CAI Corp — M&A Activity 2009

Apr 30, 2009

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in HARBOUR CENTRE DEVELOPMENT LIMITED , you should at once hand this circular to the purchaser or the transferee, or to the bank, stockbroker or other agent through whom the sale or transfer was effected for transmission to the purchaser or the transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, 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 circular.

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(Incorporated in Hong Kong with limited liability)

(Stock Code: 51)

MAJOR DISPOSAL AND MAJOR ACQUISITION

4 May 2009

CONTENTS

		Page
DEFINITIONS . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
LETTER FROM THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		5
APPENDIX I	FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . .	I-1
APPENDIX II	ACCOUNTANTS’ REPORT ON SHANGHAI CO . . . . . . . . . . . . . .	II-1
APPENDIX III	UNAUDITED PRO FORMA FINANCIAL INFORMATION OF
	THE ENLARGED GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	III-1
APPENDIX IV	VALUATION REPORT OF THE PROPERTY HELD BY
	SHANGHAI CO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	IV-1
APPENDIX V	VALUATION REPORT OF THE PROPERTY HELD BY
	HANGZHOU CO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	V-1
APPENDIX VI	GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	VI-1

— i —

DEFINITIONS

In this circular, unless the context states otherwise, the following expressions shall have the following meanings:

“Acquisition”

(a) the proposed acquisition of the Shanghai Equity Interests by Nanjing Julong from Greentown Property and Shanghai Luyu and (b) the proposed transfer of the Shanghai Shareholders’ Advancements from Greentown Property and Shanghai Luyu to Nanjing Julong, pursuant to the Agreement

• “Agreement”

the overall agreement dated 10 April 2009 entered into between the Company, Greentown China, Nanjing Julong, Greentown Property, Shanghai Luyu, Shanghai Co and Hangzhou Co in relation to the Acquisition and the Disposal

• “Board”

• the board of Directors

• “Company”

Harbour Centre Development Limited, the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 51)

• “Company Ordinance”

• the Companies Ordinance (Chapter 32 of the Laws of Hong Kong)

• “Completion” completion of the Acquisition and the Disposal

• “Completion Date”

• the date on which the Acquisition and the Disposal are completed

• “Directors”

• the directors of the Company

• “Disposal”

• (a) the proposed disposal of the Hangzhou Equity Interest by Nanjing Julong to Greentown Property and (b) the proposed transfer of the Hangzhou Shareholder’s Advancement from Nanjing Julong to Greentown Property, pursuant to the Agreement

• “Enlarged Group”

• the Group as enlarged upon the completion of the Acquisition

• “Greentown China”

• Greentown China Holdings Limited, the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 3900)

• “Greentown Parties”

• Greentown China, Greentown Property and Shanghai Luyu collectively

• “Greentown Property” 綠城房地產集團有限公司 (Greentown Property Group Company Limited*), a company established in the PRC with limited liability and a wholly-owned subsidiary of Greentown China

— 1 —

DEFINITIONS

“Group”

the Company together with its subsidiaries

• “Hangzhou Co”

• 杭州綠城海企房地產開發有限公司 (Hangzhou Greentown Haiqi Property Development Company Limited*), a company established in the PRC with limited liability

• “Hangzhou Equity Interest” all equity interests in Hangzhou Co held by Nanjing Julong, which account for 40% of the equity interests in Hangzhou Co, together with all legal rights and benefits attached to such equity interest

“Hangzhou Project” the project solely owned and developed by Hangzhou Co in relation to the development of a land lot located at Lanseqianjiang of the Hangzhou City of the PRC

• “Hangzhou Shareholder’s the shareholder’s advancement made by Nanjing Julong to Advancement” Hangzhou Co in the principal amount of RMB982.4 million and all interests (if any) accrued up to the Completion Date, together with all legal rights and benefits attached to such shareholder’s advancement

• “HK$” Hong Kong dollars, the lawful currency of Hong Kong

• “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

• “Latest Practicable Date” 27 April 2009, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information for inclusion in this circular

• “Listing Rules”

• the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

• “Material Adverse Effect Event”

• any event (which takes place during the period between the execution of the Agreement and the Completion) that has given rise or likely to give rise material adverse effect to the business of Shanghai Co, including but not limited to (1) strike, occurrence of major dispute or being informed of the possibility of occurrence of major dispute; (2) Shanghai Co being involved in any litigation or arbitration; or (3) any substantial asset of Shanghai Co being destroyed or damaged as defined in the Agreement

• “Nanjing Julong” 南京聚龍房地產開發有限公司 (Nanjing Julong Property Development Company Limited*), a company established in the PRC with limited liability and a wholly-owned subsidiary of the Company

— 2 —

DEFINITIONS

• “PRC” or “China”

• “RMB”

• “Savills”

• “SFO”

• “Shanghai Co”

• “Shanghai Equity Interests”

• “Shanghai Luyu”

• “Shanghai Project”

• “Shanghai Shareholders’ Advancements”

• “Shareholders”

• “Stock Exchange”

• “Wharf Holdings”

• “Wheelock”

the People’s Republic of China which, for the purpose of this circular, excludes Hong Kong, Macau and Taiwan

Renminbi, the lawful currency of the PRC

Savills Valuation and Professional Services Limited

• the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• 上海綠源房地產開發有限公司 (Shanghai Luyuan Property Development Company Limited*), a company established in the PRC with limited liability

• all equity interests in Shanghai Co held by Greentown Property which account for 99.9% of the equity interests in Shanghai Co, and all equity interests in Shanghai Co held by Shanghai Luyu which account for 0.1% of the equity interests in Shanghai Co, together with all legal rights and benefits attached to such equity interests

• 上海綠宇房地產開發有限公司 (Shanghai Luyu Property Development Company Limited*), a company established in the PRC with limited liability and a wholly-owned subsidiary of Greentown China

• the project solely owned and developed by Shanghai Co in relation to the development of the land lot D1 of Xinjiangwancheng of Yangpu District of the Shanghai City of the PRC

• the shareholders’ advancements made by Greentown Property and Shanghai Luyu to Shanghai Co in the aggregate principal amount of RMB1,088.7 million and all interests (if any) accrued up to the Completion Date, together with all legal rights and benefits attached to such shareholders’ advancements

• the shareholders of the Company

The Stock Exchange of Hong Kong Limited

• The Wharf (Holdings) Limited, the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 4)

Wheelock and Company Limited, the shares of which are listed on the Main Board of the Stock Exchange (Stock Code: 20)

• For identification purpose only.

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DEFINITIONS

Unless otherwise specified in this circular, amounts denominated in Renminbi have been converted, for the purpose of illustration only and as disclosed in the Company’s announcement dated 10 April 2009, into Hong Kong dollars at the rate of RMB1.000 = HK$1.134. This exchange rate is for the purpose of illustration only and does not constitute a representation that any amount has been, could have been or may be converted at the above or any other rates.

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LETTER FROM THE BOARD

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

Directors:

Stephen T. H. Ng (Chairman) T. Y. Ng H. M. V. de Lacy Staunton Michael T. P. Sze Brian S. K. Tang* Paul Y. C. Tsui Clement K. H. Wong

Registered Office: 16th Floor, Ocean Centre, Harbour City, Canton Road, Kowloon, Hong Kong

(* Independent Non-executive Directors)

4 May 2009

To the Shareholders

Dear Sir or Madam,

MAJOR DISPOSAL AND MAJOR ACQUISITION

INTRODUCTION

On 10 April 2009, the Company entered into the Agreement with, inter alia , Greentown China in relation to the Disposal and the Acquisition. Reference is made to the Company’s announcement dated 10 April 2009.

Pursuant to the Agreement, for the Disposal, the Company agreed to procure Nanjing Julong to sell and Greentown China agreed to procure Greentown Property to purchase the Hangzhou Equity Interest and Hangzhou Shareholder’s Advancement. For the Acquisition, Greentown China agreed to procure Greentown Property and Shanghai Luyu to sell, and the Company agreed to procure Nanjing Julong to purchase, the Shanghai Equity Interests and Shanghai Shareholders’ Advancements.

One or more of the applicable ratios for each of the Disposal and the Acquisition in respect of the Company is/are greater than 25% while all such ratios are less than 75% for the purposes of Rule 14.07 of the Listing Rules, and therefore each of the Disposal and the Acquisition constitutes a major transaction for the Company.

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LETTER FROM THE BOARD

The purpose of this circular is to provide you with further details of the Acquisition and the Disposal as required under the Listing Rules.

THE AGREEMENT

Date of the Agreement

10 April 2009

Parties

• (1) the Company;

• (2) Greentown China;

• (3) Nanjing Julong;

• (4) Greentown Property;

• (5) Shanghai Luyu;

• (6) Shanghai Co; and

• (7) Hangzhou Co.

The Disposal

Pursuant to the Agreement, the Company agreed to procure Nanjing Julong to sell and transfer, and Greentown China agreed to procure Greentown Property to purchase and accept:

• (1) the Hangzhou Equity Interest; and

• (2) the Hangzhou Shareholder’s Advancement.

The Acquisition

Pursuant to the Agreement, Greentown China agreed to procure Greentown Property and Shanghai Luyu to sell and transfer, and the Company agreed to procure Nanjing Julong to purchase and accept:

• (1) the Shanghai Equity Interests; and

• (2) the Shanghai Shareholders’ Advancements.

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LETTER FROM THE BOARD

Considerations

The total consideration of the Disposal amounted to RMB1,382.4 million (equivalent to approximately HK$1,567.6 million), of which RMB400.0 million (equivalent to approximately HK$453.6 million) constituted the consideration for the sale of the Hangzhou Equity Interest and RMB982.4 million (equivalent to approximately HK$1,114.0 million) constituted the consideration for the transfer of the Hangzhou Shareholder’s Advancement.

The total consideration of the Acquisition amounted to RMB1,230.2 million (equivalent to approximately HK$1,395.1 million), of which RMB141.5 million (equivalent to approximately HK$160.5 million) constituted the consideration for the purchase of the Shanghai Equity Interests (of which RMB141.4 million should be paid to Greentown Property and RMB0.1 million should be paid to Shanghai Luyu) and RMB1,088.7 million (equivalent to approximately HK$1,234.6 million) constituted the consideration for the transfer of the Shanghai Shareholders’ Advancements (of which RMB678.2 million should be paid to Greentown Property and RMB410.5 million should be paid to Shanghai Luyu).

With respect to the Disposal, Greentown Property had paid Nanjing Julong (a) a deposit of RMB100.0 million upon the signing of the Agreement and (b) an amount of RMB52.2 million on the Completion Date. The remaining portion of the consideration for the Disposal (being RMB1,230.2 million) had been off-set on the Completion Date against Nanjing Julong’s obligation to pay Greentown Property and Shanghai Luyu RMB1,230.2 million as part of the consideration for the Acquisition.

An amount of RMB25.0 million retention money was paid by Greentown Property to Nanjing Julong on the Completion Date. The said amount shall be released on 90 days after the Completion Date to Greentown Property. However, Nanjing Julong has the right to deduct, at the time of releasing the retention money to Greentown Property, from that amount any amount that Greentown Parties shall pay to or compensate the Company and/or Nanjing Julong.

The amount of the consideration for each of the Disposal and the Acquisition was determined on the basis of normal commercial terms, taking into account the prevailing market conditions and by reference to the original book costs of the relevant assets, and arm’s length negotiations between the Company and Greentown China.

Conditions Precedent

The Disposal and the Acquisition were conditional upon the fulfilment of the following conditions:

1. Conditions to be fulfilled by Greentown China:

2. (a) Greentown China having obtained the consents and approvals of its board of directors and its shareholders, pursuant to the relevant requirements in its articles of association and the Listing Rules, in relation to the transactions contemplated and the matters referred to in the Agreement;

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LETTER FROM THE BOARD

• (b) Every member of the Greentown Parties having obtained all consents of third parties (including governmental authorities), and no laws, regulations, or decisions shall have been proposed or taken by any governmental or official authority, that (1) enjoins, restrains or substantially delays the process or completion of the proposed transactions or (2) affects the operation of Shanghai Co after completion;

• (c) The Greentown Parties having completed the transfer of Shanghai Equity Interests, the registration of the new articles of association of Shanghai Co and the registration of newly appointed legal representative, directors, general manager and supervisors of Shanghai Co as appointed by the Company at the relevant registration authority. Shanghai Co has become a wholly-owned company of Nanjing Julong with limited liability. New business license of Shanghai Co having been issued;

• (d) Shanghai Co having not less than RMB180.0 million having been provided for the repayment of principal, interest, compensation and other relevant expenses in relation to the loans owed to China Construction Bank and 華寶信託有限責任公司 (Huabao Trust Company Limited*);

• (e) As at the Completion Date, every member of the Greentown Parties not having materially breached any representation and warranty it has given in the Agreement;

• (f) As at the Completion Date, there not having occurred any Material Adverse Effect Event; and

• (g) Shanghai Co having received the land certificate of its Xinjiangwancheng project stating that the shareholder of that company as Nanjing Julong.

• Conditions to be fulfilled by the Company:

• (a) The Company having obtained the consents and approvals of its board of directors and its shareholders, pursuant to the relevant requirements in its articles of association and the Listing Rules, in relation to the transactions contemplated and the matters referred to in the Agreement;

• (b) Save as the consent of China Construction Bank in Hangzhou and provided that Greentown Parties have agreed that Nanjing Julong is not required to obtain the consent from China Construction Bank, each of the Company and Nanjing Julong having obtained all consents of third parties (including governmental authorities, if required), and no laws, regulations, or decisions shall have been proposed or taken by any governmental or official authority, that enjoins, restrains or substantially delays the process or completion of the Acquisition; and

• (c) As at the Completion Date, every member of the Company not having materially breached any representation and warranty it has given in the Agreement.

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LETTER FROM THE BOARD

Undertakings from Greentown Property, Shanghai Luyu, Nanjing Julong, Shanghai Co and Hangzhou Co

According to the Agreement, Greentown Property and Shanghai Luyu confirm and undertake the following:

• (1) Greentown Property and Shanghai Luyu confirm and agree the contents of the Agreement;

• (2) Greentown Property and Shanghai Luyu confirm and agree to perform the obligations as required under the Agreement;

• (3) Greentown Property and Shanghai Luyu confirm and agree that they will adopt necessary measures and sign necessary documents in order to ensure the implementation of the Agreement, and further undertake that they will not involve in any matter that will affect the rights and obligations of the Company and/or Nanjing Julong as stipulated under the Agreement; and

• (4) Shanghai Luyu confirms and undertakes the set-off arrangement in relation to the Acquisition and the Disposal under the Agreement.

According to the Agreement, Nanjing Julong confirms and undertakes the following:

• (1) Nanjing Julong confirms and agrees the contents of the Agreement;

• (2) Nanjing Julong confirms and agrees to perform the obligations as required under the Agreement; and

• (3) Nanjing Julong confirms and agrees that it will adopt necessary measures and sign necessary documents in order to ensure the implementation of the Agreement, and further undertakes that it will not involve itself in any matter that will affect the rights and obligations of Greentown China, Greentown Property and/or Shanghai Luyu as stipulated under the Agreement.

According to the Agreement, Shanghai Co confirms and undertakes the following:

• (1) Shanghai Co confirms and agrees the arrangement in relation to the transfer of Shanghai Equity Interests and Shanghai Shareholders’ Advancements by Greentown Property and Shanghai Luyu to Nanjing Julong as stipulated under the Agreement; and

• (2) Shanghai Co confirms and agrees that it will adopt necessary measures and sign necessary documents in order to ensure the implementation of the transfer of Shanghai Equity Interests and Shanghai Shareholders’ Advancements as stipulated under the Agreement.

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LETTER FROM THE BOARD

According to the Agreement, Hangzhou Co confirms and undertakes the following:

• (1) Hangzhou Co confirms and agrees the arrangement in relation to the transfer of Hangzhou Equity Interest and Hangzhou Shareholder’s Advancement by Nanjing Julong to Greentown Property as stipulated under the Agreement; and

• (2) Hangzhou Co confirms and agrees that it will adopt necessary measure and sign necessary documents in order to ensure the implementation of the transfer of Hangzhou Equity Interest and Hangzhou Shareholder’s Advancement as stipulated under the Agreement.

Completion

According to the Agreement, on the basis that each condition having been fulfilled, the Completion shall be conducted on the day where all conditions (those not being waived by the Company in writing) having been fulfilled at the office of Shanghai Co or other time and venue as would be agreed between the Company and Greentown China.

The Completion took place on 16 April 2009 with all the conditions for the Acquisition and the Disposal were fulfilled.

INFORMATION ON HANGZHOU CO

Hangzhou Co is a company established in the Hangzhou City of the PRC on 23 November 2007 with limited liability. Its business scope includes property development, operation and management. The primary project it undertakes is the Hangzhou Project. Immediately before the Completion, Nanjing Julong held 40% of the equity interests in Hangzhou Co and the remaining 60% equity interests is held by wholly-owned subsidiaries of Greentown China. Its registered capital is of RMB1,000.0 million which has been fully contributed by its shareholders.

The net book values as at 31 December 2008 of the Hangzhou Equity Interest and the Hangzhou Shareholder’s Advancement in the books of the Company were approximately HK$41.6 million and HK$1,570.2 million, respectively. The net losses both before and after taxation and extraordinary items attributable to the Hangzhou Equity Interest were RMB0.4 million and RMB2.9 million for the financial years ended 31 December 2007 and 31 December 2008, respectively.

INFORMATION ON SHANGHAI CO

Shanghai Co is a company registered in Shanghai of the PRC on 3 February 2008 with limited liability. Its business scope includes property development and operation on the land obtained by it, property management and indoor decoration. The only project it undertakes is the Shanghai Project. Immediately before the Completion, 99.9% of equity interests in Shanghai Co was held by Greentown Property and the remaining 0.1% was held by Shanghai Luyu. Its registered capital is of RMB289.5 million which has been fully contributed by its shareholders.

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LETTER FROM THE BOARD

As far as the Directors are aware, the net book values as at 31 December 2008 of the Shanghai Equity Interests and the Shanghai Shareholders’ Advancements were approximately HK$320.6 million and HK$1,198.2 million, respectively. The net losses before and after taxation and extraordinary items attributable to the Shanghai Equity Interest was RMB6.8 million for the financial year ended 31 December 2008.

The accountants’ report of Shanghai Co for the period from 3 February 2008 (being the date of incorporation) to 31 December 2008 is set out in Appendix II to this circular.

INFORMATION ON THE COMPANY

The Company and its subsidiaries mainly engage in ownership of hotels and properties and investment. Since September 2007, the Group has embarked on a substantial business initiative in taking on property investments in China with several sites in four different cities, namely, Changzhou, Suzhou, Chongqing and Hangzhou, having been acquired by the Group.

INFORMATION ON GREENTOWN CHINA

Greentown China, together with its subsidiaries, primarily engages in property development in China with significant operations in various cities in Zhejiang Province of China such as Hangzhou, Ningbo, Wenzhou, Taizhou and Shaoxing. Its residential property development is also extended to other important cities in Yangtze River Delta including Shanghai, Nanjing, Wuxi and Nantong, important cities in Bohai Rim Economic Belt including Qingdao and Jinan, Beijing and other provincial cities such as Hefei of Anhui Province, Zhengzhou of Henan Province and Changsha of Hunan Province of China.

To the best of the knowledge, information and belief of the Directors, having made all reasonable enquiry, Greentown China and its ultimate beneficial owners are third parties independent of the Company and its connected persons (as defined in the Listing Rules).

REASONS FOR AND BENEFITS OF THE ACQUISITION AND THE DISPOSAL

Greentown China is the joint venture partner of the Group in respect of the Hangzhou Project. For facilitating Greentown China’s planned equity financing transaction comprising Hangzhou Co on a 100% basis, the Company agreed to co-operate with Greentown China under a share swap arrangement via the Agreement pursuant to which the Group sold the Hangzhou Equity Interest and Hangzhou Shareholder’s Advancement to Greentown China and Greentown China transferred the Shanghai Equity Interests and Shanghai Shareholders’ Advancements to the Group.

The Directors consider that it is in the commercial interests of the Group to take the opportunity of the share swap arrangement via the Agreement to exit a 40% equity interest in a project in exchange for fully owning another project, thereby consolidating and strengthening its management control. Furthermore, the Directors consider that the 100% interest in the Shanghai Co acquired by the Group under the Agreement is a viable investment, which enhances and/or replenishes the development landbank of, and is therefore beneficial, to the Group.

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LETTER FROM THE BOARD

Based on the net book value as at 31 March 2009 of the Hangzhou Equity Interest and the Hangzhou Shareholder’s Advancement as described above, the Group would recoup the book cost with no gain and no loss.

The amount of proceeds of the Disposal exceeded the amount of payment for the Acquisition by RMB152.2 million (equivalent to approximately HK$172.5 million). The Group intends to use such net amount as general working capital and this will enhance the cash flow position of, and is therefore beneficial to, the Group.

On the basis that the Acquisition and the Disposal are mutually conditional on each other and each of them is an integral part of the same deal under the Agreement, the Directors consider that the terms of the Disposal together with the Acquisition are on normal commercial terms, fair and reasonable and in the interests of the Company and its shareholders as a whole.

MANAGEMENT DISCUSSION AND ANALYSIS ON SHANGHAI CO

The following is a discussion and analysis on Shanghai Co for the period from 3 February 2008 (being the date of incorporation) to 31 December 2008 (the “Period”).

Investors should read the following discussion and analysis in conjunction with the financial information of Shanghai Co for the period from 3 February 2008 (being the date of incorporation) to 31 December 2008, which is included as Appendix II to this circular and should not rely merely on the information contained in this section.

Business Review

Shanghai Co was established in Shanghai of the PRC on 3 February 2008 with limited liability. Its business scope include property development and operation of land obtained by it, property management and indoor decoration. Since its establishment, the only project of Shanghai Co undertakes is the Shanghai Project.

Liquidity and Financial Resources

As at 31 December 2008, Shanghai Co had total assets of approximately RMB1,367.8 million (equivalent to approximately HK$1,551.0 million) and total liabilities of approximately RMB1,085.1 million (equivalent to approximately HK$1,230.4 million). Shanghai Co did not have any bank borrowings as at 31 December 2008.

Capital Structure

As at 31 December 2008, Shanghai Co was financed by its registered capital of RMB289.5 million (equivalent to approximately HK$330.4 million) and the shareholders’ advancements of RMB1,056.7 million (equivalent to approximately HK$1,198.2 million).

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LETTER FROM THE BOARD

Borrowings and Pledge of Assets

As at 31 December 2008, Shanghai Co had neither bank borrowings nor assets pledged to fund/loan providers.

As at 31 December 2008, Shanghai Co had RMB37.8 million (equivalent to approximately HK$42.9 million) placed with designated banks as deposits for deed tax of land use rights.

Major Acquisitions and Disposals of Subsidiaries and Associated Companies

For the period from 3 February 2008 to 31 December 2008, there were no material acquisitions or disposals of subsidiaries and associated companies by Shanghai Co.

Investments

As at 31 December 2008, Shanghai Co had no significant investments held.

Employees and Remuneration Policies

As at 31 December 2008, Shanghai Co had approximately 33 employees. Total salaries and allowances incurred during the period from 3 February 2008 to 31 December 2008 were RMB0.8 million.

Interest Rate and Foreign Currency Risks Management Objectives and Policies

During the Period, Shanghai Co’s interest rate risk was primarily related to the short and long term loans, and interest rate risk is managed by the group of which Shanghai Co was a member in accordance with defined policies through regular review to determine the strategy.

Shanghai Co’s foreign currency risk arises from commercial transactions and recognized assets and liabilities such as trade and other receivables, cash and bank balances, trade and other payables which are denominated in a currency that is not the functional currency. The functional currency of Shanghai Co is RMB. As most of the currency transactions and balances are denominated in RMB, the management does not expect that there will be any significant currency risk associated with Shanghai Co.

Contingent Liabilities

As at 31 December 2008, Shanghai Co did not have any significant contingent liabilities.

Charges on Assets

As at 31 December 2008, Shanghai Co did not have any charges on assets.

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LETTER FROM THE BOARD

PROPERTY VALUATION

Savills, an independent property valuer, has valued the property interests of Shanghai Co as of 31 March 2009 at approximately HK$1,440.0 million (RMB1,270.0 million). The texts of its letter, summary of valuation and the valuation certificates are set out in Appendix IV to this circular.

The table below sets forth a reconciliation of the net book value of the relevant property interests as of 31 March 2009 to their fair value as of 31 March 2009 as stated in Appendix IV:

	HK$ Million
Net book value of Shanghai Co’s properties under development as
at 31 December 2008 as set out in Appendix II to this circular	1,499.2
Additional cost of properties under development incurred for the
three months ended 31 March 2009 (unaudited)	108.6
Net book value of Shanghai Co’s properties under development as
at 31 March 2009 (unaudited)	1,607.8
Net valuation deficit (unaudited)	(167.8)
Fair value as at 31 March 2009	1,440.0

Furthermore, Savills has valued the property interests of Hangzhou Co as of 31 March 2009 at approximately HK$4,195.8 million (RMB3,700.0 million). The texts of its letter, summary of valuation and the valuation certificates are set out in Appendix V to this circular.

Future Plans and Prospects

In June 2007, Shanghai Co acquired a parcel of land in Yangpu District of Shanghai at a public auction for RMB1,260 million. The land has a total site area of about 638,000 square feet and planned gross floor area of 1.5 million square feet. It is planned for residential development. The project is scheduled for completion by 2011.

FINANCIAL EFFECTS ON THE COMPANY

The Disposal

The Group applied the remaining portion of the consideration for the Disposal (being RMB1,230.2 million), to off-set on the Completion Date against Nanjing Julong’s obligation to pay Greentown Property and Shanghai Luyu RMB1,230.2 million as part of the consideration for the Acquisition. Upon the Completion, the Group will cease to have any interest in Hangzhou Co.

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LETTER FROM THE BOARD

Based on the net book values at as 31 March 2009 of Hangzhou Equity Interest and the Hangzhou Shareholder’s Advancement as described above, the Group would recoup the book cost with no gain and no loss.

As set out in the Appendix III to this circular, the total assets and total liabilities of the Group immediately after the Disposal will be increased by approximately HK$111.7 million and HK$32.3 million respectively.

The Acquisition

Since the Completion, Shanghai Co has become an indirect wholly-owned subsidiary of the Company and thus its assets, liabilities and financial results will be consolidated into those of the Group. Set out in Appendix III is the unaudited pro forma financial information of the Enlarged Group.

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

In spite of the global economic downturn and stagnant business environment since the third quarter of 2008, the Group’s business of ownership of properties and investments has maintained steady earnings growth. The Group has been continuing to set its footprints in the property market in the PRC.

After the Completion, the Group will have 100% equity interest in the Shanghai property project, thereby enhancing and/or further replenishing the land bank of the Group in addition to the development sites in Changzhou, Suzhou and Chongqing. By disposal of its entire 40% equity interest in the Hangzhou project, the Group will no longer hold any interest in any property development in Hangzhou province, although it could not rule out any possibility of future property development in the same province if opportunity arises. The Group’s initiative to expand into Mainland’s property market is a long term undertaking. The Group remains optimistic about the long term outlook for the Mainland economy amid the current global crisis. It expects that, buttressed by vibrant economic developments, the prospects of the Mainland’s real estate market would stay resilient, remain promising and bring long term benefits to the Group.

IMPLICATION UNDER THE LISTING RULES

One or more of the applicable percentage ratios for each of the Disposal and the Acquisition in respect of the Company is/are greater than 25% while all such ratios are less than 75% for the purposes of Rule 14.07 of the Listing Rules, and therefore each of the Disposal and the Acquisition constitutes a major transaction for the Company.

Under the Listing Rules, each of the Disposal and the Acquisition is required to be subject to approval of shareholders of the Company. Since no Shareholders are required to abstain from voting if a general meeting were to be convened for the approval of the Acquisition and the Disposal, a written approval of the Acquisition and the Disposal was obtained by the Company from Upfront International Limited, a wholly-owned subsidiary of Wharf Holdings, holding approximately 70.37% of the issued share capital of the Company, in lieu of holding a general meeting for the approval of the Acquisition and the Disposal pursuant to Rule 14.44.

— 15 —

LETTER FROM THE BOARD

ADDITIONAL INFORMATION

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

Yours faithfully,

Stephen T. H. Ng Chairman

— 16 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

I. SUMMARY FINANCIAL INFORMATION

The financial information for the annual results of the Group for the years ended 31 December 2006, 31 December 2007 and 31 December 2008 have been extracted from the respective published audited financial statements of the Group. The auditors have expressed an unqualified opinion on those financial statements in their report for the years ended 31 December 2006, 31 December 2007 and 31 December 2008, respectively.

(i) Results

		Year ended
	31 December	31 December	31 December
	2006	2007	2008
	HK$ Million	HK$ Million	HK$ Million
Turnover	920.9	671.1	664.2
Other net income	48.7	357.5	143.2
Direct costs and operating expenses	(508.5)	(327.9)	(441.9)
Selling and marketing expenses	(41.7)	(23.8)	(25.1)
Administrative and corporate expenses	(4.6)	(8.4)	(16.3)
Depreciation and amortisation	(25.3)	(34.9)	(36.1)
Operating profit	389.5	633.6	288.0
Increase in fair value of investment properties	94.3	163.6	31.5
Net other charge	—	(19.9)	(47.5)
	483.8	777.3	272.0
Finance costs	—	(8.3)	(67.1)
Share of results after tax of
Associate	6.2	4.4	(0.1)
Jointly controlled entities	—	(0.5)	(10.9)
Profit before taxation	490.0	772.9	193.9
Taxation	(67.3)	(134.6)	(24.3)
Profit for the year	422.7	638.3	169.6
Profit attributable to:
Equity shareholders	422.7	638.4	170.5
Minority interests	—	(0.1)	(0.9)
	422.7	638.3	169.6
Dividend attributable to equity shareholders
Interim dividend paid	15.8	15.8	23.6
Final dividend proposed	75.6	113.4	70.9
	91.4	129.2	94.5
Earnings per share	HK$1.34	HK$2.03	HK$0.39

— I-1 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

(ii) Assets and liabilities

	31 December	31 December	31 December
	2006	2007	2008
	HK$ Million	HK$ Million	HK$ Million
Non-current assets
Fixed assets
Investment properties	1,663.0	1,827.0	1,877.0
Leasehold land	15.2	15.2	15.2
Other properties, plant and equipment	63.4	104.9	80.4
Interest in an associate	0.8	0.8	0.7
Interest in jointly controlled entities	—	1,964.6	2,586.7
Available-for-sale investments	1,490.0	2,516.6	604.0
Long term receivables	3.1	1.7	0.5
Employee retirement benefit assets	6.7	8.5	—
Derivative financial assets	—	—	2.9
	3,242.2	6,439.3	5,167.4
Current assets
Properties under development	—	985.3	4,972.6
Inventories	7.6	3.4	3.4
Trade and other receivables	78.8	425.2	105.3
Pledged bank deposits	—	452.4	—
Bank deposits and cash	1,840.2	132.4	1,258.4
	1,926.6	1,998.7	6,339.7
Current liabilities
Trade and other payables	140.5	187.2	180.9
Derivative financial liabilities	—	106.5	165.8
Bank loans	—	1,278.9	—
Taxation payable	22.6	80.3	77.4
	163.1	1,652.9	424.1
Net current assets	1,763.5	345.8	5,915.6
Total assets less current liabilities	5,005.7	6,785.1	11,083.0

— I-2 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

	**31 **	December	**31 **	December	**31 **	December
		2006		2007		2008
	HK$ Million		HK$ Million		HK$ Million
Non-current liabilities
Employee retirement benefit liabilities		—		—		3.6
Derivative financial liabilities		—		—		1.3
Bank loans		—		580.0		3,065.0
Deferred income		0.8		—		—
Deferred taxation		226.9		260.0		250.3
		227.7		840.0		3,320.2
NET ASSETS		4,778.0		5,945.1		7,762.8
Capital and reserves
Share capital		157.5		157.5		236.3
Reserves		4,620.5		5,590.6		6,830.7
Shareholders’ equity		4,778.0		5,748.1		7,067.0
Minority interests		—		197.0		695.8
TOTAL EQUITY		4,778.0		5,945.1		7,762.8

— I-3 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

II. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 31 DECEMBER 2008

Set out below are the audited consolidated profit and loss account, consolidated balance sheet, consolidated statement of recognised income and expense and consolidated cash flow statement of the Group and the balance sheet of the Company and notes to the financial statements reproduced from the audited financial statements published in the Company’s annual report for the year ended 31 December 2008.

CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the year ended 31 December 2008

		2008	2007
	Note	HK$ Million	HK$ Million
Turnover	1	664.2	671.1
Other net income	3	143.2	357.5
Direct costs and operating expenses		(441.9)	(327.9)
Selling and marketing expenses		(25.1)	(23.8)
Administrative and corporate expenses		(16.3)	(8.4)
Depreciation and amortisation		(36.1)	(34.9)
Operating profit	2	288.0	633.6
Increase in fair value of investment properties		31.5	163.6
Net other charge	4	(47.5)	(19.9)
		272.0	777.3
Finance costs	5	(67.1)	(8.3)
Share of results after tax of
Associate		(0.1)	4.4
Jointly controlled entities		(10.9)	(0.5)
Profit before taxation		193.9	772.9
Taxation	6(b)	(24.3)	(134.6)
Profit for the year		169.6	638.3
Profit attributable to:
Equity shareholders	7	170.5	638.4
Minority interests		(0.9)	(0.1)
		169.6	638.3
Dividends attributable to equity shareholders	8
Interim dividend paid		23.6	15.8
Final dividend proposed		70.9	113.4
		94.5	129.2
Earnings per share	9	HK$0.39	HK$2.03

— I-4 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED BALANCE SHEET

As at 31 December 2008

		2008	2007
	Note	HK$ Million	HK$ Million
Non-current assets
Fixed assets	10
Investment properties		1,877.0	1,827.0
Leasehold land		15.2	15.2
Other properties, plant and equipment		80.4	104.9
Interest in an associate	12	0.7	0.8
Interest in jointly controlled entities	13	2,586.7	1,964.6
Available-for-sale investments	14	604.0	2,516.6
Long term receivables	15	0.5	1.7
Employee retirement benefit assets	16	—	8.5
Derivative financial assets	21	2.9	—
		5,167.4	6,439.3
Current assets
Properties under development	17	4,972.6	985.3
Inventories		3.4	3.4
Trade and other receivables	18	105.3	425.2
Pledged bank deposits	19	—	452.4
Bank deposits and cash		1,258.4	132.4
		6,339.7	1,998.7
Current liabilities
Trade and other payables	20	180.9	187.2
Derivative financial liabilities	21	165.8	106.5
Bank loans	22	—	1,278.9
Taxation payable	6(d)	77.4	80.3
		424.1	1,652.9
Net current assets		5,915.6	345.8
Total assets less current liabilities		11,083.0	6,785.1
Non-current liabilities
Employee retirement benefit liabilities	16	3.6	—
Derivative financial liabilities	21	1.3	—
Bank loans	22	3,065.0	580.0
Deferred taxation	23	250.3	260.0
		3,320.2	840.0
NET ASSETS		7,762.8	5,945.1
Capital and reserves
Share capital	25	236.3	157.5
Reserves		6,830.7	5,590.6
Shareholders’ equity	26(a)	7,067.0	5,748.1
Minority interests	26(a)	695.8	197.0
TOTAL EQUITY		7,762.8	5,945.1

— I-5 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

COMPANY BALANCE SHEET

As at 31 December 2008

		2008	2007
	Note	HK$ Million	HK$ Million
			(Restated)
Non-current assets
Interest in subsidiaries	11	1,755.5	1,433.4
Current assets
Trade and other receivables		0.3	0.2
Bank deposits and cash		1,063.3	15.9
		1,063.6	16.1
Current liabilities
Trade and other payables		2.7	3.1
Bank loan	22	—	500.0
		2.7	503.1
Net current assets/(liabilities)		1,060.9	(487.0)
NET ASSETS		2,816.4	946.4
Capital and reserves
Share capital	25	236.3	157.5
Reserves	26(b)	2,580.1	788.9
TOTAL EQUITY		2,816.4	946.4

— I-6 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

For the year ended 31 December 2008

			2008	2008	2008			2007	2007
	Note	HK$ Million HK$ Million
(Deficit)/surplus on revaluation of available-for-sale
investments	26		(649.4)				482.9
Revaluation reserve transferred to the consolidated profit
and loss account
- on disposal of available-for-sale investments	26		(333.3)				(122.5)
- on impairment loss of available-for-sale investments	26			47.5				19.9
Exchange difference	26		241.8					42.5
Actuarial (losses)/gains on defined benefit pension schemes	26		(14.7)					0.3
Net (expense)/income recognised directly in equity			(708.1)				423.1
Profit for the year	26		169.6				638.3
Total recognised income and expense for the year
Attributable to equity shareholders			(550.8)				1,061.5
Attributable to minority interests				12.3				(0.1)
Total	26		(538.5)				1,061.4

— I-7 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2008

	2008	2007
	HK$ Million	HK$ Million
Cash used in operations (Note)	(3,164.9)	(961.1)
Interest received	14.4	51.8
Interest paid on bank loans	(62.0)	(7.5)
Dividends received from an associate	—	4.4
Dividend income from listed investments	43.7	47.4
Hong Kong profits tax paid	(37.1)	(43.8)
Net cash used in operating activities	(3,205.9)	(908.8)
Investing activities
Release/(placing) of pledged deposits	452.4	(452.4)
Purchase of fixed assets	(30.1)	(76.8)
Net (increase)/decrease in interest in an associate	(6.5)	7.7
Net increase in interest in jointly controlled entities	(596.9)	(1,957.2)
Decrease in long term receivables	1.2	1.7
Purchase of available-for-sale investments	(12.3)	(1,788.1)
Proceeds from sale of available-for-sale investments	1,085.4	1,470.7
(Payment on)/proceeds from forward foreign exchange contracts	(105.7)	30.8
Net cash generated from/(used in) investing activities	787.5	(2,763.6)
Financing activities
Net proceeds from shares issued under rights issue	2,006.7	—
Net drawdown of new bank loans	1,188.2	1,858.9
Issue of shares by a subsidiary to minority interests	486.5	197.1
Dividends paid	(137.0)	(91.4)
Net cash generated from financing activities	3,544.4	1,964.6
Net increase/(decrease) in cash and cash equivalents	1,126.0	(1,707.8)
Cash and cash equivalents at 1 January	132.4	1,840.2
Cash and cash equivalents at 31 December	1,258.4	132.4

Cash and cash equivalents represent bank deposits and cash.

— I-8 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

Note to the Consolidated Cash Flow Statement For the year ended 31 December 2008

Reconciliation of operating profit to cash used in operations

	2008	2007
	HK$ Million	HK$ Million
Operating profit	288.0	633.6
Depreciation and amortisation	36.1	34.9
Gain on disposal of available-for-sale investments	(143.2)	(356.7)
Release of deferred income	—	(0.8)
Dividend income from listed investments	(42.9)	(47.9)
Interest income	(14.4)	(50.6)
Increase in employee benefit liabilities/(assets)	(2.6)	(1.8)
Decrease in property held for sale	—	4.7
Increase in property under development	(3,927.6)	(985.3)
Increase in hotel consumables	—	(0.5)
Decrease/(increase) in trade and other receivables	476.5	(309.0)
Increase in trade and other payables	1.2	37.5
Increase in short-term derivative financial liabilities	165.0	75.7
(Decrease)/increase in amounts due to fellow subsidiaries (net)	(1.0)	5.1
Cash used in operations	(3,164.9)	(961.1)

— I-9 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2008

1. SEGMENT REPORTING

(a) Business segments

• (i) Revenue and results

	Revenue	Revenue		Results	Results
	2008		2007	2008		2007
	HK$ Million	_HK$ _	Million	HK$ Million	_HK$ _	Million
Hotel and restaurants	472.4		438.3	161.1		147.7
Property investment	134.5		127.6	109.9		109.6
Property development	—		6.7	(7.9)		0.6
	606.9		572.6	263.1		257.9
Investments and others	57.3		98.5	33.4		381.8
	664.2		671.1	296.5		639.7
Unallocated items				(8.5)		(6.1)
Operating profit				288.0		633.6
Increase in fair value of investment
properties				31.5		163.6
Net other charge				(47.5)		(19.9)
				272.0		777.3
Finance costs				(67.1)		(8.3)
Associate
Property development				(0.1)		4.4
Jointly controlled entities
Property development				(10.9)		(0.5)
Profit before taxation				193.9		772.9

— I-10 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SEGMENT REPORTING (Continued)

• (a) Business segments (Continued)

• (ii) Assets and liabilities

		Assets		Liabilities	Liabilities
	2008		2007	2008		2007
	HK$ Million	_HK$ _	Million	HK$ Million	_HK$ _	Million
Hotel and restaurants	133.4		171.3	100.1		121.4
Property investment	1,929.0		1,871.1	26.7		21.4
Property development	7,561.1		3,278.9	2.5		5.0
Investments and others	608.0		2,531.9	221.3		145.9
	10,231.5		7,853.2	350.6		293.7
Unallocated	1,275.6		584.8	3,393.7		2,199.2
Total assets/liabilities	11,507.1		8,438.0	3,744.3		2,492.9

Unallocated assets and liabilities mainly comprise corporate borrowings for financing purposes and cash.

(iii) Other information

			Increase in interest in	Increase in interest in
			jointly controlled		Depreciation and
	Capital expenditure		entities		amortisation
	2008	2007	2008	2007	2008	2007
	_HK$ Million HK$ Million _		_HK$ Million HK$ _	_Million _	HK$ Million HK$ Million
Hotel and restaurants	10.9	76.4	—	—	36.1	34.9
Property investment	18.5	0.4	—	—	—	—
Property development	0.7	—	633.0	1,964.6	—	—
Total	30.1	76.8	633.0	1,964.6	36.1	34.9

The Group has no significant non-cash expenses other than depreciation and amortisation.

— I-11 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. SEGMENT REPORTING (Continued)

• (b) Geographical segments

	Revenue	Revenue			Operating Profit	Operating Profit	Operating Profit
	2008		2007		2008		2007
	HK$ Million	_HK$ _	Million		HK$ Million	HK$ Million
Hong Kong	620.7		639.9		200.1		502.9
China	5.9			0.3	(1.0)		—
Singapore	37.6			30.9	88.9		130.7
Turnover/operating profit	664.2		671.1		288.0		633.6
					Assets
					2008		2007
					HK$ Million	HK$ Million
Hong Kong					3,162.2		3,759.5
China					7,758.2		3,386.3
Singapore					586.7		1,292.2
Total					11,507.1		8,438.0
					Increase in interest in
	Capital expenditure				**jointly controlled **		entities
	2008		2007		2008		2007
	HK$ Million	_HK$ _	Million		HK$ Million	HK$ Million
Hong Kong	29.4			76.8	—		—
China	0.7			—	633.0		1,964.6
Total	30.1			76.8	633.0		1,964.6

No inter-segment revenue has been recorded during the current and prior year.

— I-12 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. OPERATING PROFIT

• (a) Operating profit is arrived at:

	2008	2007
	HK$ Million	HK$ Million
After charging:
Depreciation and amortisation	36.1	34.9
Staff costs	120.0	104.2
Including:
Contributions to defined contribution pension schemes
(after deducting forfeiture of the Group’s contribution of
HK$0.3 million (2007: HK$0.4 million))	5.2	3.5
Employee retirement benefit expense/(income)	(2.1)	(0.8)
Total pension cost	3.1	2.7
Cost of inventories sold	—	32.0
Auditors’ remuneration	1.8	0.6
Net foreign exchange loss (Note)	160.6	74.2
and crediting:
Rental income less direct outgoings including contingent rentals of
HK$49.4 million (2007: HK$40.3 million)	111.1	112.7
Interest income on bank deposits	14.4	50.6
Dividend income from listed investments	42.9	47.9

Note:

Apart from the above net exchange difference, the Group also had a total exchange gain arising from the translation of the net investments in China subsidiaries and jointly controlled entities of HK$241.8 million (2007: HK$42.5 million), which has been dealt with as an equity movement.

— I-13 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. OPERATING PROFIT (Continued)

• (b) Directors’ emoluments

		Basic salaries,
		housing
		and other	Discretionary
		allowances	bonuses and/or	Retirement
		and benefits	performance	scheme	2008	2007
	Fees	in kind	related bonuses	contributions	Total	Total
	HK$000	HK$000	HK$000	HK$000	HK$000	HK$000
Executive director
G. W. J. Li	40	780	—	—	820	820
Non-executive director
T. Y. Ng	55(v)	—	—	—	55	55
Independent non-executive
directors
Michael T. P Sze	55(v)	—	—	—	55	36
H. M. V. de Lacy Staunton	40	—	—	—	40	40
Brian S. K. Tang (i)	17(v)	—	—	—	17	—
Clement Kam Hung Wong (ii)	37	—	—	—	37	—
Past directors
M. K. Tan (iii)	34(v)	—	—	—	34	55
Brian S. Forsgate	—	—	—	—	—	19
	278	780	—	—	1,058	1,025
Total for 2007	245	780	—	—		1,025

Notes:

• (i) Mr. Brian S.K. Tang was appointed as a director of the Company effective from 8 September 2008.

• (ii) Mr. Clement Kam Hung Wong was appointed as a director of the Company effective from 1 February 2008.

• (iii) Mr. M.K. Tan passed away on 14 August 2008.

• (iv) There were no compensation for loss of office and/or inducement for joining the Group paid/payable to the Company’s Directors in respect of the years ended 31 December 2008 and 31 December 2007.

• (v) Includes Audit Committee Member’s fee received by each of relevant Directors based on HK$15,000 per annum for the year ended 31 December 2008 (2007: HK$15,000 per annum).

— I-14 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

2. OPERATING PROFIT (Continued)

(c) Emoluments of the highest paid employees

Set out below are analyses of the emoluments (excluding amounts, if any, paid or payable by way of commissions on sales generated by the employees concerned) for the year ended 31 December 2008 of the five highest paid employees of the Group, none of whom is a director of the Company. The aggregate of the emoluments in respect of the individuals are as follows:

	2008	2007
	HK$ Million	HK$ Million
Basic salaries, housing allowances, and other allowances and
benefits in kind	5.0	4.8
Retirement scheme contributions	0.3	0.4
Discretionary bonuses and/or performance-related bonuses	1.0	1.0
	6.3	6.2

The emoluments of the five highest paid individuals are within the following bands:

	2008	2007
	Number of	Number of
Bands (in HK$)	individuals	individuals
Not more than $1,000,000	1	3
$1,000,001 - $1,500,000	3	1
$1,500,001 - $2,000,000	—	1
$2,000,001 - $2,500,000	1	—
OTHER NET INCOME
	2008	2007
	HK$ Million	HK$ Million
Profit on disposal of available-for-sale investments
— including HK$333.3 million (2007: HK$122.5 million)
transferred from the investments revaluation reserve	143.2	356.7
Release of deferred income	—	0.8
	143.2	357.5

3. OTHER NET INCOME

— I-15 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

4. NET OTHER CHARGE

Net other charge represents impairment loss on available-for-sale investments.

5. FINANCE COSTS

	2008	2007
	HK$ Million	HK$ Million
Interest on bank borrowings wholly repayable within five years	64.8	6.2
Other finance costs	3.9	2.1
Fair value changes on cross-currency interest rate swaps	(1.6)	—
	67.1	8.3

6. TAXATION

• (a) The provision for Hong Kong profits tax is 16.5% (2007: 17.5%) of the estimated assessable profits for the year.

• (b) Taxation in the consolidated profit and loss account represents:

	2008	2007
	HK$ Million	HK$ Million
Current taxation
Hong Kong Profits Tax	53.2	101.7
Overprovision in respect of prior years	(19.2)	(0.2)
	34.0	101.5
Deferred taxation
Origination and reversal of temporary differences	(2.7)	4.5
Change in fair value of investment properties	5.2	28.6
Effect on deferred tax balances at 1 January
resulting from a change in tax rate	(12.2)	—
	(9.7)	33.1
Total tax charge	24.3	134.6

— I-16 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

6. TAXATION (Continued)

• (c) Reconciliation between the actual total tax charge and accounting profit at applicable tax rates:

	2008	2007
	HK$ Million	HK$ Million
Profit before taxation	193.9	772.9
Notional tax on accounting profit calculated at applicable tax rates	32.0	135.3
Tax effect of non-deductible expenses	15.4	20.3
Tax effect of non-taxable revenue	(17.6)	(21.4)
Tax effect of unused tax losses not recognised	25.9	0.7
Prior-year tax loss utilised this year	—	(0.1)
Effect on deferred tax balances at 1 January resulting from a change
in tax rate	(12.2)	—
Overprovision in respect of prior years	(19.2)	(0.2)
Actual total tax charge	24.3	134.6

• (d) The taxation payable in the consolidated balance sheet is expected to be settled within one year.

• (e) No tax charge is included in the share of results after tax of an associate in 2008 (2007: HK$0.8 million).

7. PROFIT ATTRIBUTABLE TO EQUITY SHAREHOLDERS

The profit attributable to equity shareholders for the year is dealt with in the financial statements of the Company to the extent of HK$0.3 million (2007: HK$43.3 million).

8. DIVIDENDS ATTRIBUTABLE TO EQUITY SHAREHOLDERS

	2008	2007
	HK$ Million	HK$ Million
Interim dividend declared and paid of 5.0 cents
(2007: 5.0 cents) per share	23.6	15.8
Final dividend of 15.0 cents proposed after the balance sheet date
(2007: 24.0 cents) per share	70.9	113.4
	94.5	129.2

• (a) The amount of the proposed final dividend in respect of 2008 is based on 472.5 million shares (2007: 472.5 million shares) as being enlarged by the rights issue launched and completed in March 2008 by the Company. The proposed final dividends have not been recognised as liabilities at the balance sheet dates.

• (b) The final dividend of HK$113.4 million for 2007 was approved and paid in 2008.

— I-17 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

9. EARNINGS PER SHARE

The calculation of earnings per share is based on the profit for the year attributable to equity shareholders of HK$170.5 million (2007: HK$638.4 million) and the weighted average of 439.8 million ordinary shares (2007: 315.0 million shares) in issue during the year, calculated as follows:

Weighted average number of ordinary shares

Issued ordinary shares at 1 January Effect of rights issue Weighted average number of ordinary shares at 31 December	2008 Million 315.0 124.8 439.8	2007 Million 315.0 —
		315.0

For the year under review and the preceding year, there is no difference between the basic and diluted earnings per share.

— I-18 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

10. FIXED ASSETS

			Group
	Investment	Hotel	Leasehold
	properties	property	Land	Others	Total
	HK$ Million	HK$ Million	HK$ Million	HK$ Million	HK$ Million
Cost or valuation
Balance at 1 January 2007	1,663.0	85.6	15.9	161.3	1,925.8
Additions	0.4	13.3	—	63.1	76.8
Disposals	—	—	—	(3.2)	(3.2)
Revaluation surplus	163.6	—	—	—	163.6
Balance at 31 December 2007 and
at 1 January 2008	1,827.0	98.9	15.9	221.2	2,163.0
Additions	18.5	—	—	11.6	30.1
Disposals	—	—	—	(0.4)	(0.4)
Revaluation surplus	31.5	—	—	—	31.5
Balance at 31 December 2008	1,877.0	98.9	15.9	232.4	2,224.2
Accumulated depreciation and
amortisation
Balance at 1 January 2007	—	67.5	0.7	116.0	184.2
Charge for the year	—	9.6	—	25.3	34.9
Written back on disposals	—	—	—	(3.2)	(3.2)
Balance at 31 December 2007 and
at 1 January 2008	—	77.1	0.7	138.1	215.9
Charge for the year	—	9.6	—	26.5	36.1
Written back on disposals	—	—	—	(0.4)	(0.4)
Balance at 31 December 2008	—	86.7	0.7	164.2	251.6
Net book value
At 31 December 2008	1,877.0	12.2	15.2	68.2	1,972.6
At 31 December 2007	1,827.0	21.8	15.2	83.1	1,947.1

— I-19 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

10. FIXED ASSETS (Continued)

				Group
		Investment	Hotel	Leasehold
		properties	property	Land	Others	Total
		HK$ Million	HK$ Million	HK$ Million	HK$ Million	HK$ Million
The analysis of cost or valuation of the above		assets is as	follows:
2008	valuation	1,877.0	—	—	—	1,877.0
Cost	less provisions	—	98.9	15.9	232.4	347.2
		1,877.0	98.9	15.9	232.4	2,224.2
2007	valuation	1,827.0	—	—	—	1,827.0
Cost	less provisions	—	98.9	15.9	221.2	336.0
		1,827.0	98.9	15.9	221.2	2,163.0
(a)	Tenure of title to properties:
	Long term lease held in Hong Kong
	Over 50 years	1,877.0	12.2	15.2	—	1,904.4

• (b) Properties revaluation

The Group’s investment properties in Hong Kong have been revalued as at 31 December 2008 by Knight Frank Petty Limited (“Knight Frank”), an independent firm of professional surveyors who have among their staff Fellows of the Hong Kong Institute of Surveyors with extensive experience in valuing properties in Hong Kong and the PRC. Knight Frank has valued the investment properties on a market value basis and has taken into account the net income of the respective properties and allowing for reversionary potential.

• (c) The Group leases out its investment properties under operating leases which generally run for an initial period of two to four years. Lease payments may contain a contingent rent element which is based on various percentages of tenants’ sales receipts.

• (d) The Group’s total future minimum lease income under non-cancellable operating leases is receivable as follows:

	2008	2007
	HK$ Million	HK$ Million
Within 1 year	41.4	71.2
After 1 year but within 5 years	21.2	35.6
	62.6	106.8

— I-20 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

11. INTEREST IN SUBSIDIARIES

		Company	Company
		2008	2007
		HK$ Million	HK$ Million
Unlisted	shares, at cost less provision	—	—
Amount	due from subsidiaries	5,202.6	3,600.5
		5,202.6	3,600.5
Amount	due to subsidiaries	(3,447.1)	(2,167.1)
		1,755.5	1,433.4

Details of principal subsidiaries at 31 December 2008 are shown on pages I-59 to I-60.

Amounts due from subsidiaries are unsecured, non-interest bearing with no fixed terms of repayment and hence are classified as non-current as these are not expected to be recoverable within the next twelve months. Amounts due to subsidiaries are unsecured, non-interest bearing with no fixed terms of payment.

12. INTEREST IN AN ASSOCIATE

							Group
						2008			2007
					_HK$ _	Million		_HK$ _	Million
Share	of	net	tangible	assets		0.7			0.8
						0.7			0.8

Details of associate at 31 December 2008 are shown on page I-60.

— I-21 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

12. INTEREST IN AN ASSOCIATE (Continued)

• (a) Summary financial information on an associate:

		2008			2007
		Attributable			Attributable
	Total		interest	Total		interest
	HK$ Million	_HK$ _	Million	HK$ Million	_HK$ _	Million
Assets	167.7		33.5	249.6		49.9
Liabilities	(164.1)		(32.8)	(245.5)		(49.1)
Equity	3.6		0.7	4.1		0.8
Revenues	1.5		0.3	15.4		3.1
Profit before taxation	1.1		0.1	26.2		5.2
Taxation	—		—	(3.8)		(0.8)
Profit after taxation	1.1		0.1	22.4		4.4

13. INTEREST IN JOINTLY CONTROLLED ENTITIES

		Group
	2008		2007
	HK$ Million		HK$ Million
Share of net tangible assets	77.9		15.9
Amounts due from jointly controlled entities	2,508.8		1,948.7
	2,586.7		1,964.6

Details of principal jointly controlled entities at 31 December 2008 are shown on page I-60.

The Group’s interest in jointly-controlled entities mainly includes:

(a) Speedy Champ Investments Limited (“Speedy Champ”)

Speedy Champ is a limited liability company established in Hong Kong which is 55% owned by Superb Mind Investment Limited, a wholly-owned subsidiary of the Group. Notwithstanding the contribution of 55% of the registered capital by Superb Mind Investment Limited, the Group entered into an agreement with the joint venture partner relating to a property development in Chongqing in China which stipulates that all significant financial and operating decisions of Speedy Champ must be approved by all of its directors. As neither the Group nor the joint venture partner have the ability to control the board of directors and economic activities of Speedy Champ, the Group accounts for its investments in Speedy Champ as a jointly controlled entity.

— I-22 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

13. INTEREST IN JOINTLY CONTROLLED ENTITIES (Continued)

(b) Hangzhou Greentown Haiqi Real Estate Development Co., Ltd (“Greentown Haiqi”)

The Group’s interest in Greentown Haiqi is held under a joint venture agreement relating to a property development in Hangzhou in China. Throughout the joint venture period, the Group is entitled to share 40% of the financial results and net assets of Greentown Haiqi in accordance with the terms of the joint venture agreement. The Group’s interest in Greentown Haiqi is held through a wholly-owned subsidiary which has contributed 40% of the registered capital. As neither the Group nor the joint venture partner have the ability to control the board of directors and economic activities of Greentown Haiqi, the Group accounts for its investments in Greentown Haiqi as a jointly controlled entity.

The Group’s effective interest in the results, assets and liabilities of its jointly controlled entities are summarised below:

	2008	2007
	HK$ Million	HK$ Million
Assets	2,821.7	1,965.0
Liabilities	(235.0)	(0.4)
Equity	2,586.7	1,964.6
Revenues	—	—
Loss before taxation	(10.9)	(0.5)
Taxation	—	—
Loss after taxation	(10.9)	(0.5)

14. AVAILABLE-FOR-SALE INVESTMENTS

		Group
	2008		2007
	HK$ Million		HK$ Million
Listed investments stated at market value
— in Hong Kong	—		1,149.9
— outside Hong Kong	597.0		1,344.1
Unlisted investments	7.0		22.6
	604.0		2,516.6

15. LONG TERM RECEIVABLES

Long term receivables represent receivables due after more than one year.

— I-23 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. EMPLOYEE RETIREMENT BENEFITS

• (a) Defined benefit pension schemes

The Group makes contributions to defined benefit pension schemes that provide pension benefits for certain employees upon retirement. The assets of the schemes are held separately by independently administered funds. The schemes are funded by contributions from both employers and employees. The contributions from employers are in accordance with recommendations made by actuaries based on their valuation. The latest valuations of the schemes as at 31 December 2008 were performed by Watson Wyatt Hong Kong Limited, using the projected unit credit method. The funding ratio of the principal scheme is 93.0%.

(i) The defined benefit pension schemes (liabilities)/assets amount recognised in the consolidated balance sheet is as follows:

	2008	2007
	HK$ Million	HK$ Million
Present value of funded obligations	(51.4)	(78.4)
Fair value of scheme assets	47.8	86.9
	(3.6)	8.5

(ii) Scheme assets consist of the following:

	2008	2007
	HK$ Million	HK$ Million
Equity securities	29.8	60.5
Debt securities	15.5	22.5
Deposits and cash	2.5	3.9
	47.8	86.9

(iii) Movements in the present value of the defined benefit obligations are as follows:

	2008	2007
	HK$ Million	HK$ Million
At 1 January	78.4	76.9
Net benefits paid and transferred	(15.7)	(15.3)
Employee contributions	0.5	0.6
Current service cost	2.1	2.6
Interest cost	2.7	3.0
Actuarial (gains)/losses	(16.6)	10.6
At 31 December	51.4	78.4

— I-24 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

16. EMPLOYEE RETIREMENT BENEFITS (Continued)

• (a) Defined benefit pension schemes (Continued)

• (iv) Movements in the scheme assets are as follows:

	2008	2007
	HK$ Million	HK$ Million
At 1 January	86.9	83.6
Contributions paid	0.5	0.7
Net benefits paid and transferred	(15.7)	(15.3)
Employee contributions	0.5	0.6
Expected return on scheme assets	6.9	6.4
Actuarial (losses)/gains	(31.3)	10.9
At 31 December	47.8	86.9

The Group expects to pay HK$1.2 million in contribution to the scheme in 2009.

• (v) Expense/(income) recognised in the consolidated profit and loss account is as follows:

	2008	2007
	HK$ Million	HK$ Million
Current service cost	2.1	2.6
Interest cost	2.7	3.0
Expected return on scheme assets	(6.9)	(6.4)
	(2.1)	(0.8)

The income is recognised in the following line items in the consolidated profit and loss account:

		2008	2007
		HK$ Million	HK$ Million
Direct	costs and operating expenses	(1.9)	(0.6)
Selling	and marketing expenses	(0.2)	(0.2)
		(2.1)	(0.8)
Actual	return on scheme assets	(24.5)	17.3

— I-25 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

16. EMPLOYEE RETIREMENT BENEFITS (Continued)

• (a) Defined benefit pension schemes (Continued)

• (vi) The principal actuarial assumptions used as at 31 December 2008 (expressed as a range) are as follows:

		2008	2007
Discount rate at 31 December		1.2%	3.45-3.5%
Expected rate of return	on scheme assets/plan assets	8%	7-8%
Future salary increases	2008	N/A	3%
	2009	1%	3%
	2010	2%	3%
	onwards	3%	3%

The expected return on scheme assets is determined based on market expectation, at the beginning of the period, for returns net of administration costs, over the entire period of the related benefit obligations.

(vii) Historical information:

	2008	2007	2006
	HK$ Million	HK$ Million	HK$ Million
Present value of the defined benefit
obligations	(51.4)	(78.4)	(76.9)
Fair value of scheme assets	47.8	86.9	83.6
(Deficit)/surplus in the schemes	(3.6)	8.5	6.7
Experience (gain)/loss on scheme liabilities	(25.8)	10.6	3.5
Experience (gain)/loss on scheme assets	31.3	(10.9)	(7.3)

• (viii) The Group recognised actuarial losses amounting to HK$14.7 million (2007: gains HK$0.3 million) for the year ended 31 December 2008 directly in the statement of recognised income and expense. The cumulative amount of actuarial losses recognised amounted to HK$18.0 million (2007: HK$3.3 million) as at 31 December 2008.

(b) Defined contribution pension schemes

A number of defined contribution pension schemes (including the Mandatory Provident Fund) are available to the employees of the Group. For defined contribution pension schemes, both the Group and the employees contribute respectively to the schemes sums which represent percentages of the employees’ salaries as defined under the relevant trust deeds. The contributions are expensed as incurred and may be reduced by contributions forfeited by those employees who have left the scheme prior to vesting fully in the contributions.

— I-26 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

17. PROPERTIES UNDER DEVELOPMENT

(a) The carrying value of leasehold land included in properties under development is summarised as follows:

		Group
	2008		2007
	HK$ Million		HK$ Million
Held outside Hong Kong
Long lease	3,086.2		—
Medium lease	398.2		—
	3,484.4		—

• (b) Properties under development included deposit of HK$1,472.4 million (2007: HK$985.3 million) paid for the acquisition for certain land sites located in Mainland China.

18. TRADE AND OTHER RECEIVABLES

(a) Ageing analysis

Included in this item are trade receivables (net of allowance for doubtful debts) with the following ageing analysis as at 31 December 2008 as follows:

		Group
	2008		2007
	HK$ Million		HK$ Million
Trade receivables
Due within 30 days	75.1		64.2
Due after 30 days but within 60 days	1.1		2.9
Due after 60 days but within 90 days	0.7		0.4
	76.9		67.5
Other receivables	24.6		351.1
Amounts due from fellow subsidiaries	3.8		6.6
	105.3		425.2

The Group has defined credit policies for each of its core business. The general credit terms allowed range from 0 to 60 days. The amounts due from fellow subsidiaries are unsecured, interest free and recoverable on demand.

— I-27 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

18. TRADE AND OTHER RECEIVABLES (Continued)

(b) Impairment of trade receivables

Impairment losses in respect of trade receivables are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly. At 31 December 2008 and 31 December 2007, no amounts of significant trade receivables were individually determined to be doubtful or impaired.

(c) Trade receivables that are not impaired

As at 31 December 2008 and 31 December 2007, the Group assessed that of the total trade debtors and receivables, virtually all of them are neither past due nor impaired.

Receivables that were neither past due nor impaired relate to a wide range of customers for whom there was no recent history of default.

19. PLEDGED BANK DEPOSITS

Pledged bank deposits represent deposits placed with banks as security for credit facilities made available to the Group for securing a land bidding.

20. TRADE AND OTHER PAYABLES

Included in this item are trade creditors with an ageing analysis as at 31 December 2008 as follows:

		Group
	2008		2007
	HK$ Million		HK$ Million
Trade creditors
Due within 30 days	12.5		15.0
Due after 30 days but within 60 days	8.0		6.1
Due after 60 days but within 90 days	0.9		—
	21.4		21.1
Other payables and provisions	121.9		118.2
Amounts due to fellow subsidiaries	8.6		12.4
Amounts due to an associate	29.0		35.5
	180.9		187.2

The amounts due to fellow subsidiaries and an associate are unsecured, interest free and repayable on demand. The above includes deposits received amounting to HK$1.8 million (2007: HK$9.8 million) which are expected to be settled after one year.

— I-28 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

21. DERIVATIVE FINANCIAL INSTRUMENTS

	2008	2008	2007	2007
	Assets	Liabilities	Assets	Liabilities
	HK$ Million	HK$ Million	HK$ Million	HK$ Million
At fair value through profit or loss (Note (c))
Cross currency interest rate swaps	2.9	1.3	—	—
Forward foreign exchange contracts	—	165.8	—	106.5
Total	2.9	167.1	—	106.5
Analysis:
Current	—	165.8	—	106.5
Non-current	2.9	1.3	—	—
Total	2.9	167.1	—	106.5

Analysis of the remaining maturities at 31 December 2008 of the above derivative financial instruments were as follows:

		2008	2008	2007	2007
		Assets	Liabilities	Assets	Liabilities
		HK$ Million	HK$ Million	HK$ Million	HK$ Million
Cross currency interest rate swaps
Expiring after more than 1 year but
	within 5 years	2.9	1.3	—	—
		2.9	1.3	—	—
Forward foreign exchange contracts
Expiring within 1 year		—	165.8	—	106.5
		—	165.8	—	106.5
Total		2.9	167.1	—	106.5

— I-29 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

21. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)

• (a) The notional principal amounts of derivative financial instruments outstanding at 31 December 2008 were as follows:

2008 2007 HK$ Million HK$ Million Cross currency interest rate swaps 2,302.2 — Forward foreign exchange contracts 942.1 794.2

• (b) Derivative financial assets represented the amounts the Group would receive whilst derivative financial liabilities represented the amounts the Group would pay if the position were closed at the balance sheet date.

• (c) All the derivative financial instruments were not qualified for hedge accounting and their corresponding changes in fair values were recognised to profit and loss accounts.

22. BANK LOANS

		Group		Company	Company
	2008		2007	2008		2007
	HK$ Million	_HK$ _	Million	HK$ Million	_HK$ _	Million
Bank loans repayable:
Within 1 year or on demand	—		1,278.9	—		500.0
After 2 years but within 5 years	3,065.0		580.0	—		—
	3,065.0		1,858.9	—		500.0
Analysis:
Secured	1,465.0		980.0	—		—
Unsecured	1,600.0		878.9	—		500.0
	3,065.0		1,858.9	—		500.0

• (a) The Group’s borrowings are denominated in Hong Kong dollars (after the effects of cross-currency interest rate swaps arrangements as detailed in Note 24(a)).

• (b) At 31 December 2008, the Group’s banking facilities in the amount of HK$1,465.0 million (2007: HK$1,100.0 million) were secured by certain fixed assets and certain available-for-sale investments with an aggregate carrying value of HK$2,174.1 million (2007: over certain available-for-sale investments with carrying value of HK$2,003.6 million) and were fully utilised (2007: HK$980.0 million).

— I-30 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

23. DEFERRED TAXATION

• (a) The components of deferred tax liabilities recognised in the consolidated balance sheet and the movements during the year are as follows:

Balance at 1 January 2007 Charged to the consolidated profit and loss account Balance at 31 December 2007 and at 1 January 2008 Credited to the consolidated profit and loss account Balance at 31 December 2008	Group	Group
	Depreciation allowances in excess of the related depreciation Revaluation of investment properties Others Total HK$ Million HK$ Million HK$ Million HK$ Million 17.7 208.0 1.2 226.9 4.1 28.6 0.4 33.1 21.8 236.6 1.6 260.0 (2.0) (5.6) (2.1) (9.7) 19.8 231.0 (0.5) 250.3
		260.0 (9.7)
		250.3

• (b) No deferred tax assets and liabilities have been recognised by the Company as there were no material temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the corresponding tax bases at 31 December 2008 and 2007.

24. FINANCIAL RISK MANAGEMENT

The Group exposes to financial risks as to interest rate, foreign currency, liquidity and credit arises in the normal course of business. To manage these risk exposures, the Group Finance Committee develops, maintains and monitors the Group’s financial policies designed to facilitate cost efficient funding to the Group and to mitigate the impacts of fluctuations in interest rates and exchange rates. The financial policies are implemented by the Group’s Treasury department, which operates as a centralised service unit in close co-operation with the Group’s operating units for managing the day-to-day treasury functions and financial risks and for providing cost efficient funding to the Group.

The Group cautiously uses derivatives, principally forward currency contracts and cross currency interest rate swaps as appropriate for financing, hedging transactions and for managing the Group’s assets and liabilities. It is the Group’s policy not to enter into derivative transactions and invest in financial products with significant underlying leverage for speculative purposes.

— I-31 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. FINANCIAL RISK MANAGEMENT (Continued)

(a) Interest rate risk

The Group’s main exposure to interest rate risk relates principally to Hong Kong dollar and US dollar borrowings. The Group has entered into a number of cross currency interest rate swaps with the financial effect of converting the US dollar borrowings into Hong Kong dollar borrowings. Borrowings at variable rates expose the Group to cash flow interest rate risk. The Group manages its interest rate risk exposures in accordance with defined policies through regular review with a focus on reducing the Group’s overall cost of funding as well as having regards to the floating/fixed rate mix appropriate to its current business portfolio.

As at 31 December 2008, after taking into account of cross-currency interest rate swaps, all the Group’s borrowings were at floating rate, approximately 1.5% per annum (2007: 3.5 % per annum) (see Note 22(a)).

Based on the sensitivity analysis performed on 31 December 2008, it was estimated that a general increase/decrease of 1% interest rates would decrease/increase the Group’s post-tax profit and total equity by approximately HK$22.1million (2007: HK$12.7 million). This takes into account the effect of interest bearing bank deposits.

The sensitivity analysis is determined assuming all other variables, including the amount of borrowings and bank deposits, held constant for the whole year and the change in interest rates are compared to the rates applicable at the balance sheet date and are applied to both derivative and non-derivative financial instruments in existence at that date. The analysis is performed on the same basis for 2007.

(b) Foreign currency risk

The Group owns assets and conducts its business both in Hong Kong and China with its cash flows substantially denominated in Hong Kong dollars and RMB and exposes to foreign currency risk with respect to RMB related to its property development in China. Anticipated foreign exchange payments relate primarily to RMB capital expenditure. Where appropriate or available in a cost-efficient manner, the Group may enter into forward foreign exchange contracts to manage its foreign currency risk arising from the anticipated transactions in currencies other than its entities’ functional currencies.

The Group’s borrowings are predominantly denominated in the functional currency of the entity taking out the borrowings. In the case of group companies whose functional currencies are in Hong Kong dollars, their borrowings will be either in Hong Kong dollars or US dollars. For managing the overall financing costs of existing and future capital requirement for the projects in China, the Group has adopted a diversified funding approach and entered into certain forward foreign exchange contracts with the financial effect of taking up JPY borrowings, the interest rate of which is relative lower but exposing the Group to exchange rate risk with respect to JPY.

— I-32 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. FINANCIAL RISK MANAGEMENT (Continued)

• (b) Foreign currency risk (Continued)

The following table details the Group’s exposure at the balance sheet date to currency risk arising from forecast transactions or recognised assets or liabilities denominated in a currency other than the functional currency of the Group’s entities to which they relate.

		2008
	USD Million	RMB Million	AUD Million	JPY Million
The Group
Available-for-sale investments	77.4	—	—	—
Bank deposits and cash	21.2	—	—	—
Bank loans	(295.2)	—	—	—
Inter-company balances	—	65.7	—	—
Gross exposure arising from recognised
assets and liabilities	(196.6)	65.7	—	—
Notional amount of forward foreign exchange
contracts at fair value through profit
or loss	120.8	—	—	(12,771.9)
Notional amount of cross currency interest
rate swaps at fair value through profit
or loss	295.2	—	—	—
Overall net exposure	219.4	65.7	—	(12,771.9)
		2007
	USD Million	RMB Million	AUD Million	JPY Million
The Group
Available-for-sale investments	175.2	—	—	—
Bank deposits and cash	73.3	—	—	—
Bank loans	—	—	—	—
Inter-company balances	—	—	—	—
Gross exposure arising from recognised
assets and liabilities	248.5	—	—	—
Notional amount of forward foreign exchange
contracts at fair value through profit
or loss	66.1	—	39.0	(12,771.9)
Notional amount of cross currency interest
rate swaps at fair value through profit
or loss	—	—	—	—
Overall net exposure	314.6	—	39.0	(12,771.9)

— I-33 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. FINANCIAL RISK MANAGEMENT (Continued)

• (b) Foreign currency risk (Continued)

During the year, an amount of HK$165.0 million (2007: HK$75.7 million) loss was recognised on the forward foreign exchange contracts.

Based on the sensitivity analysis performed on 31 December 2008, it was estimated that the approximate change in the Group’s post-tax profit and total equity in response to reasonably possible changes in the foreign exchange rates to which the Group has significant exposure at the balance sheet date are as follows:

• a 5% increase/decrease in the exchange rate of JPY against USD will decrease/increase the Group’s post-tax profit and total equity by approximately HK$54.9 million (2007: HK$44.6 million).

• the impact on the Group’s post-tax profit and total equity is not expected to be material in response to possible changes in the foreign exchange rates of other currencies to which the Group is exposed.

The above sensitivity analysis is determined assuming that the change in foreign exchange rates are compared to the rates applicable at the balance sheet date and are applied to each of the Group’s entities’ exposure to currency risk for both derivative and non-derivative financial instruments in existence at that date, and that all other variables, in particular interest rates, remain constant.

In this respect, it is assumed that the pegged rate between the HKD and the USD would be materially unaffected by any changes in movement in value of the USD against other currencies. Results of the analysis as presented above represent an aggregation of the effects on each of the Group entities’ profit and equity measured in the respective functional currencies, translated into HKD at exchange rate ruling at the balance sheet date for presentation purpose. The analysis is performed on the same basis for 2007.

• (c) Equity price risk

The Group is exposed to equity price changes arising from equity investments classified as available-for-sale investments.

Listed investments held in the available-for-sale portfolio have been chosen taking reference to their long term growth potential and returns and are monitored regularly for performance. Given that the volatility of the stock markets may not have a direct correlation with the Group’s investment portfolio, it is impractical to determine the impact that the changes in stock market indices would have on the Group’s portfolio of equity investments.

Based on the sensitivity analysis performed on 31 December 2008, it is estimated that a 5% (2007: 10%) increase/decrease in the market value of the Group’s available-for-sale investments, with all other variables held constant, would not affect the Group’s post-tax profit unless there are impairments but would increase/decrease the Group’s total equity by HK$30.2 million (2007: HK$251.7 million). The analysis is performed on the same basis for 2007.

(d) Liquidity risk

The Group adopts a prudent liquidity risk management policy, maintaining sufficient reserves of cash and readily realisable marketable securities and adequate committed lines of funding with staggered maturities to reduce refinancing risk in any year from major financial institutions to maintain flexibility for meeting its liquidity requirements in the short and longer term. The Group’s cash management are substantially centralised by the Group Treasury department, which regularly monitor the current and expected liquidity requirements and its compliance with lending covenants.

— I-34 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. FINANCIAL RISK MANAGEMENT (Continued)

• (d) Liquidity risk (Continued)

Certain non wholly-owned subsidiaries are responsible for their own cash management, including the short term investment of cash surpluses with creditworthy financial institutions and the raising of loans to cover expected cash demands, in accordance with the established policies and strategies with the concurrence by the Company.

The following tables detail the remaining contractual maturities at the balance sheet date of the Group’s derivative an non-derivative financial liabilities, which are based on contractual undiscounted cash flows and the earliest date the Group can be required to pay:

		Contractual undiscounted cash flow	Contractual undiscounted cash flow	Contractual undiscounted cash flow	Contractual undiscounted cash flow	Contractual undiscounted cash flow	Contractual undiscounted cash flow
			Within	More than			More than
			1 year	1 year but			2 years but
	Carrying		or on		less than		less than			More than
	amount	Total	demand		2 years				5 years	5 years
	_HK$ Million _	_HK$ Million _	_HK$ Million _	_HK$ Million _			_HK$ _		_Million _	HK$ Million
At 31 December 2008
Bank loans	(3,065.0)	(3,241.5)	(46.6)			(46.4)		(3,148.5)		—
Trade and other payables	(143.2)	(139.9)	(135.0)			(3.7)			(1.2)	—
Forward foreign exchange
contracts at fair value
through profit or loss	(165.8)	(165.8)	(165.8)			—			—	—
	(3,374.0)	(3,547.2)	(347.4)			(50.1)		(3,149.7)		—
At 31 December 2007
Bank loans	(1,858.9)	(1,930.9)	(1,308.0)			(22.4)			(600.5)	—
Trade and other payables	(139.0)	(138.5)	(122.7)			(13.4)			(2.4)	—
Forward foreign exchange
contracts at fair value
through profit or loss	(106.5)	(106.5)	(106.5)			—			—	—
	(2,104.4)	(2,175.9)	(1,537.2)			(35.8)			(602.9)	—

The contractual undiscounted cash flow for bank loans is after taking into account the effect of cross currency interest rate swaps.

(e) Credit risk

The Group’s credit risk is primarily attributable to rental, trade and other receivables and over-the-counter derivative financial instruments. The exposures to these credit risks are closely monitored on an ongoing basis by the established credit policies and procedures in each of its core businesses. In respect of rental receivables, sufficient rental deposits from tenants are held to cover potential exposure to credit risk. Further, evaluations are made for the customers with reference to their repayment history and financial strength, as well as the economic environment in which the customer operates.

— I-35 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. FINANCIAL RISK MANAGEMENT (Continued)

• (e) Credit risk (Continued)

Investments and transactions involving derivative financial instruments are with counter parties with sound credit ratings to minimise credit risk exposure.

The Group has no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the consolidated balance sheet. Except for the financial guarantees given by the Company as set out in Note 28, the Group does not provide any other guarantee which would expose the Group or the Company to material credit risk.

• (f) Fair value estimation

Listed investments are stated at quoted market prices.

The fair values of receivables, bank balances and other current assets, payables and accruals, current borrowings, and provisions are assumed to approximate their carrying amounts due to the short-term maturities of these assets and liabilities.

The fair value of forward foreign exchange contracts is determined using forward exchange rates at the balance sheet date. The fair value of cross currency interest rate swaps is determined based on the amount that the Group would receive or pay to terminate the swaps.

All financial instruments are carried at amounts not materially different from their fair values as at 31 December 2008 and 31 December 2007. Amounts due from/(to) subsidiaries are unsecured, interest free and have no fixed repayment terms. Given these terms it is not meaningful to disclose fair values.

(g) Capital management

The Group’s primary objective when managing capital are to safeguard the Group’s ability to continue as a going concern to meet its financial obligations and continue to provide returns for shareholders and benefits for other stakeholders, by pricing products and services commensurately with the level of risk and by securing access to finance at a reasonable cost.

The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholders returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in the Group’s business portfolio and economic conditions.

The Group monitors its capital structure by reviewing its net debt-to-equity ratio and cash flow requirements, taking into account its future financial obligations and commitments. For this purpose, the Group defines net debt as total loans less bank deposits and cash. Shareholders’ equity comprises issued share capital and reserves attributable to equity shareholders of the Company. Total equity comprise shareholders’ equity and minority interests.

— I-36 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

24. FINANCIAL RISK MANAGEMENT (Continued)

• (g) Capital management (Continued)

The net debt-to-equity ratio as at 31 December 2008 and 2007 were as follows:

	Group
	2008	2007
	HK$ Million	HK$ Million
Total debts (Note 22)	3,065.0	1,858.9
Less: Bank deposits and cash	(1,258.4)	(584.8)
Net debt	1,806.6	1,274.1
Shareholders’ equity	7,067.0	5,748.1
Total equity	7,762.8	5,945.1
Net debt-to-shareholders’ equity ratio	25.6%	22.2%
Net debt-to-total equity ratio	23.3%	21.4%

25. SHARE CAPITAL

Authorised Ordinary shares of HK$0.50 each Ordinary shares, issued and fully paid At 1 January Rights issue At 31 December	2008 No. of shares Million HK$ Million 1,200.0 600.0 315.0 157.5 157.5 78.8 472.5 236.3	2007 No. of shares Million HK$ Million 380.0 190.0 315.0 157.5 — — 315.0 157.5	2007 No. of shares Million HK$ Million 380.0 190.0 315.0 157.5 — — 315.0 157.5
			157.5 —
			157.5

By an ordinary resolution passed at the extraordinary general meeting held on 3 March 2008, the Company’s authorised ordinary share capital was increased to HK$600,000,000 by the creation of an additional 820,000,000 ordinary shares of HK$0.50 each, ranking pari passu with the existing ordinary shares of the Company in all respects. On 25 March 2008, 157,500,000 ordinary shares were issued at HK$12.80 per share on completion of a rights issue exercise.

— I-37 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

26. CAPITAL AND RESERVES

				Shareholders’ equity	Shareholders’ equity
				Investments			Total
		Share	Share	revaluation	Revenue	Exchange	shareholders’	Minority	Total
		capital	premium	reserve	reserve	reserve	equity	interests	equity
		_HK$ Million _	_HK$ Million _	_HK$ Million _	HK$ Million HK$ Million		_HK$ Million _	HK$ Million HK$ Million
(a)	The Group
	Balance at 1 January 2007	157.5	542.0	715.9	3,362.6	—	4,778.0	—	4,778.0
	Surplus on revaluation of
	available-for-sale investments	—	—	482.9	—	—	482.9	—	482.9
	Transferred to the consolidated
	profit and loss account on
	disposal of available-for-sale
	investments	—	—	(122.5)	—	—	(122.5)	—	(122.5)
	Transferred to the consolidated
	profit and loss account on
	impairment of available-for-sale
	investments	—	—	19.9	—	—	19.9	—	19.9
	Exchange difference	—	—	—	—	42.5	42.5	—	42.5
	Actuarial gains on defined benefit
	pension schemes	—	—	—	0.3	—	0.3	—	0.3
		—	—	380.3	0.3	42.5	423.1	—	423.1
	Profit for the year	—	—	—	638.4	—	638.4	(0.1)	638.3
	Total recognised income and
	expense	—	—	380.3	638.7	42.5	1,061.5	(0.1)	1,061.4
	Shares issued by a subsidiary	—	—	—	—	—	—	197.1	197.1
	Dividends approved in respect of
	the previous year	—	—	—	(75.6)	—	(75.6)	—	(75.6)
	Dividends declared in respect of the
	current year	—	—	—	(15.8)	—	(15.8)	—	(15.8)
	Balance at 31 December 2007	157.5	542.0	1,096.2	3,909.9	42.5	5,748.1	197.0	5,945.1

— I-38 —

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

26. CAPITAL AND RESERVES (Continued)

(a) The Group Balance at 1 January 2008 Deficit on revaluation of available-for-sale investments Transferred to the consolidated profit and loss account on disposal of available-for-sale investments Transferred to the consolidated profit and loss account on impairment of available-for-sale investments Exchange difference Actuarial losses on defined benefit pension schemes Profit for the year Total recognised income and expense Shares issued by a subsidiary Rights issue Dividends approved in respect of the previous year Dividends declared in respect of th current year Balance at 31 December 2008	Shareholders’ equity Share capital Share premium Investments revaluation reserve Revenue reserve Exchange reserve Total shareholders’ equity Minority interests Total equity HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million 157.5 542.0 1,096.2 3,909.9 42.5 5,748.1 197.0 5,945.1 — — (649.4) — — (649.4) — (649.4) — — (333.3) — — (333.3) — (333.3) — — 47.5 — — 47.5 — 47.5 — — — — 228.6 228.6 13.2 241.8 — — — (14.7) — (14.7) — (14.7) — — (935.2) (14.7) 228.6 (721.3) 13.2 (708.1) — — — 170.5 — 170.5 (0.9) 169.6 — — (935.2) 155.8 228.6 (550.8) 12.3 (538.5) — — — — — — 486.5 486.5 78.8 1,927.9 — — — 2,006.7 — 2,006.7 — — — (113.4) — (113.4) — (113.4) e — — — (23.6) — (23.6) — (23.6) 236.3 2,469.9 161.0 3,928.7 271.1 7,067.0 695.8 7,762.8	Shareholders’ equity Share capital Share premium Investments revaluation reserve Revenue reserve Exchange reserve Total shareholders’ equity Minority interests Total equity HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million 157.5 542.0 1,096.2 3,909.9 42.5 5,748.1 197.0 5,945.1 — — (649.4) — — (649.4) — (649.4) — — (333.3) — — (333.3) — (333.3) — — 47.5 — — 47.5 — 47.5 — — — — 228.6 228.6 13.2 241.8 — — — (14.7) — (14.7) — (14.7) — — (935.2) (14.7) 228.6 (721.3) 13.2 (708.1) — — — 170.5 — 170.5 (0.9) 169.6 — — (935.2) 155.8 228.6 (550.8) 12.3 (538.5) — — — — — — 486.5 486.5 78.8 1,927.9 — — — 2,006.7 — 2,006.7 — — — (113.4) — (113.4) — (113.4) e — — — (23.6) — (23.6) — (23.6) 236.3 2,469.9 161.0 3,928.7 271.1 7,067.0 695.8 7,762.8
		(708.1) 169.6
		(538.5) 486.5 2,006.7 (113.4) (23.6)
		7,762.8

— I-39 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

26. CAPITAL AND RESERVES (Continued)

		Share	Share	Revenue	Total
		capital	premium	reserve	equity
		HK$ Million	HK$ Million	HK$ Million	HK$ Million
(b)	The Company
	Balance at 1 January 2007	157.5	542.0	295.0	994.5
	Profit for the year	—	—	43.3	43.3
	Dividends approved in respect of
	the previous year	—	—	(75.6)	(75.6)
	Dividends declared in respect of
	the current year	—	—	(15.8)	(15.8)
	Balance at 31 December 2007	157.5	542.0	246.9	946.4
	Balance at 1 January 2008	157.5	542.0	246.9	946.4
	Profit for the year	—	—	0.3	0.3
	Rights issue	78.8	1,927.9	—	2,006.7
	Dividends approved in respect of
	the previous year	—	—	(113.4)	(113.4)
	Dividends declared in respect of
	the current year	—	—	(23.6)	(23.6)
	Balance at 31 December 2008	236.3	2,469.9	110.2	2,816.4

• (c) Reserves of the Company available for distribution to shareholders at 31 December 2008 amounted to HK$110.2 million (2007: HK$246.9 million).

• (d) The application of the share premium account is governed by Section 48B of the Hong Kong Companies Ordinance. The investments revaluation reserve has been set up and will be dealt with in accordance with the accounting policies adopted by the Group for the revaluation of available-for-sale investments. The exchange reserve comprises exchange differences arising from the translation of the financial statements of foreign operations.

• (e) After the balance sheet date the directors proposed a final dividend of 15 cents per share (2007: 24 cents per share) amounting to HK$70.9 million (2007: HK$113.4 million). This dividend has not been recognised as a liability at the balance sheet date.

27. MATERIAL RELATED PARTY TRANSACTIONS

• (a) During the financial year, there was in existence a management agreement with a subsidiary of the ultimate holding company for the management of the Group’s hotel operations. Fees payable under this arrangement during the current year amounted to HK$36.7 million (2007: HK$34.8 million) which included management fees of HK$30.2 million (2007: HK$28.8 million) and marketing fees of HK$6.5 million (2007: HK$6.0 million). The management fees included a basic fee and an incentive fee which are calculated based on the relevant percentage of gross revenue and gross operating profit respectively. The marketing fee is calculated based on a percentage of gross revenue. Such transaction constitutes a connected transaction as defined under the Listing Rules.

— I-40 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

27. MATERIAL RELATED PARTY TRANSACTIONS (Continued)

• (b) The Group has a tenancy agreement with Lane Crawford (Hong Kong) Limited, which is indirectly wholly owned by a trust of which the chairman of the Company’s ultimate holding company is the settlor, in respect of the lease of shops situated on G/F, 1/F & 2/F of The Marco Polo Hongkong Hotel. The duration of tenancy is from 11 April 2003 to 10 April 2009. The rental income earned by the Group from the above agreement during the current year, including contingent rental income, amounted to HK$88.1 million (2007: HK$88.0 million). Such a transaction does not constitute a connected transaction under the Listing Rules.

28. CONTINGENT LIABILITIES

As at 31 December 2008, there were contingent liabilities in respect of guarantees given by the Company on behalf of subsidiaries relating to bank overdrafts and credit facilities up to HK$3,968.1 million (2007: HK$503.1 million). Except for the above, the Company does not provide any other guarantee.

The Company has not recognised any deferred income for the guarantees given in respect of borrowings and other banking facilities for subsidiaries as their fair value cannot be reliably measured and their transaction price was HK$Nil (2007: HK$Nil).

As at the balance sheet date, the directors do not consider it is probable that a claim will be made against the Company under any of the guarantees.

29. COMMITMENTS

			Group
		2008		2007
		HK$ Million		HK$ Million
(a)	Capital commitments
	Contracted but not provided for	1.6		9.0
	Authorised but not contracted for	1.4		19.8
		3.0		28.8
(b)	Properties under development
	Contracted but not provided for	345.1		3,965.3
	Authorised but not contracted for	13,583.2		11,914.0
		13,928.3		15,879.3
(c)	Properties under development undertaken by jointly
	controlled entities attributable to the Group
	Contracted but not provided for	746.0		1,126.8
	Authorised but not contracted for	2,492.3		2,052.0
		3,238.3		3,178.8

Included in properties under development and those undertaken by jointly controlled entities are land costs of HK$951.6 million payable by instalments in 2009.

— I-41 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

30. CHANGES IN ACCOUNTING POLICIES

The Hong Kong Institute of Certified Public Accountants (“HKICPA”) has issued certain new and revised Hong Kong Financial Reporting Standards (“HKFRSs”) and Interpretations that are first effective for the current accounting period of the Group, including HK(IFRIC) 14, HKAS 19 - the limit on a defined benefit asset, minimum funding requirements and their interaction. These HKFRSs developments have had no material impact on the Group’s financial statements as either they were consistent with accounting policies already adopted by the Group or they were not relevant to the Group’s operations.

The adoption of the new Interpretation to HKFRSs has had no significant impact on the financial statements of the Group for the years ended 31 December 2007 and 31 December 2008.

The Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (see Note 33).

31. POST BALANCE SHEET EVENTS

After the balance sheet date the Directors proposed a final dividend. Further details are disclosed in Note 8.

32. COMPARATIVE FIGURES

The amounts due from/to subsidiaries are now presented in interest in subsidiaries classified as non-current assets in the Company’s balance sheet. Accordingly, the comparative figures have been reclassified to conform with the current year’s presentation.

33. FUTURE CHANGES IN ACCOUNTING POLICIES

Up to the date of issue of these financial statements, the HKICPA has issued the following amendments, new standards and interpretations that may impact the Group’s financial statements, which have not been adopted since they are only effective after 31 December 2008.

	Effective for accounting	Effective for accounting
	**periods **	beginning on or after
HK (IFRIC) 13 — Customer loyalty programmes		1 July 2008
HKAS 1 (Revised 2007) — Presentation of financial statements		1 January 2009
HKAS 23 (Revised) — Borrowing costs		1 January 2009
HKAS 27 (Revised) — Consolidated and separate financial statements		1 July 2009
HKFRS 8 — Operating segments		1 January 2009

The Group is in the process of making an assessment of what the impact of these amendments, new standards and new interpretations is expected to be in the period of initial application. So far it has concluded that apart from improvements to HKFRS, and HK (IFRIC) 15 — Agreements for conclusion of real estate which may have some impact, the adoption of the other new standards and interpretation is unlikely to have a significant impact on the Group’s results of operations and financial position.

— I-42 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

34. PARENT AND ULTIMATE HOLDING COMPANY

The parent and ultimate holding company is Wheelock and Company Limited, a company incorporated and listed in Hong Kong.

35. APPROVAL OF FINANCIAL STATEMENTS

The financial statements were approved and authorised for issue by the Directors on 10 March 2009.

PRINCIPAL ACCOUNTING POLICIES

(A) STATEMENT OF COMPLIANCE

These financial statements have been prepared in accordance with all applicable Hong Kong Financial Reporting Standards (“HKFRSs”), which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations 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. A summary of the principal accounting policies adopted by the Group is set out below.

(B) BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS

The consolidated financial statements for the year ended 31 December 2008 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in an associate and jointly controlled entities.

The measurement basis used in the preparation of the financial statements is the historical cost basis except where stated otherwise in the accounting policies set out below.

The preparation of financial statements in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of HKFRSs that have significant effect on the financial statements and estimates with a significant risk of material adjustment are discussed in (V).

— I-43 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(C) BASIS OF CONSOLIDATION

(i) Subsidiaries and minority interests

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

An investment in a controlled subsidiary is consolidated into the consolidated financial statements from the date that control commences until the date that control ceases.

Intra-group balances and transactions, and any unrealised profits arising from intra-group transactions, are eliminated in full in preparing the consolidated financial statements. Unrealised losses resulting from intra-group transactions are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Minority interests represent the portion of the net assets of subsidiaries attributable to interests that are not owned by the Company, whether directly or indirectly through subsidiaries, and in respect of which the Group has not agreed any additional terms with the holders of those interests which would result in the Group as a whole having a contractual obligation in respect of those interests that meets the definition of a financial liability. Minority interests are presented in the consolidated balance sheet within equity, separately from equity attributable to the equity shareholders of the Company. Minority interests in the results of the Group are presented on the face of the consolidated profit and loss account as an allocation of the total profit or loss for the year between minority interests and the equity shareholders of the Company.

Where losses applicable to the minority exceed the minoritys interest in the equity of a subsidiary, the excess, and any further losses applicable to the minority, are charged against the Group’s interest except to the extent that the minority has a binding obligation to, and is able to, make additional investment to cover the losses. If the subsidiary subsequently reports profits, the Group’s interest is allocated all such profits until the minority’s share of losses previously absorbed by the Group has been recovered.

In the Company’s balance sheet, an investment in a subsidiary is stated at cost less impairment losses.

(ii) Associates and jointly controlled entities

An associate is an entity in which the Group or Company has significant influence, but not control or joint control, over its management, including participation in the financial and operating policy decisions.

A jointly controlled entity is an entity which operates under a contractual arrangement between the Group or Company and other parties, where the contractual arrangement establishes that the Group or Company and one or more of the other parties share joint control over the economic activity of the entity.

— I-44 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(C) BASIS OF CONSOLIDATION (Continued)

(ii) Associates and jointly controlled entities (Continued)

An investment in an associate or a jointly controlled entity is accounted for in the consolidated financial statements under the equity method and is initially recorded at cost adjusted thereafter for the post acquisition change in the Group’s share of the associate’s or the jointly controlled entity’s net assets. The consolidated profit and loss account includes the Group’s share of the post-acquisition, post-tax results of the associates and jointly controlled entities for the year, including any impairment of goodwill relating to the investment in associates and jointly controlled entities recognised for the year.

When the Group’s share of losses exceeds its interest in the associate or jointly controlled entity, the Group’s interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate and jointly controlled entity. For this purpose, the Group’s interest in the associate or jointly controlled entity is the carrying amount of the investment under the equity method together with the Group’s long-term interests that, in substance, form part of the Group’s net investment in the associate or jointly controlled entity.

Unrealised profits and losses resulting from transactions between the Group and its associates and jointly controlled entities are eliminated to the extent of the Group’s interest in the associate or jointly controlled entity, except where unrealised losses provide evidence of an impairment of the asset transferred, in which case they are recognised immediately in the consolidated profit and loss account.

(iii) Goodwill

Goodwill represents the excess of the cost of a business combination or an investment in an associate or jointly controlled entity over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities.

Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated to cash-generating units and is tested annually for impairment. In respect of associate or jointly controlled entity, the carrying amount of goodwill is included in the carrying amount of the interest in the associate or jointly controlled entity.

Any excess of the Group’s interest in the fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of a business combination or an investment in an associate or jointly controlled entity is recognised immediately in the consolidated profit and loss account.

On disposal of a cash generating unit or an associate during the year, any attributable amount of purchased goodwill is included in the calculation of the profit or loss on disposal.

— I-45 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(D) FIXED ASSETS

(i) Investment properties

Investment properties are land and/or buildings which are owned or held under a leasehold interest to earn rental income and/or for capital appreciation. These include land held for a currently undetermined future use.

Investment properties are stated in the balance sheet at fair value. Any gain or loss arising from a change in fair value or from the retirement or disposal of an investment property is recognised in the consolidated profit and loss account. Rental income from investment properties is accounted for as described in Note (O)(ii).

When the Group holds a property interest under an operating lease to earn rental income and/or for capital appreciation, the interest is classified and accounted for as an investment property on a property-by-property basis. Any such property interest which has been classified as an investment property is accounted for as if it were held under a finance lease, and the same accounting policies are applied to that interest as are applied to other investment properties leased under finance leases. Lease payments are accounted for as described in Note (G).

(ii) Hotel property

Hotel property is stated at cost less accumulated depreciation and impairment losses.

(iii) Other fixed assets

Other fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses.

Subsequent expenditure relating to a fixed asset that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Group. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

Gains or losses arising from the retirement or disposal of a fixed asset are determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated profit and loss account on the date of retirement or disposal.

(E) DEPRECIATION OF FIXED ASSETS

(i) Investment properties

No depreciation is provided on investment properties.

— I-46 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(E) DEPRECIATION OF FIXED ASSETS (Continued)

(ii) Hotel property

Depreciation is provided on the cost of the leasehold land of hotel property over the unexpired period of the lease. Costs of buildings thereon are depreciated on a straight line basis over their estimated useful lives of 40 years.

(iii) Other fixed assets

Other assets comprising plant, machinery, furniture, fixtures and equipment are depreciated at annual rates of 10% to 20% on a straight line basis on cost.

(F) IMPAIRMENT OF ASSETS

(i) Impairment of financial assets

Investments in debt and equity securities and other current and non-current receivables that are stated at cost or amortised cost or are classified as available-for-sale investments are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists, any impairment loss is determined and recognised as follows:

— For unquoted equity securities and current receivables that are carried at cost, the impairment loss is measured as the difference between the carrying amount of the financial asset and the estimated future cash flows, discounted at the current market rate of return for a similar financial asset where the effect of discounting is material. Impairment losses for current receivables are reversed if in a subsequent period the amount of the impairment loss decreases. Impairment losses for equity securities are not reversed.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade receivables whose recovery is considered doubtful but not remote. When the Group is satisfied that recovery is remote, the amount considered irrecoverable is written off against trade receivable directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in profit and loss.

— For available-for-sale investments, the cumulative loss that had been recognised directly in equity is removed from equity and is recognised in the consolidated profit and loss account. The amount of the cumulative loss that is recognised in the consolidated profit and loss account is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that asset previously recognised in the consolidated profit and loss account.

— I-47 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(F) IMPAIRMENT OF ASSETS (Continued)

• (i) Impairment of financial assets (Continued)

Impairment losses recognised in the consolidated profit and loss account in respect of available-for-sale equity investments are not reversed through the profit and loss account. Any subsequent increase in the fair value of such assets is recognised directly in the investments revaluation reserve in equity.

• (ii) The carrying amounts of non-current assets, other than properties carried at revalued amounts and deferred tax assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount exceeds the recoverable amount. Impairment losses are recognised as an expense in the consolidated profit and loss account. The recoverable amount of an asset is the greater of its net selling price and value in use. In respect of assets other than goodwill, an impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount. An impairment loss in respect of goodwill is not reversed. A reversal of impairment losses is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to the consolidated profit and loss account in the year in which the reversals are recognised.

(G) LEASED ASSETS

• (i) Classification of leased assets

Assets that are held by the Group under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases, with the following exceptions:

• property held under operating leases that would otherwise meet the definition of an investment property is classified as an investment property on a property-by-property basis and, if classified as an investment property, is accounted for as if held under a finance lease; and

• land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as being held under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by the Group, or taken over from the previous lessee, or at the date of construction of those buildings, if later.

(ii) Assets held for use in operating leases

Where the Group leases out assets under operating leases, the assets are included in the balance sheet according to their nature. Revenue arising from operating leases is recognised in accordance with the Group’s revenue recognition policies, as set out in Note (O)(ii).

— I-48 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(G) LEASED ASSETS (Continued)

• (iii) Operating lease charges

• (a) Where the Group has the use of assets under operating leases, payments made under the leases are charged to the consolidated profit and loss account in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in the consolidated profit and loss account as an integral part of the aggregate net lease payments made. Contingent rentals are charged to the consolidated profit and loss account in the accounting period in which they are incurred.

• (b) The cost of acquiring land held under an operating lease is amortised on a straight-line basis over the period of the lease term except where the property is classified as an investment property.

(H) AVAILABLE-FOR-SALE INVESTMENTS

Investments in securities classified as available-for-sale investments are initially recognised at fair value plus transaction costs. At each balance sheet date the fair value is remeasured, with any resultant gain or loss being recognised directly in the investments revaluation reserve in equity, except for impairment losses and, in the case of monetary items such as debt securities, foreign exchange gains and losses which are recognised directly in the consolidated profit and loss account. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in the consolidated profit and loss account. When these investments are derecognised, the cumulative gain or loss previously recognised directly in the investments revaluation reserve in equity is recognised in the consolidated profit and loss account.

Investments are recognised/derecognised on the date the Group commits to purchase/sell the investments or they expire.

(I) INVENTORIES

(i) Property held for sale

Property held for sale is stated at lower of cost and net realisable value. Cost is determined by apportionment of the total development costs, including borrowing costs capitalised, attributable to unsold units. Net realisable value is estimated by the management, based on prevailing market conditions.

The amount of any write down of or provision for property held for sale is recognised as an expense in the period the write down or loss occurs. The amount of any reversal of any write down or provision arising from an increase in net realisable value is recognised in the consolidated profit and loss account in the period in which the reversal occurs.

— I-49 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(I) INVENTORIES (Continued)

(ii) Property under development

Property under development is classified as current assets and stated at lower of cost and net realisable value. Cost includes identified costs including the acquisition cost of land, aggregate cost of development, borrowing costs capitalised, material and supplies, wages, other direct expenses and an appropriate proportion of overheads. Net realisable value is estimated by the management, taking into account the expected price ultimately be achieved, based on prevailing market conditions and the anticipated costs to completion.

The amount of any write down of or provision for properties under development for sale is recognised as an expense in the period the write down or loss occurs. The amount of any reversal of any write down or provision arising from an increase in net realisable value is recognised in the consolidated profit and loss account in the period in which the reversal occurs.

(iii) Hotel consumables

Inventories comprise hotel consumables and are stated at the lower of cost, calculated on weighted average basis, and net realisable value. Net realisable value represents the estimated selling price less direct selling costs.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

(J) DERIVATIVE FINANCIAL INSTRUMENTS

Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, the fair value is remeasured. The gain or loss on remeasurement to fair value is recognised immediately in the consolidated profit and loss account. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.

(K) TRADE AND OTHER RECEIVABLES

Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less impairment losses for bad and doubtful debts, except where the receivables are interest-free or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less impairment losses for bad and doubtful debts.

Impairment losses are written off against the corresponding assets directly, except for impairment losses recognised in respect of trade receivables whose recovery is considered doubtful but not remote. When the Group is satisfied that recovery is remote, the amount considered

— I-50 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(K) TRADE AND OTHER RECEIVABLES (Continued)

irrecoverable is written off against trade receivables directly and any amounts held in the allowance account relating to that debt are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly are recognised in the consolidated profit and loss account.

(L) TRADE AND OTHER PAYABLES

Trade and other payables are initially recognised at fair value and thereafter stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(M) CASH AND CASH EQUIVALENTS

Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other financial institutions, 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, having been within three months of maturity at acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents for the purpose of the consolidated cash flow statement.

(N) FOREIGN CURRENCIES

Foreign currency transactions during the year are translated into Hong Kong dollars at the exchange rates ruling at the transaction dates. Monetary foreign currency balances and the balance sheets of overseas subsidiaries are translated into Hong Kong dollars at the exchange rates ruling at the balance sheet date. The profit and loss account of overseas subsidiaries are translated into Hong Kong dollars at the monthly weighted average exchange rates for the year. Differences arising from the translation of the financial statements of overseas subsidiaries are dealt with in capital reserves and those arising from the financing of properties under development by foreign currency borrowings are capitalised as part of the development costs. All other exchange differences are dealt with in the consolidated profit and loss account.

(O) RECOGNITION OF REVENUE

• (i) Income from hotel operations is recognised at the time when the services are rendered.

• (ii) Rental income under operating leases is recognised in the consolidated profit and loss account in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased assets. Lease incentives granted are recognised in the consolidated profit and loss account as an integral part of the aggregate net lease payments receivable. Contingent rentals are recognised as income in the accounting period in which they are earned.

— I-51 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(O) RECOGNITION OF REVENUE (Continued)

• (iii) Interest income from bank deposits is recognised as it accrues using the effective interest method.

• (iv) Interest on a loan advanced to an associate or a jointly controlled entity involved in a property development project is deferred and is recognised when the associate or jointly controlled entity starts to generate profit from the property development project based on the percentage of total area sold to the total area available for sale.

• (v) Dividend income from investments is recognised when the shareholder’s right to receive the payment is established.

• (vi) Income arising from the sale of properties held for sale is recognised upon the execution of the formal sale and purchase agreement or the issue of an occupation permit by the relevant government authorities, whichever is the later. Deposits and instalments received on properties sold prior to the date of revenue recognition are included in the balance sheet under other payables.

(P) BORROWING COSTS

Borrowing costs are expensed in the consolidated profit and loss account in the year in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or complete.

(Q) INCOME TAX

• (i) Income tax for the year comprises current tax and movements in deferred tax assets and liabilities. Current tax and movements in deferred tax assets and liabilities are recognised in the consolidated profit and loss account except to the extent that they relate to items recognised directly in equity, in which case they are recognised in equity.

• (ii) Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

• (iii) Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

— I-52 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(Q) INCOME TAX (Continued)

(iii) (Continued)

Apart from certain limited exceptions, all deferred tax liabilities and all deferred tax assets, to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit can be utilised.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

• (iv) Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset. Current tax assets are offset against current tax liabilities, and deferred tax assets against deferred tax liabilities if, and only if, the Group has the legally enforceable right to set off current tax assets against current tax liabilities and the following additional conditions are met:

• in the case of current tax assets and liabilities, the Group intends either to settle on a net basis, or to realise the assets and settle the liabilities simultaneously; or

• in the case of deferred tax assets and liabilities, if they relate to income taxes levied by the same taxation authority on either:

• the same taxable entity; or

• different taxable entities, which, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered, intend to realise the current tax assets and settle the current tax liabilities on a net basis or realise and settle simultaneously.

— I-53 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(R) EMPLOYEE RETIREMENT BENEFITS

(i) Defined contribution pension scheme

Contributions to the scheme are expensed as incurred and may be reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions. The assets of the scheme are held separately from those of the Group in an independently administered fund.

(ii) Defined benefit pension schemes

The Group’s net obligation in respect of the defined benefit pension schemes is calculated separately for each scheme by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine the present value, and the fair value of any scheme assets is deducted. The discount rate is the yield at the balance sheet date on high quality corporate bonds that have maturity dates approximating the terms of the Group’s obligations. The calculation is performed using the projected unit credit method.

When the benefits of a scheme are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the consolidated profit and loss account on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in the consolidated profit and loss account.

Any actuarial gains and losses are recognised directly in equity immediately.

Where the calculation of the Group’s net obligation results in a negative amount, the asset recognised is limited to the present value of any future refunds from the scheme or reductions in future contributions to the scheme less past service cost.

(iii) Mandatory Provident Fund

Contributions to the Mandatory Provident Fund as required under the Hong Kong Mandatory Provident Fund Schemes Ordinance are charged to the consolidated profit and loss account when incurred.

• (iv) Salaries, annual bonuses, paid annual leave, leave passage and the cost of non-monetary benefits are accrued in the year in which the associated services are rendered by employees of the Group. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values.

(S) SEGMENT REPORTING

A segment is a distinguishable component of the Group that is engaged either in providing services (business segment), or in providing services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

— I-54 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(S) SEGMENT REPORTING (Continued)

In accordance with the Group’s internal financial reporting, the Group has chosen business segment information as the primary reporting format and geographical segment information as the secondary reporting format.

Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. Segment revenue, expenses, assets and liabilities are determined before intra-group balances and intra-group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group enterprises within a single segment. Inter-segment pricing is based on similar terms as those available to other external parties.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Unallocated items mainly comprise corporate assets, borrowings and corporate and financing expenses.

(T) PROVISIONS AND CONTINGENT LIABILITIES

(i) Financial guarantees issued

Financial guarantees are contracts that require the issuer (i.e., the guarantor) to make specified payments to reimburse the beneficiary of the guarantee (the “holder”) for a loss the holder incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Where the Group issues a financial guarantee, the fair value of the guarantee (being the transaction price, unless the fair value can otherwise be reliably estimated) is initially recognised as deferred income within trade and other payables. Where consideration is received or receivable for the issuance of the guarantee, the consideration is recognised in accordance with the Group’s policies applicable to that category of asset. Where no such consideration is received or receivable, an immediate expense is recognised profit or loss on initial recognition of any deferred income.

The amount of the guarantee initially recognised as deferred income is amortised in profit or loss over the term of the guarantee as income from financial guarantees issued. In addition, provisions are recognised in accordance with note (ii) below if and when (i) it becomes probable that the holder of the guarantee will call upon the Group under the guarantee, and (ii) the amount of that claim on the Group is expected to exceed the amount currently carried in trade and other payables in respect of that guarantee i.e. the amount initially recognised, less accumulated amortisation.

(ii) Other provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when the Group or the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

— I-55 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(T) PROVISIONS AND CONTINGENT LIABILITIES (Continued)

(ii) Other provisions and contingent liabilities (Continued)

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

(U) RELATED PARTIES

For the purposes of these financial statements, a party is considered to be related to the Group

if:

• (i) the party has the ability, directly or indirectly through one or more intermediates, to control the Group or exercise significant influence over the Group in making financial and operating policy decisions, or has joint control over the Group;

• (ii) the Group and the party are subject to common control;

• (iii) the party is an associate of the Group or a joint venture in which the Group is a venturer;

• (iv) the party is a member of key management personnel of the Group or the Company’s parent or a close family member of such an individual or is an entity under the control, joint control or significant influence of such individuals;

• (v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or significant influence of such individuals; or

• (vi) the party is a post-employment benefit plan which is for the benefit of employees of the Group or of any entity that is a related party of the Group.

(V) ACCOUNTING ESTIMATES AND JUDGEMENTS

(i) Key sources of estimation uncertainty

Note 16 contains information about the assumptions and their risk factors relating to defined benefit pension scheme obligations. Other key sources of estimation uncertainty are as follows:

• Assessment of provision for properties held under development

Management determines the net realisable value of properties held for sale by using (1) prevailing market data such as most recent sale transactions and market survey reports available from independent property valuers; and (2) internal estimates of costs based on quotes by suppliers.

— I-56 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(V) ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)

• (i) Key sources of estimation uncertainty (Continued)

• Assessment of provision for properties held under development (Continued)

Management’s assessment of net realisable value of properties under development for sale requires the application of a risk-adjusted discount rate to estimate future discounted cash flows to be derived from the properties under development for sale. These estimates require judgement as to the anticipated sale prices by reference to recent sale transactions in nearby locations, rates of new property sales, marketing costs (including price discounts required to stimulate sales) and the expected costs and the expected costs to completion of properties, the legal and regulatory framework and general market conditions.

• Valuation of investment properties

Investment properties are included in the balance sheet at their open market value, which is assessed annually by external qualified valuers, after taking into consideration the net income allowing for reversionary potential.

The assumptions adopted in the property valuations are based on the market conditions existing at the balance sheet date, with reference to sales evidence as available on the market and the appropriate capitalisation rate.

• Assessment of classification of investments in jointly controlled entities

The classification of investments in jointly controlled entities is based on managements assessment of whether there is joint control over the economic activity of the entity. In assessing joint control, management takes into account of the rights of each of parties over substantive operating decision; judgement is required to the extent to determine what constitutes the strategic financial and operating decisions essential to the accomplishment of the goals of the joint venture require the unanimous consent of the parties. Management also considers the terms of the shareholder agreements including the governance structure and the resolution of disputes between the parties, profit sharing arrangements and the termination provisions.

— Assessment of impairment of non-current assets

Management assesses the recoverable amount of each asset based on its value in use (using relevant rates) or on its selling price (by reference to market prices), depending upon the anticipated future plans for the asset. Estimating the value in use of an asset involves estimating the future cash inflows and outflows to be derived from continuing use of the asset and from its ultimate disposal and applying the appropriate discount rate to these future cash flows. Cash flow projections for the remaining useful life of the asset and the most recent financial budgets/forecasts are approved by management.

— I-57 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(V) ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)

• (i) Key sources of estimation uncertainty (Continued)

• Assessment of the useful economic lives for depreciation of fixed assets

In assessing the estimated useful lives of fixed assets, management takes into account factors such as the expected usage of the asset by the Company based on past experience, the expected physical wear and tear (which depends on operational factors), technical obsolescence arising from changes or improvements in production or from a change in the market demand for the product or service output of the asset. The estimation of the useful life is a matter of judgment based on the experience of the Group.

Management reviews the useful lives of fixed assets periodically. If expectations are significantly different from previous estimates of useful economic lives, the useful lives and, therefore, the depreciation rate for the future periods will be adjusted accordingly.

• (ii) Critical accounting judgments in applying the Group’s accounting policies

Management considers that there are no critical accounting judgements in applying the Group’s accounting policies.

— I-58 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

PRINCIPAL SUBSIDIARIES, ASSOCIATE AND JOINTLY CONTROLLED ENTITIES

As at 31 December 2008

		Issued share
		capital (all being
		ordinary shares
		and fully paid up	Effective
		except otherwise	equity
	Place of	stated)/registered	interest
	incorporation/	and paid up	to the	Principal
Subsidiaries	operation	capital	Company	activities
#Harbour Centre (Hong	British Virgin	500 US$1 shares	100%	Holding company
Kong) Limited	Islands
#Ocean New Investments	British Virgin	500 US$1 shares	100%	Holding company
Limited	Islands
Algebra Assets Limited	British Virgin	500 US$1 shares	100%	Investment
	Islands
Insight Ever International	British Virgin	500 US$1 shares	100%	Investment
Limited	Islands
Mandelson Investments	British Virgin	500 US$1 shares	100%	Investment
Limited	Islands
Manniworth Company	Hong Kong	10,000 HK$1	100%	Property
Limited		shares		investment
The Hongkong Hotel	Hong Kong	100,000 HK$1	100%	Hotel and
Limited		shares		property
Smooth Gain Investments	Hong Kong	1 HK$1 shares	100%	Finance
Limited
#Superb Mind	British Virgin	500 US$1 shares	100%	Holding company
International Limited	Islands
Free Boost Investments	Hong Kong	1 HK$1 shares	100%	Holding company
Limited
蘇州高龍房產發展有限	The People’s	RMB3,082,260,891	80%	Property
公司_(note (a))_	Republic of China			development
Joinhill Investments	Hong Kong	1 HK$1 shares	100%	Holding company
Limited
南京聚龍房地產開發	The People’s	US$198,000,000	100%	Holding company
有限公司_(note (b))_	Republic of China

— I-59 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

PRINCIPAL SUBSIDIARIES, ASSOCIATE AND JOINTLY CONTROLLED ENTITIES (Continued)

As at 31 December 2008

		Issued share
		capital (all being
		ordinary shares
		and fully paid up	Effective
		except otherwise	equity
	Place of	stated)/registered	interest
	incorporation/	and paid up	to the	Principal
Subsidiaries	operation	capital	Company	activities
Cheer Sky Investment	Hong Kong	1 HK$1 shares	100%	Holding company
Limited
九龍倉(常州)置業	The People’s	US$199,800,000	100%	Property
有限公司_(note (b))_	Republic of China			development
			Effective
			equity
	Place of		interest
	incorporation/		to the	Principal
Associate	operation	Class of shares	Company	activities
Kowloon Properties	Hong Kong	Ordinary	20%	Property
Company Limited				development
			Effective
			equity
	Place of		interest
Jointly controlled	incorporation/		to the	Principal
entities	operation	Class of shares	Company	activities
Speedy Champ	Hong Kong	Ordinary	55%	Holding company
Investments Limited
重慶豐盈房地產開發	The People’s	Ordinary	55%	Property
有限公司	Republic of China			development
杭州綠城海企房地產開發	The People’s	Ordinary	40%	Property
有限公司	Republic of China			development

All the subsidiaries listed above were, as at 31 December 2008, indirectly held by the Company except where marked #, which are held directly by the Company.

Notes:

(a) The nature of company is 台港澳與境內合資

• (b) The nature of company is 台港澳法人獨資

— I-60 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

Set out below is the management discussion and analysis of the group reproduced from the Company’s annual report for the year ended 31 December 2008.

Segment Review

Revenue and operating profit of the Hotel Segment grew by 8% and 9%, respectively, primarily on the strength of a 10% growth in average room rates during the year. Demand for hotel rooms during trade fairs, exhibitions, sports events and festive seasons was strong but weakened in the rest of the year due to the global economic slowdown and a slight drop in long-haul visitors. Average occupancy for the full year dropped to 84%.

The Property Investment Segment benefited from a leasing market which held up well for prime commercial properties through much of 2008. Favourable rental growth mainly from Lane Crawford, the anchor tenant for the retail area in Marco Polo Hongkong Hotel (“MPHK Hotel”), spurred a 5% growth in revenue, while operating profit rose by a mild 1% on inclusion of renovation and improvement works expenses.

The Group’s investment properties, comprising the office and retail areas in MPHK Hotel and the Star House retail units, were revalued by an independent valuer as at 31 December 2008. The net revaluation surplus after deferred tax was HK$26.3 million for 2008 (2007: HK$135.0 million).

Financial Review

• (I) Review of 2008 Final Results

Turnover

The Group’s turnover for the year ended 31 December 2008 was little changed from the preceding year at HK$664.2 million (2007: HK$671.1 million).

The Hotel Segment recorded an 8% increase in turnover to HK$472.4 million (2007: HK$438.3 million), benefiting particularly from a 10% increase in average room rates achieved by MPHK Hotel despite a moderate decline in occupancy to 84%. Food and beverage revenue also rose by 14% resulting from the full-year operation of a new restaurant in MPHK Hotel, Cucina, which opened in late 2007.

Turnover for the Property Investment Segment increased by 5% to HK$134.5 million (2007: HK$127.6 million) as rental income generated from the retail areas rose in spite of the adverse economic conditions since the third quarter of 2008.

The Property Development Segment did not record any revenue (2007: HK$6.7 million) since the Group’s projects on hand, all in China, are still at an early stage of development.

— I-61 —

APPENDIX I FINANCIAL INFORMATION OF THE GROUP

The Investment Segment’s interest and dividend income decreased by 42% to HK$57.3 million (2007: HK$98.5 million) mainly due to the decrease in the Group’s surplus cash and investment.

Operating Profit

The Group’s operating profit decreased by 55% to HK$288.0 million (2007: HK$633.6 million). Hotel Segment’s profit increased by 9% to HK$161.1 million and Property Investment Segment reported a marginal increase over 2007 to HK$109.9 million.

Profit from the Investment Segment decreased to HK$33.4 million (2007: HK$381.8 million) mainly due to an exceptionally large profit of HK$356.7 million from disposal of investments in 2007. Interest income also dropped as a result of the decrease in average surplus cash balance and the fall in interest rates.

In addition, the Group took advantage of a market window in 2007 to effectively lock in a significantly more favourable interest cost to finance RMB assets in the Mainland with liabilities in Japanese yen. Appreciation of the yen and the RMB against the US dollar (and the pegged Hong Kong dollar) in 2008 gave rise, respectively, to a net exchange loss of HK$167.1 million (2007: HK$74.2 million) in the profit and loss account and a net exchange gain of HK$241.8 million (2007: HK$42.5 million) as an equity movement on translation of the net RMB investments in China subsidiaries and jointly controlled entities.

Net Other Charge

The net other charge of HK$47.5 million (2007: HK$19.9 million) represented the impairment loss provided on the Group’s available-for-sale investments.

Finance Costs

Net finance costs for the year was HK$67.1 million (2007: HK$8.3 million), resulting from the increase in bank borrowings mainly for the Group’s equity investments in China properties.

Increase in Fair Value of Investment Properties

The Group’s investment properties were revalued by an independent valuer as at 31 December 2008, resulting in a surplus of HK$31.5 million (2007: HK$163.6 million). The net surplus after deferred tax taken to the profit and loss account was HK$26.3 million (2007: HK$135.0 million).

— I-62 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Share of Results after Tax of Associate and Jointly Controlled Entities

Share of losses of the associate and jointly controlled entities after tax was HK$11.0 million (2007: profit of HK$3.9 million). No profit was attributable to the year under review as all the trading properties held by the associate were sold in previous years and those undertaken through the jointly controlled entities are at an early stage of development.

Taxation

The taxation charge for the year decreased by 82% to HK$24.3 million (2007: HK$134.6 million) as a result of decrease in the Group’s operating profit and its revaluation surplus of investment properties. There was also a tax credit of HK$12.2 million (2007: HK$Nil) from a downward adjustment of deferred tax mainly on the investment property surplus brought forward from the previous years as a result of a reduction in Hong Kong profits tax rate by 1% to 16.5%.

Profit Attributable to Equity Shareholders

Group profit attributable to equity shareholders for the year ended 31 December 2008 amounted to HK$170.5 million (2007: HK$638.4 million), representing a decrease of HK$467.9 million or 73%. Earnings per share were HK$0.39 based on weighted average issued shares of 439.8 million (2007: HK$2.03 based on 315.0 million issued shares).

Excluding the net investment property surplus of HK$26.3 million (2007: HK$135.0 million) and the related deferred tax credit of HK$10.9 million (2007: HK$Nil) resulting from the 1% tax rate reduction, the Group’s net profit for the year was HK$133.3 million, representing a decrease of 74% over last year.

(II) Liquidity and Financial Resources

Rights Issue

In March 2008, the Company completed an issue of 157.5 million new ordinary shares at HK$12.80 each by way of rights, with net proceeds of HK$2,006.7 million.

Shareholders’ Equity

As at 31 December 2008, the Group’s shareholders’ equity was HK$7,067.0 million, equivalent to HK$14.96 per share based on 472.5 million issued shares (2007: HK$18.25 per share based on 315.0 million issued shares).

The Group’s hotel property is stated at cost less accumulated depreciation according to the prevailing Hong Kong Financial Reporting Standards. If the hotel property was restated based on the valuation as at 31 December 2008 carried out by an independent valuer, it would result in a net revaluation surplus of HK$2,542.6 million and increase the Group’s shareholders equity to HK$9,609.6 million, equivalent to HK$20.34 per share.

— I-63 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Capital Commitments

As at 31 December 2008, the Group’s total outstanding commitments to properties under development in China, both by the Group and through jointly controlled entities, amounted to HK$17.2 billion, of which HK$1.1 billion have been contracted for. Included in the commitments is land cost of HK$1.0 billion payable in 2009. The committed developments will be carried out in stages in the coming years and funded by both equity and debt, as well as proceeds from operations and property pre-sales.

Finance and Availability of Facilities and Funds

As at 31 December 2008, the Group’s available loan facilities amounted to HK$3,965.0 million of which HK$3,065.0 million was drawn. Certain banking facilities of the Group were secured by mortgages mainly over the Group’s hotel and investment properties and certain available-for-sale investments with total carrying value of HK$2,174.1 million (2007: HK$2,003.6 million).

The Group’s debts were primarily denominated in Hong Kong dollars (“HKD”) and United States dollars (“USD”). Renminbi (“RMB”) borrowings will be sourced to finance the development cost of the China projects apart from their land cost.

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

Debt and Gearing

As at 31 December 2008, the Group had a net debt of HK$1,806.6 million (2007: HK$1,274.1 million), which was made up of HK$3,065.0 million of bank borrowings less HK$1,258.4 million of cash. The increase in net debt was mainly caused by the increase in investment in the China development projects. The gearing ratio to shareholder’s equity was 25.6% (2007: 22.2%).

Net Cash Flows for Operating and Investing Activities

For the period under review, the Group had net cash outflow of HK$3,205.9 million (2007: HK$908.8 million) for operating activities mainly due to payments made for the China projects. From investing activities, the Group received a net amount of HK$787.5 million, mainly including inflow of HK$1,085.4 million from the sale of investments and outflow of HK$596.9 million for investments in jointly controlled entities in property development projects in China. Net proceeds of HK$2,006.7 million from the rights issue was received in March 2008.

The Group maintained a reasonable level of surplus cash, which was denominated principally in HKD and RMB, to facilitate the Group’s business and investment activities. As at 31 December 2008, the Group also maintained a portfolio of investments primarily consisting of blue chip securities, with an aggregate market value of HK$604.0 million (2007: HK$2,516.6 million), which is available for liquidation to meet the Group’s commitments if necessary. The decrease in the portfolio was partly due to disposals and partly due to the decline in value in line with the performance of the stock markets.

— I-64 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

(III) Human Resources

The Group has approximately 470 employees. They are remunerated according to the nature of the job and market trends, with a built-in merit component incorporated in the annual increment to reward and motivate individual performance. Total staff costs for the year ended 31 December 2008 amounted to HK$120.0 million (2007: HK$104.2 million).

INDEBTEDNESS

Borrowings

At the close of business on 31 March 2009, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this circular, the Enlarged Group had total borrowings of HK$3,269.1 million (comprising the combined indebtedness of the Group and the Shanghai Co). Details of the total borrowings are summarised below:

	The Enlarged
	Group
	HK$ million
Secured
Bank loans	1,499.0
Unsecured
Bank loans	1,600.0
Trust loan (note)	170.1
	1,770.1
Total borrowings	3,269.1
Analysis of total borrowings
Repayable within 1 year	170.1
Repayable after 2 years, but within 5 years	3,099.0
Total borrowings	3,269.1

Note: The trust loan was obtained from Huabao Trust Company Limited, a trust company in the PRC.

On 17 April 2009, Shanghai Co fully repaid the trust loan of HK$170.1 million and a secured bank loan of HK$34.0 million before their respective due dates.

Facilities

As at 31 March 2009, the Enlarged Group had total banking and trust loan facilities of approximately HK$5,392.3 million. Certain banking facilities of the Enlarged Group were secured by certain fixed assets, available-for-sale investments and properties under development with an aggregate carrying value of HK$3,570.9 million.

— I-65 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Contingent liabilities

As at 31 March 2009, there were no guarantees given by the Enlarged Group in respect of banking facilities available to its jointly controlled entities and associates.

Disclaimers

Save as aforesaid and apart from intra-group liabilities and normal trade payables, the Enlarged Group did not have any loan capital issued or agreed to be issued, bank overdrafts, loans, debt securities issued and outstanding, and authorised or otherwise created but unissued and term loans or other borrowings, indebtedness in the nature of borrowings, liabilities under acceptance (other than normal trade bills) or acceptance credits, debentures, mortgages, charges, finance lease or hire purchase commitments, which are either guaranteed, unguaranteed, secured or unsecured, guarantees or other material contingent liabilities outstanding at the close of business on 31 March 2009.

Save as disclosed above, the Directors have confirmed that there have been no material changes in the indebtedness and contingent liabilities of the Enlarged Group since 31 March 2009, up to and including the Latest Practicable Date.

WORKING CAPITAL

The Directors are of the opinion that, following completion of the Disposal and Acquisition, after taking into account the financial resources available to the Enlarged Group, including internally generated funds and the available banking facilities, the Enlarged Group has sufficient working capital for its present requirements for at least the next 12 months from the date of this circular, in the absence of unforeseeable circumstances.

MATERIAL ADVERSE CHANGE

As at the Latest Practicable Date, the Directors are not aware of any material adverse change in the financial or trading position of the Group since 31 December 2008, the date to which the latest published audited financial statements of the Group were made up.

— I-66 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

The following is the full text of a report, prepared for the purpose of inclusion in this circular, received from the independent reporting accountants of the Company, KPMG, Certified Public Accountants, Hong Kong. As described in the section headed “Documents available for inspection” in Appendix VI to this circular, a copy of the following Accountants’ Report is available for public inspection.

ACCOUNTANTS’ REPORT OF SHANGHAI CO

8th Floor Prince’s Building 10 Chater Road Central Hong Kong

4 May 2009

The Directors

Harbour Centre Development Limited

Dear Sirs,

We set out below our report on the financial information (the “Financial Information”) relating to Shanghai Luyuan Property Development Company Limited (“Shanghai Co”) including the profit and loss account, the statement of changes in equity and the cash flow statement of Shanghai Co for the period from 3 February 2008 (date of incorporation) to 31 December 2008 (the “Relevant Period”), and the balance sheet of Shanghai Co as at 31 December 2008 together with the notes thereto, for the inclusion in the circular of Harbour Centre Development Limited (the “Company”, together with its subsidiaries, collectively defined as the “Group”) dated 4 May 2009 (the “Circular”) issued in connection with the proposed disposal of 40% equity interest in Hangzhou Greentown Haiqi Property Development Company Limited and acquisition of 100% of the equity interest of Shanghai Co (the “Acquisition”).

Shanghai Co was established in the People’s Republic of China (the “PRC”) with limited liability on 3 February 2008. During the Relevant Period, Shanghai Co was principally engaged in property development in the PRC. Shanghai Co has adopted 31 December as its financial year end date.

The statutory financial statements of Shanghai Co for the Relevant Period were prepared in accordance with the relevant accounting rules and regulations applicable to enterprises in the PRC and were audited by Shanghai Saint C.P.A. Partnership (“上海上德聯合會計師事務所”), certified public accountants registered in the PRC.

— II-1 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

BASIS OF PREPARATION

The Financial Information has been prepared by the directors of Shanghai Co based on the audited financial statements, on the basis set out in note 2 of Section B below after making such adjustments as are appropriate, to conform with Hong Kong Financial Reporting Standards (“HKFRSs”) promulgated by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”) and the disclosure requirements of the Hong Kong Companies Ordinance and the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. HKFRSs include Hong Kong Accounting Standards and Interpretations. No adjustments were considered necessary for the purpose of preparing our report for inclusion in the Circular.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND REPORTING ACCOUNTANTS

The directors of Shanghai Co are responsible for the preparation and true and fair presentation of the Financial Information in accordance with HKFRSs. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of Financial Information that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

BASIS OF OPINION

Our responsibility is to express an opinion on the Financial Information based on our audit procedures.

As a basis for forming an opinion on the Financial Information, for the purpose of this report, we have carried out appropriate audit procedures in respect of the Financial Information for the Relevant Period in accordance with Hong Kong Standards on Auditing issued by the HKICPA and we have carried out such additional procedures as we considered necessary in accordance with Auditing Guideline “Prospectuses and the Reporting Accountant” (“Statement 3.340”) issued by the HKICPA. Those standards require that we comply with ethical requirements and plan and perform our work to obtain reasonable assurance as to whether the Financial Information is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Information. The procedures selected depend on the reporting accountant’s judgement, including the assessment of the risks of material misstatement of the Financial Information, whether due to fraud or error. In making those risk assessments, the reporting accountant considers internal control relevant to the entity’s preparation and true and fair presentation of the Financial Information in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Financial Information.

— II-2 —

APPENDIX II ACCOUNTANTS’ REPORT ON SHANGHAI CO

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

We have not audited any financial statements of Shanghai Co in respect of any period subsequent to 31 December 2008.

OPINION

In our opinion, for the purpose of this report, the Financial Information, under the basis of preparation and in accordance with the accounting policies set out in note 2 of Section B below, gives a true and fair view of the state of the affairs of Shanghai Co as at 31 December 2008 and of Shanghai Co’s results and cash flows for the Relevant Period.

— II-3 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

A. FINANCIAL INFORMATION

PROFIT AND LOSS ACCOUNT

For the period from 3 February 2008 (date of incorporation) to 31 December 2008 (Expressed in Hong Kong dollars)

Note Interest income Selling expenses Administrative expenses Loss from operations Finance costs Loss before taxation 3 Income tax 5 Loss for the period	HK$ 47,962 (389,214) (7,439,072) (7,780,324) — (7,780,324) — (7,780,324)

— II-4 —

APPENDIX II

ACCOUNTANTS’ REPORT ON SHANGHAI CO

BALANCE SHEET

At 31 December 2008

(Expressed in Hong Kong dollars)

Note Non-current assets Fixed assets 6 Current assets Properties under development 7 Deposits, receivables and prepayments 8 Cash and cash equivalents 9 Current liabilities Trade and other payables 10 Net current assets Total assets less current liabilities Non-current liability Shareholders’ advances 11 NET ASSETS Capital and reserves Paid-in capital 12 Reserves 12 TOTAL EQUITY	HK$ 731,645 ------------------ 1,499,185,063 50,275,963 787,795 1,550,248,821 ------------------ 32,270,477 ------------------ ----------------------------------------------------------------------- 1,517,978,344 ------------------ ----------------------------------------------------------------------- 1,518,709,989 1,198,151,991 320,557,998 330,431,396 (9,873,398) 320,557,998

— II-5 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

STATEMENT OF CHANGES IN EQUITY

For the period from 3 February 2008 (date of incorporation) to 31 December 2008 (Expressed in Hong Kong dollars)

Note Shares issued upon incorporation 12 Exchange differences on translation of Financial Information Loss for the period Total equity at 31 December 2008	HK$ 330,431,396 (2,093,074) (7,780,324) 320,557,998

— II-6 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

CASH FLOW STATEMENT

For the period from 3 February 2008 (date of incorporation) to 31 December 2008 (Expressed in Hong Kong dollars)

Note Operating activities Loss from operations Depreciation Operating loss before changes in working capital Increase in properties under development Increase in deposits, receivables and prepayments Increase in trade and other payables Net cash used in operating activities Investing activities Payments for purchase of fixed assets Net cash used in investing activities Financing activities Proceeds from the paid-in capital 12 Proceeds of shareholders’ advances Net cash generated from financing activities Net increase in cash and cash equivalents and cash and cash equivalents at 31 December 2008 9

HK$ (7,780,324) 11,215 (7,769,109) (1,500,199,072) (50,275,963) 32,270,477 (1,525,973,667) ------------------ (892,186) (892,186) ------------------ 330,431,396 1,197,222,252 1,527,653,648 ------------------ ----------------------------------------------------------------------- 787,795

— II-7 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

B. NOTES TO THE FINANCIAL INFORMATION

1. DESCRIPTION OF SHANGHAI CO

Shanghai Co is a limited liability company which is established in the PRC and was owned as to 99.9% by Greentown Property Group Company Limited and as to 0.1% by Shanghai Luyu Property Development Company Limited as at the date of the announcement on 10 April 2009. Shanghai Co’s registered and paid-in capital as at the date of this report amounted to RMB289,524,000.

Shanghai Co is principally engaged in property development. As of 31 December 2008, Greentown Property Group Company Limited and Shanghai Luyu Property Development Company Limited contributed registered capital of RMB289,234,476 (equivalent to HK$330,103,076) and RMB289,524 (equivalent to HK$328,320), respectively and shareholders’ advances of approximately RMB644,776,828 (equivalent to HK$731,112,445) and RMB411,887,774 (equivalent to HK$467,039,546), respectively to Shanghai Co for the purpose of the development of a piece of land in Shanghai Xinjiangwan City (the “Shanghai Land”) by Shanghai Co.

The Shanghai Land is located at plot D1, Xinjiangwan Cheng, Yang Pu Area in Shanghai, the PRC with a site area of approximately 59,254 sq.m. Shanghai Co has obtained the land use right certificate for the Shanghai Land and the required construction works commencement permits. The Shanghai Land is expected to be developed into residential buildings.

2. PRINCIPAL ACCOUNTING POLICIES

• (a) Statement of compliance

The Financial Information set out in this report has been prepared in accordance with all applicable HKFRSs, which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and related interpretations promulgated by the HKICPA and the disclosure requirements of the Hong Kong Companies Ordinance. The Financial Information also complies with the applicable disclosure provisions of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

A summary of the principal accounting policies adopted by Shanghai Co is set out below.

• (b) Basis of preparation of the Financial Information

The measurement basis used in the preparation of the Financial Information is the historical cost basis.

The preparation of Financial Information in conformity with HKFRSs requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of HKFRSs that have significant effect on the financial statements and major sources of estimation uncertainty are disclosed in note 2(o).

— II-8 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

2. PRINCIPAL ACCOUNTING POLICIES (Continued)

• (b) Basis of preparation of the Financial Information (Continued)

Shanghai Co’s functional currency is Renminbi (“RMB”) and its reporting currency for the purpose of this Financial Information is Hong Kong dollars (“HK$”).

(c) Fixed assets

Fixed assets are stated in the balance sheet at cost less accumulated depreciation and impairment losses.

Gains or losses arising from the retirement or disposal of a fixed asset are determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset and are recognised in the profit and loss account on the date of retirement or disposal.

Depreciation is calculated to write off the cost of items of fixed assets, less their estimated residual value, if any, using the straight line method over their estimated useful lives as follows:

			Useful life	Residual value
—	Motor	vehicles	5 years	3%
—	Office	equipment	3 years	3%

Both the useful life of an asset and its residual value are reviewed annually.

(d) Impairment of assets

(i) Impairment of trade and other receivables

Trade and other receivables that are stated at amortised cost are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If any such evidence exists, impairment loss is determined and recognised as the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition of these assets), where the effect of discounting is material.

If in a subsequent year the amount of an impairment loss decreases and the decrease can be linked objectively to an event occurring after the impairment loss was recognised, the impairment loss is reversed through profit or loss. A reversal of an impairment loss shall not result in the asset’s carrying amount exceeding that which would have been determined had no impairment loss been recognised in prior years.

(ii) Impairment of other assets

Internal and external sources of information are reviewed at each balance sheet date to identify indications that fixed assets may be impaired, or an impairment loss previously recognised no longer exists or may have decreased.

— II-9 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

2. PRINCIPAL ACCOUNTING POLICIES (Continued)

• (d) Impairment of assets (Continued)

• (ii) Impairment of other assets (Continued)

If any such indication exists, the asset’s recoverable amount is estimated.

Calculation of recoverable amount

The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where an asset does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the smallest group of assets that generates cash inflows independently (i.e. a cash-generating unit).

• Recognition of impairment losses

An impairment loss is recognised in profit or loss whenever the carrying amount of an asset, or the cash-generating unit to which it belongs, exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated to reduce the carrying amount of the assets in the unit (or group of units) on a pro rata basis, except that the carrying value of an asset will not be reduced below its individual fair value less costs to sell, or value in use, if determinable.

Reversals of impairment losses

An impairment loss is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.

A reversal of an impairment loss is limited to the asset’s carrying amount that would have been determined had no impairment loss been recognised in prior years. Reversals of impairment losses are credited to profit or loss in the year in which the reversals are recognised.

(e) Leased assets

(i) Classification of leased assets

Assets that are held by Shanghai Co under leases which transfer to Shanghai Co substantially all the risks and rewards of ownership are classified as being held under finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to Shanghai Co are classified as operating leases, with the following exceptions:

• property held under operating leases that would otherwise meet the definition of an investment property is classified as an investment property on a property-by-property basis and, if classified as an investment property, is accounted for as if held under a finance lease; and

• land held for own use under an operating lease, the fair value of which cannot be measured separately from the fair value of a building situated thereon at the inception of the lease, is accounted for as

— II-10 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

2. PRINCIPAL ACCOUNTING POLICIES (Continued)

• (e) Leased assets (Continued)

• (i) Classification of leased assets (Continued)

being held under a finance lease, unless the building is also clearly held under an operating lease. For these purposes, the inception of the lease is the time that the lease was first entered into by Shanghai Co, or taken over from the previous lessee, or at the date of construction of those buildings, if later.

(ii) Operating lease charges

The cost of acquiring land held under an operating lease is amortised on a straight-line basis over the period of the lease term except where the property is classified as an investment property.

(f) Properties under development

Properties under development represent land and properties developed for sale and are stated at lower of cost and net realisable value. The development cost of property comprises acquisition cost of land, aggregate cost of development, borrowing costs capitalised, materials and supplies, wages, other direct expenses and an appropriate proportion of overheads. Net realisable value is estimated by the management, taking into account the expected price that could ultimately be achieved, based on prevailing market conditions, and the anticipated costs to completion.

The amount of any write down of or provision for properties under development for sale is recognised as an expense in the period the write down or loss occurs. The amount of any reversal of any write down or provision arising from an increase in net realisable value is recognised in the profit and loss account in the period in which the reversal occurs.

(g) Trade and other receivables

Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance for impairment of doubtful debts (note 2(d)), except where the receivables are interest-free loans made to related parties without any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment of doubtful debts.

(h) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand.

(i) Trade and other payables

Trade and other payables are initially recognised at fair value and subsequently stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost.

(j) Shareholders’ advances

Shareholders’ advances are initially recognised at cost and subsequently stated at amortised cost unless the loans are interest-free without fixed repayment term or the discounting would be immaterial. In such cases, the loans are stated at cost.

— II-11 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

2. PRINCIPAL ACCOUNTING POLICIES (Continued)

• (k) Foreign currencies

Shanghai Co’s functional currency is RMB and the Financial Information is expressed in HK$. Foreign currency transactions during the period are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the balance sheet date. Exchange gains and losses are recognised in profit or loss.

Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates.

The results of Shanghai Co are translated into HK$ at the exchange rates at the dates of the transactions. Balance sheet items are translated into HK$ at the foreign exchange rates ruling at the balance sheet date. The resulting exchange differences are recognised directly in a separate component of equity.

(l) Income tax

Income tax for the period comprises current tax and movements in deferred tax assets and liabilities.

Current tax and movements in deferred tax assets and liabilities are recognised in the profit and loss account except to the extent that they relate to items recognised directly in equity, in which case they are recognised in equity.

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date.

Deferred tax assets and liabilities arise from deductible and taxable temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for financial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax credits.

All deferred tax liabilities and all deferred tax assets, to the extent that it is probable that future taxable profits will be available against which the asset can be utilised, are recognised.

The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of the assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.

The carrying amount of a deferred tax asset is reviewed at each balance sheet date and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow the related tax benefit to be utilised. Any such reduction is reversed to the extent that it becomes probable that sufficient taxable profits will be available.

Current tax balances and deferred tax balances, and movements therein, are presented separately from each other and are not offset.

• (m) Provisions and contingent liabilities

Provisions are recognised for liabilities of uncertain timing or amount when Shanghai Co has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.

— II-12 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

2. PRINCIPAL ACCOUNTING POLICIES (Continued)

• (m) Provisions and contingent liabilities (Continued)

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

• (n) Related parties

For the purposes of these Financial Information, a party is considered to be related to Shanghai Co if:

• (i) the party has the ability, directly or indirectly through one or more intermediates, to control Shanghai Co or exercise significant influence over Shanghai Co in making financial and operating policy decisions, or has joint control over Shanghai Co;

• (ii) Shanghai Co and the party are subject to common control;

• (iii) the party is an associate of Shanghai Co or a joint venture in which Shanghai Co is a venturer;

• (iv) the party is a member of key management personnel of Shanghai Co’s parent or a close family member of such an individual or is an entity under the control, joint control or significant influence of such individuals;

• (v) the party is a close family member of a party referred to in (i) or is an entity under the control, joint control or significant influence of such individuals; or

• (vi) the party is a post-employment benefit plan which is for the benefit of employees of Shanghai Co or of any entity that is a related party of Shanghai Co.

• (o) Accounting estimates and judgements

• (i) Key sources of estimation uncertainty

The key sources of estimation uncertainty are as follows:

• Assessment of provision for properties held under development

Management determines the net realisable value of properties held for sale by using (1) prevailing market data such as most recent sale transactions and market survey reports available from independent property valuers; and (2) internal estimates of costs based on quotes by suppliers.

Management’s assessment of net realisable value of properties under development for sale requires the application of a risk-adjusted discount rate to estimate future discounted cash flows to be derived from the properties under development for sale. These estimates require judgement as to the anticipated sale prices by reference to recent sale transactions in nearby locations, rates of new property sales, marketing costs (including price discounts required to stimulate sales) and the expected costs to completion of properties, the legal and regulatory framework and general market conditions.

— II-13 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

2. PRINCIPAL ACCOUNTING POLICIES (Continued)

• (o) Accounting estimates and judgements (Continued)

• (i) Key sources of estimation uncertainty (Continued)

  • Assessment of the useful economic lives for depreciation of fixed assets

In assessing the estimated useful lives of fixed assets, management takes into account factors such as the expected usage of the asset by Shanghai Co based on past experience, the expected physical wear and tear (which depends on operational factors), technical obsolescence arising from changes or improvements in production or from a change in the market demand for the product or service output of the asset. The estimation of the useful life is a matter of judgment based on the experience of Shanghai Co.

Management reviews the useful lives of fixed assets periodically. If expectations are significantly different from previous estimates of useful economic lives, the useful lives and, therefore, the depreciation rate for the future periods will be adjusted accordingly.

• (ii) Critical accounting judgments in applying Shanghai Co’s accounting policies

Management considers that there are no critical accounting judgements in applying Shanghai Co’s accounting policies.

3. LOSS BEFORE TAXATION

Loss before taxation is arrived at after charging:

(a) Staff costs: Salaries, wages and other benefits (b) Other items: Depreciation Auditors’ remuneration Operating lease charges	HK$ 4,534,694
	11,215 79,856 766,464

4. DIRECTORS’ REMUNERATION

None of the directors of Shanghai Co received any emoluments in respect of their services to Shanghai Co for the period of 2008 pursuant to Section 161 of the Hong Kong Companies Ordinance.

— II-14 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

5. TAXATION

• (a) Taxation in the profit and loss account:

The income tax rate applicable to Shanghai Co for the period is 25%. No provision for the PRC income tax has been made as Shanghai Co made a tax loss during the period.

• (b) Reconciliation between tax expense and accounting loss at applicable tax rate:

Loss before taxation Notional tax on loss before taxation calculated at 25% Tax effect of unused tax loss not recognised (note 5(c)) Actual tax expense	HK$ (7,780,324) (1,945,081) 1,945,081
	—

• (c) Deferred tax not recognised

Shanghai Co has not recognised the deferred tax assets attributable to the future benefit of tax losses sustained in the operations as the availability of future taxable profits against which the assets can be utilised is uncertain at 31 December 2008.

The future benefits of tax losses of Shanghai Co expire in 2013.

6. FIXED ASSETS

	Motor	Office	Total fixed
	vehicles	equipment	assets
	HK$	HK$	HK$
Cost:
Additions and at 31 December 2008	841,014	51,172	892,186
	- - - - - - - - - - - -	- - - - - - - - - - - -	- - - - - - - - - - - -
Accumulated depreciation:
Charge for the period and at 31 December 2008	(153,182)	(7,359)	(160,541)
	- - - - - - - - - - - -	- - - - - - - - - - - -	- - - - - - - - - - - -
	-----------------------------------------------	-----------------------------------------------	-----------------------------------------------
Net book value:
At 31 December 2008	687,832	43,813	731,645

— II-15 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

7. PROPERTIES UNDER DEVELOPMENT

					HK$
Properties	under	development	for	sale	1,499,185,063

At 31 December 2008, the carrying value of leasehold land included in the properties under development for sale is HK$1,428,714,000 (RMB1,260,000,000), which is held under a long term lease outside Hong Kong.

All of the properties under development for sale are expected to be recovered after more than one year.

8. DEPOSITS, RECEIVABLES AND PREPAYMENTS

Amount due from a fellow subsidiary Deposits for deed tax Prepayments to suppliers Other receivables	HK$ 5,669,500 42,861,420 1,735,093 9,950
	50,275,963

Deposits for deed tax represent deposits of RMB37,800,000 (equivalent to approximately HK$42,861,420) placed with designated banks as prepayment for deed tax on land use rights for the Shanghai Land.

Receivables and prepayments are expected to be recoverable within one year.

9. CASH AND CASH EQUIVALENTS

Cash and cash equivalents represent cash at bank and in hand.

Cash at bank and in hand is deposited in PRC banks, the remittance of which is subject to relevant rules and regulations of foreign exchange control promulgated by the PRC government.

10. TRADE AND OTHER PAYABLES

Trade creditors and accrued charges Amount due to a fellow subsidiary	HK$ 30,002,677 2,267,800
	32,270,477

All of the trade and other payables (including an amount due to a fellow subsidiary) are expected to be settled within one year or are repayable on demand.

— II-16 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

11. SHAREHOLDERS’ ADVANCES

The shareholders’ advances of RMB644,776,828 and RMB411,887,774 (equivalent to approximately HK$731,112,445 and HK$467,039,546) are provided by Greentown Property Group Company Limited and Shanghai Luyu Property Development Company Limited, respectively.

The shareholders’ advances are unsecured, interest-free and have no fixed settlement dates. At the balance sheet date, as the settlement of the advances are neither pre-agreed nor likely to occur in the foreseeable future, they are stated at cost.

12. PAID-IN CAPITAL AND RESERVES

(a) Capital and reserves

At 3 February 2008 Exchange difference on translation of Financial Information Loss for the period At 31 December 2008 Paid-in capital Registered capital Paid-in capital	Paid-in capital HK$ 330,431,396 — — 330,431,396	Exchange reserve Accumulated loss HK$ HK$ — — (2,093,074) — — (7,780,324) (2,093,074) (7,780,324) Original currency RMB 289,524,000 289,524,000	Total HK$ 330,431,396 (2,093,074) (7,780,324)
			320,557,998
			HK$ equivalent 330,431,396
			330,431,396

(b) Paid-in capital

• (c) Nature and purpose of reserves

Exchange reserve

The exchange reserve comprises foreign exchange differences arising from the translation of the Financial Information of Shanghai Co’s functional currency into the presentation currency.

— II-17 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

12. PAID-IN CAPITAL AND RESERVES (Continued)

• (d) Capital management

Shanghai Co’s primary objectives when managing capital are to safeguard Shanghai Co’s ability to continue as a going concern, so that it can continue to provide returns for shareholders, access finance at a reasonable cost. As Shanghai Co is part of a larger group, Shanghai Co’s sources of additional capital and policies for distribution of excess capital may also be affected by Greentown China Holdings Limited’s capital management objectives.

Shanghai Co’s capital structure is regularly reviewed and managed with due regard to the capital management practices of the group to which Shanghai Co belongs. Adjustments are made to the capital structure in light of changes in economic conditions affecting Shanghai Co, to the extent that these do not conflict with the directors’ fiduciary duties towards Shanghai Co or the requirements of the Hong Kong Companies Ordinance.

13. FINANCIAL RISK MANAGEMENT AND FAIR VALUE

Exposure to credit and liquidity risks arises in the normal course of Shanghai Co’s business. These risks are limited by Shanghai Co’s financial risk management policies and practices described below:

• (a) Credit risk

Shanghai Co’s credit risk is primarily attributable to cash and cash equivalents. Shanghai Co’s credit risk is limited as they are placed with reputable financial institutions.

• (b) Liquidity risk

Shanghai Co’s policy is to regularly monitor current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash and adequate committed lines of funding from other group companies to meet its liquidity requirements in the short and longer term.

• (c) Fair value

The fair values of receivables, cash and cash equivalents, trade and other payables and shareholders’ advances approximate their carrying amounts due to the short-term maturities of these assets and liabilities.

14. MATERIAL RELATED PARTY TRANSACTIONS

Apart from the transactions with group companies and balances outstanding as disclosed in notes 8 and 10 to Shanghai Co’s Financial Information, Shanghai Co did not have any other material related party transactions during the period ended 31 December 2008.

— II-18 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

15. COMMITMENTS

• (a) Commitments relating to property under development outstanding at 31 December 2008 not provided for in the Financial Information were as follows:

HK$ Contracted for 70,413,455 Authorised but not contracted for 850,313,345 920,726,800

• (b) At 31 December 2008, the total future minimum lease payments under non-cancellable operating leases are payable as follows:

HK$

Within 1 year 493,607

Shanghai Co is the lessee in respect of a property which runs for an initial period of one year, at the end of which period all terms are renegotiated. The lease does not include contingent rentals.

There were no other capital commitments at 31 December 2008.

16. POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE PERIOD ENDED 31 DECEMBER 2008

Up to the date of issue of this Financial Information, the HKICPA has issued a number of amendments, new standards and interpretations, which are not yet effective for the period ended 31 December 2008 which have not been adopted in this Financial Information.

Shanghai Co is in the process of making an assessment of what the impact of these amendments, new standards and new interpretations are expected being in the period of initial application. So far it has concluded that the adoption of them is unlikely to have a significant impact on Shanghai Co’s results of operations and financial position.

— II-19 —

ACCOUNTANTS’ REPORT ON SHANGHAI CO

APPENDIX II

C. IMMEDIATE AND ULTIMATE HOLDING COMPANY

At 31 December 2008, the directors considered the immediate parent of Shanghai Co to be Greentown Property Group Company Limited, a company established in the PRC, and ultimate holding company to be Greentown China Holdings Limited, a company incorporated in the Cayman Islands. Greentown China Holdings Limited produces consolidated financial statements available for public use.

D. SUBSEQUENT FINANCIAL STATEMENTS

No audited financial statements of Shanghai Co have been prepared in respect of any period subsequent to 31 December 2008.

Yours faithfully

KPMG

Certified Public Accountants Hong Kong

— II-20 —

APPENDIX III UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report, prepared for the sole purpose of incorporation in this circular, received from the independent reporting accountants of the Company, KPMG, Certified Public Accountants, Hong Kong. As described under “Documents available for inspection” in Appendix VI, a copy of the following report is available for inspection.

ACCOUNTANTS’ REPORT ON UNAUDITED PRO FORMA FINANCIAL INFORMATION TO THE DIRECTORS OF HARBOUR CENTRE DEVELOPMENT LIMITED

8th Floor Prince’s Building 10 Chater Road Central Hong Kong

4 May 2009

The Board of Directors

Harbour Centre Development Limited

Dear Sirs

We report on the unaudited pro forma financial information (the “Unaudited Pro Forma Financial Information”) of Harbour Centre Development Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages III-4 to III-6 in Appendix III of the Company’s circular dated 4 May 2009 (the “Circular”) in connection with an agreement dated 10 April 2009 entered into between the Company, Greentown China Holdings Limited, Nanjing Julong Property Development Company Limited, Greentown Property Group Company Limited, Shanghai Luyu Property Development Company Limited, Shanghai Luyuan Property Development Company Limited (“Shanghai Co”) and Hangzhou Greentown Haiqi Property Development Company Limited (“Hangzhou Co”) in relation to the proposed disposal of 40% equity interest in Hangzhou Co (the “Disposal”) and acquisition of 100% equity interest of Shanghai Co (the “Acquisition”) (the Disposal and Acquisition together referred to as the “Transaction” and the Group and Shanghai Co together referred to as the “Enlarged Group”), which has been prepared by the directors of the Company solely for illustrative purposes to provide information about how the Transaction might have affected the financial information presented. The basis of preparation of the Unaudited Pro Forma Financial Information is set out in the introduction and notes to the Unaudited Pro Forma Financial Information of the Enlarged Group as set out in Appendix III of the Circular.

Responsibilities

It is the responsibility solely of the directors of the Company to prepare the Unaudited Pro Forma Financial Information in accordance with Paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 “Preparation of Pro Forma Financial Information for inclusion in Investment Circulars” issued by the Hong Kong Institute of Certified Public Accountants (the “HKICPA”).

— III-1 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

It is our responsibility to form an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

Basis of opinion

We conducted our work in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 300 “Accountants’ Reports on Pro Forma Financial Information in Investment Circulars” issued by the HKICPA. Our work consisted primarily of comparing the unadjusted financial information with source documents, considering the evidence supporting the adjustments and discussing the Unaudited Pro Forma Financial Information with the directors of the Company. The engagement did not involve independent examination of any of the underlying financial information.

Our work did not constitute an audit or review made in accordance with Hong Kong Standards on Auditing or Hong Kong Standards on Review Engagements issued by the HKICPA, and accordingly, we do not express any such audit or review assurance on the Unaudited Pro Forma Financial Information.

We planned and performed our work so as to obtain the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated, that such basis is consistent with the accounting policies of the Group and that the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

The Unaudited Pro Forma Financial Information is for illustrative purposes only, based on the judgements and assumptions of the directors of the Company, and because of its hypothetical nature, it does not provide any assurance or indication that any event will take place in the future and may not be indicative of the financial position of the Group as at 31 December 2008 or any future date.

— III-2 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Opinion

In our opinion:

• a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;

• b) such basis is consistent with the accounting policies of the Group; and

• c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to Paragraph 4.29(1) of the Listing Rules.

Yours faithfully

KPMG

Certified Public Accountants Hong Kong

— III-3 —

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP AFTER THE TRANSACTION

(A) INTRODUCTION

The following is the unaudited pro forma statement of assets and liabilities of the Enlarged Group immediately after the completion of the Disposal and the Acquisition, which has been prepared to illustrate the effect of the Transaction on the assets and liabilities of the Group, as if the Transaction had taken place on 31 December 2008, and is based on the historical consolidated balance sheet of the Group and historical balance sheet of Shanghai Co with further adjustments as explained in the notes below.

The unaudited pro forma statement of assets and liabilities has been prepared for illustrative purposes only and, because of its hypothetical nature, it may not give a true picture of the financial position of the Group after the Transaction had the Transaction been completed on 31 December 2008 or any future date.

The historical consolidated balance sheet of the Group and the historical balance sheet of Shanghai Co as at 31 December 2008 have been extracted from the published annual report of the Company for the year ended 31 December 2008 and the Accountants’ Report on the Shanghai Co as set out in Appendix II to this circular, respectively.

— III-4 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

(B) UNAUDITED PRO FORMA STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

As at 31 December 2008

					The
		Acquisition	Pro forma		Enlarged
		of	adjustments		Group
		Shanghai	for the		after the
	The Group	Co.	Transaction	Note	Transaction
	HK$’	HK$’	HK$’		HK$’
	million	million	million		Million
	(Audited)	(Audited)	(Unaudited)		(Unaudited)
Non-current assets
Fixed assets
Investment properties	1,877.0	—			1,877.0
Leasehold land	15.2	—			15.2
Other properties, plant and equipment	80.4	0.7			81.1
Interest in an associate	0.7	—			0.7
Interest in jointly controlled entities	2,586.7	—	(1,611.8)	(i)	974.9
Available-for-sale investments	604.0	—			604.0
Long term receivables	0.5	—			0.5
Derivative financial assets	2.9	—			2.9
	5,167.4	0.7	(1,611.8)		3,556.3
Current assets
Properties under development	4,972.6	1,499.2			6,471.8
Inventories	3.4	—			3.4
Trade and other receivables	105.3	50.3			155.6
Bank deposits and cash	1,258.4	0.8	172.5	(ii)	1,431.7
	6,339.7	1,550.3	172.5		8,062.5
Current liabilities
Trade and other payables	180.9	32.3			213.2
Derivative financial liabilities	165.8	—			165.8
Taxation payable	77.4	—			77.4
	424.1	32.3	—		456.4
Net current assets	5,915.6	1,518.0	172.5		7,606.1
Total assets less current liabilities	11,083.0	1,518.7	(1,439.3)		11,162.4

— III-5 —

APPENDIX III

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

						The
		Acquisition	Pro forma			Enlarged
		of	adjustments			Group
		Shanghai		for the		after the
	The Group	Co.	Transaction		Note	Transaction
	HK$’	HK$’		HK$’		HK$’
	million	million		million		Million
	(Audited)	(Audited)	(Unaudited)			(Unaudited)
Non-current liabilities
Employee retirement benefit liabilities	3.6	—				3.6
Derivative financial liabilities	1.3	—				1.3
Bank loans	3,065.0	—				3,065.0
Shareholders’ advances	—	1,198.2		(1,198.2)	(iii)	—
Deferred taxation	250.3	—				250.3
	3,320.2	1,198.2		(1,198.2)		3,320.2
NET ASSETS	7,762.8	320.5		(241.1)		7,842.2
Notes:

For the purpose of preparing the unaudited pro forma statement of assets and liabilities of the Group immediately upon completion of the Acquisition, the book values of the assets and liabilities of Shanghai Co as at 31 December 2008 as extracted from the Accountants’ Report set out in Appendix II to this Circular have been used.

A formal valuation of the identified assets, liabilities and contingent liabilities of Shanghai Co will be performed as at the date of completion of the Acquisition and their fair values may be different with those used in preparing this pro forma statement of assets and liabilities.

• (i) The adjustment represents the Disposal of the investment in Hangzhou Co and the shareholder’s advance at 31 December 2008, in the amount of RMB1,421.3 million (equivalent to HK$1,611.8 million), both of which are included in interest in jointly controlled entities.

• (ii) The adjustment represents cash of RMB152.2 million (equivalent to HK$172.5 million) payable to the Group, by means of a deposit of RMB100.0 million upon signing of the 10 April 2009 agreement and an amount of RMB52.2 million on the completion date of the Transaction.

• (iii) The adjustment represents offset of the shareholders’ advances of RMB1,056.7 million (equivalent to HK$1,198.2 million) at 31 December 2008 with the receivables from shareholders of Shanghai Co (in the amount of RMB1,088.7 million (equivalent to HK$1,234.6 million) on the completion date of the Transaction which includes the additional advances of RMB32.0 million (equivalent to HK$36.4 million) during the period from 1 January 2009 to 31 March 2009).

No adjustments have been made to reflect any trading results or other transactions of the Group or Shanghai Co entered into subsequent to 31 December 2008.

In the preparation of the pro forma financial information of the Enlarged Group, the financial results of Shanghai Co along with all other transactions and changes in net assets for the period from 1 January 2009 to the completion date, and adjustments to the fair value of properties under development at the completion date, are considered to be future events or decisions subsequent to 31 December 2008 and are not considered as adjustments under Rule 4.29 (6) of the Listing Rules and therefore have not been taken into account in the preparation of the unaudited pro forma financial information.

— III-6 —

APPENDIX IV VALUATION REPORT OF THE PROPERTY HELD BY SHANGHAI CO

The following is the text of a letter and valuation certificate, prepared for inclusion in this circular, received from Savills Valuation and Professional Services Limited, an independent valuer, in connection with their valuation as of 31 March 2009 of the property held by Shanghai Co.

==> picture [72 x 71] intentionally omitted <==

==> picture [118 x 93] intentionally omitted <==

Harbour Centre Development Limited 16th Floor

Ocean Centre Harbour City Canton Road Kowloon Hong Kong

4 May 2009

Dear Sirs,

RE: A PROPOSED DEVELOPMENT LOCATED AT 1 QIU, 443 JIEFANG, XINJIANGWANCHENG, YANGPU DISTRICT, SHANGHAI, THE PEOPLE’S REPUBLIC OF CHINA (THE “PROPERTY”)

We refer to your instructions for us to value the property held by Shanghai Luyuan Property Development Company Limited (the “Shanghai Co”) in the People’s Republic of China (the “PRC”), we confirm that we have carried out an inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of value of the property as at 31 March 2009 (“date of valuation”) for inclusion in a circular issued by Harbour Centre Development Limited.

— IV-1 —

VALUATION REPORT OF THE PROPERTY HELD BY SHANGHAI CO

APPENDIX IV

Our valuation of the property is our opinion of its market value which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

The market value is the best price reasonably obtainable in the market by the seller and the most advantageous price reasonably obtainable in the market by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, joint ventures, management agreements, special considerations or concessions granted by anyone associated with the sale, or any element of special value. The market value of a property is also estimated without regard to costs of sale and purchase, and without offset for any associated taxes.

In the course of our valuation of the property, unless otherwise stated, we have assumed that transferable land use rights of the property for its specific term at a nominal annual land use fee have been granted and that any land grant premium payable has already been fully paid. In valuing the property, unless otherwise stated, we have also assumed that the owner has an enforceable title to the property and has free and uninterrupted right to use, occupy or assign the property for the whole of the unexpired terms as granted.

In valuing the property which is held under development by the Shanghai Co, we have valued it on the basis that it will be developed and completed in accordance with the latest development proposal provided to us. In arriving at our opinion of value, we have adopted the direct comparison approach by making reference to comparable sales evidence as available in the relevant market to arrive at the capital value of the property as if the property were completed at the date of valuation and have also taken into account of the development costs spent and to be spent to reflect the quality of the completed development. The “capital value of the property as if completed” represents our opinion of the aggregate selling price of the property assuming that it would have been completed at the date of valuation.

We have been provided with copies of extracts of title documents relating to the property. However, we have not inspected the original documents to ascertain the existence of any amendments which do not appear on the copies handed to us. We have relied to a very considerable extent on information given by you and your legal advisers, Shanghai Zhongjian Law Firm, regarding the title to the property.

We have relied to a very considerable extent on information given by you and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, ownership, identification of the property, development proposal, construction costs, site and floor areas and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are therefore only approximations. No on-site measurements have been made. We have had no reason to doubt the truth and accuracy of the information provided to us by you which is material to our valuation. We have also advised by you that no material facts have been omitted from the information provided.

— IV-2 —

VALUATION REPORT OF THE PROPERTY HELD BY SHANGHAI CO

APPENDIX IV

We have inspected the property. However, we have not carried out site investigations to determine the suitability of the ground conditions and the services etc, for any development. Our valuation is prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property or for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property is free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

In valuing the property, we have complied with the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by the Stock Exchange of Hong Kong Limited and Valuation Standards on Properties (First Edition) published by the Hong Kong Institute of Surveyors.

Unless otherwise stated, all money amounts are stated in Renminbi.

We enclose herewith our valuation certificate.

Yours faithfully, For and on behalf of

Savills Valuation and Professional Services Limited

Charles C K Chan MSc FRICS FHKIS MCIArb RPS(GP) Managing Director

Note: Charles C K Chan, MSc, FRICS, FHKIS, MCIArb, RPS(GP), has been a qualified valuer and has about 24 years’ experience in the valuation of properties in Hong Kong and has about 19 years’ experience in the valuation of properties in the PRC.

— IV-3 —

APPENDIX IV

VALUATION REPORT OF THE PROPERTY HELD BY SHANGHAI CO

Property held under development by the Shanghai Co in the PRC

VALUATION CERTIFICATE

			Market value in
		Particulars	existing state as at
Property	Description and tenure	of occupancy	31 March 2009
A proposed development	The property comprises a proposed	Foundation work	RMB1,270,000,000
located at 1 Qiu, 443 Jiefang,	residential development named Greentown	for the property is
Xinjiangwancheng,	Yulan Apartment to be developed upon a	in progress.
Yangpu District,	parcel of land with a site area of
Shanghai,	approximately 59,253.70 sq.m. (637,807
PRC	sq.ft.).
	According to the information provided, upon
	completion, the proposed development will
	provide a total gross floor area of
	approximately 143,677.00 sq.m. (1,546,538
	sq.ft.) and is scheduled to be completed in
	2011. The breakdown of the planned gross
	floor area is summarized as follows:
	Use Approximate
	Gross Floor Area
	(sq m) (sq ft)
	Apartment 98,804 1,063,526
	Clubhouse 1,659 17,857
	Ancillary facilities 43,214 465,155
	Total 143,677 1,546,538

The land use rights of the property have been granted for a term of 70 years expiring on 8 July 2077 for residential uses.

Notes:

1. Pursuant to the Shanghai Certificate of Real Estate Ownership No. Hu Fang Di Yang Zi (2009) 006118 dated 14 April 2009 issued by Shanghai Housing and Land Resources Administration Bureau, the land use rights of a parcel of land located on 1 Qiu, 443 Jiefang, Xinjiangwancheng, Yangpu District with a site area of approximately 59,253.70 sq.m. have been granted to Shanghai Luyuan Property Development Company Limited (上海綠源房地產開發有限公司) (the “Shanghai Co”) for a term expiring on 8 July 2077 for residential uses.

2. Pursuant to the State-owned Land Use Rights Contract No. Hu Yang Fang Di (2007) Chu Rang He Tong Di 113 dated 9 July 2007, the land premium of the land of the property is RMB1,260,000,000.

3. Pursuant to the Planning Permit for Construction Land No. Hu Yang Di (2008) 10080426E00454, the Shanghai Co is permitted to use a parcel of land with a site area of approximately 59,253.70 sq.m. for development.

— IV-4 —

APPENDIX IV VALUATION REPORT OF THE PROPERTY HELD BY SHANGHAI CO

1. Pursuant to 2 Planning Permits for Construction Works Nos. Hu Yang Jian (2008) 10081021F02597 and (2008) 10081030F02681, the Shanghai Co is permitted to construct various buildings with a total gross floor area of 143,542 sq.m.

2. Pursuant to 3 Approval for Commencement of Construction Works Nos. 0801YP0006D01 310110200803260619, 0801YP0006D02 310110200803260619 and 0801YP0006D03 310110200803260619, the construction works of various buildings with a total gross floor area of 143,542 sq.m. is permitted to commence.

3. Pursuant to the information provided, the total development costs incurred and to be spent for the proposed development as at the date of valuation are about RMB116,000,000 and RMB875,000,000 respectively. We have taken into account such amounts in our valuation.

4. The capital value of the property as if completed as at the date of valuation was RMB2,800,000,000.

5. We have been provided with a legal opinion on the title to the property issued by your PRC’s legal advisers, which contains, inter alia, the following information:

6. i. the land use rights of the property are legally held by Shanghai Co; and

7. ii. the land use rights of the property are not subject to any mortgages, seizures or encumbrances.

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VALUATION REPORT OF THE PROPERTY HELD BY HANGZHOU CO

APPENDIX V

The following is the text of a letter and valuation certificate, prepared for inclusion in this circular, received from Savills Valuation and Professional Services Limited, an independent valuer, in connection with their valuation as of 31 March 2009 of the property held by Hangzhou Co.

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Harbour Centre Development Limited

16th Floor Ocean Centre Harbour City Canton Road Kowloon Hong Kong

4 May 2009

Dear Sirs,

• RE: A PROPOSED DEVELOPMENT LOCATED AT THE JUNCTION OF ZHIJIANG ROAD AND WANGJIANG EAST ROAD, SHANGCHENG DISTRICT, HANGZHOU, ZHEJIANG PROVINCE, THE PEOPLE’S REPUBLIC OF CHINA (THE “PROPERTY”)

We refer to your instructions for us to value the property held by Hangzhou Greentown Haiqi Property Development Company Limited (the “Hangzhou Co”) in the People’s Republic of China (the “PRC”), we confirm that we have carried out an inspection, made relevant enquiries and obtained such further information as we consider necessary for the purpose of providing you with our opinion of value of the property as at 31 March 2009 (“date of valuation”) for inclusion in a circular issued by Harbour Centre Development Limited.

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VALUATION REPORT OF THE PROPERTY HELD BY HANGZHOU CO

APPENDIX V

Our valuation of the property is our opinion of its market value which we would define as intended to mean “the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion”.

The market value is the best price reasonably obtainable in the market by the seller and the most advantageous price reasonably obtainable in the market by the buyer. This estimate specifically excludes an estimated price inflated or deflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, joint ventures, management agreements, special considerations or concessions granted by anyone associated with the sale, or any element of special value. The market value of a property is also estimated without regard to costs of sale and purchase, and without offset for any associated taxes.

In the course of our valuation of the property, unless otherwise stated, we have assumed that transferable land use rights of the property for its specific term at a nominal annual land use fee have been granted and that any land grant premium payable has already been fully paid. In valuing the property, unless otherwise stated, we have also assumed that the owner has an enforceable title to the property and has free and uninterrupted right to use, occupy or assign the property for the whole of the unexpired terms as granted.

In valuing the property which is held under development by the Hangzhou Co, we have valued it on the basis that it will be developed and completed in accordance with the latest development proposal provided to us. In arriving at our opinion of value, we have adopted the direct comparison approach by making reference to comparable sales evidence as available in the relevant market to arrive at the capital value of the property as if the property were completed at the date of valuation and have also taken into account of the development costs spent and to be spent to reflect the quality of the completed development. The “capital value of the property as if completed” represents our opinion of the aggregate selling price of the property assuming that it would have been completed at the date of valuation.

We have been provided with copies of extracts of title documents relating to the property. However, we have not inspected the original documents to ascertain the existence of any amendments which do not appear on the copies handed to us. We have relied to a very considerable extent on information given by you and your legal advisers, Zhejiang Brighteous Law Firm, regarding the title to the property.

We have relied to a very considerable extent on information given by you and have accepted advice given to us on such matters as planning approvals or statutory notices, easements, tenure, ownership, identification of the property, development proposal, construction costs, site and floor areas and all other relevant matters. Dimensions, measurements and areas included in the valuation certificate are based on information contained in the documents provided to us and are therefore only approximations. No on-site measurements have been made. We have had no reason to doubt the truth and accuracy of the information provided to us by you which is material to our valuation. We have also advised by you that no material facts have been omitted from the information provided.

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VALUATION REPORT OF THE PROPERTY HELD BY HANGZHOU CO

APPENDIX V

We have inspected the property. However, we have not carried out site investigations to determine the suitability of the ground conditions and the services etc, for any development. Our valuation is prepared on the assumption that these aspects are satisfactory and that no extraordinary expenses or delays will be incurred during the construction period.

No allowance has been made in our valuation for any charges, mortgages or amounts owing on the property or for any expenses or taxation which may be incurred in effecting a sale. Unless otherwise stated, it is assumed that the property is free from encumbrances, restrictions and outgoings of an onerous nature which could affect its value.

In valuing the property, we have complied with the requirements set out in Chapter 5 and Practice Note 12 of the Rules Governing the Listing of Securities issued by the Stock Exchange of Hong Kong Limited and Valuation Standards on Properties (First Edition) published by the Hong Kong Institute of Surveyors.

Unless otherwise stated, all money amounts are stated in Renminbi.

We enclose herewith our valuation certificate.

Yours faithfully, For and on behalf of

Savills Valuation and Professional Services Limited

Charles C K Chan MSc FRICS FHKIS MCIArb RPS(GP) Managing Director

Note: Charles C K Chan, MSc, FRICS, FHKIS, MCIArb, RPS(GP), has been a qualified valuer and has about 24 years’ experience in the valuation of properties in Hong Kong and has about 19 years’ experience in the valuation of properties in the PRC.

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APPENDIX V

VALUATION REPORT OF THE PROPERTY HELD BY HANGZHOU CO

Property held under development by the Hangzhou Co in the PRC

VALUATION CERTIFICATE

Property Description and tenure A proposed development The property comprises a proposed located at the junction of comprehensive development named Zhijiang Road and Sapphire Mansion to be developed upon Wangjiang East Road, two parcels of contiguous land with a total Shangcheng District, site area of approximately 84,255 sq.m. Hangzhou, (906,921 sq.ft.) Zhejiang Province, PRC According to the information provided, the proposed development is scheduled to be developed in three phases. Phase 1 will provide mainly residential and retail areas with a total planned gross floor area of approximately 114,130 sq.m. (1,228,495 sq.ft.) and is scheduled to be completed by 2011. Phases 2 and 3 will provide mainly hotel, serviced apartment and residential areas with a total planned gross floor area of approximately 297,223 sq.m. (3,199,308 sq.ft.) and will be completed in 2012 and 2013 respectively.

Market value in Particulars of existing state as at occupancy 31 March 2009 Foundation work RMB3,700,000,000 for Phase 1 of the proposed development is in progress. Phases 2 and 3 of the property are vacant land.

The land use rights of the property have been granted for terms of 40 years and 70 years expiring on 2 December 2047 and 2 December 2077 respectively for retail/ composite (office) and residential uses respectively.

Notes:

1. Pursuant to the Contract for Grant of State-owned Land Use Rights No. Hang Tu He Zi (2007) 32 dated 6 June 2007, the land premium of the land of the property is RMB1,919,500,045.

2. Pursuant to the Compensation Agreement for Development of Government Land Reserve No. Hang Tu Chu Xie (2007) 15 dated 6 June 2007, the total land development compensation of the land of the property is RMB1,570,499,955.

3. Pursuant to five State-owned Land Use Rights Certificate Nos. (2008)000135 to (2008)000139 all dated 12 September 2008 and issued by the People’s Government of Hangzhou, the land use rights of five parcels of land located at the junction of Wangjiang East Road and Kunpeng Road, Shangcheng District with a total site area of 84,255 sq.m. have been granted to Hangzhou Greentown Haiqi Property Development Company Limited (杭州綠城海企房地產開發有限公司) (the “Hangzhou Co”) for terms of 40 years and 70 years expiring on 2 December 2047 and 2 December 2077 for retail/ composite (office) and residential uses respectively.

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APPENDIX V VALUATION REPORT OF THE PROPERTY HELD BY HANGZHOU CO

1. Pursuant to the Planning Permit for Construction Land No.(2008) 330100200800389 dated 30 July 2008 issued by the Planning Bureau of Hangzhou, the Hangzhou Co is permitted to use a parcel of site with a site area of 84,255 sq.m. for development.

2. Pursuant to the Planning Permit for Construction Work No.(2008) 330100200800447 dated 13 November 2008 issued by the Planning Bureau of Hangzhou, the Hangzhou Co is permitted to construct various buildings with a total gross floor area of 114,130 sq.m.

3. Pursuant to the Approval for Commencement of Construction Works No. (2008) 330100200811270101 dated 27 November 2008 issued by the Hangzhou Construction Commission, the construction works of various buildings with a total gross floor area of 114,130 sq.m. is permitted to commence.

4. Pursuant to the information provided, the total development costs incurred and to be spent for the proposed development as at the date of valuation are about RMB78,000,000 and RMB2,908,000,000 respectively. We have taken into account such amounts in our valuation.

5. The capital value of the property as if completed as at the date of valuation was RMB7,675,000,000.

6. We have been provided with a legal opinion on the title to the property issued by your PRC’s legal advisers, which contains, inter alia, the following information:

7. i. the land use rights of the property are legally held by Hangzhou Co;

8. ii. the property is subject to a mortgage in favour of China Construction Bank for a consideration of RMB1,400,000,000;

9. iii. Hangzhou Co is entitled to lease or mortgage the property and has the rights to transfer the property after obtaining the written consent from the mortgagee; and

10. iv. except for the mortgage as mentioned in (ii), the property is not subject to any seizures, other mortgages or encumbrances.

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GENERAL INFORMATION

APPENDIX VI

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 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 herein misleading.

DISCLOSURE OF INTERESTS

(a) DIRECTORS’ INTERESTS

As at the Latest Practicable Date, the interests (all being long positions) of the Directors and chief executive (if any) of the Company in the shares, underlying shares and debentures of the Company or any of its associated corporation(s) (within the meaning of Part XV of the SFO), which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which 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 into the register referred to therein, or which were required, pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers to be notified to the Company and the Stock Exchange, were as follows:

Quantity held Nature of Interest (percentage of issued share capital, if applicable)

The Company — Ordinary Shares Michael T. P. Sze

Michael T. P. Sze 25,000 (0.0053%) Family Interest Wheelock — Ordinary Shares Stephen T. H. Ng 300,000 (0.0148%) Personal Interest T. Y. Ng 70,000 (0.0034%) Personal Interest Wharf Holdings — Ordinary Shares Stephen T. H. Ng 731,314 (0.0266%) Personal Interest T. Y. Ng 200,268 (0.0073%) Personal Interest Michael T. P. Sze 50,099 (0.0018%) Family Interest i-CABLE Communications Limited — Ordinary Shares Stephen T. H. Ng 1,265,005 (0.0529%) Personal Interest T. Y. Ng 17,801 (0.0009%) Personal Interest Wharf Finance (BVI) Limited — HK$ Fixed Rate Notes due 2011 Brian S. K. Tang HK$1,500,000 Personal Interest

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APPENDIX VI

GENERAL INFORMATION

Except as disclosed above, as at the Latest Practicable Date, none of the Directors or chief executive (if any) of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company and any of its associated corporation(s) (within the meaning of Part XV of the SFO) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO), or pursuant to Section 352 of the SFO, to be entered into the register referred to therein, or pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers to be notified to the Company and the Stock Exchange.

(b) SUBSTANTIAL SHAREHOLDERS’ INTERESTS

Given below are the names of all parties which were, directly or indirectly, interested in 5% or more of the nominal value of any class of shares capital of the Company, the respective relevant numbers of shares in which they were, and/or were deemed to be, interested (all being long position) as at the Latest Practicable Date and required to be notified to the Company and the Stock Exchange pursuant to Divisions 2 and 3 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 to be recorded in the register kept by the Company under Section 336 of the SFO and the percentages which the shares represented to be issued share capital of the Company:

		Number of	Percentage
Names		Ordinary Shares	of Holdings
(i)	Upfront International Limited	332,496,131	70.37%
(ii)	Wharf Estates Limited	332,496,131	70.37%
(iii)	Wharf Holdings	332,496,131	70.37%
(iv)	WF Investment Partners Limited	332,496,131	70.37%
(v)	Wheelock	332,496,131	70.37%
(vi)	HSBC Trustee (Guernsey) Limited	332,496,131	70.37%
(vii)	Harson Investment Limited	38,036,250	8.05%

Note: For the avoidance of doubt and double counting, it should be noted that duplication occurs in respect of the shareholdings stated against parties (i) to (vi) above in that they represent the same block of shares.

Save as disclosed in this circular, as at the Latest Practicable Date and so far as is known to the Directors or chief executive (if any) of the Company, no other person had, or was deemed or taken to have, any interests or short positions in shares or underlying shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO, or was, directly or indirectly, interested in 5% 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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GENERAL INFORMATION

APPENDIX VI

DIRECTORS’ INTERESTS IN COMPETING BUSINESS

Save as disclosed below, as at the Latest Practicable Date, none of the Directors and their respective associates had any interests in a business, which competes or may compete with the business of the Group.

Three Directors of the Company, namely, Messrs. S. T. H. Ng, T. Y. Ng and P. Y. C. Tsui, being also directors of the Company’s parent company, namely, Wharf Holdings, and/or subsidiaries of Wharf Holdings, are considered as having an interest in Wharf Holdings under Rule 8.10 of the Listing Rules.

Ownership of property for letting and ownership of hotels by wholly-owned subsidiaries of Wharf Holdings constitute competing business to the Group.

The commercial premises at Harbour City, being in the vicinity of The Marco Polo Hongkong Hotel, owned by the Wharf Holdings group for rental purposes are considered as competing with the commercial premises in The Marco Polo Hongkong Hotel owned by the Group. In view of the Wharf Holdings group’s extensive experience and expertise in property letting and management, the Group has appointed a subsidiary of Wharf Holdings as the agent for the letting, reletting, management, licensing and re-licensing of the commercial premises in The Marco Polo Hongkong Hotel.

Two hotels, namely, The Gateway and The Prince, owned by wholly-owned subsidiaries of Wharf Holdings are also considered as competing businesses of The Marco Polo Hongkong Hotel owned by the Group. In view of the Wharf Holdings group’s expertise and very good track record in the management and operation of hotels throughout the Asia Pacific region, the Group has engaged a wholly-owned subsidiary (the “Operator”) of Wharf Holdings to act as manager to operate, direct, manage and supervise The Marco Polo Hongkong Hotel. The Operator is also responsible for the operation of two hotels in Hong Kong, namely, The Gateway and The Prince, and some other hotels in the Asia Pacific region. The Operator has agreed, inter alia , to operate The Marco Polo Hongkong Hotel as a first class hotel, failing which, the Group has the right to unilaterally terminate the engagement of the Operator.

For safeguarding the interest of the Group, the independent non-executive Directors and the Audit Committee of the Company would on a regular basis review the business and operational results of the Group to ensure, inter alia , that the Group’s hotel and property leasing and management business are and continue to be run on the basis that they are independent of, and at arm’s length from, those of the Wharf Holdings group.

DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, there existed no service contract, nor there had been proposed any service contract to be, entered into between any Director with the Company or any of its subsidiaries which will not expire or is not determinable by the employer within one year without payment of compensation (other than statutory compensation).

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GENERAL INFORMATION

APPENDIX VI

DIRECTORS’ INTERESTS IN CONTRACT OF SIGNIFICANCE

As at the Latest Practicable Date, none of the Directors is materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group subsisting at the date of this circular and which is significant in relation to the business of the Group.

DIRECTORS’ INTERESTS IN ASSETS

None of the Director has any interest, direct or indirect, in any assets which has since 31 December 2008 (being the date to which the latest published audited financial statements of the Group were made up) up to the Latest Practicable Date, been acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group.

MATERIAL CONTRACTS

As at the Latest Practicable Date, except for (1) the underwriting agreement dated 5 February 2008 entered into between the Company and Wharf Holdings in relation to the 1-for-2 rights issue of the Company as announced by the Company in an announcement dated 5 February 2008, and (2) the underwriting agreement dated 2 April 2009 entered into between the Company and Wharf Holdings in relation to the 1-for-2 rights issue of the Company as announced by the Company in an announcement dated 2 April 2009, neither the Company nor any members of the Enlarged Group had entered into any contract (not being contracts entered into in the ordinary course of business) within two years preceding the date of this circular which are or may be material.

LITIGATIONS

As at the Latest Practicable Date, neither the Company nor any members of the Enlarged Group was engaged in any litigation or arbitration of material importance and, so far as the Directors are aware, no litigation or claims of material importance is pending or threatened against the Company or any members of the Enlarged Group.

EXPERTS’ QUALIFICATIONS AND CONSENTS

The followings are the qualification of the experts who have been named in this circular or have given opinion or advice which are contained in this circular:

Name	Qualification
KPMG	Certified public accountants
Savills	Independent professional valuer

Each of KPMG and Savills has given and has not withdrawn its written consent to the issue of this circular with the inclusion herein of its letter/opinion and references to its name in the form and context in which they are included.

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GENERAL INFORMATION

APPENDIX VI

EXPERTS’ INTERESTS

As at the Latest Practicable Date, none of KPMG and Savills:

• (a) had any direct or indirect interest in any asset which had since 31 December 2008, being the date to which the latest published audited financial statements of the Company were made up, been acquired or disposed of by or leased to any member of the Group, or was proposed to be acquired or disposed of by or leased to any member of the Group; and

• (b) was beneficially interested in the share capital of any member of the Group nor did they have any right (whether legally enforceable or not) to subscribe for or to nominate persons to subscribe for securities in any member of the Group.

MISCELLANEOUS

• (a) The registered office of the Company is 16th Floor, Ocean Centre, Harbour City, Canton Road, Kowloon, Hong Kong.

• (b) The secretary of the Company appointed pursuant to Rule 3.24 of the Listing Rules is Mr. Wilson W. S. Chan, who is a fellow member of The Institute of Chartered Secretaries and Administrators.

• (c) The transfer office of the Company is that of the Company’s share registrars, namely, Tricor Tengis Limtied, and is situate at 26th Floor, Tesbury Centre, 28 Queen’s Road East, Wanchai, Hong Kong.

• (d) The English language text of this circular shall prevail over the Chinese language text.

DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours from date of this circular up to and including 19 May 2009 at the registered office in Hong Kong of the Company:

• (a) the letter from the Board, the text of which is set out on pages 5 to 16 of this circular;

• (b) each of the contracts set out under the paragraph headed “Material Contracts” in this appendix;

• (c) the accountants’ report of Shanghai Co as signed by KPMG, the text of which is set out in Appendix II to this circular;

• (d) the report on unaudited pro forma statement of the Enlarged Group as set out in Appendix III to this circular;

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GENERAL INFORMATION

APPENDIX VI

• (e) the property valuation report of the property held by Shanghai Co as signed by Savills, the text of which is set out in Appendix IV to this circular;

• (f) the property valuation report of the property held by Hangzhou Co as signed by Savills, the text of which is set out in Appendix V to this circular;

• (g) the written consents referred to in paragraph headed “Experts’ Qualifications and Consents” in this appendix;

• (h) the annual reports of the Company for the years ended 31 December 2007 and 31 December 2008; and

• (i) the memorandum and articles of association of the Company.

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