TM acid-free. The FSC forests certified in accordance with ... · Nojo, Xihe Yayuan, and a fine...

This interim report is printed on FSCTM Certi�ed Paper. Pulps used are chlorine-free and acid-free. The FSCTM logo identi�es products which contain wood from well-managed forests certified in accordance with the rules of the Forest Stewardship Council® .

2

3

14

22

44

Group Results Highlights

Business Review

Financial Review

Financial Information

Other Information

CONTENTS

2 The Wharf (Holdings) Limited Interim Report 2017

IP Demerger in Progress

HIGHLIGHTS

• Underlyingprofitincreasedby22%toHK$7,271million.

о InvestmentProperties(“IP”)werestableandturnedin66%ofGrouptotal.

о DevelopmentPropertiesmorethandoubledtocontribute32%ofGrouptotal.

• Hotel&Logisticswitnessedrecoveries.

• CMEexittocompleteinOctober.

• NetdebtreducedtoHK$21billionfora6.4%gearingratio.

• Dividendpershareincreasedby10%toHK$0.64.

• IPdemerger(bydistributioninspecie)inprogress.

GROUP RESULTS

Groupcoreprofitforthehalf-yearperiodended30June2017increasedyear-on-yearby22%toHK$7,271million(2016:HK$5,972million).

Groupprofitattributabletoequityshareholders,includingIPrevaluationsurplusandotherunrealisedaccountinggains/losses,fortheperiodamountedtoHK$8,441million(2016:HK$6,725million)fora26%increasefrom2016.BasicearningspersharewereHK$2.78(2016:HK$2.22).

INTERIM DIVIDENDS

Interim Dividend in Cash

AninterimdividendincashofHK$0.64(2016:HK$0.58)persharewillbepaidon12September2017toShareholdersonrecordasat6:00p.m.,25August2017.ThiswillabsorbatotalamountofHK$1,942million(2016:HK$1,758million).

Conditional Declaration of Special Interim Dividend — Distribution in Specie of i-CABLE Shares

ReferenceismadetotheOpenOfferCircularissuedbylistedsubsidiaryi-CABLECommunicationsLimited(“i-CABLE”)on12May2017.TheCompanyhasundertakentodistributeinspecieallsharesini-CABLE(“i-CABLEShares”)heldbytheCompanytoitsShareholdersonaproratabasis.

PleaserefertotheseparateannouncementoftheCompanydated9August2017fordetailsofthisconditionaldeclarationofspecialdividendbywayofdistributioninspecieofi-CABLESharesandtheCompany’sintentiontomakefurtherdistribution(s)inspecieofi-CABLEShares.

3The Wharf (Holdings) Limited Interim Report 2017

BUSINESS REVIEW

Coreprofitfrompropertiesadvancedby28%toHK$7.1billion,representing98%(2016:92%)ofGrouptotal.HongKongpropertiesreportedanincreaseof17%toHK$5.2billionandMainlandpropertiesby75%toHK$1.9billion.

INVESTMENT PROPERTIES

Consistentlyhighoccupancyandpositiverentalreversionunderpinneda3%growthinIPcoreprofittoHK$4.8billion.TheGroup’sstrategicdifferentiationinmanagementandexecutioncapabilitiesremainedauniquecompetitiveedgetoboostperformance.

HONG KONG

RetailsalesattheGroup’smallsgenerallywitnessednoticeablesignsofimprovement.Criticalmass,showcaseeffect,best-positioneddestinationandunmatchedproductivityreinforcedtheGroup’suniquepositioning.Totalrevenueincreasedby4%toHK$6,681millionandoperatingprofitby4%toHK$5,942million.

Harbour City

Overallrevenue(excludinghotels)increasedby4%toHK$4,656millionandoperatingprofitby5%toHK$4,162million.

Retail

Revenueincreasedby5%toHK$3,258millionfromanoccupancyrateof96%.HarbourCityoutperformedthemarketwitha2.8%growthintenantsales,reflectingagradualrevivalofconsumptionandoptimism.Thankstoitsexceptionalsalesproductivityandcraftily-managedtenantmix,HarbourCityenjoyedcontinuedpositiverentalreversionandsteadyfoottrafficgrowth.

HarbourCityremainsthecoreofthe“GreaterHarbourCity”clusterofhigh-trafficshopping,entertainment,lifestyleanddiningrealm,enhancingtheoverallattractionpowerofthelivelydistrict.Thetwomillionsquarefeetofadjoiningmallspace(includinga530-metrecontiguousretailfrontageonCantonRoad)notonlyencompassesasignificantretailrepresentationofthemostproductiveanddynamicretailprecinctinTsimshatsui,butalsoisthelargestretailofferunder one roof in town. The interconnected office towers and hotels also serve as strategic traffic feeders.

Asaglobalshowcaseandamust-havepresencefortheworld’sbest-in-classretailers,HarbourCityisbestpositionedtocreatetheultimatecustomerexperience.Solidretailers’demandunderscoredHarbourCity’scompetenceinattractingnewdifferentiatingretailerstocreatewin-wincollaborationsinacompetitivemarket.


Newadditionsincludingba&sh,JohnHardyandMr&MrsItalyfurtherredefinedtheretailexperience.HarbourCitywelcomedaspateofpremiumdebutstodelivernewsurprises,ofwhichHongKongdebutsincludedAdore,ERES,EveLom,LittleMO&Co.andYvesSalomon,whileLaurèl,St.Johnandtheworld’sfirstMichelin-starredRamenTsutaestablishedtheirKowloondebuts.Iconicpop-upstores,includingChaumet,Chloé(exclusive),Coach(exclusive)andEstéeLauder&TomFord,werealsointroducedtoaddtotheappealofthemall.RenownedfashionbrandshavebeeneyeingexpansionatHarbourCity.TheseincludedMCM,Moncler,PhilippPleinandRogerVivier.Abercrombie&Fitchwillre-entertheHongKongmarketwithafreshconceptstoreatHarbourCity,targetedforopeninginthesecondhalfof2017.

Constant re-tenanting and effective value-creation initiatives continued to generate high levels of satisfaction for visitors.

TheCheesecakeFactory,arenownedcasualdiningbrandfromAmerica,celebratedthelong-awaitedopeningofitsHongKongdebutinMay2017.ModelledontheoriginalstoreinBeverlyHills,itsuccessfullyalluredcrowdsandreceivedstrongcustomerrecognition.Furtherexcitementsincludedtherecognitionsoffoureateryoutlets,namelyChinaTang,ÉPURE,SushiTokamiandYeShanghai,inthe“MICHELINGuideHongKong/Macau2017”.OtherrecentopeningsincludedtheHongKongdebutofDuHsiaoYueh,awell-knowntraditionalTainanrestaurantwithover100yearsofhistory.

Targetedforopeninginthefourthquarterof2017,thenewextensionbuildingatOceanTerminal(“OTE”)commandingafascinating270-degreepanoramaofVictoriaHarbourissettoaddgrowthimpetus.Thewest-facingextensionexhibitingthebestsunsetandnightviewsofHongKongwillcomprise11diningoutletswithalfrescoareaandupgradedcruiseterminalfacilities.Theexcitingeateriesincludingànu,retrouvez-vous,AnaTen,PaperMoon,TsukadaNojo,XiheYayuan,andafineChinesediningrestaurantoperatedbyClubCubic,willcreatenewgastronomicexperiencesanddriveincrementalpatronage.Settinganewstandardoflifestyleexperience,thestrikingOTEwillemergeasanewiconintown.

HarbourCitycontinuedtocaptivatecrowdsthroughspectacularmarketingcampaigns.Theannualmegaevent“ChocolateTrail”withathemeof“AllYouEatisLOVE”thisyearwasheldtodelightdevoutchocolatefans.Designedtopromote“ArtinLiving”,theHarbourArtFairfeaturingaline-upof50KoreangalleriesandfocusingoncontemporaryartworkswaspresentedatMarcoPoloHongkongHotelaccompaniedwitharttalksanddocents.SoloexhibitionsoffourselectedKoreanartistswerestagedindifferentpartsofthemallasanextensionoftheFair.

Office

Revenueincreasedby2%toHK$1,235millionreflectingpositiverentalreversionandstablerentsfornewcommitments,despitetheintensifyingsupply-sidecompetition.Occupancyratewas96%attheendofJune.Leaserenewalretentionratewas62%.


Times Square

Overallrevenuedecreasedby1%toHK$1,415millionandoperatingprofitby1%toHK$1,285million.

Retail

Revenueretreatedby2%toHK$1,065millionnotwithstandingamodestincreaseinpassingrent.Suchdeclinewasprimarilyduetothereductionoflettablearea(4%oftotal)forshopamalgamationhousingtwoanchors,theFacesssandLEGOCertifiedStore,aswellasongoingtenantmixreshuffling.Occupancyratewas96%.Tenantsalesdeclineconsiderablynarrowedto4.3%duringtheperiod.Foottrafficremainedhealthy.

TimesSquare,amongthemostsuccessfulverticalmallsglobally,hasestablisheditselfasthecoreofthe“GreaterTimesSquare”clusterinCausewayBay.Itsunparalleledpositioningandmanagementexpertisecontinuetodrivecelebratedretailers’appetiteforopeningsorexpansionattheprominent17-levelshoppinglandmark.Constantvalue-accretiveinitiativesincludingtheestablishmentofthe“KidsSquare”on13Afloorandtheconversionofthe9thandpartofthe10thfloorintoalifestylehubfurtherreinforcethemall’sdifferentiationinthevibrantretailhub.

Inabidtocreatenewexperiencesforrepeatvisitorsandtoattractnewcomers,theretailofferwasproactivelyenhancedwithnewadditionsincludingba&sh,JohnMastersOrganics(HongKongdebut),MichaelKorsandProteca&ACE.Theopeningofa3,385-square-footLEGOCertifiedStore(HongKongIslanddebut)inearlyJuly2017furtherstrengthenedthelifestylecluster.Facesss,abeautycategorykillertakingupover6,450squarefeet,alsoopenedinthesame month.

Excitementalsoliesintheeclecticcollectionofdiningoptionsintroducedfromacrosstheglobetodazzlediners.TheseincludedPetitPretandtheHongKongdebutofLaCréation&Châteraisé.

Exclusivemarketinginitiativesandinspiringculturalenrichmentactivitiesforthecommunityhavehadprovensuccess.TheseincludedthePicassoandJacquelineExhibitionwhichwowedvisitorswiththecuratedcollectionof13preciousmasterpiecesbythelegendaryartistflowninallthewayfromtheMuseuPicassoinBarcelona.

Office

Revenueincreasedby1%toHK$350milliononfavourablerentalreversions.Occupancyratewas98.7%attheendofJune.Leaserenewalretentionratewas64%.


Plaza Hollywood

Revenueincreasedby6%toHK$287millionandoperatingprofitby8%toHK$228million.Occupancyratewas97%attheendofJune.

ThetremendousgrowthopportunitiesinKowloonEast,alivelyandalternativeCBD,strengthenPlazaHollywood’spositionasaleadingshoppingdestinationintheregion.PlazaHollywoodhasnotonlyauniquecriticalmasshosting259retailoutlets,25restaurants,andapurpose-builtstadiumhousingsix-screencinemamultiplexwith1,614seats,butalsoahighlyefficientlayout(65%ofGFAislettable).Itsdeliberatedesignwithouttowersatopalsoallowsmaximumflexibilityforfutureplanning.Retailofferenhancementandinnovativemarketingstrategiescontinued to create value and drive growth.

Other Hong Kong Properties

Wheelock House and Crawford House

Highoccupancyandpositiverentalreversionsunderpinnedbothproperties’steadyperformances.Theofficeswere97%letwhiletheretailspacesofCrawfordHouse(includingZara’slargestflagshipintown)were96%occupied.

CHINA

Despitetheadverseimpactoftheunfavourablecurrencymovements,revenueincreasedby4%toHK$1,246millionandoperatingprofitby6%toHK$732millionontranslationtoHongKongdollars.

In Operation

Chengdu International Finance Square (“IFS”)

Overallrevenueincreasedby15%toHK$508millionandoperatingprofitby24%toHK$259million.ProventrackrecordandunmatchedsalesproductivityreinforcedChengduIFSdifferentiation in the western China region.

Retail

Revenueincreasedby18%toRMB367million.Occupancyratewas99%attheendofJune.Tenants’salespostedarobustgainof30%whilefoottrafficgrewby22%.

Theenviablelocation,criticalmassandhigh-calibremanagementoftheChengduIFSmallunderlineditsleadingpositionintheregion.Theaward-winningtrendsettinglandmarkdemonstrateditsabilitytoattractbest-in-classretailersandtocreatewin-winpartnerships.Itsexquisitecollectionofnearly300globalpremiumbrands,withover100debutsinChinaWest,fostersexceptionalbranddiversityandsetsanewstandardofretailexperience.ThecompellingentertainmentofferingsincludinganIMAXmovietheatreandaniceskatingrinksuccessfullylurecrowds,whilethe15-metre-talloutdoorgiantpandaartinstallationandthe7,700-square-metreSculptureGardenhaveproudlybecomefavouritephotogenicdestinationsofthecity.Inabidtoenhancethecustomerjourney,tenantmixwasfurtheroptimisedwithnewadditionsincludingluxurytimepiecebrandVacheronConstantin,sportsandleisurebrands,Fjällräven,NikeJordanandOnitsukaTiger.


Powerfulmarketingcampaignsplayapivotalroleinsecuringshoppersflow.Anunprecedented“sisterstreets’partnership”wasannouncedbetweenChengduIFSandLeComitéSaintGermaindesPrésofParis,fosteringSino-Frenchexchangeandco-operationinart,culture,businessandtourism.Theworld’sdebutofthe180-metre-longSonicRunway,acontemporaryaudio-visualartavenue,waslaunchedonHongxingRoadwithagloriousshowcaseofsonicartbasedontheintegrationofscience,technologyandartattheCDIFSInternationalFashionWalk.Otherenthrallingeventsincluded“RockURooster”ChineseNewYearInteractiveArtExhibitionandDisney“BeautyandTheBeast”MovieExhibition.

Chengdu IFS continued to garner new distinguished awards including “ICSC China Shopping Centre&RetailerAwards2017–SilverAwardforMarketingExcellence”,aswellas“AsianLicensingAwards2016–BestLocation-BasedorExperientialInitiativeoftheYear”byInternationalLicensingIndustryMerchandiser’sAssociation.

Office

Thethreetop-notchGradeAofficetowers,raisingthebarforfutureworkplace,representthemostpreferredlocationformultinationals,financialinstitutionsandmajorcorporationsinChinaWest.Itiswellpositionedasanoptimalmarketplacefortenantstoconductseamlessbusinessinteraction.Embarkingonaselectivetenantstrategy,morethan125,000squaremetres(46%oftotalGFA)havebeenleasedtopremiumtenants,withrentalratessecuredamongthehighestinthecity.

IFS Residences

InauguratedinNovember2016,ithasestablisheditselfasoneofthemostexclusiveandpreferredservicedresidenceswithsuperbserviceinChengdu.Comprising150luxuriousapartments,itiscurrentlyaccommodatingeliteentrepreneursandexpatriatesofmultinationalcorporations.

Shanghai Wheelock Square (“SWS”)

RepresentingthemostcompellingofficeaddressesformultinationalsandmajorcorporationsinPuxi,thetallestskyscraperat270metresinthedistrictdeliveredsteadyperformance.SWSboastsaprominentlocationwithunparalleledaccessibility,rightoppositetoJing’anTempleMetroStationfromwherefrequenttrainscommutetoPudongInternationalAirportandadjacenttotheYan’anelevatedexpressway.ItalsositsbetweentheBundandZhongshanXiRoadwithHongqiaoInternationalAirportfurthertothewest.Totalnewcommitmentsduringtheperiodreached10,755squaremetres.Occupancyratewas88%attheendofJune.Leaserenewalretentionratewasmaintainedat66%,withsolidrentalreversion.

Acrossarangeofhealthyandcreativeevents,the4thverticalrun,anannualhealth-promotingeventaimingtoraisethespiritof“SportsforAll”,attractedmorethan400participantsincludingprofessionalmarathonrunnersandthewhite-collaredinSWS.


Shanghai Times Square

TheexclusiveretaildestinationhostingthelargestLaneCrawfordstoreintheMainlandandamegalifestylespecialtystorecity’superisstrategicallylocatedinthepremiershopping,entertainmentandbusinesshubofHuaihaiZhongRoad.Occupancyratewas97%attheendofJune.Creativesports-themedmarketingcampaignswererolledoutinthewakeoftheathleisureboom.TheseincludedNikeandOneFoundationrunningclub,Valentine’straining“Lovetogether.Exercisetogether”programme,andKidsSportsDay.OtherinterestingeventsincludedNaked-eye3DDomeTheatreandkidscurryworkshop.

Theofficeswere92%let.Leaserenewalretentionratewas60%.

Chengdu Times Outlet

The63,000-square-metreChengduTimesOutlet,amongthemostvisitedoutletdestinationsacrossChina,ishometoover250internationalbrandsatattractiveprices.SoliddomesticconsumptionfromChina’semergingmiddleclassdroveasolidgrowthof11%inretailsalesduring the period.

Changsha Times Outlet

Openedinlate2016,the72,000-square-metreoutletenjoysconvenientaccesstomultiplemajormotorways(includingmetroandhigh-speedexpressway)thatlinkChangshatovariouspopularnationaltouristattractions,includingZhangjiajieandDongtingLake.EmulatingthesuccessoftheGroup’sTimesOutletbrand,ChangshaTimesOutletisaone-stopintegratedshoppingandleisurelandmark,hostingmorethan230internationalandtoplocalapparelsandlifestylebrandsaswellaseateries.Occupancyratewas73%attheendofJune.

Under Development

TheGroupisbuildinganexcitingpipelineofIFSdevelopmentsthatwillcontinuetocreatelong-termvalue.TheremarkableperformanceofHarbourCityinHongKongandChengduIFSsetsanexcellentmodelforotherfutureIFSdevelopmentsandcreatessynergy.TheupcomingIFScomplexesinChongqingandChangshawilltapintotheGroup’smanagementexpertiseandexperienceinoperatingsomeofthemostproductiveretail-cum-officedevelopments.Therespectivenewmegamallsareexpectedtotapthehugeexperience-basedconsumptionmarketsintheregionsandtotaketheretailexperiencetothenextlevel.Thepromisingretailpre-leasingstatusachievedalsobearstestimonytoretailers’confidenceintheGroup’svaluecreationcapabilityandtheuntappedpotentialoftherespectivecities.Thisisparticularlyapparentforthoseretailerswhoarenewtothemarketsinvolved.


Chongqing IFS

ProminentlylocatedinJiangbeiDistrict(Chongqing’snewCBD),the50%-ownedChongqingIFSwillbethemostmassivemixed-usecomplexinthedistrictenvisioninganiconic300-metrelandmarktowerandfourothertowersatopa114,000-square-metreretailpodium.TheGradeAofficesandNiccoloChongqing,thesecondluxuriousNiccoloHotelintheMainland,willreinforcethepositionofthedevelopmentasaboutique-sizedHarbourCity.

Themallispoisedtobeaniconicretaildestinationofferinganexceptionalone-stoplifestyleexperienceinthevibrantalternativeCBD.Currently,over90%oftheretailfloorplatesareleasedorunderoffertokeyanchorsandvariousmajortenants.Thecoveteddestinationwillbethefirstinthecitytoassembleanampleandcomprehensivecollectionofmorethan150retailersincluding80renownedglobalbrands,ofwhich20aredebutsinChongqingincludingAlexanderMcQueen,BrooksBrothers,Dior,Fendi,SaintLaurent,ToryBurchandValentino.

AdelectablerangeofdiningoptionsincludingABCCookingStudio,KITAYAMA,NYNightMarketandVinotekawillbeintroducedtodelightdiners’palate,whilethedelightfulentertainmentofferingsincludingTheRinkandPALACEcinemaaresettoprovidevisitorswithtrulyintegrated“shoppertainment”experiences.

88%ofofficeTowerTwo,ThreeandFivewassold.ThemallandNiccoloChongqingarescheduledtoopeninthethirdquarterof2017.

Changsha IFS

Changsha IFS is set to differentiate itself in the Central China metropolis with its gigantic 254,000-square-metremall,themostenviablelocationandtheGroup’sprovenmanagementcapabilities.Targetedtoopeninthefirstquarterof2018,themegamallwillbehometoamyriadoftheworld’smostaspirationalretailersandthemostcovetedshopping,dining,lifestyleandleisuredestinationinHunanprovince.Retailpre-leasingstatuswasencouraging,withover90%oftotalretailareasleasedandunderoffertoretailers.

Representingtheultimateworkspacefortomorrow,thetop-notchofficetowersarewell-positionedtobethemostdesirableaddressesforfinancialinstitutionsandmajorcorporationsbasedintheregion.Handovertotenantsisscheduledtocommencebythefourthquarterof2017.

TheopeningofNiccoloChangsha,thethirdNiccolohotelintheMainland,atChangshaIFSistargetedforthefirstquarterof2018.

Fullcompletionoftheprojectisscheduledfor2018.

Suzhou IFS

The80%-ownedSuzhouIFSisa450-metrelandmarkdevelopment(GFA:299,000squaremetres)featuringGradeAoffices,skyresidencesandNiccoloSuzhou.SquarelylocatedinthenewCBDoverlookingJinjiLakeandadjacenttoXinghuStreetMTRStation(Line1),thedevelopmentisontrackforcompletionstartingin2018or2019.


DEVELOPMENT PROPERTIES

DPsalesdecreasedby23%toHK$15.3billionandrevenueby19%toHK$11.2billion,inclusiveofjointventuresandassociatesonanattributablebasis.Coreprofit,however,surgedby161%toHK$2.3billion,thankstotheincreasedrecognitionsofgood-marginprojectsincludingMountNicholsoninHongKongandSuzhouTimesCity.

HONG KONG

MountNicholson,a50:50jointventuredevelopmentwithNanFungGroup(project’stotalattributableGFA:162,000squarefeet)isafabulouslandmarkforluxuryliving.Itfeaturesexclusiveandultra-luxuryresidencesboastingastunninguninterruptedviewoverVictoriaHarbour.Duringtheperiod,twohousesandsixapartmentsweresoldforcombinedproceedsexceedingHK$3.1billionoranaverageofHK$73,600persquarefoot(houses:HK$1.4billionoranaverageofHK$85,900persquarefoot;apartments:HK$1.8billionoranaverageofHK$66,100persquarefoot).AnotherhousewassoldforHK$645millionoranaverageofHK$80,100persquarefootinJuly2017.

Thelatestgeneralbuildingplanofthe15%-ownedYauTongjointventureprojecthasbeensubmittedinearly2017.

CHINA

With563,900squaremetresofGFAcompletedandrecognisedduringtheperiod(2016:872,000squaremetres),revenuedecreasedby30%toHK$9,095millionbutoperatingprofitincreasedby1%toHK$2,355million,inclusiveofjointventuresandassociatesonanattributablebasis.

Withthelatestroundofcoolingmeasuresimposedbythegovernment,theGroup’sattributableinterestincontractedsalesdecreasedby27%toRMB11.9billion.Therestrictivepoliciesareexpectedtoaddtouncertaintiesoverthetradingconditionsandtodepictachallengingoutlook.AttheendofJune,thenetorderbookincreasedtoRMB30.2billionfor1.1millionsquaremetres.

InEasternChina,variousprojectsinShanghai,Suzhou,HangzhouandWuximetwithgooddemand.ShanghaiPudongE18sold35unitsforRMB1.4billion.InSuzhou,Bellagiosold335unitsforRMB0.8billion.InHangzhou,GreentownZhijiangNo.1sold123unitsforRMB0.7billiononanattributablebasis.InWuxi,RiverPittiandTimesCitysoldinaggregate495unitsforRMB0.9billion.ProjectsonsaleinotherregionsofChinaalsoreceivedencouragingresponses.Inparticular,PearlontheCrowninBeijingandTheSceneryBayinTianjinsoldinaggregate163unitsforRMB1.0billiononanattributablebasis.

AttheendofJune,theDPlandbankwasmaintainedat3.4millionsquaremetres.

TheGroupcontinuestotakeadisciplinedandselectiveapproachtolandpurchases,strategicallyfocusing on first-tier and top second-tier cities.


OTHER HONG KONG PROPERTIES

The Peak Portfolio

Wharf’sPeakPortfolioredefinestheconceptofluxurylivingwithalandmarkcollectionofthemostrespectedandprestigiousresidencesnestledonthePeak.Epitomizingauniqueandexclusivelifestyleatthemostsought-afteraddressintown,thesedevelopmentsarepoisedtooffer the ultimate destination for the most discerning residents.

Superstructure/foundationworksforthere-developmentofthePeakPortfolioincluding1PlantationRoad(20houses),11PlantationRoad(7houses)and77PeakRoad(8houses)areprogressing to plan.

Kowloon East

TherevitalisationofKowloonEastintoavibrantCBD2revealsmassivepotentialfortheGroup’sstriking“KowloonEastWaterfrontPortfolio”ofnewdevelopments.EnjoyingacompellingHarbourviewandspanninga500-metrecoastline,thisthrivingcollectioncomprises8BayEast(a534,000-square-footre-developmentoftheformerWharfT&TSquare),KowloonGodown(pendingre-development)andparentcompanyWheelock’sOneBayEast(comprisingtwoofficetowersalreadysoldtoandoccupiedbyManulifeandCitigrouprespectively).Superstructureworksfor8BayEastisunderway.

WHARF HOTELS

Currently,theGroupmanages14hotels(sixownedbytheGroup)inChina,HongKongandthePhilippinesunderthelegacybrandofMarcoPoloHotelsandthenewluxurybrand,NiccoloHotels.ThestylishcollectionofcontemporaryurbanchicNiccolohotelstrulyepitomisesunderstatedluxurywithaseamlessblendofexquisitedesignandgracioushospitality.Whilethehotelsaremodernsophisticatedspaces,thetimelesspleasuresofimpeccablehospitalityarethekeytotheirsuccess.Everytouchpointisdetailedtomakefirstclasstraveleffortlesslyluxuriousforcaptainsofindustryandleadersinstyle.

Thisbrandevolutionhasproventobearesoundingsuccess.NiccoloChengduatChengduIFS,thefirstNiccoloopenedinApril2015,catapultedthebusinesstonewheightsandsetanewstandardintheregion.Itremainsthecity’smarketleaderinroomyieldandhasearnedahostofreputableawardssinceopening,including“BestBusinessHotels”inthe“2017CondéNastTravelerChinaGoldList”.ItsetsastrongmodelforthecomingthreeNiccolohotelsintheIFScomplexesinChongqing,ChangshaandSuzhouwhichareprogressingtoplan.

TheMurray,HongKong,aNiccoloHotel,underconversionfromCentral’slandmarkMurrayBuilding,isslatedtoopeninlate2017.The336-roomluxuryhotelisbestpositionedtobefitthecity’smostprestigiousvisitorsandtobecomethenewepicentreforeventsandcelebrations.AnarrayofdiningconceptsincludingMurrayOnTheRoof(BarandRestaurant),TheTaiPan(ModernEuropean),MurrayLane(theLobbyBar),TheGardenLoungeandtheMichelin-starredGuoFuLou(Cantonese),willbeintroducedtotaketheirplaceamongstthemostpopulardiningvenuesinHongKongandtocaptivatethecity’sdiningconnoisseurs.


ThesefournewNiccolohotelswillbringtheGroup’shotelportfolioto18hotelsinthenearfuture.TheexcitingpipelineisinlinewiththeGroup’svisiontoexpanditshotelpresenceinAsiaPacific.Duringtheperiod,theNiccoloandMarcoPolohotelbrandswereofficiallygroupedunderWharfHotelsManagementLimited,anumbrellaidentityforthetwobrands.ItnotonlymarksanexcitingnewchapterfortheGroup’sdevelopmentinhotelbusiness,butalsoallowsfordifferentiatedanddefinedstrategiestobedevelopedforbothbrands.

MODERN TERMINALS

GlobaltradeflowsstagedtentativesignsofrevivalastheU.S.andEuropeaneconomieswentthroughatepidrecovery.SouthChina’scontainerthroughputincreasedby7%whileShenzhen’sandKwaiTsing’sthroughputincreasedby4%and11%respectively.MarketsharesofShenzhenandKwaiTsingwere59%and41%respectively.

ModernTerminals’contractedthroughputinHongKongincreasedbyarobust17%to2.7millionTEUsthatoutperformedtheoverallmarket.IntheMainland,throughputatDachanBayinShenzhendeclinedby11%to0.6millionTEUs,mainlyduetonewcarrieralliancedeployments,whilethatatTaicangInternationalGatewayinSuzhougrewby11%to1.2millionTEUs.ThroughputatShekouContainerTerminalsinShenzhen,inwhichModernTerminalsholdsa20%stake,postedan8%growthto2.7millionTEUs.ChiwanContainerTerminalinShenzhen,inwhichModernTerminalsholdsan8%attributablestake,handled1.1millionTEUs.

ConsolidatedrevenueimprovedtoHK$1,361million(2016:HK$1,234million),drivenbyacontinuedchangeinthroughputmixtrendwithmorebargeandtransshipmentinthebusinessmix.OperatingprofitincreasedtoHK$349million(2016:HK$290million).

InJune2017,ModernTerminalssoldtheremaining50%ofitsindirectequityinterestinTaicangcontainerportbusinesstoNingboPortCo.Ltd.,withtheremainingdisposalgainbookedduringthe period.

TheoperatingenvironmentmayremainchallengingunderpinnedbypoliticaluncertaintiesincludingglobaltradeprotectionismandtheprospectofBrexit.However,ModernTerminalshasmadeeveryefforttoimproveoperationalefficiencywithvariousinitiatives.Itisalsomakingsignificantinvestmentsinitsportinfrastructureandquaycraneequipmenttosecuremarketshareandtodrivegrowthinthecompetitivemarket.

i-CABLE

Currently,i-CABLEhasclearedallmajorregulatoryhurdlesfortheintroductionofForeverTop(Asia)LimitedasitsnewinvestorandthenextstepistoproceedwithitsOpenOffer(expectedcompletion:14September2017)andtheLoanCapitalisation(expectedcompletion:September/October2017).

Aconditionalspecialdividendbywayofdistributioninspecieofi-CABLESharesheldcurrentlybytheGrouptoitsShareholdersonaproratabasishasbeendeclaredbytheBoard.


Existingfundingcommitmentsfori-CABLEwillnotbeextendeduponexpiry.Nonetheless,theGroupwillconvertitsdebtsofi-CABLE,amountingtoHK$300million,toshares,anddistributetheminspecietoitsshareholdersatalaterstageuponcompletionoftheLoanCapitalisation.CompletionofalldistributioninspecieisscheduledforSeptember/October2017.ThesewillmarktheGroup’scompleteexitofCommunication,MediaandEntertainmentsegment.

STRATEGIC REVIEW ON IP

Followingastrategicreviewannouncedinour2016FinalResultsAnnouncement,theCompanyhassubmittedaproposaltotheStockExchangeinaccordancewithPracticeNote15ofTheRulesGoverningtheListingofSecuritiesonTheStockExchangeofHongKongLimitedtodemergeitswholly-ownedsubsidiaryWharfRealEstateInvestmentCompanyLimited(“WharfREIC”)foraseparatelistingbywayofintroduction.TheproposalhasbeenapprovedbytheStockExchange.

WharfREICisintheprocessofpreparingitsapplicationtotheStockExchangeforthelistingof,andpermissiontodealin,WharfREICsharesontheMainBoardoftheStockExchange.

WharfREICwillbeprimarilyfocusedoninvestmentpropertiesinHongKongandwillalsoholdtheCompany’s72%-ownedlistedsubsidiary,HarbourCentreDevelopmentLimited.WharfREICwillholdaportfolioofsixpremiumqualityinvestmentpropertiesinHongKong,namelyHarbourCity,TimesSquare,PlazaHollywood,CrawfordHouse,WheelockHouseandTheMurray(beingconvertedintoaluxuryhotelforopeninginlate2017).Thisportfolioofabout11millionsquarefeetofGFAhasatotalvalueofoverHK$230billionandanannualturnoverofoverHK$13billion.

Afterthedemerger,theCompanywillbeprimarilyfocusedoninvestmentpropertiesanddevelopmentpropertiesinMainlandChina,otherHongKongproperties,aswellaslogisticsandhotel management.

Theproposeddemergerisatanearlystage.TheapplicationforthelistingofWharfREIChasnotyetbeensubmittedtotheStockExchangeandthelistinghasnotyetbeenapprovedbytheStockExchange.TheimplementationofthedemergerissubjecttothefinaldecisionsoftheboardsofdirectorsofWheelock,theCompanyandWharfREIC.Accordingly,shareholdersandpotentialinvestorsoftheCompanyshouldbeawarethatthereisnoassurancethattheproposeddemergerandseparatelistingofWharfREICwilltakeplaceorastowhenitmaytakeplace.FurtherannouncementswillbemadebytheCompanyasandwhenappropriate.SubsequenttothedateofthisInterimReport,WharfREICsubmittedanapplicationforlisting(FormA1)totheStockExchangeon4September2017.


FINANCIAL REVIEW

(I) REVIEW OF INTERIM 2017 RESULTS

Groupcoreprofitroseby22%year-on-yeartoHK$7,271million(2016:HK$5,972million)inthefirsthalfof2017.Againstthebackdropsofthechallengingmarketconditions,InvestmentProperties(“IP”)managedtoachieve3%coreprofitgrowthtoHK$4,777millionandDevelopmentProperties(“DP”)surgedby161%toHK$2,306million.

Profitattributabletoshareholdersincreasedby26%toHK$8,441million(2016:HK$6,725million)withhigherIPrevaluationsurplusofHK$1,171million(2016:HK$525million).

Revenue and Operating Profit

IPrevenueandoperatingprofitcontinuedgrowingby4%toHK$7,927million(2016:HK$7,644million)and5%toHK$6,674million(2016:HK$6,377million),respectively.InHongKong,bothrevenueandoperatingprofitincreasedby4%.Mainlandrevenueroseby4%andoperatingprofitroseby6%inHKDterms,orroseby9%and11%inRMBterms.

DPrecognised29%lowerpropertysalestoHK$5,964million(2016:HK$8,409million)mainlyfromMainlandprojectsbutfor32%higheroperatingprofittoHK$1,730million(2016:HK$1,311million),benefittingfromhighermarginsachievedforcertainMainlandprojects.Togetherwithjointventureprojects,DPcoreprofitroseby161%toHK$2,306million(2016:HK$885million),includingMountNicholsoncontributioninHongKong.

Hotelrevenueroseby5%toHK$774million(2016:HK$740million)andoperatingprofitby49%toHK$155million(2016:HK$104million).HongKongrevenueincreasedwithimprovedoccupancieswhilethenewlyopenedhotelsinMainlandChinahavestartedtocontribute.

Logisticsrevenuegrewby11%toHK$1,424million(2016:HK$1,286million)andoperatingprofitby22%toHK$358million(2016:HK$293million)resultingfrommorethroughputhandledbyModernTerminals.

CMEdisposedWharfT&TinNovember2016withi-CABLEremaininginthesegment,resultingin63%revenuedeclinetoHK$641million(2016:HK$1,715million)andincreaseinoperatinglosstoHK$222million(2016:profitofHK$78million).

Investmentandothersrevenueroseby18%toHK$449million(2016:HK$382million)andoperatingprofitby19%toHK$248million(2016:HK$208million)chieflyduetoincrease in interest income.

Consolidatedrevenuefellby15%toHK$17,063millionbutoperatingprofitroseby6%toHK$8,553millionforthefirsthalfoftheyear.


DP Sales

DPcontractedsales,inclusiveofjointventureprojectsonanattributablebasis,droppedby23%toHK$15,299million(2016:HK$19,797million).

Mainlandcontractedsalesdroppedby27%toRMB11,908million(2016:RMB16,250million).Salesrecognitiondroppedby30%toHK$9,095million(2016:HK$13,049million)butoperatingprofitroseby1%toHK$2,355million(2016:HK$2,328million).NetorderbookincreasedtoRMB30,227million(December2016:RMB27,436million).

HongKongcontractedsales,mainlyattributabletoMountNicholsonjoint-venture,amountedtoHK$1,579million(2016:HK$785million).SalesrecognitionincreasedtoHK$2,119million(2016:HK$785million),whichcontributedanoperatingprofitofHK$1,045million(2016:HK$349million).

Fair Value Gain of Investment Properties

ThebookvalueoftheGroup’sIPportfolioasat30June2017increasedtoHK$324.4billion(2016:HK$319.3billion)withHK$306.0billionthereofstatedatfairvaluebasedonindependentvaluation,whichproducedarevaluationgainofHK$1,529millionfortheperiod(2016:HK$495million).TheattributablenetrevaluationgainofHK$1,171million(2016:HK$525million),aftertakingintoaccounttherelateddeferredtaxandnon-controllinginterests,wascreditedtotheconsolidatedincomestatement.

IPunderdevelopmentintheamountofHK$18.4billioniscarriedatcostandwillnotbecarriedatfairvalueuntiltheearlieroftheirfairvaluesfirstbecomingreliablymeasurableor the dates of completion.

Finance Costs

FinancecostschargedtotheconsolidatedincomestatementamountedtoHK$589million(2016:HK$322million),includinganunrealisedmark-to-marketgainofHK$50million(2016:gainofHK$352million)onthecrosscurrencyandinterestrateswapsinaccordancewith prevailing accounting standards.

TheGroup’seffectiveborrowingratefortheperiodroseto3.3%(2016:2.9%),mainlyduetohigherproportionofborrowingsathigherinterestrate.Excludingtheunrealisedmark-to-marketgain,financecostsbeforecapitalisationwereHK$808million(2016:HK$988million),representingadecreaseofHK$180million.FinancecostsaftercapitalisationwereHK$639million(2016:HK$674million),representingadecreaseofHK$35million.

Share of Results (after tax) of Associates and Joint Ventures

AttributableprofitfromassociatesdecreasedtoHK$361million(2016:HK$513million)withlowerprofitcontributionsfromMainlandDP.

JointventuresincreasedprofittoHK$986million(2016:HK$485million)attributabletoMountNicholsonprojectinHongKong.


Income Tax

TaxationchargefortheperiodwasHK$2,434million(2016:HK$1,705million),whichincludeddeferredtaxationofHK$353million(2016:creditofHK$12million)providedforthecurrentperiod’srevaluationgainattributabletoinvestmentpropertiesintheMainland.

Excludingtheabovedeferredtax,thetaxchargeincreasedby21%toHK$2,081million(2016:HK$1,717million)mainlyduetohigherprofitsfromIPandChinaDPsegments.

Non-controlling Interests

Groupprofitattributabletonon-controllinginterestsincreasedtoHK$324million(2016:HK$214million),reflectingtheincreaseinnetprofitsofcertainnon-wholly-ownedsubsidiaries.

Profit Attributable to Equity Shareholders

GroupprofitattributabletoequityshareholdersfortheperiodamountedtoHK$8,441million(2016:HK$6,725million),representinganincreaseof26%.BasicearningspersharewereHK$2.78,basedonweightedaverageof3,033millionshares(2016:HK$2.22basedon3,031millionshares).

ExcludingthenetIPrevaluationgainofHK$1,171million(2016:HK$525million),Groupprofitattributabletoshareholdersfortheperiodincreasedby17%toHK$7,270million(2016:HK$6,200million).

Groupcoreprofitroseby22%toHK$7,271million(2016:HK$5,972million),ofwhich66%wasattributabletoIPand32%toDP.CoreearningspersharewereHK$2.40(2016:HK$1.97).

CoreprofitisaperformanceindicatoroftheGroup’smajorbusinesssegmentsandarrivedatafterexcludingnetIPrevaluationgain,theattributablenetmark-to-marketandexchangelossofHK$188million(2016:gainofHK$228million)oncertainfinancialinstrumentsandothernon-recurrentgainsofHK$187million.


(II) LIQUIDITY, FINANCIAL RESOURCES AND CAPITAL COMMITMENTS

Shareholders’ and Total Equity

Asat30June2017,shareholders’equityincreasedbyHK$7.7billiontoHK$324.5billion(2016:HK$316.8billion),equivalenttoHK$106.94persharebasedon3,034millionissuedshares(2016:HK$104.48persharebasedon3,032millionissuedshares).

TheGroup’stotalequityincludingnon-controllinginterestsincreasedbyHK$7.7billiontoHK$333.1billion(2016:HK$325.4billion).

Assets and Liabilities

TheGroup’stotalassetsasat30June2017decreasedtoHK$438.5billion(2016:HK$443.8billion).Totalbusinessassets,excludingbankdepositandcash,financialanddeferredtaxassets,increasedtoHK$404.1billion(2016:HK$403.0billion).

Geographically,theMainlandbusinessassets,mainlycomprisingpropertiesandterminals,amountedtoHK$120.4billion(2016:HK$121.0billion),representing30%(2016:30%)oftheGroup’stotalbusinessassets.

Investment properties

IncludedintheGroup’stotalassetsistheIPportfolioofHK$324.4billion,representing80%oftotalbusinessassets.CoreassetsinthisportfolioareHarbourCityandTimesSquareinHongKong,whichwerevaluedatHK$165.0billion(excludingthethreehotels)andHK$54.5billion,respectively,togetherrepresenting68%oftheIPportfolio.MainlandIPamountedtoHK$62.3billion,mainlyincludingChengduIFSandShanghaiWheelockSquare,aswellasChangshaIFSandSuzhouIFSwhichwereunderdevelopmentandstatedatcostofHK$18.4billion.

Properties for sale

DPassetsdroppedtoHK$19.8billion(2016:HK$23.9billion),reflectingthesalesofMainland DP portfolio during the period.


Interests in associates and joint ventures

InterestsinassociatesandjointventuresamountedtoHK$29.1billion(2016:HK$31.1billion),mainlyrepresentingvariousjoint-ventureDPprojectsundertakenintheMainlandandHongKong.

Deposits from sale of properties

DepositsfromsaleofpropertiesamountedtoHK$19.6billion(2016:HK$18.9million),representing contracted sales in Mainland China pending revenue recognition in the comingyears.

Debts and Gearing

TheGroup’snetdebtasat30June2017wasreducedbyHK$2.4billionor10%toHK$21.4billion(2016:HK$23.8billion).ThenetdebtwasmadeupofHK$51.2billionindebtsandHK$29.8billioninbankdepositsandcash.IncludedinthenetdebtwereHK$7.2billion(2016:HK$7.1billion)attributabletoModernTerminals,HCDLandothersubsidiaries,whicharewithoutrecoursetotheCompanyanditsothersubsidiaries.Excludingthesenon-recoursedebts,theGroup’snetdebtwasHK$14.2billion(2016:HK$16.7billion).Ananalysisofthenetdebtisasbelow:

30 June2017

31December2016

Net debt/(cash) HK$ Million HK$ Million

Wharf(excludingbelowsubsidiaries) 14,206 16,755Modern Terminals 6,932 8,502HCDL (374) (1,904)i-CABLE 662 484

21,426 23,837

Asat30June2017,theratioofnetdebttototalequitydeclinedto6.4%(2016:7.3%).


Finance and Availability of Facilities

TheGroup’stotalavailableloanfacilitiesandissueddebtsecuritiesasat30June2017amountingtoHK$72.7billion,ofwhichHK$51.2billionwasutilised,areanalysedasbelow:

30 June 2017Available Total Undrawn

Facility Debts Facility HK$ Billion HK$ Billion HK$ Billion

Company/wholly-owned subsidiariesCommittedbankfacilities 29.7 15.2 14.5Debtsecurities 26.1 26.1 –

55.8 41.3 14.5Non-wholly-owned subsidiariesCommitted and uncommitted— Modern Terminals 11.8 7.4 4.4—HCDL 4.2 1.8 2.4—i-CABLE 0.9 0.7 0.2

72.7 51.2 21.5

Oftheabovedebts,HK$7.3billion(2016:HK$6.7billion)wassecuredbymortgagesovercertainIP,DPandproperty,plantandequipmentwithtotalcarryingvalueofHK$19.1billion(2016:HK$17.7billion).

TheGroupdiversifiedthedebtportfolioacrossabundleofcurrenciesincludingprimarilyUnitedStatesdollar(“USD”),HongKongdollar(“HKD”)andRenminbi(“RMB”).ThefundingsourcedfromsuchdebtportfoliowasmainlyusedtofinancetheGroup’sIP,DPand port investments.

Theuseofderivativefinancialinstrumentsisstrictlymonitoredandcontrolled.ThemajorityofthederivativefinancialinstrumentsenteredintobytheGroupareprimarilyusedformanagementoftheGroup’sinterestrateandcurrencyexposures.

The Group continued to maintain a strong financial position with ample surplus cash denominatedprincipallyinRMB,HKDandUSDandundrawncommittedfacilitiestofacilitatetheGroup’sbusinessandinvestmentactivities.Inaddition,theGroupalsomaintainedaportfolioofequityinvestmentswithanaggregatemarketvalueofHK$7.9billion(2016:HK$5.7billion),whichisimmediatelyavailableforliquidationfortheGroup’suse when in need.


Cash Flows for the Group’s Operating and Investing Activities

Fortheperiodunderreview,theGrouprecordednetcashinflowsbeforechangesinworkingcapitalofHK$8.8billion(2016:HK$8.5billion).ThechangesinworkingcapitalreducedthenetcashinflowfromoperatingactivitiestoHK$5.7billion(2016:HK$12.3billion).Forinvestingactivities,theGrouprecordedanetcashinflowofHK$2.2billion(2016:outflowofHK$7.8billion),mainlyfromdecreaseinadvancestoassociatesandjointventuresoffsettingbyadditionsofIPswhereaslastperiodincludedacquisitionofWheelockHouseofHK$6.2billion.

Major Capital and Development Expenditure and Commitments

TheGroup’smajorcapitalanddevelopmentexpenditureincurredinthefirsthalfof2017isanalysedasfollows:

A. Major capital and development expenditure

Hong Kong Mainland China TotalHK$ Million HK$ Million HK$ Million

PropertiesIP 565 2,072 2,637DP 119 5,671 5,790

684 7,743 8,427

OthersHotels 684 – 684Modern Terminals 129 6 135i-CABLE 109 – 109

922 6 928

Group total 1,606 7,749 9,355

i. IPexpenditurewasmainlyforconstructioncostsoftheMainlandIFSprojects.

ii. DPandIPexpenditureincludedHK$3.3billionforpropertiesprojectsundertakenbyassociatesandjointventures.

iii. ModernTerminals’capitalexpenditurewasmainlyforterminalequipmentwhilethoseofi-CABLEwereincurredsubstantiallyforfacilitiesandequipment.


B. Commitments to capital and development expenditure

Asat30June2017,theGroup’smajorcommitmentstocapitalanddevelopmentexpenditurethataretobeincurredintheforthcomingyearswasestimatedatHK$30.6billion,ofwhichHK$13.4billionwascommitted.Bysegment,thecommitmentsareanalysedasbelow:

As at 30 June 2017Committed Uncommitted Total

HK$ Million HK$ Million HK$ Million

IPHongKong 1,793 469 2,262Mainland China 3,750 6,156 9,906

5,543 6,625 12,168

DPHongKong – – –Mainland China 6,603 10,395 16,998

6,603 10,395 16,998

OthersHotels 899 124 1,023Modern Terminals 332 57 389

1,231 181 1,412

Group total 13,377 17,201 30,578

Propertiescommitmentsaremainlyforconstructioncost,inclusiveofattributablecommitmentstoassociatesandjointventures,tobeincurredbystages.

ThecommitmentsandplannedexpenditurewillbefundedbyGroup’sinternalfinancialresourcesincludingitssurpluscash,cashflowsfromoperations,aswellasbankandotherborrowingsandpre-saleproceeds.Otheravailableresourcesincludeequityinvestmentsavailableforsale.

(III) HUMAN RESOURCES

TheGrouphadapproximately13,300employeesasat30June2017,includingabout2,300employedbymanagedoperations.Employeesareremuneratedaccordingtotheirjobresponsibilitiesandthemarketpaytrendwithadiscretionaryannualperformancebonusasvariablepayforrewardingindividualperformanceandcontributionstotherespectivegroup’sachievementandresults.


CONSOLIDATED INCOME STATEMENTForTheSixMonthsEnded30June2017—Unaudited

Six months ended 30 June2017 2016

Note HK$ Million HK$ Million

Revenue 2 17,063 20,021Directcostsandoperatingexpenses (6,745) (9,877)Sellingandmarketingexpenses (455) (652)Administrativeandcorporateexpenses (789) (689)

Operatingprofitbeforedepreciation, amortisation,interestandtax 9,074 8,803Depreciation and amortisation (521) (728)

Operating profit 2&3 8,553 8,075Increase in fair value of investment properties 1,529 495Other net income/(charge) 4 359 (602)

10,441 7,968Finance costs 5 (589) (322)Shareofresultsaftertaxof:Associates 361 513Jointventures 986 485

Profitbeforetaxation 11,199 8,644Incometax 6 (2,434) (1,705)

Profit for the period 8,765 6,939

Profit attributable to:Equityshareholders 8,441 6,725Non-controllinginterests 324 214

8,765 6,939

Earnings per share 7Basic HK$2.78 HK$2.22Diluted HK$2.78 HK$2.22


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEForTheSixMonthsEnded30June2017—Unaudited


HK$ Million HK$ Million

Profit for the period 8,765 6,939

Other comprehensive incomeItems that will not be reclassified to profit or loss:Fairvaluechangesonequityinvestments 1,682 (1,456)

Items that may be reclassified subsequently to profit or loss:Exchangedifferenceontranslationofforeignoperations 1,989 (1,775)

Share of other comprehensive income of associates/jointventures 466 (322)

Others 6 2

Other comprehensive income for the period 4,143 (3,551)

Total comprehensive income for the period 12,908 3,388

Total comprehensive income attributable to:Equityshareholders 12,320 3,367Non-controllinginterests 588 21

12,908 3,388


CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAsAt30June2017—Unaudited

30 June 31December2017 2016


Non-current assetsInvestment properties 324,390 319,298Property,plantandequipment 21,455 20,735Interest in associates 12,483 14,437Interestinjointventures 16,633 16,710Equityinvestments 7,886 5,723Goodwillandotherintangibleassets 298 298Deferredtaxassets 686 654Derivative financial assets 196 247Other non-current assets 244 252

384,271 378,354

Current assetsProperties for sale 19,838 23,874Inventories 26 29Tradeandotherreceivables 9 4,374 4,281Derivative financial assets 194 332Bankdepositsandcash 29,781 36,957

54,213 65,473

Total assets 438,484 443,827




Non-current liabilitiesDerivativefinancialliabilities (974) (1,539)Deferredtaxliabilities (11,437) (10,633)Otherdeferredliabilities (312) (305)Bankloansandotherborrowings 11 (41,341) (45,616)

(54,064) (58,093)

Current liabilitiesTradeandotherpayables 10 (19,522) (24,245)Deposits from sale of properties (19,648) (18,937)Derivativefinancialliabilities (407) (685)Taxationpayable (1,850) (1,283)Bankloansandotherborrowings 11 (9,866) (15,178)

(51,293) (60,328)

Total liabilities (105,357) (118,421)

NET ASSETS 333,127 325,406

Capital and reservesShare capital 12 29,589 29,497Reserves 294,867 287,297

Shareholders’ equity 324,456 316,794

Non-controlling interests 8,671 8,612

TOTAL EQUITY 333,127 325,406


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYForTheSixMonthsEnded30June2017—Unaudited

Shareholders’ equity

Investmentsrevaluation Total Non-

Share and other Exchange Revenue shareholders’ controlling Totalcapital reserves reserves reserves equity interests equity

HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million

At 1 January 2017 29,497 (2,024) (3,531) 292,852 316,794 8,612 325,406

Changesinequityfortheperiod:Profit – – – 8,441 8,441 324 8,765Other comprehensive income – 1,567 2,312 – 3,879 264 4,143

Total comprehensive income – 1,567 2,312 8,441 12,320 588 12,908

Shares issued under the share option scheme 92 (8) – – 84 – 84Equitysettledshare-basedpayments – 20 – – 20 – 20Capital repatriation to non-controlling interestsofasubsidiary – – – – – (339) (339)Secondinterimdividendspaidfor2016 (Note8b) – – – (4,762) (4,762) – (4,762)Dividends paid to non-controlling interests – – – – – (190) (190)

At 30 June 2017 29,589 (445) (1,219) 296,531 324,456 8,671 333,127

At 1 January 2016 29,441 (1,118) 2,322 277,083 307,728 9,452 317,180

Changesinequityfortheperiod:Profit – – – 6,725 6,725 214 6,939Other comprehensive income – (1,392) (1,966) – (3,358) (193) (3,551)

Total comprehensive income – (1,392) (1,966) 6,725 3,367 21 3,388

Equitysettledshare-basedpayments – 9 – – 9 – 9Transfer to revenue reserves upon de-recognitionofequity investments – (34) – 34 – – –Netcapitalcontributionfrom non-controlling interests of subsidiaries – – – – – 161 161Secondinterimdividendspaidfor2015 – – – (4,092) (4,092) – (4,092)Dividends paid to non-controlling interests – – – – – (517) (517)

At 30 June 2016 29,441 (2,535) 356 279,750 307,012 9,117 316,129


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWSForTheSixMonthsEnded30June2017—Unaudited

Six months ended 30 June

2017 2016HK$ Million HK$ Million

Operating cash inflow 8,828 8,549Changesinworkingcapital/others (1,691) 5,238Taxpaid (1,404) (1,497)

Net cash generated from operating activities 5,733 12,290

Investing activitiesAdditionstoinvestmentpropertiesandproperty, plantandequipment (3,338) (9,645)Other cash generated from investing activities 5,556 1,821

Netcashgeneratedfrom/(usedin)investingactivities 2,218 (7,824)

Financial activitiesDividendspaidtoequityshareholders (4,762) (4,092)Other cash used in financing activities (10,780) (4,897)

Netcashusedinfinancingactivities (15,542) (8,989)

Decrease in cash and cash equivalents (7,591) (4,523)

Cashandcashequivalentsat1January 32,530 23,409

Effectofexchangeratechanges 613 (450)

Cash and cash equivalents at 30 June(Note) 25,552 18,436

Note:

Cash and cash equivalents

2017 2016HK$ Million HK$ Million

Bankdepositsandcashintheconsolidatedstatementoffinancialposition 29,781 18,536Less:Bankdepositswithmaturitygreaterthanthreemonths (4,229) (100)

Cashandcashequivalentsintheconsolidatedstatementofcashflows 25,552 18,436


NOTES TO THE UNAUDITED INTERIM FINANCIAL INFORMATION

1. Principal Accounting Policies and Basis of Preparation

ThisunauditedinterimfinancialinformationhasbeenpreparedinaccordancewithHongKongAccountingStandard(“HKAS”)34“InterimFinancialReporting”(“HKAS34”)issuedbytheHongKongInstituteofCertifiedPublicAccountants(“HKICPA”)andtheapplicabledisclosureprovisionsoftheRulesGoverningtheListingofSecuritiesonTheStockExchangeofHongKongLimited.

ThepreparationoftheunauditedinterimfinancialinformationinconformitywithHKAS34requiresmanagementtomakejudgments,estimatesandassumptionsthataffecttheapplicationofaccountingpoliciesandreportedamountsofassets,liabilities,incomeandexpensesonayeartodatebasis.Actualresultsmaydifferfromtheseestimates.

The accounting policies and methods of computation used in the preparation of the unaudited interim financial information are consistent with those used in the annual financialstatementsfortheyearended31December2016exceptforthechangesmentionedbelow.

TheHKICPAhasissuedcertainamendmentstoHongKongFinancialReportingStandards(“HKFRSs”)whicharefirsteffectiveforthecurrentaccountingperiodoftheGroup.TheamendmentsdonothavesignificantimpactontheGroup’sresultsandfinancialpositionforthecurrentorpriorperiodshavebeenpreparedorpresented.

The unaudited interim financial information contains condensed consolidated financial statementsandselectedexplanatorynotes.Thenotesincludeanexplanationofeventsandtransactions that are significant to an understanding of the changes in financial position andperformanceoftheGroupsincetheannualfinancialstatementsfortheyearended31December2016.TheunauditedinterimfinancialinformationandnotesthereondonotincludealloftheinformationrequiredforafullsetoffinancialstatementspreparedinaccordancewithHKFRSs.

Thefinancialinformationrelatingtothefinancialyearended31December2016thatisincluded in the unaudited interim financial information as comparative information does notconstitutetheCompany’sstatutoryannualfinancialstatementsforthatfinancialyearbutisderivedfromthosefinancialstatements.Furtherinformationrelatingtothesestatutoryfinancialstatementsdisclosedinaccordancewithsection436oftheHongKongCompaniesOrdinanceisasfollows:

TheCompanyhasdeliveredthefinancialstatementsfortheyearended31December2016totheRegistrarofCompaniesinaccordancewithsection662(3)of,andPart3ofSchedule6to,theCompaniesOrdinance.TheCompany’sauditorhasreportedonthosefinancialstatements.Theauditor’sreportwasunqualified;didnotincludeareferencetoanymatterstowhichtheauditordrewattentionbywayofemphasiswithoutqualifyingitsreport;anddidnotcontainastatementundersection406(2),407(2)or(3)oftheCompanies Ordinance.


2. Segment Information

TheGroupmanagesitsdiversifiedbusinessesaccordingtothenatureofservicesandproductsprovided.Managementhasdeterminedfivereportableoperatingsegmentsformeasuringperformanceandallocatingresources.Thesegmentsareinvestmentproperty(“IP”),developmentproperty(“DP”),hotels,logisticsandcommunicationsandmediaandentertainment(“CME”).Nooperatingsegmentshavebeenaggregatedtoformthereportablesegments.

Investmentpropertysegmentprimarilyincludespropertyleasingoperations.Currently,theGroup’spropertiesportfolio,whichmainlyconsistsofretail,officeandservicedapartmentsisprimarilylocatedinHongKongandMainlandChina.

Developmentpropertysegmentencompassesactivitiesrelatingtotheacquisition,development,design,construction,salesandmarketingoftheGroup’stradingpropertiesprimarilyinHongKongandMainlandChina.

HotelssegmentincludeshoteloperationsintheAsiaPacificregion.Currently,theGroupoperates14hotelsintheAsiaPacificregion,sixofwhichownedbytheGroup.

LogisticssegmentmainlyincludesthecontainerterminaloperationsinHongKongandMainlandChinaundertakenbyModernTerminalsLimited(“ModernTerminals”),HongKongAirCargoTerminalsLimited(“Hactl”)andotherpublictransportoperations.

CMEsegmentcomprisespaytelevision,internetandmultimediaandotherbusinessesoperatedbyi-CABLECommunicationsLimited(“i-CABLE”).ThetelecommunicationbusinessesoperatedbyWharfT&TLimited(“WharfT&T”)hasbeenterminatedafterdisposaloftheentireequityinterestsinWharfT&TinNovember2016.

Managementevaluatesperformanceprimarilybasedonoperatingprofitaswellastheequityshareofresultsofassociatesandjointventuresofeachsegment.Inter-segmentpricingisgenerallydeterminedonanarm’slengthbasis.

Segmentbusinessassetsprincipallycomprisealltangibleassets,intangibleassetsandcurrentassetsdirectlyattributabletoeachsegmentwiththeexceptionofbankdepositsandcash,certainfinancialinvestments,deferredtaxassetsandotherderivativefinancialassets.

Revenueandexpensesareallocatedwithreferencetosalesgeneratedbythosesegmentsandexpensesincurredbythosesegmentsorwhicharisefromthedepreciationofassetsattributabletothosesegments.


a. Analysis of segment revenue and results

RevenueOperating

profit

Investment properties fair value

Other net income/(charge)

Finance costs Associates

Joint ventures

Profit before

taxationFor the six months ended HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million

30June2017Investmentproperty 7,927 6,674 1,529 10 (609) – – 7,604 HongKong 6,681 5,942 724 – (531) – – 6,135 Mainland China 1,246 732 805 10 (78) – – 1,469Developmentproperty 5,964 1,730 – 506 (6) 219 980 3,429 HongKong 9 7 – – – 4 848 859 Mainland China 5,955 1,723 – 506 (6) 215 132 2,570Hotels 774 155 – – (1) – – 154Logistics 1,424 358 – 112 (103) 142 6 515 Terminals 1,361 349 – 133 (103) 90 6 475 Others 63 9 – (21) – 52 – 40CME(i-CABLE) 641 (222) – 83 (5) – – (144)Inter-segment revenue (116) – – – – – – –

Segment total 16,614 8,695 1,529 711 (724) 361 986 11,558Investment and others 449 248 – (352) 135 – – 31Corporateexpenses – (390) – – – – – (390)

Group total 17,063 8,553 1,529 359 (589) 361 986 11,199

30June2016Investmentproperty 7,644 6,377 495 (68) (603) – – 6,201 HongKong 6,447 5,688 132 – (603) – – 5,217 Mainland China 1,197 689 363 (68) – – – 984Developmentproperty 8,409 1,311 – (496) (38) 390 479 1,646 HongKong – (1) – – – 2 279 280 Mainland China 8,409 1,312 – (496) (38) 388 200 1,366Hotels 740 104 – – (1) – – 103Logistics 1,286 293 – (70) (60) 123 6 292 Terminals 1,234 290 – (49) (60) 95 6 282 Others 52 3 – (21) – 28 – 10CME 1,715 78 – – (16) – – 62 i-CABLE 710 (133) – – (2) – – (135) Telecommunications 1,005 214 – – (14) – – 200 Others – (3) – – – – – (3)Inter-segment revenue (155) – – – – – – –

Segment total 19,639 8,163 495 (634) (718) 513 485 8,304Investment and others 382 208 – 32 396 – – 636Corporateexpenses – (296) – – – – – (296)

Group total 20,021 8,075 495 (602) (322) 513 485 8,644


b. Analysis of inter-segment revenue

2017 2016

Total Revenue

Inter-segment revenue

Group Revenue

Total Revenue

Inter-segment revenue

Group Revenue

Six months ended 30 June HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million

Investmentproperty 7,927 (90) 7,837 7,644 (84) 7,560Developmentproperty 5,964 – 5,964 8,409 – 8,409Hotels 774 – 774 740 – 740Logistics 1,424 – 1,424 1,286 – 1,286CME 641 (1) 640 1,715 (37) 1,678Investment and others 449 (25) 424 382 (34) 348

17,179 (116) 17,063 20,176 (155) 20,021

c. Geographical information

Revenue Operating profit

2017 2016 2017 2016Six months ended 30 June HK$ Million HK$ Million HK$ Million HK$ Million

HongKong 9,274 9,841 6,200 6,250Mainland China 7,756 10,144 2,320 1,788Singapore 33 36 33 37

Group total 17,063 20,021 8,553 8,075


3. Operating Profit

Operating profit is arrived at:



After charging/(crediting):Depreciation and amortisation on— assets held for use under operating leases 69 75—property,plantandequipment 368 571— leasehold land 30 30—programminglibrary 54 52

Total depreciation and amortisation 521 728

Staffcost(Notei) 1,702 1,716Cost of trading properties for recognised sales 4,020 6,924Gross rental revenue from investment properties(Noteii) (7,927) (7,644)Directoperatingexpensesofinvestmentproperties 1,194 1,206Interest income (237) (173)Dividend income from investments (48) (69)Loss/(gain)ondisposalofproperty, plantandequipment 19 (20)

Notes:

(i) Staff costs included contributions to defined contribution pension schemes of HK$142 million (2016: HK$149 million) and equity-settled share-based payment expenses of HK$20 million (2016: HK$9 million).

(ii) Rental income included contingent rentals of HK$607 million (2016: HK$582 million).

4. Other Net Income/(Charge)

OthernetincomefortheperiodamountedtoHK$359million(2016:netchargeofHK$602million)mainlycomprises:

a. NetforeignexchangelossofHK$377million(2016:HK$84million)whichincludedtheimpactofforeignexchangecontracts.

b. Write-backofimpairmentprovisionofHK$279million(2016:provisionchargeofHK$496million)oncertaindevelopmentprojectsintheMainland.

c. NetgainofHK$422millionondisposalofanassociateandsubsidiaries.


5. Finance Costs



Interestchargedon:Bankloansandoverdrafts 446 402Otherborrowings 307 499

Total interest charge 753 901Other finance costs 55 87Less:Amountcapitalised (169) (314)

639 674Fairvalue(gain)/loss:Crosscurrencyinterestrateswaps (305) (381)Interest rate swaps 255 29

(50) (352)

Total 589 322

a. TheGroup’saverageeffectiveborrowingratefortheperiodwas3.3%p.a.(2016:2.9%p.a.).

b. Theaboveinterestchargehastakenintoaccounttheinterestpaid/receiptsinrespectofinterestrateswapsandcrosscurrencyinterestrateswaps.


6. Income Tax

Taxationchargedtotheconsolidatedincomestatementrepresents:

Six months ended June2017 2016


Current income taxHongKong— provision for the period 954 864—overprovisioninrespectofprioryears (17) (6)OutsideHongKong— provision for the period 504 448—overprovisioninrespectofprioryears (11) (4)

1,430 1,302

Land appreciation tax (“LAT”) in China 511 188

Deferred taxChange in fair value of investment properties 353 (12)Originationandreversaloftemporarydifferences 140 227

493 215

Total 2,434 1,705

a. TheprovisionforHongKongprofitstaxisbasedontheprofitfortheperiodasadjustedfortaxpurposesattherateof16.5%(2016:16.5%).

b. IncometaxonprofitsassessableoutsideHongKongismainlyChinacorporateincometaxcalculatedatarateof25%(2016:25%)andChinawithholdingtaxatarateofupto10%.

c. UndertheProvisionalRegulationsonLAT,allgainsarisingfromtransferofrealestatepropertyinMainlandChinaaresubjecttoLATatprogressiveratesrangingfrom30%to60%ontheappreciationoflandvalue,beingtheproceedsofsalesofpropertieslessdeductibleexpendituresincludingcostoflanduserights,borrowingscostsandallpropertydevelopmentexpenditures.

d. Taxattributabletoassociatesandjointventuresforthesixmonthsended30June2017ofHK$447million(2016:HK$460million)isincludedintheshareofresultsofassociatesandjointventures.


7. Earnings per Share

ThecalculationofbasicanddilutedearningspershareisbasedontheprofitattributabletoordinaryequityshareholdersfortheperiodofHK$8,441million(2016:HK$6,725million)andtheweightedaverageof3,033millionordinarysharesinissueduringtheperiod(2016:3,031millionordinaryshares).

8. Dividends Attributable to Equity Shareholders

Six months ended 30 June2017 2017 2016 2016

HK$ per share HK$ Million HK$ per share HK$ Million

Declared after the end of thereportingperiod:First interim dividend 0.64 1,942 0.58 1,758Distributioninspecieinthe formofsharesini-CABLE 0.09 262 – –

0.73 2,204 0.58 1,758

Theinterimdividenddeclaredaftertheendofthereportingperiodhasnotbeenrecognisedasaliabilityattheendofthereportingperiod.

a. Thefirstinterimdividendbasedon3,035millionissuedordinaryshares(2016:3,031million shares) declared after the end of the reporting period.

b. Thedistributioninspeciecomprisestheentireshareholdingof1,485.3millioni-CABLEsharescurrentlyheldbytheCompanywithanattributablebookvalueofHK$262million.Onbasisoftheexisting3,035,127,327sharesinissueoftheCompanyasatthedateofthisannouncement,Shareholderswillreceiveabout48i-CABLESharesforevery100WharfsharesheldandtheactualdistributionratiowillbedeterminedonbasisofthenumberofsharesinissueoftheCompanyasontherecorddateofthis entitlement.

c. ThesecondinterimdividendofHK$4,762millionfor2016wasapprovedandpaidin2017.


9. Trade and Other Receivables

Includedinthisitemaretradereceivables(netofallowanceforbadanddoubtfuldebts)withanageinganalysisbasedontheinvoicedateasat30June2017asfollows:



Tradereceivables0–30days 362 41131–60days 72 7061–90days 34 31Over90days 156 143

624 655

Otherreceivablesandprepayments 3,750 3,626

4,374 4,281

TheGrouphasestablishedcreditpoliciesforeachofitscorebusinesses.Thegeneralcredittermsallowedrangefrom0to60days,exceptforsaleofpropertiestheproceedsfromwhicharereceivablepursuanttothetermsoftheagreements.Allthereceivablesareexpectedtobevirtuallyrecoverablewithinoneyear.

10. Trade and Other Payables

Includedinthisitemaretradepayableswithanageinganalysisbasedontheinvoicedateasat30June2017asfollows:



Tradepayables0–30days 308 34931–60days 193 26161–90days 37 39Over90days 44 188

582 837Rental and customer deposits 4,309 4,129Constructioncostspayable 5,565 8,112Amount due to associates 2,298 3,390Amountduetojointventures 2,067 1,875Otherpayables 4,701 5,902

19,522 24,245


11. Bank Loans and Other Borrowings



Bonds and notes (unsecured) 26,059 32,597Bankloans(secured) 7,288 6,693Bankloans(unsecured) 17,860 21,504

Total bank loans and other borrowings 51,207 60,794

Analysis of maturities of the above borrowings:Current borrowingsDuewithin1year 9,866 15,178

Non-current borrowingsDueaftermorethan1yearbutnotexceeding5years 35,917 39,807Dueaftermorethan5years 5,424 5,809

41,341 45,616

Total bank loans and other borrowings 51,207 60,794

12. Share Capital

30 June2017

No. of sharesMillion

31December2016

No. of sharesMillion

30 June2017

HK$ Million

31December2016

HK$ Million

Issuedandfullypaidordinary sharesAt1January 3,032 3,031 29,497 29,441Shares issued under the share option scheme 2 1 92 56

At30June/31December 3,034 3,032 29,589 29,497


13. Fair Values Measurement of Financial Instruments

a. Assets and liabilities carried at fair value

ThefollowingtablepresentsthefairvalueoftheGroup’sfinancialinstrumentsmeasuredattheendofthereportingperiodonarecurringbasis,categorisedintothethree-levelfairvaluehierarchyasdefinedinHKFRS13,Fairvaluemeasurement(“HKFRS13”).Thelevelintowhichafairvaluemeasurementisclassifiedisdeterminedwithreferencetotheobservabilityandsignificanceoftheinputsusedinthevaluationtechnique.Thelevelsaredefinedasfollows:

• Level1valuations:Fairvaluemeasuredusingonlylevel1inputsi.e.unadjustedquotedpricesinactivemarketsforidenticalassetsorliabilitiesatthemeasurement date.

• Level2valuations:Fairvaluemeasuredusinglevel2inputsi.e.observableinputswhichfailtomeetlevel1,andnotusingsignificantunobservableinputs.Unobservableinputsareinputsforwhichmarketdataarenotavailable.

• Level3valuations:Fairvaluemeasuredusingsignificantunobservableinputs.


Financial instruments carried at fair value

The fair value measurement information for financial instruments in accordance with HKFRS13isgivenbelow.

At 30 June 2017 At31December2016Level 1 Level 2 Total Level1 Level2 Total

HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million

AssetsEquityinvestments:—Listedinvestments 7,860 – 7,860 5,697 – 5,697—Unlistedinvestments – 26 26 – 26 26

Derivativefinancialinstruments:—Forwardforeignexchange contracts – 48 48 – 154 154— Interest rate swaps – 225 225 – 273 273—Crosscurrencyinterestrate swaps – 117 117 – 152 152

7,860 416 8,276 5,697 605 6,302

LiabilitiesDerivativefinancialinstruments:—Forwardforeignexchange contracts – 70 70 – 504 504— Interest rate swaps – 314 314 – 241 241—Crosscurrencyinterestrate swaps – 997 997 – 1,479 1,479

Bankloansandotherborrowings:— Bonds and notes – 12,144 12,144 – 11,978 11,978

– 13,525 13,525 – 14,202 14,202

Duringthesixmonthsended30June2017,therewerenotransfersofinstrumentsbetweenLevel1andLevel2,ortransfersintooroutofLevel3.

TheGroup’spolicyistorecognisetransfersintoandoutoffairvaluehierarchylevelsasattheendofthereportingperiodinwhichtheyoccur.


Valuation techniques and inputs used in Level 2 fair value measurements

ThefairvalueofforwardexchangecontractsinLevel2isdeterminedbyusingtheforwardexchangeratesattheendofthereportingperiodandcomparingthemtothe contractual rates.

ThefairvalueofinterestrateswapsandcrosscurrencyswapsinLevel2isdeterminedbasedontheamountthattheGroupwouldreceiveorpaytoterminatetheswapsattheendofthereportingperiodtakingintoaccountcurrentinterestratesandcurrentcreditworthiness of the swap counter-parties.

ThefairvaluesofbankloansandotherborrowingsinLevel2isdeterminedbasedoncashflowsdiscountedusingtheGroup’scurrentincrementalborrowingratesforsimilartypesofborrowingswithmaturitiesconsistentwiththoseremainingforthedebtbeingvalued.

b. Assets and liabilities carried at other than fair value

ThecarryingamountsoftheGroup’sfinancialassetsandliabilitiescarriedatcostoramortisedcostarenotmateriallydifferentfromtheirfairvaluesasat30June2017and31December2016.

14. Material Related Party Transaction

TheGroupandtheCompanyhavenotbeenapartytoanymaterialrelatedtransactionduringtheperiodended30June2017exceptfortherentalincometotallingHK$570million(2016:HK$579million)fromvarioustenantswhicharewhollyorpartlyownedbycompanieswhichinturnarewholly-ownedbythefamilyinterestsofclosefamilymembersof,orbyatrustthesettlorofwhichisaclosefamilymemberof,thechairmanoftheCompany’sultimateholdingcompany.Suchtransactionsareconsideredtoberelatedpartytransactions,ofwhichHK$43million(2016:HK$390million)alsoconstituteconnectedtransactionsasdefinedundertheListingRules.


15. Contingent Liabilities

Asat30June2017,therewerecontingentliabilitiesinrespectofguaranteesgivenbytheCompanyonbehalfofsubsidiariesrelatingtooverdrafts,shorttermloansandcreditfacilities,bondsandnotesofuptoHK$59,653million(31/12/2016:HK$64,438million).TherewerealsocontingentliabilitiesinrespectofguaranteesgivenbytheCompanyonbehalfofjointventuresandassociatesofHK$2,715million(31/12/2016:HK$4,233million)ofwhichHK$1,191millionhadbeendrawn(31/12/2016:HK$3,095million).

Asat30June2017,therewereguaranteesofHK$8,067million(31/12/2016:HK$8,811million)providedbytheGrouptothebanksinfavouroftheircustomersinrespectofthemortgageloansprovidedbythebankstothosecustomersforthepurchaseoftheGroup’sdevelopmentproperties.TherewerealsomortgageloanguaranteesofHK$3,557million(31/12/2016:HK$3,202million)providedbyjointventuresandassociatesoftheGrouptothebanksinfavouroftheircustomers.

TheGroupandtheCompanyhavenotrecognisedanydeferredincomeoftheaboveguaranteesforsubsidiaries,jointventuresandassociatesastheirfairvaluecannotbereliablymeasuredandtheirtransactionpricewasHK$Nil.

Asattheendofthereportingperiod,theDirectorsdonotconsideritisprobablethataclaimwillbemadeagainsttheGroupandtheCompanyunderanyoftheguarantees.


16. Commitments

TheGroup’soutstandingcommitmentsasat30June2017aredetailedasbelow:

a. Planned expenditure

30 June 2017 31December2016Committed Uncommitted Total Committed Uncommitted TotalHK$ Million HK$ Million HK$ Million HK$ Million HK$ Million HK$ Million

(I) PropertiesInvestment propertiesHongKong 1,793 469 2,262 990 429 1,419Mainland China 3,750 6,156 9,906 4,035 6,301 10,336

5,543 6,625 12,168 5,025 6,730 11,755

Development propertiesHongKong – – – – – –Mainland China 6,603 10,395 16,998 7,959 12,729 20,688

6,603 10,395 16,998 7,959 12,729 20,688

Properties totalHongKong 1,793 469 2,262 990 429 1,419Mainland China 10,353 16,551 26,904 11,994 19,030 31,024

12,146 17,020 29,166 12,984 19,459 32,443

(II) Non-propertiesHotels 899 124 1,023 1,379 412 1,791Modern Terminals 332 57 389 247 126 373i-CABLE – – – 18 211 229

1,231 181 1,412 1,644 749 2,393

Group total 13,377 17,201 30,578 14,628 20,208 34,836

(i) PropertiescommitmentsaremainlyforconstructioncoststobeincurredintheforthcomingyearsincludingHK$0.2billion(2016:HK$1.7billion)attributableland costs.

(ii) TheexpenditureforpropertiesincludedattributableamountsfordevelopmentsundertakenbyjointventuresandassociatesofHK$8,964million(31/12/2016:HK$9,669million)inMainlandChina.


b. TheGroupleasesanumberofpropertiesandtelecommunicationnetworkfacilitiesunderoperatingleases.Theleasestypicallyrunforaninitialperiodoftwotofifteenyears,withanoptiontorenewtheleasewhenalltermsarerenegotiated.Leasepaymentsareusuallyincreasedannuallytoreflectmarketrentals.Noneoftheleasesincludes contingent rentals. Total operating leases commitments are detailed as below:



Expenditure for operating leasesWithinoneyear 8 7Afteroneyearbutwithinfiveyears 25 24Overfiveyears 4 7

37 38

17. Review of Unaudited Interim Financial Information

Theunauditedinterimfinancialinformationforthesixmonthsended30June2017hasbeenreviewedwithnodisagreementbytheAuditCommitteeoftheCompany.


CORPORATE GOVERNANCE CODE

Duringthefinancialperiodunderreview,allthecodeprovisionssetoutintheCorporateGovernanceCodeinAppendix14oftheRules(the“ListingRules”)GoverningtheListingofSecuritiesonTheStockExchangeofHongKongLimited(the“StockExchange”)weremetbytheCompany,withtheexceptionofCodeProvisionA.2.1providingfortherolesofthechairmanandchiefexecutivetobeperformedbydifferentindividuals.

ItisdeemedappropriateasitisconsideredtobemoreefficienttohaveonesinglepersontobetheChairmanoftheCompanyaswellastodischargetheexecutivefunctionsofachiefexecutive.TheBoardofDirectorsbelievesthatthebalanceofpowerandauthorityisadequatelyensuredbytheoperationsoftheBoardwhichcomprisesexperiencedandhighcalibreindividuals,withhalfofthembeingIndependentNon-executiveDirectors(“INEDs”).

CODE FOR DIRECTORS’ SECURITIES TRANSACTIONS

AsetoftheCompany’sowncodeofconductwasadoptedbytheCompanyin2014togovernDirectors’securitiestransactions(the“Company’sCode”)withtermsthereofbeingnolessexactingthantherequiredstandardsetoutintheModelCodeforSecuritiesTransactionsbyDirectorsofListedIssuers(the“ModelCode”)inAppendix10oftheListingRules.TheCompanyhasmadespecificenquiryofallDirectorsoftheCompany,andalltheDirectorshavecompliedwiththerequiredstandardsetoutintheCompany’sCodeduringtheperiodunderreview.


DIRECTORS’ INTERESTS IN SECURITIES

(A) Interests in Shares and Debt Securities

At30June2017,DirectorsoftheCompanyhadthefollowingbeneficialinterests,allbeinglongpositions,intheshareand/ordebenturesoftheCompany,WheelockandCompanyLimited(“Wheelock”)(whichistheCompany’sparentcompany)andtwosubsidiariesoftheCompany,namely,i-CABLECommunicationsLimited(“i-CABLE”)andModernTerminalsLimited(“ModernTerminals”),andanotherassociatedcorporationoftheCompany(ofwhichtheCompanyisinterestedinmorethan20%ofitsissuedshares),namely,GreentownChinaHoldingsLimited(“GreentownChina”).Thepercentages(whereapplicable)whichtherelevantsharesrepresentedtothenumberofsharesinissueofthefivecompaniesrespectivelyarealsosetoutbelow:

Quantity held(percentage,

where applicable) Nature of Interest

The CompanyStephenTHNg 9,445(0.0003%) Personal InterestAndrew O C Chow 340,000(0.0112%) Personal InterestKPChan 30,000(0.001%) Personal InterestAlexanderSKAu 100,000(0.0033%) Personal InterestVincentKFang 100,000(0.0033%) Personal InterestEKYeoh 20,000(0.0007%) Personal Interest

WheelockStephenTHNg 176,000(0.0086%) Personal InterestPaulYCTsui 107,000(0.0052%) Personal Interest

i-CABLEStephenTHNg 1,265,005(0.0629%) Personal Interest

Modern TerminalsHansMichaelJebsen 3,787(5.40%) Corporate Interest

Greentown ChinaAndrewOKChow 240,000(0.01%) Personal Interest

Notes:

(1) The interests in shares disclosed above do not include interests in share options of the Company and/or associated corporation(s) held by Directors as at 30 June 2017. Details of such interests in share options are separately set out below under the sub-sections headed “(B) Interests in Share Options of the Company” and “(C) Interests in Share Options of Wheelock”.

(2) The shareholdings classified as “Corporate Interest” in which the Directors concerned were taken to be interested as stated above were interests of corporation at general meetings of which the relevant Director was either entitled to exercise (or taken under Part XV of the Securities and Futures Ordinance (the “SFO”) to be able to exercise) or control the exercise of one-third or more of the voting power in general meetings of such corporation.


(B) Interests in Share Options of the Company

Setoutbelowareparticularsofinterests(allbeingpersonalinterests)inoptionsheldduringthesixmonthsended30June2017byDirectors(and/ortheirrespectiveassociate(s))oftheCompanytosubscribeforordinarysharesoftheCompanygranted/exercisableundertheshareoptionschemeoftheCompany:

No. of Shares under Option

Name of Director

Total no. as at 30 June 2017 (percentage

based on no. of shares in issue)

Date of grant (Day/Month/Year)

As at 1 January

2017

Exercised during

the period

As at 30 June

2017

Subscription Price

per Share (HK$)

Vesting/Exercise Period (Day/Month/Year)

StephenTHNg 6,000,000(0.20%) 05/06/2013 400,000 – 400,000 70.20 06/06/2013–05/06/2018400,000 – 400,000 06/06/2014–05/06/2018400,000 – 400,000 06/06/2015–05/06/2018400,000 – 400,000 06/06/2016–05/06/2018400,000 – 400,000 06/06/2017–05/06/2018

Sub-total 2,000,000 – 2,000,000

07/07/2016 1,000,000 (1,000,000)(1) – 46.90 08/07/2016–07/07/20211,000,000 – 1,000,000 08/07/2017–07/07/20211,000,000 – 1,000,000 08/07/2018–07/07/20211,000,000 – 1,000,000 08/07/2019–07/07/20211,000,000 – 1,000,000 08/07/2020–07/07/2021

Sub-total 5,000,000 (1,000,000)(1) 4,000,000

AndrewOKChow 4,400,000(0.15%) 05/06/2013 400,000 – 400,000 70.20 06/06/2013–05/06/2018400,000 – 400,000 06/06/2014–05/06/2018400,000 – 400,000 06/06/2015–05/06/2018400,000 – 400,000 06/06/2016–05/06/2018400,000 – 400,000 06/06/2017–05/06/2018

Sub-total 2,000,000 – 2,000,000

07/07/2016 600,000 (600,000)(2) – 46.90 08/07/2016–07/07/2021600,000 – 600,000 08/07/2017–07/07/2021600,000 – 600,000 08/07/2018–07/07/2021600,000 – 600,000 08/07/2019–07/07/2021600,000 – 600,000 08/07/2020–07/07/2021

Sub-total 3,000,000 (600,000)(2) 2,400,000



Name of Director




As at 1 January

2017

Exercised during

the period

As at 30 June

2017

Subscription Price

per Share (HK$)


DoreenYFLee 4,400,000(0.15%) 05/06/2013 400,000 – 400,000 70.20 06/06/2013–05/06/2018400,000 – 400,000 06/06/2014–05/06/2018400,000 – 400,000 06/06/2015–05/06/2018400,000 – 400,000 06/06/2016–05/06/2018400,000 – 400,000 06/06/2017–05/06/2018

Sub-total 2,000,000 – 2,000,000

07/07/2016 600,000 – 600,000 46.90 08/07/2017–07/07/2021600,000 – 600,000 08/07/2018–07/07/2021600,000 – 600,000 08/07/2019–07/07/2021600,000 – 600,000 08/07/2020–07/07/2021

Sub-total 2,400,000 – 2,400,000

PaulYCTsui 2,200,000(0.07%) 05/06/2013 200,000 – 200,000 70.20 06/06/2013–05/06/2018200,000 – 200,000 06/06/2014–05/06/2018200,000 – 200,000 06/06/2015–05/06/2018200,000 – 200,000 06/06/2016–05/06/2018200,000 – 200,000 06/06/2017–05/06/2018

Sub-total 1,000,000 – 1,000,000

07/07/2016 300,000 – 300,000 46.90 08/07/2017–07/07/2021300,000 – 300,000 08/07/2018–07/07/2021300,000 – 300,000 08/07/2019–07/07/2021300,000 – 300,000 08/07/2020–07/07/2021

Sub-total 1,200,000 – 1,200,000

YTLeng 1,550,000(0.05%) 05/06/2013 150,000 – 150,000 70.20 06/06/2013–05/06/2018150,000 – 150,000 06/06/2014–05/06/2018150,000 – 150,000 06/06/2015–05/06/2018150,000 – 150,000 06/06/2016–05/06/2018150,000 – 150,000 06/06/2017–05/06/2018

Sub-total 750,000 – 750,000

07/07/2016 200,000 – 200,000 46.90 08/07/2017–07/07/2021200,000 – 200,000 08/07/2018–07/07/2021200,000 – 200,000 08/07/2019–07/07/2021200,000 – 200,000 08/07/2020–07/07/2021

Sub-total 800,000 – 800,000



Name of Director




As at 1 January

2017

Exercised during

the period

As at 30 June

2017

Subscription Price

per Share (HK$)


KPChan 1,550,000(0.05%) 05/06/2013 150,000 – 150,000 70.20 06/06/2013–05/06/2018150,000 – 150,000 06/06/2014–05/06/2018150,000 – 150,000 06/06/2015–05/06/2018150,000 – 150,000 06/06/2016–05/06/2018150,000 – 150,000 06/06/2017–05/06/2018

Sub-total 750,000 – 750,000

07/07/2016 200,000 (200,000)(3) – 46.90 08/07/2016–07/07/2021200,000 – 200,000 08/07/2017–07/07/2021200,000 – 200,000 08/07/2018–07/07/2021200,000 – 200,000 08/07/2019–07/07/2021200,000 – 200,000 08/07/2020–07/07/2021

Sub-total 1,000,000 (200,000) 800,000

Notes:

(1) The weighted average closing price of the shares of the Company immediately before the dates of exercises of the options by Mr. Stephen T H Ng during the period was HK$67.07 per share.

(2) The weighted average closing price of the shares of the Company immediately before the dates of exercises of the options by Mr. Andrew O K Chow during the period was HK$65.58 per share.

(3) The closing price of the shares of the Company immediately before the date(s) of exercise(s) of the options (all exercised on the same day) by Mr. K P Chan during the period was HK$62.80 per share.

(4) Except as disclosed above, no option of the Company held by Directors (and/or their associate(s)) lapsed or was exercised or cancelled during the financial period, and no option of the Company was granted to any Director and/or their associate(s) during the financial period.


(C) Interests in Share Options of Wheelock

Setoutbelowareparticularsofallinterests(allbeingpersonalinterests)inoptionsheldduringthesixmonthsended30June2017byDirectorsoftheCompanytosubscribeforordinarysharesofWheelockgranted/exercisableundertheshareoptionschemeofWheelock:

No. of Wheelock’s Shares under Option

Name of Director




As at 1 January

2017

Exercised during

the periodAs at

30 June 2017

Subscription price

per Share (HK$)

Vesting/ Exercise period

(Day/Month/Year)

PaulYCTsui 1,200,000(0.06%) 14/06/2013 1,500,000 (1,500,000) – 39.98 15/06/2017–14/06/2018

07/07/2016 1,200,000 – 1,200,000 36.60 08/07/2017–07/07/2021(1)

Notes:

(1) The share options of Wheelock granted on 7 July 2016 (exercisable from 8 July 2016 to 7 July 2021) outstanding as at both 1 January 2017 and 30 June 2017 were/will be vested in four tranches within a period of 4 years, with each tranche covering one-fourth of the relevant options, i.e. exercisable to the extent of one-fourth of the relevant total number of Wheelock’s shares, and with the 1st, 2nd, 3rd and 4th tranches becoming exercisable from 8 July in the years 2017, 2018, 2019 and 2020 respectively.

(2) Except as disclosed above, no share option of Wheelock held by Directors of the Company (and/or their respective associate(s)) lapsed or was exercised or cancelled during the financial period and no share option of Wheelock was granted to any Director of the Company and/or their associate(s) during the financial period.

Exceptasdisclosedabove,asrecordedintheregisterkeptbytheCompanyundersection352oftheSFOinrespectofinformationrequiredtobenotifiedtotheCompanyandtheStockExchangebytheDirectorsand/orChiefExecutiveoftheCompanypursuanttotheSFOortotheModelCode(oranyotherapplicablecode)forSecuritiesTransactionsbyDirectorsofListedIssuers,therewerenointerests,whetherlongandshortpositions,heldordeemedtobeinterestedasat30June2017byanyofDirectorsorChiefExecutiveoftheCompanyinshares,underlyingsharesordebenturesoftheCompanyanditsassociatedcorporations(withinthemeaningofPartXVoftheSFO),norhadtherebeenanyrightstosubscribeforanyshares,underlyingsharesordebenturesoftheCompanyanditsassociatedcorporationsheldordeemedtobeinterestedbyanyofthemasat30June2017.


SUBSTANTIAL SHAREHOLDERS’ INTERESTS

Givenbelowarethenamesofallparties,otherthanperson(s)whois/areDirector(s),who/whichwere,directlyorindirectly,interestedin5%ormoreofanyclassofvotingsharesoftheCompanyasat30June2017,therespectiverelevantnumbersofsharesinwhichtheywere,and/orweredeemedtobe,interestedasatthatdateasrecordedintheregisterkeptbytheCompanyundersection336oftheSFO(the“Register”):

Names

No. of Ordinary Shares (percentage based on total number of

shares in issue)

(i) WheelockandCompanyLimited 1,850,408,608(60.99%)

(ii) HSBCTrustee(C.I.)Limited 1,850,408,608(60.99%)

Notes:

(1) For the avoidance of doubt and double counting, it should be noted that the shareholdings stated against parties (i) and (ii) represented the same block of shares.

(2) Wheelock’s deemed shareholding interests stated above included interests held through its wholly-owned subsidiaries, namely, Lynchpin Limited (“LL”), WF Investment Partners Limited (“WIPL”) and Wheelock Investments Limited (“WIL”), with 252,579,072 shares (8.33%) being the deemed interests held by LL, 1,360,559,536 shares (44.84%) being the deemed interests held by WIPL, 237,270,000 (7.82%) being the deemed interests held by High Fame Investments Limited and 1,850,408,608 (60.99%) being the deemed interests held by WIL.

Alltheinterestsstatedaboverepresentedlongpositions.Asat30June2017,therewerenoshort position interests recorded in the Register.


SHARE OPTION SCHEME

DetailsoftheCompany’sshareoptionsgrantedtoDirectorsandtherelevantmovement(s)duringthefinancialperiodaresetoutinthesub-sectionheaded“(B)InterestsinShareOptionsoftheCompany”.

SetoutbelowareparticularsduringthefinancialperiodofalloftheCompany’soutstandingshareoptionswhichweregrantedtocertainemployees(sixofthembeingDirectors),allworkingunderemploymentcontractsthatareregardedas“continuouscontracts”forthepurposesoftheEmploymentOrdinanceandareparticipantswithoptionsnotexceedingtherespectiveindividuallimits:

No. of shares under option

Price per shares to be paid

on exercise of options

(HK$)


As at 1 January

2017

Exercised during the

period

As at 30 June

2017Vesting/Exercise Period

(Day/Month/Year)

05/06/2013 2,100,000 – 2,100,000 06/06/2013–05/06/2018 70.202,100,000 – 2,100,000 06/06/2014–05/06/20182,100,000 – 2,100,000 06/06/2015–05/06/20182,100,000 – 2,100,000 06/06/2016–05/06/20182,100,000 – 2,100,000 06/06/2017–05/06/2018

10,500,000 – 10,500,000

07/07/2016 1,800,000 (1,800,000) – 08/07/2016–07/07/2021 46.902,900,000 – 2,900,000 08/07/2017–07/07/20212,900,000 – 2,900,000 08/07/2018–07/07/20212,900,000 – 2,900,000 08/07/2019–07/07/20212,900,000 – 2,900,000 08/07/2020–07/07/2021

13,400,000 (1,800,000) 11,600,000

Total: 23,900,000 (1,800,000) 22,100,000

Notes:

(1) Except as disclosed above, no share option of the Company lapsed or was granted, exercised or cancelled during the financial period.

(2) The weighted average closing price of the shares of the Company immediately before the date(s) of exercise(s) of the share option during the financial period was HK$66.10 per share.


CHANGES IN INFORMATION OF DIRECTORS

Givenbelowisthelatestinformationregardingannualemoluments,exclusiveofanyandallamountswhichwouldbebornebyWheelockand/oritswholly-ownedsubsidiary(ies)andcalculatedonanannualisedbasis,ofallthoseDirectorsforwhomtherehavebeenchangesofamounts of emoluments during the course of their respective terms of office since the publicationofthelastannualreportoftheCompany:

Director(s) #Salary and various allowances

##Discretionary annual bonus in cash

HK$’000 HK$’000

StephenTHNg 8,065 (2016: 7,827) 84,100* (2016:11,500)

AndrewOKChow 5,668 (2016: 5,664) 8,000 (2016: 8,000)

DoreenYFLee 6,149 (2016: 5,966) 8,000 (2016: 7,500)

PaulYCTsui 4,203 (2016: 4,075) 5,200 (2016: 5,200)

YTLeng 4,012 (2016: 3,885) 6,000 (2016: 4,000)

KPChan 3,490 (2016: 3,390) 4,000 (2016: 4,000)

# Not including the Chairman’s fee HK$250,000 per annum (2016: HK$225,000) and the Director’s fee HK$200,000 per annum (2016: HK$150,000) payable by the Company to the Chairman and all other Directors of the Company.

## Paid during the six-month period ended 30 June 2017, with the amounts of such discretionary annual bonuses fixed/decided unilaterally by the employers.

### Fee payable to each member of the Company’s Audit Committee was increased to HK$100,000 per annum (2016: HK$75,000).

#### Fee payable to each member of the Company’s Remuneration Committee was increased to HK$50,000 per annum (2016: nil).

* Included a discretionary one-off Special Entrepreneurial Merit Award of HK$72.6 million for Mr. Stephen T H Ng’s contribution to building up and managing Wharf T&T since it was established in 1995 and the realization of substantial investment value from the disposal of Whart T&T in 2016.


PURCHASE, SALE OR REDEMPTION OF SECURITIES

NeithertheCompanynoranyofitssubsidiarieshaspurchased,soldorredeemedanyofitslistedsecurities during the financial period under review.

RELEVANT DATES FOR INTERIM DIVIDENDS

Interim Dividend in CashEx-entitlementdate 24August2017(Thu)Latesttimetolodgesharetransfer 4:30p.m.,25August2017(Fri)Record date/time 6:00p.m.,25August2017(Fri)PaymentDate 12September2017(Tue)

Conditional Special Interim Dividend — Distribution in Specie of i-CABLE SharesEx-entitlementdate 24August2017(Thu)Latesttimetolodgesharetransfer 4:30p.m.,25August2017(Fri)Record date/time 6:00p.m.,25August2017(Fri)Despatchofsharecertificatesofi-CABLEShares 7September2017(Thu)

Inordertoqualifyfortheabovementionedinterimdividendincashandconditionalspecialinterimdividend,alltransfers,accompaniedbytherelevantsharecertificates,mustbelodgedwiththeCompany’sRegistrars,TricorTengisLimited,atLevel22,HopewellCentre,183Queen’sRoadEast,HongKong,notlaterthan4:30p.m.onFriday,25August2017.

ByOrderoftheBoardKevin C. Y. HuiCompany Secretary

HongKong,9August2017


As at the date of this interim report, the Board of Directors of the Company comprises Mr. Stephen T. H. Ng, Mr. Andrew O. K. Chow, Ms. Doreen Y. F. Lee, Mr. Paul Y. C. Tsui, Ms. Y. T. Leng and Mr. K. P. Chan, together with seven INEDs, namely, Mr. Alexander S. K. Au, Professor Edward K. Y. Chen, Mr. Vincent K. Fang, Mr. Hans Michael Jebsen, Ms. Elizabeth Law, Mr. David Muir Turnbull and Professor E. K. Yeoh.

Notwithstanding any choice of language or means for the receipt of corporate communications (viz. annual report, interim report, etc.) previously made by Shareholder(s) and communicated to the Company, Shareholder(s) is/are given the option (which may be exercised at any time by giving reasonable prior notice to the Company) of changing his/her/their choice of printed language version(s) to English only, Chinese only or both English and Chinese for receiving future corporate communications, or changing the choice of receiving future corporate communications to using electronic means instead of in printed version (or vice versa). Such notice of change of choice should contain the full name(s) in English, address and contact telephone number of the relevant Shareholder(s), together with the relevant words regarding the request for the change of choice, and should be sent to the Company, c/o the Company’s Registrars, Tricor Tengis Limited, at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, by post or by hand delivery, or via email to [email protected].

TM acid-free. The FSC forests certified in accordance with ... · Nojo, Xihe Yayuan, and a fine...

Documents

Transcript of TM acid-free. The FSC forests certified in accordance with ... · Nojo, Xihe Yayuan, and a fine...