3SBio Inc. - Capital/Financing Update 2008

THIS PROSPECTUS IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this prospectus, or as to the action to be taken, you should consult your licensed securities dealer, other licensed corporation, bank manager, solicitor, professional accountant or other professional adviser.

A copy of each of the Prospectus Documents, together with the documents specified under the paragraph headed “Documents delivered to the Registrar of Companies” in Appendix IV to the Prospectus, have been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies Ordinance and have been filed with the Registrar of Companies in Bermuda in accordance with the Companies Act 1981 of Bermuda (as amended). The Registrar of Companies in Hong Kong and the Registrar of Companies in Bermuda take no responsibility for the contents of any of these documents.

Each of the Securities and Futures Commission, The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) and Hong Kong Securities Clearing Company Limited (“HKSCC”) takes no responsibility for the contents of the Prospectus Documents, makes no representation as to their accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of the Prospectus Documents.

Dealings in the Shares and the Rights Shares in both nil-paid and fully-paid forms, the Bonus Warrants and the Warrant Exercise Shares may be settled through CCASS and you should consult your licensed securities dealer, other licensed corporation, bank manager, solicitor, professional accountant or other professional adviser for details of those settlement arrangements and how such arrangements may affect your rights and interests.

Subject to the granting of the listing of, and permission to deal in, the Rights Shares in both nil-paid and fully-paid forms, the Bonus Warrants and the Warrant Exercise Shares on the Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the Rights Shares in both nil-paid and fully-paid forms, the Bonus Warrants and the Warrant Exercise Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from their respective commencement dates of dealings on the Stock Exchange or such other date as may be determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

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HONGKONG CHINESE LIMITED 香港華人有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 655)

RIGHTS ISSUE OF 471,390,178 RIGHTS SHARES AT HK$1.00 EACH IN THE PROPORTION OF SEVEN RIGHTS SHARES FOR EVERY TWENTY SHARES HELD WITH BONUS WARRANTS ON THE BASIS OF THREE WARRANTS FOR EVERY SEVEN RIGHTS SHARES TO THE QUALIFYING SHAREHOLDERS ONLY

Financial adviser to Hongkong Chinese Limited and lead manager to the Rights Issue

SOMERLEY LIMITED

Underwriters to the Rights Issue

SOMERLEY LIMITED

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Lippo Securities Limited

The latest time for acceptance and payment is 4:00 p.m. on Monday, 23rd June, 2008. The procedures for acceptance and payment or transfer are set out on pages 15 and 16 of this prospectus.

Shareholders should note that the Shares have been dealt in on an ex-rights basis from Thursday, 29th May, 2008. The Rights Shares in their nil-paid form will be dealt in from Wednesday, 11th June, 2008 to Wednesday, 18th June, 2008 (both dates inclusive).

It should be noted that the Underwriting Agreement may be terminated by notice in writing given by Somerley (on behalf of the Underwriters) to the Company at any time prior to 4:00 p.m. on the second business day following the Final Acceptance Date, being Wednesday, 25th June, 2008, on the occurrence of the following force majeure events:

(i) the success of the Rights Issue or the taking up of the Rights Shares would be adversely and materially affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may materially adversely affect the business or the financial or trading position of the Group as a whole; or

(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreement) of a political, military, financial, economic, currency or other nature (whether or not unique with any of the foregoing), or any local, national or international outbreak or escalation of hostilities or armed conflict, or any event or change affecting local securities market or the occurrence of any combination of circumstances which is reasonably likely to materially adversely affect the business or the financial or trading position of the Group as a whole or is reasonably likely to materially adversely prejudice the success of the Rights Issue or the taking up of the Rights Shares (with entitlement to Bonus Warrants) by the Shareholders or investors in general; or

(c) there is any material adverse change in the business or in the financial or trading position of the Group as a whole; or
(d) any breach of the warranties of the Company set out in the Underwriting Agreement; or
(ii) any material change in market conditions or combination of market conditions and other circumstances in Hong Kong or elsewhere (including without limitation suspension or material restriction of trading in securities in general or the Company in particular) occurs which may adversely and materially affect the success of the Rights Issue or the taking up of the Rights Shares (with entitlement to Bonus Warrants) by the Shareholders or investors in general.

The Rights Issue is subject to the satisfaction of the conditions as described under the paragraph headed “Rights Issue – Conditions precedent to the Rights Issue” in the Letter from the Board contained in this prospectus. In particular, the Underwriting Agreement contains provisions allowing the Underwriters to terminate the Underwriting Agreement on the occurrence of force majeure events (as described above and under the paragraph headed “Underwriting Agreement – Termination of the Underwriting Agreement” in the Letter from the Board contained in this prospectus) by giving written notice to the Company at any time prior to 4:00 p.m. on the second business day following the Final Acceptance Date, being Wednesday, 25th June, 2008. Accordingly, any dealing in the Shares before the Underwriting Agreement becomes unconditional and in the Rights Shares in their nil-paid form from Wednesday, 11th June, 2008 to Wednesday, 18th June, 2008 (both dates inclusive) will bear the risk that the Rights Issue may not become unconditional or may not proceed. Any Shareholder or other person contemplating selling or acquiring Shares and/or Rights Shares in their nil-paid form from the date of this prospectus up to Friday, 27th June, 2008 will bear the risk that the Rights Issue may not become unconditional or may not proceed. Any Shareholder or other person contemplating any dealing in the Shares or Rights Shares in their nil-paid form are recommended to consult their own professional advisers.

6th June, 2008

* For identification purpose only

CONTENTS

	Page
Expected timetable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	i
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Summary of the Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Termination of the Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Rights Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Underwriting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	20
Deed of Undertaking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	23
Shareholding structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	24
Warning of the risks of dealing in the Shares
and nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Reasons for the Rights Issue and use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . .	25
Financial and trading prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Odd lot trading facilities for the Bonus Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Adjustment(s) in relation to the Options granted under
the Share Option Scheme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	26
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	27
Appendix I — Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . .	28
Appendix II — Unaudited pro forma financial information . . . . . . . . . . . . . . . . .	116
Appendix III — Summary of the terms of the Bonus Warrants . . . . . . . . . . . . . . .	120
Appendix IV — General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	130

EXPECTED TIMETABLE

Set out below is an indicative timetable for the Rights Issue. The timetable is subject to the changes (if any) in accordance with the Underwriting Agreement. The Company will notify the Shareholders on any changes to the expected timetable as and when appropriate.

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First day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . . Wednesday, 11th June Latest time for splitting nil-paid Rights Shares . . . . . . . . . . . . 4:30 p.m. on Friday, 13th June Last day of dealings in nil-paid Rights Shares . . . . . . . . . . . . . . . . . . . Wednesday, 18th June Latest time for acceptance of and payment for the Rights Shares and for application and payment for the excess Rights Shares . . . . . . . . . . . . . . . . 4:00 p.m. on Monday, 23rd June Underwriting Agreement becomes unconditional . . . . . . . . . 4:00 p.m. on Friday, 27th June Announcement of results of the Rights Issue expected to be made on the websites of the Stock Exchange and the Company on or about . . . . . . . . . . . . . . Wednesday, 2nd July Refund cheques in respect of wholly or partially unsuccessful applications for excess Rights Shares expected to be posted on or about . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 2nd July Share certificates for the Rights Shares and warrant certificates for the Bonus Warrants expected to be despatched on or about . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 2nd July Dealings in fully-paid Rights Shares and the Bonus Warrants commence on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 4th July Designated broker starts to stand in the market to provide matching services for odd lots of the Bonus Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 4th July Designated broker standing in the market to provide matching services for odd lots of the Bonus Warrants ends on . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Monday, 4th August

— i —

EXPECTED TIMETABLE

Notes:

All times in this prospectus refer to Hong Kong times.
Effect of bad weather on the latest time for acceptance of and payment for the Rights Shares and for application and payment for the excess Rights Shares:

The latest time for acceptance of and payment for the Rights Shares will not take effect if there is a tropical cyclone warning signal number 8 or above or a “black” rainstorm warning. If such circumstance is:

(a) in force in Hong Kong at any local time before 12:00 noon but no longer in force after 12:00 noon on Monday, 23rd June, 2008, the latest time for acceptance of and payment for the Rights Shares and for application and payment for the excess Rights Shares will be extended to 5:00 p.m. on the same business day; or
(b) in force in Hong Kong at any local time between 12:00 noon and 4:00 p.m. on Monday, 23rd June, 2008, the latest time for acceptance of and payment for the Rights Shares and for application and payment for the excess Rights Shares will be rescheduled to 4:00 p.m. on the following business day which does not have either of those warnings in force at any time between 9:00 a.m. and 4:00 p.m.

If the latest time for acceptance of and payment for the Rights Shares and for application and payment for the excess Rights Shares does not take effect on Monday, 23rd June, 2008, the dates mentioned above may be affected. An announcement will be made by the Company in such event.

— ii —

DEFINITIONS

In this prospectus, the following expressions shall have the meanings set out below unless the context requires otherwise:

“AIAB”	American International Assurance Company
	(Bermuda) Limited, a company incorporated in
	Bermuda with limited liability;
“Board”	board of Directors;
“Bonus Warrant(s)”	bonus warrant(s) to be issued to successful applicants
	of the Rights Shares in the manner as set out in the
	paragraph headed “Rights Issue – Terms of the Rights
	Issue (including Bonus Warrants)” in the Letter from
	the Board contained in this prospectus;
“Bonus Warrants Subscription	the initial subscription price of HK$1.25 (subject to
Price”	adjustment) per Warrant Exercise Shares;
“business day”	any days (other than Saturday and Sunday) on which
	licensed banks in Hong Kong are open for business
	during their normal business hours;
“Capital Increase”	the increase in the authorised share capital of the
	Company from HK$2,000,000,000 to HK$4,000,000,000
	by the creation of 2,000,000,000 new Shares of HK$1.00
	each;
“CCASS”	the Central Clearing and Settlement System established
	and operated by HKSCC;
“CCASS Operational Procedures”	the operational procedures of HKSCC in relation to
	CCASS, containing the practices, procedures and
	administrative requirements relating to the operations
	and functions of CCASS, as from time to time in force;
“Company”	Hongkong Chinese Limited (香港華人有限公司*), a
	company incorporated in Bermuda with limited
	liability, the shares of which are listed on the Stock
	Exchange;
“Companies Ordinance”	Companies Ordinance (Chapter 32 of the Laws of Hong
	Kong), as may be amended from time to time;
“Completion”	completion of the Rights Issue;

For identification purpose only

— 1 —

DEFINITIONS

“Deed of Undertaking”

a deed of undertaking dated 17th May, 2008 signed by Hennessy and Lippo in favour of the Company in relation to, among other things, the undertaking of Hennessy to subscribe for and to procure the subscription of Rights Shares to be provisionally allotted to it and/or its nominees, and to apply for the Hennessy’s Excess Application;

“Director(s)”
director(s) of the Company;
“EAF(s)”

the excess application form(s) issued to the Qualifying Shareholders in respect of applications for excess Rights Shares (with entitlement to Bonus Warrant(s)) pursuant to the Rights Issue;

“Excluded Shareholders”

Overseas Shareholders that the Directors, having made enquiries regarding the legal restrictions under the laws of relevant jurisdiction or the requirements of the relevant regulatory body or stock exchange in that jurisdiction, consider it necessary or expedient not to offer the Rights Shares (with entitlement to Bonus Warrant(s)) on account either of legal restrictions under the laws of the relevant jurisdiction or the requirements of the relevant regulatory body or stock exchange in that jurisdiction;

“Final Acceptance Date”

the latest time for acceptance of the Rights Shares anticipated as at the Latest Practicable Date to be 4:00 p.m. on Monday, 23rd June, 2008, subject to postponement in such circumstances and in such manner as may be provided in this prospectus, or such other time and date as may be agreed between the Company and the Underwriters;

“General Rules of CCASS”

the general rules of CCASS, as may be amended from time to time;

“Group”

the Company and its subsidiaries;

“Hennessy”

Hennessy Holdings Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of Lippo and is the controlling shareholder of the Company;

“Hennessy’s Excess Application” the application by Hennessy under the EAF for at least 35,000,000 excess Rights Shares pursuant to the Deed of Undertaking;

— 2 —

DEFINITIONS

Hong Kong Securities Clearing Company Limited;

“HKSCC” Hong Kong Securities Clearing Company Limited; “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China;
“Latest Practicable Date” 2nd June, 2008, being the latest practicable date prior to the printing of this prospectus for ascertaining certain information contained in this prospectus;
“LCR” Lippo China Resources Limited 力寶華潤有限公司 , a company incorporated in Hong Kong with limited liability and a subsidiary of Lippo, the shares of which are listed on the Stock Exchange;
“Lead Manager” Somerley;
“Lippo” Lippo Limited 力寶有限公司, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Stock Exchange;
“Lippo Capital” Lippo Capital Limited, a company incorporated in the Cayman Islands with limited liability and is a whollyowned subsidiary of Lippo Cayman and the controlling shareholder of Lippo;
“Lippo Cayman” Lippo Cayman Limited, a company incorporated in the Cayman Islands with limited liability which holds the entire issued share capital of Lippo Capital;
“Lippo Group” Lippo and its subsidiaries; “Lippo Bonus Warrants” bonus warrants to be issued to successful applicants of the Lippo Rights Shares in the manner as set out in the Lippo Prospectus;

“Lippo Prospectus” the prospectus of Lippo dated 6th June, 2008 in relation to the Lippo Rights Issue; “Lippo Rights Issue” the rights issue of Lippo, details of which are set out in the Lippo Prospectus; “Lippo Rights Shares” new Lippo Shares to be allotted and issued pursuant to the Lippo Rights Issue; “Lippo Securities” Lippo Securities Limited力寶證券有限公司, a company incorporated in Hong Kong with limited liability and a licensed corporation to carry on Type 1 (dealing in securities), Type 4 (advising on securities), Type 6 (advising on corporate finance) and Type 9 (asset management) regulated activities under the SFO, and is an indirect wholly-owned subsidiary of the Company;

— 3 —

DEFINITIONS

“Lippo Share(s)”	ordinary share(s) of HK$0.10 each in the share capital
	of Lippo;
“Lippo Underwriting Agreement”	the underwriting agreement dated 17th May, 2008
	entered into amongst Lippo, Lippo Capital, ASM Asia
	Recovery (Master) Fund, ASM Hudson River Fund and
	Champion Way Development Limited in relation to
	the Lippo Rights Issue;
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange;
“Macau”	the Macao Special Administrative Region of the
	People’s Republic of China;
“Option(s)”	the option(s) granted under the Share Option Scheme;
“Overseas Shareholders”	Shareholders whose names appear on the register of
	members of the Company on the Record Date and
	whose addresses as shown on such register are outside
	Hong Kong;
“PAL(s)”	the provisional allotment letter(s) issued to the
	Qualifying Shareholders in respect of their assured
	entitlements under the Rights Issue;
“Posting Date”	6th June, 2008, being the date on which the Prospectus
	Documents are sent to Qualifying Shareholders and,
	for information only, the Prospectus to the Excluded
	Shareholders;
“PRC”	the People’s Republic of China and for the purpose of
	this prospectus only, excludes Hong Kong, Macau and
	Taiwan;
“Prospectus”	this prospectus;
“Prospectus Documents”	the Prospectus, the PAL and the EAF issued by the
	Company in relation to the Rights Issue;
“Qualifying Shareholders”	the Shareholders whose names appear on the register
	of members of the Company on the Record Date, other
	than the Excluded Shareholders;
“Record Date”	5th June, 2008, the record date for determining
	entitlements of the Shareholders to participate in the
	Rights Issue;
“Registrar”	Tricor Tengis Limited, the Hong Kong branch share
	registrars and transfer office of the Company;

— 4 —

DEFINITIONS

“Rights Issue”	the issue by way of rights of 471,390,178 Rights Shares
	at the Subscription Price on the basis of seven Rights
	Shares for every twenty Shares held on the Record
	Date including the issue of the Bonus Warrants to
	successful applicants of the Right Shares, in each case
	on the terms and subject to conditions set out in the
	Prospectus Documents;
“Rights Share(s)”	new Share(s) to be allotted and issued pursuant to the
	Rights Issue;
“SFO”	Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong), as may be amended form time
	to time;
“SGM”	the special general meeting of the Company which
	was held on 5th June, 2008 and at which the resolutions
	in relation to, inter alia, the Capital Increase, and the
	creation and issue of the Bonus Warrants and the
	allotment and issue of the Warrant Exercise Shares
	were approved;
“Share(s)”	ordinary share(s) of HK$1.00 each in the share capital
	of the Company;
“Share Option Scheme”	the share option scheme of the Company adopted and
	approved by the Shareholders on 7th June, 2007;
“Shareholder(s)”	holder(s) of the Share(s);
“Somerley”	Somerley Limited, a licensed corporation to carry on
	Type 1 (dealing in securities), Type 4 (advising on
	securities), Type 6 (advising on corporate finance) and
	Type 9 (asset management) regulated activities under
	the SFO;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Subscription Price”	the subscription price of HK$1.00 per Rights Share;
“Taifook Securities”	Taifook Securities Company Limited, a licensed
	corporation to carry on Type 1 (dealing in securities),
	Type 3 (leveraged foreign exchange trading) and Type 4
	(advising on securities) regulated activities under the
	SFO;

— 5 —

DEFINITIONS

“Underwriters” Somerley, Taifook Securities, AIAB and, for and on behalf of its clients, Lippo Securities; “Underwritten Rights Shares” Rights Shares, with an aggregate amount of 194,098,156, other than those undertaken to be subscribed and applied by Hennessy (or failing which, by Lippo) pursuant to the Deed of Undertaking; “Underwriting Agreement” the underwriting agreement dated 17th May, 2008 entered into between the Company and the Underwriters in relation to the Rights Issue; “Warrant Exercise Shares” new Shares to be allotted and issued pursuant to the exercise of the Bonus Warrants; “s.q.m.” square metre(s); “HK$” Hong Kong dollar, the lawful currency of Hong Kong; “RMB” Renminbi, the lawful currency of the People’s Republic of China; “S$” Singapore dollar, the lawful currency of the Republic of Singapore; “US$” United States dollar, the lawful currency of the United States of America; and “%” per cent.

— 6 —

SUMMARY OF THE RIGHTS ISSUE

The following information is derived from, and should be read in conjunction with, the full text of this prospectus:

Basis of the Rights Issue	:	seven Rights Shares for every twenty
		Shares held on the Record Date.
		Successful applicants of the Rights
		Shares will receive three Bonus
		Warrants for every seven Rights Shares
		taken up. No Rights Shares will be
		offered to the Excluded Shareholders
Number of Rights Shares to be issued	:	471,390,178 Rights Shares
Subscription Price	:	HK$1.00 per Rights Share, payable in
		full when a Qualifying Shareholder
		accepts the provisional allotment of
		Rights Shares or applies for excess
		Rights Shares or when a transferee of
		nil-paid Rights Shares subscribes for the
		relevant Rights Share
Number of Bonus Warrants	:	up to 202,024,362 Bonus Warrants
		which upon full exercise will result in
		the issue of up to 202,024,362 Warrant
		Exercise Shares at an initial subscription
		price of HK$1.25 per Share (subject to
		adjustment in accordance with the
		terms of the Bonus Warrants)
Number of Underwritten Rights Shares	:	194,098,156 Rights Shares
Right of excess application	:	Qualifying Shareholders may apply, by
		way of excess applications, for any
		unsold entitlements of the Excluded
		Shareholders, any unsold Rights Shares
		created by adding together fractions of
		Rights Shares and any Rights Shares
		provisionally allotted but not accepted
		by the Qualifying Shareholders
Amount to be raised by the Rights Issue	:	approximately HK$471 million before
		expenses and approximately HK$463
		million after expenses
Lead manager	:	Somerley
Underwriters	:	Somerley, Taifook Securities, AIAB,
		and, for and on behalf of its clients,
		Lippo Securities

— 7 —

TERMINATION OF THE UNDERWRITING AGREEMENT

The Underwriting Agreement may be terminated by notice in writing given by the Lead Manager (on behalf of the Underwriters) to the Company at any time prior to 4:00 p.m. on the second business day following the Final Acceptance Date, being Wednesday, 25th June, 2008, on the occurrence of the following force majeure events:

(i) the success of the Rights Issue or the taking up of the Rights Shares would be adversely and materially affected by:
(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may materially adversely affect the business or the financial or trading position of the Group as a whole; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreement) of a political, military, financial, economic, currency or other nature (whether or not unique with any of the foregoing), or any local, national or international outbreak or escalation of hostilities or armed conflict, or any event or change affecting local securities market or the occurrence of any combination of circumstances which is reasonably likely to materially adversely affects the business or the financial or trading position of the Group as a whole or is reasonably likely to materially adversely prejudice the success of the Rights Issue or the taking up of the Rights Shares (with entitlement to Bonus Warrants) by the Shareholders or investors in general; or
(c) there is any material adverse change in the business or in the financial or trading position of the Group as a whole; or
(d) any breach of the warranties of the Company set out in the Underwriting Agreement; or
(ii) any material change in market conditions or combination of market conditions and other circumstances in Hong Kong or elsewhere (including without limitation suspension or material restriction of trading in securities in general or the Company in particular) occurs which may adversely and materially affect the success of the Rights Issue or the taking up of the Rights Shares (with entitlement to Bonus Warrants) by the Shareholders or investors in general.

— 8 —

TERMINATION OF THE UNDERWRITING AGREEMENT

The Rights Issue is subject to the satisfaction of the conditions as described under the paragraph headed “Rights Issue – Conditions precedent to the Rights Issue” in the Letter from the Board contained in this prospectus. In particular, the Underwriting Agreement contains provisions allowing the Underwriters to terminate the Underwriting Agreement on the occurrence of force majeure events (as described above and under the paragraph headed “Underwriting Agreement – Termination of the Underwriting Agreement” in the Letter from the Board contained in this prospectus) by giving written notice to the Company at any time prior to 4:00 p.m. on the second business day following the Final Acceptance Date, being Wednesday, 25th June, 2008. Accordingly, any dealing in the Shares before the Underwriting Agreement becomes unconditional and in the Rights Shares in their nil-paid form from Wednesday, 11th June, 2008 to Wednesday, 18th June, 2008 (both dates inclusive) will bear the risk that the Rights Issue may not become unconditional or may not proceed. Any Shareholder or other person contemplating selling or acquiring Shares and/or Rights Shares in their nil-paid form from the date of this prospectus up to Friday, 27th June, 2008 will bear the risk that the Rights Issue may not become unconditional or may not proceed. Any Shareholder or other person contemplating any dealings in the Shares or Rights Shares in their nilpaid form are recommended to consult their own professional advisers.

— 9 —

LETTER FROM THE BOARD

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HONGKONG CHINESE LIMITED 香港華人有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 655)

Non-executive Directors: Dr. Mochtar Riady (Chairman) Mr. Leon Nim Leung Chan

Executive Directors: Mr. Stephen Riady (Chief Executive Officer) Mr. John Luen Wai Lee, J.P. Mr. Kee Yee Kor Independent Non-executive Directors: Mr. Albert Saychuan Cheok Mr. King Fai Tsui Mr. Victor Ha Kuk Yung

Registered Office: Clarendon House Church Street Hamilton HM 11 Bermuda

Principal Place of Business: 24th Floor, Tower One Lippo Centre 89 Queensway Hong Kong

6th June, 2008

To the Qualifying Shareholders and, for information purposes only, the Excluded Shareholders and the Option holders of the Company

Dear Sir or Madam,

RIGHTS ISSUE OF 471,390,178 RIGHTS SHARES AT HK$1.00 EACH IN THE PROPORTION OF SEVEN RIGHTS SHARES FOR EVERY TWENTY SHARES HELD WITH BONUS WARRANTS ON THE BASIS OF THREE WARRANTS FOR EVERY SEVEN RIGHTS SHARES TO THE QUALIFYING SHAREHOLDERS ONLY

INTRODUCTION

On 17th May, 2008, the Company announced that it intends to raise approximately HK$471 million, before expenses, by way of a rights issue of 471,390,178 Rights Shares at the Subscription Price of HK$1.00 per Rights Share on the basis of seven Rights Shares for every twenty Shares held on the Record Date. Successful applicants of the Rights Shares will receive three Bonus Warrants for every seven Rights Shares taken up. The Bonus Warrants will entitle the holders to subscribe for new Shares at an initial subscription price of HK$1.25 per Share (subject to adjustment) upon exercise of the Bonus Warrant.

* For identification purpose only

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LETTER FROM THE BOARD

The purpose of this prospectus is to provide you with further details regarding the Rights Issue, including information on dealings in, transfers and acceptances of the Rights Shares, and certain financial and other information in respect of the Group.

RIGHTS ISSUE

Rights Issue statistics

Basis of the Rights Issue : seven Rights Shares for every twenty Shares held on the Record Date. Successful applicants of the Rights Shares will receive three Bonus Warrants for every seven Rights Shares taken up. No Rights Shares will be offered to the Excluded Shareholders Number of Rights Shares : 471,390,178 Rights Shares to be issued Subscription Price : HK$1.00 per Rights Share, payable in full when a Qualifying Shareholder accepts the provisional allotment of Rights Shares or applies for excess Rights Shares or when a transferee of nil-paid Rights Shares subscribes for the relevant Rights Shares Number of Bonus Warrants : up to 202,024,362 Bonus Warrants which upon full exercise will result in the issue of up to 202,024,362 Warrant Exercise Shares at an initial subscription price of HK$1.25 per Share (subject to adjustment in accordance with the terms of the Bonus Warrants) Lead Manager : Somerley Underwriters : Somerley, Taifook Securities, AIAB, and for and on behalf of its clients, Lippo Securities

The Underwritten Rights Shares will be fully underwritten by the Underwriters on the terms and subject to the conditions as set out in the Underwriting Agreement, details of which are described under the paragraph headed “Underwriting Agreement” below.

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LETTER FROM THE BOARD

Qualifying Shareholders

To qualify for the Rights Issue, a Shareholder must be registered as a member of the Company on the Record Date and not be an Excluded Shareholder.

The Company will provisionally allot the Rights Shares (with entitlement to Bonus Warrants), and send the Prospectus containing details of the Rights Issue to the Qualifying Shareholders and, for information only, to the Excluded Shareholders. PALs and EAFs will also be sent to the Qualifying Shareholders only.

Any Qualifying Shareholder holding less than twenty Shares on the Record Date will not be entitled to the provisional allotment of the Rights Shares (with entitlement to Bonus Warrants), but will be entitled to apply for excess Rights Shares (with entitlement to Bonus Warrant) under the EAF.

Overseas Shareholders

The Prospectus Documents will not be registered or filed under the applicable securities legislation of any jurisdiction other than Hong Kong and Bermuda. Based on the register of members of the Company as at the Latest Practicable Date, there were 32 Shareholders with registered addresses which were outside Hong Kong and in the countries, namely, Australia, the British Virgin Islands, Canada, the PRC, Liberia, Macau, Malaysia, Pakistan, the Republic of the Philippines, the Republic of Singapore, Spain, the United Kingdom and the United States of America. As such, the Board has made enquiries pursuant to Rule 13.36(2)(a) of the Listing Rules as to the applicable securities legislation of the relevant overseas jurisdictions or the requirements of any relevant regulatory body or stock exchange for the issue of the Rights Shares (with entitlement to Bonus Warrants) to the Overseas Shareholders. Based on the advice provided by the legal advisers in these countries, the Board has formed the view that it is necessary or expedient not to offer the Rights Shares (with entitlement to Bonus Warrants) to the Shareholders whose registered addresses are in Australia, Canada, Malaysia, Pakistan, the Republic of the Philippines, Spain, the United Kingdom and the United States of America on account either of the legal restrictions under the laws of that place or the requirements of the relevant regulatory body or stock exchange in that place. Accordingly, the Shareholders whose registered addresses are in Australia, Canada, Malaysia, Pakistan, the Republic of the Philippines, Spain, the United Kingdom and the United States of America are the Excluded Shareholders and the offer of the Rights Shares (with entitlement to Bonus Warrants) will not be extended to them. The Company will only send the Prospectus to the Excluded Shareholders for their information. The Company will not send the PALs and the EAFs to the Excluded Shareholders. The Prospectus is not and should not be construed as an offer or invitation to the Excluded Shareholders to subscribe for or purchase Shares. No person receiving a copy of the Prospectus or a PAL or an EAF having a registered address in the register of members of the Company in any jurisdiction outside Hong Kong may treat it as an offer or invitation to apply for the Rights Shares (with entitlement to Bonus Warrants), unless in the relevant jurisdiction such an offer or invitation could lawfully be made without compliance with any registration or other legal or regulatory requirements.

Arrangements will be made for the Rights Shares which would otherwise have been provisionally allotted to the Excluded Shareholders to be sold in the market in

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their nil-paid form as soon as practicable after dealings in the nil-paid Rights Shares commence on the Stock Exchange and in any event before the last date for dealings in nil-paid Rights Shares, if a premium (net of expenses) can be obtained. Proceeds of each sale, less expenses and stamp duty, of HK$100 or more will be paid to the relevant Excluded Shareholder in Hong Kong dollars. The Company will retain individual amounts of less than HK$100 for the benefit of the Company.

For those Shareholders with registered addresses on the Record Date in the British Virgin Islands, the PRC, Liberia, Macau and the Republic of Singapore, the Directors have been advised by the relevant legal advisers that no local legal or regulatory compliance is required to be made in these jurisdictions with respect to the offer of the Rights Shares (with entitlement to Bonus Warrants) to the Shareholders in those jurisdictions. Therefore, such Shareholders are Qualifying Shareholders and the provisional allotment of the Rights Shares (with entitlement to Bonus Warrants) will be made and the Prospectus Documents will be sent to them.

It is the responsibility of any person (including but without limitation, a nominee, agent and trustee) receiving the Prospectus Documents outside Hong Kong and wishing to take up the Rights Shares (with entitlement to Bonus Warrants) under the Rights Issue to satisfy himself/herself/itself as to the full observance of the laws of the relevant territory or jurisdiction including the obtaining of any governmental or other consents for observing any other formalities which may be required in such territory or jurisdiction, and to pay any taxes, duties and other amounts required to be paid in such territory or jurisdiction in connection therewith. Any acceptance of the Rights Shares (with entitlement to Bonus Warrants) by any person will be deemed to constitute a representation and warranty from such person to the Company that those local laws and requirements of the relevant territory or jurisdiction have been fully complied with. If you are in any doubt as to your position, you should consult your professional advisers.

Terms of the Rights Issue (including Bonus Warrants)

The Rights Issue will be on the basis of seven Rights Shares for every twenty Shares held on the Record Date and successful applicants of the Rights Shares will receive three Bonus Warrants for every seven Rights Shares taken up.

Subscription Price for Rights Shares

The Rights Issue is on the basis of the Subscription Price of HK$1.00 per Rights Share, which is payable in full when a Qualifying Shareholder accepts the provisional allotment of Rights Shares or applies for excess Rights Shares or when a transferee of nil-paid Rights Shares subscribed for the relevant Rights Shares.

The Subscription Price represents:

(i) a discount of 20% to the closing price of HK$1.25 per Share as quoted on the Stock Exchange on the Latest Practicable Date;

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(ii) a discount of approximately 32% to the closing price of HK$1.48 per Share as quoted on the Stock Exchange on 16th May, 2008, being the last trading day before the date of the Underwriting Agreement;
(iii) a discount of approximately 22% to the theoretical ex-rights price of approximately HK$1.285 per Share, which is calculated based on the closing price of HK$1.48 per Share on 16th May, 2008 and the theoretical value of the Bonus Warrants;
(iv) a discount of approximately 24% to the theoretical ex-rights price of approximately HK$1.319 per Share, which is calculated based on the closing price of HK$1.48 per Share on 16th May, 2008; and
(v) a discount of approximately 71% to the audited consolidated net assets value (attributable to the Shareholders after final dividend) per Share as at 31st December, 2007 of approximately HK$3.43.

Bonus Warrants and Bonus Warrants Subscription Price

On the basis that 471,390,178 Rights Shares to be issued and that the Bonus Warrants will be issued in the proportion of three Bonus Warrants for every seven Rights Shares, up to 202,024,362 Bonus Warrants will be issued, entitling the holders thereof to subscribe for up to 202,024,362 Shares, at an initial Bonus Warrants Subscription Price of HK$1.25 (subject to adjustment) per Warrant Exercise Share. The subscription period is approximately three years from the date when dealings in the Bonus Warrants commence on the Stock Exchange (which is expected to be from 4th July, 2008 to 4th July, 2011 (both dates inclusive)). The Bonus Warrants Subscription Price of HK$1.25 represents:

(i) a price which is equivalent to the closing price of HK$1.25 per Share as quoted on the Stock Exchange on the Latest Practicable Date;
(ii) a discount of approximately 16% to the closing price of HK$1.48 per Share as quoted on the Stock Exchange on 16th May, 2008, being the last trading day before the date of the Underwriting Agreement;
(iii) a discount of approximately 3% to the theoretical ex-rights price of approximately HK$1.285 per Share, which is calculated based on the closing price of HK$1.48 per Share on 16th May, 2008 and the theoretical value of the Bonus Warrants;
(iv) a discount of approximately 5% to the theoretical ex-rights price of approximately HK$1.319 per Share, which is calculated based on the closing price of HK$1.48 per Share on 16th May, 2008; and
(v) a discount of approximately 64% to the audited consolidated net assets value (attributable to the Shareholders after final dividend) per Share as at 31st December, 2007 of approximately HK$3.43.

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LETTER FROM THE BOARD

Based on 202,024,362 Bonus Warrants to be issued, the total cash proceeds upon full exercise of the Bonus Warrants are expected to be approximately HK$253 million.

Further details on the terms of the Bonus Warrants are set out in Appendix III of this prospectus.

Fractions of the Rights Shares and the Bonus Warrants

The Company will not (i) provisionally allot fractions of Rights Shares in nilpaid form; or (ii) allot fractions of Bonus Warrants. All fractions of Rights Shares and Bonus Warrants will be aggregated and sold in the market for the Company’s own benefit. Any unsold fractions of the Rights Shares may be made available for excess application under the EAFs.

The Subscription Price and the Bonus Warrants Subscription Price have been determined based on arm’s length negotiations between the Company and the Underwriters. The Directors consider the terms of the Rights Issue (including the terms of the Bonus Warrants) to be fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Status of the Rights Shares and the Warrant Exercise Shares

The Rights Shares and the Warrant Exercise Shares (when fully paid, allotted and issued) will rank pari passu with the then existing Shares in issue in all respects.

Procedures for acceptance and payment or transfer

A PAL which entitles a Qualifying Shareholder to take up the number of the Rights Shares shown therein is enclosed with this prospectus. If a Qualifying Shareholder wishes to accept all the Rights Shares (with entitlement to Bonus Warrants) provisionally allotted to him/her/it as specified in the PAL, the Qualifying Shareholder must lodge the PAL in accordance with the instructions printed thereon, together with a remittance for the full amount payable on acceptance, with the Registrar, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, by not later than 4:00 p.m. on Monday, 23rd June, 2008, or such later date as may be agreed between the Company and the Underwriters. All remittances must be made by cheques or cashier’s orders in Hong Kong dollars. Cheques must be drawn on an account with, or cashier’s orders must be issued by, a licensed bank in Hong Kong and made payable to “ HONGKONG CHINESE LIMITED — RIGHTS ISSUE ACCOUNT ” and crossed “ Account Payee Only ”.

It should be noted that unless the PAL, together with the appropriate remittance, has been lodged with the Registrar, by not later than 4:00 p.m. on Monday, 23rd June, 2008, whether by the original allottee or any person to whom the rights have been validly transferred, the relevant provisional allotment and all rights thereunder will be deemed to have been declined and will be cancelled. The Company may (at its sole discretion) treat a PAL as valid and binding on the person(s) by whom or on whose behalf it is lodged even if not completed in accordance with the relevant instructions.

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LETTER FROM THE BOARD

The PAL contains full information regarding the procedures to be followed if a Qualifying Shareholder wishes to accept only part of the provisional allotment or if a Qualifying Shareholder wishes to transfer all or part of his/her/its provisional allotment. If a Qualifying Shareholder wishes to accept only part of the provisional allotment or if a Qualifying Shareholder wishes to transfer all or part of his/her/its provisional allotment to more than one person, the PAL must be surrendered by not later than 4:30 p.m. on Friday, 13th June, 2008 to the Registrar which will cancel the original PAL and issue a new PAL in the denominations required, which will be available for collection at the Registrar after 9:00 a.m. on the third business day after the surrender of the original PAL.

All cheques and cashier’s orders will be presented for payment following receipt and all interest earned on such monies will be retained for the benefit of the Company. Completion and return of a PAL together with a cheque or a cashier’s order in payment for the Rights Shares accepted will constitute a warranty by the subscriber that the cheque or the cashier’s order will be honoured on first presentation. Without prejudice to its other rights in respect thereof, the Company reserves the right to reject any PAL in respect of which the accompanying cheque or cashier’s order is dishonoured on first presentation, and in that event the relevant provisional allotment of Rights Shares and all rights thereunder will be deemed to have been declined and will be cancelled.

If Somerley (on behalf of the Underwriters) exercises its right to terminate its obligations under the Underwriting Agreement before the second business day following the Final Acceptance Date, being Wednesday, 25th June, 2008, or if any of the conditions precedent to the Rights Issue (as set out in the paragraph headed “Rights Issue – Conditions precedent to the Rights Issue” below) is not fulfilled and/or waived, the Rights Issue will not proceed and the monies received in respect of the relevant provisional allotment of the Rights Shares will be returned to the Qualifying Shareholders or such other persons to whom the Rights Shares in their nil-paid form shall have been validly transferred without interest, by means of cheques crossed “Account Payee Only” to be despatched by ordinary post to their registered addresses and in the case of joint applicants to the registered address of the applicant whose name first appears on the register of members or the transfer form at their own risk on or about Wednesday, 2nd July, 2008.

Procedures for application for excess Rights Shares

Any Rights Shares to which the Excluded Shareholders would otherwise have been provisionally allotted and which are not sold as referred to in the paragraph headed “Rights Issue – Overseas Shareholders” above, any unsold Rights Shares created by adding together fractions of Rights Shares and any Rights Shares provisionally allotted but not accepted by the Qualifying Shareholders will be available for application through the EAF by the Qualifying Shareholders.

If you wish to apply for any Rights Shares in addition to your provisional allotment, you must complete and sign the EAF in accordance with the instructions printed thereon and lodge the same with a separate remittance for the excess Rights Shares being applied for with the Registrar by not later than 4:00 p.m. on Monday, 23rd June, 2008 or such later date as may be agreed between the Company and the Underwriters. All remittances must be made by cheques or cashier’s orders in Hong Kong dollars. Cheques must be drawn on

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account with, or cashier’s orders must be issued by, a licensed bank in Hong Kong and made payable to “HONGKONG CHINESE LIMITED — EXCESS APPLICATION ACCOUNT” and crossed “ Account Payee Only ”.

The EAF is for use only by the Qualifying Shareholder(s) to whom it is addressed and is not transferable. Qualifying Shareholders with the Shares held by a nominee company should note that the Board will regard the nominee company as a single Shareholder according to the register of members of the Company. Accordingly, the Qualifying Shareholders should note that the aforesaid arrangement in relation to the allocation of the excess Rights Shares will not be extended to beneficial owners individually.

Completion and return of the EAF together with a cheque or a cashier’s order in payment for the excess Rights Shares applied for will constitute a warranty by the applicant that the cheque or the cashier’s order will be honoured on first presentation. All cheques and cashier’s orders will be presented immediately following receipt and all interest earned on such monies will be retained for the benefit of the Company. If any cheque or cashier’s order accompanying the application is dishonoured on first presentation, without prejudice to the other rights of the Company, EAF is liable to be rejected and cancelled. The Registrar will notify you of any allotment of excess Rights Shares made to you. The Directors will allocate the excess Rights Shares at their discretion and on a fair and equitable basis and will give preference to topping up odd lots to whole board lots. Any further remaining excess Rights Shares will be allocated to all applicants based on a sliding scale with reference to the excess Rights Shares applied by them (i.e. Qualifying Shareholders belonging to pre-determined categories consisting of applications for smaller number of Rights Shares are allocated with a higher percentage of successful application but will receive less number of Rights Shares; whereas Qualifying Shareholders belonging to predetermined categories consisting of applications for larger number of Rights Shares are allocated with a smaller percentage of successful application but will receive higher number of Rights Shares), subject always to the rights of the Directors to reject any applications with an intention to abuse the general mechanism of application for excess Rights Shares.

If no excess Rights Shares are allotted to the Qualifying Shareholders, the amount tendered on application is expected to be refunded (without interest) in full on or about Wednesday, 2nd July, 2008. If the number of excess Rights Shares allotted to the Qualifying Shareholders is less than that applied for, the surplus application monies are also expected to be refunded (without interest) on or about Wednesday, 2nd July, 2008.

If Somerley (on behalf of the Underwriters) exercises the right to terminate its obligations under the Underwriting Agreement before the second business day following the Final Acceptance Date, being Wednesday, 25th June, 2008, or if any of the conditions precedent to the Rights Issue (as set out in the paragraph headed “Rights Issue – Conditions precedent to the Rights Issue” below) is not fulfilled or waived, the Rights Issue will not proceed and the monies received in respect of the relevant applications for excess Rights Shares will be returned (without interest) to the Qualifying Shareholders or, in the case of joint applicants, to the first-named person, by means of cheques crossed “ Account Payee Only ” to be despatched by ordinary post at their own risk on or about Wednesday, 2nd July, 2008.

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LETTER FROM THE BOARD

Certificates for the Rights Shares and Bonus Warrants

Subject to the fulfilment or waiver of the conditions of the Rights Issue, certificates for fully-paid Rights Shares and warrant certificates for the Bonus Warrants are expected to be despatched on or about Wednesday, 2nd July, 2008 to successful applicants at their own risk.

Application for listing

The Company has applied to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the Rights Shares in both nil-paid and fully-paid forms, the Bonus Warrants and the Warrant Exercise Shares. All necessary arrangements, including an application, have been made to HKSCC to enable the Right Shares in both nil-paid and fully-paid forms, the Bonus Warrants and the Warrant Exercise Shares to be accepted by HKSCC as eligible securities for deposit, clearance and settlement in CCASS. The nil-paid Rights Shares shall have the same board lot size as the Shares, that is, 2,000 shares in one board lot. The Bonus Warrants shall have 8,000 warrants in one board lot.

Subject to the granting of the listing of, and permission to deal in, the Rights Shares in both nil-paid and fully-paid form, the Bonus Warrants and the Warrant Exercise Shares on the Stock Exchange as well as compliance with the stock admission requirements of HKSCC, the Rights Shares in both nil-paid and fully paid forms, the Bonus Warrants and the Warrant Exercise Shares will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS with effect from their respective commencement dates of dealings on the Stock Exchange or such other dates as may be determined by HKSCC. Settlement of transactions between participants of the Stock Exchange on any trading day is required to take place in CCASS on the second trading day thereafter. All activities under CCASS are subject to the General Rules of CCASS and CCASS Operational Procedures in effect from time to time.

No part of the share capital of the Company is listed or dealt in on any stock exchange other than the Stock Exchange and no such listing or permission to deal is being or proposed to be sought. The Rights Shares, the Bonus Warrants and the Warrant Exercise Shares will not be listed or traded on any stock exchange other than the Stock Exchange and no such listing permission to deal is being or proposed to be sought.

Taxation, stamp duty and other applicable fees and charges

Dealings in the Rights Shares in their nil-paid and fully-paid forms, the Bonus Warrants and the Warrant Exercise Shares will be subject to the payment of stamp duty, Stock Exchange trading fee, Securities and Futures Commission transaction levy and any other application fees and charges in Hong Kong.

Qualifying Shareholders are recommended to consult their professional advisers if they are in any doubt as to the taxation implications of holding, disposing of or dealing in the Rights Shares (in their nil-paid and/or fully-paid forms), the Bonus Warrant and/or

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the Warrant Exercise Shares. It is emphasised that none of the Company, the Directors or any other parties involved in the Rights Issue accepts responsibility for any tax effects or liabilities of holders of the Rights Shares, the Bonus Warrants and/or the Warrant Exercise Shares resulting from the purchase, holding, disposal of, or dealing in the Rights Shares (in their nil-paid and/or fully-paid forms), the Bonus Warrants and/or the Warrant Exercise Shares.

Conditions precedent to the Rights Issue

The Rights Issue is conditional upon the following:

(i) the delivery by or on behalf of the Company on or before the Posting Date of (a) one copy of each of the duly signed Prospectus Documents together with any requisite accompanying documents, to the Stock Exchange and the Registrar of Companies in Hong Kong for filing and registration in accordance with the provisions of the Hong Kong Companies Ordinance; and (b) one copy of the duly certified Prospectus Documents together with any requisite accompanying documents, to the Registrar of Companies in Bermuda for filing in accordance with the Companies Act 1981 of Bermuda (as amended);
(ii) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment) listing of and permission to deal in (a) all the Rights Shares (in their nil-paid and fully-paid forms) before 9:00 a.m. on the date of commencement of dealing in the nil-paid Rights Shares on the Stock Exchange and not having withdrawn or revoked such listings and permission to deal and (b) the Bonus Warrants and the Warrant Exercise Shares before 9:00 a.m. on the date of commencement of dealing in the Bonus Warrants and the Warrant Exercise Shares on the Stock Exchange and not having withdrawn or revoked such listings and permission to deal;
(iii) the Bermuda Monetary Authority granting consent (if required) to the issue of the Rights Shares by no later than the Posting Date;
(iv) the passing of resolution(s) by the Shareholders at the SGM to approve (a) the creation and issue of the Bonus Warrants and the issue and allotment of the Warrant Exercise Shares (upon exercise of the subscription rights attaching to the Bonus Warrants) and (b) the Capital Increase;
(v) the posting of the Prospectus Documents to the Qualifying Shareholders and of the Prospectus, for information purposes only, to the Excluded Shareholders on the Posting Date;
(vi) compliance with and performance of all the undertakings and obligations of the Company under the terms of the Underwriting Agreement;
(vii) compliance with and performance by Hennessy and Lippo under the Deed of Undertaking;

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(viii) the passing of a resolution by the shareholders of Lippo at an extraordinary general meeting to approve the Lippo Rights Issue to the qualifying shareholders of Lippo only and the creation and issue of bonus warrants and issue and allotment of the warrant exercise shares (upon exercise of the subscription rights attaching to the Lippo Bonus Warrants) under the Lippo Rights Issue;
(ix) the Lippo Rights Issue being unconditional in all respects (save in respect of any matter or condition relating to the Rights Issue); and
(x) the obligations of the Underwriters not being terminated by the Lead Manager (on behalf of the Underwriters) in accordance with the terms as set out in the Underwriting Agreement.

As at the Latest Practicable Date, none of the conditions was satisfied. If the conditions precedent are not satisfied and/or waived by 27th June, 2008 (unless otherwise stated as above) or such later date or dates as Somerley (on behalf of the Underwriters) may agree with the Company in writing, the Underwriting Agreement shall terminate (save in respect of any reasonable legal fees and other reasonable out-of-pocket expenses, if any, of the Underwriters, or any rights or obligations which may accrue under the Underwriting Agreement and/or the Deed of Undertaking prior to such termination) and no party will have any claim against the other party for costs, damages, compensation or otherwise.

UNDERWRITING AGREEMENT

Key terms and details of the Underwriting Agreement are as set out below:

Date : 17th May, 2008 Lead Manager : Somerley Underwriters : Somerley, Taifook Securities, AIAB, and, for and on behalf of its clients, Lippo Securities; Number of Underwritten : 194,098,156 Rights Shares Rights Shares (on the basis of the Shares in issue as at the Latest Practicable Date) Commission : 2.5% of the aggregate Subscription Price of all the Underwritten Rights Shares

The obligations of the Underwriters under the Underwriting Agreement are several but not joint and several.

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To the best of the Directors’ knowledge and information and after making reasonable enquiries, each of the Underwriters and their respective ultimate beneficial owners are not connected persons (as defined in the Listing Rules) of the Company. Lippo Securities is an indirect wholly-owned subsidiary of the Company.

Underwriting

Subject to the fulfilment or waiver of the conditions contained in the Underwriting Agreement, the Underwriters have agreed to underwrite 194,098,156 Rights Shares and will receive underwriting commission of 2.5% on the aggregate Subscription Price of the Underwritten Rights Shares to be underwritten by them. Based on the number of Shares outstanding and the number of Shares held by Hennessy as at the Latest Practicable Date, such underwriting commission amounts to approximately HK$5 million. The Underwriters will also be entitled to receive three Bonus Warrants for every seven Rights Shares to be subscribed (if any) in accordance with the terms of the Rights Issue and pursuant to the Underwriting Agreement.

In the event that there are unsubscribed Rights Shares which require to be taken up by the Underwriters pursuant to the Underwriting Agreement, the Underwriters (except for AIAB) may consider placing out the untaken Rights Shares to other independent third parties.

Conditions

The Underwriting Agreement is conditional, among other things, on the following conditions being fulfilled:

(i) the Lippo Rights Issue becoming unconditional in all respects (save in respect of any matter or condition relating to the Rights Issue), not being terminated in accordance with its terms and being completed and any underwriting agreement entered or to be entered into by Lippo with any underwriter(s) in connection with the Lippo Rights Issue becoming unconditional (save in respect of any matter or condition relating to the Rights Issue) and not being terminated in accordance with its terms;
(ii) the passing of the ordinary resolutions by Shareholders at the SGM (or any adjournment(s) thereof), to approve (a) the Capital Increase, (b) the creation and issue of the Bonus Warrants and (c) to authorise the Directors to the issue and allotment of the Warrant Exercise Shares;
(iii) the Listing Committee of the Stock Exchange granting or agreeing to grant (subject to allotment), and not having revoked, the listing of, and permission to deal in, (a) the Rights Shares in their nil-paid form and fully-paid form by not later than 9:00 a.m. on 11th June, 2008 and (b) the Bonus Warrants and the Warrant Exercise Shares not later than 9:00 a.m. on 4th July, 2008;

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(iv) the delivery to the Stock Exchange and registration by the Registrar of Companies in Hong Kong not later than the Posting Date of one copy of each of the Prospectus Documents each duly certified by two of the Directors or by their agents authorised in writing as having been approved by resolution by the Board (and all documents required to be attached thereto, if any) in compliance with the Listing Rules and the Companies Ordinance;
(v) the obtaining of all requisite consents and approvals from the relevant regulatory authorities in connection with the Rights Issue and the issue of Bonus Warrants (if any) in Hong Kong or elsewhere;
(vi) the posting of the Prospectus Documents to the Qualifying Shareholders;
(vii) the delivery to the Underwriters of those documents listed in the Underwriting Agreement, when specified therein;
(viii) the filing of one duly certified (by or on behalf of each Director) copy of the Prospectus Documents with the Registrar of Companies in Bermuda;
(ix) the representations and warranties mentioned in the Underwriting Agreement remaining true and accurate in all material aspects at all times on or before 4:00 p.m. on the second business day following the Final Acceptance Date; and
(x) fulfilment of the obligations of Hennessy and of Lippo under the Deed of Undertaking.

As at the Latest Practicable Date, none of the conditions was satisfied. The Underwriters may grant extension for the fulfilment or waive any of the conditions mentioned above (save and except that conditions (ii), (iii), (iv), (v), (vi) and (vii) cannot be waived). In the event of the conditions precedent mentioned above not being fulfilled or waived on or before the respective times and/or dates aforesaid (or such later date or dates as may be agreed between the Company and Somerley (on behalf of the Underwriters)) or if the Underwriting Agreement shall be rescinded, all obligations and liabilities of the parties thereunder will forthwith cease and determine.

Termination of the Underwriting Agreement

(i) the success of the Rights Issue or the taking up of the Rights Shares would be adversely and materially affected by:

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(a) the introduction of any new law or regulation or any change in existing law or regulation (or the judicial interpretation thereof) or other occurrence of any nature whatsoever which may materially adversely affect the business or the financial or trading position of the Group as a whole; or
(b) the occurrence of any local, national or international event or change (whether or not forming part of a series of events or changes occurring or continuing before, and/or after the date of the Underwriting Agreement) of a political, military, financial, economic, currency or other nature (whether or not unique with any of the foregoing), or any local, national or international outbreak or escalation of hostilities or armed conflict, or any event or change affecting local securities market or the occurrence of any combination of circumstances which is reasonably likely to materially adversely affects the business or the financial or trading position of the Group as a whole or is reasonably likely to materially adversely prejudice the success of the Rights Issue or the taking up of the Rights Shares (with entitlement to Bonus Warrants) by the Shareholders or investors in general; or
(c) there is any material adverse change in the business or in the financial or trading position of the Group as a whole; or
(d) any breach of the warranties of the Company set out in the Underwriting Agreement; or
(ii) any material change in market conditions or combination of market conditions and other circumstances in Hong Kong or elsewhere (including without limitation suspension or material restriction of trading in securities in general or the Company in particular) occurs which may adversely and materially affect the success of the Rights Issue or the taking up of the Rights Shares (with entitlement to Bonus Warrants) by the Shareholders or investors in general.

DEED OF UNDERTAKING

Hennessy and Lippo have entered into the Deed of Undertaking in favour of the Company, pursuant to which, (i) Hennessy has undertaken to the Company that it will subscribe and procure the subscription of 242,292,022 Rights Shares (with entitlement to Bonus Warrants) that will be provisionally allotted to it under the Rights Issue and that it will apply for the Hennessy’s Excess Application; and (ii) Lippo has guaranteed the due performance of Hennessy under the Deed of Undertaking, or failing which, Lippo undertakes to subscribe and procure the subscription of such Rights Shares that will be provisionally allotted to Hennessy under the Rights Issue and Hennessy’s Excess Application.

No preferential treatment will be given to Hennessy in the allocation of the excess Rights Shares, if any.

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LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE

Set out below is the shareholding structure of the Company:

Hennessy Directors Underwriters_(Note)_ Sub-total Public Shareholders Total number of issued shares	As at the Latest Practicable Date Shares % 692,262,956 51.4 50,400 0.0 – 0.0 692,313,356 51.4 654,515,738 48.6 1,346,829,094 100.0	Immediately upon Completion assuming all Qualifying Shareholders take up their respective entitlements under the Rights Issue but before the exercise of the Bonus Warrants Shares % 934,554,978 51.4 68,040 0.0 – 0.0 934,623,018 51.4 883,596,254 48.6 1,818,219,272 100.0	Immediately upon Completion assuming all Qualifying Shareholders take up their respective entitlements under the Rights Issue and after the exercise of the Bonus Warrants Shares % 1,038,394,416 51.4 75,600 0.0 – 0.0 1,038,470,016 51.4 981,773,618 48.6 2,020,243,634 100.0	Immediately upon Completion assuming only Hennessy takes up its entitlement under the Rights Issue and the Hennessy’s Excess Application but before the exercise of the Bonus Warrants Shares % 969,554,978 53.3 50,400 0.0 194,098,156 10.7 1,163,703,534 64.0 654,515,738 36.0 1,818,219,272 100.0	Immediately upon Completion assuming only Hennessy takes up its entitlement under the Rights Issue and the Hennessy’s Excess Application and after the exercise of the Bonus Warrants Shares % 1,088,394,416 53.9 50,400 0.0 277,283,080 13.7 1,365,727,896 67.6 654,515,738 32.4 2,020,243,634 100.0

Note: As there are more than one underwriter and each of the Underwriters will underwrite, on a several basis, not more that 50% of the Underwritten Rights Shares, no single underwriter will take up more than 10% of the then issued share capital of the Company in any event.

— 24 —

LETTER FROM THE BOARD

WARNING OF THE RISKS OF DEALING IN THE SHARES AND NIL-PAID RIGHTS SHARES

The Rights Issue is subject to the satisfaction of the conditions as described under the paragraph headed “Rights Issue – Conditions precedent to the Rights Issue” above. In particular, the Underwriting Agreement contains provisions allowing the Underwriters to terminate the Underwriting Agreement on the occurrence of force majeure events (as described under the paragraph headed “Underwriting Agreement – Termination of the Underwriting Agreement” above) by giving written notice to the Company at any time prior to 4:00 p.m. on the second business day following the Final Acceptance Date, being Wednesday, 25th June, 2008. Accordingly, any dealing in the Shares before the Underwriting Agreement becomes unconditional and in the Rights Shares in their nilpaid form from Wednesday, 11th June, 2008 to Wednesday, 18th June, 2008 (both dates inclusive) will bear the risk that the Rights Issue may not become unconditional or may not proceed. Any Shareholder or other person contemplating selling or acquiring Shares and/or Right Shares in their nil-paid form from the date of this prospectus up to Friday, 27th June, 2008 will bear the risk that the Rights Issue may not become unconditional or may not proceed. Any Shareholder or other person contemplating any dealing in the Shares or Rights Shares in their nil-paid form are recommended to consult their own professional advisers.

REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

The Company and its subsidiaries are principally engaged in investment holding, property investment and development, project management and financial services.

The Company’s mission is to maintain and expand its role as a leading property investor and developer in Asia, targeting the key markets of the PRC, the Republic of Singapore and Hong Kong. The timing of the Company’s entry into the Republic of Singapore in 2004 has proved opportune, with substantial gains reflected in the 2007 results. Going forward, the Board will dedicate more resources to the PRC where it currently sees opportunities for a well-capitalised group in view of the current restraints on funding. In particular, the Board plans to move forward its development project (“BDA Project”) in 北京經濟技術開發區 (Beijing Economic-Technological Development Area) (“BDA”). The BDA Project is located in the BDA, the state-level economic-technological development area in Beijing and approximately 10 miles southeast of Beijing City Centre. With a total site area of approximately 51,200 s.q.m., the BDA Project is currently planned to comprise office buildings, apartments, hotels and shopping malls with a total gross floor area of not less than 170,000 s.q.m.. A number of Fortune 500 companies and multinational companies have a presence in the neighbourhood. As announced on 28th April, 2008, the Group has just increased its interest from 68.6% to 85.7% in the BDA Project, increasing its commitment to approximately HK$280 million in total. As announced before, the Group intends to acquire the remaining interest of the BDA Project (currently 14.3% of the BDA Project) from its joint venture partner. Completion of the BDA Project is expected to be in 2011.

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LETTER FROM THE BOARD

The Group and its associates and jointly controlled entities will also continue its luxury residential development projects in the Republic of Singapore such as:

	Expected sellable
Project	floor area	Expected completion
Sentosa Marina Collection	30,000 s.q.m.	late 2011
Kim Seng Plaza	16,000 s.q.m.	early 2012
Aura Park	5,000 s.q.m.	mid 2012

The expected net proceeds from the Rights Issue, after deduction of expenses, of approximately HK$463 million are intended to be applied as to (i) approximately HK$350 million for the BDA Project; (ii) approximately HK$100 million for property development projects in the Republic of Singapore; and (iii) the remaining balance as additional capital for different future potential property development projects and for working capital.

FINANCIAL AND TRADING PROSPECTS

Having established a strong presence in the Republic of Singapore, the Group will dedicate more resources to the PRC where it currently sees opportunities for a well-capitalised group in view of the current restraints on funding. On top of the BDA Project, the Group is actively seeking attractive property development projects in the PRC. The Directors expect that the weight of the PRC related revenue and assets will be increased in the future.

ODD LOT TRADING FACILITIES FOR THE BONUS WARRANTS

The Company has appointed Lippo Securities to act as the broker to match, on a “best effort” basis, the sale and purchase of odd lots of the Bonus Warrants arising from the Rights Issue from Friday, 4th July, 2008, being the expected commencement date of dealings in Bonus Warrants, up to and including Monday, 4th August, 2008. Shareholders should note that matching of the sale and purchase of odd lots of the Bonus Warrants is not guaranteed.

Shareholders who wish to take advantage of this facility should contact Ms. Rowinna Wu of Lippo Securities Limited at Room 2302, 23rd Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong (Tel: (852) 2533 7329) from 9:30 a.m. to 12:45 p.m., and from 2:00 p.m. to 6:00 p.m. during normal business days of the aforesaid period.

ADJUSTMENT(S) IN RELATION TO THE OPTIONS GRANTED UNDER THE SHARE OPTION SCHEME

The Company has granted options under the Share Option Scheme. The Options will be exercisable from 17th June, 2008 to 16th December, 2012. Upon full exercise of the rights attaching to the outstanding Options, 13,468,000 Shares will be issued. The terms of the Share Option Scheme stipulate that in the event of any alteration in the capital structure

— 26 —

LETTER FROM THE BOARD

of the Company including, inter alia, rights issue whilst any Option remains exercisable, adjustments shall be made to the number of Shares subject to any Option, exercise price and/or method of exercise of the Options provided that any such adjustments shall give the holders of the Options the same proportion of equity capital of the Company as that to which the holders of the Options were entitled prior to such adjustment. In respect of any such adjustments, the auditors of the Company or an independent financial adviser must confirm to the Directors in writing that the adjustments proposed satisfy the requirements of the relevant provisions of the Listing Rules.

Save for the Options, there were no outstanding warrants, share options or other securities which are convertible into or give rights to subscribe for Shares as at the Latest Practicable Date.

FURTHER INFORMATION

The Company has not conducted any equity-related fund raising exercise for the twelve months immediately prior to the Latest Practicable Date.

Your attention is drawn to the further information set out in the appendices to this prospectus.

Yours faithfully, By Order of the Board HONGKONG CHINESE LIMITED John Luen Wai Lee Director

— 27 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. SUMMARY OF CONSOLIDATED RESULTS

Set out below is a summary of the consolidated results of the Group for each of the financial years ended 31st December, 2005, 2006 and 2007 as extracted from the published annual reports of the Company for the years ended 31st December, 2006 and 2007. Unqualified opinion was issued by the Company’s auditors for each of the three years ended 31st December, 2005, 2006 and 2007

Summary of results

Profit attributable to equity holders of the Company Total assets Total liabilities Net assets Minority interests	2007 HK$’000 1,267,271 6,593,582 (1,896,179) 4,697,403 (12,078) 4,685,325	2006 HK$’000 391,472 5,985,984 (2,694,295) 3,291,689 (99,285) 3,192,404	2005 HK$’000 111,761 3,652,523 (791,428) 2,861,095 (32,079) 2,829,016

— 28 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2007

Set out below are the audited consolidated financial statements of the Group for the two financial years ended 31st December, 2006 and 2007 as extracted from the annual report of the Company.

CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the year ended 31st December, 2007

Note Revenue 5 Cost of sales Gross profit Administrative expenses Other operating expenses Fair value gains on investment properties Gain on disposal of associates Gain on disposal of subsidiaries 35b Gain on disposal of available-for-sale financial assets Net fair value gain on financial assets at fair value through profit or loss Provisions for impairment losses: Associates Available-for-sale financial assets Properties held for sale Properties under development Finance costs 10 Share of results of associates 11 Share of results of jointly controlled entities Profit before tax 6 Tax 12 Profit for the year Attributable to: Equity holders of the Company 13 & 33 Minority interests 33	2007 HK$’000 898,384 (656,741) 241,643 (132,399) (50,488) 25,106 57,620 101,956 724 52,276 (23,008) – (10,090) (26,780) (70,674) 1,110,830 (1,974) 1,274,742 (6,615) 1,268,127 1,267,271 856 1,268,127	2006 HK$’000 1,099,028 (934,659) 164,369 (114,516) (35,890) 207,276 – 848 86,238 216,728 – (5,797) – – (49,064) (4,014) (2,644) 463,534 (46,975) 416,559 391,472 25,087 416,559

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Earnings per share attributable to equity holders of the Company 14 Basic Diluted Distributions 15 Interim, declared and paid Final, proposed/paid after the balance sheet date	2007 HK cents 94.1 N/A HK$’000 23,570 67,341 90,911	2006 HK cents 29.1 N/A

		HK$’000 20,202 67,341
		87,543

— 30 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED BALANCE SHEET

As at 31st December, 2007

Note Non-current assets Goodwill 16 Fixed assets 17 Investment properties 18 Properties under development 19 Interests in associates 20 Interests in jointly controlled entities 21 Available-for-sale financial assets 22 Held-to-maturity financial assets 23 Loans and advances 24 Current assets Properties held for sale Properties under development 19 Available-for-sale financial assets 22 Financial assets at fair value through profit or loss 25 Loans and advances 24 Debtors, prepayments and deposits 26 Client trust bank balances Treasury bills Cash and bank balances Current liabilities Bank and other borrowings 27 Creditors, accruals and deposits received 28 Current, fixed, savings and other deposits of customers 29 Tax payable Net current assets Total assets less current liabilities	2007 HK$’000 71,485 44,810 524,709 137,766 3,433,610 183,964 126,958 9,572 27,884 4,560,758 9,751 47,725 2,454 398,808 237,332 171,176 730,995 34,920 399,663 2,032,824 587,934 877,370 165,223 11,036 1,641,563 391,261 4,952,019	2006 HK$’000 57,285 47,443 1,136,256 160,115 1,961,964 49,299 102,869 9,582 27,066
		3,551,879
		19,223 – – 821,025 273,324 179,171 582,905 194,970 363,487
		2,434,105
		942,205 832,729 305,521 8,265
		2,088,720
		345,385
		3,897,264

— 31 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Non-current liabilities Bank and other borrowings 27 Deferred tax liabilities 30 Net assets Equity Equity attributable to equity holders of the Company Share capital 31 Reserves 33 Minority interests 33	2007 HK$’000 225,705 28,911 254,616 4,697,403 1,346,829 3,338,496 4,685,325 12,078 4,697,403	2006 HK$’000 547,368 58,207
		605,575
		3,291,689

		1,346,829 1,845,575
		3,192,404 99,285
		3,291,689

— 32 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED SUMMARY STATEMENT OF CHANGES IN EQUITY

For the year ended 31st December, 2007

Note Total equity at 1st January Changes in equity during the year: Exchange differences on translation of foreign operations Net fair value gain on available-for-sale financial assets Deferred tax arising from fair value gain on available-for-sale financial assets 33 Derecognition of available-for-sale financial assets 33 Release of reserve in respect of disposal of subsidiaries 33 Share of reserves of associates and jointly controlled entities 33 Net income recognised directly in equity Profit for the year Total recognised income and expense for the year Issue of shares by subsidiaries to minority shareholders 33 Acquisition of shares in a subsidiary from a minority shareholder 33 Disposal of subsidiaries 33 Advances from minority shareholders of subsidiaries 33 Equity-settled share option arrangements 33 Changes in interests in subsidiaries 33 2005 final distribution, declared 33 2006 interim distribution, declared 33 2006 final distribution, declared 15 & 33 2007 interim distribution, declared 15 & 33 Total equity at 31st December Total recognised income and expense for the year attributable to: Equity holders of the Company Minority interests	2007 HK$’000 3,291,689 49,295 22,129 26 (1,306) (11,563) 250,882 309,463 1,268,127 1,577,590 – (31,925) (130,786) 74,554 6,800 392 – – (67,341) (23,570) 1,405,714 4,697,403 1,577,032 558 1,577,590	2006 HK$’000 2,861,095 23,986 26,672 (2,921) (87,288) – 72,968 33,417 416,559 449,976 402 (258) – 41,384 – (303) (40,405) (20,202) – – 430,594 3,291,689 423,995 25,981 449,976

— 33 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

BALANCE SHEET

As at 31st December, 2007

Note Non-current assets Fixed assets 17 Interests in subsidiaries 34 Available-for-sale financial assets 22 Current assets Financial assets at fair value through profit or loss 25 Debtors, prepayments and deposits Cash and bank balances Current liabilities Bank and other borrowings 27 Creditors, accruals and deposits received Net current liabilities Total assets less current liabilities Non-current liability Bank and other borrowings 27 Net assets Equity Share capital 31 Reserves 33	2007 HK$’000 2,709 3,048,522 3,165 3,054,396 33,814 1,464 13,559 48,837 372,020 31,706 403,726 (354,889) 2,699,507 213,958 2,485,549 1,346,829 1,138,720 2,485,549	2006 HK$’000 3,970 3,411,944 3,165 3,419,079 18,445 1,773 62,092 82,310 885,495 35,508 921,003 (838,693) 2,580,386 60,000 2,520,386 1,346,829 1,173,557 2,520,386

— 34 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31st December, 2007

Note Cash flows from operating activities Cash generated from operations 35(a) Interest received Dividends received from listed and unlisted investments Dividends received from associates Taxes recovered/(paid): Hong Kong Overseas Net cash inflow from operating activities Cash flows from investing activities Proceeds from disposal of: Associates Available-for-sale financial assets Payments to acquire: Items of fixed assets Available-for-sale financial assets Additions to properties under development Additions to investment properties Increase in interests in jointly controlled entities Increase in interests in associates Advances to associates Advances to jointly controlled entities Disposal of subsidiaries, net of cash and cash equivalents disposed of 35(b) Acquisition of shares in a subsidiary from a minority shareholder Net cash inflow/(outflow) from investing activities	2007 HK$’000 327,755 33,902 6,521 – 7 (2,936) 365,249 85,022 2,665 (4,857) (6,393) (42,127) (26,062) (23,586) – (147,027) (103,128) 588,355 (46,125) 276,737	2006 HK$’000 297,546 49,997 3,074 3,431 (426) (4,212) 349,410 – 313,923 (5,617) (8,088) (47,384) (473,643) (197) (1,292,187) (271,389) (39,415) 1,026 (258) (1,823,229)

— 35 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Cash flows from financing activities Interest paid Distributions paid Drawdown of bank and other borrowings_(Note) Repayment of bank and other borrowings(Note)_ Issue/(Buyback) of shares by subsidiaries to/(from) minority shareholders Advances from minority shareholders of subsidiaries Net cash inflow/(outflow) from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange realignments Cash and cash equivalents at end of year Analysis of balances of cash and cash equivalents: Cash and bank balances Treasury bills	2007 HK$’000 (72,843) (90,911) 546,929 (1,228,121) (661) 74,554 (771,053) (129,067) 558,457 5,193 434,583 399,663 34,920 434,583	2006 HK$’000 (34,589) (60,607) 1,470,960 (25,000) 402 41,384 1,392,550 (81,269) 637,260 2,466 558,457 363,487 194,970 558,457

Note: The amounts exclude bank loans drawn down by the Group for lending to its margin clients in respect of the initial public offerings. All such bank loans were fully repaid during the year.

— 36 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE 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 principal activity of the Company is investment holding. Its subsidiaries, associates and jointly controlled entities are principally engaged in investment holding, property investment and development, project management, fund management, underwriting, corporate finance, securities broking, securities investment, treasury investment, money lending, banking and other related financial services.

The immediate holding company of the Company is Hennessy Holdings Limited which is incorporated in the British Virgin Islands. In the opinion of the Directors, the ultimate holding company of the Company is Lippo Cayman Limited which is incorporated in the Cayman Islands.

2.1 BASIS OF PREPARATION

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, 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 assets, 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 year ended 31st December, 2007. Adjustments are made to bring into line any dissimilar accounting policies that may exist. The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

Minority interests shown in the consolidated profit and loss account and the consolidated balance sheet represent the interests of outside shareholders not held by the Group in the results and net assets of the Company’s subsidiaries, respectively. Acquisitions of minority interests are accounted for using the parent entity extension method whereby the difference between the consideration and the book value of the share of the net assets acquired is recognised as goodwill.

2.2 IMPACT OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

The Group has adopted the following new and revised HKFRSs for the first time for the current year’s financial statements. Except for in certain cases, giving rise to new and revised accounting policies and additional disclosures, the adoption of these new and revised standards and interpretations have had no material effect on these financial statements.

HKFRS 7 Financial Instruments: Disclosures HKAS 1 Amendment Capital Disclosures HK(IFRIC)-Int 8 Scope of HKFRS 2 HK(IFRIC)-Int 9 Reassessment of Embedded Derivatives HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The principal effects of adopting these new and revised HKFRSs are as follows:

(a) HKFRS 7 Financial Instruments: Disclosures

This standard requires disclosures that enable users of the financial statements to evaluate the significance of the Group’s financial instruments and the nature and extent of risks arising from those financial instruments. The new disclosures are included throughout the financial statements. While there has been no effect on the financial position or results of operations of the Group, comparative information has been included/revised where appropriate.

(b) Amendment to HKAS 1 Presentation of Financial Statements – Capital Disclosures

This amendment requires the Group to make disclosures that enable users of the financial statements to evaluate the Group’s objectives, policies and processes for managing capital. These new disclosures are shown in Note 41 to the financial statements.

(c) HK(IFRIC)-Int 8 Scope of HKFRS 2

This interpretation requires HKFRS 2 to be applied to any arrangement in which the Group cannot identify specifically some or all of the goods or services received, for which equity instruments are granted or liabilities (based on a value of the Group’s equity instruments) are incurred by the Group for a consideration, and which appears to be less than the fair value of the equity instruments granted or liabilities incurred. As the Group has only issued equity instruments to the Group’s employees for identified services provided in accordance with the Group’s share option scheme, the interpretation has had no effect on these financial statements.

(d) HK(IFRIC)-Int 9 Reassessment of Embedded Derivatives

This interpretation requires that the date to access whether an embedded derivative is required to be separated from the host contract and accounted for as a derivative is the date that the Group first becomes a party to the contract, with reassessment only if there is a change to the contract that significantly modifies the cash flows. As the Group has no embedded derivative requiring separation from the host contract, the interpretation has had no effect on these financial statements or impact on the financial position or results of operations of the Group.

(e) HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment

The Group has adopted this interpretation as of 1st January, 2007, which requires that an impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity instrument classified as available-for-sale or a financial asset carried at cost is not subsequently reversed. As the Group had no impairment losses previously reversed in respect of such assets, the interpretation has had no impact on the financial position or results of operations of the Group.

— 38 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2.3 IMPACT OF 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:

HKFRS 2 (Amendments) Share-based Payment – Vesting Conditions and Cancellation[1] HKFRS 3 (Revised) Business Combinations[2] HKFRS 8 Operating Segments[1] HKAS 1 (Revised) Presentation of Financial Statements[1] HKAS 23 (Revised) Borrowing Costs[1] HKAS 27 (Revised) Consolidated and Separate Financial Statements[2] HK(IFRIC)-Int 11 HKFRS 2 – Group and Treasury Share Transactions[3] HK(IFRIC)-Int 12 Service Concession Arrangements[4] HK(IFRIC)-Int 13 Customer Loyalty Programmes[5] HK(IFRIC)-Int 14 HKAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction[4]

*1 Effective for annual periods beginning on or after 1st January, 2009

*2 Effective for annual periods beginning on or after 1st July, 2009

*3 Effective for annual periods beginning on or after 1st March, 2007

*4 Effective for annual periods beginning on or after 1st January, 2008

*5 Effective for annual periods beginning on or after 1st July, 2008

HKFRS 2 has been amended to restrict the definition of “vesting condition” to a condition that includes an explicit or implicit requirement to provide services. Any other conditions are nonvesting conditions, which have to be taken into account to determine the fair value of the equity instruments granted. In the case that the award does not vest as the result of a failure to meet a non-vesting condition that is within the control of either the entity or the counterparty, this must be accounted for as a cancellation. The Group has not entered into share-based payment schemes with non-vesting conditions attached and, therefore, does not expect significant implications on its accounting for share-based payments.

HKFRS 3 has been revised to introduce a number of changes in the accounting for business combinations that will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results. It must be applied prospectively and will affect future acquisitions and transactions with minority interests.

HKFRS 8, which will replace HKAS 14 Segment Reporting, specifies how an entity should report information about its operating segments, based on information about the components of the entity that is available to the chief operating decision maker for the purposes of allocating resources to the segments and assessing their performance. The standard also requires the disclosure of information about the products and services provided by the segments, the geographical areas in which the Group operates, and revenue from the Group’s major customers. The Group expects to adopt HKFRS 8 from 1st January, 2009.

HKAS 1 has been revised to separate owner and non-owner changes in equity. The statement of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line. The standard also introduces the statement of comprehensive income: it presents all items of income and expense recognised in profit or loss, together with all other items of recognised income and expenses, either in one single statement, or in two linked statements.

HKAS 23 has been revised to require capitalisation of borrowing costs when such costs are directly attributable to the acquisition, construction or production of a qualifying asset. As the Group’s current policy for borrowing costs aligns with the requirements of the revised standard, the revised standard is unlikely to have any financial impact on the Group.

— 39 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

HKFRS 27 has been revised to require a change in the ownership interest of a subsidiary to be accounted for as an equity transaction. Therefore, such a change will have no impact on goodwill, nor will it give raise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. It must be applied prospectively and will affect future acquisitions and transactions with minority interests.

HK(IFRIC)-Int 11 requires arrangements whereby an employee is granted rights to the Group’s equity instruments, to be accounted for as an equity-settled scheme, even if the Group acquires the instruments from another party, or the shareholders provide the equity instruments needed. HK(IFRIC)-Int 11 also addresses the accounting for share-based payment transactions involving two or more entities within the Group.

HK(IFRIC)-Int 12 requires an operator under public-to-private service concession arrangements to recognise the consideration received or receivable in exchange for the construction services as a financial asset and/or an intangible asset, based on the terms of the contractual arrangements. HK(IFRIC)-Int 12 also addresses how an operator shall apply existing HKFRSs to account for the obligations and the rights arising from service concession arrangements by which a government or a public sector entity grants a contract for the construction of infrastructure used to provide public services and/or for the supply of public services. As the Group currently has no such arrangements, the interpretation is unlikely to have any financial impact on the Group.

HK(IFRIC)-Int 13 requires that loyalty award credits granted to customers as part of a sales transaction are accounted for as a separate component of the sales transaction. The consideration received in the sales transaction is allocated between the loyalty award credits and the other components of the sale. The amount allocated to the loyalty award credits is determined by reference to their fair value and is deferred until the awards are redeemed or the liability is otherwise extinguished.

HK(IFRIC)-Int 14 addresses how to assess the limit under HKAS 19 Employee Benefits, on the amount of a refund or a reduction in future contributions in relation to a defined benefit scheme that can be recognised as an asset, in particular, when a minimum funding requirement exists.

As the Group currently has no customer loyalty award credits and defined benefit scheme, HK(IFRIC)-Int 13 and HK(IFRIC)-Int 14 are not applicable to the Group and therefore are unlikely to have any financial impact on the Group.

The Group is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application. So far, it has concluded that the adoption of HKAS1 (Revised) and HKFRS 8 may result in new or amended disclosures. The Group has already commenced an assessment of the impact of the other new and revised HKFRSs but is not yet in a position to state whether these new and revised HKFRSs would have a significant impact on the results of operations and financial position.

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Subsidiaries

A subsidiary is an entity whose financial and operating policies the Company controls, directly or indirectly, so as to obtain benefits from its activities.

The results of subsidiaries are included in the Company’s profit and loss account to the extent of dividends received and receivable. Interests in subsidiaries are stated in the Company’s balance sheet at cost less any impairment losses.

— 40 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Joint ventures

A joint venture is an entity set up by contractual arrangement, whereby the Group and other parties undertake an economic activity. The joint venture operates as a separate entity in which the Group and the other parties have an interest.

The joint venture agreement between the venturers stipulates the capital contributions of the joint venture parties, the duration of the joint venture entity and the basis on which the assets are to be realised upon its dissolution. The profits and losses from the joint venture’s operations and any distributions of surplus assets are shared by the venturers, either in proportion to their respective capital contributions, or in accordance with the terms of the joint venture agreement.

A joint venture is treated as:

(i) a subsidiary, if the Group has unilateral control, directly or indirectly, over the joint venture;
(ii) a jointly controlled entity, if the Group does not have unilateral control, but has joint control, directly or indirectly, over the joint venture;
(iii) an associate, if the Group does not have unilateral or joint control, but holds, directly or indirectly, generally not less than 20 per cent. of the joint venture’s registered capital and is in a position to exercise significant influence over the joint venture; or
(iv) an equity investment accounted for in accordance with HKAS 39, if the Group holds, directly or indirectly, less than 20 per cent. of the joint venture’s registered capital and has neither joint control of, nor is in a position to exercise significant influence over, the joint venture.

(c) Jointly controlled entities

A jointly controlled entity is a joint venture that is subject to joint control, resulting in none of the participating parties having unilateral control over the economic activity of the jointly controlled entity.

The Group’s interests in jointly controlled entities are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses. The Group’s share of the post-acquisition results and reserves of jointly controlled entities is included in the consolidated profit and loss account and consolidated reserves, respectively. Unrealised gains and losses resulting from transactions between the Group and its jointly controlled entities are eliminated to the extent of the Group’s interest in the jointly controlled entities, except where unrealised losses provide evidence of an impairment of the asset transferred. Goodwill arising from the acquisition of jointly controlled entities is included as part of the Group’s interests in jointly controlled entities. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

The results of jointly controlled entities are included in the Company’s profit and loss account to the extent of dividends received and receivable. The Company’s interests in jointly controlled entities are treated as non-current assets and are stated at cost less any impairment losses.

(d) Associates

An associate is an entity, not being a subsidiary or a jointly controlled entity, in which the Group has a long term interest of generally not less than 20 per cent. of the equity voting rights and over which it is in a position to exercise significant influence.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group’s interests in associates are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses. The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated profit and loss account and consolidated reserves, respectively. Unrealised gains and losses resulting from transactions between the Group and its associates are eliminated to the extent of the Group’s interests in the associates, except where unrealised losses provide evidence of an impairment of the asset transferred. Goodwill arising from the acquisition of associates is included as part of the Group’s interests in associates. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

The results of associates are included in the Company’s profit and loss account to the extent of dividends received and receivable. The Company’s interests in associates are treated as non-current assets and are stated at cost less any impairment losses.

(e) Goodwill

Goodwill arising on the acquisition of subsidiaries, associates, and jointly controlled entities represents the excess of the cost of the business combination over the Group’s interests in the net fair value of the acquirees’ identifiable assets acquired, and liabilities and contingent liabilities assumed as at the date of acquisition.

Goodwill on acquisitions for which the agreement date is on or after 1st January, 2005

Goodwill arising on acquisition is recognised in the consolidated balance sheet as an asset, initially measured at cost and subsequently at cost less any accumulated impairment losses. In the case of associates and jointly controlled entities, goodwill is included in the carrying amount thereof, rather than as a separately identified asset on the consolidated balance sheet.

The carrying amount of goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The Group performs its annual impairment test of goodwill as at 31st December.

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, or groups of cash-generating units, 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 cash-generating unit (group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) 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 forms part of a cash-generating unit (group of cash-generating units) 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 disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Goodwill previously eliminated against consolidated distributable reserves

Prior to the adoption of the HKICPA’s Statement of Standard Accounting Practice 30 Business Combinations (“SSAP 30”) in 2001, goodwill arising on acquisition was eliminated against consolidated distributable reserves in the year of acquisition. On the adoption of HKFRS 3, such goodwill remains eliminated against consolidated distributable reserves and is not recognised in the consolidated profit and loss account when all or part of the business to which the goodwill relates is disposed of or when a cash-generating unit to which the goodwill relates becomes impaired.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Excess over the cost of business combinations

Any excess of the Group’s interest in the net fair value of the acquirees’ identifiable assets, liabilities and contingent liabilities over the cost of acquisition of subsidiaries, associates and jointly controlled entities (previously referred to as negative goodwill), after reassessment, is recognised immediately in the consolidated profit and loss account.

The excess for associates and jointly controlled entities is included in the Group’s share of the associates’ and jointly controlled entities’ profit or loss in the period in which the investments are acquired.

(f) Impairment of non-financial assets other than goodwill

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than financial assets, investment properties, properties held for sale and goodwill), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or cash generating unit’s value in use and its fair value less costs to sell, 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 cash generating unit 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 risk specific to the asset. An impairment loss is charged to the profit and loss account in the period in which it arises in those expense categories consistent with the function of the impaired asset, 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 each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill and certain financial assets 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 impairment loss is credited to the profit and loss account 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.

(g) Fixed assets and depreciation

Fixed assets are stated at cost less accumulated depreciation and any impairment losses. 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 profit and loss account in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of fixed assets, and where the cost of the item can be measured reliably, the expenditure is capitalised as an additional cost of that asset or as a replacement.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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 land and buildings 1 per cent. Leasehold improvements Over the remaining lease terms Furniture, fixtures and equipment 10 per cent. to 33[1] /3 per cent. Motor vehicles 20 per cent. to 25 per cent.

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 each balance sheet date.

An item of fixed assets 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 profit and loss account in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

(h) Investment properties

Investment properties are interests in land and buildings (including the leasehold interest under an operating lease for a property 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 balance sheet date.

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

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

(i) Properties under development

Properties under development intended 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. 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.

Properties under development which have either been pre-sold or which are intended for sale, and are expected to be completed within one year from the balance sheet date, are classified as current assets.

(j) Investments and other financial assets

Financial assets in the scope of HKAS 39 are classified as financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs.

The Group assesses whether a contract contains an embedded derivative when the Group first becomes a party to it and assesses whether an embedded derivative is required to be separated from the host contract when the analysis shows that the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at the balance sheet date.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments or financial guarantee contracts. Gains or losses on these financial assets are recognised in the profit and loss account. The net fair value gain or loss recognised in the profit and loss account does not include any dividends or interest earned on these financial assets, which are recognised in accordance with the policies set out for “Revenue recognition” below.

Financial assets may be designated upon initial recognition as at fair value through profit or loss if the following criteria are met: (i) the designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or recognising gains or losses on them on a different basis; (ii) the assets are part of a group of financial assets which are managed and their performance evaluated on a fair value basis, in accordance with a documented risk management strategy; or (iii) the financial asset contains an embedded derivative that would need to be separately recorded.

The Group’s financial assets at fair value through profit or loss which are under regular way of purchases or sales are recognised on the trade date, that is, the date 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.

Held-to-maturity financial assets

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold to maturity. Held-to-maturity financial assets are subsequently measured at amortised cost less any allowance for impairment. Amortised cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. Gains and losses are recognised in the profit and loss account when the financial assets are derecognised or impaired, as well as through the amortisation process.

All regular way purchases or sales of held-to-maturity financial assets are recognised on the settlement date, that is, the date the asset is received or delivered by the Group.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are subsequently carried at amortised cost using the effective interest method less any allowance for impairment. Gains and losses are recognised in the profit and loss account when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

All regular way purchases or sales of loans and receivables are recognised on the settlement date, that is, the date the asset is received or delivered by the Group.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets in listed and unlisted equity securities, debt securities, and investment funds that are designated as available for sale or are not classified in any of the other three categories. After initial recognition, available-for-sale financial assets are measured at fair value with gains or losses being recognised as a separate component of equity until the financial assets are derecognised or until the financial assets are determined to be impaired at which time the cumulative gain or loss previously reported in equity is included in the profit and loss account. Interest and dividends earned are reported as interest income and dividend income, respectively and are recognised in the profit and loss account as “Revenue” in accordance with the policies set out for “Revenue recognition” below. Losses arising from the impairment of such financial assets are recognised in the profit and loss account as “Provision for Impairment losses on available-for-sale financial assets” and are transferred from investment revaluation reserve.

When the fair value of unlisted equity securities and debt securities cannot be reliably measured because (a) the variability in the range of reasonable fair value estimates is significant for that financial asset, or (b) the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such securities are stated at cost less any impairment losses.

All regular way purchases or sales of available-for-sale financial assets are recognised on the settlement date, that is, the date the asset is received or delivered by the Group.

Fair value

The fair value of financial assets that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business at the balance sheet date. For financial assets where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument, which is substantially the same; a discounted cash flow analysis and other valuation models.

(k) Impairment of financial assets

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or a group of financial assets is impaired.

Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables or held-tomaturity financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through the use of an allowance account. The amount of the impairment loss is recognised in the profit and loss account. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance account. Any subsequent reversal of an impairment loss is recognised in the profit and loss account, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

In relation to trade and other receivables, a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor and significant changes in the technological, market economic or legal environment that have an adverse effect on the debtor) that the Group will not be able to collect all of the amounts due under the original terms of an invoice. The carrying amount of the receivables is reduced through the use of an allowance account. Impaired debts are derecognised when they are assessed as uncollectible.

Assets carried at cost

If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses on these assets are not reversed.

Available-for-sale financial assets

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the profit and loss account, is transferred from equity to the profit and loss account. A provision for impairment is made for available-for-sale equity investments when there has been a significant or prolonged decline in the fair value below its cost or where other objective evidence of impairment exits. The determination of what is “significant” or “prolonged” requires judgement. In addition, the Group evaluates other factors, such as the share price volatility. Impairment losses on equity instruments classified as available for sale are not reversed through the profit and loss account.

Impairment losses on debt instruments are reversed through the profit and loss account if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in the profit and loss account.

(l) 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 derecognised where:

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

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. 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.

Where continuing involvement takes the form of a written and/or purchase option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that the Group may repurchase, except in the case of a written put option (including a cashsettled option or similar provision) on an asset measured at fair value, where the extent of the Group’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(m) Financial liabilities at amortised cost (including interest-bearing loans and borrowings)

Financial liabilities, including trade and other payables and interest-bearing loans and borrowings are initially stated at fair value less directly attributable transaction costs and are subsequently measured at amortised cost, using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost. The related interest expense is recognised within “Finance costs” in the profit and loss account.

Gains and losses are recognised in the profit and loss account when the liabilities are derecognised as well as through the amortisation process.

(n) Financial guarantee contracts

Financial guarantee contracts in the scope of HKAS 39 are accounted for as financial liabilities. A financial guarantee contract is recognised initially at its fair value less transaction costs that are directly attributable to the acquisition or issue of the financial guarantee contract, except when such contract is recognised at fair value through profit or loss. Subsequent to initial recognition, the Group measures the financial guarantee contract at the higher of: (i) the amount determined in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18 Revenue.

(o) 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 profit and loss account.

(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) Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(i) rental income, in the period in which the properties are let and on the straightline basis over the lease terms;
(ii) dealings in securities and sale of investments, on the transaction dates when the relevant contract notes are exchanged or the settlement dates when the securities are delivered;
(iii) interest income, on an accrual basis using the effective interest method by applying the rate that discounts the estimated future cash receipts through the expected life of the financial instruments to the net carrying amount of the financial assets;
(iv) dividend income, when the shareholders’ right to receive payment has been established;

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(v) commission income, in the period when receivable, unless it is charged to cover the costs of a continuing service to, or risk borne for, customers, or is interest income in nature. In this case, commission income is recognised on a pro rata basis over the relevant period; and
(vi) investment advisory, management and service fee income, when the services have been rendered.

(r) Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the profit and loss account or in equity if it relates to items that are recognised in the same or a different period directly in equity.

Current tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date 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) where the deferred tax liability arise from goodwill or the initial recognition of an asset or liability in transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss; and
(ii) in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where 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.

Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, 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. In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in 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 each balance sheet date 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. Conversely, previously unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

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 at the balance sheet date.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(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 balance sheet date 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 profit and loss account.

(t) 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 balance sheet date is permitted to be carried forward and utilised by the respective employees in the following year. An accrual is made at the balance sheet date for the expected future cost of such paid leave earned during the year by the employees and carried forward at the balance sheet date.

Retirement benefits costs

Employer’s contributions made by the Group to the Mandatory Provident Funds operated for the benefits of employees of the Group as required under the Hong Kong Mandatory Provident Fund Schemes Ordinance are charged to the profit and loss account when incurred. The assets of the schemes are held separately from those of the Group in independently administrated funds.

Share-based payment transactions

The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. Employees (including directors) of the Group receive remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (“equity-settled transactions”).

The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted. The fair value is determined using an adjusted Black-Scholes model, further details of which are given in Note 32 to the financial statements. In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of the Company (“market conditions”), if applicable.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or services conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the “vesting date”). The cumulative expense recognised for equity-settled transactions at each balance sheet date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The charge or credit to the profit and loss account for a period represents the movement in the cumulative expense recognised as at the beginning and end of that period.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market conditional is satisfied, provided that all other performance conditions are satisfied.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification, which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.

Where and equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and is designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.

(u)

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.

(v)

Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets and rentals receivable under the operating leases are credited to the profit and loss account on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases are charged to the profit and loss account on the straight-line basis over the lease terms.

(w) Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise cash on hand, cash at banks, demand deposits, treasury bills, 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 balance sheets, cash and cash equivalents comprise cash on hand, cash at banks, demand deposits and treasury bills which are not restricted as to use.

(x)

Foreign currencies

These financial statements are presented in Hong Kong dollars, which is the Company’s functional and presentation 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 are initially recorded using the functional currency rates ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated at the functional currency rates of exchange ruling at the balance sheet date. All differences are taken to the profit and loss account. 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 determined.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The functional currencies of certain overseas subsidiaries, jointly controlled entities and associates are currencies other than the Hong Kong dollar. As at the balance sheet date, the assets and liabilities of these entities are translated into the presentation currency of the Company at exchange rates ruling at the balance sheet date, and their profit and loss accounts are translated into Hong Kong dollars at the weighted average exchange rates for the year. The resulting exchange differences are included in the exchange equalisation reserve. On disposal of a foreign entity, the deferred cumulative amount recognised in the exchange equalisation reserve relating to that particular foreign operation is recognised in the profit and loss account.

For the purpose of the consolidated cash flow statement, the cash flows of overseas subsidiaries are translated into Hong Kong dollars at the exchange rates ruling at the dates of the cash flows or at an approximation thereto, the weighted average exchange rates for the year. 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.

(y) Related parties

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

(a) the party, directly or indirectly through one or more intermediaries, (i) controls, is controlled by, or is under the common control with, the Group; (ii) has an interest in the Group that gives it significant influence over the Group; or (iii) has joint control over the Group;
(b) the party is an associate;
(c) the party is a jointly controlled entity;
(d) the party is a member of the key management personnel of the Group or its parent;
(e) the party is a close member of the family of any individual referred to in (a) or (d);
(f) the party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or
(g) the party is a post-employment benefit plan for the benefit of employees of the Group, or of any entity that is a related party of the Group.

(z) Dividends and distributions

Final dividends and distributions proposed by the Directors are classified as a separate allocation of distributable reserves within the equity section of the balance sheet, until they have been approved by the shareholders in a general meeting. When these dividends and distributions have been approved by the shareholders and declared, they are recognised as a liability.

Interim dividends and distributions are simultaneously proposed and declared because the Company’s memorandum and articles 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.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Group’s financial statements requires management to make judgement, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, 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:

Operating lease commitments – Group as lessor

The Group has entered into commercial property leases on its investment property portfolio. The Group has determined that it retains all the significant risks and rewards of ownership of these properties which are leased out on 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.

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.

(b) Estimation uncertainly

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

Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating units and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill at 31st December, 2007 was HK$71,485,000 (2006 – HK$57,285,000). Further details are given in Note 16.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Estimation of the fair value of investment properties

The best evidence of fair value is the current prices in an active market for similar lease terms and other contracts. In the absence of such information, the Group considers information from a variety of sources, including (i) by reference to independent valuations; (ii) the current prices in an active market for properties of a different nature, condition and location (or subject to different leases or other contracts), adjusted to reflect those differences; (iii) the recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the date of the transactions that occurred at those prices; and (iv) discounted cash flow projections, based on reliable estimates of future cash flows, derived from the terms of any existing lease and other contracts, and (where possible) from 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.

Impairment of available-for-sale financial assets

The Group classifies certain assets as available-for-sale and recognised movements of their fair values in equity. When the fair value declines, management makes assessment about the decline in value to determine whether there is an impairment that should be recognised in the profit and loss account. No impairment losses have been recognised for available-for-sale financial assets for the year (2006 – HK$5,797,000). The carrying amount of available-for-sale financial assets at 31st December, 2007 was HK$129,412,000 (2006 – HK$102,869,000).

Impairment of non-financial assets

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

4. SEGMENT INFORMATION

Segment information is presented by way of business segment as the primary segment reporting format and geographical segment as the secondary segment reporting format.

The Group’s operating businesses are structured and managed separately, according to the nature of their operations. The Group’s business segments represent different strategic business units which are subject to risks and returns that are different from those of the other business segments. In respect of geographical segment reporting, revenue is based on the location of customers, and assets and capital expenditure are based on the location of the assets.

Descriptions of the business segments are as follows:

(a) the property investment and development segment includes letting, resale and development of properties;
(b) the treasury investment segment includes investments in cash and bond markets;
(c) the securities investment segment includes dealings in securities and disposals of investments;
(d) the corporate finance and securities broking segment provides securities and futures brokerage, investment banking, underwriting and other related advisory services;
(e) the banking business segment engages in the provision of commercial and retail banking services;

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(f) the project management segment engages in the provision of project management, marketing, sales administrative and other related services; and
(g) the “other” segment comprises principally the development of computer hardware and software, money lending and the provision of fund management and investment advisory services.

An analysis of the Group’s segment information by business segment is set out as follows:

Group

Property investment and 2007 development HK$’000 Revenue External 27,867 Inter-segment – Total 27,867 Segment results 97,389 Unallocated corporate expenses Finance costs Share of results of associates 1,104,022 Share of results of jointly controlled entities (679 ) Profit before tax Tax Profit for the year	Treasury investment HK$’000 9,475 15 9,490 8,897 – –	Corporate finance and Securities securities investment broking HK$’000 HK$’000 607,661 158,871 – 174 607,661 159,045 65,454 42,686 – – – –	Banking Project business management HK$’000 HK$’000 27,338 52,655 – 3,353 27,338 56,008 4,173 30,270 – – – –	Other HK$’000 14,517 932 15,449 26,113 6,808 (1,295 )	Inter- segment elimination Consolidated HK$’000 HK$’000 – 898,384 (4,474 ) – (4,474 ) 898,384 (3,588 ) 271,394 (60,819 ) (44,689 ) – 1,110,830 – (1,974 ) 1,274,742 (6,615 ) 1,268,127

— 55 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

	Property			Corporate
	investment			finance and				Inter-
	and	Treasury	Securities	securities	Banking	Project		segment
2007	development	investment	investment	broking	business	management	Other	elimination	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Segment assets	792,705	247,503	539,012	937,874	418,745	10,188	18,885	–	2,964,912
Interests in associates	3,379,037	–	–	814	–	–	53,759	–	3,433,610
Interests in jointly
controlled entities	181,485	–	–	–	–	–	2,479	–	183,964
Unallocated assets									11,096
Total assets									6,593,582
Segment liabilities	10,174	–	56,313	830,022	167,982	9,007	1,818	–	1,075,316
Unallocated liabilities									820,863
Total liabilities									1,896,179
Other segment information:
Capital expenditure	2,115	–	–	708	1,389	73	16	–	4,301
Depreciation	(1,312 )	–	(227 )	(548 )	(2,074 )	(234 )	(505 )	–	(4,900	)
Write-back of allowance for
bad and doubtful debts
relating to
banking operation	–	–	–	–	128	–	–	–	128
Provisions for
impairment losses:
Associates	–	–	–	–	–	–	(23,008 )	–	(23,008 )
Properties held for sale	(10,090 )	–	–	–	–	–	–	–	(10,090 )
Properties under
development	(26,780 )	–	–	–	–	–	–	–	(26,780 )
Net fair value gain on
financial assets at
fair value through
profit or loss	–	–	52,276	–	–	–	–	–	52,276
Fair value gains on
investment properties	25,106	–	–	–	–	–	–	–	25,106
Unallocated:
Capital expenditure									556
Depreciation									(2,609	)

— 56 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

Property investment and 2006 development HK$’000 Revenue External 35,734 Inter-segment – Total 35,734 Segment results 218,622 Unallocated corporate expenses Finance costs Share of results of associates (17,702 ) Share of results of jointly controlled entities (572 ) Profit before tax Tax Profit for the year	Treasury investment HK$’000 15,825 1,003 16,828 16,095 – –	Corporate finance and Securities securities investment broking HK$’000 HK$’000 903,504 95,614 – 1,065 903,504 96,679 324,780 17,616 – – – –	Banking Project business management HK$’000 HK$’000 28,965 161 – 233 28,965 394 7,271 394 – – – –	Other HK$’000 19,225 6,691 25,916 4,423 13,688 (2,072 )	Inter- segment elimination Consolidated HK$’000 HK$’000 – 1,099,028 (8,992 ) – (8,992 ) 1,099,028 (7,414 ) 581,787 (76,122 ) (35,473 ) – (4,014 ) – (2,644 ) 463,534 (46,975 ) 416,559

— 57 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

Group
	Property			Corporate
	investment			finance and				Inter-
	and	Treasury	Securities	securities	Banking	Project		segment
2006	development	investment	investment	broking	business	management	Other	elimination	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Segment assets	1,424,556	262,469	933,694	786,732	541,361	1,232	12,086	–	3,962,130
Interests in associates	1,835,329	–	–	814	–	–	125,821	–	1,961,964
Interests in jointly
controlled entities	45,642	–	–	–	–	–	3,657	–	49,299
Unallocated assets									12,591
Total assets									5,985,984
Segment liabilities	16,405	–	46,968	767,974	308,875	–	2,966	–	1,143,188
Unallocated liabilities									1,551,107
Total liabilities									2,694,295
Other segment information:
Capital expenditure	845	–	–	460	334	35	318	–	1,992
Depreciation	(935 )	–	(388 )	(432 )	(1,901 )	(208 )	(708 )	–	(4,572)
Write-back of allowance/
(Allowance) for bad and
doubtful debts relating to:
Banking operation	–	–	–	–	4	–	–	–	4
Non-banking operation	–	–	–	1,850	–	–	(583 )	–	1,267
Provisions for
impairment losses on
available-for-sale
financial assets	–	–	(5,797 )	–	–	–	–	–	(5,797	)
Net fair value gain on
financial assets at
fair value through
profit or loss	–	–	216,728	–	–	–	–	–	216,728
Fair value gains on
investment properties	207,276	–	–	–	–	–	–	–	207,276
Unallocated:
Capital expenditure									3,625
Depreciation									(2,416	)

— 58 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

An analysis of the Group’s segment information by geographical segment is set out as follows:

Group

2007 Revenue Segment assets Interests in associates Interests in jointly controlled entities Total assets Capital expenditure 2006 Revenue Segment assets Interests in associates Interests in jointly controlled entities Total assets Capital expenditure	Hong Kong HK$’000 273,794 1,377,998 93 – 782 Hong Kong HK$’000 641,854 1,206,879 27,450 – 3,125	Republic of Macau Singapore HK$’000 HK$’000 27,338 551,927 788,984 384,405 – 3,379,038 – 172,187 1,389 590 Republic of Macau Singapore HK$’000 HK$’000 28,965 198,525 895,717 1,512,158 – 1,835,329 – 35,568 350 1,317	Japan HK$’000 21,055 42,396 – – – Japan HK$’000 58,504 62,845 – – –	Other Consolidated HK$’000 HK$’000 24,270 898,384 382,225 2,976,008 54,479 3,433,610 11,777 183,964 6,593,582 2,096 4,857 Other Consolidated HK$’000 HK$’000 171,180 1,099,028 297,122 3,974,721 99,185 1,961,964 13,731 49,299 5,985,984 825 5,617	Other Consolidated HK$’000 HK$’000 24,270 898,384 382,225 2,976,008 54,479 3,433,610 11,777 183,964 6,593,582 2,096 4,857 Other Consolidated HK$’000 HK$’000 171,180 1,099,028 297,122 3,974,721 99,185 1,961,964 13,731 49,299 5,985,984 825 5,617

					3,974,721 1,961,964 49,299
					5,985,984

					5,617

5. REVENUE

Revenue, which is also the Group’s turnover, representing the aggregate of gross rental income, gross income on treasury investment which includes interest income on bank deposits and debt securities, gross income from securities investment which includes proceeds from sales of investments, dividend income and related interest income, gross income from underwriting and securities broking, gross income from project management, gross interest income, commissions, dealing income and other revenues from a banking subsidiary, and interest and other income from money lending and other businesses, after eliminations of all significant intra-group transactions.

— 59 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

An analysis of the revenue of the Group by principal activity is as follows:

Property investment and development Treasury investment Securities investment Corporate finance and securities broking Banking business Project management Other	Group 2007 HK$’000 27,867 9,475 607,661 158,871 27,338 52,655 14,517 898,384	2006 HK$’000 35,734 15,825 903,504 95,614 28,965 161 19,225
		1,099,028

Revenue attributable to banking business represents revenue generated from The Macau Chinese Bank Limited (“MCB”), a licensed credit institution under the Financial System Act of the Macao Special Administrative Region of the People’s Republic of China. Revenue attributable to banking business is analysed as follows:

Interest income Commission income Other revenues	Group 2007 HK$’000 21,253 4,923 1,162 27,338	2006 HK$’000 23,916 3,915 1,134
		28,965

— 60 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

6. PROFIT BEFORE TAX

Profit before tax is arrived at after crediting/(charging):

Gross rental income Less:_Outgoings Net rental income Employee benefits expense(Note)_: Wages and salaries Share options Retirement benefits costs Total staff costs Interest income: Listed financial assets at fair value through profit or loss Unlisted financial assets at fair value through profit or loss Listed held-to-maturity financial assets Loan and receivables Banking operation Other Dividend income: Listed investments Unlisted investments Other unlisted investment income Gain/(Loss) on disposal of: Listed financial assets at fair value through profit or loss Unlisted financial assets at fair value through profit or loss Listed available-for-sale financial assets Unlisted available-for-sale financial assets Net fair value gain on financial assets at fair value through profit or loss: Listed Unlisted Provision for impairment losses on unlisted available-for-sale financial assets Depreciation Loss on disposal of fixed assets Foreign exchange gains – net Auditors’ remuneration Minimum lease payments under operating lease rentals in respect of land and buildings	Group 2007 HK$’000 27,867 (6,563) 21,304 (94,397) (6,800) (3,096) (104,293) 1,951 324 853 1,336 21,253 9,475 805 5,716 86 7,749 27 – 724 29,115 23,161 – (7,509) (445) 10,912 (2,890) (17,240)	2006 HK$’000 22,667 (6,230) 16,437 (88,288) – (2,746) (91,034) 5,650 758 884 1,093 23,916 15,825 771 2,291 664 11,217 10,322 112,923 (26,685) 25,188 191,540 (5,797) (6,988) (67) 1,371 (2,025) (13,940)

Note: The amounts include the Directors’ emoluments disclosed in Note 7 to the financial statements.

— 61 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

7. DIRECTORS’ EMOLUMENTS

Directors’ emoluments for the year, disclosed pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and Section 161 of the Hong Kong Companies Ordinance, are as follows:

Directors’ fees Basic salaries, housing and other allowances and benefits in kind Share options Discretionary bonuses paid and payable Retirement benefits costs	Group 2007 HK$’000 747 3,260 2,916 4,000 24 10,947	2006 HK$’000 627 3,680 – 3,000 24
		7,331

The emoluments paid to each of the individual directors during the year are as follows:

2007 Executive directors: Mr. Stephen Riady Mr. John Lee Luen Wai Mr. Kor Kee Yee Non-executive directors: Dr. Mochtar Riady Mr. Leon Chan Nim Leung Independent non-executive directors: Mr. Albert Saychuan Cheok Mr. Victor Yung Ha Kuk Mr. Tsui King Fai	Basic salaries, housing and other Directors’ allowances and fees benefits in kind HK$’000 HK$’000 – – 59 1,534 – 1,726 59 3,260 120 – 179 – 299 – 139 – 130 – 120 – 389 – 747 3,260	Discretionary Share bonuses paid options and payable HK$’000 HK$’000 – 4,000 1,710 – 226 – 1,936 4,000 – – 302 – 302 – 226 – 226 – 226 – 678 – 2,916 4,000	Retirement benefits costs HK$’000 – 12 12 24 – – – – – – – 24	Total HK$’000 4,000 3,315 1,964
				9,279
				120 481
				601
				365 356 346
				1,067
				10,947

— 62 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2006 Executive directors: Mr. Stephen Riady Mr. John Lee Luen Wai Mr. Kor Kee Yee Non-executive directors: Dr. Mochtar Riady Mr. Leon Chan Nim Leung Independent non-executive directors: Mr. Albert Saychuan Cheok Mr. Victor Yung Ha Kuk Mr. Tsui King Fai	Basic salaries, housing and other allowances and Directors’ benefits in fees kind HK$’000 HK$’000 – – 29 1,954 – 1,726 29 3,680 120 – 149 – 269 – 139 – 100 – 90 – 329 – 627 3,680	Discretionary bonuses paid and payable HK$’000 – 3,000 – 3,000 – – – – – – – 3,000	Retirement benefits costs HK$’000 – 12 12 24 – – – – – – – 24	Total HK$’000 – 4,995 1,738
				6,733
				120 149
				269
				139 100 90
				329
				7,331

There were no arrangements under which a director waived or agreed to waive any emoluments during the years.

Details of share options granted to the Directors are set out in Note 32 to the financial statements.

8. FIVE HIGHEST PAID EMPLOYEES’ EMOLUMENTS

The five highest paid employees during the year included two directors (2006 – two), details of whose emoluments are set out in Note 7 to the financial statements. Details of the emoluments of the remaining three (2006 – three) non-director, highest paid employees for the year are as follows:

Basic salaries, housing and other allowances and benefits in kind Share options Discretionary bonuses paid and payable Retirement benefits costs	Group 2007 HK$’000 1,030 453 13,649 100 15,232	2006 HK$’000 3,282 – 31,860 81
		35,223

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The number of non-director, highest paid employees whose emoluments fell within the following bands is as follows:

Emoluments bands (HK$): 3,000,001 – 3,500,000 3,500,001 – 4,000,000 5,000,001 – 5,500,000 8,000,001 – 8,500,000 11,000,001 – 11,500,000 19,000,001 – 19,500,000	Group 2007 Number of employees 1 1 – 1 – – 3	2006 Number of employees – – 1 – 1 1
		3

9. RETIREMENT BENEFITS COSTS

The Group previously operated several defined contribution schemes pursuant to the Occupational Retirement Schemes Ordinance which were replaced by the Mandatory Provident Fund schemes (the “MPF schemes”) in December 2000 when the Mandatory Provident Fund Schemes Ordinance became effective. The assets of the schemes are held separately from those of the Group in independently administered funds.

Contributions made to the MPF schemes are based on a percentage of the employees’ relevant income and are charged to the profit and loss account as they become payable in accordance with the rules of the schemes. The Group’s employer contributions vest fully with the employees when contributed into the 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, in accordance with the rules of the schemes.

During the year, there were no forfeited employer contributions under the MPF schemes utilised to reduce the amount of employer contributions or for payments of administrative expenses (2006 – Nil). The amounts of forfeited voluntary contributions available to offset future employer contributions against the above schemes were not material at the year end. The retirement benefits scheme costs charged to the consolidated profit and loss account represent employer contributions paid and payable by the Group to the schemes and amounted to HK$3,096,000 (2006 – HK$2,746,000).

10. FINANCE COSTS

Interest on bank and other borrowings wholly repayable within five years _Less:_Interest capitalised	Group 2007 HK$’000 78,812 (8,138) 70,674	2006 HK$’000 53,486 (4,422
		49,064

The amount excludes interest expense incurred by a banking subsidiary of the Group.

11. SHARE OF RESULTS OF ASSOCIATES

The amount included the Group’s share of profit in Lippo ASM Asia Property LP (“LAAP”), a property fund which carries the objective of investing in real estates in the East Asia Region, of approximately HK$1,104 million (2006 – loss of HK$18 million).

— 64 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

12. TAX

Hong Kong: Charge for the year Underprovision in prior years Deferred Overseas: Charge for the year Underprovision/(Overprovision) in prior years Deferred Total charge for the year	Group 2007 HK$’000 130 – 3,020 3,150 5,819 (249) (2,105) 3,465 6,615	2006 HK$’000 1,435 2,269 1,179
		4,883
		4,207 919 36,966
		42,092
		46,975

Hong Kong profits tax has been provided at the rate of 17.5 per cent. (2006 – 17.5 per cent.) on the estimated assessable profits arising in Hong Kong during the year. Taxes on profits assessable elsewhere have been calculated on the estimated assessable profits for the year at the tax rates prevailing in the countries/jurisdictions in which the Group operates based on existing legislation, interpretations and practices in respect thereof.

A reconciliation of the tax charge applicable to profit before tax using the statutory rates for the countries/jurisdictions in which the Company and the majority of its subsidiaries are domiciled to the tax charge is as follows:

Profit before tax Tax at the statutory tax rate of 17.5 per cent. (2006 – 17.5 per cent.) Effect of different tax rates in other jurisdictions Adjustments in respect of current tax of previous years Profits and losses attributable to jointly controlled entities and associates Income not subject to tax Expenses not deductible for tax Tax losses utilised from previous years Tax losses not recognised Tax charge at the Group’s effective rate of 1 per cent. (2006 – 10 per cent.)	Group 2007 HK$’000 1,274,742 223,080 (36,665) (249) (194,050) (15,701) 20,932 (4,855) 14,123 6,615	2006 HK$’000 463,534
		81,118 (20,037 3,188 1,165 (16,489 2,257 (17,183 12,956
		46,975

— 65 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

For the companies operated in Republic of Singapore and Macau, corporate taxes have been calculated on the estimated assessable profits for the year at the rate of 18 per cent. and 12 per cent. (2006 – 20 per cent. and 12 per cent.), respectively.

The share of tax charge attributable to associates amounting to HK$376,491,000 (2006 – tax credit of HK$19,159,000) is included in “Share of results of associates” on the face of the consolidated profit and loss account.

13. PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

The consolidated profit attributable to equity holders of the Company for the year included a profit of HK$49,274,000 (2006 – loss of HK$34,676,000) which has been dealt with in the financial statements of the Company as set out in Note 33 to the financial statements.

14. EARNINGS PER SHARE ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

(a) Basic earnings per share

Basic earnings per share is calculated based on (i) the consolidated profit for the year attributable to equity holders of the Company of HK$1,267,271,000 (2006 – HK$391,472,000); and (ii) the weighted average number of 1,346,829,000 ordinary shares (2006 – 1,346,829,000 ordinary shares) in issue during the year.

(b) Diluted earnings per share

No diluted earnings per share is presented for the years ended 31st December, 2007 and 2006 as the share options outstanding during these years had no dilutive effect on the basic earnings per share for these years.

15. DISTRIBUTIONS

Interim, declared and paid, of HK1.75 cents (2006 – HK1.5 cents) per ordinary share Final, proposed, of HK5 cents (2006 – HK5 cents, paid) per ordinary share	Group and Company 2007 2006 HK$’000 HK$’000 23,570 20,202 67,341 67,341 90,911 87,543	Group and Company 2007 2006 HK$’000 HK$’000 23,570 20,202 67,341 67,341 90,911 87,543
		87,543

The proposed final distribution for the year is subject to the approval of the Company’s shareholders at the forthcoming annual general meeting.

— 66 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. GOODWILL

At 1st January, 2006 and 31st December, 2006: Cost Accumulated impairment Net carrying amount Cost at 1st January, 2007, net of accumulated impairment Acquisition of shares in a subsidiary from a minority shareholder Carrying amount at 31st December, 2007 At 31st December, 2007: Cost Accumulated impairment Net carrying amount	Group HK$’000 61,027 (3,742
	57,285

	57,285 14,200
	71,485

	75,227 (3,742
	71,485

Impairment testing of goodwill

Goodwill acquired through business combination has been allocated to the banking business cash-generating unit, which is a reportable segment, for impairment testing.

The recoverable amount of the banking business cash-generating unit is determined based on a value in use calculation using cash flow projections based on financial budgets approved by senior management covering a five-year period. The discount rate applied to the cash flow projection is 5 per cent. (2006 – 5 per cent.). The growth rate used to extrapolate the cash flows of the banking business beyond the five-year period is assumed to be nil.

The carrying amount of goodwill allocated to the banking business cash-generating unit is as follows:

		2007	2006
		HK$’000	HK$’000
Carrying	amount of goodwill	71,485	57,285

— 67 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

17. FIXED ASSETS

Group

2007 Cost: At 1st January, 2007 Additions during the year Disposals during the year Exchange adjustments At 31st December, 2007 Accumulated depreciation: At 1st January, 2007 Provided for the year Disposals during the year Exchange adjustments At 31st December, 2007 Net book value: At 31st December, 2007 Group	Leasehold improvements, furniture, Leasehold fixtures, land and equipment and buildings motor vehicles HK$’000 HK$’000 25,047 79,577 – 4,857 – (1,314) – 1,183 25,047 84,303 772 56,409 250 7,259 – (869) – 719 1,022 63,518 24,025 20,785	Total HK$’000 104,624 4,857 (1,314) 1,183 109,350 57,181 7,509 (869) 719 64,540 44,810

2006 Cost: At 1st January, 2006 Additions during the year Disposals during the year Disposal of subsidiaries Exchange adjustments At 31st December, 2006 Accumulated depreciation: At 1st January, 2006 Provided for the year Disposals during the year Disposal of subsidiaries Exchange adjustments At 31st December, 2006 Net book value: At 31st December, 2006	Leasehold improvements, furniture, Leasehold fixtures, land and equipment and buildings motor vehicles HK$’000 HK$’000 25,047 75,024 – 5,617 – (236) – (1,772) – 944 25,047 79,577 522 49,956 250 6,738 – (169) – (540) – 424 772 56,409 24,275 23,168	Total HK$’000 100,071 5,617 (236) (1,772) 944 104,624 50,478 6,988 (169) (540) 424 57,181 47,443

— 68 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The leasehold land and buildings situated outside Hong Kong are held under medium term leases.

Company

2007 Cost: At 1st January, 2007 Additions during the year At 31st December, 2007 Accumulated depreciation: At 1st January, 2007 Provided for the year At 31st December, 2007 Net book value: At 31st December, 2007 2006 Cost: At 1st January, 2006 Additions during the year At 31st December, 2006 Accumulated depreciation: At 1st January, 2006 Provided for the year At 31st December, 2006 Net book value: At 31st December, 2006	Furniture, fixtures, equipment and motor vehicles HK$’000 7,115 38
	7,153
	3,145 1,299
	4,444
	2,709

	4,571 2,544
	7,115
	1,882 1,263
	3,145
	3,970

— 69 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

18. INVESTMENT PROPERTIES

Medium term leasehold land and buildings situated in Hong Kong: Balance at beginning of year Fair value adjustments Balance at end of year Long term leasehold land and buildings situated in Hong Kong: Balance at beginning of year Fair value adjustments Balance at end of year Medium term leasehold land and buildings situated outside Hong Kong: Balance at beginning of year Additions during the year Fair value adjustments Balance at end of year Freehold land and buildings situated outside Hong Kong: Balance at beginning of year Additions during the year Disposal of subsidiaries Fair value adjustments Exchange adjustments Balance at end of year Total	Group 2007 2006 HK$’000 HK$’000 17,170 16,800 2,330 370 19,500 17,170 90,523 84,118 14,977 6,405 105,500 90,523 354,000 312,000 8,474 4,422 7,526 37,578 370,000 354,000 674,563 8,605 17,588 469,221 (668,585) – 273 162,923 5,870 33,814 29,709 674,563 524,709 1,136,256	Group 2007 2006 HK$’000 HK$’000 17,170 16,800 2,330 370 19,500 17,170 90,523 84,118 14,977 6,405 105,500 90,523 354,000 312,000 8,474 4,422 7,526 37,578 370,000 354,000 674,563 8,605 17,588 469,221 (668,585) – 273 162,923 5,870 33,814 29,709 674,563 524,709 1,136,256
		17,170
		84,118 6,405
		90,523
		312,000 4,422 37,578
		354,000
		8,605 469,221 – 162,923 33,814
		674,563
		1,136,256

Based on professional valuations as at 31st December, 2007 made by Vigers Appraisal and Consulting Limited and by reference to the actual disposal value of an investment property which was disposed to a third party subsequent to the balance sheet date, the investment properties in Hong Kong were revalued on an open market, existing use basis at HK$125,000,000 (2006 – HK$107,693,000).

Based on professional valuations as at 31st December, 2007 made by Professional Asset Valuers, Incorporated, Savills (Macau) Limited and CB Richard Ellis, the investment properties situated outside Hong Kong were revalued on an open market, existing use basis at HK$399,709,000 (2006 – HK$1,028,563,000).

Certain investment properties have been mortgaged to secure banking facilities made available to the Group as set out in Note 27 to the financial statements.

— 70 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

19. PROPERTIES UNDER DEVELOPMENT

Land and buildings situated outside Hong Kong, at cost: Balance at beginning of year Additions during the year Provisions for impairment losses Exchange adjustments Balance at end of year Less:_Amount classified under current portion Non-current portion Land and buildings held under the following lease terms: Leasehold(Note)_ Freehold	Group 2007 2006 HK$’000 HK$’000 160,115 105,096 42,127 47,384 (26,780) – 10,029 7,635 185,491 160,115 (47,725) – 137,766 160,115 99,362 98,121 86,129 61,994 185,491 160,115	Group 2007 2006 HK$’000 HK$’000 160,115 105,096 42,127 47,384 (26,780) – 10,029 7,635 185,491 160,115 (47,725) – 137,766 160,115 99,362 98,121 86,129 61,994 185,491 160,115
		160,115 –
		160,115

		98,121 61,994
		160,115

Note: The lease terms of the properties under development situated outside Hong Kong are 99 years.

20. INTERESTS IN ASSOCIATES

Share of net assets in unlisted investments Goodwill arising from acquisition less impairment Due from associates Due to associates Provisions for impairment losses The amount of goodwill arising from the acquisition of associates Cost: Balance at beginning of year Disposal of associates Balance at end of year Accumulated impairment: Balance at beginning of year Disposal of associates Balance at end of year Net carrying amount at end of year	Group 2007 2006 HK$’000 HK$’000 3,028,004 1,700,144 – 1,759 445,002 298,624 – (22,175 3,473,006 1,978,352 (39,396) (16,388 3,433,610 1,961,964 is as follows: 9,195 9,195 (9,195) – – 9,195 7,436 7,436 (7,436) – – 7,436 – 1,759	Group 2007 2006 HK$’000 HK$’000 3,028,004 1,700,144 – 1,759 445,002 298,624 – (22,175 3,473,006 1,978,352 (39,396) (16,388 3,433,610 1,961,964 is as follows: 9,195 9,195 (9,195) – – 9,195 7,436 7,436 (7,436) – – 7,436 – 1,759
		1,978,352 (16,388
		1,961,964

		9,195 –
		9,195
		7,436 –
		7,436
		1,759

— 71 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The balance as at 31st December, 2007 included the Group’s interest in LAAP of approximately HK$3,115 million (2006 – HK$1,639 million). In May 2006, LAAP participated in a joint venture to invest in Overseas Union Enterprise Limited, a listed company in Singapore principally engaged in property investment and hotel operation.

The balances with the associates are unsecured, interest-free and have no fixed terms of repayment. The carrying amounts of the balances are approximate to their fair values.

The following table illustrates the summarised financial information of the Group’s associates extracted from their management accounts:

Assets Liabilities Revenues Profit	Group 2007 2006 HK$’000 HK$’000 17,611,597 11,495,246 (7,999,845) (5,603,360 1,118,750 1,222,846 1,105,141 165,614

21. INTERESTS IN JOINTLY CONTROLLED ENTITIES

Share of net assets in unlisted investments Goodwill arising from acquisition Due from jointly controlled entities	Group 2007 2006 HK$’000 HK$’000 23,945 1,243 1,324 1,324 158,695 46,732 183,964 49,299	Group 2007 2006 HK$’000 HK$’000 23,945 1,243 1,324 1,324 158,695 46,732 183,964 49,299
		49,299

As at 31st December, 2007, the balances with the jointly controlled entities included a loan of HK$4,000,000 (2006 – HK$3,988,000), which is secured by certain shares of a jointly controlled entity, bears interest at United States dollar prime rate plus 2 per cent. (2006 – United States dollar prime rate plus 2 per cent.) per annum and has no fixed terms of repayment. The remaining balances with the jointly controlled entities are unsecured, interest-free and have no fixed terms of repayment. The carrying amounts of the balances are approximate to their fair values.

— 72 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The following table illustrates the summarised financial information of the Group’s jointly controlled entities extracted from their management accounts:

Share of the jointly controlled entities’ assets and liabilities: Current assets Non-current assets Current liabilities Non-current liabilities Net assets Share of the jointly controlled entities’ results: Turnover Total expenses Loss after tax Share of the jointly controlled entities’ capital commitments	Group 2007 2006 HK$’000 HK$’000 460,627 9,671 436 47,330 (26,189) (9,522 (251,581) – 183,293 47,479 382 912 (2,356) (3,556 (1,974) (2,644 150,875 307,713

22. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Financial assets stated at fair value: Unlisted investment funds Financial assets stated at cost: Unlisted equity securities Unlisted debt securities Provision for impairment losses _Less:_Amount classified under current portion Non-current portion	Group 2007 2006 HK$’000 HK$’000 119,967 94,442 79,602 79,166 12,118 11,536 (82,275) (82,275) 9,445 8,427 129,412 102,869 (2,454) – 126,958 102,869	Company 2007 2006 HK$’000 HK$’000 – – – – 3,165 3,165 – – 3,165 3,165 3,165 3,165 – – 3,165 3,165	Company 2007 2006 HK$’000 HK$’000 – – – – 3,165 3,165 – – 3,165 3,165 3,165 3,165 – – 3,165 3,165
			– 3,165 –
			3,165
			3,165 –
			3,165

— 73 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The debt securities have effective interest rates ranging from nil to 8 per cent. (2006 – nil to 8 per cent.) per annum.

An analysis of the issuers of available-for-sale financial assets is as follows: Equity securities: Corporate entities Debt securities: Club debenture Corporate entities	Group 2007 2006 HK$’000 HK$’000 79,602 79,166 3,165 3,165 8,953 8,371 12,118 11,536	Company 2007 2006 HK$’000 HK$’000 – – 3,165 3,165 – – 3,165 3,165	Company 2007 2006 HK$’000 HK$’000 – – 3,165 3,165 – – 3,165 3,165

			3,165 –
			3,165

During the year, the gross gain of the Group’s available-for-sale financial assets recognised directly in equity amounted to HK$22,129,000 (2006 – HK$26,672,000), of which HK$1,306,000 (2006 – HK$87,288,000) was removed from equity and recognised in the consolidated profit and loss account for the year.

The above financial assets consist of investments in equity securities and investment funds which were designated as available-for-sale financial assets and have no fixed maturity date or coupon rate.

The fair values of listed equity securities are based on quoted market prices. The fair values of certain unlisted available-for-sale financial assets have been estimated using a valuation technique based on assumptions that are not supported by observable market prices or rates. The valuation requires the Directors to make estimates about the expected future cash flows including expected future dividends and proceeds on subsequent disposal of the financial assets. The Directors believe that the estimated fair values resulting from the valuation technique, which are recorded in the consolidated balance sheet, and the related changes in fair values, which are recorded in the investment revaluation reserve, are reasonable, and that they are the most appropriate values at the balance sheet date.

Apart from the above, certain unlisted equity securities and debt securities issued by private entities are measured at cost less impairment at each balance sheet date. The Directors consider that information to be applied in the valuation techniques cannot be reliably obtained on a continuous basis. The fair values of these unlisted equity securities and debt securities cannot be reliably measured.

During the year, the Directors reviewed the carrying amount of certain unlisted available-forsale financial assets with reference to their business performances and the profit projections prepared by the investees’ management. No impairment loss (2006 – HK$5,797,000) has been charged to the consolidated profit and loss account for the year.

— 74 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

23. HELD-TO-MATURITY FINANCIAL ASSETS

Debt securities, at amortised cost: Listed overseas Market value of listed debt securities	Group 2007 2006 HK$’000 HK$’000 9,572 9,582 10,555 10,444	Group 2007 2006 HK$’000 HK$’000 9,572 9,582 10,555 10,444

		10,444

The debt securities have effective interest rates of 9 per cent. (2006 – 9 per cent.) per annum.

An analysis of the issuers of held-to-maturity financial assets is as follows:

Banks and other financial institutions 9,572 9,582

24. LOANS AND ADVANCES

The loans and advances to customers of the Group have effective interest rates ranging from 6 per cent. to 18 per cent. (2006 – 3 per cent. to 18 per cent.) per annum. The carrying amounts of loans and advances are approximate to their fair values. Balances arising from securities broking and banking operation are secured by clients’ properties, deposits and securities being held as collaterals with carrying amount of HK$643,429,000 (2006 – HK$917,341,000).

As at the balance sheet date, the overdue or impaired balances are related to banking operation. Movements of allowance for bad and doubtful debts during the year are as follows:

Balance at beginning of year Allowance for bad and doubtful debts Impairment allowance released Balance at end of year	Group 2007 2006 HK$’000 HK$’000 2,996 3,000 373 85 (501) (89 2,868 2,996	Group 2007 2006 HK$’000 HK$’000 2,996 3,000 373 85 (501) (89 2,868 2,996
		2,996

Except for the above, the remaining balances are neither overdue nor impaired and are related to a range of customers for whom there are no recent history of default.

— 75 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

25. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Held for trading: Equity securities: Listed in Hong Kong Listed overseas Debt securities: Listed overseas Investment funds: Listed overseas Unlisted Other: Unlisted Designated as financial assets at fair value through profit or loss_(Note):_ Unlisted investment funds	Group 2007 2006 HK$’000 HK$’000 66,080 56,293 7,297 6,731 73,377 63,024 8,733 9,056 31,498 46,030 278,901 230,731 310,399 276,761 6,299 5,813 398,808 354,654 – 466,371 398,808 821,025	Company 2007 2006 HK$’000 HK$’000 29,663 14,200 4,151 4,245 33,814 18,445 – – – – – – – – – – 33,814 18,445 – – 33,814 18,445	Company 2007 2006 HK$’000 HK$’000 29,663 14,200 4,151 4,245 33,814 18,445 – – – – – – – – – – 33,814 18,445 – – 33,814 18,445
			18,445
			–
			– –
			–
			–
			18,445 –
			18,445

Note: The designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring the assets or recognising the gains or losses on different bases.

The debt securities have effective interest rates ranging from 6.5 per cent. to 8 per cent. (2006 – 6.5 per cent. to 8 per cent.) per annum.

— 76 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

An analysis of the issuers of financial assets at fair value through profit or loss is as follows: Equity securities: Banks and other financial institutions Corporate entities Debt securities: Corporate entities	Group 2007 2006 HK$’000 HK$’000 7,270 – 66,107 63,024 73,377 63,024 8,733 9,056	Company 2007 2006 HK$’000 HK$’000 7,270 – 26,544 18,445 33,814 18,445 – –	Company 2007 2006 HK$’000 HK$’000 7,270 – 26,544 18,445 33,814 18,445 – –
			18,445

			–

26. DEBTORS, PREPAYMENTS AND DEPOSITS

Included in the balances are trade debtors with an aged analysis as follows:

Outstanding balances with ages: Repayable on demand Within 30 days Between 31 and 60 days Between 61 and 90 days	Group 2007 2006 HK$’000 HK$’000 44,416 45,809 36,660 39,602 272 969 53 184 81,401 86,564

Trading terms with customers are either on a cash basis or credit. For those customers who trade on credit, a credit period is allowed according to relevant business practice. Credit limits are set for customers. The Group seeks to maintain tight control over its outstanding receivables in order to minimise credit risk. Overdue balances are regularly reviewed by senior management.

As at balance sheet date, receivables are neither overdue nor impaired and are related to a range of customers for whom there are no recent history of default. The Group does not hold any collateral or other credit enhancements over these balances.

Except for receivables from certain securities brokers which are interest-bearing, the balances of trade debtors are non-interest-bearing. The carrying amounts of debtors and deposits are approximate to their fair values.

— 77 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

27. BANK AND OTHER BORROWINGS

Group
2007
2006
HK$’000
HK$’000
Bank loans:
Secured_(Note (a))
265,914
594,078
Unsecured
21,747
10,000
287,661
604,078
Other borrowings:
Unsecured(Note (b))_
525,978
885,495
813,639
1,489,573
_Less:_Amount classified under
current portion
(587,934)
(942,205)
Non-current portion
225,705
547,368
Bank and other borrowings by currency:
Hong Kong dollar
433,958
1,105,495
Singapore dollar
–
337,368
United States dollar
367,934
46,710
Renminbi
11,747
–
813,639
1,489,573
Bank loans repayable:
Within one year
275,914
56,710
In the second year
11,747
220,965
In the third to fifth years, inclusive
–
326,403
287,661
604,078
Other borrowings repayable:
Within one year
312,020
885,495
In the second year
213,958
–
525,978
885,495

Company
2007
2006
HK$’000
HK$’000
60,000
60,000
–
–
60,000
60,000
525,978
885,495
585,978
945,495
(372,020)
(885,495)
213,958
60,000
273,958
945,495
–
–
312,020
–
–
–
585,978
945,495
60,000
–
–
60,000
–
–
60,000
60,000
312,020
885,495
213,958
–
525,978
885,495

The carrying amounts of the Group and Company’s bank and other borrowings are approximate to their fair values and bear interest at floating rates ranging from 4.2 per cent. to 7.5 per cent. (2006 – 4.7 per cent. to 6.1 per cent.) per annum.

Note:

(a) The bank loans as at 31st December, 2007 were secured by first legal mortgages over certain investment properties and certain securities of the Group with carrying amounts of HK$475,500,000 (2006 – HK$1,109,112,000) and HK$55,914,000 (2006 – HK$46,710,000), respectively.
(b) The Group’s other borrowings as at 31st December, 2007 comprised of unsecured loans advanced from Lippo Limited (“Lippo”), an intermediate holding company of the Company, and a third party, of HK$213,958,000 and HK$312,020,000 respectively. The loan advanced from Lippo would be repayable on or before 30th June, 2009. The loan advanced from the third party would be repayable on 26th June, 2008 and subject to renewal for one additional year on terms mutually agreed with the lender.

— 78 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The Group’s other borrowings as at 31st December, 2006 comprised of unsecured loans advanced from Lippo and Lippo China Resources Limited (“LCR”), a then intermediate holding company of the Company, of HK$248,126,000 and HK$637,369,000 respectively. The balance with LCR was fully repaid during the year.

28. CREDITORS, ACCRUALS AND DEPOSITS RECEIVED

Included in the balances are trade creditors with an aged analysis as follows:

Outstanding balances with ages: Repayable on demand Within 30 days	Group 2007 2006 HK$’000 HK$’000 767,208 637,860 45,641 108,336 812,849 746,196	Group 2007 2006 HK$’000 HK$’000 767,208 637,860 45,641 108,336 812,849 746,196
		746,196

The outstanding balances that are repayable on demand include client payables relating to cash balances held on trust for the customers in respect of the Group’s securities broking business. As at 31st December, 2007, total client trust bank balances amounted to HK$730,995,000 (2006 – HK$582,905,000).

Except for certain client payables relating to cash balances held on trust for the customers in respect of the Group’s securities broking business are interest-bearing, the balances of trade creditors are non-interest-bearing.

29. CURRENT, FIXED, SAVINGS AND OTHER DEPOSITS OF CUSTOMERS

The current, fixed, savings and other deposits of customers attributable to banking operation have effective interest rates ranging from 1.2 per cent. to 5.3 per cent. (2006 – 2.5 per cent. to 5.2 per cent.) per annum.

— 79 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

30. DEFERRED TAX

Deferred tax liabilities

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

Group

Depreciation
Fair value
allowance
gains on
in excess
available-for-
of related
Revaluation
sale financial
depreciation
of properties
assets
HK$’000
HK$’000
HK$’000
2007
At 1st January, 2007
188
50,062
7,957
Deferred tax charged to the profit and
loss account during the year
363
552
–
Deferred tax credited to equity during
the year_(Note 33)
–
–
(26)
Disposal of subsidiaries
–
(30,416)
–
Exchange adjustments
3
202
26
At 31st December, 2007
554
20,400
7,957
2006
At 1st January, 2006
193
10,770
5,026
Deferred tax charged/(credited) to
the profit and loss account during
the year
(10)
38,155
–
Deferred tax debited to equity during
the year(Note 33)_
–
–
2,921
Exchange adjustments
5
1,137
10
At 31st December, 2006
188
50,062
7,957

Total
HK$’000
58,207
915
(26)
(30,416)
231
28,911
15,989
38,145
2,921
1,152
58,207

At 31st December, 2007, there were no significant unrecognised deferred tax liabilities (2006 – Nil) for taxes that would be payable on the unremitted earnings of certain of the Group’s subsidiaries, jointly controlled entities or associates as the Group had no liability to additional tax should such amounts be remitted.

Deferred tax assets

The Group has tax losses arising in Hong Kong of HK$131,708,000 (2006 – HK$128,619,000) 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 losses at the balance sheet date due to the unpredictability of future profit streams.

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

— 80 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

31. SHARE CAPITAL

Authorised: 2,000,000,000 (2006 – 2,000,000,000) ordinary shares of HK$1.00 each Issued and fully paid: 1,346,829,094 (2006 – 1,346,829,094) ordinary shares of HK$1.00 each	Group and Company 2007 2006 HK$’000 HK$’000 2,000,000 2,000,000 1,346,829 1,346,829	Group and Company 2007 2006 HK$’000 HK$’000 2,000,000 2,000,000 1,346,829 1,346,829

		1,346,829

32. SHARE OPTION SCHEME

A new share option scheme of the Company (the “Share Option Scheme”) was adopted and approved by the shareholders of the Company, Lippo Limited, an intermediate holding company of the Company, and Lippo China Resources Limited, a then intermediate holding company of the Company, on 7th June, 2007 (the “Adoption Date”). Pursuant to the Share Option Scheme, the board of the Directors of the Company (the “Board”) may, at its discretion, offer to grant to any eligible employee (including directors, officers and/or employees of the Group or any member of it); or any consultant, adviser, supplier, customer or sub-contractor of the Group or any member of it; or any other person whomsoever is determined by the Board as having contributed to the development, growth or benefit of the Group or any member of it or as having spent any material time in or about the promotion of the Group or its business (together the “Eligible Person”) an option to subscribe for shares in the Company. The purpose of the Share Option Scheme is to provide Eligible Persons with the opportunity to acquire proprietary interests in the Company and to encourage Eligible Persons to work towards enhancing the value of the Company and its shares for the benefit of the Company and its shareholders as a whole. The Share Option Scheme shall be valid and effective for the period of ten years commencing on the Adoption Date. Under the rules of the Share Option Scheme, no further options shall be granted on and after the tenth anniversary of the Adoption Date. The options can be exercised at any time during the period commencing on the date of grant and ending on the date of expiry which date shall not be later than the day last preceding the tenth anniversary of the date of grant. The Share Option Scheme does not specify a minimum period for which an option must be held nor a performance target which must be achieved before an option can be exercised. However, the rules of the Share Option Scheme provide that the Board may determine, at its sole discretion, such term(s) on the grant of an option. No grantee of option is required to pay for the grant of the relevant option.

The overall limit on the number of shares which may be issued upon exercise of all outstanding options granted and yet to be exercised under the Share Option Scheme and other share option schemes must not exceed 30 per cent. of the issued shares of the Company from time to time. The maximum number of shares in respect of which options may be granted under the Share Option Scheme shall not (when aggregated with any shares subject to options granted after the Adoption Date pursuant to any other share option scheme(s) of the Company) exceed 10 per cent. of the issued share capital of the Company on the Adoption Date (the “Scheme Mandate Limit”). The Scheme Mandate Limit may be renewed with prior approval of the shareholders of the Company. The total number of shares issued and to be issued upon exercise of options granted and to be granted under the Share Option Scheme to any single Eligible Person, whether or not already a grantee, in any 12-month period shall be subject to a limit that it shall not exceed one per cent. of the issued shares of the Company at the relevant time. The exercise price for the shares under the Share Option Scheme shall be determined by the Board at its absolute

— 81 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

discretion but in any event shall not be less than the highest of the closing price of the shares of the Company on the date of grant of the option or the average closing price of the shares of the Company for the five trading days immediately preceding the date of grant of the option, as stated in the daily quotations sheet of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”); or the nominal value of the shares of the Company on the date of grant of the option.

On 17th December, 2007, options were granted under the Share Option Scheme without consideration to Eligible Persons including, inter alia, certain Directors of the Company and employees of the Group to subscribe for a total of 13,468,000 ordinary shares of HK$1.00 each in the Company (the “Option Shares”) at an exercise price of HK$1.68 per share (subject to adjustment). The above options cannot be exercised from the date of grant to 16th June, 2008. Such options will be exercisable from 17th June, 2008 to 16th December, 2012. The closing price of the shares of the Company on 14th December, 2007, being the trading day immediately preceding the date of grant of the options, as stated in the daily quotations sheet of the Stock Exchange was HK$1.63.

The movements in Option Shares granted under the Share Option Scheme during the year are summarised as follows:

Balance Exercise as at price 1st January, Participants Date of grant per share 2007 HK$ Directors: John Lee Luen Wai 17th December, 2007 1.68 – Leon Chan Nim Leung 17th December, 2007 1.68 – Kor Kee Yee 17th December, 2007 1.68 – Albert Saychuan Cheok 17th December, 2007 1.68 – Victor Yung Ha Kuk 17th December, 2007 1.68 – Tsui King Fai 17th December, 2007 1.68 – Employees_(Note)_ 17th December, 2007 1.68 – Others 17th December, 2007 1.68 – Total –		Number of Option Shares	Number of Option Shares	Number of Option Shares
		Granted during the year 3,400,000 600,000 450,000 450,000 450,000 450,000 5,568,000 2,100,000 13,468,000	Exercised during the year – – – – – – – – –	Cancelled/ lapsed during the year – – – – – – – – –	Balance as at 31st December, 2007 3,400,000 600,000 450,000 450,000 450,000 450,000 5,568,000 2,100,000
					13,468,000

Note : Employees refer to the employees of the Group working under employment contracts that are regarded as “continuous contracts” for the purposes of the Employment Ordinance, other than the Directors and chief executive of the Company.

As at the date of this report, the total number of shares available for issue under the Share Option Scheme is 134,682,909 ordinary shares of HK$1.00 each, representing approximately 10 per cent. of the issued share capital of the Company.

No option was exercised during the year.

— 82 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The exercise price of the Option Shares and exercise period of the options outstanding as at the balance sheet date are as follows:

2007

	Exercise price
Number of Option Shares	per share(Note)	Exercise period
	HK$
		17th June, 2008 to
13,468,000	1.68	16th December, 2012

Note : The exercise price of the Option Shares is subject to adjustment in case of rights or bonus issues, or other similar changes in the Company’s share capital.

The fair value of the options granted during the year was HK$6,800,000 (2006 – Nil) of which the Group recognised an option expense of HK$6,800,000 (2006 – Nil) during the year ended 31st December, 2007.

The fair value of equity-settled options granted during the year was estimated as at the date of grant, using an adjusted Black-Scholes model, taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used:

2007

Dividend yield (per cent.)	4.037
Historical and expected volatility (per cent.)	46.53
Risk-free interest rate (per cent.)	4
Expected life of options (year)	5
Weighted average share price (HK$)	1.61

The expected life of the options is based on the historical data over the past five years and is not necessarily indicative of the exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

No other feature of the options granted was incorporated into the measurement of fair value.

The fair value computed is inherently subjective and uncertain due to the assumptions made and the limitations of the model used.

At the balance sheet date, the Company had options outstanding under the Share Option Scheme to subscribe for a total of 13,468,000 ordinary shares of the Company. The exercise in full of the outstanding options would, under the present capital structure of the Company, result in the issue of 13,468,000 additional ordinary shares of the Company and additional share capital of HK$13,468,000 and share premium of HK$9,158,000 (before issue expenses).

At the date of this report, the Company had options outstanding under the Share Option Scheme to subscribe for a total of 13,468,000 ordinary shares, which represented approximately one per cent. of the Company’s shares in issue as at that date.

— 83 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

33. RESERVES

Group

Share premium account 2007 HK$’000 1st January, 2007 50,988 Net fair value gain on available-for-sale financial assets – Deferred tax arising from fair value gain on available-for-sale financial assets_(Note 30)_ – Derecognition of available-for-sale financial assets – Share of reserves of associates and jointly controlled entities – Transfer of reserves – Exchange realignment – Advances from minority shareholders of subsidiaries – Acquisition of shares in a subsidiary from a minority shareholder – Changes in interests in subsidiaries – Disposal of subsidiaries – Equity-settled share option arrangements – Profit for the year – 2006 final distribution, declared and paid – 2007 interim distribution, declared and paid – At 31st December, 2007 50,988	Share option reserve HK$’000 – – – – – – – – – – – 6,800 – – – 6,800	Capital redemption reserve (Note (c)) HK$’000 11,760 – – – – – – – – – – – – – – 11,760	Legal reserve (Note (d)) HK$’000 3,960 – – – – 1,410 – – – – – – – – – 5,370	Regulatory reserve (Note (e)) HK$’000 1,264 – – – – (373 ) – – – – – – – – – 891	Investment Exchange revaluation Distributable equalisation reserve reserve reserve (Note (b)) HK$’000 HK$’000 HK$’000 36,960 1,678,657 61,986 22,085 – – 26 – – (1,306 ) – – 75,982 – 174,900 – (1,037 ) – – – 49,637 – – – – – – – – – – – (11,563 ) – – – – 1,267,271 – – (67,341 ) – – (23,570 ) – 133,747 2,853,980 274,960	Total HK$’000 1,845,575 22,085 26 (1,306 ) 250,882 – 49,637 – – – (11,563 ) 6,800 1,267,271 (67,341 ) (23,570 ) 3,338,496	Minority interests HK$’000 99,285 44 – – – – (342 ) 74,554 (31,925 ) 392 (130,786 ) – 856 – – 12,078

— 84 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

2006 At 1st January, 2006 Net fair value gain on available-for-sale financial assets Deferred tax arising from fair value gain on available-for-sale financial assets_(Note 30)_ Derecognition of available-for-sale financial assets Share of reserves of associates and jointly controlled entities Transfer of reserves Exchange realignment Issue of shares by subsidiaries to minority shareholders Advances from minority shareholders of subsidiaries Acquisition of shares in a subsidiary from a minority shareholder Changes in interests in subsidiaries Profit for the year 2005 final distribution, declared and paid 2006 interim distribution, declared and paid At 31st December, 2006	Share premium account HK$’000 50,988 – – – – – – – – – – – – – 50,988	Capital redemption reserve (Note (c)) HK$’000 11,760 – – – – – – – – – – – – – 11,760	Legal reserve (Note (d)) HK$’000 3,034 – – – – 926 – – – – – – – – 3,960	Regulatory reserve (Note (e)) HK$’000 1,169 – – – – 95 – – – – – – – – 1,264	Investment Exchange revaluation Distributable equalisation reserve reserve reserve (Note (b)) HK$’000 HK$’000 HK$’000 81,876 1,348,813 (15,453 ) 26,669 – – (2,921 ) – – (87,288 ) – – 18,624 – 54,344 – (1,021 ) – – – 23,095 – – – – – – – – – – – – – 391,472 – – (40,405 ) – – (20,202 ) – 36,960 1,678,657 61,986	Total HK$’000 1,482,187 26,669 (2,921 ) (87,288 ) 72,968 – 23,095 – – – – 391,472 (40,405 ) (20,202 ) 1,845,575	Minority interests HK$’000 32,079 3 – – – – 891 402 41,384 (258 ) (303 ) 25,087 – – 99,285

— 85 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Company

At 1st January 2006 Derecognition of available-for-sale financial assets Loss for the year_(Note 13) 2005 final distribution, declared and paid 2006 interim distribution, declared and paid At 31st December, 2006 and 1st January, 2007 Equity-settled share option arrangements Profit for the year(Note 13)_ 2006 final distribution, declared and paid 2007 interim distribution, declared and paid At 31st December, 2007	Share premium account HK$’000 50,988 – – – – 50,988 – – – – 50,988	Share option reserve HK$’000 – – – – – – 6,800 – – – 6,800	Capital redemption reserve (Note (c)) HK$’000 11,760 – – – – 11,760 – – – – 11,760	Investment revaluation Distributable reserve reserves (Note (b)) HK$’000 HK$’000 6,604 1,206,092 (6,604) – – (34,676) – (40,405) – (20,202) – 1,110,809 – – – 49,274 – (67,341) – (23,570) – 1,069,172	Total HK$’000 1,275,444 (6,604) (34,676) (40,405) (20,202) 1,173,557 6,800 49,274 (67,341) (23,570) 1,138,720

— 86 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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 2nd 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 at 31st December, 2007 comprise retained profits of HK$1,698,833,000 (2006 – HK$432,599,000) and the remaining balance arising from the Cancellation of HK$1,155,147,000 (2006 – HK$1,246,058,000). Included in the distributable reserves of the Group at 31st December, 2007 was an amount of proposed final distribution for the year then ended of HK$67,341,000 (2006 – HK$67,341,000) declared after the balance sheet date.

Distributable reserves of the Company at 31st December, 2007 comprise contributed surplus of HK$134,329,000 (2006 – HK$134,329,000), accumulated losses of HK$220,304,000 (2006 – HK$269,578,000) and the remaining balance arising from the Cancellation of HK$1,155,147,000 (2006 – HK$1,246,058,000). Included in the distributable reserves of the Company at 31st December, 2007 was an amount of proposed final distribution for the year then ended of HK$67,341,000 (2006 – HK$67,341,000) declared after the balance sheet date.

(c) The capital redemption reserve is not available for distribution to shareholders.
(d) The legal reserve represents the part of reserve generated by a banking subsidiary of the Company which may only be distributable in accordance with certain limited circumstances prescribed by the statute of the country in which the subsidiary operates.
(e) The regulatory reserve represents the part of reserve generated by a banking subsidiary of the Company arising from the difference between the impairment allowance made under HKAS 39 and for regulatory purpose.

34. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Due from subsidiaries Due to subsidiaries Provisions for impairment losses	Company 2007 2006 HK$’000 HK$’000 44,953 44,953 3,768,679 3,756,546 (661,541) (285,986) 3,152,091 3,515,513 (103,569) (103,569) 3,048,522 3,411,944

The balances with subsidiaries are unsecured, have no fixed terms of repayment and are approximate to their fair values. Certain balances bear interest at rates reflecting the respective costs of funds within the Group.

— 87 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

35. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

(a) Reconciliation of profit before tax to cash generated from operations

Note
Profit before tax
Adjustments for:
Share of results of associates
Share of results of jointly controlled entities
Loss/(Gain) on disposal of:
Items of fixed assets
6
Available-for-sale financial assets
6
Associates
Subsidiaries
35(b)
Loss/(Gain) on changes in interests
in subsidiaries
Write-back of allowance for bad and
doubtful debts
Provisions for impairment losses:
Associates
Available-for-sale financial assets
6
Properties held for sale
Properties under development
19
Net fair value gain on financial assets at
fair value through profit or loss
Fair value gains on investment properties
Share options
6
Interest expenses
10
Interest income
Dividend income
Depreciation
6
Decrease in financial assets at
fair value through profit or loss
Decrease in held-to-maturity financial assets
Increase in properties held for sale
Decrease/(Increase) in loans and advances
Decrease in debtors, prepayments and deposits
Increase in creditors, accruals and
deposit received
Increase/(Decrease) in current, fixed,
savings and other deposits of customers
Increase in client trust bank balances
Cash generated from operations

Group
2007
2006
HK$’000
HK$’000
1,274,742
463,534
(1,110,830)
4,014
1,974
2,644
445
67
(724)
(86,238)
(57,620)
–
(101,956)
(848)
1,053
(303)
(128)
(1,271)
23,008
–
–
5,797
10,090
–
26,780
–
(52,276)
(216,728)
(25,106)
(207,276)
6,800
–
70,674
49,064
(35,192)
(48,126)
(6,521)
(3,062)
7,509
6,988
32,722
(31,744)
474,493
282,656
10
22
(577)
(6,782)
35,642
(28,419)
11,472
1,056
62,381
30,424
(140,298)
188,778
(148,090)
(138,445)
327,755
297,546

— 88 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Disposal of subsidiaries

In June 2007, the Group disposed of its entire interest in a joint venture, which held twenty-two strata lots in a commercial building located at 79 Anson Road in Singapore. The disposal resulted in a gain on disposal of subsidiaries of HK$101,956,000.

Net assets disposed of: Fixed assets Investment properties Cash and bank balances Debtors, prepayments and deposits Creditors, accruals and deposits received Tax payable Deferred tax liabilities Release of exchange equalisation reserve Minority interests Gain on disposal of subsidiaries Satisfied by: Cash Financial assets at fair value through profit or loss	Group 2007 2006 HK$’000 HK$’000 – 1,232 668,585 – 25,813 54,634 124 349 (9,545) (1,077) – (39) (30,416) – (11,563) – (130,786) – 512,212 55,099 101,956 848 614,168 55,947 614,168 55,660 – 287 614,168 55,947

An analysis of net inflow of cash and cash equivalents in respect of the disposal of subsidiaries is as follow:

Cash consideration Cash and bank balances disposed of Net inflow of cash and cash equivalents in respect of the disposal of subsidiaries	614,168 (25,813) 588,355	55,660 (54,634) 1,026

— 89 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

36. CONTINGENT LIABILITIES

Group

As at 31st December, 2007, the Group had contingent liabilities relating to its banking subsidiary of HK$27,478,000 (2006 – HK$29,564,000) comprising guarantees and other endorsements of HK$17,881,000 (2006 – HK$17,172,000) and liabilities under letters of credit on behalf of customers of HK$9,597,000 (2006 – HK$12,392,000).

Company

As at 31st December, 2007, guarantees provided by the Company in respect of banking facilities granted to its subsidiaries amounted to HK$478,859,000 (2006 – HK$727,394,000), which were utilised to an extent of HK$171,747,000 (2006 – HK$429,894,000).

37. OPERATING LEASE ARRANGEMENTS

(a) As lessor

The Group leases its investment properties under operating lease arrangements with leases negotiated for terms of one to three years. The terms of the leases generally also require the tenants to pay security deposits and provide for periodic rent adjustments according to the prevailing market condition. At 31st December, 2007, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due as follows:

Within one year In the second to fifth years, inclusive	Group 2007 2006 HK$’000 HK$’000 5,959 26,225 1,073 24,100 7,032 50,325

(b) As lessee

The Group leases certain properties under lease agreements which are non-cancellable. The leases expire on various dates until 31st May, 2010 and the leases for properties contain provision for rental adjustments. As at 31st December, 2007, the Group had total future minimum lease payments under non-cancellable operating leases in respect of land and buildings falling due as follows:

Within one year In the second to fifth years, inclusive	Group 2007 2006 HK$’000 HK$’000 12,479 9,261 6,062 3,914 18,541 13,175	Company 2007 2006 HK$’000 HK$’000 1,389 1,961 – 1,389 1,389 3,350	Company 2007 2006 HK$’000 HK$’000 1,389 1,961 – 1,389 1,389 3,350
			3,350

— 90 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

38. CAPITAL COMMITMENTS

The Group had the following commitments at the balance sheet date:

Capital commitments in respect of property, plant and equipment: Contracted, but not provided for Other capital commitments: Contracted, but not provided for_(Note)_	Group 2007 2006 HK$’000 HK$’000 41,358 41,623 382,888 527,024 424,246 568,647	Group 2007 2006 HK$’000 HK$’000 41,358 41,623 382,888 527,024 424,246 568,647
		568,647

Note: The balance included the Group’s capital commitments in respect of the formation of joint ventures for certain property projects in Republic of Singapore and the People’s Republic of China of approximately HK$371 million (2006 – HK$390 million).

The Company did not have any material commitments at the balance sheet date (2006 – Nil).

39. RELATED PARTY TRANSACTIONS

Listed below are related party transactions disclosed in accordance with the HKAS 24 Related party disclosures.

(a) During the year, Lippo Securities Holdings Limited (“LSHL”), being a wholly-owned subsidiary of the Company, paid rental expenses of HK$4,556,000 (2006 – HK$3,163,000) to Prime Power Investment Limited, being a fellow subsidiary of the Company, in respect of office premises occupied by LSHL, and the Company paid rental expenses of HK$1,961,000 (2006 – HK$1,588,000) to Porbandar Limited, being a fellow subsidiary of the Company, in respect of office premises occupied by the Company. The above rentals were determined by reference to open market rentals.
(b) During the year, Impac Asset Management (HK) Limited, being a wholly-owned subsidiary of the Company, received investment advisory income from Lippo ASM Investment Management Limited, being an associate of the Group, amounting to HK$11,349,000 (2006 – HK$11,287,000).
(c) During the year, the Company paid finance costs to Lippo and LCR of HK$8,152,000 (2006 – HK$8,348,000) and HK$14,067,000 (2006 – HK$13,872,000), respectively, in respect of the loans advanced to the Company. The balances of which are set out in Note 27 to the financial statements.
(d) As at 31st December, 2007, the Group had balances with its associates and jointly controlled entities as set out in Note 20 and Note 21, respectively, to the financial statements.

The transactions in respect of item(a) above are continuing connected transactions as defined in Chapter 14A of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

— 91 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

40. FINANCIAL INSTRUMENTS BY CATEGORY

The carrying amounts of each of the categories of financial instruments as at the balance sheet date are as follows:

Group

At 31st December, 2007 Financial assets

Financial assets at fair value through Held-to- profit or loss maturity held for trading financial assets HK$’000 HK$’000 Interests in associates_(Note 20) – – Interests in jointly controlled entities(Note 21)_ – – Held-to-maturity financial assets – 9,572 Available-for-sales financial assets – – Financial assets at fair value through profit or loss 398,808 – Loans and advances – – Debtors and deposits – – Client trust bank balances – – Treasury bills – – Cash and bank balances – – 398,808 9,572	Loans and receivables HK$’000 445,002 158,695 – – – 265,216 168,524 730,995 34,920 399,663 2,203,015	Available-for- sale financial assets HK$’000 – – – 129,412 – – – – – – 129,412	Total HK$’000 445,002 158,695 9,572 129,412 398,808 265,216 168,524 730,995 34,920 399,663
			2,740,807

Financial liabilities

	Financial liabilities at
	amortised cost
	HK$’000
Bank and other borrowings	813,639
Creditors, accruals and deposits received	877,370
Current, fixed, savings and other deposits of customers	165,223
	1,856,232

— 92 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

At 31st December, 2006

Financial assets

Financial assets at fair value through profit or loss designated as such upon initial held for recognition trading HK$’000 HK$’000 Interests in associates_(Note 20) – – Interests in jointly controlled entities(Note 21)_ – – Held-to-maturity financial assets – – Available-for-sales financial assets – – Financial assets at fair value through profit or loss 466,371 354,654 Loans and advances – – Debtors and deposits – – Client trust bank balances – – Treasury bills – – Cash and bank balances – – 466,371 354,654	Held-to- maturity financial assets HK$’000 – – 9,582 – – – – – – – 9,582	Loans and receivables HK$’000 298,624 46,732 – – – 300,390 176,604 582,905 194,970 363,487 1,963,712	Available-for- sale financial assets HK$’000 – – – 102,869 – – – – – – 102,869	Total HK$’000 298,624 46,732 9,582 102,869 821,025 300,390 176,604 582,905 194,970 363,487
				2,897,188

Financial liabilities

	Financial liabilities at
	amortised cost
	HK$’000
Interests in associates_(Note 20)_	22,175
Bank and other borrowings	1,489,573
Creditors, accruals and deposits received	832,729
Current, fixed, savings and other deposits of customers	305,521
	2,649,998

— 93 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Company

At 31st December, 2007 Financial assets

Financial assets at fair value through profit or loss held for trading HK$’000 Interests in subsidiaries_(Note 34)_ – Available-for-sales financial assets – Financial assets at fair value through profit or loss 33,814 Debtors and deposits – Cash and bank balances – 33,814	Available-for- Loans and sale financial receivables assets HK$’000 HK$’000 3,768,679 – – 3,165 – – 980 – 13,559 – 3,783,218 3,165	Total HK$’000 3,768,679 3,165 33,814 980 13,559
		3,820,197

Financial liabilities

	Financial liabilities
	at amortised cost
	HK$’000
Interests in subsidiaries_(Note 34)_	661,541
Bank and other borrowings	585,978
Creditors, accruals and deposits received	31,706
	1,279,225

Company

At 31st December, 2006

Financial assets

Financial assets at fair value through profit or loss held for trading HK$’000 Interests in subsidiaries_(Note 34)_ – Available-for-sales financial assets – Financial assets at fair value through profit or loss 18,445 Debtors and deposits – Cash and bank balances – 18,445	Available-for- Loans and sale financial receivables assets HK$’000 HK$’000 3,756,546 – – 3,165 – – 965 – 62,092 – 3,819,603 3,165	Total HK$’000 3,756,546 3,165 18,445 965 62,092
		3,841,213

— 94 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Financial liabilities

	Financial liabilities at
	amortised cost
	HK$’000
Interests in subsidiaries_(Note 34)_	285,986
Bank and other borrowings	945,495
Creditors, accruals and deposits received	35,508
	1,266,989

41. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group had established policies and procedures for risk management which were 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 was 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 and they are summarised as follows:

(a) Credit risk

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

The credit policies for banking and margin lending businesses set out in details the credit approval and monitoring mechanism, the loan classification criteria and provision policy. Credit approval was conducted in accordance with the credit policies, taking 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. Day-to-day credit management was performed by management of individual business units.

The Group had established guidelines to ensure that all new debt investments were properly made, taking into account the credit rating requirements, the maximum exposure limit to a single corporate or issuer; etc. All relevant departments within the Group were involved to ensure that appropriate processes, systems and controls were set in place before and after the investments were acquired.

The Group’s exposure to credit risk arising from loans and advances and trade debtors at the balance sheet date based on the information provided to key management is as follows:

By geographical area Hong Kong Republic of Singapore Macau Europe Others	Group 2007 2006 HK$’000 HK$’000 197,713 197,433 176 759 132,357 152,094 1,338 1,694 15,033 34,974 346,617 386,954	Group 2007 2006 HK$’000 HK$’000 197,713 197,433 176 759 132,357 152,094 1,338 1,694 15,033 34,974 346,617 386,954
		386,954

The bank balances are deposited with creditworthy banks with no recent history of default.

— 95 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Liquidity risk

The Group managed 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 met with the statutory requirement on minimum liquidity ratio whenever applicable.

Management comprising Executive Directors and senior managers monitored 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 fell due and to make the most efficient use of the Group’s financial resources. 72 per cent. of the Group’s debts would mature in less than one year as at 31st December, 2007 (2006 – 63 per cent.) based on the carrying value of bank and other borrowings.

An analysis of the maturity profile of assets and liabilities of the Group analysed by the remaining period at the balance sheet date to the contractual maturity date is as follows:

Group

At 31st December, 2007 Assets Debt securities: Held-to-maturity financial assets Available-for-sale financial assets Financial assets at fair value through profit or loss Loans and advances Debtors and deposits Client trust bank balances Treasury bills Cash and bank balances Liabilities Bank and other borrowings Creditors, accruals and deposits received Current, fixed, savings and other deposits of customers	Repayable on demand HK$’000 – – – 176,821 46,864 92,151 – 174,248 490,084 – 767,560 142,299 909,859	3 months or less HK$’000 – – – 43,540 38,743 638,844 34,920 225,415 981,462 275,914 63,059 18,121 357,094	1 year or less but over 3 months HK$’000 – 8,953 – 16,971 1,637 – – – 27,561 312,020 10,568 4,803 327,391	5 years or less but over 1 year HK$’000 – – – 13,134 – – – – 13,134 225,705 1,311 – 227,016	After 5 years HK$’000 9,572 – 880 14,750 – – – – 25,202 – – – –	Undated HK$’000 – 3,165 7,853 – 81,280 – – – 92,298 – 34,872 – 34,872	Total HK$’000 9,572 12,118 8,733 265,216 168,524 730,995 34,920 399,663
							1,629,741

							813,639 877,370 165,223
							1,856,232

— 96 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

At 31st December, 2006 Assets Debt securities: Held-to-maturity financial assets Available-for-sale financial assets Financial assets at fair value through profit or loss Loans and advances Debtors and deposits Client trust bank balances Treasury bills Cash and bank balances Liabilities Bank and other borrowings Creditors, accruals and deposits received Current, fixed, savings and other deposits of customers	Repayable on demand HK$’000 – – – 110,599 55,125 52,417 – 126,173 344,314 – 637,897 107,747 745,644	3 months or less HK$’000 – – – 116,151 65,693 530,488 194,970 237,314 1,144,616 56,710 114,013 194,458 365,181	1 year or less but over 3 months HK$’000 – – – 46,574 663 – – – 47,237 885,495 27,302 3,316 916,113	5 years or less but over 1 year HK$’000 – 8,371 – 10,740 – – – – 19,111 547,368 1,583 – 548,951	After 5 years HK$’000 9,582 – 976 16,326 – – – – 26,884 – – – –	Undated HK$’000 – 3,165 8,080 – 55,123 – – – 66,368 – 51,934 – 51,934	Total HK$’000 9,582 11,536 9,056 300,390 176,604 582,905 194,970 363,487
							1,648,530

							1,489,573 832,729 305,521
							2,627,823

— 97 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

An analysis of the maturity profile of assets and liabilities of the Company analysed by the remaining period at the balance sheet date to the contractual maturity date is as follows:

Company

Repayable on demand HK$’000 At 31st December, 2007 Assets Debt securities: Available-for-sale financial assets – Debtors and deposits – Cash and bank balances 2,835 2,835 Liabilities Bank and other borrowings – Creditors, accruals and deposits received – – At 31st December, 2006 Assets Debt securities: Available-for-sale financial assets – Debtors and deposits – Cash and bank balances 2,524 2,524 Liabilities Bank and other borrowings – Creditors, accruals and deposits received – –	3 months or less HK$’000 – – 10,724 10,724 60,000 37 60,037 – – 59,568 59,568 – 114 114	1 year or less but over 3 months HK$’000 – – – – 312,020 10,084 322,104 – – – – 885,495 – 885,495	5 years or less but over 1 year HK$’000 – – – – 213,958 – 213,958 – – – – 60,000 – 60,000	Undated HK$’000 3,165 980 – 4,145 – 21,585 21,585 3,165 965 – 4,130 – 35,394 35,394	Total HK$’000 3,165 980 13,559
					17,704

					585,978 31,706
					617,684

					3,165 965 62,092
					66,222

					945,495 35,508
					981,003

(c) Interest rate risk

Interest rate risk primarily resulted from timing differences in the repricing of interestbearing assets, liabilities and commitments. The Group’s interest rate positions arose mainly from treasury, banking 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. The interest rate risk was managed and monitored regularly by senior management of the Group.

— 98 —

APPENDIX I

FINANCIAL INFORMATION 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 and the Company’s profit before tax (through the impact on floating rate interest-bearing monetary assets and liabilities).

		2007		2006
	Increase/	Increase/	Increase/	Increase/
	(Decrease)	(Decrease)	(Decrease)	(Decrease)
	in basis	in profit	in basis	in profit
	points	before tax	points	before tax
		HK$’000		HK$’000
Group
Hong Kong dollar	+50	(7,597)	+50	(5,647)
United States dollar	+50	(336)	+50	657
Singapore dollar	+50	223	+50	(946)
Hong Kong dollar	–50	7,597	–50	5,647
United States dollar	–50	336	–50	(657)
Singapore dollar	–50	(223)	–50	946
Company
Hong Kong dollar	+50	(2,228)	+50	(2,231)
United States dollar	+50	(798)	+50	224
Singapore dollar	+50	38	+50	2
Hong Kong dollar	–50	2,228	–50	2,231
United States dollar	–50	798	–50	(224)
Singapore dollar	–50	(38)	–50	(2)

(d) Foreign currency risk

Foreign currency risk was the risk to earnings or capital arising from movements of foreign exchange rates. The Group’s foreign currency risk primarily arose from currency exposures originating from its banking activities, foreign dealings and other investment activities.

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

The following table demonstrates the sensitivity at the balance sheet date to a reasonably possible change in the United Stated dollar and Singapore dollar exchange rate, with all other variables held constant, of the Group and the Company’s profit before tax (due to changes in the fair value of monetary assets and liabilities).

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FINANCIAL INFORMATION OF THE GROUP

	Increase/(Decrease)	Increase/(Decrease)
	in profit before tax
	2007	2006
	HK$’000	HK$’000
Group
United States dollar against Hong Kong dollar
– strengthened 3 per cent.	2,970	11,582
– weakened 3 per cent.	(2,970)	(11,582)
Singapore dollar against Hong Kong dollar
– strengthened 3 per cent.	584	312
– weakened 3 per cent.	(584)	(312)
Company
United States dollar against Hong Kong dollar
– strengthened 3 per cent.	(9,325)	1,341
– weakened 3 per cent.	9,325	(1,341)
Singapore dollar against Hong Kong dollar
– strengthened 3 per cent.	351	140
– weakened 3 per cent.	(351)	(140)

The Group has a banking subsidiary in Macau with certain monetary assets and liabilities denominated in Hong Kong dollar and United States dollar. The Directors considered that the foreign currency risk of this subsidiary is immaterial as no material fluctuation of exchange rates between Pataca and Hong Kong dollar and between Pataca and United States dollar is expected.

(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 value of individual financial assets. The Group is exposed to equity price risk arising from individual financial assets classified as available-for-sale financial assets (Note 22) and financial assets at fair value through profit or loss (Note 25) as at 31st December, 2007. The Group’s listed financial assets are mainly listed on the Hong Kong and Singapore stock exchanges and are valued at quoted market prices at the balance sheet date.

The market equity indices for the following stock exchanges, at the close of business of the nearest trading day in the year to the balance sheet date, and their respective highest and lowest points during the year were as follows:

	31st December,	High/low	31st December,	High/low
	2007	2007	2006	2006
Hong Kong – Hang Seng Index	27,812	31,638/18,664	19,964	20,001/14,944
Singapore – Straits Times Index	3,482	3,865/2,961	2,985	2,985/2,297

The Group use Value at Risk (the “VaR”) model to assess possible changes in the market value of the investment portfolio based on historical data from the past 2 years. The VaR model that the Group adopted is an estimate, using a confidence level of 95 per cent. of the potential loss that is not expected to be exceeded if the current market risk positions held unchanged for 10 days. The VaR figure are regularly reviewed by senior management of the Group to ensure the loss arising from the changes in the market value of the investment portfolios are capped within an acceptable range.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The amount of VaR for the investment portfolio of the Group stated at fair value is shown as follows:

2007 Financial assets: Hong Kong Singapore Global and other 2006 Financial assets: Hong Kong Singapore Global and other	Carrying amount HK$’000 66,080 4,151 448,544 56,293 4,245 854,929	VaR HK$’000 7,973 490 9,018

		7,468 400 18,429

(f) Capital management

The primary objective of the Group’s capital management is 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.

Certain subsidiaries of the Company are regulated by the Securities and Futures Commission (the “SFC”) and Office of the Commissioner of Insurance (the “CI”) and are required to comply with certain minimum capital requirements according to the rules of the SFC and CI. Management monitors, on a daily basis, these subsidiaries’ liquid capital to ensure they meet the minimum liquid capital requirement in accordance with the Securities and Futures (Financial Resources) Rule and Insurance Companies Ordinance.

Under the terms of Macau banking legislation, MCB is required to transfer to a legal reserve an amount equal to a minimum of 20 per cent. of its annual profit after tax until the amount of the reserve is equal to 50 per cent. of their respective issued and fully paid up share capital. Thereafter, transfers must continue at a minimum annual rate of 10 per cent. of its annual profit after tax until the reserve is equal to MCB’s issued and fully paid up share capital. This reserve is only distributable in accordance with certain limited circumstances prescribed by statute. MCB monitors solvency ratio under the requirement of Autoridade Monetária de Macau, the Monetary Authority of Macau, and to keep the ratio at not less than 8 per cent. throughout the current year.

No changes were made in the objectives, policies or processes during the years ended 31st December, 2007 and 31st December, 2006.

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

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FINANCIAL INFORMATION OF THE GROUP

Bank and other borrowings (Note 27) _Less:_Minority interests in bank and other borrowings Bank and other borrowings, net of minority interests Equity attributable to the equity holders of the Company Gearing ratio	Group 2007 2006 HK$’000 HK$’000 813,639 1,489,573 – (67,406) 813,639 1,422,167 4,685,325 3,192,404 17per cent. 45per cent.

42. POST BALANCE SHEET EVENTS

(a) On 12th July, 2007, the Group entered into a framework agreement (the “Framework Agreement”) with 鳳凰醫院管理 (北京 )有限公司 (Phoenix Hospital Management (Beijing) Company Limited) (“Phoenix Hospital Management”) and 中信信託投資有限責任公司 (CITIC Trust & Investment Company Limited) in respect of the establishment of a thirtyyear sino-foreign equity joint venture (the “Sino-foreign Equity Joint Venture”). Pursuant to the Framework Agreement, the Group shall enter into an equity transfer agreement and a capital increase agreement, inter alia, with Phoenix Hospital Management regarding the acquisition from Phoenix Hospital Management of approximately 32.54 per cent. interest in 鳳凰聯盟醫院管理 (北京 )有限公司 (Phoenix United Hospital Management (Beijing) Company Limited) (“Phoenix United”) at an amount of approximately HK$25,279,000 and the increase in capital contribution to Phoenix United by an amount of approximately HK$63,674,000, representing approximately 46.08 per cent. equity interest in the Sino-foreign Equity Joint Venture. Phoenix United and its subsidiaries are mainly engaged in hospital property investment and hospital management.

As requisite transactional documents set out in the Framework Agreement had not been executed, the condition precedent stipulated therein was not fulfilled. The Framework Agreement was terminated. In March 2008, the escrow deposit of HK$89,173,000 in connection with the Framework Agreement was returned to the Group.

(b) On 28th September, 2007, the Group entered into a conditional sale and purchase agreement (the “Agreement”) with a purchaser for a disposal of 60 per cent. interest in MCB (the “Disposal”) for a consideration of HK$384,000,000. Completion of the Agreement was subject to and conditional upon the satisfaction or waiver of a number of conditions precedent by the long stop date, being 29th February, 2008 (the “Long Stop Date”). As the approval on the Disposal from Autoridade Monetária de Macau had not been obtained by the purchaser, the conditions for the completion were not fulfilled nor waived by the parties to the Agreement by the Long Stop Date. The parties to the Agreement decided not to extend the Long Stop Date, and the Agreement therefore lapsed.
(c) On 15th January, 2008, the Group entered into an agreement with a third party for the disposal of its entire interest in a wholly-owned subsidiary for a consideration of HK$106,578,000 (subject to adjustment). The consideration was determined by reference to the fair market value of an investment property held by the subsidiary. The transaction was subsequently completed on 18th January, 2008.

43. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform with current year’s presentation. The reclassifications had no impact on the Group’s earnings for the year ended 31st December, 2006.

44. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Board of Directors on 16th April, 2008.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

PARTICULARS OF PRINCIPAL SUBSIDIARIES

Particulars of principal subsidiaries as at 31st December, 2007 are as set out below.

		Nominal value	Percentage of	Percentage of
	Place of	of issued	equity attributable
	incorporation/	and fully	to the Company/
	registration	paid ordinary	Group (unless
Name of company	and operations	share capital	otherwise stated)#		Principal activities
Allyield Limited	British Virgin Islands	US$1	–	100	Investment holding
Brilliant Leader Limited	British Virgin Islands	US$1	–	100	Investment holding
Capital Place International	British Virgin Islands/	US$1	–	100	Property investment
Limited**	Republic of
	the Philippines
成都力寶置業有限公司	People’s Republic of	US$2,500,000*	–	100	Property investment
(Chengdu Lippo Realty	China				and management
Limited)**
Choregeo Pte. Ltd.**	Republic of Singapore	S$1,000,000	–	100	Property investment
Conrich Inc.	British Virgin Islands	US$1	–	100	Investment holding
Cony Ltd.	British Virgin Islands/	US$1	–	100	Investments
	Hong Kong
Cyberspot Limited	British Virgin Islands	US$1	–	100	Investment holding
Everbest Pacific Ltd.	British Virgin Islands	US$1	–	100	Investments
Everwin Pacific Ltd.	British Virgin Islands	US$1	–	100	Property investment
Fiatsco Limited	British Virgin Islands	US$1	–	100	Investment holding
Firstclass Real Estate	Macau	MOP25,000	–	100	Property investment
Development Limited
Goldlux Holdings Limited	British Virgin Islands	US$1	–	100	Investments
Goldsney Investment	Hong Kong	HK$2	–	100	Securities investment
Limited

— 103 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Nominal value	Percentage of	Percentage of
	Place of	of issued	equity attributable
	incorporation/	and fully	to the Company/
	registration	paid ordinary	Group (unless
Name of company	and operations	share capital	otherwise stated)#		Principal activities
Grand Fusion Limited	British Virgin Islands	US$1	–	100	Investments
Green Lane Limited	British Virgin Islands	US$1	–	100	Investment holding
HKC Property Investment	British Virgin Islands	US$1	100	100	Investment holding
Holdings Limited
HKC Realty LLC**	United States of	US$2,250,000*	–	100	Property investment
	America
HKCL Investments Limited	British Virgin Islands	US$1	100	100	Investment holding
Hong Kong Housing	Hong Kong	HK$40,000,000	–	100	Money lending
Loan Limited
ImPac Asset Management	Hong Kong	HK$8,500,000	–	100	Investment advisory
(HK) Limited					and asset
					management
ImPac Asset Management	British Virgin Islands	US$2,000,100	–	100	Investment holding
(Holdings) Ltd.
ImPac Fund Managers	British Virgin Islands	US$13,000	–	100	Fund management
(BVI) Ltd.
Kenda Limited_(carry on_	British Virgin Islands/	US$1	–	100	Property investment
business in Hong Kong	Hong Kong
as Kenda Property
Holding Limited)
Lifepower Limited	British Virgin Islands	US$1	–	100	Investment holding
Lippo Asia Limited	Hong Kong	HK$120,000,000	–	100	Investment holding
Lippo Asset Management	Hong Kong	HK$400,000	–	100	Fund management
(HK) Limited
Lippo Futures Limited	Hong Kong	US$2,000,000	–	100	Commodities brokerage
Lippo Hospital	British Virgin Islands	US$1	–	100	Investment holding
Management Inc.

— 104 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Nominal value	Percentage of	Percentage of
	Place of	of issued	equity attributable
	incorporation/	and fully	to the Company/
	registration	paid ordinary	Group (unless
Name of company	and operations	share capital	otherwise stated)#		Principal activities
Lippo Investments	Hong Kong	HK$15,000,000	–	100	Fund management
Management Limited
Lippo Medical	British Virgin Islands	US$1	–	100	Investment holding
Holdings Limited
Lippo Realty (Singapore)	Republic of Singapore	S$2	–	100	Project management
Pte. Limited**
Lippo Securities	Hong Kong	US$23,000,000	–	100	Investment holding
Holdings Limited
Lippo Securities, Inc.**	Republic of the	Pesos 69,500,000	–	100	Investment holding
	Philippines
Lippo Securities Limited	Hong Kong	HK$220,000,000	–	100	Securities brokerage
Lippo (S) Pte Ltd**	Republic of Singapore	S$2,000,000	–	100	Property investment
L.S. Finance Limited	Hong Kong	HK$5,000,000	–	100	Money lending
Masta Limited	British Virgin Islands	US$1	–	100	Investment holding
Masuda Limited	British Virgin Islands	US$1	–	100	Investment holding
MGS Ltd.	British Virgin Islands	US$1	–	100	Investment holding
Norfyork International	Hong Kong	HK$25,000,000	–	100	Investment holding
Limited
Okio Ltd.	British Virgin Islands/	US$1	–	100	Investment holding
	Hong Kong
Pacific Bond Limited	British Virgin Islands	US$1	–	100	Investment holding
Pacific Landmark	British Virgin Islands	US$1	–	100	Investment holding
Holdings Limited

— 105 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Nominal value	Percentage of	Percentage of
	Place of	of issued	equity attributable
	incorporation/	and fully	to the Company/
	registration	paid ordinary	Group (unless
Name of company	and operations	share capital	otherwise stated)#		Principal activities
Peakmillion Asia Limited	British Virgin Islands	US$1	–	100	Investments
Redsun Ltd.	British Virgin Islands/	US$1	–	100	Property investment
	Hong Kong
Rosery Inc.	British Virgin Islands	US$1	–	100	Investment holding
Sinogain Asia Limited	British Virgin Islands	US$1	–	100	Property investment
Sinorite Limited	British Virgin Islands/	US$1	100	100	Investments
	Hong Kong
Skyblue International	British Virgin Islands	US$1	–	100	Investments
Limited
Stargala Limited	British Virgin Islands	US$1	–	100	Property investment
The Macau Chinese	Macau	MOP180,000,000	–	100	Banking
Bank Limited**
Topbest Asia Inc.	British Virgin Islands/	US$1	–	100	Investments
	Hong Kong
Uchida Limited	British Virgin Islands	US$1	–	100	Investment holding
UPM Ltd.	British Virgin Islands	US$1	–	100	Investment holding
Verybest Holdings Limited	British Virgin Islands/	US$1	–	100	Property investment
	Hong Kong
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
Winsite Limited	British Virgin Islands	US$1	–	100	Investments
Winus Holdings Limited	British Virgin Islands	US$1	–	100	Investment holding

— 106 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		Nominal value	Percentage of	Percentage of
	Place of	of issued	equity attributable
	incorporation/	and fully	to the Company/
	registration	paid ordinary	Group (unless
Name of company	and operations	share capital	otherwise stated)#		Principal activities
Wonder Plan	British Virgin Islands	US$1	–	100	Investments
Holdings Limited
Yield Point Limited	British Virgin Islands	US$1	–	100	Investment holding
Goldfix Pacific Ltd.	British Virgin Islands	US$6,817.83	–	88	Investment holding
Akarie Resources Limited	Republic of Bulgaria	BGN505,000	–	88	Operation of serviced
EOOD**					offices centers
TechnoSolve Limited	Hong Kong	HK$26,296,000	–	68.65	Development of
					computer hardware
					and software
Kingtek Limited	British Virgin Islands	US$100	–	60	Investment holding
Four Prosperity	British Virgin Islands	US$40,816	–	51	Investment holding
Holdings Limited

# represents the effective holding of the Group after minority interests therein * paid up registered capital ** audited by certified public accountants other than Ernst & Young, Hong Kong

Note:

BGN – Bulgarian leva MOP – Macau patacas 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 year 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.

— 107 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

PARTICULARS OF PRINCIPAL ASSOCIATES

Particulars of principal associates as at 31st December, 2007 are as set out below.

			Nominal value	Percentage
			of issued	of equity
	Form of	Place of	and fully	attributable
	business	incorporation	paid ordinary	to the	Principal
Name of company	structure	and operations	share capital	Group#	activities
Greenix Limited	Corporate	British Virgin	US$100,000	50	Investment
		Islands			holding
Lippo Marina	Corporate	Republic of	S$1,000,000	50	Property
Collection Pte. Ltd.		Singapore			development
Lippo ASM Investment	Corporate	Cayman Islands	US$100	49	Investment
Management Limited					management
Grosswin Limited	Corporate	British Virgin	US$10,000	45	Investment
		Islands			holding
Lippo ASM Asia	Limited	Cayman Islands	N/A	N/A	Property-related
Property LP**	partnership				investment

# represents the effective holding of the Group after minority interests therein

** Lippo ASM Asia Property LP is a limited partnership of which a wholly-owned subsidiary of the Company is the limited partner

Note:

S$ – Singapore dollars US$ – United States dollars

The above table includes the associates of the Company which, in the opinion of the Directors, principally affected the results for the year 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.

— 108 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

PARTICULARS OF PRINCIPAL JOINTLY CONTROLLED ENTITIES

Particulars of principal jointly controlled entities as at 31st December, 2007 are as set out below.

			Nominal	Percentage
			value of issued	of equity
	Form of	Place of	and fully	attributable
	business	incorporation	paid ordinary	to the	Principal
Name of company	structure	and operations	share capital	Group#	activities
上海醫甸醫院管理諮詢Corporate		People’s	RMB10,000,000*	50	Hospital
有限公司		Republic			management
(Shanghai Eden		of China
Hospital
Management
Consulting
Co., Ltd.)
Sunning Asia Limited	Corporate	British Virgin	US$50,000	50	Investment
		Islands			holding
Lippo Real Estate	Corporate	Republic of	S$1,000,000	50	Property
Pte. Limited		Singapore			investment
Yamoo Bay Project	Corporate	British Virgin	US$2	50	Investment
Limited		Islands			holding
Wealthy Place Limited	Corporate	British Virgin	US$6,070,870	30	Investment
		Islands
Lippo Project Pte.	Corporate	Republic of	S$9,225,736	30	Property
Limited		Singapore			investment

# represents the effective holding of the Group after minority interests therein

* paid up registered capital

Note:

– People’s Republic of China renminbi

RMB – S$ – Singapore dollars US$ – United States dollars

— 109 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. MANAGEMENT DISCUSSION AND ANALYSIS

Hong Kong’s economy stayed vibrant in 2007. The Asia region also sustained healthy economic growth.

The Group achieved excellent results in 2007 with strong performance on its major core businesses. Property investment and development sector, being the main growth driver for the year, performed well and sustained impressive returns to the Group. Corporate finance and securities broking business also recorded a substantial growth on the back of the robust local investment market. The Group took advantage of the positive global and local market conditions and realised a substantial part of its investment portfolio at profit. Meanwhile, the Group continued to strengthen its core businesses and explore overseas investment markets.

For the year ended 31st December, 2007, the Group’s profit attributable to shareholders increased sharply to HK$1,267 million (2006 – HK$391 million).

Results for the Year

Turnover for the year 2007 totalled HK$898 million, which was 18 per cent. lower than the HK$1,099 million recorded in 2006.

Despite the drop in turnover, the Group reported a substantial growth in profit for the year of HK$1,268 million (2006 – HK$417 million). Property investment and development was the main contributor.

Property investment and development

The Group’s earnings from property investment and development continued to benefit from the buoyant property market in Singapore. In June 2007, the Group disposed of its entire interest in a joint venture, which held twenty-two strata lots in a commercial building located at 79 Anson Road in the Republic of Singapore at a net profit of HK$102 million.

The Group’s investment in a property fund (the “Property Fund”), carrying the objective of investing in real estates in the East Asia Region, registered remarkable results for the year. The Property Fund’s investment in Overseas Union Enterprise Limited (“OUE”), a listed company in the Republic of Singapore principally engaged in hotel operation and property investment, recorded a strong growth for the year as a result of the escalating property market and booming tourist demand in the Republic of Singapore. The Group registered a share of profit of HK$1,104 million from the investment. With the strong demand for hospitality services, OUE recorded higher average room rates and occupancy during the year. Currently, OUE has seven prestigious hotels, carries the “Mandarin” and “Meritus” brand, which are strategically located in various famous tourist districts of the Republic of Singapore, Malaysia and China. OUE also holds a number of prime office buildings in central financial and business districts of the Republic of Singapore. Meanwhile, OUE has

— 110 —

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FINANCIAL INFORMATION OF THE GROUP

recently participated in various new property development and investment projects, which included the redevelopment projects at Collyer Quay, Angullia Park and Leonie Hill Road, the Republic of Singapore, etc, to capture the robust prime office and luxury residential property demand. It is expected that these investments have strong value appreciation potential.

With a positive outlook in both regional and local property markets, the Group recorded a total revaluation gain on investment properties of HK$25 million during the year.

Additionally, the Group has participated in various well-located development projects in Macau, the Republic of Singapore, Thailand and Japan. Meanwhile, the Group also plans to expand its property portfolio in Mainland China in the coming years. The Chinese government recently implemented measures to prevent the overheating of the property market and sharp increases in property prices. It is believed that in the long-term, with the continuing development of the Chinese economy, market demand for quality properties remains strong. The Group will therefore focus on such opportunities in the commercial and residential sectors and explore joint ventures to complete or expand their development.

Treasury and securities investments

Entering 2007, the Group redeemed its investment in a real estate fund for a net proceed of S$92 million. The redemption enabled the Group to realise the gain made pursuant to the subscription in the real estate fund, which has been recognised as unrealised gain in the past years. Turnover and profits attributable to treasury and securities investments for the year amounted to HK$617 million (2006 – HK$919 million) and HK$74 million (2006 – HK$341 million) respectively.

Looking ahead, the investment market would still be challenging and full of uncertainty. Foreseeing the global investment market continued to be volatile with the shadow over the US sub-prime mortgage issues, the Group took necessary steps to restructure and refine its composition of investment portfolio in the securities investment segment so as to improve overall asset quality.

Corporate finance and securities broking

The performance of the local stock market in 2007 was unprecedented. The exceptional price movements of H - shares, as well as some of the large local stocks offered a rare window of opportunity, boosting the volume of local stock market to record high. The corporate finance and securities broking business has benefited from this favourable environment, registering a remarkable increase in turnover to HK$159 million (2006 – HK$96 million), although challenges of varying degrees in terms of increasing competition, mounting volatility of the global investment market and the rise in global and local inflation were also experienced. Profit derived from this segment improved substantially to HK$43 million (2006 – HK$18 million).

— 111 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Banking business

The bank sustained stable results in 2007. Credit quality overall remained sound for the year. Management continued to lend conservatively and strived to improve asset quality. Turnover and profit derived from the banking segment amounted to HK$27 million (2006 – HK$29 million) and HK$4.2 million (2006 – HK$7.3 million) respectively.

Other businesses

With the property market in the Republic of Singapore performed well, the Group’s income base has further been widening by participating in certain property project management in the Republic of Singapore. Revenue of HK$53 million was generated in the current year.

In May 2007, the Group disposed of its 34.34 per cent. interest in the Convoy Group, which engaged in the provision of independent financial planning services in Hong Kong, at a net profit of HK$58 million. The disposal is in line with the Group’s strategy of focusing on core businesses of the Group.

Financial Position

As at 31st December, 2007, the Group’s total assets increased to HK$6.6 billion (2006 – HK$6.0 billion). Property- related assets increased significantly to HK$4.4 billion (2006 – HK$3.3 billion), representing 66 per cent. (2006 – 55 per cent.) of the total assets. On the other hand, investment portfolio of the Group reduced to HK$0.5 billion (2006 – HK$0.9 billion), comprising debt and equity securities of HK$0.1 billion (2006 – HK$0.1 billion) and investment funds of HK$0.4 billion (2006 – HK$0.8 billion). The investment portfolio represented 8 per cent. (2006 – 16 per cent.) of the Group’s total assets.

Various new property projects have been financed by proceeds derived from sales of certain investments, new bank loans and other borrowings. Total liabilities dropped to HK$1.9 billion (2006 – HK$2.7 billion). The Group’s financial position remained healthy and current ratio (measured as current assets to current liabilities) stood at 1.2 to 1 (2006 – 1.2 to 1).

As at 31st December, 2007, the bank and other borrowings of the Group (other than those attributable to banking business) decreased to HK$814 million (2006 – HK$1,490 million). As at 31st December, 2007, total bank loans amounted to HK$288 million (2006 – HK$604 million), comprising secured bank loans of HK$266 million (2006 – HK$594 million) and unsecured bank loans of HK$22 million (2006 – HK$10 million), which were denominated in Hong Kong dollars, United States dollars or Renminbi (2006 – denominated in Hong Kong dollars, United States dollars or Singapore dollars). The bank loans were secured by first legal mortgages over certain investment properties and certain securities of the Group. The bank loans carried interest at floating rates and 96 per cent. of the bank loans (2006 – 9 per cent.) were repayable within one year. During the year, the Group received loans from Lippo

— 112 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Limited (“Lippo”) and a third party of HK$214 million and HK$312 million, respectively. The advance from Lippo would be repayable on or before 30th June, 2009. While the third party’s advance would be repayable on 26th June, 2008 and subject to renewal for one additional year on terms mutually agreed with the lender. Meanwhile, the Group had fully repaid the loan advanced from Lippo China Resources Limited during the year. At the end of the year, gearing ratio (measured as bank and other borrowings, net of minority interests, to shareholders’ funds) dropped to 17 per cent. (2006 – 45 per cent.).

During the year, the Company made the 2006 final distribution of HK$0.05 per share and 2007 interim distribution of HK$0.0175 per share to its shareholders, amounting to a total of HK$90.9 million. The net asset value of the Group remained strong and increased to HK$4.7 billion (2006 – HK$3.2 billion). This was equivalent to HK$3.5 per share (2006 – HK$2.4 per share).

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

Apart from the abovementioned, there were no charges on the Group’s assets at the end of the year (2006 – Nil). Aside from those arising from the normal course of the Group’s banking operation, the Group had no material contingent liabilities outstanding (2006 – Nil).

As at 31st December, 2007, the Group’s total capital commitment decreased to HK$0.4 billion (2006 – HK$0.6 billion). The investments or capital assets will be financed by the Group’s internal resources and/or external banking financing, as appropriate.

Major Suppliers and Customers

During the year, the percentage of purchases attributable to the Group’s five largest suppliers combined and that of sales attributable to the Group’s five largest customers combined were less than 30 per cent. of the Group’s aggregate purchases and sales, respectively.

Outlook

The US sub-prime mortgage crisis, which began in August 2007, has caused greater volatility in financial markets worldwide. While the Asia economy was relatively unscathed, the external trading environment has turned more uncertain, and the repercussions of the credit market turbulence have yet to play out fully. The operating environment of the Group remains challenging. Overall, the Group is cautiously optimistic for the year ahead. Economic fundamentals in Hong Kong and the Asia Pacific Region remain sound. While striving to continue to improve internal operational efficiencies, the Group will keep on refining its existing core businesses

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

and seeking new investment opportunities with long-term growth potential. Given its own strong financial position, the Group is confident that it would be able to take advantage of new business opportunities in its pursuit of enhancing shareholders’ value.

4. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading position of the Group since 31st December, 2007, the date to which the latest published audited consolidated financial statements of the Group were made up.

5. INDEBTEDNESS

As at 30th April, 2008, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this prospectus, the Group (other than The Macau Chinese Bank Limited (“MCB”), a banking subsidiary of the Company) had outstanding indebtedness of approximately HK$721 million, comprising secured bank loans of approximately HK$202 million, unsecured bank loan of approximately HK$12 million and unsecured other loans of approximately HK$507 million.

The bank loans were secured by first legal mortgages over certain investment properties and certain securities of the Group.

Save as aforesaid and apart form intra-group liabilities, the Group (other than MCB) did not, as at 30th April, 2008, have any outstanding debt securities, whether issued and outstanding, authorised or otherwise created by unissued, term loans, whether guaranteed, unguaranteed, secured (whether the security is provided by the issuer or by third parties) or unsecured, other borrowings or indebtedness in the nature of borrowing including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments, whether guaranteed, unguaranteed, secured or unsecured borrowings or debt, mortgages, charges, guarantees or other material contingent liabilities.

As at 30th April, 2008, MCB accepted deposits from customers, banks and other financial institutions of approximately HK$152 million in the normal course of their banking business. MCB also had contingent liabilities of approximately HK$30 million, comprising guarantees and other endorsements of approximately HK$20 million and liabilities under letters of credit on behalf of customers of approximately HK$10 million, as at 30th April, 2008.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Save as aforesaid, MCB did not, as at 30th April, 2008, have any outstanding debt securities, whether issued and outstanding, authorised or otherwise created but unissued, term loans, whether guaranteed, unguaranteed, secured (whether the security is provided by the issuer or by third parties) or unsecured, other borrowings or indebtedness in the nature of borrowing including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments, whether guaranteed, unguaranteed, secured or unsecured borrowings or debt, mortgages, charges, guarantees or other material contingent liabilities.

The Directors confirm that, save as disclosed above, there are no material changes in the indebtedness and contingent liabilities of the Group since 30th April, 2008.

6. WORKING CAPITAL

The Directors are of the opinion that after taking into account the present internal financial resources of the Group, the available banking facilities and the estimated net proceeds of the Rights Issue, the Group has sufficient working capital for its present requirements (for at least the next twelve months from the date of this prospectus).

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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

1. UNAUDITED PRO FORMA CONSOLIDATED NET TANGIBLE ASSETS OF THE GROUP

The following is the unaudited pro forma consolidated net tangible assets of the Group which has been prepared on the basis of the notes set out below for the purpose of illustrating the effects of the Rights Issue as if it had taken place on 31st December, 2007.

The unaudited pro forma consolidated net tangible assets of the Group has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the net tangible assets of the Group following the Rights Issue.

			Unaudited
			pro forma adjusted
	Audited		consolidated net
	consolidated net		tangible assets
	tangible assets		of the Group
	of the Group		attributable to the
	attributable to the		Company’s equity
	Company’s equity	Estimated net	shareholders after
	shareholders as at	proceeds from the	the completion of
	31st December, 2007	Rights Issue	the Rights Issue
	HK$’000	HK$’000	HK$’000
	(Note 1)	(Note 2)
Based on 471,390,178 Rights Shares
to be issued at subscription price
of HK$1.00 per Rights Share	4,613,840	463,000	5,076,840
			HK$
Audited consolidated net tangible
assets per share attributable
to the Company’s equity
shareholders, prior to the
completion of the Rights Issue
(Note 3)			3.43
Unaudited pro forma adjusted
consolidated net tangible assets
per share attributable to the
Company’s equity shareholders
after the completion of the
Rights Issue_(Note 4)_			2.79

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APPENDIX II

UNAUDITED PRO FORMA FINANCIAL INFORMATION

Notes:

(1) The audited consolidated net tangible assets of the Group attributable to the Company’s equity shareholders as at 31st December, 2007 is extracted from the published annual report of the Company for the year ended 31st December, 2007 as set out in Appendix I to this prospectus, which is based on the audited consolidated net assets of the Group attributable to the Company’s equity shareholders as at 31st December, 2007 of HK$4,685,325,000 with an adjustment for the goodwill as at 31st December, 2007 of HK$71,485,000.
(2) The estimated net proceeds from the Rights Issue of approximately HK$463,000,000 are based on 471,390,178 Rights Shares to be issued (in the proportion of seven Rights Shares for every twenty Shares held on the Record Date which was 1,346,829,094 Shares) at the subscription price of HK$1.00 per Rights Share and after deduction of estimated related expenses of approximately HK$8,000,000.
(3) The calculation of audited consolidated net tangible assets per share is based on 1,346,829,094 Shares in issue as at the Latest Practicable Date.
(4) The calculation of unaudited pro forma adjusted consolidated net tangible assets per share is based on 1,818,219,272 Shares, which comprise of 1,346,829,094 Shares in issue as at the Latest Practicable Date and 471,390,178 Rights Shares to be issued.
(5) No adjustment has been made to reflect any trading results or other transactions of the Group entered into subsequent to 31st December, 2007, including the increase of interest in a joint venture of the Group (details of which are set out in the announcement of the Company dated 28th April, 2008).

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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

2. REPORT OF THE UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following is the text of a report received from Ernst & Young, Certified Public Accountants, Hong Kong, for the purpose of incorporation in the Prospectus.

==> picture [131 x 34] intentionally omitted <==

6th June, 2008

The Directors

Hongkong Chinese Limited 24th Floor, Tower One Lippo Centre 89 Queensway Hong Kong

Dear Sirs,

We report on the unaudited pro forma statement of consolidated net tangible assets of Hongkong Chinese Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) set out in Appendix II “Unaudited pro forma financial information” of the Company’s prospectus (the “Prospectus”) dated 6th June, 2008 in connection with the rights issue in the proportion of seven rights shares for every twenty shares held with bonus warrants on the basis of three warrants for every seven rights shares to the qualifying shareholders only (the “Rights Issue”). The unaudited pro forma statement of consolidated net tangible assets has been prepared, for illustrative purpose only, to provide information about how the Rights Issue might have affected the consolidated net tangible assets of the Group.

RESPONSIBILITIES

It is solely the responsibility of the directors of the Company to prepare the unaudited pro forma statement of consolidated net tangible assets of the Group in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

It is our responsibility to form an opinion, as required by the Listing Rules, on the unaudited pro forma statement of consolidated net tangible assets of the Group and to report our opinion solely to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the unaudited pro forma statement of consolidated net tangible assets of the Group beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION

BASIS OF OPINION

We conducted our work in accordance with the Hong Kong Standard on Investment Circular Reporting Engagements (“HKSIR”) 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma statement of consolidated net tangible assets of the Group with the directors of the Company.

We planned and performed our work so as to obtain the information and explanations we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the unaudited pro forma statement of consolidated net tangible assets of the Group has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the unaudited pro forma statement of consolidated net tangible assets of the Group as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Our work did not constitute an audit or review in accordance with Hong Kong Standards on Auditing issued by the HKICPA and, accordingly, we do not express any audit or review assurance on the unaudited pro forma statement of consolidated net tangible assets of the Group.

The unaudited pro forma statement of consolidated net tangible assets of the Group is for illustration purpose only and has been prepared in accordance with the basis set out in Appendix II “Unaudited pro forma financial information” of the Prospectus and, because of its nature, it may not give a true picture of the financial position of:

the Group had the transaction actually occurred as at the date indicated therein; or
the Group at any future date.

OPINION

In our opinion:

(a) the unaudited pro forma statement of consolidated net tangible assets of the Group has been properly compiled by the directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma statement of consolidated net tangible assets of the Group as disclosed pursuant to paragraph 29(1) of Chapter 4 of the Listing Rules.

Yours faithfully, Ernst & Young

Certified Public Accountants

Hong Kong

— 119 —

APPENDIX III

SUMMARY OF THE TERMS OF THE BONUS WARRANTS

The Bonus Warrants are proposed to be created and constituted by an instrument by way of deed poll to be executed by the Company (the “ Instrument ”) and will be issued in registered form and will form one class and rank pari passu in all respects with each other.

The Bonus Warrants represent direct obligations of the Company to the registered holders for the time being of the Bonus Warrants (the “ Warrantholders ”). The principal terms and conditions of the Bonus Warrants will be set out in the certificates for the Bonus Warrants (the “ Warrant Certificates ”). The Warrantholders shall be entitled to the benefit of, be bound by, and be deemed to have notice of all the provisions of the Instrument, a copy of which will be available for inspection during normal business hours at the registered office of the Company or such other place as may be notified to the Warrantholders from time to time. The principal provisions of the Instrument are summarised below.

1. SUBSCRIPTION

(a) The Warrantholder shall have rights (the “ Subscription Rights ”) to subscribe in cash for fully-paid Shares but not in respect of any fraction of a Share at a price (subject to the adjustments referred to below) of HK$1.25 per Share (the “ Subscription Price ”). Each Warrantholder is entitled to exercise the Subscription Rights to subscribe for Shares, in whole or in part, in integral multiples of the Subscription Price, of such amount stated on the Warrant Certificate upon exercise of the Subscription Rights represented thereby (the “ Exercise Moneys ”) for fully-paid Shares at the Subscription Price per Share. The Subscription Rights attaching to the Bonus Warrants held by a Warrantholder may be exercised, in respect of all or part of the Bonus Warrants so held, at any time between the date when dealings in the Bonus Warrants on the Stock Exchange commence (which is expected to be 4th July, 2008) until the third anniversary thereof (which is expected to be 4th July, 2011) (both dates inclusive) (the “ Subscription Period ” and the date on which any of the Subscription Rights is duly exercised is called a “ Subscription Date ”). Any Subscription Rights which have not been exercised during or before the end of the Subscription Period will thereafter lapse and the relevant Bonus Warrants will cease to be valid for any purpose.
(b) The entitlement of the Warrantholders to their Bonus Warrants will be evidenced by the Warrant Certificates, each of which will contain a subscription form. In order to exercise in whole or in part the Subscription Rights represented by the Warrant Certificate, the Warrantholder must complete and sign the subscription form (which shall be irrevocable) and deliver the same together with the Warrant Certificate to the warrant registrar of the Company for the time being (the “ Registrar ”), together with a remittance for the Exercise Moneys (or, in the case of a partial exercise, the relevant portion of the Exercise Moneys). In each case, compliance must also be made with any exchange control, fiscal or other laws or regulations for the time being applicable.

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APPENDIX III

SUMMARY OF THE TERMS OF THE BONUS WARRANTS

(c) No fraction of a Share will be allotted and any balance representing fraction of the Subscription Price paid on the exercise of Subscription Rights will be retained by the Company for its own benefit, provided that if the Subscription Rights comprised in two or more Warrant Certificates are exercised by a Warrantholder on the same Subscription Date then, for the purpose of determining whether any (and if so what) fraction of a Share arises, the Subscription Rights represented by such Warrant Certificates shall be aggregated.
(d) The Company undertakes in the Instrument that Shares falling to be issued upon the exercise of the Subscription Rights will be issued and allotted not later than ten (10) business days after the relevant Subscription Date and unless adjustment thereof has been made as provided in Clause 4 of the Instrument, will rank pari passu in all respects with the fully-paid Shares in issue on the relevant Subscription Date and accordingly shall entitle the holders thereof to participate in all dividends and/or other distributions declared, paid or made and/or offers of further securities made by the Company to existing holders of Shares on or after the relevant Subscription Date and other than any dividend, other distribution and/or offers previously declared or recommended or resolved to be paid or made if the record date (as defined in the Instrument) therefor is on or before the relevant Subscription Date and notice of the amount and record date therefor has been given to the Stock Exchange prior to the relevant Subscription Date.
(e) As soon as practicable after the relevant allotment of Shares (and not later than ten (10) business days after the relevant Subscription Date), there will be issued free of charge to the Warrantholder(s) to whom such allotment has been made upon his exercise of any Subscription Rights:
(i) a certificate (or certificates) for the relevant Shares in the name(s) of such Warrantholder(s);
(ii) (if applicable) a balancing Warrant Certificate in registered form in the name(s) of such Warrantholder(s) in respect of any Subscription Rights represented by the Warrant Certificate(s) and remaining unexercised; and
(iii) (if applicable) a certificate of any balance of fractions of Subscription Price paid on exercise of the Subscription Rights which is retained by the Company as mentioned in sub-paragraph (c) above.

The certificate(s) for Shares arising on the exercise of Subscription Rights, the balancing Warrant Certificate (if any) and the certificate mentioned in subparagraph (e)(iii) above (if any) will be sent by post at the risk of such Warrantholder(s) to the address of such Warrantholder(s) or (in the case of a joint holding) to that one of them whose name stands first on the register of Warrantholders. If the Company agrees, such certificates may by prior arrangement be retained by the Registrar to await collection by the relevant Warrantholder(s).

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APPENDIX III

SUMMARY OF THE TERMS OF THE BONUS WARRANTS

2. ADJUSTMENT OF SUBSCRIPTION PRICE AND/OR SUBSCRIPTION RIGHTS

The Instrument contains detailed provisions relating to the adjustment of the Subscription Price and/or Subscription Rights. The following is a summary of, and is subject to, the detailed provisions of the Instrument:

(a) The Subscription Price shall (except as provided otherwise in sub-paragraphs (b), (c), (d), (e) and (g) below) be adjusted as provided in the Instrument in each of the following cases:
(i) an alteration of the nominal amount of the Shares by reason of any consolidation or sub-division;
(ii) an issue (other than in lieu of a cash dividend) by the Company of Shares credited as fully paid by way of capitalisation of profits or reserves (including any share premium account or capital redemption reserve fund);
(iii) Capital Distribution (as defined in the Instrument) being made by the Company, whether on a reduction or redemption of capital or otherwise (except pursuant to a purchase by the Company of Shares), to holders of Shares (in their capacity as such);
(iv) a grant by the Company to the holders of Shares (in their capacity as such) of rights to acquire cash assets of the Company or any of its Subsidiaries (as defined in the Instrument);
(v) an offer or grant being made by the Company to holders of Shares (in their capacity as such) of Shares by way of rights or of options or warrants to subscribe for Shares at a price which is less than 90 per cent. of the market price (calculated as provided in the Instrument);
(vi) an issue wholly for cash being made by the Company or any other company of securities convertible into or exchangeable for or carrying rights of subscription for new Shares, if in any case the Total Effective Consideration per Share (as defined in the Instrument) is less than 90 per cent. of the market price (calculated as provided in the Instrument), or the terms of any such issue being altered so that the said Total Effective Consideration per Share is less than 90 per cent. of the market price (calculated as provided in the Instrument);
(vii) an issue being made wholly for cash of Shares (other than pursuant to a share option scheme (as defined in the Instrument)) at a price less than 90 per cent. of the market price (calculated as provided in the Instrument); and

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APPENDIX III

SUMMARY OF THE TERMS OF THE BONUS WARRANTS

(viii) the purchase by the Company of Shares or securities convertible into or exchangeable for Shares or any rights to acquire Shares (excluding any such purchases made on the Stock Exchange or any other stock exchange recognised for this purpose by the Securities and Futures Commission of Hong Kong or equivalent authority and the Stock Exchange) in circumstances where the Directors consider that it may be appropriate to make an adjustment to the Subscription Price.
(b) Except as mentioned in sub-paragraph (c) below, no such adjustment as is referred to in sub-paragraph (a) above shall be made in respect of:
(i) an issue of fully paid Shares upon the exercise of any conversion, exchange or subscription rights attaching to securities wholly or partly convertible into Shares or exchangeable for Shares or upon the exercise of any rights (including the Subscription Rights) to acquire Shares;
(ii) an issue by the Company of Shares or other securities of the Company or any of its subsidiaries wholly or partly convertible into or exchangeable for or carrying rights of subscription for, or a grant of rights to acquire, Shares pursuant to a Share Option Scheme (as defined in the Instrument);
(iii) an issue by the Company of Shares or by the Company or any of its subsidiaries of securities wholly or partly convertible into or exchangeable for carrying rights to acquire Shares, in any such case in consideration or part consideration for the acquisition of any other securities, assets or business;
(iv) an issue of fully paid Shares by way of capitalisation of all or part of the Subscription Right Reserve (as defined in the Instrument) to be established in certain circumstances pursuant to the terms and conditions contained in the Instrument (or any similar reserve which has been or may be established pursuant to the terms of any other securities wholly or partly convertible into or exchangeable for carrying rights to acquire Shares); or
(v) an issue of Shares in lieu of a cash dividend where an amount not less than the nominal amount of the Shares so issued is capitalised and the market value (calculated as provided in the Instrument) of such Shares is not more than 110 per cent. of the amount of dividend which holders of Shares could elect to or would otherwise receive in cash.
(c) Notwithstanding the provisions referred to in sub-paragraphs (a) and (b) above, in any circumstance where the Company shall consider that an adjustment to the Subscription Price provided for under the said provisions should not be made or should be calculated on a different basis or that an adjustment to the Subscription Price should be made notwithstanding that no such adjustment

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APPENDIX III

SUMMARY OF THE TERMS OF THE BONUS WARRANTS

is required under the said provisions, the Company may appoint an approved merchant bank (as defined in the Instrument) or the Auditors (as defined in the Instrument) to consider whether for any reason whatever the adjustment to be made (or the absence of adjustment) would not or might not fairly and appropriately reflect the relative interests of the persons affected thereby and, if such approved merchant bank or the Auditors shall consider this to be the case, the adjustment shall be modified or nullified or an adjustment made instead of no adjustment in such manner (including, without limitation, making an adjustment calculated on a different basis) as shall be certified by such approved merchant bank or the Auditors to be in its opinion appropriate.

(d) Any modification or adjustment of any rights or rate of conversion, exchange or subscription attaching to any securities issued by the Company or any of its subsidiaries prior to the issue of the Bonus Warrants which by their terms are wholly or partly convertible into or exchangeable for or carrying rights to subscribe for new fully paid-up Shares shall not affect the Subscription Price of the Bonus Warrants in any respect whatsoever.
(e) Any adjustment to the Subscription Price shall be made to the nearest one cent so that any amount under half a cent shall be rounded down and any amount of half a cent or more shall be rounded up. No adjustment shall be made to the Subscription Price in any case in which the amount by which the same would be reduced would be less than one cent and any adjustment which would otherwise then be required shall not be carried forward. No adjustment may be made (except on a consolidation of Shares into Shares) which would increase the Subscription Price.
(f) Every adjustment to the Subscription Price will be certified to be fair and appropriate by the Auditors or an approved merchant bank and notice of each adjustment (giving the relevant particulars) will be given to the Warrantholders. Any such certificates of the Auditors or approved merchant bank will be available for inspection at the principal place of business for the time being of the Company, where copies may be obtained.
(g) No adjustments or modifications to the Subscription Price shall become effective unless and until the event(s) triggering such adjustments or modifications shall have become unconditional and effective.

3. REGISTERED WARRANTS

The Bonus Warrants will be issued in registered form. The Company shall be entitled to treat the registered holder(s) of any Bonus Warrants as the absolute owner(s) thereof and accordingly shall not, except as ordered by a court of competent jurisdiction or as required by law, be bound to recognise any equitable or other claim to or interest in such Bonus Warrants on the part of any other person, whether or not the Company has express or other notice thereof.

— 124 —

APPENDIX III

SUMMARY OF THE TERMS OF THE BONUS WARRANTS

4. TRANSFER, TRANSMISSION AND REGISTRATION

The Bonus Warrants will be transferable, in whole amounts or integral multiples of the Subscription Price for the time being in force, by instrument of transfer in any usual or common form or in any other form which may be approved by the Directors. The Company shall maintain a register of Warrantholders accordingly. Transfers of Bonus Warrants must be executed by both the transferor and the transferee. Where the transferor or the transferee is HKSCC Nominees Limited (or such other company as may be approved by the Directors for that purpose), the transfer may be executed under the hand of an authorised person or by machine imprinted signatures on its behalf. The provisions of the Company’s Bye-laws relating to the registration, transmission and transfer of Shares shall, mutatis mutandis, apply to the registration, transmission and transfer of the Bonus Warrants.

Since the Bonus Warrants will be admitted to the CCASS, so far as applicable laws or regulations of relevant regulatory authorities, terms of the Instrument and circumstances permit, the Company may determine the last trading day of the Bonus Warrants to be a date at least three trading days before the last day of the Subscription Period.

Persons who hold the Bonus Warrants and have not registered the Bonus Warrants in their own names and wish to exercise the Bonus Warrants should note that they may incur additional costs and expenses in connection with any expedited re-registration of the Bonus Warrants prior to the transfer or exercise of the Bonus Warrants, in particular during the period commencing ten (10) business days, or any period from time to time fixed by the Listing Rules or other rules or regulations of other relevant regulatory authorities for standard securities registration service, prior to and including the last day of the Subscription Period.

5. CLOSURE OF REGISTER OF WARRANTHOLDERS

The Register (as defined in the Instrument) may be closed from time to time, subject to the same restrictions, mutatis mutandis, as apply to the closure of the register of members of the Company under the Company’s Bye-laws and the Companies Act 1981 of Bermuda (as amended from time to time). Any exercise of Subscription Rights during the period for which the register of Warrantholders is closed shall be deemed to be and shall be effective upon the first day upon which the register of Warrantholders reopens and such date shall be deemed to be the relevant Subscription Date for all purposes in respect of such exercise of Subscription Rights.

6. PURCHASE AND CANCELLATION

The Company or any of its subsidiaries may at any time purchase Bonus Warrants:

(a) in the open market or by tender (available to all Warrantholders alike) at any price; or

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APPENDIX III

SUMMARY OF THE TERMS OF THE BONUS WARRANTS

(b) by private treaty at a price, exclusive of expenses, not exceeding 110 per cent. of the closing price on the Stock Exchange per Warrant for one or more board lots of Bonus Warrants prior to the date of purchase of the Bonus Warrants on the Stock Exchange,

but not otherwise and all Bonus Warrants purchased as aforesaid shall be cancelled forthwith and may not be reissued or re-sold.

7. MEETINGS OF WARRANTHOLDERS AND MODIFICATION OF RIGHTS

(a) The Instrument contains provisions for convening meetings of Warrantholders to consider any matter affecting the interests of Warrantholders, including the modification by Special Resolution (as defined in the Instrument) of the provisions of the Instrument and/or of the terms and conditions endorsed on the Warrant Certificates. A Special Resolution duly passed at any such meeting of Warrantholders shall be binding on the Warrantholders, whether present or not.
(b) All or any of the rights for the time being attached to the Bonus Warrants (including any of the provisions of the Instrument) may from time to time (whether or not the Company is being wound up) be altered or abrogated (including, but without prejudice to that generality by waiving compliance with, or by waiving or authorising any past or proposed breach of, any of the provisions of the terms and conditions endorsed on the Warrant Certificates and/or the Instrument) with the prior sanction of a Special Resolution and may be effected only by deed poll executed by the Company and expressed to be supplemental to the Instrument.
(c) Where the Warrantholder is a recognised clearing house (within the meaning of the SFO) or its nominee(s), it may authorise such person or persons as it thinks fit to act as its representative (or representatives) or proxy (or proxies) at any Warrantholders’ meeting provided that, if more than one person is so authorised, the authorisation or proxy form must specify the number and class of warrants in respect of which each such person is so authorised. The person so authorised will be entitled to exercise the same power on behalf of the recognised clearing house as that clearing house or its nominee(s) could exercise as if such person were an individual Warrantholder of the company.

8. QUORUM

A quorum of a meeting of Warrantholders will be two or more persons holding or representing not less than one tenth in value of the Subscription Rights for the time being outstanding and exercisable present in person or by proxies.

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APPENDIX III

SUMMARY OF THE TERMS OF THE BONUS WARRANTS

9. REPLACEMENT OF WARRANT CERTIFICATES

If a Warrant Certificate is mutilated, defaced, lost or destroyed, it may, at the discretion of the Company, be replaced at the office of the Registrar on payment of such costs as may be incurred in connection therewith and on such terms as to evidence, indemnity and/or security as the Company may require and on payment of such fee not exceeding HK$2.50 (or such higher fee as may from time to time be permitted by the Stock Exchange) as the Company may determine. Mutilated or defaced Warrant Certificates must be surrendered before replacements will be issued.

In the case of lost Warrant Certificates, Section 71A of the Companies Ordinance shall apply as if “shares” referred to therein included the Bonus Warrants.

10. PROTECTION OF SUBSCRIPTION RIGHTS

The Instrument contains certain undertakings by and restrictions on the Company designed to protect the Subscription Rights.

11. CALL

If at any time during the Subscription Period the aggregate of the value of the Subscription Rights represented by the Bonus Warrants for the time being outstanding is equal to or less than 10 per cent. of the aggregate value of the Subscription Rights attached to all the Bonus Warrants issued under the Instrument, then the Company may, on giving not less than three months’ notice, require Warrantholders either to exercise their Subscription Rights or to allow them to lapse. On expiry of such notice, all unexercised Bonus Warrants will be automatically cancelled without compensation to Warrantholders.

12. FURTHER ISSUES

The Company shall be at liberty to issue further warrants or other securities convertible into, exchangeable for or carrying rights to subscribe for Shares in such manner and on such terms as it sees fit.

13. UNDERTAKINGS BY THE COMPANY

The Company undertakes in the Instrument, amongst other things, that:

(a) upon the exercise of any Subscription Rights it will within ten (10) business days after the relevant Subscription Date allot and issue the number of Shares for which subscription is made;
(b) all Shares so allotted shall rank pari passu in all respect with the fully paid Shares in issue on the relevant Subscription Date and shall accordingly entitle the holders to participate in full in all dividends or other distributions paid or

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APPENDIX III

SUMMARY OF THE TERMS OF THE BONUS WARRANTS

made on the Shares after the relevant Subscription Date other than any dividend or other distribution previously declared, or recommended or resolved to be paid or made if the record date therefor shall be on or before the relevant Subscription Date and notice of the amount and record date for which shall have been given to the Stock Exchange prior to the relevant Subscription Date;

(c) for so long as the Shares remain listed on the Stock Exchange, it will use its best endeavours to ensure that all Shares allotted on exercise of Subscription Rights shall be admitted to listing on the Stock Exchange;
(d) it will send to each Warrantholder (or, in the case of joint Warrantholders, to the Warrantholder whose name stands first in the Register in respect of the Warrant held by such joint Warrantholders) at the same time as the same are sent to the holders of Shares, its audited accounts and all other notices, reports and communications despatched by it to the holders of the Shares generally; and
(e) it will pay all Hong Kong stamp duties, registration fees or similar charges in respect of the execution of the Instrument, the creation and initial issue of the Bonus Warrants in registered form, the exercise of the Subscription Rights and the issue of Shares upon exercise of the Subscription Rights.

14. OVERSEAS WARRANTHOLDERS

None of the Subscription Rights attaching to the Bonus Warrants may be exercised by any person and/or Warrantholder whose registered address is in or who is a national of or is resident in any territory other than Hong Kong where, the allotment of Shares to such Warrantholder upon exercise of any Subscription Rights would or may in the absence of compliance with registration or any other special formalities in such territory, be unlawful, impractical or inexpedient (to be determined at the discretion of the Directors) taking into account the laws and regulations of such territory or Hong Kong and each exercise of Subscription Rights by any other Warrantholder resident outside Hong Kong shall constitute a confirmation that all necessary governmental or other consents or approvals have been obtained or formalities observed by the person so exercising.

15. WINDING UP OF THE COMPANY

(a) In the event a notice is given by the Company to its shareholders to convene a shareholders’ meeting for the purpose of considering and, if thought fit, approving a resolution to wind-up the Company voluntarily, every Warrantholder shall be entitled by irrevocable surrender of his Warrant Certificate(s) to the Company with the Subscription Form(s) duly completed, together with payment of the Exercise Moneys or the relative portion thereof (such Subscription Form(s) and Exercise Moneys to be received by the Company

— 128 —

APPENDIX III

SUMMARY OF THE TERMS OF THE BONUS WARRANTS

not less than two (2) business days prior to the proposed shareholders’ meeting) to be allotted and issued, as soon as possible and in any event no later than the day immediately prior to the date of the proposed shareholder’s meeting, the Shares which fall to be issued pursuant to the exercise of the relevant Subscription Rights.

(b) If an effective resolution is passed during the Subscription Period for the voluntary winding-up of the Company for the purpose of reconstruction or amalgamation pursuant to a scheme of arrangement to which the Warrantholders, or some persons designated by them for such purpose by Special Resolution, shall be a party or in conjunction with which a proposal is made to the Warrantholders and is approved by Special Resolution, the terms of such scheme of arrangement or (as the case may be) proposal shall be binding on all the Warrantholders.

Subject to the foregoing, if the Company is wound up, all Subscription Rights which have not been exercised at the date of the passing of such resolution shall lapse and each Warrant Certificate shall cease to be valid for any purpose.

16. GOVERNING LAW

The Instrument and the Bonus Warrants are governed by and shall be construed in accordance with the laws of Hong Kong.

— 129 —

APPENDIX IV

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

This prospectus includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors collectively and individually accept full responsibility for the accuracy of the information contained in this prospectus and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief, there are no other facts the omission of which would make any statement in this prospectus misleading.

2. SHARE CAPITAL, SHARE OPTIONS AND WARRANTS

(a) Share capital

The authorised and issued share capitals of the Company as at the Latest Practicable Date were, and immediately following completion of the Capital Increase and the Rights Issue (assuming the Rights Issue becoming unconditional) and the full exercise of the Bonus Warrants will be, as follows:

Authorised:	HK$
2,000,000,000 Shares	2,000,000,000

Upon completion of the Capital Increase:	HK$
4,000,000,000 Shares	4,000,000,000

Issued and fully paid:	HK$
1,346,829,094 Shares as at the Latest Practicable Date	1,346,829,094
To be issued pursuant to the Rights Issue
(with entitlement to Bonus Warrants):
471,390,178 Rights Shares to be issued	471,390,178
202,024,362 Warrant Exercise Shares to be issued	202,024,362
upon full exercise of the Bonus Warrants
2,020,243,634 Shares	2,020,243,634

All the existing issued Shares rank pari passu with each other in all respects, including in particular as to dividends or other distributions, voting rights and capital. The Rights Shares and Warrant Exercise Shares to be allotted and issued will, when issued and fully paid, rank pari passu in all respects with the then existing Shares in issue, including the right to receive all future dividends or other distributions which may be declared, made or paid after the date of issue of the Rights Shares and Warrant Exercise Shares (as applicable). The Company did not have any convertible debt securities as at the Latest Practicable Date.

— 130 —

APPENDIX IV

GENERAL INFORMATION

(b) Share options

Details of the Options as at the Latest Practicable Date were as follows:

				Number of
		Exercise		Shares
		price per		falling to be
		Share		issued upon
		(subject to		full exercise of
Grantees	Date ofgrant	adjustment)	Exerciseperiod	the Options
Directors:
John Luen Wai Lee	17th December, 2007	HK$1.68	17th June, 2008 to	3,400,000
			16th December,	2012
Leon Nim Leung Chan	17th December, 2007	HK$1.68	17th June, 2008 to	600,000
			16th December,	2012
Kee Yee Kor	17th December, 2007	HK$1.68	17th June, 2008 to	450,000
			16th December,	2012
Albert Saychuan	17th December, 2007	HK$1.68	17th June, 2008 to	450,000
Cheok			16th December,	2012
King Fai Tsui	17th December, 2007	HK$1.68	17th June, 2008 to	450,000
			16th December,	2012
Victor Ha Kuk Yung	17th December, 2007	HK$1.68	17th June, 2008 to	450,000
			16th December,	2012
Employees of	17th December, 2007	HK$1.68	17th June, 2008 to	5,568,000
the Group			16th December,	2012
Others:
Jonathan Miles Foxall	17th December, 2007	HK$1.68	17th June, 2008 to	900,000
1C, Celestial Garden			16th December,	2012
5 Repulse Bay Road
Hong Kong
Mei Wa Chan	17th December, 2007	HK$1.68	17th June, 2008 to	650,000
Room 2020			16th December,	2012
Tung Yuen House
Chuk Yuen North Estate
Wong Tai Sin
Kowloon
Hong Kong

— 131 —

APPENDIX IV

GENERAL INFORMATION

				Number of
		Exercise		Shares
		price per		falling to be
		Share		issued upon
		(subject to		full exercise of
Grantees	Date ofgrant	adjustment)	Exerciseperiod	the Options
Adeline So Han Ng	17th December, 2007	HK$1.68	17th June, 2008 to	400,000
Flat A, 3/F., Tower 9			16th December,	2012
Parc Oasis
7 Parc Oasis Road
Yau Yat Chuen
Kowloon
Hong Kong
Chung Chak Li	17th December, 2007	HK$1.68	17th June, 2008 to	100,000
Flat 21B			16th December,	2012
Tower Two
Euston Court
6 Park Road
Mid-Levels
Hong Kong
Flora Wai Kwan Lee	17th December, 2007	HK$1.68	17th June, 2008 to	50,000
Flat D, 21/F			16th December,	2012
Block 9
23 Laguna Street
Laguna City
Lam Tin
Kowloon
Hong Kong

The Options were granted without consideration under the Share Option Scheme.

(c) Warrants

Up to 202,024,362 Bonus Warrants will be issued to successful applicants of the Rights Shares under the Rights Issue, which upon full exercise will result in the issue of up to 202,024,362 Warrant Exercise Shares at the Bonus Warrants Subscription Price.

Save as disclosed in this prospectus, as at the Latest Practicable Date, none of the members of the Group had any other options, warrants or other convertible securities or rights affecting the share capital and no capital of any member of the Group was under option, or agreed conditionally or unconditionally to be put under option.

— 132 —

APPENDIX IV

GENERAL INFORMATION

3. DISCLOSURE OF INTERESTS

(I) As at the Latest Practicable Date, the interests or short positions of the Directors and chief executive of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or which were required, pursuant to Section 352 of the SFO, to be entered in the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers under the Listing Rules (the “Model Code”), to be notified to the Company and the Stock Exchange, were as follows:

Directors’ and Chief Executive’s interests and short positions in shares, underlying shares and debentures of the Company and associated corporations

A. Interests in shares of the Company and associated corporations

	Personal				Approximate
	interests	Family			percentage of
	(held as	interests			total interests
	beneficial	(interest of	Other	Total	in the issued
Name of Director	owner)	spouse)	interests	interests	share capital
Number of Shares
in the Company
Mochtar Riady	–	–	989,554,978	989,554,978	73.47
			20,000,000_(s)_	20,000,000_(s)_	1.48
			(Note (i))
Stephen Riady	–	–	989,554,978	989,554,978	73.47
			20,000,000_(s)_	20,000,000_(s)_	1.48
			(Note (i))
John Luen Wai Lee	200	200	–	400	0.00
King Fai Tsui	–	50,000	–	50,000	0.00
Number of Lippo Shares
Mochtar Riady	–	–	319,179,715	319,179,715	73.59
			(Notes (i) and (ii))
Stephen Riady	–	–	319,179,715	319,179,715	73.59
			(Notes (i) and (ii))
John Luen Wai Lee	825,000	–	–	825,000	0.19

(s) – short position

— 133 —

APPENDIX IV

GENERAL INFORMATION

	Personal				Approximate
	interests	Family			percentage of
	(held as	interests			total interests
	beneficial	(interest of	Other	Total	in the issued
Name of Director	owner)	spouse)	interests	interests	share capital
Number of ordinary shares
of HK$0.10 each in LCR
Mochtar Riady	–	–	6,544,696,389	6,544,696,389	71.13
			(Notes (i), (ii)
			and (iii))
Stephen Riady	–	–	6,544,696,389	6,544,696,389	71.13
			(Notes (i), (ii)
			and (iii))

Note:

(i) As at the Latest Practicable Date, Lippo Cayman, an associated corporation (within the meaning of Part XV of the SFO) of the Company, was indirectly interested in (a) 692,262,956 Shares, (b) 242,292,022 Rights Shares (with entitlement to Bonus Warrants) to be subscribed by Hennessy, an indirect subsidiary of Lippo Cayman, and/or its nominees, and 35,000,000 excess Rights Shares (with entitlement to Bonus Warrants) to be applied by Hennessy pursuant to the Deed of Undertaking and (c) 20,000,000 Rights Shares (with entitlement to Bonus Warrants) agreed to be underwritten by Lippo Securities, an indirect subsidiary of Lippo Cayman, pursuant to the Underwriting Agreement, amounting in a total of 989,554,978 Shares in, representing approximately 73.47 per cent. of, the issued share capital of the Company. Lippo Securities has entered into sub-underwriting arrangements under which the 20,000,000 underwritten Rights Shares (with entitlement to Bonus Warrants) as mentioned above have all been sub-underwritten which gave rise to the short position of 20,000,000 Shares. Lanius Limited (“Lanius”), an associated corporation (within the meaning of Part XV of the SFO) of the Company, was the registered shareholder of 10,000,000 shares of US$1.00 each in, representing 100 per cent. of, the issued share capital of Lippo Cayman. Lanius was the trustee of a discretionary trust, of which Dr. Mochtar Riady is the founder and in accordance with whose instructions Lanius was accustomed to act. Dr. Mochtar Riady did not have any interests in the share capital of Lanius. The beneficiaries of the trust include Dr. Mochtar Riady, Mr. Stephen Riady and their respective family members including, inter alia, the minor child of Mr. Stephen Riady. Dr. Mochtar Riady as the founder and beneficiary of the trust and Mr. Stephen Riady (together with his minor child) as beneficiaries of the trust were taken to be interested in Lippo Cayman under the SFO.
(ii) As at the Latest Practicable Date, Lippo Cayman, and through its wholly-owned subsidiaries, Lippo Capital, J & S Company Limited and Huge Returns Limited, was directly and indirectly interested in an aggregate of 248,697,776 Lippo Shares and 70,481,939 Lippo Rights Shares (with entitlement to Lippo Bonus Warrants) agreed to be underwritten by Lippo Capital pursuant to the Lippo Underwriting Agreement, amounting in a total of 319,179,715 Lippo Shares, representing approximately 73.59 per cent. of the issued share capital of Lippo.
(iii) As at the Latest Practicable Date, Lippo was indirectly interested in 6,544,696,389 ordinary shares of HK$0.10 each in, representing approximately 71.13 per cent. of, the issued share capital of LCR.
(iv) The percentages of issued share capital stated in this section were arrived based on the existing issued share capital of each of the Company, Lippo and LCR (as the case may be).
(v) Further details of the interests in the Bonus Warrants are disclosed in the paragraph headed “Interests in underlying shares of the Company and associated corporations– Warrants ” of this section.

— 134 —

APPENDIX IV

GENERAL INFORMATION

As at the Latest Practicable Date, Dr. Mochtar Riady, as founder and beneficiary of the aforesaid discretionary trust, and Mr. Stephen Riady (together with his minor child), as beneficiaries of the aforesaid discretionary trust, through their interests in Lippo Cayman as mentioned in Note (i) above, were also taken to be interested in the share capital of the following associated corporations (within the meaning of Part XV of the SFO) of the Company:

			Approximate
			percentage
			of interest
		Number of	in the issued
Name of associated corporation	Class of shares	shares interested	share capital
Abital Trading Pte. Limited	Ordinary shares	2	100
AcrossAsia Limited	Ordinary shares	3,669,576,788	72.45
		(Note a)
Actfield Limited	Ordinary shares	1	100
Boudry Limited	Ordinary shares	1,000	100
Congrad Holdings Limited	Ordinary shares	1	100
CRC China Limited	Ordinary shares	1	100
Cyport Limited	Ordinary shares	1	100
East Winds Food Pte Ltd.	Ordinary shares	400,000	88.88
		(Note b)
First Bond Holdings Limited	Ordinary shares	1	100
First Tower Corporation	Ordinary shares	1	100
Glory Power Worldwide Limited	Ordinary shares	1	100
Grand Peak Investment Limited	Ordinary shares	2	100
Grandform Limited	Ordinary shares	1	100
Grandhill Asia Limited	Ordinary shares	1	100
Greenroot Limited	Ordinary shares	1	100
Hennessy Holdings Limited	Ordinary shares	1	100
		(Note c)
HKCL Holdings Limited	Ordinary shares	50,000	100
Honix Holdings Limited	Ordinary shares	1	100
Huge Returns Limited	Ordinary shares	1	100
J & S Company Limited	Ordinary shares	1	100
Lippo Assets (International) Limited	Ordinary shares	1,000,000	100
	Non-voting deferred shares	15,000,000	100
Lippo Capital Limited	Ordinary shares	705,690,000	100
Lippo Energy Company N.V.	Ordinary shares	6,000	100
Lippo Energy Holding Limited	Ordinary shares	1	100
Lippo Finance Limited	Ordinary shares	6,176,470	82.35
Lippo Holding America Inc.	Ordinary shares	1	100
Lippo Holding Company Limited	Ordinary shares	2,500,000	100
	Non-voting deferred shares	7,500,000	100
Lippo Holdings Inc.	Ordinary shares	1	100

— 135 —

APPENDIX IV

GENERAL INFORMATION

			Approximate
			percentage
			of interest
		Number of	in the issued
Name of associated corporation	Class of shares	shares interested	share capital
Lippo Investments Limited	Ordinary shares	2	100
Lippo Realty Limited	Ordinary shares	2	100
Lippo Strategic Holdings Inc.	Ordinary shares	1	100
Lippo World Holdings Limited	Ordinary shares	1	100
Multi-World Builders &	Ordinary shares	4,080	51
Development Corporation
Nelton Limited	Ordinary shares	10,000	100
Pointbest Limited	Ordinary shares	1	100
Prime Success Limited	Ordinary shares	1	100
		(Note d)
SCR Ltd.	Ordinary shares	1	100
Sinotrend Global Holdings Limited	Ordinary shares	1	100
Skyscraper Realty Limited	Ordinary shares	10	100
The HCB General Investment	Ordinary shares	70,000	70
(Singapore) Pte Ltd.
(“HCB General”)
Times Grand Limited	Ordinary shares	1	100
Valencia Development Limited	Ordinary shares	800,000	100
	Non-voting deferred shares	200,000	100
Welux Limited	Ordinary shares	1	100

Note:

a. The interests included 219,600,000 ordinary shares held by Mideast Pacific Strategic Holdings Limited in which Lippo Cayman controlled a 30 per cent. interest.
b. The interests were held by HCB General, a 70 per cent. owned subsidiary of Lippo Cayman.
c. The interest was held through Lippo, a subsidiary of Lippo Cayman.
d. The interest was held by Lippo, a subsidiary of Lippo Cayman.

As at the Latest Practicable Date, Mr. Stephen Riady, as beneficial owner and through his nominee, was interested in 5 ordinary shares of HK$1.00 each in, representing 25 per cent. of, the issued share capital of Lanius which was the registered shareholder of 10,000,000 ordinary shares of US$1.00 each in, representing 100 per cent. of, the issued share capital of Lippo Cayman. Lanius was the trustee of a discretionary trust, of which Dr. Mochtar Riady, father of Mr. Stephen Riady, is the founder and the beneficiaries of the trust included, inter alia, Mr. Stephen Riady and his minor child.

— 136 —

APPENDIX IV

GENERAL INFORMATION

As at the Latest Practicable Date, Mr. John Luen Wai Lee, as a beneficial owner, was also interested in 230,000 ordinary shares of HK$0.10 each in, representing approximately 0.0045 per cent. of, the issued share capital of AcrossAsia Limited, an associated corporation (within the meaning of Part XV of the SFO) of the Company.

As at the Latest Practicable Date, Mr. Kee Yee Kor, as beneficial owner, was interested in 2,444,000 ordinary shares of HK$1.00 each in, representing approximately 9.29 per cent. of, the issued share capital of TechnoSolve Limited, an associated corporation (within the meaning of Part XV of the SFO) of the Company.

B. Interests in underlying shares of the Company and associated corporations

(a) Share options
(i) The Company

		Number of	Approximate
		underlying Shares	percentage
		in respect of	of the issued
	Capacity and	which Options	share capital
Name of Director	nature of interest	have beengranted*	of the Company
John Luen Wai Lee	Personal (held as	3,400,000	0.25
	beneficial owner)
Leon Nim Leung Chan	Personal (held as	600,000	0.04
	beneficial owner)
Kee Yee Kor	Personal (held as	450,000	0.03
	beneficial owner)
Albert Saychuan Cheok	Personal (held as	450,000	0.03
	beneficial owner)
King Fai Tsui	Personal (held as	450,000	0.03
	beneficial owner)
Victor Ha Kuk Yung	Personal (held as	450,000	0.03
	beneficial owner)

The Options were granted on 17th December, 2007 without consideration under the Share Option Scheme. Such options are exercisable from 17th June, 2008 to 16th December, 2012 in accordance with the rules of the Share Option Scheme to subscribe for Shares at an exercise price of HK$1.68 per Share (subject to adjustment). None of the Options were exercised by any of the above Directors since they were granted.

— 137 —

APPENDIX IV

GENERAL INFORMATION

(ii) Lippo

		Number of
		underlying shares	Approximate
		of HK$0.10 each	percentage
		in Lippo in respect	of the issued
	Capacity and	of which options	share capital
Name of Director	nature of interest	have beengranted #	of Lippo
John Luen Wai Lee	Personal (held as	900,000	0.21
	beneficial owner)
Leon Nim Leung Chan	Personal (held as	155,000	0.04
	beneficial owner)
King Fai Tsui	Personal (held as	130,000	0.03
	beneficial owner)
Victor Ha Kuk Yung	Personal (held as	130,000	0.03
	beneficial owner)

The options were granted on 17th December, 2007 without consideration under the share option scheme adopted by Lippo (the “Lippo Share Option Scheme”). Such options are exercisable from 17th June, 2008 to 16th December, 2012 in accordance with the rules of the Lippo Share Option Scheme to subscribe for ordinary shares of HK$0.10 each in Lippo at an exercise price of HK$6.98 per share (subject to adjustment). None of the options were exercised by any of the above Directors since they were granted.

(iii) LCR

		Number of
		underlying shares	Approximate
		of HK$0.10 each	percentage
		in LCR in respect	of the issued
	Capacity and	of which options	share capital
Name of Director	nature of interest	have beengrantedˆ	of LCR
John Luen Wai Lee	Personal (held as	22,000,000	0.24
	beneficial owner)
Leon Nim Leung Chan	Personal (held as	3,000,000	0.03
	beneficial owner)
King Fai Tsui	Personal (held as	2,300,000	0.02
	beneficial owner)
Victor Ha Kuk Yung	Personal (held as	2,300,000	0.02
	beneficial owner)

ˆ The options were granted on 17th December, 2007 without consideration under the share option scheme adopted by LCR (the “LCR Share Option Scheme”). Such options are exercisable from 17th June, 2008 to 16th December, 2012 in accordance with the rules of the LCR Share Option Scheme to subscribe for ordinary shares of HK$0.10 each in LCR at an exercise price of HK$0.267 per share (subject to adjustment). None of the options were exercised by any of the above Directors since they were granted.

— 138 —

APPENDIX IV

GENERAL INFORMATION

The above interests in the underlying shares of the Company and its associated corporations in respect of share options were held pursuant to unlisted physically settled equity derivatives.

(b) Warrants
(i) The Company

(ii)

Number of Shares
falling to be issued
Approximate
upon full exercise of the
percentage of
Bonus Warrants
the issued
Capacity and
under the
share capital
Name of Director
nature of interest
Rights Issue
of the Company

Mochtar Riady
Founder of a trust
127,410,864
9.46
(Note (1))
8,571,426_(S)
0.64
Stephen Riady
Beneficiary of a trust
127,410,864
9.46
(Note (1))
8,571,426(S)
0.64
(S) – short position_
Lippo
Number of Lippo Shares
falling to be issued
Approximate
upon full exercise of the
percentage of
Lippo Bonus Warrants
the issued
Capacity and
under the
share capital
Name of Director
nature of interest
Lippo Rights Issue
of Lippo

Mochtar Riady
Founder of a trust
35,240,969
8.12
(Note (2))
Stephen Riady
Beneficiary of a trust
35,240,969
8.12
(Note (2))

Note:

(1) Pursuant to the Deed of Undertaking, Hennessy undertakes to subscribe for and to procure the subscription of 242,292,022 Rights Shares (with entitlement of 103,839,438 Bonus Warrants) and to apply for at least 35,000,000 excess Rights Shares (with entitlement of at least 15,000,000 Bonus Warrants). Pursuant to the Underwriting Agreement, Lippo Securities has agreed to underwrite 20,000,000 Rights Shares (with entitlement of 8,571,426 Bonus Warrants). Lippo Securities has entered into sub-underwriting arrangements under which the 20,000,000 underwritten Rights Shares (with entitlement of 8,571,426 Bonus Warrants) as mentioned above have all been sub-underwritten which gave rise to the short position of 8,571,426 Shares. Upon the issue of the Bonus Warrants, its holders will be entitled to subscribe for one Share for each Bonus Warrant then held at an initial subscription price of HK$1.25 per Share

— 139 —

APPENDIX IV

GENERAL INFORMATION

(subject to adjustment) in a subscription period of approximately three years from the date when dealings in the Bonus Warrants commence on the Stock Exchange (which is expected to be from 4th July, 2008 to 4th July, 2011). Further details of the interests of Dr. Mochtar Riady and Mr. Stephen Riady are disclosed in Note (i) of paragraph 3(I)A of this section.

(2) Pursuant to the Lippo Underwriting Agreement, Lippo Capital has agreed to underwrite 70,481,939 Lippo Rights Shares (with entitlement of 35,240,969 Lippo Bonus Warrants). Upon the issue of the Lippo Bonus Warrants, its holders will be entitled to subscribe for one Lippo Share for each Lippo Bonus Warrant then held at an initial subscription price of HK$4.70 per Lippo Share (subject to adjustment) in a subscription period of approximately three years from the date when dealings in the Lippo Bonus Warrants commence on the Stock Exchange (which is expected to be from 4th July, 2008 to 4th July, 2011). Further details of the interests of Dr. Mochtar Riady and Mr. Stephen Riady are disclosed in Notes (i) and (ii) of paragraph 3(I)A of this section.
(3) The percentages of issued share capital stated in this section were arrived based on the existing issued share capital of each of the Company and Lippo (as the case may be).

The above interests in the underlying shares of the Company and its associated corporation in respect of warrants were held pursuant to listed physically settled equity derivatives.

As at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests in the underlying shares in respect of cash settled or other equity derivatives of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

All the interests stated above represent long positions unless otherwise stated. Save as disclosed herein, as at the Latest Practicable Date, to the knowledge of the Company:

(1) none of the Directors or chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) (a) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests or short positions which the Directors and the chief executive of the Company were taken or deemed to have under such provisions of the SFO); or (b) which were required to be entered in the register kept by the Company under Section 352 of the SFO; or (c) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code; and
(2) 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 (within the meaning of Part XV of the SFO).

Dr. Mochtar Riady is also a director of Lippo Cayman. Mr. Stephen Riady is also a director of Lanius, Lippo Cayman and Lippo. Save as disclosed herein, none of the Directors holds any directorship or employment in a company which has an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

— 140 —

APPENDIX IV

GENERAL INFORMATION

(II) As at the Latest Practicable Date, none of the Directors had any existing nor proposed service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).
(III) As at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which have been, since 31st December, 2007, being the date to which the latest published audited consolidated financial statements of the Company were made up, acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposed of by or leased to any member of the Group.
(IV) None of the Directors are materially interested in any contract or arrangement entered into by any member of the Group subsisting at the date of this prospectus and which is significant in relation to the business of the Group taken as a whole.

4. INTERESTS AND SHORT POSITIONS OF SHAREHOLDERS

So far as is known to the Directors or chief executive of the Company, as at the Latest Practicable Date, the persons (other than the Directors or chief executive of the Company) who had interests or short positions in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or who were, directly or indirectly, interested in 10 per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group were as follows:

(i) The Company

		Approximate
	No. of	percentage
	Shares and	of the issued
Name	underlying Shares	share capital
Substantial shareholders
(as defined in the Listing Rules):
Hennessy	1,116,965,842	82.93
	28,571,426_(S)_	2.12
Prime Success Limited	1,116,965,842	82.93
(“Prime Success”)	28,571,426_(S)_	2.12
Lippo	1,116,965,842	82.93
	28,571,426_(S)_	2.12
Lippo Cayman	1,116,965,842	82.93
	28,571,426_(S)_	2.12
Lanius	1,116,965,842	82.93
	28,571,426_(S)_	2.12
Madam Lidya Suryawaty	1,116,965,842	82.93
	28,571,426_(S)_	2.12

(S) – short position

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GENERAL INFORMATION

		Approximate
	No. of	percentage
	Shares and	of the issued
Name	underlying Shares	share capital
Other persons:
Taifook Securities	107,142,857	7.96
Taifook Finance Company Limited	107,142,857	7.96
(“Taifook Finance”)
Taifook (BVI) Limited	107,142,857	7.96
(“Taifook BVI”)
Taifook Securities Group Limited	107,142,857	7.96
(“Taifook Securities Group”)

Note:

Hennessy, the immediate holding company of the Company, as beneficial owner, held 692,262,956 Shares of the Company. Pursuant to the Deed of Undertaking, Hennessy has undertaken to subscribe for 242,292,022 Rights Shares (with entitlement of 103,839,438 Bonus Warrants) to be provisionally allotted to it under the Rights Issue and to apply for at least 35,000,000 excess Rights Shares (with entitlement of at least 15,000,000 Bonus Warrants). Pursuant to the Underwriting Agreement, Lippo Securities, an indirect subsidiary of Hennessy, has agreed to underwrite 20,000,000 Rights Shares (with entitlement of 8,571,426 Bonus Warrants). As a result, Hennessy was directly and indirectly interested in an aggregate of 1,116,965,842 Shares and underlying Shares, representing approximately 82.93 per cent. of the issued share capital of the Company.

Lippo Securities has entered into sub-underwriting arrangements under which the 20,000,000 underwritten Rights Shares (with entitlement of 8,571,426 Bonus Warrants) as mentioned above have all been sub-underwritten which gave rise to the short position of 28,571,426 Shares and underlying Shares. Lippo Securities was wholly owned by Lippo Securities Holdings Limited which in turn was wholly owned by Norfyork International Limited (“Norfyork”). Norfyork was wholly owned by Lippo Asia Limited which in turn was wholly owned by Lippo Securities Holdings Inc. (“LSHI”). LSHI was wholly owned by the Company.

Hennessy was wholly owned by Prime Success which in turn was wholly owned by Lippo.
Lippo Cayman was the holding company of Lippo through direct holding and through wholly-owned subsidiaries, one of which was Lippo Capital Limited, the immediate holding company of Lippo.
Lanius was the registered shareholder of the entire issued share capital of Lippo Cayman and was the trustee of a discretionary trust, of which Dr. Mochtar Riady is the founder and in accordance with whose instructions Lanius was accustomed to act. The beneficiaries of the trust include Dr. Mochtar Riady and his family members. Madam Lidya Suryawaty is the spouse of Dr. Mochtar Riady. Dr. Mochtar Riady was not the registered holder of any shares in the issued share capital of Lanius.
Hennessy’s interests in the Shares and underlying Shares were recorded as the interests of Prime Success, Lippo, Lippo Cayman, Lanius and Madam Lidya Suryawaty. The above 1,116,965,842 Shares and underlying Shares in the Company related to the same block of Shares and underlying Shares that Dr. Mochtar Riady and Mr. Stephen Riady were interested, details of which are disclosed in the above section headed “Disclosure of interests – Directors’ and Chief Executive’s interests and short positions in shares, underlying shares and debentures of the Company and associated corporations”.

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Pursuant to the Underwriting Agreement, Taifook Securities has underwritten 75,000,000 Rights Shares (with entitlement to Bonus Warrants). Thus, Taifook Securities has given notice to the Company under the SFO that it was interested in 107,142,857 ordinary Shares, representing approximately 7.96 per cent. of the issued share capital of the Company. Taifook Securities was wholly owned by Taifook Finance which in turn was wholly owned by Taifook BVI. Taifook BVI was wholly owned by Taifook Securities Group.
The percentage of issued share capital stated in this section was arrived based on a total of 1,346,829,094 Shares in issue.
Upon the issue of the Bonus Warrants, its holders will be entitled to subscribe for one Share in the Company for each Bonus Warrant then held at an initial subscription price of HK$1.25 per Share (subject to adjustment).

(ii) Four Prosperity Holdings Limited

	No. of ordinary shares
Name	of US$1.00 each	Percentage
Tiger Square Ltd.	10,408 “A” shares	51
(“Tiger Square”)	10,408 “B” shares	51

Note: Tiger Square is a wholly-owned subsidiary of the Company. See also (i) above in respect of the substantial shareholders of the Company.

(iii) Rossinis Restaurant Pte. Ltd.

	No. of ordinary shares
Name	of S$1.00 each	Percentage
Brilliant Leader Limited	399,999	99.99975
(“Brilliant Leader”)

Note: Brilliant Leader is a wholly-owned subsidiary of the Company. See also (i) above in respect of the substantial shareholders of the Company.

(iv) TechnoSolve Limited

	No. of ordinary shares	Approximate
Name	of HK$1.00 each	percentage
HKCL Investments Limited	18,053,500	68.65
(“HKCL Investments”)

Note: HKCL Investments is a wholly-owned subsidiary of the Company. See also (i) above in respect of the substantial shareholders of the Company.

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(v) Masuda Limited (“Masuda”)

No. of ordinary shares

Name	of US$1.00 each	Percentage
HKC Property Investment Holdings	9,164	91.64
Limited (“HKC Property”)

Note: HKC Property is a wholly-owned subsidiary of the Company. See also (i) above in respect of the substantial shareholders of the Company.

(vi) Kingtek Limited

No. of ordinary shares

Name	of US$1.00	each	Percentage
Masuda		60	60
Mezquita Incorporated		40	40

Note: See also (v) above in respect of the substantial shareholder of Masuda.

(vii) 北京力寶世紀置業有限公司 (Beijing Lippo Century Realty Co., Ltd.) (“Beijing Lippo”)

		Approximate
	Amount of paid up	percentage of
Name	registered capital	profit sharing
Uchida Limited (“Uchida”)	US$4,320,000	68.6
Wealtop Limited (“Wealtop”)	US$1,080,000	17.1
北京經濟技術投資開發總公司	N/A	14.3
(Beijing Economic & Technological
Investment Development Corp.)
(“BETIDC”)

Note: Uchida and Wealtop are both wholly-owned subsidiaries of the Company. See also (i) above in respect of the substantial shareholders of the Company. BETIDC is obliged to inject certain land use right into Beijing Lippo and shall be entitled to 14.3 per cent. profit sharing right.

All the interests stated above represent long positions unless otherwise stated. Save as disclosed herein, as at the Latest Practicable Date, none of the substantial shareholders (as defined under the Listing Rules) or other persons (other than the Directors or chief executive of the Company) had any interests or short positions in the Shares and underlying Shares as recorded in the register required to be kept by the Company under Section 336 of the SFO.

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Save as disclosed above, as at the Latest Practicable Date, so far as was known to the Directors or chief executive of the Company, there was no person, other than a Director or chief executive of the Company, who had an interest or short position in the Shares and underlying Shares which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or who were, directly or indirectly, interested in 10 per cent. or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any other members of the Group.

5. LITIGATION

As at the Latest Practicable Date, there was no litigation or claim of material importance pending or threatened against any member of the Group.

6. QUALIFICATION AND CONSENT OF EXPERT

The following is the qualification of the expert who has given opinion which is contained in this prospectus:

Name Qualification Ernst & Young Certified Public Accountants

Ernst & Young has given and has not withdrawn its written consent to the issue of this prospectus with the inclusion of its report as set out in this prospectus and references to its name in the form and context in which it appears.

As at the Latest Practicable Date, Ernst & Young did not have any shareholding in any member of the Group or the right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

As at the Latest Practicable Date, Ernst & Young did not have any direct or indirect interest in any assets which had been acquired or disposed of by or leased to, or which were proposed to be acquired or disposed of by or leased to, any member of the Group, since 31st December, 2007, the date to which the latest published audited consolidated financial statements of the Company were made up.

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7. MATERIAL CONTRACTS

The contracts (not being contracts entered into in the ordinary course of business) which have been entered into by the members of the Group within two years immediately preceding 6th June, 2008, being the date of this prospectus, and which are or may be material are as follows:

(a) (i) a new Chinese-foreign cooperative joint venture contract, a new framework agreement and the new articles of association entered into on 31st January, 2007 among 北京經濟技術投資開發總公司 (Beijing Economic & Technological Investment Development Corp.) (“BETIDC”), Uchida Limited (“Uchida”), a wholly-owned subsidiary of the Company, and Wealtop Limited (“Wealtop”) in relation to the establishment of a joint venture company (the “JV Co”) for the land Lot No.4C1 development project (the “Beijing Project”) in 北京經濟技術開發區 (Beijing Economic-Technological Development Area), whereby Wealtop agreed to participate in the Beijing Project in place of 北京世紀創新房地產有限公司 (INNOSTAR Real Estate Development Ltd.);
(ii) supplemental articles of association (《中外合作經營北京力寶世紀置業有限公司章程》補充協議 ), an amended and restated articles of the JV Co (北京力寶世紀置業有限公司章程 ), a supplemental Sino-foreign cooperative joint venture contract (《北京力寶世紀置業有限公司中外合作經營合同》補充合同 ), an amended and restated Sino-foreign cooperative joint venture contract (中外合作經營合同 ) and a supplemental framework agreement, all dated 8th May, 2007, entered into among BETIDC, Uchida and Wealtop in relation to the Beijing Project and the JV Co, as a result of the prevailing PRC laws and regulations requiring the JV Co to increase the proportion of its registered capital to total investment to 50 per cent.;
(iii) confirmation regarding the Sino-foreign cooperative joint venture contract and the articles of association of the JV Co (關於《北京力寶世紀置業有限公司中外合作經營合同》及《中外合作經營北京力寶世紀置業有限公司章程》的確認函 ), a further amended and restated articles of the JV Co (北京力寶世紀置業有限公司章程 ), a further amended and restated Sinoforeign cooperative joint venture contract (中外合作經營合同 ) and a further supplemental framework agreement, all dated 23rd November, 2007, entered into between BETIDC, Uchida and Wealtop whereby BETIDC agreed to, after the establishment of the JV Co, list its 14.3 per cent. interest in the JV Co for sale on 北京產權交易所 (China Beijing Equity Exchange) and Uchida (or a party introduced by it) agreed to submit an intention memorandum for the purchase of such 14.3 per cent. interest; and

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(iv) a sale and purchase agreement dated 28th April, 2008 entered into between, among others, Silverich Century Limited, a wholly-owned subsidiary of the Company, and the sole shareholder of Wealtop in relation to the acquisition of the entire issued share capital of Wealtop and the related shareholder’s loan of Wealtop for an aggregate amount of HK$81,360, resulting in the Group’s entitlement to the profit of JV Co increased from approximately 68.6 per cent. to approximately 85.7 per cent.;
(b) a shareholders’ agreement dated 30th October, 2006 entered into between Winrider Limited, a wholly-owned subsidiary of the Company, Golden Rainbow International Limited (“Golden Rainbow”), SUTL Realty Pte Ltd, OCBC eVenture Fund II Pte Ltd (now known as OCBC Capital Investment II Pte. Ltd.), Royall Dazzle Corporation (“RDC”) and Greenix Limited (“Greenix”) governing the relationship among the shareholders of Greenix. The tender submitted by Lippo Global Assets Limited, a wholly-owned subsidiary of Greenix, to purchase the land parcels C10 and C11 located at Sentosa Cove, Sentosa Island, the Republic of Singapore (the “Sentosa Property”) with site areas of approximately 12,035.6 square metres and 10,186.6 square metres respectively for S$234,701,103 (equivalent to approximately HK$1,169,398,000) was formally accepted by Sentosa Development Corporation on 6th October, 2006. A project undertaking dated 3rd January, 2007 was entered into by the Company, Golden Rainbow, SUTL Investment Pte. Ltd. and RDC (collectively, the “Undertaking Shareholders”) together with Lippo Marina Collection Pte. Ltd. (“Lippo Marina”), a wholly-owned subsidiary of Greenix, in favour of Oversea-Chinese Banking Corporation Limited pursuant to which the Undertaking Shareholders severally, based on their respective shareholding proportion, undertake to complete and cause the various stages of the development of the Sentosa Property by Lippo Marina (the “Sentosa Project”) to be completed in accordance with the construction contracts and loan facility agreement in relation to the Sentosa Project (the “Loan Agreement”) and to pay all cost overruns for completion of the Sentosa Project to the extent Lippo Marina fails to pay such costs and to cover all interest servicing obligations/ cash flow deficiency of Lippo Marina and to procure and grant all necessary assistance to Lippo Marina in order to maintain its loan to collateral ratio in relation to the Loan Agreement;
(c) a shareholders agreement dated 24th November, 2006 entered into between Pacific Bond Limited (“Pacific Bond”), a wholly-owned subsidiary of the Company, Kusu Island Limited and Sunning Asia Limited (“Sunning Asia” which is 50 per cent. owned by Pacific Bond) governing the relationship among the shareholders of Sunning Asia. A tender submitted by Lippo Real Estate Pte. Limited, a wholly-owned subsidiary of Sunning Asia, for the collective sale of the units in No. 100, Kim Seng Road, Kim Seng Plaza in the Republic of Singapore at a consideration of S$132,020,000 (equivalent to approximately HK$660,496,000) was formally accepted on 15th November, 2006;

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(d) a sale and purchase agreement dated 25th May, 2007 entered into between Winus Holdings Limited, an indirect wholly-owned subsidiary of the Company, as seller and Convoy Inc. as purchaser in relation to the sale and purchase of 2,480,089 shares of US$0.01 each in the issued share capital of Advance All Enterprises Limited (“AAEL”), representing approximately 34.34 per cent. of the entire issued share capital of AAEL for a consideration of HK$85,000,000;
(e) a sale and purchase agreement dated 15th June, 2007 entered into between UPM Ltd. (“UPM”), a wholly-owned subsidiary of the Company, and Harvest Day Group Limited (“Harvest Day”) as sellers and Maximilian Realty Pte Ltd as purchaser in relation to the sale and purchase of the entire issued and paid up share capital of Grandbury Holdings Limited (“GHL”), a company whose voting share capital was held as to 90.5 per cent. and 9.5 per cent. by UPM and Harvest Day respectively with all the issued non-voting preference shares held by Harvest Day and being the holding company for eleven wholly-owned subsidiaries which are owners of a total of twenty two strata lots in the building located at 79 Anson Road, the Republic of Singapore, together with the novation, to the purchaser, of all amounts outstanding under the shareholders’ loans in the aggregate sum of approximately S$35,609,000 (equivalent to approximately HK$181,285,000) made by the sellers to GHL, for an aggregate consideration of S$149,000,000 (equivalent to approximately HK$758,559,000);
(f) (i) the written letter from the vendors confirming acceptance of the tender offer submitted by the Group for the en-bloc purchase of the units in No. 53 Holland Road, Aura Park, the Republic of Singapore (“Aura Park Property”) for S$55,500,000 (equivalent to approximately HK$283,383,000), and the conditions of tender and sale, pursuant to which Lippo Project Pte. Limited, a wholly-owned subsidiary of Wealthy Place Limited (“WPL”) which in turn was then wholly owned by Kingtek Limited (“Kingtek”), a then wholly-owned subsidiary of the Company, was nominated as the purchaser of the Aura Park Property on 20th June, 2007; and
(ii) a shareholders’ agreement dated 3rd September, 2007 entered into between (1) Kingtek, (2) Highland Investment Ltd (“Highland”) and (3) WPL in relation to (a) the equity funding of WPL as the joint venture company and (b) the rights and obligations of each of Kingtek and Highland as the shareholders of WPL, pursuant to which the Group’s equity interest in WPL was diluted from 100 per cent. to 50 per cent.;
(g) a framework agreement dated 12th July, 2007 (the “Phoenix Framework Agreement”) entered into among Lippo Medical Holdings Limited (“Lippo Medical”), a wholly-owned subsidiary of the Company, 鳳凰醫院管理（北京）有限公司 (Phoenix Hospital Management (Beijing) Company Limited) and 中信信託投資有限責任公司 (CITIC Trust & Investment Company Limited) in relation to the establishment of 力寶鳳凰醫院管理（北京）有限公司 (LippoPhoenix Healthcare Management (Beijing) Limited) (the “Joint Venture”), to

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undertake the provision of hospital investment and hospital operation management services in the PRC. The total capital commitment of Lippo Medical in the Joint Venture would be RMB85,920,300 (equivalent to approximately HK$88,953,000). As the requisite transactional documents set out in the Phoenix Framework Agreement had not been executed and therefore the condition precedent to completion was not fulfilled, the Phoenix Framework Agreement was subsequently terminated;

(h) a conditional sale and purchase agreement dated 28th September, 2007 (the Winwise Agreement”) entered into between the Company and Value Convergence Holdings Limited (“VC”) pursuant to which VC agreed to acquire and the Company agreed to sell 60 shares of Winwise Holdings Limited (“Winwise”), representing 60 per cent. of the issued share capital of Winwise, and the sale of a loan in the amount representing 60 per cent. of the outstanding shareholders’ loan advanced by the Company, as lender, to Winwise, as borrower, at an aggregated consideration of HK$384,000,000. The major asset of Winwise is its 100 per cent. interest in The Macau Chinese Bank Limited. As certain conditions precedent required under the Winwise Agreement were not fulfilled or waived on or before the agreed long stop date, the Winwise Agreement lapsed on 29th February, 2008; and
(i) the Underwriting Agreement.

Save as disclosed herein, none of the members of the Group has entered into any contracts (not being contracts entered into in the ordinary course of business) within two years preceding the date of this prospectus that are or may be material.

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8. CORPORATE INFORMATION

Registered office Clarendon House Church Street Hamilton HM 11 Bermuda Principal place of business 24th Floor, Tower One Lippo Centre, 89 Queensway Hong Kong Authorised representatives Mr. John Luen Wai Lee Flat 29B, Trafalgar Court 70 Tai Hang Road Hong Kong Mr. Tat Kwong Hau Flat 1C, Block 1 Kornhill Gardens Quarry Bay Hong Kong Company secretary Mr. Tat Kwong Hau Fellow member of both the Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Chartered Secretaries Qualified accountant Mr. Tai Chiu Ng Fellow member of each of the Hong Kong Institute of Certified Public Accountants, the Association of Chartered Certified Accountants and the Institute of Chartered Secretaries and Administrators Financial adviser to the Somerley Limited Company in relation to 10th Floor the Rights Issue The Hong Kong Club Building 3A Chater Road, Central Hong Kong Legal adviser to the Company in Richards Butler relation to the Rights Issue (in association with Reed Smith LLP) 20th Floor Alexandra House 16-20 Chater Road, Central Hong Kong

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Auditors

Ernst & Young 18th Floor Two International Finance Centre 8 Finance Street Central, Hong Kong

Principal share registrars and Butterfield Fund Services (Bermuda) Limited transfer office Rosebank Centre 11 Bermudiana Road Hamilton Bermuda Hong Kong branch share Tricor Tengis Limited registrars and transfer office 26th Floor, Tesbury Centre 28 Queen’s Road East Wanchai, Hong Kong Principal bankers CITIC Ka Wah Bank Limited 232 Des Voeux Road Central Hong Kong Fubon Bank (Hong Kong) Limited Fubon Bank Building 38 Des Voeux Road Central Hong Kong Asia Commercial Bank Limited Asia Financial Centre 120 Des Voeux Road Central Hong Kong Wing Hang Bank, Ltd. 161 Queen’s Road Central Hong Kong Standard Chartered Bank Standard Chartered Tower 388 Kwun Tong Road Kwun Tong Hong Kong United Overseas Bank Limited 1 Raffles Place OUB Centre, 10th Floor Singapore Bank of China Limited, Macau Branch Bank of China Building Avenida Doutor Mario Soares Macau

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The Bank of East Asia, Limited 10 Des Voeux Road Central, Hong Kong

Raiffeisen Zentralbank Österreich AG

Singapore Branch One Raffles Quay #38-01 North Tower Singapore

9. PARTICULARS OF THE DIRECTORS

(a) Name

Address

Nationality

Non-executive Directors

Dr. Mochtar Riady (Chairman) Imperial Drive Kav. 20 Indonesian Lippo Karawaci Tangerang 15811 Banten, Indonesia Mr. Leon Nim Leung Chan Flat 9C, Amber Garden British 72 Kennedy Road Hong Kong Executive Directors Mr. Stephen Riady 21st Floor, Celestial Garden Chinese (Chief Executive Officer) 5 Repulse Bay Road Hong Kong Mr. John Luen Wai Lee, J.P. Flat 29B, Trafalgar Court British 70 Tai Hang Road Hong Kong Mr. Kee Yee Kor Flat A, 5/F Chinese Blue Pool Mansion 1 Blue Pool Road Happy Valley, Hong Kong

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Independent non-executive Directors

Mr. Albert Saychuan Cheok A-P1-1 (Penthouse) Block A Australian Sri Langit Condo Jalan Taman Seputeh 7 Taman Seputeh 58000 Kuala Lumpur Malaysia Mr. King Fai Tsui 6B, 21 Braemar Hill Road Australian North Point Hong Kong Mr. Victor Ha Kuk Yung 2A Albany Court British 51 Bisney Road Pokfulam Hong Kong

(b) Brief biographical details

Non-executive Directors

Dr. Mochtar Riady (also known as Dr. Lee Man Tjin), aged 79, is the founder and the Chairman of the group of companies controlled by the Riady family. Dr. Riady is the father of Mr. Stephen Riady. Dr. Riady has over 30 years’ banking and financial institution experience in Indonesia, Hong Kong, the Republic of Singapore, Taiwan and the United States of America. He was appointed a Director in 1992 and is the Chairman of the Company. He is also the Honorary Chairman of LCR and a director of Lippo Cayman and Lippo Capital.

Mr. Leon Nim Leung Chan, aged 52, was appointed a Director of the Company in 1992 and was re-designated from independent non-executive Director to nonexecutive Director of the Company in September 2004. He 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 and is currently one of the Panel Chairman of the Appeal Tribunal Panel on appeals against a decision of the Building Authority. He is also a non-executive director of Lippo and LCR. Mr. Chan is also the Chairman of the remuneration committee and nomination committee and a member of the audit committee of each of the Company, Lippo and LCR. He was also a former director of Auric Pacific Group Limited (“Auric”), a public listed company in the Republic of Singapore, and The Hong Kong Building and Loan Agency Limited (“HKBLA”) and Pearl Oriental Enterprises Limited (now known as China Infrastructure Investment Limited), both are listed on the Stock Exchange.

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Executive Directors

Mr. Stephen Riady, aged 47, was appointed a Director of the Company in 1992 and is the Chief Executive Officer of the Company. Mr. Riady is a son of Dr. Mochtar Riady. He is also the Chairman of Lippo and the Deputy Chairman, Managing Director and Chief Executive Officer of LCR. He is a member of the remuneration committee and nomination committee of each of the Company, Lippo and LCR. Mr. Riady is a director of Lanius Limited, Lippo Cayman and Lippo Capital. Mr. Riady is also a director of Overseas Union Enterprise Limited (“OUE”) and Auric, both are public listed companies in the Republic of Singapore. He was also a former director of Medco Holdings, Inc. (“Medco”), which is listed on The Philippine Stock Exchange, Inc. and Robinson and Company, Limited, which is a public listed company in the Republic of Singapore. He is a graduate of the University of Southern California and holds an Honorary Degree of Doctor of Business Administration from Napier University in the United Kingdom. He is one of the first Honorary University Fellows installed by the Hong Kong Baptist University in September 2006. Mr. Riady is a banker by profession, with over 15 years’ experience in retail, commercial and merchant banking in North America and in the Southeast Asian region.

Mr. John Luen Wai Lee, J.P., aged 59, was appointed a Director of the Company in 1992. Mr. Lee is also the Managing Director and Chief Executive Officer of Lippo and a director of LCR, Prime Success Limited, Hennessy and Medco. He is an independent non-executive director of New World Development Company Limited and New World China Land Limited. He was a former director of Auric and OUE. Mr. Lee is a qualified accountant and was a partner of one of the leading international accounting firms in Hong Kong. He has extensive experience in corporate finance and capital markets. Mr. Lee serves as a member on a number of Hong Kong Government Boards and Committees including the Hospital Authority, and Nonlocal Higher and Professional Education Appeal Board. He is also the Chairman of the Queen Elizabeth Hospital Governing Committee.

Mr. Kee Yee Kor, aged 60, was appointed a Director of the Company in 2002. Mr. Kor holds a Master’s Degree in Business Administration from Asia International Open University (Macau). He has over 30 years’ comprehensive banking experience.

Independent non-executive Directors

Mr. Albert Saychuan Cheok, aged 57, was appointed an independent nonexecutive Director of the Company in 2002. He is also a member of the audit committee, remuneration committee and nomination committee of the Company. Mr. Cheok graduated from the University of Adelaide, Australia, with a First Class Honours degree in Economics. He is a Fellow of the Australian Society of Certified Public Accountants and is a banker with over 30 years of experience in banking in the Asia-Pacific region, particularly in Australia, Hong Kong, Thailand and Malaysia. Mr. Cheok is the Chairman of Bowsprit Capital Corporation Limited, the Manager of First Real Estate Investment Trust (First REIT) in the Republic of Singapore. He is

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also the Vice Chairman of the Export and Industry Bank, Inc. in the Republic of the Philippines. He is a director of Metal Reclamation Berhad in Malaysia and several other public companies. He is currently a committee member of the Malaysian Institute of Corporate Governance in Malaysia. He was the Chairman of Bangkok Bank Berhad in Malaysia for the period from September 1995 to November 2005. Mr. Cheok is also an independent non-executive director of AcrossAsia Limited (“AcrossAsia”), a company listed on the Stock Exchange, and Auric.

Mr. King Fai Tsui, aged 58, was appointed an independent non-executive Director of the Company in September 2004. Mr. Tsui is a director and senior consultant of a registered financial services company in Hong Kong. He is an independent non-executive director of Vinda International Holdings Limited and China Aoyuan Property Group Limited. He has over 30 years of extensive experience in accounting, finance and investment management, particularly in investments in Mainland China. Mr. Tsui worked for two of the Big Four audit firms in the United States of America 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 Institute of Chartered Accountants in Australia and a member of the American Institute of Certified Public Accountants. He graduated from the University of Houston, Texas, the United States of America and holds a Master of Science in Accountancy and a Bachelor of Business Administration with first class honours. Mr. Tsui is also an independent non-executive director of Lippo and LCR. Mr. Tsui is a member of the audit committee, remuneration committee and nomination committee of each of the Company, Lippo and LCR. He was a former director of HKBLA and AcrossAsia.

Mr. Victor Ha Kuk Yung, aged 54, 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 was appointed a member of the listings sub-committee of the Stock Exchange of Singapore from 1998 to 1999. Mr. Yung 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 non-executive director of Lippo and LCR. Mr. Yung is the Chairman of the audit committee and a member of the remuneration committee and nomination committee of each of the Company, Lippo and LCR. He was a former director of HKBLA and Wanji Pharmaceutical Holdings Limited (now known as Nubrands Group Holdings Limited), both are listed on the Stock Exchange.

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10. DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES

A copy of each of the Prospectus Documents, having attached thereto the written consent referred to under the paragraph headed “Qualification and consent of expert” in this appendix, has been registered by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies Ordinance. A copy of the Prospectus Documents has been filed with the Registrar of Companies in Bermuda in accordance with the Companies Act 1981 of Bermuda (as amended).

The Prospectus Documents and all acceptances of any offer or application contained in such documents are governed by and shall be construed in accordance with laws of Hong Kong. Where an application is made in pursuance of any such documents, the relevant document shall have the effect of rendering all persons concerned bound by the provisions, other than the penal provisions, of Sections 44A and 44B of the Companies Ordinance, so far as applicable.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the principal place of business of the Company which is situated at 24th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong from the date of this prospectus up to and including 23rd June, 2008:

(a) the memorandum of association and bye-laws of the Company;
(b) the annual reports of the Company for the two years ended 31st December, 2006 and 31st December, 2007;
(c) the report from Ernst & Young on the unaudited pro forma financial information of the Group, the text of which is set out in Appendix II to this prospectus;
(d) the written consent referred to under the paragraph headed “Qualification and consent of expert” of this appendix;
(e) the material contracts referred to under the paragraph headed “Material contracts” of this appendix; and
(f) a copy of each circular issued pursuant to the requirements set out in Chapter 14 and/or 14A of the Listing Rules which has been issued since 31st December, 2007, being the date to which the latest published audited consolidated financial statements of the Company were made up.

12. LANGUAGE

In the event of inconsistency, the English text of this prospectus shall prevail over the Chinese text.

— 156 —

AI assistant

3SBio Inc. — Capital/Financing Update 2008

49981_rns_2008-06-05_9d11be63-f077-47d8-9467-7b9ceea0a398.pdf

HONGKONG CHINESE LIMITED 香港華人有限公司[*]

SOMERLEY LIMITED

SOMERLEY LIMITED

EXPECTED TIMETABLE

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

DEFINITIONS

HONGKONG CHINESE LIMITED 香港華人有限公司[*]

RIGHTS ISSUE OF 471,390,178 RIGHTS SHARES AT HK$1.00 EACH IN THE PROPORTION OF SEVEN RIGHTS SHARES FOR EVERY TWENTY SHARES HELD WITH BONUS WARRANTS ON THE BASIS OF THREE WARRANTS FOR EVERY SEVEN RIGHTS SHARES TO THE QUALIFYING SHAREHOLDERS ONLY

INTRODUCTION

RIGHTS ISSUE

Rights Issue statistics

Qualifying Shareholders

Overseas Shareholders

Terms of the Rights Issue (including Bonus Warrants)

Subscription Price for Rights Shares

Status of the Rights Shares and the Warrant Exercise Shares

Procedures for acceptance and payment or transfer

Procedures for application for excess Rights Shares

Certificates for the Rights Shares and Bonus Warrants

Application for listing

Taxation, stamp duty and other applicable fees and charges

LETTER FROM THE BOARD

Conditions precedent to the Rights Issue

UNDERWRITING AGREEMENT

Underwriting

Conditions

Termination of the Underwriting Agreement

DEED OF UNDERTAKING

SHAREHOLDING STRUCTURE

REASONS FOR THE RIGHTS ISSUE AND USE OF PROCEEDS

FINANCIAL AND TRADING PROSPECTS

ODD LOT TRADING FACILITIES FOR THE BONUS WARRANTS

ADJUSTMENT(S) IN RELATION TO THE OPTIONS GRANTED UNDER THE SHARE OPTION SCHEME

FURTHER INFORMATION

1. SUMMARY OF CONSOLIDATED RESULTS

Summary of results

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2007

CONSOLIDATED PROFIT AND LOSS ACCOUNT

CONSOLIDATED BALANCE SHEET

CONSOLIDATED SUMMARY STATEMENT OF CHANGES IN EQUITY

BALANCE SHEET

CONSOLIDATED CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

2.1 BASIS OF PREPARATION

Basis of consolidation

2.2 IMPACT OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

(a) HKFRS 7 Financial Instruments: Disclosures

(b) Amendment to HKAS 1 Presentation of Financial Statements – Capital Disclosures

(c) HK(IFRIC)-Int 8 Scope of HKFRS 2

(d) HK(IFRIC)-Int 9 Reassessment of Embedded Derivatives

(e) HK(IFRIC)-Int 10 Interim Financial Reporting and Impairment

2.3 IMPACT OF ISSUED BUT NOT YET EFFECTIVE HONG KONG FINANCIAL REPORTING STANDARDS

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Subsidiaries

(b) Joint ventures

(c) Jointly controlled entities

(d) Associates

(e) Goodwill

(f) Impairment of non-financial assets other than goodwill

(g) Fixed assets and depreciation

(h) Investment properties

(i) Properties under development

(j) Investments and other financial assets

Financial assets at fair value through profit or loss

Loans and receivables

Available-for-sale financial assets

Fair value

(k) Impairment of financial assets

Assets carried at amortised cost

Assets carried at cost

Available-for-sale financial assets

(l) Derecognition of financial assets

3SBio Inc. Capital/Financing Update 2008