to generate significant contribution to the Company and its shareholders as a whole.

2020 Annual Report Hongkong Chinese Limited 21

Corporate Governance Report (continued)

BOARD OF DIRECTORS (continued)

Under the Bye-laws, one-third of the Directors must retire from office at each annual general meeting and their re-election is subject to a vote of shareholders. In addition, every Director is subject to retirement by rotation at least once every three years notwithstanding that the total number of Directors to retire at the relevant annual general meeting would as a result exceed one-third of the Directors. Under the Listing Rules, if an independent non-executive Director serves more than nine years, his further appointment should be subject to a separate resolution to be approved by shareholders. All the Directors have entered into letter agreements and/or employment agreements with the Company setting out the key terms and conditions of their respective appointment as Directors and/or executive role in the Company.

The Board oversees the Group’s strategic development and determines the objectives, strategies and policies of the Group. The Board also monitors and controls the operating and financial performance in pursuit of the Group’s strategic objectives. The Board has delegated certain functions to the relevant Board committees, details of which are disclosed below. Day-to-day management of the Group’s business is delegated to the management of the Company under the supervision of the executive Directors. The functions and powers that are so delegated are reviewed periodically to ensure that they remain appropriate. Matters reserved for the Board are those affecting the Group’s overall strategic policies, dividend policy, material policies and decisions, significant changes in accounting policies, material contracts, major investments, as well as approval of interim reports, annual reports and announcements of interim and final results and other matters.

Management provides the Directors with management updates of the Group’s operations, performance and position. All the Directors are kept informed of and duly briefed of major changes and information that may affect the Group’s businesses in a timely manner. Legal and regulatory updates are provided to the Directors from time to time for their information so as to keep them abreast of the latest rule requirements and assist them in fulfilling their responsibilities. The Company Secretary may advise the Directors on queries raised or issues which arise in performance of their duties as Directors. The Board members have access to appropriate business documents and information about the Group on a timely basis. All the Directors and Board committees have recourse to external legal counsel and other professionals for independent advice at the Group’s expense upon their request.

Three Board committees, namely, the Audit Committee, the Remuneration Committee and the Nomination Committee (collectively the “Committees”) have been established to oversee particular aspects of the Group’s affairs.

The Board meets regularly to review the financial and operating performance of the Group and other business units, and formulate future strategy. Five Board meetings were held during the Period.

During the Period, the Chairman held a meeting with the independent non-executive Directors without the presence of other Directors.

22 Hongkong Chinese Limited 2020 Annual Report

Corporate Governance Report (continued)

BOARD OF DIRECTORS (continued)

Individual attendance of each Director at the Board meetings and general meeting and each committee member at the meetings of the Committees during the Period are set out below:

==> picture [483 x 54] intentionally omitted <==

----- Start of picture text -----

Attendance/Number of Meetings
Audit Remuneration Nomination General
Directors Board Committee Committee Committee Meeting
----- End of picture text -----*

Executive Directors
Dr Stephen Riady_(Chairman)_	4/5	N/A	3/3	3/3	1/1
Mr John Luen Wai Lee	5/5	N/A	N/A	N/A	1/1
(Chief Executive Officer)
Non-executive Director
Mr Leon Nim Leung Chan	5/5	2/2	3/3	3/3	1/1
Independent non-executive Directors
Mr King Fai Tsui	5/5	2/2	3/3	3/3	1/1
(Chairman of the Audit Committee,
Remuneration Committee and
Nomination Committee)
Mr Victor Ha Kuk Yung	5/5	2/2	3/3	3/3	1/1
Mr Edwin Neo	5/5	2/2	3/3	3/3	1/1

The only general meeting of the Company held during the Period was the annual general meeting on 8 September 2020 (the “2020 AGM”).

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

The roles of the Chairman and the Chief Executive Officer of the Company are segregated. Dr Riady is the Chairman of the Board. The primary role of the Chairman is to provide leadership for the Board and to ensure that it works effectively in the discharge of its responsibilities. Mr Lee is the Chief Executive Officer of the Company. The Chief Executive Officer is responsible for the day-to-day management of the Group’s business. Their respective roles and responsibilities are set out in writing which have been approved by the Board.

NON-EXECUTIVE DIRECTORS

There are currently four non-executive Directors of whom three are independent. Under the Bye-laws, every Director, including the non-executive Directors, shall be subject to retirement by rotation at least once every three years. All the non-executive Directors have a fixed term of contract of two years with the Company.

2020 Annual Report Hongkong Chinese Limited 23

Corporate Governance Report (continued)

REMUNERATION OF DIRECTORS

The Remuneration Committee was established by the Board in June 2005. It has clear terms of reference and is accountable to the Board. Its terms of reference is posted on the Websites. The Remuneration Committee has been delegated with the authority and responsibility to determine the remuneration packages of individual Directors and senior management. Senior management of the Company comprises executive Directors of the Company only.

The principal role of the Remuneration Committee is to exercise the powers of the Board to review and determine or make recommendations to the Board on the remuneration packages of individual Directors and senior staff, including salaries, bonuses and benefits in kind. Salaries paid by comparable companies, time commitment and responsibilities and employment conditions elsewhere in the Group have been considered in determining the remuneration packages so as to align management incentives with shareholders’ interests. During the Period, the Remuneration Committee assessed the performance of the executive Directors, and reviewed and determined with delegated responsibility, inter alia, (i) the remuneration packages of the Directors and senior staff; and (ii) new letter agreements for the appointment of certain existing Directors.

A majority of the Remuneration Committee members are non-executive Directors. The Remuneration Committee comprises five members including three independent non-executive Directors, namely Messrs Tsui (being the Chairman), Yung and Neo, a non-executive Director, namely Mr Chan and an executive Director, namely Dr Riady. The composition of the Remuneration Committee meets the requirements of chairmanship and independence of the Listing Rules. Three meetings were held during the Period and the individual attendance of each member is set out above.

Details of Directors’ emoluments and retirement benefits are disclosed in Notes 8 and 2.4(v) to the financial statements respectively.

NOMINATION OF DIRECTORS

The Board has the power to appoint Director(s) pursuant to the Bye-laws. No new Director was appointed during the Period.

The Nomination Committee was established by the Board in June 2005. It has clear terms of reference and is accountable to the Board. A copy of the terms of reference is posted on the Websites.

The principal duties of the Nomination Committee include, inter alia: to review the structure, size and composition (including the skills, knowledge, experience and diversity of perspectives) of the Board at least annually and make recommendations on any proposed changes to the Board to complement the Company’s corporate strategy; to assess the independence of independent non-executive Directors and make recommendations to the Board for the appointment of independent non-executive Directors; to identify individuals suitably qualified to become Board members and make recommendations to the Board on the appointment or re-election of Directors and succession planning for Directors in particular the Chairman of the Board and the chief executive; and to review the terms of reference of the Nomination Committee, the Board Diversity Policy (the “Diversity Policy”) and the Directors’ Nomination Policy (the “Nomination Policy”) of the Company and recommend to the Board any necessary changes required.

24 Hongkong Chinese Limited 2020 Annual Report

Corporate Governance Report (continued)

NOMINATION OF DIRECTORS (continued)

Proposed candidates for re-election and appointment are first considered by the Nomination Committee and its recommendation is then put to the Board for decision. During the Period, the Nomination Committee reviewed, inter alia, the eligibility of the retiring Directors seeking for re-election at the 2020 AGM and assessed the independence of the independent non-executive Directors. It also reviewed the existing structure, size, composition, diversity and efficiency of the Board.

With the support and recommendation of the Nomination Committee, the Board adopted the Nomination Policy in January 2019. The Nomination Policy aims to, inter alia, set out the criteria and process in the nomination, appointment and re-election of Directors and ensure that the Board has a balance of skills, experience and diversity of perspectives appropriate to the Company. The Nomination Committee is responsible for identifying, evaluating and recommending potential candidates to the Board. The ultimate responsibility for selection and appointment of Directors rests with the entire Board and, where applicable, subject to the approval of the shareholders in general meeting.

Any Directors or shareholders may nominate any individuals as candidates for directorship for consideration by the Nomination Committee in accordance with the Bye-laws, any applicable policies or procedures of the Company and/or the Listing Rules. The procedures for such shareholders’ nomination are published on the Company Website. When assessing the suitability of a proposed candidate, the Nomination Committee will take into consideration various factors including, but not limited to, character and integrity, qualification, skills, knowledge, experience, potential contributions, board diversity, number of directorships in other listed companies, independence requirements (for independent non-executive Directors) and such other perspectives that are appropriate to the Company’s business and succession plan.

Proposed candidates for appointment as a new Director will need to submit necessary information together with their written consents to be appointed as a Director. The Nomination Committee shall consider as a candidate any existing Director who has indicated that he or she is willing to stand for re-election. It may use any process it deems appropriate for the purpose of evaluating the proposed candidate in accordance with the Nomination Policy. It shall then recommend the proposed re-election or appointment of a Director to the Board for consideration by the Board which in turn will make recommendation to shareholders where appropriate. It may also nominate a suitable candidate to fill a casual vacancy on the Board for the Board’s consideration and approval. A circular containing the requisite information of the candidates recommended by the Board to stand for election at the general meeting (whether as new appointment or re-election) will be sent to shareholders as required under the Listing Rules.

The Diversity Policy was adopted by the Board in August 2013 and was revised in January 2019. A copy of the revised Diversity Policy is posted on the Company Website. The Company sees increasing diversity at the Board level as an essential element in supporting the attainment of its strategic objectives and sustainable and balanced development. The Diversity Policy sets out the approach to achieve diversity on the Board. Selection of candidates will be based on a range of diversity factors including, but not limited to, gender, age, professional experience, skills, cultural and educational background, knowledge, length of service, and the business models and specific needs of the Company from time to time. The ultimate decision will be based on merits and contribution that the selected candidates may bring to the Board, having regard to the benefits of diversity on the Board and also the needs of the Board without focusing on a single diversity aspect. The Nomination Committee reviews the objectives for and monitors the implementation of the Diversity Policy. It will also review the Diversity Policy from time to time as appropriate to ensure its continued effectiveness.

2020 Annual Report Hongkong Chinese Limited 25

Corporate Governance Report (continued)

NOMINATION OF DIRECTORS (continued)

A Majority of the Nomination Committee members are non-executive Directors. The Nomination Committee comprises five members including three independent non-executive Directors, namely Messrs Tsui (being the Chairman), Yung and Neo, a non-executive Director, namely Mr Chan and an executive Director, namely Dr Riady. The composition of the Nomination Committee meets the requirements of chairmanship and independence of the Listing Rules. Three meetings were held during the Period and the individual attendance of each member is set out above.

DIRECTORS’ TIME COMMITMENT AND TRAINING

The Company received confirmation from each Director that he had sufficient time and attention to the affairs of the Company for the Period. The Directors are encouraged to participate in professional, public and community organisations. The Directors have disclosed to the Company the number and nature of offices held in Hong Kong or overseas public listed companies or organisations and other significant commitments and an indication of the time involved. They are also reminded to notify the Company in a timely manner of any change of such information. In respect of those retiring Directors who will stand for re-election at the forthcoming 2021 annual general meeting of the Company (the “2021 AGM”), their directorships held in public listed companies in the past three years are set out in the circular to shareholders regarding, inter alia, proposed re-election of retiring Directors. Other details of the Directors are set out in the brief biographical details of Directors and senior management on pages 10 to 12.

The Directors are also encouraged to attend seminars and conferences to enrich their knowledge in discharging their duties as a Director. The Company has arranged from time to time at its cost seminars and/or conferences conducted by professional bodies for the Directors relating to, inter alia, directors’ duties, corporate governance and regulatory updates. The Directors’ knowledge and skills are continuously developed and refreshed by, inter alia, the following means:

(1) participation in continuous professional training seminars and/or conferences and/or courses and/or workshops on subjects relating to, inter alia, corporate governance, directors’ duties and legal and regulatory changes organised and/or arranged by the Company and/or professional bodies and/or lawyers;
(2) reading materials provided from time to time by the Company to the Directors regarding legal and regulatory changes and matters of relevance to the Directors in the discharge of their duties; and
(3) reading news, journals, magazines and/or other reading materials regarding legal and regulatory changes and matters of relevance to the Directors in the discharge of their duties.

26 Hongkong Chinese Limited 2020 Annual Report

Corporate Governance Report (continued)

DIRECTORS’ TIME COMMITMENT AND TRAINING (continued)

According to the training records provided by the existing Directors to the Company, all of them participated in continuous professional development during the Period through the above means. Records of their training during the Period are as follows:

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Directors Training received
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Executive Directors
Dr Stephen Riady_(Chairman)_	(1), (2) and (3)
Mr John Luen Wai Lee_(Chief Executive Officer)_	(1), (2) and (3)
Non-executive Director
Mr Leon Nim Leung Chan	(1), (2) and (3)
Independent non-executive Directors
Mr Victor Ha Kuk Yung	(1), (2) and (3)
Mr King Fai Tsui	(1), (2) and (3)
Mr Edwin Neo	(1), (2) and (3)

DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE

The Company has arranged directors’ and officers’ liability insurance for years to indemnify the directors and officers of the Group against any potential liability arising from the Group’s activities which such directors and officers may be held liable.

AUDITOR’S REMUNERATION

Ernst & Young has been appointed by the shareholders annually as the Company’s auditor (the “Auditor”). During the Period, the fees charged to the consolidated financial statements of the Group for the statutory audit and non-statutory audit services provided by Ernst & Young (which for the purpose includes any entity under common control, ownership or management with the Auditor or any entity that a reasonable and informed third party having knowledge of all relevant information would reasonably conclude as part of the Auditor nationally and internationally) amounted to approximately HK$2.6 million (Previous Year — HK$2.9 million) and approximately HK$0.1 million (Previous Year — HK$0.1 million) respectively.

AUDIT COMMITTEE

The Board established the Audit Committee in December 1998. The Audit Committee has clear terms of reference and is accountable to the Board. Its terms of reference can be found on the Websites. It assists the Board in meeting its responsibilities for ensuring an effective system of risk management, internal control and compliance, and in meeting its external financial reporting objectives. It is also responsible for the Company’s corporate governance functions. All the members of the Audit Committee are non-executive Directors. The Audit Committee comprises four members including three independent non-executive Directors, namely Messrs Tsui (being the Chairman), Yung and Neo and a non-executive Director, namely Mr Chan. Two meetings were held during the Period and the individual attendance of each member is set out above.

2020 Annual Report Hongkong Chinese Limited 27

Corporate Governance Report (continued)

AUDIT COMMITTEE (continued)

The members of the Audit Committee possess diversified industry experience and its Chairman has appropriate professional qualifications and experience in accounting matters. Under its current terms of reference, the Audit Committee will meet at least twice each year. Management and the Auditor normally attend the meetings. In addition, the Audit Committee holds regular meetings with the Auditor without the presence of executive Directors and/or management.

During the Period, the Audit Committee discharged its duties by reviewing and/or monitoring financial, audit, risk management, internal control and corporate governance matters of the Group, including management accounts, financial statements, interim and annual reports, corporate governance report, risk management report and internal audit reports, discussing with the executive Directors, management, Auditor and internal audit department (the “IA Department”) regarding financial matters, corporate governance policies and practices, and internal audit, risk management and internal control matters of the Group, and making recommendations to the Board including, inter alia, financial-related matters. The Audit Committee reviewed the Company’s compliance with the CG Code and disclosure in the Corporate Governance Report, the Company’s corporate governance policies and practices, the training and continuous professional development of the Directors and senior management, the Company’s policies and practices in compliance with legal and regulatory requirements and the code of conduct applicable to employees and the Directors. It also recommended to the Board that, subject to the shareholders’ approval at the 2021 AGM, Ernst & Young shall be re-appointed as the Auditor for the ensuing year, and reviewed the fees charged by the Auditor.

RISK MANAGEMENT AND INTERNAL CONTROL

The Board recognises its responsibility for maintaining adequate systems of risk management and internal control on an ongoing basis and is responsible for evaluating and determining the nature and extent of the risks it is willing to take in achieving the Group’s strategic objectives, and ensuring that the Group establishes and maintains appropriate and effective risk management and internal control systems. The Board should oversee management in the design, implementation and monitoring of the risk management and internal control systems.

During the Period, a review of the effectiveness of the Group’s risk management and internal control systems covering the risk management functions and all material controls, including financial, operational and compliance controls was conducted, details of which are set out in the Risk Management Report on pages 32 to 38. Such review will be conducted on an annual basis.

An Inside Information Policy was adopted by the Company which sets out guidelines to the Directors, officers and all relevant employees of the Group to ensure inside information (as defined in the Listing Rules) of the Group (the “Inside Information”) would be disseminated to the public in equal and timely manner in accordance with applicable laws and regulations. The Company also established Group Internal Notification Policies and Procedures for setting out guidelines for identification and notification of Inside Information and notifiable transactions (as defined in the Listing Rules). A Whistleblowing Policy and an Anti-corruption Policy were also adopted by the Group.

During the Period, the Board reviewed the adequacy of resources, qualifications and experience of staff of the Company’s internal audit, accounting and financial reporting functions, and their training programmes and budgets. The review will be conducted annually in accordance with the requirements of the CG Code.

28 Hongkong Chinese Limited 2020 Annual Report

Corporate Governance Report (continued)

INTERNAL AUDIT

The IA Department was set up in 2007 to perform internal audit and to review the risk management and internal control systems of the Group.

The principal roles of the IA Department are to ensure the effectiveness of internal control procedures and compliance with different standards and policies across different businesses and operations of the Group. The IA Department audits and evaluates the Group’s internal control operation and risk management process so as to address the financial, operational and compliance risks in the Group. The Board and the Audit Committee will actively take actions based on the findings from the IA Department. The IA Department is also responsible for providing improvement recommendations to different operation teams and departments so as to minimise the risk exposure in the future.

COMPANY SECRETARY

The Company Secretary is responsible for facilitating the Board’s processes and communications among Board members, with shareholders and with management. During the Period, the Company Secretary had taken the necessary professional training.

COMMUNICATION WITH SHAREHOLDERS

The Company has established a shareholders’ communication policy and will review it on a regular basis to ensure its effectiveness.

The Company’s annual general meeting (the “AGM”) is one of the principal channels of communication with its shareholders. It provides an opportunity for shareholders to ask questions about the Company’s performance. Separate resolutions will be proposed for each substantially separate issue at the AGM. Board members, including the Chairmen of the Board and Board committees, and the Auditor are invited to attend the AGM and answer questions from shareholders.

Under the Listing Rules, all resolutions proposed at shareholders’ meetings must be voted by poll except where the chairman of a general meeting, in good faith and in compliance with the Listing Rules, decides to allow resolutions to be voted on by the shareholders on a show of hands. Details of the poll procedures will be explained during the proceedings of shareholders’ meetings. The poll voting results will be released and posted on the Websites.

The Company Website is maintained to provide effective communication. All the financial information and other disclosures including, inter alia, annual reports, interim reports, announcements, circulars, notices, the Company’s Memorandum of Association (the “Memorandum”) and the Bye-laws are available on the Company Website.

Shareholders may direct their questions about their shareholdings to the Company’s Hong Kong Branch Share Registrar, Tricor Tengis Limited, at Level 54, Hopewell Centre, 183 Queen’s Road East, Hong Kong (the “Registrar”) or contact the Customer Service Hotline of the Registrar at (852) 2980 1333. Shareholders may send their enquiries in writing to the Board or the Company Secretary at the principal place of business of the Company at 40th Floor, Tower Two, Lippo Centre, 89 Queensway, Hong Kong.

2020 Annual Report Hongkong Chinese Limited 29

Corporate Governance Report (continued)

SHAREHOLDERS’ RIGHTS

Under Bye-law 58 of the Bye-laws, members holding at the date of deposit of the requisition not less than onetenth of the paid up capital of the Company carrying the right of voting at general meetings of the Company shall at all times have the right, by written requisition to the Board or the Company Secretary, to require a special general meeting to be called by the Board for the transaction of any business specified in such requisition; and such meeting shall be held within two (2) months after the deposit of such requisition. If within twenty-one (21) days of such deposit, the Board fails to proceed to convene such meeting, the requisitionists themselves may do so in accordance with the provisions of the Companies Act 1981 of Bermuda. Shareholders may send the requisition and request in writing to the Board or the Company Secretary at the principal place of business of the Company at 40th Floor, Tower Two, Lippo Centre, 89 Queensway, Hong Kong.

DIVIDEND POLICY

The Company considers stable and sustainable returns to the shareholders and investors of the Company to be its goal and endeavours to achieve a progressive dividend policy where appropriate. The Board adopted a dividend policy of the Company (the “Dividend Policy”) in January 2019. The Dividend Policy aims to set out the approach to determine the dividend to be payable by the Company, enhance transparency of the Company and facilitate shareholders and investors to make informed investment decisions. In deciding whether to propose a dividend and in determining the dividend amount, the Board will take into account the Group’s earnings performance, financial position, investment and funding requirements, and future prospects. The Board will review the Dividend Policy from time to time to ensure its continued effectiveness.

FAIR DISCLOSURE AND INVESTOR RELATIONS

The Company uses its best endeavours to distribute material information about the Group to all interested parties as widely as possible. When announcements are made through the HKEX, the same information will be available to the public on the Company Website. The Company recognises its responsibility to disclose its activities to those with a legitimate interest and to respond to their questions. In all cases, great care is taken in handling Inside Information in accordance with the Inside Information Policy.

Management of the Group maintains regular contacts with the investment community.

During the Period, no amendments were made to the Memorandum and the Bye-laws. An updated and consolidated version of the Memorandum and the Bye-laws is available on the Websites.

30 Hongkong Chinese Limited 2020 Annual Report

Corporate Governance Report (continued)

FINANCIAL REPORTING

The Board recognises its responsibility to prepare the Company’s financial statements which give a true and fair view and are in compliance with the Hong Kong Financial Reporting Standards, the Listing Rules and other regulatory requirements. As at 31 December 2020, the Board was not aware of any material misstatement or uncertainties that might put doubt on the Group’s financial position or going concern. The Board selected appropriate accounting policies and applied consistently. Judgments and estimates were reasonably and prudently made. The Auditor is responsible for audit and reports, if any, material misstatement or noncompliance with the Hong Kong Financial Reporting Standards or other regulations. The Board uses its best endeavours to ensure a balanced, clear and understandable assessment of the Group’s performance, position and prospects in financial reporting.

The responsibilities of the Auditor with respect to financial reporting are set out in the Independent Auditor’s Report on pages 53 to 57.

CORPORATE SOCIAL RESPONSIBILITY

The Group is conscious of its role as a socially responsible group of companies. It cares for and supports the communities where it operates. The Group makes donations for community well-being from time to time.

2020 Annual Report Hongkong Chinese Limited 31

Risk Management Report

Effective risk management is essential for the Group to take the appropriate level of risks and opportunities in pursuing its strategic and business goals. The Group is committed to the continuous improvement of the risk management system in order to facilitate the long-term growth and sustainability of its businesses. During the Period, the Group has integrated Environmental, Social and Governance (“ESG”) risk factors into enterprise risk management process given that the increasing significance of ESG risks.

With reference to Enterprise Risk Management — Integrated Framework issued by COSO and ISO 31000 Risk Management — Principles and Guidelines, the Group’s risk management framework comprises 3 key components:

Risk Management Strategy;
Risk Governance Structure; and
Risk Management Process.

RISK MANAGEMENT STRATEGY

The Group recognises the importance of a proactive risk culture to the effective implementation of a risk management system. In order to foster the desired risk culture, the Group has integrated the risk management system into various parts of the business and day-to-day operation processes, and the Group aims to achieve the following objectives through the risk management activities:

Promote corporate governance with a sound system of internal controls
Embed a systematic approach to identify risks
Enable the Group to strike the right balance between risks and rewards by making risk informed decisions in accordance with the Group’s business objectives and risk appetite
Ensure the adequacy and effectiveness of risk controls in place to manage key risks
Ensure compliance with the relevant legal and regulatory requirements

32 Hongkong Chinese Limited 2020 Annual Report

Risk Management Report (continued)

RISK GOVERNANCE STRUCTURE

The Group’s risk governance structure provides the foundation for risk monitoring and management. The roles and responsibilities of each layer are clearly established to ensure a thorough understanding among all the personnel within the Group.

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Direct/Monitor/
Board Supervision
Facilitate
Board, Audit Committee
Report/Escalate
Risk Leadership Assure/Advise
Senior Management, Risk
Management Steering Group
Risk Facilitator
Group Risk Management Team Independent
Assurance
Group Internal
Risk & Control Ownership
Audit Department
Business Entities & Departments
----- End of picture text -----

The key roles and responsibilities of each layer are listed below:

Board Supervision

The Board

Take the overall responsibility for the risk management and internal control systems

Audit Committee empowered by the Board

Determine the Group’s overall risk appetite and establish appropriate culture throughout the Group for effective risk governance
Review and approve risk criteria adopted by senior management to ensure that they are aligned with the Group’s risk appetite
Oversee the risk exposure of various types including the mitigation strategies
Provide supervision on the risk management and internal control systems and review their adequacy and effectiveness at least on an annual basis

2020 Annual Report Hongkong Chinese Limited 33

Risk Management Report (continued)

RISK GOVERNANCE STRUCTURE (continued)

Risk Leadership

Senior Management

Provide overall leadership in risk management activities, via the Risk Management Steering Group (the “RM Steering Group”)

RM Steering Group led by Senior Management

Establish risk criteria
Assess the group level material risks and review the entity level risk profile periodically
Determine and assign sufficient resources to implement the risk management framework and manage risks within the Group
Update periodically the Audit Committee with the Group’s risk profile and status of risk treatment plans for key business risks
Ensure the annual review of adequacy and effectiveness of the risk management system

Risk Facilitator

Group Risk Management Team

Implement the Group’s risk management policies and plans formulated by the RM Steering Group
Develop necessary tools and templates for risk assessment, risk treatment plan and risk reporting
Cascade and facilitate the risk management process and activities across all business entities and departments
Follow up on the implementation of risk treatment plans and ensure the internal controls and risk mitigations are properly designed and implemented

34 Hongkong Chinese Limited 2020 Annual Report

Risk Management Report (continued)

RISK GOVERNANCE STRUCTURE (continued)

Risk and Control Ownership

Business Entities and Departments

Identify and review changes in risks in line with changes in the business environment
Analyse risks and identify appropriate controls or risk treatment plans to address the risks
Responsible for risk management activities and reporting in their businesses or operations
Perform risk and control self-assessment activity to evaluate the effectiveness of risk management and internal controls for their respective entities

Independent Assurance

Group Internal Audit Department

Conduct audit projects on various entities and functions across the Group and provide independent review on the adequacy and effectiveness of the internal control and risk management systems

RISK MANAGEMENT PROCESS

The Group’s risk management process provides a systematic approach to manage risks. The following diagram illustrates the key activities in the process.

Establish Identify Analyse and Report and Context Risks Evaluate Risks Treat Risks Monitor Risks Respective Respective Respective The Group business Respective business business entities establishes risk entities and business entities and and the Group’s assessment the Group’s entities and the Group’s management criteria and risk management the Group’s management report the risk matrix to assess the management evaluate the profile regularly cascade the risk likelihood and identify the existing risk to appropriate appetite across impact of the risks in their controls and level of authority the Group and risks, determine areas of formulate risk and maintain provides acceptance businesses or treatment plan ongoing referencing and prioritize operations if appropriate monitoring risk inventory the risks

2020 Annual Report Hongkong Chinese Limited 35

Risk Management Report (continued)

CONTINUOUS IMPROVEMENT

The Group continues to strive for improvement on its risk management system and has taken a series of actions during the Period:

Revised enterprise risk management reporting templates
Revised Risk and Control Self-Assessment template
Discussed risk management improvement initiatives across different levels of the Group
Provided risk management training to the risk owners
Integrated ESG risk factors into enterprise risk management process

MATERIAL RISKS

During the Period, the Group conducted risk review from the Group’s perspective and on the risk profile submitted by the underneath business entities. Through this combined top-down and bottom-up risk review process, the Group has identified the material risks of various business segments for the Period.

The Group classifies risks into 4 main categories:

Strategic	—	Risk resulting from suboptimal determination and execution of business strategies or
		changes in external business environment.
Operational	—	Risk of potential financial losses and/or business instability arising from failures in
		internal controls, operational processes, or in the system that supports them.
Financial	—	Risk resulting from financial and reporting activities and/or use of financial
		instruments.
Compliance	—	Risk of non-compliance with any internal requirements/standards, legal/regulatory requirements, and/or any related third party legal actions/disputes.

36 Hongkong Chinese Limited 2020 Annual Report

Risk Management Report (continued)

MATERIAL RISKS (continued)

A. Group Operations

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Risks Examples of Response Taken Risk Trend
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Operational — Natural Disaster Risk1 The risk of extensive damage in network facilities caused by storm, flood, landslide, extreme weather phenomenon due to climate change impacting the Group’s ability to sustain operation and/or loss of critical data and/or information.	• Performed periodic system back up. • Established business continuity plan covering different disaster scenarios. • Arranged appropriate insurance coverage for different disaster scenarios.
Operational — COVID 19 outbreak The risk of adverse impact to the Group’s business performance due to COVID-19.	• Ensured clean and hygienic work environment. • Provided face masks and hygiene supplies to staff and required staff to wear face masks at workplace. • Implemented precautionary measures at workplace. • Implemented flexible working hours and work from home arrangement. • Temporary suspension of non-essential business travel. • Used electronic means for meeting.
Operational — Cyber Security Risk The risk of financial or reputational loss or inability to deliver services and products due to unauthorised access, use, disclosure, disruption, modification, or destruction of organisational data and/or systems.	• Enhanced cyber threat prevention and detection.
Strategic — Macroeconomic Risk The risk of economic downturn or slow down in economic recovery in the business region, impacting the company’s profitability.	• Cost monitoring and cost management.

1 Material risk identified with ESG aspects

2020 Annual Report Hongkong Chinese Limited 37

Risk Management Report (continued)

MATERIAL RISKS (continued)

B. Property Investment, Property Development and Management Services

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Risks Examples of Response Taken Risk Trend
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Strategic — Market Dynamics Risk The risk of unfavorable condition in the market demand, supply and price of the product/service that the company positioning, impacting the company’s sales revenue target.	• Contacted property agency to find new tenants proactively in order to minimize vacancy periods. • Increased agency commission to motivate property agency.
Risk level has increased Risk level has remained steady

REVIEW OF RISK MANAGEMENT AND INTERNAL CONTROL SYSTEMS

During the Period, the Board, through the Audit Committee, has reviewed the adequacy and effectiveness of the risk management and internal control systems based on:

Regular risk management progress reports on the status of implementation;
Regular risk reports on the Group’s material risks and entities’ risk profile including key mitigations;
Risk and control self-assessment by various entities;
Regular audit reports by the Group Internal Audit Department for audit evaluation of the internal controls and key findings with relevant recommendations;
Consideration on the adequacy of resources, staff qualifications and experience, training programmes and budgets of the accounting, internal audit and financial reporting functions;
Consideration on the scope and quality of management’s ongoing monitoring of the systems; and
Consideration on the extent and frequency of communication and reporting to the Board and Audit Committee on the risk management results and risk issues.

As a result of the review, the Board, with the confirmation from the Management of the Group, considered the risk management and internal control systems to be effective and adequate for the Period. However, it should be acknowledged that the systems are designed to manage rather than to eliminate the risks of failure to achieve business objectives, and can only provide reasonable but not absolute assurance against material misstatement or loss.

38 Hongkong Chinese Limited 2020 Annual Report

Environmental, Social and Governance Report

ABOUT THIS REPORT

This report captures the performance of the Group in the environmental, social and governance (“ESG”) aspects for the Period. By reporting the policies, measures and performance of the Group in ESG aspects, it allows all stakeholders to better understand the progress of the Group towards sustainability.

Reporting Boundary

This report focuses on the operation of the Company’s head office in Hong Kong and its subsidiaries in property investment, development and management, as well as management services for the Period (as summarised in the following table). While not all of the Group’s operations are covered herein, it is the Group’s aim to consistently upgrade the internal data collection procedure and gradually expand the scope of disclosure where appropriate.

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Segments Subsidiaries covered in the reporting boundary
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Property investment,	•	北京力寶世紀置業有限公司(Beijing Lippo Century Realty Co., Ltd.)
development and		(“Beijing Lippo”)
management	•	成都力寶置業有限公司(Chengdu Lippo Realty Limited) (“Chengdu Lippo”)
	•	Fairseas 1 Pte. Ltd. (“Fairseas”)
	•	One Realty Pte. Limited (“One Realty”)
Management services	•	HCL Management Limited (“HCL Management”)

Reporting Standard

This report was prepared in accordance with the “comply or explain” provisions of the Environmental, Social and Governance Reporting Guide (the “ESG Reporting Guide”) in Appendix 27 of the Listing Rules. To ensure the accuracy of key environmental performance indicators, the Group commissioned a professional consultant to conduct a carbon assessment. Selected key performance indicators that are categorised by the ESG Reporting Guide as “recommended disclosures” are also included for readers’ easy reference.

In preparation of this report, the Group adhered to the reporting principles of materiality, quantitative, balance and consistency:

Reporting principles	The Group’s application
Materiality	Material environmental and social issues were identified through stakeholder
	engagement, and materiality assessment was presented to the Board. The relevant
	content was prioritised and disclosed in this report.
Quantitative	The Group records and discloses key performance indicators in quantitative terms as
	appropriate.
Balance	This report discloses information in an objective manner, giving stakeholders a fair
	picture of the Group’s overall ESG performance.
Consistency	As far as practicable and unless stated otherwise, the Group employs consistent
	measurement methodology to allow for meaningful comparison of ESG data over
	time.

2020 Annual Report Hongkong Chinese Limited 39

Environmental, Social and Governance Report (continued)

ABOUT THIS REPORT (continued)

Confirmation and Approval

Information in this report was sourced from official documents, statistical data, and management and operational information of and collected by the Group. This report was approved by the Board on 30 March 2021.

Opinion and Feedback

The Group values the opinion of stakeholders. Any stakeholder having any questions or suggestions on this report is welcome to contact the Group by post or email to the following:

Address: 40th Floor, Tower Two, Lippo Centre, 89 Queensway, Hong Kong Email: [email protected]

MANAGEMENT APPROACH TO ESG

The Board has the overall responsibility to oversee the Group’s ESG matters, including policies, measures, performance and risks. Through regular board meetings, the Board evaluates and reviews ESG matters as appropriate.

A working group that comprises representatives from business divisions and compliance team, is delegated to identify, evaluate and manage material ESG related issues. The working group implements ESG policies and strategy, carry out materiality assessment and prepare the ESG Report. To better prepare the Group for future challenges and opportunities, it is on the Group’s agenda to continue enhancing its ESG governance and develop sustainability strategies more comprehensively.

During the Period, ESG online training workshops were organised for the staff of the Group, covering ESG reporting, improvement opportunities and updates of local reporting standards.

ESG Risk Management and Internal Control Systems

The Group considers effective risk management as an integral part of day-to-day operations and sound corporate governance. It is essential for the Group to evaluate risks that may prevent or endanger the achievement of its strategic and business goals, and to identify opportunities ahead.

The Board takes the overall responsibility for ensuring an appropriate and effective risk management and internal control systems. The Group’s risk governance structure and risk management process span all business entities and departments. Empowered by the Board, the Audit Committee reviews and approves risk criteria, oversees the risk exposure and reviews the adequacy and effectiveness of the systems.

To increase risk awareness among business entities and departments, risk management training sessions were provided to the risk owners of the business entities and departments during the Period.

For further information regarding the Group’s risk governance structure, management strategy and major risks identified, please refer to the Risk Management Report.

40 Hongkong Chinese Limited 2020 Annual Report

Environmental, Social and Governance Report (continued)

MANAGEMENT APPROACH TO ESG (continued)

Stakeholder Engagement

The Group defines its stakeholders as internal and external groups and individuals who have a significant impact on the Group’s businesses, and those who are materially influenced or affected by the Group’s businesses. Understanding the needs and expectations of stakeholders enables the Group to formulate strategies that respond to their concerns and manage potential risks. The Group engages its key stakeholders to gather their feedback in daily operations through multiple channels such as meetings, emails, telephone, interviews, conferences, visits, website and/or survey.

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Internal Stakeholders External Stakeholders
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•	C-level executives	• Investors
•	Board of directors	• Shareholders
•	Senior and middle management	• Suppliers
•	General staff	• Business partners
		• Auditors
		• Service providers
		• Customers
		• Media

The Group believes that stakeholder engagement is a continuous process and will continue to explore different forms of engagement channels in order to strengthen its interaction with stakeholders to create mutually beneficial relationships.

Materiality Assessment

To ensure that this report addresses the environmental and social issues that are important to the Group and its stakeholders, a materiality assessment was conducted by adopting a four-step approach.

Step		Outcome
1	Identify relevant issues	• A list of issues was compiled through reviewing existing and previous
		engagement results, with reference to local reporting standards.
		• 22 relevant issues were identified in aspects of “Environment” and “Social”.
2	Collect feedback	• A quantitative online survey was conducted with internal and external
		stakeholders.
3	Identify material issues	• The materiality of each relevant issue was assessed by considering
		its importance to the stakeholders and the Group’s impact on the
		environment and society.
		• The results are shown in the table below, together with the aspects of the
		ESG Reporting Guide to which they relate.
4	Validation	• The materiality assessment results were presented to the Board and senior
		management.

2020 Annual Report Hongkong Chinese Limited 41

Environmental, Social and Governance Report (continued)

MANAGEMENT APPROACH TO ESG (continued) Materiality Assessment (continued)

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ESG aspects set out in the Reporting Guide Material ESG issues
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A. Environment	A1:	Emissions	•	Air emissions
			•	Greenhouse gases (“GHG”) emissions
			•	Waste
	A2:	Use of resources	•	Energy
			•	Water
	A3:	The environment and	•	No other significant environmental impact
		natural resources
B. Social	B1:	Employment	•	Diversity and equal opportunities
			•	Fair and competitive remuneration
			•	Employee relations
	B2:	Health and safety	•	Employee Health and safety
	B3:	Development and training	•	Development and training
	B4:	Labour standards	•	Labour standards
	B5:	Supply chain management	•	Supply chain management
	B6:	Product responsibility	•	Responsible marketing and customer communication
			•	Quality management
			•	Protection of data privacy and intellectual property
				rights
	B7:	Anti-corruption	•	Anti-corruption and whistle-blowing
	B8:	Community investment	•	Community investment

A. ENVIRONMENT

Adhering to the goal of being environmentally responsible, the Group is committed to reducing its negative environmental impacts in its operations. With the Environmental Policy in place, the Group conducts its business in an environmentally conscious manner and identify its material environmental risks and opportunities. All subsidiaries are expected to make ongoing efforts in the management as well as minimisation of their environmental impacts by establishing applicable procedures and practices. The Group’s environmental performance is regularly monitored and reviewed to ensure compliance with regulatory requirements and industry standards.

A1: Emissions

Air emissions

Key air pollutants included nitrogen oxides, sulphur oxides and respirable suspended particles, which were emitted by vehicles and yacht. The air emissions of the Period was lower compared to that of the Previous Year. This was mainly due to a decrease in fuel consumption by vehicles and yacht in several subsidiaries.

The air emissions data is set out in the table below.

Air emissions	Period	Previous Year
Nitrogen oxides (kg)	0.20	0.83
Sulphur oxides (kg)	0.09	0.26
Respirable suspended particulates (kg)	0.05	0.38

Hongkong Chinese Limited 2020 Annual Report

Environmental, Social and Governance Report (continued)

A. ENVIRONMENT (continued)

A1: Emissions (continued)

GHG emissions

Guidelines for Accounting and Reporting Greenhouse Gas Emissions — China Public Building Operator Units (Enterprises) (Trial) of the PRC, the Guidelines to Account for and Report on Greenhouse Gas Emissions and Removals for Buildings (Commercial, Residential or Institutional Purposes) in Hong Kong and international standards including ISO 14064-1 and GHG Protocol were referred to during the quantification of GHG emissions.

The total GHG emissions of the Period was 64.9 tonnes CO2-e. The GHG intensity was 0.17 tonnes CO2-e/square metre floor area.

Scope 2, being the energy indirect GHG emissions, constitutes 78% of the total GHG emissions. Scope 1 and Scope 3, being the direct GHG emissions and other indirect GHG emissions, account for 22% and 0% of the total GHG emissions respectively.

In an effort to reduce and manage the emissions, preference is given to purchasing office equipment and company vehicles with higher energy efficiency and lower emissions, such as LED lights and electric vehicles. Going forward, the Group will consider the possibility of using the emission data in support of establishing carbon reduction action plan and setting reduction targets.

The GHG emissions data is set out in the table below.

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GHG emissions Period Previous Year
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Scope 1: Direct emissions (tonnes of CO2-e)	14.3	53.6
Scope 2: Energy indirect emissions (tonnes of CO2-e)	50.6	58.0
Scope 3: Other indirect emissions (tonnes of CO2-e)	0	1.0
Total GHG emissions (Scope 1, 2 and 3) (tonnes of CO2-e)	64.9	112.6
GHG intensity (tonnes of CO2-e/m2)	0.17	0.30

2020 Annual Report Hongkong Chinese Limited 43

Environmental, Social and Governance Report (continued)

A. ENVIRONMENT (continued)

A1: Emissions (continued)

Waste

Mindful of its responsibility to manage and reduce the waste it produces, the Group has implemented a set of practices with the following performance.

Practices Performance • Adopt e-communication whenever • The Group produced 0.15 tonnes non-hazardous possible; waste and generated minimal quantities of hazardous waste during the Period. Non-
• Practise reuse and recycling in office where hazardous waste intensity was 0.02 tonnes/ feasible; employee.
• Print double-sided; • Major non-hazardous waste produced across the
Print double-sided; • Major non-hazardous waste produced across the Group’s operations are domestic solid waste from
• Reuse one-sided used paper. offices. All are disposed of by authorised vendors in accordance with applicable environmental regulations.

The non-hazardous waste data is set out in the table below.

Waste(Note)	Period	Previous Year
Non-hazardous waste (tonnes)	0.15	0.51
Non-hazardous waste intensity (tonnes/employee)	0.02	0.05

Note: Including Beijing Lippo and Chengdu Lippo only

44 Hongkong Chinese Limited 2020 Annual Report

Environmental, Social and Governance Report (continued)

A. ENVIRONMENT (continued)

A2: Use of Resources

Energy

Improving operational energy efficiency is a fundamental strategy to reduce energy consumption and associated GHG emissions. To conserve energy, a series of energy-efficiency initiatives have been implemented across the subsidiaries with the following performance.

Practices	Performance
• Automatic lighting controls on a set	The total energy consumption of the Period was
schedule to save energy during non-	146.9 MWh-e. The energy intensity was 0.39 MWh-
business hours;	e/square metre floor area.

Set thermostat of air conditioner to optimal temperature that balances employee comfort and energy use;
Perform regular cleaning and maintenance of air-conditioning systems;
Give priority to energy efficient electrical appliances and LED lights when there is need for replacement.

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Energy consumption Period Previous Year
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Direct energy	Petrol (MWh-e)	10.6	31.1
	Diesel (MWh-e)	25.9	156.1
Indirect energy	Electricity (MWh)	110.3	131.3
Total energy consumption (MWh-e)		146.8	318.5
Energy intensity (MWh-e/m2)		0.39	0.84

Water

The Group sourced water from the municipal supply and faced no issue in sourcing water fit for purpose. To reduce water consumption, the Group applied the following practices.

Practices	Performance
Install water efficient taps with a low flow	The total water consumption and the water intensity
rate;	of the Period was 177.8 cubic metres and 35.6 cubic
Perform regular maintenance of water supply	metres/employee respectively.
facilities.

Water consumption(Note)	Period	Previous Year
Total water consumption (m3)	177.8	191.3
Water intensity (m3/employee)	35.6	31.9

Note: Including Chengdu Lippo and Fairseas only. Other subsidiaries were operated in leased premises with the supply of water controlled by building management and no sub-metering for individual occupants.

2020 Annual Report Hongkong Chinese Limited 45

Environmental, Social and Governance Report (continued)

A. ENVIRONMENT (continued)

A3: The Environment and Natural Resources

Other environmental impacts

Apart from the emissions and resource use disclosed above, the nature of the Group’s operation does not have any significant impact on the environment and natural resources. Going forward, the Group will be working to reduce the consumption of energy and other natural resources across its operations and to use environmentally friendly products and services whenever possible.

There are no relevant laws and regulations in relation to the environment that have a significant impact on the Group. During the Period, the Group did not identify any cases of non-compliance in relation to the environment.

B. SOCIAL

As a responsible corporate citizen, the Group is committed to upholding business ethics and standards of quality products and services. Its commitment and approach are underlined in the following Group’s policies:

Human Resources Policy
Sustainable Supply Chain Policy
Product and Service Responsibility Policy
Anti-corruption Policy
Whistleblowing Policy
Donation Policy

B1: Employment

A sound employment system is the first step in maintaining a pool of talented employees. The Group aims to create a motivating, impartial, harmonious and safe working environment, as stated in the Human Resources Policy. Employment policies and procedures list guidelines and provisions such as recruitment, promotion, dismissal, hours of work, rest periods, overtime, compensation and other benefits and welfare.

Diversity and equal opportunities

The Human Resources Policy emphasises the importance of employee diversity and equal opportunities. Employees are given equal access to opportunities regardless of their age, gender, marital status, pregnancy, sexual orientation, family status, disability, politics, race, nationality or religion. Recruitment, compensation, rewards and promotion are based on employees’ performance, aptitude and potential.

Fair and competitive remuneration

The Group enhances employees’ well-being by offering comprehensive welfare and benefits. A number of benefits are covered in the Group’s remuneration package, such as paid marriage leave, medical and compassionate leave, annual leave, healthcare and life insurance, retirement benefits and training subsidies.

46 Hongkong Chinese Limited 2020 Annual Report

Environmental, Social and Governance Report (continued)

B. SOCIAL (continued)

B1: Employment (continued)

Employee relations

Employees are free to voice out any concerns and complaints to their direct supervisors and managers, the human resources department, the general manager or the chief executive officer as appropriate through various communication channels. All feedback and complaints received will be handled with confidentiality.

The employment data is set out in the table below.

Number of Region	employees Gender	Age 30–50	Above 50	Employee category Management Other employees	Employee category Management Other employees	Employment type Full-time Part-time	Subtotal Total (by region)	Period Total workforce Male to female ratio	Period Total workforce Male to female ratio	Previous Year Total workforce Male to female ratio	Previous Year Total workforce Male to female ratio
	Male	0	7	4	3	7	7
Hong Kong	Female	5	4	0	9	9	16 9
	Male	1	2	0	3	3	3
Singapore	Female	2	3	1	4	5	8 5	34	0.7:1	34	0.79:1
Mainland	Male	3	1	2	2	4	4
China	Female	4	2	3	3	6	10 6

B2: Health and safety

The Group cares about its employees and makes health and safety a priority to the Group’s operations. As underlined in its Human Resources Policy, the Group’s overall goal is to minimise risks related to employees’ health and safety and to protect them from occupational hazards.

For the property investment and development business, fire drills are regularly held to better prepare employees in emergencies to ensure that they can efficiently identify and mitigate potential risks in the event of a fire. First aid kits are also provided at offices in the event of an accident. For subsidiaries located in poorer air quality regions such as Beijing Lippo, personal desktop air cleaners are provided to employees to minimise health risks related to respiratory system.

In the midst of the Pandemic, the Group has been caring for the health and safety of its employees and providing free surgical masks to them. It has implemented work-from-home and flexible working hours arrangements for the employees as appropriate. It has also sourced suppliers of surgical masks and disinfection products for the employees and placed orders for them. Offices are regularly sanitised and equipped with adequate disinfection and hygiene supplies for the employees.

There are no relevant laws and regulations in relation to health and safety that have a significant impact on the Group. During the Period, the Group did not identify any cases of non-compliance in relation to health and safety.

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Work-related fatality and injury
Number and rate of Number and rate of Lost days due to
work-related fatalities work-related injury work-related injury
Period 0 0 0
Previous Year 0 0 0
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2020 Annual Report Hongkong Chinese Limited 47

Environmental, Social and Governance Report (continued)

B. SOCIAL (continued)

B3: Development and training

The key to unleashing employee potential lies in establishing the right processes to support employees. In line with the Human Resources Policy, the Group supports employees to seek a variety of learning and development opportunities to acquire knowledge and skills for career growth. Divisions and departments nurture their staff through formulating work plans and providing day-to-day guidance. Employee performance is assessed against different performance indices and goals. An annual performance appraisal is performed to deliver feedback, identify individual development needs and address any performance concerns. Promotion is based on employees’ performance, aptitude and potential to make future contributions in line with the Group’s development.

During the Period, the Group provided a range of internal and external training opportunities to its employees. Examples of training activities during the Period are shown below:

Business		Subsidiary	Subsidiary	Key Training Activities in the Period	Key Training Activities in the Period
Property investment		One Realty		• Online training on risk management and internal
and development				control, ESG reporting
Management		HCL Management		• Training workshop on corporate and regulatory
services				updates
Number and percentage of employees trained(Note) Region Gender Employee category Management Other employees				Subtotal Period Total (by gender) Male Female	Previous Year Total (by gender) Male Female
Hong Kong	Male Female	2 (50%) 0 (0%)	2 (67%) 1 (11%)	4 (57%) 1 (11%)
Singapore	Male Female	0 (0%) 0 (0%)	0 (0%) 2 (50%)	4 (29%) 3 (15%) 0 (0%) 2 (40%)	4 (27%) 7 (37%)
PRC	Male Female	0 (0%) 0 (0%)	0 (0%) 0 (0%)	0 (0%) 0 (0%)

Note: Percentage of employees trained = number of employees trained in specified category/number of employees in specified category x 100%.

48 Hongkong Chinese Limited 2020 Annual Report

Environmental, Social and Governance Report (continued)

B. SOCIAL (continued)

B3: Development and training (continued)

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Breakdown for employee trained for the Period (Note)
Employee category Gender
Management Other employees Male Female
29% 71% 57% 43%
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Note: Breakdown for employees trained = employee trained in specified category/total number of employees trained x 100%.

Average training hours(Note) Region Gender Hong Kong Male Female	Average training hours(Note) Region Gender Hong Kong Male Female	Employee category Management Other employees 4.8 6.4 0 0.2	Employee category Management Other employees 4.8 6.4 0 0.2	Subtotal 5.5 0.2	Total Male	Period (by gender) Female	Previous Year Total (by gender) Male Female	Previous Year Total (by gender) Male Female
Singapore	Male Female	0 0	0 0.5	0 0.4	2.7	0.2	3.4	1.6
PRC	Male Female	0 0	0 0	0 0

Note: Average training hours = number of training hours for employees in specified category/number of employees in specified category.

B4: Labour standards

The Group respects human rights and strictly prohibits any form of child and forced labour, as stated in the Human Resources Policy. The Group has also established effective systems and controls across its operation. To ensure the Group to comply with local rules and regulations, during the recruitment process, a suitable candidate is selected and assessed based on the identity document, academic background, talent, age, experience and other applicable merits.

There are no relevant laws and regulations in relation to employment and labour standards that have a significant impact on the Group. During the Period, the Group did not identify any non-compliance cases regarding employment, child labour and forced labour.

2020 Annual Report Hongkong Chinese Limited 49

Environmental, Social and Governance Report (continued)

B. SOCIAL (continued)

B5: Supply chain management

The Group is committed to enhance its supply chain management to build a more sustainable supply chain. The Sustainable Supply Chain Policy highlights its commitment and expectations on suppliers. Subsidiaries are expected to implement procurement practices in line with the Group’s policy and other procurement policies that governs daily operations.

To manage the social and environmental risks in its supply chain, the Group defines in its policy the environmental and social factors that should be considered in the supplier selection and monitoring processes. Priority should be given to the supplier with better credentials or merits under the four pillars below, considering potential suppliers meet all other requirements. Subsidiaries are expected to perform on-going monitoring and regular review of the relevant performance of suppliers.

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Consideration of credentials or merits achieved by
Pillar suppliers
----- End of picture text -----

Business ethics	• Formulation of business code of conduct, policies related
	to regulatory compliance and policies related to the
	protection of employee rights, awards or accreditation
	obtained
	• Compliance with laws and regulations related to business
	ethics, environment and social responsibility
Product/service safety and	• Quality management system, assurance function, awards
quality	or accreditation obtained
Work health and safety	• Safe working environment, health and safety
	management system, policy, training, record of incident
	rate and awards achieved related to health and safety
Environmental management	• Environmental management system, policy and awards
	achieved

To uphold values for social responsibility, the Group encourages subsidiaries to invite local suppliers to participate in the selection process and consider small firms, voluntary, community service and ethnic minority organisations and/or social enterprises as potential suppliers, as far as practicable. Subsidiaries are also suggested to consider purchasing environmentally friendly products and services whenever feasible.

The Group will continue to enforce these standards and explore possibilities in improving the approach to identify and manage potential environmental and social impacts across its supply chain.

50 Hongkong Chinese Limited 2020 Annual Report

Environmental, Social and Governance Report (continued)

B. SOCIAL (continued)

B6: Product responsibility

The Group’s Product and Service Responsibility Policy defines its commitment with regard to maintaining the safety and quality of its products and services, customer feedback and product recall, advertising and labelling, as well as protection of customer data and intellectual property.

Responsibility marketing and customer communication

The Group recognises the importance of responsibly advertising and labelling its products and services to help customer make informed choice. As stated in the Product and Service Responsibility Policy, the Group seeks to protect customer interest by promoting and advertising its products and services in ways that do not mislead customers. Information on products and services disclosed should also be adequate and reliable.

To enhance customer satisfaction, subsidiaries are required to establish appropriate feedback channels and mechanisms to solicit and respond to customer concerns and feedback. Subsidiaries such as Chengdu Lippo conduct visits to their tenants to collect their feedback and identify ways to improve their products and services.

There are no relevant laws and regulations in relation to product responsibility that have a significant impact on the Group. During the Period, the Group did not identify any non-compliance or complaint in relation to product responsibility.

Quality management

The Group cares about the potential impacts of its products and services on its customers. To ensure the products and services offered are safe and reliable, subsidiaries are required to follow the Group’s Product and Service Responsibility Policy and other specific policies and procedures. To ensure the safety and quality of products and services offered by the suppliers, it is expected to maintain on-going monitoring and regular review of supplier performance and communicate with suppliers to identify any safety and quality concerns. In the event of any safety and quality issues, suppliers are requested to report, investigate and respond as soon as possible, and to recall products as appropriate.

To take care of the health of tenants, subsidiaries are expected to establish facility hygiene requirements and maintain pest control. In the operations of property management, the property management companies engaged by subsidiaries provide regular maintenance of equipment and fixtures in the buildings, safety and security for tenants, and fire and emergency surveillance. For property development, the Group did not have any ongoing property project under development during the Period.

Protection of data privacy and intellectual property rights

The Group respects customer privacy and intellectual property rights of any third-party. The Product and Service Responsibility Policy defines the guiding principles on safeguarding customer data and intellectual property of third-parties. Employees are required to follow the policy and comply with applicable laws and regulations when handling such information. The Group only collects and keeps information of its business partners, customers and tenants that is necessary in its business activities. Consent from the relevant stakeholders is obtained for data collection. To preserve the confidentiality of the data, the Group ensures that only authorised persons have access to such information. Important data are encrypted and regular data backup is performed.

2020 Annual Report Hongkong Chinese Limited 51

Environmental, Social and Governance Report (continued)

B. SOCIAL (continued)

B7: Anti-corruption

Honesty, integrity and fair play have always been the Group’s core values. With these core values in mind, the Group is strongly against bribery, extortion, fraud and money laundering. The Anticorruption Policy guides directors and staff in circumstances such as acceptance of advantage and handling of conflict of interest.

According to the Group’s Whistleblowing Policy, a whistleblower should report any suspected misconduct, malpractice or irregularity to his/her manager or head of department, and even directly to the Group Internal Audit Department (“GIA”), the Chief Executive Officer of the Company or the Audit Committee (as the case may be). The Audit Committee and the GIA assess and investigate reports if received. The process is kept confidential and the whistleblower is protected against unfair dismissal, victimisation or unwarranted disciplinary action. For effective monitoring and implementation, the Whistleblowing Policy is reviewed periodically by the head of the GIA.

There are no relevant laws and regulations in relation to corruption that have a significant impact on the Group. During the Period, the Group did not identify any cases of non-compliance in relation to corruption or whistleblowing nor was there any concluded legal case regarding corruption practices brought against it or its employees.

B8: Community investment

The Group aspires to understand and meet the needs of local communities and reducing the impacts of its operations on the surroundings. With guidance from the Donation Policy, the Group aims to promote and support the development of the communities in the form of philanthropic donations. The focus areas of contribution continue to include a wide array of aspects, ranging over education, sickness and disability relief, poverty alleviation, disaster aid and religious pursuit. During the Period, the Group made charitable and other donations of HK$100,000.

The Group will carry on with its endeavour in community engagement and leverage its network and influence in community investment initiatives to fulfil its corporate social responsibility as a corporate citizen.

52 Hongkong Chinese Limited 2020 Annual Report

Independent Auditor’s Report

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To the shareholders of Hongkong Chinese Limited

(Incorporated in Bermuda with limited liability)

OPINION

We have audited the consolidated financial statements of Hongkong Chinese Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages 58 to 146, which comprise the consolidated statement of financial position as at 31 December 2020, and the consolidated statement of profit or loss, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the nine months ended 31 December 2020, and notes to the consolidated financial statements, including a summary of significant accounting policies.

In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2020, and of its consolidated financial performance and its consolidated cash flows for the nine months ended 31 December 2020 in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly prepared in compliance with the disclosure requirements of the Hong Kong Companies Ordinance.

BASIS FOR OPINION

We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report. We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.

We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying consolidated financial statements.

2020 Annual Report Hongkong Chinese Limited 53

Independent Auditor’s Report (continued)

KEY AUDIT MATTERS (continued)

Key audit matter

How our audit addressed the key audit matter

Impairment assessment of interest in a joint venture

The carrying amount of the Group’s interests in joint ventures amounted to HK$10,175 million as at 31 December 2020. The interests in joint ventures were stated at the Group’s share of net assets under the equity method of accounting, less any impairment losses at the end of each reporting period.

The carrying amount of the Group’s interest in Lippo ASM Asia Property Limited (“LAAPL”), a material joint venture of the Group, amounted to HK$10,031 million as at 31 December 2020. LAAPL has a controlling interest in OUE Limited, a listed company in Singapore which is principally engaged in developing and managing assets across the commercial, hospitality, retail, residential and healthcare sectors.

We assessed management’s process for identifying the objective evidence of impairment in respect of the interest in LAAPL. We evaluated and tested the assumptions and methodologies used by management in the determination of the recoverable amount. We assessed the cash flow projection of LAAPL by making reference to its historical financial performance. For the discount rate applied to the cash flow projection, we assessed the inputs used to determine the rate with reference to market data. We involved our internal valuation specialists to assist us in assessing the discount rate adopted in the cash flow projection.

The impairment assessment of the Group’s interest in LAAPL and its subsidiaries is significant to our audit due to (i) the significance of the carrying amount as at 31 December 2020; and (ii) the determination of the recoverable amount of the interest in LAAPL requires significant management’s judgement and estimate.

Related disclosures are included in Notes 3 and 20 to the consolidated financial statements.

Fair value of investment properties

As at 31 December 2020, investment properties measured at fair values amounted to approximately HK$152 million, with a corresponding net fair value gain of HK$6 million recognised in profit or loss. The valuation process is inherently subjective and dependent on a number of estimates. The Group has engaged independent professional valuers to perform the valuation of the investment properties.

We considered the objectivity, independence and competency of the valuers. We assessed the valuation methodologies adopted and assumptions used by the valuers, and performed market value benchmarking against comparable properties. We involved our internal valuation specialists to assist us in evaluating the methodologies adopted and the assumptions used by the valuers for the valuation of investment properties held by the Group.

Related disclosures are included in Notes 3 and 17 to the consolidated financial statements.

54 Hongkong Chinese Limited 2020 Annual Report

Independent Auditor’s Report (continued)

OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT

The Directors of the Company are responsible for the other information. The other information comprises the information included in the Annual Report, other than the consolidated financial statements and our auditor’s report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

RESPONSIBILITIES OF THE DIRECTORS FOR THE CONSOLIDATED FINANCIAL STATEMENTS

The Directors of the Company are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with HKFRSs issued by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance, and for such internal control as the Directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the Directors of the Company are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors of the Company either intend to liquidate the Group or to cease operations or have no realistic alternative but to do so.

The Directors of the Company are assisted by the Audit Committee in discharging their responsibilities for overseeing the Group’s financial reporting process.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Our report is made solely to you, as a body, in accordance with section 90 of the Bermuda Companies Act 1981, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

2020 Annual Report Hongkong Chinese Limited 55

Independent Auditor’s Report (continued)

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors.
Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Audit Committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant ethical requirements regarding independence and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

56 Hongkong Chinese Limited 2020 Annual Report

Independent Auditor’s Report (continued)

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (continued) From the matters communicated with the Audit Committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Wong Yat Kin.

Ernst & Young Certified Public Accountants 22/F CITIC Tower 1 Tim Mei Avenue Central, Hong Kong

30 March 2021

2020 Annual Report Hongkong Chinese Limited

Consolidated Statement of Profit or Loss

For the nine months ended 31 December 2020

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Nine months Year
ended ended
31 December 31 March
2020 2020
Note HK$’000 HK$’000
(Restated)
Continuing operations
Revenue 5 82,526 71,438
Cost of sales 7 (17,639) (1,643)
Gross profit 64,887 69,795
Administrative expenses (33,634) (38,183)
Other operating expenses 7 (29,342) (38,111)
Other gains — net 6 12,725 853
Finance costs 10 (9,356) (19,192)
Share of results of associates 6,590 24,520
Share of results of joint ventures 11 (966,114) 433,852
Profit/(Loss) before tax from continuing operations 7 (954,244) 433,534
Income tax 12 (9,968) (2,908)
Profit/(Loss) for the period/year from continuing operations (964,212) 430,626
Discontinued operation
Profit/(Loss) for the period/year from discontinued operation 13 134,599 (7,021)
Profit/(Loss) for the period/year (829,613) 423,605
Attributable to:
Equity holders of the Company (829,662) 424,838
Non-controlling interests 49 (1,233)
(829,613) 423,605
HK cents HK cents
(Restated)
Earnings/(Loss) per share attributable to
equity holders of the Company 14
Basic and diluted
– For profit/(loss) for the period/year (41.5) 21.3
– For profit/(loss) from continuing operations (48.2) 21.6
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58 Hongkong Chinese Limited 2020 Annual Report

Consolidated Statement of Comprehensive Income

For the nine months ended 31 December 2020

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Nine months Year
ended ended
31 December 31 March
2020 2020
Note HK$’000 HK$’000
Profit/(Loss) for the period/year (829,613) 423,605
Other comprehensive income/(loss)
Other comprehensive income/(loss) that may be reclassified to
profit or loss in subsequent periods:
Exchange differences on translation of foreign operations 47,552 (35,953)
Exchange differences reclassified to profit or loss upon
liquidation of foreign operations 6 (5,720) –
Share of other comprehensive income/(loss) of joint ventures:
Exchange differences on translation of foreign operations 712,071 (502,169)
Other reserves (14,167) (50,719)
Adjustment for disposal of interests in a joint venture 13 282 –
Net other comprehensive income/(loss) that may be reclassified to
profit or loss in subsequent periods, net of tax 740,018 (588,841)
Other comprehensive income/(loss) that will not be reclassified to
profit or loss in subsequent periods:
Changes in fair value of equity instruments at fair value
through other comprehensive income 24 (26)
Share of changes in fair value of equity instruments at fair value
through other comprehensive income of joint ventures 90,561 54,920
Net other comprehensive income that will not be reclassified to
profit or loss in subsequent periods, net of tax 90,585 54,894
Other comprehensive income/(loss) for the period/year, net of tax 830,603 (533,947)
Total comprehensive income/(loss) for the period/year 990 (110,342)
Attributable to:
Equity holders of the Company (636) (107,864)
Non-controlling interests 1,626 (2,478)
990 (110,342)
Total comprehensive income/(loss) for the period/year
attributable to equity holders of the Company:
– From continuing operations (136,036) (100,644)
– From discontinued operation 135,400 (7,220)
(636) (107,864)
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2020 Annual Report Hongkong Chinese Limited 59

Consolidated Statement of Financial Position

As at 31 December 2020

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31 December 31 March
2020 2020
Note HK$’000 HK$’000
Non-current assets
Fixed assets 16 22,854 26,777
Investment properties 17 152,385 138,207
Right-of-use assets 18(a) 510 –
Interests in associates 19 411,510 375,999
Interests in joint ventures 20 10,174,850 10,319,111
Financial assets at fair value through other comprehensive income 21 97 69
Financial assets at fair value through profit or loss 22 2,880 2,900
Other financial asset 23 – 46,780
10,765,086 10,909,843
Current assets
Properties held for sale 69,298 80,732
Properties under development 24 31,509 30,179
Loans and advances 25 8,827 7,041
Debtors, prepayments and other assets 26 4,351 3,334
Financial assets at fair value through profit or loss 22 11,121 11,121
Tax recoverable 120 150
Cash and cash equivalents 198,489 135,169
323,715 267,726
Current liabilities
Bank and other borrowings 27 145,417 –
Lease liabilities 18(b) 267 –
Other payables, accruals and other liabilities 54,578 33,356
Tax payable 52,693 48,775
252,955 82,131
Net current assets 70,760 185,595
Total assets less current liabilities 10,835,846 11,095,438
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60 Hongkong Chinese Limited 2020 Annual Report

Consolidated Statement of Financial Position (continued)

As at 31 December 2020

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31 December 31 March
2020 2020
Note HK$’000 HK$’000
Non-current liabilities
Bank and other borrowings 27 130,000 491,667
Lease liabilities 18(b) 254 –
Deferred tax liabilities 28 17,836 15,483
148,090 507,150
Net assets 10,687,756 10,588,288
Equity
Equity attributable to equity holders of the Company
Share capital 29 1,998,280 1,998,280
Reserves 30 8,669,459 8,571,617
10,667,739 10,569,897
Non-controlling interests 20,017 18,391
10,687,756 10,588,288
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Stephen Riady Director

John Luen Wai Lee Director

2020 Annual Report Hongkong Chinese Limited 61

Consolidated Statement of Changes in Equity

For the nine months ended 31 December 2020

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Attributable to equity holders of the Company
Fair value
reserve of
Share Capital financial Exchange Non-
Share premium redemption assets at Hedging equalisation Distributable controlling Total
capital account reserve FVOCI reserve reserve reserves Total interests equity
(Note 30(b)) (Note 30(c)) (Note 30(b))
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 April 2020 1,998,280 92,775 22,144 (66,436) (57,066) (59,275) 8,639,475 10,569,897 18,391 10,588,288
Profit/(Loss) for the period – – – – – – (829,662) (829,662) 49 (829,613)
Other comprehensive income/(loss) for the period:
Exchange differences on translation of
foreign operations – – – – – 45,975 – 45,975 1,577 47,552
Exchange differences reclassified to profit or loss
upon liquidation of foreign operations – – – – – (5,720) – (5,720) – (5,720)
Changes in fair value of equity instruments at
fair value through other comprehensive income – – – 24 – – – 24 – 24
Share of other comprehensive income/(loss) of
joint ventures – – – 91,080 (14,686) 712,071 – 788,465 – 788,465
Adjustment for disposal of interests in a joint venture – – – 282 – – – 282 – 282
Total comprehensive income/(loss) for the period – – – 91,386 (14,686) 752,326 (829,662) (636) 1,626 990
Share of equity movements arising on
equity transactions of joint ventures – – – – – – 158,427 158,427 – 158,427
2019/2020 final dividend – – – – – – (19,983) (19,983) – (19,983)
2019/2020 special dividend – – – – – – (19,983) (19,983) – (19,983)
2020 interim dividend – – – – – – (19,983) (19,983) – (19,983)
At 31 December 2020 1,998,280 92,775 22,144 24,950 (71,752) 693,051 7,908,291 10,667,739 20,017 10,687,756
At 1 April 2019 1,998,280 92,775 22,144 348,433 (6,546) 477,602 7,990,562 10,923,250 20,869 10,944,119
Profit/(Loss) for the year – – – – – – 424,838 424,838 (1,233) 423,605
Other comprehensive income/(loss) for the year:
Exchange differences on translation of
foreign operations – – – – – (34,708) – (34,708) (1,245) (35,953)
Changes in fair value of equity instruments at
fair value through other comprehensive income – – – (26) – – – (26) – (26)
Share of other comprehensive income/(loss) of
joint ventures – – – 54,721 (50,520) (502,169) – (497,968) – (497,968)
Total comprehensive income/(loss) for the year – – – 54,695 (50,520) (536,877) 424,838 (107,864) (2,478) (110,342)
Share of equity movements arising on
equity transactions of joint ventures – – – – – – (205,523) (205,523) – (205,523)
Transfer of reserve of a joint venture – – – (469,564) – – 469,564 – – –
2018/2019 final dividend – – – – – – (19,983) (19,983) – (19,983)
2019/2020 interim dividend – – – – – – (19,983) (19,983) – (19,983)
At 31 March 2020 1,998,280 92,775 22,144 (66,436) (57,066) (59,275) 8,639,475 10,569,897 18,391 10,588,288
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FVOCI stands for fair value through other comprehensive income.

62 Hongkong Chinese Limited 2020 Annual Report

Consolidated Statement of Cash Flows

For the nine months ended 31 December 2020

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Nine months Year
ended ended
31 December 31 March
2020 2020
Note HK$’000 HK$’000
Cash flows from operating activities
Cash used in operations 32(a) (22,860) (62,987)
Interest received 1,082 1,907
Dividends received from:
–
A joint venture 1,418
Investments 226 708
Taxes refund/(paid):
Hong Kong 72 –
Mainland China and overseas (7,252) (6,207)
Net cash flows used in operating activities (28,732) (65,161)
Cash flows from investing activities
Distribution from financial assets
at fair value through profit or loss 104 894
Proceeds from disposal of:
Fixed assets 670 –
–
Interests in a joint venture 311,473
Payments to acquire:
Fixed assets (453) (1,755)
Financial assets at fair value through
–
other comprehensive income (76)
–
Financial assets at fair value through profit or loss (29)
Advances to associates (44) (42)
–
Advances to joint ventures (225,139)
Repayment from joint ventures 265,754 3,400
Net cash flows from investing activities 352,365 2,392
Cash flows from financing activities
–
Drawdown of bank and other borrowings 130,000
Repayment of bank and other borrowings (350,000) (250,000)
–
Principal portion of lease payments (278)
Finance costs paid (5,643) (14,394)
Dividends paid to shareholders of the Company (39,966) (39,966)
Net cash flows used in financing activities (265,887) (304,360)
Net increase/(decrease) in cash and cash equivalents 57,746 (367,129)
Cash and cash equivalents at beginning of period/year 135,169 506,525
Exchange realignments 5,574 (4,227)
Cash and cash equivalents at end of period/year 198,489 135,169
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2020 Annual Report Hongkong Chinese Limited 63

Notes to the Financial Statements

1. CORPORATE AND GROUP INFORMATION

Hongkong Chinese Limited is a limited liability company incorporated in Bermuda. The registered office of the Company is located at Clarendon House, Church Street, Hamilton HM 11, Bermuda.

The immediate holding company of the Company is Hennessy Holdings Limited, a company incorporated in the British Virgin Islands. In the opinion of the Directors, the ultimate holding company of the Company is Lippo Capital Group Limited, a company incorporated in Hong Kong.

Details of the principal subsidiaries are set out on pages 142 to 144.

2.1 BASIS OF PREPARATION

Change of financial year end date

Pursuant to a resolution of the Board of Directors passed on 18 September 2020, the Company’s financial year end date was changed from 31 March to 31 December. Accordingly, the current financial period covers a 9-month period from 1 April 2020 to 31 December 2020. The comparative figures cover a 12-month period from 1 April 2019 to 31 March 2020, which may not be comparable with amounts shown for the current period.

Statement of compliance

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and the disclosure requirements of the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for investment properties and certain financial instruments which have been measured at fair value. These financial statements are presented in Hong Kong dollars (“HK$”) and all values are rounded to the nearest thousand (“HK$’000”) except when otherwise indicated.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries (collectively referred to as the “Group”) for the period from 1 April 2020 to 31 December 2020. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee).

64 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

2.1 BASIS OF PREPARATION (continued)

Basis of consolidation (continued)

When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group’s voting rights and potential voting rights.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Profit or loss and each component of other comprehensive income are attributed to the owners of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All significant intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control described above. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value of the consideration received, (ii) the fair value of any investment retained and (iii) any resulting surplus or deficit in profit or loss. The Group’s share of components previously recognised in other comprehensive income is reclassified to profit or loss or distributable reserves, as appropriate, on the same basis as would be required if the Group had directly disposed of the related assets or liabilities.

2020 Annual Report Hongkong Chinese Limited 65

Notes to the Financial Statements (continued)

2.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

The Group has adopted the Conceptual Framework for Financial Reporting 2018 and the following revised HKFRSs for the first time for the current period’s financial statements:

Amendments to HKFRS 3	Definition of a Business
Amendments to HKFRS 9, HKAS 39 and HKFRS 7	Interest Rate Benchmark Reform
Amendment to HKFRS 16	Covid-19-Related Rent Concessions(early adopted)
Amendments to HKAS 1 and HKAS 8	Definition of Material

The application of the Conceptual Framework for Financial Reporting 2018 and the revised HKFRSs has had no significant financial effect on these financial statements.

2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, in these financial statements:

Amendments to HKFRS 3	Reference to the Conceptual Framework2
Amendments to HKFRS 9, HKAS 39,	Interest Rate Benchmark Reform — Phase 21
HKFRS 7, HKFRS 4 and HKFRS 16
Amendments to HKFRS 10 and	Sale or Contribution of Assets between an Investor and
HKAS 28 (2011)	its Associate or Joint Venture4
HKFRS 17	Insurance Contracts3
Amendments to HKFRS 17	Insurance Contracts3, 6
Amendments to HKAS 1	Classification of Liabilities as Current or Non-current3, 5
Amendments to HKAS 16	Property, Plant and Equipment — Proceeds before
	Intended Use2
Amendments to HKAS 37	Onerous Contracts — Cost of Fulfilling a Contract2
Annual Improvements to HKFRSs 2018-2020	Amendments to HKFRS 1, HKFRS 9, Illustrative Examples
	accompanying HKFRS 16, and HKAS 412

1 Effective for annual periods beginning on or after 1 January 2021 2 Effective for annual periods beginning on or after 1 January 2022 3 Effective for annual periods beginning on or after 1 January 2023
4 No mandatory effective date yet determined but available for adoption
5
As a consequence of the amendments to HKAS 1, Hong Kong Interpretation 5 Presentation of Financial Statements – Classification by the Borrower of a Term Loan that Contains a Repayment on Demand Clause was revised in October 2020 to align the corresponding wording with no change in conclusion
6 As a consequence of the amendments to HKFRS 17 issued in October 2020, HKFRS 4 was amended to extend the temporary exemption that permits insurers to apply HKAS 39 rather than HKFRS 9 for annual periods beginning before 1 January 2023

66 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS (continued)

Further information about those HKFRSs that are expected to be applicable to the Group is described below.

Amendments to HKFRS 3 are intended to replace a reference to the previous Framework for the Preparation and Presentation of Financial Statements with a reference to the Conceptual Framework for Financial Reporting issued in June 2018 without significantly changing its requirements. The amendments also add to HKFRS 3 an exception to its recognition principle for an entity to refer to the Conceptual Framework to determine what constitutes an asset or a liability. The exception specifies that, for liabilities and contingent liabilities that would be within the scope of HKAS 37 or HK(IFRIC)-Int 21 if they were incurred separately rather than assumed in a business combination, an entity applying HKFRS 3 should refer to HKAS 37 or HK(IFRIC)-Int 21 respectively instead of the Conceptual Framework. Furthermore, the amendments clarify that contingent assets do not qualify for recognition at the acquisition date. The Group expects to adopt the amendments prospectively from 1 January 2022. Since the amendments apply prospectively to business combinations for which the acquisition date is on or after the date of first application, the Group will not be affected by these amendments on the date of transition.

Amendments to HKFRS 9, HKAS 39, HKFRS 7, HKFRS 4 and HKFRS 16 address issues not dealt with in the previous amendments which affect financial reporting when an existing interest rate benchmark is replaced with an alternative risk-free rate (“RFR”). The Phase 2 amendments provide a practical expedient to allow the effective interest rate to be updated without adjusting the carrying amount when accounting for changes in the basis for determining the contractual cash flows of financial assets and liabilities, if the change is a direct consequence of the interest rate benchmark reform and the new basis for determining the contractual cash flows is economically equivalent to the previous basis immediately preceding the change. In addition, the amendments permit changes required by the interest rate benchmark reform to be made to hedge designations and hedge documentation without the hedging relationship being discontinued. Any gains or losses that could arise on transition are dealt with through the normal requirements of HKFRS 9 to measure and recognise hedge ineffectiveness. The amendments also provide a temporary relief to entities from having to meet the separately identifiable requirement when an RFR is designated as a risk component. The relief allows an entity, upon designation of the hedge, to assume that the separately identifiable requirement is met, provided the entity reasonably expects the RFR risk component to become separately identifiable within the next 24 months. Furthermore, the amendments require an entity to disclose additional information to enable users of financial statements to understand the effect of interest rate benchmark reform on an entity’s financial instruments and risk management strategy. The amendments are effective for annual periods beginning on or after 1 January 2021 and shall be applied retrospectively, but entities are not required to restate the comparative information.

The Group had certain interest-bearing bank and other borrowings denominated in Hong Kong dollars based on the Hong Kong Interbank Offered Rate as at 31 December 2020. If the interest rates of these borrowings are replaced by RFRs in a future period, the Group will apply this practical expedient upon the modification of these borrowings when the “economically equivalent” criterion is met and expects that no significant modification gain or loss will arise as a result of applying the amendments to these changes.

2020 Annual Report Hongkong Chinese Limited 67

Notes to the Financial Statements (continued)

2.3 ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS (continued)

Amendments to HKFRS 10 and HKAS 28 (2011) address an inconsistency between the requirements in HKFRS 10 and in HKAS 28 (2011) in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments require a full recognition of a gain or loss when the sale or contribution of assets between an investor and its associate or joint venture constitutes a business. For a transaction involving assets that do not constitute a business, a gain or loss resulting from the transaction is recognised in the investor’s profit or loss only to the extent of the unrelated investor’s interest in that associate or joint venture. The amendments are to be applied prospectively. The previous mandatory effective date of amendments to HKFRS 10 and HKAS 28 (2011) was removed by the HKICPA in January 2016 and a new mandatory effective date will be determined after the completion of a broader review of accounting for associates and joint ventures. However, the amendments are available for adoption now.

Amendments to HKAS 1 clarify the requirements for classifying liabilities as current or non-current. The amendments specify that if an entity’s right to defer settlement of a liability is subject to the entity complying with specified conditions, the entity has a right to defer settlement of the liability at the end of the reporting period if it complies with those conditions at that date. Classification of a liability is unaffected by the likelihood that the entity will exercise its right to defer settlement of the liability. The amendments also clarify the situations that are considered a settlement of a liability. The amendments are effective for annual periods beginning on or after 1 January 2023 and shall be applied retrospectively. Earlier application is permitted. The amendments are not expected to have any significant impact on the Group’s financial statements.

Amendments to HKAS 16 prohibit an entity from deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling any such items, and the cost of those items, in profit or loss. The amendments are effective for annual periods beginning on or after 1 January 2022 and shall be applied retrospectively only to items of property, plant and equipment made available for use on or after the beginning of the earliest period presented in the financial statements in which the entity first applies the amendments. Earlier application is permitted. The amendments are not expected to have any significant impact on the Group’s financial statements.

68 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Interests in associates and joint ventures

An associate is an entity in which the Group has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

The Group’s interests in associates and joint ventures are stated in the consolidated statement of financial position at the Group’s share of net assets under the equity method of accounting, less any impairment losses. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

The Group’s share of the post-acquisition results and other comprehensive income of associates and joint ventures is included in the consolidated statement of profit or loss and consolidated other comprehensive income, respectively. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the consolidated statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group’s interests in the associates or joint ventures, except where unrealised losses provide evidence of an impairment of the assets transferred. Goodwill arising from the acquisition of associates or joint ventures is included as part of the Group’s interests in associates or joint ventures.

If an interest in an associate becomes an interest in a joint venture or vice versa, the retained interest is not remeasured. Instead, the investment continues to be accounted for under the equity method. In all other cases, upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

2020 Annual Report Hongkong Chinese Limited 69

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The consideration transferred is measured at the acquisition date fair value which is the sum of the acquisition date fair values of assets transferred by the Group, liabilities assumed by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation at fair value or at the proportionate share of the acquiree’s identifiable net assets. All other components of non-controlling interests are measured at fair value. Acquisition-related costs are expensed as incurred.

The Group determines that it has acquired a business when the acquired set of activities and assets includes an input and a substantive process that together significantly contribute to the ability to create outputs.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts of the acquiree.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability is measured at fair value with changes in fair value recognised in profit or loss. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests and any fair value of the Group’s previously held equity interests in the acquiree over the net identifiable assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net assets acquired, the difference is, after reassessment, recognised in profit or loss as a gain on bargain purchase.

70 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Business combinations and goodwill (continued)

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units (“CGU”), or groups of CGU, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

Impairment is determined by assessing the recoverable amount of the CGU (group of CGU) to which the goodwill relates. Where the recoverable amount of the CGU (group of CGU) is less than the carrying amount, an impairment loss is recognised. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Where goodwill has been allocated to a CGU (or group of CGU) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based on the relative value of the operation disposed of and the portion of the CGU retained.

(c) Fair value measurement

The Group measures its investment properties and certain financial instruments at fair value at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

2020 Annual Report Hongkong Chinese Limited 71

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(c) Fair value measurement (continued)

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 — based on quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2 — based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly
Level 3 — based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

(d) Impairment of non-financial assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than financial assets, contract assets, deferred tax assets, investment properties, properties under development and properties held for sale), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or CGU’s value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the CGU to which the asset belongs.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the statement of profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the statement of profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

72 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(e) Related parties

A party is considered to be related to the Group if:

(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group;

or

(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;
(vi) the entity is controlled or jointly controlled by a person identified in (a);
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and
(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the parent of the Group.

2020 Annual Report Hongkong Chinese Limited 73

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(f) Fixed assets and depreciation

Fixed assets are stated at cost less accumulated depreciation and any impairment losses. When an item of fixed assets is classified as held for sale or when it is part of a disposal group classified as held for sale, it is not depreciated and is accounted for in accordance with HKFRS 5. The cost of an item of fixed assets comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Expenditure incurred after items of fixed assets have been put into operation, such as repairs and maintenance, is normally charged to the statement of profit or loss in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of fixed assets are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

Depreciation is calculated on the straight-line basis to write off the cost of each item of fixed assets to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Leasehold improvements	Over the unexpired terms of the leases or 25% to 331/3%,
	whichever is shorter
Furniture, fixtures and equipment	10% to 331/3%
Motor vehicles	20% to 25%
Yacht	10%

Where parts of an item of fixed assets have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end.

An item of fixed assets including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the statement of profit or loss in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

74 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(g) Investment properties

Investment properties are interests in land and buildings (including the leasehold property held as a right-of-use asset which would otherwise meet the definition of an investment property) held to earn rental income and/or for capital appreciation, rather than for use in the production or supply of goods or services or for administrative purposes; or for sale in the ordinary course of business. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the end of the reporting period. When fair value is not reliably determinable for a property under development, the property is measured at cost until the earlier of the date construction is completed and the date at which fair value becomes reliably determinable.

Gains or losses arising from changes in the fair values of investment properties are included in the statement of profit or loss in the year in which they arise.

Any gains or losses on the retirement or disposal of investment properties are recognised in the statement of profit or loss in the year of the retirement or disposal.

For a transfer from investment properties to owner-occupied properties, the deemed cost of a property for subsequent accounting is its fair value at the date of change in use. If a property occupied by the Group as an owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under “Fixed assets and depreciation” for owned property and/or accounts for such property in accordance with the policy stated under “Right-of-use assets” for property held as a right-of-use asset up to the date of change in use, and any difference at that date between the carrying amount and the fair value of the property is dealt with as movements in the other assets revaluation reserve. On disposal of the asset, the relevant portion of the other assets revaluation reserve realised in respect of previous valuations is transferred to the distributable reserves as a movement in reserves.

(h) Leases

The Group assesses at contract inception whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Group as a lessee

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

At inception or on reassessment of a contract that contains a lease component and non-lease components, the Group adopts the practical expedient not to separate non-lease components and to account for the lease component and the associated non-lease components (e.g., property management services for leases of properties) as a single lease component.

2020 Annual Report Hongkong Chinese Limited 75

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(h) Leases (continued)

Group as a lessee (continued)

(i) Right-of-use assets

Right-of-use assets are recognised at the commencement date of the lease (that is the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and any impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Where applicable, the cost of a right-of-use asset also includes an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease terms and the estimated useful lives of the assets as follows:

Leasehold land and buildings

3 years

If ownership of the leased asset transfers to the Group by the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.

When the right-of-use assets relate to interests in leasehold land held as properties held for sale, they are subsequently measured at the lower of cost and net realisable value in accordance with the Group’s policy for “Properties held for sale”. When a right-of-use asset meets the definition of investment property, it is included in investment properties. The corresponding right-of-use asset is initially measured at cost, and subsequently measured at fair value, in accordance with the Group’s policy for “Investment properties”.

(ii) Lease liabilities

Lease liabilities are recognised at the commencement date of the lease at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for termination of a lease, if the lease term reflects the Group exercising the option to terminate the lease. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in lease payments (e.g., a change to future lease payments resulting from a change in an index or rate) or a change in assessment of an option to purchase the underlying asset.

76 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(h) Leases (continued)

Group as a lessee (continued)

(iii) Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases of property and other equipment (that is those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the recognition exemption for leases of low-value assets to leases of office equipment and laptop computers that are considered to be of low value.

Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.

Group as a lessor

When the Group acts as a lessor, it classifies at lease inception (or when there is a lease modification) each of its leases as either an operating lease or a finance lease.

Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. When a contract contains lease and non-lease components, the Group allocates the consideration in the contract to each component on a relative stand-alone selling price basis. Rental income is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.

Leases that transfer substantially all the risks and rewards incidental to ownership of an underlying asset to the lessee are accounted for as finance leases.

(i) Investments and other financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through other comprehensive income (“FVOCI”), and fair value through profit or loss (“FVPL”).

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient of not adjusting the effect of a significant financing component, the Group initially measures a financial asset at its fair value, plus in the case of a financial asset not at FVPL, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under HKFRS 15 in accordance with the policies set out for “Revenue recognition” below.

2020 Annual Report Hongkong Chinese Limited 77

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(i) Investments and other financial assets (continued)

Initial recognition and measurement (continued)

In order for a financial asset to be classified and measured at amortised cost or FVOCI, it needs to give rise to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding. Financial assets with cash flows that are not SPPI are classified and measured at FVPL, irrespective of the business model.

The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets classified and measured at amortised cost are held within a business model with the objective to hold financial assets in order to collect contractual cash flows, while financial assets classified and measured at FVOCI are held within a business model with the objective of both holding to collect contractual cash flows and selling. Financial assets which are not held within the aforementioned business models are classified and measured at FVPL.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at amortised cost (debt instruments)

Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in the statement of profit or loss when the asset is derecognised, modified or impaired.

Financial assets at FVOCI (debt instruments)

For debt investments at FVOCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in other comprehensive income. Upon derecognition, the cumulative fair value change recognised in other comprehensive income is recycled to the statement of profit or loss.

78 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(i) Investments and other financial assets (continued)

Subsequent measurement (continued) Financial assets designated at FVOCI (equity investments)

Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity investments designated at FVOCI when they meet the definition of equity under HKAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.

Gains and losses on these financial assets are never recycled to the statement of profit or loss. Dividends are recognised as revenue in the statement of profit or loss when the right of payment has been established, it is probable that the economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in other comprehensive income. Equity investments designated at fair value through other comprehensive income are not subject to impairment assessment.

Financial assets at FVPL

Financial assets at FVPL are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss.

This category includes derivative instruments and equity investments which the Group had not irrevocably elected to classify at FVOCI. Dividends on equity investments classified as financial assets at FVPL are also recognised as revenue in the statement of profit or loss when the right of payment has been established, it is probable that the economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

(j) Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:

(i) the rights to receive cash flows from the asset have expired; or
(ii) the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

2020 Annual Report Hongkong Chinese Limited 79

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(j) Derecognition of financial assets (continued)

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if, and to what extent, it has retained the risk and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

(k) Impairment of financial assets

The Group recognises an allowance for expected credit losses (“ECLs”) for all debt instruments not held at FVPL. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

General approach

ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next twelve months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).

At each reporting date, the Group assesses whether the credit risk on a financial instrument has increased significantly since initial recognition. When making the assessment, the Group compares the risk of a default occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial instrument as at the date of initial recognition and considers reasonable and supportable information that is available without undue cost or effort, including historical and forward-looking information.

For debt investments at FVOCI, the Group applies the low credit risk simplification. At each reporting date, the Group evaluates whether the debt investments are considered to have low credit risk using all reasonable and supportable information that is available without undue cost or effort. In making that evaluation, the Group reassesses the external credit ratings of the debt investments. In addition, the Group considers that there has been a significant increase in credit risk when contractual payments are more than 30 days past due.

The Group considers a financial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

80 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(k) Impairment of financial assets (continued)

General approach (continued)

Debt investments at FVOCI and financial assets at amortised cost are subject to impairment under the general approach and they are classified within the following stages for measurement of ECLs except for trade receivables and contract assets which apply the simplified approach as detailed below.

Stage 1 Financial instruments for which credit risk has not increased significantly since initial recognition and for which the loss allowance is measured at an amount equal to 12-month ECLs
Stage 2 Financial instruments for which credit risk has increased significantly since initial recognition but that are not credit-impaired financial assets and for which the loss allowance is measured at an amount equal to lifetime ECLs
Stage 3 Financial assets that are credit-impaired at the reporting date (but that are not purchased or originated credit-impaired) and for which the loss allowance is measured at an amount equal to lifetime ECLs

Simplified approach

For trade receivables and contract assets that do not contain a significant financing component or when the Group applies the practical expedient of not adjusting the effect of a significant financing component, the Group applies the simplified approach in calculating ECLs. Under the simplified approach, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

For trade receivables and contract assets that contain a significant financing component and lease receivables, the Group chooses as its accounting policy to adopt the simplified approach in calculating ECLs with policies as described above.

(l) Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at FVPL, loans and borrowings or payables, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.

The Group’s financial liabilities include financial liabilities included in other payables, accruals and other liabilities and bank and other borrowings.

2020 Annual Report Hongkong Chinese Limited 81

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(l) Financial liabilities (continued)

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Financial liabilities at FVPL

Financial liabilities at FVPL include financial liabilities held for trading and financial liabilities designated upon initial recognition as at FVPL.

Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term. This category also includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined by HKFRS 9. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the statement of profit or loss. The net fair value gain or loss recognised in the statement of profit or loss does not include any interest charged on these financial liabilities.

Financial liabilities designated upon initial recognition as at FVPL are designated at the initial date of recognition, and only if the criteria in HKFRS 9 are satisfied. Gains or losses on liabilities designated at FVPL are recognised in the statement of profit or loss, except for the gains or losses arising from the Group’s own credit risk which are presented in other comprehensive income with no subsequent reclassification to the statement of profit or loss. The net fair value gain or loss recognised in the statement of profit or loss does not include any interest charged on these financial liabilities.

Financial liabilities at amortised cost (loans and borrowings)

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in the statement of profit or loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in the statement of profit or loss.

(m) Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the statement of profit or loss.

(n) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

82 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(o) Derivative financial instruments

Initial recognition and subsequent measurement

When appropriate, the Group uses derivative financial instruments, such as forward currency contracts and interest rate swaps, to hedge its foreign currency risk and interest rate risk, respectively. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

Any gains or losses arising from changes in fair value of derivatives are taken directly to the statement of profit or loss, except for the effective portion of cash flow hedges, which is recognised in other comprehensive income and later reclassified to profit or loss when the hedged item affects profit or loss.

Current versus non-current classification

Derivative instruments that are not designated as effective hedging instruments are classified as current or non-current or separated into current and non-current portions based on an assessment of the facts and circumstances (i.e., the underlying contracted cash flows). Where the Group expects to hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond twelve months after the end of the reporting period, the derivative is classified as non-current (or separated into current and non-current portions) consistently with the classification of the underlying item.

(p) Properties held for sale

Properties held for sale are stated at the lower of cost and net realisable value which is determined by reference to prevailing market prices, on an individual property basis.

(q) Properties under development

Properties under development intended for sale are classified as current assets and stated at the lower of cost and net realisable value. Properties being constructed or developed as investment properties are classified as investment properties and accounted for in accordance with the policy stated under “Investment properties”. Other properties under development are stated at cost less any impairment losses. Costs comprise the cost of land, development expenditure, other attributable costs and borrowing costs capitalised. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

(r) Cash and cash equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand, cash at banks, demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the consolidated statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

2020 Annual Report Hongkong Chinese Limited 83

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(s) Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the statement of profit or loss.

A contingent liability recognised in a business combination is initially measured at its fair value. Subsequently, it is measured at the higher of (i) the amount that would be recognised in accordance with the general policy for provisions above; and (ii) the amount initially recognised less, when appropriate, the amount of income recognised in accordance with the policy for revenue recognition.

(t) Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised outside profit or loss, either in other comprehensive income or directly in equity.

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Group operates.

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

(i) when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
(ii) in respect of taxable temporary differences associated with interests in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

84 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(t) Income tax (continued)

Deferred tax assets are recognised for all deductible temporary differences, and the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except:

(i) when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
(ii) in respect of deductible temporary differences associated with interests in subsidiaries, associates and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

(u) Revenue recognition

Revenue from contracts with customers

Revenue from contracts with customers is recognised when control of goods or services is transferred to the customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

When the consideration in a contract includes a variable amount, the amount of consideration is estimated to which the Group will be entitled in exchange for transferring the goods or services to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.

2020 Annual Report Hongkong Chinese Limited 85

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(u) Revenue recognition (continued)

Revenue from contracts with customers (continued)

When the contract contains a financing component which provides the customer with a significant benefit of financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing transaction between the Group and the customer at contract inception. When the contract contains a financing component which provides the Group with a significant financial benefit for more than one year, revenue recognised under the contract includes the interest expense accreted on the contract liability under the effective interest method. For a contract where the period between the payment by the customer and the transfer of the promised goods or services is one year or less, the transaction price is not adjusted for the effects of a significant financing component, using the practical expedient in HKFRS 15.

(i) Sale of properties

Revenue from the sale of properties is recognised at the point in time when control of the properties is transferred to the customers. Deposits received from purchasers prior to revenue recognition are accounted for as deposits received.

(ii) Provision of project management services
Revenue from the provision of project management services is recognised over the scheduled period on a straight-line basis because the customer simultaneously receives and consumes the benefits provided by the Group.

Revenue from other sources

Rental income is recognised on a time proportion basis over the lease terms. Variable lease payments that do not depend on an index or a rate are recognised as income in the accounting period in which they are incurred.

Interest income is recognised on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter period, when appropriate, to the net carrying amount of the financial asset.

Dividend income is recognised when the shareholders’ right to receive payment has been established, it is probable that the economic benefits associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably.

(v) Employee benefits

Paid leave entitlement

The Group provides paid annual leave to its employees under their employment contracts on a calendar year basis. Under certain circumstances, such leave which remains untaken as at the end of each reporting period is permitted to be carried forward and utilised by the respective employees in the following year. An accrual is made at the end of the reporting period for the expected future cost of such paid leave earned during the year by the employees and carried forward at the end of each reporting period.

86 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(v) Employee benefits (continued)

Retirement benefits

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In Hong Kong, the Group operates defined contribution Mandatory Provident Fund retirement benefit schemes (the “MPF Schemes”) under the Mandatory Provident Fund Schemes Ordinance for those employees who are eligible to participate in the MPF Schemes. Contributions are made based on a percentage of the employees’ relevant income and are charged to the statement of profit or loss as they become payable in accordance with the rules of the MPF Schemes. The assets of the MPF Schemes are held separately from those of the Group in independently administered funds. The Group’s employer contributions vest fully with the employees when contributed into the MPF Schemes except for the Group’s employer voluntary contributions forfeited when the employees leave employment prior to fully vesting in such contributions, which can be used to reduce the amount of future employer contributions or to offset against future administration expenses or to refund to the Group, in accordance with the rules of the MPF Schemes.

The employees of the Group’s subsidiaries which operate in mainland China are required to participate in a central pension scheme operated by the local municipal government. Contributions are made to the central pension scheme based on a percentage of the employees’ relevant income and are charged to the statement of profit or loss as they become payable in accordance with the rules of the central pension scheme.

The Singapore companies in the Group make contributions to the Central Provident Fund Scheme (“CPF”) in Singapore, a defined contribution pension scheme. Contributions to the CPF are recognised as an expense in the statement of profit or loss in the period in which the related service is performed.

(w) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

(x) Dividends and distributions

Final dividends and distributions are recognised as a liability when they are approved by the shareholders in a general meeting. Proposed final dividends are disclosed in the notes to the financial statements.

Interim dividends and distributions are simultaneously proposed and declared because the Company’s memorandum of association and bye-laws grant the Directors the authority to declare interim dividends and distributions. Consequently, interim dividends and distributions are recognised immediately as a liability when they are proposed and declared.

2020 Annual Report Hongkong Chinese Limited 87

Notes to the Financial Statements (continued)

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(y) Foreign currencies

These financial statements are presented in Hong Kong dollars, which is the Company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions recorded by the entities in the Group are initially recorded using their respective functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange ruling at the end of the reporting period. Differences arising on settlement or translation of monetary items are recognised in the statement of profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation difference on the item whose fair value gain or loss is recognised in other comprehensive income or profit or loss is also recognised in other comprehensive income or profit or loss, respectively).

In determining the exchange rate on initial recognition of the related asset, expense or income on the derecognition of a non-monetary asset or non-monetary liability relating to an advance consideration, the date of initial transaction is the date on which the Group initially recognises the non-monetary asset or non-monetary liability arising from the advance consideration. If there are multiple payments or receipts in advance, the Group determines the transaction date for each payment or receipt of the advance consideration.

The functional currencies of certain overseas subsidiaries, joint ventures and associates are currencies other than Hong Kong dollars. As at the end of the reporting period, the assets and liabilities of these entities are translated into Hong Kong dollars at the exchange rates prevailing at the end of the reporting period and their statements of profit or loss are translated into Hong Kong dollars at the weighted average exchange rates for the year. The resulting exchange differences are recognised in other comprehensive income and accumulated in the exchange equalisation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the statement of profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.

For the purpose of the consolidated statement of cash flows, the cash flows of overseas subsidiaries are translated into Hong Kong dollars at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of overseas subsidiaries which arise throughout the year are translated into Hong Kong dollars at the weighted average exchange rates for the year.

88 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying disclosures and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

(a) Judgements

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Property lease classification — Group as lessor

The Group has entered into commercial property leases on its investment property portfolio. The Group has determined, based on an evaluation of the terms and conditions of the arrangements, such as the lease term not constituting a major part of the economic life of the commercial property and the present value of the minimum lease payments not amounting to substantially all the fair value of the commercial property, that it retains substantially all the significant risks and rewards incidental to ownership of these properties which are leased out and accounts for the contracts as operating leases.

Classification between investment properties and owner-occupied properties

The Group determines whether a property qualifies as an investment property, and has developed criteria in making that judgement. Investment property is a property held to earn rentals or for capital appreciation or both. Therefore, the Group considers whether a property generates cash flows largely independently of the other assets held by the Group. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group accounts for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. The Group may provide ancillary services to the occupants of properties it holds. Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as an investment property. The property is an investment property only if the ancillary services are insignificant to the arrangement as a whole.

2020 Annual Report Hongkong Chinese Limited 89

Notes to the Financial Statements (continued)

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES (continued)

(b) Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below.

Estimation of fair value of investment properties

In the absence of current prices in an active market for similar properties, the Group considers information from a variety of sources, including:

(i) current prices in an active market for properties of a different nature, condition or location, adjusted to reflect those differences;
(ii) recent prices of similar properties on less active markets, with adjustments to reflect any changes in economic conditions since the dates of the transactions that occurred at those prices; and
(iii) discounted cash flow projections based on reliable estimates of future cash flows, supported by the terms of any existing lease and other contracts and (when possible) by external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows.

The carrying amount of investment properties as at 31 December 2020 was HK$152,385,000 (31 March 2020 — HK$138,207,000). Further details are disclosed in Note 17 to the financial statements.

Impairment of non-financial assets

The Group assesses whether there are any indicators of impairment for non-financial assets at the end of each reporting period. Non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. An impairment exists when the carrying value of an asset or a CGU exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The calculation of the fair value less costs of disposal is based on available data from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. When value-in-use calculations are undertaken, management must estimate the expected future cash flows from the asset or CGU and choose a suitable discount rate in order to calculate the present value of those cash flows.

After applying the equity method, the Group assesses whether there is any objective evidence of impairment for the interests in joint ventures. The interests in joint ventures are tested for impairment when there is objective evidence of impairment. The carrying amount of interests in joint ventures as at 31 December 2020 was HK$10,174,850,000 (31 March 2020 — HK$10,319,111,000). Further details are disclosed in Note 20 to the financial statements.

90 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

4. SEGMENT INFORMATION

For management purposes, the Group is organised into business units based on their products and services, and has reportable operating segments as follows:

(a) the property investment segment includes investments relating to the letting and resale of properties;
(b) the property development segment includes the development and sale of properties;
(c) the treasury investment segment includes investments in money markets;
(d) the securities investment segment includes investments in securities that are held for trading and for long-term strategic purposes; and
(e) the “other” segment comprises principally money lending and the provision of project management services.

The banking business segment which engages in the provision of commercial and retail banking services was classified as discontinued operation during the nine months ended 31 December 2020 (Note 13).

Management monitors the results of the Group’s operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on reportable segment profit/(loss) and comprises segment results of the Company and its subsidiaries, the Group’s share of results of associates and joint ventures.

Segment results are measured consistently with the Group’s profit/(loss) before tax except that the Group’s share of results of associates and joint ventures, unallocated corporate expenses and certain finance costs are excluded from such measurement.

Segment assets exclude interests in associates and joint ventures, deferred tax assets, tax recoverable and other head office and corporate assets which are managed on a group basis.

Segment liabilities exclude tax payable, deferred tax liabilities and other head office and corporate liabilities which are managed on a group basis.

Inter-segment transactions are on an arm’s length basis in a manner similar to transactions with third parties.

2020 Annual Report Hongkong Chinese Limited 91

Notes to the Financial Statements (continued)

4. SEGMENT INFORMATION (continued) Nine months ended 31 December 2020

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Discontinued
Continuing operations operation
Property Property Treasury Securities Banking
investment development investment investment Other Consolidated business Consolidated
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Revenue — external 50,250 29,221 224 226 2,605 82,526 – 82,526
Segment results 38,515 15,060 224 687 2,285 56,771 134,883 191,654
–
Unallocated corporate expenses (51,491) (51,491)
Share of results of associates – 6,590 – – – 6,590 – 6,590
Share of results of joint ventures (967,490) 1,376 – – – (966,114) (284) (966,398)
Profit/(Loss) before tax (954,244) 134,599 (819,645)
Segment assets 177,143 90,825 186,523 14,098 10,129 478,718 – 478,718
Interests in associates 6,963 404,547 – – – 411,510 – 411,510
Interests in joint ventures 10,173,212 1,638 – – – 10,174,850 – 10,174,850
Unallocated assets 23,723 – 23,723
Total assets 11,088,801 – 11,088,801
Segment liabilities 280,310 11,655 – – 1,636 293,601 – 293,601
Unallocated liabilities 107,444 – 107,444
Total liabilities 401,045 – 401,045
Other segment information:
Capital expenditure (Note) 152 – – – – 152 – 152
– – – –
Depreciation (252) (281) (533) (533)
Interest income 46,066 – 224 – 176 46,466 – 46,466
Finance costs (9,329) – – – (27) (9,356) – (9,356)
Gain on disposal of interests in
a joint venture – – – – – – 181,663 181,663
Provisions for impairment losses on:
An associate – – – – (107) (107) – (107)
– – – – –
Properties held for sale (620) (620) (620)
– – – – –
Properties under development (149) (149) (149)
Realised translation gains reclassified to
the statement of profit or loss relating to
liquidation of foreign operations – 5,714 – – 6 5,720 – 5,720
Net fair value gain/(loss) on
financial instruments at fair value
through profit or loss – – – 585 – 585 (46,780) (46,195)
Net fair value gain on investment properties 5,960 – – – – 5,960 – 5,960
Unallocated:
Capital expenditure (Note) 301 301
Depreciation (4,368) (4,368)
Loss on disposal of fixed assets (628) (628)
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92 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

4. SEGMENT INFORMATION (continued)

Year ended 31 March 2020 (restated)

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Discontinued
Continuing operations operation
Property Property Treasury Securities Banking
investment development investment investment Other Consolidated business Consolidated
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Revenue — external 68,243 – 1,048 708 1,439 71,438 – 71,438
Segment results 47,571 (3,871) 1,048 (3,255) (2,138) 39,355 (2,307) 37,048
–
Unallocated corporate expenses (64,193) (64,193)
Share of results of associates – 24,520 – – – 24,520 – 24,520
– – –
Share of results of joint ventures 433,874 (22) 433,852 (4,714) 429,138
Profit/(Loss) before tax 433,534 (7,021) 426,513
Segment assets 174,709 99,930 112,951 14,090 7,085 408,765 46,780 455,545
Interests in associates 6,290 369,646 – – 63 375,999 – 375,999
Interests in joint ventures 10,189,628 190 – – – 10,189,818 129,293 10,319,111
Unallocated assets 26,914 – 26,914
Total assets 11,001,496 176,073 11,177,569
– – – –
Segment liabilities 494,685 9,177 503,862 503,862
Unallocated liabilities 85,419 – 85,419
Total liabilities 589,281 – 589,281
Other segment information:
Capital expenditure (Note) 171 – – – – 171 – 171
– – – –
Depreciation (24) (2) (26) (26)
Interest income 61,254 – 1,048 – 246 62,548 – 62,548
Finance costs (19,192) – – – – (19,192) – (19,192)
Write-back of provisions/(Provisions)
for impairment losses on:
An associate – – – – (41) (41) – (41)
– – – – –
A joint venture 3,400 3,400 3,400
– – – – –
Properties under development (140) (140) (140)
Net fair value loss on
financial instruments at fair value
– – – –
through profit or loss (3,860) (3,860) (2,307) (6,167)
– – – – –
Net fair value gain on investment properties 4,208 4,208 4,208
Unallocated:
Capital expenditure (Note) 1,584 1,584
Depreciation (5,920) (5,920)
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Note: Capital expenditure includes additions to fixed assets.

2020 Annual Report Hongkong Chinese Limited 93

Notes to the Financial Statements (continued)

4. SEGMENT INFORMATION (continued)

Geographical information

(a) Revenue from external customers

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Hong Kong 757 857
Mainland China 31,175 4,052
Republic of Singapore 41,173 53,786
Indonesia 7,042 9,670
Other 2,379 3,073
82,526 71,438
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The revenue information above is based on the locations of the customers.

(b) Non-current assets

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31 December 31 March
2020 2020
HK$’000 HK$’000
Hong Kong 351 2,002
Macau – 129,293
Mainland China 78,509 75,602
Republic of Singapore 10,475,651 10,467,699
Indonesia 142,158 130,704
Other 65,440 54,794
10,762,109 10,860,094
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The non-current assets information above is based on the locations of the assets and excludes financial instruments.

Information about major customers

For the nine months ended 31 December 2020, revenue of approximately HK$38,276,000 (year ended 31 March 2020 — HK$51,584,000) was derived from interest income from a major customer in the property investment segment and HK$28,740,000 (year ended 31 March 2020 — Nil) was derived from sale of properties by the property development segment to a major customer. For the year ended 31 March 2020, revenue of approximately HK$9,670,000 was derived from interest income from a major customer in the property investment segment.

94 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

5. REVENUE

An analysis of revenue from continuing operations is as follows:

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Revenue from contracts with customers:
–
Sale of properties 29,221
Provision of project management services 1,642 1,110
30,863 1,110
Revenue from other sources:
Property rental income from operating leases 4,184 6,989
Interest income 46,466 62,548
Dividend income 226 708
Other 787 83
82,526 71,438
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Revenue from contracts with customers (a) Disaggregated revenue information

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Year ended
Nine months ended 31 March
31 December 2020 2020
Property
Segments development Other Total Other
HK$’000 HK$’000 HK$’000 HK$’000
Types of goods or services:
– –
Sale of properties 29,221 29,221
–
Provision of project management services 1,642 1,642 1,110
Total revenue from contracts with customers 29,221 1,642 30,863 1,110
Geographical markets:
Mainland China 29,221 – 29,221 –
–
Republic of Singapore 1,642 1,642 1,110
Total revenue from contracts with customers 29,221 1,642 30,863 1,110
Timing of revenue recognition:
– –
Goods transferred at a point in time 29,221 29,221
Services transferred over time – 1,642 1,642 1,110
Total revenue from contracts with customers 29,221 1,642 30,863 1,110
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2020 Annual Report Hongkong Chinese Limited 95

Notes to the Financial Statements (continued)

5. REVENUE (continued)

Revenue from contracts with customers (continued)

(a) Disaggregated revenue information (continued)

Set out below is the reconciliation of the revenue from contracts with customers with the amounts disclosed in the segment information:

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Year ended
Nine months ended 31 March
31 December 2020 2020
Property
Segments development Other Total Other
HK$’000 HK$’000 HK$’000 HK$’000
Revenue from contracts with
external customers 29,221 1,642 30,863 1,110
Revenue from other sources — external – 963 963 329
Total segment revenue 29,221 2,605 31,826 1,439
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(b) Performance obligations

Information about the Group’s performance obligations is summarised below:

(i) Sale of properties

Revenue from the sale of properties is recognised at a point in time when control of the properties is transferred to the customers. Deposits received from purchasers prior to revenue recognition are accounted for as deposits received.

(ii) Provision of project management services

The performance obligation is satisfied over time as services are rendered. Accordingly, the project management fee income is recognised as the service is performed over time.

96 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

6. OTHER GAINS — NET

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Net fair value gain/(loss) on financial instruments at
fair value through profit or loss:
Financial assets at fair value through profit or loss
held for trading:
Equity securities 1,292 (4,026)
Investment funds (732) 186
Other financial assets mandatorily classified at
fair value through profit or loss:
Debt securities (20) (40)
Investment funds 45 20
585 (3,860)
–
Loss on disposal of fixed assets (628)
Net fair value gain on investment properties 5,960 4,208
Write-back of provisions/(Provisions) for impairment losses on:
An associate (107) (41)
–
A joint venture 3,400
–
Properties held for sale (620)
Properties under development (149) (140)
Foreign exchange gains/(losses) — net 1,964 (2,714)
Realised translation gains reclassified to the statement of
–
profit or loss relating to liquidation of foreign operations 5,720
12,725 853
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2020 Annual Report Hongkong Chinese Limited 97

Notes to the Financial Statements (continued)

7. PROFIT/(LOSS) BEFORE TAX FROM CONTINUING OPERATIONS

Profit/(Loss) before tax from continuing operations is arrived at after crediting/(charging):

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Cost of sales:
–
Cost of properties sold (15,885)
Other (1,754) (1,643)
(17,639) (1,643)
Employee benefit expense (Note (a)):
Wages and salaries (22,846) (23,075)
Retirement benefit costs (Note (b)) (626) (793)
Total staff costs (23,472) (23,868)
Interest income:
Loans and advances 46,242 61,500
Other 224 1,048
Depreciation of fixed assets (4,624) (5,946)
–
Depreciation of right-of-use assets (277)
Auditors’ remuneration (3,287) (5,340)
Lease payments not included in the measurement of
lease liabilities (Note 18(c)) (1,809) (2,800)
Direct operating expenses arising on rental-earning
investment properties (1,754) (1,643)
Legal and professional fees (Note (c)) (4,799) (7,695)
Consultancy and service fees (Note (c)) (17,645) (19,840)
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Note:

(a) The amounts include Directors’ emoluments disclosed in Note 8 to the financial statements.

(b) The Group had no forfeited voluntary contributions available to offset future employer contributions against the pension schemes at the period/year end.

98 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

8. DIRECTORS’ EMOLUMENTS

Directors’ emoluments for the period/year, disclosed pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”), section 383(1)(a), (b), (c) and (f) of the Hong Kong Companies Ordinance and Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation, are as follows:

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Directors’ fees 1,647 2,195
Basic salaries, allowances and benefits in kind 1,186 1,666
–
Discretionary bonuses paid and payable 7,000
Retirement benefit costs 28 36
9,861 3,897
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The emoluments paid to each of the Directors during the nine months ended 31 December 2020 are as follows:

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Basic salaries,
allowances Discretionary
Nine months ended Directors’ and benefits bonuses paid Retirement
31 December 2020 fees in kind and payable benefit costs Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Executive directors:
Stephen Riady 185 751 5,000 14 5,950
John Luen Wai Lee 185 435 2,000 14 2,634
370 1,186 7,000 28 8,584
Non-executive director:
Leon Nim Leung Chan 303 – – – 303
Independent non-executive directors:
Victor Ha Kuk Yung 303 – – – 303
King Fai Tsui 368 – – – 368
Edwin Neo 303 – – – 303
974 – – – 974
1,647 1,186 7,000 28 9,861
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2020 Annual Report Hongkong Chinese Limited 99

Notes to the Financial Statements (continued)

8. DIRECTORS’ EMOLUMENTS (continued)

The emoluments paid to each of the Directors during the year ended 31 March 2020 are as follows:

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Basic salaries,
allowances
Year ended Directors’ and benefits Retirement
31 March 2020 fees in kind benefit costs Total
HK$’000 HK$’000 HK$’000 HK$’000
Executive directors:
Stephen Riady 246 1,085 18 1,349
John Luen Wai Lee 246 581 18 845
492 1,666 36 2,194
Non-executive director:
Leon Nim Leung Chan 404 – – 404
Independent non-executive directors:
Victor Ha Kuk Yung 404 – – 404
King Fai Tsui 491 – – 491
Edwin Neo 404 – – 404
– –
1,299 1,299
2,195 1,666 36 3,897
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There were no arrangements under which a Director waived or agreed to waive any emoluments during the period/year.

No share options were granted to the Directors during the period/year.

100 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

9. FIVE HIGHEST PAID EMPLOYEES’ EMOLUMENTS

The five highest paid employees during the nine months ended 31 December 2020 included two Directors (year ended 31 March 2020 — one Director), details of whose emoluments are set out in Note 8 to the financial statements. Details of the emoluments of the remaining three (year ended 31 March 2020 — four) non-director, highest paid employees for the period/year are as follows:

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Basic salaries, allowances and benefits in kind 3,157 5,543
Discretionary bonuses paid and payable 950 1,380
Retirement benefit costs 73 115
4,180 7,038
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The number of non-director, highest paid employees whose emoluments fell within the following bands is as follows:

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Nine months Year
ended ended
31 December 31 March
2020 2020
Number of Number of
Emoluments bands (HK$): employees employees
1,000,001 — 1,500,000 2 1
1,500,001 — 2,000,000 – 2
2,000,001 — 2,500,000 1 1
3 4
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10. FINANCE COSTS

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Interest on bank and other borrowings 9,329 19,192
Interest on lease liabilities 27 –
Total interest 9,356 19,192
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2020 Annual Report Hongkong Chinese Limited 101

Notes to the Financial Statements (continued)

11. SHARE OF RESULTS OF JOINT VENTURES

Share of results of joint ventures for the nine months ended 31 December 2020 mainly included share of loss in Lippo ASM Asia Property Limited (“LAAPL”) of HK$957,501,000 (year ended 31 March 2020 — share of profit of HK$439,522,000). The share of loss for the nine months ended 31 December 2020 was mainly attributable to net fair value losses on investment properties and impairment losses on fixed assets. LAAPL is a material joint venture of the Group, further details of which are given in Note 20 to the financial statements.

12. INCOME TAX

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Hong Kong:
Charge for the period/year 1,533 2,243
–
Overprovision in prior years (2)
Deferred (Note 28) (162) 219
1,371 2,460
Mainland China and overseas:
Charge for the period/year 6,964 213
–
Overprovision in prior years (163)
Deferred (Note 28) 1,633 398
8,597 448
Total charge for the period/year from continuing operations 9,968 2,908
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Hong Kong profits tax has been provided at the rate of 8.25% or 16.5% (year ended 31 March 2020 — 8.25% or 16.5%), as appropriate. For the companies operating in mainland China and the Republic of Singapore, corporate taxes have been calculated on the estimated assessable profits for the period/year at the rates of 25% and 17% (year ended 31 March 2020 — 25% and 17%), respectively. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries/jurisdictions in which the Group operates.

102 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

12. INCOME TAX (continued)

A reconciliation of the tax charge/(credit) applicable to profit/(loss) before tax at the statutory rates for the countries/jurisdictions in which the Company and the majority of its subsidiaries are domiciled to the tax charge at the effective tax rate is as follows:

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
(Restated)
Profit/(Loss) before tax from continuing operations (954,244) 433,534
Profit/(Loss) before tax from discontinued operation 134,599 (7,021)
(819,645) 426,513
Tax at the statutory tax rate of 16.5%
(year ended 31 March 2020 — 16.5%) (135,241) 70,375
Effect of different tax rates in other jurisdictions 743 (15)
–
Adjustments in respect of current tax of previous years (165)
Losses/(Profits) attributable to joint ventures and associates 158,368 (74,854)
Income not subject to tax (33,871) (3,490)
Expenses not deductible for tax 14,214 9,629
Effect of partial tax exemption and tax relief (165) (205)
Effect of withholding tax on the distributable profits of
the Group’s subsidiary in mainland China 491 (420)
Tax losses utilised from previous years (368) (1)
Tax losses not recognised 723 2,054
–
Land appreciation tax 6,765
–
Tax effect of land appreciation tax (1,691)
Tax charge from continuing operations at the Group’s effective rate 9,968 2,908
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2020 Annual Report Hongkong Chinese Limited 103

Notes to the Financial Statements (continued)

13. DISCONTINUED OPERATION

In September 2020, the Group disposed of its remaining 20% interest in The Macau Chinese Bank Limited (“MCB”, a joint venture of the Company). After the disposal, the Group ceased its banking business. Accordingly, the banking business was classified as discontinued operation. The put option to sell its 20% interest to the majority shareholder of MCB (the “Put Option”) ceased to have effect upon the completion of the disposal.

The results of the banking business for the period/year are presented below:

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Nine months Year
ended ended
31 December 31 March
2020 2020
Note HK$’000 HK$’000
Fair value loss on financial instrument at fair value
through profit or loss 23 (46,780) (2,307)
Share of results of a joint venture (284) (4,714)
Loss before tax (47,064) (7,021)
Income tax – –
Loss after tax from discontinued operation (47,064) (7,021)
–
Gain on disposal of discontinued operation 181,663
Profit/(Loss) for the period/year from
discontinued operation 134,599 (7,021)
Other comprehensive income
Share of fair value reserve of financial assets at
fair value through other comprehensive income of
a joint venture 519 (199)
Release of cumulative fair value reserve of financial assets
at fair value through other comprehensive income
from discontinued operation upon disposal 282 –
Other comprehensive income/(loss) from
discontinued operation 801 (199)
Total comprehensive income/(loss) for
the period/year from discontinued operation 135,400 (7,220)
HK cents HK cents
Earnings/(Loss) per share attributable to
equity holders of the Company 14
Basic and diluted
— For profit/(loss) from discontinued operation 6.7 (0.3)
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104 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

14. EARNINGS/(LOSS) PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

(a) Basic earnings/(loss) per share

Basic earnings/(loss) per share is calculated based on (i) the consolidated profit/(loss) for the period/year attributable to equity holders of the Company; and (ii) the weighted average number of approximately 1,998,280,000 ordinary shares (year ended 31 March 2020 — approximately 1,998,280,000 ordinary shares) in issue during the period/year.

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
(Restated)
Consolidated profit/(loss) attributable to
equity holders of the Company:
From continuing operations (964,261) 431,859
From discontinued operation 134,599 (7,021)
(829,662) 424,838
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(b) Diluted earnings/(loss) per share

The Group had no potentially dilutive ordinary shares in issue during the nine months ended 31 December 2020 and the year ended 31 March 2020.

15. DIVIDENDS

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Interim dividend, declared, of HK1 cent
(year ended 31 March 2020 — HK1 cent) per ordinary share 19,983 19,983
Final dividend, proposed, of HK0.75 cents
(year ended 31 March 2020 — HK1 cent) per ordinary share 14,987 19,983
Special dividend, proposed, of Nil
–
(year ended 31 March 2020 — HK1 cent per ordinary share) 19,983
34,970 59,949
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The proposed final dividend for the period is subject to the approval of the Company’s shareholders at the forthcoming annual general meeting.

2020 Annual Report Hongkong Chinese Limited 105

Notes to the Financial Statements (continued)

16. FIXED ASSETS

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Leasehold
improvements,
furniture,
fixtures,
equipment and
motor vehicles Yacht Total
HK$’000 HK$’000 HK$’000
Nine months ended 31 December 2020
At 1 April 2020
Cost 12,002 50,561 62,563
Accumulated depreciation (7,532) (28,254) (35,786)
Net carrying amount 4,470 22,307 26,777
At 1 April 2020, net of
accumulated depreciation 4,470 22,307 26,777
Additions during the period 453 – 453
–
Disposals during the period (1,298) (1,298)
Depreciation provided during the period (709) (3,915) (4,624)
Exchange adjustments 18 1,528 1,546
At 31 December 2020, net of
accumulated depreciation 2,934 19,920 22,854
At 31 December 2020
Cost 11,212 54,396 65,608
Accumulated depreciation (8,278) (34,476) (42,754)
Net carrying amount 2,934 19,920 22,854
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106 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

16. FIXED ASSETS (continued)

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Leasehold
improvements,
furniture,
fixtures,
equipment and
motor vehicles Yacht Total
HK$’000 HK$’000 HK$’000
Year ended 31 March 2020
At 1 April 2019
Cost 17,014 53,711 70,725
Accumulated depreciation (13,597) (24,642) (38,239)
Net carrying amount 3,417 29,069 32,486
At 1 April 2019, net of
accumulated depreciation 3,417 29,069 32,486
–
Additions during the year 1,755 1,755
Depreciation provided during the year (660) (5,286) (5,946)
Exchange adjustments (42) (1,476) (1,518)
At 31 March 2020, net of
accumulated depreciation 4,470 22,307 26,777
At 31 March 2020
Cost 12,002 50,561 62,563
Accumulated depreciation (7,532) (28,254) (35,786)
Net carrying amount 4,470 22,307 26,777
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2020 Annual Report Hongkong Chinese Limited 107

Notes to the Financial Statements (continued)

17. INVESTMENT PROPERTIES

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Carrying amount at beginning of period/year 138,207 140,112
Fair value adjustments 5,960 4,208
Exchange adjustments 8,218 (6,113)
Carrying amount at end of period/year 152,385 138,207
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The Group engages external, independent and professionally qualified valuers to perform valuations for determining the fair value of the Group’s investment properties for financial reporting purposes. The Group’s management has reviewed the valuation results by verifying the major inputs and assumptions made by the independent valuers and assessing the reasonableness of property valuation.

Based on professional valuations as at 31 December 2020 made by Asian Appraisal Company, Inc., CBRE, Inc., RHL Appraisal Limited and Savills Valuation And Professional Services (S) Pte Ltd, independent qualified valuers, the investment properties were revalued on an open market, existing use basis at HK$152,385,000 (31 March 2020 — HK$138,207,000).

Fair value hierarchy

The following table illustrates the fair value measurement hierarchy of the Group’s investment properties:

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108 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

17. INVESTMENT PROPERTIES (continued)

Fair value hierarchy (continued)

During the period, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3 (year ended 31 March 2020 — Nil).

Below is a summary of the valuation techniques used and key inputs to the valuation of investment properties:

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Valuation Significant
Class of property techniques unobservable inputs Range
Completed investment
properties in:
Mainland China Market approach Price per square metre HK$13,500 to HK$14,500
(31 March 2020 — HK$11,500 to HK$14,500)
Republic of Singapore Market approach Price per square metre HK$155,000 to HK$162,500
(31 March 2020 — HK$142,000 to HK$153,500)
Overseas Market approach Price per square metre HK$35,000 to HK$57,000
(31 March 2020 — HK$35,000 to HK$56,000)
Income approach Rental per square metre HK$104 to HK$3,000
per month (31 March 2020 — HK$84 to HK$4,000)
Capitalisation rate 4.5% to 8.5%
(31 March 2020 — 4.7% to 8.3%)
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Under the market approach, fair value is estimated by the direct comparison method on the assumption of the sale of the property interest with the benefit of vacant possession and by referring to comparable sales transactions as available in the market. The key input was the market price per square metre. A significant increase/decrease in the market price in isolation would result in a significant increase/decrease in the fair value of the investment properties.

Under the income approach, fair value is estimated on the basis of capitalisation of the net income and has allowed for outgoings and, in appropriate cases, made provisions for reversionary income potential. The key inputs were the market rent and the capitalisation rate. A significant increase/decrease in the market rent in isolation would result in a significant increase/decrease in the fair value of the investment properties and a significant increase/decrease in the capitalisation rate in isolation would result in a significant decrease/ increase in the fair value of the investment properties.

2020 Annual Report Hongkong Chinese Limited 109

Notes to the Financial Statements (continued)

18. LEASES

The Group as a lessee

The Group leases certain properties as office premises with lease terms of 1 to 3 years (year ended 31 March 2020 — 1 year). The Group has elected not to recognise right-of-use assets and lease liabilities for leases with lease term of 1 year or less. There is one lease contract that includes extension option, which is further discussed below.

(a) Right-of-use assets

The carrying amount of the Group’s right-of-use assets and the movements during the period are as follows:

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----- Start of picture text -----

Land and
buildings
HK$’000
–
At 31 March 2020 and 1 April 2020
Additions 742
Depreciation provided during the period (277)
Exchange adjustments 45
At 31 December 2020 510
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(b) Lease liabilities

The carrying amount of lease liabilities and the movements during the period are as follows:

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Nine months
ended
31 December
2020
HK$’000
–
At 31 March 2020 and 1 April 2020
Additions 742
Interest expenses 27
Payments (305)
Exchange adjustments 57
At 31 December 2020 521
Analysed for reporting purposes as:
Current liabilities 267
Non-current liabilities 254
521
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The maturity analysis of lease liabilities is disclosed in Note 38(b) to the financial statements.

110 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

18. LEASES (continued)

The Group as a lessee (continued)

(c) Amounts recognised in profit or loss in relation to leases

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Interest on lease liabilities 27 –
Depreciation of right-of-use assets 277 –
Expense relating to short-term leases and other leases with
remaining lease terms ended on or before 31 March 2020
(included in administrative expenses) 1,809 2,800
Total amount recognised in the statement of profit or loss 2,113 2,800
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(d) Extension option

The Group has a lease contract that includes an extension option (31 March 2020 — Nil). The option is negotiated by management to provide flexibility in managing the leased-asset portfolio and it is aligned with the Group’s business needs. Set out below are the undiscounted potential future rental payments relating to periods following the exercise date of extension option that are not included in the lease terms:

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----- Start of picture text -----

Payable within
five years
HK$’000
At 31 December 2020
Extension option expected not to be exercised 846
At 31 March 2020
–
Extension option expected not to be exercised
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(e) The total cash outflow for leases is disclosed in Note 32(d) to the financial statements.

2020 Annual Report Hongkong Chinese Limited 111

Notes to the Financial Statements (continued)

18. LEASES (continued)

The Group as a lessor

The Group leases its investment properties under operating lease arrangements. The terms of the leases generally require the tenants to pay security deposits and provide for periodic rent adjustments according to the prevailing market condition. Rental income recognised by the Group during the period was HK$4,184,000 (year ended 31 March 2020 — HK$6,989,000), details of which are included in Note 5 to the financial statements.

At the end of the reporting period, the undiscounted lease payments receivable by the Group in future periods under non-cancellable operating leases with its tenants are as follows:

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----- Start of picture text -----

31 December 31 March
2020 2020
HK$’000 HK$’000
Within one year 4,786 2,807
After one year but within two years 2,686 979
After two years but within three years 665 441
After three years but within four years 369 37
8,506 4,264
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19. INTERESTS IN ASSOCIATES

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31 December 31 March
2020 2020
HK$’000 HK$’000
Share of net assets 417,457 381,857
Due from associates 30,551 29,834
Provisions for impairment losses (36,498) (35,692)
411,510 375,999
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The amounts due from associates are unsecured, interest-free and repayable on demand. In the opinion of the Directors, these balances are considered as part of the Group’s net investments in the associates. As at 31 December 2020, the loss allowance for impairment of amounts due from associates amounted to HK$23,588,000 (31 March 2020 — HK$23,481,000), which represented lifetime ECLs made for credit-impaired balances. Loss allowance of HK$107,000 (year ended 31 March 2020 — HK$41,000) was provided for the nine months ended 31 December 2020 for credit-impaired receivables with a gross carrying amount of HK$107,000 (31 March 2020 — HK$41,000). Except for the credit-impaired balances, there has been no significant increase in credit risk of the remaining balances. As at 31 December 2020 and 31 March 2020, the loss allowance for such remaining balances was assessed to be minimal.

112 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

19. INTERESTS IN ASSOCIATES (continued)

During the period, the Directors reviewed the carrying amount of the associates with reference to their business performances prepared by the investees’ management. Except for the loss allowance for expected credit losses, no impairment loss (year ended 31 March 2020 — Nil) has been charged to the consolidated statement of profit or loss for the period.

Details of the principal associates are set out on page 145.

Greenix Limited and its subsidiaries, which are considered material associates of the Group, are engaged in property development in Singapore and are accounted for using the equity method.

The following table illustrates the summarised consolidated financial information of Greenix Limited, adjusted for any differences in accounting policies and reconciled to the carrying amount in the financial statements:

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----- Start of picture text -----

31 December 31 March
2020 2020
HK$’000 HK$’000
Current assets 860,025 797,000
Current liabilities (50,931) (57,709)
Net assets 809,094 739,291
Reconciliation to the Group’s interest in the associate:
Group’s share of net assets of the associate and
carrying amount of the investment 404,547 369,646
Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Revenue for the period/year 125,686 204,211
Profit and total comprehensive income for the period/year 13,179 49,039
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The following table illustrates the aggregate financial information of the Group’s associates that are not individually material:

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----- Start of picture text -----

31 December 31 March
2020 2020
HK$’000 HK$’000
Aggregate carrying amount of the Group’s interests
in the associates 6,963 6,353
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2020 Annual Report Hongkong Chinese Limited 113

Notes to the Financial Statements (continued)

20. INTERESTS IN JOINT VENTURES

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31 December 31 March
2020 2020
HK$’000 HK$’000
Share of net assets 7,497,847 7,836,739
Due from joint ventures 2,695,345 2,500,495
Due to a joint venture (4,497) (4,278)
Provisions for impairment losses (13,845) (13,845)
10,174,850 10,319,111
----- End of picture text -----

As at 31 December 2020, the amounts due from joint ventures included balances of HK$2,523,323,000 (31 March 2020 — HK$2,346,523,000), which are unsecured, bear interest at rates ranging from nil to 2.25% per annum (31 March 2020 — nil to 2.25% per annum) and are repayable on demand. The amounts due from joint ventures also included balances of HK$158,177,000 (31 March 2020 — HK$140,127,000), which are unsecured, bear interest at rates ranging from nil to 7% per annum (31 March 2020 — nil to 7% per annum) and are repayable when the resources of the joint venture permit. The remaining balances with the joint ventures are unsecured, interest-free and repayable on demand. In the opinion of the Directors, the balances with joint ventures are considered as part of the Group’s net investments in the joint ventures. As at 31 December 2020, the loss allowance for impairment of amounts due from joint ventures amounted to HK$13,845,000 (31 March 2020 — HK$13,845,000), which represented lifetime ECLs made for credit-impaired balances. Except for the credit-impaired balances which were fully impaired in prior years, there has been no significant increase in credit risk of the remaining balances. As at 31 December 2020 and 31 March 2020, the loss allowance for such remaining balances was assessed to be minimal.

Details of the principal joint ventures are set out on page 146.

LAAPL is considered a material joint venture of the Group and is accounted for using the equity method. LAAPL is a joint venture set up to hold the controlling stake in OUE Limited (“OUE”). OUE is listed on the Mainboard of Singapore Exchange Securities Trading Limited. OUE is principally engaged in developing and managing assets across the commercial, hospitality, retail, residential and healthcare sectors. Certain bank facilities under LAAPL were secured by certain listed shares held under it. The Directors assessed whether there is any indication that the carrying amount of interest in the joint venture may be impaired and the recoverable amount of the joint venture is estimated based on a value-in-use calculation. The Directors considered no impairment loss was necessary for the nine months ended 31 December 2020 (year ended 31 March 2020 — Nil).

114 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

20. INTERESTS IN JOINT VENTURES (continued)

The following table illustrates the summarised consolidated financial information of LAAPL, adjusted for any differences in accounting policies and reconciled to the carrying amount in the financial statements:

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----- Start of picture text -----

31 December 31 March
2020 2020
HK$’000 HK$’000
Non-current assets 39,290,072 47,760,390
Cash and cash equivalents 3,372,343 3,260,070
Other current assets 9,267,869 3,098,905
Current assets 12,640,212 6,358,975
Financial liabilities, excluding trade and other payables (5,308,869) (10,303,498)
Other current liabilities (1,645,270) (1,623,484)
Current liabilities (6,954,139) (11,926,982)
Non-current financial liabilities, excluding trade and
other payables and provisions (19,901,670) (16,531,662)
Other non-current liabilities (1,024,360) (1,295,047)
Non-current liabilities (20,926,030) (17,826,709)
Net assets 24,050,115 24,365,674
Reconciliation to the Group’s interest in the joint venture:
Net assets 24,050,115 24,365,674
Less: Non-controlling interests (16,086,660) (16,184,967)
Net assets attributable to equity holders of the joint venture 7,963,455 8,180,707
Group’s share of net assets of the joint venture 7,507,731 7,712,401
Due from the joint venture 2,523,323 2,346,523
Carrying amount of the investment 10,031,054 10,058,924
----- End of picture text -----

2020 Annual Report Hongkong Chinese Limited 115

Notes to the Financial Statements (continued)

20. INTERESTS IN JOINT VENTURES (continued)

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----- Start of picture text -----

Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Revenue 1,937,668 5,596,809
Interest income 12,409 30,350
Depreciation and amortisation (126,445) (173,796)
Interest expenses (533,499) (926,457)
Tax 138,161 (176,695)
Profit/(Loss) for the period/year attributable
to equity holders of the joint venture (1,015,828) 466,296
Other comprehensive income/(loss) for the period/year
attributable to equity holders of the joint venture 820,755 (513,648)
Total comprehensive loss for the period/year
attributable to equity holders of the joint venture (195,073) (47,352)
----- End of picture text -----

The following table illustrates the aggregate financial information of the Group’s joint ventures that are not individually material:

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----- Start of picture text -----

Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Share of the joint ventures’ loss for the period/year (8,897) (10,384)
Share of the joint ventures’ other comprehensive income/(loss)
for the period/year 14,821 (13,803)
Share of the joint ventures’ total comprehensive income/(loss)
for the period/year 5,924 (24,187)
Aggregate carrying amount of the Group’s interests
in the joint ventures at the end of the reporting period 143,796 260,187
----- End of picture text -----

As at 31 December 2020, the Group’s share of joint ventures’ own capital commitments amounted to HK$58,045,000 (31 March 2020 — HK$32,322,000).

116 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

21. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME

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----- Start of picture text -----

31 December 31 March
2020 2020
HK$’000 HK$’000
Financial assets at fair value through other comprehensive income:
Equity securities 97 69
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The Group has designated certain equity securities as financial assets at fair value through other comprehensive income as the Group considers these equity securities to be strategic in nature.

22. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

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----- Start of picture text -----

31 December 31 March
2020 2020
HK$’000 HK$’000
Held for trading:
Equity securities 9,048 7,757
Investment funds 2,073 3,305
11,121 11,062
Other financial assets mandatorily classified at fair value
through profit or loss:
Debt securities 2,880 2,900
Investment funds – 59
2,880 2,959
14,001 14,021
Analysed for reporting purposes as:
Current assets 11,121 11,121
Non-current assets 2,880 2,900
14,001 14,021
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2020 Annual Report Hongkong Chinese Limited 117

Notes to the Financial Statements (continued)

23. OTHER FINANCIAL ASSET

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----- Start of picture text -----

31 December 31 March
2020 2020
HK$’000 HK$’000
–
Put Option (Note) 46,780
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Note: Pursuant to the amended and restated shareholders agreement for the joint arrangement for investment in MCB, the Group had the Put Option to sell its remaining 20% interest to the majority shareholder of MCB at any time during the 5 years from 3 November 2017. The right to exercise the Put Option survived any termination or expiry of the shareholders agreement. The Put Option ceased to have effect upon the completion of the disposal of MCB in September 2020 (Note 13).

24. PROPERTIES UNDER DEVELOPMENT

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Land and buildings situated outside Hong Kong, at cost:
Balance at beginning of period/year 42,214 41,247
Additions during the period/year 213 207
Exchange adjustments 1,766 760
Balance at end of period/year 44,193 42,214
Provisions for impairment losses:
Balance at beginning of period/year (12,035) (11,681)
Impairment during the period/year (149) (140)
Exchange adjustments (500) (214)
Balance at end of period/year (12,684) (12,035)
31,509 30,179
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The properties under development are expected to be recovered in more than twelve months after the end of the reporting period.

118 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

25. LOANS AND ADVANCES

The loans and advances to customers of the Group bear interest at a rate of 3.0% per annum (31 March 2020 — 3.0% per annum). Certain loans and advances are secured by client’s assets being held as collateral with a carrying amount of HK$39,365,000 (31 March 2020 — HK$29,973,000).

The movements in the loss allowance for impairment of loans and advances are as follows:

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----- Start of picture text -----

Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Balance at beginning of period/year 761 771
Exchange adjustments 82 (10)
Balance at end of period/year 843 761
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The Group assessed the latest performance and financial position of the counterparties, adjusted for the future outlook of the industry in which the counterparties operate, general economic conditions forecasts and forward-looking information that is available without undue cost or effort. Loss allowance represented lifetime ECLs made for credit-impaired balances. Except for such credit-impaired balances, loans and advances are secured by client’s asset being held as collateral with no significant changes in the quality of the collateral. Loss allowance for such loans and advances is considered to be minimal.

26. DEBTORS, PREPAYMENTS AND OTHER ASSETS

Included in the balances are trade debtors with an ageing analysis, based on the invoice date and net of loss allowance, as follows:

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----- Start of picture text -----

31 December 31 March
2020 2020
HK$’000 HK$’000
Outstanding balances with ages:
Within 30 days 25 36
Between 31 and 60 days 25 –
50 36
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As at 31 December 2020, the balances of debtors, prepayments and other assets were non-interest bearing. The Group does not hold any collateral or other credit enhancements over these balances.

2020 Annual Report Hongkong Chinese Limited 119

Notes to the Financial Statements (continued)

26. DEBTORS, PREPAYMENTS AND OTHER ASSETS (continued)

Loss allowance for impairment of trade debtors

The Group applies the simplified approach to measure the loss allowance at lifetime ECLs for trade debtors. The Group determines the ECLs by using a provision matrix. The provision rates are based on the past due status of the debtors and adjusted for factors specific to the debtors, general economic conditions forecasts and forward-looking information that is available without undue cost or effort. As at 31 December 2020 and 31 March 2020, the loss allowance was assessed to be minimal. No loss allowance (year ended 31 March 2020 — Nil) was charged to the consolidated statement of profit or loss for the period.

Set out below is the information about credit risk exposure on the Group’s trade debtors using a provision matrix:

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----- Start of picture text -----

31 December 2020 31 March 2020
Expected Gross Expected Expected Gross Expected
credit carrying credit credit carrying credit
loss rate amount losses loss rate amount losses
HK$’000 HK$’000 HK$’000 HK$’000
Past due:
Within 30 days 0% 25 – 0% 36 –
Between 31 and 60 days 0% 25 – 0% – –
0% 50 – 0% 36 –
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Loss allowance for impairment of other financial assets included in debtors, prepayments and other assets

The movements in the loss allowance for impairment of other financial assets included in debtors, prepayments and other assets are as follows:

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----- Start of picture text -----

Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Balance at beginning of period/year 3,491 3,491
Exchange adjustments 268 –
Balance at end of period/year 3,759 3,491
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The Group assessed the latest performance and financial position of the counterparties, adjusted for the future outlook of the industry in which the counterparties operate, general economic conditions forecasts and forward-looking information that is available without undue cost or effort. Loss allowance represented lifetime ECLs made for credit-impaired balances. Except for the credit-impaired balances, there has been no significant increase in credit risk of the remaining balances, additional ECLs required for the nine months ended 31 December 2020 and the year ended 31 March 2020 are minimal.

120 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

27. BANK AND OTHER BORROWINGS

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----- Start of picture text -----

31 December 31 March
2020 2020
HK$’000 HK$’000
Current portion:
Unsecured bank loan (Note (a)) 145,417 –
Non-current portion:
Unsecured bank loan (Note (a)) – 491,667
Unsecured other loan (Note (b)) 130,000 –
130,000 491,667
275,417 491,667
Bank loans repayable:
–
Within one year 145,417
–
In the second year 491,667
145,417 491,667
Other borrowings repayable:
–
In the second year 130,000
----- End of picture text -----

Note:

(a) The Group’s bank loans were denominated in Hong Kong dollars and bore interest at floating rate. The Company has provided corporate guarantee for the bank loans granted to a subsidiary of the Company.

(b) The Group’s other loan represents an unsecured loan advanced from Lippo Limited (“Lippo”), a holding company of the Company. The other loan was denominated in Hong Kong dollars and bore interest at a rate of 2.4% per annum.

2020 Annual Report Hongkong Chinese Limited 121

Notes to the Financial Statements (continued)

28. DEFERRED TAX

The movements in deferred tax liabilities during the period/year are as follows:

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----- Start of picture text -----

Depreciation
allowance
in excess
of related Revaluation
depreciation of properties Others Total
HK$’000 HK$’000 HK$’000 HK$’000
Nine months ended 31 December 2020
–
At 1 April 2020 2,592 12,891 15,483
Deferred tax charged/(credited) to
the statement of profit or loss
during the period (Note 12) (162) 1,142 491 1,471
Exchange adjustments 174 682 26 882
At 31 December 2020 2,604 14,715 517 17,836
Year ended 31 March 2020
At 1 April 2019 2,327 12,616 436 15,379
Deferred tax charged/(credited) to
the statement of profit or loss
during the year (Note 12) 219 818 (420) 617
Exchange adjustments 46 (543) (16) (513)
At 31 March 2020 2,592 12,891 – 15,483
----- End of picture text -----

The Group has tax losses of HK$71,833,000 (31 March 2020 — HK$69,198,000) that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these tax losses as it is not considered probable that taxable profits will be available against which the tax losses can be utilised.

Pursuant to the People’s Republic of China Corporate Income Tax Law, a 10% withholding tax is levied on dividends declared to foreign investors from the foreign investment enterprises established in mainland China. The requirement became effective from 1 January 2008 and applies to earnings after 31 December 2007. A lower withholding tax rate may be applied if there is a tax treaty between mainland China and the jurisdiction of the foreign investors. The Group is therefore liable for withholding taxes on dividends distributed by those subsidiaries established in mainland China in respect of earnings generated from 1 January 2008.

As at 31 December 2020, except for withholding tax provided for under deferred tax liabilities, there were no significant unrecognised deferred tax liabilities (31 March 2020 — Nil) for taxes that would be payable on the unremitted earnings of certain of the Group’s subsidiaries, associates or joint ventures as the Group has no liability to additional tax should such amounts be remitted.

There are no income tax consequences attaching to the payments of dividends of the Company to its shareholders.

122 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

29. SHARE CAPITAL

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----- Start of picture text -----

31 December 31 March
2020 2020
HK$’000 HK$’000
Authorised:
4,000,000,000 (31 March 2020 — 4,000,000,000)
ordinary shares of HK$1.00 each 4,000,000 4,000,000
Issued and fully paid:
1,998,280,097 (31 March 2020 — 1,998,280,097)
ordinary shares of HK$1.00 each 1,998,280 1,998,280
----- End of picture text -----

There was no movement in share capital during the nine months ended 31 December 2020 and the year ended 31 March 2020.

30. RESERVES

The amounts of the Group’s reserves and movements therein for the current period and the prior year are presented in the consolidated statement of changes in equity on page 62.

Note:

(a) Cancellation of the share premium account and transfer to distributable reserves: Pursuant to a special resolution passed at a special general meeting of the Company on 2 December 1997, the entire amount standing to the credit of the share premium account of HK$3,630,765,000 was cancelled (the “Cancellation”). The credit arising from the Cancellation was transferred to distributable reserves. The balance of the reserves arising from the Cancellation could be applied towards any capitalisation issues of the Company in future, or for making distributions to shareholders of the Company.
(b) Distributable reserves of the Group as at 31 December 2020 comprised retained profits of HK$7,163,316,000 (31 March 2020 — HK$7,894,500,000) and the remaining balance arising from the Cancellation of HK$744,975,000 (31 March 2020 — HK$744,975,000). The distributable reserves and the capital redemption reserve are available for distribution to shareholders. Included in the distributable reserves of the Group as at 31 December 2020 was an amount of final dividend for the nine months ended 31 December 2020 of HK$14,987,000 (year ended 31 March 2020 — HK$19,983,000) proposed after the end of the reporting period. The distributable reserves of the Group as at 31 March 2020 also included a special dividend for the year ended 31 March 2020 of HK$19,983,000.
(c) The hedging reserve relates to the Group’s share of the hedging reserve under joint ventures.

2020 Annual Report Hongkong Chinese Limited 123

Notes to the Financial Statements (continued)

31. PARTLY-OWNED SUBSIDIARIES WITH MATERIAL NON-CONTROLLING INTERESTS

Beijing Lippo Century Realty Co., Ltd. is considered a subsidiary that has material non-controlling interests. The percentage of equity interest held by its non-controlling shareholder as at 31 December 2020 was 20% (31 March 2020 — 20%). Details of the Group’s subsidiary that has material non-controlling interests are set out below:

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Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Profit/(Loss) for the period/year allocated to
non-controlling interests 49 (1,233)
Accumulated balances of non-controlling interests at
the end of the reporting period 20,017 18,391
----- End of picture text -----

The following tables illustrate the summarised financial information of the above subsidiary. The amounts disclosed are before any inter-company eliminations:

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----- Start of picture text -----

31 December 31 March
2020 2020
HK$’000 HK$’000
Current assets 137,513 126,234
Non-current assets 90 83
Current liabilities (36,945) (33,834)
Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Revenue 28,122 87
Total expenses (27,878) (6,254)
Profit/(Loss) for the period/year 244 (6,167)
Total comprehensive income/(loss) for the period/year 8,149 (12,409)
Net cash flows from/(used in) operating activities and
net increase/(decrease) in cash and cash equivalents 20,799 (8,267)
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124 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

32. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS

(a) Reconciliation of profit/(loss) before tax to cash used in operations

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Nine months Year
ended ended
31 December 31 March
2020 2020
Note HK$’000 HK$’000
Profit/(Loss) before tax:
From continuing operations (954,244) 433,534
From discontinued operation 134,599 (7,021)
Adjustments for:
Share of results of associates (6,590) (24,520)
Share of results of joint ventures 966,398 (429,138)
Loss/(Gain) on disposal of:
Fixed assets 6 628 –
A joint venture 13 (181,663) –
Net fair value gain on investment properties 6 (5,960) (4,208)
Provisions/(Write-back of provisions) for
impairment losses on:
An associate 6 107 41
A joint venture 6 – (3,400)
Properties held for sale 6 620 –
Properties under development 6 149 140
Realised translation gains reclassified to
the statement of profit or loss relating to
liquidation of foreign operations 6 (5,720) –
Net fair value loss on financial instruments at
fair value through profit or loss 46,195 6,167
Finance costs 9,356 19,192
Interest income 5 (46,466) (62,548)
Dividend income 5 (226) (708)
Depreciation of fixed assets 7 4,624 5,946
Depreciation of right-of-use assets 7 277 –
(37,916) (66,523)
–
Decrease in properties held for sale 15,885
Increase in properties under development (213) (207)
Decrease/(Increase) in loans and advances (1,786) 1,315
Decrease/(Increase) in debtors, prepayments and
other assets (863) 3,863
Decrease in financial instruments at fair value
through profit or loss 501 652
Increase/(Decrease) in other payables, accruals and
other liabilities 1,532 (2,087)
Cash used in operations (22,860) (62,987)
----- End of picture text -----

2020 Annual Report Hongkong Chinese Limited 125

Notes to the Financial Statements (continued)

32. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

(b) Major non-cash transactions

Save as disclosed elsewhere in the financial statements, the Group had the following major non-cash transactions:

During the nine months ended 31 December 2020, the Group had non-cash additions to right-of-use assets and lease liabilities of HK$742,000 and HK$742,000, respectively, in respect of lease arrangements (year ended 31 March 2020 — Nil).

(c) Changes in liabilities arising from financing activities

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----- Start of picture text -----

Bank and
other Interest Lease
borrowings payable liabilities Total
HK$’000 HK$’000 HK$’000 HK$’000
At 1 April 2020 491,667 43 – 491,710
Changes from financing cash flows:
– –
Drawdown of bank and other borrowings 130,000 130,000
– –
Repayment of bank and other borrowings (350,000) (350,000)
– –
Principal portion of lease payments (278) (278)
–
Finance costs paid (5,616) (27) (5,643)
Total changes from financing cash flows (220,000) (5,616) (305) (225,921)
Addition to lease liabilities – – 742 742
Exchange adjustments – – 57 57
Finance costs charged to the statement of
profit or loss 3,750 5,579 27 9,356
At 31 December 2020 275,417 6 521 275,944
At 1 April 2019 736,667 245 – 736,912
Changes from financing cash flows:
– –
Repayment of bank and other borrowings (250,000) (250,000)
– –
Finance costs paid (14,394) (14,394)
–
Total changes from financing cash flows (250,000) (14,394) (264,394)
Finance costs charged to the statement of
–
profit or loss 5,000 14,192 19,192
At 31 March 2020 491,667 43 – 491,710
----- End of picture text -----

126 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

32. NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

(d) Total cash outflow for leases

The total cash outflow for leases included in the consolidated statement of cash flows is as follows:

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----- Start of picture text -----

Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
Within operating activities 1,809 2,800
Within financing activities 305 –
2,114 2,800
----- End of picture text -----

33. CONTINGENT LIABILITIES

As at 31 December 2020, the Group had no material contingent liabilities (31 March 2020 — Nil).

34. COMMITMENTS

The Group had the following commitments at the end of the reporting period:

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----- Start of picture text -----

31 December 31 March
2020 2020
HK$’000 HK$’000
Commitments in respect of properties, plant and equipment:
Contracted, but not provided for 141 –
Other commitments:
Contracted, but not provided for – 574
141 574
----- End of picture text -----

2020 Annual Report Hongkong Chinese Limited 127

Notes to the Financial Statements (continued)

35. RELATED PARTY TRANSACTIONS

In addition to the transactions detailed elsewhere in the financial statements, the Group had the following transactions with related parties during the nine months ended 31 December 2020:

(a) During the period, the Company paid rental expenses (including service charges) of HK$1,037,000 (year ended 31 March 2020 — HK$1,622,000) to a fellow subsidiary of the Company, in respect of office premises occupied by the Company. The rental was determined by reference to the then prevailing open market rentals. Such lease will expire on 31 July 2021. The Company expects the total future minimum lease payables for the year ending 31 December 2021 to be approximately HK$593,000.
(b) During the period, the Group received interest income of HK$46,066,000 (year ended 31 March 2020 — HK$61,254,000) from joint ventures of the Group.
(c) During the period, the Group received revenue from the provision of project management services of HK$1,440,000 (year ended 31 March 2020 — HK$837,000) from an associate of the Group.
(d) During the period, the Group provided a loan of HK$225,040,000 to a joint venture of the Group. The loan is unsecured, bears interest at 2.2% over 1 week US$ London Inter-Bank Offered Rate and is repayable on demand. The loan was fully repaid by the joint venture during the period.
(e) As at 31 December 2020, the Group had balances with its associates and joint ventures, further details of which are set out in Notes 19 and 20 to the financial statements.
(f) As at 31 December 2020, the Group had an unsecured loan advanced from Lippo, further details of which are set out in Note 27 to the financial statements.
(g) The key management personnel of the Group are its Directors. Details of the Directors’ emoluments are disclosed in Note 8 to the financial statements.

The transaction referred to in item (a) above was a continuing connected transaction and the transaction referred to in item (f) above was a connected transaction, both were exempted from reporting, annual review and independent shareholders’ approval under Chapter 14A of the Listing Rules.

128 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

36. FINANCIAL INSTRUMENTS BY CATEGORY

The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows:

Financial assets

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----- Start of picture text -----

Financial assets
at fair value
Financial assets through other
at fair value through comprehensive
profit or loss income
Mandatorily
classified Financial
at fair value assets at Derivative
Held for through Equity amortised financial
trading profit or loss securities cost instrument Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 31 December 2020
Financial assets at fair value through
other comprehensive income – – 97 – – 97
– – –
Financial assets at fair value through profit or loss 11,121 2,880 14,001
Amounts due from associates – – – 6,963 – 6,963
– – – –
Amounts due from joint ventures 2,681,500 2,681,500
Loans and advances – – – 8,827 – 8,827
Financial assets included in debtors,
– – – –
prepayments and other assets 3,446 3,446
– – – –
Cash and cash equivalents 198,489 198,489
11,121 2,880 97 2,899,225 – 2,913,323
At 31 March 2020
Financial assets at fair value through
other comprehensive income – – 69 – – 69
– – –
Financial assets at fair value through profit or loss 11,062 2,959 14,021
Other financial asset – – – – 46,780 46,780
Amounts due from associates – – – 6,353 – 6,353
– – – –
Amounts due from joint ventures 2,486,650 2,486,650
Loans and advances – – – 7,041 – 7,041
Financial assets included in debtors,
– – – –
prepayments and other assets 2,378 2,378
– – – –
Cash and cash equivalents 135,169 135,169
11,062 2,959 69 2,637,591 46,780 2,698,461
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2020 Annual Report Hongkong Chinese Limited 129

Notes to the Financial Statements (continued)

36. FINANCIAL INSTRUMENTS BY CATEGORY (continued)

The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows: (continued)

Financial liabilities

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----- Start of picture text -----

Financial liabilities
at amortised cost
31 December 31 March
2020 2020
HK$’000 HK$’000
Bank and other borrowings 275,417 491,667
Financial liabilities included in other payables,
accruals and other liabilities 50,051 28,802
Amount due to a joint venture 4,497 4,278
329,965 524,747
----- End of picture text -----

37. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS

The carrying amounts and fair values of the Group’s financial instruments carried at fair value, other than those with carrying amounts that reasonably approximate to fair values, are as follows:

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----- Start of picture text -----

Carrying amounts Fair values
31 December 31 March 31 December 31 March
2020 2020 2020 2020
HK$’000 HK$’000 HK$’000 HK$’000
Financial assets
Financial assets at fair value through
other comprehensive income 97 69 97 69
Financial assets at fair value through
profit or loss 14,001 14,021 14,001 14,021
Other financial asset:
– –
Put Option 46,780 46,780
14,098 60,870 14,098 60,870
----- End of picture text -----

Management has assessed that the fair values of cash and cash equivalents, financial assets included in debtors, prepayments and other assets, loans and advances, amounts due from associates and joint ventures and financial liabilities included in other payables, accruals and other liabilities approximate to their carrying amounts largely due to the short term maturity of these instruments. In addition, the fair values of interest-bearing bank loans approximate to their carrying amounts as they are floating rate instruments that are repriced to market interest rates at or near the end of the reporting period and the changes in fair value as a result of the Group’s non-performance risk were considered to be minimal.

130 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

37. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (continued)

The Group’s management is responsible for determining the policies and procedures for the fair value measurement of significant financial instruments. At each reporting date, the finance team analyses the movements in the values of financial instruments and determines major inputs applied in the valuation.

The fair values of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

The fair values of listed equity securities are based on quoted market prices.

The fair values of unlisted debt securities are determined by reference to the quoted market prices from the broker using a valuation technique with market observable inputs.

The fair values of unlisted investment funds are assessed to approximate the net asset values indicated on the net asset value statements issued by the investment fund managers, which take into consideration the fair values of the underlying assets held under the investments. For unlisted investment funds classified under Level 3 of the fair value measurement hierarchy, when the net asset value increases/decreases by 3% (31 March 2020 — 3%), the fair value will be increased/decreased by HK$62,000 (31 March 2020 — HK$101,000).

The fair value of the Put Option as at 31 March 2020 was determined by Monte-Carlo simulation, which was the capitalisation of discounted cash flows generated by possible share price paths simulated by the model. Set out below is a summary of significant unobservable input to the valuation of the Put Option used in Level 3 fair value measurements as at 31 March 2020:

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----- Start of picture text -----

Significant
Valuation unobservable Sensitivity of
technique input Rate fair value to the input
Other financial asset:
Put Option Monte-Carlo Volatility of 20.9% When the volatility of
simulation method underlying the underlying shares
shares increases/decreases by 5%,
the fair value will be
increased/decreased by
HK$343,000 and HK$75,000,
respectively.
----- End of picture text -----

2020 Annual Report Hongkong Chinese Limited 131

Notes to the Financial Statements (continued)

37. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (continued)

Fair value hierarchy

The following table illustrates the fair value measurement hierarchy of the Group’s financial instruments:

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----- Start of picture text -----

Fair value measurement using
Quoted prices Significant Significant
in active observable unobservable
markets inputs inputs
(Level 1) (Level 2) (Level 3) Total
HK$’000 HK$’000 HK$’000 HK$’000
At 31 December 2020
Financial assets at fair value through
other comprehensive income:
Equity securities 97 – – 97
Financial assets at fair value through
profit or loss held for trading:
– –
Equity securities 9,048 9,048
Investment funds – – 2,073 2,073
Other financial assets mandatorily classified
at fair value through profit or loss:
Debt securities – 2,880 – 2,880
9,145 2,880 2,073 14,098
At 31 March 2020
Financial assets at fair value through
other comprehensive income:
Equity securities 69 – – 69
Financial assets at fair value through
profit or loss held for trading:
– –
Equity securities 7,757 7,757
Investment funds – – 3,305 3,305
Other financial assets mandatorily classified
at fair value through profit or loss:
Debt securities – 2,900 – 2,900
Investment funds – – 59 59
Other financial asset:
Derivative financial instrument – – 46,780 46,780
7,826 2,900 50,144 60,870
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132 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

37. FAIR VALUE AND FAIR VALUE HIERARCHY OF FINANCIAL INSTRUMENTS (continued)

Fair value hierarchy (continued)

The movements in fair value measurements in Level 3 during the period/year are as follows:

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Investment
Investment funds
funds at mandatorily
fair value classified
through at fair value Other
profit or loss through financial
held for trading profit or loss asset
HK$’000 HK$’000 HK$’000
At 1 April 2020 3,305 59 46,780
Total gains/(losses) recognised in
the statement of profit or loss (732) 45 (46,780)
Distributions (500) (104) –
At 31 December 2020 2,073 – –
At 1 April 2019 3,796 136 49,087
Total gains/(losses) recognised in
the statement of profit or loss 277 20 (2,307)
Additions – 29 –
Distributions (768) (126) –
At 31 March 2020 3,305 59 46,780
----- End of picture text -----

During the nine months ended 31 December 2020, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3 (year ended 31 March 2020 — Nil). The Group’s policy is to recognise transfers between levels of fair value hierarchy as at the end of the reporting period in which they occur.

38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group has established policies and procedures for risk management which are reviewed regularly by the Executive Directors and senior management of the Group to ensure the proper monitoring and control of all major risks arising from the Group’s activities at all times.

The main risks arising from the Group’s financial instruments are credit risk, liquidity risk, interest rate risk, foreign currency risk and equity price risk. The risk management function is carried out by individual business units and regularly overseen by the Group’s senior management with all the risk limits approved by the Executive Directors of the Group, which are summarised below. The Group’s accounting policies in relation to derivatives are set out in Note 2.4 to the financial statements.

2020 Annual Report Hongkong Chinese Limited 133

Notes to the Financial Statements (continued)

38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

(a) Credit risk

Credit risk arises from the possibility that the counterparty in a transaction may default. It arises from lending, treasury, investment and other activities undertaken by the Group.

The Group trades only with recognised and creditworthy parties. The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposures. Credit policies with guidelines on credit terms and limits set the basis for risk control for trade receivables. New customers are subject to credit evaluation while the Group continues to monitor existing customers, especially those with repayment issues. Credit approval for loans and advances takes into account the type and tenor of loans, creditworthiness and repayment ability of prospective borrowers, collateral available and the resultant risk concentration in the context of the Group’s total assets. Appropriate allowances are made for probable losses when necessary for identified debtors.

Maximum exposure and year-end staging

The tables below show the credit quality and the maximum exposure to credit risk based on the Group’s credit policy, which is mainly based on past due information unless other information is available without undue cost or effort, and year-end staging classification. The amounts presented are gross carrying amounts for financial assets.

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12-month ECLs Lifetime ECLs
Simplified
Stage 1 Stage 2 Stage 3 approach Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
As at 31 December 2020
Amounts due from associates 6,963 – 23,588 – 30,551
– –
Amounts due from joint ventures 2,681,500 13,845 2,695,345
Loans and advances 8,827 – 843 – 9,670
Financial assets included in debtors,
prepayments and other assets
Trade debtors – – – 50 50
Others 3,396 – 3,759 – 7,155
– – –
Cash and cash equivalents 198,489 198,489
2,899,175 – 42,035 50 2,941,260
As at 31 March 2020
Amounts due from associates 6,353 – 23,481 – 29,834
– –
Amounts due from joint ventures 2,486,650 13,845 2,500,495
Loans and advances 7,041 – 761 – 7,802
Financial assets included in debtors,
prepayments and other assets
Trade debtors – – – 36 36
Others 2,342 – 3,491 – 5,833
– – –
Cash and cash equivalents 135,169 135,169
2,637,555 – 41,578 36 2,679,169
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134 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

(a) Credit risk (continued)

Maximum exposure and year-end staging (continued)

Further details in respect of the Group’s loss allowance for impairment of amounts due from associates, amounts due from joint ventures, loans and advances and other financial assets included in debtors, prepayments and other assets are disclosed in Notes 19, 20, 25 and 26 to the financial statements, respectively.
** For trade debtors to which the Group applies the simplified approach for impairment, information based on the provision matrix is disclosed in Note 26 to the financial statements.
*** The bank balances are deposited with creditworthy financial institutions with no recent history of default. The Group considers these balances to have low credit risk and the amount of the loss allowance for impairment was negligible.

Concentration of credit risk

The Group’s exposure to credit risk arising from trade debtors and loans and advances at the end of the reporting period based on the information provided to key management is as follows:

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----- Start of picture text -----

31 December 31 March
2020 2020
HK$’000 HK$’000
By geographical area:
Australia 8,827 7,041
Others 50 36
8,877 7,077
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(b) Liquidity risk

The Group manages the liquidity structure of its assets, liabilities and commitments in view of market conditions and its business needs, as well as to ensure that its operations meet the statutory requirement for the minimum liquidity ratio whenever applicable.

Management comprising Executive Directors and senior managers monitors the liquidity position of the Group on an on-going basis to ensure the availability of sufficient liquid funds to meet all obligations as they fall due and to make the most efficient use of the Group’s financial resources. As at 31 December 2020, approximately 53% (31 March 2020 — Nil) of the Group’s debts would mature in less than one year based on the carrying values of bank and other borrowings.

2020 Annual Report Hongkong Chinese Limited 135

Notes to the Financial Statements (continued)

38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

(b) Liquidity risk (continued)

The maturity profile of liabilities of the Group as at the end of the reporting period, based on the contractual undiscounted payments, is as follows:

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----- Start of picture text -----

1 year 5 years
or less or less
Repayable 3 months but over but over
on demand or less 3 months 1 year Total
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 31 December 2020
–
Bank and other borrowings 1,265 153,778 133,111 288,154
Lease liabilities – 71 211 258 540
– –
Financial liabilities included in other payables, accruals and other liabilities 41,215 8,836 50,051
– – –
Amount due to a joint venture 4,497 4,497
4,497 42,551 162,825 133,369 343,242
At 31 March 2020
–
Bank and other borrowings 3,927 11,823 511,176 526,926
– –
Financial liabilities included in other payables, accruals and other liabilities 20,855 7,947 28,802
– – –
Amount due to a joint venture 4,278 4,278
4,278 24,782 19,770 511,176 560,006
----- End of picture text -----

(c) Interest rate risk

Interest rate risk primarily results from timing differences in the repricing of interest-bearing assets and liabilities. The Group’s interest rate positions mainly arise from treasury and other investment activities undertaken.

The Group monitors its interest-sensitive products and investments and net repricing gap and limits interest rate exposure through management of maturity profile, currency mix and choice of fixed or floating interest rates. When appropriate, interest rate swaps would be used to manage this risk in a cost-effective manner. The interest rate risk is managed and monitored regularly by the senior management of the Group.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s profit/(loss) before tax and equity (through the impact on interest-bearing monetary assets and liabilities).

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Nine months ended 31 December 2020 Year ended 31 March 2020
Increase/ Increase/ Increase/ Increase/
(Decrease) (Decrease) Increase/ (Decrease) (Decrease) Increase/
in basis in profit (Decrease) in basis in profit (Decrease)
points before tax in equity points before tax in equity
HK$’000 HK$’000 HK$’000 HK$’000
Hong Kong dollar +50 (439) (439) +50 (2,443) (2,443)
United States dollar +50 133 133 +50 77 77
Singapore dollar +50 137 137 +50 222 222
Renminbi +50 396 396 +50 293 293
Hong Kong dollar –50 439 439 –50 2,443 2,443
United States dollar –50 (133) (133) –50 (77) (77)
Singapore dollar –50 (137) (137) –50 (222) (222)
Renminbi –50 (396) (396) –50 (293) (293)
----- End of picture text -----

136 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

(d) Foreign currency risk

Foreign currency risk is the risk to earnings or capital arising from movements in foreign exchange rates. The Group’s foreign currency risk primarily arises from currency exposures originating from its foreign exchange dealings and other investment activities.

The Group monitors the relative foreign exchange positions of its assets and liabilities to minimise foreign currency risk. When appropriate, hedging instruments including forward contracts, swaps and currency loans would be used to manage the foreign exchange exposure. The foreign currency risk is managed and monitored on an on-going basis by the senior management of the Group.

The following table demonstrates the sensitivity at the end of the reporting period to a reasonably possible change in the United States dollars, Singapore dollars and Renminbi exchange rates, with all other variables held constant, of the Group’s profit/(loss) before tax (due to changes in the fair value of monetary assets and liabilities).

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Increase/(Decrease)
in profit before tax
Nine months Year
ended ended
31 December 31 March
2020 2020
HK$’000 HK$’000
United States dollar against Hong Kong dollar
— strengthened by 3% (31 March 2020 — 3%) 725 430
— weakened by 3% (31 March 2020 — 3%) (725) (430)
Singapore dollar against Hong Kong dollar
— strengthened by 3% (31 March 2020 — 3%) 659 1,107
— weakened by 3% (31 March 2020 — 3%) (659) (1,107)
Renminbi against Hong Kong dollar
— strengthened by 3% (31 March 2020 — 3%) 214 194
— weakened by 3% (31 March 2020 — 3%) (214) (194)
----- End of picture text -----

At the end of the reporting period, the cash and cash equivalents of the Group’s subsidiaries in mainland China denominated in Renminbi amounted to HK$79,202,000 (31 March 2020 — HK$58,460,000). The conversion of these Renminbi balances into foreign currencies is subject to the rules and regulations of foreign exchange control promulgated by the government in mainland China.

2020 Annual Report Hongkong Chinese Limited 137

Notes to the Financial Statements (continued)

38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

(e) Equity price risk

Equity price risk is the risk that the fair values of financial assets decrease as a result of changes in the levels of equity indices and the values of individual financial assets. The Group is exposed to equity price risk mainly arising from individual financial assets included in financial assets at fair value through other comprehensive income (Note 21) and financial assets at fair value through profit or loss (Note 22) as at 31 December 2020. The Group’s listed financial assets are mainly listed on stock exchanges in Hong Kong and the Republic of Singapore and are valued at quoted market prices at the end of the reporting period.

The market equity indices for the following stock exchanges, at the close of business of the nearest trading day to the end of the reporting period, and their respective highest and lowest points during the period/year were as follows:

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High/Low High/Low
Nine months Year
ended ended
31 December 31 December 31 March 31 March
2020 2020 2020 2020
Hong Kong — Hang Seng Index 27,231 27,341/22,519 23,603 30,281/21,139
Republic of Singapore — Straits Times Index 2,844 2,921/2,380 2,481 3,416/2,208
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The senior management of the Group regularly reviews and monitors the mix of securities in the Group’s investment portfolio based on the fair value to ensure the loss arising from the changes in the market values of the investment portfolios is capped within an acceptable range.

The following table demonstrates the sensitivity to every 3% change in the fair values of the equity investments and investment funds, with all other variables held constant and before any impact on tax, based on their carrying amounts at the end of the reporting period. For the purpose of this analysis, for the investments at fair value through other comprehensive income, the impact is deemed to be on the fair value reserve of financial assets at FVOCI.

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Nine months ended 31 December 2020 Year ended 31 March 2020
3% increase 3% decrease 3% increase 3% decrease
Increase Decrease Increase Decrease
in profit Increase in profit Decrease in profit Increase in profit Decrease
before tax in equity before tax in equity before tax in equity before tax in equity
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Financial assets at fair value through
other comprehensive income
Global and others – 3 – (3) – 2 – (2)
Financial assets at fair value
through profit or loss
Hong Kong 3 – (3) – 6 – (6) –
Republic of Singapore 269 – (269) – 227 – (227) –
Global and others 62 – (62) – 101 – (101) –
334 – (334) – 334 – (334) –
----- End of picture text -----

Excluding retained profits

138 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

38. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

(f) Capital management

The primary objectives of the Group’s capital management are to safeguard the Group’s ability to continue as a going concern and to maintain healthy capital ratios in order to support its business and maximise shareholders’ value.

The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

No changes were made in the objectives, policies or processes for managing capital during the nine months ended 31 December 2020 and the year ended 31 March 2020.

The Group monitors capital using a gearing ratio, which is calculated by dividing its total borrowings by equity attributable to equity holders of the Company. Total borrowings include current and non-current bank and other borrowings.

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31 December 31 March
2020 2020
HK$’000 HK$’000
Bank and other borrowings (Note 27) 275,417 491,667
Equity attributable to equity holders of the Company 10,667,739 10,569,897
Gearing ratio 2.6% 4.7%
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39. COMPARATIVE AMOUNTS

The comparative statement of profit or loss has been re-presented as if the operation discontinued during the current period had been discontinued at the beginning of the comparative period (Note 13).

2020 Annual Report Hongkong Chinese Limited 139

Notes to the Financial Statements (continued)

40. STATEMENT OF FINANCIAL POSITION OF THE COMPANY

Information about the statement of financial position of the Company at the end of the reporting period is as follows:

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31 December 31 March
2020 2020
HK$’000 HK$’000
Non-current assets
Fixed assets 351 2,002
Interests in subsidiaries 3,395,226 3,087,064
Financial assets at fair value through profit or loss 2,880 2,900
3,398,457 3,091,966
Current assets
Debtors, prepayments and other assets 2,187 1,089
Financial assets at fair value through profit or loss 8,958 7,570
Cash and cash equivalents 108,496 51,732
119,641 60,391
Current liabilities
Other payables, accruals and other liabilities 25,125 8,939
Amount due to a joint venture 4,497 4,278
Tax payable 2,458 1,526
32,080 14,743
Net current assets 87,561 45,648
Total assets less current liabilities 3,486,018 3,137,614
Non-current liabilities
–
Other borrowings 130,000
Deferred tax liabilities 57 219
130,057 219
Net assets 3,355,961 3,137,395
Equity
Share capital 1,998,280 1,998,280
Reserves (Note) 1,357,681 1,139,115
3,355,961 3,137,395
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140 Hongkong Chinese Limited 2020 Annual Report

Notes to the Financial Statements (continued)

40. STATEMENT OF FINANCIAL POSITION OF THE COMPANY (continued)

Note:

A summary of the Company’s reserves is as follows:

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Share Capital
premium redemption Distributable
account reserve reserves Total
(Note 30(b))
HK$’000 HK$’000 HK$’000 HK$’000
Nine months ended 31 December 2020
At 1 April 2020 92,275 22,144 1,024,696 1,139,115
Profit and total comprehensive income
for the period – – 278,515 278,515
2019/2020 final dividend – – (19,983) (19,983)
2019/2020 special dividend – – (19,983) (19,983)
2020 interim dividend – – (19,983) (19,983)
At 31 December 2020 92,275 22,144 1,243,262 1,357,681
Year ended 31 March 2020
At 1 April 2019 92,275 22,144 1,050,446 1,164,865
Profit and total comprehensive income
for the year – – 14,216 14,216
2018/2019 final dividend – – (19,983) (19,983)
2019/2020 interim dividend – – (19,983) (19,983)
At 31 March 2020 92,275 22,144 1,024,696 1,139,115
----- End of picture text -----

Distributable reserves of the Company as at 31 December 2020 comprised contributed surplus of HK$134,329,000 (31 March 2020 — HK$134,329,000), retained earnings of HK$363,958,000 (31 March 2020 — HK$145,392,000) and the remaining balance arising from the Cancellation of HK$744,975,000 (31 March 2020 — HK$744,975,000). The distributable reserves and the capital redemption reserve are available for distributions to the shareholders of the Company.

Included in the distributable reserves of the Company as at 31 December 2020 was an amount of final dividend for the nine months ended 31 December 2020 of HK$14,987,000 (year ended 31 March 2020 — HK$19,983,000) proposed after the end of the reporting period. The distributable reserves of the Company as at 31 March 2020 also included a special dividend for the year ended 31 March 2020 of HK$19,983,000.

41. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Board of Directors on 30 March 2021.

2020 Annual Report Hongkong Chinese Limited 141

Particulars of Principal Subsidiaries

Particulars of the principal subsidiaries as at 31 December 2020 are set out below:

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----- Start of picture text -----

Issued and Percentage
fully paid of equity
Place of ordinary attributable to the
incorporation/ share capital Company/Group
registration and (unless otherwise (unless otherwise
Name of company operations stated) stated) [#] Principal activities
----- End of picture text -----

Beaming Empire Limited	British Virgin Islands	US$1	–	100	Investment holding
Capital Place International Limited	British Virgin Islands/	US$50,000	–	100	Property investment
	Republic of the Philippines
成都力寶置業有限公司	People’s Republic of China	US$3,000,000*	–	100	Property investment
(Chengdu Lippo Realty Limited)					and management
Conrich Inc.	British Virgin Islands	US$1	–	100	Investment holding
Everwin Pacific Ltd.	British Virgin Islands	US$1	–	100	Property investment
Fairseas 1 Pte. Ltd.	Republic of Singapore	S$1	–	100	Owner of
					a motor yacht
Fiatsco Limited	British Virgin Islands	US$1	–	100	Investment holding
Golden Stellar Limited	British Virgin Islands	US$1	100	100	Investment holding
HCL Management Limited	Hong Kong	HK$1	–	100	Management services
HKC Property Investment	British Virgin Islands/	US$1	100	100	Investment holding
Holdings Limited	Hong Kong
HKC Realty LLC	United States of America	US$2,250,000**	–	100	Property investment
Hong Kong Housing Loan Limited	Hong Kong	HK$40,000,000	–	100	Money lending

142 Hongkong Chinese Limited 2020 Annual Report

Particulars of Principal Subsidiaries (continued)

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Lippo Asia Limited	Hong Kong	HK$120,000,000	–	100	Investment holding
Lippo Cybergroup Limited	Hong Kong	HK$2	–	100	Investment holding
Lippo Securities, Inc.	Republic of the Philippines	Pesos 69,500,000	–	100	Investment holding
Mass Empire Limited	Hong Kong	HK$1	–	100	Investment
MGS Ltd.	British Virgin Islands	US$1	–	100	Investment holding
Norfyork International Limited	Hong Kong	HK$25,000,000	–	100	Investment holding
One Realty Pte. Limited	Republic of Singapore	S$2	–	100	Investment holding
					and provision of
					project and
					management services
Pacific Bond Limited	British Virgin Islands	US$1	–	100	Investment holding
Polar Step Limited	British Virgin Islands/	US$1	–	100	Investment
	Hong Kong
Sinogain Asia Limited	British Virgin Islands	US$1	–	100	Property investment
Sinorite Limited	British Virgin Islands/	US$1	100	100	Investment
	Hong Kong
Stargala Limited	British Virgin Islands	US$1	–	100	Property investment
Uchida Limited	British Virgin Islands/	US$1	–	100	Investment holding
	Hong Kong
Wealtop Limited	British Virgin Islands/	US$1	–	100	Investment holding
	Hong Kong

2020 Annual Report Hongkong Chinese Limited 143

Particulars of Principal Subsidiaries (continued)

Name of company	Place of incorporation/ registration and operations	Issued and fully paid ordinary share capital (unless otherwise stated)	Percentage of equity attributable to the Company/Group (unless otherwise stated)#	Principal activities
Winluck Asia Limited	British Virgin Islands	US$1	– 100	Property investment
Winluck Pacific Limited	British Virgin Islands	US$1	– 100	Property investment
Winrider Limited	British Virgin Islands	US$1	– 100	Investment holding
Yield Point Limited	British Virgin Islands	US$1	– 100	Investment holding
北京力寶世紀置業有限公司	People’s Republic of China	US$14,000,000*	– 80@	Property development
(Beijing Lippo Century Realty
Co., Ltd.)

# based on the number of issued shares carrying voting rights and represents the effective holding of the Group after non-controlling interests therein

@ profit sharing ratio * paid up registered capital

** paid up capital contribution

Note:

Pesos — Philippines pesos S$ — Singapore dollars US$ — United States dollars

The above table includes the subsidiaries of the Company which, in the opinion of the Directors, principally affected the results for the period or formed a substantial portion of the net assets of the Group. To give details of all subsidiaries would, in the opinion of the Directors, result in particulars of excessive length.

144 Hongkong Chinese Limited 2020 Annual Report

Particulars of Principal Associates

Particulars of the principal associates as at 31 December 2020 are set out below:

Name of company	Form of business structure	Place of incorporation and operations	Issued and fully paid ordinary share capital	Approximate percentage of equity attributable to the Group (unless otherwise stated)#	Principal activities
Greenix Limited	Corporate	British Virgin Islands	US$100,000	50	Investment holding
Lippo Marina Collection Pte. Ltd.	Corporate	Republic of Singapore	S$1,000,000	50	Property development
Goldfix Pacific Ltd.	Corporate	British Virgin Islands	US$16,286.6	36.84	Investment holding
Rebound Power Limited	Corporate	British Virgin Islands	US$300	Note (b)	Investment holding
Proton Power Asia Limited	Corporate	Hong Kong	HK$90	Note (c)	Investment holding
Proton Power Pte. Ltd.	Corporate	Republic of Singapore	S$1	Note (c)	Green energy
					development

# based on the number of issued shares carrying voting rights and represents the effective holding of the Group after non-controlling interests therein

Notes:

(a) S$ — Singapore dollars US$ — United States dollars

(b) Its issued share capital comprised (i) 100 voting, non-participating class “A” shares of US$1.00 each; (ii) 100 non-voting, participating class “B” shares of US$1.00 each; (iii) 50 non-voting, participating class “C” shares of US$1.00 each; and (iv) 50 non-voting, participating class “D” shares of US$1.00 each. The Group was interested in 50% of all the class “A” shares in issue, 100% of all the class “B” shares in issue and approximately 36.32% of all the class “C” shares in issue which entitled the Group to 50% of the voting rights and approximately 75.45% of the profit sharing of this company.
(c) This company was a wholly-owned subsidiary of Rebound Power Limited.

The above table includes the associates of the Company which, in the opinion of the Directors, principally affected the results for the period or formed a substantial portion of the net assets of the Group. To give details of all associates would, in the opinion of the Directors, result in particulars of excessive length.

2020 Annual Report Hongkong Chinese Limited 145

Particulars of Principal Joint Ventures

Particulars of the principal joint ventures as at 31 December 2020 are set out below:

Name of company	Form of business structure	Place of incorporation and operations	Issued and fully paid ordinary share capital	Percentage of equity attributable to the Group (unless otherwise stated)#	Principal activities
Bell Eastern Limited	Corporate	British Virgin Islands/	S$2,000,000	50	Property investment
		Hong Kong
Sunning Asia Limited	Corporate	British Virgin Islands	US$50,000	50	Investment holding
Lippo Real Estate Pte. Limited	Corporate	Republic of Singapore	S$2	50	Property development
Yamoo Bay Project Limited	Corporate	British Virgin Islands	US$2	50	Investment holding
Lippo ASM Asia Property Limited	Corporate	Cayman Islands	US$1,200	Note (b)	Investment holding

# based on the number of issued shares carrying voting rights and represents the effective holding of the Group after non-controlling interests therein

Notes:

(a) S$ — Singapore dollars US$ — United States dollars

(b) Its issued share capital comprised (i) 800 voting, non-participating class “A” shares of US$1.00 each; (ii) 200 non-voting, participating class “B” shares of US$1.00 each; and (iii) 200 non-voting, participating class “C” shares of US$1.00 each. The Group was interested in 50% of all the class “A” shares in issue and 100% of all the class “B” shares in issue which entitled the Group to 50% of the voting rights and approximately 94.26% of the profit sharing of this company.

146 Hongkong Chinese Limited 2020 Annual Report

Schedule of Major Properties

(1) PROPERTIES HELD FOR INVESTMENT AS AT 31 DECEMBER 2020

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Percentage of
Approximate the Group’s
Description Use gross floor area Status interest
----- End of picture text -----

		(square metres)
People’s Republic of China
5 floors of Unit 1	Commercial	5,421	Rental	100
Building 1, Lippo Tower
No. 62 North Kehua Road
Wuhou District
Chengdu
The above property is held under medium term lease.
Overseas
31st Floor	Commercial	885	Rental	100
Rufino Pacific Tower
Ayala Avenue Corner
Herrera Street, Makati
Metropolitan Manila
Republic of the Philippines
522 S. Sepulveda Boulevard	Commercial	925	Rental	100
Los Angeles, CA 90049
United States of America
The above properties are freehold.
21 Marina Way #26-16	Residential	104	Rental	100
Marina One Residences
Singapore 018978

The above property is held under long term lease.

2020 Annual Report Hongkong Chinese Limited 147

Schedule of Major Properties (continued)

(2) PROPERTY HELD FOR DEVELOPMENT AS AT 31 DECEMBER 2020

Description Use	Approximate site area	Approximate gross floor area	Percentage of the Group’s interest	Estimated completion date	Stage of development at 31 December 2020
	(square metres)	(square metres)
Overseas
3 pieces of land at Residential	12,484	N/A	100	N/A	Vacant land
Minakami Heights
Golf Residence
Gumma
Japan
PROPERTIES HELD FOR SALE	AS AT 31 DECEMBER 2020
Description		Use	Approximate gross floor area		Percentage of the Group’s interest
			(square metres)
People’s Republic of China
Certain units and car parking spaces at		Commercial/		14,989	80
No. 8 Ronghua Middle Road		Residential
Yizhuang
Beijing Economic-Technological
Development Area
(北京經濟技術開發區)
Beijing
Overseas
854 West Adams Boulevard		Residential		723	100
Los Angeles, CA 90007
United States of America

(3) PROPERTIES HELD FOR SALE AS AT 31 DECEMBER 2020

148 Hongkong Chinese Limited 2020 Annual Report

Summary of Financial Information

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Nine months Year Year Year Year
ended ended ended ended ended
31 December 31 March 31 March 31 March 31 March
2020 2020 2019 2018 2017
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Profit/(Loss) attributable to
equity holders of the Company (829,662) 424,838 10,818 326,840 44,996
Total assets 11,088,801 11,177,569 11,786,366 12,258,404 11,915,519
Total liabilities (401,045) (589,281) (842,148) (1,027,392) (1,860,101)
Net assets 10,687,756 10,588,288 10,944,218 11,231,012 10,055,418
Non-controlling interests (20,017) (18,391) (20,869) (32,060) (43,226)
Equity attributable to
equity holders of the Company 10,667,739 10,569,897 10,923,349 11,198,952 10,012,192
----- End of picture text -----

2020 Annual Report Hongkong Chinese Limited 149

Supplementary Financial Information

DISCLOSURE PURSUANT TO RULE 13.22 OF THE LISTING RULES

Set out below is a pro forma combined statement of financial position of the Group’s affiliates as at 31 December 2020 (being the latest practicable date for determining the relevant figures) required to be disclosed under the Listing Rules:

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----- Start of picture text -----

HK$’000
Pro forma combined statement of financial position
Intangible assets 1,145,080
Fixed assets 3,865,158
Investment properties 26,626,264
Right-of-use assets 304,493
Interests in equity-accounted investees 6,372,106
Properties held for sale 633,277
Financial assets at fair value through other comprehensive income 766,615
Financial assets at fair value through profit or loss 358,161
Debtors, prepayments and other assets 1,396,394
Cash and cash equivalents 3,778,918
Assets classified as held for sale 7,380,166
Other assets 281,854
Bank and other borrowings (22,088,086)
Lease liabilities (154,633)
Creditors, accruals and other liabilities (1,382,689)
Tax payable (266,090)
Shareholders’ advance (3,156,481)
Deferred tax liabilities (869,253)
Other financial liabilities (240,315)
Non-controlling interests (16,081,662)
8,669,277
Group’s attributable interest (Note) 10,586,360
----- End of picture text -----

Note: The Group’s attributable interest represents that portion attributable to the Group before non-controlling interests included therein.

150 Hongkong Chinese Limited 2020 Annual Report

AI assistant

3SBio Inc. — Annual Report 2020

49981_rns_2021-04-28_ab36e4e0-02a0-4a57-8fc5-ada2c00fc2d2.pdf

ANNUAL REPORT 2020

Contents

Corporate Information

BOARD OF DIRECTORS

Executive Directors

PRINCIPAL BANKERS

SOLICITORS

Non-executive Director

PRINCIPAL SHARE REGISTRAR AND

Independent non-executive Directors

COMMITTEES

Audit Committee

Remuneration Committee

Nomination Committee

SECRETARY

TRANSFER OFFICE

HONG KONG BRANCH SHARE REGISTRAR

AND TRANSFER OFFICE

REGISTERED OFFICE

PRINCIPAL PLACE OF BUSINESS

STOCK CODE

AUDITOR

WEBSITE

Chairman’s Statement

Report of the Directors

BUSINESS REVIEW

Overview

Results for the Period

Property Investment

Report of the Directors (continued)

BUSINESS REVIEW (continued)

Results for the Period (continued)

Property Investment (continued)

Report of the Directors (continued)

BUSINESS REVIEW (continued)

Results for the Period (continued)

Property Investment (continued)

Property Development

Treasury and Securities Investments

Financial Position

BUSINESS REVIEW (continued)

Financial Position (continued)

Staff and Remuneration

PROSPECTS

BUSINESS STRATEGY

CHANGE OF FINANCIAL YEAR END DATE

PRINCIPAL ACTIVITIES

RESULTS AND DIVIDENDS

SUMMARY OF FINANCIAL INFORMATION

SHARE CAPITAL

DISTRIBUTABLE RESERVES

INVESTMENT PROPERTIES

Report of the Directors (continued)

DONATIONS

DIRECTORS

Executive Directors

Non-executive Director

Independent non-executive Directors

Report of the Directors (continued)

DIRECTORS (continued)

BRIEF BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

Report of the Directors (continued)

BRIEF BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT (continued)

Report of the Directors (continued)

BRIEF BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT (continued)

DIRECTORS’ AND FIVE HIGHEST PAID EMPLOYEES’ EMOLUMENTS

Report of the Directors (continued)

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ASSOCIATED CORPORATIONS

Interests in shares and underlying shares of the Company and Associated Corporations

Report of the Directors (continued)

DIRECTORS’ AND CHIEF EXECUTIVE’S INTERESTS AND SHORT POSITIONS IN SHARES, UNDERLYING SHARES AND DEBENTURES OF THE COMPANY AND ASSOCIATED CORPORATIONS (continued)

Report of the Directors (continued)

ARRANGEMENTS TO ACQUIRE SHARES OR DEBENTURES

PERMITTED INDEMNITY PROVISION

Report of the Directors (continued)

INTERESTS AND SHORT POSITIONS OF SHAREHOLDERS DISCLOSEABLE UNDER THE SFO

Interests of substantial shareholders in shares of the Company

3SBio Inc. Annual Report 2020