Asiasec Properties Limited - Proxy Solicitation & Information Statement 2005

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 stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Lippo China Resources Limited, you should at once hand this circular to the purchaser or transferee or to the bank, stockbroker 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.

LIPPO CHINA RESOURCES LIMITED 力寶華潤有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 156)

MAJOR TRANSACTION

SUBSCRIPTION OF INTEREST IN LIMITED PARTNERSHIP BY HONGKONG CHINESE LIMITED

28th July, 2005

			Page
Definitions . .	. . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			5
Appendix I	–	Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . .	35
Appendix II	–	Pro forma financial information of the Group . . . . . . . . . . . . . . .	99
Appendix III	–	General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	104

DEFINITIONS

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

“Advisory Council”	an advisory council of LAAP to be established as soon
	as practicable after Initial Closing with not less than
	three members to be selected from among the Limited
	Partners, to consult with the General Partner as to
	investment policies, corporate governance issues and
	method of valuation for investments of LAAP;
“ASM”	Argyle Street Management Limited, a company
	established in the British Virgin Islands with limited
	liability on 28th December, 2001;
“associates”	has the meaning ascribed to it under the Listing Rules;
“Board”	the board of Directors;
“Capital Commitment(s)”	amount(s) agreed to be contributed by the Limited
	Partners to the capital of LAAP;
“Company”	Lippo China Resources Limited力寶華潤有限公司, a
	company incorporated in Hong Kong with limited
	liability, the shares of which are listed on the Stock
	Exchange and whose shares are owned as to
	approximately 71.13 per cent. by Lippo;
“connected person(s)”	has the meaning ascribed to it under the Listing Rules;
“Director(s)”	the director(s) of the Company;
“Final Closing”	the final closing held by LAAP for the admission of
	any Limited Partner, which shall not be more than
	12 months after the Initial Closing unless the Advisory
	Council otherwise agrees;
“Final Drawdown Date”	the final date when commitments can be called from
	Limited Partners, being the fifth anniversary of the
	last day of the month of the Final Closing;
“General Partner”	LAAP General Partner Limited, a company established
	on 10th May, 2005 under the laws of the Cayman
	Islands as an indirect wholly-owned subsidiary of
	ASM, to be appointed as the general partner of LAAP;
“Group”	the Company and its subsidiaries;

– 1 –

DEFINITIONS

“HCL”	Hongkong Chinese Limited (香港華人有限公司*), a
	company incorporated in Bermuda with limited
	liability, the shares of which are listed on the Stock
	Exchange and whose shares are owned as to
	approximately 72.26 per cent. by the Company;
“HCL Group”	HCL and its subsidiaries;
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC;
“Initial Closing”	the date on which Pacific becomes a Limited Partner
	of LAAP by becoming a party to the Limited
	Partnership Agreement (which is expected to be on or
	before 31st August, 2005);
“Investment Advisor”	ImPac Asset Management (HK) Limited, a company
	incorporated in Hong Kong with limited liability on
	13th November, 1990 and an indirect wholly-owned
	subsidiary of HCL, which will provide investment
	advice to the Investment Manager and perform certain
	administrative services;
“Investment Advisor Agreement”	the investment advisor agreement to be entered into
	between the Investment Manager and the Investment
	Advisor pursuant to which the Investment Advisor
	shall provide investment advice to the Investment
	Manager and perform certain administrative services;
“Investment Manager”	Lippo ASM Investment Management Limited, a
	company incorporated in the Cayman Islands with
	limited liability on 10th May, 2005, being a 49 per
	cent.:51 per cent. joint venture between the respective
	wholly-owned subsidiaries of HCL and ASM, which
	will be appointed as the investment manager of LAAP
	pursuant to the Management Agreement;

“Investment Manager Group Company”
- the Investment Manager and any of its subsidiaries which may be incorporated or acquired (directly or indirectly) by it;
“LAAP” or
“Limited Partnership”
Lippo ASM Asia Property LP, established on 12th May, 2005 in the Cayman Islands as a limited partnership;

* For identification purpose only

– 2 –

DEFINITIONS

“LAAP Investment” the investment to be made by Pacific in LAAP for an amount of up to HK$1,450 million on the terms and conditions set out in the Term Sheet and as detailed in the “Letter from the Board”; “Latest Practicable Date” 25th July, 2005, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein; “Limited Partner(s)” each of the limited partners of LAAP; “Limited Partnership Agreement” the limited partnership agreement to be entered into initially between the General Partner and Pacific, as a Limited Partner, to govern their relationship and provide for the manner of operation and management of LAAP; “Lippo” Lippo Limited 力寶有限公司, a company incorporated in Hong Kong with limited liability, the shares of which are listed on the Stock Exchange; “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange; “Macau” the Macao Special Administration Region of the PRC; “Management Agreement” the management agreement to be entered into between the General Partner and the Investment Manager which provides for the delegation to the Investment Manager by the General Partner of its powers of management and administration under the Limited Partnership Agreement; “Model Code” the Model Code for Securities Transactions by Directors of Listed Issuers under the Listing Rules; “Pacific” Pacific Landmark Holdings Limited, a company incorporated in the British Virgin Islands on 1st November, 2004 with limited liability, which is a wholly-owned subsidiary of HCL; “PRC” the People’s Republic of China; “SFO” Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong);

– 3 –

DEFINITIONS

“Share(s)” ordinary share(s) of HK$0.10 each in the issued share capital of the Company; “Shareholder(s)” holder(s) of the Share(s); “Shareholders’ Agreement” the shareholders’ agreement to be entered into among the respective wholly-owned subsidiaries of HCL and ASM, and the Investment Manager governing the relationship between the respective wholly-owned subsidiaries of HCL and ASM as shareholders of the Investment Manager and providing for the operation and management of the Investment Manager; “Stock Exchange” The Stock Exchange of Hong Kong Limited; “Subscription Agreement” the subscription agreement to be entered into between LAAP and Pacific for the investment of up to HK$1,450 million in LAAP by Pacific as the founding Limited Partner; “Term Sheet” the conditional legally binding term sheet entered into by the General Partner and Pacific dated 6th June, 2005 in respect of LAAP Investment; “HK$” Hong Kong dollar, the lawful currency of Hong Kong; “MOP” Macau pataca, the lawful currency of Macau; “Peso” Philippine peso, the lawful currency of the Republic of Philippines; “RM” Malaysian Ringgit, the lawful currency of Malaysia; ”RMB” Renminbi, the lawful currency of the PRC; “Rp” Indonesian Rupiah, the lawful currency of Indonesia; “S$” Singapore dollar, the lawful currency of Singapore; and “US$” United States dollar, the lawful currency of the United States of America.

– 4 –

LETTER FROM THE BOARD

LIPPO CHINA RESOURCES LIMITED 力寶華潤有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 156)

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

Executive Directors:

Registered Office: Room 2301, 23rd Floor Tower One Lippo Centre 89 Queensway Hong Kong

Mr. James Riady (Chairman) Mr. Stephen Riady (Deputy Chairman, Managing Director and Chief Executive Officer) Mr. John Luen Wai Lee, J.P.

Independent Non-executive Directors: Mr. Edwin Neo Mr. Victor Ha Kuk Yung Mr. King Fai Tsui

28th July, 2005

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

SUBSCRIPTION OF INTEREST IN LIMITED PARTNERSHIP BY HONGKONG CHINESE LIMITED

INTRODUCTION

Reference is made to the joint announcement of Lippo, HCL and the Company dated 6th June, 2005 announcing that Pacific, a wholly-owned subsidiary of HCL, entered into the Term Sheet for the LAAP Investment. HCL is beneficially owned as to approximately 72.26 per cent. by the Company, which in turn is beneficially owned as to approximately 71.13 per cent. by Lippo. The LAAP Investment exceeds 25 per cent. but does not exceed 100 per cent. of the market capitalisation of the Company and therefore constitutes a major transaction for the Company under Chapter 14 of the Listing Rules.

– 5 –

LETTER FROM THE BOARD

The purpose of this circular is to provide you with further information on the LAAP Investment, the Limited Partnership Agreement, the Management Agreement, the Subscription Agreement, the Shareholders’ Agreement and the Investment Advisor Agreement as detailed below.

LAAP INVESTMENT

On 6th June, 2005, Pacific, a wholly-owned subsidiary of HCL, entered into the Term Sheet with the General Partner to invest up to HK$1,450 million in LAAP, as a founding Limited Partner. Pursuant to the Term Sheet, Pacific’s Capital Commitment may be drawn down by LAAP at such times (from Initial Closing up to the Final Drawdown Date) and in such amounts (not exceeding Pacific’s agreed total Capital Commitment of HK$1,450 million) as required by LAAP for the purposes of making investments complying with LAAP’s investment objectives, and in paying the costs and expenses of LAAP.

INVESTMENT OBJECTIVES AND KEY INVESTMENT POLICIES OF LAAP

LAAP has been established on 12th May, 2005 in the Cayman Islands as a limited partnership. Based on the property price indices in Hong Kong, Taipei, Shanghai, Bangkok, Singapore, Jakarta and Kuala Lumpur, the General Partner is aware of the growth potential of property investment and the stable income generated from the rental market in East Asia, and aims at capturing the potential capital gain from property appreciation. Accordingly, the investment objectives of LAAP is to invest in real estate in the East Asia region, in particular in Malaysia, Singapore, Thailand, Indonesia, the PRC (including both Hong Kong and Macau) and Japan.

LAAP seeks long-term capital growth through a well-diversified portfolio of investments in income producing projects including commercial and residential usages, direct investments in high potential properties and green field development projects as well as listed and/or unlisted equity, bonds and/or equity equivalent securities of companies invested predominately in real estate.

The long term capital growth which LAAP sought aligns with the term of LAAP, which is set at ten years, however, the terms in holding the various investments will also depend on the type of investments and the investment environment at the time of acquisition.

The General Partner shall engage independent qualified valuers to conduct separate valuations on individual properties at least once a year and shall mark-to-market the valuation of all other listed securities and bonds. The General Partner shall value the unlisted equities/bonds at fair value, at either the cost price or at such other fair value price or cash realisable value as may be reasonably determined by the General Partner with regard to reliable information available, taking into account historical and projected financial information and operating data and other relevant factors. The General Partner shall monitor and analyse the performance of LAAP periodically (i.e. quarterly on its real estate investment and weekly on the securities and/or bonds equivalent investments).

– 6 –

LETTER FROM THE BOARD

As a control to the liquidity of LAAP, LAAP cannot make any investment in any single portfolio investment that would result in LAAP having invested more than 50 per cent. of the total Capital Commitments (including Capital Commitments that were not then drawndown) of the Limited Partners at the relevant time in a single portfolio investment without the super majority approval of not less than two thirds of the members of the Advisory Council. Details of the investment restrictions of LAAP are set out in point (vi) under the sub-section headed “Limited Partnership Agreement” below.

The execution by Pacific and the General Partner of the Subscription Agreement, pursuant to which Pacific will become a Limited Partner with a Capital Commitment of HK$1,450 million, shall take place as soon as practicable and, in any event, on or before the Initial Closing (which is expected to be on or before 31st August, 2005).

ADMISSION OF ADDITIONAL LIMITED PARTNERS AND MAXIMUM TARGETED FUND SIZE

In addition to the amount of up to HK$1,450 million agreed to be invested in LAAP by Pacific pursuant to the Term Sheet, LAAP intends to invite subscriptions from up to 13 Limited Partners (including Pacific), of up to an aggregate amount of HK$3.5 billion (including the HK$1,450 million to be invested by Pacific) of total Capital Commitments. Capital Commitments exceeding the targeted maximum fund size of HK$3.5 billion may only be accepted with the prior approval of the Advisory Council. These potential Limited Partners will be sophisticated professional investors including institutions and companies which have made, or are interested in making, substantial property investments in East Asia, and may also include wealthy individuals or families. They and their respective ultimate beneficial owners are expected to be third parties independent of, and not connected with, Lippo, the Company or HCL or any of their respective connected persons. No additional Limited Partner investors have been specifically identified at this time. At any time after the Initial Closing, expected to be on or before 31st August, 2005, and up to the Final Closing Date (not to be more than 12 months after the Initial Closing unless the Advisory Council otherwise agrees), the General Partner, with the approval of the Advisory Council, may arrange for one or more further closings to be held (as necessary) to accommodate the admission of further Limited Partners. The minimum Capital Commitment for each Limited Partner admitted to the Limited Partnership will be US$1 million (equivalent to approximately HK$7.8 million), although commitments of lesser amount may be accepted at the discretion of the General Partner, with the prior consent of the Advisory Council.

– 7 –

LETTER FROM THE BOARD

KEY FEATURES OF CONSTITUTION AND MANAGEMENT

Overview

Key features of LAAP, in common with other limited partnership vehicles, are as follows:

There is only one general partner who has the right to manage and take any and all actions on behalf of the Limited Partnership which the Limited Partnership has the power and capacity to take in its own name, subject to the restrictions and other terms specified in the Limited Partnership Agreement constituting the Limited Partnership, described below.
The General Partner has unlimited liability for the obligations of the Limited Partnership.
The liability of the Limited Partners is limited to the amount of the Capital Commitment agreed to be contributed by the respective Limited Partner to LAAP.
The provisions relating to the distribution of income and profits received by the Limited Partnership are set out in the Limited Partnership Agreement and are described below. In summary, the Limited Partners are entitled to all or substantially all of the income and profits of the Limited Partnership and the General Partner is ultimately required to distribute all income and profits to the Limited Partners. The distribution of income and profits is made by reference to the dollar amount of the Capital Commitment actually drawn down and paid to LAAP by each Limited Partner and used to acquire the investment giving rise to the distribution. The Capital Commitment of a Limited Partner is the total amount of capital required to be invested in the Limited Partnership, as a legally binding commitment, which can be drawn down by the General Partner to make investments for the Limited Partnership, on a pro rata basis among all the Limited Partners.
Subject to the minimum individual Capital Commitment of each Limited Partner of US$1 million, the targeted maximum fund size of HK$3.5 billion, and the absolute limit of not more than 13 Limited Partners, additional Limited Partners (in addition to Pacific) can be invited by the General Partner, with the prior approval of the Advisory Council, to join at any time after the Initial Closing and up to the Final Closing Date.

Power of Management

The General Partner will, subject to the delegation of the General Partner’s powers to the Investment Manager under the Management Agreement as detailed under the sub-section headed “Management Agreement” below, have full power of management, control and operation of and determination of policy with respect to, LAAP and its

– 8 –

LETTER FROM THE BOARD

investment and other activities. As such, the Investment Manager is responsible for the investment decisions of LAAP subject to the terms of the Management Agreement. In certain circumstances (as detailed below in this sub-section), approval from the Advisory Council is required. Pursuant to the Investment Advisor Agreement, the Investment Advisor will be appointed to advise the Investment Manager.

In addition, LAAP will establish an Advisory Council consisting of at least three members not affiliated with the General Partner. The first three members shall be appointed by Pacific, the founding Limited Partner. Each subsequent Limited Partner making minimum Capital Commitments of HK$700 million or more shall be entitled to appoint an additional member of the Advisory Council.

Nevertheless, the Advisory Council may consider appointing additional members nominated by Limited Partners with Capital Commitments of less than HK$700 million in circumstances where the members of the Advisory Council consider that such person(s) would bring particular benefits or insights to the Advisory Council.

The Advisory Council will meet as required, and at least quarterly, to consult with the General Partner as to investment policies, corporate governance issues and method of valuation. With the consent of the Advisory Council, LAAP may enter into investments other than real estate, vary the countries it invests in and invest in a single investment portfolio investment that would result in LAAP having invested more than 50 per cent. of the total Capital Commitments of LAAP at the relevant time in that single portfolio investment. The Advisory Council shall take no part in the control or management of LAAP nor shall it have any power or authority to act and to invest for or on behalf of LAAP.

Drawdown of Capital Commitments

Capital Commitments will be drawn down by LAAP pro rata from the Limited Partners at such times during the period after Initial Closing and prior to the Final Drawdown Date (i.e. the fifth anniversary of the last day of the month of the Final Closing), and in such amounts not exceeding the aggregate Capital Commitments of all Limited Partners, as required by LAAP for the purposes of making investments of LAAP complying with its investment objectives, and paying the costs and expenses of LAAP.

Distribution of Proceeds of Portfolio Investments and Income

Upon the approval of Limited Partners representing not less than a majority (i.e. over 50 per cent.) of the aggregate Capital Commitments of all the Limited Partners at the time in question, net proceeds attributable to the disposition of an investment of LAAP will be distributed to all Limited Partners in proportion to the amount of their respective Capital Commitments actually drawn down and paid to LAAP and used to acquire the investment giving rise to the distribution.

– 9 –

LETTER FROM THE BOARD

Any and all income received with respect to an investment will be distributed to the Limited Partners, in proportion to their respective Capital Commitments actually drawn down and paid to LAAP and used to acquire the investment giving rise to the distribution, on a periodic basis and no less frequently than quarterly.

Rights of First Refusal

Limited Partners shall have the benefit of rights of first refusal in relation to any sale or transfer of any Limited Partner’s interests in LAAP. Any Limited Partner wishing to sell or transfer their interests in LAAP will be required to offer such interests to the other Limited Partners. Limited Partners wishing to purchase any interest in LAAP will be required to indicate the amount of interest offered for sale that they wish to purchase. In circumstances where the amount of interest requested to be purchased by the Limited Partners is equal to or less than the amount of interest offered for sale, such interest will be allocated in satisfaction of the applications received.

If the amount of interest requested to be purchased by the Limited Partners is greater than the amount of interest offered for sale, then the General Partner shall allocate the interest offered for sale in proportion to the amounts requested to be purchased by the Limited Partners, provided that no Limited Partner shall be required to purchase more than the amount of interest requested to be purchased by it. Such allocation process shall be repeated until there are no amounts of interest remaining to be purchased.

If the interest offered for sale is offered subject to a condition that all the interest offered for sale must be purchased by the Limited Partners, and the Limited Partners do not offer to purchase all the interest offered for sale, then the selling Limited Partner shall be entitled to dispose of all its interest to an independent third party. Alternatively, if the interest offered for sale is not offered subject to such a condition and if, following the allocation process set out above, part of the interest has not been requested to be purchased by the Limited Partners, then the selling Limited Partner shall be entitled to dispose of that part of the interest not requested to be purchased by the Limited Partners to an independent third party. Such third party purchaser must adhere to the Limited Partnership Agreement.

Other than a sale or transfer in accordance with the foregoing rights of first refusal, the Limited Partners may not withdraw from LAAP in any circumstances.

Term

LAAP shall have a term of ten years from the date of the Final Closing (which is expected to be one year after the Initial Closing). Two consecutive additional one year extensions to the ten-year term may be granted as determined by the General Partner with the prior consent of the Advisory Council, to allow for the orderly disposal of LAAP’s investments and the distribution to the Limited Partners of the disposal proceeds. Other than on expiry of the term, LAAP shall be dissolved (i) after the Final Drawdown Date, upon the sale or disposal of all the portfolio investments acquired by LAAP in circumstances in which Limited Partners representing a majority of the aggregate Capital Commitments

– 10 –

LETTER FROM THE BOARD

of all the Limited Partners do not consent to the reinvestment of the sale proceeds; (ii) upon the entry of a judicial decree of dissolution of LAAP under the laws of the Cayman Islands; (iii) at such time as there are no Limited Partners; (iv) if the General Partner determines that, due to a change in applicable law, rules or regulations, LAAP cannot operate effectively in accordance with its investment objectives or the terms of the agreement constituting LAAP; or (v) on the expiry of not less than 12 months’ written notice given by Limited Partners representing a majority of the aggregate Capital Commitments of all the Limited Partners.

General Partner

LAAP General Partner Limited, being the General Partner, was incorporated in the Cayman Islands on 10th May, 2005 and is an indirect wholly-owned subsidiary of ASM. Its principal business is investment management. Having regard to the unlimited liability of the general partner of a limited partnership, as referred to above, the General Partner has been established as a special purpose vehicle to serve as the general partner of LAAP and will not conduct any other business or activities.

The management team of the General Partner of LAAP shall consist of the following:

Mr. Kin Chan

Mr. Kin Chan has been ASM’s Chief Investment Officer since ASM was founded in December 2001. Before co-founding ASM, Mr. Kin Chan was the Managing Director and the Chief Executive of Lazard Asia Limited, a merchant banking and corporate advisory business, from March 2000 to October 2001. Before that, Mr. Kin Chan worked with Goldman, Sachs & Co from August 1989 to January 2000 where he worked in Hong Kong, New York and Singapore. Mr. Kin Chan has over 14 years experience in the asset management and corporate finance industry. Mr. Kin Chan was Vice President of Goldman, Sachs & Co when he left in 2000.

By taking up the aforesaid positions, Mr. Kin Chan is one of the few individuals with pan-Asian transaction experience specialized in the real estate sections and combines technical skills and relationships with relevant Asian business people and organisations.

Mr. Kin Chan has been involved in a number of real estate investment projects in many of the countries in South East Asia for the funds under the management of ASM and the clients of Goldman, Sachs & Co and Lazard Asia Limited.

Mr. Kin Chan has extensive contacts in the real estate business community in Asia. The real estate-related transactions he has worked on exceed US$2 billion in value. These transactions included distressed property-related investments in Thailand, the PRC, Hong Kong and Indonesia.

– 11 –

LETTER FROM THE BOARD

Mr. V-Nee Yeh

Mr. V-Nee Yeh co-founded Value Partners Limited (“VPL”) in 1993 with Mr. Cheah Cheng Hye. VPL has grown to become one of the leading independent asset management companies in Asia with assets under management in excess of US$2.4 billion.

Mr. V-Nee Yeh was previously with Lazard Freres & Co., NY in 1984 in corporate finance, Lazard Asia Limited in 1987 in merger and acquisition and later served as a partner in Lazard Brothers & Co., London in 1988 before co-founding VPL. Such companies are prominent international financial advisory and asset management firms providing specialised solutions to complex financial and strategic challenges advisory services.

Mr. V-Nee Yeh acquired over 20 years experience in the asset management and corporate finance industry.

Mr. V-Nee Yeh was a council member of the Stock Exchange until its merger with the Hong Kong Futures Exchange. Currently, he sits on the Stock Exchange’s listing committee, as well as the Securities and Futures Commission’s Takeovers and Mergers Panel. He is a member of the Listing Committee of the China Securities Regulatory Commission through 2003.

Mr. V-Nee Yeh is familiar with real estate investments worldwide including in the United States, Japan and the much of rest of Asia.

Ms. Angie Yick Yee Li

Ms. Angie Yick Yee Li has been a fund manager of the ASM Asia Recovery Fund (a fund managed by ASM) since March 2002 and is currently a member of ASM’s management team. While with ASM, Ms. Li has acquired substantial experience in direct investments in the real estate markets in the South East Asia region, ex-Japan as well as real estate linked bonds, equities and other related investments for the funds under the management of ASM, which are approximately US$200 million.

Prior to joining ASM, Ms. Li worked with Lazard Asia (Hong Kong) Limited since August 2001, a company providing corporate finance advisory services and Lazard Freres & Co., NY from July 1997 to August 2001, where she participated in a number of major merger and acquisition and restructuring transactions in the telecommunications, media and technology sectors.

Ms. Li has over 7 years experience in the asset management and corporate finance industry.

– 12 –

LETTER FROM THE BOARD

Ms. Li has a number of academic distinctions. At Columbia University, she was awarded the Fellowship of the Graduate School of Art and Social Science and President Fellowship. She is also a scholar of the Sir Edward Youde Memorial Fund for Overseas Studies sponsored by the Hong Kong Government.

Mr. Kin Chan will be a director of the corporate director of the General Partner. The positions to be held by Mr. V-Nee Yeh and Ms. Angie Yick Yee Li are yet to be determined.

ASM

ASM’s principal business (since its incorporation) is investing in Asian distressed assets ex-Japan. ASM has been beneficially owned as to 40 per cent. by Mr. Kin Chan, 30 per cent. by Mr. V-Nee Yeh and the balance by the management team of ASM since February 2004. ASM’s assets under management are approximately US$200 million, including the ASM Asia Recovery Fund. ASM, its directors and its wholly-owned subsidiaries also control a Taiwanese based fund management company which has approximately US$500 million under management.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiry, each of Mr. Kin Chan, Mr. V-Nee Yeh, the General Partner, ASM and their ultimate beneficial shareholders (where appropriate) is a third party independent of, and not connected with, Lippo, the Company, HCL or any of their respective connected persons, and are not connected persons of any of Lippo, the Company or HCL. Neither Mr. Kin Chan, Mr. V-Nee Yeh, the General Partner, ASM, or their ultimate beneficial shareholders or any of their respective associates holds any shares in any of Lippo, the Company or HCL. HCL invested US$0.5 million in the ASM Asia Recovery Fund in 2002. As at 31st March, 2005, the value of this holding has more than doubled since the investment was made.

Advisory Council

The Advisory Council will be authorised under the Limited Partnership Agreement to consent to, approve or waive any matter requiring the consent, approval or waiver of the Advisory Council under the Limited Partnership Agreement and to provide advice to the General Partner as requested by the General Partner in connection with matters relating to LAAP. The Advisory Council is a committee of the Limited Partnership and will take no part in the control or management of the Limited Partnership in dealings with persons who are not the General Partner or the Limited Partners, nor shall it have any power or authority to act for or on behalf of LAAP. All investment decisions as well as all responsibility for the management of LAAP remain with the General Partner. Other than those matters referred to in the sub-section headed “Limited Partnership Agreement” below for which the consent, approval, review or waiver of the Advisory Council is required by the Limited Partnership Agreement, actions taken by the Advisory Council will be advisory only and the General Partner shall not be required or bound to act in accordance with any decision, action or comment of the Advisory Council or any of its members.

– 13 –

LETTER FROM THE BOARD

Investment Manager

Lippo ASM Investment Management Limited, a company incorporated in the Cayman Islands with limited liability on 10th May, 2005, will be appointed by the General Partner as the Investment Manager pursuant to the Management Agreement as detailed below. The Investment Manager is a 49 per cent. : 51 per cent. joint venture between the respective wholly-owned subsidiaries of HCL and ASM. The Company’s indirect interest in the Investment Manager will be equity accounted for in its accounts. The sole business of Lippo ASM Investment Management Limited will be to act as the investment manager of LAAP. It will not provide similar investment management services to other funds. Mr. Kin Chan, Mr. V-Nee Yeh and Ms. Angie Yick Yee Li will be the representatives from ASM responsible for the management and operation of the Investment Manager. Their profiles are detailed under the sub-section headed “General Partner” above. Mr. Christopher James Williams, who shall be appointed as a non-executive director of the Investment Manager, shall provide such advice in respect of the business and operations of the Investment Manager as may be required from time to time. Mr. Williams is a practising solicitor in Hong Kong and is a partner in the firm of Richards Butler. He is qualified as a solicitor in England and Wales and in Hong Kong and has over 19 years of legal experience. His areas of specialisation include corporate finance, capital markets, mergers and acquisitions, joint ventures and cross border transactions.

Messrs. Jonathan Miles Foxall and Thio Gim Hock will be the representatives of HCL responsible for the management and operation of the Investment Manager. Both Messrs. Foxall and Thio are directors of certain subsidiaries of Lippo engaging principally in property development, investment and management and have been responsible for managing and supervising the property investments of the Group since February 1991 and March 2005 respectively.

Mr. Jonathan Miles Foxall has 29 years’ property experience and has been responsible for a series of property transactions and development projects in Australia, Thailand, Malaysia, Singapore, Hong Kong, Macau and the PRC. Mr. Foxall is a fellow member of both the Royal Institute of Chartered Surveyors and the Hong Kong Institute of Surveyors.

Mr. Thio Gim Hock has been involved in property development field since 1973. Mr. Thio has been responsible for property acquisition, development, marketing and management in Singapore, Malaysia, Indonesia, Thailand, Hong Kong and London in respect of residential, office, retail, commercial, hotel and resorts projects.

Messrs. Kin Chan, Christopher James Williams, Jonathan Miles Foxall and Thio Gim Hock will sit on the board of directors of the Investment Manager. The positions to be held by Mr. V-Nee Yeh and Ms. Angie Yick Yee Li are yet to be determined.

Investment Advisor

ImPac Asset Management (HK) Limited, a company incorporated in Hong Kong with limited liability on 13th November, 1990, will be appointed as the Investment Advisor to the Investment Manager to provide investment advice to, and perform certain

– 14 –

LETTER FROM THE BOARD

administrative services for the Investment Manager. It is based in Hong Kong and is not currently providing, or intending to provide, any similar advisory services to investment managers other than Lippo ASM Investment Management Limited. It is a licensed corporation registered with the Securities and Futures Commission to conduct Types 4, 5 and 9 regulated activities under the SFO. Being an indirect wholly-owned subsidiary of HCL, its results are consolidated into the results of the Group. The directors of the Investment Advisor are Messrs. Tai Chiu Ng, Eric Fook Wah Lai, Alex Shiu Leung Au and Andrew Tat Kwong Hau and their profiles are set out below:

Mr. Tai Chiu Ng is a qualified accountant and holds a master degree in Business (Electronic Commerce) from Curtin University of Technology in Australia, a master degree in International Banking and Financial Studies from the Heriot-Watt University in the United Kingdom and a doctor degree in Business Administration from the University of Hull in the United Kingdom. He is a fellow member of the Hong Kong Institute of Certified Public Accountants, the Association of Chartered Certified Accountants and the Institute of Chartered Secretaries and Administrators. Mr. Ng has over 20 years’ experience in the accounting and corporate finance fields in Hong Kong. He is a licensed person registered with the Securities and Futures Commission to conduct Types 4, 5, 6 and 9 regulated activities under the SFO.

Mr. Eric Fook Wah Lai holds a degree in Business Administration from The Chinese University of Hong Kong. He has over 20 years’ experience in the local securities dealing and investment advisory businesses and provides portfolio management services to individual and institutional clients of the securities arm of the Group. He is a licensed person registered with the Securities and Futures Commission to conduct Types 1, 2, 4, 5, 6 and 9 regulated activities under the SFO.

Mr. Alex Shiu Leung Au is the Chief Financial Officer of the Group. He holds a bachelor degree of Commerce (Accounting) from the University of Birmingham in the United Kingdom and is an associate member of both the Institute of Chartered Accountants in England and Wales and the Hong Kong Institute of Certified Public Accountants. He has nearly 20 years’ experience in the accounting, treasury and financial fields.

Mr. Andrew Tat Kwong Hau is the Company Secretary of HCL. He holds a master degree in Business Administration from the University of Warwick in the United Kingdom. He is a fellow member of both the Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Company Secretaries. He has over 20 years’ experience in the corporate secretarial field.

Messrs. Ng and Lai have substantial knowledge and actual experience in the field of corporate finance, investment advisory and management. They have been appointed by the Investment Advisor as its responsible officers in respect of Types 4, 5 and 9 regulated activities under the SFO. On the other hand, Mr. Au has extensive experiences in treasury and financial management and will be responsible for accounting and financial matters of the Investment Advisor. Mr. Hau has extensive experience in the corporate secretarial and administration field and will be

– 15 –

LETTER FROM THE BOARD

responsible for the compliance and corporate secretarial matters of the Investment Advisor. Though the experiences of the aforesaid directors are not directly related to real estate investments, it will not undermine the ability of the Investment Advisor in providing investment advisory services to the Investment Manager since they are all qualified professionals with substantial and solid business experiences. In order to strengthen and enhance the directors’ knowledge about the real estate markets in East Asia, the Investment Advisor will recruit additional property analysts and experts specialising in real estate investment in East Asia so as to provide prompt property market research, analysis and information to the directors of the Investment Advisor.

INVESTMENT MANAGEMENT FEES

For the period from Initial Closing to Final Drawdown Date, the General Partner will in accordance with the Limited Partnership Agreement receive from LAAP an annual fee of 1 per cent. of the Capital Commitments. After the Final Drawdown Date, the annual fee will be 1 per cent. of capital contributions used to fund the cost of, and which remain invested in, investments. The fee is payable semi-annually in advance. The amount of the fee was determined by arm’s length negotiations between the General Partner and Pacific and is on normal commercial terms so far as HCL, the Company and Lippo are concerned.

For the period from Initial Closing to the Final Drawdown Date, the Investment Manager will receive an annual management fee payable by the General Partner under the Management Agreement from the annual fee of 1 per cent. as described above received by the General Partner from LAAP. It is intended that the General Partner will only retain sufficient of the management fee to pay its expenses and those of administering and maintaining the status and good standing of LAAP with a small margin not more than 20.7 per cent. of the annual fee payable to the General Partner. The amount to be retained by the General Partner shall be determined between the General Partner and the Investment Manager and payable semi-annually in advance. The remainder will be passed to the Investment Manager, as agreed between the General Partner and the Investment Manager on the basis of arm’s length negotiations and set out in the Management Agreement. After the Final Drawdown Date, the Investment Manager will receive an annual management fee, calculated on the same basis as described above, on the total amount of the Capital Commitments of the Limited Partners actually drawn down prior to the Final Drawdown Date (i.e. the fifth anniversary of the last day of the month of the Final Closing) and invested in portfolio assets.

The Investment Advisor shall receive a fee in an amount to be determined and specified in the Investment Advisor Agreement. It is the present intention of the parties to the Investment Advisor Agreement that such fee will be determined on cost-plus basis. The costs to be incurred by the Investment Advisor shall include staff wages, professional fees and other costs incidental in discharging its duties pursuant to the Investment Advisor Agreement. The mark up margin is yet to be determined between the Investment Manager and the Investment Advisor and the Directors currently estimate such margin will be around 10 per cent. to 15 per cent.

– 16 –

LETTER FROM THE BOARD

The aforesaid remunerations have been determined after arm’s length negotiation between the parties. The Directors consider that the remuneration payable to each of the General Partner and the Investment Manager is fair and reasonable and on normal commercial terms.

STATUS OF THE TRANSACTION

The Term Sheet is legally binding and subject to the conditions set out below. If the conditions are fulfilled, the following detailed transaction documents will be entered into as soon as practicable after fulfillment of the conditions, which is expected to be on or before 31st August, 2005: (i) the Limited Partnership Agreement; (ii) the Management Agreement; (iii) the Subscription Agreement; (iv) the Shareholders’ Agreement; and (v) the Investment Advisor Agreement, subject to the transaction having been approved by shareholders of Lippo, the Company and HCL in accordance with the requirements of the Listing Rules.

THE AGREEMENTS

Limited Partnership Agreement

Parties: General Partner Limited Partner

The Limited Partnership Agreement will initially be entered into between the General Partner and Pacific, as a Limited Partner. New Limited Partners investing in LAAP will become parties to the Limited Partnership Agreement prior to making their respective investments. The Limited Partnership is established for a term of ten years from the date of the Final Closing, although two consecutive additional one year extensions to the ten-year term may be granted as determined by the General Partner with the prior consent of the Advisory Council, to allow for the orderly disposal of the Limited Partnership’s investments and the distribution of the disposal proceeds to the Limited Partners.

The Limited Partnership Agreement will set out the terms governing the relationship between the General Partner and the Limited Partners and provide for the manner of operation and management of LAAP. The Limited Partnership Agreement will provide, among other things, that:

(i) the General Partner will have full power of management, control and operation of, and determination of policy with respect to, LAAP, its investments and other activities in accordance with the stated investment objectives of LAAP, namely investment in real estate in the jurisdictions referred to under the section headed “Investment objectives and key investment policies of LAAP” above and no Limited Partner shall take part in the management or control of LAAP’s investment or other activities;

– 17 –

LETTER FROM THE BOARD

(ii) commitments will be drawn down by LAAP from the Limited Partners as needed to make investments and to pay liabilities and expenses of LAAP during the period from the Initial Closing to the Final Drawdown Date (i.e. the fifth anniversary of the last day of the month of the Final Closing). The timing and amount of such drawdowns shall be determined by the General Partner by written notice to the Limited Partners (with the prior consent of the Advisory Council);
(iii) the term of LAAP will be ten years from the date of the Final Closing, subject to up to two consecutive additional one year extensions as determined by the General Partner with the prior consent of the Advisory Council;
(iv) upon the approval of Limited Partners representing not less than a majority (i.e. over 50 per cent.) of the aggregate Capital Commitments of all the Limited Partners at the time in question, net proceeds attributable to the disposal of investments of LAAP will be distributed to all Limited Partners in proportion to the amount of their respective Capital Commitments actually drawn down and paid to LAAP and used to acquire the investment giving rise to the distribution;

(v) as soon as practicable after Initial Closing, LAAP will establish an Advisory Council of at least three members selected from among Limited Partners. The first three members shall be appointed by Pacific, the founding Limited Partner. Each subsequent Limited Partner making minimum Capital Commitments of HK$700 million or more will be entitled to appoint an additional member to the Advisory Council. Nevertheless, the Advisory Council may consider appointing additional members nominated by Limited Partners with Capital Commitments of less than HK$700 million in circumstances where the members of the Advisory Council consider that such person(s) would bring particular benefits or insights to the Advisory Council. The Advisory Council will meet at least quarterly (or more frequently, if required) and consult with the General Partner on investment policies, valuations and conflicts of interest;
(vi) the prior super majority approval of not less than two thirds of the members of the Advisory Council will be required before the General Partner will cause or permit LAAP, to (a) invest in any investment other than real estate assets or transactions based primarily on the value of underlying real estate; or (b) invest in any jurisdiction other than those set out under the section headed “Investment objectives and key investment policies of LAAP” above; or (c) terminate or amend the Management Agreement, otherwise than pursuant to any other express term of the Management Agreement, the Limited

– 18 –

LETTER FROM THE BOARD

Partnership Agreement, or the Investment Advisor Agreement; or (d) make any investment in any single portfolio investment that would result in LAAP having invested more than 50 per cent. of the total Capital Commitments of the Limited Partners at the relevant time in that single portfolio investment; or (e) take any action or exercise any power, discretion or authority once a notice of removal of the General Partner has been given by Limited Partners under the Limited Partnership Agreement (see (vii) below);

(vii) the General Partner may be removed by a vote of Limited Partners representing a majority of the total Capital Commitments agreed to be invested by all the Limited Partners of the Limited Partnership at the relevant time in the following circumstances: (a) the insolvency of the General Partner; or (b) the occurrence of any event that causes the General Partner to cease to be the General Partner of the Limited Partnership under the Partnership Law; or (c) any failure by the General Partner to comply with applicable laws and regulations and such other circumstances; or (d) a failure by the General Partner or the Investment Manager to comply with their respective obligations under the Limited Partnership Agreement and the Management Agreement, (such removal to be subject to the prior approval of not less than a majority of the members of the Advisory Council);
(viii) Limited Partners will have a right of first refusal in relation to the sale and transfer by any Limited Partner of their interests in LAAP. Any Limited Partner wishing to sell or transfer their interests in LAAP will be required to offer such interests to the other Limited Partners. Limited Partners wishing to purchase any interest in LAAP will be required to indicate the amount of interest offered for sale that they wish to purchase. In circumstances where the amount of interest requested to be purchased by the Limited Partners is equal to or less than the amount of interest offered for sale, such interest will be allocated in satisfaction of the applications received;

– 19 –

LETTER FROM THE BOARD

of that part of the interest not requested to be purchased by the Limited Partners to an independent third party. Such third party purchaser must adhere to the Limited Partnership Agreement;

Other than a sale or transfer in accordance with the foregoing rights of first refusal, the Limited Partners may not withdraw from LAAP in any circumstances;

(ix) the General Partner will ensure that annual audited financial statements of LAAP are produced, together with quarterly progress reports with respect to investments and a monthly summary of key-events during the month in question;
(x) borrowings of, and indebtedness incurred by, the Limited Partnership shall be borrowings or indebtedness solely of the Limited Partnership and without recourse to the Limited Partners. Subject to this, the Limited Partnership may borrow or guarantee indebtedness up to an amount equal to 50 per cent. of the aggregate Capital Commitments of the Limited Partners at that time. Any borrowing in excess of this amount would require the prior consent of the Advisory Council;
(xi) other than on expiry of the term as detailed in paragraph (iii) above, the Limited Partnership shall be dissolved in the circumstances set out under the sub-section headed “Term” on pages 10 and 11 of this circular;
(xii) the General Partner shall receive the fee as set out under the section headed “Investment management fees” on pages 16 and 17 of this circular; and
(xiii) subject to the minimum individual Capital Commitment of each Limited Partner of US$1 million, the targeted maximum fund size of HK$3.5 billion, and the absolute limit of not more than 13 Limited Partners, the General Partner, with the approval by way of simple majority of the Advisory Council, may arrange for one or more further closings to be held (as necessary) to accommodate the admission of further Limited Partners at any time after the Initial Closing, expected to be on or before 31st August, 2005 and up to the Final Closing Date. Nevertheless, commitments of lesser amount may be accepted at the discretion of the General Partner, with the prior consent by way of simple majority of the Advisory Council.

If the General Partner or the Investment Manager fails to comply with its respective obligations under, in the case of the General Partner, the Limited Partnership Agreement and the Management Agreement and, in the case of the Investment Manager, the Management Agreement and the Investment Advisor Agreement, being the agreements relating to the Limited Partnership and its operation and management to which they are respective parties, the Limited Partners can, with the prior approval of a majority of the members of the Advisory Council, remove and replace the General Partner by a resolution of Limited Partners representing a majority of the total Capital Commitments agreed to be

– 20 –

LETTER FROM THE BOARD

invested by all the Limited Partners of the Limited Partnership at the relevant time. Upon the removal of the General Partner, the Management Agreement automatically terminates. The General Partner’s appointment is not automatically terminated upon the termination of the Management Agreement.

Management Agreement

Parties: General Partner Investment Manager

On or immediately prior to Initial Closing, the General Partner and the Investment Manager will enter into the Management Agreement pursuant to which the Investment Manager will act as the investment manager of LAAP from Initial Closing and for the duration of the term of LAAP but subject to early termination of not less than six months written notice from either party to the Management Agreement or immediately on the occurrence of certain “termination events”, namely:

(i) the insolvency of the Investment Manager; or
(ii) the General Partner ceases to be the general partner of the Limited Partnership or if the General Partner or any company that controls the General Partner suffers a change of control that has not been previously approved by the Limited Partners; or
(iii) the expiration or early termination of the Limited Partnership Agreement; or
(iv) the Investment Manager ceasing to be authorised under any applicable laws, rules or regulation to manage or operate, or act as manager of, the Limited Partnership; or
(v) the Investment Manager committing a material breach of its obligations under the Management Agreement (which, if capable of remedy, is not remedied within 21 days notice) or disregarding its obligations and duties under the Management Agreement; or
(vi) by a vote of Limited Partners representing a majority of the Capital Commitments agreed to be invested by all Limited Partners of the Limited Partnership at the relevant time; or
(vii) there occurs a change in control of the Investment Manager or any company that controls the Investment Manager, and such change of control has not been previously approved by each of the shareholders of the Investment Manager.

– 21 –

LETTER FROM THE BOARD

In the event that the term of LAAP is extended for one or more additional one year extensions, the Management Agreement may be extended for similar additional one year periods by agreement between the General Partner and the Investment Manager.

The Investment Manager will be Lippo ASM Investment Management Limited, a company established on 10th May, 2005 under the laws of the Cayman Islands and owned as to 49 per cent.:51 per cent. by wholly-owned subsidiaries of HCL and ASM respectively. The sole business of Lippo ASM Investment Management Limited will be to act as the investment manager of LAAP. It will not provide similar investment management services to other funds. The financial results of the Investment Manager will not be consolidated in the financial statements of the Company but the interest in the Investment Manager will be equity accounted for in the financial statements of the Company.

Pursuant to the Management Agreement, the General Partner will delegate its powers in relation to portfolio management and administration of LAAP to the Investment Manager, including investigating, analysing, structuring and negotiating potential investments, monitoring the performance of investments and making recommendations to the General Partner in relation to the acquisition and realisation of investments. As such, the Investment Manager will be responsible for the investment decisions of LAAP subject to the terms of the Management Agreement. The Investment Manager will not assume the liabilities of the General Partner in connection with the Limited Partnership, but will be required to indemnify LAAP under the Management Agreement in respect of any breach of the Management Agreement by the Investment Manager. It is anticipated that HCL, through its 49 per cent. interest in the Investment Manager, will gain from the transfer of know-how and expertise from the General Partner and ASM. The Investment Manager shall receive the fee for such services referred to under the section headed “Investment management fees” above.

Subscription Agreement

Parties: LAAP Pacific

The Subscription Agreement will set out the terms and conditions on which Pacific will invest up to HK$1,450 million in LAAP as a founding Limited Partner. The Subscription Agreement will provide, among other things, that:

(i) Pacific will invest up to HK$1,450 million in LAAP as a Limited Partner;
(ii) such investment will be subject to the terms of the Limited Partnership Agreement, to which Pacific will become a party; and
(iii) LAAP will give representations and warranties to Pacific, including as to its formation and standing and its power to enter into the Subscription Agreement and Pacific will give certain representations and warranties to LAAP including as to its status and the purpose of Pacific’s investment in LAAP.

– 22 –

LETTER FROM THE BOARD

Shareholders’ Agreement

Parties: a wholly-owned subsidiary of HCL a wholly-owned subsidiary of ASM Investment Manager

The Shareholders’ Agreement will set out the terms governing the relationship between the respective wholly-owned subsidiaries of HCL and ASM as shareholders of the Investment Manager and provide for the operation and management of the Investment Manager. The Shareholders’ Agreement will provide, among other things, that:

(i) each of the respective wholly-owned subsidiaries of ASM and HCL shall be entitled to appoint two directors to the board of the Investment Manager and the subsidiary of HCL shall have the right to appoint the chairman of the board from any of its representatives. The chairman shall not have an additional of casting vote;
(ii) the respective wholly-owned subsidiaries of ASM and HCL shall not transfer any shares in the Investment Manager without the prior written consent of the other to such transfer;
(iii) any new offers of shares or other securities in the capital of the Investment Manager will be subject to rights of pre-emption in favour of the respective wholly-owned subsidiaries of HCL and ASM;
(iv) the following “reserved matters” will require the approval of the respective wholly-owned subsidiaries of ASM and HCL prior to their being conducted by the Investment Manager:
(i) any material change in the nature of the business of any Investment Manager Group Company or the way in which such business is carried on;
(ii) the alteration, variation or replacement of the memorandum and articles of association or the constitutive documents of any Investment Manager Group Company (including any change of name);
(iii) any corporate restructuring or reorganisation of any Investment Manager Group Company or plans or proposal thereof;
(iv) any matters affecting the share capital, share premium account, or other capital of any Investment Manager Group Company including (without limitation) the issue and allotment of or agreeing to issue and allot any shares or securities of any class or grant of any options, warrants or any other rights or creation of any loan capital having attached thereto a right of conversion into or subscription for share capital or otherwise

– 23 –

LETTER FROM THE BOARD

carrying out any act which have or may have the effect of diluting the equity interest of any shareholder in the Investment Manager or in respect of any other Investment Manager Group Company, the equity interest of the Investment Manager, whether direct or indirect, in such Investment Manager Group Company;

(v) the increase, reduction, cancellation, purchase or redemption of the authorized or issued share capital of the Investment Manager and/or any Investment Manager Group Company;
(vi) the making of any investment or expenditure which exceeds 5 per cent. of the net asset value of the Investment Manager as stated in the most recent consolidated accounts of the Investment Manager;
(vii) the acquisition or disposal, mortgaging or charging by any Investment Manager Group Company of any land, property or estate or any interest therein or granting or permitting to arise any encumbrance over or in respect thereof other than in the ordinary course of its business and in relation to its daily business operations;
(viii) the sale or disposal of the whole or a substantial part of the undertaking, goodwill or the assets of any Investment Manager Group Company (including the Investment Manager’s interest, directly or indirectly, in any of its subsidiaries);
(ix) the declaration or payment of any dividend or distribution of assets or the capitalisation, repayment or other forms of distribution of any amount standing to the credit of any reserve of any Investment Manager Group Company or the redemption or purchase of any shares or any other reorganisation of the share capital of any Investment Manager Group Company;
(x) the sale, transfer, licensing, creating any charge or other encumbrance or otherwise disposal of any trade marks, patents or other intellectual property owned by any Investment Manager Group Company;
(xi) the acquisition of any shares, debentures, debenture stock, securities or other obligations of any company;
(xii) the amalgamation or merger or consolidation of any Investment Manager Group Company with or into any other company, or reconstruction or amalgamation of its business;
(xiii) the flotation or other public offering of shares in any Investment Manager Group Company and any matters and arrangements relating thereto;

– 24 –

LETTER FROM THE BOARD

(xiv) the approval of the annual budget in respect of each Investment Manager Group Company for each financial year or agreeing any variation to or departure from such annual budget;
(xv) the lending of any moneys or providing credit in any form other than in the ordinary course of the business of the relevant Investment Manager Group Company or by way of placing surplus funds on deposit with a bank or other institution the normal business of which includes the acceptance of deposits;
(xvi) the borrowing of any moneys or accepting of any other financial facilities or credit other than trade facilities obtained from banks and other financial institutions in the ordinary course of the business of the relevant Investment Manager Group Company;
(xvii) the borrowing of any money which would result in the ratio of total debt to equity of any Investment Manager Group Company exceeding 50 per cent.;
(xviii) the giving of any guarantee or surety or creating any mortgage, charge, lien or encumbrance of any kind by the Investment Manager or any Investment Manager Group Company over its assets;
(xix) the creation, permission to arise or issue of any debenture constituting a pledge, lien or charge (whether by way of fixed or floating charge, mortgage, encumbrance or other security) on all or any of the undertaking, assets or rights of any Investment Manager Group Company or factoring any book debts except for the purpose of securing borrowings from banks or other financial institutions in the ordinary course of business;
(xx) the appointment and removal of the auditors or the changing of accounting policies and practices or financial year or accounting reference date of any Investment Manager Group Company;
(xxi) the formation, acquisition, disposition, liquidation or winding up of any Investment Manager Group Company or shares in any subsidiary or any interest in any partnership or joint venture or taking of any steps to effect its winding up or passing any resolution to liquidate it;
(xxii) the passing of any resolution for the winding up of any Investment Manager Group Company or undertaking any merger, reconstruction or liquidation exercise concerning any Investment Manager Group Company or applying for the appointment of a receiver, manager or judicial manager or like officer or applying to the court in any relevant jurisdiction to order a meeting of creditors or any class of creditors or

– 25 –

LETTER FROM THE BOARD

members or any class of members or to sanction any such compromise or arrangement as is referred to in Section 166 of the Companies Ordinance or the equivalent under the law of the relevant jurisdiction;

(xxiii) the application to the court in any relevant jurisdiction to order a meeting of creditors or any class of creditors or members or any class of members or to sanction any such compromise or arrangement in any manner similar to that as referred to in Section 166 of the Companies Ordinance or the equivalent under the law of the relevant jurisdiction;
(xxiv) the entering into, approving or making adjustments of or modifications to terms of transactions between any Investment Manager Group Company and the directors and/or shareholders of any Investment Manager Group Company involving the interest of any director and/or shareholder of the Investment Manager Group Company, including but not limited to the making of any loans or advances, whether directly or indirectly, or the provision of any guarantee, indemnity or security for or in connection with any indebtedness of liabilities of any director or shareholder of the Investment Manager Group Company;
(xxv) the entering into of any transaction between any Investment Manager Group Company and the directors and/or shareholders of any Investment Manager Group Company or any other persons or companies associated with any of the above other than transactions entered into on normal commercial terms and on an arm’s length basis;
(xxvi) the entering into of any abnormal or unusual contract or contract outside the ordinary course of business of the Investment Manager Group Company or under which the Investment Manager may incur costs of US$125,000 or more or which may not be fulfilled or completed within one year;
(xxvii) the entering into of any agreement, transaction or arrangement which is not negotiated and not entered into on an arm’s length basis and in the ordinary course of business of any Investment Manager Group Company or the payment of any fee, charge or other sum to any person except pursuant to a transaction which has been negotiated and entered into on an arm’s length basis and in the ordinary course of business of such Investment Manager Group Company;
(xxviii) the institution, compromise, settlement of or withdrawal from material legal proceedings or the submission to arbitration of any material dispute (in each case other than a dispute involving one of the shareholders or a director appointed by them) involving any Investment Manager Group Company provided that for this purpose “material” matter shall mean any matter or number of related or similar matters, where the possible liability exceeds US$125,000;

– 26 –

LETTER FROM THE BOARD

(xxix) the introduction of any profit sharing scheme, employee share option scheme or share participation scheme, or the alteration to the terms thereof;
(xxx) the adoption of the audited accounts of any Investment Manager Group Company;
(xxxi) the appointment, removal and conditions of employment of any employee earning US$125,000 or more per year;
(xxxii) the adoption of or amendment to any business plan;
(xxxiii) the acquisition of any assets or property (other than in the ordinary course of business) with a total cost of more than US$125,000;
(xxxiv) the sale or disposal of any fixed assets for a total price per transaction of more than US$125,000;
(xxxv) the appointment of a managing director of any Investment Manager Group Company;
(xxxvi) any matters concerning, affecting or varying any rights, powers, privileges, entitlements, obligations or liabilities attaching to the shares held by each shareholder;
(xxxvii) any matters concerning, affecting or varying any rights, powers, duties, obligations or liabilities of the Investment Manager or the General Partner under the Management Agreement, including, without limitation, any amendment to or assignment or termination thereof requiring the consent or approval of the Investment Manager;
(xxxviii) any delegation of the powers of the board of directors of any Investment Manager Group Company in relation to any of the matters referred to in paragraphs (i) to (xxxvii) above; and
(xxxix) any amendment, modification, variation, deletion or addition to or in respect of any or all of the matters referred to in paragraphs (i) to (xxxviii) above.
(v) the wholly-owned subsidiary of HCL being the party to the Management Agreement shall be granted an option, exercisable at any time when the Management Agreement subsists, to acquire all of the shares of the Investment Manager held by the wholly-owned subsidiary of ASM for an amount equal to the fair value of such shares, such amount to be determined by multiplying the net asset value of the Investment Manager (based on its latest consolidated audited accounts) by 51 per cent.

– 27 –

LETTER FROM THE BOARD

Investment Advisor Agreement

Parties: ImPac Asset Management (HK) Limited Investment Manager

ImPac Asset Management (HK) Limited, an indirect wholly-owned subsidiary of HCL, will act as the investment advisor to the Investment Manager. It was incorporated in Hong Kong on 13th November, 1990 and is based in Hong Kong. It is not currently providing, or intending to provide, any similar advisory services to investment managers other than Lippo ASM Investment Management Limited. Its principal functions will be to identify, review (including by conducting due diligence) and recommend potential investments to the Investment Manager and to co-ordinate the provision of administrative services to LAAP, monitoring investments and assisting in the compilation of financial information to be ultimately provided to the Limited Partners. The Investment Advisor will have employees based in Hong Kong performing those functions and is therefore required to be registered with the Securities and Futures Commission in Hong Kong under the SFO.

Investment advisory services to be performed by the Investment Advisor include:

(i) facilitating the sourcing of opportunities for possible investments by LAAP consistent with the investment objectives of LAAP, including providing initial screening of such opportunities and making recommendations on such opportunities to the Investment Manager;
(ii) carrying out due diligence on potential investments by LAAP and advising the Investment Manager as to the terms of acquisition or disposal of any investments;
(iii) periodically reporting to the Investment Manager thereon including providing one or more representatives to attend meetings with the General Partner, LAAP or Limited Partners to report on investments and related matters;
(iv) providing the Investment Manager with written reports and other materials relating thereto as the Investment Manager may reasonably require;
(v) providing advice to the Investment Manager concerning the exercise of voting and other rights attaching to or arising in respect of investments;
(vi) keeping under review each investment with a view to identifying, procuring and evaluating possible divestment opportunities;
(vii) calculating the value of particular investments as and when reasonably required by the Investment Manager;
(viii) preparing monthly, quarterly and yearly progress reports and valuations (prepared by the Investment Advisor) of the investments in accordance with such procedures and on such a basis as the Investment Manager may require; and

– 28 –

LETTER FROM THE BOARD

(ix) carrying out such other investment advisory activities and other actions in connection with the Investment Advisor’s appointment under the Investment Advisor Agreement as may be reasonably requested by the Investment Manager (and which are within the Investment Advisor’s power and control, do not require material additional expenditure to be incurred by the Investment Advisor and are not materially detrimental to the Investment Advisor’s business).

The Investment Advisor shall receive a fee in an amount to be determined and specified in the Investment Advisor Agreement.

Unless previously terminated, the Investment Advisor Agreement shall continue for the entire length of the term of the Limited Partnership and shall expire on the date the Limited Partnership is liquidated.

The Investment Manager and the Investment Advisor shall be entitled to terminate the appointment of the other party to the Investment Advisor Agreement at any time by giving notice in writing to the other party to the Investment Advisor Agreement, as the case may be, if:

(i) an event of insolvency occurs in relation to the other party to the Investment Advisor Agreement; or
(ii) the General Partner ceases to be the general partner of the Limited Partnership or if the General Partner or any company that controls the General Partner suffers a change of control that has not been previously approved by the Limited Partners; or
(iii) upon the expiration or early termination of the Limited Partnership Agreement; or
(iv) the other party to the Investment Advisor Agreement, either (i) commits any material breach of its obligations under the Investment Advisor Agreement; or (ii) is negligent in the performance of its duties or disregards its obligations and duties under the Investment Advisor Agreement.

In addition, the Investment Manager shall be entitled to terminate the appointment of the Investment Advisor at any time by giving notice in writing to the Investment Advisor if:

(i) Limited Partners representing not less than 50 per cent. of the Capital Commitments of the Limited Partners vote in favour of such termination; or
(ii) any of the Investment Advisor or any company that controls the Investment Advisor suffers a change of control that has not been previously approved by the Investment Manager in writing, such approval not to be unreasonably withheld.

– 29 –

LETTER FROM THE BOARD

Finally, the Investment Advisor shall be entitled to terminate its appointment under the Investment Advisor Agreement at any time by giving notice in writing to the Investment Manager if the Investment Manager ceases to be the sole and exclusive investment manager to the General Partner. No notice period is required for the aforesaid termination of the Investment Advisor Agreement.

CONDITIONS

The LAAP Investment is conditional on:

(i) the approval of the shareholders of each of Lippo, the Company and HCL at the relevant extraordinary/special general meetings (as the case may be) of each of the foregoing to be convened to approve the matters set out in the Term Sheet, including the five agreements referred to above. In the case of the Company and HCL, written shareholders’ consents from Lippo and the Company have been obtained in lieu of convening meetings of shareholders; and
(ii) the obtaining of all relevant regulatory approvals in the Cayman Islands for the establishment of LAAP and, following the obtaining of such approvals, the establishment and registration of LAAP in the Cayman Islands. As at the Latest Practicable Date, all such approvals have been obtained and LAAP is established and registered in the Cayman Islands.

All the aforesaid conditions save for obtaining the approval from the shareholders of Lippo have been fulfilled as at the Latest Practicable Date.

No investment management activities or investment decisions of LAAP will take place within Hong Kong and, accordingly, none of LAAP, the General Partner or the Investment Manager are required to be authorised by, or registered with, the Securities and Futures Commission in Hong Kong. All investment management activities or investment decisions of LAAP, the General Partner and the Investment Manager will take place in jurisdictions where LAAP, the General Partner or the Investment Manager, as the case may be, has been advised by their legal advisers in those jurisdictions that no authorisation or registration is required.

REASONS FOR AND BENEFITS OF INVESTING IN LAAP

The HCL Group has accumulated a substantial amount of cash and other investment in securities (over 150 different types of listed or unlisted equity securities, debt securities and investment funds). As at 31st May, 2005, it had unaudited other investments in securities of approximately HK$1.1 billion and cash and bank balances of approximately HK$0.5 billion, totalling approximately HK$1.6 billion, representing approximately 47 per cent. of the HCL Group’s total assets at that date, which it wishes to deploy. There is no material change in the value of the securities investments as at the Latest Practicable Date as compared to their value as at 31st May, 2005. Of the HK$1.1 billion other investments in securities as at 31st May, 2005, approximately HK$0.7 billion, being its market value as at 31st May, 2005, were listed investments and approximately HK$0.4 billion were unlisted

– 30 –

LETTER FROM THE BOARD

investments. The unlisted investments are valued based on their quoted prices or net asset values provided by the investment brokers. Such unlisted investments are purchased and realised by HCL from time to time. Based on past experiences, most of these securities can be realised within one month and, accordingly, are considered by the Directors to be liquid investments. Based on audited consolidated accounts of HCL as of 31st December, 2004, the HCL Group had other investments in securities of approximately HK$1.1 billion and cash and bank balances of approximately HK$0.8 billion, totalling approximately HK$1.9 billion, representing approximately 55 per cent. of its total assets at that date. Of the HK$1.1 billion other investments in securities as at 31st December, 2004, approximately HK$0.7 billion were listed investments and approximately HK$0.4 billion were unlisted investments. HCL has identified property in East Asia as an attractive area of investment opportunity. The Directors consider that participation in LAAP will provide an effective medium for investments in Asian property markets and one to which other prospective Limited Partners may be attracted as co-investors, increasing the ability of LAAP to network and tackle larger projects. ASM, being a professional investment manager with a highly experienced team and proven record, will promote deal flow and ensure that projects are properly vetted and administered. By participating as a Limited Partner, through Pacific, HCL will not take any responsibility for any debts or other obligations of LAAP. Similarly, the wholly-owned subsidiary of HCL which is a shareholder of the Investment Manager will not take any responsibility for any debts or other obligations of LAAP in that capacity. Although the Group will not have any direct control over the General Partner who has the right to manage and take any and all actions on behalf of LAAP, the Group will be able to exert significant influence through its 49 per cent. interest in the Investment Manager. Moreover, the Investment Manager will be advised by the Investment Advisor which is a wholly-owned subsidiary of HCL. With such investment management and advisory structure, and the solid background and experience of ASM, the Directors are of the view that the interests of the Company and the Shareholders will be properly safeguarded.

The opportunity for real estate investment in East Asia is growing and the economic environment has improved significantly. The Directors consider that certain commercial and residential property assets may be acquired at attractive prices as rents and capital values in certain East Asian markets are at historically low levels. The Directors believe that the prospects for real estate investment in the near term are encouraging, based on the favourable prospects for strong economic growth throughout the region driven by on-going economic and structural reforms. Based on the aforesaid, the Directors consider the LAAP Investment which seeks capital growth by investing in real estate in the East Asia region to be in the interest of the Company and the Shareholders. The Directors consider that the initial term of ten years for the Limited Partnership is appropriate in view of the long term nature of property investment. Moreover, the Directors consider that LAAP, by actively managing its real estate investments in conjunction with ASM, will add value for Pacific and the other Limited Partners. In this regard, HCL hopes to gain from the wealth of experience which ASM has accumulated in actively managing its own investment portfolio.

– 31 –

LETTER FROM THE BOARD

FINANCIAL EFFECTS

When Pacific is called to inject capital into LAAP, such amount will be recognised as investment in an associate. The LAAP Investment will be funded from the cash resources and the sales proceeds from realisation of certain securities investments of HCL. As set out in the unaudited pro forma consolidated balance sheet in Appendix II – “Pro forma financial information of the Group”, the Directors estimate that approximately HK$450 million cash resources and approximately HK$1,000 million sales proceeds from the securities investment realisation will be used for funding the LAAP Investment. Since the Group’s actual balance of other investments in securities and bank and cash changes from time to time, the actual outlays from each category might be different from the aforesaid figures. Certain amount of securities investments will be realised following the approval of the LAAP Investment so as to meet Pacific’s obligations in respect of drawdowns for funding the investments in the Limited Partnership. The management of HCL will closely monitor the performance of these securities investments to ensure that Pacific will have sufficient funding to meet its HK$1,450 million Capital Commitment.

The total assets and the net asset value of the Group will not be affected because of the subscription. However, non-current and current assets will be increased and reduced by HK$1,450 million respectively and the current ratio, calculated as dividing current assets by current liabilities, will be reduced from 3.18: 1 to 2.13:1. The Directors consider the current ratio of 2.13:1 following the injection of HK$1,450 million into LAAP is healthy and do not expect such reduction will have any significant adverse impact on the Group’s liquidity. With the LAAP Investment to be funded from the internal resources of the Group and the total assets remain unchanged, the Group’s gearing ratio will not be affected. The Directors consider that the LAAP Investment will improve the earning base of the Group in view of the expected quarterly distribution to be made by LAAP in due course having regard to the favourable prospects of real estate investment in the East Asia region.

RISK FACTORS

The risk factors associated with the LAAP Investment are as follows:

Illiquidity of real estate investment

Investment in real property are generally illiquid, limiting the ability of LAAP to realise property assets for cash at short notice, or requiring a substantial reduction in the price which might otherwise be sought for such assets to ensure a quick sale.

Property investment risks

The revenue and value of property investment projects may be affected by a number of factors, including international, regional and local economic climates; local real estate conditions; interest rates and exchange rate fluctuations and changes in governmental regulations. No assurance can be given that these factors will not have any adverse effect on LAAP’s financial or other prospects which in turn may affect the Group’s return from the LAAP Investment.

– 32 –

LETTER FROM THE BOARD

Reliance on the General Partner and the Investment Manager

Pursuant to the Limited Partnership Agreement, the General Partner has full power of management, control and operation of and determination of policy with respect to, LAAP, its investments and other activities. The General Partner will delegate its power of management and administration over LAAP to the Investment Manager pursuant to the Management Agreement. Although the Group can exert influence through its 49 per cent. interest in the Investment Manager, it will not have the power to control the General Partner which is an independent third party.

LISTING RULES IMPLICATIONS

Pacific is a wholly-owned subsidiary of HCL. HCL is beneficially owned as to approximately 72.26 per cent. by the Company, which in turn is beneficially owned as to approximately 71.13 per cent. by Lippo. The LAAP Investment exceeds 25 per cent. but does not exceed 100 per cent. of the market capitalisation of the Company, and therefore constitutes a major transaction for the Company under Chapter 14 of the Listing Rules.

As the LAAP Investment is an investment in a newly established entity, there are no net profits attributable to LAAP or to the Capital Commitments contributed to the Limited Partnership by Pacific. As HCL will not control LAAP, the results and balance sheet of LAAP will not be consolidated into that of HCL. Subject to the review by the auditors of HCL, HCL will equity accounted for the results of LAAP whereby the LAAP Investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in Pacific’s share of net assets of LAAP and the profit or loss of HCL shall include its share of profit or loss of LAAP because HCL can exert influence on LAAP through its interest in the Investment Manager. The Company will have the same accounting treatment in respect of its attributable interest in the LAAP Investment as HCL. No guarantee or other security will be given by Lippo, the Company, HCL or Pacific, or required by the General Partner or LAAP, as part of, or in connection with, the LAAP Investment.

As stated above, shareholders’ approval is required to approve the LAAP Investment and the relevant agreements. In this respect, no shareholders of Lippo, the Company or HCL or their respective associates have any interest in the LAAP Investment different from the other shareholders of Lippo, the Company and HCL in general and consequently no shareholders will be required to abstain from voting at the relevant shareholders’ meetings. The Company, which is beneficially interested in an aggregate of 973,240,440 shares in HCL through itself and HKCL Holdings Limited (representing approximately 72.26 per cent. of the existing issued share capital of HCL), has given written approval to HCL to enter into the Term Sheet for the LAAP Investment. Similarly, Lippo, which is beneficially interested in an aggregate of 6,544,696,389 Shares through Skyscraper Realty Limited (representing approximately 71.13 per cent. of the existing issued share capital of the Company), has given written approval to the Company to enter into the Term Sheet for the LAAP Investment. In accordance with Rule 14.44 of the Listing Rules, the written shareholder’s approvals have been accepted in lieu of holding the relevant general meetings.

– 33 –

LETTER FROM THE BOARD

INFORMATION ON THE COMPANY

The principal business activity of the Company is investment holding. The principal activities of its subsidiaries are investment holding, property investment and development, food businesses, fund management, underwriting, corporate finance, securities broking, securities investment, treasury investment, money lending, banking and other related financial services.

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

Looking ahead, the general prospects for the Hong Kong economy for the coming year look promising with a forecast of a 4.5 to 5.5 per cent. Gross Domestic Product growth in 2005 according to 2005-06 budget speech. The extension of the Individual Traveller Scheme and the coming into effect of Phase 2 of the Closer Economic Partnership Arrangement on 1st January, 2005 has provided further momentum to local economic growth. While the general prospects look good, there are some uncertainties on the global economic front, reflecting concerns over the pace of economic growth in the United States, increasing interest rates, high oil prices and slowing down of the PRC economy.

Overall, the Group remains optimistic about its business in the future. With its strong and healthy financial position, the Group is in an excellent position to benefit from the economic growth in Asia. During the first half of the year, the Group has expanded its property portfolio by acquiring high quality properties in Macau, Singapore and Indonesia. Going forward, the Group will continue to explore suitable investment opportunities, especially in the financial and investment sectors and in addition to its investment in LAAP, look into properties markets in the Asian region with an aim of bringing additional value to the Group. Management will continue to adopt a cautious and prudent approach when assessing new investment opportunities.

GENERAL

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

Yours faithfully, By Order of the Board Lippo China Resources Limited

Stephen Riady

Deputy Chairman, Managing Director and Chief Executive Officer

– 34 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

1. THREE-YEAR FINANCIAL SUMMARY

Set out below is a summary of the audited consolidated profit and loss account and consolidated balance sheet of the Group for each of the three years ended 31st December, 2004, extracted from the relevant annual reports of the Company:

(a) Consolidated Profit and Loss Account

Turnover
Cost of sales
Gross profit
Other revenue
Administrative expenses
Other operating expenses
Write-back of provision/(Provisions)
for bad and doubtful debts relating to:
Banking operation
Non-banking operations
Write-back of provisions/(Provisions)
for impairment losses:
Associates
Investment securities
Fixed assets
Goodwill
Net unrealised gain/(loss) on transfer
of investment securities and
held-to-maturity securities
to other investments in securities
Gain on disposal of subsidiaries
Loss on disposal of interests in
subsidiaries
Negative goodwill recognised as income
Provision against properties held for sale
Write-back of provision/(Provision)
for loss on guaranteed return
arrangement for fund management
Write back of deficit on revaluation
of investment properties
Gain on dilution of shareholding
in an associate
Profit from operating activities
Finance costs
Share of results of associates
Profit before tax
Tax
Profit before minority interests
Minority interests
Net profit from ordinary activities
attributable to shareholders

For the year ended 31st December
2004
2003
2002
HK$’000
HK$’000
HK$’000
2,793,276
1,811,952
1,116,614
(2,299,519)
(1,201,480)
(755,915)
493,757
610,472
360,699
–
4,171
7,750
(231,146)
(200,770)
(218,928)
(173,297)
(133,092)
(128,217)
666
(3,753)
(4,025)
(6,514)
(1,916)
(19,851)
(16,367)
(2,703)
–
49,207
(32,596)
(66,865)
–
–
(283,194)
–
–
(83,193)
(7,856)
20,483
–
–
–
525,726
(7,497)
–
–
553
40,580
131,668
–
(11,280)
(29,220)
–
10,868
(88,290)
–
–
56,751
–
–
16,423
101,506
300,464
177,234
(29,260)
(38,268)
(62,549)
60,679
52,458
(3,472)
132,925
314,654
111,213
(66,312)
(43,624)
7,865
66,613
271,030
119,078
(20,753)
(67,848)
(371,171)
45,860
203,182
(252,093)

– 35 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Consolidated Balance Sheet

ASSETS NON-CURRENT ASSETS Goodwill Fixed assets Investment properties Properties under development Interests in associates Interests in jointly controlled entities Investment securities Held-to-maturity securities Loans and advances Deferred tax assets Assets less liabilities attributable to banking operations Deposits paid for long term investments CURRENT ASSETS Properties held for sale Inventories Held-to-maturity securities Other investments in securities Loans and advances Debtors, prepayments and deposits Client trust bank balances Certificates of deposit held Pledged time deposits Cash and bank balances TOTAL ASSETS	As 2004 HK$’000 76,512 325,157 2,362,777 167,634 531,676 7,393 552,094 62,816 24,031 4,115 175,411 – 4,289,616 10,140 105,780 82,216 1,306,843 180,692 396,645 389,123 – – 1,933,592 4,405,031 8,694,647	at 31st December, 2003 2002 HK$’000 HK$’000 80,155 63,881 304,118 309,857 1,911,479 1,981,688 46,403 39,990 510,312 457,084 – – 358,238 345,841 86,266 504,348 26,553 58,339 4,282 – 156,081 148,971 – 74,342 3,483,887 3,984,341 89,696 86,280 120,801 64,611 93,563 112,320 1,342,806 310,840 99,907 135,447 515,564 412,496 430,558 253,930 – 1,000,000 155,102 155,817 1,962,892 1,538,161 4,810,889 4,069,902 8,294,776 8,054,243	at 31st December, 2003 2002 HK$’000 HK$’000 80,155 63,881 304,118 309,857 1,911,479 1,981,688 46,403 39,990 510,312 457,084 – – 358,238 345,841 86,266 504,348 26,553 58,339 4,282 – 156,081 148,971 – 74,342 3,483,887 3,984,341 89,696 86,280 120,801 64,611 93,563 112,320 1,342,806 310,840 99,907 135,447 515,564 412,496 430,558 253,930 – 1,000,000 155,102 155,817 1,962,892 1,538,161 4,810,889 4,069,902 8,294,776 8,054,243
			3,984,341
			86,280 64,611 112,320 310,840 135,447 412,496 253,930 1,000,000 155,817 1,538,161
			4,069,902
			8,054,243

– 36 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

EQUITY AND LIABILITIES CAPITAL AND RESERVES Share capital Reserves MINORITY INTERESTS NON-CURRENT LIABILITIES Deferred tax liabilities Long term bank loans CURRENT LIABILITIES Bank loans Loan note Creditors, accruals and deposits received Provision for loss on guaranteed return arrangement for fund management Tax payable TOTAL EQUITY AND LIABILITIES	As 2004 HK$’000 920,109 3,797,838 4,717,947 1,686,437 176,336 727,612 903,948 471,654 – 843,811 – 70,850 1,386,315 8,694,647	at 31st December, 2003 2002 HK$’000 HK$’000 920,109 920,109 3,399,204 3,204,622 4,319,313 4,124,731 1,654,587 1,683,656 160,624 116,011 700,262 692,551 860,886 808,562 277,723 430,508 – 58,500 1,118,546 767,401 – 138,290 63,721 42,595 1,459,990 1,437,294 8,294,776 8,054,243	at 31st December, 2003 2002 HK$’000 HK$’000 920,109 920,109 3,399,204 3,204,622 4,319,313 4,124,731 1,654,587 1,683,656 160,624 116,011 700,262 692,551 860,886 808,562 277,723 430,508 – 58,500 1,118,546 767,401 – 138,290 63,721 42,595 1,459,990 1,437,294 8,294,776 8,054,243
			4,124,731
			1,683,656
			116,011 692,551
			808,562
			430,508 58,500 767,401 138,290 42,595
			1,437,294
			8,054,243

– 37 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2. AUDITED FINANCIAL STATEMENTS

The following is a summary of the audited consolidated income statement of the Company for the two years ended 31st December, 2004, the audited consolidated balance sheet of the Group and the audited balance sheet of the Company as at 31st December, 2004 and 2003, the audited consolidated statement of changes in equity and audited consolidated cash flow statement of the Group for the two years ended 31st December, 2004 together with accompanying notes extracted from the annual report of the Company for the year ended 31st December, 2004:

Consolidated Profit and Loss Account

For the year ended 31st December, 2004

Note Turnover 5 Cost of sales Gross profit Other revenue Administrative expenses Other operating expenses Write-back of provision/(Provisions) for bad and doubtful debts relating to: Banking operation Non-banking operations Write-back of provisions/(Provisions) for impairment losses: Associates Investment securities Net unrealised gain/(loss) on transfer of investment securities and held-to-maturity securities to other investments in securities 6 Loss on disposal of interests in subsidiaries Negative goodwill recognised as income Provision against properties held for sale Write-back of provision for loss on guaranteed return arrangement for fund management Profit from operating activities 7 Finance costs 11 Share of results of associates Profit before tax Tax 12 Profit before minority interests Minority interests Net profit from ordinary activities attributable to shareholders 13, 14 & 33	2004 HK$’000 2,793,276 (2,299,519) 493,757 – (231,146) (173,297) 666 (6,514) (16,367) 49,207 (7,856) (7,497) 553 – – 101,506 (29,260) 60,679 132,925 (66,312) 66,613 (20,753) 45,860	2003 HK$’000 1,811,952 (1,201,480) 610,472 4,171 (200,770) (133,092) (3,753) (1,916) (2,703) (32,596) 20,483 – 40,580 (11,280) 10,868 300,464 (38,268) 52,458 314,654 (43,624) 271,030 (67,848) 203,182

– 38 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Earnings per share 15 Basic Diluted Dividend Final, proposed/paid after the balance sheet date 16	2004 HK cents 0.5 N/A HK$’000 18,402	2003 HK cents 2.2

		N/A

		HK$’000 18,402

– 39 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Balance Sheet

As at 31st December, 2004

Note ASSETS NON-CURRENT ASSETS Goodwill 17 Fixed assets 18 Investment properties 19 Properties under development 20 Interests in associates 21 Interests in jointly controlled entities 22 Investment securities 23 Held-to-maturity securities 24 Loans and advances Deferred tax assets 25 Assets less liabilities attributable to banking operation 26 CURRENT ASSETS Properties held for sale 27 Inventories 28 Held-to-maturity securities 24 Other investments in securities 29 Loans and advances Debtors, prepayments and deposits 30 Client trust bank balances Pledged time deposits Cash and bank balances TOTAL ASSETS	2004 HK$’000 76,512 325,157 2,362,777 167,634 531,676 7,393 552,094 62,816 24,031 4,115 175,411 4,289,616 10,140 105,780 82,216 1,306,843 180,692 396,645 389,123 – 1,933,592 4,405,031 8,694,647	2003 HK$’000 80,155 304,118 1,911,479 46,403 510,312 – 358,238 86,266 26,553 4,282 156,081
		3,483,887
		89,696 120,801 93,563 1,342,806 99,907 515,564 430,558 155,102 1,962,892
		4,810,889
		8,294,776

– 40 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note EQUITY AND LIABILITIES CAPITAL AND RESERVES Share capital 31 Reserves 33 MINORITY INTERESTS NON-CURRENT LIABILITIES Deferred tax liabilities 34 Long term bank loans 35 CURRENT LIABILITIES Bank loans 35 Creditors, accruals and deposits received 36 Tax payable TOTAL EQUITY AND LIABILITIES	2004 HK$’000 920,109 3,797,838 4,717,947 1,686,437 176,336 727,612 903,948 471,654 843,811 70,850 1,386,315 8,694,647	2003 HK$’000 920,109 3,399,204
		4,319,313
		1,654,587
		160,624 700,262
		860,886
		277,723 1,118,546 63,721
		1,459,990
		8,294,776

– 41 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Summary Statement of Changes in Equity

For the year ended 31st December, 2004

Note Total equity as at 1st January Surplus on revaluation of investment properties 33 Deferred tax charge arising from surplus on revaluation of investment properties 33 Release of deferred tax charge on revaluation surplus upon disposal of investment properties 33 Deferred tax charge arising from change in statutory tax rate on revaluation surplus of leasehold properties 33 Exchange differences on translation of the financial statements of foreign entities 33 Net gain not recognised in the consolidated profit and loss account Net profit from ordinary activities attributable to shareholders 33 Utilisation of tax loss included in investment property revaluation reserve 33 Release of investment property revaluation reserve upon disposal of investment properties 33 Release of reserves upon disposal of a subsidiary 33 2003 final dividend, declared 16 & 33 Total equity as at 31st December	2004 HK$’000 4,319,313 368,076 (9,961) – – 12,721 370,836 45,860 – 214 126 (18,402) 4,717,947	2003 HK$’000 4,124,731 48,814 (25,026) 8,912 (381) (8,774) 23,545 203,182 (11,160) (20,985) – – 4,319,313

– 42 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Balance Sheet

As at 31st December, 2004

Note ASSETS NON-CURRENT ASSETS Fixed assets 18 Interests in subsidiaries 37 Interests in an associate 21 Investment securities 23 CURRENT ASSETS Debtors, prepayments and deposits Pledged time deposits Cash and bank balances TOTAL ASSETS EQUITY AND LIABILITIES CAPITAL AND RESERVES Share capital 31 Reserves 33 NON-CURRENT LIABILITIES Long term bank loans 35 CURRENT LIABILITIES Bank loans 35 Creditors, accruals and deposits received Tax payable TOTAL EQUITY AND LIABILITIES	2004 HK$’000 770 5,028,165 1 7,810 5,036,746 18,400 – 132,910 151,310 5,188,056 920,109 3,475,033 4,395,142 611,000 164,000 17,617 297 181,914 5,188,056	2003 HK$’000 358 4,813,153 21 7,810
		4,821,342
		18,089 155,102 49,322
		222,513
		5,043,855

		920,109 3,391,258
		4,311,367
		545,000
		181,786 5,405 297
		187,488
		5,043,855

– 43 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Consolidated Cash Flow Statement

For the year ended 31st December, 2004

Note Cash flows from operating activities Cash from operations 38(a) Interest received Dividends received from: Listed investments Unlisted investments Dividends received from associates Taxes paid: Hong Kong Overseas Net cash from operating activities Cash flows from investing activities Capital injection to banking operation Return of capital by an associate Receipts from disposals of: Fixed assets Investment properties Investment securities Interests in a subsidiary Payments to acquire: Fixed assets Investment properties Properties under development Investment securities Held-to-maturity securities Associates Receipts from redemption of investment securities and held-to-maturity securities Advance from banking operation Deposits refunded from long term investments Additions to properties under development Decrease in pledged time deposits Repayment from/(Advances to) associates Advances to jointly controlled entities Disposal of a subsidiary, net of cash disposed of 38(b) Acquisition of subsidiaries, net of cash acquired 38(c) Increase in interests in subsidiaries Increase in interests in associates Payment of deferred cash settlement for acquisition of a subsidiary Net cash from/(used in) investing activities	2004 HK$’000 52,577 55,129 19,905 2,029 – (2,072) (16,870) 110,698 (29,100) – 2,494 2,561 31,836 21,798 (17,403) (71,682) (97,193) (216,822) (10,134) (1,903) 27,904 15,540 – (20,466) 155,102 3,539 (7,393) (1,264) 12,836 (3,943) (38,259) (21,242) (263,194)	2003 HK$’000 869,265 77,899 13,722 976 7,945 (1,490) (9,927) 958,390 – 25,478 3,613 156,291 80,602 – (10,102) – – (28,622) (67,077) (24,154) – – 267 (14,448) – (1,044) – – (34,043) (24,469) – – 62,292

– 44 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Cash flows from financing activities Drawdown of bank loans_(Note) Repayment of bank loans(Note)_ Repayment to minority shareholders of subsidiaries Issue of shares by subsidiaries to minority shareholders Repayment of loan note Interest paid Dividend paid to shareholders of the Company Dividends and distributions paid to minority shareholders of subsidiaries Net cash from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Exchange realignments Cash and cash equivalents at end of year Analysis of balances of cash and cash equivalents: Cash and bank balances	2004 HK$’000 893,578 (682,797) (30,414) 4,398 – (26,987) (18,402) (30,483) 108,893 (43,603) 1,962,892 14,303 1,933,592 1,933,592	2003 HK$’000 618,306 (761,004) (19,478) – (58,500) (39,636) – (30,047) (290,359) 730,323 1,228,940 3,629 1,962,892 1,962,892

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

– 45 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes to the Financial Statements

1. CORPORATE INFORMATION

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

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

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

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

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (which also include Statements of Standard Accounting Practice and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the Companies Ordinance. They have been prepared under the historical cost convention, except for the periodic remeasurement of investment properties and certain securities investments as further explained below.

(b) Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries for the year ended 31st December, 2004. The results of subsidiaries acquired or disposed of during the year are consolidated from or to their effective dates of acquisition or disposal, respectively. All significant intercompany transactions and balances within the Group are eliminated on consolidation.

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

(c) Subsidiaries

A subsidiary is a company, other than a jointly controlled entity, in which the Company, directly or indirectly, controls more than half of its voting power or issued share capital or controls the composition of its board of directors.

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.

– 46 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(d) Joint venture companies

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

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

A joint venture company is treated as:

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

(e) Jointly controlled entities

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

The Group’s share of the post-acquisition results and reserves of jointly controlled entities is included in the consolidated profit and loss account and consolidated reserves, respectively. The Group’s interests in jointly controlled entities are stated in the consolidated balance sheet at the Group’s share of net assets under the equity method of accounting, less any impairment losses.

(f) Associates

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

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

The results of associates are included in the Company’s profit and loss account to the extent of dividends received and receivable. The Company’s interest in an associate is treated as an long term asset and is stated at cost less any impairment losses.

– 47 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(g) Goodwill

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

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

Prior to the adoption of Statement of Standard Accounting Practice (“SSAP”) 30 “Business combinations” in 2001, goodwill arising from acquisitions was eliminated against consolidated reserves in the year of acquisition. On the adoption of SSAP 30, the Group applied the transitional provision of the SSAP that permitted such goodwill to remain eliminated against consolidated reserves. Goodwill from acquisitions subsequent to the adoption of the SSAP is treated according to the policy stated above.

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

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

(h) Negative goodwill

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

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

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

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

Prior to the adoption of SSAP 30 “Business combinations” in 2001, negative goodwill arising from acquisitions was credited to the capital reserve in the year of acquisition. On the adoption of SSAP 30, the Group applied the transitional provision of the SSAP that permitted such negative goodwill to remain credited to the capital reserve. Negative goodwill from acquisition subsequent to the adoption of the SSAP is treated according to the policy stated above.

– 48 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

(i) Impairment of assets

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

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. An impairment loss is charged to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued amount, when the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the recoverable amount of an asset, however not to an amount higher than the carrying amount that would have been determined (net of any depreciation/ amortisation), had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is credited to the profit and loss account in the period in which it arises, unless the asset is carried at a revalued amount, when the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

(j) Fixed assets and depreciation

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

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

Land and buildings	1 per cent.
Leasehold land and buildings	Over the remaining lease terms
Leasehold improvements	20 per cent.
Furniture, fixtures, plant and equipment	10 per cent. to 331/3per cent.
Motor vehicles	12 per cent. to 25 per cent.

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

When an asset is reclassified from investment properties to leasehold land and buildings or vice versa, the asset is stated at the carrying amount as at the date of reclassification and the revaluation reserve attributable to that asset is reclassified from the investment property revaluation reserve to the other asset revaluation reserve or vice versa, as the case may be. Depreciation of such reclassified fixed assets is calculated based on that carrying amount and the portion of the depreciation charge attributable to the related revaluation surplus is transferred from the other asset revaluation reserve to retained profits. On disposal or retirement, the attributable revaluation surplus not previously dealt with in retained profits is transferred directly to retained profits.

– 49 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(k) Investment properties

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

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

(l) Properties under development

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

(m) Investment securities

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

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

(n) Held-to-maturity securities

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

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

(o) Other investments in securities

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

– 50 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(p) Properties held for sale

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

(q) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average basis and in the case of finished goods, comprises direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

(r) 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) income from the sale of completed properties, on the exchange of legally binding unconditional sales contracts;
(iii) sales from food businesses, on despatch of goods to customers;
(iv) dealings in securities and sale of investments, on the transaction dates when the relevant contract notes are exchanged;
(v) interest income, in proportion to time, taking into account the principal outstanding and the effective interest rate applicable;
(vi) dividend income, when the shareholders’ right to receive payment has been established; and
(vii) commission income is accounted for, in the period when receivable, unless it is charged to cover the costs of a continuing service to, or risk borne for, customers, or is interest income in nature. In this case, commission income is recognised on a pro rata basis over the relevant period.

(s) Income tax

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

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

Deferred tax liabilities are recognised for all taxable temporary differences:

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

– 51 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax assets and unused tax losses can be utilised:

except where the deferred tax asset relating to the deductible temporary differences arises from negative goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

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

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

(t) 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.

(u) 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.

(v) Foreign currencies

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

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

– 52 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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.

(w) Cash and cash equivalents

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

For the purpose of the balance sheet, cash and bank balances comprise cash on hand and at banks, including term deposits, which are not restricted as to use.

(x) Related parties

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

(y) Dividends

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

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

(z) 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 Fund schemes operated for the benefits of employees of the Group as required under the Hong Kong Mandatory Provident Fund Schemes Ordinance are charged to the profit and loss account when incurred. The assets of the schemes are held separately from those of the Group in independently administered funds.

– 53 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Share option schemes

The Group operates share option schemes for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. The financial impact of share options granted under the share option schemes is not recorded in the Company’s or the Group’s balance sheet until such time as the options are exercised, and no charge is recorded in the profit and loss account or balance sheet for their cost. Upon the exercise of share options, the resulting shares issued are recorded by the Company and its subsidiaries as additional share capital at the nominal value of the shares, and the excess of the exercise price per share over the nominal value of the shares is recorded by the Company and its subsidiaries in the share premium account. Options which are cancelled prior to their exercise date, or which lapse, are deleted from the register of outstanding options.

(aa) Accounting for banking operation

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

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

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

All advances are recognised when cash is advanced to borrowers.

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

(ii) Finance leases and hire purchase contracts

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

(iii) Off-balance sheet financial instruments

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

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

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

– 54 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

4. SEGMENT INFORMATION

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

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

(a) the treasury investment segment includes investments in cash and bond markets;
(b) the property investment and development segment includes letting of properties and sale of completed properties;
(c) the securities investment segment includes dealings in securities and disposals of investments;
(d) the food businesses segment engages in food manufacturing, wholesale distribution of food and allied fast-moving consumer goods;
(e) the corporate finance and securities broking segment provides securities and futures brokerage, investment banking, underwriting and other related advisory services;
(f) the banking business segment engages in the provision of commercial and retail banking services; and
(g) the “other” segment comprises principally money lending, the development of computer hardware and software and the provision of property and fund management services.

– 55 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Group

Revenue External Inter-segment Total Segment results Unallocated corporate expenses Finance costs Share of results of associates Profit before tax Tax Profit before minority interests Minority interests Net profit from ordinary activities attributable to shareholders	Property investment Treasury and investment development HK$’000 HK$’000 28,401 254,129 9,504 4,778 37,905 258,907 25,101 128,821 – 389	Securities investment HK$’000 1,537,405 – 1,537,405 39,392 –	2004 Corporate finance and Food securities businesses broking HK$’000 HK$’000 870,448 63,437 – 3,061 870,448 66,498 31,845 4,077 – –	Banking business HK$’000 16,198 – 16,198 3,972 2,280	Inter- segment Other elimination Consolidated HK$’000 HK$’000 HK$’000 23,258 – 2,793,276 – (17,343 ) – 23,258 (17,343 ) 2,793,276 (6,600 ) (5,102 ) 221,506 (124,873 ) (24,387 ) 58,010 – 60,679 132,925 (66,312 ) 66,613 (20,753 ) 45,860

– 56 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

					2004
		Property			Corporate
		investment			finance and				Inter-
	Treasury	and	Securities	Food	securities		Banking		segment
	investment	development	investment	businesses	broking		business	Other	elimination	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000
Segment assets	1,892,409	2,570,303	1,963,325	440,494	721,143		232,696	63,664	–	7,884,034
Interests in associates	–	11,802	–	–	1,334		84,121	434,419	–	531,676
Interests in jointly
controlled entities	–	7,393	–	–		–	–	–	–	7,393
Unallocated assets										271,544
Total assets										8,694,647
Segment liabilities	–	1,462,911	301,661	195,299	622,890		–	438,303	(2,006,726 )	1,014,338
Unallocated liabilities										1,275,925
Total liabilities										2,290,263
Other segment information:
Capital expenditure	–	5,820	62	7,826	781		–	1,113	–	15,602
Depreciation	–	(2,922 )	(1,417 )	(10,927 )	(681 )		(785 )	(508 )	–	(17,240 )
Write-back of provision/
(Provisions) for bad and
doubtful debts relating to:
Banking operation	–	–	–	–		–	666	–	–	666
Non-banking operations	–	–	–	(1,827 )	(1,203 )		–	(3,484 )	–	(6,514	)
Write-back of provisions/
(Provisions) for impairment
losses:
Associates	–	4,736	–	–		–	–	(4,500 )	–	236
Investment securities	–	–	49,207	–		–	–	–	–	49,207
Amortisation of goodwill
arising from acquisition
of subsidiaries	–	–	–	(4,511 )		–	(3,356 )	(888 )	–	(8,755	)
Negative goodwill
recognised as income	–	–	–	–		–	–	229	–	229
Net unrealised holding loss
on other investments
in securities	–	–	(67,720 )	–		–	–	–	–	(67,720	)
Unallocated:
Capital expenditure										1,801
Depreciation										(8,118	)
Provision for impairment loss
on an associate										(16,603	)
Negative goodwill
recognised as income										324

– 57 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

Revenue External Inter-segment Total Segment results Unallocated corporate expenses_(Note)_ Finance costs Share of results of associates Profit before tax Tax Profit before minority interests Minority interests Net profit from ordinary activities attributable to shareholders	Property investment Treasury and investment development HK$’000 HK$’000 75,593 283,752 11,739 2,561 87,332 286,313 71,650 106,300 – 185	Securities investment HK$’000 700,474 – 700,474 119,000 –	2003 Corporate finance and Food securities businesses broking HK$’000 HK$’000 630,054 56,828 – 1,524 630,054 58,352 22,240 4,784 – –	Banking business HK$’000 21,434 – 21,434 4,808 8,336	Inter- segment Other elimination Consolidated HK$’000 HK$’000 HK$’000 47,988 – 1,816,123 – (15,824 ) – 47,988 (15,824 ) 1,816,123 18,763 (1,712 ) 345,833 (50,069 ) (33,568 ) 43,937 – 52,458 314,654 (43,624 ) 271,030 (67,848 ) 203,182

Note: Amount includes negative goodwill recognised as income of HK$40,580,000.

– 58 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

					2003
		Property			Corporate
		investment			finance and				Inter-
	Treasury	and	Securities	Food	securities		Banking		segment
	investment	development	investment	businesses	broking		business	Other	elimination	Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000	HK$’000	HK$’000	HK$’000
Segment assets	2,332,927	2,074,125	1,594,624	375,549	796,547		216,722	103,454	–	7,493,948
Interests in associates	–	9,406	–	–	1,340		126,050	373,516	–	510,312
Unallocated assets										290,516
Total assets										8,294,776
Segment liabilities	–	1,508,019	264,716	161,914	730,312		–	324,570	(1,932,104 )	1,057,427
Unallocated liabilities										1,263,449
Total liabilities										2,320,876
Other segment information:
Capital expenditure	1,588	952	–	4,261		14	26,982	1,245	–	35,042
Depreciation	–	(2,216 )	(2,117 )	(9,656 )	(665 )		(820 )	(196 )	–	(15,670 )
Provisions for bad and
doubtful debts relating to:
Banking operation	–	–	–	–		–	(3,753 )	–	–	(3,753	)
Non-banking operations	–	–	–	–	(1,916 )		–	–	–	(1,916	)
Provisions for impairment
losses on investment
securities	–	–	(32,596 )	–		–	–	–	–	(32,596	)
Write-back of provision for
loss on guaranteed return
arrangement for fund
management	–	–	–	–		–	–	10,868	–	10,868
Amortisation of goodwill
arising from acquisition
of subsidiaries	–	–	–	(321 )		–	(3,240 )	(378 )	–	(3,939	)
Provision against properties
held for sale	–	(11,280 )	–	–		–	–	–	–	(11,280	)
Net unrealised holding gain
on other investments
in securities	–	–	95,978	–		–	–	–	–	95,978
Unallocated:
Capital expenditure										2,042
Depreciation										(6,372	)
Negative goodwill
recognised as income										40,580

– 59 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Group

Revenue Segment assets Interests in associates Interests in jointly controlled entities Unallocated assets Total assets Capital expenditure Revenue Segment assets Interests in associates Unallocated assets Total assets Capital expenditure	Hong Kong HK$’000 806,391 3,254,723 25,825 80 3,463 Hong Kong HK$’000 460,013 3,396,517 34,218 2,033	Republic of Singapore HK$’000 1,243,369 1,614,470 918 – 7,517 Republic of Singapore HK$’000 973,060 1,383,134 4,059 7,283	Malaysia HK$’000 174,883 157,420 7,168 – 647 Malaysia HK$’000 73,510 372,546 10,878 –	2004 Japan HK$’000 158,513 221,783 – – – 2003 Japan HK$’000 – 19,878 – –	Mainland China HK$’000 97,847 1,679,133 406,092 – 821 Mainland China HK$’000 237,073 1,563,192 317,840 518	Other Consolidated HK$’000 HK$’000 312,273 2,793,276 1,223,934 8,151,463 91,673 531,676 7,313 7,393 4,115 8,694,647 4,955 17,403 Other Consolidated HK$’000 HK$’000 72,467 1,816,123 1,044,915 7,780,182 143,317 510,312 4,282 8,294,776 27,250 37,084	Other Consolidated HK$’000 HK$’000 312,273 2,793,276 1,223,934 8,151,463 91,673 531,676 7,313 7,393 4,115 8,694,647 4,955 17,403 Other Consolidated HK$’000 HK$’000 72,467 1,816,123 1,044,915 7,780,182 143,317 510,312 4,282 8,294,776 27,250 37,084

							7,780,182 510,312 4,282
							8,294,776

							37,084

– 60 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

5. TURNOVER

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

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

Treasury investment Property investment and development Securities investment Food businesses Corporate finance and securities broking Banking business Other	Group 2004 2003 HK$’000 HK$’000 28,401 75,593 254,129 283,752 1,537,405 700,474 870,448 630,054 63,437 56,828 16,198 17,263 23,258 47,988 2,793,276 1,811,952	Group 2004 2003 HK$’000 HK$’000 28,401 75,593 254,129 283,752 1,537,405 700,474 870,448 630,054 63,437 56,828 16,198 17,263 23,258 47,988 2,793,276 1,811,952
		1,811,952

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

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

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

During the year, investment securities of a total cost of HK$19,019,000 (2003 – investment securities of a total cost of HK$54,681,000 and held-to-maturity securities of a total amortised cost of HK$402,191,000) were transferred to other investments in securities at market value or fair value to reflect the Group’s current intention to sell the investments in response to changes in market conditions, resulting in a loss at the date of transfer of HK$7,856,000 (2003 – gain of HK$20,483,000).

– 61 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

7. PROFIT FROM OPERATING ACTIVITIES

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

Gross rental income
Less:_Outgoings
Net rental income
Staff costs(Note (a)):
Wages and salaries
Retirement benefits costs
_Less:_Forfeited contributions
Net retirement benefits costs
Total staff costs
Interest income (_Note (b)):
Listed investments
Unlisted investments
Other
Dividend income:
Listed investments
Unlisted investments
Write-back of provisions/(Provisions) for impairment losses
on investment securities:
Listed
Unlisted
Other investment income:
Listed
Unlisted
Net realised gain/(loss) on disposal of investment securities:
Listed
Unlisted
Net realised and unrealised holding gain/(loss)
on other investments in securities (Note (c)):
Listed
Unlisted
Net unrealised gain/(loss) on transfer of investment
securities and held-to-maturity securities to other
investments in securities:
Listed
Unlisted
Depreciation:
Banking operation
Other
Gain on disposal of fixed assets
Gain on disposal of properties
Exchange gains/(losses) – net
Cost of inventories sold
Auditors’ remuneration
Minimum lease payments under operating lease rentals
in respect of land and buildings
Amortisation of goodwill arising from
acquisition of subsidiaries (Note (d))

Group
2004
2003
HK$’000
HK$’000
126,260
116,868
(18,024)
(17,816)
108,236
99,052
(193,880)
(172,698)
(13,143)
(12,333)
421
212
(12,722)
(12,121)
(206,602)
(184,819)
21,609
25,845
5,258
19,323
23,304
30,425
19,905
13,722
2,029
976
53,336
–
(4,129)
(32,596)
446
–
6,032
–
–
5,401
(708)
–
(40,625)
126,815
29,310
16,016
(3,766)
12,946
(4,090)
7,537
(785)
(820)
(24,573)
(21,222)
212
436
35,042
40,960
6,789
(7,042)
(665,760)
(477,589)
(3,726)
(3,218)
(14,953)
(10,993)
(8,755)
(3,939)

– 62 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note:

(a) The amounts include the Directors’ emoluments disclosed in Note 8 to the financial statements.
(b) The amounts exclude income relating to the banking operation of the Group.
(c) The amounts include net unrealised holding loss of HK$67,720,000 (2003 – gain of HK$95,978,000) which is grouped under “Cost of sales” on the face of the consolidated profit and loss account.
(d) The amortisation of goodwill for the year is included in “Other operating expenses” on the face of the consolidated profit and loss account.

8. DIRECTORS’ EMOLUMENTS

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

Directors’ fees Basic salaries, housing and other allowances and benefits in kind Bonuses paid and payable Retirement benefits costs	Group 2004 2003 HK$’000 HK$’000 1,357 1,022 18,528 10,817 7,400 – 45 24 27,330 11,863	Group 2004 2003 HK$’000 HK$’000 1,357 1,022 18,528 10,817 7,400 – 45 24 27,330 11,863
		11,863

Included in Directors’ emoluments were fees of HK$222,000 (2003 – HK$765,000) paid to the independent non-executive Directors in respect of the year.

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

Emoluments bands(HK$) Nil – 1,000,000 2,000,001 – 2,500,000 4,000,001 – 4,500,000 6,500,001 – 7,000,000 7,500,001 – 8,000,000 11,000,001 – 11,500,000	Group 2004 2003 Number of Number of Directors Directors 5 4 1 2 1 – – 1 1 – 1 – 9 7	Group 2004 2003 Number of Number of Directors Directors 5 4 1 2 1 – – 1 1 – 1 – 9 7
		7

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

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

– 63 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

9. SENIOR EXECUTIVES’ EMOLUMENTS

The emoluments of the two (2003 – four) highest paid employees are as follows:

Basic salaries, housing and other allowances and benefits in kind Bonuses paid and payable Retirement benefits costs	Group 2004 2003 HK$’000 HK$’000 6,435 3,702 4,637 15,950 305 93 11,377 19,745	Group 2004 2003 HK$’000 HK$’000 6,435 3,702 4,637 15,950 305 93 11,377 19,745
		19,745

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

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

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

Details of share options granted to the non-director highest paid employees are set out in Note 32 to the financial statements.

10. RETIREMENT BENEFITS COSTS

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

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

During the year, the amounts of forfeited employer contributions under the MPF schemes utilised to reduce the amount of employer contributions or for payments of administrative expenses amounted to HK$421,000 (2003 – HK$212,000). The amounts of forfeited voluntary contributions available to offset future employer contributions against the above schemes were not material at the year end. The retirement benefits scheme costs charged to the profit and loss account represent employer contributions paid and payable by the Group to the schemes and amounted to HK$12,722,000 (2003 – HK$12,121,000).

– 64 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

11. FINANCE COSTS

Interest on bank loans wholly repayable within five years_(Note) Interest on bank loans wholly repayable after five years(Note)_ Total interest _Less:_Interest capitalised	Group 2004 2003 HK$’000 HK$’000 21,185 25,889 10,176 12,379 31,361 38,268 (2,101) – 29,260 38,268	Group 2004 2003 HK$’000 HK$’000 21,185 25,889 10,176 12,379 31,361 38,268 (2,101) – 29,260 38,268
		38,268 –
		38,268

Note: The amounts exclude interest expense incurred by a banking subsidiary of the Group.

12. TAX

Hong Kong: Charge for the year Underprovisions in prior years Deferred (Note 25 and Note 34) Overseas: Charge for the year Underprovisions in prior years Deferred (Note 25 and Note 34) Share of tax attributable to associates: Hong Kong Overseas Deferred_(Note)_ Total charge for the year	Group 2004 2003 HK$’000 HK$’000 1,629 1,273 3,354 4,252 1,543 (3,577 6,526 1,948 20,891 22,545 1,673 5,182 (526) 2,165 22,038 29,892 1,208 389 1,492 11,395 35,048 – 37,748 11,784 66,312 43,624	Group 2004 2003 HK$’000 HK$’000 1,629 1,273 3,354 4,252 1,543 (3,577 6,526 1,948 20,891 22,545 1,673 5,182 (526) 2,165 22,038 29,892 1,208 389 1,492 11,395 35,048 – 37,748 11,784 66,312 43,624
		1,948
		22,545 5,182 2,165
		29,892
		389 11,395 –
		11,784
		43,624

Note: The amount includes the Group’s share of an associate’s deferred tax assets written off of HK$40,183,000 during the year (2003 – Nil).

Hong Kong profits tax has been provided for at the rate of 17.5 per cent. (2003 – 17.5 per cent.) on the estimated assessable profits arising in Hong Kong for the year. Overseas taxes have been calculated on the estimated assessable profits for the year at the tax rates prevailing in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

– 65 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Profit before tax Tax at the statutory tax rate of 17.5 per cent. (2003 – 17.5 per cent.) Effect of different tax rates in other jurisdictions Effect on opening deferred tax of increase in tax rates Adjustments in respect of current tax of previous years Income not subject to tax Expenses not deductible for tax Tax losses from previous years recognised Tax losses utilised from previous years Tax losses not recognised Tax charge at the Group’s effective rate of 49.9 per cent. (2003 – 13.9 per cent.)	Group 2004 2003 HK$’000 HK$’000 132,925 314,654 23,262 55,064 48,043 24,818 133 440 4,808 9,434 (39,152) (64,870 30,713 29,233 – (3,826 (15,293) (27,385 13,798 20,716 66,312 43,624	Group 2004 2003 HK$’000 HK$’000 132,925 314,654 23,262 55,064 48,043 24,818 133 440 4,808 9,434 (39,152) (64,870 30,713 29,233 – (3,826 (15,293) (27,385 13,798 20,716 66,312 43,624

		55,064 24,818 440 9,434 (64,870 29,233 (3,826 (27,385 20,716
		43,624

For the companies operated in Republic of Singapore, Mainland China and Republic of the Philippines, corporate taxes have been calculated on the estimated assessable profits for the year at the rate of 20 per cent., 33 per cent. and 32 per cent. (2003 – 22 per cent., 33 per cent. and 32 per cent.), respectively.

13. NET PROFIT FROM ORDINARY ACTIVITIES ATTRIBUTABLE TO SHAREHOLDERS

The net profit from ordinary activities attributable to shareholders includes net profit for the year ended 31st December, 2004 dealt with in the financial statements of the Company amounting to HK$102,177,000 (2003 – HK$186,676,000) as set out in Note 33 to the financial statements.

14. PROFIT RETAINED FOR THE YEAR

Profit retained for the year by: The Company and its subsidiaries Associates	Group 2004 2003 HK$’000 HK$’000 22,929 162,508 22,931 40,674 45,860 203,182	Group 2004 2003 HK$’000 HK$’000 22,929 162,508 22,931 40,674 45,860 203,182
		203,182

15. EARNINGS PER SHARE

(a) Basic earnings per share

Basic earnings per share is calculated based on (i) the net profit from ordinary activities attributable to shareholders of HK$45,860,000 (2003 – HK$203,182,000); and (ii) the weighted average number of 9,201,089,000 shares (2003 – 9,201,089,000 shares) in issue during the year.

(b) Diluted earnings per share

No diluted earnings per share is presented for the years ended 31st December, 2004 and 2003 as there were no dilutive potential ordinary shares during these years.

– 66 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. DIVIDEND

	Group and Company	Group and Company
	2004	2003
	HK$’000	HK$’000
Final dividend, proposed, of HK0.2 cent
(2003 – HK0.2 cent, paid) per ordinary share	18,402	18,402

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

17. GOODWILL

Group

Cost: At 1st January, 2004 Additions during the year Exchange adjustments At 31st December, 2004 Accumulated amortisation and impairment losses/ (Recognition as income): At 1st January, 2004 Amortisation provided/(Recognised as income) for the year Exchange adjustments At 31st December, 2004 Net book value: At 31st December, 2004 At 31st December, 2003	Goodwill HK$’000 169,388 8,366 (345) 177,409 89,233 8,755 159 98,147 79,262 80,155	Negative goodwill HK$’000 (172,248 (3,303 –
		(175,551
		(172,248 (553 –
		(172,801
		(2,750

		–

– 67 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

18. FIXED ASSETS

Group

Cost: At 1st January, 2004 Additions during the year Acquisition of subsidiaries Disposal of a subsidiary Disposals during the year Exchange adjustments At 31st December, 2004 Accumulated depreciation and impairment losses: At 1st January, 2004 Provided for the year Acquisition of subsidiaries Disposal of a subsidiary Disposals during the year Exchange adjustments At 31st December, 2004 Net book value: At 31st December, 2004 At 31st December, 2003	Leasehold land and Leasehold buildings improvements HK$’000 HK$’000 749,431 49,342 176 1,956 15,691 572 – (395) – (598) 4,214 16 769,512 50,893 489,849 48,745 10,739 588 – 138 – (395) – (183) 2,555 19 503,143 48,912 266,369 1,981 259,582 597	Furniture, fixtures, plant and equipment HK$’000 120,354 13,903 12,237 (786) (10,885) 1,741 136,564 80,600 12,313 195 (780) (9,019) 1,116 84,425 52,139 39,754	Motor vehicles HK$’000 11,939 1,368 – – (2,700) 71 10,678 7,754 933 – – (2,699) 22 6,010 4,668 4,185	Total HK$’000 931,066 17,403 28,500 (1,181 (14,183 6,042
				967,647
				626,948 24,573 333 (1,175 (11,901 3,712
				642,490
				325,157

				304,118

Certain leasehold land and buildings have been mortgaged to secure banking facilities made available to the Group as set out in Note 35 to the financial statements.

The net book value of the leasehold land and buildings comprises:

Long term leasehold land and buildings situated in Hong Kong Leasehold land and buildings situated outside Hong Kong on: Short term lease Medium term leases Long term leases Total	Group 2004 2003 HK$’000 HK$’000 197,813 202,413 17,144 15,239 31,744 21,560 19,668 20,370 68,556 57,169 266,369 259,582	Group 2004 2003 HK$’000 HK$’000 197,813 202,413 17,144 15,239 31,744 21,560 19,668 20,370 68,556 57,169 266,369 259,582
		15,239 21,560 20,370
		57,169
		259,582

– 68 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Company

Furniture, fixtures, Leasehold plant and Motor improvements equipment vehicles HK$’000 HK$’000 HK$’000 Cost: At 1st January, 2004 2,219 4,934 5,374 Additions during the year – 68 461 Disposals during the year – (75) (1,340) At 31st December, 2004 2,219 4,927 4,495 Accumulated depreciation: At 1st January, 2004 2,214 4,770 5,185 Provided for the year 5 53 59 Disposals during the year – (75) (1,340) At 31st December, 2004 2,219 4,748 3,904 Net book value: At 31st December, 2004 – 179 591 At 31st December, 2003 5 164 189 19. INVESTMENT PROPERTIES Group 2004 HK$’000 Leasehold land and buildings situated in Hong Kong_(Note)_: Balance at beginning of year 516,246 Additions during the year 71,682 Disposals during the year – Surplus/(Deficit) on revaluation 351,064 Balance at end of year 938,992 Medium term leasehold land and buildings situated outside Hong Kong: Balance at beginning of year 1,388,183 Disposals during the year (1,449) Surplus on revaluation 27,768 Exchange adjustments 1,782 Balance at end of year 1,416,284 Freehold land and buildings situated outside Hong Kong: Balance at beginning of year 7,050 Surplus on revaluation 516 Exchange adjustments (65) Balance at end of year 7,501 Total 2,362,777	Furniture, fixtures, Leasehold plant and Motor improvements equipment vehicles HK$’000 HK$’000 HK$’000 Cost: At 1st January, 2004 2,219 4,934 5,374 Additions during the year – 68 461 Disposals during the year – (75) (1,340) At 31st December, 2004 2,219 4,927 4,495 Accumulated depreciation: At 1st January, 2004 2,214 4,770 5,185 Provided for the year 5 53 59 Disposals during the year – (75) (1,340) At 31st December, 2004 2,219 4,748 3,904 Net book value: At 31st December, 2004 – 179 591 At 31st December, 2003 5 164 189 19. INVESTMENT PROPERTIES Group 2004 HK$’000 Leasehold land and buildings situated in Hong Kong_(Note)_: Balance at beginning of year 516,246 Additions during the year 71,682 Disposals during the year – Surplus/(Deficit) on revaluation 351,064 Balance at end of year 938,992 Medium term leasehold land and buildings situated outside Hong Kong: Balance at beginning of year 1,388,183 Disposals during the year (1,449) Surplus on revaluation 27,768 Exchange adjustments 1,782 Balance at end of year 1,416,284 Freehold land and buildings situated outside Hong Kong: Balance at beginning of year 7,050 Surplus on revaluation 516 Exchange adjustments (65) Balance at end of year 7,501 Total 2,362,777	Total HK$’000 12,527 529 (1,415) 11,641 12,169 117 (1,415) 10,871 770 358 2003 HK$’000 524,801 10,075 (13,800) (4,830) 516,246 1,449,551 (136,544) 81,014 (5,838) 1,388,183 7,336 59 (345) 7,050 1,911,479

– 69 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Based on professional valuations as at 31st December, 2004 made by Mr. Jonathan Miles Foxall, chartered surveyor and a director of certain subsidiaries of the Company, the investment properties in Hong Kong were valued on an open market, existing use basis at HK$938,992,000 (2003 – HK$516,246,000).

Based on professional valuations as at 31st December, 2004 made by 廈門同建房地產評估諮詢有限公司 , Jones Lang LaSalle Limited, DTZ Debenham Tie Leung International Property Advisers, RHL Appraisal Ltd. and Professional Asset Valuers, Incorporated, the investment properties situated outside Hong Kong were valued on an open market, existing use basis at HK$1,423,785,000 (2003 – HK$1,395,233,000).

The portion of the revaluation surplus attributable to the Group amounted to HK$368,076,000 (2003 – HK$48,814,000) has been credited to the investment property revaluation reserve account as set out in Note 33 to the financial statements.

Certain investment properties have been mortgaged to secure banking facilities made available to the Group as set out in Note 35 to the financial statements.

Note: At the balance sheet date, investment properties situated in Hong Kong of HK$924,192,000 (2003 – HK$506,546,000) and HK$14,800,000 (2003 – HK$9,700,000) were held under long term and medium leases, respectively.

20. PROPERTIES UNDER DEVELOPMENT

Land and buildings situated outside Hong Kong, at cost:
Balance at beginning of year
Additions during the year
Interest capitalised during the year
Reclassification to properties held for sale
Exchange adjustments
Balance at end of year
Provisions for impairment losses:
Balance at beginning and at end of year
Total
Land and buildings held under the following lease terms:
Leasehold_(Note)_
Freehold

Group
2004
2003
HK$’000
HK$’000
135,403
128,990
115,558
14,448
2,101
–
–
(14,696)
3,572
6,661
256,634
135,403
(89,000)
(89,000)
167,634
46,403
78,060
15,872
89,574
30,531
167,634
46,403

Note: The lease terms of the properties under development situated outside Hong Kong of HK$62,367,000 (2003 – Nil) are 99 years and those of HK$15,693,000 (2003 – HK$15,872,000) are determined by their final intended use upon completion and vary from 40 to 70 years.

– 70 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

21. INTERESTS IN ASSOCIATES

Share of net assets in a listed company Share of net assets in unlisted companies Goodwill arising from acquisition less amortisation Negative goodwill arising from acquisition less recognition Due from associates Due to associates Provisions for impairment losses Market value of a listed company at 31st December Share of post-acquisition deficits at the balance sheet date	Group 2004 2003 HK$’000 HK$’000 85,704 133,576 431,804 342,518 4,951 10,440 (1,875) (1,672) 47,566 51,781 (2,988) (2,213) 565,162 534,430 (33,486) (24,118) 531,676 510,312 47,410 62,323 (77,402) (95,480)

The share of post-acquisition deficits represents that portion attributable to the Group before minority interests included therein. The balances with the associates are unsecured, interest-free and have no fixed terms of repayment.

The amounts of goodwill and negative goodwill arising from the acquisition of associates are as follows:

Group

Cost: At 1st January, 2004 Additions during the year At 31st December, 2004 Accumulated amortisation and impairment losses/ (Recognition as income): At 1st January, 2004 Amortisation provided/(Recognised as income) for the year Impairment provided for the year At 31st December, 2004 Net book value: At 31st December, 2004 At 31st December, 2003	Goodwill HK$’000 15,445 7,573 23,018 5,005 6,172 6,890 18,067 4,951 10,440	Negative goodwill HK$’000 (1,760) (354) (2,114) (88) (151) – (239) (1,875) (1,672)

– 71 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Unlisted shares, at cost Due from associates INTERESTS IN JOINTLY CONTROLLED ENTITIES Due from jointly controlled entities	Company 2004 2003 HK$’000 HK$’000 1 1 – 20 1 21 Group 2004 2003 HK$’000 HK$’000 7,393 –

22. INTERESTS IN JOINTLY CONTROLLED ENTITIES

The balances with the jointly controlled entities are unsecured, interest-free and have no fixed terms of repayment.

23. INVESTMENT SECURITIES

Equity securities, at cost: Listed in Hong Kong Listed outside Hong Kong Unlisted Provisions for impairment losses Unlisted debt securities, at cost Provisions for impairment losses Unlisted investment funds, at cost Provisions for impairment losses Market value of listed investments at the balance sheet date	Group 2004 2003 HK$’000 HK$’000 29,077 29,077 427,448 427,445 246,208 269,712 702,733 726,234 (438,231) (506,705) 264,502 219,529 34,532 13,223 (2,776) – 31,756 13,223 285,224 156,969 (29,388) (31,483) 255,836 125,486 552,094 358,238 239,967 75,194	Company 2004 2003 HK$’000 HK$’000 – – – – – – – – – – – – 7,810 7,810 – – 7,810 7,810 – – – – – – 7,810 7,810 – –	Company 2004 2003 HK$’000 HK$’000 – – – – – – – – – – – – 7,810 7,810 – – 7,810 7,810 – – – – – – 7,810 7,810 – –
			– –
			–
			7,810 –
			7,810
			– –
			–
			7,810

			–

– 72 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

An analysis of the issuers of investment securities is as follows:

Equity securities: Banks and other financial institutions Corporate entities Debt securities: Club debentures Corporate entities	Group 2004 2003 HK$’000 HK$’000 709 709 263,793 218,820 264,502 219,529 10,975 10,975 20,781 2,248 31,756 13,223	Company 2004 2003 HK$’000 HK$’000 – – – – – – 7,810 7,810 – – 7,810 7,810	Company 2004 2003 HK$’000 HK$’000 – – – – – – 7,810 7,810 – – 7,810 7,810
			–

			7,810 –
			7,810

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

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

24. HELD-TO-MATURITY SECURITIES

Debt securities, at amortised cost: Listed outside Hong Kong Unlisted Portion included under current assets Non-current portion Market value of listed securities at the balance sheet date An analysis of the issuers of the held-to-maturity securities is as follows: Banks and other financial institutions Corporate entities	Group 2004 2003 HK$’000 HK$’000 50,938 41,275 94,094 138,554 145,032 179,829 (82,216) (93,563 62,816 86,266 50,938 42,135 6,260 3,882 138,772 175,947 145,032 179,829	Group 2004 2003 HK$’000 HK$’000 50,938 41,275 94,094 138,554 145,032 179,829 (82,216) (93,563 62,816 86,266 50,938 42,135 6,260 3,882 138,772 175,947 145,032 179,829
		179,829 (93,563
		86,266

		42,135

		3,882 175,947
		179,829

– 73 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

25. DEFERRED TAX ASSETS

At 1st January Credited/(Charged) to consolidated profit and loss account for the year Exchange adjustments At 31st December	Group 2004 2003 HK$’000 HK$’000 4,282 – (190) 4,282 23 – 4,115 4,282	Group 2004 2003 HK$’000 HK$’000 4,282 – (190) 4,282 23 – 4,115 4,282
		4,282

The Group has deductible temporary differences and tax losses of HK$28,100,000 (2003 – HK$33,479,000) and HK$600,507,000 (2003 – HK$525,548,000), respectively, that are available indefinitely for offsetting against future taxable profits of companies in which the losses arose. Deferred tax assets have not been recognised in respect of these deductible temporary differences and tax losses at the balance sheet date.

26. ASSETS LESS LIABILITIES ATTRIBUTABLE TO BANKING OPERATION

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

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

Note:

(a) Cash and short-term funds

Cash and balances with banks and other financial institutions Treasury bills	2004 HK$’000 60,143 23,765 83,908	2003 HK$’000 219,402 35,405
		254,807

– 74 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Other investments in securities

Listed equity securities, at market value: Hong Kong Overseas Debt securities: Listed outside Hong Kong, at market value Unlisted, at fair value Unlisted investment funds, at fair value An analysis of the issuers of other investments in securities is as follows: Equity securities: Corporate entities Debt securities: Corporate entities Banks and other financial institutions	2004 HK$’000 3,128 759 3,887 9,190 7,769 16,959 3,827 24,673 3,887 9,190 7,769 16,959	2003 HK$’000 – –
		–
		13,646 –
		13,646
		–
		13,646

		–

		13,646 –
		13,646

(c) Advances and other accounts Advances to customers Other accounts Accrued interest Provisions for bad and doubtful debts	2004 HK$’000 153,071 2,956 1,240 (5,140) 152,127	2003 HK$’000 156,643 3,190 1,296 (5,050
		156,079

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

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

		3,627

– 75 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(d) Held-to-maturity securities

Debt securities, at amortised cost: Listed outside Hong Kong Market value of listed debt securities An analysis of the issuers of held-to-maturity securities is as follows: Banks and other financial institutions	2004 HK$’000 9,643 10,877 9,643	2003 HK$’000 9,672

		10,891

		9,672

(e) Fixed assets

Cost: At 1st January, 2004 Disposals during the year At 31st December, 2004 Accumulated depreciation: At 1st January, 2004 Provided for the year Disposals during the year At 31st December, 2004 Net book value: At 31st December, 2004 At 31st December, 2003	Furniture, fixtures, Land and equipment and buildings motor vehicles HK$’000 HK$’000 25,047 5,267 – (2,780) 25,047 2,487 21 3,236 250 535 – (2,780) 271 991 24,776 1,496 25,026 2,031	Total HK$’000 30,314 (2,780
		27,534
		3,257 785 (2,780
		1,262
		26,272

		27,057

27. PROPERTIES HELD FOR SALE

Properties held for sale which were carried at net realisable value at 31st December, 2003 amounted to HK$75,000,000.

28. INVENTORIES

Raw materials Finished goods and goods held for resale	Group 2004 2003 HK$’000 HK$’000 2,752 2,655 103,028 118,146 105,780 120,801	Group 2004 2003 HK$’000 HK$’000 2,752 2,655 103,028 118,146 105,780 120,801
		120,801

Inventories which were carried at net realisable value at the balance sheet date amounted to HK$6,808,000 (2003 – HK$7,939,000).

– 76 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

29. OTHER INVESTMENTS IN SECURITIES

Listed equity securities, at market value: Hong Kong Overseas Debt securities: Listed, at market value: Hong Kong Overseas Unlisted, at fair value Investment funds: Listed overseas, at market value Unlisted, at fair value An analysis of the issuers of other investments in securities is as follows: Equity securities: Public sector entities Banks and other financial institutions Corporate entities Debt securities: Central governments and central banks Banks and other financial institutions Corporate entities Others	Group 2004 2003 HK$’000 HK$’000 280,620 415,969 104,770 84,491 385,390 500,460 – 8,441 225,245 299,669 163,875 256,661 389,120 564,771 229,252 – 303,081 277,575 532,333 277,575 1,306,843 1,342,806 493 15,507 44,883 207,841 340,014 277,112 385,390 500,460 13,869 16,948 105,239 199,957 220,879 332,618 49,133 15,248 389,120 564,771	Group 2004 2003 HK$’000 HK$’000 280,620 415,969 104,770 84,491 385,390 500,460 – 8,441 225,245 299,669 163,875 256,661 389,120 564,771 229,252 – 303,081 277,575 532,333 277,575 1,306,843 1,342,806 493 15,507 44,883 207,841 340,014 277,112 385,390 500,460 13,869 16,948 105,239 199,957 220,879 332,618 49,133 15,248 389,120 564,771
		500,460
		8,441 299,669 256,661
		564,771
		– 277,575
		277,575
		1,342,806

		15,507 207,841 277,112
		500,460
		16,948 199,957 332,618 15,248
		564,771

– 77 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

30. DEBTORS, PREPAYMENTS AND DEPOSITS

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

Outstanding balances with ages: Repayable on demand Within 30 days Between 31 and 60 days Between 61 and 90 days Between 91 and 180 days Over 180 days	Group 2004 2003 HK$’000 HK$’000 32,959 274,775 221,626 85,773 59,767 46,032 37,746 25,027 18,157 4,182 1,061 14,543 371,316 450,332	Group 2004 2003 HK$’000 HK$’000 32,959 274,775 221,626 85,773 59,767 46,032 37,746 25,027 18,157 4,182 1,061 14,543 371,316 450,332
		450,332

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

31. SHARE CAPITAL

Authorised: 28,000,000,000 (2003 – 28,000,000,000) ordinary shares of HK$0.10 each Issued and fully paid: 9,201,088,716 (2003 – 9,201,088,716) ordinary shares of HK$0.10 each	Group and Company 2004 2003 HK$’000 HK$’000 2,800,000 2,800,000 920,109 920,109	Group and Company 2004 2003 HK$’000 HK$’000 2,800,000 2,800,000 920,109 920,109

		920,109

32. SHARE OPTIONS

Pursuant to the Share Option Scheme for Employees of the Company (the “Share Option Scheme”) approved and adopted by its shareholders on 2nd May, 1994 (the “Adoption Date”), the Directors of the Company might, at their discretion, grant to any employees (including Directors) of the Company and its subsidiaries options to subscribe for shares in the Company. The purpose of the adoption of the Share Option Scheme was to provide an incentive scheme to the employees of the Company and its subsidiaries. Under the rules of the Share Option Scheme, no more options could be granted from the tenth anniversary of the Adoption Date. Accordingly, no more options can be granted under the Share Option Scheme since May 2004. The options can be exercisable after two months from the date on which the options were deemed to be granted and accepted and prior to the expiry of ten years from that date.

The maximum number of shares in respect of which options might be granted under the Share Option Scheme should not exceed 10 per cent. of the number of issued shares of the Company from time to time, excluding the aggregate number of shares issued on exercise of options, and the maximum number of shares in respect of which options might be granted under the Share Option Scheme in any one financial year should not exceed 5 per cent. of the total number of issued shares of the Company from time to time. In addition, the maximum number of shares in respect of which options might be granted under the Share Option Scheme to any grantee should not exceed 25 per cent. of the number of shares subject to the Share Option Scheme at the time of grant. The exercise price for the share under the Share Option Scheme would be determined by the Directors of the Company at their absolute

– 78 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

discretion but in any event should not be less than 80 per cent. of the average of the closing price of the shares of the Company as stated on daily quotation sheets of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”) for the five trading days immediately preceding the date of offer of the option or the nominal value of the shares of the Company, whichever was the greater. The consideration for the grant was HK$1.00 per grantee which must be paid on acceptance to the Company by the grantee within 28 days after the date of offer of the option.

The following is a summary of movement in share options of the Company during the year:

				Quantity of	Quantity of	Quantity of
		Exercise	Exercise	share options	share options	share options
		price	period of	outstanding at	exercised/lapsed	outstanding at
Date	of grant	per share	share options	1st January, 2004	during the year	31st December, 2004
23rd	June, 1997	HK$0.883	August 1997	5,800,000	Nil	5,800,000
			to June 2007

Pursuant to the bonus issue of new shares in the ratio of one for one in October 1997, the rights issue of new shares in July 1999 on the basis of one rights share for every one share held and the rights issue of new shares in November 2000 on the basis of one rights share for every two shares held, the holder of each share option is entitled to subscribe for six ordinary shares of HK$0.10 each in the Company in cash at the above exercise price per share which is subject to adjustment.

As at 31st December, 2004, save for Mr. John Luen Wai Lee, a Director of the Company, held 1,500,000 options, none of the Directors, chief executive or substantial shareholders of the Company or their respective associates had an interest in any options to subscribe for shares of the Company. The remaining 4,300,000 share options are held by Directors of the Company’s subsidiaries or employees of the Company or its subsidiaries.

As at the date of this report, the total number of shares available for issue under the Share Option Scheme is 920,108,871 shares of HK$0.10 each, representing approximately 10 per cent. of the issued share capital of the Company. The exercise in full of 5,800,000 share options would, under the present capital structure of the Company, result in the issue of 34,800,000 shares of HK$0.10 each, representing approximately 0.38 per cent. of the issued share capital of the Company.

Since no share options were granted under the Share Option Scheme during the year, no value of the share options granted has been disclosed.

Details of the share option scheme of a subsidiary of the Company are set out below.

Pursuant to the Executives’ Share Option Scheme of Auric Pacific Group Limited (“APG”), a listed subsidiary of the Company in Singapore, approved by the shareholders of APG on 17th December, 1992 (the “APG Share Option Scheme”), the directors of APG might, at their discretion, grant to any employees of APG or any of its subsidiaries (the “APG Group”) options to subscribe for shares in APG. The APG Share Option Scheme continued in operation for a period of ten years from the date of adoption, that is, 17th December, 1992 and expired after 16th December, 2002.

The following is a summary of movements in share options of APG during the year:

				Quantity of	Quantity of	Quantity of
		Exercise	Exercise	share options	share options	share options
		price	period of	outstanding at	lapsed	outstanding at
Date	of grant	per share	share options	1st January, 2004	during the year	31st December, 2004
27th	April, 1999	S$1.53	April 2000	90,000	90,000	Nil
			to April 2004

– 79 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The holder of each share option was entitled to subscribe for one share of S$0.50 in APG in cash at the above exercise price per share. The above interests in options to subscribe for shares of APG were held by employees of the APG Group. During the year, no options were exercised and all the options lapsed.

As at 31st December, 2004, none of the Directors, chief executive or substantial shareholders of the Company or their respective associates had an interest in any options to subscribe for shares of APG.

33. RESERVES

Group

Share premium account HK$’000 At 1st January, 2003 785,257 Surplus on revaluation of investment properties – Deferred tax charge arising from surplus on revaluation of investment properties – Transfer of portion of depreciation charge on leasehold properties attributable to the related revaluation surplus to retained profits – Deferred tax charge arising from change in statutory tax rate on revaluation surplus of leasehold properties – Utilisation of tax loss – Release upon disposal of investment properties – Release of deferred tax charge on revaluation surplus upon disposal of investment properties – Transfer of reserve – Exchange differences on consolidation – Profit for the year – At 31st December, 2003 785,257	Capital reserve (Note (a)) HK$’000 93,691 – – – – – – – – – – 93,691	Special capital reserve (Note (b)) HK$’000 2,075,948 – – – – – – – – – – 2,075,948	Legal reserve (Note (c)) HK$’000 – – – – – – – – 621 – – 621	Investment property revaluation reserve HK’000 7,177 48,814 (25,026 ) – – (11,160 ) (20,985 ) 8,912 – – – 7,732	Other asset revaluation Exchange reserve equalisation (Note (d)) reserve HK$’000 HK$’000 259,636 (165,807 ) – – – – (5,777 ) – (381 ) – – – – – – – – – – (8,774 ) – – 253,478 (174,581 )	Retained profits HK$’000 148,720 – – 5,777 – – – – (621 ) – 203,182 357,058	Total HK$’000 3,204,622 48,814 (25,026 ) – (381 ) (11,160 ) (20,985 ) 8,912 – (8,774 ) 203,182 3,399,204

– 80 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Group

Share premium account HK$’000 At 1st January, 2004 785,257 Surplus on revaluation of investment properties – Deferred tax charge arising from surplus on revaluation of investment properties – Transfer of portion of depreciation charge on leasehold properties attributable to the related revaluation surplus to retained profits – Release upon disposal of investment properties – Release upon disposal of a subsidiary – Transfer of reserve – Exchange differences on consolidation – Profit for the year – 2003 final dividend, declared and paid – At 31st December, 2004 785,257	Capital reserve (Note (a)) HK$’000 93,691 – – – – – – – – – 93,691	Special capital reserve (Note (b)) HK$’000 2,075,948 – – – – – – – – – 2,075,948	Legal reserve (Note (c)) HK$’000 621 – – – – (22 ) 886 – – – 1,485	Investment property revaluation reserve HK’000 7,732 368,076 (9,961 ) – 214 4 – – – – 366,065	Other asset revaluation Exchange reserve equalisation (Note (d)) reserve HK$’000 HK$’000 253,478 (174,581 ) – – – – (5,777 ) – – – – 144 – – – 12,721 – – – – 247,701 (161,716 )	Retained profits HK$’000 357,058 – – 5,777 – – (886 ) – 45,860 (18,402 ) 389,407	Total HK$’000 3,399,204 368,076 (9,961 ) – 214 126 – 12,721 45,860 (18,402 ) 3,797,838

Note:

(a) Capital reserve

Certain amounts of goodwill and negative goodwill arising from the acquisition of subsidiaries in prior years remain eliminated against and credited to the capital reserve, respectively, as explained in Note 3(g) and Note 3(h) to the financial statements.

(b) Special capital reserve

Pursuant to a special resolution passed at an extraordinary general meeting of the Company on 2nd December, 1997 and the subsequent confirmation by the court on 22nd December, 1997, the then entire amount standing to the credit of the share premium account of the Company in the amount of HK$849,149,000 was cancelled on 23rd December, 1997 (the “Cancellation”).

The credit arising from the Cancellation was transferred to a special capital reserve account. A summary of the terms of the undertaking given by the Company (the “Undertaking”) in respect of the application of the special capital reserve is set out below:

(1) The reserve is to be used for eliminating goodwill which has already arisen on the acquisition of subsidiaries and associates at the date of the Cancellation and that arising as a result of future acquisitions.

– 81 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(2) The reserve (a) shall not be treated as realised profits; and (b) shall be treated as an undistributable reserve for so long as there shall remain any outstanding debts or claims which were in existence on the date of the Cancellation provided that:
(i) the Company shall be at liberty to apply the reserve for the same purposes as a share premium account may be applied; and
(ii) the amount of the reserve may be reduced by the amount of any future increase in the share capital and the share premium account. Any part of the reserve so reduced is released from the terms of the Undertaking.

Pursuant to a special resolution passed at an extraordinary general meeting of the Company on 23rd December, 1998 and the subsequent confirmation by the court on 26th January, 1999, the then issued and fully paid-up share capital of the Company was reduced from approximately HK$1,533,498,000 divided into 3,066,996,246 shares of HK$0.50 each to approximately HK$306,700,000 divided into 3,066,996,246 shares of HK$0.10 each and an amount standing to the credit of the share capital account of the Company of approximately HK$1,226,799,000 was cancelled and transferred to a special capital reserve account, the application of which is subject to the same conditions as specified in (2)(a) and (2)(b)(ii) of the terms of the Undertaking above.

As at 1st January, 2004, special capital reserve subject to the Undertaking amounted to HK$679,156,000. During the year, such Undertaking was released since no debt or claim which was in existence on the date of the Cancellation remained unsettled. As at 31st December, 2004, no special capital reserve remained subject to the Undertaking (2003 – HK$679,156,000).

(c) Legal reserve

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.

(d) Other asset revaluation reserve

The other asset revaluation reserve comprises revaluation surplus in respect of leasehold land and buildings which were reclassified from investment properties.

Company

At 1st January, 2003 Profit for the year_(Note 13) At 31st December, 2003 and 1st January, 2004 Profit for the year(Note 13)_ 2003 final dividend, declared and paid At 31st December, 2004	Share premium account HK$’000 783,382 – 783,382 – – 783,382	Special capital reserve (Note (b)) HK$’000 2,075,948 – 2,075,948 – – 2,075,948	Capital reserve HK$’000 705 – 705 – – 705	Retained profits HK$’000 344,547 186,676 531,223 102,177 (18,402) 614,998	Total HK$’000 3,204,582 186,676 3,391,258 102,177 (18,402) 3,475,033

– 82 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 31st December, 2004, the Company’s reserves available for distribution, calculated in accordance with Section 79B of the Companies Ordinance, amounted to HK$614,998,000 (2003 – HK$531,223,000). As at 1st January, 2004, other distributable reserves as arising from the release of the Undertaking amounted to HK$1,396,792,000. During the year, such Undertaking was released since no debt or claim which was in existence on the date of the Cancellation remained unsettled with other distributable reserves of HK$679,156,000 arising from such release. As at 31st December, 2004, other distributable reserves as arising from the release of the Undertaking amounted to HK$2,075,948,000 (2003 – HK$1,396,792,000).

Included in the retained profits of the Group and the Company at 31st December, 2004 was an amount of a proposed final dividend for the year then ended of HK$18,402,000 (2003 – HK$18,402,000) declared after the balance sheet date.

34. DEFERRED TAX LIABILITIES

Group

Revaluation, Accelerated net of tax related depreciation depreciation HK$’000 HK$’000 At 1st January, 2003 4,694 129,879 Charged/(Credited) to consolidated profit and loss account for the year 965 (106) Charged to investment property revaluation reserve for the year (Note) – 24,580 Charged to other asset revaluation reserve for the year – 381 At 31st December, 2003 and 1st January, 2004 5,659 154,734 Charged/(Credited) to consolidated profit and loss account for the year 714 (99) Charged to investment property revaluation reserve for the year (Note) – 14,835 Exchange adjustments – – At 31st December, 2004 6,373 169,470	Tax losses HK$’000 (18,562) (154) 16,782 – (1,934) 42 – – (1,892)	Others HK$’000 – 2,165 – – 2,165 170 – 50 2,385	Total HK$’000 116,011 2,870 41,362 381
			160,624 827 14,835 50
			176,336

Note: The portion of the deferred tax liabilities, net of minority interests, of which HK$9,961,000 (2003 – HK$27,274,000) has been charged to investment property revaluation reserve.

– 83 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

35. BANK LOANS

Bank loans: Secured_(Note)_ Unsecured Repayable within one year Non-current portion Bank loans repayable: Within one year In the second year In the third to fifth years, inclusive After five years	Group 2004 2003 HK$’000 HK$’000 1,151,635 967,985 47,631 10,000 1,199,266 977,985 (471,654) (277,723) 727,612 700,262 471,654 277,723 168,741 202,631 38,871 77,631 520,000 420,000 1,199,266 977,985	Company 2004 2003 HK$’000 HK$’000 775,000 726,786 – – 775,000 726,786 (164,000) (181,786 611,000 545,000 164,000 181,786 91,000 125,000 – – 520,000 420,000 775,000 726,786	Company 2004 2003 HK$’000 HK$’000 775,000 726,786 – – 775,000 726,786 (164,000) (181,786 611,000 545,000 164,000 181,786 91,000 125,000 – – 520,000 420,000 775,000 726,786
			726,786 (181,786
			545,000

			181,786 125,000 – 420,000
			726,786

Note: The bank loans were secured by shares in certain listed subsidiaries of the Group, first legal mortgages over certain investment properties, leasehold land and buildings, properties under development, shares in certain subsidiaries of the Group, certain securities of the Group and certain securities owned by margin clients of the Group.

36. CREDITORS, ACCRUALS AND DEPOSITS RECEIVED

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

Outstanding balances with ages: Repayable on demand Within 30 days Between 31 and 60 days Between 61 and 90 days Between 91 and 180 days Over 180 days	Group 2004 2003 HK$’000 HK$’000 486,189 691,367 76,645 142,093 29,440 34,321 5,571 8,338 6,755 9,856 563 15,189 605,163 901,164	Group 2004 2003 HK$’000 HK$’000 486,189 691,367 76,645 142,093 29,440 34,321 5,571 8,338 6,755 9,856 563 15,189 605,163 901,164
		901,164

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

– 84 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

37. INTERESTS IN SUBSIDIARIES

Investments at cost: Unlisted shares Shares listed in Hong Kong Due from subsidiaries Due to subsidiaries Provisions for impairment losses Market value of listed shares at 31st December	Company 2004 2003 HK$’000 HK$’000 179,469 179,469 242,754 242,754 422,223 422,223 7,165,628 7,076,132 (1,190,763) (1,189,938) 6,397,088 6,308,417 (1,368,923) (1,495,264) 5,028,165 4,813,153 274,864 171,582

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

– 85 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

38. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

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

Note
Profit before tax
Adjustments for:
Share of results of associates
Loss/(Gain) on disposal of:
Fixed assets
7
Investment properties
Interests in subsidiaries
Investment securities
7
Provisions/(Write-back of provisions)
for impairment losses:
Associates
Investment securities
Net unrealised loss/(gain) on transfer of
investment securities and held-to-maturity
securities to other investments in securities
6
Write-back of provision for loss on guaranteed
return arrangement for fund management
Interest expense
Interest income
Dividend income
Depreciation
7
Amortisation of goodwill arising from
acquisition of subsidiaries
7
Negative goodwill recognised as income
Operating profit before working capital changes
Decrease in properties held for sale
Decrease/(Increase) in inventories
Decrease in held-to-maturity securities
Decrease/(Increase) in other investments
in securities
Decrease/(Increase) in loans and advances
Decrease/(Increase) in debtors, prepayments
and deposits
Decrease in certificates of deposit held
Decrease/(Increase) in client trust bank balances
Decrease in bank deposits with original maturity
over three months
Increase/(Decrease) in creditors, accruals and
deposits received
Decrease in provision for loss on guaranteed
return arrangement for fund management
Profit attributable to banking operation
Cash from operations

Group
2004
2003
HK$’000
HK$’000
132,925
314,654
(60,679)
(52,458)
(212)
(436)
(898)
(40,960)
7,497
–
708
(5,401)
16,367
2,703
(49,207)
32,596
7,856
(20,483)
–
(10,868)
29,260
36,470
(50,171)
(75,593)
(21,934)
(14,698)
24,573
21,222
8,755
3,939
(553)
(40,580)
44,287
150,107
79,264
11,280
21,504
(25,527)
48,818
56,944
54,072
(593,043)
(78,263)
28,157
106,186
(105,060)
–
1,000,000
41,435
(176,628)
–
309,221
(257,480)
340,238
–
(117,985)
59,823
877,704
(7,246)
(8,439)
52,577
869,265

– 86 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Disposal of a subsidiary

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

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

Cash consideration received Cash and bank balances disposed of Net outflow of cash and cash equivalents Acquisition of subsidiaries Net assets acquired: Fixed assets Inventories Cash and bank balances Bank loans Debtors, prepayments and deposits Creditors, accruals and deposits received Minority interests Reclassification from interest in an associate Goodwill arising from acquisition Negative goodwill arising from acquisition Deferred cash settlement Cash consideration paid	Group 2004 2003 HK$’000 HK$’000 700 – (1,964) – (1,264) – Group 2004 2003 HK$’000 HK$’000 28,167 7,419 1,238 29,629 40,686 2,140 (10,397) – 25,565 – (15,072) (3,020 (9,662) (10,167 60,525 26,001 (17,891) – 7,317 19,591 (878) – (21,223) (9,409 27,850 36,183	Group 2004 2003 HK$’000 HK$’000 700 – (1,964) – (1,264) – Group 2004 2003 HK$’000 HK$’000 28,167 7,419 1,238 29,629 40,686 2,140 (10,397) – 25,565 – (15,072) (3,020 (9,662) (10,167 60,525 26,001 (17,891) – 7,317 19,591 (878) – (21,223) (9,409 27,850 36,183
		26,001 – 19,591 – (9,409
		36,183

(c) Acquisition of subsidiaries

– 87 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Cash consideration paid Cash and bank balances acquired Net inflow/(outflow) of cash and cash equivalents	Group 2004 2003 HK$’000 HK$’000 (27,850) (36,183) 40,686 2,140 12,836 (34,043)

The subsidiaries acquired during the year contributed turnover of HK$6,800,000 (2003 – HK$21,677,000) and a loss after tax of HK$8,423,000 (2003 – profit of HK$661,000) to the Group since the date of their respective acquisition. In the case of the associate which was reclassified to a subsidiary, these turnover and profit after tax amounts exclude the former associate’s contribution to the results prior to its becoming a subsidiary.

(d) Major non-cash transactions

– 88 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

39. 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$’000 At 31st December, 2004 Assets Debt securities: Investment securities – Held-to-maturity securities – Other investments in securities – Loans and advances 166,253 Client trust bank balances 43,244 Cash and bank balances 673,228 Assets less liabilities attributable to banking operation: Cash and short-term funds 44,475 Debt securities: Held-to-maturity securities – Other investments in securities – Advances to customers 28,598 955,798 Liabilities Bank loans – Assets less liabilities attributable to banking operation: Current, fixed, savings and other deposits of customers 19,912 19,912	3 months or less HK$’000 – 40,465 – 232 345,879 1,260,364 39,433 – – 61,854 1,748,227 249,127 88,576 337,703	1 year or less but over 3 months HK$’000 – 41,751 28,722 4,223 – – – – – 21,573 96,269 222,527 9,153 231,680	5 years or less but over 1 year HK$’000 20,782 56,556 234,815 11,587 – – – – 7,769 23,326 354,835 207,612 – 207,612	After 5 years HK$’000 – 6,260 70,180 22,428 – – – 9,643 – 12,580 121,091 520,000 – 520,000	Undated HK$’000 10,974 – 55,403 – – – – – 9,190 – 75,567 – – –	Total HK$’000 31,756 145,032 389,120 204,723 389,123 1,933,592 83,908 9,643 16,959 147,931
						3,351,787

						1,199,266 117,641
						1,316,907

– 89 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Repayable on demand HK$’000 At 31st December, 2003 Assets Debt securities: Investment securities – Held-to-maturity securities – Other investments in securities 5,486 Loans and advances 98,395 Client trust bank balances 207,923 Pledged time deposits – Cash and bank balances 276,450 Assets less liabilities attributable to banking operation: Cash and short-term funds 219,402 Placements with banks and other financial institutions maturing between one and twelve months – Debt securities: Held-to-maturity securities – Other investments in securities – Advances to customers 25,312 832,968 Liabilities Bank loans – Assets less liabilities attributable to banking operation: Current, fixed, savings and other deposits of customers 566,394 566,394	3 months or less HK$’000 – 51,329 52,694 1,051 222,635 155,102 1,686,442 35,405 368,320 – – 99,037 2,672,015 64,342 92,381 156,723	1 year or less but over 3 months HK$’000 – 42,234 23,610 461 – – – – – – – 10,418 76,723 213,381 7,515 220,896	5 years or less but over 1 year HK$’000 2,248 82,384 373,640 2,605 – – – – – – – 3,240 464,117 280,262 – 280,262	After 5 years HK$’000 – 3,882 97,462 23,948 – – – – – 9,672 4,735 13,586 153,285 420,000 – 420,000	Undated HK$’000 10,975 – 11,879 – – – – – – – 8,911 – 31,765 – – –	Total HK$’000 13,223 179,829 564,771 126,460 430,558 155,102 1,962,892 254,807 368,320 9,672 13,646 151,593
						4,230,873

						977,985 666,290
						1,644,275

– 90 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

40. CONTINGENT LIABILITIES

At the balance sheet date, the Group and the Company had the following contingent liabilities:

(a) Guarantees in respect of banking facilities

Guarantees provided in respect of banking facilities granted to: An associate An investee company	Group 2004 2003 HK$’000 HK$’000 – 11,320 2,915 2,911 2,915 14,231	Company 2004 2003 HK$’000 HK$’000 – 11,320 2,915 2,911 2,915 14,231	Company 2004 2003 HK$’000 HK$’000 – 11,320 2,915 2,911 2,915 14,231
			14,231

(b) As at 31st December, 2003, the Group had entered into certain foreign exchange contracts. Pursuant to the contracts, the Group is committed to sell Japanese Yen with a principal sum of HK$9,002,000 and to purchase United States Dollars with a principal sum of HK$8,899,000. The transaction committed as at 31st December, 2003 was fully settled during the year.
(c) Pursuant to a letter of indemnity dated 18th June, 2004 from the Company amongst others in favour of its associate, the Company agreed to indemnify the associate in respect of certain claims made by the associate’s contractor to a maximum contingent liability thereunder of US$11,309,000 (equivalent to approximately HK$87,917,000). On 28th March, 2005, the contingent liability ceased as a result of the settlement of the aforesaid claims between the associate and the contractor.

(d) Details of the off-balance sheet exposures relating to banking operation

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

41. OPERATING LEASE ARRANGEMENTS

(a) As lessor

The Group leases its investment properties and properties held for sale under operating lease arrangements with leases negotiated for terms ranging from one to eight years. At 31st December, 2004, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due as follows:

Within one year In the second to fifth years, inclusive	Group 2004 2003 HK$’000 HK$’000 94,935 102,086 51,812 87,752 146,747 189,838	Group 2004 2003 HK$’000 HK$’000 94,935 102,086 51,812 87,752 146,747 189,838
		189,838

– 91 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) As lessee

The Group leases certain properties and motor vehicles under operating lease agreements which are non-cancellable. The leases expire on various dates until 15th December, 2032 and the leases for properties contain provision for rental adjustments. As at 31st December, 2004, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

Within one year In the second to fifth years, inclusive After five years	Group 2004 2003 HK$’000 HK$’000 13,959 11,951 32,164 26,987 17,414 18,496 63,537 57,434	Group 2004 2003 HK$’000 HK$’000 13,959 11,951 32,164 26,987 17,414 18,496 63,537 57,434
		57,434

42. CAPITAL COMMITMENTS

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

Capital commitments in respect of plant and equipment: Contracted, but not provided for Other capital commitments: Contracted, but not provided for	Group 2004 2003 HK$’000 HK$’000 4,699 123 166,337 72,794 171,036 72,917	Group 2004 2003 HK$’000 HK$’000 4,699 123 166,337 72,794 171,036 72,917
		72,917

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

43. RELATED PARTY TRANSACTIONS

Listed below are related party transactions disclosed in accordance with the Statement of Standard Accounting Practice 20 “Related party disclosures”.

(a) At the balance sheet date, an overseas affiliate of the Company had the following balances with The Macau Chinese Bank Limited, a banking subsidiary of Hongkong Chinese Limited (“HCL”) which in turn is a subsidiary of the Company:


	2004	2003
	HK$’000	HK$’000
Included under the following item as referred to in
Note 26 to the financial statements:
Current, fixed, savings and
other deposits of customers	–	(195,313)

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

– 92 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) As at 31st December, 2004, the Group had balances with its associates and jointly controlled entities, further details of which are set out in Note 21 and Note 22 to the financial statements, respectively.
(c) During the prior year, the Group paid to Lippo Limited (“Lippo”), an intermediate holding company of the Company, an interest of HK$1,462,000. The interest was paid on the outstanding loan note due to Lippo which was fully redeemed at par in cash during the prior year. The interest rate was determined by reference to the then prevailing market lending rates.
(d) (i) During the year, the Group received rental income of HK$2,117,000 (2003 – HK$2,117,000) from Lippo. The rental was determined by reference to the then prevailing open market rentals.
(ii) Details of the tenancy agreement about the rental income received during the year in item (i) above and other tenancy agreements between group companies in respect of the letting of office premises are disclosed in the section headed “Directors’ and controlling shareholders’ interests in contracts” in the Report of the Directors.

The transactions in respect of item (d) above also constitute connected transactions under the Listing Rules. Further details of the transactions are disclosed in the section headed “Directors’ and controlling shareholders’ interests in contracts” in the Report of the Directors.

In respect of the above transactions, the relationships between the Company, Lippo and HCL, all of which are publicly listed companies in Hong Kong, and the ultimate holding company of which is Lippo Cayman Limited, are defined, and the Directors’ interests therein are separately reported.

44. SUBSEQUENT EVENTS

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

45. APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Board of Directors on 22nd April, 2005.

– 93 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. INDEBTEDNESS

As at 31st May, 2005, 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$1,027 million, comprising secured bank loans of approximately HK$994 million, unsecured bank loans of approximately HK$26 million and guarantee in a total of approximately HK$7 million provided for its associated company and investee company in respect of banking facilities. The bank loans were secured by shares in certain subsidiaries of the Company, first legal mortgages over properties, fixed assets, certain securities owned by the Group (other than MCB) and securities owned by margin clients of the Group and corporate guarantee provided by the shareholders of a subsidiary of the Company.

Save as aforesaid and apart from intra-group liabilities, the Group (other than MCB) did not, as at 31st May, 2005, have any outstanding debt securities, whether issued and outstanding, authorised or otherwise created but unissued, term loans, whether guaranteed, unguaranteed, secured (whether the security is provided by the issuer or by third parties) or unsecured, other borrowings or indebtedness in the nature of borrowing including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits or hire purchase commitments, whether guaranteed, unguaranteed, secured or unsecured borrowings or debt, mortgages, charges, guarantees or other material contingent liabilities.

As at 31st May, 2005, MCB accepts deposits from customers, banks and other financial institutions of approximately HK$114 million in the normal course of their banking business. MCB also had contingent liabilities of approximately HK$22 million, comprising guarantees and other endorsements of approximately HK$13 million and liabilities under letters of credit on behalf of customers of approximately HK$9 million, as at 31st May, 2005.

Save as aforesaid, MCB did not, as at 31st May, 2005, 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.

4. WORKING CAPITAL

The Directors are of the opinion that taking into account the internal financial resources, the present available banking facilities and the injection of HK$1,450 million into LAAP, the Group will have sufficient working capital for its normal business for the next 12 months from the date of this circular.

– 94 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

5. MATERIAL CHANGE

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

6. MANAGEMENT DISCUSSION AND ANALYSIS OF THE OPERATING RESUTLS OF THE GROUP FOR THE YEAR ENDED 31ST DECEMBER, 2004

Hong Kong achieved a strong economic growth in 2004 and the global economy expanded by 4 per cent., the best since 2000. Amid the remarkable recovery in market conditions last year, the Group’s turnover increased by 54 per cent. to HK$2,793 million (2003 – HK$1,812 million).

The Group’s property and food businesses continued to perform well. However, the Group’s performance was affected by volatile investment markets during the year with a substantial reduction of profit arising from treasury and securities investments. Against this background, the Group recorded a net profit attributable to shareholders of HK$46 million (2003 – HK$163 million when non-recurrent negative goodwill recognised as income of HK$40 million was excluded).

Results for the year

Turnover for the year totalled HK$2,793 million which was 54 per cent. higher than the HK$1,812 million recorded for 2003. Property, food businesses and treasury and securities investments remained the principal sources of revenue of the Group, contributing 9 per cent. (2003 – 16 per cent.), 31 per cent. (2003 – 35 per cent.) and 56 per cent. (2003 – 43 per cent.), respectively, of total turnover.

Property

Property investment achieved a profit of HK$129 million for the year, which was 21 per cent. higher than the HK$106 million recorded in 2003, although turnover for this business segment reduced from HK$284 million to HK$254 million.

During the year, the Group disposed of certain of its properties in Hong Kong, the PRC and Australia for HK$128 million (2003 – HK$167 million), of which 86 per cent. (2003 – 8 per cent.) was attributable to properties situated in Hong Kong. Boosted by the improving local property market, gross profit margin is higher at 27 per cent. (2003 – 24.5 per cent.). In addition, rising property prices, particularly in Hong Kong, also resulted in a surplus of HK$358 million arising on revaluation of the Group’s investment properties, which was credited to the Group’s revaluation reserve.

– 95 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

On the other hand, rental income generated from the Group’s portfolio continued to increase, though at a moderate pace of 8 per cent., as a result of higher occupancy and renewed rental rates. Total rental income for the year amounted to HK$126 million (2003 – HK$117 million). It remained as a stable and recurrent income source of the Group. The growth of rental income in the PRC is comparably higher with Lippo Plaza in Shanghai achieved almost full occupancy throughout the year. As a result, rental income attributable to the Group’s overseas properties increased to 71 per cent. (2003 – 68 per cent.) of the total rental income whereas that attributable to local properties reduced to 29 per cent. (2003 – 32 per cent.).

In order to replenish the Group’s property portfolio and enhance the stable income source, the Group acquired new properties for rental purpose and participated in well located property development projects in Macau, the PRC, Singapore and Japan. During the year, the Group invested over HK$200 million in property investment.

Food businesses

The Group’s food businesses produced encouraging results in 2004. This segment registered a 38 per cent. increase in turnover to HK$870 million (2003 – HK$630 million) and reported a profit of HK$32 million, which is 43 per cent. higher than the HK$22 million recorded in 2003. Food businesses mainly comprise wholesale and distribution of food and allied fast-moving consumer goods and food manufacturing in Singapore, Malaysia and the PRC.

The increase was mainly contributed by the new subsidiaries acquired by the Group in December 2003. These subsidiaries are mainly engaged in food distribution and manufacturing in Malaysia. In addition, the Group’s marketing division was strengthened by partnering with a number of new international brands in 2004.

The Group is constantly on the lookout for opportunities to acquire good businesses with strategic fit for the Group. During the year, the Group also completed the acquisition of a subsidiary which was engaged in the dairy production business in Foshan, the PRC. It complements the Group’s existing regional food manufacturing and distribution and represents the Group’s first expansion into the PRC food market.

Treasury and securities investments

Turnover from treasury and securities investments increased by two-fold to HK$1,566 million (2003 – HK$776 million). In 2004, the Group took advantage of the improving equity market conditions to actively realise the investments, resulting in a realised gain of HK$53 million (2003 – HK$42 million). Also, in anticipation of likely rises in interest rates, the Group has taken steps to adjust its investment portfolio by realising certain bonds and investment funds to a total of HK$448 million (2003 – HK$278 million). However, due to volatile market conditions, the Group recorded an unrealised holding loss on other investments in securities of

– 96 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

HK$68 million (2003 – gain of HK$96 million) at year end, representing 4.9 per cent. (2003 – 7.7 per cent.) of the total portfolio. As a result, the net gain from this segment reduced to HK$64 million (2003 – HK$191 million). Notwithstanding the volatility of the investment markets, the bond portfolio continued to contribute high and stable interest income to the Group.

Infrastructure investment

The Group has a 26.3 per cent. interest in a power plant in Fujian Province, the PRC whose operating performance continued to maintain at a satisfactory level during the year. Profit from the project company has been included under the Group’s share of results of associates. In June 2004, the refinancing arrangement with the domestic banks in the PRC was successfully completed. The new financing arrangement replaced foreign currency denominated loans with Renminbi, which enables it to match with the electricity income which is also denominated in Renminbi and reduces the project company’s exposure to exchange rate risk.

Financial position

As at 31st December, 2004, total assets of the Group increased by HK$0.4 billion to HK$8.7 billion (2003 – HK$8.3 billion) with consolidated net asset value increased correspondingly to HK$4.7 billion (2003 – HK$4.3 billion), equivalent to HK$0.51 per share (2003 – HK$0.47 per share). The increase was mainly attributable to the property revaluation surplus and the net profit for the year.

The Group’s financial position remained strong and healthy with liquidity ratio standing at 3.18 to 1 (2003 – 3.30 to 1) at end of the year. Total borrowings increased by 23 per cent. to HK$1,199 million (2003 – HK$978 million), comprising secured bank loans of HK$1,152 million (2003 – HK$968 million) and unsecured bank loans of HK$47 million (2003 – HK$10 million). The increase was in line with the expansion of the Group through the acquisition of new subsidiaries. Certain properties, fixed assets, shares in certain subsidiaries and certain securities of the Group and certain securities owned by margin clients of the Group were pledged against secured banking facilities. Almost all the bank loans were denominated in United States dollars or Hong Kong dollars, carrying interest at floating rates and 39 per cent. (2003 – 28 per cent.) of which was repayable within one year. Despite the increase in loan balance, the Group’s gearing ratio (measured as total borrowings, net of minority interests, to shareholders’ equity) remained low at 22.6 per cent. (2003 – 20.7 per cent.).

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

– 97 –

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

On 18th June, 2004, the Company agreed to indemnify one of its associates against a potential liability arising from claims made by the associate’s contractor to a maximum obligation of US$11.3 million (equivalent to approximately HK$88 million). On 28th March, 2005, such contingent liability ceased as a result of the settlement of the aforesaid claims between the associate and the contractor.

Save as aforesaid and other than those relating to the banking operation, the Group had no material contingent liabilities outstanding as at 31st December, 2004 (2003 – Nil).

Staff and remuneration

The Group had approximately 1,018 employees (2003 – 906 employees) as at 31st December, 2004. Staff levels were managed in line with business needs and market opportunities. Total staff costs during the year amounted to HK$207 million (2003 – HK$185 million). The Group ensures that its employees are offered competitive remuneration packages. Certain employees of the Group were granted options under share option schemes of their respective companies.

– 98 –

APPENDIX II

PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The following is the unaudited pro forma financial information of the Group. The unaudited pro forma financial information of the Group are prepared based on the audited consolidated financial statements of the Company as at 31st December, 2004, extracted from its annual report for the year ended 31st December, 2004 as set out in Appendix I and adjusted to reflect the effect of the LAAP Investment.

The accompanying unaudited pro forma statement of assets and liabilities as at 31st December, 2004 gives effect to the transaction described above as if it had been consummated on 31st December, 2004.

The unaudited pro forma financial information was prepared for the purpose of illustrating how the LAAP Investment might have affected the assets and liabilities position of the Group. As it is prepared for illustrative purpose only, and because of its nature, it may not purport to represent what the assets and liabilities position of the Group are on the completion of the LAAP Investment.

Unaudited Pro Forma Statement of Assets and Liabilities

(A) (B) Proforma (As at adjustments 31st December, relating to the 2004) subscription Audited of the LAAP Balance Investment HK$’000 HK$’000 Note Non-current assets Goodwill 76,512 Fixed assets 325,157 Investment properties 2,362,777 Properties under development 167,634 Interests in associates 531,676 1,450,000 a Interests in jointly controlled entities 7,393 Investment securities 552,094 Held-to-maturity securities 62,816 Loans and advances 24,031 Deferred tax assets 4,115 Assets less liabilities attributable to banking operation 175,411 4,289,616 Current assets Properties held for sale 10,140 Inventories 105,780 Held-to-maturity securities 82,216 Other investments in securities 1,306,843 (1,000,000) a Loans and advances 180,692 Debtors, prepayments and deposits 396,645 Client trust bank balances 389,123 Cash and bank balances 1,933,592 (450,000) a 4,405,031 TOTAL ASSETS 8,694,647	(C) = (A)+(B) Adjusted Balance HK$’000 76,512 325,157 2,362,777 167,634 1,981,676 7,393 552,094 62,816 24,031 4,115 175,411
	5,739,616
	10,140 105,780 82,216 306,843 180,692 396,645 389,123 1,483,592
	2,955,031
	8,694,647

– 99 –

APPENDIX II

PRO FORMA FINANCIAL INFORMATION OF THE GROUP

(A) (B) Proforma (As at adjustments 31st December, relating to the 2004) subscription Audited of the LAAP Balance Investment HK$’000 HK$’000 Note Current liabilities Bank loans 471,654 Creditors, accruals and deposits received 843,811 Tax payable 70,850 1,386,315 Non-current liabilities Long term bank loans 727,612 Deferred tax liabilities 176,336 903,948 TOTAL LIABILITIES 2,290,263 NET ASSETS 6,404,384	(C) = (A)+(B) Adjusted Balance HK$’000 471,654 843,811 70,850
	1,386,315
	727,612 176,336
	903,948
	2,290,263

	6,404,384

Notes to pro forma adjustments:

a. The LAAP investment will be financed by internal resources by utilizing the Group’s other investments in securities and bank and cash. The Directors estimate that approximately HK$450 million cash resources and approximately HK$1,000 million sales proceeds from the securities investments realisation will be used for funding the LAAP Investment. Since the Group’s actual balance of other investments in securities and bank and cash will change from time to time, the actual outlays from each category might be different from the figures as shown in this statement.
b. The above pro forma adjustments have not taken into account:
(i) the consideration payable of HK$238,000,000 for the acquisition of a property located in Macau, details of which are set out in the announcement of the Company dated 27th January, 2005.
(ii) the consideration payable of RMB 67,870,000 for the acquisition relating to the proposed abattoir project in Shanghai, the PRC, details of which are set out in the announcement of the Company dated 16th February, 2005.
(iii) the consideration payable of S$43,620,000 for the acquisition of a residential property in Singapore, details of which are set out in the announcements of the Company dated 25th February, 2005, 20th May, 2005 and 22nd June, 2005.
(iv) the appointment of an investment advisor in Singapore, details of which are set out in the announcement of the Company dated 1st June, 2005.
c. The Hong Kong Institute of Certified Public Accountants has issued a number of new and revised Hong Kong Financial Reporting Standards and Hong Kong Accounting Standards (“new HKFRSs”) which are effective for accounting periods beginning on or after 1st January, 2005. These new HKFRSs have not been early adopted in the audited financial statements of the Group for the year ended 31st December, 2004 or in the preparation of the unaudited pro forma

– 100 –

APPENDIX II

PRO FORMA FINANCIAL INFORMATION OF THE GROUP

financial information for the year ended 31st December, 2004. The Directors are in the process of making an assessment of the impact of these new HKFRSs and have so far concluded that the more significant differences between new HKFRSs and current accounting policies that are expected to affect the Group are as follows:

Goodwill

Under HKFRS 3 ‘Business Combinations’, goodwill will no longer be amortised but instead will be subject to rigorous annual impairment testing. This will result in a change to the Group’s current accounting policy under which goodwill is amortised over its useful life of not exceeding 20 years and assessed for an indication of impairment at each balance sheet date. Under the new policy, amortisation will no longer be charged, but goodwill will be tested annually for impairment, as well as when there are indications of impairment. This new policy will be applied prospectively from 1st January, 2005. Reliable estimation of the future financial effects of this change in accounting policy is not practical because the conditions under which impairment will be assessed are not yet known.

Investment property

Under HKAS 40 ‘Investment Property’, the change in fair value of the investment properties will be recognised in the profit and loss account. This treatment will increase the volatility of the Group’s results as revaluation surplus on a portfolio basis has been accounted for in the equity under the current accounting policy. Reliable estimation of the future financial effects of this change in accounting policy is not practical as the details of future change in fair value of the investment properties are not yet known.

Financial instruments and investment securities

Under HKAS 39 ‘Financial Instruments: Recognition and Measurement’, financial instruments will be carried at either cost, amortised cost or fair value, depending on their classification. Depending on the classification of the financial instruments, movements in fair value will be either charged to net profit or loss or taken to equity in accordance with the standard. In addition, all derivatives, including those embedded in non-derivatives host contracts will be recognised in the balance sheet at fair value.

This will result in a change to the Group’s current accounting policy in respect of classification, measurement and recognition of certain investments. This new accounting policy will be applied prospectively from 1st January, 2005 and requires the available for sales investments (currently shown as investment securities) to be accounted for at fair value through equity. Reliable estimation of the future financial effects of this change in accounting policy is not practical because the fair value of such investments at next balance sheet date is not currently available.

This new accounting standards will also result in a change to the Group’s current accounting policies in respect of classification, measurement and recognition of derivative financial instruments. This will be applied prospectively from 1st January, 2005. The future financial effect of this change in accounting policy is not yet known as the classification and measurement process has not been completed. However, the requirements to recognise derivatives and certain other financial instruments with changes in fair value being reflected in the profit and loss account or the equity reserve may result in increased volatility in the Group’s profit and net assets.

Derecognition of financial assets and liabilities

HKAS 39 ‘Financial Instruments: Recognition and Measurement’ gives a clear guidance on derecognition of financial assets and liabilities. This new accounting policy will be applied prospectively from 1st January, 2005.

The Group will be continuing with the assessment of the impact of the other new HKFRSs and other significant changes may be identified as a result.

– 101 –

APPENDIX II

PRO FORMA FINANCIAL INFORMATION OF THE GROUP

The following is the full text of a letter received from Ernst & Young for the purpose of incorporation in this circular.

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

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

28th July, 2005

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

Dear Sirs

Lippo China Resources Limited (the “Company”) and its subsidiaries (the “Group”)

We report on the unaudited pro forma financial information of the Group set out on pages 99 to 101 in Appendix II “Pro Forma Financial Information of the Group” to the circular of the Company dated 28th July, 2005, which has been prepared by the directors of the Company, solely for illustrative purposes, to provide information about how the subscription of interest in a limited partnership, Lippo ASM Asia Property LP, (the “Subscription”) might have affected the historical financial information in respect of the Group.

The historical financial information is derived from the audited historical financial information of the Group. The basis of preparation of the unaudited pro forma financial information is set out in the accompanying introduction and notes to the unaudited pro forma financial information of the Group.

Responsibilities

It is the responsibility of the directors of the Company to prepare the unaudited pro forma financial information in accordance with Rule 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

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

– 102 –

APPENDIX II

PRO FORMA FINANCIAL INFORMATION OF THE GROUP

Basis of opinion

We conducted our work in accordance with the Statements of Investment Circular Reporting Standards and Bulletin 1998/8 “Reporting on pro forma financial information pursuant to the Listing Rules” issued by the Auditing Practices Board in the United Kingdom, where applicable. Our work, which involved no independent examination of any of the underlying financial information, consisted primarily of comparing the unadjusted financial information with the source documents, considering the evidence supporting the adjustments and discussing the unaudited pro forma financial information with the directors of the Company.

Our work did not constitute an audit or review made in accordance with Statements of Auditing Standards issued by the Hong Kong Institute of Certified Public Accountants, and accordingly, we do not express any such audit or review assurance on the unaudited pro forma financial information.

The unaudited pro forma financial information is for illustrative purposes only, based on the judgements and assumptions of the directors of the Company set out on pages 99 to 101 in Appendix II, and because of its nature, it does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position or results of the Group had the Subscription actually occurred as at the dates indicated therein or at any other future date.

Opinion

In our opinion:

(a) the unaudited pro forma financial information has been properly compiled by the directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purposes of the unaudited pro forma financial information as disclosed pursuant to Rule 4.29(1) of the Listing Rules.

Yours faithfully Ernst & Young Certified Public Accountants Hong Kong

– 103 –

APPENDIX III

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

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

– 104 –

APPENDIX III

GENERAL INFORMATION

	Personal	Personal				Approximate
	interests		Family			percentage of
	(held as		interests			total interests
	beneficial		(interest of	Other	Total	in the issued
Name of Director	owner)		spouse)	interests	interests	share capital
Number of ordinary shares of
HK$0.10 each in Lippo
Mochtar Riady		–	–	248,697,776	248,697,776	57.34
				Note (i)
James Riady		–	–	248,697,776	248,697,776	57.34
				Note (i)
Stephen Riady		–	–	248,697,776	248,697,776	57.34
				Note (i)
John Luen Wai Lee	825,000		–	–	825,000	0.19
Number of ordinary shares of
HK$1.00 each in HCL
Mochtar Riady		–	–	973,240,440	973,240,440	72.26
				Notes (i), (ii)
				and (iii)
James Riady		–	–	973,240,440	973,240,440	72.26
				Notes (i), (ii)
				and (iii)
Stephen Riady		–	–	973,240,440	973,240,440	72.26
				Notes (i), (ii)
				and (iii)
John Luen Wai Lee		200	200	–	400	0.00
King Fai Tsui		–	50,000	–	50,000	0.00

Note:

(i) 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, 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. 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 included Dr. Mochtar Riady, Mr. James Riady, Mr. Stephen Riady and their respective family members including, inter alia, the minor children of each of Messrs. James Riady and Stephen Riady. Dr. Mochtar Riady as the founder and beneficiary of the trust and Messrs. James Riady and Stephen Riady (together with their minor children) as beneficiaries of the trust were taken to be interested in Lippo Cayman under the SFO.

– 105 –

APPENDIX III

GENERAL INFORMATION

(ii) As at the Latest Practicable Date, Lippo was indirectly interested in 6,544,696,389 ordinary Shares in, representing approximately 71.13 per cent. of, the issued share capital of the Company.
(iii) As at the Latest Practicable Date, the Company was directly and indirectly interested in an aggregate of 973,240,440 ordinary shares of HK$1.00 each in, representing approximately 72.26 per cent. of, the issued share capital of HCL.

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

			Approximate
			percentage
		Number of	of interest in
Name of		shares	the issued
associated corporation	Class of shares	interested	share capital
Abital Trading Pte. Limited	Ordinary shares	2	100
AcrossAsia Multimedia	Ordinary shares	3,669,576,788	72.45
Limited (now known as		(Note a)
AcrossAsia Limited)
Actfield Limited	Ordinary shares	1	100
Boudry Limited	Ordinary shares	1,000	100
Congrad Holdings Limited	Ordinary shares	1	100
Cyport Limited	Ordinary shares	1	100
East Winds Food Pte Ltd.	Ordinary shares	400,000	88.88
		(Note b)
First Bond Holdings Limited	Ordinary shares	1	100
First Tower Corporation	Ordinary shares	1	100
		(Note c)
Glory Power Worldwide Limited	Ordinary shares	1	100
Grandhill Asia Limited	Ordinary shares	1	100
Grand Peak Investment Limited	Ordinary shares	2	100
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	15,000,000	100
	deferred shares
Lippo Capital Limited	Ordinary shares	705,690,000	100
Lippo Energy Company N.V.	Ordinary shares	6,000	100

– 106 –

APPENDIX III

GENERAL INFORMATION

			Approximate
			percentage
		Number of	of interest in
Name of		shares	the issued
associated corporation	Class of shares	interested	share capital
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	7,500,000	100
	deferred shares
Lippo Investments Limited	Ordinary shares	2	100
Lippo Leisure Holdings Limited	Ordinary shares	2	100
Lippo Realty Limited	Ordinary shares	2	100
Multi-World Builders &	Ordinary shares	4,080	51
Development Corporation
Nelton Limited	Ordinary shares	10,000	100
Pointbest Limited	Ordinary shares	1	100
SCR Ltd.	Ordinary shares	1	100
Sinotrend Global Holdings Limited	Ordinary shares	1	100
Skyscraper Realty Limited	Ordinary shares	10	100
		(Note d)
The HCB General Investment	Ordinary shares	70,000	70
(Singapore) Pte Ltd.
(“HCB General”)
The Hong Kong Building and	Ordinary shares	168,313,038	74.80
Loan Agency Limited		(Note e)
(“HKBLA”)
Valencia Development Limited	Ordinary shares	800,000	100
	Non-voting	200,000	100
	deferred shares
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.
e. The interests were held through the Company, a 71.13 per cent. owned subsidiary of Lippo which in turn was a 57.34 per cent. owned subsidiary of Lippo Cayman. On 18th June, 2005, a conditioned sale and purchase agreement was entered into by, inter alia, a wholly-owned subsidiary of the Company and the Company for the disposal of the entire interest in the shares of HKBLA.

– 107 –

APPENDIX III

GENERAL INFORMATION

As at the Latest Practicable Date, each of Messrs. James Riady and Stephen Riady, as beneficial owner, through their respective nominees, 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, Messrs. James Riady and Stephen Riady and their minor children. Dr. Mochtar Riady did not have any interests in the share capital of Lanius but the shareholders of Lanius were accustomed to act in accordance with his instructions.

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 Multimedia Limited (now known as AcrossAsia Limited), an associated corporation (within the meaning of Part XV of the SFO) of the Company.

(b) Interests in underlying shares of the Company

		Number of
		underlying Shares	Approximate
		in respect of	percentage
	Capacity and	which options	of the issued
Name of Director	nature of interest	have been granted*	share capital
John Luen Wai Lee	Personal (held as	9,000,000	0.09
	beneficial owner)

The options were granted on 23rd June, 1997 at a consideration of HK$1.00 per grantee under the Share Option Scheme for Employees adopted by the Company (the “Share Option Scheme”). Such options vested after two months from the date when the options were deemed to be granted and accepted and are exercisable from 23rd August, 1997 to 23rd June, 2007 in accordance with the rules of the Share Option Scheme to subscribe for ordinary Shares at an initial exercise price of HK$5.30 per Share (subject to adjustment). Pursuant to the bonus issue of new shares in the ratio of one for one in October 1997, the rights issue of new shares in July 1999 on the basis of one rights share for every one share held and the rights issue of new shares in November 2000 on the basis of one rights share for every two shares held, the holder of each option is entitled to subscribe for six ordinary Shares at an exercise price of HK$0.883 per Share (subject to adjustment). None of the options were exercised by the above Director since they were granted.

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

– 108 –

APPENDIX III

GENERAL INFORMATION

Certain Directors have non-beneficial personal equity interests in certain subsidiaries of the Company held for the benefit of the Group solely for the purpose of holding the requisite qualifying shares.

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

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

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

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 members of the Group are as follows:

– 109 –

APPENDIX III

GENERAL INFORMATION

(i) The Company

		Approximate
		percentage of
		the issued
Name	No. of ordinary Shares	share capital
Lippo	6,544,696,389	71.13
Lippo Cayman Limited
(“Lippo Cayman”)	6,544,696,389	71.13
Lanius Limited (“Lanius”)	6,544,696,389	71.13
Madam Lidya Suryawaty	6,544,696,389	71.13

Note (i):

(a) 6,544,696,389 ordinary Shares were held by Skyscraper Realty Limited directly as beneficial owner which in turn was a wholly-owned subsidiary of First Tower Corporation (“First Tower”). First Tower was a wholly-owned subsidiary of Lippo. Lippo Cayman, and through its wholly-owned subsidiaries, Lippo Capital Limited (which owned approximately 50.47 per cent. interest of the issued share capital of Lippo), J & S Company Limited and Huge Returns Limited, was directly and indirectly interested in approximately 57.34 per cent. of the issued share capital of Lippo.
(b) 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 included 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.
(c) Lippo’s interests in the ordinary Shares were recorded as the interests of Lippo Cayman, Lanius and Madam Lidya Suryawaty. The above ordinary Shares related to the same block of shares that Dr. Mochtar Riady, Messrs. James Riady and Stephen Riady were interested, details of which were disclosed in the above section headed “Directors’ and chief executive’s interests and short positions in shares and underlying shares of the Company and associated corporations”.
(d) All the interests stated above represent long positions.

(ii) Hassell Holdings Limited (“Hassell”)

	No. of ordinary shares
Name	of US$0.01 each	Percentage
Binsak Holdings Limited (“Binsak”)	5,500	55
Hackney Investments Limited	2,500	25
Fullway Properties Limited	1,000	10
Portland Limited	1,000	10

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

– 110 –

APPENDIX III

GENERAL INFORMATION

(iii) Firstrate Development Limited

	No. of ordinary shares
Name	of HK$1.00 each	Percentage
Hassell	40,004,000	40
First Dragon Limited	35,003,500	35
Sinofix Limited (“Sinofix”)	15,001,500	15

Note (iii): Hassell is a subsidiary of Binsak which in turn is a wholly-owned subsidiary of the Company and Sinofix is also a wholly-owned subsidiary of the Company. See also (i) above in respect of the substantial shareholders of the Company.

(iv) Tecwell Limited

	No. of ordinary shares
Name	of US$1.00 each	Percentage
Reiley Inc. (“Reiley”)	70	70
Itochu Corporation	30	30

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

(v) MEDCO Holdings, Inc. (“MEDCO”)

	No. of ordinary shares	Approximate
Name	of Peso 1.00 each	percentage
Citivest Asia Limited
(“Citivest Asia”)	494,814,901	70.70

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

(vi) MEDCO Asia Investment Corporation

	No. of ordinary shares	Approximate
Name	of Pesos 10.00 each	percentage
MEDCO	17,378,498	64.54
Classic Premium Limited
(“Classic Premium”)	3,721,000	13.82

Note (vi): Classic Premium is a wholly-owned subsidiary of the Company. See also (i) above in respect of the substantial shareholders of the Company and (v) above in respect of the substantial shareholders of MEDCO.

– 111 –

APPENDIX III

GENERAL INFORMATION

(vii) Zhuhai Chung Po House Property Development Company Limited

		Approximate
		percentage of
	Amount of paid up	development
Name	registered capital	right
Chung Po Investment and
Development Company
Limited (“CPID”)	RMB150,000,000	77.15
廣東省拱北中旅集團有限公司
(Guangdong Gongbei CTS Group
Co., Ltd.)	Nil	22.85

Note (vii): CPID is a wholly-owned subsidiary of Reiley which in turn is a wholly-owned subsidiary of the Company. See also (i) above in respect of the substantial shareholders of the Company.

(viii) Jeremiah Holdings Limited (“Jeremiah”)

	No. of ordinary shares
Name	of S$1.00 each	Percentage
Dragon Board Holdings
Limited (“Dragon Board”)	779,187	60
Mrs. Endang Utari Mokodompit	519,458	40

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

(ix) Nine Heritage Pte Ltd (“Nine Heritage”)

	No. of ordinary shares
Name	of S$1.00 each	Percentage
Jeremiah	800,000	80
SouthQuay Capital Asia Limited	200,000	20

Note (ix): See also (viii) above in respect of the substantial shareholders of Jeremiah.

– 112 –

APPENDIX III

GENERAL INFORMATION

(x) Auric Pacific Group Limited (“APG”)

	No. of ordinary shares	Approximate
Name	of S$0.50 each	percentage
Jeremiah	28,078,930	22.34
Nine Heritage	22,384,000	17.81
Pantogon Holdings Pte Ltd
(“Pantogon”)	13,085,405	10.41
Westront Pte Ltd	27,493,311	21.88

Note (x): Nine Heritage is a subsidiary of Jeremiah and Pantogon is a wholly-owned subsidiary of Jeremiah. See also (viii) above in respect of the substantial shareholders of Jeremiah. As at the Latest Practicable Date, Hongkong China Treasury Limited and Apexwin Limited, both being wholly-owned subsidiaries of the Company, were also interested in an aggregate of 759,000 ordinary shares of S$0.50 each in APG.

(xi) Auric Chun Yip Sdn. Bhd.

	No. of ordinary shares	Approximate
Name	of RM1.00 each	percentage
Auric Pacific (M) Sdn. Bhd. (“APM”)	7,000,000	58.33
Sunbeam Food Sdn. Bhd. (“SFSB”)	3,000,000	25
Mr. Abdul Razak Bin Mohd Karim	2,000,000	16.67

Note (xi): APM is a wholly-owned subsidiary of APG. See also (x) above in respect of the substantial shareholders of APG.

(xii) Auric Pacific Food Processing Sdn. Bhd.

	No. of ordinary shares	Approximate
Name	of RM1.00 each	percentage
APM	700,000	58.33
SFSB	300,000	25
Mr. Abdul Razak Bin Mohd Karim	200,000	16.67

Note (xii): APM is a wholly-owned subsidiary of APG. See also (x) above in respect of the substantial shareholders of APG.

(xiii) Chunex Pte. Ltd.

Chunex Pte. Ltd.
	No. of ordinary shares
Name	of S$1.00 each	Percentage
APG Foods Pte. Limited (“APF”)	2,250,000	75
SW Investments Holding Pte. Ltd.	750,000	25

Note (xiii): APF is a wholly-owned subsidiary of APG. See also (x) above in respect of the substantial shareholders of APG.

– 113 –

APPENDIX III

GENERAL INFORMATION

(xiv) Classic Aspire Sdn Bhd

	No. of ordinary shares
Name	of RM1.00 each	Percentage
APG	40,000	40
Mr. Zaidaton Akmah Binti Yeop	43,000	43
Mr. Yeap Kok Leong	17,000	17

Note (xiv): See also (x) above in respect of the substantial shareholders of APG.

(xv) Foshan Ausoon Dairy Co., Ltd

	Amount of paid up
Name	registered capital	Percentage
Auric Pacific Dairy (Foshan)
Limited (“Auric Foshan”)	US$4,464,000	75
廣東新盈科技創業投資有限公司
(Guangdong Xinying Science
and Technology Venture
Investments Co., Ltd)	US$1,488,000	25

Note (xv): Auric Foshan is a wholly-owned subsidiary of APG. See also (x) above in respect of the substantial shareholders of APG.

(xvi) Win Double Limited (“Win Double”)

	No. of ordinary shares
Name	of US$1.00 each	Percentage
Primewin Holdings Limited
(“Primewin”)	84	84
Mercurine Investment Pte. Ltd.	16	16

Note (xvi): Primewin is a wholly-owned subsidiary of APG. See also (x) above in respect of the substantial shareholders of APG.

(xvii) Mention Property Limited (“MPL”)

No. of ordinary shares

	No. of ordinary shares
Name	of US$1.00 each	Percentage
Win Double	71	71
Tarragon Ventures Pte. Ltd.	29	29

Note (xvii): See also (xvi) above in respect of the substantial shareholders of Win Double.

– 114 –

APPENDIX III

GENERAL INFORMATION

(xviii) PT Duta Wisata Loka

	No. of ordinary shares	Approximate
Name	of Rp1,000,000 each	percentage
MPL	370,707	85.33
Sonic Asia Capital Ltd. (“SAC”)	34,232	7.88
PT Multi Pratama Gemilang Perkasa
(“MPGP”)	29,500	6.79

Note (xviii): See also (xvii) above in respect of the substantial shareholder of MPL. SAC is a wholly-owned subsidiary of MPGP.

(xix) The Hong Kong Building and Loan Agency Limited (“HKBLA”)

	No. of ordinary shares	Approximate
Name	of HK$1.00 each	percentage
HKCB Corporation Limited
(“HKCB Corporation”)	168,313,038	74.80

Note (xix): HKCB Corporation is a wholly-owned subsidiary of No. 1 Dragon Ltd. which in turn is a wholly-owned subsidiary of the Company. See also (i) above in respect of the substantial shareholders of the Company. On 18th June, 2005, a conditional sale and purchase agreement was entered into by, inter alia, HKCB Corporation for the disposal of its entire interest in the shares of HKBLA.

(xx) HCL

	No. of ordinary shares	Approximate
Name	of HK$1.00 each	percentage
HKCL Holdings Limited
(“HKCL”)	806,656,440	59.89
The Company	166,584,000	12.37

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

(xxi) Four Prosperity Holdings Limited

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

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

– 115 –

APPENDIX III

GENERAL INFORMATION

(xxii) Goldfix Pacific Ltd.

	No. of ordinary shares	Approximate
Name	of US$0.01 each	percentage
Sinopro Limited (“Sinopro”)	600,000	80.89
_Note (xxii):_Sinopro is a wholly-owned subsidiary of HCL. See also (xx) above		in respect of the
substantial shareholders of HCL.

(xxiii) Rossinis Restaurant Pte. Ltd.

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

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

(xxiv)TechnoSolve Limited

	No. of ordinary shares	Approximate
Name	of HK$1.00 each	percentage
HKCL Investments Limited
(“HKCL Investments”)	18,053,500	80.43

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

(xxv) The Macau Chinese Bank Limited

	No. of ordinary shares
Name	of MOP100 each	Percentage
Winwise Holdings Limited
(“Winwise”)	1,530,000	85
Mr. Wong Kon Kei	270,000	15

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

– 116 –

APPENDIX III

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 a service contract with any member of the Group (excluding contracts expiring or determinable by the employer within one year without payment of compensation (other than statutory compensation)).

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 interests in any business which competes or is likely to compete, either directly or indirectly, with the business of the Group or have any other conflicts of interest with the Group pursuant to the Listing Rules.

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

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

As at the Latest Practicable Date, the followings were particulars of assets acquired or disposed of by, or leased to, members of the Group since 31st December, 2004, being the date to which the latest published audited consolidated financial statements of the Group were made up, in which any Director had a direct or indirect interest:

(a) On 21st March, 2004, a tenancy agreement was entered into between Shanghai Lippo Fuxing Real Estate Limited (“Shanghai Lippo Fuxing”), a non whollyowned subsidiary of the Company, and AcrossAsia Limited (“AAL”, formerly known as AcrossAsia Multimedia Limited) pursuant to which AAL agreed to lease Room R1, 39th Floor of Lippo Plaza (“Room R1”) with a net floor area of approximately 29.9 square metres for a period of one year from 1st April, 2004 to 31st March, 2005 at a monthly rental of US$2,465 (equivalent to approximately HK$19,000), exclusive of service charges and outgoings.

– 117 –

APPENDIX III

GENERAL INFORMATION

On 9th March, 2005, a new tenancy agreement was entered into between Shanghai Lippo Fuxing and AAL pursuant to which AAL agreed to lease Room R1 for a period of six months from 1st April, 2005 to 30th September, 2005 at a monthly rental of US$2,300 (equivalent to approximately HK$18,000), exclusive of service charges and outgoings.

AAL is a subsidiary of Lippo Cayman Limited (“Lippo Cayman”) which in turn is wholly owned by Lanius Limited (“Lanius”), the trustee of a trust, the beneficiaries of which include Dr. Mochtar Riady, Mr. James Riady and Mr. Stephen Riady and their respective family members.

(b) As stated in the joint announcement of the Company and HCL dated 10th January, 2005, a tenancy agreement was entered into between Lippo and Superform Investment Limited (“Superform”), a wholly-owned subsidiary of the Company, on 10th January, 2005 pursuant to which Lippo agreed to lease from Superform portion of 24th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong with a gross floor area of approximately 11,028 square feet for a period of two years from 1st January, 2005 at a monthly rental of HK$248,100, exclusive of rates, service charges and all other outgoings. The leasing arrangement constituted a continuing connected transaction of the Company under the Listing Rules.
(c) As stated in the joint announcement of the Company and Lippo dated 7th July, 2005, the following leasing arrangements constitute continuing connected transactions of the Group under the Listing Rules and are summarised as follows:
(i) On 24th July, 1996, a lease agreement was entered into between PT Duta Wisata Loka (“DWL”) and PT Matahari Putra Prima Tbk (“Matahari”) pursuant to which DWL agreed to lease to Matahari the premises located at certain portions of the ground floor through the fourth floor, with a total area of 14,104.74 square metres, of Megamal Pluit (the “Mall”), a shopping mall in Indonesia, for a period from 8th June, 1996 to 7th June, 2006 (subject to an option of Matahari to renew the lease for another 10 years). Rental, service charges and outgoings for the year ending 31st December, 2005 and for the period ending 7th June, 2006 are payable in cash and amount to a total of approximately Rp1,211,563,000 (equivalent to approximately HK$992,000) per month; and
(ii) On 24th July, 1996, two lease agreements were entered into between DWL and PT Matahari Graha Fantasi (“Matahari Fantasi”) pursuant to which DWL agreed to lease to Matahari Fantasi the premises located at certain portions of the fourth floor, with a total area of 923.3 square metres, of the Mall for a period both from 8th June, 1996 to 7th June, 2006 (but can be extended by Matahari Fantasi by giving a written notice to DWL prior to the expiry of the lease agreements). Rental, service charges and outgoings for the year ending 31st December, 2005 and for

– 118 –

APPENDIX III

GENERAL INFORMATION

the period ending 7th June, 2006 are payable in cash and amount to a total of approximately Rp128,140,000 (equivalent to approximately HK$105,000) per month.

Following the completion of the acquisition of a 50.89 per cent. effective interest in DWL, the owner of the Mall, by AP Property Pte. Ltd., a wholly-owned subsidiary of Auric Pacific Group Limited (“APG”) which in turn is a non wholly-owned subsidiary of the Company, on 8th June, 2005, DWL became an indirect subsidiary of APG. Matahari Fantasi is a 50.01 per cent. owned subsidiary of Matahari which in turn is a 50.1 per cent. owned subsidiary of PT Multipolar Corporation Tbk, an indirect non wholly-owned subsidiary of Lippo Cayman. Lippo Cayman is wholly owned by Lanius, the trustee of a trust, the beneficiaries of which include Dr. Mochtar Riady, Mr. James Riady and Mr. Stephen Riady and their respective family members.

Save for aforesaid, as at the Latest Practicable Date, none of the Directors had any direct or indirect interest in any assets which had been acquired or disposed of by or leased to any member of the Group or were proposed to be acquired or disposed of by or leased to any member of the Group since 31st December, 2004, being the date to which the latest published audited financial statements of the Group were made up.

7. EXPERT

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

Name Qualification

Ernst & Young Certified Public Accountants

(b) As at the Latest Practicable Date, Ernst & Young did not have any shareholding in the Group or any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in the Group, nor did it have any interest, direct or indirect, in any assets which had, since 31st December, 2004, being the date to which the latest published audited financial statements of the Group were made up, been acquired or disposed of by or leased to the Group, or were proposed to be acquired or disposed of by or leased to the Group.
(c) Ernst & Young has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter and references to its name in the form and context in which they appear.

– 119 –

APPENDIX III

GENERAL INFORMATION

8. LITIGATION

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

9. MATERIAL CONTRACTS

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

(a) (i) a sale and purchase agreement dated 4th November, 2003 entered into between Chun Yip Trading Sdn. Bhd., Sunbeam Food Sdn. Bhd. (“SFSB“) and Auric Pacific (M) Sdn. Bhd. (“APM”), a wholly-owned subsidiary of Auric Pacific Group Limited (“APG”) which in turn is a non whollyowned subsidiary of the Company, relating to the acquisition of a 70 per cent. interest in each of Auric Chun Yip Sdn. Bhd. (“ACY”) and Auric Pacific Food Processing Sdn. Bhd. (“APFP”) for an aggregate consideration of approximately RM16.5 million;
(ii) a shareholders’ agreement dated 4th November, 2003 entered into between APM, SFSB and ACY relating to the operation of ACY;
(iii) a shareholders’ agreement dated 4th November, 2003 entered into between APM, SFSB and APFP relating to the operation of APFP;
(iv) a put and call option agreement dated 4th November, 2003 entered into between APM and SFSB pursuant to which APM irrevocably granted to SFSB an option to require APM to purchase from SFSB all (but not some only) of the remaining ordinary shares in the capital of ACY that are held by SFSB and similarly, SFSB has granted APM a corresponding call option in respect of the same shares;
(v) a put and call option agreement dated 4th November, 2003 entered into between APM and SFSB pursuant to which APM irrevocably granted to SFSB an option to require APM to purchase from SFSB all (but not some only) of the remaining ordinary shares in the capital of APFP that are held by SFSB and similarly, SFSB has granted APM a corresponding call option in respect of the same shares;
(vi) a sale and purchase agreement dated 4th November, 2003 entered into between Les Fromage Pte. Ltd. (formerly known as Chunex Trading Company Pte. Ltd.) and APG Foods Pte. Limited (“APF”) relating to the acquisition of a 75 per cent. interest in Chunex Pte. Ltd. (“Chunex”) for an aggregate consideration of approximately S$2,250,000;
(vii) a shareholders’ agreement dated 4th November, 2003 entered into between APF and SW Investments Holding Pte. Ltd. (“SWIPL”) relating to the operation of Chunex; and

– 120 –

APPENDIX III

GENERAL INFORMATION

(viii) a put and call option agreement dated 4th November, 2003 entered into between APF and SWIPL pursuant to which APF irrevocably granted to SWIPL an option to require APF to purchase from SWIPL all (but not some only) of the remaining ordinary shares in the capital of Chunex that are held by SWIPL and similarly, SWIPL has granted APF a corresponding call option in respect of the same shares;
(b) a sale and purchase agreement dated 29th March, 2004 entered into between Firstrate Development Limited (“Firstrate”) and Karlstead Limited (“Karlstead”), both are subsidiaries of the Company, as vendors and Star Chance Investments Limited as purchaser relating to the sale by Firstrate and Karlstead of various shop units in World Trade Plaza of Chungking Mansion, 36-44 Nathan Road, Kowloon, Hong Kong for a total consideration of HK$110 million;
(c) a Chinese-foreign cooperative joint venture contract dated 8th June, 2004 (“CJV Contract”) entered into between 北京經濟技術投資開發總公司 (Beijing Economic & Technological Investment Development Corp.), Uchida Limited (“Uchida”), an indirect wholly-owned subsidiary of HCL, and 中國技術創新有限公司 (China Technology Innovation Corporation) relating to the development of the land situated at Lot no. 4C1 in 北京經濟技術開發區 (Beijing Economic-Technological Development Area) and the capital commitment of Uchida under the CJV Contract is US$19.2 million;
(d) (i) an equity transfer agreement dated 8th June, 2004 entered into between Auric Pacific Dairy (Foshan) Limited (“Auric Foshan”), a wholly-owned subsidiary of APG, as purchaser, and 廣東新盈科技創業投資有限公司 (Guangdong Xinying Science and Technology Venture Investments Co., Ltd) (“Guangdong Xinying”), Jiufang Technology Industry (HK) Co., Ltd and 佛山市逕口華僑刨花板廠 (Foshan Jingkou Overseas Chinese Flakeboard Factory), together as vendors, relating to the acquisition by Auric Foshan of 55.71 per cent. equity interest in 佛山澳純乳業有限公司 (Foshan Ausoon Dairy Co., Ltd) (“Foshan Ausoon Dairy”), a Chineseforeign equity joint venture enterprise established in the PRC which is engaged in dairy production business, for an aggregate consideration of US$1,046,967; and
(ii) an equity joint venture contract dated 8th June, 2004 entered into between Auric Foshan and Guangdong Xinying relating to an additional capital contribution of US$2,592,000 to the registered capital of Foshan Ausoon Dairy by Auric Foshan to increase its equity interest in Foshan Ausoon Dairy to 75 per cent. and the total investment amount of Foshan Ausoon Dairy is US$9.4 million;

– 121 –

APPENDIX III

GENERAL INFORMATION

(e) a letter of indemnity dated 18th June, 2004 (“Letter of Indemnity”) executed by the Company, EPED B Company and InterGen in favour of Fujian Pacific Electric Company Limited (“Fujian Pacific”), in which the Company through its wholly-owned subsidiary, China Pacific Electric Limited, then had an indirect 25 per cent. interest, on a several basis in order to satisfy a condition precedent to the Common Terms Agreement dated 19th January, 2004 entered into between Fujian Pacific as borrower and Bank of China, Fujian Province Branch as initial lender, facility and security agent in relation to the refinancing of certain project loans comprising loan facilities of up to the aggregate of RMB4,429 million for the project of a 724 megawatt (net) coal-fired power plant in Putian City, Fujian Province, the PRC and the maximum obligation of the Company under the Letter of Indemnity is US$11,309,000;
(f) a discretionary management agreement and a supplemental agreement both dated 19th October, 2004 entered into between Ferrell Asset Management Limited (“Ferrell Management”) and Everbest Pacific Ltd. (“Everbest”), a wholly-owned subsidiary of HCL, pursuant to which Ferrell Management, as a discretionary investment manager of Everbest in respect of certain funds, invested S$42 million to subscribe for an interest in Ferrell Real Estate Investment Fund for and on behalf of Everbest;
(g) a tender to purchase the entire 7th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong (“Lippo Centre Property”) for a sum of HK$68,336,268 from Internation Bank of Asia Limited (“IBA”, now known as Fubon Bank (Hong Kong) Limited) as mortgagee in possession of the Lippo Centre Property submitted by Verybest Holdings Limited, a wholly-owned subsidiary of HCL, was accepted by IBA on 25th October, 2004;
(h) a sale and purchase agreement dated 21st January, 2005 entered into between Allyield Limited (“Allyield”), a wholly-owned subsidiary of HCL, as purchaser and Kuoc Hou – Fomento Predial Limitada as seller relating to the acquisition by Allyield of the land located at 83 Estrada de Cacilhas, Macau together with the buildings constructed thereon for a consideration of HK$238 million;
(i) (i) an assets transfer agreement dated 11th February, 2005 entered into between Confield Holdings Limited (“Confield”), a wholly-owned subsidiary of APG, as purchaser, 上海順利肉類食品有限公司 (Shanghai Shunli Meat Processing Co., Limited) (“Shanghai Shunli”) as vendor and 上海奉賢農業發展有限公司 (Shanghai Fengxian Agricultural Development Co., Limited) as guarantor relating to the acquisition by a project company of the construction-in-progress of a pig abattoir and related assets on a parcel of land situated at Fengxian Modern Agricultural Park, Shanghai, the PRC for a consideration of approximately RMB32.95 million and the aforesaid project company is a wholly foreign-owned enterprise established in the PRC as an indirect wholly-owned subsidiary of APG to assume all the rights and obligations of Confield under the above assets transfer agreement;

– 122 –

APPENDIX III

GENERAL INFORMATION

(ii) sale and purchase contracts dated 11th February, 2005 entered into between Confield as purchaser and Mr.郭順利 (Guo Shunli) (“Mr. Guo”) on behalf of Shanghai Shunli as seller relating to the acquisition by Confield of two office properties situated at Room A, 8th Floor, Dongfang Shiji Building, No. 345 Xianxia Road, Changning District, Shanghai, the PRC and Room B, 8th Floor of the same building for an aggregate selling price of approximately RMB9.04 million; and
(iii) motor vehicles transfer agreements dated 11th February, 2005 entered into between Mr.陶濤 (Tao Tao), Mr. Guo and Ms.朱佩芬 (Zhu Peifen) each on behalf of Shanghai Shunli as transferors and Mr.蔡軼峰 (Cai Yifeng), a trustee of Confield, as transferee relating to the transfer of four private cars for an aggregate transfer price of approximately RMB2.88 million;
(j) letters of offer from 30 proprietors (namely (1) Ling Kong Chui, (2) Toi Mui Keow, (3) Ling Chia Tien, Ho Yeng and Goh Miah Kiang Oswald, (4) Huang Tuan Li-Erh, (5) Tan Koh Gin and Low Siew Choo, (6) Florence Goh Bee Eng and Tan Hong Pew, (7) Fumiko Nobuhata @ Fumiko Davis, (8) Ng Kheng Lian Lilian, (9) Jeffrey Tsang Chi Mun, (10) Tan Lay Ching, (11) Soh Peck Lay and Jen Kwong Nam, (12) Suppiah a/1 Pakrisamy, (13) Ng Sun Eng, (14) Tan Hun Tong, (15) Wong Law Sein @ Maung Hla Thein and Koe Kyin Hoon @ Khin Khin Yee, (16) Nah Kok Joo and Khaw Pheck Choo Judy, (17) Lam Larry Chi Keung and Lam Lily Chung, (18) Tan Swee Lee and Chan Chan Wah, (19) Tan Wai Fong Gracy, (20) Chai Woon Fook, Chong Kwei Kee and Choy Sai Chak, (21) Cheung Chi Yuen and Tsun Yuet Chun, (22) Michelle Quek Guan Lian, (23) Leow Yoon Fook and Tan Peng San, (24) Tan Han Thiam and Yip Sook San, (25) Wang Kai Peng Patrick and Liaw Yen Lin, (26) Hsu Wei Ching and Lian Keng Heong, (27) Chang Cheung Oi Lin @ Tseung Irene and Chang Tin Yu Terry, (28) Neo Beng Choo, (29) Yeo Hong Ping and Tan Boon Kee (Chen Wenqi) and (30) Hat Holdings Pte Ltd) who collectively owned all of the apartment units and the common areas comprised in the property known as Newton Heights at 1 Newton Road, Singapore (the “Singapore Property”) as vendors to sell the Singapore Property to HKCL Investments Pte. Ltd. (“HKCL”), a then wholly-owned subsidiary of HCL, for a total consideration of S$43,620,000 were accepted by HKCL on 18th February, 2005;
(k) the Term Sheet;
(l) (i) a share sale and purchase agreement dated 8th June, 2005 entered into between Win Double Limited (“Win Double”), a non wholly-owned subsidiary of APG, Tarragon Ventures Pte. Ltd., Morimasa Group Investment Ltd. and Metropolo Property Inc., and Mention Property Limited (“MPL”) relating to, inter alia, the acquisition of 71 shares of US$1.00 each in, representing 71 per cent. shareholding in, the capital of MPL for a total consideration of Rp75,596,614,721 (equivalent to approximately HK$61,863,000);

– 123 –

APPENDIX III

GENERAL INFORMATION

(ii) a debt sale and purchase agreement dated 8th June, 2005 entered into between PT Bhuwanatala Indah Permai Tbk (“BIP”), PT Duta Wisata Loka (“DWL”), of which MPL is interested in approximately 85.33 per cent. of its issued share capital, and Primewin Holdings Limited (“Primewin”), a wholly-owned subsidiary of APG, relating to the assignment by BIP to Primewin a debt of Rp1,178,387,869 (equivalent to approximately HK$964,000) owing by DWL to BIP for a consideration of its face value;
(iii) a debt sale and purchase agreement dated 8th June, 2005 entered into between Pacific Star Properties Ltd. (“PSPL”), DWL and Primewin relating to the assignment by PSPL to Primewin a debt of Rp16,343,567,438 (equivalent to approximately HK$13,375,000) owing by DWL to PSPL for a consideration of its face value; and
(iv) a loan agreement and acknowledgement of indebtedness dated 8th June, 2005 entered into between Primewin and DWL relating to the extension of further loan of Rp61,610,294,118 (equivalent to approximately HK$50,417,000) by Primewin;
(m) a conditional sale and purchase agreement dated 18th June, 2005 entered into between HKCB Corporation Limited, a wholly-owned subsidiary of the Company as vendor, the Company as warrantor, Island New Finance Limited as purchaser and United Asia Finance Limited as the guarantor in relation to the sale and purchase of an aggregate of 168,313,038 shares of HK$1.00 each in the issued share capital of The Hong Kong Building and Loan Agency Limited for an aggregate consideration of HK$184 million; and
(n) (i) a subscription agreement dated 21st June, 2005 entered into between Export and Industry Bank, Inc. (“EIB”) and Conreal Holdings Limited, a wholly-owned subsidiary of the Company, relating to the subscription for 312,500,000 common shares in EIB for a total consideration of Pesos 125,000,000 (equivalent to approximately HK$17,500,000); and
(ii) a subscription agreement dated 21st June, 2005 entered into between EIB and Kingmild Limited, a wholly-owned subsidiary of the Company, relating to the subscription for 312,500,000 common shares in EIB for a total consideration of Pesos 125,000,000 (equivalent to approximately HK$17,500,000).

10. MISCELLANEOUS

(a) The Secretary of the Company is Ms. Millie Yuen Fun Luk, a fellow member of both the Institute of Chartered Secretaries and Administrators and the Hong Kong Institute of Company Secretaries.

– 124 –

APPENDIX III

GENERAL INFORMATION

(b) The qualified accountant of the Company is Mr. Alex Shiu Leung Au, an associate member of both the Institute of Chartered Accountants in England and Wales and the Hong Kong Institute of Certified Public Accountants.
(c) The registered office of the Company is situate at Room 2301, 23rd Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong.
(d) The transfer office of the Company is situate at the office of its registrars, Tengis Limited, at G/F., Bank of East Asia Harbour View Centre, 56 Gloucester Road, Wanchai, Hong Kong.
(e) In case of inconsistency, the English text of this circular shall prevail over the Chinese text.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours at the registered office of the Company which is situated at Room 2301, 23rd Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong, for a period of 14 days from the date of this circular:

(a) the Memorandum and Articles of Association of the Company;
(b) the published audited consolidated financial statements of the Company for each of the two financial years ended 31st December, 2004;
(c) the circulars issued pursuant to the requirements set out in Chapter 14 and/or 14A of the Listing Rules since 31st December, 2004, being the date to which the latest published audited consolidated financial statements of the Group were made up;
(d) the comfort letter from Ernst & Young on the pro forma statement of assets and liabilities of the Group set out in Appendix II to this circular;
(e) the written consent from Ernst & Young as referred to in the section headed “Expert” in this Appendix;
(f) the contracts referred to in this circular including the material contracts referred to in the section headed “Material Contracts” in this Appendix; and
(g) final drafts of the Limited Partnership Agreement, Management Agreement, Subscription Agreement, Shareholders’ Agreement and Investment Advisor Agreement.

Note: Certain English translations of Chinese names or words 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.

– 125 –

AI assistant

Asiasec Properties Limited — Proxy Solicitation & Information Statement 2005

49086_rns_2005-07-28_197ed8a3-04d8-4f66-9edc-da6359891839.pdf

LIPPO CHINA RESOURCES LIMITED 力寶華潤有限公司

MAJOR TRANSACTION

SUBSCRIPTION OF INTEREST IN LIMITED PARTNERSHIP BY HONGKONG CHINESE LIMITED

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

LIPPO CHINA RESOURCES LIMITED 力寶華潤有限公司

MAJOR TRANSACTION

SUBSCRIPTION OF INTEREST IN LIMITED PARTNERSHIP BY HONGKONG CHINESE LIMITED

INTRODUCTION

LAAP INVESTMENT

INVESTMENT OBJECTIVES AND KEY INVESTMENT POLICIES OF LAAP

ADMISSION OF ADDITIONAL LIMITED PARTNERS AND MAXIMUM TARGETED FUND SIZE

KEY FEATURES OF CONSTITUTION AND MANAGEMENT

Overview

Power of Management

Drawdown of Capital Commitments

Distribution of Proceeds of Portfolio Investments and Income

Rights of First Refusal

Term

General Partner

Mr. Kin Chan

Mr. V-Nee Yeh

Ms. Angie Yick Yee Li

ASM

Advisory Council

Investment Manager

Investment Advisor

INVESTMENT MANAGEMENT FEES

STATUS OF THE TRANSACTION

THE AGREEMENTS

Limited Partnership Agreement

Management Agreement

Subscription Agreement

Shareholders’ Agreement

Investment Advisor Agreement

CONDITIONS

REASONS FOR AND BENEFITS OF INVESTING IN LAAP

FINANCIAL EFFECTS

RISK FACTORS

Illiquidity of real estate investment

Property investment risks

Reliance on the General Partner and the Investment Manager

LISTING RULES IMPLICATIONS

INFORMATION ON THE COMPANY

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

GENERAL

1. THREE-YEAR FINANCIAL SUMMARY

(a) Consolidated Profit and Loss Account

(b) Consolidated Balance Sheet

2. AUDITED FINANCIAL STATEMENTS

Consolidated Profit and Loss Account

Consolidated Balance Sheet

Consolidated Summary Statement of Changes in Equity

Balance Sheet

Consolidated Cash Flow Statement

Notes to the Financial Statements

1. CORPORATE INFORMATION

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

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

(b) Basis of consolidation

(c) Subsidiaries

(d) Joint venture companies

(e) Jointly controlled entities

(f) Associates

(g) Goodwill

(h) Negative goodwill

(i) Impairment of assets

(j) Fixed assets and depreciation

(k) Investment properties

(l) Properties under development

(m) Investment securities

(n) Held-to-maturity securities

(o) Other investments in securities

(p) Properties held for sale

Asiasec Properties Limited Proxy Solicitation & Information Statement 2005