IRC Limited - Interim / Quarterly Report 2012

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

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(Stock Code: 488)

ANNOUNCEMENT OF INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 JANUARY 2012

RESULTS

The board of directors (the “ Board ”) of Lai Sun Development Company Limited (the “ Company ”) announces the unaudited consolidated results of the Company and its subsidiaries (the “ Group ”) for the six months ended 31 January 2012 together with the comparative figures of the last corresponding period as follows:

Condensed Consolidated Income Statement

For the six months ended 31 January 2012

Notes
TURNOVER
3
Cost of sales
Gross profit
Other revenue and gain
Selling and marketing expenses
Administrative expenses
Other operating expenses, net
Fair value gain on investment properties
Reversal of provision/(provision) for tax indemnity
4
PROFIT FROM OPERATING ACTIVITIES
5
Finance costs
6
Share of profits and losses of associates
9
Discount on acquisition of additional interest
in an associate
PROFIT BEFORE TAX
Tax
7
PROFIT FOR THE PERIOD

Six months ended
31 January
2012
2011
(Unaudited)
(Unaudited)
HK$’000
HK$’000
451,989
669,439
(174,216)
(353,473 )
277,773
315,966
11,400
39,938
(6,119)
(24,597 )
(154,435)
(147,677)
(21,106)
(11,691 )
60,624
587,635
1,060
(47,185)
169,197
712,389
(23,035)
(23,866 )
116,288
391,588
88,695
-
351,145
1,080,111
(25,403)
(115,677)
325,742
964,434

Condensed Consolidated Income Statement (continued) For the six months ended 31 January 2012

Notes Attributable to: Ordinary equity holders of the Company Non-controlling interests EARNINGS PER SHARE ATTRIBUTABLE TO 8 ORDINARY EQUITY HOLDERS OF THE COMPANY Basic Diluted	Six months ended 31 January 2012 2011 (Unaudited) (Unaudited) *HK$’000* HK$’000 302,384 940,835 23,358 23,599 325,742 964,434 (Adjusted) HK 1.82 cents HK 6.14 cents N/A N/A

Condensed Consolidated Statement of Comprehensive Income For the six months ended 31 January 2012

PROFIT FOR THE PERIOD
OTHER COMPREHENSIVE INCOME/(EXPENSES)
Changes in fair value of available-for-sale financial assets
Exchange realignments:
Subsidiaries
Associates
Share of investment revaluation reserve of an associate
Share of an associate’s release of reserves to the income
statement upon disposal of its interest in an associate
OTHER COMPREHENSIVE INCOME
FOR THE PERIOD
TOTAL COMPREHENSIVE INCOME
FOR THE PERIOD
Attributable to:
Ordinary equity holders of the Company
Non-controlling interests

Six months ended
31 January
2012
2011
(Unaudited)
(Unaudited)
HK$’000
HK$’000
325,742
964,434
61,435
168,487
(2,889)
233
30,509
33,757
(1,808)
8,338
-
( 99,279 )
87,247
111,536
412,989
1,075,970
389,620
1,052,290
23,369
23,680
412,989
1,075,970

Condensed Consolidated Statement of Financial Position

As at 31 January 2012

Notes NON-CURRENT ASSETS Property, plant and equipment Prepaid land lease payments Investment properties Properties under development for sale Interests in associates 9 Available-for-sale financial assets Pledged bank balances and time deposits Deposit paid for acquisition of interest in an associate Total non-current assets CURRENT ASSETS Completed properties for sale Equity investments at fair value through profit or loss Inventories Debtors and deposits paid 10 Held-to-maturity debt investments Pledged bank balances and time deposits Cash and cash equivalents Total current assets CURRENT LIABILITIES Creditors, deposits received and accruals 10 Tax payable Bank borrowings Total current liabilities NET CURRENT ASSETS TOTAL ASSETS LESS CURRENT LIABILITIES NON-CURRENT LIABILITIES Bank borrowings Deferred tax Provision for tax indemnity 4 Long term rental deposits received Total non-current liabilities EQUITY Equity attributable to ordinary equity holders of the Company Issued capital 11 Share premium account 11 Investment revaluation reserve Share option reserve Capital redemption reserve General reserve 11 Other reserve Special capital reserve 11 Exchange fluctuation reserve Retained profits Non-controlling interests	31 January 2012 (Unaudited) *HK$’000* 356,051 25,524 7,824,709 1,183,870 5,836,435 994,659 - - 16,221,248 103,005 13,502 5,534 138,145 - 99,837 1,194,468 1,554,491 225,243 59,970 872,018 1,157,231 397,260 16,618,508 (1,649,873) (1,170,389) (517,510) (56,988) (3,394,760) 13,223,748 200,629 7,429,332 893,483 1,211 1,200,000 630,400 59,950 - 139,988 2,359,812 12,914,805 308,943 13,223,748	31 July 2011 (Audited) HK$’000 356,226 26,038 7,756,931 1,098,195 5,048,312 883,183 99,591 90,000 15,358,476 147,197 10,158 5,878 124,827 33,963 - 1,002,805 1,324,828 222,099 62,896 217,097 502,092 822,736 16,181,212 (2,199,440) (1,160,297) (518,570 ) (55,930) (3,934,237) 12,246,975 141,620 6,974,701 833,856 1,092 1,200,000 504,136 7,565 126,264 112,379 2,057,428 11,959,041 287,934 12,246,975

Notes to Condensed Consolidated Interim Financial Statements

1. BASIS OF PREPARATION

The unaudited condensed consolidated interim financial statements of the Group for the six months ended 31 January 2012 have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “ Listing Rules ”) and with Hong Kong Accounting Standard (“ HKAS ”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants.

The condensed consolidated interim financial statements have not been audited by the Company’s auditors but have been reviewed by the Company’s audit committee.

2. SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies and basis of presentation used in the preparation of these interim financial statements are the same as those used in the Group’s audited consolidated financial statements for the year ended 31 July 2011. The Group has adopted the new and revised Hong Kong Financial Reporting Standards (“ HKFRSs ”, which also include HKASs and Interpretations) which are applicable to the Group and are effective in the current period. The adoption of these new and revised HKFRSs has had no material impact on the reported results or financial position of the Group.

Impact of issued but not yet effective HKFRSs

The Group has not applied the following new and revised HKFRSs, which are applicable to the Group, that have been issued but are not yet effective, in these interim financial statements:

HKAS 1 (Amendments)	Presentation of Items of Other Comprehensive Income1
HKAS 12 (Amendments)	Deferred Tax : Recovery of Underlying Assets2
HKAS 27 (as revised in 2011)	Separate Financial Statements3
HKAS 28 (as revised in 2011)	Investments in Associates and Joint Ventures3
HKAS 32 (Amendments)	Financial Instruments: Presentation – Offsetting Financial
	Assets and Financial Liabilities4
HKFRS 7 Amendments	Financial Instruments: Disclosures – Offsetting Financial
	Assets and Financial Liabilities3
HKFRS 9 and HKFRS 7 (Amendments)	Mandatory Effective Date of HKFRS 9 and Transition Disclosures5
HKFRS 9	Financial Instruments5
HKFRS 10	Consolidated Financial Statements3
HKFRS 11	Joint Arrangements3
HKFRS 12	Disclosure of Interests in Other Entities3
HKFRS 13	Fair Value Measurement3

1 Effective for annual periods beginning on or after 1 July 2012

2 Effective for annual periods beginning on or after 1 January 2012

3 Effective for annual periods beginning on or after 1 January 2013

4 Effective for annual periods beginning on or after 1 January 2014 5 Effective for annual periods beginning on or after 1 January 2015

The amendments to HKAS 12 “Deferred Tax: Recovery of Underlying Assets” mainly deal with the measurement of deferred tax for investment properties that are measured using the fair value model in accordance with HKAS 40 “Investment Property”. Based on the amendments, for the purposes of measuring deferred tax liabilities and deferred tax assets for investment properties measured using the fair value model, the carrying amounts of the investment properties are presumed to be recovered through sale, unless the presumption is rebutted in certain circumstances. The adoption of the amendments to HKAS 12 may have a material impact on deferred tax recognised for investment properties that are measured using the fair value model. The Group is in the process of assessing the impact from application of these amendments.

For other new and revised HKFRSs which are issued but not yet effective, the Group is in the process of making an assessment of the impact upon initial application. The Group is not yet in a position to state whether they would have a significant impact on the Group’s results of operations and financial position.

3. SEGMENT INFORMATION

The following table presents revenue and profit/(loss) for the Group's reportable segments:

				Six	months ended 31 January (Unaudited)	months ended 31 January (Unaudited)	months ended 31 January (Unaudited)	months ended 31 January (Unaudited)
	Property				Hotel and
	development		Property		restaurant
	and	sales	investment		operations		Others		Eliminations		Consolidated
	2012	2011	2012	2011	2012	2011	2012	2011	2012	2011	2012	2011
	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000	HK$'000HK$'000		HK$'000	HK$'000	HK$'000	HK$'000	HK$'000
Segment revenue:
Sales to external
customers	57,893	287,486	195,868	174,614	186,899	196,758	11,329	10,581	-	-	451,989	669,439
Intersegment sales	-	-	5,152	3,800	-	-	11,577	11,431	(16,729)	(15,231)	-	-
Other revenue	4,965 ______	2,533 _____	1,246 _	266 _	1 _	- _	- _	- ______	- _	- _	6,212 ___	2,799 _
Total	62,858 ______	290,019 _	202,266 _	178,680 _	186,900 _	196,758 _	22,906 _	22,012 ______	(16,729) _	(15,231) _	458,201 ___	672,238 _
	______	_	_	_	_	_	_	______	_	_	___	_
Segment results	13,313 ______	40,904 _	153,430 _	135,240 _	38,447 _	40,299 _	(639) _	(63) ______	- _	- ______	204,551	216,380
	______	_	_	_	_	_	_	______	_	______
Interest income and
unallocated gain											5,188	37,139
Fair value gain on
investment properties		-	60,624	587,635	-	-	-	-	-	-	60,624	587,635
Unallocated expenses											(102,226)	(81,580)
Reversal of provision /
(provision)
for tax indemnity											1,060 __	(47,185) __
Profit from operating
activities											169,197	712,389
Finance costs											(23,035)	(23,866)
Share of profits and losses
of associates	34,829	(3,075)	105,058	147,691	(1,275)	431	-	-	-	-	138,612	145,047
Share of profits and losses
of associates - unallocated											(22,324)	246,541
Discount on acquisition of
additional interest in an
associate											88,695 ___	- ___
Profit before tax											351,145	1,080,111
Tax											(25,403) ___	(115,677) ___
Profit for the period											325,742 _ _	964,434 _ _

The following table presents the total assets for the Group’s reportable segments:-

	Property	Property	Hotel and	Hotel and
	development Property		restaurant
	and	sales investment	operations		Others		Consolidated
	31 January	31 July31 January31 July	31 January	31 July31 January		31 July	31 January	31 July
	2012	2011 2012 2011	2012	2011	2012	2011	2012	2011
	(Unaudited)	(Audited)(Unaudited)(Audited)	(Unaudited)	(Audited)(Unaudited)		(Audited)	(Unaudited)	(Audited)
	HK$'000	HK$'000HK$'000HK$'000	HK$'000	HK$'000HK$'000		HK$'000	HK$'000	HK$'000
Segment assets	1,308,0801,258,8137,905,6827,794,466		531,900	557,901	61,555	55,143	9,807,217	9,666,323
Interests in associates	356,197	721,4322,803,3621,847,124	11,223	4,975	-		3,170,782	2,573,531
Interests in associates
- unallocated							2,665,653	2,474,781
Unallocated assets							2,132,087 ___	1,968,669 ___
Total assets							17,775,739 _ _	16,683,304 _ _

4. REVERSAL OF PROVISION/(PROVISION) FOR TAX INDEMNITY

Pursuant to an indemnity deed (the “ Lai Fung Tax Indemnity Deed ”) dated 12 November 1997 entered into between the Company and Lai Fung Holdings Limited (“ Lai Fung ”), the Company has undertaken to indemnify Lai Fung in respect of certain potential PRC income tax and land appreciation tax (“ LAT ”) payable or shared by Lai Fung in consequence of the disposal of any of the property interests attributable to Lai Fung through its subsidiaries and its associates as at 31 October 1997 (the “ Property Interests ”). These tax indemnities given by the Company apply in so far as such tax is applicable to the difference between (i) the value of the Property Interests in the valuation thereon by Chesterton Petty Limited (currently known as “Knight Frank Petty Limited”), independent chartered surveyors, as at 31 October 1997 (the “ Valuation ”); and (ii) the aggregate costs of such Property Interests incurred up to 31 October 1997, together with the amount of unpaid land costs, unpaid land premium and unpaid costs of resettlement, demolition and public utilities and other deductible costs in respect of the Property Interests. The Lai Fung Tax Indemnity Deed assumes that the Property Interests are disposed of at the values attributed to them in the Valuation, computed by reference to the rates and legislation governing PRC income tax and LAT prevailing at the time of the Valuation.

The indemnities given by the Company do not cover (i) new properties acquired by Lai Fung subsequent to the listing of the shares of Lai Fung on the Stock Exchange (the “ Listing ”); (ii) any increase in the relevant tax which arises due to an increase in tax rates or changes to the legislation prevailing at the time of the Listing; and (iii) any claim to the extent that provision for deferred tax on the revaluation surplus has been made in the calculation of the adjusted net tangible asset value of Lai Fung as set out in Lai Fung's prospectus dated 18 November 1997.

After taking into account the Property Interests currently held by Lai Fung as at 31 January 2012 which are covered under the Lai Fung Tax Indemnity Deed and the prevailing tax rates and legislation governing PRC income tax and LAT, the total amount of tax indemnity given by the Company is estimated to be HK$1,336,996,000.

As at 31 January 2012, the directors of the Company, after taking into account the prevailing market situation and the latest development plan and status of the various individual property development projects as included in the Property Interests and the prevailing tax rates and legislation governing PRC income tax and LAT, considered it is probable that an estimated amount of HK$517,510,000 (31 July 2011:HK$518,570,000) of the abovementioned tax indemnity given by the Company would be crystallised. Therefore, a reversal of provision for the tax indemnity amount of HK$1,060,000 was recognised in the consolidated income statement for the six months ended 31 January 2012.

5. PROFIT FROM OPERATING ACTIVITIES

The Group’s profit from operating activities is arrived at after charging/(crediting):

	Six months ended	Six months ended
	31 January
	2012	2011
	(Unaudited)	(Unaudited)
	*HK$’000*	HK$’000
Depreciation#	11,551	11,447
Amortisation of prepaid land lease payments *	514	514
Loss on disposal of equity investments at fair value through profit or loss*	51	882
Fair value loss/(gain) on equity investments at fair value through profit or loss*	6,580	(2,083)
Gain on disposal of an available-for-sale financial asset	-	(27,795)
Interest income from bank deposits	(1,742)	(1,676)
Other interest income	(202)	(1,702)
Dividend income from unlisted available-for-sale equity investments	(100)	(215)
Dividend income from listed equity investments at fair value through profit or loss	(40)	-

Depreciation charge of HK$10,439,000 (Six months ended 31 January 2011: HK$9,840,000) for property, plant and equipment is included in “other operating expenses, net” on the face of the condensed consolidated income statement.

These items are included in “other operating expenses, net” on the face of the condensed consolidated income statement.

6. FINANCE COSTS

Interest on bank borrowings wholly repayable within five years Bank financing charges Less : Amount capitalised in properties under development for sale	Six months ended 31 January 2012 2011 (Unaudited) (Unaudited) *HK$’000* HK$’000 22,887 21,108 4,466 4,651 27,353 25,759 (4,318) (1,893) 23,035 23,866	Six months ended 31 January 2012 2011 (Unaudited) (Unaudited) *HK$’000* HK$’000 22,887 21,108 4,466 4,651 27,353 25,759 (4,318) (1,893) 23,035 23,866
		25,759 (1,893)
		23,866

7. TAX

Hong Kong profits tax has been provided at the rate of 16.5% (Six months ended 31 January 2011: 16.5%) on the estimated assessable profits arising in Hong Kong during the period.

Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the places in which the Group operates, based on existing legislation, interpretations and practices in respect thereof.

Current tax Hong Kong Overseas Deferred tax Tax charge for the period	Six months ended 31 January 2012 2011 (Unaudited) (Unaudited) *HK$’000* HK$’000 7,644 8,369 7,667 7,556 15,311 15,925 10,092 99,752 25,403 115,677	Six months ended 31 January 2012 2011 (Unaudited) (Unaudited) *HK$’000* HK$’000 7,644 8,369 7,667 7,556 15,311 15,925 10,092 99,752 25,403 115,677
		15,925 99,752
		115,677

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

The calculation of basic earnings per share is based on the profit for the period attributable to ordinary equity holders of the Company of approximately HK$302,384,000 (Six months ended 31 January 2011: HK$940,835,000) and the weighted average number of approximately 16,609,379,000 (Six months ended 31 January 2011:15,320,755,000) ordinary shares in issue during the period. The weighted average number of shares in issued for the six months ended 31 January 2011 used in the basic earnings per share calculation have been restated to reflect the effect of the rights issue completed in December 2011.

The diluted earnings per share amounts for the six months ended 31 January 2012 and 2011 have not been disclosed as no diluting events existed during both periods.

9. INTERESTS IN ASSOCIATES/SHARE OF PROFITS AND LOSSES OF ASSOCIATES

The eSun Group

Included in the Group’s interests in associates at 31 January 2012 and share of profits and losses of associates for the six months ended 31 January 2012 was the Group’s share of net assets and loss of eSun Holdings Limited (“ eSun ”) and its subsidiaries (the “ eSun Group ”) of HK$2,652,309,000 (31 July 2011 : HK$2,461,426,000) and HK$22,319,000 (Six months ended 31 January 2011: share of profit of HK$246,539,000), respectively.

(a) Reorganisation involving shares in the capital of Lai Fung and the Company in prior period

On 26 July 2010, Lai Sun Garment (International) Limited (“ LSG ”), a substantial shareholder of the Company, entered into a conditional shares swap agreement with eSun pursuant to which (i) LSG transferred its entire shareholding interest in Lai Fung, representing approximately 40.58% of the issued share capital of Lai Fung, to eSun (the “ Lai Fung Transaction ”) whereby eSun transferred its entire shareholding interest in LSD, representing approximately 36.72% of the issued share capital of LSD, to LSG (the “LSD Transaction” and referred as the “ Shares Swap Transactions ” together with Lai Fung Transaction); and (ii) cash consideration of approximately HK$178.4 million was paid by eSun to LSG. All the conditions precedent under the shares swap agreement were fulfilled and completion of the Shares Swap Transactions took place on 30 September 2010 (the “ Completion ”).

Prior to the Completion, a crossholding position existed between the eSun Group and the Company that the Group’s interest in eSun was 36.08% and the eSun Group held 36.72% of the issued share capital of the Company. Upon Completion of the Shares Swap Transactions, eSun no longer holds any interest in the Company but the Company continues to hold a 36.08% equity interest in eSun. Accordingly, the cross-holding relationship between eSun and the Company was eliminated.

Included in the share of results of eSun Group for the six months ended 31 January 2011 were (i) eSun Group’s gain on disposal of 36.72% interest in the Company shared by the Group of HK$215,505,000; and (ii) eSun Group’s discount on acquisition of 40.58% interest in Lai Fung shared by the Group of HK$1,861,000.

(b) In April 2011, certain share options granted by eSun under its share option scheme were exercised to subscribe for ordinary shares of eSun. Accordingly, the Group’s interest in eSun was diluted from 36.08% to 36.00%.
(c) In August 2011, the Group acquired a 1.93% additional interest in eSun at a cost of HK$43,301,000 and the Group’s interest in eSun was increased from 36.00% to 37.93%. A discount on acquisition of HK$88,695,000 was arising from such acquisition and recognised in the consolidated income statement for the six months ended 31 January 2012.

Diamond String Limited (“Diamond String”)

Included in the Group’s interests in associates as at 31 January 2012 and share of profits and losses of associates for the six months ended 31 January 2012 was the Group’s share of net assets and profit of Diamond String, a 50%-owned associate holds a property situated at 3 Connaught Road Central, Hong Kong which is being re-developed into a grade A office tower for investment purpose, of approximately HK$1,952,182,000 (31 July 2011: HK$1,847,124,000) and HK$105,058,000 (Six months ended 31 January 2011: HK$147,691,000), respectively.

9. INTERESTS IN ASSOCIATES/SHARE OF PROFITS AND LOSSES OF ASSOCIATES (continued)

Best Value International Limited (“Best Value”)

On 12 July 2011, Luck Reach Limited (the “ Purchaser ”, a wholly-owned subsidiary of the Company), the Company, Focal Point Services Limited (“ Focal ”), Keyfull Investment Limited (“ Keyfull ”), Cypress Vine Corporation (“ Cypress ”, together with Focal and Keyfull, collectively referred as the “ Vendors ”), guarantors for the Vendors and the trustee for Cypress entered into an agreement (the “ Acquisition Agreement ”), pursuant to which:

(a) the Purchaser conditionally agreed to acquire and the Vendors conditionally agreed to sell 50% equity and loan interests in Best Value at a total consideration of HK$845,635,574 (subject to adjustment in accordance with the terms and conditions of the Acquisition Agreement); and

(b) the Vendors granted an option to the Purchaser to purchase an additional 10% equity and loan interests in Best Value (the “ Option ”) for a consideration of HK$169,127,115 (subject to adjustment in accordance with the terms and conditions of the Acquisition Agreement), exercisable by the Purchaser subject to certain conditions stipulated in the Acquisition Agreement.

The principal assets of Best Value and its subsidiaries (the “ Best Value Group ”) comprise properties, which representing parcels of ground on Observatory Road, Kowloon, Hong Kong with the buildings erected thereon (now known as Nos. 2, 4, 6, 8, 10 and 12, Observatory Road, Kowloon, Hong Kong) (the “ Land ”). The Group currently intends that the Best Value Group will develop a multi-storey commercial complex on the Land.

In July 2011, the Group paid an amount of HK$90,000,000 to the Vendors’ solicitors as the deposit upon signing of the Acquisition Agreement.

The acquisition of 50% equity and loan interests in Best Value, the exercise of the Option and the financial assistance to be provided by the Group to the Best Value Group for redevelopment of the Land (collectively as the “ Transactions ”) together constituted a major transaction for the Company under Chapter 14 of the Listing Rules and are, therefore, subject to the approval of the Company’s shareholders by way of poll. Further details of the Transactions and the Acquisition Agreement were set out in the circular of the Company dated 4 October 2011.

Resolutions approving the Transactions were duly passed at the extraordinary general meeting of the Company on 22 October 2011. Completion of the acquisition of a 50% interest took place on 11 November 2011.

Given the fact that the conditions in relation to the Option were not fulfilled, the Option was not exercisable by the Purchaser. Accordingly, the Group ends up holding a 50% interest in Best Value.

Based on terms and conditions of the Acquisition Agreement, the final consideration for acquisition of 50% equity and loan interests was approximately HK$842,410,000. The remaining balance of the final consideration was fully paid to the Vendors during the six months ended 31 January 2012.

10. DEBTORS AND DEPOSITS PAID/CREDITORS, DEPOSITS RECEIVED AND ACCRUALS

(a) The Group maintains various credit policies for different business operations in accordance with business practices and market conditions in which the respective subsidiaries operate. Sales proceeds receivable from the sale of properties are settled in accordance with the terms of the respective contracts. Rent and related charges in respect of the leasing of properties are receivable from tenants, and are normally payable in advance with rental deposits received in accordance with the terms of the tenancy agreements. Hotel and restaurant charges are mainly settled by customers on cash basis except for those corporate clients who maintain credit accounts with the respective subsidiaries, the settlement of which is in accordance with the respective agreements.

An ageing analysis of the trade debtors, based on payment due date, as at the end of the reporting period is as follows:

Trade debtors: Not yet due or less than 30 days past due 31 – 60 days past due 61 – 90 days past due Over 90 days past due Other debtors and deposits paid	31 January 2012 (Unaudited) *HK$’000* 17,622 1,292 404 1,884 21,202 116,943 138,145	31 July 2011 (Audited) HK$’000 7,252 2,143 385 2,559
		12,339 112,488
		124,827

(b) An ageing analysis of the trade creditors, based on payment due date, as at the end of the reporting period is as follows:

Trade creditors: Not yet due or less than 30 days past due 31 – 60 days past due 61 – 90 days past due Over 90 days past due Other creditors, deposits received and accruals	31 January 2012 (Unaudited) *HK$’000* 7,551 344 191 507 8,593 216,650 225,243	31 July 2011 (Audited) HK$’000 7,004 1,273 374 481
		9,132 212,967
		222,099

11. SHARE CAPITAL

Authorised: Ordinary shares of HK$0.01 each Preference shares of HK$1.00 each Issued and fully paid: Ordinary shares of HK$0.01 each	31 January 2012 Number of Nominal shares value (Unaudited) (Unaudited) *’000* *HK$’000* 27,000,000 270,000 1,200,000 1,200,000 1,470,000 20,062,893 200,629	31 July 2011 Number of Nominal shares value (Audited) (Audited) ’000 HK$’000 17,200,000 172,000 1,200,000 1,200,000 1,372,000 14,162,042 141,620	31 July 2011 Number of Nominal shares value (Audited) (Audited) ’000 HK$’000 17,200,000 172,000 1,200,000 1,200,000 1,372,000 14,162,042 141,620
			1,372,000

			141,620

Pursuant to an ordinary resolution passed at the extraordinary general meeting of the Company on 22 September 2011, the authorised share capital of the Company was increased from HK$1,372,000,000 divided into 17,200,000,000 ordinary shares of HK$0.01 each and 1,200,000,000 preference shares of HK$1.00 each to HK$1,470,000,000 divided into 27,000,000,000 ordinary shares of HK$0.01 each and 1,200,000,000 preference shares of HK$1.00 each by the creation of 9,800,000,000 additional ordinary shares of HK$0.01 each, ranking pari passu in all respects with the existing shares of the Company.

In December 2011, the Company completed a rights issue of 5,900,850,966 ordinary shares of HK$0.01 each on the basis of five rights shares for every twelve shares held of the Company at a subscription price of HK$0.09 per rights share (“ Rights Issue ”). The net proceeds from the rights issue was approximately HK$513,640,000, after deduction of share issue expenses of approximately HK$17,437,000.

Movements in the Company’s issued capital during the period are summarised as follows:

	Number		Share
	of ordinary	Issued	premium
	shares	capital	account	Total
	’000	HK$'000	HK$'000	HK$'000
As at 1 August 2011	14,162,042	141,620	6,974,701	7,116,321
Rights Issue	5,900,851	59,009	472,068	531,077
Share issue expenses	-	-	(17,437)	(17,437)
	___	____	____	____
As at 31 January 2012	20,062,893 _ _	200,629 _ _	7,429,332 _ _	7,629,961 _ _

Pursuant to a special resolution passed at an extraordinary general meeting of the Company held on 24 July 2006, and the subsequent Order of the High Court of Hong Kong granted on 17 October 2006, the Company effected a capital reduction (the “ Capital Reduction ”) which took effect on 18 October 2006. The paid-up capital on each of its issued ordinary shares of HK$0.50 was cancelled to the extent of HK$0.49 per share, and the nominal value of all of the ordinary shares of the Company, both issued and unissued, was reduced from HK$0.50 per share to HK$0.01 per share. A total credit of HK$6,245,561,000 had arisen as a result of the Capital Reduction. An amount of HK$5,619,000,000 of the total credit was credited to the accumulated losses of the Company and the remaining amount of HK$626,561,000 was credited to the share premium account of the Company.

11. SHARE CAPITAL (continued)

An undertaking in standard terms was given to the High Court by the Company in connection with the Capital Reduction. The undertaking is for the benefit of the Company's creditors as at the effective date of the Capital Reduction. Pursuant to the undertaking, any receipts by the Company on or after 1 August 2005 in respect of the Company's:

(1) 50% investment in Fortune Sign Venture Inc. ( “Fortune Sign ”), up to an aggregate amount of HK$1,556,000,000;
(2) 10% investment in Bayshore Development Group Limited (“ Bayshore ”), up to an aggregate amount of HK$2,923,000,000; and/or
(3) 100% investment in Furama Hotel Enterprises Limited, up to an aggregate amount of HK$1,140,000,000

shall be credited to a special capital reserve in the accounting records of the Company. While any debt of or claim against the Company as at 18 October 2006 (the effective date of the Capital Reduction) remains outstanding, and the person entitled to the benefit thereof has not agreed otherwise, the special capital reserve shall not be treated as realised profits and (for so long as the Company remains a listed company) shall be treated as an undistributable reserve pursuant to Section 79C of the Hong Kong Companies Ordinance.

The undertaking is subject to the following provisos:

(i) the amount standing to the credit of the special capital reserve may be applied for the same purposes as a share premium account may be applied or may be reduced or extinguished by the aggregate of any increase in the Company's issued share capital or share premium account resulting from an issue of shares for cash or other new consideration upon a capitalisation of distributable reserves after 18 October 2006 and the Company shall be at liberty to transfer the amount of any such reduction to the general reserve of the Company and the same shall become available for distribution;
(ii) the aggregate limit in respect of the special capital reserve may be reduced after the disposal or other realisation of any of the assets being the subject of the undertaking (as referred to at (1) to (3) above) by the amount of the individual limit for the asset in question less such amount (if any) as is credited to the special capital reserve as a result of such disposal or realisation; and
(iii) in the event that the amount standing to the credit of the special capital reserve exceeds the limit thereof, after any reduction of such limit pursuant to proviso (ii) above, the Company shall be at liberty to transfer the amount of such excess to the general reserve of the Company and the same shall become available for distribution.

In prior years, an aggregate amount of HK$630,400,000, which comprised (i) the reversal of provision for impairment of the Company's interest in Peakflow Profits Limited, a wholly-owned subsidiary of the Company which holds a 10% equity interest in Bayshore, to the extent of HK$372,072,000; and (ii) the recognition of dividend income from the Company's investment in Fortune Sign of HK$258,328,000, was transferred from accumulated losses to the special capital reserve of the Company. During the six months ended 31 January 2012, there was no movement of transfer between retained profits/(accumulated losses) and special capital reserve.

After the effective date of the Capital Reduction, the Company entered into a placing agreement dated 17 November 2006 pursuant to which a total of 1,416,000,000 new ordinary shares of HK$0.01 each in the capital of the Company were allotted and issued for net cash proceeds of HK$504,136,000. With such increase in the Company's issued share capital and share premium account resulting from the placing of new shares for cash, an aggregate amount of HK$504,136,000 was then transferred from special capital reserve to general reserve (a distributable reserve) of the Company in prior years pursuant to the provisos of the undertaking given by the Company in connection with the Capital Reduction as stated above.

As a result of the Rights Issue with net cash proceeds of approximately HK$513,640,000 as detailed above, the Company’s issued share capital and share premium account was further increased by an aggregate amount of HK$513,640,000. The entire remaining balance of the special capital reserve of HK$126,264,000 was further transferred to the general reserve (a distributable reserve) of the Company pursuant to the provisos of the undertaking given by the Company in connection with the Capital Reduction as stated above.

As a result of the above transfers between the reserves, the outstanding balance of the general reserve of the Company as at 31 January 2012 was HK$630,400,000 (31 July 2011:HK$504,136,000). There was no remaining balance in the special capital reserve as at 31 January 2012 (31 July 2011 : HK$126,264,000).

INTERIM ORDINARY DIVIDEND

As at 31 January 2012, the Company did not have any reserves available for distribution in accordance with provisions of Section 79B of the Companies Ordinance, Chapter 32 of the Laws of Hong Kong. The Board of the Company has resolved not to declare the payment of an interim ordinary dividend for the financial year ending 31 July 2012. No interim ordinary dividend was declared in respect of the last corresponding period.

OVERVIEW OF RESULTS

For the six months ended 31 January 2012, the Group recorded a turnover of HK$452.0 million (2011: HK$669.4 million) and a gross profit of HK$277.8 million (2011: HK$316.0 million), representing a decrease of approximately 32.5% and 12.1% respectively over the corresponding period last year. Net profit attributable to shareholders was approximately HK$302.4 million (2011: HK$940.8 million), representing a decrease of approximately 67.9%. Accordingly, basic earnings per share declined to HK1.82 cents (2011: HK6.14 cents ).

Shareholders’ equity as at 31 January 2012 amounted to HK$12,914.8 million, up from HK$11,959.0 million as at 31 July 2011. Net asset value per share attributable to owners of the Company after adjusting for the Rights Issue which was completed in December 2011, decreased to HK$0.644 per share from HK$0.844 per share for the same period.

MARKET OUTLOOK AND BUSINESS REVIEW

Despite the lingering fear of global economic recession, financial market volatility and policy headwinds casting a shadow on the property market in Hong Kong, the property market has demonstrated resilience and has shown signs of a rebound with prices stabilising in recent weeks. As a favoured investment destination for mainland Chinese investors, activities in the primary and secondary markets have recovered to a certain extent given limited supply of new stock and low interest rates.

The Group has a healthy balance sheet with reasonable leverage given improvements in the Group’s operations in the past few years. Under the current market conditions, the Group will continue to look for suitable high yielding investment opportunities and replenish its landbank in both Hong Kong and overseas.

Investment Properties

Rent levels for offices and commercial properties in prime locations in Hong Kong have remained robust. The operating conditions for most retail, consumption and commercial sectors in Hong Kong have performed favorably given the strong retail spending by visitors from mainland China. The demand for high quality commercial properties in traditional commercial districts is strong given the lack of new supply coming on stream. Improved local consumption expenditure and strong retail spending by the visitors from mainland China is expected to provide further impetus to the retail property market.

The Group will continue to upgrade its commercial investment properties as well as tenant mix so that it can continue to maintain high occupancy rates and strong rental cashflow.

Development Properties

The continued economic growth under a low interest rate environment, ample liquid funds and a tight market supply of new residential units have helped sustain momentum in the market despite recent consolidation.

The Group currently owns a number of residential projects under development in Hong Kong. The Group has adopted a prudent strategy with a view of delivering long term value to shareholders as demonstrated by the Group’s ability to capture the strong growth in the Hong Kong residential property market by achieving satisfactory sales performances for The Oakhill and Emerald 28 projects that it owns 50% and 100% respectively. We are starting the preparation work for the pre-sale of the residential development project, Ocean One, in Yau Tong, Kowloon.

New Investments

The Group completed the acquisition of a 50% interest in a project at Observatory Road, Kowloon, Hong Kong with the buildings currently erected there known as Nos. 2, 4, 6, 8, 10 and 12, Observatory Road, Kowloon, Hong Kong in November 2011.

The Group is now in discussions with the joint venture partner as regards the overall re-development plan including the designs, features and quality of the new building. The site is being planned to be redeveloped into a multi-storey commercial building with a total gross floor area (“ GFA ”) of approximately 165,000 square feet. Subject to the finalisation of the re-development plan with the joint venture partner, the total development cost was estimated to be approximately HK$2.3 billion including an estimated land value of approximately HK$1.7 billion. The new building is expected to be completed in 2015.

With the Hong Kong Government committed to increasing land supply in the long run as a measure to stabilise local property prices, the Group will continue to monitor the prices achieved at Government land auctions and tenders in Hong Kong and will participate in these exercises if and when suitable investment opportunities arise.

Stable financial position

The Group adopts a prudent financial strategy aimed at optimising its financial structure and strengthening working capital. The Group maintains stable and sufficient cash flows to capitalise on investment opportunities when appropriate. During the period, the Group completed a rights issue and raised approximately HK$513.6 million after expenses to strengthen its financial position further. As at 31 January 2012, the Group’s total cash and bank deposits were approximately HK$1,194.5 million; committed but undrawn construction loan facilities were approximately HK$342.2 million.

MANAGEMENT DISCUSSION AND ANALYSIS

Property Investment

For the six months ended 31 January 2012, aggregate gross rental income from the Group’s investment properties amounted to approximately HK$195.9 million (2011: HK$174.6 million), representing an increase of 12.2% over the corresponding period last year. The increase is generally due to an improvement in rental renewals.

The Group wholly owns three major investment properties in Hong Kong and one in London including Causeway Bay Plaza 2, Cheung Sha Wan Plaza, Lai Sun Commercial Centre and an office building in the United Kingdom (“ UK ”). During the period under review, these properties had in aggregate a total leasable GFA of approximately 1,496,000 square feet with an average occupancy of 98%.

Property Development and Sales

For the six months ended 31 January 2012, recognised turnover from sales of properties was HK$57.9 million (2011: HK$287.5 million), representing a decrease of 79.9% over the corresponding period last year. The decrease was due to the conclusion of the sale of the Emerald 28 project. During the period under review, we sold virtually all of the remaining residential units at Emerald 28.

The Group holds the following property development projects in Hong Kong:

Emerald 28, Tai Po Road, Kowloon

The Group wholly owns this development project. The project comprises a total of 53 residential units with a total gross floor area of 60,686 square feet and retail units with a total GFA of 10,186 square feet. During the six months ended 31 January 2012, the Group recorded the sale of 5 residential units (2011: 29 residential units) with an aggregate GFA of 5,670 square feet (2011: 33,178 square feet) at an average selling price of HK$10,212 per square foot (2011: HK$8,665 per square foot) and a turnover of HK$57.9 million (2011: HK$287.5 million). The sale of the residential portion of the project has virtually been completed.

Ocean One, Yau Tong, Kowloon

The Group wholly owns this development project located at No. 6 Shung Shun Street, Yau Tong, Kowloon. The Group is developing the site into a residential-cum-commercial property with a total GFA of about 110,000 square feet. The estimated total development cost (including land cost and lease modification premium) is about HK$700 million.

Superstructure work started in February 2011 and the building is expected to be completed in the third quarter of 2012. The Group plans to commence pre-sale of the residential units in the second quarter of 2012.

335 - 339, Tai Hang Road, Hong Kong

The Group wholly owns the site located at 335-339 Tai Hang Road, Hong Kong. The Group is developing the site into a luxury residential property. The Group completed the lease modification of the site. The total GFA of the development is about 30,000 square feet. The total development cost (including land cost and lease modification premium) is estimated to be about HK$650 million.

Foundation work started in October 2010 and the building is expected to be completed in the second quarter of 2013.

Hotel and Restaurant Operations

The hotel and restaurant operations includes the Group’s interests in the Caravelle Hotel and a number of acclaimed restaurants including the only Michelin 3 star Italian restaurant 8½ Otto e Mezzo BOMBANA; Michelin 1 star Japanese restaurant Wagyu Kaiseki Den; Michelin 1 star Cantonese restaurant Island Tang; as well as other high profile restaurants such as Kowloon Tang and Chiu Tang.

For the six months ended 31 January 2012, hotel and restaurant operations contributed HK$186.9 million to the Group’s turnover (2011: HK$196.8 million), representing a decrease of approximately 5% from the same period last year. Most of the turnover from hotel and restaurant operations was derived from the Group’s operation of the Caravelle Hotel in Ho Chi Minh City, Vietnam. For the period under review, Caravelle Hotel achieved an average occupancy rate of 68% (2011: 68%) and an average daily room rate of US$149 (2011: US$142). Caravelle Hotel will undergo a comprehensive renovation and upgrade program which will be commenced shortly and the renovation is expected to be completed in the fourth quarter of 2013.

The Hotel and Restaurant Operations are managed by Furama Hotels and Resorts International Limited (“ FHRI ”), the Group’s hotels and resorts management operation. FHRI has extensive experience in providing consultancy and management services to hotels in China, Hong Kong and other Asian countries. FHRI’s key strategy going forward will continue to focus on providing management services, particularly to capture opportunities arising from Lai Fung’s development in Shanghai, Guangzhou and Zhongshan. FHRI will manage the serviced apartments in Shanghai May Flower Plaza, Guangzhou Paramount Centre and Zhongshan Palm Spring when the development is completed.

Interests in associates

During the period under review, contribution from associates decreased to HK$116.3 million (2011: HK$391.6 million), representing a decrease of 70.3%. This is primarily due to the absence of share of eSun’s gain from the group reorgansiation and lower property revaluation gain of the 3 Connaught Road Central project compared to the same period last year.

Property

The Group has interest in the following joint venture projects in Hong Kong:

3 Connaught Road Central

The Group has a 50:50 interest with China Construction Bank Corporation (“ CCB ”) in the joint redevelopment project of the former Ritz-Carlton Hotel in Central. The redeveloped project will be an office tower that is expected to become a landmark property in Central featuring underground access to the MTR station in Central. Part of the redeveloped property, upon its completion, will be used by CCB as offices for its Hong Kong operations. Total construction cost of the project is estimated to be approximately HK$1,100 million.

Superstructure work commenced in April 2010. The building is expected to be completed in the third quarter of 2012.

The Oakhill, Wood Road, Wanchai

This joint residential development project is a 50:50 joint venture between the Group and Invesco. The project’s total development cost is approximately HK$1,300 million. The project comprises a total of 130 residential units with a total GFA of 154,713 square feet, street level retail shops with a total GFA of 7,880 square feet and 62 car-parking spaces.

The project was completed in June 2011. To date, 123 residential units with an aggregate GFA of 141,754 square feet were sold at an average selling price of approximately HK$15,000 per square foot.

2-12 Observatory Road

The Group completed the acquisition of a 50% interest in a project at Observatory Road, Kowloon with the buildings currently erected there known as Nos. 2, 4, 6, 8, 10 and 12, Observatory Road, Kowloon in November 2011.

The Group is now in discussions with the joint venture partner as regards the overall re-development plan including the designs, features and quality of the new building. The site is being planned to be redeveloped into a multi-storey commercial building with a total GFA of approximately 165,000 square feet. Subject to the finalisation of the re-development plan with the joint venture partner, the total development cost was estimated to be approximately HK$2.3 billion including an estimated land value of approximately HK$1.7 billion. The new building is expected to be completed in 2015.

eSun

The Company’s share of eSun’s loss amounted to HK$22.3 million for the six months ended 31 January 2012 (2011: share of profit of HK$246.5 million). eSun’s business momentum was encouraging despite the absence of blockbuster titles released and anchor live events organised, which were partially offset by increase in volume. Excluding the effects of non-cash / non-recurring items (i.e. effects of the convertible notes issued by its listed subsidiary, Media Asia Group Holdings Limited; gains from reorganisation; and contribution from Lai Fung after adjusting for reorganisation) the business fundamentals remain sound. The Group expects this momentum to continue given an underlying schedule of new releases in movie, events and music albums in the second half of 2012.

Despite the challenging operating environment characteried by stringent austerity measures in the property market in China, Lai Fung was able to deliver a good performance for the six months ended 31 January 2012 after adjusting for gains from property revaluation and group reorganisation. Net asset value increased steadily and net profit attributable to shareholders was broadly maintained.

Liquidity and Financial Resources

As at 31 January 2012, the Group had consolidated net assets of approximately HK$12,915 million (as at 31 July 2011: HK$11,959 million).

The Group’s sources of funding comprise mainly internal funds generated from the Group’s business operations and loan facilities provided by banks.

As at 31 January 2012, the Group had secured bank facilities (excluding amounts repaid and cancelled pursuant to the respective terms of the facilities) of approximately HK$2,864 million. The amount of outstanding borrowings under these secured banking facilities was approximately HK$2,522 million (as at 31 July 2011: HK$2,417 million). The debt to equity ratio expressed as a percentage of the total outstanding borrowings to consolidated net assets was approximately 19.5%. As at 31 January 2012, the maturity profile of the bank borrowings of HK$2,522 million was spread over a period of less than 5 years with HK$872 million repayable within 1 year, HK$362 million repayable in the second year and HK$1,288 million repayable in the third to fifth years. As at 31 January 2012, all the Group’s borrowings carried interest on a floating rate basis.

As at 31 January 2012, certain investment properties with carrying amounts of approximately HK$7,810 million, certain property, plant and equipment with carrying amounts of approximately HK$239 million, prepaid land lease payments of approximately HK$26 million, certain properties under development for sale of approximately HK$1,075 million, and certain bank balances and time deposits with banks of approximately HK$100 million were pledged to banks to secure banking facilities granted to the Group. In addition, certain shares in subsidiaries held by the Group were also pledged to banks to secure loan facilities granted to the Group. Certain shares in an associate held by the Group were pledged to a bank to secure a loan facility granted to an associate of the Group. Certain shares of an investee company held by the Group were pledged to banks to secure a loan facility granted to this investee company. The Group’s secured bank borrowings were also secured by floating charges over certain assets held by the Group.

The Group’s major assets and liabilities and transactions were denominated in Hong Kong dollars or United States dollars. Considering that Hong Kong dollars are pegged against United States dollars, the Group believes that the corresponding exposure to exchange rate risk arising from United States dollars is nominal. In addition, the Group has an investment in UK with the assets and liabilities denominated in Pounds Sterling. The investment was partly financed by bank borrowings denominated in Pounds Sterling in order to minimise the net foreign exchange exposure. The net investment amounted to approximately HK$131 million which only accounted for a small portion of the consolidated net assets of the Group as at 31 January 2012. Other than the abovementioned, the remaining monetary assets and liabilities of the Group were denominated in Renminbi and Vietnamese Dong which were also insignificant as compared with the Group’s total assets and liabilities. No hedging instruments were employed to hedge for the foreign exchange exposure.

PURCHASE, SALE OR REDEMPTION OF LISTED SECURITIES

During the six months ended 31 January 2012, the Company did not redeem any of its shares listed and traded on The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) nor did the Company or any of its subsidiaries purchase or sell any of such shares.

CORPORATE GOVERNANCE

The Company has complied with all the code provisions set out in the Code on Corporate Governance Practices (the “ CG Code ”) contained in Appendix 14 to the Rules Governing the Listing of Securities on the Stock Exchange throughout the six months ended 31 January 2012 save for the deviations from code provisions A.4.1 and E.1.2.

Under code provision A.4.1, non-executive directors should be appointed for a specific term and should be subject to re-election.

None of the existing non-executive directors (including the independent non-executive directors (the “ INEDs ”)) of the Company is appointed for a specific term. However, all directors of the Company (the “ Directors ”) are subject to the retirement provisions in the Articles of Association of the Company (the “ Articles of Association ”), which require that the Directors for the time being shall retire from office by rotation once every three years since their last election by shareholders and the retiring Directors are eligible for re-election. In addition, any person appointed by the Board as an additional Director (including a non-executive Director) will hold office only until the next annual general meeting of the Company (the “ AGM ”) and will then be eligible for re-election. Further, each of the Directors appointed to fill a causal vacancy will be subject to election by the shareholders at the first general meeting after his/her appointment in line with the relevant code provision of the CG Code. In view of these, the Board considers that such requirements are sufficient to meet the underlying objective of the said code provision A.4.1 and, therefore, does not intend to take any remedial steps in this regard.

Under code provision E.1.2, the chairman of the board should attend the annual general meeting.

Due to other pre-arranged business commitments which must be attended to by him, the Chairman was not present at the AGM held on 21 December 2011. However, Mr. Lau Shu Yan, Julius, an executive Director and the Chief Executive Officer who was present at that AGM was elected chairman of that AGM pursuant to the Articles of Association to ensure an effective communication with shareholders of the Company at that AGM.

REVIEW OF INTERIM RESULTS

The audit committee of the Company currently comprises two INEDs, namely Messrs. Leung Shu Yin, William and Lam Bing Kwan and a non-executive Director, Mr. Wan Yee Hwa, Edward. Such committee has reviewed the unaudited interim results (including the unaudited condensed consolidated financial statements) of the Company for the six months ended 31 January 2012.

By Order of the Board Lam Kin Ngok, Peter Chairman

Hong Kong, 29 March 2012

As at the date of this announcement, the Board comprises the following members:

Executive Directors:

Dr. Lam Kin Ngok, Peter (Chairman) and Messrs. Lau Shu Yan, Julius (Chief Executive Officer), Tam Kin Man, Kraven, Lui Siu Tsuen, Richard and Cheung Sum, Sam;

Non-Executive Directors: Dr. Lam Kin Ming, Madam U Po Chu and Mr. Wan Yee Hwa, Edward; and

Independent Non-Executive Messrs. Lam Bing Kwan, Leung Shu Yin, William and Ip Shu Kwan, Stephen. Directors: