IRC Limited - Annual Report 2016 | FinancialReports.eu

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LAI SUN DEVELOPMENT COMPANY LIMITED

Annual Report Year ended 31 July 2016

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Cover Photo Causeway Bay Plaza 2

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2 Corporate Information
3 Corporate Profile
4 Chairman’s Statement
11 Financial Highlights
13 Management Discussion and Analysis
26 Summary of Financial Information
28 Particulars of Major Properties
30 Corporate Social Responsibility Report
32 Corporate Governance Report
46 Biographical Details of Directors
51 Report of the Directors
68 Shareholders’ Information
69 Independent Auditors’ Report
71 Consolidated Income Statement
72 Consolidated Statement of Comprehensive Income
73 Consolidated Statement of Financial Position
75 Consolidated Statement of Changes in Equity
76 Consolidated Statement of Cash Flows
78 Notes to Financial Statements
164 Notice of Annual General Meeting

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Corporate Information

Place of IncorPoratIon

authorIsed rePresentatIves

Hong Kong

Board of dIrectors

Chew Fook Aun Chow Kwok Wor

share regIstrar and transfer offIce

Executive Directors

Lam Kin Ngok, Peter, GBS (Chairman) Chew Fook Aun (Deputy Chairman) Lau Shu Yan, Julius (Chief Executive Officer) Lam Hau Yin, Lester

Non-executive Directors

Tricor Tengis Limited Level 22, Hopewell Centre 183 Queen’s Road East Hong Kong

IndePendent audItors

Ernst & Young Certified Public Accountants

PrIncIPal Bankers

Lam Kin Ming U Po Chu

Independent Non-executive Directors

Ip Shu Kwan, Stephen, GBS, JP Lam Bing Kwan Leung Shu Yin, William

audIt commIttee

Leung Shu Yin, William (Chairman) Lam Bing Kwan Lam Kin Ming

remuneratIon commIttee

Leung Shu Yin, William (Chairman) Chew Fook Aun Lam Bing Kwan

Bank of China (Hong Kong) Limited The Bank of East Asia, Limited China Construction Bank (Asia) Corporation Limited DBS Bank Ltd. Hang Seng Bank Limited The Hongkong and Shanghai Banking Corporation Limited Industrial and Commercial Bank of China (Asia) Limited Shanghai Pudong Development Bank Co., Ltd., Hong Kong Branch United Overseas Bank Limited

shares InformatIon

Place of Listing

The Main Board of The Stock Exchange of Hong Kong Limited

Stock Code / Board Lot

488 / 15,000 Shares

American Depositary Receipt

comPany secretary

Chow Kwok Wor

CUSIP Number: 50731V102 Trading Symbol: LSNVY ADR to Ordinary Share Ratio: 1:400 Depositary Bank: The Bank of New York Mellon

regIstered offIce / PrIncIPal offIce

WeBsIte

11th Floor Lai Sun Commercial Centre 680 Cheung Sha Wan Road Kowloon, Hong Kong

Tel: (852) 2741 0391 Fax: (852) 2785 2775

www.laisun.com

Investor relatIons

Tel: (852) 2853 6116 Fax: (852) 2853 6651 E-mail: [email protected]

2 LAI SUN DEVELOPMENT Annual Report 2015 - 2016

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Corporate Profile

Lai Sun Development Company Limited is a member of the Lai Sun Group. The Company is well diversified and its principal activities include property investment, property development, investment in and operation of hotels and restaurants and investment holding. The Company was listed on The Stock Exchange of Hong Kong Limited in March 1988 following a reorganisation of the Group.

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LAI SUN GARMENT
(INTERNATIONAL)
LIMITED
61.93% 66.86% 51.08%
LAI SUN MEDIA ASIA
DEVELOPMENT 41.92% eSUN GROUP LAI FUNG
HOLDINGS HOLDINGS
COMPANY HOLDINGS
LIMITED LIMITED
LIMITED LIMITED [#]
COSMETIC,
CINEMA PROPERTY
PROPERTY PROPERTY MEDIA &
(OVERSEAS) (HONG KONG) HOTELS RESTAURANTS OPERATION, ENTERTAINMENT (MAINLAND
MEDIA & CHINA)
ENTERTAINMENT
Caravelle
Property Property Property Property Hotel Ho Chi Chinese Japanese Western Property Investment & Development
Investment Investment Development& Sales Management (Vietnam)Minh City Cuisine Cuisine Cuisine Management Property
(26.01%) Hotels & Serviced
Apartments
36 QueenStreet, Cheung Sha Wan Plaza 339 Tai Hang Road, Hong Kolot Property Services Park Marriott Kong Ocean The Hong Tang [2] TakumiWagyu CIAK-All Day Italian Entertainment & Related FacilitiesCultural, Leisure,
London (100%) (100%) (100%) Kong Limited (100%) Hotel (67%) (63%) (67%)
(100%)
100 Alto
LeadenhallLondonStreet, Causeway BayPlaza 2 (100%) Ocean One, Yau Tong, Kowloon (100%) Management Residences Property Limited Chiu Tang (57%) Rozan (63%) Operetta (67%)
(100%) (50%)
Leadenhall Street, 106 Commercial Lai Sun Centre Chung Street, Kowloon93 Pau Harbour City China Tang Kaiseki DenWagyu The KitchenCIAK-In
London (100%) (100%) (56%) (59%) (62%)
(100%)
Leadenhall107-112LondonStreet, 8 Observatory Tsimshatsui Road, (50%) Street Project,Hong KongSai Wan Ho (100%) China TangLandmark (50%) Beefbar (62%)
(100%)
81/2 Otto e
CCB Tower, Ki Lung Howard’s Mezzo
Central Street Project,Kowloon Gourmet BOMBANA,
(50%) (100%) (50%) Hong Kong
(37%)
Alto
AIA Central, Central (10%) Residences, Kowloon Kwan O,Tseung (50%) Kowloon (27%) Tang BOMBANA, BeijingOpera (20%)
81/2 Otto e
Mezzo
BOMBANA,
Shanghai
(13%)
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Listed on the Main Board of The Stock Exchange of Hong Kong Limited
# Listed on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited
** Operated under various subsidiaries and associates

Corporate structure as at 19 October 2016

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Chairman’s Statement

I am pleased to present the audited consolidated results of Lai Sun Development Company Limited (“ Company ”) and its subsidiaries (collectively, the “ Group ”) for the year ended 31 July 2016.

overvIeW of fInal results

For the year ended 31 July 2016, the Group recorded turnover of HK$1,868.3 million (2015: HK$1,541.7 million) and a gross profit of HK$1,006.6 million (2015: HK$895.6 million), representing an increase of approximately 21.2% and 12.4%, respectively over last year. Set out below is the turnover by segment:

	For the year 2016 (HK$ million)	ended 31 July 2015 (HK$ million)	Diference (HK$ million)	% change
Property investment	701.6	655.5	46.1	7.0
Property development
and sales	468.7	277.8	190.9	68.7
Restaurant operations	280.7	201.7	79.0	39.2
Hotel operations and others	417.3	406.7	10.6	2.6
Total	1,868.3	1,541.7	326.6	21.2

Net profit attributable to owners of the Company was approximately HK$1,148.4 million (2015: HK$2,018.3 million), representing a decrease of approximately 43.1% over last year. The decrease

is primarily due to a substantially lower revaluation of the Group’s investment properties during the year under review. Excluding the effect of property revaluations, net profit attributable to owners of the Company increased by 13.5% to approximately HK$329.8 million (2015: HK$290.6 million). The increase is primarily due to profit contribution from the recognition of the sale of residential units in 339 Tai Hang Road during the year under review. Basic earnings per share including and excluding the effect of property revaluations was HK$0.045 (2015 (adjusted): HK$0.098) and HK$0.013 (2015: HK$0.014), respectively.

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4 LAI SUN DEVELOPMENT Annual Report 2015 - 2016

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dr. lam kIn ngok, Peter Chairman

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overvIeW of fInal results (contInued)

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For the year ended 31 July
Profit attributable to owners of the Company (HK$ million) 2016 2015
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Reported	1,148.4	2,018.3
Less: Adjustments in respect of revaluation gains of
investment properties held by
— the Company and subsidiaries	(51.5)	(1,289.3)
— associates and joint ventures	(767.1)	(438.4)
Net proft after tax excluding revaluation gains of
investment properties	329.8	290.6

Equity attributable to owners of the Company as at 31 July 2016 amounted to HK$24,357.7 million, up from HK$22,662.5 million as at 31 July 2015. Net asset value per share attributable to owners of the Company dropped by 28.4% to HK$0.808 per share as at 31 July 2016 from HK$1.128 per share as at 31 July 2015. The decrease in the net asset value per share attributable to owners of the Company was due to the enlarged shareholder base as a result of the Rights Issue in November 2015 which was completed in February 2016.

fInal dIvIdend

The Directors have resolved to recommend the payment of a final dividend of HK0.19 cent per share (2015: HK0.25 cent per share), amounting to approximately HK$57,302,000 (2015: HK$50,236,000) for the financial year ended 31 July 2016 to shareholders of the Company (“ Shareholders ”) whose names appear on the Register of Members of the Company on Friday, 23 December 2016 subject to the approval of Shareholders at the forthcoming annual general meeting of the Company to be held on Friday, 16 December 2016 (“ AGM ”).

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Chairman’s Statement

fInal dIvIdend (contInued)

No interim dividend was declared during the year (2015: Nil).

The Directors propose that shareholders be given the option to receive the final dividend in new shares in lieu of cash. The scrip dividend proposal is subject to: (1) the approval of the proposed final dividend at the AGM; and (2) The Stock Exchange of Hong Kong Limited (“ Stock Exchange ”) granting the listing of and permission to deal in the new shares to be issued pursuant to this proposal.

A circular containing details of the scrip dividend proposal will be despatched to shareholders together with the form of election for scrip dividend on or about Wednesday, 4 January 2017. It is expected that the final dividend warrants and share certificates for the scrip dividend will be despatched to Shareholders on or about Friday, 27 January 2017.

BusIness revIeW and outlook

The 2015/2016 financial year was dominated by political and geopolitical uncertainties at home and abroad. These included the US presidential election, Brexit, protracted conflicts in the Middle East, refugee issues in Europe, Legislative Council elections in Hong Kong, to name a few. Major global economies continued to be hindered by these factors. The fundamentals remained delicate and capital markets performances around the world are correspondingly cautious. Hong Kong’s economic performance is certainly not insulated from these challenges faced by the major economies around the world.

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Architect’s impression of 93 Pau Chung Street
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BusIness revIeW and outlook (contInued)

The property sector in Hong Kong as a whole has shown resilience and recovered from an extended period of softening. During the year under review, the slowdown in the retail market has been most pronounced due to reduced visitor numbers. The office leasing market remains steady and residential market was rejuvenated, underpinned by a lack of supply and a sustained period of low interest rates. Events such as Brexit led to capital outflows from the region in search for safe havens which arguably provided more liquidity to fuel the already liquidity flushed markets such as Hong Kong. Labour supply shortages in the construction industry continues to drive wage inflation and pose a challenge on the cost management side.

The Group performed admirably against this challenging environment. The attributable rental portfolio of approximately 1.8 million square feet generated steady rental income at high occupancy rates. Rental income increased through tenant mix adjustments, rental reversion and robust contribution from the London properties. The completion of the 8 Observatory Road project in June 2015 added an attributable gross floor area (“ GFA ”) of 82,585 square feet in the prime Tsim Sha Tsui area of Hong Kong. As at 18 October 2016, approximately 97% of the floor area of the building has been leased or has offers to lease with another approximately 3% of floor area under negotiation. 4 out of 9 units of the 339 Tai Hang Road luxury residential property were sold during the year under review.

Subsequent to the year end, the Urban Renewal Authority project in Ma Tau Kok, Kowloon, “93 Pau Chung Street” (“ 93 Pau Chung Street ”) and the joint venture project in Tseung Kwan O named “Alto Residences” (“ Alto Residences ”) were launched for pre-sale in September 2016 and October 2016, respectively. The 93 Pau Chung Street project offers 209 flats in total, including studios, one and two-bedroom units. Up to 18 October 2016, the Group has pre-sold 75 units in 93 Pau Chung Street with saleable area of approximately 26,400 square feet at an average selling price of approximately HK$15,900 per square foot. The Alto Residences provides 605 flats, including 23 detached houses. Up to 18 October 2016, the first, second and the third price lists of the Alto Residences were released on 11 October 2016, 15 October 2016 and 18 October 2016, respectively for a total of 363 units with listed prices range from HK$12,373 to HK$27,508 per square foot.

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Architect’s impression of Alto Residences
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Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Chairman’s Statement

BusIness revIeW and outlook (contInued)

The management believes it is paramount to prepare the Group for the challenges and opportunities ahead. The Group completed a series of corporate activities as part of the new strategy to improve funding sources, execution capabilities and overall coordination with the wider Lai Sun Group since refocusing the strategy in 2012. Set out below are the projects the Group secured after the implementation of the new rental focused strategy:

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Expected
Total GFA Completion
Date Secured Projects (square feet) Use Date
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Hong Kong	Development Properties
November 2012	Alto Residences	573,422	Commercial/	Q1 2018
			Residential
April 2014	93 Pau Chung Street	111,354	Commercial/	Q1 2018
			Residential
May 2014	The Hong Kong Ocean Park	366,000	Hotel	Q4 2017
	Marriott Hotel
	(“Ocean Hotel”)
September 2015	Sai Wan Ho Street Project	61,139	Residential	Q4 2019
May 2016	Ki Lung Street Project	42,873	Commercial/	Q2 2020
			Residential
London, United Kingdom Investment Properties
April 2014	107-112 Leadenhall Street	146,606*	Ofce	N/A
November 2014	100 Leadenhall Street	177,700*	Ofce	N/A
December 2015	106 Leadenhall Street	12,687**	Ofce	N/A

* Gross internal area ** Net internal area

The acquisition of 106 Leadenhall Street in London in December 2015, adjacent to other two wholly-owned properties of the Group, namely 100 and 107 Leadenhall Street, added approximately 12,687 square feet net internal area of office space to our rental portfolio in the United Kingdom. This multi-tenanted property is expected to enhance and enlarge the Group’s strategic property investment portfolio in the City of London. The Ocean Hotel, to be operated by the Marriott group, will provide a total of 471 rooms and add approximately 366,000 square feet of attributable rental space to the existing rental portfolio attributable to the Group of approximately 1.8 million square feet. Set out below is the expected growth of the rental portfolio of the Group:

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BusIness revIeW and outlook (contInued)

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2,185 Ocean Hotel
Hong Kong
1,819 366 • Cheung Sha Wan Plaza
• Causeway Bay Plaza 2
• Lai Sun Commercial Centre
• CCB Tower
• 8 Observatory Road
• AIA Central
• others
1,323 1,323
London, United Kingdom
• 107-112 Leadenhall Street
• 100 Leadenhall Street
• 36 Queen Street
• 106 Leadenhall Street
398 398
Vietnam
98 98 • Caravelle Hotel
31-Jul-2016 FY 2018
Attributable rental GFA (’000 square feet)
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The Group continued to participate in government tenders to grow the pipeline. In September 2015, the Group was successful in its bid for the development right to the Sai Wan Ho Street project from the Urban Renewal Authority in Shau Kei Wan, Hong Kong. Upon completion, it is planned to provide about 144 residential units with a total GFA of 61,139 square feet. In May 2016, the Group completed the purchase of the remaining unit for the proposed development on Ki Lung Street in Sham Shui Po, Kowloon, which comprises numbers 48-56 on Ki Lung Street and has a combined site area of 5,053 square feet. It is planned to be developed primarily into a commercial/residential development for sale with a total GFA of 42,873 square feet. Set out below is the pipeline for development projects for sale of the Group:

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398
Ocean One
111
339 Tai Hang Road
Alto Residences
93 Pau Chung Street
287 104
Sai Wan Ho Street project
43
37
27 61 Ki Lung Street project
10
31-Jul-2016 FY 2018 FY 2020
Attributable GFA (’000 square feet)
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Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Chairman’s Statement

BusIness revIeW and outlook (contInued)

The rights issue of 10,047,266,781 shares on the basis of one rights share for every two existing shares of the Company at a subscription price of HK$0.092 each in November 2015 (“ Rights Issue ”) was completed in February 2016. The Rights Issue was fully underwritten by the controlling shareholder of the Company, Lai Sun Garment (International) Limited (“ LSG ”). The total net proceeds of the Rights Issue, after deduction of estimated rights issue expenses, was approximately HK$912.7 million and immediately after the completion of the Rights Issue, LSG’s interest in the Company increased from 51.84% to 61.93%.

To increase liquidity of the Company’s shares in the United States of America (“ US ”) and to provide access to the US capital market, a sponsored Level 1 American Depositary Receipt Programme was established with the Bank of New York Mellon and is effective since 1 April 2016.

In September 2016, the Group acquired approximately 49.96% interests in Camper & Nicholsons International SA (“ CNI ”), a long established and internationally recognised brand for luxury yachts. The Group believed that the acquisition of CNI will bolster it’s offering of high-end food and beverage and hospitality services.

The Group’s strong cash position of HK$2,570.9 million of cash on hand with a net debt to equity ratio of 22.7% as at 31 July 2016 provides the Group with full confidence and the means to review opportunities more actively. The Group’s gearing excluding the net debt of the London portfolio all of which have a positive carry net of financing costs is 16.2%. However, the Group will continue its prudent and flexible approach in growing the landbank and managing its financial position.

aPPrecIatIon

Looking back on this financial year, I would like to thank my Board colleagues, the senior management team, our partners and everyone who worked with us during the year for their loyalty, support and outstanding teamwork. I firmly believe that through the concerted efforts of our staff and with the support of all our stakeholders, we will continue to grow the Group going forward in a prudent and sustainable manner.

Lam Kin Ngok Peter Chairman Hong Kong 19 October 2016

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Financial Highlights

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Year ended Year ended
31 July 31 July Change
2016 2015 %
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Turnover Gross proft Gross proft margin Operating proft Operating proft margin Proft attributable to owners	(HK$M) (HK$M) (%) (HK$M) (%)	1,868.3 1,006.6 54% 628.0 34%	1,541.7 895.6 58% 1,863.5 121%	21% 12% -66%
of the Company — excluding the efect of property	(HK$M)
revaluations		329.8	290.6	13%
— including the efect of property
revaluations Net proft margin — excluding the efect of property	(%)	1,148.4	2,018.3	-43%
revaluations		18%	19%
— including the efect of property
revaluations		61%	131%
Basic earnings per share — excluding the efect of property	(HK$)
revaluations		0.013	0.014	-7%
— including the efect of property
revaluations		0.045	0.098	-54%
Equity attributable to owners
of the Company	(HK$M)	24,357.7	22,662.5	7%
Net borrowings	(HK$M)	5,540.7	5,733.0	-3%
Net asset value per share attributable to
owners of the Company	(HK$)	0.808	1.128	-28%
Share price as at 31 July	(HK$)	0.140	0.169	-17%
Price earnings ratio — excluding the efect of property	(times)
revaluations		10.8	12.1
— including the efect of property
revaluations		3.1	1.7
Market capitalisation as at 31 July	(HK$M)	4,222.3	3,396.0	24%
Return on shareholders’ equity — excluding the efect of property	(%)
revaluations		2%	1%
— including the efect of property
revaluations		6%	9%
Dividend per share	(HK$)	0.0019	0.0025
Dividend yield	(%)	1%	2%
Gearing - net debt to equity	(%)	23%	25%
Interest cover_(Note 1)_ — excluding the efect of property	(times)
revaluations		0.9	1.0
— including the efect of property
revaluations		3.0	7.2
EBITDA_(Note 2)_/Interest expenses	(times)	1.7	2.2
Current Ratio	(times)	4.0	1.3
Discount to net asset value	(%)	83%	85%

Note 1: calculated as profit attributable to owners of the Company over cash interest expenses Note 2: EBITDA = Operating profit - Property revaluation gain/loss + Depreciation + Amortisation

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Financial Highlights

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Turnover by Segment Turnover by Geographical Location
(In HK$’million) (In HK$’million)
2,400 2,400
3.1
11.9
2,000 2,000
393.3 367.2 3.8
149.7
1,600 167.1 417.3 1,600 2.9
122.9 385.9
502.3 406.7 280.7 380.8
1,200 1,200
201.7
800 346.4 701.6 800 17.7 9.4 1,727.4
387.3 302.3 327.0 1,328.9
82.9 655.5
1,046.9 1,035.1
400 400
395.8 434.2 468.7 555.2 627.4
277.8
92.1 100.3
0 0
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016
Property development and sales Restaurant operation
Property investment Hotel operation and others Hong Kong Vietnam United Kingdom Others [#]
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Including turnover from restaurant operations for year ended 31 July 2012
# Including turnover from United Kingdom for year ended 31 July 2012

Profit/(loss) attributable to owners of the Company including & excluding the effect of property revaluations

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(In HK$’million)
3,000 Proft/(loss) attributable to owners
2,564.1 of the Company excluding the
2,500 2,282.6 effect of property revaluations
2,018.3
2,000 Proft attributable to owners of the
Company including the effect of
1,500 1,478.7 property revaluations
1,148.4
1,000 845.5
500 333.2 290.6 329.8
0
(201.4)
(500)
2012 2013 2014 2015 2016
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Net Assets & Net Asset Value (“NAV”) per share attributable to owners of the Company

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(In HK$’million) (In HK$)
25,000 HK$1.128 24,357.7 1.25
HK$1.035 Net assets attributable to
22,662.5
HK$0.953 owners of the Company
20,774.5
20,000 1.00 (in HK$’million)
HK$0.815 19,127.8
HK$0.808
16,357.6 NAV per share attributable to
15,000 0.75 owners of the Company
(in HK$)
10,000 0.50
5,000 0.25
0 0.00
2012 2013 2014 2015 2016
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Management Discussion and Analysis

overvIeW

Despite the challenging operating environment during the year under review, the Group weathered the challenging conditions and delivered an encouraging set of results underpinned by the steady and growing recurrent rental income base from investment properties of the Group.

ProPerty PortfolIo comPosItIon

As at 31 July 2016, the Group maintained a property portfolio with attributable GFA of approximately 2.7 million square feet. Approximate attributable GFA (in ‘000 square feet) of the Group’s major properties and number of car-parking spaces is as follows:

	Commercial/ Retail	Ofce	Industrial	Residential	Hotel	Total No. of (excluding car-parking car-parking spaces spaces attributable & ancillary to the facilities) Group	Total No. of (excluding car-parking car-parking spaces spaces attributable & ancillary to the facilities) Group
Completed Properties Held for Rental1	485	1,172	64	—	—	1,721	1,027
Completed Hotel Properties	—	—	—	—	98	98	—
Properties Under Development2	79	—	—	423	366	868	196
Completed Properties Held for Sale	27	—	—	10	—	37	11
Total GFA of major properties
of the Group	591	1,172	64	433	464	2,724	1,234

1. Completed and rental generating properties

2. All properties under construction

The above table does not include GFA of properties held by Lai Fung Holdings Limited (“ Lai Fung ”).

ProPerty Investment

Rental Income

During the year under review, the Group’s rental operations recorded a turnover of HK$701.6 million (2015: HK$655.5 million), representing a 7.0% increase over last year. The increase is primarily due to the contributions from newly acquired rental properties in London, as well as continued management of tenant mix and rental reversion at major investment properties during the year under review.

The Group wholly owns three major investment properties in Hong Kong, namely Cheung Sha Wan Plaza, Causeway Bay Plaza 2 and Lai Sun Commercial Centre. The 50:50 joint venture with Henderson Land Development Company Limited (“ Henderson Land ”) at 8 Observatory Road, Kowloon was completed in June 2015 and has started to contribute to the Group’s results in the year under review. This is recognised as a component of “Share of profits of joint ventures” in the consolidated income statement.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Management Discussion and Analysis

ProPerty Investment (contInued)

Rental Income (continued)

Breakdown of rental turnover by major investment properties is as follows:

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For the year ended 31 July
2016 2015 Year end
HK$ million HK$ million % Change occupancy (%)
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Hong Kong
Cheung Sha Wan Plaza
(including car-parking spaces)	302.6	293.9	3.0	93.3
Causeway Bay Plaza 2
(including car-parking spaces)	178.0	170.9	4.2	96.5
Lai Sun Commercial Centre
(including car-parking spaces)	59.8	56.4	6.0	98.0
Subtotal:	540.4	521.2	3.7
London, United Kingdom
36 Queen Street	25.9	26.7	-3.0	100.0
107-112 Leadenhall Street	50.2	53.7	-6.5	100.0
100 Leadenhall Street	70.1	42.5	64.9	100.0
106 Leadenhall Street	3.5	—	N/A	94.7
Subtotal:	149.7	122.9	21.8
Others	11.5	11.4	0.9
Total:	701.6	655.5	7.0
Rental proceeds from
joint venture project
Hong Kong
CCB Tower#(50% basis)	113.7	113.6	0.1	100.0
8 Observatory Road##(50% basis)	30.0	—	N/A	Ofce: 86.5
				Retail: 90.4

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ProPerty Investment (contInued)

Rental Income (continued)

Breakdown of turnover by usage of our major rental properties is as follows:

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For the year ended 31 July 2016 For the year ended 31 July 2015
Attributable Attributable
Group Turnover GFA Group Turnover GFA
interest (HK$ million) (square feet) interest (HK$ million) (square feet)
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Hong Kong
Cheung Sha Wan Plaza	100%			100%
Commercial		163.2	233,807		158.1	233,807
Ofce		122.6	409,896		118.5	409,896
Car-parking spaces		16.8	N/A		17.3	N/A
Subtotal:		302.6	643,703		293.9	643,703
Causeway Bay Plaza 2	100%			100%
Commercial		122.3	109,770		114.1	109,770
Ofce		50.9	96,268		52.1	96,268
Car-parking spaces		4.8	N/A		4.7	N/A
Subtotal:		178.0	206,038		170.9	206,038
Lai Sun Commercial Centre	100%			100%
Commercial		34.8	95,063		33.4	95,063
Ofce		8.2	74,181		7.7	74,181
Car-parking spaces		16.8	N/A		15.3	N/A
Subtotal:		59.8	169,244		56.4	169,244
Others		11.5	63,592*		11.4	59,302*
Subtotal:		551.9	1,082,577*		532.6	1,078,287*
London, United Kingdom
36 Queen Street	100%			100%
Ofce		25.9	60,816		26.7	60,816
107-112 Leadenhall Street	100%			100%
Ofce		50.2	146,606		53.7	146,606
100 Leadenhall Street	100%			100%
Ofce		70.1	177,700		42.5	177,700
106 Leadenhall Street	100%			—
Ofce		3.5	12,687		—	—
Subtotal:		149.7	397,809		122.9	385,122
Total:		701.6	1,480,386*		655.5	1,463,409*

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Management Discussion and Analysis

ProPerty Investment (contInued)

Rental Income (continued)

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Joint Venture Project
Hong Kong
CCB Tower#(50% basis)	50%			50%
Ofce		113.3	114,555**		113.6	114,555#
Car-parking spaces		0.4	N/A			N/A
Subtotal:		113.7	114,555**		113.6	114,555#
8 Observatory Road##
(50% basis)	50%			—
Commercial		21.0	46,064***		—	—
Ofce		7.1	36,521***		—	—
Car-parking spaces		1.9	N/A		—	—
Subtotal:		30.0	82,585***		—	—

Excluding 10% interest in AIA Central.

** Referring to GFA attributable to the Group. The total GFA of CCB Tower is 229,110 square feet.

*** Referring to GFA attributable to the Group. The total GFA of 8 Observatory Road is 165,170 square feet.

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8 Observatory Road, Tsimshatsui
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CCB Tower, 3 Connaught Road Central
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ProPerty Investment (contInued)

Review of major investment properties

Hong Kong Properties

Cheung Sha Wan Plaza

The asset comprises of a 8-storey and a 7-storey office towers erected on top of a retail podium which was completed in 1989. It is located on top of the Lai Chi Kok MTR station with a total GFA of 643,703 square feet (excluding car-parking spaces). The arcade is positioned to serve the local communities nearby with major banks and recognised restaurants chains as the key tenants.

Causeway Bay Plaza 2

The asset comprises of a 28-storey commercial/office building with car-parking facilities at basement levels which was completed in 1992. It is located at the heart of Causeway Bay with a total GFA of 206,038 square feet (excluding car-parking spaces). Key tenants include a HSBC branch and commercial offices and major restaurants.

Lai Sun Commercial Centre

The asset comprises a 13-storey commercial/carpark complex completed in 1987. It is located near the Lai Chi Kok MTR station with a total GFA of 169,244 square feet (excluding car-parking spaces).

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AIA Central
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Cheung Sha Wan Plaza
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Lai Sun Commercial Centre
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Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Management Discussion and Analysis

ProPerty Investment (contInued)

Review of major investment properties (continued)

Hong Kong Properties (continued)

CCB Tower, 3 Connaught Road Central

The Group has a 50:50 interest with CCB in the joint redevelopment project of the former Ritz-Carlton Hotel in Central. This 27-storey office tower is a landmark property in Central featuring underground access to the Central MTR station. The property has a total GFA of 229,110 square feet (excluding car-parking spaces). CCB Tower was completed in 2012 and added 114,555 square feet of attributable GFA to the rental portfolio of the Group. CCB Tower is now fully leased out with 18 floors of the office floors and 2 banking hall floors leased to CCB for its Hong Kong operations.

8 Observatory Road

The Group has a 50:50 interest with Henderson Land in this joint development project at Observatory Road, Kowloon. The property is a 19-storey commercial building with a total GFA of 165,170 square feet (excluding car-parking spaces). The property was completed in June 2015 and as at 18 October 2016, approximately 97% of the floor area of the building has been leased or has offers to lease with another approximately 3% of floor area under negotiation.

AIA Central

The Group has 10% interest in AIA Central which is situated in the central business district of Hong Kong and commands spectacular views over Victoria Harbour, to Kowloon Peninsula to the north, and across Chater Garden and The Peak to the south. This 39-storey office tower provides prime office space with a total GFA of approximately 428,962 square feet (excluding car-parking spaces).

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36 Queen Street, London
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107-112 Leadenhall Street, London
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ProPerty Investment (contInued)

Review of major investment properties (continued)

Overseas Properties

36 Queen Street, London EC4, United Kingdom

In February 2011, the Group acquired an office building in the City in central London located at 36 Queen Street. Completed in 1986, it comprises 60,816 square feet gross internal area of office accommodation extending over basement, ground and six upper floors. The building is currently fully leased out.

107-112 Leadenhall Street, London EC3, United Kingdom

In April 2014, the Group acquired a property located at the core of the insurance district in the City of London, surrounded by 30 St Mary Axe (commonly known as the Gherkin), Lloyd’s of London and the Willis Building at 51 Lime Street. It is a freehold commercial property housing commercial, offices and retail space. The building comprises 146,606 square feet gross internal area of office accommodation extending over basement, ground, mezzanine and seven upper floors. The building is currently fully leased out.

100 Leadenhall Street, London EC3, United Kingdom

Following the acquisition of 107-112 Leadenhall Street in April 2014, the Group announced the acquisition of 100 Leadenhall Street in November 2014 which was completed in January 2015. This property comprises a basement, a lower ground floor, ground floor and nine upper floors and provides 177,700 square feet gross internal area of offices and ancillary accommodation. The property is currently fully let to ACE Global Markets Limited.

106 Leadenhall Street, London EC3, United Kingdom

In December 2015, the Group acquired the property located adjacent to 100 and 107 Leadenhall Street, namely 106 Leadenhall Street, which is a multi-tenanted asset with approximately 12,687 square feet net internal area of office space.

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106 Leadenhall Street, London
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100 Leadenhall Street, London
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Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Management Discussion and Analysis

ProPerty develoPment

For the year ended 31 July 2016, recognised turnover from sales of properties was HK$468.7 million (2015: HK$277.8 million), representing an increase of 68.7% over last year. The significant increase was mainly contributed by the sale of residential units in 339 Tai Hang Road during the year under review.

Review of major projects for sale

339 Tai Hang Road, Hong Kong

The Group wholly owns the development project located at 339 Tai Hang Road, Hong Kong. The development project is a luxury residential property with a total GFA of approximately 30,400 square feet (excluding car-parking spaces). The total development cost (including land cost and lease modification premium) is approximately HK$670 million.

The property is now open for sale. For the year ended 31 July 2016, the Group has completed the sale of 4 residential units with total saleable area of 10,920 square feet. Total sales proceeds of HK$468.7 million were recognised during the year under review and the average selling price based on saleable area is approximately HK$42,900 per square foot. Up to 18 October 2016, 7 out of 9 units of this project have been sold.

Ocean One, 6 Shung Shun Street, Yau Tong

The Group wholly owns this development project, namely “Ocean One” located at No. 6 Shung Shun Street, Yau Tong, Kowloon. This property is a residential-cum-commercial property with a total GFA of about 122,000 square feet (excluding car-parking spaces) or 124 residential units and 2 commercial units. All units have been sold other than 2 shops and 7 car-parking spaces.

Review of major projects under development

Alto Residences, Tseung Kwan O

In November 2012, the Group successfully tendered for and secured a site located at Area 68A2, Tseung Kwan O, New Territories, through a 50% joint venture vehicle. The lot has an area of 229,338 square feet with a total GFA of 573,422 square feet split into 458,914 square feet for residential use and 114,508 square feet for commercial use. Completion is expected to be in the first quarter of 2018.

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Latest construction progress of Alto Residences
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Subsequent to the year end, this project providing 605 flats, including 23 detached houses was named “Alto Residences” and

was launched for pre-sale in October 2016. Up to 18 October 2016, the first, second and the third price lists of the Alto Residences were released on 11 October 2016, 15 October 2016 and 18 October 2016, respectively for a total of 363 units with listed prices based on saleable area range from HK$12,373 to HK$27,508 per square foot.

Ocean Hotel project

The Group was named the most preferred proponent by Ocean Park for the Ocean Hotel project in October 2013 and was officially awarded the project in May 2014. The Ocean Hotel, to be operated by the Marriott group, will provide a total of 471 rooms and add 366,000 square feet of attributable rental space to the existing rental portfolio of the Group of approximately 1.8 million square feet. The total development cost is estimated to be approximately HK$4.4 billion. Completion is expected to be in the fourth quarter of 2017.

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Latest construction progress of Ocean Hotel project
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ProPerty develoPment (contInued)

Review of major projects under development (continued)

93 Pau Chung Street

In April 2014, the Group was successful in its bid for the development right to the San Shan Road/Pau Chung Street project from the Urban Renewal Authority in Ma Tau Kok, Kowloon, Hong Kong. The lot has an area of 12,599 square feet with a total GFA of 111,354 square feet split into 94,486 square feet for residential use and 16,868 square feet for commercial use. The total development cost is estimated to be approximately HK$1 billion and completion is expected to be in the first quarter of 2018.

Subsequent to the year end, this project was named “93 Pau Chung Street” and launched for pre-sale in September 2016, offering 209 flats in total, including studios, one and two-bedroom units. Up to 18 October 2016, the Group has pre-sold 75 units in this project with saleable area of approximately 26,400 square feet at an average selling price of HK$15,900 per square foot.

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Latest construction progress of 93 Pau Chung Street
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Sai Wan Ho Street project

The Group was successful in September 2015 in its bid for the development rights to the Sai Wan Ho Street project from the Urban Renewal Authority in Shau Kei Wan, Hong Kong. The project site covers an area of 7,642 square feet. Upon completion, it is planned to provide about 144 residential units with a total residential GFA of 61,139 square feet. The total development cost is estimated to be approximately HK$0.9 billion and completion is expected to be in the fourth quarter of 2019.

Ki Lung Street project

On 16 May 2016, the Group has completed the purchase of the remaining unit for the proposed development on Ki Lung Street in Sham Shui Po, Kowloon. The site comprises numbers 48-56 on Ki Lung Street and has a combined site area of 5,053 square feet. It is planned to be developed primarily into a commercial/residential development for sale with a total GFA of 42,873 square feet. The total development cost is expected to be approximately HK$0.4 billion and construction is expected to be completed in the second quarter of 2020.

restaurant oPeratIons

For the year ended 31 July 2016, the restaurant operations contributed HK$280.7 million to the Group’s turnover (2015: HK$201.7 million), representing an increase of approximately 39.2% from last year. The contribution from the restaurants segment was boosted by contributions from the newly opened restaurants, including Tang[2] in Cheung Sha Wan Plaza, Beefbar in Central, Howard’s Gourmet in CCB Tower, Hong Kong, CIAK – All Day Italian in Cityplaza, Hong Kong and China Tang Harbour City in Hong Kong.

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Latest construction progress of Sai Wan Ho Street project
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Latest construction progress of Ki Lung Street project
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Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Management Discussion and Analysis

restaurant oPeratIons (contInued)

Up to the date of this Annual Report, the restaurant operations include the Group’s interests in 16 restaurants in Hong Kong and mainland China.

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Cuisine Restaurant Location Award
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Western Cuisine	81/2Otto e Mezzo	Hong Kong	Three Michelin stars (2012-2016)
	BOMBANA Hong Kong
	Otto e Mezzo BOMBANA	Shanghai	Two Michelin stars (2017)
	Shanghai
	Opera BOMBANA	Beijing
	CIAK – In The Kitchen	Hong Kong	One Michelin star (2015-2016)
	CIAK – All Day Italian	Hong Kong
	Beefbar	Hong Kong
	Operetta	Hong Kong
Chinese Cuisine	China Tang Landmark	Hong Kong
	China Tang Harbour City	Hong Kong
	Howard’s Gourmet	Hong Kong
	Chiu Tang	Hong Kong
	Tang2	Hong Kong
	Kowloon Tang	Hong Kong
Japanese Cuisine	Wagyu Takumi	Hong Kong	Two Michelin stars (2014-2016)
	Wagyu Kaiseki Den	Hong Kong	One Michelin star (2010-2016)
	Rozan	Hong Kong

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CIAK – In The Kitchen
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Wagyu Takumi
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Beefbar
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hotel oPeratIons

Turnover from hotel operation was mainly derived from the Group’s operation of the Caravelle Hotel in Ho Chi Minh City, Vietnam. For the year ended 31 July 2016, the hotel operation contributed HK$391.7 million to the Group’s turnover (2015: HK$384.0 million).

Caravelle Hotel is a leading international 5-star hotel in the centre of the business, shopping and entertainment district in Vietnam. It is an elegant 24-storey tower with a mixture of French colonial and traditional Vietnamese style and has 335 superbly appointed rooms, suites, exclusive Signature Floors, Signature Lounge and a specially equipped room for the disabled. Total GFA attributable to the Group is 98,376 square feet.

The Group was awarded the hotel tender at Ocean Park in May 2014 and the Ocean Hotel, to be operated by the Marriott group, will provide a total of 471 rooms upon its completion in 2017. The Group is optimistic about the prospects of the Ocean Hotel project given the strong popularity of Ocean Park, which is underpinned by robust growth in visitor numbers to Hong Kong coinciding with its expansion.

The hotel operation has extensive experience in providing consultancy and management services to hotels in Mainland China, Hong Kong and other Asian countries. The division’s key strategy going forward will continue to focus on providing management services, particularly to capture opportunities arising from the developments of Lai Fung in Shanghai, Guangzhou, Zhongshan and Hengqin. The hotel division manages Lai Fung’s serviced apartments in Shanghai and Zhongshan under the “STARR” brand. STARR Resort Residence Zhongshan comprises two 16-storey blocks with 90 fully furnished serviced apartment units located in the Palm Lifestyle complex in Zhongshan Western district at Cui Sha Road, opposite to the new Zhongshan traditional Chinese medical centre. STARR Hotel Shanghai is a 17-storey hotel with 239 fully furnished and equipped hotel units with kitchenette located in the Mayflower Lifestyle complex right in the heart of the Zhabei inner ring road district, within walking distance to Lines 1, 3 and 4 of the Shanghai Metro Station with easy access to major motorways.

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Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Management Discussion and Analysis

Interests In assocIates (esun)

As at 31 July 2016, the Group’s interest in eSun Holdings Limited (“ eSun ”) is 41.92%.

Share of profits of eSun amounting to HK$33.9 million (2015: HK$108.3 million). The decrease is primarily due to a lower revaluation gain rising in the revaluation of Lai Fung’s investment properties during the year under review and decrease in results of Media Asia Group Holdings Limited (“ MAGHL ”) and its subsidiaries (collectively, “ MAGHL Group ”) which is primarily attributable to (i) decrease in both the turnover and the gross profit ratio due to the decrease in the number of large-scale films released and events held by MAGHL Group during the year under review and (ii) increase in other operating expenses of MAGHL Group which is mainly due to the exchange loss arising from the depreciation in Renminbi.

Interests In JoInt ventures

During the year under review, contribution from joint ventures increased to HK$770.5 million (2015: HK$354.2 million), representing an increase of 117.5%. This is primarily due to stronger revaluation gains of 8 Observatory Road and CCB Tower.

	For the year ended 31 July 2016 2015 (HK$ million) (HK$ million)	For the year ended 31 July 2016 2015 (HK$ million) (HK$ million)
Revaluation gains	682.4	282.9
Operating profts	88.1	71.3
Contribution from joint ventures	770.5	354.2

lIquIdIty and fInancIal resources

As at 31 July 2016, cash and bank balances and undrawn facilities held by the Group amounted to HK$2,570.9 million and HK$6,115.0 million, respectively.

The Group’s sources of funding comprise mainly internal funds generated from the Group’s business operations, loan facilities provided by banks, guaranteed notes issued to investors and rights issue.

As at 31 July 2016, the Group had bank borrowings of approximately HK$5,402.4 million and guaranteed notes of approximately HK$2,709.2 million. The gearing ratio, expressed as a percentage of the total outstanding net debt (being the total outstanding bank borrowings and guaranteed notes less the pledged and unpledged bank balances and time deposits) to consolidated net assets attributable to owners of the Company, was approximately 22.7%. The Group’s gearing excluding the net debt of the London portfolio all of which had a positive carry net of financing costs was approximately 16.2%. As at 31 July 2016, the maturity profile of the bank borrowings of HK$5,402.4 million was spread over a period of less than 5 years with HK$126.7 million repayable within 1 year, HK$154.2 million repayable in the second year and HK$5,121.5 million repayable in the third to fifth years.

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lIquIdIty and fInancIal resources (contInued)

All the Group’s borrowings carried interest on a floating rate basis except for the guaranteed notes issued in January 2013 which has a fixed rate of 5.7% per annum.

As at 31 July 2016, certain investment properties with carrying amounts of approximately HK$14,912.7 million, certain property, plant and equipment with carrying amounts of approximately HK$2,390.4 million, certain properties under development for sale of approximately HK$634.6 million and certain bank balances and time deposits with banks of approximately HK$216.2 million were pledged to banks to secure banking facilities granted to the Group. In addition, certain shares in subsidiaries held by the Group were also pledged to banks to secure banking facilities granted to the Group. Certain shares in joint ventures held by the Group were pledged to banks to secure banking facilities granted to joint ventures of the Group. The Group’s secured bank borrowings were also secured by floating charges over certain assets held by the Group.

The Group’s major assets and liabilities and transactions were denominated in Hong Kong dollars and United States dollars. Considering that Hong Kong dollars are pegged against United States dollars, the Group believes that the corresponding exposure to exchange rate risk arising from United States dollars is nominal. In addition, the Group has investments in United Kingdom with the assets and liabilities denominated in Pounds Sterling. Majority of the investments were partly financed by bank borrowings denominated in Pounds Sterling in order to minimise the net foreign exchange exposure. Other than the abovementioned, the remaining monetary assets and liabilities of the Group were denominated in Renminbi and Vietnamese Dong which were also insignificant as compared with the Group’s total assets and liabilities. No hedging instruments were employed to hedge for the foreign exchange exposure. The Group manages its foreign currency risk by closely reviewing the movement of the foreign currency rate and considers hedging significant foreign currency exposure should the need arise.

contIngent lIaBIlItIes

Details of contingent liabilities of the Group at the end of the reporting period are set out in note 33 to the financial statements.

emPloyees and remuneratIon PolIcIes

As at 31 July 2016, the Group employed a total of approximately 1,500 employees. The Group recognises the importance of maintaining a stable staff force in its continued success. Under the Group’s existing policies, employee pay rates are maintained at competitive levels whilst promotion and salary increments are assessed on a performance-related basis. Discretionary bonuses are granted to employees based on their merit and in accordance with industry practice. Other benefits including share option scheme, mandatory provident fund scheme, free hospitalisation insurance plan, subsidised medical care and sponsorship for external education and training programmes are offered to eligible employees.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Summary of Financial Information

A summary of the results, assets, liabilities and non-controlling interests of the Group for the last five financial years is set out below.

results

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Year ended 31 July
2016 2015 2014 2013 2012
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
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TURNOVER	1,868,334	1,541,686	2,109,647	963,757	875,156
PROFIT BEFORE TAX	1,237,457	2,127,891	1,602,137	2,648,032	2,356,838
Tax	(57,691)	(79,397)	(90,489)	(45,694)	(31,110)
PROFIT FOR THE YEAR	1,179,766	2,048,494	1,511,648	2,602,338	2,325,728
Attributable to:
Owners of the Company	1,148,390	2,018,262	1,478,730	2,564,114	2,282,568
Non-controlling interests	31,376	30,232	32,918	38,224	43,160
	1,179,766	2,048,494	1,511,648	2,602,338	2,325,728

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assets, lIaBIlItIes and non-controllIng Interests

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As at 31 July
2016 2015 2014 2013 2012
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
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Property, plant and equipment	2,983,985	2,380,267	554,635	510,202	350,817
Prepaid land lease payments	20,901	21,928	22,955	23,982	25,010
Investment properties	15,147,376	15,236,780	12,669,295	10,736,496	8,570,911
Properties under development for sale	1,322,403	653,845	109,158	777,904	1,309,418
Goodwill	5,161	—	—	—	—
Interests in associates	3,660,835	3,930,309	3,841,870	3,378,850	3,083,687
Interests in joint ventures	6,754,353	5,937,793	6,018,543	5,688,684	3,889,258
Available-for-sale fnancial assets	1,382,026	1,215,485	1,232,466	1,198,321	1,185,810
Pledged bank balances and time deposits
(classifed as non-current assets)	216,241	—	138,049	134,692	—
Deposits paid and other receivables	181,062	141,968	727,468	23,500	61,500
Current assets	2,879,098	2,088,503	2,648,408	4,033,832	1,854,169
TOTAL ASSETS	34,553,441	31,606,878	27,962,847	26,506,463	20,330,580
Current liabilities	(719,579)	(1,592,678)	(849,356)	(831,198)	(1,410,048)
Bank borrowings (classifed as
non-current liabilities)	(5,275,720)	(3,270,608)	(2,274,414)	(2,661,322)	(1,707,404)
Guaranteed notes	(2,709,227)	(2,703,324)	(2,698,122)	(2,695,474)	—
Amounts due to associates	—	—	—	—	(20,799)
Deferred tax	(127,891)	(121,020)	(111,620)	(105,694)	(100,880)
Provision for tax indemnity	(729,387)	(729,387)	(729,387)	(614,672)	(347,135)
Long term rental deposits received	(90,063)	(81,907)	(71,087)	(68,152)	(60,032)
Deferred rental	(9,724)	(4,380)	(4,366)	—	—
TOTAL LIABILITIES	(9,661,591)	(8,503,304)	(6,738,352)	(6,976,512)	(3,646,298)
NON-CONTROLLING INTERESTS	(534,115)	(441,031)	(449,947)	(402,179)	(326,697)
NET ASSETS ATTRIBUTABLE TO
OWNERS OF THE COMPANY	24,357,735	22,662,543	20,774,548	19,127,772	16,357,585

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Particulars of Major Properties

comPleted ProPertIes held for rental

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Approximate Attributable Gross Floor Area (square feet)
Total No. of
(excluding car-parking
carpark & spaces
Group Commercial/ ancillary attributable to
Property Name Location Interest Tenure Retail Office Industrial facilities) the Group
Hong Kong Properties
Cheung Sha Wan Plaza 833 Cheung Sha Wan Road, Cheung 100% The property is held for a term 233,807 409,896 — 643,703 355
Sha Wan, Kowloon, Hong Kong expiring on 30 June 2047
(New Kowloon Inland Lot No. 5955)
Causeway Bay Plaza 2 463-483 Lockhart Road, 100% The property is held for a term 109,770 96,268 — 206,038 57
Causeway Bay, Hong Kong of 99 years commencing on
(Section J and the Remaining 15 April 1929 and renewable
Portions of Sections D,E,G,H,K,L,M for a further term of 99 years
and O, Subsection 4 of Section
H and the Remaining Portion of
Inland Lot No. 2833)
Lai Sun Commercial Centre 680 Cheung Sha Wan Road, 100% The property is held for a term 95,063 74,181 — 169,244 538
Cheung Sha Wan, Kowloon, which expired on 27 June
Hong Kong 1997 and has been extended
(New Kowloon Inland Lot No. 5984) upon expiry until 30 June 2047
CCB Tower 3 Connaught Road Central, 50% The property is held for — 114,555 — 114,555 19
Hong Kong a term commencing from
(Inland Lot No. 8736) 28 June 1989 and expiring on
30 June 2047
8 Observatory Road 2,4,6,8,10 and 12 Observatory Road, 50% The property is held for a term 46,064 36,521 — 82,585 30
Tsim Sha Tsui, Kowloon, Hong Kong of 50 years commencing on
(Inland Lot No. 11231) 10 January 2014
Wyler Centre, Phase II 192-200 Tai Lin Pai Road, 100% The property is held for — — 47,932 47,932 3
(20/F and 27/F and car-parking Kwai Chung, New Territories, a term which expired on
spaces nos. 17, 18 and 59 on 2/F) Hong Kong 27 June 1997 and has been
extended upon expiry until
30 June 2047
AIA Central 1 Connaught Road Central, 10% The property is held for a term — 42,896 — 42,896 6
Hong Kong of 999 years commencing from
(Marine Lot No. 275, Section A and 9 September 1895 (for Marine
the Remaining Portion of Marine Lot No. 275) and 999 years
Lot No. 278) commencing from 12 October
1896 (for Marine Lot no. 278)
Metropolitan Factory and Metropolitan Factory and 100% The property is held for a term — — 11,370 11,370 4
Warehouse Building Warehouse Building, 30-32 Chai which expired on 27 June
(Units A and B on 10/F and Wan Kok Street, Tsuen Wan, 1997 and has been extended
car-parking space nos. 1, 2, 13 New Territories, Hong Kong upon expiry until 30 June 2047
and 14 on G/F)
Luen Fat Loong Factory Building Luen Fat Loong 100% The property is held for a term — — 4,290 4,290 —
(4/F) Factory Building, 19 Cheung of 75 years commencing on
Lee Street, Chai Wan, Hong Kong 4 November 1963 renewable
for a further term of 75 years
Subtotal of Hong Kong properties held for rental: 484,704 774,317 63,592 1,322,613 1,012
Overseas Properties
107-112 Leadenhall Street 107-112 Leadenhall Street, London 100% The property is held freehold — 146,606 — 146,606 —
London (Note 1) EC3, United Kingdom
100 Leadenhall Street London 100 Leadenhall Street, London EC3, 100% The property is held freehold — 177,700 — 177,700 15
(Note 1) United Kingdom
36 Queen Street London 36 Queen Street, London, EC4, 100% The property is held freehold — 60,816 — 60,816 —
(Note 1) United Kingdom
106 Leadenhall Street London 106 Leadenhall Street, London EC3, 100% The property is held freehold — 12,687 — 12,687 —
(Note 2) United Kingdom
Subtotal of overseas properties held for rental: — 397,809 — 397,809 15
Total of completed properties held for rental: 484,704 1,172,126 63,592 1,720,422 1,027
----- End of picture text -----

Note 1: Gross internal area Note 2: Net internal area

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comPleted hotel ProPerty

comPleted hotel ProPerty
Hotel Name Location Group Interest Tenure	Approximate Attributable Gross Floor Area (square feet) No. of car-parking spaces attributable to the Group Hotel
	Approximate Attributable Gross Floor Area (square feet)
	Hotel
Caravelle Hotel 19 Lam Son Square, District 1, Ho Chi Minh City, Vietnam 26.01% The property is held under a land use right due to expire on 8 October 2040	98,376 —

ProPertIes under develoPment

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Approximate Attributable Gross Floor Area (square feet)
Total No. of
Site Area (excluding car-parking
(approximate Expected carpark & spaces
Group square feet) completion Commercial/ ancillary attributable
Location Stage of construction interest (Note) date Retail Hotel Residential facilities) to the Group
The Hong Kong Ocean Superstructure works in 100% 183,460 Q4 2017 — 366,000 — 366,000 16
Park Marriott Hotel, progress
Hong Kong
Area 68A2, Tseung Superstructure works in 50% 229,338 Q1 2018 57,254 — 229,457 286,711 150
Kwan O, New Territories, progress
Hong Kong
20-32 San Shan Road Superstructure works in 100% 12,599 Q1 2018 16,868 — 94,486 111,354 22
and 93 Pau Chung progress
Street, Ma Tau Kok,
Kowloon, Hong Kong
9-11 and 15 Sai Wan Ho Foundation works in progress 100% 7,642 Q4 2019 — — 61,139 61,139 8
Street, Shau Kei Wan,
Hong Kong
48-56 Ki Lung Street, Demolition works in progress 100% 5,053 Q2 2020 5,235 — 37,638 42,873 —
Kowloon, Hong Kong
Total of properties under development: 79,357 366,000 422,720 868,077 196
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Note: On project basis

comPleted ProPertIes held for sale

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Approximate Attributable Gross Floor Area
(square feet)
Total
(excluding No. of car-
carpark & parking spaces
Group Commercial/ ancillary attributable to
Property Name Location interest Retail Residential facilities) the Group
Ocean One 6 Shung Shun Street, Yau Tong, 100% 27,306 — 27,306 7
Kowloon, Hong Kong
339 Tai Hang Road 335-339 Tai Hang Road, Hong Kong 100% — 9,571 9,571 4
Total of completed properties held for sale: 27,306 9,571 36,877 11
----- End of picture text -----

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Corporate Social Responsibility Report

The Group is committed to contributing to the sustainability of the environment and community in which we conduct business and where our stakeholders live.

envIronmental ProtectIon

As a responsible developer, the Group has endeavoured to comply with laws and regulations regarding environmental protection and adopted effective environmental technologies to ensure its projects meet the construction standards and ethics in respect of environmental protection.

Several measures have been implemented in order to mitigate emissions produced by the Group’s offices, such as controlled use of chiller units during night-time, using more LED lamps, switching off some passenger lifts after office hours, etc.

The Group has actively promoted material-saving and the extensive use of environmentally friendly construction materials so as to protect the environment and improve air quality within the community.

comPlIance WIth laWs and regulatIons

Compliance procedures are in place to ensure adherence to applicable laws, rules and regulations in particular, those have significant impact on the Group. Our Audit Committee is delegated by the Board to monitor the Group’s policies and practices on compliance with legal and regulatory requirements and such policies are regularly reviewed. Any changes in the applicable laws, rules and regulations are brought to the attention of relevant employees and relevant operation units from time to time.

The Group complies with all relevant rules and regulations promulgated by Lands Department, Buildings Department and the Planning Department governing property development and property investment in Hong Kong and holds relevant required licences for provision of product and services. The management must ensure that the conduct of business is in conformity with the applicable laws and regulations.

To protect the Group’s intellectual property rights, the Group has registered its domain name and various trademarks have been applied for or registered in various classes in Hong Kong, Macau, the PRC and other relevant jurisdictions and takes all appropriate actions to enforce its intellectual property rights.

WorkPlace qualIty

The Group is an equal opportunity employer and does not discriminate on the basis of personal characteristics. The Group has employee handbooks outlining terms and conditions of employment, expectations for employees’ conduct and behavior, employees’ rights and benefits. We establish and implement policies that promote a harmony and respectful workplace.

The Group believes that employees are the valuable assets of an enterprise and regards human resources as its corporate wealth. We provide on-the-job training and development opportunities to enhance our employees’ career progression. Through different training, staff’s professional knowledge in corporate operations, occupational and management skills are enhanced. The Group also organised charitable and staff-friendly activities for employees, such as outings, cookery class and health talks to provide communication opportunities among staff, which are vital to promote staff relationship and physical fitness.

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health and safety

The Group prides itself on providing a safe, effective and congenial work environment. Adequate arrangements, training and guidelines are implemented to ensure the working environment is healthy and safe. The Group provided health and safety communications for employees to present the relevant information and raise awareness of occupational health and safety issues.

All construction work is carried out by construction workers via outsourced contractors. All contractors engaged by the Group are required to provide their quality and safety plan for reference and are obliged to follow the Group’s safety management plan. The rate of accidents and injuries during the year, as reported by the engaged contractors, remained minimal.

The Group values the health and well-being of staff. In order to provide employees with health coverage, staff are entitled to medical insurance benefits as well as other health awareness programs.

communIty Involvement

The Group is committed to participate in the community events and made donations to a number of charitable organisations to the improvement of community well-being and social services. The Group believes that by encouraging staff to participate in a wide range of charitable events, concern for the community will be raised and boosted, which would inspire more people to take part in serving the community.

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Corporate Governance Report

The Company is committed to achieving and maintaining high standards of corporate governance and has established policies and procedures in compliance with the principles and code provisions set out from time to time in the Corporate Governance Code (“ CG Code ”) contained in Appendix 14 to the Rules Governing the Listing of Securities (“ Listing Rules ”) on The Stock Exchange of Hong Kong Limited (“ Stock Exchange ”).

(1) corPorate governance PractIces

The Company has complied with all the code provisions set out in the CG Code throughout the year ended 31 July 2016 (“ Year ”) save for the deviations from code provisions A.4.1, A.5.1 and E.1.2.

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

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

Under code provision A.5.1, a nomination committee comprising a majority of the independent non-executive directors should be established and chaired by the chairman of the board or an independent non-executive director.

The Company has not established a nomination committee whose functions are assumed by the full Board. Potential new Directors will be recruited based on their knowledge, skills, experience and expertise and the requirements of the Company at the relevant time and candidates for the INEDs must meet the independence criterion. The process of identifying and selecting appropriate candidates for consideration and approval by the Board has been, and will continue to be, carried out by the executive Directors (“ EDs ”). As the above selection and nomination policies and procedures have already been in place and the other duties of the nomination committee as set out in the CG Code have long been performed by the full Board effectively, the Board does not consider it necessary to establish a nomination committee at the current stage.

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

Due to other pre-arranged business commitments which must be attended to by him, Dr. Lam Kin Ngok, Peter, the Chairman was not present at the AGM held on 11 December 2015. However, Mr. Chew Fook Aun, the Deputy Chairman and an ED present at that AGM took the chair of that AGM pursuant to Article 71 of the Articles of Association to ensure an effective communication with the Shareholders thereat.

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(2) Board of dIrectors

(2.1) Responsibilities and delegation

The Board oversees the overall management of the Company’s business and affairs. The Board’s primary duty is to ensure the viability of the Company and to ascertain that it is managed in the best interests of its Shareholders as a whole while taking into account the interests of other stakeholders.

The Board has established specific committees with written terms of reference to assist it in the efficient implementation of its functions, namely the Executive Committee, the Audit Committee and the Remuneration Committee. Specific responsibilities have been delegated to the above committees.

The Board has delegated the day-to-day management of the Company’s business to the management and the Executive Committee, and focuses its attention on matters affecting the Company’s long term objectives and plans for achieving these objectives, the Group’s overall business and commercial strategy as well as overall policies and guidelines.

From April 2012 onwards, all Directors have been provided, on a monthly basis, with the Group’s management information updates, giving a balanced and understandable assessment of the Group’s performance, position, recent developments and prospects in sufficient detail to keep them abreast of the Group’s affairs and facilitate them to discharge their duties under the relevant requirements of the Listing Rules.

(2.2) Composition of the Board

The Board currently comprises nine members, of whom four are EDs, two are NEDs and the remaining three are INEDs, in compliance with the minimum number of INEDs required under Rule 3.10(1) of the Listing Rules. The Company has also complied with Rule 3.10A with INEDs representing at least one-third of the Board. The Directors who served the Board during the Year and up to the date of this Report are named as follows:

Executive Directors (“EDs”)

Lam Kin Ngok, Peter, GBS (Chairman) Chew Fook Aun (Deputy Chairman) Lau Shu Yan, Julius (Chief Executive Officer) Lam Hau Yin, Lester

Non-executive Directors (“NEDs”)

Lam Kin Ming U Po Chu

Independent Non-executive Directors (“INEDs”)

Ip Shu Kwan, Stephen, GBS, JP Lam Bing Kwan Leung Shu Yin, William

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Corporate Governance Report

(2) Board of dIrectors (contInued)

(2.2) Composition of the Board (continued)

The brief biographical particulars of the Directors are set out in the section headed “Biographical Details of Directors” of this Annual Report on pages 46 to 50.

Dr. Lam Kin Ngok, Peter, Chairman of the Board and an ED, is the son of Madam U Po Chu, a NED, a younger brother of Dr. Lam Kin Ming, another NED and the father of Mr. Lam Hau Yin, Lester, an ED.

Save as disclosed above and in the “Biographical Details of Directors” section of this Annual Report, none of the Directors has any financial, business, family or other material/relevant relationships with one another.

(2.3) Directors’ attendance at Board meetings

The Board had held five meetings during the Year. The attendance record of individual Directors at these Board meetings is set out below:

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Number of Meetings Attended/
Directors Number of Meetings Held
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Executive Directors
Lam Kin Ngok, Peter, GBS_(Chairman)_	5/5
Chew Fook Aun_(Deputy Chairman)_	5/5
Lau Shu Yan, Julius_(Chief Executive Ofcer)_	5/5
Lam Hau Yin, Lester	5/5
Non-executive Directors
Lam Kin Ming	5/5
U Po Chu	5/5
Independent Non-executive Directors
Ip Shu Kwan, Stephen, GBS, JP	5/5
Lam Bing Kwan	5/5
Leung Shu Yin, William	5/5

(2.4) INEDs

The Company has complied with the requirements under Rules 3.10(1) and 3.10(2) of the Listing Rules which require that every board of directors of a listed issuer must include at least three INEDs and at least one of the INEDs must have appropriate professional qualifications or accounting or related financial management expertise. The Company has received from each of the INEDs an annual confirmation in writing of his independence for the Year and all INEDs meet the guidelines for assessment of their independence as set out in Rule 3.13 of the Listing Rules. Further, up to the date of this Report, the Board has not been aware of the occurrence of any events which would cause it to believe that their independence has been impaired.

(2.5) Directors’ and Officers’ Liabilities Insurance

The Company has arranged appropriate directors’ and officers’ liabilities insurance coverage for the Directors and officers of the Company.

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(3) dIrectors’ InductIon and contInuous ProfessIonal develoPment

On appointment to the Board, each Director receives a comprehensive induction package covering business operations, policy and procedures of the Company as well as the general, statutory and regulatory obligations of being a Director to ensure that he/she is sufficiently aware of his/her responsibilities under the Listing Rules and other relevant regulatory requirements.

The Directors are regularly briefed on the amendments to or updates on the relevant laws, rules and regulations. In addition, the Company has been encouraging the Directors and senior executives to enroll in a wide range of professional development courses and seminars relating to the Listing Rules, companies ordinance/act and corporate governance practices organised by professional bodies, independent auditors and/or law firms in Hong Kong so that they can continuously update and further improve their relevant knowledge and skills.

From time to time, Directors are provided with written training materials to develop and refresh their professional skills; the Group’s legal and company secretarial departments also organise and arrange seminars on the latest development of applicable laws, rules and regulations for the Directors to assist them in discharging their duties. During the Year, the Company arranged for the INEDs to attend a seminar organised by the independent auditors of the Company (“ Independent Auditors ”).

According to the records maintained by the Company, the current Directors received the following training with an emphasis on the roles, functions and duties of a director of a listed company in compliance with the requirement of the CG Code on continuous professional development during the Year:

	Corporate Governance/ Updates on Laws, Rl & Rli	Accounting/ Financial/Management or Oh Pfil Skill
ues eguatons Attend Read Seminars/ Directors Materials Briefngs Executive Directors Lam Kin Ngok, Peter, GBS √ √ Chew Fook Aun √ √ Lau Shu Yan, Julius √ √ Lam Hau Yin, Lester √ √ Non-executive Directors Lam Kin Ming √ √ U Po Chu √ √ Independent Non-executive Directors Ip Shu Kwan, Stephen, GBS, JP √ √ Lam Bing Kwan √ √ Leung Shu Yin, William √ √		ter roessona s Attend Read Seminars/ Materials Briefngs √ — √ √ √ — √ √ √ — √ — √ √ √ √ √ √

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Corporate Governance Report

(4) Board commIttees

The Executive Committee comprising members appointed by the Board amongst the EDs was established on 18 November 2005 with written terms of reference to assist the Board in monitoring the ongoing management of the Company’s business and in implementing the Company’s objectives in accordance with the strategy and policies approved by the Board. The Board has also delegated its authority to the following Committees to assist it in the implementation of its functions:

(4.1) Remuneration Committee

The Board established on 18 November 2005 a Remuneration Committee which currently comprises two INEDs, namely Mr. Leung Shu Yin, William (Chairman) and Mr. Lam Bing Kwan and an ED, Mr. Chew Fook Aun.

On 29 March 2012, the Board adopted a set of the revised terms of reference of the Remuneration Committee, which has included changes in line with the CG Code’s new requirements effective from 1 April 2012. The Remuneration Committee has adopted the operation model where it performs an advisory role to the Board, with the Board retaining the final authority to approve the remuneration packages of the Directors and senior management. The revised terms of reference of the Remuneration Committee setting out its authority, duties and responsibilities are available on the respective website of the Company and the Stock Exchange.

(a) Duties of the Remuneration Committee

The Remuneration Committee has been charged with the responsibility of making recommendations to the Board, in consultation with the Chairman of the Board and/ or the Chief Executive Officer, on an appropriate policy and framework for all aspects of remuneration of all Directors and senior management, including but not limited to Directors’ fees, salaries, allowances, bonuses, share options, benefits in kind and pension rights, to ensure that the level of remuneration offered by the Company is competitive and sufficient to attract, retain and motivate personnel of the required quality to manage the Company successfully.

(b) Work performed by the Remuneration Committee

The Remuneration Committee held one meeting during the Year to discuss remuneration-related matters. No Director was involved in deciding his own remuneration at the meeting of the Remuneration Committee.

(c) Attendance at the Remuneration Committee meeting

The attendance record of the committee members at this meeting is set out below:

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Number of Meeting Attended/
Committee Members Number of Meeting Held
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Independent Non-executive Directors
Leung Shu Yin, William	1/1
Lam Bing Kwan	1/1
Executive Director
Chew Fook Aun	1/1

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(4) Board commIttees (contInued)

(4.2) Audit Committee

The Board established an Audit Committee on 31 March 2000 which currently comprises two INEDs, namely Mr. Leung Shu Yin, William (Chairman) and Mr. Lam Bing Kwan, and a NED, Dr. Lam Kin Ming.

The Company has complied with Rule 3.21 of the Listing Rules, which requires that at least one of the members of the Audit Committee (which must comprise a minimum of three members and must be chaired by an INED) is an INED who possesses appropriate professional qualifications or accounting or related financial management expertise.

(a) Duties of the Audit Committee (including corporate governance functions)

While recognising corporate governance is the collective responsibility of all of its members, the Board has delegated the corporate governance functions to the members of the Audit Committee who are considered to be better positioned to provide an objective and independent guidance on governance-related matters.

On 29 March 2012, the Board formalised the governance-related policies and procedures, established on the foundations of accountability, transparency, fairness and integrity and adopted by the Group for years, into a set of corporate governance policy (“ CG Policy ”). The terms of reference of the Audit Committee were revised in line with the CG Policy and had incorporated the new corporate governance-related functions required under the CG Code effective from 1 April 2012.

In compliance with the Stock Exchange’s implementation of the revised Listing Rules relating to the risk management and internal controls for accounting periods beginning on or after 1 January 2016, the terms of reference of the Audit Committee were revised by the Board on 23 March 2016. The revised terms of reference setting out the Audit Committee’s authority, duties and responsibilities are available on the websites of the Stock Exchange and the Company.

During the Year, an independent external risk advisory firm (“ Independent Advisor ”) had been retained to conduct certain internal control reviews of the Group. The relevant reports from the Independent Advisor were presented to and reviewed by the Audit Committee and the Board.

Apart from performing the corporate governance functions, the Audit Committee is principally responsible for the monitoring of the integrity of periodical financial statements of the Company, the review of significant financial reporting judgments contained in them before submission to the Board for approval, and the review and monitoring of the auditors’ independence and objectivity as well as the effectiveness of the audit process.

The Audit Committee is also responsible to oversight the Company’s internal control and risk management systems.

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Corporate Governance Report

(4) Board commIttees (contInued)

(4.2) Audit Committee (continued)

(b) Work performed by the Audit Committee

The Audit Committee held three meetings during the Year. It has reviewed the audited results of the Company for the year ended 31 July 2015, the unaudited interim results of the Company for the six months ended 31 January 2016 and other matters related to the financial and accounting policies and practices of the Company as well as the nature and scope of the audit for the Year. Further, it has reviewed the Group’s internal audit plan and the budget for the ensuing year and put forward relevant recommendations to the Board.

On 18 October 2016, the Audit Committee reviewed the draft audited consolidated financial statements of the Company as well as the accounting principles and policies for the Year with the Company’s management in the presence of the representatives of the Independent Auditors of the Company. It also reviewed this Corporate Governance Report and the internal control review reports on the Company prepared by the Independent Advisor.

(c) Attendance at the Audit Committee meetings

The attendance record of the committee members at these meetings held during the Year is set out below:

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Number of Meetings Attended/
Committee Members Number of Meetings Held
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Independent Non-executive Directors
Leung Shu Yin, William	3/3
Lam Bing Kwan	3/3
Non-executive Director
Lam Kin Ming	3/3

(5) chaIrman and chIef executIve

The CG Code provides that the roles of the chairman and the chief executive should be separated and performed by different individuals.

During the Year and up to the date of this Report, Dr. Lam Kin Ngok, Peter is the Chairman of the Company while Mr. Chew Fook Aun and Mr. Lau Shu Yan, Julius is the Deputy Chairman and Chief Executive Officer of the Company, respectively.

(6) non-executIve dIrectors

As explained in Paragraph (1) above, none of the existing NEDs (including the INEDs) was appointed for a specific term.

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(7) nomInatIon of dIrectors

As explained in Paragraph (1) above, the Company does not establish a nomination committee. The policies (including the board diversity policy) and procedures for the selection and nomination of Directors, and arrangements for the performance of other duties of the nomination committee have also been disclosed therein.

(8) Board dIversIty PolIcy

The Company has adopted a board diversity policy (“ Policy ”) in July 2013 which sets out the approach to achieve and maintain diversity on the Board in order to enhance the effectiveness of the Board.

The Company recognises Board diversity will strengthen the Company’s strategic objectives in driving business results; enhancing good corporate governance and reputation; and attracting and retaining talent for the Board.

Board diversity ensures the Board has the appropriate balance and level of skills, experience and perspective required to support the execution of its business strategies. The Company seeks to achieve Board diversity through the consideration of a number of factors, including professional qualifications and experience, cultural and educational background, race and ethnicity, gender, age and length of service. The Company will also take into consideration factors based on its own business model and specific needs from time to time in determining the optimum composition of the Board.

On recommendation from the EDs, the Board will set measurable objectives to implement the Policy and review such objectives from time to time to ensure their appropriateness and ascertain the progress made towards achieving those objectives. The EDs will review the Policy, as appropriate, to ensure its continued effectiveness from time to time.

A copy of the Policy is published on the Company’s website for public information.

(9) securItIes transactIons By dIrectors and desIgnated emPloyees

The Company has adopted a Code of Practice for Securities Transactions by Directors and Designated Employees (“ Securities Code ”) on terms no less exacting than the required standard set out in the Model Code for Securities Transactions by Directors of Listed Issuers in Appendix 10 to the Listing Rules. The Company has made specific enquiry of all Directors and they have confirmed in writing their compliance with the required standard set out in the Securities Code during the Year.

(10) IndePendent audItors’ remuneratIon

The fees in respect of the audit and non-audit services provided to the Group by the Independent Auditors, Ernst & Young, Certified Public Accountants, (“ Ernst & Young ”) Hong Kong for the Year amounted to HK$3,508,000 and HK$1,336,300, respectively. The non-audit services mainly consist of advisory, review, tax compliance service and other reporting services.

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Corporate Governance Report

(11) dIrectors’ resPonsIBIlIty for PreParIng fInancIal statements

The Directors acknowledge that they are responsible for overseeing the preparation of the financial statements which give a true and fair view of the financial position of the Group and of the financial performance and cash flows for such reporting period. In doing so, the Directors select suitable accounting policies and apply them consistently and make accounting estimates that are appropriate in the circumstances. With the assistance of the accounting and finance staff, the Directors ensure that the financial statements of the Group are prepared in accordance with statutory requirements and appropriate financial reporting standards.

(12) IndePendent audItors’ rePortIng resPonsIBIlIty

The statement by the Independent Auditors about their reporting and auditing responsibilities for the financial statements is set out in the Independent Auditors’ Report contained in this Annual Report.

(13) Internal controls

The Board acknowledges that it is responsible for the internal control system of the Group, and an effective internal control system enhances the Group’s ability in achieving business objectives, safeguarding assets, complying with applicable laws and regulations and contributes to the effectiveness and efficiency of its operations. As such, the Group’s internal control procedures include a comprehensive budgeting, information reporting and performance monitoring system.

Since July 2006, the Board has been engaging independent advisors to conduct various agreed upon reviews over the Company’s internal control systems (normally twice a year) in order to assist the Board in reviewing the effectiveness of the internal control system of the Group. The periodic reviews have covered all material controls, including financial, operational and compliance controls and risk management functions of the Group. Relevant reports from the independent advisors were presented to and reviewed by the Audit Committee and the Board. Appropriate recommendations for further enhancing the internal control system have been taken.

(14) comPany secretary

During the Year, the company secretary of the Company (“ Company Secretary ”) has complied with the relevant training requirement under Rule 3.29 of the Listing Rules.

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(15) shareholders’ rIghts

(15.1) Procedures for Shareholders to convene a general meeting

Pursuant to the Articles of Association and the Companies Ordinance, Chapter 622 of the laws of Hong Kong (“ Companies Ordinance ”), registered Shareholders representing at least 5% of the total voting rights of all the members having a right to vote at general meetings of the Company (“ GM Requisitionists ”) can deposit a written request to convene a general meeting (“ GM ”) at the registered office of the Company (“ Registered Office ”), which is situated at the 11th Floor, Lai Sun Commercial Centre, 680 Cheung Sha Wan Road, Kowloon, Hong Kong for the attention of the Company Secretary.

The GM Requisitionists must state in their request(s) the general nature of the business to be dealt with at the GM and such request(s) must be authenticated by all the GM Requisitionists and may consist of several documents in like form.

The Company’s share registrar (“ Share Registrar ”) will verify the GM Requisitionists’ particulars in the GM Requisitionists’ request. Promptly after confirmation from the Share Registrar that the GM Requisitionists’ request is in order, the Company Secretary will arrange with the Board to convene a GM by serving sufficient notice to all the registered Shareholders in accordance with all the relevant statutory and regulatory requirements. On the contrary, if the GM Requisitionists’ request is verified not in order, the GM Requisitionists will be advised of the outcome and accordingly, a GM will not be convened as requested.

The GM Requisitionists, or any of them representing more than one-half of the total voting rights of all of them, may themselves convene a GM if within twenty-one (21) days of the deposit of the GM Requisitionists’ request, the Board does not proceed duly to convene a GM for a day not more than twenty-eight (28) days after the date on which the notice convening the GM is given, provided that any GM so convened is held within three (3) months from the date of the original GM Requisitionists’ request. Any reasonable expenses incurred by the GM Requisitionists by reason of the Board’s failure to duly convene a GM shall be repaid to the GM Requisitionists by the Company.

(15.2) Procedures for putting forward proposals at general meeting

Pursuant to Section 580 and 615 of the Companies Ordinance, either the Shareholders of the Company representing at least 2.5% of the total voting rights of all the Shareholders who have a right to vote on the resolution at the GM, or at least 50 registered Shareholders who have a right to vote on the resolution at the GM, may request the Company in writing to give to the Shareholders entitled to receive notice of the GM of any resolution which may properly be moved and is intended to be moved at that meeting; and to circulate statements regarding resolutions proposed at GM.

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Corporate Governance Report

(15) shareholders’ rIghts (contInued)

(15.2) Procedures for putting forward proposals at general meeting (continued)

The requisition (i) must be sent to the Company in hard copy form at the Registered Office stated in paragraph (15.1) above or in electronic form by email at [email protected]; (ii) must identify the resolution of which notice is to be given; (iii) must be authenticated by the person or persons making it; and (vi) (a) in the case requisition for the circulation of resolutions to be moved at GM, the requisition must be received by the Company not later than 6 weeks before the GM or (b) in the case of requisition for the circulation of statements regarding resolutions proposed at the GM, such requisition must be received by the Company not later than 7 days before the GM, or if later, the time at which notice is given of that meeting.

(15.3) Procedures for proposing a person for election as a director

As regards the procedures for proposing a person for election as a director, please refer to the procedures made available under the Corporate Governance section (Shareholders’ Right sub-section) of the Company’s website at www.laisun.com.

(15.4) Procedures for directing Shareholders’ enquiries to the Board

Shareholders may at any time send their enquiries and concerns to the Board in writing through the Company Secretary whose contact details are as follows:

11/F., Lai Sun Commercial Centre 680 Cheung Sha Wan Road Kowloon, Hong Kong

Fax: (852) 2743 8459 Email: [email protected]

Shareholders may also make enquiries with the Board at the GM of the Company.

(16) communIcatIon WIth shareholders

(16.1) Shareholders’ Communication Policy

On 29 March 2012, the Board adopted a Shareholders’ Communication Policy reflecting mostly the current practices of the Company for communication with its Shareholders. Such policy aims at providing the Shareholders and potential investors with ready and timely access to balanced and understandable information of the Company. However, it will be reviewed regularly to ensure its effectiveness and compliance with the prevailing regulatory and other requirements.

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(16) communIcatIon WIth shareholders (contInued)

(16.1) Shareholders’ Communication Policy (continued)

The Company has established a number of channels for maintaining an on-going dialogue with its Shareholders as follows:

(i) corporate communications such as annual reports, interim reports and circulars are issued in printed form and are available on the Stock Exchange’s website at www.hkex.com.hk and the Company’s website at www.laisun.com;
(ii) financial highlights, press releases and results roadshows presentations are also posted on the Company’s website;
(iii) periodic announcements are made through the Stock Exchange and published on the respective websites of the Stock Exchange and the Company;
(iv) corporate information and the Articles of Association of the Company are made available on the Company’s website and the latter is also posted on the website of the Stock Exchange;
(v) participate in roadshows and investors’ conferences to meet Shareholders/investors, media and financial analysts;
(vi) AGMs and/or GMs provide a forum for the Shareholders to make comments and exchange views with the Directors and senior management; and
(vii) the Share Registrar serves the Shareholders in respect of share registration, dividend payment, change of Shareholders’ particulars and related matters.

(16.2) Directors’ attendance at general meeting

During the Year, the Company had held one general meeting (that is, the 2015 AGM) and the attendance record of individual Directors at the meeting is set out below:

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

Number of Meeting Attended/
Directors Number of Meeting Held
----- End of picture text -----

Executive Directors
Lam Kin Ngok, Peter, GBS_(Chairman)_	0/1
Chew Fook Aun_(Deputy Chairman)_	1/1
Lau Shu Yan, Julius_(Chief Executive Ofcer)_	1/1
Lam Hau Yin, Lester	0/1
Non-executive Directors
Lam Kin Ming	0/1
U Po Chu	0/1
Independent Non-executive Directors
Ip Shu Kwan, Stephen, GBS, JP	1/1
Lam Bing Kwan	1/1
Leung Shu Yin, William	1/1

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Corporate Governance Report

(16) communIcatIon WIth shareholders (contInued)

(16.3) Details of the Shareholders’ general meeting

The last AGM was held at 11:00 a.m. on 11 December 2015 at Harbour View Rooms I & II, 3rd Floor, The Excelsior, Hong Kong, 281 Gloucester Road, Causeway Bay, Hong Kong (“ 2015 AGM ”). At the 2015 AGM, Shareholders approved by a vast majority of votes (i) the adoption of the audited financial statements of the Company for the year ended 31 July 2015 and the reports of the directors and the independent auditors thereon; (ii) the declaration of a final dividend; (iii) the election of Dr. Lam Kin Ngok, Peter, Mr. Chew Fook Aun and Mr. Lam Hau Yin, Lester as EDs; (iv) the authorisation for the Board to fix the remuneration of the Directors; (v) the appointment of Ernst & Young as the Independent Auditors for the Year and the authorisation for the Board to fix their remuneration; (vi) the granting to the Directors a general mandate to buy back the Company’s shares not exceeding 10% of the aggregate number of the issued shares of the Company; (vii) the granting to the Directors a general mandate to issue, allot and deal with additional shares of the Company of not exceeding 20% of the aggregate number of the issued shares; (viii) the extension to the general mandate granted to the Directors to issue share of the Company by adding the number of bought back; and (ix) the adoption of the new Share Option Scheme and the termination of the then Existing Share Option Scheme of the Company. The notice of the 2015 AGM and the poll results announcement in respect of the 2015 AGM were published on the websites of both the Stock Exchange and the Company on 12 November 2015 and 11 December 2015, respectively.

(17) Investor relatIons

To ensure our investors have a better understanding of the Company, our management engages in a pro-active investor relations programme. Our EDs and Investor Relations Department communicate with research analysts and institutional investors on an on-going basis and meet with research analysts and the press after our results announcements, attend major investors’ conferences and participate in international non-deal roadshows to communicate the Company’s financial performance and global business strategy.

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(17) Investor relatIons (contInued)

During the Year, the Company has met with a number of research analysts and investors, attended conferences as well as non-deal roadshows as follows:

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Month Event Organiser Location
----- End of picture text -----

October 2015	Post results non-deal roadshow	BNP	Hong Kong
October 2015	Post results non-deal roadshow	DBS	New York/
			Philadelphia/
			Boston/
			San Francisco
October 2015	Post results non-deal roadshow	Daiwa	Paris/Basel/Zurich/
			London
November 2015	Post results non-deal roadshow	BNP	Singapore
January 2016	DBS Vickers Pulse of Asia Conference	DBS	Singapore
January 2016	Asia Pacifc Financial,	BNP	Hong Kong
	Property & Logistics Conference
January 2016	The Sixth Hong Kong Corporate Summit	Daiwa	Hong Kong
March 2016	Post results non-deal roadshow	DBS	Hong Kong
April 2016	Post results non-deal roadshow	DBS	Singapore
April 2016	Post results non-deal roadshow	Daiwa	London
April 2016	Post results non-deal roadshow	Daiwa	New York/
			Los Angeles/
			San Diego/
			San Francisco

During the Year under review, the Company also had research reports published as follows:

Firm	Analyst	Publication Date
Quam	Johnson CHEUNG	6 May 2016

The Company is keen on promoting investor relations and enhancing communication with the Shareholders and potential investors. It welcomes suggestions from investors, stakeholders and the public who may contact the Investor Relations Department by phone on (852) 2853 6116 during normal business hours, by fax at (852) 2853 6651 or by e-mail at [email protected].

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Biographical Details of Directors

executIve dIrectors

Each of the executive directors of the Company (“ Executive Directors ”) named below holds directorships in a number of subsidiaries of the Company and all of them hold directorships in all or certain of the Company’s listed affiliates, namely Lai Sun Garment (International) Limited (“ LSG ”), eSun Holdings Limited (“ eSun ”), Lai Fung Holdings Limited (“ Lai Fung ”) and Media Asia Group Holdings Limited (“ MAGH ”). The issued shares of LSG, eSun and Lai Fung are listed and traded on the Main Board of The Stock Exchange of Hong Kong Limited (“ Stock Exchange ”) and MAGH’s issued shares are listed and traded on the Growth Enterprise Market of the Stock Exchange. LSG is the ultimate holding company of the Company which in turn is the controlling shareholder of eSun, while eSun is the ultimate holding company of Lai Fung and MAGH.

Dr. Lam Kin Ngok, Peter , Chairman, aged 59, has been an Executive Director since June 1977 and is presently a member of the Executive Committee of the Company. He is also the deputy chairman and executive director of LSG and an executive director of Crocodile Garments Limited (“ CGL ”), a company listed on the Main Board of the Stock Exchange as well as the chairman and an executive director of MAGH. Dr. Lam was an executive director of eSun from 15 October 1996 to 13 February 2014. Dr. Lam was the chairman and an executive director of Lai Fung from 25 November 1993 to 31 October 2012. Dr. Lam has extensive experience in the property development and investment business, hospitality and media and entertainment business. He was conferred an Honorary Doctorate by The Hong Kong Academy for Performing Arts in June 2011. Dr. Lam received the Gold Bauhinia Star award from the Government of the HKSAR on 1 July 2015.

Currently, Dr. Lam is the chairman of the Hong Kong Tourism Board and an ex officio member of the Hong Kong Trade Development Council. He is also a member of the 12th National Committee of the Chinese People’s Political Consultative Conference and the vice chairman of the Committee for Liaison with Hong Kong, Macau, Taiwan and Overseas Chinese. In addition, Dr. Lam is chairman of Hong Kong Chamber of Films Limited, honorary chairman of Hong Kong Motion Picture Industry Association Limited, a director of The Real Estate Developers Association of Hong Kong, a trustee of The Better Hong Kong Foundation, a member of Friends of Hong Kong Association Limited, a director of Hong Kong-Vietnam Chamber of Commerce Limited and a non-official member of the Lantau Development Advisory Committee. On 24 July 2015, Dr. Lam was appointed a member of Aviation Development and Three-runway System Advisory Committee for a term of two years from 1 August 2015 to 31 July 2017. Dr. Lam was appointed an honorary chairman of Federation of HK Jiangsu Community Organisations on 20 May 2015 and the chairman of Hong Kong Cultural Development Research Institute Limited on May 2015. Dr. Lam was a non-official member of the Consultative Committee on Economic and Trade Co-operation between Hong Kong and the Mainland from 7 October 2013 to 6 October 2015.

Dr. Lam is the son of Madam U Po Chu (a Non-executive Director of the Company), the younger brother of Dr. Lam Kin Ming (a Non-executive Director of the Company) and the father of Mr. Lam Hau Yin, Lester (an Executive Director of the Company).

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executIve dIrectors (contInued)

Mr. Chew Fook Aun , aged 54, was appointed the Deputy Chairman and an Executive Director on 5 June 2012 and is presently a member of the Executive Committee and Remuneration Committee. He was also appointed a deputy chairman and an executive director of LSG, an executive director of eSun and the chairman and an executive director of Lai Fung.

Mr. Chew has over 30 years of experience in accounting, auditing and finance in the United Kingdom (“ UK ”) and Hong Kong. He graduated from the London School of Economics and Political Science of the University of London in the UK with a Bachelor of Science (Economics) Degree. Mr. Chew is a fellow member of both the Hong Kong Institute of Certified Public Accountants (“ HKICPA ”) and The Institute of Chartered Accountants in England and Wales. He was also a council member of the HKICPA and its vice president in 2010. Mr. Chew is currently a member of the Operations Review Committee of the Independent Commission Against Corruption (“ ICAC ”) and a member of the Barristers Disciplinary Tribunal Panel, both being organisations established in Hong Kong. He was a member of the Advisory Committee of the Securities and Futures Commission, the Corruption Prevention Advisory Committee of the ICAC, the Standing Committee on Company Law Reform of the Companies Registry and a council member of the Financial Reporting Council.

Prior to joining the Lai Sun Group, Mr. Chew was an executive director and the group chief financial officer of Esprit Holdings Limited (“ Esprit ”) from 1 February 2009 to 1 May 2012, an executive director and the chief financial officer of The Link Management Limited acting as manager of The Link Real Estate Investment Trust (“ Link REIT ”) from February 2007 to January 2009. He was also the chief financial officer of Kerry Properties Limited (“ Kerry Properties ”) from 1996 to 2004, a director of corporate finance for Kerry Holdings Limited from 1998 to 2004 and an executive director of Kyard Limited in charge of the property portfolio of a private family office from 2004 to 2007. The issued shares of Esprit and Kerry Properties and the issued units of the Link REIT are listed and traded on the Stock Exchange.

Mr. Lau Shu Yan, Julius , Chief Executive Officer, aged 60, joined the Company as an Executive Director in July 1991 and is a member of the Executive Committee of the Company. Mr. Lau was an executive director of Lai Fung from 22 April 2005 to 16 January 2015. Prior to joining the Lai Sun Group, he was a director of Jones Lang Wootton Limited and subsequently Jardine Fleming Broking Limited. Mr. Lau is a director and a member of the Executive Committee of The Real Estate Developers Association of Hong Kong. Mr. Lau was graduated with an honour degree of Bachelor of Social Science from the University of Hong Kong in 1980.

Mr. Lam Hau Yin, Lester , aged 35, was appointed an Executive Director and a member of the Executive Committee of the Company with effect from 1 November 2012. He is also an executive director of LSG and eSun as well as an executive director and the chief executive officer of Lai Fung. Further, Mr. Lam is an alternate director to Madam U Po Chu in her capacity as an executive director of LSG.

Mr. Lam holds a Bachelor of Science in Business Administration degree from Northeastern University, Boston, the United States of America and has completed the Kellogg — HKUST Executive MBA programme in July 2016. He joined the Company as a vice president in January 2004 and has acquired working experience since 1999 in various companies engaged in securities investment, hotel operations, environmental products, entertainment and property development and investment.

Mr. Lam is a son of Dr. Lam Kin Ngok, Peter (Chairman and an Executive Director of the Company), a nephew of Dr. Lam Kin Ming (a Non-executive Director of the Company) and a grandson of Madam U Po Chu (a Non-executive Director of the Company).

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Biographical Details of Directors

non-executIve dIrectors

Dr. Lam Kin Ming , aged 79, has been a Director of the Company since June 1959 and is presently a member of the Audit Committee. He is also the chairman and an executive director of LSG, the deputy chairman and an executive director of Lai Fung and the chairman, the chief executive officer and an executive director of CGL. The issued shares of LSG, Lai Fung and CGL are listed and traded on the Main Board of the Stock Exchange. LSG is the ultimate holding company of the Company. Dr. Lam has extensive experience in property development and investment and has been involved in the management of garment business since 1958. He received an Honorary Doctorate Degree from the International American University in the United States of America in 2009 and was admitted as Honorary Doctorate of Management of the Lincoln University in the United States of America in February 2014.

He is the elder brother of Dr. Lam Kin Ngok, Peter (Chairman and an Executive Director of the Company) and an uncle of Mr. Lam Hau Yin, Lester (an Executive Director of the Company).

Madam U Po Chu , aged 91, has been a Director of the Company since December 1993. She is also a non-executive director of eSun and an executive director of Lai Fung. Further, Madam U has been re-designated as an executive director of LSG with effect from 27 November 2012. The issued shares of LSG, eSun and Lai Fung are listed and traded on the Main Board of the Stock Exchange. LSG is the ultimate holding company of the Company while the Company is the controlling shareholder of eSun which in turn is the ultimate holding company of Lai Fung.

Madam U has over 55 years’ experience in the garment manufacturing business and had been involved in the printing business since the mid-1960’s. She started to expand the business to fabric bleaching and dyeing in the early 1970’s and became involved in property development and investment in the late 1980’s.

She is the mother of Dr. Lam Kin Ngok, Peter (Chairman and Executive Director of the Company) and the grandmother of Mr. Lam Hau Yin, Lester (an Executive Director of the Company).

Madam U does not have a service contract with the Company. However, in accordance with the provisions of the articles of association of the Company (“ Articles of Association ”), she will be subject to retirement from office as director by rotation once every three years if re-elected at the forthcoming annual general meeting of the Company (“ AGM ”) and will also be eligible for re-election at future AGMs. Madam U presently receives an annual director’s fee of HK$250,000 and is entitled to receive such other remuneration and discretionary bonus as may be determined by the Board from time to time with reference to the performance of the Company, her duties and responsibilities with the Company as well as prevailing market practice.

As at the date of this annual report, Madam U is interested or deemed to be interested within the meaning of Part XV of the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong (“ SFO ”) in 4,127,625 shares in LSG and 1,345,974 Shares in the Company. Save as disclosed herein, Madam U does not hold any interest or short position in the shares, underlying shares and/or debentures of the Company or any of its associated corporations within the meaning of Part XV of the SFO.

For the purpose of her re-election as a director of the Company at the forthcoming AGM in accordance with Article 102 of the Articles of Association, save as disclosed above, there are no other matters which need to be brought to the attention of the shareholders of the Company, and there is no information which is discloseable pursuant to any of the requirements of Rule 13.51(2) of the Listing Rules.

Please also refer to the Note at the end of this section of “Biographical Details of Directors”.

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IndePendent non-executIve dIrectors

Mr. Lam Bing Kwan , aged 66, was appointed an Independent Non-Executive Director in July 2002 and is a member of both the Audit Committee and the Remuneration Committee of the Company. Mr. Lam graduated from the University of Oregon in the United States of America with a Bachelor of Business Administration degree in 1974. He has substantial experience in the property development and investment in China, having been actively involved in this industry since the mid-1980’s. Mr. Lam has served on the boards of directors of a number of listed companies in Hong Kong for over 10 years and is currently a non-executive director of Sino-i Technology Limited and Nan Hai Corporation Limited and an independent non-executive director of LSG, Lai Fung and eForce Holdings Limited. The issued shares of all the aforesaid companies are listed and traded on the Main Board of the Stock Exchange. LSG is the ultimate holding company of the Company.

Mr. Leung Shu Yin, William , aged 67, was appointed an Independent Non-Executive Director in September 2004 and is the chairman of both the Remuneration Committee and the Audit Committee of the Company. Mr. Leung is a certified public accountant, a member of the Hong Kong Securities and Investment Institute and a fellow of both the Association of Chartered Certified Accountants in the United Kingdom and the Hong Kong Institute of Certified Public Accountants. He is a practising director of two certified public accountants’ firms in Hong Kong and is also an independent non-executive director of LSG, CGL and Mainland Headwear Holdings Limited. The issued shares of all the aforesaid companies are listed and traded on the Main Board of the Stock Exchange. LSG is the ultimate holding company of the Company.

Mr. Ip Shu Kwan, Stephen , aged 65, was appointed an Independent Non-Executive Director of the Company in December 2009. Mr. Ip graduated from the University of Hong Kong with a Bachelor degree in Social Sciences in 1973. He joined the Hong Kong Government in November 1973 and was promoted to the rank of Director of Bureau in April 1997. He worked in the Government of the Hong Kong Special Administrative Region (“ HKSAR ”) as a Principal Official from July 1997 to June 2007. Senior positions held by Mr. Ip in the past included Commissioner of Insurance, Commissioner for Labour, Secretary for Economic Services and Secretary for Financial Services. Mr. Ip took up the position of Secretary for Economic Development and Labour on 1 July 2002. His portfolio in respect of economic development covered air and sea transport, logistics development, tourism, energy, postal services, meteorological services, competition and consumer protection. He was also responsible for labour policies including matters relating to employment services, labour relations and employees’ rights. Mr. Ip retired from the Government of the HKSAR in July 2007. Mr. Ip received the Gold Bauhinia Star award from the Government of the HKSAR in 2001 and is an unofficial Justice of the Peace.

Mr. Ip is currently an independent non-executive director of four other publicly-listed companies, namely Synergis Holdings Limited, China Resources Cement Holdings Limited, Kingboard Laminates Holdings Limited and Luk Fook Holdings (International) Limited. The issued shares of all the aforesaid companies are listed and traded on the Main Board of the Stock Exchange. He was formerly an independent non-executive director of Goldpoly New Energy Holdings Limited (now known as United Photovoltaics Group Limited), Milan Station Holdings Limited, PICC Property and Casualty Company Limited, Viva China Holdings Limited and Yangtze China Investment Limited.

Mr. Ip does not have a service contract with the Company. However, in accordance with the provisions of the Articles of Association, he will be subject to retirement from office as director by rotation once every three years if re-elected at the forthcoming AGM and will also be eligible for re-election at future AGMs. Mr. Ip presently receives an annual director’s fee of HK$300,000 and is entitled to receive such other remuneration and discretionary bonus as may be determined by the Board from time to time with reference to the performance of the Company, his duties and responsibilities with the Company as well as prevailing market practice.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Biographical Details of Directors

IndePendent non-executIve dIrectors (contInued)

As at the date of this annual report, Mr. Ip does not have any interests or short positions in the shares, underlying shares and/or debentures of the Company or any of its associated corporations within the meaning of Part XV of the SFO.

For the purpose of his re-election as a director of the Company at the forthcoming AGM in accordance with Article 102 of the Articles of Association, save as disclosed above, there are no other matters which need to be brought to the attention of the shareholders of the Company, and there is no information which is discloseable pursuant to any of the requirements of Rule 13.51(2) of the Listing Rules.

Please also refer to the Note at the end of this section of “Biographical Details of Directors”.

Note:

Madam U Po Chu and Mr. Ip Shu Kwan, Stephen (“ Retiring Directors ”) will retire as directors at the forthcoming AGM. Being eligible, they offer themselves for re-election. For the purpose of each of the Retiring Directors’ re-election, save as disclosed above, there are no other matters which need to be brought to the attention of the shareholders of the Company, and there is no information which is discloseable pursuant to any of the requirements of Rule 13.51(2) of the Rules Governing the Listing of Securities on the Stock Exchange.

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Report of the Directors

The directors of the Company (“ Directors ”) present their report and the audited financial statements of the Company and its subsidiaries (“ Group ”) for the year ended 31 July 2016 (“ Year ”).

PrIncIPal actIvItIes

During the Year, the Group’s principal activities have not changed and the Group focused on property development, property investment, investment in and operation of hotels and restaurants and investment holding.

results and dIvIdends

Details of the consolidated profit of the Company for the Year and the state of affairs of the Company and of the Group as at 31 July 2016 are set out in the consolidated financial statements and their accompanying notes on pages 71 to 163.

No interim dividend was paid or declared in respect of the Year (2015: Nil).

The Directors have resolved to recommend the payment of a final dividend of HK$0.0019 per share (2015: HK$0.0025 per share), amounting to HK$57,302,000 (2015: HK$50,236,000) for the financial year ended 31 July 2016 to shareholders of the Company (“ Shareholders ”) whose names appear on the Register of Members of the Company on Friday, 23 December 2016 subject to the approval of Shareholders at the forthcoming Annual General Meeting to be held on Friday, 16 December 2016 (“ AGM ”).

The Directors propose that Shareholders be given the option to receive the final dividend in new shares in lieu of cash. The scrip dividend proposal is subject to: (1) the approval of the proposed final dividend at the AGM; and (2) The Stock Exchange of Hong Kong Limited (“ Stock Exchange ”) granting the listing of and permission to deal in the new shares to be issued pursuant to the scrip dividend proposal.

A circular containing details of the scrip dividend proposal will be despatched to Shareholders together with the form of election for scrip dividend on or about Wednesday, 4 January 2017. It is expected that the final dividend warrants and share certificates for the scrip dividend will be despatched to Shareholders on or about Friday, 27 January 2017.

BusIness revIeW

A review of the business of the Group during the Year and a discussion on the Group’s future business development, possible risks and uncertainties that the Group may be facing are provided in the Chairman’s Statement on pages 4 to 10 and Management Discussion and Analysis on pages 13 to 25 of this Annual Report.

The financial risk management objectives and policies of the Group are shown in note 37 to the financial statements.

An analysis of the Group’s performance during the Year using financial key performance indicators is provided in the Chairman’s Statement on pages 4 to 10 and Financial Highlights on pages 11 to 12 of this Annual Report.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Report of the Directors

BusIness revIeW (contInued)

Discussions on the Group’s environmental policies, relationships with its key stakeholders and compliance with relevant laws and regulations which have a significant impact on the Group are contained in the Corporate Social Responsibility Report on pages 30 and 31 of this Annual Report.

dIstrIButaBle reserves

The Company’s reserves available for distribution to shareholders as at 31 July 2016 were approximately HK$1,337,719,000.

shares Issued In the year

Details of the ordinary shares issued by the Company in the Year are set out in note 29 to the financial statements. The ordinary shares issued during the Year were resulting from a rights issue and in lieu of cash dividends.

PermItted IndemnIty ProvIsIon

Pursuant to the Company’s Articles of Association, every Director shall be entitled to be indemnified out of the assets of the Company against all loss or liabilities (to the fullest extent permitted by the Companies Ordinance (Chapter 622)) which he/she may sustain or incur in or about the execution of the duties of his/her office or otherwise in relation thereto. The Company has arranged appropriate directors’ and officers’ liability insurance coverage for the Directors and officers of the Group.

dIrectors

The Directors who were in office during the Year and those as at the date of this Report are named as follows:

Executive Directors (“EDs”)

Lam Kin Ngok, Peter, GBS (“ Dr. Peter Lam ”) (Chairman) Chew Fook Aun (“ Mr. FA Chew ”) (Deputy Chairman) Lau Shu Yan, Julius (Chief Executive Officer) Lam Hau Yin, Lester (“ Mr. Lester Lam ”)

Non-executive Directors (“NEDs”)

Lam Kin Ming (“ Dr. KM Lam ”) U Po Chu (“ Madam U ”)

Independent Non-executive Directors (“INEDs”)

Ip Shu Kwan, Stephen, GBS, JP (“ Mr. Stephen Ip ”) Lam Bing Kwan Leung Shu Yin, William

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dIrectors (contInued)

In accordance with Article 102 of the Articles of Association of the Company (“ Articles of Association ”) and pursuant to Appendix 14 to the Rules Governing the Listing of Securities on the Stock Exchange (“ Listing Rules ”), Madam U and Mr. Stephen Ip (“ Retiring Directors ”) will retire by rotation at the forthcoming AGM. Being eligible, they offer themselves for re-election.

Details of the Retiring Directors proposed for re-election required to be disclosed under Rule 13.51(2) of the Listing Rules are set out in the section headed “Biographical Details of Directors” of this Annual Report and the section headed “Directors’ Interests” of this Report below.

During the Year and up to the date of this Report, each of the Directors named above holds directorship in all or certain of the Company’s subsidiaries. Other directors of the Company’s subsidiaries include Lui Siu Tsuen, Richard, Yip Chai Tuck, Lau Lawrence Tak Sun, Li Wah Chung, Allan, Poon Yui Man, Chan Ying Keung, Yuen Kam Sang, Danilo Nicoletti, Tse Kam Yiu, Lawrence, Alexander Wong, Ho Wing Yi, Poon Ching Fung, Jason, Tse See Fan, Paul, Lo Tai On, Koo Ching Fan, Nguyen Anh Tuan, Tran Hung Viet, Nguyen Dong Hoa and Ang Hooi Yeong, Pauline.

BIograPhIcal detaIls of dIrectors

Brief biographical particulars of the existing Directors are set out on pages 46 to 50 of this Annual Report. Directors’ other particulars are contained in this Report and elsewhere in this Annual Report.

dIrectors’ servIce contracts

None of the Directors proposed for re-election at the forthcoming AGM has an unexpired service contract with the Company, its holding company, or any of its subsidiaries or fellow subsidiaries, which is not determinable by the employing company within one year without payment of compensation, other than statutory compensation.

dIrectors’ Interests In transactIons, arrangements or contracts

Save as disclosed in note 5 to the financial statements headed “Related Party Transactions” and the section headed “Continuing Connected Transactions/Connected Transactions” of this Report below, no Director had a material interest, whether directly or indirectly, in any contract of significance to the business of the Group to which the Company, its holding company, or any of its subsidiaries or fellow subsidiaries was a party during the Year.

controllIng shareholder’s Interests In sIgnIfIcant contracts

Save as disclosed in note 5 to the financial statements headed “Related Party Transactions” and the section headed “Continuing Connected Transactions/Connected Transactions” of this Report below, at no time during the Year had the Company or any of its subsidiaries, and the controlling shareholder (as defined in the Listing Rules) or any of its subsidiaries entered into any contract of significance or any contract of significance for the provision of services by the controlling shareholder or any of its subsidiaries to the Company or any of its subsidiaries.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Report of the Directors

contInuIng connected transactIons/connected transactIons

The Company has certain continuing connected transactions (“ CCTs ”) or connected transactions (“ CTs ”) (as defined in the Listing Rules) during the Year, brief particulars of which are as follows:–

Offer to Lease

As reported in the annual report of the Company for the year ended 31 July 2015, the Company announced on 2 December 2013, that Winfield Properties Limited (“ Winfield Properties ”), a wholly-owned subsidiary of the Company, as tenant entered into an Offer to Lease on 30 November 2013 (“ Offer to Lease ”) with Mass Energy Limited (“ Mass Energy ”) as landlord for the lease of the car-parking spaces (“ Carpark ”) of Crocodile Center, 79 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong, for a term of 24 months from 1 December 2013 to 30 November 2015 at a basic rent of HK$140,000 per month or at a turnover rent being the amount of 52% of the monthly turnover of Winfield Properties’ business carried on at the Carpark, whichever is higher.

The cap amount for the period from 1 December 2013 to 31 July 2014, for the financial year ended 31 July 2015 and for the period from 1 August 2015 to 30 November 2015 had been determined at HK$1,952,000, HK$3,072,000 and HK$1,076,000, respectively.

Mass Energy is owned as to 50% each by Lai Sun Garment (International) Limited (“ LSG ”) and Crocodile Garments Limited (“ CGL ”). LSG is the ultimate holding company of the Company and CGL is a connected person of the Company. Mass Energy is, therefore, an associate of the connected persons of the Company and the Offer to Lease constituted CCT of the Company under the Listing Rules.

There have been no changes to the rent or terms of the Offer to Lease mentioned above.

Ernst & Young, Certified Public Accountants (“ Ernst & Young ”), the Company’s independent auditors, were engaged to report on the Group’s CCT in accordance with Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” and with reference to Practice Note 740 “Auditor’s Letter on Continuing Connected Transactions under the Listing Rules” issued by the Hong Kong Institute of Certified Public Accountants. Ernst & Young have issued a letter to the Board (with a copy provided to the Stock Exchange) in accordance with Rule 14A.56 of the Listing Rules and confirming that nothing has come to their attention that causes them to believe that the CCT:

(i) has not been approved by the Board;
(ii) was not entered into in accordance with the relevant agreement governing the transactions; and
(iii) has exceeded the cap.

In addition, during the Year, there were sharing of corporate salaries and administrative expenses on a cost basis allocated from and to LSG. These CCTs are exempt from announcement, reporting and independent shareholders’ approval requirements pursuant to Rule 14A.98 of the Listing Rules.

Subsequent to the change in Listing Rules in July 2014, the de minimus threshold applies and no disclosure is required in connection with the captioned CCT.

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contInuIng connected transactIons/connected transactIons (contInued)

Underwriting Agreement

As announced by the Company and LSG in the joint announcement dated 17 November 2015 and the circular of the Company dated 18 January 2016, the Company and LSG entered into the Underwriting Agreement dated 17 November 2015 in relation to the Company’s 1 for 2 rights issue, whereby LSG has underwritten to subscribe the untaken shares.

As LSG is the controlling shareholder of the Company and a connected person of the Company for the purposes of the Listing Rules, the Underwriting Agreement therefore represents a CT of the Company. Subscription by LSG for the underwritten shares is exempt from shareholders’ approval, annual review and all disclosure requirements under Rule 14A.92 (2) of the Listing Rules.

The CCT/CT listed above have been reviewed by the INEDs who have confirmed that the transactions had been entered into:

(a) in the ordinary and usual course of business of the Group;
(b) on normal commercial terms or better; and
(c) according to the agreements governing them on terms that are fair and reasonable and in the interests of the shareholders of the Company as a whole.

dIrectors’ Interests In comPetIng BusInesses

During the Year and up to the date of this Report, the following Directors are considered to have interests in the businesses which compete or are likely to compete, either directly or indirectly, with the businesses of the Group pursuant to the Listing Rules.

Dr. Peter Lam, Mr. FA Chew, Dr. KM Lam, Madam U and Mr. Lester Lam (“ Interested Directors ”) held shareholding interests and/or directorships in companies/entities engaged in the businesses of property investment and development in Hong Kong including CGL.

Dr. Peter Lam held shareholding or other interests and/or directorships in companies or entities engaged in the business of investment in and operation of restaurants in Hong Kong.

Dr. KM Lam held shareholding or other interests and/or directorships in companies or entities engaged in the production of pop concerts, music production and distribution and management of artistes.

The Directors do not consider the interests held by the Interested Directors to be competing in practice with the relevant business of the Group in view of:

(1) different locations and different uses of the properties owned by the above companies and those of the Group; and
(2) different target customers of the restaurant operations as well as the concerts and albums of the above companies and those of the Group.

However, the Board is independent from the boards of directors/governing committees of the aforesaid companies/entities and none of the Interested Directors can personally control the Board. Further, each of the Interested Directors is fully aware of, and has been discharging his/her fiduciary duty to the Company and has acted and will continue to act in the best interest of the Company and its shareholders as a whole. Therefore, the Group is capable of carrying on its businesses independently of, and at arm’s length from, the businesses of such companies/entities.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Report of the Directors

share oPtIon scheme

At the annual general meeting of the Company held on 11 December 2015, the shareholders of the Company approved the adoption of a new share option scheme (“ New Scheme ”). The share option scheme adopted by the Company on 22 December 2006 (“ Old Scheme ”) terminated when the New Scheme became effective on 23 December 2015 (“ Effective Date ”). No more options will be granted under the Old Scheme but the subsisting options granted prior to its termination will continue to be valid and exercisable in accordance with the terms of the Old Scheme.

The purpose of the New Share Option Scheme is to recognize the contribution or future contribution of the Eligible Participant (as defined in the Scheme) including any employee, any director, officer or consultant and any other group or classes of participants for their contribution to the Group by granting Options to them as incentives or rewards and to attract, retain or motivate Eligible Participants in line with the performance goals of the Relevant Companies (as defined in the Scheme) including any member of the Group or of an affiliated group with the Company. Unless otherwise altered or terminated, the New Scheme will be valid and effective for a period of 10 years commencing on the Effective Date.

During the year ended 31 July 2016, there were 15,000,000 options granted to eligible employees under the New Scheme out of which 3,000,000 options lapsed. Apart from that mentioned above and listed below, no options were granted, exercised, cancelled or lapsed in accordance with the terms of the schemes during the year ended 31 July 2016. Particulars of the outstanding options at the beginning and at the end of the financial period are as follows:

	Number of underlying shares comprised in share options *Adjusted** number of Adjusted underlying exercise shares price of*
Name and category of participant Directors Lam Kin Ngok, Peter Chew Fook Aun Lau Shu Yan, Julius Lam Hau Yin, Lester Other employees Other employees Other employees Other employees	Exercise price comprised in share options Outstanding Granted of share share options per share Exercised Lapsed Outstanding Exercisable Date of at during options HK$ after the after the during during at period of grant of options 01/08/2015 the Year per share Rights Issue Rights Issue the Year the Year 31/07/2016 share options HK$ 18/01/2013 20,062,893 — 0.335 20,865,408 0.322 — — 20,865,408 18/01/2013 - 17/01/2023 05/06/2012 200,628,932 — 0.112 208,654,089 0.107 — — 208,654,089 05/06/2012 - 04/06/2022 18/01/2013 100,314,466 — 0.335 104,327,044 0.322 — — 104,327,044 18/01/2013 - 17/01/2023 18/01/2013 200,628,932 — 0.335 208,654,089 0.322 — — 208,654,089 18/01/2013 - 17/01/2023 18/01/2013 177,188,680 — 0.335 184,276,227 0.322 — — 184,276,227 18/01/2013 - 17/01/2023 26/07/2013 4,000,000 — 0.235 4,160,000 0.225 — — 4,160,000 26/07/2013 - 25/07/2023 21/01/2015 11,000,000 — 0.174 11,440,000 0.167 — — 11,440,000 21/01/2015 - 20/01/2025 22/01/2016 — 15,000,000 0.094 — — — 3,000,000 12,000,000 22/01/2016 - 21/01/2026
Total:	713,823,903 15,000,000 — 742,376,857 — — 3,000,000 754,376,857

Number of underlying shares comprised in share options
Adjusted*
number of
Adjusted
underlying
exercise
shares
price of*

Name and
category of
participant
Directors
Lam Kin Ngok, Peter
Chew Fook Aun
Lau Shu Yan, Julius
Lam Hau Yin, Lester
Other employees
Other employees
Other employees
Other employees

Exercise price comprised in share options
Outstanding
Granted
of share share options
per share
Exercised
Lapsed Outstanding
Exercisable
Date of
at
during options HK$
after the
after the
during
during
at
period of
grant of options
01/08/2015
the Year
per share
Rights Issue
Rights Issue
the Year
the Year
31/07/2016
share options
HK$ 18/01/2013
20,062,893
—
0.335
20,865,408
0.322
—
—
20,865,408
18/01/2013 -
17/01/2023
05/06/2012
200,628,932
—
0.112
208,654,089
0.107
—
—
208,654,089
05/06/2012 -
04/06/2022
18/01/2013
100,314,466
—
0.335
104,327,044
0.322
—
—
104,327,044
18/01/2013 -
17/01/2023
18/01/2013
200,628,932
—
0.335
208,654,089
0.322
—
—
208,654,089
18/01/2013 -
17/01/2023
18/01/2013
177,188,680
—
0.335
184,276,227
0.322
—
—
184,276,227
18/01/2013 -
17/01/2023
26/07/2013
4,000,000
—
0.235
4,160,000
0.225
—
—
4,160,000
26/07/2013 -
25/07/2023
21/01/2015
11,000,000
—
0.174
11,440,000
0.167
—
—
11,440,000
21/01/2015 -
20/01/2025
22/01/2016
—
15,000,000
0.094
—
—
—
3,000,000
12,000,000
22/01/2016 -
21/01/2026

Total:

713,823,903
15,000,000
—
742,376,857
—
—
3,000,000
754,376,857

* Note:

On 17 February 2016, the exercise price of and the number of shares entitled to be subscribed for under the outstanding share options granted under the Old Scheme have been adjusted following the completion of the Rights Issue.

Details of the Share Option Scheme are set out in note 30 to the financial statements.

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dIrectors’ Interests

The following Directors and the chief executive of the Company who held office on 31 July 2016 and their respective close associates (as defined in the Listing Rules) were interested or were deemed to be interested in the following interests or short positions in the shares, underlying shares and debentures of the Company or any of its associated corporations (within the meaning of the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong (“ SFO ”)) on that date (a) as required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions, if any, which they were taken or deemed to have under such provisions of the SFO); or (b) as recorded in the register required to be kept by the Company pursuant to section 352 of the SFO (“ Register of Directors and Chief Executive ”); or (c) as otherwise notified to the Company and the Stock Exchange pursuant to the Code of Practice for Securities Transactions by Directors and Designated Employees adopted by the Company (“ Securities Code ”); or (d) as known by the Directors:

(1) The Company

Long positions in the ordinary shares of the Company (“Shares”) and the underlying Shares

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

Approximate
% of total
interests to
Name of Personal Family Corporate Other Total total issued
Director Capacity interests interests interests interests interests shares
----- End of picture text -----

Lam Kin Ngok, Peter	Benefcial	21,461,617	Nil	18,676,828,782	20,865,408	18,719,155,807	62.07%
	owner/	(Note 1)		(Note 1)	(Note 3)
	Owner of
	controlled
	corporations
Chew Fook Aun	Benefcial	Nil	Nil	Nil	208,654,089	208,654,089	0.69%
	owner				(Note 3)
Lau Shu Yan, Julius	Benefcial	13,175,000	Nil	Nil	104,327,044	117,502,044	0.39%
	owner	(Note 1)			(Note 3)
Lam Hau Yin, Lester	Benefcial	Nil	Nil	Nil	208,654,089	208,654,089	0.69%
	owner				(Note 3)
U Po Chu_(Note 2)_	Benefcial	1,345,974	Nil	Nil	Nil	1,345,974	0.01%
	owner	(Note 1)

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Report of the Directors

dIrectors’ Interests (contInued)

(1) The Company (continued)

Notes:

(1) These Shares include the Rights Shares allotted on 17 February 2016 pursuant to the 1-for-2 rights issue of the Company (“ Rights Issue ”).

Lai Sun Garment (International) Limited (“ LSG ”) and two of its wholly-owned subsidiaries, namely Zimba International Limited (“ Zimba International ”) and Joy Mind Limited (“ Joy Mind ”), beneficially owned 18,676,828,782 Shares, representing approximately 61.93% of the issued share capital of the Company as enlarged by the Rights Issue. Dr. Lam Kin Ngok, Peter was deemed to be interested in the same 18,676,828,782 Shares by virtue of, in aggregate, his personal and deemed interests of approximately 42.33% in the issued share capital of LSG. LSG is approximately 12.63% owned by Dr. Lam Kin Ngok, Peter and is approximately 29.70% owned by Wisdoman Limited which in turn is 100% beneficially owned by Dr. Lam Kin Ngok, Peter.

LSG pledged 10,425,699,353 Shares held by LSG, Zimba International and Joy Mind as security pursuant to its 7.70% secured guaranteed notes due 2018 under a Share Charge dated 24 July 2014.

(2) Madam U Po Chu is the widow of the late Mr. Lim Por Yen whose estate includes an interest of 197,859,550 Shares, representing approximately 0.66% of the issued share capital of the Company as enlarged by the Rights Issue.
(3) A share option scheme was adopted by the Company on 22 December 2006 and commenced with effect from 29 December 2006 (“ Old Scheme ”). A share option was granted to each of Dr. Lam Kin Ngok, Peter, Mr. Chew Fook Aun, Mr. Lau Shu Yan, Julius and Mr. Lam Hau Yin, Lester under the Old Scheme, particulars of which are set out below, and remained exercisable though the Old Scheme was terminated on 23 December 2015 when a new share option scheme became effective after adoption by the shareholders of the Company at the annual general meeting held on 11 December 2015:

		Number of underlying shares comprised in	Number of underlying shares comprised in
Registered Name	Date of grant	the option before the Rights Issue	the option after the Rights Issue	Option period	Subscription price before the Rights Issue	Subscription price after the Rights Issue
Lam Kin Ngok, Peter	18/01/2013	20,062,893	20,865,408	18/01/2013-	HK$0.335 per Share	HK$0.322 per Share
				17/01/2023
Chew Fook Aun	05/06/2012	200,628,932	208,654,089	05/06/2012-	HK$0.112 per Share	HK$0.107 per Share
				04/06/2022
Lau Shu Yan, Julius	18/01/2013	100,314,466	104,327,044	18/01/2013-	HK$0.335 per Share	HK$0.322 per Share
				17/01/2023
Lam Hau Yin, Lester	18/01/2013	200,628,932	208,654,089	18/01/2013-	HK$0.335 per Share	HK$0.322 per Share
				17/01/2023

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dIrectors’ Interests (contInued)

(2) Associated Corporations

(i) Lai Sun Garment (International) Limited (“LSG”) — the ultimate holding company of the Company

Long positions in the ordinary shares and the underlying shares in LSG

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Lam Kin Ngok, Peter	Benefcial	237,464,979	Nil	562,590,430	1,876,211	801,931,620	42.33%
	owner/			(Note 1)	(Note 3)
	Owner of
	controlled
	corporations
Chew Fook Aun	Benefcial	Nil	Nil	7,232,000	8,012,111	15,244,111	0.80%
	owner/			(Note 2)	(Note 3)
	Owner of
	controlled
	corporations
Lam Hau Yin, Lester	Benefcial	60,623,968	Nil	Nil	18,762,111	79,386,079	4.19%
	owner				(Note 3)
Lam Kin Ming	Benefcial	5,008,263	Nil	Nil	Nil	5,008,263	0.26%
	owner
U Po Chu	Benefcial	4,127,625	Nil	Nil	Nil	4,127,625	0.22%
	owner

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Report of the Directors

dIrectors’ Interests (contInued)

(2) Associated Corporations (continued)

(i) Lai Sun Garment (International) Limited (“LSG”) — the ultimate holding company of the Company (continued)

Notes:

(1) Dr. Lam Kin Ngok, Peter was deemed to be interested in 562,590,430 shares (representing approximately 29.70% of LSG’s issued share capital) by virtue of his 100% interests in the issued share capital of Wisdoman Limited.
(2) These shares were held by The Orchid Growers Association Limited, a company wholly-owned by Mr. Chew Fook Aun. Subsequent to 31 July 2016 and up to the date of this Report, Mr. Chew Fook Aun has disposed of 100,000 shares in LSG.
(3) A share option scheme was adopted by LSG on 22 December 2006 and commenced with effect from 29 December 2006 (“ Old Scheme ”). A share option was granted by LSG to each of Dr. Lam Kin Ngok, Peter, Mr. Chew Fook Aun and Mr. Lam Hau Yin, Lester under the Old Scheme, particulars of which are set out below, and remained exercisable though the Old Scheme was terminated on 23 December 2015 when a new share option scheme became effective after adoption by the shareholders of LSG at the annual general meeting held on 11 December 2015 (on 7 February 2014, the subscription price and the number of underlying shares comprised in the option have been adjusted following the completion of rights issue of LSG (“ Rights Issue ”)):

Registered Name	Date of grant	Number of underlying shares comprised in the option before the Rights Issue	Number of underlying shares comprised in the option after the Rights Issue	Option period	Subscription price before the Rights Issue	Subscription price after the Rights Issue
Lam Kin Ngok, Peter	18/01/2013	1,617,423	1,876,211	18/01/2013-	HK$1.41 per share	HK$1.21 per share
				17/01/2023
Chew Fook Aun	05/06/2012	16,174,234	18,762,111	05/06/2012-	HK$0.582 per share	HK$0.501 per share
				04/06/2022
Lam Hau Yin, Lester	18/01/2013	16,174,234	18,762,111	18/01/2013-	HK$1.41 per share	HK$1.21 per share
				17/01/2023

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dIrectors’ Interests (contInued)

(2) Associated Corporations (continued)

(ii) eSun Holdings Limited (“eSun”) — an associate of the Company

Long positions in the ordinary shares and the underlying shares in eSun

Name of Director	Capacity	Personal interests	Family interests	Corporate interests	Other interests	Total interests	Approximate % of total interests to total issued shares
Lam Kin Ngok, Peter	Benefcial	2,794,443	Nil	521,204,186	1,243,212	525,241,841	42.25%
	owner/			(Note 1)	(Note 2)
	Owner of
	controlled
	corporations
Chew Fook Aun	Benefcial	Nil	Nil	Nil	6,216,060	6,216,060	0.50%
	owner				(Note 2)
Lam Hau Yin, Lester	Benefcial	2,794,443	Nil	Nil	12,432,121	15,226,564	1.22%
	owner				(Note 2)

Notes:

(1) LSG was interested in 18,676,828,782 Shares in the Company, representing approximately 61.93% of the issued share capital of the Company. Transtrend Holdings Limited, a wholly-owned subsidiary of the Company, was interested in 521,204,186 shares in eSun, representing approximately 41.92% of the issued share capital of eSun. As such, Dr. Lam Kin Ngok, Peter was deemed to be interested in the same 521,204,186 shares in eSun (representing approximately 41.92% of eSun’s issued share capital) by virtue of, in aggregate, his personal and deemed interests of approximately 42.33% and 62.07% in the issued share capital of LSG and the Company, respectively.
(2) A share option scheme was adopted by eSun on 23 December 2005 and commenced with effect from 5 January 2006 (“ Old Scheme ”). A share option was granted to each of Dr. Lam Kin Ngok, Peter, Mr. Chew Fook Aun and Mr. Lam Hau Yin, Lester under the Old Scheme, particulars of which are set out below, and remained exercisable though the Old Scheme was terminated on 23 December 2015 when a new share option scheme became effective after adoption by the shareholders of eSun at the annual general meeting held on 11 December 2015:

Registered Name	Date of grant	Number of underlying shares comprised in the option	Option period	Subscription price
Lam Kin Ngok, Peter	18/01/2013	1,243,212	18/01/2013-17/01/2023	HK$1.612 per share
Chew Fook Aun	05/06/2012	6,216,060	05/06/2012-04/06/2022	HK$0.92 per share
Lam Hau Yin, Lester	18/01/2013	12,432,121	18/01/2013-17/01/2023	HK$1.612 per share

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Report of the Directors

dIrectors’ Interests (contInued)

(2) Associated Corporations (continued)

(iii) Lai Fung Holdings Limited (“Lai Fung”) — a subsidiary of eSun

Long positions in the ordinary shares and the underlying shares in Lai Fung

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Lam Kin Ngok, Peter	Benefcial	Nil	Nil	8,274,270,422	16,095,912	8,290,366,334	51.18%
	owner/			(Note 1)	(Note 2)
	Owner of
	controlled
	corporations
Chew Fook Aun	Benefcial	Nil	Nil	Nil	80,479,564	80,479,564	0.50%
	owner				(Note 2)
Lau Shu Yan, Julius	Benefcial	11,772	Nil	Nil	48,287,738	48,299,510	0.30%
	owner				(Note 2)
Lam Hau Yin, Lester	Benefcial	Nil	Nil	Nil	160,959,129	160,959,129	0.99%
	owner				(Note 2)

Notes:

(1) eSun was interested in 8,274,270,422 shares in Lai Fung, representing approximately 51.08% of the issued share capital of Lai Fung. As such, Dr. Lam Kin Ngok, Peter was deemed to be interested in the same 8,274,270,422 issued shares in Lai Fung by virtue of, in aggregate, his personal and deemed shareholding interests of approximately 42.25% in the issued share capital of eSun.
(2) A share option scheme was adopted by Lai Fung on 21 August 2003 and commenced with effect from 28 August 2003 (“ Old Scheme ”). A new share option scheme was adopted by Lai Fung on 18 December 2012 and commenced with effect from 20 December 2012 (“ New Scheme ”). A share option was granted to Mr. Chew Fook Aun under the Old Scheme and remains exercisable though the Old Scheme was terminated on 20 December 2012 when the New Scheme became effective. A share option was also granted to each of Dr. Lam Kin Ngok, Peter, Mr. Lau Shu Yan, Julius and Mr. Lam Hau Yin, Lester under the New Scheme, particulars of the share options granted in the above schemes are set out below:

Registered Name	Date of grant	Number of underlying shares comprised in the option	Option period	Subscription price
Lam Kin Ngok, Peter	18/01/2013	16,095,912	18/01/2013-17/01/2023	HK$0.228 per share
Chew Fook Aun	12/06/2012	80,479,564	12/06/2012-11/06/2020	HK$0.133 per share
Lau Shu Yan, Julius	18/01/2013	48,287,738	18/01/2013-17/01/2023	HK$0.228 per share
Lam Hau Yin, Lester	18/01/2013	160,959,129	18/01/2013-17/01/2023	HK$0.228 per share

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dIrectors’ Interests (contInued)

(2) Associated Corporations (continued)

(iv) Media Asia Group Holdings Limited (“MAGHL”) — a subsidiary of eSun

Long positions in the shares and underlying shares in MAGHL

Name of Director	Capacity	Number of ordinary shares held	Number of underlying shares held	Total number of issued shares and underlying shares	Approximate % of total interests to total issued shares
Lam Kin Ngok, Peter	Owner of	1,415,132,837	218,340,611	1,633,473,448	76.47%
	controlled	(Note 1)	(Note 2)
	corporations

Notes:

(1) As at 31 July 2016, these interests in MAGHL represented the shares beneficially owned by Perfect Sky Holdings Limited (“ Perfect Sky ”), a wholly-owned subsidiary of eSun, representing approximately 66.25% of the issued share capital of MAGHL. eSun is owned as to approximately 41.92% by the Company which in turn is owned as to approximately 61.93% by LSG. As LSG is approximately 12.63% owned by Dr. Lam Kin Ngok, Peter and approximately 29.70% owned by Wisdoman Limited which is turn 100% beneficially owned by Dr. Lam Kin Ngok, Peter, he was deemed to be interested in the said 1,415,132,837 shares in MAGHL.
(2) By virtue of Dr. Lam Kin Ngok, Peter’s interests through the controlled corporations described in Note (1) above, he was also deemed to be interested in the 218,340,611 underlying shares of MAGHL comprised in the convertible notes issued to Perfect Sky by MAGHL pursuant to a subscription agreement dated 17 April 2015.

Save as disclosed above, as at 31 July 2016, none of the Directors and the chief executive of the Company and their respective close associates was interested or was deemed to be interested in the long and short positions in the shares, underlying shares and/or debentures of the Company or any of its associated corporations, which were required to be notified to the Company and the Stock Exchange, or recorded in the Register of Directors and Chief Executive as aforesaid, notified under the Securities Code or otherwise known by the Directors.

dIrectors’ rIghts to acquIre shares or deBentures

Save as disclosed in the sections headed “Share Option Scheme” and “Directors’ Interests” in this Report and in note 30 headed “Share Option Scheme” to the financial statements, at no time during the Year was the Company or any of its subsidiaries a party to any arrangement to enable a Director to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Report of the Directors

suBstantIal shareholders’ and other Persons’ Interests

As at 31 July 2016, so far as was known by or otherwise notified by any Director or the chief executive of the Company, the particulars of the corporations or individuals (are being a Director), who had 5% or more interests in the following long positions in the Shares and underlying Shares of the Company which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO, or which were recorded in the register required to be kept under section 336 of the SFO (“ Register of Shareholders ”) or were entitled to exercise, or control the exercise of, 10% or more of the voting power at any general meeting of the Company (“ Voting Entitlements ”) (i.e. within the meaning of Substantial Shareholders of the Listing Rules) were as follows:

Long positions in the Shares and the underlying Shares of the Company

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

Number of Approximate
Nature of Shares and % of Shares
Name Capacity interests underlying Shares in issue
----- End of picture text -----

Lai Sun Garment	Benefcial owner	Corporate	18,676,828,782	61.93%
(International) Limited
(Note)
Lam Kin Ngok, Peter	Benefcial owner/	Personal and	18,719,155,807	62.07%
	Owner of	corporate
	controlled
	corporation

Note:

LSG and two of its wholly-owned subsidiaries, namely Zimba International Limited and Joy Mind Limited, beneficially owned 18,676,828,782 Shares, representing approximately 61.93% of the issued share capital of the Company. Dr. Lam Kin Ngok, Peter was deemed to be interested in the same 18,676,828,782 Shares by virtue of, in aggregate, his personal and deemed interests of approximately 42.33% in the issued share capital of LSG. Dr. Lam Kin Ngok, Peter is the deputy chairman and an ED of LSG.

Save as disclosed above, the Directors are not aware of any other corporation or individual (other than a Director or the chief executive of the Company) who, as at 31 July 2016, had the Voting Entitlements or 5% or more interests or short positions in the Shares or underlying Shares of the Company recorded in the Register of Shareholders.

Purchase, sale or redemPtIon of lIsted securItIes

During the Year, the Company did not redeem any of its Shares listed and traded on the Stock Exchange nor did the Company or any of its subsidiaries purchase or sell any of such Shares.

PuBlIc float

Based on the information that is publicly available to the Company and within the knowledge of the Directors, at least 25% of the issued Shares were held by the public (i.e. the prescribed public float applicable to the Company under the Listing Rules) during the Year and up to the date of this Report.

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ProPerty, Plant and equIPment, Investment ProPertIes and ProPertIes under develoPment for sale

Details of the movements in the property, plant and equipment, investment properties and properties under development for sale of the Company and the Group during the Year are set out in notes 14, 16 and 17, respectively, to the financial statements. Further details of the Group’s investment properties and properties under development for sale are set out in the “Particulars of Major Properties” of this Annual Report.

PrIncIPal suBsIdIarIes

Particulars of the Company’s principal subsidiaries as at 31 July 2016 are set out in note 39 to the financial statements.

charItaBle contrIButIons

During the Year, the Group made charitable contributions totalling approximately HK$6,931,000.

maJor customers and suPPlIers

During the Year, sales to the Group’s five largest customers accounted for less than 30% of the Group’s total sales for the year.

During the Year, purchases from the Group’s five largest suppliers accounted for approximately 50% of the total purchase, while the largest supplier accounted for approximately 41% of the Group’s total purchases.

None of the Directors or any of their close associates or any Shareholders, which to the best knowledge of the Directors, own more than 5% of the Company’s issued share capital, had any beneficial interest in the Group’s five largest suppliers.

dIsclosure Pursuant to ParagraPh 13.21 of chaPter 13 of the lIstIng rules

In August 2014, the Group entered into a facility agreement related to a term loan facility of GBP48,480,000 to be made available to a wholly-owned subsidiary of the Company, as borrower, for a period of five years up to 6 August 2019. Pursuant to the facility agreement, the Company has undertaken to procure that Dr. Peter Lam and his family, will, at all times during the facility period, remain as the controlling shareholder of the Company (directly or indirectly) and will maintain control over the management of the Company. At 31 July 2016, the outstanding loan balance was approximately HK$467,080,000.

summary of fInancIal InformatIon

A summary of the results and of the assets, liabilities and non-controlling interests of the Group for the last five financial years is set out in the “Summary of Financial Information” of this Annual Report on pages 26 and 27.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Report of the Directors

dIsclosure Pursuant to ParagraPh 13.22 of chaPter 13 of the lIstIng rules

Financial assistance and guarantees to affiliated companies

As at 31 July 2016, the aggregate amount of financial assistance and guarantees given for facilities granted to affiliated companies has exceeded the assets ratio of 8% under the Rules Governing the Listing Rules.

In compliance with paragraph 13.22 of Chapter 13 of the Listing Rules, the proforma combined statement of financial position of the affiliated companies as at 31 July 2016 is disclosed as follows:

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HK$’000
----- End of picture text -----

Property, plant and equipment	3,071,947
Properties under development	1,446,653
Investment property under construction	3,723,892
Investment properties	19,905,613
Film rights	23,682
Film products	123,768
Music catalogs	14,918
Goodwill	123,440
Other intangible assets	28,605
Interests in associates	48,430
Interests in joint ventures	1,161,752
Available-for-sale investments	138,592
Deposits, prepayments and other receivables	325,639
Deferred tax assets Deferred rental benefts	9,652 109,454
Pledged bank balances	178,412
Amounts due from shareholders	11,333
Net current assets	3,979,730
Total assets less current liabilities	34,425,512
NON-CURRENT LIABILITIES
Long term deposits received	184,960
Long term borrowings	5,803,432
Other payable	16,275
Convertible notes	166,170
Fixed rate senior notes	2,092,741
Guaranteed notes Derivative fnancial instruments	222,430 210,068
Deferred tax liabilities	2,834,765
Deferred income	45,447
Amounts due to shareholders	4,979,293
	16,555,581
	17,869,931
CAPITAL AND RESERVES
Issued capital	661,013
Share premium account	4,230,797
Contributed surplus	891,289
Investment revaluation reserve	25,052
Share option reserve	15,293
Hedging reserve	21,813
Exchange reserve	(481,312)
Statutory reserve	70,732
Other reserve Accumulatedprofts	616,112 4,153,616
	10,204,405
Non-controllinginterests	7,665,526
	17,869,931

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corPorate governance

Particulars of the Company’s corporate governance practices are set out in the Corporate Governance Report of this Annual Report on pages 32 to 45.

IndePendence of IndePendent non-executIve dIrectors

The Company has received from each of the INEDs in writing an annual confirmation of his independence pursuant to Rule 3.13 of the Listing Rules and the Company considers all the INEDs to be independent.

equIty-lInked agreements

For the year ended 31 July 2016, the Company has not entered into any equity-linked agreements. Particulars of options granted are set out in the section under Share Option Scheme of this Report.

revIeW By audIt commIttee

The Audit Committee of the Company comprises two INEDs, Mr. Leung Shu Yin, William and Mr. Lam Bing Kwan and a NED, Dr. Lam Kin Ming. The Audit Committee has reviewed with the management the audited consolidated financial statements of the Company for the Year.

IndePendent audItors

The consolidated financial statements of the Company for the Year have been audited by Ernst & Young which will retire and being eligible, offer themselves for re-appointment at the forthcoming AGM. Approved by the Board upon the Audit Committee’s recommendation, a resolution for the re-appointment of Ernst & Young as independent auditors of the Company for the ensuing year will be put to the forthcoming AGM for shareholders’ approval.

On behalf of the Board

Chew Fook Aun

Executive Director and Deputy Chairman Hong Kong 19 October 2016

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Shareholders’ Information

key dates

Shareholders and investors are advised to note the following key dates of the Company and take appropriate action:

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

For Financial Year 2015/2016
Annual results announcement 19 October 2016
Latest time and date for lodging transfer documents with
the share registrar to ascertain entitlement to attending
and voting at the 2016 annual general meeting (“ AGM ”) 4:30 p.m. on 13 December 2016
2016 AGM 16 December 2016
Closure of Register of Members for final dividend entitlement 22 to 23 December 2016
(both dates inclusive)
Record date of final dividend entitlement 23 December 2016
Latest time and date for lodging form of election for scrip dividend 4:30 p.m. on 18 January 2017
Proposed Final Dividend of HK$0.0019 per share
Payable 27 January 2017
Scrip share certificate despatch 27 January 2017
For Financial Year 2016/2017
Interim results announcement on or before 31 March 2017
Annual results announcement on or before 31 October 2017
----- End of picture text -----

annual rePort

To ensure that all shareholders have equal and timely access to important corporate information, the Company makes extensive use of its website to deliver up-to-date information. This 2015-2016 Annual Report is printed in both English and Chinese and is available on the Company’s website at www.laisun.com.

agm

The AGM will be held on 16 December 2016. Details of the AGM are set out in the notice of the AGM which constitutes part of this Annual Report. Notice of the AGM and the proxy form are also available on the Company’s website.

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Independent Auditors’ Report

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To the members of Lai Sun Development Company Limited

(Incorporated in Hong Kong with limited liability)

We have audited the consolidated financial statements of Lai Sun Development Company Limited (the “ Company ”) and its subsidiaries set out on pages 71 to 163, which comprise the consolidated statement of financial position as at 31 July 2016, and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

dIrectors’ resPonsIBIlIty for the consolIdated fInancIal statements

The directors of the Company are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the Hong Kong Companies Ordinance, and for such internal control as the directors determine is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

audItors’ resPonsIBIlIty

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Our report is made solely to you, as a body, in accordance with section 405 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation of consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Independent Auditors’ Report

oPInIon

In our opinion, the consolidated financial statements give a true and fair view of the financial position of the Company and its subsidiaries as at 31 July 2016, and of their financial performance and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in compliance with the Hong Kong Companies Ordinance.

Ernst & Young Certified Public Accountants

22/F CITIC Tower 1 Tim Mei Avenue Central, Hong Kong

19 October 2016

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Consolidated Income Statement

Year ended 31 July 2016

	Notes	2016 HK$’000	2015 HK$’000
TURNOVER	6	1,868,334	1,541,686
Cost of sales		(861,722)	(646,115)
Gross proft		1,006,612	895,571
Other revenue	6	68,235	128,826
Selling and marketing expenses		(28,520)	(23,534)
Administrative expenses		(249,995)	(240,557)
Other operating expenses	7(b)	(219,826)	(186,026)
Fair value gains on investment properties, net	16	51,539	1,289,257
PROFIT FROM OPERATING ACTIVITIES	7(a)	628,045	1,863,537
Finance costs	8	(178,290)	(180,016)
Share of profts and losses of associates		17,233	90,127
Share of profts of joint ventures		770,469	354,243
PROFIT BEFORE TAX		1,237,457	2,127,891
Tax	11	(57,691)	(79,397)
PROFIT FOR THE YEAR		1,179,766	2,048,494
Attributable to:
Owners of the Company		1,148,390	2,018,262
Non-controlling interests		31,376	30,232
		1,179,766	2,048,494
EARNINGS PER SHARE ATTRIBUTABLE TO
OWNERS OF THE COMPANY	13		(Adjusted)
Basic		HK$0.045	HK$0.098
Diluted		HK$0.045	HK$0.097

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Consolidated Statement of Comprehensive Income

Year ended 31 July 2016

	2016	2015
	HK$’000	HK$’000
PROFIT FOR THE YEAR	1,179,766	2,048,494
OTHER COMPREHENSIVE INCOME/(EXPENSE)
Other comprehensive income/(expense) to be reclassifed
to proft or loss in subsequent periods:
Available-for-sale fnancial assets:
Changes in fair values	131,108	(31,818)
Reclassifcation adjustment for impairment loss included
in the consolidated income statement	—	6,141
	131,108	(25,677)
Exchange realignments	(174,440)	(52,306)
Share of other comprehensive expense of associates	(244,302)	(25,242)
Release of reserves upon disposal of associates	(31)	—
OTHER COMPREHENSIVE EXPENSE FOR THE YEAR	(287,665)	(103,225)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	892,101	1,945,269
Attributable to:
Owners of the Company	860,672	1,915,037
Non-controlling interests	31,429	30,232
	892,101	1,945,269

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Consolidated Statement of Financial Position

31 July 2016

	Notes	2016 HK$’000	2015 HK$’000
NON-CURRENT ASSETS
Property, plant and equipment	14	2,983,985	2,380,267
Prepaid land lease payments	15	20,901	21,928
Investment properties	16	15,147,376	15,236,780
Properties under development for sale	17	1,322,403	653,845
Goodwill	43	5,161	—
Interests in associates	18(a)	3,660,835	3,930,309
Interests in joint ventures	18(b)	6,754,353	5,937,793
Available-for-sale fnancial assets	19	1,382,026	1,215,485
Pledged bank balances and time deposits	20	216,241	—
Deposits paid and other receivables	21	181,062	141,968
Total non-current assets		31,674,343	29,518,375
CURRENT ASSETS
Completed properties for sale	22	321,509	641,048
Equity investments at fair value through proft or loss	23	—	5,574
Inventories		25,899	12,704
Debtors, deposits paid and other receivables	24	177,008	175,672
Pledged bank balances and time deposits	20	—	185,467
Cash and cash equivalents	20	2,354,682	1,068,038
Total current assets		2,879,098	2,088,503
CURRENT LIABILITIES
Creditors, deposits received and accruals	25	460,588	409,301
Tax payable		132,282	170,783
Bank borrowings	26	126,709	1,012,594
Total current liabilities		719,579	1,592,678
NET CURRENT ASSETS		2,159,519	495,825
TOTAL ASSETS LESS CURRENT LIABILITIES		33,833,862	30,014,200

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Consolidated Statement of Financial Position

31 July 2016

		2016	2015
	Notes	HK$’000	HK$’000
NON-CURRENT LIABILITIES
Bank borrowings	26	5,275,720	3,270,608
Guaranteed notes	27	2,709,227	2,703,324
Deferred tax	28	127,891	121,020
Provision for tax indemnity	33(b)	729,387	729,387
Long term rental deposits received		90,063	81,907
Deferred rental		9,724	4,380
Total non-current liabilities		8,942,012	6,910,626
		24,891,850	23,103,574
EQUITY
Equity attributable to owners of the Company
Share capital	29	4,050,252	3,135,561
Investment revaluation reserve		1,241,566	1,117,849
Share option reserve		65,633	65,172
Hedging reserve		9,114	(963)
Capital reduction reserve	29	4,692	4,692
General reserve	29	646,700	646,700
Other reserve		233,252	263,684
Statutory reserve		28,996	24,518
Exchange fuctuation reserve		(399,139)	22,373
Retained profts		18,476,669	17,382,957
		24,357,735	22,662,543
Non-controlling interests		534,115	441,031
		24,891,850	23,103,574

Chew Fook Aun Director

Lau Shu Yan, Julius Director

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Consolidated Statement of Changes in Equity

Year ended 31 July 2016

	Attributable to owners of the Company Investment Share Capital Exchange Non- Share revaluation option Hedging reduction General Other Statutory fuctuation Retained controlling capital reserve reserve reserve reserve reserve reserve reserve reserve profts Sub-total interests Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
At 1 August 2014 Proft for the year Other comprehensive income/(expense) for the year Change in fair values of available-for-sale fnancial assets Exchange realignments Share of other comprehensive income/(expense) of associates	3,129,961 1,131,735 64,469 (963) 4,692 646,700 256,582 — 111,712 15,429,660 20,774,548 449,947 21,224,495 — — — — — — — — — 2,018,262 2,018,262 30,232 2,048,494 : — (25,677) — — — — — — — — (25,677) — (25,677) — — — — — — — — (52,306) — (52,306) — (52,306) — 11,791 — — — — — — (37,033) — (25,242) — (25,242)
Total comprehensive (expense)/income for the year Final 2014 dividend declared Share of reserve movements of an associate Recognition of share-based payments Capital contribution from non-controlling shareholders of a subsidiary Shares issued in lieu of cash dividend (note 29(a)) Dividends paid to non-controlling shareholders of subsidiaries	— (13,886) — — — — — — (89,339) 2,018,262 1,915,037 30,232 1,945,269 — — — — — — — — — (50,157) (50,157) — (50,157) — — 175 — — — 7,102 24,518 — (14,808) 16,987 — 16,987 — — 528 — — — — — — — 528 — 528 — — — — — — — — — — — 26,820 26,820 5,600 — — — — — — — — — 5,600 — 5,600 — — — — — — — — — — — (65,968) (65,968)
At 31 July 2015 and 1 August 2015	3,135,561 1,117,849 65,172 (963) 4,692 646,700 263,684 24,518 22,373 17,382,957 22,662,543 441,031 23,103,574
Proft for the year Other comprehensive income/(expense) for the year: Change in fair values of available-for-sale fnancial assets Exchange realignments Share of other comprehensive (expense)/income of associates Release of reserves upon disposal of associates	— — — — — — — — — 1,148,390 1,148,390 31,376 1,179,766 — 131,108 — — — — — — — — 131,108 — 131,108 — — — — — — — — (174,440) — (174,440) — (174,440) — (7,391) — 10,077 — — — — (247,041) — (244,355) 53 (244,302) — — — — — — — — (31) — (31) — (31)
Total comprehensive income/(expense) for the year Final 2015 dividend declared (note 12) Share of reserve movements of an associate Recognition of share-based payments Capital contribution from non-controlling shareholders of subsidiaries Shares issued in lieu of cash dividend (note 29(b)) Net proceeds from rights issue (note 29(c)) Dividends paid to non-controlling shareholders of subsidiaries Acquisition of subsidiaries (note 42) Acquisition of non-controlling interests (note 39) Disposal of partial interest in a subsidiary	— 123,717 — 10,077 — — — — (421,512) 1,148,390 860,672 31,429 892,101 — — — — — — — — — (50,236) (50,236) — (50,236) — — — — — — (26,495) 4,478 — (4,442) (26,459) — (26,459) — — 461 — — — — — — — 461 — 461 — — — — — — — — — — — 35,060 35,060 2,008 — — — — — — — — — 2,008 — 2,008 912,683 — — — — — — — — — 912,683 — 912,683 — — — — — — — — — — — (61,005) (61,005) — — — — — — (2,056) — — — (2,056) 17,763 15,707 — — — — — — (13,398) — — — (13,398) (61,845) (75,243) — — — — — — 11,517 — — — 11,517 131,682 143,199
At 31 July 2016	4,050,252 1,241,566 65,633 9,114 4,692 646,700 233,252 28,996 (399,139) 18,476,669 24,357,735 534,115 24,891,850

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Consolidated Statement of Cash Flows

Year ended 31 July 2016

		2016	2015
	Notes	HK$’000	HK$’000
CASH FLOWS FROM OPERATING ACTIVITIES
Proft before tax		1,237,457	2,127,891
Adjustments for:
Finance costs	8	178,290	180,016
Share of profts and losses of associates		(17,233)	(90,127)
Share of profts of joint ventures		(770,469)	(354,243)
Fair value gains on investment properties, net		(51,539)	(1,289,257)
Depreciation	7(a)	62,119	48,613
Amortisation of prepaid land lease payments	7(a)	1,027	1,027
Loss/(gain) on disposal of items of property,
plant and equipment	6, 7(a)	100	(69)
Gain on bargain purchase upon acquisition
of a subsidiary	6	(3,128)	—
Gain on disposal of associates	6	(5,338)	—
Fair value loss/(gain) on a listed equity investment
at fair value through proft or loss	6, 7(a)	4,247	(3,415)
Impairment loss on an unlisted available-for-sale
fnancial asset	7(a)	—	6,141
Interest income	6	(12,623)	(9,107)
Dividend income from unlisted available-for-sale
fnancial assets	6	(36,215)	(97,149)
Employee share option benefts	7(a)	461	528
Foreign exchange diferences, net		6,308	10,420
		593,464	531,269
Increase in properties under development for sale		(625,625)	(34,100)
Increase in loan receivables		(21,910)	(77,697)
Decrease in completed properties for sale		319,539	190,002
Increase in inventories		(3,224)	(4,598)
Decrease/(increase) in debtors, deposits
paid and other receivables		2,897	(56,005)
Increase in creditors, deposits received and accruals		53,880	118,929
Cash generated from operations		319,021	667,800
Interest received		12,623	9,107
Interest paid on bank borrowings		(110,841)	(93,292)
Interest paid on guaranteed notes		(154,928)	(154,671)
Hong Kong profts tax paid		(64,271)	(25,890)
Overseas taxes paid		(23,827)	(6,149)
Net cash fows (used in)/from operating activities		(22,223)	396,905

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	Notes	2016 HK$’000	2015 HK$’000
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of items of property, plant and equipment		(540,870)	(1,622,402)
Additions to investment properties		(261,886)	(1,373,780)
Deposits paid for purchase of items of property,
plant and equipment	21	(13,498)	(9,321)
Deposits paid for additions to investment properties	21	(6,578)	—
Acquisition of unlisted available-for-sale fnancial assets		(35,433)	(14,837)
Proceeds from disposal of items of property,
plant and equipment		397	466
Proceeds from disposal of investment properties		—	1,620
Acquisition of subsidiaries	42	33,248	—
Advances to associates		(11,820)	(13,144)
Repayment from associates		2,080	6,551
Advances to joint ventures		(50,000)	(110,025)
Repayment from a joint venture		75	534,939
Dividend received from a joint venture		—	10,000
Dividends received from unlisted available-for-sale
fnancial assets		36,215	97,149
Increase in pledged bank balances and time deposits		(30,774)	(47,418)
Net cash fows used in investing activities		(878,844)	(2,540,202)
CASH FLOWS FROM FINANCING ACTIVITIES
New bank borrowings raised		3,823,089	2,127,465
Repayment of bank borrowings		(2,393,476)	(468,175)
Bank fnancing charges		(117,846)	(30,661)
Net proceeds from rights issue	29(c)	912,683	—
Proceeds from subscription of a rights issue of a subsidiary
by non-controlling interests		45,122	—
Dividend paid		(48,228)	(44,557)
Dividends paid to non-controlling shareholders		(61,005)	(65,968)
Capital contribution from non-controlling shareholders of
subsidiaries		35,060	26,820
Net cash fows from fnancing activities		2,195,399	1,544,924
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		1,294,332	(598,373)
Cash and cash equivalents at beginning of year		1,068,038	1,671,478
Efect of foreign exchange rate changes, net		(7,688)	(5,067)
CASH AND CASH EQUIVALENTS AT END OF YEAR		2,354,682	1,068,038
ANALYSIS OF BALANCES OF CASH AND CASH
EQUIVALENTS
Non-pledged cash and bank balances		820,727	485,284
Non-pledged time deposits		1,533,955	582,754
		2,354,682	1,068,038

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Notes to Financial Statements

31 July 2016

1. corPorate and grouP InformatIon

Lai Sun Development Company Limited (the “ Company ”) is a limited liability company incorporated in Hong Kong with its shares listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”). The registered office of the Company is located at 11th Floor, Lai Sun Commercial Centre, 680 Cheung Sha Wan Road, Kowloon, Hong Kong. In the opinion of the directors, the Company’s ultimate holding company is Lai Sun Garment (International) Limited (“ LSG ”), a limited liability company incorporated in Hong Kong with its shares listed on the Main Board of the Stock Exchange.

During the year, the Company and its subsidiaries (collectively referred to as the “ Group ”) were involved in the following principal activities:

property development for sale;
property investment;
investment in and operation of hotels;
investment in and operation of restaurants; and
investment holding.

Details of the principal subsidiaries are set out in note 39 to the financial statements.

2.1 BasIs of PreParatIon

These financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“ HKFRSs ”) (which include all Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“ HKASs ”) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and the Hong Kong Companies Ordinance. They have been prepared under the historical cost convention, except for investment properties, equity investments at fair value through profit or loss and certain available-for-sale financial assets, which have been measured at fair value. These financial statements are presented in Hong Kong dollars (“ HK$ ”) and all values are rounded to the nearest thousand except when otherwise indicated.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries for the year ended 31 July 2016. A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that give the Group the current ability to direct the relevant activities of the investee).

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2.1 BasIs of PreParatIon (contInued)

Basis of consolidation (continued)

When the Company has, directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group’s voting rights and potential voting rights.

The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using consistent accounting policies. The results of subsidiaries are consolidated from the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

Profit or loss and each component of other comprehensive income are attributed to the owners of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control described in the accounting policy for subsidiaries below. A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises (i) the assets (including goodwill) and liabilities of the subsidiary, (ii) the carrying amount of any non-controlling interest and (iii) the cumulative translation differences recorded in equity; and recognises (i) the fair value of the consideration received, (ii) the fair value of any investment retained and (iii) any resulting surplus or deficit in profit or loss. The Group’s share of components previously recognised in other comprehensive income is reclassified to profit or loss or retained profits, as appropriate, on the same basis as would be required if the Group had directly disposed of the related assets or liabilities.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Notes to Financial Statements

31 July 2016

2.2 changes In accountIng PolIcIes and dIsclosures

There were no new or revised standards adopted for the first time for the current year’s financial statements.

2.3 Issued But not yet effectIve hong kong fInancIal rePortIng standards

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

HKFRS 9	Financial Instruments 3
Amendments to HKFRS 2	Classifcation and Measurement of Share-based Payment Transactions 3
Amendments to HKFRS 10	Sale or Contribution of Assets between an Investor and its
and HKAS 28 (2011)	Associate or Joint Venture 6
Amendments to HKFRS 10,	Investment Entities: Applying the Consolidation Exception 1
HKFRS 12 and
HKAS 28 (2011)
Amendments to HKFRS 11	Accounting for Acquisitions of Interests in Joint Operations 1
HKFRS 14	Regulatory Deferral Accounts 5
HKFRS 15	Revenue from Contracts with Customers 3
Amendments to HKFRS 15	Clarifcations to HKFRS 15 Revenue from Contracts with Customers 3
HKFRS 16	Leases 4
Amendments to HKAS 1	Disclosure Initiative 1
Amendments to HKAS 7	Disclosure Initiative 2
Amendments to HKAS 12	Recognition of Deferred Tax Assets for Unrealised Losses 2
Amendments to HKAS 16	_Clarifcation of Acceptable Methods of Depreciation and Amortisation_1
and HKAS 38
Amendments to HKAS 16	Agriculture: Bearer Plants 1
and HKAS 41
Amendments to HKAS 27	Equity Method in Separate Financial Statements 1
(2011)
Annual Improvements	Amendments to a number of HKFRSs 1
2012-2014 Cycle

1 Effective for annual periods beginning on or after 1 January 2016
2 Effective for annual periods beginning on or after 1 January 2017
3 Effective for annual periods beginning on or after 1 January 2018
4 Effective for annual periods beginning on or after 1 January 2019
5 Effective for an entity that first adopts HKFRSs for its annual financial statements beginning on or after 1 January 2016 and therefore is not applicable to the Group
6 No mandatory effective date yet determined but available for early adoption

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

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2.4 summary of sIgnIfIcant accountIng PolIcIes

Investments in associates and joint ventures

An associate is an entity in which the Group has a long term interest of generally not less than 20% of the equity voting rights and over which it is in a position to exercise significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control.

The Group’s investments in associates and joint ventures are stated in the consolidated statement of financial position at the Group’s share of net assets under the equity method of accounting, less any impairment losses.

Adjustments are made to bring into line any dissimilar accounting policies that may exist.

The Group’s share of the post-acquisition results and other comprehensive income of associates and joint ventures is included in the consolidated income statement and consolidated other comprehensive income, respectively. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the consolidated statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and its associates or joint ventures are eliminated to the extent of the Group’s investments in the associates or joint ventures, except where unrealised losses provide evidence of an impairment of the asset transferred. Goodwill arising from the acquisition of associates or joint ventures is included as part of the Group’s investments in associates or joint ventures.

If an investment in an associate becomes an investment in a joint venture or vice versa, the retained interest is not remeasured. Instead, the investment continues to be accounted for under the equity method. In all other cases, upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss.

When an investment in an associate or a joint venture is classified as held for sale, it is accounted for in accordance with HKFRS 5 Non-current Assets Held for Sale and Discontinued Operations .

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Notes to Financial Statements

31 July 2016

2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The consideration transferred is measured at the acquisition date fair value which is the sum of the acquisition date fair values of assets transferred by the Group, liabilities assumed by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree that are present ownership interests and entitle their holders to a proportionate share of net assets in the event of liquidation at fair value or at the proportionate share of the acquiree’s identifiable net assets. All other components of non-controlling interests are measured at fair value. Acquisition-related costs are expensed as incurred.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts of the acquiree.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability is measured at fair value with changes in fair value recognised in profit or loss. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred, the amount recognised for non-controlling interests and any fair value of the Group’s previously held equity interests in the acquiree over the identifiable net assets acquired and liabilities assumed. If the sum of this consideration and other items is lower than the fair value of the net assets acquired, the difference is, after reassessment, recognised in profit or loss as a gain on bargain purchase.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. The Group performs its annual impairment test of goodwill as at 31 July. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cashgenerating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognised. An impairment loss recognised for goodwill is not reversed in a subsequent period.

Where goodwill has been allocated to a cash-generating unit (or group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on the disposal. Goodwill disposed of in these circumstances is measured based on the relative value of the operation disposed of and the portion of the cash-generating unit retained.

82 LAI SUN DEVELOPMENT Annual Report 2015 - 2016

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2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Fair value measurement

The Group measures its investment properties, equity investments at fair value and certain available-forsale financial assets at the end of each reporting period. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either in the principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 — based on quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 — based on valuation techniques for which the lowest level input that is significant to the fair value measurement is observable, either directly or indirectly
Level 3 — based on valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by reassessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Impairment of non-financial assets

Where an indication of impairment exists, or when annual impairment testing for an asset is required (other than properties under development for sale, completed properties for sale, inventories, financial assets and investment properties), the asset’s recoverable amount is estimated. An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair value less costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Notes to Financial Statements

31 July 2016

2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Impairment of non-financial assets (continued)

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is charged to the income statement in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

An assessment is made at the end of each reporting period as to whether there is an indication that previously recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to the income statement in the period in which it arises, unless the asset is carried at a revalued amount, in which case the reversal of the impairment loss is accounted for in accordance with the relevant accounting policy for that revalued asset.

Related parties

A party is considered to be related to the Group if:

(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group;

(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;

84 LAI SUN DEVELOPMENT Annual Report 2015 - 2016

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2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Related parties (continued)

(b) (continued)
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or an entity related to the Group;
(vi) the entity is controlled or jointly controlled by a person identified in (a);
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); and
(viii) the entity, or any member of a group of which it is a part, provides key management personnel services to the Group or to the parent of the Group.

Property, plant and equipment and depreciation

Property, plant and equipment, other than construction in progress, are stated at cost less accumulated depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use.

Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs and maintenance, is normally charged to the income statement in the period in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them accordingly.

Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as follows:

Hotel properties	Over the remaining lease terms
Leasehold buildings	Over the remaining lease terms
Leasehold improvements	20% or over the lease terms, whichever is shorter
Furniture, fxtures and equipment	20%
Motor vehicles	17% - 25%
Computers	20% - 33%
Motor vessels	25%

Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year end.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Notes to Financial Statements

31 July 2016

2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Property, plant and equipment and depreciation (continued)

An item of property, plant and equipment including any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal or retirement recognised in the income statement in the year the asset is derecognised is the difference between the net sales proceeds and the carrying amount of the relevant asset.

Construction in progress represents buildings under construction, which are stated at cost less any impairment losses, and are not depreciated. Cost comprises the direct costs of construction and capitalised borrowing costs on related borrowed funds during the period of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use.

Investment properties

Investment properties are interests in land and buildings (including the leasehold interest under an operating lease for a property which would otherwise meet the definition of an investment property) held to earn rental income and/or for capital appreciation, rather than for use in the production or supply of goods or services or for administrative purposes; or for sale in the ordinary course of business. These include properties that are being constructed or developed for future use as investment properties. Such properties are measured initially at cost, including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the end of the reporting period, unless they are still in the course of construction or development at the end of the reporting period and their fair value cannot be reliably determined at that time.

Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the year in which they arise.

Any gains or losses on the retirement or disposal of an investment property are recognised in the income statement in the year of the retirement or disposal.

Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Where the Group is the lessor, assets leased by the Group under operating leases are included in non-current assets, and rentals receivable under the operating leases are credited to the income statement on the straight-line basis over the lease terms. Where the Group is the lessee, rentals payable under the operating leases are charged to the income statement on the straightline basis over the lease terms.

Prepaid land lease payments under operating leases are initially stated at cost and subsequently recognised on the straight-line basis over the lease terms.

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2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Properties under development for sale

Properties under development for sale are stated at the lower of cost and net realisable value. Cost comprises the prepaid land lease payments or cost of land together with any other direct costs attributable to the development of the properties and other related expenses capitalised during the development period. Net realisable value is determined by the directors based on prevailing market prices on an individual property basis less estimated costs of completion and costs to be incurred in selling the property.

Once the construction or development of these properties is completed, these properties are reclassified to the appropriate categories of assets.

Completed properties for sale

Completed properties for sale are stated at the lower of cost and net realisable value. Cost includes all development expenditure, applicable borrowing costs and other direct costs attributable to such properties. Cost is determined by apportionment of the total land and building costs attributable to unsold properties. Net realisable value is determined by the directors based on prevailing market prices on an individual property basis less costs to be incurred in selling the property.

Investments and other financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables and available-for-sale financial investments, as appropriate. When financial assets are recognised initially, they are measured at fair value plus transaction costs that are attributable to the acquisition of the financial assets, except in the case of financial assets recorded at fair value through profit or loss.

All regular way purchases and sales of financial assets are recognised on the trade date, that is, the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading. Financial assets are classified as held for trading if they are acquired for the purpose of sale in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments as defined by HKAS 39.

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the income statement. These net fair value changes do not include any dividends or interest earned on these financial assets, which are recognised in accordance with policies set out for “Revenue recognition” below.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Notes to Financial Statements

31 July 2016

2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Investments and other financial assets (continued)

Financial assets at fair value through profit or loss (continued)

Financial assets designated upon initial recognition as at fair value through profit or loss are designated at the date of initial recognition and only if the criteria in HKAS 39 are satisfied.

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated as at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in the income statement. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such assets are subsequently measured at amortised cost using the effective interest rate method less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and includes fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in other revenue in the income statement. The loss arising from impairment is recognised in the income statement.

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets in listed and unlisted equity investments and debt securities. Equity investments classified as available for sale are those which are neither classified as held for trading nor designated as at fair value through profit or loss. Debt securities in this category are those which are intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in market conditions.

After initial recognition, available-for-sale financial assets are subsequently measured at fair value, with unrealised gains or losses recognised as other comprehensive income in the investment revaluation reserve until the investment is derecognised, at which time the cumulative gain or loss is recognised in income statement, or until the investment is determined to be impaired, when the cumulative gain or loss is reclassified from the investment revaluation reserve to income statement. Interest and dividends earned whilst holding the available-for-sale financial assets are reported as interest income and dividend income, respectively and are recognised in the income statement as other revenue in accordance with the policies set out for “Revenue recognition” below.

When the fair value of unlisted equity investments cannot be reliably measured because (a) the variability in the range of reasonable fair value estimates is significant for that investment or (b) the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating fair value, such investments are stated at cost less any impairment losses.

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2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Investments and other financial assets (continued)

Available-for-sale financial assets (continued)

The Group evaluates whether the ability and intention to sell its available-for-sale financial assets in the near term are still appropriate. When, in rare circumstances, the Group is unable to trade these financial assets due to inactive markets, the Group may elect to reclassify these financial assets if management has the ability and intention to hold the assets for the foreseeable future or until maturity.

For a financial asset reclassified from the available-for-sale category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on that asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the effective interest rate. Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using the effective interest rate. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the income statement.

Derecognition of financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:

the rights to receive cash flows from the asset have expired; or
the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership of the asset. When it has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of the Group’s continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Notes to Financial Statements

31 July 2016

2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Impairment of financial assets

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that occurred after the initial recognition of the asset have an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that a debtor or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

The amount of any impairment loss identified is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate (i.e., the effective interest rate computed at initial recognition).

The carrying amount of the asset is reduced through the use of an allowance account and the loss is recognised in the income statement. Interest income continues to be accrued on the reduced carrying amount using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Loans and receivables together with any associated allowance are written off when there is no realistic prospect of future recovery.

If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a write-off is later recovered, the recovery is credited to the income statement.

Assets carried at cost

If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Impairment losses on these assets are not reversed.

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2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Impairment of financial assets (continued)

Available-for-sale financial assets

For available-for-sale financial assets, the Group assesses at the end of each reporting period whether there is objective evidence that an investment or a group of investments is impaired.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is removed from other comprehensive income and recognised in the income statement.

In the case of equity investments classified as available for sale, objective evidence would include a significant or prolonged decline in the fair value of an investment below its cost. “Significant” is evaluated against the original cost of the investment and “prolonged” against the period in which the fair value has been below its original cost. Where there is evidence of impairment, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the income statement - is removed from other comprehensive income and recognised in the income statement. Impairment losses on equity instruments classified as available for sale are not reversed through the income statement. Increases in their fair value after impairment are recognised directly in other comprehensive income.

The determination of what is “significant” or “prolonged” requires judgement. In making this judgement, the Group evaluates, among other factors, the duration or extent to which the fair value of an investment is less than its cost.

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings, net of directly attributable transaction costs.

Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as follows:

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Notes to Financial Statements

31 July 2016

2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Financial liabilities (continued)

Loans and borrowings

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost, using the effective interest rate method unless the effect of discounting would be immaterial, in which case they are stated at cost. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in finance costs in the income statement.

Financial guarantee contracts

Financial guarantee contracts issued by the Group are those contracts that require a payment to be made to reimburse the holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt instrument. A financial guarantee contract is recognised initially as a liability at its fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, the Group measures the financial guarantee contract at the higher of: (i) the amount of the best estimate of the expenditure required to settle the present obligation at the end of the reporting period; and (ii) the amount initially recognised less, when appropriate, cumulative amortisation.

Derecognition of financial liabilities

A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and a recognition of a new liability, and the difference between the respective carrying amounts is recognised in the income statement.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost for food, beverages, cutlery, linen and supplies used in hotel and restaurant operations is determined on the first-in, first-out basis. Net realisable value is based on estimated selling prices less any estimated costs to be incurred to completion and disposal.

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2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Cash and cash equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and demand deposits, and short term highly liquid investments that are readily convertible into known amounts of cash, are subject to an insignificant risk of changes in value, and have a short maturity of generally within three months when acquired, less bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management.

For the purpose of the consolidated statement of financial position, cash and cash equivalents comprise cash on hand and at banks, including term deposits, and assets similar in nature to cash, which are not restricted as to use.

Provisions

A provision is recognised when a present obligation (legal or constructive) has arisen as a result of a past event and it is probable that a future outflow of resources will be required to settle the obligation, provided that a reliable estimate can be made of the amount of the obligation.

When the effect of discounting is material, the amount recognised for a provision is the present value at the end of the reporting period of the future expenditures expected to be required to settle the obligation. The increase in the discounted present value amount arising from the passage of time is included in finance costs in the income statement.

Income tax

Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss is recognised either in other comprehensive income or directly in equity.

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period, taking into consideration interpretations and practices prevailing in the countries in which the Group operates.

Deferred tax is provided, using the liability method, on all temporary differences at the end of the reporting period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

when the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint ventures, when the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Notes to Financial Statements

31 July 2016

2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Income tax (continued)

Deferred tax assets are recognised for all deductible temporary differences, the carryforward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, the carryforward of unused tax credits and unused tax losses can be utilised, except:

when the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

For the purposes of measuring deferred tax liabilities and deferred tax assets for investment properties that are measured using the fair value model in accordance with HKAS 40 Investment Property , the carrying amounts of such properties are presumed to be recovered through sale, unless the presumption is rebutted. The presumption is rebutted when the investment property is depreciable and is held within a business model of the Group whose business objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through sale. If the presumption is rebutted, deferred tax liabilities and deferred tax assets for such investment properties are measured in accordance with the above general principles set out in HKAS 12 (i.e., based on the expected manner as to how the properties will be recovered).

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2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Revenue recognition

Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be measured reliably, on the following bases:

(a) revenue from the sale of properties is recognised when the significant risks and rewards of properties are transferred to the purchasers, which refers to the time when the construction of relevant properties has been completed and the properties are ready for delivery to the purchasers pursuant to the sales agreements, and collectability of the related receivables is reasonably assured. Deposits and instalments received on properties sold prior to the date of revenue recognition are included in the statement of financial position as deposits received;
(b) rental and building management fee income is recognised in the period in which the properties are let and on the straight-line basis over the lease terms;
(c) service income from hotel and restaurant operations and the provision of other related services is recognised when such services have been provided to customers;
(d) revenue from the sale of food and other operating items is recognised when the food and other operating items are sold to customers and the significant risks and rewards of ownership have been transferred to the customers, provided that the Group maintains neither managerial involvement to the degree usually associated with ownership, nor effective control over the food and other operating items sold;
(e) interest income is recognised on an accrual basis using the effective interest method by applying the rate that exactly discounts the estimated future cash receipts over the expected life of the financial instrument to the net carrying amount of the financial asset; and
(f) dividend income is recognised when the shareholders’ right to receive payment has been established.

Dividends

Final dividends are recognised as a liability when they are approved by the shareholders in a general meeting. Proposed final dividends are disclosed in the notes to the financial statements.

Interim dividends are simultaneously proposed and declared, because the Company’s memorandum of association and bye-laws grant the directors the authority to declare interim dividends. Consequently, interim dividends are recognised immediately as a liability when they are proposed and declared.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Notes to Financial Statements

31 July 2016

2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, i.e., assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. The capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs capitalised. All other borrowing costs are expensed in the period in which they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Foreign currencies

These financial statements are presented in Hong Kong dollars, which is the Company’s functional currency. Each entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that functional currency. Foreign currency transactions recorded by the entities in the Group are initially recorded using their respective functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rates of exchange at the end of the reporting period. Differences arising on settlement or translation of monetary items are recognised in the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was measured. The gain or loss arising on translation of a non-monetary item measured at fair value is treated in line with the recognition of the gain or loss on change in fair value of the item (i.e., translation difference on the item whose fair value gain or loss is recognised in other comprehensive income or income statement is also recognised in other comprehensive income or income statement, respectively).

The functional currencies of certain overseas subsidiaries and associates are currencies other than the Hong Kong dollar. As at the end of the reporting period, the assets and liabilities of these entities are translated into Hong Kong dollars at the exchange rates prevailing at the end of the reporting period and their income statements are translated into Hong Kong dollars at the weighted average exchange rates for the year.

The resulting exchange differences are recognised in other comprehensive income and accumulated in the exchange fluctuation reserve. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in the income statement.

For the purpose of the consolidated statement of cash flows, the cash flows of overseas subsidiaries are translated into Hong Kong dollars at the exchange rates ruling at the dates of the cash flows. Frequently recurring cash flows of overseas subsidiaries which arise throughout the year are translated into Hong Kong dollars at the weighted average exchange rates for the year.

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2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Employee benefits

Share-based payments

The Company operates a share option scheme for the purpose of providing incentives and rewards to eligible participants who contribute to the success of the Group’s operations. Employees (including directors) of the Group receive remuneration in the form of share-based payments, whereby employees render services as consideration for equity instruments (“ equity-settled transactions ”).

The cost of equity-settled transactions with employees for grants after 7 November 2002 is measured by reference to the fair value at the date at which they are granted. The fair value is determined by using the Binomial Option Pricing Model, further details of which are given in note 30 to the financial statements.

The cost of equity-settled transactions is recognised in employee benefit expense, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at the end of each reporting period until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The charge or credit to the income statement for a period represents the movement in the cumulative expense recognised as at the beginning and end of that period.

Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or performance conditions.

For awards that do not ultimately vest because non-market performance and/or service conditions have not been met, no expense is recognised. Where awards include a market or non-vesting condition, the transactions are treated as vesting irrespective of whether the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified, if the original terms of the award are met. In addition, an expense is recognised for any modification that increases the total fair value of the share-based payments, or is otherwise beneficial to the employee as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. This includes any award where non-vesting conditions within the control of either the Group or the employee are not met. However, if a new award is substituted for the cancelled award, and is designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of earnings per share.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Notes to Financial Statements

31 July 2016

2.4 summary of sIgnIfIcant accountIng PolIcIes (contInued)

Employee benefits (continued)

Paid leave carried forward

The Group provides paid annual leave to its employees under their employment contracts on a calendar year basis. Under certain circumstances, such leave which remains untaken as at the year end is permitted to be carried forward and utilised by the respective employees in the following year. An accrual is made at the end of the reporting period for the material expected future cost of such paid leave earned during the current financial year by the employees and carried forward.

Retirement benefits

The Group operates a defined contribution Mandatory Provident Fund retirement benefit scheme (the “ MPF Scheme ”) under the Mandatory Provident Fund Schemes Ordinance, for those employees who are eligible to participate in the MPF Scheme. Contributions are made based on a percentage of the employees’ basic salaries and are charged to the income statement as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are held separately from those of the Group in an independently administered fund. The Group’s employer contributions vest fully with the employees when contributed into the MPF Scheme.

The employees of the Group’s subsidiaries which operate in Vietnam and the People’s Republic of China (the “ PRC ”) are required to participate in central pension schemes operated by the respective governments in Vietnam and the PRC. These subsidiaries are required to contribute a certain percentage of their payroll costs to the central pension schemes. The contributions are charged to the income statement as they become payable in accordance with the rules of the central pension schemes.

3. sIgnIfIcant accountIng Judgements and estImates

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or liabilities affected in the future.

Judgements

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Impairment of assets

In determining whether an asset is impaired or the event previously causing the impairment no longer exists, the Group has to exercise judgement in the area of asset impairment, particularly in assessing: (1) whether an event has occurred that may affect the asset value or such event affecting the asset value has not been in existence; (2) whether the carrying value of an asset can be supported by the net present value of future cash flows which are estimated based upon the continued use of the asset or derecognition; and (3) the appropriate key assumptions to be applied in preparing cash flow projections including whether these cash flow projections are discounted using an appropriate rate. Changing the assumptions selected by management to determine the level of impairment, including the discount rates or the growth rate assumptions in the cash flow projections, could materially affect the net present value used in the impairment test.

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3. sIgnIfIcant accountIng Judgements and estImates (contInued)

Judgements (continued)

Provision for tax indemnity

Provision for tax indemnity is recognised when a present obligation (legal or constructive) has arisen as a result of tax liability arising from disposal of certain property interests in the PRC pursuant to certain indemnity deeds entered into by the Group and it is probable that such tax liability will be required to be settled. Management’s judgement is required to determine (i) the estimated sales proceeds and outgoings; and (ii) the latest development plan and status of individual property development projects. Further details are included in note 33(b) to the financial statements.

Estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets within the next financial year, are described below.

Estimation of fair values of investment properties and available-for-sale financial assets

The best evidence of fair value is current prices in an active market for similar properties in the same location and condition and subject to similar leases and other contracts. In the absence of such information, management determines the amount within a range of reasonable fair value estimates. In making its judgement, management considers information from (i) independent valuations; (ii) current prices in an active market for properties of a different nature, condition or location by reference to available market information; (iii) recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the dates of transactions that occurred at those prices; and (iv) discounted cash flow projections, based on reliable estimates of future cash flows, derived from the terms of any existing lease and other contracts, and (where possible) from external evidence such as current market rates for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of cash flows. The carrying amount at fair value of investment properties as at 31 July 2016 was approximately HK$15,147,376,000 (2015: HK$15,236,780,000) and that of an available-for-sale financial asset, of which the principal asset is an investment property, as at 31 July 2016 was approximately HK$1,204,693,000 (2015: HK$1,051,018,000).

Estimation of total budgeted costs and costs to completion for properties under development for sale

The total budgeted costs for properties under development for sale comprise (i) prepaid land lease payments; (ii) construction costs; and (iii) any other direct costs attributable to the development of the properties. In estimating the total budgeted costs for properties under development for sale, management refers to information such as (i) current offers from contractors and suppliers; and (ii) professional estimation on construction and material costs.

Impairment of loans and receivables

The Group assesses at the end of each reporting period whether there is any objective evidence that a loan/receivable is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics.

Annual Report 2015 - 2016 LAI SUN DEVELOPMENT

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Notes to Financial Statements

31 July 2016

3. sIgnIfIcant accountIng Judgements and estImates (contInued)

Estimation uncertainty (continued)

Useful lives and residual values of items of property, plant and equipment

In determining the useful lives and residual values of items of property, plant and equipment, the Group has to consider various factors, such as technical or commercial obsolescence arising from changes or improvements in production, expected usage of the asset, expected physical wear and tear, the care and maintenance of the asset, and legal or similar limits on the use of the asset. The estimation of the useful life of the asset is based on the experience of the Group with similar assets that are used in a similar way. Additional depreciation is made if the estimated useful lives and/or the residual values of items of property, plant and equipment are different from previous estimation. Useful lives and residual values are reviewed at each financial year end date based on changes in circumstances.

4. segment InformatIon

For management purposes, the Group has the following reportable segments:

(a) the property development and sales segment engages in property development and sale of properties;
(b) the property investment segment engages in the leasing of and sale of investment properties and development of properties for investment purposes;
(c) the hotel operation segment engages in the operation of and provision of consultancy services to hotels;
(d) the restaurant operation segment engages in the operation of and provision of consultancy services to restaurants; and
(e) the “others” segment comprises the Group’s property management and consultancy services business, which provides property management, security and consultancy services to residential, office, industrial and commercial properties, and project management services to property development projects.

Management monitors the results of the Group’s operating segments separately for the purpose of making decisions about resources allocation and performance assessment. Segment performance is evaluated based on reportable segment results, which is a measure of adjusted profit before tax. The adjusted profit before tax is measured consistently with the Group’s profit before tax except that fair value gains on investment properties, interest income, finance costs, dividend income, share of profits and losses of associates and share of profits of joint ventures are excluded from such measurement.

Segment assets mainly exclude interests in associates, interests in joint ventures, available-for-sale financial assets, equity investments at fair value through profit or loss, pledged bank balances and time deposits, and certain cash and cash equivalents.

Segment liabilities mainly exclude bank borrowings, guaranteed notes, tax payable, deferred tax and provision for tax indemnity.

Intersegment sales are transacted with reference to the prevailing market prices.

100 LAI SUN DEVELOPMENT Annual Report 2015 - 2016

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4. segment InformatIon (contInued)

Segment revenue and results

The following table presents revenue and results for the Group’s reportable segments:

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

Property
development and sales Property investment Hotel operation Restaurant operation Others Eliminations Consolidated
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
----- End of picture text -----

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Segment revenue: Sales to external customers 468,691 277,811 701,643 655,476 391,683 383,973 280,664 201,726 25,653 22,700 — — 1,868,334 1,541,686 Intersegment sales — — 15,353 12,400 360 360 — — 24,659 22,700 (40,372) (35,460) — — Other revenue 3,997 4,703 1,085 1,357 15 25 8,525 — 8,409 5,159 — — 22,031 11,244
Total 472,688 282,514 718,081 669,233 392,058 384,358 289,189 201,726 58,721 50,559 (40,372) (35,460) 1,890,365 1,552,930
Segment results 103,524 53,301 573,239 535,444 76,173 69,956 (27,851) (8,587) 3,846 (8,171) — —	728,931 641,943 4,872 3,977 41,332 113,605 51,539 1,289,257 (198,629) (185,245)
Interest income from bank deposits — unallocated Unallocated revenue Fair value gains on investment properties, net — — 51,539 1,289,257 — — — — — — — — Unallocated expenses Proft from operating activities Finance costs Share of profts and losses of associates 986 444 — — — — (7,670) (2,462) — — — — Share of profts and losses of associates — unallocated Share of profts of joint ventures (4,127) (686) 774,596 354,929 — — — — — — — — Proft before tax Tax Proft for the year
	628,045 1,863,537 (178,290) (180,016) (6,684) (2,018) 23,917 92,145 770,469 354,243
	1,237,457 2,127,891 (57,691) (79,397)
	1,179,766 2,048,494

101

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Notes to Financial Statements

31 July 2016

4. segment InformatIon (contInued)

The following table presents the total assets and liabilities and other segment information for the Group’s reportable segments:

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

Property
development and sales Property investment Hotel operation Restaurant operation Others Consolidated
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
----- End of picture text -----

Segment assets and liabilities Segment assets 1,690,614 1,349,283 15,312,609 15,367,059 3,070,692 2,503,471 626,357 381,659 152,583 135,991 Interests in associates 7,343 7,114 — — — — (1,061) 21,669 — — Interests in associates — unallocated Interests in joint ventures 990,385 948,346 5,763,968 4,989,447 — — — — — — Unallocated assets Total assets Segment liabilities 62,467 99,813 187,129 184,020 195,510 122,509 47,472 20,976 6,163 8,344 Bank borrowings Guaranteed notes Other unallocated liabilities Total liabilities Other segment information Amortisation of prepaid land lease payments — — — — 1,027 1,027 — — — — Depreciation 225 352 137 322 17,205 17,615 33,773 19,273 95 69 Depreciation — unallocated Capital expenditure — — 261,888 1,384,367 565,472 1,850,422 96,217 15,898 155 262 Capital expenditure — unallocated	20,852,855 19,737,463 6,282 28,783 3,654,553 3,901,526 6,754,353 5,937,793 3,285,398 2,001,313
	34,553,441 31,606,878
	498,741 435,662 5,402,429 4,283,202 2,709,227 2,703,324 1,051,194 1,081,116
	9,661,591 8,503,304
	1,027 1,027 51,435 37,631 10,684 10,982
	62,119 48,613
	923,732 3,250,949 4,488 7,998
	928,220 3,258,947

102

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4. segment InformatIon (contInued)

Geographical information

The following table presents revenue and assets by geographical location of the assets:

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

Hong Kong United Kingdom Vietnam Others Consolidated
2016 2015 2016 2015 2016 2015 2016 2015 2016 2015
HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
----- End of picture text -----

	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Segment revenue
Sales to external customers	1,328,949	1,035,066	149,713	122,946	385,903	380,775	3,769	2,899	1,868,334	1,541,686
Other revenue	21,626	11,219	391	—	—	4	14	21	22,031	11,244
Total	1,350,575	1,046,285	150,104	122,946	385,903	380,779	3,783	2,920	1,890,365	1,552,930
Segment assets
Non-current assets	16,876,046	15,401,620	2,512,864	2,665,250	263,781	269,930	985	1,430	19,653,676	18,338,230
Current assets	820,506	954,557	30,247	76,713	345,692	364,060	2,734	3,903	1,199,179	1,399,233
Total	17,696,552	16,356,177	2,543,111	2,741,963	609,473	633,990	3,719	5,333	20,852,855	19,737,463

Information about major customers

For both the years ended 31 July 2016 and 31 July 2015, there was no revenue derived from a single customer which contributed more than 10% of the Group’s revenue for the respective years.

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Notes to Financial Statements

31 July 2016

5. related Party transactIons

In addition to the related party transactions and balances detailed elsewhere in the financial statements, the Group entered into the following material transactions with related parties during the year:

(a) Transactions with related parties

Transactions with related parties
		2016	2015
		HK$’000	HK$’000
Rental income and building management fee
received or receivable from eSun Holdings
Limited (“eSun”) and its subsidiaries
(collectively the “eSun Group”), an associate	Note	11,966	11,267
Sharing of corporate salaries on a cost basis
allocated to:
— LSG		7,546	8,657
— the eSun Group		44,710	41,678
Sharing of administrative expenses on a cost
basis allocated to:
— LSG		1,826	2,605
— the eSun Group		6,129	8,631
Rental expenses and building management
fees paid or payable to:
— an associate of LSG	Note	2,087	1,991
— the eSun Group	Note	69	73
Sharing of corporate salaries on a cost basis
allocated from:
— LSG		5,545	5,415
— the eSun Group		5,196	4,702
Sharing of administrative expenses on
a cost basis allocated from:
— LSG		1	22
— the eSun Group		1,359	351
Underwriting commission paid to LSG		9,733	—

Note: These transactions were entered into based on terms stated in the respective agreements or contracts and were charged on bases mutually agreed by the respective parties.

Certain of the above related party transactions also constitute continuing connected transactions as defined in chapter 14A of the Rules Governing the Listing of Securities on the Stock Exchange (the “ Listing Rules ”) and their details are disclosed in the Report of the Directors.

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5. related Party transactIons (contInued)

(b) Compensation of key management personnel of the Group

	2016 HK$’000	2015 HK$’000
Short term employee benefts	31,290	33,846
Post-employment benefts	264	260
Total compensation paid to key management personnel	31,554	34,106

Further details of directors’ emoluments are included in note 9 to the financial statements.

6. turnover and other revenue

Turnover comprises the proceeds from the sale of properties, rental income and building management fee, and income from hotel, restaurant and other operations.

An analysis of turnover and other revenue are as follows:

	2016 HK$’000	2015 HK$’000
Turnover
Sale of properties	468,691	277,811
Rental income and building management fee	701,643	655,476
Hotel, restaurant and other operations	698,000	608,399
	1,868,334	1,541,686
Other revenue
Interest income from bank deposits	4,872	3,977
Other interest income	7,751	5,130
Dividend income from unlisted available-for-sale fnancial assets	36,215	97,149
Gain on disposal of items of property, plant and equipment	—	69
Gain on disposal of associates	5,338	—
Gain on bargain purchase upon acquisition of a subsidiary (note 42)	3,128	—
Fair value gain on a listed equity investment at fair value
through proft or loss	—	3,415
Others	10,931	19,086
	68,235	128,826

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Notes to Financial Statements

31 July 2016

7. ProfIt from oPeratIng actIvItIes

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

		2016	2015
	Notes	HK$’000	HK$’000
Cost of inventories sold		111,809	80,132
Cost of completed properties sold		336,139	198,892
Depreciation#	14	62,119	48,613
Amortisation of prepaid land lease payments*	15	1,027	1,027
Staf costs (including directors’ remuneration
— note 9):
Wages and salaries		288,324	256,095
Pension scheme contributions		8,076	6,704
Employee share option benefts		461	528
		296,861	263,327
Auditors’ remuneration		3,508	2,885
Loss/(gain) on disposal of items of property,
plant and equipment		100*	(69)@
Impairment loss on an unlisted available-for-sale
fnancial asset*		—	6,141
Fair value loss/(gain) on a listed equity investment
at fair value through proft or loss		4,247*	(3,415)@
Minimum lease payments under operating leases		37,749	20,915
Contingent rents		4,264	2,628
Total operating lease payments^		42,013	23,543
Minimum lease income under operating leases		(701,230)	(654,286)
Contingent rents		(414)	(1,190)
Total operating lease income		(701,644)	(655,476)
Less: Outgoings		93,304	83,664
Net rental income		(608,340)	(571,812)
Foreign exchange diferences, net*		6,625	11,587

These items are included in “other operating expenses” on the consolidated income statement.

(b) Other than those mentioned in note 7(a) above, “other operating expenses” also included service fee for operation of a club in the Group’s hotel operation in Vietnam of approximately HK$64,616,000 (2015: HK$67,296,000).

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8. fInance costs

fInance costs
	2016 HK$’000	2015 HK$’000
Interest on bank borrowings	111,396	92,694
Interest on guaranteed notes	159,085	158,825
Bank fnancing charges	41,839	22,727
	312,320	274,246
Less: Amount capitalised in a hotel development project (note 14)	(91,097)	(72,000)
Amount capitalised in properties under development
for sale (note 17)	(42,933)	(22,230)
	178,290	180,016

Where funds have been borrowed generally and used for the purpose of obtaining qualifying assets, a capitalisation rate of 4.40% (2015: 4.45%) has been applied to the expenditure on the individual assets for the year ended 31 July 2016.

9. dIrectors’ remuneratIon

Directors’ remuneration for the year, disclosed pursuant to the Listing Rules, section 383(1)(a), (b), (c) and (f) of the Hong Kong Companies Ordinance and Part 2 of the Companies (Disclosure of Information about Benefits of Directors) Regulation, is as follows:

Benefts of Directors) Regulation, is as follows:
	2016 HK$’000	2015 HK$’000
Fees	1,325	1,250
Other emoluments:
Salaries, allowances and benefts in kind	29,965	32,596
Pension scheme contributions	264	260
	30,229	32,856
	31,554	34,106

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Notes to Financial Statements

31 July 2016

9. dIrectors’ remuneratIon (contInued)

The remuneration paid to executive directors, non-executive directors and independent non-executive directors during the year were as follows:

	Fees HK$’000	Salaries, allowances and benefts in kind HK$’000	Pension scheme contributions HK$’000	Total HK$’000
2016
Executive directors:
Lam Kin Ngok, Peter	—	15,778	18	15,796
Chew Fook Aun	—	7,883	18	7,901
Lau Shu Yan, Julius^	—	4,538	210	4,748
Lam Hau Yin, Lester	—	1,766	18	1,784
	—	29,965	264	30,229
Non-executive directors:
Lam Kin Ming	250	—	—	250
U Po Chu	250	—	—	250
	500	—	—	500
Independent non-executive directors:
Ip Shu Kwan, Stephen	275	—	—	275
Lam Bing Kwan	275	—	—	275
Leung Shu Yin, William	275	—	—	275
	825	—	—	825
	1,325	29,965	264	31,554

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9. dIrectors’ remuneratIon (contInued)

		Salaries,
		allowances	Pension
		and benefts	scheme
	Fees	in kind	contributions	Total
	HK$’000	HK$’000	HK$’000	HK$’000
2015
Executive directors:
Lam Kin Ngok, Peter	—	18,174	18	18,192
Chew Fook Aun	—	8,089	18	8,107
Lau Shu Yan, Julius^	—	4,638	206	4,844
Lam Hau Yin, Lester	—	1,695	18	1,713
	—	32,596	260	32,856
Non-executive directors:
Lam Kin Ming	250	—	—	250
U Po Chu	250	—	—	250
	500	—	—	500
Independent non-executive directors:
Ip Shu Kwan, Stephen	250	—	—	250
Lam Bing Kwan	250	—	—	250
Leung Shu Yin, William	250	—	—	250
	750	—	—	750
	1,250	32,596	260	34,106

There were no other emoluments payable to the independent non-executive directors during the year (2015: Nil).

There was no arrangement under which a director waived or agreed to waive any remuneration during the year (2015: Nil).

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Notes to Financial Statements

31 July 2016

10. emPloyees’ remuneratIon

The five highest paid employees during the year included three (2015: three) directors, details of whose remuneration are set out in note 9 above. Details of the remuneration of the remaining two (2015: two) highest paid employees who are neither a director nor chief executive officer of the Company are as follows:

follows:
	2016	2015
	HK$’000	HK$’000
Salaries, allowances and benefts in kind	6,498	5,308
Pension scheme contributions	120	111
	6,618	5,419

The number of non-director and non-chief executive highest paid employees whose remuneration fell within the following bands is as follows:

		Number of employees	Number of employees
		2016	2015
HK$2,000,001	to HK$2,500,000	1	1
HK$3,000,001	to HK$3,500,000	—	1
HK$4,000,001	to HK$4,500,000	1	—

11. tax

Hong Kong profits tax has been provided at the rate of 16.5% (2015: 16.5%) on the estimated assessable profits arising in Hong Kong during the year.

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

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11. tax (contInued)

tax (contInued)
	2016 HK$’000	2015 HK$’000
Current tax
Hong Kong	38,494	44,321
Overseas	26,724	23,135
	65,218	67,456
Deferred tax (note 28)	6,933	9,400
Prior years’ (overprovision)/underprovision
Hong Kong	(20)	(35)
Overseas	(14,440)	2,576
	(14,460)	2,541
Tax charge for the year	57,691	79,397

A reconciliation of the tax charge applicable to profit before tax at the statutory rate for the location in which the Company and the majority of its subsidiaries are domiciled to the tax charge at the effective tax rate is as follows:

rate is as follows:
	2016 HK$’000	2015 HK$’000
Proft before tax	1,237,457	2,127,891
Less: Share of profts and losses of associates	(17,233)	(90,127)
Share of profts of joint ventures	(770,469)	(354,243)
Proft before tax attributable to the Group	449,755	1,683,521
Tax at the statutory tax rate of 16.5% (2015: 16.5%)	74,210	277,781
Higher tax rate for other countries	2,433	6,655
Adjustments in respect of current tax of previous periods	(14,460)	2,541
Income not subject to tax	(38,124)	(251,927)
Expenses not deductible for tax purposes	33,078	42,121
Tax losses utilised from previous periods	(19,209)	(5,187)
Tax losses not recognised	19,763	7,413
Tax charge for the year	57,691	79,397

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Notes to Financial Statements

31 July 2016

12. dIvIdend

dIvIdend
	2016	2015
	HK$’000	HK$’000
Proposed fnal — HK0.19 cent (2015: HK0.25 cent)
per ordinary share	57,302	50,236

The proposed final dividend for the year is subject to the approval of the Company’s shareholders at the forthcoming annual general meeting.

13. earnIngs Per share attrIButaBle to oWners of the comPany

	2016	2015
	HK$’000	HK$’000
Earnings
Earnings for the purpose of basic earnings per share	1,148,390	2,018,262
Efect of dilutive potential ordinary shares arising from
adjustment to the share of proft of an associate based on
dilution of its earnings per share	—	(90)
Earnings for the purpose of diluted earnings per share	1,148,390	2,018,172
	’000	’000
		(Adjusted)
Number of shares
Weighted average number of ordinary shares for the purpose
of basic earnings per share	25,305,631	20,693,323
Efect of dilutive potential ordinary shares arising from
share options	17,411	85,430
Weighted average number of ordinary shares for the purpose
of diluted earnings per share	25,323,042	20,778,753

The exercise of share options of an associate and the conversion of the outstanding convertible notes issued by an associate have an anti-dilutive effect on the basic earnings per share as presented during the year ended 31 July 2016.

The basic and diluted earnings per share for the year ended 31 July 2015 have been adjusted to reflect the effect of the rights issue of the Company during the year (note 29(c)).

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14. ProPerty, Plant and equIPment

ProPerty,	Pla	nt and	equI	Pment
					Furniture,
		Hotel	Leasehold	Leasehold	fxtures and	Motor		Motor	Construction
		properties	buildings	improvements	equipment	vehicles	Computers	vessels	in progress	Total
	Notes	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Cost:
At 1 August 2014		357,035	237,627	109,447	152,102	23,965	15,617	53,594	13,258	962,645
Finance cost capitalised	8	—	—	—	—	—	—	—	72,000	72,000
Additions		—	—	9,616	10,355	9,519	756	—	1,772,396	1,802,642
Disposals/write-of		—	—	(14)	(37,096)	(4,311)	(3,345)	—	—	(44,766)
At 31 July 2015 and
1 August 2015		357,035	237,627	119,049	125,361	29,173	13,028	53,594	1,857,654	2,792,521
Finance cost capitalised	8	—	—	—	—	—	—	—	91,097	91,097
Additions		—	—	45,891	35,024	686	2,879	1,885	463,826	550,191
Acquisition of
subsidiaries	42	—	—	14,624	10,217	—	205	—	—	25,046
Disposals/write-of		—	—	(2,153)	(11,568)	(37)	(171)	—	—	(13,929)
At 31 July 2016		357,035	237,627	177,411	159,034	29,822	15,941	55,479	2,412,577	3,444,926
Accumulated depreciation:
At 1 August 2014		139,055	25,065	56,147	115,336	23,302	12,116	36,989	—	408,010
Depreciation provided
during the year	7(a)	8,209	4,858	14,337	12,680	2,478	1,307	4,744	—	48,613
Disposals/write-of		—	—	(7)	(36,478)	(4,311)	(3,573)	—	—	(44,369)
At 31 July 2015 and
1 August 2015		147,264	29,923	70,477	91,538	21,469	9,850	41,733	—	412,254
Depreciation provided
during the year	7(a)	8,209	4,857	25,043	15,440	2,586	1,706	4,278	—	62,119
Disposals/write-of		—	—	(2,152)	(11,194)	(1)	(85)	—	—	(13,432)
At 31 July 2016		155,473	34,780	93,368	95,784	24,054	11,471	46,011	—	460,941
Net carrying amount:
At 31 July 2016		201,562	202,847	84,043	63,250	5,768	4,470	9,468	2,412,577	2,983,985
At 31 July 2015		209,771	207,704	48,572	33,823	7,704	3,178	11,861	1,857,654	2,380,267

At 31 July 2016, the Group’s construction in progress with a carrying amount of approximately HK$2,390,355,000 (2015: Nil) were pledged to banks to secure banking facilities granted to the Group (note 26).

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Notes to Financial Statements

31 July 2016

15. PrePaId land lease Payments

PrePaId land lease Payments
	2016	2015
	HK$’000	HK$’000
Cost:
At beginning and end of year	35,960	35,960
Accumulated amortisation:
At beginning of year	14,032	13,005
Amortisation provided for the year (note 7(a))	1,027	1,027
At end of year	15,059	14,032
Net carrying amount:
At beginning of year	21,928	22,955
At end of year	20,901	21,928

16. Investment ProPertIes

	2016	2015
	HK$’000	HK$’000
Carrying amount at beginning of year	15,236,780	12,669,295
Exchange realignment	(402,829)	(104,536)
Additions, at cost	261,886	1,384,305
Disposal	—	(1,541)
Fair value gains, net	51,539	1,289,257
Carrying amount at end of year	15,147,376	15,236,780

Most of the investment properties of the Group are leased to third parties under operating leases, further summary details of which are included in note 34(a) to the financial statements.

Certain investment properties of the Group with carrying amounts of approximately HK$14,912,746,000 (2015: HK$15,025,950,000) were pledged to banks to secure banking facilities granted to the Group (note 26).

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16. Investment ProPertIes (contInued)

Valuation process

The directors of the Company have determined that all investment properties are completed properties held for rental, based on the nature, characteristics and risks of each property. The Group’s investment properties were revalued on 31 July 2016 based on valuations performed by Savills Valuation and Professional Services Limited and Savills (UK) Limited, independent professionally qualified valuers, at HK$12,684,630,000 (2015: HK$12,580,830,000) and HK$2,462,746,000 (2015: HK$2,655,950,000), respectively. Each year, the Group’s management decides to appoint which external valuer to be responsible for the external valuations of the Group’s properties. Selection criteria include market knowledge, reputation, independence and whether professional standards are maintained. The Group’s management has discussions with the valuer on the valuation assumptions and valuation results twice a year when the valuations are performed for interim and annual financial reporting.

Valuation techniques

Fair value measurement using significant unobservable inputs (Level 3)

Fair value of investment properties is generally determined using the income capitalisation method and, wherever appropriate, by the direct comparison method. The income capitalisation method is based on the capitalisation of the net income and reversionary income potential by adopting appropriate capitalisation rates, which are derived from an analysis of sales transactions and valuers’ interpretations of prevailing investor requirements or expectations. The prevailing market rents adopted in the valuation are determined with reference to recent lettings, within the subject properties and other comparable properties. The direct comparison method is based on comparing the property to be valued directly with other comparable properties, which have recently been transacted.

Information about fair value measurement using significant unobservable inputs (Level 3) 2016

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

Range of Relationship of
Valuation Unobservable unobservable unobservable inputs
Description technique inputs inputs to fair value
----- End of picture text -----

Completed	Income	Average monthly	HK$13 to HK$350	The higher the
properties	capitalisation	market rent per		market rent,
held for rental	method	square foot		the higher the
fair value
		Capitalisation rate	3.4% to 5.4%	The higher the
				capitalisation
				rate, the lower the
				fair value

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Notes to Financial Statements

31 July 2016

16. Investment ProPertIes (contInued)

Valuation techniques (continued)

Information about fair value measurement using significant unobservable inputs (Level 3) (continued)

2015

(continued) 2015
			Range of	Relationship of
	Valuation	Unobservable	unobservable	unobservable inputs
Description	technique	inputs	inputs	to fair value
Completed	Income	Average monthly	HK$13 to HK$332	The higher the
properties	capitalisation	market rent per		market rent,
held for rental	method	square foot		the higher the
				fair value
		Capitalisation rate	3.4% to 5.2%	The higher the
				capitalisation
				rate, the lower the
				fair value

During the year, there were no transfers of fair value measurements between Level 1 and Level 2 and no transfers into or out of Level 3 (2015: Nil).

17. ProPertIes under develoPment for sale

ProPertIes under develoPment for sale
	2016	2015
	HK$’000	HK$’000
At beginning of year, at cost	653,845	109,158
Additions	625,625	522,457
Interest and bank fnancingcharges capitalised (note 8)	42,933	22,230
At end ofyear, at cost	1,322,403	653,845

As at 31 July 2016, certain of the Group’s properties under development for sale with a total carrying amount of approximately HK$634,624,000 (2015: HK$545,247,000) were pledged to banks to secure banking facilities granted to the Group (note 26).

18. Interests In assocIates/Interests In JoInt ventures

(a) Interests in associates

Interests in associates
	2016	2015
	HK$’000	HK$’000
Share of net assets	3,495,531	3,751,527
Amounts due from associates	340,550	356,676
Provision for impairment	(175,246)	(177,894)
	3,660,835	3,930,309
Market value of listed shares at the end
of the reporting period	390,903	422,175

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18. Interests In assocIates/Interests In JoInt ventures (contInued)

(a) Interests in associates (continued)

The amounts due from associates are unsecured, interest-free and not expected to be repayable in the foreseeable future. In the opinion of the directors, these balances are considered as part of the Group’s net investments in the associates.

The provision for impairment in respect of the amounts due from associates at the end of the reporting period was determined on the basis of the amounts recoverable from the associates with reference to the fair value of the underlying assets held by the associates.

During the year, the provision for impairment decreased by approximately HK$2,648,000 which represented exchange differences (2015: HK$876,000).

Details of the principal associates are set out in note 40 to the financial statements.

The eSun Group

The financial year end date of the eSun Group, which is considered as a principal associate of the Group, is coterminous with that of the Group.

The eSun Group is accounted for using the equity method in these financial statements.

(i) In June 2014, a wholly-owned subsidiary of eSun issued RMB650 million of 8.375% secured guaranteed notes which will mature in 2018. In relation to these notes, the Company entered into a keepwell and security shortfall support deed (the “ Keepwell Deed ”) and a deed of equity interest purchase undertaking (the “ Undertaking Deed ”) on 17 June 2014.

Pursuant to the Keepwell Deed and the Undertaking Deed, the Company shall, if eSun Group defaults on the notes and the proceeds from disposal of eSun Group’s assets charged as security are insufficient to discharge the relevant amounts outstanding under the notes, use its best endeavours to as soon as reasonably practicable obtain all relevant approvals, including shareholders’ approvals, to (i) provide sufficient funds to eSun Group so as to satisfy the security shortfall amount, if any; (ii) invest or procure a subsidiary to invest in eSun Group by way of an equity investment or advancement of shareholders’ loan or a combination thereof; and (iii) purchase the equity interest held by eSun Group as prescribed under the Undertaking Deed.

During the year, eSun Group repurchased and cancelled a total of RMB581 million in principal amount of the notes. eSun Group also redeemed and cancelled a total of RMB69 million in principal amount of the outstanding notes. The Keepwell Deed and the Undertaking Deed were cancelled accordingly.

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Notes to Financial Statements

31 July 2016

18. Interests In assocIates/Interests In JoInt ventures (contInued)

(a) Interests in associates (continued)

The eSun Group (continued)

The below summarised financial information is extracted from the published consolidated financial statements of the eSun Group. The consolidated financial statements of the eSun Group are prepared in accordance with HKFRSs and comply with the Group’s accounting policies.

	31 July	31 July
	2016	2015
	HK$’000	HK$’000
Current assets	7,407,402	7,811,709
Non-current assets	20,994,349	21,064,984
Total assets	28,401,751	28,876,693
Current liabilities	(3,175,552)	(4,753,177)
Non-current liabilities	(8,961,415)	(6,981,001)
Total liabilities	(12,136,967)	(11,734,178)
Equity attributable to owners of eSun	8,599,258	9,164,680
Non-controlling interests	7,665,526	7,977,835
Total equity	16,264,784	17,142,515
	Year ended	Year ended
	31 July	31 July
	2016	2015
	HK$’000	HK$’000
Turnover	3,369,275	3,329,495
Other revenue (including other operating gains
and share of profts and losses of associates)	205,069	247,892
Fair value gains on investment properties	522,043	964,632
Share of profts and losses of joint ventures	79,623	83,703
Expenses	(3,863,004)	(4,003,846)
Proft for the year	313,006	621,876
Other comprehensive expense for the year	(1,104,025)	(141,109)
Total comprehensive (expense)/income for the year	(791,019)	480,767
Proft for the year attributable to owners of eSun	80,825	258,231
Total comprehensive (expense)/income for the year
attributable to owners of eSun	(502,306)	197,975

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18. Interests In assocIates/Interests In JoInt ventures (contInued)

(a) Interests in associates (continued)

The eSun Group (continued)

Reconciliation of the above summarised financial information of the eSun Group to the carrying amount of the interests in associates recognised in the consolidated financial statements is as follows:

	31 July 2016 HK$’000	31 July 2015 HK$’000
Net assets attributable to owners of eSun	8,599,258	9,164,680
The Group’s 41.92% (2015: 41.92%) interest
in the eSun Group	3,604,809	3,841,834
The Group’s share of net liabilities of the remaining
associates not individually material	(109,278)	(90,307)
The Group’s share of net assets of associates	3,495,531	3,751,527
	Year ended 31 July 2016 HK$’000	Year ended 31 July 2015 HK$’000
The Group’s share of loss and total comprehensive
expense of the remaining associates not
individually material	(16,649)	(18,123)

(b) Interests in joint ventures

Interests in joint ventures
	2016 HK$’000	2015 HK$’000
Share of net assets	4,728,150	3,961,515
Amounts due from joint ventures	2,026,203	1,976,278
	6,754,353	5,937,793

The amounts due from joint ventures are unsecured, interest-free and not expected to be repayable in the foreseeable future. In the opinion of the directors, these balances are considered as part of the Group’s net investments in the joint ventures.

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Notes to Financial Statements

31 July 2016

18. Interests In assocIates/Interests In JoInt ventures (contInued)

(b) Interests in joint ventures (continued)

Certain shares in joint ventures held by the Group were pledged to banks to secure banking facilities granted to the joint ventures.

All joint ventures are 50% held by the Group and are accounted for using the equity method in these financial statements. During the year, no dividend was declared by the joint ventures (2015: HK$20,000,000).

Details of the principal joint ventures are set out in note 41 to the financial statements.

The summarised financial information below represents amounts shown in the financial statements of the respective joint ventures prepared in accordance with HKFRSs and complies with the Group’s accounting policies.

Best Value International Limited and its subsidiaries (the “Best Value Group”)

The Best Value Group, a 50%-owned joint venture, principally held a property for rental in Hong Kong. The property, “8 Observatory Road”, is located at 8 Observatory Road, Tsim Sha Tsui, Hong Kong.

	31 July	31 July
	2016	2015
	HK$’000	HK$’000
Current assets	81,882	63,645
Non-current assets	3,500,000	3,000,000
Total assets	3,581,882	3,063,645
Current liabilities	(59,218)	(78,067)
Non-current liabilities	(1,274,180)	(1,274,180)
Total liabilities	(1,333,398)	(1,352,247)
The above amounts of assets and liabilities
include the following:
Cash and cash equivalents	65,263	62,415
Non-current fnancial liabilities (excluding
trade and other payables)	(1,274,180)	(1,274,180)

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18. Interests In assocIates/Interests In JoInt ventures (contInued)

(b) Interests in joint ventures (continued)

Best Value International Limited and its subsidiaries (the “Best Value Group”) (continued)

	Year ended Year ended
	31 July 31 July
	2016 2015
	HK$’000 HK$’000
Turnover	60,011 —
Proft and total comprehensive income for the year	537,086 372,057

Reconciliation of the above summarised financial information of the Best Value Group to the carrying amount of the interest in the Best Value Group recognised in the consolidated financial statements is as follows:

	31 July 2016 HK$’000	31 July 2015 HK$’000
Net assets of the Best Value Group	2,248,484	1,711,398
The Group’s 50% ownership interest
in the Best Value Group	1,124,242	855,699
Amount due from the Best Value Group	637,090	637,090
Carrying amount of the Group’s interest in the
Best Value Group	1,761,332	1,492,789

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Notes to Financial Statements

31 July 2016

18. Interests In assocIates/Interests In JoInt ventures (contInued)

(b) Interests in joint ventures (continued)

Diamond Path Limited and its subsidiaries (the “Diamond Path Group”)

The Diamond Path Group, a 50%-owned joint venture, was principally engaged in development of a residential/commercial project in Hong Kong. The project, “Alto Residences”, is located at Area 68A2, Tseung Kwan O, Hong Kong.

68A2, Tseung Kwan O, Hong Kong.
	31 July	31 July
	2016	2015
	HK$’000	HK$’000
Current assets	67,495	15,596
Non-current assets	3,706,770	3,312,961
Total assets	3,774,265	3,328,557
Current liabilities	(7,827)	(67,439)
Non-current liabilities	(3,776,851)	(3,263,309)
Total liabilities	(3,784,678)	(3,330,748)
The above amounts of assets and liabilities
include the following:
Cash and cash equivalents	54,654	15,084
Non-current fnancial liabilities (excluding
trade and other payables and provisions)	(3,760,576)	(3,263,309)
	Year ended	Year ended
	31 July	31 July
	2016	2015
	HK$’000	HK$’000
Turnover	—	—
Loss and total comprehensive expense for the year	(8,223)	(1,247)

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18. Interests In assocIates/Interests In JoInt ventures (contInued)

(b) Interests in joint ventures (continued)

Diamond Path Limited and its subsidiaries (the “Diamond Path Group”) (continued)

Reconciliation of the above summarised financial information of the Diamond Path Group to the carrying amount of the interest in the Diamond Path Group recognised in the consolidated financial statements is as follows:

	31 July 2016 HK$’000	31 July 2015 HK$’000
Net liabilities of the Diamond Path Group	(10,413)	(2,191)
The Group’s 50% ownership interest in the Diamond
Path Group	(5,206)	(1,095)
Amount due from the Diamond Path Group	995,591	945,591
Carrying amount of the Group’s interest in the
Diamond Path Group	990,385	944,496

Diamond String Limited (“Diamond String”)

Diamond String, a 50%-owned joint venture, principally held a property for rental in Hong Kong. The property, “CCB Tower”, is located at 3 Connaught Road Central, Hong Kong.

	31 July 2016 HK$’000	31 July 2015 HK$’000
Current assets	197,885	233,201
Non-current assets	8,812,404	7,902,359
Total assets	9,010,289	8,135,560
Current liabilities	(221,314)	(244,347)
Non-current liabilities	(1,570,748)	(1,685,091)
Total liabilities	(1,792,062)	(1,929,438)

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Notes to Financial Statements

31 July 2016

18. Interests In assocIates/Interests In JoInt ventures (contInued)

(b) Interests in joint ventures (continued)

Diamond String Limited (“Diamond String”) (continued)

	31 July	31 July
	2016	2015
	HK$’000	HK$’000
The above amounts of assets and liabilities include
the following:
Cash and cash equivalents	178,412	204,923
Non-current fnancial liabilities (excluding
trade and other payables and provisions)	(1,484,318)	(1,600,342)
	Year ended	Year ended
	31 July	31 July
	2016	2015
	HK$’000	HK$’000
Turnover	227,474	227,297
Proft and total comprehensive income for the year	1,012,105	337,801
The above proft and total comprehensive income for
the year include the following:
Interest income	227	516
Interest expense	(25,388)	(25,891)

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18. Interests In assocIates/Interests In JoInt ventures (contInued)

(b) Interests in joint ventures (continued)

Diamond String Limited (“Diamond String”) (continued)

Reconciliation of the above summarised financial information of Diamond String to the carrying amount of the interest in Diamond String recognised in the consolidated financial statements is as follows:

follows:
	31 July 2016 HK$’000	31 July 2015 HK$’000
Net assets of Diamond String	7,218,227	6,206,122
The Group’s 50% ownership interest in Diamond String	3,609,114	3,103,061
Amount due from Diamond String	393,522	393,597
Carrying amount of the Group’s interest in Diamond String	4,002,636	3,496,658

19. avaIlaBle-for-sale fInancIal assets

avaIlaBle-for-sale fInancIal assets
	2016 HK$’000	2015 HK$’000
Unlisted equity investments, at fair value	1,368,774	1,202,233
Unlisted equity investments, at cost	38,460	38,460
Provision for impairment	(25,208)	(25,208)
	1,382,026	1,215,485

As at 31 July 2016, unlisted investments of the Group with a carrying amount of approximately HK$13,252,000 (2015: HK$13,252,000) were stated at cost less impairment because the directors are of the opinion that the variability in the range of reasonable fair value estimates is significant and the probabilities of the various estimates within the range cannot be reasonably assessed and used in estimating the fair value.

In the prior year, the directors considered an unlisted equity investment had been impaired and an impairment loss of approximately HK$6,141,000 was reclassified from other comprehensive income and recognised in the income statement for that year.

As at 31 July 2016, included in available-for-sale financial assets at fair value was an equity interest in Bayshore Development Group Limited (“ Bayshore ”) of approximately HK$1,204,693,000 (2015: HK$1,051,018,000). The principal activity of Bayshore is property investment.

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Notes to Financial Statements

31 July 2016

19. avaIlaBle-for-sale fInancIal assets (contInued)

Valuation techniques

Fair value measurement using significant unobservable inputs (Level 3)

Fair value of the equity interest in Bayshore has been estimated using the fair value of investment property held by Bayshore, which is determined by the direct comparison method and the income capitalisation method detailed below.

The properties are valued by the direct comparison method on the assumption that each property can be sold in its existing state subject to existing tenancies or otherwise with the benefit of vacant possession and by referring to comparable sales transactions as available in the relevant markets. Comparison is based on prices realised on actual transactions or asking prices of comparable properties. Comparable properties with similar sizes, characters and locations are analysed, and carefully weighed against all respective advantages and disadvantages of each property in order to arrive at a fair comparison of value.

The properties are also valued by the income capitalisation approach taking into account the rents passing of the properties and the reversionary potential of the tenancies, and reconciling the two approaches, if applicable.

Information about fair value measurement using significant unobservable inputs (Level 3) 2016

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

Relationship of unobservable inputs
Valuation technique Unobservable inputs to fair value
----- End of picture text -----

Income capitalisation	Average monthly market rent	HK$122	The higher the market rent,
method	per square foot		the higher the fair value
	Capitalisation rate	3.0%	The higher the capitalisation
			rate, the lower the fair value
2015
			Relationship of unobservable inputs
Valuation technique	Unobservable inputs		to fair value
Income capitalisation	Average monthly market rent	HK$107	The higher the market rent,
method	per square foot		the higher the fair value
	Capitalisation rate	3.0%	The higher the capitalisation
			rate, the lower the fair value

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20. Pledged Bank Balances and tIme dePosIts and cash and cash equIvalents

Pledged Bank Balances and tIme dePosIt equIvalents	s and cas	h and cash
	2016 HK$’000	2015 HK$’000
Cash and bank balances	936,827	586,250
Time deposits	1,634,096	667,255
	2,570,923	1,253,505
Less: Pledged balances for bank borrowings:
Bank balances	(116,100)	(100,966)
Time deposits	(100,141)	(84,501)
Pledged bank balances and time deposits (note 26)	(216,241)	(185,467)
Cash and cash equivalents	2,354,682	1,068,038

The conversion of Vietnamese Dong (“ VND ”)/Renminbi (“ RMB ”) denominated cash and bank balances and time deposits into foreign currencies and the remittance of such foreign currencies denominated balances out of Vietnam/the PRC are subject to the relevant rules and regulations of foreign exchange control promulgated by the respective government authorities concerned. As at 31 July 2016, such VND and RMB denominated cash and bank balances and time deposits of the Group amounted to approximately HK$261,276,000 (2015: HK$70,815,000) and approximately HK$1,073,000 (2015: HK$574,000), respectively.

Cash at banks earns interest at floating rates based on bank deposit rates. Short term time deposits are spread over varying periods up to one month based on the estimated cash requirements of the Group, and earn interest at the respective short term time deposit rates. Bank balances and time deposits are deposited with creditworthy banks with no recent history of default.

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Notes to Financial Statements

31 July 2016

21. dePosIts PaId and other receIvaBles

	2016	2015
	HK$’000	HK$’000
Rental and other deposits	19,025	10,722
Loan receivables:
Variable-rate mortgage loan receivables	12,046	15,128
Fixed-rate other loan receivables	99,355	97,569
	111,401	112,697
Other receivables	30,560	9,228
Deposits paid:
For purchase of items of property, plant and equipment	13,498	9,321
For additions to investment properties	6,578	—
	20,076	9,321
	181,062	141,968

22. comPleted ProPertIes for sale

The completed properties for sale were carried at cost at the end of the reporting period.

23. equIty Investments at faIr value through ProfIt or loss

equIty Investments at faIr value through Pro	fIt or loss
	2016	2015
	HK$’000	HK$’000
Equity investments at market value	—	5,574

The above equity instruments as at the end of the reporting period were classified as held for trading.

24. deBtors, dePosIts PaId and other receIvaBles

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

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24. deBtors, dePosIts PaId and other receIvaBles (contInued)

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

	2016 HK$’000	2015 HK$’000
Trade debtors:
Not yet due or less than 30 days past due	15,653	7,257
31 - 60 days past due	2,102	1,358
61 - 90 days past due	853	403
Over 90 days past due	3,492	2,088
	22,100	11,106
Other receivables	78,776	50,112
Deposits paid and prepayments	76,132	114,454
	177,008	175,672

Debtors that were past due but not impaired mainly relate to a number of independent customers that have a good track record with the Group. Based on past experience, the directors of the Company are of the opinion that no provision for impairment is necessary in respect of these balances as there has not been a significant change in credit quality and rental deposits are received by the Group in advance from its customers, and accordingly, the balances are still considered fully recoverable. Other than rental deposits received, the Group does not hold any collateral or other credit enhancements over these balances.

25. credItors, dePosIts receIved and accruals

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

	2016 HK$’000	2015 HK$’000
Trade creditors:
Not yet due or less than 30 days past due	19,288	11,611
31 - 60 days past due	1,176	458
61 - 90 days past due	143	22
Over 90 days past due	1,148	479
	21,755	12,570
Other payables and accruals	285,696	194,668
Deposits received and other provisions	153,137	202,063
	460,588	409,301

The trade creditors are non-interest-bearing and normally with one month credit period.

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Notes to Financial Statements

31 July 2016

26. Bank BorroWIngs

Bank BorroWIngs
	Efective annual interest rate (%)	2016 HK$’000	2015 HK$’000
Current
Bank borrowings — secured	1.9 - 3.0
	(2015: 2.0 - 3.4)	126,709	1,012,594
Non-current
Bank borrowings — secured	1.9 - 3.0
	(2015: 2.0 - 3.4)	5,275,720	3,270,608
		5,402,429	4,283,202
		2016	2015
		HK$’000	HK$’000
Analysed into:
Bank borrowings repayable:
Within one year		126,709	1,012,594
In the second year		154,229	1,331,330
In the third to ffth years, inclusive		5,121,491	1,939,278
		5,402,429	4,283,202

The Group’s bank borrowings as at the end of the reporting period were secured, inter alia, by:

(i) fixed charges over certain items of property, plant and equipment, certain investment properties and certain properties under development for sale of the Group with carrying amounts of approximately HK$2,390,355,000 (2015: Nil) (note 14), HK$14,912,746,000 (2015: HK$15,025,950,000) (note 16) and HK$634,624,000 (2015: HK$545,247,000) (note 17), respectively;
(ii) floating charges over all assets of certain subsidiaries of the Group with the aggregate carrying amounts of approximately HK$10,233,147,000 (2015: HK$7,075,238,000), of which the carrying amounts of the items of property, plant and equipment, investment properties and properties under development of approximately HK$2,390,355,000 (2015: Nil), HK$6,832,746,000 (2015: HK$6,985,950,000) and HK$634,624,000 (2015: Nil), respectively, are also included in note (i) above;
(iii) charges over certain bank balances and time deposits of the Group with an aggregate carrying amounts of approximately HK$216,241,000 (2015: HK$185,467,000) (note 20); and
(iv) charges over the shares of certain subsidiaries held by the Group (note 39).

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27. guaranteed notes

On 18 January 2013, Lai Sun International Finance (2012) Limited, a wholly-owned subsidiary of the Company, issued guaranteed notes in an aggregate principal amount of US$350,000,000 (the “ Notes ”). The Notes are guaranteed by the Company, have a maturity term of five years and bear a fixed interest rate of 5.7% per annum with interest payable semi-annually in arrears.

The net proceeds from the offering of the Notes were approximately US$347,000,000 and were used for general corporate purposes.

The net proceeds from the ofering of the Notes were approximately general corporate purposes.	US$347,000,000	and were used for
	2016 HK$’000	2015 HK$’000
Guaranteed notes	2,715,300	2,713,550
Issue expenses	(6,073)	(10,226)
	2,709,227	2,703,324
Fair value of the Notes	2,820,200	2,747,300

The fair value was determined by reference to the closing price of the Notes published by a leading global financial market data provider as at 31 July 2016 and 31 July 2015.

28. deferred tax

The movements in deferred tax (liabilities)/assets during the year are as follows:

	Accelerated
	tax	Tax
	depreciation	losses	Others	Total
	HK$’000	HK$’000	HK$’000	HK$’000
At 1 August 2014	(114,044)	1,921	503	(111,620)
Deferred tax (charged)/credited to the
consolidated income statement during
the year (note 11)	(8,047)	(1,427)	74	(9,400)
At 31 July 2015 and 1 August 2015	(122,091)	494	577	(121,020)
Deferred tax charged to the
consolidated income statement during
the year (note 11)	(6,573)	(226)	(134)	(6,933)
Acquisition of subsidiaries (note 42)	255	—	(193)	62
At 31 July 2016	(128,409)	268	250	(127,891)

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Notes to Financial Statements

31 July 2016

28. deferred tax (contInued)

Apart from tax losses for which deferred tax had been recognised above, the Group had estimated tax losses of approximately HK$1.5 billion (2015: HK$1.5 billion) that are available indefinitely for offsetting against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses as future taxable profits may not be available to utilise such losses in the foreseeable future.

At 31 July 2016, there was no significant unrecognised deferred tax liability (2015: Nil) for taxes that would be payable on the unremitted earnings of certain of the Group’s subsidiaries and associates as the Group has no liability to additional tax should such amounts be remitted.

29. share caPItal

share caPItal
	2016 Number of	Total	2015 Number of	Total
	shares	amount	shares	amount
		HK$’000		HK$’000
Issued and fully paid ordinary shares	30,159,108,707	4,050,252	20,094,533,563	3,135,561

A summary of movements in the Company’s share capital is as follows:

		Number of	Total
		shares in issue	amount
	Notes		HK$’000
At 1 August 2014		20,062,893,286	3,129,961
Shares issued in lieu of cash dividend	a	31,640,277	5,600
At 31 July 2015 and 1 August 2015		20,094,533,563	3,135,561
Shares issued in lieu of cash dividend	b	17,308,363	2,008
Rights issue	c	10,047,266,781	912,683
At 31 July 2016		30,159,108,707	4,050,252

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29. share caPItal (contInued)

Notes:

a. On 9 December 2014, the Company’s shareholders approved at the annual general meeting a final dividend of HK$0.0025 per share payable in cash with a scrip dividend alternative (the “ 2014 Scrip Dividend Scheme ”) for the year ended 31 July 2014 (the “ 2014 Final Dividend ”). During the year ended 31 July 2015, 31,640,277 new shares were issued by the Company at a deemed price of HK$0.177 per share, credited as fully paid, to shareholders of the Company who had elected to receive scrip shares in lieu of cash under the 2014 Scrip Dividend Scheme to settle HK$5,600,000 of the 2014 Final Dividend. The remaining balance of the 2014 Final Dividend of HK$44,557,000 was satisfied by cash.

Further details of the 2014 Scrip Dividend Scheme are set out in the Company’s circular dated 30 December 2014.

b. On 11 December 2015, the Company’s shareholders approved at the annual general meeting a final dividend of HK$0.0025 per share payable in cash with a scrip dividend alternative (the “ 2015 Scrip Dividend Scheme ”) for the year ended 31 July 2015 (the “ 2015 Final Dividend ”). During the year, 17,308,363 new shares were issued by the Company at a deemed price of HK$0.116 per share, credited as fully paid, to shareholders of the Company who had elected to receive scrip shares in lieu of cash under the 2015 Scrip Dividend Scheme to settle HK$2,008,000 of the 2015 Final Dividend. The remaining balance of the 2015 Final Dividend of HK$48,228,000 was satisfied by cash.

Further details of the 2015 Scrip Dividend Scheme are set out in the Company’s circular dated 30 December 2015.

c. Pursuant to the prospectus dated 18 January 2016, the Company proposed a rights issue of 10,047,266,781 shares on the basis of one rights share for every two existing shares of the Company at a subscription price of HK$0.092 per share. The rights issue was subsequently completed on 5 February 2016. The net proceeds from the rights issue of approximately HK$912,683,000, after deduction of rights issue expenses of approximately HK$11,665,000, were credited to share capital.

2006 Capital Reduction

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

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Notes to Financial Statements

31 July 2016

29. share caPItal (contInued)

2006 Capital Reduction (continued)

An undertaking in standard terms was given to the High Court by the Company in connection with the 2006 Capital Reduction. The undertaking is for the benefit of the Company’s creditors as at the effective date of the 2006 Capital Reduction. Pursuant to the undertaking, any receipts by the Company on or after 1 August 2005 in respect of the Company’s:

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

shall be credited to a special capital reserve in the accounting records of the Company. While any debt of or claim against the Company as at 18 October 2006 (the effective date of the 2006 Capital Reduction) remains outstanding, and the person entitled to the benefit thereof has not agreed otherwise, the special capital reserve shall not be treated as realised profits and (for so long as the Company remains a listed company) shall be treated as an undistributable reserve pursuant to section 79C of the predecessor Hong Kong Companies Ordinance (Cap. 32).

The undertaking is subject to the following provisos:

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

In prior years, an aggregate amount of HK$630,400,000, which comprised (i) the reversal of provision for impairment of the Company’s interest in Peakflow Profits Limited (“ Peakflow ”), a wholly-owned subsidiary, which holds a 10% equity interest in Bayshore, to the extent of HK$372,072,000; and (ii) the recognition of dividend income from the Company’s investment in Fortune Sign of HK$258,328,000, was transferred from accumulated losses to the special capital reserve of the Company.

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29. share caPItal (contInued)

2006 Capital Reduction (continued)

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

As a result of the rights issue during the year ended 31 July 2012 with net cash proceeds of approximately HK$513,640,000, the Company’s issued share capital and share premium account was further increased by an aggregate amount of approximately HK$513,640,000. The entire remaining balance of the special capital reserve of approximately HK$126,264,000 was further transferred to the general reserve (a distributable reserve) of the Company during the year ended 31 July 2012 pursuant to the provisos of the undertaking given by the Company in connection with the 2006 Capital Reduction as stated above.

During the year ended 31 July 2013, the Company recognised a dividend income from Fortune Sign of HK$16,300,000. Therefore, the Company transferred HK$16,300,000 (i) from retained profits to special capital reserve and (ii) from special capital reserve to general reserve, pursuant to the provisos of the undertaking given by the Company in connection with the 2006 Capital Reduction as stated above.

As a result of the above transfer between the reserves, the outstanding balance of the general reserve of the Company as at 31 July 2016 was approximately HK$646,700,000 (2015: HK$646,700,000). There was no remaining balance in the special capital reserve as at 31 July 2016 and 31 July 2015.

30. share oPtIon schemes

2006 Share Option Scheme

On 22 December 2006, the Company adopted a share option scheme (the “ 2006 Share Option Scheme ”) for the purpose of providing incentives or rewards to eligible participants for their contribution or wouldbe contribution to the Group, to enable the Group to recruit and retain high-calibre employees and to attract human resources that are valuable to the Group. Eligible participants of the 2006 Share Option Scheme include the directors (including executive, non-executive and independent non-executive directors), employees of the Group, agents or consultants of the Group, and employees of the shareholder or any member of the Group or any holder of any securities issued by any member of the Group. The 2006 Share Option Scheme became effective on 29 December 2006. Unless otherwise terminated or amended, the 2006 Share Option Scheme would remain in force for 10 years from 29 December 2006. The 2006 Share Option Scheme was terminated upon the adoption of the 2015 Share Option Scheme (as defined below) on 11 December 2015.

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Notes to Financial Statements

31 July 2016

30. share oPtIon schemes (contInued)

2006 Share Option Scheme (continued)

The maximum number of the Company’s shares which may be issued upon exercise of all outstanding share options granted and yet to be exercised under the 2006 Share Option Scheme and any other schemes of the Company must not exceed 30% of the Company’s total number of shares in issue from time to time. The total number of shares which may be issued upon exercise of all share options to be granted under the 2006 Share Option Scheme and any other schemes of the Company shall not exceed 10% of the total number of shares of the Company in issue as at the date of adopting the 2006 Share Option Scheme unless the Company seeks the approval of its shareholders in general meeting to refresh the 10% limit under the 2006 Share Option Scheme.

The total number of shares issued and to be issued upon exercise of the share options granted to each eligible participant (including both exercised and outstanding options) in any 12-month period must not exceed 1% of the Company’s total number of shares in issue. Any further grant of share options representing in aggregate over 1% of the total number of the Company’s shares in issue must be separately approved by the shareholders in general meetings of the Company.

Each grant of share options to a director, chief executive or substantial shareholder of the Company, or to any of their respective associates, shall be subject to approval by the independent non-executive directors of the Company. Any grant of share options to a substantial shareholder or an independent nonexecutive director of the Company, or to any of their respective associates, representing in aggregate over 0.1% of the shares of the Company in issue or having an aggregate value (based on the closing price of the Company’s shares at the date of grant) in excess of HK$5 million, in the 12-month period up to and including the date of such grant must be approved by shareholders in general meetings of the Company.

The offer of a grant of share options shall be accepted within 28 days from the date of offer and acceptance shall be made with a remittance in favour of the Company of HK$1 by way of consideration for the grant. The exercise period of the share options granted is determinable by the directors of the Company save that such period shall not be more than 10 years from the date of grant of the share options.

The exercise price of share options is determinable by the directors of the Company, but shall not be lower than the highest of (i) the closing price of the Company’s shares as stated in the daily quotations sheet of the Stock Exchange on the date of grant, which must be a trading day; and (ii) the average closing price of the Company’s shares as stated in the Stock Exchange’s daily quotations sheets for the five trading days immediately preceding the date of grant.

Share options do not confer rights on the holders to dividends or to vote at general meetings of the Company.

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30. share oPtIon schemes (contInued)

2015 Share Option Scheme

On 11 December 2015, the Company adopted a new share option scheme (the “ 2015 Share Option Scheme ”) and terminated the 2006 Share Option Scheme. Subsisting options granted prior to the termination will continue to be valid and exercisable in accordance with the terms of the previous scheme. The purpose of the 2015 Share Option Scheme is to recognise the contribution or future contribution of the eligible participants to the Group by granting share options to them as incentives or rewards and to attract, retain and motivate high-caliber eligible participants in line with the performance goals of the relevant companies. Eligible participants include but are not limited to the directors and any employee of the Group. The 2015 Share Option Scheme became effective on 23 December 2015. Unless otherwise cancelled or amended, the 2015 Share Option Scheme will remain in force for 10 years from 23 December 2015.

The maximum number of shares which may be issued upon the exercise of all options to be granted under the 2015 Share Option Scheme (i) shall not exceed 10% of the shares of the Company in issue at the date of adopting the 2015 Share Option Scheme; (ii) shall not exceed 30% of the shares of the Company in issue from time to time; and (iii) to each eligible participant and within any 12-month period, is limited to 1% of the shares of the Company in issue at any time. Any further grant of share options in excess of the limits set out in (i) and (iii) is subject to the approval of shareholders of the Company and the shareholders of LSG (so long as the Company is a subsidiary of LSG under the Listing Rules) in the respective general meetings.

Share options granted to a director, chief executive or substantial shareholder of the Company, or to any of their associates, are subject to approval in advance by the independent non-executive directors of each of the Company and LSG (so long as the Company is a subsidiary of LSG under the Listing Rules). In addition, any share options granted to a substantial shareholder or an independent non-executive director of the Company, or to any of their associates, in excess of 0.1% of the shares of the Company in issue at any time or with an aggregate value (based on the closing price of the Company’s shares at the date of grant) in excess of HK$5 million, within any 12-month period, are subject to the approval of shareholders of the Company and the shareholders of LSG (so long as the Company is a subsidiary of LSG under the Listing Rules) in the respective general meetings.

The offer of a grant of share options may be accepted within 30 days from the date of grant, upon payment of a nominal consideration of HK$1 in total by the grantee. The exercise period of the share options granted is determined by the directors of the Company, save that such period shall not be longer than 10 years from the date of grant of the share options.

The exercise price of the share options is determinable by the directors of the Company, which shall be at least the highest of (i) the closing price of the Company’s shares as stated in the daily quotation sheet of the Stock Exchange on the date of grant of the share options; and (ii) the average closing price of the Company’s shares as stated in the daily quotation sheet of the Stock Exchange for the five trading days immediately preceding the date of grant.

Share options do not confer rights on the holders to dividends or to vote at shareholders’ meetings of the Company.

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Notes to Financial Statements

31 July 2016

30. share oPtIon schemes (contInued)

Details of the movements of the Company’s share options outstanding under the 2006 Share Option Scheme and the 2015 Share Option Scheme during the years are as follows:

	2016 Number of Weighted underlying shares average comprised in exercise price	2016 Number of Weighted underlying shares average comprised in exercise price	2015 Number of Weighted underlying shares average comprised in exercise price	2015 Number of Weighted underlying shares average comprised in exercise price
	share options	per share*	share options	per share*
		HK$		HK$
Outstanding at beginning of year	713,823,903	0.269	702,823,903	0.271
Granted during the year	15,000,000	0.094	11,000,000	0.174
Cancelled during the year	(3,000,000)	0.094	—	—
Adjustment during the year (Note)	28,552,954	—	—	—
Outstanding at end of year	754,376,857	0.256	713,823,903	0.269

Note: On 17 February 2016, the exercise price of and the number of shares entitled to be subscribed for under the outstanding share options have been adjusted due to rights issue of the Company.

The exercise price of the share options is subject to adjustment in case of rights or bonus issues, or other relevant changes in the Company’s share capital.

The exercise price of the Company’s share options granted on 22 January 2016 was HK$0.094 per share. The closing price of the Company’s shares immediately before 22 January 2016 was HK$0.091.

The exercise price of the Company’s share options granted on 21 January 2015 was HK$0.174 per share. The closing price of the Company’s shares immediately before 21 January 2015 was HK$0.171.

The fair value of the share options granted during the year was approximately HK$461,000 (2015: HK$528,000), of which the Group recognised the entire amount as an expense during the year.

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30. share oPtIon schemes (contInued)

The fair value of equity-settled share options granted during the year was estimated as at the date of acceptance of the share options using the Binomial Option Pricing Model, taking into account the terms and conditions upon which the options were granted. The following table lists the inputs to the model used:

used:
	2016	2015
Dividend yield (%)	1.7241	1.3021
Expected volatility (%)	51.1150	53.6130
Historical volatility (%)	51.1150	53.6130
Risk-free interest rate (%)	1.4675	1.4172
Expected life of options (years)	10	10
Closing share price (HK$ per share)	0.1060	0.1720

The expected life of the options is not necessarily indicative of the exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome.

No other feature of the options granted was incorporated into the measurement of fair value.

Other than the movements of the share options as detailed above, no other options were granted, exercised, cancelled or lapsed in accordance with the terms of the 2006 Share Option Scheme and the 2015 Share Option Scheme.

As at 31 July 2016 and the date of approval of these financial statements, a total of 754,376,857 underlying shares comprised in share options were outstanding, of which 742,376,857 underlying shares relate to share options granted under the 2006 Share Option Scheme and 12,000,000 underlying shares relate to share options granted under the 2015 Share Option Scheme, and represented approximately 2.46% and 0.04% of the Company’s shares in issue, respectively, as at the respective dates.

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Notes to Financial Statements

31 July 2016

31. Partly-oWned suBsIdIarIes WIth materIal non-controllIng Interests

Summarised consolidated financial information of Porchester Assets Limited (“ Porchester ”) and its subsidiaries that has material non-controlling interests before intergroup eliminations is set out below:

	31 July	31 July
	2016	2015
	HK$’000	HK$’000
Current assets	345,692	364,060
Non-current assets	260,491	266,435
Total assets	606,183	630,495
Current liabilities	(58,613)	(72,624)
Non-current liabilities	(32,790)	(28,813)
Total liabilities	(91,403)	(101,437)
Equity attributable to owners of Porchester	280,594	291,243
Non-controlling interests	234,186	237,815
Total equity	514,780	529,058
	Year ended	Year ended
	31 July	31 July
	2016	2015
	HK$’000	HK$’000
Turnover	385,903	380,775
Cost of sales and operating expenses	(314,440)	(312,674)
Other revenue	1,513	729
Tax	(2,533)	(16,551)
Proft and total comprehensive income for the year	70,443	52,279
Proft and total comprehensive income attributable to
the non-controlling interests of Porchester	34,591	25,952
Dividends paid to the non-controlling interests of Porchester	38,220	41,468

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32. caPItal commItments

The Group had the following commitments not provided for in the financial statements at the end of the reporting period:

reporting period:
	2016 HK$’000	2015 HK$’000
Contracted, but not provided for
Purchase of items of property, plant and equipment	7,550	27,974
Development and operation of a hotel project	2,124,016	375,123
Additions to investment properties	43,739	7,698
	2,175,305	410,795

In addition, the Group’s share of a joint venture’s own capital commitments, in respect of future development expenditure of its investment properties, is as follows:

development expenditure of its investment properties, is as follows:
	2016 HK$’000	2015 HK$’000
Contracted, but not provided for	—	13,926

33. contIngent lIaBIlItIes

Save as disclosed elsewhere in the financial statements, the Group also had the following contingent liabilities at the end of the reporting period:

(a) Contingent liabilities not provided for in the financial statements:

	2016 HK$’000	2015 HK$’000
Guarantees given to banks in connection with facilities
granted to and utilised by a joint venture	897,000	703,000

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Notes to Financial Statements

31 July 2016

33. contIngent lIaBIlItIes (contInued)

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

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

After taking into account the Property Interests currently held by Lai Fung as at 31 July 2016 which are covered under the Lai Fung Tax Indemnity Deed and the prevailing tax rates and legislation governing PRC income tax and LAT, the total amount of tax indemnity given by the Company is estimated to be approximately HK$1,350,000,000 (2015: HK$1,350,000,000).

After taking into account the plans and the status of the Property Interests held by Lai Fung as at 31 July 2016 and 31 July 2015 which are covered under the Lai Fung Tax Indemnity Deed and the prevailing tax rates and legislation governing PRC income tax and LAT, the Group recorded an aggregate provision for tax indemnity of approximately HK$729,387,000 as at the end of the reporting period (2015: HK$729,387,000).

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34. oPeratIng lease arrangements

(a) As lessor

The Group leases its investment properties (note 16) under operating lease arrangements, with leases negotiated for terms mainly ranging from one to five years. Certain leases in United Kingdom are negotiated for terms up to twenty-five years. The terms of the leases generally also require the tenants to pay security deposits and provide for periodic rental adjustments according to the then prevailing market conditions. Certain leases include contingent rentals calculated with reference to the turnover of the tenants.

At the end of the reporting period, the Group had total future minimum lease receivables under non-cancellable operating leases with its tenants falling due as follows:

	2016 HK$’000	2015 HK$’000
Within one year	511,685	487,702
In the second to ffth years, inclusive	563,432	617,136
After fve years	121,436	147,988
	1,196,553	1,252,826

(b) As lessee

The Group leases certain properties under operating lease arrangements. One of these leases has an original lease term of twelve years with an option to terminate the leases upon expiry of six years, nine years or twelve years. Remaining operating lease arrangements are with leases negotiated for terms ranging from one to six years.

At the end of the reporting period, the Group had total future minimum lease payments under non-cancellable operating leases falling due as follows:

non-cancellable operating leases falling due as follows:
	2016 HK$’000	2015 HK$’000
Within one year	71,415	40,870
In the second to ffth years, inclusive	119,097	69,980
After fve years	5,835	—
	196,347	110,850

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Notes to Financial Statements

31 July 2016

35. fInancIal Instruments By category

The carrying amounts of each of the categories of financial instruments as at the end of the reporting period are as follows:

Financial assets

Financial assets
		2016		Financial	2015
				assets at
		Available-		fair value		Available-
		for-sale		through		for-sale
	Loans and	fnancial		proft	Loans and	fnancial
	receivables	assets	Total	or loss	receivables	assets	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Available-for-sale fnancial assets	—	1,382,026	1,382,026	—	—	1,215,485	1,215,485
Long term loan and other receivables	141,961	—	141,961	—	121,925	—	121,925
Trade debtors and other receivables	100,876	—	100,876	—	61,218	—	61,218
Equity investments at fair value through proft or loss	—	—	—	5,574	—	—	5,574
Pledged bank balances and time deposits	216,241	—	216,241	—	185,467	—	185,467
Cash and cash equivalents	2,354,682	—	2,354,682	—	1,068,038	—	1,068,038
	2,813,760	1,382,026	4,195,786	5,574	1,436,648	1,215,485	2,657,707

Financial liabilities

Financial liabilities
	2016	2015
	Financial	Financial
	liabilities	liabilities
	at amortised	at amortised
	cost	cost
	HK$’000	HK$’000
Trade creditors, other payables and accruals	307,451	207,238
Bank borrowings	5,402,429	4,283,202
Guaranteed notes	2,709,227	2,703,324
	8,419,107	7,193,764

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36. faIr value hIerarchy of fInancIal Instruments

Financial instruments for which fair value is disclosed

Except for the guaranteed notes with a fair value in aggregate of approximately HK$2,820,200,000 (2015: HK$2,747,300,000) as detailed in note 27, the directors consider the carrying amounts of all other financial assets and financial liabilities measured at amortised cost approximated to their fair values as at the end of the reporting period.

Financial instruments measured at fair value

	Level 1	Level 2	Level 3	Total
	HK$’000	HK$’000	HK$’000	HK$’000
As at 31 July 2016
Available-for-sale fnancial assets,
at fair value (note 19)	—	164,081	1,204,693	1,368,774
As at 31 July 2015
Available-for-sale fnancial assets,
at fair value (note 19)	—	151,215	1,051,018	1,202,233
Equity investments at fair value
through proft or loss	5,574	—	—	5,574
	5,574	151,215	1,051,018	1,207,807

The movements in fair value measurements in Level 3 during the year are as follows:

	2016 HK$’000	2015 HK$’000
Available-for-sale fnancial assets, at fair value
At beginning of year	1,051,018	1,115,780
Total gains/(losses) recognised in other comprehensive income	153,675	(64,762)
At end of year	1,204,693	1,051,018

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Notes to Financial Statements

31 July 2016

37. fInancIal rIsk management oBJectIves and PolIcIes

The principal financial assets held by the Group comprise available-for-sale financial assets, pledged bank balances and time deposits, and cash and cash equivalents. The management would, based on the Group’s projected cash flow requirements, determine the types and levels of these financial instruments with a view to maintaining appropriate level of funding for the Group’s operations and to enhancing the returns generated from these financial instruments. The Group’s principal financial liabilities comprise bank borrowings and guaranteed notes. The Group will procure various types and levels of such financial liabilities in order to maintain sufficient funding for the Group’s daily operations and to cope with expenditures incurred for various properties under development for sale or investment projects. In addition, the Group has various other financial assets and liabilities such as long term loan receivables, debtors and creditors which arise directly from its daily operations.

The main risks arising from the Group’s financial instruments are interest rate risks, foreign currency risk, credit risk and liquidity risk. The management of the Company meets periodically to analyse and formulate measures to manage the Group’s exposure to these risks. Generally, the Group has adopted relatively conservative strategies on its risk management and the Group has not used any derivatives and other instruments for hedging purposes during the year. The Group does not hold or issue derivative financial instruments for trading purposes. The directors review and determine policies for managing each of these risks and they are summarised as follows:

(i) Fair value and cash flow interest rate risks

Fair value interest rate risk is the risk that the value of a financial instrument fluctuates because of changes in market interest rates. Cash flow interest rate risk is the risk that the future cash flows of a financial instrument fluctuate because of changes in market interest rates. The Group is exposed to both fair value and cash flow interest rate risks. The Group’s exposure to market risk for changes in interest rates relates primarily to the Group’s pledged bank balances and time deposits, cash and cash equivalents and bank borrowings with a floating interest rate.

At present, the Group does not intend to seek to hedge its exposure to interest rate fluctuations. However, the Group constantly reviews the economic situation and its interest rate risk profile, and will consider appropriate hedging measures in future as may be necessary.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant and before any impact on tax, of the Group’s profit or loss (through the impact on variable-rate mortgage loan receivables, pledged bank balances and time deposits, cash and cash equivalents and bank borrowings) and the Group’s equity.

	Increase
	in interest	Decrease
	rate (in	in proft
	percentage)	and equity
		HK$’000
2016	0.5	14,095
2015	0.5	15,070

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37. fInancIal rIsk management oBJectIves and PolIcIes (contInued)

(ii) Foreign currency risk

Foreign currency risk is the risk that the value of a financial instrument fluctuates because of changes in foreign exchange rates.

The Group’s major assets and liabilities and transactions are principally denominated in HK$ or US$. As HK$ is pegged against US$, the Group does not expect any significant movements in the exchange rate in the foreseeable future.

The Group had made investments in the United Kingdom with the assets and liabilities denominated in Pounds Sterling. The investments were partly financed by bank borrowings denominated in Pounds Sterling in order to minimise the net foreign exchange exposure. Other than the abovementioned, the remaining monetary assets and liabilities of the Group were denominated in RMB and VND which were insignificant as compared with the Group’s total assets and liabilities. No hedging instruments were employed to hedge for the foreign exchange exposure.

(iii) Credit risk

The Group maintains various credit policies for different business operations as described in note 24. In addition, trade debtor balances are closely monitored on an ongoing basis and the Group’s exposure to bad debts is not significant.

The credit risk of the financial assets, which comprise trade debtors and other receivables, pledged bank balances and time deposits, cash and cash equivalents and available-for-sale financial assets, arises from default of the counterparty, with a maximum exposure equal to the carrying amounts of these instruments.

(iv) Liquidity risk

The Group’s objective is to ensure adequate funds are available to meet commitments associated with its capital expenditure and financial liabilities. Cash flows are closely monitored on an ongoing basis.

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Notes to Financial Statements

31 July 2016

37. fInancIal rIsk management oBJectIves and PolIcIes (contInued)

(iv) Liquidity risk (continued)

The maturity profile of the Group’s financial liabilities as at the end of the reporting period, based on the contractual undiscounted payments, is as follows:

	Less than 3 months or on demand HK$’000	2016 3 to 12 months HK$’000	1 to 5 years HK$’000	Total HK$’000
Trade creditors, other
payables and accruals	307,451	—	—	307,451
Bank borrowings	62,737	187,238	5,639,427	5,889,402
Guaranteed notes	—	149,183	2,792,686	2,941,869
Bank guarantee to
ajoint venture (note 33(a))	897,000	—	—	897,000
	1,267,188	336,421	8,432,113	10,035,722
		2015
	Less than
	3 months
	or on	3 to	1 to
	demand	12 months	5 years	Total
	HK$’000	HK$’000	HK$’000	HK$’000
Trade creditors, other
payables and accruals	207,238	—	—	207,238
Bank borrowings	956,261	151,157	3,475,286	4,582,704
Guaranteed notes	—	154,672	2,945,559	3,100,231
Bank guarantee to
ajoint venture (note 33(a))	703,000	—	—	703,000
	1,866,499	305,829	6,420,845	8,593,173

(v) Capital management

The Group manages its capital structure to ensure that entities in the Group will be able to continue to operate as a going concern while maximising the return to stakeholders through the setting up and maintenance of an optimal debt and equity capital structure. The Group’s overall strategy remains unchanged from that of the prior year.

The capital structure of the Group mainly consists of bank borrowings, guaranteed notes and equity attributable to owners of the Company, comprising share capital and reserves.

The directors of the Company review the capital structure regularly. They will take into consideration the cost of capital and the risks associated with each class of capital prevailing in the market. Based on the recommendation of the directors, the Group will balance its overall capital structure through various types of equity fund raising exercises as well as maintenance of appropriate types and level of debt.

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37. fInancIal rIsk management oBJectIves and PolIcIes (contInued)

(v) Capital management (continued)

The Group monitors capital using, inter-alia, a gearing ratio which is net debt divided by equity attributable to owners of the Company. Net debt includes bank borrowings and guaranteed notes, less pledged bank balances and time deposits, and cash and cash equivalents. The gearing ratio as at the end of the reporting period is as follows:

at the end of the reporting period is as follows:
	2016 HK$’000	2015 HK$’000
Bank borrowings	5,402,429	4,283,202
Guaranteed notes	2,709,227	2,703,324
Less: Pledged bank balances and time deposits	(216,241)	(185,467)
Cash and cash equivalents	(2,354,682)	(1,068,038)
Net debt	5,540,733	5,733,021
Equity attributable to owners of the Company	24,357,735	22,662,543
Gearing ratio	23%	25%

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Notes to Financial Statements

31 July 2016

38. statement of fInancIal PosItIon of the comPany

Information about the statement of financial position of the Company at the end of the reporting period is as follows:

is as follows:
	2016	2015
	HK$’000	HK$’000
NON-CURRENT ASSETS
Property, plant and equipment	8,796	10,830
Investment properties	8,108,500	8,066,700
Interests in subsidiaries	6,295,840	5,997,146
Interests in associates	6,134	6,141
Interests in joint ventures	393,522	393,597
Available-for-sale fnancial assets	55,200	68,892
Pledged bank balances and time deposits	148,525	—
Deposits paid and other receivables	6,888	—
Total non-current assets	15,023,405	14,543,306
CURRENT ASSETS
Equity investments at fair value through proft or loss	—	5,574
Debtors, deposits paid and other receivables	40,026	88,463
Pledged bank balances and time deposits	—	185,467
Cash and cash equivalents	1,236,833	263,766
Total current assets	1,276,859	543,270
CURRENT LIABILITIES
Creditors, deposits received and accruals	74,232	71,235
Tax payable	95,286	86,753
Bank borrowings	98,580	973,289
Total current liabilities	268,098	1,131,277
NET CURRENT ASSETS/(LIABILITIES)	1,008,761	(588,007)
TOTAL ASSETS LESS CURRENT LIABILITIES	16,032,166	13,955,299

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38. statement of fInancIal PosItIon of the comPany (contInued)

	2016 HK$’000	2015 HK$’000
NON-CURRENT LIABILITIES
Bank borrowings	2,161,743	1,301,100
Deferred tax	62,700	60,315
Provision for tax indemnity	729,387	729,387
Long term rental deposits received	52,397	49,983
Total non-current liabilities	3,006,227	2,140,785
	13,025,939	11,814,514
EQUITY
Share capital	4,050,252	3,135,561
Reserves (Note)	8,975,687	8,678,953
	13,025,939	11,814,514

Chew Fook Aun Director

Lau Shu Yan, Julius

Director

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Notes to Financial Statements

31 July 2016

38. statement of fInancIal PosItIon of the comPany (contInued)

Note:

A summary of the Company’s reserves is as follows:

	Investment	Share	Capital
	revaluation	option	reduction	General	Retained
	reserve	reserve	reserve	reserve	profts	Total
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
At 1 August 2014	13,723	58,826	4,692	646,700	7,011,404	7,735,345
Proft for the year	—	—	—	—	987,988	987,988
Other comprehensive income for the year:
Change in fair values of available- for-sale
fnancial assets	5,249	—	—	—	—	5,249
Total comprehensive income for the year	5,249	—	—	—	987,988	993,237
Final 2014 dividend declared	—	—	—	—	(50,157)	(50,157)
Recognition of share-basedpayments	—	528	—	—	—	528
At 31 July 2015 and 1 August 2015	18,972	59,354	4,692	646,700	7,949,235	8,678,953
Proft for the year	—	—	—	—	360,201	360,201
Other comprehensive expense for the year:
Change in fair values of available-for-sale
fnancial assets	(13,692)	—	—	—	—	(13,692)
Total comprehensive (expense)/
income for the year	(13,692)	—	—	—	360,201	346,509
Final 2015 dividend declared (note 12)	—	—	—	—	(50,236)	(50,236)
Recognition of share-basedpayments	—	461	—	—	—	461
At 31 July 2016	5,280	59,815	4,692	646,700	8,259,200	8,975,687

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39. PartIculars of PrIncIPal suBsIdIarIes

Particulars of the Company’s principal subsidiaries as at 31 July 2016 were as follows:

	Place of	Issued			Percentage
	incorporation	ordinary/			of equity
	or registration	registered	Class of	attributable
Name	and business	share capital	shares held	to	the Company	Principal activities
				Direct	Indirect
Bushell Limited	Hong Kong	HK$2	Ordinary	—	100.00	Property
						development
						and sales
Capital Court Limited	Hong Kong	HK$1	Ordinary	—	100.00	Hotel
						development
						and operation
Chains Caravelle Hotel	Vietnam	US$23,175,577	*	—	26.01**	Hotel operation
Joint Venture Company
Limited (“CCHJV”)
Ever Dragon	British Virgin	US$1	Ordinary	—	100.00	Property
Properties Limited	Islands/					investment
	United Kingdom
Frontier Dragon	British Virgin	US$1	Ordinary	—	100.00	Property
Limited	Islands/					investment
	United Kingdom
Furama Hotel Enterprises	Hong Kong	HK$102,880,454	Ordinary	—	100.00	Investment
Limited						holding
Furama Hotels and Resorts	British Virgin	US$1,000,000	Ordinary	—	100.00	Provision of
International Limited	Islands/					management
	Hong Kong					services
Fusion Century Limited****	Hong Kong	HK$100	Ordinary	—	50.28	Restaurant
						operation
Gilroy Company Limited	Hong Kong	HK$10,000	Ordinary	100.00	—	Property
						investment
Glynhill Hotels and Resorts	Singapore/	S$2	Ordinary	—	100.00	Provision of
(Vietnam) Pte Ltd	Vietnam					management
						and consultancy
						services to
						hotel owners

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Notes to Financial Statements

31 July 2016

39. PartIculars of PrIncIPal suBsIdIarIes (contInued)

PartIculars of P	rIncIPal suB	sIdIarIes (co	ntInued)
	Place of	Issued			Percentage
	incorporation	ordinary/			of equity
	or registration	registered	Class of	attributable
Name	and business	share capital	shares held	to	the Company	Principal activities
				Direct	Indirect
Glynhill Investments (Vietnam)	Singapore	S$2	Ordinary	—	51.00**	Investment
Pte Ltd (“GIV”)						holding
Goldmay Development	Hong Kong	HK$2	Ordinary	100.00	—	Property
Limited						development
						and sales
Greatful Limited***	Hong Kong	HK$100	Ordinary	—	67.04	Central kitchen
						and restaurant
						operation
Intercontinental	Hong Kong	HK$300,000	Ordinary	—	100.00	Property
Development and						investment
Services Limited
King Faithful Limited***	Hong Kong	HK$100	Ordinary	—	61.68	Restaurant
						operation
Kolot Property	Hong Kong	HK$780,002	Ordinary	100.00	—	Property
Services Limited						management
Lai Sun F&B Holding	British Virgin	US$1	Ordinary	—	67.04	Investment
Company Limited	Islands/					holding
(“LSF&B”)***	Hong Kong
Lai Sun F&B Management	Hong Kong	HK$1	Ordinary	—	67.04	Provision of
Limited***						management
						and consultancy
						services to
						restaurants
Lai Sun International	British Virgin	US$1	Ordinary	100.00	—	Treasury
Finance (2012) Limited	Islands/					operation
	Hong Kong
Lai Sun Real Estate	Hong Kong	HK$2	Ordinary	100.00	—	Property
Agency Limited						management
						and real
						estate agency

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39. PartIculars of PrIncIPal suBsIdIarIes (contInued)

PartIculars of	PrIncIPal suB	sIdIarIes (co	ntInued)
	Place of	Issued			Percentage
	incorporation	ordinary/			of equity
	or registration	registered	Class of	attributable
Name	and business	share capital	shares held	to	the Company	Principal activities
				Direct	Indirect
Mazy Charm Limited***	Hong Kong	HK$4,200	Ordinary	—	61.68	Restaurant
						operation
Mazy Lamp Limited***	Hong Kong	HK$3,300	Ordinary	—	49.61	Restaurant
						operation
Megabull Limited****	British Virgin	US$1	Ordinary	—	100.00	Property
	Islands/					investment
	Hong Kong
Milirich Investment Limited	Hong Kong	HK$2	Ordinary	100.00	—	Property
						development
Modern Charm Limited***	Hong Kong	HK$10,000	Ordinary	—	67.04	Restaurant
						operation
Oriental Style Limited	Hong Kong	HK$1	Ordinary	—	100.00	Property
						development
						and sales
Peakfow Profts Limited	British Virgin	US$1	Ordinary	100.00	—	Investment
	Islands/					holding
	Hong Kong
Porchester Assets Limited	British Virgin	US$100	Ordinary	—	51.00**	Investment
	Islands/					holding
	Hong Kong
Prompt Result Limited****	British Virgin	US$100	Ordinary	—	57.65	Restaurant
	Islands/					operation
	Hong Kong
Really Star Limited***	Hong Kong	HK$3,100	Ordinary	—	62.71	Restaurant
						operation
Rife World Limited	Hong Kong	HK$1	Ordinary	—	100.00	Provision
						of fnance
Rolling Star Limited	Hong Kong	HK$1	Ordinary	—	100.00	Provision
						of fnance

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Notes to Financial Statements

31 July 2016

39. PartIculars of PrIncIPal suBsIdIarIes (contInued)

PartIculars of	PrIncIPal suBs	IdIarIes (co	ntInued)
	Place of	Issued			Percentage
	incorporation	ordinary/			of equity
	or registration	registered	Class of	attributable
Name	and business	share capital	shares held	to	the Company	Principal activities
				Direct	Indirect
Royal Team Limited***	Hong Kong	HK$10,000	Ordinary	—	59.00	Restaurant
						operation
Silver Fusion Limited****	Hong Kong	HK$500,000	Ordinary	—	67.04	Restaurant
						operation
Skyway Century Limited****	Hong Kong	HK$1,000,000	Ordinary	—	67.04	Restaurant
						operation
Speedy Result Limited	British Virgin	US$1	Ordinary	—	100.00	Property
	Islands/					investment
	United Kingdom
Top Winsome Limited***	Hong Kong	HK$300,000	Ordinary	—	56.31	Restaurant
						operation
Transformation	British Virgin	US$1	Ordinary	100.00	—	Investment
International Limited	Islands/					holding
	Hong Kong
Transtrend Holdings Limited	Hong Kong	HK$20	Ordinary	—	100.00	Investment
						holding
Winstead Limited	Hong Kong	HK$1	Ordinary	—	100.00	Property
						development
World Palace Limited****	Hong Kong	HK$1,300	Ordinary	—	57.25	Restaurant
						operation

This subsidiary has registered capital rather than issued share capital.

** The Group owns a 51% (2015: 51%) equity interest in Porchester, which in turn, through GIV, a wholly-owned subsidiary of Porchester, owns a 51% (2015: 51%) interest in CCHJV. By virtue of the 51% (2015: 51%) equity interest in CCHJV held by the Group through the 51%-owned Porchester, an effective equity interest of 26.01% (2015: 26.01%) in CCHJV was held by the Group.

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39. PartIculars of PrIncIPal suBsIdIarIes (contInued)

*** On 30 June 2016, the Group acquired additional equity interests in the following subsidiaries (the “ Acquisition of Additional Interests ”):

	Equity interest		Equity interest
	attributable to		attributable to
	LSF&B prior		LSF&B upon
	to the Acquisition		the Acquisition
	of Additional	Acquired	of Additional
Subsidiaries	Interests	interests	Interests
Greatful Limited	55.00%	45.00%	100.00%
King Faithful Limited	62.00%	30.00%	92.00%
Mazy Charm Limited	51.00%	41.00%	92.00%
Mazy Lamp Limited	53.00%	21.00%	74.00%
Modern Charm Limited	70.00%	30.00%	100.00%
Really Star Limited	56.77%	36.77%	93.54%
Royal Team Limited	52.00%	36.00%	88.00%
Top Winsome Limited	54.00%	30.00%	84.00%

The consideration was satisfied by the allotment and issuance of 75,242,791 new shares at HK$1 each of LSF&B, at a fair value of approximately HK$68,471,000 (being 75,242,791 shares valued at HK$0.91 each).

Pursuant to the above allotment and issuance of new shares of LSF&B and as set out in note 42, LSF&B became a 66.71%-owned subsidiary of the Company. On the same day, LSF&B completed a rights issue of 140,000,000 shares for HK$1 each with total proceeds of HK$140 million (the “ LSF&B Rights Issue “). Following the completion of the LSF&B Rights Issue, the Company’s interest in LSF&B was increased from 66.71% to 67.04%.

**** These subsidiaries were newly incorporated/acquired during the year.

The above table lists the subsidiaries of the Company which, in the opinion of the directors, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive length.

Shares of certain subsidiaries held by the Group were also pledged to banks to secure banking facilities granted to the Group (note 26).

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Notes to Financial Statements

31 July 2016

40. PartIculars of PrIncIPal assocIates

Particulars of the Group’s principal associates as at 31 July 2016 were as follows:

			Percentage
	Place of		of ownership
	incorporation		interest
	or registration	Class of	attributable
Name	and business	shares held	to the Group	Notes
eSun	Bermuda/	Ordinary	41.92	a
	Hong Kong
Lai Fung	Cayman Islands/	Ordinary	21.41	b
	PRC
Media Asia Group Holdings	Incorporated	Ordinary	27.77	c
Limited (“Media Asia”)	in the Cayman
	Islands and
	continued in
	Bermuda/
	Hong Kong

Notes:

a. eSun is listed on the Main Board of the Stock Exchange.

eSun and its subsidiaries are principally engaged in property development for sale and property investment for rental purposes; development and operation of and investment in cultural, leisure, entertainment and related facilities; development and operation of and investment in media, entertainment, music production and distribution; investment in and production and distribution of television programmes, films and video format products; cinema operation; sale of cosmetic products; and investment holding.

b. Lai Fung is listed on the Main Board of the Stock Exchange. As at 31 July 2016, eSun owns a 51.08% (2015: 51.30%) interest in Lai Fung.

Lai Fung and its subsidiaries are principally engaged in property development for sale, property investment for rental purposes, and development and operation of and investment in cultural, leisure, entertainment and related facilities.

c. Media Asia is listed on the Growth Enterprise Market of the Stock Exchange. As at 31 July 2016, eSun owns a 66.25% (2015: 60.41%) interest in Media Asia.

Media Asia and its subsidiaries are principally engaged in film production and distribution; organisation, management and production of concerts and live performances; artiste management; production and distribution of television programs; music production and publishing; licensing of media contents; and provision of consultancy services in planning and management of cultural, entertainment and live performance projects.

The above table lists the associates of the Group which, in the opinion of the directors of the Company, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other associates would, in the opinion of the directors of the Company, result in particulars of excessive length.

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41. PartIculars of PrIncIPal JoInt ventures

Particulars of the Group’s principal joint ventures as at 31 July 2016 were as follows:

			Percentage
	Place of		of ownership
	incorporation		interest
	or registration	Class of	attributable	Principal
Name	and business	shares held	to the Group	activities
Best Value International	Hong Kong	Ordinary	50.00	Property
Limited				development
Diamond Path Limited	British	Ordinary	50.00	Investment
	Virgin Islands/			holding
	Hong Kong
Diamond String Limited	Hong Kong	Ordinary	50.00	Property
				investment
Strongly Limited	Hong Kong	Ordinary	50.00	Property
				development

The above table lists the joint ventures of the Group which, in the opinion of the directors of the Company, principally affected the results for the year or formed a substantial portion of the net assets of the Group. To give details of other joint ventures would, in the opinion of the directors of the Company, result in particulars of excessive length.

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Notes to Financial Statements

31 July 2016

42. acquIsItIon of suBsIdIarIes

On 30 June 2016, the Group acquired additional equity interests in three associates (the “ Acquisition ”), namely Fusion Century Limited, Prompt Result Limited and World Palace Limited (collectively the “ Acquired Subsidiaries ”) as follows:

			Equity interest
	Equity interest		attributable to
	attributable to		LSF&B upon
	LSF&B prior to	Interest	the	Principal
Entities	the Acquisition	acquired	Acquisition	activities
Fusion Century Limited	45.00%	30.00%	75.00%	Restaurant
				operation
Prompt Result Limited	30.00%	56.00%	86.00%	Restaurant
				operation
World Palace Limited	30.00%	55.39%	85.39%	Restaurant
				operation

The consideration was satisfied by the allotment and issuance of 22,834,205 new shares of a subsidiary, LSF&B, at a fair value of approximately HK$20,779,000 (being 22,834,205 shares valued at HK$0.91 each).

Goodwill of approximately HK$5,161,000 and gain on bargain purchase of HK$3,128,000 were recognised upon the completion of the Acquisition. The Group considers that the Acquired Subsidiaries would add immediate scale to its food and beverage operation in Hong Kong. None of the goodwill recognised is expected to be deductible for income tax purposes.

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42. acquIsItIon of suBsIdIarIes (contInued)

The fair values of identifiable assets and liabilities of the Acquired Subsidiaries as at the date of acquisition were as follows:

	Notes	HK$’000
Property, plant and equipment (note 14)		25,046
Interest in an associate		181
Deferred tax (note 28)		62
Inventories		9,971
Debtors, deposits paid and other receivables		10,069
Cash and cash equivalents		33,248
Creditors, deposits received and accruals		(10,348)
Tax payable		(561)
Non-controlling interests of the Acquired Subsidiaries	(i)	(3,630)
		64,038
Non-controlling interests	(i), (ii)	(14,133)
Total identifable net assets at fair value		49,905
Goodwill on acquisition (note 43)	(iii)	5,161
Gain on bargain purchase recognised
on the consolidated income statement (note 6)		(3,128)
		51,938
Satisfed by:
LSF&B consideration shares		20,779
Fair value of equity interests of the Acquired Subsidiaries prior to
the Acquisition		31,159
		51,938

Notes:

(i) The non-controlling interests acquired and arising from the Acquisition amounted to HK$17,763,000.
(ii) The non-controlling interests in the Acquired Subsidiaries recognised at the date of the acquisition were measured by reference to the respective proportionate shares of recognised amounts of net assets of the relevant Acquired Subsidiaries and amounted to HK$14,133,000.
(iii) The goodwill arising on the Acquisition is measured as the excess of the sum of the consideration transferred and the amount of non-controlling interests, over the net amounts of the identifiable assets acquired and the liabilities assumed at the date of acquisition.

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Notes to Financial Statements

31 July 2016

42. acquIsItIon of suBsIdIarIes (contInued)

The cash and cash equivalents acquired amounted to approximately HK$33,248,000.

The Group incurred transaction costs of approximately HK$140,000 for the Acquisition. These transaction costs have been expensed and are included in administrative expenses in the consolidated income statement.

Since the Acquisition, the Acquired Subsidiaries contributed approximately HK$9,279,000 to the Group’s revenue and loss of approximately HK$179,000 to the Group’s consolidated profit for the year ended 31 July 2016.

Had the Acquisition taken place at the beginning of the year, the revenue and the profit for the year of the Group would have been approximately HK$1,980,707,000 and approximately HK$1,182,047,000, respectively.

43. goodWIll

goodWIll
	HK$’000
Cost and net carrying amount:
At 1 August 2014, 31 July 2015 and 1 August 2015	—
Acquisition of subsidiaries	5,161
At 31 July 2016	5,161

Impairment testing of goodwill

Goodwill acquired through a business combination during the year ended 31 July 2016 had been allocated to cash-generating units (the “ CGU ”) from the Acquisition, which are components of the restaurant operation segment, for impairment testing.

The acquired subsidiaries are a group of CGU which generate cash inflows that are largely independent of the cash inflows from other assets.

The recoverable amount of the CGU has been determined based on a value-in-use calculation using cash flow projections based on financial budgets covering a three-year period with a growth rate approved by senior management, which is based on the management’s expectation for market development. The discount rate applied to the cash flow projections is 15%.

Assumptions were used in the value-in-use calculation of the CGU for the year ended 31 July 2016. The following describes each key assumption on which management has based its cash flow projections to undertake impairment testing of goodwill:

Budgeted profit - The basis used to determine the value assigned to the budgeted profit is the average profit achieved in the markets, adjusted for expected efficiency improvement, and expected market development.

Discount rate - The discount rate used is before tax and reflects specific risks relating to the relevant unit.

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44. event after the rePortIng PerIod

On 30 September 2016, Action Charm Limited (“ ACL ”), a wholly-owned subsidiary of the Company, entered into a sale and purchase agreement, pursuant to which the vendor conditionally agreed to sell and ACL conditionally agreed to purchase 49.92% interest in Camper & Nicholsons International SA (“ CNI ”) for an aggregate consideration of approximately EUR13,000,000 (equivalent to approximately HK$113,804,000). Upon completion on 3 October 2016, ACL subscribed a further one new share of CNI which increased its shareholding interest to 49.96%.

CNI is principally engaged in the business of brokerage, charter, marketing, management and construction of yachts.

Due to the timing of the transaction, the Group is still assessing the financial impact on the Group. Accordingly, certain disclosures in relation to the acquisition have not been presented.

Further details are set out in the Company’s announcement dated 30 September 2016.

45. aPProval of the fInancIal statements

The financial statements were approved and authorised for issue by the board of directors on 19 October 2016.

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Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN THAT the Annual General Meeting (“ AGM ”) of the members (“ Members ”) of Lai Sun Development Company Limited (“ Company ”) will be held at Harbour View Rooms I & II, 3rd Floor, The Excelsior, Hong Kong, 281 Gloucester Road, Causeway Bay, Hong Kong on Friday, 16 December 2016 at 11:00 a.m. for the following purposes:

To consider and adopt the audited financial statements of the Company for the year ended 31 July 2016 (“ Year ”) and the reports of the directors and the independent auditors of the Company thereon;
To declare a final dividend with a scrip dividend option;
To re-elect the retiring directors of the Company (“ Directors ”) and to authorise the board of Directors (“ Board ”) to fix the Directors’ remuneration;
To re-appoint Ernst & Young, Certified Public Accountants (“ Ernst & Young ”), as the independent auditors of the Company for the ensuing year and to authorise the Board to fix their remuneration; and
As special businesses, to consider and, if thought fit, pass with or without amendments, the following resolutions as Ordinary Resolutions:

Ordinary Resolution (A)

“ THAT :

(a) subject to paragraph (b) of this Resolution, the exercise by the directors of the Company (“ Directors ”) during the Relevant Period (as hereinafter defined) of all the powers of the Company to buy back shares of the Company on The Stock Exchange of Hong Kong Limited (“ Stock Exchange ”) or on any other stock exchange on which the shares of the Company may be listed and recognised by the Securities and Futures Commission of Hong Kong and the Stock Exchange under the Code on Share Buy-Backs for this purpose, subject to and in accordance with all applicable laws in Hong Kong and the requirements of the Rules Governing the Listing of Securities on the Stock Exchange or any other stock exchange as amended from time to time, be and is hereby generally and unconditionally approved;
(b) the aggregate number of the shares of the Company to be bought back by the Company pursuant to the approval in paragraph (a) of this Resolution shall not exceed 10% of the total number of the shares of the Company in issue as at the date of passing this Resolution, and the said approval shall be limited accordingly; and
(c) for the purposes of this Resolution, “Relevant Period” means the period from the passing of this Resolution until whichever is the earliest of:
(i) the conclusion of the next Annual General Meeting of the Company;
(ii) the revocation or variation of the authority given under this Resolution by an ordinary resolution of the members of the Company in general meeting; or
(iii) the expiration of the period within which the next Annual General Meeting of the Company is required by law or the Articles of Association of the Company to be held.”

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Ordinary Resolution (B)

“ THAT :

(a) subject to paragraph (c) of this Resolution, the exercise by the directors of the Company (“ Directors ”) during the Relevant Period (as hereinafter defined) of all the powers of the Company to issue, allot and deal with additional shares in the Company and to make or grant offers, agreements and options (including warrants, bonds, debentures, notes and any securities which carry rights to subscribe for or are exchangeable or convertible into shares in the Company) which would or might require the exercise of such power be and is hereby generally and unconditionally approved;
(b) the approval in paragraph (a) of this Resolution shall authorise the Directors during the Relevant Period to make or grant offers, agreements and options (including warrants, bonds, debentures, notes and any securities which carry rights to subscribe for or are exchangeable or convertible into shares in the Company) which would or might require the exercise of such power after the end of the Relevant Period;
(c) the aggregate number of the shares allotted or agreed conditionally or unconditionally to be allotted (whether pursuant to an option or otherwise) and issued by the Directors pursuant to the approval in paragraph (a) of this Resolution, otherwise than pursuant to:
(i) a Rights Issue (as hereinafter defined); or
(ii) an issue of shares in the Company upon the exercise of rights of subscription, exchange or conversion under the terms of any of the options (including bonds, debentures, notes and any securities which carry rights to subscribe for or are exchangeable or convertible into shares in the Company); or
(iii) an issue of shares in the Company as scrip dividends pursuant to the Articles of Association of the Company from time to time; or
(iv) an issue of shares in the Company under any award or option scheme or similar arrangement for the grant or issue to eligible participants under such scheme or arrangement of shares in the Company or rights to acquire shares in the Company,

shall not exceed 20% of the total number of the shares of the Company in issue as at the date of passing this Resolution, and the said approval shall be limited accordingly; and

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Notice of Annual General Meeting

(d) for the purposes of this Resolution:

“Relevant Period” means the period from the passing of this Resolution until whichever is the earliest of:

(i) the conclusion of the next Annual General Meeting of the Company;
(ii) the revocation or variation of the authority given under this Resolution by an ordinary resolution of the Members of the Company in general meeting; or
(iii) the expiration of the period within which the next Annual General Meeting of the Company is required by law or the Articles of Association of the Company to be held; and

“Rights Issue” means an offer of shares in the Company open for a period fixed by the Directors to the holders of shares, whose names appear on the Register of Members of the Company on a fixed record date in proportion to their then holdings of such shares as at that date (subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to fractional entitlements or having regard to any restrictions or obligations under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any territory applicable to the Company).”

Ordinary Resolution (C)

“ THAT :

subject to the passing of the Ordinary Resolution (A) and Ordinary Resolution (B) set out in agenda item 5 contained in the notice convening this meeting, the general mandate granted to the directors of the Company (“ Directors ”) and for the time being in force to exercise the powers of the Company to allot shares and to make or grant offers, agreements and options which might require the exercise of such powers be and is hereby extended by the addition thereto of such number of shares of the Company which has been bought back by the Company since the granting of such general mandate pursuant to the exercise by the Directors of the powers of the Company to buy back such shares, provided that such number of shares shall not exceed 10% of the total number of the shares of the Company in issue as at the date of passing of this Resolution.”

By Order of the Board Lai Sun Development Company Limited Chow Kwok Wor Company Secretary

Hong Kong, 17 November 2016

Registered Office:

11th Floor Lai Sun Commercial Centre 680 Cheung Sha Wan Road Kowloon, Hong Kong

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Notes:

1. A Member entitled to attend and vote at the AGM convened by the above notice (“ Notice ”) (or its adjourned meeting) is entitled to appoint one (or if he/she/it holds two or more shares, more than one) proxy to attend and, on a poll, vote on his/ her/its behalf in accordance with the Articles of Association of the Company (“ Articles of Association ”). A proxy need not be a Member.

2. A form of proxy for use at the AGM is sent to the Member with the Annual Report of the Company for the Year and is also available at the websites of the Stock Exchange and the Company.

3. To be valid, a form of proxy, together with the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of such power or authority, must be lodged with the Company’s share registrar, Tricor Tengis Limited (“ Registrar ”), at Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong, not less than 48 hours before the time appointed for holding the AGM or its adjourned meeting (as the case may be) and in default, the form of proxy shall not be treated as valid. Completion and return of the form of proxy shall not preclude Members from attending in person and voting at the AGM or at its adjourned meeting should they so wish. In such case, the said form(s) of proxy shall be deemed to be revoked.

The contact phone number of the Registrar is (852) 2980 1333.

4. To ascertain the entitlements to attend and vote at the AGM, Members must lodge the relevant transfer document(s) and share certificate(s) at the office of the Registrar not later than 4:30 p.m. on Tuesday, 13 December 2016 for registration.

5. Where there are joint registered holders of any ordinary share of the Company (“ Share ”), any one of such joint holders may attend and vote at the AGM or its adjourned meeting (as the case may be), either personally or by proxy, in respect of such Share as if he/she/it were solely entitled thereto; but if more than one of such joint holders are present at the AGM or its adjourned meeting (as the case may be) personally or by proxy, that one of such holders so present whose name stands first in the Register of Members of the Company in respect of such Share shall alone be entitled to vote in respect thereof.

6. The proposed final dividend of HK$0.0019 per Share as recommended by the Board is subject to the approval of the Members at the AGM. The record date for the proposed final dividend is at the close of business on Friday, 23 December 2016. For determining the entitlement of the proposed final dividend, the Register of Members will be closed on Thursday, 22 December 2016 and Friday, 23 December 2016, during which period no transfer of Shares will be registered. In order to qualify for the proposed final dividend, all relevant transfer document(s) and share certificate(s) must be lodged with the Registrars for registration no later than 4:30 p.m. on Wednesday, 21 December 2016.

7. Concerning agenda item 3 of this Notice,

(i) in accordance with Article 102 of the Articles of Association, Madam U Po Chu (“ Madam U ”) and Mr. Ip Shu Kwan, Stephen (“ Mr. Stephen Ip ”) will retire from office as Directors by rotation at the AGM. Being eligible, they offer themselves for re-election; and
(ii) in accordance with Rule 13.74 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, the particulars of Madam U and Mr. Stephen Ip are set out in the “Biographical Details of Directors” section of the Annual Report of the Company for the Year.

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Notice of Annual General Meeting

8. Concerning agenda item 4 of this Notice, the Board (which concurs with the Audit Committee) has recommended that subject to the approval of Members at the AGM, Ernst & Young be re-appointed independent auditors of the Company for the year ending 31 July 2017 (“ Year 2017 ”). Members should note that in practice, independent auditors’ remuneration for Year 2017 cannot be fixed at the AGM because such remuneration varies by reference to the scope and extent of the audit and other works which the independent auditors are being called upon to undertake in any given year. To enable the Company to charge the amount of such independent auditors’ remuneration as operating expenses for the Year 2017, Members’ approval to delegate the authority to the Board to fix the independent auditors’ remuneration for the Year 2017 is required, and is hereby sought, at the AGM.

9. The proposed Ordinary Resolution (A) under agenda item 5 of this Notice relates to the granting of a general mandate to the Directors to buy back shares of up to a maximum of 10% of the total number of the shares of the Company in issue as at the date of passing the said Resolution. Members’ attention is also drawn to the explanatory statement on the proposed buy back mandate contained in the Appendix to the circular dated 17 November 2016.

The proposed Ordinary Resolution (B) under agenda item 5 of this Notice relates to the granting of a general mandate to the Directors to issue new Shares of up to a maximum of 20% of the total number of the shares of the Company in issue as at the date of passing the said Resolution. The Company has no immediate plan to issue any new Shares under the general mandate.

The proposed Ordinary Resolution (C) under agenda item 5 of this Notice extends the general mandate to include the Shares bought back under the buy back mandate.

10. Details regarding the Ordinary Resolutions (A), (B) and (C) under agenda item 5 of this Notice is set out in the circular of the Company dated 17 November 2016 in relation to, among others, the proposals involving general mandates to buy back shares and to issue shares.

11. In compliance with Rule 13.39(4) of the Listing Rules, voting on all resolutions proposed in this Notice will be taken by poll.

12. If a tropical cyclone warning signal No. 8 or above is expected to be hoisted or a black rainstorm warning signal is expected to be in force at any time between 7:00 a.m. and 5:00 p.m. on the date of the AGM, the AGM will be postponed and the Members will be informed of the date, time and venue of the postponed AGM by a supplementary notice, posted on the respective websites of the Company and the Stock Exchange.

If a tropical cyclone warning signal No. 8 or above or a black rainstorm warning signal is cancelled at or before 7:00 a.m. on the date of the AGM and where conditions permit, the AGM will be held as scheduled.

The AGM will be held as scheduled when an amber or red rainstorm warning signal is in force.

Members should decide whether they would attend the AGM under a bad weather condition after considering their own situations and if they do so, they are advised to exercise care and caution.

168

AI assistant

IRC Limited — Annual Report 2016

49636_rns_2016-11-16_1d5db942-f8af-4c49-b500-606e595ba348.pdf

Contents

Corporate Information

Place of IncorPoratIon

authorIsed rePresentatIves

Board of dIrectors

share regIstrar and transfer offIce

Executive Directors

Non-executive Directors

IndePendent audItors

PrIncIPal Bankers

Independent Non-executive Directors

audIt commIttee

remuneratIon commIttee

shares InformatIon

Place of Listing

Stock Code / Board Lot

American Depositary Receipt

comPany secretary

regIstered offIce / PrIncIPal offIce

WeBsIte

Investor relatIons

Corporate Profile

Chairman’s Statement

overvIeW of fInal results

overvIeW of fInal results (contInued)

fInal dIvIdend

Chairman’s Statement

fInal dIvIdend (contInued)

BusIness revIeW and outlook

BusIness revIeW and outlook (contInued)

Chairman’s Statement

BusIness revIeW and outlook (contInued)

BusIness revIeW and outlook (contInued)

Chairman’s Statement

BusIness revIeW and outlook (contInued)

aPPrecIatIon

Financial Highlights

Financial Highlights

Profit/(loss) attributable to owners of the Company including & excluding the effect of property revaluations

Net Assets & Net Asset Value (“NAV”) per share attributable to owners of the Company

Management Discussion and Analysis

overvIeW

ProPerty PortfolIo comPosItIon

ProPerty Investment

Rental Income

Management Discussion and Analysis

ProPerty Investment (contInued)

Rental Income (continued)

ProPerty Investment (contInued)

Rental Income (continued)

Management Discussion and Analysis

ProPerty Investment (contInued)

Rental Income (continued)

ProPerty Investment (contInued)

Review of major investment properties

Hong Kong Properties

Cheung Sha Wan Plaza

Causeway Bay Plaza 2

Lai Sun Commercial Centre

Management Discussion and Analysis

ProPerty Investment (contInued)

Review of major investment properties (continued)

Hong Kong Properties (continued)

CCB Tower, 3 Connaught Road Central

8 Observatory Road

AIA Central

ProPerty Investment (contInued)

Review of major investment properties (continued)

Overseas Properties

36 Queen Street, London EC4, United Kingdom

107-112 Leadenhall Street, London EC3, United Kingdom

100 Leadenhall Street, London EC3, United Kingdom

106 Leadenhall Street, London EC3, United Kingdom

Management Discussion and Analysis

ProPerty develoPment

Review of major projects for sale

339 Tai Hang Road, Hong Kong

IRC Limited Annual Report 2016