3SBio Inc. - Proxy Solicitation & Information Statement 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold or transferred all your shares in Hongkong Chinese Limited, you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

HONGKONG CHINESE LIMITED 香港華人有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 655)

MAJOR TRANSACTIONS

ACQUISITION, DEEMED DISPOSAL AND ENTRY INTO A JOINT VENTURE IN RESPECT OF LAND PARCELS IN SENTOSA COVE, SENTOSA ISLAND, SINGAPORE

21st December, 2006

For identification purpose only

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
The Tender and the Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Terms of the Shareholders Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Information on Lippo, LCR and the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Information on the Property, the Project and
the Parties to the Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Reasons for and benefits of the Acquisition and the Disposal . . . . . . . . . . . . . . .	10
Financial effects of the Acquisition and the Disposal . . . . . . . . . . . . . . . . . . . . . . .	10
Proceeds from the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Listing Rules implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Appendix I – Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Appendix II – Pro forma financial information of the Group . . . . . . . . . . . . . . . . . .	112
Appendix III – Valuation of the Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	116
Appendix IV – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	119

DEFINITIONS

In this circular, the following terms and expressions shall have the following meanings unless the context otherwise requires:

“Acceptance Date”	6th October, 2006, being the date on which the
	Corporation accepted the Tender;
“Acquisition”	the acquisition of the Property;
“associate(s)”	has the meaning ascribed to it under the Listing Rules;
“Board”	the board of directors of the Company;
“Company”	Hongkong Chinese Limited (香港華人有限公司*), a
	company incorporated in Bermuda with limited
	liability, the shares of which are listed on the Stock
	Exchange and whose shares are beneficially owned as
	to approximately 72.26 per cent. by LCR;
“Conditions of Tender”	the conditions of tender issued by the Corporation in
	connection with its offer for sale of the Property;
“connected person(s)”	has the meaning ascribed to it under the Listing Rules;
“Corporation”	Sentosa Development Corporation, a corporation
	established under the Sentosa Development
	Corporation Act (Chapter 291) of Singapore, acting
	through its agent, Sentosa Cove Pte Ltd;
“DC”	the Development Committee of Greenix;
“Deadlock”	when a resolution of the Shareholders for the
	transaction of any business of Greenix cannot be
	passed after 2 successive attempts;
“Director(s)”	director(s) of the Company;
“Disposal”	the dilution of the Company’s interest in its subsidiary,
	Greenix, by the allotment of new shares to other joint
	venture parties, which constitutes a deemed disposal
	under the Listing Rules;
“Golden Rainbow”	Golden Rainbow International Limited, a company
	incorporated in the British Virgin Islands, whose shares
	are wholly-owned by RZB;

For identification purpose only

• 1 •

DEFINITIONS

“Greenix”	Greenix Limited, a company incorporated in the British
	Virgin Islands with limited liability, whose issued
	share capital is held as to 50 per cent. by Winrider,
	25 per cent. by Golden Rainbow, 10 per cent. by SUTL
	Realty, 9.99 per cent. by OCBC eVenture and
	5.01 per cent. by Royall Dazzle;
“Greenix Director(s)”	director(s) of Greenix;
“Group”	the Company and its subsidiaries;
“HKC Shareholders”	shareholders of the Company;
“HKCL Holdings”	HKCL Holdings Limited, a company incorporated in
	the Cayman Islands with limited liability and a wholly-
	owned subsidiary of LCR;
“Hong Kong”	the Hong Kong Special Administrative Region of the
	People’s Republic of China;
“Latest Practicable Date”	18th December, 2006, being the latest practicable date
	prior to the printing of this circular for ascertaining
	certain information contained herein;
“LCR”	Lippo China Resources Limited力寶華潤有限公司, a
	company incorporated in Hong Kong with limited
	liability whose shares are listed on the Stock Exchange
	and an approximate 71.13 per cent. owned subsidiary
	of Lippo;
“LCR Directors”	directors of LCR;
“LCR Group”	LCR and its subsidiaries;
“LCR Shareholders”	shareholders of LCR;
“LGA”	Lippo Global Assets Limited, a company incorporated
	in the British Virgin Islands with limited liability and
	a wholly-owned subsidiary of Greenix which, prior to
	the Disposal, was a wholly-owned subsidiary of
	Winrider;
“Lippo”	Lippo Limited力寶有限公司, a company incorporated
	in Hong Kong with limited liability whose shares are
	listed on the Stock Exchange;

• 2 •

DEFINITIONS

“Lippo Capital”	Lippo Capital Limited, a company incorporated in the
	Cayman Islands with limited liability, which holds
	approximately 50.47 per cent. of the issued share
	capital of Lippo;
“Lippo Directors”	directors of Lippo;
“Lippo Group”	Lippo and its subsidiaries;
“Lippo Shareholders”	shareholders of Lippo;
“Listing Rules” or “Rule”	the Rules Governing the Listing of Securities on the
	Stock Exchange;
“Model Code”	the Model Code for Securities Transactions by Directors
	of Listed Issuers under the Listing Rules;
“OCBC eVenture”	OCBC eVenture Fund II Pte Ltd, a company
	incorporated in Singapore with limited liability, which
	is wholly-owned by Oversea-Chinese Banking
	Corporation Limited;
“Project”	the proposed property development project involving
	development of a condominium or condominiums on
	the land comprising the Property;
“Property”	comprises land parcels C10 and C11 located at Sentosa
	Cove, Sentosa Island, Singapore with site areas of
	approximately 12,035.6 square metres and 10,186.6
	square metres respectively, subject to survey, each with
	a leasehold tenure of ninety-nine (99) years;
“Royall Dazzle”	Royall Dazzle Corporation, a company incorporated
	in the British Virgin Islands with limited liability;
“SFO”	the Securities and Futures Ordinance (Chapter 571 of
	the Laws of Hong Kong);
“Shares”	shares of HK$1.00 each in the capital of the Company;
“Shareholders”	the shareholders of Greenix;
“Shareholders Agreement”	the shareholders’ agreement entered into between
	Winrider, Golden Rainbow, SUTL Realty, OCBC
	eVenture, Royall Dazzle and Greenix on 30th October,
	2006 governing the relationship among the
	Shareholders;

• 3 •

DEFINITIONS

“Singapore”	the Republic of Singapore;
“Skyscraper”	Skyscraper Realty Limited, a company incorporated
	in the British Virgin Islands with limited liability and
	a wholly-owned subsidiary of Lippo;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“SUTL Realty”	SUTL Realty Pte Ltd, a company incorporated in
	Singapore with limited liability, which is wholly-
	owned by SUTL Corporation Pte Ltd;
“Tender”	the tender submitted by LGA to purchase the Property,
	which was then being offered for sale by Sentosa Cove
	Pte Ltd acting as agent for and on behalf of the
	Corporation, the owner of the Property;
“Tender Premium”	an amount of S$234,701,103 (equivalent to approximately
	HK$1,169,398,000), being the consideration payable for
	the Property in accordance with the Conditions of Tender;
“Transaction”	the Disposal and the entry into a joint venture in
	respect of the Project;
“Winrider”	Winrider Limited, a company incorporated in the
	British Virgin Islands with limited liability and a
	wholly-owned subsidiary of the Company;
“HK$”	Hong Kong dollar, the lawful currency of Hong Kong;
“MOP”	Macau pataca, the lawful currency of the Macao Special
	Administrative Region of the People’s Republic of
	China;
“S$”	Singapore dollar, the lawful currency of Singapore;
	and
“US$”	United States dollar, the lawful currency of the United
	States of America.

Note: For use in this circular and for illustration purposes only, conversion of S$ into HK$ for the Acquisition and the Transaction is based on the approximate exchange rate of S$1.00 to HK$4.9825 as at 31st October, 2006. Conversion of US$ into HK$ for the Acquisition and the Transaction is based on the approximate exchange rate of US$1.00 to HK$7.78 as at 31st October, 2006. No representation or assurance is made or given that any amount in S$, HK$ or US$ could be converted at such rates or any other rates.

• 4 •

LETTER FROM THE BOARD

HONGKONG CHINESE LIMITED 香港華人有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 655)

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

Executive Directors: Mr. Stephen Riady (Chief Executive Officer) Mr. John Luen Wai Lee, J.P. Mr. Kee Yee Kor

Independent Non-executive Directors: Mr. Albert Saychuan Cheok Mr. Victor Ha Kuk Yung Mr. King Fai Tsui

Registered Office: Clarendon House Church Street Hamilton HM 11 Bermuda

Principal place of business: 24th Floor Tower One Lippo Centre 89 Queensway Hong Kong

21st December, 2006

To the shareholders of the Company

Dear Sir or Madam,

MAJOR TRANSACTIONS

ACQUISITION, DEEMED DISPOSAL AND ENTRY INTO A JOINT VENTURE IN RESPECT OF LAND PARCELS IN SENTOSA COVE, SENTOSA ISLAND, SINGAPORE

INTRODUCTION

Reference is made to the joint announcement of Lippo, LCR and the Company dated 9th October, 2006 announcing that the Tender submitted by LGA for the acquisition of the Property for S$234,701,103 (equivalent to approximately HK$1,169,398,000) was formally accepted by the Corporation on 6th October, 2006. The Tender consideration for the Property was determined after a feasibility study carried out internally by the Group, where this

For identification purpose only

• 5 •

LETTER FROM THE BOARD

feasibility study was based on the market price of the properties in Sentosa Island, Singapore. The Tender process was open to the public. A valuation of the Property as of 6th November, 2006 is set out in Appendix III to this circular.

The Property comprises two parcels of land with site areas of approximately 12,035.6 square metres and 10,186.6 square metres respectively, subject to survey, located at Sentosa Cove, Sentosa Island, Singapore with a leasehold tenure of ninety-nine (99) years.

Reference is also made to the joint announcement of Lippo, LCR and the Company dated 3rd November, 2006 announcing that Winrider has entered into a joint venture with Golden Rainbow, SUTL Realty, OCBC eVenture and Royall Dazzle to hold and develop the Property. LGA is a wholly-owned subsidiary of Greenix, which, prior to the Disposal, was a wholly-owned subsidiary of Winrider. Winrider is a wholly-owned subsidiary of the Company, and Winrider’s participation in the joint venture shall be funded by the Company. With the completion of subscription for and allotment of new shares in Greenix, which is the joint venture company and continues to be the holding company of LGA, the Company’s interest in the Project is reduced from 100 per cent. to 50 per cent.. The Company’s reduction of shareholding percentage following an allotment of new shares by a subsidiary is regarded as a deemed disposal by the Company under Chapter 14 of the Listing Rules. Following the Disposal, LGA ceases to be a subsidiary of the Company. Further details of the Disposal are stated in the sections of this circular headed “Reasons for and benefits of the Acquisition and the Disposal”, “Financial effects of the Acquisition and the Disposal” and “Proceeds from the Disposal” below. On 30th October, 2006, Winrider entered into the Shareholders Agreement with Golden Rainbow, SUTL Realty, OCBC eVenture, Royall Dazzle and Greenix in relation to (i) the funding of Greenix, by way of allotment to and subscription for shares by the abovementioned parties, and (ii) certain rights amongst the abovementioned parties (apart from Greenix) as Shareholders. Further terms and conditions of the Shareholders Agreement are stated in the section of this circular headed “Terms of the Shareholders Agreement” below.

THE TENDER AND THE ACQUISITION

Pursuant to the Conditions of Tender, details of the Tender, the Property and the Acquisition thereof are as follows:

Effective date:	The Acceptance Date.
Subject matter:	The Property, being two parcels of land with site areas
	of approximately 12,035.6 square metres and 10,186.6
	square metres respectively, subject to survey, located
	at Sentosa Cove, Sentosa Island, Singapore.
Tender Premium:	S$234,701,103 (equivalent to approximately
	HK$1,169,398,000).

• 6 •

LETTER FROM THE BOARD

Payment:

The entire amount of the Tender Premium is required to be paid by cashier’s order(s) in accordance with the following timetable:

the Tender deposit (equivalent to 5 per cent. of the Tender Premium) (the “Tender Deposit”) has been paid;
25 per cent. of the Tender Premium (less Tender Deposit) has been paid; and
75 per cent. of the Tender Premium to be paid within ninety (90) days of the Acceptance Date.

Use of the Property:

The permitted use of the land is for condominium development. The land is with an aggregate site area of approximately 22,222.2 square metres, subject to survey, has a maximum gross plot ratio of 1.2 and a maximum permissible gross floor area of approximately 26,666.64 square metres.

Tenure:

Leasehold property with a tenure of ninety-nine (99) years from a date falling 90 days from and including the Acceptance Date or ninety-nine (99) years commencing from 15th October, 2007, whichever is earlier.

TERMS OF THE SHAREHOLDERS AGREEMENT

Certain salient terms of the Shareholders Agreement are as follows:

Greenix shall be funded by way of capital, shareholder loans and/or bank financing.
The total issued share capital of Greenix shall be US$100,000, being 100,000 ordinary shares of US$1.00 each issued at par value, of which Winrider shall subscribe 50,000 ordinary shares for US$50,000 (equivalent to approximately HK$389,000). Upon subscription, the shareholding of the voting capital in Greenix is held as to 50 per cent. by Winrider, 25 per cent. by Golden Rainbow, 10 per cent. by SUTL Realty, 9.99 per cent. by OCBC eVenture and 5.01 per cent. by Royall Dazzle.
Unless otherwise agreed by the Shareholders, the Shareholders shall advance to Greenix shareholder loans of an aggregate of S$115,000,000 (equivalent to approximately HK$572,988,000) on a pro rata basis in accordance with their respective shareholding, of which Winrider shall extend S$57,500,000 (equivalent to approximately HK$286,494,000). The shareholder loans shall be interest-free unless agreed otherwise by a majority of the Shareholders. If required, the shareholder loans shall be subordinated to any external financing

• 7 •

LETTER FROM THE BOARD

procured by Greenix or by its subsidiaries, and repayable if cash flow so allows, in compliance with applicable contracts, laws and regulations. As Winrider has previously advanced shareholder loans of S$11,735,056 (equivalent to approximately HK$58,470,000) as partial payment of the land cost of the Property, its obligation to advance shareholder loans shall be adjusted to take into account monies already paid by Winrider.

In addition to the Project, Greenix shall principally be engaged (whether directly or through a wholly-owned subsidiary) in the selling and/or leasing of the units comprised in the Project, subject to prevailing market conditions.
The maximum number of Greenix Directors is six. Winrider is entitled to appoint three Greenix Directors and each of Golden Rainbow, SUTL Realty and OCBC eVenture is entitled to appoint one Greenix Director.
The board of Greenix Directors shall set up a development committee to monitor the practical execution, progress, construction and completion of the Project. The DC shall consist of six members. Winrider is entitled to appoint three members of the DC and each of Golden Rainbow, SUTL Realty and OCBC eVenture is entitled to appoint one member of the DC.
In the event of a proposed sale by Shareholder(s) of its interests in Greenix to a third party, the non-selling Shareholders shall each have the right of preemption to purchase the interests of the selling Shareholder(s) on a pro-rata basis.
In the event of any Deadlock, subject to the terms and conditions of bank financing (if applicable), Winrider shall have the right and the obligation to purchase from the dissenting Shareholders all their shares in Greenix, subject to Winrider having obtained all applicable regulatory and other approvals. Winrider believes this provision will allow it the opportunity to ensure continuity with the Project.

INFORMATION ON LIPPO, LCR AND THE COMPANY

The principal activity of each of Lippo, LCR and the Company is investment holding. The Company is one of the principal subsidiaries of LCR which in turn is one of Lippo’s principal subsidiaries. The principal activities of the Lippo Group, the LCR Group and the Group include investment holding, property investment and development, fund management, underwriting, corporate finance, securities broking, securities investment, treasury investment, money lending, banking and other related financial services.

Lippo, through its indirect wholly-owned subsidiary, Skyscraper, is interested in approximately 71.13 per cent. of LCR’s total issued share capital, and accordingly, LCR is a subsidiary of Lippo. LCR, through its indirect wholly-owned subsidiary, HKCL Holdings, holds approximately 59.89 per cent. interest in the Company. In addition, LCR directly holds approximately 12.37 per cent. interest in the Company. Accordingly, the Company is a subsidiary of LCR.

• 8 •

LETTER FROM THE BOARD

INFORMATION ON THE PROPERTY, THE PROJECT AND THE PARTIES TO THE JOINT VENTURE

The Property consists of two parcels of land with site areas of approximately 12,035.6 square metres and 10,186.6 square metres respectively, subject to survey, located at Sentosa Cove, Sentosa Island, Singapore. It is a leasehold property with a tenure of ninety-nine (99) years from a date falling 90 days from and including the Acceptance Date or ninetynine (99) years commencing from 15th October, 2007, whichever is earlier. The permitted use of the Property is for condominium development. The site has a maximum gross plot ratio of 1.2 and a maximum permissible gross floor area of approximately 26,666.64 square metres. A total of 150 4-storey high luxury dwelling units are proposed to be constructed on the Property.

The Corporation is a corporation established under the Sentosa Development Corporation Act (Chapter 291) of Singapore. Pursuant to the Sentosa Development Corporation Act, immovable property in Sentosa Island that was vested in or held on behalf of the Government of the Republic of Singapore immediately before 1st September, 1972 was transferred to and vested in the Corporation, hence the Corporation is the owner of the Property. To the best of the knowledge, information and belief of the Lippo Directors, the LCR Directors and the Directors respectively and having made reasonable enquiry, the Corporation is a third party independent of and is not connected with each of the Lippo Group, the LCR Group and the Group and their connected persons.

OCBC eVenture is an indirect wholly-owned subsidiary of Singapore’s OverseaChinese Banking Corporation Limited (“OCBC”). OCBC and its banking subsidiaries offer specialist financial services such as consumer, corporate, investment, private and transaction banking and global treasury and stockbroking services. It currently has assets of S$136 billion and a network of over 340 branches and representative offices in 15 countries and territories.

Golden Rainbow is a wholly-owned subsidiary of Raiffeisen Zentralbank Österreich AG (“RZB”), the third largest bank in Austria. It is one of the leading corporate and investment banks in Austria and Eastern Europe. Apart from a branch in Beijing, RZB has been operating a branch in Singapore since 1998 and also has representative offices in Hong Kong, Mumbai, Tehran, Ho Chi Minh City, Seoul and Zhuhai.

SUTL Realty is a wholly-owned subsidiary of SUTL Corporation Pte Ltd, which was incorporated in Singapore in 1968. SUTL Corporation Pte Ltd and its subsidiaries (the “SUTL Group”) form a leisure and lifestyle products conglomerate with key businesses in property investments and development, consumer goods, travel retail supply and leisure and education products and services. In September 2004, the SUTL Group secured the tender to build and operate a marina at Sentosa Cove, Singapore, which is slated for completion in the first quarter of 2007, where this will be the first marina in Singapore designed to house mega yachts in sheltered waters.

• 9 •

LETTER FROM THE BOARD

Royall Dazzle is a company engaged in property investment. It plans to expand in the property and real estate industry in Singapore.

To the best of the knowledge, information and belief of the Lippo Directors, the LCR Directors and the Directors respectively and having made reasonable enquiry, each of OCBC eVenture, Golden Rainbow, SUTL Realty, Royall Dazzle and their ultimate beneficial owners are third parties independent of each of the Lippo Group, the LCR Group and the Group and their connected persons.

REASONS FOR AND BENEFITS OF THE ACQUISITION AND THE DISPOSAL

The Lippo Directors, the LCR Directors and the Directors are optimistic about the residential property market in Singapore. To enhance its asset portfolio, the Group continues with its quest to acquire quality property interests in Singapore as the Singapore market, in particular, has been performing well in the past year.

Bringing in joint venture participants to the Project will provide another source of financing for the Project. In addition to its own increased experience and expertise in Singapore property development industry from its participation in several acquisitions of property interests in Singapore, the Group also hopes that by the Disposal and in this Project, it will be able to leverage on the experience and expertise of the Shareholders, who are well-established in the banking and property development industries in Singapore.

As the principal activities of the Group include, inter alia, property investment and development, the Acquisition and the Project is a furtherance of the principal businesses of the Group. As such, it is expected that the Acquisition and the Disposal will contribute positively to the future development of the Group.

Accordingly, the Lippo Directors, the LCR Directors and the Directors are of the view that the terms of the Acquisition and the Disposal are fair and reasonable, are on arm’s length basis and are in the interests of the Lippo Group, the LCR Group and the Group and their respective shareholders as a whole.

FINANCIAL EFFECTS OF THE ACQUISITION AND THE DISPOSAL

The non-current assets of the Group would increase while the current assets of the Group would decrease by the same amount as a consequence of the Acquisition and the Disposal. There is no gain or loss to the Group as a result of the Disposal. Greenix will be accounted for as an associate of the Group. The Group’s interest in Greenix will be included in the consolidated financial statements of the Company using the equity method in accordance with the accounting polices of the Group. Pro forma financial information regarding the assets and liabilities of the Group as a result of the Acquisition and the Disposal is set out in Appendix II to this circular.

• 10 •

LETTER FROM THE BOARD

The Directors believe that the Acquisition and the Transaction will contribute positively to the earnings base of the Group but the quantitative effect will depend on the progress of the development of the Project.

PROCEEDS FROM THE DISPOSAL

LGA is a wholly-owned subsidiary of Greenix. Apart from its interest in the Project through LGA, Greenix has no other material assets or business activity. As the Shareholders shall subscribe for new shares in Greenix at par value and inject the relevant amounts of shareholder loans in accordance with their respective shareholding ratio, there is no gain or loss to each of the Lippo Group, the LCR Group or the Group following the Disposal.

LISTING RULES IMPLICATIONS

The Company is beneficially owned as to approximately 72.26 per cent. by LCR, which in turn is beneficially owned as to approximately 71.13 per cent. by Lippo. The Acquisition exceeds 25 per cent. but does not exceed 100 per cent. of one or more of the applicable percentage ratios (as defined in Rule 14.07 of the Listing Rules) and the Transaction exceeds 25 per cent. but does not exceed 75 per cent. of one or more of such percentage ratios of each of Lippo, LCR and the Company and therefore constitute major transactions for each of Lippo, LCR and the Company. Lippo Capital, Skyscraper and HKCL Holdings have each given its written consents to Lippo, LCR and the Company, respectively, for approval of the Acquisition and the Transaction.

Since the Acquisition and the Transaction constitute major transactions for each of Lippo, LCR and the Company, respectively, under Rule 14.40, they will be subject to the approval of the Lippo Shareholders, the LCR Shareholders and the HKC Shareholders respectively, which shall be given by majority vote at general meetings of the Lippo Shareholders, the LCR Shareholders and the HKC Shareholders, respectively, unless the conditions in Rule 14.44 can be satisfied, in which case written shareholders’ approvals may be accepted in lieu of holding formal shareholders’ meetings of each of Lippo, LCR and the Company (as the case may be).

As:

(i) Lippo Capital holds approximately 50.47 per cent. of Lippo’s existing issued share capital giving the right to attend and to vote at Lippo Shareholders’ meetings;
(ii) Skyscraper holds approximately 71.13 per cent. of LCR’s existing issued share capital giving the right to attend and to vote at LCR Shareholders’ meetings;
(iii) HKCL Holdings holds approximately 59.89 per cent. of the Company’s existing issued share capital giving the right to attend and to vote at HKC Shareholders’ meetings;

• 11 •

LETTER FROM THE BOARD

(iv) none of the Lippo Shareholders, the LCR Shareholders and the HKC Shareholders are required to abstain from voting at the aforesaid shareholders’ meetings of Lippo, LCR and the Company, respectively (if held); and
(v) each of Lippo Capital, Skyscraper and HKCL Holdings has given written consents to approve the Acquisition and the Transaction in lieu of holding formal shareholders’ meetings of each of Lippo, LCR and the Company (as the case may be),

no shareholders’ meetings of Lippo, LCR or the Company will therefore be required for the purposes of the Listing Rules.

FURTHER INFORMATION

Your attention is drawn to the additional information set out in the Appendices to this circular.

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

• 12 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. FINANCIAL SUMMARY

Set out below is a summary of the unaudited consolidated profit and loss account and consolidated balance sheet of the Group for the six months ended 30th June, 2006 and the audited consolidated profit and loss account and consolidated balance sheet of the Group for each of the three years ended 31st December, 2005, extracted from the relevant interim reports and annual reports of the Company:

(a) Consolidated Profit and Loss Account

Six months ended 30th June,
2006
2005
HK$’000
HK$’000
(unaudited)
(unaudited)
Revenue
816,732
677,554
Cost of sales
(626,629)
(598,009)
Gross profit
190,103
79,545
Other income
–
–
Administrative expenses
(39,581)
(33,457)
Other operating expenses
(17,339)
(20,086)
Fair value gains on investment
properties
5,468
46,349
Write-back of allowance/(Allowance)
for bad and doubtful debts relating to:
Banking operation
–
–
Non-banking operations
–
(33,810)
Provisions for impairment losses on:
Associates
–
(6,987)
Available-for-sale financial assets
(970)
(1,418)
Goodwill
–
–
Investment securities
–
–
Net fair value gain/(loss) on financial
assets at fair value through profit or loss
6,588
(7,496)
Net unrealised holding gain/(loss) on other
investments in securities
–
–
Net unrealised gain/(loss) on transfer of
investment securities and held-to-maturity
securities to other investments
in securities
–
–
Write-back of provision for loss on
guaranteed return arrangement for
fund management
–
–

Years ended 31st December,
2005
2004
2003
HK$’000
HK$’000
HK$’000
(audited)
(audited)
(audited)
1,186,933
1,325,136
617,246
(985,355)
(1,170,412)
(455,777)
201,578
154,724
161,469
–
–
4,171
(74,224)
(70,531)
(70,165)
(45,497)
(35,833)
(34,422)
74,784
–
–
2,140
666
(3,753)
(33,036)
(1,203)
(1,916)
(5,859)
(16,603)
–
(53,757)
–
–
(412)
–
–
–
(2,776)
(20,000)
70,370
–
–
–
(72,097)
54,926
–
(7,856)
20,483
–
–
10,868

• 13 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Finance costs Share of results of associates Share of results of jointly controlled entities Profit/(Loss) before tax Tax Profit/(Loss) for the period/year Attributable to: Equity holders of the Company Minority interests	Six months ended 30th June, 2006 2005 HK$’000 HK$’000 (unaudited) (unaudited) (12,677) (3,317) 2,200 (413) (1,968) – 131,824 18,910 (3,926) (7,429) 127,898 11,481 128,766 12,313 (868) (832) 127,898 11,481	Years ended 31st December, 2005 2004 2003 HK$’000 HK$’000 HK$’000 (audited) (audited) (audited) (7,363) (4,873) (4,700) (2,548) (6,517) (6,488) (423) – – 125,753 (62,899) 110,473 (15,033) (3,535) (5,182) 110,720 (66,434) 105,291 111,761 (64,957) 106,067 (1,041) (1,477) (776) 110,720 (66,434) 105,291

• 14 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Consolidated balance sheet

As at 30th June, 2006 HK$’000 (unaudited) NON-CURRENT ASSETS Goodwill 57,285 Fixed assets 49,474 Investment properties 905,463 Properties under development 140,736 Interests in associates 1,555,659 Interests in jointly controlled entities 10,684 Available-for-sale financial assets 108,427 Investment securities – Held-to-maturity financial assets/securities 9,619 Financial assets at fair value through profit or loss 269,716 Loans and advances 32,020 Assets less liabilities attributable to banking operation – 3,139,083 CURRENT ASSETS Property held for sale 16,226 Available-for-sale financial assets 11,000 Financial assets at fair value through profit or loss 484,559 Other investments in securities – Loans and advances 286,695 Debtors, prepayments and deposits 174,623 Client trust bank balances 608,143 Treasury bills 75,660 Cash and cash balances 252,093 1,908,999	As at 2005 HK$’000 (audited) 57,285 49,593 421,523 105,096 175,235 12,615 175,048 – 9,604 268,753 29,975 – 1,304,727 12,441 213,896 617,913 – 240,498 181,328 444,460 15,520 621,740 2,347,796	31st December, 2004 2003 HK$’000 HK$’000 (audited) (audited) 56,553 60,893 36,976 5,004 96,144 16,750 99,767 – 27,166 48,544 7,313 – – – 365,658 171,867 9,643 – – – 45,890 – – 156,081 745,110 459,139 10,140 – – – – – 1,133,217 1,033,890 277,639 91,888 171,692 330,369 389,123 430,558 23,765 – 858,120 1,335,116 2,863,696 3,221,821	31st December, 2004 2003 HK$’000 HK$’000 (audited) (audited) 56,553 60,893 36,976 5,004 96,144 16,750 99,767 – 27,166 48,544 7,313 – – – 365,658 171,867 9,643 – – – 45,890 – – 156,081 745,110 459,139 10,140 – – – – – 1,133,217 1,033,890 277,639 91,888 171,692 330,369 389,123 430,558 23,765 – 858,120 1,335,116 2,863,696 3,221,821
			459,139
			– – – 1,033,890 91,888 330,369 430,558 – 1,335,116
			3,221,821

• 15 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at 30th June, 2006 HK$’000 (unaudited) CURRENT LIABILITIES Bank and other borrowings 59,909 Creditors, accruals and deposits received 885,740 Current, fixed, savings and other deposits of customers 182,594 Tax payable 6,060 1,134,303 NET CURRENT ASSETS 774,696 TOTAL ASSETS LESS CURRENT LIABILITIES 3,913,779 NON-CURRENT LIABILITIES Bank and other borrowings 997,075 Deferred tax liabilities 20,957 1,018,032 NET ASSETS 2,895,747 EQUITY Equity attributable to equity holders of the Company Share capital 1,346,829 Reserves 1,478,425 2,825,254 Minority interests 70,493 2,895,747	As at 2005 HK$’000 (audited) 25,000 629,584 116,743 4,112 775,439 1,572,357 2,877,084 – 15,989 15,989 2,861,095 1,346,829 1,482,187 2,829,016 32,079 2,861,095	31st December, 2004 2003 HK$’000 HK$’000 (audited) (audited) 208,761 10,000 541,737 822,042 117,641 – 4,129 2,802 872,268 834,844 1,991,428 2,386,977 2,736,538 2,846,116 – – 1,234 – 1,234 – 2,735,304 2,846,116 1,346,829 1,346,829 1,358,271 1,474,494 2,705,100 2,821,323 30,204 24,793 2,735,304 2,846,116	31st December, 2004 2003 HK$’000 HK$’000 (audited) (audited) 208,761 10,000 541,737 822,042 117,641 – 4,129 2,802 872,268 834,844 1,991,428 2,386,977 2,736,538 2,846,116 – – 1,234 – 1,234 – 2,735,304 2,846,116 1,346,829 1,346,829 1,358,271 1,474,494 2,705,100 2,821,323 30,204 24,793 2,735,304 2,846,116
			834,844
			2,386,977
			2,846,116
			– –
			–
			2,846,116

			1,346,829 1,474,494
			2,821,323 24,793
			2,846,116

• 16 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30TH JUNE, 2006

Condensed Consolidated Profit and Loss Account

Note
Revenue
3
Cost of sales
Gross profit
Administrative expenses
Other operating expenses
Fair value gains on investment properties
Allowance for bad and doubtful debts
relating to non-banking operations
4
Net fair value gain/(loss) on financial
assets at fair value through
profit or loss
Finance costs
Share of results of associates
Share of results of jointly controlled
entities
Profit before tax
5
Tax
6
Profit for the period
Attributable to:
Equity holders of the Company
19
Minority interests
19
Earnings per share attributable to
equity holders of the Company
7
Basic
Diluted
Interim distribution
8

Six months ended
30th June,
2006
2005
HK$’000
HK$’000
(restated)
816,732
677,554
(626,629)
(598,009)
190,103
79,545
(39,581)
(33,457)
(18,309)
(28,491)
5,468
46,349
–
(33,810)
6,588
(7,496)
(12,677)
(3,317)
2,200
(413)
(1,968)
–
131,824
18,910
(3,926)
(7,429)
127,898
11,481
128,766
12,313
(868)
(832)
127,898
11,481
HK cents
HK cents
9.6
0.9
N/A
N/A
HK$’000
HK$’000
20,202
20,202

• 17 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Balance Sheet

Note Non-current assets Goodwill Fixed assets Investment properties Properties under development Interests in associates 9 Interests in jointly controlled entities Available-for-sale financial assets 10 Held-to-maturity financial assets 11 Financial assets at fair value through profit or loss 12 Loans and advances 13 Current assets Property held for sale Available-for-sale financial assets 10 Financial assets at fair value through profit or loss 12 Loans and advances 13 Debtors, prepayments and deposits 14 Client trust bank balances Treasury bills Cash and bank balances Current liabilities Bank and other borrowings 15 Creditors, accruals and deposits received 16 Current, fixed, savings and other deposits of customers 17 Tax payable Net current assets Total assets less current liabilities	30th June, 31st December, 2006 2005 HK$’000 HK$’000 57,285 57,285 49,474 49,593 905,463 421,523 140,736 105,096 1,555,659 175,235 10,684 12,615 108,427 175,048 9,619 9,604 269,716 268,753 32,020 29,975 3,139,083 1,304,727 16,226 12,441 11,000 213,896 484,559 617,913 286,695 240,498 174,623 181,328 608,143 444,460 75,660 15,520 252,093 621,740 1,908,999 2,347,796 59,909 25,000 885,740 629,584 182,594 116,743 6,060 4,112 1,134,303 775,439 774,696 1,572,357 3,913,779 2,877,084	30th June, 31st December, 2006 2005 HK$’000 HK$’000 57,285 57,285 49,474 49,593 905,463 421,523 140,736 105,096 1,555,659 175,235 10,684 12,615 108,427 175,048 9,619 9,604 269,716 268,753 32,020 29,975 3,139,083 1,304,727 16,226 12,441 11,000 213,896 484,559 617,913 286,695 240,498 174,623 181,328 608,143 444,460 75,660 15,520 252,093 621,740 1,908,999 2,347,796 59,909 25,000 885,740 629,584 182,594 116,743 6,060 4,112 1,134,303 775,439 774,696 1,572,357 3,913,779 2,877,084
		1,304,727
		12,441 213,896 617,913 240,498 181,328 444,460 15,520 621,740
		2,347,796
		25,000 629,584 116,743 4,112
		775,439
		1,572,357
		2,877,084

• 18 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Non-current liabilities Bank and other borrowings 15 Deferred tax liabilities Net assets Equity Equity attributable to equity holders of the Company Share capital 18 Reserves 19 Minority interests 19	30th June, 31st December, 2006 2005 HK$’000 HK$’000 997,075 – 20,957 15,989 1,018,032 15,989 2,895,747 2,861,095 1,346,829 1,346,829 1,478,425 1,482,187 2,825,254 2,829,016 70,493 32,079 2,895,747 2,861,095	30th June, 31st December, 2006 2005 HK$’000 HK$’000 997,075 – 20,957 15,989 1,018,032 15,989 2,895,747 2,861,095 1,346,829 1,346,829 1,478,425 1,482,187 2,825,254 2,829,016 70,493 32,079 2,895,747 2,861,095
		15,989
		2,861,095

		1,346,829 1,482,187
		2,829,016 32,079
		2,861,095

• 19 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Summary Statement of Changes in Equity

Note
Total equity at 1st January
Changes in equity during the period:
Exchange differences on translation
of foreign operations
Net fair value loss on available-for-sale
financial assets
Deferred tax arising from fair value
gain on available-for-sale
financial assets
19
Derecognition of available-for-sale
financial assets
19
Net expense recognised directly in equity
Profit for the period
Total recognised income and expense
for the period
Issue of shares by subsidiaries to
minority shareholders
19
Advance from minority shareholders
of subsidiaries
19
Changes in interests in a subsidiary
19
2004 final distribution, declared
19
2005 final distribution, declared
19
Total equity at 30th June
Total recognised income and expense
for the period attributable to:
Equity holders of the Company
Minority interests

Six months ended
30th June,
2006
2005
HK$’000
HK$’000
2,861,095
2,731,386
4,116
(3,124)
(12,882)
(16,043)
(4,001)
(2,743)
(79,351)
–
(92,118)
(21,910)
127,898
11,481
35,780
(10,429)
402
2,446
39,132
203
(257)
(1,772)
–
(40,405)
(40,405)
–
34,652
(49,957)
2,895,747
2,681,429
36,643
(9,601)
(863)
(828)
35,780
(10,429)

• 20 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Cash Flow Statement

Net cash from operating activities Net cash used in investing activities Net cash from/(used in) financing activities Net decrease 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 Bank overdrafts	Six months ended 30th June, 2006 2005 HK$’000 HK$’000 (restated) 286,756 206,011 (1,615,145) (253,077) 1,015,770 (108,375) (312,619) (155,441) 637,260 881,885 1,017 (127) 325,658 726,317 252,093 716,617 75,660 9,700 (2,095) – 325,658 726,317

• 21 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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, 2005, except in relation to the following new/revised Hong Kong Financial Reporting Standards (“HKFRSs”), HKASs and Interpretations (hereinafter collectively referred to as the “new/revised HKFRSs”), which have become effective for accounting periods beginning on or after 1st January, 2006, that are adopted for the first time for the current period’s financial statements:

HKAS 19 (Amendment)	Employee Benefits – Actuarial Gains and Losses,
	Group Plans and Disclosures
HKAS 21 (Amendment)	The Effects of Changes in Foreign Exchange Rates
	– Net Investment in a Foreign Operation
HKAS 39 (Amendment)	Cash Flow Hedge Accounting of Forecast Intragroup
	Transactions
HKAS 39 (Amendment)	The Fair Value Option
HKAS 39 & HKFRS 4 (Amendment)	Financial Instruments: Recognition and Measurement
	and Insurance Contracts – Financial Guarantee
	Contracts
HK(IFRIC)-Int 4	Determining whether an Arrangement contains a Lease

The adoption of the above new/revised HKFRSs has no material impact on the accounting policies of the Group and the methods of computation in the Group’s condensed consolidated interim financial statements.

The following new/revised HKFRSs relevant to the Group’s operations have been issued but are not effective for 2006 and have not been early adopted:

HKAS 1 (Amendment)	Capital Disclosures
HKFRS 7	Financial Instruments: Disclosures
HK(IFRIC)-Int 7	Applying the Restatement Approach under HKAS 29
	Financial Reporting in Hyperinflationary Economies
HK(IFRIC)-Int 8	Scope of HKFRS 2
HK(IFRIC)-Int 9	Reassessment of Embedded Derivatives

2. SEGMENT INFORMATION

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

(a) the property investment and development segment includes letting, resale and development of properties;
(b) the treasury investment segment includes investments in cash and bond markets;
(c) the securities investment segment includes dealings in securities and disposals of investments;

• 22 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(d) the corporate finance and securities broking segment provides securities and futures brokerage, investment banking, underwriting and other related advisory services;
(e) the banking business segment engages in the provision of commercial and retail banking services; and
(f) the “other” segment comprises principally the development of computer hardware and software, money lending and the provision of fund management services.

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

Six months ended 30th June, 2006
Property
Corporate
investment
finance and
and
Treasury
Securities
securities
Banking
development
investment
investment
broking
business
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
Revenue
External
21,610
11,801
713,779
46,110
14,338
Inter-segment
–
797
–
222
–
Total
21,610
12,598
713,779
46,332
14,338
Segment results
9,029
11,728
125,342
6,772
5,051
Unallocated corporate expenses
Finance costs
Share of results of associates
(4,832 )
–
–
–
–
Share of results of jointly
controlled entities
(522 )
–
–
–
–
Profit before tax
Tax
Profit for the period

Inter-
segment
Other
elimination
Consolidated
HK$’000
HK$’000
HK$’000
9,094
–
816,732
3,494
(4,513 )
–
12,588
(4,513 )
816,732
3,628
(3,420 )
158,130
(20,138 )
(6,400 )
7,032
–
2,200
(1,446 )
–
(1,968 )
131,824
(3,926 )
127,898

• 23 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

			Six months ended 30th June, 2005 (restated)	Six months ended 30th June, 2005 (restated)	Six months ended 30th June, 2005 (restated)	Six months ended 30th June, 2005 (restated)	Six months ended 30th June, 2005 (restated)
	Property			Corporate
	investment		finance and					Inter-
	and	Treasury	Securities	securities		Banking		segment
	development	investment	investment	broking		business	Other	elimination	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000		HK$’000
Revenue
External	4,291	7,680	629,501	27,260		7,729	1,093	–		677,554
Inter-segment	–	631	–	238		–	770	(1,639 )		–
Total	4,291	8,311	629,501	27,498		7,729	1,863	(1,639 )		677,554

Segment results	46,850	7,624	29,554	(33,437	)	1,901	(10,228 )	(1,220 )		41,044
Unallocated corporate expenses										(21,721	)
Share of results of associates	–	–	–	–		–	(413 )	–		(413	)
Profit before tax										18,910
Tax										(7,429	)
Profit for the period										11,481

3. REVENUE

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

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

Property investment and development Treasury investment Securities investment Corporate finance and securities broking Banking business Other	Six months ended 30th June, 2006 2005 HK$’000 HK$’000 (restated) 21,610 4,291 11,801 7,680 713,779 629,501 46,110 27,260 14,338 7,729 9,094 1,093 816,732 677,554	Six months ended 30th June, 2006 2005 HK$’000 HK$’000 (restated) 21,610 4,291 11,801 7,680 713,779 629,501 46,110 27,260 14,338 7,729 9,094 1,093 816,732 677,554
		677,554

• 24 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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:

Interest income Commission income Other revenues	Six months ended 30th June, 2006 2005 HK$’000 HK$’000 (restated) 12,064 6,822 1,658 907 616 – 14,338 7,729	Six months ended 30th June, 2006 2005 HK$’000 HK$’000 (restated) 12,064 6,822 1,658 907 616 – 14,338 7,729
		7,729

4. ALLOWANCE FOR BAD AND DOUBTFUL DEBTS RELATING TO NON-BANKING OPERATIONS

The allowance for the six months ended 30th June, 2005 included an individual provision of HK$33,810,000 made for a loan advanced to a margin client, which had been secured by certain shares in a listed company and a guarantee provided by a director of the client. Both the client and the listed company were under provisional liquidation and in the opinion of Directors, the probability for recovery of the loan was uncertain.

5. PROFIT BEFORE TAX

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

	Six months ended	Six months ended
	30th June,
	2006	2005
	HK$’000	HK$’000
		(restated)
Dividend income:
Listed investments	763	15,168
Unlisted investments	1,291	625
Interest income:
Listed investments	3,652	9,049
Unlisted investments	758	1,328
Banking operation	12,064	6,822
Other	11,801	8,022
Net realised gain/(loss) on disposal of:
Listed financial assets at fair value through profit or loss	13,649	27,999
Unlisted financial assets at fair value through profit or loss	267	599
Listed available-for-sale financial assets	103,338	–
Unlisted available-for-sale financial assets	(2,858)	(601)
Net fair value gain/(loss) on financial assets at fair value
through profit or loss:
Listed	92	(2,388)
Unlisted	6,496	(5,108)
Other unlisted investment income	664	760
Depreciation	(3,364)	(1,810)
Provision for impairment losses on:
Unlisted available-for-sale financial assets	(970)	(1,418)
Associates	–	(6,987)

• 25 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

6. TAX

Hong Kong: Charge for the period Deferred Overseas: Charge for the period Underprovision in prior periods Deferred Total charge for the period	Six months ended 30th June, 2006 2005 HK$’000 HK$’000 1,270 – 955 2,762 2,225 2,762 1,438 1,396 263 – – 3,271 1,701 4,667 3,926 7,429	Six months ended 30th June, 2006 2005 HK$’000 HK$’000 1,270 – 955 2,762 2,225 2,762 1,438 1,396 263 – – 3,271 1,701 4,667 3,926 7,429
		2,762
		1,396 – 3,271
		4,667
		7,429

Hong Kong profits tax has been provided for at the rate of 17.5 per cent. on the estimated assessable profits arising in Hong Kong during the period. No provision for Hong Kong profits tax had been provided for the six months ended 30th June, 2005 as the Group had available tax losses brought forward from prior periods to offset the estimated assessable profits generated during the six months ended 30th June, 2005. Overseas taxes have been calculated on the estimated assessable profits for the period at the tax rates prevailing in the countries in which the Group operates based on existing legislation, interpretations and practices in respect thereof.

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

(a) Basic earnings per share

Basic earnings per share is calculated based on (i) the consolidated profit for the period attributable to equity holders of the Company of HK$128,766,000 (2005 – HK$12,313,000); and (ii) the weighted average number of 1,346,829,000 ordinary shares (2005 – 1,346,829,000 ordinary shares) in issue during the period.

(b) Diluted earnings per share

No diluted earnings per share is presented for the periods ended 30th June, 2006 and 2005 as there were no dilutive potential ordinary shares during these periods.

8. INTERIM DISTRIBUTION

		Six months ended	Six months ended
		30th June,
		2006	2005
		HK$’000	HK$’000
Interim	distribution, declared, of HK1.5 cents
(2005	– HK1.5 cents) per ordinary share	20,202	20,202

The interim distribution was declared after the balance sheet date and hence was not accrued on that date.

• 26 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

9. INTERESTS IN ASSOCIATES

The balance as at 30th June, 2006 included the Group’s interest in Lippo ASM Asia Property LP (“LAAP”), a property fund which carries the objective of investing in real estates in the East Asia region, of approximately HK$1,433 million (31st December, 2005 – HK$151 million). In May 2006, LAAP participated in a joint venture to invest in Overseas Union Enterprise Limited, a listed company in Singapore principally engaged in property investments and hotel operations.

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Financial assets stated at fair value: Equity securities listed in Hong Kong Unlisted equity securities Unlisted investment funds Financial assets stated at cost: Unlisted equity securities Unlisted debt securities Provision for impairment losses _Less:_Amount classified under current portion Non-current portion	30th June, 31st December, 2006 2005 HK$’000 HK$’000 16,583 262,666 11,000 43,854 27,583 306,520 84,604 74,036 112,187 380,556 74,054 74,004 11,230 10,862 (78,044) (76,478 7,240 8,388 119,427 388,944 (11,000) (213,896 108,427 175,048	30th June, 31st December, 2006 2005 HK$’000 HK$’000 16,583 262,666 11,000 43,854 27,583 306,520 84,604 74,036 112,187 380,556 74,054 74,004 11,230 10,862 (78,044) (76,478 7,240 8,388 119,427 388,944 (11,000) (213,896 108,427 175,048
		306,520 74,036
		380,556
		74,004 10,862 (76,478
		8,388
		388,944 (213,896
		175,048

The debt securities have effective interest rates ranging from nil to 8 per cent. (31st December, 2005 – nil to 8 per cent.) per annum.

An analysis of the issuers of available-for-sale financial assets is as follows: Equity securities: Corporate entities Debt securities: Club debentures Corporate entities	101,637 3,165 8,065 11,230	380,524

		3,165 7,697
		10,862

• 27 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

11. HELD-TO-MATURITY FINANCIAL ASSETS

	30th June,	31st December,	31st December,
	2006		2005
	HK$’000		HK$’000
Debt securities, at amortised cost:
Listed overseas	9,619		9,604

Market value of listed debt securities	10,805		11,019

The debt securities have effective interest rates of 9 per cent. (31st December,		2005 – 9 per cent.)
per annum.
An analysis of the issuers of held-to-maturity
financial assets is as follows:
Banks and other financial institutions	9,619		9,604

FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
	30th June,	31st December,
	2006		2005
	HK$’000		HK$’000
Held for trading:
Equity securities:
Listed in Hong Kong	67,035		64,425
Listed overseas	4,269		68,275
	71,304		132,700
Debt securities:
Listed in Hong Kong	–		1,967
Listed overseas	8,824		162,143
Unlisted	–		84,808
	8,824		248,918
Investment funds:
Listed in Hong Kong	–		25
Listed overseas	43,628		50,913
Unlisted	347,456		131,708
	391,084		182,646
Other:
Unlisted	13,347		53,649
	484,559		617,913
Designated as financial assets at fair value through
profit or loss:
Unlisted investment funds	269,716		268,753
	754,275		886,666
_Less:_Amount classified under current portion	(484,559)		(617,913)
Non-current portion	269,716		268,753

12. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

• 28 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The debt securities have effective interest rates ranging from 6.5 per cent. to 8 per cent. (31st December, 2005 – 4.3 per cent. to 14.8 per cent.) per annum.

An analysis of the issuers of financial assets at fair value through profit or loss is as follows: Equity securities: Banks and other financial institutions Corporate entities Debt securities: Central governments and central banks Public sector entities Banks and other financial institutions Corporate entities	30th June, 31st December, 2006 2005 HK$’000 HK$’000 – 13,266 71,304 119,434 71,304 132,700 – 9,289 – 4,397 – 93,431 8,824 141,801 8,824 248,918	30th June, 31st December, 2006 2005 HK$’000 HK$’000 – 13,266 71,304 119,434 71,304 132,700 – 9,289 – 4,397 – 93,431 8,824 141,801 8,824 248,918
		132,700

		9,289 4,397 93,431 141,801
		248,918

13. LOANS AND ADVANCES

The loans and advances to customers of the Group have effective interest rates ranging from 8.3 per cent. to 18 per cent. (31st December, 2005 – 3.5 per cent. to 18 per cent.) per annum. The carrying amounts of loans and advances are approximate to their fair values.

Movements of allowance for bad and doubtful debts relating to banking operation during the period are as follows:

Balance at beginning of period Allowance for bad and doubtful debts Impairment allowance released Balance at end of period	Six months ended 30th June, 2006 2005 HK$’000 HK$’000 3,000 5,140 24 – (12) (485 3,012 4,655	Six months ended 30th June, 2006 2005 HK$’000 HK$’000 3,000 5,140 24 – (12) (485 3,012 4,655
		4,655

14. DEBTORS, PREPAYMENTS AND DEPOSITS

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

Outstanding balances with ages: Repayable on demand Within 30 days Between 31 and 60 days Between 61 and 90 days	30th June, 31st December, 2006 2005 HK$’000 HK$’000 43,236 55,282 72,291 78,903 – 295 38 157 115,565 134,637	30th June, 31st December, 2006 2005 HK$’000 HK$’000 43,236 55,282 72,291 78,903 – 295 38 157 115,565 134,637
		134,637

• 29 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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.

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

15. BANK AND OTHER BORROWINGS

Bank overdrafts: Secured_(Note (a)) Bank loans: Secured(Note (a)) Unsecured Other borrowings: Unsecured(Note (b))_ Repayable within one year Non-current portion Bank loans and overdrafts repayable: Within one year In the second year In the third to fifth years, inclusive Other borrowings repayable: In the second year	30th June, 31st December, 2006 2005 HK$’000 HK$’000 2,095 – 437,853 25,000 5,000 – 444,948 25,000 612,036 – 1,056,984 25,000 (59,909) (25,000) 997,075 – 59,909 25,000 64,876 – 320,163 – 444,948 25,000 612,036 –

The carrying amounts of the Group’s bank and other borrowings are approximate to their fair values and bear interest at rates ranging from 4.5 per cent. to 6.1 per cent. (31st December, 2005 – 5.3 per cent. to 5.5 per cent.) per annum.

Note:

(a) The bank loans and overdrafts as at 30th June, 2006 were secured by first legal mortgages over certain investment properties and certain securities of the Group and certain securities owned by margin clients of the Group. The bank loans as at 31st December, 2005 were secured by certain securities owned by margin clients of the Group.
(b) The Group’s other borrowings comprise of loans advanced from Lippo Limited and Lippo China Resources Limited, intermediate holding companies of the Company, of HK$250,000,000 and HK$362,036,000 respectively, which are repayable on or before 31st December, 2007.

• 30 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. CREDITORS, ACCRUALS AND DEPOSITS RECEIVED

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

Outstanding balances with ages: Repayable on demand Within 30 days	30th June, 31st December, 2006 2005 HK$’000 HK$’000 651,717 495,639 86,625 91,427 738,342 587,066	30th June, 31st December, 2006 2005 HK$’000 HK$’000 651,717 495,639 86,625 91,427 738,342 587,066
		587,066

The outstanding balances that are repayable on demand include client payables relating to cash balances held on trust for the customers in respect of the Group’s securities broking business. As at 30th June, 2006, total client trust bank balances amounted to HK$608,143,000 (31st December, 2005 – HK$444,460,000).

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

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

The current, fixed, savings and other deposits of customers attributable to banking operation have effective interest rates ranging from 1.75 per cent. to 5 per cent. (31st December, 2005 – 0.25 per cent. to 4.18 per cent.) per annum.

18. SHARE CAPITAL

Authorised: 2,000,000,000 (31st December, 2005 – 2,000,000,000) ordinary shares of HK$1.00 each Issued and fully paid: 1,346,829,094 (31st December, 2005 – 1,346,829,094) ordinary shares of HK$1.00 each	30th June, 31st December, 2006 2005 HK$’000 HK$’000 2,000,000 2,000,000 1,346,829 1,346,829	30th June, 31st December, 2006 2005 HK$’000 HK$’000 2,000,000 2,000,000 1,346,829 1,346,829

		1,346,829

• 31 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

19. RESERVES

At 1st January, 2006 Net fair value loss on available-for-sale financial assets Deferred tax arising from fair value gain on available-for-sale financial assets Derecognition of available-for-sale financial assets Transfer of reserve Exchange realignment Issue of shares by subsidiaries to minority shareholders Advance from minority shareholders of subsidiaries Changes in interests in a subsidiary Profit/(Loss) for the period 2005 final distribution, declared and paid At 30th June, 2006	Capital Share redemption premium reserve account (Note (c)) HK$’000 HK$’000 50,988 11,760 – – – – – – – – – – – – – – – – – – – – 50,988 11,760	Legal Regulatory Investment Distributable Exchange reserve reserve revaluation reserves equalisation (Note (d)) (Note (e)) reserve (Note (b)) reserve HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 3,034 1,169 81,876 1,348,813 (15,453 ) – – (12,859 ) – – – – (4,001 ) – – – – (79,351 ) – – 926 – – (926 ) – – – – – 4,088 – – – – – – – – – – – – – – – – – – 128,766 – – – – (40,405 ) – 3,960 1,169 (14,335 ) 1,436,248 (11,365 )	Total HK$’000 1,482,187 (12,859 ) (4,001 ) (79,351 ) – 4,088 – – – 128,766 (40,405 ) 1,478,425	Minority interests HK$’000 32,079 (23 ) – – – 28 402 39,132 (257 ) (868 ) – 70,493

• 32 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 1st January, 2005 Net fair value loss on available-for-sale financial assets Deferred tax arising from fair value gain on available-for-sale financial assets Transfer of reserve Exchange realignment Issue of shares by a subsidiary to minority shareholders Advance from minority shareholders of a subsidiary Changes in interests in a subsidiary Profit/(Loss) for the period 2004 final distribution, declared and paid At 30th June, 2005	Capital Share redemption premium reserve account (Note (c)) HK$’000 HK$’000 50,988 11,760 – – – – – – – – – – – – – – – – – – 50,988 11,760	Legal Regulatory Investment Distributable Exchange reserve reserve revaluation reserves equalisation (Note (d)) (Note (e)) reserve (Note (b)) reserve HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 2,053 – – 1,299,809 (10,257 ) – – (16,043 ) – – – – (2,743 ) – – 1,154 – – (1,154 ) – – – – – (3,128 ) – – – – – – – – – – – – – – – – – – 12,313 – – – – (40,405 ) – 3,207 – (18,786 ) 1,270,563 (13,385 )	Total HK$’000 1,354,353 (16,043 ) (2,743 ) – (3,128 ) – – – 12,313 (40,405 ) 1,304,347	Minority interests HK$’000 30,204 – – – 4 2,446 203 (1,772 ) (832 ) – 30,253

Note:

(a) Cancellation of 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, 2006 comprise retained profits of HK$169,988,000 (31st December, 2005 – HK$42,148,000) and the remaining balance arising from the Cancellation of HK$1,266,260,000 (31st December, 2005 – HK$1,306,665,000).
(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 made under HKAS 30 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.

• 33 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

20. MATURITY PROFILE OF ASSETS AND LIABILITIES

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

At 30th June, 2006 Assets Debt securities: Held-to-maturity financial assets Available-for-sale financial assets Financial assets at fair value through profit or loss Loans and advances Client trust bank balances Treasury bills Cash and bank balances Liabilities Bank and other borrowings Current, fixed, savings and other deposits of customers At 31st December, 2005 Assets Debt securities: Held-to-maturity financial assets Available-for-sale financial assets Financial assets at fair value through profit or loss Loans and advances Client trust bank balances Treasury bills Cash and bank balances Liabilities Bank and other borrowings Current, fixed, savings and other deposits of customers	Repayable on demand HK$’000 – – – 193,551 43,227 – 125,928 362,706 2,095 32,335 34,430 Repayable on demand HK$’000 – – – 133,983 21,150 – 98,303 253,436 – 43,601 43,601	3 months or less HK$’000 – – – 48,033 564,916 75,660 126,165 814,774 57,814 145,341 203,155 3 months or less HK$’000 – – – 62,255 423,310 15,520 523,437 1,024,522 25,000 71,643 96,643	1 year or less but over 3 months HK$’000 – – – 45,111 – – – 45,111 – 4,918 4,918 1 year or less but over 3 months HK$’000 – – 10,177 44,260 – – – 54,437 – 1,499 1,499	5 years or less but over 1 year HK$’000 – 8,065 – 14,516 – – – 22,581 997,075 – 997,075 5 years or less but over 1 year HK$’000 – 7,697 159,103 12,642 – – – 179,442 – – –	After 5 years HK$’000 9,619 – 885 17,504 – – – 28,008 – – – After 5 years HK$’000 9,604 – 71,496 17,333 – – – 98,433 – – –	Undated HK$’000 – 3,165 7,939 – – – – 11,104 – – – Undated HK$’000 – 3,165 8,142 – – – – 11,307 – – –	Total HK$’000 9,619 11,230 8,824 318,715 608,143 75,660 252,093
							1,284,284

							1,056,984 182,594
							1,239,578

							Total HK$’000 9,604 10,862 248,918 270,473 444,460 15,520 621,740
							1,621,577

							25,000 116,743
							141,743

• 34 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

21. CONTINGENT LIABILITIES

At the balance sheet date, the Group had the following contingent liabilities relating to its banking subsidiary:

Guarantees and other endorsements Liabilities under letters of credit on behalf of customers	30th June, 31st December, 2006 2005 HK$’000 HK$’000 7,070 11,785 15,324 18,168 22,394 29,953	30th June, 31st December, 2006 2005 HK$’000 HK$’000 7,070 11,785 15,324 18,168 22,394 29,953
		29,953

22. CAPITAL COMMITMENTS

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

Capital commitment in respect of property, plant and equipments: Contracted, but not provided for Other capital commitments: Contracted, but not provided for_(Note)_	30th June, 31st December, 2006 2005 HK$’000 HK$’000 31,904 59,988 248,206 1,471,472 280,110 1,531,460	30th June, 31st December, 2006 2005 HK$’000 HK$’000 31,904 59,988 248,206 1,471,472 280,110 1,531,460
		1,531,460

Note: The balance as at 30th June, 2006 included the Group’s capital commitment in respect of the formation of a joint venture for a property project in the People’s Republic of China of approximately HK$149 million (31st December, 2005 – HK$149 million).

The balance as at 31st December, 2005 included the Group’s capital commitment in a property fund of approximately HK$1,292 million, which had been paid during the period. Details of the property fund are described in Note 9 to the interim financial statements.

• 35 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

23. RELATED PARTY TRANSACTIONS

(a) During the period, Lippo Securities Holdings Limited (“LSHL”), being a wholly-owned subsidiary of the Company, paid rental expenses of HK$1,582,000 (2005 – HK$1,543,000) to Prime Power Investment Limited, being a fellow subsidiary of the Company, in respect of office premises occupied by LSHL. The rental was determined by reference to open market rentals.
(b) During the period, the Company paid rental expenses of HK$717,000 (2005 – HK$717,000) to Porbandar Limited, being a fellow subsidiary of the Company, in respect of office premises occupied by the Company. The rental was determined by reference to open market rentals.
(c) During the period, ImPac Asset Management (HK) Limited, being a wholly-owned subsidiary of the Company, received investment advisory income from Lippo ASM Investment Management Limited, being an associate of the Group, amounting to HK$5,638,000 (2005 – Nil).
(d) During the period, the Company paid finance costs to Lippo Limited and Lippo China Resources Limited of HK$1,373,000 (2005 – Nil) and HK$1,660,000 (2005 – Nil) respectively, in respect of the loans advanced to the Company. The balances of which are set out in Note 15 to the interim financial statements.
(e) During the period, a wholly-owned subsidiary of the Company, acquired certain financial assets at fair value through profit or loss from LAAP, being an associate of the Group, amounting to HK$219,951,000 (2005 – Nil). The acquisition price was determined by reference to fair market value.
(f) As at 30th June, 2006, the Group had amounts due from associates in a total of HK$101,285,000 (31st December, 2005 – HK$5,060,000) and amounts due from jointly controlled entities of HK$7,317,000 (31st December, 2005 – HK$7,317,000). The balances with the associates and the jointly controlled entities are unsecured, interest-free and have no fixed terms of repayment.

24. COMPARATIVE AMOUNTS

Certain comparative amounts have been reclassified and restated to conform with the current period’s presentation. The reclassifications and restatements had no impact on the Group’s earnings for the six months ended 30th June, 2005.

• 36 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2005

The audited consolidated financial statements of the Group for the year ended 31st December, 2005 set out below is not subject to any qualified opinion.

Consolidated Profit and Loss Account

Note Revenue 5 Cost of sales Gross profit Administrative expenses Other operating expenses Write-back of allowance/(Allowance) for bad and doubtful debts relating to: Banking operation Non-banking operations 6 Provisions for impairment losses on: Associates Available-for-sale financial assets Goodwill Investment securities Net fair value gain on financial assets at fair value through profit or loss Net unrealised holding loss on other investments in securities Net unrealised loss on transfer of investment securities and held-to-maturity securities to other investments in securities 7 Fair value gains on investment properties Finance costs 12 Share of results of associates Share of results of jointly controlled entities Profit/(Loss) before tax 8 Tax 13 Profit/(Loss) for the year Attributable to: Equity holders of the Company 14 & 35 Minority interests	2005 HK$’000 1,186,933 (985,355) 201,578 (74,224) (45,497) 2,140 (33,036) (5,859) (53,757) (412) – 70,370 – – 74,784 (7,363) (2,548) (423) 125,753 (15,033) 110,720 111,761 (1,041) 110,720	2004 HK$’000 (restated) 1,325,136 (1,170,412) 154,724 (70,531) (35,833) 666 (1,203) (16,603) – – (2,776) – (72,097) (7,856) – (4,873) (6,517) – (62,899) (3,535) (66,434) (64,957) (1,477) (66,434)

• 37 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Earnings/(Loss) per share attributable to equity holders of the Company 15 Basic Diluted Distributions 16 Interim, declared and paid Final, proposed/paid after the balance sheet date	2005 HK cents 8.3 N/A HK$’000 20,202 40,405 60,607	2004 HK cents (4.8) N/A HK$’000 20,202 40,405 60,607

• 38 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Balance Sheet

Note NON-CURRENT ASSETS Goodwill: 17 Goodwill Negative goodwill Fixed assets 18 Investment properties 19 Properties under development 20 Interests in associates 21 Interests in jointly controlled entities 22 Available-for-sale financial assets 23 Investment securities 24 Held-to-maturity financial assets/securities 25 Financial assets at fair value through profit or loss 26 Loans and advances 28 CURRENT ASSETS Property held for sale Available-for-sale financial assets 23 Financial assets at fair value through profit or loss 26 Other investments in securities 27 Loans and advances 28 Debtors, prepayments and deposits 29 Client trust bank balances Treasury bills Cash and bank balances CURRENT LIABILITIES Bank loans 30 Creditors, accruals and deposits received 31 Current, fixed, savings and other deposits of customers 32 Tax payable NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liabilities 33 NET ASSETS	2005 HK$’000 57,285 – 49,593 421,523 105,096 175,235 12,615 175,048 – 9,604 268,753 29,975 1,304,727 12,441 213,896 617,913 – 240,498 181,328 444,460 15,520 621,740 2,347,796 25,000 629,584 116,743 4,112 775,439 1,572,357 2,877,084 15,989 2,861,095	2004 HK$’000 (restated) 57,697 (1,144) 36,976 96,144 99,767 27,166 7,313 – 365,658 9,643 – 45,890 745,110 10,140 – – 1,133,217 277,639 171,692 389,123 23,765 858,120 2,863,696 208,761 541,737 117,641 4,129 872,268 1,991,428 2,736,538 1,234 2,735,304

• 39 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note EQUITY Equity attributable to equity holders of the Company Share capital 34 Reserves 35 Minority interests 35	2005 HK$’000 1,346,829 1,482,187 2,829,016 32,079 2,861,095	2004 HK$’000 (restated) 1,346,829 1,358,271
		2,705,100 30,204
		2,735,304

• 40 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Summary Statement of Changes in Equity

Note Total equity at 1st January: As previously reported as equity attributable to equity holders of the Company As previously reported separately as minority interests Prior year and opening adjustments 2.4(b) As restated Changes in equity during the year: Exchange differences on translation of foreign operations Net fair value gain on available-for-sale financial assets Deferred tax arising from net fair value gain on available-for-sale financial assets 35 Surplus on revaluation of investment properties 35 Deferred tax arising from revaluation of investment properties 35 Net income recognised directly in equity Profit/(Loss) for the year Total recognised income and expense for the year Issue of shares by subsidiaries to minority shareholders 35 Advance from minority shareholders of a subsidiary 35 Acquisition of subsidiaries 35 Disposal of a subsidiary 35 Changes in interests in subsidiaries 35 2003 final distribution, declared 16 & 35 2004 interim distribution, declared 16 & 35 2004 final distribution, declared 16 & 35 2005 interim distribution, declared 16 & 35 Total equity at 31st December Total recognised income and expense for the year attributable to: Equity holders of the Company Minority interests Effect of prior year and opening adjustments attributable to: Equity holders of the Company Minority interests	2005 HK$’000 2,706,334 30,204 (5,152) 2,731,386 (5,152) 85,636 (3,670) – – 76,814 110,720 187,534 6,128 870 – – (4,216) – – (40,405) (20,202) 129,709 2,861,095 188,441 (907) 187,534 (5,152) – (5,152)	2004 HK$’000 (restated) 2,821,323 24,793 – 2,846,116 3,069 – – 7,461 (1,234) 9,296 (66,434) (57,138) 4,398 610 2,174 (803) 554 (40,405) (20,202) – – (110,812) 2,735,304 (55,616) (1,522) (57,138) – – –

• 41 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Balance Sheet

Note NON-CURRENT ASSETS Fixed assets 18 Interests in subsidiaries 36 Available-for-sale financial assets 23 Investment securities 24 CURRENT ASSETS Financial assets at fair value through profit or loss 26 Other investments in securities 27 Debtors, prepayments and deposits Cash and bank balances CURRENT LIABILITIES Bank loans 30 Creditors, accruals and deposits received NET CURRENT ASSETS NET ASSETS EQUITY Share capital 34 Reserves 35	2005 HK$’000 2,689 2,257,540 51,935 – 2,312,164 108,148 – 4,808 208,557 321,513 – 11,404 11,404 310,109 2,622,273 1,346,829 1,275,444 2,622,273	2004 HK$’000 2,135 2,005,994 – 31,915
		2,040,044
		– 337,033 25,944 364,529
		727,506
		108,761 6,203
		114,964
		612,542
		2,652,586

		1,346,829 1,305,757
		2,652,586

• 42 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Cash Flow Statement

Note Cash flows from operating activities Cash from/(used in) operations 37(a) Interest received Dividend received from listed investments Dividend received from an associate Taxes paid: Hong Kong Overseas Net cash from/(used in) operating activities Cash flows from investing activities Receipts from disposals of: Available-for-sale financial assets Investment securities Payments to acquire: Items of fixed assets Properties under development Investment properties Available-for-sale financial assets Investment securities Associates Increase in interest in a jointly controlled entity Increase in interests in associates Advances to associates Advance to a jointly controlled entity Disposal of a subsidiary, net of cash disposed of 37(b) Acquisition of subsidiaries, net of cash acquired 37(c) Net cash used in investing activities Cash flows from financing activities Interest paid Distributions paid Drawdown of bank loans_(Note) Repayment of bank loans(Note)_ Issue of shares by subsidiaries to minority shareholders Advance from minority shareholders of a subsidiary Net cash from/(used in) financing activities	2005 HK$’000 349,319 51,295 21,618 1,736 (55) (6,804) 417,109 39,371 – (17,809) (9,514) (250,172) (21,879) – – (5,721) (157,934) (2,293) (4) 11,098 – (414,857) (8,770) (60,607) 24,500 (208,261) 6,128 870 (246,140)	2004 HK$’000 (restated) (886,037) 49,423 17,194 – (1,815) (1,722) (822,957) – 2,340 (7,764) (97,193) (71,682) – (216,822) (1,903) – (17,083) (1,587) (7,313) (1,264) 21,224 (399,047) (3,466) (60,607) 545,761 (347,000) 4,398 610 139,696

• 43 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange realignments Cash and cash equivalents at end of year Analysis of balances of cash and cash equivalents: Cash and bank balances Treasury bills	2005 HK$’000 (243,888) 881,885 (737) 637,260 621,740 15,520 637,260	2004 HK$’000 (restated) (1,082,308) 1,963,556 637 881,885 858,120 23,765 881,885

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

• 44 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes to the Financial Statements

1. CORPORATE INFORMATION

Hongkong Chinese Limited is a limited liability company incorporated in Bermuda. The principal place of business of the Company is located at 24th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong.

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

In the opinion of the Directors, the immediate holding company of the Company is HKCL Holdings Limited, which is incorporated in the Cayman Islands and the ultimate holding company of the Company is Lippo Cayman Limited, which is incorporated in the Cayman Islands.

2.1 BASIS OF PREPARATION

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

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries for the year ended 31st December, 2005. Adjustments are made to bring into line any dissimilar accounting policies that may exist. The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

Minority interests shown in the consolidated profit and loss account and the consolidated balance sheet represent the interests of outsider shareholders of the Company’s subsidiaries in the results and net assets of such subsidiaries, respectively.

• 45 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2.2 IMPACT OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

The following new and revised HKFRSs affect the Group and are adopted for the first time for the current year’s financial statements:

HKAS 1 Presentation of Financial Statements HKAS 2 Inventories HKAS 7 Cash Flow Statements HKAS 8 Accounting Policies, Changes in Accounting Estimates and Errors HKAS 10 Events after the Balance Sheet Date HKAS 11 Construction Contracts HKAS 12 Income Taxes HKAS 14 Segment Reporting HKAS 16 Property, Plant and Equipment HKAS 17 Leases HKAS 18 Revenue HKAS 19 Employee Benefits HKAS 20 Accounting for Government Grants and Disclosure of Government Assistance HKAS 21 The Effects of Changes in Foreign Exchange Rates HKAS 23 Borrowing Costs HKAS 24 Related Party Disclosures HKAS 27 Consolidated and Separate Financial Statements HKAS 28 Investments in Associates HKAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions HKAS 31 Interests in Joint Ventures HKAS 32 Financial Instruments: Disclosure and Presentation HKAS 33 Earnings per Share HKAS 36 Impairment of Assets HKAS 37 Provisions, Contingent Liabilities and Contingent Assets HKAS 38 Intangible Assets HKAS 39 Financial Instruments: Recognition and Measurement HKAS 39 Amendment Transition and Initial Recognition of Financial Assets and Financial Liabilities HKAS 40 Investment Property HKFRS 2 Share-based Payment HKFRS 3 Business Combinations HK-Int 4 Leases – Determination of the Length of Lease Term in respect of Hong Kong Land Leases HK(SIC)-Int 15 Operating Leases – Incentives HK(SIC)-Int 21 Income Taxes – Recovery of Revalued Non-depreciable Assets

The adoption of HKASs 2, 7, 8, 10, 11, 12, 14, 16, 17, 18, 19, 20, 23, 24, 28, 30, 31 ,33, 37, 38, HKFRS 2, HK-Int 4 and HK(SIC)-Int 15 has had no material impact on the accounting policies of the Group and the Company and the methods of computation in the Group’s and the Company’s financial statements.

HKAS 1 has affected the presentation of minority interests on the face of the consolidated balance sheet, consolidated profit and loss account, consolidated summary statement of changes in equity and other disclosures. In addition, in prior years, the Group’s share of tax attributable to associates was presented as a component of the Group’s total tax charge in the consolidated profit and loss account. Upon the adoption of HKAS 1, the Group’s share of the post-acquisition results of associates and jointly controlled entities is presented net of the Group’s share of tax attributable to associates and jointly controlled entities.

• 46 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

HKAS 21 had no material impact on the Group. As permitted by the transitional provisions of HKAS 21, goodwill arising in a business combination prior to 1st January, 2005 and fair value adjustments arising on that acquisition are deemed to be in the currency of the Company. In respect of acquisitions subsequent to 1st January, 2005, any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of the assets and liabilities are treated as asset and liabilities of the foreign operation and are translated at the closing rate in accordance with HKAS 21.

The impacts of adopting the other HKFRSs are summarised as follows:

(a) HKAS 27 – Consolidated and Separate Financial Statements

(i) Banking subsidiary

In prior years, due to dissimilar nature of banking and non-banking operations, on consolidation of the banking subsidiary of the Company, respective assets and liabilities attributable to the banking operation were recognised in aggregate under “Assets less liabilities attributable to banking operation”. Net interest income, commissions, dealing income and other revenues arising from the banking business were reported as “Turnover” in the consolidated profit and loss account.

With effect from 1st January, 2005, in accordance with HKAS 27, banking subsidiary is consolidated into the Group on a line-by-line basis. Assets and liabilities of the banking subsidiary are reported according to the respective type of the assets and liabilities as presented in the Group’s consolidated balance sheet. Revenue attributable to the banking business is reported on a gross basis and the relevant direct expenses are included in the “Cost of sales” as shown in the consolidated profit and loss account.

(ii) Investment fund

In prior years, the Group’s certain unlisted investment fund was accounted for as other investment in securities which was stated in the balance sheet at fair value.

With effect from 1st January, 2005, in accordance with HKAS 27, requirement for consolidation of an investee should be based on the parent’s ability to control the investee, which captures both the power to control and actual control. Accordingly, the underlying assets, liabilities and returns derived from such investment fund are now consolidated into the Group on a line-by-line basis.

The above changes have been adopted retrospectively and comparative amounts have been restated to reflect the aforesaid reclassifications. The effects of the above changes are summarised in Note 2.4 to the financial statements.

(b) HKAS 32 and HKAS 39 – Financial Instruments

Until 31st December, 2004, the Group classified its investments in securities into investment securities, held-to-maturity securities and other investments in securities, which were stated in the balance sheet at cost and amortised cost less any impairment losses and at fair value, respectively. Any impairment losses on investment securities and held-tomaturity securities and changes in fair value on other investments in securities were recognised in the profit and loss account for the period in which they arise. Loans and receivables were reported on the balance sheet at the total of principal amount outstanding and accrued interest receivable (if applicable) net of provisions for doubtful debts.

• 47 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

From 1st January, 2005 onwards, the Group classifies its investments into the following categories, taking into account the purpose for which the investments are acquired:

(i) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading and those designated at fair value through profit or loss at inception. Derivatives are also categorised as held for trading unless they are designated as hedges. They are carried at fair value in the balance sheet. Any change in fair value shall be recognised in the profit and loss account.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are recognised initially at fair value and subsequently carried at amortised costs using effective interest method, less any accumulated impairment losses. If the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss shall be reversed to the extent that such reversal shall not result in a carrying amount of the loans and receivables that exceeds what the amortised cost would have been had the impairment not been recognised at the date the impairment is reversed. The amount of such reversal shall be recognised in the profit and loss account.

Impairment provisions for loans and receivables assessed individually are calculated using a discounted cash flow analysis for the impaired advances. Collective assessment of impairment for individually insignificant items or items where no impairment has been identified on an individual basis, with similar risk characteristic, made using formula-based approaches or statistical methods. Impairment provisions for loans and receivables will be presented as individually assessed and collectively assessed instead of specific provisions and general provisions. Loans and receivables are included in loans and advances and debtors, prepayments and deposits in the balance sheet.

(iii) Held-to-maturity financial assets

Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity. They are carried at amortised costs using effective interest method, less any accumulated impairment losses.

(iv) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or not classified in any other categories. They are carried at fair value except for certain available-for-sale financial assets that do not have a published quoted price in an active market and whose fair value cannot be reliably measured, they are measured at cost less any accumulated impairment losses. The impairment loss is charged to the profit and loss account for the period in which they arise.

For available-for-sale financial assets carried at fair value, any gain or loss arising from the change in fair value shall be recognised directly in equity except for impairment losses, until the financial asset is derecognised at which time the cumulative gain or loss previously recognised in equity shall be recognised in the profit and loss account.

• 48 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity shall be removed from equity and recognised in the profit and loss account. Impairment losses recognised in the profit and loss account on equity instruments shall not be reversed through profit or loss. For debt instruments, impairment losses shall be reversed through profit or loss if the fair value of the debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised.

Interest on available-for-sale financial assets is calculated using the effective interest method and recognised in the profit and loss account and dividends are recognised in the profit and loss account when the Group’s right to receive payment is established.

The fair values of quoted financial assets are based on current bid prices at the close of business at the balance sheet date. If the market for a financial asset is not active (and for unlisted financial assets), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length market transactions; reference to the current market values of other instruments that are substantially the same; a discounted cash flow analysis; and option pricing models refined to reflect the issuer’s specific circumstances.

In accordance with the transitional provisions of HKAS 39, the Group re-designated:

(i) other investments in securities with total carrying amount of HK$935,515,000 and HK$197,702,000 into financial assets at fair value through profit or loss and available-for-sale financial assets on 1st January, 2005, respectively. There is no effect on re-measurement as the accounting policy on measurement of the Group’s other investments in securities as at 31st December, 2004 is the same as that for the financial assets at fair value through profit or loss and the available-for-sale financial assets which are carried at fair value;
(ii) investment securities with total carrying amount of HK$195,672,000 and HK$121,082,000 into financial assets at fair value through profit or loss and available-for-sale financial assets on 1st January, 2005, respectively, resulting in an adjustment of HK$5,062,000 debited to the opening balance of accumulated profit or loss to reflect the difference in fair value; and
(iii) the remaining investment securities with total carrying amount of HK$48,904,000 into available-for-sale financial assets which are carried at cost less any impairment losses. There is no effect on re-measurement as the accounting policy on measurement of the Group’s investment securities as at 31st December, 2004 is the same as that for available-for-sale financial assets which are carried at cost.

The effects of the above changes are summarised in Note 2.4 to the financial statements. In accordance with the transitional provisions of HKAS 39, comparative amounts have not been restated.

(c) HKAS 40 – Investment Property

In prior years, changes in the fair values of investment properties were dealt with as movements in the investment property revaluation reserve. If the total of this reserve was insufficient to cover a deficit, on a portfolio basis, the excess of the deficit was charged to the profit and loss account. Any subsequent revaluation surplus was credited to the profit and loss account to the extent of the deficit previously charged.

• 49 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Upon the adoption of HKAS 40, gains or losses arising from changes in the fair values of investment properties are included in the profit and loss account in the period in which they arise. Any gains or losses on the retirement or disposal of an investment property are recognised in the profit and loss account in the period of the retirement or disposal.

The Group has taken advantage of the transitional provisions of HKAS 40 to adjust the effect of adopting the standard to the opening balance of accumulated profit or loss rather than restating the comparative amounts to reflect the changes retrospectively. The effects of the above changes are summarised in Note 2.4 to the financial statements.

(d) HKFRS 3 – Business Combinations and HKAS 36 – Impairment of Assets

In prior years, goodwill/negative goodwill arising on acquisitions prior to 1st January, 2001 was eliminated against consolidated capital reserve in the year of acquisition and was not recognised in the consolidated profit and loss account until disposal or impairment of the acquired business.

Goodwill arising on acquisitions on or after 1st January, 2001 was capitalised and amortised on the straight-line basis over its estimated useful life and was subject to impairment testing when there was any indication of impairment. Negative goodwill was carried in the consolidated balance sheet and was recognised in the consolidated profit and loss account on a systematic basis over the remaining average useful life of the acquired depreciable/amortisable assets, except to the extent it related to expectations of future losses and expenses that were identified in the acquisition plan and that could be measured reliably, in which case, it was recognised as income in the consolidated profit and loss account when the future losses and expenses were recognised.

Upon the adoption of HKFRS 3 and HKAS 36, goodwill arising on acquisitions is no longer amortised but subject to an annual impairment review (or more frequently if events or changes in circumstances indicate that the carrying value may be impaired). Any impairment loss recognised for goodwill is not reversed in a subsequent period.

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

The transitional provisions of HKFRS 3 have required the Group to eliminate at 1st January, 2005 the carrying amounts of accumulated amortisation with a corresponding entry to the cost of goodwill and to derecognise the carrying amounts of negative goodwill (including that remaining in consolidated capital reserve) against accumulated profit or loss. Goodwill previously eliminated against consolidated capital reserve remains eliminated against consolidated capital reserve and is not recognised in the consolidated profit and loss account when all or part of the business to which the goodwill relates is disposed of or when a cash-generating unit to which the goodwill relates becomes impaired.

The effects of the above changes are summarised in Note 2.4 to the financial statements. In accordance with the transitional provisions of HKFRS 3, comparative amounts have not been restated.

(e) HK(SIC)-Int 21 – Income Taxes – Recovery of Revalued Non-depreciable Assets

In prior years, deferred tax arising on the revaluation of investment properties was recognised based on the tax rate that would be applicable upon the sale of the investment properties.

• 50 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Upon the adoption of HK(SIC)-Int 21, deferred tax arising on the revaluation of the Group’s investment properties is determined depending on whether the properties will be recovered through use or through sale. The Group has determined that its investment properties will be recovered through use, and accordingly the current profits tax rate has been applied to the calculation of deferred tax.

The change has been adopted retrospectively and the comparative amounts have been restated to reflect the deferred tax liabilities incurred. The effects of the above changes are summarised in Note 2.4 to the financial statements.

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

The Group has not applied the following new and revised HKFRSs, that have been issued but are not yet effective, to these financial statements. Unless otherwise stated, these HKFRSs are effective for annual periods beginning on or after 1st January, 2006:

HKAS 1 Amendment Capital Disclosures HKAS 19 Amendment Actuarial Gains and Losses, Group Plans and Disclosures HKAS 39 Amendment Cash Flow Hedge Accounting of Forecast Intragroup Transactions HKAS 39 Amendment The Fair Value Option HKAS 39 and HKFRS 4 Financial Guarantee Contracts Amendments HKFRS 7 Financial Instruments: Disclosures HK(IFRIC)-Int 4 Determining whether an Arrangement contains a Lease

The HKAS 1 Amendment shall be applied for annual periods beginning on or after 1st January, 2007. The revised standard will affect the disclosures about qualitative information about the Group’s objective, policies and processes for managing capital; quantitative data about what the Company regards as capital; and compliance with any capital requirements and the consequences of any non-compliance.

HKFRS 7 will replace HKAS 32 and has modified the disclosure requirements of HKAS 32 relating to financial instruments. This HKFRS shall be applied for annual periods beginning on or after 1st January, 2007.

In accordance with the amendments to HKAS 39 regarding financial guarantee contracts, financial guarantee contracts are initially recognised at fair value and are subsequently measured at the higher of (i) the amount determined in accordance with HKAS 37 and (ii) the amount initially recognised, less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18.

The HKAS 19 Amendment regarding actuarial gains and losses, group plans and disclosures and HKAS 39 Amendments regarding: (i) cash flow hedge accounting of forecast intragroup transactions and (ii) the fair value option shall be applied for annual periods beginning on or after 1st January, 2006.

The above new HKFRSs may result in changes in the future as to how the Group’s financial performance and financial position are prepared and presented.

• 51 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2.4 SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICIES

(a) Effect on the consolidated balance sheet

At 1st January, 2005 Effect of new policies (Increase/(Decrease)) Assets Negative goodwill Fixed assets Held-to-maturity financial assets Assets less liabilities attributable to banking operation Available-for-sale financial assets Investment securities Financial assets at fair value through profit or loss Other investments in securities Loans and advances Debtors, prepayments and deposits Treasury bills Cash and bank balances Liabilities/Equity Creditors, accruals and deposits received Current, fixed, savings and other deposits of customers Tax payable Deferred tax liabilities Investment property revaluation reserve Distributable reserves	Effect of adopting HKASs 32 HK(SIC)- HKAS 27# and 39 HKAS 40 HKFRS 3 Int 21# Change in* Surplus on Deferred tax classification revaluation of Derecognition on revaluation Change in of security investment of negative of investment presentation investments properties goodwill properties HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 – – – 1,144 – 26,272 – – – – 9,643 – – – – (175,411) – – – – – 365,441 – – – – (365,658) – – – – 1,131,270 – – – (11,031) (1,133,217 ) – – – 147,931 – – – – 4,196 – – – – 23,765 – – – – 95,847 – – – – 2,477 – – – – 117,641 – – – – 1,094 – – – – – 2,898 – – 1,234 – – (6,227 ) – (1,234 ) – (5,062 ) 6,227 1,144 –	Total HK$’000 1,144 26,272 9,643 (175,411) 365,441 (365,658) 1,131,270 (1,144,248 ) 147,931 4,196 23,765 95,847 120,192 2,477 117,641 1,094 4,132 (7,461 ) 2,309 120,192

Adjustments taken effect prospectively from 1st January, 2005
Adjustments/presentation taken effect retrospectively

• 52 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 31st December, 2005 Effect of new policies (Increase/(Decrease)) Assets Goodwill Fixed assets Held-to-maturity financial assets Assets less liabilities attributable to banking operation Available-for-sale financial assets Investment securities Financial assets at fair value through profit or loss Other investments in securities Loans and advances Debtors, prepayments and deposits Treasury bills Cash and bank balances Liabilities/Equity Creditors, accruals and deposits received Current, fixed, savings and other deposits of customers Tax payable Deferred tax liabilities Investment property revaluation reserve Investment revaluation reserve Distributable reserves	Effect of adopting HKASs 32 HK(SIC)- HKAS 27 and 39 HKAS 40 HKFRS 3 Int 21 Discontinuation of amortisation Change in Surplus on of goodwill/ Deferred tax classification revaluation of Derecognition on revaluation Change in of security investment of negative of investment presentation investments properties goodwill properties HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 – – – 3,971 – 33,504 – – – – 9,604 – – – – (195,006) – – – – 8,439 380,505 – – – – (310,089) – – – 152 886,514 – – – – (882,569) – – – 176,740 – – – – 3,185 – – – – 15,520 – – – – 68,022 – – – – 2,855 – – – – 116,743 – – – – 429 – – – – 133 5,026 – – 10,770 – – (81,011) – (1,234 ) – 81,876 – – – – (12,541 ) 81,011 3,971 (9,536 )	Total HK$’000 3,971 33,504 9,604 (195,006) 388,944 (310,089) 886,666 (882,569) 176,740 3,185 15,520 68,022 198,492 2,855 116,743 429 15,929 (82,245) 81,876 62,905 198,492

• 53 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Effect on the balance of equity at 1st January, 2004 and at 1st January, 2005

At 1st January, 2005 Effect of new policies (Increase/(Decrease)) Investment property revaluation reserve Distributable reserves	Effect of adopting HKASs 32 and 39 HKAS 40 HKFRS 3 HK(SIC)-Int 21 Designation of financial assets at fair value through Surplus on Deferred tax profit or loss revaluation on revaluation and available-for- of investment Negative of investment sale financial assets properties goodwill properties HK$’000 HK$’000 HK$’000 HK$’000 – (6,227) – (1,234) (5,062) 6,227 1,144 –	Total HK$’000 (7,461) 2,309 (5,152)

The adoption of HKFRSs and HKASs has had no material impact on the balance of equity at 1st January, 2004.

(c) Effect on the consolidated profit and loss account for the years ended 31st December, 2005 and 2004

Effect of adopting
HKASs 32
HK(SIC)-
Year ended 31st December, 2005
HKAS 1
HKAS 27
and 39
HKAS 40
HKFRS 3
Int 21
Designation of
financial assets
at fair value
through profit
Surplus on
Deferred tax
Share of post–
or loss and
revaluation of
Discontinuation
on revaluation
tax results
Change in
available-for-sale
investment
of amortisation
of investment
Effect of new policies
of associates
presentation
financial assets
properties
of goodwill
properties
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
Increase in revenue
–
149,294
–
–
–
–
Increase in cost of sales
–
(140,069 )
(10,423 )
–
–
–
Increase/(Decrease) in net fair value
gain on financial assets at fair
value through profit or loss
–
(9,225 )
2,944
–
–
–
Increase in fair value gains on
investment properties
–
–
–
74,784
–
–
Decrease in other operating
expenses
–
–
–
–
2,827
–
Decrease in share of results
of associates
(1,037 )
–
–
–
–
–
Decrease/(Increase) in tax
1,037
–
–
–
–
(9,536 )
Total increase/(decrease) in profit
attributable to equity holders
of the Company
–
–
(7,479 )
74,784
2,827
(9,536 )
Increase/(Decrease) in basic
earnings per share
–
–
(0.6) cents
5.6 cents
0.2 cents
(0.7) cents
Increase/(Decrease) in diluted
earnings per share
N/A
N/A
N/A
N/A
N/A
N/A

Total
HK$’000
149,294
(150,492 )
(6,281 )
74,784
2,827
(1,037 )
(8,499 )
60,596
4.5 cents
N/A

• 54 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Effect of adopting
HKASs 32
HK(SIC)–
Year ended 31st December, 2004
HKAS 1
HKAS 27
and 39
HKAS 40
HKFRS 3
Int 21
Designation of
financial assets
at fair value
through profit
Surplus on
Deferred tax
Share of post–
or loss and
revaluation of
Discontinuation
on revaluation
tax results
Change in
available-for-sale
investment
of amortisation
of investment
Effect of new policies
of associates
presentation
financial assets
properties
of goodwill
properties
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
Increase in revenue
–
147,224
–
–
–
–
Increase in cost of sales
–
(140,322 )
–
–
–
–
Increase in net unrealised
holding loss on other
investments in securities
–
(10,794 )
–
–
–
–
Decrease in other operating
expenses
–
3,892
–
–
–
–
Decrease in share of results
of associates
(1,208 )
–
–
–
–
–
Decrease in tax
1,208
–
–
–
–
–
Total increase/(decrease) in profit
attributable to equity holders
of the Company
–
–
–
–
–
–
Increase/(Decrease) in basic
earnings per share
–
–
–
–
–
–
Increase/(Decrease) in diluted
earnings per share
N/A
N/A
N/A
N/A
N/A
N/A

Total
HK$’000
147,224
(140,322 )
(10,794 )
3,892
(1,208 )
1,208
–
–
N/A

• 55 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Subsidiaries

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

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

(b) Joint venture companies

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

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

A joint venture company is treated as:

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

(c) Jointly controlled entities

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

The Group’s share of the post-acquisition results and reserves of jointly controlled entities is included in the consolidated profit and loss account and consolidated reserves, respectively. The Group’s interests in jointly controlled entities are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses. Goodwill arising from the acquisition of jointly controlled entities is included as part of the Group’s interests in jointly controlled entities. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

• 56 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

(d) Associates

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

The Group’s share of the post-acquisition results and reserves of associates is included in the consolidated profit and loss account and consolidated reserves, respectively. The Group’s interests in associates are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses. Goodwill arising from the acquisition of associates is included as part of the Group’s interests in associates. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

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

(e) Goodwill

Goodwill arising on the acquisition of subsidiaries, associates, and jointly controlled entities represents the excess of the cost of the acquisition over the Group’s share of the fair values of the identifiable assets and liabilities acquired and contingent liabilities assumed as at the date of acquisition.

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

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

The carrying amount of goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated:

represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and
is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format determined in accordance with HKAS 14 “Segment Reporting”.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which the goodwill relates. Where the recoverable amount of the cash- generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised.

• 57 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

An impairment loss recognised for goodwill is not reversed in a subsequent period.

Goodwill previously eliminated against the consolidated reserve

Prior to the adoption of SSAP 30 “Business combinations” in 2001, goodwill arising on acquisitions was eliminated against consolidated reserves in the year of acquisition. On the adoption of HKFRS 3, such goodwill remains eliminated against the consolidated distributable reserve and is not recognised in profit or loss when all or part of the business to which the goodwill relates is disposed of or when a cash- generating unit to which the goodwill relates becomes impaired.

Excess over the cost of business combinations (applicable to business combinations for which the agreement date is on or after 1st January, 2005)

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

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

(f) Impairment of assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than financial assets, investment properties and goodwill), the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s or cash generating unit’s value in use and its fair value less costs to sell, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash generating unit to which the asset belongs.

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

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(g) Fixed assets and depreciation

Fixed assets are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of fixed assets comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after items of fixed assets have been put into operation, such as repairs and maintenance, is normally charged to the profit and loss account in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of fixed assets and the cost of the item can be measured realiably, the expenditure is capitalised as an additional cost to that asset or as a replacement.

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

Leasehold land and buildings	1 per cent.
Leasehold improvements	Over the remaining lease terms
Furniture, fixtures and equipment	10 per cent. to 331/3per cent.
Motor vehicles	20 per cent. to 25 per cent.

When parts of an item of fixed assets have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately.

Residual values, useful lives and depreciation method are reviewed, and adjusted if appropriate, at each balance sheet date.

An item of fixed asset is derecognised upon disposal or when no future economic benefits are expected from its used or disposal. Any gain or loss on disposal or retirement recognised in the profit and loss account in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

(h) Investment properties

Investment properties are interests in land and buildings (including the leasehold interest under an operating lease for property which would otherwise meet the definition of an investment property) held to earn rental income and/or for capital appreciation, rather than for use in the production or supply of goods or services or for administrative purposes; or for sale in the ordinary course of business. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the balance sheet date.

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

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

• 59 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(i) Properties under development

Properties under development intended for sale are stated at the lower of cost and net realisable value, which is determined by reference to prevailing market prices, on an individual property basis. Other properties under development are stated at cost less any impairment losses. Costs comprise the cost of land, development expenditure, other attributable costs and borrowing costs capitalised.

(j) Investments and other financial assets

Applicable to the year ended 31st December, 2004

The Group classified its investments in securities other than subsidiaries, associates and jointly controlled entities, as investment securities, held-to-maturity securities and other investments in securities.

Investment securities

Investment securities are investments in equity securities, debt securities and investment funds which are intended to be held on a continuing strategic or long term purpose. Investment securities are included in the balance sheet at cost less impairment losses, on an individual investment basis.

When a decline in the fair value of a security below its carrying amount has occurred, the carrying amount of the security is reduced to its fair value, as determined by the Directors. The amount of the impairment is charged to the profit and loss account for the period in which it arises. When the circumstances and events which led to the impairment losses cease to exist and there is persuasive evidence that the new circumstances and events will persist for the foreseeable future, the amounts of the impairment previously charged is credited to the profit and loss account to the extent of the amount previously charged.

Held-to-maturity securities

Held-to-maturity securities are investments in dated debt securities which the Group has the expressed intention and ability to hold to maturity, and are stated at cost adjusted for the amortisation of premiums or discounts arising on acquisition, less any impairment losses which reflect their credit risk.

Premiums and discounts arising on acquisition of held-to-maturity securities are amortised over the period to maturity and are included as part of interest income. Profits or losses on realisation of held-to-maturity securities are accounted for in the profit and loss account as they arise.

Other investments in securities

Other investments in securities are those securities which are not classified as investment securities nor held-to-maturity securities, and are stated at their fair values on the basis of their quoted prices at the balance sheet date, on an individual investment basis. Unrealised holding gains or losses arising from changes in fair values of securities are dealt with in the profit and loss account as they arise.

Applicable to the year ended 31st December, 2005

Financial assets in the scope of HKAS 39 are classified as either financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets, as appropriate. When financial assets are recognised initially they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at the balance sheet date.

• 60 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Financial assets at fair value through profit or loss

Financial assets classified as held for trading are included in the category “financial assets at fair value through profit or loss”. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on financial assets held for trading are recognised in the profit and loss account.

The Group’s financial assets at fair value through profit or loss which are under regular way of purchases or sales are accounted for at trade dates. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the market place.

Held-to-maturity financial assets

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group has the positive intention and ability to hold to maturity. Financial assets intended to be held for an undefined period are not included in this classification. Other long term financial assets that are intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost. Amortised cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. For financial assets carried at amortised cost, gains and losses are recognised in the profit and loss account when the financial assets are derecognised or impaired, as well as through the amortisation process.

All regular way purchases and sales of held-to-maturity financial assets are recognised on the settlement dates, i.e., the dates the assets are received or delivered by the Group.

Loans and receivables

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

All regular way purchases and sales of loans and receivables are recognised on the settlement dates, i.e., the dates the assets are received or delivered by the Group.

Available-for-sale financial assets

Available-for-sale financial assets are those non-derivative financial assets in listed and unlisted equity securities, debt securities, and investment funds that are designated as available-for-sale or are not classified in any of the other three categories. After initial recognition, an available-for-sale financial assets is measured at fair value with gain or loss being recognised as a separate component of equity until the financial asset is derecognised or until the financial asset is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is included in the profit and loss account.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

All regular way purchases and sales of available-for-sale financial assets are recognised on the settlement dates, i.e., the dates the assets are received or delivered by the Group.

Fair value

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

(k) Impairment of financial assets

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

Assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables or held-tomaturity financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through the use of an allowance account. The amount of the impairment loss is recognised in profit or loss.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

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

Assets carried at cost

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Available-for-sale financial assets

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to the profit and loss account. Impairment losses on equity instruments classified as available-for-sale are not reversed through profit or loss.

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

(l) Derecognition of financial assets (Applicable to year ended 31st December, 2005)

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where:

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

Where the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and reward of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

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

(m) Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

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

• 63 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(n) Derecognition of financial liabilities (Applicable to the year ended 31st December, 2005)

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

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

(o) Property held for sale

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

(p) Revenue recognition

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

(i) rental income, in the period in which the properties are let and on the straightline basis over the lease terms;
(ii) dealings in securities and sale of investments, on the transaction dates when the relevant contract notes are exchanged or the settlement dates when the securities are delivered;
(iii) interest income, on an accrual basis using the effective interest method by applying the rate that discounts the estimated future cash receipts through the expected life of the financial instruments to the net carrying amount of the financial assets;
(iv) dividend income, when the shareholders’ right to receive payment has been established; and
(v) commission income is accounted for, in the period when receivable, unless it is charged to cover the costs of a continuing service to, or risk borne for, customers, or is interest income in nature. In this case, commission income is recognised on a pro-rata basis over the relevant period.

(q) Income tax

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

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

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

Deferred tax liabilities are recognised for all taxable temporary differences, except in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised. In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

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

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

(r) Provisions

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

When the effect of discounting is material, the amount recognised for a provision is the present value at the balance sheet date of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the profit and loss account.

(s) Employee benefits

Paid leave entitlement

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

Retirement benefits costs

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

• 65 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(t) Operating leases

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

(u) Cash and cash equivalents

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

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

(v) Foreign currencies

The financial statements are presented in Hong Kong dollars, which is the Company’s functional and presentation currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions are initially recorded using the functional currency rates ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are re- translated at the functional currency rates of exchange ruling at that balance sheet date. All differences are taken to profit or loss. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

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

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

• 66 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(w) Related parties

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

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

(x) Dividends and distributions

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

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

(y) Judgements

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

Operating lease commitments – Group as lessor

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

Classification between investment properties and owner-occupied properties

The Group determines whether a property qualifies as an investment property, and has developed criteria in making that judgement. Investment property is a property held to earn rentals or for capital appreciation or both. Therefore, the Group considers whether a property generates cash flows largely independently of the other assets held by the Group.

• 67 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions could be sold separately (or leased out separately under a finance lease), the Group accounts for the portions separately. If the portions could not be sold separately, the property is an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes.

Judgement is made on an individual property basis to determine whether ancillary services are so significant that a property does not qualify as an investment property.

(z) Estimation uncertainty

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

Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating unit to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill at 31st December, 2005 was HK$57,285,000 (2004 – HK$57,697,000). Further details are given in Note 17.

4. SEGMENT INFORMATION

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

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

(a) the property investment and development segment includes letting, resale and development of properties;
(b) the treasury investment segment includes investments in cash and bond markets;
(c) the securities investment segment includes dealings in securities and disposals of investments;
(d) the corporate finance and securities broking segment provides securities and futures brokerage, investment banking, underwriting and other related advisory services;
(e) the banking business segment engages in the provision of commercial and retail banking services;
(f) the information technology segment engages in the development of computer hardware and software; and
(g) the “other” segment comprises principally money lending and the provision of fund management services.

• 68 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Group

Property Corporate investment finance and and Treasury Securities securities 2005 development investment investment broking HK$’000 HK$’000 HK$’000 HK$’000 Revenue External 9,845 16,810 1,076,656 59,740 Inter-segment – 970 – 650 Total 9,845 17,780 1,076,656 60,390 Segment results 76,838 17,084 127,801 (25,646 ) Unallocated corporate expenses Share of results of associates (6,723 ) – (32 ) – Share of results of jointly controlled entities (313 ) – – – Profit before tax Tax Profit for the year	Banking Information business technology HK$’000 HK$’000 18,076 – – 883 18,076 883 6,638 (3,678 ) – – – –	Inter- segment Other elimination Consolidated HK$’000 HK$’000 HK$’000 5,806 – 1,186,933 2,015 (4,518 ) – 7,821 (4,518 ) 1,186,933 (8,915 ) (2,939 ) 187,183 (58,459 ) 4,207 – (2,548 ) (110 ) – (423 ) 125,753 (15,033 ) 110,720

• 69 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

	Property			Corporate
	investment			finance and				Inter-
	and	Treasury	Securities	securities	Banking	Information		segment
2005	development	investment	investment	broking	business	technology	Other	elimination	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000
Segment assets	570,842	548,513	1,270,414	663,002	372,452	1,674	22,420	–		3,449,317
Interests in associates	151,071	–	–	814	–	–	23,350	–		175,235
Interests in jointly
controlled entities	7,000	–	–	–	–	–	5,615	–		12,615
Unallocated assets										15,356
Total assets										3,652,523

Segment liabilities	3,513	–	1,351	625,899	120,071	60	9,338	–		760,232
Unallocated liabilities										31,196
Total liabilities										791,428

Other segment information:
Capital expenditure	1,536	–	–	801	8,123	12	1,124	–		11,596
Depreciation	(978 )	–	(390 )	(633 )	(890 )	(270 )	(359 )	–		(3,520	)
Write-back of allowance/
(Allowance) for bad and
doubtful debts relating to:
Banking operation	–	–	–	–	2,140	–	–	–		2,140
Non-banking operations	(94 )	–	–	(30,272 )	–	–	(2,670 )	–		(33,036	)
Provisions for impairment
losses on:
Associates	–	–	–	–	–	–	(5,859 )	–		(5,859	)
Available-for-sale
financial assets	–	–	(53,757 )	–	–	–	–	–		(53,757	)
Goodwill	–	–	–	–	–	–	(412 )	–		(412	)
Net fair value gain on financial
assets at fair value through
profit or loss	–	–	70,370	–	–	–	–	–		70,370
Fair value gains on investment
properties	74,784	–	–	–	–	–	–	–		74,784
Unallocated:
Capital expenditure										6,213
Depreciation										(1,093	)

• 70 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

Property Corporate investment finance and and Treasury Securities securities 2004 (restated) development investment investment broking HK$’000 HK$’000 HK$’000 HK$’000 Revenue External 2,056 12,988 1,219,029 65,045 Inter-segment – 906 – 1,453 Total 2,056 13,894 1,219,029 66,498 Segment results (2,486 ) 12,327 (5,263 ) 4,077 Unallocated corporate expenses Share of results of associates – – – – Loss before tax Tax Loss for the year	Banking Information business technology HK$’000 HK$’000 17,975 900 – – 17,975 900 3,972 (10,817 ) – (2,379 )	Inter- segment Other elimination Consolidated HK$’000 HK$’000 HK$’000 7,143 – 1,325,136 – (2,359 ) – 7,143 (2,359 ) 1,325,136 (18,828 ) – (17,018 ) (39,364 ) (4,138 ) – (6,517 ) (62,899 ) (3,535 ) (66,434 )

• 71 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

		Property			Corporate
	investment				finance and				Inter-
		and	Treasury	Securities	securities	Banking	Information		segment
2004 (restated)	development		investment	investment	broking	business	technology	Other	elimination	Consolidated
		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Segment assets		226,930	721,008	1,507,047	721,143	353,908	3,567	20,394	–	3,553,997
Interests in associates		–	–	–	1,334	–	–	25,832	–	27,166
Interests in a jointly
controlled entity		7,313	–	–	–	–	–	–	–	7,313
Unallocated assets										20,330
Total assets										3,608,806
Segment liabilities		2,672	–	110,250	622,890	120,118	22	2,805	–	858,757
Unallocated liabilities										14,745
Total liabilities										873,502
Other segment information:
Capital expenditure		4,948	–	–	781	–	101	1,012	–	6,842
Depreciation		(564 )	–	(402 )	(681 )	(785 )	(267 )	(241 )	–	(2,940	)
Write-back of allowance/
(Allowance) for bad and
doubtful debts relating to:
Banking operation		–	–	–	–	666	–	–	–	666
Non-banking operations		–	–	–	(1,203 )	–	–	–	–	(1,203	)
Provisions for impairment loss on:
An associate		–	–	–	–	–	–	(16,603 )	–	(16,603	)
Investment securities		–	–	(2,776 )	–	–	–	–	–	(2,776	)
Net unrealised holding loss on
other investments in securities		–	–	(72,097 )	–	–	–	–	–	(72,097	)
Negative goodwill recognised	as
income/(Amortisation of
goodwill) arising from
acquisition of subsidiaries		–	–	–	–	(3,356 )	(806 )	146	–	(4,016	)
Write-back of deficit on
revaluation of investment
properties		316	–	–	–	–	–	–	–	316
Unallocated:
Capital expenditure										922
Depreciation										(431	)

• 72 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Group

2005 Hong Kong HK$’000 Revenue 251,947 Segment assets 1,546,310 Interests in associates 20,533 Interests in jointly controlled entities Total assets Capital expenditure 2,173 2004 (restated) Hong Kong HK$’000 Revenue 551,467 Segment assets 1,702,340 Interests in associates 17,477 Interests in a jointly controlled entity – Total assets Capital expenditure 2,816	Republic of Macau Singapore HK$’000 HK$’000 18,076 336,375 645,969 548,913 – 151,211 8,123 6,941 Republic of Macau Singapore HK$’000 HK$’000 18,875 216,778 353,908 571,149 – – – – – –	Japan HK$’000 264,860 148,779 – – Japan HK$’000 265,628 201,857 – – –	Ireland HK$’000 176,168 – – – Ireland HK$’000 – – – – –	Other Consolidated HK$’000 HK$’000 139,507 1,186,933 574,702 3,464,673 3,491 175,235 12,615 12,615 3,652,523 572 17,809 Other Consolidated HK$’000 HK$’000 272,388 1,325,136 745,073 3,574,327 9,689 27,166 7,313 7,313 3,608,806 4,948 7,764	Other Consolidated HK$’000 HK$’000 139,507 1,186,933 574,702 3,464,673 3,491 175,235 12,615 12,615 3,652,523 572 17,809 Other Consolidated HK$’000 HK$’000 272,388 1,325,136 745,073 3,574,327 9,689 27,166 7,313 7,313 3,608,806 4,948 7,764

					3,574,327 27,166 7,313
					3,608,806

					7,764

• 73 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

5. REVENUE

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

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

Property investment and development Treasury investment Securities investment Corporate finance and securities broking Banking business Information technology Other	Group 2005 2004 HK$’000 HK$’000 (restated) 9,845 2,056 16,810 12,988 1,076,656 1,219,029 59,740 65,045 18,076 17,975 – 900 5,806 7,143 1,186,933 1,325,136	Group 2005 2004 HK$’000 HK$’000 (restated) 9,845 2,056 16,810 12,988 1,076,656 1,219,029 59,740 65,045 18,076 17,975 – 900 5,806 7,143 1,186,933 1,325,136
		1,325,136

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

Interest income Commission income Other revenues	Group 2005 2004 HK$’000 HK$’000 (restated) 15,722 11,247 2,180 5,793 174 935 18,076 17,975	Group 2005 2004 HK$’000 HK$’000 (restated) 15,722 11,247 2,180 5,793 174 935 18,076 17,975
		17,975

6. ALLOWANCE FOR BAD AND DOUBTFUL DEBTS RELATING TO NON-BANKING OPERATIONS

The allowance for the year includes an individual provision of HK$29,883,000 made for a loan advanced to a margin client, which has been secured by certain shares in a listed company and a guarantee provided by a director of the client. Currently, both the client and the listed company are under provisional liquidation and in the opinion of Directors, the probability for recovery of the loan is uncertain.

7. NET UNREALISED LOSS ON TRANSFER OF INVESTMENT SECURITIES AND HELD-TOMATURITY SECURITIES TO OTHER INVESTMENTS IN SECURITIES

During the year ended 31st December, 2004, investment securities of a total cost of HK$19,019,000 were transferred to other investments in securities at market value or fair value to reflect the Group’s intention to sell the investments in response to changes in market conditions, resulting in a loss at the date of transfer of HK$7,856,000.

• 74 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

8. PROFIT/(LOSS) BEFORE TAX

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

Gross rental income
Less:_Outgoings
Net rental income
Employee benefits expense(Note (a)):
Wages and salaries
Retirement benefit costs
_Less:_Forfeited contributions
Net retirement benefit costs
Total staff costs
Interest income:
Listed investments
Unlisted investments
Banking operation
Other
Dividend income:
Listed investments
Unlisted investments
Provision for impairment losses on:
Unlisted available-for-sale financial assets
Unlisted investment securities
Net realised gain/(loss) on:
Listed financial assets at fair value through profit or loss
Unlisted financial assets at fair value through profit or loss
Listed available-for-sale financial assets
Unlisted available-for-sale financial assets
Unlisted investment securities
Net realised and unrealised holding gain/(loss)
on other investments in securities:
Listed
Unlisted
Net fair value gain/(loss) on financial assets at fair
value through profit or loss:
Listed
Unlisted
Other unlisted investment income
Net unrealised loss on transfer of investment securities
and held-to-maturity securities to other investments
in securities:
Listed
Unlisted
Depreciation
Loss on disposal of fixed assets
Foreign exchange gains/(losses) – net
Fair value gains on investment properties
Write-back of deficit on revaluation of investment properties
Auditors’ remuneration
Minimum lease payments under operating lease rentals
in respect of land and buildings
Amortisation of goodwill arising from acquisition of
subsidiaries(Note (b))
Negative goodwill recognised as income(Note (b))_

Group
2005
2004
HK$’000
HK$’000
(restated)
9,845
2,056
(2,328)
(1,378)
7,517
678
(53,211)
(53,952)
(2,803)
(3,221)
369
181
(2,434)
(3,040)
(55,645)
(56,992)
18,112
19,259
2,028
1,171
15,722
11,247
16,810
12,988
20,165
16,716
1,465
478
(53,757)
–
–
(2,776)
68,978
–
(1,117)
–
1,006
–
7,341
–
–
340
–
(55,488)
–
20,832
(2,621)
–
72,991
–
681
5,253
–
(3,766)
–
(4,090)
(4,613)
(3,371)
(48)
(415)
(6,006)
7,468
74,784
–
–
316
(1,626)
(1,342)
(12,158)
(8,827)
–
(4,245)
–
229

• 75 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes:

(a) The amounts include the Directors’ emoluments disclosed in Note 9 to the financial statements.
(b) The amortisation of goodwill and negative goodwill recognised as income for the year ended 31st December, 2004 were included under “Other operating expenses” on the face of the consolidated profit and loss account.

9. DIRECTORS’ EMOLUMENTS

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

Directors’ fees Basic salaries, housing and other allowances and benefits in kind Discretionary bonuses paid and payable Retirement benefits costs	Group 2005 2004 HK$’000 HK$’000 517 389 4,784 12,367 – 1,200 29 36 5,330 13,992	Group 2005 2004 HK$’000 HK$’000 517 389 4,784 12,367 – 1,200 29 36 5,330 13,992
		13,992

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

2005 Executive directors: Mr. Stephen Riady Mr. John Lee Luen Wai Mr. Kor Kee Yee Mr. Jesse Leung Nai Chau Non-executive directors: Dr. Mochtar Riady Mr. Leon Chan Nim Leung Independent non-executive directors: Mr. Albert Saychuan Cheok Mr. Victor Yung Ha Kuk Mr. Tsui King Fai	Basic salaries, housing and other allowances and Fees benefits in kind HK$’000 HK$’000 – – 29 1,742 – 1,731 19 1,311 48 4,784 – – 169 – 169 – 140 – 80 – 80 – 300 – 517 4,784	Retirement benefits costs HK$’000 – 12 12 5 29 – – – – – – – 29	Total HK$’000 – 1,783 1,743 1,335
			4,861
			– 169
			169
			140 80 80
			300
			5,330

• 76 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2004 Executive directors: Mr. Stephen Riady Mr. John Lee Luen Wai Mr. Kor Kee Yee Mr. Jesse Leung Nai Chau Non-executive directors: Dr. Mochtar Riady Mr. Leon Chan Nim Leung Independent non-executive directors: Mr. Albert Saychuan Cheok Mr. Victor Yung Ha Kuk Mr. Tsui King Fai	Basic salaries, housing and other Discretionary allowances and bonuses paid Retirement Fees benefits in kind and payable benefits costs HK$’000 HK$’000 HK$’000 HK$’000 – – – – 20 1,638 1,200 12 – 1,729 – 12 20 1,000 – 12 40 4,367 1,200 36 – 8,000 – – 169 – – – 169 8,000 – – 140 – – – 20 – – – 20 – – – 180 – – – 389 12,367 1,200 36	Total HK$’000 – 2,870 1,741 1,032
		5,643
		8,000 169
		8,169
		140 20 20
		180
		13,992

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

10. FIVE HIGHEST PAID EMPLOYEES’ EMOLUMENTS

The five highest paid employees during the year included two directors (2004 – three), details of whose emoluments are set out in Note 9 to the financial statements. Details of the emoluments of the remaining three (2004 – two) non-director, highest paid employees for the year are as follows:

Basic salaries, housing and other allowances and benefits in kind Bonuses paid and payable Retirement benefits costs	Group 2005 2004 HK$’000 HK$’000 (restated) 3,912 7,097 7,142 560 81 248 11,135 7,905	Group 2005 2004 HK$’000 HK$’000 (restated) 3,912 7,097 7,142 560 81 248 11,135 7,905
		7,905

• 77 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Emoluments bands(HK$): 1,500,001 – 2,000,000 2,000,001 – 2,500,000 3,000,001 – 3,500,000 5,500,001 – 6,000,000 6,000,001 – 6,500,000	Group 2005 2004 Number of Number of employees employees (restated) 1 – – 1 1 – – 1 1 – 3 2	Group 2005 2004 Number of Number of employees employees (restated) 1 – – 1 1 – – 1 1 – 3 2
		2

11. RETIREMENT BENEFITS COSTS

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

Contributions made to the MPF schemes are based on a percentage of the employees’ relevant income and are charged to the profit and loss account as they become payable in accordance with the rules of the schemes. The Group’s employer contributions vest fully with the employees when contributed into the schemes except for the Group’s employer voluntary contributions forfeited when the employees leave employment prior to fully vesting in such contributions, which can be used to reduce the amount of future employer contributions or to offset against future administration expenses, in accordance with the rules of the schemes.

During the year, the amounts of forfeited employer contributions under the MPF schemes utilised to reduce the amount of employer contributions or for payments of administrative expenses amounted to HK$369,000 (2004 – HK$181,000). The amounts of forfeited voluntary contributions available to offset future employer contributions against the above schemes were not material at the year end. The retirement benefits scheme costs charged to the consolidated profit and loss account represent employer contributions paid and payable by the Group to the schemes and amounted to HK$2,434,000 (2004 – HK$3,040,000).

• 78 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

12. FINANCE COSTS


	2005	2004
	HK$’000	HK$’000
Interest on bank loans wholly repayable within five years	7,363	4,873

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

13. TAX

Hong Kong: Charge for the year Underprovision/ (Overprovision) in prior years Overseas: Charge for the year Underprovision/ (Overprovision) in prior years Deferred_(Note 33)_ Total charge for the year	Group 2005 2004 HK$’000 HK$’000 (restated) 639 – (11) 2,059 628 2,059 6,446 1,095 (232) 381 6,214 1,476 8,191 – 15,033 3,535	Group 2005 2004 HK$’000 HK$’000 (restated) 639 – (11) 2,059 628 2,059 6,446 1,095 (232) 381 6,214 1,476 8,191 – 15,033 3,535
		2,059
		1,095 381
		1,476
		–
		3,535

Hong Kong profits tax has been provided at the rate of 17.5 per cent. on the estimated assessable profits arising in Hong Kong during the year. No provision for Hong Kong profits tax has been provided for the year ended 31st December, 2004 as the Group has available tax losses brought forward from prior years to offset the estimated assessable profits generated during the year ended 31st December, 2004. Overseas taxes have been calculated on the estimated assessable profits for the year at the tax rates prevailing in the countries in which the Group operates based on existing legislation, interpretations and practices in respect thereof.

• 79 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

A reconciliation of the tax charge applicable to profit/(loss) before tax using the statutory rate for the country in which the Company and the majority of its subsidiaries, associates and jointly controlled entities are domiciled to the tax charge is as follows:

Profit/(Loss) before tax
Tax at the statutory tax rate of 17.5 per cent.
(2004 – 17.5 per cent.)
Effect of different tax rates in other jurisdictions
Adjustments in respect of current tax of previous years
Profits and losses attributable to jointly controlled
entities and associates
Income not subject to tax
Expenses not deductible for tax
Tax losses utilised from previous years
Tax losses not recognised
Tax charge at the Group’s effective rate of 12.0 per cent.
(2004 – 5.6 per cent., as restated)

Group
2005
2004
HK$’000
HK$’000
(restated)
125,753
(62,899)
22,007
(11,007)
(5,694)
(1,019)
(243)
2,441
520
1,140
(16,585)
(14,943)
5,335
15,738
–
(1,533)
9,693
12,718
15,033
3,535

For a company operated in Macau, corporate taxes have been calculated on the estimated assessable profits for the year at the rate of 12 per cent. (2004 – 15.75 per cent.).

The share of tax attributable to associates amounting to HK$1,037,000 (2004 – HK$1,208,000) is included in “Share of results of associates” on the face of the consolidated profit and loss account.

14. PROFIT/(LOSS) FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

The profit from ordinary activities attributable to equity holders of the Company for the year dealt with in the financial statements of the Company amounting to HK$4,715,000 (2004 – loss of HK$27,241,000) as set out in Note 35 to the financial statements.

15. 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 for the year attributable to equity holders of the Company of HK$111,761,000 (2004 – loss of HK$64,957,000); and (ii) the weighted average number of 1,346,829,000 ordinary shares (2004 – 1,346,829,000 ordinary shares) in issue during the year.

(b) Diluted earnings/(loss) per share

No diluted earnings/(loss) per share is presented for the years ended 31st December, 2005 and 2004 as there were no dilutive potential ordinary shares during these years.

• 80 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. DISTRIBUTIONS

Interim, declared and paid, of HK1.5 cents (2004 – HK1.5 cents) per ordinary share Final, proposed, of HK3 cents (2004 – HK3 cents, paid) per ordinary share	Group and Company 2005 2004 HK$’000 HK$’000 20,202 20,202 40,405 40,405 60,607 60,607	Group and Company 2005 2004 HK$’000 HK$’000 20,202 20,202 40,405 40,405 60,607 60,607
		60,607

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

17. GOODWILL/NEGATIVE GOODWILL

2005 At 1st January, 2005: Cost as previously reported Effect of adopting HKFRS 3_(Note 2.2(d)) Cost as restated Accumulated amortisation and impairment as previously reported Effect of adopting HKFRS 3(Note 2.2(d))_ Accumulated impairment as restated Net carrying amount Cost at 1st January, 2005, net of accumulated impairment Impairment during the year Cost and carrying amount at 31st December, 2005 At 31st December, 2005: Cost Accumulated impairment Net carrying amount	Goodwill HK$’000 70,984 (9,957) 61,027 (13,287) 9,957 (3,330) 57,697 57,697 (412) 57,285 61,027 (3,742) 57,285	Group Negative goodwill HK$’000 (1,373) 1,373 – 229 (229) – – – – – – – –	Total HK$’000 69,611 (8,584
			61,027
			(13,058 9,728
			(3,330
			57,697

			57,697 (412
			57,285

			61,027 (3,742
			57,285

• 81 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2004 At 1st January, 2004: Cost Accumulated amortisation and impairment Net carrying amount Cost at 1st January, 2004, net of accumulated amortisation and impairment Acquisition of subsidiaries Recognised as income/(Amortisation provided) during the year Cost and carrying amount at 31st December, 2004 At 31st December, 2004: Cost Accumulated amortisation and impairment Net carrying amount	Goodwill HK$’000 69,935 (9,042) 60,893 60,893 1,049 (4,245) 57,697 70,984 (13,287) 57,697	Group Negative goodwill HK$’000 – – – – (1,373) 229 (1,144) (1,373) 229 (1,144)	Total HK$’000 69,935 (9,042
			60,893

			60,893 (324 (4,016
			56,553

			69,611 (13,058
			56,553

For the year ended 31st December, 2004, goodwill not previously eliminated against reserves was amortised on the straight-line basis over its estimate useful life of 3 to 20 years.

Impairment testing of goodwill

Goodwill acquired through business combinations have been allocated to the following cashgenerating units, which are reportable segments, for impairment testing:

Banking business segment cash generating unit; and
Other segment cash-generating unit.

Banking business cash-generating unit

The recoverable amount of the banking business cash-generating unit is determined based on a value in use calculation using cash flow projections based on financial budgets approved by senior management covering a five-year period. The discount rate applied to the cash flow projection is 4.4 per cent. The growth rate used to extrapolate the cash flows of the banking business beyond the five-year period is assumed to be nil.

The carrying amount of goodwill allocated to each of the cash-generating units is as follows:

	Banking business	Banking business	Other business	Other business	Total	Total
	2005	2004	2005	2004	2005	2004
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Carrying amount of
goodwill	57,285	57,285	–	412	57,285	57,697

• 82 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

18. FIXED ASSETS

Group

2005 Cost: At 1st January, 2005, as restated Additions during the year Disposals during the year Exchange adjustments At 31st December, 2005 Accumulated depreciation: At 1st January, 2005, as restated Provided for the year Exchange adjustments At 31st December, 2005 Net book value: At 31st December, 2005 2004 (restated) Cost: At 1st January, 2004 Additions during the year Acquisition of subsidiaries Disposal of a subsidiary Disposals during the year Exchange adjustments At 31st December, 2004 Accumulated depreciation: At 1st January, 2004 Provided for the year Acquisition of subsidiaries Disposal of a subsidiary Disposals during the year Exchange adjustments At 31st December, 2004 Net book value: At 31st December, 2004	Leasehold improvements, furniture, fixtures, Leasehold equipment land and and motor buildings vehicles HK$’000 HK$’000 25,047 57,952 – 17,809 – (48) – (689) 25,047 75,024 271 45,752 251 4,362 – (158) 522 49,956 24,525 25,068 25,047 54,294 – 7,764 – 1,317 – (1,181) – (4,286) – 44 25,047 57,952 21 47,259 250 3,121 – 333 – (1,175) – (3,871) – 85 271 45,752 24,776 12,200	Total HK$’000 82,999 17,809 (48) (689) 100,071 46,023 4,613 (158) 50,478 49,593 79,341 7,764 1,317 (1,181) (4,286) 44 82,999 47,280 3,371 333 (1,175) (3,871) 85 46,023 36,976

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

• 83 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Company

	Furniture, fixtures,
	equipment and
2005	motor vehicles
	HK$’000
Cost:
At 1st January, 2005	3,300
Additions during the year	1,271
At 31st December, 2005	4,571
Accumulated depreciation:
At 1st January, 2005	1,165
Provided for the year	717
At 31st December, 2005	1,882
Net book value:
At 31st December, 2005	2,689
2004
Cost:
At 1st January, 2004	2,378
Additions during the year	922
At 31st December, 2004	3,300
Accumulated depreciation:
At 1st January, 2004	752
Provided for the year	413
At 31st December, 2004	1,165
Net book value:
At 31st December, 2004	2,135

• 84 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

19. INVESTMENT PROPERTIES

Medium term leasehold land and buildings situated
in Hong Kong:
Balance at beginning of year
Fair value adjustments
Balance at end of year
Long term leasehold land and buildings situated
in Hong Kong:
Balance at beginning of year
Additions during the year
Fair value adjustments
Balance at end of year
Medium term leasehold land and buildings situated
outside Hong Kong:
Additions during the year
Fair value adjustments
Balance at end of year
Freehold land and buildings situated outside Hong Kong:
Balance at beginning of year
Fair value adjustments
Exchange adjustments
Balance at end of year
Total

Group
2005
2004
HK$’000
HK$’000
14,800
9,700
2,000
5,100
16,800
14,800
73,843
–
–
71,682
10,275
2,161
84,118
73,843
250,172
–
61,828
–
312,000
–
7,501
7,050
681
516
423
(65)
8,605
7,501
421,523
96,144

Based on professional valuations as at 31st December, 2005 made by Mr. Jonathan Miles Foxall, a chartered surveyor and a director of certain subsidiaries of the Company, the investment properties in Hong Kong were valued on an open market, existing use basis at HK$100,918,000 (2004 – HK$88,643,000).

Based on professional valuations as at 31st December, 2005 made by Savills Consultancy Limited and Professional Asset Valuers, Incorporated, professionally qualified property appraisers, the investment properties situated outside Hong Kong were valued on an open market, existing use basis at HK$312,000,000 (2004 – Nil) and HK$8,605,000 (2004 – HK$7,501,000), respectively.

• 85 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

20. PROPERTIES UNDER DEVELOPMENT

Land and buildings situated outside Hong Kong, at cost: Balance at beginning of year Additions during the year Exchange adjustments Balance at end of year Land and buildings held under the following lease terms: Leasehold_(Note)_ Freehold	Group 2005 2004 HK$’000 HK$’000 99,767 – 9,514 97,193 (4,185) 2,574 105,096 99,767 69,795 62,367 35,301 37,400 105,096 99,767	Group 2005 2004 HK$’000 HK$’000 99,767 – 9,514 97,193 (4,185) 2,574 105,096 99,767 69,795 62,367 35,301 37,400 105,096 99,767
		99,767

		62,367 37,400
		99,767

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

21. INTERESTS IN ASSOCIATES

Share of net assets in unlisted companies Goodwill from acquisition less impairment Due from associates Provisions for impairment losses Share of post-acquisition reserves/(deficits) at the balance sheet date	Group 2005 2004 HK$’000 HK$’000 184,804 33,169 1,759 2,305 5,060 2,767 191,623 38,241 (16,388) (11,075 175,235 27,166 (1,155) 5,145	Group 2005 2004 HK$’000 HK$’000 184,804 33,169 1,759 2,305 5,060 2,767 191,623 38,241 (16,388) (11,075 175,235 27,166 (1,155) 5,145
		38,241 (11,075
		27,166

		5,145

The share of post-acquisition reserves/(deficits) represents that portion attributable to the Group before minority interests therein. The balances with the associates are unsecured, interest-free and have no fixed terms of repayment. The carrying amount of the balances are approximate to their fair values.

• 86 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The amount of goodwill arising from the acquisition of associates is as follows:

Group
2005
Cost:
As previously reported at 1st January, 2005
Effect of adopting HKFRS 3_(Note 2.2 (d))
Accumulated amortisation:
As previously reported at 1st January, 2005
Effect of adopting HKFRS 3(Note 2.2 (d))_
Cost as restated at 1st January, 2005 and at 31st December, 2005
Accumulated impairment:
At 1st January, 2005
Impairment provided for the year
At 31st December, 2005
Net carrying amount at 31st December, 2005
2004
Cost:
At 1st January, 2004
Additions during the year
At 31st December, 2004
Accumulated amortisation and impairment:
At 1st January, 2004
Amortisation provided for the year
Impairment provided for the year
At 31st December, 2004
Net carrying amount at 31st December, 2004

Goodwill
HK$’000
20,269
(11,074)
9,195
11,074
(11,074)
–
9,195
6,890
546
7,436
1,759
15,445
4,824
20,269
5,005
6,069
6,890
17,964
2,305

• 87 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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


	2005	2004
	HK$’000	HK$’000
Assets	308,190	130,887
Liabilities	74,972	49,204
Revenues	251,846	168,622
Profit/(Loss)	(1,676)	7,401

22. INTERESTS IN JOINTLY CONTROLLED ENTITIES

Share of net assets in unlisted companies Goodwill from acquisition Due from jointly controlled entities Share of post-acquisition deficits at the balance sheet date	Group 2005 2004 HK$’000 HK$’000 3,974 – 1,324 – 7,317 7,313 12,615 7,313 (423) –	Group 2005 2004 HK$’000 HK$’000 3,974 – 1,324 – 7,317 7,313 12,615 7,313 (423) –
		7,313

		–

The share of post-acquisition deficits represents that portion attributable to the Group before minority interests therein. The balances with the jointly controlled entities are unsecured, interestfree and have no fixed terms of repayment. The carrying amounts of the balances are approximate to their fair values.

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

Share of the jointly controlled entities’ assets and liabilities: Current assets Non-current assets Current liabilities Non-current liabilities Net assets Share of the jointly controlled entities’ results: Total expenses and loss after tax Share of the jointly controlled entities’ capital commitments	Group 2005 2004 HK$’000 HK$’000 5,043 62 8,654 9,552 (1,111) (419 (1,936) (2,050 10,650 7,145 (423) – 2,042 813	Group 2005 2004 HK$’000 HK$’000 5,043 62 8,654 9,552 (1,111) (419 (1,936) (2,050 10,650 7,145 (423) – 2,042 813
		7,145

		–

		813

• 88 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

23. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Financial assets stated at fair value: Equity securities listed in Hong Kong Unlisted equity securities Unlisted investment funds Financial assets stated at cost: Unlisted equity securities Unlisted debt securities Provision for impairment losses Less: Amount classified under current portion Non-current portion	Group 2005 2004 HK$’000 HK$’000 262,666 – 43,854 – 306,520 – 74,036 – 380,556 – 74,004 – 10,862 – (76,478) – 8,388 – 388,944 – (213,896) – 175,048 –	Company 2005 2004 HK$’000 HK$’000 48,770 – – – 48,770 – – – 48,770 – – – 3,165 – – – 3,165 – 51,935 – – – 51,935 –	Company 2005 2004 HK$’000 HK$’000 48,770 – – – 48,770 – – – 48,770 – – – 3,165 – – – 3,165 – 51,935 – – – 51,935 –
			– –
			–
			– – –
			–
			– –
			–

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

An analysis of the issuers of available-for-sale financial assets is as follows: Equity securities: Corporate entities Debt securities: Club debenture Corporate entities	380,524 3,165 7,697 10,862	– – – –	48,770 3,165 – 3,165	–

				– –
				–

During the year, the gross gain of the Group’s available-for-sale financial assets, recognised directly in equity amounted to HK$85,636,000.

The above financial assets consist of investments in equity securities and investment funds which were designated as available-for-sale financial assets on 1st January, 2005 and have no fixed maturity date or coupon rate.

• 89 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

During the year, the Directors reviewed the carrying amount of certain unlisted available-forsale financial assets in light of their business performances and with reference to the profit projections prepared by the investees’ management. An impairment loss of HK$53,757,000 has been charged to the consolidated profit and loss account.

As at 31st December, 2005, particulars of the Group’s available-for-sale financial assets which exceed 20 per cents. of the nominal value of the investee company’s issued shares disclosed pursuant to section 129(1) of the Hong Kong Companies Ordinance are as follows:

				Percentage of
				issued share
				capital held
Name	of company	Place of incorporation	Class of shares	by the Group
Vigor	Online Offshore Limited	British Virgin Islands	Ordinary shares	32.3

The above company is not regarded as an associate of the Group in accordance with HKAS 28 as the Group has no significant influence over its financing and operating policies.

• 90 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

24. INVESTMENT SECURITIES

Equity securities, at cost: Listed in Hong Kong Unlisted Provision for impairment loss for unlisted equity securities Unlisted debt securities, at cost Provision for impairment loss for unlisted debt securities Unlisted investment funds, at cost Market value of listed investments at the balance sheet date An analysis of the issuers of investment securities is as follows: Equity securities: Corporate entities Debt securities: Club debentures Corporate entities	Group 2005 2004 HK$’000 HK$’000 – 28,750 – 152,060 – 180,810 – (20,000) – 160,810 – 7,680 – (2,776) – 4,904 – 199,944 – 365,658 – 47,725 – 160,810 – 3,165 – 1,739 – 4,904	Company 2005 2004 HK$’000 HK$’000 – 28,750 – – – 28,750 – – – 28,750 – 3,165 – – – 3,165 – – – 31,915 – 47,725 – 28,750 – 3,165 – – – 3,165	Company 2005 2004 HK$’000 HK$’000 – 28,750 – – – 28,750 – – – 28,750 – 3,165 – – – 3,165 – – – 31,915 – 47,725 – 28,750 – 3,165 – – – 3,165
			28,750 –
			28,750
			3,165 –
			3,165
			–
			31,915

			47,725

			28,750

			3,165 –
			3,165

25. HELD-TO-MATURITY FINANCIAL ASSETS/SECURITIES

		Group
	2005	2004
	HK$’000	HK$’000
		(restated)
Debt securities, at amortised cost:
Listed overseas	9,604	9,643

Market value of listed debt securities	11,019	10,877

The debt securities have effective interest rates of 9 per cent. per annum.
An analysis of the issuers of held-to-maturity
financial assets/securities is as follows:
Banks and other financial institutions	9,604	9,643

• 91 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

26. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Held for trading: Listed equity securities: Hong Kong Overseas Debt securities: Listed in Hong Kong Listed overseas Unlisted Investment funds: Listed in Hong Kong Listed overseas Unlisted Other: Unlisted Designated as financial assets at fair value through profit or loss: Unlisted investment funds Less: Amount classified under current portion Non-current portion	Group 2005 2004 HK$’000 HK$’000 64,425 – 68,275 – 132,700 – 1,967 – 162,143 – 84,808 – 248,918 – 25 – 50,913 – 131,708 – 182,646 – 53,649 – 617,913 – 268,753 – 886,666 – (617,913) – 268,753 –	Company 2005 2004 HK$’000 HK$’000 38,605 – 6,523 – 45,128 – – – 4,454 – 54,308 – 58,762 – – – 4,258 – – – 4,258 – – – 108,148 – – – 108,148 – (108,148) – – –	Company 2005 2004 HK$’000 HK$’000 38,605 – 6,523 – 45,128 – – – 4,454 – 54,308 – 58,762 – – – 4,258 – – – 4,258 – – – 108,148 – – – 108,148 – (108,148) – – –
			–
			– – –
			–
			– – –
			–
			–
			– –
			– –
			–

The debt securities have effective interest rates ranging from 4.3 per cent. to 14.8 per cent. per annum.

• 92 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

An analysis of the issuers of financial assets at fair value through profit or loss is as follows: Equity securities: Banks and other financial institutions Corporate entities Debt securities: Central governments and central banks Public sector entities Banks and other financial institutions Corporate entities	Group 2005 2004 HK$’000 HK$’000 13,266 – 119,434 – 132,700 – 9,289 – 4,397 – 93,431 – 141,801 – 248,918 –	Company 2005 2004 HK$’000 HK$’000 – – 45,128 – 45,128 – – – – – 22,504 – 36,258 – 58,762 –	Company 2005 2004 HK$’000 HK$’000 – – 45,128 – 45,128 – – – – – 22,504 – 36,258 – 58,762 –
			–

			– – – –
			–

27. OTHER INVESTMENTS IN SECURITIES

Listed equity securities, at market value: Hong Kong Overseas Debt securities: Listed overseas, at market value Unlisted, at fair value Investment funds: Listed overseas, at market value Unlisted, at fair value	Group 2005 2004 HK$’000 HK$’000 (restated) – 251,454 – 72,594 – 324,048 – 234,435 – 165,374 – 399,809 – 229,252 – 180,108 – 409,360 – 1,133,217	Company 2005 2004 HK$’000 HK$’000 – 90,733 – 7,102 – 97,835 – 4,601 – 50,033 – 54,634 – 176,671 – 7,893 – 184,564 – 337,033	Company 2005 2004 HK$’000 HK$’000 – 90,733 – 7,102 – 97,835 – 4,601 – 50,033 – 54,634 – 176,671 – 7,893 – 184,564 – 337,033
			97,835
			4,601 50,033
			54,634
			176,671 7,893
			184,564
			337,033

• 93 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

An analysis of the issuers of other investments in securities is as follows: Equity securities: Public sector entities Banks and other financial institutions Corporate entities Debt securities: Central governments and central banks Banks and other financial institutions Corporate entities Others	Group 2005 2004 HK$’000 HK$’000 (restated) – 493 – 6,341 – 317,214 – 324,048 – 13,869 – 113,008 – 223,799 – 49,133 – 399,809	Company 2005 2004 HK$’000 HK$’000 – – – 1,848 – 95,987 – 97,835 – – – 23,213 – 31,421 – – – 54,634	Company 2005 2004 HK$’000 HK$’000 – – – 1,848 – 95,987 – 97,835 – – – 23,213 – 31,421 – – – 54,634
			97,835

			– 23,213 31,421 –
			54,634

28. LOANS AND ADVANCES

The loans and advances to customers of the Group have effective interest rates ranging from 3.5 per cent. to 18 per cent. (2004 – 3 per cent. to 10.5 per cent.) per annum. The carrying amounts of loans and advances are approximate to their fair values.

Movements of allowance for bad and doubtful debts relating to banking operation during the year are as follows:

Balance at beginning of year Allowance for bad and doubtful debts Impairment allowance released Balance at end of year	Group 2005 2004 HK$’000 HK$’000 5,140 5,050 2,910 90 (5,050) – 3,000 5,140	Group 2005 2004 HK$’000 HK$’000 5,140 5,050 2,910 90 (5,050) – 3,000 5,140
		5,140

• 94 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

29. DEBTORS, PREPAYMENTS AND DEPOSITS

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

Outstanding balances with ages: Repayable on demand Within 30 days Between 31 and 60 days Between 61 and 90 days	Group 2005 2004 HK$’000 HK$’000 55,282 32,835 78,903 95,347 295 – 157 – 134,637 128,182	Group 2005 2004 HK$’000 HK$’000 55,282 32,835 78,903 95,347 295 – 157 – 134,637 128,182
		128,182

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

30. BANK LOANS

Repayable within one year: Secured_(Note)_ Unsecured Repayable within one year: Secured	Group 2005 2004 HK$’000 HK$’000 25,000 188,761 – 20,000 25,000 208,761 Company 2005 2004 HK$’000 HK$’000 – 108,761

• 95 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The carrying amounts of the Group’s and Company’s bank loans are approximate to their fair values and bear interest at 5.3 per cent. to 5.5 per cent. (2004 – 1.4 per cent. to 2.5 per cent.) per annum.

Note: The bank loans as at 31st December, 2005 were secured by certain securities owned by the margin clients of the Group. The bank loans as at 31st December, 2004 were secured by certain securities of the Group and certain securities owned by the margin clients of the Group.

31. CREDITORS, ACCRUALS AND DEPOSITS RECEIVED

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

Outstanding balances with ages: Repayable on demand Within 30 days	Group 2005 2004 HK$’000 HK$’000 495,639 486,189 91,427 21,217 587,066 507,406	Group 2005 2004 HK$’000 HK$’000 495,639 486,189 91,427 21,217 587,066 507,406
		507,406

The outstanding balances that are repayable on demand include client payable relating to cash balances held on trust for the customers in respect of the Group’s securities broking business. As at 31st December, 2005, total client trust bank balances amounted to HK$444,460,000 (2004 – HK$389,123,000). The balances of trade creditors are non-interest-bearing.

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

The current, fixed, savings and other deposits of customers attributable to banking operation have effective interest rates ranging from 0.25 per cent. to 4.18 per cent. (2004 – 0.1 per cent. to 3.75 per cent.) per annum.

• 96 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

33. DEFERRED TAX

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

Deferred tax liabilities

Group Accelerated tax Revaluation depreciation of properties HK$000 HK$000 2005 At 1st January, 2005 Restated before opening adjustment – 1,234 Opening adjustment – – As restated – 1,234 Deferred tax charged to profit and loss account during the year_(Note 13)_ 193 9,536 Deferred tax debited to equity during the year – – Exchange adjustments – – At 31st December, 2005 193 10,770 2004 (restated) At 1st January, 2004 – – Deferred tax debited to equity during the year – 1,234 At 31st December, 2004 – 1,234	Fair value gains on available- for-sale financial assets HK$000 – 2,898 2,898 (1,538) 3,670 (4) 5,026 – – –	Total HK$000 1,234 2,898 4,132 8,191 3,670 (4) 15,989 – 1,234 1,234

At 31st December, 2005, there was no significant unrecognised deferred tax liabilities (2004 – Nil) for taxes that would be payable on the unremitted earnings of certain of the Group’s subsidiaries, jointly controlled entities or associates as the Group had no liability to additional tax should such amounts be remitted.

Deferred tax assets

The Group has tax losses arising in Hong Kong of HK$178,468,000 (2004 – HK$120,726,000) that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses at the balance sheet date due to the unpredictability of future profit streams.

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

• 97 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

34. SHARE CAPITAL

Shares Authorised: 2,000,000,000 (2004 – 2,000,000,000) ordinary shares of HK$1.00 each Issued and fully paid: 1,346,829,094 (2004 – 1,346,829,094) ordinary shares of HK$1.00 each	Group and Company 2005 2004 HK$’000 HK$’000 2,000,000 2,000,000 1,346,829 1,346,829	Group and Company 2005 2004 HK$’000 HK$’000 2,000,000 2,000,000 1,346,829 1,346,829

		1,346,829

35. RESERVES

Group

At 1st January, 2005 As previously reported Prior year adjustment: HK(SIC)-Int 21 Deferred tax arising from revaluation of investment properties As restated before opening adjustments Opening adjustments: In respect of financial instruments In respect of investment properties In respect of negative goodwill As restated after opening adjustments Net fair value gain on available-for-sale financial assets Deferred tax arising from net fair value gain on available-for-sale financial assets Transfer of reserves Exchange realignment Issue of shares by subsidiaries to minority shareholders Advance from minority shareholders of a subsidiary Changes in interests in subsidiaries Profit/(Loss) for the year_(Note (b))_ 2004 final distribution, declared and paid 2005 interim distribution, declared and paid At 31st December, 2005	Share premium account HK$’000 50,988 – 50,988 – – – 50,988 – – – – – – – – – – 50,988	Capital redemption reserve *(Note (d))* HK$’000 11,760 – 11,760 – – – 11,760 – – – – – – – – – – 11,760	Legal reserve *(Note (e))* HK$’000 2,053 – 2,053 – – – 2,053 – – 981 – – – – – – – 3,034	Regulatory reserve *(Note (f))* HK$’000 – – – – – – – – – 1,169 – – – – – – – 1,169	Investment property revaluation reserve HK$’000 7,461 (1,234 ) 6,227 – (6,227 ) – – – – – – – – – – – – –	Investment revaluation reserve HK$’000 – – – – – – – 85,546 (3,670 ) – – – – – – – – 81,876	Dis- tributable Exchange reserves equalisation *(Note (c))* reserve HK$’000 HK$’000 1,297,500 (10,257 ) – – 1,297,500 (10,257 ) (5,062 ) – 6,227 – 1,144 – 1,299,809 (10,257 ) – – – – (2,150 ) – – (5,196 ) – – – – – – 111,761 – (40,405 ) – (20,202 ) – 1,348,813 (15,453 )	Total HK$’000 1,359,505 (1,234 ) 1,358,271 (5,062 ) – 1,144 1,354,353 85,546 (3,670 ) – (5,196 ) – – – 111,761 (40,405 ) (20,202 ) 1,482,187	Minority interests HK$’000 30,204 –
									30,204 – – –
									30,204 90 – – 44 6,128 870 (4,216 (1,041 – –
									32,079

• 98 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

At 1st January, 2004 Surplus on revaluation of investment properties Deferred tax arising from revaluation of investment properties Transfer of reserve Exchange realignment Issue of shares by subsidiaries to minority shareholders Acquisition of subsidiaries Disposal of a subsidiary Changes in interests in a subsidiary Advance from minority shareholders of a subsidiary Loss for the year_(Note (b))_ 2003 final distribution, declared and paid 2004 interim distribution, declared and paid At 31st December, 2004, as restated	Capital Share redemption premium reserve account *(Note (d))* HK$’000 HK$’000 50,988 11,760 – – – – – – – – – – – – – – – – – – – – – – – – 50,988 11,760	Investment Legal property Investment Distributable Exchange reserve revaluation revaluation reserves equalisation *(Note (e))* reserve reserve *(Note (c))* reserve HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 845 – – 1,424,272 (13,371 ) – 7,461 – – – – (1,234 ) – – – 1,208 – – (1,208 ) – – – – – 3,114 – – – – – – – – – – – – – – – – – – – – – – – – – – – – (64,957 ) – – – – (40,405 ) – – – – (20,202 ) – 2,053 6,227 – 1,297,500 (10,257 )	Total HK$’000 1,474,494 7,461 (1,234 ) – 3,114 – – – – – (64,957 ) (40,405 ) (20,202 ) 1,358,271	Minority interests HK$’000 24,793 – – – (45 ) 4,398 2,174 (803 ) 554 610 (1,477 ) – – 30,204

• 99 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Company

At 1st January, 2004 Loss for the year_(Note 14) 2003 final distribution, declared and paid 2004 interim distribution, declared and paid At 31st December, 2004 and 1st January, 2005, before opening adjustment Opening adjustment in respect of financial instruments As restated after opening adjustment Net fair value gain on available-for-sale financial assets Profit for the year(Note 14)_ 2004 final distribution, declared and paid 2005 interim distribution, declared and paid At 31st December, 2005	Capital Share redemption premium reserve account (Note (d)) HK$’000 HK$’000 50,988 11,760 – – – – – – 50,988 11,760 – – 50,988 11,760 – – – – – – – – 50,988 11,760	Investment Distributable revaluation reserves reserve (Note (c)) HK$’000 HK$’000 – 1,330,857 – (27,241) – (40,405) – (20,202) – 1,243,009 – 18,975 – 1,261,984 6,604 – – 4,715 – (40,405) – (20,202) 6,604 1,206,092	Total HK$’000 1,393,605 (27,241) (40,405) (20,202) 1,305,757 18,975 1,324,732 6,604 4,715 (40,405) (20,202) 1,275,444

Note:

(a) Cancellation of the share premium account and transfer to distributable reserves:

(b) Consolidated profit/(loss) for the year attributable to equity holders of the Company is retained/(accumulated) as follows:

The Company and its subsidiaries Associates Jointly controlled entities	Group 2005 2004 HK$’000 HK$’000 114,732 (58,440) (2,548) (6,517) (423) – 111,761 (64,957)

• 100 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(c) Distributable reserves of the Group at 31st December, 2005 comprise retained profit of HK$42,148,000 (1st January, 2005 – accumulated losses of HK$67,463,000; 31st December, 2004 – accumulated losses of HK$69,772,000) and the remaining balance arising from the Cancellation of HK$1,306,665,000 (2004 – HK$1,367,272,000). Included in the distributable reserves of the Group at 31st December, 2005 was an amount of proposed final distribution for the year then ended of HK$40,405,000 (2004 – HK$40,405,000) declared after the balance sheet date.

Distributable reserves of the Company at 31st December, 2005 comprise contributed surplus of HK$134,329,000 (2004 – HK$134,329,000), accumulated losses of HK$234,902,000 (1st January, 2005 – HK$239,617,000; 31st December, 2004 – HK$258,592,000) and the remaining balance arising from the Cancellation of HK$1,306,665,000 (2004 – HK$1,367,272,000). Included in the distributable reserves of the Company at 31st December, 2005 was an amount of proposed final distributable for the year then ended of HK$40,405,000 (2004 – HK$40,405,000) declared after the balance sheet date.

(d) The capital redemption reserve is not available for distribution to shareholders.
(e) 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.
(f) The regulatory reserve made under HKAS 30 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.

36. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Due from subsidiaries Due to subsidiaries Provisions for impairment losses	Company 2005 2004 HK$’000 HK$’000 44,953 44,953 2,497,693 2,201,677 (181,537) (137,067) 2,361,109 2,109,563 (103,569) (103,569) 2,257,540 2,005,994

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

• 101 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

37. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

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

Note
Profit/(Loss) before tax
Adjustments for:
Share of results of associates
Share of results of jointly controlled entities
Loss/(Gain) on disposal of:
Items of fixed assets
8
Available-for-sale financial assets
Investment securities
8
A subsidiary
Gain on changes in interests in subsidiaries
Net allowance for bad and doubtful debts
Provisions for impairment losses on:
Available-for-sale financial assets
8
Investment securities
8
Associates
Goodwill
Net fair value gain on financial assets at fair
value through profit or loss
Net unrealised loss on transfer of investment
securities and held-to-maturity securities
to other investments in securities
7
Fair value gains on investment properties
8
Write-back of deficit on revaluation of
investment properties
8
Interest expenses
12
Interest income
Dividend income
Depreciation
8
Amortisation of goodwill arising from
acquisition of subsidiaries
8
Negative goodwill recognised as income
8
Operating loss before working capital changes
Decrease in financial assets at fair value
through profit or loss
Decrease in held-to-maturity financial
assets/securities
Increase in other investments in securities
Increase in property held for sale
Decrease/(Increase) in loans and advances
Decrease/(Increase) in debtors, prepayments
and deposits
Increase/(Decrease) in creditors, accruals
and deposit received
Decrease in current, fixed, savings and
other deposits of customers
Decrease/(Increase) in client trust bank balances
Cash from/(used in) operations

Group
2005
2004
HK$’000
HK$’000
(restated)
125,753
(62,899)
2,548
6,517
423
–
48
415
(8,347)
–
–
(340)
295
140
(4,216)
–
30,896
537
53,757
–
–
2,776
5,859
16,603
412
–
(70,370)
–
–
7,856
(74,784)
–
–
(316)
7,363
4,873
(52,672)
(44,665)
(21,630)
(17,194)
4,613
3,371
–
4,245
–
(229)
(52)
(78,310)
314,974
–
39
29
–
(79,831)
(2,301)
(10,140)
22,643
(80,585)
(19,003)
119,653
89,254
(249,639)
(898)
(548,649)
(55,337)
41,435
349,319
(886,037)

• 102 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Disposal of a subsidiary

Net assets disposed of:
Fixed assets
Cash and bank balances
Debtors, prepayment and deposits
Creditors and accruals
Release of exchange reserve
Minority interests
Loss on disposal of a subsidiary
Cash consideration received
An analysis of net inflow/(outflow) of cash and
cash equivalents in respect of the disposal of
a subsidiary is as follow:
Cash consideration received
Cash and bank balances disposed of
Net inflow/(outflow) of cash and cash equivalents
in respect of the disposal of a subsidiary
(c)
Acquisition of subsidiaries
Net assets acquired:
Fixed assets
Cash and bank balances
Debtors, prepayments and deposits
Creditors and accruals
Minority interests
Reclassification from interest in an associate
Negative goodwill arising on acquisition
Cash consideration paid

Group
2005
2004
HK$’000
HK$’000
–
6
–
1,964
11,393
40,069
–
(40,400)
–
4
–
(803)
11,393
840
(295)
(140)
11,098
700
11,098
700
–
(1,964)
11,098
(1,264)
Group
2005
2004
HK$’000
HK$’000
–
984
–
40,500
–
1,163
–
(2,428)
–
(2,174)
–
38,045
–
(17,891)
–
20,154
–
(878)
–
19,276

• 103 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

An analysis of net inflow of cash and cash equivalents in respect of the acquisition of subsidiaries is as follows:

Cash consideration paid Cash and bank balances acquired Net inflow of cash and cash equivalents in respect of the acquisition of subsidiaries	Group 2005 2004 HK$’000 HK$’000 – (19,276 – 40,500 – 21,224	Group 2005 2004 HK$’000 HK$’000 – (19,276 – 40,500 – 21,224
		21,224

38. MATURITY PROFILE OF ASSETS AND LIABILITIES

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

Repayable on demand HK$’000 At 31st December, 2005 Assets Debt securities: Held-to-maturity financial assets – Available-for-sale financial assets – Financial assets at fair value through profit or loss – Loans and advances 133,983 Client trust bank balances 21,150 Treasury bills – Cash and bank balances 98,303 253,436 Liabilities Bank loans – Current, fixed, savings and other deposits of customers 43,601 43,601	3 months or less HK$’000 – – – 62,255 423,310 15,520 523,437 1,024,522 25,000 71,643 96,643	1 year or less but over 3 months HK$’000 – – 10,177 44,260 – – – 54,437 – 1,499 1,499	5 years or less but over 1 year HK$’000 – 7,697 159,103 12,642 – – – 179,442 – – –	After 5 years HK$’000 9,604 – 71,496 17,333 – – – 98,433 – – –	Undated HK$’000 – 3,165 8,142 – – – – 11,307 – – –	Total HK$’000 9,604 10,862 248,918 270,473 444,460 15,520 621,740
						1,621,577

						25,000 116,743
						141,743

• 104 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Repayable on demand HK$’000 At 31st December, 2004 (restated) Assets Debt securities: Held-to-maturity securities – Investment securities – Other investments in securities – Loans and advances 194,212 Client trust bank balances 43,244 Treasury bills – Cash and bank balances 168,091 405,547 Liabilities Bank loans – Current, fixed, savings and other deposits of customers 19,912 19,912	3 months or less HK$’000 – – – 61,854 345,879 23,765 690,029 1,121,527 193,213 88,576 281,789	1 year or less but over 3 months HK$’000 – – 28,722 21,573 – – – 50,295 15,548 9,153 24,701	5 years or less but over 1 year HK$’000 – 1,739 242,584 33,310 – – – 277,633 – – –	After 5 years HK$’000 9,643 – 70,180 12,580 – – – 92,403 – – –	Undated HK$’000 – 3,165 58,323 – – – – 61,488 – – –	Total HK$’000 9,643 4,904 399,809 323,529 389,123 23,765 858,120
						2,008,893

						208,761 117,641
						326,402

39. CONTINGENT LIABILITIES

Group

As at 31st December, 2005, the Group had contingent liabilities relating to its banking subsidiary of HK$29,953,000 (2004 – HK$29,245,000) comprising guarantees and other endorsements of HK$11,785,000 (2004 – HK$15,528,000) and liabilities under letters of credit on behalf of customers of HK$18,168,000 (2004 – HK$13,717,000).

Company

As at 31st December, 2005, guarantees provided by the Company in respect of banking facilities granted to its subsidiaries amounted to HK$257,500,000 (2004 – HK$257,500,000).

• 105 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

40. OPERATING LEASE ARRANGEMENTS

(a) As lessor

The Group leases its investment properties under operating lease arrangements with leases negotiated for terms of two years. The terms of the leases generally also require the tenants to pay security deposits and provide for periodic rent adjustments according to the prevailing market condition. At 31st December, 2005, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due as follows:

Within one year In the second to fifth years, inclusive	Group 2005 2004 HK$’000 HK$’000 7,058 2,900 2,868 16 9,926 2,916	Group 2005 2004 HK$’000 HK$’000 7,058 2,900 2,868 16 9,926 2,916
		2,916

(b) As lessee

The Group leases certain properties under lease agreements which are non-cancellable. The leases expire on various dates until 30th November, 2008 and the leases for properties contain provision for rental adjustments. As at 31st December, 2005, the Group had total future minimum lease payments under non-cancellable operating leases in respect of land and buildings falling due as follows:

Within one year In the second to fifth years, inclusive	Group 2005 2004 HK$’000 HK$’000 12,258 6,529 6,172 7,877 18,430 14,406	Company 2005 2004 HK$’000 HK$’000 1,016 1,434 – 1,016 1,016 2,450	Company 2005 2004 HK$’000 HK$’000 1,016 1,434 – 1,016 1,016 2,450
			2,450

41. CAPITAL COMMITMENTS

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

Capital commitment in respect of property, plant and equipment: Contracted, but not provided for Other capital commitments: Contracted, but not provided for_(Note)_	Group 2005 2004 HK$’000 HK$’000 59,988 – 1,471,472 160,118 1,531,460 160,118	Group 2005 2004 HK$’000 HK$’000 59,988 – 1,471,472 160,118 1,531,460 160,118
		160,118

• 106 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note: The balance as at 31st December, 2005 included the Group’s commitment in Lippo ASM Asia Property LP, a limited partnership established with an investment objective to invest in real estate in the East Asia region, of approximately HK$1,292,000,000 (2004 – Nil).

The Company did not have any material commitments at the balance sheet date (2004 – Nil).

42. RELATED PARTY TRANSACTIONS

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

(a) During the year, Lippo Securities Holdings Limited (“LSHL”), being a wholly-owned subsidiary of the Company, paid rental expenses of HK$3,005,000 (2004 – HK$2,311,000) to Prime Power Investment Limited, being a fellow subsidiary of the Company, in respect of office premises occupied by LSHL, and the Company and ImPac Asset Management (HK) Limited (“ImPac”), being a wholly-owned subsidiary of the Company, paid rental expenses of HK$1,434,000 (2004 – HK$934,000) and nil (2004 – HK$142,000) to Porbandar Limited, being a fellow subsidiary of the Company, in respect of office premises occupied by the Company and ImPac, respectively. The above rentals were determined by reference to open market rentals.

Details of the tenancy agreements between group companies in respect of the letting of office premises are disclosed in the section headed “Directors’ and controlling shareholders’ interests in contracts” in the Report of the Directors.

(b) During the year, LSHL and its subsidiaries (the “LSHL Group”) received commission income for dealing in listed securities in the market from The Hong Kong Building and Loan Agency Limited, being a former fellow subsidiary of the Company, for itself and its subsidiaries, amounted to HK$164,000 (2004 – HK$803,000), Lippo China Resources Limited, being an indirect controlling shareholder of the Company, for itself and its subsidiaries, amounted to HK$181,000 (2004 – HK$805,000), Lippo Limited, being an indirect controlling shareholder of the Company, for itself and its subsidiaries, amounted to HK$4,000 (2004 – HK$65,000) and Lippo Cayman Limited, being an indirect controlling shareholder of the Company, for itself and its subsidiaries, amounted to HK$14,000 (2004 – HK$25,000). The commissions were in line with those offered by LSHL Group to its customers.
(c) During the year, HKCL Investments Limited (“HKCL Investments”), a wholly-owned subsidiary of the Company, sold the entired issue share capital of HKCL Investments Pte. Ltd. (“HKCL Pte”) and assigned the related shareholder ’s loan in aggregate of HK$6,495,000 owing by HKCL Pte to HKCL Investments to Timemore Limited, a fellow subsidiary of the Company, for a consideration of HK$11,098,000.
(d) During the year, ImPac received investment advisory income from Lippo ASM Investment Management Limited, being an associate of the Group, amounted to HK$4,112,000.
(e) As at 31st December, 2005, the Group had balances with its associates and jointly controlled entities as set out in Note 21 and Note 22 respectively to the financial statements.

The transactions in respect of items (a) & (b) above are continuing connected transactions as defined in Chapter 14A of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. Further details of the transaction are disclosed in the section headed “Directors’ and controlling shareholders’ interests in contracts” in the Report of the Directors.

• 107 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

43. POST BALANCE SHEET EVENTS

(a) On 18th January, 2006, the Group entered into a total of twenty two sale and purchase agreements to acquire certain strata interest in a commercial building located at 79 Anson Road in Singapore for an aggregate consideration of HK$448,020,000 for property investment purpose. The acquisition was completed on 12th April, 2006.
(b) On 17th March, 2006 and 27th March, 2006, the Group entered into a subscription agreement and a shareholders’ agreement respectively, in respect of investment in and formation of a joint venture (the “Joint Venture”). Pursuant to the subscription agreement, the Group has subscribed for 45 per cent. of the issued share capital of the Joint Venture for a consideration of US$4,500. Pursuant to the shareholders’ agreement, the Joint Venture will acquire and hold 86.25 per cent. equity interest in Tongren Healthcare Management Group Co., Ltd. and its subsidiaries (“Tongren Healthcare Group”). The funding for the acquisition will be met by shareholders’ loans in proportion to the respective equity interests of the shareholders in the Joint Venture. Tongren Healthcare Group is mainly engaged in medical and healthcare related business in the People’s Republic of China. The completion of the acquisition will be subject to the fulfillments of certain conditions precedent as stipulated in the agreements.

44. COMPARATIVE AMOUNTS

As explained in Note 2.2 and Note 2.4 to the financial statements, due to the adoption of the new and revised HKFRSs and HKASs during the current year, the accounting treatment and presentation of certain items and balances in the financial statements have been revised to comply with the new requirement. Accordingly, certain comparative amounts have been restated to conform with current year’s presentation.

45. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Board of Directors on 19th April, 2006.

• 108 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

4. INDEBTEDNESS

As at 31st October, 2006, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group (other than The Macau Chinese Bank Limited (“MCB”), a banking subsidiary of the Company) had outstanding indebtedness of approximately HK$1,373 million, comprising secured bank loans of approximately HK$587 million and unsecured other loans of approximately HK$786 million.

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

Save as aforesaid and apart from intra-group liabilities, the Group (other than MCB) did not, as at 31st October, 2006, have any outstanding debt securities, whether issued and outstanding, authorised or otherwise created but unissued, term loans, whether guaranteed, unguaranteed, secured (whether the security is provided by the issuer or by third parties) or unsecured, other borrowings or indebtedness in the nature of borrowing including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments, whether guaranteed, unguaranteed, secured or unsecured borrowings or debt, mortgages, charges, guarantees or other material contingent liabilities.

As at 31st October, 2006, MCB accepts deposits from customers, banks and other financial institutions of approximately HK$257 million in the normal course of their banking business. MCB also had contingent liabilities of approximately HK$21 million, comprising guarantees and other endorsements of approximately HK$14 million and liabilities under letters of credit on behalf of customers of approximately HK$7 million, as at 31st October, 2006.

Save as aforesaid, MCB did not, as at 31st October, 2006, have any outstanding debt securities, whether issued and outstanding, authorised or otherwise created but unissued, term loans, whether guaranteed, unguaranteed, secured (whether the security is provided by the issuer or by third parties) or unsecured, other borrowings or indebtedness in the nature of borrowing including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments, whether guaranteed, unguaranteed, secured or unsecured borrowings or debt, mortgages, charges, guarantees or other material contingent liabilities.

The Directors confirm that, save as disclosed above, there are no material changes in the indebtedness and contingent liabilities of the Group since 31st October, 2006.

5. WORKING CAPITAL

The Directors (including the independent non-executive Directors) are of the opinion that taking into account of cash balances of the Group, its expected internally generated funds and the present available banking facilities of the Group, the Group has sufficient working capital for its present requirements (for at least the next twelve months from the date of this Circular).

• 109 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

6. MATERIAL CHANGE

The Directors confirm that, as at the Latest Practicable Date, there are no material adverse changes in the financial or trading position or prospect of the Group since 31st December, 2005, the date to which the latest published audited financial statements of the Group were made up.

7. FINANCIAL AND TRADING PROSPECTS

The global economy sustained a steady growth in the first half of 2006, especially in the Asia region. Property investment and development sector continued to perform well and generated stable returns and revenues to the Group. Meanwhile, the Group continued to strengthen its core businesses and take positive steps to explore the overseas investment markets. For the six months ended 30th June, 2006, the Group’s profit attributable to shareholders increased markedly to HK$129 million (2005 – HK$12 million).

With the regional property markets looking promising, especially in relation to long term capital appreciation, the Group has been actively seeking strategic property investments. In April 2006, the Group acquired a freehold commercial property with total lettable area of 111,245 square feet within the central business district of Singapore for an aggregate consideration of approximately HK$448 million. The property started to generate recurrent rental income to the Group in the current period. On the other hand, the investment properties in Hong Kong continued to provide stable and recurrent rental income source to the Group during the period. With the growth in Hong Kong property market became moderate in the first half of year 2006, the Group recorded a revaluation gain on investment properties of HK$5.5 million (2005 – HK$46.3 million) during the period.

In 2005, the Group entered into an agreement under which it would be committed to invest in a property fund (the “Property Fund”), carrying the objective of investing in real estates in the East Asia region. During the current period, the Group has contributed HK$1.3 billion to the Property Fund. In May 2006, the Property Fund participated in a joint venture to invest in Overseas Union Enterprise Limited (“OUE”), a listed company in Singapore principally engaged in property investments and hotel operations. OUE held a number of prime office buildings and hotels located in major financial and business districts and prime shopping areas of Singapore as well as other Asia regions. Amidst the backup of a sustained pick up in tourism sector and the economy with a limited supply of prime office buildings and hotels in Singapore and some Asia regions, it is expected that these assets have future value appreciation potential.

Additionally, the Group has participated in other well-located development projects in Macau, Singapore, Thailand and Japan.

• 110 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Despite turbulence of oil price and uncertainty in interest rate hikes in the United States, the Group is cautiously optimistic about the global and regional economic prospects. The growth prospects will continue to be centered on developments in the Asia Pacific Region. The operating environment of the Group remains challenging. While striving to continue to improve internal operational efficiencies, the Group will keep on refining its existing core businesses and seeking new investment opportunities with long-term growth potential. Given its own strong financial position, the Group is confident that it would be able to take advantage of new business opportunities in its pursuit of enhancing shareholders’ value.

• 111 •

APPENDIX II PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The following is the full text of a letter received from the auditors, Ernst & Young, Certified Public Accountants, Hong Kong for the purpose of incorporation in this circular.

==> picture [131 x 35] intentionally omitted <==

21st December, 2006

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

Dear Sirs

We report on the unaudited pro forma statement of assets and liabilities of Hongkong Chinese Limited (the “Company”) and its subsidiaries (hereinafter collectively referred to as the “Group”) set out in Appendix II “Pro forma financial information of the Group” of the Company’s circular (the “Circular”) dated 21st December, 2006 in connection with the acquisition, deemed disposal and entry into a joint venture in respect of land parcels in Sentosa Cove, Sentosa Island, Singapore (the “Proposed Transaction”). The unaudited pro forma statement of assets and liabilities has been prepared, for illustrative purpose only, to provide information about how the Proposed Transaction resulting in the formation of an enlarged group (the “Enlarged Group”) might have affected the net assets of the Group.

RESPONSIBILITIES

It is solely the responsibility of the directors of the Company to prepare the unaudited pro forma statement of assets and liabilities of the Group in accordance with paragraph 29 of Chapter 4 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to AG7 ”Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

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

BASIS OF OPINION

We conducted our work in accordance with the Hong Kong Standard on Investment Circular Reporting Engagements (“HKSIR”) 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work, which involved no independent examination of any of the underlying financial information,

• 112 •

APPENDIX II PRO FORMA FINANCIAL INFORMATION OF THE GROUP

consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma statement of assets and liabilities of the Group with the directors of the Company.

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

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

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

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

OPINION

In our opinion:

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

Yours faithfully,

Ernst & Young

Certified Public Accountants

• 113 •

APPENDIX II PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Set out below is the unaudited pro forma statement of assets and liabilities of the Group as at 30th June, 2006 which gives effect to the acquisition, deemed disposal and entry into a joint venture in respect of land parcels in Sentosa Cove, Sentosa Island, Singapore (the “Proposed Transaction”) as if it had been consummated on 30th June, 2006.

The unaudited pro forma financial information of the Group is prepared based on the unaudited consolidated balance sheet of the Company as at 30th June, 2006, extracted from its interim report for the six months ended 30th June, 2006, after making appropriate pro forma adjustment that is considered necessary.

The unaudited pro forma financial information was prepared for the purpose of illustrating how the Proposed Transaction might have affected the assets and liabilities position of the Group. As it is prepared for illustrative purpose only, and because of its nature, it may not purport to represent the assets and liabilities position of the Group on the completion of the Proposed Transaction or at any future date.

Unaudited Pro Forma Statement of Assets and Liabilities of the Group

The Group As at Pro forma 30th June, 2006 Adjustment HK$’000 HK$’000 NON-CURRENT ASSETS Goodwill 57,285 Fixed assets 49,474 Investment properties 905,463 Properties under development 140,736 Interests in associates 1,555,659 286,883 Interests in jointly controlled entities 10,684 Available-for-sale financial assets 108,427 Held to maturity financial assets 9,619 Financial assets at fair value through profit or loss 269,716 Loans and advances 32,020 3,139,083 CURRENT ASSETS Property held for sale 16,226 Available-for-sale financial assets 11,000 Financial assets at fair value through profit or loss 484,559 (172,130) Loans and advances 286,695 Debtors, prepayments and deposits 174,623 Client trust bank balances 608,143 Treasury bills 75,660 Cash and bank balances 252,093 (114,753) 1,908,999	Adjusted Balance HK$’000 57,285 49,474 905,463 140,736 1,842,542 10,684 108,427 9,619 269,716 32,020
	3,425,966
	16,226 11,000 312,429 286,695 174,623 608,143 75,660 137,340
	1,622,116

• 114 •

APPENDIX II

PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The Group As at Pro forma 30th June, 2006 Adjustment HK$’000 HK$’000 CURRENT LIABILITIES Bank and other borrowings 59,909 Creditors, accruals and deposits received 885,740 Current, fixed, savings and other deposits of customers 182,594 Tax payable 6,060 1,134,303 NET CURRENT ASSETS 774,696 TOTAL ASSETS LESS CURRENT LIABILITIES 3,913,779 NON-CURRENT LIABILITIES Bank and other borrowings 997,075 Deferred tax liabilities 20,957 1,018,032 NET ASSETS 2,895,747	Adjusted Balance HK$’000 59,909 885,740 182,594 6,060
	1,134,303
	487,813
	3,913,779
	997,075 20,957
	1,018,032
	2,895,747

Notes to pro forma adjustments:

a. The increase in interests in associates represents the capital contribution and shareholder’s loan to the joint venture company which will acquire, own and deal with the Property. The increase in interests in associates will be financed by internal resources by utilising the Group’s financial assets at fair value through profit or loss and cash and bank in the ratio of 60 per cent. and 40 per cent. respectively. Since the Group’s actual balance of financial assets at fair value through profit or loss and cash and bank will change from time to time, the actual outlays from each category might be different from the figures as shown in this statement.

In relation to the financing of the acquisition of the Property, it is currently the intention of joint venture company that the ratio between internal funding and bank borrowings will be 30 per cent. and 70 per cent. respectively. However, the ratio may change at the time of completion, depending on the terms of the bank borrowing and other financial circumstances at the time.

b. The above pro forma adjustments have not taken into account:

(i) the establishment of a joint venture for development of properties in Beijing, the People’s Republic of China, details of which are set out in the announcement of the Company dated 22nd May, 2006.
(ii) the formation of a joint venture for acquisition of a property in Singapore, details of which are set out in the announcement of the Company dated 27th November, 2006.

• 115 •

APPENDIX III

VALUATION OF THE PROPERTY

==> picture [32 x 46] intentionally omitted <==

Knight Frank Pte Ltd 16 Raffles Quay #30-00 Hong Leong Building Singapore 048581 (65) 6222 1333 (65) 6224 5843 fax www.knightfrank.com.sg Reg No 198205243Z

[email protected] direct tel +65 6228 6868 direct fax +65 6323 5042

21st December, 2006

The Board of Directors Hongkong Chinese Limited 24th Floor, Tower One Lippo Centre 89 Queensway Hong Kong

Dear Sirs

VALUATION OF PROPERTY AT COVE DRIVE/COVE WAY, SENTOSA COVE, SENTOSA ISLAND (LOTS 1399N & 1400L MUKIM 34) SINGAPORE

In accordance with your instructions for us to value the property held by Lippo Global Assets Limited, we confirm that we have carried out an inspection, made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of the market value of the property as at 6th November, 2006.

Our valuation is our opinion of the market value of the property which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

The market value is the best price reasonably obtainable in the market by the seller and the most advantageous price reasonably obtainable in the market by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, special considerations or concessions granted by anyone associated with the sale, or any element of special value. The market value of a property is also estimated without regard to costs of sale and purchase, and without offset for any associated taxes.

• 116 •

APPENDIX III

VALUATION OF THE PROPERTY

We have valued the property, which is held by you for development, on the basis that it will be developed and completed in accordance with the development parameters as set out in the Conditions of Tender of the site issued by Sentosa Development Corporation. We have assumed that formal planning approvals for the development proposal will be obtained in due course. In undertaking our valuation, we have adopted the “Direct Comparison Approach” by making reference to the comparable market transactions as available in the market.

We have carried out a search at the Singapore Land Authority and note that caveats have been lodged against the titles of the land by Lippo Global Assets Limited claiming interest as Purchaser. However, we have not inspected the original documents for verification. We have also relied on information available in the Conditions of Tender of the site issued by Sentosa Development Corporation regarding tenure, identification of the property, permitted development type and intensity, site area and all other relevant matters. Dimensions and areas included in the valuation certificate are only approximations. We have not been able to carry out on-site measurements to verify the correctness of the site area of the property and have assumed that the areas shown in the title searches and Conditions of Tender are correct. We have also been advised by you that no material facts have been omitted from the information provided.

We have inspected the property. However, we have not carried out investigations on site to determine the suitability of the ground conditions and the services etc for any future development. Our valuation is prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property nor for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property is free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

In preparing our valuation report, we have complied with the “First Edition of The HKIS Valuation Standards on Properties” published by The Hong Kong Institute of Surveyors (“HKIS”) and all the requirements contained in the provision of Chapter 5 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

All monetary amounts stated are in Singapore dollars.

We enclose herewith our valuation certificate.

Yours faithfully

For and on behalf of

Knight Frank Pte Ltd

Lydia Sng B.Sc. (Estate Management) Hons.,MSISV Executive Director

Note: Lydia Sng, B.Sc. (Estate Management) Hons.,MSISV, has over 28 years’ experience in the valuation of properties in Singapore.

• 117 •

APPENDIX III

VALUATION OF THE PROPERTY

VALUATION CERTIFICATE

		Particulars of	Market Value as at
Property	Description and Tenure	Occupancy	6th November, 2006
Land at Cove Drive/	The property is a residential	The site is currently	S$235,000,000
Cove Way, Sentosa	development site with a total	vacant.
Cove, Sentosa Island	site area of approximately
(Lots 1399N & 1400L	22,222.2 sm (239,198 sf).
Mukim 34)
Singapore	According to Conditions of
	Tender of the site issued by
	Sentosa Development
	Corporation, the permitted
	development is for a
	condominium with a maximum
	of 170 units. The gross plot ratio
	is 1.2 (maximum). Other
	requirements include provision
	of 1.1 car park lots for every
	dwelling unit and a building
	height restriction of 4 storeys
	and not exceeding maximum of
	18.8 metres from platform level
	of 103.148 RL.
	The land tenure is 99 years from
	a date falling 90 days from and
	including the date of the Letter
	of Acceptance or 99 years from
	15th October, 2007, whichever is
	the earlier.

Note: Caveats have been lodged against the titles of the land by Lippo Global Assets Limited claiming interest as Purchaser.

• 118 •

APPENDIX IV

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

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

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

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

					Approximate
	Personal				percentage
	interests	Family			of total
	(held as	interests			interests in
	beneficial	(interest	Other	Total	the issued
Name of Director	owner)	of spouse)	interests	interests	share capital
Number of ordinary Shares
in the Company
Mochtar Riady	–	–	973,240,440	973,240,440	72.26
			(Note 1)
Stephen Riady	–	–	973,240,440	973,240,440	72.26
			(Note 1)
John Luen Wai Lee	200	200	–	400	0.00
King Fai Tsui	–	50,000	–	50,000	0.00

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GENERAL INFORMATION

					Approximate
	Personal				percentage
	interests	Family			of total
	(held as	interests			interests in
	beneficial	(interest	Other	Total	the issued
Name of Director	owner)	of spouse)	interests	interests	share capital
Number of ordinary shares
of HK$0.10 each in Lippo
Mochtar Riady	–	–	248,697,776	248,697,776	57.34
			(Notes 1 & 2)
Stephen Riady	–	–	248,697,776	248,697,776	57.34
			(Notes 1 & 2)
John Luen Wai Lee	825,000	–	–	825,000	0.19
Number of ordinary shares
of HK$0.10 each in LCR
Mochtar Riady	–	–	6,544,696,389	6,544,696,389	71.13
			(Notes 1, 2 & 3)
Stephen Riady	–	–	6,544,696,389	6,544,696,389	71.13
			(Notes 1, 2 & 3)

Note:

As at the Latest Practicable Date, Lippo Cayman Limited (“Lippo Cayman”), an associated corporation (within the meaning of Part XV of the SFO) of the Company, was indirectly interested in 973,240,440 ordinary Shares in, representing approximately 72.26 per cent. of, the issued share capital of the Company. Lanius Limited (“Lanius”), an associated corporation (within the meaning of Part XV of the SFO) of the Company, was the registered shareholder of 10,000,000 ordinary shares of US$1.00 each in, representing 100 per cent. of, the issued share capital of Lippo Cayman. Lanius was the trustee of a discretionary trust, of which Dr. Mochtar Riady is the founder and in accordance with whose instructions Lanius was accustomed to act. Dr. Mochtar Riady did not have any interests in the share capital of Lanius. The beneficiaries of the trust include Dr. Mochtar Riady, Mr. Stephen Riady and their respective family members including, inter alia, the minor child of Mr. Stephen Riady. Dr. Mochtar Riady as the founder and beneficiary of the trust and Mr. Stephen Riady (together with his minor child) as beneficiaries of the trust were taken to be interested in Lippo Cayman under the SFO.
As at the Latest Practicable Date, Lippo Cayman, and through its wholly-owned subsidiaries, Lippo Capital, J & S Company Limited and Huge Returns Limited, was directly and indirectly interested in an aggregate of 248,697,776 ordinary shares of HK$0.10 each in, representing approximately 57.34 per cent. of, the issued share capital of Lippo.
As at the Latest Practicable Date, Lippo was indirectly interested in 6,544,696,389 ordinary shares of HK$0.10 each in, representing approximately 71.13 per cent. of, the issued share capital of LCR.

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GENERAL INFORMATION

As at the Latest Practicable Date, Dr. Mochtar Riady, as founder and beneficiary of the aforesaid discretionary trust, and Mr. Stephen Riady (together with his minor child), as beneficiaries of the aforesaid discretionary trust, through their interests in Lippo Cayman as mentioned in Note 1 above, were also taken to be interested in the share capital of the following associated corporations (within the meaning of Part XV of the SFO) of the Company:

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

• 121 •

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GENERAL INFORMATION

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

Note:

a. The interests included 219,600,000 ordinary shares held by Mideast Pacific Strategic Holdings Limited in which Lippo Cayman controlled a 30 per cent. interest.
b. The interests were held by HCB General, a 70 per cent. owned subsidiary of Lippo Cayman.
c. The interest was held by Lippo, a 57.34 per cent. owned subsidiary of Lippo Cayman.
d. The interest was held by LCR, a 71.13 per cent. owned subsidiary of Lippo which in turn was a 57.34 per cent. owned subsidiary of Lippo Cayman.
e. The interests were held through LCR, a 71.13 per cent. owned subsidiary of Lippo which in turn was a 57.34 per cent. owned subsidiary of Lippo Cayman.
f. The interests were held through Lippo, a 57.34 per cent. owned subsidiary of Lippo Cayman.

As at the Latest Practicable Date, Mr. Stephen Riady, as beneficial owner and through his nominee, was interested in 5 ordinary shares of HK$1.00 each in, representing 25 per cent. of, the issued share capital of Lanius which was the registered shareholder of 10,000,000 ordinary shares of US$1.00 each in, representing 100 per cent. of, the issued share capital of Lippo Cayman. Lanius was the trustee of a discretionary trust, of which Dr. Mochtar Riady is the founder and beneficiary. The beneficiaries of the trust also include, inter alia, Mr. Stephen Riady and his minor child. Dr. Mochtar Riady did not have any interests in the share capital of Lanius but the shareholders of Lanius were accustomed to act in accordance with his instructions.

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GENERAL INFORMATION

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

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

(b) Interests in underlying shares of the Company’s associated corporation

As at the Latest Practicable Date, Mr. John Luen Wai Lee, as beneficial owner, held 1,500,000 options granted to him on 23rd June, 1997 at a consideration of HK$1.00 under the Share Option Scheme for Employees adopted by LCR (the “LCR Share Option Scheme”). Such options vested after two months from the date when the options were deemed to be granted and accepted and are exercisable from 23rd August, 1997 to 23rd June, 2007 in accordance with the rules of the LCR Share Option Scheme to subscribe for ordinary shares in LCR at an initial exercise price of HK$5.30 per share (subject to adjustment). Pursuant to the bonus issue of new shares in the ratio of one for one in October 1997, the rights issue of new shares in July 1999 on the basis of one rights share for every one share held and the rights issue of new shares in November 2000 on the basis of one rights share for every two shares held, the holder of each option is entitled to subscribe for six ordinary shares of HK$0.10 each in LCR at an exercise price of HK$0.883 per share (subject to adjustment). Accordingly, Mr. John Luen Wai Lee is entitled to subscribe for 9,000,000 ordinary shares in, representing approximately 0.09 per cent. of, the issued share capital of LCR. None of the options were exercised by Mr. John Luen Wai Lee since they were granted and the quantity of options held by him as at the Latest Practicable Date remained unchanged.

The above interest in the underlying shares of LCR was held pursuant to unlisted physically settled equity derivatives. As at the Latest Practicable Date, none of the Directors or chief executive of the Company had any interests in the underlying shares in respect of cash settled or other equity derivatives of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

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GENERAL INFORMATION

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

(1) none of the Directors or chief executive of the Company had or was deemed to have any interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of Part XV of the SFO) (a) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which the Directors and the chief executive were taken or deemed to have under such provisions of the SFO); or (b) which were required to be entered in the register kept by the Company under Section 352 of the SFO; or (c) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code; and
(2) none of the Directors or chief executive of the Company nor their spouses or minor children (natural or adopted) were granted or had exercised any rights to subscribe for any equity or debt securities of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

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

3. INTERESTS AND SHORT POSITIONS OF SHAREHOLDERS

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

(i) The Company

		Approximate
Name	No. of ordinary Shares	percentage
HKCL Holdings	806,656,440	59.89
LCR	973,240,440	72.26
Lippo	973,240,440	72.26
Lippo Cayman	973,240,440	72.26
Lanius	973,240,440	72.26
Madam Lidya Suryawaty	973,240,440	72.26

• 124 •

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GENERAL INFORMATION

Note:

HKCL Holdings, the immediate holding company of the Company, as beneficial owner, held 806,656,440 ordinary Shares in the Company.
LCR’s interests in the Shares of the Company included the interest of HKCL Holdings which was held by LCR through Greenroot Limited, a wholly-owned subsidiary of LCR. LCR, as beneficial owner, directly held 166,584,000 ordinary Shares in, representing approximately 12.37 per cent. of, the issued share capital of the Company.
Lippo was an intermediate holding company of LCR which was held by Skyscraper Realty Limited as to approximately 71.13 per cent., which in turn was wholly owned by First Tower Corporation, a wholly-owned subsidiary of Lippo.
Lippo Cayman was the holding company of Lippo through direct holding and through wholly-owned subsidiaries, one of which was Lippo Capital which controlled an approximate 50.47 per cent. interest in Lippo.
Lanius was the registered shareholder of the entire issued share capital of Lippo Cayman and was the trustee of a discretionary trust, of which Dr. Mochtar Riady is the founder and in accordance with whose instructions Lanius was accustomed to act. The beneficiaries of the trust include Dr. Mochtar Riady and his family members. Madam Lidya Suryawaty is the spouse of Dr. Mochtar Riady. Dr. Mochtar Riady was not the registered holder of any shares in the issued share capital of Lanius.
LCR’s interests in the shares of the Company were recorded as the interests of Lippo, Lippo Cayman, Lanius and Madam Lidya Suryawaty. The above 973,240,440 ordinary Shares in the Company related to the same block of shares that Dr. Mochtar Riady and Mr. Stephen Riady were 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”.

(ii) Four Prosperity Holdings Limited

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

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

(iii) Goldfix Pacific Ltd.

	No. of ordinary shares	Approximate
Name	of US$0.01 each	percentage
Sinopro Limited (“Sinopro”)	600,000	80.89

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

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GENERAL INFORMATION

(iv) Grandbury Holdings Limited

No. of ordinary shares

	No. of ordinary shares
Name	of US$1.00 each	Percentage
UPM Ltd. (“UPM”)	905	90.5

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

(v) Rossinis Restaurant Pte. Ltd.

No. of ordinary shares

Name	of S$1.00 each	Percentage
Brilliant Leader Limited	399,999	99.99975
(“Brilliant Leader”)

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

(vi) TechnoSolve Limited

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

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

(vii) The Macau Chinese Bank Limited

No. of ordinary shares

Name	of MOP100 each	Percentage
Winwise Holdings Limited	1,530,000	85
(“Winwise”)
Wong Kon Kei	270,000	15

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

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

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GENERAL INFORMATION

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

4. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had entered or was proposing to enter into any service contract with the Company or any other member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

5. COMPETING INTERESTS OF DIRECTORS AND ASSOCIATES

As at the Latest Practicable Date, none of the Directors and their respective associates were considered to have interest in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group or have any other conflicts of interest with the Group pursuant to the Listing Rules.

6. DIRECTORS’ INTERESTS IN ASSETS/CONTRACTS AND OTHER INTERESTS

None of the Directors is materially interested in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date which is significant in relation to the business of the Group.

As at the Latest Practicable Date, the following were particulars of assets acquired or disposed of by, or leased to, members of the Group since 31st December, 2005, being the date to which the latest published audited consolidated financial statements of the Group were made up, in which any Director had a direct or indirect interest:

(a) It was announced on 21st September, 2004 that a tenancy agreement dated 16th September, 2004 was entered into between the Company and Porbandar Limited (“Porbandar”), a fellow subsidiary of the Company, pursuant to which Porbandar agreed to let to the Company of Room 4301, 43rd Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong with a gross floor area of approximately 4,879 square feet for a term of two years from 16th September, 2004 to 15th September, 2006, both days inclusive, at a monthly rental of HK$119,500, exclusive of rates, service charges and all other outgoings. Such transaction constituted a continuing connected transaction of the Group under the Listing Rules. Such tenancy agreement has expired on 15th September, 2006.

• 127 •

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GENERAL INFORMATION

(b) It was announced on 10th January, 2005 that a tenancy agreement dated 10th January, 2005 was entered into between Lippo Securities Holdings Limited (“LSHL”), a wholly-owned subsidiary of the Company, and Prime Power Investment Limited (“Prime Power”), a fellow subsidiary of the Company, pursuant to which Prime Power agreed to let to LSHL of Rooms 2302-2306, 23rd Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong with a gross floor area of approximately 12,038 square feet for a term of two years from 18th January, 2005 to 17th January, 2007, both days inclusive, at a monthly rental of HK$263,600, exclusive of rates, service charges and all other outgoings. Such transaction constituted a continuing connected transaction of the Group under the Listing Rules.
(c) It was announced on 18th September, 2006 that a tenancy agreement dated 18th September, 2006 was entered into between the Company and Porbandar, pursuant to which Porbandar agreed to let to the Company of Room 4301, 43rd Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong with a gross floor area of approximately 4,879 square feet for a term of two years from 16th September, 2006 to 15th September, 2008, both days inclusive, at a monthly rental of HK$163,446.50, exclusive of rates, service charges and all other outgoings. Such transaction constituted a continuing connected transaction of the Group under the Listing Rules.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group or were proposed to be acquired or disposed of by or leased to any member of the Group since 31st December, 2005, being the date to which the latest published audited consolidated financial statements of the Group were made up.

7. EXPERTS

(a) The qualification of the experts who have given opinion or advice which is contained in this circular are as follows:

Name

Qualification

Ernst & Young Certified Public Accountants Knight Frank Pte Ltd Registered Surveyors and Valuers

(b) As at the Latest Practicable Date, Ernst & Young and Knight Frank Pte Ltd did not have any shareholding in the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group, nor did they have any interest, direct or indirect, in any assets which had, since 31st December, 2005, being the date to which the latest published audited consolidated financial statements of the Group were made up, been acquired or disposed of by or leased to any member of the Group, or were proposed to be acquired or disposal of by or leased to any member of the Group.

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GENERAL INFORMATION

(c) Ernst & Young and Knight Frank Pte Ltd have given and have not withdrawn their written consents to the issue of this circular with the inclusion herein of their letters and references to their names in the form and context in which they appear.

8. LITIGATION

As at the Latest Practicable Date, so far as was known to the Directors, there was no litigation or claim of material importance pending or threatened against any member of the Group.

9. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) have been entered into by the Company or its subsidiaries within two years preceding the date of this circular and which are or may be material:

(a) a sale and purchase agreement dated 21st January, 2005 entered into between Allyield Limited (“Allyield”), a wholly-owned subsidiary of the Company, as purchaser and Kuoc Hou – Fomento Predial Limitada as seller relating to the acquisition by Allyield of the land located at 83 Estrada de Cacilhas, Macau together with the buildings constructed thereon for a consideration of HK$238 million;
(b) letters of offer from 30 proprietors (namely (1) Ling Kong Chui, (2) Toi Mui Keow, (3) Ling Chia Tien, Ho Yeng and Goh Miah Kiang Oswald, (4) Huang Tuan Li-Erh, (5) Tan Koh Gin and Low Siew Choo, (6) Florence Goh Bee Eng and Tan Hong Pew, (7) Fumiko Nobuhata @ Fumiko Davis, (8) Ng Kheng Lian Lilian, (9) Jeffrey Tsang Chi Mun, (10) Tan Lay Ching, (11) Soh Peck Lay and Jen Kwong Nam, (12) Suppiah a/1 Pakrisamy, (13) Ng Sun Eng, (14) Tan Hun Tong, (15) Wong Law Sein @ Maung Hla Thein and Koe Kyin Hoon @ Khin Khin Yee, (16) Nah Kok Joo and Khaw Pheck Choo Judy, (17) Lam Larry Chi Keung and Lam Lily Chung, (18) Tan Swee Lee and Chan Chan Wah, (19) Tan Wai Fong Gracy, (20) Chai Woon Fook, Chong Kwei Kee and Choy Sai Chak, (21) Cheung Chi Yuen and Tsun Yuet Chun, (22) Michelle Quek Guan Lian, (23) Leow Yoon Fook and Tan Peng San, (24) Tan Han Thiam and Yip Sook San, (25)Wang Kai Peng Patrick and Liaw Yen Lin, (26) Hsu Wei Ching and Lian Keng Heong, (27) Chang Cheung Oi Lin @ Tseung Irene and Chang Tin Yu Terry, (28) Neo Beng Choo, (29) Yeo Hong Ping and Tan Boon Kee (Chen Wenqi) and (30) Hat Holdings Pte Ltd) who collectively owned all of the apartment units and the common areas comprised in the property known as Newton Heights at 1 Newton Road, Singapore (the “Singapore Property”) as vendors to sell the Singapore Property to HKCL Investments Pte. Ltd. (“HKCL”), a then wholly-owned subsidiary of the Company, for a total consideration of S$43,620,000 were accepted by HKCL on 18th February, 2005;

• 129 •

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GENERAL INFORMATION

(c) (i) a conditional legally binding term sheet dated 6th June, 2005 was agreed between LAAP General Partner Limited (“LAAP General Partner”) and Pacific Landmark Holdings Limited (“Pacific Landmark”), an indirect wholly-owned subsidiary of the Company, in respect of the investment in Lippo ASM Asia Property LP (“LAAP”) for an amount of up to HK$1,450 million;
(ii) an amended and restated limited partnership agreement dated 22nd August, 2005 of LAAP entered into between Pacific Landmark as the limited partner and LAAP General Partner as the general partner (the “General Partner”) which governs the relationship between Pacific Landmark and the General Partner and provides for the manner of operation and management of LAAP; and
(iii) a subscription agreement dated 22nd August, 2005 entered into between Pacific Landmark with LAAP, pursuant to which Pacific Landmark will invest an amount of up to HK$1,450 million in LAAP;
(d) twenty two sale and purchase agreements dated 18th January, 2006 entered into between each of eleven subsidiaries of the Company (the “Subsidiaries”) and the respective twenty two vendors in relation to the acquisition by the Subsidiaries of a total of twenty two strata lots in the building located at 79 Anson Road, Singapore for an aggregate consideration of S$95,000,000 (equivalent to approximately HK$448,020,000). Subsequently, on 27th January, 2006, HKC Property Investment Holdings Limited, a wholly-owned subsidiary of the Company, entered into a memorandum of understanding with ASM Asia Recovery (Master) Fund in relation to, inter alia, the setting up and funding of a joint venture company to become the holding company of the Subsidiaries and certain rights amongst the parties as the shareholders of such joint venture company;
(e) a subscription agreement dated 17th March, 2006 entered into among Lifepower Limited (“Lifepower”), a wholly-owned subsidiary of the Company, Luck Healthy Group Limited (“Luck Healthy”), Kingscott Limited (“Kingscott”) and Grosswin Limited (“Grosswin”) whereby Lifepower agreed to subscribe for 45 per cent. equity interest in Grosswin at a total consideration of US$4,500 (equivalent to approximately HK$35,000). A shareholders’ agreement dated 27th March, 2006 was entered into among Lifepower, Luck Healthy, Kingscott and Grosswin to regulate their respective shareholders’ rights in Grosswin. Grosswin will acquire and hold 86.25 per cent. equity interest in 同仁醫療管理集團有限公司 (Tongren Healthcare Management Group Co., Ltd.);
(f) a framework agreement dated 22nd May, 2006 entered into between 北京經濟技術投資開發總公司 (Beijing Economic & Technological Investment Development Corp.) (“BETIDC”), Uchida Limited (“Uchida”, a wholly-owned subsidiary of the Company), and 北京世紀創新房地產有限公司 (INNOSTAR Real Estate Development Ltd.) whereby BETIDC agreed to, after the

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APPENDIX IV

GENERAL INFORMATION

establishment of a joint venture company (the “JV Co.”) for the land Lot No. 4C1 development project in 北京經濟技術開發區 (Beijing EconomicTechnological Development Area), list its 20 per cent. interest in the JV Co. for sale on 北京產權交易所 (China Beijing Equity Exchange) and Uchida (or a party introduced by it) agreed to submit an intention memorandum for the purchase of such 20 per cent. interest;

(g) the Tender;
(h) the Shareholders Agreement; and
(i) a shareholders agreement dated 24th November, 2006 entered into between Pacific Bond Limited (“Pacific Bond”), a wholly-owned subsidiary of the Company, Kusu Island Limited (“KIL”) and Sunning Asia Limited (“Sunning Asia”, a 50:50 joint venture of Pacific Bond and KIL) governing the relationship among the shareholders of Sunning Asia. A tender dated 15th November, 2006 submitted by Lippo Real Estate Pte. Limited, a wholly-owned subsidiary of Sunning Asia, for the collective sale of the units in No. 100, Kim Seng Road, Kim Seng Plaza in Singapore at a consideration of S$132,020,000 (equivalent to approximately HK$660,496,000) was formally accepted.

10. MISCELLANEOUS

(a) The Secretary of the Company is Mr. Andrew Tat Kwong Hau, a fellow member of both the Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Chartered Secretaries.
(b) The qualified accountant of the Company is Mr. David Tai Chiu Ng, a fellow member of each of the Hong Kong Institute of Certified Public Accountants, the Association of Chartered Certified Accountants and the Institute of Chartered Secretaries and Administrators.
(c) The registered office of the Company is situated at Clarendon House, Church Street, Hamilton HM 11, Bermuda and the principal place of business of the Company is situated at 24th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong.
(d) The principal transfer office of the Company is situated at the office of its principal share registrars, Butterfield Fund Services (Bermuda) Limited at Rosebank Centre, 11 Bermudiana Road, Hamilton, Bermuda and the Hong Kong branch transfer office of the Company is situated at the office of its Hong Kong branch share registrars, Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• 131 •

APPENDIX IV

GENERAL INFORMATION

11. MATERIAL ADVERSE CHANGE

The Directors confirm that, as at the Latest Practicable Date, there were no material adverse changes in the financial or trading positions of the Company since 31st December, 2005, being the date to which the latest published audited consolidated financial statements of the Group were made up.

12. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the principal place of business of the Company which is situated at 24th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong, for a period of 14 days from the date of this circular:

(a) this circular;
(b) the Memorandum of Association and Bye-laws of the Company;
(c) the published audited consolidated financial statements of the Company for each of the two financial years ended 31st December, 2005 and the published unaudited consolidated interim accounts of the Company for the six months ended 30th June, 2006;
(d) the circulars issued by the Company pursuant to the requirements set out in Chapter 14 of the Listing Rules since 31st December, 2005, being the date to which the latest published audited consolidated financial statements of the Group were made up;
(e) the comfort letter from Ernst & Young on the pro forma statement of assets and liabilities of the Group set out in Appendix II to this circular;
(f) the valuation report issued by Knight Frank Pte Ltd in respect of the Property set out in Appendix III to this circular;
(g) the written consent from each of Ernst & Young and Knight Frank Pte Ltd as referred to in the section headed “Experts” in this Appendix; and
(h) the contracts referred to in this circular including the material contracts referred to in the section headed “Material Contracts” in this Appendix.

13. LANGUAGE

In the event of inconsistency, the English text of this circular will prevail over the Chinese text.

Note: Certain English translations of Chinese names or words used in this Appendix are included for information purpose only and should not be relied upon as the official translation of such Chinese names or words.

• 132 •

AI assistant

3SBio Inc. — Proxy Solicitation & Information Statement 2006

49981_rns_2006-12-21_9cf5e899-5d92-4d94-a474-845fa4bffa6f.pdf

HONGKONG CHINESE LIMITED 香港華人有限公司[*]

MAJOR TRANSACTIONS

DEFINITIONS

HONGKONG CHINESE LIMITED 香港華人有限公司[*]

MAJOR TRANSACTIONS

INTRODUCTION

THE TENDER AND THE ACQUISITION

TERMS OF THE SHAREHOLDERS AGREEMENT

INFORMATION ON LIPPO, LCR AND THE COMPANY

INFORMATION ON THE PROPERTY, THE PROJECT AND THE PARTIES TO THE JOINT VENTURE

REASONS FOR AND BENEFITS OF THE ACQUISITION AND THE DISPOSAL

FINANCIAL EFFECTS OF THE ACQUISITION AND THE DISPOSAL

PROCEEDS FROM THE DISPOSAL

LISTING RULES IMPLICATIONS

FURTHER INFORMATION

1. FINANCIAL SUMMARY

(a) Consolidated Profit and Loss Account

(b) Consolidated balance sheet

2. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30TH JUNE, 2006

Condensed Consolidated Profit and Loss Account

Condensed Consolidated Balance Sheet

Condensed Consolidated Summary Statement of Changes in Equity

Condensed Consolidated Cash Flow Statement

Notes to the Interim Financial Statements

1. PRINCIPAL ACCOUNTING POLICIES

3. REVENUE

4. ALLOWANCE FOR BAD AND DOUBTFUL DEBTS RELATING TO NON-BANKING OPERATIONS

5. PROFIT BEFORE TAX

6. TAX

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

(a) Basic earnings per share

(b) Diluted earnings per share

8. INTERIM DISTRIBUTION

9. INTERESTS IN ASSOCIATES

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS

11. HELD-TO-MATURITY FINANCIAL ASSETS

12. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

13. LOANS AND ADVANCES

14. DEBTORS, PREPAYMENTS AND DEPOSITS

15. BANK AND OTHER BORROWINGS

16. CREDITORS, ACCRUALS AND DEPOSITS RECEIVED

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

18. SHARE CAPITAL

19. RESERVES

20. MATURITY PROFILE OF ASSETS AND LIABILITIES

21. CONTINGENT LIABILITIES

22. CAPITAL COMMITMENTS

23. RELATED PARTY TRANSACTIONS

24. COMPARATIVE AMOUNTS

3. AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2005

Consolidated Profit and Loss Account

Consolidated Balance Sheet

Consolidated Summary Statement of Changes in Equity

Balance Sheet

Consolidated Cash Flow Statement

Notes to the Financial Statements

1. CORPORATE INFORMATION

2.1 BASIS OF PREPARATION

Basis of consolidation

2.2 IMPACT OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

(a) HKAS 27 – Consolidated and Separate Financial Statements

(i) Banking subsidiary

(ii) Investment fund

(b) HKAS 32 and HKAS 39 – Financial Instruments

(i) Financial assets at fair value through profit or loss

(ii) Loans and receivables

(iii) Held-to-maturity financial assets

(iv) Available-for-sale financial assets

(c) HKAS 40 – Investment Property

(d) HKFRS 3 – Business Combinations and HKAS 36 – Impairment of Assets

(e) HK(SIC)-Int 21 – Income Taxes – Recovery of Revalued Non-depreciable Assets

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

2.4 SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICIES

(a) Effect on the consolidated balance sheet

Adjustments/presentation taken effect retrospectively

(c) Effect on the consolidated profit and loss account for the years ended 31st December, 2005 and 2004

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3SBio Inc. Proxy Solicitation & Information Statement 2006