CAI Corp — Earnings Release 2014

Feb 28, 2014

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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(Incorporated in Hong Kong with limited liability) Stock Code: 51

2013 Final Results Announcement

HIGHLIGHTS

• Investment Properties (IP) performed satisfactorily and Hotel was steady.

• Development Properties (DP) declined substantially in the absence of the exceptional profit (of over HK$1 billion) attributable to the Shanghai Xiyuan project in 2012.

• Profit before provision for hotel property and IP revaluation surplus declined by 24% to HK$1,464 million.

• A HK$543 million provision was made for the Changzhou development project to write down the value of the hotel against DP profits.

• IP revaluation surplus declined by 68% to HK$355 million.

• Group profit declined by 58% to HK$1,276 million.

• Second interim dividend remains unchanged at HK$0.48 per share.

• Book net asset value was HK$21.70 per share; net debt HK$0.58 per share.

• The Changzhou hotel is due to open in mid-2014 into an over-supplied market. Demand has also been hard hit by the government’s austerity measures. Pre-opening and initial post-opening losses are expected.

• Murray Building in Hong Kong will be converted into a prime hotel in Central, presently targeted for opening in 2017.

• DP sales recognized in 2013 totaled RMB4.6 billion; new sales totaled RMB3.9 billion.

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Harbour Centre – Final Results Announcement (28 February 2014)

• Net DP sales order book as at 31 December 2013 was RMB4.5 billion. Profit margins will, however, be generally tighter than those reported for the past two years.

• Government policy is expected to remain unfavourable to developers in the near to medium term.

• Suzhou IFS (80%-owned) is due for completion by 2017 at an estimated total cost of RMB5.3 billion. Bundled with a larger and profitable DP project, the majority of IFS will be held as IP for recurrent income. In a challenging market, IFS is expected to outperform the competition due to location and quality.

GROUP RESULTS

Group profit attributable to equity shareholders for the financial year ended 31 December 2013 decreased by 58% to HK$1,276.4 million (2012: HK$3,057.5 million). Group profit before provision for hotel property and IP revaluation surplus decreased by 24% to HK$1,464.3 million (2012: HK$1,936.5 million). Earnings per share were HK$1.80 (2012: HK$4.31).

DIVIDENDS

A first interim dividend of 12 cents per share and a special non-recurrent interim dividend of 18 cents per share were paid on 27 September 2013. The Board has declared a second interim dividend of 48 cents per share in respect of the financial year ended 31 December 2013, payable on 23 May 2014 to Shareholders on record as at 16 May 2014. This second interim dividend is to be paid in lieu of a final dividend in respect of the financial year ended 31 December 2013.

BUSINESS REVIEW

China Portfolio

Development Properties (DP)

2012 had been an exceptional year with completion of the highly successful Shanghai Xiyuan project which contributed a net profit of over HK$1 billion. In the absence of a similarly exceptional project in 2013, revenue and operating profit for the segment decreased to HK$4,577.3 million and HK$970.1 million respectively, mainly from Suzhou Times City and Changzhou Times Palace. Net contribution from the joint venture totaled HK$270.8 million, as a result of the completion of additional phases of The U World in Chongqing.

Inclusive of joint ventures on an attributable basis, property sales contracted in 2013 totaled RMB3,937.6 million (2012: RMB4,219.5 million). As at 31 December 2013, the net order book amounted to RMB4,486.8 million (31/12/2012: RMB5,378.8 million), pending recognition on completion of the respective properties.

As at 31 December 2013, the Group had an attributable land bank of 1.9 million square metres

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at a book value of HK$13.9 billion, which represented 58% of the Group’s business assets.

Sales

The fast-growing middle class spurred the underlying demand for quality residences and rendered support to the real estate market.

Including the attributable share in the jointly-controlled project, over 2,100 residences with a total GFA of 287,200 square metres were contracted for sale in 2013 for RMB3.9 billion (HK$5.0 billion). At the end of 2013, the net order book stood at RMB4.5 billion for 4,005 residences with a total GFA of 475,000 square metres. Profit margins for the net order book in hand, however, will generally be tighter than those reported for the past two years. In 2013, sales order recognition was about RMB4.6 billion.

Initial phases of retail units and additional phases of residential units of Suzhou Times City were launched for pre-sale in 2013. 131,000 square metres were sold or pre-sold at an average price of RMB12,300 per square metre for residential and RMB28,000 per square metre for retail. Total proceeds amounted to RMB1.7 billion. The cumulative GFA sold/pre-sold represents 45% of the project total.

Changzhou Times Palace launched additional phases for pre-sale and sold or pre-sold 107,000 square metres at an average price of RMB7,900 per square metre. Contracted sales proceeds increased by 10% to RMB847 million. The cumulative GFA sold / pre-sold represents 56% of the project total.

Additional phases of residential units of The U World in Chongqing were launched for pre-sale in 2013. On an attributable basis, 40,300 square metres were sold or pre-sold at an average price of RMB19,500 per square metre for residential and RMB40,800 per square metre for retail. Total proceeds amounted to RMB864 million, 56% higher than in 2012. The cumulative GFA sold / pre-sold represents 47% of the project total.

Shanghai Xiyuan sold a further 8,900 square metres at an average price of RMB50,000 per square metre for proceeds of RMB528 million. The cumulative GFA sold represents 99% of the project total.

Development Progress

Changzhou Times Palace comprises residential towers and carparks, semi-detached houses and villas, a State Guest House, a five-star Marco Polo Hotel and serviced apartments with a total GFA of 800,000 square metres. Additional phases of residential units were completed in 2013. Construction of the remaining residential towers is underway, with full completion scheduled for 2016.

The U World in Chongqing, 55%-owned jointly-controlled residential and commercial development with China Overseas Land & Investment Ltd, offers an attributable GFA of 235,000 square metres with most of the residences enjoying a panoramic river view from different angles. The development, being adjacent to the Grand Theatre, Chongqing Science and Technology Museum and the Central Park in the new Jiangbei CBD, is in close proximity to the future Chongqing IFS. Additional phases of residential units were completed in 2013. Construction of the remaining residential towers is underway, with full completion scheduled for 2016.

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Suzhou Times City, a joint venture owned 80:20 between the Group and a unit of the local government, is located along the main east-west thoroughfare of Xiandai Da Dao and near a future metro station, with a residential GFA of 907,000 square metres. Initial phases were completed in 2013. Construction of the remaining towers is underway, with full completion scheduled for 2018.

Shanghai South Station is a 493,000-square-metre commercial development in Xuhui District, in which the Group owns a 27% interest (attributable 133,000 square metres), led by major Mainland developer China Vanke Company Limited with a 51% interest. The development, situated next to South Railway Station, is well-connected to the existing Metro Line 1, Line 3 and future Line 15 stations. Construction is underway, with full completion scheduled for 2018.

Investment Properties (IP)

Suzhou IFS (80% attributable to the Group) is a 450-metre landmark commercial development in the new CBD of Suzhou overlooking Jinji Lake, and will be comparable in height to the tallest building in Hong Kong. Designed by Kohn Pedersen Fox, the development consists of international Grade A office, luxurious apartments as well as a boutique premium sky hotel with full scenery of Suzhou. It offers a total GFA of 278,000 square metres and will be directly connected to the future metro station. Construction is underway with the initial phases targeted for completion by 2017. Total estimated cost amounted to RMB5.3 billion.

Hotel

In Changzhou, the 31-suite State Guest House, a 271-room five-star hotel and 139-unit serviced apartments are scheduled for completion by 2014. The hotel is part of the State Guest House complex with vast garden space for major events and weddings. Pre-operating expenses affected the Hotel segment’s results in 2013 and are expected to continue in 2014. Initial post-opening losses are also expected. Its book value has been written down by HK$542.8 million to more accurately reflect the current state of the market.

In Suzhou, construction of a 129-room sky hotel with full scenery of the city in the Suzhou IFS project is also underway.

Hong Kong Portfolio

Investment Properties (IP)

The IP segment (mainly comprising prime Canton Road retail properties) was powered by the solid local and international consumption demand, with a 23% increase in revenue and a 26% increase in operating profit. The Group’s IP portfolio was independently revalued as at 31 December 2013, resulting in a net revaluation surplus of HK$354.9 million for the year.

Hotel

With its favourable location in Harbour City, Marco Polo Hongkong Hotel (“MPHK Hotel”) provides convenience for discerning travelers and will continue to benefit from inbound tourism. Average room rate increased by 3% while average occupancy was maintained at 90%. Profitability was however affected by rising operating costs and higher depreciation charges. Operating costs will continue to come under upward pressure in 2014.

Acquisition

In November 2013, the Group acquired the 27-storey Murray Building in Cotton Tree Drive in

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Central, which is probably the last remaining prime site in Central area for a major hotel, for HK$4.4 billion. Murray Building, a majestic building with towering arches, is a unique, prominent landmark building featuring an intricate design and part of Hong Kong’s heritage for nearly 50 years. It guards the intersection of traffic arteries in Central that run east-west and north-south, commands open green views over Hong Kong Park and is well connected to other buildings in the neighbourhood, as well as to the Mass Transit Railway.

Situated on a site of 68,136 square feet, Murray Building envisages a total GFA of 325,000 square feet. The Group will convert this iconic property to a unique, fashionable five-star hotel for a total investment of over HK$7 billion. Target opening is scheduled for 2017. Design planning is underway.

With its extensive experience in managing high-quality hotels through its much respected MPHK Hotel, the Group is poised to add another stylish hotel to its hospitality portfolio. On completion, the Group will own two unique hotels in Hong Kong that are distinguished not only in location, but also rich in history and superior in market position.

FINANCIAL REVIEW

(I) Review of 2013 Final Results

In 2013, the Group reported profit before provision for hotel property and IP revaluation surplus of HK$1,464.3 million despite the absence of the exceptionally large profit of over HK$1 billion from the Shanghai Xiyuan project in 2012.

Including profit from IP revaluation and impairment provision for hotel properties under development, profit attributable to shareholders decreased by 58% to HK$1,276.4 million (2012: HK$3,057.5 million).

Revenue

Group revenue decreased by 8% to HK$5,757.7 million (2012: HK$6,260.5 million).

DP revenue of HK$4,577.3 million (2012: HK$5,229.3 million) was recognized, mainly from the phased completion of Suzhou Times City and Changzhou Times Palace and sales of the remaining Shanghai Xiyuan units.

IP revenue increased by 23% to HK$324.7 million (2012: HK$263.6 million), benefitting from higher retail rental, particularly in Marco Polo Hongkong Hotel (“MPHK Hotel”).

Hotel revenue rose by 3% to HK$656.4 million (2012: HK$637.1 million).

Investment and Other Income comprising interest and dividend from the Group’s surplus cash and investments increased by 53% to HK$199.3 million (2012: HK$130.5 million).

Operating Profit

Group operating profit decreased by 30% to HK$1,652.9 million (2012: HK$2,358.5

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million).

DP profit decreased by 46% to HK$970.1 million (2012: HK$1,790.8 million) with an operating margin of 21% (2012: 34%).

IP contribution increased by 26% to HK$296.0 million (2012: HK$235.6 million).

Hotel profit fell by 5% to HK$203.2 million (2012: HK$214.5 million) mainly due to increase in depreciation charges at MPHK Hotel and pre-operating expenses incurred by Changzhou Marco Polo Hotel.

Profit contribution from Investment and Others increased by 53% to HK$199.3 million (2012: HK$130.5 million).

Increase in Fair Value of Investment Properties

The Group’s completed investment properties were stated at fair value based on an independent valuation as at 31 December 2013 which resulted in a revaluation surplus of HK$354.9 million in 2013 (2012: HK$1,121.0 million). Investment properties under development are carried at cost and will not be carried at fair value until the earlier of their fair values first becoming reliably measurable or the dates of completion.

Impairment of Hotel Properties Under Development

An impairment provision in the amount of HK$542.8 million was made in respect of the Changzhou Marco Polo Hotel (2012: Nil) which is expected to open into a challenging market environment in mid-2014.

Other Net Income

Other net income for the year amounted to HK$210.7 million mainly including foreign exchange gain of HK$201.2 million (2012: HK$129.9 million).

Finance Costs

Net finance costs amounted to HK$69.6 million (2012: HK$30.7 million) mainly as a result of the increase in bank borrowings. The charge was stated after capitalisation of HK$19.0 million (2012: HK$24.1 million) for the Group’s projects.

Share of Results after Tax of Joint Ventures

The attributable profit after tax from joint ventures amounted to HK$270.8 million (2012: HK$312.4 million), representing a decrease of HK$41.6 million, with the profit contribution from The U World in Chongqing development project in the Mainland.

Income Tax

Taxation charge for the year decreased to HK$535.8 million (2012: HK$819.7 million) resulting from a decrease in taxable profit.

Profit Attributable to Equity Shareholders

Group profit attributable to equity shareholders for the year ended 31 December 2013

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amounted to HK$1,276.4 million (2012: HK$3,057.5 million), representing a year-on-year decrease of 58%. Earnings per share were HK$1.80 (2012: HK$4.31) based on 708.8 million issued shares.

Excluding the investment property revaluation surplus of HK$354.9 million (2012: HK$1,121.0 million) and impairment provision for hotel properties under development of HK$542.8 million (2012:Nil), the Group’s profit attributable to shareholders for the year was HK$1,464.3 million (2012: HK$1,936.5 million), representing a decrease of 24%. Earnings per share before hotel property provision and IP revaluation surplus were HK$2.07 (2012: HK$2.73) based on 708.8 million issued shares.

(II) Liquidity, Financial Resources and Commitments

Shareholders’ and Total Equity

As at 31 December 2013, the Group’s shareholders’ equity increased by 5% to HK$15,381.6 million (31/12/2012: HK$14,591.3 million), equivalent to HK$21.70 per share (31/12/2012: HK$20.59 per share). Including the non-controlling interests, the Group’s total equity stood at HK$16,447.5 million (31/12/2012: HK$15,563.4 million).

MPHK Hotel is stated at cost less accumulated depreciation according to the prevailing Hong Kong Financial Reporting Standards. Restating the hotel property based on the valuation as at 31 December 2013 carried out by an independent valuer would give rise to an additional revaluation surplus of HK$4,283.5 million and increase the Group’s shareholders’ equity as at 31 December 2013 to HK$19,665.1 million, equivalent to HK$27.75 per share.

Total Assets

The Group’s total assets increased by 16% to HK$31,076.2 million (31/12/2012: HK$26,782.7 million), including HK$23,857.7 million of business assets, HK$5,824.6 million of bank deposits and cash and HK$1,340.5 million of available-for-sale investments.

The Group’s major business assets included DP for sale of HK$7,375.4 million, interest held through joint ventures of HK$2,161.9 million, IP of HK$6,434.8 million and fixed assets of HK$4,764.5 million. Geographically, HK$13,887.3 million or 58% of the Group’s total business assets were located in the Mainland.

IP increased by HK$868.9 million to HK$6,434.8 million (31/12/2012: HK$5,565.9 million). The increase reflects the surplus of HK$354.9 million arisen from revaluation of the completed IPs and the construction cost incurred for Suzhou IFS.

Fixed assets increased by HK$4,114.7 million to HK$4,764.5 million (31/12/2012: HK$649.8 million). The increase is principally due to the acquisition of the Murray Building site for hotel purpose at HK$4,400 million.

Interest in associates was HK$1,924.7 million (31/12/2012: HK$0.1 million), increasing

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by HK$1,924.6 million mainly resulting from the new investment in the Shanghai South Station project in the Mainland.

Debt/Cash and Gearing

As at 31 December 2013, the Group had net debt of HK$413.4 million (31/12/2012: Net Cash HK$4,580.5 million), which comprised HK$5,824.6 million of cash and HK$6,238.0 million of bank borrowings in various currencies. The ratio of net debt to total equity was 2.5% (31/12/2012: N/A).

Finance and Availability of Facilities and Funds

As at 31 December 2013, the Group’s available loan facilities amounted to HK$6,970.2 million, of which HK$6,238.0 million was drawn. HK$500.0 million is repayable within one year while the balance is due between two and five years. Certain banking facilities were secured by mortgage over the Group’s certain properties under development for sale with total carrying value of HK$208.6 million (31/12/2012: HK$963.5 million).

The Group’s debts were denominated in HKD, USD and RMB. As as 31 December 2013, all the Group’s borrowings were at floating rate. Further borrowings will be sourced to finance the Group’s property and hotel development projects.

The use of derivative financial instruments was strictly controlled. The majority of the derivative financial instruments entered into by the Group were primarily used for management of the Group’s interest rate and currency exposures.

The Group continued to maintain a reasonable level of surplus cash denominated principally in HKD and RMB to facilitate the Group’s business and investment activities. As at 31 December 2013, the Group also maintained a portfolio of available-for-sale investments primarily consisting of blue chip listed securities, with an aggregate market value of HK$1,340.5 million (31/12/2012: HK$1,541.6 million), which is available for liquidation to meet the Group’s needs if necessary. The performance of the portfolio was largely in line with the general stock market.

Net Cash Flows for Operating and Investing Activities

For the year under review, the Group generated HK$1,946.7 million of net cash inflow from operating activities (2012: HK$2,617.4 million), primarily from pre-sales proceeds net of construction cost payment for the Group’s Mainland development projects. For investing activities, the Group recorded a net cash outflow of HK$6,595.4 million (2012: HK$436.4 million), mainly comprising HK$4,422.1 million for the Murray Building project in Hong Kong and HK$1,563.7 million for the South Station project in Shanghai.

Commitments

As at 31 December 2013, the Group’s total authorised and contracted for commitments amounted to HK$5.1 billion which was mainly for Mainland development projects. Furthermore, the Group intends to invest HK$2.1 billion for the conversion of Murray Building into a hotel. Besides that, the Group also intends to invest HK$7.7 billion primarily for the existing DP in the Mainland, which will be incurred by stages in the

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coming years.

The above commitments and planned expenditures will be funded by the Group’s internal financial resources including cash of HK$5,824.6 million and proceeds from property pre-sales as well as bank loans. Other available resources include available-for-sale investments.

(III) Human Resources

The Group had approximately 710 employees as at 31 December 2013. Employees are remunerated according to their job responsibilities and the market pay trend with a discretionary annual performance bonus as variable pay for rewarding individual performance and contributions to the Group’s achievement and results.

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Consolidated Income Statement For the year ended 31 December 2013

Note Revenue 2 Direct costs and operating expenses Selling and marketing expenses Administrative and corporate expenses Operating profit before depreciation, interest and tax Depreciation Operating profit 3 Increase in fair value of investment properties Impairment for hotel properties under development 4 Other net income 5 Finance costs 6 Share of results after tax of: Joint ventures Associates Profit before taxation Income tax 7(a) Profit for the year Profit attributable to: Equity shareholders Non-controlling interests Earnings per share 8 Basic Diluted		2013 2012 HK$ Million HK$Million
		5,757.7 6,260.5 (3,804.0) (3,564.3) (169.7) (239.1) (77.2) (55.9)
		1,706.8 2,401.2 (53.9) (42.7)
		1,652.9 2,358.5 354.9 1,121.0 (542.8) - 210.7 103.9
		1,675.7 3,583.4 (69.6) (30.7) 270.8 312.4 (2.3) -
		1,874.6 3,865.1 (535.8) (819.7)
		1,338.8 3,045.4
		1,276.4 3,057.5 62.4 (12.1)
		1,338.8 3,045.4
		HK$1.80 HK$4.31 HK$1.80 HK$4.31

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Consolidated Statement of Comprehensive Income For the year ended 31 December 2013

Profit for the year Other comprehensive income for the year: Items that may be reclassified subsequently to profit or loss: Exchange difference on translation overseas operations of: - subsidiaries - joint ventures Fair value changes on available-for-sale investments: - (deficit)/surplus on revaluation - transferred to consolidated income statement on disposal Others Other comprehensive income for the year Total comprehensive income of the year Total comprehensive income attributable to: Equity shareholders Non-controlling interests	2013 **HK$ Million **	2012 HK$Million 3,045.4 12.0 10.8 1.2 528.1 496.3 31.8 - 540.1 3,585.5 3,596.2 (10.7) 3,585.5
	**1,338.8 **
	376.6 310.9 65.7 (286.3) (245.3) (41.0) 7.8
	98.1
	1,436.9
	1,343.1 **93.8 **
	1,436.9

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Consolidated Statement of Financial Position At 31 December 2013

Consolidated Statement of Financial At 31 December 2013	Position
Note Non-current assets Investment properties Fixed assets Interest in associates Interest in joint ventures Available-for-sale investments Deferred tax assets Other non-current assets Current assets Properties for sale Inventories Trade and other receivables 10 Prepaid tax Derivative financial assets Bank deposits and cash Current liabilities Trade and other payables 11 Pre-sale deposits and proceeds Derivative financial liabilities Bank loans Taxation payable Net current assets Total assets less current liabilities Non-current liabilities Bank loans Derivative financial liabilities Deferred tax liabilities NET ASSETS Capital and reserves Share capital Reserves Shareholders’ equity Non-controlling interests TOTAL EQUITY	2013 **HK$ Million **	2012 HK$Million
	6,434.8 4,764.5 1,924.7 2,161.9 1,340.5 1.1 **19.5 **	5,565.9 649.8 0.1 2,082.3 1,541.6 44.0 375.9
	16,647.0 7,375.4 2.4 1,066.3 108.2 52.3 **5,824.6 **	10,259.6 7,822.2 2.0 750.7 122.7 95.0 7,730.5
	**14,429.2 **	16,523.1
	(3,116.3) (4,998.0) - (500.0) **(214.6) **	(1,791.2) (5,700.4) (9.3) (800.0) (488.9)
	**(8,828.9) **	(8,789.8)
	**5,600.3 **	7,733.3
	22,247.3	17,992.9
	(5,738.0) (3.9) **(57.9) **	(2,350.0) - (79.5)
	**(5,799.8) **	(2,429.5)
	**16,447.5 **	15,563.4
	354.4 **15,027.2 **	354.4 14,236.9
	15,381.6 **1,065.9 **	14,591.3 972.1
	**16,447.5 **	15,563.4

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Notes to the Financial Statements

1. PRINCIPAL ACCOUNTING POLICIES AND BASIS OF PREPARATION

These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”), accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance. These financial statements also comply with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

The accounting policies and methods of computation used in the preparation of the financial statements are consistent with those used in the annual financial statements for the year ended 31 December 2012 except the changes mentioned below.

The HKICPA has issued certain new and revised HKFRSs and amendments to HKFRSs that are first effective or available for the current accounting period of the Group. Of these, the following developments are relevant to the Group’s financial statements but the adoption of which has no effect on reported profit or loss, total income and expense or net assets for any period presented:

Amendments to HKAS 1	Presentation of financial statements – Presentation of
	items of other comprehensive income
Amendments to HKFRS 7	Financial instruments: Disclosures – Offsetting
	financial assets and financial liabilities
HKFRSs (Amendments)	Annual Improvements to HKFRSs 2009-2011 Cycle
HKFRS 10	Consolidated financial statements
HKFRS 11	Joint arrangements
HKFRS 12	Disclosure of interests in other entities
HKFRS 13	Fair value measurement

The amendments to HKAS 1 require companies to classify items within other comprehensive income under two categories: (i) items which may be reclassified to profit or loss in the future if certain conditions are met and (ii) items which would never be reclassified to profit or loss. The Group’s presentation of other comprehensive income in these financial statements has been modified accordingly.

Amendments to HKFRS 7 requires new disclosures for all recognised financial instruments that are set off in accordance with HKAS 32, Financial Instruments: Presentation. The adoption of the amendments does not have an impact on the Group’s interim financial statements because the Group has not offset financial instruments, nor has it entered into master netting arrangement or similar agreement which is subject to the disclosures of HKFRS 7.

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HKFRS 10 introduces a single control model to determine whether an investee should be consolidated, based on the concept of power over the investee, exposure or rights to variability of returns and the ability to use power to affect the amount of returns. This replaces the previous approach which emphasised legal control under HKAS 27 (Revised) (for companies) or exposure to risks and rewards under HK(SIC)-INT 12 (for special purpose entities). The adoption of HKFRS 10 does not have any financial impact on the Group as all subsidiaries within the Group satisfy the requirements for control under HKFRS 10 as at 1 January 2013.

HKFRS 11 provides guidance on what constitutes a joint arrangement by focusing on the rights and obligations of the arrangement, rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and are recognised on a line-by-line basis to the extent of the joint operator’s interest in the joint operation. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and are required to be accounted for using the equity method in the Group’s consolidated financial statements. HKFRS 11 replaces HKAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities – Non-monetary Contributions by Ventures. Unlike HKAS 31, proportional consolidation of joint ventures is no longer allowed. This new standard does not have a significant impact on the results and financial position of the Group.

HKFRS 12 consolidates and replaces the previous disclosure requirements for subsidiaries, associates in the old HKAS 27 (Revised) Consolidated and Separate Financial Statements and HKAS 28 Investment in Associates and introduces new disclosure requirements for unconsolidated structured entities, such as the judgement and basis of exclusion of the entities for consolidation. This new standard does not have a significant impact on the results and financial position of the Group.

HKFRS 13 establishes a single source of guidance for all fair value measurements required or permitted by HKFRSs. It clarifies the definition of fair value as an exit price, which is defined as a price at which an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under market conditions. HKFRS 13 contains extensive disclosure requirements about fair value measurements for both financial instruments and non-financial instruments. To the extent that the requirements are applicable to the Group, the Group provides those disclosures in the Group’s annual report.

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2. SEGMENT INFORMATION

The Group manages its diversified businesses according to the nature of services and products provided. Management has determined three reportable operating segments for measuring performance and allocating resources. The segments are development property, investment property and hotel. No operating segment has been aggregated to form reportable segments.

Development property (DP) segment encompasses activities relating to the acquisition, development, design, marketing and sale of trading properties primarily in Mainland China.

Investment property (IP) segment primarily represents the property leasing of the Group’s investment properties in Hong Kong. Some of the Group’s development projects in Mainland China include properties which are intended to be held for investment purposes on completion.

Hotel segment represents the operations of Marco Polo Hongkong Hotel. It also includes the Murray Building and Marco Polo Changzhou, both under construction.

Management evaluates performance based on operating profit as well as the equity share of results of associates and a joint ventures of each segment.

Segment business assets principally comprise all tangible assets, intangible assets and current assets directly attributable to each segment with the exception of bank deposits and cash, available-for-sale investments, derivative financial instruments and deferred tax assets.

Revenue and expenses are allocated with reference to sales generated by those segments and expenses incurred by those segments or which arise from the depreciation of assets attributable to those segments.

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(a) Analysis of segment results

			Increase	Other
			in fair	net
			value of	income				Profit
		Operating	investment	and	Finance	Joint		before
	Revenue	profit	properties	provision	costs	venture	Associates	taxation
	HK$ Million	HK$ Million	HK$ Million	HK$ Million	HK$ Million	HK$ Million	HK$ Million	HK$ Million
2013
Development property	4,577.3	970.1	-	(9.1)	-	270.8	(2.3)	1,229.5
Investment property	324.7	296.0	354.9	-	-	-	-	650.9
Hotel	656.4	203.2	-	(542.8)	(16.3)	-	-	(355.9)
Segment total	5,558.4	1,469.3	354.9	(551.9)	(16.3)	270.8	(2.3)	1,524.5
Investment and others	199.3	199.3	-	219.8	(53.3)	-	-	365.8
Corporate expenses	-	(15.7)	-	-	-	-	-	(15.7)
Grouptotal	5,757.7	1,652.9	354.9	(332.1)	(69.6)	270.8	(2.3)	1,874.6
2012
Development property	5,229.3	1,790.8	-	(13.1)	-	312.4	-	2,090.1
Investment property	263.6	235.6	1,121.0	-	-	-	-	1,356.6
Hotel	637.1	214.5	-	3.3	(12.2)	-	-	205.6
Segment total	6,130.0	2,240.9	1,121.0	(9.8)	(12.2)	312.4	-	3,652.3
Investment and others	130.5	130.5	-	113.7	(18.5)	-	-	225.7
Corporate expenses	-	(12.9)	-	-	-	-	-	(12.9)
Grouptotal	6,260.5	2,358.5	1,121.0	103.9	(30.7)	312.4	-	3,865.1

(i) Substantially all depreciation were attributable to the Hotel Segment.

(ii) No inter-segment revenue has been recorded during the current and prior years.

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(b) Analysis of segment business assets

Development property Investment property Hotel Total segment business assets Unallocated corporate assets Total assets	2013 2012 HK$ Million HK$Million
	12,408.1 10,963.8 6,446.2 5,669.6 5,003.4 738.2
	23,857.7 17,371.6 7,218.5 9,411.1
	31,076.2 26,782.7

• (i) Hotel is stated at amortised cost. Should the completed hotel property be stated based on the valuation as at 31 December 2013 of HK$4,310.0 million (2012: HK$4,120.0 million), the total segment business assets would be increased to HK$28,141.2 million (2012: HK$21,460.1 million).

• (ii) Unallocated corporate assets mainly comprise available-for-sale investments, deferred tax assets, bank deposits and cash and derivative financial assets.

(c) Geographical information

Hong Kong Mainland China Singapore Group total Hong Kong Mainland China Group total	Revenue Operating profit 2013 2012 2013 2012 HK$ Million HK$ Million HK$ Million HK$ Million
	994.3 910.4 512.2 460.6 4,731.8 5,320.4 1,109.1 1,868.2 31.6 29.7 31.6 29.7
	5,757.7 6,260.5 1,652.9 2,358.5
	Specified non-current assets Total business assets 2013 2012 2013 2012 HK$ Million HK$ Million HK$ Million HK$ Million
	9,717.8 4,949.3 9,970.4 5,146.5 5,568.1 3,348.8 13,887.3 12,225.1
	15,285.9 8,298.1 23,857.7 17,371.6

Specified non-current assets represented non-current assets other than deferred tax assets, available-for-sale investments and other non-current assets.

The geographical location of revenue and operating profit are analysed based on the location at which services are provided and in the case of equity instruments, where they are listed. The geographical location of specified non-current assets and total business assets are based on the physical location of operations.

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3. OPERATING PROFIT Operating profit is arrived at:

OPERATING PROFIT Operating profit is arrived at:
After charging/(crediting): Depreciation Staff costs (Note i) Auditors’ remuneration - audit services - other services Cost of trading properties for recognised sales Rental charges under operating leases Rental income less direct outgoings (Note ii) Interest income Dividend income from listed investments	2013 2012 HK$ Million HK$Million
	53.9 42.7 227.5 198.5 1.6 1.6 0.1 3,419.7 - 3,195.7 16.9 10.4 (302.9) (241.7) (159.6) (91.6) (39.7) (38.9)

Notes:

• (i) Staff costs included contributions to defined contribution pension schemes of HK$6.9 million (2012: HK$6.6 million).

(ii) Rental income included contingent rentals of HK$131.9 million (2012: HK$91.3 million).

4. IMPAIRMENT FOR HOTEL PROPERTIES UNDER DEVELOPMENT

Impairment provision of HK$542.8 million (2012:HK$Nil) was made for Changzhou Marco Polo Hotel in Mainland China.

5. OTHER NET INCOME

Profit/(loss) on disposal of available-for-sale investments - including revaluation surplus of HK$41.0 million (2012: deficit HK$31.8 million) transferred from the investments revaluation reserve Net exchange gain, including the impact of forward foreign exchange contracts	2013 2012 HK$ Million HK$Million
	43.9 (16.2) 166.8 120.1
	210.7 103.9

Apart from the above net exchange differences, the Group also had a total exchange gain arising from the translation of the net investments in Mainland China subsidiaries, joint ventures and associates of HK$376.6 million (2012: HK$12.0 million), which has been dealt with as other comprehensive income.

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6. FINANCE COSTS

Interest on bank borrowings wholly repayable within five years Other finance costs Less: Amount capitalised Fair value changes on cross currency interest rate swaps	2013 2012 HK$ Million HK$Million
	76.7 36.1 21.2 9.9
	97.9 46.0 (19.0) (24.1)
	78.9 21.9 (9.3) 8.8
	69.6 30.7

The above interest charge has taken into account the interest paid/receipts in respect of cross currency interest rate swaps.

7. INCOME TAX

• (a) Taxation charged to the consolidated income statement represents:

Current income tax Hong Kong - provision for the year - (overprovision)/underprovision in respect of prior years Mainland China - provision for the year Land appreciation tax (“LAT”)(Note (d)) Deferred tax Origination and reversal of temporary differences Total	2013 2012 HK$ Million HK$Million
	79.8 68.4 (1.6) 5.3 220.7 420.6
	298.9 494.3 215.1 293.1 21.8 32.3
	535.8 819.7

• (b) The provision for Hong Kong profits tax is at the rate of 16.5% (2012: 16.5%) of the estimated assessable profits for the year.

• (c) Income tax on profits assessable in Mainland China are China corporate income tax calculated at a rate of 25%.

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Harbour Centre – Final Results Announcement (28 February 2014)

• (d) Under the Provisional Regulations on LAT, all gains arising from transfer of real estate property in Mainland China are subject to LAT at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sales of properties less deductible expenditures including cost of land use rights, borrowings costs and all property development expenditures.

• (e) The China tax law also imposes a withholding tax at 10% unless reduced by a treaty or agreement, for dividends distributed by a PRC-resident enterprise to its immediate holding company outside Mainland China.

• (f) Tax attributable to joint venture for the year ended 31 December 2013 of HK$230.6 million (2012: HK$196.9 million) is included in the share of results of joint ventures.

8. EARNINGS PER SHARE

The calculation of earnings per share is based on the profit for the year attributable to equity shareholders of HK$1,276.4 million (2012: HK$3,057.5 million) and 708.8 million (2012: 708.8 million) ordinary shares.

There were no potential dilutive ordinary shares in existence during the years ended 31 December 2013 and 2012.

9. DIVIDENDS ATTRIBUTABLE TO EQUITY SHAREHOLDERS

First interim dividend declared and paid of 12.0 cents (2012: 12.0 cents) per share Special first interim dividend declared and paid of 18.0 cents (2012: 36.0 cents) per share Second interim dividend of 48.0 cents (2012: 48.0 cents) per share proposed after the end of the reporting period	2013 2012 HK$ Million HK$Million
	85.1 85.1 127.5 255.1 340.2 340.2
	552.8 680.4

• (a) The proposed second interim dividend has not been recognised as a liability at the end of the reporting period.

• (b) The second interim dividend of HK$340.2 million for 2012 was approved and paid in 2013.

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10. TRADE AND OTHER RECEIVABLES

Included in this item are trade receivables (net of allowance for doubtful debts) with an ageing analysis based on invoice date as at 31 December 2013 as follows:

Trade receivables 0 - 30 days 31 - 60 days 61 - 90 days Over 90 days Prepayments Other receivables Amounts due from fellow subsidiaries	2013 2012 HK$ Million HK$Million
	156.8 117.6 1.6 1.0 0.1 0.1 0.3 0.1
	158.8 118.8 412.8 424.7 480.0 191.7 14.7 15.5
	1,066.3 750.7

The Group has defined credit policies for each of its core business. The general credit terms allowed range from 0 to 60 days, except for sale of properties the proceeds from which are receivable pursuant to the terms of the agreements. The amounts due from fellow subsidiaries are unsecured, interest free and recoverable on demand. All the trade and other receivables are expected to be virtually recoverable within one year.

11. TRADE AND OTHER PAYABLES

Included in this item are trade creditors with an ageing analysis as at 31 December 2013 as follows:

Trade payables 0 - 30 days 31 - 60 days 61 - 90 days Over 90 days Other payables and provisions Construction costs payable Amounts due to fellow subsidiaries Amounts due to associates Amounts due to a joint venture	2013 2012 HK$ Million HK$Million 16.1 15.6 1.2 0.1 0.1 0.1 0.4 0.3 17.8 16.1 270.8 226.5 2,052.7 973.1 40.5 37.5 1.3 1.3 733.2 536.7 3,116.3 1,791.2

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12. REVIEW OF RESULTS

The financial results for the year ended 31 December 2013 have been reviewed with no disagreement by the Audit Committee of the Company. The figures in respect of the preliminary announcement of the Group’s results for the year ended 31 December 2013 have been agreed with the Company’s Auditors to the amounts set out in the Group’s consolidated financial statements for the year.

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Harbour Centre – Final Results Announcement (28 February 2014)

CODE ON CORPORATE GOVERNANCE

During the financial year ended 31 December 2013, all the code provisions in the Corporate Governance Code as set out in Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited were met by the Company, except in respect of one code provision (viz. Code Provision A.2.1) providing for the roles of chairman and chief executive to be performed by different individuals. Such deviation is deemed appropriate as it is considered to be more efficient to have one single person to be the Chairman of the Company as well as to discharge the executive functions of a chief executive. The Board of Directors believes that the balance of power and authority is adequately ensured by the operations of the Board which comprises experienced and high calibre individuals, with more than half of them being Independent Non-executive Directors.

PURCHASE, SALE OR REDEMPTION OF SHARES

Neither the Company nor any of its subsidiaries has purchased, sold or redeemed any listed securities of the Company during the financial year under review.

BOOK CLOSURE

The Register of Members of the Company will be closed from Friday, 16 May 2014 to Friday, 23 May 2014, both days inclusive, during which period no transfer of shares of the Company can be registered. In order to qualify for the abovementioned second interim dividend and to ascertain Shareholders’ rights for the purpose of attending and voting at the forthcoming Annual General Meeting to be held on 23 May 2014, all transfers, accompanied by the relevant share certificates, must be lodged with the Company’s Registrars, Tricor Tengis Limited, at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong, not later than 4:30 p.m. on Thursday, 15 May 2014.

By Order of the Board H. O. Hung Company Secretary

Hong Kong, 28 February 2014

As at the date of this announcement, the Board of Directors of the Company comprises Mr. Stephen T. H. Ng, Mr. Kevin K. P. Chan, Mr. Paul Y. C. Tsui and Hon. Frankie C. M. Yick, together with five Independent Non-executive Directors, namely, Dr. Joseph M. K. Chow, Mr. H. M. V. de Lacy Staunton, Hon. Andrew K. Y. Leung, Mr. Michael T. P. Sze and Mr. Brian S. K. Tang.

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Harbour Centre – Final Results Announcement (28 February 2014)