IRC Limited — Proxy Solicitation & Information Statement 2014

Jun 19, 2014

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer, registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser for independent advice.

If you have sold or transferred all your shares in Lai Sun Development Company Limited , you should at once hand this circular to the purchaser(s) or transferee(s), or to the licensed securities dealer, registered institution in securities, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser(s) or transferee(s).

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

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VERY SUBSTANTIAL ACQUISITION AWARD OF TENDER FOR THE DEVELOPMENT AND OPERATION OF THE OCEAN HOTEL AT OCEAN PARK

A letter from the Board is set out on pages 5 to 10 of this circular.

20 June 2014

CONTENTS

			Page
Definitions.................................................................................................................................			1
Letter from the	Board.............................................................................................................		5
Appendix I	–	Financial Information of the Group.................................................	11
Appendix II	–	Management Discussion and Analysis of the Group......................	15
Appendix III	–	General Information ...........................................................................	46

This circular in both English and Chinese is available in printed form and published on the respective websites of the Company at “http://www.laisun.com” and Hong Kong Exchanges and Clearing Limited at “http://www.hkexnews.hk”. The English version will prevail in case of any inconsistency between the English and the Chinese versions of this circular.

– i –

DEFINITIONS

In this circular, the following expressions have the following meanings unless the context requires otherwise:

• “Ancillary Works”

the planning, design, construction and maintenance of the access requirements, utilities related works, reprovisioning, ancillary and other related works as set out in the Development Agreement;

• “Board”

the board of Directors;

• “Capital Court”

Capital Court Limited (財閣有限公司), a limited liability company incorporated in Hong Kong and an indirect wholly-owned subsidiary of the Company;

• “Company”

• Lai Sun Development Company Limited (麗新發展有限公司), a company incorporated in Hong Kong with limited liability, the issued shares of which are listed and traded on the Main Board of the Stock Exchange (Stock Code: 488);

• “connected person(s)”

• has the meaning ascribed thereto in Rule 1.01 of the Listing Rules;

• “Development Agreement”

• the agreement for development and sub-lease to be entered into between OPC and Capital Court pursuant to which Capital Court will be granted, among other things, the rights to undertake the Project and to enter into the Sub-Lease on completion of the development of the Ocean Hotel;

• “Director(s)”

the directors of the Company;

• “Government” the Government of Hong Kong;

• “Group”

the Company and its subsidiaries;

• “HK$”

Hong Kong dollars, the lawful currency of Hong Kong;

• “Hong Kong”

the Hong Kong Special Administrative Region of the People’s Republic of China;

• “Hotel Management Agreement”

the agreement (in the form to be approved by OPC) to be entered into between Capital Court and the Hotel Operator or its affiliates for the purposes of regulating the management and operation of the Ocean Hotel;

– 1 –

DEFINITIONS

• “Hotel Operation and Management Agreements”

• “Hotel Operator”

• “Land Grant” or the “Lease”

• “Latest Practicable Date”

• “Lease Modification”

• “Listing Rules”

collectively, the Technical Services Agreement, the Hotel Management Agreement and any other agreements related to the performance of the Ocean Hotel under the brand managed by the Hotel Operator, such as licences or royalty agreements, services agreement with the Hotel Operator and its affiliates for the pre-opening period, the operation and/or management of the Ocean Hotel;

the Marriott group, being the hotel operator for the management and operation of the Ocean Hotel pursuant to the Hotel Management Agreement;

• (a) the agreement and conditions of grant in respect of Rural Building Lot No. 1020 deposited and registered in the Land Registry as Conditions of Grant No. 11036 which is dated 24 March 1977 and made between the Government and OPC as varied and/or modified by a modification letter dated 4 November 1978 and registered in the Land Registry by Memorial No. UB1645793 and another modification letter dated 16 May 1980 and registered in the Land Registry by Memorial No. UB1889655; and (b) the letter of extension dated 26 April 1984 in respect of an extension to Rural Building Lot No.1020 and registered in the Land Registry by Memorial No. UB2669195, as varied and/or modified by a modification letter dated 26 April 1984 and registered in the Land Registry by Memorial No. UB2680264 and a waiver letter dated 25 April 1997 and registered in the Land Registry by Memorial No. UB7081361 (both in respect of Rural Building Lot No. 1020 and the extension thereto) and a modification letter dated 13 February 2007 and registered in the Land Registry by Memorial No.07022302750027 (in respect of the remaining portion of Rural Building Lot No.1020 and the extension thereto) and shall include the Lease Modification;

• 17 June 2014, being the latest practicable date prior to the printing of this circular for ascertaining certain information contained herein;

• the intended modification of the conditions under the Land Grant relating to the development of the Ocean Hotel as agreed between OPC and the Lands Department;

• the Rules Governing the Listing of Securities on the Stock Exchange (as amended, supplemented or otherwise modified from time to time);

– 2 –

DEFINITIONS

“LSG”	Lai Sun Garment (International) Limited (麗新製衣國際有限
	公司), a company incorporated in Hong Kong with limited
	liability, the issued shares of which are listed and traded on the
	Main Board of the Stock Exchange (Stock Code: 191);
“Ocean Hotel”	the hotel development to be constructed and completed on the
	Premises in accordance with the terms of the Development
	Agreement;
“Ocean Park”	a marine mammal park, oceanarium, animal theme park and
	amusement park, situated in Wong Chuk Hang and Nam Long
	Shan in the Southern District of Hong Kong;
“OPC”	Ocean Park Corporation, an independent body corporate
	established under the Ocean Park Corporation Ordinance
	(Chapter 388 of the Laws of Hong Kong);
“Percentage Ratio(s)”	has the meaning ascribed thereto in Rule 14.07 of the Listing
	Rules;
“Premises”	the parcel of land located near the Entry Plaza of the
	“Waterfront” area at the Lowland of Ocean Park with a site
	area of approximately 17,000 square metres and bound by Wong
	Chuk Hang Road to the east and north and Ocean Park itself to
	the south and west;
“Project”	the design, financing, development, construction, operation,
	management and maintenance of the Ocean Hotel pursuant to
	the terms of the Development Agreement;
“Qualified Property Acquisition”	has the meaning ascribed thereto in Rule 14.04(10C) of the
	Listing Rules;
“SFO”	the Securities and Futures Ordinance (Chapter 571 of the Laws
	of Hong Kong);
“Share(s)”	share(s) in the issued share capital of the Company;
“Stock Exchange”	The Stock Exchange of Hong Kong Limited;
“Sub-Lease”	the sub-lease of the Premises and the buildings thereon to be
	granted by OPC to Capital Court upon completion of the
	development of the Ocean Hotel under the terms of the
	Development Agreement;

– 3 –

DEFINITIONS

• “Technical Services the technical services or a pre-opening services agreement to Agreement” be entered into by Capital Court with the Hotel Operator or its affiliates pursuant to which the Hotel Operator or its affiliates will be appointed as the technical services adviser of the Ocean Hotel to provide all necessary technical advice to enable Capital Court to design and construct the Ocean Hotel to the relevant brand standard and as contemplated under the Development Agreement;

“Tender” the open tender exercise conducted by OPC for the Project on the terms of the Tender Invitation; “Tender Confirmation” the confirmation dated 16 May 2014 and issued by OPC to Capital Court, confirming the award of the Tender to Capital Court; “Tender Invitation” the invitation for tender submission dated 8 January 2013 and issued by OPC in respect of the Project; “Term” the term of the Sub-Lease, being an initial term from the date to be specified by OPC and expiring on 18 December 2047, subject to renewal or extension; and “%” per cent.

– 4 –

LETTER FROM THE BOARD

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Executive Directors: Registered Office: Dr. Lam Kin Ngok, Peter (Chairman) 11th Floor Mr. Chew Fook Aun (Deputy Chairman) Lai Sun Commercial Centre Mr. Lau Shu Yan, Julius (Chief Executive Officer) 680 Cheung Shan Wan Road Mr. Lam Hau Yin, Lester Kowloon Hong Kong

Non-executive Directors: Dr. Lam Kin Ming Madam U Po Chu

Independent Non-executive Directors: Mr. Ip Shu Kwan, Stephen Mr. Lam Bing Kwan Mr. Leung Shu Yin, William

20 June 2014

To the Shareholders

Dear Sir or Madam,

VERY SUBSTANTIAL ACQUISITION AWARD OF TENDER FOR THE DEVELOPMENT AND OPERATION OF THE OCEAN HOTEL AT OCEAN PARK

INTRODUCTION

Reference is made to the joint announcements of LSG and the Company dated 10 October 2013, 24 April 2014 and 19 May 2014 in relation to the Tender for the development and operation of the Ocean Hotel at Ocean Park, where it was announced that, among other things, Capital Court received the Tender Confirmation from OPC in respect of the Project on 16 May 2014.

The purpose of this circular is to provide you with further particulars regarding the Tender and the general information of the Group.

– 5 –

LETTER FROM THE BOARD

Date of the Tender Invitation

• 8 January 2013

Date of the Tender Confirmation

16 May 2014

Parties involved in the Tender

• (1) OPC

• (2) Capital Court, an indirect wholly-owned subsidiary of the Company, as the successful proponent of the Tender

To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, OPC and its ultimate beneficial owner are third parties independent of the Company and its connected persons.

Subject matter of the Tender

The Tender is an open tender exercise conducted by OPC pursuant to which OPC invited proponents to submit Tenders for the Project. As the successful proponent, Capital Court will, subject to acceptance of the Lease Modification and payment of the requisite fees to OPC, be granted the rights of development, design, construction and completion of the Ocean Hotel and thereafter the operation, management and maintenance of the Ocean Hotel for the Term up to 18 December 2047, subject to any renewal or extension.

PARTICULARS OF THE PROJECT

Scope of the Project

The Project involves the planning, design, construction, development, management and maintenance of the Ocean Hotel at the Premises and the Ancillary Works.

The Premises

The Premises is located near the Entry Plaza of the “Waterfront” area at the Lowland of Ocean Park with a site area of approximately 17,000 square metres. It is bound by Wong Chuk Hang Road to the east and north and Ocean Park itself to the south and west.

The Ocean Hotel

The Ocean Hotel shall consist of up to 6 storeys, with a total gross floor area of approximately 34,000 square metres, providing a maximum of 495 guest rooms. The middle of the three wings will form a central courtyard with a themed lagoon pool, children’s play area and alfresco dining sections.

– 6 –

LETTER FROM THE BOARD

Construction and development of the Ocean Hotel and sub-leasing of the Premises

Capital Court is required to enter into the Development Agreement with OPC for the design, construction and development of the Ocean Hotel and the Ancillary Works within the time stipulated in the Tender Confirmation. Pursuant to the Tender Confirmation, the Development Agreement should be entered into:

• (1) after Capital Court has obtained the relevant written approvals and permits from all the relevant authorities and has fully paid any relevant insurance charges or premiums; or

• (2) within three months after the signing of all the relevant documents, including the formal Lease to be received from the Lands Department,

whichever is earlier, or on such other date as approved by the Commissioner for Tourism. The land premium should have been fully paid before entering into the Development Agreement. As at the Latest Practicable Date, the Development Agreement has not been entered into.

The Ancillary Works encompass the planning, design, construction and maintenance of the access requirements, utilities related works, reprovisioning, ancillary and other related works in connection with the construction and development of the Ocean Hotel.

Demolition work and construction on the site near the main entrance of Ocean Park will begin in late 2014. It is expected that the Project will be developed over a period between 30 and 36 months from the date of the Development Agreement. The construction of the Ocean Hotel should be completed and the Ocean Hotel should commence its operation before the end of the 36-month period from the date of the Development Agreement.

Upon completion of the development of the Ocean Hotel, OPC will enter into the Sub-Lease with Capital Court to sub-lease the Premises and the buildings thereon to Capital Court for the continuing operation, supervision and management of the Ocean Hotel for the Term up to 18 December 2047, subject to any renewal or extension.

Total investment amount of the Project

The total investment amount of the Project is estimated to be approximately HK$4.1 billion, which was determined based on the expected economics that could be derived from the Project and accepted by the Government. Capital Court paid an amount of HK$0.16 billion to OPC on 20 May 2014, which represents 10% of the land premium payable. The remaining 90%, being approximately HK$1.44 billion is payable within 28 days from the signing of the Lease. The balance of approximately HK$2.5 billion represents the construction cost of the Project primarily and will be incurred gradually as the construction progresses. The Group will fund the Project from its internal and external resources including bank borrowings.

The Directors consider that the total investment amount of the Project is fair and reasonable.

– 7 –

LETTER FROM THE BOARD

Hotel Management Agreement and other related agreements

On or before the date of the Development Agreement, Capital Court will also enter into the following Hotel Operation and Management Agreements with the Marriott group, the Hotel Operator, for the pre-opening services, the operation and/or management of the Ocean Hotel as a Marriott hotel.

To the best of the knowledge, information and belief of the Directors having made all reasonable enquiries, the Hotel Operator is independent of the Company and its connected persons.

Technical Services Agreement

Capital Court will enter into the Technical Services Agreement with the Hotel Operator or its affiliates appointing the latter as the technical services adviser of the Ocean Hotel to provide all necessary technical advice to enable Capital Court to design and construct the Ocean Hotel to the relevant brand standard and as contemplated under the Development Agreement.

Hotel Management Agreement

Capital Court will enter into the Hotel Management Agreement with the Hotel Operator or its affiliates for the purposes of regulating the management and operation of the Ocean Hotel.

Other hotel related agreements

Capital Court will enter into any other agreements related to the performance of the Ocean Hotel under the brand managed by the Hotel Operator, such as licences or royalty agreements and services agreement with the Hotel Operator and/or its affiliates for the pre-opening period, and the operation and/or management of the Ocean Hotel.

Provision of guarantee and performance bond

To secure the due performance of the obligations of Capital Court under the Development Agreement and the Sub-Lease, Capital Court is required to deliver to OPC (a) a parent company guarantee issued by the Company; and (b) a performance bond for the sum of HK$10 million issued by a licensed bank or financial institution in Hong Kong.

REASONS FOR AND BENEFITS OF THE PROJECT

The number of visitors visiting Hong Kong has been increasing steadily in recent years. The total number of visitors reached over 54 million in 2013, representing an increase of 11.7% over 2012. The growth in hotel room supply increased correspondingly with occupancy rate averaged between mid 80% and mid 90% and daily room rate averaged between HK$1,400 and HK$1,600 per night.

– 8 –

LETTER FROM THE BOARD

Ocean Park is one of the leading amusement parks globally with annual visitors of over 7 million in 2012. Ocean Park is the 2012 recipient of the highly coveted and prestigious Applause Award, presented by Liseberg Amusement Park. Recognised by the attractions industry worldwide, the award is presented at the International Association of Amusement Parks and Attractions (IAAPA) Attractions Expo every other year in honour of a theme park for its excellence in management, operations, and creativity. Ocean Park is the first theme park in Asia to win this international award since its inception in 1980.

The Project is located at the main entrance of Ocean Park and adjacent to the MTR station. It is accessible by various forms of surface transportation and within close proximity to popular tourists’ destinations such as Central, Admiralty and Causeway Bay. This is expected to be enhanced further when MTR’s South Island Line (East) commences operation. The construction of MTR’s South Island Line (East) is expected to be completed in 2015.

Given the favourable fundamentals for the hotel industry, Ocean Park’s robust performance and the expertise of the Hotel Operator, the Project is expected to deliver long term value to the shareholders of the Company.

For the reasons set out above, the Board considers that the terms of the Project are on normal commercial terms, the terms of which are fair and reasonable and that the Project is in the interests of the shareholders of the Company as a whole.

INFORMATION ON OPC

OPC is an independent body corporate established under the Ocean Park Corporation Ordinance (Chapter 388 of the Laws of Hong Kong). The principal activities of OPC include the provision of entertainment and educational facilities to tourists and guests in the form of nature-based theme amusement park, and related facilities.

INFORMATION ON CAPITAL COURT AND THE COMPANY

Capital Court is a company incorporated in Hong Kong with limited liability. The principal activities of Capital Court include the development and operation of the Ocean Hotel.

The Company is a company incorporated in Hong Kong with limited liability, the issued shares of which are listed and traded on the Main Board of the Stock Exchange. The principal activities of the Group include property investment, property development, investment in and operation of hotels and restaurants and investment holding.

FINANCIAL EFFECTS OF THE PROJECT

The Group will fund the Project from its internal and external resources including bank borrowings. It is expected that the Project will not have any material effect on the earnings of the Group before the end of the 36-month period of the Project from the date of the Development Agreement, and may have a positive impact on the Group’s earning when it is completed and in steady operation. Assuming that HK$3.3 billion will be financed by bank borrowings and HK$0.8 billion will be financed by internal resources of the Group, the Group’s total assets and total liabilities will be increased by HK$3.3 billion.

– 9 –

LETTER FROM THE BOARD

IMPLICATIONS UNDER THE LISTING RULES

As one or more of the applicable Percentage Ratios in respect of the total investment amount of the Project are more than 100% for the Company, the Project constitutes a very substantial acquisition for the Company under Chapter 14 of the Listing Rules.

The transactions contemplated under the Development Agreement, including the rights granted by OPC to Capital Court (i) to undertake the Project; and (ii) to enter into the Sub-Lease on completion of the Project, constitute a very substantial acquisition for the Company under Chapter 14 of the Listing Rules. Nonetheless, the Project is a Qualified Property Acquisition under Rule 14.04(10C) of the Listing Rules as it involves an acquisition of a property development project in Hong Kong from OPC, a Government-controlled entity, through the Tender. Under Rule 14.33A of the Listing Rules, the Project and the Development Agreement are exempt from the shareholders’ approval requirement for the Company as it is undertaken on a sole basis by the Company (through Capital Court) in its ordinary and usual course of business. While the principal terms of the Development Agreement have been disclosed in this circular, the Company will publish further announcements once the Development Agreement and the Sub-Lease are entered into.

The transactions contemplated under the Hotel Operation and Management Agreements are of a revenue nature and within the ordinary and usual course of business of the Group, and are therefore not subject to any requirements under Chapter 14 of the Listing Rules.

ADDITIONAL INFORMATION

Your attention is drawn to the additional information set out in the appendices to this circular.

Yours faithfully, For and on behalf of the Board of

Lai Sun Development Company Limited Chew Fook Aun

Executive Director and Deputy Chairman

– 10 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

FINANCIAL INFORMATION OF THE GROUP

By way of reference, the financial information of the Group for the three years ended 31 July 2013 are disclosed in the following documents which have been published on the respective websites of the Stock Exchange at http://www.hkexnews.hk and the Company at http://www.laisun.com:

• the annual report of the Company for the year ended 31 July 2011 published on 21 November 2011, from pages 45 to 121;

• the annual report of the Company for the year ended 31 July 2012 published on 16 November 2012, from pages 55 to 156; and

• the annual report of the Company for the year ended 31 July 2013 published on 23 October 2013, from pages 57 to 147.

INDEBTEDNESS

As at 30 April 2014, the Group had bank borrowings of approximately HK$2,768.3 million and guaranteed notes of approximately HK$2,698.1 million.

As at 30 April 2014, certain investment properties with carrying amounts of approximately HK$11,075.3 million (being their carrying amounts as at 31 January 2014 as disclosed in the interim report of the Company for the six months ended 31 January 2014) and certain bank balances and time deposits with a bank of approximately HK$138.1 million were pledged to banks to secure banking facilities granted to the Group. In addition, the shares in a subsidiary held by the Group were also pledged to a bank to secure loan facilities granted to the Group. The shares of a joint venture held by the Group were pledged to a bank to secure a loan facility granted to a joint venture of the Group. The shares of an investee company held by the Group were pledged to a bank to secure a loan facility granted to this investee company. The Group’s secured bank borrowings were also secured by floating charges over certain assets held by the Group.

As at 30 April 2014, the Group had the following material contingent liabilities:

• (a) In connection with the disposal (“ Disposal ”) of 100% interests in Majestic Hotel and Majestic Centre, Kowloon, Hong Kong by Taiwa Land Investment Company, Limited (“ Taiwa ”), an indirect 50%-owned associate of the Group, Taiwa, the Company, and the other 50% beneficial shareholder of Taiwa (collectively “ Covenantors ”) entered into a tax deed (“ Tax Deed ”) with the purchaser of the Disposal, and Majestic Hotel Enterprises Holding Limited and Majestic Centre Holding Limited and their subsidiaries (collectively “ Properties Holding Companies ”) on 17 July 2007. Pursuant to the Tax Deed, the Covenantors severally agreed to indemnify the Properties Holding Companies against any taxation on profits levied by relevant tax authority in Hong Kong resulting from events which happened prior to the completion of the Disposal for a maximum amount of HK$30 million. As such, the maximum liability of the Company under the Tax Deed is HK$15 million. The Tax Deed is valid for a period of 7 years from the date of its execution.

– 11 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

• (b) Pursuant to an indemnity deed (“ 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 income tax and land appreciation tax (“ LAT ”) of the People’s Republic of China (“ PRC ”) 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 associates as at 31 October 1997 (“ 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 chartered surveyors, as at 31 October 1997 (“ 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 (“ 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 30 April 2014 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$1,350.0 million.

As at 30 April 2014, the Directors, after taking into account the plan and status of the Property Interests and the prevailing tax rates and legislation governing PRC income tax and LAT, considered it is probable that an estimated amount of HK$729.4 million of the abovementioned tax indemnity given by the Company would be crystallised.

MATERIAL ADVERSE CHANGE

Based on the announcement of the Company dated 14 March 2014 and the interim report of the Company for the six months ended 31 January 2014, for the six months ended 31 January 2014, the profit attributable to owners of the Company amounted to approximately HK$622.0 million (2013: approximately HK$1,964.7 million), representing a significant decrease of approximately 68% over the same period of last year, which was mainly due to a significantly lower revaluation gain arising in the revaluation of the Group’s investment properties for the six months ended 31 January 2014 as compared to the same period last year.

– 12 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Save for the abovementioned, as at the Latest Practicable Date, the Directors confirmed that there had been no material adverse change in the financial or trading position or prospects of the Group since 31 July 2013, the date to which the latest published audited financial statements of the Group were made up.

WORKING CAPITAL

The Directors are of the opinion that, in the absence of any unforeseen circumstances and after taking into account (i) the internal resources of the Group; (ii) the Group’s presently available banking facilities; and (iii) completion of the Tender, the Group has sufficient working capital for its requirements for at least 12 months from the date of this circular.

FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Group is engaged in property investment, property development, investment in and operation of hotels and restaurants and investment holding.

The global economy is on a delicate recovery path with the United States leading the way through improving economic and employment conditions. However, a number of factors still shroud the horizon: the weak euro zone economy, adjustments to the macroeconomic policies of major economies, and geopolitical tensions. As a global financial centre, Hong Kong’s economic performance is clearly not immune from the challenges faced by the major economies around the world.

The property sector in Hong Kong could be described as a tale of two cities: retail market well supported by low unemployment and robust visitors trend with the office leasing market stabilising with some improvements, but the residential market continues to be quiet since the introduction of control measures in late 2012 and early 2013. It is very likely that these control measures, barring any unforeseen circumstances, are here to stay until land supply has caught up; which is likely to take some years notwithstanding the government’s emphasis and effort. Labour supply shortage in the construction industry drove wage inflation and continues to pose a challenge on the cost management side of the picture. The Group performed admirably against this challenging environment.

Property Investment

The Group’s rental portfolio of approximately 1.5 million square feet generated steady rental income at high occupancy rates. During the six months ended 31 January 2014, the Group’s rental operations recorded a turnover of HK$237.0 million (2013: HK$214.8 million), representing a 10% increase over the same period last year. Rental income increased through tenant mix adjustments, rental reversion and addition of the CCB Tower that is fully leased subsequent to the period end, rental proceeds of which was recognised as contributions from joint venture. The acquisition of a freehold commercial property in London in April 2014 added an attributable rental gross floor area (“ GFA ”) of approximately 106,100 square feet to the Group’s rental portfolio.

– 13 –

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

Project Development

For the six months ended 31 January 2014, recognised turnover from sales of properties was HK$722.7 million (2013: HK$1.2 million), representing a significant increase over the same period last year. The exceptional performance was due to the sale of residential units in Ocean One. Sale of Ocean One is substantially completed at the intended average selling price and boosted the revenue and profit of the Group compared to the same period last year. The management believes it is paramount to prepare the Group for the challenges and opportunities ahead.

Further to securing the Tseung Kwan O site in the same period last year, the Group participated in a number of government tenders to grow the pipeline. Other than the Ocean Park Hotel project, the Group won the development of San Shan Road/Pau Chung Street project of Urban Renewal Authority, Hong Kong in Ma Tau Kok, Kowloon, Hong Kong in April 2014, which will provide residential/ commercial GFA of approximately 113,400 square feet. The completion of the Observatory Road project will add an attributable rental GFA of approximately 82,600 square feet in the prime Tsim Sha Tsui area of Hong Kong when it is completed in the third quarter of 2015. The Tai Hang Road project, with 9 luxury units located at one of the most sought after addresses in Hong Kong with attributable GFA of approximately 30,400 square feet, was completed in January 2014 and the Group is preparing for its sale currently. Construction of the Tseung Kwan O site has commenced and is ontrack for completion in 2017.

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. Subsequent to the period end, the Group announced proposed capital reduction on 20 May 2014 that would put the Company in a position to legally pay dividends, subject to the Company’s performance and when the Board considers that it is appropriate in the future and/or undertake any corporate exercise which requires the use of distributable reserves.

The Group’s strong cash position of HK$3,469.3 million of cash on hand with a net debt to equity ratio of 11% as at 31 January 2014 provides the Group full confidence and the means to review opportunities more actively. However, the Group will continue its prudent and flexible approach in growing the landbank and managing its financial position.

– 14 –

APPENDIX II MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

MANAGEMENT DISCUSSION AND ANALYSIS ON THE GROUP FOR THE SIX MONTHS ENDED 31 JANUARY 2014

Set out below is the management discussion and analysis on the Group as extracted from the interim report of the company for the six months ended 31 January 2014. Terms used below shall have the same meanings as defined in the said interim report.

For the six months ended 31 January 2014, the Group recorded turnover of HK$1,224.7 million (2013: HK$429.2 million) and a gross profit of HK$601.6 million (2013: HK$282.2 million), representing an increase of approximately 185% and 113%, respectively, over the same period last year. Turnover from rental income, sales of properties, hotel and restaurant and other operations during the period was HK$237.0 million (2013: HK$214.8 million), HK$722.7 million (2013: HK$1.2 million) and HK$265.0 million (2013: HK$213.2 million), respectively.

Profit before tax, excluding finance costs and property revaluations, was HK$360.7 million (2013: HK$156.5 million). Net profit attributable to owners of the Company was approximately HK$622.0 million (2013: HK$1,964.7 million), representing a decrease of approximately 68% over the same period of last year. Excluding the effect of property revaluations, net profit attributable to owners of the Company increased to approximately HK$178.5 million (2013: HK$73.8 million), primarily due to the successful sale of the majority of units at Ocean One. Basic earnings per share including and excluding the effect of property revaluations was HK$0.031 (2013: HK$0.098) and HK$0.009 (2013: HK$0.004), respectively.

	Six months ended 31 January	Six months ended 31 January
	2014	2013
Profit attributable to owners of the Company	HK$ million	HK$ million
Reported	622.0	1,964.7
Adjustments in respect of revaluation gains of
investment properties held by
– subsidiaries	(340.2)	(1,373.5)
– associates and joint ventures	(103.3)	(517.4)
Profit attributable to owners of the Company excluding
revaluation gains of investment properties	178.5	73.8

Equity attributable to owners of the Company as at 31 January 2014 amounted to HK$19,943.3 million, up from HK$19,127.8 million as at 31 July 2013. Net asset value per share attributable to owners of the Company increased by 4% to HK$0.994 per share as at 31 January 2014 from HK$0.953 per share as at 31 July 2013, representing a discount of 80% to the share price of HK$0.195 as at 31 January 2014.

– 15 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

PROPERTY PORTFOLIO COMPOSITION

Approximate attributable GFA (in ’000 square feet) and car-parking spaces of the Group’s major properties as at 31 January 2014:

						Total
						(excluding		No. of
						car-parking	car-parking
						spaces &		spaces
	Commercial/					ancillary	attributable
	Retail	Office	Industrial	Residential	Hotel	**facilities) **	to the Group
Completed Properties Held for Rental1	433	872	63	–	–	1,368		965
Completed Hotel Properties	–	–	–	–	98	98		–
Properties Under Development2	131	–	–	229	–	360		172
Completed Properties Held for Sale3	18	–	–	69	–	87		41
Total GFA of major properties
of the Group	582	872	63	298	98	1,913		1,178

1. Completed and rental generating properties

2. All properties under construction

3. Completed properties held for sale

The above table does not include GFA of properties held by Lai Fung.

– 16 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

PROPERTY INVESTMENT

Rental Income

During the period under review, the Group’s rental operations recorded a turnover of HK$237.0 million (2013: HK$214.8 million), representing a 10% increase over the same period last year. The increase was primarily due to continued management of tenant mix and rental reversion at major investment properties. CCB Tower, the 50:50 joint venture project, is fully leased subsequent to the period end and the rental proceeds was recognised as contributions from joint venture.

The Group wholly owns three major rental properties in Hong Kong, namely Cheung Sha Wan Plaza, Causeway Bay Plaza 2 and Lai Sun Commercial Centre. The Group also owns 50% of the CCB Tower.

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

	Six months ended	31 January		Period end
	2014	2013		occupancy
	HK$ million	HK$ million	% Change	(%)
Cheung Sha Wan Plaza
(including car-parking spaces)	134.6	120.9	11	98.7
Causeway Bay Plaza 2
(including car-parking spaces)	73.0	65.8	11	96.8
Lai Sun Commercial Centre
(including car-parking spaces)	24.1	25.1	-4	89.2
Others	5.3	3.0	77	N/A
Total:	237.0	214.8	10
Rental proceeds from joint venture	project
CCB Tower (50% basis)	50.5	–	N/A	95.7

Review of major rental properties

Hong Kong Properties

Cheung Sha Wan Plaza

The asset comprises of an 8-storey and a 7-storey office tower 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 approximately 689,500 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.

– 17 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

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 approximately 208,500 square feet (excluding car-parking spaces). Key tenants include a branch of HSBC, 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 approximately 188,500 square feet (excluding car-parking spaces).

CCB Tower, 3 Connaught Road Central

The Group has a 50:50 interest with China Construction Bank Corporation (“ CCB ”) in the joint redevelopment project of the former Ritz-Carlton Hotel in Central. This office tower is a landmark property in Central featuring underground access to the MTR station in Central. The property has a total GFA of approximately 229,000 square feet (excluding car-parking spaces). CCB Tower was completed in 2013 and added approximately 115,000 square feet of attributable GFA to our rental portfolio. Subsequent to the period end, CCB Tower has been fully leased with 15 floors of the office floors and 2 banking hall floors leased by CCB for its Hong Kong operations and it is expected to contribute in the coming financial year.

Overseas Property

36 Queen Street, London EC4 1HJ, 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 gross internal area of approximately 61,000 square feet of office accommodation extending over basement, ground and six upper floors. Comprehensive refurbishment and renovation work has been completed and the building is currently being leased.

PROPERTY DEVELOPMENT

For the six months ended 31 January 2014, recognised turnover from sales of properties was HK$722.7 million (2013: HK$1.2 million), representing a significant increase over the same period last year. The exceptional performance was due to the sale of residential units in Ocean One.

– 18 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

Review of major projects for sale

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. The estimated total development cost (including land cost and lease modification premium) is about HK$730 million.

As at 31 January 2014, the Group has sold 82 units out of a total of 124 residential units, of which the sale of 68 residential units were completed during the period under review. A total of HK$567.7 million was recognised during the period under review and the average selling prices based on net saleable area and GFA are approximately HK$13,600 per square foot and HK$10,200 per square foot, respectively. Subsequent to the period end and up to 28 February 2014, we have completed the sale of a further 4 residential units with total sales proceeds of HK$34.8 million.

335-339 Tai Hang Road, Hong Kong

The Group wholly owns the site located at 335-339 Tai Hang Road, Hong Kong. The Group is developing the site into a luxury residential property with a total GFA of about 30,400 square feet (excluding car-parking spaces). The total development cost (including land cost and lease modification premium) is estimated to be about HK$670 million. This project has been completed during the current period and the Group is preparing the sale of this project.

Review of major projects under development

2-12 Observatory Road

The Group completed the acquisition of a 50% interest in a project at Observatory Road, Kowloon with the buildings previously erected there known as Nos. 2-12, Observatory Road, Kowloon in November 2011. The joint venture partner is Henderson Land.

The site is being planned to be redeveloped into a multi-storey commercial building with a total GFA of approximately 165,200 square feet (excluding car-parking spaces). The total development cost is estimated to be approximately HK$2.3 billion including an estimated land value of approximately HK$1.8 billion. The new building is expected to be completed in the third quarter of 2015.

The Group reached an agreement with the Government to modify its land lease in relation to the relaxation of the development plot ratio and height restriction. Land premium of about HK$133.7 million was paid during the period.

– 19 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

Area 68A2, 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 approximately 229,000 square feet with a permitted total GFA of approximately 556,100 square feet split into approximately 458,600 square feet for residential use and approximately 97,500 square feet for commercial use. The current intention is to develop the lot primarily into a residential project for sale, comprising residential towers as well as houses. Completion is expected to be in the second half of 2017.

HOTEL AND RESTAURANT OPERATIONS

For the six months ended 31 January 2014, hotel and restaurant operations contributed HK$253.1 million to the Group’s turnover (2013: HK$202.8 million), representing an increase of approximately 25% from the same period last year. Majority of the turnover from hotel and restaurant operations was derived from the Group’s operation of the Caravelle Hotel in Ho Chi Minh City, Vietnam.

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 mixture of French colonial and traditional Vietnamese style and has 335 superbly appointed rooms, suites, exclusive Signature Floors, Signature Lounge, specially equipped room for the disabled. Total GFA attributable to the Group is approximately 98,400 square feet.

The restaurant operation includes the Group’s interests in 11 restaurants in Hong Kong and Mainland China, including the Michelin 3 star Italian restaurant 8[1/2] Otto e Mezzo BOMBANA Hong Kong, Michelin 2 star Japanese restaurant Wagyu Takumi, 8[1/2] Otto e Mezzo BOMBANA Shanghai, CIAK – In The Kitchen at Landmark (opened in the fourth quarter in 2013), Wagyu Kaiseki Den, Gin Sai, Rozan, Kowloon Tang, Island Tang, Chiu Tang and China Tang Hong Kong at Landmark (opened in the fourth quarter in 2013).

The hotel and restaurant operations have 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 and Zhongshan. The hotel division will manage Lai Fung’s serviced apartments in Shanghai, Guangzhou and Zhongshan under the “STARR” brand. STARR Resort Residence Zhongshan soft opened in August 2013 and 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 soft opened in November 2013 and is a 17-storey hotel with 287 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. The Guangzhou “STARR Xin Hotel”, located at the junction of Da Sha Tou Road and Yan Jiang Dong Road in Yuexiu District is expected to soft-open in the fourth quarter of 2014.

– 20 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

INTERESTS IN ASSOCIATES (eSun)

During the period under review, the Group’s interest in eSun Holdings Limited (“ eSun ”) increased from 39.93% to 41.26%.

Film production and distribution and media and entertainment divisions improved across the board. Turnover substantially improved and losses narrowed. The acquisition of Intercontinental Group Holdings Limited bolstered its cinema network and film distribution capability. Lai Fung’s results were encouraging given the challenging operating environment in the property sector in Mainland China.

As a result, the contribution from eSun increased from a loss to a profit of HK$45.3 million (2013: loss of HK$9.9 million).

INTERESTS IN JOINT VENTURES

During the period under review, contribution from joint ventures decreased to HK$49.2 million (2013: HK$522.4 million). This is primarily due to lower revaluation gains of CCB Tower and the Observatory Road project.

CAPITAL STRUCTURE, LIQUIDITY AND DEBT MATURITY PROFILE

As at 31 January 2014, cash and bank balances and undrawn facilities held by the Group amounted to HK$3,469.3 million and HK$1,258.2 million, respectively.

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

As at 31 January 2014, the Group had bank borrowings of approximately HK$3,011.4 million and guaranteed notes of approximately HK$2,700.8 million. The net debt to equity 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 11%. As at 31 January 2014, the maturity profile of the bank borrowings of HK$3,011.4 million was spread over a period of less than 5 years with HK$425.9 million repayable within 1 year, HK$1,285.4 million repayable in the second year and HK$1,300.1 million repayable in the third to fifth years. All the Group’s borrowings carried interest on a floating rate basis except for the United States dollar guaranteed notes issued in January 2013 which has a fixed rate of 5.7% per annum.

– 21 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

As at 31 January 2014, certain investment properties with carrying amounts of approximately HK$11,075.3 million, certain completed properties for sale of approximately HK$682.2 million, and certain bank balances and time deposits with banks of approximately HK$171.7 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 loan facilities granted to the Group. The shares of a joint venture held by the Group were pledged to a bank to secure a loan facility granted to a joint venture of the Group. The shares of an investee company held by the Group were pledged to a bank to secure a loan facility granted to this investee company. 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 an investment in United Kingdom with the assets and liabilities denominated in Pounds Sterling. The investment was partly financed by bank borrowings denominated in Pounds Sterling in order to minimise the net foreign exchange exposure. The net investment amounted to approximately HK$227.2 million which only accounted for an insignificant portion of the consolidated net assets of the Group as at 31 January 2014. 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

As at 31 January 2014, the Group had the following material contingent liabilities:

• (a) In connection with the Disposal by Taiwa, the Covenantors entered into the Tax Deed with the Properties Holding Companies on 17 July 2007. Pursuant to the Tax Deed, the Covenantors severally agreed to indemnify the Properties Holding Companies against any taxation on profits levied by relevant tax authority in Hong Kong resulting from events which happened prior to the completion of the Disposal for a maximum amount of HK$30 million. As such, the maximum liability of the Company under the Tax Deed is HK$15 million. The Tax Deed is valid for a period of 7 years from the date of its execution.

– 22 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

• (b) Pursuant to the Lai Fung Tax Indemnity Deed dated 12 November 1997 entered into between the Company and Lai Fung, the Company has undertaken to indemnify Lai Fung in respect of certain LAT payable or shared by Lai Fung in consequence of the disposal of any of 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, independent chartered surveyors, as at 31 October 1997; 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; (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 January 2014 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. As at 31 January 2014, the Directors, after taking into account the plan and status of the Property Interests and the prevailing tax rates and legislation governing PRC income tax and LAT, considered it is probable that an estimated amount of HK$753,689,000 of the abovementioned tax indemnity given by the Company would be crystallised, of which HK$24,302,000 is included in creditors, deposits received and accruals and HK$729,387,000 is included in provision for tax indemnity.

EMPLOYEES AND REMUNERATION POLICIES

As at 31 January 2014, the Group employed a total of approximately 1,300 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.

– 23 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

Material Investments

Save as disclosed in this Appendix II, there were no material investments held by the Group during the six months ended 31 January 2014.

Acquisition and Disposal of Subsidiaries and Associated Companies

The Group did not have any material acquisition or disposal of subsidiaries or associated companies during the six months ended 31 January 2014.

Future Plans for Material Investments or Capital Assets

In accordance with the terms of the Tender, Capital Court is required to enter into the Development Agreement with OPC for the design, construction and development of the Ocean Hotel and the ancillary works. On or before the date of the Development Agreement, Capital Court will also enter into the Hotel Operation and Management Agreements with the Marriott group, the Hotel Operator, for the pre-opening services, the operation and/or management of the Ocean Hotel as a Marriott hotel.

Demolition work and construction on the site near the main entrance of Ocean Park will begin in late 2014. It is expected that the Project will be developed over a period between 30 and 36 months from the date of the Development Agreement. The Group will fund the Project from its internal and external resources including bank borrowings.

Save as disclosed above, the Group had no future plans for material investments or capital assets as at 31 January 2014.

MANAGEMENT DISCUSSION AND ANALYSIS ON THE GROUP FOR THE YEAR ENDED 31 JULY 2013

Set out below is the management discussion and analysis on the Group as extracted from the annual report of the Company for the year ended 31 July 2013. Terms used below shall have the same meanings as defined in the said annual report.

The Hong Kong property market weathered the global economic challenges well as a whole primarily due to the chronic lack of short term supply, robust underlying demand and a low interest rate environment. Against such a backdrop, the Group achieved a solid set of results from its investment properties and the sales of residential units in Ocean One.

As at 31 July 2013, the Group maintained a property portfolio including, in attributable GFA (excluding car-parking spaces and ancillary facilities), completed properties held for rental with attributable GFA of approximately 1,304,000 square feet, completed hotel properties with attributable GFA of approximately 98,000 square feet, properties under development with attributable GFA of approximately 400,000 square feet, and completed properties held for sale with attributable GFA of approximately 121,000 square feet. The Group will continue to build on this sound asset base with a view to delivering long-term value to its shareholders.

– 24 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

PROPERTY PORTFOLIO COMPOSITION

Approximate attributable GFA (in ’000 square feet) and car-parking spaces of the Group’s major properties as at 31 July 2013:

						Total	No. of
						(excluding	car-parking
						car-parking	spaces
						spaces &	attributable
	Commercial/					ancillary	to the
	Retail	Office	Industrial	Residential	Hotel	facilities)	Group
Completed Properties Held for Rental1	434	859	11	–	–	1,304	962
Completed Hotel Properties	–	–	–	–	98	98	–
Properties Under Development2	140	–	–	260	–	400	197
Completed Properties Held for Sale3	27	–	–	94	–	121	29
Total GFA of major properties
of the Group	601	859	11	354	98	1,923	1,188

1. Completed and rental generating properties

2. All properties under construction

3. Completed properties held for sale

The above table does not include GFA of properties held by Lai Fung.

PROPERTY INVESTMENT

Rental Income

During the year under review, the Group’s rental operations recorded a turnover of HK$434.2 million (2012: HK$395.8 million), representing a 10% increase over last year. The increase was primarily due to continued management of tenant mix and rental reversion at major investment properties.

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. CCB Tower, a 50:50 joint venture, was completed during the year under review and added approximately 115,000 square feet of attributable GFA to our rental portfolio. Subsequent to the year end, CCB Tower was almost fully leased out and it is expected to contribute in the coming financial year.

– 25 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

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

	For the year ended 31 July	For the year ended 31 July		Year end
	2013	2012		occupancy
	HK$ million	HK$ million	% Change	(%)
Cheung Sha Wan Plaza
(including car-parking spaces)	249.9	212.7	17	98.9%
Causeway Bay Plaza 2
(including car-parking spaces)	131.1	120.8	9	96.9%
Lai Sun Commercial Centre
(including car-parking spaces)	48.0	48.0	–	95.3%
Others	5.2	14.3	-64	N/A
Total:	434.2	395.8	10

Review of major investment properties

Hong Kong Properties

Cheung Sha Wan Plaza

The asset comprises an 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 approximately 690,500 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 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 approximately 208,500 square feet (excluding car-parking spaces). Key tenants include the HSBC’s branch, 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 approximately 188,500 square feet (excluding car-parking spaces).

– 26 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

CCB Tower, 3 Connaught Road Central

The Group has a 50:50 interest with China Construction Bank Corporation (“ CCB ”) in the joint redevelopment project of the former Ritz-Carlton Hotel in Central. This office tower is a landmark property in Central featuring underground access to the MTR station in Central. The property has a total GFA of approximately 229,000 square feet (excluding car-parking spaces). CCB Tower was completed during the year under review and added approximately 115,000 square feet of attributable GFA to our rental portfolio. Subsequent to the year end, CCB Tower was almost fully leased out with 14 floors of the office floors and 2 banking hall floors leased by CCB for its Hong Kong operations and it is expected to contribute in the coming financial year.

Overseas Property

36 Queen Street, London EC4 1HJ, 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 approximately 47,000 square feet of office accommodation extending over basement, ground and six upper floors. Comprehensive refurbishment work was done during 2012 and 2013 with the renovation completed after the year end and the building is currently available for lease.

PROPERTY DEVELOPMENT

For the year ended 31 July 2013, recognised turnover from sales of properties was HK$100.3 million (2012: HK$92.1 million), representing an increase of 9% over last year. The increase was due to sales of Ocean One in Yau Tong. Notwithstanding the launch coincided with the introduction of the new stamp duty requirement and other cooling measures subsequently, sale of 14 residential units out of a total of 124 residential units were completed during the year under review, representing 11% of total residential units. Subsequent to the year end, a further 65 residential units have been sold up to 30 September 2013 with total sales proceeds of approximately HK$527.7 million.

Review of major projects for sale

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 112,000 square feet (excluding car-parking spaces) or 124 residential units and 2 commercial units. The estimated total development cost (including land cost and lease modification premium) is about HK$730 million. Pre-sales commenced in December 2012.

As at 31 July 2013, we have completed the sale of 14 residential units with total sales proceeds of HK$99.7 million recognised during the year and the average selling price based on saleable area was approximately HK$13,600 per square foot as at 31 July 2013. Subsequent to the year end, the Group has sold a further 65 residential units up to 30 September 2013 with total sales proceeds of HK$527.7 million.

– 27 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

Review of major projects under development

335-339 Tai Hang Road, Hong Kong

The Group wholly owns the site located at 335-339 Tai Hang Road, Hong Kong. The Group is developing the site into a luxury residential property with a total GFA of about 30,500 square feet (excluding car-parking spaces). The total development cost (including land cost and lease modification premium) is estimated to be about HK$670 million. This project is expected to be completed by end of 2013.

2-12 Observatory Road

The Group completed the acquisition of a 50% interest in a project at Observatory Road, Kowloon with the buildings previously erected there known as Nos. 2-12, Observatory Road, Kowloon in November 2011. The joint venture partner is Henderson Land.

The site is being planned to be redeveloped into a multi-storey commercial building with a total GFA of approximately 165,000 square feet (excluding car-parking spaces). The total development cost is estimated to be approximately HK$2.3 billion including an estimated land value of approximately HK$1.7 billion. The new building is expected to be completed in the third quarter of 2015.

Area 68A2, 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 approximately 229,000 square feet with a permitted total GFA of approximately 573,300 square feet split into approximately 458,600 square feet for residential use and approximately 114,700 square feet for non-industrial use. The current intention is to develop the lot primarily into a residential project for sale, comprising residential towers as well as houses. Completion is expected to be in the second quarter of 2017.

HOTEL AND RESTAURANT OPERATIONS

For the year ended 31 July 2013, hotel and restaurant operations contributed HK$409.9 million (2012: HK$362.8 million) to the Group’s turnover, representing an increase of approximately 13% over last year. Most of the turnover from hotel and restaurant operations was derived from the Group’s operation of the Caravelle Hotel in Ho Chi Minh City, Vietnam.

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 mixture of French colonial and traditional Vietnamese style and has 335 superbly appointed rooms, suites, exclusive Signature Floor Rooms, Signature Lounge, specially equipped room for the disabled. Total GFA attributable to the Group is approximately 98,400 square feet.

– 28 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

The restaurant operation includes the Group’s interests in 11 restaurants in Hong Kong and Mainland China, including the Michelin 3 star Italian restaurant 8[1/2] Otto e Mezzo BOMBANA Hong Kong, Michelin 1 star Japanese restaurant Wagyu Kaiseki Den, 8[1/2] Otto e Mezzo BOMBANA Shanghai, Wagyu Takumi, Gin Sai, Rozan, Kowloon Tang, Island Tang, Chiu Tang, CIAK – In The Kitchen at Landmark (opening in the fourth quarter of 2013) and China Tang Hong Kong at Landmark (opening in the fourth quarter of 2013).

The hotel and restaurant operations have 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 be continued to focus on providing management services, particularly to capture opportunities arising from the developments of Lai Fung in Shanghai, Guangzhou and Zhongshan. The hotel division will manage Lai Fung’s serviced apartments in Shanghai, Guangzhou and Zhongshan under the “STARR” brand. STARR Resort Residence Zhongshan soft opened in August 2013 and comprises two 16-storey blocks with 90 fully furnished serviced apartment units located in the Palm Lifestyle complex in Zhongshan Western district.

INTERESTS IN ASSOCIATES (eSun)

During the year under review, the Group’s interest in eSun increased from 37.93% to 39.93%.

Film production and distribution and media and entertainment divisions improved across the board. Turnover substantially improved and losses narrowed. The acquisition of IGHL after the year end bolstered its cinema network and film distribution capability. Lai Fung’s results were encouraging given the challenging operating environment in the property sector in Mainland China.

Notwithstanding the sound fundamental performance, contribution from eSun decreased from a profit to a loss of HK$6.3 million (2012: profit of HK$440.6 million). This was primarily due to the absence of the substantial one-off gain on bargain purchase of subsidiaries arose from the underwriting of Lai Fung’s open offer in financial year ended 31 July 2012 which amounted to HK$1,350.4 million.

INTERESTS IN JOINT VENTURES

During the year under review, contribution from joint ventures decreased to HK$616.1 million (2012: HK$711.0 million), representing a decrease of 13%. This is primarily due to the conclusion of the sale of The Oakhill and lower gain on property revaluation of CCB Tower.

OUTLOOK

Given the precarious state of the global economy, it is fair to expect that major economies will continue their effort to maintain the momentum to grow through various stimuli. This translates to a rising but still relatively low interest rate environment in Hong Kong. As a result, taming asset price inflation, particularly on the property sector, is likely to remain a priority for the Hong Kong Government.

– 29 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

Although the tightening measures implemented by the Hong Kong Government were taking effect, the demand for housing due to a lack of supply and the desire for improved living conditions remained robust, which continued to support property prices. As such the property market is expected to remain stable and the Group is optimistic about the pent-up demand as a result of these tightening measures.

Notwithstanding the above, the Group expects CCB Tower’s contribution will strengthen the rental income further. The sale momentum of Ocean One is expected to continue and the Tai Hang project to attract strong interest when it is launched towards the end of 2013. The Observatory Road project and the Tseung Kwan O project will provide catalysts for growth in the medium term.

The Group will continue its prudent yet flexible approach with the objective of preserving margin and optimizing long-term value for shareholders. The financial liquidity of the Group has been bolstered by the HK$2,200 million syndicated loan in October 2012 and the US$350 million unrated bond issued in January 2013 which is listed on the Stock Exchange. As at 31 July 2013, our cash position amounted to HK$3,258.3 million with a net debt to equity ratio of 13% as at 31 July 2013 giving us the confidence and the means to be reviewing opportunities more actively.

LIQUIDITY AND FINANCIAL RESOURCES

As at 31 July 2013, cash and bank balances and undrawn facilities held by the Group amounted to HK$3,258.3 million and HK$1,260.5 million, respectively.

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

As at 31 July 2013, the Group had bank borrowings of approximately HK$3,078.6 million and guaranteed notes of approximately HK$2,695.5 million. The net debt to equity 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 13%. As at 31 July 2013, the maturity profile of the bank borrowings of HK$3,078.6 million was spread over a period of less than 5 years with HK$417.3 million repayable within 1 year, HK$386.9 million repayable in the second year and HK$2,274.4 million repayable in the third to fifth years. 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.

As at 31 July 2013, certain investment properties with carrying amounts of approximately HK$10,714.4 million, certain properties under development for sale of approximately HK$668.9 million, and certain bank balances and time deposits with banks of approximately HK$134.7 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 loan facilities granted to the Group. Certain shares in a joint venture held by the Group were pledged to a bank to secure a loan facility granted to a joint venture of the Group. Certain shares of an investee company held by the Group were pledged to banks to secure a loan facility granted to this investee company. The Group’s secured bank borrowings were also secured by floating charges over certain assets held by the Group.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

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 an investment in United Kingdom with the assets and liabilities denominated in Pounds Sterling. The investment was partly financed by bank borrowings denominated in Pounds Sterling in order to minimise the net foreign exchange exposure. The net investment amounted to approximately HK$146.0 million which only accounted for an insignificant portion of the consolidated net assets of the Group as at 31 July 2013. 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 34 to the financial statements.

EMPLOYEES AND REMUNERATION POLICIES

As at 31 July 2013, the Group employed a total of approximately 1,200 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.

MANAGEMENT DISCUSSION AND ANALYSIS ON THE GROUP FOR THE YEAR ENDED 31 JULY 2012

Set out below is the management discussion and analysis on the Group as extracted from the annual report of the Company for the year ended 31 July 2012. Terms used below shall have the same meanings as defined in the said annual report.

The Hong Kong property market weathered the global economic challenges well as a whole primarily due to the chronic lack of short term supply, robust underlying demand and low interest rate environment. Against such backdrop, Lai Sun Development Company Limited (the “ Company ”) and its subsidiaries (the “ Group ”) achieved a solid set of results from its investment properties and the remaining units from Emerald 28 and The Oakhill.

– 31 –

APPENDIX II MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

As at 31 July 2012, the Group maintained a property portfolio comprising, in attributable gross floor area (“ GFA ”) (excluding carparks), completed investment properties with attributable GFA of approximately 1,183,211 square feet, properties under development with attributable GFA of approximately 361,073 square feet, and properties held for sale with attributable GFA of approximately 15,531 square feet. The Group will build on this sound asset base with a view to delivering long-term value to its shareholders.

PROPERTY PORTFOLIO COMPOSITION

Approximate attributable GFA in ’000 square feet as at 31 July 2012

Commercial/	Commercial/					No. of
	Retail	Office	Industrial	Residential	Total	carparks
Investment Properties	434	738	11	–	1,183	943
Properties Under Development	111	115	–	135	361	61
Properties Held for Sale	13	–	–	3	16	13
Total GFA	558	853	11	138	1,560	1,017

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$395.8 million (2011: HK$367.5 million), representing a 8% increase over 2011. The increase is primarily due to the management of tenant mix and rental reversion at its major investment properties.

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. During the year under review, these properties had in aggregate a total GFA of approximately 1,086,975 square feet (excluding carparks).

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

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

	Year ended	31 July		Period end
	2012	2011		occupancy
	HK$ million	HK$ million	% Change	(%)
Cheung Sha Wan Plaza
(including carparks)	212.7	198.2	7%	99.4
Causeway Bay Plaza 2
(office, retail and carparks)	120.8	113.9	6%	95.4
Lai Sun Commercial Centre
(including carparks)	48.0	42.4	13%	98.2
Other	14.3	13.0	10%	N/A
Total	395.8	367.5	8%

Review of major investment properties

Cheung Sha Wan Plaza

The asset comprises of two 8-storey and 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 approximately 690,006 square feet (excluding carparks). 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 approximately 208,432 square feet (excluding carparks). Key tenants include the HSBC’s 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 approximately 188,537 square feet (excluding carparks).

– 33 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

The Group has interest in the following joint venture projects in Hong Kong:

3 Connaught Road Central

The Group has a 50:50 interest with China Construction Bank Corporation (“ CCB ”) in the joint redevelopment project of the former Ritz-Carlton Hotel in Central. The redeveloped project will be an office tower that is expected to become a landmark property in Central featuring underground access to the MTR station in Central. Part of the redeveloped property, upon its completion, will be mostly used by CCB as offices for its Hong Kong operations. The total construction cost of the project is estimated to be approximately HK$950 million with a total GFA of approximately 229,165 square feet (excluding carparks).

The building is expected to be completed before the end of 2012 and pre-leasing of the remaining space is in progress.

2-12 Observatory Road

The Group completed the acquisition of a 50% interest in a project at Observatory Road, Kowloon with the buildings previously erected there known as Nos. 2-12, Observatory Road, Kowloon in November 2011.

The Group is now in discussions with the joint venture partner regarding the overall re-development plan including the designs, features and quality of the new building. The site is being planned to be redeveloped into a multi-storey commercial building with a total GFA of approximately 162,448 square feet (excluding carparks). Subject to the finalisation of the re-development plan with the joint venture partner, the total development cost is estimated to be approximately HK$2.3 billion including an estimated land value of approximately HK$1.7 billion. The new building is expected to be completed in 2015.

PROPERTY DEVELOPMENT

During the year under review, recognised turnover from sales of properties was HK$92.1 million (2011: HK$414.5 million), representing a decrease of 78% over last year. The decrease was due to the conclusion of the sale of the Emerald 28 project where all the remaining units have been sold virtually.

Review of major projects under development

Ocean One, Yau Tong, Kowloon

The Group wholly owns this development project located at No. 6 Shung Shun Street, Yau Tong, Kowloon. The Group is developing the site into a residential-cum-commercial property with a total saleable GFA of about 132,092 square feet (excluding carparks). The estimated total development cost (including land cost and lease modification premium) is about HK$700 million and expected to be completed by end of 2012. The Group is in the process of pre-sale of the residential units currently.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

335-339 Tai Hang Road, Hong Kong

The Group wholly owns the site located at 335-339 Tai Hang Road, Hong Kong. The Group is developing the site into a luxury residential property with a total GFA of about 30,479 square feet (excluding carparks). The Group completed the lease modification of the site. The total development cost (including land cost and lease modification premium) is estimated to be about HK$650 million. Completion is expected to be in the second quarter of 2013.

HOTEL AND RESTAURANT OPERATIONS

The hotel and restaurant operations include the Group’s interests in the historic Caravelle Hotel in Ho Chi Minh City, Vietnam and a number of acclaimed restaurants in Hong Kong including the only Michelin 3 star Italian restaurant 8[1/2] Otto e Mezzo BOMBANA; Michelin 1 star Japanese restaurant Wagyu Kaiseki Den; Michelin 1 star Cantonese restaurant Island Tang; as well as other high profile restaurants such as Kowloon Tang and Chiu Tang.

During the year under review, hotel and restaurant operations contributed HK$362.8 million to the Group’s turnover (2011: HK$389.4 million), representing a decrease of approximately 7% from last year. Most of the turnover from hotel and restaurant operations was derived from the Group’s operation of the Caravelle Hotel. For the year under review, Caravelle Hotel achieved an average occupancy rate of 67% (2011: 68%) and an average daily room rate of US$149 (2011: US$146). Caravelle Hotel will undergo a comprehensive renovation and upgrade programme which will commence in the first quarter of 2013. The renovation is expected to finish in the third quarter of 2014.

The hotel and restaurant operations are managed by Furama Hotels and Resorts International Limited (“ FHRI ”), the Group’s hotels and resorts management operation. FHRI has extensive experience in providing consultancy and management services to hotels in China, Hong Kong and other Asian countries. FHRI’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 and Zhongshan. FHRI will provide technical advisory services to the serviced apartments in Shanghai May Flower Plaza, Guangzhou Paramount Centre and Zhongshan Palm Spring when the relevant developments are completed. All three properties are expected to complete in 2013.

INTERESTS IN ASSOCIATES (eSun Holdings Limited)

During the year under review, contribution from eSun Holdings Limited (“ eSun ”) increased to HK$440.6 million (2011: HK$270.2 million), representing an increase of 63%. This is primarily due to eSun’s gain on the bargain purchase of the additional interest in Lai Fung as part of Lai Fung’s open offer.

eSun expects its momentum to continue given an underlying schedule of new releases in movies, events and music albums in the coming financial year. Despite the challenging operating environment characteried by stringent austerity measures in the property market in China, Lai Fung was able to deliver a good performance for the year under review. Net asset value and net profit attributable to shareholders increased steadily.

– 35 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

INTERESTS IN JOINT VENTURES

During the year under review, contribution from joint ventures decreased to HK$711.0 million (2011 (restated): HK$990.8 million), representing a decrease of 28%. This is primarily due to the conclusion of the sale of The Oakhill.

OUTLOOK

The monetary easing as a result of central banks around the world attempting to revive major economies around the world is expected to remain for some time which sustains a generally low interest rate environment for the foreseeable future. In Hong Kong, the low interest rate environment, together with the robust underlying demand and lack of near term supply, are expected to be countered by the fiscal policies implemented to cool the property market. The Group believes the Hong Kong property market as a whole will remain stable. Rental of retail properties and sale of residential properties are expected to provide the main impetus.

In light of this, the Group has adopted a prudent yet flexible approach with the objective of preserving margin and optimising long-term value for shareholders. The Group believes that it is well-positioned to take advantage of the pent-up demand with its project pipelines. The Group intends to expand the investment property portfolio through retaining any sizeable commercial and retail elements that it develops to improve recurring income which will form the bedrock for securing funding to develop other projects.

The addition of 3 Connaught Road Central and the Observatory Road projects will add to the critical mass of the investment property portfolio. The Group expects the sale of Ocean One and the Tai Hang Road projects to deliver a strong set of results.

LIQUIDITY AND FINANCIAL RESOURCES

As at 31 July 2012, the Group had consolidated net assets attributable to shareholders of the Company of approximately HK$16,357.6 million (2011 (restated) : HK$13,463.8 million).

The Group’s sources of funding comprise mainly internal funds generated from the Group’s business operations and loan facilities provided by banks.

As at 31 July 2012, the Group had secured bank facilities (excluding amounts repaid and cancelled pursuant to the respective terms of the facilities) of approximately HK$3,127.0 million. The amount of outstanding borrowings under these secured banking facilities was approximately HK$2,812.2 million (as at 31 July 2011: HK$2,416.5 million). The net debt to equity ratio expressed as a percentage of the total outstanding net borrowings (being the total outstanding borrowings less the pledged and unpledged bank balances and time deposits) to consolidated net assets attributable to shareholders of the Company was approximately 7%. As at 31 July 2012, the maturity profile of the bank borrowings of HK$2,812.2 million was spread over a period of less than 5 years with HK$1,104.8 million repayable within 1 year, HK$357.5 million repayable in the second year and HK$1,349.9 million repayable in the third to fifth years. As at 31 July 2012, all the Group’s borrowings carried interest on a floating rate basis.

– 36 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

As at 31 July 2012, certain investment properties with carrying amounts of approximately HK$8,554.4 million, certain property, plant and equipment with carrying amounts of approximately HK$234.4 million, prepaid land lease payments of approximately HK$25.0 million, certain properties under development for sale of approximately HK$1,200.5 million, and certain bank balances and time deposits with banks of approximately HK$106.0 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 loan facilities granted to the Group. Certain shares in a joint venture held by the Group were pledged to a bank to secure a loan facility granted to a joint venture of the Group. Certain shares of an investee company held by the Group were pledged to banks to secure a loan facility granted to this investee company. 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 or 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 an investment in United Kingdom with the assets and liabilities denominated in Pounds Sterling. The investment was partly financed by bank borrowings denominated in Pounds Sterling in order to minimise the net foreign exchange exposure. The net investment amounted to approximately HK$124.0 million which only accounted for a small portion of the consolidated net assets of the Group as at 31 July 2012. 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.

CONTINGENT LIABILITIES

Details of contingent liabilities of the Group as 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 2012, the Group employed a total of approximately 1,200 employees (2011: 1,200). 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.

– 37 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

MANAGEMENT DISCUSSION AND ANALYSIS ON THE GROUP FOR THE YEAR ENDED 31 JULY 2011

Set out below is the management discussion and analysis on the Group as extracted from the annual report of the Company for the year ended 31 July 2011. Terms used below shall have the same meanings as defined in the said annual report.

For the year ended 31 July 2011, the Company and its subsidiaries (collectively the “ Group ”) recorded a turnover of HK$1,192,914,000 (2010: HK$729,254,000) and a gross profit of HK$611,636,000 (2010: HK$474,981,000), representing an increase of approximately 63.6% and 28.8% respectively from the previous corresponding year. The increase in turnover and gross profit was mainly attributable to the sales of residential units at Emerald 28, Tai Po Road, Kowloon, Hong Kong.

During the year under review, the Group recorded a fair value gain on completed investment properties of HK$1,074,933,000 (2010: HK$1,232,615,000). In addition, the Group recorded an additional provision for tax indemnity of approximately HK$48,379,000 (2010: a provision of HK$17,495,000). Such provision was made in respect of certain tax indemnity granted by the Group to Lai Fung at the time of effecting the separate listing of Lai Fung on The Stock Exchange of Hong Kong Limited (the “ Stock Exchange ”) in November 1997 (details of the tax indemnity and the provisions thereof are set out in note 33(c) to the financial statements). Taking into account the above exceptional items, the Group recorded a profit from operating activities of HK$1,325,577,000 during the year ended 31 July 2011 (2010: HK$1,412,230,000).

During the year under review, the Group’s share of profits from associates was HK$1,335,581,000 (2010: HK$982,364,000). Movements of main items of the Group’s share of profits from associates during the year under review are as follows:

1. The Group owns a 50% interest in a joint venture company set up between the Group and Invesco Management Group, Inc. (formerly known as AIG Global Real Estate Investment (Asia) LLC.) (“ Invesco ”) which in turn owns a residential/commercial development project named The Oakhill, Wood Road, Hong Kong. The occupation permit for The Oakhill was issued in June 2011. Following the issue of the occupation permit, the joint venture company was able to recognise and book the sale of units at The Oakhill during the year under review. Accordingly, the Group’s share of the net profit of the joint venture company as recorded in the Group’s consolidated income statement amounted to approximately HK$436,400,000.

2. The Group owns a 50% interest in Diamond String Limited (“ DSL ”), a joint venture company formed between the Group and a wholly-owned subsidiary of China Construction Bank Corporation (“ CCB ”) for the redevelopment of the property site situated at 3 Connaught Road Central, Hong Kong. During the year under review, the Group’s share of the fair value gain from DSL’s investment property under development as recorded in the Group’s consolidated income statement (net of the related deferred tax) amounted to approximately HK$463,300,000 (2010: HK$859,582,000).

– 38 –

APPENDIX II MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

1. Prior to the Group Reorganisation, the Group held a 36.08% shareholding interest in eSun, which in turn held a 36.72% shareholding interest in the Group. Immediately following completion of the Group Reorganisation on 30 September 2010, (i) the Group continues to hold a 36.08% shareholding interest in eSun, and (ii) eSun holds a 40.58% shareholding interest in Lai Fung. The Group’s interest in eSun was subsequently reduced from 36.08% to 36.00% as eSun issued additional ordinary shares upon exercise of certain share options by a grantee under eSun’s share option scheme. Subsequent to 31 July 2011, the shareholding interests in eSun were increased to 37.93% as a result of on-market purchase of additional eSun shares by the Company. The Group’s share of profits of eSun during the year under review was mainly attributable to (i) the share of eSun’s operating profit (excluding eSun’s share of the results of the Company and Lai Fung) of HK$102,500,000 (2010: share of eSun’s operating loss of HK$168,700,000) which was mainly attributable to a gain recognised by eSun in relation to the disposal of its shareholding interests in the Macao Studio City project during the year; (ii) share of eSun’s share of the Company’s profits due to the cross-shareholding structure that was in place during the period from 1 August 2010 to 30 September 2010 of HK$52,000,000 (2010: HK$295,900,000); (iii) share of eSun’s gain on the Group Reorganisation of HK$217,400,000; and (iv) share of eSun’s share of Lai Fung’s results from 1 October 2010 to 31 July 2011 of HK$63,400,000.

Finance costs during the year amounted to HK$47,076,000 (2010: HK$41,777,000).

For the year ended 31 July 2011, the Group recorded a consolidated net profit attributable to ordinary equity holders of the Company of HK$2,343,707,000 (2010: HK$2,064,562,000).

Shareholders’ equity as at 31 July 2011 amounted to HK$11,959,041,000, up from HK$9,405,690,000 as at 31 July 2010. Net asset value per share as at 31 July 2011 was HK$0.844, as compared to HK$0.664 as at 31 July 2010.

BUSINESS REVIEW

Investment Properties

The Group wholly owns three major investment properties in Hong Kong. They include Causeway Bay Plaza 2, Cheung Sha Wan Plaza and Lai Sun Commercial Centre.

In February 2011, the Group acquired an office building with a total floor area of 41,680 square feet at 36 Queen Street, London, the United Kingdom at a consideration of GBP16,880,000 (equivalent to approximately HK$213,532,000). This acquisition represents an opportunity to own a piece of prime investment property in the core financial district of central London that has the potential of generating good cashflow and rental yield.

For the year ended 31 July 2011, aggregate gross rental income from the Group’s investment properties amounted to approximately HK$367,455,000 (2010: HK$341,103,000), representing an increase of 7.7% over the last corresponding year. Overall average occupancy of the Group’s investment properties for the year under review remained at about 98%.

– 39 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

Development Properties

The Group holds the following property development projects in Hong Kong:

3 Connaught Road Central

This is the joint redevelopment project of the former Ritz-Carlton Hotel in Central. This redevelopment project is a 50:50 joint venture between the Group and a wholly-owned subsidiary of CCB. The buildable gross floor area is approximately 225,000 square feet. The redeveloped project will be an office tower that is expected to become a landmark property in Central featuring underground access to the MTR station in Central. Part of the redeveloped property, upon its completion, will be used by CCB as offices of its Hong Kong operations. Total construction cost of the project is estimated to be approximately HK$1,100,000,000.

Superstructure work commenced in April 2010. The building is expected to be completed in the third quarter of 2012.

The Oakhill, Wood Road, Wanchai

This joint residential development project is a 50:50 joint venture between the Group and Invesco. The project’s total development cost is approximately HK$1,300,000,000. The project comprises a total of 130 residential units with a total gross floor area of 154,713 square feet, street level retail shops with a total gross floor area of 7,880 square feet and 62 car-parking spaces.

Pre-sale of the residential units commenced in July 2010 and the project was completed in June 2011. To date, 124 residential units with an aggregate gross floor area of 142,525 square feet were pre-sold at an average selling price of approximately HK$15,000 per square foot. Most of the income from the sale of the residential units was recognised in the Group’s share of results of associates in the year under review.

Emerald 28, Tai Po Road, Kowloon

The Group wholly owns this development project. The project’s estimated total development cost is approximately HK$500,000,000. The project comprises a total of 53 residential units with a total gross floor area of 60,686 square feet and retail units with a total gross floor area of 10,186 square feet. During the year ended 31 July 2011, the Group recorded the sale of 42 residential units (2010: 3 residential units) with an aggregate gross floor area of 47,920 square feet (2010: 3,694 square feet) at an average selling price of HK$8,650 per square foot (2010: HK$9,361 per square foot) and on a turnover of HK$414,521,000 (2010: HK$34,578,000).

– 40 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

Yau Tong Project

The Group wholly owns this development project located at No. 4 Shung Shun Street, Yau Tong, Kowloon. The Group intends to develop the site into a residential-cum-commercial property with a total gross floor area of about 110,000 square feet. The estimated total development cost (including land cost and lease modification premium) is about HK$700 million.

Superstructure work started in February 2011 and the building is expected to be completed in the third quarter of 2012. The Group plans to commence pre-sale of the residential units in the second quarter of 2012.

Tai Hang Road Project

The Group wholly owns the site located at 335-339 Tai Hang Road, Hong Kong. The Group intends to develop the site into a luxury residential property. During the year, the Group also completed the lease modification of the site. The total gross floor area of the development is about 30,000 square feet. The total development cost (including land cost and lease modification premium) is estimated to be about HK$650 million.

Foundation work started in October 2010 and the building is expected to be completed in the second quarter of 2013.

Observatory Road Project

On 12 July 2011, the Group announced the acquisition of a 50% interest as well as an option to acquire an additional 10% interest in parcels of ground at Observatory Road, Kowloon with the buildings currently erected there known as Nos. 2, 4, 6, 8, 10 and 12, Observatory Road, Kowloon.

The Group plans to redevelop the site into a multi-storey commercial building with a total gross floor area of approximately 165,000 square feet. The total development cost is estimated to be about HK$2.3 billion (including the land cost). The building is expected to be completed in 2014.

Resolutions approving the acquisition, the option and the financial assistance to be provided by the Group for the redevelopment of the land were duly passed at the extraordinary general meeting of the Company on 22 October 2011. Completion of the acquisition is expected to take place on or around mid of November 2011.

– 41 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

Hotel and Restaurant Operations

For the year ended 31 July 2011, hotel and restaurant operations contributed HK$389,419,000 to the Group’s turnover (2010: HK$334,843,000), up approximately 16.3% from the previous year. The increase in turnover was partly contributed by an existing restaurant and a new restaurant which commenced business in the second half of 2010. Most of the turnover from hotel and restaurant operations was derived from the Group’s operation of Caravelle Hotel in Ho Chi Minh City, Vietnam. For the year ended 31 July 2011, Caravelle Hotel achieved an average occupancy of 68% (2010: 59%) and average daily room rate of US$146 (2010: US$148). Caravelle Hotel will undergo a comprehensive renovation and upgrade program in the first quarter of 2012 and the renovation is expected to be completed in the fourth quarter of 2013.

DIVIDENDS

As at 31 July 2011, the Company did not have any reserves available for distribution in accordance with provisions of the Hong Kong Companies Ordinance. The Directors have resolved not to declare the payment of an ordinary dividend for the financial year ended 31 July 2011.

PROSPECTS

Hong Kong Property Development

In 2011, Hong Kong’s economy and property market continues to benefit from the global low interest rate environment and the relatively strong performance of Mainland China’s domestic economy. As a favoured investment destination for Mainland Chinese investors, Hong Kong’s property market continues to perform well despite challenging times in other global economies.

With improvement of its operations and with the timely disposal of assets in the past few years, the Group has a healthy balance sheet with reasonable leverage. Under the current circumstances, the Group has been looking and will continue to look for suitable high yielding investment opportunities to expand and grow its businesses in both Hong Kong and overseas.

Investment Properties

Rent levels for office and commercial properties in prime locations in Hong Kong have remained strong in 2010 and 2011. The operating conditions for most retail, consumption and commercial sectors in Hong Kong have performed favorably given the strong retail spending from Mainland visitors. The demand for high quality commercial properties in traditional commercial districts is strong given the lack of new supply coming on stream and this has resulted in an uptick of rental rates. Improved local consumption expenditure and strong retail spending by the Mainland visitors provide further impetus to the retail property market.

In the coming year, the Group will continue to upgrade its commercial investment properties as well as tenant mix so that it can continue to maintain high occupancy rates and strong rental cashflow.

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MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

Development Properties

The continued economic growth, a low interest rate environment, ample liquid funds and a tight market supply of residential units have extended the bullish sentiment towards Hong Kong’s residential properties since early 2010. As pre-cautionary measures against the rising risks of inflation and the development of a property bubble, the Hong Kong Government and the Hong Kong Monetary Authority in November 2010 introduced a series of tightening measures, including the levy of a special stamp duty on short-term property transactions and the direction to mortgage lenders to lower the loan-tovalue ratio for mortgage loans to ease property speculation. Between November 2010 and early 2011, the market experienced a short-term consolidation, evidenced by a sharp drop in transaction volume. Starting from early 2011, the market gradually stabilised as transaction volume and prices of residential properties edged up modestly. The recovery has reinforced market sentiment and re-opened the window for the primary sale of residential projects. The low interest rate environment and a tight supply of new residential units in urban areas are expected to contribute towards a steady development of the residential market in Hong Kong.

The Group currently owns a number of residential projects under development in Hong Kong. In 2010, the Group has managed to capture the strong growth in the Hong Kong residential property market by achieving satisfactory sales performances for The Oakhill and Emerald 28 projects that it owns 50% and 100% respectively. In 2011, the Group intends to sell the remaining units at The Oakhill and Emerald 28 and start the preparation work for the pre-sale of the residential development project in Yau Tong.

New Investments

Encouraged by strong retail and consumption demand by Mainland visitors and locals alike, the Group continues to seek opportunities in the retail and commercial properties sector.

On 12 July 2011, the Group announced the acquisition of a 50% interest as well as an option to acquire an additional 10% interest in parcels of ground at Observatory Road, Kowloon, Hong Kong with the buildings currently erected there known as Nos. 2, 4, 6, 8, 10 and 12, Observatory Road, Kowloon, Hong Kong.

The Group plans to redevelop the site into a multi-storey commercial building with total gross floor area of approximately 165,000 square feet. The total development cost is estimated to be about HK$2.3 billion. The building is expected to be completed in 2014.

With the Hong Kong Government committed to increasing land supply in the long run as a measure to stabilise local property prices, the Group will continue to monitor the prices achieved at Government land auctions in Hong Kong and will participate in the auction if and when suitable investment opportunities arise.

– 43 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

LIQUIDITY AND FINANCIAL RESOURCES

As at 31 July 2011, the Group had consolidated net assets of approximately HK$11,959 million (as at 31 July 2010: HK$9,406 million).

The Group’s sources of funding comprise mainly internal funds generated from the Group’s business operations and loan facilities provided by banks.

As at 31 July 2011, the Group had secured bank facilities (excluding amounts repaid and cancelled pursuant to the respective terms of the facilities) of approximately HK$2,650 million. The amount of outstanding borrowings under these secured banking facilities was approximately HK$2,417 million (as at 31 July 2010: HK$2,704 million). The debt to equity ratio expressed as a percentage of the total outstanding borrowings to consolidated net assets was approximately 20%. As at 31 July 2011, the maturity profile of the bank borrowings of HK$2,417 million was spread over a period of less than 5 years with HK$217 million repayable within 1 year, HK$1,094 million repayable in the second year and HK$1,106 million repayable in the third to fifth years. As at 31 July 2011, all the Group’s borrowings carried interest on a floating rate basis.

As at 31 July 2011, certain investment properties with carrying amounts of approximately HK$7,743 million, certain property, plant and equipment with carrying amounts of approximately HK$243 million, prepaid land lease payments of approximately HK$26 million, certain properties under development of approximately HK$482 million, and certain bank balances and time deposits with banks of approximately HK$100 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 loan facilities granted to the Group. Certain shares in an associate held by the Group were pledged to a bank to secure a loan facility granted to an associate of the Group. Certain shares of an investee company held by the Group were pledged to banks to secure a loan facility granted to this investee company. 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 or 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. During the year, the Group had made a new investment in United Kingdom with the assets and liabilities denominated in Pounds Sterling. The investment was partly financed by bank borrowings denominated in Pounds Sterling in order to minimise the net foreign exchange exposure. The net investment amounted to approximately HK$86 million which only accounted for a small portion of the consolidated net assets of the Group as at 31 July 2011. 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.

– 44 –

MANAGEMENT DISCUSSION AND ANALYSIS OF THE GROUP

APPENDIX II

EMPLOYEES AND REMUNERATION POLICIES

The Group employed a total of approximately 1,200 (2010: 1,000) employees as at 31 July 2011. Pay rates of employees are maintained at competitive levels and salary adjustments or bonuses are made on a performance related basis. Other staff benefits included a share option scheme, mandatory provident fund scheme for all eligible employees, free hospitalisation insurance plan, subsidised medical care and subsidies for external educational and training programmes.

CONTINGENT LIABILITIES

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

– 45 –

GENERAL INFORMATION

APPENDIX III

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

Directors’ and chief executive’s interests and short positions in the Shares, underlying Shares and debentures of the Company or its associated corporations

As at the Latest Practicable Date, the interests and short positions of the Directors and the chief executive of the Company in the Shares, underlying Shares and debentures of the Company and any of its associated corporations (within the meaning of Part XV of the SFO) which were required to be (i) 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 (ii) as recorded in the register required to be kept by the Company pursuant to Section 352 of the SFO; or (iii) 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 ”) were as follows:

(a) The Company

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

							Approximate
							% of total
							interests to
Name of		Personal	Family	Corporate	Other	Total	total issued
Director	Capacity	interests	interests	interests	interests	interests	Shares
Lam Kin Ngok, Peter	Beneficial owner/	14,307,745	Nil	10,425,699,353	20,062,893	10,460,069,991	52.14%
	Owner of controlled			(Note 1)	(Note 2)
	corporations
Chew Fook Aun	Beneficial owner	Nil	Nil	Nil	200,628,932	200,628,932	1.00%
						(Note 2)
Lau Shu Yan, Julius	Beneficial owner	8,783,333	Nil	Nil	100,314,466	109,097,799	0.544%
						(Note 2)
Lam Hau Yin, Lester	Beneficial owner	Nil	Nil	Nil	200,628,932	200,628,932	1.00%
						(Note 2)
U Po Chu	Beneficial owner	897,316	Nil	Nil	Nil	897,316	0.004%

– 46 –

GENERAL INFORMATION

APPENDIX III

Notes:

• (1) LSG and two of its wholly-owned subsidiaries, namely Zimba International Limited and Joy Mind Limited, beneficially owned a total of 10,425,699,353 Shares, representing approximately 51.97% of the issued share capital of the Company. Dr. Lam Kin Ngok, Peter was deemed to be interested in the same 10,425,699,353 Shares by virtue of, in aggregate, his personal and deemed interests of approximately 42.74% in the issued share capital of LSG. LSG is approximately 12.75% owned by Dr. Lam Kin Ngok, Peter and is approximately 29.99% owned by Wisdoman Limited which is in turn 100% beneficially owned by Dr. Lam Kin Ngok, Peter.

• (2) A share option scheme was adopted by the Company on 22 December 2006 and commenced with effect from 29 December 2006. 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, particulars of which are set out below:

		Number of
		underlying
		Shares
	Date of	comprised in
Registered Name	grant	the option	Option period	Subscription price
Lam Kin Ngok, Peter	18/01/2013	20,062,893	18/01/2013-17/01/2023	HK$0.335 per Share
Chew Fook Aun	05/06/2012	200,628,932	05/06/2012-04/06/2022	HK$0.112 per Share
Lau Shu Yan, Julius	18/01/2013	100,314,466	18/01/2013-17/01/2023	HK$0.335 per Share
Lam Hau Yin, Lester	18/01/2013	200,628,932	18/01/2013-17/01/2023	HK$0.335 per Share

(b) Associated Corporations

• (i) LSG – the ultimate holding company of the Company

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

							Approximate
							% of total
							interests to
		Personal	Family	Corporate	Other	Total	total issued
Name of Director	Capacity	interests	interests	interests	interests	interests	shares
Lam Kin Ngok, Peter	Beneficial owner/	237,464,979	Nil	562,590,430	1,876,211	801,931,620	42.74%
	Owner of			(Note 1)	(Note 2)
	controlled
	corporations
Chew Fook Aun	Beneficial owner	Nil	Nil	Nil	18,762,111	18,762,111	1.00%
					(Note 2)
Lam Hau Yin, Lester	Beneficial owner	60,623,968	Nil	Nil	18,762,111	79,386,079	4.23%
					(Note 2)
Lam Kin Ming	Beneficial owner	5,008,263	Nil	Nil	Nil	5,008,263	0.27%
U Po Chu	Beneficial owner	4,127,625	Nil	Nil	Nil	4,127,625	0.22%

– 47 –

GENERAL INFORMATION

APPENDIX III

Notes:

• (1) Dr. Lam Kin Ngok, Peter was deemed to be interested in 562,590,430 shares (representing approximately 29.99% of LSG’s issued share capital enlarged by the Rights Issue) by virtue of his 100% interests in the issued share capital of Wisdoman Limited.

• (2) A share option scheme was adopted by LSG on 22 December 2006 and commenced with effect from 29 December 2006. 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, particulars of which are set out below (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 ”)):

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

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

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

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

– 48 –

GENERAL INFORMATION

APPENDIX III

Notes:

• (1) LSG was interested in 10,425,699,353 Shares in the Company, representing approximately 51.97% of the issued share capital of the Company. Transtrend Holdings Limited, a whollyowned 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 42.74% and 52.14% 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. A share option was granted to Dr. Lam Kin Ngok, Peter, Mr. Chew Fook Aun and Mr. Lam Hau Yin, Lester, particulars of which are set out below:

				Number of	underlying	underlying
		Date of		shares comprised
	Registered Name	grant		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
Lai Fung Holdings Limited			(“Lai Fung”)		– a	subsidiary of eSun
Long positions		in the ordinary shares and the underlying shares							in Lai	Fung
										Approximate
										% of total
										interests to
Name of			Personal	Family		Corporate	Other		Total	total issued
Director		Capacity	interests	interests		interests	interests		interests	shares
Lam Kin	Ngok, Peter	Beneficial	Nil		Nil 8,274,270,422		16,095,912	8,290,366,334		51.49%
		owner/				(Note 1)	(Note 2)
		Owner of
		controlled
		corporations
Chew Fook Aun		Beneficial	Nil		Nil	Nil	80,479,564	80,479,564		0.50%
		owner					(Note 2)
Lau Shu Yan, Julius		Beneficial	12,917,658		Nil	Nil	48,287,738	61,205,396		0.38%
		owner					(Note 2)
Lam Hau	Yin, Lester	Beneficial	Nil		Nil	Nil	160,959,129	160,959,129		1.00%
		owner					(Note 2)

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

– 49 –

GENERAL INFORMATION

APPENDIX III

Notes:

• (1) eSun was interested in 8,274,270,422 shares in Lai Fung, representing approximately 51.39% 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:

		Number of underlying
	Date of	shares comprised
Registered Name	grant	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

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

Long positions in the ordinary shares and underlying shares in MAGHL

					Total
					number of
					issued
					shares and
					underlying
					shares and
				Deemed	deemed	Approximate
				interest	interest	% of total
		Number of	Number of	pursuant to	pursuant to	interests to
Name of		ordinary	underlying	Section 317	Section 317	total	issued
Director	Capacity	shares held	shares held	of the SFO	of the SFO		shares
Lam Kin Ngok, Peter	Owner of	842,675,225	79,596,050	252,250,000	1,174,521,275	87.66%
	controlled	(Note 1)	(Note 2)	(Note 3)
	corporations

– 50 –

GENERAL INFORMATION

APPENDIX III

Notes:

1. As at the Latest Practicable Date, these interests in MAGHL represented the shares beneficially owned by Perfect Sky Holdings Limited (“ Perfect Sky ”), a wholly-owned subsidiary of eSun, representing approximately 62.89% 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 51.97% by LSG. As LSG is approximately 12.75% owned by Dr. Lam Kin Ngok, Peter and approximately 29.99% owned by Wisdoman Limited which is in turn 100% beneficially owned by Dr. Lam Kin Ngok, Peter, he was deemed to be interested in the said 842,675,225 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 79,596,050 underlying shares of MAGHL comprised in the convertible notes issued to Perfect Sky by MAGHL on 9 June 2012 (“ Second Completion Convertible Notes ”).

3. These shares (132,250,000 shares and 120,000,000 underlying shares comprised in the Second Completion Convertible Notes) are held by concert parties of Perfect Sky. Dr. Lam Kin Ngok, Peter was deemed to be interested in the shares and underlying shares of MAGHL pursuant to Section 317 of the SFO.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors or the chief executive of the Company and their respective 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 under the SFO, recorded in the Register of Directors and Chief Executive or notified under the Securities Code or otherwise known by the Directors.

Substantial Shareholders’ and other persons’ interests

As at the Latest Practicable Date, so far as was known by or otherwise notified by any Director and 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:

– 51 –

GENERAL INFORMATION

APPENDIX III

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

		Nature of	Number of	Approximate %
Name	Capacity	interests	Shares	of Shares in issue
LSG_(Note)_	Beneficial owner	Corporate	10,425,699,353	51.97%
Lam Kin Ngok, Peter	Beneficial owner/	Personal and	10,460,069,991	52.14%
	Owner of	corporate
	controlled
	corporation

Note:

LSG and two of its wholly-owned subsidiaries, namely Zimba International Limited and Joy Mind Limited, beneficially owned 10,425,699,353 Shares, representing approximately 51.97% of the issued share capital of the Company. Dr. Lam Kin Ngok, Peter was deemed to be interested in the same 10,425,699,353 Shares by virtue of, in aggregate, his personal and deemed interests of approximately 42.74% in the issued share capital of LSG. Dr. Lam Kin Ngok, Peter is an executive director 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 the Latest Practicable Date, 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.

3. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which will not expire or be determinable by the relevant member of the Group within one year without payment of compensation (other than statutory compensation).

4. LITIGATION

As at the Latest Practicable Date, none of the members of the Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against the members of the Group.

– 52 –

GENERAL INFORMATION

APPENDIX III

5. COMPETING INTERESTS

As at the Latest Practicable Date, the following Directors are considered to have interests in businesses which compete or may compete with the businesses of the Group (which would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them was a controlling shareholder of the Company):

Dr. Lam Kin Ngok, Peter, Dr. Lam Kin Ming, Madam U Po Chu and Mr. Lam Hau Yin, Lester (together, “ Interested Directors ”) held shareholding interests and/or directorships in companies/ entities engaged in the businesses of property investment and development in Hong Kong including Crocodile Garments Limited (“ CGL ”).

Dr. Lam Kin Ngok, Peter 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. Lam Kin Ming 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 businesses 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.

Save as disclosed above, as at the Latest Practicable Date, none of the Directors and their respective associates had any interest in a business which competes or may compete with the businesses of the Group (which would be required to be disclosed under Rule 8.10 of the Listing Rules if each of them was a controlling shareholder of the Company).

– 53 –

GENERAL INFORMATION

APPENDIX III

6. INTEREST IN ASSETS AND CONTRACTS

Save for the interest of Dr. Lam Kin Ming, a non-executive Director, in CGL as set out below, as at the Latest Practicable Date, none of the Directors had any interest, direct or indirect, in any assets which have been, since 31 July 2013 (being the date to which the latest published audited financial statements of the Group were made up), acquired or disposed of by or leased to any member of the Group, or are proposed to be acquired or disposed of by or leased to any member of the Group:

On 30 November 2013, Winfield Properties Limited (“ Winfield ”) as tenant entered into an Offer to Lease with Mass Energy Limited (“ Mass Energy ”) as landlord, pursuant to which Mass Energy agreed to lease to Winfield the Carpark of Crocodile Center, 79 Hoi Yuen Road, Kwun Tong, Kowloon, Hong Kong consisting of all the car parking spaces thereof for a term of two years from 1 December 2013 to 30 November 2015 at a basic monthly rent of HK$140,000 or 52% of the gross monthly revenue of the tenant’s business carried on at the above premises, whichever is higher.

Winfield is a wholly-owned subsidiary of the Company and Mass Energy is owned as to 50% each by LSG and CGL, which is owned as to approximately 50.90% by Dr. Lam Kin Ming, a non-executive Director. Details of the transaction are set out in the joint announcement of the Company and LSG dated 2 December 2013.

Save as disclosed above, there is no contract or arrangement subsisting as at the Latest Practicable Date, in which any of the Directors are materially interested and which is significant to the business of the Group.

7. MATERIAL CONTRACTS

The following contracts (being contracts entered into outside the ordinary course of business carried on by the Group) have been entered into by members of the Group within the two years immediately preceding the date of this circular:

• (a) a tender submitted on 7 April 2014 by Winstead Limited, a wholly-owned subsidiary of the Company for the acquisition of a property located at San Shan Road/Pau Chung Street, Ma Tau Kok, Kowloon, Hong Kong, known as Kowloon Inland Lot No.11215, and accepted by Urban Renewal Authority, Hong Kong on 29 April 2014, for which an initial deposit of HK$50 million has been applied in part payment of the premium;

• (b) an agreement entered into between Ever Dragon Properties Limited, an indirect wholly-owned subsidiary of the Company (“ Ever Dragon ”) and West Register (Bankside) Limited (“ West Register ”) dated 25 April 2014 in respect of the acquisition of the freehold property at 107-112 Leadenhall Street, London EC3A 4AF, United Kingdom by Ever Dragon from West Register for a consideration of £60,600,000;

– 54 –

APPENDIX III

GENERAL INFORMATION

• (c) a conditional sale and purchase agreement entered into between the Company as purchaser and Kadokawa Holdings Asia Limited (“ KHAL ”), Lai’s Holdings Limited (“ LHL ”) and Kadokawa Intercontinental Group Holdings Limited (“ KIGHL ”) dated 5 July 2013, pursuant to which KHAL and LHL (collectively, as “ Sellers ”) conditionally agreed to procure KIGHL to sell, and KIGHL conditionally agreed to sell to the Company (i) 30,000 ordinary shares in the share capital of Intercontinental Development Services Limited (“ IDSL ”); (ii) all loans and other advances made by any one of the Sellers (namely KHAL and LHL) and/or the Seller’s group to IDSL from time to time and which remain outstanding immediately prior to the completion of the proposed acquisition, if any; and (iii) all amounts due from IDSL to the Sellers or the Seller’s group from time to time and which remain outstanding immediately prior to the completion of the proposed acquisition, if any, for a total consideration of HK$130 million;

• (d) a subscription agreement entered into between the Company, Lai Sun International Finance (2012) Limited (a wholly-owned subsidiary of the Company) as issuer and BNP Paribas, Hong Kong Branch, The Hongkong and Shanghai Banking Corporation Limited and Standard Chartered Bank as joint lead managers dated 11 January 2013, pursuant to which the joint lead managers agreed to subscribe or procure subscribers to subscribe the guaranteed notes in principal amount of US$350,000,000 with a maturity of five years due in 2018 bearing a fixed interest rate of 5.70% per annum issued by issuer; and

• (e) a tender submitted on 23 November 2012 by Strongly Limited, a 50%-owned joint venture of the Company for the acquisition of a land lot known as Tseung Kwan O Town Lot No.95, and accepted by Director of Lands, Lands Administration Office, Lands Department, Hong Kong on 28 November 2012, for which an initial deposit of HK$25 million has been applied in part payment of the premium of HK$2,826 million.

8. GENERAL

• (a) The address of the registered office of the Company is 11th Floor, Lai Sun Commercial Centre, 680 Chueng Sha Wan Road, Kowloon, Hong Kong.

• (b) Mr. Chow Kwok Wor is the company secretary of the Company. He is a fellow member of The Institute of Chartered Secretaries and Administrators, The Hong Kong Institute of Chartered Secretaries and The Hong Kong Institute of Certified Public Accountants.

• (c) The share registrar of the Company is Tricor Tengis Limited of Level 22, Hopewell Centre, 183 Queen’s Road East, Hong Kong.

• (d) In case of inconsistency, the English text of this circular shall prevail over the Chinese text.

– 55 –

GENERAL INFORMATION

APPENDIX III

9. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during the following business hours (i.e. from 9:30 a.m. to 12:30 p.m. and from 2:30 p.m. to 5:30 p.m.) on any weekday (Saturdays and public holidays excepted) unless (i) a tropical cyclone warning signal number 8 or above is hoisted; or (ii) a black rainstorm warning signal is issued at 11th Floor, Lai Sun Commercial Centre, 680 Chueng Sha Wan Road, Kowloon, Hong Kong for 14 days from the date of this circular:

• (a) the Articles of Association of the Company;

• (b) the material contracts referred to under the paragraph headed “Material Contracts” in this Appendix III;

• (c) the annual reports of the Company for the two years ended 31 July 2012 and 31 July 2013; and

• (d) this circular.

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