THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

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

If you have sold all your shares in Henderson Land Development Company Limited, you should at once hand this circular to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

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

==> picture [41 x 42] intentionally omitted <==

==> picture [289 x 34] intentionally omitted <==

(incorporated in Hong Kong with limited liability)

DISCLOSEABLE AND CONNECTED TRANSACTION

PROPOSED PRIVATISATION OF HENDERSON INVESTMENT LIMITED BY WAY OF A SCHEME OF ARRANGEMENT UNDER SECTION 166 OF THE COMPANIES ORDINANCE

Financial adviser to Henderson Land Development Company Limited

HSBC

The Hongkong and Shanghai Banking Corporation Limited

6th December, 2002

Henderson Land Development Company Limited

	Page	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		1
Letter from the Board
1.	Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	5
2.	Information relating to the HIL Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
3.	Shareholding structure of HIL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	11
4.	Conditions of the Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	13
5.	Reasons for the acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	14
6.	Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
7.	Financial effects of the acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	15
8.	Information relating to HLD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
9.	Connected transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
10.	Additional information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	16
Appendix I — General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		17
Appendix II — Scheme Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .		24

Henderson Land Development Company Limited

DEFINITIONS

In this circular, the following expressions shall have the meanings respectively set opposite them, unless the context otherwise requires:

“Adjusted NTAV”
pro forma adjusted consolidated net tangible asset value of the HIL Group which is based on the NTAV and adjusted for the deficit arising from valuation of property interests attributable to the HIL Group as at 31st October, 2002, final dividend of HK$0.11 per HIL Share recommended but not provided for, unrealised loss on investments in securities and attributable loss for Henderson Cyber for the quarter ended 30th September, 2002
“Announcement” the announcement dated 5th November, 2002 issued jointly by HLD and HIL relating to the Proposal and published in the South China Morning Post, the Hong Kong Economic Journal and the Hong Kong Economic Times on 6th November, 2002
“Authorisations” all necessary authorisations, registrations, filings, rulings, consents, permissions and approvals in connection with the Proposal
“Banshing” Banshing Investment Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly owned subsidiary of HLD
“Cancellation Price” the cancellation price of HK$7.60 per Scheme Share payable by HLD to the holders of Scheme Shares pursuant to the Scheme
“Companies Ordinance” Companies Ordinance, Chapter 32 of the Laws of Hong Kong
“Condition(s)” conditions or any of them to which the Proposal is subject, all of which are set out on page 13 of this circular
“Controlling Parties” Markshing, Darnman, Gainwise, Covite and Banshing, all beneficially interested in an aggregate of approximately 73.48% of the issued capital of HIL as at the date of this circular
“Court Meeting” the meeting of the Minority Shareholders to be convened at the direction of the High Court for the approval of the Scheme
“Covite” Covite Investment Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly owned subsidiary of HLD
“Darnman” Darnman Investment Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly owned subsidiary of HLD
“Effective Date” the date on which the Scheme, if approved, becomes effective, which is expected to be 29th January, 2003

Henderson Land Development Company Limited

DEFINITIONS

“Excluded Parties”
Dr. Lee Shau Kee, Fu Sang, Mr. Ho Wing Fun, Mr. Lee King Yue, Mr. Lee Tat Man, Mr. Leung Sing, Mr. Lo Tak Shing, Madam Yang Hsueh Chin, Mr. Fung Pok Wah, Mr. Fung Chun Wah, Mr. Lam Ka Wai, Mr. Lam Ko Yu, Mr. Lee Siu Lun, Tako Assets and Thommen, all beneficially interested in an aggregate of approximately 1.97% of the issued capital of HIL as at the date of the Scheme Document and are deemed to be acting in concert with HLD under the Takeovers Code
“Extraordinary General the extraordinary general meeting of HIL for the approval Meeting” and implementation of the Scheme
”Fu Sang”
Fu Sang Company Limited, a company incorporated in Hong Kong with limited liability
“Gainwise” Gainwise Investment Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly owned subsidiary of HLD
“Henderson Cyber”
“High Court”
“HIL”
“HIL Director(s)”
“HIL Group”
“HIL Shareholders”
“HIL Share(s)”
“HLD”
“HLD Board”
Henderson Cyber Limited, a company incorporated in the Cayman Islands with limited liability and the shares of which are listed on the Growth Enterprise Market of the Stock Exchange and owned as to 66.67% by HIL
High Court of Hong Kong
Henderson Investment Limited ( ), a company incorporated in Hong Kong with limited liability and whose HIL Shares are listed on the Stock Exchange
director(s) of HIL
HIL and its subsidiaries
holders of HIL Shares

ordinary share(s) of HK$0.20 each in the capital of HIL Henderson Land Development Company Limited ( ), a company incorporated in Hong Kong with limited liability and whose HLD Shares are listed on the Stock Exchange

the board of HLD Directors
“HLD Director(s)”
“HLD Group”
“HLD Shareholder(s)”
“HLD Share(s)”
“holder”

director(s) of HLD

HLD and its subsidiaries
holders of HLD Shares

ordinary share(s) of HK$2.00 each in the capital of HLD

a registered holder of shares including a person entitled by transmission to be registered as such and joint holders

“Hong Kong”

the Hong Kong Special Administrative Region of the PRC

Henderson Land Development Company Limited

DEFINITIONS

“Hong Kong and China Gas” The Hong Kong and China Gas Company Limited, a company incorporated in Hong Kong with limited liability and the shares of which are listed on the Stock Exchange and owned as to 36.42% by HIL
“Hong Kong Ferry” Hong Kong Ferry (Holdings) Company Limited, a company incorporated in Hong Kong with limited liability and the shares of which are listed on the Stock Exchange and owned as to 30.98% by HIL
“HSBC” The Hongkong and Shanghai Banking Corporation Limited, a licensed bank under the Banking Ordinance, Chapter 155 of the Laws of Hong Kong, and an exempt dealer under the Securities Ordinance, Chapter 333 of the Laws of Hong Kong, being the financial adviser to HLD in connection with the Proposal
“Independent Director” Mr. Philip Yuen Pak Yiu, the independent HIL Director appointed to advise the Independent Minority Shareholders in relation to the Proposal
“Independent Minority Minority Shareholders other than the holders of the HIL Shareholders” Shares beneficially owned by the Excluded Parties
“Latest Practicable Date” 3rd December, 2002, being the latest practicable date prior to the printing of this circular for the purpose of ascertaining certain information contained herein
“Listing Rules” Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
“Markshing” Markshing Investment Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly owned subsidiary of HLD
“Meeting(s)” the Court Meeting and the Extraordinary General Meeting or any of them, as the case may be
“Minority Shareholders” HIL Shareholders other than the holders of the HIL Shares beneficially owned by the Controlling Parties
“Miramar” Miramar Hotel and Investment Company, Limited, a company incorporated in Hong Kong with limited liability and the shares of which are listed on the Stock Exchange and owned as to 43.67% by HIL
“Net debt/equity ratio” total consolidated liabilities (excluding trade creditors and taxation payable) of the HLD Group, after deducting cash and bank deposits, as at 30th June, 2002, as a ratio of shareholders’ funds of the HLD Group as at 30th June, 2002
“NTAV” the consolidated net tangible asset value of the HIL Group as at 30th June, 2002, based on the audited financial statements of the HIL Group for the year ended 30th June, 2002 as set out in the latest annual report of HIL despatched to the HIL Shareholders on 28th October, 2002

Henderson Land Development Company Limited

DEFINITIONS

“PER” price to earnings ratio “PRC” People’s Republic of China “Proposal” the proposal for the privatisation of HIL by HLD by way of the Scheme as described in this circular
“Record Time” 4:00 p.m. Hong Kong time on the day immediately preceding the Effective Date
“Relevant Authorities” appropriate governments, governmental bodies, regulatory bodies, courts or institutions
“Scheme” the scheme of arrangement between HIL and the holders of Scheme Shares under Section 166 of the Companies Ordinance involving the cancellation and extinguishment of all the Scheme Shares, with or subject to any modification thereof or addition thereto or conditions approved or imposed by the High Court
“Scheme Document” a composite document dated 6th December 2002 to be despatched to the Minority Shareholders, containing, inter alia, the terms of the Scheme, the explanatory statement required under Section 166 of the Companies Ordinance, the notice of Court Meeting and the notice of Extraordinary General Meeting
“Scheme Share(s)” HIL Share(s) in issue as at the Record Time other than those beneficially owned by the Controlling Parties
“SDI Ordinance” Securities (Disclosure of Interests) Ordinance, Chapter 396 of the Laws of Hong Kong
“Stock Exchange” The Stock Exchange of Hong Kong Limited “Takeovers Code” The Code on Takeovers and Mergers “Tako Assets” Tako Assets Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly owned subsidiary of Hong Kong Ferry
“Thommen” Thommen Limited, a company incorporated in Hong Kong with limited liability and a wholly owned subsidiary of Hong Kong Ferry
“trading day” a day on which the Stock Exchange is open for trading in securities
“HK$” and “cents” Hong Kong dollars and cents respectively, the lawful currency of Hong Kong
“RMB” Renminbi, the lawful currency of the PRC “sq.ft.” square feet “%” per cent

Henderson Land Development Company Limited

LETTER FROM THE BOARD

==> picture [41 x 41] intentionally omitted <==

==> picture [289 x 35] intentionally omitted <==

(incorporated in Hong Kong with limited liability)

Executive Directors: Lee Shau Kee (Chairman and Managing Director) Lee Ka Kit (Vice Chairman) Colin Lam Ko Yin (Vice Chairman) Lee King Yue Fung Lee Woon King Leung Sing Eddie Lau Yum Chuen Li Ning Lee Ka Shing Patrick Kwok Ping Ho Ho Wing Fun John Yip Ying Chee Suen Kwok Lam

Registered office: 6th Floor World-Wide House 19 Des Voeux Road Central Hong Kong

Independent non-executive Directors: Lo Tak Shing (Vice Chairman) Woo Po Shing Leung Hay Man Angelina Lee Pui Ling Vincent Liang (Alternate Director to Lo Tak Shing) Jackson Woo Ka Biu (Alternate Director to Woo Po Shing)

Non-executive Directors:

Lee Tat Man Kan Fook Yee

6th December, 2002

To the HLD Shareholders

Dear Sir or Madam,

Proposed Privatisation of Henderson Investment Limited by Henderson Land Development Company Limited by way of a Scheme of Arrangement under Section 166 of the Companies Ordinance

1. INTRODUCTION

On 5th November, 2002, HLD, five of whose indirect wholly owned subsidiaries comprising the Controlling Parties holding 2,070,243,859 HIL Shares representing in

Henderson Land Development Company Limited

LETTER FROM THE BOARD

aggregate 73.48% of the issued share capital of HIL, requested the board of HIL Directors to put forward a proposal to the Minority Shareholders regarding a proposed privatisation of HIL by way of a scheme of arrangement under Section 166 of the Companies Ordinance involving the cancellation and extinguishment of all the Scheme Shares in consideration of the payment of the cancellation price of HK$7.35 per Scheme Share.

It was announced on 29th November, 2002 that HLD, having taken into consideration the views of various HIL Shareholders, had decided to increase the Cancellation Price as originally announced on 5th November, 2002 from HK$7.35 per Scheme Share to HK$7.60 per Scheme Share, representing an increase of 3.4%. HLD has stated that it would not further increase the Cancellation Price. Following this announcement, HLD will not be allowed to increase the Cancellation Price, save in wholly exceptional circumstances, as a result of the provisions of Rule 18.3 of the Takeovers Code. HLD and HIL reserve the right to amend the other terms of the Proposal, subject to all applicable provisions of the Takeovers Code.

The purpose of this circular is to provide you with further information with regard to the Proposal which constitutes a discloseable and connected transaction for HLD under the Listing Rules.

2. INFORMATION RELATING TO THE HIL GROUP

History

HIL was incorporated in Hong Kong with limited liability and the HIL Shares have been listed on the Stock Exchange and its predecessors since September 1972. HIL is an investment holding company. The principal activities of the subsidiaries of HIL are property development and investment, investment holding, infrastructure, department store operation, retailing and hotel business, security guard services and information technology development in Hong Kong.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

HIL Group Structure

==> picture [417 x 259] intentionally omitted <==

----- Start of picture text -----

65.21%
Dr. Lee Shau Kee
HLD
(Note)
1.43% 73.48%
0.18%
HIL
36.42% 30.98% 43.67% 66.67%
Hong Kong and
Hong Kong Ferry Miramar Henderson Cyber
China Gas
18.05%
----- End of picture text -----

Note:

Dr. Lee Shau Kee is taken to be interested in HLD by virtue of the SDI Ordinance. The HLD Shares in which Dr. Lee Shau Kee is taken to be interested are beneficially owned by Henderson Development Limited and its subsidiaries. Details of such interest are set out in Note 1 to paragraph (b)(i) in Section 3 of Appendix III to the Scheme Document.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

Business

An analysis of the HIL Group’s turnover and operating profit or loss before interest expenses for each of the years ended 30th June, 2001 and 2002 by reference to its activities is set out below:

Sale of properties Rental income Hotel operation Sale of goods Security guard services Toll fee income Information technology services income Others	Year ended 30th June, 2002 2001 Turnover Operating profit/(loss) Turnover Operating profit/(loss) HK$’000 HK$’000 HK$’000 HK$’000 2,967 713 8,825 2,265 539,976 295,267 447,366 276,752 84,696 24,534 97,563 33,339 116,791 8,017 87,128 11,923 73,373 9,219 71,087 12,280 220,992 145,335 160,926 107,730 67,437 (85,310) 28,306 (130,858 82,090 32,933 149,550 2,192 1,188,322 430,708 1,050,751 315,623	Year ended 30th June, 2002 2001 Turnover Operating profit/(loss) Turnover Operating profit/(loss) HK$’000 HK$’000 HK$’000 HK$’000 2,967 713 8,825 2,265 539,976 295,267 447,366 276,752 84,696 24,534 97,563 33,339 116,791 8,017 87,128 11,923 73,373 9,219 71,087 12,280 220,992 145,335 160,926 107,730 67,437 (85,310) 28,306 (130,858 82,090 32,933 149,550 2,192 1,188,322 430,708 1,050,751 315,623	)
		315,623

Property rental

Rental income has become a steady source of income to the HIL Group. Performance of the local economy, similar to that of the United States of America, has been subject to volatility. This has adversely affected the property rental market and local consumer spending. However, the major retail shopping properties owned by the HIL Group were able to maintain an overall occupancy rate of 93% in the financial year ended 30th June, 2002 whilst rental levels generally remained steady. Such resilience as shown from the HIL Group’s rental property portfolio is mainly a result of the positioning strategy adopted by the HIL Group whereby most of its retail shopping podiums are located in new towns and at the existing and planned mass transportation networks.

Hotel and retailing operations

The negative impact of the economic developments occurring both locally as well as overseas has resulted in the HIL Group’s two Newton Hotels recording an operating loss in the financial year ended 30th June, 2002. Room tariffs were subject to pressure for downward adjustments notwithstanding that the average occupancy rate was maintained at 89%, being the same as that recorded in the previous financial year.

In respect of the retailing operations, the HIL Group now operates a total of six outlets of Citistore department stores.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

Infrastructural projects

In the financial year ended 30th June, 2002, the toll bridge and toll road joint venture operations of the HIL Group in the PRC continued to make contributions to the HIL Group’s profit. The turnover and profit of these two categories of business operations amounted in total to HK$222 million and HK$145 million respectively.

Subsidiary and associated companies

Hong Kong and China Gas

Hong Kong and China Gas is 36.42% owned by the HIL Group. The number of customers of Hong Kong and China Gas reached 1,436,984 as at 30th June, 2002, representing an increase of approximately 5% over that of the previous year. With respect to the energy business of Hong Kong and China Gas, investment in mainland gas projects in line with the environmental policy of the PRC has been a long term strategic priority for its core business development. In particular, Hong Kong and China Gas has participated in environmentallyfriendly energy projects, including the Guangdong Liquefied Natural Gas Receiving Terminal and Trunkline Project and the West-to-East gas pipeline project. During the last financial year, Hong Kong and China Gas concluded sino-foreign joint venture projects for the transmission of natural gas in three mainland cities each with vast territories, large population and prosperous commercial and industrial activities, namely Zhuhai in Guangdong Province, Taizhou in Jiangsu Province and Zibo in Shandong Province. Recently, Hong Kong and China Gas entered into a framework agreement with Nanjing General Gas Company to establish a sino-foreign city gas joint venture and the total investment for the project will be RMB1.2 billion.

Hong Kong and China Gas strives to strengthen its environmentally-friendly energy business in Hong Kong by expanding its filling station services to meet the demand for liquefied petroleum gas from the existing 16,000 taxis and 200 light buses. ECO Stations’ current market share is approximately 32% and the business of ECO Stations generates steady revenue.

According to a press release of Hong Kong and China Gas on 8th November, 2002, the warm weather and the poor economy in Hong Kong for the first nine months of 2002 had a negative impact on gas sales. Hong Kong and China Gas has frozen its tariffs and monthly maintenance charge since January 1998 and has no present plans to adjust gas tariffs.

On the property development front, besides participating in two large development projects — Two International Finance Centre of Airport Railway Hong Kong Station project and Sai Wan Ho Ferry Concourse project — which are presently under construction, Hong Kong and China Gas has agreed to co-operate with HLD in the development of Ma Tau Kok South Plant Site, which will provide a total gross floor area of over 1.1 million sq. ft. and is expected to be completed in 2005.

Hong Kong Ferry

Hong Kong Ferry is 30.98% owned by the HIL Group. Profits of Hong Kong Ferry for the financial year ended 30th June, 2002 were mainly derived from the pre-sale of the residential units of Metro Harbour View. Subsequent to the successful pre-sale of Phase 1 of Metro Harbour View in late 2001, Phase 2 was launched in April 2002. The accumulated total number of units sold was approximately 1,500. Phases 1 and 2 are expected to be completed by late 2002 and late 2003 respectively.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

Miramar

Miramar is 43.67% owned by the HIL Group. Miramar now manages a total of ten hotels and service apartments with five in Hong Kong and five in the PRC. Faced with the negative impact of the terrorist attack in the United States of America, Miramar’s flagship, Hotel Miramar, recorded a modest decline in its occupancy rate to 85% during the year ended 31st March, 2002. It is expected that the entry of the PRC into the World Trade Organisation and its hosting of the Olympic Games in 2008 will facilitate the growth of the tourism industry as well as the economic recovery of Hong Kong, which will benefit the overall business development of Miramar.

Henderson Cyber

Henderson Cyber is 66.67% owned by the HIL Group. Henderson Cyber reported a turnover of HK$67.5 million for the financial year ended 30th June, 2002, representing an increase of 1.4 times over that registered in the previous financial year as a result of the substantial increase shown in its retail business. Other revenue, mainly represented by interest income from deposits and debt securities, was recorded at a much lower level as compared to that of the previous financial year due to the significant fall in interest rates during the year under review. In the long run, Henderson Cyber seeks to integrate its existing businesses and, where feasible, to offer one-stop shopping while exploring a range of partnerships and alliances with leading technology companies to accelerate access to technologies and further enhance the relationship with the large customer bases of the HLD Group and Hong Kong and China Gas.

Financial information

A summary of the audited consolidated results of the HIL Group for each of the years ended 30th June, 2001 and 2002 is set out below:

Year ended 30th June, 2002 2001 HK$’000 HK$’000 Turnover 1,188,322 1,050,751 Operating profit 306,025 366,256 Profit before taxation 2,032,651 2,224,809 Profit after taxation but before minority interests 1,782,519 1,989,328 Profit attributable to the HIL Shareholders 1,780,158 1,977,849 Dividends (619,812) (648,492 Earnings per HIL Share HK$0.63 HK$0.70	)

Net tangible assets

The NTAV of the HIL Group as at 30th June, 2002 was approximately HK$19,099 million, equivalent to HK$6.78 per HIL Share. The Adjusted NTAV is approximately HK$18,425 million, equivalent to HK$6.54 per HIL Share.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

3. SHAREHOLDING STRUCTURE OF HIL

The table below sets out the ownership of the HIL Shares in issue, including those beneficially owned by the Controlling Parties and the Excluded Parties, as at the Latest Practicable Date:

Markshing (Note 1) Darnman (Note 1) Gainwise (Note 1) Covite (Note 1) Banshing (Note 1) Aggregate number of the HIL Shares of the Controlling Parties Lee Shau Kee Fu Sang (Note 2) Ho Wing Fun Lee King Yue (Note 3) Lee Tat Man Leung Sing Lo Tak Shing Yang Hsueh Chin (Note 3) Fung Pok Wah (Note 4) Fung Chun Wah (Note 4) Lam Ka Wai (Note 4) Lam Ko Yu (Note 4) Lee Siu Lun (Note 4) Tako Assets (Note 5) Thommen (Note 5) Aggregate number of the HIL Shares of the Excluded Parties Aggregate number of the HIL Shares of the Controlling Parties and the Excluded Parties Independent Minority Shareholders	As at the Latest Practicable Date Number of HIL Shares % 602,168,418 21.37 84,642,341 3.00 217,250,000 7.71 363,328,900 12.90 802,854,200 28.50 2,070,243,859 73.48 34,779,936 1.23 5,615,148 0.20 40,395,084 1.43 1,100 — 959,028 0.03 6,666 — 150,000 0.01 404,375 0.01 42,711 0.01 300,000 0.01 1,751,000 0.06 1,137,000 0.04 941,000 0.03 4,857,100 0.18 3,000,000 0.11 1,406,000 0.05 55,351,064 1.97 2,125,594,923 75.45 691,732,472 24.55 2,817,327,395 100.00	As at the Latest Practicable Date Number of HIL Shares % 602,168,418 21.37 84,642,341 3.00 217,250,000 7.71 363,328,900 12.90 802,854,200 28.50 2,070,243,859 73.48 34,779,936 1.23 5,615,148 0.20 40,395,084 1.43 1,100 — 959,028 0.03 6,666 — 150,000 0.01 404,375 0.01 42,711 0.01 300,000 0.01 1,751,000 0.06 1,137,000 0.04 941,000 0.03 4,857,100 0.18 3,000,000 0.11 1,406,000 0.05 55,351,064 1.97 2,125,594,923 75.45 691,732,472 24.55 2,817,327,395 100.00
		73.48
		1.23 0.20
		1.43 — 0.03 — 0.01 0.01 0.01 0.01 0.06 0.04 0.03 0.18 0.11 0.05
		1.97
		75.45 24.55
		100.00

Henderson Land Development Company Limited

LETTER FROM THE BOARD

Assuming that no further HIL Shares will be issued between the Latest Practicable Date and the Record Time, immediately upon the Effective Date, all of the 2,817,327,395 HIL Shares then in issue will be held in the names of HLD or its subsidiaries or as HLD may direct with the result that HIL will become a wholly owned subsidiary of HLD (Note 6) .

Notes:

These companies, being the Controlling Parties, are all indirect wholly owned subsidiaries of HLD and together they beneficially own 2,070,243,859 HIL Shares, which represented 73.48% of the issued capital of HIL. Dr. Lee Shau Kee was taken to be interested in these HIL Shares by virtue of the SDI Ordinance.
Dr. Lee Shau Kee was taken to be interested in Fu Sang by virtue of the SDI Ordinance.
Mr. Lee King Yue was deemed to be interested in the 42,711 HIL Shares held by his spouse, Madam Yang Hsueh Chin, by virtue of the SDI Ordinance.
Mr. Fung Pok Wah and Mr. Fung Chun Wah are the sons of Madam Fung Lee Woon King, a director of HLD. Mr. Lam Ka Wai and Mr. Lam Ko Yu are the brothers of Mr. Colin Lam Ko Yin, a director of HLD. Mr. Lee Siu Lun is the brother of Dr. Lee Shau Kee. Such persons are deemed to be acting in concert with HLD under the Takeovers Code.
Tako Assets and Thommen are wholly owned subsidiaries of Hong Kong Ferry and are deemed to be acting in concert with HLD under the Takeovers Code.
Under the Scheme, the share capital of HIL will, on the Effective Date, be reduced by cancelling and extinguishing the Scheme Shares. Forthwith upon such reduction, the authorised share capital of HIL will be increased to its former amount by the creation of the same number of HIL Shares as is equal to the Scheme Shares cancelled. The credit arising in HIL’s books of account as a result of the capital reduction will be applied in paying up in full at par the new HIL Shares so created, which will be allotted and issued, credited as fully paid, to HLD or as HLD may direct.

Following the Effective Date and the withdrawal of listing of the HIL Shares on the Stock Exchange, HIL will become a wholly owned subsidiary of HLD.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

4. CONDITIONS OF THE PROPOSAL

The Proposal will become effective and binding on HIL and all of the holders of Scheme Shares subject to the fulfillment or waiver, as applicable, of the following conditions:

(a) the approval of the Scheme by a majority in number of the Independent Minority Shareholders present and voting either in person or by proxy at the Court Meeting representing not less than three-fourths in value of the HIL Shares that are voted either in person or by proxy by the Independent Minority Shareholders at the Court Meeting, provided that the Scheme is not disapproved by the Independent Minority Shareholders at the Court Meeting holding more than 10% in value of all of the HIL Shares held by the Independent Minority Shareholders;
(b) the passing of a special resolution to approve and give effect to the Scheme (including the cancellation of the Scheme Shares and the reduction of the authorised and issued share capital of HIL) by not less than three-fourths in value of the votes cast by the HIL Shareholders present and voting in person or by proxy at the Extraordinary General Meeting;
(c) the sanction of the Scheme (with or without modifications) and confirmation of the reduction of capital involved in the Scheme by the High Court;
(d) an office copy of the order of the High Court, together with a minute containing the particulars required by Section 61 of the Companies Ordinance, being registered by the Registrar of Companies in Hong Kong;
(e) the Authorisations having been obtained or made from, with or by (as the case may be) the Relevant Authorities in Hong Kong or other relevant jurisdictions;
(f) all Authorisations remaining in full force and effect without variation, all necessary statutory or regulatory obligations in all relevant jurisdictions having been complied with and no requirement having been imposed by any Relevant Authorities which is not expressly provided for, or is in addition to requirements expressly provided for, in the relevant laws, rules, regulations or codes in connection with the Proposal or any matters, documents (including circulars) or things relating thereto, in each aforesaid case up to and at the time when the Scheme becomes effective; and
(g) all bank and other necessary consents which may be required under any existing contractual obligations of HIL having been obtained.

HLD reserves the right to waive Conditions (e), (f) and (g) or any of them, either in whole or in respect of any particular matter. Conditions (a) to (d) cannot be waived as they are imposed either by law or by the Takeovers Code. All of the Conditions will have to be fulfilled or waived, as applicable, on or before 31st March, 2003 or such later date as the High Court may allow in relation to the Scheme, otherwise the Proposal will lapse.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

5. REASONS FOR THE ACQUISITIONS

The HLD Board considers that the Proposal will result in a leaner structure of the HLD Group through the elimination of the listing of HIL, being one of the HLD Group’s listed vehicles. At the same time, HLD’s indirect interests in Hong Kong and China Gas, Hong Kong Ferry, Miramar and Henderson Cyber, all listed subsidiary or associated companies of HIL, will be increased with resulting benefits to the HLD Group.

The principal activities of both HLD and HIL include property development and investment. The consolidation of such active operations of HLD and HIL is expected to result in better utilisation of resources for both HLD and HIL and, therefore, the resultant consolidated business is expected to operate in a more efficient manner.

The HLD Board took into consideration the following factors in arriving at the Cancellation Price:

over the two years ended 4th November, 2002, being the day immediately preceding the Announcement, the HIL Shares traded within the range of HK$4.68 to HK$7.35 per HIL Share with an average closing price of HK$6.05 per HIL Share;
the Cancellation Price represents a premium of about 12.1% over the NTAV per HIL Share of HK$6.78 and a premium of about 29.5% and 24.2% respectively over the 5-day and 60-day average closing price per HIL Share up to and including 4th November, 2002;
on 4th November, 2002, the shares in Hong Kong and China Gas traded at a historic PER of 19.3, which is at the high end of the historic PER range of 14.3 to 21.0 for the Hong Kong and China Gas shares over the 36 months preceding 4th November, 2002;
the expected returns from other potential investment opportunities for HLD;
the final dividend of HK$0.11 per HIL Share for the year ended 30th June, 2002 already recommended by the HIL Board and that the Minority Shareholders will be entitled to receive such dividend if it is approved at the forthcoming annual general meeting of HIL; and
the views of various HIL Shareholders on the original cancellation price of HK$7.35 per Scheme Share.

Upon the Scheme becoming effective, HIL will become a wholly owned subsidiary of HLD. HIL will apply to the Stock Exchange for the withdrawal of the listing of the HIL Shares on the Stock Exchange immediately following the effective date of the Scheme. It is the intention of HLD to maintain the existing businesses of the HIL Group upon the privatisation of HIL.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

6. CONSIDERATION

The Cancellation Price represents:

(i) a premium of about 27.7% over the closing price of HK$5.95 per HIL Share as quoted on the Stock Exchange on 4th November, 2002, being the last trading day prior to the suspension of trading in the HIL Shares pending the issue of the Announcement;
(ii) a premium of about 29.5% over the average closing price of HK$5.87 per HIL Share based on the daily closing prices as quoted on the Stock Exchange over the five trading days up to and including 4th November, 2002;
(iii) a premium of about 26.9% over the average closing price of HK$5.99 per HIL Share based on the daily closing prices as quoted on the Stock Exchange over the 20 trading days up to and including 4th November, 2002;
(iv) a premium of about 24.2% over the average closing price of HK$6.12 per HIL Share based on the daily closing prices as quoted on the Stock Exchange over the 60 trading days up to and including 4th November, 2002; and
(v) a premium of about 2.7% over the closing price of HK$7.40 per HIL Share as quoted on the Stock Exchange as at the Latest Practicable Date.

Based on the Cancellation Price of HK$7.60 per Scheme Share and a total of 2,817,327,395 HIL Shares outstanding as at the Latest Practicable Date, the entire issued share capital of HIL is valued at about HK$21,412 million under the Proposal. The total amount of Cancellation Price payable pursuant to the Scheme is about HK$5,678 million. HLD intends to finance this amount from bank borrowings.

7. FINANCIAL EFFECTS OF THE ACQUISITIONS

(a) Earnings

The earnings per share of the HLD Group based on the audited earnings for the year ended 30th June, 2002 was about HK$1.25. The pro forma earnings per share of the HLD Group for the year ended 30th June, 2002 (assuming that the Proposal had become effective on 1st July, 2001) is about HK$1.40. This represents an increase in the HLD Group’s earnings per share of 12.0%.

(b) Net assets

The net tangible asset value per HLD Share based on the audited net tangible asset value of the HLD Group as at 30th June, 2002 was about HK$32.65. The pro forma net tangible asset value per HLD Share as at 30th June, 2002 (assuming that the Proposal had become effective on 30th June, 2002) was about HK$32.28. This represents a decrease in the net tangible asset value per HLD Share of 1.13%.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

(c) Net debt/equity ratio

The Net debt/equity ratio of the HLD Group based on audited accounts for the year ended 30th June, 2002 was about 25.5%. The pro forma Net debt/equity ratio of the HLD Group as at 30th June, 2002 (assuming that the Proposal had become effective on 30th June, 2002) is about 35.5%. This represents an increase in the HLD Group’s Net debt/equity ratio of 39.2%.

8. INFORMATION RELATING TO HLD

HLD is a company incorporated in Hong Kong with limited liability and the HLD Shares have been listed on the Stock Exchange since 1981. HLD is an investment holding company. The principal activities of its subsidiaries are property development and investment, project management, construction, property management, finance and investment holding in Hong Kong as well as property development and investment in the PRC.

9. CONNECTED TRANSACTION

The Excluded Parties are interested in 55,351,064 HIL Shares which form part of the Scheme Shares. Out of the Excluded Parties, Dr. Lee Shau Kee, Mr. Ho Wing Fun, Mr. Lee King Yue, Mr. Lee Tat Man, Mr. Leung Sing and Mr. Lo Tak Shing, who beneficially own 34,779,936 HIL Shares, 1,100 HIL Shares, 959,028 HIL Shares, 6,666 HIL Shares, 150,000 HIL Shares and 404,375 HIL Shares respectively, are HLD Directors. Fu Sang, which is an associate of a substantial shareholder of HLD, beneficially owns 5,615,148 HIL Shares. Madam Yang Hsueh Chin, who is the spouse of Mr. Lee King Yue, beneficially owns 42,711 HIL Shares. Dr. Lee Shau Kee, Fu Sang, Mr. Ho Wing Fun, Mr. Lee King Yue, Madam Yang Hsueh Chin, Mr. Lee Tat Man, Mr. Leung Sing and Mr. Lo Tak Shing are regarded as connected persons of HLD under the Listing Rules. Upon the Scheme becoming effective, an aggregate Cancellation Price of about HK$319 million will be paid to such connected persons in consideration for the cancellation of their interests in HIL. Disposal of HIL Shares by such connected persons to HLD constitutes a connected transaction for HLD under the Listing Rules. The Proposal made by HLD also constitutes a discloseable transaction for HLD under the Listing Rules.

However, as the aggregate value of the consideration to be paid of about HK$319 million represents less than 3% of the net tangible assets of HLD as at 30th June, 2002 based on its audited consolidated accounts as at that date, approval from the independent shareholders of HLD will not be required.

Details of this connected transaction will be included in the next annual report of HLD in compliance with Rule 14.25(1)(A) to (D) of the Listing Rules.

10. ADDITIONAL INFORMATION

Your attention is drawn to the general information set out in Appendix I to this circular and the Scheme Document set out in Appendix II to this circular.

Yours faithfully, Dr. Lee Shau Kee

Chairman and Managing Director

Henderson Land Development Company Limited

GENERAL INFORMATION

APPENDIX I

1. RESPONSIBILITY STATEMENT

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

2. DISCLOSURE OF INTERESTS

As at the Latest Practicable Date, the interests of the HLD Directors in the shares of HLD and its associated corporations (within the meaning of the SDI Ordinance) required to be disclosed pursuant to Section 28 of the SDI Ordinance (including interests which they are taken or deemed to have under Section 31 or Part I of the Schedule to the SDI Ordinance) and which are required to be entered in the register pursuant to Section 29 of the SDI Ordinance or which are required pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to HLD and the Stock Exchange were as follows:

(i) Ordinary Shares (unless otherwise specified)

		Personal	Family	Corporate	Other
Name of Company	Name of Director	Interests	Interests	Interests	Interests	Total
Henderson Land	Lee Shau Kee				1,122,938,300	1,122,938,300
Development					(Note 3)
Company Limited	Lo Tak Shing	11,000				11,000
	Angelina Lee Pui Ling	30,000				30,000
	Lee Tat Man	858,000				858,000
	Lee King Yue	26,400	16,500	19,800		62,700
				(Note 11)
	Fung Lee Woon King	1,000,000				1,000,000
	Leung Sing	85,600				85,600
	Kan Fook Yee		24,000			24,000
	Ho Wing Fun	100				100
	Jackson Woo Ka Biu		2,000			2,000
	(Alternate director
	to Woo Po Shing)
Henderson	Lee Shau Kee	34,779,936			2,075,859,007	2,110,638,943
Investment Limited					(Note 8)
	Lo Tak Shing	404,375				404,375
	Lee Tat Man	6,666				6,666
	Lee King Yue	959,028	42,711			1,001,739
	Leung Sing	150,000				150,000
	Ho Wing Fun	1,100				1,100
Henderson China	Lee Shau Kee				325,133,977	325,133,977
Holdings Limited					(Note 15)
	Jackson Woo Ka Biu	544,802				544,802
	(Alternate director
	to Woo Po Shing)

Henderson Land Development Company Limited

GENERAL INFORMATION

APPENDIX I

		Personal	Family	Corporate	Other
Name of Company	Name of Director	Interests	Interests	Interests	Interests	Total
Henderson Cyber	Lee Shau Kee	173,898			4,244,996,094	4,245,169,992
Limited					(Note 17)
	Lo Tak Shing	2,021				2,021
	Lee Tat Man	33				33
	Lee King Yue	4,795	588			5,383
	Colin Lam Ko Yin	55				55
	Leung Sing	750				750
	Ho Wing Fun	5				5
Hong Kong Ferry	Lee Shau Kee	7,799,220			110,363,090	118,162,310
(Holdings) Company					(Note 9)
Limited	Colin Lam Ko Yin	150,000				150,000
	Leung Hay Man	2,250				2,250
	Fung Lee Woon King	465,100				465,100
The Hong Kong and	Lee Shau Kee	3,226,174			2,157,017,776	2,160,243,950
China Gas Company					(Note 10)
Limited
Miramar Hotel and	Lee Shau Kee				252,105,250	252,105,250
Investment					(Note 13)
Company, Limited	Woo Po Shing	2,705,000		2,455,000		5,160,000
				(Note 11)
	Kan Fook Yee		20,000			20,000
Drinkwater	Woo Po Shing			3,250		3,250
Investment Limited				(Note 11)
	Leung Hay Man			5,000		5,000
				(Note 11)
Henderson	Lee Shau Kee				8,190	8,190
Development					(Ordinary A	(Ordinary A
Limited					Shares)	Shares)
					(Note 4)
		35,000,000			15,000,000	50,000,000
		(Non-voting			(Non-voting	(Non-voting
		Deferred			Deferred	Deferred
		Shares)			Shares)	Shares)
					(Note 5)
					3,510	3,510
					(Non-voting B	(Non-voting B
					Shares)	Shares)
					(Note 16)
	Lee Ka Kit				8,190	8,190
					(Ordinary A	(Ordinary A
					Shares)	Shares)
					(Note 6)
	Li Ning				8,190	8,190
					(Ordinary A	(Ordinary A
					Shares)	Shares)
					(Note 7)
	Lee Ka Shing				8,190	8,190
					(Ordinary A	(Ordinary A
					Shares)	Shares)
					(Note 12)

Henderson Land Development Company Limited

GENERAL INFORMATION

APPENDIX I

		Personal	Family	Corporate	Other
Name of Company	Name of Director	Interests	Interests	Interests	Interests	Total
Zenger Investment	Fung Lee Woon King	1				1
Limited	Leung Sing	2				2
Fordley Investment	Fung Lee Woon King	2,000				2,000
Limited
Angelfield	Colin Lam Ko Yin			1		1
Investment Limited				(Note 11)
Pochette Investment	Leung Hay Man			40		40
Limited				(Note 11)
Land Fortune	Lo Tak Shing			1		1
Development Limited				(Note 11)
Gain Base	Fung Lee Woon King	50				50
Development Limited
China Investment	Jackson Woo Ka Biu			16,000		16,000
Group Limited	(Alternate director			(Note 11)
	to Woo Po Shing)
Henfield Properties	Lee Ka Kit			4,000		4,000
Limited				(Note 11)
Shellson	Lee Ka Kit			25		25
International Limited				(Note 11)
Feswin Investment	Lee Ka Kit			5,000		5,000
Limited				(Note 11)
Perlin Development	Lee Ka Kit			5		5
Limited				(Note 11)
Quickcentre Properties	Lee Ka Kit			1		1
Limited				(Note 11)
Techno Factor	Lee Ka Kit	2,575,000				2,575,000
(Development)
Limited
Amanwana Limited	Lee Ka Kit	5				5
Maxfine	Lee Ka Kit			1,525		1,525
Development Limited				(Note 11)
Shanghai Henfield	Lee Ka Kit			see		see
Properties Co.,				(Note 14)		(Note 14)
Ltd.

Henderson Land Development Company Limited

GENERAL INFORMATION

APPENDIX I

(ii) Interests in options to subscribe for shares in subsidiaries

(a) Henderson Cyber

As at the Latest Practicable Date, the following HLD Directors had interests in options to subscribe for shares in Henderson Cyber, which were granted on 28th June, 2000:

		Number of
		share	Number of
	Number of	options	share options
	share	granted	outstanding at
	options at	during the	the Latest
Name of Director	1st July, 2001	year	Practicable Date
Lee Shau Kee	2,400,000	—	2,400,000
Colin Lam Ko Yin	1,200,000	—	1,200,000
Lee Ka Kit	1,200,000	—	1,200,000
Lee Ka Shing	1,200,000	—	1,200,000
John Yip Ying Chee	1,200,000	—	1,200,000
Patrick Kwok Ping Ho	600,000	—	600,000
Li Ning	400,000	—	400,000
	(Note 18)
Ho Wing Fun	400,000	—	400,000
Suen Kwok Lam	400,000	—	400,000

Each of the above HLD Directors will be entitled to exercise at the price of HK$1.25 per share (i) 30% of the share options so granted at any time after the expiry of 12 months from 14th July, 2000, (ii) a further 30% of the share options so granted at any time after the expiry of 24 months from 14th July, 2000 and (iii) the remaining share options at any time after the expiry of 36 months from 14th July, 2000 and, in each case, not later than four years from 14th July, 2000.

(b) Henderson China Holdings Limited (“Henderson China”)

As at the Latest Practicable Date, the following HLD Directors had interests in options to subscribe for shares in Henderson China:

					Number of
					share
				Number of	options
		Number		share	outstanding
		of share		options	at
		options at		granted	the Latest
Name of		1st July,	Exercisable	during the	Practicable
Director	Date of Grant	2001	Period	year	Date
Colin Lam	21/02/2001	1,500,000	21/08/2001 -	—	1,500,000
Ko Yin			20/08/2004
Lee Ka Kit	02/05/2001	1,500,000	02/11/2001 -	—	1,500,000
			01/11/2004

Henderson Land Development Company Limited

APPENDIX I

GENERAL INFORMATION

Save as disclosed above, as at the Latest Practicable Date, none of the HLD Directors had any interests in the shares of HLD and its associated corporations (within the meaning of the SDI Ordinance) which are required to be disclosed pursuant to Section 28 of the SDI Ordinance (including interests which they are taken or deemed to have under Section 31 or Part I of the Schedule to the SDI Ordinance) and which are required to be entered in the register pursuant to Section 29 of the SDI Ordinance or which are required pursuant to the Model Code for Securities Transactions by Directors of Listed Companies to be notified to HLD and the Stock Exchange.

Mrs. Angelina Lee Pui Ling is a partner of Woo, Kwan, Lee & Lo, legal adviser to HIL on Hong Kong law in relation to the Proposal. Woo, Kwan, Lee & Lo will receive normal professional fees in connection with matters relating to the Proposal.

3. SUBSTANTIAL SHAREHOLDINGS

So far as the HLD Directors are aware, as at the Latest Practicable Date, other than the interests of certain HLD Directors disclosed under the heading “Disclosure of Interests” above, the interests of persons interested directly or indirectly in 10% or more of the nominal value of any class of share capital carrying rights to vote in all circumstances at general meetings of any member of the HLD Group were as follows:

	No. of shares
Name of Company	in which interested
Rimmer (Cayman) Limited (Note 2)	1,110,384,700
Hopkins (Cayman) Limited (Note 2)	1,110,384,700
Henderson Development Limited (Note 1)	1,110,192,200
Glorious Asia S.A. (Note 1)	534,039,300
Believegood Limited (Note 1)	215,094,300

Notes:

1 These shares were beneficially owned by Henderson Development Limited (“HD”) and its subsidiaries. Glorious Asia S.A. (“Glorious”), a wholly-owned subsidiary of HD, together with its subsidiaries beneficially owned 534,039,300 shares out of these shares. Believegood Limited, a wholly-owned subsidiary of Glorious, beneficially owned 215,094,300 shares.
2 Of these shares, 1,110,192,200 shares are duplicated in the interests described in Note 1. Rimmer (Cayman) Limited was the trustee of a discretionary trust which held the majority of units in a unit trust (“Unit Trust”). Hopkins (Cayman) Limited was the trustee of the Unit Trust which beneficially owned all the issued ordinary shares which carry the voting rights in the share capitals of HD and Fu Sang (which beneficially owned 192,500 shares).
3 Of these shares, 1,110,384,700 shares are duplicated in the interests described in Note 1 and Note 2. Dr. Lee Shau Kee beneficially owned all the issued share capitals of Rimmer (Cayman) Limited and Hopkins (Cayman) Limited. In addition, 5,602,600 shares were beneficially owned by a subsidiary of Hong Kong and China Gas. Dr. Lee Shau Kee was taken to be interested in Hong Kong and China Gas as set out in Note 10 by virtue of the SDI Ordinance.
4 Dr. Lee Shau Kee was taken to be interested in HD through the Unit Trust, Hopkins (Cayman) Limited and Rimmer (Cayman) Limited as set out in Note 2 and Note 3 by virtue of the SDI Ordinance.
5 These shares were beneficially owned by Fu Sang. Dr. Lee Shau Kee was taken to be interested in Fu Sang through the Unit Trust, Hopkins (Cayman) Limited and Rimmer (Cayman) Limited as set out in Note 2 and Note 3 by virtue of the SDI Ordinance.

Henderson Land Development Company Limited

GENERAL INFORMATION

APPENDIX I

6 These shares were beneficially owned by the Unit Trust. The units of the Unit Trust were owned by two discretionary trusts in which Mr. Lee Ka Kit was one of the discretionary beneficiaries.
7 These shares were beneficially owned by the Unit Trust. The units of the Unit Trust were owned by two discretionary trusts in which Mr. Li Ning’s spouse was one of the discretionary beneficiaries.
8 These shares were beneficially owned by Fu Sang and certain subsidiaries of HLD. Dr. Lee Shau Kee was taken to be interested in Fu Sang and HLD as set out in Note 1, Note 2 and Note 3 by virtue of the SDI Ordinance.
9 These shares were beneficially owned by certain subsidiaries of HIL. Dr. Lee Shau Kee was taken to be interested in HIL through Fu Sang and HLD as set out in Note 1, Note 2, Note 3 and Note 8 by virtue of the SDI Ordinance.
10 These shares were beneficially owned by certain subsidiaries of HIL, Fu Sang and a subsidiary of HD. Dr. Lee Shau Kee was taken to be interested in HIL, Fu Sang and HD as set out in Note 1, Note 2, Note 3 and Note 8 by virtue of the SDI Ordinance.
11 These shares were beneficially owned by a company in which the relevant director is entitled to exercise or control the exercise of one-third or more of the voting power at its general meetings.
12 These shares were beneficially owned by the Unit Trust. The units of the Unit Trust were owned by two discretionary trusts in which Mr. Lee Ka Shing was one of the discretionary beneficiaries.
13 These shares were beneficially owned by certain subsidiaries of HIL. Dr. Lee Shau Kee was taken to be interested in HIL through Fu Sang and HLD as set out in Note 1, Note 2, Note 3 and Note 8 by virtue of the SDI Ordinance.
14 Shanghai Henfield Properties Co., Ltd. was an equity joint venture company in the PRC of which the registered capital was US$27,000,000. Henfield Properties Limited (“Henfield”) (owned as to 40% by a company controlled by Mr. Lee Ka Kit) and the PRC partner to the joint venture had entered into a joint venture contract under which Henfield and the PRC partner agreed to make contributions to the total amount of investment in the proportion of 99% and 1% respectively and to share the profits of the joint venture company in accordance with their equity interest in the joint venture company.
15 These shares were beneficially owned by certain subsidiaries of HLD. Dr. Lee Shau Kee was taken to be interested in HLD as set out in Note 3 by virtue of the SDI Ordinance.
16 These shares were beneficially owned by Hopkins (Cayman) Limited as trustee of the Unit Trust. Dr. Lee Shau Kee was taken to be interested in HD through the Unit Trust, Hopkins (Cayman) Limited and Rimmer (Cayman) Limited as set out in Note 2 and Note 3 by virtue of the SDI Ordinance.
17 These shares were beneficially owned by a subsidiary of HIL, Fu Sang, certain subsidiaries of HLD and a subsidiary of Hong Kong and China Gas. Dr. Lee Shau Kee was taken to be interested in HIL, Fu Sang, HLD and Hong Kong and China Gas as set out in Note 1, Note 2, Note 3, Note 8 and Note 10 by virtue of the SDI Ordinance.
18 The number of share options offered and accepted included the option to subscribe for 200,000 shares in Henderson Cyber granted to the spouse of Mr. Li Ning.

Save as disclosed herein, there is no person (not being a HLD Director) known to the HLD Directors who, as at the Latest Practicable Date, was directly or indirectly interested in 10% or more of the nominal value of any class of the share capital carrying rights to vote in all circumstances at general meetings of any member of the HLD Group.

Henderson Land Development Company Limited

GENERAL INFORMATION

APPENDIX I

4. LITIGATION

Neither HLD nor any of its subsidiaries is engaged in any litigation or arbitration of material importance and no litigation or claim of material importance is known to the HLD Directors to be pending or threatened by or against HLD or any of its subsidiaries.

5. COMPANY SECRETARY

The company secretary of HLD is Mr. John Yip Ying Chee, LL.B., F.C.I.S..

6. TRANSFER OFFICE

The share registrar of HLD is Computershare Hong Kong Investor Services Limited whose office is situate at 19th Floor, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

7. MISCELLANEOUS

The English text of this circular shall prevail over the Chinese text.

Henderson Land Development Company Limited

SCHEME DOCUMENT

APPENDIX II

References in this Appendix II to page numbers are to pages of the attached Scheme Document and not to pages of this circular

Henderson Land Development Company Limited

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in doubt as to any aspect of this document, you should consult a stockbroker or other registered dealer in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold all your shares in Henderson Investment Limited, you should at once hand this document and the accompanying forms of proxy to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser.

accompanying forms of proxy to the purchaser or to the bank, stockbroker or other agent through whom the sale was effected for transmission to the purchaser. The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this document, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. (incorporated in Hong Kong with limited liability) PROPOSED PRIVATISATION BY (incorporated in Hong Kong with limited liability) BY WAY OF A SCHEME OF ARRANGEMENT UNDER SECTION 166 OF THE COMPANIES ORDINANCE INVOLVING THE CANCELLATION OF ALL THE ISSUED SHARES OF HK$0.20 EACH IN HENDERSON INVESTMENT LIMITED HELD BY THE MINORITY SHAREHOLDERS (AS DEFINED HEREIN) Financial adviser to Henderson Land Development Company Limited HSBC The Hongkong and Shanghai Banking Corporation Limited Independent financial adviser to the Independent Director (as defined herein) of Henderson Investment Limited A letter from the board of directors of Henderson Investment Limited is set out on pages 8 to 17 of this document. An explanatory statement regarding the Proposal (as defined herein) is set out on pages 46 to 131 of this document. A letter from the Independent Director containing his advice to the Independent Minority Shareholders (as defined herein) in relation to the Proposal is set out on page 18 of this document. A letter from the independent financial adviser, Platinum Securities Company Limited, containing its advice to the Independent Director in relation to the Proposal is set out on pages 19 to 45 of this document. The action to be taken by the Independent Minority Shareholders (as defined herein) is set out on page 60 of this document. Notices convening the Court Meeting (as defined herein) and the Extraordinary General Meeting (as defined herein) to be held on 2nd January, 2003 are set out on pages 139 to 142 of this document. Whether or not you are able to attend the Meetings (as defined herein) in person, you are strongly urged to complete and sign the enclosed pink form of proxy in respect of the Court Meeting and the white form of proxy in respect of the Extraordinary General Meeting in accordance with the instructions respectively printed thereon and to lodge both of them with the share registrar of Henderson Investment Limited, Standard Registrars Limited, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong as soon as possible and, in any event, not less than 48 hours before the time appointed for the holding of the relevant Meeting. In the case of the pink form of proxy, it may be handed to the chairman of the Court Meeting at the Court Meeting if it is not so lodged.

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

This document is issued jointly by Henderson Investment Limited and Henderson Land Development Company Limited.

6th December, 2002

Henderson Land Development Company Limited

Page	Page
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1
Expected timetable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	6
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	8
Letter from the Independent Director . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	18
Letter from Platinum to the Independent Director . . . . . . . . . . . . . . . . . . . . . . . . . . . .	19
Explanatory Statement
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	46
Summary of the Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	46
Conditions of the Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	47
Financial effects of the Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	48
Background to, and reasons for, the Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	50
Information relating to the HIL Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	51
Future intentions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	56
Information relating to the interests of the Controlling Parties,
the Excluded Parties and the HIL Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	56
Share certificates, dealings and listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	57
Registration and payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	58
Overseas holders of Scheme Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	58
Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	59
Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	59
Action to be taken by the Independent Minority Shareholders . . . . . . . . . . . . . . . . .	60
Further information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	60
Appendix I — Financial information relating to the HIL Group . . . . . . . . . . . . .	61
Appendix II — Property valuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	104
Appendix III — General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	123
Scheme of Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	132
Notice of Court Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	139
Notice of Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	141

Henderson Land Development Company Limited

DEFINITIONS

In this document (other than the Scheme and notices of the Meetings), the following expressions shall have the meanings respectively set opposite them, unless the context otherwise requires:

“Adjusted NTAV”
pro forma adjusted consolidated net tangible asset value of the HIL Group which is based on the NTAV and adjusted for certain items as set out in Section 6 of Appendix I to this document
“Announcement” the announcement dated 5th November, 2002 issued jointly by HLD and HIL relating to the Proposal and published in the South China Morning Post, the Hong Kong Economic Journal and the Hong Kong Economic Times on 6th November, 2002
“Authorisations” all necessary authorisations, registrations, filings, rulings, consents, permissions and approvals in connection with the Proposal
“Banshing” Banshing Investment Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly owned subsidiary of HLD
“Cancellation Price” the cancellation price of HK$7.60 per Scheme Share payable by HLD to the holders of Scheme Shares pursuant to the Scheme
“Companies Ordinance” Companies Ordinance, Chapter 32 of the Laws of Hong Kong
“Condition(s)” the conditions or any of them to which the Proposal is subject, all of which are set out in the Explanatory Statement on pages 47 and 48 of this document
“Controlling Parties” Markshing, Darnman, Gainwise, Covite and Banshing, all beneficially interested in an aggregate of approximately 73.48% of the issued capital of HIL as at the date of this document
“Court Meeting” the meeting of the Minority Shareholders to be convened at the direction of the High Court for the approval of the Scheme, notice of which is set out on pages 139 and 140 of this document, and any adjournment thereof
“Covite” Covite Investment Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly owned subsidiary of HLD

Henderson Land Development Company Limited

DEFINITIONS

“Darnman” Darnman Investment Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly owned subsidiary of HLD
“DTZ” DTZ Debenham Tie Leung Limited, an independent professional property valuer
“Effective Date” the date on which the Scheme, if approved, becomes effective, which is expected to be 29th January, 2003
“Excluded Parties” Dr. Lee Shau Kee, Fu Sang, Mr. Ho Wing Fun, Mr. Lee King Yue, Mr. Lee Tat Man, Mr. Leung Sing, Mr. Lo Tak Shing, Madam Yang Hsueh Chin, Mr. Fung Pok Wah, Mr. Fung Chun Wah, Mr. Lam Ka Wai, Mr. Lam Ko Yu, Mr. Lee Siu Lun, Tako Assets and Thommen, all beneficially interested in an aggregate of approximately 1.97% of the issued capital of HIL as at the date of this document and are deemed to be acting in concert with HLD under the Takeovers Code
“Explanatory Statement” the explanatory statement set out on pages 46 to 131 of this document and issued in compliance with Section 166A of the Companies Ordinance
“Extraordinary General the extraordinary general meeting of HIL for the approval Meeting” and implementation of the Scheme, notice of which is set out on pages 141 and 142 of this document, and any adjournment thereof
“Fu Sang” Fu Sang Company Limited, a company incorporated in Hong Kong with limited liability
“Gainwise” Gainwise Investment Limited, a company incorporated in Hong Kong with limited liability and an indirect wholly owned subsidiary of HLD
“Henderson Cyber” Henderson Cyber Limited, a company incorporated in the Cayman Islands with limited liability and the shares of which are listed on the Growth Enterprise Market of the Stock Exchange and owned as to 66.67% by HIL
“High Court” High Court of Hong Kong “HIL” Henderson Investment Limited ( ), a company incorporated in Hong Kong with limited liability and whose HIL Shares are listed on the Stock Exchange
“HIL Board” the board of HIL Directors
“HIL Director(s)” director(s) of HIL

Henderson Land Development Company Limited

DEFINITIONS

“HIL Group” HIL and its subsidiaries “HIL Share(s)” ordinary share(s) of HK$0.20 each in the capital of HIL “HIL Shareholders” holders of HIL Shares “HLD” Henderson Land Development Company Limited ( ), a company incorporated in Hong Kong with limited liability and whose HLD Shares are listed on the Stock Exchange
“HLD Group” HLD and its subsidiaries “HLD Shares” ordinary shares of HK$2.00 each in the capital of HLD “holder” a registered holder of shares including a person entitled by transmission to be registered as such and joint holders
“Hong Kong” the Hong Kong Special Administrative Region of the PRC “Hong Kong and China Gas” The Hong Kong and China Gas Company Limited, a company incorporated in Hong Kong with limited liability and the shares of which are listed on the Stock Exchange and owned as to 36.42% by HIL
“Hong Kong Ferry” Hong Kong Ferry (Holdings) Company Limited, a company incorporated in Hong Kong with limited liability and the shares of which are listed on the Stock Exchange and owned as to 30.98% by HIL
“HSBC” The Hongkong and Shanghai Banking Corporation Limited, a licensed bank under the Banking Ordinance, Chapter 155 of the Laws of Hong Kong, and an exempt dealer under the Securities Ordinance, Chapter 333 of the Laws of Hong Kong, being the financial adviser to HLD in connection with the Proposal
“Independent Director” Mr. Philip Yuen Pak Yiu, the independent HIL Director appointed to advise the Independent Minority Shareholders in relation to the Proposal
“Independent Minority Minority Shareholders other than the holders of the HIL Shareholders” Shares beneficially owned by the Excluded Parties
“Latest Practicable Date”
“Latest Practicable Date” 3rd December, 2002, being the latest practicable date prior to the printing of this document for the purpose of ascertaining certain information contained herein
“Listing Rules” Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited

Henderson Land Development Company Limited

DEFINITIONS

“Markshing”	Markshing Investment Limited, a company incorporated
	in Hong Kong with limited liability and an indirect wholly
	owned subsidiary of HLD
“Meeting(s)”	the Court Meeting and the Extraordinary General
	Meeting or any of them, as the case may be
“Minority Shareholders”	HIL Shareholders other than the holders of the HIL
	Shares beneficially owned by the Controlling Parties
“Miramar”	Miramar Hotel and Investment Company, Limited, a
	company incorporated in Hong Kong with limited liability
	and the shares of which are listed on the Stock Exchange
	and owned as to 43.67% by HIL
“NTAV”	the consolidated net tangible asset value of the HIL
	Group as at 30th June, 2002, based on the audited
	financial statements of the HIL Group for the year ended
	30th June, 2002 as set out in the latest annual report of
	HIL despatched to the HIL Shareholders on 28th October,
	2002
“Platinum”	Platinum Securities Company Limited, a registered
	investment adviser and a registered dealer under the
	Securities Ordinance, Chapter 333 of the Laws of Hong
	Kong, and the independent financial adviser to the
	Independent Director
“PER”	price to earnings ratio
“PRC”	People’s Republic of China
“Proposal”	the proposal for the privatisation of HIL by HLD by way of
	the Scheme as described in this document
“Record Time”	4:00 p.m. Hong Kong time on the day immediately
	preceding the Effective Date
“Register”	the register of members of HIL
“Relevant Authorities”	appropriate governments, governmental bodies,
	regulatory bodies, courts or institutions
“Scheme”	the scheme of arrangement between HIL and the holders
	of Scheme Shares under Section 166 of the Companies
	Ordinance as set out on pages 132 to 138 of this
	document, with or subject to any modification thereof or
	addition thereto or conditions approved or imposed by
	the High Court
	4
Henderson Land Development	Company Limited

DEFINITIONS

“Scheme Share(s)”	HIL Share(s) in issue as at the Record Time other than
	those beneficially owned by the Controlling Parties
“SDI Ordinance”	Securities (Disclosure of Interests) Ordinance, Chapter
	396 of the Laws of Hong Kong
“Stock Exchange”	The Stock Exchange of Hong Kong Limited
“Takeovers Code”	The Code on Takeovers and Mergers
“Tako Assets”	Tako Assets Limited, a company incorporated in the
	British Virgin Islands with limited liability and a wholly
	owned subsidiary of Hong Kong Ferry
“Thommen”	Thommen Limited, a company incorporated in Hong
	Kong with limited liability and a wholly owned subsidiary
	of Hong Kong Ferry
“trading day”	a day on which the Stock Exchange is open for trading in
	securities
“HK$” and “cents”	Hong Kong dollars and cents respectively, the lawful
	currency of Hong Kong
“RMB”	Renminbi, the lawful currency of the PRC
“sq.ft.”	square feet
“sq.m.”	square metres
“%”	per cent

Henderson Land Development Company Limited

EXPECTED TIMETABLE

Latest time for lodging transfers of the HIL Shares in order to be entitled to attend and vote at the Court Meeting and the Extraordinary General Meeting . . . . . . . . 4:00 p.m. on Monday, 30th December, 2002 Register closed for determination of entitlements of Independent Minority Shareholders to attend and vote at the Court Meeting and the Extraordinary General Meeting . . . . . . . . . . . . . . . . . . . Tuesday, 31st December, 2002 to Thursday, 2nd January, 2003 (both dates inclusive) Latest time for lodging forms of proxy in respect of: Court Meeting (Note 1) . . . . . . . . . . . . . . . . 11:00 a.m. on Tuesday, 31st December, 2002 Extraordinary General Meeting (Note 1) . . . 11:30 a.m. on Tuesday, 31st December, 2002 Suspension of dealings in the HIL Shares and the HLD Shares . . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Thursday, 2nd January, 2003 Court Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 11:00 a.m. on Thursday, 2nd January, 2003 Extraordinary General Meeting . . . . . . . . . . . . . . 11:30 a.m. on Thursday, 2nd January, 2003 Press announcements of the results of the Meetings in the South China Morning Post and the Hong Kong Economic Times . . . . . . . . . . . . . . . . . . Friday, 3rd January, 2003

Resumption of dealings in the HIL Shares

and the HLD Shares . . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Friday, 3rd January, 2003 Last day for dealings in

the HIL Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tuesday, 21st January, 2003

Suspension of dealings in

the HIL Shares . . . . . . . . . . . . . . . . . . . . . . . 9:30 a.m. on Wednesday, 22nd January, 2003 Latest time for lodging transfers of the HIL Shares in order to qualify for the Cancellation Price under the Scheme . . . . . . 4:00 p.m. on Friday, 24th January, 2003 High Court hearing of petition to sanction the Scheme . . . . . . Tuesday, 28th January, 2003 Record Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4:00 p.m. on Tuesday, 28th January, 2003 Effective Date (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, 29th January, 2003 Withdrawal of the listing of the HIL Shares on the Stock Exchange (Note 2) . . . . . . . . . 4:00 p.m. on Wednesday, 29th January, 2003

Henderson Land Development Company Limited

EXPECTED TIMETABLE

Press announcements of the Effective Date and the withdrawal of the listing of the HIL Shares in the South China Morning Post and the Hong Kong Economic Times . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Thursday, 30th January, 2003
Cheques for payment of the Cancellation Price to be despatched on or before . . . . . . . . . . . . . . . . . . . . . . . . . . Friday, 7th February, 2003

The Minority Shareholders should note that the above timetable, which is mainly dependent on the availability of the dates for the High Court to hear the proceedings relating to the Scheme, is subject to change. Further announcements will be made in the event that there is any change.

Notes:

Forms of proxy should be lodged with the share registrar of HIL, Standard Registrars Limited, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong as soon as possible and by the times and dates stated above. In the case of the pink form of proxy in respect of the Court Meeting, it may be handed to the chairman of the Court Meeting at the Court Meeting if it is not so lodged. In order to be valid, the white form of proxy for the Extraordinary General Meeting must be lodged, not later than the time and date stated above. Completion and return of a form of proxy for either of the Meetings will not preclude an Independent Minority Shareholder from attending the relevant Meeting and voting in person if he so wishes. In such event, the returned form of proxy will be deemed to have been revoked.
The Scheme will become effective when it is sanctioned (with or without modification) by the High Court and an office copy of the order of the High Court, together with the minute containing the particulars required by Section 61 of the Companies Ordinance, are delivered to and registered by the Registrar of Companies in Hong Kong. Registration is expected to take place on 29th January, 2003. The Minority Shareholders should note the Conditions set out in the Explanatory Statement on pages 47 and 48 of this document. If the Scheme becomes effective, it is expected that the listing of the HIL Shares on the Stock Exchange will be withdrawn on 29th January, 2003.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

==> picture [217 x 35] intentionally omitted <==

(incorporated in Hong Kong with limited liability)

Executive Directors: Lee Shau Kee (Chairman and Managing Director) Lee Ka Kit (Vice Chairman) Colin Lam Ko Yin (Vice Chairman) Lee Tat Man Lee King Yue Eddie Lau Yum Chuen Li Ning Lee Ka Shing Patrick Kwok Ping Ho Ho Wing Fun Lau Chi Keung Donald Cheung Ping Keung Augustine Wong Ho Ming Suen Kwok Lam Sit Pak Wing

Registered office: 6th Floor World-Wide House 19 Des Voeux Road Central Hong Kong

Independent Non-executive Directors: Woo Po Shing Philip Yuen Pak Yiu Leung Hay Man Jackson Woo Ka Biu (Alternate Director to Woo Po Shing)

6th December, 2002

To the Minority Shareholders

Dear Sir or Madam,

Proposed Privatisation of HENDERSON INVESTMENT LIMITED by Henderson Land Development Company Limited by way of a Scheme of Arrangement under Section 166 of the Companies Ordinance

INTRODUCTION

On 5th November, 2002, HLD, five of whose indirect wholly owned subsidiaries comprising the Controlling Parties holding 2,070,243,859 HIL Shares representing in aggregate 73.48% of the issued share capital of HIL, requested the HIL Board to put forward a proposal to the Minority Shareholders regarding a proposed privatisation of HIL by way of a scheme of arrangement under Section 166 of the Companies Ordinance involving the cancellation and extinguishment of all the Scheme Shares in consideration of the payment of the cancellation price of HK$7.35 per Scheme Share.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

For the avoidance of doubt, it should be noted that the 11 cents final dividend recommended by the HIL Board and, if approved by HIL Shareholders at the forthcoming annual general meeting of HIL to be held on 18th December, 2002, payable to the HIL Shareholders whose names appear on the Register on 18th December, 2002, will not be affected by the outcome of the Proposal.

Upon the Scheme becoming effective, HIL will become a wholly owned subsidiary of HLD. HIL will apply to the Stock Exchange for the withdrawal of the listing of the HIL Shares on the Stock Exchange immediately following the Effective Date. It is the intention of HLD to maintain the existing businesses of the HIL Group upon the privatisation of HIL.

As at the date of this document, the Controlling Parties remain interested beneficially in an aggregate of 2,070,243,859 HIL Shares, representing about 73.48% of the issued share capital of HIL. Such HIL Shares, by reason of the fact that the Controlling Parties are all indirect wholly owned subsidiaries of HLD, will not form part of the Scheme Shares and, accordingly, will neither be represented nor voted at the Court Meeting to approve the Scheme. The Controlling Parties have also stated that such HIL Shares will similarly not be represented or voted at the Extraordinary General Meeting to approve and give effect to the Scheme.

In view of the interests of HLD in the Proposal and the direct or indirect relationships between the Excluded Parties and HLD as explained in the following paragraph, all of the 55,351,064 HIL Shares of the Excluded Parties which represent approximately 1.97% of the issued capital of HIL, although forming part of the Scheme Shares, will not be represented or voted at the Meetings as the Excluded Parties are deemed to be acting in concert with HLD under the Takeovers Code.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

respectively, representing in aggregate 0.05% of the issued capital of HIL as at the date of this document. In the case of Mr. Lee King Yue, he is also deemed to be interested in 42,711 HIL Shares beneficially owned by his spouse, Madam Yang Hsueh Chin, representing 0.01% of the issued capital of HIL as at the date of this document. In addition, Mr. Fung Pok Wah and Mr. Fung Chun Wah, being the sons of Madam Fung Lee Woon King who is a director of HLD, are interested in 300,000 HIL Shares and 1,751,000 HIL Shares respectively. Mr. Lam Ka Wai and Mr. Lam Ko Yu, being the brothers of Mr. Colin Lam Ko Yin who is also a director of HLD, are interested in 1,137,000 HIL Shares and 941,000 HIL Shares respectively. Mr. Lee Siu Lun, who is the brother of Dr. Lee Shau Kee, is beneficially interested in 4,857,100 HIL Shares. Because they are close relatives of certain directors of HLD, Mr. Fung Pok Wah, Mr. Fung Chun Wah, Mr. Lam Ka Wai, Mr. Lam Ko Yu and Mr. Lee Siu Lun, all of whom are collectively interested in an aggregate of 8,986,100 HIL Shares representing 0.32% of the issued capital of HIL as at the date of this document, are deemed to be acting in concert with HLD under the Takeovers Code. Tako Assets and Thommen, both of which are wholly owned subsidiaries of Hong Kong Ferry which in turn is owned as to 30.98% by HIL and, hence, HLD is indirectly interested, are beneficially interested in a total of 4,406,000 HIL Shares, representing approximately 0.16% of the issued capital of HIL as at the date of this document. In the circumstances, all of these parties, who are defined as “Excluded Parties”, are deemed to be acting in concert with HLD under the Takeovers Code because of their direct or indirect relationship with HLD.

HLD has appointed HSBC as its financial adviser in connection with the Proposal.

The HIL Board comprises eighteen HIL Directors, fifteen of whom are executive HIL Directors and the remaining three are independent non-executive HIL Directors. Apart from Mr. Lau Chi Keung, Mr. Cheung Ping Keung, Donald, Mr. Wong Ho Ming, Augustine and Mr. Sit Pak Wing all of whom are employees of a wholly owned subsidiary of HLD, Henderson Real Estate Agency Limited, all of the other executive HIL Directors are common directors of HLD and HIL. Of such common directors of HLD and HIL, Dr. Lee Shau Kee, Mr. Ho Wing Fun, Mr. Lee King Yue and Mr. Lee Tat Man, in addition to their interests in HIL Shares as mentioned above, are interested in HLD Shares. Mr. Lau Chi Keung is also interested in HLD Shares. Hence, all of the executive HIL Directors are not considered independent under the Takeovers Code to opine on the terms of the Proposal. In respect of the independent non-executive HIL Directors, Sir Po-Shing Woo and Mr. Leung Hay Man, being common directors of HLD and HIL, are likewise not considered to be independent so as to express any view to the Independent Minority Shareholders regarding the Proposal. As a result, Mr. Philip Yuen Pak Yiu, an independent non-executive HIL Director, has been appointed by the HIL Board as the Independent Director to make a recommendation to the Independent Minority Shareholders in respect of the Proposal.

Platinum has been appointed by the HIL Board as the independent financial adviser to advise the Independent Director in connection with the Proposal.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE

The table below sets out the ownership of the HIL Shares in issue, including those beneficially owned by the Controlling Parties and the Excluded Parties, as at the Latest Practicable Date:

Markshing (Note 1) Darnman (Note 1) Gainwise (Note 1) Covite (Note 1) Banshing (Note 1) Aggregate number of the HIL Shares of the Controlling Parties Lee Shau Kee Fu Sang (Note 2) Ho Wing Fun Lee King Yue (Note 3) Lee Tat Man Leung Sing Lo Tak Shing Yang Hsueh Chin (Note 3) Fung Pok Wah (Note 4) Fung Chun Wah (Note 4) Lam Ka Wai (Note 4) Lam Ko Yu (Note 4) Lee Siu Lun (Note 4) Tako Assets (Note 5) Thommen (Note 5) Aggregate number of the HIL Shares of the Excluded Parties Aggregate number of the HIL Shares of the Controlling Parties and the Excluded Parties Independent Minority Shareholders	As at the Latest Practicable Date Number of HIL Shares % 602,168,418 21.37 84,642,341 3.00 217,250,000 7.71 363,328,900 12.90 802,854,200 28.50 2,070,243,859 73.48 34,779,936 1.23 5,615,148 0.20 40,395,084 1.43 1,100 — 959,028 0.03 6,666 — 150,000 0.01 404,375 0.01 42,711 0.01 300,000 0.01 1,751,000 0.06 1,137,000 0.04 941,000 0.03 4,857,100 0.18 3,000,000 0.11 1,406,000 0.05 55,351,064 1.97 2,125,594,923 75.45 691,732,472 24.55 2,817,327,395 100.00	As at the Latest Practicable Date Number of HIL Shares % 602,168,418 21.37 84,642,341 3.00 217,250,000 7.71 363,328,900 12.90 802,854,200 28.50 2,070,243,859 73.48 34,779,936 1.23 5,615,148 0.20 40,395,084 1.43 1,100 — 959,028 0.03 6,666 — 150,000 0.01 404,375 0.01 42,711 0.01 300,000 0.01 1,751,000 0.06 1,137,000 0.04 941,000 0.03 4,857,100 0.18 3,000,000 0.11 1,406,000 0.05 55,351,064 1.97 2,125,594,923 75.45 691,732,472 24.55 2,817,327,395 100.00
		73.48
		1.23 0.20
		1.43 — 0.03 — 0.01 0.01 0.01 0.01 0.06 0.04 0.03 0.18 0.11 0.05
		1.97
		75.45 24.55
		100.00

Henderson Land Development Company Limited

LETTER FROM THE BOARD

Notes:

These companies, being the Controlling Parties, are all indirect wholly owned subsidiaries of HLD and together they beneficially own 2,070,243,859 HIL Shares, which represented 73.48% of the issued capital of HIL. Dr. Lee Shau Kee was taken to be interested in these HIL Shares by virtue of the SDI Ordinance.
Dr. Lee Shau Kee was taken to be interested in Fu Sang by virtue of the SDI Ordinance.
Mr. Lee King Yue was deemed to be interested in the 42,711 HIL Shares held by his spouse, Madam Yang Hsueh Chin, by virtue of the SDI Ordinance.
Mr. Fung Pok Wah and Mr. Fung Chun Wah are the sons of Madam Fung Lee Woon King, a director of HLD. Mr. Lam Ka Wai and Mr. Lam Ko Yu are the brothers of Mr. Colin Lam Ko Yin, a director of HLD. Mr. Lee Siu Lun is the brother of Dr. Lee Shau Kee. Such persons are deemed to be acting in concert with HLD under the Takeovers Code.
Tako Assets and Thommen are wholly owned subsidiaries of Hong Kong Ferry and are deemed to be acting in concert with HLD under the Takeovers Code.
Under the Scheme, the share capital of HIL will, on the Effective Date, be reduced by cancelling and extinguishing the Scheme Shares. Forthwith upon such reduction, the authorised share capital of HIL will be increased to its former amount by the creation of the same number of HIL Shares as is equal to the Scheme Shares cancelled. The credit arising in HIL’s books of account as a result of the capital reduction will be applied in paying up in full at par the new HIL Shares so created, which will be allotted and issued, credited as fully paid, to HLD or as HLD may direct.

SUMMARY OF THE PROPOSAL

The purpose of this document is to provide you with further information regarding the Proposal and to give you notices of the Meetings. Your attention is also drawn to the letter from the Independent Director, the letter from Platinum to the Independent Director, the Explanatory Statement and the Scheme, all of which form part of this document.

It is proposed that, subject to the Conditions being fulfilled or, if applicable, waived, the Proposal will be implemented by way of the Scheme, which will involve a reduction in the authorised and issued share capital of HIL by the cancellation and extinguishment of all of the Scheme Shares. Forthwith upon such reduction of capital taking effect, the authorised share capital of HIL will be increased to its former amount of HK$600,000,000 by the creation of such number of new HIL Shares as is equal to the number of the Scheme Shares cancelled. The credit which will arise in HIL’s books of account as a result of the reduction of capital will be applied in paying up in full at par the new HIL Shares so created, which will be allotted and issued, credited as fully paid, to HLD or as HLD may direct. The Scheme also provides that, in consideration of the cancellation and extinguishment of the Scheme Shares, the holders of Scheme Shares whose names appear on the Register at the Record Time will be entitled to receive the Cancellation Price of HK$7.60 from HLD for each Scheme Share held.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

Payment of the Cancellation Price will be effected by cheques and implemented in full in accordance with the terms of the Scheme without regard to any lien, right of set-off, counterclaim or other analogous right to which HLD may otherwise be, or claim to be, entitled against any holder of Scheme Shares.

On the bases of the Cancellation Price and of a total of 2,817,327,395 HIL Shares outstanding as at the Latest Practicable Date, the entire issued capital of HIL is valued at about HK$21,412 million under the Proposal. The total amount of the Cancellation Price payable pursuant to the Scheme is about HK$5,678 million. HLD has stated that it intended to finance this amount from bank borrowings. HLD has, among others, two syndicated loan facilities of HK$5,500,000,000 and HK$1,000,000,000 and their respective agents are BNP Paribas Hong Kong Branch and Wing Lung Bank Limited. The payment of interest on, and repayment of or security for, any loan facilities will not depend to any significant extent on the business of HIL. HSBC is satisfied that sufficient financial resources are available to HLD for the implementation of the Proposal.

The Proposal will become effective and binding on HIL and all of the holders of Scheme Shares, including the Excluded Parties and their nominees in whose names some of the HIL Shares beneficially owned by them are registered, provided that the Conditions are fulfilled or, if applicable, waived.

The Scheme will lapse if it does not become effective on or before 31st March, 2003 (or such later date as the High Court may allow) and the holders of Scheme Shares will be notified accordingly by press announcements. Further announcements regarding the Proposal will be made as and when appropriate.

Assuming that the Scheme becomes effective on 29th January, 2003, cheques for the Cancellation Price are expected to be despatched to the holders of Scheme Shares on or before 7th February, 2003.

FINANCIAL EFFECTS OF THE PROPOSAL

Share Price

The Cancellation Price represents:

(i) a premium of about 27.7% over the closing price of HK$5.95 per HIL Share as quoted on the Stock Exchange on 4th November, 2002, being the last trading day prior to the suspension of trading in the HIL Shares pending the issue of the Announcement;
(ii) a premium of about 29.5% over the average closing price of HK$5.87 per HIL Share based on the daily closing prices as quoted on the Stock Exchange over the five trading days up to and including 4th November, 2002;
(iii) a premium of about 26.9% over the average closing price of HK$5.99 per HIL Share based on the daily closing prices as quoted on the Stock Exchange over the 20 trading days up to and including 4th November, 2002;

Henderson Land Development Company Limited

LETTER FROM THE BOARD

(iv) a premium of about 24.2% over the average closing price of HK$6.12 per HIL Share based on the daily closing prices as quoted on the Stock Exchange over the 60 trading days up to and including 4th November, 2002; and
(v) a premium of about 2.7% over the closing price of HK$7.40 per HIL Share as quoted on the Stock Exchange as at the Latest Practicable Date.

As already explained, the outcome of the Proposal will not affect the 11 cents final dividend recommended by the HIL Board and payable to the HIL Shareholders whose names appear on the Register on 18th December, 2002, if approved by them at the forthcoming annual general meeting of HIL to be held on 18th December, 2002.

Historical share price information on the HIL Shares is set out in Section 2 of Appendix III to this document.

Net Tangible Assets

The Cancellation Price represents:

(i) a premium of about 12.1% over the NTAV per HIL Share of about HK$6.78; and
(ii) a premium of about 16.2% over the Adjusted NTAV per HIL Share of HK$6.54.

Earnings

The HIL Group’s audited consolidated profit attributable to the HIL Shareholders for the year ended 30th June, 2002 was approximately HK$1,780 million, representing earnings per HIL Share of approximately 63 cents as shown in the Consolidated Income Statement in Section 2 of Appendix I to this document. When compared with the HIL Group’s audited consolidated profit attributable to the HIL Shareholders of approximately HK$1,978 million in respect of the previous financial year which is equivalent to earnings per HIL Share of approximately 70 cents, this represents a year-on-year reduction in profit attributable to the HIL Shareholders of 10%.

Based on the earnings per HIL Share for the year ended 30th June, 2002, the Cancellation Price would represent a PER for HIL Shares of about 12.1. This represents a premium of about 27.7% over the PER of about 9.4 based on the closing price of HK$5.95 per HIL Share on 4th November, 2002, being the day immediately preceding the Announcement.

Dividend Yield

Based on the Cancellation Price and the dividends for the year ended 30th June, 2002, the dividend yield for HIL Shares would be about 2.9%.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

BACKGROUND TO, AND REASONS FOR, THE PROPOSAL

Your attention is drawn to the section headed “Background to, and reasons for, the Proposal” in the Explanatory Statement on page 50 of this document.

INFORMATION RELATING TO THE HIL GROUP AND FUTURE INTENTIONS

Your attention is drawn to the sections headed “Information relating to the HIL Group” and “Future intentions” in the Explanatory Statement on pages 51 to 56 of this document.

MEETINGS AND ACTION TO BE TAKEN BY THE INDEPENDENT MINORITY SHAREHOLDERS

As you will see from the notices of Meetings on pages 139 to 142 of this document, the Meetings have been convened to be held at 11:00 a.m. and 11:30 a.m. respectively in the Stork and Bamboo Rooms, Mandarin Oriental, 5 Connaught Road Central, Hong Kong on Thursday, 2nd January, 2003.

The High Court has directed that the Court Meeting be held for the purpose of considering and, if thought fit, passing a resolution to approve the Scheme, with or without modification. In so far as the statutory requirement for the sanction of the Scheme by the High Court is concerned, a resolution for the approval of the Scheme will be deemed to have been passed if a majority in number representing three-fourths in value of the HIL Shares held by the Minority Shareholders present and voting either in person or by proxy at the Court Meeting vote in favour of the Scheme. Under Rule 2.10 of the Takeovers Code, however, such a resolution will only be considered to have been passed if (i) the Scheme is approved by at least 75% of the votes attaching to the HIL Shares of the Independent Minority Shareholders that are cast either in person or by proxy at the Court Meeting; and (ii) the number of votes cast against the resolution at the Court Meeting is not more than 10% of all the HIL Shares held by all of the Independent Minority Shareholders. Based on 691,732,472 HIL Shares held by the Independent Minority Shareholders as at the date of this document, 10% of such HIL Shares amounted to 69,173,247 HIL Shares.

Immediately following the Court Meeting, the Extraordinary General Meeting will be held for the purpose of considering and, if thought fit, passing a special resolution to approve and give effect to the Scheme.

In addition to the fact that the Controlling Parties will not be entitled to attend the Court Meeting as they are not parties to the Scheme, the aggregate of 2,070,243,859 HIL Shares representing approximately 73.48% of the issued capital of HIL beneficially owned by them will also not be represented or voted at the Extraordinary General Meeting. Moreover, the Excluded Parties, who, as at the date of this document, are collectively beneficially interested in 55,351,064 HIL Shares representing approximately 1.97% of the issued share capital of HIL, and their nominees in whose names some of the HIL Shares beneficially owned by them are registered, for the reasons already stated above, will not attend and vote at the Meetings in person or by proxy in their capacity as Minority Shareholders although, in the case of those who are HIL Directors, they may attend the Meetings as HIL Directors.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

Whether or not you are able to attend the Meetings in person, you are strongly urged to complete and sign the enclosed pink form of proxy in respect of the Court Meeting and the white form of proxy in respect of the Extraordinary General Meeting in accordance with the instructions respectively printed thereon and to lodge them with the share registrar of HIL, Standard Registrars Limited, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong as soon as possible, but in any case not later than the following respective times. In the case of the pink form of proxy for use at the Court Meeting, you are requested to lodge this form of proxy not later than 11:00 a.m. on Tuesday, 31st December, 2002, but if it is not so lodged, it may be handed to the chairman of the Court Meeting at the Court Meeting. In order to be valid, the white form of proxy for use at the Extraordinary General Meeting must be lodged not later than 11:30 a.m. on the same day. Two self-addressed, pre-paid envelopes marked “For Return of Court Meeting Proxy Form — Henderson Investment Limited” and “For Return of EGM Proxy Form — Henderson Investment Limited” respectively are enclosed for your convenience for returning by post (from within Hong Kong only) your completed forms of proxy. The completion and return of a form of proxy for any of the Meetings will not preclude you from attending the relevant Meeting and voting in person if you so wish. In the event that you attend a Meeting after having lodged the form of proxy, that form of proxy will be deemed to have been revoked.

For the purpose of determining the entitlements of Independent Minority Shareholders to attend and vote at the Court Meeting and the Extraordinary General Meeting, the Register will be closed from Tuesday, 31st December, 2002 to Thursday, 2nd January, 2003 (both dates inclusive) and during such period, no transfer of HIL Shares will be effected. In order to qualify to vote at the Court Meeting and the Extraordinary General Meeting, all transfers accompanied by the relevant share certificates must be lodged with the share registrar of HIL, Standard Registrars Limited, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not later than 4:00 p.m. on Monday, 30th December, 2002.

Assuming that the Conditions are fulfilled or, where applicable, waived, the Scheme will become effective on the Effective Date, which is expected to be on Wednesday, 29th January, 2003. Further press announcements will be made giving details of the results of the Meetings and, if all the resolutions are passed at the Meetings, the last day for dealing in the HIL Shares, the Record Time, the result of the hearing of the petition for the sanction of the Scheme by the High Court, the Effective Date and the date of the withdrawal of the listing of the HIL Shares on the Stock Exchange.

SHARE CERTIFICATES, DEALINGS, LISTING, REGISTRATION AND PAYMENT

Your attention is drawn to the sections headed “Share certificates, dealings and listing” and “Registration and payment” in the Explanatory Statement on pages 57 and 58 of this document.

FURTHER INFORMATION

A letter from the Independent Director to the Independent Minority Shareholders as well as a letter from Platinum to the Independent Director are reproduced on pages 18 to 45 of this document. We advise you to read these letters carefully before you take any action in respect of the Proposal.

Henderson Land Development Company Limited

LETTER FROM THE BOARD

In considering what action to take in connection with the Proposal, you should consider your own tax position and, if you are in any doubt, you should consult your professional advisers.

You are also urged to read carefully the Explanatory Statement and all the Appendices to the Explanatory Statement set out on pages 46 to 131 of this document, the Scheme set out on pages 132 to 138 of this document and the notices of the Meetings set out on pages 139 to 142 of this document.

Yours faithfully, For and on behalf of the Board Dr. Lee Shau Kee Chairman and Managing Director

Henderson Land Development Company Limited

LETTER FROM THE INDEPENDENT DIRECTOR

==> picture [217 x 35] intentionally omitted <==

(incorporated in Hong Kong with limited liability)

6th December, 2002

To the Independent Minority Shareholders

Dear Sir or Madam,

Proposed Privatisation of HENDERSON INVESTMENT LIMITED by Henderson Land Development Company Limited by way of a Scheme of Arrangement under Section 166 of the Companies Ordinance

Terms used in this letter have the same meanings as those defined in the document of which this letter forms part.

It was announced on 5th November, 2002 that HLD had requested the HIL Directors to put forward the Proposal to the Minority Shareholders for the purpose of acquiring their interests in HIL at the cancellation price of HK$7.35 per Scheme Share by way of the Scheme. It was further announced on 29th November, 2002 that HLD, having taken into consideration the views of various HIL Shareholders, had decided to increase the Cancellation Price from HK$7.35 per Scheme Share to HK$7.60 per Scheme Share, representing an increase of 3.4%. Details of the Proposal are set out in the section headed “Letter from the Board” on pages 8 to 17 of this document. For the purpose of the Proposal I have been appointed the Independent Director in order to give a recommendation to the Independent Minority Shareholders as to how they should vote on the Scheme. Platinum has been appointed as the independent financial adviser to advise me in connection with the Proposal.

Having taken into account the terms of the Proposal and the opinion of Platinum and, in particular, the factors, reasons and recommendations set out in the letter from Platinum to me which appears on pages 19 to 45 of this document and to which I draw the specific attention of the Independent Minority Shareholders, I consider that the terms of the Proposal are fair and reasonable in so far as the Independent Minority Shareholders are concerned. Accordingly, I recommend the Independent Minority Shareholders to vote in favour of the resolution to approve the Scheme at the Court Meeting. I also recommend the Independent Minority Shareholders to vote in favour of the special resolution to approve and give effect to the Scheme at the Extraordinary General Meeting.

I also draw the attention of the Independent Minority Shareholders to (i) the letter from the Board, (ii) the Explanatory Statement and (iii) the Appendices which form part of the Explanatory Statement, in particular, the property valuations in Appendix II.

Yours faithfully,

Philip Yuen Pak Yiu

Independent Non-executive Director

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

Set out below is the text of the letter from Platinum to the Independent Director prepared for inclusion in this document:

==> picture [162 x 87] intentionally omitted <==

6th December, 2002

The Independent Director Henderson Investment Limited 6th Floor, World-Wide House 19 Des Voeux Road Central Hong Kong

Dear Sir,

PROPOSED PRIVATISATION OF HENDERSON INVESTMENT LIMITED BY HENDERSON LAND DEVELOPMENT COMPANY LIMITED BY WAY OF A SCHEME OF ARRANGEMENT

INTRODUCTION

We refer to our engagement to advise the Independent Director with respect to the proposed privatisation of HIL by way of a scheme of arrangement under Section 166 of the Companies Ordinance. Details of the Scheme are contained in the document to the Minority Shareholders of HIL dated 6th December, 2002 (the “Document”) of which this letter forms part. Unless the context otherwise requires, capitalised terms used in this letter shall have the same meanings as those defined in the Document.

Platinum has been retained as the financial adviser to advise the Independent Director as to whether or not the terms of the Proposal, in particular the Cancellation Price, are fair and reasonable so far as the Independent Minority Shareholders are concerned. Platinum is independent from, and not connected with, HIL, its associates or parties acting in concert with any of them save for the fact that Dr. The Hon. David Li Kwok Po (“Dr. Li”) (an independent non-executive director of Hong Kong and China Gas and Henderson Cyber) is the Chairman and Chief Executive Officer of The Bank of East Asia, Limited (“BEA”), which in turn has an equity interest in Platinum Holdings Company Limited (“Platinum Holdings”), the holding company of Platinum. Dr. Li has no management function in the Platinum Group, defined herein to include Platinum Holdings, its subsidiaries (including Platinum) and associated companies. Furthermore, Dr. Li is acting independently of Hong Kong and China Gas and Henderson Cyber and has no involvement on the board of either HIL or HLD. Dr. Li’s association with Platinum via Platinum Holdings and BEA does not present any conflict of interest in respect of the role of Platinum insofar as in its advice to the Independent Director is concerned.

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

In formulating our opinion, we have relied on the information and facts supplied by, the opinions expressed by, and the representations of, the HIL Directors and the management of HIL concerning the HIL Group, the Proposal and the Scheme, including those facts, opinions and representations set out in the Document. Examples of such information include financial information, terms of the Proposal, current business operations, future prospects and valuation reports. We have assumed that all such information is true and accurate in all material respects as at the date hereof. The HIL Directors have confirmed that they take full responsibility for the contents of the Document, other than those relating to the HLD Group apart from the HIL Group, which the directors of HLD have assumed full responsibility.

We have no reason to believe that such information is inaccurate or that any material facts have been omitted or withheld from the information supplied or opinions expressed in the Document. In line with normal practice, we have not, however, conducted a verification process of the information supplied to us, nor have we conducted any independent in-depth investigation into the business and affairs of the HIL Group. The HIL Directors have confirmed that no material facts have been omitted from the information supplied to us. We consider that we have reviewed sufficient information to enable us to reach an informed view and to provide a reasonable basis for our recommendation regarding the Proposal and the Scheme.

INDEPENDENT DIRECTOR

The HIL Board comprises eighteen HIL Directors. Fifteen of them are executive HIL Directors and three are independent non-executive HIL Directors. Apart from Mr. Lau Chi Keung, Mr. Cheung Ping Keung, Donald, Mr. Wong Ho Ming, Augustine and Mr. Sit Pak Wing, all other executive HIL Directors are common directors of HLD and HIL. Out of those executive HIL Directors who are common directors of HLD and HIL, Dr. Lee Shau Kee, Mr. Lee King Yue, Mr. Ho Wing Fun and Mr. Lee Tat Man are interested in HLD Shares. Mr. Lau Chi Keung, Mr. Cheung Ping Keung, Donald, Mr. Wong Ho Ming, Augustine and Mr. Sit Pak Wing are all employees of a wholly-owned subsidiary of HLD. Mr. Lau Chi Keung is also interested in HLD Shares. Hence, all executive HIL Directors are not considered independent to opine on the terms of the Proposal. In respect of the independent non-executive HIL Directors, Sir Po-shing Woo and Mr. Leung Hay Man are common directors of HLD and HIL and hence they are also not considered independent to opine on the terms of the Proposal. As a result, the HIL Board appointed Mr. Philip Yuen Pak Yiu, an independent non-executive HIL Director, to be the only member of the HIL Board to make a recommendation to the Independent Minority Shareholders in connection with the Proposal.

TERMS OF THE PROPOSAL

In summary, the Proposal involves the following principal steps:

(i) all the Scheme Shares held by their holders will be cancelled and in consideration therefor such holders will receive the Cancellation Price of HK$7.60 from HLD for every Scheme Share held; and
(ii) the authorised share capital of HIL will be restored to its original amount and new fully paid HIL Shares equivalent to the number of the Scheme Shares cancelled will be issued to HLD or its nominees so that HIL will become a wholly-owned subsidiary of HLD and the listing of the HIL Shares on the Stock Exchange will be withdrawn.

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

Further details of the terms and conditions of the Proposal are set out in the Explanatory Statement contained in the Document.

The Scheme is subject to a number of Conditions, including the approval by not less than three-fourths in value of the votes (taken by poll) cast by a majority in number of the Independent Minority Shareholders present and voting at the Court Meeting, the dissenting votes against the Scheme at the Court Meeting cast by the Independent Minority Shareholders not exceeding 10% in value of all the HIL Shares held by the Independent Minority Shareholders and the sanction of the Scheme and the confirmation of the reduction of capital involved in the Scheme by the High Court.

PRINCIPAL FACTORS AND REASONS CONSIDERED

In formulating our recommendation relating to the terms of the Proposal, we have taken into consideration the following principal factors and reasons:

Background to, and reasons for, the Proposal

HIL is a holding company. The principal activities of its subsidiaries are property development and investment, investment holding, infrastructure, department store operation, retailing and hotel business, security guard services and information technology development in Hong Kong. One of the subsidiaries of HIL, Henderson Cyber, is listed on the Growth Enterprise Market of the Stock Exchange. Three of the principal associates of HIL, being Hong Kong and China Gas, Hong Kong Ferry and Miramar, are listed on the Main Board of the Stock Exchange. The HIL Directors have confirmed that, upon privatisation of HIL, they do not intend to make any significant changes to the existing businesses or make significant disposals of assets in the near future, other than in the ordinary course of business.

It was announced on 29th November, 2002 (the “Second Announcement Day”) that HLD, having taken into consideration the views of various HIL Shareholders, had decided to increase the Cancellation Price as originally announced on 5th November, 2002 from HK$7.35 per Scheme Share to HK$7.60 per Scheme Share, representing an increase of approximately 3.40%. HLD has stated that it would not further increase the Cancellation Price. Following this announcement, HLD will not be allowed to increase the Cancellation Price, save in wholly exceptional circumstances, as a result of the provisions of Rule 18.3 of the Takeovers Code. HLD and HIL reserve the right to amend the other terms of the Proposal, subject to all applicable provisions of the Takeovers Code.

The board of HLD has stated that it does not intend to dispose, or procure any of the Controlling Parties to dispose, of any of their beneficial interests in HIL or any of the principal associates of the HIL Group following implementation of the Proposal. HIL will, subject to the approval of the Stock Exchange, withdraw the listing of the HIL Shares on the Stock Exchange. However, in the event that the Proposal is not approved or withdrawn or lapses, it is intended that HIL will maintain the listing of the HIL Shares on the Stock Exchange. Both HLD and HIL have also confirmed that no material discussions have commenced, or are taking place, with any third party regarding the disposal of any major assets of the HIL Group.

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

HIL is owned as to approximately 73.48% by HLD and is one of the seven listed companies within the HLD Group. The board of HLD has stated the reasons for the Proposal in the section headed “Background to, and reasons for, the Proposal” in the Explanatory Statement contained in the Document. As a result of the Proposal, an opportunity is available to all of the holders of Scheme Shares to realise their investments in HIL at a premium over the prevailing market price of the HIL Shares. We consider this choice being made available is in the interests of the Independent Minority Shareholders, especially after we have reviewed other aspects of the Proposal which we will discuss in the ensuing sections of this letter.

Historical financial performance and future growth

According to the 2002 Annual Report of HIL, sale of properties and rental income represented approximately 45.7% of its turnover and rental income alone accounted for approximately 45.4% of the turnover of the HIL Group for the year ended 30th June, 2002. Meanwhile, our analysis below shows that the share of results of associates contributed to approximately 55.5%, 86.3% and 88.6% of the adjusted profit before taxation for the three years ended 30th June, 2002 respectively. Share of results of Hong Kong and China Gas alone accounted for approximately 47.5%, 72.1% and 74.4% of the adjusted audited consolidated profit before tax of the HIL Group for the three years ended 30th June, 2002 respectively.

An excerpt of the key financials from the audited consolidated results of the HIL Group for the three years ended 30th June, 2002 are set out below:

Year ended 30th June,
Percentage change
2000
2001
2002
2001/2000
2002/2001
HK$ million
HK$ million
HK$ million
%
%
Turnover
817
1,051
1,188
28.6
13.1
Profit from
operations (Note 1)
1,215
366
306
(69.9)
(16.4
Share of results of
associates (Note 2)
1,337
1,481
1,580
10.7
6.7
Profit before taxation
1,823
2,225
2,033
22.1
(8.6
Profit attributable to
the HIL Shareholders
1,608
1,978
1,780
23.0
(10.0
Sources: 2001 and 2002 Annual Reports of HIL
Adjusted profit before
taxation (Note 3)
2,410
1,715
1,783
(28.8)
4.0

)
)
)

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

Notes:

1. Profit from operations

	2000	2001	2002
	HK$ million	HK$ million	HK$ million
Gross profit	611	499	588
Other operating income	10	96	92
Gain on disposal of investments in securities	1,239	101	2
(Deficit) surplus on revaluation of investments
in securities	32	(49)	(64)
Impairment loss on property, plant and
equipment recognised	(345)	—	(60)
Selling and distribution costs	(197)	(110)	(77)
Administrative expenses	(128)	(167)	(175)
Other operating expenses	(7)	(4)	—
Profit from operations	1,215	366	306

For information purposes, the following is a breakdown of the share of results of the associated companies of HIL for the three years ended 30th June, 2002:

	2000	2001	2002
	HK$ million	HK$ million	HK$ million
Hong Kong and China Gas	1,145	1,236	1,326
Hong Kong Ferry	58	89	51
Miramar	64	85	134
Other non-listed associates	70	71	69
Share of results of associates	1,337	1,481	1,580

Source: HIL

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

The adjusted profit before taxation is calculated using the audited consolidated profit before taxation for each of the three years ended 30th June, 2002, adjusted by excluding the gains and losses on disposal of interests in subsidiaries and associates for the respective years as well as the provisions for impairment in values in associates and in a jointly controlled entity for the respective years as follows:

	2000	2001	2002
	HK$ million	HK$ million	HK$ million
Profit before taxation	1,823	2,225	2,033
Add:
Loss on disposal of interests in subsidiaries	—	—	4
Impairment in value of
associates	559	23	—
jointly controlled entity	28	49	—
Less:
Gain on disposal of interests in
subsidiaries	—	(582)	—
associates	—	—	(134)
Impairment in value of associates written back	—	—	(120)
Adjusted profit before taxation	2,410	1,715	1,783

Sources: 2001 and 2002 Annual Reports of HIL

Although turnover of the HIL Group showed an upward trend, the rate of increase slowed from approximately 28.6% to 13.1% during the three-year period under review. The increase in turnover for the year ended 30th June, 2001 from that of 2000 was mainly due to an increase in rental income of approximately HK$63.8 million and the consolidation of infrastructural projects in the accounts of HIL, which were held by an associated company previously and HIL increased its stake in the associated company from approximately 44.06% to 64.06% for the year ended 30th June, 2001 so that the associated company became a subsidiary. Therefore, turnover from the toll roads and bridges increased from zero to approximately HK$161 million for the year ended 30th June, 2001. A full year turnover from the toll roads and bridges was consolidated in the accounts of HIL for the following year ended 30th June, 2002, thus increasing the turnover of HIL by approximately HK$60 million. Increase in rental income accounted for approximately HK$92.6 million of the increase in turnover for the same year. Despite the turnover moving upward from approximately HK$817 million to HK$1,188 million, the profit from operations during this period under review dropped from approximately HK$1,215 million to HK$306 million. For the year ended 30th June, 2000, HIL disposed of the majority of its holding in China Telecom Corporation Limited (currently renamed as China Mobile (Hong Kong) Limited) which resulted in a gain of approximately HK$1,206 million. The stake in China Telecom Corporation Limited was acquired as a strategic investment during the initial public offering of its shares and was disposed of when the market price was attractive. For the year ended 30th June, 2001, HIL also realised a gain of approximately HK$30 million on the disposal of shares of China Telecom Corporation Limited. In the same year, HIL also realised a gain on disposal of B-shares of China-listed companies during that more active period of the B-shares market. There was no major disposal of, or trading in, equity securities for the year ended 30th June, 2002.

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

Impairment loss on property, plant and equipment in 2000 was due to provisions made on properties to reflect the then market valuations. The valuation on properties between the two years ended 30th June, 2001 did not have any material change, thus no provision was made for the year ended 30th June, 2001. For the financial year 2002, impairment in value of the data-center equipment and facilities of Henderson Cyber of approximately HK$60 million was provided for in the accounts.

Although there were contributions from gains on disposal of investment in securities and provisions made on properties plants and equipment, the timing and amounts of such gains and provisions will be uncertain in the future.

Rental income accounted for approximately 45.4% and 68.6% of the turnover and operating profit respectively of the HIL Group for the year ended 30th June, 2002. Rental income has become a steady source of income to the HIL Group. Performance of the local economy has adversely affected the property rental market and local consumer spending. However, according to the 2002 Annual Report of HIL, the major retail shopping properties owned by the HIL Group, which accounted for approximately 62.6% of the investment properties of the HIL Group, were able to maintain an overall occupancy rate of approximately 93% while rental levels generally remained steady.

Regarding the recent new housing policy measures put forward by the Hong Kong Government in mid-November 2002, we concur with the HIL Directors who are of the view that the effect of such measures will initially be on the residential properties sales market. Since the value of the residential properties held for sale in Hong Kong accounted for only approximately 1.55% of the entire property portfolio of the HIL Group as at 31st October, 2002, the HIL Directors expect the immediate impact of the new housing policy measures on the value of the property portfolio of the HIL Group will not be significant.

Hotel and retailing operations represented approximately 17.0% and 7.6% of the turnover and operating profit respectively of the HIL Group for the year ended 30th June, 2002. The downturn of the local and foreign economy resulted in the two Newton Hotels of the HIL Group recording an operating loss of approximately HK$10.59 million for the financial year 2002. Room tariffs were subject to pressure for downward adjustments. The HIL Group currently operates a total of six outlets of Citistore department stores.

Toll fee income accounted for approximately 18.6% and 33.7% of the turnover and operating profit respectively of the HIL Group for the year ended 30th June, 2002. The toll bridge and toll road joint venture operations of the HIL Group in the PRC continued to make contributions to the profit of the HIL Group. However, as indicated by the HIL Directors, due to the efforts of the PRC government to enhance the road and bridge infrastructure of the country, there is an increasing number of toll roads and bridges being built. According to the HIL Directors, the toll fee income last year dropped on a year-on-year basis. Based on the above, we consider the expectation of the HIL Directors that the toll projects would face more competition from the nearby toll roads and bridges to be reasonable.

We have discussed with the HIL Directors and we concur with their view that rental property portfolio, investment in infrastructural projects, business in hotel and retailing operations, together with contributions from associated companies, have been contributing

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

steady income to the HIL Group. As mentioned above and further discussed below, the Independent Minority Shareholders should note that the HIL Group has become more dependent on the earnings contribution from its associates and the future earnings growth of HIL will depend much on the contributions from the associated companies.

Income attributable to the share of results of associates has been trending up during this review period, increasing from approximately HK$1,337 million to HK$1,580 million during the three years ended 30th June, 2002. These amounts represented approximately 55.5%, 86.3% and 88.6% of the adjusted profit before taxation for the three years ended 30th June, 2002 respectively. This trend shows an increasing dependence of the HIL Group on the earnings contributions from its associates. In summary, the earnings growth of HIL is becoming more dependent on its associates.

As Hong Kong and China Gas is owned as to approximately 36.42% by HIL and approximately 74.4% of the adjusted audited consolidated profit before taxation of the HIL Group for the year ended 30th June, 2002 was attributable to the share of results from Hong Kong and China Gas, we reviewed the growth of Hong Kong and China Gas in order to form a view on its impact on the growth of HIL. Meanwhile, performances of Miramar and Hong Kong Ferry have improved over the last three years ended respectively 31st March, 2002 and 30th June, 2002, their respective profit contributions represented approximately 6.6% and 2.5% of the profit before taxation of HIL for the year ended 30th June, 2002. We will not elaborate further on the results of these two companies, but will focus on the main profit contributing associate, Hong Kong and China Gas. Set out below is a graph showing the historical turnover and profit performance of Hong Kong and China Gas for the last ten financial years:

10-year turnover and profit of Hong Kong and China Gas

HK$ million

==> picture [405 x 238] intentionally omitted <==

----- Start of picture text -----

8,000
Turnover
7,000
Profit attributable to
6,000 shareholders
5,000
4,000
3,000
2,000
1,000
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
Year ended 31st December
----- End of picture text -----

Sources: 2001 Annual Report of Hong Kong and China Gas

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

Utilities in developed cities are stable businesses as illustrated in the graph above showing the ten-year trend of the turnover and profit attributable to the shareholders of Hong Kong and China Gas. Turnover of Hong Kong and China Gas grew approximately 3.1% for the year ended 31st December, 2001 and fell approximately 1.1% for the six-month interim period ended 30th June, 2002. The profit attributable to the shareholders only grew approximately 1.65% for the year ended 31st December, 2001 and approximately 0.15% for the interim period ended 30th June, 2002. Although Hong Kong and China Gas is actively developing China business to expand its market, the time for pay back on such investments and the performance of such investments are both uncertain. According to a press release of Hong Kong and China Gas on 8th November, 2002, the warm weather and the poor economy in Hong Kong for the first nine months of 2002 had a negative impact on gas sales. Hong Kong and China Gas has frozen its tariffs and monthly maintenance charge since January 1998 and has no present plan to adjust gas tariffs.

Looking at the audited consolidated turnover, gross profit and net profit attributable to the HIL Shareholders for the past three years of the HIL Group, the growth of the HIL Group has been on a downward trend and unstable. Based on the historical financials of the past three years, HIL has also become more dependent on its associates, its future growth potential may be directly impacted by the earnings growth of its associates, especially by that of Hong Kong and China Gas as discussed above.

The Proposal can be considered to be an opportunity for the Minority Shareholders to liquidate their investments in HIL for other alternative investments. The swapping of potentially steady growth investments for other investments is especially conducive when the Cancellation Price is at a premium over the market price of the HIL Shares. Although some investors may prefer investments with steady growth, we believe that giving the opportunity to the Minority Shareholders to realise their investments in HIL at a premium over the market price is in the interests of the Independent Minority Shareholders.

Dividend

The following table shows the dividend related statistics of the HIL Group for the last five financial years:

				Average
				daily closing
				price of the
	Dividend	Earnings	Dividend	HIL Share for
For the year ended	per	per	pay-out	the year	Dividend
30th June,	HIL Share	HIL Share	ratio	then ended	yield
	HK$	HK$	%	HK$	%
1998	0.24	0.36	66.67	6.51	3.69
1999	0.22	0.39	56.41	4.66	4.72
2000	0.23	0.57	40.35	5.61	4.10
2001	0.23	0.70	32.86	5.46	4.22
2002	0.22	0.63	34.92	6.23	3.53

Sources: 2002 Annual Report of HIL and Bloomberg

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

The dividend per HIL Share has been fairly constant for the last five years ended 30th June, 2002, ranging from HK$0.22 to HK$0.24 per HIL Share. However, the dividend payout ratio has steadily decreased from approximately 66.67% in 1998 to approximately 34.92% in 2002 due to the HIL Directors’ intention to retain cash to further reduce gearing. The dividend yield calculated using the annual average daily closing price of the HIL Shares also show an overall decreasing trend since 1999, with the dividend yield dropping from approximately 4.72% to 3.53% in 2002. Despite the downward trend, an average dividend yield of approximately 4.05%, calculated by applying the dividend yield ratios of the last five financial years, is attractive when compared to the average Hang Seng Index dividend yield for the last five years up to and including the Second Announcement Day of approximately 2.9%. However, there is no assurance that the dividend yield of HIL will remain the same.

We are of the view that the Proposal offering the Cancellation Price, which represents a premium over the market price of the HIL Shares while allowing the Minority Shareholders an opportunity to swap their investments in HIL Shares into other investments, is in the interests of the Minority Shareholders and hence the Independent Minority Shareholders.

HIL Share price performance

The table below sets out the highest and lowest trading prices and the average closing prices of the HIL Shares of each month for the period commencing from 1st May, 2002 and up to and including the Latest Practicable Date:

			Monthly
	Closing	price	average daily
Month	Highest	Lowest	closing price
	HK$	HK$	HK$
2002
May	7.35	6.45	6.85
June	6.95	6.55	6.75
July	6.75	6.20	6.47
August	6.60	5.95	6.18
September	6.35	6.00	6.18
October	6.15	5.80	6.01
November	7.40	5.75	7.22
December (Up to and including the
Latest Practicable Date)	7.55	7.40	7.48

Source: Stock Exchange website (www.hkex.com.hk)

The highest and lowest trading prices of the HIL Shares as from 1st May, 2002 and up to and including the Latest Practicable Date were HK$7.55 (on 2nd December, 2002) and HK$5.75 (on 1st November, 2002) respectively. The Cancellation Price of HK$7.60 per Scheme Share represents a premium of approximately 0.66% and 32.17% respectively over the highest and lowest trading prices of the HIL Shares during the period under review.

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

The table below shows a summary of the premiums based on the Cancellation Price of HK$7.60 per Scheme Share over the various closing prices on the dates and periods listed below:

		Premium
		based on the
		Cancellation
Trading day	Closing price	Price
Latest Practicable Date	7.40	2.70%
Second Announcement Day	7.40	2.70%
4th November, 2002, being the last trading day
prior to the issue of the Announcement
(the “Pre-suspension Day”)	5.95	27.73%
		Premium
		based on the
	Average	Cancellation
Period	closing price	Price
5 trading days up to and including
the Pre-suspension Day	5.87	29.47%
10 trading days up to and including
the Pre-suspension Day	5.95	27.73%
30 trading days up to and including
the Pre-suspension Day	6.03	26.04%
60 trading days up to and including
the Pre-suspension Day	6.12	24.18%
180 trading days up to and including
the Pre-suspension Day	6.39	18.94%

Source: Stock Exchange website (www.hkex.com.hk)

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

The graph below further illustrates the daily closing prices of the HIL Shares quoted on the Stock Exchange from 1st November, 2000 up to and including the Latest Practicable Date:

Price chart of the HIL Shares

==> picture [450 x 309] intentionally omitted <==

----- Start of picture text -----

HK$
8.00 Cancellation Price of HK$7.60 per Scheme Share
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
1-Nov-00 1-Dec-00 1-Jan-01 1-Feb-01 1-Mar-01 1-Apr-01 1-May-01 1-Jun-01 1-Jul-01 1-Aug-01 1-Sep-01 1-Oct-01 1-Nov-01 1-Dec-01 1-Jan-02 1-Feb-02 1-Mar-02 1-Apr-02 1-May-02 1-Jun-02 1-Jul-02 1-Aug-02 1-Sep-02 1-Oct-02 1-Nov-02 Latest Practicable Date
----- End of picture text -----

Source: Bloomberg

As illustrated in the above share price chart, the closing prices of the HIL Shares traded below the Cancellation Price of HK$7.60 per Scheme Share at all times for the two years before the Latest Practicable Date. Following the Announcement, the HIL Shares rose to and close at HK$7.40 on both days of the Second Announcement Day and the Latest Practicable Date. However, there is no assurance that the price of the HIL Shares will remain at the current level if the Scheme is unsuccessful or the Proposal is withdrawn or lapses. We are of the view that, as mentioned in the section headed “Prospect of an alternative offer and further increase of the Cancellation Price” below, due to the substantial stake in HIL held by HLD, it is unlikely that any independent third party will be making an offer, better or worse than the Cancellation Price, for the HIL Shares. Furthermore, in the section headed “Background to, and reasons for, the Proposal” above, we have referred to the fact that HLD has no intention of disposing of or procuring the Controlling Parties to dispose of their HIL Shares to any third party and HLD will not further increase the Cancellation Price. Given that the historical prices of the HIL Shares during the recent years have fallen below the Cancellation Price, which will not be further increased by HLD, and that a competing offer is not likely, an exit price higher than the Cancellation Price may not likely be available to the Minority Shareholders in the near future. Therefore, we consider that the Cancellation Price is reasonable and in the interests of the Independent Minority Shareholders.

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

Price earnings multiple

The graph below illustrates the PER of the HIL Shares between the period of 1st November, 2000 and the Latest Practicable Date, and the PER represented by the Cancellation Price:

PER chart of the HIL Shares

==> picture [442 x 245] intentionally omitted <==

----- Start of picture text -----

PER of approximately 12.06 represented
PER by the Cancellation Price
14.00
12.00
10.00
8.00
6.00
PER of the HIL Shares
4.00
2.00
0
1-Nov-00 1-Dec-00 1-Jan-01 1-Feb-01 1-Mar-01 1-Apr-01 1-May-01 1-Jun-01 1-Jul-01 1-Aug-01 1-Sep-01 1-Oct-01 1-Nov-01 1-Dec-01 1-Jan-02 1-Feb-02 1-Mar-02 1-Apr-02 1-May-02 1-Jun-02 1-Jul-02 1-Aug-02 1-Sep-02 1-Oct-02 1-Nov-02 Latest Practicable Date
----- End of picture text -----

Source: Bloomberg

As can be seen from the above graph, the PER of approximately 12.06 represented by the Cancellation Price and the earnings per HIL Share for the year ended 30th June, 2002 is higher than all PERs of the HIL Shares achieved within the last 2 years before the Latest Practicable Date.

Following the Announcement, the daily closing price of the HIL Shares rose to HK$7.40 on both days of the Second Announcement Day and the Latest Practicable Date. However, there is no assurance that the price of the HIL Shares will remain at the current level if the Proposal is withdrawn or lapses, and hence the PER may return to a lower level.

Based on its historical PER of the HIL Shares, the Scheme provides an opportunity for the Minority Shareholders to realise their investments at a higher PER. Accordingly, we are of the view that the Proposal is in the interests of the Independent Minority Shareholders and the Cancellation Price is fair and reasonable.

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

Liquidity

The following table sets out the trading volume of the HIL Shares for the period commencing from 1st May, 2002 and up to and including the Latest Practicable Date:

			Percentage
		Percentage	of monthly
		of monthly	trading
		trading	volume to
	Monthly	volume to	public float
	trading	total issued	of the HIL
	volume	HIL Shares	Shares
		(Note 1)	(Note 2)
2002
May	45,351,228	1.61%	6.56%
June	28,275,500	1.00%	4.09%
July	28,318,033	1.01%	4.09%
August	20,294,500	0.72%	2.93%
September	24,946,888	0.89%	3.61%
October	26,929,714	0.96%	3.89%
November	120,575,697	4.28%	17.43%
- From 1st November to
Pre-suspension Day	3,846,334	0.14%	0.56%
- From the date of the Announcement
and up to and including the Second
Announcement Day	116,729,363	4.14%	16.87%
December (up to and including
the Latest Practicable Date)	19,779,000	0.70%	2.86%
From the date of the Announcement
and up to and including the
Latest Practicable Date	136,508,363	4.85%	19.73%

Notes:

Based on 2,817,327,395 HIL Shares in issue.
Based on the public float of approximately 691,732,472 HIL Shares.

Source: Stock Exchange website (www.hkex.com.hk)

As shown in the table above, the monthly trading volume of the HIL Shares during the six-month period before the Pre-suspension Day dropped from the highest trading volume recorded in May 2002, of approximately 1.61% of the total issued share capital of HIL, or approximately 6.56% of the HIL Shares held by the public, to approximately 0.96% of the total issued share capital of HIL, or approximately 3.89% of the HIL Shares held by the public in October 2002. From the date of the Announcement and up to and including the Latest Practicable Date, the trading volume of the HIL Shares increased significantly to 136,508,363 HIL Shares, representing approximately 4.85% of the total issued HIL Shares and approximately 19.73% of the HIL Shares held by the public. The monthly trading volume of the HIL Shares in November was approximately 4.28% of the total issued share capital of HIL, or approximately 17.43% of the HIL Shares held by the public. Based on the trading volume of the HIL Shares since May 2002, it is not likely, in our opinion, that the relatively active trading

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

volume of the HIL Shares recorded since the Pre-suspension Day will continue if the Proposal is withdrawn or lapses. Given the relatively low level of liquidity of the HIL Shares before the release of the Announcement, the Independent Minority Shareholders would not be able to sell a significant number of their HIL Shares in the market without depressing the market price of the HIL Shares. The Proposal represents an opportunity for the Minority Shareholders to dispose of their investment in HIL at the Cancellation Price. Therefore, we are of the view that the Scheme is in the interests of the Independent Minority Shareholders as an opportunity is available to them to liquidate their holdings in HIL at a price that is at a premium over the market price, even when the holdings are in sizable blocks.

Net asset value

The Cancellation Price of HK$7.60 per Scheme Share represents a premium of approximately 12.09% to the NTAV per HIL Share of approximately HK$6.78 and a premium of approximately 16.21% to the Adjusted NTAV per HIL Share of approximately HK$6.54 as shown in Section 6 of Appendix I to the Document.

We have assessed the daily closing price of the HIL Shares against the net tangible asset value based on the then latest published audited accounts of HIL (the “Latest NTAV”) per HIL Share from 1st November, 2000 to the Latest Practicable Date. Set out below is a graph showing the premium or discount of the daily closing price of the HIL Shares over/to the Latest NTAV per HIL Share:

Premium/discount of closing price over/to the Latest NTAV per HIL Share

==> picture [433 x 292] intentionally omitted <==

----- Start of picture text -----

25%
20% Premium of approximately 16.21% represented by the Cancellation Price
15%
10%
5%
0%
-5%
-10%
-15%
-20%
-25%
-30%
-35%
1-Nov-00 1-Dec-00 1-Jan-01 1-Feb-01 1-Mar-01 1-Apr-01 1-May-01 1-Jun-01 1-Jul-01 1-Aug-01 1-Sep-01 1-Oct-01 1-Nov-01 1-Dec-01 1-Jan-02 1-Feb-02 1-Mar-02 1-Apr-02 1-May-02 1-Jun-02 1-Jul-02 1-Aug-02 1-Sep-02 1-Oct-02 1-Nov-02
Latest Practicable Date
----- End of picture text -----

Sources: Bloomberg

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

It can be seen that the HIL Shares have traded at discounts to the Latest NTAV per HIL Share for most of the days during the last two years. Before the date of the Announcement, the biggest trading premium over the then Latest NTAV per HIL Share was approximately 7.61% on 17th May, 2002 while the deepest trading discount to the then Latest NTAV per HIL Share was approximately 29.27% on 13th November, 2000. On the Pre-suspension Day, the discount of the closing price to the Latest NTAV per HIL Share was approximately 12.24%. On the Second Announcement Day and the Latest Practicable Date, the premiums of the closing prices over the respective Latest NTAV per HIL Share were both approximately 9.14%. Based on the historical trend, in the absence of the Proposal it is unlikely that the discount to the Latest NTAV per HIL Share will become a premium of approximately 16.21% over the Adjusted NTAV per HIL Share represented by the Cancellation Price. Therefore, we are of the view that the Cancellation Price is reasonable and in the interests of the Independent Minority Shareholders.

Market Value Adjusted NTAV (as defined below)

As book value does not always reflect the market value of the assets held by a company, we believe that it is also necessary to look at the market values of the underlying listed assets held by HIL. We believe that this is a more up-to-date value of HIL to the HIL Shareholders. We have examined the value of each HIL Share in two components: (i) the market value of the interests of HIL in its listed subsidiary, being Henderson Cyber, and associated companies, being Hong Kong and China Gas, Hong Kong Ferry and Miramar; and (ii) the net asset value of the residual net tangible assets held by HIL. For easy reference, we have termed this combined value as the Market Value Adjusted NTAV.

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

We have compared the Market Value Adjusted NTAV per HIL Share as at the Latest Practicable Date with the Cancellation Price of HK$7.60 per Scheme Share. Taking the share prices of the listed subsidiary and associated companies of HIL on the Latest Practicable Date, the Market Value Adjusted NTAV per HIL Share is calculated as follows:

(i) Market value of the listed subsidiary and associated companies held by HIL

	Percentage		Attributable	Equivalent	Equivalent
	shareholding	Market	market value	value per
Company	held by HIL	capitalisation	to HIL	HIL Share
	%	HK$ million	HK$ million		HK$
		(Note 1)			(Note 2)
	(a)	(b)	(c) = (a) x (b)
Henderson Cyber	66.67%	1,300	867		0.31
Miramar	43.67%	3,319	1,449		0.51
Hong Kong and
China Gas	36.42%	58,616	21,348		7.58
Hong Kong Ferry	30.98%	2,049	635		0.22
			Market value
			of the listed
			subsidiary and
			associated
			companies
			per HIL Share		HK$8.62

Notes:

Being the closing price of the subsidiary and each associated company of HIL on the Latest Practicable Date multiplied by the latest published number of shares in issue of the respective subsidiary and associated companies of HIL.
Being column (c) divided by 2,817,327,395 HIL Shares in issue.

Sources: Bloomberg and 2002 Annual Report of HIL

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

(ii) Residual net tangible assets

Adjusted NTAV as shown in Section 6 of Appendix I to the Document Less: Share of interests in listed associates Share of interests in listed subsidiary Residual net tangible assets Residual net tangible assets per HIL Share Sources: 2001 and 2002 Annual Reports of HIL *(iii) Market Value Adjusted NTAV per HIL Share* Market value of the listed subsidiary and associated companies per HIL Share as illustrated in part (i) above Residual net tangible assets per HIL Share Market Value Adjusted NTAV per HIL Share Discount of the Cancellation Price to the Market Value Adjusted NTAV per HIL Share	HK$’000 18,425,439 (12,537,618 (531,467	) )
	5,356,354 HK$1.90 HK$8.62 HK$1.90 HK$10.52 27.76%

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

We have compared the Market Value Adjusted NTAV per HIL Share of each day with the daily closing prices of the HIL Shares for that same day for the last two years from 1st November, 2000 up to and including the Latest Practicable Date. We noted that daily closing price of the HIL Shares was consistently at a discount to the corresponding Market Value Adjusted NTAV per HIL Share during the period under review. The graph below shows such discounts over the last two years from 1st November, 2000 to the Latest Practicable Date:

Discount of daily closing price of the HIL Shares to the daily Market Value Adjusted NTAV per HIL Share

==> picture [439 x 308] intentionally omitted <==

----- Start of picture text -----

Discount (%)
60.00
Maximum discount of approximately
49.71% on 27th November, 2000
50.00
40.00
30.00
Discount represented by the Cancellation Price to the Market
Value Adjusted NTAV per HIL Share of approximately 27.76%
20.00
Minimum discount of approximately
10.00 29.59% on 4th September, 2001
0
1-Nov-00 1-Dec-00 1-Jan-01 1-Feb-01 1-Mar-01 1-Apr-01 1-May-01 1-Jun-01 1-Jul-01 1-Aug-01 1-Sep-01 1-Oct-01 1-Nov-01 1-Dec-01 1-Jan-02 1-Feb-02 1-Mar-02 1-Apr-02 1-May-02 1-Jun-02 1-Jul-02 1-Aug-02 1-Sep-02 1-Oct-02 1-Nov-02 Latest Practicable Date
----- End of picture text -----

Sources: Bloomberg and 2001 and 2002 Annual Report of HIL

We noted that the daily closing price of the HIL Shares was consistently at a discount to the daily Market Value Adjusted NTAV during the period under review. The discounts ranged from the lowest of approximately 29.59% (on 4th September, 2001) to the highest of approximately 49.71 % (on 27th November, 2000), indicating that the market has, at least in the last two years, valued the HIL Shares at discounts from approximately 29.59% to 49.71% to the value of its underlying investments.

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

Meanwhile, the Cancellation Price is at a discount of approximately 27.76% to the Market Value Adjusted NTAV of approximately HK$10.52 per HIL Share on the Latest Practicable Date. This discount is lower than all discounts of the daily closing prices to the corresponding Market Value Adjusted NTAV per HIL Share in the last two years. On the Pre-suspension Day, the closing price of HK$5.95 per HIL Share represented a discount of approximately 44.20% to the then Market Value Adjusted NTAV per HIL Share. On the Second Announcement Day, the closing price of HK$7.40 per HIL Share represented a discount of approximately 31.23% to the then Market Value Adjusted NTAV per HIL Share. On the Latest Practicable Date, the closing price of HK$7.40 per HIL Share represented a discount of approximately 29.66% to the then Market Value Adjusted NTAV per HIL Share. As such, the Cancellation Price values the HIL Shares better than all of the values the market has placed on the HIL Shares during the last two years before the Latest Practicable Date. Accordingly, notwithstanding that the discount represented by the Cancellation Price to the Market Value Adjusted NTAV is approximately 27.76% per HIL Share, we consider that the level of discount is acceptable.

We have used this Market Value Adjusted NTAV basis to value the HIL Shares because this approach is similar to a “breakup value” approach except without the discount resulting from a mass sell down of assets as in the case of breaking up a company. We consider using the discounted cash flow approach inappropriate as it involves assumptions which are uncertain and subjective. For example, one may have to assume that for a start, there is no major change in the market and economic conditions in the markets in which HIL operates. Other assumptions would be the rental rates of the rental properties of HIL remaining at certain levels or growing at certain rates.

However, the Independent Minority Shareholders should note that although the Market Value Adjusted NTAV of approximately HK$10.52 per HIL Share is one of the relevant bases for comparison, whether this value is realisable or not in the market is uncertain. The reason being that if the shares of all the listed subsidiary and associated companies attributable to the HIL shareholdings held by the Independent Minority Shareholders are sold simultaneously in the market, their prices will be depressed and the values we used in the analysis will not be achievable even if all other market factors remain constant. Although HIL can attempt to negotiate for a block sale of its holdings in listed subsidiary and associated companies to benefit from the control premium, such sale is subject to the availability of a willing buyer. This is especially likely in the case of Henderson Cyber where its average monthly trading volume from January 2002 to November 2002 was in the region of 209,000 shares. Its share price has also dropped continuously from HK$0.73 per share on 8th January, 2002 to HK$0.26 per share on the Latest Practicable Date. Another consideration that the Market Value Adjusted NTAV per HIL Share of approximately HK$10.52 may be uncertain is that Hong Kong and China Gas, Hong Kong Ferry and Miramar are all listed companies and their share prices fluctuate and are affected by market and other economic factors or their respective intrinsic factors. In particular, the share price of Hong Kong and China Gas stood at an average PER range of between approximately 14.3 and 21.0 for the past three years up to the Latest Practicable Date while the other two Hong Kong power utility companies had ranges of approximately 8.3 to 15.1 and approximately 8.8 to 12.3 respectively for the same period. Despite Hong Kong and China Gas having a unique advantage in terms of its market position given that it has a dominant market share of gas supplying service in Hong Kong, the recent public pressure on utility companies to lower their rates may have an impact on its share price. Lastly, the realisation of all of the properties held by the HIL Group would take considerable time and the total amount realised would depend on the state of the property market which has been depressed in recent years.

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

Comparable Companies

To help evaluate the fairness and reasonableness of the premium or discount represented by the Cancellation Price to the underlying assets of HIL, we have made comparisons with comparable companies. Since HIL is one of the constituent stocks of the Hang Seng Property Index, we have identified the other eight constituent stocks (Note 9) in the Hang Seng Property Index as comparable companies (the “Comparable Companies”). The principal activities of these companies include property investment and development. We have further reviewed the 33 Hang Seng Index constituent stocks (other than the nine Hang Seng Property Index constituent companies) and reviewed all of the non-bank companies in order to identify comparable companies. From our review, we have chosen and included into our group of Comparable Companies all the companies that hold two or more listed subsidiaries and/or associated companies. With this criterion, we have identified and included The Wharf (Holdings) Limited, New World Development Company Limited, Hutchison Whampoa Limited and Swire Pacific Limited “A” in our group of Comparable Companies. The Comparable Companies have a market capitalisation of between approximately HK$6.36 billion and HK$234.49 billion as at the Latest Practicable Date and a net asset value (based on the latest published consolidated accounts) of between approximately HK$18.16 billion and HK$210.48 billion. Since the market value of each Comparable Company is more than the aggregate market value of its listed subsidiaries and/or associated companies, while this is not the case for HIL, using the Market Value Adjusted NTAV as a basis for comparison would be inappropriate. Furthermore, the underlying residual net asset value other than the listed subsidiaries and/or associates are not publicly available for all the Comparable Companies, we would not be able to obtain a consistent and comparable Market Value Adjusted NTAV for all such companies. Therefore, we consider using the Market Value Adjusted NTAV basis for the Comparable Companies unsuitable and net asset values of the Comparable Companies are used as the bases for comparison instead. The table below illustrates the level of premium or discount of the share price to the net asset value per share of each of the Comparable Companies and HIL:

									Premium/	Premium/
	Closing			Market				Latest	(Discount)
share price		capitalisation					Latest	published	of share
	on the			on the		published		audited		price to
	Latest			Latest	audited net			consolidated	net asset
Practicable			Practicable		asset value			net asset	value per
	Date			Date		per share		value		share
	HK$		HK$ million				HK$	HK$ million		%
Comparable Companies	in the Hang		Seng Property			Index:
Cheung Kong	57.75			133,758			71.87	166,472		(19.65)
								(Note 1)
Hang Lung Group (Note 9)	6.85			9,068			13.72	18,160		(50.07)
								(Note 2)
Hang Lung Properties	7.50			21,670			9.04	26,112		(17.04)
								(Note 2)
Henderson Land	27.30			47,014			33.01	56,852		(17.30)
								(Note 2)
Hysan (Note 9)	6.15			6,363			20.47	21,177		(69.96)
								(Note 1)

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR	LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

Closing share price on the Latest Practicable Date Market capitalisation on the Latest Practicable Date Latest published audited net asset value per share Latest published audited consolidated net asset value Premium/ (Discount) of share price to net asset value per share HK$ HK$ million HK$ HK$ million % Sino Land 2.775 10,725 6.65 25,719 (Note 2) (58.27 Sun Hung Kai Properties 52.50 126,048 53.56 128,598 (Note 2) (1.98 Wheelock 5.70 11,582 13.03 26,485 (Note 3) (56.25 Other Comparable Companies: Hutchison Whampoa 55.00 234,485 49.37 210,481 (Note 1) 11.40 New World Development 4.625 10,020 24.77 53,651 (Note 2) (81.33 Swire Pacific “A” 32.20 30,167 47.00 44,033 (Note 1) (31.49 Wharf (Holdings) 17.20 42,097 22.27 54,513 (Note 1) (22.77 Simple average of all the Comparable Companies (34.56 Simple average of nine Comparable Companies (Note 8) (44.94 HIL 7.40 20,848 6.54 (Note 4) 18,425 (Note 5) 13.15 Cancellation Price: Compared to the Adjusted NTAV per HIL Share 7.60 (Note 6) 6.54 (Note 4) 16.21 Compared to the Market Value Adjusted NTAV per HIL Share 7.60 (Note 6) 10.52 (Note 7) (27.76	) ) ) ) ) ) ) ) )

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

Notes:

Based on the relevant interim report for the six months ended 30th June, 2002.
Based on the relevant Annual Report for the year ended 30th June, 2002.
Based on the relevant Annual Report for the year ended 31st March, 2002.
Adjusted NTAV per HIL Share.
Adjusted NTAV.
Cancellation Price.
Market Value Adjusted NTAV per HIL Share.
The nine Comparable Companies with market capitalisation and net asset value of less than HK$100 billion.
Since 2nd December, 2002, both Hang Lung Group Limited and Hysan Development Company Limited no longer belong to the Hang Seng Property Index. However, due to the fact that these two companies were still the Hang Seng Property Index constituents on the Pre-suspension Day and the Second Announcement Day, for comparison reason, we consider it appropriate to include them as the Comparable Companies.

Sources: Bloomberg, Annual Reports and interim reports of the Comparable Companies

The Comparable Companies traded from a discount to net asset value of approximately 81.33% to a premium over net asset value of approximately 11.40%. The simple average discount of all the Comparable Companies is approximately 34.56%. Since the market capitalisation of HIL as at the Latest Practicable Date and the Adjusted NTAV were approximately HK$20.85 billion and HK$18.43 billion respectively, we consider making comparison with those Comparable Companies of comparable size, that is with market capitalisation and net asset value of less than HK$100 billion, would be more meaningful. As a result, the average discounts of the closing prices to the net asset value per share of the nine Comparable Companies with market capitalisation and net asset value of less than HK$100 billion is approximately 44.94%.

HIL traded at a premium of approximately 13.15% over the Adjusted NTAV per HIL Share on the Latest Practicable Date. Meanwhile, the Cancellation Price offers a premium of approximately 16.21% over the Adjusted NTAV per HIL Share and represents a discount of approximately 27.76% to the Market Value Adjusted NTAV per HIL Share on the Latest Practicable Date. We are of the view that due to the discounts put on property companies by the market, it is unusual to find property companies that are valued at a premium. Although the historical HIL Share prices reflected narrow discounts to the Latest NTAV per HIL Share, we believe that in the absence of the Proposal, the Independent Minority Shareholders will find it difficult to achieve an exit price with a premium of approximately 16.21% over the Adjusted NTAV per HIL Share for the HIL Shares. Furthermore, the discount of approximately 27.76% represented by the Cancellation Price to the Market Value Adjusted NTAV per HIL Share on the Latest Practicable Date is below the average discount of the market price to the net asset value per share of approximately 34.56% of all the Comparable Companies and is also lower than the average discount of approximately 44.94% of the nine Comparable Companies with market capitalisation and net asset value of less than HK$100 billion. We, therefore, consider the Cancellation Price fair and reasonable and is in the interests of the Independent Minority Shareholders.

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

Privatisation precedents

The level of discount to the Market Value Adjusted NTAV per HIL Share as at the Latest Practicable Date represented by the Cancellation Price is approximately 27.76%. In assessing whether this level of discount is fair and reasonable, we have briefly reviewed all of the successful privatisation proposals which have been announced since January 2001 in Hong Kong and have summarised below the key statistics of these precedents:

									Premium/
				Premium over					(Discount) of
				average closing					offer price
				share price				Adjusted	to adjusted
								consolidated	consolidated
	Date of			Last	30		60	net tangible	net tangible
	privatisation	Principal	Offer	trading	trading	trading		asset value	asset value
Company	proposal	activities	price	day	days		days	per share	per share
			(HK$)	(%)	(%)		(%)	(HK$)	(%)
				(Note 1)
Concord Land	February	Property	1.40	66.67	65.62		74.53	6.33	(77.88)
Development	2001	development
Company		in Hong Kong
Limited		and the PRC
Evergo China	August	Property	0.18	55.17	65.39		59.72	0.82	(78.05)
Holdings Limited	2001	investment in
		Hong Kong
		and the PRC
Grand Hotel	August	Management and	1.84	116.47	117.49		108.07	1.84	0
Holdings Limited	2002	ownership of
(A share offer)		hotels and
		service
		apartments
IMC Holdings	January	Ship-owning,	1.60	5.96	23.27		27.44	2.70	(40.74)
Limited	2002	operation and
		trading of
		vessels, ship
		management,
		crew agency
		and
		investment in
		shipyards
Lam Soon Food	March	Manufacturing	2.90	31.82	31.72		33.46	6.11	(52.54)
Industries	2002	and trading of
Limited		food products

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

								Premium/
				Premium over				(Discount) of
				average closing				offer price
				share price			Adjusted	to adjusted
							consolidated	consolidated
	Date of			Last	30	60	net tangible	net tangible
	privatisation	Principal	Offer	trading	trading	trading	asset value	asset value
Company	proposal	activities	price	day	days	days	per share	per share
			(HK$)	(%)	(%)	(%)	(HK$)	(%)
				(Note 1)
Ryoden	August	Property	0.80	53.85	74.04	65.52	1.12	(28.57)
Development	2002	investment
Limited		and
		development
		in Hong Kong
		and the PRC
The Mingly	January	Investing in and	0.70	29.63	55.84	55.30	1.05	(33.33)
Corporation	2001	developing
Limited		principally
		high
		technology
		companies
		and property
		development
Average				51.37	61.91	60.57		(44.44)
Proposal:
Compared to			7.60	27.73	26.04	24.18	6.54	16.21
the Adjusted				(Note 2)
NTAV
Compared to			7.60	27.73	26.04	24.18	10.52	(27.76)
the Market				(Note 2)
Value
Adjusted
NTAV

Sources: Bloomberg and offer documents of the above privatisation companies

Notes:

The last trading day prior to the announcement of the respective privatisation proposals
Pre-suspension Day

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

We note that the Cancellation Price of HK$7.60 per Scheme Share represents a premium of approximately 16.21% over the Adjusted NTAV per HIL Share and a discount to the Market Value Adjusted NTAV per HIL Share as at the Latest Practicable Date of approximately 27.76%. The above precedents have offer prices which are mostly at deeper discounts to the adjusted consolidated net tangible asset value than that represented by the Cancellation Price to the Market Value Adjusted NTAV per HIL Share as at the Latest Practicable Date. The discount of approximately 27.76% is below the average discount of approximately 44.44% of the privatisation precedents. We also note that the premium of the Cancellation Price over the closing price of the HIL Shares on the Pre-suspension Day is within the range of those for the other privatisation precedents. Accordingly, we consider the Cancellation Price is fair and reasonable.

Prospect of an alternative offer and further increase of the Cancellation Price

HIL is approximately 73.48% held by HLD, which has informed us that it did not have any intention to sell its controlling shareholding in HIL. Consequently, the Independent Minority Shareholders should note that, without the support of HLD, it is unlikely that there will be a third party offer or proposal for the Scheme Shares. In addition, it was announced on 29th November, 2002 that HLD would not further increase the Cancellation Price. Following this announcement, HLD will not be allowed to increase the Cancellation Price of HK$7.60 per Scheme Share, save in wholly exceptional circumstances, as a result of the provisions of Rule 18.3 of the Takeovers Code. Therefore, if the Proposal is withdrawn or lapses, the price of the HIL Shares may return to its historical trading range and trading volume. Therefore, the Proposal is, in our view, an opportunity for the holders of Scheme Shares to liquidate their investments in the HIL Shares at a premium, regardless of the shareholding size to be liquidated. The Proposal and its terms are, therefore, in the interests of the Independent Minority Shareholders.

CONCLUSIONS AND RECOMMENDATION

We have considered the above principal factors and reasons and, in particular, have taken into account the following factors in arriving at our opinion:

the leveling financial performance of the HIL Group for the preceding three financial years;
the Proposal provides a cash exit and an opportunity for all of the holders of Scheme Shares to realise their investments in HIL at a premium over the closing prices of the HIL Shares over the two-year period before the Latest Practicable Date;
the Cancellation Price of HK$7.60 per Scheme Share is at a premium over the trading price of HK$4.68 to HK$7.55 per HIL Share over the two-year period before the Latest Practicable Date;
the Cancellation Price represents a PER of approximately 12.06 and this being higher than all PERs of the HIL Shares achieved over the two-year period before the Latest Practicable Date;

Henderson Land Development Company Limited

LETTER FROM PLATINUM TO THE INDEPENDENT DIRECTOR

the discount represented by the Cancellation Price to the Market Value Adjusted NTAV per HIL Share as at the Latest Practicable Date of approximately 27.76% is below the average discounts to the net assets value of approximately 34.56% represented by the closing prices of the Comparable Companies on the Latest Practicable Date, and is also lower than the average discount of approximately 44.94% of the nine Comparable Companies with market capitalisation and net asset value of less than HK$100 billion;
the discount represented by the Cancellation Price to the Market Value Adjusted NTAV per HIL Share as at the Latest Practicable Date of approximately 27.76% is less than all of the discounts represented by the daily closing prices of HIL over the two-year period before the Latest Practicable Date;
the discount represented by the Cancellation Price to the Market Value Adjusted NTAV per HIL Share as at the Latest Practicable Date of approximately 27.76% is below the average discounts to the net tangible asset value of approximately 44.44% represented by the offer price of other recent Hong Kong privatisation proposals;
the decreasing trend of dividend pay-out ratio of HIL and dividend yield of the HIL Shares;
the low trading volume in the HIL Shares, with monthly trading generally less than 2% of the total issued HIL Shares and 7% of the free float of the HIL Shares from May 2002 to the Pre-suspension Day;
the absence of an alternative offer, which is unlikely to be successful without the approval or support of HLD; and
the Cancellation Price will not be further increased to over HK$7.60 per Scheme Share by HLD.

Having considered the above, we consider the terms of the Proposal, in particular the Cancellation Price, are fair and reasonable so far as the Independent Minority Shareholders are concerned. Accordingly, we recommend the Independent Director to advise the Independent Minority Shareholders to vote in favour of the relevant resolutions, which will be proposed at the Court Meeting and the Extraordinary General Meeting to approve and implement the Scheme.

Yours faithfully, For and on behalf of Platinum Securities Company Limited Jeny Lau Managing Director

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

This Explanatory Statement constitutes the statement required under Section 166A of the Companies Ordinance.

SCHEME OF ARRANGEMENT FOR THE CANCELLATION OF THE SCHEME SHARES AND THE PAYMENT OF THE CANCELLATION PRICE

INTRODUCTION

It was announced on 5th November, 2002 that HLD had requested the HIL Directors to put forward the Proposal to the Minority Shareholders for consideration.

It was further announced on 29th November, 2002 that HLD, having taken into consideration the views of various HIL Shareholders, had decided to increase the Cancellation Price as originally announced on 5th November, 2002 from HK$7.35 per Scheme Share to HK$7.60 per Scheme Share, representing an increase of 3.4%. HLD has stated that it would not further increase the Cancellation Price. Following this announcement, HLD will not be allowed to increase the Cancellation Price, save in wholly exceptional circumstances, as a result of the provisions of Rule 18.3 of the Takeovers Code. HLD and HIL reserve the right to amend the other terms of the Proposal, subject to all applicable provisions of the Takeovers Code.

The purpose of this Explanatory Statement is to explain the terms and the effects of the Proposal, which is to be implemented by the Scheme, and to give to the Minority Shareholders the other relevant information.

A letter from the Board is set out on pages 8 to 17 of this document. A letter from the Independent Director, together with a letter from Platinum to the Independent Director, in connection with the Proposal are set out on pages 18 to 45 of this document. The terms of the Scheme are set out on pages 132 to 138 of this document.

SUMMARY OF THE PROPOSAL

It is proposed that, subject to the Conditions being fulfilled or, if applicable, waived, the Proposal will be implemented by way of the Scheme, which will involve a reduction in the authorised and issued share capital of HIL by the cancellation and extinguishment of all of the Scheme Shares. Forthwith upon such reduction of capital taking effect, the authorised share capital of HIL will be increased to its former amount of HK$600,000,000 by the creation of such number of new HIL Shares as is equal to the number of the Scheme Shares cancelled. The credit which will arise in HIL’s books of account as a result of the reduction of capital will be applied in paying up in full at par the new HIL Shares so created, which will be allotted and issued, credited as fully paid, to HLD or as HLD may direct. Accordingly, HIL will become a wholly owned subsidiary of HLD. The Scheme also provides that, in consideration of the cancellation and extinguishment of the Scheme Shares, all of the holders of Scheme Shares whose names must appear on the Register at the Record Time will be entitled to receive the Cancellation Price, which is HK$7.60 for each Scheme Share held.

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

As at the Latest Practicable Date, there were no outstanding options, warrants or convertible securities issued by HIL. On the bases of the Cancellation Price and of a total of 2,817,327,395 HIL Shares outstanding as at the Latest Practicable Date, the entire issued share capital of HIL is valued at about HK$21,412 million under the Proposal. The amount of cash required for the payment of the Cancellation Price is about HK$5,678 million. HLD has stated that it intended to finance the payment of the Cancellation Price from bank borrowings. HLD has, among others, two syndicated loan facilities of HK$5,500,000,000 and HK$1,000,000,000 and their respective agents are BNP Paribas Hong Kong Branch and Wing Lung Bank Limited. The payment of interest on, and repayment of or security for, any loan facilities will not depend to any significant extent on the business of HIL. HSBC is satisfied that sufficient financial resources are available to HLD for the implementation of the Proposal.

CONDITIONS OF THE PROPOSAL

The Proposal will become effective and binding on HIL and all of the holders of Scheme Shares subject to the fulfillment or waiver, as applicable, of the following conditions:

(a) the approval of the Scheme by a majority in number of the Independent Minority Shareholders present and voting either in person or by proxy at the Court Meeting representing not less than three-fourths in value of the HIL Shares that are voted either in person or by proxy by the Independent Minority Shareholders at the Court Meeting, provided that the Scheme is not disapproved by the Independent Minority Shareholders at the Court Meeting holding more than 10% in value of all of the HIL Shares held by the Independent Minority Shareholders;
(b) the passing of a special resolution to approve and give effect to the Scheme (including the cancellation of the Scheme Shares and the reduction of the authorised and issued share capital of HIL) by not less than three-fourths in value of the votes cast by the HIL Shareholders present and voting in person or by proxy at the Extraordinary General Meeting;
(c) the sanction of the Scheme (with or without modifications) and confirmation of the reduction of capital involved in the Scheme by the High Court;
(d) an office copy of the order of the High Court, together with a minute containing the particulars required by Section 61 of the Companies Ordinance, being registered by the Registrar of Companies in Hong Kong;
(e) the Authorisations having been obtained or made from, with or by (as the case may be) the Relevant Authorities in Hong Kong or other relevant jurisdictions;
(f) all Authorisations remaining in full force and effect without variation, all necessary statutory or regulatory obligations in all relevant jurisdictions having been complied with and no requirement having been imposed by any Relevant Authorities which is

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

not expressly provided for, or is in addition to requirements expressly provided for, in the relevant laws, rules, regulations or codes in connection with the Proposal or any matters, documents (including circulars) or things relating thereto, in each aforesaid case up to and at the time when the Scheme becomes effective; and

(g) all bank and other necessary consents which may be required under any existing contractual obligations of HIL having been obtained.

Condition (a) is the combined effect of Section 166 of the Companies Ordinance and Rule 2.10 of the Takeovers Code. In so far as the statutory requirement for the sanction of the Scheme by the High Court is concerned, a resolution for the approval of the Scheme will be deemed to have been passed if a majority in number representing three-fourths in value of the HIL Shares held by the Minority Shareholders present and voting either in person or by proxy at the Court Meeting vote in favour of the Scheme. Under Rule 2.10 of the Takeovers Code, however, such a resolution will only be considered to have been passed if (i) the Scheme is approved by at least 75% of the votes attaching to the HIL Shares of the Independent Minority Shareholders that are cast either in person or by proxy at the Court Meeting; and (ii) the number of votes cast against the resolution at the Court Meeting is not more than 10% of all the HIL Shares held by all of the Independent Minority Shareholders. Based on 691,732,472 HIL Shares held by the Independent Minority Shareholders as at the date of this document, 10% of such HIL Shares amounted to 69,173,247 HIL Shares.

Assuming that all of the Conditions are fulfilled or, where applicable, waived, the Scheme will become effective on the Effective Date, which is expected to be Wednesday, 29th January, 2003. Further press announcements will be made giving details of the results of the Meetings and, if the resolutions are passed at the Meetings, the last day for dealing in the HIL Shares, the Record Time, the result of the hearing of the petition for the sanction of the Scheme by the High Court, the Effective Date and the date of the withdrawal of the listing of the HIL Shares on the Stock Exchange.

The Scheme will lapse if it does not become effective on or before 31st March, 2003 or such later date as the High Court may allow and the holders of Scheme Shares will be notified accordingly by press announcements.

FINANCIAL EFFECTS OF THE PROPOSAL

Share Price

The Cancellation Price represents:

(i) a premium of about 27.7% over the closing price of HK$5.95 per HIL Share as quoted on the Stock Exchange on 4th November, 2002, being the last trading day prior to the suspension of trading in the HIL Shares pending the issue of the Announcement;

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

(ii) a premium of about 29.5% over the average closing price of HK$5.87 per HIL Share based on the daily closing prices as quoted on the Stock Exchange over the five trading days up to and including 4th November, 2002;
(iii) a premium of about 26.9% over the average closing price of HK$5.99 per HIL Share based on the daily closing prices as quoted on the Stock Exchange over the 20 trading days up to and including 4th November, 2002;
(iv) a premium of about 24.2% over the average closing price of HK$6.12 per HIL Share based on the daily closing prices as quoted on the Stock Exchange over the 60 trading days up to and including 4th November, 2002; and
(v) a premium of about 2.7% over the closing price of HK$7.40 per HIL Share as quoted on the Stock Exchange as at the Latest Practicable Date.

The Minority Shareholders should note that payment to the HIL Shareholders whose names appear on the Register on 18th December, 2002, of the 11 cents final dividend, which has been recommended by the HIL Board but is pending approval at the forthcoming annual general meeting of HIL to be held on 18th December, 2002, is not dependent on the outcome of the Proposal.

Historical share price information on the HIL Shares is set out in Section 2 of Appendix III to this document.

Net Tangible Assets

The Cancellation Price represents:

(i) a premium of about 12.1% over the NTAV per HIL Share of about HK$6.78; and
(ii) a premium of about 16.2% over the Adjusted NTAV per HIL Share of HK$6.54.

Earnings

Dividend Yield

Based on the Cancellation Price and the dividends for the year ended 30th June, 2002, the dividend yield for the HIL Shares would be about 2.9%.

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

BACKGROUND TO, AND REASONS FOR, THE PROPOSAL

As stated in the Announcement, the board of directors of HLD considers that the Proposal will result in a leaner structure of the HLD Group through the elimination of the listing of HIL, being one of the HLD Group’s listed vehicles. At the same time, HLD’s indirect interests in Hong Kong and China Gas, Hong Kong Ferry, Miramar and Henderson Cyber, all listed subsidiary or associated companies of HIL, will be increased with resulting benefits to the HLD Group.

The HIL Directors have been informed by the board of directors of HLD that the latter took into consideration the following factors in arriving at the Cancellation Price:

over the two years ended 4th November, 2002, being the day immediately preceding the Announcement, the HIL Shares traded within the range of HK$4.68 to HK$7.35 per HIL Share with an average closing price of HK$6.05 per HIL Share;
the Cancellation Price represents a premium of about 12.1% over the NTAV per HIL Share of HK$6.78 and a premium of about 29.5% and 24.2% respectively over the 5-day and 60-day average closing price per HIL Share up to and including 4th November, 2002;
on 4th November, 2002, the shares in Hong Kong and China Gas traded at a historic PER of 19.3, which is at the high end of the historic PER range of 14.3 to 21.0 for the Hong Kong and China Gas shares over the 36 months preceding 4th November, 2002;
the expected returns from other potential investment opportunities for HLD;
the final dividend of HK$0.11 per HIL Share for the year ended 30th June, 2002 already recommended by the HIL Board and that the Minority Shareholders will be entitled to receive such dividend if it is approved at the forthcoming annual general meeting of HIL; and
the views of various HIL Shareholders on the original cancellation price of HK$7.35 per Scheme Share.

The HIL Board have decided to put forward the Proposal to the Minority Shareholders for their consideration as it is their belief that the Proposal provides an opportunity for all of the holders of Scheme Shares to realise their investments in HIL at a premium over the market price of the HIL Shares during the two-year period preceding 29th November, 2002.

Upon the Scheme becoming effective, HIL will become a wholly owned subsidiary of HLD. It is the intention of HLD to maintain the existing businesses of the HIL Group upon the privatisation of HIL.

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

INFORMATION RELATING TO THE HIL GROUP

History

HIL Group Structure

==> picture [417 x 259] intentionally omitted <==

Note:

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

Business

An analysis of the HIL Group’s turnover and operating profit or loss before interest expenses for each of the years ended 30th June, 2001 and 2002 by reference to its activities is set out below:

Sale of properties Rental income Hotel operation Sale of goods Security guard services Toll fee income Information technology services income Others	Year ended 30th June, 2002 2001 Turnover Operating profit/(loss) Turnover Operating profit/(loss) HK$’000 HK$’000 HK$’000 HK$’000 2,967 713 8,825 2,265 539,976 295,267 447,366 276,752 84,696 24,534 97,563 33,339 116,791 8,017 87,128 11,923 73,373 9,219 71,087 12,280 220,992 145,335 160,926 107,730 67,437 (85,310) 28,306 (130,858 82,090 32,933 149,550 2,192 1,188,322 430,708 1,050,751 315,623	Year ended 30th June, 2002 2001 Turnover Operating profit/(loss) Turnover Operating profit/(loss) HK$’000 HK$’000 HK$’000 HK$’000 2,967 713 8,825 2,265 539,976 295,267 447,366 276,752 84,696 24,534 97,563 33,339 116,791 8,017 87,128 11,923 73,373 9,219 71,087 12,280 220,992 145,335 160,926 107,730 67,437 (85,310) 28,306 (130,858 82,090 32,933 149,550 2,192 1,188,322 430,708 1,050,751 315,623	)
		315,623

Property rental

Hotel and retailing operations

In respect of the retailing operations, the HIL Group now operates a total of six outlets of Citistore department stores.

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

Infrastructural projects

Subsidiary and associated companies

Hong Kong and China Gas

Hong Kong Ferry

Hong Kong Ferry is 30.98% owned by the HIL Group. Profits of Hong Kong Ferry for the financial year ended 30th June, 2002 were mainly derived from the pre-sale of the residential

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

units of Metro Harbour View. Subsequent to the successful pre-sale of Phase 1 of Metro Harbour View in late 2001, Phase 2 was launched in April 2002. The accumulated total number of units sold was approximately 1,500. Phases 1 and 2 are expected to be completed by late 2002 and late 2003 respectively.

Miramar

Henderson Cyber

Financial information

A summary of the audited consolidated results of the HIL Group for each of the years ended 30th June, 2001 and 2002 is set out below:

Year ended 30th June, 2002 2001 HK$’000 HK$’000 Turnover 1,188,322 1,050,751 Operating profit 306,025 366,256 Profit before taxation 2,032,651 2,224,809 Profit after taxation but before minority interests 1,782,519 1,989,328 Profit attributable to the HIL Shareholders 1,780,158 1,977,849 Dividends (619,812) (648,492 Earnings per HIL Share HK$0.63 HK$0.70	)

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

Net tangible assets

Dividends

An interim dividend of HK$0.11 per HIL Share was declared and paid by HIL on 24th April, 2002. The HIL Shareholders whose names appear on the Register on 18th December, 2002 will be paid a final dividend of HK$0.11 per HIL Share on 19th December, 2002, subject to the approval of the HIL Shareholders at the annual general meeting of HIL to be held on 18th December, 2002. For the avoidance of doubt, it should be noted that payment of such final dividend is not dependent on the result of the Proposal or the Scheme, which is not expected to become effective on or before 18th December, 2002.

Liquidity and financial resources

As at 30th June, 2002, the gearing ratio of the HIL Group which was calculated on the basis of the total net bank borrowings as a ratio of the HIL Group’s shareholders’ fund amounted to 4.5% (2001: 4.7%).

The total net bank borrowing of the HIL Group, after deducting cash holdings of approximately HK$668 million, amounted to approximately HK$896 million as at 30th June, 2002. Except for a very small portion of the bank borrowings related to a member of the HIL Group, all of the HIL Group’s borrowings were unsecured with the vast majority being obtained on a committed term basis. The maturity profiles of the HIL Group’s bank loans and borrowings outstanding as at the end of the two previous financial years are summarised respectively as follows:

As at 30th June, 2002 2001 (In HK$’000) (In HK$’000) Bank loans and borrowings repayable: Within 1 year 431,189 274,154 After 1 year but within 2 years 996,304 751,421 After 2 years but within 5 years 70,870 858,170 After 5 years 65,275 96,980 Total bank loans and borrowings 1,563,638 1,980,725 Less: cash at bank and in hand (667,601) (1,080,547 Total net bank borrowings 896,037 900,178	As at 30th June, 2002 2001 (In HK$’000) (In HK$’000) Bank loans and borrowings repayable: Within 1 year 431,189 274,154 After 1 year but within 2 years 996,304 751,421 After 2 years but within 5 years 70,870 858,170 After 5 years 65,275 96,980 Total bank loans and borrowings 1,563,638 1,980,725 Less: cash at bank and in hand (667,601) (1,080,547 Total net bank borrowings 896,037 900,178	)
	1,980,725 (1,080,547
	900,178

The interest expense of the HIL Group was recorded at approximately HK$66 million (2001: HK$136 million) for the past financial year and showed a substantial decrease as a

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

result of the low interest rate environment. Bank loans and borrowings of the HIL Group, which are primarily obtained from international banks in Hong Kong with interests mainly based on agreed interest margins over the Hong Kong Interbank Offer Rate, are mainly of floating rate in nature.

As of 30th June, 2002, the shareholders’ fund of the HIL Group amounted to approximately HK$19,959 million (2001: HK$19,250 million), which is similar to that recorded at the end of the previous financial year. The HIL Group is in a strong financial position and possesses a large capital base and its net debt position remains low in comparison. With substantial committed banking facilities in place and continuous cash inflow from a solid base of recurrent income, the HIL Group has adequate financial resources for funding its ongoing operations as well as future expansion.

FUTURE INTENTIONS

HLD does not intend to dispose of or procure any of the Controlling Parties to dispose of any of their beneficial interests in HIL, nor does it intend to discontinue any of the HIL Group’s businesses following the implementation of the Proposal. It is the intention of HLD to maintain the existing businesses of the HIL Group upon implementation of the Proposal.

The HIL Directors have confirmed that, upon the privatisation of HIL, they do not intend to make any significant changes to the existing businesses or make significant disposals of assets or interests in the listed subsidiary or associated companies of HIL in the near future, other than in the ordinary course of business.

Whether or not the Proposal is implemented, the HIL Directors do not have any intention to make any significant changes to the existing businesses, employment of the staff of the HIL Group or any significant redeployment of its fixed assets.

The HIL Directors intend that the listing of the HIL Shares on the Stock Exchange will be withdrawn if the Scheme is implemented and be maintained in the event that the Scheme is not approved or withdrawn or lapses.

INFORMATION RELATING TO THE INTERESTS OF THE CONTROLLING PARTIES, THE EXCLUDED PARTIES AND THE HIL DIRECTORS

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

Dr. Lee Shau Kee, as the Chairman of the board of directors of HLD and its Managing Director, is deemed under the SDI Ordinance to be interested in the HIL Shares beneficially owned by the Controlling Parties. In addition, he is interested personally and, under the SDI Ordinance, taken to be interested through Fu Sang in an aggregate of 40,395,084 HIL Shares, representing approximately 1.43% of the issued capital of HIL as at the date of this document. Fu Sang is controlled by a unit trust in which Dr. Lee Shau Kee is taken to be interested under the SDI Ordinance. Some of the other members of the board of directors of HLD comprising Mr. Ho Wing Fun, Mr. Lee King Yue, Mr. Lee Tat Man, Mr. Leung Sing and Mr. Lo Tak Shing are also interested in an aggregate of 1,563,880 HIL Shares, which amounts to about 0.06% of the issued capital of HIL as at the date of this document. Mr. Ho Wing Fun, Mr. Lee King Yue, Mr. Lee Tat Man, Mr. Leung Sing and Mr. Lo Tak Shing beneficially own 1,100 HIL Shares, 959,028 HIL Shares, 6,666 HIL Shares, 150,000 HIL Shares and 404,375 HIL Shares respectively, representing in aggregate 0.05% of the issued capital of HIL as at the date of this document. In the case of Mr. Lee King Yue, he is also deemed to be interested in 42,711 HIL Shares beneficially owned by his spouse, Madam Yang Hsueh Chin, representing 0.01% of the issued capital of HIL as at the date of this document. In addition, Mr. Fung Pok Wah and Mr. Fung Chun Wah, being the sons of Madam Fung Lee Woon King who is a director of HLD, are interested in 300,000 HIL Shares and 1,751,000 HIL Shares respectively. Mr. Lam Ka Wai and Mr. Lam Ko Yu, being the brothers of Mr. Colin Lam Ko Yin who is also a director of HLD, are interested in 1,137,000 HIL Shares and 941,000 HIL Shares respectively. Mr. Lee Siu Lun, who is the brother of Dr. Lee Shau Kee, is beneficially interested in 4,857,100 HIL Shares. Because they are close relatives of certain directors of HLD, Mr. Fung Pok Wah, Mr. Fung Chun Wah, Mr. Lam Ka Wai, Mr. Lam Ko Yu and Mr. Lee Siu Lun, all of whom are collectively interested in an aggregate of 8,986,100 HIL Shares representing 0.32% of the issued capital of HIL as at the date of this document, are deemed to be acting in concert with HLD under the Takeovers Code. Tako Assets and Thommen, both of which are wholly owned subsidiaries of Hong Kong Ferry which in turn is owned as to 30.98% by HIL and, hence, HLD is indirectly interested, are beneficially interested in a total of 4,406,000 HIL Shares, representing approximately 0.16% of the issued capital of HIL as at the date of this document. In the circumstances, all of these parties, who are defined as “Excluded Parties”, are deemed to be acting in concert with HLD under the Takeovers Code because of their direct or indirect relationship with HLD.

Further information in respect of the interests of the HIL Directors, whether as such directors, Excluded Parties, HIL Shareholders or creditors of HIL or otherwise, and the effect thereon of the Scheme, in so far as it is different from the effect on the like interests of the other holders of Scheme Shares, are set out under Section 3 headed “Disclosure of Interests” in Appendix III to this document.

SHARE CERTIFICATES, DEALINGS AND LISTING

Upon the Scheme becoming effective, all of the Scheme Shares will be cancelled and extinguished, and all the certificates representing the Scheme Shares will, accordingly, cease to have effect as documents or evidence of title.

HIL will apply to the Stock Exchange for the withdrawal of the listing of the HIL Shares on the Stock Exchange immediately following the Effective Date, which is expected to take place on Wednesday, 29th January, 2003. In such an event, the listing of the HIL Shares on the Stock Exchange is expected to be withdrawn on Wednesday, 29th January, 2003.

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

The holders of Scheme Shares will be notified of the exact dates on which the Scheme and the withdrawal of the listing of the HIL Shares on the Stock Exchange become effective by press announcements.

If the Scheme is not approved or withdrawn or lapses, it is intended that the listing of the HIL Shares on the Stock Exchange will be maintained.

REGISTRATION AND PAYMENT

If the Scheme becomes effective, cheques for the Cancellation Price will be sent to the holders of Scheme Shares whose names must appear on the Register at the Record Time. Such cheques will be posted within ten days after the Effective Date.

It is proposed to close the Register immediately after 4:00 p.m. on Friday, 24th January, 2003, or such other date as may be notified to the Minority Shareholders by press announcements, in order to establish entitlements to the Cancellation Price under the Scheme. The Minority Shareholders or their successors in title should ensure that their HIL Shares are registered or lodged for registration in their names or in the names of their nominees before the Register is closed. The share registrar of HIL is Standard Registrars Limited situate at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong.

Assuming that the Scheme becomes effective on 29th January, 2003, cheques for the Cancellation Price are expected to be despatched to the holders of Scheme Shares or persons nominated by them on or before 7th February, 2003. As provided in the Scheme, on or after the day being six calendar months after the posting of such cheques, HLD shall have the right to cancel or countermand payment of any such cheque which has not then been cashed or has been returned uncashed, and shall place all monies represented thereby in a deposit account in HIL’s name with a licensed bank in Hong Kong selected by HIL. HIL shall hold such monies until the expiry of six years from the Effective Date and shall, prior to such date, make payments thereout of the sums, together with interest thereon in accordance with Clause 3(e) of the Scheme, to persons who satisfy HIL that they are respectively entitled thereto and that the cheques of which they are payees have not been cashed. On the expiry of six years from the Effective Date, HLD shall be released from any further obligation to make any payments under the Scheme and HIL shall thereafter transfer to HLD the balance (if any) of the sums then standing to the credit of the deposit account in its name, including accrued interest subject, if applicable, to the deduction of any interest or withholding or other tax or any other deduction required by law and subject to the deduction of any expenses.

In the absence of any specific instructions to the contrary received in writing by the share registrar of HIL, Standard Registrars Limited, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong, cheques will be sent to the persons whose names appear on the Register at the Record Time at their respective addresses or, in the case of joint holders, to the registered address of that joint holder whose name stands first in the Register in respect of the joint holding. All such cheques will be sent at the risk of the persons entitled thereto and neither HLD nor HIL will be liable for any loss or delay in transmission.

OVERSEAS HOLDERS OF SCHEME SHARES

In so far as those holders of Scheme Shares not resident in Hong Kong are concerned, they may be subject to the laws of the jurisdiction in which they reside. Such holders should inform themselves of and observe any applicable legal or regulatory requirements. It is the responsibility of all overseas holders of Scheme Shares to satisfy themselves as to the full

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

observance of the laws of the relevant jurisdiction in connection therewith, including the obtaining of any governmental approval, exchange control or other consents which may be required, or the compliance with other necessary formalities and the payment of any issue, transfer or other taxes due in such jurisdiction.

TAXATION

The holders of Scheme Shares, whether in Hong Kong or in other jurisdictions, are recommended to consult their professional advisers if they are in any doubt as to the taxation implications of the Proposal and, in particular, whether the receipt of the Cancellation Price would make such holders of Scheme Shares liable to taxation in Hong Kong or in other jurisdictions.

MEETINGS

The High Court has directed that the Court Meeting be held for the purpose of considering and, if thought fit, passing a resolution to approve the Scheme (with or without modification). In so far as the sanction of the Scheme by the High Court is concerned, such a resolution will be deemed to have been passed if a majority in number representing three-fourths in value of the HIL Shares held by the Minority Shareholders present and voting either in person or by proxy at the Court Meeting vote in favour of the Scheme. As explained above, however, such a resolution will only be considered to have been passed under the Takeovers Code if (i) the Scheme is approved by at least 75% of the votes attaching to the HIL Shares of the Independent Minority Shareholders that are cast either in person or by proxy at the Court Meeting; and (ii) the number of votes cast against the resolution at the Court Meeting is not more than 10% of all the HIL Shares held by all of the Independent Minority Shareholders. Based on 691,732,472 HIL Shares held by the Independent Minority Shareholders as at the date of this document, 10% of such HIL Shares amounted to 69,173,247 HIL Shares.

As at the date of this document, the Controlling Parties beneficially own an aggregate of 2,070,243,859 HIL Shares, representing about 73.48% of the issued share capital of HIL. Such HIL Shares, by reason of the fact that the Controlling Parties are all indirect wholly owned subsidiaries of HLD, will not form part of the Scheme Shares and, accordingly, will neither be represented nor voted at the Court Meeting to approve the Scheme. Such HIL Shares likewise will neither be represented nor voted at the Extraordinary General Meeting to approve and give effect to the Scheme. In addition, the Excluded Parties, who as at the date of this document are collectively beneficially interested in 55,351,064 HIL Shares representing approximately 1.97% of the issued share capital of HIL, and their nominees in whose names some of the HIL Shares beneficially owned by them are registered will not, for the reasons already explained above, attend and vote at the Meetings in person or by proxy in their capacity as Minority Shareholders although, in the case of those who are HIL Directors, they may attend the Meetings as HIL Directors.

Notices of the Meetings are set out on pages 139 to 142 of this document. The Meetings will be held on Thursday, 2nd January, 2003 at the respective times specified in such notices in the Stork and Bamboo Rooms, Mandarin Oriental, 5 Connaught Road Central, Hong Kong.

Henderson Land Development Company Limited

EXPLANATORY STATEMENT

ACTION TO BE TAKEN BY THE INDEPENDENT MINORITY SHAREHOLDERS

A pink form of proxy for use at the Court Meeting and a white form of proxy for use at the Extraordinary General Meeting are enclosed with this document.

Whether or not an Independent Minority Shareholder is able to attend the Meetings in person, he is strongly urged to complete and sign the enclosed pink form of proxy in respect of the Court Meeting and the white form of proxy in respect of the Extraordinary General Meeting in accordance with the instructions respectively printed thereon and to lodge them with the share registrar of HIL, Standard Registrars Limited, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong as soon as possible, but in any case not later than the following respective times. In the case of the pink form of proxy for use at the Court Meeting, it is requested that this form of proxy be lodged not later than 11:00 a.m. on Tuesday, 31st December, 2002, but if it is not so lodged, it may be handed to the chairman of the Court Meeting at the Court Meeting. In order to be valid, the white form of proxy for use at the Extraordinary General Meeting must be lodged not later than 11:30 a.m. on Tuesday, 31st December, 2002. Two self-addressed, pre-paid envelopes marked “For Return of Court Meeting Proxy Form — Henderson Investment Limited” and “For Return of EGM Proxy Form — Henderson Investment Limited” respectively are enclosed in order to facilitate the return by the Independent Minority Shareholders by post (from within Hong Kong only) of their completed forms of proxy. The completion and return of a form of proxy for any of the Meetings will not preclude an Independent Minority Shareholder from attending the relevant Meeting and voting in person if he so wishes. In the event that an Independent Minority Shareholder who has lodged a form of proxy attends the Meeting, his form of proxy for that Meeting will be deemed to have been revoked.

Assuming that the Conditions are fulfilled or, where applicable, waived, the Scheme will become effective on the Effective Date, which is expected to be on Wednesday, 29th January, 2003. Further press announcements will be made giving details of the results of the Meetings and, if all the resolutions are passed at the Meetings, the last day for dealing in the HIL Shares, the Record Time, the result of the hearing of the petition to sanction the Scheme by the High Court, the Effective Date and the date of the withdrawal of the listing of the HIL Shares on the Stock Exchange.

FURTHER INFORMATION

Further information in relation to the Proposal is set out in the Appendices to this document, all of which form part of this Explanatory Statement.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

1. THREE-YEAR FINANCIAL SUMMARY

Set out below is a summary of the audited consolidated results of the HIL Group for each of the three financial years ended 30th June, 2002:

Year ended 30th June,
2002
2001
2000
HK$’000
HK$’000
HK$’000
Turnover
1,188,322
1,050,751
817,208
Profit from operations
306,025
366,256
1,215,475
Shares of results of associated companies
and jointly controlled company
1,580,147
1,488,874
1,362,309
Profit before taxation
2,032,651
2,224,809
1,822,991
Taxation
(250,132)
(235,481)
(214,409
Profit after taxation
1,782,519
1,989,328
1,608,582
Minority interests
(2,361)
(11,479)
(919
Profit for the year attributable
to the HIL Shareholders
1,780,158
1,977,849
1,607,663
Dividends
(619,812)
(648,492)
(647,985
Earnings per HIL Share (HK$)
0.63
0.70
0.57
Dividend per HIL Share (HK$)
0.22
0.23
0.23

)
)
)

2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE HIL GROUP FOR THE YEAR ENDED 30TH JUNE, 2002

Subject to the adoption of the definitions in this document, the following information has been extracted from the audited consolidated financial statements of the HIL Group for the year ended 30th June, 2002. The page numbers in the auditor’s report below refer to the 2002 annual report of HIL.

TO THE MEMBERS OF HENDERSON INVESTMENT LIMITED

(INCORPORATED IN HONG KONG WITH LIMITED LIABILITY)

We have audited the financial statements on pages 37 to 87 which have been prepared in accordance with accounting principles generally accepted in Hong Kong.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The Companies Ordinance requires the directors to prepare financial statements which give a true and fair view. In preparing financial statements which give a true and fair view it is fundamental that appropriate accounting policies are selected and applied consistently.

It is our responsibility to form an independent opinion, based on our audit, on those statements and to report our opinion to you.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

BASIS OF OPINION

We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong Society of Accountants. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the circumstances of the Company and the Group, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to whether the financial statements are free from material misstatement. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements. We believe that our audit provides a reasonable basis for our opinion.

OPINION

In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group as at 30th June, 2002 and of the profit and cash flows of the Group for the year then ended and have been properly prepared in accordance with the Companies Ordinance.

DELOITTE TOUCHE TOHMATSU

Certified Public Accountants

Hong Kong, 3rd October, 2002

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

Consolidated Income Statement

for the year ended 30th June, 2002

Consolidated Income Statement for the year ended 30th June, 2002	Consolidated Income Statement for the year ended 30th June, 2002	Consolidated Income Statement for the year ended 30th June, 2002	Consolidated Income Statement for the year ended 30th June, 2002
Notes Turnover 4 Direct operating costs Other operating income 6 Gain on disposal of investments in securities Impairment in value of investments in securities recognised Unrealised holding loss on investments in securities Impairment loss on property, plant and equipment recognised Selling and distribution costs Administrative expenses Other operating expenses Profit from operations 7 Finance costs 8 (Loss) gain on disposal of interests in subsidiaries Share of results of associates Share of results of a jointly controlled entity Gain on disposal of interests in associates Impairment in value of associates written back (recognised) 9 Impairment in value of a jointly controlled entity recognised Amortisation of goodwill Goodwill written off Profit before taxation Taxation 12 Profit before minority interests Minority interests Net profit for the year Dividends 13 Earnings per HIL Share 14	2002 HK$’000 1,188,322 (599,921) 588,401 92,139 2,285 (11,002) (52,504) (60,260) (77,412) (175,500) (122) 306,025 (65,559) (4,417) 1,580,147 — 134,455 120,000 — (38,000) — 2,032,651 (250,132) 1,782,519 (2,361) 1,780,158 (619,812) HK$0.63	2001 HK$’000 1,050,751 (552,157	) ) ) ) ) ) ) ) ) ) ) ) )
		498,594 96,140 101,272 (16,953 (31,948 — (109,968 (167,165 (3,716
		366,256 (135,721 582,181 1,480,615 8,259 — (23,122 (49,251 — (4,408
		2,224,809 (235,481
		1,989,328 (11,479
		1,977,849
		(648,492
		HK$0.70

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

Consolidated Balance Sheets

at 30th June, 2002

Consolidated Balance Sheets at 30th June, 2002	Consolidated Balance Sheets at 30th June, 2002	Consolidated Balance Sheets at 30th June, 2002	Consolidated Balance Sheets at 30th June, 2002	Consolidated Balance Sheets at 30th June, 2002
Notes NON-CURRENT ASSETS Investment properties 15 Property, plant and equipment 16 Properties held for development 17 Investments in subsidiaries 18 Interests in associates 19 Investments in securities 20 Instalments receivable Amount due from an investee company 21 CURRENT ASSETS Inventories 22 Investments in securities 20 Completed properties for sale 23 Debtors, deposits and prepayments 24 Instalments receivable Amounts due from subsidiaries Amounts due from associates 43 Amount due from an investee company 21 Pledged bank deposits 38 Bank balances and cash 38 CURRENT LIABILITIES Creditors and accrued expenses 25 Amounts due to subsidiaries Amounts due to associates 43 Amount due to an investee company 43 Taxation Borrowings 26 Obligations under finance leases 27 NET CURRENT ASSETS	The HIL Group 2002 2001 2002 HK$’000 HK$’000 HK$’000 (Restated) 4,215,740 4,272,688 — 2,237,604 2,477,817 — 17,053 19,975 — — — 2,263,258 13,864,189 13,600,217 167,183 904,940 821,036 30 7,224 10,294 5,774 5,670 — — 21,252,420 21,202,027 2,436,245 27,406 36,243 — 216,700 — — 281,588 282,489 1,295 467,593 202,821 261,805 1,428 1,711 256 — — 10,519,951 126,560 126,418 33,775 630 — — 20,205 24,070 — 647,396 1,056,477 214 1,789,506 1,730,229 10,817,296 288,407 288,383 3,609 — — 1,474,801 26,097 80,501 25,857 360 — 360 139,812 133,608 — 430,772 273,150 — 417 1,004 — 885,865 776,646 1,504,627 903,641 953,583 9,312,669 22,156,061 22,155,610 11,748,914		HIL 2001 HK$’000 (Restated — — — 2,266,258 394,180 30 — —	)
	21,252,420	21,202,027	2,660,468
	27,406 216,700 281,588 467,593 1,428 — 126,560 630 20,205 647,396	36,243 — 282,489 202,821 1,711 — 126,418 — 24,070 1,056,477	— — — 3 — 11,104,032 31,312 — — 295
	1,789,506	1,730,229	11,135,642
	288,407 — 26,097 360 139,812 430,772 417	288,383 — 80,501 — 133,608 273,150 1,004	3,357 2,101,171 80,253 — — — —
	885,865	776,646	2,184,781
	903,641	953,583	8,950,861
	22,156,061	22,155,610	11,611,329

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

		The HIL Group	The HIL Group		HIL
		2002	2001	2002	2001
	Notes	HK$’000	HK$’000	HK$’000	HK$’000
			(Restated)		(Restated)
CAPITAL AND RESERVES
Share capital	28	563,466	563,466	563,466	563,466
Reserves	29	19,395,571	18,686,188	11,185,448	11,047,863
		19,959,037	19,249,654	11,748,914	11,611,329
MINORITY INTERESTS	30	905,106	978,352	—	—
NON-CURRENT LIABILITIES
Borrowings	26	1,132,402	1,706,101	—	—
Obligations under finance leases	27	47	470	—	—
Amounts due to fellow
subsidiaries	43	159,469	221,033	—	—
		1,291,918	1,927,604	—	—
		22,156,061	22,155,610	11,748,914	11,611,329

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

Consolidated Statement of Recognised Gains and Losses

for the year ended 30th June, 2002

	2002	2001
	HK$’000	HK$’000
Revaluation decrease on investment properties	(22,621)	(436,044)
Revaluation decrease on other properties	(94,000)	(150,000)
Net losses not recognised in the consolidated
income statement	(116,621)	(586,044)
Net profit for the year	1,780,158	1,977,849
Realisation of investment property revaluation reserve	(282,733)	—
Realisation of other property revaluation reserve	(23,436)	(116,428)
	1,357,368	1,275,377
Prior year adjustment arising from the effects
of changes in accounting policies
— increase in dividend reserve at 1st July, 2001		338,079

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

Consolidated Cash Flow Statement

for the year ended 30th June, 2002

Consolidated Cash Flow Statement for the year ended 30th June, 2002	Consolidated Cash Flow Statement for the year ended 30th June, 2002	Consolidated Cash Flow Statement for the year ended 30th June, 2002	Consolidated Cash Flow Statement for the year ended 30th June, 2002
Notes NET CASH INFLOW FROM OPERATING ACTIVITIES 31 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Interest received Interest paid Interest element of finance lease payments Dividends paid to shareholders Dividends received from associates and investments in securities Dividends paid to minority shareholders NET CASH INFLOW (OUTFLOW) FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE TAXATION Hong Kong Profits Tax paid INVESTING ACTIVITIES Proceeds from disposal of associates Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Payments to acquire investments in securities Proceeds from disposal of investments in securities Payments to acquire interests in associates (Repayment to) advances from associates Advance to an investee company Acquisition of subsidiaries (net of cash and cash equivalents acquired) 32 Proceeds from disposal of a subsidiary (net of cash and cash equivalents disposed) 33 Decrease in pledged bank deposits NET CASH OUTFLOW FROM INVESTING ACTIVITIES NET CASH INFLOW BEFORE FINANCING FINANCING 34 Repayment to fellow subsidiaries Repayment to minority shareholders Repayment of obligations under finance leases Issue of shares to minority shareholders New bank and other loans raised Repayment of bank and other loans NET CASH (OUTFLOW) INFLOW FROM FINANCING	2002 HK$’000 478,650 19,592 (53,179) (226) (648,001) 918,459 (28,879) 207,766 (35,840) 44,254 (37,389) 556 (406,955) 41,283 (130,650) (56,595) (5,940) — 13,293 3,865 (534,278) 116,298 (61,564) (46,728) (1,010) — 600,000 (1,016,879) (526,181)	2001 HK$’000 595,462	) ) ) ) ) ) ) ) ) ) ) ) ) )
		73,936 (140,510 (162 (648,294 733,723 (40,839
		(22,146
		(20,641
		— (168,819 5,927 (727,383 760,077 (153,453 30,185 — 398 — —
		(253,068
		299,607
		(64,282 (3,765 (134 897,546 1,000,000 (1,293,193
		536,172

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

		2002	2001
	Notes	HK$’000	HK$’000
(DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS		(409,883)	835,779
CASH AND CASH EQUIVALENTS AT
BEGINNING OF THE YEAR		1,014,949	179,170
CASH AND CASH EQUIVALENTS AT
END OF THE YEAR		605,066	1,014,949
ANALYSIS OF BALANCES OF CASH AND
CASH EQUIVALENTS
Bank balances and cash		647,396	1,056,477
Bank overdrafts		(42,330)	(41,528)
		605,066	1,014,949

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

Notes to the Financial Statements for the year ended 30th June, 2002

1 GENERAL

HIL is a public limited liability company incorporated in Hong Kong with its HIL Shares listed on the Stock Exchange. Its ultimate holding company is Henderson Development Limited, a private limited liability company incorporated in Hong Kong.

HIL is an investment holding company and the principal activities of its subsidiaries are property development and investment, investment holding, infrastructure, department store operation, security guard services, hotel operation and information technology development.

2 ADOPTION OF STATEMENTS OF STANDARD ACCOUNTING PRACTICE

In the current year, the HIL Group has adopted, for the first time, a number of new and revised Statements of Standard Accounting Practice (“SSAPs”) issued by the Hong Kong Society of Accountants. Adoption of these standards has led to a number of changes in the HIL Group’s accounting policies. The revised accounting policies are set out in note 3.

The adoption of these new and revised standards has resulted in the following changes to the HIL Group’s accounting policies that have affected the amounts reported for the current or prior periods.

(a) Dividends proposed or declared after the balance sheet date

In accordance with SSAP 9 (Revised) “Events after the balance sheet date”, dividends proposed or declared after the balance sheet date are not recognised as a liability at the balance sheet date, but are disclosed in the notes to the financial statements. This change in accounting policy has been applied retrospectively and the effect of this change has been to increase the HIL Group’s and HIL’s net assets at each of 1st July, 2000 and 30th June, 2001 by HK$338,079,000. Comparative information has been restated to reflect this change in accounting policy.

(b) Segment reporting

In the current year, the HIL Group has changed the basis of identification of reportable segments to that required by SSAP 26 “Segment reporting”. Segment disclosures for the year ended 30th June, 2001 have been amended so that they are presented on a consistent basis.

(c) Goodwill

In the current year, the HIL Group has adopted SSAP 30 “Business combinations” and has elected not to restate goodwill previously eliminated against reserves. Accordingly, goodwill arising on acquisitions prior to 1st July, 2001 is held in reserves and will be charged to the income statement at the time of disposal of the relevant subsidiary, associate or jointly controlled entity, or at such time as the goodwill is determined to be impaired.

Goodwill arising on acquisitions after 1st July, 2001 is capitalised and amortised over its estimated useful life. Negative goodwill arising on acquisitions after 1st July, 2001 is presented as a deduction from assets and will be released to income based on an analysis of the circumstances from which the balance resulted.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

3 SIGNIFICANT ACCOUNTING POLICIES

The financial statements have been prepared under the historical cost convention as modified for the revaluation of certain properties and investments in securities and in accordance with accounting principles generally accepted in Hong Kong. The principal accounting policies adopted are as follows:

(a) Basis of consolidation

The consolidated financial statements incorporate the financial statements of HIL and its subsidiaries made up to 30th June each year.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

All significant intercompany transactions and balances within the HIL Group have been eliminated on consolidation.

(b) Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the HIL Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition.

Goodwill arising on acquisitions after 1st July, 2001 is capitalised and amortised on a straight-line basis over its useful economic life. Goodwill arising on the acquisition of an associate or a jointly controlled entity is included within the carrying amount of the associate or jointly controlled entity. Goodwill arising on the acquisition of subsidiaries is presented as a separate intangible asset.

Goodwill arising on acquisitions prior to 1st July, 2001 continues to be held in reserves, and will be charged to the income statement at the time of disposal of the relevant subsidiary, associate or jointly controlled entity, or at such time as the goodwill is determined to be impaired.

On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill previously eliminated against or credited to reserves is included in the determination of the profit or loss on disposal.

(c) Negative goodwill

Negative goodwill represents the excess of the HIL Group’s interest in the fair value of the identifiable assets and liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition over the cost of acquisition.

Negative goodwill arising on acquisitions after 1st July, 2001 is presented as a deduction from assets and will be released to income based on an analysis of the circumstances from which the balance resulted.

Negative goodwill arising on the acquisition of an associate or a jointly controlled entity is deducted from the carrying value of that associate or jointly controlled entity. Negative goodwill arising on the acquisition of subsidiaries is presented as a deduction from intangible assets.

(d) Investments in subsidiaries

Investments in subsidiaries are included in HIL’s balance sheet at cost less any identified impairment loss.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

(e) Interests in associates

The consolidated income statement includes the HIL Group’s share of the post-acquisition results of its associates for the year based on their financial statements made up to 30th June each year or to a date which is not more than six months before the HIL Group’s balance sheet date. In the consolidated balance sheet, interests in associates are stated at the HIL Group’s share of the net assets of the associates plus the premium paid/less any discount on acquisition in so far as it has not already been amortised/released to income, less any identified impairment loss.

When the HIL Group transacts with its associates, unrealised profits and losses are eliminated to the extent of the HIL Group’s interest in the relevant associates, except where unrealised losses provide evidence of an impairment of the asset transferred.

The results of associates are accounted for by HIL on the basis of dividends received and receivable during the year. In HIL’s balance sheet, investments in associates are stated at cost, as reduced by any identified impairment loss.

(f) Investments in securities

Investments in securities are recognised on a trade-date basis and are initially measured at cost.

At subsequent reporting dates, debt securities that the HIL Group has the expressed intention and ability to hold to maturity (held-to-maturity debt securities) are measured at amortised cost, less any identified impairment losses. The annual amortisation of any discount or premium on the acquisition of a held-to-maturity security is aggregated with other investment income receivable over the term of the instrument so that the revenue recognised in each period represents a constant yield on the investment.

Investments other than held-to-maturity debt securities are classified as investment securities and other investments.

Investment securities, which are securities held for an identified long-term strategic purpose, are measured at subsequent reporting dates at cost, as reduced by any impairment loss that is other than temporary.

Other investments are measured at fair value, with unrealised gains and losses included in net profit or loss for the period.

(g) Revenue recognition

(i) Income from the sale of completed properties is recognised upon the execution of a binding sale agreement. Deposits and instalments received on properties sold prior to the date of revenue recognition are included in the balance sheet under forward sales deposits received, if any.
(ii) The fixed portion of rental income under operating leases is recognised on a straight-line basis over the respective lease term. Contingent rent, which is determined based on a factor other than just the passage of time, is recognised when the HIL Group’s entitlement to receive payment has been established in accordance with the terms of the agreements.
(iii) Sale of goods from the retail business are recognised when goods are delivered and title of goods passes to the purchaser.
(iv) Interest income is accrued on a time basis, by reference to the principal outstanding and at the interest rate applicable.
(v) Investment income and dividend income from investments are recognised when the shareholders’ rights to receive payment have been established.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

(vi) Income from hotels and restaurants and management services are recognised when the relevant services are provided.
(vii) Income from security guard services/consultancy service is recognised when services are provided.
(viii) Toll fee income is recognised on a cash receipt basis.

(h) Investment properties

Investment properties are completed properties which are held for their investment potential, any rental income being negotiated at arm’s length.

Investment properties are stated at their open market value which is assessed annually by professional valuers of the HIL Group and at least once every three years by independent professional valuers. Any surplus or deficit arising on the revaluation of investment properties is credited or charged to the investment property revaluation reserve, unless the balance on this reserve is insufficient to cover a deficit, in which case the excess of the deficit over the balance on the investment property revaluation reserve is charged to the income statement. Where a deficit has previously been charged to the income statement and a revaluation surplus subsequently arises, this surplus is credited to the income statement to the extent of the deficit previously charged.

On the disposal of an investment property, the balance on the investment property revaluation reserve attributable to that property is transferred to the income statement.

No depreciation is provided on investment properties except where the unexpired term of the relevant lease is 20 years or less.

(i) Hotel properties

Hotel properties are stated at their open market value which is assessed annually by qualified valuers of the HIL Group and at least once every three years by independent professional qualified valuers. Any surplus or deficit arising on the revaluation of hotel properties is credited or charged to the other property revaluation reserve unless the balance on this reserve is insufficient to cover a deficit, in which case the excess of the deficit over the balance on the other property revaluation reserve is charged to the income statement. Where a deficit has previously been charged to the income statement and a revaluation surplus subsequently arises, this surplus is credited to the income statement to the extent of the deficit previously charged.

On the disposal of a hotel property, the balance on the revaluation reserve attributable to that property is transferred to the income statement.

No depreciation is provided on hotel properties held on leases of more than 20 years. Due to the fact that the hotels are maintained in a continuous state of proper repairs and improvements thereto from time to time, the HIL Directors consider that given the estimated lives of the hotel properties, any depreciation would be insignificant due to their high residual value.

(j) Development properties

Properties held for development are stated at the cost of acquisition to the HIL Group together with any attributable expenses less any identified impairment losses, where appropriate.

(k) Properties held for sale

Properties held for sale are stated at the lower of cost and net realisable value. Cost includes interest, finance charges, professional fees and other direct costs attributable to such properties until they reach a marketable state. Net realisable value is calculated as the estimated selling price less all costs to completion and costs to be incurred in marketing and selling.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

(l) Property, plant and equipment

Property, plant and equipment other than hotel properties are stated at cost less accumulated depreciation and amortisation and accumulated impairment losses.

Depreciation and amortisation are provided to write off the cost of property, plant and equipment other than toll highway operation rights and bridges and hotel properties over their estimated useful lives, using the straight-line method, at the following rates per annum:

Leasehold land Over the term of the lease Buildings Over the shorter of the term of the lease or 50 years Others 10% to 33%

Amortisation of toll highway operation rights and depreciation of bridges are provided for on the basis of a sinking fund calculation whereby annual amortisation and depreciation amounts compounded at 6% per annum will equal the costs of the relevant toll highway operation rights and bridges at the expiry of the relevant operating periods.

The gain or loss arising from the disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in the income statement.

(m) Impairment

At each balance sheet date, the HIL Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is carried at a revalued amount under another accounting standard, in which case the impairment loss is treated as a revaluation decrease under that other accounting standard.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount under another accounting standard, in which case the reversal of the impairment loss is treated as a revaluation increase under that other accounting standard.

(n) Inventories

Inventories, which represent retail and catering inventories, are stated at the lower of cost and net realisable value. Costs is calculated on the weighted average cost method.

(o) Instalments receivable

Instalments receivable represent the principal amounts of proceeds from sale of flats contracted to be received by instalments. The gross amounts repaid by customers include principal and interest calculated at contracted rates on the remaining balance outstanding. The principal amounts receivable within twelve months from the balance sheet date have been included in current assets.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

(p) Leases

A finance lease is a lease that transfers to the lessee substantially all the risks and rewards incidental to ownership of an asset. Title may or may not eventually be transferred.

Finance leases are recognised as assets and liabilities in the balance sheet at amounts equal to the fair value of the leased assets at the inception of the leases or, if lower, at the present value of the minimum lease payments. Leased assets are subject to depreciation the same as other owned depreciable assets unless there is no reasonable certainty that the HIL Group will obtain ownership by the end of the lease term whereby the assets are then depreciated over the shorter of the lease term or their estimated useful lives.

Lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated over the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

An operating lease is a lease other than a finance lease. Payments under an operating lease are recognised as an expense in the income statement on a straight-line basis over the lease term after deducting incentive benefits which are recognised as part of the net consideration agreed for the use of the leased asset, irrespective of their nature or form or the timing of payments.

(q) Development costs

Expenditure on development is charged to the income statement in the year in which it is incurred except where a major project is undertaken and it is reasonably anticipated that the development costs will be recovered through future commercial activity. Such development costs are then deferred and written off over the life of the project from the date of commencement of commercial operation.

(r) Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised.

All other borrowing costs are recognised as an expense in the period in which they are incurred.

(s) Foreign currencies

Transactions in foreign currencies are translated at the rates of exchange ruling on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated at the rates ruling on the balance sheet date. Gains and losses arising on exchange are dealt with in the income statement.

On consolidation, the financial statements of overseas subsidiaries, associates and jointly controlled entities which are denominated in currencies other than Hong Kong dollars are translated at the rates ruling on the balance sheet date. All exchange differences arising on consolidation are dealt with in reserves.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

(t) Taxation

The charge for taxation is based on the results for the year as adjusted for items which are non-assessable or disallowed. Timing differences arise from the recognition for tax purposes of certain items of income and expense in a different accounting period from that in which they are recognised in the financial statements. The tax effect of timing differences, computed using the liability method, is recognised as deferred taxation in the financial statements to the extent that it is probable that a liability or an asset will crystallise in the foreseeable future.

(u) Retirement benefit scheme/mandatory provident fund scheme cost

The pension costs charged in the income statement represent the contributions paid and payable in respect of the current year to the HIL Group’s defined contribution schemes/mandatory provident fund schemes.

4 TURNOVER

Sale of properties Rental income Hotel operation Sale of goods Security guard services Toll fee income Information technology services income Others	The HIL Group 2002 2001 HK$’000 HK$’000 2,967 8,825 539,976 447,366 84,696 97,563 116,791 87,128 73,373 71,087 220,992 160,926 67,437 28,306 82,090 149,550 1,188,322 1,050,751	The HIL Group 2002 2001 HK$’000 HK$’000 2,967 8,825 539,976 447,366 84,696 97,563 116,791 87,128 73,373 71,087 220,992 160,926 67,437 28,306 82,090 149,550 1,188,322 1,050,751
		1,050,751

BUSINESS AND GEOGRAPHICAL SEGMENTS

Business segments

The business upon which the HIL Group reports its primary segment information is as follows:

Property leasing — property rental Hotel operation — hotel operations and management Department store — department store operations and management Infrastructure — infrastructure project investment Others — sale of properties, provision of cleaning and security guard services and provision of information technology services

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

Segment information about these businesses is presented below:

	2002	2002
Property leasing HK$’000 539,976 4,199 544,175 62,509 606,684	Hotel operation Department store Infrastructure HK$’000 HK$’000 HK$’000 84,696 142,212 220,992 735 1,661 532 85,431 143,873 221,524 1,740 — — 87,171 143,873 221,524		Others Eliminations Consolidated HK$’000 HK$’000 HK$’000 200,446 — 1,188,322 60,743 — 67,870 261,189 — 1,256,192 4,524 (68,773) — 265,713 (68,773) 1,256,192
		221,524 —		1,256,192 —
		221,524		1,256,192

Inter-segment sales were charged at prices determined by management with reference to market prices.

Segment results Interest income Gain on disposal of investments in securities Impairment in value of investments in securities recognized Unrealised holding loss on investments in securities Impairment loss on property, plant and equipment recognised Unallocated corporate expenses Profit from operations Finance costs Loss on disposal of interests in subsidiaries Share of results of associates Gain on disposal of interests in associates Impairment in value of associates written back Amortisation of goodwill Profit before taxation Taxation Profit before minority interests Minority interests Net profit for the year	338,897	(10,590)	2,022	145,334	(45,352)	397	430,708 24,269 2,285 (11,002) (52,504) (60,260) (27,471)

							306,025 (65,559) (4,417) 1,580,147 134,455 120,000 (38,000)
							2,032,651 (250,132)
							1,782,519 (2,361)
							1,780,158

Henderson Land Development Company Limited

APPENDIX I

FINANCIAL INFORMATION RELATING TO THE HIL GROUP

BALANCE SHEET Assets Segment assets Investments in associates Amount due from associates Unallocated corporate assets Consolidated total assets Liabilities Segment liabilities Unallocated corporate liabilities Consolidated total liabilities OTHER INFORMATION Capital additions Depreciation and amortisation Amortisation of goodwill Impairment loss on property, plant and equipment recognized Impairment in value of investments in securities recognized Impairment in value of associates written back	2002	2002
	Property leasing Hotel operation Department store Infrastructure Others Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 4,235,213 742,656 58,333 1,331,154 506,995 6,874,351 13,864,189 126,560 2,176,826 23,041,926 85,600 6,061 112,281 21,971 41,860 267,773 1,910,010 2,177,783 — 227 17,198 5,623 14,341 37,389 — (894) (11,644) (36,234) (34,377) (83,149) — — — — — (38,000) — — — — (60,260) (60,260) — — — — — (11,002) — — — — — 120,000
		23,041,926
		267,773 1,910,010
		2,177,783
		37,389 (83,149) (38,000) (60,260) (11,002) 120,000

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

2001

	Property	Hotel	Department
	leasing	operation	store Infrastructure		Others Eliminations			Consolidated
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000		HK$’000
INCOME AND RESULTS
Turnover	447,366	97,563	188,252	160,926	156,644		—	1,050,751
Other operating income	439	—	3,981	—	17,784		—	22,204
External income	447,805	97,563	192,233	160,926	174,428		—	1,072,955
Inter-segment income	67,087	1,500	—	—	2,874	(71,461)		—
Total income	514,892	99,063	192,233	160,926	177,302	(71,461)		1,072,955
Inter-segment sales were charged at prices		determined	by management with reference		to market	prices.
Segment results	344,279	(897)	(13,150)	107,730	(116,115)	(6,224)		315,623
Interest income								73,936
Gain on disposal of
investments in securities								101,272
Impairment in value of
investments in securities
recognized								(16,953)
Unrealised holding loss on
investments in securities								(31,948)
Unallocated corporate
expenses								(75,674)
Profit from operations								366,256
Finance costs								(135,721)
Gain on disposal of interest
in subsidiaries								582,181
Share of results of
associates								1,480,615
Share of results of a jointly
controlled entity								8,259
Impairment in value of
associates recognized								(23,122)
Impairment in value of
jointly controlled entity
recognized								(49,251)
Goodwill written off								(4,408)
Profit before taxation								2,224,809
Taxation								(235,481)
Profit before minority
interests								1,989,328
Minority interests								(11,479)
Net profit for the year								1,977,849

Henderson Land Development Company Limited

APPENDIX I

FINANCIAL INFORMATION RELATING TO THE HIL GROUP

BALANCE SHEET Assets Segment assets Investments in associates Amount due from associates Unallocated corporate assets Consolidated total assets Liabilities Segment liabilities Unallocated corporate liabilities Consolidated total liabilities OTHER INFORMATION Capital additions Depreciation and amortization Goodwill written off Impairment in value of investments in securities recognized Impairment in value of associates recognised Impairment in value of jointly controlled entity recognised	2001	2001
	Property leasing Hotel operation Department store Infrastructure Others Consolidated HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 4,287,320 838,796 55,149 1,364,990 639,577 7,185,832 13,600,217 126,418 2,019,789 22,932,256 83,377 8,385 83,458 14,440 87,993 277,653 2,426,597 2,704,250 — 276 21,755 6,187 140,601 168,819 — (998) (11,982) (24,010) (25,799) (62,789) — — — — (4,408) (4,408) — — — — — (16,953) — — — — — (23,122) — — — — — (49,251)
		22,932,256
		277,653 2,426,597
		2,704,250
		168,819 (62,789) (4,408) (16,953) (23,122) (49,251)

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

Geographical segments

The HIL Group’s sale of properties, property leasing, hotel operation, department store operation, security guard services and information technology services are carried out in Hong Kong. Infrastructure is carried out in other regions of the PRC.

The following table provides an analysis of the HIL Group’s revenue by geographical market, irrespective of the origin of the goods/services:

	2002	2002
Hong Kong HK$’000 961,110 60,570 1,021,680 68,773 1,090,453 299,937	PRC Eliminations Consolidated HK$’000 HK$’000 HK$’000 227,212 — 1,188,322 7,300 — 67,870 234,512 — 1,256,192 — (68,773) — 234,512 (68,773) 1,256,192 130,374 397 430,708
		1,256,192 —
		1,256,192
		430,708

The following is an analysis of the carrying amount of segment assets, and additions to property, plant and equipment and intangible assets, analysed by the geographical area in which the assets are located:

	1,383,039 5,689 2001	23,041,926 37,389

Hong Kong HK$’000 881,116 20,353 901,469 71,461 972,930 223,575	PRC Eliminations Consolidated HK$’000 HK$’000 HK$’000 169,635 — 1,050,751 1,851 — 22,204 171,486 — 1,072,955 — (71,461) — 171,486 (71,461) 1,072,955 98,272 (6,224) 315,623
		1,072,955 —
		1,072,955
		315,623

Carrying	amount of segment assets	21,509,063	1,423,193	—	22,932,256
Additions	to property, plant and equipment	162,529	6,290	—	168,819

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

6 OTHER OPERATING INCOME

Compensation for early termination of tenancy agreements Interest income Dividend income from listed investments Dividend income from unlisted investments Sponsorship fee Sundry income	The HIL Group 2002 2001 HK$’000 HK$’000 187 198 24,269 73,936 28,048 8,932 7,083 — 1,584 1,822 30,968 11,252 92,139 96,140	The HIL Group 2002 2001 HK$’000 HK$’000 187 198 24,269 73,936 28,048 8,932 7,083 — 1,584 1,822 30,968 11,252 92,139 96,140
		96,140

7 PROFIT FROM OPERATIONS

Profit from operations has been arrived at after charging: Allowances for doubtful debts Auditors’ remuneration Cost of inventories recognised as an expense Cost of properties recognised as an expense Amortisation of held to-maturity-securities Depreciation and amortization Owned assets Assets held under finance leases Development costs Loss on disposal of property, plant and equipment Operating lease payments in respect of rented premises Minimum leases payments Contingent rent (Note a) Operating lease payments in respect of telecommunications network facilities Staff costs including HIL Directors’ emoluments and after crediting: Rental from investment properties net of outgoings of HK$111,209,000 (2001: HK$117,770,000) Other rental income less outgoings (Notes b and c)	The HIL Group 2002 2001 HK$’000 HK$’000 178 9,539 2,969 3,119 128,346 82,305 2,145 6,275 3,847 — 82,450 62,262 699 527 17 1,034 7,154 815 85,289 75,856 — 277 85,289 76,133 12,236 — 221,313 197,138 230,627 212,672 60,393 64,080	The HIL Group 2002 2001 HK$’000 HK$’000 178 9,539 2,969 3,119 128,346 82,305 2,145 6,275 3,847 — 82,450 62,262 699 527 17 1,034 7,154 815 85,289 75,856 — 277 85,289 76,133 12,236 — 221,313 197,138 230,627 212,672 60,393 64,080
		76,133 — 197,138 212,672 64,080

Notes:

a. Contingent rent payments were calculated based on the excess of certain percentages of turnover of the relevant operation that occupied the premise/property over the fixed portion of the monthly rentals.
b. Including contingent rents received of HK$66,777,000 (2001: HK$16,200,000).
c. Including rental income of HK$1,894,000 (2001: HK$1,713,000) from jointly controlled assets less expenses of HK$583,000 (2001: HK$599,000).

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

8 FINANCE COSTS

Interest on: Bank loans and overdrafts and other borrowings wholly repayable within five years Finance leases Other borrowings	The HIL Group 2002 2001 HK$’000 HK$’000 57,006 107,975 226 162 8,327 27,584 65,559 135,721	The HIL Group 2002 2001 HK$’000 HK$’000 57,006 107,975 226 162 8,327 27,584 65,559 135,721
		135,721

9 IMPAIRMENT IN VALUE OF ASSOCIATES WRITTEN BACK

The amount represents reversal of an impairment loss recognised in respect of an investment in one of the HIL Group’s associates in prior years. This follows a review of the carrying amount of the said investment at the balance sheet date.

10 HIL DIRECTORS’ EMOLUMENTS

	The HIL Group	The HIL Group
	2002	2001
	HK$’000	HK$’000
HIL Directors’ fees	360	340
Other emoluments	180	—
Total emoluments	540	340

Except for HIL Directors’ fees of HK$60,000 (2001: HK$60,000) and other emoluments of HK$100,000 (2001: Nil), no emoluments were paid to the independent non-executive HIL Directors during the two years ended 30th June, 2002.

The aggregate emoluments of each of the HIL Directors during the relevant periods were within the emolument band of Nil to HK$1,000,000.

There was no arrangement under which an HIL Director had waived or agreed to waive any emoluments during the year.

Certain of the HIL Directors received remuneration from HIL’s intermediate holding company for services provided to the HIL Group headed by the intermediate holding company of which HIL is a member.

No apportionment has been made as the HIL Directors are of the opinion that it is impracticable to apportion this amount between their services to HIL’s intermediate holding company and each of that company’s subsidiaries.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

11 EMPLOYEES’ EMOLUMENTS

The emoluments of the five highest paid individuals in the HIL Group, none of whom is a HIL Director, are as follows:

Basic salaries, allowances and benefits in kind Contributions to retirement benefit schemes Bonus	The HIL Group 2002 2001 HK$’000 HK$’000 5,958 7,861 157 102 535 314 6,650 8,277	The HIL Group 2002 2001 HK$’000 HK$’000 5,958 7,861 157 102 535 314 6,650 8,277
		8,277

Their emoluments are within the following bands:

Bands Nil — HK$1,000,000 HK$1,000,001 — HK$1,500,000 HK$1,500,001 — HK$2,000,000 HK$2,000,001 — HK$2,500,000 TAXATION The charge comprises: Profit for the year Hong Kong PRC Underprovision in prior years Hong Kong Share of tax on results of associates Share of tax on results of jointly controlled entity	Number of employees 2002 2001 1 — 2 3 2 1 — 1 5 5 The HIL Group 2002 2001 HK$’000 HK$’000 30,156 38,786 9,040 9,590 39,196 48,376 2,893 2,744 42,089 51,120 208,043 182,973 — 1,388 250,132 235,481	Number of employees 2002 2001 1 — 2 3 2 1 — 1 5 5 The HIL Group 2002 2001 HK$’000 HK$’000 30,156 38,786 9,040 9,590 39,196 48,376 2,893 2,744 42,089 51,120 208,043 182,973 — 1,388 250,132 235,481
		48,376 2,744
		51,120 182,973 1,388
		235,481

12 TAXATION

Hong Kong Profits Tax is calculated at 16% of the estimated assessable profit for the year. Provision for taxation outside Hong Kong is provided for at the applicable rates of taxation for the year on the estimated assessable profits arising in the relevant foreign jurisdiction during the year.

Details of the unprovided deferred tax are set out in note 36.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

14 EARNINGS PER HIL SHARE

15 INVESTMENT PROPERTIES

13 DIVIDENDS

Special dividend Interim paid, 11 cents (2001: 11 cents) per HIL Share Final proposed, 11 cents (2001: 12 cents) per HIL Share	2002 HK$’000 — 309,906 309,906 619,812	2001 HK$’000 507 309,906 338,079
		648,492

HIL distributed 14,086,384 shares in a subsidiary, Henderson Cyber Limited, as special dividend by way of distribution in specie to its HIL Shareholders on the basis of 1 share in Henderson Cyber Limited for every 200 HIL Shares held as at 11th July, 2000.

The calculation of earnings per HIL Share is based on the net profit for the year of HK$1,780,158,000 (2001: HK$1,977,849,000) and on 2,817,327,395 (2001: 2,817,327,395) HIL Shares in issue during the year. Diluted earnings per HIL Share is not shown as there were no dilutive potential shares in existence during the two years ended 30th June, 2002.

	The HIL Group
	HK$’000
At 1st July, 2001	4,272,688
Revaluation decrease	(56,948)
At 30th June, 2002	4,215,740

Representing:

Long-term leasehold properties situated in Hong Kong Medium-term leasehold properties situated in Hong Kong	The HIL Group 2002 2001 HK$’000 HK$’000 1,030,325 1,048,023 3,185,415 3,224,665 4,215,740 4,272,688	The HIL Group 2002 2001 HK$’000 HK$’000 1,030,325 1,048,023 3,185,415 3,224,665 4,215,740 4,272,688
		4,272,688

Investment properties were revalued on 30th June, 2002 on an open market value basis by Mr. Augustine Wong, MRICS, FHKIS, MCIArb, RPS (GP), a Chartered Valuation Surveyor of Henderson Valuation and Agency Limited, a fellow subsidiary of HIL. The deficit arising on revaluation of investment properties attributable to the HIL Group has been debited to the investment property revaluation reserve.

All the investment properties of the HIL Group are rented out under operating leases.

Investment properties in Hong Kong with a total carrying value of HK$399,440,000 (2001: HK$408,888,000) were co-owned with certain fellow subsidiaries as tenants in common. The carrying values represent the HIL Group’s proportionate share in the valuation of the relevant properties.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

16 PROPERTY, PLANT AND EQUIPMENT

						Leasehold
						improvements,
			Toll			equipment,
		Other land	highway			furniture,
	Hotel	and	operating		Construction	fixtures and
	Properties	buildings	rights	Bridges	in progress	motor vehicles	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
THE HIL GROUP
COST OR VALUATION
At 1st July, 2001	830,000	58,765	789,529	658,262	852	413,859	2,751,267
Additions	—	427	—	168	122	36,672	37,389
Revaluation decrease	(94,000)	—	—	—	—	—	(94,000)
Disposals	—	—	—	—	—	(26,834)	(26,834)
Disposal of subsidiaries	—	(4,384)	—	—	—	(14,420)	(18,804)
Reclassification	—	—	—	(2,813)	—	2,813	—
Price adjustment (Note a)	—	—	—	—	—	(17,647)	(17,647)
	736,000	54,808	789,529	655,617	974	394,443	2,631,371
Comprising:
At cost	—	54,808	789,529	655,617	974	394,443	1,895,371
At valuation
30th June, 2002	736,000	—	—	—	—	—	736,000
	736,000	54,808	789,529	655,617	974	394,443	2,631,371
DEPRECIATION,
AMORTISATION AND
IMPAIRMENT
At 1st July, 2001	—	7,025	45,986	52,408	—	168,031	273,450
Provided for the year	—	1,262	20,301	13,498	—	48,088	83,149
Eliminated on disposals	—	—	—	—	—	(19,124)	(19,124)
Eliminated on disposal of
subsidiaries	—	(570)	—	—	—	(3,398)	(3,968)
Impairment loss (Note b)	—	—	—	—	—	60,260	60,260
Reclassification	—	—	—	(106)	—	106	—
At 30th June, 2002	—	7,717	66,287	65,800	—	253,963	393,767
NET BOOK VALUES
At 30th June, 2002	736,000	47,091	723,242	589,817	974	140,480	2,237,604
At 30th June, 2001	830,000	51,740	743,543	605,854	852	245,828	2,477,817

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

Long-term leasehold properties situated in — Hong Kong — PRC Medium-term leasehold properties situated in — Hong Kong — PRC	Hotel properties 2002 2001 HK$’000 HK$’000 216,000 254,000 — — 520,000 576,000 — — 736,000 830,000	Other land and buildings 2002 2001 HK$’000 HK$’000 1 1 959 1,002 43,077 44,094 3,054 6,643 47,091 51,740	Toll highway operating rights 2002 2001 HK$’000 HK$’000 — — — — — — 723,242 743,543 723,242 743,543	Bridges 2002 2001 HK$’000 HK$’000 — — — — — — 589,817 605,854 589,817 605,854	Construction in progress 2002 2001 HK$’000 HK$’000 — — — — — — 974 852 974 852	Construction in progress 2002 2001 HK$’000 HK$’000 — — — — — — 974 852 974 852
						852

Hotel properties were revalued on 30th June, 2002 on an open market value basis by Mr. Augustine Wong, MRICS, FHKIS, MCIArb, RPS (GP), a Chartered Valuation Surveyor of Henderson Valuation and Agency Limited, a fellow subsidiary of HIL.

The net book value of motor vehicles and equipment includes an amount of HK$1,087,000 (2001: HK$2,196,000) in respect of assets held under finance leases.

The HIL Group’s toll highway operating rights are pledged as securities for certain bank loans.

Notes:

(a) Price adjustment represents the reduction in the original cost of network equipment and facilities acquired in prior years, granted by the manufacturer during the year.
(b) During the year, the operating scale of the information technology services has been down-sized. Based on the HIL Group’s assessment of the recoverable amount of the related assets, the carrying amount of the data centre and network equipment and facilities were written down by HK$60,260,000.

	Furniture
	and
	equipment
	HK$’000
HIL
COST
At 1st July, 2001 and 30th June, 2002	21
DEPRECIATION
At 1st July, 2001 and 30th June, 2002	21
NET BOOK VALUES
At 30th June, 2002 and 30th June, 2001	—

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

17 PROPERTIES HELD FOR DEVELOPMENT

THE HIL GROUP

Included in properties held for development is net interest capitalised of HK$618,000 (2001: HK$618,000).

18 INVESTMENTS IN SUBSIDIARIES

Unlisted shares, at cost INTERESTS IN ASSOCIATES Unlisted Shares, at cost Share of net assets Listed in Hong Kong Share of net assets net of provision Goodwill on acquisition of associates Amortisation Negative goodwill on acquisition of associates Release to income statement Market value of listed investments	The HIL Group 2002 2001 HK$’000 HK$’000 — — 466,329 971,827 466,329 971,827 12,537,618 12,628,390 1,073,167 — (45,000) — 1,028,167 — (174,925) — 7,000 — (167,925) — 13,397,860 12,628,390 13,864,189 13,600,217 23,688,952 20,498,643	HIL 2002 2001 HK$’000 HK$’000 2,263,258 2,266,258 HIL 2002 2001 HK$’000 HK$’000 167,183 394,180 — — 167,183 394,180 — — — — — — — — — — — — — — — — 167,183 394,180 — —	HIL 2002 2001 HK$’000 HK$’000 2,263,258 2,266,258 HIL 2002 2001 HK$’000 HK$’000 167,183 394,180 — — 167,183 394,180 — — — — — — — — — — — — — — — — 167,183 394,180 — —

			394,180
			—
			— —
			—
			— —
			—
			—
			394,180
			—

19 INTERESTS IN ASSOCIATES

The goodwill (negative goodwill) is amortised (released) to the consolidated income statement on a straight-line basis over 20 years.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

20 INVESTMENTS IN SECURITIES

	Held to	maturity	Investment	Investment	Other	Other
	securities		securities		investments		Total
	2002	2001	2002	2001	2002	2001	2002	2001
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
THE HIL GROUP
Equity securities
Listed in Hong Kong	—	—	545,674	528,941	121,314	214,979	666,988	743,920
Unlisted	—	—	50,058	61,060	40,563	16,056	90,621	77,116
	—	—	595,732	590,001	161,877	231,035	757,609	821,036
Debt securities
Listed outside Hong Kong	83,123	—	—	—	—	—	83,123	—
Unlisted	280,908	—	—	—	—	—	280,908	—
	364,031	—	—	—	—	—	364,031	—
Market value of listed
securities	84,267	—	486,140	528,941	121,314	214,979	691,721	743,920
Carrying amount
analysed for reporting
purposes as:
Current	216,700	—	—	—	—	—	216,700	—
Non-current	147,331	—	595,732	590,001	161,877	231,035	904,940	821,036
	364,031	—	595,732	590,001	161,877	231,035	1,121,640	821,036

HIL Equity securities Unlisted Carrying amount analysed for reporting purposes as: Non-current	Other investments 2002 2001 HK$’000 HK$’000 30 30 30 30	Other investments 2002 2001 HK$’000 HK$’000 30 30 30 30
		30

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

24 DEBTORS, DEPOSITS AND PREPAYMENTS

21 AMOUNT DUE FROM AN INVESTEE COMPANY

The amount is repayable as follows: Within one year After one year Less: Amount due within one year shown under current assets	The HIL Group 2002 2001 HK$’000 HK$’000 630 — 5,670 — 6,300 — (630) — 5,670 —	The HIL Group 2002 2001 HK$’000 HK$’000 630 — 5,670 — 6,300 — (630) — 5,670 —
		— —
		—

The amount is unsecured, bears interest at 10% (2001: Nil) per annum and is repayable by instalments. The last instalment is repayable in October 2006.

INVENTORIES

THE HIL GROUP

Inventories of HK$1,131,000 (2001: HK$12,153,000) are carried at net realisable value.

COMPLETED PROPERTIES FOR SALE

THE HIL GROUP

Completed properties for sale with a total carrying value of HK$30,686,000 (2001: HK$30,812,000) were co-owned with certain fellow subsidiaries as tenants in common and the carrying value represents the HIL Group’s proportionate share in the total cost of the relevant properties.

Completed properties for sale of HK$86,501,000 (2001: HK$86,501,000) are carried at net realisable value.

The HIL Group maintains a defined credit policy. Consideration in respect of sold properties are payable by the purchasers pursuant to the terms of the sale and purchase agreements. Monthly rent in respect of leased properties are payable in advance by the tenants. In respect of retailing, most of transaction are being on cash basis. Other trade debtors settle their accounts according to the payment terms as stated in contracts. An ageing analysis of trade debtors is prepared on a regular basis and is closely monitored to minimise any credit risk associated with receivables.

The ageing analysis of trade debtors (net of allowances for bad debts) is as follows:

Under 1 month overdue 1 to 3 months overdue More than 3 months overdue but less than 6 months overdue Over 6 months overdue Prepayments, deposits and other receivable	The HIL Group 2002 2001 HK$’000 $’000 29,284 32,646 31,868 23,536 5,110 6,876 7,451 3,628 73,713 66,686 393,880 136,135 467,593 202,821	The HIL Group 2002 2001 HK$’000 $’000 29,284 32,646 31,868 23,536 5,110 6,876 7,451 3,628 73,713 66,686 393,880 136,135 467,593 202,821
		66,686 136,135
		202,821

Included in deposits is an amount of HK$2,834,000 (2001: HK$2,834,000) in respect of a rental deposit which is expected to be repaid after twelve months.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

25 CREDITORS AND ACCRUED EXPENSES

The ageing analysis of trade payables of the HIL Group included in creditors and accrued expenses by due date is as follows:

Due within 1 month or on demand Due after 1 month but within 3 months Due after 3 months but within 6 months Due after 6 months Rental deposits and other payable Total creditors and accrued expenses	The HIL Group 2002 2001 HK$’000 HK$’000 140,526 118,395 44,240 35,036 4,053 5,322 4,186 26,499 193,005 185,252 95,402 103,131 288,407 288,383	The HIL Group 2002 2001 HK$’000 HK$’000 140,526 118,395 44,240 35,036 4,053 5,322 4,186 26,499 193,005 185,252 95,402 103,131 288,407 288,383
		185,252 103,131
		288,383

26 BORROWINGS

Bank loans Other loans Bank overdrafts Secured Unsecured	The HIL Group 2002 2001 HK$’000 HK$’000 1,494,524 1,911,403 26,320 26,320 42,330 41,528 1,563,174 1,979,251 294,614 411,403 1,268,560 1,567,848 1,563,174 1,979,251	The HIL Group 2002 2001 HK$’000 HK$’000 1,494,524 1,911,403 26,320 26,320 42,330 41,528 1,563,174 1,979,251 294,614 411,403 1,268,560 1,567,848 1,563,174 1,979,251
		1,979,251
		411,403 1,567,848
		1,979,251

The borrowings bear interest at prevailing market rates and are repayable as follows:

Within one year Between one to two years Between two to five years After five years Less: Amounts due within one year and included in current liabilities Amounts due after one year	2002 HK$’000 430,772 996,257 70,870 65,275 1,563,174 (430,772) 1,132,402	2001 HK$’000 273,150 750,951 858,170 96,980
		1,979,251 (273,150
		1,706,101

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

27 OBLIGATIONS UNDER FINANCE LEASES

At the balance sheet date, the total minimum lease payments and the present value of the obligations under financial leases for each of the following periods are:

Not later than 1 year Later than 1 year and not later than 5 years Less: Future finance charges Present value of lease obligations Amount due within one year shown under current liabilities Amount shown under non-current liabilities	The HIL Group Total outstanding minimum lease payments Present 2002 2001 2002 HK$’000 HK$’000 HK$’000 487 1,221 417 51 563 47 538 1,784 464 (74) (310) — 464 1,474 464 (417) 47	value 2001 HK$’000 1,004 470
		1,474 —
		1,474 (1,004
		470

The difference between the total outstanding minimum lease payments and the present value represents the discount implicit in the leases.

The HIL Group enters into finance leasing arrangements for certain of its motor vehicles and equipment. The average term of finance leases entered into is two years.

28 SHARE CAPITAL

Authorised: 3,000,000,000 HIL Shares Issued and fully paid: 2,817,327,395 (2001: 2,817,327,395) HIL Shares	2002 HK$’000 600,000 563,466	2001 HK$’000 600,000
		563,466

There was no movement in the share capital of HIL for the two years ended 30th June, 2002.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

29 RESERVES

RESERVES
	Investment	Other
	property	property		Share
	revaluation	revaluation	Capital	premium	Dividend	Retained
	reserve	reserve	reserve	account	reserve	profits	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
THE HIL GROUP
At 1st July, 2000
As previously reported	3,405,705	793,860	12,909	6,158,568	—	7,350,182	17,721,224
Prior period adjustment
(Note a)	—	—	—	—	338,079	—	338,079
As restated	3,405,705	793,860	12,909	6,158,568	338,079	7,350,182	18,059,303
Final dividend paid	—	—	—	—	(338,079)	—	(338,079)
Deficit on revaluation
Company and subsidiaries	(398,895)	(150,000)	—	—	—	—	(548,895)
Associates	(37,149)	—	—	—	—	—	(37,149)
Net profit for the year	—	—	—	—	—	1,977,849	1,977,849
Realisation of revaluation
reserve	—	(116,428)	—	—	—	—	(116,428)
Special dividend paid	—	—	—	—	—	(507)	(507)
Interim dividend paid	—	—	—	—	—	(309,906)	(309,906)
Final dividend proposed	—	—	—	—	338,079	(338,079)	—
At 1st July, 2001	2,969,661	527,432	12,909	6,158,568	338,079	8,679,539	18,686,188
Final dividend paid	—	—	—	—	(338,079)	—	(338,079)
Surplus (deficit) on revaluation
HIL and subsidiaries	(56,948)	(94,000)	—	—	—	—	(150,948)
Associates	34,327	—	—	—	—	—	34,327
Net profit for the year	—	—	—	—	—	1,780,158	1,780,158
Realisation of revaluation
reserve	(443)	(23,436)	—	—	—	—	(23,879)
Realisation on disposal of
associates	(282,290)	—	—	—	—	—	(282,290)
Interim dividend paid	—	—	—	—	—	(309,906)	(309,906)
Final dividend proposed	—	—	—	—	309,906	(309,906)	—
At 30th June, 2002	2,664,307	409,996	12,909	6,158,568	309,906	9,839,885	19,395,571
HIL
At 1st July, 2000
As previously reported	—	—	3,461	6,158,568	—	4,533,059	10,695,088
Prior period adjustment
(Note a)	—	—	—	—	338,079	—	338,079
As restated	—	—	3,461	6,158,568	338,079	4,533,059	11,033,167
Final dividend paid	—	—	—	—	(338,079)	—	(338,079)
Net profit for the year	—	—	—	—	—	663,188	663,188
Special dividend paid	—	—	—	—	—	(507)	(507)
Interim dividend paid	—	—	—	—	—	(309,906)	(309,906)
Final dividend proposed	—	—	—	—	338,079	(338,079)	—
At 1st July, 2001	—	—	3,461	6,158,568	338,079	4,547,755	11,047,863
Final dividend paid	—	—	—	—	(338,079)	—	(338,079)
Net profit for the year	—	—	—	—	—	785,570	785,570
Interim dividend paid	—	—	—	—	—	(309,906)	(309,906)
Final dividend proposed	—	—	—	—	309,906	(309,906)	—
At 30th June, 2002	—	—	3,461	6,158,568	309,906	4,713,513	11,185,448

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

Included in the above is the HIL Group’s share of post-acquisition reserves of its associates as follows:

	Investment	Other
	property	property		Share
	revaluation	revaluation	Capital	premium	Dividend	Retained
	reserve	reserve	reserve	account	reserve	profits	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
At 1st July, 2000	1,286,086	179,336	—	—	—	2,977,611	4,443,033
Deficit on revaluation	(37,149)	—	—	—	—	—	(37,149)
Realisation of revaluation
reserve	—	(116,428)	—	—	—	—	(116,428)
Net profit for the year	—	—	—	—	—	572,850	572,850
Reclassification (Note c)	—	—	—	—	—	(20,833)	(20,833)
At 1st July, 2001	1,248,937	62,908	—	—	—	3,529,628	4,841,473
Surplus on revaluation	34,327	—	—	—	—	—	34,327
Realisation of revaluation
reserve	(443)	(23,436)	—	—	—	—	(23,879)
Realisation on disposal of
associates	(282,290)	—	—	—	—	28,177	(254,113)
Net profit for the year	—	—	—	—	—	490,867	490,867
At 30th June, 2002	1,000,531	39,472	—	—	—	4,048,672	5,088,675

Included in the above is the HIL Group’s share of post-acquisition profits of its jointly controlled entity as follows:

At 1st July, 2000 Net profit for the year Reclassification (Note c) At 1st July, 2001	— — — —	— — — —	— — — —	— — — —	— — — —	70,902 6,871 (77,773) —	70,902 6,871 (77,773)
							—

Notes:

(a) Proposed dividends have been restated to the dividend reserve as a result of a change in accounting policy. Details of HIL’s new accounting policy adopted are set out in Note 2.
(b) HIL’s reserves available for distribution to HIL Shareholders as at the balance sheet date are represented by its dividend reserve and retained profits amounting to HK$309,906,000 and HK$4,713,513,000 (2001: HK$338,079,000 and HK$4,547,755,000) respectively.
(c) Amounts represented post-acquisition profits of certain associates and a jointly controlled entity transferred to the HIL Group which became subsidiaries of HIL on 1st November, 2000.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

30 MINORITY INTERESTS

THE HIL GROUP

Including amounts due to minority shareholders of HK$186,782,000 (2001: HK$200,208,000).

The minority shareholders have agreed that no repayment will be demanded within the next twelve months from the balance sheet date and are therefore classified as non-current liabilities.

31 RECONCILIATION OF PROFIT BEFORE TAXATION TO NET CASH INFLOW FROM OPERATING ACTIVITIES

Profit before taxation Share of results of associates Share of results of a jointly controlled entity Interest income Interest expenses Dividends from investments in securities Depreciation and amortisation Gain on disposal of investments in securities Impairment in value of investments in securities recognised Unrealised holding loss on investments in securities Impairment loss on property, plant and equipment recognised Loss (gain) on disposal of interests in subsidiaries Gain on disposal of interests in associates Impairment in value of associates (written back) recognised Impairment in value of a jointly controlled entity recognised Amortisation of goodwill Goodwill written off Impairment in value of completed properties for sale recognised Impairment in value of properties held for development recognised Allowance for doubtful debts on instalments receivable Allowance for doubtful debts Allowance for obsolete inventories Loss on disposal of property, plant and equipment Exchange losses Decrease in instalments receivable Decrease (increase) in inventories Decrease in completed properties for sale Increase in properties under development Decrease in debtors, deposits and prepayments Increase in creditors and accrued expenses Decrease in forward sales deposits Net cash inflow from operating activities	2002 HK$’000 2,032,651 (1,580,147) — (24,269) 65,559 (35,131) 83,149 (2,285) 11,002 52,504 60,260 4,417 (134,455) (120,000) — 38,000 — — — — 178 — 7,154 — 3,353 8,621 901 — 841 6,347 — 478,650	2001 HK$’000 2,224,809 (1,480,615) (8,259) (73,936) 135,721 (8,932) 62,789 (101,272) 16,953 31,948 — (582,181) — 23,122 49,251 — 4,408 14,397 336 9,539 — 101 815 1,706 4,726 (19,943) 6,275 (871) 240,676 45,289 (1,390)
		595,462

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

32 ACQUISITION OF SUBSIDIARIES

Net assets acquired: Property, plant and equipment Interests in associates Investments in securities Inventories Debtors, deposits and prepayments Pledged bank deposits Bank balances and cash Creditors and accrued expenses Obligations under finance leases Taxation Borrowings Loan from an HIL Shareholder Carrying value of associates and jointly controlled entity prior to becoming subsidiaries on acquisition Minority interests Net assets Goodwill Satisfied by: Cash consideration paid Analysis of net inflow of cash and cash equivalents in connection with the acquisition of subsidiaries: Cash consideration paid Bank balances and cash acquired Net inflow of cash and cash equivalents in connection with the acquisition of subsidiaries	2002 HK$’000 — — — — — — — — — — — — — — — — — — — — —	2001 HK$’000 1,466,546 16,749 150 4,982 50,440 24,070 65,224 (43,147) (1,410) (3,569) (454,596) (161,533) (344,882) (559,259)
		59,765 5,061
		64,826
		64,826
		(64,826) 65,224
		398

The subsidiaries acquired last year contributed HK$149,243,000 to the HIL Group’s net operating cash flow, paid HK$45,414,000 in respect of the net returns on investments and servicing of finance, paid HK$10,301,000 in respect of taxation, received HK$155,000 for investing activities and paid HK$123,169,000 in respect of financing activities last year.

The subsidiaries acquired last year contributed HK$160,926,000 to the HIL Group’s turnover and HK$53,196,000 to the HIL Group’s profit from operations last year.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

33 DISPOSAL OF SUBSIDIARIES

Net assets disposed of: Property, plant and equipment Property held for development Inventories Debtors, deposits and prepayments Amount due from immediate holding company Bank balances and cash Creditors and accrued expenses Taxation Net assets Loss on disposal Total consideration Satisfied by: Cash consideration Net cash inflow arising on disposal: Cash consideration Bank balances and cash disposed of	2002 HK$’000 14,836 2,922 216 444 151 245 (814) (45) 17,955 (4,417) 13,538 13,538 13,538 (245) 13,293	2001 HK$’000 — — — — — — — —
		— —
		—
		—
		— —
		—

The subsidiary disposed of during the year did not have any significant contribution to the HIL Group’s cash flows or operating results for the year.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

34 ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR

Obligations
under finance
leases
Amounts due
to fellow
subsidiaries
Borrowings
HK$’000
HK$’000
HK$’000
At 1st July, 2000
—
285,315
1,776,320
New bank and other loans raised
—
—
1,000,000
Repayment of bank and other loans
—
—
(1,293,193)
Attributable profits less dividends paid
—
—
—
Acquisition of subsidiaries
1,410
—
454,596
Inception of finance lease contracts
198
—
—
Share of investment property
revaluation reserve
—
—
—
Issue of shares to minority shareholders
of subsidiaries
—
—
—
Loss on deemed disposal of subsidiaries
—
—
—
Net cash outflow from financing
(134)
(64,282)
—
At 1st July, 2001
1,474
221,033
1,937,723
New bank and other loans raised
—
—
600,000
Repayment of bank and other loans
—
—
(1,016,879)
Attributable profits less dividends paid
—
—
—
Net cash outflow from financing
(1,010)
(61,564)
—
At 30th June, 2002
464
159,469
1,520,844

Minority
interests
HK$’000
141,277
—
—
(29,360
559,259
—
(4,424
897,546
(582,181
(3,765

978,352
—
—
(26,518
(46,728

905,106

35 MAJOR NON-CASH TRANSACTIONS

During the year ended 30th June, 2001, the HIL Group entered into finance lease arrangements in respect of assets with a total capital value at the inception of the leases of HK$198,000.

Part of the consideration from the disposal of associates of HK$257,903,000 during the year remained unsettled at the balance sheet date.

36 UNPROVIDED DEFERRED TAX

At the balance sheet date, the major components of the unprovided deferred tax assets (liabilities) are as follows:

Tax effect of timing differences because of: Excess of tax allowances over depreciation Unutilised tax losses Other timing differences	The HIL 2002 HK$’000 (24,326) 197,684 62 173,420	Group 2001 HK$’000 (28,037) 190,809 (16) 162,756	HIL 2002 2001 HK$’000 HK$’000 — — 378 3,390 — — 378 3,390	HIL 2002 2001 HK$’000 HK$’000 — — 378 3,390 — — 378 3,390
				3,390

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

The amount of the unprovided deferred tax (credit) charge for the year is analysed as follows:

Tax effect of timing differences because of: (Shortfall) excess of tax allowances over depreciation Tax losses (arising) utilised Other timing differences	The HIL 2002 HK$’000 (3,711) (6,875) (78) (10,664)	Group 2001 HK$’000 18,112 (24,009) 2,103 (3,794)	HIL 2002 2001 HK$’000 HK$’000 — (1) 3,012 (1,129) — — 3,012 (1,130)	HIL 2002 2001 HK$’000 HK$’000 — (1) 3,012 (1,129) — — 3,012 (1,130)
				(1,130)

The deferred tax assets primarily relating to taxation losses have not been recognised in the financial statements as it is uncertain that the resulting deferred tax assets will crystallise in the foreseeable future.

Deferred tax has not been provided on the revaluation surplus arising on the revaluation of investment properties and hotel properties as profit arising on the disposal of these assets would not be subject to taxation. Accordingly, the revaluation does not constitute a timing difference for tax purpose.

JOINTLY CONTROLLED ASSETS

Completed properties for sale include the HIL Group’s share of interest in jointly controlled assets with an aggregate book value of HK$35,493,000 (2001: HK$35,493,000). The HIL Group’s share of liabilities incurred in relation to the jointly controlled assets included in creditors and accrued expenses amounted to HK$451,000 (2001: HK$434,000).

PLEDGED BANK DEPOSITS/BANK BALANCES AND CASH

Of the pledged bank deposits and bank balances and cash items, a total sum being the equivalent of HK$76,593,000 (2001: HK$113,411,000), was kept in other regions of the PRC and is subject to exchange control regulations.

EMPLOYEES RETIREMENT SCHEMES

The HIL Group’s Hong Kong employees participate in the Henderson Staff Provident Fund (the “Fund”), a defined contribution provident fund scheme as defined in the Occupational Retirement Schemes Ordinance or in another defined contribution scheme as mentioned below or in schemes (the “MPF Schemes”) registered under the Mandatory Provident Fund Schemes Ordinance (“MPFO”).

Contributions to the Fund are made by the participating employers at rates ranging from 4% to 6%, and by the employees at 2%, of the employees’ basic monthly salaries. The portion of employers’ contributions to which the employees are not entitled and which has been forfeited shall not be used to reduce the future contributions of the participating employers.

As for the scheme, contributions are made by both the employers and the employees at the rate of 5% of the employees’ basic monthly salaries. Forfeited contributions can be applied towards reducing the amount of future contributions payable by the employers. The amount of forfeited contributions utilised during the year was HK$155,000 (2001: HK$274,000). As at 30th June, 2002, there was no remaining balance available to be utilised (2001: HK$15,000).

No employees of the HIL Group were eligible to join the Fund or the scheme on or after 1st December, 2000.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

Employees of the HIL Group who are not members of the Fund and the scheme participate in the MPF Schemes. In addition to the minimum benefits set out in the MPFO, the HIL Group provides certain voluntary top-up benefits to employees participating in the MPF Schemes. The portion of employer’s contributions to which the employees are not entitled and which has been forfeited can be used by the HIL Group to reduce the future contributions. No amounts were utilised in the year ended 30th June, 2002 (2001: Nil) and the balance available to be utilised as at 30th June 2002 was HK$278,000 (2001: HK$34,000).

The HIL Group also participates in the state-organised pension scheme operated by the Government of the PRC for its PRC employees and contributes a certain percentage of the employees’ covered payroll to fund the benefits.

The HIL Group’s retirement costs charged to the income statement for the year ended 30th June, 2002 were HK$8,606,000 (2001: HK$5,404,000).

40 CAPITAL COMMITMENTS

Contracted commitments for the acquisition of property, plant and equipment and for property development and renovation expenditure System development costs approved by the HIL Directors but not yet contracted for	The HIL Group 2002 2001 HK$’000 HK$’000 14,579 23,808 1,447 —	The HIL Group 2002 2001 HK$’000 HK$’000 14,579 23,808 1,447 —
		—

41 CONTINGENT LIABILITIES


		2002	2001
		HK$’000	HK$’000
Guarantees	given to banks to secure banking
facilities	utilised by subsidiaries	1,242,240	1,543,517

In addition, there were contingent liabilities in respect of a performance bond guaranteed by a bank on behalf of a subsidiary of HIL amounting to HK$12,000,000 (2001: HK$19,000,000). The performance bond was provided in accordance with the terms of the fixed telecommunication network services licence granted to the HIL Group on 16th February, 2000 and amended on 30th May, 2002.

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

42 OPERATING LEASE COMMITMENTS

The HIL Group as lessee

At the balance sheet date, the HIL Group had commitments for future minimum lease payments under non-cancellable operating leases which fall due as follows:

Not later than one year Later than one year and not later than five years Later than five years	The HIL Group 2002 2001 HK$’000 HK$’000 55,154 32,612 154,300 30,590 256,374 4,361 465,828 67,563	The HIL Group 2002 2001 HK$’000 HK$’000 55,154 32,612 154,300 30,590 256,374 4,361 465,828 67,563
		67,563

Operating lease commitments represent rentals payable by the HIL Group for retail shopping centre, telecommunication network facilities and certain of its office premises. The leases are negotiated for terms of three to twenty years at fixed rental.

The HIL Group as lessor

As at the balance sheet date, the following assets were rented out under operating leases:

Investment properties Completed properties held for sale Properties held for development	The HIL Group 2002 2001 HK$’000 HK$’000 4,215,740 4,272,688 230,024 216,154 12,541 12,541	The HIL Group 2002 2001 HK$’000 HK$’000 4,215,740 4,272,688 230,024 216,154 12,541 12,541
		216,154
		12,541

These assets were leased out for periods of one to three years without renewal options given to the lessees.

Contingent rent income were calculated based on the excess of certain percentages of turnover of the relevant operation that occupied the premise/property over the fixed portion of the monthly rentals.

As at the balance sheet date, the future minimum lease payments under non-cancellable operating leases for each of the following periods is:

Not later than 1 year Later than 1 year and not later than 5 years	The HIL Group 2002 2001 HK$’000 HK$’000 333,278 311,416 194,379 184,315 527,657 495,731	The HIL Group 2002 2001 HK$’000 HK$’000 333,278 311,416 194,379 184,315 527,657 495,731
		495,731

100

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

43 RELATED PARTY TRANSACTIONS

During the year, the HIL Group entered into the following significant transactions with related parties:

	Fellow	Fellow			Investee	Investee
	subsidiaries		Associates		companies
	2002	2001	2002	2001	2002	2001
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Consultancy service income	2,584	5,390	118	536	—	—
Cleaning services income	8,153	8,061	—	—	—	—
Hotel management fee income	735	661	—	—	—	—
Interest income	—	—	2,436	3,155	—	—
Management fee income	1,131	2,474	—	—	—	—
Rental income	5,596	5,843	—	—	—	—
Security guard service income	53,194	62,458	—	—	—	—
Accountancy fee paid	5,859	5,921	—	—	—	—
Agency commission paid	18,407	18,523	—	—	—	—
Building management fee paid	57,530	55,636	—	—	—	—
Hotel management fee paid	—	—	2,927	3,467	—	—
Interest expenses	5,610	16,283	—	—	—	—
Licence fee	952	675	—	—	—	—
Maintenance fee	—	1,902	—	—	—	—
Professional fee paid	2,538	2,270	756	280	—	—
Rental expenses	70,804	57,311	4,718	4,004	—	—
Rental deposit paid	2,701	2,834	—	—	—	—
Staff cost reimbursement	211	738	2,460	2,700	—	—
At the Balance sheet date
Amounts due to
— Interest-free	—	—	26,097	80,501	360	—
— Interest bearing	159,469	221,033	—	—	—	—
Amounts due from
— Interest-free	—	—	66,560	66,418	—	—
— Interest bearing	—	—	60,000	60,000	6,300	—

Notes:

(1) Apart from the above interest-bearing advances with interest chargeable on the balances outstanding from time to time based on Hong Kong Inter-Bank Offer Rate or with interest at market rates, the other transactions were carried out at market prices or, where no market price was available, at cost plus a percentage profit mark-up.
(2) During the year, interests in certain associates were transferred to the ultimate holding company at profit of HK$1,877,000.
(3) HIL’s holding company performed administrative services comprising company secretarial, accounting and personnel to certain group companies at no charge as the HIL Directors consider that the costs involved were not significant.

101

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

3. SHARE CAPITAL

The authorised and issued share capital of HIL as at the date of this document are as follows:

	Number of	Nominal
	HIL Shares	value
	’000	HK$’000
Authorised	3,000,000	600,000
Issued and fully paid	2,817,327	563,466

There was no movement in share capital for the period between 30th June, 2002 and the date of this document.

Each of the HIL Shares ranks pari passu in all respects, including dividends, voting and capital.

Apart from the HIL Shares, HIL does not have any warrants, options, convertible securities or other securities in issue. None of the unissued share or loan capital of HIL is subject to any warrants, options or conversion rights and it has not been agreed, conditionally or unconditionally, to put any of the unissued share or loan capital of HIL under any warrants, options or conversion rights.

4. INDEBTEDNESS

At the close of business on 30th September, 2002, being the latest practicable date for the purpose of this indebtedness statement prior to the printing of this document, the HIL Group had outstanding borrowings of approximately HK$1,100 million, comprising bank borrowings of approximately HK$1,074 million, other borrowings due to a financial institution of approximately HK$26 million and obligations under finance leases of approximately HK$0.3 million. The HIL Group’s bank borrowings of approximately HK$289 million were secured by the toll highway operating rights of the HIL Group with net book value of HK$718 million and bank deposits of approximately HK$20 million were pledged.

In addition, there were contingent liabilities in respect of a performance bond guaranteed by a bank on behalf of a subsidiary of HIL amounting to HK$12 million.

Save as aforesaid and apart from intra-group liabilities and normal trade payables in the ordinary course of the business of the HIL Group, the HIL Group did not have any outstanding mortgages, charges, debentures, loan capital or other similar indebtedness, or hire-purchase commitments, liabilities under acceptances or acceptance credits or any guarantees or other material contingent liabilities as at the close of business on 30th September, 2002.

For the purpose of the above indebtedness statement, foreign currency amounts have been translated into Hong Kong dollars at the approximate exchange rates prevailing at the close of business on 30th September, 2002. The HIL Directors have confirmed that there has been no material changes in HIL’s indebtedness and contingent liability positions since 30th September, 2002.

102

Henderson Land Development Company Limited

APPENDIX I FINANCIAL INFORMATION RELATING TO THE HIL GROUP

5. MATERIAL CHANGES

There has been no material changes in the financial or trading position or prospects of the HIL Group since 30th June, 2002, the date to which the latest published audited consolidated financial statements of the HIL Group were made up.

6. STATEMENT OF ADJUSTED NTAV

Set out below is a statement of the Adjusted NTAV, which was arrived at based on the NTAV and adjusted as follows:

NTAV of the HIL Group as at 30th June, 2002 (Note 1)
Adjustments:
Less:
Deficit arising from the valuation of property interests
attributable to the HIL Group as at 31st October, 2002
Final dividend of HK$0.11 per HIL Share
recommended but not provided for (Note 2)
Unrealised loss on investments in securities (Note 3)
Attributable loss for the quarter ended
30th September, 2002 for Henderson Cyber (Note 4)
Adjusted NTAV
Adjusted NTAV per HIL Share (based on 2,817,327,395 HIL
Shares in issue as at the Latest Practicable Date)

HK$’000
19,098,795
211,243
309,906
148,478
3,729

18,425,439

HK$
6.54

Note 1: The NTAV was arrived at after deducting goodwill of HK$860,242,000 from the audited consolidated net asset value of HK$19,959,037,000 as stated in HIL’s annual report for the year ended 30th June, 2002.
Note 2: This dividend is subject to the approval of the HIL Shareholders at the annual general meeting of HIL to be held on 18th December, 2002 and, if approved, will be paid on 19th December, 2002, which is prior to the approval of the Scheme.
Note 3: This represents the difference between the total marked-to-market value of listed securities held by HIL as at the Latest Practicable Date (other than those held as interests in associates) and the value of such listed securities as stated in HIL’s annual report for the year ended 30th June, 2002.
Note 4: This represents HIL’s share of Henderson Cyber’s quarterly results for the quarter ended 30th September, 2002 which was announced on 13th November, 2002.

103

Henderson Land Development Company Limited

APPENDIX II

PROPERTY VALUATIONS

The following is an extract of the property valuation report, prepared for the purpose of inclusion in this document in connection with DTZ’s valuation of the property interests of the HIL Group as at 31st October, 2002, setting out the basis of their valuation:

==> picture [166 x 59] intentionally omitted <==

10th Floor Jardine House 1 Connaught Place Central Hong Kong

6th December, 2002

The Directors Henderson Investment Limited 6/F, World-Wide House 19 Des Voeux Road Central Hong Kong

Dear Sirs,

RE: PORTFOLIO VALUATION

Instructions, In accordance with your instructions for us to value the property interests Purpose in which Henderson Investment Limited (“HIL”) and its subsidiaries & Date of (together referred to as the “HIL Group”) have interests, we confirm that we Valuation have made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of values of these property interests as at 31st October, 2002 (the “date of valuation”).

Basis of Our valuation of each property interest represents its open market value Valuation which we would define as intended to mean “an opinion of the best price at which the sale of an interest in property would have been completed unconditionally for cash consideration on the date of valuation, assuming:

(a) a willing seller;
(b) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of the price and terms and for the completion of the sale;
(c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;

104

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

(d) that no account is taken of any additional bid by a prospective purchaser with a special interest; and
(e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion.”

Valuation Assumptions

Our valuations have been made on the assumption that the owners sell the property interests on the open market without the benefit of deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements which could serve to affect the values of the property interests.

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

Land Tenure

In valuing the properties in Hong Kong the Government Leases of which expired before 30th June, 1997, we have taken into account that under the provisions contained in Annex III of the Joint Declaration of the Government of the United Kingdom and the Government of the People’s Republic of China (the “PRC”) on the Question of Hong Kong as well as in the New Territories Leases (Extension) Ordinance, such leases have been extended without premium until 30th June, 2047 and that rents of three per cent. of the rateable value are charged per annum from the date of extension.

In the course of our valuation of Property interest no. 46 which is situated in the PRC, we have assumed that transferable land use right in respect of the property for the specific term at nominal annual land use fee has been granted and that any premium payable has already been fully paid. We are unable to verify the title or the ownership of the property but have relied on the advice given by the HIL Group and its legal adviser on the PRC laws regarding the title and interest in the property.

Method of Valuation

Regarding property interests in Groups I and III which are held for investment in Hong Kong and the PRC respectively, we have valued them by investment method by capitalizing the net incomes shown on the schedules provided to us by the HIL Group with due provisions for reversionary income potential. Each of Property interest nos. 10 and 11 has been valued as a fully operational hotel with the inclusion of fixtures, fittings and equipments which are necessary for the operation of the hotel having regard to the trading accounts of the hotel and our opinion as to the future trading potential and level of turnover likely to be achieved.

Regarding property interests in Group II which are held for sale in Hong Kong, we have valued them by direct comparison method by making reference to relevant comparable transactions.

105

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

Source of We have relied to a very considerable extent on the information given by Information the HIL Group and have accepted advice given to us on such matters as planning approvals, statutory notices, easements, tenure, particulars of occupancy, floor areas, number of parking spaces, number of guest rooms, trading accounts, profit and loss accounts, interest attributable to the HIL Group and all other relevant matters. Dimensions and measurements are based on the copies of documents or other information provided to us by the HIL Group and are therefore only approximations. No on-site measurement has been carried out.

Title We have not been provided with copies of the title documents relating to Investigation the properties but have caused searches to be made at the appropriate Land Registry in respect of properties in Hong Kong. However, we have not searched the original documents to verify ownership or to ascertain any amendments. All documents have been used for reference only and all dimensions, measurements and areas are approximate.

Site We have, wherever possible, inspected the exterior of the properties. Inspection However, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report whether the properties are free of rot, infestation or any other structural defects. No test was carried out on any of the services.

Exchange Unless otherwise stated all money amounts stated are in Hong Kong Rate Dollars. The exchange rate adopted is the average rate as at 31st October, 2002, being HK$1=RMB1.06, and there has been no significant fluctuation in exchange rate between that day and the date of this letter.

We attach herewith a summary of valuations and, pursuant to Practice Note 12 of the Listing Rules, an extract of our valuation certificate regarding Property interest no. 46.

Yours faithfully, for and on behalf of DTZ Debenham Tie Leung Limited K.B. Wong Registered Professional Surveyor (General Practice Division) A.H.K.I.S., M.R.I.C.S. Director

Note: Mr. K.B. Wong is a registered professional surveyor who has over 18 years’ experience in the valuation of properties in Hong Kong and over 10 years’ experience in the valuation of properties in the PRC.

106

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

SUMMARY OF VALUATIONS

				Capital value
		Capital value		in existing state
		in existing		attributable to
		state as at	Interest	HIL as at
		31st October,	attributable	31st October,
	Property interest	2002	to HIL	2002
		HK$	%	HK$
Group I — Properties held for investment in Hong Kong
1.	All shop units on Level Three,	1,335,000,000	94.4	1,260,240,000
	the Remaining Parts at
	Level One and various Car
	Parking Spaces on Levels One
	and Two of the Podium,
	Shatin Centre,
	2-16 Wang Pok Street,
	Shatin,
	New Territories
2.	Shops units on Levels One to	1,038,000,000	100	1,038,000,000
	Three of the Shopping Podiums
	of North and South Wings,
	the external walls of the podium
	and Car Parking Spaces Nos. 1
	to 78 on Basement and Bicycle
	Parking Spaces Nos. 1 to 64 on
	Level One,
	Trend Plaza,
	2 Tuen Lung Street,
	Tuen Mun,
	New Territories
3.	Eva Court,	600,000,000	100	600,000,000
	36 MacDonnell Road,
	Mid-Levels,
	Hong Kong

107

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

				Capital value
		Capital value		in existing state
		in existing		attributable to
		state as at	Interest	HIL as at
		31st October,	attributable	31st October,
	Property interest	2002	to HIL	2002
		HK$	%	HK$
4.	Shops Nos. G1, G7, G11, G15,	197,000,000	100	197,000,000
	G19, G23 and G32 on Ground
	Floor, Shops Nos. 203, 206, 210,
	214, 218, 222, 226, 230, 238
	and a Portion of Shop area on
	Second Floor of
	the Commercial Development,
	Town Square (currently known as
	City Landmark II),
	67-95 Tsuen Wan Market Street,
	Tsuen Wan,
	New Territories
5.	Block C and all Car Parking	56,500,000	100	56,500,000
	Spaces on Second Floor,
	Hang Wai Industrial Centre,
	6 Kin Tai Street,
	Tuen Mun,
	New Territories
6.	Shops on Ground and First	555,000,000	23.04	127,872,000
	Floors, Kindergarten, Wet
	Market, Cinema and Plaza on
	Ground Floor, Lorry Parking
	Spaces and Car Parking Spaces
	on Ground and First Floors,
	Fanling Centre,
	33 San Wan Road,
	Fanling,
	New Territories
7.	85 Car Parking Spaces in	21,000,000	26	5,460,000
	Basement, Town Square
	(currently known as City
	Landmark II),
	67-95 Tsuen Wan Market Street,
	Tsuen Wan,
	New Territories

108

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

				Capital value
		Capital value		in existing state
		in existing		attributable to
		state as at	Interest	HIL as at
		31st October,	attributable	31st October,
	Property interest	2002	to HIL	2002
		HK$	%	HK$
8.	Shop 14A on Level 1 and	4,883,000	100	4,883,000
	19.48% attributable interest in
	the parking spaces, namely
	14 Lorry Parking Spaces and
	96 Car Parking Spaces on
	Basement and 7 Lorry Parking
	Spaces and 161 Bicycle Storage
	Spaces on Level 1 of
	the Shopping Podium,
	Jade Plaza,
	3 On Chee Road/
	On Cheung Road,
	Tai Po,
	New Territories
9.	Kowloon Building,	358,000,000	100	358,000,000
	555 Nathan Road,
	Yaumatei,
	Kowloon
10.	Newton Hotel Kowloon,	216,000,000	100	216,000,000
	58-66 Boundary Street,
	Mongkok,
	Kowloon
11.	Newton Hotel Hong Kong,	520,000,000	100	520,000,000
	200-218 Electric Road,
	North Point,
	Hong Kong
12.	External wall,	1,500,000	100	1,500,000
	Golden Dragon Commercial
	Building,
	522 Nathan Road,
	Yaumatei,
	Kowloon

109

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

				Capital value
		Capital value		in existing state
		in existing		attributable to
		state as at	Interest	HIL as at
		31st October,	attributable	31st October,
	Property interest	2002	to HIL	2002
		HK$	%	HK$
13.	Shops Nos. 1 to 11 on Ground	62,000,000	35.42	21,960,400
	Floor and Shops Nos. 1 to 2 on
	Lower Ground Floor,
	Fairview Height,
	1 Seymour Road,
	Mid-levels,
	Hong Kong
14.	The whole of Well Tech Centre	132,600,000	100	132,600,000
	(except 16th to 19th Floors),
	9 Pat Tat Street,
	San Po Kong,
	Kowloon
15.	The whole of Big Star Centre	77,500,000	100	77,500,000
	(except 3rd Floor),
	8 Wang Kwong Road,
	Kowloon Bay,
	Kowloon
		Sub-total:		4,617,515,400

110

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

				Capital value
		Capital value		in existing state
		in existing		attributable to
		state as at	Interest	HIL as at
		31st October,	attributable	31st October,
	Property interest	2002	to HIL	2002
		HK$	%	HK$
Group II — Properties held for sale in Hong Kong
16.	3rd Floor,	1,700,000	100	1,700,000
	25 Castle Road,
	Mid-levels,
	Hong Kong
17.	Ground Floor Garage,	700,000	100	700,000
	29 Castle Road,
	Mid-levels,
	Hong Kong
18.	Lower and Upper Basements,	17,500,000	100	17,500,000
	Mackenny Court,
	65-73 MacDonnell Road,
	Mid-levels,
	Hong Kong
19.	3rd Floor of Block D,	2,200,000	100	2,200,000
	25 Robinson Road,
	Mid-levels,
	Hong Kong
20.	Basement Garage,	1,500,000	100	1,500,000
	2E Seymour Road,
	Mid-levels,
	Hong Kong
21.	604 Shanghai Street,	7,800,000	100	7,800,000
	Mongkok,
	Kowloon
22.	3rd Floor,	780,000	100	780,000
	39 Yin Chong Street,
	Mongkok,
	Kowloon
23.	The whole of 5th Floor,	2,000,000	100	2,000,000
	Oxford Factory Building,
	42-46 Wang Lung Street,
	Tsuen Wan,
	New Territories

111

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

				Capital value
		Capital value		in existing state
		in existing		attributable to
		state as at	Interest	HIL as at
		31st October,	attributable	31st October,
	Property interest	2002	to HIL	2002
		HK$	%	HK$
24.	Shop No. 4 on Ground Floor,	1,650,000	100	1,650,000
	Ching Fai Terrace,
	4-8 Ching Wah Street,
	North Point,
	Hong Kong
25.	102 Car Parking Spaces at	20,400,000	100	20,400,000
	Tycoon Court,
	8 Conduit Road,
	Mid-levels,
	Hong Kong
26.	Java Road 108	57,000,000	33.33	18,998,100
	Commercial Centre,
	108 Java Road,
	North Point,
	Hong Kong
27.	Flat F on 36th Floor together	18,000,000	100	18,000,000
	with portion of the Roof
	thereabove, and Car Parking
	Spaces Nos. 1 to 11 on Ground
	Floor, Car Parking Spaces Nos.
	1 to 17 on 1st Floor, Car Parking
	Spaces Nos. 6, 11, 13, 16 and
	19 on 2nd Floor, Car Parking
	Spaces Nos. 1 to 3, 5, 7 and 19
	on 3rd Floor, Car Parking
	Spaces Nos. 8 to 13 and 19 on
	4th Floor and Car Parking Spaces
	Nos. 1 to 15 on 5th Floor,
	Royal Court,
	9M Kennedy Road,
	Mid-levels,
	Hong Kong

112

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

				Capital value
		Capital value		in existing state
		in existing		attributable to
		state as at	Interest	HIL as at
		31st October,	attributable	31st October,
	Property interest	2002	to HIL	2002
		HK$	%	HK$
28.	23rd Floor,	14,000,000	100	14,000,000
	Car Parking Space No. 4 on
	Ground Floor and Portion of
	Spaces on Car Park “1” (also
	known as Car Parking Spaces
	Nos. 2 and 3 on Car Park “1”),
	Hoover Court,
	7-9 MacDonnell Road,
	Mid-levels,
	Hong Kong
29.	Flats A and B and Flat Roofs on	40,400,000	100	40,400,000
	1st Floor, Flat B on 3rd Floor,
	Duplex Flat A on 23rd and 24th
	Floors, Car Parking Spaces
	Nos. 7 and 7A, 8 and 8A, 11, 13,
	15, 17 and 19 on Ground Floor,
	Car Parking Spaces Nos. 31 and
	36 on 1st Lower Ground Floor
	and Car Parking Spaces Nos. 42
	to 44, 49, 50, 57 to 59 and 62
	on 2nd Lower Ground Floor,
	Suncrest Tower,
	1 Monmouth Terrace,
	Wanchai,
	Hong Kong
30.	4 shop units, 84 domestic units	540,000,000	0.49	2,646,000
	and 71 car parking spaces at
	Palatial Crest,
	3 Seymour Road,
	Mid-levels,
	Hong Kong
31.	Car Parking Space No. 6 on	200,000	100	200,000
	Car Park Ground Floor,
	Silver Star Court,
	22-26 Village Road,
	Happy Valley,
	Hong Kong

113

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

				Capital value
		Capital value		in existing state
		in existing		attributable to
		state as at	Interest	HIL as at
		31st October,	attributable	31st October,
	Property interest	2002	to HIL	2002
		HK$	%	HK$
32.	Shop 3 on Ground Floor,	1,900,000	100	1,900,000
	Victor Court,
	14-28 Wang On Road,
	North Point,
	Hong Kong
33.	Units 1 to 8 on 1st Floor and	4,000,000	100	4,000,000
	Units 1, 3 and 4 on 2nd Floor,
	Lai Kwan Court,
	438 Castle Peak Road,
	Cheung Sha Wan,
	Kowloon
34.	Shop No. 19 on Ground Floor	10,000,000	100	10,000,000
	and the yard appertaining
	thereto and 21% attributable
	interest of the whole of 1st and
	2nd Floors,
	Florence Plaza,
	23 Cheung Wah Street,
	Cheung Sha Wan,
	Kowloon
35.	Shop No. 15 on 1st Floor, Shops	640,000	100	640,000
	Nos. 13 and 15 on 2nd Floor,
	Wing On Building,
	206 Fuk Wa Street,
	Shamshuipo,
	Kowloon
36.	Flat Roofs 1 and 2 on 3rd Floor,	150,000	100	150,000
	Tak Sun Building,
	442-448 Ma Tau Wai Road,
	Kowloon City,
	Kowloon

114

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

				Capital value
		Capital value		in existing state
		in existing		attributable to
		state as at	Interest	HIL as at
		31st October,	attributable	31st October,
	Property interest	2002	to HIL	2002
		HK$	%	HK$
37.	The whole of Royal Commercial	89,000,000	100	89,000,000
	Centre (except Units 2 and 3 on
	5th Floor, Units 1 on 10th and
	13th Floors, Unit 3 on 18th
	Floor, Unit 5 on 19th Floor and
	the whole of 20th Floor),
	56 Parkes Street,
	Tsimshatsui,
	Kowloon
38.	Units 1 to 11 on 18th Floor and	8,900,000	100	8,900,000
	Private Car Parking Spaces Nos.
	8 and 18 on 4th Floor,
	New Trend Centre,
	704 Prince Edward Road East
	and 104 King Fuk Street,
	San Po Kong,
	Kowloon
39.	All shop units and all car parking	463,000,000	9.1288	42,266,344
	spaces in Wonderland Villas,
	9 Wah King Hill Road,
	Kwai Chung,
	New Territories
40.	37 Car Parking Spaces on Level 2,	4,810,000	100	4,810,000
	Greenery Plaza,
	3 Chui Yi Street,
	Tai Po,
	New Territories

115

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

				Capital value
		Capital value		in existing state
		in existing		attributable to
		state as at	Interest	HIL as at
		31st October,	attributable	31st October,
	Property interest	2002	to HIL	2002
		HK$	%	HK$
41.	Workshop Units A, B, E and G	20,800,000	100	20,800,000
	on 3rd Floor, Workshop Unit P
	on 5th Floor and Workshop Unit
	E on 9th Floor, 9 Car Parking
	Spaces on Ground Floor and 19
	Car Parking Spaces and 23
	Lorry Parking Spaces on 1st Floor,
	Houston Industrial Building,
	32-40 Wang Lung Street,
	Tsuen Wan,
	New Territories
42.	Shop No. 12 on Ground Floor,	4,500,000	100	4,500,000
	Brilliant Garden,
	250 Castle Peak Road,
	San Hui,
	Tuen Mun,
	New Territories
43.	27 Car Parking Spaces on	3,510,000	100	3,510,000
	Ground and Lower Ground Floors,
	The Rainbow Garden,
	351 Castle Peak Road,
	Castle Peak Bay,
	Tuen Mun,
	New Territories
44.	Car Parking Space No. 23 and	250,000	100	250,000
	Area A and Area B on Ground Floor,
	Hamford Court,
	335 Prince Edward Road West,
	Kowloon City,
	Kowloon
45.	18 Car Parking Spaces	3,380,000	100	3,380,000
	on First Floor,
	Tak Lee Industrial Centre,
	8 Tsing Yeung Circuit,
	Tuen Mun,
	New Territories
		Sub-total:		344,580,444

116

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

					Capital value
		Capital	value		in existing state
		in existing			attributable to
		state	as at	Interest	HIL as at
		31st October,		attributable	31st October,
	Property interest		2002	to HIL	2002
			HK$	%	HK$
Group III — Property held for sale in the PRC
46.	Unit E on 13th Floor,	500,000		100	500,000
	Block B,
	Taojin Garden,
	No. 110 Hengfu Road,
	Tianhe District,
	Guangzhou,
	Guangdong Province,
	the PRC
		Sub-total:			500,000
		Grand-total:			4,962,595,844

117

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

VALUATION CERTIFICATE

Capital value in Particulars of existing state as at Property interest Description and tenure occupancy 31st October, 2002 46. Unit E on 13th Floor, The property comprises a residential The property was HK$500,000 Block B, unit on the 13th floor of a high-rise vacant. Taojin Garden, residential building completed in No. 110 Hengfu Road, 1990’s. Tianhe District, The property has a gross floor area Guangzhou, of approximately 1,222 sq.ft. (113.55 Guangdong Province, sq.m.). the PRC The land use rights of the development has been granted for a term of 70 years from 18th October, 1991 for residential use.

Notes:

(1) According to Realty Title Certificate No. 0271896, the land use rights and the building ownership of the property are vested in Citistore (China) Limited, a wholly owned subsidiary of Max-mercan Investment Limited which in turn is a wholly owned subsidiary of HIL, for a term of 70 years for residential use from 18th October, 1991.
(2) According to Housing Pre-sale Contract No. 30073, the property was purchased by Citistore (China) Limited at a consideration of HK$967,000.
(3) The PRC legal opinion states that:
(i) Citistore (China) Limited has legally obtained the land use rights and building ownership of the property with a total gross floor area of 113.55 sq.m.
(ii) Citistore (China) Limited has the right to transfer, lease and mortgage the related property interest.

118

Henderson Land Development Company Limited

APPENDIX II

PROPERTY VALUATIONS

The following is an extract of the property valuation report, prepared for the purpose of inclusion in this document in connection with DTZ’s valuation of the property interests of the Henderson Cyber Group as at 31st October, 2002, setting out the basis of their valuation:

==> picture [166 x 59] intentionally omitted <==

10th Floor Jardine House 1 Connaught Place Central Hong Kong

6th December, 2002

The Directors Henderson Cyber Limited 6/F, World-Wide House 19 Des Voeux Road Central Hong Kong

Dear Sirs,

RE: PORTFOLIO VALUATION

Instructions, In accordance with your instructions for us to value the properties which Purpose & are held by Henderson Cyber Limited (“Henderson Cyber”) and/or its Date of subsidiaries (hereinafter together referred to as the “Henderson Cyber Valuation Group”), we confirm that we have made relevant enquiries and searches and obtained such further information as we consider necessary for the purpose of providing you with our opinion of values of such properties as at 31st October, 2002 (the “date of valuation”).

Basis of Valuation

Our valuation of each property represents its open market value which we would define as intended to mean “an opinion of the best price at which the sale of an interest in property would have been completed unconditionally for cash consideration on the date of valuation, assuming:

(a) a willing seller;
(b) that, prior to the date of valuation, there had been a reasonable period (having regard to the nature of the property and the state of the market) for the proper marketing of the interest, for the agreement of the price and terms and for the completion of the sale;
(c) that the state of the market, level of values and other circumstances were, on any earlier assumed date of exchange of contracts, the same as on the date of valuation;

119

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

(d) that no account is taken of any additional bid by a prospective purchaser with a special interest; and
(e) that both parties to the transaction had acted knowledgeably, prudently and without compulsion.”

Valuation Assumptions

Our valuations have been made on the assumption that the owners sell the properties on the open market without the benefit of deferred term contracts, leasebacks, joint ventures, management agreements or any similar arrangements which could serve to affect the values of the properties.

Land Tenure

In valuing the properties the Government Leases of which expired before 30th June, 1997, we have taken into account that under the provisions contained in Annex III of the Joint Declaration of the Government of the United Kingdom and the Government of the People’s Republic of China on the Question of Hong Kong as well as in the New Territories Leases (Extension) Ordinance, such leases have been extended without premium until 30th June, 2047 and that rents of three per cent. of the rateable value are charged per annum from the date of extension.

Method of We have valued the properties by direct comparison method by making Valuation reference to comparable sales evidence as available in the relevant market or where appropriate by capitalizing the net incomes shown on the schedules provided to us by the Henderson Cyber Group with due provisions for reversionary income potential of the properties.

Source of We have relied to a very considerable extent on the information given by Information the Henderson Cyber Group and have accepted advice given to us on such matters as planning approvals, statutory notices, easements, tenure, particulars of occupancy, floor areas and all other relevant matters. Dimensions and measurements are based on the copies of documents or other information provided to us by the Henderson Cyber Group and are therefore only approximations. No on-site measurement has been carried out.

Title We have not been provided with copies of the title documents relating to Investigation the properties but have caused searches to be made at the Urban Land Registry. However, we have not searched the original documents to verify ownership or to ascertain any amendments. All documents have been used for reference only and all dimensions, measurements and areas are approximate.

120

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

Site Inspection

We have inspected the exterior of the properties. However, no structural survey has been made, but in the course of our inspection, we did not note any serious defects. We are not, however, able to report whether the properties are free of rot, infestation or any other structural defects. No test was carried out on any of the services.

We attach herewith a summary of valuations.

Yours faithfully, for and on behalf of DTZ Debenham Tie Leung Limited K.B. Wong Registered Professional Surveyor (General Practice Division) A.H.K.I.S., M.R.I.C.S. Director

Note: Mr. K.B. Wong is a registered professional surveyor who has over 18 years’ experience in the valuation of properties in Hong Kong.

121

Henderson Land Development Company Limited

PROPERTY VALUATIONS

APPENDIX II

SUMMARY OF VALUATIONS

			Capital value in
			existing state as at
	Property		31st October, 2002
			HK$
1.	Units 1, 2, 3, 4 and 5 on 16th,		30,000,000
	17th, 18th and 19th Floors,
	Well Tech Centre,
	9 Pat Tat Street,
	San Po Kong,
	Kowloon
2.	Workshop on 3rd Floor,		9,500,000
	Big Star Centre,
	8 Wang Kwong Road,
	Kowloon Bay,
	Kowloon
		Total:	39,500,000

122

Henderson Land Development Company Limited

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

The information in this document relating to the HIL Group has been supplied by the HIL Directors. The issue of this document has been approved by the HIL Directors, who jointly and severally accept fully responsibility for the accuracy of the information contained in this document (other than that relating to the HLD Group apart from the HIL Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this document (other than that relating to the HLD Group apart from the HIL Group) have been arrived at after due and careful consideration and there are no other facts not contained in this document the omission of which would make any statement in this document misleading.

The information in this document relating to the HLD Group has been supplied by the directors of HLD. The issue of this document has been approved by the directors of HLD, who jointly and severally accept full responsibility for the accuracy of the information contained in this document (other than that relating to the HIL Group) and confirm, having made all reasonable enquiries, that to the best of their knowledge, opinions expressed in this document (other than that relating to the HIL Group) have been arrived at after due and careful consideration and there are no other facts not contained in this document the omission of which would make any statement in this document misleading.

2. MARKET PRICES

The HIL Shares are traded on the Stock Exchange.

The table below shows the respective closing prices of the HIL Shares on the Stock Exchange (i) on the last trading day of each of the six calendar months preceding the date of the Announcement; (ii) on 4th November, 2002 (being the last full trading day immediately preceding the date of the Announcement); (iii) on 29th November, 2002; and (iv) on the Latest Practicable Date.

Date	Price per Share
	HK$
31st May, 2002	6.85
28th June, 2002	6.55
31st July, 2002	6.35
30th August, 2002	6.60
30th September, 2002	6.00
31st October, 2002	5.80
4th November, 2002	5.95
29th November, 2002	7.40
Latest Practicable Date	7.40

The highest and lowest closing prices of the HIL Shares recorded on the Stock Exchange during the period from 5th May, 2002, being the date six months prior to the date of the Announcement, to the Latest Practicable Date were respectively HK$7.55 on 2nd December, 2002 and HK$5.75 on 1st November, 2002.

123

Henderson Land Development Company Limited

GENERAL INFORMATION

APPENDIX III

3. DISCLOSURE OF INTERESTS

For the purpose of this Section, the “Offer Period” means the period from 5th November, 2002 to the Latest Practicable Date, both dates inclusive, the “Disclosure Period” means the period beginning from the six months prior to the Offer Period and ending with the Latest Practicable Date, both dates inclusive, and “interested” and “interests” have the meanings respectively ascribed thereto in the SDI Ordinance.

(a) Interests and dealings in HIL Shares
(i) As at the Latest Practicable Date, HLD, through the Controlling Parties, was interested in 2,070,243,859 HIL Shares.
(ii) As at the Latest Practicable Date, the following HIL Directors had interests in HIL Shares:

	Number of HIL Shares held and	Number of HIL Shares held and	Number of HIL Shares held and	Number of HIL Shares held and		Total number
		nature of interest				and percentage of issued share
	Personal	Family	Corporate		Other	capital of HIL
Name of Director	interest	interest	interest	interests		held
Lee Shau Kee	34,779,936			2,075,859,007		2,110,638,943
					(Note 1)	(74.92%)
Lee Tat Man	6,666					6,666
						(0.00%)
Lee King Yue	959,028	42,711				1,001,739
		(Note 3)				(0.04%)
Ho Wing Fun	1,100					1,100
						(0.00%)

Dr. Lee Shau Kee, Mr. Lee Tat Man, Mr. Lee King Yue and Mr. Ho Wing Fun are also directors of HLD.

Save as disclosed above, none of the HIL Directors had any interests in HIL Shares as at the Latest Practicable Date. Save as disclosed in paragraph (a)(iv) below, none of the HIL Directors dealt for value in any HIL Shares during the Disclosure Period.

124

Henderson Land Development Company Limited

APPENDIX III

GENERAL INFORMATION

(iii) As at the Latest Practicable Date, the Excluded Parties had the following interests in the HIL Shares:

	Number of HIL Shares held and	Number of HIL Shares held and	Number of HIL Shares held and	Number of HIL Shares held and		Total number
		nature of interest				and percentage of issued share
Name of	Personal	Family	Corporate		Other	capital of HIL
Excluded Parties	interest	interest	interest	interests		held
Lee Shau Kee	34,779,936			2,075,859,007		2,110,638,943
					(Note 1)	(74.92%)
Fu Sang			5,615,148			5,615,148
			(Note 2)			(0.20%)
Ho Wing Fun	1,100					1,100
						(0.00%)
Lee King Yue	959,028	42,711				1,001,739
		(Note 3)				(0.04%)
Lee Tat Man	6,666					6,666
						(0.00%)
Leung Sing	150,000					150,000
						(0.01%)
Lo Tak Shing	404,375					404,375
						(0.01%)
Yang Hsueh Chin	42,711					42,711
	(Note 3)					(0.01%)
Fung Pok Wah	300,000					300,000
(Note 4)						(0.01%)
Fung Chun Wah	1,751,000					1,751,000
(Note 4)						(0.06%)
Lam Ka Wai	1,137,000					1,137,000
(Note 4)						(0.04%)
Lam Ko Yu	941,000					941,000
(Note 4)						(0.03%)
Lee Siu Lun	4,857,100					4,857,100
(Note 4)						(0.18%)
Tako Assets			3,000,000			3,000,000
(Note 5)						(0.11%)
Thommen			1,406,000			1,406,000
(Note 5)						(0.05%)

Notes:

These 2,075,859,007 HIL Shares included the 5,615,148 HIL Shares held by Fu Sang. These 2,075,859,007 HIL Shares were beneficially owned by Fu Sang and the Controlling Parties, which are subsidiaries of HLD. Dr. Lee Shau Kee was taken to be interested in Fu Sang and HLD by virtue of the SDI Ordinance. Dr. Lee Shau Kee beneficially owned all the issued share capital of Rimmer (Cayman) Limited (“Rimmer”) and Hopkins (Cayman) Limited (“Hopkins”). Rimmer was the trustee of a discretionary trust which held the majority of units in a unit trust.

125

Henderson Land Development Company Limited

GENERAL INFORMATION

APPENDIX III

Hopkins was the trustee of the unit trust, which beneficially owned all the issued ordinary shares which carry the voting rights in the share capital of Henderson Development Limited (“HD”) and Fu Sang. HD and its subsidiaries together beneficially owned 1,117,143,200 HLD Shares.

These HIL Shares were included in the interests described in Note 1 above.
Mr. Lee King Yue was deemed to be interested in the same 42,711 HIL Shares held by his spouse, Madam Yang Hsueh Chin, by virtue of the SDI Ordinance.
Mr. Fung Pok Wah and Mr. Fung Chun Wah are the sons of Madam Fung Lee Woon King, a director of HLD. Mr. Lam Ka Wai and Mr. Lam Ko Yu are the brothers of Mr. Colin Lam Ko Yin, a director of HLD. Mr. Lee Siu Lun is the brother of Dr. Lee Shau Kee. Such persons are deemed to be acting in concert with HLD under the Takeovers Code.
Tako Assets and Thommen are wholly owned subsidiaries of Hong Kong Ferry which is 30.98% owned by the HIL Group.

Save as disclosed above, none of the Excluded Parties had any interest in the HIL Shares as at the Latest Practicable Date. Save as disclosed in paragraph (a)(iv) below, none of the Excluded Parties dealt for value in any HIL Shares during the Disclosure Period.

Save as disclosed above, neither HLD nor any of the parties acting in concert with HLD owned or controlled any HIL Shares as at the Latest Practicable Date.

(iv) On 8th May, 2002, Mr. Lee King Yue, being a director of both HIL and HLD, acquired 5,000 HIL Shares at a consideration of HK$6.45 per HIL Share. On 4th November, 2002, Mr. Colin Lam Ko Yin, also a director of both HIL and HLD, donated 11,000 HIL Shares to a charitable organisation established in Hong Kong. Save as disclosed herein, neither HLD nor any parties acting in concert with HLD dealt for value in any HIL Shares during the Disclosure Period.
(v) As at the Latest Practicable Date, no subsidiary of HIL, pension fund of HIL or of any subsidiary of HIL or any advisers of HIL owned or controlled any HIL Shares or dealt for value in any HIL Shares during the Disclosure Period.
(vi) As at the Latest Practicable Date, no arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code existed between HLD or any person acting in concert with HLD and any other person.
(vii) As at the Latest Practicable Date, no person who has an arrangement of the kind referred to in Note 8 to Rule 22 of the Takeovers Code with HIL or HLD or with any person acting in concert with HIL or HLD or with any person who is an associate of HIL by virtue of classes (1), (2), (3) and (4) of the definition of “associate” under the Takeovers Code owned or controlled any HIL Shares or dealt for value in any HIL Shares during the Disclosure Period.

126

Henderson Land Development Company Limited

APPENDIX III

GENERAL INFORMATION

(viii) As at the Latest Practicable Date, there was no interest in any HIL Shares which was managed on a discretionary basis by fund managers (other than exempt fund managers) connected with HIL and no such fund manager dealt for value in any HIL Shares during the Disclosure Period.

(b) Interests and dealings in HLD Shares

(i) As at the Latest Practicable Date, the following HIL Directors had interests in HLD Shares:

	Number of HLD Shares held and	Number of HLD Shares held and	Number of HLD Shares held and	Number of HLD Shares held and	Total number
		nature of interest			and percentage of issued share
Name of	Personal	Family	Corporate	Other	capital of HLD
HIL Director	interest	interest	interest	interests	held
Lee Shau Kee				1,122,938,300	1,122,938,300
				(Note 1)	(65.21%)
Lee Tat Man	858,000				858,000
					(0.05%)
Lee King Yue	26,400	16,500	19,800		62,700
			(Note 2)		(0.00%)
Ho Wing Fun	100				100
					(0.00%)
Lau Chi Keung	2,200				2,200
					(0.00%)
Jackson Woo Ka Biu		2,000			2,000
(Alternate					(0.00%)
director to
Woo Po Shing)

Notes:

Out of these HLD Shares, 1,117,143,200 HLD Shares were beneficially owned by HD and its subsidiaries as described in Note 1 to paragraph (a)(iii) above and 192,500 HLD Shares were beneficially owned by Fu Sang. Dr. Lee Shau Kee was taken to be interested in Fu Sang and HD as set out in Note 1 to paragraph (a)(iii). In addition, 5,602,600 HLD Shares were beneficially owned by a subsidiary of Hong Kong and China Gas. Dr. Lee Shau Kee was taken to be interested in Hong Kong and China Gas by virtue of the SDI Ordinance.
These HLD Shares were beneficially owned by a company in which the relevant HIL Director was entitled to exercise or control the exercise of one-third or more of the voting rights at its general meetings.
(ii) Save as disclosed above, none of the HIL Directors and HIL had any interest in any HLD Shares as at the Latest Practicable Date and none of the HIL Directors and HIL dealt for value in any HLD Shares or options, derivatives or convertible securities of HLD during the Disclosure Period.

127

Henderson Land Development Company Limited

GENERAL INFORMATION

APPENDIX III

(c) Other interests
(i) No benefit is or will be paid to any HIL Director as compensation for loss of office or otherwise in connection with the Scheme.
(ii) No agreement, arrangement or understanding (including any compensation arrangement) exists between HLD or any person acting in concert with HLD and any of the HIL Directors, recent HIL Directors, HIL Shareholders or recent HIL Shareholders having any connection with or dependence upon the Scheme.
(iii) No agreement or arrangement exists between any HIL Director and any other person which is conditional on or dependent upon the outcome of the Scheme or otherwise connected with the Scheme.
(iv) No material contract has been entered into by HLD in which any HIL Director has a material personal interest.
(v) None of the HIL Directors has a service contract in force with any member of the HIL Group which has more than twelve months to run or which was entered into or amended within six months before the Announcement.
(vi) HSBC Broking Services (Asia) Limited, an indirect wholly owned subsidiary of HSBC, holds at the date of this document 1,596 HIL Shares in a dividend suspense account.

4. MATERIAL CONTRACTS

Neither HIL nor any of its subsidiaries within the two years prior to the Latest Practicable Date entered into any contracts which are or may be material other than in the ordinary course of the business carried on or intended to be carried on by the HIL Group.

5. LITIGATION

As at the Latest Practicable Date, neither HIL nor any of its subsidiaries was engaged in any litigation or arbitration of material importance and no litigation or claim of material importance was known to any of the HIL Directors to be pending or threatened by or against HIL or any of its subsidiaries.

128

Henderson Land Development Company Limited

GENERAL INFORMATION

APPENDIX III

6. MISCELLANEOUS

(a) The beneficial interests in the HIL Shares of the parties deemed to be acting in concert with the offeror, HLD, are set out in the section headed “Shareholding Structure” on page 11 of this document. Those parties which are companies are Markshing, Darnman, Gainwise, Covite and Banshing (all of which are wholly owned subsidiaries of HLD), Fu Sang, Tako Assets and Thommen (both of which are wholly owned subsidiaries of Hong Kong Ferry). Their addresses and the names of their directors are set out below:

Name	Address	Directors
HLD	6th Floor	Lee Shau Kee, Lee Ka Kit, Colin
	World-Wide House	Lam Ko Yin, Lee King Yue, Fung
	19 Des Voeux Road	Lee Woon King, Leung Sing,
	Central	Eddie Lau Yum Chuen, Li Ning,
	Hong Kong	Lee Ka Shing, Patrick Kwok Ping
		Ho, Ho Wing Fun, John Yip Ying
		Chee, Suen Kwok Lam, Lo Tak
		Shing, Woo Po Shing, Leung Hay
		Man, Angelina Lee Pui Ling, Lee
		Tat Man, Kan Fook Yee, Vincent
		Liang (alternate to Lo Tak Shing),
		Jackson Woo Ka Biu (alternate to
		Woo Po Shing)
Markshing	as above	Lee Shau Kee, Fung Lee Woon
		King, Colin Lam Ko Yin, Lee King
		Yue, Lee Ka Shing
Darnman	as above	as above
Gainwise	as above	as above
Covite	as above	as above
Banshing	as above	as above
Fu Sang	as above	Lee Shau Kee, Lee Tat Man,
		Lee Ka Shing, Colin Lam Ko Yin
		(alternate to Lee Tat Man)
Tako Assets	P.O. Box 71	Colin Lam Ko Yin,
	Craigmuir Chambers	Leung Hay Man, Li Ning,
	Road Town	Peter Wong Man Kong
	Tortola
	British Virgin Islands
Thommen	98 Tam Kon Shan Road	Colin Lam Ko Yin, Li Ning,
	Ngau Kok Wan	Leung Hay Man
	North Tsing Yi
	New Territories
	Hong Kong

129

Henderson Land Development Company Limited

APPENDIX III

GENERAL INFORMATION

The ultimate controlling shareholder of HLD, Markshing, Darnman, Gainwise, Covite, Banshing and Fu Sang is Hopkins, the trustee of the unit trust as described in Note 1 to paragraph (a)(iii) in Section 3 of this Appendix III. The ultimate parent company of HLD, Markshing, Darnman, Gainwise, Covite and Banshing is Henderson Development Limited. The directors of Henderson Development Limited are Lee Shau Kee, Lee Ka Kit, Lee Ka Shing, Lee Tat Man, Fung Lee Woon King, Colin Lam Ko Yin (also alternate to Lee Tat Man) and Woo Po Shing.

The ultimate controlling shareholder of Tako Assets and Thommen is Hong Kong Ferry. The directors of Hong Kong Ferry are Colin Lam Ko Yin, Norman Ho Hau Chong, Michael Kan Yuet Loong, Eddie Lau Yum Chuen, Lee Shau Kee, Leung Hay Man, Li Ning, Peter Wong Man Kong and Alex Wu Shu Chih.

The addresses of the other parties deemed to be acting in concert with HLD are as follows:

Lee Shau Kee: 22nd Floor, 36 MacDonnell Road, Hong Kong; Ho Wing Fun: Flat L, 3rd Floor, 111 Mount Butler Road, Hong Kong; Lee King Yue: Flat D7, Hong Kong Garden, 8 Seymour Road, Hong Kong; Lee Tat Man: Flat A, 10th Floor, Fortune Court, 25 Repulse Bay Road, Hong Kong; Leung Sing: Block 8, Greenwood Terrace, 28 Sui Wo Road, Shatin, New Territories, Hong Kong; Lo Tak Shing: 19th Floor, Eva Court, 36 MacDonnell Road, Mid-levels, Hong Kong; Yang Hsueh Chin: Flat D7, Hong Kong Garden, 8 Seymour Road, Hong Kong; Fung Pok Wah: 21st Floor, Wilshire Park, 12-14 MacDonnell Road, Hong Kong; Fung Chun Wah: 21st Floor, Wilshire Park, 12-14 MacDonnell Road, Hong Kong; Lam Ka Wai: 19B Fine Mansion, 36 Village Road, Hong Kong; Lam Ko Yu: Room 2206, Wellborne Commercial Centre, 8 Java Road, Hong Kong; Lee Siu Lun: Flat B2, 29th Floor, Nicholson Tower, 8 Wongnaichung Gap Road, Hong Kong.

(b) The registered office of HLD is 6th Floor, World-Wide House, 19 Des Voeux Road, Central, Hong Kong.
(c) The principal place of business of HSBC is 1 Queen’s Road Central, Hong Kong.
(d) All costs, charges and expenses of and incidental to the Scheme and the costs of carrying the Scheme into effect will be borne by HLD.
(e) The English text of this document and the forms of proxy shall prevail over the Chinese text.
(f) All announcements in relation to the Proposal will be published as a paid announcement in at least one leading English language newspaper and one leading Chinese language newspaper, being in each case a newspaper which is published daily and circulating generally in Hong Kong.

130

Henderson Land Development Company Limited

GENERAL INFORMATION

APPENDIX III

7. EXPERTS

The following are the qualifications of the experts who have given opinions or advice which are contained in this document:

Name

Qualifications

HSBC Licensed bank and exempt dealer Platinum Registered investment adviser and securities dealer DTZ Property valuer Deloitte Touche Tohmatsu Certified Public Accountants

8. CONSENTS

HSBC, Platinum, DTZ and Deloitte Touche Tohmatsu have given and have not withdrawn their respective written consents to the issue of this document with the inclusion therein of their opinions, letters or valuation reports, as the case may be, and the references to their names, opinions, letters or valuation reports in the form and context in which they respectively appear.

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents are available for inspection at the offices of the Solicitors for HIL, Woo, Kwan, Lee & Lo, at 27th Floor, Jardine House, 1 Connaught Place, Central, Hong Kong during normal business hours on any weekday (public holidays excepted) until the Effective Date or the date on which the Scheme lapses or is withdrawn, whichever is earlier:

(a) the memorandum and articles of association of HIL;
(b) the memorandum and articles of association of HLD;
(c) the audited consolidated financial statements of the HIL Group for each of the years ended 30th June, 2000, 2001 and 2002;
(d) the letter from Platinum to the Independent Director, the text of which is set out on pages 19 to 45 of this document;
(e) the letters and summaries of valuations from DTZ, the texts of which are set out in Appendix II to this document, and the valuation certificates from DTZ; and
(f) the letters of consent referred to in Section 8 of this Appendix.

131

Henderson Land Development Company Limited

SCHEME OF ARRANGEMENT

HCMP 4885/02

IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 4885 OF 2002

In the Matter

HENDERSON INVESTMENT LIMITED

(

)

and

In the Matter of the COMPANIES ORDINANCE, Chapter 32 of the Laws of Hong Kong

Scheme of Arrangement (under Section 166 of the Companies Ordinance, Chapter 32 of the Laws of Hong Kong)

between

HENDERSON INVESTMENT LIMITED ( )

and

the holders of Scheme Shares (as hereinafter defined)

PRELIMINARY

(A) In this Scheme of Arrangement, unless inconsistent with the subject or context, the following expressions shall have the meanings respectively set opposite them:

“Banshing”

Banshing Investment Limited, a company incorporated in Hong Kong with limited liability

“Controlling Parties” Markshing, Darnman, Gainwise, Covite and Banshing, all indirect wholly owned subsidiaries of HLD and beneficially interested in an aggregate of approximately 73.48% of the issued capital of HIL as at the date of this Scheme

132

Henderson Land Development Company Limited

SCHEME OF ARRANGEMENT

“Court”	the High Court of the Hong Kong Special Administrative
	Region
“Covite”	Covite Investment Limited, a company incorporated in
	Hong Kong with limited liability
“Darnman”	Darnman Investment Limited, a company incorporated in
	Hong Kong with limited liability
“Effective Date”	the date on which this Scheme becomes effective in
	accordance with Clause 6 of this Scheme
“Excluded Parties”	Lee Shau Kee, Fu Sang, Ho Wing Fun, Lee King Yue, Lee
	Tat Man, Leung Sing, Lo Tak Shing, Yang Hsueh Chin,
	Fung Pok Wah, Fung Chun Wah, Lam Ka Wai, Lam Ko
	Yu, Lee Siu Lun, Tako Assets and Thommen, all
	beneficially interested in an aggregate of approximately
	1.97% of the issued capital of HIL as at the date of this
	Scheme
“Fu Sang”	Fu Sang Company Limited, a company incorporated in
	Hong Kong with limited liability
“Gainwise”	Gainwise Investment Limited, a company incorporated in
“HIL”	Hong Kong with limited liability Henderson Investment Limited ( ), a
	company incorporated in Hong Kong with limited liability
“HIL Shares”	ordinary shares of HK$0.20 each in the capital of HIL
“HLD”	Henderson Land Development Company Limited ( ), a company incorporated in Hong
	Kong with limited liability
“holder”	a registered holder and includes a person entitled by
	transmission to be registered as such and joint holders
“Markshing”	Markshing Investment Limited, a company incorporated
	in Hong Kong with limited liability
“Record Time”	4:00 p.m. Hong Kong time on the day immediately
	preceding the Effective Date
“Register”	the register of members of HIL
“Scheme”	this scheme of arrangement under Section 166 of the
	Companies Ordinance in its present form or with or
	subject to any modification thereof or addition thereto or
	conditions approved or imposed by the Court

133

Henderson Land Development Company Limited

SCHEME OF ARRANGEMENT

“Scheme Share(s)”	HIL Share(s) in issue as at the Record Time other than
	those beneficially owned by the Controlling Parties
“Tako Assets”	Tako Assets Limited, a company incorporated in the
	British Virgin Islands with limited liability
“Thommen”	Thommen Limited, a company incorporated in Hong
	Kong with limited liability
“HK$”	Hong Kong dollars

(B) The authorised share capital of HIL at the date of this Scheme is HK$600,000,000 divided into 3,000,000,000 HIL Shares 2,817,327,395 of which have been issued and are fully paid and the remainder are unissued.
(C) The primary purpose of this Scheme is that all of the Scheme Shares should be cancelled and that HIL should become a wholly owned subsidiary of HLD.
(D) As at the date of this Scheme, an aggregate of 2,070,243,859 HIL Shares are beneficially owned by the Controlling Parties and registered as follows:

Name of	Name of	Number of
Controlling Parties	Registered Holders	HIL Shares
Markshing	Markshing	342,705,418
	Arsenton Nominees Limited	259,463,000
Darnman	Darnman	34,955,000
	Superb Nominees Limited	49,687,341
Gainwise	Gainwise	167,750,000
	Superb Nominees Limited	49,500,000
Covite	Covite	363,328,900
Banshing	Banshing	751,604,200
	Wing Lung Bank (Nominees) Limited	51,250,000

Each of the Controlling Parties has undertaken that in relation to such HIL Shares in which it is beneficially interested, each of such HIL Shares will remain so registered and beneficially interested until the date on which this Scheme becomes effective, is withdrawn or lapses.

134

Henderson Land Development Company Limited

SCHEME OF ARRANGEMENT

(E) As at the date of this Scheme, an aggregate of 55,351,064 HIL Shares are beneficially owned by the Excluded Parties and registered as follows:

Name of	Name of	Number of
Excluded Parties	Registered Holders	HIL Shares
Lee Shau Kee	Lee Shau Kee	9,482,962
	Hang Seng (Nominees) Limited	25,287,762
	Superb Nominees Limited	9,212
Fu Sang	Fu Sang	5,615,148
Ho Wing Fun	Ho Wing Fun	1,100
Lee King Yue	Lee King Yue	9,028
	HKSCC Nominees Limited	950,000
Lee Tat Man	Hang Seng (Nominees) Limited	6,666
Leung Sing	HKSCC Nominees Limited	150,000
Lo Tak Shing	Lo Tak Shing	4,375
	HKSCC Nominees Limited	400,000
Yang Hsueh Chin	Yang Hsueh Chin	17,711
	HKSCC Nominees Limited	25,000
Fung Pok Wah	HKSCC Nominees Limited	300,000
Fung Chun Wah	HKSCC Nominees Limited	1,751,000
Lam Ka Wai	HKSCC Nominees Limited	1,137,000
Lam Ko Yu	HKSCC Nominees Limited	941,000
Lee Siu Lun	HKSCC Nominees Limited	4,857,100
Tako Assets	HKSCC Nominees Limited	3,000,000
Thommen	HKSCC Nominees Limited	1,406,000

Each of the Excluded Parties, being deemed to be acting in concert with HLD under The Code on Takeovers and Mergers, has undertaken that in relation to such HIL Shares in which each of them is beneficially interested, each of such HIL Shares will remain so registered and beneficially interested until the date on which this Scheme becomes effective, is withdrawn or lapses and will procure that such HIL Shares will not be represented or voted at the meeting convened by direction of the Court for the purpose of approving this Scheme.

(F) HLD and each of the Controlling Parties and Excluded Parties have agreed to appear by Counsel on the hearing of the Petition to sanction this Scheme and to undertake to the Court to be bound thereby and will execute and do and procure to be executed and done all such documents, acts and things as may be necessary or desirable to be executed or done by each of them for the purpose of giving effect to this Scheme.

135

Henderson Land Development Company Limited

SCHEME OF ARRANGEMENT

THE SCHEME

PART I

Cancellation of the Scheme Shares

On the Effective Date:
(a) the authorised and issued share capital of HIL shall be reduced by cancelling and extinguishing the Scheme Shares;
(b) subject to and forthwith upon such reduction of capital taking effect, the authorised share capital of HIL shall be increased to its former amount of HK$600,000,000 by the creation of such number of new HIL Shares as is equal to the number of the Scheme Shares cancelled; and
(c) HIL shall apply the credit arising in its books of account as a result of the reduction of its share capital referred to in sub-clause (a) of this Clause 1 in paying up in full at par the new HIL Shares to be created as aforesaid, which new HIL Shares shall be allotted and issued, credited as fully paid, to HLD or as HLD may direct.

PART II

Consideration for cancellation of the Scheme Shares

In consideration of the cancellation and extinguishment of the Scheme Shares, HLD shall pay or cause to be paid to each holder of Scheme Shares (as appearing in the Register at the Record Time) HK$7.60 for each Scheme Share held.

PART III

General

(a) Not later than ten days after the Effective Date, HLD shall send or cause to be sent to the holders of Scheme Shares (as appearing in the Register at the Record Time), cheques in respect of the sums payable to such holders pursuant to Clause 2 of this Scheme.
(b) Unless indicated otherwise in writing to the share registrar of HIL, Standard Registrars Limited at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong, all such cheques shall be sent by post in pre-paid envelopes addressed to such holders at their respective addresses as appearing on the Register at the Record Time or, in the case of joint holders, at the address as appearing on the Register at the Record Time of the joint holder whose name then stands first in the Register in respect of the relevant joint holding.
(c) Cheques shall be posted at the risk of the addressees and neither HIL nor HLD shall be responsible for any loss or delay in transmission.

136

Henderson Land Development Company Limited

SCHEME OF ARRANGEMENT

(d) Each such cheque shall be payable to the order of the person to whom, in accordance with the provisions of paragraph (b) of this Clause 3, the envelope containing the same is addressed and the encashment of any such cheque shall be a good discharge to HLD for the monies represented thereby.
(e) On or after the day being six calendar months after the posting of the cheques pursuant to paragraph (b) of this Clause 3, HLD shall have the right to cancel or countermand payment of any such cheque which has not then been encashed or has been returned uncashed and shall place all monies represented thereby in a deposit account in HIL’s name with a licensed bank in Hong Kong selected by HIL. HIL shall hold such monies until the expiration of six years from the Effective Date and shall prior to such date make payments thereout of the sums payable pursuant to Clause 2 of this Scheme to persons who satisfy HIL that they are respectively entitled thereto and the cheques referred to in paragraph (b) of this Clause 3 of which they are payees have not been cashed. Any payments made by HIL hereunder shall include any interest accrued on the sums to which the respective persons are entitled pursuant to Clause 2 of this Scheme, calculated at the annual rate prevailing from time to time at the licensed bank in which the monies are deposited, subject, if applicable, to the deduction of any interest or withholding tax or any other deductions required by law. HIL shall exercise its absolute discretion in determining whether or not it is satisfied that any person is so entitled and a certificate of HIL to the effect that any particular person is so entitled or not so entitled, as the case may be, shall be conclusive and binding upon all persons claiming an interest in the relevant monies.
(f) On the expiration of six years from the Effective Date, HLD shall be released from any further obligation to make any payments under this Scheme and HIL shall transfer to HLD the balance, if any, of the sums standing to the credit of the deposit account referred to in paragraph (e) of this Clause 3 including accrued interest subject, if applicable, to the deduction of interest tax or any withholding tax or any other deductions required by laws.
(g) Paragraph (f) of this Clause 3 shall take effect subject to any prohibition or condition imposed by law.
Each certificate existing at the Record Time in respect of a holding of any number of Scheme Shares shall on the Effective Date cease to be valid for any purpose as a certificate for such Scheme Shares and every holder of such certificate shall be bound at the request of HIL to deliver up the same to HIL for the cancellation thereof.
All mandates or relevant instructions in force at the Record Time relating to any of the Scheme Shares shall cease to be valid and effective mandates or instructions.
This Scheme shall become effective as soon as an office copy of the Order of the Court sanctioning this Scheme under Section 166 of the Companies Ordinance, Chapter 32 of the Laws of the Hong Kong Special Administrative Region, and confirming, under Section 60 of the same Ordinance, the reduction of share capital provided for in this Scheme, together with a minute relating to the share capital of HIL and containing the particulars required by Section 61 of such Ordinance, shall have been duly registered by the Registrar of Companies.

137

Henderson Land Development Company Limited

SCHEME OF ARRANGEMENT

Unless this Scheme shall have become effective on or before 31st March, 2003 or such later date, if any, as the Court may allow, this Scheme shall lapse.
HIL and HLD may jointly consent for and on behalf of all concerned to any modification of or addition to the Scheme or to any condition which the Court may think fit to approve or impose.
All costs, charges and expenses of and incidental to this Scheme and the costs of carrying this Scheme into effect will be borne by HLD.

Dated 6th December, 2002.

138

Henderson Land Development Company Limited

NOTICE OF COURT MEETING

HCMP 4885/02

IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 4885 OF 2002

In the Matter of HENDERSON INVESTMENT LIMITED ( )

and In the Matter of the COMPANIES ORDINANCE, Chapter 32 of the Laws of Hong Kong

NOTICE OF COURT MEETING

NOTICE IS HEREBY GIVEN that, by an Order dated 3rd December, 2002 made in the above matters, the Court has directed a Meeting to be convened of the holders of the ordinary shares of HK$0.20 each in the capital of the above-named Company other than those of such shares beneficially owned by Markshing Investment Limited, Darnman Investment Limited, Gainwise Investment Limited, Covite Investment Limited and Banshing Investment Limited, all being indirect wholly owned subsidiaries of Henderson Land Development Company Limited ( ), for the purpose of considering and, if thought fit, approving (with or without modification) a Scheme of Arrangement proposed to be made between the Company and the aforementioned holders of ordinary shares of HK$0.20 each and that such Meeting will be held in the Stork and Bamboo Rooms, Mandarin Oriental, 5 Connaught Road Central, Hong Kong on Thursday, 2nd January, 2003 at 11:00 a.m. at which place and time all such holders of ordinary shares of HK$0.20 each in the capital of the Company are requested to attend.

A copy of the Scheme of Arrangement and a copy of the Explanatory Statement required to be furnished pursuant to Section 166A of the above-mentioned Ordinance are incorporated in the composite document of which this Notice forms part.

The above-mentioned holders of ordinary shares of HK$0.20 each in the capital of the Company may vote in person at the Meeting or they may appoint another person, whether a member of the Company or not, as their proxy to attend and vote in their stead. A pink form of proxy for use at the Meeting is enclosed herewith.

139

Henderson Land Development Company Limited

NOTICE OF COURT MEETING

It is requested that forms appointing proxies be lodged with the Registrar of the Company, Standard Registrars Limited, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not less than 48 hours before the time appointed for the Meeting, but if forms are not so lodged they may be handed to the Chairman of the Meeting at the Meeting.

In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the vote(s) of the other joint holder(s), and for this purpose seniority will be determined by the order in which the names stand in the Register of Members of the Company in respect of the relevant joint holding.

By the same Order, the Court has appointed Philip Yuen Pak Yiu or, failing him, Augustine Wong Ho Ming or, failing him, Donald Cheung Ping Keung to act as Chairman of the Meeting and has directed the Chairman to report the result thereof to the Court.

The Scheme of Arrangement will be subject to the subsequent approval of the Court.

Dated 6th December, 2002

WOO, KWAN, LEE & LO 27th Floor, Jardine House 1 Connaught Place Central, Hong Kong

Solicitors for Henderson Investment Limited

140

Henderson Land Development Company Limited

NOTICE OF EXTRAORDINARY GENERAL MEETING

==> picture [217 x 35] intentionally omitted <==

(incorporated in Hong Kong with limited liability)

NOTICE IS HEREBY GIVEN that an Extraordinary General Meeting of the above-named Company will be held in the Stork and Bamboo Rooms, Mandarin Oriental, 5 Connaught Road Central, Hong Kong on Thursday, 2nd January, 2003 at 11:30 a.m. (or so soon thereafter as the meeting of certain holders of the ordinary shares of HK$0.20 each in the capital of the Company convened by direction of the High Court of the Hong Kong Special Administrative Region for the same place and day shall have been concluded or adjourned), for the purpose of considering and, if thought fit, passing the following resolution which will be proposed as a Special Resolution:

SPECIAL RESOLUTION

“THAT:

(A) the Scheme of Arrangement dated 6th December, 2002 (the “Scheme”) between the Company and the holders of Scheme Shares (as defined in the Scheme) in the form of the print which has been produced to this Meeting and for the purposes of identification signed by the Chairman of this Meeting, with any modification thereof or addition thereto or condition approved or imposed by the Court, be and is hereby approved; and
(B) for the purpose of giving effect to the Scheme, on the Effective Date (as defined in the Scheme):
(i) the authorised and issued share capital of the Company be reduced by cancelling and extinguishing the Scheme Shares;
(ii) subject to and forthwith upon such reduction of capital taking effect, the authorised share capital of the Company be increased to its former amount of HK$600,000,000 by the creation of such number of new ordinary shares of HK$0.20 each in the capital of the Company as is equal to the number of the Scheme Shares cancelled; and
(iii) the Company shall apply the credit arising in its books of account as a result of such reduction of capital in paying up in full at par the new ordinary shares of HK$0.20 each in the capital of the Company to be created as aforesaid, which new shares shall be allotted and issued, credited as fully paid, to Henderson Land Development Company Limited or as it may direct and the Directors of the Company be and are hereby unconditionally authorised to allot and issue the same accordingly.”

By Order of the Board John Yip Secretary

Dated 6th December, 2002

141

Henderson Land Development Company Limited

NOTICE OF EXTRAORDINARY GENERAL MEETING

Registered Office:

6th Floor World-Wide House 19 Des Voeux Road Central Hong Kong

Notes:

(i) A member entitled to attend and vote at the above Meeting is entitled to appoint not more than two persons as his proxy or proxies to attend and, on a poll, to vote instead of him. A proxy need not be a member of the Company, but must attend the Meeting in person to represent him.
(ii) A white form of proxy for use at the Meeting is enclosed herewith.
(iii) In order to be valid, the white form of proxy, together with the power of attorney or other authority (if any) under which it is signed or a notarially certified copy thereof, must be lodged with the Registrar of the Company, Standard Registrars Limited, at 5th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong not less than 48 hours before the time for holding the Meeting or any adjournment thereof. Completion and return of the form of proxy will not preclude a member from attending the Meeting and voting in person if he so wishes. In the event that a member attends the Meeting after having lodged his form of proxy, his form of proxy will be deemed to have been revoked.
(iv) In the case of joint holders of a share, any one of such holders may vote at the Meeting, either personally or by proxy, in respect of such share as if he were solely entitled thereto; but if more than one of such joint holders be present at the Meeting personally or by proxy, that one of the holders so present whose name stands first on the register of members in respect of such share shall alone be entitled to vote in respect thereof.

142

Henderson Land Development Company Limited

AI assistant

Swire Pacific Limited 'A' — Proxy Solicitation & Information Statement 2002

48876_rns_2002-12-06_17a90203-f229-46f9-a67d-51aca572c85c.pdf

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

DISCLOSEABLE AND CONNECTED TRANSACTION

Financial adviser to Henderson Land Development Company Limited

HSBC

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

Proposed Privatisation of Henderson Investment Limited by Henderson Land Development Company Limited by way of a Scheme of Arrangement under Section 166 of the Companies Ordinance

1. INTRODUCTION

LETTER FROM THE BOARD

2. INFORMATION RELATING TO THE HIL GROUP

History

LETTER FROM THE BOARD

HIL Group Structure

LETTER FROM THE BOARD

Business

Property rental

Hotel and retailing operations

LETTER FROM THE BOARD

Infrastructural projects

Subsidiary and associated companies

Hong Kong and China Gas

Hong Kong Ferry

LETTER FROM THE BOARD

Miramar

Henderson Cyber

Financial information

Net tangible assets

LETTER FROM THE BOARD

3. SHAREHOLDING STRUCTURE OF HIL

LETTER FROM THE BOARD

Notes:

4. CONDITIONS OF THE PROPOSAL

LETTER FROM THE BOARD

5. REASONS FOR THE ACQUISITIONS

6. CONSIDERATION

7. FINANCIAL EFFECTS OF THE ACQUISITIONS

(a) Earnings

(b) Net assets

LETTER FROM THE BOARD

(c) Net debt/equity ratio

8. INFORMATION RELATING TO HLD

9. CONNECTED TRANSACTION

10. ADDITIONAL INFORMATION

1. RESPONSIBILITY STATEMENT

2. DISCLOSURE OF INTERESTS

(i) Ordinary Shares (unless otherwise specified)

(ii) Interests in options to subscribe for shares in subsidiaries

(a) Henderson Cyber

(b) Henderson China Holdings Limited (“Henderson China”)

APPENDIX I

GENERAL INFORMATION

3. SUBSTANTIAL SHAREHOLDINGS

APPENDIX I

4. LITIGATION

5. COMPANY SECRETARY

6. TRANSFER OFFICE

7. MISCELLANEOUS

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

CONTENTS

DEFINITIONS

DEFINITIONS

DEFINITIONS

EXPECTED TIMETABLE

EXPECTED TIMETABLE

Proposed Privatisation of HENDERSON INVESTMENT LIMITED by Henderson Land Development Company Limited by way of a Scheme of Arrangement under Section 166 of the Companies Ordinance

INTRODUCTION

LETTER FROM THE BOARD

LETTER FROM THE BOARD

LETTER FROM THE BOARD

SHAREHOLDING STRUCTURE

LETTER FROM THE BOARD

Notes:

SUMMARY OF THE PROPOSAL

LETTER FROM THE BOARD

FINANCIAL EFFECTS OF THE PROPOSAL

Swire Pacific Limited 'A' Proxy Solicitation & Information Statement 2002