3SBio Inc. - Proxy Solicitation & Information Statement 2007

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.

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HONGKONG CHINESE LIMITED 香港華人有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 655)

MAJOR TRANSACTION

DISPOSAL OF CERTAIN INTEREST IN THE MACAU CHINESE BANK LIMITED

* For identification purpose only

24th October, 2007

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Terms of the Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Terms of the Shareholders’ Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	9
Terms of the Option Deed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	10
Reason for and benefits of the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
Financial effects of the Disposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Information on Winwise, DPL and MCB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Information on the Company and Lippo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	12
Information on VC and VCFI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Listing Rules implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
Appendix I – Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . .	14
Appendix II – General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	106

DEFINITIONS

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

“Agreement”	the conditional sale and purchase agreement entered
	into between (1) the Company and (2) VC dated
	28th September, 2007 relating to the Disposal;
“AMCM”	Autoridade Monetária e Cambial de Macau, the
	Monetary Authority of Macau;
“Applicable Laws”	any and all laws which have been promulgated and
	are effective and applicable, including all statutes,
	codes, ordinances, decrees, rules, regulations,
	municipal by-laws, judicial judgments, orders,
	decisions, rulings or awards, binding on, relevant to
	or affecting the entity referred to in the context in
	which the word is used and in respect of the Winwise
	Group Companies, shall include but not limited to,
	the Macau Commercial Code, the Financial System Act
	and/or any rules or regulations promulgated by
	AMCM from time to time;
“associates”	has the meaning ascribed to it under the Listing Rules;
“Board”	board of directors of the Company;
“Call Option”	an option to require the Company to sell all of the
	Option Shares and the Shareholders’ Loan on and in
	accordance with the terms of the Option Deed;
“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 an approximate 51.4 per cent. subsidiary
	of Lippo;
“Completion”	completion of the Agreement;
“connected persons”	has the meaning ascribed to it under the Listing Rules;
“Consideration Shares”	10,000,000 new ordinary shares of HK$0.01 each in
	the capital of VC to be allotted and issued to the
	Company (or as the Company may direct) at an issue
	price of HK$6.00 each, credited as fully paid;

For identification purpose only

• 1 •

DEFINITIONS

“Default Event”	in respect of the Option Deed, means an event of
	default as specified in the Shareholders’ Agreement in
	respect of which the beneficiary thereof, has served
	on the other, as defaulter, a Termination Notice on
	and in accordance with the Shareholders’ Agreement,
	including, a party ceasing to carry on business, a party
	being in material breach of its obligations under the
	Shareholders’ Agreement, a party going into voluntary
	redundancy or entering into a composition with its
	creditors;
“Director(s)”	director(s) of the Company;
“Discovery Planet Transaction”	the acquisition, by DPL, of the remaining 15 per cent.
	interest in MCB;
“Disposal”	the disposal of the Sale Shares and the Sale Loan by
	the Company in accordance with the terms and
	conditions of the Agreement;
“DPL”	Discovery Planet Limited, a company incorporated in
	the British Virgin Islands with limited liability and a
	wholly-owned subsidiary of Winwise;
“GEM”	the Growth Enterprise Market operated by the Stock
	Exchange;
“GEM Listing Rules”	Rules Governing the Listing of Securities on the
	Growth Enterprise Market of the Stock Exchange;
“Group”	the Company and its subsidiaries;
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC;
“Latest Practicable Date”	22nd October, 2007, being the latest practicable date
	prior to the printing of this circular for ascertaining
	certain information contained herein;
“Lippo”	Lippo Limited力寶有限公司, a company incorporated
	in Hong Kong with limited liability whose shares are
	listed on the Stock Exchange;
“Listing Rules” or “Rule”	Rules Governing the Listing of Securities on the Stock
	Exchange;

• 2 •

DEFINITIONS

“Loan”	shareholders’ loan in the aggregate principal amount
	of HK$260,878,217.60 advanced by the Company as
	lender to Winwise or other Winwise Group Companies
	as borrower(s) which is outstanding at Completion;
“Loan Assignment Deed”	the deed of assignment to be entered into between
	(1) the Company, (2) VC and (3) Winwise pursuant to
	which the Company will assign the Sale Loan to VC;
“Long Stop Date”	90 days from the date of the Agreement or such other
	date as may be agreed by the parties in writing;
“Macau”	the Macao Special Administrative Region of the PRC;
“MCB”	The Macau Chinese Bank Limited, a company
	incorporated in Macau, and a wholly-owned
	subsidiary of Winwise;
“Melco”	Melco International Development Limited, a company
	incorporated in Hong Kong with limited liability
	whose shares are listed on the Stock Exchange and is
	the controlling shareholder of VC, holding
	approximately 43.57 per cent. of the issued share
	capital of VC;
“Model Code”	Model Code for Securities Transactions by Directors
	of Listed Issuers under the Listing Rules;
“Option Consideration”	the consideration to be paid for the Option Shares and
	the Shareholders’ Loan under the Option Deed;
“Option Deed”	the option deed to be entered into by (1) the Company
	and (2) VC at Completion;
“Option Shares”	the shares in the issued share capital of Winwise
	held by the Company from time to time;
“PRC”	People’s Republic of China;
“Put Option”	an option to require VC to purchase all or any of the
	Option Shares and the Shareholders’ Loan on and in
	accordance with the terms of the Option Deed;
“Related Company”	in relation to a party, any subsidiary or holding
	company of that party or any other subsidiary of any
	such holding company and “Related Companies” shall
	be construed accordingly;

• 3 •

DEFINITIONS

“Sale Loan”	the amount of HK$156,526,930.56, representing 60 per
	cent. of the aggregate amount of the Loan, to be sold
	by the Company to VC;
“Sale Shares”	60 shares of HK$1.00 each in Winwise;
“SFO”	Securities and Futures Ordinance (Chapter 571 of the
	Laws of Hong Kong);
“Shareholders’ Agreement”	the shareholders’ agreement to be entered into between
	the Company, VC and Winwise in relation to Winwise
	and its subsidiaries;
“Shareholders’ Loan(s)”	any and all monies advanced by the Company or any
	of its Related Companies to Winwise, DPL, MCB or
	any subsidiaries of Winwise by way of loans or credit
	from time to time and at any time and which as at the
	date of completion of the Option Deed are outstanding
	together with accrued interest (if any) and any other
	monies then due or outstanding to the Company or
	any of its Related Companies in respect of such
	outstanding loans;
“Shares”	ordinary shares of HK$1.00 each in the share capital
	of the Company;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Termination Notice”	a notice given in writing by a shareholder of Winwise
	terminating the Shareholders’ Agreement upon
	occurrence of a Default Event;
“VC”	Value Convergence Holdings Limited, a company
	incorporated in Hong Kong with limited liability
	whose shares are listed on GEM;
“VCFI”	VC Financial Investment Holdings Limited, a company
	incorporated in Hong Kong with limited liability and
	a wholly-owned subsidiary of VC;
“Winwise”	Winwise Holdings Limited, a company incorporated
	in Hong Kong with limited liability and a wholly-
	owned subsidiary of the Company;
“Winwise Group”	Winwise and each of its subsidiaries at the relevant
	time, including DPL and MCB;

• 4 •

DEFINITIONS

“Winwise Group Company”	Winwise and each of its subsidiaries at the relevant
	time and “Winwise Group Companies” shall be
	construed accordingly;
“HK$”	Hong Kong dollar, the lawful currency of Hong Kong;
“MOP”	Macau pataca, the lawful currency of Macau;
“RMB”	Renminbi, the lawful currency of the PRC;
“S$”	Singapore dollar, the lawful currency of the Republic
	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 HK$ into MOP is based on an approximate exchange rate of HK$0.97 to MOP1.00. No representation or assurance is made or given that any amount in HK$ or MOP could be converted at such rate or any other rates.

• 5 •

LETTER FROM THE BOARD

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HONGKONG CHINESE LIMITED 香港華人有限公司[*]

(Incorporated in Bermuda with limited liability)

(Stock Code: 655)

Non-executive Directors:

Dr. Mochtar Riady (Chairman) Mr. Leon Nim Leung Chan

Executive Directors:

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

Mr. Albert Saychuan Cheok Mr. 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

24th October, 2007

To the shareholders of the Company

Dear Sir or Madam,

MAJOR TRANSACTION

DISPOSAL OF CERTAIN INTEREST IN THE MACAU CHINESE BANK LIMITED

INTRODUCTION

Reference is made to the joint announcement of the Company and Lippo dated 3rd October, 2007 announcing that on 28th September, 2007, a conditional sale and purchase agreement was entered into between (1) the Company and (2) VC, pursuant to which VC agreed to acquire and the Company agreed to sell 60 shares of HK$1.00 each in, representing 60 per cent. of the issued share capital of, Winwise and the sale of a loan in the amount of HK$156,526,930.56, representing 60 per cent. of the outstanding shareholders’ loan advanced by the Company, as lender, to Winwise, as borrower, which is outstanding at Completion. The major asset of Winwise is its 100 per cent. interest in MCB, a licensed credit institution

* For identification purpose only

• 6 •

LETTER FROM THE BOARD

in Macau which carries on banking activities in Macau. On Completion, the Company and VC will hold 40 per cent. and 60 per cent. of the issued share capital in Winwise respectively.

The purpose of this circular is to provide you with further information in relation to the Disposal, the Agreement, the Shareholders’ Agreement and the Option Deed.

TERMS OF THE AGREEMENT

Date:	28th September, 2007.
Parties:	(1) the Company and (2) VC.
Transaction:	the Company has agreed to sell, and VC has agreed to purchase,
	the Sale Shares and the Sale Loan.
Consideration:	The consideration payable by VC shall be HK$384,000,000 which
	will be satisfied as to HK$324,000,000 in cash and HK$60,000,000
	by the allotment and issue of the Consideration Shares. A deposit
	in the amount of HK$25,000,000 was paid in cash on the date of
	the Agreement as a refundable deposit to the Company and as a
	part payment of the consideration pending Completion, such
	deposit to be held in escrow until Completion. The balance amount
	of HK$359,000,000 will be payable on Completion as follows: (i)
	an amount of HK$299,000,000 in cash; and (ii) the balance of
	HK$60,000,000 by the allotment and issue of the Consideration
	Shares.

The consideration was determined after arm’s length negotiations between the parties by reference to the net asset value of MCB. The board of directors of each of the Company and Lippo considers that the Agreement was on normal commercial terms and that the consideration was fair and reasonable so far as the shareholders of each of the Company and Lippo are concerned. Based on the present capital structure of VC, the Consideration Shares will represent approximately 2.6 per cent. of the enlarged issued share capital of VC.

Conditions: Completion of the Agreement is conditional upon satisfaction or waiver of, among others, the following conditions on or before the Long Stop Date:

(i) VC and Melco or other controller of VC having been approved by AMCM as a qualifying shareholder (as such expression is defined in the Financial System Act) of MCB and of Winwise (being, together with DPL, the sole beneficial shareholders of MCB) under Article 40 of the Financial System Act, insofar as required by Applicable Laws;

• 7 •

LETTER FROM THE BOARD

(ii) if required by Applicable Laws, written consent from AMCM to the change of control of MCB and of Winwise (being, together with DPL, the sole beneficial shareholders of MCB) and consequently any deemed change of control of MCB (if any), as contemplated by the Agreement;
(iii) shareholders’ approval of VC and/or Melco (if applicable) approving the entering into by VC of the Agreement, the Shareholders’ Agreement, the Option Deed and the Loan Assignment Deed and the transactions contemplated thereunder having been obtained in accordance with the requirements of the Listing Rules and/or the GEM Listing Rules, if so required;
(iv) shareholders approval of the Company and Lippo approving the entering into by the Company of the Agreement, the Shareholders’ Agreement, the Option Deed and the Loan Assignment Deed and the transactions contemplated thereunder having been obtained in accordance with the Listing Rules, if so required;
(v) all authorisations, consents and approvals of all governmental or regulatory authorities, agencies or bodies which are necessary or required for the purposes of the transactions contemplated by the Agreement, the Shareholders’ Agreement and the Option Deed having been obtained and not having been revoked;
(vi) all representations and warranties contained in the Agreement made by the Company where required to be repeated in accordance with the Agreement at Completion shall be true and accurate in all material respects at the time of Completion, as though then made; and
(vii) the Stock Exchange having granted the approval for the listing of and permission to deal in the Consideration Shares (either unconditionally or subject only to allotment and issue of the Consideration Shares, despatch of certificates in respect of the Consideration Shares and/or such other condition as may be reasonably acceptable to the Company) on GEM.

If the conditions precedent are not fulfilled by the parties by the Long Stop Date, the Agreement shall be terminated and shall cease to be of effect and none of the parties shall have any rights against any other parties except (where applicable) for liability for any antecedent breach of its obligations under the Agreement. Upon Completion, Winwise, DPL and MCB will cease to be subsidiaries

• 8 •

LETTER FROM THE BOARD

of the Company and Lippo. They will be accounted for as associated companies of the Group and will be included in the consolidated financial statements of the Group using the equity method in accordance with the accounting policies of the Group. It is intended that the 40 per cent. shareholding in Winwise will be retained by the Company.

TERMS OF THE SHAREHOLDERS’ AGREEMENT

Date: Upon Completion. Parties: (1) the Company, (2) VCFI, (3) VC, (4) Winwise and (5) DPL. Business: Winwise was incorporated to act as an investment holding company for the purposes of acquiring and holding shares in DPL and MCB, which includes the provision of funding required to finance the acquisition of shares in DPL and MCB. DPL was incorporated to act as an investment holding company for the purpose of acquiring and holding shares in MCB upon completion of the Discovery Planet Transaction on 21st September, 2007. MCB is a licensed credit institution in Macau which carries on banking activities in Macau.

Board composition The maximum number of directors comprising the board of of Winwise, DPL Winwise, DPL and MCB shall be five. Each shareholder shall be and MCB: entitled to appoint and at any time remove or substitute one director of Winwise, DPL and MCB for each 20 per cent. of the equity share capital of Winwise held by the relevant shareholder. At the time of the entering into of the Shareholders’ Agreement, the Company shall be entitled to appoint two directors and VC shall be entitled to appoint three directors to the board of directors of each of Winwise, DPL and MCB respectively.

Voting: For so long as the Company holds not less than 20 per cent. of the issued share capital of Winwise, the shareholders shall take all steps to ensure that, so far as they are legally able, no important shareholder matter is taken by any member of the Winwise Group unless the applicable provisions as set out therein have been complied with.

Termination: Unless terminated in accordance with the terms of the Shareholders’ Agreement, the Shareholders’ Agreement shall subsist for as long as there are two shareholders and each of them holds not less than 10 per cent. of the issued share capital of Winwise. A shareholder may give notice in writing to the other shareholder terminating the Shareholders’ Agreement at any time after the occurrence of any of the Default Events as set out therein.

• 9 •

LETTER FROM THE BOARD

TERMS OF THE OPTION DEED

Date:

Upon Completion.

Parties:

(1) the Company and (2) VC.

Subject matter of the shares of Winwise held by the Company from time to time the Option Deed: and the Shareholders’ Loan.

Grant of option: VC irrevocably and unconditionally grants to the Company the Put Option.

The Company irrevocably and unconditionally grants to VC the Call Option.

Exercise of Put Option: The Put Option may be exercised:

(i) on the occurrence of any Default Event, within 30 days after the date of the Termination Notice in respect of all (but not part only) of the Option Shares and the Shareholders’ Loan; and
(ii) in the absence of a Default Event, only during the period commencing from the second anniversary of the date of the Option Deed and ending on the fifth anniversary of the date of the Option Deed. Such exercise of Put Option shall take place in multiples of 10 per cent. of the then issued share capital of Winwise, together with the corresponding proportion of the Shareholders’ Loan.
Exercise of Call Option:

The Call Option may be exercised on the occurrence of a Default Event. The Call Option shall be exercised within 30 days after the date of the Termination Notice under the Shareholders’ Agreement in respect of all (but not part only) of the Option Shares and the Shareholders’ Loan.

In the absence of a Default Event, the Call Option shall not be exercised.

Option Consideration:

The Option Consideration shall be based on the initial price per Sale Share and the attributable Shareholders’ Loan of HK$6,400,000 per share of Winwise plus any attributable post-acquisition profits earned from the month immediately preceding the date of the Agreement up to and including the month immediately preceding the date of the option notice and any amount (attributable to such number of Option Shares under the option notice) invested by the Company in Winwise or any of its subsidiaries by way of equity or advances by way of loans or otherwise after Completion and

• 10 •

LETTER FROM THE BOARD

shall be satisfied in cash at completion of the Option Deed. For post-acquisition losses, there is no adjustment made to the Option Consideration. For the avoidance of doubt, the aggregate Option Consideration in respect of the Option Shares and the Shareholders’ Loan shall in no event be less than HK$256,000,000. When based on Option Consideration of HK$256,000,000 and assuming it was exercised on the date of the Agreement, the gain on exercise of the Put Option in full would be approximately HK$142 million. The board of directors of each of the Company and Lippo considers that the Option Deed (as part of the Agreement) was on normal commercial terms and that the Option Consideration was fair and reasonable so far as the shareholders of each of the Company and Lippo are concerned. Upon exercise of the Put Option, the Company and Lippo shall ensure they will comply with the requirements of the Listing Rules and make further announcement if required.

The Option Consideration represents the fair value of the Option Shares, which reflects the consideration payable for the Disposal, together with any further amounts advanced by the Company by way of shareholder loan and retained earnings on a dollar for dollar basis. It is the current intention to repay the shareholder loans and pay out retained earnings by way of dividend to the extent possible.

REASON FOR AND BENEFITS OF THE DISPOSAL

The board of directors of each of the Company and Lippo considers that the entering into of the Agreement will bring in a strategic shareholder to the Winwise Group which will help broaden the business horizon and improve the long term growth potential of MCB, which will be beneficial to the Company and Lippo and the respective shareholders of the Company and Lippo as a whole. The entering into the Option Deed by the Company will provide an exit of the Company’s investment in MCB. The gain on the Disposal (when excluding the exercise of the Put Option) is approximately HK$214 million, subject to fair value adjustment applied to the Consideration Shares on Completion. The proceeds from the Disposal (and, if exercised, arising from the Option Deed), will be put towards other capital and property investment opportunities as well as for general working capital purposes. Currently, no property investment opportunities have been identified by the Company and Lippo.

The Directors are of the view that the terms of the Agreement, the Shareholders’ Agreement and the Option Deed are fair and reasonable, are on arm’s length basis and are in the interest of the Company and its shareholders as a whole, accordingly if the Company is required to convene a shareholders’ meeting, the Directors would recommend its shareholders to vote in favour of the transaction.

• 11 •

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE DISPOSAL

The audited net asset value of MCB was MOP213,189,000 (equivalent to approximately HK$206,793,000) as at 31st December, 2006. The audited net profit before and after tax of MCB for the financial year ended 31st December, 2005 was MOP7,370,000 (equivalent to approximately HK$7,149,000) and MOP7,030,000 (equivalent to approximately HK$6,819,000), respectively. The audited net profit before and after tax of MCB for the financial year ended 31st December, 2006 was MOP9,787,000 (equivalent to approximately HK$9,493,000) and MOP8,664,000 (equivalent to approximately HK$8,404,000), respectively.

Upon Completion, Winwise, DPL and MCB will cease to be subsidiaries of the Company and Lippo. Without the exercise of the Call Option, the gain on the Disposal is approximately HK$214 million, subject to fair value adjustment applied to the Consideration Shares on Completion. They will be accounted for as associated companies of the Group and will be included in the consolidated financial statements of the Group using the equity method in accordance with the accounting policies of the Group. The non-current assets and current liabilities will be decreased by approximately HK$19 million and HK$164 million respectively, while the current assets will be increased by HK$84 million.

If the Call Option is exercised, the gain on the Disposal is approximately HK$356 million, subject to fair value adjustment applied to the Consideration Shares on Completion. In such case, no shareholding in Winwise will be retained by the Company. The non-current assets and current liabilities will be decreased by approximately HK$132 million and HK$164 million respectively, while the current assets will be increased by HK$340 million.

INFORMATION ON WINWISE, DPL AND MCB

The principal business activity of Winwise and DPL is investment holding. MCB is a licensed credit institution in Macau whose principal business is the carrying on of banking activities in Macau.

INFORMATION ON THE COMPANY AND LIPPO

The principal business activity of the Company is investment holding. The principal activities of the subsidiaries of 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.

The principal business activity of Lippo is investment holding. The principal activities of the subsidiaries of Lippo include investment holding, property investment and development, retail business, fund management, underwriting, corporate finance, securities broking, securities investment, treasury investment, money lending, banking and other related financial services.

• 12 •

LETTER FROM THE BOARD

INFORMATION ON VC AND VCFI

VC is a company whose shares are listed on GEM whereas VCFI is a wholly-owned subsidiary of VC. VC and its subsidiaries are engaged in securities, futures and option contracts brokerage mainly on the Stock Exchange and the provision of other related financial services, including margin financing, securities underwriting, placing arrangement, asset management and corporate finance advisory services focusing on the markets in Hong Kong, Macau and the PRC. To the best of the knowledge, information and belief of the Directors, and having made all reasonable enquiries, both VC and VCFI and their respective ultimate beneficial owners are third parties independent of and not connected persons of the Company and its connected persons.

LISTING RULES IMPLICATIONS

Lippo is interested in approximately 51.4 per cent. of the issued share capital of the Company. The Company is the holding company of Winwise which currently, directly and indirectly (through DPL), holds the entire issued share capital of MCB. The Company is the beneficial owner of the entire issued share capital of Winwise. On completion of the Disposal, the Company and VC will hold 40 per cent. and 60 per cent. of the issued share capital in Winwise respectively.

As the Disposal, including the Call Option and the Put Option under the Option Deed, exceeds 25 per cent. but does not exceed 75 per cent. of one or more of the applicable percentage ratios (as defined in the Listing Rules) of the Company, it constitutes a major transaction for the Company under the Listing Rules. 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 Disposal, the Company is not required to convene a shareholders’ meeting to approve the transaction pursuant to Rule 14.44 of the Listing Rules. Skyscraper Realty Limited (a wholly-owned subsidiary of Lippo), an immediate holding company of the Company currently holding 692,261,982 ordinary shares of HK$1.00 each in, representing approximately 51.4 per cent. of, the issued share capital of the Company, has given its written consent to the Company for the entering into of the Agreement, the Shareholders’ Agreement, the Option Deed and the Disposal.

The Company will also take necessary steps to ensure the exercise of the Call Option by VC will not be classified as a very substantial disposal (as defined in the Listing Rules) of the Company.

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

• 13 •

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, 2007 and the unqualified audited consolidated profit and loss account and consolidated balance sheet of the Group for each of the three years ended 31st December, 2006, extracted from the relevant interim reports and annual reports of the Company:

(a) Consolidated Profit and Loss Account

Six months ended 30th June,
2007
2006
HK$’000
HK$’000
(unaudited)
(unaudited)
Revenue
708,620
538,850
Cost of sales
(579,861)
(449,227)
Gross profit
128,759
89,623
Administrative expenses
(53,107)
(39,581)
Other operating expenses
(29,628)
(17,084)
Fair value gains on investment
properties
3,333
5,468
Gain on disposal of available-for-sales
financial assets
724
100,480
Gain/(Loss) on disposal of subsidiaries
101,956
(255)
Gain on disposal of associates
57,620
–
Write-back of allowance/(Allowance)
for bad and doubtful debts relating to:
Banking operation
–
–
Non-banking operations
–
–
Provisions for impairment losses on:
Associates
–
–
Available-for-sale financial assets
–
(970)
Goodwill
–
–
Investment securities
–
–
Net fair value gain on financial
assets at fair value through profit or loss
23,295
6,588
Net unrealised holding loss on other
investments in securities
–
–
Net unrealised loss on transfer of
investment securities and held-to-maturity
securities to other investments
in securities
–
–

Years ended 31st December,
2006
2005
2004
HK$’000
HK$’000
HK$’000
(audited)
(audited)
(audited)
1,099,028
1,147,457
1,325,136
(934,659)
(954,226)
(1,170,412)
164,369
193,231
154,724
(114,516)
(74,224)
(70,531)
(37,161)
(45,202)
(35,693)
207,276
74,784
–
86,238
8,347
–
848
(295)
(140)
–
–
–
4
2,140
666
1,267
(33,036)
(1,203)
–
(5,859)
(16,603)
(5,797)
(53,757)
–
–
(412)
–
–
–
(2,776)
216,728
70,370
–
–
–
(72,097)
–
–
(7,856)

• 14 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Finance costs Share of results of associates Share of results of jointly controlled entities Profit/(Loss) before tax Tax Profit/(Loss) for the period/year Attributable to: Equity holders of the Company Minority interests	Six months ended 30th June, 2007 2006 HK$’000 HK$’000 (unaudited) (unaudited) (38,847) (12,677) 494,276 2,200 (811) (1,968) 687,570 131,824 895 (3,926) 688,465 127,898 687,082 128,766 1,383 (868) 688,465 127,898	Years ended 31st December, 2006 2005 2004 HK$’000 HK$’000 HK$’000 (audited) (audited) (audited) (49,064) (7,363) (4,873) (4,014) (2,548) (6,517) (2,644) (423) – 463,534 125,753 (62,899) (46,975) (15,033) (3,535) 416,559 110,720 (66,434) 391,472 111,761 (64,957) 25,087 (1,041) (1,477) 416,559 110,720 (66,434)

• 15 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Consolidated balance sheet

As at 30th June, 2007 HK$’000 (unaudited) NON-CURRENT ASSETS Goodwill 57,285 Fixed assets 45,899 Investment properties 497,028 Properties under development 138,599 Interests in associates 2,572,876 Interests in jointly controlled entities 151,684 Available-for-sale financial assets 109,522 Investment securities – Held-to-maturity financial assets 9,613 Financial assets at fair value through profit or loss – Loans and advances 23,963 3,606,469 CURRENT ASSETS Properties held for sale 19,666 Properties under development 30,768 Available-for-sale financial assets 1,922 Financial assets at fair value through profit or loss 378,009 Other investments in securities – Loans and advances 714,488 Debtors, prepayments and deposits 858,371 Client trust bank balances 558,517 Treasury bills 13,580 Cash and cash balances 354,741 2,930,062	As at 2006 HK$’000 (audited) 57,285 47,443 1,136,256 160,115 1,961,964 49,299 102,869 – 9,582 – 27,066 3,551,879 19,223 – – 821,025 – 273,324 179,171 582,905 194,970 363,487 2,434,105	31st December, 2005 2004 HK$’000 HK$’000 (audited) (audited) 57,285 56,553 49,593 36,976 421,523 96,144 105,096 99,767 175,235 27,166 12,615 7,313 175,048 – – 365,658 9,604 9,643 268,753 – 29,975 45,890 1,304,727 745,110 12,441 10,140 – – 213,896 – 617,913 – – 1,133,217 240,498 277,639 181,328 171,692 444,460 389,123 15,520 23,765 621,740 858,120 2,347,796 2,863,696	31st December, 2005 2004 HK$’000 HK$’000 (audited) (audited) 57,285 56,553 49,593 36,976 421,523 96,144 105,096 99,767 175,235 27,166 12,615 7,313 175,048 – – 365,658 9,604 9,643 268,753 – 29,975 45,890 1,304,727 745,110 12,441 10,140 – – 213,896 – 617,913 – – 1,133,217 240,498 277,639 181,328 171,692 444,460 389,123 15,520 23,765 621,740 858,120 2,347,796 2,863,696
			745,110
			10,140 – – – 1,133,217 277,639 171,692 389,123 23,765 858,120
			2,863,696

• 16 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

As at 30th June, 2007 HK$’000 (unaudited) CURRENT LIABILITIES Bank and other borrowings 1,592,240 Creditors, accruals and deposits received 865,588 Current, fixed, savings and other deposits of customers 158,678 Tax payable 8,963 2,625,469 NET CURRENT ASSETS 304,593 TOTAL ASSETS LESS CURRENT LIABILITIES 3,911,062 NON-CURRENT LIABILITIES Bank and other borrowings – Deferred tax liabilities 25,589 25,589 NET ASSETS 3,885,473 EQUITY Equity attributable to equity holders of the Company Share capital 1,346,829 Reserves 2,504,210 3,851,039 Minority interests 34,434 3,885,473	As at 2006 HK$’000 (audited) 942,205 832,729 305,521 8,265 2,088,720 345,385 3,897,264 547,368 58,207 605,575 3,291,689 1,346,829 1,845,575 3,192,404 99,285 3,291,689	31st December, 2005 2004 HK$’000 HK$’000 (audited) (audited) 25,000 208,761 629,584 541,737 116,743 117,641 4,112 4,129 775,439 872,268 1,572,357 1,991,428 2,877,084 2,736,538 – – 15,989 1,234 15,989 1,234 2,861,095 2,735,304 1,346,829 1,346,829 1,482,187 1,358,271 2,829,016 2,705,100 32,079 30,204 2,861,095 2,735,304	31st December, 2005 2004 HK$’000 HK$’000 (audited) (audited) 25,000 208,761 629,584 541,737 116,743 117,641 4,112 4,129 775,439 872,268 1,572,357 1,991,428 2,877,084 2,736,538 – – 15,989 1,234 15,989 1,234 2,861,095 2,735,304 1,346,829 1,346,829 1,482,187 1,358,271 2,829,016 2,705,100 32,079 30,204 2,861,095 2,735,304
			872,268
			1,991,428
			2,736,538
			– 1,234
			1,234
			2,735,304

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

• 17 •

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

2. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30TH JUNE, 2007

Condensed Consolidated Profit and Loss Account

Note
Revenue
3
Cost of sales
Gross profit
Administrative expenses
Other operating expenses
Fair value gains on investment properties
Gain on disposal of available-for-sale
financial assets
Gain/(Loss) on disposal of subsidiaries
4
Gain on disposal of associates
Net fair value gain on financial assets
at fair value through profit or loss
Finance costs
Share of results of associates
5
Share of results of jointly controlled
entities
Profit before tax
6
Tax
7
Profit for the period
Attributable to:
Equity holders of the Company
19
Minority interests
19
Earnings per share attributable to
equity holders of the Company
8
Basic
Diluted
Interim distribution
9

Unaudited
six months ended 30th June,
2007
2006
HK$’000
HK$’000
(restated)
708,620
538,850
(579,861)
(449,227)
128,759
89,623
(53,107)
(39,581)
(29,628)
(18,054)
3,333
5,468
724
100,480
101,956
(255)
57,620
–
23,295
6,588
(38,847)
(12,677)
494,276
2,200
(811)
(1,968)
687,570
131,824
895
(3,926)
688,465
127,898
687,082
128,766
1,383
(868)
688,465
127,898
HK cents
HK cents
51.0
9.6
N/A
N/A
HK$’000
HK$’000
23,570
20,202

• 18 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Balance Sheet

Note Non-current assets Goodwill Fixed assets Investment properties Properties under development Interests in associates 5 Interests in jointly controlled entities Available-for-sale financial assets 10 Held-to-maturity financial assets 11 Loans and advances 13 Current assets Properties held for sale Properties under development Available-for-sale financial assets 10 Financial assets at fair value through profit or loss 12 Loans and advances 13 Debtors, prepayments and deposits 14 Client trust bank balances Treasury bills Cash and bank balances Current liabilities Bank and other borrowings 15 Creditors, accruals and deposits received 16 Current, fixed, savings and other deposits of customers 17 Tax payable Net current assets Total assets less current liabilities	30th June, 31st December, 2007 2006 HK$’000 HK$’000 (Unaudited) (Audited) 57,285 57,285 45,899 47,443 497,028 1,136,256 138,599 160,115 2,572,876 1,961,964 151,684 49,299 109,522 102,869 9,613 9,582 23,963 27,066 3,606,469 3,551,879 19,666 19,223 30,768 – 1,922 – 378,009 821,025 714,488 273,324 858,371 179,171 558,517 582,905 13,580 194,970 354,741 363,487 2,930,062 2,434,105 1,592,240 942,205 865,588 832,729 158,678 305,521 8,963 8,265 2,625,469 2,088,720 304,593 345,385 3,911,062 3,897,264	30th June, 31st December, 2007 2006 HK$’000 HK$’000 (Unaudited) (Audited) 57,285 57,285 45,899 47,443 497,028 1,136,256 138,599 160,115 2,572,876 1,961,964 151,684 49,299 109,522 102,869 9,613 9,582 23,963 27,066 3,606,469 3,551,879 19,666 19,223 30,768 – 1,922 – 378,009 821,025 714,488 273,324 858,371 179,171 558,517 582,905 13,580 194,970 354,741 363,487 2,930,062 2,434,105 1,592,240 942,205 865,588 832,729 158,678 305,521 8,963 8,265 2,625,469 2,088,720 304,593 345,385 3,911,062 3,897,264
		3,551,879
		19,223 – – 821,025 273,324 179,171 582,905 194,970 363,487
		2,434,105
		942,205 832,729 305,521 8,265
		2,088,720
		345,385
		3,897,264

• 19 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Non-current liabilities Bank and other borrowings 15 Deferred tax liabilities Net assets Equity Equity attributable to equity holders of the Company Share capital 18 Reserves 19 Minority interests 19	30th June, 31st December, 2007 2006 HK$’000 HK$’000 (Unaudited) (Audited) – 547,368 25,589 58,207 25,589 605,575 3,885,473 3,291,689 1,346,829 1,346,829 2,504,210 1,845,575 3,851,039 3,192,404 34,434 99,285 3,885,473 3,291,689	30th June, 31st December, 2007 2006 HK$’000 HK$’000 (Unaudited) (Audited) – 547,368 25,589 58,207 25,589 605,575 3,885,473 3,291,689 1,346,829 1,346,829 2,504,210 1,845,575 3,851,039 3,192,404 34,434 99,285 3,885,473 3,291,689
		605,575
		3,291,689

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

• 20 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Summary Statement of Changes in Equity

Note
Total equity at 1st January
Changes in equity during the period:
Exchange differences on translation
of foreign operations
Release of reserves in respect of
disposal of subsidiaries
19
Net fair value gain/(loss) on
available-for-sale financial assets
Deferred tax arising from fair value gain
on available-for-sale financial assets
19
Derecognition of available-for-sale
financial assets
19
Share of reserves of associates and
jointly controlled entities
19
Net income/(expense) recognised
directly in equity
Profit for the period
Total recognised income and expense
for the period
Issue of shares by subsidiaries to
minority shareholders
19
Disposal of subsidiaries
19
Advance from minority shareholders
of subsidiaries
19
Changes in interests in subsidiaries
19
2005 final distribution, declared
19
2006 final distribution, declared
19
Total equity at 30th June
Total recognised income and expense
for the period attributable to:
Equity holders of the Company
Minority interests

Unaudited
six months ended 30th June,
2007
2006
HK$’000
HK$’000
3,291,689
2,861,095
7,270
4,116
(11,563)
–
10,348
(12,882)
(353)
(4,001)
(1,204)
(79,351)
34,867
–
39,365
(92,118)
688,465
127,898
727,830
35,780
–
402
(130,786)
–
64,081
39,132
–
(257)
–
(40,405)
(67,341)
–
593,784
34,652
3,885,473
2,895,747
725,976
36,643
1,854
(863)
727,830
35,780

• 21 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Cash Flow Statement

Net cash from/(used in) operating activities Net cash from/(used in) investing activities Net cash from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1st January Exchange realignment Cash and cash equivalents at 30th June Analysis of balances of cash and cash equivalents: Cash and bank balances Treasury bills Bank overdrafts	Unaudited six months ended 30th June, 2007 2006 HK$’000 HK$’000 (737,554) 286,756 432,163 (1,615,145) 105,761 1,015,770 (199,630) (312,619) 558,457 637,260 4,621 1,017 363,448 325,658 354,741 252,093 13,580 75,660 (4,873) (2,095) 363,448 325,658

• 22 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes to the Interim Financial Statements

1. PRINCIPAL ACCOUNTING POLICIES

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

The accounting policies and basis of preparation adopted in the preparation of these condensed consolidated interim financial statements are consistent with those used in the Group’s audited financial statements for the year ended 31st December, 2006, except in relation to the following new/revised Hong Kong Financial Reporting Standards (“HKFRSs”), HKASs and Interpretations (hereinafter collectively referred to as the “new/revised HKFRSs”), which have become effective for accounting periods beginning on or after 1st January, 2007, that are adopted for the first time for the current period’s financial statements:

HKAS 1 Amendment	Capital Disclosures
HKFRS 7	Financial Instruments: Disclosures
HK(IFRIC)–Int 7	Applying the Restatement Approach under HKAS 29
	Financial Reporting in Hyperinflationary Economies
HK(IFRIC)–Int 8	Scope of HKFRS 2
HK(IFRIC)–Int 9	Reassessment of Embedded Derivatives
HK(IFRIC)–Int 10	Interim Financial Reporting and Impairment

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

2. SEGMENT INFORMATION

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

(a) the property investment and development segment includes letting, resale and development of properties;
(b) the treasury investment segment includes investments in cash and bond markets;
(c) the securities investment segment includes dealings in securities and disposals of investments;
(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 project management segment engages in the provision of project management, marketing, sales administrative and other related services; and
(g) the “other” segment comprises principally the development of computer hardware and software, money lending and the provision of fund management and investment advisory services.

• 23 •

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$’000 Revenue External 19,765 Inter-segment – Total 19,765 Segment results 114,050 Unallocated corporate expenses Finance costs Share of results of associates 490,547 Share of results of jointly controlled entities (49 ) Profit before tax Tax Profit for the period	Treasury investment HK$’000 4,284 15 4,299 4,152 – –	Six months ended 30th June, 2007 Corporate finance and Securities securities Banking Project investment broking business management HK$’000 HK$’000 HK$’000 HK$’000 552,934 67,424 15,388 39,770 – 164 – 167 552,934 67,588 15,388 39,937 28,723 13,180 4,157 34,026 – – – – – – – –	Other HK$’000 9,055 715 9,770 59,239 3,729 (762 )	Inter- segment elimination Consolidated HK$’000 HK$’000 – 708,620 (1,061 ) – (1,061 ) 708,620 (618 ) 256,909 (35,152 ) (27,652 ) – 494,276 – (811 ) 687,570 895 688,465

• 24 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Property investment and development HK$’000 Revenue External 21,610 Inter-segment – Total 21,610 Segment results 9,029 Unallocated corporate expenses Finance costs Share of results of associates (4,832 ) Share of results of jointly controlled entities (522 ) Profit before tax Tax Profit for the period	Treasury investment HK$’000 11,801 797 12,598 11,728 – –	Six months ended 30th June, 2006 (restated) Corporate finance and Securities securities Banking Project investment broking business management HK$’000 HK$’000 HK$’000 HK$’000 435,897 46,110 14,338 – – 222 – – 435,897 46,332 14,338 – 125,342 6,772 5,051 (1,291 ) – – – – – – – –	Other HK$’000 9,094 3,494 12,588 4,919 7,032 (1,446 )	Inter- segment elimination Consolidated HK$’000 HK$’000 – 538,850 (4,513 ) – (4,513 ) 538,850 (3,420 ) 158,130 (20,138 ) (6,400 ) – 2,200 – (1,968 ) 131,824 (3,926 ) 127,898

• 25 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. REVENUE

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

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

Property investment and development Treasury investment Securities investment Corporate finance and securities broking Banking business Project management Other	Six months ended 30th June, 2007 2006 HK$’000 HK$’000 (restated) 19,765 21,610 4,284 11,801 552,934 435,897 67,424 46,110 15,388 14,338 39,770 – 9,055 9,094 708,620 538,850	Six months ended 30th June, 2007 2006 HK$’000 HK$’000 (restated) 19,765 21,610 4,284 11,801 552,934 435,897 67,424 46,110 15,388 14,338 39,770 – 9,055 9,094 708,620 538,850
		538,850

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

Interest income Commission income Other revenues	Six months ended 30th June, 2007 2006 HK$’000 HK$’000 12,428 12,064 2,132 1,658 828 616 15,388 14,338	Six months ended 30th June, 2007 2006 HK$’000 HK$’000 12,428 12,064 2,132 1,658 828 616 15,388 14,338
		14,338

4. GAIN/(LOSS) ON DISPOSAL OF SUBSIDIARIES

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

• 26 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

5. SHARE OF RESULTS OF ASSOCIATES/INTERESTS IN ASSOCIATES

Share of results of associates included the Group’s share of profit in Lippo ASM Asia Property LP (“LAAP”), a property fund which carries the objective of investing in real estates in the East Asia region, of approximately HK$491 million (2006 – loss of HK$5 million).

Interests in associates included the Group’s interest in LAAP of approximately HK$2,253 million (31st December, 2006 – HK$1,639 million).

In May 2006, LAAP participated in a joint venture to invest in Overseas Union Enterprise Limited, a listed company in Singapore principally engaged in property investments and hotel operations.

6. PROFIT BEFORE TAX

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

	Six months ended 30th June,	Six months ended 30th June,
	2007	2006
	HK$’000	HK$’000
Interest income:
Listed investments	821	3,652
Unlisted investments	324	758
Banking operation	12,428	12,064
Other	4,859	11,801
Dividend income:
Listed investments	136	763
Unlisted investments	4,212	1,291
Other unlisted investment income	–	664
Gain/(Loss) on disposal of:
Listed financial assets at fair value
through profit or loss	(130)	13,649
Unlisted financial assets at fair value
through profit or loss	27	267
Listed available-for-sale financial assets	–	103,338
Unlisted available-for-sale financial assets	724	(2,858)
Net fair value gain on financial assets
at fair value through profit or loss:
Listed	11,233	92
Unlisted	12,062	6,496
Provision for impairment losses on unlisted
available-for-sale financial assets	–	(970)
Depreciation	(3,861)	(3,364)

• 27 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

7. TAX

Hong Kong: Charge for the period Deferred Overseas: Charge for the period Underprovision/(Overprovision) in prior periods Deferred Total charge/(credit) for the period	Six months ended 30th June, 2007 2006 HK$’000 HK$’000 – 1,270 578 955 578 2,225 1,943 1,438 (36) 263 (3,380) – (1,473) 1,701 (895) 3,926	Six months ended 30th June, 2007 2006 HK$’000 HK$’000 – 1,270 578 955 578 2,225 1,943 1,438 (36) 263 (3,380) – (1,473) 1,701 (895) 3,926
		2,225
		1,438 263 –
		1,701
		3,926

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

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

(a) Basic earnings per share

Basic earnings per share is calculated based on (i) the consolidated profit for the period attributable to equity holders of the Company of HK$687,082,000 (2006 – HK$128,766,000); and (ii) the weighted average number of 1,346,829,000 ordinary shares (2006 – 1,346,829,000 ordinary shares) in issue during the period.

(b) Diluted earnings per share

No diluted earnings per share is presented for the periods ended 30th June, 2007 and 2006 as there were no dilutive potential ordinary shares during these periods.

9. INTERIM DISTRIBUTION

		Six months ended 30th June,	Six months ended 30th June,
		2007	2006
		HK$’000	HK$’000
Interim	distribution, declared, of HK1.75 cents
(2006	– HK1.5 cents) per ordinary share	23,570	20,202

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

• 28 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Financial assets stated at fair value: Unlisted investment funds Financial assets stated at cost: Unlisted equity securities Unlisted debt securities Provision for impairment losses _Less:_Amount classified under current portion Non-current portion	30th June, 31st December, 2007 2006 HK$’000 HK$’000 102,883 94,442 79,250 79,166 11,586 11,536 (82,275) (82,275 8,561 8,427 111,444 102,869 (1,922) – 109,522 102,869	30th June, 31st December, 2007 2006 HK$’000 HK$’000 102,883 94,442 79,250 79,166 11,586 11,536 (82,275) (82,275 8,561 8,427 111,444 102,869 (1,922) – 109,522 102,869
		79,166 11,536 (82,275
		8,427
		102,869 –
		102,869

The debt securities have effective interest rates ranging from nil to 8 per cent. (31st December, 2006 – nil to 8 per cent.) per annum.

An analysis of the issuers of available-for-sale financial assets

is as follows: Equity securities: Corporate entities Debt securities: Club debenture Corporate entities HELD-TO-MATURITY FINANCIAL ASSETS Debt securities, at amortised cost: Listed overseas Market value of listed debt securities	79,250 79,166 3,165 3,165 8,421 8,371 11,586 11,536 30th June, 31st December, 2007 2006 HK$’000 HK$’000 9,613 9,582 10,502 10,444	79,166

		3,165 8,371
		11,536


		10,444

11. HELD-TO-MATURITY FINANCIAL ASSETS

The debt securities have effective interest rates of 9 per cent. (31st December, 2006 – 9 per cent.) per annum.

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

Banks and other financial institutions 9,613 9,582

• 29 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

12. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Held for trading: Equity securities: Listed in Hong Kong Listed overseas Debt securities: Listed overseas Investment funds: Listed overseas Unlisted Other: Unlisted Designated as financial assets at fair value through profit or loss:(Note) Unlisted investment funds	30th June, 31st December, 2007 2006 HK$’000 HK$’000 58,575 56,293 8,551 6,731 67,126 63,024 8,911 9,056 58,050 46,030 237,849 230,731 295,899 276,761 6,073 5,813 378,009 354,654 – 466,371 378,009 821,025	30th June, 31st December, 2007 2006 HK$’000 HK$’000 58,575 56,293 8,551 6,731 67,126 63,024 8,911 9,056 58,050 46,030 237,849 230,731 295,899 276,761 6,073 5,813 378,009 354,654 – 466,371 378,009 821,025
		63,024
		9,056
		46,030 230,731
		276,761
		5,813
		354,654 466,371
		821,025

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

The debt securities have effective interest rates ranging from 6.5 per cent. to 8 per cent. (31st December, 2006 – 6.5 per cent. to 8 per cent.) per annum.

An analysis of the issuers of financial assets at fair value through profit or loss is as follows: Equity securities: Banks and other financial institutions Corporate entities Debt securities: Corporate entities	14,250 52,876 67,126 8,911	– 63,024
		63,024

		9,056

• 30 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

13. LOANS AND ADVANCES

The balance mainly comprised of loans and advances to customers of the Group in respect of securities broking business of HK$563,543,000 (31st December, 2006 – HK$108,332,000).

The loans and advances to customers of the Group have effective interest rates ranging from 6 per cent. to 14 per cent. (31st December, 2006 – 3 per cent. to 18 per cent.) per annum. The carrying amounts of loans and advances are approximate to their fair values.

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

Balance at beginning of period Allowance for bad and doubtful debts Impairment allowance released Balance at end of period	Six months ended 30th June, 2007 2006 HK$’000 HK$’000 2,996 3,000 326 24 – (12 3,322 3,012	Six months ended 30th June, 2007 2006 HK$’000 HK$’000 2,996 3,000 326 24 – (12 3,322 3,012
		3,012

14. DEBTORS, PREPAYMENTS AND DEPOSITS

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

Outstanding balances with ages: Repayable on demand Within 30 days Between 31 and 60 days Between 61 and 90 days	30th June, 31st December, 2007 2006 HK$’000 HK$’000 75,791 45,809 693,343 39,602 58 969 288 184 769,480 86,564	30th June, 31st December, 2007 2006 HK$’000 HK$’000 75,791 45,809 693,343 39,602 58 969 288 184 769,480 86,564
		86,564

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

The balance mainly comprised of receivables from customers and securities brokers of the Group in respect of securities broking business of HK$752,712,000 (31st December, 2006 – HK$84,385,000). Except for receivables from certain securities brokers which are interest-bearing, the balances of trade debtors are non-interest-bearing. The carrying amounts of debtors and deposits are approximate to their fair values.

• 31 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

15. BANK AND OTHER BORROWINGS

Bank overdrafts:
Secured_(Note (a))
Bank loans:
Secured(Note (a))
Unsecured
Other borrowings:
Unsecured(Note (b))_
_Less:_Amount classified under current portion
Non-current portion
Bank and other borrowings by currency:
Hong Kong dollar
Singapore dollar
United States dollar
Bank loans and overdrafts repayable:
Within one year
In the second year
In the third to fifth years, inclusive
Other borrowings repayable:
Within one year

30th June,
31st December,
2007
2006
HK$’000
HK$’000
4,873
–
1,254,691
594,078
20,000
10,000
1,279,564
604,078
312,676
885,495
1,592,240
1,489,573
(1,592,240)
(942,205)
–
547,368
1,229,166
1,105,495
–
337,368
363,074
46,710
1,592,240
1,489,573
1,279,564
56,710
–
220,965
–
326,403
1,279,564
604,078
312,676
885,495

The carrying amounts of the Group’s bank and other borrowings are approximate to their fair values and bear interest at floating rates ranging from 4.9 per cent. to 6.4 per cent. (31st December, 2006 – 4.7 per cent. to 6.1 per cent.) per annum.

Note:

(a) The Group’s secured bank loans and overdrafts included bank loans drawn down by the Group of HK$984,293,000 (31st December, 2006 – nil) for lending to its margin clients in respect of the initial public offerings. All such bank loans were fully repaid subsequent to the period ended 30th June, 2007.

The bank loans and overdrafts were secured by first legal mortgages over certain investment properties and certain securities of the Group with carrying amounts of HK$451,550,000 (31st December, 2006 – HK$1,109,112,000) and HK$68,559,000 (31st December, 2006 – HK$46,710,000) respectively and certain securities owned by margin clients of the Group.

• 32 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) The Group’s other borrowings as at 30th June, 2007 comprised of an unsecured loan advanced from a third party of HK$312,676,000, which would be repayable on 26th June, 2008 and subject to renewal for one additional year on terms mutually agreed with the lender. The Group’s other borrowings as at 31st December, 2006 comprised of unsecured loans advanced from Lippo Limited (“Lippo”) and Lippo China Resources Limited (“LCR”), intermediate holding companies of the Company, of HK$248,126,000 and HK$637,369,000, respectively. The balances of which were fully repaid during the period.

16. CREDITORS, ACCRUALS AND DEPOSITS RECEIVED

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

Outstanding balances with ages: Repayable on demand Within 30 days	30th June, 31st December, 2007 2006 HK$’000 HK$’000 618,768 637,860 156,538 108,336 775,306 746,196	30th June, 31st December, 2007 2006 HK$’000 HK$’000 618,768 637,860 156,538 108,336 775,306 746,196
		746,196

The outstanding balances that are repayable on demand include client payables relating to cash balances held on trust for the customers in respect of the Group’s securities broking business. As at 30th June, 2007, total client trust bank balances amounted to HK$558,517,000 (31st December, 2006 – HK$582,905,000).

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

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

The current, fixed, savings and other deposits of customers attributable to banking operation have effective interest rates ranging from 2.2 per cent. to 5.0 per cent. (31st December, 2006 – 2.5 per cent. to 5.2 per cent.) per annum.

18. SHARE CAPITAL

Authorised: 2,000,000,000 (31st December, 2006 – 2,000,000,000) ordinary shares of HK$1.00 each Issued and fully paid: 1,346,829,094 (31st December, 2006 – 1,346,829,094) ordinary shares of HK$1.00 each	30th June, 31st December, 2007 2006 HK$’000 HK$’000 2,000,000 2,000,000 1,346,829 1,346,829	30th June, 31st December, 2007 2006 HK$’000 HK$’000 2,000,000 2,000,000 1,346,829 1,346,829

		1,346,829

Share options

On 7th June, 2007, a new share option scheme of the Company (the “Share Option Scheme”) was adopted and approved by the shareholders of the Company, Lippo and LCR.

No options have been granted under the Share Option Scheme since its adoption and accordingly, there were no options outstanding as at 30th June, 2007.

• 33 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

19. RESERVES

Share premium account HK$’000 At 1st January, 2007 50,988 Net fair value gain on available-for-sale financial assets – Deferred tax arising from fair value gain on available-for-sale financial assets – Derecognition of available-for-sale financial assets – Share of reserves of associates and jointly controlled entities – Transfer of reserve – Exchange realignment – Advance from minority shareholders of subsidiaries – Disposal of subsidiaries – Profit for the period – 2006 final distribution, declared – At 30th June, 2007 50,988 At 1st January, 2006 50,988 Net fair value loss on available-for-sale financial assets – Deferred tax arising from fair value gain on available-for-sale financial assets – Derecognition of available-for-sale financial assets – Transfer of reserve – Exchange realignment – Issue of shares by subsidiaries to minority shareholders – Advance from minority shareholders of subsidiaries – Changes in interests in subsidiaries – Profit/(Loss) for the period – 2005 final distribution, declared and paid – At 30th June, 2006 50,988	Capital redemption reserve (Note (c)) HK$’000 11,760 – – – – – – – – – – 11,760 11,760 – – – – – – – – – – 11,760	Legal reserve (Note (d)) HK$’000 3,960 – – – – 1,410 – – – – – 5,370 3,034 – – – 926 – – – – – – 3,960	Regulatory reserve (Note (e)) HK$’000 1,264 – – – – – – – – – – 1,264 1,169 – – – – – – – – – – 1,169	Investment Exchange revaluation Distributable equalisation reserve reserves reserve (Note (b)) HK$’000 HK$’000 HK$’000 36,960 1,678,657 61,986 10,290 – – (353 ) – – (1,204 ) – – 22,569 – 12,298 – (1,410 ) – – – 6,857 – – – – – (11,563 ) – 687,082 – – (67,341 ) – 68,262 2,296,988 69,578 81,876 1,348,813 (15,453 ) (12,859 ) – – (4,001 ) – – (79,351 ) – – – (926 ) – – – 4,088 – – – – – – – – – – 128,766 – – (40,405 ) – (14,335 ) 1,436,248 (11,365 )	Total HK$’000 1,845,575 10,290 (353 ) (1,204 ) 34,867 – 6,857 – (11,563 ) 687,082 (67,341 ) 2,504,210 1,482,187 (12,859 ) (4,001 ) (79,351 ) – 4,088 – – – 128,766 (40,405 ) 1,478,425	Minority interests HK$’000 99,285 58 – – – – 413 64,081 (130,786 ) 1,383 – 34,434 32,079 (23 ) – – – 28 402 39,132 (257 ) (868 ) – 70,493

• 34 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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, 2007 comprise retained profits of HK$1,118,271,000 (31st December, 2006 – HK$432,599,000) and the remaining balance arising from the Cancellation of HK$1,178,717,000 (31st December, 2006 – HK$1,246,058,000).
(c) The capital redemption reserve is not available for distribution to shareholders.
(d) The legal reserve represents the part of reserve generated by a banking subsidiary of the Company which may only be distributable in accordance with certain limited circumstances prescribed by the statute of the country in which the subsidiary operates.
(e) The regulatory reserve represents the part of reserve generated by a banking subsidiary of the Company arising from the difference between the impairment allowance made under HKAS 39 and for regulatory purpose.

• 35 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

20. MATURITY PROFILE OF ASSETS AND LIABILITIES

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

At 30th June, 2007 Assets Debt securities: Held-to-maturity financial assets Available-for-sale financial assets Financial assets at fair value through profit or loss Loans and advances Client trust bank balances Treasury bills Cash and bank balances Liabilities Bank and other borrowings Current, fixed, savings and other deposits of customers At 31st December, 2006 Assets Debt securities: Held-to-maturity financial assets Available-for-sale financial assets Financial assets at fair value through profit or loss Loans and advances Client trust bank balances Treasury bills Cash and bank balances Liabilities Bank and other borrowings Current, fixed, savings and other deposits of customers	Repayable on demand HK$’000 – – – 209,961 80,230 – 89,081 379,272 4,873 62,404 67,277 – – – 110,599 52,417 – 126,173 289,189 – 107,747 107,747	3 months or less HK$’000 – – – 487,823 478,287 13,580 265,660 1,245,350 1,064,691 91,440 1,156,131 – – – 116,151 530,488 194,970 237,314 1,078,923 56,710 194,458 251,168	1 year or less but over 3 months HK$’000 – 8,421 – 16,704 – – – 25,125 522,676 4,834 527,510 – – – 46,574 – – – 46,574 885,495 3,316 888,811	5 years or less but over 1 year HK$’000 – – – 12,144 – – – 12,144 – – – – 8,371 – 10,740 – – – 19,111 547,368 – 547,368	After 5 years HK$’000 9,613 – 929 11,819 – – – 22,361 – – – 9,582 – 976 16,326 – – – 26,884 – – –	Undated HK$’000 – 3,165 7,982 – – – – 11,147 – – – – 3,165 8,080 – – – – 11,245 – – –	Total HK$’000 9,613 11,586 8,911 738,451 558,517 13,580 354,741
							1,695,399

							1,592,240 158,678
							1,750,918

							9,582 11,536 9,056 300,390 582,905 194,970 363,487
							1,471,926

							1,489,573 305,521
							1,795,094

• 36 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

21. CONTINGENT LIABILITIES

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

Guarantees and other endorsements Liabilities under letters of credit on behalf of customers	30th June, 31st December, 2007 2006 HK$’000 HK$’000 18,340 17,172 1,922 12,392 20,262 29,564	30th June, 31st December, 2007 2006 HK$’000 HK$’000 18,340 17,172 1,922 12,392 20,262 29,564
		29,564

22. CAPITAL COMMITMENTS

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

Capital commitments in respect of property, plant and equipment: Contracted, but not provided for Other capital commitments: Contracted, but not provided for_(Note)_	30th June, 31st December, 2007 2006 HK$’000 HK$’000 299,125 41,623 366,642 527,024 665,767 568,647	30th June, 31st December, 2007 2006 HK$’000 HK$’000 299,125 41,623 366,642 527,024 665,767 568,647
		527,024
		568,647

Note: The balance included the Group’s capital commitments in respect of the formation of joint ventures for certain property projects in Republic of Singapore and the People’s Republic of China of approximately HK$349 million (31st December, 2006 – HK$390 million).

23. RELATED PARTY TRANSACTIONS

(a) During the period, Lippo Securities Holdings Limited (“LSHL”), being a wholly-owned subsidiary of the Company, paid rental expenses of HK$2,245,000 (2006 – HK$1,582,000) to Prime Power Investment Limited, being a fellow subsidiary of the Company, in respect of office premises occupied by LSHL. The rental was determined by reference to open market rentals.
(b) During the period, the Company paid rental expenses of HK$981,000 (2006 – HK$717,000) to Porbandar Limited, being a fellow subsidiary of the Company, in respect of office premises occupied by the Company. The rental was determined by reference to open market rentals.
(c) During the period, ImPac Asset Management (HK) Limited, being a wholly-owned subsidiary of the Company, received investment advisory income from Lippo ASM Investment Management Limited, being an associate of the Group, amounting to HK$5,649,000 (2006 – HK$5,638,000).

• 37 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(d) During the period, the Company paid finance costs to Lippo and LCR of HK$3,025,000 (2006 –HK$1,373,000) and HK$13,923,000 (2006 – HK$1,660,000) respectively, in respect of the loans advanced to the Company. The balances of which were fully repaid during the period.
(e) As at 30th June, 2007, the Group had amounts due from associates in a total of HK$388,353,000 (31st December, 2006 – amounts due from associates in a total of HK$298,624,000 and amounts due to associates in a total of HK$22,175,000) and amounts due from jointly controlled entities in a total of HK$149,964,000 (31st December, 2006 – HK$46,732,000). The balances with the associates are unsecured, interest-free and have no fixed terms of repayment. The balances with the jointly controlled entities included a loan of HK$4,009,000 (31st December, 2006 – HK$3,988,000), which is secured by certain shares of a jointly controlled entity, bears interest at US dollar prime rate plus 2 per cent. per annum and has no fixed terms of repayment. The remaining balances with the jointly controlled entities are unsecured, interest-free and have no fixed terms of repayment. The carrying amounts of the balances are approximate to their fair values.

24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group had established policies and procedures for risk management which were reviewed regularly by the Executive Directors and senior management of the Group to ensure the proper monitoring and control of all major risks arising from the Group’s activities at all times. The risk management function was carried out by individual business units and regularly overseen by the Group’s senior management with all the risk limits approved by the Directors of the Group.

(a) Credit risk

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

The credit policies for banking and margin lending businesses set out in details the credit approval and monitoring mechanism, the loan classification criteria and provision policy. Credit approval was conducted in accordance with the credit policies, taking into account the type and tenor of loans, creditworthiness and repayment ability of prospective borrowers, collateral available and the resultant risk concentration in the context of the Group’s total assets. Day-to-day credit management was performed by management of individual business units.

The Group had established guidelines to ensure that all new debt investments were properly made, taking into account a number of factors, including but not limiting to, the credit rating requirements, the maximum exposure limit to a single corporate or issuer; etc. All relevant departments within the Group were involved to ensure that appropriate processes, systems and controls were set in place before and after the investments were acquired.

(b) Liquidity risk

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

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

• 38 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(c) Interest rate risk

Interest rate risk primarily resulted from timing differences in the repricing of interest bearing assets, liabilities and commitments. The Group’s interest rate positions arose mainly from treasury, commercial banking and other investment activities undertaken.

The Group monitors its interest-sensitive products and investments and net repricing gap and limits interest rate exposure through management of maturity profile, currency mix and choice of fixed or floating interest rates. The interest rate risk was managed and monitored regularly by senior managers of the Group.

(d) Foreign exchange risk

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

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

(e) Market risk

Market risk was the risk that changes in interest rates, foreign exchange rates, equity or commodity prices would affect the prices of financial instruments taken or held by the Group. Financial instruments included foreign exchange contracts, interest rate contracts, equity and fixed income securities.

Market risk limits were approved by the Directors of the Group. Actual positions were compared with approved limits and monitored regularly by the Executive Directors and senior managers of the Group. Exposures were measured and monitored on the basis of principal and notional amounts, outstanding balances and pre-determined stop-loss limits. All market risk trading positions were subject to periodic mark-to-market valuation, which was monitored and managed by senior managers of the Group. With respect to the investment accounts, the Group had established evaluation procedures for the selection of investments and fund managers and the Executive Directors and senior managers of the Group perform regular reviews of the operation and performance of these investment accounts and ensure compliance with the market risk limits and guidelines adopted by the Group.

• 39 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

25. POST BALANCE SHEET EVENTS

(a) On 12th July, 2007, the Group entered into a framework agreement (the “Framework Agreement”) with 鳳凰醫院管理（北京）有限公司 (Phoenix Hospital Management (Beijing) Company Limited) (“Phoenix Hospital Management”) and 中信信託投資有限責任公司 (CITIC Trust & Investment Company Limited) in respect of the establishment of a thirty-year sino-foreign equity joint venture (the “Sino-foreign Equity Joint Venture”). Pursuant to the Framework Agreement, the Group will enter into an equity transfer agreement and a capital increase agreement with Phoenix Hospital Management regarding the acquisition from Phoenix Hospital Management of approximately 32.54 per cent. interest in 鳳凰聯盟醫院管理（北京）有限公司 (Phoenix United Hospital Management (Beijing) Company Limited) (“Phoenix United”) in an amount of approximately HK$25,279,000 and the increase in capital contribution to Phoenix United by an amount of approximately HK$63,674,000, representing approximately 46.08 per cent. equity interest in the Sino-foreign Equity Joint Venture. Phoenix United and its subsidiaries are mainly engaged in hospital property investment and hospital management. The Group’s capital commitment in the Sino-foreign Equity Joint Venture will be approximately HK$88,953,000. The completion of the transaction will be subject to the fulfilment of certain conditions precedent as stipulated in the Framework Agreement.
(b) On 17th July, 2007, the Group entered into a conditional sale and purchase agreement with a vendor for an acquisition of 15 per cent. interest in MCB for a consideration of approximately HK$45,784,000. The completion of the acquisition will be subject to the fulfilment of certain conditions precedent as stipulated in the agreement.
(c) On 17th July, 2007, LCR declared a special interim distribution which was satisfied by way of a distribution in specie of the Company’s shares held by LCR in the proportion of 1.057745 Company’s share for every ten LCR’s shares held by the shareholders of LCR. As a result of the distribution, the Company ceased to be a subsidiary of LCR.
(d) On 3rd September, 2007, the Group entered into a shareholders’ agreement in respect of the investment in and formation of a joint venture (the “Joint Venture”) in respect of a property project located at 53 Holland Road, Singapore (the “Aura Park Project”). As a result of the formation of the Joint Venture, the Group’s interest in the Aura Park Project would be reduced to 50 per cent. The Group’s capital commitment in the Joint Venture will be approximately HK$71,628,000.

26. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform with the current period’s presentation. The reclassifications had no impact on the Group’s earnings for the six months ended 30th June, 2006.

• 40 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2006

The audited consolidated financial statements of the Group for the year ended 31st December, 2006 set out below is not subject to any qualified opinion.

Consolidated Profit and Loss Account

Note Revenue 5 Cost of sales Gross profit Administrative expenses Other operating expenses Write-back of allowance/(Allowance) for bad and doubtful debts relating to: Banking operation Non-banking operations 6 Provisions for impairment losses on: Associates Available-for-sale financial assets Goodwill Gain on disposal of available-for-sale financial assets Net fair value gain on financial assets at fair value through profit or loss Fair value gains on investment properties Finance costs 11 Share of results of associates Share of results of jointly controlled entities Profit before tax 7 Tax 12 Profit for the year Attributable to: Equity holders of the Company 13 & 32 Minority interests	2006 HK$’000 1,099,028 (934,659) 164,369 (114,516) (36,313) 4 1,267 – (5,797) – 86,238 216,728 207,276 (49,064) (4,014) (2,644) 463,534 (46,975) 416,559 391,472 25,087 416,559	2005 HK$’000 1,147,457 (954,226) 193,231 (74,224) (45,497) 2,140 (33,036) (5,859) (53,757) (412) 8,347 70,370 74,784 (7,363) (2,548) (423) 125,753 (15,033) 110,720 111,761 (1,041) 110,720

• 41 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Earnings per share attributable to equity holders of the Company 14 Basic Diluted Distributions 15 Interim, declared and paid Final, proposed/paid after the balance sheet date	2006 HK cents 29.1 N/A HK$’000 20,202 67,341 87,543	2005 HK cents 8.3 N/A

		HK$’000 20,202 40,405
		60,607

• 42 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Balance Sheet

Note Non-current assets Goodwill 16 Fixed assets 17 Investment properties 18 Properties under development 19 Interests in associates 20 Interests in jointly controlled entities 21 Available-for-sale financial assets 22 Held-to-maturity financial assets 23 Financial assets at fair value through profit or loss 24 Loans and advances 25 Current assets Property held for sale Available-for-sale financial assets 22 Financial assets at fair value through profit or loss 24 Loans and advances 25 Debtors, prepayments and deposits 26 Client trust bank balances Treasury bills Cash and bank balances Current liabilities Bank and other borrowings 27 Creditors, accruals and deposits received 28 Current, fixed, savings and other deposits of customers 29 Tax payable Net current assets Total assets less current liabilities	2006 HK$’000 57,285 47,443 1,136,256 160,115 1,961,964 49,299 102,869 9,582 – 27,066 3,551,879 19,223 – 821,025 273,324 179,171 582,905 194,970 363,487 2,434,105 942,205 832,729 305,521 8,265 2,088,720 345,385 3,897,264	2005 HK$’000 57,285 49,593 421,523 105,096 175,235 12,615 175,048 9,604 268,753 29,975
		1,304,727
		12,441 213,896 617,913 240,498 181,328 444,460 15,520 621,740
		2,347,796
		25,000 629,584 116,743 4,112
		775,439
		1,572,357
		2,877,084

• 43 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Non-current liabilities Bank and other borrowings 27 Deferred tax liabilities 30 Net assets Equity Equity attributable to equity holders of the Company Share capital 31 Reserves 32 Minority interests 32	2006 HK$’000 547,368 58,207 605,575 3,291,689 1,346,829 1,845,575 3,192,404 99,285 3,291,689	2005 HK$’000 – 15,989
		15,989
		2,861,095

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

• 44 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Summary Statement of Changes in Equity

Note Total equity at 1st January Changes in equity during the year: Exchange differences on translation of foreign operations Net fair value gain on available-for-sale financial assets Deferred tax arising from net fair value gain on available-for-sale financial assets 32 Derecognition of available-for-sale financial assets 32 Share of reserves of associates and jointly controlled entities 32 Net income recognised directly in equity Profit for the year Total recognised income and expense for the year Issue of shares by subsidiaries to minority shareholders 32 Acquisition of shares in a subsidiary from a minority shareholder 32 Advances from minority shareholders of subsidiaries 32 Changes in interests in subsidiaries 32 2004 final distribution, declared 32 2005 interim distribution, declared 32 2005 final distribution, declared 15 & 32 2006 interim distribution, declared 15 & 32 Total equity at 31st December Total recognised income and expense for the year attributable to: Equity holders of the Company Minority interests	2006 HK$’000 2,861,095 23,986 26,672 (2,921) (87,288) 72,968 33,417 416,559 449,976 402 (258) 41,384 (303) – – (40,405) (20,202) 430,594 3,291,689 423,995 25,981 449,976	2005 HK$’000 2,731,386 (5,152) 85,636 (3,670) – – 76,814 110,720 187,534 6,128 – 870 (4,216) (40,405) (20,202) – – 129,709 2,861,095 188,441 (907) 187,534

• 45 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Balance Sheet

Note Non-current assets Fixed assets 17 Interests in subsidiaries 33 Available-for-sale financial assets 22 Current assets Financial assets at fair value through profit or loss 24 Debtors, prepayments and deposits Cash and bank balances Current liabilities Bank and other borrowings 27 Creditors, accruals and deposits received Net current assets/(liabilities) Total assets less current liabilities Non-current liability Bank and other borrowings 27 Net assets Equity Share capital 31 Reserves 32	2006 HK$’000 3,970 3,411,944 3,165 3,419,079 18,445 1,773 62,092 82,310 885,495 35,508 921,003 (838,693) 2,580,386 60,000 2,520,386 1,346,829 1,173,557 2,520,386	2005 HK$’000 2,689 2,257,540 51,935
		2,312,164
		108,148 4,808 208,557
		321,513
		– 11,404
		11,404
		310,109
		2,622,273
		–
		2,622,273

		1,346,829 1,275,444
		2,622,273

• 46 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Cash Flow Statement

Note Cash flows from operating activities Cash generated from operations 34(a) Interest received Dividend received from listed and unlisted investments Dividend received from associates Taxes paid: Hong Kong Overseas Net cash inflow from operating activities Cash flows from investing activities Proceeds from disposal of available-for-sale financial assets Payments to acquire: Items of fixed assets Available-for-sale financial assets Additions to properties under development Additions to investment properties Increase in interests in jointly controlled entities Increase in interests in associates Advances to associates Advances to jointly controlled entities Disposal of subsidiaries, net of cash and bank balances disposed of 34(b) Acquisition of shares in a subsidiary from a minority shareholder Net cash outflow from investing activities	2006 HK$’000 297,546 49,997 3,074 3,431 (426) (4,212) 349,410 313,923 (5,617) (8,088) (47,384) (473,643) (197) (1,292,187) (271,389) (39,415) 1,026 (258) (1,823,229)	2005 HK$’000 349,319 51,295 21,618 1,736 (55) (6,804) 417,109 39,371 (17,809) (21,879) (9,514) (250,172) (5,721) (157,934) (2,293) (4) 11,098 – (414,857)

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note Cash flows from financing activities Interest paid Distributions paid Drawdown of bank and other borrowings (Note) Repayment of bank and other borrowings (Note) Issue of shares by subsidiaries to minority shareholders Advances from minority shareholders of subsidiaries Net cash inflow/(outflow) from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange realignments Cash and cash equivalents at end of year Analysis of balances of cash and cash equivalents: Cash and bank balances Treasury bills	2006 HK$’000 (34,589) (60,607) 1,470,960 (25,000) 402 41,384 1,392,550 (81,269) 637,260 2,466 558,457 363,487 194,970 558,457	2005 HK$’000 (8,770) (60,607) 24,500 (208,261) 6,128 870 (246,140) (243,888) 881,885 (737) 637,260 621,740 15,520 637,260

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

NOTES TO THE FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

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

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

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

2. BASIS OF PREPARATION

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

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries for the year ended 31st December, 2006. Adjustments are made to bring into line any dissimilar accounting policies that may exist. The results of subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

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

2.1 IMPACT OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

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

HKAS 21 Amendment Net Investment in a Foreign Operation HKAS 39 & HKFRS 4 Amendments Financial Guarantee Contracts HKAS 39 Amendment Cash Flow Hedge Accounting of Forecast Intragroup Transactions HKAS 39 Amendment The Fair Value Option HK(IFRIC)-Int 4 Determining whether an Arrangement contains a Lease

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The principal changes in accounting policies are as follows:

(a) HKAS 21 The Effects of Changes in Foreign Exchange Rates

Upon the adoption of the HKAS 21 Amendment regarding a net investment in a foreign operation, all exchange differences arising from a monetary item that forms part of the Group’s net investment in a foreign operation are recognised in a separate component of equity in the consolidated financial statements irrespective of the currency in which the monetary item is denominated. This change has had no material impact on these financial statements as at 31st December, 2006 or 31st December, 2005.

(b) HKAS 39 Financial Instruments: Recognition and Measurement

(i) Amendment for financial guarantee contracts

This amendment has revised the scope of HKAS 39 to require financial guarantee contracts issued that are not considered insurance contracts, to be recognised initially at fair value and to be remeasured at the higher of the amount determined in accordance with HKAS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with HKAS 18 Revenue. The adoption of this amendment has had no material impact on these financial statements.

(ii) Amendment for the fair value option

This amendment has changed the definition of a financial instrument classified as fair value through profit or loss and has restricted the use of the option to designate any financial asset or any financial liability to be measured at fair value through the profit and loss account. The adoption of this amendment has had no material effect on these financial statements.

(iii) Amendment for cash flow hedge accounting of forecast intragroup transactions

This amendment has revised HKAS 39 to permit the foreign currency risk of a highly probable intragroup forecast transaction to qualify as a hedged item in a cash flow hedge, provided that the transaction is denominated in a currency other than the functional currency of the entity entering into that transaction and that the foreign currency risk will affect the consolidated profit and loss account. As the Group currently has no such transactions, the amendment has had no material effect on these financial statements.

(c) HK(IFRIC)-Int 4 Determining whether an Arrangement contains a Lease

The Group has adopted this interpretation as of 1st January, 2006, which provides guidance in determining whether arrangements contain a lease to which lease accounting must be applied. This interpretation has had no material impact on these financial statements.

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

The Group has not applied the following new/revised HKFRSs, that have been issued but are not yet effective, in these financial statements.

HKAS 1 Amendment	Capital Disclosures
HKFRS 7	Financial Instruments: Disclosures
HKFRS 8	Operating Segments
HK(IFRIC)-Int 7	Applying the Restatement Approach under HKAS 29
	Financial Reporting in Hyperinflationary Economies
HK(IFRIC)-Int 8	Scope of HKFRS 2
HK(IFRIC)-Int 9	Reassessment of Embedded Derivatives
HK(IFRIC)-Int 10	Interim Financial Reporting and Impairment
HK(IFRIC)-Int 11	HKFRS 2 – Group and Treasury Share Transactions
HK(IFRIC)-Int 12	Service Concession Arrangements

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

HKFRS 7 shall be applied for annual periods beginning on or after 1st January, 2007. The standard requires disclosures that enable users of the financial statements to evaluate the significance of the Group’s financial instruments and the nature and extent of risks arising from those financial instruments and also incorporates many of the disclosure requirements of HKAS 32.

HKFRS 8 shall be applied for annual periods beginning on or after 1st January, 2009. The standard requires the disclosure of information about the operating segments of the Group, the products and services provided by the segments, the geographical areas in which the Group operates, and revenues from the Group’s major customers. This standard will supersede HKAS 14 “Segment Reporting”.

HK(IFRIC)-Int 7, HK(IFRIC)-Int 8, HK(IFRIC)-Int 9, HK(IFRIC)-Int 10, HK(IFRIC)-Int 11 and HK(IFRIC)-Int 12 shall be applied for annual periods beginning on or after 1st March, 2006, 1st May, 2006, 1st June, 2006, 1st November, 2006, 1st March, 2007 and 1st January 2008, respectively.

The Group is in the process of making an assessment of the impact of these new and revised HKFRSs upon initial application. So far, it has concluded that while the adoption of the HKAS 1 Amendment, HKFRS 7 and HKFRS 8 may result in new or amended disclosures. The Group has already commenced an assessment of the impact of the other new and revised HKFRSs but is not yet in a position to state whether these new and revised HKFRSs would have a significant impact on the results of operations and financial position.

2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Subsidiaries

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

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

(b) Joint ventures

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

A joint venture is treated as:

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

(c) Jointly controlled entities

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

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

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

(d) Associates

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

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

(e) Goodwill

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

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

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

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

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

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

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

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

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

Goodwill previously eliminated against consolidated reserves

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Excess over the cost of business combinations

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

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

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

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

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

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

(g) Fixed assets and depreciation

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

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

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

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

(h) Investment properties

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

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

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

(i) Properties under development

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

(j)

Investments and other financial assets

Financial assets in the scope of HKAS 39 are classified as financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group considers whether a contract contains an embedded derivative when the Group first becomes a party to it. The embedded derivatives are separated from the host contract which is not measured at fair value through profit or loss when the analysis shows that the economic characteristics and risks of embedded derivatives are not closely related to those of the host contract.

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition as at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments or financial guarantee contracts. Gains or losses on investments held for trading or these financial assets are recognised in the profit and loss account.

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

The Group’s financial assets at fair value through profit or loss which are under regular way of purchases or sales are recognised on the trade date, that is, the date the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Held-to-maturity financial assets

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

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

Loans and receivables

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

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Available-for-sale financial assets

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

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

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

Fair value

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

(k) Impairment of financial assets

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

Assets carried at amortised cost

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

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

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

• 57 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Assets carried at cost

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

Available-for-sale financial assets

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

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

(l) Derecognition of financial assets

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

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

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

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Financial liabilities, including trade and other payables and interest-bearing loans and borrowings, are initially stated at fair value less directly attributable transaction costs and are subsequently measured at amortised cost, using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost.

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

(n) Financial guarantee contracts

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

(o) Derecognition of financial liabilities

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

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

(p) 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.

(q) Revenue recognition

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

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

(r) Income tax

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

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

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

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

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

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

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

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

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

• 60 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(s) Provisions

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

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

(t) Employee benefits

Paid leave entitlement

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

Retirement benefits costs

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

(u) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised.

(v) Operating leases

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

(w) Cash and cash equivalents

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

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(x) Foreign currencies

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

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

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

(y) Related parties

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

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

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APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(z) Dividends and distributions

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

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

3. SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

(a) Judgements

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

Operating lease commitments – Group as lessor

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

Classification between investment properties and owner-occupied properties

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

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

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

(b) Estimation uncertainly

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

Impairment of goodwill

The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill at 31st December, 2006 was HK$57,285,000 (2005 – HK$57,285,000). Further details are given in Note 16.

• 63 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Estimation of the fair value of investment properties

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

4. SEGMENT INFORMATION

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

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

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

• 64 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Group

Property investment and 2006 development HK$’000 Revenue External 35,734 Inter-segment – Total 35,734 Segment results 218,622 Unallocated corporate expenses Finance costs Share of results of associates (17,702 ) Share of results of jointly controlled entities (572 ) Profit before tax Tax Profit for the year	Treasury investment HK$’000 15,825 1,003 16,828 16,095 – –	Securities investment HK$’000 903,504 – 903,504 324,780 – –	Corporate finance and securities broking HK$’000 95,614 1,065 96,679 17,616 – –	Banking business HK$’000 28,965 – 28,965 7,271 – –	Other HK$’000 19,386 6,924 26,310 4,817 13,688 (2,072 )	Inter- segment elimination Consolidated HK$’000 HK$’000 – 1,099,028 (8,992 ) – (8,992 ) 1,099,028 (7,414 ) 581,787 (76,122 ) (35,473 ) – (4,014 ) – (2,644 ) 463,534 (46,975 ) 416,559

• 65 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

	Property					Corporate
	investment					finance and						Inter-
	and		Treasury	Securities		securities		Banking				segment
2006	development		investment	investment		broking		business		Other		elimination	Consolidated
	HK$’000		HK$’000	HK$’000		HK$’000		HK$’000		HK$’000		HK$’000	HK$’000
Segment assets	1,424,556		262,469	933,694		786,732		541,361		13,318		–	3,962,130
Interests in associates	1,835,329		–	–		814		–		125,821		–	1,961,964
Interests in jointly
controlled entities	45,642		–	–		–		–		3,657		–	49,299
Unallocated assets													12,591
Total assets													5,985,984
Segment liabilities	16,405		–	46,968		767,974		308,875		2,966		–	1,143,188
Unallocated liabilities													1,551,107
Total liabilities													2,694,295
Other segment information:
Capital expenditure	845		–	–		460		334		353		–	1,992
Depreciation	(935	)	–	(388	)	(432	)	(1,901	)	(916	)	–	(4,572 )
Write-back of allowance/
(Allowance) for bad and
doubtful debts
relating to:
Banking operation	–		–	–		–		4		–		–	4
Non-banking operations	–		–	–		1,850		–		(583	)	–	1,267
Provisions for impairment
losses on available-for-sale
financial assets	–		–	(5,797	)	–		–		–		–	(5,797	)
Net fair value gain on
financial assets at fair value
through profit or loss	–		–	216,728		–		–		–		–	216,728
Fair value gains on
investment properties	207,276		–	–		–		–		–		–	207,276
Unallocated:
Capital expenditure													3,625
Depreciation													(2,416	)

• 66 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

Property investment and 2005 development HK$’000 Revenue External 9,845 Inter-segment – Total 9,845 Segment results 76,838 Unallocated corporate expenses Share of results of associates (6,723 ) Share of results of jointly controlled entities (313 ) Profit before tax Tax Profit for the year	Treasury investment HK$’000 16,810 970 17,780 17,084 – –	Securities investment HK$’000 1,037,180 – 1,037,180 127,801 (32 ) –	Corporate finance and securities broking HK$’000 59,740 650 60,390 (25,646 ) – –	Banking business HK$’000 18,076 – 18,076 6,638 – –	Other HK$’000 5,806 2,898 8,704 (12,593 ) 4,207 (110 )	Inter- segment elimination Consolidated HK$’000 HK$’000 – 1,147,457 (4,518 ) – (4,518 ) 1,147,457 (2,939 ) 187,183 (58,459 ) – (2,548 ) – (423 ) 125,753 (15,033 ) 110,720

• 67 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

	Property					Corporate
	investment					finance and						Inter–
	and		Treasury	Securities		securities		Banking				segment
2005	development		investment	investment		broking		business		Other		elimination	Consolidated
	HK$’000		HK$’000	HK$’000		HK$’000		HK$’000		HK$’000		HK$’000	HK$’000
Segment assets	570,842		548,513	1,270,414		663,002		372,452		24,094		–	3,449,317
Interests in associates	151,071		–	–		814		–		23,350		–	175,235
Interests in jointly
controlled entities	7,000		–	–		–		–		5,615		–	12,615
Unallocated assets													15,356
Total assets													3,652,523
Segment liabilities	3,513		–	1,351		625,899		120,071		9,398		–	760,232
Unallocated liabilities													31,196
Total liabilities													791,428
Other segment information:
Capital expenditure	1,536		–	–		801		8,123		1,136		–	11,596
Depreciation	(978	)	–	(390	)	(633	)	(890	)	(629	)	–	(3,520 )
Write-back of allowance/
(Allowance) for bad and
doubtful debts relating to:
Banking operation	–		–	–		–		2,140		–		–	2,140
Non-banking operations	(94	)	–	–		(30,272	)	–		(2,670	)	–	(33,036 )
Provisions for impairment
losses on:
Associates	–		–	–		–		–		(5,859	)	–	(5,859	)
Available-for-sale
financial assets	–		–	(53,757	)	–		–		–		–	(53,757 )
Goodwill	–		–	–		–		–		(412	)	–	(412 )
Net fair value gain on financial
assets at fair value through
profit or loss	–		–	70,370		–		–		–		–	70,370
Fair value gains on
investment properties	74,784		–	–		–		–		–		–	74,784
Unallocated:
Capital expenditure													6,213
Depreciation													(1,093	)

• 68 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Group

2006 Revenue Segment assets Interests in associates Interests in jointly controlled entities Total assets Capital expenditure 2005 Revenue Segment assets Interests in associates Interests in jointly controlled entities Total assets Capital expenditure	Hong Kong HK$’000 641,854 1,206,879 27,450 – 3,125 Hong Kong HK$’000 216,978 1,546,310 20,533 – 2,173	Macau HK$’000 28,965 895,717 – – 350 Macau HK$’000 18,076 645,969 – – 8,123	Republic of Singapore HK$’000 198,525 1,512,158 1,835,329 35,568 1,317 Republic of Singapore HK$’000 336,375 548,913 151,211 – 6,941	Japan HK$’000 58,504 62,845 – – – Japan HK$’000 264,860 148,779 – – –	Ireland HK$’000 – – – – – Ireland HK$’000 176,168 – – – –	Other Consolidated HK$’000 HK$’000 171,180 1,099,028 297,122 3,974,721 99,185 1,961,964 13,731 49,299 5,985,984 825 5,617 Other Consolidated HK$’000 HK$’000 135,000 1,147,457 574,702 3,464,673 3,491 175,235 12,615 12,615 3,652,523 572 17,809	Other Consolidated HK$’000 HK$’000 171,180 1,099,028 297,122 3,974,721 99,185 1,961,964 13,731 49,299 5,985,984 825 5,617 Other Consolidated HK$’000 HK$’000 135,000 1,147,457 574,702 3,464,673 3,491 175,235 12,615 12,615 3,652,523 572 17,809

							3,464,673 175,235 12,615
							3,652,523

							17,809

5. REVENUE

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

• 69 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Property investment and development Treasury investment Securities investment Corporate finance and securities broking Banking business Other	Group 2006 2005 HK$’000 HK$’000 35,734 9,845 15,825 16,810 903,504 1,037,180 95,614 59,740 28,965 18,076 19,386 5,806 1,099,028 1,147,457	Group 2006 2005 HK$’000 HK$’000 35,734 9,845 15,825 16,810 903,504 1,037,180 95,614 59,740 28,965 18,076 19,386 5,806 1,099,028 1,147,457
		1,147,457

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

Interest income Commission income Other revenues	Group 2006 2005 HK$’000 HK$’000 23,916 15,722 3,915 2,180 1,134 174 28,965 18,076	Group 2006 2005 HK$’000 HK$’000 23,916 15,722 3,915 2,180 1,134 174 28,965 18,076
		18,076

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

The allowance for the year ended 31st December, 2005 included an individual provision of HK$29,883,000 made for a loan advanced to a margin client, which had been secured by certain shares of a listed company and a guarantee provided by a director of the client. Both the client and the listed company were under provisional liquidation and in the opinion of Directors, the probability for recovery of the loan was uncertain.

• 70 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

7. PROFIT BEFORE TAX

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

Gross rental income
Less:_Outgoings
Net rental income
Employee benefits expense(Note)_:
Wages and salaries
Retirement benefits costs
_Less:_Forfeited contributions
Net retirement benefit costs
Total staff costs
Interest income:
Listed investments
Unlisted investments
Banking operation
Other
Dividend income:
Listed investments
Unlisted investments
Gain/(Loss) on disposal of financial assets at fair value
through profit or loss:
Listed
Unlisted
Gain/(Loss) on disposal of available-for-sale financial assets:
Listed
Unlisted
Net fair value gain/(loss) on financial assets at fair value
through profit or loss:
Listed
Unlisted
Other unlisted investment income
Provisions for impairment losses on unlisted available-for-sale
financial assets
Depreciation
Loss on disposal of fixed assets
Foreign exchange gains/(losses) – net
Fair value gains on investment properties
Auditors’ remuneration
Minimum lease payments under operating lease rentals
in respect of land and buildings

Group
2006
2005
HK$’000
HK$’000
22,667
9,845
(6,230)
(2,328)
16,437
7,517
(88,288)
(53,211)
(2,746)
(2,803)
–
369
(2,746)
(2,434)
(91,034)
(55,645)
6,534
18,112
758
2,028
23,916
15,722
16,918
16,810
771
20,165
2,291
1,465
11,217
68,978
10,322
(1,117)
112,923
1,006
(26,685)
7,341
25,188
(2,621)
191,540
72,991
664
681
(5,797)
(53,757)
(6,988)
(4,613)
(67)
(48)
1,371
(6,006)
207,276
74,784
(2,025)
(1,626)
(13,940)
(12,158)

Note: The amounts include the Directors’ emoluments disclosed in Note 8 to the financial statements.

• 71 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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 Discretionary bonuses paid and payable Retirement benefits costs	Group 2006 2005 HK$’000 HK$’000 627 517 3,680 4,784 3,000 – 24 29 7,331 5,330	Group 2006 2005 HK$’000 HK$’000 627 517 3,680 4,784 3,000 – 24 29 7,331 5,330
		5,330

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

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

• 72 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

9. FIVE HIGHEST PAID EMPLOYEES’ EMOLUMENTS

The five highest paid employees during the year included two directors (2005 – two), details of whose emoluments are set out in Note 8 to the financial statements. Details of the emoluments of the remaining three (2005 – three) non-director, highest paid employees for the year are as follows:

Basic salaries, housing and other allowances and benefits in kind Bonuses paid and payable Retirement benefits costs	Group 2006 2005 HK$’000 HK$’000 3,282 3,912 31,860 7,142 81 81 35,223 11,135	Group 2006 2005 HK$’000 HK$’000 3,282 3,912 31,860 7,142 81 81 35,223 11,135
		11,135

• 73 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Emoluments bands(HK$): 1,500,001 – 2,000,000 3,000,001 – 3,500,000 5,000,001 – 5,500,000 6,000,001 – 6,500,000 11,000,001 – 11,500,000 19,000,001 – 19,500,000	Group 2006 2005 Number of Number of employees employees – 1 – 1 1 – – 1 1 – 1 – 3 3	Group 2006 2005 Number of Number of employees employees – 1 – 1 1 – – 1 1 – 1 – 3 3
		3

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 administration expenses, in accordance with the rules of the schemes.

During the year, there were no forfeited employer contributions under the MPF schemes utilised to reduce the amount of employer contributions or for payments of administrative expenses (2005 – HK$369,000). The amounts of forfeited voluntary contributions available to offset future employer contributions against the above schemes were not material at the year end. The retirement benefits scheme costs charged to the consolidated profit and loss account represent employer contributions paid and payable by the Group to the schemes and amounted to HK$2,746,000 (2005 – HK$2,434,000).

11. FINANCE COSTS

Interest on bank and other borrowings wholly repayable within five years _Less:_Interest capitalised	Group 2006 2005 HK$’000 HK$’000 53,486 7,363 (4,422) – 49,064 7,363	Group 2006 2005 HK$’000 HK$’000 53,486 7,363 (4,422) – 49,064 7,363
		7,363

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

• 74 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

12. TAX

Hong Kong: Charge for the year Underprovision/(Overprovision) in prior years Deferred_(Note 30) Overseas: Charge for the year Underprovision/(Overprovision) in prior years Deferred(Note 30)_ Total charge for the year	Group 2006 2005 HK$’000 HK$’000 1,435 639 2,269 (11) 1,179 2,137 4,883 2,765 4,207 6,446 919 (232) 36,966 6,054 42,092 12,268 46,975 15,033

Hong Kong profits tax has been provided at the rate of 17.5 per cent. (2005 – 17.5 per cent.) on the estimated assessable profits arising in Hong Kong during the year. Taxes on profits assessable elsewhere have been calculated on the estimated assessable profits for the year at the tax rates prevailing in the countries/jurisdictions in which the Group operates based on existing legislation, interpretations and practices in respect thereof.

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

Profit before tax
Tax at the statutory tax rate of 17.5 per cent.
(2005 – 17.5 per cent.)
Effect of different tax rates in other jurisdictions
Adjustments in respect of current tax of previous years
Profits and losses attributable to jointly controlled entities
and associates
Income not subject to tax
Expenses not deductible for tax
Tax losses utilised from previous years
Tax losses not recognised
Tax charge at the Group’s effective rate of 10 per cent.
(2005 – 12 per cent.)

Group
2006
2005
HK$’000
HK$’000
463,534
125,753
81,118
22,007
(20,037)
(5,694)
3,188
(243)
1,165
520
(16,489)
(16,585)
2,257
5,335
(17,183)
–
12,956
9,693
46,975
15,033

For the companies operated in Republic of Singapore and Macau, corporate taxes have been calculated on the estimated assessable profits for the year at the rate of 20 per cent. and 12 per cent. (2005 – 20 per cent. and 12 per cent.), respectively.

The share of tax credit attributable to associates amounting to HK$19,159,000 (2005 – tax charge of HK$1,037,000) is included in “Share of results of associates” on the face of the consolidated profit and loss account.

• 75 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

13. PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

The consolidated profit attributable to equity holders of the Company for the year included a loss of HK$34,676,000 (2005 – profit of HK$4,715,000) which has been dealt with in the financial statements of the Company as set out in Note 32 to the financial statements.

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

(a) Basic earnings per share

Basic earnings per share is calculated based on (i) the consolidated profit for the year attributable to equity holders of the Company of HK$391,472,000 (2005 – HK$111,761,000); and (ii) the weighted average number of 1,346,829,000 ordinary shares (2005 – 1,346,829,000 ordinary shares) in issue during the year.

(b) Diluted earnings per share

No diluted earnings per share is presented for the years ended 31st December, 2006 and 2005 as there were no dilutive potential ordinary shares during these years.

15. DISTRIBUTIONS

Interim, declared and paid, of HK1.5 cents (2005 – HK1.5 cents) per ordinary share Final, proposed, of HK5 cents (2005 – HK3 cents, paid) per ordinary share	Group and 2006 HK$’000 20,202 67,341 87,543	Company 2005 HK$’000 20,202 40,405
		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.

• 76 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. GOODWILL

Group

At 1st January, 2005: Cost Accumulated impairment Net carrying amount Cost at 1st January, 2005, net of accumulated impairment Impairment during the year At 31st December, 2005 At 1st January, 2006 and 31st December, 2006: Cost Accumulated impairment Net carrying amount	HK$’000 61,027 (3,330
	57,697

	57,697 (412
	57,285

	61,027 (3,742
	57,285

Impairment testing of goodwill

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

The recoverable amount of the banking business cash-generating unit is determined based on a value in use calculation using cash flow projections based on financial budgets approved by senior management covering a five-year period. The discount rate applied to the cash flow projection is 5 per cent. (2005 – 4.4 per cent.). The growth rate used to extrapolate the cash flows of the banking business beyond the five-year period is assumed to be nil.

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

		2006	2005
		HK$’000	HK$’000
Carrying	amount of goodwill	57,285	57,285

• 77 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

17. FIXED ASSETS

Group

2006 Cost: At 1st January, 2006 Additions during the year Disposals during the year Disposal of subsidiaries Exchange adjustments At 31st December, 2006 Accumulated depreciation: At 1st January, 2006 Provided for the year Disposals during the year Disposal of subsidiaries Exchange adjustments At 31st December, 2006 Net book value: At 31st December, 2006 2005 Cost: At 1st January, 2005 Additions during the year Disposals during the year Exchange adjustments At 31st December, 2005 Accumulated depreciation: At 1st January, 2005 Provided for the year Exchange adjustments At 31st December, 2005 Net book value: At 31st December, 2005	Leasehold improvements, furniture, fixtures, Leasehold equipment land and and motor buildings vehicles HK$’000 HK$’000 25,047 75,024 – 5,617 – (236) – (1,772) – 944 25,047 79,577 522 49,956 250 6,738 – (169) – (540) – 424 772 56,409 24,275 23,168 25,047 57,952 – 17,809 – (48) – (689) 25,047 75,024 271 45,752 251 4,362 – (158) 522 49,956 24,525 25,068	Total HK$’000 100,071 5,617 (236) (1,772) 944 104,624 50,478 6,988 (169) (540) 424 57,181 47,443 82,999 17,809 (48) (689) 100,071 46,023 4,613 (158) 50,478 49,593

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

• 78 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Company

	Furniture, fixtures,
	equipment
	and motor vehicles
2006	HK$’000
Cost:
At 1st January, 2006	4,571
Additions during the year	2,544
At 31st December, 2006	7,115
Accumulated depreciation:
At 1st January, 2006	1,882
Provided for the year	1,263
At 31st December, 2006	3,145
Net book value:
At 31st December, 2006	3,970
2005
Cost:
At 1st January, 2005	3,300
Additions during the year	1,271
At 31st December, 2005	4,571
Accumulated depreciation:
At 1st January, 2005	1,165
Provided for the year	717
At 31st December, 2005	1,882
Net book value:
At 31st December, 2005	2,689

• 79 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

18. INVESTMENT PROPERTIES

Medium term leasehold land and buildings situated in Hong Kong: Balance at beginning of year Fair value adjustments Balance at end of year Long term leasehold land and buildings situated in Hong Kong: Balance at beginning of year Fair value adjustments Balance at end of year Medium term leasehold land and buildings situated outside Hong Kong: Balance at beginning of year Additions during the year Fair value adjustments Balance at end of year Freehold land and buildings situated outside Hong Kong: Balance at beginning of year Additions during the year Fair value adjustments Exchange adjustments Balance at end of year Total	Group 2006 2005 HK$’000 HK$’000 16,800 14,800 370 2,000 17,170 16,800 84,118 73,843 6,405 10,275 90,523 84,118 312,000 – 4,422 250,172 37,578 61,828 354,000 312,000 8,605 7,501 469,221 – 162,923 681 33,814 423 674,563 8,605 1,136,256 421,523	Group 2006 2005 HK$’000 HK$’000 16,800 14,800 370 2,000 17,170 16,800 84,118 73,843 6,405 10,275 90,523 84,118 312,000 – 4,422 250,172 37,578 61,828 354,000 312,000 8,605 7,501 469,221 – 162,923 681 33,814 423 674,563 8,605 1,136,256 421,523
		16,800
		73,843 10,275
		84,118
		– 250,172 61,828
		312,000
		7,501 – 681 423
		8,605
		421,523

Based on professional valuations as at 31st December, 2006 made by Mr. Jonathan Miles Foxall, a chartered surveyor and a director of certain subsidiaries of the Company, the investment properties in Hong Kong were revalued on an open market, existing use basis at HK$107,693,000 (2005 – HK$100,918,000).

Based on professional valuations as at 31st December, 2006 made by Professional Asset Valuers, Incorporated, Savills (Macau) Limited and Savills (Singapore) Pte Limited, the investment properties situated outside Hong Kong were revalued on an open market, existing use basis at HK$1,028,563,000 (2005 – HK$320,605,000).

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

• 80 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

19. PROPERTIES UNDER DEVELOPMENT

Land and buildings situated outside Hong Kong, at cost: Balance at beginning of year Additions during the year Exchange adjustments Balance at end of year Land and buildings held under the following lease terms: Leasehold_(Note)_ Freehold	Group 2006 2005 HK$’000 HK$’000 105,096 99,767 47,384 9,514 7,635 (4,185) 160,115 105,096 98,121 69,795 61,994 35,301 160,115 105,096	Group 2006 2005 HK$’000 HK$’000 105,096 99,767 47,384 9,514 7,635 (4,185) 160,115 105,096 98,121 69,795 61,994 35,301 160,115 105,096
		105,096

		69,795 35,301
		105,096

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

20. INTERESTS IN ASSOCIATES

Share of net assets in unlisted investments Goodwill on acquisition less impairment Due from associates Due to associates Provisions for impairment losses	Group 2006 2005 HK$’000 HK$’000 1,700,144 184,804 1,759 1,759 298,624 5,060 (22,175) – 1,978,352 191,623 (16,388) (16,388) 1,961,964 175,235	Group 2006 2005 HK$’000 HK$’000 1,700,144 184,804 1,759 1,759 298,624 5,060 (22,175) – 1,978,352 191,623 (16,388) (16,388) 1,961,964 175,235
		191,623 (16,388)
		175,235

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

Cost:

Cost:
Balance at beginning of year and at end of year Accumulated impairment: Balance at beginning of year Impairment provided for the year Balance at end of year Net carrying amount at end of year	9,195 7,436 – 7,436 1,759	9,195
		6,890 546
		7,436
		1,759

The balance as at 31st December, 2006 included the Group’s interest in Lippo ASM Asia Property LP (“LAAP”), a property fund which carries the objective of investing in real estates in the East Asia region, of approximately HK$1,639 million (2005 – HK$151 million). In May 2006, LAAP participated in a joint venture to invest in Overseas Union Enterprise Limited, a listed company in Singapore principally engaged in property investments and hotel operations.

• 81 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

Assets Liabilities Revenues Profit/(Loss)	Group 2006 2005 HK$’000 HK$’000 11,495,246 308,190 (5,603,360) (74,972 1,222,846 251,846 165,614 (1,676

21. INTERESTS IN JOINTLY CONTROLLED ENTITIES

Share of net assets in unlisted investments Goodwill on acquisition Due from jointly controlled entities	Group 2006 2005 HK$’000 HK$’000 1,243 3,974 1,324 1,324 46,732 7,317 49,299 12,615	Group 2006 2005 HK$’000 HK$’000 1,243 3,974 1,324 1,324 46,732 7,317 49,299 12,615
		12,615

As at 31st December, 2006, the balances with the jointly controlled entities included a loan of HK$3,988,000, which is secured by certain shares of a jointly controlled entity, bears interest at US dollar prime rate plus 2 per cent. per annum and has no fixed terms of repayment. The remaining balances with the jointly controlled entities are unsecured, interest-free and have no fixed terms of repayment. As at 31st December, 2005, the balances with the jointly controlled entities were unsecured, interest-free and had no fixed terms of repayment. The carrying amounts of the balances are approximate to their fair values.

• 82 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Share of the jointly controlled entities’ assets and liabilities: Current assets Non-current assets Current liabilities Non-current liabilities Net assets Share of the jointly controlled entities’ results: Turnover Total expenses Loss after tax Share of the jointly controlled entities’ capital commitments	Group 2006 2005 HK$’000 HK$’000 9,671 5,043 47,330 8,654 (9,522) (1,111 – (1,936 47,479 10,650 912 – (3,556) (423 (2,644) (423 307,713 2,042	Group 2006 2005 HK$’000 HK$’000 9,671 5,043 47,330 8,654 (9,522) (1,111 – (1,936 47,479 10,650 912 – (3,556) (423 (2,644) (423 307,713 2,042
		10,650
		– (423
		(423

		2,042

22. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Financial assets stated at fair value: Equity securities listed in Hong Kong Unlisted equity securities Unlisted investment funds Financial assets stated at cost: Unlisted equity securities Unlisted debt securities Provision for impairment losses _Less:_Amount classified under current portion Non-current portion	Group 2006 2005 HK$’000 HK$’000 – 262,666 – 43,854 – 306,520 94,442 74,036 94,442 380,556 79,166 74,004 11,536 10,862 (82,275) (76,478) 8,427 8,388 102,869 388,944 – (213,896) 102,869 175,048	Company 2006 2005 HK$’000 HK$’000 – 48,770 – – – 48,770 – – – 48,770 – – 3,165 3,165 – – 3,165 3,165 3,165 51,935 – – 3,165 51,935

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

• 83 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

An analysis of the issuers of available- for-sale financial assets is as follows: Equity securities: Corporate entities Debt securities: Club debenture Corporate entities	Group 2006 2005 HK$’000 HK$’000 79,166 380,524 3,165 3,165 8,371 7,697 11,536 10,862	Company 2006 2005 HK$’000 HK$’000 – 48,770 3,165 3,165 – – 3,165 3,165	Company 2006 2005 HK$’000 HK$’000 – 48,770 3,165 3,165 – – 3,165 3,165

			3,165 –
			3,165

During the year, the gross gain of the Group’s available-for-sale financial assets recognised directly in equity amounted to HK$26,672,000 (2005 – HK$85,636,000), of which HK$87,288,000 (2005 – Nil) was removed from equity and recognised in the consolidated profit and loss account during the year.

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

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

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

During the year, the Directors reviewed the carrying amount of certain unlisted available-forsale financial assets with reference to their business performances and the profit projections prepared by the investees’ management. An impairment loss of HK$5,797,000 (2005 – HK$53,757,000) has been charged to the consolidated profit and loss accounts.

• 84 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

23. HELD-TO-MATURITY FINANCIAL ASSETS

Debt securities, at amortised cost: Listed overseas Market value of listed debt securities	Group 2006 2005 HK$’000 HK$’000 9,582 9,604 10,444 11,019	Group 2006 2005 HK$’000 HK$’000 9,582 9,604 10,444 11,019

		11,019

The debt securities have effective interest rates of 9 per cent. (2005 – 9 per cent.) per annum.

An analysis of the issuers of held-to-maturity financial
assets is as follows:
Banks and other financial institutions	9,582	9,604

24. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Held for trading: Equity securities: Listed in Hong Kong Listed overseas Debt securities: Listed in Hong Kong Listed overseas Unlisted Investment funds: Listed in Hong Kong Listed overseas Unlisted Other: Unlisted Designated as financial assets at fair value through profit or loss_(Note)_: Unlisted investment funds _Less:_Amount classified under current portion Non-current portion	Group 2006 2005 HK$’000 HK$’000 56,293 64,425 6,731 68,275 63,024 132,700 – 1,967 9,056 162,143 – 84,808 9,056 248,918 – 25 46,030 50,913 230,731 131,708 276,761 182,646 5,813 53,649 354,654 617,913 466,371 268,753 821,025 886,666 (821,025) (617,913) – 268,753	Company 2006 2005 HK$’000 HK$’000 14,200 38,605 4,245 6,523 18,445 45,128 – – – 4,454 – 54,308 – 58,762 – – – 4,258 – – – 4,258 – – 18,445 108,148 – – 18,445 108,148 (18,445) (108,148 – –	Company 2006 2005 HK$’000 HK$’000 14,200 38,605 4,245 6,523 18,445 45,128 – – – 4,454 – 54,308 – 58,762 – – – 4,258 – – – 4,258 – – 18,445 108,148 – – 18,445 108,148 (18,445) (108,148 – –
			45,128
			– 4,454 54,308
			58,762
			– 4,258 –
			4,258
			–
			108,148 –
			108,148 (108,148
			–

• 85 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

An analysis of the issuers of financial assets at fair value through profit or loss is as follows: Equity securities: Banks and other financial institutions Corporate entities Debt securities: Central governments and central banks Public sector entities Banks and other financial institutions Corporate entities	Group 2006 2005 HK$’000 HK$’000 – 13,266 63,024 119,434 63,024 132,700 – 9,289 – 4,397 – 93,431 9,056 141,801 9,056 248,918	Company 2006 2005 HK$’000 HK$’000 – – 18,445 45,128 18,445 45,128 – – – – – 22,504 – 36,258 – 58,762	Company 2006 2005 HK$’000 HK$’000 – – 18,445 45,128 18,445 45,128 – – – – – 22,504 – 36,258 – 58,762
			45,128

			– – 22,504 36,258
			58,762

• 86 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

25. LOANS AND ADVANCES

The loans and advances to customers of the Group have effective interest rates ranging from 3 per cent. to 18 per cent. (2005 – 3.5 per cent. to 18 per cent.) per annum. The carrying amounts of loans and advances are approximate to their fair values.

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

Balance at beginning of year Allowance for bad and doubtful debts Impairment allowance released Balance at end of year	Group 2006 2005 HK$’000 HK$’000 3,000 5,140 85 2,910 (89) (5,050 2,996 3,000	Group 2006 2005 HK$’000 HK$’000 3,000 5,140 85 2,910 (89) (5,050 2,996 3,000
		3,000

26. DEBTORS, PREPAYMENTS AND DEPOSITS

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

Outstanding balances with ages: Repayable on demand Within 30 days Between 31 and 60 days Between 61 and 90 days	Group 2006 2005 HK$’000 HK$’000 45,809 55,282 39,602 78,903 969 295 184 157 86,564 134,637	Group 2006 2005 HK$’000 HK$’000 45,809 55,282 39,602 78,903 969 295 184 157 86,564 134,637
		134,637

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

• 87 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

27. BANK AND OTHER BORROWINGS

Bank loans: Secured_(Note (a)) Unsecured Other borrowings: Unsecured(Note (b))_ _Less:_Amount classified under current portion Non-current portion Bank loans and other borrowings by currency: Hong Kong dollar Singapore dollar United States dollar Bank loans repayable: Within one year In the second year In the third to fifth years, inclusive Other borrowings repayable: Within one year	Group 2006 2005 HK$’000 HK$’000 594,078 25,000 10,000 – 604,078 25,000 885,495 – 1,489,573 25,000 (942,205) (25,000) 547,368 – 1,105,495 25,000 337,368 – 46,710 – 1,489,573 25,000 56,710 25,000 220,965 – 326,403 – 604,078 25,000 885,495 –	Company 2006 2005 HK$’000 HK$’000 60,000 – – – 60,000 – 885,495 – 945,495 – (885,495) – 60,000 – 945,495 – – – – – 945,495 – – – 60,000 – – – 60,000 – 885,495 –	Company 2006 2005 HK$’000 HK$’000 60,000 – – – 60,000 – 885,495 – 945,495 – (885,495) – 60,000 – 945,495 – – – – – 945,495 – – – 60,000 – – – 60,000 – 885,495 –
			– –
			– –
			–

			– – –
			–

			– – –
			–

			–

The carrying amounts of the Group’s bank and other borrowings are approximate to their fair values and bear interest at floating rates ranging from 4.7 per cent. to 6.1 per cent. (2005 – 5.3 per cent. to 5.5 per cent.) per annum.

Note:

(a) The bank loans as at 31st December, 2006 were secured by first legal mortgages over certain investment properties and certain securities of the Group with carrying amounts of HK$1,109,112,000 and HK$46,710,000, respectively. The bank loans as at 31st December, 2005 were secured by certain securities owned by the margin clients of the Group.
(b) The Group’s other borrowings comprise of loans advanced from Lippo Limited and Lippo China Resources Limited, intermediate holding companies of the Company, of HK$248,126,000 and HK$637,369,000 respectively, which are repayable on or before 31st December, 2007.

• 88 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

28. CREDITORS, ACCRUALS AND DEPOSITS RECEIVED

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

Outstanding balances with ages: Repayable on demand Within 30 days	Group 2006 2005 HK$’000 HK$’000 637,860 495,639 108,336 91,427 746,196 587,066	Group 2006 2005 HK$’000 HK$’000 637,860 495,639 108,336 91,427 746,196 587,066
		587,066

The outstanding balances that are repayable on demand include client payables relating to cash balances held on trust for the customers in respect of the Group’s securities broking business. As at 31st December, 2006, total client trust bank balances amounted to HK$582,905,000 (2005 – HK$444,460,000).

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

The current, fixed, savings and other deposits of customers attributable to banking operation have effective interest rates ranging from 2.5 per cent. to 5.2 per cent. (2005 – 0.3 per cent. to 4.2 per cent.) per annum.

• 89 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

30. DEFERRED TAX

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

Deferred tax liabilities

Group

Depreciation
Fair value
allowance in
gains on
excess of
available-for-
related
Revaluation sale financial
2006
depreciation of properties
assets
HK$’000
HK$’000
HK$’000
At 1st January, 2006
193
10,770
5,026
Deferred tax charged/(credited)
to the profit and loss account
during the year_(Note 12)
(10)
38,155
–
Deferred tax debited to equity
during the year(Note 32)
–
–
2,921
Exchange adjustments
5
1,137
10
At 31st December, 2006
188
50,062
7,957
2005
At 1st January, 2005
–
1,234
2,898
Deferred tax charged/(credited)
to the profit and loss account
during the year(Note 12)
193
9,536
(1,538)
Deferred tax debited to equity
during the year(Note 32)_
–
–
3,670
Exchange adjustments
–
–
(4)
At 31st December, 2005
193
10,770
5,026

Total
HK$’000
15,989
38,145
2,921
1,152
58,207
4,132
8,191
3,670
(4)
15,989

At 31st December, 2006, there were no significant unrecognised deferred tax liabilities (2005 – Nil) for taxes that would be payable on the unremitted earnings of certain of the Group’s subsidiaries, jointly controlled entities or associates as the Group had no liability to additional tax should such amounts be remitted.

• 90 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Deferred tax assets

The Group has tax losses arising in Hong Kong of HK$128,619,000 (2005 – HK$178,468,000) that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses at the balance sheet date due to the unpredictability of future profit streams.

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

31. SHARE CAPITAL

Authorised: 2,000,000,000 (2005 – 2,000,000,000) ordinary shares of HK$1.00 each Issued and fully paid: 1,346,829,094 (2005 – 1,346,829,094) ordinary shares of HK$1.00 each	Group and Company 2006 2005 HK$’000 HK$’000 2,000,000 2,000,000 1,346,829 1,346,829	Group and Company 2006 2005 HK$’000 HK$’000 2,000,000 2,000,000 1,346,829 1,346,829

		1,346,829

• 91 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

32. RESERVES

Group

Share premium account HK$’000 At 1st January, 2005 50,988 Net fair value gain on available-for-sale financial assets – Deferred tax arising from net fair value gain on available-for-sale financial assets_(Note 30) – Transfer of reserves – Exchange realignments – Issue of shares by subsidiaries to minority shareholders – Advances from minority shareholders of a subsidiary – Changes in interests in subsidiaries – Profit/(Loss) for the year – 2004 final distribution, declared and paid – 2005 interim distribution, declared and paid – At 31st December, 2005 and 1st January, 2006 50,988 Net fair value gain on available-for-sale financial assets – Deferred tax arising from net fair value gain on available- for-sale financial assets (Note 30)_ – Derecognition of available- for-sale financial assets – Share of reserves of associates and jointly controlled entities – Transfer of reserves – Exchange realignments – Issue of shares by subsidiaries to minority shareholders – Advances from minority shareholders of subsidiaries – Acquisition of shares in a subsidiary from a minority shareholder – Changes in interests in subsidiaries – Profit for the year – 2005 final distribution, declared and paid – 2006 interim distribution, declared and paid – At 31st December, 2006 50,988	Capital redemption reserve (Note (c)) HK$’000 11,760 – – – – – – – – – – 11,760 – – – – – – – – – – – – – 11,760	Legal reserve (Note (d)) HK$’000 2,053 – – 981 – – – – – – – 3,034 – – – – 926 – – – – – – – – 3,960	Regulatory reserve (Note (e)) HK$’000 – – – 1,169 – – – – – – – 1,169 – – – – 95 – – – – – – – – 1,264	Investment Distributable Exchange revaluation reserves equalisation reserve (Note (b)) reserve HK$’000 HK$’000 HK$’000 – 1,299,809 (10,257 ) 85,546 – – (3,670 ) – – – (2,150 ) – – – (5,196 ) – – – – – – – – – – 111,761 – – (40,405 ) – – (20,202 ) – 81,876 1,348,813 (15,453 ) 26,669 – – (2,921 ) – – (87,288 ) – – 18,624 – 54,344 – (1,021 ) – – – 23,095 – – – – – – – – – – – – – 391,472 – – (40,405 ) – – (20,202 ) – 36,960 1,678,657 61,986	Total HK$’000 1,354,353 85,546 (3,670 ) – (5,196 ) – – – 111,761 (40,405 ) (20,202 ) 1,482,187 26,669 (2,921 ) (87,288 ) 72,968 – 23,095 – – – – 391,472 (40,405 ) (20,202 ) 1,845,575	Minority interests HK$’000 30,204 90 – – 44 6,128 870 (4,216 ) (1,041 ) – – 32,079 3 – – – – 891 402 41,384 (258 ) (303 ) 25,087 – – 99,285

• 92 •

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FINANCIAL INFORMATION OF THE GROUP

Company

At 1st January, 2005 Net fair value gain on available- for-sale financial assets Profit for the year_(Note 13) 2004 final distribution, declared and paid 2005 interim distribution, declared and paid At 31st December, 2005 and 1st January 2006 Derecognition of available-for-sale financial assets Loss for the year(Note 13)_ 2005 final distribution, declared and paid 2006 interim distribution, declared and paid At 31st December, 2006	Share premium account HK$’000 50,988 – – – – 50,988 – – – – 50,988	Capital redemption reserve (Note (c)) HK$’000 11,760 – – – – 11,760 – – – – 11,760	Investment Distributable revaluation reserves reserve (Note (b)) HK$’000 HK$’000 – 1,261,984 6,604 – – 4,715 – (40,405) – (20,202) 6,604 1,206,092 (6,604) – – (34,676) – (40,405) – (20,202) – 1,110,809	Total HK$’000 1,324,732 6,604 4,715 (40,405) (20,202) 1,275,444 (6,604) (34,676) (40,405) (20,202) 1,173,557

Note:

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

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

(b) Distributable reserves of the Group at 31st December, 2006 comprise retained profits of HK$432,599,000 (2005 – HK$42,148,000) and the remaining balance arising from the Cancellation of HK$1,246,058,000 (2005 – HK$1,306,665,000). Included in the distributable reserves of the Group at 31st December, 2006 was an amount of proposed final distribution for the year then ended of HK$67,341,000 (2005 – HK$40,405,000) declared after the balance sheet date.

Distributable reserves of the Company at 31st December, 2006 comprise contributed surplus of HK$134,329,000 (2005 – HK$134,329,000), accumulated losses of HK$269,578,000 (2005 – HK$234,902,000) and the remaining balance arising from the Cancellation of HK$1,246,058,000 (2005 – HK$1,306,665,000). Included in the distributable reserves of the Company at 31st December, 2006 was an amount of proposed final distribution for the year then ended of HK$67,341,000 (2005 – HK$40,405,000) declared after the balance sheet date.

• 93 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(c) The capital redemption reserve is not available for distribution to shareholders.
(d) The legal reserve represents the part of reserve generated by a banking subsidiary of the Company which may only be distributable in accordance with certain limited circumstances prescribed by the statute of the country in which the subsidiary operates.
(e) The regulatory reserve made under HKAS 30 represents the part of reserve generated by a banking subsidiary of the Company arising from the difference between the impairment allowance made under HKAS 39 and for regulatory purpose.

33. INTERESTS IN SUBSIDIARIES

Unlisted shares, at cost Due from subsidiaries Due to subsidiaries Provisions for impairment losses	Company 2006 2005 HK$’000 HK$’000 44,953 44,953 3,756,546 2,497,693 (285,986) (181,537) 3,515,513 2,361,109 (103,569) (103,569) 3,411,944 2,257,540

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

• 94 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

34. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

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

Note
Profit before tax
Adjustments for:
Share of results of associates
Share of results of jointly controlled entities
Loss/(Gain) on disposal of:
Items of fixed assets
7
Available-for-sale financial assets
Subsidiaries
Gain on changes in interests in subsidiaries
Allowance/(Write-back of allowance) for
bad and doubtful debts
Provisions for impairment losses on:
Available-for-sale financial assets
7
Associates
Goodwill
Net fair value gain on financial assets at
fair value through profit or loss
Fair value gains on investment properties
Interest expenses
11
Interest income
Dividend income
Depreciation
7
Decrease in financial assets at fair value through
profit or loss
Decrease in held-to-maturity financial assets
Increase in property held for sale
Decrease/(Increase) in loans and advances
Decrease/(Increase) in debtors, prepayments
and deposits
Increase in creditors, accruals and deposits
received
Increase/(Decrease) in current, fixed, savings
and other deposits of customers
Increase in client trust bank balances
Cash generated from operations

Group
2006
2005
HK$’000
HK$’000
463,534
125,753
4,014
2,548
2,644
423
67
48
(86,238)
(8,347)
(848)
295
(303)
(4,216)
(1,271)
30,896
5,797
53,757
–
5,859
–
412
(216,728)
(70,370)
(207,276)
(74,784)
49,064
7,363
(48,126)
(52,672)
(3,062)
(21,630)
6,988
4,613
(31,744)
(52)
282,656
314,974
22
39
(6,782)
(2,301)
(28,419)
22,643
1,056
(19,003)
30,424
89,254
188,778
(898)
(138,445)
(55,337)
297,546
349,319

• 95 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Disposal of subsidiaries


	2006	2005
	HK$’000	HK$’000
Net assets disposed of:
Fixed assets	1,232	–
Cash and bank balances	54,634	–
Debtors, prepayments and deposits	349	11,393
Creditors and accruals	(1,077)	–
Tax payable	(39)	–
	55,099	11,393
Gain/(Loss) on disposal of subsidiaries	848	(295)
	55,947	11,098

Satisfied by:
Cash	55,660	11,098
Financial assets at fair value through profit or loss	287	–
	55,947	11,098

An analysis of net inflow of cash and cash equivalents in respect of the		disposal of
subsidiaries is as follow:
Cash consideration	55,660	11,098
Cash and bank balances disposed of	(54,634)	–
Net inflow of cash and cash equivalents in respect
of the disposal of subsidiaries	1,026	11,098

• 96 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

35. MATURITY PROFILE OF ASSETS AND LIABILITIES

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

Repayable on demand HK$’000 At 31st December, 2006 Assets Debt securities: Held-to-maturity financial assets – Available-for-sale financial assets – Financial assets at fair value through profit or loss – Loans and advances 110,599 Client trust bank balances 52,417 Treasury bills – Cash and bank balances 126,173 289,189 Liabilities Bank and other borrowings – Current, fixed, savings and other deposits of customers 107,747 107,747 At 31st December, 2005 Assets Debt securities: Held-to-maturity financial assets – Available-for-sale financial assets – Financial assets at fair value through profit or loss – Loans and advances 133,983 Client trust bank balances 21,150 Treasury bills – Cash and bank balances 98,303 253,436 Liabilities Bank and other borrowings – Current, fixed, savings and other deposits of customers 43,601 43,601	3 months or less HK$’000 – – – 116,151 530,488 194,970 237,314 1,078,923 56,710 194,458 251,168 – – – 62,255 423,310 15,520 523,437 1,024,522 25,000 71,643 96,643	1 year or less but over 3 months HK$’000 – – – 46,574 – – – 46,574 885,495 3,316 888,811 – – 10,177 44,260 – – – 54,437 – 1,499 1,499	5 years or less but over 1 year HK$’000 – 8,371 – 10,740 – – – 19,111 547,368 – 547,368 – 7,697 159,103 12,642 – – – 179,442 – – –	After 5 years HK$’000 9,582 – 976 16,326 – – – 26,884 – – – 9,604 – 71,496 17,333 – – – 98,433 – – –	Undated HK$’000 – 3,165 8,080 – – – – 11,245 – – – – 3,165 8,142 – – – – 11,307 – – –	Total HK$’000 9,582 11,536 9,056 300,390 582,905 194,970 363,487
						1,471,926

						1,489,573 305,521
						1,795,094

						9,604 10,862 248,918 270,473 444,460 15,520 621,740
						1,621,577

						25,000 116,743
						141,743

• 97 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

36. CONTINGENT LIABILITIES

Group

As at 31st December, 2006, the Group had contingent liabilities relating to its banking subsidiary of HK$29,564,000 (2005 – HK$29,953,000) comprising guarantees and other endorsements of HK$17,172,000 (2005 – HK$11,785,000) and liabilities under letters of credit on behalf of customers of HK$12,392,000 (2005 – HK$18,168,000).

Company

As at 31st December, 2006, guarantees provided by the Company in respect of banking facilities granted to its subsidiaries amounted to HK$727,394,000 (2005 – HK$257,500,000), which were utilised to an extent of HK$429,894,000 (2005 – HK$25,000,000).

37. OPERATING LEASE ARRANGEMENTS

(a) As lessor

The Group leases its investment properties under operating lease arrangements with leases negotiated for terms of one to three years. The terms of the leases generally also require the tenants to pay security deposits and provide for periodic rent adjustments according to the prevailing market condition. At 31st December, 2006, 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 2006 2005 HK$’000 HK$’000 26,225 7,058 24,100 2,868 50,325 9,926	Group 2006 2005 HK$’000 HK$’000 26,225 7,058 24,100 2,868 50,325 9,926
		9,926

(b) As lessee

The Group leases certain properties under lease agreements which are non-cancellable. The leases expire on various dates until 30th November, 2008 and the leases for properties contain provision for rental adjustments. As at 31st December, 2006, 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 2006 2005 HK$’000 HK$’000 9,261 12,258 3,914 6,172 13,175 18,430	Company 2006 2005 HK$’000 HK$’000 1,961 1,016 1,389 – 3,350 1,016

• 98 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

38. CAPITAL COMMITMENTS

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


	2006	2005
	HK$’000	HK$’000
Capital commitments in respect of property, plant and equipment:
Contracted, but not provided for	41,623	59,988
Other capital commitments:
Contracted, but not provided for_(Note)_	527,024	1,471,472
	568,647	1,531,460

Note: The balance as at 31st December, 2006 included the Group’s capital commitments in respect of the formation of joint ventures for certain property projects in Republic of Singapore and the People’s Republic of China (“PRC”) of approximately HK$390 million (2005 – HK$149 million).

The balance as at 31st December, 2005 included the Group’s capital commitments in a property fund of approximately HK$1,292 million, which had been paid during the year. Details of the property fund are described in Note 20 to the financial statements.

The Company did not have any material commitments at the balance sheet date (2005 – Nil).

39. RELATED PARTY TRANSACTIONS

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

(a) During the year, Lippo Securities Holdings Limited (“LSHL”), being a wholly-owned subsidiary of the Company, paid rental expenses of HK$3,163,000 (2005 – HK$3,005,000) to Prime Power Investment Limited, being a fellow subsidiary of the Company, in respect of office premises occupied by LSHL, and the Company paid rental expenses of HK$1,588,000 (2005 – HK$1,434,000) to Porbandar Limited, being a fellow subsidiary of the Company, in respect of office premises occupied by the Company. The above rentals were determined by reference to open market rentals.
(b) During the year, LSHL and its subsidiaries (the “LSHL Group”) received commission income for dealing in listed securities in the market from Lippo China Resources Limited, being an indirect controlling shareholder of the Company, for itself and its subsidiaries, amounted to HK$27,000 (2005 – HK$181,000), Lippo Limited, being an indirect controlling shareholder of the Company, for itself and its subsidiaries, amounted to Nil (2005 – HK$4,000) and Lippo Cayman Limited, being an indirect controlling shareholder of the Company, for itself and its subsidiaries, amounted to Nil (2005 – HK$14,000). The commissions were in line with those offered by the LSHL Group to its customers.
(c) During the year, Impac Asset Management (HK) Limited, being a wholly-owned subsidiary of the Company, received investment advisory income from Lippo ASM Investment Management Limited, being an associate of the Group, amounting to HK$11,287,000 (2005 – HK$4,112,000).
(d) During the year, the Company paid finance costs to Lippo Limited and Lippo China Resources Limited of HK$8,348,000 (2005 – Nil) and HK$13,872,000 (2005 – Nil), respectively, in respect of the loans advanced to the Company. The balances of which are set out in Note 27 to the financial statements.

• 99 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(e) During the year, a wholly-owned subsidiary of the Company acquired certain financial assets at fair value through profit or loss from LAAP, being an associate of the Group, amounting to HK$277,695,000 (2005 – Nil). The acquisition price was determined by reference to fair market value.
(f) As at 31st December, 2006, the Group had balances with its associates and jointly controlled entities as set out in Note 20 and Note 21, respectively, to the financial statements.

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

40. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

(a) Credit risk

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

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

(b) Liquidity risk

• 100 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(c) Interest rate risk

Interest rate risk primarily resulted from timing differences in the repricing of interest bearing assets, liabilities and commitments. The Group’s interest rate positions arose mainly from treasury, banking and other investment activities undertaken.

(d) Foreign exchange risk

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

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

(e) Market risk

• 101 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

41. POST BALANCE SHEET EVENTS

(a) On 8th February, 2007, the Group gave notice to Ferrell Asset Management Limited (“Ferrell Management”), a discretionary investment manager of the Group in respect of a real estate fund, to terminate the discretionary management arrangement made between Ferrell Management and the Group. Due to the termination, Ferrell Management effected the redemption of the real estate fund. In March 2007, net proceed of the redemption of approximately HK$470 million was returned to the Group.
(b) On 17th March, 2006 and 27th March, 2006, the Group entered into a subscription agreement and a shareholders’ agreement, respectively, in respect of an investment in and formation of a joint venture (the “Joint Venture”). Pursuant to the subscription agreement, the Group had subscribed for 45 per cent. of the issued share capital of the Joint Venture for a consideration of US$4,500. Pursuant to the shareholders’ agreement, the Joint Venture would acquire and hold an 86.25 per cent. equity interest in Tongren Healthcare Management Group Co., Ltd. and its subsidiaries, which are engaged in medical and healthcare related business in the PRC. The funding for acquisition would be met by shareholders’ loans in proportion to the respective equity interests of the shareholders in the Joint Venture.

As certain conditions as set out in the shareholders’ agreement were not fulfilled nor waived by the shareholders, notices were served by the Group on 20th March, 2007 to the Joint Venture that the shareholders’ agreement was terminated and to demand repayment of the shareholder’s loan. Up to the date of the notice, a shareholder’s loan of HK$99 million has been made by the Group to the Joint Venture.

42. COMPARATIVE AMOUNTS

Certain comparative amounts have been reclassified to conform with current year’s presentation. The reclassifications had no impact on the Group’s earnings for the year ended 31st December, 2005.

43. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Board of Directors on 23rd April, 2007.

• 102 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

4. INDEBTEDNESS

As at 30th September, 2007, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group (other than The Macau Chinese Bank Limited (“MCB”), a banking subsidiary of the Company) had outstanding indebtedness of approximately HK$1,635 million, comprising secured bank loans of approximately HK$1,324 million and unsecured other loans of approximately HK$311 million.

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

Save as aforesaid and apart from intra-group liabilities, the Group (other than MCB) did not, as at 30th September, 2007, 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 30th September, 2007, MCB accepts deposits from customers, banks and other financial institutions of approximately HK$147 million in the normal course of their banking business. MCB also had contingent liabilities of approximately HK$23 million, comprising guarantees and other endorsements of approximately HK$18 million and liabilities under letters of credit on behalf of customers of approximately HK$5 million, as at 30th September, 2007.

Save as aforesaid, MCB did not, as at 30th September, 2007, have any outstanding debt securities, whether issued and outstanding, authorised or otherwise created but unissued, term loans, whether guaranteed, unguaranteed, secured (whether the security is provided by the issuer or by third parties) or unsecured, other borrowings or indebtedness in the nature of borrowing including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments, whether guaranteed, unguaranteed, secured or unsecured borrowings or debt, mortgages, charges, guarantees or other material contingent liabilities.

The Directors confirm that, save as disclosed above, there are no material changes in the indebtedness and contingent liabilities of the Group since 30th September, 2007.

• 103 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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).

6. MATERIAL CHANGE

The Directors confirm that, as at the Latest Practicable Date, there are no material adverse changes in the financial or trading position or prospect of the Group since 31st December, 2006, the date to which the latest published audited financial statements of the Group were made up.

7. FINANCIAL AND TRADING PROSPECTS

Hong Kong’s economy gathered strong momentum in 2007. The Asia region also sustained healthy economic growth. The Group achieved encouraging results in the first half of 2007 with good progress on all major core businesses. Property investment and development sector, being one of the major business streams of the Group, performed well and sustained impressive returns to the Group. Meanwhile, the Group continued to strengthen its core businesses and explore overseas investment markets. For the six months ended 30th June, 2007, the Group’s profit attributable to shareholders increased sharply to HK$687 million (2006 – HK$129 million).

The Group’s earnings from property investment and development continued to benefit from the prosperous property market in Singapore. In June 2007, the Group disposed of its entire interest in a joint venture, which held twenty-two strata lots in a commercial building located at 79 Anson Road in Singapore (the “Anson Road Properties”) at a net profit of HK$102 million. Given the increase in Singapore property values, the disposal enabled the Group to realise the gain from its investment in the Anson Road Properties.

The Group’s investment in a property fund (the “Property Fund”), carrying the objective of investing in real estates in the East Asia region, registered remarkable results for the period. The Property Fund’s investment in Overseas Union Enterprise Limited (“OUE”), a listed company in Singapore principally engaged in hotel operations and property investments, recorded a strong growth for the period as a result of the buoyant property market and booming tourist demand in Singapore. The Group registered a share of profit of HK$491 million from the investment. Currently, OUE has six prestigious hotels, carries the “Mandarin” and “Meritus” brand, which are strategically located in various famous tourist districts of Singapore, Malaysia and China. OUE also holds a number of prime office buildings in central financial and business districts of Singapore. Meanwhile, OUE has recently participated in certain new property development and investment projects to capture the robust prime office and luxury residential property demand. It is expected that these investments have strong value appreciation potential.

• 104 •

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

On the other hand, the investment properties in Hong Kong continued to provide stable rental income to the Group during the period. With a positive outlook in both regional and local property markets, the Group recorded a total revaluation gain on investment properties in Hong Kong of HK$3 million during the period.

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

Despite turbulence over the global financial and capital markets triggered off by the sub-prime mortgage problems in the United States, the Group is optimistic about the global and regional economic prospects. The growth prospects will continue to be centered on developments in the Asia Pacific region. The operating environment of the Group remains challenging. While striving to continue to improve internal operational efficiencies, the Group will keep on refining its existing core businesses and seeking new investment opportunities with long-term growth potential. Given its own strong financial position, the Group is confident that it would be able to take advantage of new business opportunities in its pursuit of enhancing shareholders’ value.

• 105 •

APPENDIX II

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	–	–	692,262,956	692,262,956	51.4
			(Note 1)
Stephen Riady	–	–	692,262,956	692,262,956	51.4
			(Note 1)
John Luen Wai Lee	200	200	–	400	0.00
King Fai Tsui	–	50,000	–	50,000	0.00

• 106 •

APPENDIX II

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
Lippo China Resources
Limited (“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 692,262,956 ordinary Shares in, representing approximately 51.4 per cent. of, the issued share capital of the Company. Lanius Limited (“Lanius”), an associated corporation (within the meaning of Part XV of the SFO) of the Company, was the registered shareholder of 10,000,000 ordinary shares of US$1.00 each in, representing 100 per cent. of, the issued share capital of Lippo Cayman. Lanius was the trustee of a discretionary trust, of which Dr. Mochtar Riady is the founder and in accordance with whose instructions Lanius was accustomed to act. Dr. Mochtar Riady did not have any interests in the share capital of Lanius. The beneficiaries of the trust include Dr. Mochtar Riady, Mr. Stephen Riady and their respective family members including, inter alia, the minor child of Mr. Stephen Riady. Dr. Mochtar Riady as the founder and beneficiary of the trust and Mr. Stephen Riady (together with his minor child) as beneficiaries of the trust were taken to be interested in Lippo Cayman under the SFO.
As at the Latest Practicable Date, Lippo Cayman, and through its wholly-owned subsidiaries, Lippo Capital 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.

• 107 •

APPENDIX II

GENERAL INFORMATION

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

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

• 108 •

APPENDIX II

GENERAL INFORMATION

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

Note:

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

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

• 109 •

APPENDIX II

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

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

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 physically settled, cash settled or other equity derivatives of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

All the interests stated above represent long positions. Save as disclosed herein, as at 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 of the Company were taken or deemed to have under such provisions of the SFO); or (b) which were required to be entered in the register kept by the Company under Section 352 of the SFO; or (c) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code; and
(2) none of the Directors or chief executive of the Company nor their spouses or minor children (natural or adopted) were granted or had exercised any rights to subscribe for any equity or debt securities of the Company or any of its associated corporations (within the meaning of Part XV of the SFO).

Dr. Mochtar Riady is also a director of Lippo Cayman. Mr. Stephen Riady is also a director of Lanius, Lippo Cayman, Lippo and Skyscraper. 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.

• 110 •

APPENDIX II

GENERAL INFORMATION

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
Skyscraper	692,262,956	51.4
Lippo	692,262,956	51.4
Lippo Cayman	692,262,956	51.4
Lanius	692,262,956	51.4
Madam Lidya Suryawaty	692,262,956	51.4

Note:

Skyscraper, the immediate holding company of the Company, as beneficial owner, directly held 692,261,982 ordinary Shares and indirectly held, through its subsidiaries, 974 ordinary Shares in, representing in aggregate approximately 51.4 per cent. of, the issued share capital of the Company.
Lippo was an intermediate holding company of Skyscraper which 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.
Skyscraper’s interests in the shares of the Company were recorded as the interests of Lippo, Lippo Cayman, Lanius and Madam Lidya Suryawaty. The above 692,262,956 ordinary Shares in the Company related to the same block of shares that Dr. Mochtar Riady and Mr. Stephen Riady were interested, details of which are disclosed in the above section headed “Directors’ and Chief Executive’s interests and short positions in shares and underlying shares of the Company and associated corporations”.

• 111 •

APPENDIX II

GENERAL INFORMATION

(ii) Four Prosperity Holdings Limited

No. of ordinary shares

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.

(iv) Rossinis Restaurant Pte. Ltd.

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

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

(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.

• 112 •

APPENDIX II

GENERAL INFORMATION

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.

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 or may have any other conflicts of interest with the Group pursuant to the Listing Rules.

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

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

As at the Latest Practicable Date, the following were particulars of assets acquired or disposed of by, or leased to, members of the Group since 31st December, 2006, 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 10th January, 2005 that a tenancy agreement dated 10th January, 2005 was entered into between Lippo Securities Holdings Limited (“LSHL”), a wholly-owned subsidiary of the Company, and Prime Power Investment Limited (“Prime Power”), a fellow subsidiary of the Company, pursuant to which Prime Power agreed to let to LSHL of Rooms 2302-2306, 23rd Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong with a gross floor area of approximately 12,038 square feet for a term of two years from 18th January, 2005 to 17th January, 2007, both days inclusive, at a monthly

• 113 •

APPENDIX II

GENERAL INFORMATION

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. Such tenancy agreement has expired on 17th January, 2007.

(b) It was announced on 18th September, 2006 that a tenancy agreement dated 18th September, 2006 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, 2006 to 15th September, 2008, both days inclusive, at a monthly rental of HK$163,446.50, exclusive of rates, service charges and all other outgoings. Such transaction constituted a continuing connected transaction of the Group under the Listing Rules.
(c) It was announced on 29th January, 2007 that a tenancy agreement dated 29th January, 2007 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, 2007 to 17th January, 2009, both days inclusive, at a monthly rental of HK$385,216, exclusive of rates, service charges and all other outgoings. Such transaction constituted a continuing connected transaction of the Group under the Listing Rules.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group or were proposed to be acquired or disposed of by or leased to any member of the Group since 31st December, 2006, being the date to which the latest published audited consolidated financial statements of the Group were made up.

7. LITIGATION

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

• 114 •

APPENDIX II

GENERAL INFORMATION

8. 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) twenty two sale and purchase agreements dated 18th January, 2006 entered into between each of eleven subsidiaries of the Company (the “Subsidiaries”) and the respective twenty two vendors in relation to the acquisition by the Subsidiaries of a total of twenty two strata lots in the building located at 79 Anson Road, Singapore for an aggregate consideration of S$95,000,000 (equivalent to approximately HK$448,020,000). Subsequently, on 27th January, 2006, HKC Property Investment Holdings Limited, a wholly-owned subsidiary of the Company, entered into a memorandum of understanding with ASM Asia Recovery (Master) Fund in relation to, inter alia, the setting up and funding of a joint venture company to become the holding company of the Subsidiaries and certain rights amongst the parties as the shareholders of such joint venture company;
(b) a subscription agreement dated 17th March, 2006 entered into among Lifepower Limited (“Lifepower”), a wholly-owned subsidiary of the Company, Luck Healthy Group Limited (“Luck Healthy”), Kingscott Limited (“Kingscott”) and Grosswin Limited (“Grosswin”) whereby Lifepower agreed to subscribe for 45 per cent. equity interest in Grosswin at a total consideration of US$4,500 (equivalent to approximately HK$35,000). A shareholders’ agreement dated 27th March, 2006 (the “Shareholders’ Agreement”) was entered into among Lifepower, Luck Healthy, Kingscott (the “Shareholders”) and Grosswin to regulate their respective shareholders’ rights in Grosswin. Grosswin will acquire and hold 86.25 per cent. equity interest in 同仁醫療管理集團有限公司 (Tongren Healthcare Management Group Co., Ltd.). As certain conditions precedent as set out in the Shareholders’ Agreement were not fulfilled or waived by the Shareholders, notices were served by Lifepower on 20th March, 2007 to Grosswin stating that the Shareholders’ Agreement has terminated;
(c) (i) a framework agreement dated 22nd May, 2006 entered into between 北京經濟技術投資開發總公司 (Beijing Economic & Technological Investment Development Corp.) (“BETIDC”), Uchida Limited (“Uchida”, a wholly-owned subsidiary of the Company), and 北京世紀創新房地產有限公司 (INNOSTAR Real Estate Development Ltd.) (“Innostar”) whereby BETIDC agreed to, after the establishment of a joint venture company (the “JV Co.”) for the land Lot No. 4C1 development project (the “Beijing Project”) in 北京經濟技術開發區 (Beijing EconomicTechnological Development Area), list its 20 per cent. interest in the JV Co. for sale on 北京產權交易所 (China Beijing Equity Exchange) and Uchida (or a party introduced by it) agreed to submit an intention memorandum for the purchase of such 20 per cent. interest;

• 115 •

APPENDIX II

GENERAL INFORMATION

(ii) a new Chinese-foreign cooperative joint venture contract, a new framework agreement and the new articles of association entered into on 31st January, 2007 among BETIDC, Uchida and Wealtop Limited (“Wealtop”) in relation to the Beijing Project and the JV Co., whereby Wealtop agreed to participate in the Beijing Project in place of Innostar; and
(iii) a supplemental articles of association (《中外合作經營北京力寶世紀置業有限公司章程》補充協議 ), an amended and restated articles of the JV Co. (北京力寶世紀置業有限公司章程 ), a supplemental Sino-foreign cooperative joint venture contract (《北京力寶世紀置業有限公司中外合作經營合同》補充合同 ), an amended and restated Sino-foreign cooperative joint venture contract (中外合作經營合同 ) and a supplemental framework agreement, all dated 8th May, 2007, entered into among BETIDC, Uchida and Wealtop in relation to the Beijing Project and the JV Co., as a result of the prevailing PRC laws and regulations requiring the JV Co. to increase the proportion of its registered capital to total investment to 50 per cent.;
(d) a shareholders’ agreement dated 30th October, 2006 entered into between Winrider Limited, a wholly-owned subsidiary of the Company, Golden Rainbow International Limited, SUTL Realty Pte Ltd, OCBC eVenture Fund II Pte Ltd, Royall Dazzle Corporation (“RDC”) and Greenix Limited (“Greenix”) governing the relationship among the shareholders of Greenix. The tender submitted by Lippo Global Assets Limited, a wholly-owned subsidiary of Greenix, to purchase the land parcels C10 and C11 located at Sentosa Cove, Sentosa Island, Singapore (the “Sentosa Property”) with site areas of approximately 12,035.6 square metres and 10,186.6 square metres respectively for S$234,701,103 (equivalent to approximately HK$1,169,398,000) was formally accepted by Sentosa Development Corporation on 6th October, 2006. A project undertaking dated 3rd January, 2007 was entered into by the Company, Raiffeisen Zentralbank Österreich Aktiengesellschaft, SUTL Investment Pte. Ltd. and RDC (collectively, the “Undertaking Shareholders”) together with Lippo Marina Collection Pte. Ltd. (“Lippo Marina”), a wholly-owned subsidiary of Greenix, in favour of Oversea-Chinese Banking Corporation Limited pursuant to which the Undertaking Shareholders severally, based on their respective shareholding proportion, undertake to complete and cause the various stages of the development of the Sentosa Property by Lippo Marina (the “Sentosa Project”) to be completed in accordance with the construction contracts and loan facility agreement in relation to the Sentosa Project (the “Loan Agreement”) and to pay all cost overruns for completion of the Sentosa Project to the extent Lippo Marina fails to pay such costs and to cover all interest servicing obligations/cash flow deficiency of Lippo Marina and to procure and grant all necessary assistance to Lippo Marina in order to maintain its loan to collateral ratio in relation to the Loan Agreement;

• 116 •

APPENDIX II

GENERAL INFORMATION

(e) a shareholders agreement dated 24th November, 2006 entered into between Pacific Bond Limited (“Pacific Bond”), a wholly-owned subsidiary of the Company, Kusu Island Limited and Sunning Asia Limited (“Sunning Asia” which is 50 per cent. owned by Pacific Bond) governing the relationship among the shareholders of Sunning Asia. A tender submitted by Lippo Real Estate Pte. Limited, a wholly-owned subsidiary of Sunning Asia, for the collective sale of the units in No. 100, Kim Seng Road, Kim Seng Plaza in Singapore at a consideration of S$132,020,000 (equivalent to approximately HK$660,496,000) was formally accepted on 15th November, 2006;
(f) a sale and purchase agreement dated 25th May, 2007 entered into between Winus Holdings Limited, an indirect wholly-owned subsidiary of the Company, as seller and Convoy Inc. as purchaser in relation to the sale and purchase of 2,480,089 shares of US$0.01 each in the issued share capital of Advance All Enterprises Limited (“AAEL”), representing approximately 34.34 per cent. of the entire issued share capital of AAEL for a consideration of HK$85,000,000;
(g) a sale and purchase agreement dated 15th June, 2007 entered into between UPM Ltd. (“UPM”), a wholly-owned subsidiary of the Company, and Harvest Day Group Limited (“Harvest Day”) as sellers and Maximilian Realty Pte Ltd as purchaser in relation to the sale and purchase of the entire issued and paid up share capital of Grandbury Holdings Limited (“GHL”), a company whose voting share capital was held as to 90.5 per cent. and 9.5 per cent. by UPM and Harvest Day respectively with all the issued non-voting preference shares held by Harvest Day and being the holding company for eleven wholly-owned subsidiaries which are owners of a total of twenty two strata lots in the building located at 79 Anson Road, Singapore, together with the novation, to the purchaser, of all amounts outstanding under the shareholders’ loans in the aggregate sum of approximately S$35,609,000 (equivalent to approximately HK$181,285,000) made by the sellers to GHL, for an aggregate consideration of S$149,000,000 (equivalent to approximately HK$758,559,000);
(h) (i) the written letter from the vendors confirming acceptance of the tender offer submitted by the Group for the en-bloc purchase of the units in No. 53 Holland Road, Aura Park, Singapore (“Aura Park Property”) for S$55,500,000 (equivalent to approximately HK$283,383,000), and the conditions of tender and sale, pursuant to which Lippo Project Pte. Limited, a wholly-owned subsidiary of Wealthy Place Limited (“WPL”) which in turn is wholly owned by Kingtek Limited (“Kingtek”), a whollyowned subsidiary of the Company, was nominated as the purchaser of the Aura Park Property on 20th June, 2007; and
(ii) a shareholders’ agreement dated 3rd September, 2007 entered into between (1) Kingtek, (2) Highland Investment Ltd (“Highland”) and (3) WPL in relation to (a) the equity funding of WPL as the joint venture company and (b) the rights and obligations of each of Kingtek and Highland as the shareholders of WPL, pursuant to which the Group’s equity interest in WPL will be diluted from 100 per cent. to 50 per cent.;

• 117 •

APPENDIX II

GENERAL INFORMATION

(i) a framework agreement dated 12th July, 2007 entered into among Lippo Medical Holdings Limited (“Lippo Medical”), a wholly-owned subsidiary of the Company, 鳳凰醫院管理（北京）有限公司 (Phoenix Hospital Management (Beijing) Company Limited) and 中信信託投資有限責任公司 (CITIC Trust & Investment Company Limited) in relation to the establishment of 力寶鳳凰醫院管理（北京）有限公司 (Lippo-Phoenix Healthcare Management (Beijing) Limited) (the “Joint Venture”), to undertake the provision of hospital investment and hospital operation management services in the PRC. The total capital commitment of Lippo Medical in the Joint Venture will be RMB85,920,300 (equivalent to approximately HK$88,953,000); and
(j) the Agreement.

9. MISCELLANEOUS

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

10. MATERIAL ADVERSE CHANGE

The Directors confirm that, as at the Latest Practicable Date, there were no material adverse changes in the financial or trading positions of the Company since 31st December, 2006, being the date to which the latest published audited consolidated financial statements of the Group were made up.

• 118 •

APPENDIX II

GENERAL INFORMATION

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the principal place of business of the Company which is situated at 24th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong, 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, 2006 and the published unaudited consolidated interim financial statements of the Company for the six months ended 30th June, 2007;
(d) the circulars issued by the Company pursuant to the requirements set out in Chapter 14 of the Listing Rules since 31st December, 2006, being the date to which the latest published audited consolidated financial statements of the Group were made up; and
(e) the contracts referred to in this circular including the material contracts referred to in the section headed “Material Contracts” in this Appendix.

12. 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.

• 119 •

AI assistant

3SBio Inc. — Proxy Solicitation & Information Statement 2007

49981_rns_2007-10-23_78b42d63-8393-4484-b383-73dcb40ab454.pdf

HONGKONG CHINESE LIMITED 香港華人有限公司[*]

MAJOR TRANSACTION

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

HONGKONG CHINESE LIMITED 香港華人有限公司[*]

MAJOR TRANSACTION

DISPOSAL OF CERTAIN INTEREST IN THE MACAU CHINESE BANK LIMITED

INTRODUCTION

TERMS OF THE AGREEMENT

TERMS OF THE SHAREHOLDERS’ AGREEMENT

TERMS OF THE OPTION DEED

REASON FOR AND BENEFITS OF THE DISPOSAL

FINANCIAL EFFECTS OF THE DISPOSAL

INFORMATION ON WINWISE, DPL AND MCB

INFORMATION ON THE COMPANY AND LIPPO

INFORMATION ON VC AND VCFI

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, 2007

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

2. SEGMENT INFORMATION

3. REVENUE

4. GAIN/(LOSS) ON DISPOSAL OF SUBSIDIARIES

5. SHARE OF RESULTS OF ASSOCIATES/INTERESTS IN ASSOCIATES

6. PROFIT BEFORE TAX

7. TAX

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

(a) Basic earnings per share

(b) Diluted earnings per share

9. INTERIM DISTRIBUTION

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS

11. HELD-TO-MATURITY FINANCIAL ASSETS

12. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

13. LOANS AND ADVANCES

14. DEBTORS, PREPAYMENTS AND DEPOSITS

15. BANK AND OTHER BORROWINGS

16. CREDITORS, ACCRUALS AND DEPOSITS RECEIVED

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

18. SHARE CAPITAL

Share options

19. RESERVES

20. MATURITY PROFILE OF ASSETS AND LIABILITIES

21. CONTINGENT LIABILITIES

22. CAPITAL COMMITMENTS

23. RELATED PARTY TRANSACTIONS

24. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

(a) Credit risk

(b) Liquidity risk

(c) Interest rate risk

(d) Foreign exchange risk

(e) Market risk

25. POST BALANCE SHEET EVENTS

26. COMPARATIVE FIGURES

3. AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER, 2006

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. BASIS OF PREPARATION

Basis of consolidation

2.1 IMPACT OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS

(b) HKAS 39 Financial Instruments: Recognition and Measurement

(c) HK(IFRIC)-Int 4 Determining whether an Arrangement contains a Lease

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

3SBio Inc. Proxy Solicitation & Information Statement 2007