ew_00127IR

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1 Stock Code 127 Interim Report For The Six Months Ended 30th June, 2016

2 CONTENTS Corporate Information 1 Results Condensed Consolidated Statement of Comprehensive Income 3 Condensed Consolidated Statement of Financial Position 5 Condensed Consolidated Statement of Changes in Equity 8 Condensed Consolidated Statement of Cash Flows 11 Notes to the Condensed Consolidated Financial Statements 12 Interim Dividend 63 Closure of Register of Members 63 Financial Operation Review 63 Business Review 79 Other Information and Events after the Reporting Period 82 Prospects 84 Directors and Chief Executives Interests in the Securities of the Company and Associated Corporation 85 Substantial Shareholders Interests in the Securities of the Company 86 Share Award Scheme 87 Audit Committee Review 87 Corporate Governance 87 Model Code for Securities Transactions 88 Purchase, Sale or Redemption of the Company s Listed Securities 88 Disclosure of Change of Information of Directors under Rules 13.51B(1) and 13.51(2) of the Listing Rules 13.51B(1)13.51(2) 89 Appreciation 89 * Should there be any discrepancy between the English and Chinese versions, the English version shall prevail. Date of this report: 30th August, 2016

3 CORPORATE INFORMATION Directors Executive Directors: Chan, Sze-wan (Chief Executive Officer) Chan, Lok-wan Lam, Kwong-wai Non-executive Directors: Lau, Ming-wai (Chairman) Amy Lau, Yuk-wai Independent Non-executive Directors: Chan, Kwok-wai Phillis Loh, Lai-ping Ma, Tsz-chun Audit Committee Chan, Kwok-wai (Chairman) Phillis Loh, Lai-ping Ma, Tsz-chun Investment Committee Chan, Sze-wan (Chairman) Lam, Kwong-wai (Chief Investment Officer) Chan, Kwok-wai Ma, Tsz-chun Nomination Committee Phillis Loh, Lai-ping (Chairman) Chan, Kwok-wai Ma, Tsz-chun Remuneration Committee Chan, Kwok-wai (Chairman) Phillis Loh, Lai-ping Ma, Tsz-chun Special Committee Chan, Kwok-wai Phillis Loh, Lai-ping Ma, Tsz-chun Company Secretary Lam, Kwong-wai Solicitors Baker & McKenzie Sidley Austin Sit, Fung, Kwong & Shum Auditors HLB Hodgson Impey Cheng Limited Bankers (Listed in alphabetical order) Bank of China (Hong Kong) Limited Bank of Communications Co., Ltd. Chong Hing Bank Limited OCBC Wing Hang Bank Limited The Bank of East Asia, Limited, London Branch 1

4 CORPORATE INFORMATION (continued) Place of Incorporation Bermuda Registered Office Canon s Court, 22 Victoria Street Hamilton HM12, Bermuda Principal Office in Hong Kong 26th Floor, MassMutual Tower 38 Gloucester Road Wanchai, Hong Kong Principal Registrar and Transfer Office MUFG Fund Services (Bermuda) Limited The Belvedere Building, 69 Pitts Bay Road Pembroke HM08, Bermuda Branch Registrar and Transfer Office in Hong Kong Computershare Hong Kong Investor Services Limited Shops th Floor, Hopewell Centre 183 Queen s Road East Wanchai, Hong Kong Tel: (852) Fax: (852) /(852) Offices in the People s Republic of China Beijing Office: Room 202, Oriental Place No. 9 East Dongfang Road North Dongsanhuan Road Chaoyang District, Beijing, PRC Post Code: Tel: (8610) Fax: (8610) Shanghai Office: Room 303, Evergo Tower 1325 Central Huaihai Road Xuhui District, Shanghai, PRC Post Code: Tel: (8621) Shenzhen Office: Rooms 1-3A, South Gong, 6th Floor Lowu Commercial Plaza 25 Railway Station Square Luohu District, Shenzhen Guangdong Province, PRC Post Code: Tel: (86755) Fax: (86755) Website Stock Code 127 Board Lot 500 shares Investor Relations For enquiries relating to investor relations, please contact: Tel: (852) Fax: (852) /(852) [email protected] Canon s Court, 22 Victoria Street Hamilton HM12, Bermuda MUFG Fund Services (Bermuda) Limited The Belvedere Building, 69 Pitts Bay Road Pembroke HM08, Bermuda (852) (852) /(852) (8610) (8610) (8621) /F1-3A (86755) (86755) (852) (852) /(852) [email protected] 2

5 RESULTS The board of directors (the Board ) of Chinese Estates Holdings Limited (the Company ) would like to announce the unaudited consolidated interim results of the Company and its subsidiaries (together, the Group ) for the six months ended 30th June, 2016 (the Period ) together with the comparative figures for the corresponding period in 2015: CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the six months ended 30th June, 2016 Chinese Estates Holdings Limited Six months ended 30th June, Notes (Unaudited) (Unaudited) Revenue 3 1,944, ,961 Cost of sales (588,462) (201,286) Gross profit 1,356, ,675 Other income 5 51,493 60,371 Investment income, net 6 1,170, ,529 Administrative expenses (192,835) (215,322) Other expenses (404) Gain (loss) on disposals of equipment, net 99 (1,646) Fair value changes on investment properties (891,210) (543,529) Finance costs 8 (89,415) (185,408) Other gains and losses, net 9 1,992,303 (97,018) Share of results of associates 117, ,305 Profit before tax 3,514,764 98,553 Income tax expense 10 (352,087) (215,788) Profit (loss) for the period 7 3,162,677 (117,235) Other comprehensive (expenses) income Items that will not be reclassified to profit or loss Fair value changes on financial assets measured at fair value through other comprehensive income Share of other comprehensive expenses of associates (2,336,029) (2) (2,336,031) 3

6 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (continued) For the six months ended 30th June, 2016 Six months ended 30th June, Notes (Unaudited) (Unaudited) Other comprehensive (expenses) income (continued) Items that may be reclassified subsequently to profit or loss Fair value changes on available-for-sale investments Exchange differences on translation of foreign operations Reclassification adjustment related to foreign operation disposed of during the period Share of other comprehensive (expenses) income of associates (11,533) (265,049) 23,868 9,053 (2,419) 1,325 (258,415) 13,660 Other comprehensive (expenses) income for the period (net of tax) (2,594,446) 13,660 Total comprehensive income (expenses) for the period 568,231 (103,575) Profit (loss) for the period attributable to: Owners of the Company 2,931,016 (115,384) Non-controlling interests 231,661 (1,851) 3,162,677 (117,235) Total comprehensive income (expenses) for the period attributable to: Owners of the Company 336,570 (101,724) Non-controlling interests 231,661 (1,851) 568,231 (103,575) Earnings (loss) per share (HK$) 12 Basic and diluted (0.061) 4

7 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION At 30th June, th June, st December, 2015 Notes (Unaudited) (Audited) Non-current assets Investment properties 13 12,487,131 21,941,263 Property, plant and equipment 48,261 50,540 Intangible assets Goodwill , ,938 Interests in associates 15 2,059,036 3,770,476 Advances to associates 16 78,732 55,482 Available-for-sale investments ,649 Financial assets designated as at fair value through profit or loss 798,489 Financial assets measured at fair value through profit or loss ,741 Financial assets measured at fair value through other comprehensive income 19 5,421,490 Advances to investee companies 423, ,579 Advance to a non-controlling shareholder 14,908 14,908 Other receivables 20 7,344,707 3,998,358 Deferred tax assets 3,715 4,280 Pledged deposits 72,666 24,557 28,740,909 32,138,519 Current assets Stock of properties 2,181,865 2,595,987 Available-for-sale investment 17 67,625 Investments held-for-trading 39, ,244 Financial assets designated as at fair value through profit or loss 10,270,781 Financial assets measured at fair value through profit or loss 18 9,229,940 Financial assets measured at fair value through other comprehensive income 19 53,801 Inventories 2,293 2,533 Debtors, deposits, other receivables and prepayments 20 5,798,622 3,366,415 Securities trading receivables and deposits 263,032 86,175 Tax recoverable 3,956 3,955 Pledged deposits 994, ,193 Time deposits, bank balances and cash 1,898,509 2,849,807 Sales proceeds held by stakeholders 454,057 1,891,712 20,919,806 21,677,427 Assets classified as held for sale 21 10,681,698 9,239,271 31,601,504 30,916,698 5

8 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued) At 30th June, th June, st December, 2015 Notes (Unaudited) (Audited) Current liabilities Creditors and accruals ,039 1,081,746 Securities trading and margin payable 6,589,452 11,181 Deposits and receipts in advance 677,033 2,106,924 Tax liabilities 332, ,906 Borrowings 23 7,609,428 8,651,773 Provisions 467 1,249 Liabilities directly associated with assets classified as held for sale 15,588,022 12,092, ,870,102 1,857,996 20,458,124 13,950,775 Net current assets 11,143,380 16,965,923 Total assets less current liabilities 39,884,289 49,104,442 Equity attributable to owners of the Company Share capital , ,762 Properties revaluation reserve 98,162 98,162 Securities investments reserve 16,044 Financial assets measured at fair value through other comprehensive income reserve (2,222,594) Statutory reserve ,028 Other reserve (2,407) (2,407) Special reserve 2,499,685 2,499,685 Capital redemption reserve 138, ,062 Translation reserve (413,608) (155,193) Amounts recognised in other comprehensive income and accumulated in equity relating to non-current assets held for sale Retained profits 127,054 declared/proposed dividends 10,186,686 19,076 others 26,433,386 37,292,327 36,908,802 40,247,600 Non-controlling interests 249,423 77,762 Total equity 37,158,225 40,325,362 6

9 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued) At 30th June, th June, st December, 2015 Notes (Unaudited) (Audited) Non-current liabilities Borrowings 23 2,416,381 5,880,000 Amounts due to associates ,819 1,789,647 Amounts due to investee companies 25 27,085 Amounts due to non-controlling shareholders 25 99, ,768 Deferred tax liabilities 90, ,580 2,726,064 8,779,080 39,884,289 49,104,442 7

10 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the six months ended 30th June, 2016 Share capital Attributable to owners of the Company Properties revaluation reserve Securities investments reserve Financial assets measured at fair value through other comprehensive income reserve Statutory reserve (note (i)) (note (i)) (note (ii)) (i) (i) (ii) At 1st January, 2015 (audited) 190, ,216 41,022 53,650 Loss for the period Other comprehensive (expenses) income for the period (11,533) Total comprehensive (expenses) income for the period (11,533) PRC statutory reserve 41 Final dividend for 2014 paid Special interim dividend for 2015 declared and paid subsequently At 30th June, 2015 (unaudited) 190, ,216 29,489 53,691 Profit (loss) for the period Other comprehensive (expenses) income for the period (127,054) (13,445) Total comprehensive (expenses) income for the period (127,054) (13,445) PRC statutory reserve 2,546 Release of reserve upon disposals of subsidiaries (32,209) Interim dividend for 2015 paid Special interim dividend for 2015 paid At 31st December, 2015 and 1st January, 2016 (originally stated) (audited) Effect on early adoption of Hong Kong Financial Reporting Standard 9 (2014) (net of tax) 190,762 98,162 16,044 24,028 9 (2014 (16,044) 113,437 At 1st January, 2016 (restated) 190,762 98, ,437 24,028 Profit for the period Other comprehensive expenses for the period (2,336,031) Total comprehensive (expenses) income for the period (2,336,031) Release of reserves upon disposals of subsidiaries (23,360) Dividend paid to a non-controlling shareholder Final dividend for 2015 paid Special interim dividend for 2016 paid At 30th June, 2016 (unaudited) 190,762 98,162 (2,222,594) 668 8

11 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) For the six months ended 30th June, 2016 Attributable to owners of the Company Other reserve Special reserve Capital redemption reserve Translation reserve Amounts relating to non-current assets held for sale Retained profits Total Noncontrolling interests Total equity (note (iii)) (note (iv)) (note (v)) (iii) (iv) (v) (2,435) 2,499, ,062 1,026,504 37,394,888 41,567,354 85,239 41,652,593 (115,384) (115,384) (1,851) (117,235) 10 25,183 13,660 13, ,183 (115,384) (101,724) (1,851) (103,575) (41) (19,076) (19,076) (19,076) (4,959,810) (4,959,810) (4,959,810) (2,425) 2,499, ,062 1,051,687 32,300,577 36,486,744 83,388 36,570,132 7,842,592 7,842,592 (5,626) 7,836, (1,206,880) 127,054 (1,220,307) (1,220,307) 18 (1,206,880) 127,054 7,842,592 6,622,285 (5,626) 6,616,659 (2,546) 32,209 (572,286) (572,286) (572,286) (2,289,143) (2,289,143) (2,289,143) (2,407) 2,499, ,062 (155,193) 127,054 37,311,403 40,247,600 77,762 40,325,362 61, , ,946 (2,407) 2,499, ,062 (155,193) 127,054 37,372,956 40,406,546 77,762 40,484,308 2,931,016 2,931, ,661 3,162,677 (258,415) (2,594,446) (2,594,446) (258,415) 2,931, , , ,231 (127,054) 150,414 (60,000) (60,000) (19,076) (19,076) (19,076) (3,815,238) (3,815,238) (3,815,238) (2,407) 2,499, ,062 (413,608) 36,620,072 36,908, ,423 37,158,225 9

12 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued) For the six months ended 30th June, 2016 Notes: (i) The carrying amount of the loss on fair value change of listed equity investment included in financial assets measured at fair value through other comprehensive income reserve was approximately HK$2,314,494,000 as at 30th June, 2016 (31st December, 2015: in securities investments reserve of nil). (i) 2,314,494,000 (ii) The statutory reserve of the Group refers to the People s Republic of China ( PRC ) statutory reserve fund. Appropriations to such reserve fund are made out of profit after tax as recorded in the statutory financial statements of the PRC subsidiaries. The amount should not be less than 10% of the profit after tax as recorded in the statutory financial statements unless the aggregate amount exceeds 50% of the registered capital of the PRC subsidiaries. The statutory reserve can be used to make up prior year losses, if any, and can be applied in conversion into the PRC subsidiaries capital by means of capitalisation issue. (iii) The movement of other reserve for the period represented the release of the negative reserve held by an associate of the Group upon the disposals of the relevant properties. (iv) Special reserve represented the difference arising from the aggregate of the share capital and premium amount of the former holding company and the Company upon redomicile of the holding company as a Bermuda Company in 1989 and is non-distributable. (v) Amount represented Amount recognised in other comprehensive income and accumulated in equity relating to non-current assets held for sale. (ii) 10% 50% (iii) (iv) (v) 10

13 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS For the six months ended 30th June, 2016 Six months ended 30th June, Note (Unaudited) (Unaudited) Net cash generated from operating activities 3,858,693 2,630,000 Net cash generated from investing activities (Increase) decrease in pledged deposits (951,819) 203,104 Contributions to available-for-sale investments (564,287) Partial payment for purchase of a financial asset measured at fair value through other comprehensive income (346,308) Purchases of investment properties (3,554,052) Net cash inflow on disposals of subsidiaries 26 3,696,330 2,206,293 Deferred consideration received in respect of disposals of subsidiaries in prior year 1,562,500 Other investing activities 520, , ,196 2,045,045 Net cash used in financing activities Bank loans and other loans repaid, net (1,265,152) (2,323,690) Dividends paid (3,834,314) (2,298,749) Other financing activities (632,359) (240,450) (5,731,825) (4,862,889) Net decrease in cash and cash equivalents (945,936) (187,844) Cash and cash equivalents at 1st January 2,862,041 4,742,903 Effect of foreign exchange rate changes (1,341) 3,665 Cash and cash equivalents at 30th June 1,914,764 4,558,724 Analysis of the balances of cash and cash equivalents Time deposits, bank balances and cash 1,898,509 4,513,606 Bank balances and cash included in assets classified as held for sale 16,255 45,118 1,914,764 4,558,724 11

14 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the six months ended 30th June, Basis of Preparation These unaudited condensed consolidated financial statements have been prepared in accordance with the applicable disclosure requirements of Appendix 16 to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and with Hong Kong Accounting Standard ( HKAS ) 34 Interim Financial Reporting issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ). These unaudited condensed consolidated financial statements have been prepared under the historical cost basis, except for certain properties and financial instruments, which are measured at their fair values. 2. Application of New and Amended Hong Kong Financial Reporting Standards ( HKFRSs ) The accounting policies adopted in these unaudited condensed consolidated financial statements for the Period are consistent with those followed in the preparation of the Group s consolidated financial statements for the year ended 31st December, 2015 except as described below. In the current period, the Group has applied, for the first time, the following amendments to existing HKFRSs ( Amendments ) issued by the HKICPA, which are effective for current accounting period of the Group. The Amendments adopted by the Group in these unaudited condensed consolidated financial statements are set out below: HKFRSs (Amendments) HKFRS 10, HKFRS 12 and HKAS 28 (2011) (Amendments) HKFRS 11 (Amendments) HKAS 1 (Amendments) Annual Improvements to HKFRSs Cycle Investment Entities: Applying the Consolidation Exception Accounting for Acquisitions of Interests in Joint Operations Disclosure Initiative

15 2. Application of New and Amended Hong Kong Financial Reporting Standards ( HKFRSs ) (continued) 2. HKAS 16 and HKAS 38 (Amendments) HKAS 16 and HKAS 41 (Amendments) HKAS 27 (2011) (Amendments) Clarification of Acceptable Methods of Depreciation and Amortisation Agriculture: Bearer Plants Equity Method in Separate Financial Statements Amendments to HKAS 1 Disclosure Initiative Amendments to HKAS 1 include narrow-focus improvements in respect of the presentation and disclosure in financial statements. The amendments clarify: the materiality requirements in HKAS 1; that specific line items in the statement of comprehensive income and the statement of financial position may be disaggregated; that entities have flexibility as to the order in which they present the notes to financial statements; and that the share of other comprehensive income of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss. Furthermore, the amendments clarify the requirements that apply when additional subtotals are presented in the statement of financial position and the statement of comprehensive income. The application of the Amendments had no material effect on how the results and financial position for the current or prior accounting periods are prepared and presented. Accordingly, no prior period adjustment has been required. HKFRS 9 Financial Instruments During the Period, the Group has early adopted HKFRS 9 (2014) that is effective for annual periods beginning on or after 1st January, The Group has chosen 1st January, 2016 as its date of initial application

16 2. Application of New and Amended Hong Kong Financial Reporting Standards ( HKFRSs ) (continued) HKFRS 9 Financial Instruments (continued) Accounting policies applied from 1st January, 2016 HKFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. The final version of HKFRS 9 was issued in September It replaces the guidance in HKAS 39 Financial Instruments: Recognition and Measurement that relates to the classification and measurement of financial instruments. HKFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other comprehensive income ( FVTOCI ) and fair value through profit or loss ( FVTPL ). The basis of classification depends on the entity s business model and the contractual cash flow characteristics of the financial assets. Investments in equity instruments (that are not held-for-trading) are measured at fair values with an irrevocable election at inception to present changes in fair value in other comprehensive income not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in HKAS 39. For financial liabilities, there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at FVTPL. HKFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the hedged ratio to be the same as the one management actually uses for risk management purposes. Financial Assets (i) Classification (i) From 1st January, 2016, the Group classifies its financial assets in the following measurement categories: those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and those to be measured at amortised cost. The classification depends on the entity s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investments (that are not held-for-trading) at FVTOCI. The Group reclassifies debt investments when and only when its business model for managing those assets changes. 14

17 2. Application of New and Amended Hong Kong Financial Reporting Standards ( HKFRSs ) (continued) HKFRS 9 Financial Instruments (continued) Accounting policies applied from 1st January, 2016 (continued) Financial Assets (continued) (ii) Measurement At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at FVTPL, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets measured at FVTPL are recognised in profit or loss. Debt instruments Subsequent measurement of debt instruments depends on the Group s business model for managing the assets and the cash flow characteristics of the assets. There are three measurement categories into which the Group classifies its debt instruments: Amortised cost: Assets that are held for collection of contractual cash flows, where the assets cash flows represent solely payments of principal and interest, are measured at amortised cost. A gain or loss on a debt investment that is subsequently measured at amortised cost and is not part of a hedging relationship is recognised in profit or loss when the asset is derecognised or impaired. Interest income from these financial assets is included in investment income using the effective interest rate method. FVTOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets cash flows represent solely payments of principal and interest, are measured at FVTOCI. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of impairment gains or losses, interest income and foreign exchange gains or losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss and recognised in investment income/expenses. Interest income from these financial assets is included in investment income using the effective interest rate method. FVTPL: Assets that do not meet the criteria for amortised cost or FVTOCI are measured at FVTPL. A gain or loss on a debt investment that is subsequently measured at FVTPL and is not part of a hedging relationship is recognised in profit or loss and presented net in the consolidated statement of comprehensive income within investment income/expenses in the period in which it arises. Interest income from these financial assets is included in investment income (ii) 15

18 2. Application of New and Amended Hong Kong Financial Reporting Standards ( HKFRSs ) (continued) HKFRS 9 Financial Instruments (continued) Accounting policies applied from 1st January, 2016 (continued) Financial Assets (continued) (ii) Measurement (continued) Equity instruments The Group subsequently measures all equity investments at fair value. Where the Group s management has elected to present fair value gains and losses on equity investments (that are not held-for-trading) in other comprehensive income/expenses, there is no subsequent reclassification of fair value gains and losses to profit or loss. Dividends from such investments continue to be recognised in profit or loss as investment income when the Group s right to receive payments is established. Changes in the fair value of financial assets measured at FVTPL are recognised in investment income/expenses in the consolidated statement of comprehensive income as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVTOCI are not reported separately from other changes in fair value. (iii) Impairment The Group assesses on a forward looking basis the expected credit losses associated with its assets measured at amortised cost and FVTOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. In accordance with HKFRS 9, the Group did not restate prior periods and the cumulative effect of initially applying the standard as an adjustment was recognised in either retained earnings or an appropriate equity reserve as of the opening balance as at 1st January, (ii) (iii) 9 16

19 2. Application of New and Amended Hong Kong Financial Reporting Standards ( HKFRSs ) (continued) HKFRS 9 Financial Instruments (continued) Accounting policies applied from 1st January, 2016 (continued) Financial Assets (continued) The following summarises the classification and measurement changes for the Group s financial assets on 1st January, 2016, the Group s date of initial application of HKFRS 9: (i) Unlisted equity securities previously classified as available-forsale investments (i) The Group elected to present in other comprehensive income changes in the fair value of all its unlisted equity securities previously classified as available-for-sale investments because these investments are not held-fortrading. As a result, the financial assets were reclassified from available-for-sale investments with original carrying amount of approximately HK$794,693,000 to financial assets measured at FVTOCI and were remeasured at fair value of approximately HK$891,653,000. Fair value gain of approximately HK$16,044,000 was reclassified from the securities investments reserve to the financial assets measured at FVTOCI reserve and additional fair value gain of approximately HK$97,393,000 (including share of other comprehensive income of associates of approximately HK$433,000) was recognised in the financial assets measured at FVTOCI reserve upon remeasurement on 1st January, ,693, ,653,000 16,044,000 97,393, ,000 (ii) Club debentures previously classified as available-for-sale investments The Group elected to present in profit or loss changes in the fair value of all its club debentures previously classified as available-for-sale investments because the Group considered their investment purpose at the date of initial application of HKFRS 9. As a result, the financial assets were reclassified from available-for-sale investments with original carrying amount of approximately HK$16,581,000 to financial assets measured at FVTPL and were remeasured at fair value of approximately HK$78,134,000. Fair value gain of approximately HK$61,553,000 was recognised in retained profits upon remeasurement on 1st January, (iii) Bonds previously classified as financial assets designated as at fair value through profit or loss The Group reclassified the financial assets designated as at fair value through profit or loss to financial assets measured at FVTPL and no change in their measurement on 1st January, (ii) 9 16,581,000 78,134,000 61,553,000 (iii) 17

20 2. Application of New and Amended Hong Kong Financial Reporting Standards ( HKFRSs ) (continued) The Group has not early adopted the following new HKFRSs and amendments to existing HKFRSs ( new and amended HKFRSs ) that have been issued but are not yet effective. 2. HKFRS 10 and HKAS 28 (2011) (Amendments) HKFRS 15 HKFRS 16 Leases 3 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture 4 Revenue from Contracts with Customers 2 HKAS 7 (Amendments) Disclosure Initiative 1 HKAS 12 (Amendments) Recognition of Deferred Tax Assets for Unrealised Losses Effective for annual periods beginning on or after 1st January, Effective for annual periods beginning on or after 1st January, Effective for annual periods beginning on or after 1st January, Effective for annual periods beginning on or after a date to be determined Amendments to HKFRS 10 and HKAS 28 (2011) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments to HKFRS 10 and HKAS 28 (2011) address an inconsistency between the requirements in HKFRS 10 and in HKAS 28 (2011) in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The amendments require a full recognition of a gain or loss when the sale or contribution of assets between an investor and its associate or joint venture constitutes a business. For a transaction involving assets that do not constitute a business, a gain or loss resulting from the transaction is recognised in the investor s profit or loss only to the extent of the unrelated investor s interest in that associate or joint venture

21 2. Application of New and Amended Hong Kong Financial Reporting Standards ( HKFRSs ) (continued) HKFRS 15 Revenue from Contracts with Customers HKFRS 15 establishes a new five-step model to account for revenue arising from contracts with customers. Under HKFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in HKFRS 15 provide a more structured approach for measuring and recognising revenue. The standard also introduces extensive qualitative and quantitative disclosure requirements, including disaggregation of total revenue, information about performance obligations, changes in contract asset and liability account balances between periods and key judgments and estimates. The standard will supersede all current revenue recognition requirements under HKFRSs. In September 2015, the HKICPA issued an amendment to HKFRS 15 regarding a one-year deferral of the mandatory effective date of HKFRS 15 to 1st January, HKFRS 16 Leases HKFRS 16 introduces a comprehensive model for the identification of lease arrangements and accounting treatments for both lessors and lessees. It distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Subject to limited exceptions for short-term leases and low value assets, distinctions of operating and finance leases are removed for lessee accounting, and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for all leases by lessees. However, the standard does not significantly change the accounting of lessors. The directors of the Company ( Directors ) are in the process of assessing the potential impact of the new and amended HKFRSs but are not yet in a position to determine whether the new and amended HKFRSs will have a significant impact on how the Group s results of operations and financial position are prepared and presented. The new and amended HKFRSs may result in changes in the future as to how the results and financial position are prepared and presented

22 3. Revenue Revenue represents the aggregate amounts received and receivable from property rental income, sales of properties held for sale, gain/ loss on sales of investments held-for-trading, hotel operation income, commission from brokerage, settlement charges from brokerage and cosmetic goods sold less returns, analysed as follows: 3. Six months ended 30th June, Property rental income 482, ,380 Sales of properties held for sale 1,480, ,981 (Loss) gain on sales of investments held-for-trading (24,351) 9,989 Hotel operation income 41,724 Brokerage and cosmetic income 6,811 9,887 1,944, , Operating Segments The Group determines its operating segments based on the reports reviewed by the chief operating decision-makers that are used to make strategic decisions. The Group has six reportable segments (i) property development and trading; (ii) property leasing for retail; (iii) property leasing for non-retail; (iv) listed equity investments at FVTOCI (2015: listed available-for-sale equity investments); (v) listed investments heldfor-trading and treasury products; and (vi) unlisted investments, investment holding and brokerage. The segmentations are based on the information about the operation of the Group that management of the Group uses to make decisions. Principal activities are as follows: Property development and Property development and sales of trading properties trading Property leasing Retail Property leasing from retail properties Non-retail Property leasing from non-retail properties Listed equity investments at FVTOCI Listed equity securities at FVTOCI (2015: listed equity securities in available-for-sale (2015: listed available-for- investments) sale equity investments) Listed investments held-for-trading and treasury products Unlisted investments, investment holding and brokerage Listed securities investments in investments heldfor-trading, over-the-counter trading and structured products Unlisted securities investments, trading and brokerage 4. (i) (ii)(iii)(iv) (v) (vi) 20

23 4. Operating Segments (continued) The Group evaluates performance on the basis of profit or loss from operations after tax expense and non-controlling interests but not including the major non-cash items. The major non-cash items are unrealised fair value changes on investment properties and other properties together with their, if applicable, respective deferred tax. No intersegment revenue is accounted for as the intersegment revenue is mainly the rental income for administrative purpose. Unallocated corporate assets mainly comprised leasehold land and building for own use, deposit paid in respect of a property, advance to a non-controlling shareholder, deferred tax assets, tax recoverable and deferred considerations in respect of disposals of subsidiaries. Unallocated corporate liabilities mainly comprised tax liabilities, bank loans (excluding a bank loan originated in the United Kingdom), amounts due to associates, amounts due to investee companies, amounts due to non-controlling shareholders and deferred tax liabilities (31st December, 2015: also included deposit received in respect of disposal of a subsidiary). The Group s measurement methods used to determine reported segment profit or loss remain unchanged from The Group s reportable segments are strategic business units that operate different activities. They are managed separately because each business unit has different markets and requires different marketing strategies. Further, the business units are also managed to operate in different countries separately. Revenue and result are attributed to countries on the basis of the property or asset location. There were two major customers (2015: nil) who individually accounted for over 10% of the Group s revenue. Revenue of approximately HK$377,836,000 and HK$333,909,000 (2015: nil) were derived from property development and trading segment from each of the two customers in Hong Kong % 377,836, ,909,000 21

24 4. Operating Segments (continued) Operating segment information is presented below: Condensed Consolidated Statement of Comprehensive Income For the six months ended 30th June, Property development and trading Property leasing Retail Non-retail Listed equity investments at FVTOCI Listed investments held-fortrading and treasury products Unlisted investments, investment holding and brokerage All other segments Consolidated Major cash items excluding in revenue Hong Kong 6,014,754 6,014,754 Other countries 1,346,222 1,346,222 7,360,976 7,360,976 Revenue Revenue from external customers Hong Kong 1,480, , ,641 (24,351) 1,989 4,822 1,798,250 Mainland China 23,834 19,036 42,870 United Kingdom 6,344 97, ,749 1,480, , ,082 (24,351) 1,989 4,822 1,944,869 Revenue from external customers after non-controlling interests 1,036, , ,867 (24,351) 1,989 4,822 1,499,971 Attributable property sales from associates Hong Kong Attributable rental revenue from associates/investee company Hong Kong 10,170 20,056 30,226 Mainland China 34,411 4,309 38,720 1,036, , ,232 (24,351) 1,989 4,822 1,569,552 Result Segment result Hong Kong 929, , , , , ,901 12,415 2,312,893 Mainland China 21,276 16,637 2,648 40,561 United Kingdom 5,880 93, ,768 Other countries 84,266 84, , , , , , ,637 12,415 2,537,488 Share of results of associates Attributable property sales, net Hong Kong Attributable gross income Hong Kong 9,662 19,463 1,132 30,257 Mainland China 34,411 4,309 38,720 Attributable operating cost Hong Kong (328) (3,611) (3,939) Mainland China (14,742) (1,525) (16,267) Non-controlling interests (272,020) (504) (189) (272,713) 657, , , , , ,637 13,547 2,314,074 22

25 4. Operating Segments (continued) Condensed Consolidated Statement of Comprehensive Income (continued) For the six months ended 30th June, Property development and trading Property leasing Retail Non-retail Listed equity investments at FVTOCI Listed investments held-fortrading and treasury products Unlisted investments, investment holding and brokerage All other segments Consolidated Finance (costs) income (1,278) (45,272) 1,579 (44,971) Other gains and losses, net (6,085) (60) (6,145) Share of results of associates income tax and others (84) (16,622) (3,247) (254) (20,207) Income tax expense (19,117) (19,117) 651, , , , , ,637 13,293 2,223,634 Unallocated items Unallocated corporate expenses, net (152,141) Unallocated finance costs (44,444) Gain on disposals of subsidiaries 1,998,448 Income tax expense (335,278) Unallocated non-controlling interests 41,052 Operating profit for the period attributable to owners of the Company 3,731,271 Major non-cash items Unrealised fair value changes on investment properties (including share of results of associates) (802,563) Deferred tax credit 2,308 Profit for the period attributable to owners of the Company 2,931,016 Core profit (excluding major non-cash items) Operating profit for the period attributable to owners of the Company Major accumulated realised fair value changes together with their respective deferred tax on disposals of investment properties in current period (including fair value changes recognised in properties revaluation reserve) Recognised in prior years 8,682,033 3,731,271 Core profit for the period attributable to owners of the Company 12,413,304 23

26 4. Operating Segments (continued) Condensed Consolidated Statement of Financial Position At 30th June, Property development and trading Property leasing Retail Non-retail Listed equity investments at FVTOCI Listed investments held-fortrading and treasury products Unlisted investments, investment holding and brokerage All other segments Consolidated Assets Segment assets Hong Kong 3,161,770 4,160,791 3,648,757 4,782,210 8,255, ,059 43,753 24,570,813 Mainland China 385,609 28,730 6, ,900 United Kingdom 1,636,118 5,669,478 7,305,596 Other countries 11 1,847, ,831 2,518,049 Interests in associates Hong Kong 119, ,917 1,382,932 2,117 4,943 1,882,685 Mainland China 114,648 61, ,351 Advances to associates Hong Kong 1, ,141 2,612 Mainland China 49,512 26,608 76,120 Reportable segment assets 3,282,794 6,719,606 10,818,426 4,782,210 10,102,680 1,191,012 56,398 36,953,126 Assets classified as held for sale 10,681,698 Unallocated corporate assets 12,707,589 Consolidated total assets 60,342,413 Liabilities Segment liabilities Hong Kong 807,105 29,970 62,917 6,579, ,267 9,544 7,501,770 Mainland China 12, ,408 United Kingdom 81,798 2,512,353 2,594,151 Other countries 1 4,959, ,959,885 Reportable segment liabilities 807, ,157 2,575,279 6,579,858 4,959,987 12,273 9,555 15,068,214 Liabilities directly associated with assets classified as held for sale 4,870,102 Unallocated corporate liabilities 3,245,872 Consolidated total liabilities 23,184,188 Additions to non-current assets (other than financial instruments and deferred tax assets) 328 1,686,876 1,877,

27 4. Operating Segments (continued) Other Material Items For the six months ended 30th June, Reportable segments total Adjustments for unallocated Adjustments for major non-cash items Condensed consolidated statement of comprehensive income total Interest income 928, ,087 Finance costs (44,971) (44,444) (89,415) Net income (expenses) 883,116 (44,444) 838,672 Depreciation (5,795) (5,795) Fair value changes on investment properties (891,210) (891,210) Share of results of associates 29,092 88, ,739 Income tax (expense) credit (19,117) (335,278) 2,308 (352,087) Non-controlling interests (272,713) 41,052 (231,661) Condensed Consolidated Statement of Comprehensive Income For the six months ended 30th June, 2015 Property development and trading Property leasing Retail Non-retail Listed availablefor-sale equity investments Listed investments held-fortrading and treasury products Unlisted investments, investment holding and brokerage All other segments Consolidated Major cash items excluding in revenue Hong Kong 681, ,646 Other countries 4,275,946 4,275,946 4,957,592 4,957,592 Revenue Revenue from external customers Hong Kong 46, , ,986 9,989 4,844 5, ,785 Mainland China 100,072 31,861 23,550 41, ,207 United Kingdom 2,553 90,416 92, , , ,952 9,989 4,844 46, ,961 Revenue from external customers after non-controlling interests 135, , ,736 9,989 4,844 46, ,422 Attributable property sales from associates Hong Kong 5,864 5,864 Mainland China 89,279 89,279 Attributable rental revenue from associates/investee company Hong Kong 9,880 18,952 28,832 Mainland China 35,625 43,319 78, , , ,007 9,989 4,844 46,767 1,159,341 25

28 4. Operating Segments (continued) Condensed Consolidated Statement of Comprehensive Income (continued) For the six months ended 30th June, Property development and trading Property leasing Retail Non-retail Listed availablefor-sale equity investments Listed investments held-fortrading and treasury products Unlisted investments, investment holding and brokerage All other segments Consolidated Result Segment result Hong Kong 30, , ,694 (51,181) 24,720 10, ,076 Mainland China 31,354 27,187 13,057 16,596 (14,296) 73,898 United Kingdom 2,486 88, ,560 Other countries 203, ,964 61, , , ,783 41,333 (3,593) 958,498 Share of results of associates Attributable property sales, net Hong Kong 3,762 3,762 Mainland China 4,322 4,322 Attributable gross income Hong Kong 9,315 18,349 1,056 28,720 Mainland China 35,625 43,319 78,944 Attributable operating cost Hong Kong (525) (2,997) (3,522) Mainland China (15,098) (7,695) (22,793) Non-controlling interests (7,616) (535) (194) (8,345) 62, , , ,783 41,333 (2,537) 1,039,586 Other income and expenses, net 3, ,453 Finance costs (1,387) (49,133) (2,818) (53,338) Other gains and losses, net Share of results of associates Income tax and others (6,937) (19,296) (19,340) (147) (45,720) 59, , , ,965 41,347 (2,684) 945,198 Unallocated items Unallocated corporate expenses, net (170,748) Unallocated finance costs (132,070) Loss on disposals of subsidiaries (97,235) Income tax expense (61,766) Unallocated non-controlling interests 10,196 Operating profit for the period attributable to owners of the Company 493,575 Major non-cash items Unrealised fair value changes on investment properties (including share of results of associates) Deferred tax expense (454,937) (154,022) Loss for the period attributable to owners of the Company (115,384) Core profit (excluding major non-cash items) Operating profit for the period attributable to owners of the Company Major accumulated realised fair value changes on disposal of investment properties in current period Recognised in prior years 8,507, ,575 Core profit for the period attributable to owners of the Company 9,001,331 26

29 4. Operating Segments (continued) Condensed Consolidated Statement of Financial Position At 31st December, Property development and trading Property leasing Retail Non-retail Listed availablefor-sale equity investments Listed investments held-fortrading and treasury products Unlisted investments, investment holding and brokerage All other segments Consolidated Assets Segment assets Hong Kong 5,006,542 10,607,954 8,230,890 8,624, ,733 41,915 32,845,803 Mainland China 975, ,809 6,654 1,811,409 United Kingdom 116,573 4,319,308 4,435,881 Other countries 11 3,088, ,873 3,814,782 Interests in associates Hong Kong 142, ,486 1,365,871 1,722 5,029 1,872,863 Mainland China 131,621 1,765,992 1,897,613 Advances to associates Hong Kong 7, ,126 8,517 Mainland China 30,575 16,390 46,965 Reportable segment assets 5,156,505 12,220,166 16,527,441 11,713,667 1,061,330 54,724 46,733,833 Assets classified as held for sale 9,239,271 Unallocated corporate assets 7,082,113 Consolidated total assets 63,055,217 Liabilities Segment liabilities Hong Kong 1,533, , , ,006 6,273 1,848,885 Mainland China 19,086 12, ,772 United Kingdom 73,862 2,748,353 2,822,215 Other countries 1 5,389, ,390,002 Reportable segment liabilities 1,533, ,711 2,914,920 5,390,205 14,012 6,292 10,092,874 Liabilities directly associated with assets classified as held for sale 1,857,996 Unallocated corporate liabilities 10,778,985 Consolidated total liabilities 22,729,855 Additions to non-current assets (other than financial instruments and deferred tax assets) 219,801 16, ,700 38,927 27

30 4. Operating Segments (continued) Other Material Items For the six months ended 30th June, Reportable segments total Adjustments for unallocated Adjustments for major non-cash items Condensed consolidated statement of comprehensive income total Interest income 235, ,043 Finance costs (53,338) (132,070) (185,408) Net income (expenses) 181,705 (132,070) 49,635 Depreciation (41,718) (41,718) Fair value changes on investment properties (543,529) (543,529) Share of results of associates 43,713 88, ,305 Income tax expense (61,766) (154,022) (215,788) Non-controlling interests (8,345) 10,196 1, Other Income 5. Six months ended 30th June, Included in other income are: Building management fee income 50,978 96,525 Building management fee expenses (40,080) (87,231) 10,898 9,294 Rental services income 11,220 12,996 Property management services, leasing administration services and property administration services income 17,091 9,761 Asset management and maintenance services income 2,120 9,101 Advisory and consultancy services income Exchange gain, net 1,320 Reversal of impairment in respect of other receivable and interest thereon 3,717 Forfeiture of deposits received on sales of stock of properties 12 28

31 6. Investment Income, Net 6. Six months ended 30th June, Financial assets at fair value through profit or loss classified as held-for-trading: Unrealised loss arising on change in fair value (14,154) (104,515) Financial assets measured at fair value through profit or loss (2015: financial assets designated as at fair value through profit or loss): (89,713) 65,008 Unrealised (loss) gain arising on change in fair value of bonds Realised gain (loss) arising on change in fair value of bonds Change in fair value 87,057 (35,185) Exchange component of change 8,716 (5,775) Net gain arising on change in fair value of bonds 6,060 24,048 Other investment income, net 14,358 13,098 Dividend income on: Listed investment 191,167 Unlisted investments 45,306 15,840 Interest income 927, ,058 1,170, ,529 Included in interest income are interests from bonds of approximately H K$448,785,000 (2015: H K$210,163,000) and imputed interest income from deferred considerations of approximately HK$474,001,000 (2015: nil). 448,785, ,163, ,001,000 29

32 7. Profit (Loss) for the Period 7. Six months ended 30th June, Profit (loss) for the period has been arrived at after (charging) crediting: Total staff costs: Staff costs, including Directors emoluments (108,200) (159,738) Retirement benefits scheme contributions, net of forfeited contributions of approximately HK$215,000 (2015: HK$275,000) 215, ,000 (5,026) (5,155) (113,226) (164,893) Auditors remuneration: Auditors of the Company Current period (1,214) (1,284) Other auditors Current period (173) (84) Underprovision in prior years (127) (118) Depreciation (5,795) (41,718) Exchange loss, net (23,512) Cost of trading properties recognised (481,437) (70,184) Cost of cosmetic products recognised (1,586) (1,691) Cost of inventories for hotel recognised (4,631) Share of tax of associates (included in share of results of associates) (5,899) (14,589) Gross proceeds on disposal of investments held-for-trading Carrying amount on investments held-for-trading disposed of Transaction costs on investments held-for-trading disposed of Net (loss) gain on disposal of investments held-for-trading included in revenue 568, ,180 (591,227) (597,410) (1,209) (781) (24,351) 9,989 Gross rental income from investment properties 482, ,380 Less: Direct operating expenses from investment properties that generated rental income during the period (29,448) (50,849) Direct operating expenses from investment properties that did not generate rental income during the period (3,434) (3,371) 449, ,160 30

33 8. Finance Costs 8. Six months ended 30th June, Interest on: Bank loans 85, ,013 Other loans 31,999 4,603 Amount due to a non-controlling shareholder 10,074 Total interest 117, ,690 Exchange gain on translation of foreign currency loans, net (33,578) (1,785) Other finance costs 6,618 26,669 Less: Interest capitalised to stock of properties under development Interest capitalised to investment properties under development 90, ,574 (1,233) (285) (66,881) 89, ,408 During the Period, the Group has capitalised borrowing costs at a rate of 2.25% (2015: ranging from 2.24% to 6.76%) per annum amounting to approximately HK$1,233,000 (2015: HK$67,166,000) on qualifying assets. 9. Other Gains and Losses, Net ,233,000 67,166, Six months ended 30th June, Included in other gains and losses, net are: Gain on disposal of a subsidiary Pioneer Time (note (i)) Gain on disposal of a subsidiary Evergo Shanghai (note (ii)) Impairment loss recognised in respect of interest in and advance to an associate, net (Underprovision) overprovision for rental guarantee (note (iii)) Loss on disposals of subsidiaries Silvercord Group (note (iv)) Pioneer Time(i) 1,277,154 (ii) 721,294 (6,083) (iii) (60) 217 (iv) (97,235) 31

34 9. Other Gains and Losses, Net (continued) Notes: 9. (i) Gain on disposal of a subsidiary arose from the disposal of the Group s entire issued share capital of Pioneer Time Investment Limited ( Pioneer Time ), an indirect wholly-owned subsidiary of the Company ( Pioneer Time Disposal ) on 15th January, Pioneer Time held the property known as MassMutual Tower in Hong Kong. Details of the Pioneer Time Disposal are set out in Note 26(a). (i) Pioneer Time Investment LimitedPioneer Time Pioneer TimePioneer Time Pioneer Time26(a) (ii) Gain on disposal of a subsidiary arose from the disposal of the Group s entire issued share capital of Evergo Real Estate (Shanghai) Company Limited ( Evergo Shanghai ), an indirect wholly-owned subsidiary of the Company ( Evergo Shanghai Disposal ) on 22nd June, Evergo Shanghai held the property known as Evergo Tower located in Shanghai, the PRC. Details of the Evergo Shanghai Disposal are set out in Note 26(b). (iii) The amount represented (underprovision) overprovision for rental guarantee provided to purchasers of certain shops or units of an investment property in Hong Kong disposed of in prior years. (iv) Loss on disposals of subsidiaries arose from the disposals of the Group s entire issued share capital of Brass Ring Limited ( Brass Ring ), Union Leader Limited ( Union Leader ) and Chinese Estates and Finance, Limited (now known as Silvercord Finance Limited), all are indirect wholly-owned subsidiaries of the Company, and their respective subsidiaries (collectively Silvercord Group ) ( Silvercord Disposal ) on 13th January, Silvercord Group held the property known as Silvercord in Hong Kong. Details of the Silvercord Disposal are set out in Note 26(c). 10. Income Tax Expense (ii) 26(b) (iii) (iv) Brass Ring Limited Brass Ring Union Leader Limited Union Leader 26(c) 10. Six months ended 30th June, The charge comprises: Current tax: Hong Kong Profits Tax 163,829 45,318 Other than Hong Kong 167,444 8, ,273 53,705 Underprovision (overprovision) in prior years: Hong Kong Profits Tax (308) (290) Other than Hong Kong 22,869 (16,482) 22,561 (16,772) Deferred tax: Current period (credit) charge (1,747) 178, , ,788 32

35 10. Income Tax Expense (continued) Hong Kong Profits Tax is calculated at 16.5% (2015: 16.5%) on the estimated assessable profits for the Period. PRC Enterprise Income Tax for PRC subsidiaries are calculated at PRC Enterprise Income Tax rate of 25% (2015: 25%). Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. 11. Dividends %16.5% 25% 25% 11. Six months ended 30th June, Interim dividend for 2016 declared after interim period end of HK1 cent (2015: HK30 cents) per share Special interim dividends for 2016 declared after interim period end of HK$2.1 and HK$3.23 (2015: HK$1.2) per share , , ,167,610 2,289,143 10,186,686 2,861,429 Final dividend for 2015 paid on 6th June, 2016 of HK1 cent (2014: HK1 cent) per share Conditional special interim dividend declared on 21st December, 2015 and paid on 20th January, 2016 of HK$2 per share Special interim dividend declared on 16th December, 2014 and paid on 13th January, 2015 of HK$4 per share ,076 19, ,815, ,630,476 Total dividends paid 3,834,314 7,649,552 Special interim dividend for 2015 declared on 15th June, 2015 and subsequently paid on 15th July, 2015 of HK$2.6 per share 2.6 4,959,810 33

36 12. Earnings (Loss) per Share The calculation of the basic and diluted earnings (loss) per share attributable to owners of the Company is based on the following data: 12. Six months ended 30th June, Earnings (loss): Earnings (loss) for the purposes of basic and diluted earnings (loss) per share Profit (loss) for the period attributable to owners of the Company 2,931,016 (115,384) Number of shares Six months ended 30th June, Number of shares: Weighted average number of ordinary shares for the purposes of basic and diluted earnings (loss) per share 1,907,619,079 1,907,619,079 Diluted earnings (loss) per share for the six months ended 30th June, 2016 and 2015 were the same as the basic earnings (loss) per share as there were no diluting events during both periods. 34

37 13. Investment Properties 13. Fair value Properties under construction Cost Properties under construction Completed properties Total At 1st January, ,739, ,000 4,156,683 39,528,923 Additions 19,203 19,203 Construction costs incurred 95, , ,801 Transfer to stock of properties (958,000) (958,000) Transfer from properties under construction at cost to completed properties at fair value Transfer to assets classified as held for sale 840,901 (840,901) (8,657,600) (8,657,600) Exchange adjustments (218,246) (4,410) (222,656) (Decrease) increase in fair value recognised in the consolidated statement of comprehensive income realised (4,860) (4,860) unrealised 4,464, ,430 4,694,084 Disposals of subsidiaries (9,171,029) (3,435,603) (12,606,632) Disposal (71,000) (71,000) At 31st December, ,941,263 21,941,263 Additions 3,559,296 3,559,296 Transfer to assets classified as held for sale (10,873,550) (10,873,550) Exchange adjustments (627,374) (627,374) Decrease in fair value recognised in the condensed consolidated statement of comprehensive income unrealised (475,447) (475,447) Disposal of a subsidiary (Note 26(b)) 26(b) (1,037,057) (1,037,057) Carrying amounts At 30th June, ,487,131 12,487,131 All of the Group s property interests held under operating leases to earn rentals or for capital appreciation purposes (including those classified as held for sale) are measured using the fair value model and are classified and accounted for as investment properties. 35

38 13. Investment Properties (continued) Property valuations as at 30th June, 2016 were carried out by B.I. Appraisals Limited ( B.I. Appraisals ) (31st December, 2015: B.I. Appraisals and Vigers Appraisal and Consulting Limited ( Vigers Appraisal )), independent qualified professional valuer, in respect of the Group s investment properties in Hong Kong and Mainland China. For the investment properties in the United Kingdom, the valuations as at 30th June, 2016 and 31st December, 2015 were carried out by Peak Vision Appraisals Limited ( Peak Vision Appraisals ), another independent qualified professional valuer. The valuers have recent relevant experience in the valuation of similar properties in the relevant locations. At the end of the reporting period, the management of the Group discussed with the independent qualified professional valuers about the appropriate valuation techniques and key inputs for Level 3 fair value measurements. The valuation reports for the investment properties as at 30th June, 2016 are signed by the respective director of B.I. Appraisals and Peak Vision Appraisals (31st December, 2015: B.I. Appraisals, Vigers Appraisal and Peak Vision Appraisals), who are members of The Hong Kong Institute of Surveyors and/or The Royal Institution of Chartered Surveyors. The valuations were performed in accordance with The HKIS Valuation Standards 2012 Edition published by The Hong Kong Institute of Surveyors and/or The RICS Valuation Professional Standards January 2014 published by The Royal Institution of Chartered Surveyors. The fair value of each investment property is individually determined at the end of each reporting period based on its market value and by adopting investment method, and/or direct comparison method, as appropriate. The investment method relying on the capitalisation of rental income is based upon estimates of future results and a set of assumptions specific to each property to reflect its tenancy status. The fair value of each investment property reflects, among other things, rental income from current term leases, term yield rate, assumptions about rental income from future reversion leases in light of current market conditions, the assumed occupancy rate and reversionary yield rate. Judgment by the valuers is required to determine the principal valuation factors, including term yield rate and reversionary yield rate. Such yield rates were adopted after considering the investment sentiments and market expectations of properties of similar nature. Direct comparison method assumes each of these properties is capable of being sold in its existing state with the benefit of vacant possession and by making reference to comparable sales evidence as available in the relevant markets. 13. RICS 36

39 13. Investment Properties (continued) The following tables analysed the investment properties which are measured at fair value at the end of the reporting period into the three-level hierarchy as defined in HKFRS 13 Fair Value Measurement which is further elaborated in Note At 30th June, 2016 Fair value Level 1 Level 2 Level 3 Recurring fair value measurements: Completed properties (note) 22,966,131 1,679,067 21,287,064 At 31st December, 2015 Fair value Level 1 Level 2 Level 3 Recurring fair value measurements: Completed properties (note) 30,598,863 2,016,554 28,582,309 Note: Included those classified as held for sale of approximately HK$10,479,000,000 (31st December, 2015: HK$8,657,600,000) which were categorised as Level 3 fair value measurement. Certain investment properties located in Hong Kong and Mainland China categorised as Level 2 fair value measurement are determined using direct comparison method with reference to the recent selling prices of comparable properties on a price per square foot basis which are adjusted to reflect the conditions and locations of the related properties. 10,479,000,000 8,657,600,000 37

40 13. Investment Properties (continued) Details of valuation techniques used and key inputs to valuation on investment properties which are categorised as Level 3 fair value measurement at the end of the reporting period are as follows: 13. Properties held for investment in Hong Kong 30th June, 2016 Valuation Significant Fair value techniques unobservable inputs Range 31st December, ,076,070 23,156,440 Combination of direct comparison method and investment method (1) Reversionary yield; and (2) Market rent per square foot 3.50% to 5.00% (31st December, 2015: 2.25% to 5.00%) Properties held for investment in the United Kingdom 6,865,916 4,037,118 Combination of direct comparison method and investment method (1) Reversionary yield; and (2) Market rent per square foot % to 4.50% (31st December, 2015: 4.50% to 4.75%) Properties held for investment in Mainland China 345,078 1,388,751 Combination of direct comparison method and investment method (1) Reversionary yield; and (2) Market rent per square foot 8.50% (31st December, 2015: 7.50% to 9.00%) Total 21,287,064 28,582,309 Reversionary yield is the rate taking into account the capitalisation of rental income potential, nature of the property and prevailing market condition. Market rent per square foot is the market rent taking into account the direct comparable market transactions to the related properties. The fair value measurements are negatively correlated to the reversionary yield, while positively correlated to the market rent per square foot. 38

41 13. Investment Properties (continued) Movements of investment properties which are categorised as Level 3 fair value measurement during the period/year are as follows: th June, 31st December, At the beginning of the period/year 28,582,309 42,493,864 Additions 3,578,290 14,391 Construction costs incurred 95,570 Transfer to stock of properties (958,000) Transfer from properties under construction at cost to completed properties at fair value 840,901 Exchange adjustments (627,075) (216,645) (Decrease) increase in fair value recognised in the consolidated statement of comprehensive income realised (4,860) unrealised (551,803) 4,947,397 Disposals of subsidiaries (9,694,657) (18,559,309) Disposal (71,000) Carrying amounts At the end of the period/year 21,287,064 28,582,309 There were no transfers into or out of Level 3 fair value measurement during the period/year and no change in valuation techniques used in prior years. In estimating the fair value of the properties, their current use equates to the highest and best use of the properties. 14. Goodwill 14. Cost At 1st January, 2015, 31st December, 2015 and 30th June, 2016 Impairment At 1st January, 2015, 31st December, 2015 and 30th June, ,686 47,748 Carrying amounts At 30th June, ,938 At 31st December, ,938 39

42 15. Interests in Associates th June, 31st December, Cost of investment in associates: Unlisted 1,204,736 1,204,413 Share of post-acquisition profits and other comprehensive income, net of dividends received 854,300 2,566,063 2,059,036 3,770,476 The Company provided corporate guarantee to secure bank loans granted to its associates in prior years. The fair value of the financial guarantee contract at initial recognition was determined by Norton Appraisals Limited, independent qualified professional valuer, and it was recognised as interests in associates and financial guarantee liabilities in the Group s consolidated statement of financial position. The investment properties held by the Group s principal associates were revalued at 30th June, 2016 by B.I. Appraisals. B.I. Appraisals continues to adopt investment method and/or direct comparison method as the valuation methodologies. The valuation methods and significant assumptions applied in determining the fair values of investment properties are detailed in Note Advances to Associates th June, 31st December, Interest-bearing advances to associates 77,256 48,089 Interest-free advances to associates 1,476 7,393 78,732 55,482 The advances to associates are unsecured, the Group will not demand for repayment within one year from the end of the reporting period and the amounts are therefore shown as non-current. The interestbearing advances to associates bear interest at the prevailing market rates. 40

43 17. Available-for-sale Investments th June, 31st December, Unlisted equity securities: Incorporated in Hong Kong 68,834 Incorporated elsewhere 725, ,693 Club debentures 16, ,274 Analysed for reporting purpose as: Non-current 743,649 Current 67, , Financial Assets Measured at Fair Value Through Profit or Loss th June, 31st December, Bonds 9,630,607 Club debentures 63,074 9,693,681 Analysed for reporting purpose as: Non-current 463,741 Current 9,229,940 9,693,681 41

44 18. Financial Assets Measured at Fair Value Through Profit or Loss (continued) Major terms of the bonds denominated in United States dollar ( US$ ), Euro ( EUR ), Pound Sterling ( GBP ) and Singapore dollar ( SGD ) are as follows: 18. Notional amount Maturity US$9,000, US$163,500, US$49,000, US$204,000, US$10,386, US$1,000, US$56,000, US$620, US$10,000, US$59,300, EUR13,300, US$15,000, US$7,000, US$31,456, EUR5,500, US$10,000, US$10,000, US$476,859,000 Perpetual EUR25,600,000 Perpetual GBP14,000,000 Perpetual SGD51,250,000 Perpetual 9,000, ,500,000 49,000, ,000,000 10,386,000 1,000,000 56,000, ,000 10,000,000 59,300,000 13,300,000 15,000,000 7,000,000 31,456,000 5,500,000 10,000,000 10,000, ,859,000 25,600,000 14,000,000 51,250, Financial Assets Measured at Fair Value Through Other Comprehensive Income th June, 31st December, Listed investment: Equity securities listed in Hong Kong (note (i)) (i) 4,611,672 Unlisted equity securities: Incorporated in Hong Kong 192,804 Incorporated elsewhere (note (ii)) (ii) 670,815 5,475,291 Analysed for reporting purpose as: Non-current 5,421,490 Current 53,801 5,475,291 42

45 19. Financial Assets Measured at Fair Value Through Other Comprehensive Income (continued) Notes: 19. (i) During the Period, the Group acquired 577,180,500 H shares of Shengjing Bank Co., Ltd. (Stock Code: 2066) at the total consideration of HK$6,926,166,000, after deducting the fair value loss of approximately HK$2,314,494,000 for the Period, the carrying amount of listed equity investment categorised as financial assets measured at FVTOCI as at 30th June, 2016 was approximately HK$4,611,672,000. (i) 6,926,166, ,180,500 H ,314,494,000 4,611,672,000 (ii) The carrying amount as at 30th June, 2016 mainly comprised investment in an exempted limited partnership formed under the Exempted Limited Partnership Law (Revised) of the Cayman Islands ( Cayman Islands Partnership ) of approximately HK$569,434,000 (31st December, 2015: HK$648,214,000 in available-for-sale investments). 20. Debtors, Deposits, Other Receivables and Prepayments Included in debtors, deposits, other receivables and prepayments are trade receivables of approximately HK$5,881,000 (31st December, 2015: HK$12,315,000) comprised rental receivables billed in advance and settlements from tenants which are expected upon receipts of billings and receivables from cosmetic business. The following is the aged analysis of trade receivables (net of allowance for doubtful debts), presented based on the respective revenue recognition dates, at the end of the reporting period: (ii) 569,434, ,214, ,881,000 12,315,000 30th June, 31st December, days 1,712 2, days days Over 90 days 3,021 8,861 5,881 12,315 43

46 20. Debtors, Deposits, Other Receivables and Prepayments (continued) Included in debtors, deposits, other receivables and prepayments are consideration receivables in respect of deferred considerations of the Chengdu Project Disposal (as defined below), the Chongqing Project Disposal (as defined below) and the Pioneer Time Disposal of approximately HK$11,092,821,000 (31st December, 2015: the Chengdu Project Disposal and the Chongqing Project Disposal of HK$6,808,466,000). On 30th July, 2015, the Group disposed of the entire issued share capital of Lucky Benefit Limited and Rising Sheen Limited, both are indirect wholly-owned subsidiaries of the Company, and their respective subsidiaries ( Chengdu Project Disposal ). The consideration of the Chengdu Project Disposal was HK$6,500,000,000 of which 10% was received from Shengyu (BVI) Limited ( Shengyu ), a wholly-owned subsidiary of Evergrande Real Estate Group Limited (now known as China Evergrande Group) which is independent of and not connected with the Company, as at 31st December, In accordance with the equity and debt transfer agreement of the Chengdu Project Disposal dated 14th July, 2015, the remaining 90% of the cash consideration receivable from the Chengdu Project Disposal amounting to HK$5,850,000,000 would be received in 4 instalments within 24 months from the date of the disposal agreement. During the Period, the Group received HK$1,300,000,000. At the end of the reporting period, the cash consideration receivable initially recognised at fair value and subsequently measured at amortised cost was recorded as other receivables in which the carrying amount of approximately HK$1,943,620,000 (31st December, 2015: HK$3,158,744,000) to be received after one year was shown as non-current. On 27th October, 2015, the Group disposed of the entire issued share capital of Million Castle Investments Limited, an indirect wholly-owned subsidiary of the Company ( Chongqing Project Disposal ). The consideration of the Chongqing Project Disposal was HK$1,750,000,000 of which 15% was received from Shengyu as at 31st December, In accordance with the equity and debt receivable transfer agreement of the Chongqing Project Disposal dated 19th October, 2015, the remaining 85% of the cash consideration receivable from the Chongqing Project Disposal amounting to HK$1,487,500,000 would be received in 4 instalments within 24 months from the date of the disposal agreement. During the Period, the Group received HK$262,500,000. At the end of the reporting period, the cash consideration receivable initially recognised at fair value and subsequently measured at amortised cost was recorded as other receivables in which the carrying amount of approximately HK$514,082,000 (31st December, 2015: HK$839,614,000) to be received after one year was shown as noncurrent. 20. Pioneer Time 11,092,821,000 6,808,466,000 Lucky Benefit Limited 6,500,000,000 10%BVI 90% 5,850,000,000 1,300,000,000 1,943,620,000 3,158,744,000 Million Castle Investments Limited 1,750,000,000 15% 85% 1,487,500, ,500, ,082, ,614,000 44

47 20. Debtors, Deposits, Other Receivables and Prepayments (continued) The consideration of the Pioneer Time Disposal was approximately HK$12,448,280,000 (after adjustment) of which HK$5,000,000,000 was received from Shengyu at the end of the reporting period. In accordance with the equity and debt transfer agreement of the Pioneer Time Disposal dated 12th November, 2015, the remaining of the cash consideration receivable from the Pioneer Time Disposal amounting to approximately HK$7,448,280,000 would be received in 6 instalments within 6 years from the date of completion of the Pioneer Time Disposal. At the end of the reporting period, the cash consideration receivable initially recognised at fair value and subsequently measured at amortised cost was recorded as other receivables in which the carrying amount of approximately HK$4,887,005,000 to be received after one year was shown as noncurrent. Subsequent to the end of the reporting period, the Group received cash consideration HK$5,700,000,000. Included in other receivables is the outstanding claim receivable from Shantou City Planning and State-owned Land Resources Bureau ( Chenghai Bureau ) with the principal amount of approximately Renminbi ( RMB ) 45,512,000 (equivalent to approximately HK$53,076,000) (31st December, 2015: RMB45,512,000 (equivalent to approximately HK$53,640,000)) for the recovery of the down payment made by the Group for the acquisition of the property interests located in Chenghai Royal Garden, Shantou, the PRC. The down payment was fully impaired in prior years. On 5th December, 2012, the Shantou City Intermediate People s Court ( Intermediate Court ) delivered a judgment in favour of the Group and upheld the majority claims of the Group. On 26th February, 2014, the High People s Court of Guangdong Province declared its judgment on 3rd December, 2013, which upheld the ruling of the Intermediate Court and dismissed the appeals of the Group and Chenghai Bureau, became effective on 23rd February, Up to 30th June, 2016, the Group received a cumulative amount of RMB6,000,000 (31st December, 2015: RMB6,000,000) including the interest as partial satisfaction of the enforcement. Subsequent to the end of the reporting period, the Group received a further sum of RMB3,000,000 including the interest as partial satisfaction of the enforcement. Up to the date of the approval of these unaudited condensed consolidated financial statements, the enforcement of the judgment is still in progress. 21. Assets Classified as Held For Sale/Liabilities Directly Associated with Assets Classified as Held For Sale (a) Windsor Disposal On 23rd December, 2015, (i) China Entertainment and Land Investment Company, Limited ( CELIC ), a direct whollyowned subsidiary of the Company; (ii) the Company, being the guarantor of CELIC; (iii) Magic Square Limited ( Magic Square ), a company wholly-owned by Mr. Joseph Lau, Luen-hung ( Mr. Joseph Lau ), a substantial shareholder and a controlling shareholder of the Company; and (iv) Mr. Joseph Lau, being the guarantor of Magic Square, entered into a sale and purchase agreement, pursuant to which CELIC agreed to sell and Magic Square agreed to acquire the entire issued share capital of Keep Speed Company Limited ( Keep Speed ), an indirect whollyowned subsidiary of the Company. 20. Pioneer Time12,448,280,000 5,000,000,000 Pioneer Time 7,448,280,000Pioneer Time Pioneer Time 4,887,005,000 5,700,000,000 45,512,000 53,076,000 45,512,000 53,640,000 6,000,000 6,000,000 3,000, (a) (i) (ii) (iii) Magic Square Limited Magic Square (iv) Magic Square Magic Square Keep Speed Company LimitedKeep Speed 45

48 21. Assets Classified as Held For Sale/Liabilities Directly Associated with Assets Classified as Held For Sale (continued) (a) Windsor Disposal (continued) On the same date, (i) Good Top Limited ( Good Top ), an indirect wholly-owned subsidiary of the Company; (ii) the Company, being the guarantor of Good Top; (iii) Best Range Limited ( Best Range ), a company wholly-owned by Mr. Joseph Lau; and (iv) Mr. Joseph Lau, being the guarantor of Best Range, entered into a sale and purchase agreement, pursuant to which Good Top agreed to sell and Best Range agreed to acquire the entire issued share capital of Jumbo Grace Limited ( Jumbo Grace ), an indirect wholly-owned subsidiary of the Company. On 2nd February, 2016, the disposals of Keep Speed and Jumbo Grace and its subsidiary (holding the property known as Windsor House in Hong Kong) (collectively Windsor Group ) ( Windsor Disposal ) were duly approved by the independent shareholders of the Company at the special general meeting. The Windsor Disposal has not yet completed up to the date of the approval of these unaudited condensed consolidated financial statements. As a result of the Windsor Disposal, the consolidated assets and liabilities of the Windsor Group have been presented as assets classified as held for sale and liabilities directly associated with assets classified as held for sale respectively in the unaudited condensed consolidated statement of financial position as at 30th June, 2016 in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Details of the Windsor Disposal were set out in the announcements of the Company dated 23rd December, 2015 and 2nd February, 2016 and the circular of the Company dated 15th January, (b) Pioneer Time Disposal on 15th January, 2016 During the year ended 31st December, 2015, Great System Investment Limited ( Great System ), an indirect wholly-owned subsidiary of the Company, and Shengyu entered into an equity and debt transfer agreement, pursuant to which Great System agreed to sell and Shengyu agreed to acquire the entire issued share capital of Pioneer Time. The Pioneer Time Disposal was completed on 15th January, As at 31st December, 2015, a deposit of HK$1,250,000,000 had been received by the Group and included in deposits and receipts in advance. As a result of the Pioneer Time Disposal, the assets and liabilities of Pioneer Time had been presented as assets classified as held for sale and liabilities directly associated with assets classified as held for sale respectively in the consolidated statement of financial position as at 31st December, 2015 in accordance with HKFRS 5. Further details of the Pioneer Time Disposal are set out in Note 26(a). 21. (a) (i) Good Top LimitedGood Top (ii) Good Top (iii) Best Range LimitedBest Range (iv) Best Range Good TopBest Range Jumbo Grace LimitedJumbo Grace Keep Speed Jumbo Grace Windsor Windsor 5 (b) Pioneer Time Pioneer Time Pioneer Time 1,250,000,000 Pioneer TimePioneer Time 5 Pioneer Time 26(a) 46

49 21. Assets Classified as Held For Sale/Liabilities Directly Associated with Assets Classified as Held For Sale (continued) The fair value of investment properties was based on the valuation performed by independent valuers. Details of the valuers, valuation techniques and key inputs are set out in Note 13. At the end of the reporting period, the major classes of assets and liabilities classified as assets held for sale and liabilities directly associated with assets classified as held for sale correspondingly are as follows: th June, 31st December, Assets classified as held for sale Investment properties 10,479,000 8,657,600 Property, plant and equipment 1, ,585 Financial asset measured at fair value through profit or loss 15,000 Debtors, deposits, other receivables and prepayments 31,074 4,539 Pledged deposits 139,285 59,313 Bank balances and cash 16,255 12,234 10,681,698 9,239,271 Liabilities directly associated with assets classified as held for sale Creditors and accruals 19,391 2,910 Deposits and receipts in advance 188,955 46,265 Tax liabilities 24,230 6,214 Borrowing 4,610,000 1,785,000 Deferred tax liabilities 27,526 17,607 4,870,102 1,857,996 Amounts recognised in other comprehensive income and accumulated in equity relating to non-current assets held for sale Properties revaluation reserve 127,054 47

50 22. Creditors and Accruals Included in creditors and accruals are trade payables of approximately HK$37,847,000 (31st December, 2015: HK$64,975,000). The following is the aged analysis of trade payables at the end of the reporting period: ,847,000 64,975,000 30th June, 31st December, days 22,926 50,813 Over 90 days 14,921 14,162 37,847 64, Borrowings th June, 31st December, Secured bank loans 5,066,063 9,141,994 Other secured loans 4,959,746 5,389,779 10,025,809 14,531,773 Less: Amounts due within one year (7,609,428) (8,651,773) Amounts due after one year 2,416,381 5,880, Share Capital 24. Number of shares Share capital Ordinary shares of HK$0.10 each Authorised: At 1st January, 2015, 31st December, 2015 and 30th June, ,000,000, ,000 Issued and fully paid: At 1st January, 2015, 31st December, 2015 and 30th June, ,907,619, ,762 48

51 25. Amounts due to Associates, Investee Companies and Non-controlling Shareholders The amounts due to associates, investee companies and noncontrolling shareholders are unsecured and interest-free (31st December, 2015: except for a principal amount of approximately HK$180,578,000 due to a non-controlling shareholder carried interest at 11.25% per annum from 1st January to 31st October, 2015 and interest-free thereafter). The associates, investee companies and non-controlling shareholders will not demand for repayment within one year from the end of the reporting period and the amounts are therefore shown as non-current. 26. Disposals of Subsidiaries (a) Pioneer Time Disposal on 15th January, 2016 The Pioneer Time Disposal was completed on 15th January, 2016 at a consideration of approximately HK$12,448,280,000 (after adjustment). Upon completion, Pioneer Time ceased to be a subsidiary of the Company and its results, assets and liabilities were ceased to be consolidated with those of the Group. Details of the Pioneer Time Disposal were set out in the announcements of the Company dated 12th November, 2015 and 15th January, 2016 and the circular of the Company dated 3rd December, ,578, (a) Pioneer Time Pioneer Time 12,448,280,000 Pioneer Time Pioneer Time 2016 The net assets of Pioneer Time as at Pioneer Time the date of disposal were as follows: Investment properties 8,657,600 Property, plant and equipment 505,585 Debtors, deposits, other receivables and prepayments 5,006 Bank balances and cash 554 Creditors and accruals (1,268) Deposits and receipts in advance (54,249) Tax liabilities (1,763) Deferred tax liabilities (17,651) Amount due to the Group (1,053,961) Net assets disposed of 8,039,853 Sale of amount due to the Group 1,053,961 Gain on disposal of a subsidiary 1,277,154 10,370,968 49

52 26. Disposals of Subsidiaries (continued) (a) Pioneer Time Disposal on 15th January, 2016 (continued) 26. (a) Pioneer Time 2016 Satisfied by: Cash consideration received 5,000,000 Present value of deferred consideration (note) 5,372,854 10,372,854 Expenses incurred for disposal (1,886) 10,370,968 Net cash inflow arising on disposal: Cash consideration 12,448,280 Cash consideration receivable (note) (7,448,280) Deposit received in prior year (1,250,000) Cash consideration received during the Period 3,750,000 Expenses incurred for disposal (1,886) Bank balances and cash disposed of (554) 3,747,560 The gain on the Pioneer Time Disposal was included in other gains and losses, net (Note 9(i)) in the unaudited condensed consolidated statement of comprehensive income. Note: The deferred consideration represents the consideration of approximately HK$7,448,280,000 receivable in cash by instalments within 6 years from the date of completion of the Pioneer Time Disposal. Subsequent to the end of the reporting period, the Group received HK$5,700,000,000. (b) Evergo Shanghai Disposal on 22nd June, 2016 During the Period, Digi-Star Limited, an indirect wholly-owned subsidiary of the Company, entered into an equity transfer agreement with an independent third party to dispose of the entire issued share capital of Evergo Shanghai. Pioneer Time 9(i) Pioneer Time 7,448,280,000 5,700,000,000 (b) 50

53 26. Disposals of Subsidiaries (continued) (b) Evergo Shanghai Disposal on 22nd June, 2016 (continued) The Evergo Shanghai Disposal was completed on 22nd June, 2016 at a consideration of equivalent to approximately HK$1,355,843,000. Upon completion, Evergo Shanghai ceased to be a subsidiary of the Company and its results, assets and liabilities were ceased to be consolidated with those of the Group. 26. (b) 1,355,843, The net assets of Evergo Shanghai as at the date of disposal were as follows: Investment properties 1,037,057 Equipment 195 Debtors, deposits, other receivables and prepayments 1,527 Tax recoverable 185 Bank balances and cash 49,168 Creditors and accruals (9,289) Deposits and receipts in advance (17,328) Deferred tax liabilities (438,081) Net assets disposed of 623,434 Release of translation reserve upon disposal 9,053 Gain on disposal of a subsidiary 721,294 1,353,781 Satisfied by: Cash consideration 1,355,843 Expenses incurred for disposal (2,062) 1,353,781 Net cash outflow arising on disposal: Cash consideration 1,355,843 Cash consideration receivable (note) (1,355,843) Cash consideration received during the Period Expenses incurred for disposal (2,062) Bank balances and cash disposed of (49,168) (51,230) The gain on the Evergo Shanghai Disposal was included in other gains and losses, net (Note 9(ii)) in the unaudited condensed consolidated statement of comprehensive income. Note: Subsequent to the end of the reporting period, the entire amount of consideration receivable was received. 9(ii) 51

54 26. Disposals of Subsidiaries (continued) (c) Disposal of the Silvercord Group to connected persons on 13th January, 2015 The Silvercord Disposal was completed on 13th January, 2015 at a total consideration of approximately HK$7,656,149,000. Upon completion, the Silvercord Group ceased to be subsidiaries of the Company and its consolidated results, assets and liabilities were ceased to be consolidated with those of the Group. Upon completion of the Silvercord Disposal, the Group recorded loss on disposals of subsidiaries of approximately HK$97,235,000. The loss was mainly derived from the increase in fair value of the investment properties of HK$93,200,000 due to revaluation of the investment properties as at 31st December, 2014 (which was carried out in accordance with the Group s accounting policies on revaluation of the Group s investment properties as at reporting date) as compared with the property valuation under the sale and purchase agreements of the Silvercord Disposal dated 1st September, Details of the Silvercord Disposal were set out in the announcements of the Company dated 2nd September, 2014 and 13th January, 2015 and the circular of the Company dated 23rd September, (c) 7,656,149,000 97,235,000 93,200, The consolidated net assets of the Silvercord Group as at the date of disposal were as follows: Investment properties 9,388,280 Equipment 3 Debtors, deposits, other receivables and prepayments 48,917 Tax recoverable 1 Bank balances and cash 95,018 Amount due from the Group 424,226 Creditors and accruals (7,192) Deposits and receipts in advance (217,539) Tax liabilities (18,714) Borrowings (1,500,000) Deferred tax liabilities (39,425) Amount due to the Group (7,538,215) Consolidated net assets disposed of 635,360 Sale of amount due to the Group 7,538,215 Assumption of amount due from the Group (424,226) Loss on disposals of subsidiaries (97,235) 7,652,114 52

55 26. Disposals of Subsidiaries (continued) (c) Disposal of the Silvercord Group to connected persons on 13th January, 2015 (continued) 26. (c) 2015 Satisfied by: Cash consideration 7,656,149 Expenses incurred for disposal (4,035) 7,652,114 Net cash inflow arising on disposal: Cash consideration 7,656,149 Settled by special interim dividend (note) (5,350,803) Net cash consideration received 2,305,346 Expenses incurred for disposal (4,035) Bank balances and cash disposed of (95,018) 2,206,293 The loss on the Silvercord Disposal was included in other gains and losses, net (Note 9(iv)) in the unaudited condensed consolidated statement of comprehensive income. Note: The purchaser of Brass Ring and Union Leader in the Silvercord Disposal, Fly High Target Limited, a company wholly-owned by Mr. Joseph Lau, has elected to settle the consideration by procuring Mr. Joseph Lau s entitlement on the special interim dividend declared in 2014 and paid in 2015 (Note 11) in an amount of approximately HK$5,350,803, Capital Commitments 27. 9(iv) Brass Ring Union Leader Fly High Target Limited 11 5,350,803,000 30th June, 31st December, Authorised and contracted for: Development expenditure of properties in Hong Kong 37, ,257 Renovation of properties 22,410 6,997 Investee company s contribution 171, ,600 Capital investment in limited partnership (note) 109, , , ,755 53

56 27. Capital Commitments (continued) Note: The Group had committed to make a capital contribution of U S$100,000,000 ( equivalent to a pproximately HK$775,790,000) in the Cayman Islands Partnership. Up to the end of the reporting period, approximately US$85,825,000 (equivalent to approximately HK$665,825,000) (31st December, 2015: US$83,625,000 (equivalent to approximately HK$648,214,000)) among the contribution has been paid by the Group. 28. Contingent Liabilities and Assets Contingent Liabilities ,000,000775,790,000 85,825, ,825,000 83,625, ,214, th June, 31st December, Guarantee given to a bank in respect of banking facilities in lieu of the cash public utility deposit jointly utilised by subsidiaries 15,000 15,000 Contingent Assets Post-completion development upside sharing or compensation upside sharing on the case of Moon Ocean Ltd. ( Moon Ocean ) On 1st September, 2014, (i) Data Dynasty Limited ( Data Dynasty ), an indirect wholly-owned subsidiary of the Company; (ii) the Company, being the guarantor of Data Dynasty; (iii) One Midland Limited ( One Midland ), a company wholly-owned by Mr. Joseph Lau; and (iv) Mr. Joseph Lau, being the guarantor of One Midland, entered into a sale and purchase agreement, namely Moon Ocean SP Agreement, pursuant to which Data Dynasty agreed to sell and One Midland agreed to acquire the entire issued share capital of Value Eight Limited ( Value Eight ), Value Eight held investments relating to the Macau Land (as defined below) through Moon Ocean ( Moon Ocean Disposal ). Subject to completion of the Moon Ocean Disposal on 31st October, 2014, (a) if judgments are made in favour of Moon Ocean in the appeals to its legal case in the Macau Special Administrative Region of the PRC ( Macau ) ( Appeals ) and have become final and the title to the Macau land previously held by Moon Ocean ( Macau Land ) is vested on Moon Ocean again, One Midland shall pay to Data Dynasty the development upside sharing pursuant to the Moon Ocean SP Agreement; or (b) if judgments are made against Moon Ocean in the Appeals and have become final, One Midland shall pay to Data Dynasty the compensation upside sharing pursuant to the Moon Ocean SP Agreement. Moon Ocean Ltd.Moon Ocean (i) Data Dynasty Limited Data Dynasty (ii) Data Dynasty (iii) One Midland LimitedOne Midland (iv) One Midland Moon Ocean Data Dynasty One Midland Value Eight LimitedValue Eight Value EightMoon Ocean Moon Ocean Moon Ocean (a) Moon Ocean Moon OceanMoon Ocean Moon OceanOne MidlandMoon Ocean Data Dynasty(b) Moon Ocean One MidlandMoon Ocean Data Dynasty 54

57 28. Contingent Liabilities and Assets (continued) Contingent Assets (continued) Post-completion development upside sharing or compensation upside sharing on the case of Moon Ocean Ltd. ( Moon Ocean ) (continued) The Appeals comprise (i) the appeal against the Chief Executive of Macau s declaration of the previous act of the Chief Executive of Macau in confirming the approval of the transfers of the rights deriving from the land concession for the Macau Land to Moon Ocean and the amendments of the related land concession contracts in March 2006 invalid ( First Decision Appeal ); and (ii) the appeal against the notice from the Land, Public Works and Transport Bureau of Macau that the Chief Executive of Macau declared the previous act of approval of the increase of residential gross floor area of the Macau Land and an exchange of land in March 2011 by the Chief Executive of Macau was invalid ( Second Decision Appeal ). The arrangement of the development upside sharing or the compensation upside sharing (as the case may be) allows the Group to share the possible upside or compensation in relation to the Macau Land and the La Scala project post completion of the Moon Ocean SP Agreement. The aggregate amount of all the development upside sharing or the compensation upside sharing (as the case may be) payable by One Midland to Data Dynasty shall be subject to a maximum amount of HK$12,500,000,000. The Directors consider the aggregate amount of all the development upside sharing or the compensation upside sharing (as the case may be) payable by One Midland to Data Dynasty and the maximum amount of HK$12,500,000,000 for the development upside sharing or the compensation upside sharing (as the case may be) are fair and reasonable and in the interests of the Company and the shareholders of the Company as a whole. The Court of Final Appeal of Macau denied the First Decision Appeal in its judgment on 22nd June, Up to the date of the approval of these unaudited condensed consolidated financial statements, the Second Decision Appeal is still in progress. Details of the Moon Ocean Disposal, the development upside sharing and the compensation upside sharing were set out in the announcement of the Company dated 2nd September, 2014 and the circular of the Company dated 23rd September, Moon Ocean Ltd.Moon Ocean (i) Moon Ocean (ii) Moon Ocean One MidlandData Dynasty 12,500,000,000 One MidlandData Dynasty 12,500,000,000 Moon Ocean 55

58 29. Material Related Party Transactions Save as disclosed elsewhere in these unaudited condensed consolidated financial statements, the Group had the following material transactions with related parties during the Period: 29. Six months ended 30th June, Interest income received from associates 1,094 1,689 Income received from a controlling shareholder of the Company ( Controlling Shareholder )/ companies controlled by the Controlling Shareholder/a company controlled by a close family member of the Controlling Shareholder: Rental services 11,220 12,996 Property management services, leasing administration services and property administration services 17,091 9,761 Asset management and maintenance services 2,120 9,101 Advisory and consultancy services Rent and building management fee paid to associates Consideration received for the disposal of the Group s stock of properties to a non-executive Director (note (i)) Consideration received for the disposals of subsidiaries to companies wholly-owned by the Controlling Shareholder (note (ii)) Deposit received for the disposal of subsidiaries to a company wholly-owned by the Controlling Shareholder (note (iii)) 1,339 1,344 (i) 113,568 (ii) 7,656,149 (iii) 14,307 Interest income was charged at the prevailing market rates based on outstanding balances during the Period. Rental services, property management services, leasing administration services and property administration services, asset management and maintenance services and advisory and consultancy services (the contract for services with effect from 1st November, 2014 (details were disclosed in the announcement of the Company dated 31st October, 2014)) were charged at the terms agreed by both parties. Rent and building management fee were determined on terms similar to those applicable to transactions with unrelated parties. 56

59 29. Material Related Party Transactions (continued) Consideration received for the disposal of the Group s stock of properties was determined with reference to the prevailing market values. Consideration received for the disposals of subsidiaries was determined after arm s length negotiations between both parties with reference to the consolidated net asset value of the respective subsidiaries at their respective date of completion. Notes: 29. (i) As set out in the announcement of the Company dated 21st December, 2015, a subsidiary owned as to 70% by the Company accepted a tender submitted by a non-executive Director, to purchase a residential unit together with a car parking space of 55 Conduit Road, the Group s stock of property held for sale, at a consideration of approximately HK$113,568,000 (after cash rebate). The transaction was completed on 5th April, (i) 70% 113,568,000 (ii) Details of the Silvercord Disposal (Note 26(c)) were set out in the announcements of the Company dated 2nd September, 2014 and 13th January, 2015 and the circular of the Company dated 23rd September, (iii) Details of the disposal of Asian East Limited, an indirect whollyowned subsidiary of the Company, and its subsidiaries (one of which held the property known as The ONE in Hong Kong) were set out in the announcements of the Company dated 12th December, 2014, 15th July, 2015 and 13th August, 2015 and the circular of the Company dated 7th January, Details of the balances with related parties at the end of the reporting period are set out in Notes 16 and Fair Value Measurements of Financial Instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these unaudited condensed consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of HKFRS 2 Share-based Payment, leasing transactions that are within the scope of HKAS 17 Leases, and measurements that have some similarities to fair value but are not fair value, such as net realisable value in HKAS 2 Inventories or value in use in HKAS 36 Impairment of Assets. (ii) 26(c) (iii) Asian East Limited The ONE

60 30. Fair Value Measurements of Financial Instruments (continued) In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurements in its entirety, which are described as follows: 30. Level 1: Level 2: Level 3: inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and inputs are unobservable inputs for the asset or liability. Financial instruments measured at fair value The following table analysed the financial instruments which are measured at fair value at the end of the reporting period into the three-level hierarchy. Fair value Valuation techniques Significant Financial assets Fair value hierarchy and key inputs unobservable inputs 30th June, st December, 2015 Listed equity securities presented as investments held-for-trading 39, ,244 Level 1 Quoted prices in active markets N/A Bonds presented as financial assets measured at FVTPL (31st December, 2015: bonds presented as financial assets designated as at FVTPL) 9,630,607 11,069,270 Level 1 Quoted prices in active markets N/A Listed equity investment presented as financial assets measured at FVTOCI 4,611,672 Level 1 Quoted prices in active markets N/A 58

61 30. Fair Value Measurements of Financial Instruments (continued) Financial instruments measured at fair value (continued) 30. Fair value Valuation techniques Significant Financial assets Fair value hierarchy and key inputs unobservable inputs 30th June, st December, 2015 Unlisted club debentures presented as financial assets measured at FVTPL 63,074 Level 2 Market comparison N/A Unlisted equity securities presented as financial assets measured at FVTOCI (31st December, 2015: unlisted equity securities presented as available-for-sale investments measured at fair value) 863,619 68,544 Level 3 Discounted cash flow: forecast dividend income, forecast distribution, discount rate and contract terms (if any) Forecast dividend income taking into account management s experience, dividend records over the past years, forecast distribution and the estimated terminal value (note (i)) (i) Discount rate ranging from 1% below prime rate ( Prime ) to 21.30% (31st December, 2015: discount rate ranging from 1% below Prime to Prime) (note (i)) (i) Reference to the fair value of the underlying property Fair value of the underlying property based on valuation model (note (i)) (i) Net asset value (note (ii)) (ii) N/A 15,208,309 11,502,058 59

62 30. Fair Value Measurements of Financial Instruments (continued) Financial instruments measured at fair value (continued) Notes: 30. (i) The higher the forecast dividend income, forecast distribution, terminal value and fair value of the underlying property, the higher the fair value. The higher the discount rate, the lower the fair value. (i) (ii) The Group has determined that the net asset value represents fair value at the end of the reporting period. There were no transfers amongst Level 1, Level 2 and Level 3 in the fair value hierarchy during the period/year and no change in valuation techniques used in the prior years, except for the measurements of certain financial instruments changed from cost model to fair value upon early adoption of HKFRS 9 (2014) on 1st January, The fair value of financial instruments traded in active markets is based on quoted market prices at the end of each reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm s length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in Level 1. (ii)

63 30. Fair Value Measurements of Financial Instruments (continued) Financial instruments measured at fair value (continued) The movement during the period/year in the balances of Level 3 fair value measurement is as follows: 30. Financial assets measured at FVTOCI Unlisted equity securities presented as availablefor-sale investments Financial guarantee liabilities At 1st January, ,515 (102) Net unrealised loss recognised in other comprehensive income during the year (note) (24,971) Fair value changes recognised in profit or loss during the year (58) Disposals of subsidiaries 160 At 31st December, 2015 and 1st January, 2016 (originally stated) 68,544 Unlisted equity securities reclassified from available-for-sale investments measured at fair value to financial assets measured at FVTOCI upon early adoption of HKFRS 9 (2014) Unlisted equity securities reclassified from available-for-sale investments measured at cost to financial assets measured at FVTOCI upon early adoption of HKFRS 9 (2014) ,544 (68,544) ,149 Effect on financial assets remeasured at fair value upon early adoption of HKFRS 9 (2014) 794,693 (68,544) ,960 At 1st January, 2016 (restated) Net return of capital contributed during the period Net unrealised loss recognised in other comprehensive income during the period (note) 891,653 (6,499) (21,535) At 30th June, ,619 61

64 30. Fair Value Measurements of Financial Instruments (continued) Financial instruments measured at fair value (continued) Note: All of the above losses included in other comprehensive income for the period/year relate to unquoted equity investments held at the end of the reporting period and are reported as changes of financial assets measured at fair value through other comprehensive income reserve (2015: securities investments reserve). Financial instruments not measured at fair value The Directors consider that the carrying amounts of the Group s financial instruments that are not measured at fair value approximate to their fair values

65 INTERIM DIVIDEND During the Period, the Board had declared and/or paid a final dividend of HK1 cent per share (payment date: 6th June, 2016) (2014: HK1 cent per share) and special interim dividend of HK$2 per share (payment date: 20th January, 2016) (2015: HK$4 per share and HK$2.6 per share). Subsequent to the Period, the Board had also declared special interim dividends of (i) HK$2.1 per share (payment date: 11th August, 2016) and (ii) HK$3.23 per share (payment date: 1st September, 2016) (2015: HK$1.2 per share). In order to maintain a continuous dividend payment record, the Board has resolved to declare a nominal interim dividend of HK1 cent per share (2015: HK30 cents per share) for the Period (the Interim Dividend ). Dividend warrants for the Interim Dividend will be posted on or about 23rd September, 2016 to shareholders whose names appear on the register of members of the Company on 13th September, CLOSURE OF REGISTER OF MEMBERS The register of members will be closed on 13th September, In order to qualify for the Interim Dividend, all share transfers documents accompanied by the relevant share certificates must be lodged with the Company s Branch Registrar and Transfer Office in Hong Kong, namely Computershare Hong Kong Investor Services Limited, at Shops , 17th Floor, Hopewell Centre, 183 Queen s Road East, Wanchai, Hong Kong not later than 4:30 p.m. on 12th September, FINANCIAL OPERATION REVIEW Results Revenue Revenue for the Period amounted to HK$1,944.9 million (2015: HK$969.0 million), an increase of 100.7% over the same period of last year and comprised gross rental income of HK$482.1 million (2015: HK$760.4 million), property sales of HK$1,480.4 million (2015: HK$147.0 million), loss on sales of investments held-fortrading on a net basis of HK$24.4 million (2015: profit of HK$10.0 million) and others of HK$6.8 million (2015: HK$51.6 million). The increase in revenue was mainly due to the increase in sales of trading properties. Gross Profit Gross profit for the Period amounted to HK$1,356.4 million (2015: HK$767.7 million), an increase of 76.7% as compared with the same period of last year which was mainly due to the increase in profit from property sales of HK$867.5 million while the decrease in net rental income of HK$257.0 million (i)2.1 (ii) ,944,900, ,000, % 482,100, ,400,000 1,480,400, ,000,000 24,400,000 10,000,000 6,800,000 51,600,000 1,356,400, ,700, % 867,500, ,000,000 63

66 FINANCIAL OPERATION REVIEW (continued) Results (continued) Property Leasing For property leasing, the rental revenue in retail and non-retail section have decreased significantly by 53.8% to HK$196.0 million and 14.8% to HK$286.1 million respectively during the Period. The total rental income in revenue for the Period recorded a decrease of 36.6% to HK$482.1 million as compared with the same period of last year of HK$760.4 million. Together with the attributable rental revenue generated from associates and an investee company of HK$68.9 million (2015: HK$107.8 million), the total attributable rental revenue to the Group after non-controlling interests amounted to HK$550.2 million (2015: HK$867.3 million), which representing a decline of 36.6% over the same period of last year. Attributable net rental income for the Period showed HK$526.1 million, a 33.0% decrease over HK$785.7 million in the same period of last year. The decline in attributable rental revenue and net rental income were mainly due to the disposals of subsidiaries holding MassMutual Tower and The ONE in January 2016 and July 2015 respectively, since then the results of those subsidiaries were not consolidated to the Group. For those properties remain as at 30th June, 2016, the attributable rental revenue and net rental income maintained stable performance over the same period of last year. In addition, the newly acquired properties in the United Kingdom contributed rental revenue and net rental income of HK$15.6 million and HK$14.5 million respectively during the Period. Property Development and Trading During the Period, the attributable property sales revenue and the relevant attributable profit from the Group and its associates recorded an increase of 350.0% to HK$1,036.9 million (2015: HK$230.4 million) and 956.0% to HK$657.9 million (2015: HK$62.3 million) respectively. The major component recorded in gross profit is sales of 55 Conduit Road located in Mid-Levels West (70% interest) had contributed an attributable profit to the Group of HK$657.4 million (including 1 unit and 1 car parking space of 55 Conduit Road sold to a connected person as disclosed in section headed Other Information and Events After the Reporting Period of this interim report) (2015: sales of Phase I, Phase II and parking spaces of Splendid City in Chengdu (100% interest) generated profit of HK$0.5 million, HK$1.9 million and HK$6.7 million respectively; Tower 1 of The Metropolis in Chengdu (100% interest) generated profit of HK$22.3 million; and One WanChai and parking spaces at The Zenith in Wanchai (both 87.5% interest) had contributed an attributable profit of HK$25.1 million and HK$1.5 million respectively). 53.8% 196,000, % 286,100, ,400, % 482,100,000 68,900, ,800, ,200, ,300, % 526,100, ,700, % The ONE 15,600,000 14,500, % 1,036,900, ,400, % 657,900,000 62,300,000 70% 657,400, % 500,000 1,900,0006,700, % 22,300, % 25,100,0001,500,000 64

67 FINANCIAL OPERATION REVIEW (continued) Results (continued) Property Development and Trading (continued) In respect of properties held by associates, Greenville Residence in Yuen Long (50% interest) generated profit of HK$0.5 million (2015: The Coronation in Chongqing (25% interest) generated profit of HK$4.3 million) as reflected in the share of results of associates. As at 30th June, 2016, deposits received from stock of properties contracted to be sold amounted to HK$499.8 million. Of which, deposits of HK$458.5 million were received from presale of 88 units of One South Lane in Kennedy Town (100% interest) with contracted sale of HK$467.3 million (after discount), together with deposits of HK$40.8 million were received for 7 units and 3 car parking spaces of 55 Conduit Road with contracted sale of HK$489.6 million (after cash rebate) and its attributable interest of sales to the Group amounted to HK$342.7 million. In summary, the Group together with associates executed properties sale agreements, including presale agreements to third parties, recorded an attributable contracted sales of HK$539.8 million (after cash rebate) (2015: HK$390.7 million) during the Period. Total attributable property sales profit recognised for the Period was HK$657.9 million (2015: HK$62.3 million). Securities Investments The Group has in the ordinary and normal course of business conducted its securities investment activities. During the Period, the Group recorded a realised loss of HK$24.4 million (2015: realised gain of HK$10.0 million) on disposal of listed investments held-fortrading (the gains/losses of which was included in revenue) with gross proceeds of HK$568.1 million (2015: HK$608.2 million). However, a realised gain from sale of bonds of HK$95.8 million (2015: realised loss of HK$41.0 million) was recognised. The net realised gain for the Period was HK$71.4 million (2015: net realised loss of HK$31.0 million). Furthermore, the Group recorded an unrealised loss of HK$103.9 million (2015: HK$39.5 million) representing the changes in fair value of listed investments held-for-trading and bonds, which had no effect on the cash flow of the Group. Summing up the above and adding the net income from net dividend income, interest income, other net investment income and other finance income of HK$636.9 million (2015: net income from interest income, other investment income and other finance costs of HK$220.5 million), the gain recognised on securities investments was HK$604.4 million (2015: HK$150.0 million). 50% 500,000 25% 4,300, ,800, % 88458,500, ,300, ,800,000489,600, ,700, ,800, ,700, ,900,000 62,300,000 24,400,000 10,000, ,100, ,200,000 95,800,000 41,000,000 71,400,000 31,000, ,900,000 39,500, ,900, ,500, ,400, ,000,000 65

68 FINANCIAL OPERATION REVIEW (continued) Results (continued) Securities Investments (continued) The respective income/expense from securities investments under different categories are further elaborated below. Listed Equity Investment at Fair Value Through Other Comprehensive Income In May 2016, the Group acquired 577,180,500 H shares of Shengjing Bank Co., Ltd. (Stock Code: 2066) ( Shengjing Bank ) at the total consideration of HK$6,926.2 million included in financial assets measured at fair value through other comprehensive income ( FVTOCI ). During the Period, the after-expenses dividend income of HK$189.6 million and the withholding tax of HK$19.1 million, making a net dividend income of HK$170.5 million was recognised in the unaudited condensed consolidated statement of comprehensive income and an unrealised loss on fair value change of HK$2,314.5 million was recorded as an other comprehensive expense. The Group believes that the decrease in share price of Shengjing Bank from May to the end of June 2016, among other things, was because of the slowdown in the People s Republic of China ( PRC ) economic growth and the challenging environment on risk management in the PRC banking industry. The fair value change is a non-cash item and will not affect the cash flow of the Group. Shengjing Bank is a joint stock company and a commercial bank incorporated in the PRC and is principally engaged in corporate banking, retail banking and treasury business. Its corporate banking products and services include corporate loans and advances, trade financing and deposit taking activities, agency services, and remittance and settlement services. The H shares of Shengjing Bank are listed on the main board of The Stock Exchange of Hong Kong Limited. Its headquarters are located in Shenyang, Liaoning Province, the PRC, and Shengjing Bank is a leading commercial bank in Northeast China. Listed Investments Held-for-trading and Treasury Products The listed investments held-for-trading and treasury products recorded a profit before and after finance income of HK$432.3 million and HK$433.9 million (2015: before and after finance cost of HK$152.8 million and HK$150.0 million) respectively for the Period. 577,180,500 H 20666,926,200, ,600,000 19,100, ,500,000 2,314,500,000 H 432,300, ,900, ,800,000150,000,000 66

69 FINANCIAL OPERATION REVIEW (continued) Results (continued) Securities Investments (continued) Listed Investments Held-for-trading and Treasury Products (continued) Profit from the listed investments held-for-trading and treasury products reflected in the unaudited condensed consolidated statement of comprehensive income for the Period comprised a realised loss on listed securities of HK$24.4 million (2015: realised gain of HK$10.0 million), a realised gain on bonds of HK$95.8 million (2015: realised loss of HK$41.0 million), an unrealised loss on fair value changes of listed securities and bonds of HK$103.9 million (2015: HK$39.5 million) and interest income and other net investment income of HK$464.8 million (2015: HK$223.3 million). Net relevant finance income for the Period was HK$1.6 million (2015: net finance costs of HK$2.8 million) including interest expense of HK$32.0 million (2015: HK$4.6 million) and exchange gain of HK$33.6 million (2015: HK$1.8 million). Other Income and Expenses Other income for the Period, which mainly came from net building management fee income, asset management and maintenance services income, property management services, leasing administration services and property administration services income, advisory and consultancy services income and rental services income, decreased to HK$51.5 million (2015: HK$60.4 million), representing a decrease of 14.7% as compared with the same period of last year. During the Period, administrative expenses decreased by 10.5% to HK$192.8 million (2015: HK$215.3 million). Finance costs decreased by 51.8% to HK$89.4 million (2015: HK$185.4 million) during the Period, including exchange gain of HK$33.6 million (2015: HK$1.8 million) on foreign currency loans hedged for foreign currency securities investments. The decrease in administrative expenses and finance costs were mainly due to the disposals of subsidiaries during the Period and the year of Other gains and losses recorded a net gain of HK$1,992.3 million mainly comprised gain on the disposal of the Group s entire issued share capital of Pioneer Time Investment Limited ( Pioneer Time ), an indirect wholly-owned subsidiary of the Company ( Pioneer Time Disposal ) and the disposal of the Group s entire issued share capital of Evergo Real Estate (Shanghai) Company Limited ( Evergo Shanghai ), an indirect wholly-owned subsidiary of the Company ( Evergo Shanghai Disposal ) of HK$1,277.2 million and HK$721.3 million respectively (2015: net loss of HK$97.0 million mainly comprised loss on the disposals of the Group s entire issued share capital of Brass Ring Limited, Union Leader Limited and Chinese Estates and Finance, Limited (now known as Silvercord Finance Limited), all are indirect wholly-owned subsidiaries of the Company, and their respective subsidiaries of HK$97.2 million). 24,400,000 10,000,000 95,800,000 41,000, ,900,000 39,500, ,800, ,300,000 1,600,000 2,800,000 32,000,000 4,600,00033,600,000 1,800,000 51,500,000 60,400, % 10.5% 192,800, ,300, % 89,400, ,400,000 33,600,000 1,800,000 1,992,300,000 Pioneer Time Investment LimitedPioneer Time Pioneer Time 1,277,200, ,300,000 97,000,000Brass Ring Limited Union Leader Limited 97,200,000 67

70 FINANCIAL OPERATION REVIEW (continued) Results (continued) Disposals of Subsidiaries 1) The Pioneer Time Disposal was completed on 15th January, 2016 at a consideration of HK$12,448.3 million (after adjustment). Upon completion, Pioneer Time ceased to be a subsidiary of the Company and its results, assets and liabilities were ceased to be consolidated with those of the Group. The Group recorded a gain on the Pioneer Time Disposal of HK$1,277.2 million. Details of the Pioneer Time Disposal were set out in the announcements of the Company dated 12th November, 2015 and 15th January, 2016 and the circular of the Company dated 3rd December, ) During the Period, Digi-Star Limited, an indirect wholly-owned subsidiary of the Company, entered into an equity transfer agreement with an independent third party to dispose of the entire issued share capital of Evergo Shanghai. The Evergo Shanghai Disposal was completed on 22nd June, 2016 at a consideration of equivalent to HK$1,355.8 million. Upon completion, Evergo Shanghai ceased to be a subsidiary of the Company and its results, assets and liabilities were ceased to be consolidated with those of the Group. The Group recorded a gain on the Evergo Shanghai Disposal of HK$721.3 million. 1) Pioneer Time 12,448,300,000 Pioneer Time Pioneer Time 1,277,200,000 Pioneer Time 2) 1,355,800, ,300,000 Associates The share of results of associates for the Period was a profit of HK$117.7 million as compared to HK$132.3 million for the same period of last year, the decrease of which was mainly due to no rental income was generated for the Period from Platinum located in Shanghai which was disposed of by an associate during the year of Fair Value Changes on Investment Properties Investment properties of the Group in Hong Kong and Mainland China were revalued at 30th June, 2016 by B.I. Appraisals Limited ( B.I. Appraisals ) whereas the investment properties in the United Kingdom were revalued by Peak Vision Appraisals Limited ( Peak Vision Appraisals ). B.I. Appraisals and Peak Vision Appraisals are independent property valuers. A decrease in fair value of investment properties of HK$891.2 million (2015: HK$543.5 million) was recorded during the Period. The unrealised fair value changes will not affect the cash flow of the Group. 117,700, ,300, ,200, ,500,000 68

71 FINANCIAL OPERATION REVIEW (continued) Profit, Core Profit, Dividends, Repurchase and Cash Payment Ratio Profit Profit attributable to owners of the Company for the Period was HK$2,931.0 million as compared to loss of HK$115.4 million for the same period of last year. The result of profit for the Period was mainly arising from increase in attributable property sales profit, gains on the Pioneer Time Disposal and the Evergo Shanghai Disposal, net profit from the segment of the listed investments held-for-trading and treasury products and dividend income from listed equity investment at FVTOCI and imputed interest income from deferred consideration receivables which were included in investment income, net. Earnings per share for the Period was HK$1.54 (2015: loss per share of HK$0.06). Core Profit The Group disposed of certain investment properties through disposals of subsidiaries during the Period, the costs of which are stated at fair value. Before disposal, such gain/loss on fair value change is unrealised and recognised at the end of each reporting period, but excluded from core profit as non-cash items. In the period of disposal, such unrealised gain/loss has become realised; and in computating core profit, accumulated fair value gain/loss from prior years and current period are included as cash items. If the net loss on the major non-cash items of HK$800.3 million (2015: HK$609.0 million) are excluded, but the accumulated realised fair value gain together with the respective deferred tax on disposals of investment properties recognised in prior years of HK$8,682.0 million (including those recognised in properties revaluation reserve) (2015: HK$8,507.7 million) is included, the Group will have a core profit attributable to owners of the Company for the Period of HK$12,413.3 million (2015: HK$9,001.3 million) and a core earnings per share of HK650.7 cents (2015: HK471.9 cents), which were both increased 37.9% over the same period last year. The major non-cash items represented the attributable unrealised fair value loss on investment properties together with their respective deferred tax from the Group and its associates of HK$800.3 million (2015: HK$609.0 million). 2,931,000, ,400,000 Pioneer Time ,300, ,000,000 8,682,000,000 8,507,700,000 12,413,300,000 9,001,300, % 800,300, ,000,000 69

72 FINANCIAL OPERATION REVIEW (continued) Profit, Core Profit, Dividends, Repurchase and Cash Payment Ratio (continued) Dividends Conditional special interim dividend of HK$2 per share, which was conditional upon completion of the Pioneer Time Disposal in total amount of HK$3,815.2 million was paid in cash on 20th January, 2016 (2015: special interim dividends of HK$4 per share in total amount of HK$7,630.5 million was paid in cash on 13th January, 2015 and HK$2.6 per share in total amount of HK$4,959.8 million was declared on 15th June, 2015 and paid in cash on 15th July, 2015). Final dividend of HK1 cent (year ended 31st December, 2014: HK1 cent) per share in total amount of HK$19.1 million for the year ended 31st December, 2015 was paid in cash on 6th June, Total dividends of HK$3,834.3 million were paid in cash during the Period. Special interim dividends of HK$2.1 per share in total amount of HK$4,006.0 million was declared on 19th July, 2016 and paid in cash on 11th August, 2016 and HK$3.23 per share in total amount of HK$6,161.6 million was declared on 9th August, 2016 and will be payable on or about 1st September, Repurchase During the Period, the Company had not repurchased any of the Company s share. Cash Payment Ratio Based on (a) the core profit for the Period of HK$12,413.3 million (2015: HK$9,001.3 million) or HK650.7 cents (2015: HK471.9 cents) per share; (b) special interim dividend of HK$2 (2015: HK$4) per share paid during the Period; (c) cash special interim dividend of HK$2.1 per share declared; and (d) cash interim dividend of HK1 cent (2015: HK30 cents) per share declared, the ratio of such cash payment to the core profit is 63.2% (2015: 91.1%). 23,815,200,000 Pioneer Time 47,630,500, ,959,800, ,100,000 3,834,300, ,006,000, ,161,600,000 (a) 12,413,300,000 9,001,300, (b) 2 4 (c) 2.1 (d) %91.1% 70

73 FINANCIAL OPERATION REVIEW (continued) Net Asset Value As at 30th June, 2016, the Group s net asset attributable to owners of the Company amounted to HK$36,908.8 million (31st December, 2015: HK$40,247.6 million), a decrease of HK$3,338.8 million or 8.3% when compared with 31st December, With the total number of ordinary shares in issue of 1,907,619,079 as at 30th June, 2016 (31st December, 2015: 1,907,619,079), the net asset value per share attributable to owners of the Company was HK$19.35 (31st December, 2015: HK$21.10). The movement in net asset value was mainly due to (a) total comprehensive income for the Period attributable to owners of the Company of HK$336.6 million; (b) increase in net asset upon early adoption of Hong Kong Financial Reporting Standard ( HKFRS ) 9 (2014) Financial Instruments of HK$158.9 million (net of tax); (c) payment of final dividend of HK$19.1 million; and (d) payment of special interim dividend of HK$3,815.2 million. During the Period, the Group acquired a listed equity investment categorised as financial assets measured at FVTOCI and an unrealised loss on fair value change of HK$2,314.5 million was recorded as an other comprehensive expense. The carrying amount of the loss on fair value change of listed equity investment included in financial assets measured at FVTOCI reserve was HK$2,314.5 million as at 30th June, 2016 (31st December, 2015: in securities investments reserve of nil). Other than disposal of subsidiaries holding Windsor House (as disclosed in the paragraph Assets Classified as Held for Sale/ Liabilities Directly Associated with Assets Classified as Held for Sale below), the existing projects and those disclosed in the interim results, the Group did not have material acquisition or disposal of assets and any future plans for material investment or capital assets. Securities Investments Listed Equity Investment at Fair Value Through Other Comprehensive Income During the Period, the Group acquired 577,180,500 H shares of Shengjing Bank at the total consideration of HK$6,926.2 million, after deducting the fair value loss of HK$2,314.5 million for the Period, the carrying amount of listed equity investment categorised as financial assets measured at FVTOCI as at 30th June, 2016 was HK$4,611.7 million. 36,908,800,000 40,247,600,000 3,338,800, % 1,907,619,079 1,907,619, (a) 336,600,000(b) ,900,000 (c) 19,100,000 (d) 3,815,200,000 2,314,500,000 2,314,500,000 6,926,200, ,180,500 H 2,314,500,000 4,611,700,000 71

74 FINANCIAL OPERATION REVIEW (continued) Securities Investments (continued) Listed Investments Held-for-trading and Treasury Products As at 31st December, 2015, the carrying amount of the listed investments held-for-trading and treasury products was HK$11,433.5 million. During the Period, the portfolio was decreased by a net disposal of HK$1,659.7 million. After deducting the fair value loss of HK$103.9 million for the Period, the listed investments heldfor-trading and treasury products portfolio of the Group became HK$9,669.9 million as at 30th June, 2016, which formed part of the Group s cash management activities. As at 30th June, 2016, the portfolio of listed securities investments and treasury products of HK$14,281.6 million (31st December, 2015: HK$11,433.5 million) comprised (a) listed equity securities (investments held-for-trading) of HK$39.3 million (31st December, 2015: HK$364.2 million); (b) bonds (financial assets measured at fair value through profit or loss) of HK$9,630.6 million (31st December, 2015: financial assets designated as at fair value through profit or loss of HK$11,069.3 million); and (c) listed equity investment (financial assets measured at FVTOCI) of HK$4,611.7 million (31st December, 2015: nil), representing 23.7% of total assets. Unlisted Securities Investments The Group had committed to make a capital contribution of United States dollar ( US$ ) million (equivalent to approximately HK$775.8 million) in an exempted limited partnership formed under the Exempted Limited Partnership Law (Revised) of the Cayman Islands. At as 30th June, 2016, the Group has contributed US$85.8 million (equivalent to approximately HK$665.8 million) and the carrying amount was HK$569.4 million, which was included in financial assets measured at FVTOCI. 11,433,500,000 1,659,700, ,900,000 9,669,900,000 14,281,600,000 11,433,500,000 (a) 39,300, ,200,000 (b) 9,630,600,000 11,069,300,000 (c) 4,611,700, % 100,000, ,800,000 85,800, ,800, ,400,000 72

75 FINANCIAL OPERATION REVIEW (continued) Assets Classified as Held for Sale/Liabilities Directly Associated with Assets Classified as Held for Sale On 23rd December, 2015, (i) China Entertainment and Land Investment Company, Limited ( CELIC ), a direct wholly-owned subsidiary of the Company; (ii) the Company, being the guarantor of CELIC; (iii) Magic Square Limited ( Magic Square ), a company wholly-owned by Mr. Joseph Lau, Luen-hung ( Mr. Joseph Lau ), a substantial shareholder and a controlling shareholder of the Company; and (iv) Mr. Joseph Lau, being the guarantor of Magic Square, entered into a sale and purchase agreement, pursuant to which CELIC agreed to sell and Magic Square agreed to acquire the entire issued share capital of Keep Speed Company Limited ( Keep Speed ), an indirect wholly-owned subsidiary of the Company, at a consideration equal to the aggregate of (a) the net asset value or liability of Keep Speed as at the date of completion; and (b) the aggregate face amount of all sums due or owing by Keep Speed to other members of the Group (other than the Jumbo Grace Group (as defined below)) less the aggregate face amount of all sums due and owing to Keep Speed by any member of the Group (other than the Jumbo Grace Group) as at the date of completion. On the same date, (i) Good Top Limited ( Good Top ), an indirect wholly-owned subsidiary of the Company; (ii) the Company, being the guarantor of Good Top; (iii) Best Range Limited ( Best Range ), a company wholly-owned by Mr. Joseph Lau; and (iv) Mr. Joseph Lau, being the guarantor of Best Range, entered into a sale and purchase agreement, pursuant to which Good Top agreed to sell and Best Range agreed to acquire the entire issued share capital of Jumbo Grace Limited ( Jumbo Grace ), an indirect wholly-owned subsidiary of the Company, and its subsidiary (holding the property known as Windsor House in Hong Kong) (collectively Jumbo Grace Group ) at a consideration equal to the aggregate of (a) the consolidated net asset value or liability of the Jumbo Grace Group as at the date of completion; and (b) the aggregate face amount of all sums due or owing by the Jumbo Grace Group to other members of the Group (other than Keep Speed and the Jumbo Grace Group) less the aggregate face amount of all sums due and owing to any company of the Jumbo Grace Group by any member of the Group (other than Keep Speed and the Jumbo Grace Group) as at the date of completion. As a result of the disposals of Keep Speed and the Jumbo Grace Group (collectively Windsor Group ) ( Windsor Disposal ), the consolidated assets and liabilities of the Windsor Group have been presented as assets classified as held for sale and liabilities directly associated with assets classified as held for sale respectively in the unaudited condensed consolidated statement of financial position as at 30th June, 2016 in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations. Details of the Windsor Disposal were set out in the announcements of the Company dated 23rd December, 2015 and 2nd February, 2016 and the circular of the Company dated 15th January, (i) (ii) (iii) Magic Square LimitedMagic Square (iv) Magic Square Magic Square Keep Speed Company LimitedKeep Speed (a) Keep Speed (b) Keep Speed Jumbo Grace Jumbo Grace Keep Speed (i) Good Top LimitedGood Top (ii) Good Top (iii) Best Range Limited Best Range (iv) Best Range Good Top Best Range Jumbo Grace Limited Jumbo Grace Jumbo Grace (a) Jumbo Grace (b) Jumbo Grace Keep Speed Jumbo Grace Keep Speed Jumbo Grace Jumbo Grace Keep SpeedJumbo Grace WindsorWindsor 5 73

76 FINANCIAL OPERATION REVIEW (continued) Risk Management The Group has established adequate risk management procedures that enable it to identify, measure, monitor and control various types of risk it faces. This is supplemented by active management involvement, effective internal controls and adequate internal audit in the best interests of the Group. Equity The number of issued ordinary shares as at 30th June, 2016 and 31st December, 2015 were 1,907,619,079. Debt and Gearing As at 30th June, 2016, the Group s bank and other borrowings amounted to HK$10,025.8 million (31st December, 2015: HK$14,531.8 million) (excluding bank borrowing presented as liabilities directly associated with assets classified as held for sale). Cash and deposits at banks amounted to HK$1,898.5 million (31st December, 2015: HK$2,849.8 million) (excluding cash and deposits at banks presented as assets classified as held for sale), pledged deposits amounted to HK$1,067.1 million (31st December, 2015: HK$202.8 million) (excluding pledged deposits presented as assets classified as held for sale) and net borrowings amounted to HK$7,060.2 million (31st December, 2015: HK$11,479.2 million). Total debt to equity ratio was 27.0% (31st December, 2015: 36.0%) and net debt to equity ratio was 19.0% (31st December, 2015: 28.5%), which are expressed as a percentage of total borrowings, and net borrowings, respectively, over the total equity of HK$37,158.2 million (31st December, 2015: HK$40,325.4 million). The decrease in the total debt to equity ratio and the net debt to equity ratio were mainly due to the decrease in borrowings following the bank borrowing of the Windsor Group was presented as liabilities directly associated with assets classified as held for sale. If the listed securities investments and treasury products of HK$14,281.6 million (31st December, 2015: HK$11,433.5 million) are included, there would be a net cash position of HK$7,221.4 million (31st December, 2015: net debt of HK$45.7 million or net debt to equity ratio of 0.1%). 1,907,619,079 10,025,800,000 14,531,800,000 1,898,500,000 2,849,800,000 1,067,100, ,800,000 7,060,200,000 11,479,200, % 36.0% 19.0% 28.5% 37,158,200,000 40,325,400,000 Windsor 14,281,600,000 11,433,500,000 7,221,400,000 45,700, % 74

77 FINANCIAL OPERATION REVIEW (continued) Debt and Gearing (continued) As at 30th June, 2016, the Group s bank and other borrowings of HK$10,025.8 million (excluding bank borrowing presented as liabilities directly associated with assets classified as held for sale), 75.9%, 0.6% and 23.5% were repayable within 1 year, 1 to 2 years and 2 to 5 years respectively. Of which the Group s bank and other borrowings were denominated in HK$ (22.1%), Pound Sterling ( GBP ) (43.7%), US$ (28.1%), Euro ( EUR ) (3.3%) and Singapore dollar ( SGD ) (2.8%). GBP, US$, EUR and SGD investment securities were hedged by GBP, US$, EUR and SGD borrowings. The Group s bank and other borrowings in HK$, US$, EUR and SGD were carried at interest rates calculated mainly with reference to Hong Kong Interbank Offered Rate and cost of funds; bank and other borrowings in GBP were effectively carried at fixed rate and carried at interest rates calculated with reference to London Interbank Offered Rate and cost of funds. As at 30th June, 2016, about 75.4% of the Group s borrowings were on floating rate basis and 24.6% were on fixed rate basis. No hedging for interest rate is subsisted at the end of the reporting period. Pledge of Assets As at 30th June, 2016, the Group had pledged the following assets with their respective carrying amounts: (a) The Group s investment properties of HK$18,590.4 million (including investment properties presented as assets classified as held for sale), stock of properties of HK$961.7 million and time deposits of HK$263.5 million (including time deposits presented as assets classified as held for sale) (31st December, 2015: investment properties of HK$26,527.8 million (including investment properties presented as assets classified as held for sale), properties of HK$505.5 million (presented as assets classified as held for sale), stock of properties of HK$958.0 million and time deposits of HK$253.4 million (including time deposits presented as assets classified as held for sale)) were pledged to the Group s bankers to secure general banking and loan facilities granted to the Group. (b) The Group s investments held-for-trading, bonds and listed equity investment at FVTOCI with carrying amounts of HK$10,277.2 million (31st December, 2015: investments held-for-trading and bonds of HK$11,433.5 million) and cash deposits of HK$942.9 million (31st December, 2015: HK$8.6 million) were pledged to the Group s financial institutions to secure margin and securities facilities granted to the Group in respect of securities transactions, of which HK$4,959.7 million (31st December, 2015: HK$5,389.8 million) was utilised as at 30th June, 2016 as borrowings due within one year. (c) Interests in certain subsidiaries of the Company have been pledged as part of the security to secure certain bank borrowings granted to the Group. 10,025,800, % 0.6% 23.5% 22.1% 43.7% 28.1% 3.3% 2.8% 75.4% 24.6% (a) 18,590,400, ,700, ,500,000 26,527,800, ,500, ,000, ,400,000 (b) 10,277,200,000 11,433,500, ,900,000 8,600,000 4,959,700,000 5,389,800,000 (c) 75

78 FINANCIAL OPERATION REVIEW (continued) Financial and Interest Income/Expenses Interest income was included in revenue and investment income (2015: revenue, other income and investment income). Interest income for the Period was HK$928.1 million, representing an increase of 294.9% over the same period of last year of HK$235.0 million. Finance costs included interest expenses on bank loans and other loans; exchange difference on translation of foreign currency loans; and arrangement fee and facility and commitment fee expenses. Interest expenses for the Period amounted to HK$116.4 million, representing a decrease of 27.5% over the same period of last year of HK$160.5 million. Interest capitalised for the Period was HK$1.2 million as compared to HK$67.2 million for the same period of last year. The decrease in interest expenses and interest capitalised were mainly due to decrease in total borrowings following certain disposals of subsidiaries during the Period and the year of The average interest rate over the period under review was 1.59% (2015: 2.93%), which was expressed as a percentage of total interest paid over the average total borrowings. Remuneration Policies, Share Option Scheme and Share Award Scheme As at 30th June, 2016, the Group employed a total of 572 staff (31st December, 2015: 582 staff) in Hong Kong including about 254 staff (31st December, 2015: 269 staff) employed under the estate management company in Hong Kong and 4 staff (31st December, 2015: 4 staff) in the offices in Mainland China. Employees were remunerated on the basis of their performance, experience and prevailing industry practice. Remuneration packages comprised salary and year-end discretionary bonus based on market conditions and individual performance. The executive directors of the Company continued to review employees contributions and to provide them with necessary incentives and flexibility for their better commitment and performance. No share option scheme was adopted during the Period. The Company had adopted a share award scheme ( Share Award Scheme ) in The Share Award Scheme is to recognise and reward certain employees for their contributions to the Group and to give long-term incentives for retaining them for the continued operations and development of the Group. Details of the Share Award Scheme were set out in the Company s circular dated 23rd December, No share was granted under the Share Award Scheme during the Period. 928,100, ,000, % 116,400, ,500, % 1,200,000 67,200, % 2.93%

79 FINANCIAL OPERATION REVIEW (continued) Mainland China and United Kingdom Profit contribution from the Group s investment in Mainland China (mainly included in gross profit, fair value changes on investment properties, gain on disposal of a subsidiary, share of results of associates and taxation) for the Period amounted to HK$581.0 million (2015: HK$80.3 million). The Group s net investment in Mainland China as at 30th June, 2016 amounted to HK$838.1 million (31st December, 2015: HK$1,772.9 million) representing 2.3% of the Group s total equity. The Group acquired investment properties in the United Kingdom in April and May As at 30th June, 2016, the Group s investment properties in the United Kingdom with carrying amount of GBP658.5 million (equivalent to approximately HK$6,865.9 million) (31st December, 2015: GBP351.5 million (equivalent to approximately HK$4,037.1 million)) contributed a net loss of HK$59.9 million (2015: net profit of HK$28.4 million) to the Group for the Period, the loss mainly included loss on fair value changes on investment properties of HK$98.2 million. GBP exchange loss of foreign operations included in other comprehensive expense amounted to HK$262.6 million. As at 30th June, 2016, the Group s net investment in the United Kingdom amounted to HK$3,561.2 million (31st December, 2015: HK$1,613.1 million) representing 9.6% of the Group s total equity. Listed Subsidiary The Group did not own any listed subsidiary at the end of the reporting period. Property Valuation Property valuations in respect of the Group s investment properties in Hong Kong and Mainland China have been carried out by B.I. Appraisals as at 30th June, 2016 (31st December, 2015: B.I. Appraisals and Vigers Appraisal and Consulting Limited), independent qualified professional valuer. For the investment properties in the United Kingdom, the valuations as at 30th June, 2016 and 31st December, 2015 were carried out by Peak Vision Appraisals, another independent qualified professional valuer. Their valuations were based on investment method and/or direct comparison method as the valuation methodologies and were used in preparing 2016 interim results. 581,000,000 80,300, ,100,000 1,772,900, % 658,500,000 6,865,900, ,500,000 4,037,100,000 59,900,000 28,400,000 98,200, ,600,000 3,561,200,000 1,613,100, % 77

80 FINANCIAL OPERATION REVIEW (continued) Property Valuation (continued) The Group s investment properties were valued at HK$22,966.1 million (31st December, 2015: HK$30,598.9 million) (including those presented as assets classified as held for sale), a 3.9% decrease over 2015 after adjusted for the additions, disposals and exchange adjustments of investment properties during the Period. The decrease in fair value of HK$891.2 million was recognised in the unaudited condensed consolidated statement of comprehensive income for the Period. The Group also shared an increase in fair value of investment properties of associates of HK$88.6 million (adjusted deferred tax credit of HK$0.1 million) for the Period. The decline in fair value of HK$891.2 million was mainly due to decrease in fair values of the retail properties in Hong Kong as a result of rental rates of certain retail business sectors have shown indications of reaching their peaks. The fair value change is a noncash item and will not affect the cash flow of the Group. 22,966,100,000 30,598,900, % 891,200,000 88,600, , ,200,000 78

81 BUSINESS REVIEW Hong Kong Property Investment Rentals from investment properties continued to be one of the major sources of our income. The overall occupancy rate of the Group s retail portfolio was 94.00% during the Period. The high occupancy rate was attributable to the prime locations of the Group s retail properties. During the Period, the average occupancy rate of Windsor House shopping mall was approximately 94.83%. The average occupancy rate of the shops of Causeway Place was approximately 80.48% during the Period. Olympian City 3 (25% interest), the retail mall in The Hermitage residences in West Kowloon, all the shops were fully let out as of 30th June, Coronation Circle (15% interest), the retail mall in The Coronation residences in West Kowloon, the average occupancy rate was approximately 57.89% during the Period. The occupancy rate for the Group s office properties maintained at a high level throughout the Period. During the Period, the average occupancy rates of Windsor House and Harcourt House were approximately 98.32% and 98.07% respectively, bringing the approximate occupancy rate of the overall office portfolio to 98.22%. In January 2016, the Group disposed the company holding MassMutual Tower. The Group has also in December 2015 entered into a disposal agreement to dispose the companies holding Windsor House, such transaction has not yet completed as at the date of this report and is expected to be completed in early September % 94.83% 80.48% 25% 15% 57.89% 98.32% 98.07% 98.22% 79

82 BUSINESS REVIEW (continued) Hong Kong Property Development In general, the Group s development projects have been progressing satisfactorily and sales of trading properties has recorded a pleasing results. No. 12 Shiu Fai Terrace, located in Mid-Levels East, is a traditional prestigious location for luxury residential project in Hong Kong. A luxury residential tower which provides a total residential gross floor area of around 41,108 square feet will be redeveloped. Superstructure work is in progress. Completion of the project is rescheduled to first half of One South Lane is located in the Western District and enjoys close proximity to the HKU MTR Station. It will be redeveloped into a luxury residential/retail tower with a total gross floor area of around 41,353 square feet and consists of 92 residential units. Superstructure and fitting-out works are in progress. Completion of the project is re-scheduled to the third quarter of Since its pre-sales commenced in September 2014, 88 units were presold up to 30th June, 2016, representing 95.65% of total units. 55 Conduit Road (70% interest) is a luxury residential development in Mid-Levels West with total residential gross floor area of around 87,800 square feet which provides 35 residential units. The occupation permit and the certificate of compliance were issued in March 2015 and November 2015 respectively and it has been launched in December As at 30th June, 2016, 20 units were contracted for sales, representing 57.14% of total units, of which 13 units had been handed over to individual purchasers. The Hermitage (25% interest) is one of the Group s joint venture development projects in West Kowloon. It comprises 6 residential tower blocks and provides in aggregate 964 residential units and retail properties with a total gross floor area of around 1,095,980 square feet. As at 30th June, 2016, 99.79% of total units were sold ,108 41, % 70% 87, %13 25% ,095, % The Coronation (15% interest) is another joint venture development project of the Group in West Kowloon. It comprises 6 residential tower blocks and provides in aggregate 740 residential units and retail properties with a total gross floor area of around 650,600 square feet. As at 30th June, 2016, 99.86% of total units were sold. Kwun Tong Town Centre Project (Development Areas 2 and 3) (10% interest) is a joint venture development project of the Group awarded by the Urban Renewal Authority. Its total site area is approximately 234,160 square feet. Total gross floor area of around 1,853,561 square feet will be developed. Foundation work was completed. Excavation and lateral support works and pile cap works are in progress and the whole project is expected to be completed in the first quarter of % , % 10% 234,160 1,853,561 80

83 BUSINESS REVIEW (continued) Mainland China Property Investment During the Period, the 79 retail outlets with a total area of approximately 29,000 square feet in Lowu Commercial Plaza, Shenzhen were fully let out. Hilton Beijing (50% interest), having 503 rooms, average occupancy rate was approximately 73.21% for the Period. Oriental Place (50% interest), a 10-storey office building next to Hilton Beijing, average occupancy rate was approximately 87.29% for the Period. In June 2016, the Group disposed the company holding Evergo Tower, a 21-storey office and shopping complex located at Central Huaihai Road in Shanghai. The average occupancy rates of the office and retail spaces of Evergo Tower for the Period immediately before disposal were approximately 79.66% and 85.75% respectively. An associate of the Group disposed the company holding Platinum (50% interest), an office building in Shanghai in September Mainland China Property Development The Group disposed the companies holding the property projects known as Splendid City, The Metropolis and Chinese Estates Plaza, all located in Chengdu in July 2015 and The Coronation (25% interest) located in Chongqing in October Overseas Property Investment River Court is a Grade A freehold office building situate at Fleet Street, London, United Kingdom. It provides a total net internal area of approximately 431,324 square feet, together with certain car parking spaces. It was fully let out as of 30th June, In April 2016, the Group acquired 14 St George Street, a Grade A freehold office building located in London, United Kingdom. The building comprises approximately 51,861 square feet of office accommodation arranged over lower ground, ground and four upper floors. It was fully let out as of 30th June, In May 2016, the Group acquired a mixed use freehold building located in (odd) Oxford Street and Soho Street, London, United Kingdom, comprising approximately 55,162 square feet in aggregate. The building provides retail, office and residential accommodation, occupying approximately 33,850 square feet, 13,735 square feet and 7,577 square feet respectively, over lower ground, ground and six upper floors. It was fully let out as of 30th June, ,000 50% % 50% % % 85.75% 50% 25% River Court Fleet Street River Court 431,324 St George Street 14 51,861 Oxford Street Soho Street ,162 33,850 13,735 7,577 81

84 OTHER INFORMATION AND EVENTS AFTER THE REPORTING PERIOD Disposal of a Subsidiary holding MassMutual Tower Major Transaction The Group has on 12th November, 2015 entered into an equity and debt transfer agreement in relation to, inter alia, disposal of a wholly-owned subsidiary of the Company that ultimately held the commercial property known as MassMutual Tower located in Wanchai, Hong Kong to an independent third party ( MMT Transaction ). MMT Transaction constituted a major transaction of the Company under the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the Stock Exchange ) (the Listing Rules ). MMT Transaction was completed on 15th January, 2016 at the final consideration of approximately HK$12,448.3 million. Details of MMT Transaction were set out in the Company s announcement dated 12th November, 2015, circular dated 3rd December, 2015, and announcement dated 15th January, Disposal of a Residential Unit of 55 Conduit Road Connected Transaction As announced on 21st December, 2015, the Group accepted a tender submitted by Ms. Amy Lau, Yuk-wai, a non-executive director ( NED ) of the Company, to purchase a residential unit together with a car parking space of the Group s luxury residential development located in Mid-Levels West, Hong Kong, namely 55 Conduit Road at the purchase price of HK$124,118,000 (before cash rebate). The transaction constituted a connected transaction of the Company under the Listing Rules. Completion took place on 5th April, Disposal of Subsidiaries holding Windsor House Major and Connected Transactions As announced on 23rd December, 2015, the Group has on 23rd December, 2015 entered into sale and purchase agreements, in relation to, inter alia, disposal of the wholly-owned subsidiaries of the Company that ultimately held the property known as Windsor House located in Causeway Bay, Hong Kong to the companies whollyowned by Mr. Joseph Lau, Luen-hung, a substantial shareholder and a controlling shareholder of the Company, at a consideration capped at HK$12,010.0 million in total ( Windsor Transactions ). Windsor Transactions constituted major and connected transactions of the Company under the Listing Rules and were approved by the independent shareholders of the Company at the special general meeting of the Company held on 2nd February, Details of Windsor Transactions were set out in the announcement of the Company dated 23rd December, 2015 and the circular of the Company dated 15th January, Windsor Transactions have not yet completed as at the date of this report. Completion shall take place in early September ,448,300, ,118,000 12,010,000,000 82

85 OTHER INFORMATION AND EVENTS AFTER THE REPORTING PERIOD (continued) Acquisition of a Property in the United Kingdom In March 2016, the Group entered into a sale and purchase agreement with an independent third party to acquire a freehold property situate at 14 St George Street, London, United Kingdom at a consideration of GBP121.7 million. Completion of the acquisition took place on 15th April, Acquisition of a Property in the United Kingdom Discloseable Transaction As announced on 21st March, 2016, the Group has on 21st March, 2016 entered into a sale and purchase agreement with an independent third party to acquire a freehold property situate at (odd) Oxford Street and Soho Street, London, United Kingdom at a consideration of GBP182.8 million (before rent top up and allowance for stamp duty land tax of the United Kingdom). The acquisition constituted a discloseable transaction of the Company under the Listing Rules. Completion of the acquisition took place on 20th May, Acquisition of Equity Interest in Shengjing Bank Co., Ltd. The Group has entered into a sale and purchase agreement with an independent third party on 6th May, 2016, in relation to the acquisition of 577,180,500 H shares in Shengjing Bank Co., Ltd. (Stock Code: 2066), at a consideration of approximately HK$6,926.2 million. Disposal of a Subsidiary holding Evergo Tower, Shanghai The Group has on 19th May, 2016 entered into an equity transfer agreement in relation to, inter alia, disposal of a wholly-owned subsidiary of the Company that held the office and shopping complex known as Evergo Tower located in Shanghai, the People s Republic of China to an independent third party, at the final consideration of equivalent to approximately HK$1,355.8 million. Completion of the disposal took place in June St George Street 14121,700,000 Oxford Street Soho Street ,800, ,180,500 H ,926,200,000 1,355,800,000 83

86 PROSPECTS The geopolitical tensions in Europe and Middle East as well as the United Kingdom s public referendum to leave the European Union will continue to cause global economic and political uncertainty. In Mainland China, the economic prospect is still promising, notwithstanding the current economic slowdown and domestic rebalancing. It is believed that with stable political situation and strong central government leadership, the One Belt and One Road policy will continue to promote gradual economic growth and sustainable development. In Hong Kong, there are signs of recovery from the slowdown in inbound tourism and hopefully the decline in retail sales can be curbed soon. The residential property market remained quiet during the first quarter of However, gradual sales pick-up has been recorded starting from the second quarter of The Group s properties under development held for sale in Hong Kong are located at good hillside location, and the Group remains optimistic in its property development business in Hong Kong. Subsequent to the disposal of the company holding MassMutual Tower in January 2016 and the disposal of the companies holding Windsor House which is anticipated to be completed in early September 2016, contribution of rental income from these properties to the Group in year 2016 will be significantly lowered. In addition, taking into account the disposal of the company holding The ONE in July 2015, it is expected that the Group s rental revenue and net rental income in year 2016 will record a sizeable decrease when compared to that of the year The Group has expanded its property investment portfolio overseas during the Period. The Group will remain watchful to the domestic and global market changes and will consider replenishing its land bank if good opportunity arises. The ONE 84

87 DIRECTORS AND CHIEF EXECUTIVES INTERESTS IN THE SECURITIES OF THE COMPANY AND ASSOCIATED CORPORATION As at 30th June, 2016, the interests and short positions of the Directors and chief executives of the Company in the shares, underlying shares and debentures of the Company as recorded in the register kept by the Company pursuant to section 352 of the Securities and Futures Ordinance, Chapter 571 of the laws of Hong Kong (the SFO ) or as otherwise notified to the Company and the Stock Exchange pursuant to Appendix 10 of Model Code for Securities Transactions by Directors of Listed Issuers (the Model Code ) contained in the Listing Rules were as follows: Name of Director Number of Shares Held Note Capacity Percentage of Issued Share Capital Mr. Lau, Ming-wai ( Mr. MW Lau ) 1,430,700,768 * Beneficiary of trust 74.99% Note: * These shares were indirectly owned by a discretionary trust of which Mr. MW Lau was one of the eligible beneficiaries of that trust. All the interests stated above represent long positions. The percentage shown was the number of shares the relevant Director was interested in expressed as a percentage of the number of issued shares as at 30th June, Save as disclosed above, none of the other Directors and chief executives of the Company had or were deemed under the SFO to have any interests or short positions in the shares, underlying shares or debentures of the Company or any of its associated corporation (within the meaning of Part XV of the SFO) as at 30th June, During the Period, none of the Directors and chief executives of the Company nor their spouses or children under 18 years of age were granted or had exercised any right to subscribe for any securities of the Company or any of its associated corporation. * XV 85

88 SUBSTANTIAL SHAREHOLDERS INTERESTS IN THE SECURITIES OF THE COMPANY As at 30th June, 2016, so far as are known to any Directors or chief executives of the Company, the following parties (other than Directors or chief executives of the Company) were recorded in the register kept by the Company under section 336 of the SFO, or as otherwise notified to the Company, as being directly or indirectly interested or deemed to be interested in 5% or more of the issued share capital of the Company: 336 5% Name of Substantial Shareholders Number of Shares Held Notes Capacity Mr. Joseph Lau, Luen-hung ( Mr. Joseph Lau ) 1,430,700,768 ^ Founder, beneficiary of trust and interest of children under Alto Trust Limited 1,430,700,768 # Trustee and interest in controlled corporation Solar Bright Ltd. 1,430,700,768 # Beneficiary of a trust and interest in controlled corporation Percentage of Issued Share Capital 74.99% 74.99% 74.99% Global King (PTC) Ltd. 1,199,715,948 # Trustee 62.89% Joseph Lau Luen Hung Investments Limited 230,984,820 # Beneficial owner 12.10% Notes: ^ These shares were indirectly owned by a discretionary trust of which Mr. Joseph Lau was the founder. Mr. Joseph Lau and his certain other family members were eligible beneficiaries of that trust. ^ # Alto Trust Limited as trustee of a discretionary trust held the entire issued share capital of Solar Bright Ltd. and therefore was regarded as interested in the same parcel of shares held by Solar Bright Ltd.. Solar Bright Ltd. held the entire issued share capital of Global King (PTC) Ltd. and all issued units in a unit trust of which Global King (PTC) Ltd. was the trustee and therefore was regarded as interested in the same parcel of shares held by Global King (PTC) Ltd. as trustee of the unit trust. Solar Bright Ltd. also held the entire issued share capital of Joseph Lau Luen Hung Investments Limited and therefore was also regarded as interested in the same parcel of shares held by Joseph Lau Luen Hung Investments Limited. As such, the 1,430,700,768 shares of the Company in which Solar Bright Ltd. was deemed to be interested represented the aggregate of the 1,199,715,948 shares and 230,984,820 shares of the Company held by Global King (PTC) Ltd. and Joseph Lau Luen Hung Investments Limited respectively, which was referred to in the interests of Mr. MW Lau as disclosed under Directors and Chief Executives Interests in the Securities of the Company and Associated Corporation. # Alto Trust Limited Solar Bright Ltd. Solar Bright Ltd. Solar Bright Ltd.Global King (PTC) Ltd. Global King (PTC) Ltd. Global King (PTC) Ltd. Solar Bright Ltd.Joseph Lau Luen Hung Investments Limited Joseph Lau Luen Hung Investments Limited Solar Bright Ltd. 1,430,700,768 Global King (PTC) Ltd. 1,199,715,948 Joseph Lau Luen Hung Investments Limited 230,984,820 86

89 SUBSTANTIAL SHAREHOLDERS INTERESTS IN THE SECURITIES OF THE COMPANY (continued) All the interests stated above represent long positions. As at 30th June, 2016, no short positions were recorded in the register kept by the Company under section 336 of the SFO. SHARE AWARD SCHEME The Company had adopted a share award scheme (the Share Award Scheme ) in The Share Award Scheme is a long-term incentive arrangement for the selected employees. The purpose of the Share Award Scheme is to recognise and reward certain employees of the Group for their contributions to the Group and to give long-term incentives for retaining them for the continued operations and development of the Group. It also intends to attract suitable professional recruits to join the Group and to assist in the further development of the Group. Details of the Share Award Scheme were set out in the circular of the Company dated 23rd December, No share was granted under the Share Award Scheme during the Period. AUDIT COMMITTEE REVIEW The interim results for the Period are unaudited and have not been reviewed by the auditors of the Company. The Audit Committee of the Company, comprised all the Independent Nonexecutive Directors ( INED(s) ), has reviewed with management the accounting principles and practices adopted by the Group and the unaudited condensed consolidated financial statements for the Period. CORPORATE GOVERNANCE Throughout the Period, the Company had applied the principles and complied with the code provisions and certain recommended best practices set out in the Corporate Governance Code contained in Appendix 14 to the Listing Rules, except the following deviations: Code Provision A.6.7 Independent Non-executive Directors and Non-executive Directors Attending General Meetings Mr. MW Lau, a NED, was unable to attend the special general meeting of the Company held on 2nd February, 2016 ( SGM ) and the annual general meeting of the Company held on 19th May, 2016 ( AGM ) as he had business engagement. Ms. Amy Lau, Yuk-wai, another NED, was also unable to attend the SGM and AGM as she was not in Hong Kong on the dates of SGM and AGM. Ms. Phillis Loh, Lai-ping, an INED, was unable to attend the SGM as she had business engagement. 336 A

90 CORPORATE GOVERNANCE (continued) Code Provision E.1.2 Chairman Attending Annual General Meeting Mr. MW Lau, the chairman of the Board, was unable to attend the AGM as he had business engagement. Mr. Chan, Kwok-wai, the chairman of the Audit Committee and the Remuneration Committee, was elected as the chairman of the AGM to ensure effective communication with shareholders of the Company at the AGM. The chairman of the Nomination Committee, Ms. Phillis Loh, Lai-ping had attended the AGM. MODEL CODE FOR SECURITIES TRANSACTIONS The Company has adopted a code of conduct regarding securities transactions by Directors on terms without deviation from the required standard set out in the Model Code. All Directors, after specific enquiries by the Company, confirmed that they had complied with the required standard set out in the Model Code and the said code of conduct during the Period. The Company has also adopted a code of conduct regarding securities transactions by relevant employees on terms no less exacting than the required standard set out in the Model Code. All the relevant employees (the Relevant Employees ) who, because of office or employment, are likely to be in possession of unpublished inside information in relation to the Group s securities had been requested to follow such code when dealing in the securities of the Company. All Relevant Employees, after specific enquiries by the Company, confirmed that they had complied with the required standard set out in the said code during the Period. PURCHASE, SALE OR REDEMPTION OF THE COMPANY S LISTED SECURITIES During the Period, neither the Company nor any of its subsidiaries had purchased, sold or redeemed any of the Company s listed securities. E

91 DISCLOSURE OF CHANGE OF INFORMATION OF DIRECTORS UNDER RULES 13.51B(1) AND 13.51(2) OF THE LISTING RULES The annual remuneration of Ms. Chan, Sze-wan has been increased to HK$1,200,000 with effect from 1st August, 2016 with reference to her duties and responsibilities in the Group as well as the prevailing market condition. Mr. Lam, Kwong-wai has been appointed as an independent nonexecutive director of Lifestyle China Group Limited, a company whose shares are listed on the Stock Exchange, since 24th June, Save those changes mentioned above, there is no change of information of each Director that is required to be disclosed under Rules 13.51B(1) and 13.51(2) of the Listing Rules, since the publication of 2015 Annual Report. APPRECIATION We would like to take this opportunity to express our gratitude to the shareholders for their continuing support. We would also like to express our sincere thanks to all staff members for their dedication and hard work B(1)13.51(2) 1,200, B(1)13.51(2) On behalf of the Board Lau, Ming-wai Chairman Hong Kong, 30th August,

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