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 TRANSACTION

PURCHASE OF STRATA INTEREST IN 79 ANSON ROAD IN SINGAPORE AND FORMATION OF A JOINT VENTURE

27th March, 2006

For identification purpose only

CONTENTS

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Terms of the Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Certain salient terms of the Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Information on Lippo, LCR and the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Information on ASM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Information on the Vendors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Reasons for and benefits of the Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Financial effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Listing Rules implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Appendix I – Financial information of the Group. . . . . . . . . . . . . . . . . . . . . . . . . .	10
Appendix II – Pro forma financial information of the Group. . . . . . . . . . . . . . . .	91
Appendix III – Valuation of the Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	95
Appendix IV – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	107

DEFINITIONS

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

“Acquisition”

acquisition of the Property by the Subsidiaries;

“Agreements” a total of 22 agreements entered into between each of the Subsidiaries and the respective Vendors in relation to sale and purchase of the strata lots in the Building and the “Agreement” shall be construed accordingly; “ASM” ASM Asia Recovery (Master) Fund; “associate(s)” has the meaning ascribed to it under the Listing Rules; “Board” the board of Directors; “Building” the building located at 79 Anson Road, Singapore; “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 are owned as to approximately 72.26L per cent. by LCR; “connected person(s)” has the meaning ascribed to it under the Listing Rules; “Director(s)” director(s) of the Company; L “Grandbury” Grandbury Holdings Limited, a company incorporated L[in the British Virgin Islands with limited liability to] acquire, own, develop and deal with the Property, the voting share capital of which will be held as to 90.5 per cent. by HKC Property and 9.5 per cent. by ASML (or their respective nominees); “Group” or “HCL Group” the Company and its subsidiaries; “HKC Property” HKC Property Investment Holdings Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company; “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China; “Latest Practicable Date” L[23rd March, 2006, being the latest practicable date prior] to the printing of this circular for ascertaining certain information contained herein;

For identification purpose only

• 1 •

DEFINITIONS

“LCR”	Lippo China Resources Limited力寶華潤有限公司, a
	company incorporated in Hong Kong with limited
	liability, the shares of which are listed on the Stock
	L Exchange and are owned as to approximately 71.13
	per cent. by Lippo;
“LCR Group”	LCR and its subsidiaries;
“Lippo”	Lippo Limited力寶有限公司, a company incorporated
	in Hong Kong with limited liability, the shares of
	which are listed on the Stock Exchange;
“Lippo Capital”	Lippo Capital Limited, a company incorporated in the
	Cayman Islands with limited liability and is
	beneficially interested in approximately 50.47 per cent.
	of the issued share capital of Lippo;
“Lippo Group”	Lippo and its subsidiaries;
“Listing Rules” or “Rule(s)”	the Rules Governing the Listing of Securities on the
	Stock Exchange;
“Memorandum”	the legally binding memorandum of understanding
	dated 27th January, 2006 entered into between HKC
	Property and ASM;
“Model Code”	the Model Code for Securities Transactions by Directors
	of Listed Issuers under the Listing Rules;
“Property”	a total of twenty two strata lots located on level 1, 5 to 15
	of the Building;
“SFO”	the Securities and Futures Ordinance (Chapter 571 of
	the Laws of Hong Kong);
“Share(s)”	share(s) of HK$1.00 each in the capital of the Company;
“Shareholder(s)”	holder(s) of the Shares;
“Singapore”	the Republic of Singapore;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Subsidiaries”	a total of eleven wholly-owned subsidiaries of
	Grandbury which entered into the Agreements;

• 2 •

DEFINITIONS

the Agreements, the Memorandum and such other ancillary agreements to be entered into in connection therewith;

“Transaction” the Agreements, the Memorandum and such other ancillary agreements to be entered into in connection therewith; “Vendors” Anson 5 Ltd, Anson 5A Ltd, Anson 6 Ltd, Anson 6A Ltd, Anson 7 Ltd, Anson 7A Ltd, Anson 8 Ltd, Anson 8A Ltd, Anson 9 Ltd, Anson 9A Ltd, Anson 10 Ltd, Anson 10A Ltd, Anson 11 Ltd, Anson 11A Ltd, Anson 12 Ltd, Anson 12A Ltd, Anson 13 Ltd, Anson 13A Ltd, Anson 14 Ltd, Anson 14A Ltd, Anson 15 Ltd, Anson 15A Ltd, each the owner of the respective strata lot in the Building and “Vendor” shall be construed accordingly;

“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$ and US$ into HK$ for the Transaction are based on the approximate exchange rates of S$1.00 to HK$4.716 and US$1.00 to HK$7.759, respectively as at 18th January, 2006. No representation or assurance is made or given that any amount in HK$, S$ or US$ could be converted at such rates or any other rates.

• 3 •

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

27th March, 2006

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

PURCHASE OF STRATA INTEREST IN 79 ANSON ROAD IN SINGAPORE AND FORMATION OF A JOINT VENTURE

INTRODUCTION

Reference is made to the joint announcement of Lippo, LCR and the Company dated 10th February, 2006 announcing that on 18th January, 2006, the Subsidiaries entered into a total of twenty two sale and purchase agreements with the respective twenty two owners of strata lots in 79 Anson Road, Singapore, pursuant to which the Subsidiaries purchased a total of twenty two strata lots in the Building for an aggregate consideration of S$95,000,000 (approximately HK$448,020,000). Further terms and conditions of the Agreements are stated in the section headed “Terms of the Agreements” below.

For identification purpose only

• 4 •

LETTER FROM THE BOARD

On 27th January, 2006, HKC Property and ASM entered into the Memorandum in relation to, inter alia, (i) the setting up and funding of a joint venture company to become the holding company of the Subsidiaries; and (ii) certain rights amongst the parties as the shareholders of the joint venture company. Further terms and conditions of the Memorandum are stated in the section headed “Certain Salient Terms of the Memorandum” below. The shareholders’ agreement has not yet been entered into as at the Latest Practicable Date.

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 Building is a freehold commercial office building situated within the Central Business District of Singapore with a total strata area of approximately 19,415 square metres (208,975 square feet). The Property forming the subject matter of the Acquisition comprises a total strata area of approximately 10,909 square metres (117,423 square feet) and a current total lettable area of approximately 10,335 square metres (111,245 square feet) based on the current leasing configuration. The Property represents approximately 56 per cent. of the total strata area of the Building.

The purchase price for the Property was agreed at after arm’s length negotiation between the parties and by reference to market information such as recent transaction records of properties in the Central Business District of Singapore, information from market practitioners and analysts obtained by the Company on an informal basis. A valuation in relation to the Property as of 27th March, 2006 is set out in Appendix III to this circular. The valuation states that the current open market value of the Property is S$95,000,000. The valuation has been carried out by Savills (Singapore) Pte Ltd, which is independent and not connected with each of Lippo, LCR or the Company and their connected persons.

Grandbury, incorporated on 11th January, 2006, is the joint venture entity to become the holding company of the Subsidiaries and the Subsidiaries shall be wholly owned by Grandbury. The shareholding of the voting share capital in Grandbury will be owned as to 90.5 per cent. and 9.5 per cent. by HKC Property and ASM, or by their respective nominees, respectively.

It is intended that the Acquisition shall be financed by internal funds and/or bank borrowings obtained by Grandbury and/or the Subsidiaries. The internal funds of Grandbury are in turn financed by HKC Property and ASM by way of capital and/or shareholder loan so that each of the Subsidiaries has sufficient working capital to fulfil its obligations as purchaser under the Agreements.

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 percentage ratios (as defined in Rule 14.07 of the Listing Rules) of each of Lippo, LCR and the Company and therefore constitutes a major transaction for each of Lippo, LCR and the Company. Lippo Capital, Lippo and LCR have each given its written consent to Lippo,L LCR and the Company, respectively, to enter into the Agreements and the Memorandum.

• 5 •

LETTER FROM THE BOARD

No shareholder’s interest in the Transaction is different from any other shareholders of the Company. Since no shareholder of the Company is required to abstain from voting on the resolution to approve the Agreements and the Memorandum, the Company is not required to convene a shareholders’ meeting to approve the Transaction pursuant to Rule 14.44 of the Listing Rules.

Accordingly, a written shareholders’ approval may be accepted in lieu of holding a formal shareholders’ meeting of the Company. HKCL Holdings Limited, a company which holds approximately 59.89 per cent. of the Company’s existing issued share capital giving the right to attend and vote at the Shareholders’ meetings, gave a written consent on 10th February, 2006 to approve the Acquisition in lieu of holding a formal shareholders’ meeting of the Company. Therefore no shareholders’ meeting will be required for the purposes of the Listing Rules.

The purpose of this circular is to provide you with, among other things, further information on the Transaction and the principal terms of the Memorandum in relation to Grandbury as detailed below.

TERMS OF THE AGREEMENTS

There were in total 22 agreements for each individual strata lot in the Building entered into between each of the Subsidiaries and the respective 22 Vendors. Each of the Agreements is on similar terms save that the consideration for each of the strata lots varies depending on the size and location of the individual lot within the Building.

Each of the Agreements contains the following salient terms:

the sale is subject to the Law Society of Singapore’s Conditions of Sale 1999 insofar as the same are applicable to a sale by private treaty and are not inconsistent with or varied by provisions of the Agreements;
10 per cent. of the purchase price for the respective strata lot was paid to the respective Vendor’s solicitors as stakeholders pending completion (when the remaining balance will be paid);
completion of each of the strata lots is conditional upon concurrent completion of the sale and purchase of the other strata lots;
subject to paragraph 3 above, completion shall take place on the date expiring 12 weeks from the date of the Agreements; and
each of the strata lots is sold subject to existing tenancy (if any).

• 6 •

LETTER FROM THE BOARD

CERTAIN SALIENT TERMS OF THE MEMORANDUM

Parties: (i) HKC Property; and (ii) ASM. Purpose: To establish a joint venture company, Grandbury, to become the holding company of the Subsidiaries, which are wholly owned by Grandbury. Shareholding structure: The shareholding of the voting share capital in Grandbury will be owned as to 90.5 per cent. and 9.5 per cent. by HKC Property and ASM, or by their respective nominees, respectively. Profit sharing: The profit of Grandbury shall be shared among HKC Property and ASM by reference to the respective contribution of the aggregate of the capital and loan made to Grandbury and its subsidiaries. Future capital commitment: Grandbury shall be funded by way of capital, shareholder loan and/or bank financing. The aggregate amount of the capital and loan contributed by ASM shall be initially fixed at the total of US$5,000,000 (approximately HK$38,795,000). Board composition: The board of directors of Grandbury will initially consist of four (4) directors, out of which HKC Property will be entitled to nominate a minimum of three (3) directors and ASM will be entitled to nominate one (1) director.

INFORMATION ON LIPPO, LCR AND THE COMPANY

The principal business 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 subsidiaries of Lippo, LCR and the Company 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.

INFORMATION ON ASM

ASM is a fund which was incorporated in February 2003. The principal business of the fund is investing in Asian distressed assets ex-Japan, where it has approximately US$270 million of assets including equity and debt instruments as well as real estate investment in the Asian region. HCL Group currently invested less than 0.5 per cent. interest in ASM. Save as aforesaid, ASM and its ultimate beneficial shareholders are third parties independent of and not connected with Lippo, LCR, the Company and their connected persons.

• 7 •

LETTER FROM THE BOARD

INFORMATION ON THE VENDORS

The Vendors are companies wholly owned by a private fund, which is managed by Pramerica Real Estate Investors (Asia) Pte Ltd.

To the best of the knowledge, information and belief and having made reasonable enquiry, each of the Vendors and their ultimate beneficial owners are third parties independent of and are not connected with each of Lippo, LCR and the Company and their connected persons.

REASONS FOR AND BENEFITS OF THE TRANSACTION

The directors of each of Lippo, LCR and the Company are optimistic about the property market in Singapore. As the principal activities of the Lippo Group, the LCR Group and the HCL Group include, inter alia, property investment, the Acquisition is a furtherance of their principal businesses and provides another good opportunity for the business development in Singapore. Bringing in of a new joint venture partner will provide another source of external funding for the Acquisition. Grandbury and the Subsidiaries will be treated as subsidiaries of the Company and it is expected that the rental income from the Property will help increase the recurrent and stable income source of the HCL Group. As such, it is expected that the Transaction will contribute positively to the future development of Lippo, LCR and the Company and their respective subsidiaries.

Accordingly, the Directors are of the view that the terms of the Transaction are fair and reasonable, are on arms length basis and are in the interest of the Company and the Shareholders as a whole.

FINANCIAL EFFECTS

The Acquisition will be financed by internal funds from the shareholders (including contribution from ASM of US$5,000,000) and/or bank borrowings. Upon completion of the Acquisition, the non-current assets of the Group will be increased, which shall be balanced by a decrease in current assets and an increase in minority interests and/or bank borrowings of the Group.

The income to be generated from the Property is anticipated to be derived from rentals of the office space of the Property and shall be consolidated into the accounts of the Group.

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 percentage ratios (as defined in Rule 14.07 of the Listing Rules) of each of Lippo, LCR and the Company and therefore constitutes a major transaction for each of Lippo, LCR and the Company. Lippo Capital, Lippo and LCR have each given its written consent to Lippo, LCR and the Company, respectively, to enter into the Agreements and the Memorandum.

• 8 •

LETTER FROM THE BOARD

No shareholder’s interest in the Transaction is different from any other shareholders of each of Lippo, LCR and the Company. Since no shareholder of each of Lippo, LCR and the Company is required to abstain from voting on the resolution to approve the Agreements and the Memorandum, each of Lippo, LCR and the Company is not required to convene a shareholders’ meeting to approve the Transaction pursuant to Rule 14.44 of the Listing Rules.

Since the Acquisition constitutes a major transaction for each of Lippo, LCR and the Company, respectively, under Rule 14.40 of the Listing Rules, it will be subject to the majority vote approval of their respective shareholders at their general meetings, unless the conditions in Rule 14.44 of the Listing Rules can be satisfied, in which case a written shareholders’ approval may be accepted in lieu of holding a formal shareholders’ meeting. HKCL Holdings Limited, a company which holds approximately 59.89 per cent. of the Company’s existing issued share capital giving the right to attend and vote at the Shareholders’ meetings, gave a written consent on 10th February, 2006 to approve the Acquisition in lieu of holding a formal shareholders’ meeting of the Company, therefore no shareholders’ meeting of the Company will 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

• 9 •

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, 2005 and the audited consolidated profit and loss account and consolidated balance sheet of the Group for each of the three years ended 31st December, 2004, extracted from the relevant interim reports and annual reports of the Company:

(a) Consolidated Profit and Loss Account

Six months ended 30th June,
2005
2004
HK$’000
HK$’000
(unaudited)
(unaudited)
Revenue
617,056
762,178
Cost of sales
(545,028)
(671,817)
Gross profit
72,028
90,361
Other income
–
–
Administrative expenses
(33,457)
(40,788)
Other operating expenses
(21,483)
(20,348)
Fair value changes on investment
properties
46,349
375
Write-back of provision/(Allowance)
for bad and doubtful debts relating to:
Banking operation
–
–
Non-banking operations
(33,810)
–
Provisions for impairment losses:
Investment securities
–
–
Goodwill
–
–
Associates
(6,987)
–
Net unrealised holding gain/(loss) on other
investments in securities
–
(72,522)
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
–
–
Loss on disposal of subsidiaries
–
–

Years ended 31st December,
2004
2003
2002
HK$’000
HK$’000
HK$’000
(audited)
(audited)
(audited)
1,177,912
617,246
260,287
(1,030,090)
(455,777)
(111,541)
147,822
161,469
148,746
–
4,171
–
(70,531)
(70,165)
(85,340)
(39,725)
(34,422)
(37,247)
–
–
–
666
(3,753)
(4,025)
(1,203)
(1,916)
(19,851)
(2,776)
(20,000)
–
–
–
(3,330)
(16,603)
–
–
(61,303)
54,926
(6,448)
(7,856)
20,483
–
–
10,868
(88,290)
–
–
(10,545)

• 10 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Finance costs Share of results of associates 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, 2005 2004 HK$’000 HK$’000 (unaudited) (unaudited) (3,317) (2,068) (413) (3,496) 18,910 (48,486) (7,429) (660) 11,481 (49,146) 12,313 (48,716) (832) (430) 11,481 (49,146)	Years ended 31st December, 2004 2003 2002 HK$’000 HK$’000 HK$’000 (audited) (audited) (audited) (4,873) (4,700) (4,228) (5,309) (6,488) (133) (61,691) 110,473 (110,691) (4,743) (5,182) (427) (66,434) 105,291 (111,118) (64,957) 106,067 (111,368) (1,477) (776) 250 (66,434) 105,291 (111,118)

• 11 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Consolidated balance sheet

NON-CURRENT ASSETS Goodwill Fixed assets Investment properties Properties under development Interests in associates Interests in a jointly controlled entity Available-for-sale financial assets Investment securities Financial assets at fair value through profit or loss Held-to-maturity securities Assets less liabilities attributable to banking operation Deposits paid for long term investments CURRENT ASSETS Property held for sale Available-for-sale financial assets Financial assets at fair value through profit or loss Other investments in securities Loans and advances Debtors, prepayments and deposits Certificates of deposit held Client trust bank balances Pledged time deposits Cash and cash equivalents	As at 30th June, 2005 HK$’000 (unaudited) 57,697 12,607 391,957 98,758 21,452 7,313 177,044 – 195,703 – 191,996 3,720 1,158,247 10,874 170,577 692,101 – 120,227 118,552 – 316,844 86,116 612,471 2,127,762	As 2004 HK$’000 (audited) 56,553 10,704 96,144 99,767 27,166 7,313 – 365,658 – – 175,411 – 838,716 10,140 – – 1,144,248 175,598 167,496 – 389,123 – 762,273 2,648,878	at 31st December, 2003 2002 HK$’000 HK$’000 (audited) (audited) 60,893 63,881 5,004 3,550 16,750 7,336 – – 48,544 64,117 – – – – 171,867 132,846 – – – 355,152 156,081 148,971 – 74,342 459,139 850,195 – – – – – – 1,033,890 166,098 91,888 115,260 330,369 261,275 – 1,000,000 430,558 253,930 – – 1,335,116 834,449 3,221,821 2,631,012	at 31st December, 2003 2002 HK$’000 HK$’000 (audited) (audited) 60,893 63,881 5,004 3,550 16,750 7,336 – – 48,544 64,117 – – – – 171,867 132,846 – – – 355,152 156,081 148,971 – 74,342 459,139 850,195 – – – – – – 1,033,890 166,098 91,888 115,260 330,369 261,275 – 1,000,000 430,558 253,930 – – 1,335,116 834,449 3,221,821 2,631,012
				850,195
				– – – 166,098 115,260 261,275 1,000,000 253,930 – 834,449
				2,631,012

• 12 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CURRENT LIABILITIES Bank loans Creditors, accruals and deposits received Provision for loss on guaranteed return arrangement for fund management Tax payable NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liabilities CAPITAL AND RESERVES Equity attributable to equity holders of the Company Share capital Reserves Minority interests	As at 30th June, 2005 HK$’000 (unaudited) 141,635 447,073 – 2,965 591,673 1,536,089 2,694,336 12,907 2,681,429 1,346,829 1,304,347 2,651,176 30,253 2,681,429	As 2004 HK$’000 (audited) 208,761 539,260 – 3,035 751,056 1,897,822 2,736,538 – 2,736,538 1,346,829 1,359,505 2,706,334 30,204 2,736,538	at 31st December, 2003 2002 HK$’000 HK$’000 (audited) (audited) 10,000 21,000 822,042 515,114 – 138,290 2,802 – 834,844 674,404 2,386,977 1,956,608 2,846,116 2,806,803 – – 2,846,116 2,806,803 1,346,829 1,351,537 1,474,494 1,428,260 2,821,323 2,779,797 24,793 27,006 2,846,116 2,806,803	at 31st December, 2003 2002 HK$’000 HK$’000 (audited) (audited) 10,000 21,000 822,042 515,114 – 138,290 2,802 – 834,844 674,404 2,386,977 1,956,608 2,846,116 2,806,803 – – 2,846,116 2,806,803 1,346,829 1,351,537 1,474,494 1,428,260 2,821,323 2,779,797 24,793 27,006 2,846,116 2,806,803
				674,404
				1,956,608
				2,806,803 –
				2,806,803

				1,351,537 1,428,260
				2,779,797 27,006
				2,806,803

• 13 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30TH JUNE, 2005

Condensed Consolidated Profit and Loss Account

Note
Revenue
4
Cost of sales
Gross profit
Administrative expenses
Other operating expenses
Fair value changes on investment
properties
Allowance for bad and doubtful debts
relating to non-banking operation
5
Net unrealised holding loss on other
investments in securities
Share of results of associates
Finance costs
Profit/(Loss) before tax
6
Tax
7
Profit/(Loss) for the period
Attributable to:
Equity holders of the Company
Minority interests
Earnings/(Loss) per share
8
Basic
Diluted
Interim distribution
9

Six months ended
30th June,
2005
2004
HK$’000
HK$’000
(restated)
617,056
762,178
(545,028)
(671,817)
72,028
90,361
(33,457)
(40,788)
(28,470)
(20,348)
46,349
375
(33,810)
–
–
(72,522)
(413)
(3,496)
(3,317)
(2,068)
18,910
(48,486)
(7,429)
(660)
11,481
(49,146)
12,313
(48,716)
(832)
(430)
11,481
(49,146)
HK cents
HK cents
0.9
(3.6)
N/A
N/A
HK$’000
HK$’000
20,202
20,202

• 14 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Balance Sheet

Note
NON-CURRENT ASSETS
Fixed assets
Investment properties
Properties under development
Goodwill:
Goodwill
Negative goodwill
Interests in associates
Interests in a jointly controlled entity
Available-for-sale financial assets
10
Investment securities
11
Financial assets at fair value through
profit or loss
12
Assets less liabilities attributable to
banking operation
13
Deposit paid for long term investment
CURRENT ASSETS
Property held for sale
Available-for-sale financial assets
10
Financial assets at fair value through
profit or loss
12
Other investments in securities
14
Loans and advances
15
Debtors, prepayments and deposits
16
Client trust bank balances
Pledged time deposits
Cash and cash equivalents

30th June,
31st December,
2005
2004
HK$’000
HK$’000
(restated)
12,607
10,704
391,957
96,144
98,758
99,767
57,697
57,697
–
(1,144)
21,452
27,166
7,313
7,313
177,044
–
–
365,658
195,703
–
191,996
175,411
3,720
–
1,158,247
838,716
10,874
10,140
170,577
–
692,101
–
–
1,144,248
120,227
175,598
118,552
167,496
316,844
389,123
86,116
–
612,471
762,273
2,127,762
2,648,878

• 15 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note CURRENT LIABILITIES Bank loans 17 Creditors, accruals and deposits received 18 Tax payable NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Deferred tax liabilities CAPITAL AND RESERVES Equity attributable to equity holders of the Company Share capital 19 Reserves 20 Minority interests 20	30th June, 31st December, 2005 2004 HK$’000 HK$’000 (restated) 141,635 208,761 447,073 539,260 2,965 3,035 591,673 751,056 1,536,089 1,897,822 2,694,336 2,736,538 12,907 1,234 2,681,429 2,735,304 1,346,829 1,346,829 1,304,347 1,358,271 2,651,176 2,705,100 30,253 30,204 2,681,429 2,735,304	30th June, 31st December, 2005 2004 HK$’000 HK$’000 (restated) 141,635 208,761 447,073 539,260 2,965 3,035 591,673 751,056 1,536,089 1,897,822 2,694,336 2,736,538 12,907 1,234 2,681,429 2,735,304 1,346,829 1,346,829 1,304,347 1,358,271 2,651,176 2,705,100 30,253 30,204 2,681,429 2,735,304
		751,056
		1,897,822
		2,736,538
		1,234
		2,735,304

		1,346,829 1,358,271
		2,705,100 30,204
		2,735,304

• 16 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Summary Statement of Changes in Equity

Note
Total equity at 1st January:
As previously reported as equity
As previously reported separately as
minority interests
Prior period and opening adjustments
1, 2
As restated
Changes in equity during the period:
Exchange differences on translation of
foreign operations
20
Fair value changes on available-for-sale
financial assets
20
Deferred tax arising from fair value changes
on available-for-sale financial assets
20
Surplus on revaluation of investment
properties
20
Deferred tax arising from revaluation
of investment properties
20
Net income/(expense) recognised directly
in equity
Profit/(Loss) for the period
20
Total recognised income and expense for
the period
Issue of shares by subsidiaries to minority
shareholders
Advance from minority shareholders of a
subsidiary
Acquisition of subsidiaries
Disposal of a subsidiary
Increase/(Decrease) in interests in a subsidiary
2003 final distribution, declared
2004 final distribution, declared
Total equity at 30th June

Six months ended
30th June,
2005
2004
HK$’000
HK$’000
(restated)
2,706,334
2,821,323
30,204
24,793
(5,152)
–
2,731,386
2,846,116
(3,124)
218
(16,043)
–
(2,743)
–
–
2,626
–
(459)
(21,910)
2,385
11,481
(49,146)
(10,429)
(46,761)
2,446
4,398
203
–
–
2,174
–
(803)
(1,772)
554
–
(40,405)
(40,405)
–
(49,957)
(80,843)
2,681,429
2,765,273

• 17 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Total recognised income and expense for the period attributable to: Equity holders of the Company Minority interests Effect of prior period and opening adjustments attributable to: Equity holders of the Company Minority interests	Six months ended 30th June, 2005 2004 HK$’000 HK$’000 (restated) (9,601) (46,322) (828) (439) (10,429) (46,761) (5,152) – – – (5,152) –

• 18 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Cash Flow Statement

Net cash from/(used in) 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	Six months ended 30th June, 2005 2004 HK$’000 HK$’000 227,350 (404,552) (268,650) (96,521) (108,375) 57,841 (149,675) (443,232) 762,273 1,335,116 (127) 2,152 612,471 894,036 612,471 894,036

• 19 •

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 this condensed consolidated interim financial statements are consistent with those used in the Group’s audited financial statements for the year ended 31st December, 2004, except in relation to the following new and revised Hong Kong Financial Reporting Standards (“HKFRSs”, which also include HKASs and Interpretations) that affect the Group and are adopted for the first time for the current period’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 12	Income Taxes
HKAS 14	Segment Reporting
HKAS 16	Property, Plant and Equipment
HKAS 17	Leases
HKAS 18	Revenue
HKAS 19	Employee Benefits
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 31	Investments in Joint Ventures
HKAS 32	Financial Instruments: Disclosure and Presentation
HKAS 33	Earnings per Share
HKAS 34	Interim Financial Reporting
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 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 1, 2, 7, 8, 10, 12, 14, 16, 17, 18, 19, 21, 23, 24, 27, 28, 31, 33, 34, 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 methods of computation in the Group’s condensed consolidated interim financial statements. The impact of adopting the other HKFRSs is summarised as follows:

• 20 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(a) HKAS 32 and HKAS 39 – Financial Instruments

Until 31st December, 2004, the Group classified its investments in securities into investment securities and other investments in securities, which were stated in the balance sheet at cost less any impairment losses and at fair value, respectively. Any impairment losses on investment 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.

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 is 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-derivatives 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, when 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.

• 21 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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.

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. 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 transactions by reference to other instruments that are substantially the same, 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$950,373,000 and HK$193,875,000 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 effect of the above changes are summarised in Note 2 to the interim financial statements. In accordance with the transitional provisions of HKAS 39, comparative amounts have not been restated.

(b) HKAS 40 – Investment Property

In prior periods, 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.

• 22 •

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 to the interim financial statements.

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

In prior periods, 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 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 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 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 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 to the interim financial statements. In accordance with the transitional provisions of HKFRS 3, comparative amounts have not been restated.

(d) HK(SIC)-Int 21 – Income Taxes – Recovery of Revalued Non-Depreciable Assets

In prior periods, 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.

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.

• 23 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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 to the interim financial statements.

2. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICIES

Following the adoption of the new and revised HKFRSs, the opening balances of the following accounts were adjusted retrospectively. The details of the prior period adjustment and opening adjustments are summarised as follows:

(a) Effect on opening balance of total equity at 1st January, 2005

Effect of new policies (Increase/(Decrease)) Note Prior period adjustment: HK(SIC)-Int 21 Deferred tax arising from revaluation of investment properties 1(d) Net decrease in total equity before opening adjustments Opening adjustments: HKAS 39 Re–designated investment securities as: Available-for-sale financial assets 1(a) Financial asset at fair value through profit or loss 1(a) HKAS 40 Surplus on revaluation of investment properties 1(b) HKFRS 3 Derecognition of negative goodwill 1(c) Total effect at 1st January, 2005	Investment property Distributable revaluation reserves reserve (Note) HK$’000 HK$’000 (1,234) – (1,234) – – (5,145) – 83 (6,227) 6,227 – 1,144 (7,461) 2,309	Minority interests HK$’000 – – – – – – –	Total HK$’000 (1,234) (1,234) (5,145) 83 – 1,144 (5,152)

Note: Distributable reserves of the Group comprised of accumulated losses and other distributable reserves and all the above adjustments were made to accumulated losses.

(b) Effect on opening balance of total equity at 1st January, 2004

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

• 24 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The following tables summarise the impact on profit/(loss) and income or expenses recognised directly in equity for the six months ended 30th June, 2005 and 2004 upon the adoption of the new and revised HKFRSs. As no retrospective adjustments have been made for the adoption of HKASs 39, 40 and HKFRS 3, the amounts shown for the six months ended 30th June, 2004 may not be comparable to the amounts shown for the current period.

(c) Effect on profit/(loss) for the six months ended 30th June, 2005 and 2004

Effect of new policies (Increase/(Decrease)) Note Effect on profit/(loss) for the period: HKAS 40 Fair value changes on investment properties 1(b) HKFRS 3 Discontinuation of amortisation of goodwill/recognition of negative goodwill 1(c) HK(SIC)-Int 21 Deferred tax arising from revaluation of investment properties 1(d) Total effect for the period Effect on earnings per share: Basic Diluted	Equity holders of the Company HK$’000 46,349 1,463 (7,571) 40,241 HK cents 3.0 N/A	Six months ended 30th June, 2005 2004 Equity holders Minority of the Minority interests Total Company interests HK$’000 HK$’000 HK$’000 HK$’000 – 46,349 – – – 1,463 – – – (7,571) – – – 40,241 – – HK cents N/A N/A	Total HK$’000 – – –
			–

(d) Effect on income or expenses recognised directly in equity for the six months ended 30th June, 2005 and 2004

Effect of new policies (Increase/(Decrease)) Note HKAS 39 Fair value changes on available-for-sale financial assets 1(a) HKAS 40 Fair value changes on investment properties no longer recognised in reserves 1(b) HK (SIC)-Int 21 Deferred tax arising from revaluation of investment properties 1(d) Total effect for the period	Equity holders of the Company HK$’000 (18,786) (46,349) – (65,135)	Six months ended 30th June, 2005 2004 Equity holders Minority of the Minority interests Total Company interests HK$’000 HK$’000 HK$’000 HK$’000 – (18,786) – – – (46,349) – – – – (459 ) – – (65,135) (459 ) –	Total HK$’000 – – (459
			(459

• 25 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. SEGMENT INFORMATION

Segment information is presented by way of business segment as the primary 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;
(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 provisions 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 service.

• 26 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Property investment and development HK$’000 Revenue External 4,291 Inter–segment – Total 4,291 Segment results 46,850 Unallocated corporate expenses Share of results of associates – Profit before tax Tax Profit for the period Property investment and development HK$’000 Revenue External 539 Inter–segment – Total 539 Segment results (927 ) Unallocated corporate expenses Share of results of associates – Loss before tax Tax Loss for the period	Six months ended 30th June, 2005 Corporate finance and Treasury Securities securities Banking Information investment investment broking business technology HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 7,680 569,848 27,260 6,884 – 631 – 238 – 770 8,311 569,848 27,498 6,884 770 7,624 29,554 (33,437 ) 1,901 (2,248 ) – – – – – Six months ended 30th June, 2004 (restated) Corporate finance and Treasury Securities securities Banking Information investment investment broking business technology HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 6,276 703,688 36,155 9,723 – 507 – 1,158 – – 6,783 703,688 37,313 9,723 – 6,193 (28,379 ) 2,579 3,809 (6,301 ) – – – – (2,050 )	Inter-segment Other elimination Consolidated HK$’000 HK$’000 HK$’000 1,093 – 617,056 – (1,639 ) – 1,093 (1,639 ) 617,056 (7,980 ) (1,220 ) 41,044 (21,721 ) (413 ) – (413 ) 18,910 (7,429 ) 11,481 Inter-segment Other elimination Consolidated HK$’000 HK$’000 HK$’000 5,797 – 762,178 163 (1,828 ) – 5,960 (1,828 ) 762,178 (1,326 ) – (24,352 ) (20,638 ) (1,446 ) – (3,496 ) (48,486 ) (660 ) (49,146 )

• 27 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

4. REVENUE/TURNOVER

All revenue for the period represents turnover generated from the principal activities of the Group, comprising 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 gross 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 net interest income, commissions, dealing income and other revenues from a banking subsidiary, after eliminations of all significant intra–group transactions.

An analysis of the turnover 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, 2005 2004 HK$’000 HK$’000 4,291 539 7,680 6,276 569,848 703,688 27,260 36,155 6,884 9,723 1,093 5,797 617,056 762,178	Six months ended 30th June, 2005 2004 HK$’000 HK$’000 4,291 539 7,680 6,276 569,848 703,688 27,260 36,155 6,884 9,723 1,093 5,797 617,056 762,178
		762,178

Turnover attributable to banking business represents turnover 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. Turnover attributable to banking business is analysed as follows:

Interest income Interest expenses Commission income Net dealing income/(expense) and other revenues/(expense)	Six months ended 30th June, 2005 2004 HK$’000 HK$’000 6,822 5,356 (786) (868 907 4,577 (59) 658 6,884 9,723	Six months ended 30th June, 2005 2004 HK$’000 HK$’000 6,822 5,356 (786) (868 907 4,577 (59) 658 6,884 9,723
		9,723

5. ALLOWANCE FOR BAD AND DOUBTFUL DEBTS RELATING TO NON-BANKING OPERATION

Amount represents specific provision 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 liquidation or provisional liquidation and that the probability for recovery of the loan is uncertain.

• 28 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

6. PROFIT/(LOSS) BEFORE TAX

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

	Six months ended	Six months ended
	30th June,
	2005	2004
	HK$’000	HK$’000
Dividend income:
Listed investments	14,992	6,152
Unlisted investments	625	88
Interest income_(Note(a))_:
Listed investments	9,049	10,315
Unlisted investments	1,328	969
Other	8,022	6,276
Net realised and unrealised holding gain/(loss) on
financial assets at fair value through profit or loss:
Listed	20,112	–
Unlisted	1,166	–
Net realised and unrealised holding gain/(loss) on other
investments in securities:
Listed	–	(48,167)
Unlisted	–	2,092
Net realised loss on disposal of unlisted
available-for-sale financial assets	(601)	–
Other investment income:
Unlisted	760	3,602
Depreciation:
Banking operation	(393)	(392)
Other	(1,417)	(1,070)
Amortisation of goodwill arising on acquisition of
subsidiaries_(Note (b))_	–	(2,182)
Provision for impairment losses:
Available-for-sale financial assets	(1,418)	–
Associates	(6,987)	–

Note:

(a) The amounts exclude income relating to banking operation of the Group.

(b) The amortisation of goodwill arising on acquisition of subsidiaries for the six months ended 30th June, 2004 is included under “Other operating expenses” on the face of the condensed consolidated profit and loss account.

• 29 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

7. TAX

Charge for the period: Overseas Deferred: Hong Kong Overseas Total tax charge for the period	Six months ended 30th June, 2005 2004 HK$’000 HK$’000 (restated) 1,396 660 2,762 – 3,271 – 7,429 660	Six months ended 30th June, 2005 2004 HK$’000 HK$’000 (restated) 1,396 660 2,762 – 3,271 – 7,429 660
		660

No provision for Hong Kong profits tax has been made as the Group has available tax losses brought forward from prior periods to offset the estimated assessable profits generated during the period. 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.

Share of tax attributable to associates amounting to HK$610,000 for the six months ended 30th June, 2004 is included in “Share of results of associates” on the face of the condensed consolidated profit and loss account.

8. EARNINGS/(LOSS) PER SHARE

(a) Basic earnings/(loss) per share

Basic earnings/(loss) per share is calculated based on (i) the consolidated profit attributable to equity holders of the Company of HK$12,313,000 (2004 – loss of HK$48,716,000); and (ii) the weighted average number of 1,346,829,000 shares (2004 – 1,346,829,000 shares) in issue during the period.

(b) Diluted earnings/(loss) per share

No diluted earnings/(loss) per share is presented for the periods ended 30th June, 2005 and 2004 as there were no dilutive potential ordinary shares during these periods.

9. INTERIM DISTRIBUTION

		Six months ended	Six months ended
		30th June,
		2005	2004
		HK$’000	HK$’000
Interim	distribution, declared, of HK1.5 cents
(2004	– 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.

• 30 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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 An analysis of the issuers of available-for-sale financial assets is as follows: Equity securities: Corporate entities Debt securities: Club debenture Corporate entities	30th June, 31st December, 2005 2004 HK$’000 HK$’000 170,577 – 60,931 – 231,508 – 66,250 – 297,758 – 64,000 – 10,057 – (24,194) – 49,863 – 347,621 – (170,577) – 177,044 – 295,508 – 3,165 – 6,892 – 10,057 –	30th June, 31st December, 2005 2004 HK$’000 HK$’000 170,577 – 60,931 – 231,508 – 66,250 – 297,758 – 64,000 – 10,057 – (24,194) – 49,863 – 347,621 – (170,577) – 177,044 – 295,508 – 3,165 – 6,892 – 10,057 –
		– –
		–
		– – –
		–
		– –
		–

		–

		– –
		–

• 31 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

11. 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

30th June,
31st December,
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

• 32 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

12. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Held for trading: Listed equity securities, at fair value: Hong Kong Overseas Debt securities: Listed overseas, at fair value Unlisted, at fair value Investment funds: Listed overseas, at fair value Unlisted, at fair value Other: Unlisted, at fair value Designated as financial assets at fair value through profit or loss: Unlisted investment funds, at fair value Less: amount classified under current portion Non-current portion	30th June, 31st December, 2005 2004 HK$’000 HK$’000 118,288 – 82,649 – 200,937 – 169,764 – 75,900 – 245,664 – 48,166 – 143,576 – 191,742 – 53,758 – 692,101 – 195,703 – 887,804 – (692,101) – 195,703 –	30th June, 31st December, 2005 2004 HK$’000 HK$’000 118,288 – 82,649 – 200,937 – 169,764 – 75,900 – 245,664 – 48,166 – 143,576 – 191,742 – 53,758 – 692,101 – 195,703 – 887,804 – (692,101) – 195,703 –
		–
		– –
		–
		– –
		–
		–
		–
		–
		– –
		–

Financial assets at fair value through profit or loss with carrying amount of HK$55,410,000 were pledged as collateral for the bank loans of the Group.

An analysis of the issuers of financial assets at fair value through profit or loss is as follows: Equity securities: Public sector entities 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, 2005 2004 HK$’000 HK$’000 474 – 34,983 – 165,480 – 200,937 – 10,263 – 2,471 – 99,427 – 133,503 – 245,664 –	30th June, 31st December, 2005 2004 HK$’000 HK$’000 474 – 34,983 – 165,480 – 200,937 – 10,263 – 2,471 – 99,427 – 133,503 – 245,664 –
		–

		– – – –
		–

• 33 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

13. ASSETS LESS LIABILITIES ATTRIBUTABLE TO BANKING OPERATION

Due to the dissimilar nature of banking and non-banking operations, assets less liabilities attributable to banking operation are shown separately in the consolidated interim financial statements. The financial information in respect of banking operation shown below is based on the unaudited financial statements of MCB for the six months ended 30th June, 2005.

Note
Cash and short–term funds
(a)
Financial assets at fair value through profit or loss
(b)
Other investments in securities
(c)
Advances and other accounts
(d)
Held-to-maturity financial assets
(e)
Fixed assets
(f)
Current, fixed, savings and other deposits
of customers
Other accounts and provisions
Note:
(a)
Cash and short–term funds
Cash and balances with banks and other
financial institutions
Treasury bills

30th June,
31st December,
2005
2004
HK$’000
HK$’000
111,406
83,908
25,490
–
–
24,673
166,019
152,127
9,618
9,643
25,879
26,272
338,412
296,623
(112,081)
(117,641)
(34,335)
(3,571)
(146,416)
(121,212)
191,996
175,411
30th June,
31st December,
2005
2004
HK$’000
HK$’000
101,706
60,143
9,700
23,765
111,406
83,908

• 34 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Listed equity securities, at fair value: Hong Kong Overseas Debt securities: Listed outside Hong Kong, at fair value Unlisted, at fair value Unlisted investment funds, at fair value An analysis of the issuers of financial assets at fair value through profit or loss is as follows: Equity securities: Corporate entities Debt securities: Corporate entities Banks and other financial institutions	30th June, 31st December, 2005 2004 HK$’000 HK$’000 3,140 – 704 – 3,844 – 9,197 – 7,766 – 16,963 – 4,683 – 25,490 – 3,844 – 9,197 – 7,766 – 16,963 –	30th June, 31st December, 2005 2004 HK$’000 HK$’000 3,140 – 704 – 3,844 – 9,197 – 7,766 – 16,963 – 4,683 – 25,490 – 3,844 – 9,197 – 7,766 – 16,963 –
		–
		– –
		–
		–
		–

		–

		– –
		–

• 35 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(c) Other investments in securities

Listed equity securities, at market value:
Hong Kong
Overseas
Debt securities:
Listed outside Hong Kong, at market value
Unlisted, at fair value
Unlisted investment funds, at fair value
An analysis of the issuers of
other investments in securities is as follows:
Equity securities:
Corporate entities
Debt securities:
Corporate entities
Banks and other financial institutions
Advances and other accounts
Advances to customers
Other accounts
Accrued interest
Allowance for bad and doubtful debts

30th June,
31st December,
2005
2004
HK$’000
HK$’000
–
3,128
–
759
–
3,887
–
9,190
–
7,769
–
16,959
–
3,827
–
24,673
–
3,887
–
9,190
–
7,769
–
16,959
30th June,
31st December,
2005
2004
HK$’000
HK$’000
164,209
153,071
5,431
2,956
1,034
1,240
(4,655)
(5,140)
166,019
152,127

(d) Advances and other accounts

• 36 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Non-performing loans, which represent the gross amount of advances, net of suspended interest, on which interest has been placed in suspense or on which interest accrual has ceased, are rescheduled as follows:

Rescheduled advances Market value of collateral held (e) Held-to-maturity financial assets Debt securities, at amortised cost: Listed outside Hong Kong Market value of listed debt securities An analysis of the issuers of held-to-maturity financial assets is as follows: Banks and other financial institutions (f) Fixed assets Land and buildings HK$’000 Cost: At 1st January, 2005 and 30th June, 2005 25,047 Accumulated depreciation: At 1st January, 2005 271 Provided for the period 125 At 30th June, 2005 396 Net book value: At 30th June, 2005 24,651 At 31st December, 2004 24,776	30th June, 31st December, 2005 2004 HK$’000 HK$’000 218 3,342 222 3,564 30th June, 31st December, 2005 2004 HK$’000 HK$’000 9,618 9,643 11,199 10,877 9,618 9,643 Furniture, fixtures, equipment and motor vehicles Total HK$’000 HK$’000 2,487 27,534 991 1,262 268 393 1,259 1,655 1,228 25,879 1,496 26,272	30th June, 31st December, 2005 2004 HK$’000 HK$’000 218 3,342 222 3,564 30th June, 31st December, 2005 2004 HK$’000 HK$’000 9,618 9,643 11,199 10,877 9,618 9,643 Furniture, fixtures, equipment and motor vehicles Total HK$’000 HK$’000 2,487 27,534 991 1,262 268 393 1,259 1,655 1,228 25,879 1,496 26,272

		10,877

		9,643

		Total HK$’000 27,534
		1,262 393
		1,655
		25,879

		26,272

• 37 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

14. 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 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	30th June, 31st December, 2005 2004 HK$’000 HK$’000 – 248,326 – 40,092 – 288,418 – 225,245 – 157,605 – 382,850 – 229,252 – 243,728 – 472,980 – 1,144,248 – 493 – 6,341 – 281,584 – 288,418 – 13,869 – 105,239 – 214,609 – 49,133 – 382,850	30th June, 31st December, 2005 2004 HK$’000 HK$’000 – 248,326 – 40,092 – 288,418 – 225,245 – 157,605 – 382,850 – 229,252 – 243,728 – 472,980 – 1,144,248 – 493 – 6,341 – 281,584 – 288,418 – 13,869 – 105,239 – 214,609 – 49,133 – 382,850
		288,418
		225,245 157,605
		382,850
		229,252 243,728
		472,980
		1,144,248

		493 6,341 281,584
		288,418

		13,869 105,239 214,609 49,133
		382,850

15. LOANS AND ADVANCES

The carrying amounts of loans and advances are approximate to their fair values.

• 38 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. DEBTORS, PREPAYMENTS AND DEPOSITS

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

Outstanding balances with ages: Repayable on demand Within 30 days	30th June, 31st December, 2005 2004 HK$’000 HK$’000 32,995 32,835 61,746 95,347 94,741 128,182	30th June, 31st December, 2005 2004 HK$’000 HK$’000 32,995 32,835 61,746 95,347 94,741 128,182
		128,182

Trading terms with customers are either on cash basis or on 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.

The carrying amounts of debtors and deposits are approximate to their fair values.

17. BANK LOANS

Repayable within one year: Secured_(Note)_ Unsecured	30th June, 31st December, 2005 2004 HK$’000 HK$’000 131,635 188,761 10,000 20,000 141,635 208,761	30th June, 31st December, 2005 2004 HK$’000 HK$’000 131,635 188,761 10,000 20,000 141,635 208,761
		208,761

Note: The bank loans of HK$131,635,000 (31st December, 2004 – HK$188,761,000) were secured by certain securities and time deposits of the Group and certain securities owned by margin clients of the Group.

18. CREDITORS, ACCRUALS AND DEPOSITS RECEIVED

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

Outstanding balances with ages: Repayable on demand Within 30 days	30th June, 31st December, 2005 2004 HK$’000 HK$’000 331,116 486,189 86,046 21,217 417,162 507,406	30th June, 31st December, 2005 2004 HK$’000 HK$’000 331,116 486,189 86,046 21,217 417,162 507,406
		507,406

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, 2005, total client trust bank balances amounted to HK$316,844,000 (31st December, 2004 – HK$389,123,000).

• 39 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

19. SHARE CAPITAL

Authorised: 2,000,000,000 (31st December, 2004 – 2,000,000,000) ordinary shares of HK$1.00 each Issued and fully paid: 1,346,829,094 (31st December, 2004 – 1,346,829,094) ordinary shares of HK$1.00 each RESERVES Capital Investment Share redemption Legal property premium reserve reserve revaluation account (Note (c)) (Note (d)) reserve HK$’000 HK$’000 HK$’000 HK$’000 At 1st January, 2005 As previously reported 50,988 11,760 2,053 7,461 Prior period adjustment:(Notes 1& 2) HK(SIC)-Int 21 Deferred tax arising from revaluation of investment properties – – – (1,234 ) At restated before opening adjustments 50,988 11,760 2,053 6,227 Opening adjustments:(Notes 1& 2) In respect of financial instruments – – – – In respect of investment properties – – – (6,227 ) In respect of negative goodwill – – – – At restated after opening adjustments 50,988 11,760 2,053 – Fair value changes on available-for-sale financial assets – – – – Deferred tax arising from fair value changes on available-for-sale financial assets – – – – Transfer of reserve – – 1,154 – Exchange realignment – – – – Issue of shares by a subsidiary to minority shareholders – – – – Advance from minority shareholders of a subsidiary – – – – Decrease in interests in a subsidiary – – – – Profit/(Loss) for the period – – – – 2004 final distribution, declared and paid – – – – At 30th June, 2005 50,988 11,760 3,207 –	Investment revaluation reserve HK$’000 – –	30th June, 31st December, 2005 2004 HK$’000 HK$’000 2,000,000 2,000,000 1,346,829 1,346,829 Distributable Exchange reserves equalisation Minority (Note (b)) reserve Total interests HK$’000 HK$’000 HK$’000 HK$’000 1,297,500 (10,257 ) 1,359,505 30,204 – – (1,234 ) – 1,297,500 (10,257 ) 1,358,271 30,204 (5,062 ) – (5,062 ) – 6,227 – – – 1,144 – 1,144 – 1,299,809 (10,257 ) 1,354,353 30,204 ) – – (16,043 ) – ) – – (2,743 ) – (1,154 ) – – – – (3,128 ) (3,128 ) 4 – – – 2,446 – – – 203 – – – (1,772 ) 12,313 – 12,313 (832 ) (40,405 ) – (40,405 ) – ) 1,270,563 (13,385 ) 1,304,347 30,253
	– – – –
	– (16,043 (2,743 – – – – – – –
	(18,786

20. RESERVES

• 40 •

APPENDIX I

FINANCIAL INFORMATION OF THE 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 Increase in interests in a subsidiary Loss for the period 2003 final distribution, declared and paid At 30th June, 2004 and 1st July, 2004 (as restated) Surplus on revaluation of investment properties Deferred tax arising from revaluation of investment properties Exchange realignment Advance from minority shareholders of a subsidiary Loss for the period 2004 interim distribution, declared and paid At 31st December, 2004 (as restated)	Capital Share redemption premium reserve account (Note (c)) HK$’000 HK$’000 50,988 11,760 – – – – – – – – – – – – – – – – – – – – 50,988 11,760 – – – – – – – – – – – – 50,988 11,760	Legal reserve (Note (d)) HK$’000 845 – – 1,208 – – – – – – – 2,053 – – – – – – 2,053	Investment property revaluation reserve HK$’000 – 2,626 (459 ) – – – – – – – – 2,167 4,835 (775 ) – – – – 6,227	Investment Distributable Exchange revaluation reserves equalisation reserve (Note (b)) reserve HK$’000 HK$’000 HK$’000 – 1,424,272 (13,371 ) – – – – – – – (1,208 ) – – – 227 – – – – – – – – – – – – – (48,716 ) – – (40,405 ) – – 1,333,943 (13,144 ) – – – – – – – – 2,887 – – – – (16,241 ) – – (20,202 ) – – 1,297,500 (10,257 )	Total HK$’000 1,474,494 2,626 (459 ) – 227 – – – – (48,716 ) (40,405 ) 1,387,767 4,835 (775 ) 2,887 – (16,241 ) (20,202 ) 1,358,271	Minority interests HK$’000 24,793 – – – (9 ) 4,398 2,174 (803 ) 554 (430 ) – 30,677 – – (36 ) 610 (1,047 ) – 30,204

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, 2005 comprise accumulated losses of HK$56,304,000 (1st January, 2005 – HK$67,463,000; 31st December, 2004 – HK$69,772,000) and the remaining balance arising from the Cancellation of HK$1,326,867,000 (31st December, 2004 – HK$1,367,272,000).
(c) The capital redemption reserve is not available for distribution to shareholders.
(d) 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.

• 41 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

21. MATURITY PROFILE OF ASSETS AND LIABILITIES

The maturity profile analysed by the remaining period at the balance sheet date to the contractual maturity date is as follows:

At 30th June, 2005 Assets Debt securities: Available-for-sale financial assets Financial assets at fair value through profit or loss Loans and advances Client trust bank balances Pledged time deposits Cash and cash equivalents Assets less liabilities attributable to banking operation: Cash and short–term funds Debt securities: Held-to-maturity financial assets Financial assets at fair value through profit or loss Advances to customers Liabilities Bank loans Assets less liabilities attributable to banking operation: Current, fixed, savings and other deposits of customers	Repayable on demand HK$’000 – – 90,143 31,040 – 31,179 95,722 – – 26,859 274,943 – 30,406 30,406	3 months or less HK$’000 – 4,200 24,647 285,804 86,116 581,292 15,684 – – 68,540 1,066,283 141,635 71,044 212,679	1 year or less but over 3 months HK$’000 – 12,686 5,437 – – – – – – 20,065 38,188 – 8,662 8,662	5 years or less but over 1 year HK$’000 6,892 149,140 – – – – – – 7,766 25,268 189,066 – 1,969 1,969	After 5 years HK$’000 – 79,638 – – – – – 9,618 976 18,822 109,054 – – –	Undated HK$’000 3,165 – – – – – – – 8,221 – 11,386 – – –	Total HK$’000 10,057 245,664 120,227 316,844 86,116 612,471 111,406 9,618 16,963 159,554
							1,688,920

							141,635 112,081
							253,716

• 42 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 31st December, 2004 Assets Debt securities: Investment securities Other investments in securities Loans and advances Client trust bank balances Cash and cash equivalents Assets less liabilities attributable to banking operation: Cash and short–term funds Debt securities: Held-to-maturity financial assets Other investments in securities Advances to customers Liabilities Bank loans Assets less liabilities attributable to banking operation: Current, fixed, savings and other deposits of customers	Repayable on demand HK$’000 – – 165,614 43,244 87,912 44,475 – – 28,598 369,843 – 19,912 19,912	3 months or less HK$’000 – – – 345,879 674,361 39,433 – – 61,854 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 1,739 234,815 9,984 – – – – 7,769 23,326 277,633 – – –	After 5 years HK$’000 – 70,180 – – – – 9,643 – 12,580 92,403 – – –	Undated HK$’000 3,165 49,133 – – – – – 9,190 – 61,488 – – –	Total HK$’000 4,904 382,850 175,598 389,123 762,273 83,908 9,643 16,959 147,931
							1,973,189

							208,761 117,641
							326,402

22. 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, 2005 2004 HK$’000 HK$’000 13,464 15,528 7,209 13,717 20,673 29,245	30th June, 31st December, 2005 2004 HK$’000 HK$’000 13,464 15,528 7,209 13,717 20,673 29,245
		29,245

• 43 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

23. CAPITAL COMMITMENTS

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

Capital commitments in respect of property, plant and machinery: Contracted, but not provided for Other capital commitments: Contracted, but not provided for_(Note)_	30th June, 31st December, 2005 2004 HK$’000 HK$’000 7,265 – 1,604,903 160,118 1,612,168 160,118	30th June, 31st December, 2005 2004 HK$’000 HK$’000 7,265 – 1,604,903 160,118 1,612,168 160,118
		160,118

Note: In June 2005, the Group committed to invest up to a maximum amount of HK$1,450,000,000 in Lippo ASM Asia Property LP, a limited partnership recently established with the investment objective to invest in real estate in the East Asia region, which was conditional upon the approval of the shareholders of Lippo Limited, being the intermediate holding company of the Company. Subsequent to the balance sheet date, such approval has been obtained.

24. 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$1,543,000 (2004 – HK$1,156,000) 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 and ImPac Asset Management (HK) Limited (“ImPac”), being a wholly–owned subsidiary of the Company, paid rental expenses of HK$717,000 (2004 – HK$364,000) and Nil (2004 – HK$116,000) to Porbandar Limited, being a fellow subsidiary of the Company, in respect of office premises occupied by the Company and ImPac, respectively. The rental was determined by reference to open market rentals.
(c) As at 30th June, 2005, the Group had amounts due from associates in a total of HK$4,453,000 (31st December, 2004 – HK$2,767,000) and an amount due from a jointly controlled entity of HK$7,313,000 (31st December, 2004 – HK$7,313,000). The balances with the associates and the jointly controlled entity are unsecured, interest–free and have no fixed terms of repayment.

• 44 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2004

The audited consolidated financial statements of the Group for the year ended 31st December, 2004 set out below is not subject to any qualified opinion.

Consolidated Profit and Loss Account

For the year ended 31st December, 2004

Note Turnover 5 Cost of sales Gross profit Other revenue Administrative expenses Other operating expenses Write-back of provision/(Provisions) for bad and doubtful debts relating to: Banking operation Non-banking operations Provisions for impairment losses: An associate Investment securities 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 6 Write-back of provision for loss on guaranteed return arrangement for fund management Profit/(Loss) from operating activities 7 Finance costs 11 Share of results of associates Profit/(Loss) before tax Tax 12 Profit/(Loss) before minority interests Minority interests Net profit/(loss) from ordinary activities attributable to shareholders 13& 27 Earnings/(Loss) per share 14 Basic Diluted Distributions 15 Interim, declared and paid Final, proposed/paid after the balance sheet date	2004 HK$’000 1,177,912 (1,030,090) 147,822 – (70,531) (39,725) 666 (1,203) (16,603) (2,776) (61,303) (7,856) – (51,509) (4,873) (5,309) (61,691) (4,743) (66,434) 1,477 (64,957) HK cents (4.8) N/A HK$’000 20,202 40,405	2003 HK$’000 617,246 (455,777) 161,469 4,171 (70,165) (34,422) (3,753) (1,916) – (20,000) 54,926 20,483 10,868 121,661 (4,700) (6,488) 110,473 (5,182) 105,291 776 106,067 HK cents 7.9 N/A HK$’000 20,202 40,405

• 45 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Balance Sheet

As at 31st December, 2004

Note ASSETS NON-CURRENT ASSETS Goodwill 16 Fixed assets 17 Investment properties 18 Properties under development 19 Interests in associates 20 Interests in a jointly controlled entity 21 Investment securities 22 Assets less liabilities attributable to banking operation 23 CURRENT ASSETS Property held for sale Loans and advances Other investments in securities 24 Debtors, prepayments and deposits 25 Client trust bank balances Cash and bank balances TOTAL ASSETS EQUITY AND LIABILITIES CAPITAL AND RESERVES Share capital 26 Reserves 27 MINORITY INTERESTS CURRENT LIABILITIES Bank loans 28 Creditors, accruals and deposits received 29 Tax payable TOTAL EQUITY AND LIABILITIES	2004 HK$’000 56,553 10,704 96,144 99,767 27,166 7,313 365,658 175,411 838,716 10,140 175,598 1,144,248 167,496 389,123 762,273 2,648,878 3,487,594 1,346,829 1,359,505 2,706,334 30,204 208,761 539,260 3,035 751,056 3,487,594	2003 HK$’000 60,893 5,004 16,750 – 48,544 – 171,867 156,081
		459,139
		– 91,888 1,033,890 330,369 430,558 1,335,116
		3,221,821
		3,680,960

		1,346,829 1,474,494
		2,821,323
		24,793
		10,000 822,042 2,802
		834,844
		3,680,960

• 46 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Summary Statement of Changes in Equity

For the year ended 31st December, 2004

Note Total equity as at 1st January Surplus on revaluation of investment properties 27 Exchange differences on translation of the financial statements of foreign entities Net gain/(loss) not recognised in the consolidated profit and loss account Net profit/(loss) from ordinary activities attributable to shareholders 27 Repurchase of shares 27 2002 final distribution, declared 27 2003 interim distribution, declared 15& 27 2003 final distribution, declared 15& 27 2004 interim distribution, declared 15& 27 Total equity as at 31st December	2004 HK$’000 2,821,323 7,461 3,114 10,575 (64,957) – – – (40,405) (20,202) 2,706,334	2003 HK$’000 2,779,797 – (969) (969) 106,067 (2,965) (40,405) (20,202) – – 2,821,323

• 47 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Balance Sheet

As at 31st December, 2004

Note ASSETS NON-CURRENT ASSETS Fixed assets 17 Interests in subsidiaries 30 Interests in associates 20 Investment securities 22 CURRENT ASSETS Other investments in securities 24 Debtors, prepayments and deposits Cash and bank balances TOTAL ASSETS EQUITY AND LIABILITIES CAPITAL AND RESERVES Share capital 26 Reserves 27 CURRENT LIABILITIES Bank loans 28 Creditors, accruals and deposits received TOTAL EQUITY AND LIABILITIES	2004 HK$’000 2,135 2,005,994 – 31,915 2,040,044 337,033 25,944 364,529 727,506 2,767,550 1,346,829 1,305,757 2,652,586 108,761 6,203 114,964 2,767,550	2003 HK$’000 1,626 1,793,759 28,435 31,915
		1,855,735
		194,681 1,984 742,831
		939,496
		2,795,231

		1,346,829 1,393,605
		2,740,434
		– 54,797
		54,797
		2,795,231

• 48 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Cash Flow Statement

For the year ended 31st December, 2004

Note Cash flows from operating activities Cash from/(used in) operations 31(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 Capital injection to banking operation Return of capital by an associate Receipts from disposal of investment securities Payments to acquire: Fixed assets Properties under development Investment properties Investment securities Associates Increase in interests in subsidiaries Increase in interests in associates Advance from banking operation Advances to associates Advance to a jointly controlled entity Disposal of a subsidiary, net of cash disposed of 31(b) Acquisition of subsidiaries, net of cash acquired 31(c) Deposits refunded from long term investments 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)_ Repurchase of shares Issue of shares by subsidiaries to minority shareholders Advance from minority shareholders of a subsidiary Net cash from/(used in) financing activities	2004 HK$’000 (353,849) 38,176 16,930 – (1,815) (11) (300,569) (29,100) – 2,340 (7,764) (97,193) (71,682) (216,822) (1,903) – (17,083) 15,540 (1,587) (7,313) (1,264) 21,224 – (412,607) (3,466) (60,607) 545,761 (347,000) – 4,398 610 139,696	2003 HK$’000 850,280 53,481 4,745 7,379 (609) – 915,276 – 25,478 – (3,068) – – (20,952) (24,154) (2,067) – – (7) – – – 267 (24,503) (4,700) (60,607) 142,000 (153,000) (2,965) – – (79,272)

• 49 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Net increase/(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	2004 HK$’000 (573,480) 1,335,116 637 762,273 762,273	2003 HK$’000 811,501 525,228 (1,613) 1,335,116 1,335,116

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.

• 50 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes to the Financial Statements

1. CORPORATE INFORMATION

The principal activity of the Company is investment holding. Its subsidiaries, associates and a jointly controlled entity 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 ultimate holding company of the Company is Lippo Cayman Limited which is incorporated in the Cayman Islands.

2. IMPACT OF RECENTLY ISSUED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRS”)

The Hong Kong Institute of Certified Public Accountants has issued a number of new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards, herein collectively referred to as the new HKFRSs, which are generally effective for accounting periods beginning on or after 1st January, 2005. The Group has not early adopted these new HKFRSs in the financial statements for the year ended 31st December, 2004. The new HKFRSs may result in changes in the future as to how the Group’s financial performance and financial position are prepared and presented.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (which also include Statements of Standard Accounting Practice (“SSAPs”) 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 Companies Ordinance. They have been prepared under the historical cost convention, except for the periodic remeasurement of investment properties and certain securities investments as further explained below.

(b) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries for the year ended 31st December, 2004. The results of subsidiaries acquired or disposed of during the year are consolidated from or to their effective dates of acquisition or disposal, respectively. 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 in the results and net assets of the Company’s subsidiaries, respectively.

(c) Subsidiaries

A subsidiary is a company 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.

• 51 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(d) Joint venture companies

A joint venture company is a company 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 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) a long term investment, 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.

(e) Jointly controlled entity

A jointly controlled entity is a joint venture company which 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.

(f) Associates

An associate is a company, 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.

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 long term assets and are stated at cost less any impairment losses.

• 52 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(g) Goodwill

Goodwill arising from the acquisition of subsidiaries and associates 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 as at the date of acquisition.

Goodwill arising from acquisition is recognised in the consolidated balance sheet as an asset and amortised on the straight-line basis over its estimated useful life of not exceeding 20 years. Goodwill is stated in the consolidated balance sheet at cost less any accumulated amortisation and any impairment losses which may be present. In the case of associates, any unamortised goodwill is included in the carrying amount thereof, rather than as a separately identified asset on the consolidated balance sheet.

On disposal of subsidiaries or associates, the gain or loss on disposal is calculated by reference to the net assets at the date of disposal, including the attributable amount of goodwill which remains unamortised and any relevant reserves, as appropriate.

The carrying amount of goodwill is reviewed annually and written down for impairment when it is considered necessary. A previously recognised impairment loss for goodwill is not reversed unless the impairment loss was caused by a specific external event of an exceptional nature that was not expected to recur, and subsequent external events have occurred which have reversed the effect of that event.

(h) Negative goodwill

Negative goodwill arising from the acquisition of subsidiaries and associates represents the excess of the Group’s share of the fair values of the identifiable assets and liabilities acquired as at the date of acquisition, over the cost of the acquisition.

To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the acquisition plan and that can be measured reliably, but which do not represent identifiable liabilities as at the date of acquisition, that portion of negative goodwill is recognised as income in the consolidated profit and loss account when the future losses and expenses are recognised.

To the extent that negative goodwill does not relate to identifiable expected future losses and expenses as at the date of acquisition, negative goodwill is recognised in the consolidated profit and loss account on a systematic basis over the remaining average useful life of the acquired depreciable/amortisable assets. The amount of any negative goodwill in excess of the fair values of the acquired non-monetary assets is recognised as income immediately.

In the case of associates, any negative goodwill not yet recognised in the consolidated profit and loss account is included in the carrying amount thereof, rather than as a separately identified item on the consolidated balance sheet.

On disposal of subsidiaries or associates, the gain or loss on disposal is calculated by reference to the net assets at the date of disposal, including the attributable amount of negative goodwill which remains unamortised and any relevant reserves, as appropriate. Any attributable negative goodwill previously credited to the capital reserve at the time of acquisition is written back and included in the calculation of the gain or loss on disposal.

(i) Impairment of assets

An assessment is made at each balance sheet date of whether there is any indication of impairment of any asset, or whether there is any indication that an impairment loss previously recognised for an asset in prior years may no longer exist or may have decreased. If any such indication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount is calculated as the higher of the asset’s value in use and its net selling price.

• 53 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. 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, when the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an 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 an 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, when the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

(j) Fixed assets and depreciation

Fixed assets, other than investment properties, are stated at cost less accumulated depreciation and any impairment losses. The cost of an asset 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 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 the asset, the expenditure is capitalised as an additional cost to that asset.

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

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

The gain or loss on disposal or retirement of a fixed asset, other than investment properties, recognised in the profit and loss account is the difference between the net sales proceeds and the carrying amount of the relevant asset.

(k) Investment properties

Investment properties are interests in land and buildings in respect of which construction work and development have been completed and which are intended to be held on a long term basis for their investment potential, with any rental income being negotiated at arm’s length. Such properties are stated at their open market values on the basis of annual professional valuations at the end of each financial year and are not depreciated except where the unexpired terms of the leases are 20 years or less, in which case the then carrying amounts are amortised on the straight-line basis over the respective remaining lease terms. Changes in the values of investment properties are dealt with as movements in the investment property revaluation reserve. If the total of this reserve is insufficient to cover a deficit, on a portfolio basis, the excess of the deficit is charged to the profit and loss account. Any subsequent revaluation surplus is credited to the profit and loss account to the extent of the deficit previously charged.

Upon disposal of an investment property, the relevant portion of the investment property revaluation reserve realised in respect of previous valuations is released to the profit and loss account.

• 54 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(l) 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.

(m) 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.

(n) 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.

(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;
(iii) interest income, in proportion to time, taking into account the principal outstanding and the effective interest rate applicable;
(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.

• 55 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(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.

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

Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax assets 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 assets 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 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.

(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.

• 56 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Retirement benefits costs

Employer’s contributions made by the Group to the Mandatory Provident Fund schemes 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 administered funds.

(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) Foreign currencies

Foreign currency transactions are recorded at the applicable exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the applicable exchange rates ruling at that date. Exchange differences are dealt with in the profit and loss account.

On consolidation, the financial statements of overseas subsidiaries, associates and jointly controlled entities denominated in foreign currencies, are translated into Hong Kong dollars using the net investment method. The profit and loss accounts of overseas subsidiaries, associates and jointly controlled entities are translated into Hong Kong dollars at the weighted average exchange rates for the year, and their balance sheets are translated into Hong Kong dollars at the exchange rates ruling at the balance sheet date. The resulting translation differences are included in the exchange equalisation reserve.

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.

(v) Cash and cash equivalents

For the purpose of the consolidated cash flow statement, cash and cash equivalents represent cash on hand and demand deposits, 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 sheet, cash and bank balances comprise cash on hand and at banks, including term deposits, which are not restricted as to use.

(w) Related parties

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities.

• 57 •

APPENDIX I

FINANCIAL INFORMATION 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 capital and reserves 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) Accounting for banking operation

Banking operation represent operation carried out through The Macau Chinese Bank Limited (“MCB”). The principal accounting policies which are specific to the banking operation are described below:

(i) Advances to customers, banks and other financial institutions

Advances to customers, banks and other financial institutions are reported in the balance sheet at the principal amount outstanding, net of provisions for bad and doubtful debts. Advances to banks and other financial institutions include placements with banks and other financial institutions of more than one year.

All advances are recognised when cash is advanced to borrowers.

Cash rebates granted in relation to residential mortgage loans are capitalised and amortised to the profit and loss account on the straight-line basis over the terms of the loans, or, where relevant, the early repayment penalty period.

(ii) Finance leases and hire purchase contracts

The amounts due from customers in respect of finance leases and hire purchase contracts are included in the balance sheet at net investment which represents the total rentals receivable under finance leases and hire purchase contracts less unearned income. Finance income implicit in the rentals receivable is credited to the profit and loss account over the lease period so as to produce an approximately constant periodic rate of return on the net investment for each accounting period.

(iii) Off-balance sheet financial instruments

Off-balance sheet financial instruments arise from forward and swap transactions undertaken by the banking operation in the foreign exchange, interest rate and equity markets. The accounting for these instruments is dependent upon whether the transactions are undertaken for trading purposes or to hedge risk.

Transactions undertaken for trading purposes are marked to market and the gains or losses arising is recognised in the profit and loss account. Transactions designated as hedges are valued on an equivalent basis to the assets, liabilities or net positions that they are hedging. Any profit or loss is recognised in the profit and loss account on the same basis as that arising from the related assets, liabilities or net positions.

Unrealised gains and losses on transactions which are marked to market are included under assets and liabilities, respectively, in the balance sheet.

• 58 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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, turnover 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 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 disposal 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 fund management services.

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

Group

Property investment and 2004 development HK$’000 Revenue External 2,056 Inter-segment – Total 2,056 Segment results (2,486 ) Unallocated corporate expenses Share of results of associates – Loss before tax Tax Loss before minority interests Minority interests Net loss from ordinary activities attributable to shareholders	Treasury investment HK$’000 12,988 906 13,894 12,327 –	Securities investment HK$’000 1,073,582 – 1,073,582 (5,263 ) –	Corporate finance and securities broking HK$’000 65,045 1,453 66,498 4,077 –	Banking Information business technology HK$’000 HK$’000 16,198 900 – – 16,198 900 3,972 (10,817 ) – (2,379 )	Inter-segment Other elimination Consolidated HK$’000 HK$’000 HK$’000 7,143 – 1,177,912 – (2,359 ) – 7,143 (2,359 ) 1,177,912 (2,225 ) – (415 ) (55,967 ) (2,930 ) – (5,309 ) (61,691 ) (4,743 ) (66,434 ) 1,477 (64,957 )

• 59 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

	Property			Corporate
	investment			finance and
	and	Treasury	Securities	securities	Banking	Information		Inter-segment
2004	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	232,696	3,567	20,394	–	3,432,785
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									3,487,594
Segment liabilities	2,672	–	110,250	622,890	–	22	2,805	–	738,639
Unallocated liabilities									12,417
Total liabilities									751,056
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 provision/
(Provisions) for bad and
doubtful debts relating to:
Banking operation	–	–	–	–	666	–	–	–	666
Non-banking operations	–	–	–	(1,203 )	–	–	–	–	(1,203	)
Provision for impairment loss
in investment securities	–	–	(2,776 )	–	–	–	–	–	(2,776	)
Net unrealised holding loss
on other investments in
securities	–	–	(61,303 )	–	–	–	–	–	(61,303	)
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	)
Provision for impairment
loss in an associate									(16,603	)

• 60 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

Property investment and 2003 development HK$’000 Revenue External 323 Inter-segment – Total 323 Segment results (515 ) Unallocated corporate expenses Share of results of associates – Profit before tax Tax Profit before minority interests Minority interests Net profit from ordinary activities attributable to shareholders	Treasury investment HK$’000 51,461 706 52,167 50,097 –	Securities investment HK$’000 460,092 – 460,092 91,310 –	Corporate finance and securities broking HK$’000 56,828 1,008 57,836 4,784 –	Banking Information business technology HK$’000 HK$’000 21,434 – – – 21,434 – 4,808 (6,422 ) – (5,419 )	Inter-segment Other elimination Consolidated HK$’000 HK$’000 HK$’000 31,279 – 621,417 – (1,714 ) – 31,279 (1,714 ) 621,417 10,573 706 155,341 (38,380 ) (1,069 ) – (6,488 ) 110,473 (5,182 ) 105,291 776 106,067

• 61 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

	Property			Corporate
	investment			finance and
	and	Treasury	Securities	securities	Banking	Information		Inter-segment
2003	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	16,750	1,308,931	1,216,007	796,547	216,722	4,166	55,362	–	3,614,485
Interests in associates	–	–	–	1,340	–	3,143	44,061	–	48,544
Unallocated assets									17,931
Total assets									3,680,960
Segment liabilities	–	–	59,937	730,312	–	120	26,748	–	817,117
Unallocated liabilities									17,727
Total liabilities									834,844
Other segment information:
Capital expenditure	–	–	–	14	26,982	–	1,596	–	28,592
Depreciation	–	–	(539 )	(665 )	(820 )	–	(238 )	–	(2,262	)
Provision for bad and
doubtful debts relating to:
Banking operation	–	–	–	–	(3,753 )	–	–	–	(3,753	)
Non-banking operations	–	–	–	(1,916 )	–	–	–	–	(1,916	)
Provision for impairment
loss on investment
securities	–	–	(20,000 )	–	–	–	–	–	(20,000	)
Net unrealised holding gain
on other investments in
securities	–	–	54,926	–	–	–	–	–	54,926
Write-back of provision for
loss on guaranteed
return arrangement for
fund management	–	–	–	–	–	–	10,868	–	10,868
Amortisation of goodwill
arising from acquisition
of subsidiaries	–	–	–	–	(3,240 )	–	(378 )	–	(3,618	)
Deficit on revaluation of
investment properties	(316 )	–	–	–	–	–	–	–	(316	)
Unallocated:
Capital expenditure									1,458
Depreciation									(168	)

• 62 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Geographical segments

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

Group

2004 Revenue Segment assets Interests in associates Interests in a jointly controlled entity Total assets Capital expenditure 2003 Revenue Segment assets Interests in associates Total assets Capital expenditure	Hong Kong HK$’000 551,467 1,696,399 17,477 – 2,816 Hong Kong HK$’000 323,672 2,651,119 26,904 1,637	Republic of Singapore HK$’000 216,778 571,149 – – – Republic of Singapore HK$’000 234,896 16,962 3,143 1,431	Japan HK$’000 120,181 201,857 – – – Japan HK$’000 – 19,878 – –	Other Consolidated HK$’000 HK$’000 289,486 1,177,912 983,710 3,453,115 9,689 27,166 7,313 7,313 3,487,594 4,948 7,764 Other Consolidated HK$’000 HK$’000 62,849 621,417 944,457 3,632,416 18,497 48,544 3,680,960 26,982 30,050	Other Consolidated HK$’000 HK$’000 289,486 1,177,912 983,710 3,453,115 9,689 27,166 7,313 7,313 3,487,594 4,948 7,764 Other Consolidated HK$’000 HK$’000 62,849 621,417 944,457 3,632,416 18,497 48,544 3,680,960 26,982 30,050

					3,632,416 48,544
					3,680,960

					30,050

• 63 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

5. TURNOVER

Turnover represents the aggregate of gross rental income, gross income on treasury investment which includes interest income on bank deposits and held-to-maturity securities, gross proceeds from sales of investments, gross income from underwriting and securities broking, interest and other income from money lending business, gross income from licensing of software, gross income from fund management, dividend income and net interest income, commissions, dealing income and other revenues from a banking subsidiary, after eliminations of all significant intra-group transactions.

An analysis of the turnover 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 2004 2003 HK$’000 HK$’000 2,056 323 12,988 51,461 1,073,582 460,092 65,045 56,828 16,198 17,263 900 – 7,143 31,279 1,177,912 617,246	Group 2004 2003 HK$’000 HK$’000 2,056 323 12,988 51,461 1,073,582 460,092 65,045 56,828 16,198 17,263 900 – 7,143 31,279 1,177,912 617,246
		617,246

Turnover attributable to banking business represents turnover generated from MCB, a licensed credit institution under the Financial System Act of the Macao Special Administrative Region of the People’s Republic of China. Turnover attributable to banking business is analysed as follows:

Interest income Interest expenses Commission income Net dealing income and other revenues	Group 2004 2003 HK$’000 HK$’000 11,247 12,442 (1,777) (2,023 5,793 5,400 935 1,444 16,198 17,263	Group 2004 2003 HK$’000 HK$’000 11,247 12,442 (1,777) (2,023 5,793 5,400 935 1,444 16,198 17,263
		17,263

6. NET UNREALISED GAIN/(LOSS) ON TRANSFER OF INVESTMENT SECURITIES AND HELD-TO-MATURITY SECURITIES TO OTHER INVESTMENTS IN SECURITIES

During the year, investment securities of a total cost of HK$19,019,000 (2003 – investment securities of a total cost of HK$54,681,000 and held-to-maturity securities of a total amortised cost of HK$357,153,000) were transferred to other investments in securities at market value or fair value to reflect the Group’s current 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 (2003 – gain of HK$20,483,000).

• 64 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

7. PROFIT/(LOSS) FROM OPERATING ACTIVITIES

Profit/(Loss) from operating activities is arrived at after crediting/(charging):

Gross rental income
Less: Outgoings
Net rental income
Staff costs_(Note (a)):
Wages and salaries
Retirement benefit costs
Less: Forfeited contributions
Net retirement benefit costs
Total staff costs
Interest income(Note (b)):
Listed investments
Unlisted investments
Other
Dividend income:
Listed investments
Unlisted investments
Provision for impairment losses on unlisted
investment securities
Net realised gain on unlisted investment securities
Net realised and unrealised holding gain/(loss)
on other investments in securities:
Listed
Unlisted
Other unlisted investment income
Net unrealised gain/(loss) on transfer of investment
securities and held-to-maturity securities to
other investments in securities:
Listed
Unlisted
Depreciation:
Banking operation
Other
Loss on disposal of fixed assets
Exchange gains/(losses) – net
Write-back of deficit/(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 (c))
Negative goodwill recognised as income(Note (c))_

Group
2004
2003
HK$’000
HK$’000
2,056
323
(1,378)
(128)
678
195
(53,952)
(55,448)
(3,221)
(3,058)
181
73
(3,040)
(2,985)
(56,992)
(58,433)
19,259
22,301
1,171
10,163
12,988
18,997
16,452
4,745
478
–
(2,776)
(20,000)
340
–
(66,968)
80,649
33,111
16,582
5,253
–
(3,766)
12,946
(4,090)
7,537
(785)
(820)
(2,586)
(1,610)
(415)
–
6,933
(2,101)
316
(316)
(1,342)
(1,076)
(8,827)
(8,225)
(4,245)
(3,618)
229
–

• 65 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note:

(a) The amounts include the Directors’ emoluments disclosed in Note 8 to the financial statements.
(b) The amounts exclude income relating to the banking operation of the Group.
(c) The amortisation of goodwill and negative goodwill recognised as income for the year are included under “Other operating expenses” on the face of the consolidated profit and loss account.

8. 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 Bonuses paid and payable Retirement benefits costs	Group 2004 2003 HK$’000 HK$’000 389 318 12,367 4,275 1,200 – 36 36 13,992 4,629	Group 2004 2003 HK$’000 HK$’000 389 318 12,367 4,275 1,200 – 36 36 13,992 4,629
		4,629

Included in Directors’ emoluments were fees of HK$180,000 (2003 – HK$279,000) paid to the independent non-executive Directors in respect of the year.

The number of Directors whose emoluments fell within the following bands is as follows:

Emoluments bands (HK$): Nil – 1,000,000 1,000,001 – 1,500,000 1,500,001 – 2,000,000 2,500,001 – 3,000,000 7,500,001 – 8,000,000	Group 2004 2003 Number of Number of Directors Directors 5 4 1 1 1 2 1 – 1 – 9 7	Group 2004 2003 Number of Number of Directors Directors 5 4 1 1 1 2 1 – 1 – 9 7
		7

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

• 66 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

9. SENIOR EXECUTIVES’ EMOLUMENTS

The emoluments of the three (2003 – five) highest paid employees are as follows:

Basic salaries, housing and other allowances and benefits in kind Bonuses paid and payable Retirement benefits costs	Group 2004 2003 HK$’000 HK$’000 11,105 8,987 – 11,150 314 289 11,419 20,426	Group 2004 2003 HK$’000 HK$’000 11,105 8,987 – 11,150 314 289 11,419 20,426
		20,426

The five highest paid individuals for the year included two Directors (2003 – Nil), details of whose emoluments are set out in Note 8 to the financial statements.

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

Emoluments bands (HK$): 2,000,001 – 2,500,000 2,500,001 – 3,000,000 3,000,001 – 3,500,000 3,500,001 – 4,000,000 4,500,001 – 5,000,000 5,500,001 – 6,000,000	Group 2004 2003 Number of Number of individuals individuals 1 – – 1 1 1 – 1 – 1 1 1 3 5	Group 2004 2003 Number of Number of individuals individuals 1 – – 1 1 1 – 1 – 1 1 1 3 5
		5

10. 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 administrative 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$181,000 (2003 – HK$73,000). 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 profit and loss account represent employer contributions paid and payable by the Group to the schemes and amounted to HK$3,040,000 (2003 – HK$2,985,000).

• 67 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

11. FINANCE COSTS


	2004	2003
	HK$’000	HK$’000
Interest on bank loans wholly repayable within five years	4,873	4,700

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

12. TAX

Hong Kong: Underprovision in prior years Overseas: Charge for the year Underprovision in prior years Share of tax attributable to an associate: Hong Kong Total charge for the year	Group 2004 2003 HK$’000 HK$’000 2,059 3,464 1,095 1,329 381 – 1,476 1,329 1,208 389 4,743 5,182	Group 2004 2003 HK$’000 HK$’000 2,059 3,464 1,095 1,329 381 – 1,476 1,329 1,208 389 4,743 5,182
		1,329 –
		1,329
		389
		5,182

No provision for Hong Kong profits tax has been made as the Group has available tax losses brought forward from prior years to offset the estimated assessable profits generated during the year. Hong Kong profits tax for the prior year had been provided for at the rate of 17.5 per cent. on the estimated assessable profits arising in Hong Kong during that year. 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.

The Group has tax losses arising in Hong Kong of HK$120,726,000 (2003 – HK$123,012,000) 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 31st December, 2004, there was no significant unrecognised deferred tax liability (2003 – Nil) for taxes that would be payable on the unremitted earnings of certain of the Group’s subsidiaries, a jointly controlled entity or associates as the Group had no liability to additional tax should such amounts be remitted.

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

• 68 •

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 a jointly controlled entity are domiciled to the tax charge is as follows:

Profit/(Loss) before tax Tax at the statutory tax rate of 17.5 per cent. (2003 – 17.5 per cent.) Effect of different tax rates in other jurisdictions Adjustments in respect of current tax of previous years 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 7.7 per cent. (2003 – 4.7 per cent.)	Group 2004 2003 HK$’000 HK$’000 (61,691) 110,473 (10,796) 19,333 1,118 3,726 2,441 3,464 (14,943) (36,345 15,738 2,041 (1,533) – 12,718 12,963 4,743 5,182	Group 2004 2003 HK$’000 HK$’000 (61,691) 110,473 (10,796) 19,333 1,118 3,726 2,441 3,464 (14,943) (36,345 15,738 2,041 (1,533) – 12,718 12,963 4,743 5,182
		19,333 3,726 3,464 (36,345 2,041 – 12,963
		5,182

For a company operated in Macau, corporate taxes have been calculated on the estimated assessable profits for the year at the rate of 15.75 per cent. (2003 – 15.75 per cent.).

13. NET PROFIT/(LOSS) FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS

The net profit/(loss) from ordinary activities attributable to shareholders includes the loss for the year ended 31st December, 2004 dealt with in the financial statements of the Company amounting to HK$27,241,000 (2003 – net profit of HK$41,456,000) as set out in Note 27 to the financial statements.

14. EARNINGS/(LOSS) PER SHARE

(a) Basic earnings/(loss) per share

Basic earnings/(loss) per share is calculated based on (i) the net loss from ordinary activities attributable to shareholders of HK$64,957,000 (2003 – net profit of HK$106,067,000); and (ii) the weighted average number of 1,346,829,000 shares (2003 – 1,347,972,000 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, 2004 and 2003 as there were no dilutive potential ordinary shares during these years.

15. DISTRIBUTIONS

Interim, declared and paid, of HK1.5 cents (2003 – HK1.5 cents) per ordinary share Final, proposed, of HK3 cents (2003 – HK3 cents, paid) per ordinary share	Group and Company 2004 2003 HK$’000 HK$’000 20,202 20,202 40,405 40,405 60,607 60,607	Group and Company 2004 2003 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.

• 69 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. GOODWILL

Group

Cost: At 1st January, 2004 Additions during the year At 31st December, 2004 Accumulated amortisation and impairment/(Recognition as income): At 1st January, 2004 Amortisation provided/(Recognised as income) for the year At 31st December, 2004 Net book value: At 31st December, 2004 At 31st December, 2003	Goodwill HK$’000 69,935 1,049 70,984 9,042 4,245 13,287 57,697 60,893	Negative goodwill HK$’000 – (1,373) (1,373) – (229) (229) (1,144) –

• 70 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

17. FIXED ASSETS

Group

	Leasehold
	improvements,
	furniture, fixtures,
	equipment and
	motor vehicles
	HK$’000
Cost:
At 1st January, 2004	49,027
Additions during the year	7,764
Acquisition of subsidiaries	1,317
Disposal of a subsidiary	(1,181)
Disposals during the year	(1,506)
Exchange adjustments	44
At 31st December, 2004	55,465
Accumulated depreciation:
At 1st January, 2004	44,023
Provided for the year	2,586
Acquisition of subsidiaries	333
Disposal of a subsidiary	(1,175)
Disposals during the year	(1,091)
Exchange adjustments	85
At 31st December, 2004	44,761
Net book value:
At 31st December, 2004	10,704
At 31st December, 2003	5,004
Company
	Furniture, fixtures,
	equipment and
	motor vehicles
	HK$’000
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
At 31st December, 2003	1,626

• 71 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

18. INVESTMENT PROPERTIES

Medium term leasehold land and buildings situated in Hong Kong: Balance at beginning of year Additions during the year Surplus/(Deficit) on revaluation Balance at end of year Long term leasehold land and buildings situated in Hong Kong: Additions during the year Surplus on revaluation Balance at end of year Freehold land and buildings situated outside Hong Kong: Balance at beginning of year Surplus on revaluation Exchange adjustments Balance at end of year Total	Group 2004 2003 HK$’000 HK$’000 9,700 – – 10,075 5,100 (375 14,800 9,700 71,682 – 2,161 – 73,843 – 7,050 7,336 516 59 (65) (345 7,501 7,050 96,144 16,750	Group 2004 2003 HK$’000 HK$’000 9,700 – – 10,075 5,100 (375 14,800 9,700 71,682 – 2,161 – 73,843 – 7,050 7,336 516 59 (65) (345 7,501 7,050 96,144 16,750
		9,700
		– –
		–
		7,336 59 (345
		7,050
		16,750

Based on professional valuations as at 31st December, 2004 made by Mr. Jonathan Miles Foxall, 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$88,643,000 (2003 – HK$9,700,000).

Based on a professional valuation as at 31st December, 2004 made by Professional Asset Valuers, Incorporated, property appraiser, the investment property situated outside Hong Kong was valued on an open market, existing use basis at HK$7,501,000 (2003 – HK$7,050,000).

19. PROPERTIES UNDER DEVELOPMENT

Land and buildings situated outside Hong Kong, at cost: Additions during the year Exchange adjustments Balance at end of year Land and buildings held under the following lease terms: Leasehold_(Note)_ Freehold	Group 2004 2003 HK$’000 HK$’000 97,193 – 2,574 – 99,767 – 62,367 – 37,400 – 99,767 –	Group 2004 2003 HK$’000 HK$’000 97,193 – 2,574 – 99,767 – 62,367 – 37,400 – 99,767 –
		–

		– –
		–

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

• 72 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

20. INTERESTS IN ASSOCIATES

			Group	Group
	2004				2003
	HK$’000			HK$’000
Share of net assets in unlisted companies	33,169				41,518
Goodwill from acquisition less amortisation	2,596				10,440
Negative goodwill arising from acquisition less recognition	(291)				–
Due from associates	2,767				1,180
	38,241				53,138
Provisions for impairment losses	(11,075)				(4,594)
	27,166				48,544

Share of post-acquisition reserves at the balance sheet date	5,145				16,209

The share of post-acquisition reserves represents that portion attributable to		the		Group	before
y interests therein. The balances with the associates are unsecured, interest-free and have no
rms of repayment.
The amounts of goodwill and negative goodwill arising from the acquisition of			associates		are as
:
				Negative
Group	Goodwill			goodwill
	HK$’000			HK$’000
Cost:
At 1st January, 2004	15,445				–
Additions during the year	5,178				(354)
At 31st December, 2004	20,623				(354)
Accumulated amortisation and impairment/
(recognition as income):
At 1st January, 2004	5,005				–
Amortisation provided/(Recognised as income)
for the year	6,132				(63)
Impairment provided for the year	6,890				–
At 31st December, 2004	18,027				(63)
Net book value:
At 31st December, 2004	2,596				(291)

At 31st December, 2003	10,440				–

		Company
	2004				2003
	HK$’000			HK$’000
Unlisted shares, at cost	–				28,435

The share of post-acquisition reserves 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 amounts of goodwill and negative goodwill arising from the acquisition of associates are as follows:

• 73 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

21. INTERESTS IN A JOINTLY CONTROLLED ENTITY


	2004	2003
	HK$’000	HK$’000
Due from a jointly controlled entity	7,313	–

The balance with the jointly controlled entity is unsecured, interest-free and has no fixed terms of repayment.

22. 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 2004 2003 HK$’000 HK$’000 28,750 28,750 152,060 154,060 180,810 182,810 (20,000) (20,000) 160,810 162,810 7,680 5,413 (2,776) – 4,904 5,413 199,944 3,644 365,658 171,867 47,725 41,400 160,810 162,810 3,165 3,165 1,739 2,248 4,904 5,413	Company 2004 2003 HK$’000 HK$’000 28,750 28,750 – – 28,750 28,750 – – 28,750 28,750 3,165 3,165 – – 3,165 3,165 – – 31,915 31,915 47,725 41,400 28,750 28,750 3,165 3,165 – – 3,165 3,165	Company 2004 2003 HK$’000 HK$’000 28,750 28,750 – – 28,750 28,750 – – 28,750 28,750 3,165 3,165 – – 3,165 3,165 – – 31,915 31,915 47,725 41,400 28,750 28,750 3,165 3,165 – – 3,165 3,165
			28,750 –
			28,750
			3,165 –
			3,165
			–
			31,915

			41,400

			28,750

			3,165 –
			3,165

• 74 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at 31st December, 2004, particulars of the Group’s investments in equity securities which exceed 20 per cent. of the nominal value of the investee company’s issued shares disclosed pursuant to Section 129(1) of the Hong Kong Companies Ordinance is as follows:

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

23. ASSETS LESS LIABILITIES ATTRIBUTABLE TO BANKING OPERATION

Due to the dissimilar nature of banking and non-banking operations, assets less liabilities attributable to banking operation are shown separately in the consolidated financial statements. The financial information in respect of banking operation shown below is based on the audited financial statements of MCB for the year ended 31st December, 2004.

Note Cash and short-term funds (a) Placements with banks and other financial institutions maturing between one and twelve months Other investments in securities (b) Advances and other accounts (c) Held-to-maturity securities (d) Fixed assets (e) Current, fixed, savings and other deposits of customers Other accounts and provisions	Group 2004 2003 HK$’000 HK$’000 83,908 254,807 – 368,320 24,673 13,646 152,127 156,079 9,643 9,672 26,272 27,057 296,623 829,581 (117,641) (666,290 (3,571) (7,210 (121,212) (673,500 175,411 156,081	Group 2004 2003 HK$’000 HK$’000 83,908 254,807 – 368,320 24,673 13,646 152,127 156,079 9,643 9,672 26,272 27,057 296,623 829,581 (117,641) (666,290 (3,571) (7,210 (121,212) (673,500 175,411 156,081
		829,581
		(666,290 (7,210
		(673,500
		156,081

Note: (a) Cash and short-term funds Cash and balances with banks and other financial institutions Treasury bills	2004 HK$’000 60,143 23,765 83,908	2003 HK$’000 219,402 35,405
		254,807

• 75 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Other investments in securities

Listed equity securities, at market value: Hong Kong Overseas Debt securities: Listed outside Hong Kong, at market value Unlisted, at fair value Unlisted investment funds, at fair value An analysis of the issuers of other investments in securities is as follows: Equity securities: Corporate entities Debt securities: Corporate entities Banks and other financial institutions (c) Advances and other accounts Advances to customers Other accounts Accrued interest Provisions for bad and doubtful debts	2004 HK$’000 3,128 759 3,887 9,190 7,769 16,959 3,827 24,673 3,887 9,190 7,769 16,959 2004 HK$’000 153,071 2,956 1,240 (5,140) 152,127	2003 HK$’000 – –
		–
		13,646 –
		13,646
		–
		13,646

		–

		13,646 –
		13,646

		2003 HK$’000 156,643 3,190 1,296 (5,050
		156,079

Rescheduled advances Market value of collateral held	2004 HK$’000 3,342 3,564	2003 HK$’000 3,464

		3,627

• 76 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(d) Held-to-maturity securities

2004
HK$’000
Debt securities, at amortised cost:
Listed outside Hong Kong
9,643
Market value of listed debt securities
10,877
An analysis of the issuers of held-to-maturity securities
is as follows:
Banks and other financial institutions
9,643
(e)
Fixed assets
Furniture,
fixtures,
Land and
equipment and
buildings
motor vehicles
HK$’000
HK$’000
Cost:
At 1st January, 2004
25,047
5,267
Disposals during the year
–
(2,780)
At 31st December, 2004
25,047
2,487
Accumulated depreciation:
At 1st January, 2004
21
3,236
Provided for the year
250
535
Disposals during the year
–
(2,780)
At 31st December, 2004
271
991
Net book value:
At 31st December, 2004
24,776
1,496
At 31st December, 2003
25,026
2,031

2003
HK$’000
9,672
10,891
9,672
Total
HK$’000
30,314
(2,780)
27,534
3,257
785
(2,780)
1,262
26,272
27,057

• 77 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

24. OTHER INVESTMENTS IN SECURITIES

Listed equity securities, at market value: Hong Kong Overseas Debt securities: Listed, at market value: Hong Kong Overseas Unlisted, at fair value Investment funds: Listed overseas, at market value Unlisted, at fair value 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 2004 2003 HK$’000 HK$’000 248,326 274,979 40,092 10,503 288,418 285,482 – 8,441 225,245 287,614 157,605 211,800 382,850 507,855 229,252 240,553 243,728 – 472,980 240,553 1,144,248 1,033,890 493 8,862 6,341 123,220 281,584 153,400 288,418 285,482 13,869 16,948 105,239 199,957 214,609 275,702 49,133 15,248 382,850 507,855	Company 2004 2003 HK$’000 HK$’000 90,733 100,036 7,102 2,662 97,835 102,698 – – 4,601 4,988 50,033 86,995 54,634 91,983 176,671 – 7,893 – 184,564 – 337,033 194,681 – – 1,848 75,920 95,987 26,778 97,835 102,698 – – 23,213 79,289 31,421 12,694 – – 54,634 91,983	Company 2004 2003 HK$’000 HK$’000 90,733 100,036 7,102 2,662 97,835 102,698 – – 4,601 4,988 50,033 86,995 54,634 91,983 176,671 – 7,893 – 184,564 – 337,033 194,681 – – 1,848 75,920 95,987 26,778 97,835 102,698 – – 23,213 79,289 31,421 12,694 – – 54,634 91,983
			102,698
			– 4,988 86,995
			91,983
			– –
			–
			194,681

			– 75,920 26,778
			102,698

			– 79,289 12,694 –
			91,983

• 78 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

25. 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 Between 91 and 180 days Over 180 days	Group 2004 2003 HK$’000 HK$’000 32,835 274,775 95,347 10,313 – 238 – 400 – 839 – 11,887 128,182 298,452	Group 2004 2003 HK$’000 HK$’000 32,835 274,775 95,347 10,313 – 238 – 400 – 839 – 11,887 128,182 298,452
		298,452

Trading terms with customers are either on 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.

In prior year, outstanding balances with ages over 180 days include claims receivable in respect of the Group’s insurance underwriting business which is broadly consistent with the claims payable included in the trade creditors of the Group. During the year, the Group disposed of such insurance underwriting business, which did not have significant impact on the net asset value or the profit and loss account of the Group.

26. SHARE CAPITAL

Authorised: 2,000,000,000 (2003 – 2,000,000,000) ordinary shares of HK$1.00 each Issued and fully paid: 1,346,829,094 (2003 – 1,346,829,094) ordinary shares of HK$1.00 each	Group and Company 2004 2003 HK$’000 HK$’000 2,000,000 2,000,000 1,346,829 1,346,829	Group and Company 2004 2003 HK$’000 HK$’000 2,000,000 2,000,000 1,346,829 1,346,829

		1,346,829

During the prior year, a total of 4,708,000 shares of HK$1.00 each were repurchased on The Stock Exchange of Hong Kong Limited and were cancelled by the Company. The discount of HK$1,743,000 arising from such repurchase has been credited to the distributable reserves and an amount of HK$4,708,000 was transferred from distributable reserves to the capital redemption reserve account as set out in Note 27 to the financial statements.

The repurchases of the Company’s shares during that year were effected by the Directors with a view to benefiting shareholders as a whole by enhancing the net asset value per share and earnings per share of the Group.

• 79 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

27. RESERVES

Group

At 1st January, 2003 Transfer of reserve Repurchase of shares Exchange differences on consolidation Profit for the year_(Note (b)) 2002 final distribution, declared and paid 2003 interim distribution, declared and paid At 31st December, 2003 and 1st January, 2004 Surplus on revaluation of investment properties Transfer of reserve Exchange differences on consolidation Loss for the year(Note (b))_ 2003 final distribution, declared and paid 2004 interim distribution, declared and paid At 31st December, 2004	Share premium account HK$’000 50,988 – – – – – – 50,988 – – – – – – 50,988	Capital redemption reserve (Note (d)) HK$’000 7,052 – 4,708 – – – – 11,760 – – – – – – 11,760	Legal reserve (Note (e)) HK$’000 – 845 – – – – – 845 – 1,208 – – – – 2,053	Investment property revaluation reserve HK$’000 – – – – – – – – 7,461 – – – – – 7,461	Distributable reserves (Note (c)) HK$’000 1,382,622 (845 ) (2,965) – 106,067 (40,405) (20,202) 1,424,272 – (1,208) – (64,957) (40,405) (20,202) 1,297,500	Exchange equalisation reserve HK$’000 (12,402) – – (969 ) – – – (13,371) – – 3,114 – – – (10,257)	Total HK$’000 1,428,260 – 1,743 (969 ) 106,067 (40,405) (20,202) 1,474,494 7,461 – 3,114 (64,957) (40,405) (20,202) 1,359,505

Company

At 1st January, 2003 Profit for the year_(Note 13) Repurchase of shares 2002 final distribution, declared and paid 2003 interim distribution, declared and paid At 31st December, 2003 and 1st January, 2004 Loss for the year(Note 13)_ 2003 final distribution, declared and paid 2004 interim distribution, declared and paid At 31st December, 2004	Share premium account HK$’000 50,988 – – – – 50,988 – – – 50,988	Capital redemption Distributable reserve reserves (Note (d)) (Note (c)) HK$’000 HK$’000 7,052 1,352,973 – 41,456 4,708 (2,965) – (40,405) – (20,202) 11,760 1,330,857 – (27,241) – (40,405) – (20,202) 11,760 1,243,009	Total HK$’000 1,411,013 41,456 1,743 (40,405) (20,202) 1,393,605 (27,241) (40,405) (20,202) 1,305,757

• 80 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note:

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

Pursuant to a special resolution passed at a special general meeting of the Company on 2nd December, 1997, the entire amount standing to the credit of the share premium account of HK$3,630,765,000 was cancelled (the “Cancellation”). The credit arising from the Cancellation was transferred to distributable reserves. The balance of the reserves arising from the Cancellation could be applied towards any capitalisation issues of the Company in future, or for making distributions to shareholders of the Company.

(b) Consolidated profit/(loss) for the year attributable to shareholders is retained/ (accumulated) as follows:

The Company and its subsidiaries Associates	Group 2004 2003 HK$’000 HK$’000 (58,440) 112,944 (6,517) (6,877 (64,957) 106,067	Group 2004 2003 HK$’000 HK$’000 (58,440) 112,944 (6,517) (6,877 (64,957) 106,067
		106,067

(c) Distributable reserves of the Group at 31st December, 2004 comprise accumulated losses of HK$69,772,000 (2003 – HK$3,607,000) and the remaining balance arising from the Cancellation of HK$1,367,272,000 (2003 – HK$1,427,879,000). Included in the distributable reserves of the Group at 31st December, 2004 was an amount of a proposed final distribution for the year then ended of HK$40,405,000 (2003 – HK$40,405,000) declared after the balance sheet date.

Distributable reserves of the Company at 31st December, 2004 comprise contributed surplus of HK$134,329,000 (2003 – HK$134,329,000), accumulated losses of HK$258,592,000 (2003 – HK$231,351,000) and the remaining balance arising from the Cancellation of HK$1,367,272,000 (2003 – HK$1,427,879,000). Included in the distributable reserves of the Company at 31st December, 2004 was an amount of proposed final distribution for the year then ended of HK$40,405,000 (2003 – 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.

28. BANK LOANS

Repayable within one year: Secured_(Note)_ Unsecured	Group 2004 2003 HK$’000 HK$’000 188,761 – 20,000 10,000 208,761 10,000	Group 2004 2003 HK$’000 HK$’000 188,761 – 20,000 10,000 208,761 10,000
		10,000

• 81 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Repayable within one year: Secured_(Note)_	Company 2004 2003 HK$’000 HK$’000 108,761 – 108,761 –	Company 2004 2003 HK$’000 HK$’000 108,761 – 108,761 –
		–

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

29. 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 Between 31 and 60 days Between 61 and 90 days Between 91 and 180 days Over 180 days	Group 2004 2003 HK$’000 HK$’000 486,189 691,367 21,217 70,503 – 207 – 696 – 3,810 – 13,703 507,406 780,286	Group 2004 2003 HK$’000 HK$’000 486,189 691,367 21,217 70,503 – 207 – 696 – 3,810 – 13,703 507,406 780,286
		780,286

The outstanding balances that are repayable on demand include client payables relating to cash balances held on trust for the customers in respect of the Group’s securities broking business. As at 31st December, 2004, total client trust bank balances amounted to HK$389,123,000 (2003 – HK$430,558,000).

30. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Due from subsidiaries Due to subsidiaries Provisions for impairment losses	Company 2004 2003 HK$’000 HK$’000 44,953 1 2,201,677 1,987,239 (137,067) (89,912 2,109,563 1,897,328 (103,569) (103,569 2,005,994 1,793,759	Company 2004 2003 HK$’000 HK$’000 44,953 1 2,201,677 1,987,239 (137,067) (89,912 2,109,563 1,897,328 (103,569) (103,569 2,005,994 1,793,759
		1,897,328 (103,569
		1,793,759

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

• 82 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

31. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

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


		2004	2003
	Note	HK$’000	HK$’000
Profit/(Loss) before tax		(61,691)	110,473
Adjustments for:
Share of results of associates		5,309	6,488
Loss/(Gain) on disposal of:
Fixed assets	7	415	–
Investment securities	7	(340)	–
A subsidiary		140	–
Provisions for impairment losses:
Investment securities	7	2,776	20,000
An associate		16,603	–
Net unrealised loss/(gain) on transfer of
investment securities and held-to-maturity
securities to other investments in securities	6	7,856	(20,483)
Write-back of provision for loss on
guaranteed return arrangement for
fund management		–	(10,868)
Deficit/(Write-back of deficit) on revaluation
of investment properties	7	(316)	316
Interest expenses	11	4,873	4,700
Interest income		(33,418)	(51,461)
Dividend income	7	(16,930)	(4,745)
Depreciation	7	2,586	1,610
Amortisation of goodwill arising from
acquisition of subsidiaries	7	4,245	3,618
Negative goodwill recognised as income	7	(229)	–
Operating profit/(loss) before
working capital changes		(68,121)	59,648
Increase in other investments in securities		(99,195)	(473,662)
Increase in property held for sale		(10,140)	–
Decrease/(Increase) in loans and advances		(83,710)	23,372
Decrease/(Increase) in debtors, prepayments
and deposits		119,363	(73,115)
Increase/(Decrease) in creditors, accruals
and deposits received		(246,235)	307,868
Decrease in bank deposits with original
maturity over three months		–	309,221
Decrease in certificates of deposit held		–	1,000,000
Decrease/(Increase) in client trust
bank balances		41,435	(176,628)
Decrease in provision for loss on guaranteed
return arrangement for fund management		–	(117,985)
		(346,603)	858,719
Profit attributable to banking operation		(7,246)	(8,439)
Cash from/(used in) operations		(353,849)	850,280

• 83 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Disposal of a subsidiary

Net assets disposed of: Fixed assets Cash and bank balances Debtors, prepayments and deposits Creditors and accruals Release of exchange reserve Minority interests Loss on disposal of a subsidiary Cash consideration received	Group 2004 2003 HK$’000 HK$’000 6 – 1,964 – 40,069 – (40,400) – 4 – (803) – 840 – (140) – 700 –	Group 2004 2003 HK$’000 HK$’000 6 – 1,964 – 40,069 – (40,400) – 4 – (803) – 840 – (140) – 700 –
		– –
		–

An analysis of net outflow of cash and cash equivalents in respect of the disposal of a subsidiary is as follows:

Cash consideration received Cash and bank balances disposed of Net outflow of cash and cash equivalents in respect of the disposal of a subsidiary	Group 2004 2003 HK$’000 HK$’000 700 – (1,964) – (1,264) –	Group 2004 2003 HK$’000 HK$’000 700 – (1,964) – (1,264) –
		–

(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 from acquisition Cash consideration paid	Group 2004 2003 HK$’000 HK$’000 984 – 40,500 – 1,163 – (2,428) – (2,174) – 38,045 – (17,891) – 20,154 – (878) – 19,276 –	Group 2004 2003 HK$’000 HK$’000 984 – 40,500 – 1,163 – (2,428) – (2,174) – 38,045 – (17,891) – 20,154 – (878) – 19,276 –
		– –
		– –
		–

• 84 •

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 2004 2003 HK$’000 HK$’000 (19,276) – 40,500 – 21,224 –	Group 2004 2003 HK$’000 HK$’000 (19,276) – 40,500 – 21,224 –
		–

(d) Major non-cash transaction

32. 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 31st December, 2004 Assets Debt securities: Investment securities Other investments in securities Loans and advances Client trust bank balances Cash and bank balances Assets less liabilities attributable to banking operation: Cash and short-term funds Debt securities: Held-to-maturity securities Other investments in securities Advances to customers Liabilities Bank loans Assets less liabilities attributable to banking operation: Current, fixed, savings and other deposits of customers	Repayable on demand HK$’000 – – 165,614 43,244 87,912 44,475 – – 28,598 369,843 – 19,912 19,912	3 months or less HK$’000 – – – 345,879 674,361 39,433 – – 61,854 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 1,739 234,815 9,984 – – – – 7,769 23,326 277,633 – – –	After 5 years HK$’000 – 70,180 – – – – 9,643 – 12,580 92,403 – – –	Undated HK$’000 3,165 49,133 – – – – – 9,190 – 61,488 – – –	Total HK$’000 4,904 382,850 175,598 389,123 762,273 83,908 9,643 16,959 147,931
							1,973,189

							208,761 117,641
							326,402

• 85 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 31st December, 2003 Assets Debt securities: Investment securities Other investments in securities Loans and advances Client trust bank balances Cash and bank balances Assets less liabilities attributable to banking operation: Cash and short-term funds Placements with banks and other financial institutions maturing between one and twelve months Debt securities: Held-to-maturity securities Other investments in securities Advances to customers Liabilities Bank loans Assets less liabilities attributable to banking operation: Current, fixed, savings and other deposits of customers	Repayable on demand HK$’000 – 5,486 91,888 207,923 148,965 219,402 – – – 25,312 698,976 – 566,394 566,394	3 months or less HK$’000 – 52,694 – 222,635 1,186,151 35,405 368,320 – – 99,037 1,964,242 10,000 92,381 102,381	1 year or less but over 3 months HK$’000 – 23,610 – – – – – – – 10,418 34,028 – 7,515 7,515	5 years or less but over 1 year HK$’000 2,248 346,732 – – – – – – – 3,240 352,220 – – –	After 5 years HK$’000 – 79,333 – – – – – 9,672 4,735 13,586 107,326 – – –	Undated HK$’000 3,165 – – – – – – – 8,911 – 12,076 – – –	Total HK$’000 5,413 507,855 91,888 430,558 1,335,116 254,807 368,320 9,672 13,646 151,593
							3,168,868

							10,000 666,290
							676,290

33. CONTINGENT LIABILITIES

Group

As at 31st December, 2004, the Group had contingent liabilities relating to its banking subsidiary of HK$29,245,000 (2003 – HK$40,073,000), comprising guarantees and other endorsements of HK$15,528,000 (2003 – HK$11,337,000) and liabilities under letters of credit on behalf of customers of HK$13,717,000 (2003 – HK$28,736,000).

Company

As at 31st December, 2004, guarantees provided by the Company in respect of banking facilities granted to its subsidiaries amounted to HK$257,500,000 (2003 – HK$245,000,000).

• 86 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

34. OPERATING LEASE ARRANGEMENTS

(a) As lessor

The Group leases its investment properties under operating lease arrangements with leases negotiated for terms of two years. At 31st December, 2004, 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 2004 2003 HK$’000 HK$’000 2,900 708 16 13 2,916 721	Group 2004 2003 HK$’000 HK$’000 2,900 708 16 13 2,916 721
		721

(b) As lessee

The Group leases certain properties under operating lease agreements which are noncancellable. The leases expire on various dates until 30th November, 2008 and the leases for properties contain provision for rental adjustments. As as 31st December, 2004, 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 2004 2003 HK$’000 HK$’000 6,529 5,168 7,877 209 14,406 5,377	Company 2004 2003 HK$’000 HK$’000 1,434 516 1,016 – 2,450 516	Company 2004 2003 HK$’000 HK$’000 1,434 516 1,016 – 2,450 516
			516

35. CAPITAL COMMITMENTS

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


	2004	2003
	HK$’000	HK$’000
Other capital commitments:
Contracted, but not provided for	160,118	66,582

The Company did not have any material commitments at the balance sheet date (2003 – Nil).

36. CONNECTED AND RELATED PARTY TRANSACTIONS

Listed below are connected transactions disclosed in accordance with the Rules Governing the Listing of Securities (the “Listing Rules”) on The Stock Exchange of Hong Kong Limited and related party transactions disclosed in accordance with the Statement of Standard Accounting Practice 20 “Related party disclosures”.

• 87 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(a) During the year, Lippo Securities Holdings Limited (“LSHL”), being a wholly-owned subsidiary of the Company, paid rental expenses of HK$2,311,000 (2003 – HK$2,416,000) 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$934,000 (2003 – HK$728,000) and HK$142,000 (2003 – HK$232,000) 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 fellow subsidiary of the Company, for itself and its subsidiaries, amounted to HK$803,000 (2003 – HK$441,000), Lippo China Resources Limited, being an indirect controlling shareholder of the Company, for itself and its subsidiaries, amounted to HK$805,000 (2003 – HK$75,000), Lippo Limited, being an indirect controlling shareholder of the Company, for itself and its subsidiaries, amounted to HK$65,000 (2003 – HK$2,000) and Lippo Cayman Limited, being an indirect controlling shareholder of the Company, for itself and its subsidiaries, amounted to HK$25,000 (2003 – HK$20,000). The commissions were in line with those offered by the LSHL Group to its customers.
(c) At the balance sheet date, an overseas affiliate of the Company had the following balances with MCB:


	2004	2003
	HK$’000	HK$’000
Included under the following item as referred to
in Note 23 to the financial statements:
Current, fixed, savings and other deposits
of customers	–	(195,313)

The Directors are of the opinion that these transactions were undertaken on terms similar to those offered to unrelated customers in the ordinary course of business of the relevant companies.

(d) As at 31st December, 2004, the Group had balances with its associates and jointly controlled entity as set out in Note 20 and Note 21 respectively to the financial statements.

The transactions in respect of items (a) and (b) above are continuing connected transactions as defined in Chapter 14A of the Listing Rules. Further details of the transactions are disclosed in the section headed “Directors’ and controlling shareholders’ interests in contracts” in the Report of the Directors.

37. SUBSEQUENT EVENTS

(a) On 21st January, 2005, the Group entered into agreement to purchase a property in Macau for a consideration of HK$238,000,000 for residential redevelopment. The acquisition is expected to be completed on or before 28th April, 2005.
(b) On 18th February, 2005, the Group accepted offer to acquire a property in Singapore for an aggregate consideration of S$43,620,000 (equivalent to approximately HK$207,614,000) for residential redevelopment. The acquisition is expected to be completed on or before 18th May, 2005.

38. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Board of Directors on 20th April, 2005.

• 88 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

4. INDEBTEDNESS

As at 31st January, 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$10 million, which solely comprising of a secured bank loan. The bank loan was secured by certain securities owned by margin client of the Group.

Save as aforesaid and apart from intra-group liabilities, the Group (other than MCB) did not, as at 31st January, 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 January, 2006, MCB accepts deposits from customers, banks and other financial institutions of approximately HK$123 million in the normal course of their banking business. MCB also had contingent liabilities of approximately HK$18 million, comprising guarantees and other endorsements of approximately HK$12 million and liabilities under letters of credit on behalf of customers of approximately HK$6 million, as at 31st January, 2006.

Save as aforesaid, MCB did not, as at 31st January, 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.

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) in the absence of unforeseen circumstances.

• 89 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

6. MATERIAL CHANGE

The Directors are not aware, as at the Latest Practicable Date, of any material adverse change in the financial or trading position or prospect of the Group since 31st December, 2004, the date to which the latest published audited financial statements of the Group were made up.

7. FINANCIAL AND TRADING PROSPECTS

After an extended economic boom in 2004, Hong Kong’s economic outlook for 2005 still seems robust though less rosy. Meanwhile, vibrant tourist growth, buoyant property prices, strong pick-up in local consumption helped counteract the effects of rising interest rates. The Group has been taking positive steps to explore the overseas investment markets and diversified into property investment, in addition to its financial services businesses. By the first half of 2005, the Group’s property-related assets have been gradually increased to 22 per cent. (31st December, 2004 – 12 per cent.) of the total assets. Taking advantage of the continuing increases in property prices in Hong Kong as well as the East Asia, the Group achieved a net profit attributable to shareholders of HK$12.3 million for the six months ended 30th June, 2005 (2004 – loss of HK$48.7 million).

In capturing investment opportunities under the continuing surges in property prices in the region, the Group has been active in making strategic property investments. In particular, looking for long term capital appreciation, the Group completed the acquisition of a parcel of land in Macau with a site area of approximately 39,000 square feet in April 2005. The new office floor at Lippo Centre, Hong Kong acquired in the second half of last year has contributed rental income to the Group during the period. In addition, the Group has participated in well-located property development projects in China, Singapore and Japan. Benefited from the booming property markets in the region, the Group registered a revaluation gain of HK$46 million during the period. Following the adoption of the revised accounting standards in 2005, such gain was recognised in the profit and loss account.

In June 2005, the Group committed to invest up to HK$1.45 billion in a property fund with the investment objectives to invest in real estate in the East Asia. With the ongoing improving economic environment and structural reforms in the East Asia, it is expected that the prospect for real estate investment in the East Asia is encouraging in the coming future. As at 30th June, 2005, no investment has yet been made by the property fund.

The global economy has been rather resilient in absorbing the impacts from the soaring oil prices and the rising interest rates. The growth impetus continues to depend on the developments in the United States and Mainland China. Operating environment is still challenging. While dedicating to improve internal operational efficiencies, the Group will continue to refine its existing core businesses and capture new investment opportunities with long-term growth potential. The Group is cautiously optimistic about the global and regional economic prospects in the future year. Given its own strong financial position, the Group is confident to take advantage of any strategic opportunities in pursuit of enhancing shareholders’ value.

• 90 •

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 34] intentionally omitted <==

27th March, 2006

The Directors Hongkong Chinese Limited 24/F, 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 27th March, 2006 in connection with the purchase of strata interest in 79 Anson Road in Singapore and formation of a joint venture (the “Purchase and Formation”). The unaudited pro forma statement of assets and liabilities has been prepared, for illustrative purpose only, to provide information about how the Purchase and Formation 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”).

It is our responsibility to form an opinion on the unaudited pro forma statement of assets and liabilities of the Group and to report our opinion 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 Statements of Investment Circular Reporting Standards and Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom, where applicable. Our work, which involved no independent examination of

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APPENDIX II PRO FORMA FINANCIAL INFORMATION OF THE GROUP

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

Our work does not constitute an audit or review in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants 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 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

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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, 2005 which gives effect to the purchase of strata interest in 79 Anson Road in Singapore and the formation of a joint venture company as if it had been consummated on 30th June, 2005.

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, 2005, extracted from its interim report for the six months ended 30th June, 2005, 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 purchase of strata interest in 79 Anson Road in Singapore and the formation of the joint venture company 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 purchase of strata interest in 79 Anson Road in Singapore and the formation of the joint venture company or at any future date.

Unaudited Pro Forma Statement of Assets and Liabilities of the Group

The Group As at Pro forma 30th June, 2005 Adjustment HK$’000 HK$’000 NON-CURRENT ASSETS Fixed assets 12,607 Investment properties 391,957 448,020 Properties under development 98,758 Goodwill 57,697 Interests in associates 21,452 Interests in a jointly controlled entity 7,313 Available-for-sale financial assets 177,044 Financial assets at fair value through profit or loss 195,703 Assets less liabilities attributable to banking operation 191,996 Deposit paid for long term investment 3,720 1,158,247 CURRENT ASSETS Properties held for sale 10,874 Available-for-sale financial assets 170,577 Financial assets at fair value through profit or loss 692,101 Loans and advances 120,227 Debtors, prepayments and deposits 118,552 Client trust bank balances 316,844 Pledged time deposits 86,116 Cash and cash equivalents 612,471 (95,611) 2,127,762	Adjusted Balance HK$’000 12,607 839,977 98,758 57,697 21,452 7,313 177,044 195,703 191,996 3,720
	1,606,267
	10,874 170,577 692,101 120,227 118,552 316,844 86,116 516,860
	2,032,151

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APPENDIX II

PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The Group As at Pro forma 30th June, 2005 Adjustment HK$’000 HK$’000 CURRENT LIABILITIES Bank loans 141,635 Creditors, accruals and deposits received 447,073 Tax payable 2,965 591,673 NET CURRENT ASSETS 1,536,089 TOTAL ASSETS LESS CURRENT LIABILITIES 2,694,336 NON-CURRENT LIABILITIES Long term bank loans – 313,614 Deferred tax liabilities 12,907 12,907 NET ASSETS 2,681,429	Adjusted Balance HK$’000 141,635 447,073 2,965
	591,673
	1,440,478
	3,046,745
	313,614 12,907
	326,521
	2,720,224

Note to pro forma adjustment:

The acquisition of Anson Road is intended to be financed by internal funding from shareholders (including contribution from ASM of US$5,000,000) and bank borrowings in the ratio of 30% and 70% respectively. However, the ratio may change at the time of completion, depending on the terms of the bank borrowings and other financial circumstances at the time.

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APPENDIX III

VALUATION OF THE PROPERTY

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

Savills (Singapore) Pte Ltd DL: 6536 8600 F: 6536 8611

No. 2 Shenton Way #17 – 01 SGX Centre 1 Singapore 068804, Singapore

REG NO.: 198703410D T: (65) 6536 5022 savills.com

27 March 2006

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

The Board of Directors Lippo China Resources Limited Room 2301, 23rd Floor Tower One Lippo Centre 89 Queensway Hong Kong

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

Dear Sirs

EXECUTIVE SUMMARY VALUATION OF 22 STRATA LOTS AT 79 ANSON ROAD, SINGAPORE 079906

The Instructions

Savills (Singapore) Private Limited (“Savills”) has been instructed by Lippo Limited, Lippo China Resources Limited and Hongkong Chinese Limited (the “Clients”) to prepare a valuation report on 22 Strata Lots (as listed in paragraph 3.3 of this report) at 79 Anson Road (the “Property”). We confirm that we have inspected the Property, conducted title searches and made relevant inquiries and investigations as we consider necessary to provide you with our assessment of the current open market value.

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VALUATION OF THE PROPERTY

The Property

Completed in 1992, 79 Anson Road is a 23-storey freehold commercial development accommodating shops on the first level and offices on the upper levels. The building is of reinforced concrete construction. Vertical circulation within the building is by means of eight passenger lifts, one fire/service lift, two carpark lifts and two staircases.

The Property, comprising one strata shop lot on the 1st storey and 21 strata office lots on the 5th to 15th storeys, is currently let to various tenants. As at the date of valuation the occupancy stands at 62%.

Basis of Valuation

We have been instructed to value the Property on an “as-is where-is” basis assuming it is free from encumbrances and can be freely disposed of in the open market as at the date of valuation.

We are of the opinion that the current open market value of the Property in its existing state subject to the existing tenancies and further subject to the above Basis of Valuation is S$95,000,000/– (SINGAPORE DOLLARS NINETY-FIVE MILLION ONLY).

Yours faithfully,

Savills (Singapore) Pte Ltd	Savills Valuation & Professional
Jessie Yeo	Services Limited, Hong Kong
BSc (Estate Management), MSISV	Charles C K Chan
Appraiser’s Licence No.AD041-2002061K	MSc FRICS FHKIS MCIArb RPS(GP)
Director, Valuation and Consultancy	Managing Director

Note: Ms Jessie Yeo is a Licensed Appraiser and a member of the Singapore Institute of Surveyors and Valuers (SISV) with more than 20 years valuation experience in Singapore.

Mr Charles Chan is a Registered Professional Surveyor (General Practice), fellow of the Hong Kong Institute of Surveyors and of the Royal Institution of Chartered Surveyors, and member of the Chartered Institute of Arbitrators. He has over 20 years of valuation experience in Asian property markets.

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APPENDIX III

VALUATION OF THE PROPERTY

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

Savills (Singapore) Pte Ltd DL: 6536 8600 F: 6536 8611

No. 2 Shenton Way #17 – 01 SGX Centre 1 Singapore 068804, Singapore

REG NO.: 198703410D T: (65) 6536 5022 savills.com

27 March 2006

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

The Board of Directors Lippo China Resources Limited Room 2301, 23rd Floor Tower One Lippo Centre 89 Queensway Hong Kong

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

Dear Sirs

VALUATION OF 22 STRATA LOTS AT 79 ANSON ROAD, SINGAPORE 079906

1. TERMS OF REFERENCE

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VALUATION OF THE PROPERTY

we have inspected the Property, conducted searches and made relevant inquiries and investigations as we consider necessary to provide you with our assessment of its current open market value.

Our valuation is prepared in accordance with “HKIS Valuation Standards on Properties (First Edition 2005)“ published by The Hong Kong Institute of Surveyors. We have also complied with all the requirements contained in Chapter 5 of the Rules Governing the Listing of Securities (the “Listing Rules”) issued by The Stock Exchange of Hong Kong Limited.

2. LOCALITY AND ENVIRONMENT

The Property is located at the junction of Anson Road and Palmer Road, within the central business district (CBD) of Singapore.

The immediate locality comprises mainly mid to high rise commercial developments such as International Plaza, Springleaf Tower, Lippo Centre (formerly known as 78 Shenton Way), Temasek Tower and MAS Building.

Vehicular accessibility to the Property is convenient and public bus facilities are readily available. The Tanjong Pagar Mass Rapid Transit (MRT) Station is also located nearby.

3. KEY TITLE PARTICULARS

3.1 Tenure: – Estate In Perpetuity

The Property is registered in the Singapore Land Registry as separate strata titles.

3.2 Ground Rent: – Not Applicable

Holders of an Estate In Perpetuity used to pay a nominal ground rent of S$12 per annum. With effect from 1 January 2001, the collection of ground rent has been waived.

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VALUATION OF THE PROPERTY

3.3 Legal Description/Strata Area/Registered Owner

The respective legal descriptions, strata area and registered owner of the 22 L L Strata Lots are set out as follows:

		All of Town	Subdivision 23
		Strata	Strata Area	Registered
S/No.	Unit No.	Lot No.	L (square metres)	Owner
1	#01-02	U3167N	620	Anson 5 Ltd
2	#05-02/03	U3168X	308	Anson 5A Ltd
3	#06-01/02	U3169L	441	Anson 6 Ltd
4	#06-03 to 05	U3187C	559	Anson 6A Ltd
5	#07-01/02	U3170N	441	Anson 7 Ltd
6	#07-03 to 05	U3188M	559	Anson 7A Ltd
7	#08-01/02	U3171X	441	Anson 8 Ltd
8	#08-03 to 05	U3189W	559	Anson 8A Ltd
9	#09-01/02	U3172L	441	Anson 9 Ltd
10	#09-03 to 05	U3190C	559	Anson 9A Ltd
11	#10-01/02	U3173C	441	Anson 10 Ltd
12	#10-03 to 05	U3191M	559	Anson 10A Ltd
13	#11-01/02	U3174M	441	Anson 11 Ltd
14	#11-03 to 05	U3192W	559	Anson 11A Ltd
15	#12-01/02	U3175W	441	Anson 12 Ltd
16	#12-03 to 05	U3193V	559	Anson 12A Ltd
17	#13-01/02	U3176V	441	Anson 13 Ltd
18	#13-03 to 05	U3194P	559	Anson 13A Ltd
19	#14-01 to 04	U3177P	559	Anson 14 Ltd
20	#14-05/06	U3195T	441	Anson 14A Ltd
21	#15-01 to 04	U3178T	559	Anson 15 Ltd
22	#15-05/06	U3196A	422	Anson 15A Ltd
		Total	10,909
			(117,423 sq. feet)

We have caused searches to be made at the Land Registry, but have not given any legal advice in respect of title. Further, we have not searched the original documents to verify the correctness of any information or to verify whether any amendments have been made which do not appear on the copies handed to us. As such, we are not in the position to advise on any options or rights of pre-emption concerning or affecting the Property.

4. GENERAL DESCRIPTION

4.1 The Property

79 Anson Road, completed in 1992, is a 23-storey freehold commercial development with a total strata floor area of 19,415 square metres (approximately 208,981 square feet) accommodating shop and office units with floor areas ranging from 1,200 to 10,764 square feet.

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APPENDIX III

VALUATION OF THE PROPERTY

The building stands on a near-rectangular-shaped land plot, legally known asL Lot 992X Town Subdivision 23, with a site area of approximately 2,617 square metresL (28,169 square feet).

The building is of reinforced concrete construction. It is fitted with stone cladding and aluminium framed glass windows, fixed panels and aluminium grilles generally.

Internal floor finishes to the common areas include granite tiles to the first storey entrance lobby and carpet to the lift lobbies and office corridors on every floor.

The typical floor plate is octagonal in shape, accommodating two strata office lots per level from the 6th level to the 23rd level. The 5th level consists of one strata office lot with direct access to the landscaped roof garden. The building has a fully automated carpark system with a total of 146 lots located from the 2nd to 4th levels. There are two strata shop units on the 1st level with individual entrances from street front.

Vertical circulation within the building is by means of eight passenger lifts, one fire/service lifts, two carpark lifts and two staircases.

The building is air-conditioned and is protected by automated fire sprinkler system, fully computerised and centrally controlled by a Fire Command Centre. Executive toilet/shower and pantry are located on every level.L

4.2 Tenancy Status

We are given to understand that based on the current leasing configuration, the Property has a total lettable area of approximately 10,335 square metres (111,245 square feet). According to the tenancy schedule provided by the Clients, 6,421.7 square metres (69,123 square feet) or approximately 62% of the total lettable area of the Property is currently let to various tenants at a total gross rental of S$242,514.06L per month. These individual tenancies are of either 2-year or 3-year terms with staggered expiry dates ranging from 30th April, 2006 to 30th September, 2009 (PleaseL L L see Schedule of Tenancies in Annex E).

As we have not had sight of the tenancy agreements, our valuation assumes that there are no obligations to repair or other factors of which we have not been informed.

5. MASTER PLAN ZONING

Under the 2003 Edition of the Master Plan, the subject site is zoned “Commercial” with a base plot ratio of 8.4.

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VALUATION OF THE PROPERTY

6. BASIS OF VALUATION

This formal valuation report is prepared in accordance with the instructions of the Clients and the following international definition of “Market Value” as advocated by the Hong Kong Institute of Surveyors:

“Market Value is 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.”

In addition, “Market Value” assumes:

(a) a willing seller;
(b) that, prior to the date of valuation there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of the price and terms and for the completion of the sale;
(c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;
(d) that no account is taken of any additional bid by a prospective purchaser with a special interest; and
(e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion.

No allowances have been made for any expenses or realisation, or for taxation which might arise in the event of a disposal. The property is considered as if free and clear of all mortgages or other charges which may be secured thereon.

We have valued the Property on an enbloc basis subject to existing tenancies, by applying an appropriate bulk discount rate on the aggregate value of the constituent units of the Property.

7. METHODOLOGY

Income Capitalization Approach and Direct Comparison Approach are adopted in the course of our valuation of the Property.

7.1 Income Capitalisation Approach

By the income capitalisation approach, we have estimated the gross income in the form of the prevailing and sustainable rent that the Property can fetch. Deductions are then made for outgoings such as property tax, maintenance and management

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VALUATION OF THE PROPERTY

fees, and a vacancy allowance reflecting possible future vacancies. The resultant net income is capitalised using an appropriate rate that reflects the current market investment criteria as analysed from the relevant sales evidence, to arrive at the capital value.

We have taken the current passing rental rates as well as the market rental rates as a cross-check against each.

7.2 Direct Comparison Approach

A cross-check is by the Market Comparison Method whereby the market value of the Property is assessed having regard to recent transactions of similar type properties, preferably in the same locality. Appropriate adjustments are made to account for differences in tenure, location, floor area and level, condition, etc. This method is based on the substitution principle whereby a prudent purchaser is assumed to pay no more for a particular property than it would cost to buy an equally desirable substitute property available in the market. This approach also takes into account the general prevailing economic conditions affecting the property market.

8. LIMITING AND GENERAL SERVICES CONDITIONS

We have relied to a very considerable extent on the information provided by yourselves and have accepted advice given to us on such matters as planning approvals, statutory notices, easements, tenure, letting and site and floor areas and all other relevant matters. Dimensions, measurements and areas included in this report are based on information contained in the documents provided to us and are therefore only approximations.

We have caused searches to be made at the Land Registry, but have not given any legal advice in respect of title. Further, we have not searched the original documents to verify the correctness of any information or to verify whether any amendments have been made which do not appear on the copies handed to us. We do not accept liability for any interpretation which we have placed on such information which is more properly the sphere of your legal advisers.

We have inspected the property. However, no structural survey has been made nor were any tests carried out on any of the services. We have not inspected the woodwork or other covered, unexposed or inaccessible parts of the premises, nor has any geotechnical site investigation been conducted. We are, therefore, not able to report that the property is or is not free from rot, infestation or other structural or non-structural defects. Unless otherwise stated in the report, no on-site or no-building measurement has been made.

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.

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Neither the whole nor any part of this report nor any reference thereto may be included in any document, circular or statement without our written approval of the form and context in which it may appear.

The service(s) provided by Savills is performed in accordance with professional valuation standards. Our compensation is not contingent in any way upon our conclusions of value. We assume, without independent verification, the accuracy of all data provided to us. We act as an independent valuer and reserve the right to use sub-consultants if deemed appropriate. All files, workpapers or documents developed by us during the course of the engagement has become our property. We may retain this data for at least three years.

Our report is to be used only for the purpose stated herein; any use or reliance for any other purpose, by you or third party, is invalid. You may show our report in its entirety to those third parties professional consultants who need to review the information contained therein in order to give their professional advice. Neither the whole nor any part of this report nor any reference thereto may be included in any document, circular or statement without our written approval of the form and context in which it may appear.

You will not be liable for our negligence. In the event we are subject to any liability in connection with this engagement, regardless of legal theory advanced, such liability will be limited to the amount of fees we received for this engagement.

We reserve the right to include you in our client list, but we will maintain the confidentiality of all conversations and documents provided to us, and the contents of our reports, subject to legal or administrative process of proceedings. These conditions can only be modified by written documents executed by both parties.

We hereby certify that our valuers undertaking this valuation are authorized to practise as valuers and have the necessary expertise and experience in valuing similar types of property.

9. VALUATION

In view of the foregoing and having regard to current market conditions, we are of the opinion that the current Open Market Value of the Property in its existing state and subject to the existing tenancies, is S$95,000,000/– (SINGAPORE DOLLARS NINETY-FIVE MILLION ONLY) as at 27 March 2006.

Yours faithfully,	Yours faithfully,
Savills (Singapore) Pte Ltd	Savills Valuation & Professional
Jessie Yeo	Services Limited, Hong Kong
BSc (Estate Management), MSISV	Charles C K Chan
Appraiser’s Licence No.AD041-2002061K	MSc FRICS FHKIS MCIArb RPS(GP)
Director, Valuation and Consultancy	Managing Director

Note: Ms Jessie Yeo is a Licensed Appraiser and a member of the Singapore Institute of Surveyors and Valuers (SISV) with more than 20 years valuation experience in Singapore.

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VALUATION OF THE PROPERTY

ANNEX E

SCHEDULE OF TENANCIES – 79 ANSON ROAD, 22 STRATA LOTS

Total Leased Area: 6421.71sqm

Total Current Rental Income per month: $242,514.06

				Tenancy
		Floor Area	Commence-	Term/Option
S/No.	Unit No.	(sq m)/(sq ft)	ment Date	Renewal Term	Remarks
1	#01-02	310/3,336	01/10/2005	24 mths/No option	Fitting Out Period as follows:
				to renew	(i) 2 wks from 17/08/2006 to
					31/08/2006;
					(ii) 1 mth from 01/09/2006 to
					30/09/2006; and
					(iii) 2 mths from 01/08/2007 to
					30/09/2007
2	#06-01/02/03	470/5,059	01/04/2006	36 mths/Option to	Fitting Out Period
				renew for further	from 01/01/2006
				36 mths	to 31/03/2006
3	#06-04/05/06	524/5,640	01/09/2004	36 mths/Option to renew	Fitting Out Period as follows:
				for further 36 mths	(i) 1 mth from 01/09/2005 to
				(at a renewal rent not	30/09/2005; and
				exceeding $43.59 psm	(ii) 1 mth from 01/09/2006 to
				or $4.05 psf)	30/09/2006
4	#07-01/02	247/2,659	01/05/2005	24 mths/No option to renew	–
5	#07-03	287/3,089	01/12/2005	36 mths/Option to	–
				renew for further 36 mths
6	#08-01/02/	636/6,846	01/10/2004	36 mths/Option to renew	–
	03/04			for further 36 mths
7	#08-05	198/2,131	20/02/2006	24 mths/Option to renew	Fitting Out Period
				for further 24 mths	from 20/12/2005/to
					19/02/2006.
					Fitting Out Period from
					20/02/2006 to 19/03/2006.
8	#10-01	154/1,658	15/12/2004	24 mths/Option to renew	–
				to further 24 mths

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VALUATION OF THE PROPERTY

				Tenancy
		Floor Area	Commence-	Term/Option
S/No.	Unit No.	(sq m)/(sq ft)	ment Date	Renewal Term	Remarks
9	#11-01/02	442/4,758	01/05/2004	24 mths/Option to	Fitting Out Period as follows:
				renew for further	(i) 1 mth from 01/05/2004 to
				24 mths		31/05/2004;
					(ii)	1 mth from 01/04/2005
						to 30/04/2005;
					(iii) 1 mth from 01/05/2005 to
						31/05/2005; and
					(iv) 1 mth from 01/04/2006 to
						30/04/2006.
10	#11-03	120/1,292	01/03/2005	24 mths/Option to	–
				renew for further
				24 mths
11	#11-03A	130/1,399	01/10/2005	24 mths/Option to	–
				renew for further
				24 mths
12	#11-04	129/1,388	01/12/2004	24 mths/no option	Fitting Out Period as follows:
				to renew	(i) 1 mth from 01/11/2005 to
						30/11/2005; and
					(ii)	1 mth from 01/11/2006 to
						30/11/2006.
13	#11-05	120/1,292	01/06/2005	24 mths/Option to	–
				renew for further
				24 mths
14	#12-01/02/	1,000/10,764	15/05/2005	24 mths/Option to	Fitting Out Period as follows:
	03/04/05/06			renew for further	(i) 1 mth from 15/05/2005 to
				24 mths		14/06/2005;
					(ii)	1 mth from 15/05/2006 to
						14/06/2006; and
					(iii) 2 wks from 01/05/2007 to
						14/05/2007.
15	#13-01/02	403/4,338	01/10/2005	48 mths/option to	–
				renew for further
				36 mths
				Tenant may only exercise
				its option to renew if
				at the same time the option
				to renew the lease of the
				premises at #13-03 is
				also exercised.
16	#13-03	167/1,798	01/10/2005	48 mths/Option to renew	–
				for further 36 mths
				Tenant may only exercise
				its option to renew if
				at the same time the
				option to renew the
				lease of the premises at
				#13-01/02, 79 Anson Road
				is also exercised.

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					Tenancy
			Floor Area	Commence-	Term/Option
S/No.	Unit No.	(sq m)/(sq ft)		ment Date	Renewal Term	Remarks
17	#13-06		153/1,647	22/03/2006	0.5 yr/No option	–
					to renew
18	#15-01		322/3,466	05/02/2006	24 mths/Option to renew	Fitting Out Period as follows:
					for further 24 mths	(i) 1 mth from 01/01/2007 to
						31/01/2007; and
						(ii) 1 mth from 05/01/2008 to
						04/02/2008.
19	#15-02		182.71/	01/02/2006	36 mths/Option to renew	Fitting Out Period
			1,967		for further 24 mths	from 01/12/2005
						to 31/01/2006.
						Fitting Out Period of 1 mth
						from 01/02/2006 to
						28/02/2006.
20	#15-03		150/1,615	01/06/2004	2 yrs/No option to renew	–
21	#15-04/05		175/1,884	16/04/2005	36 mths/Option to renew	–
					for further 24 mths
22	#15-06		102/1,098	16/05/2005	24 mths/Option to renew	–
					for further 24 mths

• 106 •

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

• 107 •

APPENDIX IV

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 children of Mr. Stephen Riady. Dr. Mochtar Riady as the founder and beneficiary of the trust and Mr. Stephen Riady (together with his minor children) 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 Limited, 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 children), 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
CRC China Limited	Ordinary shares	1	100
Congrad Holdings 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
Grandhill Asia Limited	Ordinary shares	1	100
Grand Peak Investment Limited	Ordinary shares	2	100
Greenroot Limited	Ordinary shares	1	100
		(Note d)
HKCL Holdings Limited	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 Limited	Ordinary shares	705,690,000	100
Lippo Energy Company N.V.	Ordinary shares	6,000	100
Lippo Energy Holding Limited	Ordinary shares	1	100
Lippo Finance Limited	Ordinary shares	6,176,470	82.35
Lippo Global Assets Limited	Ordinary shares	1	100
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

• 109 •

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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 Leisure Holdings Limited	Ordinary shares	2	100
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 children. 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.

• 110 •

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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).

• 111 •

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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 Limited (“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

• 112 •

APPENDIX IV

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 Limited 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 were 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.

• 113 •

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GENERAL INFORMATION

(iv) Rossinis Restaurant Pte. Ltd.

	No. of ordinary shares	Approximate
Name	of S$1.00 each	percentage
Brilliant Leader Limited	349,999	87.5
(“Brilliant Leader”)
Lim Siew Fei	50,000	12.5

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

(v) 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.

(vi) The Macau Chinese Bank Limited

	No. of ordinary shares
Name	of MOP100 each	Percentage
Winwise Holdings Limited
(“Winwise”)	1,530,000	85
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.

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.

• 114 •

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GENERAL INFORMATION

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 date of this circular 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, 2004, 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 16th December, 2002 that a tenancy agreement dated 16th December, 2002 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 12,038 square feet for a term of two years from 18th January, 2003 to 17th January, 2005, both days inclusive, at a monthly rental of HK$192,608, exclusive of rates, service charges and all other outgoings. Such transaction constituted a connected transaction of the Group under the Listing Rules.
(b) 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.

• 115 •

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GENERAL INFORMATION

(c) It was announced on 10th January, 2005 that a tenancy agreement dated 10th January, 2005 was entered into between LSHL and Prime Power 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.
(d) It was announced on 22nd June, 2005 that:
(1) a sale and purchase agreement dated 17th June, 2005 (the “S&P Agreement”) was entered into between HKCL Investments Limited (“HKCL Investments”), a wholly-owned subsidiary of the Company, as vendor and Timemore Limited (“Timemore”), a fellow subsidiary of the Company, as purchaser pursuant to which HKCL Investments had agreed to sell and Timemore had agreed to purchase an aggregate of 1,000,000 ordinary shares of S$1.00 each (the “Sale Shares”) in, representing the entire issued share capital of, HKCL Investments Pte. Ltd. (“HKCL Pte”) and, by way of assignment, the related shareholder’s loan in the aggregate amount of S$1,404,549.11 (equivalent to approximately HK$6,495,000) owing by HKCL Pte to HKCL Investments (the “Shareholder’s Loan”) for a total consideration of S$2,400,000 (equivalent to approximately HK$11,098,000); and
(2) a deed of novation dated 17th June, 2005, (the “Deed”) was entered into amongst HKCL Investments, Timemore and Auric Property Pte. Ltd. (“Auric Property”), a then fellow subsidiary of the Company, pursuant to which HKCL Investments had agreed to novate in favour of Timemore all its rights, benefits and liabilities as vendor under the conditional sale and purchase agreement dated 20th May, 2005 between HKCL Investments as vendor and Auric Property as purchaser in relation to the sale and purchase of the Sale Shares and the assignment of the Shareholder’s Loan.

Completion of the S&P Agreement and the Deed took place simultaneously on 17th June, 2005. Such transaction constituted a 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, 2004, being the date to which the latest published audited consolidated financial statements of the Group were made up.

• 116 •

APPENDIX IV

GENERAL INFORMATION

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 Savills (Singapore) Pte Ltd Licensed Valuers and Estate Agents

(b) As at the Latest Practicable Date, Ernst & Young and Savills (Singapore) 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, 2004, 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.
(c) Ernst & Young and Savills (Singapore) 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 Chinese-foreign cooperative joint venture contract dated 8th June, 2004 (“CJV Contract”) entered into between 北京經濟技術投資開發總公司 (Beijing Economic & Technological Investment Development Corp.), Uchida Limited (“Uchida”), a wholly-owned subsidiary of the Company, and 中國技術創新有限公司 (China Technology Innovation Corporation) relating to the development of the land situated at Lot no. 4C1 in 北京經濟技術開發區 (Beijing Economic-Technological Development Area) and the capital commitment of Uchida under the CJV Contract is US$19.2 million;

• 117 •

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GENERAL INFORMATION

(b) a discretionary management agreement and a supplemental agreement both dated 19th October, 2004 entered into between Ferrell Asset Management Limited (“Ferrell Management”) and Everbest Pacific Ltd. (“Everbest”), a wholly-owned subsidiary of the Company, pursuant to which Ferrell Management, as a discretionary investment manager of Everbest in respect of certain funds, invested S$42 million to subscribe for an interest in Ferrell Real Estate Investment Fund for and on behalf of Everbest;
(c) a tender to purchase the entire 7th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong (“Lippo Centre Property”) for a sum of HK$68,336,268 from International Bank of Asia Limited (“IBA”, now known as Fubon Bank (Hong Kong) Limited) as mortgagee in possession of the Lippo Centre Property submitted by Verybest Holdings Limited, a wholly-owned subsidiary of the Company, was accepted by IBA on 25th October, 2004;
(d) 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;
(e) 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;

• 118 •

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GENERAL INFORMATION

(f) (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 a 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;

(g) the Agreements and the Memorandum; and
(h) A conditional subscription agreement dated 17th March, 2006 entered into among Lifepower Limited (“Lifepower”), a wholly-owned subsidiary of the Company, Luck Healthy Group Limited, Kingscott Limited and Grosswin Limited (the “Joint Venture”) in relation to the subscription of new shares in the Joint Venture in which Lifepower has agreed to subscribe for a 45 per cent. interest. The Joint Venture will acquire and hold an 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.).

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 the Hong Kong Institute of Certified Public Accountants, theL 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

• 119 •

APPENDIX IV

GENERAL INFORMATION

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.

11. MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors were not aware of any material adverse change in the financial or trading positions of the Company since 31st December, 2004, 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, 2004 and the published unaudited consolidated interim accounts of the Company for the six months ended 30th June, 2005;
(d) the circulars issued by the Company pursuant to the requirements set out in Chapter 14 of the Listing Rules since 31st December, 2004, 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 Savills (Singapore) 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 Savills (Singapore) 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.

• 120 •

APPENDIX IV

GENERAL INFORMATION

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.

• 121 •

AI assistant

3SBio Inc. — Proxy Solicitation & Information Statement 2006

49981_rns_2006-03-27_1bc74be4-4b22-480e-99a9-41f9f6f25254.pdf

HONGKONG CHINESE LIMITED 香港華人有限公司[*]

MAJOR TRANSACTION

DEFINITIONS

DEFINITIONS

HONGKONG CHINESE LIMITED 香港華人有限公司[*]

MAJOR TRANSACTION

INTRODUCTION

TERMS OF THE AGREEMENTS

CERTAIN SALIENT TERMS OF THE MEMORANDUM

INFORMATION ON LIPPO, LCR AND THE COMPANY

INFORMATION ON ASM

INFORMATION ON THE VENDORS

REASONS FOR AND BENEFITS OF THE TRANSACTION

FINANCIAL EFFECTS

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, 2005

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

(a) 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

(b) HKAS 40 – Investment Property

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

(d) HK(SIC)-Int 21 – Income Taxes – Recovery of Revalued Non-Depreciable Assets

2. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICIES

(a) Effect on opening balance of total equity at 1st January, 2005

(b) Effect on opening balance of total equity at 1st January, 2004

(c) Effect on profit/(loss) for the six months ended 30th June, 2005 and 2004

3. SEGMENT INFORMATION

4. REVENUE/TURNOVER

5. ALLOWANCE FOR BAD AND DOUBTFUL DEBTS RELATING TO NON-BANKING OPERATION

6. PROFIT/(LOSS) BEFORE TAX

7. TAX

8. EARNINGS/(LOSS) PER SHARE

(a) Basic earnings/(loss) per share

(b) Diluted earnings/(loss) per share

9. INTERIM DISTRIBUTION

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS

11. INVESTMENT SECURITIES

12. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

13. ASSETS LESS LIABILITIES ATTRIBUTABLE TO BANKING OPERATION

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

(c) Other investments in securities

(d) Advances and other accounts

14. OTHER INVESTMENTS IN SECURITIES

15. LOANS AND ADVANCES

16. DEBTORS, PREPAYMENTS AND DEPOSITS

17. BANK LOANS

18. CREDITORS, ACCRUALS AND DEPOSITS RECEIVED

19. SHARE CAPITAL

20. RESERVES

21. MATURITY PROFILE OF ASSETS AND LIABILITIES

22. CONTINGENT LIABILITIES

23. CAPITAL COMMITMENTS

24. RELATED PARTY TRANSACTIONS

3. AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2004

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. IMPACT OF RECENTLY ISSUED HONG KONG FINANCIAL REPORTING STANDARDS (“HKFRS”)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

(b) Basis of consolidation

3SBio Inc. Proxy Solicitation & Information Statement 2006