3SBio Inc. — Interim / Quarterly Report 2012

Sep 27, 2012

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Contents

Contents
	Page
Condensed Consolidated Income Statement	2
Condensed Consolidated Statement of Comprehensive Income	3
Condensed Consolidated Statement of Financial Position	4
Condensed Consolidated Statement of Changes in Equity	6
Condensed Consolidated Statement of Cash Flows	7
Notes to the Interim Financial Statements	8
Management Discussion and Analysis	30
Business Review and Prospects	34
Additional Information	37
Corporate Information	48

The Directors of Hongkong Chinese Limited (the “Company”) present the unaudited condensed consolidated interim financial statements of the Company and its subsidiaries (collectively, the “Group”) for the six months ended 30th June, 2012.

Condensed Consolidated Income Statement

For the six months ended 30th June, 2012

Note

Unaudited six months ended 30th June, 2012 2011 HK$’000 HK$’000 (Restated) 50,807 53,405 (7,160) (10,793) 43,647 42,612 (52,136) (52,004) (30,227) (4,813) — 3,415 (2,111) (225) (1,728) (3,931) (69,049) 1,138,937 (394) (76) (111,998) 1,123,915 (616) 149 (112,614) 1,124,064 (112,264) 1,125,334 (350) (1,270) (112,614) 1,124,064 HK cents HK cents (Restated) (5.6) 60.0 (5.6) 59.5

Revenue 3 Cost of sales Gross profit Administrative expenses Other operating expenses Gain on disposal of available-for-sale financial assets Net fair value loss on financial assets at fair value through profit or loss Finance costs Share of results of associates 4 Share of results of jointly controlled entities Profit/(Loss) before tax 5 Income tax 6 Profit/(Loss) for the period Attributable to: Equity holders of the Company Non-controlling interests Earnings/(Loss) per share attributable to equity holders of the Company 7 Basic Diluted

Details of the interim distribution are disclosed in Note 8 to the interim financial statements.

2 Hongkong Chinese Limited Interim Report 2012

Condensed Consolidated Statement of Comprehensive Income

For the six months ended 30th June, 2012	Unaudited six months ended 30th June, 2012 2011 HK$’000 HK$’000 (Restated) (112,614) 1,124,064 3,100 1,914 — 85 (1,360) (227) 1,740 1,772 8,885 — (1,066) — 7,819 — 5,068 11,148 (96) (345) 130,547 362,465 135,519 373,268 16,460 43,019 161,538 418,059 48,924 1,542,123 49,431 1,539,612 (507) 2,511 48,924 1,542,123
Profit/(Loss) for the period Other comprehensive income/(loss) Available-for-sale financial assets: Changes in fair value Reclassification adjustments for disposal Income tax effect Surplus on revaluation of leasehold land and buildings Income tax effect Share of other comprehensive income/(loss) of associates: Share of changes in fair value of available-for-sale financial assets Share of effective portion of changes in fair value of cash flow hedges of an associate Share of exchange differences on translation of foreign operations Exchange differences on translation of foreign operations Other comprehensive income for the period, net of tax Total comprehensive income for the period Attributable to: Equity holders of the Company Non-controlling interests
	(112,614)
	3,100
	—
	(1,360)
	1,740
	8,885
	(1,066)
	7,819
	5,068
	(96)
	130,547
	135,519
	16,460
	161,538
	48,924
	49,431
	(507)
	48,924

3

Interim Report 2012 Hongkong Chinese Limited

Condensed Consolidated Statement of Financial Position

As at 30th June, 2012 Note	30th June, 2012 HK$’000 (Unaudited)	31st December, 2011 HK$’000 (Restated)
Non-current assets Goodwill Fixed assets Investment properties Interests in associates 4 Interests in jointly controlled entities Available-for-sale financial assets 9 Held-to-maturity financial assets 10 Loans and advances 11 Current assets Properties held for sale Properties under development Financial assets at fair value through profit or loss 12 Loans and advances 11 Debtors, prepayments and deposits 13 Client trust bank balances Restricted cash Treasury bills Cash and bank balances Current liabilities Bank and other borrowings 14 Creditors, accruals and deposits received 15 Current, fixed, savings and other deposits of customers 16 Tax payable Net current assets Total assets less current liabilities		71,485 137,169 171,408 8,381,354 185,613 46,304 27,265 41,541
	71,485
	134,094
	182,612
	8,640,929
	66,157
	60,378
	27,822
	46,715
		9,062,139
	9,230,192
		8,545 1,347,459 92,442 199,578 117,323 550,716 466,295 — 406,508
	8,531
	1,677,532
	83,618
	219,187
	266,227
	440,842
	585,935
	7,760
	743,542
		3,188,866
	4,033,174
		67,349 1,313,919 120,225 1,821
	508,327
	2,076,445
	192,796
	1,706
		1,503,314
	2,779,274
		1,685,552
	1,253,900
		10,747,691
	10,484,092

Hongkong Chinese Limited Interim Report 2012

4

Condensed Consolidated Statement of Financial Position (Continued)

Condensed Consolidated Statement of Financial Position_(C_	ontinued)
As at 30th June, 2012 Note	30th June, 31st December, 2012 2011 HK$’000 HK$’000 (Unaudited) (Restated)
Non-current liabilities Bank and other borrowings 14 Deferred tax liabilities Net assets Equity Equity attributable to equity holders of the Company Issued capital 17 Reserves 18 Non-controlling interests	268,269 699,057 38,175 35,808
	306,444 734,865
	10,177,648 10,012,826
	1,998,457 2,003,215 8,090,545 7,920,458
	10,089,002 9,923,673 88,646 89,153
	10,177,648 10,012,826

5

Interim Report 2012 Hongkong Chinese Limited

Condensed Consolidated Statement of Changes in Equity

For the six months ended 30th June, 2012

Unaudited

							Unaudited	Unaudited	Unaudited	Unaudited
					Attribu	table to equity	holders of the Company				Distributable reserves Total Non- controlling interests Total equity (Note 18(b)) HK$’000 HK$’000 HK$’000 HK$’000
	Issued capital Share premium account HK$’000 HK$’000		Share option reserve HK$’000	Capital redemption reserve (Note 18(c)) HK$’000	Legal reserve (Note 18(d)) HK$’000	Regulatory reserve (Note 18(e)) HK$’000	Investment revaluation reserve Other asset revaluation reserve Hedging reserve Exchange equalisation reserve (Note 18(f)) HK$’000 HK$’000 HK$’000 HK$’000
At 1st January, 2012 As previously reported Prior year adjustments As restated Loss for the period Other comprehensive income/(loss) for the period: Available-for-sale financial assets: Changes in fair value Income tax effect Surplus on revaluation of leasehold land and buildings Income tax effect on surplus on revaluation of leasehold land and buildings Share of other comprehensive income/(loss) of associates Exchange differences on translation of foreign operations Total comprehensive income/(loss) for the period Repurchases of shares Share of equity movements arising on equity transactions of associates Transfer of reserve 2011 final and special final distributions declared to shareholders of the Company At 30th June, 2012
	2,003,215 90,667		7,219	13,328	7,534	891	225,921 28,255 (4,336) 738,510				6,020,609 9,131,813 89,153 9,220,966
	— —		—	—	—	—	— — — 35,310				756,550 791,860 — 791,860
	2,003,215 90,667		7,219	13,328	7,534	891	225,921 28,255 (4,336) 773,820				6,777,159 9,923,673 89,153 10,012,826
	— —		—	—	—	—	— — — —				(112,264) (112,264) (350) (112,614)
	— —		—	—	—	—	3,100 — — —				— 3,100 — 3,100
	— —		—	—	—	—	(1,360) — — —				— (1,360) — (1,360)
	— —		—	—	—	—	—	8,885 — —			— 8,885 — 8,885
	— —		—	—	—	—	—	(1,066) — —			— (1,066) — (1,066)
	— —		—	—	—	—	5,068	—	(96) 130,547		— 135,519 — 135,519
	— —		—	—	—	—	—	—	— 16,617		— 16,617 (157) 16,460
	— —		—	—	—	—	6,808	7,819	(96) 147,164		(112,264) 49,431 (507) 48,924
	(4,758) —		—	4,758	—	—	—	—	—	—	(5,945) (5,945) —			(5,945)
	—	—	—	—	—	—	—	—	—	—	181,831 181,831 —			181,831
	—	—	—	—	320	—	—	—	—	—	(320) — —			—
	—	—	—	—	—	—	—	—	—	—	(59,988) (59,988) —			(59,988)
	1,998,457	90,667	7,219	18,086	7,854	891	232,729	36,074	(4,432) 920,984		6,780,473	10,089,002	88,646	10,177,648
At 1st January, 2011 As previously reported Prior year adjustments As restated Profit/(loss) for the period Other comprehensive income/(loss) for the period: Available-for-sale financial assets: Changes in fair value Reclassification adjustments for disposal Income tax effect Share of other comprehensive income/(loss) of associates Exchange differences on translation of foreign operations Total comprehensive income/(loss) for the period Issuance of shares upon exercise of warrants Share of equity movements arising on equity transactions of associates Advances from a non-controlling shareholder of a subsidiary Transfer of reserve 2010 final distribution declared to shareholders of the Company At 30th June, 2011 (restated)	1,816,715 —	44,042 —	7,219 —	13,328 —	7,142 —	891 —	229,686 —	28,255 —	(7,159) 813,240 — 47,998		5,095,590 620,767	8,048,949 668,765	112,592 —	8,161,541 668,765
	1,816,715 — — — — — —	44,042 — — — — — —	7,219 — — — — — —	13,328 — — — — — —	7,142 — — — — — —	891 — — — — — —	229,686 28,255 — — 1,914 — 85 — (227) — 11,148 — — —		(7,159) 861,238 — — — — — — — — (345) 362,465 — 39,238		5,716,357 1,125,334 — — — — —	8,717,714 112,592 8,830,306 1,125,334 (1,270) 1,124,064 1,914 — 1,914 85 — 85 (227) — (227) 373,268 — 373,268 39,238 3,781 43,019
	— 156,872 — — — —	— 39,218 — — — —	— — — — — —	— — — — — —	— — — — 392 —	— — — — — —	12,920 — — — — — — — — — — —		(345) 401,703 — — — — — — — — — —		1,125,334 1,539,612 2,511 1,542,123 — 196,090 — 196,090 (211,190) (211,190) — (211,190) — — 25 25 (392) — — — (39,332) (39,332) — (39,332)
	1,973,587	83,260	7,219	13,328	7,534	891	242,606 28,255		(7,504) 1,262,941		6,590,777 10,202,894 115,128 10,318,022

6

Hongkong Chinese Limited Interim Report 2012

Condensed Consolidated Statement of Cash Flows

For the six months ended 30th June, 2012

Unaudited six months ended 30th June, 2012 2011 HK$’000 HK$’000 (Restated) 338,372 (368,735) 1,372 97,234 6,030 336,492 345,774 64,991 406,508 449,132 (2,568) 4,305 749,714 518,428 743,542 566,527 7,760 — (1,588) (48,099) 749,714 518,428

Net cash flows from/(used in) operating activities Net cash flows from investing activities Net cash flows from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1st January Exchange realignments Cash and cash equivalents at 30th June Analysis of balances of cash and cash equivalents: Cash and bank balances Treasury bills Time deposits with original maturity of more than three months

7

Interim Report 2012 Hongkong Chinese Limited

Notes to the Interim Financial Statements

1. Principal Accounting Policies

The interim financial statements are unaudited, condensed and have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants.

The accounting policies and basis of preparation adopted in the preparation of these condensed consolidated interim financial statements are consistent with those used in the Group’s audited financial statements for the year ended 31st December, 2011, except as described below.

The Group has adopted the following new and revised Hong Kong Financial Reporting Standards (“HKFRS”), HKASs and Interpretations (hereinafter collectively referred to as the “new and revised HKFRSs”), which have become effective for accounting periods beginning on or after 1st January, 2012, for the first time for the current period’s financial statements:

HKFRS 1 Amendments	Amendments to HKFRS 1_First-time Adoption of Hong Kong_
	Financial Reporting Standards — Severe Hyperinflation
	and Removal of Fixed Dates for First-time Adopters
HKFRS 7 Amendments	Amendments to HKFRS 7_Financial Instruments:_
	Disclosures — Transfers of Financial Assets
HKAS 12 Amendments	Amendments to HKAS 12_Income Taxes —_
	Deferred Tax: Recovery of Underlying Assets

Other than as further explained below regarding the impact of HKAS 12 Amendments, the adoption of the above new and revised HKFRSs has had no material impact on the accounting policies of the Group and the methods of computation in the Group’s condensed consolidated interim financial statements.

HKAS 12 Amendments clarify the determination of deferred tax for investment property measured at fair value. The amendments introduce a rebuttable presumption that deferred tax on investment property measured at fair value should be determined on the basis that its carrying amount will be recovered through sale. Furthermore, the amendments incorporate the requirement previously in HK(SIC)-Int 21 Income Taxes — Recovery of Revalued NonDepreciable Assets that deferred tax on non-depreciable assets, measured using the revaluation model in HKAS 16, should always be measured on a sale basis.

8

Hongkong Chinese Limited Interim Report 2012

Notes to the Interim Financial Statements (Continued)

1. Principal Accounting Policies (Continued)

In prior years, deferred tax was provided on the basis that the carrying amounts of investment properties will be recovered through use. Upon adoption of HKAS 12 Amendments, deferred tax is provided on the basis that the carrying amounts of the investment properties will be recovered through sale except that the basis of recovery through use will continue to apply to those investment properties which are depreciable and are held with an objective to consume substantially all of the economic benefits embodied in the investment properties over time, rather than through sale. This change in accounting policy has been applied retrospectively and the effects are summarised below:

	Six months ended 30th June,	Six months ended 30th June,
	2012	2011
	HK$’000	HK$’000
Increase in share of results of associates	—	148,577
Increase in share of other comprehensive income of associates	17,528	51,705
Increase in basic earnings per share_(HK cents)_	—	7.9
Increase in diluted earnings per share_(HK cents)_	—	7.8
	30th June,	31st December,
	2012	2011
	HK$’000	HK$’000
Increase in interests in associates	840,349	791,860
Increase in exchange equalisation reserve	52,838	35,310
Increase in distributable reserves	787,511	756,550

In addition, the Group has changed voluntarily its accounting policy regarding the current/non-current assets classification for properties under development intended for sale. In prior years, the Group classified the properties under development intended for sale as properties under development in non-current assets in the statement of financial position which would be transferred to properties under development in current assets when the construction was expected to be completed within one year from the end of the reporting period. Under the revised accounting policy, properties under development intended for sale are classified as current assets. In the opinion of the directors, the financial statements according to the revised policy will provide more relevant information to the users of the financial statements and bring the Group in line with the treatment adopted by other entities in the real estate industry. This change in policy has been applied retrospectively and comparative amounts have been restated.

9

Interim Report 2012 Hongkong Chinese Limited

Notes to the Interim Financial Statements (Continued)

1. Principal Accounting Policies (Continued)

The above change has had no effect on the condensed consolidated income statement. The effect on the condensed consolidated statement of financial position is summarised as follows:

	30th June,	31st December,
	2012	2011
	HK$’000	HK$’000
Non-current Assets
Decrease in properties under development	1,677,532	1,347,459
Current Assets
Increase in properties under development	1,677,532	1,347,459

There was no impact on the net assets of the Group.

2. Segment Information

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

• (a) the property investment segment includes letting and resale of properties;

• (b) the property development segment includes development and sale of properties;

• (c) the treasury investment segment includes investments in cash and bond markets;

• (d) the securities investment segment includes dealings in securities and disposals of investments;

• (e) the corporate finance and securities broking segment provides securities and futures brokerage, investment banking, underwriting and other related advisory services;

• (f) the banking business segment engages in the provision of commercial and retail banking services;

• (g) the project management segment engages in the provision of project management, marketing, sales and administrative and other related services; and

• (h) the “other” segment comprises principally the development of computer hardware and software, money lending and the provision of fund management and investment advisory services.

Management monitors the results of its operating segments separately for the purpose of making decisions about resources allocation and performance assessment. Segment performance is evaluated based on reportable segment profit/(loss), which is a measure of adjusted profit/(loss) before tax. The adjusted profit/(loss) before tax is measured consistently with the Group’s profit/(loss) before tax except that finance costs as well as head office and corporate expenses are excluded from such measurement.

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

10

Hongkong Chinese Limited Interim Report 2012

Notes to the Interim Financial Statements (Continued)

2. Segment Information (Continued) Six months ended 30th June, 2012

	Property investment Property development Treasury investment Securities investment Corporate finance and securities broking Banking business Project management Other Inter- segment elimination HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Consolidated HK$’000
Revenue External Inter-segment Total Segment results Unallocated corporate expenses Finance costs Share of results of associates Share of results of jointly controlled entities Loss before tax
	5,968 — 3,586 9,909 16,523 5,928 5,895 2,998 —	50,807
	— — — — — — 296 1,319 (1,615)	—
	5,968 — 3,586 9,909 16,523 5,928 6,191 4,317 (1,615)	50,807
	1,949 (6,524) 3,376 5,555 (9,195) 63 (1,074) 1,653 (1,615)	(5,812)
		(35,015)
		(1,728)
	(120,417) 51,368 — — — — — — —	(69,049)
	— (394) — — — — — — —	(394)
		(111,998)

Six months ended 30th June, 2011 (restated)

	Property investment Property development Treasury investment Securities investment Corporate finance and securities broking Banking business Project management Other Inter- segment elimination HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Consolidated HK$’000
Revenue External Inter-segment Total Segment results Unallocated corporate expenses Finance costs Share of results of associates Share of results of jointly controlled entities Profit before tax	5,523 — 1,072 10,037 24,566 6,433 3,408 2,366 — — — — — — — 3,297 1,290 (4,587)	53,405 —
	5,523 — 1,072 10,037 24,566 6,433 6,705 3,656 (4,587)	53,405
	3,266 (3,054) 968 10,979 (1,879) 137 (3,913) 1,634 (4,587)	3,551 (14,566) (3,931) 1,138,937 (76)
	875,065 263,872 — — — — — — — — (76) — — — — — — —
		1,123,915

11

Interim Report 2012 Hongkong Chinese Limited

Notes to the Interim Financial Statements (Continued)

3. Revenue

Revenue, which is also the Group’s turnover, represents the aggregate of gross rental income, gross proceeds from sales of properties, gross income on treasury investment which includes interest income on bank deposits and debt securities, income from securities investment which includes gain/(loss) on sales of securities investment, dividend income and related interest income, gross income from underwriting and securities broking, gross interest income, commissions, dealing income and other revenues from a banking subsidiary, gross income from project management, and interest and other income from money lending and other businesses, after eliminations of all significant intragroup transactions.

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

	Six months ended 30th June, 2012 2011 HK$’000 HK$’000
Property investment Treasury investment Securities investment Corporate finance and securities broking Banking business Project management Other	5,968 5,523 3,586 1,072 9,909 10,037 16,523 24,566 5,928 6,433 5,895 3,408 2,998 2,366
	50,807 53,405

Revenue attributable to banking business represents revenue generated from The Macau Chinese Bank Limited, 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:

	Six months ended 30th June, 2012 2011 HK$’000 HK$’000
Interest income Commission income Other revenues	4,910 4,501 1,018 1,418 — 514
	5,928 6,433

12

Hongkong Chinese Limited Interim Report 2012

Notes to the Interim Financial Statements (Continued)

4. Share of Results of Associates/Interests in Associates

Share of results of associates included the Group’s share of loss in Lippo ASM Asia Property LP (“LAAP”) of approximately HK$120,417,000 (2011 — share of profit of HK$875,065,000, restated) and share of profit from Lippo Marina Collection Pte. Ltd. (“Lippo Marina”) of approximately HK$51,368,000 (2011 — HK$263,872,000). LAAP, a fund which carries the objective of investing in real estate and hospitality service businesses in Asia, invested in Overseas Union Enterprise Limited (“OUE”), a listed company in Singapore which is principally engaged in property investment and development and hotel operations. The decrease in share of results was mainly attributable to absence of fair value gains on investment properties of OUE as compared with the corresponding period of last year. Lippo Marina was set up for the purpose of a property development project in Singapore, namely Marina Collection. The share of profit in 2011 was arising from the profit recognition of the sold units upon completion in April 2011. The profit in 2012 represented the share of profit from the sale of additional units during the period.

Interests in associates mainly included the Group’s interest in LAAP of approximately HK$8,034,612,000 (31st December, 2011 — HK$7,837,681,000, restated). Certain shares of OUE held under LAAP had been pledged to secure banking facilities made available to the subsidiaries of LAAP. Due to the share buy-back of OUE during the period, LAAP’s controlling interest in OUE increased from approximately 65.6 per cent. as at 31st December, 2011 to approximately 68.0 per cent. as at 30th June, 2012.

5. Profit/(Loss) before Tax

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

	Six months ended 30th June,	Six months ended 30th June,	Six months ended 30th June,
	2012		2011
	HK$’000		HK$’000
Interest income:
Unlisted financial assets at fair value through profit or loss	51		204
Listed available-for-sale financial assets	915		743
Listed held-to-maturity financial assets	1,030		748
Loans and advances	869		488
Banking business	4,910		4,501
Other	3,586		1,072
Dividend income:
Listed investments	656		520
Unlisted investments	1,485		80
Gain on disposal of:
Listed financial assets at fair value through profit or loss	3,660		5,268
Unlisted financial assets at fair value through profit or loss	2,112		2,474
Unlisted available-for-sale financial assets	—		3,415
Net fair value gain/(loss) on financial assets at fair value
through profit or loss:
Listed	(5,921)		(3,029)
Unlisted	3,810		2,804
Provision for impairment losses on unlisted available-for-sale
financial assets	(90)		—
Write-back of allowance/(Allowance) for bad and doubtful debts	(233)		267
Interest expense attributable to banking business	(786)		(288)
Depreciation	(4,703)		(4,661)
Foreign exchange gains/(losses) — net	(11)		11,376

13

Interim Report 2012 Hongkong Chinese Limited

Notes to the Interim Financial Statements (Continued)

6. Income Tax

	Six months ended 30th June, 2012 2011 HK$’000 HK$’000
Hong Kong: Charge for the period Overseas: Charge for the period Overprovision in prior periods Total charge/(credit) for the period	40 —
	576 104 — (253)
	576 (149)
	616 (149)

Hong Kong profits tax has been provided at the rate of 16.5 per cent. (2011 — 16.5 per cent.) on the estimated assessable profits arising in Hong Kong during the period. Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries/jurisdictions in which the Group operates.

7. Earnings/(Loss) Per Share Attributable to Equity Holders of the Company

(a) Basic earnings/(loss) per share

Basic earnings/(loss) per share is calculated based on (i) the consolidated profit/(loss) for the period attributable to equity holders of the Company; and (ii) the weighted average number of 2,001,226,833 ordinary shares (2011 — 1,875,987,000 ordinary shares) in issue during the period.

(b) Diluted earnings/(loss) per share

Diluted earnings/(loss) per share is calculated based on (i) the consolidated profit/(loss) for the period attributable to equity holders of the Company; and (ii) the weighted average number of 2,002,203,240 ordinary shares (2011 — 1,890,601,000 ordinary shares), calculated as follows:

	Number of shares 2012 2011
Weighted average number of ordinary shares in issue during the period used in the basic earnings/(loss) per share calculation Effect of dilution — weighted average number of ordinary shares: Share options Warrants	2,001,226,833 1,875,987,000 976,407 4,767,000 — 9,847,000
	2,002,203,240 1,890,601,000

14 Hongkong Chinese Limited Interim Report 2012

Notes to the Interim Financial Statements (Continued)

8. Interim Distribution

		Six months ended 30th June,	Six months ended 30th June,	Six months ended 30th June,
		2012		2011
		HK$’000		HK$’000
Interim distribution, declared — Nil (2011	— Nil)	—		—

9. Available-for-sale Financial Assets

	30th June, 31st December, 2012 2011 HK$’000 HK$’000
Financial assets stated at fair value: Debt securities listed in Hong Kong Debt securities listed overseas Unlisted investment funds Financial assets stated at cost: Unlisted equity securities Unlisted debt securities Provision for impairment losses	3,627 3,407 18,921 18,388 16,865 14,936
	39,413 36,731
	81,890 70,408 3,165 3,165 (64,090) (64,000)
	20,965 9,573
	60,378 46,304

The debt securities bear interest at effective rates ranging from nil to 10 per cent. (31st December, 2011 — nil to 10 per cent.) per annum.

15

Interim Report 2012 Hongkong Chinese Limited

Notes to the Interim Financial Statements (Continued)

9. Available-for-sale Financial Assets (Continued)

An analysis of the issuers of available-for-sale financial assets is as follows:

	30th June, 31st December, 2012 2011 HK$’000 HK$’000
Equity securities: Corporate entities Debt securities: Club debenture Corporate entities Banks and other financial institutions	81,890 70,408
	3,165 3,165 12,255 11,704 10,293 10,091
	25,713 24,960
Held-to-maturity Financial Assets	30th June, 31st December, 2012 2011 HK$’000 HK$’000
Debt securities, at amortised cost: Listed in Hong Kong Listed overseas Market value of listed debt securities	18,098 8,083 9,724 19,182
	27,822 27,265
	28,245 26,654

10. Held-to-maturity Financial Assets

The debt securities bear interest at effective rates ranging from 6 per cent. to 9 per cent. (31st December, 2011 — 6 per cent. to 9 per cent.) per annum.

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

	30th June, 31st December, 2012 2011 HK$’000 HK$’000
Corporate entities Banks and other financial institutions	25,891 15,889 1,931 11,376
	27,822 27,265

16 Hongkong Chinese Limited Interim Report 2012

Notes to the Interim Financial Statements (Continued)

11. Loans and Advances

The balance mainly comprised of loans and advances to customers of the Group in respect of securities broking and banking operations of HK$256,279,000 (31st December, 2011 — HK$230,589,000).

The loans and advances to customers of the Group bear interest at effective rates ranging from 2 per cent. to 9 per cent. (31st December, 2011 — 3 per cent. to 8 per cent.) per annum. Certain balances arising from securities broking and banking operations are secured by clients’ properties, deposits and securities being held as collaterals with carrying amounts of HK$684,016,000 (31st December, 2011 — HK$498,272,000).

As at the end of the reporting period, the overdue or impaired balances are related to securities broking, banking and money lending operations. Movements of the allowance for bad and doubtful debts during the period are as follows:

	Six months ended 30th June, 2012 2011 HK$’000 HK$’000
Balance at beginning of period Allowance for bad and doubtful debts Balance at end of period	8,450 13,294 233 —
	8,683 13,294
Financial Assets at Fair Value through Profit or Loss	30th June, 31st December, 2012 2011 HK$’000 HK$’000
Held for trading: Equity securities: Listed in Hong Kong Listed overseas Unlisted investment funds	49,080 26,396 3,143 36,902
	52,223 63,298
	31,395 29,144
	83,618 92,442

12. Financial Assets at Fair Value through Profit or Loss

17

Interim Report 2012 Hongkong Chinese Limited

Notes to the Interim Financial Statements (Continued)

12. Financial Assets at Fair Value through Profit or Loss (Continued)

An analysis of the issuers of financial assets at fair value through profit or loss is as follows:

	30th June, 31st December, 2012 2011 HK$’000 HK$’000
Equity securities: Corporate entities Banks and other financial institutions Public sector entities	49,339 60,380 662 703 2,222 2,215
	52,223 63,298

13. Debtors, Prepayments and Deposits

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

	30th June, 31st December, 2012 2011 HK$’000 HK$’000
Outstanding balances with ages: Repayable on demand Within 30 days Between 31 and 60 days Between 61 and 90 days Between 91 and 180 days Over 180 days	32,500 50,076 5,383 5,649 99 — 5 — — 125 — 9
	37,987 55,859

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.

At the end of the reporting period, other receivables of HK$26,460,000 (31st December, 2011 — HK$26,460,000) related to securities broking operation and a property development project were impaired and provided for. Except for this, 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. 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.

18

Hongkong Chinese Limited Interim Report 2012

Notes to the Interim Financial Statements (Continued)

14. Bank and Other Borrowings

	30th June, 2012 HK$’000	31st December, 2011 HK$’000
Bank loans: Secured_(Note (a)) Unsecured Unsecured other borrowings(Note (b))_ _Less:_Amount classified under current portion Non-current portion Bank and other borrowings by currency: Hong Kong dollar Renminbi Bank loans repayable: Within one year or on demand In the second year In the third to fifth years, inclusive Other borrowings repayable: In the second year		708,798 —
	708,988
	10,000
		708,798 57,608
	718,988
	57,608
		766,406 (67,349)
	776,596
	(508,327)
		699,057
	268,269
		328,963 437,443
	278,269
	498,327
		766,406
	776,596
		67,349 370,094 271,355
	508,327
	—
	210,661
		708,798
	718,988
		57,608
	57,608

19

Interim Report 2012 Hongkong Chinese Limited

Notes to the Interim Financial Statements (Continued)

14. Bank and Other Borrowings (Continued)

Note:

• (a) At the end of the reporting period, the bank loans were secured by:

• (i) first legal mortgages over certain investment properties and properties under development of the Group with carrying amounts of HK$90,773,000 (31st December, 2011 — HK$91,279,000) and HK$1,213,587,000 (31st December, 2011 — HK$1,306,333,000), respectively; and

• (ii) certain bank deposits of the Group with carrying amount of HK$191,536,000 (31st December, 2011 — HK$168,588,000).

• (b) The Group’s other borrowings as at 30th June, 2012 comprised of unsecured loans advanced from Lippo Limited (“Lippo”), an intermediate holding company of the Company, of HK$57,608,000 (31st December, 2011 — HK$57,608,000).

The Group’s bank and other borrowings bear interest at floating rates ranging from 1.3 per cent. to 7.4 per cent. (31st December, 2011 — 2.7 per cent. to 7.4 per cent.) per annum.

15. Creditors, Accruals and Deposits Received

Creditors, accruals and deposits received mainly comprised of pre-sale proceeds received from the property development projects of the Group of HK$1,364,669,000 (31st December, 2011 — HK$676,081,000), and trade payables relating to cash balances held on trust for the customers in respect of the Group’s securities broking operation of HK$464,499,000 (31st December, 2011 — HK$593,250,000). As at 30th June, 2012, total client trust bank balances amounted to HK$440,842,000 (31st December, 2011 — HK$550,716,000).

An aged analysis of trade creditors are as follows:

	30th June, 31st December, 2012 2011 HK$’000 HK$’000
Outstanding balances with ages: Repayable on demand Within 30 days	458,329 435,334 6,170 169,644
	464,499 604,978

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

16. Current, Fixed, Savings and Other Deposits of Customers

The current, fixed, savings and other deposits of customers attributable to banking business bear interest at effective rates ranging from 0.01 per cent. to 4.0 per cent. (31st December, 2011 — 0.02 per cent. to 2.75 per cent.) per annum.

20

Hongkong Chinese Limited Interim Report 2012

Notes to the Interim Financial Statements (Continued)

17. Share Capital

Shares

	30th June, 31st December, 2012 2011 HK$’000 HK$’000
Authorised: 4,000,000,000 (31st December, 2011 — 4,000,000,000) ordinary shares of HK$1.00 each Issued and fully paid: 1,998,457,097* (31st December, 2011 — 2,003,215,097) ordinary shares of HK$1.00 each	4,000,000 4,000,000
	1,998,457 2,003,215

• After taking into account of 106,000 ordinary shares of HK$1.00 each repurchased prior to 30th June, 2012 which were cancelled in July 2012.

During the period, the Company had repurchased a total of 4,758,000 ordinary shares of HK$1.00 each in the Company on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) of which 4,652,000 shares were cancelled before the end of reporting period and 106,000 shares were subsequently cancelled in July 2012. The premium of HK$1,187,000 arising from such repurchases has been charged to the distributable reserves of the Company and an amount of HK$4,758,000 was transferred from distributable reserves to the capital redemption reserve as set out in the condensed consolidated statement of changes in equity on page 6. The repurchases of the Company’s shares during the period were effected by the Directors with a view to benefiting shareholders as a whole by enhancing the net asset value per share of the Company.

Share Option Scheme

Pursuant to the share option scheme of the Company (the “Share Option Scheme”) adopted and approved by the shareholders of the Company, Lippo, an intermediate holding company of the Company, and Lippo China Resources Limited, a former intermediate holding company of the Company, on 7th June, 2007 (the “Adoption Date”), the board of the Directors of the Company (the “Board”) may, at its discretion, offer to grant to any eligible employee (including director, officer and/or employee 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 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.

21

Interim Report 2012 Hongkong Chinese Limited

Notes to the Interim Financial Statements (Continued)

17. Share Capital (Continued)

Share Option Scheme (Continued)

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, that is, 134,682,909 shares (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 discretion but in any event shall not be less than the highest of (i) the closing price of the shares of the Company on the date of grant of the option, as stated in the daily quotations sheets of the Stock Exchange; (ii) 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 sheets of the Stock Exchange; and (iii) 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 and employees of the Company to subscribe for a total of 13,468,000 ordinary shares of HK$1.00 each in the Company (the “Shares”) at an initial exercise price of HK$1.68 per Share (subject to adjustment). Due to the rights issue of new shares of the Company in June 2008 in the proportion of seven rights shares for every twenty shares held, adjustments were made to the number of Shares subject to the options of the Company and the exercise price, resulting in options to subscribe for a total of 18,181,800 Shares at an exercise price of HK$1.24 per Share (subject to adjustment), with effect from 27th June, 2008. The above options could not be exercised from the date of grant to 16th June, 2008. Such options are exercisable from 17th June, 2008 to 16th December, 2012.

On 1st August, 2008, an option was granted under the Share Option Scheme without consideration to an Eligible Person to subscribe for 2,025,000 Shares at an exercise price of HK$1.00 per Share (subject to adjustment). Such option could not be exercised from the date of grant to 31st July, 2009. Such option is exercisable from 1st August, 2009 to 16th December, 2012.

An option to subscribe for 337,500 Shares lapsed in 2010.

As at 1st January, 2012, there were outstanding options granted under the Share Option Scheme to subscribe for a total of 19,869,300 Shares (the “Option Shares”).

22

Hongkong Chinese Limited Interim Report 2012

Notes to the Interim Financial Statements (Continued)

17. Share Capital (Continued)

Share Option Scheme (Continued)

Details of the Option Shares granted under the Share Option Scheme are summarised as follows:

Participants Date of grant Exercise price per Share HK$	Number of Option Shares
	Balance as at 1st January, 2012 and 30th June, 2012
Directors: John Lee Luen Wai 17th December, 2007 1.24 Leon Chan Nim Leung 17th December, 2007 1.24 Kor Kee Yee 17th December, 2007 1.24 Albert Saychuan Cheok 17th December, 2007 1.24 Victor Yung Ha Kuk 17th December, 2007 1.24 Tsui King Fai 17th December, 2007 1.24 Employees_(Note 1) 17th December, 2007 1.24 Others(Note 2)_ 17th December, 2007 1.24 1st August, 2008 1.00
	4,590,000
	810,000
	607,500
	607,500
	607,500
	607,500
	7,179,300
	2,835,000
	2,025,000
Total
	19,869,300
Weighted average exercise price per Share_(HK$)_
	1.22

Note:

1. Employees refer to the employees of the Group as at 30th June, 2012 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.

2. Others included a former Eligible Person who held an option to subscribe for 67,500 Option Shares which lapsed on 1st July, 2012.

No option of the Company was granted, exercised, cancelled or lapsed during the period.

23

Interim Report 2012 Hongkong Chinese Limited

Notes to the Interim Financial Statements (Continued)

17. Share Capital (Continued)

Share Option Scheme (Continued)

The exercise prices of the Option Shares and exercise periods of the options outstanding as at 30th June, 2012 are as follows:

	Exercise price
	per Share
	(Note)
Number of Option Shares	HK$	Exercise period
17,844,300 2,025,000*	1.24 1.00	17th June, 2008 to 16th December, 2012 1st August, 2009 to 16th December, 2012

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

• including an option to subscribe for 67,500 Option Shares which lapsed on 1st July, 2012

18. Reserves

The amounts of the Group’s reserves and movements therein for the current and prior periods are presented in the condensed consolidated statement of changes in equity on page 6.

• (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 30th June, 2012 comprise retained profits of HK$5,830,819,000 (31st December, 2011 — HK$5,761,572,000, restated) and the remaining balance arising from the Cancellation of HK$949,654,000 (31st December, 2011 — HK$1,015,587,000).

• (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.

• (f) The hedging reserve relates to the Group’s share of the hedging reserve of an associate.

24

Hongkong Chinese Limited Interim Report 2012

Notes to the Interim Financial Statements (Continued)

19. Contingent Liabilities

At the end of the reporting period, the Group had the following contingent liabilities relating to its banking subsidiary:

	30th June, 31st December, 2012 2011 HK$’000 HK$’000
Guarantees and other endorsements Liabilities under letters of credit on behalf of customers	14,310 15,278 5,772 9,556
	20,082 24,834

20. Capital Commitments

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

	30th June, 31st December, 2012 2011 HK$’000 HK$’000
Capital commitments in respect of property, plant and equipment: Contracted, but not provided for Other capital commitments: Contracted, but not provided for_(Note)_	568,801 643,046 73,655 72,082
	642,456 715,128

• Note: The balance included the Group’s capital commitments in respect of the formation of joint ventures for certain property projects in Singapore, of approximately HK$73 million (31st December, 2011 — HK$71 million).

21. Related Party Transactions

• (a) During the period, the Company paid rental expenses (including service charges) of HK$1,532,000 (2011 — HK$1,530,000) to Porbandar Limited, a fellow subsidiary of the Company, in respect of office premises occupied by the Company. The rental was determined by reference to the then prevailing open market rentals.

• (b) During the period, the Group paid rental expenses (including service charges) of HK$1,856,000 (2011 — Nil) to an associate of the Group. The rental was determined by reference to the then prevailing open market rentals.

• (c) During the period, the Company paid finance costs to Lippo of HK$830,000 (2011 — HK$838,000) in respect of the loan advanced to the Company.

• (d) During the period, the Group received project management income of HK$4,596,000 (2011 — HK$1,842,000) and HK$813,000 (2011 — HK$4,753,000) from associates and jointly controlled entities of the Group, respectively.

25

Interim Report 2012 Hongkong Chinese Limited

Notes to the Interim Financial Statements (Continued)

21. Related Party Transactions (Continued)

• (e) As at 30th June, 2012, the Group had amounts due from associates in a total of HK$424,864,000 (31st December, 2011 — HK$418,527,000) and amounts due from jointly controlled entities in a total of HK$14,790,000 (31st December, 2011 — HK$149,701,000). The balances with the associates are unsecured, interest-free and have no fixed terms of repayment. The balances with the jointly controlled entities included a loan of HK$3,977,000 (31st December, 2011 — HK$3,984,000), which is secured by certain shares of a jointly controlled entity, bears interest at 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.

22. Financial Risk Management Objectives and Policies

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

The main risks arising from the Group’s financial instruments are credit risk, liquidity risk, interest rate risk, foreign currency risk and equity price risk. The risk management function is carried out by individual business units and regularly overseen by the Group’s senior management with all the risk limits approved by the Executive Directors of the Group and they are summarised below.

(a) Credit risk

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

The 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 is 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 is performed by management of individual business units.

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

(b) Liquidity risk

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

Management comprising Executive Directors and senior managers monitors the liquidity position of the Group on an on-going basis to ensure the availability of sufficient liquid funds to meet all obligations as they fall due and to make the most efficient use of the Group’s financial resources.

26

Hongkong Chinese Limited Interim Report 2012

Notes to the Interim Financial Statements (Continued)

22. Financial Risk Management Objectives and Policies (Continued)

(b) Liquidity risk (Continued)

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

	Repayable on demand 3 months or less 1 year or less but over 3 months 5 years or less but over 1 year After 5 years Undated Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 30th June, 2012 Assets Amount due from a jointly controlled entity Debt securities: Held-to-maturity financial assets Available-for-sale financial assets Loans and advances Debtors and deposits Client trust bank balances Restricted cash Treasury bills Cash and bank balances Liabilities Bank and other borrowings Creditors, accruals and deposits received Current, fixed, savings and other deposits of customers
	— — — — — 3,977 3,977
	— — — — 27,822 — 27,822
	— — — — 3,627 22,086 25,713
	160,961 40,035 18,191 24,191 22,524 — 265,902
	35,152 7,503 1,475 — — 15,122 59,252
	148,039 292,803 — — — — 440,842
	585,605 330 — — — — 585,935
	— 7,760 — — — — 7,760
	268,930 473,024 1,588 — — — 743,542
	1,198,687 821,455 21,254 24,191 53,973 41,185 2,160,745
	14,965 10,000 483,362 268,269 — — 776,596
	461,333 76,094 1,455 — — 1,537,563 2,076,445
	92,348 89,553 10,895 — — — 192,796
	568,646 175,647 495,712 268,269 — 1,537,563 3,045,837

27

Interim Report 2012 Hongkong Chinese Limited

Notes to the Interim Financial Statements (Continued)

22. Financial Risk Management Objectives and Policies (Continued)

(b) Liquidity risk (Continued)

	Repayable on demand 3 months or less 1 year or less but over 3 months 5 years or less but over 1 year After 5 years Undated Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 31st December, 2011 Assets Amount due from a jointly controlled entity Debt securities: Held-to-maturity financial assets Available-for-sale financial assets Loans and advances Debtors and deposits Client trust bank balances Restricted cash Cash and bank balances Liabilities Bank and other borrowings Creditors, accruals and deposits received Current, fixed, savings and other deposits of customers	— — — — — 3,984 3,984 — — — — 27,265 — 27,265 — — — — 3,407 21,553 24,960 155,236 33,005 11,337 19,201 22,340 — 241,119 52,679 8,179 371 — — 14,332 75,561 126,934 423,782 — — — — 550,716 465,964 331 — — — — 466,295 240,865 165,643 — — — — 406,508
	1,041,678 630,940 11,708 19,201 53,012 39,869 1,796,408
	18,009 — 49,340 699,057 — — 766,406 437,977 177,519 588 — — 697,835 1,313,919 57,478 58,566 4,181 — — — 120,225
	513,464 236,085 54,109 699,057 — 697,835 2,200,550

28

Hongkong Chinese Limited Interim Report 2012

Notes to the Interim Financial Statements (Continued)

22. Financial Risk Management Objectives and Policies (Continued)

(c) Interest rate risk

Interest rate risk primarily results from timing differences in the repricing of interest-bearing assets and liabilities. The Group’s interest rate positions mainly arise from treasury, 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 is managed and monitored regularly by senior management of the Group.

(d) Foreign currency risk

Foreign currency risk is the risk to earnings or capital arising from movements of foreign exchange rates. The Group’s foreign currency risk primarily arises from currency exposures originating from its banking activities, foreign exchange 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, swaps and currency loans would be used to manage the foreign exchange exposure. The foreign currency risk is managed and monitored on an on-going basis by senior management of the Group.

(e) Equity price risk

Equity price risk is the risk that the fair values of financial assets decrease as a result of changes in the levels of equity indices and the values of individual financial assets. The Group is exposed to equity price risk arising from individual financial assets classified as available-for-sale financial assets (Note 9) and financial assets at fair value through profit or loss (Note 12) as at 30th June, 2012. 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 end of the reporting period.

The Group uses Value at Risk (the “VaR”) model to assess possible changes in the market value of the investment portfolios based on historical data. The VaR figures are regularly reviewed by senior management of the Group to ensure the loss arising from the changes in the market values of the investment portfolios is capped within an acceptable range.

29

Interim Report 2012 Hongkong Chinese Limited

Management Discussion and Analysis

The global economic environment is still very challenging in the first half of 2012. The European financial crisis remains unresolved and is even deepening. High unemployment rate in the United States not only hinders the recovery of US economy, but also adds weights to the investor sentiment. Major emerging markets, including China and Brazil have lowered down the growth forecast.

For the six months ended 30th June, 2012, the Group reported a loss attributable to shareholders of HK$112 million as compared to the profit of HK$1,125 million (restated) for the corresponding period in 2011. The profit recorded in 2011 was mainly attributable to the then substantial fair value gains of the investment properties of the Group’s associates recognised upon completion of redevelopment and the higher profit shared from the sold units upon the completion of a property development project in Singapore during the first half of last year.

Results for the Period

Turnover for the six months ended 30th June, 2012 totalled HK$51 million (2011 — HK$53 million).

Property investment

The revenue of the property investment business amounted to HK$6 million for the period (2011 — HK$6 million). The segment registered a profit of HK$2 million (2011 — HK$3 million).

The Group has invested in a fund, Lippo ASM Asia Property LP (together with its subsidiaries, the “LAAP Group”), which has indirect interests in Overseas Union Enterprise Limited (“OUE”), a listed company in Singapore principally engaged in property investment and development and hotel operations. The hotels managed by OUE, including Mandarin Orchard Singapore and the Crowne Plaza Changi Airport Hotel acquired in July 2011, are strategically located in various well known tourist destinations of Singapore, Malaysia and mainland China. The investment property portfolio in Singapore, which includes OUE Bayfront, Mandarin Gallery and DBS Building Towers One and Two, provided a recurring source of revenue to OUE. OUE also holds interests in One Raffles Place which is located at the central financial and business district of Singapore. One Raffles Place Tower Two, a 38-storey Grade A office building adjoining One Raffles Place Tower One, has commenced leasing operations in the first quarter of 2012 and provides additional source of income. Currently, OUE plans to redevelop the podium of DBS Building Towers One and Two into a retail mall and plans to revamp the retail podium at One Raffles Place into a modern retail hub to maximise the value of these properties. Pre-sale of a residential property development project, named as Twin Peaks, at 33 Leonie Hill Road in Singapore has been started. The Group registered a share of loss of HK$120 million from the investment during the period (2011 — profit of HK$875 million (restated), which included a then substantial fair value gain over the construction costs incurred on OUE Bayfront recognised upon the issuance of temporary occupation permit in January 2011). As a result of the share buy-back by OUE during the period, LAAP’s controlling stake in OUE increased from approximately 65.6 per cent. as at 31st December, 2011 to approximately 68.0 per cent. as at

30 Hongkong Chinese Limited Interim Report 2012

Management Discussion and Analysis (Continued)

30th June, 2012 and recorded a net increase of share of equity interest of HK$182 million directly in the reserves of the LAAP Group.

Property development

The Group has participated in a number of well-located property development projects in mainland China, Macau, Singapore and other areas of the Asia Pacific region.

In Singapore, the Group has interests in Marina Collection, a joint venture development project in Sentosa Cove. The project was completed in April 2011 and contributed a share of profit of HK$264 million during the first half of 2011 from the sold units. During the first half of 2012, a further share of profit of HK$51 million was recorded from the project, mainly arising from the sale of properties. All the units of Centennia Suites, another joint venture property development project at Kim Seng Road, have been sold out during the pre-sale in 2010. Centennia Suites is scheduled to be completed in 2013, profit arising therefrom will be recognised upon completion of the development.

In mainland China, construction of an integrated residential, commercial and retail complex at the Beijing Economic-Technological Development Area is progressing well. Pre-sale permit was obtained in July 2011 and pre-sale was launched. This project is expected to be completed in 2013.

Superstructure works of M Residences, a property development project in Macau, will be commenced in the second half of 2012. Pre-sale has been launched since November 2011 and has received satisfactory response. M Residences is expected to be completed in 2014.

Treasury and securities investments

The investment markets are challenging and full of uncertainties. Foreseeing that the global investment markets will continue to be volatile, the Group cautiously managed its investment portfolio. In the first six months of 2012, treasury and securities investments business recorded a revenue of HK$13 million (2011 — HK$11 million), with a profit of HK$9 million (2011 — HK$12 million).

Corporate finance and securities broking

The sentiments in the investment markets were affected by uncertainties resulting from unresolved Eurozone financial crisis and threat of China economic slowdown. Investors are watchful and vigilant in the highly volatile markets. Fund raising activities in Hong Kong also reduced as compared to the same period of last year. The Group’s corporate finance and securities broking business was adversely affected. It registered a turnover of HK$17 million in the first half of 2012 (2011 — HK$25 million) and a loss of HK$9 million was derived from this segment (2011 — HK$2 million).

31

Interim Report 2012 Hongkong Chinese Limited

Management Discussion and Analysis (Continued)

Banking business

The Macau Chinese Bank Limited, a licensed bank in Macau, is a wholly-owned subsidiary of the Company. Macau’s economic growth rate has slowed down since the last quarter of 2011. The operating environment is tough because of the strong competition, high operating costs and subdued global economic activities. Nevertheless, the management remains positive to the development and growth in the region, manages to maintain the quality of its client and loan portfolio and will seek opportunities to expand the products and customers base.

Financial Position

As at 30th June, 2012, the Group’s total assets increased to HK$13.3 billion (31st December, 2011 — HK$12.3 billion, restated). Property-related assets increased to HK$11.8 billion (31st December, 2011 — HK$10.8 billion, restated), representing 89 per cent. (31st December, 2011 — 88 per cent., restated) of the total assets. Total liabilities increased to HK$3.1 billion (31st December, 2011 — HK$2.2 billion). The Group’s financial position remained healthy.

As at 30th June, 2012, the bank and other borrowings of the Group (other than those attributable to banking business) increased to HK$776 million (31st December, 2011 — HK$766 million). The bank loans amounted to HK$719 million (31st December, 2011 — HK$709 million), comprising secured bank loans of HK$709 million (31st December, 2011 — HK$709 million) and an unsecured bank loan of HK$10 million (31st December, 2011 — Nil). The bank loans were secured by first legal mortgages over certain properties and certain bank deposits of the Group. The bank loans carried interest at floating rates and were denominated in Hong Kong dollars and Renminbi. Approximately 71 per cent. (31st December, 2011 — 10 per cent.) of the bank loans were repayable within one year. The Group’s other borrowings as at 30th June, 2012 comprised of unsecured loans advanced from Lippo Limited of HK$57 million (31st December, 2011 — HK$57 million). Such advance would be repayable on or before 31st December, 2013. At the end of the period, gearing ratio (measured as total borrowings, net of non-controlling interests, to shareholders’ funds) was 6.7 per cent. (31st December, 2011 — 6.9 per cent., restated).

During the period, the Company repurchased a total of 4,758,000 shares of HK$1.00 each in the Company at a total consideration of approximately HK$5.9 million.

The net asset value of the Group remained strong and increased to HK$10.1 billion (31st December, 2011 — HK$10.0 billion, restated). This was equivalent to HK$5.1 per share (31st December, 2011 — HK$5.0 per share, restated).

32 Hongkong Chinese Limited Interim Report 2012

Management Discussion and Analysis (Continued)

The Group monitors the relative foreign exchange position of its assets and liabilities to minimise foreign currency risk. When appropriate, hedging instruments including forward contracts, 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 period (31st December, 2011 — Nil). Aside from those arising from the normal course of the Group’s banking operation, the Group had no material contingent liabilities outstanding (31st December, 2011 — Nil).

As at 30th June, 2012, the Group’s total capital commitment amounted to HK$642 million (31st December, 2011 — HK$715 million), mainly arising from the property development projects in Macau and Beijing. The investments or capital assets will be financed by the Group’s internal resources and/or external bank financing, as appropriate.

Staff and Remuneration

The Group had approximately 226 employees as at 30th June, 2012 (2011 — 203 employees). Staff costs (including directors’ emoluments) charged to the income statement during the period amounted to HK$35 million (2011 — HK$34 million). The Group ensures that its employees are offered competitive remuneration packages. Certain employees of the Group were granted options under the share option scheme of the Company.

Outlook

The business environment continues to be challenging. The world economy will remain unstable, unless the European debt problems can be resolved. Despite of the weakening global outlook, the Group remains prudently optimistic about the prospects of the Asia Pacific region over the medium term and will continue to focus on business development in the region. The Group will respond to the fast changing market conditions, refine its existing businesses and prudently seek new investment opportunities with long-term growth potential.

33

Interim Report 2012 Hongkong Chinese Limited

Business Review and Prospects

Business Review

In the first half of 2012, the world economy continued to be dominated by the Euro zone financial crisis, which saw sovereign debt problems spreading to a wider number of European countries. Consumer and investor confidence and job markets remained weak in the US. Except for Japan, which recorded almost no growth, the other major economies in the Asia region have been able to hold on to their economic growth, which has contributed to a more stable economic environment in Asia. However, prospects for the global economy is for little growth overall in the coming year.

China continued to be the Asia’s leading economic performer. But recent statistics show that the pace of China’s economic growth has slowed down, expectedly in response to the weakening global market as well as the various credit tightening and austerity measures taken by the Central Government in 2011. The potential for an overheated economy has been averted and inflation brought down to a modest level. The Chinese Government is looking at ways to measuredly reflate its economy. The continuing strong economic performance in the South East Asian countries has also contributed to the overall economic growth holding on well in Asia.

However, within the overall economic picture in Asia, growth in the property sector has moderated, largely a response to various measures taken by local and national authorities in the key property markets to address local community concerns about high and rising property prices.

As the Group’s operations and investments are substantially within the Asia region, its performance is largely unaffected, and if so only marginally and indirectly, by the wider global economic happenings outside Asia. Despite the Asia region maintaining steady growth overall, the Group’s performance has been hindered by the weak property sector in the key markets. As a result, the Group has recorded a consolidated loss attributable to shareholders of approximately HK$112 million for the six months ended 30th June, 2012, as compared to a profit of HK$1,125 million (restated) recorded for the corresponding period in 2011. The loss was mainly attributable to absence of fair value gains of investment properties of the Group’s associates and reduction of profit arising from sale of properties by an associate of the Group in the period under review, as compared to the corresponding period in 2011.

In Singapore, the strong tourist arrivals, and its continuing role as one of the major financial centres in Asia have contributed to the country’s continued economic growth in the first half of 2012.

“Marina Collection”, in which the Group has a 50 per cent. interest, is located at Sentosa Cove, Sentosa Island, Singapore. This property development project was completed in 2011 and provides 124 high-end luxury waterfront residential units with a total saleable area of approximately 29,808 square metres of which 60 units have been sold and some of the units have been leased out. 15 units were sold during the first half of 2012 and profits arising therefrom have been recognised in the 2012 interim results of the Group. With the presence of the integrated casino/recreational resorts on the Sentosa Island, the Group is confident about the prospects of “Marina Collection”.

34 Hongkong Chinese Limited Interim Report 2012

Business Review and Prospects (Continued)

The Group also has a 50 per cent. interest in “Centennia Suites” located at 100 Kim Seng Road, Singapore. “Centennia Suites”, with a site area of approximately 5,611 square metres, will be redeveloped into a residential development with a saleable area of approximately 16,182 square metres. Construction work has been progressing well and it is expected that completion will take place in 2013. All the 97 residential units in this project have been pre-sold.

Lippo ASM Asia Property LP (“LAAP”, together with its subsidiaries, the “LAAP Group”), of which a wholly-owned subsidiary of the Company is the limited partner, was set up with the objective of investing in real estate and hospitality service businesses in the Asia region. As at 30th June, 2012, the LAAP Group held a majority stake of approximately 68 per cent. in Overseas Union Enterprise Limited (“OUE”), a listed company in Singapore, principally engaged in property investment and development and hotel operations. OUE has interests in prime office buildings in the Central Business District in Singapore like One Raffles Place, OUE Bayfront and DBS Building Towers One and Two as well as hotels in the Asia region, including the famous Mandarin Orchard Singapore and Crowne Plaza Changi Airport Hotel in Singapore. The Mandarin Gallery at the Mandarin Orchard Singapore, a premier luxury retail mall with retail space of around 11,639 square metres, is enjoying nearly full occupancy. This bespoke portfolio of well diversified and high quality properties will help to generate substantial and stable recurrent income for OUE.

The Group also participated in property projects in mainland China, including Lippo Tower in Chengdu and the development project at a prime site located in 北京經濟技術開發區 (Beijing Economic-Technological Development Area) in Beijing (the “BDA Project”). With a total site area of approximately 51,209 square metres, the BDA Project, in which the Group has an 80 per cent. interest, will be developed into an integrated residential, commercial and retail complex with a total gross floor area of about 275,000 square metres, including basements. Superstructure works are substantially completed and completion of the whole project is expected to be in 2013. Pre-sale was launched in the second half of 2011 and the response has been satisfactory. As at 30th June, 2012, about 52 per cent. of the total saleable area has been sold.

The Group will develop the site situated at 83 Estrada de Cacilhas, Macau, with a site area of approximately 3,398 square metres, into a residential development now named as “M Residences”. The Group has a 100 per cent. interest in this project which will be developed into 311 residential units with a total saleable area of approximately 26,025 square metres. Foundation works have been completed. With completion expected to be in 2014, pre-sale had been launched and as at 30th June, 2012, about 90 per cent. of the total saleable area has been sold.

The Macau Chinese Bank Limited (“MCB”), a wholly-owned subsidiary of the Company, maintained a steady performance in the first half of 2012 amidst the strong performance of the Macau economy. Recognising that MCB’s future performance will be largely dependent on the growth of the Macau economy, the Group will continue to seek new business opportunities for MCB and enhance its competitiveness in the Macau banking sector.

35

Interim Report 2012 Hongkong Chinese Limited

Business Review and Prospects (Continued)

The local stock market remained sluggish and inactive in the first half of 2012 with low initial public offering activities. Participation from retail investors remained cautious given the present market conditions. This has affected the performance and profitability of Lippo Securities Holdings Limited, a wholly-owned subsidiary of the Company, and its subsidiaries, which are principally engaged in underwriting, securities brokerage, corporate finance, investment advisory and other related financial services. The outlook for the local stock market will be dependent on the market conditions in China and economic developments globally, especially in Europe and the US.

The Group will continue to be watchful of market developments and will manage its portfolio with a view to further improving overall asset quality.

Prospects

Prospects for Asia remains positive but the growth momentum could be hindered by the continuing economic uncertainty in the US and Europe. The continuing weak US economy and sovereign debt crisis in Europe suggest that global economic recovery would be slow. Hopefully, with signs that the threat of inflation has been brought under control, the continuing low interest rate environment in Asia should help to promote stronger investor confidence and create new business opportunities.

The Group will continue to focus on property investment and property development businesses in Asia Pacific region for its long term growth. Management is however watchful of the economic challenges ahead and will accordingly continue to take a cautious and prudent approach in the management of the Group’s property portfolio and businesses and in its assessment of new investment opportunities.

36

Hongkong Chinese Limited Interim Report 2012

Additional Information

Interim Distribution

The Directors do not recommend the payment of an interim distribution for the six months ended 30th June, 2012 (2011 — Nil).

Directors’ and Chief Executive’s Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company and Associated Corporations

As at 30th June, 2012, the interests or short positions of the Directors and chief executive of the Company in the shares and underlying shares of the Company or any of its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (the “SFO”)) as recorded in the register required to be kept by the Company under Section 352 of the SFO or as otherwise notified to the Company and The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers under the Rules Governing the Listing of Securities on the Stock Exchange (the “Model Code”), were as follows:

Interests in shares and underlying shares of the Company and associated corporations (a) The Company

Name of Director	Number of ordinary shares of HK$1.00 each in the Company Personal interests (held as beneficial owner) Family interests (interest of spouse) Other interests	Number of underlying ordinary shares of HK$1.00 each in the Company Approximate Personal interests (held as beneficial owner) Total interests percentage of total interests in the issued share capital
Stephen Riady John Lee Luen Wai Leon Chan Nim Leung Tsui King Fai Albert Saychuan Cheok Kor Kee Yee Victor Yung Ha Kuk	— — 1,120,987,842 Note (i) 270 270 — — — — — 75,000 — — — — — — — — — —	Options^ — 1,120,987,842 56.09 4,590,000 4,590,540 0.23 810,000 810,000 0.04 607,500 682,500 0.03 607,500 607,500 0.03 607,500 607,500 0.03 607,500 607,500 0.03

^ The options were granted on 17th December, 2007 without consideration under the share option scheme adopted by the Company (the “Share Option Scheme”). The above options could not be exercised from the date of grant to 16th June, 2008. 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 ordinary shares of HK$1.00 each in the Company at an initial exercise price of HK$1.68 per share (subject to adjustment). Pursuant to the rights issue of new shares of the Company in June 2008 on the basis of seven rights shares for every twenty shares held, the number of ordinary shares to be subscribed for subject to the options was increased and the exercise price was adjusted from HK$1.68 per share to HK$1.24 per share (subject to adjustment) with effect from 27th June, 2008. None of the options were exercised by any of the above Directors during the period. Further details of the interests of Directors in the options are disclosed in Note 17 to the interim financial statements.

37

Interim Report 2012 Hongkong Chinese Limited

Additional Information (Continued)

Directors’ and Chief Executive’s Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company and Associated Corporations (Continued)

Interests in shares and underlying shares of the Company and associated corporations (Continued)

• (b) Lippo Limited (“Lippo”)

Name of Director	Number of ordinary shares of HK$0.10 each in Lippo Personal interests (held as beneficial owner) Other interests	Number of underlying ordinary shares of HK$0.10 each in Lippo Approximate Personal interests (held as beneficial owner) Total interests percentage of total interests in the issued share capital
Stephen Riady John Lee Luen Wai Leon Chan Nim Leung Victor Yung Ha Kuk Tsui King Fai	— 319,322,219 Notes (i) and (ii) 1,031,250 — — — — — — —	Options* — 319,322,219 64.03 1,125,000 2,156,250 0.43 193,750 193,750 0.04 162,500 162,500 0.03 162,500 162,500 0.03

• The options were granted on 17th December, 2007 without consideration under the share option scheme adopted by Lippo (the “Lippo Share Option Scheme”). The above options could not be exercised from the date of grant to 16th June, 2008. 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 initial exercise price of HK$6.98 per share (subject to adjustment). Pursuant to the rights issue of new shares of Lippo in June 2008 on the basis of one rights share for every four shares held, the number of ordinary shares to be subscribed for subject to the options was increased and the exercise price was adjusted from HK$6.98 per share to HK$5.58 per share (subject to adjustment) with effect from 27th June, 2008. None of the options were exercised by any of the above Directors during the period. Details of the Directors’ interests in underlying shares in respect of the options are summarised in Note (v) below.

38

Hongkong Chinese Limited Interim Report 2012

Additional Information (Continued)

Directors’ and Chief Executive’s Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company and Associated Corporations (Continued)

Interests in shares and underlying shares of the Company and associated corporations (Continued)

• (c) Lippo China Resources Limited (“LCR”)

Name of Director	Number of ordinary shares of HK$0.10 each in LCR Other interests	Number of underlying ordinary shares of HK$0.10 each in LCR Approximate percentage of total Personal interests (held as beneficial owner) Total interests interests in the issued share capital
Stephen Riady John Lee Luen Wai Leon Chan Nim Leung Victor Yung Ha Kuk Tsui King Fai	6,544,696,389 Notes (i), (ii) and (iii) — — — —	Options# — 6,544,696,389 71.21 22,000,000 22,000,000 0.24 3,000,000 3,000,000 0.03 2,300,000 2,300,000 0.03 2,300,000 2,300,000 0.03

• The options were granted on 17th December, 2007 without consideration under the share option scheme adopted by LCR (the “LCR Share Option Scheme”). The above options could not be exercised from the date of grant to 16th June, 2008. 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 during the period and the number of underlying ordinary shares of HK$0.10 each in LCR in respect of which options have been granted to them as at 1st January, 2012 and 30th June, 2012 were the same as set out above.

Note:

• (i) As at 30th June, 2012, Lippo Capital Limited (“Lippo Capital”), an associated corporation (within the meaning of Part XV of the SFO) of the Company, was indirectly interested in 1,120,987,842 ordinary shares of HK$1.00 each in, representing approximately 56.09 per cent. of the then issued share capital of, the Company. Lanius Limited (“Lanius”), an associated corporation (within the meaning of Part XV of the SFO) of the Company, is the holder of 705,690,001 ordinary shares of HK$1.00 each in, representing the entire issued share capital of, Lippo Capital. Lanius is the trustee of a discretionary trust which was founded by Dr. Mochtar Riady, who does not have any interest in the share capital of Lanius. The beneficiaries of the trust include, inter alia, Mr. Stephen Riady and other members of the family. Mr. Stephen Riady was taken to be interested in Lippo Capital under the provisions of the SFO.

39

Interim Report 2012 Hongkong Chinese Limited

Additional Information (Continued)

Directors’ and Chief Executive’s Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company and Associated Corporations (Continued)

Interests in shares and underlying shares of the Company and associated corporations (Continued)

Note: (Continued)

• (ii) As at 30th June, 2012, Lippo Capital, and through its wholly-owned subsidiary, J & S Company Limited, was directly and indirectly interested in an aggregate of 319,322,219 ordinary shares of HK$0.10 each in, representing approximately 64.03 per cent. of the then issued share capital of, Lippo.

• (iii) As at 30th June, 2012, Lippo was indirectly interested in 6,544,696,389 ordinary shares of HK$0.10 each in, representing approximately 71.21 per cent. of the issued share capital of, LCR.

• (iv) The percentages of the issued share capital stated in this section were arrived at based on the issued share capital of each of the Company, Lippo and LCR (as the case may be) as at 30th June, 2012.

• (v) Details of the Directors’ interests in underlying shares in respect of the options granted under the Lippo Share Option Scheme are summarised as follows:

Name of Director Exercise price per share	Number of underlying ordinary shares of HK$0.10 each in Lippo in respect of which options have been granted
	Balance as at 1st January, 2012 and 30th June, 2012
HK$ John Lee Luen Wai 5.58 Leon Chan Nim Leung 5.58 Victor Yung Ha Kuk 5.58 Tsui King Fai 5.58	1,125,000 193,750 162,500 162,500

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

40

Hongkong Chinese Limited Interim Report 2012

Additional Information (Continued)

Directors’ and Chief Executive’s Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company and Associated Corporations (Continued)

Interests in shares and underlying shares of the Company and associated corporations (Continued)

For the reasons outlined above, through his deemed interest in Lippo Capital as mentioned in Note (i) above, Mr. Stephen Riady was 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
				Number of	interest in
				shares	the issued
Name of associated corporation	Class of shares			interested	share capital
Abital Trading Pte. Limited	Ordinary shares			2	100
Blue Regent Limited	Ordinary shares			100	100
Boudry Limited	Ordinary shares			10	100
	Non-voting deferred shares			1,000	100
Broadwell Overseas Holdings Limited	Ordinary shares			1	100
First Tower Corporation	Ordinary shares			1	100
Grand Peak Investment Limited	Ordinary shares			2	100
Great Honor Investments Limited	Ordinary shares			1	100
Greenorth Holdings Limited	Ordinary shares			1	100
Greenroot Limited	Ordinary shares			1	100
Hennessy Holdings Limited	Ordinary shares			1	100
HKCL Holdings Limited	Ordinary shares			50,000	100
Honix Holdings Limited	Ordinary shares			1	100
J & S Company Limited	Ordinary shares			1	100
Kingaroy Limited	Ordinary shares			1	100
Lippo Assets (International) Limited	Ordinary shares			1	100
	Non-voting deferred shares			15,999,999	100
Lippo Finance Limited	Ordinary shares			6,176,470	82.35
Lippo Investments Limited	Ordinary shares			2	100
Lippo Pacific Limited	Ordinary shares			1	100
Lippo Realty Limited	Ordinary shares			2	100
Multi-World Builders &	Ordinary shares			4,080	51
Development Corporation
Prime Success Limited	Ordinary shares			1	100
SCR Ltd.	Ordinary shares			1	100
Skyscraper Realty Limited	Ordinary shares			10	100
The HCB General Investment	Ordinary shares			100,000	100
(Singapore) Pte Ltd.
Times Grand Limited	Ordinary shares			1	100
Valencia Development Limited	Ordinary shares			800,000	100
	Non-voting deferred shares			200,000	100
Winroot Holdings Limited	Ordinary shares			1	100

41

Interim Report 2012 Hongkong Chinese Limited

Additional Information (Continued)

Directors’ and Chief Executive’s Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company and Associated Corporations (Continued)

Interests in shares and underlying shares of the Company and associated corporations (Continued)

As at 30th June, 2012, 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 is the holder of the entire issued share capital of Lippo Capital. Lanius is the trustee of a discretionary trust which was founded by Dr. Mochtar Riady (father of Mr. Stephen Riady), who does not have any interest in the share capital of Lanius. The beneficiaries of the trust include, inter alia, Mr. Stephen Riady and other members of the family.

As at 30th June, 2012, Mr. Kor Kee Yee, 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.

As at 30th June, 2012, save as disclosed herein, 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. Save as disclosed herein, as at 30th June, 2012, none of the Directors or chief executive of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be recorded in the register kept by the Company under Section 352 of the SFO or which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code.

Save as disclosed herein, as at 30th June, 2012, 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).

42

Hongkong Chinese Limited Interim Report 2012

Additional Information (Continued)

Updated Directors’ Information

The following are the updated information of Directors of the Company disclosed pursuant to rule 13.51B(1) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited:

• (i) Mr. John Lee Luen Wai ceased to be a non-executive director of Asia Now Resources Corp., a company listed on TSX Venture Exchange of Canada, on 21st June, 2012.

• (ii) Mr. Albert Saychuan Cheok:

• ceased to be the independent non-executive Chairman but remains as an independent non-executive director of MIDAN City Development Co., Ltd. with effect from 6th March, 2012.

• ceased to be the Vice Chairman of Export and Industry Bank, Inc., a public listed company in the Philippines, on 27th April, 2012.

• resigned as a director of Oriental Capital Assurance Berhad, a general insurance company in Malaysia, with effect from 18th June, 2012.

• (iii) During the period under review, Mr. Stephen Riady (“Mr. Riady”) entered into a letter agreement (the “Agreement”) with the Company setting out the key terms and conditions for serving as a Director of the Company. Pursuant to the Agreement, Mr. Riady would receive salaries of HK$1,300,000 per annum with effect from 1st April, 2012. He would also receive allowances and benefits in kind and a discretionary bonus to be determined by the Remuneration Committee by reference to his roles and responsibilities. Mr. Riady was not appointed for a specific term but would be subject to the relevant provisions of the Bye-laws of the Company.

43

Interim Report 2012 Hongkong Chinese Limited

Additional Information (Continued)

Interests and Short Positions of Shareholders Discloseable under the Securities and Futures Ordinance

As at 30th June, 2012, so far as is known to the Directors of the Company, the following substantial shareholders (as defined under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”)) and other persons, other than the Directors or chief executive of the Company, had interests or short positions in the shares and underlying shares of the Company as recorded in the register required to be kept by the Company under Section 336 of the Securities and Futures Ordinance (the “SFO”) and/or as notified to the Company as follows:

Interests of substantial shareholders (as defined under the Listing Rules) and other persons in shares of the Company

			Approximate
	Number of		percentage of
	ordinary shares		interests in the
Name	of HK$1.00 each		issued share capital
Substantial shareholders:
Hennessy Holdings Limited (“Hennessy”)	1,120,987,842		56.09
Prime Success Limited (“Prime Success”)	1,120,987,842		56.09
Lippo Limited (“Lippo”)	1,120,987,842		56.09
Lippo Capital Limited (“Lippo Capital”)	1,120,987,842		56.09
Lanius Limited (“Lanius”)	1,120,987,842		56.09
Dr. Mochtar Riady	1,120,987,842		56.09
Madam Lidya Suryawaty	1,120,987,842		56.09
Other persons:
Paul G. Desmarais	156,460,000		8.01
Nordex Inc. (“Nordex”)	156,460,000		8.01
Gelco Enterprises Ltd (“Gelco”)	156,460,000		8.01
Power Corporation of Canada (“PCC”)	156,460,000		8.01
Power Financial Corporation (“PFC”)	156,460,000		8.01
IGM Financial Inc. (“IGM”)	156,460,000		8.01

Note:

1. Hennessy, the immediate holding company of the Company, as beneficial owner, directly held 1,120,987,842 ordinary shares of HK$1.00 each in, representing approximately 56.09 per cent. of the then issued share capital of, the Company.

2. Hennessy is wholly owned by Prime Success which in turn is wholly owned by Lippo.

3. Lippo Capital, the holding company of Lippo, together with its wholly-owned subsidiary, J & S Company Limited, owns ordinary shares representing approximately 64.03 per cent. of the then issued share capital of Lippo.

Hongkong Chinese Limited Interim Report 2012

44

Additional Information (Continued)

Interests and Short Positions of Shareholders Discloseable under the Securities and Futures Ordinance (Continued)

Interests of substantial shareholders (as defined under the Listing Rules) and other persons in shares of the Company (Continued) Note: (Continued)

1. Lanius is the holder of the entire issued share capital of Lippo Capital and is the trustee of a discretionary trust which was founded by Dr. Mochtar Riady, who does not have any interest in the share capital of Lanius. Dr. Mochtar Riady and his wife Madam Lidya Suryawaty were taken to be interested in Lippo Capital under the provisions of the SFO.

2. Hennessy’s interests in the ordinary shares of the Company were recorded as the interests of Prime Success, Lippo, Lippo Capital, Lanius, Dr. Mochtar Riady and Madam Lidya Suryawaty. The above 1,120,987,842 ordinary shares in the Company related to the same block of shares that Mr. Stephen Riady was interested, details of which are disclosed in the above section headed “Directors’ and Chief Executive’s Interests and Short Positions in Shares, Underlying Shares and Debentures of the Company and Associated Corporations”. Dr. Mochtar Riady, his wife Madam Lidya Suryawaty and Mr. Stephen Riady were taken to be interested in the shares of the Company under the provisions of the SFO.

3. Mackenzie Financial Corporation in its capacity as trustee and portfolio manager for certain mutual fund trusts, through its wholly-owned subsidiary Mackenzie Financial Capital Corporation which is a mutual fund corporation for which it acts as portfolio manager and through certain Bermuda-based mutual funds for which another whollyowned subsidiary Mackenzie Cundill Investment Management (Bermuda) Limited acts as manager and for which it acts as sub-adviser, was directly interested in an aggregate of 156,460,000 ordinary shares of HK$1.00 each in, representing approximately 8.01 per cent. of the then issued share capital of, the Company. Paul G. Desmarais as controlling shareholder and Nordex, Gelco, PCC, PFC and IGM as intermediate holding companies to Mackenzie Financial Corporation, each has an indirect interest in the above 156,460,000 ordinary shares of the Company.

4. The percentages of interests in the issued share capital stated in this section were arrived at based on 1,998,563,097 ordinary shares of HK$1.00 each in issue of the Company as at 30th June, 2012. The percentages of interests of “other persons” in the issued share capital stated in this section were based on the respective disclosure forms filed with the Company.

All the interests stated above represent long positions. Save as disclosed herein, as at 30th June, 2012, 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 of the Company as recorded in the register required to be kept by the Company under Section 336 of the SFO.

Share Option Scheme

Details of the share option scheme of the Company are disclosed in Note 17 to the interim financial statements.

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Interim Report 2012 Hongkong Chinese Limited

Additional Information (Continued)

Purchase, Sale or Redemption of the Company’s Listed Securities

During the six months ended 30th June, 2012, the Company had repurchased a total of 4,758,000 shares of HK$1.00 each in the Company on The Stock Exchange of Hong Kong Limited, all of which were subsequently cancelled. Particulars of the aforesaid repurchases are as follows:

	Number of shares of HK$1.00 each repurchased Highest price paid per share Lowest price paid per share	Total price paid HK$ 1,997,820 598,040 1,701,100 1,621,520 5,918,480 27,482 5,945,962
2012 January April May June Total	HK$ HK$ 1,514,000 1.33 1.31 482,000 1.25 1.23 1,414,000 1.25 1.16 1,348,000 1.23 1.16 4,758,000 Expenses incurred for shares repurchased

The above repurchases were effected by the Directors with a view to benefiting the shareholders as a whole in enhancing the net asset value per share of the Company.

Save as disclosed herein, there was no purchase, sale or redemption of the Company’s listed securities by the Company or any of its subsidiaries during the six months ended 30th June, 2012. Further details of the repurchases are set out in Note 17 to the interim financial statements.

Audit Committee

The Company has established an audit committee (the “Committee”). The existing members of the Committee comprise three independent non-executive Directors, namely Mr. Tsui King Fai (Chairman), Mr. Albert Saychuan Cheok and Mr. Victor Yung Ha Kuk and one non-executive Director, Mr. Leon Chan Nim Leung. The Committee has reviewed with the management of the Company the accounting principles and practices adopted by the Group and financial reporting matters including the review of the unaudited consolidated interim financial statements of the Company for the six months ended 30th June, 2012.

46 Hongkong Chinese Limited Interim Report 2012

Additional Information (Continued)

Corporate Governance

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

To the best knowledge and belief of the Directors, the Directors consider that, save as disclosed below, the Company has complied with the code provisions of the Code on Corporate Governance Practices for the period from 1st January, 2012 to 31st March, 2012 and the Corporate Governance Code (the “CG Code”) for the period from 1st April, 2012 to 30th June, 2012 as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The CG Code is the new edition of the Code on Corporate Governance Practices and is applicable to financial reports covering a period after 1st April, 2012. Under the code provision A.6.7 of the CG Code, independent non-executive directors and other non-executive directors should also attend general meetings. One of the non-executive Directors of the Company was unable to attend the annual general meeting of the Company held on 5th June, 2012 as he was stranded in overseas due to an unexpected yacht sunken incident.

Model Code for Securities Transactions by Directors

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) contained in Appendix 10 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited as the code for securities transactions by Directors. Having made specific enquiry of all Directors, the Directors have complied with the required standard set out in the Model Code during the period under review.

By Order of the Board Hongkong Chinese Limited John Lee Luen Wai Chief Executive Officer

Hong Kong, 16th August, 2012

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Interim Report 2012 Hongkong Chinese Limited

Corporate Information

Board of Directors

Executive Directors

Mr. Stephen Riady (Chairman) Mr. John Lee Luen Wai, BBS, JP (Chief Executive Officer) Mr. Kor Kee Yee

Non-executive Director

Principal Bankers

CITIC Bank International Limited Standard Chartered Bank Bank of Beijing Co., Ltd. Bank of China, Macau Branch Raiffeisen Bank International AG, Singapore Branch Oversea-Chinese Banking Corporation Limited

Mr. Leon Chan Nim Leung

Solicitors

Independent non-executive Directors

Mr. Albert Saychuan Cheok Mr. Victor Yung Ha Kuk Mr. Tsui King Fai

Committees

Audit Committee

Mr. Tsui King Fai (Chairman) Mr. Leon Chan Nim Leung Mr. Albert Saychuan Cheok Mr. Victor Yung Ha Kuk

Remuneration Committee

Mr. Tsui King Fai (Chairman) Mr. Stephen Riady Mr. Leon Chan Nim Leung Mr. Albert Saychuan Cheok Mr. Victor Yung Ha Kuk

Nomination Committee

Mr. Tsui King Fai (Chairman) Mr. Stephen Riady Mr. Leon Chan Nim Leung Mr. Albert Saychuan Cheok Mr. Victor Yung Ha Kuk

Secretary

Mr. Andrew Hau Tat Kwong

Auditors

Ernst & Young

Howse Williams Bowers

Principal Share Registrars and Transfer Office Butterfield Fulcrum Group (Bermuda) Limited Rosebank Centre 11 Bermudiana Road Pembroke HM 08 Bermuda

Hong Kong Branch Share Registrars and Transfer Office Tricor Tengis Limited 26th Floor, Tesbury Centre 28 Queen’s Road East, Wanchai, Hong Kong

Registered Office

Clarendon House Church Street Hamilton HM 11 Bermuda

Principal Place of Business

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

Stock Code

655

Website

www.hkchinese.com.hk

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Hongkong Chinese Limited Interim Report 2012