Asiasec Properties Limited - Proxy Solicitation & Information Statement 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

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

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

LIPPO CHINA RESOURCES LIMITED 力寶華潤有限公司

(Incorporated in Hong Kong with limited liability)

(Stock Code: 156)

MAJOR TRANSACTION

CESSATION OF AURIC PACIFIC GROUP LIMITED AS A SUBSIDIARY

17th March, 2006

	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Letter from the Board
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	3
The Deed of Gift . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	4
Information on Auric Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Effects of and reasons for the Donation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
Listing Rules implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Information on the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	7
Appendix I – Financial information of the Group . . . . . . . . . . . . . . . . . . . . . . . . .	8
Appendix II – General information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	102

DEFINITIONS

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

“associates”	has the meaning ascribed to it under the Listing Rules
“Auric Pacific”	Auric Pacific Group Limited, a company incorporated
	in Singapore with limited liability whose shares are
	listed on the Main Board of the SGX-ST
“Auric Shares”	ordinary shares of S$0.50 each in the capital of Auric
	Pacific
“Board”	the board of Directors
“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 Main
	Board of the Stock Exchange and whose shares are
	owned as to approximately 71.1 per cent. by Lippo
“connected persons”	has the meaning ascribed thereto under the Listing
	Rules
“Deed of Gift”	the unconditional deed of gift dated 23rd February,
	2006 executed by the Company in favour of the
	University in relation to the Donation
“Director(s)”	director(s) of the Company
“Donation”	the donation of the Gift Share by the Company to the
	University in accordance with the terms of the Deed
	of Gift
“Gift Company”	Gainston Limited, a company incorporated in the
	British Virgin Islands with limited liability and a
	wholly-owned subsidiary of the Company prior to the
	completion of the transfer of the Gift Share
“Gift Share”	one share of US$1.00 in the share capital of the Gift
	Company, representing the entire issued share capital
	of the Gift Company
“Group”	the Company and its subsidiaries
“Hong Kong”	the Hong Kong Special Administrative Region of the
	PRC

DEFINITIONS

“Latest Practicable Date”	15th March, 2006, being the latest practicable date prior
	to the printing of this circular for ascertaining certain
	information contained herein
“Listing Rules”	the Rules Governing the Listing of Securities on the
	Stock Exchange
“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 Main Board of the Stock
	Exchange
“Model Code”	the Model Code for Securities Transactions by Directors
	of Listed Issuers under the Listing Rules
“PRC”	the People’s Republic of China, which for the purpose
	of this circular, shall exclude Hong Kong, the Macao
	Special Administrative Region of the PRC and Taiwan
“SFO”	the Securities and Futures Ordinance (Chapter 571 of
	the Laws of Hong Kong)
“SGX-ST”	Singapore Exchange Securities Trading Limited
“Share(s)”	share(s) of HK$0.10 each in the capital of the Company
“Shareholder(s)”	shareholder(s) of the Company
“Singapore”	the Republic of Singapore
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“University”	Southeast University, a university in the PRC
“HK$”	Hong Kong dollar, the lawful currency of Hong Kong
“MOP”	Macau pataca, the lawful currency of the Macao Special
	Administrative Region of the PRC
“Peso”	Philippine Peso, the lawful currency of the Republic
	of Philippines
“RMB”	Renminbi, the lawful currency of the PRC
“S$”	Singapore dollar, the lawful currency of Singapore
“US$”	United States dollar, the lawful currency of the United
	States of America

Note: For use in this circular and for illustration purposes only, conversion of S$ into HK$ is based on the approximate exchange rate of S$1 to HK$4.737. No representation or assurance is made or given that any amount in S$ or HK$ could be converted at such rate or any other rates.

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

17th March, 2006

To the Shareholders

Dear Sir or Madam,

MAJOR TRANSACTION

CESSATION OF AURIC PACIFIC GROUP LIMITED AS A SUBSIDIARY

INTRODUCTION

By a joint announcement dated 23rd February, 2006, the respective boards of directors of the Company and Lippo announced that on 23rd February, 2006, the Company executed the Deed of Gift in favour of the University whereby the Company agreed to donate the Gift Share, representing the entire issued share capital of the Gift Company, as gift to the University. The transfer of the Gift Share was completed immediately after execution of the Deed of Gift.

LETTER FROM THE BOARD

The sole asset of the Gift Company is its holding of 2,380,000 Auric Shares, representing approximately 1.9 per cent. of the issued share capital of Auric Pacific as at the date of the Deed of the Gift. Before completion of the transfer of the Gift Share, the Company was indirectly interested in approximately 51.2 per cent. of the issued share capital of Auric Pacific. Upon completion of the transfer of the Gift Share, as a result of which the Company’s indirect interest in Auric Pacific was reduced to approximately 49.3 per cent., Auric Pacific ceased to be a subsidiary of the Company.

The reduction of interest held by the Company in Auric Pacific as a result of the Donation constitutes a major transaction for the Company under the Listing Rules and is subject to the approval of the Shareholders. Skyscraper Realty Limited, being a wholly-owned subsidiary of Lippo and a controlling Shareholder holding approximately 71.1 per cent. of the issued share capital of the Company as at the date of the Deed of Gift, has given its written approval to the Company to execute the Deed of Gift. In accordance with Rule 14.44 of the Listing Rules, the written Shareholder’s approval has been accepted in lieu of holding the relevant general meeting.

The purpose of this circular is to provide you with, among other things, further details of the Deed of Gift and certain financial information of the Group.

THE DEED OF GIFT

Date : 23rd February, 2006 Donor : the Company Recipient : Southeast University

Southeast University is a national key university administered directly under the Ministry of Education of the PRC. It is one of the oldest institutions of higher learning in the PRC founded in 1902 and one of the top ten universities in scientific research and development in the PRC. It has five campuses located in Nanjing and comprises various departments such as science, engineering, art, social sciences, law, economics, management and languages, with engineering as its focus. At present, the University has over 26,000 full-time students, of whom about 9,000 are postgraduates. To the best of the knowledge, information and belief of the Directors and after making all reasonable enquiries, the University is a third party independent of the Company and its connected persons.

Gift Share

Pursuant to the Deed of Gift, the Company agreed to donate the Gift Share, representing the entire issued share capital of the Gift Company, as gift to the University free from all claims, liens, charges, encumbrances, third party rights, options, rights of pre-emption, defects, adverse interests and equities of any kind whatsoever. The Gift Company is an investment holding company. Its sole asset is its holding of 2,380,000 Auric Shares, representing approximately 1.9 per cent. of the issued share capital of Auric Pacific as at the date of the Deed of Gift. Based on the closing price of S$1.1 per Auric

LETTER FROM THE BOARD

Share as quoted on the SGX-ST on 23rd February, 2006, being the date of the Deed of Gift, the market value of the 2,380,000 Auric Shares was approximately S$2.6 million (equivalent to approximately HK$12.3 million).

The transfer of the Gift Share was completed immediately after execution of the Deed of Gift.

INFORMATION ON AURIC PACIFIC

Auric Pacific is a company incorporated in Singapore with limited liability and whose shares are listed on the Main Board of the SGX-ST. The principal activity of Auric Pacific is investment holding. The principal activities of the subsidiaries of Auric Pacific are food manufacturing, wholesale distribution of food and allied fast-moving consumer goods and investment holding. Based on the audited financial statements of Auric Pacific prepared in accordance with the generally accepted accounting principles in Singapore, the audited consolidated profits before and after taxation, extraordinary items and minority interests of Auric Pacific for the year ended 31st December, 2004 were approximately S$5.9 million (equivalent to approximately HK$27.9 million) and S$3.4 million (equivalent to approximately HK$16.1 million) respectively. As stated in the results announcement of Auric Pacific dated 22nd February, 2006, the unaudited consolidated profits before and after taxation, extraordinary items and minority interests of Auric Pacific for the year ended 31st December, 2005 were approximately S$18.2 million (equivalent to approximately HK$86.2 million) and S$13.1 million (equivalent to approximately HK$62.1 million) respectively. As set out in the aforesaid results announcement, the unaudited consolidated net asset value of Auric Pacific attributable to its shareholders was approximately S$212.6 million (equivalent to approximately HK$1,007.1 million) as at 31st December, 2005.

EFFECTS OF AND REASONS FOR THE DONATION

Prior to completion of the transfer of the Gift Share, the Company was indirectly interested in approximately 51.2 per cent. of the issued share capital of Auric Pacific. Following completion of the transfer of the Gift Share, the Company’s indirect interest in Auric Pacific was reduced to approximately 49.3 per cent. The board of Auric Pacific consists of eight directors, four of whom are either directors of Lippo or the Company. Following completion of the transfer of the Gift Share, four directors resigned from the board of Auric Pacific including three of these common directors (one of whom was the executive chairman). Three new independent non-executive directors and a new executive director have been appointed. Following the aforesaid appointment and resignation taking effect in the evening of 23rd February, 2006, the Company had no control over the board of Auric Pacific. Accordingly, Auric Pacific ceased to be a subsidiary of the Company and becomes an associated company of the Company. The results of Auric Pacific will be equity accounted for in the consolidated accounts of the Company. Based on the unaudited consolidated net asset value of Auric Pacific attributable to its shareholders as at 31st December, 2005 stated above, it is estimated that an amount net of minority interests of approximately HK$19.1 million will be charged to the profit and loss accounts of the Company as a result of the Donation.

LETTER FROM THE BOARD

Auric Pacific is a company listed on the Main Board of the SGX-ST and is therefore subject to the regulatory requirements under the Listing Manual in Singapore. Transactions which Auric Pacific are allowed to proceed with and conclude in accordance with the Listing Manual in Singapore may be subject to additional disclosures and/or the Shareholders’ approval requirements under the Listing Rules. The different regulatory regimes under which Lippo, the Company and Auric Pacific each operates have created constraints for Auric Pacific to enter into transactions which require speedy execution. In order to prevent leakage of price sensitive information, transactions undertaken by Auric Pacific in the past were usually notified to the Company at a late stage when the relevant announcements were finalised for release by Auric Pacific according to the disclosure requirements under the Listing Manual in Singapore. Due to the time taken to collate necessary information from Auric Pacific to satisfy the different disclosure requirements in Hong Kong, trading in the Shares might need to be suspended, and the release of the appropriate announcements in compliance with the requirements of the Listing Rules often lagged behind those released by Auric Pacific in Singapore which are not subject to pre-vetting by SGX-ST. The undue burden on the part of the Company to comply with the relevant Listing Rules requirements and the intermittent suspension in trading of the Shares by reasons of transactions undertaken by Auric Pacific are not in the interests of the Shareholders.

After completion of the transfer of the Gift Share, Auric Pacific ceased to be a subsidiary of the Company and will be able to enjoy the flexibility to conduct corporate exercises without regulatory constraints at the level of the Company. Auric Pacific will be equity accounted for as an associated company of the Company and the Company will continue to share the results of Auric Pacific while the administrative burden on compliance with the Listing Rules in respect of transactions conducted by Auric Pacific will be reduced. The Directors are of the view that the Donation is in the interests of the Company and the Shareholders as a whole.

The Directors consider that it would be inappropriate to effect a sale of a substantial lot of Auric Shares in the market as this may give rise to questions and other regulatory issues, and is likely to have an adverse effect on the price of Auric Shares. A donation of the Auric Shares is considered the most appropriate manner to effect the disposition in an orderly manner. Having considered the long-established history and reputation of the University, the Directors consider the University an appropriate donee for the Gift Share.

LISTING RULES IMPLICATIONS

In this respect, no Shareholders or their respective associates have any interest in the Donation different from the other Shareholders in general and consequently no Shareholders will be required to abstain from voting at the relevant Shareholders’ meeting. Skyscraper Realty Limited, a wholly-owned subsidiary of Lippo, holding approximately 71.1 per cent. of the issued share capital of the Company as the date of the Deed of Gift,

LETTER FROM THE BOARD

has given written approval to the Company to execute the Deed of Gift. In accordance with Rule 14.44 of the Listing Rules, the written Shareholder’s approval has been accepted in lieu of holding the relevant general meeting.

INFORMATION ON THE COMPANY

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

FURTHER INFORMATION

Your attention is drawn to the 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

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Set out below is the unaudited condensed consolidated profit and loss account, condensed consolidated balance sheet, condensed consolidated summary statement of changes in equity, condensed consolidated cash flow statement together with the notes thereto as extracted from pages 3 to 40 of the interim report of the Company for the six months ended 30th June, 2005.

“Condensed Consolidated Profit and Loss Account

Note
Revenue
4
Cost of sales
Gross profit
Other income
26
Administrative expenses
Other operating expenses
Fair value changes on investment properties
Write-back of provision/(Provision) for
impairment loss in associates
Allowance for bad and doubtful debts
relating to non-banking operations
5
Net unrealised holding loss on
other investments in securities
Share of results of associates
Finance costs
Profit before tax
6
Tax
7
Profit for the period
Attributable to:
Equity holders of the Company
Minority interests
Earnings per share
8
Basic
Diluted
Interim dividend
9

Six months ended
30th June,
2005
2004
HK$’000
HK$’000
(restated)
1,217,321
1,767,761
(958,188)
(1,449,341)
259,133
318,420
8,529
–
(112,688)
(111,046)
(101,987)
(84,790)
287,985
–
(53,907)
4,655
(34,756)
(1,053)
–
(86,431)
3,543
21,534
(18,198)
(12,078)
237,654
49,211
(79,595)
(14,109)
158,059
35,102
112,977
12,345
45,082
22,757
158,059
35,102
HK cents
HK cents
1.2
0.1
N/A
N/A
HK$’000
HK$’000
18,402
–

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Balance Sheet

Note
NON-CURRENT ASSETS
Goodwill:
Goodwill
Negative goodwill
Prepaid lease payments for land
Fixed assets
Investment properties
Properties under development
Interests in associates
Interests in jointly controlled entities
Available-for-sale financial assets
10
Investment securities
11
Financial assets at fair value through
profit or loss
12
Held-to-maturity securities
13
Loans and advances
14
Deferred tax assets
Assets less liabilities attributable to
banking operation
15
Deposit paid for long term investment
CURRENT ASSETS
Properties held for sale
Inventories
Available-for-sale financial assets
10
Financial assets at fair value through
profit or loss
12
Held-to-maturity securities
13
Other investments in securities
16
Loans and advances
14
Debtors, prepayments and deposits
17
Client trust bank balances
Pledged time deposits
Cash and cash equivalents

30th June,
31st December,
2005
2004
HK$’000
HK$’000
(restated)
79,342
79,262
–
(2,750)
5,304
5,399
332,972
319,758
3,132,091
2,362,777
322,645
167,634
483,745
531,676
7,393
7,393
411,684
–
–
552,094
451,766
–
–
62,816
851
24,031
4,115
4,115
191,996
175,411
3,720
–
5,427,624
4,289,616
63,186
10,140
107,424
105,780
173,053
–
920,762
–
–
82,216
–
1,306,843
144,355
180,692
379,659
396,645
316,844
389,123
86,116
–
1,506,763
1,933,592
3,698,162
4,405,031

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note CURRENT LIABILITIES Bank loans 18 Creditors, accruals and deposits received 19 Tax payable NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Long term bank loans 18 Deferred tax liabilities CAPITAL AND RESERVES Equity attributable to equity holders of the Company Share capital 20 Reserves 21 Minority interests 21	30th June, 31st December, 2005 2004 HK$’000 HK$’000 (restated) 368,283 471,654 776,551 843,811 69,518 70,850 1,214,352 1,386,315 2,483,810 3,018,716 7,911,434 7,308,332 971,043 727,612 338,906 263,312 1,309,949 990,924 6,601,485 6,317,408 920,109 920,109 3,863,624 3,697,222 4,783,733 4,617,331 1,817,752 1,700,077 6,601,485 6,317,408	30th June, 31st December, 2005 2004 HK$’000 HK$’000 (restated) 368,283 471,654 776,551 843,811 69,518 70,850 1,214,352 1,386,315 2,483,810 3,018,716 7,911,434 7,308,332 971,043 727,612 338,906 263,312 1,309,949 990,924 6,601,485 6,317,408 920,109 920,109 3,863,624 3,697,222 4,783,733 4,617,331 1,817,752 1,700,077 6,601,485 6,317,408
		1,386,315
		3,018,716
		7,308,332
		727,612 263,312
		990,924
		6,317,408

		920,109 3,697,222
		4,617,331 1,700,077
		6,317,408

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Summary Statement of Changes in Equity

Note
Total equity at 1st January:
As previously reported as equity
As previously reported separately as
minority interests
Prior period and opening adjustments
1,2
As restated
Changes in equity during the period:
Exchange differences on translation of
foreign operations
Fair value changes on available-for-sale
financial assets
Deferred tax arising from fair value
changes on available-for-sale
financial assets
Surplus on revaluation of investment
properties
Deferred tax charge arising from surplus on
revaluation of investment properties
Net income/(expense) recognised directly
in equity
Profit for the period

Six months ended
30th June,
2005
2004
HK$’000
HK$’000
(restated)
4,717,947
4,319,313
1,686,437
1,654,587
25,722
(37,033)
6,430,106
5,936,867
(40,966)
(5,090)
(31,640)
–
(2,743)
–
–
191,983
–
(29,973)
(75,349)
156,920
158,059
35,102

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note
Total recognised income and expense
for the period
Issue of shares by subsidiaries to
minority shareholders
Advance from minority shareholders
of subsidiaries
Acquisition of subsidiaries
Disposal of a subsidiary
Changes in interests in subsidiaries
2003 final dividend, declared and paid to
shareholders of the Company
2003 final dividend and distribution,
declared and paid to minority
shareholders of subsidiaries
2004 final dividend, declared and paid to
shareholders of the Company
2004 final dividend and distribution,
declared and paid to minority
shareholders of subsidiaries
Total equity at 30th June
Total recognised income and expense
for the period attributable to:
Equity holders of the Company
Minority interests
Effect of prior period and opening
adjustments attributable to:
Equity holders of the Company
Minority interests

Six months ended
30th June,
2005
2004
HK$’000
HK$’000
(restated)
82,710
192,022
2,446
4,398
82,054
19,328
50,073
9,662
–
(803)
(1,772)
(1)
–
(18,402)
–
(25,097)
(18,402)
–
(25,730)
–
171,379
181,107
6,601,485
6,117,974
71,018
171,475
11,692
20,547
82,710
192,022
13,170
(49,330)
12,552
12,297
25,722
(37,033)

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Condensed Consolidated Cash Flow Statement

Net cash from/(used in) operating activities Net cash used in investing activities Net cash from/(used in) financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1st January Exchange realignments Cash and cash equivalents at 30th June Analysis of balances of cash and cash equivalents: Cash and bank balances	Six months ended 30th June, 2005 2004 HK$’000 HK$’000 252,487 (98,027) (723,239) (54,878) 56,547 (8,593) (414,205) (161,498) 1,933,592 1,962,892 (12,624) (40) 1,506,763 1,801,354 1,506,763 1,801,354

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Notes to the Interim Financial Statements

1. PRINCIPAL ACCOUNTING POLICIES

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

The accounting policies and basis of preparation adopted in the preparation of this condensed consolidated interim financial statements are consistent with those used in the Group’s audited financial statements for the year ended 31st December, 2004, except in relation to the following new and revised Hong Kong Financial Reporting Standards (“HKFRSs”, which also include HKASs and Interpretations) that affect the Group and are adopted for the first time for the current period’s financial statements:

HKAS 1	Presentation of Financial Statements
HKAS 2	Inventories
HKAS 7	Cash Flow Statements
HKAS 8	Accounting Policies, Changes in Accounting Estimates and Errors
HKAS 10	Events after the Balance Sheet Date
HKAS 12	Income Taxes
HKAS 14	Segment Reporting
HKAS 16	Property, Plant and Equipment
HKAS 17	Leases
HKAS 18	Revenue
HKAS 19	Employee Benefits
HKAS 21	The Effects of Changes in Foreign Exchange Rates
HKAS 23	Borrowing Costs
HKAS 24	Related Party Disclosures
HKAS 27	Consolidated and Separate Financial Statements
HKAS 28	Investments in Associates
HKAS 31	Investments in Joint Ventures
HKAS 32	Financial Instruments: Disclosure and Presentation
HKAS 33	Earnings per Share
HKAS 34	Interim Financial Reporting
HKAS 36	Impairment of Assets
HKAS 37	Provisions, Contingent Liabilities and Contingent Assets
HKAS 38	Intangible Assets
HKAS 39	Financial Instruments: Recognition and Measurement
HKAS 40	Investment Property
HKFRS 2	Share-based Payment
HKFRS 3	Business Combinations
HK-Int 4	Leases – Determination of the Length of Lease Term in respect of
	Hong Kong Land Leases
HK(SIC)-Int 15	Operating Leases – Incentives
HK(SIC)-Int 21	Income Taxes – Recovery of Revalued Non-Depreciable Assets

The adoption of HKASs 1, 2, 7, 8, 10, 12, 14, 16, 18, 19, 21, 23, 24, 27, 28, 31, 33, 34, 37, 38, HKFRS 2, HK-Int 4 and HK(SIC)-Int 15 has had no material impact on the accounting policies of the Group and the methods of computation in the Group’s condensed consolidated interim financial statements. The impact of adopting the other HKFRSs is summarised as follows:

(a) HKAS 17 – Leases

In prior periods, owner-occupied leasehold land and buildings were included in fixed assets and stated at cost less accumulated depreciation and any impairment losses.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Upon the adoption of HKAS 17, the Group’s leasehold interest in land and buildings is separated into leasehold land and leasehold buildings unless the lease payments cannot be allocated reliably between the land and building elements. The Group’s leasehold land is classified as an operation lease, because the title of the land is not expected to pass to the Group by the end of the lease term, and is reclassified from fixed assets to prepaid lease payments for land, while leasehold buildings continue to be classified as part of fixed assets. Prepaid lease payments for land under operating leases are initially stated at cost and subsequently amortised on the straight-line basis over the lease term. When the lease payments cannot be allocated reliably between the land and building elements, the entire lease payments are included in the cost of the land and buildings as a finance lease in fixed assets.

The change has been adopted retrospectively and the comparative amounts have been restated to reflect the reclassification of leasehold land.

(b) HKAS 32 and HKAS 39 – Financial Instruments

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

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

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

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

(ii) Loans and receivables

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

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

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(iii) Held-to-maturity financial assets

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

(iv) Available-for-sale financial assets

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

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

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

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

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

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

(i) other investments in securities with total carrying amount of HK$1,106,698,000 and HK$200,145,000 into financial assets at fair value through profit or loss and available-for-sale financial assets on 1st January, 2005, respectively. There is no effect on re-measurement as the accounting policy on measurement of the Group’s other investments in securities as at 31st December, 2004 is the same as that for the financial assets at fair value through profit or loss and the available-for-sale financial assets which are carried at fair value;
(ii) investment securities with total carrying amount of HK$272,590,000 and HK$195,812,000 into financial assets at fair value through profit or loss and available-for-sale financial assets on 1st January, 2005, respectively, resulting in an adjustment of HK$123,756,000 credited to the opening balance of retained profits to reflect the difference in fair value;

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(iii) the remaining investment securities with total carrying amount of HK$83,692,000 into available-for-sale financial assets which are carried at cost less any impairment losses. There is no effect on re-measurement as the accounting policy on measurement of the Group’s investment securities as at 31st December, 2004 is the same as that for available-for-sale financial assets which are carried at cost;
(iv) loans and advances with total carrying amount of HK$25,906,000 into availablefor-sale financial assets on 1st January, 2005, resulting in an adjustment of HK$12,403,000 debited to the opening balance of retained profits to reflect the difference in fair value; and
(v) held-to-maturity securities with total carrying amount of HK$145,032,000 into financial assets at fair value through profit or loss on 1st January, 2005. There is no material effect on re-measurement as the carrying amounts of the held-tomaturity securities are approximate to their fair values.

The effect of the above changes are summarised in Note 2 to the interim financial statements. In accordance with the transitional provisions of HKAS 39, comparative amounts have not been restated.

(c) HKAS 40 – Investment Property

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

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

The Group has taken advantage of the transitional provisions of HKAS 40 to adjust the effect of adopting the standard to the opening balance of retained profits rather than restating the comparative amounts to reflect the changes retrospectively. The effects of the above changes are summarised in Note 2 to the interim financial statements.

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

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

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

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

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

The effects of the above changes are summarised in Note 2 to the interim financial statements. In accordance with the transitional provisions of HKFRS 3, comparative amounts have not been restated.

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

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

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

The change has been adopted retrospectively and the comparative amounts have been restated to reflect the deferred tax liabilities incurred. The effects of the above changes are summarised in Note 2 to the interim financial statements.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

2. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICIES

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

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

Effect of new policies (Increase/(Decrease)) Note Prior period adjustment: HK(SIC)-Int 21 Deferred tax arising from revaluation of investment properties 1(e) Net increase/(decrease) in total equity before opening adjustments Opening adjustments: HKAS 39 Re-designated investment securities as: Available-for-sale financial assets 1(b) Financial assets at fair value through profit or loss 1(b) Re-designated loans and advances as available-for-sale financial assets 1(b) HKAS 40 Surplus on revaluation of investment properties 1(c) HKFRS 3 Derecognition of negative goodwill 1(d) Total effect at 1st January, 2005	Investment property Other asset Capital revaluation revaluation reserve reserve reserve HK$’000 HK$’000 HK$’000 – (59,018 ) – – (59,018 ) – – – – – – – – – – – (307,047 ) (247,701 ) (93,691 ) – – (93,691 ) (366,065 ) (247,701 )	Retained profits HK$’000 (41,598 ) (41,598 ) 123,696 60 (12,403 ) 554,748 96,124 720,627	Minority interests HK$’000 13,640 13,640 (1,428) 23 – – 317 12,552	Total HK$’000 (86,976 ) (86,976 ) 122,268 83 (12,403 ) – 2,750 25,722

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Investment property Effect of new policies revaluation (Increase/(Decrease)) reserve Note HK$’000 Prior period adjustment: HK(SIC)-Int 21 Deferred tax arising from revaluation of investment properties 1(e) (7,732) Total effect at 1st January, 2004 (7,732)	Retained profits HK$’000 (41,598) (41,598)	Minority interests HK$’000 12,297 12,297	Total HK$’000 (37,033
			(37,033

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

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

Effect of new policies (Increase/(Decrease)) Note Effect on profit for the period: HKAS 40 Fair value changes on investment properties 1(c) HKFRS 3 Discontinuation of amortisation of goodwill/recognition of negative goodwill 1(d) HK(SIC)-Int 21 Deferred tax arising from revaluation of investment properties 1(e) Total effect for the period Effect on earnings per share: Basic Diluted	Equity holder of the Company HK$’000 227,974 1,838 (55,102 ) 174,710 HK cents 1.9 N/A	2005 Minority interests HK$’000 60,011 2,346 (17,627 ) 44,730	Six months ended 30th June, 2004 Equity holders of the Minority Total Company interests HK$’000 HK$’000 HK$’000 287,985 – – 4,184 – – (72,729 ) – – 219,440 – – HK cents N/A N/A	Total HK$’000 – – –
				–

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Effect of new policies (Increase/(Decrease)) Note HKAS 39 Fair value changes on available-for-sale financial assets 1(b) HKAS 40 Fair value changes on investment properties no longer recognised in reserves 1(c) HK(SIC)-Int 21 Deferred tax arising from revaluation of investment properties 1(e) Total effect for the period	Equity holder of the Company HK$’000 (29,172 ) (227,974 ) 43,492 (213,654 )	2005 Minority interests HK$’000 (5,211 ) (60,011 ) 23,735 (41,487 )	Six months ended 30th June, 2004 Equity holders of the Minority Total Company interests HK$’000 HK$’000 HK$’000 (34,383 ) – – (287,985 ) – – 67,227 (29,827 ) (146 ) (255,141 ) (29,827 ) (146 )	Total HK$’000 – – (29,973 ) (29,973 )

3. SEGMENT INFORMATION

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

(a) the treasury investment segment includes investments in cash and bond markets;
(b) the property investment and development segment includes letting, resale and development of 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 the development of computer hardware and software, money lending and the provision of property and fund management services.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Revenue External Inter-segment Total Segment results Unallocated corporate expenses Finance costs Share of results of associates Profit before tax Tax Profit for the period	Property investment Treasury and investment development HK$’000 HK$’000 17,437 75,187 631 3,195 18,068 78,382 15,115 346,061 – 62	Securities investment HK$’000 661,539 – 661,539 27,030 –	Six months ended 30th June, 2005 Corporate finance and Food securities Banking businesses broking business HK$’000 HK$’000 HK$’000 421,875 27,072 6,884 – 426 – 421,875 27,498 6,884 12,087 (33,437 ) (44,955 ) – – (29,649 )	Other HK$’000 7,327 770 8,097 (5,135 ) 33,130	Inter- segment elimination Consolidated HK$’000 HK$’000 – 1,217,321 (5,022 ) – (5,022 ) 1,217,321 (4,415 ) 312,351 (63,359 ) (14,881 ) – 3,543 237,654 (79,595 ) 158,059

Revenue External Inter-segment Total Segment results Unallocated corporate expenses Finance costs Share of results of associates Profit before tax Tax Profit for the period	Property investment Treasury and investment development HK$’000 HK$’000 12,732 172,540 6,973 2,322 19,705 174,862 11,402 80,534 – 117	Six months ended 30th June, Corporate finance and Securities Food securities investment businesses broking HK$’000 HK$’000 HK$’000 1,101,597 424,149 36,155 – – 2,731 1,101,597 424,149 38,886 (18,789 ) 12,419 2,579 – – –	2004 (restated) Banking business Other HK$’000 HK$’000 9,723 10,865 – 163 9,723 11,028 3,809 (3,135 ) 401 21,016	Inter- segment elimination Consolidated HK$’000 HK$’000 – 1,767,761 (12,189 ) – (12,189 ) 1,767,761 (990 ) 87,829 (50,142 ) (10,010 ) – 21,534 49,211 (14,109 ) 35,102

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

4. REVENUE/TURNOVER

All revenue for the period represents turnover generated from the principal activities of the Group, comprising gross income on treasury investment which includes interest income on bank deposits and debt securities, gross rental income, gross proceeds from sales of properties, gross income from securities investment which includes gross proceeds from sales of investments, dividend income and related interest income, gross income from underwriting and securities broking, sales income from food businesses, interest and other income from money lending business, gross income from property management 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	Six months ended 30th June, 2005 2004 HK$’000 HK$’000 17,437 12,732 75,187 172,540 661,539 1,101,597 421,875 424,149 27,072 36,155 6,884 9,723 7,327 10,865 1,217,321 1,767,761	Six months ended 30th June, 2005 2004 HK$’000 HK$’000 17,437 12,732 75,187 172,540 661,539 1,101,597 421,875 424,149 27,072 36,155 6,884 9,723 7,327 10,865 1,217,321 1,767,761
		1,767,761

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

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

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

Included in the amount for the period was a specific provision made for a loan advanced to a margin client of HK$33,810,000, which has been secured by certain shares in a listed company and a guarantee provided by a director of the client. Currently, both the client and the listed company are under liquidation or provisional liquidation and that the probability for recovery of the loan is uncertain.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

6. PROFIT BEFORE TAX

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

Interest income_(Note (a)):
Listed investments
Unlisted investments
Other
Dividend income:
Listed investments
Unlisted investments
Net realised and unrealised holding gain on financial assets
at fair value through profit or loss:
Listed
Unlisted
Net realised and unrealised holding loss on other investments
in securities:
Listed
Unlisted
Other investment income:
Listed
Unlisted
Gain on disposal of unlisted investment securities
Depreciation:
Banking operation
Other
Amortisation of prepaid lease payments for land
Gain on disposal of fixed assets
Gain on disposal of properties
Cost of inventories sold
Net realised loss on disposal of unlisted available-for-sale
financial assets
Amortisation of goodwill arising from acquisition of
subsidiaries(Note (b))
Negative goodwill recognised as income(Note (b))_
Provision for impairment losses on unlisted available-for-sale
financial assets

Six months ended
30th June,
2005
2004
HK$’000
HK$’000
10,140
11,419
3,110
2,439
17,781
10,158
16,894
8,154
838
88
18,293
–
7,336
–
–
(31,472)
–
(475)
–
645
814
5,404
–
211
(393)
(392)
(9,611)
(10,997)
(95)
–
47
885
–
34,834
(320,765)
(328,286)
(517)
–
–
(4,169)
–
324
(5,240)
–

Note:

(a) The amounts exclude income relating to the banking operation of the Group.
(b) The amortisation of goodwill arising from acquisition of subsidiaries and negative goodwill recognised as income for the six months ended 30th June, 2004 are included under “Other operating expenses” on the face of the condensed consolidated profit and loss account.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

7. TAX

Hong Kong: Charge for the period (Over)/Underprovisions in prior years Deferred Overseas: Charge for the period Underprovisions in prior years Deferred Total tax charge for the period	Six months ended 30th June, 2005 2004 HK$’000 HK$’000 (restated) – 230 (680) 52 22,630 914 21,950 1,196 9,017 10,173 1,266 3,114 47,362 (374) 57,645 12,913 79,595 14,109

Hong Kong profits tax has been provided for at the rate of 17.5 per cent. (2004 – 17.5 per cent.) on the estimated assessable profits arising in Hong Kong for the period. Overseas taxes have been calculated on the estimated assessable profits for the period at the tax rates prevailing in the countries in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

Share of tax attributable to associates amounting to HK$4,735,000 (2004 – HK$3,546,000) is included in “Share of results of associates” on the face of the condensed consolidated profit and loss account.

8. EARNINGS PER SHARE

(a) Basic earnings per share

Basic earnings per share is calculated based on (i) the consolidated profit attributable to equity holders of the Company of HK$112,977,000 (2004 – HK$12,345,000); and (ii) the weighted average number of 9,201,089,000 shares (2004 – 9,201,089,000 shares) in issue during the period.

(b) Diluted earnings per share

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

9. INTERIM DIVIDEND

Interim dividend, declared, of HK0.2 cent (2004 – Nil) per ordinary share	Six months ended 30th June, 2005 2004 HK$’000 HK$’000 18,402 –

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

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS

	30th June,	31st December,
	2005	2004
	HK$’000	HK$’000
Financial assets stated at fair value:
Equity securities listed in Hong Kong	171,165	–
Equity securities listed outside Hong Kong	174,757	–
Unlisted equity securities	60,931	–
	406,853	–
Unlisted debt securities	14,189	–
Unlisted investment funds	76,589	–
	497,631	–
Financial assets stated at cost:
Unlisted equity securities	106,669	–
Unlisted debt securities	37,614	–
Unlisted investment funds	15,461	–
	159,744	–
Provisions for impairment losses	(72,638)	–
	87,106	–
	584,737	–
_Less:_amount classified under current portion	(173,053)	–
Non-current portion	411,684	–
An analysis of the issuers of available-for-sale
financial assets is as follows:
Equity securities:
Corporate entities	510,548	–
Bank and other financial institutions	2,974	–
	513,522	–
Debt securities:
Club debenture	10,975	–
Corporate entities	35,619	–
Bank and other financial institutions	5,209	–
	51,803	–

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

11. 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
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

30th June,
31st December,
2005
2004
HK$’000
HK$’000
–
29,077
–
427,448
–
246,208
–
702,733
–
(438,231)
–
264,502
–
34,532
–
(2,776)
–
31,756
–
285,224
–
(29,388)
–
255,836
–
552,094
–
239,967
–
709
–
263,793
–
264,502
–
10,975
–
20,781
–
31,756

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

12. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Held for trading:
Equity securities:
Listed in Hong Kong, at fair value
Listed outside Hong Kong, at fair value
Unlisted, at fair value
Debt securities:
Listed outside Hong Kong, at fair value
Unlisted, at fair value
Investment funds:
Listed outside Hong Kong, at fair value
Unlisted, at fair value
Other:
Unlisted, at fair value
Designated as financial assets at fair value through profit
or loss:
Unlisted investment funds, at fair value
_Less:_amount classified under current portion
Non-current portion

30th June,
31st December,
2005
2004
HK$’000
HK$’000
183,319
–
161,761
–
10,411
–
355,491
–
213,708
–
138,202
–
351,910
–
48,166
–
367,500
–
415,666
–
53,758
–
1,176,825
–
195,703
–
1,372,528
–
(920,762)
–
451,766
–

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

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

		30th June,	31st December,	31st December,
		2005		2004
		HK$’000		HK$’000
	An analysis of the issuers of financial assets at fair value
	through profit or loss is as follows:
	Equity securities:
	Public sector entities	474		–
	Banks and other financial institutions	90,261		–
	Corporate entities	264,756		–
		355,491		–
	Debt securities:
	Central governments and central banks	10,263		–
	Public sector entities	2,471		–
	Banks and other financial institutions	103,314		–
	Corporate entities	235,862		–
		351,910		–
13.	HELD-TO-MATURITY SECURITIES
		30th June,	31st December,
		2005		2004
		HK$’000		HK$’000
	Debt securities, at amortised cost:
	Listed outside Hong Kong	–		50,938
	Unlisted	–		94,094
		–		145,032
	Portion included under current assets	–		(82,216)
	Non-current portion	–		62,816
	Market value of listed securities at the balance sheet date	–		50,938
	An analysis of the issuers of held-to-maturity securities
	is as follows:
	Banks and other financial institutions	–		6,260
	Corporate entities	–		138,772
		–		145,032

14. LOANS AND ADVANCES

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

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

15. 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 condensed consolidated interim financial statements. The financial information in respect of banking operation shown below is based on the unaudited financial statements of MCB for the six months ended 30th June, 2005.

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

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

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

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

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(c) Other investments in securities

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

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

(d) Advances and other accounts

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Rescheduled advances Market value of collateral held (e) Held-to-maturity financial assets Debt securities, at amortised cost: Listed outside Hong Kong Market value of listed debt securities An analysis of the issuers of held-to-maturity financial assets is as follows: Banks and other financial institutions (f) Fixed assets	30th June, 31st December, 2005 2004 HK$’000 HK$’000 218 3,342 222 3,564 30th June, 31st December, 2005 2004 HK$’000 HK$’000 9,618 9,643 11,199 10,877 9,618 9,643

		Furniture,
		fixtures,
		equipment
	Land and	and motor
	buildings	vehicles	Total
	HK$’000	HK$’000	HK$’000
Cost:
At 1st January, 2005 and 30th June, 2005	25,047	2,487	27,534
Accumulated depreciation:
At 1st January, 2005	271	991	1,262
Provided for the period	125	268	393
At 30th June, 2005	396	1,259	1,655
Net book value:
At 30th June, 2005	24,651	1,228	25,879
At 31st December, 2004	24,776	1,496	26,272

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. OTHER INVESTMENTS IN SECURITIES

Listed equity securities, at market value:
Hong Kong
Overseas
Debt securities:
Listed overseas, at market value
Unlisted, at fair value
Investment funds:
Listed overseas, at market value
Unlisted, at fair value
An analysis of the issuers of other investments in securities
is as follows:
Equity securities:
Public sector entities
Banks and other financial institutions
Corporate entities
Debt securities:
Central governments and central banks
Banks and other financial institutions
Corporate entities
Other

30th June,
31st December,
2005
2004
HK$’000
HK$’000
–
280,620
–
104,770
–
385,390
–
225,245
–
163,875
–
389,120
–
229,252
–
303,081
–
532,333
–
1,306,843
–
493
–
44,883
–
340,014
–
385,390
–
13,869
–
105,239
–
220,879
–
49,133
–
389,120

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

17. DEBTORS, PREPAYMENTS AND DEPOSITS

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

	30th June,	31st December,
	2005	2004
	HK$’000	HK$’000
Outstanding balances with ages:
Repayable on demand	32,995	32,959
Within 30 days	137,232	221,626
Between 31 and 60 days	63,317	59,767
Between 61 and 90 days	28,114	37,746
Between 91 and 180 days	16,032	18,157
Over 180 days	2,215	1,061
	279,905	371,316

Trading terms with customers are either on cash basis or on credit. For those customers who trade on credit, invoices are normally payable within 90 days of issuance. Credit limits are set for customers. The Group seeks to maintain tight control over its outstanding receivables in order to minimise credit risk. Overdue balances are regularly reviewed by senior management.

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

18. 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	30th June, 31st December, 2005 2004 HK$’000 HK$’000 1,306,728 1,151,635 32,598 47,631 1,339,326 1,199,266 (368,283) (471,654 971,043 727,612 368,283 471,654 107,720 168,741 247,772 38,871 615,551 520,000 1,339,326 1,199,266	30th June, 31st December, 2005 2004 HK$’000 HK$’000 1,306,728 1,151,635 32,598 47,631 1,339,326 1,199,266 (368,283) (471,654 971,043 727,612 368,283 471,654 107,720 168,741 247,772 38,871 615,551 520,000 1,339,326 1,199,266
		1,199,266 (471,654
		727,612
		471,654 168,741 38,871 520,000
		1,199,266

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

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

19. CREDITORS, ACCRUALS AND DEPOSITS RECEIVED

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

	30th June,	31st December,
	2005	2004
	HK$’000	HK$’000
Outstanding balances with ages:
Repayable on demand	331,116	486,189
Within 30 days	168,797	76,645
Between 31 and 60 days	12,634	29,440
Between 61 and 90 days	3,157	5,571
Between 91 and 180 days	6,887	6,755
Over 180 days	557	563
	523,148	605,163

The outstanding balances that are repayable on demand include client payables relating to cash balances held on trust for the customers in respect of the Group’s securities broking business. As at 30th June, 2005, total client trust bank balances amounted to HK$316,844,000 (31st December, 2004 – HK$389,123,000).

20. SHARE CAPITAL

Authorised: 28,000,000,000 (31st December, 2004 – 28,000,000,000) ordinary shares of HK$0.10 each Issued and fully paid: 9,201,088,716 (31st December, 2004 – 9,201,088,716) ordinary shares of HK$0.10 each	30th June, 31st December, 2005 2004 HK$’000 HK$’000 2,800,000 2,800,000 920,109 920,109	30th June, 31st December, 2005 2004 HK$’000 HK$’000 2,800,000 2,800,000 920,109 920,109
		920,109

Share options

Pursuant to the Share Option Scheme for Employees of the Company (the “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 Group options to subscribe for shares in the Company. Under the rules of the Scheme, no more options could be granted from the tenth anniversary of the Adoption Date. Accordingly, no more options can be granted under the Scheme from May 2004.

As at 1st January, 2005, certain directors and employees of the Group held a total of 5,800,000 share options under the Scheme. The holder of each option is entitled to subscribe for six shares of HK$0.10 each in the Company on or before 23rd June, 2007 at an exercise price of HK$0.883 per share (subject to adjustment). The above share options were granted on 23rd June, 1997 at a consideration of HK$1.00 per grantee under the Scheme. During the six months ended 30th June, 2005, no share options were cancelled or exercised. The exercise in full of the 5,800,000 share options would, under the capital structure of the Company as at 30th June, 2005, result in the issue of 34,800,000 shares of HK$0.10 each in the Company and cash proceeds, before expenses, of HK$30,728,000.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

21. RESERVES

At 1st January, 2005 As previously reported Prior period adjustment: (Notes 1 & 2) HK(SIC)-Int 21 Deferred tax arising from revaluation of investment properties As restated before opening adjustments Opening adjustments: (Notes 1 & 2) In respect of financial instruments In respect of investment properties In respect of negative goodwill As restated after opening adjustments Fair value changes on available-for-sale financial assets Deferred tax arising from fair value changes on available-for-sale financial assets Transfer of reserve Exchange realignment Issue of shares by subsidiaries to minority shareholders Changes in interests in subsidiaries Advance from minority shareholders of subsidiaries Acquisition of subsidiaries Profit for the period 2004 final dividend, declared and paid to shareholders of the Company 2004 final dividend and distribution, declared and paid to minority shareholders of subsidiaries At 30th June, 2005	Share premium account HK$’000 785,257 – 785,257 – – – 785,257 – – – – – – – – – – – 785,257	Capital reserve (Note (a)) HK$’000 93,691 – 93,691 – – (93,691 ) – – – – – – – – – – – – –	Special capital reserve (Note (b)) HK$’000 2,075,948 – 2,075,948 – – – 2,075,948 – – – – – – – – – – – 2,075,948	Investment Other asset Legal property revaluation Investment Exchange reserve revaluation reserve revaluation equalisation (Note (c)) reserve (Note (d)) reserve reserve HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 1,485 366,065 247,701 – (161,716 ) – (59,018 ) – – – 1,485 307,047 247,701 – (161,716 ) – – – – – – (307,047 ) (247,701 ) – – – – – – – 1,485 – – – (161,716 ) – – – (27,190 ) – – – – (1,982 ) – 880 – – – – – – – – (12,787 ) – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 2,365 – – (29,172 ) (174,503 )	Retained profits HK$’000 389,407 (41,598 ) 347,809 111,353 554,748 96,124 1,110,034 – – (880 ) – – – – – 112,977 (18,402 ) – 1,203,729	Total HK$’000 3,797,838 (100,616 ) 3,697,222 111,353 – 2,433 3,811,008 (27,190 ) (1,982 ) – (12,787 ) – – – – 112,977 (18,402 ) – 3,863,624	Minority interests HK$’000 1,686,437 13,640 1,700,077 (1,405 ) – 317 1,698,989 (4,450 ) (761 ) – (28,179 ) 2,446 (1,772 ) 82,054 50,073 45,082 – (25,730 ) 1,817,752

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

At 1st January, 2004 As previously reported Prior period adjustment:(Notes 1 & 2) HK(SIC)-Int 21 Deferred tax arising from revaluation of investment properties As restated Surplus on revaluation of investment properties Deferred tax charge arising from surplus on revaluation of investment properties (as restated) Transfer of portion of depreciation charge on leasehold properties attributable to the related revaluation surplus to retained profits Transfer of reserve Exchange realignment Disposal of a subsidiary Advance from minority shareholders of subsidiaries Issue of shares by subsidiaries to minority shareholders Acquisition of subsidiaries Changes in interests in subsidiaries Profit for the period 2003 final dividend, declared and paid to shareholders of the Company 2003 final dividend and distribution, declared and paid to minority shareholders of subsidiaries At 30th June, 2004 and 1st July, 2004 (as restated) Surplus on revaluation of investment properties Deferred tax charge arising from surplus on revaluation of investment properties (as restated) Transfer of portion of depreciation charge on leasehold properties attributable to the related revaluation surplus to retained profits Release upon disposal of investment properties Exchange realignment Repayment to minority shareholders of subsidiaries Changes in interests in subsidiaries Profit for the period 2004 interim distribution, declared and paid to minority shareholders of subsidiaries At 31st December, 2004 (as restated)	Share premium account HK$’000 785,257 – 785,257 – – – – – – – – – – – – – 785,257 – – – – – – – – – 785,257	Capital reserve (Note (a)) HK$’000 93,691 – 93,691 – – – – – – – – – – – – – 93,691 – – – – – – – – – 93,691	Special capital reserve (Note(b)) HK$’000 2,075,948 – 2,075,948 – – – – – – – – – – – – – 2,075,948 – – – – – – – – – 2,075,948	Investment Other asset Legal property revaluation Exchange reserve revaluation reserve equalisation (Note(c)) reserve (Note (d)) reserve HK$’000 HK$’000 HK$’000 HK$’000 621 7,732 253,478 (174,581 ) – (7,732 ) – – 621 – 253,478 (174,581 ) – 191,183 – – – (29,827 ) – – – – (2,888 ) – 886 – – – – – – (2,226 ) – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 1,507 161,356 250,590 (176,807 ) – 176,893 – – – (31,420 ) – – – – (2,889 ) – – 214 – – – – – 14,947 – – – – (22 ) 4 – 144 – – – – – – – – 1,485 307,047 247,701 (161,716 )	Retained profits HK$’000 357,058 (41,598 ) 315,460 – – 2,888 (886 ) – – – – – – 12,345 (18,402 ) – 311,405 – – 2,889 – – – – 33,515 – 347,809	Total HK$’000 3,399,204 (49,330 ) 3,349,874 191,183 (29,827 ) – – (2,226 ) – – – – – 12,345 (18,402 ) – 3,502,947 176,893 (31,420 ) – 214 14,947 – 126 33,515 – 3,697,222	Minority interests HK$’000 1,654,587 12,297 1,666,884 800 (146 ) – – (2,864 ) (803 ) 19,328 4,398 9,662 (1 ) 22,757 – (25,097 ) 1,694,918 10,472 (3,385 ) – – 31,908 (49,742 ) 23,296 (2,004 ) (5,386 ) 1,700,077

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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. On 1st January, 2005, the reserve was transferred to retained profits as referred to in Notes 1 and 2 to the interim 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.
(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$306,699,000 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 30th June, 2005, no special capital reserve remained subject to the Undertaking (31st December, 2004 – Nil).

(c) Legal reserve

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.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(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. On 1st January, 2005, the reserve was transferred to retained profits as referred to in Notes 1 and 2 to the interim financial statements.

22. MATURITY PROFILE OF ASSETS AND LIABILITIES

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

Repayable on demand HK$’000 At 30th June, 2005 Assets Debt securities: Available-for-sale financial assets – Financial assets at fair value through profit or loss – Loans and advances 113,811 Client trust bank balances 31,040 Pledged time deposit – Cash and cash equivalents 339,956 Assets less liabilities attributable to banking operation: Cash and short-term funds 95,722 Debt securities: Held-to-maturity financial assets – Financial assets at fair value through profit or loss – Advances to customers 26,859 607,388 Liabilities Bank loans – Assets less liabilities attributable to banking operation: Current, fixed, savings and other deposits of customers 30,406 30,406	3 months or less HK$’000 – 22,664 24,774 285,804 86,116 1,166,807 15,684 – – 68,540 1,670,389 276,825 71,044 347,869	1 year or less but over 3 months HK$’000 2,476 45,002 5,770 – – – – – – 20,065 73,313 91,458 8,662 100,120	5 years or less but over 1 year HK$’000 6,892 198,411 777 – – – – – 7,766 25,268 239,114 355,492 1,969 357,461	After 5 years HK$’000 – 85,833 74 – – – – 9,618 976 18,822 115,323 615,551 – 615,551	Undated HK$’000 42,435 – – – – – – – 8,221 – 50,656 – – –	Total HK$’000 51,803 351,910 145,206 316,844 86,116 1,506,763 111,406 9,618 16,963 159,554
						2,756,183

						1,339,326 112,081
						1,451,407

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Repayable on demand HK$’000 At 31st December, 2004 Assets Debt securities: Investment securities – Held-to-maturity securities – Other investments in securities – Loans and advances 166,253 Client trust bank balances 43,244 Cash and cash equivalents 673,228 Assets less liabilities attributable to banking operation: Cash and short-term funds 44,475 Debt securities: Held-to-maturity financial assets – Other investments in securities – Advances to customers 28,598 955,798 Liabilities Bank loans – Assets less liabilities attributable to banking operation: Current, fixed, savings and other deposits of customers 19,912 19,912	3 months or less HK$’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

23. CONTINGENT LIABILITIES

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

(a) As at 30th June, 2005, the Group had guarantees in respect of banking facilities granted to an investee company of HK$2,915,000 (31st December, 2004 – HK$2,915,000).
(b) Details of the off-balance sheet exposures relating to banking operation.

As at 30th June, 2005, the Group had contingent liabilities relating to its banking subsidiary of HK$20,673,000 (31st December, 2004 – HK$29,245,000), comprising guarantees and other endorsements of HK$13,464,000 (31st December, 2004 – HK$15,528,000) and liabilities under letters of credit on behalf of customers of HK$7,209,000 (31st December, 2004 – HK$13,717,000).

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

24. CAPITAL COMMITMENTS

At the balance sheet date, the Group had the following commitments:

Capital commitments in respect of property, plant and equipment: Contracted, but not provided for Other capital commitments: Contracted, but not provided for_(Note)_	30th June, 31st December, 2005 2004 HK$’000 HK$’000 8,281 4,699 1,611,125 166,337 1,619,406 171,036	30th June, 31st December, 2005 2004 HK$’000 HK$’000 8,281 4,699 1,611,125 166,337 1,619,406 171,036
		171,036

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

25. RELATED PARTY TRANSACTIONS

(a) As at 30th June, 2005, the Group had amounts due from associates in a total of HK$48,570,000 (31st December, 2004 – HK$47,566,000), amounts due to associates in a total of HK$2,301,000 (31st December, 2004 – HK$2,988,000) and amounts due from jointly controlled entities in a total of HK$7,393,000 (31st December, 2004 – HK$7,393,000). The balances with the associates and jointly controlled entities are unsecured, interest-free and have no fixed terms of repayment.
(b) During the period, the Group received rental income from Lippo Limited, an intermediate holding company of the Company, of HK$1,489,000 (2004 – HK$1,059,000). The rental was determined by reference to open market rentals.

26. BUSINESS COMBINATION

On 8th June, 2005, the Group, through a non-wholly owned subsidiary, acquired an 85.3 per cent. equity interest in PT Duta Wisata Loka (“DWL”), a company incorporated in Indonesia and holding a shopping mall known as Megamal Pluit in Jakarta, Indonesia for rental purpose. The Group’s effective interest in DWL is 14.6 per cent.

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

The carrying amounts of the acquiree’s assets and liabilities immediately before combination and recognised at the date of acquisition are as follows:

Fixed assets
Investment properties
Trade and other debtors
Cash and cash equivalents
Bank borrowings
Trade and other creditors
Provision for taxation
Net assets
Minority interests
Net assets acquired
Purchase consideration
Cash and cash equivalents in subsidiary acquired
Cash outflow on acquisition
The excess of the acquirer’s interest in net assets over cost is as follows:
Purchase consideration
Net assets acquired

HK$’000
7,849
251,721
11,336
16,831
(104,054)
(58,224)
(2,547)
122,912
(50,073)
72,839
64,310
(16,831)
47,479
HK$’000
64,310
(72,839)
(8,529)

The excess of HK$8,529,000 was recognised as “Other income” in the condensed consolidated profit and loss account. Since the acquisition was just completed in June 2005, the post-acquisition profit contributed from the acquired business to the Group for the six months ended 30th June, 2005 was not material.

During the six months ended 30th June, 2004, the Group also completed acquisition of certain subsidiaries. Such acquisitions did not have significant impact on the Group’s assets, liabilities and profit for that period.

27. SUBSEQUENT EVENT

On 12th September, 2005, HKCB Corporation Limited, a subsidiary of the Company, disposed of its entire interest in, representing 74.8 per cent. of the issued share capital of, The Hong Kong Building and Loan Agency Limited, a then listed subsidiary of the Company, at a profit for an aggregate consideration of HK$184,000,000.”

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

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

Set out below is the audited consolidated profit and loss account, consolidated balance sheet, consolidated summary statement of changes in equity and consolidated cash flow statement of the Group, and the balance sheet of the Company together with the notes to the financial statements of the Group as extracted from pages 37 to 108 of the annual report of the Company for the year ended 31st December, 2004 which is not subject to any qualified opinion.

“Consolidated Profit and Loss Account For the year ended 31st December, 2004

Note Turnover 5 Cost of sales Gross profit Other revenue Administrative expenses Other operating expenses Write-back of provision/(Provisions) for bad and doubtful debts relating to: Banking operation Non-banking operations 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

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

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

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

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

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

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

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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

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.

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

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

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).

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)

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.

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).

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.

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.

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

		–

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

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

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.

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)

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

			–

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

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

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(b) Other investments in securities

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

		–

		13,646 –
		13,646

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

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

		3,627

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).

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

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

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

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

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

(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.

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

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.

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).

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.

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

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

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

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

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

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

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.

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.”

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

3. INDEBTEDNESS

As at 31st January, 2006, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Group (other than The Macau Chinese Bank Limited (“MCB”), a banking subsidiary of the Company) had outstanding indebtedness of approximately HK$1,075 million, comprising secured bank loans of approximately HK$1,042 million, unsecured bank loans of approximately HK$31 million and guarantee in a total of approximately HK$2 million provided for its associated company and investee company in respect of banking facilities.

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.

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

As at 31st January, 2006, MCB accepts deposits from customers, banks and other financial institutions of approximately HK$123 million in the normal course of their banking business. MCB also had contingent liabilities of approximately HK$18 million, comprising guarantees and other endorsements of approximately HK$12 million and liabilities under letters of credit on behalf of customers of approximately HK$6 million, as at 31st January, 2006.

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

4. WORKING CAPITAL

The Directors, after due and careful consideration, are of the opinion that after taking into account the cash balances, the expected internally generated funds and the present banking facilities available to the Group, the Group has sufficient working capital for its requirements for at least the next twelve months from the date of this circular in the absence of unforeseen circumstances.

100

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

5. FINANCIAL AND TRADING PROSPECTS

The general prospects for the Hong Kong economy for 2005 was promising. A continuing pick up in consumer spending and return of investor confidence are expected to support the economy in 2006. The opening of the Hong Kong Disneyland, extension of the Mainland Individual Traveller Scheme and implementation of Phase 2 of the Closer Economic Partnership Arrangements are expected to continue to provide further momentum to economic growth. While the general prospects look good, there are some uncertainties on the global economic front, in particular, the pace of economic growth in the United States, rising interest rates, high oil prices and slowing down of the PRC economy.

Overall, outlook for the Group’s business is optimistic. With its strong and healthy financial position, the Group is in an excellent position to benefit from the economic growth in Asia. The Group will continue to explore suitable investment opportunities, especially in the financial and investment sectors and look into property markets in the Asian region, which are compatible with its long term growth strategy. Management will continue to adopt a cautious and prudent approach when assessing new investment opportunities.

101

APPENDIX II

GENERAL INFORMATION

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

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

Directors’ and chief executive’s interests and short positions in shares and underlying shares of the Company and associated corporations

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

	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)

102

APPENDIX II

GENERAL INFORMATION

	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 Hongkong
Chinese Limited
(“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

103

APPENDIX II

GENERAL INFORMATION

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.

(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 interest
Name of		of shares	in 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
CRC China Limited	Ordinary shares	1	100
Congrad Holdings Limited	Ordinary shares	1	100
Cyport Limited	Ordinary shares	1	100
East Winds Food Pte Ltd.	Ordinary shares	400,000	88.88
		(Note b)
First Bond Holdings Limited	Ordinary shares	1	100
First Tower Corporation	Ordinary shares	1	100
		(Note c)
Glory Power Worldwide	Ordinary shares	1	100
Limited
Grandhill Asia Limited	Ordinary shares	1	100
Grand Peak Investment	Ordinary shares	2	100
Limited
Honix Holdings Limited	Ordinary shares	1	100
Huge Returns Limited	Ordinary shares	1	100

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			Approximate
			percentage
		Number	of interest
Name of		of shares	in the issued
associated corporation	Class of shares	interested	share capital
J & S Company Limited	Ordinary shares	1	100
Lippo Assets (International)	Ordinary shares	1,000,000	100
Limited	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
Lippo Energy Holding	Ordinary shares	1	100
Limited
Lippo Finance Limited	Ordinary shares	6,176,470	82.35
Lippo Global Assets Limited	Ordinary shares	1	100
Lippo Holding America Inc.	Ordinary shares	1	100
Lippo Holding Company	Ordinary shares	2,500,000	100
Limited	Non-voting	7,500,000	100
	deferred shares
Lippo Investments Limited	Ordinary shares	2	100
Lippo Leisure Holdings	Ordinary shares	2	100
Limited
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	Ordinary shares	1	100
Limited
Skyscraper Realty Limited	Ordinary shares	10	100
		(Note d)
The HCB General Investment	Ordinary shares	70,000	70
(Singapore) Pte Ltd.
(“HCB General”)
Valencia Development	Ordinary shares	800,000	100
Limited	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.

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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).

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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:

(i) The Company

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

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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”, in members’ voluntary liquidation)

	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.

(iii) Firstrate Development Limited (in members’ voluntary liquidation)

No. of ordinary shares

	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 was 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.

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(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) Zhuhai Chung Po House Property Development Company Limited

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

Note (v): 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.

(vi) Jeremiah Holdings Limited (“Jeremiah”)

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

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

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(vii) 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 (vii): See also (vi) above in respect of the substantial shareholders of Jeremiah.

(viii) Hongkong Chinese Limited (“HCL”)

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

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

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

(x) Goldfix Pacific Ltd.

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

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

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(xi) Rossinis Restaurant Pte. Ltd.

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

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

(xii) TechnoSolve Limited

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

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

(xiii) The Macau Chinese Bank Limited

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

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

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 herein, 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.

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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, so far as the Directors were aware, none of the Directors and their respective associates were considered to have interests in any business which competes or may compete, either directly or indirectly, with the businesses of the Group or have or may have any other conflicts of interest with the Group pursuant to the Listing Rules.

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

None of the Directors is materially interested in any contract or arrangement entered into by any member of the Group subsisting at the 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, 222 Huaihai Zhong Road, Shanghai, the PRC (“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.

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. On 10th October, 2005, the tenancy was extended to 31st October, 2005 with the same rental.

AAL is a subsidiary of Lippo Cayman Limited which in turn is wholly owned by Lanius Limited, 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.

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(b) On 10th January, 2005, a tenancy agreement was entered into between Lippo and Superform Investment Limited (“Superform”), a wholly-owned subsidiary of the Company, 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.

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 consolidated financial statements of the Group were made up.

7. 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.

8. MATERIAL CONTRACTS

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

(a) a sale and purchase agreement dated 29th March, 2004 entered into between Firstrate Development Limited (“Firstrate”, in members’ voluntary liquidation) and Karlstead Limited (“Karlstead”, in members’ voluntary liquidation), both of which were 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;
(b) 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 Hongkong Chinese Limited (“HCL”) which in turn is a non wholly-owned subsidiary of the Company, and 中國技術創新有限公司 (China Technology Innovation Corporation) relating to the development of the land situated at Lot no. 4C1 in 北京經濟技術開發區 (Beijing Economic-Technological Development Area), as supplemented by an agreement dated 25th January, 2006 and the capital commitment of Uchida under the CJV Contract is US$19.2 million;

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(c) 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;
(d) 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;
(e) a tender to purchase the entire 7th Floor, Tower One, Lippo Centre, 89 Queensway, Hong Kong (“Lippo Centre Property”) for a sum of HK$68,336,268 from International Bank of Asia Limited (“IBA”, now known as Fubon Bank (Hong Kong) Limited) as mortgagee in possession of the Lippo Centre Property submitted by Verybest Holdings Limited, a wholly-owned subsidiary of HCL, was accepted by IBA on 25th October, 2004;
(f) 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;

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(g) 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. HKCL has become a wholly-owned subsidiary of the Company on 17th June, 2005;
(h) (i) a conditional legally binding term sheet dated 6th June, 2005 was agreed between LAAP General Partner Limited (“LAAP General Partner”) and Pacific Landmark Holdings Limited (“Pacific Landmark”), an indirect wholly-owned subsidiary of HCL, in respect of the investment in Lippo ASM Asia Property LP (“LAAP”) for an amount of up to HK$1,450 million;
(ii) an amended and restated limited partnership agreement dated 22nd August, 2005 of LAAP entered into between Pacific Landmark as a limited partner and LAAP General Partner as the general partner (the “General Partner”) which governs the relationship between Pacific Landmark and the General Partner and provides for the manner of operation and management of LAAP; and
(iii) a subscription agreement dated 22nd August, 2005 entered into between Pacific Landmark and LAAP, pursuant to which Pacific Landmark will invest an amount of up to HK$1,450 million in LAAP;
(i) 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;

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(j) (i) a subscription agreement dated 21st June, 2005 entered into between Export and Industry Bank, Inc. (“EIB”) and Conreal Holdings Limited (“Conreal”), 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 such subscription agreement was subsequently cancelled by a cancellation agreement dated 29th December, 2005 entered into between Conreal, Kingmild (as defined hereinafter) and EIB (the “Cancellation Agreement”); and
(ii) a subscription agreement dated 21st June, 2005 entered into between EIB and Kingmild Limited (“Kingmild”), 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 such subscription agreement was subsequently cancelled by the Cancellation Agreement;
(k) a letter of offer from the Singapore Land Authority dated 25th August, 2005 to sell the state land lots 106pt, 1049pt, 99484pt and 99485pt TS 28 at Newton Road, Singapore to HKCL for a consideration of S$13,156,710 (equivalent to approximately HK$59,876,000), subject to adjustment, was accepted by HKCL on 6th October, 2005;
(l) a tender dated 16th November, 2005 submitted jointly by Lippo Group International Pte. Limited (“LGI”), a wholly-owned subsidiary of the Company, and CRL Realty Pte Ltd (“CRL”) to purchase a parcel of land located at Alexandra Road/Tiong Bahru Road, Singapore (the “Project”) for a consideration of S$179,988,000 (equivalent to approximately HK$814,446,000) was accepted by the Urban Redevelopment Authority in Singapore on 21st November, 2005. A project undertaking dated 10th February, 2006 was entered into between CRL, LGI, the Company, Tanglin Residential Pte. Ltd. (“Tanglin”, a 50:50 joint venture of CRL and LGI) and United Overseas Bank Limited which incorporates, inter alia, a completion undertaking given by the Company and CRL jointly and severally to procure completion of the development of the Project by Tanglin without delay. A shareholders’ agreement dated 17th February, 2006 was also entered into between CRL, LGI, the Company and Tanglin for regulating the relationship of the shareholders of Tanglin, that is, CRL and LGI and the conduct of the business and affairs of Tanglin;
(m) a memorandum of agreement dated 29th December, 2005 (the “Memorandum of Agreement”) entered into between Kingmild, Conreal, Golden Harmony Limited and Classic Premium Limited (collectively the “LCR’s Entities”, all of which are wholly-owned subsidiaries of the Company), and EIB, Philippine Deposit Insurance Corporation (“PDIC”) and other investors in relation to (i) the injection into EIB of an aggregate additional capital of at least Pesos 3,000,000,000 (approximately HK$448,500,000), of which Pesos 1,200,000,000 (approximately HK$179,400,000) will be injected by LCR’s Entities and the

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APPENDIX II

GENERAL INFORMATION

remaining balance will be injected by certain other investors signing the Memorandum of Agreement, and (ii) a package of financial assistance in the aggregate amount of Pesos 12,000,000,000 (approximately HK$1,794,000,000) to be provided by PDIC in favour of EIB, which includes a secured loan in the amount of Pesos 7,000,000,000 (approximately HK$1,046,500,000), an unsecured subordinated debt in an aggregate amount of Pesos 2,000,000,000 (approximately HK$299,000,000), the purchase of certain non-performing loans of EIB and certain regulatory relief;

(n) twenty two sale and purchase agreements dated 18th January, 2006 entered into between eleven subsidiaries of HCL (the “Subsidiaries”) and the respective twenty two vendors in relation to the acquisition of a total of twenty two strata lots in the building located at 79 Anson Road, Singapore by the Subsidiaries for an aggregate consideration of S$95,000,000 (approximately HK$448,020,000). Subsequently, on 27th January, 2006, HKC Property Investment Holdings Limited, a wholly-owned subsidiary of HCL, entered into a memorandum of understanding with ASM Asia Recovery (Master) Fund in relation to, inter alia, the setting up and funding of a joint venture company to become the holding company of the Subsidiaries and certain rights amongst the parties as the shareholders of such joint venture company; and
(o) the Deed of Gift.

9. 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 Chartered Secretaries.
(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 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 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

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APPENDIX II

GENERAL INFORMATION

10. 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 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) this circular;
(b) the Memorandum and Articles of Association of the Company;
(c) the published audited consolidated financial statements of the Company for each of the two financial years ended 31st December, 2004 and the published unaudited consolidated interim accounts of the Company for the six months ended 30th June, 2005;
(d) the circulars issued 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; and
(e) the material contracts referred to the section headed “Material Contracts” in this appendix.

11. LANGUAGE

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

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

118

AI assistant

Asiasec Properties Limited — Proxy Solicitation & Information Statement 2006

49086_rns_2006-03-20_e9557ea1-5fdf-4d31-875c-915aaf0faeb2.pdf

LIPPO CHINA RESOURCES LIMITED 力寶華潤有限公司

MAJOR TRANSACTION

CONTENTS

DEFINITIONS

LIPPO CHINA RESOURCES LIMITED 力寶華潤有限公司

MAJOR TRANSACTION

CESSATION OF AURIC PACIFIC GROUP LIMITED AS A SUBSIDIARY

INTRODUCTION

THE DEED OF GIFT

Gift Share

INFORMATION ON AURIC PACIFIC

EFFECTS OF AND REASONS FOR THE DONATION

LETTER FROM THE BOARD

LISTING RULES IMPLICATIONS

INFORMATION ON THE COMPANY

FURTHER INFORMATION

Yours faithfully,

LIPPO CHINA RESOURCES LIMITED

Stephen Riady

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

“Condensed Consolidated Profit and Loss Account

Condensed Consolidated Balance Sheet

Condensed Consolidated Summary Statement of Changes in Equity

Condensed Consolidated Cash Flow Statement

Notes to the Interim Financial Statements

1. PRINCIPAL ACCOUNTING POLICIES

(b) HKAS 32 and HKAS 39 – Financial Instruments

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

(ii) Loans and receivables

(iii) Held-to-maturity financial assets

(iv) Available-for-sale financial assets

(c) HKAS 40 – Investment Property

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

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

2. SUMMARY OF THE IMPACT OF CHANGES IN ACCOUNTING POLICIES

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

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

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

3. SEGMENT INFORMATION

4. REVENUE/TURNOVER

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

6. PROFIT BEFORE TAX

7. TAX

8. EARNINGS PER SHARE

(a) Basic earnings per share

(b) Diluted earnings per share

9. INTERIM DIVIDEND

10. AVAILABLE-FOR-SALE FINANCIAL ASSETS

11. INVESTMENT SECURITIES

12. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

14. LOANS AND ADVANCES

15. ASSETS LESS LIABILITIES ATTRIBUTABLE TO BANKING OPERATION

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

(c) Other investments in securities

16. OTHER INVESTMENTS IN SECURITIES

17. DEBTORS, PREPAYMENTS AND DEPOSITS

18. BANK LOANS

19. CREDITORS, ACCRUALS AND DEPOSITS RECEIVED

20. SHARE CAPITAL

Share options

21. RESERVES

(a) Capital reserve

(b) Special capital reserve

(c) Legal reserve

(d) Other asset revaluation reserve

22. MATURITY PROFILE OF ASSETS AND LIABILITIES

23. CONTINGENT LIABILITIES

24. CAPITAL COMMITMENTS

25. RELATED PARTY TRANSACTIONS

26. BUSINESS COMBINATION

27. SUBSEQUENT EVENT

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

Consolidated Balance Sheet

Consolidated Summary Statement of Changes in Equity

Balance Sheet

Consolidated Cash Flow Statement

Notes to the Financial Statements

Asiasec Properties Limited Proxy Solicitation & Information Statement 2006