To: Business Editor 1st August 2013 For immediate release The following announcement was issued today to a Regulatory Information Service approved by the Financial Conduct Authority in the United Kingdom. HONGKONG LAND HOLDINGS LIMITED HALF-YEARLY RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2013 Highlights Underlying earnings up 63% to US$519 million Higher average rents from investment properties Hong Kong rental reversions largely positive Two Singapore residential developments completed While the operating environment generally remains uncertain, the Group is well positioned in its key markets. Conditions in the Hong Kong office leasing market have shown some improvement and positive rental reversions are expected to continue for the remainder of the year. During the second half, the Group will also benefit from the completion of a third residential project in Singapore as well as ongoing completions in mainland China. Ben Keswick, Chairman 1st August 2013 Results (unaudited) Six months ended 30th June 2013 2012 Change % restated Underlying profit attributable to shareholders # 519 318 +63 Profit attributable to shareholders 598 626 4 Shareholders funds 26,386 26,148* +1 Net debt 3,316 3,273* +1 US US % Underlying earnings per share 22.08 13.58 +63 Earnings per share 25.43 26.72 5 Interim dividend per share 6.00 6.00 - US$ US$ % Net asset value per share 11.21 11.11* +1 # The Group uses underlying profit attributable to shareholders in its internal financial reporting to distinguish between ongoing business performance and non-trading items, as more fully described in note 8 to the condensed financial statements. Management considers this to be a key measure which provides additional information to enhance understanding of the Group s underlying business performance. * At 31st December 2012 The accounts have been restated due to a change in accounting policy upon adoption of IAS 19 (amended 2011) Employee Benefits, as set out in note 1 to the condensed financial statements. The interim dividend of US 6.00 per share will be payable on 16th October 2013 to shareholders on the register of members at the close of business on 23rd August 2013. The ex-dividend date will be on 21st August 2013, and the share registers will be closed from 26th to 30th August 2013, inclusive.
Page 2 HONGKONG LAND HOLDINGS LIMITED HALF-YEARLY RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2013 OVERVIEW The Group s results benefited from higher rents achieved in its commercial properties and the completion of two large residential projects in Singapore. In Hong Kong, the limited new supply of office and retail space is supporting positive rental reversions. In the Group s key residential markets, sentiment remains affected by government measures to dampen prices, particularly in the premium sector. Notwithstanding this, overall sales at the Group s residential projects in Singapore and mainland China have been satisfactory. PERFORMANCE The Group s underlying profit for the first six months of 2013 was US$519 million compared with US$318 million in 2012. In addition, a US$79 million net gain has been recorded following an independent valuation of the Group s investment properties at 30th June 2013, including its share of properties in joint ventures. This compares with a US$308 million gain in the first half of 2012. Accordingly, the profit attributable to shareholders for the first half of 2013 was US$598 million, compared with US$626 million in the comparable period last year. The net asset value per share at 30th June 2013 was US$11.21, up 1% from US$11.11 at the end of 2012. The Directors have declared an interim dividend of US 6.00 per share, unchanged from 2012. GROUP REVIEW Commercial Property In Hong Kong, the office leasing market has shown signs of improvement although overall activity remains low. Current rents, which remain below the highs achieved in 2011, are relatively stable. Rental reversions continued to be largely positive and the Group s average office rent rose to HK$96.6 per sq. ft in the first six months compared with HK$89.3 per sq. ft in the same period of 2012. At 30th June 2013, office vacancy was 5.6% compared to 3.4% at the end of December 2012. The increase was mainly due to a major lease expiry in April.
Page 3 Commitments for some 75% of this space have now been secured but are not yet fully reflected as some leases only take effect in the second half. Rental reversions were also positive in the Hong Kong retail portfolio, which remained fully occupied. The Group s average retail rent was HK$197.4 per sq. ft compared to HK$165.3 per sq. ft in the first half of 2012. In Singapore, the office portfolio was 97% leased, including Tower 3 of Marina Bay Financial Centre which is now 90% committed. Rental levels were stable, but new leases were principally for smaller spaces, with overall activity remaining relatively subdued. In Jakarta, the Group s 50%-owned office portfolio was 93% let. Construction has commenced on the Group s Wangfujing development, its first significant commercial project in Beijing. Residential Property Two large projects were completed in Singapore. MCL Land s The Estuary project with 608 units had been fully pre-sold. At the one-third owned Marina Bay Suites development, the final residential component of the Marina Bay Financial Centre complex, 89% of the 221 units had been sold prior to completion. Este Villa, a fully pre-sold MCL Land project of 121 freehold townhouses, is scheduled for completion in the second half of the year. A 738-unit condominium project, J Gateway, was fully committed within a few days of its June launch. Palms@Sixth Avenue, an exclusive 32-unit landed housing development launched in March, is 19% pre-sold. This project is targeted at the premium sector where the government cooling measures have had greatest impact. MCL Land also started selective marketing of Hallmark Residences, a 75-unit condominium project. Construction at the three previously launched projects is on schedule. These are mostly pre-sold. In Hong Kong, five apartments of Serenade were handed over to buyers in the first half of the year. At the Group s 47%-owned joint venture in Macau, seven units were handed over. In mainland China, the Group s attributable interest in contracted sales across its residential projects was US$369 million in the first six months of the year, compared with
Page 4 US$200 million in the same period in 2012. The Group benefited from improving market conditions as well as additional launches. In particular, pre-sales of the first phases at Yorkville North and Chengdu in the period were encouraging while Yorkville South also performed ahead of expectations. Sales continue at other Group projects in Chongqing, Shenyang and Maple Place in Beijing. Master planning has been completed at the Group s 49%-owned residential joint venture development in the southwest of Jakarta, with construction and pre-selling targeted to commence in 2014. Recently, the Group has agreed to take a 40% interest in a residential project to be developed in Jakarta with its affiliate, PT Astra International. The project will feature some 500 luxury apartments in the heart of the city. FINANCE At 30th June 2013, the Group s net debt was US$3.3 billion, with gearing of 13%. This was little changed from the position at the end of 2012. During the first half of 2013, the Group raised US$930 million in bilateral loan facilities, principally to refinance expiring facilities. PEOPLE Simon Keswick stepped down as Chairman in May, and remains a non-executive Director. We appreciate greatly his tremendous contribution as Chairman of the Group s holding company since his first appointment in 1983. OUTLOOK While the operating environment generally remains uncertain, the Group is well positioned in its key markets. Conditions in the Hong Kong office leasing market have shown some improvement and positive rental reversions are expected to continue for the remainder of the year. During the second half, the Group will also benefit from the completion of a third residential project in Singapore as well as ongoing completions in mainland China. Ben Keswick Chairman 1st August 2013
Page 5 Hongkong Land Holdings Limited Consolidated Profit and Loss Account Underlying business performance (unaudited) Six months ended 30th June Year ended 31st December 2013 2012 2012 Nontrading items Total Underlying business performance restated Nontrading items restated Total restated Underlying business performance restated Nontrading items restated Total restated Revenue (note 2) 912.0-912.0 478.4-478.4 1,114.8-1,114.8 Net operating costs (note 3) (433.0) - (433.0) (120.2) - (120.2) (315.4) - (315.4) Change in fair value of investment properties - (43.4) (43.4) - 250.8 250.8-306.4 306.4 Asset disposals - - - - - - - 1.6 1.6 Operating profit (note 4) 479.0 (43.4) 435.6 358.2 250.8 609.0 799.4 308.0 1,107.4 Financing charges (51.6) - (51.6) (46.9) - (46.9) (98.8) - (98.8) Financing income 19.3-19.3 18.0-18.0 37.9-37.9 Net financing charges (32.3) - (32.3) (28.9) - (28.9) (60.9) - (60.9) Share of results of associates and joint ventures (note 5) 155.3 130.9 286.2 42.0 59.7 101.7 165.8 360.7 526.5 Profit before tax 602.0 87.5 689.5 371.3 310.5 681.8 904.3 668.7 1,573.0 Tax (note 6) (80.5) (5.7) (86.2) (51.4) 0.1 (51.3) (124.3) 0.6 (123.7) Profit after tax 521.5 81.8 603.3 319.9 310.6 630.5 780.0 669.3 1,449.3 Attributable to: Shareholders of the Company 519.4 79.0 598.4 317.9 307.6 625.5 776.2 661.5 1,437.7 Non-controlling interests 2.1 2.8 4.9 2.0 3.0 5.0 3.8 7.8 11.6 521.5 81.8 603.3 319.9 310.6 630.5 780.0 669.3 1,449.3 US US US US US US Earnings per share (note 7) - basic 22.08 25.43 13.58 26.72 33.11 61.32 - diluted 22.08 25.43 13.53 26.62 33.11 61.32
Page 6 Hongkong Land Holdings Limited Consolidated Statement of Comprehensive Income 2013 (unaudited) Six months ended 30th June 2012 restated Year ended 31st December 2012 restated Profit for the period 603.3 630.5 1,449.3 Other comprehensive (expense)/income Items that will not be reclassified to profit or loss: Remeasurements of defined benefit plans - 0.4 (0.2) Tax on items that will not be reclassified - (0.1) 0.1 Items that may be reclassified subsequently to profit or loss: - 0.3 (0.1) Net exchange translation differences (44.4) 40.0 146.1 Revaluation of other investments (19.3) 17.4 33.9 Cash flow hedges - net gain arising during the period 9.2 23.2 7.6 - transfer to profit and loss 1.0 2.3 4.0 10.2 25.5 11.6 Tax relating to items that may be reclassified (1.4) (4.0) (2.2) Share of other comprehensive (expense)/income of associates and joint ventures (46.4) 15.8 97.1 (101.3) 94.7 286.5 Other comprehensive (expense)/income for the period (101.3) 95.0 286.4 Total comprehensive income for the period 502.0 725.5 1,735.7 Attributable to: Shareholders of the Company 496.8 720.5 1,723.7 Non-controlling interests 5.2 5.0 12.0 502.0 725.5 1,735.7
Page 7 Hongkong Land Holdings Limited Consolidated Balance Sheet 2013 (unaudited) At 30th June 2012 restated At 31st December 2012 restated Net operating assets Land use rights 6.8 - - Tangible assets 5.9 4.9 5.6 Investment properties (note 10) 23,511.8 23,332.8 23,493.7 Associates and joint ventures 4,453.1 3,630.5 4,270.4 Other investments 71.1 66.0 82.6 Non-current debtors 27.9 81.4 68.4 Deferred tax assets 4.3 4.7 5.2 Pension assets 5.1 6.4 5.5 Non-current assets 28,086.0 27,126.7 27,931.4 Properties for sale 2,677.0 1,910.0 2,513.4 Current debtors 409.1 514.6 351.0 Current tax assets 16.7 3.7 7.1 Bank balances 1,046.5 815.5 982.1 Current assets 4,149.3 3,243.8 3,853.6 Current creditors (1,176.2) (939.9) (1,142.6) Current borrowings (note 11) (852.4) (535.1) (364.5) Current tax liabilities (95.9) (84.1) (59.8) Current liabilities (2,124.5) (1,559.1) (1,566.9) Net current assets 2,024.8 1,684.7 2,286.7 Long-term borrowings (note 11) (3,509.7) (3,428.2) (3,891.0) Deferred tax liabilities (84.8) (64.0) (66.4) Non-current creditors (91.1) (43.3) (76.3) 26,425.2 25,275.9 26,184.4 Total equity Share capital 235.3 234.4 235.3 Revenue and other reserves 26,150.4 25,011.2 25,912.4 Shareholders funds 26,385.7 25,245.6 26,147.7 Non-controlling interests 39.5 30.3 36.7 26,425.2 25,275.9 26,184.4
Page 8 Hongkong Land Holdings Limited Consolidated Statement of Changes in Equity Share capital Attributable to shareholders of the Company Share Revenue Capital Hedging premium reserves reserves reserves Exchange reserves Total Attributable to noncontrolling interests Total equity Six months ended 30th June 2013 At 1st January 2013 - as previously reported and restated 235.3 370.0 24,983.9 - (5.9) 564.4 26,147.7 36.7 26,184.4 Total comprehensive income - - 579.1-9.5 (91.8) 496.8 5.2 502.0 Dividends paid by the Company - - (258.8) - - - (258.8) - (258.8) Dividends paid to non-controlling shareholders - - - - - - - (2.4) (2.4) At 30th June 2013 235.3 370.0 25,304.2-3.6 472.6 26,385.7 39.5 26,425.2 Six months ended 30th June 2012 At 1st January 2012 - as previously reported and restated 233.8 315.8 23,881.1 1.5 (13.7) 320.0 24,738.5 25.3 24,763.8 Total comprehensive income - - 643.2-20.1 57.2 720.5 5.0 725.5 Dividends paid by the Company - - (234.2) - - - (234.2) - (234.2) Issue of shares 0.6 20.2 - - - - 20.8-20.8 Transfer - - 1.0 (1.0) - - - - - At 30th June 2012 234.4 336.0 24,291.1 0.5 6.4 377.2 25,245.6 30.3 25,275.9 Total comprehensive income for the six months ended 30th June 2013 included in revenue reserves comprises profit attributable to shareholders of the Company of US$598.4 million (2012: US$625.5 million) and fair value loss on other investments of US$19.3 million (2012: gain of US$17.4 million). Cumulative net fair value gain on other investments and net actuarial loss on employee benefit plans amounted to US$23.4 million and US$1.3 million, respectively. (Consolidated Statement of Changes in Equity continued on page 9)
Page 9 Hongkong Land Holdings Limited Consolidated Statement of Changes in Equity (continued) Share capital Attributable to shareholders of the Company Share Revenue Capital Hedging premium reserves reserves reserves Exchange reserves Total Attributable to noncontrolling interests Total equity Year ended 31st December 2012 At 1st January 2012 - as previously reported and restated 233.8 315.8 23,881.1 1.5 (13.7) 320.0 24,738.5 25.3 24,763.8 Total comprehensive income - - 1,471.5-7.8 244.4 1,723.7 12.0 1,735.7 Dividends paid by the Company - - (375.1) - - - (375.1) - (375.1) Dividends paid to non-controlling shareholders - - - - - - - (0.6) (0.6) Unclaimed dividends forfeited - - 4.9 - - - 4.9-4.9 Issue of shares 1.5 54.2 - - - - 55.7-55.7 Transfer - - 1.5 (1.5) - - - - - At 31st December 2012 235.3 370.0 24,983.9 - (5.9) 564.4 26,147.7 36.7 26,184.4 The comprehensive income for the year ended 31st December 2012 included in revenue reserves comprises profit attributable to shareholders of the Company of US$1,437.7 million, fair value gain on other investments of US$33.9 million and net actuarial loss on employee benefit plans of US$0.1 million. Cumulative net fair value gain on other investments and net actuarial loss on employee benefit plans amounted to US$42.7 million and US$1.3 million, respectively.
Page 10 Hongkong Land Holdings Limited Consolidated Cash Flow Statement (unaudited) Six months ended 30th June 2013 2012 restated Year ended 31st December 2012 restated Operating activities Operating profit 435.6 609.0 1,107.4 Depreciation 1.1 1.1 2.1 Reversal of writedowns on properties for sale (6.9) (6.1) (7.5) Change in fair value of investment properties 43.4 (250.8) (306.4) Asset disposals - - (1.6) Increase in properties for sale (190.0) (375.6) (907.6) (Increase)/decrease in debtors (40.0) (198.7) 73.6 Increase in creditors 27.5 164.7 380.7 Interest received 20.3 16.9 37.4 Interest and other financing charges paid (65.6) (24.5) (71.7) Tax paid (41.1) (50.9) (147.4) Dividends from associates and joint ventures 43.1 47.2 139.7 Cash flows from operating activities 227.4 (67.7) 298.7 Investing activities Major renovations expenditure (25.5) (21.9) (47.8) Developments capital expenditure (53.9) (488.8) (515.0) Investments in and loans to associates and joint ventures (21.6) 7.6 (179.0) Deposit for a joint venture (7.7) - (112.1) Disposal of an investment property - - 8.3 Cash flows from investing activities (108.7) (503.1) (845.6) Financing activities Drawdown of borrowings 797.8 1,173.3 1,550.1 Repayment of borrowings (595.7) (545.4) (635.9) Contribution from non-controlling shareholders - 22.7 22.1 Dividends paid by the Company (256.6) (233.6) (374.3) Dividends paid to non-controlling shareholders (2.0) - (0.6) Cash flows from financing activities (56.5) 417.0 561.4 Effect of exchange rate changes 2.1 2.1 (0.2) Net increase/(decrease) in cash and cash equivalents 64.3 (151.7) 14.3 Cash and cash equivalents at beginning of period 981.0 966.7 966.7 Cash and cash equivalents at end of period 1,045.3 815.0 981.0
Page 11 Hongkong Land Holdings Limited Notes to Condensed Financial Statements 1. ACCOUNTING POLICIES AND BASIS OF PREPARATION The condensed financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting. The condensed financial statements have not been audited or reviewed by the Group s auditor pursuant to the UK Auditing Practices Board guidance on the review of interim financial information. The following standards, amendments and interpretations which are effective in the current accounting period and relevant to the Group s operations are adopted in 2013: IFRS 10 IFRS 11 IFRS 12 IFRS 13 Amendments to IFRS 7 Consolidated Financial Statements Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement Disclosures Offsetting Financial Assets and Financial Liabilities Amendments to IFRSs 10, 11 and 12 Consolidated Financial Statements, Joint Arrangements and Disclosure of Interests in Other Entities: Transition Guidance Amendments to IAS 1 IAS 19 (amended 2011) IAS 27 (2011) IAS 28 (2011) Annual Improvements to IFRS Presentation of Items of Other Comprehensive Income Employee Benefits Separate Financial Statements Investments in Associates and Joint Ventures 2009 2011 Cycle There have been no changes to the accounting policies described in the 2012 annual financial statements except for the adoption of IAS 19 (amended 2011). IFRS 10 Consolidated Financial Statements replaces SIC Interpretation 12 Consolidation Special Purpose Entities and most of IAS 27 Consolidated and Separate Financial Statements. It contains a new single consolidation model that identifies control as the basis for consolidation for all types of entities. It provides a definition of control that comprises the elements of power over an investee; exposure of rights to variable returns from an investee; and ability to use power to affect the reporting entity s returns. IFRS 11 Joint Arrangements replaces IAS 31 Interests in Joint Ventures and SIC 13 Jointly Controlled Entities Non Monetary Contributions by Venturers. Under IFRS 11, joint arrangements are classified as either joint operations (whereby the parties that have joint control have rights to the assets and obligations for the liabilities of the joint arrangements) or joint ventures (whereby the parties that have joint control have rights to the net assets of the joint arrangements). Joint operations are accounted for by showing the party s interest in the assets, liabilities, revenue and expenses, and/or its relative share of jointly controlled assets, liabilities, revenue and expenses, if any. Accounting for joint ventures is now covered by IAS 28 (2011) as proportionate consolidation is no longer permitted.
Page 12 1. ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued) IFRS 12 Disclosure of Interests in Other Entities requires entities to disclose information that helps financial statements readers to evaluate the nature, risks and financial effects associated with the entity s interests in subsidiaries, associates, joint arrangements and unconsolidated structured entities. Disclosure required includes significant judgements and assumptions made in determining whether an entity controls, jointly controls, significantly influences or has some other interest in other entities. IFRS 13 Fair Value Measurement requires entities to disclose information about the valuation techniques and inputs used to measure fair value, as well as information about the uncertainty inherent in fair value measurements. The standard applies to both financial and non-financial items measured at fair value. Fair value is now defined as 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 (i.e. an exit price). Amendments to IFRS 7 Disclosures Offsetting Financial Assets and Financial Liabilities focus on disclosures of quantitative information about recognised financial instruments that are offset in the balance sheet, as well as those recognised financial instruments that are subject to master netting or similar arrangements irrespective of whether they are offset. Amendments to IFRSs 10, 11 and 12 on transition guidance provide additional transition relief to IFRSs 10, 11 and 12, limiting the requirement to provide adjusted comparative information to only the preceding comparative period. For disclosures related to unconsolidated structured entities, the amendments will remove the requirement to present comparative information for periods before IFRS 12 is first applied. Amendments to IAS 1 Presentation of Items of Other Comprehensive Income improve the consistency and clarity of the presentation of items of other comprehensive income. The amendments require entities to separate items presented in other comprehensive income into two groups, based on whether or not they may be reclassified to profit or loss in the future. Items that will not be reclassified such as remeasurements of defined benefit pension plans will be presented separately from items that may be reclassified in the future such as deferred gains and losses on cash flow hedges. The amounts of tax related to the two groups are required to be allocated on the same basis. IAS 19 (amended 2011) Employee Benefits requires, for defined benefit plans, the assumed return on plan assets recognised in the profit and loss to be the same as the rate used to discount the defined benefit obligation. Previously, the Group determined income on plan assets based on their long-term rate of expected return. It also requires past service costs to be recognised immediately in profit or loss. Additional disclosures are required to present the characteristics of defined benefit plans, the amount recognised in the financial statements, and the risks arising from defined benefit plans and multi-employer plans. The Group has applied the amended standard retrospectively and the comparative financial statements have been restated in accordance with the transition provisions of the standard. Details of the effect of the change are set out on page 14.
Page 13 1. ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued) IAS 27 (2011) Separate Financial Statements supersedes IAS 27 (2008) and prescribes the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity prepares separate financial statements. There is no impact on the consolidated financial statements as the changes only affect the separate financial statements of the investing entity. IAS 28 (2011) Investments in Associates and Joint Ventures supersedes IAS 28 (2008) and prescribes the accounting for investments in associates and joint ventures and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. Amendment to IAS 1 Presentation of Financial Statements clarifies the disclosure requirements for comparative information when an entity provides a third balance sheet either as required by IAS 8, Accounting policies, changes in accounting estimates and errors ; or voluntarily. When an entity produces an additional balance sheet as required by IAS 8, the balance sheet should be as at the date of the beginning of the preceding period that is, the opening position. No notes are required to support this balance sheet. When management provides additional comparative information voluntarily for example, profit and loss account, balance sheet it should present the supporting notes to these additional statements. Amendment to IAS 16 Property, Plant and Equipment clarifies that spare parts and servicing equipment are classified as property, plant and equipment rather than inventory when they meet the definition of property, plant and equipment. The previous wording of IAS 16 indicated that servicing equipment should be classified as inventory, even if it was used for more than one period. Following the amendment, this equipment used for more than one period is classified as property, plant and equipment. Amendment to IAS 32 Financial Instruments: Presentation clarifies that income tax related to profit distributions is recognised in the profit and loss account, and income tax related to the costs of equity transactions is recognised in equity. Prior to the amendment, IAS 32 was ambiguous as to whether the tax effects of distributions and the tax effects of equity transactions should be accounted for in the profit and loss account or in equity. Amendment to IAS 34 Interim Financial Reporting clarifies the disclosure requirements for segment assets and liabilities in interim financial statements. A measure of total assets and liabilities is required for an operating segment in interim financial statements if such information is regularly provided to the chief operating decision maker and there has been a material change in those measures since the last annual financial statements.
Page 14 1. ACCOUNTING POLICIES AND BASIS OF PREPARATION (continued) The effects of adopting IAS 19 (amended 2011) were as follows: (a) On the consolidated profit and loss for the six months ended 30th June 2012 Increase in net operating costs (0.4) Decrease in tax 0.1 Decrease in profit after tax (0.3) Attributable to: Shareholders of the Company (0.3) US Decrease in basic earnings per share (0.01) Decrease in diluted earnings per share (0.01) (b) There was no impact on the consolidated balance sheet at 31st December 2011 and 2012. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. 2. REVENUE Six months ended 30th June 2013 2012 Rental income 398.2 366.9 Service income 59.4 57.6 Sales of trading properties 454.4 53.9 912.0 478.4 Service income includes service and management charges and hospitality service income. 3. NET OPERATING COSTS Six months ended 30th June 2013 2012 Cost of sales (392.9) (85.0) Other income 4.8 3.5 Administrative expenses (44.9) (38.7) (433.0) (120.2)
Page 15 4. OPERATING PROFIT Six months ended 30th June 2013 2012 By business Commercial property 390.2 358.1 Residential property 116.1 27.3 Corporate (27.3) (27.2) Change in fair value of investment properties 479.0 358.2 - Commercial property (39.9) 246.6 - Residential property (3.5) 4.2 (43.4) 250.8 435.6 609.0 5. SHARE OF RESULTS OF ASSOCIATES AND JOINT VENTURES Six months ended 30th June 2013 2012 By business Commercial property - operating profit 69.0 45.5 - net financing charges (19.0) (15.8) - tax (5.5) (4.6) - net profit 44.5 25.1 Residential property - operating profit 139.2 28.5 - net financing charges (1.0) (0.9) - tax (27.6) (10.8) - non-controlling interests 0.2 0.1 - net profit 110.8 16.9 Underlying business performance 155.3 42.0 Non-trading items: Change in fair value of investment properties (net of deferred tax) - Commercial property 129.8 59.8 - Residential property 1.1 (0.1) 130.9 59.7 286.2 101.7
Page 16 6. TAX Six months ended 30th June 2013 2012 Tax (charged)/credited to profit and loss is analysed as follows: Current tax (68.1) (50.0) Deferred tax - changes in fair value of investment properties (5.7) 0.1 - other temporary differences (12.4) (1.4) (86.2) (51.3) Tax charged relating to components of other comprehensive income is analysed as follows: Actuarial valuation of employee benefit plans - (0.1) Cash flow hedges (1.4) (4.0) (1.4) (4.1) Tax on profits has been calculated at the rates of taxation prevailing in the territories in which the Group operates. The Group has no tax payable in the United Kingdom (2012: nil). Share of tax of associates and joint ventures of US$42.0 million (2012: US$25.5 million) is included in share of results of associates and joint ventures. 7. EARNINGS PER SHARE Basic earnings per share are calculated on profit attributable to shareholders of US$598.4 million (2012: US$625.5 million) and on the weighted average number of 2,352.8 million (2012: 2,341.1 million) shares in issue during the period. In 2012, diluted earnings per share were calculated on profit attributable to shareholders of US$625.7 million, which was after adjusting for the effects of the conversion of convertible bonds, and on the weighted average number of 2,350.7 million shares in issue during the period. The weighted average number of shares for basic and diluted earnings per share is reconciled as follows: Ordinary shares in millions 2013 2012 Weighted average number of shares in issue 2,352.8 2,341.1 Adjustment for shares to be issued on conversion of convertible bonds - 9.6 Weighted average number of shares for diluted earnings per share calculation 2,352.8 2,350.7
Page 17 7. EARNINGS PER SHARE (continued) Earnings per share are additionally calculated based on underlying profit attributable to shareholders. A reconciliation of earnings is set out below: Six months ended 30th June 2013 2012 Basic earnings per share US Diluted earnings per share US Basic earnings per share US Diluted earnings per share US Underlying profit attributable to shareholders 519.4 22.08 22.08 317.9 13.58 13.53 Non-trading items (note 8) 79.0 307.6 Profit attributable to shareholders 598.4 25.43 625.5 26.72 Interest expense on convertible bonds (net of tax) - 0.2 Profit for calculation of diluted earnings per share 598.4 25.43 625.7 26.62 8. NON-TRADING ITEMS Non-trading items are separately identified to provide greater understanding of the Group s underlying business performance. Items classified as non-trading items include fair value gains or losses on revaluation of investment properties; gains and losses arising from the sale of businesses, investments and investment properties; impairment of non-depreciable intangible assets and other investments; provisions for the closure of businesses; acquisition-related costs in business combinations; and other credits and charges of a non-recurring nature that require inclusion in order to provide additional insight into underlying business performance. An analysis of non-trading items is set out below: Six months ended 30th June 2013 2012 Change in fair value of investment properties (43.4) 250.8 Deferred tax on change in fair value of investment properties (5.7) 0.1 Share of change in fair value of investment properties of associates and joint ventures (net of deferred tax) 130.9 59.7 Non-controlling interests (2.8) (3.0) 79.0 307.6
Page 18 9. DIVIDENDS Six months ended 30th June 2013 2012 Final dividend in respect of 2012 of US 11.00 (2011: US 10.00) per share 258.8 234.2 An interim dividend in respect of 2013 of US 6.00 (2012: US 6.00) per share amounting to a total of US$141.2 million (2012: US$140.9 million) is declared by the Board and will be accounted for as an appropriation of revenue reserves in the year ending 31st December 2013. 10. INVESTMENT PROPERTIES Six months ended 30th June 2013 2012 Year ended 31st December 2012 Net book value at beginning of period 23,493.7 22,529.9 22,529.9 Exchange differences (32.0) 39.4 99.3 Additions 93.5 512.7 564.7 Disposal - - (6.6) Net (decrease)/increase in fair value (43.4) 250.8 306.4 Net book value at end of period 23,511.8 23,332.8 23,493.7
Page 19 11. BORROWINGS 2013 At 30th June 2012 At 31st December 2012 Current Bank overdrafts 1.2 0.5 1.1 Current portion of long-term borrowings - bank loans 334.4 498.4 363.4-2.75% United States dollar convertible bonds due 2012-36.2 - - 5.5% United States dollar notes due 2014 516.8 - - Long-term 852.4 535.1 364.5 Bank loans 1,000.6 462.7 844.1 5.5% United States dollar notes due 2014-537.4 527.7 3.65% Singapore dollar notes due 2015 297.5 294.8 308.1 Medium term notes - due 2017 41.7 42.5 44.6 - due 2019 103.0 102.9 103.0 - due 2020 315.3 315.9 323.3 - due 2021 68.0 73.6 74.5 - due 2022 584.6 547.8 614.2 - due 2025 656.3 656.4 657.0 - due 2026 38.5 38.5 38.5 - due 2027 185.7 185.5 185.7 - due 2028 38.0 - - - due 2030 103.1 103.1 103.2 - due 2031 25.4 25.4 25.4 - due 2032 19.9 9.6 9.6 - due 2040 32.1 32.1 32.1 2,211.6 2,133.3 2,211.1 3,509.7 3,428.2 3,891.0 4,362.1 3,963.3 4,255.5
Page 20 12. FINANCIAL INSTRUMENTS Financial instruments by category The fair values of financial assets and financial liabilities, together with carrying amounts at 30th June 2013 are as follows: Loans and receivables Derivatives Other financial liabilities at Availablefor-sale cost amortised Total carrying amount Fair value Assets Other investments - - 71.1-71.1 71.1 Debtors 157.0 31.2 - - 188.2 188.2 Bank balances 1,046.5 - - - 1,046.5 1,046.5 1,203.5 31.2 71.1-1,305.8 1,305.8 Liabilities Borrowings - - - (4,362.1) (4,362.1) (4,287.3) Creditors excluding non-financial liabilities - (41.2) - (528.7) (569.9) (569.9) - (41.2) - (4,890.8) (4,932.0) (4,857.2) Fair value estimation (i) Financial instruments that are measured at fair value For financial instruments that are measured at fair value in the balance sheet, the corresponding fair value measurements are disclosed by level of the following fair value measurement hierarchy: (a) Quoted prices (unadjusted) in active markets for identical assets or liabilities ( quoted prices in active markets ) The fair value of listed securities, which are classified as available-for-sale, is based on quoted prices in active markets at the balance sheet date. The quoted market price used for listed investments held by the Group is the current bid price. (b) Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly ( observable current market transactions ) The fair values of all interest rate swaps, cross-currency swaps and forward foreign exchange contracts are determined using rates quoted by the Group s bankers at the balance sheet date which are calculated by reference to market interest rates and foreign exchange rates.
Page 21 12. FINANCIAL INSTRUMENTS (continued) Fair value estimation (continued) (i) Financial instruments that are measured at fair value (continued) (c) Inputs for assets or liabilities that are not based on observable market data ( unobservable inputs ) The fair value of unlisted securities, which are classified as available-for-sale, is determined using valuation techniques by reference to observable current market transactions (including price-earnings and price-book multiples of listed securities of entities engaged in similar industries) or the market prices of the underlying investments with certain degree of entity specific estimates. There were no changes in valuation techniques during the period. The table below analyses financial instruments carried at fair value at 30th June 2013, by the levels in the fair value measurement hierarchy: Quoted prices in active markets Observable current market transactions Unobservable inputs Total Assets Available-for-sale financial assets - listed securities 61.2 - - 61.2 - unlisted investments - - 9.9 9.9 61.2-9.9 71.1 Derivative financial instruments - 31.2-31.2 61.2 31.2 9.9 102.3 Liabilities Derivative financial instruments - (41.2) - (41.2) (ii) Financial instruments that are not measured at fair value The fair values of current debtors, bank balances and other liquid funds, current creditors and current borrowings are assumed to approximate their carrying amounts due to the short-term maturities of these assets and liabilities. The fair values of long-term borrowings are based on market prices or are estimated using the expected future payments discounted at market interest rates.
Page 22 13. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES Total capital commitments at 30th June 2013 and 31st December 2012 amounted to US$810.2 million and US$838.2 million, respectively. Various Group companies are involved in litigation arising in the ordinary course of their respective businesses. Having reviewed outstanding claims and taking into account legal advice received, the Directors are of the opinion that adequate provisions have been made in the condensed financial statements. 14. RELATED PARTY TRANSACTIONS The parent company of the Group is Jardine Strategic Holdings Limited and the ultimate holding company is Jardine Matheson Holdings Limited ( JMH ). Both companies are incorporated in Bermuda. In the normal course of business, the Group has entered into a variety of transactions with the subsidiaries, associates and joint ventures of JMH ( Jardine Matheson group members ). The more significant of these transactions are described below: Management fee The management fee payable by the Group, under an agreement entered into in 1995, to Jardine Matheson Limited ( JML ), a wholly-owned subsidiary of JMH, in 2013 was US$2.6 million (2012: US$1.6 million), being 0.5% per annum of the Group s underlying profit in consideration for management consultancy services provided by JML. Property and other services The Group rented properties to Jardine Matheson group members. Gross rents on such properties in 2013 amounted to US$9.6 million (2012: US$11.0 million). Jardine Matheson group members provided property construction, maintenance and other services to the Group in 2013 in aggregate amounting to US$27.4 million (2012: US$14.7 million). The outstanding balances arising from the above services at 30th June 2013 are not material. Hotel management services Jardine Matheson group members provided hotel management services to the Group in 2013 amounting to US$1.4 million (2012: US$1.2 million). The outstanding balances arising from the above services at 30th June 2013 are not material. Outstanding balances with associates and joint ventures Amounts of outstanding balances with associates and joint ventures are included in debtors and creditors as appropriate.
Page 23 Hongkong Land Holdings Limited Going Concern Statement The Directors are required to consider whether it is appropriate to prepare financial statements on the basis that the Company and the Group are going concerns. The Group prepares comprehensive financial forecasts and, based on these forecasts, cash resources and existing credit facilities, the Directors consider that the Company and the Group have adequate resources to continue in business for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements. Principal Risks and Uncertainties The Board has overall responsibility for risk management and internal control. The following have been identified previously as the areas of principal risk and uncertainty facing the Company, and they will remain relevant in the second half of the year: Economic Risk Commercial Risk and Financial Risk Regulatory and Political Risk Terrorism, Pandemic and Natural Disasters For greater detail, please refer to page 70 of the Company s Annual Report for 2012, a copy of which is available on the Company s website www.hkland.com. Responsibility Statement The Directors of the Company confirm to the best of their knowledge that: (a) the condensed financial statements have been prepared in accordance with IAS 34; and (b) the interim management report includes a fair review of all information required to be disclosed by the Disclosure and Transparency Rules 4.2.7 and 4.2.8 issued by the Financial Conduct Authority of the United Kingdom. For and on behalf of the Board Y.K. Pang John R. Witt Directors 1st August 2013
Page 24 The interim dividend of US 6.00 per share will be payable on 16th October 2013 to shareholders on the register of members at the close of business on 23rd August 2013. The ex-dividend date will be on 21st August 2013, and the share registers will be closed from 26th to 30th August 2013, inclusive. Shareholders will receive their dividends in United States dollars, unless they are registered on the Jersey branch register where they will have the option to elect for sterling. These shareholders may make new currency elections for the 2013 interim dividend by notifying the United Kingdom transfer agent in writing by 27th September 2013. The sterling equivalent of dividends declared in United States dollars will be calculated by reference to a rate prevailing on 2nd October 2013. Shareholders holding their shares through The Central Depository (Pte) Limited ( CDP ) in Singapore will receive United States dollars unless they elect, through CDP, to receive Singapore dollars. Hongkong Land Group Hongkong Land is one of Asia s leading property investment, management and development groups. Founded in Hong Kong in 1889, Hongkong Land s business is built on partnership, integrity and excellence. In Hong Kong, the Group owns and manages some 450,000 sq. m. (five million sq. ft) of prime commercial space that defines the heart of the Central Business District. In Singapore, it has been instrumental in the creation of the city-state s new Central Business District at Marina Bay with the expansion of its joint venture portfolio of new developments. Hongkong Land s properties in these and other Asian centres are recognised as market leaders and house the world s foremost financial, business and luxury retail names. Hongkong Land develops premium residential properties in a number of cities in the region, principally in China and Singapore where its subsidiary, MCL Land, is a significant developer. Hongkong Land Holdings Limited is incorporated in Bermuda. It has a premium listing on the London Stock Exchange, and secondary listings in Bermuda and Singapore. The Group s assets and investments are managed from Hong Kong by Hongkong Land Limited. Hongkong Land is a member of the Jardine Matheson Group. For further information, please contact: - end - Hongkong Land Limited Y.K. Pang (852) 2842 8428 John R. Witt (852) 2842 8101 GolinHarris Sue So (852) 2501 7984 As permitted by the Disclosure and Transparency Rules of the Financial Conduct Authority of the United Kingdom, the Company will not be posting a printed version of the Half-Yearly Results announcement to shareholders. The Half-Yearly Results announcement will remain available on the Company s website, www.hkland.com, together with other Group announcements.