TAI SANG LAND DEVELOPMENT LIMITED

DIRECTORS’ REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31ST DECEMBER 2018

Outstanding
1. Deferred tax
2. Staff cost related note
3. N6 (c), N25 (b), N4(a), N3.1(e)

Question to ask
1. PPE disposal 1,034,708 – 825,375 not equal 184,340 +25,000
2. Bad debt directly write off? Recover from deposit? Is it the legal case we noted?
3. Any schedule to tie N10 (d) and N16 US dollar
4. N26 supporting? Possible tie to bank confirmation
5. N14 & N17 Year ended bank interest rate?
6. Suggestion to deletion Short term bank loan secured
7. N18 able to tie with Cost of sales?
8. Any Cash flow exchange difference in current year?

3.24022018.443353
TAI SANG LAND DEVELOPMENT LIMITED

REPORT OF THE DIRECTORS

The directors of Tai Sang Land Development Limited (the “Company”) submit their report together with
the audited consolidated financial statements of the Company and its subsidiaries (collectively the “Group”)
for the year ended 31st December 2018.

Principal activities and geographical analysis of operations

The principal activities of the Company are investment holding and property investment. The activities of
the principal subsidiaries are shown in note 30 to the consolidated financial statements.

An analysis of the Group’s performance for the year by operating segments is set out in note 5(d) to the
consolidated financial statements.

Results and appropriations

The results of the Group for the year ended 31st December 2018 are set out in the consolidated statement
of profit or loss on page [26] of this annual report.

The directors have declared an interim dividend of HK10 cents (2017: HK8 cents) per ordinary share,
totalling HK$28,766,968 (2017: HK$23,013,574), which was paid on 24th September 2018.

The directors recommend the payment of a final dividend of HK[ ] cents (2017: HK8 cents) per ordinary
share, totalling HK$[ ] (2017: HK$23,013,574).

The total dividends for the year ended 31st December 2018 amounted to HK[ ] cents (2017: HK16 cents) per
ordinary share.

Donations

Charitable and other donations made by the Group during the year amounted to HK$[ ] (2017:
HK$5,711,506).

Principal properties

Details of the Group’s significant properties are set out on pages [78] to [80] of this annual report.

Purchase, sale and redemption of shares

The Company has not redeemed any of its shares during the year. Neither the Company nor any of its
subsidiaries has purchased or sold any of the Company’s shares during the year.

Borrowings

Particulars of the bank loans are shown in notes [14] and [17] to the consolidated financial statements.

Distributable reserves

Distributable reserves of the Company at 31st December 2018, calculated under part 6 of the Companies
Ordinance (Cap. 622 of the Laws of Hong Kong), amounted to HK$562,817,375 (2017: HK$507,488,564).

Five-year financial summary

A summary of the results and of the assets and liabilities of the Group for the last five financial years is set
out on page [81] of this annual report.

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TAI SANG LAND DEVELOPMENT LIMITED

REPORT OF THE DIRECTORS (CONTINUED)

Directors

(a) Directors of the Company

The directors of the Company during the year and up to the date of this report were:

Executive directors:

William Ma Ching Wai (Chairman and Chief Executive)

Patrick Ma Ching Hang, BBS, JP (Deputy Chairman)
Alfred Ma Ching Kuen (Managing Director)
Amy Ma Ching Sau (Managing Director)
Philip Ma Ching Yeung

Non-executive director:

Edward Cheung Wing Yui, BBS

Independent non-executive directors:

Kevin Chau Kwok Fun

Tan Soo Kiu
Yiu Kei Chung

In accordance with Article 103(A) of the Company’s Articles of Association, Mr. William Ma Ching
Wai, Mr. Alfred Ma Ching Kuen and Mr. Kevin Chau Kwok Fun retire by rotation and, being eligible,
offer themselves for re-election.

(b) Directors of the Company’s subsidiaries

During the year and up to the date of this report, Mr. William Ma Ching Wai, Mr. Patrick Ma Ching
Hang, Mr. Alfred Ma Ching Kuen, Ms. Amy Ma Ching Sau and Mr. Philip Ma Ching Yeung are also
directors of certain subsidiaries of the Company. Other directors of the Company’s subsidiaries
during the year and up to the date of this report include: Ms. Katy Ma Ching Man, Ms. Ruth Ma
Ching Keung, Ms. Joy Ma Ching Mun, Ms. Ida Ma Ching Kuai and Mr. Justin Ma Kwai Fung.

Directors’ service contracts

None of the directors who are proposed for re-election at the forthcoming annual general meeting has a
service contract with the Company which is not determinable within one year without payment of
compensation, other than statutory compensation.

Biographical details of directors and senior management

Biographical details of directors and senior management are set out on pages [1] to [3] of this annual report.

Directors’ and senior management’s emoluments

Details of directors’ and senior management’s emoluments are set out in note 29(a) to the consolidated
financial statements.

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TAI SANG LAND DEVELOPMENT LIMITED

REPORT OF THE DIRECTORS (CONTINUED)

Directors’ and chief executive’s interests and /or short positions in shares, underlying shares
of the Company or any specified undertaking of the Company’s or any other associated
corporation

At 31st December 2018, the interests and short positions of each director and chief executive in the shares
or underlying shares of the Company, and its associated corporation (within the meaning of the Securities
and Futures Ordinance (“SFO”)), as recorded in the register maintained by the Company under Section 352
of Part XV of SFO were as follows:

Number of ordinary shares held

Capacity
Personal Corporate
interest interests Total Percentage
(notes (a)
and (b))
Directors:

William Ma Ching Wai [] [] [] []

Patrick Ma Ching Hang [] [] [] []
Alfred Ma Ching Kuen [] [] [] []
Amy Ma Ching Sau [] [] [] []
Philip Ma Ching Yeung [] [] [] []
Edward Cheung Wing Yui [] [] [] []
Kevin Chau Kwok Fun [] [] [] []
Tan Soo Kiu [] [] [] []
Yiu Kei Chung [] [] [] []
══════════ ══════════ ══════════ ══════════

Notes:

(a) Kam Chan & Company, Limited (“Kam Chan & Co”) and its associates and Holston Investment
Limited directly or indirectly owned [ ] and [ ]ordinary shares in the Company respectively. Mr.
William Ma Ching Wai is a substantial shareholder of these companies.

(b) Tai Sang International Limited directly owned [ ] ordinary shares in the Company. Mr. Patrick Ma
Ching Hang is a substantial shareholder of this company.

(c) Mr. Alfred Ma Ching Kuen beneficially held [ ] shares (or [ ]%) in the total number of issued shares
of a subsidiary, Tai Sang Cold Storage & Godown Company Limited.

(d) Mr. Patrick Ma Ching Hang and Ms. Katy Ma Ching Man jointly and beneficially held [ ] shares (or
[ ]%); Mr. William Ma Ching Wai and Mr. Patrick Ma Ching Hang jointly and beneficially held [ ]
share (or [ ]%); and Mr. Alfred Ma Ching Kuen beneficially held [ ] shares (or [ ]%) in the total
number of issued shares of a subsidiary, Kam Hang Company Limited.

(e) In addition, certain directors of the Company held non-beneficial interests in subsidiaries in trust
to the absolute benefit of the Company, the details of which are available for inspection at the
Company’s registered office.

(f) Other than as stated above, no directors or chief executive of the Company had any interest or short
position in the shares or underlying shares of the Company or any of its associated corporation.

(g) At no time during the year was the Company or any of its subsidiaries a party to any arrangements
to enable the directors and chief executive of the Company (including their spouse and children
under 18 years of age) to acquire the benefits by acquisition of shares, or underlying shares of, the
Company or its associated corporations.

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TAI SANG LAND DEVELOPMENT LIMITED

REPORT OF THE DIRECTORS (CONTINUED)

Substantial shareholders’ interests and / or short positions in the shares, underlying shares
of the Company

At 31st December 2018, the interest and short position of substantial shareholders in the shares or
underlying shares of the Company, as recorded in the register maintained by the Company under Section
336 of part XV of the SFO were as follows:

Number of ordinary shares held at 31st December 2018

Capacity
Personal Corporate
interest interests Total Percentage
(note)

Substantial shareholders:

Kam Chan & Co [] [] [] []

Holston Investment [] [] [] []
Limited
Gold Fortune Investment [] [] [] []
Co. Ltd.
══════════ ══════════ ══════════ ══════════

All interests stated above represent long positions.

Note:

Gold Fortune Investment Co. Ltd, Suremark Limited (beneficially interested in 5,852,920 shares in the
Company) and Montgomery Securities Limited (beneficially interested in 5,406,422 shares in the Company)
are wholly owned subsidiaries of Kam Chan & Co. The aggregate shareholding of these three companies are
deemed to be the corporate interest of Kam Chan & Co in the ordinary shares in the Company.

Directors’ material interests in transactions, arrangements and contracts that are

significant in relation to the Company’s business

Except for the continuing connected transaction as set out in the section headed “Continuing Connected
Transaction” below, no other transactions, arrangements and contracts of significance in relation to the
Group’s business to which the Company or any of its subsidiaries was a party and in which a director of the
Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any
time during the year.

Management contracts

No contracts concerning the management and administration of the whole or any substantial part of the
business of the Company were entered into or existed during the year.

Major suppliers and customers

During the year, less than 30% of the Group’s revenue and less than 30% of the Group’s purchases were
attributable to the Group’s five largest customers and five largest suppliers respectively.

None of the directors, their associates or any shareholders (which to the knowledge of the directors owns
more than 5% of the Company’s share capital) had an interest in the suppliers or customers noted above.

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TAI SANG LAND DEVELOPMENT LIMITED

REPORT OF THE DIRECTORS (CONTINUED)

Continuing connected transaction

On 10th April 2017, a tenancy agreement (“the Tenancy Agreement”) was entered into between TSB as
landlord and the Company as tenant for the renewal of the Previous Tenancy Agreement of the office
premises:

Located at 2nd floor, 9th floor, 10th floor, 11th floor and 14th floor of Tai Sang Bank Building

Term: 15th April 2017 to 14th April 2019

Rental: HK$330,000 per month exclusive of rate and service charges

As set out in the announcement of the Company dated 10th April 2017. the annual cap for the aggregate
amount payable under the Tenancy Agreement entered into on 10th April 2017 in respect of the office
premises for the year ended 31st December 2018 is HK$4,600,000. The aggregate amount paid by the
Company to TSB under these tenancy agreements for the year ended 31st December 2018 was
HK$4,488,000.

The independent non-executive directors of the Company have reviewed the above continuing connected
transaction and confirmed that this transaction has been entered into:

(i) on normal commercial terms;

(ii) in the ordinary and usual course of business of the Group; and
(iii) in accordance with the relevant agreements governing them and on terms that are fair and
reasonable in the interests of the shareholders of the Company as a whole.

The Company’s auditor was engaged to report on the above Group’s continuing connected transaction in
accordance with Hong Kong Standard on Assurance Engagements 3000 “Assurance Engagements Other
Than Audits or Reviews of Historical Financial Information” and with reference to Practice Note 740
“Auditor’s Letter on Continuing Connected Transactions under the Hong Kong Listing Rules” issued by the
Hong Kong Institute of Certified Public Accountants. The auditor has issued a unmodified report containing
the findings and conclusions in respect of the above continuing connected transaction disclosed by the
Group in accordance with paragraph 14A of the Listing Rule. A copy of the auditor’s letter has been provided
by the Company to the Stock Exchange.

Sufficiency of public float

Based on the information that is publicly available to and within the knowledge of the directors, it is
confirmed that there is sufficient public float of more than 25% of the Company’s issued shares as at date of
this annual report.

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TAI SANG LAND DEVELOPMENT LIMITED

REPORT OF THE DIRECTORS (CONTINUED)

Directors’ interest in competing business

At 31st December 2018, all directors except for non-executive directors are directors and shareholders of
Kam Chan & Co, which is also engaged in property investment, and may be in competition with the business
carried on by the Group.

The directors are of the view that the Group is capable of carrying on its businesses independently from the
property investment business. When making decisions on the property investment business, the relevant
directors, in the performance of their duties as directors of the Company, have acted and will continue to
act in the best interests of the Group.

Corporate governance

The Company has complied with the code provisions of Corporate Governance Code contained in Appendix
14 of the Listing Rules during the year ended 31st December 2018, except for the code provision A.2.1, as
explained in the section headed Chairman and Chief Executive in the Corporate Governance Report on page
[ ] of this annual report.

Confirmation of independence

The Company has received from each of the independent non-executive directors an annual confirmation
of independence pursuant to Rule 3.13 of the Listing Rules and considers all the independent non-executive
directors to be independent.

Business review

Discussion and analysis of the Group’s business as required by Schedule 5 of the Companies Ordinance,
including a fair review of the Group’s business; an indication of likely future development; an analysis of it
using financial key performance indicators and particulars of important events affecting the Group that have
occurred since the end of the year ended 31st December 2018 (if any), are included in the “Chairman’s
Statement” and “Management Discussion and Analysis” set out in this annual report on page [ ] and pages
[ ] to [ ] respectively. The discussions and analysis form part of this Report of the Directors.

Environmental policies and performance

The Group has complied with laws and regulations regarding environmental protection and has taken
measures to promote environmental-friendliness of the workplace by encouraging paper recycling, water
conservation and energy-saving practices to minimize the impact of operations on the environment and
natural resources and to mitigate the emissions. The construction-related works for the Group’s property
development and renovation projects are outsourced to independent construction companies which are
subject to various environmental laws and regulations, including those relating to waste disposal, water
pollution control, air pollution control, drainage control and noise control.

Further discussions on the Group’s environmental policies and performance are covered by a separate
Environmental, Social and Governance Report which will be posted on website of the Company and the
Stock Exchange within three months from the publication of this annual report.

Compliance with laws and regulations

The Group has complied in material aspects in the relevant applicable laws and regulations that have
significant impact on the businesses and operations of the Group during the year.

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TAI SANG LAND DEVELOPMENT LIMITED

REPORT OF THE DIRECTORS (CONTINUED)

BUSINESS REVIEW (Continued)

Key risk factors

The following section lists out the key risks and uncertainties facing the Group. It is a non-exhaustive list
and there may be other risks and uncertainties further to the key risks areas outlined below. Besides, this
annual report does not constitute a recommendation or an advice for anyone to invest in the securities of
the Company. Investors are advised to make their own judgment or consult professionals before making
any investment in the securities of the Company.

Policy risks

Policy risks are mainly attributable to the regulatory policies launched by the governing bodies regarding
the property market, credit policies and labour policies that may affect the Group to adjust its investment
and development strategy to commensurate the changes in the relevant policies.

Market risks

Market risks are mainly attributable to the internal and external environmental changes such as changes in
the domestic and overseas macro-economies, demand and supply of the property market and market
competition. Failure to compete in terms of pricing and levels of services will adversely affect the
performance of the Group.

Operation risks

Operation risks are mainly attributable to the supervision and control procedures of each business segments
involved in daily operation and management process of the Group, any default from business partners,
tenants, suppliers or any deficiency or failure of our internal control which may cause negative effects on
the business operation of the Group.

Financial risks

Financial risks are mainly attributable to the exposure of the Group’s activities to the foreign exchange risk,
credit risk, liquidity risk, interest rate risk and price risk. The impacts of the financial risks on the Group’s
performance are also discussed in note 3(a) to this consolidated financial statements.

Past performance and forward-looking statements

The performance and the results of operation of the Group as set out in this annual report are historical in
nature and past performance is not a guarantee of future performance. This annual report may contain
forward-looking statements and opinions that involve risks and uncertainties. Actual result may also differ
materially from expectations discussed in such forward-looking statements and opinions. Neither the Group
nor the Directors, employees or agents of the Group assume (a) any obligations to correct or update the
forward-looking statements or opinions contained in this annual report; and (b) any obligations or liabilities
in the event that any of the forward-looking statements or opinions does not materialize or turns out to be
incorrect.

Relationships with key stakeholders

The Group’s success also depends on the support from key stakeholders which comprise employees, tenants,
customers, suppliers, contractors and service vendors.

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TAI SANG LAND DEVELOPMENT LIMITED

REPORT OF THE DIRECTORS (CONTINUED)

BUSINESS REVIEW (Continued)

Relationships with key stakeholders (Continued)

Employees

The Group believes that employees are the valuable assets of an enterprise and regards human resources as
its corporate wealth. We provide on-the-job training and development opportunities to enhance our
employees’ career progression. Through different training, staff’s professional knowledge in corporate
operations, occupational and management skills are enhanced. The Group is committed to ensuring the
high standards in occupational health and safety and providing a safe working environment for our
employees.

Tenants and Customers

The Group has the mission to provide excellent client service to the tenants and hotel guests whilst
maintaining long term profitability and business growth.

Suppliers, contractors and service vendors

Sound relationships with key suppliers, contractors and service vendors of the Group are important in
supply chain management, properties maintenance and development, meeting business challenges and
regulatory requirements, which can derive cost effectiveness and foster long term business benefits. The key
service vendors comprise system and equipment vendors, external consultants which provide professional
services and other business partners which provide value added services to the Group.

Permitted indemnity provisions

The Company’s Articles of Association provides that every director is entitled to be indemnified out of the
assets of the Company against all losses or liabilities which he/she may sustain or incur in or about the
execution of the duties of his/her office or otherwise in relation thereto.

The Company has taken out and maintained directors’ liability insurance throughout the year, which
provides appropriate cover for the directors of the Group.

Auditor

The consolidated financial statements for the year have been audited by PricewaterhouseCoopers who retire
and being eligible, offer themselves for re-appointment.

On behalf of the Board

William Ma Ching Wai

Chairman

Hong Kong, [ ]

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TAI SANG LAND DEVELOPMENT LIMITED

CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE PRACTICES

The Company is committed to maintain a high standard of corporate governance practices and procedures
to safeguard the interests of the shareholders and enhance the performance of the Group. The Company
endeavours to ensure that its businesses are conducted in accordance with rules and regulations, and
applicable codes and standards.

The Company has complied with all the code provisions of the Corporate Governance Code (the “CG Code”)
as set out in Appendix 14 of the Listing Rules throughout the accounting year ended 31st December 2018,
except for the code provision A.2.1, as explained in the section headed Chairman and Chief Executive below.

DIRECTORS’ SECURITIES TRANSACTIONS

The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers as set
out in Appendix 10 to the Listing Rules (the “Model Code”) as the Company’s codes of conduct regarding
directors’ securities transactions.

On specific enquires made, all directors confirmed that they had complied with the Model Code during the
year ended 31st December 2018.

BOARD OF DIRECTORS

Composition of the Board

The Board currently comprises five executive directors, one non-executive director and three independent
non-executive directors (“INEDs”). The composition of the Board is set out as follows:

Executive directors William Ma Ching Wai (Chairman)

Patrick Ma Ching Hang (Deputy Chairman)
Alfred Ma Ching Kuen
Amy Ma Ching Sau
Philip Ma Ching Yeung

Non- executive director Edward Cheung Wing Yui

INEDs Kevin Chau Kwok Fun

Tan Soo Kiu
Yiu Kei Chung

Throughout the year and up to the date of this report, the Company has complied with the requirements
under Rules 3.10(1) and (2) of the Listing Rules that there are three INEDs and one of the INEDs has the
appropriate professional qualifications or accounting or related financial management expertise.

Each of the INEDs has provided an annual written confirmation of their independence that they meet the
guidelines for assessing independence as set out in Rule 3.13 of the Listing Rules. Their independence has
been assessed by the Nomination Committee. The Company considers all the INEDs are independent.

Biographical details of the directors and their relationships, where applicable, are set out on pages [1] to [3]
of this annual report.

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TAI SANG LAND DEVELOPMENT LIMITED

CORPORATE GOVERNANCE REPORT (CONTINUED)

Role of the Board

The Board has reserved for its decision or consideration matters covering mainly the Group’s overall
strategy, annual operating budget, annual and interim results, recommendations on directors’ appointment
or re-appointment, material contracts and transactions as well as other significant policies and financial
matters. The Board has delegated the day-to-day businesses of the Company to the management who works
under the leadership and supervision of the Executive Committee of the Board.

The Executive Committee of the Board, comprises the Chairman, Deputy Chairman, two Managing
Directors and one executive director. The Executive Committee meets regularly to review and discuss the
performance of the Group, current plans and long term opportunities, and any other issues of immediate
concern.

The non-executive directors (a majority of whom are independent) provided the Company with a wide range
of expertise and a balance of skills and brought independent judgment on issues of strategic direction,
development, performance and risk management through their contribution at board meetings and
committee meetings.

Corporate Governance Functions

The Board is responsible for performing the corporate governance duties including:

(a) to develop and review the Company’s policies and practices on corporate governance;
(b) to review and monitor the training and continuous professional development of directors and senior
management;
(c) to review and monitor the Company’s policies and practices on compliance with legal and regulatory
requirements;
(d) to develop, review and monitor the code of conduct and compliance manual (if any) applicable to
employees and directors; and
(e) to review the Company’s compliance with Appendix 14 to the Listing Rules (Corporate Governance
Code and Corporate Governance Report).

Board Meetings

Board meetings are held at least 4 times a year and involve the active participation, either in person or
through other electronic means of communication, of a majority of directors. At least 14 days’ notice of the
board meetings is given to all directors, and all directors are given an opportunity to include matters for
discussion in the agenda. An agenda and accompanying board papers are sent in full to all directors in a
timely manner and at least 4 days before the intended date of a full board meeting. They also have
unrestricted access to the advice and service of the Company Secretary, who assists the Chairman in
preparing the agenda for meetings, is responsible for providing directors with board papers and related
materials and ensures that board procedures are followed.

According to the current Board practice, if a substantial shareholder or a director has a conflict of interest
in a matter to be considered by the Board which the Board has determined to be material, the matter will
be dealt with by the Board at a duly convened Board meeting.

The articles of association of the Company (“Articles of Association”) also stipulate that save for the
exceptions as provided therein, a director shall abstain from voting and not be counted in the quorum at
meetings for approving any contract or arrangement in which such director or any of his/her associates
have a material interest.

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TAI SANG LAND DEVELOPMENT LIMITED

CORPORATE GOVERNANCE REPORT (CONTINUED)

Directors’ Training

Each newly appointed director is provided with necessary induction and information to ensure that he/she
has a proper understanding of the Company’s operations and businesses as well as his/her responsibilities
under relevant statues, laws, rules and regulations. The Company Secretary also provides directors with
updates on latest development and changes in the Listing Rules and other relevant legal and regulatory
requirements from time to time.

All directors are encouraged to participate in continuous professional development to develop and refresh
their knowledge and skills. The Company has arranged in-house trainings for directors in the form of
seminar and reading materials. A summary of training received by directors during the year according to
the records provided by the directors is as follows:

Corporate Governance/ Accounting/ Financial/

Updates in Laws, Rules and Management or Other
Regulations Professional Skills

Attended Attended
Directors Reading Seminars/ Reading Seminars/
Materials Briefings Materials Briefings
Executive directors
William Ma Ching Wai (Chairman) ✓ ✓ ✓ ✓
Patrick Ma Ching Hang ✓ ✓ ✓ ✓
Alfred Ma Ching Kuen ✓ ✓ ✓ ✓
Amy Ma Ching Sau ✓ ✓ ✓ ✓
Philip Ma Ching Yeung ✓ ✓ ✓ ✓

Non-executive director
Edward Cheung Wing Yui ✓ ✓ ✓ ✓

INEDs
Kevin Chau Kwok Fun ✓ ✓ ✓ ✓
Tan Soo Kiu ✓ ✓ ✓ ✓
Yiu Kei Chung ✓ ✓ ✓ ✓

CHAIRMAN AND CHIEF EXECUTIVE

The code provision A.2.1 of the CG Code stipulates that the positions of the Chairman and Chief Executive
should be held by separate individuals as to maintain an effective segregation of duties.

Mr. William Ma Ching Wai, the Chairman of the Board of Directors was appointed the Chief Executive of
the Company on 15th June 2017, since then Mr. William Ma Ching Wai holds both positions as the Chairman
and Chief Executive of the Company. This is a deviation from the code provision with respect to the roles of
chairman and chief executive to be performed by different individuals.

The Board believes that vesting the roles of both Chairman and Chief Executive on the same individual will
enable the Company to have a stable and consistent leadership and also facilitate the planning and execution
of the Company’s strategy.

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TAI SANG LAND DEVELOPMENT LIMITED

CORPORATE GOVERNANCE REPORT (CONTINUED)

NON-EXECUTIVE DIRECTORS

All non-executive directors have entered into letters of appointment with the Company for a specific term
of three years. All non-executive directors are also subject to retirement from office by rotation and re-
election at the annual general meeting once every three years in accordance with the Articles of Association.

Serving more than 9 years could be relevant to the determination of a non-executive director's independence.
If an independent non-executive director serves more than 9 years, his further appointment will be subject
to a separate resolution to be approved by shareholders.

BOARD COMMITTEES

The Board has established various committees, including Audit Committee, Remuneration Committee and
Nomination Committee, each of which has its specific written terms of reference. Copies of minutes of all
meetings and resolutions of the committees, which are kept by the Company Secretary, are circulated to all
Board members. The committees are required to report back to the Board on their decision and
recommendations where appropriate. All the Board committees are empowered by the Board under their
own terms of reference which have been posted on website of the Company and the Stock Exchange.

Audit Committee

Members:

INEDs Tan Soo Kiu (Chairman)

Kevin Chau Kwok Fun
Yiu Kei Chung

Non- executive director Edward Cheung Wing Yui

The Audit Committee was established in March 1999. The terms of reference setting out the Audit
Committee’s authority, duties and responsibilities are available on both the websites of the Company and
the Stock Exchange.

The main responsibilities of the Audit Committee are to review and monitor the integrity of the Company’s
financial statements, annual report and interim report. Other responsibilities include making
recommendations to the board on the appointment, reappointment and removal of the external auditor,
approval of the external auditor’s remuneration and terms of engagements, and to develop and implement
policy on engaging an external auditor to supply non-audit services. The Audit Committee is also charged
with overseeing the Company’s financial reporting system, the effectiveness of risk management and
internal control systems.

During the year, the Audit Committee held 2 meetings. The work performed by the Audit Committee during
the financial year ended 31st December 2018 are summarised below:

(i) reviewed annual report for the year ended 31st December 2017, and interim report for the six
months ended 30th June 2018;
(ii) proposed the appointment of PricewaterhouseCoopers (“PwC”) as Independent Auditor of the
Company and approved the auditor’s remuneration and terms of engagements;
(iii) reviewed and discussed with the Independent Auditor in respect of the consolidated financial
statements for the year ended 31st December 2017 and the interim financial information for the six
months ended 30th June 2018; and
(iv) reviewed and assessed the adequacy and effectiveness of the Group’s financial controls, risk
management and internal controls systems.

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TAI SANG LAND DEVELOPMENT LIMITED

CORPORATE GOVERNANCE REPORT (CONTINUED)

Remuneration Committee

Members:

INEDs Tan Soo Kiu (Chairman)

Yiu Kei Chung

Executive director Amy Ma Ching Sau

The Remuneration Committee was established in April 2005. The terms of reference of the Remuneration
Committee setting out its authority, duties and responsibilities are available on the websites of the Company
and the Stock Exchange.

The Remuneration Committee adopted the operation model where it performs an advisory role to the Board,
with the Board retaining the final authority to approve the remuneration packages of individual executive
directors and senior management.

The Remuneration Committee is responsible for ensuring formal and transparent procedures for
developing remuneration policies and overseeing the remuneration packages of the executive directors and
senior management. It takes into consideration of factors such as salaries paid by comparable companies,
time commitment and responsibilities of directors and senior management.

During the year, the Remuneration Committee held 2 meetings. The Remuneration Committee reviewed
the remuneration policy for executive directors and senior management of the Company, and made
recommendations on the Group’s bonus structure, retirement benefit scheme and other compensation
related issues.

Nomination Committee

Members:

Executive director William Ma Ching Wai (Chairman)

INEDs Kevin Chau Kwok Fun

Yiu Kei Chung

The Nomination Committee of the Company was established in March 2012. The terms of reference of the
Nomination Committee setting out its authority, duties and responsibilities are available on the websites of
the Company and the Stock Exchange.

The Nomination Committee is responsible to review the structure, size and composition of the Board and
make recommendations on any proposed changes to the Board to complement the Company’s corporate
strategy. It shall identify individuals suitably qualified to become board members and select or make
recommendations to the Board on the selection of individuals nominated for directorships, and assess the
independence of independent non-executive directors in accordance with Rule 3.13 of the Listing Rules.

[During the year, the Nomination Committee held 2 meetings. The Nomination Committee reviewed the
structure and composition of the Board, recommended the re-election of the retiring directors and assessed
the independence of all the INEDs and recommended the appointment of Mr. William Ma Ching Wai as the
Chief Executive of the Company upon the retirement of Mr. Ted Mok Tat Hung on 15 June 2017. ]

The Nomination Committee is also responsible to review the Board Diversity Policy, when appropriate to
ensure the effectiveness of the Board Diversity Policy and will discuss any revisions that may be required to
be considered and approved by the Board.

- 13 -
TAI SANG LAND DEVELOPMENT LIMITED

CORPORATE GOVERNANCE REPORT (CONTINUED)

Board Diversity Policy

The Company recognizes the importance and the benefit of having a diverse Board that fits its own business
model and specific needs in order to achieve its corporate goals and strategies. A number of factors,
including but not limited to age, gender, cultural and educational background, professional experience, skill
and knowledge, will be considered in determining the optimum composition of the Board so as to contribute
to the achievement of the Company’s corporate goals and strategic objectives. The Company also sees
diversity at the Board level as an essential element in maintaining a competitive advantage. The Company
does not discriminate on the grounds of race, gender, disability, age, religions or any other factor.

The Company aims to ensure that Board appointments will be made on the basis of a range of diversity
factors, including those set out above. Selection of candidates to join the Board will be, in part, dependent
on the pool of available candidates with the necessary skills, knowledge and experience. The ultimate
decision will be based on merit and the contribution the chosen candidate will bring to the Board, having
regard for the benefits of diversity on the Board.

ATTENDANCE AT BOARD MEETINGS, BOARD COMMITTEE MEETINGS

AND GENERAL MEETINGS

Number of Meetings Attended/ Eligible to attend for the year ended 31st December 2018
Board Meeting Audit Remuneration Nomination Annual
Committee Committee Committee General
Name of directors Meeting Meeting Meeting Meeting

Executive directors
William Ma Ching Wai (Chairman) 4/4 2/2 2/2 1/1

Patrick Ma Ching Hang 4/4 1/1

Alfred Ma Ching Kuen 4/4 1/1
Amy Ma Ching Sau 4/4 2/2 1/1
Philip Ma Ching Yeung 4/4 1/1

Non-executive director
Edward Cheung Wing Yui 4/4 2/2 1/1

INEDs
Kevin Chau Kwok Fun 4/4 2/2 2/2 1/1
Tan Soo Kiu 4/4 2/2 2/2 1/1
Yiu Kei Chung 3/4 2/2 2/2 2/2 0/1

- 14 -
TAI SANG LAND DEVELOPMENT LIMITED

CORPORATE GOVERNANCE REPORT (CONTINUED)

ACCOUNTABILITY AND AUDIT

Financial Reporting

The directors endeavour to ensure a balanced, clear and understandable assessment of the Group’s
performance, position and prospects in annual and interim reports and other disclosures required under
the Listing Rules and other statutory requirements. All members of the Board are provided with monthly
updates, which give the directors a balanced and understandable assessment of the performance, position
and prospects of the Group. Management provides all relevant information to the Board, giving the
members sufficient explanation and information they need to discharge their responsibilities.

The Board is responsible for the preparation of the consolidated financial statements that give a true and
fair view of the state of affairs of the Company and the Group and of the results and cash flows of the Group
for such reporting period. The consolidated financial statements are prepared in accordance with all
applicable Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of
Certified Public Accountants and the Hong Kong Companies Ordinance (Cap. 622 of the Laws of Hong Kong)
(“Companies Ordinance”). Appropriate accounting policies have also been used and applied consistently
except for the adoption of the new and revised HKFRSs.

The reporting responsibilities of directors and external auditor are set out in the Independent Auditor’s
Report on page [ ] to [ ] of this annual report.

Auditors’ Remuneration

The fees in respect of audit and audit related services provided to the Company and its subsidiaries by PwC
and other auditors were HK$2,192,200 and HK$565,500 respectively for the year. Fees for non-audit
services, which mainly consist of taxation services, provided by PwC and other auditors were HK$451,000
and HK$202,800 respectively.

COMPANY SECRETARY

The Company Secretary is a full time employee of the Company and has day-to-day knowledge of the
Company’s affairs. The Company Secretary reports to the Chairman and is responsible for advising the
Board on governance matters. The biography of the Company Secretary is set out on page [ ] of this annual
report.

The Company Secretary has provided her training records to the Company indicating that she has
undertaken more than 15 hours of relevant professional development during the year ended 31st December
2018, by means of attending seminars and reading relevant guidance materials.

SHAREHOLDERS’ RIGHTS

Convening Extraordinary General Meeting (“EGM”)

In accordance with Sections 566 to 568 of the Companies Ordinance, shareholder(s) of the Company
representing at least 5% of the total voting rights of all the shareholders having a right to vote at general
meetings of the Company, may require the directors of the Company to convene an EGM. The written
requisition must state the general nature of the business to be dealt with at the EGM and must be signed by
the shareholder(s) concerned and deposited at the registered office of the Company at 11th Floor, Tai Sang
Bank Building, 130-132 Des Voeux Road Central, Hong Kong for the attention of the Company Secretary in
hard copy form or sent to the Company in electronic form. The requisition may consist of several documents
in like form, each signed by one or more of the shareholders concerned.

- 15 -
TAI SANG LAND DEVELOPMENT LIMITED

CORPORATE GOVERNANCE REPORT (CONTINUED)

SHAREHOLDERS’ RIGHTS (Continued)

Convening Extraordinary General Meeting (“EGM”) (Continued)

If the directors of the Company do not within 21 days after the date on which the written requisition is
received by the Company proceed duly to convene an EGM for a day not more than 28 days after the date
on which the notice convening the EGM is given, the shareholder(s) concerned, or any of them representing
more than one-half of the total voting rights of all of them, may themselves convene an EGM, provided that
the EGM so convened shall not be held after the expiration of 3 months from the date of the original
requisition.

The EGM convened by shareholders shall be convened in the same manner, as nearly as possible, as that in
which general meetings are to be convened by the directors of the Company.

Any reasonable expenses incurred by the shareholder(s) requesting the meeting by reason of the failure of
the directors to duly convened a meeting will be reimbursed to shareholder(s) by the Company.

Putting Forward Proposals at Shareholders’ Meetings

Shareholders are requested to follow Sections 615 and 616 of the Companies Ordinance for including a
resolution at an annual general meeting of the Company (“AGM”). The requirements and procedures are
set out below:

(i) Any number of shareholders representing at least 2.5% of the total voting rights of all shareholders
having a right to vote on the resolution at an AGM to which the requisition relates, or at least 50
shareholders having a right to vote on the resolution at an AGM to which the requisition relates,
may submit a requisition in writing to put forward a resolution which may properly be moved at an
AGM.

(ii) The Company shall not be bound by the Companies Ordinance to give notice of the proposed
resolution or to circulate a statement of not more than 1,000 words with respect to the matter
referred to in the proposed resolution to shareholders of the Company entitled to receive notice of
an AGM unless a copy of the requisition specifying the resolution of which notice is to be given and
signed by the shareholders concerned (or 2 or more copies which between them contain the
signatures of all the shareholders concerned) is deposited at the registered office of the Company at
11th Floor, Tai Sang Bank Building, 130-132 Des Voeux Road Central, Hong Kong for the attention
of the Company Secretary in hard copy form or is sent to the Company in electronic form not less
than (i) 6 weeks before an AGM to which the requisition relates; or (ii) if later, the time at which
notice is given of that AGM.

If a shareholder of the Company intends to propose a person other than a director of the Company for
election as a director of the Company at any general meeting, the shareholder concerned shall lodge with
the registered office of the Company for the attention of the Company Secretary (i) a written notice of his
intention to propose that person for election as a Director; and (ii) a notice in writing by that person of
his/her willingness to be elected together with the necessary information within the period commencing no
earlier than the day after the dispatch of the notice of the general meeting and ending no later than 7 days
prior to the date of such general meeting.

Enquiries to the Board

Enquiries may be put to the Board through the Company Secretarial Department at 11/F., Tai Sang Bank
Building, 130-132 Des Voeux Road Central, Hong Kong (email: shareholderenquiry@tsld.com).

- 16 -
TAI SANG LAND DEVELOPMENT LIMITED

CORPORATE GOVERNANCE REPORT (CONTINUED)

INVESTORS RELATION

Constitutional Documents

During the year, there is no change in Company’s constitutional documents.

Communication with Shareholders

The Board and senior management maintain an on-going dialogue with the Company’s shareholders and
investors and in particular, use annual general meetings or other general meetings to communicate with
them and encourage their participation.

The Chairman of the Board will attend the AGM and he will invite the chairmen of the Audit Committee,
Remuneration Committee and Nomination Committee to attend. In their absence, the Chairman of the
Board will invite another member of the committee or failing this his duly appointed delegate to attend.
These persons will be available to answer questions at the annual general meeting.

The Chairman of the Board will ensure the external auditor attend the annual general meeting to answer
questions about the conduct of the audit, the preparation and content of the auditors’ report, the accounting
policies and auditor independence.

RISK MANAGEMENT AND INTERNAL CONTROL

The Board is responsible to oversee the Group’s risk management and internal control systems on an
ongoing basis and ensure that a review of the effectiveness of both systems has been conducted at least
annually. The reviews covering all material controls include financial, operational and compliance controls
are conducted.

The Board and the management take top priority on the Group’s implementation of risk management
process and internal controls. A comprehensive risk management systems based on risk identification,
measures, internal audit and assessment, monitoring and ongoing improvement are established.

The Group’s risk management framework comprises of the Board, the management, Audit Committee and
risk management and internal control functions.

1. The Board is responsible for overseeing the risk management and internal control systems to ensure
the core values, strategic planning and operational guidelines and communications of the above
throughout the Group are effective. Risk controls are embedded into the operations.

2. The management is responsible for design, implementation and monitoring the risk management
and internal controls systems. The management monitors to ensure that all the operation managers
comply with the established policies and procedures via business systems.

3. Risk management and internal control function assist the Board to set up and ensure that Group’s
effective implementation policies, procedures and controls are in place. Risk management function
initiates the risk management plan and determine risk factors with support from the operation
departments. Risk profile which may affect the Group are identified. The identified risks are not
exhaustive. Internal control function is responsible to conduct regular reviews on the implementation
of the policies and procedures and recommend changes in response to different business and control
environments.

4. The Audit Committee supports the Board in reviewing the risk management and internal controls
systems to ensure effective controls are in place. The risk management and internal control functions
regularly report the audit assessment and make recommendations to the Audit Committee.

- 17 -
TAI SANG LAND DEVELOPMENT LIMITED

CORPORATE GOVERNANCE REPORT (CONTINUED)

RISK MANAGEMENT AND INTERNAL CONTROL (CONTINUED)

During the year of 2018, the internal audit function performed two semi-annual risk-based audits to review
and assess the effectiveness of the Company’s internal controls. The reviews covered the functions over
financial, operation and compliance with emphasis on property rental and project procurement systems, to
assure that risk management and internal control measures are adequate and effective.

Two Audit Committee meetings were held in year 2018 to review the risk management and internal control
systems. Both systems are confirmed effective and adequate. Frequency and extent of communication of
monitoring results to the Board is adequate. The Board conducted on-going review of the effectiveness of
both systems of the Group and considered that both systems in place are effective. No significant control
failure was identified. Besides, the resources, staff qualifications and experience, training programmes and
budget of accounting, internal audit and financial reporting functions were reviewed and assured adequate.

HANDLING AND DISSEMINATION OF INSIDE INFORMATION

For the purpose of handling and disseminating inside information in accordance with the Listing Rules and
the Securities and Futures Ordinance (Cap 571 of the Laws of Hong Kong), the Group has taken various
procedures and measures, including arousing the awareness to preserve confidentiality of inside
information within the Group, sending blackout period and securities dealing restrictions notification to the
relevant directors and employees regularly, disseminating information to specified persons on a need-to-
know basis and regarding closely to the “Guidelines on Disclosure of Inside Information” issued by the
Securities and Futures Commission in June 2012.

On behalf of the Board

William Ma Ching Wai

Chairman

Hong Kong, 22nd March 2019

- 18 -
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF TAI SANG LAND DEVELOPMENT LIMITED
(incorporated in Hong Kong with limited liability)

Opinion

What we have audited

The consolidated financial statements of Tai Sang Land Development Limited (the “Company”)
and its subsidiaries (the “Group”) set out on pages [24] to [74], which comprise:
• the consolidated statement of financial position as at 31st December 2018;
• the consolidated statement of profit or loss for the year then ended;
• the consolidated statement of comprehensive income for the year then ended;
• the consolidated statement of cash flows for the year then ended;
• the consolidated statement of changes in equity for the year then ended; and
• the notes to the consolidated financial statements, which include a summary of
significant accounting policies.

Our opinion

In our opinion, the consolidated financial statements give a true and fair view of the consolidated
financial position of the Group as at 31st December 2018, and of its consolidated financial
performance and its consolidated cash flows for the year then ended in accordance with Hong
Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified
Public Accountants (“HKICPA”) and have been properly prepared in compliance with the Hong
Kong Companies Ordinance.

Basis for Opinion

We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued
by the HKICPA. Our responsibilities under those standards are further described in the Auditor’s
Responsibilities for the Audit of the Consolidated Financial Statements section of our report.

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

Independence

We are independent of the Group in accordance with the HKICPA’s Code of Ethics for
Professional Accountants (“the Code”), and we have fulfilled our other ethical responsibilities in
accordance with the Code.

- 19 -
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF TAI SANG LAND DEVELOPMENT LIMITED (CONTINUED)
(incorporated in Hong Kong with limited liability)

Key Audit Matter

Key audit matter is the matter that, in our professional judgment, was of most significance in our
audit of the consolidated financial statements of the current period. The matter was addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on this matter.

Key audit matter identified in our audit is summarised as follows:

• Valuation of investment properties

How our audit addressed the

Key Audit Matter Key Audit Matter

Valuation of investment Experience of valuers and relevance of

properties their work

Refer to notes 2(f), 4(a)(i) and 7 to the We assessed the valuers’ qualifications and
consolidated financial statements expertise and read their terms of engagement
with the Group to determine whether they
The amount of the investment properties have the experience and whether there were
in the consolidated statement of financial any matters that might have affected their
position was HK$8,158 million and the objectivity or may have imposed scope
fair value gain of investment properties for limitations upon their work.
the year was HK$466 million. The Group’s
investment properties and its changes in Data provided to the valuers
valuation are significant to the statement
of financial position and statement of For completed investment properties, we
profit or loss respectively. performed testing on a sample basis on the
data provided by the Group to the valuers from
The valuations were carried out by third which the valuation was based upon. This data
party valuers to perform validation of all included key terms of lease agreements, rental
the investment properties in order to income schedules and vacant information
support management’s estimate. which we agreed to appropriate supporting
documentation. For properties under
development, we checked the planned
schemes being value with our property
industry knowledge. For the budgeted costs
adopted by the valuers, we agreed them on a
sample basis by comparing the budget costs to
our independently formed market expectation
and industry data.

- 20 -
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF TAI SANG LAND DEVELOPMENT LIMITED (CONTINUED)
(incorporated in Hong Kong with limited liability)

Key Audit Matter (Continued)

How our audit addressed the

Key Audit Matter Key Audit Matter

The valuation of completed properties Assumptions and estimates used by the

were based on the income capitalisation valuers
method and direct comparison method
which depend on certain key assumptions We attended meetings with the valuers in
that require significant management which the valuation approaches and the key
estimate and judgement, including assumptions therein were discussed. The
market rents and capitalisation rates. The assumptions used varied across the portfolio
valuation of properties under depending on the age, nature and location of
development was based on the residual each property and they included market rents,
method which depends on key capitalisation rates, gross development value,
assumptions including the gross estimated development costs and allowance
development value of the project upon for developer’s profit for properties in similar
completion (estimated using a direct location and condition. In each of these areas,
comparison method) less estimated and on a sample basis, we compared the
development costs and developer’s profit. estimates and assumptions used by the valuers
against the published industry benchmarks
The existence of significant estimation and comparable market transactions, and our
uncertainty, coupled with the fact that experience in this sector.
only a small percentage difference in
individual property valuations, when We considered that the assumptions used in
aggregated, could result in a material the valuations were supportable in light of
misstatement, warrants specific audit available and comparable market evidence.
focus in this area.

Other Information

The directors of the Company are responsible for the other information. The other information
comprises all of the information included in the annual report other than the consolidated
financial statements and our auditor’s report thereon.

Our opinion on the consolidated financial statements does not cover the other information and
we do not express any form of assurance conclusion thereon.

- 21 -
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF TAI SANG LAND DEVELOPMENT LIMITED (CONTINUED)
(incorporated in Hong Kong with limited liability)

Other Information (Continued)

In connection with our audit of the consolidated financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit
or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this
regard. ‘

Responsibilities of Directors and the Audit Committee for the Consolidated

Financial Statements

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

In preparing the consolidated financial statements, the directors are responsible for assessing
the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the directors either intend
to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

The Audit Committee is responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion. We report our opinion solely to you, as a
body, in accordance with Section 405 of the Hong Kong Companies Ordinance and for no other
purpose. We do not assume responsibility towards or accept liability to any other person for the
contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with HKSAs will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements.

- 22 -
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF TAI SANG LAND DEVELOPMENT LIMITED (CONTINUED)
(incorporated in Hong Kong with limited liability)

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

(Continued)

As part of an audit in accordance with HKSAs, we exercise professional judgment and maintain
professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.

• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s
ability to continue as a going concern. If we conclude that a material uncertainty exists,
we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial
statements, including the disclosures, and whether the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair
presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction, supervision and performance
of the group audit. We remain solely responsible for our audit opinion.

- 23 -
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF TAI SANG LAND DEVELOPMENT LIMITED (CONTINUED)
(incorporated in Hong Kong with limited liability)

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

(Continued)

We communicate with the Audit Committee regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.

We also provide the Audit Committee with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.

From the matters communicated with the Audit Committee , we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because
the adverse consequences of doing so would reasonably be expected to outweigh the public
interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Yam Kwok
Damien Chow.

PricewaterhouseCoopers
Certified Public Accountants

Hong Kong, [ ]

- 24 -
TAI SANG LAND DEVELOPMENT LIMITED

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31ST DECEMBER 2018

Note 2018 2017

HK$ HK$

Non-current assets
Property, plant and equipment 6 1,693,970,411 1,429,096,939
Investment properties 7 8,158,136,000 7,566,706,400
Financial assets at fair value through other
comprehensive income 8 29,582,659 -
Available-for-sale financial assets 8 - 34,759,579
─────────── ───────────
9,881,689,070 9,030,562,918
------------------ ------------------

Current assets
Properties for sale 9
^
109,596,388
^
101,740,124
Inventory - 49,913
Debtors and prepayments 10 47,261,251 41,737,563
Current income tax recoverable 93,876 90,926
Cash and cash equivalents 11 61,935,964 51,509,824
─────────── ───────────
218,887,479 195,128,350
------------------ ------------------

Total assets ^
10,100,576,549 ^
9,225,691,268
═══════════ ═══════════

Equity and liabilities ^ ^

Equity attributable to owners of the Company
Share capital 12 417,321,278 417,321,278
Reserves 13 7,185,291,236 6,747,552,580
─────────── ───────────
7,602,612,514 7,164,873,858
Non-controlling interests
^
225,208,760
───────────
^
211,012,636
───────────
Total equity 7,827,821,274 7,375,886,494

^ ^
------------------ ------------------

Non-current liabilities
Long term bank loans - secured 14 492,288,947 734,210,035
Deferred income tax liabilities 15 298,889,774 247,906,286
─────────── ───────────
791,178,721 982,116,321

^ ^
------------------ ------------------

- 25 -
TAI SANG LAND DEVELOPMENT LIMITED

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)

AS AT 31ST DECEMBER 2018

Note 2018 2017

HK$ HK$

Current liabilities
Rental and other deposits 85,901,463 86,920,835
Creditors and accruals 16 35,743,835 49,935,641
Current income tax liabilities 1,250,756 707,878
Short term bank loans 17 382,000,000 345,991,250
Current portion of long term bank loans - secured 14 968,992,048 384,132,849
Bank overdrafts 17 7,688,452 -
─────────── ───────────
1,481,576,554 867,688,453
------------------ ------------------

Total equity and liabilities

^
10,100,576,549
^
9,225,691,268
═══════════ ═══════════
^ ^
The financial statements on pages [24] to [76] were approved by the board of directors on 22nd March 2019
and were signed on its behalf.

------------------ ------------------

William Ma Ching Wai Alfred Ma Ching Kuen

Director Director

The notes on pages [30] to [74] are an integral part of these consolidated financial statements.
- 26 -
TAI SANG LAND DEVELOPMENT LIMITED

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

FOR THE YEAR ENDED 31ST DECEMBER 2018

Note 2018 2017

HK$ HK$

Revenues 5(a) 352,361,761 283,630,266

Cost of sales 18 (89,390,846) (90,537,335)
─────────── ───────────
Gross profit 262,970,915 193,092,931

Fair value gains on investment properties 7 ^

466,253,152 ^
391,152,143
Other gains, net 19 3,248,569 10,308,910
Administrative expenses 18 (116,424,325) (115,955,792)
Other operating expenses 18 (12,504,224) (10,119,484)
─────────── ───────────
Operating profit 603,544,087 468,478,708
------------------ ------------------
Finance income
Finance costs
21
21
^ 311,667
(37,523,168)
^ 94,422
(25,622,714)
─────────── ───────────
Finance costs, net (37,211,501) (25,528,292)
------------------ ------------------

Profit before income tax

^
566,332,586 ^
442,950,416

Income tax (expense)/credit 22 (54,639,088) 74,542,847

─────────── ───────────
Profit for the year 511,693,498 517,493,263
═══════════ ═══════════
Attributable to:
Owners of the Company 13
^
492,802,815 ^
502,055,056
Non-controlling interests 18,890,683 15,438,207
─────────── ───────────
511,693,498 517,493,263
═══════════ ═══════════

Earnings per share (basic and diluted) 23

^
HK$1.71
^
HK$1.75
═══════════ ═══════════

The notes on pages [30] to [74] are an integral part of these consolidated financial statements.
- 27 -
TAI SANG LAND DEVELOPMENT LIMITED

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31ST DECEMBER 2018

Note 2018 2017

HK$ HK$

Profit for the year 511,693,498 517,493,263

------------------ ------------------

Other comprehensive income

Items that may be reclassified subsequently to profit or
loss
Net fair value gain on available-for-sale financial
assets 8 - 1,513,638
Recycle to profit or loss upon disposal and impairment
of available-for-sale financial assets - (4,772,783)
Exchange translation differences 13 - (1,688)

Item that will not be reclassified to profit or loss

Changes in the fair value of equity investments at fair
value through other comprehensive income 8 (5,164,976) -
─────────── ───────────

Other comprehensive income for the year (5,164,976) (3,260,833)

------------------ ------------------

Total comprehensive income for the year 506,528,522 514,232,430

═══════════ ═══════════

Total comprehensive income attributable to: ^ ^

Owners of the Company 13 489,519,198 498,623,579
Non-controlling interests 17,009,324 15,608,851
─────────── ───────────
506,528,522 514,232,430
═══════════ ═══════════

^ ^

The notes on pages [30] to [74] are an integral part of these consolidated financial statements.
- 28 -
TAI SANG LAND DEVELOPMENT LIMITED

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST DECEMBER 2018

Note 2018 2017

HK$ HK$

Operating activities
Net cash generated from operations 25(a) 146,198,841 70,119,263
Hong Kong profits tax paid (3,133,434) (4,429,853)
Hong Kong profits tax refunded 31,022 49,722
Overseas taxation paid (13,260) (14,318)
─────────── ───────────
Net cash generated from operating activities 143,083,169 65,724,814
------------------ ------------------
^ ^
Investing activities
Additions of property, plant and equipment (261,751,295) (95,661,582)
Additions of investment properties (137,881,538) (257,591,936)
Proceeds on disposal of financial assets at fair value
through other comprehensive income/available-for-
sale financial assets 11,944 18,127,566
Proceeds on disposal of property, plant and equipment 25,000 2,662,351
Interest received 311,667 94,422
Dividends received 3,432,909 5,742,769
─────────── ───────────
Net cash used in investing activities (395,851,313) (326,626,410)
------------------ ------------------

Financing activities ^ ^
Interest paid (65,708,381) (39,172,963)
Drawn down of bank loan 25 (b) 622,650,000 628,500,000
Repayments of bank loans 25 (b) (246,842,045) (305,042,052)
Dividends paid to shareholders (51,780,542) (40,273,755)
Dividends paid to non-controlling shareholders of
subsidiaries (2,813,200) (3,979,700)
─────────── ───────────
Net cash generated from financing activities 255,505,832 240,031,530
------------------ ------------------

Net increase/(decrease) in cash and cash equivalents ^

2,737,688 ^
(20,870,066)
Exchange translation difference - (1,688)
Cash and cash equivalents at 1st January 51,509,824 72,381,578
─────────── ───────────
Cash and cash equivalents at 31st December 54,247,512 51,509,824
═══════════ ═══════════

Analysis of the balances of cash and cash equivalents ^ ^

Bank balances and cash 61,935,964 51,509,824
Bank overdrafts (7,688,452) -
─────────── ───────────
54,247,512 51,509,824
═══════════ ═══════════

^ ^

- 29 -
The notes on pages [30] to [74] are an integral part of these consolidated financial statements.

- 30 -
TAI SANG LAND DEVELOPMENT LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31ST DECEMBER 2018

Attributable to owners of the Company

Property Investment
Share revaluation revaluation Exchange Retained Total Non-controlling
capital reserve reserve reserve profits reserves interests Total
HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$

6,958,565,216
<
<
At 1st January 2018 417,321,278 549,850,101 12,730,402 7,232,063 6,177,740,014 6,747,552,580 211,012,636 7,375,886,494
Adoption of HKFRS 9 - - (28,001,188) - 28,001,188 - - -
─────────── ─────────── ─────────── ─────────── ─────────── ─────────── ─────────── ───────────

<
Total equity at 1st January
6,958,565,216
2018 417,321,278 549,850,101 (15,270,786) 7,232,063 6,205,741,202 6,747,552,580 211,012,636 7,375,886,494

^ ^ ^ ^ ^ ^ ^
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Comprehensive income
Profit for the year ^ - - - - 492,802,815 492,802,815 18,890,683 511,693,498

Other comprehensive
income
Net fair value loss on financial
assets at fair value
through other
comprehensive income - - (3,283,617) - - (3,283,617) (1,881,359) (5,164,976)
Transfer of loss on disposal of
equity investment
at fair value through other
comprehensive
income to retained profits - - 15,923 - (15,923) - - -
─────────── ─────────── ─────────── ─────────── ─────────── ─────────── ─────────── ───────────
Total comprehensive
income for the year -
------------------
-
------------------
(3,267,694)
------------------
-
------------------
492,786,892
------------------
489,519,198
------------------
17,009,324
------------------
506,528,522
------------------
<
Transaction with owners
- dividends paid - - ^ - - ^
(51,780,542) ^
(51,780,542) ^
(2,813,200) ^
(54,593,742)
<
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------

At 31st December 2018 417,321,278 549,850,101 (18,538,480) 7,232,063 6,646,747,552 7,185,291,236 225,208,760 7,827,821,274
═══════════ ═══════════ ═══════════ ═══════════ ═══════════ ═══════════ ═══════════
7,410,499,996
═══════════

^ ^ ^ ^ ^ ^ ^ ^

The notes on pages [30] to [74] are an integral part of these consolidated financial statements.

- 31 -
TAI SANG LAND DEVELOPMENT LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)

FOR THE YEAR ENDED 31ST DECEMBER 2018

Attributable to owners of the Company

Property Investment
Share revaluation revaluation Exchange Retained Total Non-controlling
capital reserve reserve reserve profits reserves interests Total
HK$ HK$ HK$ HK$ HK$ HK$ HK$ HK$
At 1st January 2017 417,321,278 549,850,101 16,160,191 7,233,751 5,715,958,713 6,289,202,756 199,383,485 6,905,907,519
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
6,488,586,241
------------------
Comprehensive income
Profit for the year - - - - 502,055,056 502,055,056 15,438,207 517,493,263 <

Other comprehensive
income
Net fair value gain on
available-for-sale financial
assets - - 1,342,994 - - 1,342,994 170,644 1,513,638 <
Recycle to profit or loss upon
disposal and impairment of
available-for-sale financial
assets - - (4,772,783) - - (4,772,783) - (4,772,783)
Exchange translation
difference - - - (1,688) - (1,688) - (1,688)
─────────── ─────────── ─────────── ─────────── ─────────── ─────────── ─────────── ───────────
Total comprehensive
income for the year - - (3,429,789) (1,688) 502,055,056 498,623,579 15,608,851 514,232,430 <
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------
Transaction with owners
- dividends paid - - - - (40,273,755) (40,273,755) (3,979,700) (44,253,455) <
------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ ------------------

At 31st December 2017 417,321,278 549,850,101 12,730,402 7,232,063 6,177,740,014 6,747,552,580 211,012,636
6,958,565,216
7,375,886,494
═══════════ ═══════════ ═══════════ ═══════════ ═══════════ ═══════════ ═══════════ ═══════════

^ ^ ^ ^ ^ ^
^

The notes on pages [30] to [74] are an integral part of these consolidated financial statements.

- 32 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

1 General information

Tai Sang Land Development Limited (the “Company”) and its subsidiaries (collectively the “Group”)
are principally engaged in property investment, property rental, property development, estate
management and agency and hotel operation.

The Company is a limited liability company incorporated in Hong Kong. The Company’s shares are
listed on The Stock Exchange of Hong Kong Limited.

These consolidated financial statements are presented in Hong Kong dollar (HK$), unless
otherwise stated. These consolidated financial statements have been approved for issue by the
board of directors on 22nd March 2019.

2 Summary of significant accounting policies

2.1 Basis of preparation

The consolidated financial statements have been prepared in accordance with Hong Kong Financial
Reporting Standards (“HKFRSs”) and requirements of the Hong Kong Companies Ordinance
Cap.622. The consolidated financial statements have been prepared under the historical cost
convention except for investment properties and financial assets at fair value through other
comprehensive income which are measured at fair value.

The Group had net current liabilities of HK$1,262,689,075 as at 31st December 2018. The current
liabilities mainly included short term bank loans of HK$382,000,000 and current portion of long
term bank loans of HK$968,992,048. Based on the Group’s history of refinancing, its available
banking facilities and its assets backing, the directors consider that the Group will be able to obtain
sufficient financial resources so as to enable it to operate and meet its liabilities as and when they
fall due. The directors believe that the Group will continue as a going concern and consequently
prepared the consolidated financial statements on a going concern basis.

The preparation of consolidated financial statements in conformity with HKFRSs requires the use
of certain critical accounting estimates. It also requires management to exercise its judgment in the
process of applying the Group’s accounting policies. There are areas involving a higher degree of
judgment or complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements, are disclosed in note 4.

2.2 Changes in accounting policy and disclosures

(a) New and amended standards adopted by the Group

The following new standards and amendments to standards are relevant and mandatory to
the Group for the first time for the financial year beginning on or after 1st January 2018:

Annual Improvements Project Annual Improvements 2014-2016 Cycle

HKAS 40 (Amendment) Transfers of Investment Property
HKFRS 9 Financial Instruments
HKFRS 15 Revenue from Contracts with Customers

The application of the above new standards, amendments and improvements to existing
standards and interpretation in the current period has had no material impact on the
Group’s results and financial position, except HKFRS 9 “Financial Instruments” and
HKFRS 15 “Revenue from Contracts with Customers”. The other standards did not have
any impact on the Group’s accounting policies and did not require retrospective
adjustments.

- 33 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.2 Changes in accounting policy and disclosures (Continued)

(b) Impact on the financial statements

As a result of the changes in the entity’s accounting policies, prior year financial statements
had to be restated. As explained in note 2.2(c) below, HKFRS 9 was generally adopted
without restating comparative information.

The following tables show the adjustments recognised for each individual line item. Line
items that were not affected by the changes have not been included. As a result, the sub-
totals and totals disclosed cannot be recalculated from the numbers provided. The
adjustments are explained in more detail by standard below.

Consolidated statement of At 31st

financial position December
(extract) 2017 as Effects of the At 1st
originally adoption of January
presented HKFRS 9 2018
HK$ HK$ HK$

Non-current assets
Available-for-sale financial
assets 34,759,579 (34,759,579) -
Financial assets at fair value
through other comprehensive
income - 34,759,579 34,759,579

(c) HKFRS 9 Financial Instruments – Impact of adoption

HKFRS 9 replaces the provisions of HKAS 39 that relate to the recognition, classification
and measurement of financial assets and financial liabilities, derecognition of financial
instruments and impairment of financial assets.

The adoption of HKFRS 9 Financial Instruments from 1st January 2018 resulted in changes
in accounting policies and adjustments to the amounts recognised in the consolidated
financial statements. The new accounting policies are set out in note 2.9 below. In
accordance with the transitional provisions in HKFRS 9 (7.2.15) and (7.2.26), comparative
figures have not been restated.

(i) Classification and measurement

On 1st January 2018 (the date of initial application of HKFRS 9), the Group’s
management has assessed which business models apply to the financial assets held by
the Group and has classified its financial instruments into the financial assets at fair
value through other comprehensive income (“FVOCI”).

- 34 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.2 Changes in accounting policy and disclosures (Continued)

(c) HKFRS 9 Financial Instruments – Impact of adoption (Continued)

(i) Classification and measurement

The Group has made an irrevocable election at the time of initial recognition to account
for the equity investment at FVOCI for all its available-for-sale financial assets. The
Group has used modified retrospective approach while adopting HKFRS 9, without
restating comparative information. As a result, listed and unlisted available-for-sale
financial assets with a fair value of HK$34,759,579 at 31st December 2017 were
reclassified from available-for-sale financial assets to financial assets at FVOCI on 1st
January 2018. A retained profits with HK$28,001,188 were adjusted in the opening
retained profits on 1st January 2018 to investment revaluation reserve to account for the
restatement of the impairment of the investments in past years.

(ii) Impairment of financial assets

The Group’s trade receivables are subjected to HKFRS 9’s new expected credit loss
model. The Group applies the HKFRS 9 simplified approach to measuring expected
credit losses which uses a lifetime expected loss allowance for all trade receivables. To
measure the expected credit losses, trade receivables have been grouped based on shared
credit risk characteristics and the days past due.

Trade receivables are written off when there is no reasonable expectation of recovery.
Indicators that there is no reasonable expectation of recovery include, amongst others,
the failure of a debtor to engage in a repayment plan with the Group, and a failure to
make contractual payments.

The Group is continuing to assess the implications of applying the new impairment
model. While the application of this new guidance represents a change in accounting,
this is not expected to have a material impact on the Group’s financial position and/or
financial performance as, based on assessment today, the credit losses calculated
pursuant to the new requirements for a number of the Group’s operations are not
expected to be significantly different from the amount recognised under their current
credit loss provision practices.

(d) HKFRS 15 Revenue from Contracts with Customers - Impact of adoption

HKFRS 15 replaces the provisions of HKAS 18, HKAS 11 and the related interpretations
that relate to the recognition of revenues. HKFRS 15 deals with revenue recognition and
establishes principles for reporting information to users of financial statements about the
nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s
contracts with customers. Revenue is recognised when a customer obtains control of a good
or service and thus has the ability to direct the use and obtain the benefits from the good
or service. The standard permits either a full retrospective or a modified retrospective
approach for the adoption. Rental income from lease agreements is specifically excluded
from the scope of the new standard. The Group has adopted HKFRS 15 Revenue from
Contracts with Customers from 1st January 2018 which had no material effect on timing
and amount of revenues recognised in the consolidated financial statements.

- 35 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.2 Changes in accounting policy and disclosures (Continued)

(e) New standards and interpretations not yet adopted

The following new standards and amendments to standards are relevant and mandatory to
the Group for accounting period beginning on or after 1st January 2018 and have not been
early adopted by the Group:

Effective for
accounting year
beginning
on or after

HK(IFRIC)-Int 23 Uncertainty over Income Tax Treatments 1st January 2019

HKFRS 16 Leases 1st January 2019
Annual Improvements Annual Improvements 2015-2017 Cycle 1st January 2019
Project

The Grouphas already commenced an assessment of the impact of adopting the above new
and amended standards. The Group is not yet in position to state whether they will have a
significant impact on the Group's results of operations and financial position. The Group
will adopt the above new and amended standards when they become effective.

2.3 Consolidation

The consolidated financial statements include the financial statements of the Company and its
subsidiaries made up to 31st December 2018.

A subsidiary is an entity (including a structured entity) over which the Group has control. The
Group controls an entity when the Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the
entity. Subsidiaries are consolidated from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases.

Business combination

The Group applies the acquisition method to account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the
liabilities incurred to the former owner of the acquiree and the equity interests issued by the Group.
The consideration transferred includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date.

- 36 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.3 Consolidation (Continued)

Business combination (Continued)

The Group recognises any non-controlling interest in the acquire on an acquisition-by-acquisition

basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised
amounts of the acquiree’s identifiable net assets.

Acquisition related costs are expensed as incurred. The excess of the consideration transferred and
the fair value of non-controlling interest over the net assets acquired and liabilities assumed is
recorded as goodwill. If this consideration is lower than the fair value of the net assets of the
subsidiary acquired, the difference is recognised in the statement of profit or loss.

In the Company’s statement of financial position, investments in subsidiaries are accounted for cost
less impairment. Cost is adjusted to reflect changes in consideration arising from contingent
consideration amendments. The results of subsidiaries are accounted for by the Company on the
basis of dividends received and receivable.

2.4 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified as
the executive directors of the Company that makes strategic decisions.

2.5 Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured
using the currency of the primary economic environment in which the entity operates (the
“functional currency”). The consolidated financial statements are presented in Hong Kong
dollar (HK$), which is the Company’s functional and Group’s presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the
exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation of monetary assets and
liabilities denominated in foreign currencies at year end exchange rates are generally
recognised in profit or loss.

(iii) Group companies

The results and financial positions of all the group entities that have a functional currency
different from the presentation currency are translated into the presentation currency as
follows:

- assets and liabilities for each statement of financial position presented are translated
at the closing rate at the date of that statement of financial position;

- income and expenses for each statement of profit or loss are translated at average
exchange rates; and

- all resulting exchange differences are recognised in other comprehensive income.

- 37 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.5 Foreign currency translation (Continued)

(iii) Group companies (Continued)

On consolidation, exchange differences arising from the translation of the net investment
in foreign entities are taken to other comprehensive income. When a foreign operation is
sold, such exchange differences are recognised in the consolidated statement of profit or
loss as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated
as assets and liabilities of the foreign entity and translated at the closing rate.

(iv) Disposal of foreign operation

On the disposal of a foreign operation (that is, a disposal of the Group’s entire interest in a
foreign operation, or a disposal involving loss of control over a subsidiary that includes a
foreign operation), all of the exchange differences accumulated in equity in respect of that
operation attributable to the equity holding of the Company are reclassified to the
consolidated statement of profit or loss.

2.6 Property, plant and equipment

(i) Leasehold land classified under finance lease and freehold land

Leasehold land classified as finance lease are stated at cost less accumulated depreciation
and impairment losses. Freehold land is stated at cost less accumulated impairment losses.
No depreciation is provided for freehold land.

Depreciation of leasehold land classified as finance lease commences depreciation from the
time when the land interest becomes available for its intended use. The depreciation is
calculated using the straight-line basis over the remaining period of the leases or their
estimated useful life of 20 years.

(ii) Buildings

Buildings are stated at cost less accumulated depreciation and impairment losses.

Depreciation of buildings is provided to write off the cost less impairment losses and
residual value on a straight-line basis over 15 to 40 years.

(iii) Property under development

Property under development are interest in land and building on which construction work
has not been completed. Property under development is carried at cost which includes land
cost, development and construction expenditure and other direct costs attributable to the
development less any impairment losses.

(iv) Plant and equipment

Plant and equipment, comprising plant and machinery, furniture and equipment and
motor vehicles, are stated at cost less accumulated depreciation and impairment losses.

Depreciation of plant and equipment is calculated using straight-line method to allocate

cost to their residual values over their estimated useful lives of 3 to 10 years.

- 38 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.6 Property, plant and equipment (Continued)

(v) Leasehold improvement

Leasehold improvement is stated at cost less accumulated depreciation and impairment

losses.

Depreciation of leasehold improvement is calculated using straight-line method to allocate

cost to their residual value over the shorter of the lease term or estimated useful lives of 5
years.

(vi) Subsequent costs, residual value, useful lives and disposal

Subsequent costs are included in the asset’s carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic benefits associated with
the item will flow to the Group and the cost of the item can be measured reliably. The
carrying amount of the replaced part is derecognised. All other repairs and maintenance
are charged in the statement of profit or loss during the financial period in which they are
incurred.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the
end of each reporting period.

Gains and losses on disposals are determined by comparing the proceeds with the carrying
amount and are recognised in the statement of profit or loss.

2.7 Investment properties

Property that is held for long-term rental yields or for capital appreciation or both, and that is not
occupied by the group companies, is classified as investment property. Investment property also
includes property that is being constructed or developed for future use as investment property.

Investment property comprises freehold land, leasehold land and buildings. Land held under
operating leases is classified and accounted for as investment property when the rest of the
definition of investment property is met. The operating lease is accounted for as if it was a finance
lease.

Investment property is measured initially at its cost, including related transaction costs. After initial
recognition, investment property is carried at fair value. Fair value is based on valuations carried
out by external valuers. Changes in fair value are recognised in the statement of profit or loss. The
fair value of an investment property reflects, among other things, rental income from current leases
and assumptions about rental income from future leases in the light of current market conditions.

Property that is being constructed or developed as investment property is carried at fair value.
Where fair value is not reliably determinable, such investment property under construction is
measured at cost until either its fair value becomes reliably determinable or construction is
completed (whichever is earlier).

Subsequent expenditure is included to the asset’s carrying amount only when it is probable that
future economic benefits associated with the item will flow to the Group and the cost of the item
can be measured reliably. All other repairs and maintenance costs are expensed in the statement of
profit or loss during the financial period in which they are incurred.

If an investment property becomes owner-occupied, it is reclassified as property, plant and

equipment, and its fair value at the date of reclassification becomes its cost for accounting purposes.

- 39 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.8 Impairment of non-financial assets and investments in subsidiaries

Non-financial assets are reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the
amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows which are largely independent of the cash inflows from other assets or groups
of assets (cash generating units). Non-financial assets other than goodwill that suffered an
impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

Impairment testing of the investments in subsidiaries is required upon receiving dividends from
these investments if the dividend exceeds the total comprehensive income of the subsidiary in the
period the dividend is declared or if the carrying amount of the investment in the separate financial
statements exceeds the carrying amount in the consolidated financial statements of the investee’s
net assets including goodwill.

2.9 Investments and other financial assets

(i) Classification

From 1 January 2018, the Group classifies its financial assets in the following two categories:
those to be measured subsequently at fair value (either through other comprehensive
income, or through profit or loss) and those to be measured at amortised cost.

The classification depends on the entity’s business model for managing the financial assets
and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will either be recorded in profit or loss
or other comprehensive income. For investments in equity instruments, this will depend
on whether the Group has made an irrevocable election at the time of initial recognition to
account for the equity investment at fair value through other comprehensive income.

The Group reclassifies debt investments when and only when its business model for
managing those assets changes.

(ii) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade-date, the date
on which the group commits to purchase or sell the asset. Financial assets are derecognised
when the rights to receive cash flows from the financial assets have expired or have been
transferred and the group has transferred substantially all the risks and rewards of
ownership.

(iii) Measurement

At initial recognition, the group measures a financial asset at its fair value plus, in the case
of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are
directly attributable to the acquisition of the financial asset. Transaction costs of financial
assets carried at FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when
determining whether their cash flows are solely payment of principal and interest.

- 40 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.9 Investments and other financial assets (Continued)

(iii) Measurement (Continued)

Equity instruments

The group subsequently measures all equity investments at fair value. Where the group’s
management has elected to present fair value gains and losses on equity investments in OCI,
there is no subsequent reclassification of fair value gains and losses to profit or loss
following the derecognition of the investment. Dividends from such investments continue
to be recognised in profit or loss as other income when the group’s right to receive payments
is established.

Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses)
in the statement of profit or loss as applicable. Impairment losses (and reversal of
impairment losses) on equity investments measured at FVOCI are not reported separately
from other changes in fair value.

(iv) Impairment

From 1st January 2018, the group assesses on a forward looking basis the expected credit
losses associated with its debt instruments carried at amortised cost and FVOCI. The
impairment methodology applied depends on whether there has been a significant increase
in credit risk. For trade receivables, the group applies the simplified approach permitted by
HKFRS 9, which requires expected lifetime losses to be recognised from initial recognition
of the receivables, see note 10 for further details.

(v) Accounting policies applied until 31st December 2017

The group has applied HKFRS 9 retrospectively, but has elected not to restate comparative
information. As a result, the comparative information provided continues to be accounted
for in accordance with the group’s previous accounting policy.

The Group classifies its financial assets in the following two categories: loans and
receivables and available-for-sale financial assets. The classification depends on the
purpose for which the investments were acquired. Management determines the
classification of its investments at initial recognition.

(i) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or

determinable payments that are not quoted in an active market. They arise when
the Group provides money, goods or services directly to a debtor with no intention
of trading the receivable. They are included in non-current assets when the
maturities are greater than 12 months after the reporting period.

(ii) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in

this category or not classified in any of the other categories. They are included in
non-current assets unless the investments mature or management intends to
dispose them within 12 months from the end of reporting period.

- 41 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.9 Investments and other financial assets (Continued)

(v) Accounting policies applied until 31st December 2017 (Continued)

(ii) Available-for-sale financial assets (Continued)

Available-for-sale financial assets are subsequently carried at fair value. Unrealised

gains and losses arising from changes in the fair value of available-for-sale financial
assets are recognised in other comprehensive income. When securities classified
as available-for-sale financial assets are sold or impaired, the accumulated fair
value adjustments are included in the statement of profit or loss as gains or losses
from investments.

The fair values of quoted investments are based on current bid prices. If the market
for a financial asset is not active (and for unlisted securities), the Group establishes
fair value by using valuation techniques which refer to observable market data and
are commonly used by market participants.

(iii) Impairment of financial assets

Assets carried at amortised cost

The Group assesses at the end of each reporting period whether there is objective
evidence that a financial asset or group of financial assets is impaired. A financial
asset or a group of financial assets is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of one or more events
that occurred after the initial recognition of the asset (a “loss event”) and that loss
event (or events) has an impact on the estimated future cash flows of the financial
asset or group of financial assets that can be reliably estimated.

Evidence of impairment may include indications that the debtors or a group of

debtors is experiencing significant financial difficulty, default or delinquency in
interest or principal payments, the probability that they will enter bankruptcy or
other financial reorganisation, and where observable data indicate that there is a
measurable decrease in the estimated future cash flows, such as changes in arrears
or economic conditions that correlate with defaults.

For loans and receivables category, the amount of the loss is measured as the
difference between the asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not been incurred)
discounted at the financial asset’s original effective interest rate. The carrying
amount of the asset is reduced and the amount of the loss is recognised in the
statement of profit or loss. If a loan has a variable interest rate, the discount rate
for measuring any impairment loss is the current effective interest rate determined
under the contract. As a practical expedient, the Group may measure impairment
on the basis of an instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the
decrease can be related objectively to an event occurring after the impairment was
recognised (such as an improvement in the debtor’s credit rating), the reversal of
the previously recognised impairment loss is recognised in the statement of profit
or loss.

- 42 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.9 Investments and other financial assets (Continued)

(v) Accounting policies applied until 31st December 2017 (Continued)

(iii) Impairment of financial assets

Available-for-sale financial assets

The Group assesses at the end of each reporting period whether there is objective
evidence that a financial asset or a group of financial assets is impaired.

For debt securities, if any such evidence exists the cumulative loss - measured as
the difference between the acquisition cost and the current fair value, less any
impairment loss on that financial asset previously recognised in the statement of
profit or loss - is removed from equity and recognised in statement of profit or loss.
If, in a subsequent period, the fair value of a debt instrument classified as available
for sale increases and the increase can be objectively related to an event occurring
after the impairment loss was recognised in statement of profit or loss, the
impairment loss is reversed through the statement of profit or loss.

For equity investments, a significant or prolonged decline in the fair value of the
security below its cost is also evidence that the assets are impaired. If any such
evidence exists the cumulative loss - measured as the difference between the
acquisition cost and the current fair value, less any impairment loss on that
financial asset previously recognised in statement of profit or loss - is removed
from equity and recognised in statement of profit or loss. Impairment losses
recognised in the statement of profit or loss on equity instruments are not reversed
through the statement of profit or loss.

Available-for-sale financial assets are subsequently carried at fair value. Unrealised

gains and losses arising from changes in the fair value of available-for-sale financial
assets are recognised in other comprehensive income. When securities classified
as available-for-sale financial assets are sold or impaired, the accumulated fair
value adjustments are included in the statement of profit or loss as gains or losses
from investments.

The fair values of quoted investments are based on current bid prices. If the market
for a financial asset is not active (and for unlisted securities), the Group establishes
fair value by using valuation techniques which refer to observable market data and
are commonly used by market participants.

2.10 Properties for sale

Properties for sale are stated at the lower of cost and net realisable value. Cost comprises
development expenditure and other associated expenditures, including interest capitalised. Net
realisable value is determined on the basis of anticipated sales proceeds less estimated selling
expenses.

2.11 Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the
estimated selling price in the ordinary course of business, less applicable variable selling expenses.

- 43 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.12 Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision for impairment. If collection of
trade and other receivables is expected in one year or less (or in the normal operating cycle of the
business if longer), they are classified as current assets. If not, they are presented as non-current
assets.

2.13 Cash and cash equivalents

In the consolidated statement of cash flows, cash and cash equivalents include cash in hand,
deposits held at call with banks, other short-term highly liquid investments with original maturities
of three months or less and bank overdrafts.

2.14 Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method. Trade and other payables are classified as
current liabilities if payment is due within one year or less (or in the normal operating cycle of the
business if longer). If not, they are presented as non-current liabilities.

2.15 Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result
of past events; it is probable that an outflow of resources will be required to settle the obligation;
and the amount has been reliably estimated. Provisions are not recognised for future operating
losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to any one item included in the same
class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle
the obligation using a pre-tax rate that reflects current market assessments of the time value of
money and the risks specific to the obligation. The increase in the provision due to passage of time
is recognised as finance costs.

- 44 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.16 Current and deferred income tax

The income tax expense for the year comprises current and deferred income tax. Tax is recognised
in the statement of profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other
comprehensive income or directly in equity, respectively.

(i) Current income tax

The current income tax charge is calculated on the basis of the tax laws enacted or
substantively enacted at the end of reporting period in the countries where the Company
and its subsidiaries operate and generate taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax
regulation is subject to interpretation. It establishes provisions where appropriate on the
basis of amounts expected to be paid to the tax authorities.

(ii) Deferred income tax

Inside basis differences

Deferred income tax is recognised, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the
financial statements. However, the deferred income tax is not accounted for if it arises from
initial recognition of an asset or a liability in a transaction (other than a business
combination) that at the time of the transaction affects neither accounting nor taxable
profit or loss. Deferred income tax is determined using tax rates (and laws) that have been
enacted or substantively enacted by the end of reporting period and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is
settled.

Deferred income tax assets are recognised to the extent that it is probable that future
taxable profit will be available against which the temporary differences can be utilised.

(iii) Offsetting

Deferred income tax assets and liabilities are offset when there is a legally enforceable right
to offset current tax assets against current tax liabilities and when the deferred income taxes
assets and liabilities relate to income taxes levied by the same taxation authority on either
the taxable entity or different taxable entities where there is an intention to settle the
balances on a net basis.

2.17 Contingent liabilities and contingent assets

A contingent liability is a possible obligation that arises from past events and whose existence will
only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not
wholly within the control of the Group. It can also be a present obligation arising from past events
that is not recognised because it is not probable that outflow of economic resources will be required
or the amount of obligation cannot be measured reliably.

- 45 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.18 Contingent liabilities and contingent assets (Continued)

A contingent liability is not recognised but is disclosed in the notes to the financial statements.
When a change in the probability of an outflow occurs so that outflow is probable, it will then be
recognised as a provision.

A contingent asset is a possible asset that arises from past events and whose existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly
within the control of the Group.

Contingent assets are not recognised but are disclosed in the notes to the financial statements when
an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.

2.19 Revenue and income recognition

Revenue is measured at the fair value of the consideration received or receivable for the services in
the ordinary course of the Group’s activities. If contracts involve the sale of multiple services, the
transaction price will be allocated to each performance obligation based on their relative stand-
alone selling prices. If the stand-alone selling prices are not directly observable, they are estimated
based on expected cost plus a margin or adjusted market assessment approach, depending on the
availability of observable information.

Revenues are recognised when or as the control of the good or service is transferred to the customer.
Depending on the terms of the contract and the laws that apply to the contract, control of the good
or service may be transferred over time or at a point in time.

(i) Rental income

Rental income is recognised on a straight-line basis over the terms of the lease agreements.

(ii) Agency commission and management fees

Agency commission and management fees income is recongised overtime when the service
is rendered and the Group’s performance provides all of the benefits received and
consumed simultaneously by the customer.

(iii) Dividend income

Dividend income is recognised when the right to receive payment is established.

(iv) Income on sale of properties and investments

Revenues are recognised when or as the control of the asset is transferred to the customer.
Depending on the terms of the contract and laws that apply to the contract, control of the
asset may transfer over time or at a point in time. Control of the asset is transferred over
time if the Group’s performance:

• provide all of the benefits received and consumed simultaneously by the customer;
or
• creates and enhances an asset that the customer controls as the Group performs;
or
• do not create and asset with an alternative use of the Group and the Group has an
enforceable right to payment for performance completed to date.

- 46 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.19 Revenue and income recognition (Continued)

(iv) Income on sale of properties and investments (Continued)

If control of the asset transfers over time, revenue is recognised over the period of the
contract by reference to the progress towards complete satisfaction of that performance
obligation. Otherwise, revenue is recognised at a point in time when the customer obtains
control of the asset.

For properties sales contract for which the control of the property is transferred at a point
in time, revenue is recognised when the customer obtains the physical possession or the
legal title of the completed property and the Group has present right to payment and the
collection of the consideration is probable.

In determining the transaction price, the Group adjusts the promised amount of
consideration for the effect of a financing component if it is significant.

(v) Income from hotel operations

Income from hotel operations are recognised when the customers simultaneously receive
and consume the benefits provided by the Group.

(vi) Sales of food and beverages

Income from sales of food and beverages is recognised at a point in time when the goods
are delivered to customers and title has passed.

(vii) Interest income

Interest income from a financial asset is recognised on a time-proportion basis using the
effective interest method.

2.20 Retirement benefit obligations

The Group’s contributions to the defined contribution retirement schemes are available to all
employees in Hong Kong and the United States of America (“US”). The assets of the schemes are
held separately from those of the Group in independently administered funds.

The US subsidiaries, which participate in the US government benefit schemes, are required to
contribute to the schemes for the retirement benefits of eligible employees. The government
authorities are responsible for the entire benefit obligations payable to the retired employees. The
only obligation of the Group with respect to the schemes is to pay the ongoing contributions
required by the schemes.

- 47 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.20 Retirement benefit obligations (Continued)

The Group’s contributions to the aforesaid defined contribution retirement schemes are calculated
either based on certain percentages of the applicable payroll costs or fixed sums that are determined
with reference to salary scale as stipulated under the requirements of the respective territories and
are charged to the statement of profit or loss as incurred.

Employee entitlements to long service payments are recognised when they accrue to employees. A
provision is made for the estimated liability for long service payments as a result of services
rendered by employees up to the end of reporting period. The provision for long service payments
is included as liabilities in the financial statements.

2.21 Borrowings and borrowing costs

Borrowings are recognised initially at fair value, net of transaction costs incurred. Transaction costs
are incremental costs that are directly attributable to the issue of a financial liability, including fees
and commissions paid to agents, advisers, brokers and dealers, levies by regulatory agencies and
securities exchanges, and transfer taxes and duties. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of transaction costs) and the redemption
value is recognised in the statement of profit or loss over the period of the borrowings using the
effective interest method.

General and specific borrowing costs directly attributable to the acquisition, construction or
production of qualifying assets, which are assets that necessarily take a substantial period of time
to get ready for their intended use or sale, are added to the cost of those assets, until such time as
the assets are substantially ready for their intended use or sale. All other borrowing costs are
recognised in the statement of profit or loss in the period in which they are incurred.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the reporting period.

2.22 Financial guarantee contracts

Financial guarantee contracts are recognised as a financial liability at the time the guarantee is
issued. The liability is initially measured at fair value and subsequently at the higher of (i) the
amount determined in accordance with the expected credit loss model under HKFRS 9 Financial
Instruments; and (ii) the amount initially recognised less, where appropriate, the cumulative
amount of income recognised in accordance with the principles of HKFRS 15 Revenue from
Contracts with Customers.

The fair value of financial guarantees is determined based on the present value of the difference in
cash flows between the contractual payments required under the debt instrument and the payments
that would be required without the guarantee, or the estimated amount that would be payable to a
third party for assuming the obligations.

Where guarantees in relation to loans or other payables of associates are provided for no
compensation, the fair values are accounted for as contributions and recognised as part of the cost
of the investment.

- 48 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

2 Summary of significant accounting policies (Continued)

2.23 Operating leases

Leases where substantially all the risks and rewards of ownership are remained with the lessors are
classified as operating leases.

(i) Leases - where the Group is the lessor

Where the Group leases out assets under operating leases, the assets are included in the
statement of financial position according to their nature. Revenue arising from operating
leases is recognised in accordance with the Group’s revenue recognition policies, as set out
in note 2.19(i) above.

(ii) Leases - where the Group is the lessee

Payments made under operating leases (net of any incentives received from the lessor) are
charged to the statement of profit or loss on a straight-line basis over the lease periods.

2.24 Dividend distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s and
the Company’s financial statements in the period in which the dividends are approved by the
Company’s shareholders or board of directors, where appropriate.

3 Financial risk management

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks, including foreign exchange risk, credit
risk, liquidity risk, interest rate risk and price risk.

(a) Foreign exchange risk

The Group operates in the US and Hong Kong and is primarily exposed to foreign exchange
risk arising from US dollar (“US$”). The foreign exchange risk exposure is considered to be
minimal to the Group because Hong Kong dollar is pegged to US dollar.

(b) Credit risk

Credit risk refers to the risk that the counterparty to a financial instrument would fail to
discharge its obligation under the terms of the financial instrument and cause a financial
loss to the Group. The credit risk of the Group’s financial assets, which mainly comprise
cash and cash equivalents and debtors, arises from potential default of the counterparty,
with a maximum exposure equal to the carrying amounts of these instruments.

To manage this risk arising from cash and cash equivalents and restricted bank balances,
they are mainly placed with banks with high credit rating. There has been no recent history
of default in relation to these financial institutions. The expected credit loss is close to zero.

Based on historical experience, majority of debtor receivables were settled shortly upon
maturity, hence the expected credit loss is immaterial. Management considers the credit
risk is not high. The Group maintains frequent communications with the counterparties.
Management has closely monitored the credit qualities and the collectability of these
receivables and consider that the expected credit risks of them are minimal in view of the
history of cooperation with them.

- 49 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

3 Financial risk management (Continued)

3.1 Financial risk factors (Continued)

(c) Liquidity risk

The Group adopts a prudent liquidity risk management and maintains sufficient cash on
hand and the availability of funding through an adequate amount of committed credit
facilities.

At 31st December 2018, the Group’s net current liabilities amounted to HK$1,262,689,075
(2017: HK$672,560,103). Based on the Group’s history of refinancing, the directors
consider that the Group will be able to refinance its existing short term bank loans and
obtain sufficient financial resources so as to satisfy its working capital requirements,
provision for payments of liabilities as and when they fall due and its future capital
commitments. Management also reviewed the compliance of loan covenants as at 31st
December 2018 and no non-compliance of covenants was noted. The directors has been
closely monitored the expected liquidity requirements to ensure the maintenance of
sufficient reserves of cash and adequate committed lines of funding.

The table below analyses the Group’s financial liabilities into relevant maturity groupings
based on the remaining period at the end of reporting period to the contractual maturity
date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Except for bank borrowings, balances due within 12 months equal their carrying balances,
as the impact of discounting is not significant.

2018
In the In the
Within second third to
one year year fifth years
HK$ HK$ HK$

Rental and other deposits 85,901,463 - -

Creditors and accruals 35,743,835 - -
Bank overdrafts 7,688,452 - -
Short term bank loans 398,131,551 - -
Long term bank loans 1,032,575,692 512,615,790 -
────────── ────────── ──────────
1,560,040,799 512,615,790 -
══════════ ══════════ ══════════

2017
^ In the In the
Within second third to
one year year fifth years
HK$ HK$ HK$

Rental and other deposits 86,920,835 - -

Creditors and accruals 49,935,641 - -
Short term bank loans 356,581,972 - -
Long term bank loans 421,968,512 359,111,086 411,107,455
────────── ────────── ──────────
915,406,960 359,111,086 411,107,455
══════════ ══════════ ══════════

^
- 50 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

3 Financial risk management (Continued)

3.1 Financial risk factors (Continued)

(d) Interest rate risk

The Group is primarily exposed to interest rate risk arising from bank borrowings. The
Group’s policy is to maintain all its bank borrowings in floating rate instruments except
when management’s objectives are to limit the impact of interest rate changes on earnings
and cash flows and to lower overall borrowings. The Group will attempt to refinance by
fixed rate borrowings at a lower rate if and when available.

At 31st December 2018, if interest rates on bank borrowings had been 10 basis points
higher/lower with all other variables held constant, profit after income tax for the year
would have been decreased/increased by HK$1,566,000 (2017: HK$1,244,000) before
taking account of interest capitalisation, mainly as a result of higher/lower interest expense
on floating rate borrowings.

(e) Price risk

The Group is exposed to equity securities price risk for the Group’s available-for-sale
financial assets. The performance of the Group’s investments is closely monitored, together
with an assessment of their relevance to the Group’s long term strategic plans.

At 31st December 2018, if the fair value of the equity securities had been 10% higher with
all other variances held constant, the investment revaluation reserve would have been
increased by HK$[ ] (2017: HK$3,476,000). If the fair value of equity securities had been
10% lower with all other variables held constant, the profit after income tax for the year and
investment revaluation reserve would have been decreased by HK$[ ] and HK$[ ] (2017:
HK$800,000 and HK$2,676,000) respectively.

3.2 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern in order to provide returns for shareholders and benefits for other stakeholders and
to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends
paid to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the debt (total borrowings) to equity (total equity) ratio.
The debt to equity ratio is 23.6% (2017: 19.9%) as at 31st December 2018.

3.3 Fair value estimation

Financial instruments that are measured in the consolidated statement of financial position at fair
value required disclosure of fair value measurements by level of the following fair value
measurement hierarchy:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
• Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).
• Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs) (level 3).

- 51 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

3 Financial risk management (Continued)

3.3 Fair value estimation (Continued)

The following table presents the Group’s financial assets that are measured at fair value at 31st
December 2018 and 2017.

Level 1 Level 2 Level 3

HK$ HK$ HK$

2018
Financial assets at fair value through
other comprehensive income
(2017: Available-for-sale financial assets) 19,582,659 - 10,000,000
═════════ ═════════ ═════════

2017
Available-for-sale financial assets 23,759,579 - 11,000,000
═════════ ═════════ ═════════

For the year ended 31st December 2018, there were no transfers of financial assets of the Group
between different levels of the fair value hierarchy.

For the year ended 31st December 2018, there were no significant changes in the business or
economic circumstances that affect the fair value of the Group’s financial assets.

For the year ended 31st December 2018, there were reclassifications of financial assets of the Group
after the adoption of HKFRS 9, as set out in note 2.

3.4 Offsetting financial assets and financial liabilities

There are no financial assets and financial liabilities subject to offsetting, enforceable master netting
arrangements and similar agreements for both years ended 31st December 2018 and 2017.

4 Critical accounting estimates and judgment

Estimates and judgment used in preparing the financial statements are continually evaluated and
are based on historical experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances.

(a) Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results. The estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities with the next financial year are discussed below:

- 52 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

4 Critical accounting estimates and judgment (Continued)

(a) Critical accounting estimates and assumptions (Continued)

(i) Investment properties

The fair values of investment properties are determined by independent valuers on an open
market basis with reference to comparable market transactions. In making the judgment,
the Group considers information from a variety of sources including:

• current prices in an active market for properties of different nature, condition or

location (or subject to different lease or other contracts), adjusted to reflect those
differences;

• recent prices of similar properties in less active markets, with adjustments to reflect
any changes in economic conditions since the date of the transactions that occurred
at those prices; and

• discounted cash flow projections based on reliable estimates of future cash flows,
derived from the terms of any existing lease and other contracts, and (where
possible) from external evidence such as current market rents for similar
properties in the same location and condition, and using discount rates that reflect
current market assessments of the uncertainty in the amount and timing of the
cash flows.

If information on current or recent prices of investment properties is not available, the fair
values of investment properties are determined using discounted cash flow valuation
techniques. The Group uses assumptions that are mainly based on market conditions
existing at each end of reporting period.

The principal assumptions underlying management’s estimation of fair value are those
related to: the receipt of contractual rentals, expected future market rentals, maintenance
requirements and appropriate discount rates. These valuations are regularly compared to
actual market yield data, actual transactions by the Group and those reported by the market.
The valuations are reviewed semi-annually by external valuers.

Should the capitalisation rates or market rates differ by 10%, the fair value gain would be
reduced or increased by HK$[ ] or HK$[ ] (2017: HK$687,946,000 or HK$840,823,000)
respectively and the deferred income tax charge thereon would be reduced or increased by
HK$[ ] or HK$[ ] (2017: HK$21,633,000 or HK$26,440,000) respectively.

(ii) Fair value of certain financial assets

The fair value of investments which are not traded in an active market is determined by
using valuation techniques (including discounted cash flow model or price/earnings
multiple model). The Group uses its judgment to select a variety of methods and make
assumptions of fair value and discounted rate that are mainly based on market conditions
existing at each end of reporting period.

- 53 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

4 Critical accounting estimates and judgment (Continued)

(a) Critical accounting estimates and assumptions (Continued)

(iii) Useful lives and residual values of property, plant and equipment

Management determines the estimated useful lives and residual values for the Group’s
property, plant and equipment. The Group will revise the depreciation charge where useful
lives and residual values are different from previous estimates, or will write off or write
down technically obsolete or non-strategic assets that have been abandoned or sold.

Should the useful lives of the property, plant and equipment be different by 10% from
management’s estimates, the depreciation expense would be reduced or increased by HK$[ ]
or HK$[ ] (2017: HK$1,378,000 or HK$1,597,000) respectively in the current year.

Should the residual values of the property, plant and equipment be different by 10% from
management’s estimates, the depreciation expense would be reduced or increased by HK$[ ]
(2017: HK$1,254,000 ) respectively in the current year.

(b) Critical judgment in applying the Group’s accounting policies

(i) Impairment of financial assets

The loss allowances for financial assets are based on assumptions about risk of default and
expected loss rates. This determination requires significant judgment. In making this
judgment, the Group evaluates, among other factors, the duration and extent to which the
fair value of an investment is less than its cost; and the financial health of and short-term
business outlook for the investee, including factors such as industry and sector
performance, changes in technology and operational and financing cash flow.

(ii) Income tax

The Group is subject to taxes in Hong Kong and the US. Significant judgment is required
in determining the provision for the taxes. There are many transactions and calculations
for which the ultimate tax determination is uncertain during the ordinary course of
business. The Group recognises liabilities for potential tax audit issues based on estimates
of whether additional taxes will be due. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the
current tax and deferred tax provisions in the period in which such determination is made.

- 54 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

5 Revenues and segment information

(a) Revenues recognised during the year are as follows:

2018 2017
HK$ HK$

Revenues
Property rental
- investment properties 288,663,653 223,724,731
- properties for sale 26,174,343 27,140,589
Revenue from contract with customers (Note(i)) 37,523,765 32,764,946
────────── ──────────
352,361,761 283,630,266
══════════ ══════════

^
Property rental and property related services revenue above included amounts of HK$1,279,336
(2017: HK$1,521,136) and HK$479,300 (2017: HK$492,361) from related companies and persons
^
respectively based on prices and terms as agreed by parties involved.

Note

(i) The Group derives its revenue from the transfer of goods and services over time and at a point in
time in the following major revenue stream:

Property related Hotel Catering

services operations operations Total
HK$ HK$ HK$ HK$
Year ended 31st December 2017
Revenue from contracts with
customers 14,146,795
════════
15,988,128
════════
2,630,023
════════
32,764,946
════════ <
Timing of revenue recognition
At a point in time - - 2,630,023 2,630,023
Over time 14,146,795
────────
15,988,128
──────── ────────
- 30,134,923
──────── <
14,146,795
════════
15,988,128
════════
2,630,023
════════
32,764,946
════════ <
Year ended 31st December 2018
Revenue from contracts with
customers 21,527,138
════════
15,996,627
════════ ════════
- 37,523,765
════════
<
Timing of revenue recognition
Over time 21,527,138
════════
15,996,627
════════ ════════
- 37,523,765
════════ <

- 55 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

5 Revenues and segment information (Continued)

(b) Operating lease arrangement

The Group leases out investment properties and properties for sale under lease terms generally in
the range of one to ten years.

At 31st December 2018, the future aggregate minimum lease receivables under non-cancellable
operating leases are as follows:

2018 2017
HK$ HK$

Not later than one year 295,024,000 233,795,000

Later than one year but not later than five years 629,472,000 420,061,000
Later than five years 238,992,000 300,217,000
────────── ──────────
1,163,488,000 954,073,000
══════════ ══════════

(c) ^ ^
The chief operating decision-maker has been identified as the executive directors of the Company.
The board of directors reviews the Group’s internal reporting in order to assess performance and
allocate resources. Management has determined the operating segments based on these reports.
The board of directors considers the business from a geographic perspective and has identified the
operating segments of the Group in Hong Kong and North America.

The board of directors assesses the performance of the operating segments based on their
underlying profit, which is measured by profit after income tax excluding fair value changes on
investment properties (net of deferred income tax in the United States), and their segment assets
and segment liabilities which is measured in a manner consistent with that in the financial
statements.

There are no sales between the operating segments.

- 56 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

5 Revenues and segment information (Continued)

(d) Operating segments

North
Hong Kong America Total
HK$ HK$ HK$
For the year ended 31st December
2018
Segment revenues
Property rental
Property related services
245,909,848
21,527,138
68,928,148
-
314,837,996
21,527,138
<
Hotel operations 15,996,627 - 15,996,627
─────────── ─────────── ───────────
Total segment revenues 283,433,613
═══════════
68,928,148
═══════════
352,361,761
═══════════
<
Segment results - underlying profit ^ ^ ^
- Property rental and related services
- Hotel operations
58,311,761
2,442,244
21,804,669
-
80,116,430
2,442,244
<
Fair value gains on investment properties
Deferred income tax, net
357,968,864
-
108,284,288
(37,118,328)
466,253,152
(37,118,328)
<
─────────── ─────────── ───────────
Profit for the year 418,722,869
═══════════
92,970,629
═══════════
511,693,498
═══════════
<
Included in segment results: ^ ^ ^
Finance income 76,700 234,967 311,667 <
Finance costs
Income tax expense (note)
(32,614,523)
(17,507,500)
(4,908,645)
(13,260)
(37,523,168)
(17,520,760)
<
<
Depreciation (14,854,672)
═══════════
(3,164,945)
═══════════
(18,019,617)
═══════════
<
Capital expenditure 402,784,474
═══════════
11,855,230
═══════════
414,639,704
═══════════
<
-64,899,995 -7,851,883 -72,751,878
At 31st December 2018 -146,503,756
Property, plant and equipment 1,677,935,036 16,035,375 1,693,970,411 <
Investment properties 7,242,650,000
───────────
915,486,000
───────────
8,158,136,000
───────────
<
Non-current assets (excluding financial
assets at fair value through other
9,852,106,411
comprehensive income) 8,920,585,036 931,521,375 9,852,106,410
Non-current financial assets at fair value 29,582,659 - 29,582,659
through other comprehensive income
Current assets 176,600,660
───────────
42,286,819
───────────
218,887,479
───────────
<
Segment assets 9,126,768,355
═══════════
973,808,194
═══════════
10,100,576,549
═══════════
<
10,100,576,548
Current liabilities ^
1,464,257,052 ^
17,319,502 1,481,576,554 <
Non-current liabilities 490,871,347
───────────
301,018,427
───────────
791,889,774
───────────
<
Segment liabilities 1,955,128,399
═══════════
318,337,929
═══════════
2,273,466,328
═══════════
<
^ ^ ^
- 57 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

5 Revenues and segment information (Continued)

(d) Operating segments (Continued)

North
Hong Kong America Total
HK$ HK$ HK$
For the year ended 31st December 2017
Segment revenues
Property rental
Property related services
195,208,193
14,146,795
55,657,127
-
250,865,320
14,146,795
<
Hotel operations 15,988,128 - 15,988,128
Catering operations 2,630,023 - 2,630,023
─────────── ─────────── ───────────
Total segment revenues 227,973,139
═══════════
55,657,127
═══════════
283,630,266
═══════════ <
Segment results ^ ^ ^
- Property rental and related services
- Hotel operations
34,273,657
1,729,260
12,473,072
-
46,746,729
1,729,260
<
- Catering operations (4,586,435) - (4,586,435)
Fair value gains/(losses) on investment
properties
Deferred income tax credit, net
421,316,881
-
(30,164,738)
82,451,566
<
391,152,143
82,451,566
─────────── ─────────── ───────────
Profit for the year 452,733,363
═══════════
64,759,900
═══════════ <
517,493,263
═══════════

Included in segment results:

Finance income
^7,788
^86,634
^ <94,422
Finance costs
Income tax credit/(expense) (note)
(21,812,703)
(7,894,401)
(3,810,011)
(14,318) <
(25,622,714)

<
(7,908,719)
Depreciation (15,323,233)
═══════════
(2,514,509)
═══════════ <
(17,837,742)
═══════════
Capital expenditure 336,654,162
═══════════
31,022,768
═══════════
<
367,676,930
═══════════

At 31st December 2017

Property, plant and equipment 1,412,006,539 17,090,400 <
1,429,096,939
Investment properties

Non-current assets (excluding available-

6,769,250,000
───────────
797,456,400
─────────── <
7,566,706,400
───────────

for-sale financial assets)

Non-current available-for-sale financial
assets
8,181,256,539

34,759,579
814,546,800

-
<
8,995,803,339

34,759,579
Current assets 163,418,371
───────────
31,709,979
─────────── <
195,128,350
───────────
Segment assets 8,379,434,489
═══════════
846,256,779
═══════════
<
9,225,691,268
═══════════

Current liabilities ^
849,673,464 ^
18,014,989 ^ <
867,688,453
Non-current liabilities 716,374,174
───────────
265,742,147
─────────── <
982,116,321
───────────
Segment liabilities 1,566,047,638
═══════════
283,757,136
═══════════ <
1,849,804,774
═══════════

Note: ^ ^
The amount excludes net deferred income tax of North America segment.
^
- 58 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

6 Property, plant and equipment

Property
Land and Plant and under
buildings equipment development Total
HK$ HK$ HK$ HK$

Cost
At 1st January 2018 762,983,827 82,038,700 671,744,809 1,516,767,336 <
Additions - 4,618,522 284,844,734 289,463,256 <
Disposals and write-off - (1,034,708) - (1,034,708)
Transfer to properties for sale (9,411,999) - - (9,411,999)
─────────── ─────────── ─────────── ───────────
At 31st December 2018 753,571,828 85,622,514 956,589,543 1,795,783,885
------------------ ----------------- ----------------- -----------------

Accumulated depreciation
^ ^ ^ ^
At 1st January 2018 39,719,825 47,950,572 - 87,670,397 <
Depreciation charge
Disposals and write-off
9,882,274
-
8,137,343
(825,375)
-
-
18,019,617
(825,375)
<
Transfer to properties for sale (3,051,165) - - (3,051,165)
─────────── ─────────── ─────────── ───────────
At 31st December 2018 46,550,934 55,262,540 - 104,813,474 101,813,474
------------------ ------------------ ------------------ ------------------

Net book value ^ ^

At 31st December 2018 707,020,894
═══════════
30,359,974
═══════════
956,589,543
═══════════
1,693,970,411
═══════════
<
1,690,970,411
Cost ^ ^ ^
At 1st January 2017 762,517,705 70,635,843 583,142,094 1,416,295,642 <
Additions
Disposals and write-off
466,122
-
21,199,836
(9,796,979)
88,602,715
-
110,268,673
(9,796,979)
<
─────────── ─────────── ─────────── ───────────
At 31st December 2017 762,983,827 82,038,700 671,744,809 1,516,767,336 <
------------------ ----------------- ----------------- -----------------

Accumulated depreciation
^ ^ ^ ^
At 1st January 2017 29,829,689 46,930,952 - 76,760,641 <
Depreciation charge 9,890,136 7,947,606 - 17,837,742 <
Disposals and write-off - (6,927,986) - (6,927,986)
─────────── ─────────── ─────────── ───────────
At 31st December 2017 39,719,825 47,950,572 - 87,670,397 <
------------------ ------------------ ------------------ ------------------

Net book value ^ ^ ^

At 31st December 2017 723,264,002 34,088,128 671,744,809 1,429,096,939 <
═══════════ ═══════════ ═══════════ ═══════════

Notes: ^ ^ ^ ^
(a) The Group’s freehold land and building located in the US with net book value of
HK$7,722,000 (2017: HK$8,394,750 ) together with an investment property located in the
US (note 7(a)) have been pledged to a financial institution to secure a credit facility of the
Group in the US totalling HK$141,906,336 (2017: HK$128,148,384) of which
HK$126,130,995 (2017: HK$127,856,508) was utilised as at 31st December 2018.

- 59 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

6 Property, plant and equipment (Continued)

Notes: (Continued)

(b) The Group’s property under development located in Hong Kong with net book value of
HK$956,589,543 (2017: HK$671,744,809) has been pledged to a financial institution to
secure a credit facility of the Group in Hong Kong of HK$1,192,000,000 (2017:
HK$1,192,000,000) of which HK$629,150,000 (2017: HK$356,407,333) was utilised as at
31st December 2018.

(c) The Group’s property under development included additions of HK$24,893,868 (2017:
HK$13,185,724) (note 21) being interest expenses with an effective interest rate per annum
at the end of reporting period of [ ]% (2017: 3.49%) capitalised for the development project.

7 Investment properties

2018 201
HK$ HK$

At 1st January 7,566,706,400 6,918,146,000

Additions 125,176,448 257,408,257
Fair value gains 466,253,152 391,152,143
─────────── ───────────
At 31st December (note) 8,158,136,000 7,566,706,400
═══════════ ═══════════

^
Note: As at 31st December 2018, the fair value of the investment property under development is ^
HK$940,000,000 (2017: HK$920,000,000 ).

All the investment properties of the Group measured at fair value are categorised as Level 3 in the
fair value hierarchy. The Group’s policy is to recognise transfers into and transfers out of fair value
hierarchy levels as of the date of the event or change in circumstances that caused the transfer.
There were no transfer between Levels 1, 2 and 3 during the year.

Fair value measurement using significant unobservable inputs

North
Hong Kong America
Industrial Commercial Residential Commercial
properties properties properties property Total
HK$ HK$ HK$ HK$ HK$

At 1st January 2018 3,945,500,000 740,900,000 2,082,850,000 797,456,400 7,566,706,400 <

Additions 109,730,877 833,253 4,867,006 9,745,312 125,176,448
<
Fair value gains 259,369,123
───────────
22,566,747
───────────
76,032,994
───────────
108,284,288
───────────
466,253,152
─────────── <
At 31st December 2018 4,314,600,000
═══════════
764,300,000
═══════════
2,163,750,000
═══════════
915,486,000
═══════════
8,158,136,000
═══════════
<
At 1st January 2017 ^
3,434,700,000 ^
743,500,000 ^
1,937,950,000 ^
801,996,000 ^
6,918,146,000 <
Additions 226,034,647 408,472 5,340,000 25,625,138 257,408,257 <
Fair value gains/(losses) 284,765,353
───────────
(3,008,472)
───────────
139,560,000
───────────
(30,164,738)
───────────
(391,152,143)
───────────
<
At 31st December 2017 3,945,500,000
═══════════
740,900,000
═══════════
2,082,850,000
═══════════
797,456,400
═══════════
7,566,706,400
═══════════
<
^ ^ ^ ^ ^
- 60 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

7 Investment properties (Continued)

Valuation processes

The Group measures its investment properties at fair value. As at 31st December 2018, the fair value
of the investment properties of the Group in Hong Kong were revalued by A A Property Services
Limited and the Group’s North America investment property was revalued by Martorana Bohegian
& Company. They are independent qualified valuers not related to the Group, who hold recognised
relevant professional qualifications and have recent experience in the locations and segments of the
investment properties valued. For all investment properties, their current use equates to the best
use.

The Group assigns a team to review the valuations performed by the independent valuers for
financial reporting purposes. This team reports directly to the senior management and the audit
committee. Discussions of valuation processes and results are held between the management and
valuers at least once every six months, in line with the Group’s interim and annual reporting dates.

At each financial year end, the assigned team:

• Verifies all major inputs to the independent valuation reports;

• Assess property valuations movements when compared to the prior year valuation reports; and
• Holds discussions with the independent valuers.

Valuation techniques

For completed properties, the income capitalisation method and direct comparison method were
used. For income capitalisation method, the valuers apply assumptions for capitalisation rates and
notional income, which are influenced by the prevailing market yields and comparable market
transactions, as well as discount rate, to arrive at the final valuation. For direct comparison method,
the valuers apply assumption for the current prices in an active market, which are influenced by the
different nature, condition or location, to arrive at the final valuation.

For properties under development, the residual method is used, whereby the valuation is derived
from the gross development value of the project upon completion (estimated using a direct
comparison method) less estimated development costs and allowance for developer’s profit.

There were no changes to the valuation techniques during the year.

Significant unobservable inputs used to determine fair value

The valuation determined using the direct comparison method by A A Property Services Limited,
sales price of comparable properties in close proximity and adjusted for differences in key attributes
such as property size and location. The most significant unobservable input into this valuation
method is the price adjustment per square foot.

Capitalisation rates are estimated by A A Property Services Limited and Martorana Bohegian &
Company based on the risk profile of the properties being valued in Hong Kong and North America
respectively. The higher the rates, the lower the fair value. At 31st December 2018, capitalisation
rates ranged from 1.9% to 4.8% (2017: 2.4% to 4.5%) and 5% (2017: 5%) are used in the income
capitalisation method for completed properties in Hong Kong and North America respectively and
capitalisation rate of 5% (2017: 5%) is used in the residual value method for investment property
under development in Hong Kong.

- 61 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

7 Investment properties (Continued)

Significant unobservable inputs used to determine fair value (Continued)

Notes:

(a) The Group’s investment property located in the US with a net book value of
HK$915,486,000 (2017: HK$797,456,400 ) together with the freehold land and building
located in the US have been pledged to a financial institution to secure a credit facility of
the Group in the US (note 6(a)).

Certain of the Group’s investment properties located in Hong Kong with an aggregate net
book value of HK$4,611,000,000 (2017: HK$4,257,000,000) have been pledged to
financial institutions to secure credit facilities of the Group in Hong Kong totalling
HK$1,110,000,000 (2017: HK$1,090,000,000) of which HK$990,688,452 (2017:
HK$845,079,043) were utilised as at 31st December 2018.

(b) The interests in investment properties at their net book values are analysed as follows:

2018 2017
HK$ HK$
In Hong Kong, held on:
Leases of over 50 years 1,024,750,000 944,850,000
Leases of between 10 and 50 years 6,217,900,000 5,824,400,000

Outside Hong Kong, held on:

Freehold 915,486,000 797,456,400
─────────── ───────────
8,158,136,000 7,566,706,400
═══════════ ═══════════

(c) ^ ^
Addition during the year included an amount of Nil (2017: HK$2,403,754) (note 21) being
interest expenses with an effective interest rate per annum at the end of 2017 in the range
of 3.19% to 3.37% capitalised for the improvement works of the investment property.

- 62 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

8 Financial assets at fair value through other comprehensive income

(i) Equity investments at fair value through other comprehensive income

2018 2017
HK$ HK$

At 1st January 34,759,579 -

Net fair value loss charged to equity (5,164,976) -
Disposals (11,944) -
────────── ──────────
At 31st December 29,582,659 -
══════════ ══════════

FVOCI include the following: ^

Listed equity securities in Hong Kong (note (a)) 19,582,659 -
Unlisted equity securities (note (b)) 10,000,000 -
────────── ──────────
29,582,659 -
══════════ ══════════

Notes: ^
(a) Listed equity securities in Hong Kong, which were denominated in Hong Kong dollar,
mainly represented securities listed in the Main Board of The Stock Exchange of Hong Kong
Limited, which included conglomerates that are also engaged in property development and
utility businesses.

(b) Unlisted securities were denominated in Hong Kong dollar, represented approximately
12% equity interests each in The Yangtze Ventures Limited, The Yangtze Ventures II
Limited, and Yangtze China Investment Limited. The underlying investments of these
entities comprise companies engaged in Chinese medical products and environmental
friendly product in China, and a provider of expansion capital to China-based enterprises.

On disposal of these equity investments, any related balance within the FVOCI reserve is reclassified
to retained earnings.

In the prior financial year, the group had designated equity investments as available-for-sale where
management intended to hold them for the medium to long-term.

Note 2.2(c) explains the change of accounting policy and the reclassification of certain equity
investments from available-for-sale to at fair value through profit or loss. Note 2.9 sets out the
remaining accounting policies.

- 63 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

8 Financial assets at fair value through other comprehensive income (Continued)

(ii) Financial assets previously classified as available-for-sale financial assets (2017)

2018 2017
HK$ HK$

At 1st January - 51,373,507

Net fair value gains charged to equity - 1,513,638
Disposals - (18,127,566)
────────── ──────────
At 31st December - 34,759,579
══════════ ══════════

Available-for-sale financial assets include the following: ^

Listed equity securities in Hong Kong (note (a)) - 23,743,589
Listed equity securities in overseas (note (b)) - 15,990
Unlisted equity securities (note (c)) - 11,000,000
────────── ──────────
- 34,759,579
══════════ ══════════

Notes: ^
(a) Listed equity securities in Hong Kong, which were denominated in Hong Kong dollar,
mainly represented securities listed in the Main Board of The Stock Exchange of Hong Kong
Limited, which included conglomerates that are also engaged in property development and
utility businesses.

(b) Listed equity securities in overseas as at 31st December 2017 were denominated in US
dollar, represented a publicly traded container port business trust, an equity investment
listed in the Singapore Exchange.

(c) Unlisted securities were denominated in Hong Kong dollar, represented approximately
12% equity interests each in The Yangtze Ventures Limited, The Yangtze Ventures II
Limited, and Yangtze China Investment Limited. The underlying investments of these
entities comprise companies engaged in Chinese medical products and environmental
friendly product in China, and a provider of expansion capital to China-based enterprises.

9 Properties for sale

The Group’s interests in properties for sale at their net book values are analysed as follows:

2018 2017
HK$ HK$

Leasehold land 12,063,340 12,063,340

Development expenditures 97,533,048 89,676,784
────────── ──────────
109,596,388 101,740,124
══════════ ══════════

These completed properties held for sale are located in Hong Kong.
^ ^

- 64 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

10 Debtors and prepayments

2018 2017
HK$ HK$

Trade debtors (note (a)) 499,249 690,521

Prepayments, deposits and other debtors (note (b)) 46,762,002 41,047,042
────────── ──────────
47,261,251 41,737,563
══════════ ══════════

Notes: ^ ^
(a) The trade debtors represent rental and management fee receivables. The Group normally
does not grant credit period to rental receivables, and grants 30 days credit period to
management fee receivables.

At 31st December 2017, the ageing analysis of the trade debtors were as follows:

2018 2017
HK$ HK$

0 – 30 days 426,429 690,521

31 - 60 days 73,000 -
──────── ────────
499,429 690,521
════════ ════════

^
At 31st December 2018, trade debtors of HK$15,338 (2017: HK$8,781) were fully
performing. Trade debtors of HK$483,911 (2017: HK$681,740) were past due but not
impaired and its due date analysis was as follows:

2018 2017
HK$ HK$

0 - 30 days 410,911 681,740

31 - 60 days 73,000 -
──────── ────────
483,911 681,740
════════ ════════

^
At 31st December 2018 and 2017, no impairment provision was made on the trade debtors.
The Group applies the simplified approach to provide for expected credit losses prescribed
by HKFRS 9 as disclosed in Not 3.1(b).

(b) The prepayments, deposits and other debtors represent utilities deposits, and other
prepayments, deposits and receivables.

(c) The carrying amounts of debtors and prepayments approximated their fair values as at 31st
December 2018 and 2017.

- 65 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

10 Debtors and prepayments (Continued)

(d) Included in the debtors and prepayments are the following amounts denominated in a
currency other than the functional currency of the Company:

2018 2017
HK$ HK$

US dollar 17,496,180 10,908,472

══════════ ══════════

11 Cash and cash equivalents

2018 2017
HK$ HK$

Bank balances and cash 61,935,964 51,509,824

══════════ ══════════

Note:

Included in the bank balances and cash are the following amounts denominated in a currency other
than the functional currency of the Company:

2018 2017
HK$ HK$

US dollar 24,790,639 20,801,508

══════════ ══════════

12 Share capital

Ordinary shares, issued and fully paid:

Number of Share
shares capital
HK$

At 1st January 2018 and 31st December 2018 287,669,676 417,321,278

══════════ ══════════

At 1st January 2017 and 31st December 2017 287,669,676 417,321,278

══════════ ══════════

- 66 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

13 Reserves

Property Investment
revaluation revaluation Exchange Retained
reserve reserve reserve profits Total
HK$ HK$ HK$ HK$ HK$

At 1st January 2018 549,850,101 12,730,402 7,232,063 6,177,740,014 6,747,552,580

Adoption of HKFRS 9 - (28,001,188) - 28,001,188 -
<
────────── ───────── ───────── ─────────── ───────────
Total equity at 1st January 2018 549,850,101 (15,270,786) 7,232,063 6,205,741,202 6,747,552,580 <
--------------- --------------- --------------- ----------------- -----------------

Comprehensive income
^ ^
Profit for the year - - - 492,802,815 492,802,815

Other comprehensive
income
Net fair value loss on financial
assets at fair value through
other comprehensive income - (3,283,617) - - (3,283,617)
Transfer of loss on disposal of
equity investment at fair value
through other comprehensive
income to retained profits -` 15,923 - (15,923) -
────────── ───────── ───────── ─────────── ───────────
Total comprehensive
income for the year -
---------------
(3,267,694)
---------------
-
---------------
492,786,892
-----------------
489,519,198
----------------- <
Transaction with owners
Dividends paid ^ ^ ^
2017 final dividend (note 24) - - - (23,013,574) (23,013,574)
2018 interim dividend
(note 24) - - - (28,766,968) (28,766,968)
--------------- --------------- --------------- ----------------- -----------------
At 31st December 2018 549,850,101 (18,538,480) 7,232,063 6,646,747,552 7,185,291,236
══════════ ═════════ ═════════ ═══════════ ═══════════ <
Representing:
^ ^ ^
Reserves
2018 final dividend proposed
549,850,101 (18,538,480) 7,232,063 [6,646,747,552] [7,185,291,236]
<
(note 24) - - - [-] [-]
────────── ───────── ───────── ─────────── ───────────
549,850,101
══════════
(18,538,480)
═════════
7,232,063
═════════
6,646,747,552
═══════════
7,185,291,236
═══════════ <

- 67 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

13 Reserves (Continued)

Property Investment
revaluation revaluation Exchange Retained
reserve reserve reserve profits Total
HK$ HK$ HK$ HK$ HK$

At 1st January 2017 549,850,101

---------------
16,160,191
---------------
7,233,751
---------------
5,715,958,713
-----------------
6,289,202,756
-----------------
<
Comprehensive income
Profit for the year - - - 502,055,056 502,055,056

Other comprehensive
income
Net fair value gain on available-
for-sale financial assets - 1,342,994 - - 1,342,994
Recycle to profit or loss upon
disposal and impairment of
available-for-sale financial
assets - (4,772,783) - - (4,772,783)
Exchange translation difference - - (1,688) - (1,688)
────────── ───────── ───────── ─────────── ───────────-
Total comprehensive
income for the year -
---------------
(3,429,789)
---------------
(1,688)
---------------
502,055,056
-----------------
498,623,579
------------------
<
Transaction with owners
2016 final dividend - ^ - -
^
(17,260,181)
^
(17,260,181)
2017 interim dividend
(note 24) - - - (23,013,574) (23,013,574)
--------------- --------------- --------------- ----------------- ------------------
At 31st December 2017 549,850,101
══════════
12,730,402
═════════
7,232,063
═════════
6,177,740,014
═══════════
6,747,552,580
═══════════
<
Representing:
^ ^
Reserves 549,850,101 12,730,402 7,232,063 6,154,726,440 6,724,539,006 <
2017 final dividend proposed
(note 24) - - - 23,013,574 23,013,574
────────── ───────── ───────── ─────────── ───────────
549,850,101
══════════
12,730,402
═════════
7,232,063
═════════
6,177,740,014
═══════════
6,747,552,580
═══════════
<
14 Long term bank loans - secured ^ ^ ^ ^
2018 2017
HK$ HK$

Bank loans
- wholly repayable within five years 1,461,280,995 1,118,342,884

Amounts due within one year included under current

liabilities (968,992,048) (384,132,849)
────────── ──────────
492,288,947 734,210,035
══════════ ══════════

^ ^
- 68 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

14 Long term bank loans - secured (Continued)

The maturity of the long term bank loans is as follows:

2018 2017
HK$ HK$

- within one year 968,992,048 384,132,849

- in the second year 492,288,947 334,572,334
- in the third to fifth year - 399,637,701
────────── ──────────
1,461,280,995 1,118,342,884
══════════ ══════════

^
The effective interest rates per annum at the end of reporting period were as follows: ^
2018 2017

HK dollar bank loans 4.24%-4.52% 3.13% - 3.49%

US dollar bank loan 3.55% 3.14%
══════════ ══════════

The exposure to the long term bank loans to interest rate changes and the contractual repricing
dates are as follows:

2018 2017
HK$ HK$

1 month or less 1,461,280,995 127,856,508

1 to 3 months - 990,486,376
────────── ──────────
1,461,280,995 1,118,342,884
══════════ ══════════

^
The carrying amounts of the long term bank loans approximated their fair values as at 31st
December 2018 and 2017. The fair values are based on cash flows discounted using a rate based on
the borrowing rate in the range of 4.24% to 4.52% (2017: 3.13% to 3.49%) per annum.

The carrying amounts of the long term bank loans are denominated in the following currencies:

2018 2017
HK$ HK$

HK dollar 1,335,150,000 992,036,548

US dollar 126,130,995 126,306,336
────────── ──────────
1,461,280,995 1,118,342,884
══════════ ══════════
^ ^
The long term bank loans are secured by the freehold land and building in the US (note 6(a)),
investment properties in the US and Hong Kong (note 7(a)) and the rental income thereon.

- 69 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

15 Deferred income tax liabilities

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income taxes relate to the
same fiscal authority.

2018 2017
HK$ HK$

Deferred income tax liabilities

- to be settled after more than 12 months 298,889,774 247,906,286
══════════ ══════════

The movements on the net deferred tax liabilities are as follows:

2018 2017
HK$ HK$

At 1st January 247,906,286 326,183,137

Charged/(credited) to consolidated statement of profit or
loss 50,983,488 (78,276,851)
────────── ──────────
At 31st December 298,889,774 247,906,286
══════════ ══════════

^
At 31st December 2018, the Company’s subsidiaries in Hong Kong had unrecognised tax losses of ^
HK$[ ] (2017: HK$28,919,000) to carry forward against future taxable income. Such tax losses have
no expiry date.

The movements in deferred income tax assets/(liabilities) (prior to offsetting of balances within the
same taxation jurisdiction) during the year are as follows:

Tax losses
2018 2017
HK$ HK$

At 1st January 70,875,040 87,333,874

Charged to consolidated statement of profit or loss (16,458,834)
────────── ──────────
At 31st December 70,875,040
══════════ ══════════

Revaluation of properties ^
Accelerated tax depreciation
2018 2017 2018 2017
HK$ HK$ HK$ HK$

At 1st January (137,512,116) (208,528,440) (181,269,210) (204,988,571)

Charged to consolidated
statement of profit or loss 71,016,324 23,719,361
────────── ────────── ────────── ──────────
At 31st December (137,512,116) (181,269,210)
══════════ ══════════ ══════════ ══════════

^ ^

- 70 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

16 Creditors and accruals

2018 2017
HK$ HK$

Trade creditors 6,410,147 6,941,430

Other creditors 9,699,187 13,412,381
Accruals 19,634,501 29,581,830
────────── ──────────
35,743,835 49,935,641
══════════ ══════════

^ ^
At 31st December 2017, the ageing analysis of the trade creditors was as follows:

2018 2017
HK$ HK$

0 – 30 days 6,048,591 6,896,346

31 - 60 days 258,152 3,642
61 – 90 days - 2,016
Over 90 days 103,404 39,426
────────── ──────────
6,410,147 6,941,430
══════════ ══════════
^ ^
The carrying amounts of creditors and accruals approximated their fair values as at 31st December
2018 and 2017.

Included in the trade creditors, other creditors and accruals are the following amounts denominated
in a currency other than the functional currency of the Company:

2018 2017
HK$ HK$

US dollar 17,319,502 5,556,931

══════════ ══════════

17 Short term bank loans and bank overdrafts

Certain short term bank loans in the amount of HK$ 105,000,000 (at 31st December 2017:
HK$ 134,991,250) are unsecured.

The effective interest rates per annum at the end of reporting period were as follows:

2018 2017
HK$ HK$

Short term bank loans 3.82% - 4.44% 2.58% - 3.6%

Bank overdrafts 5.13% -
═══════════ ═══════════

- 71 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

17 Short term bank loans and bank overdrafts– secured (Continued)

The exposure to the short term bank loans to interest rate changes and the contractual repricing
dates are as follows:

2018 2017
HK$ HK$

1 month or less 382,000,000 100,000,000

1 to 3 months - 245,991,250
────────── ──────────
382,000,000 345,991,250
══════════ ══════════
^
The carrying amounts of the short term bank loans and bank overdrafts approximated their fair
values as at 31st December 2018 and 2017.

Certain short term bank loans and bank overdrafts are secured by certain investment properties
(note 7(a)) in Hong Kong and the rental income thereon. All the short term bank loans are
denominated in Hong Kong dollar.

18 Cost and expenses

2018 2017
HK$ HK$

Auditors’ remuneration
- audit services 2,757,700 2,659,887
- non-audit services 653,800 597,633
Bad debts written off 151,772 -
Depreciation 18,019,617 17,837,742
Outgoings in respect of
- investment properties 47,023,614 46,716,175
- properties for sale 8,584,156 7,518,445
- property related services 18,866,543 13,817,896
- property, plant and equipment 2,526,404 2,421,904
- hotel operations 10,119,992 10,688,542
- catering operations - 7,105,996
Operating lease rental for office premises to a related
company (note) 4,488,000 3,803,484
Employee benefit expense (note 20) [] 92,780,888
Others [] 10,664,019
────────── ──────────
Total cost of sales, administrative expenses and other
operating expenses 218,319,395 216,612,611
113,191,598 ══════════ ══════════

Note:
^
The transaction was entered with a company with common key management personnel and
based on prices and terms as agreed between the parties involved.

- 72 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

19 Other gains, net

2018 2017
HK$ HK$

Dividend income from available-for-sale financial assets 3,432,909 5,742,769

Loss on disposal of property, plant and equipment, net (184,340) (206,642)
Gain on disposal of available-for-sale financial assets - 4,772,783
────────── ──────────
3,248,569 10,308,910
══════════ ══════════

20 Employee benefit expense (including directors’ emoluments)

^ ^
2018 2017
HK$ HK$

Salaries [] 63,154,223
Housing and other allowances, benefits in kind [] 17,089,237
Bonuses [] 10,885,627
Retirement benefit costs [] 1,651,801
────────── ──────────
[] 92,780,888
══════════ ══════════

(a) Pensions - defined contribution plans ^

There was no forfeited contribution as at 31st December 2018 (2017: Nil). No forfeited
contribution was utilised during the year (2017: Nil).

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year include
[ ] (2017: four) directors whose emoluments are reflected in note 29(a). The emoluments
payable to the remaining [ ] (2017: one) individual during the year are as follows:

2018 2017
HK$ HK$

Salaries [] 4,775,844
Housing and other allowances, benefits in kind [] 1,536,000
Bonuses [] 1,614,176
Retirement benefit costs [] 18,000
────────── ──────────
[] 7,944,020
══════════ ══════════

- 73 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

20 Employee benefit expense (including directors’ emoluments) (Continued)

(b) Five highest paid individuals (Continued)

The emoluments fell with the following bands:

Number of individuals
2018 2017

Emolument bands (in HK$)

HK$7,000,001 - HK$8,000,000 [] 1
────────── ──────────
[] 1
══════════ ══════════

During the year, no emolument was paid by the Group to the directors or the five highest paid
individuals as an inducement to join or upon joining the Group, or as compensation for loss of office.
No directors waived or agreed to waive any emoluments during the year.

(c) Key management remuneration

Remuneration for key management, including amounts paid to the Company’s executive directors
and chief executive, as disclosed in note 29(a), and two (2016: two), senior management and other
member is as follows:

2018 2017
HK$ HK$

Fees [] 100,000
Salaries [] 19,984,405
Housing and other allowances, benefits in kind [] 14,759,635
Bonuses [] 4,642,624
Retirement benefit costs [] 222,211
────────── ──────────
[] 39,708,875
══════════ ══════════

21 Finance income and costs ^

2018 2017
HK$ HK$

Finance income
Interest income from banks 311,667 94,422
----------------- -----------------
Finance costs
Interest expenses on bank loans and overdrafts wholly
repayable within five years (62,417,036) (41,212,192)
Less: Amount capitalised in property under development
and investment property (note 6(c) and note 7(c)) 24,893,868 15,589,478
────────── ──────────
(37,523,168) (25,622,714)
---------------- ----------------

Finance costs, net (37,211,501) (25,528,292)

══════════ ══════════

^ ^
- 74 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

22 Income tax (expense)/credit

Hong Kong profits tax has been provided at the rate of 16.5% (2017: 16.5%) on the estimated
assessable profits for the year. Except for the minimum United States state tax which has been paid
during the year, no overseas taxation (2017: Nil) has been provided as there is no estimated taxable
profit for the overseas subsidiaries for the year.

The amount of income tax (charged)/credited to the consolidated statement of profit or loss
represents:

2018 2017
HK$ HK$

Current income tax

- Hong Kong profits tax (4,106,755) (4,019,190)
- overseas taxation (13,260) (14,318)
────────── ──────────
(4,120,015) (4,033,508)
Deferred income tax (expense)/credit (50,983,488) 78,276,851
────────── ──────────
(55,103,503) 74,243,343
Over provisions in prior years from current income tax 464,415 299,504
────────── ──────────
(54,639,088) 74,542,847
══════════ ══════════

^ ^
The tax on the Group’s profit before income tax differs from the theoretical amount that would arise
using the taxation rate of Hong Kong where the Company operates and the difference is set out as
follows:

2018 2017
HK$ HK$

Profit before income tax 566,332,586 442,950,416

══════════ ══════════

Calculated at a taxation rate of 16.5% (2017: 16.5%) (93,444,877) (73,086,819)

Income not subject to tax 59,641,790 76,056,509
Expenses not deductible for tax purposes (835,340) (5,870,086)
Effect of different taxation rates in other countries (17,355,630) 2,919,125
Tax reduction in US - 71,004,450
Over provision in prior years 464,415 299,504
Others (3,109,446) 3,220,164
────────── ──────────
Income tax (expense)/credit (54,639,088) 74,542,847
══════════ ══════════

^ ^
There was no income tax relating to components of other comprehensive income for the year ended
31st December 2018 and 2017.

23 Earnings per share

The calculation of basic earnings per share is based on profit attributable to owners of the Company
of HK$492,802,815 (2017: HK$502,055,056) and on 287,669,676 (2017: 287,669,676) ordinary
shares in issue during the year.

As there are no dilutive potential ordinary shares as at 31st December 2018 and 2017, the diluted
earnings per share is equal to the basic earnings per share.

- 75 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

24 Dividends

The interim dividends paid in 2018 and 2017 were HK$28,766,968 (HK10 cents per share) and
HK$23,013,574 (HK8 cents per share) respectively. At a meeting held on 22nd March 2019, the
directors proposed a final dividend of HK[ ] cents per ordinary share. This proposed dividend is not
reflected as a dividend payable in the consolidated financial statements, but will be reflected as an
appropriation of retained profits for the year ending 31st December 2018 upon the approval by the
Company’s shareholders.

2018 2017
HK$ HK$

Interim, paid, of HK10 cents (2017: HK8 cents) per

ordinary share 28,766,968 23,013,574
Final, proposed, of HK[ ] cents (2017: HK8 cents) per
ordinary share [] 23,013,574
────────── ──────────
[] 46,027,148
══════════ ══════════

25 Note to consolidated statement of cash flows ^

(a) Reconciliation of profit before income tax to net cash generated from operations

2018 2017
HK$ HK$

Profit before income tax 566,332,586 442,950,416

Finance income (311,667) (94,422)
Finance costs 37,523,168 25,622,714
Depreciation 18,019,617 17,837,742
Bad debts written off 151,772 -
Fair value gains on investment properties (466,253,152) (391,152,143)
Loss on disposal of property, plant and equipment, net 184,340 206,642
Gain on disposal of available-for-sale financial assets - (4,772,783)
Dividend income (3,432,909) (5,742,769)
────────── ──────────
Operating profit before working capital changes 152,213,755 84,855,397
Increase in properties for sale (1,495,430) -
Decrease/(increase) in inventory 49,913 (18,197)
Increase/(decrease) in debtors and prepayments (4,294,568) (23,412,491)
(Decrease)/increase in rental and other deposits (1,019,372) 12,209,578
Increase/(decrease) in creditors and accruals 744,543 (3,515,024)
────────── ──────────
Net cash generated from operations 146,198,841 70,119,263
══════════ ══════════

(b) Bank loans reconciliation ^ ^

During the year, movement of bank loans represented net cash inflow of HK$375,807,955 (2017:
HK$323,457,948) and bank loan origination fee amortised of HK$[ ] (2017: HK$2,613,617).

- 76 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

26 Financial guarantees

At 31st December 2018, the Company had provided guarantees to bankers for credit facilities
granted to subsidiaries of which HK$1,654,838,452 (2017: HK$1,239,500,000) were utilised as at
31st December 2018.

27 Commitments

(a) Capital commitments

At 31st December 2018, the Group had capital commitments as follows:

2018 2017
HK$ HK$

Contracted but not provided for

- investment properties 66,352,000 129,851,000
- investment property under development - 5,998,000
- property, plant and equipment 3,010,000 90,000
- property under development 328,747,000 462,012,000
────────── ──────────
398,109,000 597,951,000
══════════ ══════════

(b) Commitments under operating leases ^ ^

At 31st December 2018, the future aggregate minimum lease payments under non-cancellable
operating leases are as follows:

2018 2017
HK$ HK$

Land and buildings

Not later than one year 825,000 3,960,000

Later than one year but not later than five years - 825,000
────────── ──────────
825,000 4,785,000
══════════ ══════════

- 77 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

28 Statement of financial position and reserve movement of the Company

Statement of financial position of the Company as at 31st December 2018

2018 2017
HK$ HK$

Non-current assets
Property, plant and equipment 945,396 1,361,278
Investment properties 587,000,000 580,000,000
Subsidiaries 503,567,449 502,268,200
─────────── ───────────
1,091,512,845 1,083,629,478
------------------ ------------------
Current assets
Debtors and prepayments ^
4,311,784 ^
4,614,041
Amounts due from subsidiaries 655,535,172 645,738,543
Cash and cash equivalents 4,831,541 6,380,269
─────────── ───────────
664,678,497 656,732,853
------------------ ------------------

Total assets ^
1,756,191,342 ^
1,740,362,331
═══════════ ═══════════

Equity and liabilities ^ ^

Equity attributable to owners of the Company
Share capital 417,321,278 417,321,278
Reserves (note (a)) 1,075,522,907 1,064,125,692
─────────── ───────────
Total equity 1,492,844,185 1,481,446,970
------------------ ------------------

Current liabilities ^ ^
Rental and other deposits 3,566,200 3,843,400
Creditors and accruals 5,318,995 5,688,258
Short term bank loan 70,000,000 100,000,000
Amounts due to subsidiaries 184,461,962 149,383,703
─────────── ───────────
263,347,157 258,915,361
------------------ ------------------

Total equity and liabilities ^ ^

1,756,191,342
1,740,362,331
═══════════
═══════════

The statement of financial position of the Company was approved by^the board of directors
^ on
22nd March 2019 and were signed on its behalf

.................................... ...................................
William Ma Ching Wai Alfred Ma Ching Kuen
Director Director

- 78 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

28 Statement of financial position and reserve movement of the Company (Continued)

Note (a): Reserve movement of the Company

Retained
profits
HK$

At 1st January 2018 1,064,125,692

Total comprehensive income for the year

Profit for the year 63,177,757

Transaction with owners

Dividends paid
2017 final dividend (note 24) (23,013,574)
2018 interim dividend (note 24) (28,766,968)
───────────
At 31st December 2018 1,075,522,907
═══════════

Representing: ^
Reserves [1,075,522,907]
2018 final dividend proposed (note 24) [-]
───────────
[1,075,522,907]
═══════════

- 79 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

28 Statement of financial position and reserve movement of the Company (Continued)

Note (a): Reserve movement of the Company (Continued)

Investment
revaluation Retained
reserve profits Total
HK$ HK$ HK$

At 1st January 2017 157,207

------------------
1,087,245,951
------------------
1,087,403,158
------------------
<
Comprehensive income
Loss for the year - 17,153,496 17,153,496
------------------ ------------------ ------------------
Other comprehensive income
Fair value loss on available-for-sale
financial asset 7,245 - 7,245
Recycle to profit or loss upon disposal of
available-for-sale financial assets (164,452) - (164,452)
─────────── ─────────── ───────────
Total comprehensive income for
the year (157,207)
------------------
17,153,496
------------------
16,996,289
------------------
<
Transaction with owners
Dividends paid
2016 final dividend (note 24) - (17,260,181) (17,260,181)
2017 interim dividend (note 24) - (23,013,574) (23,013,574)
------------------ ------------------ ------------------
At 31st December 2017 - 1,064,125,692 1,064,125,692
═══════════ ═══════════ ═══════════

Representing:
Reserves -
^
1,041,112,118
^
1,041,112,118
2017 final dividend proposed (note 24) - 23,013,574 23,013,574
─────────── ─────────── ───────────
- 1,064,125,692 1,064,125,692
═══════════ ═══════════ ═══════════

^ ^

- 80 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

29 Benefits and interests of directors

(a) Directors’ and chief executive’s emoluments

The remuneration of every director and the chief executive is set out below:

For the year ended 31st December 2018

Emoluments paid or receivable in respect of a person’s services as a director, whether of

the Company or its subsidiaries undertaking

Fees Salaries Discretionary Housing Employer’s Total

bonuses and other contribution to a
allowances, retirement
benefit in kind benefit scheme
HK$ HK$ HK$ HK$ HK$ HK$
Name of director

William Ma Ching Wai (chief executive) [] [] [] [] [] []

Patrick Ma Ching Hang [] [] [] [] [] []
Alfred Ma Ching Kuen [] [] [] [] [] []
Amy Ma Ching Sau [] [] [] [] [] []
Philip Ma Ching Yeung [] [] [] [] [] []
Edward Cheung Wing Yui [] [] [] [] [] []
Kevin Chau Kwok Fun [] [] [] [] [] []
Tan Soo Kiu [] [] [] [] [] []
Yiu Kei Chung [] [] [] [] [] []
──────── ──────── ──────── ──────── ──────── ────────
[] [] [] [] [] []
════════ ════════ ════════ ════════ ════════ ════════

- 81 -
 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

29 Benefits and interests of directors (Continued)

(a) Directors’ and chief executive’s emoluments (Continued)

For the year ended 31st December 2017

Emoluments paid or receivable in respect of a person’s services as a director, whether of

the Company or its subsidiaries undertaking

Fees Salaries Discretionary Housing Employer’s Total

bonuses and other contribution to a
allowances, retirement
benefit in kind benefit scheme
HK$ HK$ HK$ HK$ HK$ HK$
Name of director

William Ma Ching Wai 24,000 5,390,880 2,246,200 11,451,637 18,000 19,130,717 <
Patrick Ma Ching Hang 19,000 1,841,400 306,900 - 18,000 2,185,300 <
Alfred Ma Ching Kuen 19,000 925,200 154,200 - 18,000 1,116,400 <
Amy Ma Ching Sau 19,000 2,016,960 436,160 600,000 18,000 3,090,120 <
Philip Ma Ching Yeung 19,000 2,400,000 400,000 2,004,000 18,000 4,841,000 <
Edward Cheung Wing Yui 160,000 - - - - 160,000
Kevin Chau Kwok Fun 160,000 - - - - 160,000
Tan Soo Kiu 160,000 - - - - 160,000
Yiu Kei Chung 160,000 - - - - 160,000
──────── ──────── ──────── ──────── ──────── ────────
740,000 12,574,440 3,543,460 14,055,637 90,000 31,003,537 <
════════ ════════ ════════ ════════ ════════ ════════
Name of chief executive
^ ^ ^ ^ ^ ^
Ted Mok Tak Hung* -
════════
2,510,365
════════
415,164
════════
704,000
════════
8,250
════════
3,637,779
════════ <
* Mr William Ma Ching Wai was appointed the Chief Executive of the Company on 15th June 2017, upon the retirement of Mr Ted Mok Tak Hung.

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 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

29 Benefits and interests of directors (Continued)

(b) Directors’ retirement benefits

No retirement benefits are paid to or receivable by the directors during the year ended 31st
December 2018 (2017: Nil).

(c) Directors’ termination benefits

None of the directors received or will receive any termination benefits during the financial year
(2017: Nil).

(d) Consideration provided to third parties for making available directors’ services

During the financial year ended 31st December 2018, the Company does not pay consideration to
any third parties for making available directors’ services (2017: Nil).

(e) Information about loans, quasi-loans and other dealings in favour of directors,
controlled bodies corporate by and connected entities with such directors

As at 31st December 2018, there are no loans, quasi-loans and other dealing arrangements in favour
of directors, controlled bodies corporate by and connected entities with such directors (2017: Nil).

(f) Directors’ material interests in transactions, arrangements or contracts

Except for the following transaction, no other contracts of significance in relation to the Group’s
business to which the Company or any of its subsidiaries was a party and in which a director of the
Company had a material interest, whether directly or indirectly, subsisted at the end of the year or
at any time during the year.

On 10th April 2017, a new tenancy agreement was entered into between Tai Sang Bank Limited
(“TSB”) as landlord and the Company as tenant for the renewal of the leases of the office premises.
TSB is an associate of Kam Chan & Company, Limited, a company of which, Mr. William Ma Ching
Wai is a substantial shareholder, is indirectly interested in more than 30% of its issued voting share
capital of TSB. The amount paid by the Company to TSB under the tenancy agreements for the year
ended 31st December 2018 was HK$4,488,000 (2017: HK$3,803,484).

The above transaction is also set out in the section headed “Continuing Connected Transaction” on
page [5] of this annual report.

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 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

30 Principal subsidiaries

At 31st December 2018, the Company had the following principal subsidiaries which, in the opinion
of the directors, materially affect the results and/or assets of the Group. Montgomery Lands,
Incorporated, Central Financial Management Company Inc. and Central Financial Management of
Montana LLC are incorporated and operate in the United States of America. All other subsidiaries
are incorporated and operate in Hong Kong.

Percentage of issued shares held

Name By the Company By subsidiary Issued ordinary Principal
company shares activities
2018 2017 2018 2017

Ballington Limited 100 100 - - 1,000 shares e, g

Cambella Limited 100 100 - - 1,000 shares b
Capital Gold Investment Limited - - 100 100 1 share g
Central Financial Management - - 100 100 10,000 shares of i
Company lnc. US$1 each
Central Financial Management - - 100 100 N/A j
of Montana LLC
Chi Ho Investment Company 100 100 - - 100 shares a, g
Limited
China Gateway Emporium 100 100 - - 2 shares l
Limited
East Gold Investment Limited - - 100 100 1 share g
Etrema Company Limited 100 100 - - 1,000 shares a
Glory Gold investment Limited - - 100 100 1 share g
Gold Earth Investment Limited - - 100 100 1 share g
Gold Express Investment - - 100 100 1 share g
Limited
Golden Ocean Corporation 100 100 - - 531,510 shares a, g
Limited
Kam Cheung Investment 75 75 - - 1,200,000 shares a
Company Limited
Kam Chung Industrial Company, 100 100 - - 1,149,430 shares g
Limited
Kam Hang Company Limited 95 95 - - 5,000 shares a
Kam Yiu Company Limited 100 100 - - 73,000 shares b
La Bizplace Limited 100 100 - - 2 shares i, h
Montgomery Enterprises 100 100 - - 1,190,840 shares a, e, g, k
Limited
Montgomery Lands, - - 100 100 20,000 shares of a, e
Incorporated US$1 each
Ocean Gold Investment Limited - - 100 100 1 share g
On Ah Enterprises, Limited 65 65 - - 100,000 shares a
Pentacontinental Land 53.6 53.6 - - 2,000,000 shares a, e
Investment Company Limited
Satvision Limited 100 100 - - 1,000 shares a, g
Silver Focus Investment Limited - - 100 100 1,000 shares e, g
Silver Grand Investment Limited - - 100 100 1,000 shares g
Tai Fung Investment Company 65 65 - - 1,400,000 shares a
Limited
Tai Land Finance Company 100 100 - - 100,000 shares c
Limited

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 TAI SANG LAND DEVELOPMENT LIMITED

NOTES TO THE FINANCIAL STATEMENTS

30 Principal subsidiaries (Continued)

Percentage of issued shares held

By subsidiary Issued ordinary Principal
Name By the Company company shares activities
2018 2017 2018 2017

Tai Sang Cold Storage & 58 58 - - 5,600,000 shares e

Godown Company Limited
Tai Sang Estate Agency 100 100 - - 100,000 shares d, e
Limited
TSE (Floral Villas) Limited - - 100 100 100 shares d
TSE (Kam Yuen Mansion) - - 100 100 1,000 shares d
Limited
TSL Construction and 100 100 - - 2 shares g
Engineering Limited
Welldicker Industrial Limited 100 100 - - 2 shares e
Xin Kuok Investments Limited 100 100 - - 2 shares f

Principal activities:

a = property rental g = property sale

b = property development h = property sub-letting
c = finance i = management service
d = estate management and agency j = motor vehicle holding
e = investment holding k = hotel operation
f = motor vehicle rental l = catering operation

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TAI SANG LAND DEVELOPMENT LIMITED

SCHEDULE OF THE GROUP'S SIGNIFICANT PROPERTIES

AT 31ST DECEMBER 2018

A PROPERTIES FOR INVESTMENT

Appro. Group’s
Description Lot Number Type# G.F.A. interest Lease term
(M2)
Hong Kong
Gateway ts, 8 Cheung Fai Road, Tsing T.Y.T.L. 56 G&I 118,025 100.0% Medium term
Yi Island

Heung Wah Industrial Building A.I.L. 340 I 6,947 95.0% Long term
(portion), 12 Wong Chuk Hang Road,
Aberdeen

Chin Fat Factory Building (portion), 3 K.I.L. 4438 & 4439 I 966 65.0% Medium term
Tsat Po Street, San Po Kong

House of Corona (portion), 50 Hung K.T.I.L. 284 I 699 65.0% Medium term
To Road, Kwun Tong

Kam Yuen Mansion (portion), 3 Old I.L. 646 Sec. A & R 2,034 75% Long term
Peak Road Sec. B

Sea and Sky Court (portion), 92 S.I.L. 8 R 319 100% Long term
Stanley Main Street, Stanley

Mercantile House, 186 & 190 Nathan K.I.L.9735 & 2/70 C 1,078 100% Medium term
Road, Tsim Sha Tsui shares of 8631

Continental Mansion (portion), 294- R.P. of I.L. 7185 R&C 1,078 53.6% Long term
304 King's Road, North Point

Shing Wah Building (portion), 31 K.C.T.L. 232 C 309 100% Medium term
Shing Fong Street, Kwai Chung

Kin Wah Mansion (portion), 176-178 I.L. 3578, 3579 & C 590 100% Long term
Tung Lo Wan Road 3581

Viking Court (portion), 165-166 M.L. 342 & 343 C 585 100% Long term
Connaught Road West, Western
District

Kam Wah Building (portion), 23-25 K.C.T.L. 171 C 262 95% Medium term
Shek Yam Road and 2-14 Shek Yi
Road, Kwai Chung

Floral Villas (portion), Tso Wo Hang, D.D. 252 Lot 314 R&C 4,623 100% Medium term
18 Tso Wo Road, Sai Kung

Overseas
Montgomery Plaza, 456 Montgomery - C 15,638^ 100% Freehold
Street, San Francisco, the United
States of America

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TAI SANG LAND DEVELOPMENT LIMITED

SCHEDULE OF THE GROUP'S SIGNIFICANT PROPERTIES

AT 31ST DECEMBER 2018

B PROPERTIES FOR SALE

Appro. Group’s
Description Lot Number Type# G.F.A. interest
(M2)
Hong Kong
Floral Villas (portion), Tso Wo Hang, 18 Tso Wo Road, Sai D.D.252 Lot 314 R 3,838 100%
Kung

Sheung Wan Tai Sang Commercial Building (Hollywood I.L. 3752 to 3758 C 3,915 100%
Centre) (portion), 77-91 Queen's Road West, Sheung Wan

Kam Wah Building (portion), 23-25 Shek Yam Road and 2- K.C.T.L. 171 C 1,724 100%
14 Shek Yi Road, Kwai Chung

C PROPERTIES FOR HOTEL OPERATION

Appro. Group’s
Description Lot Number Type# G.F.A. interest
(M2)
Hong Kong
Sheung Wan Tai Sang Commercial Building (Hollywood I.L. 3752 to 3758 H [1,945] 100%
Centre) (portion), 77-91 Queen's Road West, Sheung Wan

D PROPERTIES UNDER DEVELOPMENT

Group’s Expected
Description Lot Number Type# Site area interest completion
(M2)
Hong Kong
43 Heung Yip Road, Aberdeen A.I.L. 353 H&C 1,208 100% [2019]

No.20 & No.22 Severn Road, The Peak R.B.L. 1137 R 3,810 100% Planning

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TAI SANG LAND DEVELOPMENT LIMITED

SCHEDULE OF THE GROUP'S SIGNIFICANT PROPERTIES

AT 31ST DECEMBER 2018

F OTHER PROPERTIES

Properties for own operations

Appro. Group’s
Description Lot Number Type# G.F.A. interest Lease term
(M2)
Hong Kong
No.1 Barker Road R.B.L. 810 Q 1,352 100% Medium term

Kam Yuen Mansion (portion), 3 Old I.L. 646 Sec. A & Q 910 75.0% Long term
Peak Road Sec. B

Type#

G : Godown
I : Industrial
R : Residential
C : Commercial
H : Hotel
Q : Quarters for directors/senior management/staff
^ : Net rentable area
G.F.A. : Gross floor area

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TAI SANG LAND DEVELOPMENT LIMITED

FIVE-YEAR FINANCIAL SUMMARY

2014 2015 2016 2017 2018

RESULTS
(HK$ thousand)

Profit attributable to:

- Owners of the Company 620,250 263,268 373,607 502,055 492,803
- Non-controlling interests 11,845 19,481 8,913 15,438 18,890
──────── ──────── ──────── ──────── ────────
632,095 282,749 382,520 517,493 511,693
════════ ════════ ════════ ════════ ════════

Earnings per share HK$2.16 HK$0.92

^
HK$1.30
^
HK$1.75 ^
HK$1.71
════════ ════════ ════════ ════════ ════════

ASSETS AND
LIABILITIES
(HK$ thousand)

Total assets 6,912,414 7,948,880 8,512,750 9,225,691 10,100,576

Total liabilities (1,113,725) (1,376,354) (1,606,843) (1,849,805) (2,272,755)
──────── ──────── ──────── ──────── ────────
Total equity 5,798,689 6,572,526 6,905,907 7,375,886 7,827,821
════════ ════════ ════════ ════════ ════════

^ ^ ^ ^ ^

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