Contents
2 Corporate Profile
3 Corporate Information
4 Chairman's Statement
17 Report of the Directors
37 Report of the Auditors
39 Consolidated Profit and Loss Account
40 Consolidated Balance Sheet
41 Consolidated Cash Flow Statement
43 Company Balance Sheet
44 Notes to Financial Statements
110 Notice of Annual General Meeting
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
Lai Sun Development Company Limited
11/F Lai Sun Commercial Centre
680 Cheung Sha Wan Road
Kowloon, Hong Kong
Tel (852) 2741 0391 Fax (852) 2785 2775
Internet http://www.laisun.com.hk
E-mail [email protected]
1
Lai Sun Development Company Limited (``the Company'') is a member of the
Lai Sun Group which obtained its first listing on the Hong Kong stock exchange
in 1972. The Company is well-diversified with five business areas: property
development, property investment, China property, hotels and strategic
investments. The Company was listed on The Stock Exchange of Hong Kong
Limited in 1988 following a reorganisation of the Group.
* Listed Companies
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
2
Corporate Profile
Place of Incorporation
Hong Kong
Directors
Lim Por Yen (Chairman)
Lam Kin Ngok, Peter
(Deputy Chairman and President)
Lau Shu Yan, Julius
Tong Yuk Lun, Paul
Wu Shiu Kee, Keith
Lam Kin Ming
U Po Chu
Chiu Wai
Shiu Kai Wah
David Tang
Law Man Fai
Secretary and Registered Office
Yeung Kam Hoi
11th Floor
Lai Sun Commercial Centre
680 Cheung Sha Wan Road
Kowloon, Hong Kong
Share Registrars
Tengis Limited
1601 Hutchison House
10 Harcourt Road
Central
Hong Kong
Auditors
Ernst & Young
Certified Public Accountants
15th Floor, Hutchison House
10 Harcourt Road
Central
Hong Kong
Solicitors
Woo, Kwan, Lee & Lo
27th Floor, Jardine House
1 Connaught Place
Central
Hong Kong
Vincent T.K. Cheung, Yap & Co.
15th Floor, Alexandra House
16-20 Chater Road
Central
Hong Kong
Lo & Lo
35th Floor, Gloucester Tower
The Landmark,
Central
Hong Kong
Bankers
Citibank, N.A.
Dao Heng Bank Limited
Hang Seng Bank Limited
Standard Chartered Bank
The Hongkong and Shanghai Banking
Corporation Limited
The Bank of Tokyo-Mitsubishi, Limited
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
3
Corporate Information
Chairman’s Statement
LAI SUN DEVELOPMENT ANNUAL REPORT 1998-99
4
Chairman LIM Por Yen
RESULTS
The Group registered a consolidated net loss attributable to
shareholders of HK$6,832,423,000 for the year ended 31st July,
1999. Basic loss per share was HK$2.26.
The financial year under review witnessed a still difficult
operating environment for the Group despite lower interest rates.
With the consistent priority of cash generation over profitability,
the Group continued to implement an aggressive disposal
program during the period and thus suffered from losses arising
from property sales and disposal of selective long term
investments. In addition, provisions for diminution in the values
of the Group’s properties, notably for the Furama Hotel, together
with significant interest expenses further aggravated the
bottomline.
DIVIDENDS
The Directors do not recommend payment of a dividend for the
current financial year.
BUSINESS REVIEW
After weathering an extremely difficult 1998, the Hong Kong
economy gradually stabilized in 1999 with investor sentiment
and consumer confidence exhibiting mild improvement.
However, deflation remains a major feature of and depressant to
Chairman’s Statement
LAI SUN DEVELOPMENT ANNUAL REPORT 1998-99
5
the economy; as Hong Kong interest rates remain at moderate
single-digit levels, the local economy continued to suffer from an
unprecedented high real interest rate environment. On the
liquidity front, while banks have in general eased credit, the
focus of lending has been very much on residential mortgages.
Trade finance and syndication activities remained sluggish. On
balance, residential property prices, being fueled by ample bank
liquidity, registered a 10%–15% rebound from their lows; in
contrast, capital values for both office and retail properties have
shown virtually no improvement while the industrial sector
recorded further fall in value, albeit subdued.
Under this economic backdrop, the Group continued to place a
strong emphasis on cash generation in order to improve the
overall debt position. Total debt of the Group, excluding Lai Sun
Hotels and Lai Fung Holdings, has fallen by almost 19% to
HK$7.6 billion as of the end of this financial period.
However, this debt reduction was achieved at the heavy expense
of profitability as stated in the interim results announcement. In
addition, a further decline in recurrent rental income, together
with the absence of contributions from both the hotel and China
divisions also affected the bottomline. Together with higher
interest charges, the Group recorded an operating loss before
exceptional items of HK$1,001 million. In addition, the Group
recorded an exceptional loss of HK$5,691 million representing
provisions for diminution in the values of the Group’s property
development landbank and loss on disposal of investments. In
particular, provisions of HK$2,375 million were taken in respect
of the Group’s investments in the Furama Hotel Hong Kong and
Furama Shenyang, and HK$855 million was taken in respect of
the put options relating to the disposal of the Majestic Hotel;
meanwhile, a provision of HK$874 million was also taken in
respect of the Group’s other properties under development. In
addition, a provision of HK$228 million was taken for loss in
relation to the Group’s 50% interest in Sky Connection Limited,
which trades at Chek Lap Kok Airport under the name “Free
Duty”, and a further HK$729 million of exceptional loss was
represented by loss on disposal and provision in respect of long-
term listed and unlisted investments.
Chairman’s Statement
LAI SUN DEVELOPMENT ANNUAL REPORT 1998-99
6
Property Investment
Notwithstanding the depressed state of the leasing market, the
Group’s 3.1 million sq.ft. investment property portfolio generated
gross rental and related income of HK$607 million for the year,
representing a drop of 23% from the previous year. Overall
vacancy rates continued to stay at single digit levels thanks to the
resilient commercial and office portfolio; in contrast, the
industrial properties registered further decline in rentals and
occupancy during the period under review. On a breakdown by
type basis, rental revenues derived from office and retail spaces
represented approximately 84% of total, with industrial making
up the balance.
Apart from softened demand conditions, the Group’s decline in
rental was also attributable to the disposal of the Carnarvon
Plaza which alone contributed HK$61 million in the previous
financial year. Looking ahead, it is the Group’s consistent
strategy to review the portfolio in terms of location, tenant mix
and rental prospects from time to time, and decide on whether
further disposals of non-core investment properties will be
appropriate.
Property Development in Hong Kong
Property sales
With the absence of major property disposals during the year
under review, total sales turnover, including the attributable
share of that of the associated companies, more than halved from
the previous year to HK$1,265 million. Some of the key disposal
items are as follows:
Group Attributable
Location Type Interest GFA (sq.ft.)
The Panorama Residential/ 50.0% 154,699
520–526 Castle Peak Road Commercial
Tsuen Wan
New Territories
Hong Kong
Tycoon Place Residential 33.3% 68,327
38 Lo Fai Road
TPTL 119, Area 30
Tai Po, New Territories
Hong Kong
Chairman’s Statement
LAI SUN DEVELOPMENT ANNUAL REPORT 1998-99
8
Group Attributable
Location Type Interest GFA (sq.ft.)
283–297 Shun Ning Road Residential 100.0% 69,285
Kowloon
Hong Kong
Various Lots in DD244 Agricultural 100.0% N.A.
Ho Chung land
Sai Kung
New Territories
Hong Kong
Various Lots in DD106 Agricultural 100.0% N.A.
Kam Sheung Road land
Yuen Long
New Territories
Hong Kong
The size of the Group’s landbank remained at around 1.6 million
sq.ft. On a breakdown by type basis, approximately 80% is
earmarked for residential use, while commercial and industrial
projects constitute the remainder. Looking ahead, in tandem with
the ongoing infrastructural developments in both the New
Territories and traditional industrial areas such as Cheung Sha
Wan, the Group will continue to put emphasis on applications
for plot ratio relaxation and re-zoning of our agricultural land
reserves and selective industrial properties. These activities, if
successful, will enable the Group to expand its landbank and
give greater flexibility when determining development options.
Furama Hotel, Hong Kong
The wholly-owned Furama Hotel, Hong Kong (“Furama Hotel”)
continued to provide meaningful contribution to the Group
despite the sluggish state of the hotel sector. Average occupancy
during the period was around 70% while average room rate
exhibited a 25% retreat to HK$912. Looking ahead, the
likelihood of steady room rates together with implementation of
efficiency enhancement measures is expected to help improve the
earnings prospects of this prime hotel property.
Chairman’s Statement
LAI SUN DEVELOPMENT ANNUAL REPORT 1998-99
9
As highlighted in the interim results, the Group announced the
plan to redevelop the Furama Hotel into a composite office, retail
and hotel complex and has agreed to dispose of the retail and hotel
portion of the redeveloped complex to its subsidiary Lai Sun
Hotels International Limited (“LSHIL”) for a consideration of
HK$1,900 million. The proposal was approved by the independent
shareholders of both companies on 22nd March, 1999. This
redevelopment plan is consistent with the Group’s stated intention
of unlocking the synergistic value through an alliance with the
adjacent Ritz-Carlton Hotel in which LSHIL has a 65% interest.
Lai Fung Holdings
Strategic partnership with Sun Chung Estate
It has been a year of consolidation for the Group’s 74.49%-owned
subsidiary Lai Fung Holdings Limited (“Lai Fung”) as the overall
property market in the PRC underwent downward adjustment,
varying in severity between sectors. For Lai Fung, the
profitability was affected adversely by a substantial gap in
development earnings as well as a shortfall in actual rentals vis-à-
vis the rental guarantee granted to buyers of the Hong Kong
Plaza service apartments.
From a strategic perspective, however, the Company achieved a
strengthened alliance with Sun Chung Estate Company, Limited
(“Sun Chung”), a property investment arm and wholly-owned
subsidiary of the Bank of China. In April 1999, the Group
granted a call option to Sun Chung whereby the latter has been
offered the right to purchase up to 230,000,000 existing shares in
the issued share capital of Lai Fung at the price of $0.65 per
share. In June 1999, Lai Fung completed a HK$600 million
convertible note issue to Sun Chung, with the majority of the
proceeds raised being utilized to purchase 181 units of Hong
Kong Plaza service apartments from LSHIL.
Sun Chung has been a strategic shareholder of Lai Fung since its
flotation in November 1997 and the Group strongly believes that
this strategic tie will prove beneficial, both in terms of funding
requirements and future acquisitions. In the meantime, the
service apartments’ re-purchase, which removed the rental
guarantee burden, will also enhance earnings.
Chairman’s Statement
LAI SUN DEVELOPMENT ANNUAL REPORT 1998-99
10
For the coming year, Lai Fung will focus on the completion and
disposal of the Eastern Place Phase II which has already been
50% pre-sold, as well as further improving the occupancy of the
Hong Kong Plaza. As of year-end, the average occupancy rate for
the commercial complex comfortably exceeded 60%. Finally,
construction activities are progressing satisfactorily for the New
Trend Plaza, the flagship Ginza-type project located on
Zhongshanwu Road and atop of the strategic Gongyuanqian Mass
Transit Station. Management expects the project to be
substantially completed by early 2002.
Lai Sun Hotels
Performance of the hotel division, principally operated through
the 52.17% subsidiary LSHIL, was mixed during the period. On
the operating level, the 65%-owned Ritz-Carlton Hotel achieved
an average occupancy rate of 63% versus 55% in the preceding
corresponding period, while average daily rate (“ADR”) exhibited
a year-on-year drop of 14% to HK$1,375. In contrast, the
buoyant state of the US hospitality sector continued to help
support the performance of the 25%-owned Regent Beverly
Wilshire Hotel; both average occupancy and ADR were stable at
66.9% and US$323 respectively.
In March 1999, LSHIL completed the disposal of the Four
Seasons Hotel, New York for a total consideration of US$265
million in which LSHIL had an attributable interest of 49.995%.
The exceptional gain, however, was largely offset by the losses
resulted from the disposal of “The Lions” — a residential
development project in Vancouver in May 1999, and the disposal
of the Hong Kong Plaza service apartments for HK$475 million
in June 1999. Finally, LSHIL has made a provision for the loss
arising from the disposal of the Delta Whistler Resort, Canada, a
transaction which was completed in August 1999.
Despite losses being incurred, these disposal activities have
generated substantial liquidity for the Company, thus allowing it
to focus on opportunities in Asia-Pacific where asset prices
remain attractive.
Chairman’s Statement
LAI SUN DEVELOPMENT ANNUAL REPORT 1998-99
12
Strategic Investments
The Group’s investments in the television and telecommunication
sectors, while incurring minor losses at the operating level, have
further consolidated their presence in their respective markets.
Asia Television Limited (“ATV”) in which the Group has an 16.7%
interest, recorded an encouraging viewership improvement during
the financial period. Meanwhile, the Group’s 15% stake in
Mandarin Communications Limited (“MCL”) which operates
under the successful brandname “Sunday”, continued to exhibit its
competitiveness amidst the stiffening competition in the mobile
phone market. Given the prevailing bullish sentiment toward high
tech ventures, these strategic investments, in our view, will in due
course add tangible value to the Group.
Elsewhere, flat tourism growth together with initial operational
disruption at the new Chek Lap Kok Airport have cost dearly for
Sky Connection Limited, the Group’s 50%-owned liquor and
tobacco duty-free operator which trades under the name “Free
Duty”. As mentioned earlier, adequate provision in respect of the
business has already been made. Looking ahead, the prospects of
the business will be dependent on strong tourism recovery, and
the potential of securing the arrival duty-free operation in order
to achieve better economies of scale.
PROSPECTS
While it is consensus view that the Hong Kong economy is
gradually emerging from recession, in view of the currency peg
with the US dollar and still high labour costs, the territory’s
competitive advantage relative to its Asian peers remains in
question. Furthermore, the likelihood of prolonged deflation
implies that Hong Kong will continue to suffer from a high real
interest rate environment, which in turn will continue to depress
both consumption and investment sentiment.
Chairman’s Statement
LAI SUN DEVELOPMENT ANNUAL REPORT 1998-99
14
It is on this basis that the Group remains cautious over the short
term prospects for the overall property market. On the property
investment front, while further rental downturn appears unlikely,
upside potential is also constrained by limited demand and still
ample supply. Nonetheless, the Group’s diversified and well
located investment property portfolio is expected to be able to
maintain high occupancies and generate steady recurrent rental
income for the coming year. Projects earmarked for pre-sale in
Hong Kong for the year ending 31st July, 2000 are as follows:
Group Attributable
Location Type Interest GFA (sq.ft.)
DD105 Residential 50% 11,625
Ngau Tam Mei
Yuen Long
(Phase I)
New Territories
Hong Kong
The Waterfront Residential 10% 158,836
1 Austin Road West
Tsim Sha Tsui
Kowloon
Hong Kong
488 Jaffe Court Residential/ 100% 15,713
486–488 Jaffe Road Commercial
Causeway Bay
Hong Kong
51–53 Station Lane and Residential/ 100% 28,964
84–86 Wuhu Street Commercial
Kowloon
Hong Kong
789 Cheung Sha Wan Road Industrial/ 100% 158,155
Kowloon Office
Hong Kong
Chairman’s Statement
LAI SUN DEVELOPMENT ANNUAL REPORT 1998-99
15
Overall, I am reasonably sanguine over the medium term
prospects of the local property market. In particular, a “gap” in
supply across all sectors is evident due to previous land sales
suspension and developers’ prudence in expanding their
respective landbanks. This, together with a resurgence in take-up
as the economy further recovers, is likely to bring about
reasonable appreciation in capital values. Under this medium
term projection, it is optimal for the Group to retain to its core
property portfolio so as to benefit from this uptrend and
therefore create more shareholder value.
Similarly, despite the short term market uncertainty, the Group’s
intention to proceed with redeveloping the Furama Hotel
remains unchanged. This key project would enable the Group to
fully capitalize on the medium term cyclical upswing, thus
further strengthening the Group’s financial position and asset
backing.
I am guardedly optimistic over developments in China, which is
poised to achieve a 7% GDP growth for the current year, an
enviable achievement by world standards. Looking ahead, the
likelihood of procuring WTO status together with the central
Government’s firm intention to reflate the economy will spur
economic growth. This, coupled with a steadily declining interest
rates should bode well for low-cost housing projects.
With a firm financial footing and a strong residential landbank,
Lai Fung is well positioned to capitalize on this evolving trend.
In addition, exploring future investment opportunities, jointly
with the Bank of China Group should prove beneficial given the
latter’s strong presence in China. I am confident that the
company will be able to provide a stronger contribution to the
Group in the years ahead.
The road of recovery for the Asian hospitality sector is expected
to remain uncertain despite a more stable economic environment.
Stringent cost control and enhanced productivity will be
imperative to generate organic growth, while a firm balance sheet
footing will be necessary for expansion via acquisitions.
Management will adopt these operating principles as the basis for
the Company’s strategy going forward, aspiring to capitalize on
the improving economic conditions in a proactive and prudent
manner.
Chairman’s Statement
LAI SUN DEVELOPMENT ANNUAL REPORT 1998-99
16
At the time of writing, certain principal lending banks have
indicated their support in principle to grant waivers in respect of
the Group’s failure to maintain loan covenants and, in addition,
to defer repayment of amounts totalling approximately HK$3,545
million to 31st December 2002, subject to all other lending
banks and bondholders also agreeing to a similar repayment
deferral. Discussions with other banks are already underway,
while the convening of bondholders’ meetings will take place as
soon as practicable. The Group is confident that satisfactory
arrangements with all creditor groups will be agreed, which in
turn will give time for the Group, as referred to above, to
reorganize its property portfolio through the disposal of non-core
assets as the basis for it to take advantage of an anticipated
upturn of the Hong Kong property market over the next few
years.
This has been a difficult year for the Group, and I would like to
take this opportunity to thank the shareholders of the Company
for their support to the Group. At the same time, my token of
appreciation also goes to fellow Board colleagues and all staff
members of the Group for their hardwork and contribution
during the year.
Lim Por Yen
Chairman
Hong Kong
12th November, 1999
The directors herein present their report and the audited financial statements of the Company and its
subsidiaries (the `̀ Group'') for the year ended 31st July, 1999.
P R I N C I P A L A C T I V I T I E S
The Company's principal activities have not changed during the year and consisted of property development
for sale, property investment for rental purposes and investment holding.
The Group's principal activities have not changed during the year and consisted of property development for
sale, property investment for rental purposes, investment in and operations of hotels and restaurants and
investment holding.
S E G M E N T E D I N F O R M A T I O N
An analysis of Group turnover and contribution/(absorption) to operating loss by activity and geographical
area for the year ended 31st July, 1999 is as follows:
Turnover
Contribution/
(absorption)
HK$'000 HK$'000
By activity:
Property development and sale of properties 552,318 (5,489,824)
Property rentals 649,321 65,065
Long term investments Ð (729,364)
Hotel, restaurant and other operations 550,454 (537,950)
1,752,093 (6,692,073)
By geographical area:
Hong Kong 1,381,291 (5,316,293)
People's Republic of China (`̀ PRC''), excluding Hong Kong 186,206 (424,374)
Canada 83,768 (404,876)
Others 100,828 (546,530)
1,752,093 (6,692,073)
R E S U L T S A N D D I V I D E N D S
The Group's loss for the year ended 31st July, 1999 and the state of affairs of the Company and the Group as
at that date are set out in the financial statements on pages 39 to 109.
The directors do not recommend the payment of a final ordinary dividend for the year ended 31st July,
1999.
No interim ordinary dividend had been paid by the Company for the year.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
17
Report of the Directors
D I R E C T O R S
The directors of the Company who were in office during the year and those at the date of this report are as
follows:
Lim Por Yen (Chairman)
Lam Kin Ngok, Peter (Deputy Chairman and President)
Lau Shu Yan, Julius
Tong Yuk Lun, Paul
Wu Shiu Kee, Keith
Lam Kin Ming
Cheung Wing Sum, Ambrose (resigned on 11th October, 1999)
U Po Chu
Chiu Wai
Shiu Kai Wah
David Tang*
Law Man Fai*
* Independent Non-Executive Directors
In accordance with Article 102 of the Company's Articles of Association, Mr. Lau Shu Yan, Julius, Madam U
Po Chu, Mr. Chiu Wai and Mr. Shiu Kai Wah retire by rotation at the forthcoming Annual General Meeting
and, being eligible, offer themselves for re-election at the said meeting.
D I R E C T O R S ' S E R V I C E C O N T R A C T S
None of the directors proposed for re-election at the forthcoming Annual General Meeting has a service
contract with the Company and/or any of its subsidiaries, which is not determinable by the employing
company within one year without payment of compensation other than that of a statutory nature.
D I R E C T O R S ' I N T E R E S T S I N C O N T R A C T S
Save as disclosed in note 16 to the financial statements, no director had a beneficial interest in any contract
of significance to the business of the Group to which the Company, its holding company, any of its
subsidiaries or fellow subsidiaries was a party during the year.
C O N N E C T E D T R A N S A C T I O N S
The Group has conducted certain connected transactions (the ``Connected Transactions'') the details of
which are included in notes 15, 16, 35 and 37 to the financial statements. The Connected Transactions have
been approved by the Company's directors.
In the opinion of the Company's directors, the Connected Transactions have been entered into by the
Group:
(a) in the ordinary and usual course of its business;
(b) on normal commercial terms and on arm's length basis;
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
18
Report of the Directors
C O N N E C T E D T R A N S A C T I O N S ( c o n t i n u e d )
(c) where there are agreements governing such transactions, the transactions have been carried out in
accordance with the terms of the agreements governing such transactions, or if there are no such
agreements, the transactions have been entered into on terms no less favourable than terms available to
or from independent third parties; and
(d) on terms that are fair and reasonable so far as the shareholders of the Company are concerned.
B I O G R A P H I C A L D E T A I L S O F D I R E C T O R S A N D S E N I O R M A N A G E M E N T
Directors
Executive Directors
Mr. Lim Por Yen, Chairman, aged 84, is the founder of the Lai Sun Group. He has been an executive director
of the Company since June 1959. He is also the chairman and managing director of Lai Sun Garment
(International) Limited (`̀ LSG''), the chairman of Crocodile Garments Limited and an executive director of
Lai Sun Hotels International Limited. LSG is the ultimate holding company of the Company. Mr. Lim first
became involved in the property and investment business in the mid-1950's and has over 59 years'
experience in the garment business. He is an honorary citizen of the city of Guangzhou, the city of Swatow,
the city of Xiamen and the city of Zhong Shan. Mr. Lim was also one of the Hong Kong Affairs Advisers to
the People's Republic of China and is a founder member of The Better Hong Kong Foundation.
Mr. Lam Kin Ngok, Peter, Deputy Chairman and President, aged 42, has been an executive director of the
Company since June 1977. He is also the deputy chairman of Lai Sun Garment (International) Limited
(``LSG''), the chairman of Lai Sun Hotels International Limited and Lai Fung Holdings Limited and, an
executive director of Crocodile Garments Limited. LSG is the ultimate holding company of the Company.
Mr. Lam has extensive experience in property and investment business. He is a director of the Real Estate
Developers Association of Hong Kong, a member of the Hong Kong Hotel Owners Association and a council
member of the Anglo Hong Kong Trust. Mr. Lam is a son of Mr. Lim Por Yen and is the younger brother of
Mr. Lam Kin Ming.
Mr. Lau Shu Yan, Julius, aged 43, joined the Company as an executive director in July 1991. Mr. Lau has
over 10 years of experience in the property and securities industries holding senior management positions.
Prior to his current appointment, he had been a director of Jones Lang Wootton Limited and subsequently
Jardine Fleming Broking Limited. Mr Lau is a director and a member of the Executive Committee of Real
Estate Developers Association of Hong Kong.
Dr. Tong Yuk Lun, Paul, aged 58, was appointed as an executive director of the Company in October 1997
and was also appointed as the vice chairman of Lai Fung Holdings Limited in June 1999. Prior to Dr. Tong's
current appointments, he was an executive director and the chief executive officer of Pacific Century
Regional Developments Ltd. for the period from January 1995 to September 1997. From 1978 to 1994, Dr.
Tong was employed by the New World Group. He had been an executive director of Hip Hing Construction
Co., Ltd. and the general manager of New World Development Co., Ltd. Dr. Tong holds B.Sc., M.Sc. and
Ph.D. degrees and has extensive experience in civil, structural and geotechnical engineering. He is a member
of Institution of Civil Engineers, London and Hong Kong Institution of Engineers and has also worked with
British and Hong Kong engineering consulting firms.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
19
Report of the Directors
B I O G R A P H I C A L D E T A I L S O F D I R E C T O R S A N D S E N I O R M A N A G E M E N T
( c o n t i n u e d )
Directors (continued)
Executive Directors (continued)
Mr. Wu Shiu Kee, Keith, aged 36, joined the Lai Sun Group in November 1997 and was appointed as an
executive director of the Company on 1st January, 1998. He has over 12 years' experience in investment
research and asset management. Prior to his appointment with the Lai Sun Group in 1997, Mr. Wu served as
a director and head of Hong Kong/ China Research for Peregrine Brokerage Limited. He holds a Bachelor in
Science degree from the University of Toronto and a Master in Science degree from Stanford University.
Non-Executive Directors
Mr. Lam Kin Ming, aged 62, has been a director of the Company since June 1959. Mr. Lam is also the deputy
chairman of both Crocodile Garments Limited and Lai Sun Garment (International) Limited (`̀ LSG''). He is
an executive director of Lai Fung Holdings Limited and a non-executive director of Lai Sun Hotels
International Limited. LSG is the ultimate holding company of the Company. Mr. Lam has been involved in
the day-to-day management of the garment business since 1958 and is the son of Mr. Lim Por Yen and the
elder brother of Mr. Lam Kin Ngok, Peter.
Madam U Po Chu, aged 74, has been a director of the Company since December 1993. She is also a non-
executive director of Lai Sun Garment (International) Limited (``LSG''), Lai Sun Hotels International Limited
and Crocodile Garments Limited. LSG is the ultimate holding company of the Company. Madam U has over
50 years' experience in the garment manufacturing business and had been involved in the printing business
in the mid-1960's. In the early 1970's, she started to expand the business to fabric bleaching and dyeing,
and became involved in property development and investment in the late 1980's. She is Mr. Lim Por Yen's
wife.
Mr. Chiu Wai, aged 68, has been a director of the Company since December 1993. Mr. Chiu is also an
executive director of Lai Sun Garment (International) Limited (``LSG'') and a non-executive director of Lai
Sun Hotels International Limited and Crocodile Garments Limited. LSG is the ultimate holding company of
the Company. Mr. Chiu has over 40 years' experience in production management and is responsible for the
operation and administration of the garment business of LSG. He has been working for the Lai Sun Group's
garment business since 1955.
Mr. Shiu Kai Wah, aged 67, has been a director of the Company since December 1993. He is also an
executive director of Lai Sun Garment (International) Limited (``LSG'') and a non-executive director of Lai
Sun Hotels International Limited and Crocodile Garments Limited. LSG is the ultimate holding company of
the Company. Mr. Shiu has over 28 years' experience in the management of garment business.
Mr. David Tang, aged 45, is an independent non-executive director of the Company. He is the founder of
The China Clubs in Hong Kong and Peking, Shanghai Tang Stores and The Pacific Cigar Company Ltd. He is
also a director of First Pacific Company Ltd. and FPB Bank Holdings Ltd. In community service, he is the
chairman of The Hong Kong Cancer Fund and president of the Hong Kong Down Syndrome Association. He
holds an Honours Degree in Philosophy and Logic. In 1983/84, he taught at Peking University.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
20
Report of the Directors
B I O G R A P H I C A L D E T A I L S O F D I R E C T O R S A N D S E N I O R M A N A G E M E N T
( c o n t i n u e d )
Directors (continued)
Non-Executive Directors (continued)
Mr. Law Man Fai, aged 63, is an independent non-executive director of the Company. He had completed his
education specialising in architecture and had served with a reputable local architects firm. He had also
worked for a number of large and well-known local property development companies. He possesses
extensive experience in the building industry.
Senior Management
Miss Nancy S.H. Lin, aged 29, joined the Lai Sun Group as vice president in March 1996. Prior to joining
the Lai Sun Group, Miss Lin was an investment banker at Jardine Fleming Securities Ltd. specializing in
regional transactions.
Mr. Tse Kim Lun, Alan, aged 36, joined the Lai Sun Group in June 1989. Mr. Tse has been the financial
controller of the Company since October 1990. Mr. Tse is a Fellow of the Association of Chartered Certified
Accountants with over 14 years' financial experience.
Mr. Keith Jacobsen, aged 33, joined the Company in May 1996 and is a vice president in the Corporate
Finance Department. He was admitted as a solicitor of Hong Kong in 1992 and previously worked in the
Investment Banking Department of a U.K. securities house before joining the Lai Sun Group.
Mr. Yeung Kam Hoi, aged 50, joined the Company as group company secretary in March 1998. Prior to his
current appointment, Mr Yeung served at various times as the company secretary of a number of listed
companies in Hong Kong for over 10 years. He has been an Associate Member of The Institute of Chartered
Secretaries and Administrators since 1979 and is also an Associate Member of The Hong Kong Institute of
Company Secretaries and a member of Hong Kong Securities Institute.
D I R E C T O R S ' I N T E R E S T S I N S H A R E C A P I T A L O R D E B E N T U R E S
As at 31st July, 1999, the interests of the directors and chief executive of the Company in the equity or debt
securities of the Company and its associated corporations (within the meaning of the Securities (Disclosure
of Interests) Ordinance (the ``SDI Ordinance'')) as recorded in the register required to be kept pursuant to
Section 29 of the SDI Ordinance or as otherwise notified to the Company and The Stock Exchange of Hong
Kong Limited pursuant to the Model Code for Securities Transactions by Directors of Listed Companies (the
`̀ Model Code'') were as follows:
(1) the Company
Ordinary Shares
Number of Shares Held
Personal
Interests
Family
Interests
Corporate
Interests
Other
Interests Total
Lim Por Yen 197,859,550 Nil Nil Nil 197,859,550
Lam Kin Ngok, Peter 10,099,585 Nil Nil Nil 10,099,585
U Po Chu 633,400 Nil Nil Nil 633,400
Chiu Wai 195,500 Nil Nil Nil 195,500
Lau Shu Yan, Julius 1,200,000 Nil Nil Nil 1,200,000
Tong Yuk Lun, Paul 135,000 Nil Nil Nil 135,000
Wu Shiu Kee, Keith 200,000 Nil Nil Nil 200,000
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
21
Report of the Directors
D I R E C T O R S ' I N T E R E S T S I N S H A R E C A P I T A L O R D E B E N T U R E S ( c o n t i n u e d )
(1) the Company (continued)
Note: Lai Sun Garment (International) Limited (`̀ LSG'') and its wholly-owned subsidiary beneficially owned 1,582,869,192
ordinary shares representing approximately 44.76% of the issued ordinary share capital of the Company. Mr. Lim Por Yen
(together with his spouses) held an interest of approximately 29.8% of the issued share capital of LSG. Mr. Lim Por Yen, Mr.
Lam Kin Ngok, Peter, Mr. Lam Kin Ming, Madam U Po Chu and Madam Lai Yuen Fong were directors of LSG and held an
interest of approximately 42% in aggregate of the issued share capital of LSG, thus controlling collectively more than one-
third of the voting power at LSG's general meetings.
(2) Associated Corporations:
(a) Lai Sun Hotels International Limited (`̀ LSHIL'')
Ordinary Shares (`̀ LSHIL Shares'')
Number of LSHIL Shares Held
Personal
Interests
Family
Interests
Corporate
Interests
Other
Interests Total
Lim Por Yen 5,522,890 Nil Nil Nil 5,522,890
Lam Kin Ngok, Peter 11,421,890 Nil Nil Nil 11,421,890
U Po Chu 375,000 Nil Nil Nil 375,000
Lau Shu Yan, Julius 400,000 Nil Nil Nil 400,000
Wu Shiu Kee, Keith 200,000 Nil Nil Nil 200,000
Note: The Company and its wholly-owned subsidiaries beneficially owned 951,709,306 LSHIL Shares. Lai Sun Garment
(International) Limited (`̀ LSG'') together with its wholly-owned subsidiary held an interest of approximately 44.76%
of the issued ordinary share capital of the Company. Mr. Lim Por Yen (together with his spouses) held an interest of
approximately 29.8% of the issued share capital of LSG. Mr. Lim Por Yen, Mr. Lam Kin Ngok, Peter, Mr. Lam Kin
Ming, Madam U Po Chu and Madam Lai Yuen Fong were directors of LSG and held an interest of approximately 42%
in aggregate of the issued share capital of LSG, thus controlling collectively more than one-third of the voting power
at LSG's general meetings.
(b) Lai Sun Garment (International) Limited (`̀ LSG'')
Ordinary Shares (`̀ LSG Shares'')
Number of LSG Shares Held
Personal
Interests
Family
Interests
Corporate
Interests
Other
Interests Total
Lim Por Yen 420,381,750 4,451,790 Nil Nil 424,833,540
Lam Kin Ngok, Peter 110,794,951 Nil Nil Nil 110,794,951
Lam Kin Ming 64,610,000 Nil Nil Nil 64,610,000
U Po Chu 3,669,000 Nil Nil Nil 3,669,000
Chiu Wai 199,600 Nil Nil Nil 199,600
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
22
Report of the Directors
D I R E C T O R S ' I N T E R E S T S I N S H A R E C A P I T A L O R D E B E N T U R E S ( c o n t i n u e d )
(2) Associated Corporations: (continued)
As at 31st July, 1999, none of the directors or chief executive of the Company or their respective associates
had in pursuance of the SDI Ordinance any interest in either Crocodile Garments Limited (`̀ Crocodile'') or
Lai Fung Holdings Limited (``Lai Fung''), the associated corporations of the Company. The interests of
Messrs. Lim Por Yen, Lam Kin Ngok, Peter and Lam Kin Ming and their respective associates and the
respective members of the Lai Sun Group in Crocodile and Lai Fung were as follows:
(i) Lai Fung
The Company beneficially owned 779,958,912 shares in Lai Fung. LSG together with its wholly-
owned subsidiary held an interest of approximately 44.76% of the issued ordinary share capital of the
Company. Mr. Lim Por Yen (together with his spouses) held an interest of approximately 29.8% of the
issued share capital of LSG. Mr. Lim Por Yen, Mr. Lam Kin Ngok, Peter, Mr. Lam Kin Ming, Madam U
Po Chu and Madam Lai Yuen Fong were directors of LSG and held an interest of approximately 42% in
aggregate of the issued share capital of LSG, thus controlling collectively more than one-third of the
voting power at LSG's general meetings.
(ii) Crocodile
LSG and its wholly-owned subsidiary beneficially owned 338,982,809 shares in Crocodile. Mr. Lim
Por Yen (together with his spouses) held an interest of approximately 29.8% in the issued share capital
of LSG. Mr. Lim Por Yen, Mr. Lam Kin Ngok, Peter, Mr. Lam Kin Ming, Madam U Po Chu and Madam
Lai Yuen Fong were directors of LSG and held an interest of approximately 42% in aggregate of the
issued share capital of LSG, thus controlling collectively more than one-third of the voting power at
LSG's general meetings.
In addition to the above, certain directors held non-beneficial interests in the share capital of some of the
subsidiaries of the Company and of its associated corporations as nominee shareholders, mainly for the
purpose of complying with the statutory requirement for a minimum number of shareholders for those
subsidiaries and associated corporations.
Save as disclosed above, as at 31st July, 1999, none of the directors or chief executive of the Company or
their respective associates had any interest in the equity or debt securities of the Company or of any of its
associated corporations which were required to be notified to the Company and The Stock Exchange of
Hong Kong Limited pursuant to Section 28 of the SDI Ordinance or to the Model Code (including interests
which they were deemed or taken to have under Section 31 or Part 1 of the Schedule to that Ordinance) or
which were required, pursuant to Section 29 of that Ordinance, to be entered in the register referred to
therein.
At no time during the year was the Company, its holding company, or any of its subsidiaries or fellow
subsidiaries a party to any arrangement to enable a director of the Company to acquire benefits by means of
the acquisition of equity or debt securities of the Company or any other body corporate.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
23
Report of the Directors
S U B S T A N T I A L S H A R E H O L D E R S
As at 31st July, 1999, the following parties were interested in 10% or more of the total issued ordinary share
capital of the Company as recorded in the register required to be kept under Section 16(1) of the SDI
Ordinance:
Number of Shares Held
Lai Sun Garment (International) Limited (`̀ LSG'') 1,582,869,192
(Note 1)
Lucky Source Investment Limited (``Lucky Source'') 531,894,335
(Note 2)
Hendon Developments Limited (`̀ Hendon Developments'') 531,894,335
(Notes 2 & 3)
Nan Fung Textiles Consolidated Limited (`̀ Nan Fung'') 852,764,935
(Notes 2, 3 & 4)
Mr. Chen Din Hwa 852,764,935
(Notes 2, 3, 4 & 5)
Notes:
1. LSG and its wholly-owned subsidiary beneficially owned 1,582,869,192 ordinary shares in the Company. Mr. Lim Por Yen
(together with his spouses) held an interest of approximately 29.8% of the issued share capital of LSG. Mr. Lim Por Yen, Mr.
Lam Kin Ngok, Peter, Mr. Lam Kin Ming, Madam U Po Chu and Madam Lai Yuen Fong were directors of LSG and held an
interest of approximately 42% in aggregate of the issued share capital of LSG, thus controlling collectively more than one-third
of the voting power at LSG's general meetings.
2. Lucky Source beneficially owned 531,894,335 ordinary shares in the Company.
3. Hendon Developments was taken to be interested in 531,894,335 ordinary shares in the Company beneficially owned by
Lucky Source due to its corporate interests therein.
4. Nan Fung, by virtue of its corporate interests in its subsidiaries, inter alia, Lucky Source and Hendon Developments, was taken
to be interested in an aggregate of 852,764,935 ordinary shares in the Company.
5. Mr. Chen Din Hwa was taken to be interested in an aggregate of 852,764,935 ordinary shares in the Company by virtue of his
interests in Nan Fung.
P U R C H A S E , S A L E O R R E D E M P T I O N O F L I S T E D S E C U R I T I E S
During the financial year ended 31st July, 1999, there was no purchase, sale or redemption by the
Company, or any of its subsidiaries, of the Company's listed securities.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
24
Report of the Directors
D E T A I L S O F P R O P E R T I E S
The principal investment properties of the Group are as follows:
Location
Group
interest Tenure Use
1. Cheung Sha Wan Plaza,
833 Cheung Sha Wan Road,
Cheung Sha Wan, Kowloon,
Hong Kong (New Kowloon
Inland Lot No. 5955)
100% The property is held
for a term expiring
on 30th June, 2047
Office/
commercial/
carpark
2. Causeway Bay Plaza 1,
489 Hennessy Road,
Causeway Bay,
Hong Kong
(The remaining portion of
Subsection 10 of Section A of
Inland Lot No. 2836 and
Inland Lot Nos. 8659 and 8683)
100% Inland Lot No. 2836
is held for a term
of 99 years
commencing on
30th September, 1929
and renewable for a
further 99 years
Inland Lot Nos. 8659
and 8683 are held
for a term commencing
on 18th June, 1987 and expiring
on 30th June, 2047
Office/
commercial
3. Causeway Bay Plaza 2,
463±483 Lockhart Road,
Causeway Bay, Hong Kong
(Section J and the remaining
portions of Sections D, E, G, H,
K, L, M and O,
Subsection 4 of Section H and
the remaining portion of
Inland Lot No. 2833)
100% The property is
held for a term of
99 years commencing
on 15th April, 1929 and
renewable for a further
term of 99 years
Office/
commercial/
carpark
4. Lai Sun Commercial Centre,
680 Cheung Sha Wan Road,
Cheung Sha Wan, Kowloon,
Hong Kong (New Kowloon Inland
Lot No. 5984)
100% The property is
held for a term of
99 years less the
last 3 days thereof
from 1st July, 1898, and was
renewed for a term of
another 50 years
Office/
commercial/
carpark
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
25
Report of the Directors
D E T A I L S O F P R O P E R T I E S ( c o n t i n u e d )
Location
Group
interest Tenure Use
5. Crocodile House 1,
50 Connaught Road,
Central, Hong Kong
(Marine Lot Nos. 384±386)
100% Marine Lot No. 384
is held for a term
of 999 years from
7th December, 1903.
Marine Lot Nos. 385
and 386 are held for a
term of 999 years from
20th November, 1903
Office/
commercial
6. Crocodile House 2,
54±56 Connaught Road,
Central, Hong Kong
(Marine Lot Nos. 387, 388 and
the remaining portion of
Marine Lot No. 389)
100% Marine Lot No. 388
and the remaining
portion of Marine
Lot No. 389 are held
for a term of 999
years from 6th November,
1903. Marine Lot No. 387
is held for a term of 999 years
from 20th November, 1903
Office/
commercial
7. Lai Sun Yuen Long Centre,
27 Wang Yip Street East,
Yuen Long, New Territories,
Hong Kong (Yuen Long Town
Lot No. 362)
100% The property is held for
a term of 99 years less the
last 3 days thereof from
1st July, 1898, and was renewed
for a term of another 50 years
Industrial
8. Garment Centre,
576±586 Castle Peak Road,
Cheung Sha Wan, Kowloon,
Hong Kong (The remaining
portion of Section C
of New Kowloon Inland
Lot No. 1892)
100% The property is held for
a renewed term of 24 years
less the last 3 days thereof from
1st July, 1973, and was renewed
for a term of another 50 years
Industrial
9. Commercial podium and
certain office and service
apartment units of
Hong Kong Plaza,
282 & 283 Huaihaizhong
Road, Luwan District,
Shanghai,
PRC
45% The property is held
for a term of 50 years,
commencing on
16th September, 1992
and expiring on
15th September, 2042
Office/
commercial/
club/
service
apartments
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
26
Report of the Directors
D E T A I L S O F P R O P E R T I E S ( c o n t i n u e d )
Location
Group
interest Tenure Use
10. 181 service apartment units of
Hong Kong Plaza,
North Tower,
282 & 283 Huaihaizhong Road,
Luwan District,
Shanghai,
PRC
75% The property is held
for a term of 50 years,
commencing on
16th September, 1992
and expiring on
15th September, 2042
Service
apartments
All the Group's investment properties are situated in Hong Kong or the PRC and are held under medium or
long term leases.
The principal properties under development of the Group are as follows:
Location
Group
interest
Stage of
construction
Expected
completion
date
Expected
use Gross floor area
1. 55±61 Carnarvon Road,
38±40 Kimberley
Street and 24 & 26
Kimberley Road,
Tsim Sha Tsui,
Kowloon,
Hong Kong
50% Demolition
completed
March
2002
Commercial/
service
apartments
The total site area is
960 sq.m. The total
gross floor area will
be 10,610 sq.m.
2. 789 Cheung Sha
Wan Road,
Cheung Sha Wan,
Kowloon,
Hong Kong
100% Foundation
work
completed
December
2000
Industrial/
office
The total site area is
1,224 sq.m.
The total gross
floor area will
be 14,693 sq.m.
3. 488 Jaffe Court,
486±488 Jaffe Road,
Causeway Bay,
Hong Kong
100% Foundation
work
completed
November
2000
Commercial/
residential
The total site area is
159 sq.m. The total
gross floor area will
be 1,506 sq.m.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
27
Report of the Directors
D E T A I L S O F P R O P E R T I E S ( c o n t i n u e d )
Location
Group
interest
Stage of
construction
Expected
completion
date
Expected
use Gross floor area
4. The Waterfront
1 Austin Road West,
Tsim Sha Tsui,
Kowloon,
Hong Kong
10% Superstructure
work in
progress
August
2000
Residential The total site area
is 16,815 sq.m.
The total gross
floor area will
be 147,562 sq.m.
5. Lot No. 2087 in
DD105, Ngau Tam Mei,
Yuen Long,
New Territories,
Hong Kong
50% Superstructure
work in
progress
December
1999
Residential The total site area is
5,400 sq.m. The
total gross floor area
will be 2,160 sq.m.
6. Eastern Place,
787 Dong Feng Road
East, Guangzhou,
Guangdong Province,
PRC
75% Phase II
interior
decoration
work in
progress
Phase II
residential
late 1999
Commercial/
residential/
office for the
whole
development
The total site area
for the development
is 52,073 sq.m.
The total gross
floor area for the
development will
be 261,945 sq.m.
7. New Trend Plaza
(previously known as
Rili Shangsha),
32±80
Zhongshanwu Road,
5±15 Guang Da Road
and 3±7 Guangzhou
Yixiang, Yue Xiu
District,
Guangzhou,
Guangdong Province,
PRC
75% Basement
construction
work in
progress
Early 2002 Commercial/
office
The total site area
is 5,782 sq.m.
The total gross
floor area will
be 34,733 sq.m.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
28
Report of the Directors
D E T A I L S O F P R O P E R T I E S ( c o n t i n u e d )
Location
Group
interest
Stage of
construction
Expected
completion
date
Expected
use Gross floor area
8. Guangli Building,
Chang Di Main Road,
Yue Xiu District,
Guangzhou,
Guangdong Province,
PRC
75% Resettlement
of original
inhabitants in
progress
2005 Commercial/
office
The total site area
is 8,427 sq.m.
The total gross
floor area will
be 104,500 sq.m.
9. Shanghai Baining
Baba Plaza,
Junction of
Anhua Road
and Kaixuan Road,
Changning District,
Shanghai,
PRC
71% Vacant site
and in
planning stage
2005 Residential/
commercial
The total site area
is 36,149 sq.m.
The total gross
floor area will
be 166,285 sq.m.
10. Zhong Yue Garden,
Xujiahui Road,
Luwan District,
Shanghai,
PRC
63% Phase I
foundation
work in
progress
Late 2000 Commercial/
residential
The total site area
for the whole
development is
21,289 sq.m. The
total gross floor area
for the whole
development will be
106,445 sq.m.
11. Zhabei Plaza
(plot 130±3),
Zhabei,
Shanghai,
PRC
36% Interior
decoration
work in
progress
Late 1999 Commercial/
office
The total site area is
3,222 sq.m. The
total gross area will
be 17,609 sq.m.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
29
Report of the Directors
F I X E D A S S E T S A N D I N V E S T M E N T P R O P E R T I E S
Details of movements in the fixed assets and investment properties of the Company and the Group during
the year are set out in notes 13 and 14, respectively, to the financial statements.
P R O P E R T I E S U N D E R D E V E L O P M E N T
Details of movements in the properties under development of the Company and the Group during the year
are set out in note 15 to the financial statements.
S U B S I D I A R I E S
Details of the Company's principal subsidiaries at the balance sheet date are set out in note 16 to the
financial statements.
A S S O C I A T E D C O M P A N I E S A N D J O I N T L Y C O N T R O L L E D E N T I T I E S
Details of the Company and the Group's principal associated companies and the Group's jointly controlled
entities are set out in notes 19 and 20, respectively, to the financial statements.
B O R R O W I N G S
Details of bank loans, overdrafts and other borrowings of the Company and the Group at the balance sheet
date are set out in notes 24 and 26 to the financial statements.
B O N D S P A Y A B L E
Details of bonds payable of the Group at the balance sheet date are set out in notes 24 and 27 to the financial
statements.
S H A R E C A P I T A L
Details of movements in the share capital of the Company during the year are set out in note 28 to the
financial statements.
R E S E R V E S
Details of movements in the reserves of the Company and of the Group during the year are set out in note 29
to the financial statements.
D I S T R I B U T A B L E R E S E R V E S
At 31st July, 1999, the Company did not have any reserves available for distribution in accordance with the
provisions of Section 79B of the Companies Ordinance.
C O N V E R T I B L E B O N D S
Details of the convertible bonds of the Group at the balance sheet date are set out in note 30 to the financial
statements.
C O N V E R T I B L E N O T E
Details of the convertible note of the Group at the balance sheet date are set out in note 31 to the financial
statements.
D O N A T I O N S
During the year, the Group made charitable or other donations totalling HK$5,367,000.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
30
Report of the Directors
P O S T B A L A N C E S H E E T E V E N T S
Details of the post balance sheet events are set out in note 37 to the financial statements.
I N T E R E S T C A P I T A L I S E D
Interest capitalised by the Group during the year amounted to HK$625,143,000.
S U M M A R Y F I N A N C I A L I N F O R M A T I O N
A summary of the results and of the assets and liabilities of the Group for the last five financial years, as
extracted from the audited financial statements and reclassified as appropriate, is set out below.
Results
Year ended 31st July,
1999 1998 1997 1996 1995
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
TURNOVER 1,752,093 3,538,210 3,040,345 2,186,843 2,499,082
PROFIT/(LOSS) BEFORE
TAXATON (6,998,179) 486,251 1,108,411 910,813 931,628
Taxation (45,614) (143,959) (141,671) (141,026) (183,630)
PROFIT/(LOSS) BEFORE
MINORITY INTERESTS (7,043,793) 342,292 966,740 769,787 747,998
Minority interests 211,370 (32,910) (62,048) (3,384) (19,883)
NET PROFIT/(LOSS)
ATTRIBUTABLE TO
SHAREHOLDERS (6,832,423) 309,382 904,692 766,403 728,115
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
31
Report of the Directors
S U M M A R Y F I N A N C I A L I N F O R M A T I O N ( c o n t i n u e d )
ASSETS AND LIABILITIES
As at 31st July,
1999 1998 1997 1996 1995
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Fixed assets 2,014,989 2,338,740 1,742,399 1,716,295 1,650,738
Investment properties 9,954,900 13,259,000 13,668,400 10,211,100 10,031,517
Properties under development 7,886,347 10,994,066 4,954,064 3,484,384 2,185,551
Goodwill Ð 90,012 87,965 28,943 29,804
Deferred pre-operating
expenses 10,718 32,256 6,068 11,331 17,629
Associated companies 1,126,531 2,399,601 2,749,201 2,795,211 2,230,259
Jointly controlled entities 188,572 183,219 79,919 33,088 25,332
Long term investments 1,018,389 2,073,429 2,479,810 899,196 705,346
Long term note receivable 245,000 1,100,000 Ð Ð Ð
Deferred tax assets 216 Ð Ð Ð Ð
Current assets 2,140,135 2,368,064 4,138,726 2,872,901 2,343,549
TOTAL ASSETS 24,585,797 34,838,387 29,906,552 22,052,449 19,219,725
Current liabilities (4,703,058) (4,395,426) (2,942,319) (2,466,938) (1,793,161)
Long term rental deposits
received (102,635) (124,527) (108,868) (97,860) (93,200)
Provision for premium on bond
redemption (249,554) (135,915) (23,023) (87,795) (53,575)
Provision for premium on note
redemption (1,667) Ð Ð Ð Ð
Long term borrowings (3,124,279) (5,314,604) (2,681,221) (2,109,301) (1,862,237)
Long term bonds payable (891,250) (891,250) (1,818,850) (927,600) Ð
Deferred taxation Ð (1,130) (34,401) Ð Ð
TOTAL LIABILITIES (9,072,443) (10,862,852) (7,608,682) (5,689,494) (3,802,173)
MINORITY INTERESTS (4,105,773) (4,682,432) (2,465,560) (1,023,063) (902,130)
CONVERTIBLE BONDS (2,098,581) (2,102,757) (1,158,465) (1,158,465) (1,158,465)
CONVERTIBLE NOTE (600,000) Ð Ð Ð Ð
NET ASSETS 8,709,000 17,190,346 18,673,845 14,181,427 13,356,957
Certain items in the consolidated balance sheets and consolidated profit and loss accounts in prior years
have been restated, as appropriate, to conform with the provisions of Statement of Standard Accounting
Practice 2.121 ``Accounting for Interests in Joint Ventures'' (`̀ SSAP 21''). The adoption of SSAP 21 has no
effect on the amount of the previously reported consolidated results attributable to shareholders or the
aggregate amounts of consolidated equity and retained profits.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
32
Report of the Directors
M A J O R C U S T O M E R S A N D S U P P L I E R S
During the year, the Group's sales to its five largest customers accounted for less than 30% of the Group's
combined sales and the Group's purchases from its five largest suppliers accounted for less than 30% of the
Group's combined purchases.
L I Q U I D I T Y A N D F I N A N C I A L R E S O U R C E S
The Group sustained a consolidated net loss attributable to shareholders of HK$6,832 million for the year
ended 31st July, 1999. As at that date, the Group had consolidated net current liabilities of HK$2,563
million, consolidated accumulated losses of HK$4,194 million and consolidated net assets of HK$8,709
million.
In order to reduce the overall level of indebtedness, the Group gave cash generation priority over
profitability and implemented an aggressive disposal programme during the period thereby suffering losses
arising from property sales and disposals of selective long-term investments.
As at the balance sheet date, the Group's total bank and other borrowings, including amounts outstanding
under bonds and a note, was HK$9,820 million. As a result of the Group's losses and the deterioration in the
Group's financial position, the Group has not complied with certain financial covenants given in relation to
indebtedness amounting to HK$1,664 million. Further, the Group has not maintained financial covenants in
relation to bonds with principal and redemption premium aggregating HK$1,023 million. Accordingly,
certain lending banks and bondholders have the right to require immediate repayment. This, in turn, will
give rise to rights under cross-default provisions exercisable by certain lending banks and bondholders to
serve notice requiring immediate repayment of further amounts aggregating approximately HK$5,139
million.
On the basis of preliminary discussions, certain principal lending banks have indicated their support in
principle to grant waivers in respect of the Group's failure to maintain loan covenants and, in addition, to
defer repayment of amounts totalling approximately HK$3,545 million to 31st December, 2002, subject to
all other lending banks and bondholders also agreeing to a similar repayment deferral.
It is anticipated that further discussions with the Company's lending banks and bondholders will take place
over the next few weeks, with a view to obtaining all necessary waivers in respect of the Group's failure to
maintain the relevant loan covenants and to agreeing the basis on which principal payments will be
deferred.
As part of these discussions, it is proposed to convene, as soon as practicable, meetings of the Group's
bondholders. Further announcements to shareholders and bondholders will be made as and when
appropriate.
The business of the Company is carrying on normally and based on initial discussions with the Company's
principal lending banks, the directors are confident that satisfactory arrangements with all creditor groups
will be agreed.
The Group will continue to reorganise its property portfolio through the disposal of non-core assets as the
basis for the Group to take advantage of an anticipated upturn in the Hong Kong property market in the
medium term.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
33
Report of the Directors
E M P L O Y E E S A N D R E M U N E R A T I O N P O L I C I E S
The Group employs a total of approximately 1,900 employees. Pay rates of employees are maintained at
competitive levels and salary and bonuses are rewarded on a performance related basis. Other staff benefits
include both contributory and defined benefit provident fund schemes, free hospitalisation insurance plan,
subsidised medical care and subsidies for external educational and training programmes.
Y E A R 2 0 0 0 C O M P L I A N C E
The Group has been carrying on the implementation of the Year 2000 compliance program of which the
approach, structure, risk assessment and compliance definition have been well covered in the previous
Annual Report. In this respect, the Group has appointed independent consultants to advise on the
replacement or upgrading of the hardware and related software to ensure compliance.
The systems identified as requiring major upgrades are the accounting and hotel reservation systems. The
compliance program and all necessary Year 2000 compliance projects have been completed. Total cost
incurred was approximately HK$2 million.
The Group has formulated contingency plans to deal with any unforeseen problems that might arise at the
turn of the millennium. They mainly involve the backing up of all electronic data in multiple media at
intervals to enable the restoration of the same later when necessary; the engagement of external consultants
to oversee the transition of the computer systems through the turn of the millennium and having manual
modes of the Group's vital functions ready to enable the continued operation of the Group without the need
of computers.
P R A C T I C E N O T E 1 9 T O T H E L I S T I N G R U L E S
(1) Specific performance obligations on controlling shareholder
A bank loan facility of HK$200 million was granted to the Company for a term of two years (the ``Loan
Agreement'') from 19th February, 1999. The outstanding amount as at 31st July, 1999 was HK$183.9
million. According to the Loan Agreement, Mr. Lim Por Yen and members of the Lim Family (as
defined in the Loan Agreement) should maintain control of Lai Sun Garment (International) Limited
(`̀ LSG''), and LSG should maintain control of the Company.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
34
Report of the Directors
P R A C T I C E N O T E 1 9 T O T H E L I S T I N G R U L E S ( c o n t i n u e d )
(2) Financial assistance and guarantees provided to affiliated companies (including associated
companies and jointly controlled entities)
As at 31st July, 1999, the Company and its subsidiaries (the ``Group'') had given financial assistance
and guarantees to financial institutions for the benefit of its affiliated companies amounting to, in
aggregate, approximately 25.5% of the Group's net asset value. In compliance with Practice Note 19,
the proforma combined balance sheet of affiliated companies as at the balance sheet date is disclosed
as follows:
HK$'000
Fixed assets 1,450,998
Investment properties 143,700
Properties under development 2,780,290
Goodwill 78,732
Deferred expenses 64,531
Associated companies 352,909
Net current liabilities (169,523)
Total assets less current liabilities 4,701,637
Long term borrowings (1,009,172)
Deferred income (87,080)
Amounts due to shareholders (3,328,793)
276,592
CAPITAL AND RESERVES
Share capital 888,433
Capital reserve 64,111
Investment property revaluation reserve 110,311
Exchange fluctuation reserve 8,879
Accumulated losses (775,095)
296,639
Minority interests (20,047)
276,592
(3) Breach of loan agreements
Except for those disclosed in note 1 `̀ Basis of presentation'' to the financial statements, the directors of
the Company are not aware of any breach of the terms of the loan agreements with respect to the
Group's borrowings.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
35
Report of the Directors
C O D E O F B E S T P R A C T I C E
In the opinion of the directors, the Company has complied with the Code of Best Practice as set out in
Appendix 14 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited
during the year ended 31st July, 1999. All the non-executive directors of the Company were not appointed
for a specific term as they are subject to retirement by rotation and re-election at the Company's Annual
General Meeting in accordance with the Articles of Association of the Company.
A U D I T O R S
Ernst & Young retire at the forthcoming Annual General Meeting and a resolution for their reappointment as
auditors of the Company will be proposed at the said meeting.
On Behalf of the Board
Lam Kin Ngok, Peter
Deputy Chairman
Hong Kong
12th November, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
36
Report of the Directors
To the members
Lai Sun Development Company Limited
(Incorporated in Hong Kong with limited liability)
We have audited the financial statements on pages 39 to 109 which have been prepared in accordance with
accounting principles generally accepted in Hong Kong.
R E S P E C T I V E R E S P O N S I B I L I T I E S O F D I R E C T O R S A N D A U D I T O R S
The Companies Ordinance requires the directors to prepare financial statements which give a true and fair
view. In preparing financial statements which give a true and fair view it is fundamental that appropriate
accounting policies are selected and applied consistently. It is our responsibility to form an independent
opinion, based on our audit, on those statements and to report our opinion to you.
B A S I S O F O P I N I O N
We conducted our audit in accordance with Statements of Auditing Standards issued by the Hong Kong
Society of Accountants. An audit includes an examination, on a test basis, of evidence relevant to the
amounts and disclosures in the financial statements. It also includes an assessment of the significant
estimates and judgements made by the directors in the preparation of the financial statements, and of
whether the accounting policies are appropriate to the Company's and the Group's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance as to
whether the financial statements are free from material misstatement. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the financial statements. We believe that
our audit provides a reasonable basis for our opinion.
F U N D A M E N T A L U N C E R T A I N T I E S R E L A T I N G T O T H E G O I N G C O N C E R N
B A S I S
In forming our opinion, we have considered the adequacy of the disclosures made in note 1 to the financial
statements which explain the circumstances giving rise to the fundamental uncertainties relating to (1) the
possible outcome of the discussions with the relevant lending banks in respect of borrowings that amounted
to HK$5,525 million at 31st July, 1999 (the ``Bank Discussions'') with a view to obtaining waivers for the
Group's failure to maintain the relevant loan covenants (the `̀ Waivers'') and/or to concluding formal
agreements with them in respect of a deferral of the principal repayments to 31st December, 2002 (the
`̀ Principal Repayment Deferral''); and (2) the possible outcome of the discussions with the bondholders in
respect of bonds payable with an aggregate principal amount of HK$2,052 million and an aggregate
redemption premium of HK$249 million as at 31st July, 1999 (the ``Bondholder Discussions'') with a view to
obtaining the Waivers and/or to securing their agreement to the Principal Repayment Deferral. The financial
statements have been prepared on a going concern basis, the validity of which depends upon the successful
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
37
Report of the Auditors
outcome of the Bank Discussions and the Bondholder Discussions. The financial statements do not include
any adjustments that would result from the failure of the Bank Discussions and the Bondholder Discussions.
We consider that appropriate disclosures and estimates have been made in the financial statements and our
opinion is not qualified in this respect.
O P I N I O N
In our opinion the financial statements give a true and fair view, in all material respects, of the state of affairs
of the Company and of the Group as at 31st July, 1999 and of the loss and cash flows of the Group for the
year then ended and have been properly prepared in accordance with the Companies Ordinance.
Ernst & Young
Certified Public Accountants
Hong Kong
12th November, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
38
Report of the Auditors
1999 1998
Notes HK$'000 HK$'000
TURNOVER 3 1,752,093 3,538,210
OPERATING PROFIT/(LOSS) BEFORE EXCEPTIONAL
ITEMS 5 (1,000,882) 468,961
Exceptional items 6 (5,691,191) Ð
OPERATING PROFIT/(LOSS) (6,692,073) 468,961
Share of results of associated companies (305,396) 17,290
Share of results of jointly controlled entities (710) Ð
PROFIT/(LOSS) BEFORE TAXATION (6,998,179) 486,251
Taxation 9 (45,614) (143,959)
PROFIT/(LOSS) BEFORE MINORITY INTERESTS (7,043,793) 342,292
Minority interests 211,370 (32,910)
NET PROFIT/(LOSS) ATTRIBUTABLE TO
SHAREHOLDERS 10, 29 (6,832,423) 309,382
Dividend 11 Ð 64,280
EARNINGS/(LOSS) PER SHARE 12
Basic (HK$2.26) HK$0.24
Diluted N/A HK$0.23
For the year ended 31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
39
Consolidated Profit and Loss Account
1999 1998Notes HK$'000 HK$'000
FIXED ASSETS 13 2,014,989 2,338,740
INVESTMENT PROPERTIES 14 9,954,900 13,259,000
PROPERTIES UNDER DEVELOPMENT 15 7,886,347 10,994,066
GOODWILL ON CONSOLIDATION OF SUBSIDIARIES 17 Ð 90,012
DEFERRED PRE-OPERATING EXPENSES 18 10,718 32,256
ASSOCIATED COMPANIES 19 1,126,531 2,399,601
JOINTLY CONTROLLED ENTITIES 20 188,572 183,219
LONG TERM INVESTMENTS 21 1,018,389 2,073,429
LONG TERM NOTE RECEIVABLE 22 245,000 1,100,000
DEFERRED TAX ASSETS 23 216 Ð
NET CURRENT LIABILITIES 24 (2,562,923) (2,027,362)
TOTAL ASSETS LESS CURRENT LIABILITIES 19,882,739 30,442,961
LONG TERM RENTAL DEPOSITS RECEIVED (102,635) (124,527)
PROVISION FOR PREMIUM ON BOND REDEMPTION (249,554) (135,915)
PROVISION FOR PREMIUM ON NOTE REDEMPTION (1,667) Ð
LONG TERM BANK LOANS AND OTHER BORROWINGS 26 (3,124,279) (5,314,604)
LONG TERM BONDS PAYABLE 27 (891,250) (891,250)
DEFERRED TAXATION 23 Ð (1,130)
15,513,354 23,975,535
CAPITAL AND RESERVESShare capital 28 1,768,001 803,500Reserves 29 6,940,999 16,386,846
8,709,000 17,190,346
MINORITY INTERESTS 4,105,773 4,682,432
12,814,773 21,872,778
CONVERTIBLE BONDS 30 2,098,581 2,102,757
CONVERTIBLE NOTE 31 600,000 Ð
15,513,354 23,975,535
Lam Kin Ngok, PeterDirector
Lau Shu Yan, JuliusDirector
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
40
Consolidated Balance Sheet
1999 1998Notes HK$'000 HK$'000
NET CASH INFLOW/(OUTFLOW) FROM OPERATINGACTIVITIES 32(a) (407,772) 837,640
RETURNS ON INVESTMENTS AND SERVICING OFFINANCE
Dividends received from associated companies 113,304 18,657Dividends received from listed and unlisted investments 4,456 10,707Dividends paid Ð (208,910)Interest received 174,806 268,783Interest paid on bank loans, overdrafts and other
borrowings (601,173) (787,440)Interest paid on bonds payable (88,582) (120,311)Interest paid on convertible bonds and note (80,759) (110,007)
Net cash outflow from returns on investments and servicingof finance (477,948) (928,521)
TAXATIONHong Kong profits tax paid (76,574) (20,825)Taxes paid outside Hong Kong (18,271) (30,127)
Taxes paid (94,845) (50,952)
INVESTING ACTIVITIESProceeds from disposal of fixed assets 253,887 10,319Proceeds from disposal of investment properties 123,438 910,248Proceeds from disposal of partial interests in subsidiaries Ð 41,827Proceeds from disposal of associated companies 98,423 704,626Proceeds from disposal of long term investments 241,579 148,954Proceeds from disposal of properties under development 116,938 267,140Acquisition of subsidiaries 32(e) 272 (6,568,818)Proceeds from disposal of subsidiaries 32(f) 519,853 1,452,813Capital injection to a jointly controlled entity (5,153) (73,300)Acquisition of additional interests in subsidiaries (169,104) (85,646)Acquisition of additional interests in associated companies (5,846) ÐAcquisition of long term investments (31,059) (366,136)Additions to properties under development (183,149) (1,720,682)Additions to deferred pre-operating expenses (3,090) (1,686)Reorganisation expenses paid Ð (44,024)Additions to investment properties (2,979) (255,610)Purchases of fixed assets (92,395) (95,013)Acquisition of associated companies (42,043) (284,159)Advances from associated companies 264,639 88,401Advances to investee companies (75,730) (100,788)Advances from/(to) jointly controlled entities 1,298 (26,190)Return of capital from an associated company 114,926 46,422Subsidiary excluded from consolidation 32(g) Ð (20,633)
Net cash inflow/(outflow) from investing activities 1,124,705 (5,971,935)
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCINGÐ page 42 144,140 (6,113,768)
For the year ended 31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
41
Consolidated Cash Flow Statement
1999 1998Notes HK$'000 HK$'000
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCINGÐ page 41 144,140 (6,113,768)
FINANCINGProceeds from private placement of shares 32(b) 152,950 ÐProceeds from the issue of rights shares 32(b) 883,999 501,859Share issue expenses 32(b) (25,870) ÐProceeds from the issue of shares upon exercise of warrants 32(b) 19 725Proceeds from the issue of convertible bonds 32(b) Ð 1,161,375Proceeds from the issue of convertible note 32(b) 600,000 ÐBond issue expenses Ð (51,423)Note issue expenses (12,600) ÐRepurchase of convertible bonds 32(b) (3,542) (69,415)Redemption of bonds 32(b) (923,735) ÐRepurchase of bonds 32(b) Ð (3,408)Proceeds from new borrowings 32(b) 1,589,481 4,833,130Release of bank deposits pledged 32(b) 2,214 3,348Repayment of borrowings 32(b) (2,211,062) (1,931,173)Advances from/(repayment to) minority interests 32(b) (19,252) 85,895Capital injection by minority interests of subsidiaries 32(b) Ð 778,632
Net cash inflow from financing 32,602 5,309,545
INCREASE/(DECREASE) IN CASH AND CASHEQUIVALENTS 176,742 (804,223)
Cash and cash equivalents at beginning of year 602,747 1,409,339Exchange realignments (9,057) (2,369)
CASH AND CASH EQUIVALENTS AT END OF YEAR 770,432 602,747
ANALYSIS OF BALANCES OF CASH AND CASHEQUIVALENTS
Cash and bank balances 778,487 650,217Bank deposits pledged Ð (2,214)Restricted cash and bank balances (8,055) (45,256)
770,432 602,747
For the year ended 31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
42
Consolidated Cash Flow Statement
1999 1998
Notes HK$'000 HK$'000
FIXED ASSETS 13 27,539 35,639
INVESTMENT PROPERTIES 14 3,297,200 4,447,200
PROPERTIES UNDER DEVELOPMENT 15 16,063 10,558
SUBSIDIARIES 16 5,008,761 9,447,416
ASSOCIATED COMPANIES 19 263,073 684,592
LONG TERM INVESTMENTS 21 469,773 403,003
NET CURRENT LIABILITIES 24 (1,231,550) (537,536)
TOTAL ASSETS LESS CURRENT LIABILITIES 7,850,859 14,490,872
LONG TERM RENTAL DEPOSITS RECEIVED (42,314) (57,701)
PROVISION FOR PREMIUM ON BOND REDEMPTION (249,554) (135,915)
LONG TERM BANK LOANS 26 (781,118) (1,757,300)
6,777,873 12,539,956
CAPITAL AND RESERVES
Share capital 28 1,768,001 803,500
Reserves 29 5,009,872 11,736,456
6,777,873 12,539,956
Lam Kin Ngok, Peter
Director
Lau Shu Yan, Julius
Director
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
43
Company Balance Sheet
1. B A S I S O F P R E S E N T A T I O N
The Group sustained a net loss attributable to shareholders of HK$6,832 million for the year ended 31st
July, 1999. As at that date, the Group had consolidated net current liabilities of HK$2,563 million,
consolidated accumulated losses of HK$4,194 million and consolidated net assets of HK$8,709 million.
The deterioration in financial position was largely attributable to the provisions made, particularly those
made for diminution in the values of the Group's properties as a result of the continued depressed property
market in Hong Kong.
The Group had consolidated bank and other borrowings of HK$6,230 million and bond and note payables,
which include the Exchangeable Bonds (note 27), the Convertible Bonds 2002, the Lai Fung Convertible
Bonds (note 30), and the Convertible Note (note 31), of HK$3,590 million at 31st July, 1999.
As a result of the Group's losses and the deterioration in the Group's financial position as stated above,
certain financial covenants given by the Group in loan agreements (the `̀ Loan Agreements'') in relation to
bank borrowings totalling HK$1,664 million (the `̀ Loans'') have not been complied with. Further, certain
covenants specified in the trust deed governing the issue of the Exchangeable Bonds (the `̀ Exchangeable
Trust Deed'') were not maintained. The principal and redemption premium in respect of the Exchangeable
Bonds outstanding as at 31st July, 1999 were HK$891 million and HK$132 million, respectively.
Loan agreements with respect to certain other bank loans amounting to HK$3,861 million as at 31st July,
1999 (the ``Other Loans'') and the trust deed governing the issue of the Convertible Bonds 2002 with a
principal of HK$1,161 million and a redemption premium of HK$117 million as at 31st July, 1999 (the
`̀ Convertible Trust Deed'') contain cross default clauses. If any relevant borrowings, including the Loans and
the Exchangeable Bonds, become due and repayable prematurely because of an event of default, the Other
Loans and the Convertible Bonds 2002 will, in turn, become immediately due and repayable if the relevant
lending banks or trustee serve notice to the Group for immediate repayment.
The remaining bank and other loans of HK$705 million, the Lai Fung Convertible Bonds of HK$938 million
and the Convertible Note of HK$600 million were obtained through Lai Fung Holdings Limited (`̀ Lai Fung'')
and Lai Sun Hotels International Limited (``LSHIL''), the two listed subsidiaries of the Group. According to
the respective loan agreements and trust deeds, Lai Fung and LSHIL are subject to different sets of covenants
from those referred to above. Lai Fung and LSHIL have maintained compliance with such covenants as at the
balance sheet date.
Pursuant to the Loan Agreements and Exchangeable Trust Deed, as confirmed by the Company's legal
advisors, upon the breach of any covenants, the respective lending banks or trustee may (in the case of a
trustee, the trustee must if so required by bondholders) serve notice on the Group to declare the Loans or
the Exchangeable Bonds to be immediately due and repayable. However, unless and until such notice is
served by the respective lending banks or the trustee, the Loans and the Exchangeable Bonds remain
repayable in accordance with their original stated maturity dates.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
44
Notes to Financial Statements
1. B A S I S O F P R E S E N T A T I O N ( c o n t i n u e d )
In addition, with respect to the Other Loans and the Convertible Bonds 2002, the respective lending banks
or trustee may (in the case of a trustee, the trustee must if so required by bondholders) declare an event of
default in respect of the Group's respective borrowings by virtue of the cross default provisions contained in
the respective agreements of the Other Loans or the Convertible Trust Deed.
As at the current date, certain principal lending banks of the Loans and the Other Loans have indicated their
support in principle to waive any breach of covenants and to defer the repayment of the respective loan
principals to 31st December, 2002 (the `̀ Principal Repayment Deferral'') provided that all other lending
banks and the bondholders of the Exchangeable Bonds and the Convertible Bonds 2002 also agree to the
same waiver and deferral terms. The amounts due to these principal lending banks as at 31st July 1999
amounted to HK$3,545 million in aggregate.
With regard the other lending banks, the directors of the Company (the ``Directors'') are confident that
waivers in respect of the Group's breach of certain loan covenants (the ``Waivers'') and/or the Principal
Repayment Deferral can be arranged. Accordingly, the Directors consider it appropriate to continue
classifying the Loans and Other Loans as current or long term liabilities according to their original maturity
terms under the respective loan agreements as at 31st July 1999.
The Group will shortly conduct meetings with the bondholders of the Exchangeable Bonds and the
Convertible Bonds 2002 with a view to obtaining the Waivers and/or to secure their agreement to the
Principal Repayment Deferral (the ``Discussions''). The Directors are optimistic that the Discussions will be
successful. On such basis, the Directors consider it appropriate to continue classifying the Exchangeable
Bonds and the Convertible Bonds 2002 as long term liabilities according to their respective original maturity
dates.
On the bases that formal agreements with banks on the Waivers and/or the Principal Repayment Deferral
can be arranged and the Discussions are successful, the Directors are satisfied that it is appropriate to
prepare the financial statements on a going concern basis.
If the going concern basis is not appropriate, adjustments would have to be made to restate the values of the
assets to their recoverable amounts, to provide for any further liabilities which might arise and to reclassify
non-current assets and liabilities as current assets and current liabilities, respectively.
2. S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S
Basis of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries
for the year ended 31st July, 1999, except for LSHIL and Furama Hotel Enterprises Limited (``Furama''),
which prepared their statutory consolidated accounts based on the financial years ended 31st December and
31st March, respectively, of which the management accounts for the year ended 31st July, 1999, after
making appropriate adjustments, were included. The results of subsidiaries acquired or disposed of during
the year are consolidated from or to their effective dates of acquisition or disposal, respectively. All
significant intercompany transactions and balances within the Group are eliminated on consolidation.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
45
Notes to Financial Statements
2. S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( c o n t i n u e d )
Subsidiaries
A subsidiary is a company in which the Company, directly or indirectly, controls more than 50% of its
voting power or controls the composition of its board of directors.
Interests in subsidiaries are stated in the Company's balance sheet at cost unless, in the opinion of the
directors, there have been permanent diminutions in values, when they are written down to values
determined by the directors.
Associated companies
An associated company is a company, not being a subsidiary or a jointly controlled entity, in which the
Group has a long term interest of not less than 20% of the equity voting rights and over which it is in a
position to exercise significant influence.
The Group's share of the post-acquisition results and reserves of associated companies is included in the
consolidated profit and loss account and consolidated reserves, respectively. The Group's investments in
associated companies are stated in the consolidated balance sheet at the Group's share of net assets under
the equity method of accounting less any provisions for permanent diminutions in values deemed necessary
by the directors, other than goodwill which is recorded in the associated company's own financial
statements, plus goodwill arising on the acquisition of interests in the associated companies in so far as it
has not already been written off or amortised.
The results of associated companies are included in the Company's profit and loss account to the extent of
dividends received. The interests in associated companies in the Company's balance sheet are stated at cost
unless, in the opinion of the directors, there have been permanent diminutions in values, when they are
written down to the directors' valuations.
Certain interest on loans borrowed for investments in associated companies engaging in property
development is capitalised in the Group's share of the net assets of the associated companies.
Jointly controlled entities
A jointly controlled entity is a joint venture which involves the establishment of a corporation, partnership
or other form of entity in which each venturer has an interest. The jointly controlled entity operates in the
same way as other enterprises, except that a contractual arrangement between the venturers establish joint
control over the economic activities of the entity.
The Group's share of the post-acquisition results and reserves of jointly controlled entities is included in the
consolidated profit and loss account and consolidated reserves, respectively. Where the profit sharing ratios
are different from the Group's equity interests therein, the share of post-acquisition results of the jointly
controlled entities is determined based on the agreed profit sharing ratios. The Group's interests in jointly
controlled entities are stated in the consolidated balance sheet at the Group's share of net assets under the
equity method of accounting less any provisions for diminutions in values, other than temporary in nature,
deemed necessary by the directors.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
46
Notes to Financial Statements
2. S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( c o n t i n u e d )
Jointly controlled entities (continued)
In prior years, jointly controlled entities were accounted for and disclosed as subsidiaries or associated
companies. The change in accounting policy has resulted from the adoption of Statement of Standard
Accounting Practice No. 2.121 `̀ Accounting for Interests in Joint Ventures'' (`̀ SSAP 21'') issued by the Hong
Kong Society of Accountants (`̀ HKSA'') in March 1998. The change in accounting policy has been applied
retrospectively, and accordingly the comparative amounts have been restated to conform with the current
year's presentation. The change in accounting policy resulted in deconsolidation of two entities with an
aggregate net asset value of HK$140,971,000 at 31st July, 1998 and their restatement as jointly controlled
entities; and the reclassification of HK$42,248,000 at 31st July, 1998 from associated companies to jointly
controlled entities. The adoption of SSAP 21 had no effect on the Group's consolidated results attributable
to shareholders for the year ended 31st July, 1998 or the consolidated net assets as at 31st July, 1998.
Certain interest on loans borrowed for investments in jointly controlled entities engaging in property
development is capitalised in the Group's share of net assets of the jointly controlled entities.
Goodwill
Goodwill arising on consolidation of subsidiaries and on acquisition of associated companies represents the
excess of the purchase consideration paid for subsidiaries/associated companies over the fair values ascribed
to the net underlying assets acquired at the date of acquisition.
Goodwill arising on the acquisition of three subsidiaries, Chains International Hotels Management Limited,
Century International Hotels Limited and Delta Asia Limited, and of associated companies is amortised on
the straight-line basis over a period of forty years. Such goodwill is stated at amortised balance adjusted for
any permanent impairment in value considered necessary by the directors.
Goodwill arising on the acquisition of other subsidiaries is eliminated against reserves at the time of
acquisition.
Capital reserve
The capital reserve arising on consolidation of subsidiaries and on acquisition of associated companies
represents the excess of the fair values ascribed to the net underlying assets of subsidiaries/associated
companies acquired at the date of acquisition over the purchase consideration paid for subsidiaries/
associated companies.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
47
Notes to Financial Statements
2. S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( c o n t i n u e d )
Fixed assets and depreciation
No depreciation is provided for freehold land, hotel and investment properties, and construction in
progress. Other fixed assets are stated at cost less accumulated depreciation.
The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to
its working condition and location for its intended use. Expenditure incurred after the fixed assets have
been put into operation, such as repairs and maintenance, is normally charged to the profit and loss account
in the period in which it is incurred. In situations where it can be clearly demonstrated that the expenditure
has resulted in an increase in the future economic benefits expected to be obtained from the use of the fixed
assets, the expenditure is capitalised as an additional cost of the fixed assets.
Depreciation is calculated on the straight-line basis to write off the cost of each asset over its estimated
useful life. The principal annual rates used for this purpose are as follows:
Leasehold land Over the unexpired lease terms
Buildings 2.5% ± 5%
Leasehold improvements 2.5% ± 20%
Furniture, fixtures and equipment 5% ± 20%
Motor vehicles 10% ± 25%
Computers 10% ± 25%
Motor vessels 25%
Hotel properties are interests in land and buildings and their integral fixed plant which are collectively used
in the operation of hotels, and are stated at cost. It is the Group's policy to maintain the hotel properties in
such condition that their residual values are not currently diminished by the passage of time and, therefore,
any element of depreciation is insignificant. Accordingly, the directors consider that it is not necessary for
depreciation to be charged in respect of the hotel properties. The related maintenance and repairs are
charged to the profit and loss account in the year in which they are incurred and the costs of significant
improvements are capitalised.
Construction in progress is not depreciated until such time when the relevant assets are completed and put
into use.
The gain or loss on disposal or retirement of a fixed asset, other than investment properties, recognised in
the profit and loss account is the difference between the net sales proceeds and the carrying amount of the
relevant asset.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
48
Notes to Financial Statements
2. S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( c o n t i n u e d )
Investment properties
Investment properties are interests in land and buildings in respect of which construction work and
development have been completed and which are intended to be held on a long term basis for their
investment potential. Such properties are not depreciated and are stated at their open market values on the
basis of annual professional valuations. Changes in the values of investment properties are dealt with as
movements in the investment property revaluation reserve. If the total of this reserve is insufficient to cover
a deficit, on a portfolio basis, the excess of the deficit is charged to the profit and loss account.
Where a deficit has previously been charged to the profit and loss account and a revaluation surplus
subsequently arises, this surplus is credited to the profit and loss account to the extent of the deficit
previously charged.
Upon the disposal of an investment property, the relevant portion of the revaluation reserve realised in
respect of previous valuations is released to the profit and loss account.
Properties under development
Properties under development intended to be held for rental purposes are stated at their open market values
on the basis of annual professional valuations.
Changes in the values of properties under development which have been revalued are dealt with as
movements in the revaluation reserve for properties under development held for rental purposes. If this
reserve is insufficient to cover a deficit, on a portfolio basis, the excess of the deficit is charged to the profit
and loss account.
Upon the disposal of a property under development which has been revalued, the relevant portion of the
revaluation reserve for properties under development held for rental purposes realised in respect of previous
valuations is released to the profit and loss account.
Properties under development held for purposes other than rental are stated at cost less any provisions for
permanent diminutions in values considered necessary by the directors. Cost includes the cost of land,
construction, financing and other related expenses.
Where pre-sale profit is recognised, the attributable profit on the pre-sold portion of the properties under
development is recognised over the course of the development after taking into account all further costs to
completion and due allowances for contingencies and, is calculated on each project by reference to the lower
of:
(i) the percentage which results from the proportion of the total construction cost incurred to the total
estimated construction costs to completion; and
(ii) the proportion of the actual cash received to the total sales consideration.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
49
Notes to Financial Statements
2. S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( c o n t i n u e d )
Completed properties for sale
Completed properties for sale are stated at the lower of cost and net realisable value. Net realisable value is
estimated by the directors based on prevailing market conditions. Cost includes all development
expenditure, applicable borrowing costs and other direct costs attributable to such properties. Cost is
determined by an apportionment of the total land and building costs attributable to unsold properties.
Deferred pre-operating expenses
Deferred pre-operating expenses represent expenses incurred prior to the commencement of operations of
certain subsidiaries. The pre-operating expenses are capitalised at cost and amortised on the straight-line
basis over a period of three to five years from the date of commencement of the operations of the relevant
subsidiaries.
Investments
Investments held on a long term basis are stated at cost less provisions for any permanent diminutions in
values considered necessary by the directors.
Short term investments comprise listed and unlisted investments. Listed investments are stated at the lower
of cost and market value at the balance sheet date. Unlisted investments are stated at cost less provisions for
diminutions in values considered necessary by the directors.
Cetain interest on loans borrowed for long term investments engaging in property development is
capitalised.
Stocks
Stocks are stated at the lower of cost and net realisable value after making due allowance for obsolete or
slow-moving items. Cost for food, beverages, cutlery, linen and supplies is determined on the first-in, first-
out basis. Cost for flour is determined on the weighted average basis and comprises materials, direct labour
and an appropriate proportion of all production overhead expenditure. Net realisable value is determined
on the basis of anticipated sales proceeds less estimated selling expenses.
Leased assets
Leases that transfer substantially all the rewards and risks of ownership of assets to the Group, other than
legal title, are accounted for as finance leases. At the inception of a finance lease, the cost of the asset is
capitalised at the present value of the minimum lease payments and recorded together with the obligation,
excluding the interest element, to reflect the purchase and financing. Assets held under capitalised finance
leases are included in fixed assets and depreciated over the shorter of the lease terms and the estimated
useful lives of the assets. The finance costs of such leases are charged to the profit and loss account so as to
produce a constant periodic rate of charge over the lease terms.
Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company
are accounted for as operating leases. Rentals applicable to such operating leases are charged to the profit
and loss account on the straight-line basis over the lease terms.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
50
Notes to Financial Statements
2. S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( c o n t i n u e d )
Revenue recognition
Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the
revenue can be measured reliably, on the following bases:
(a) sales of completed properties developed for sale, upon the establishment of a binding contract in
respect of the sale of properties, or upon the issue of an occupation permit by the Hong Kong
Government or a completion certificate by the relevant government authorities, whichever is the later;
(b) income from pre-sale of certain properties under development, when the construction work has
reached a stage where the ultimate realisation of profit can be reasonably determined on the basis set
out under the heading ``Properties under development'' above;
(c) sales of investment properties, when all the conditions of a sale have been met and the risks and
rewards of ownership have been transferred to the buyer;
(d) rental and property management fee income, in the period in which the properties are let out and on
the straight-line basis over the lease terms;
(e) hotel and restaurant operations and other related service income, in the period in which such services
are rendered;
(f) dealing of securities and sales of investments, on the transaction date when the relevant contract is
entered into;
(g) interest income, on a time proportion basis, taking into account the principal outstanding and the
effective interest rate applicable; and
(h) dividend income, when the shareholders' right to receive payment is established.
Borrowing costs
Borrowing costs directly attributable to the acquisition or construction of an asset which takes a substantial
period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. The
capitalisation rate for the year is based on the weighted average of the attributable borrowing cost of the
borrowings. All other borrowing costs are charged to the profit and loss account in the period in which they
are incurred.
Pension costs
The Group operates defined contribution pension schemes and a defined benefit retirement scheme for its
employees, the assets of which are held separately from those of the Group in independently administered
funds.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
51
Notes to Financial Statements
2. S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S ( c o n t i n u e d )
Pension costs (continued)
Contributions to the defined contribution pension schemes are made based on a percentage of the eligible
employees' salaries and are charged to the profit and loss account as they become payable in accordance
with the rules of the schemes. When an employee leaves the scheme prior to his/her interest in the Group
employer contributions vesting fully, the ongoing contributions payable by the Group may be reduced by
the relevant amount of forfeited contributions.
Contributions to the defined benefit retirement scheme are charged to the profit and loss account so as to
charge the cost of the retirement benefits over the eligible employees' working lives within the Group. The
contribution rate is recommended by independent qualified actuaries on the basis of triennial valuations,
using the aggregate method.
Foreign currencies
Foreign currency transactions are recorded at the applicable rates of exchange ruling at the transaction
dates. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are
translated at the applicable rates of exchange ruling at that date. Exchange differences are dealt with in the
profit and loss account.
On consolidation, the financial statements of subsidiaries, associated companies and jointly controlled
entities outside Hong Kong are translated to Hong Kong dollars at the applicable rates of exchange ruling at
the balance sheet date. The resulting translation differences are included in the exchange fluctuation reserve.
Deferred taxation
Deferred taxation is provided, using the liability method, on all significant timing differences to the extent it
is probable that the liability will crystallise in the foreseeable future. A deferred tax asset is not recognised
until its realisation is assured beyond reasonable doubt.
Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other
party, or exercise significant influence over the other party in making financial and operating decisions.
Parties are also considered to be related if they are subject to common control or common significant
influence.
Cash equivalents
Cash equivalents represent short term highly liquid investments which are readily convertible into known
amounts of cash and which are within three months of maturity when acquired, less advances from banks
repayable within three months from the date of the advance.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
52
Notes to Financial Statements
3. T U R N O V E R
Turnover comprises proceeds from the sales of properties, rental income, and income from hotel, restaurant
and other operations. Revenue from the following activities has been included in turnover.
Group
1999 1998
HK$'000 HK$'000
Sales of properties 552,318 2,042,298
Property rentals 649,321 776,379
Hotel, restaurant and other operations 550,454 719,533
1,752,093 3,538,210
4. R E L A T E D P A R T Y T R A N S A C T I O N S
In addition to the related party transactions and balances detailed elsewhere in the financial statements, the
Group had the following material transactions with related parties during the year.
Group
1999 1998
Notes HK$'000 HK$'000
Interest income received from associated companies (i) 66,892 123,167
Rental income received from a fellow subsidiary (ii) 19,321 32,507
Rental income received from the ultimate holding company (ii) 2,003 2,902
Project management and consultancy fees received from an
associated company (iii) Ð 30,400
(i) Interest income received from associated companies arose from advances thereto. Interest is charged at the prevailing market rates.
(ii) Rental income received are pursuant to the terms in the respective lease agreements with reference to the then prevailing market
rentals.
(iii) The project management and consultancy fees received from an associated company were based on terms mutually agreed.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
53
Notes to Financial Statements
5. O P E R A T I N G P R O F I T / ( L O S S ) B E F O R E E X C E P T I O N A L I T E M S
This is arrived at after charging/(crediting):
Group
1999 1998
HK$'000 HK$'000
Rental income (649,321) (776,379)
Less: Outgoings 88,375 83,680
Net rental income (560,946) (692,699)
Interest from bank deposits (52,310) (71,030)
Other interest income (102,465) (208,626)
Gain on disposal of investment properties Ð (463,231)
Gain on disposal of properties under development Ð (467)
Gain on disposal of subsidiaries (13,923) Ð
Gain on deemed disposal of a subsidiary Ð (56,871)
Gain on disposal of interests in associated companies Ð (158,893)
Gain on disposal of associated companies (15,138) Ð
Dividend income from listed investments (4,256) (1,820)
Dividend income from unlisted investments (200) (8,887)
Gain on cancellation of convertible bonds (17,718) Ð
Write back of provision for premium on convertible bond redemption Ð (121,922)
Interest on bank loans, overdrafts and other borrowings:
Wholly repayable within five years 609,679 756,113
Not wholly repayable within five years 255 16,853
609,934 772,966
Interest on bonds payable 102,670 128,421
Interest on convertible bonds and note 107,887 110,007
Less: Amounts capitalised in properties under development (589,481) (611,423)
Amounts capitalised in construction in progress Ð (1,245)
Amounts capitalised in associated companies engaged in property
development (33,837) (48,229)
Amounts capitalised in long term investments engaged in property
development Ð (21,543)
Amount capitalised as acquisition cost of a subsidiary Ð (212,491)
Amounts capitalised in jointly controlled entities engaged in
property development (1,825) (3,684)
195,348 112,779
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
54
Notes to Financial Statements
5. O P E R A T I N G P R O F I T / ( L O S S ) B E F O R E E X C E P T I O N A L I T E M S
( c o n t i n u e d )
Group
1999 1998
HK$'000 HK$'000
Provision for premium on bond redemption 113,639 112,892
Provision for premium on note redemption 1,667 Ð
Amortisation of goodwill on acquisition of:
Subsidiaries 1,419 2,397
Associated companies 1,396 6,161
Write off of goodwill 54,182 Ð
Write off of deferred pre-operating expenses 18,974 Ð
Amortisation of deferred pre-operating expenses 5,690 8,540
Auditors' remuneration 5,020 5,027
Depreciation:
Owned fixed assets 63,547 70,647
Leased fixed assets 92 187Provisions for diminutions in values of short term listed and unlisted
investments 2,514 3,391
Provisions for diminutions in values of properties under development
to net realisable value 9,527 155,874
Provisions for diminutions in values of completed properties for sale
to net realisable value 128,931 20,930
Provision for/(write back of) diminution in value of an associated
company holding completed properties for sale (110,910) 110,910
Provisions for diminutions in values of, and advances to, associated
companies and investee companies engaged in hotel operations 42,487 Ð
Provisions for debtors and deposits paid for acquisition of properties Ð 91,913
Loss on disposal of fixed assets 155,336 2,377
Loss on disposal of properties under development 158,153 Ð
Loss on disposal of investment properties 153,940 Ð
Loss on disposal of subsidiaries Ð 131,339
Loss on dissolution of associated companies 1,808 Ð
Loss on disposal of partial interests in subsidiaries Ð 2,752
Loss on disposal of short term listed investments 10,527 194,702
Loss on disposal of short term unlisted investments 112,375 2,901
Loss on disposal of long term unlisted investments 431 Ð
Operating lease rentals in respect of land and buildings 2,655 4,519
Foreign exchange losses, net 4,779 13,683
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
55
Notes to Financial Statements
5. O P E R A T I N G P R O F I T / ( L O S S ) B E F O R E E X C E P T I O N A L I T E M S
( c o n t i n u e d )
The operating loss before exceptional items for the year includes costs of properties sold and services
provided for property rentals, hotel, restaurant and other operations of HK$1,341,089,000 (1998 :
HK$1,465,122,000 included in operating profit before exceptional items).
Such amount has not included provisions for diminutions in values of completed properties for sale to net
realisable value of HK$128,931,000 (1998 : HK$20,930,000) or the provisions for diminutions in values of
properties under development of HK$9,527,000 (1998 : HK$155,874,000).
6. E X C E P T I O N A L I T E M S
Group
1999 1998
HK$'000 HK$'000
Provisions for diminutions in values of properties under development 2,937,127 Ð
Provisions for diminutions in values of associated companies holding
properties under development 311,000 Ð
Provisions for deposits paid for acquisition of properties 452,500 Ð
Provision for contingent loss in respect of the Put Options (note 22) 855,000 Ð
Provisions for contingent losses in respect of profit guarantees(1) 178,200 Ð
Provision for contingent loss in respect of a guarantee given to a bank(2) 228,000 Ð
Loss on disposal of a long term listed investment 302,382 Ð
Provisions for diminutions in values of long term unlisted investments 426,982 Ð
5,691,191 Ð
(1) These relate to certain guaranteed returns given to the respective independent third parties in connection with the disposal of
certain investment properties and a subsidiary in prior years.
(2) This relates to a guarantee given to provide counter-indemnity to a bank for facilities granted by it to an associated company
engaged in the operations of duty free merchandise.
7. D I R E C T O R S ' A N D E M P L O Y E E S ' E M O L U M E N T S
(a) Directors' emoluments
Group
1999 1998
HK$'000 HK$'000
Fees 260 260
Basic salaries, housing and other allowances and benefits in kind 34,183 39,505
Bonuses paid and payable Ð 4,800
Inducement fee Ð 5,000
34,443 49,565
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
56
Notes to Financial Statements
7. D I R E C T O R S ' A N D E M P L O Y E E S ' E M O L U M E N T S ( c o n t i n u e d )
(a) Directors' emoluments (continued)
Directors' emoluments paid to independent non-executive directors during the year were HK$260,000
(1998 : HK$260,000).
The emoluments of the directors fell within the following bands.
Group
1999 1998
Number of
directors
Number of
directors
HK$Nil ± HK$1,000,000 6 6
HK$2,000,001 ± HK$2,500,000 2 1
HK$3,000,001 ± HK$3,500,000 1 Ð
HK$3,500,001 ± HK$4,000,000 Ð 1
HK$4,000,001 ± HK$4,500,000 1 Ð
HK$5,500,001 ± HK$6,000,000 1 Ð
HK$6,500,001 ± HK$7,000,000 Ð 1
HK$8,500,001 ± HK$9,000,000 Ð 2
HK$15,500,001 ± HK$16,000,000 1 Ð
HK$19,000,001 ± HK$19,500,000 Ð 1
12 12
There were no arrangements under which a director waived or agreed to waive any emoluments.
(b) Employees' emoluments
The five highest paid employees during the year included 2 (1998 : 4) directors, details of whose
emoluments are set out above. The details of the emoluments of the remaining 3 (1998 : 1) non-director,
highest paid employees are set out below.
Group
1999 1998
HK$'000 HK$'000
Basic salaries, housing and other allowances and benefits in kind 27,755 5,437
Bonuses paid and payable Ð 472
27,755 5,909
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
57
Notes to Financial Statements
7. D I R E C T O R S ' A N D E M P L O Y E E S ' E M O L U M E N T S ( c o n t i n u e d )
(b) Employees' emoluments (continued)
The emoluments of the non-director, highest paid employees fell within the following bands:
Group
1999 1998
Number of
individuals
Number of
individuals
HK$5,000,001 ± HK$5,500,000 1 Ð
HK$5,500,001 ± HK$6,000,000 Ð 1
HK$6,000,001 ± HK$6,500,000 1 Ð
HK$16,000,001 ± HK$16,500,000 1 Ð
3 1
8. P E N S I O N C O S T S
Group
1999 1998
HK$'000 HK$'000
Gross employer's contributions 6,010 9,306
Less: Forfeited contributions utilised to offset employer's
contributions for the year (1,684) (685)
4,326 8,621
At 31st July, 1999, there were forfeited contributions of HK$141,000 (1998 : HK$39,000) available to the
Group to reduce its contributions to the pension scheme in future years.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
58
Notes to Financial Statements
9. T A X A T I O N
Hong Kong profits tax has been provided at the rate of 16% (1998 : 16%) on the estimated assessable profits
arising in Hong Kong during the year.
Taxes on profits assessable elsewhere have been calculated at the rates of taxation prevailing in the places in
which the Group operates, based on existing legislation, interpretations and practices in respect thereof.
Group
1999 1998
HK$'000 HK$'000
Provision for taxation for the year:
Hong Kong 33,062 89,837
Outside Hong Kong 11,196 86,221
Deferred Ð note 23 (5,403) (33,651)
38,855 142,407
Prior year overprovision:
Hong Kong (2,315) (6,619)
36,540 135,788
Rebate received relating to prior year provision in Hong Kong (9,983) Ð
26,557 135,788
Associated companies:
Hong Kong 16,563 1,779
Outside Hong Kong 2,494 6,392
19,057 8,171
Taxation charge for the year 45,614 143,959
10. N E T P R O F I T / ( L O S S ) A T T R I B U T A B L E T O S H A R E H O L D E R S
Net loss attributable to shareholders dealt with in the financial statements of the Company is
HK$5,626,044,000 (1998 : net profit of HK$31,174,000).
The Group's share of aggregate profits less losses retained by the associated companies for the year
amounted to losses of HK$437,757,000 (1998 : HK$9,538,000).
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
59
Notes to Financial Statements
11. D I V I D E N D
1999 1998
HK$'000 HK$'000
Interim dividend Ð 64,280
Interim dividend per ordinary share Ð 6 cents
12. E A R N I N G S / ( L O S S ) P E R S H A R E
The calculations of basic and diluted earnings/(loss) per share are based on:
1999 1998
HK$'000 HK$'000
Earnings/(loss)
Earnings/(loss) used in basic earnings/(loss) per share calculation (6,832,423) 309,382
Adjustment for the dilutive effect of Lai Fung Convertible Bonds N/A (10,740)
Earnings/(loss) used in diluted earnings/(loss) per share calculation(2) N/A 298,642
1999 1998
'000 '000
Number of shares
Weighted average number of ordinary shares in issue during the year used
in basic and diluted earnings/(loss) per share calculation(1) 3,016,739 1,301,356
(1) The weighted average number of ordinary shares of the Company in issue during the year is arrived at by adjusting the number of
ordinary shares in issue prior to the rights issue of 3rd February, 1999 with a factor of 1.2063. The weighted average number of
ordinary shares of the Company in issue during 1998 is arrived at by adjusting the number of ordinary shares in issue prior to the
rights issue of 27th July, 1998 with a factor of 1.007 and then by a factor of 1.2063 to reflect the rights issue of 3rd February, 1999.
(2) Diluted loss per share for current year has not been shown as the warrants, convertible bonds and convertible note of the Group
outstanding during the year have an anti-dilutive effect on the basic loss per share.
Diluted earnings per share for the year ended 31st July, 1998 has been restated in accordance with the provisions of the Statement
of Standard Accounting Practice No. 5 (Revised) issued by HKSA in May 1998.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
60
Notes to Financial Statements
13. F I X E D A S S E T S
Group
31st July,
1998 Additions
Transfer from
investment in
Whistler
Mountain Inn,
Limited
Partnership
(note 19) Disposals
Arising on
disposal of
subsidiaries
Exchange
realignments
31st July,
1999
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Cost:
Hotel properties 1,940,297 43,270 Ð (253,272) Ð (2,455) 1,727,840
Freehold land and buildings 5,546 Ð Ð Ð Ð Ð 5,546
Leasehold land and buildings 108,801 403 Ð (28,535) (17,132) 49 63,586
Leasehold improvements 48,066 9,476 2,358 (19,188) (78) 66 40,700
Construction in progress 1,975 320 Ð (380) (1,915) Ð Ð
Furniture, fixtures and equipment 383,529 35,387 3,887 (30,714) (32,274) (610) 359,205
Motor vehicles 33,910 264 Ð (1,362) (315) 4 32,501
Computers 11,426 3,272 Ð (1,013) (606) (32) 13,047
Motor vessels 34,198 3 Ð Ð Ð Ð 34,201
2,567,748 92,395 6,245 (334,464) (52,320) (2,978) 2,276,626
Accumulated depreciation:
Freehold buildings 2,218 222 Ð Ð Ð Ð 2,440
Leasehold land and buildings 11,835 2,268 Ð (1,794) (1,821) 5 10,493
Leasehold improvements 31,297 3,485 Ð (2,610) (16) (1) 32,155
Furniture, fixtures and equipment 141,280 43,050 Ð (16,165) (6,295) (40) 161,830
Motor vehicles 18,940 4,377 Ð (997) (243) 10 22,087
Computers 5,489 2,124 Ð (763) (278) (2) 6,570
Motor vessels 17,949 8,113 Ð Ð Ð Ð 26,062
229,008 63,639 Ð (22,329) (8,653) (28) 261,637
Net book value 2,338,740 2,014,989
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
61
Notes to Financial Statements
13. F I X E D A S S E T S ( c o n t i n u e d )
The net book value of assets held under finance leases included in the total amount of fixed assets at 31st
July, 1999 amounted to HK$238,000 (1998 : HK$716,000). The depreciation charge for the year in respect
of such assets amounted to HK$92,000 (1998 : HK$187,000).
Certain land and buildings were pledged to banks to secure banking facilities granted to the Group.
The Group's land and buildings as stated above are held under the following lease terms:
Hong
Kong
Outside
Hong Kong Total
HK$'000 HK$'000 HK$'000
Freehold Ð 5,546 5,546
Medium term 1,104,102 656,571 1,760,673
Long term 30,753 Ð 30,753
1,134,855 662,117 1,796,972
Company
31st July,
1998 Additions Disposals
31st July,
1999
HK$'000 HK$'000 HK$'000 HK$'000
Cost:
Freehold land and buildings 5,546 Ð Ð 5,546
Leasehold land and buildings 11,139 Ð (607) 10,532
Leasehold improvements 12,965 Ð Ð 12,965
Furniture, fixtures and equipment 42,057 1,434 (20) 43,471
Motor vehicles 20,974 Ð Ð 20,974
Computers 3,083 225 Ð 3,308
95,764 1,659 (627) 96,796
Accumulated depreciation:
Freehold buildings 2,218 222 Ð 2,440
Leasehold land and buildings 3,354 421 (24) 3,751
Leasehold improvements 12,817 87 Ð 12,904
Furniture, fixtures and equipment 26,793 5,272 (18) 32,047
Motor vehicles 12,526 2,807 Ð 15,333
Computers 2,417 365 Ð 2,782
60,125 9,174 (42) 69,257
Net book value 35,639 27,539
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
62
Notes to Financial Statements
13. F I X E D A S S E T S ( c o n t i n u e d )
The Company's freehold land and buildings are situated outside Hong Kong. The Company's leasehold land
and buildings are situated in Hong Kong and are held under medium term leases.
14. I N V E S T M E N T P R O P E R T I E S
Group Company
1999 1998 1999 1998
HK$'000 HK$'000 HK$'000 HK$'000
At beginning of year, at valuation 13,259,000 13,668,400 4,447,200 5,654,600
Additions, at cost 2,979 313,154 2,979 12,113
Disposals (190,430) (1,627,970) (2,000) (114,000)
Arising on acquisition of subsidiaries Ð 701,472 Ð Ð
Transfer from/(to) completed properties for sale (244,961) 665,005 (10,361) Ð
Transfer from properties under development Ð 1,943,241 Ð Ð
Deficits on revaluation (2,871,688) (1,904,209) (1,140,618) (1,105,513)
Arising on disposal of subsidiaries Ð (500,093) Ð Ð
At end of year, at valuation 9,954,900 13,259,000 3,297,200 4,447,200
The analysis by lease terms of the carrying value of the investment properties is as follows:
Group Company
1999 1998 1999 1998
HK$'000 HK$'000 HK$'000 HK$'000
Long term, situated in Hong Kong 2,113,300 3,151,900 Ð Ð
Medium term:
Situated in Hong Kong 4,885,600 6,870,100 3,297,200 4,447,200
Situated outside Hong Kong 2,956,000 3,237,000 Ð Ð
9,954,900 13,259,000 3,297,200 4,447,200
At 31st July, 1999, the investment properties were revalued by Chesterton Petty Limited, independent
chartered surveyors, on an open market value basis.
Certain investment properties were pledged to banks to secure banking facilities granted to the Group.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
63
Notes to Financial Statements
15. P R O P E R T I E S U N D E R D E V E L O P M E N T
Group Company
1999 1998 1999 1998
HK$'000 HK$'000 HK$'000 HK$'000
Properties under development held for rental
purposes, at cost/valuation:
At beginning of year 2,855,400 1,222,094 Ð Ð
Interest capitalised, net 21,025 37,707 Ð Ð
Other additions, at cost 94,445 427,608 Ð Ð
Reclassified from properties under development
held for purposes other than rental, at cost Ð 863,430 Ð Ð
Reclassified to properties under development
held for purposes other than rental, at cost Ð (14,995) Ð Ð
Transfer to investment properties Ð (1,679,335) Ð Ð
Surplus/(deficits) on revaluation (55,340) 1,997,221 Ð Ð
Exchange realignments 5,924 1,670 Ð Ð
At end of year 2,921,454 2,855,400 Ð Ð
Properties under development held for purposes
other than rental, at cost:
At beginning of year 8,138,666 3,731,970 10,558 73,363
Interest capitalised, net 568,456 573,716 1,204 5,767
Other additions, at cost 88,704 1,293,074 4,301 57,410
Arising on acquisition of subsidiaries 236,590 6,033,998 Ð Ð
Transfer to completed properties for sale (160,059) (410,488) Ð (125,982)
Transfer to investment properties Ð (263,906) Ð Ð
Transfer of hotel properties to fixed assets Ð (367,918) Ð Ð
Disposals (275,091) (266,673) Ð Ð
Arising on disposal of subsidiaries (697,377) (1,161,159) Ð Ð
Reclassified from properties under development
held for rental purposes, at cost Ð 14,995 Ð Ð
Reclassified to properties under development
held for rental purposes, at cost Ð (863,430) Ð Ð
Exchange realignments 11,658 (19,639) Ð Ð
7,911,547 8,294,540 16,063 10,558
Provisions for diminutions in values (2,946,654) (155,874) Ð Ð
At end of year 4,964,893 8,138,666 16,063 10,558
Total balance at end of year 7,886,347 10,994,066 16,063 10,558
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
64
Notes to Financial Statements
15. P R O P E R T I E S U N D E R D E V E L O P M E N T ( c o n t i n u e d )
The analysis by lease terms of the carrying value of the properties under development held for rental
purposes and held for purposes other than rental is as follows:
Group Company
1999 1998 1999 1998
HK$'000 HK$'000 HK$'000 HK$'000
Properties under development held for rental
purposes, at valuation:
Long term, situated outside Hong Kong 1,729,827 1,682,400 Ð Ð
Medium term, situated outside Hong Kong 1,191,627 1,173,000 Ð Ð
2,921,454 2,855,400 Ð Ð
Properties under development held for purposes
other than rental, at cost:Long term:
Situated in Hong Kong 3,620,791 5,581,159 Ð Ð
Situated outside Hong Kong 703,810 1,108,775 Ð ÐMedium term:
Situated in Hong Kong 527,381 692,346 16,063 10,558
Situated outside Hong Kong 112,911 756,386 Ð Ð
4,964,893 8,138,666 16,063 10,558
7,886,347 10,994,066 16,063 10,558
At 31st July, 1999, properties under development held for rental purposes were revalued by Chesterton
Petty Limited, independent chartered surveyors, on an open market value basis.
Properties under development held for purposes other than rental which are carried at net realisable value
and included in the above balance amounted to HK$703,810,000 (1998 : HK$174,677,000).
Certain properties under development were pledged to banks to secure banking facilities granted to the
Group.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
65
Notes to Financial Statements
15. P R O P E R T I E S U N D E R D E V E L O P M E N T ( c o n t i n u e d )
On 18th November, 1998, Winfield Properties Limited (`̀ Winfield'') and Faith Lot Limited (``Faith Lot'),
both wholly-owned subsidiaries of the Group, entered into a provisional sales and purchase agreement (the
`̀ Agreement'') with Fine Smart Development Limited ('Fine Smart'), a wholly-owned subsidiary of Nan Fung
Textiles Consolidated Limited (`̀ Nan Fung''), pursuant to which Winfield and Faith Lot would sell to Fine
Smart two pieces of adjacent land located at Section E, F, G, H, I, J, K and the Remaining Portion of New
Kowloon Inland Lot No. 2855 (the ``Properties'') for a total consideration of approximately HK$88.7 million.
The consideration was arrived at based on negotiations between the Group and Nan Fung. The book value
of the Properties was approximately HK$242 million. The disposal resulted in a loss of approximately
HK$153 million. The transaction was completed during the year.
The net proceeds from the disposal were used by the Group for repayment of bank borrowings and for its
general working capital purposes.
As at 18th November, 1998, Nan Fung owned approximately 18.18% of the issued share capital of the
Company. By virtue of the interest of Nan Fung in the Agreement and its shareholdings in the Company, the
transaction constituted a connected transaction for the Company as defined under the Rules Governing the
Listing of Securities (`̀ Listing Rules'') on The Stock Exchange of Hong Kong Limited.
16. S U B S I D I A R I E S
Company
1999 1998
HK$'000 HK$'000
Shares listed in Hong Kong, at cost 3,519,386 3,518,086
Unlisted shares, at cost 1,174,064 1,183,903
4,693,450 4,701,989
Amounts due from subsidiaries 12,077,329 13,091,609
Amounts due to subsidiaries (5,921,963) (8,004,528)
10,848,816 9,789,070
Provisions for diminutions in values (5,840,055) (341,654)
5,008,761 9,447,416
Market value of listed shares at the balance sheet date 1,342,307 790,826
The balances due are unsecured, interest-free and have no fixed terms of repayment, except for a sum of
HK$7,848,550,000 (1998 : HK$6,450,927,000) due from subsidiaries and a sum of HK$1,517,640,000
(1998 : HK$2,093,646,000) due to subsidiaries which bear interest at the prevailing market rates.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
66
Notes to Financial Statements
16. S U B S I D I A R I E S ( c o n t i n u e d )
Details of the principal subsidiaries are as follows:
Name of company
Place of
incorporation
or registration/
place of
operations
Issued/
registered
capital
Class of
shares
held
Equity interest
attributable
to the Company Principal
activitiesDirect Indirect
(%) (%)
Centico Investment
Limited
Hong Kong HK$2 Ordinary 100.00 Ð Property
investment
Chains Caravelle
Hotel Joint
Venture Company
Limited
Vietnam US$16,326,000 * Ð 13.74 Hotel
investment
Chains International
Hotels
Management
Limited
Hong Kong HK$3,000,000 Ordinary Ð 52.17 Hotel
management
Concrest Limited British Virgin
Islands
US$1 Ordinary Ð 100.00 Investment
holding
Crocodile
Development
Limited
Hong Kong HK$9,996
HK$4
Ordinary
Deferred
Ð 100.00 Property
investment
Delta Asia Limited Cayman Islands US$70 Class A Ð 52.17 Hotel
management
Diamond String
Limited
Hong Kong HK$10,000 Ordinary Ð 33.91 Hotel
investment
and
restaurant
operations
Euroscot Enterprises
Limited
British
Virgin Islands/
Hong Kong
US$10 Ordinary Ð 100.00 Property
investment
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
67
Notes to Financial Statements
16. S U B S I D I A R I E S ( c o n t i n u e d )
Name of company
Place of
incorporation
or registration/
place of
operations
Issued/
registered
capital
Class of
shares
held
Equity interest
attributable
to the Company Principal
activitiesDirect Indirect
(%) (%)
Faith Lot Limited Hong Kong HK$2 Ordinary 100.00 Ð Property
development
Faithful Properties
Limited
Hong Kong HK$10,000 Ordinary Ð 100.00 Property
investment
Fordspace
Development
Limited
Hong Kong HK$2 Ordinary 100.00 Ð Investment
holding
Franklin
Development
Limited
Hong Kong HK$700 Ordinary Ð 100.00 Property
investment
Furama Hotel
Enterprises
Limited
Bermuda HK$102,880,454 Ordinary Ð 100.00 Hotel
operation
Gilroy Company
Limited
Hong Kong HK$10,000 Ordinary 100.00 Ð Property
investment
Global Planner
Investment
Limited
Hong Kong HK$2 Ordinary Ð 100.00 Property
investment
Good Strategy
Limited
British Virgin
Islands
US$1 Ordinary Ð 74.68 Investment
holding
Guangzhou Jieli
Real Estate
Development
Company Limited
People's
Republic of
China
HK$168,000,000 * Ð **59.47 Property
development
and
investment
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
68
Notes to Financial Statements
16. S U B S I D I A R I E S ( c o n t i n u e d )
Name of company
Place of
incorporation
or registration/
place of
operations
Issued/
registered
capital
Class of
shares
held
Equity interest
attributable
to the Company Principal
activitiesDirect Indirect
(%) (%)
Guangzhou Guong
Bird Property
Development
Limited
People's
Republic of
China
US$14,600,000 * Ð **74.68 Property
development
and
investment
Guangzhou Grand
Wealth Properties
Limited
People's
Republic of
China
HK$128,000,000 * Ð **74.68 Property
development
and
investment
Heathfield Limited British Virgin
Islands/
Canada
US$100 Ordinary Ð 52.17 Hotel
investment
JSP Limited British Virgin
Islands
US$100 Ordinary Ð 52.17 Investment
holding
Kenjacky Limited British Virgin
Islands
US$100 Ordinary Ð 52.17 Investment
holding
Kolot Property
Services Limited
Hong Kong HK$2 Ordinary 100.00 Ð Property
management
Lai Fung Holdings
Limited
Cayman
Islands
HK$104,447,379 Ordinary 74.68 Ð Investment
holding
Lai Fung Overseas
Finance Limited
Cayman Islands HK$0.2 Ordinary Ð 74.68 Bond issue
Lai Sun Hotels
International
Limited
Bermuda HK$182,413,136 Ordinary 46.44 5.73 Investment
holding
Lai Sun International
Finance Limited
Cayman Islands US$2 Ordinary 100.00 Ð Bond issue
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
69
Notes to Financial Statements
16. S U B S I D I A R I E S ( c o n t i n u e d )
Name of company
Place of
incorporation
or registration/
place of
operations
Issued/
registered
capital
Class of
shares
held
Equity interest
attributable
to the Company Principal
activitiesDirect Indirect
(%) (%)
Lai Sun International
Finance (Cayman
Islands) Limited
Cayman Islands US$2 Ordinary 100.00 Ð Bond issue
Lai Sun International
Finance (1997)
Limited
Cayman Islands US$2 Ordinary 100.00 Ð Bond issue
Lai Sun Real Estate
Agency Limited
Hong Kong HK$2 Ordinary 100.00 Ð Property
management
and real estate
agency
Lucky Strike
Investment
Limited
Hong Kong HK$10,000 Ordinary 100.00 Ð Property
investment
Lycon Investment
Limited
Hong Kong HK$2 Ordinary 100.00 Ð Investment
holding
Maxgear Investment
Limited
Hong Kong HK$100 Ordinary Ð 100.00 Property
investment
Main Crown
Development
Limited
Hong Kong HK$2 Ordinary 100.00 Ð Property
investment
Milirich Investment
Limited
Hong Kong HK$2 Ordinary 100.00 Ð Property
investment
New Page Limited British Virgin
Islands
US$5 Ordinary Ð 41.74 Investment
holding
Richman
International
Limited
British Virgin
Islands
US$1 Ordinary 100.00 Ð Investment
holding
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
70
Notes to Financial Statements
16. S U B S I D I A R I E S ( c o n t i n u e d )
Name of company
Place of
incorporation
or registration/
place of
operations
Issued/
registered
capital
Class of
shares
held
Equity interest
attributable
to the Company Principal
activitiesDirect Indirect
(%) (%)
Real Genius
Company Limited
Hong Kong HK$10,000 Ordinary 100.00 Ð Property
development
Shanghai Li Xing
Real Estate
Development
Company Limited
People's
Republic of
China
US$36,000,000 * Ð 44.60 Property
investment
Shanghai Wa Yee
Real Estate
Development Co.,
Ltd.
People's
Republic of
China
US$10,000,000 * Ð 70.95 Property
development
and
investment
Sinoking Investment
Limited
Hong Kong HK$2 Ordinary Ð 100.00 Property
investment
Smart Leader
Limited
British Virgin
Islands
US$1 Ordinary 100.00 Ð Investment
holding
Sonics Development
Limited
Hong Kong HK$2 Ordinary Ð 100.00 Property
development
Sunlite Investment
Limited
Hong Kong HK$2 Ordinary Ð 68.62 Investment
holding
Surearn Profits
Limited
British Virgin
Islands
US$1 Ordinary Ð 52.17 Investment
holding
Target Power
Limited
Hong Kong HK$10,000 Ordinary Ð 100.00 Property
investment
Tiger Hill Limited British Virgin
Islands
US$1 Ordinary 100.00 Ð Real estate
agency
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
71
Notes to Financial Statements
16. S U B S I D I A R I E S ( c o n t i n u e d )
Name of company
Place of
incorporation
or registration/
place of
operations
Issued/
registered
capital
Class of
shares
held
Equity interest
attributable
to the Company Principal
activitiesDirect Indirect
(%) (%)
Top Town
Enterprises
Limited
Hong Kong HK$1,000 Ordinary Ð 100.00 Property
investment
Transtrend Canada
Limited
Canada C$37,500,000 Ordinary Ð 52.17 Hotel
investment
Village Gate Resorts
Limited
Canada C$100 Ordinary Ð 52.17 Investment
holding
Winfield Properties
Limited
Hong Kong HK$2 Ordinary 100.00 Ð Property
development
Winpet Investment
Limited
Hong Kong HK$2 Ordinary Ð 100.00 Property
development
World Classic
Development
Limited
Hong Kong HK$2 Ordinary 100.00 Ð Property
investment
World Trend
Development
Limited
Hong Kong HK$2 Ordinary 100.00 Ð Property
development
* These subsidiaries have registered rather than issued share capital.
** These subsidiaries are co-operative joint ventures of which the partners' profit sharing ratios and the distribution of net assets upon
the expiration of the joint venture periods are not in proportion to their equity ratios but are as defined in the joint venture
contracts.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
72
Notes to Financial Statements
16. S U B S I D I A R I E S ( c o n t i n u e d )
The above table lists the subsidiaries of the Group which, in the opinion of the directors, principally affected
the results of the year or formed a substantial portion of the net assets of the Group at the balance sheet date.
To give details of other subsidiaries would, in the opinion of the directors, result in particulars of excessive
length.
The subsidiaries acquired and disposed of during the year did not have any material effect on the Group's
turnover or loss after taxation.
The shares of certain subsidiaries held by the Group have been pledged to banks to secure banking facilities.
Certain of the Group's subsidiaries had the following transactions during the year and subsequent to the
year end date.
(1) On 11th February, 1999, the Company and its wholly-owned subsidiary, Furama, entered into an
agreement (the `̀ Furama Agreeement'') with LSHIL and its wholly-owned subsidiary, Golden Pool
Enterprises Limited (`̀ GPEL''), with respect to the redevelopment of the Furama Hotel, which is a
property situated in Hong Kong. Pursuant to the Furama Agreement, the Furama Hotel will be
redeveloped into a composite retail, hotel and office building (the ``New Building'') which is expected
to be completed in or around May 2004.
Upon the completion of the redevelopment of the New Building, GPEL will purchase the hotel
portions (the `̀ Hotel Portions'') from Furama for a consideration of HK$1,900 million. The
consideration for the Hotel Portions was determined by reference to valuations of independent
valuers. In addition, GPEL may request the Company to carry out the possible fitting out works of the
Hotel Portions for a consideration of HK$250 million, subject to the Company's agreeing to carry out
such works.
The Furama Agreement provided that upon the occurrence of certain events, if Furama notifies GPEL
in writing that it does not intend to carry out the redevelopment works or the progress of the
redevelopment is not in accordance with the timetable as stated in the Furama Agreement, at a
consideration of HK$10, Furama will grant to GPEL an option to purchase the Furama Hotel (the
`̀ Furama Option''). The Furama Option will only be valid for a period of six months commencing from
the date on which the relevant events occur. The purchase price will be equaled to the open market
value of the Furama Hotel as at the date of exercise of the Furama Option, as determined by
independent valuers who will be appointed jointly by GPEL and Furama. The exercise of the Furama
Option is subject to the approval of the independent shareholders of the respective companies as
required under the Listing Rules.
The acquisition of the Hotel Portions by GPEL has been approved by the independent shareholders of
the Company, Lai Sun Garment (International) Limited (`̀ LSG'') and LSHIL in their respective special
general meetings held on 22nd March, 1999. The consideration for the Hotel Portions has been fully
paid by GPEL to Furama in the form of a deposit of approximately HK$965 million (the `̀ Deposit'') and
a prepayment of approximately HK$935 million (the `̀ Prepayment'') as at the balance sheet date.
According to the Furama Agreement, the prepaid consideration is interest bearing with interest
charged at the higher of 8% or LIBOR plus 2% per annum for the Deposit, and at the three month
deposit rate offered by LSHIL's principal bank plus 1% per annum for the Prepayment.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
73
Notes to Financial Statements
16. S U B S I D I A R I E S ( c o n t i n u e d )
In the opinion of the Company's directors, the disposal of the Hotel Portions by Furama to LSHIL will
create synergy and efficiencies of scale upon the integration and joint operation of the Hotel Portions
with the Ritz-Carlton Hotel held by LSHIL. As such, the value of LSHIL's investments in the Hotel
Portions and the Ritz-Carlton Hotel will be enhanced, which will ultimately be beneficial to the
Company as a major shareholder of LSHIL. Part of the prepaid consideration was used by the
Company to release its obligation to reimburse LSHIL the repayment of certain of LSHIL's bank loans
which arose from the Group's asset restructuring in 1997. The remaining balance of the prepaid
consideration was used as general working capital of the Group.
As at 3rd March, 1999, Mr. Lim Por Yen, Mr. Lam Kin Ngok, Peter and Mr. Lam Kin Ming and their
respective associates (together the `̀ Lim Family'') owned approximately 42.00% of the issued share
capital of LSG; LSG, in turn, owned approximately 44.76% of the issued share capital of the Company;
and the Company owned approximately 52.17% of the issued share capital of LSHIL. The Lim Family
also directly owned approximately 5.94% of the issued share capital of the Company and
approximately 0.95% of the issued share capital of LSHIL. The transaction therefore constituted a
connected transaction of the Company, LSG and LSHIL as defined under the Listing Rules.
(2) On 7th April, 1999, the Company entered into an option agreement, supplemented on 12th April,
1999 by a supplemental agreement (collectively the `̀ Option Agreement'') with Sun Chung Estate
Company, Limited (``Sun Chung''), a wholly-owned subsidiary of the Bank of China. Pursuant to the
Option Agreement, the Company, at a consideration of HK$10, granted a right (the ``Option'') to Sun
Chung to purchase 230,000,000 shares (the `̀ Option Shares'') in Lai Fung held by the Company.
The Option is exerciseable in whole or in part, and from time to time, upon Sun Chung giving the
Company at least seven days' notice during the period commencing on 7th April, 1999 and ending on
7th October, 2002, at a price of HK$0.65 per Option Share, subject to adjustments in certain events as
defined in the Option Agreement.
(3) On 11th May, 1999, Goldthorpe Limited (``Goldthorpe''), a wholly-owned subsidiary of Lai Fung,
entered into a conditional sales and purchase agreement (the `̀ Acquisition Agreement'') with LSHIL
whereby Goldthrope would acquire from LSHIL the entire interest in Good Strategy Limited at a
consideration of HK$475 million. The principal assets held by Good Strategy Limited are the 181
service apartment units at the North Tower of Hong Kong Plaza in Shanghai, the People's Republic of
China. The consideration was determined by reference to the valuations of the said properties
performed by independent property valuers.
This transaction allowed Lai Fung to consolidate its interests in Hong Kong Plaza, thereby enhancing
its position in generating recurring rental income. In addition, LSHIL was able to realise its interest in
the Hong Kong Plaza units with the net proceeds used as its general working capital and as additional
funding to capture any potential investment opportunities.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
74
Notes to Financial Statements
16. S U B S I D I A R I E S ( c o n t i n u e d )
As at 27th May, 1999, the Lim Family owned approximately 42.00% of the issued share capital of LSG;
LSG owned approximately 44.76% of the issued share capital of the Company; and the Company
owned approximately 52.17% of the issued share capital of LSHIL and approximately 74.67% of the
issued share capital of Lai Fung. The Lim Family also directly owned approximately 5.94% of the
issued share capital of the Company and 0.95% of the issued share capital of LSHIL. As such, this
transaction constituted a connected transaction of the Company, LSG, Lai Fung and LSHIL under the
Listing Rules. The transaction was approved by the independent shareholders of the Company, LSG,
LSHIL and Lai Fung at their respective extraordinary general meetings held on 22nd June, 1999 and
was completed on 2nd July, 1999.
(4) On 11th May, 1999, Lycon Investment Limited (``LIL''), a wholly-owned subsidiary of the Company,
entered into a conditional agreement with Lai Fung Overseas Finance Limited (`̀ LFO''), a wholly-
owned subsidiary of Lai Fung, whereby LIL would sell certain Lai Fung Convertible Bonds (as defined
in note 30), with an aggregate principal amount of US$11,700,000 (approximately HK$90,675,000) to
LFO at a consideration of HK$50,000,000. The consideration represented a discount of approximately
45% on the initial issue price of the bonds.
With the repurchase and cancellation of these bonds, the Group would have an annual saving of the
bond interest expense. In addition, the Company would cease to be liable to redeem or mandatorily
convert the bonds upon maturity.
As at 27th May, 1999, the Lim Family owned approximately 42.00% of the issued share capital of LSG;
LSG owned approximately 44.76% of the issued share capital of the Company; and the Company
owned approximately 52.17% of the issued share capital of LSHIL and approximately 74.67% of the
issued share capital of Lai Fung. Accordingly, this transaction constituted a connected transaction for
the Company, LSG and Lai Fung under the Listing Rules. The transaction was approved by the
independent shareholders of the Company, LSG and Lai Fung at their respective extraordinary general
meetings held on 22nd June, 1999. The transaction was completed during the year. The related bonds
were cancelled upon repurchase, resulting in a profit before minority interests of HK$17,718,000.
(5) On 8th June, 1999, the Company entered into another option agreement (the `̀ Second Option
Agreement'') with a third party (the `̀ Optionholder''). Pursuant to the Second Option Agreement, the
Company, at a consideration of HK$10, granted a right (the ``Second Option'') to the Optionholder to
purchase 20,000,000 ordinary shares in Lai Fung (the `̀ Second Option Shares'') held by the Company.
The Second Option is exercisable in whole or in part, and from time to time, upon the Optionholder
giving the Company at least seven days' notice during the period from 1st December, 2000 to 8th
September, 2002, at a price of HK$0.63 per Second Option Share, subject to adjustments in the
occurrence of certain events as defined in the Second Option Agreement.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
75
Notes to Financial Statements
16. S U B S I D I A R I E S ( c o n t i n u e d )
(6) In connection with the spin off of Lai Fung, the Company entered into an agreement with Lai Fung on
12th November, 1997 which stated, inter alia, that for any of the Property Interests (as defined in note
23) valued in the Valuation (as defined in note 23), if, within two years of Lai Fung's date of Listing (as
defined in note 23) the land use rights certificate of these Property Interests or the business licence
which is required to set up a company for the purposes of developing these Property Interests have not
been obtained, Lai Fung, within six months after the second anniversary of the date of Listing, is
entitled to require the Company to buy back all direct or indirect interests of Lai Fung in these
Property Interests. The buy back consideration would be in cash, equal to the net asset value of these
Property Interests based on the Valuation, discounted to the same extent as the discount applied to the
net asset value of Lai Fung under the initial public offer of its shares.
(7) During the year, the Group advanced approximately HK$130,137,000 (1998 : HK$210,435,000) to
Shanghai Li Xing Real Estate Development Company Limited (``Li Xing''), a 44.80% owned subsidiary
of the Group, as working capital. The Group had not made any advances to other unrelated minority
shareholders of Li Xing during the year (1998 : HK$10,680,000). The above advances are unsecured,
interest-bearing with interest charged at various rates ranging from 10% to 14% per annum, and have
no fixed terms of repayment. Interest income received from the minority shareholders with respect to
these advances was HK$10,632,000 for the year (1998 : HK$9,651,000).
(8) Pursuant to an agreement dated 3rd September, 1997, the Company leased certain units of Lai Sun
Commercial Centre, a property situated in Hong Kong, to Lai Fung and its subsidiaries for a term of
two years which commenced on 11th March, 1997 and expired on 10th March, 1999. The lease
agreement was not renewed upon its expiry on 10th March, 1999.
Pursuant to a licence agreement dated 16th March, 1997, Crocodile Development Limited, a wholly-
owned subsidiary of the Company, leased certain units of Crocodile House 1, a property situated in
Hong Kong, to Lai Fung and its subsidiaries. The licence had no fixed term and was terminated during
the year.
The rentals in relation to these properties were calculated on the basis determined by reference to the
floor area of the properties. The aggregate rental and management charges from these properties
amounted to HK$1,249,000 for the year ended 31st July, 1999 (1998 : HK$1,259,000).
(9) On 27th August, 1999, Lai Fung and Li Xing entered into the following agreements (collectively the
`̀ Rental Agreements'') with the Bank of China (`̀ BOC'').
(i) BOC leases certain units of the Bank of China Tower, a property situated in Hong Kong, to Lai
Fung for a term of three years commencing on 1st September, 1999 and expiring on 31st August,
2002. The rental and service charges are approximately HK$177,000 per month.
(ii) BOC leases certain car parking spaces of the Bank of China Tower to Lai Fung on a month-to-
month basis commencing on 1st September, 1999. The licence agreement can be terminated
upon one month's written notice by either party. The licence fee is HK$15,000 per month.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
76
Notes to Financial Statements
16. S U B S I D I A R I E S ( c o n t i n u e d )
(iii) Li Xing leases certain units of the North Tower of Hong Kong Plaza, a property situated in
Shanghai, PRC, to BOC for a term of ten years commencing on 1st November, 1999 and expiring
on 31st October, 2009. The rental is US$19,503 per month and the service charge is initially
US$6,999 per month. The rental income will increase by 10% in the fourth year and again in the
seventh year of the tenancy or otherwise agreed between Li Xing and BOC.
The Rental Agreements were entered into based on negotiations between Lai Fung/Li Xing and BOC.
The leased properties are used by the respective parties as office premises or for business use.
In the opinion of the Company's directors, BOC is deemed to be a connected person of the Company
and Lai Fung under the Listing Rules. Accordingly, the above transactions constituted connected
transactions of the Company, LSG and Lai Fung under the Listing Rules.
17. G O O D W I L L O N C O N S O L I D A T I O N O F S U B S I D I A R I E S
Group
1999 1998
HK$'000 HK$'000
Cost:
At beginning of year 101,799 97,355
Additions during the year Ð 4,444
Written off during the year (54,182) Ð
Release on disposal of a subsidiary (37,629) Ð
9,988 101,799
Accumulated amortisation:
At beginning of year 11,787 9,390
Charge for the year 1,419 2,397
Release on disposal of a subsidiary (3,218) Ð
9,988 11,787
Net book value Ð 90,012
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
77
Notes to Financial Statements
18. D E F E R R E D P R E - O P E R A T I N G E X P E N S E S
Group
1999 1998
HK$'000 HK$'000
Cost:
At beginning of year 67,578 29,001
Additions during the year 3,090 1,686
Arising on acquisition of subsidiaries Ð 36,889
Written off during the year (18,974) Ð
Exchange realignments 49 2
51,743 67,578
Accumulated amortisation:
At beginning of year 35,322 22,933
Charge for the year 5,690 8,540
Arising on acquisition of subsidiaries Ð 3,846
Exchange realignments 13 3
41,025 35,322
Net book value 10,718 32,256
19. A S S O C I A T E D C O M P A N I E S
Group Company
1999 1998 1999 1998
HK$'000 HK$'000 HK$'000 HK$'000
Unlisted shares, at cost Ð Ð 18,634 18,634
Share of net assets other than goodwill 63,563 831,060 Ð Ð
Unamortised goodwill 31,741 43,693 Ð Ð
95,304 874,753 18,634 18,634
Amounts due from associated companies 1,477,255 1,776,417 479,049 777,568
Amounts due to associated companies (102,805) (140,659) Ð Ð
1,469,754 2,510,511 497,683 796,202
Provisions for diminutions in values (343,223) (110,910) (234,610) (111,610)
1,126,531 2,399,601 263,073 684,592
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
78
Notes to Financial Statements
19. A S S O C I A T E D C O M P A N I E S ( c o n t i n u e d )
The balances due are unsecured, interest-free and have no fixed terms of repayment, except for amounts
aggregating HK$377,168,000 (1998 : HK$1,135,800,000) due from associated companies which bear
interest at the prevailing market rate.
Details of the principal associated companies are as follows:
Name of company
Place of
incorporation/
registration
Class of
shares
held
Percentage
of capital
held Principal activities
B.W. Hotel Limited Liability
Company#
United States of
America
* 13.04 Investment in and
operation of
hotel
Barnwood Limited British Virgin
Islands
Ordinary 50.00 Investment holding
Besto Investments Limited Hong Kong Ordinary 18.59 Investment holding
Bushell Limited Hong Kong Ordinary 50.00 Property
investment
Eagle Capital Investment Limited# British Virgin
Islands
Ordinary 33.33 Investment holding
Easlin Corporation# British Virgin
Islands
Ordinary 20.00 Investment holding
Giant Riches Limited Hong Kong Ordinary 50.00 Property
development
Hankey Development Limited Hong Kong Ordinary 37.17 Investment holding
Lai Sun Textiles Company Limited Hong Kong Ordinary 33.33 Property
investment
Naples Investment Limited British Virgin
Islands
Ordinary 50.00 Investment holding
Omicron International Limited British Virgin
Islands
Ordinary 43.50 Investment holding
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
79
Notes to Financial Statements
19. A S S O C I A T E D C O M P A N I E S ( c o n t i n u e d )
Name of company
Place of
incorporation/
registration
Class of
shares
held
Percentage
of capital
held Principal activities
P.S. Development Group of
Companies Limited
Thailand Ordinary 49.00 Investment in and
operation of
hotel
Pengkalen Heights Sdn. Bhd.# Malaysia Ordinary 30.00 Hotel operations
and property
investment
Philippine Dream Company, Inc. Philippines Common 36.00 Hotel investment
Rich Vision Limited British Virgin
Islands
Ordinary 50.00 Investment holding
Sky Connection Limited Hong Kong Ordinary 50.00 Retail
# Audited by public accountants other than Ernst & Young.
* This company has no issued share capital. The Group's capital contribution and profit sharing ratio are not in proportion to its
interest in this company but are as defined by mutual agreement among the owners.
The above table lists the associated companies of the Group which, in the opinion of the directors,
principally affected the results of the year or formed a substantial portion of the net assets of the Group. To
give details of other associated companies would, in the opinion of the directors, result in particulars of
excessive length.
The shares of certain associated companies held by the Group have been pledged to banks to secure banking
facilities granted to the Group.
Included in the balance of `̀ Share of net assets other than goodwill'' is interest capitalised of approximately
HK$134,082,904 (1998 : HK$100,251,619) on loans borrowed for investments in associated companies
engaged in property development.
Pursuant to a judgement rendered by the Court of Appeal of British Columbia in November 1997, the court
allowed the meeting to vote on the dissolution of Whistler Mountain Inn Limited Partnership (the
`̀ Partnership'') of which Village Gate Resorts Limited, a subsidiary of the Group, is a general partner, to
proceed. On 14th November, 1997, the limited partners passed an extraordinary resolution to dissolve the
Partnership. The Partnership was put under receivership from 15th November,1997. The Partnership was
effectively dissolved on 31st December, 1998. During the period of the receivership, the Group's investment
in the Partnership was accounted for using the equity method of accounting. Subsequent to the dissolution
on 31st December, 1998, the Group received its share of the Partnership's fixed assets of HK$6,245,000
(note 13) and a distribution of the remaining other assets of HK$20,679,000 for the dissolution of the
Partnership.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
80
Notes to Financial Statements
20. J O I N T L Y C O N T R O L L E D E N T I T I E S
Group
1999 1998
HK$'000 HK$'000
Share of net assets 145,333 138,682
Amounts due from jointly controlled entities 44,276 44,537
Amount due to a jointly controlled entity (1,037) Ð
188,572 183,219
The balances with jointly controlled entities are unsecured, interest-free and have no fixed terms of
repayment.
Details of the jointly controlled entities are as follows:
Name of company
Business
structure
Place of
registration
Registered
capital
Equity
interest
Profit
sharing
Principal
activities
Qingyuan Grace Snow
Properties Ltd.
Corporate PRC US$5,000,000 74.68% 53.77% Property
development
Shanghai Zhong Yue
Real Estate
Development Co.,
Ltd.
Corporate PRC US$8,000,000 63.48% 63.48% Property
development
Zhong Shan Li Shan
Properties
Development Limited
Corporate PRC RMB75,000,000 37.34% 37.34% Property
development
Included in the balance of `̀ Share of net assets'' is interest capitalised of approximately HK$18,503,000
(1998 : HK$16,678,000) on borrowings for investments in jointly controlled entities engaged in property
development.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
81
Notes to Financial Statements
21. L O N G T E R M I N V E S T M E N T S
Group Company
1999 1998 1999 1998
HK$'000 HK$'000 HK$'000 HK$'000
Listed investments, at cost:
In Hong Kong Ð 461,473 Ð Ð
Outside Hong Kong 5,000 5,000 5,000 5,000
Unlisted investments, at cost 333,411 568,657 12,718 12,164
Deposits paid Ð 325,000 Ð Ð
Advances 679,978 713,299 452,055 385,839
1,018,389 2,073,429 469,773 403,003
Market value of listed investments
at balance sheet date 2,926 105,646 2,926 6,166
22. L O N G T E R M N O T E R E C E I V A B L E
On 18th December, 1997, a sales and purchase agreement (the `̀ Majestic Agreement'') was entered into
between Furama and independent third parties (the ``Majestic Purchasers'') pursuant to which Furama
agreed to sell the entire issued share capital of Fortune Sign Venture Inc. (``Fortune Sign''), a then wholly-
owned subsidiary of Furama, and to assign the shareholder's loan due from Fortune Sign of approximately
HK$82 million to the Majestic Purchasers at a total consideration of HK$2,030 million. The major assets
held by Fortune Sign are the properties, namely the Majestic Hotel and the Majestic Centre (the `̀ Majestic
Properties''), which are situated in Hong Kong. The transaction was satisfied by cash of HK$930 million and
a note of HK$1,100 million (the `̀ Note'').
In accordance with the terms of the Majestic Agreement, the Note is interest-free, repayable on the earlier of
31st March, 2001 or the lapse of the Put Options as detailed in note 34, and is secured by a charge over the
Majestic Properties.
In the opinion of the directors, due to the diminution in value of the Majestic Properties, the Majestic
Purchasers will probably exercise the Put Options. Accordingly, a provision for the contingent loss for the
Note receivable to its net realisable value of HK$855 million has been made.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
82
Notes to Financial Statements
23. D E F E R R E D T A X A S S E T S / D E F E R R E D T A X A T I O N
Group Company
1999 1998 1999 1998
HK$'000 HK$'000 HK$'000 HK$'000
At beginning of year (1,130) (34,401) Ð Ð
Arising on acquisition of subsidiaries Ð (1,780) Ð Ð
Arising on disposal of subsidiaries (4,096) 1,400 Ð Ð
Taxation Ð note 9 5,403 33,651 Ð Ð
Exchange realignment 39 Ð Ð Ð
At end of year 216 (1,130) Ð Ð
The principal components of the deferred tax assets/(liabilities) are as follows:
Group
Provided Not provided
1999 1998 1999 1998
HK$'000 HK$'000 HK$'000 HK$'000
Accelerated capital allowances on fixed assets (1,130) (1,130) (7,106) (11,969)
Tax losses 1,346 Ð 51,941 83,633
Revaluation of investment properties in the PRC Ð Ð (255,410) (342,388)
Revaluation of properties under development in
the PRC Ð Ð (592,942) (1,073,240)
Other timing differences Ð Ð (952) (800)
216 (1,130) (804,469) (1,344,764)
Company
Provided Not provided
1999 1998 1999 1998
HK$'000 HK$'000 HK$'000 HK$'000
Accelerated capital allowances on fixed assets Ð Ð (1,495) (2,007)
The revaluation of the Group's investment properties in Hong Kong does not constitute a timing difference
and, consequently, the amount of potential deferred tax thereon has not been quantified.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
83
Notes to Financial Statements
23. D E F E R R E D T A X A S S E T S / D E F E R R E D T A X A T I O N ( c o n t i n u e d )
The unprovided deferred tax liabilities at the balance sheet date which arise from the revaluation of the
Group's investment properties and properties under development in the PRC in respect of land appreciation
tax (`̀ LAT'') and income tax are set out above. In the opinion of the directors, the deferred tax liabilities are
not expected to crystallise in the foreseeable future since the Group has no intention to dispose of these
revalued properties.
Pursuant to the indemnity deeds dated 12th November, 1997 entered into between the Company and Lai
Fung, the Company has undertaken to indemnify Lai Fung in respect of certain potential PRC income taxes
and LAT payable or shared by Lai Fung in consequence of the disposal of any of the property interests
attributable to Lai Fung through its subsidiaries and its associated companies as at 31st October, 1997
(``Property Interests''). These taxation indemnities given by the Company apply in so far as such taxation is
applicable to the difference between (i) the value of the Property Interests in the valuation thereon by
Chesterton Petty Limited as at 31st October, 1997 (the ``Valuation''), and (ii) the aggregate costs of such
Property Interests incurred up to 31st October, 1997 together with the amount of unpaid land costs, unpaid
land premium and unpaid costs of resettlement, demolition and public utilities and other deductible costs in
respect of the Property Interests. The indemnity deeds assume that the Property Interests are disposed of at
the values attributed to them in the Valuation, computed by reference to the rates and legislation governing
PRC income tax and LAT prevailing at the time of the Valuation.
The indemnities given by the Company do not cover (i) new properties acquired by Lai Fung subsequent to
the listing of the shares of Lai Fung on the Stock Exchange of Hong Kong Limited (the ``Listing''); (ii) any
increase in the relevant tax which arises due to an increase in tax rates or changes to the legislation
prevailing at the time of the Listing; and (iii) any claim to the extent that provision for deferred taxation on
the revaluation surplus has been made in the calculation of the adjusted net tangible asset value of Lai Fung
as set out in Lai Fung's prospectus dated 18th November, 1997.
Lai Fung had no LAT payable during the year. No income tax payable by Lai Fung was indemnifiable by the
Company during the year.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
84
Notes to Financial Statements
24. N E T C U R R E N T L I A B I L I T I E S
Group Company
1999 1998 1999 1998
HK$'000 HK$'000 HK$'000 HK$'000
Current assets:
Cash and bank balances Ð note 36 778,487 650,217 323,316 36,484
Short term investments Ð note 25 43,587 34,306 Ð Ð
Debtors and deposits 1,082,634 1,547,852 50,261 129,517
Completed properties for sale* 218,145 95,647 5,973 574
Stocks 17,282 40,042 Ð Ð
2,140,135 2,368,064 379,550 166,575
Current liabilities:
Bank loans and other borrowings
due within one year Ð note 26 3,105,637 1,790,550 1,482,867 549,641
Bonds payable due within one year
Ð note 27 Ð 923,735 Ð Ð
Creditors, deposits received and accruals 1,386,348 1,394,045 90,176 83,497
Taxation 211,073 287,096 38,057 70,973
4,703,058 4,395,426 1,611,100 704,111
Net current liabilities (2,562,923) (2,027,362) (1,231,550) (537,536)
* Completed properties for sale which are carried at net realisable value and included in the above balance amounted to
HK$186,478,000 (1998 : HK$54,706,000).
Last year's debtors and deposits included balances of HK$471,401,000 due from associated companies
which arose from the ordinary course of business of the Group. Such balances were settled during the year.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
85
Notes to Financial Statements
25. S H O R T T E R M I N V E S T M E N T S
Group
1999 1998
HK$'000 HK$'000
Listed investments, at cost:
In Hong Kong 70,653 72,595
Outside Hong Kong 3,099 3,099
73,752 75,694
Less: Provisions for diminutions in values (39,999) (51,222)
33,753 24,472
Unlisted investments, at cost 26,102 26,102
Less: Provisions for diminutions in values (16,268) (16,268)
9,834 9,834
43,587 34,306
Market value of listed investments
at the balance sheet date 34,656 31,283
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
86
Notes to Financial Statements
26. B A N K L O A N S A N D O T H E R B O R R O W I N G S
Group Company
1999 1998 1999 1998
HK$'000 HK$'000 HK$'000 HK$'000
Bank loans:
Secured 6,223,210 7,067,096 2,263,985 2,306,941
Unsecured 4,688 36,044 Ð Ð
6,227,898 7,103,140 2,263,985 2,306,941Other loan:
Secured Ð 1,558 Ð Ð
Unsecured 1,875 Ð Ð Ð
6,229,773 7,104,698 2,263,985 2,306,941
Obligations under finance leases 143 456 Ð Ð
6,229,916 7,105,154 2,263,985 2,306,941
Portion due within one year classified as current
liabilities Ð note 24 (3,105,637) (1,790,550) (1,482,867) (549,641)
Long term portion 3,124,279 5,314,604 781,118 1,757,300
The long term portion of bank loans and other
borrowings are repayable within periods of:More than one year but not exceeding
two years 1,096,994 2,575,949 659,264 1,397,300More than two years but not exceeding
five years 1,996,185 2,118,895 90,754 360,000
More than five years 31,100 619,760 31,100 Ð
3,124,279 5,314,604 781,118 1,757,300
The secured bank loans are secured by fixed charges on certain properties and assets and floating charges on
certain assets held by the Group.
The unsecured other loan is interest bearing with interest charged at 7.67% per annum and is repayable
within one year.
Obligations under finance leases are repayable in various installments up to the year 2000. Interest is
charged on the outstanding balances at rates ranging from 6.25% to 7.7% per annum.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
87
Notes to Financial Statements
26. B A N K L O A N S A N D O T H E R B O R R O W I N G S ( c o n t i n u e d )
As more fully explained in note 1, at the balance sheet date, certain financial covenants given by the Group
in the Loan Agreements in relation to the Loans have not been complied with. Pursuant to the Loan
Agreements, as confirmed by the Company's legal advisors, upon the breach of any covenants, the respective
lending banks may serve notice on the Group to declare the Loans to be immediately due and repayable.
However, unless and until such notice is served by the respective lending banks, the Loans remain repayable
in accordance with their original stated maturity dates.
Loan agreements with respect to the Other Loans contain cross default clauses. As explained in note 1, if any
relevant borrowings, including the Loans and the Exchangeable Bonds, become due and repayable
prematurely because of an event of default, the Other Loans will, in turn, become immediately due and
repayable if the relevant lending banks serve notice to the Group for immediate repayment. The respective
lending banks of the Other Loans have not to date declared an event of default in respect of any of the
Group's borrowings by virtue of the cross default provisions contained in the respective agreements of the
Other Loans.
For the reasons set out in note 1, the Loans and the Other Loans have not become immediately due and
repayable. Accordingly, the Loans and the Other Loans have continued to be classified as current or long
term liabilities according to their original maturity dates under the respective loan agreements.
27. B O N D S P A Y A B L E
Group
1999 1998
HK$'000 HK$'000
1999 Bonds Ð 923,735
Exchangeable Bonds 891,250 891,250
891,250 1,814,985
Portion due within one year classified
as current liabilities Ð note 24 Ð (923,735)
Long term portion 891,250 891,250
(1) US$120,000,000 guaranteed bonds (the ``1999 Bonds'') were issued on 10th April, 1996 by a wholly-
owned subsidiary of the Company, Lai Sun International Finance Limited. The 1999 Bonds were
unconditionally and irrevocably guaranteed by the Company.
In the prior year, part of the 1999 Bonds with a principal value of US$50,000 was repurchased and
cancelled. The remaining balance of the 1999 Bonds was fully redeemed on 10th April, 1999 at 100%
of the principal amount.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
88
Notes to Financial Statements
27. B O N D S P A Y A B L E ( c o n t i n u e d )
(2) US$115,000,000 exchangeable bonds (the ``Exchangeable Bonds'') were issued on 28th February,
1997 by a wholly-owned subsidiary of the Company, Lai Sun International Finance (Cayman Islands)
Limited (the ``Issuer''). The Exchangeable Bonds are unconditionally and irrevocably guaranteed by the
Company.
The Exchangeable Bonds bear interest from 24th February, 1997 at the rate of 5% per annum. Interest
is payable semi-annually in arrears on 28th February and 28th August in each year.
Unless previously redeemed or purchased and cancelled, each Exchangeable Bond will, at the option
of the holder, be exchangeable for a pro rata share of the Exchange Property (as defined below) on or
after the date which falls 90 days after the IPO listing date of Asia Television Limited (`̀ ATV'') as
defined in the related bond document, up to and including 30th January, 2004 or, if the Exchangeable
Bonds have been called for redemption before then, up to the close of business on a date not later than
five business days prior to the date fixed for redemption thereof. Upon electing to exchange, each
bondholder shall have the right to require the redemption of all or any of its Exchangeable Bonds at
their Early Redemption Price as defined in the related bond document and have that amount applied
on its behalf in acquiring a pro rata share of such number of the equity shares in the capital of ATV as
represents one-sixth of the total shares outstanding as at the IPO listing date from time to time for
exchange (the `̀ Exchange Property'').
Unless previously redeemed, purchased and cancelled or exchanged, the Exchangeable Bonds will be
redeemed at 142.9171% of their principal amount on 28th February, 2004. The Exchangeable Bonds
may be redeemed at the option of the relevant holders on 8th June, 2001 at 120.6984% of the
principal amount in the event that either ATV's current licence to broadcast is not renewed or a
complying IPO as defined in the related bond document has not occurred on or before 1st June, 2001.
The Exchangeable Bonds may be redeemed at the option of the relevant holders on 28th February,
2002 at 125.4520% of their principal amount. The Exchangeable Bonds may also be redeemed at any
time during the period from 28th February, 1997 to 28th February, 2004 on the occurrence of any of
certain other events as defined in the related bond document at various pre-determined rates ranging
from 100% to 142.9171% of the principal amount.
The Exchangeable Trust Deed contains specific covenants that the Group is to comply with. At the
balance sheet date, the Group had not complied with certain of these covenants. As more fully
explained in note 1, the terms of the Exchangeable Trust Deed stipulate that upon the breach of any
covenants, the trustee may (the trustee must if so required by the bondholders) serve a notice to the
Group to declare the bonds to be immediately due and repayable. However, unless and until such
notice is served by the trustee, the Exchangeable Bonds remain repayable in accordance with their
original stated maturity dates. For the reasons set out in note 1, the Directors consider that it is
appropriate to continue classifying the Exchangeable Bonds as long term liabilities in accordance with
the original maturity terms under the Exchangeable Trust Deed.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
89
Notes to Financial Statements
28. S H A R E C A P I T A L
Number of
shares
Nominal
value
Number of
shares
Nominal
value
1999 1999 1998 1998
'000 HK$'000 '000 HK$'000
Authorised:
Ordinary shares of HK$0.50 each 10,000,000 5,000,000 5,000,000 2,500,000
Preference shares of HK$1 each 1,200,000 1,200,000 1,200,000 1,200,000
6,200,000 3,700,000
Issued and fully paid:
Ordinary shares of HK$0.50 each 3,536,002 1,768,001 1,606,999 803,500
(1) During the year, the authorised ordinary share capital of the Company was increased from
HK$2,500,000,000 to HK$5,000,000,000 by the creation of an additional 5,000,000,000 ordinary
shares of HK$0.5 each, ranking pari passu in all respects with the existing ordinary shares of the
Company.
(2) On 14th August, 1998, the Company allotted and issued 161,000,000 new ordinary shares of
HK$0.50 each to Lucky Source Investment Limited, a wholly-owned subsidiary of Nan Fung, at a
subscription price of HK$0.95 per ordinary share. The net proceeds of approximately HK$152 million
was used as general working capital of the Group. Immediately following the placement, Nan Fung
was interested in approximately 18.01% of the Company's share capital and became a substantial
shareholder of the Company.
(3) On 3rd February, 1999, the Company completed a rights issue of 1,767,999,209 ordinary shares of
HK$0.50 each (`̀ Rights Shares'') on the basis of one Rights Share for every existing share of the
Company at the subscription price of HK$0.50 per Rights Share. The net proceeds of approximately
HK$859 million was used to repay the Group's borrowings. As a result of the rights issue, the
subscription price of the warrants was adjusted from HK$6.81 to HK$4.83 per share with effect from
7th January, 1999.
(4) As a result of the exercise of warrants with an aggregate amount of HK$18,847 during the year, 3,902
ordinary shares were issued at HK$4.83 per share. All the Company's remaining warrants expired on
23rd March, 1999.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
90
Notes to Financial Statements
29. R E S E R V E S
Group
Share
premium
account
Warrant
subscription
reserve
Investment
property
revaluation
reserve
Revaluation
reserve for
properties
under
development
held for
rental
purposes
Capital
redemption
reserve
Capital
reserve
General
reserve
Exchange
fluctuation
reserve
Retained
profits/
(accumulated
losses) Total
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
At beginning of year 5,766,933 44,627 5,225,871 1,458,651 1,200,000 102,566 322 (6,072) 2,593,948 16,386,846
Arising on exercise of
warrants 17 Ð Ð Ð Ð Ð Ð Ð Ð 17
Arising on private placement
of shares 72,450 Ð Ð Ð Ð Ð Ð Ð Ð 72,450
Share issue expenses (25,870) Ð Ð Ð Ð Ð Ð Ð Ð (25,870)
Release upon disposal of
investment properties Ð Ð 86,948 Ð Ð Ð Ð Ð Ð 86,948
Release upon transfer of
investment properties to
completed properties for
sale Ð Ð 52,688 Ð Ð Ð Ð Ð Ð 52,688
Deficits on revaluation of
investment properties Ð Ð (2,716,631) Ð Ð Ð Ð Ð Ð (2,716,631)
Deficits on revaluation of
properties under
development Ð Ð Ð (41,140) Ð Ð Ð Ð Ð (41,140)
Share of revaluation deficits
of associated companies Ð Ð (14,493) (26,162) Ð Ð Ð Ð Ð (40,655)
Share of reserve in associated
companies Ð Ð Ð Ð Ð Ð (322) Ð Ð (322)
Exchange realignments:
Subsidiaries Ð Ð Ð Ð Ð Ð Ð 6,145 Ð 6,145
Associated companies Ð Ð Ð Ð Ð Ð Ð 2,470 Ð 2,470
Jointly controlled entities Ð Ð Ð Ð Ð Ð Ð 285 Ð 285
Elimination of goodwill
arising on acquisition of
associated companies Ð Ð Ð Ð Ð (28,000) Ð Ð Ð (28,000)
Elimination of goodwill
arising on acquisition of
additional interests in
subsidiaries Ð Ð Ð Ð Ð (39,284) Ð Ð Ð (39,284)
Release upon disposal of fixed
assets Ð Ð Ð Ð Ð Ð Ð 50,651 Ð 50,651
Release upon expiry of
warrants Ð (44,627) Ð Ð Ð Ð Ð Ð 44,627 Ð
Release upon disposal of
subsidiaries Ð Ð Ð Ð Ð 9,756 Ð 14,152 Ð 23,908
Release upon cancellation of
Lai Fung Convertible
Bonds Ð Ð Ð Ð Ð (17,084) Ð Ð Ð (17,084)
Net loss for the year Ð Ð Ð Ð Ð Ð Ð Ð (6,832,423) (6,832,423)
At end of the year 5,813,530 Ð 2,634,383 1,391,349 1,200,000 27,954 Ð 67,631 (4,193,848) 6,940,999
Reserves retained by:
Company and
subsidiaries 5,813,530 Ð 2,520,052 1,390,011 1,200,000 27,954 Ð 68,124 (3,769,365) 7,250,306
Associated companies Ð Ð 114,331 1,338 Ð Ð Ð 1,236 (423,955) (307,050)
Jointly controlled entities Ð Ð Ð Ð Ð Ð Ð (1,729) (528) (2,257)
5,813,530 Ð 2,634,383 1,391,349 1,200,000 27,954 Ð 67,631 (4,193,848) 6,940,999
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
91
Notes to Financial Statements
29. R E S E R V E S ( c o n t i n u e d )
Company
Share
premium
account
Warrant
subscription
reserve
Investment
property
revaluation
reserve
Capital
redemption
reserve
Retained
profits/
(accumulated
losses) Total
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
At beginning of year 5,766,933 44,627 3,541,281 1,200,000 1,183,615 11,736,456
Arising on exercise of warrants 17 Ð Ð Ð Ð 17
Arising on private placement of shares 72,450 Ð Ð Ð Ð 72,450
Share issue expenses (25,870) Ð Ð Ð Ð (25,870)
Release upon transfer of investment
properties to completed properties
for sale Ð Ð (4,749) Ð Ð (4.749)
Release upon expiry of warrants Ð (44,627) Ð Ð 44,627 Ð
Release upon disposal of investment
properties Ð Ð (1,770) Ð Ð (1,770)
Deficits on revaluation of investment
properties Ð Ð (1,140,618) Ð Ð (1,140,618)
Net loss for the year Ð Ð Ð Ð (5,626,044) (5,626,044)
At end of year 5,813,530 Ð 2,394,144 1,200,000 (4,397,802) 5,009,872
30. C O N V E R T I B L E B O N D S
Group
1999 1998
Notes HK$'000 HK$'000
Lai Fung Convertible Bonds: (1)
At the beginning of year 941,382 1,158,465
Converted during the year Ð (130,584)
Repurchased during the year (4,176) (86,499)
937,206 941,382
Convertible Bonds 2002 : (2)
At beginning of year 1,161,375 Ð
Issued during the year Ð 1,161,375
1,161,375 1,161,375
At end of year 2,098,581 2,102,757
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
92
Notes to Financial Statements
30. C O N V E R T I B L E B O N D S ( c o n t i n u e d )
(1) Lai Fung Convertible Bonds
On 5th January, 1994, a subsidiary of the Group, LFO, issued US$150,000,000 (HK$1,158,465,000)
of convertible guaranteed bonds (``Lai Fung Convertible Bonds''). The Lai Fung Convertible Bonds
were unconditionally guaranteed by the Company up to 28th November, 1997, the date of the Listing,
and thereafter by Lai Fung.
The Lai Fung Convertible Bonds bear interest at the rate of 5.25% per annum payable in arrears on 5th
January, 1995, 5.5% per annum payable in arrears on 5th January, 1996 and 5.75% per annum
payable in arrears on 5th January, 1997, and each 5th January thereafter.
Unless previously redeemed or purchased and cancelled, the Lai Fung Convertible Bonds are
convertible into fully paid ordinary shares of Lai Fung at the option of the holders on or after the date
falling three calendar months after the date of Listing up to the close of business on the date seven days
prior to the third anniversary of the date of Listing. Upon conversion, the Lai Fung Convertible Bonds
will be convertible into a number of shares determined by dividing the principal amount of such
bonds by HK$2.94, being 105% of the initial public offer price of the shares of Lai Fung.
On the third anniversary of the date of Listing, LFO may elect to redeem the outstanding Lai Fung
Convertible Bonds in cash at their principal amount, or to mandatorily convert the outstanding Lai
Fung Convertible Bonds into shares of Lai Fung at a conversion price that is equal to the average
closing price of the shares over a period of 30 consecutive dealing days prior to such date.
Subsequent to the date of Listing, the Lai Fung Convertible Bonds may also be redeemed at their
principal amount at any time on the occurrence of any of the events of default as defined in the related
bond document. LFO may also elect to redeem the outstanding Lai Fung Convertible Bonds at any
time in whole, but not in part, in the event of certain changes relating to the Cayman Islands or Hong
Kong taxation at their principal amount multiplied by 103%.
Subsequent to the balance sheet date, 2,639,795 ordinary shares of HK$0.10 each in the share capital
of Lai Fung were issued upon the conversion of the Lai Fung Convertible Bonds with a principal value
of US$1,000,000 (approximately HK$7,748,000) by certain bondholders at a conversion rate of
HK$2.94 per share.
(2) Convertible Bonds 2002
US$150,000,000 4% convertible guaranteed bonds due in 2002 (``Convertible Bonds 2002'') were
issued on 4th August, 1997 by Lai Sun International Finance (1997) Limited (`̀ LSIF 1997''), a wholly-
owned subsidiary of the Company. The Convertible Bonds 2002 are unconditional and irrevocably
guaranteed by the Company.
The Convertible Bonds 2002 were issued at 100% of their principal amount and bear interest at a rate
of 4% per annum payable annually in arrears on 4th August of each year.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
93
Notes to Financial Statements
30. C O N V E R T I B L E B O N D S ( c o n t i n u e d )
(2) Convertible Bonds 2002 (continued)
Unless previously redeemed, purchased and cancelled or converted, the Convertible Bonds 2002 are
convertible into fully paid ordinary shares of HK$0.50 each of the Company at the option of the holder
at a conversion price of, initially, HK$11.50 per share at a fixed rate of exchange on conversion of
HK$7.751 = US$1.00, at any time from 4th September, 1997 to 24th June, 2002, both dates inclusive.
In the event that the average of the closing price of the ordinary shares of the Company for the 30
dealing days ending on the dealing day prior to 4th August, 1998 or the dealing day immediately
preceding the day falling 30 days prior to 4th August, 2000 is less than the conversion price, then in
effect the conversion price will be reduced, with effect from 4th August, 1998 or 4th August, 2000, as
the case may be, to such average price, or if higher, a price equal to 90% of the then conversion price.
The conversion price will be subject to adjustment upon the occurrence of certain events as defined in
the document pertaining to the issue of the Convertible Bonds 2002.
As a result of the rights issue completed on 27th July, 1998, the conversion price was adjusted from
HK$11.50 to HK$10.64 per share with effect from 27th July, 1998.
Pursuant to the terms of the related bond document, the conversion price was reset from HK$10.64
per share to HK9.50 per share with effect from 4th August, 1998.
As a result of the rights issue completed on 3rd February, 1999, the conversion price was adjusted
from HK$9.50 per share to HK$6.70 per share with effect from 3rd February, 1999.
Unless previously redeemed, purchased and cancelled or converted, LSIF 1997, under certain
conditions as defined in the related documents, may redeem all or some of the Convertible Bonds
2002, on or at any time after 4th August, 1999 at their Early Redemption Price together with accrued
interest with the calculation based on a formula as defined in the related bond document.
Unless previously redeemed, purchased and cancelled or converted, the Convertible Bonds 2002 may
be redeemed at the option of the holders, on 4th August, 2000 at 115.2249% of their principal
amount plus accrued interest.
Unless previously redeemed, purchased and cancelled or converted, the Convertible Bonds 2002 will
be redeemed at their principal amount plus accrued interest on 4th August, 2002.
The Convertible Bonds 2002 may also be redeemed at any time upon the occurrence of any of the
events as defined in the document pertaining to the issue of the bonds, at their Early Redemption Price
plus accrued interest.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
94
Notes to Financial Statements
30. C O N V E R T I B L E B O N D S ( c o n t i n u e d )
(2) Convertible Bonds 2002 (continued)
As stated in notes 26 and 27, at the balance sheet date, the Group had not complied with certain loan
covenants in respect of the Loans and the Exchangeable Bonds. As more fully explained in note 1, the
Convertible Trust Deed contains a cross default clause to the effect that if any relevant borrowings,
including the Loans and the Exchangeable Bonds, become due and repayable prematurely by reason of
an event of default, the Convertible Bonds 2002, in turn, will become immediately due and repayable,
if the trustee serves notice to the Group for immediate repayment. The trustee (the trustee must if so
required by the bondholders) has not to date declared an event of default in respect of any of the
Group's borrowings by virtue of the cross default provisions contained in the Convertible Trust Deed.
For reasons set out in note 1, the Convertible Bonds 2002 have not become immediately due and
repayable and have continued to be classified as long term liabilities according to their original
maturity terms.
31. C O N V E R T I B L E N O T E
On 11th May, 1999, Lai Fung entered into a conditional subscription agreement (the `̀ Note Agreement'')
with Sunny Group Investment Limited (``Sunny Group''), a wholly-owned subsidiary of Sun Chung which in
turn is wholly-owned by the Bank of China, whereby Lai Fung would issue a HK$600 million convertible
note (the `̀ Convertible Note'') to the Sunny Group. The transaction was approved by the shareholders of the
Company, LSG and Lai Fung at their respective extraordinary general meetings on 22nd June, 1999. The
Convertible Note was issued on 2nd July, 1999.
The Convertible Note was issued at 100% of its principal amount and bears interest at the rate of 5% per
annum payable quarterly in arrears on 2nd January, 2nd April, 2nd July and 2nd October of each year.
Pursuant to the Note Agreement, unless previous redeemed, the Convertible Note is convertible at 105% of
the principal amount, in whole or in part, into fully paid ordinary shares of HK$0.10 each of Lai Fung at a
conversion price of HK$0.65 per share (the `̀ Conversion Price''), at any time from 1st December, 2000 to
2nd July, 2002, being the third anniversary of the date of the issue of the Convertible Note. The Conversion
Price is subject to certain adjustments as defined in the Note Agreement.
Unless previously redeemed or converted, the Convertible Note will be redeemed at 110% of the principal
amount plus accrued interest on 2nd July, 2002. The Convertible Note may also be redeemed at any time
upon the occurrence of any of the events as defined in the Note Agreement at 110% of the principal amount
plus accrued interest up to and including the date of repayment.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
95
Notes to Financial Statements
32. N O T E S T O T H E C O N S O L I D A T E D C A S H F L O W S T A T E M E N T
(a) Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from operating activities
1999 1998
HK$'000 HK$'000
Operating profit/(loss) (6,692,073) 468,961
Interest expense 195,348 112,779
Interest income (154,775) (279,656)
Bond issue expenses Ð 51,423
Gain on disposal of interests in associated companies Ð (158,893)
Loss on disposal of partial interests in subsidiaries Ð 2,752
Dividend income from listed investments (4,256) (1,820)
Dividend income from unlisted investments (200) (8,887)
Depreciation 63,639 70,834
Amortisation of goodwill on acquisition of subsidiaries and associated
companies 2,815 8,558
Amortisation of deferred pre-operating expenses 5,690 8,540
Provision for premium on bond redemption 113,639 112,892
Provision for premium on note redemption 1,667 Ð
Gain on cancellation of convertible bonds (17,718) Ð
Loss/(gain) on disposal of long term listed investments 302,382 (10,019)
Loss on disposal of long term unlisted investments 431 Ð
Loss on dissolution of associated companies 1,808 Ð
Loss on disposal of fixed assets 155,336 2,377
Loss/(gain) on disposal of subsidiaries (13,923) 131,339
Loss/(gain) on disposal of properties under development 158,153 (467)
Loss/(gain) on disposal of investment properties 153,940 (463,231)
Gain on deemed disposal of a subsidiary Ð (56,871)
Gain on disposal of associated companies (15,138) Ð
Provisions for diminutions in values of properties under development 2,946,654 155,874
Provisions for diminutions in values of completed properties for sale to
net realisable value 128,931 20,930
Provisions for diminutions in values of long term unlisted investments 426,982 Ð
Provisions for contingent losses in respect of profit guarantees 178,200 Ð
Provision for potential loss arising from exercise of Put Option 855,000 Ð
Provision for contingent loss in respect of a guarantee given to a bank 228,000 Ð
Provisions for debtors and deposits paid for acquisition of properties 452,500 91,913
Provisions for diminutions in values of associated companies holding
properties under development 311,000 Ð
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
96
Notes to Financial Statements
32. N O T E S T O T H E C O N S O L I D A T E D C A S H F L O W S T A T E M E N T ( c o n t i n u e d )
(a) Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from operating activities
(continued)
1999 1998
HK$'000 HK$'000
Provision for/(write back of) diminution in value of an associated
company holding completed properties for sale (110,910) 110,910
Provisions for diminutions in values of, and advances to, associated
companies and investee companies engaged in hotel operations 42,487 Ð
Write off of deferred pre-operating expenses 18,974 Ð
Write off of goodwill 54,182 Ð
Write back of provision for premium on convertible bond redemption Ð (121,922)
Discount on repurchase of bonds Ð (457)
Decrease/(increase) in restricted cash and bank balances 37,201 (45,256)
Decrease/(increase) in short term investments (9,281) 385,606
Decrease in stocks 16,565 15,440
Decrease in completed properties for sale 206,279 471,023
Decrease/(increase) in debtors and deposits 17,928 (399,363)
Increase/(decrease) in creditors, deposits received and accruals (465,229) 162,331
Net cash inflow/(outflow) from operating activities (407,772) 837,640
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
97
Notes to Financial Statements
32. N O T E S T O T H E C O N S O L I D A T E D C A S H F L O W S T A T E M E N T ( c o n t i n u e d )
(b) Analysis of changes in financing during the year
Share
capital and
premium
Bank loans,
other
borrowings
and deposits
pledged
Convertible
bonds
Convertible
note
Bonds
payable
Minority
interests
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Balance at 1st August, 1997 6,067,849 4,322,178 1,158,465 Ð 1,818,850 2,465,560
Net cash inflow/(outflow) from financing 502,584 2,905,305 1,091,960 Ð (3,408) 864,527
Share of net profit for the year Ð Ð Ð Ð Ð 32,910
Share of surplus on revaluation of
investment properties Ð Ð Ð Ð Ð 655,459
Share of surplus on revaluation of
properties under development held
for rental purposes Ð Ð Ð Ð Ð 566,070
Share of surplus on revaluation of
properties under development of
associated companies Ð Ð Ð Ð Ð 9,492
Share of capital reserve Ð Ð Ð Ð Ð 3,162
Purchases of fixed assets under finance
leases Ð 416 Ð Ð Ð Ð
Arising on acquisition of subsidiaries Ð 295,401 Ð Ð Ð 198,413
Arising on acquisition of additional
interest in a subsidiary Ð Ð Ð Ð Ð (159,925)
Disposal of partial interests in
subsidiaries Ð Ð Ð Ð Ð 44,579
Arising on deemed disposal of a
subsidiary Ð Ð Ð Ð Ð (100,174)
Disposal of subsidiaries Ð (409,552) Ð Ð Ð Ð
Subsidiary excluded from consolidation Ð Ð Ð Ð Ð (10,101)
Conversion of convertible bonds Ð Ð (130,584) Ð Ð 130,584
Discount on repurchase of convertible
bonds Ð Ð (17,084) Ð Ð Ð
Discount on repurchase of bonds Ð Ð Ð Ð (457) Ð
Exchange realignments Ð (10,808) Ð Ð Ð (18,124)
Balance at 31st July, 1998 and 1st
August, 1998 Ð page 99 6,570,433 7,102,940 2,102,757 Ð 1,814,985 4,682,432
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
98
Notes to Financial Statements
32. N O T E S T O T H E C O N S O L I D A T E D C A S H F L O W S T A T E M E N T ( c o n t i n u e d )
(b) Analysis of changes in financing during the year (continued)
Share
capital and
premium
Bank loans,
other
borrowings
and deposits
pledged
Convertible
bonds
Convertible
note
Bonds
payable
Minority
interests
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Balance at 1st August, 1998 Ð page 98 6,570,433 7,102,940 2,102,757 Ð 1,814,985 4,682,432
Net cash inflow/(outflow) from financing 1,011,098 (619,367) (3,542) 600,000 (923,735) (19,252)
Share of net loss for the year Ð Ð Ð Ð Ð (211,370)
Share of deficits on revaluation of
investment properties Ð Ð Ð Ð Ð (155,057)
Share of deficits on revaluation of
properties under development held for
rental purposes Ð Ð Ð Ð Ð (23,230)
Share of general reserve Ð Ð Ð Ð Ð (276)
Arising on acquisition of additional
interest in a subsidiary Ð Ð Ð Ð Ð (86,421)
Disposal of subsidiaries Ð (258,007) Ð Ð Ð (72,530)
Share of goodwill arising on acquisition
of associated companies Ð Ð Ð Ð Ð (32,846)
Share of goodwill arising on acquisition
of additional interests in subsidiaries Ð Ð Ð Ð Ð (43,399)
Share of exchange fluctuation reserve on
disposal of fixed assets Ð Ð Ð Ð Ð 46,437
Share of goodwill released from disposal
of subsidiaries Ð Ð Ð Ð Ð 8,944
Share of exchange fluctuation reserve
released from disposal of subsidiaries Ð Ð Ð Ð Ð 12,974
Discount on repurchase of convertible
bonds Ð Ð (634) Ð Ð Ð
Exchange realignments Ð 4,350 Ð Ð Ð (633)
Balance at 31st July, 1999 7,581,531 6,229,916 2,098,581 600,000 891,250 4,105,773
(c) Major non-cash transactions
Part of the considerations for the disposal of subsidiaries during the year with an amount of
HK$165,208,000 was satisfied by receivables.
(d) Exceptional items
The exceptional items for the year resulted in a cash inflow from investing activities of HK$159,091,000
(1998 : Nil).
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
99
Notes to Financial Statements
32. N O T E S T O T H E C O N S O L I D A T E D C A S H F L O W S T A T E M E N T ( c o n t i n u e d )
(e) Acquisition of subsidiaries
1999 1998
HK$'000 HK$'000
Net assets acquired:
Fixed assets Ð 1,811,893
Investment properties Ð 701,472
Properties under development 236,590 6,033,998
Deferred pre-operating expenses Ð 33,043
Associated companies Ð 21,223
Long term investments Ð 3,413
Cash and bank balances 272 191,031
Short term investments Ð 11,502
Debtors and deposits 105 85,252
Completed properties for sale Ð 4,908
Stocks Ð 9,568
Bank loans and other borrowings Ð (295,401)
Creditors, deposits received and accruals (123,787) (416,049)
Taxation Ð (32,956)
Deferred taxation Ð (1,780)
Minority interests Ð (198,413)
113,180 7,962,704
Goodwill Ð (9,921)
113,180 7,952,783
Carrying value of interests in subsidiaries
acquired originally held by the Group as:
Interests in associated companies (113,180) (167,209)
Interests in long term investments Ð (813,234)
Ð 6,972,340
Satisfied by:
Cash Ð 6,972,340
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
100
Notes to Financial Statements
32. N O T E S T O T H E C O N S O L I D A T E D C A S H F L O W S T A T E M E N T ( c o n t i n u e d )
(e) Acquisition of subsidiaries (continued)
The subsidiaries acquired during the year utilised HK$1,223,000 (1998 : HK$14,211,000) of the Group's
net operating cash flows, paid HK$5,825,000 (1998 : HK$31,358,000) in respect of the net returns on
investments and servicing of finance, no amount was paid in respect of taxation (1998 : HK$33,692,000),
contributed HK$88,700,000 (1998 : HK$852,799,000) for investing activities, and utilised HK$81,926,000
(1998 : HK$193,780,000) for financing activities.
Analysis of net outflow/(inflow) of cash and cash equivalents in respect of the acquisition of subsidiaries:
1999 1998
HK$'000 HK$'000
Cash consideration Ð 6,972,340
Cash and bank balances acquired (272) (191,031)
Interest capitalised as acquisition costs of a subsidiary Ð (212,491)
Net outflow/(inflow) of cash and cash equivalents in respect of the
acquisition of subsidiaries (272) 6,568,818
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
101
Notes to Financial Statements
32. N O T E S T O T H E C O N S O L I D A T E D C A S H F L O W S T A T E M E N T ( c o n t i n u e d )
(f) Disposal of subsidiaries
1999 1998
HK$'000 HK$'000
Net assets disposed of:
Fixed assets 43,667 1,563,699
Investment properties Ð 500,093
Properties under development 697,377 1,161,159
Goodwill 34,411 Ð
Interests in associated companies 311,735 Ð
Long term investments Ð 140,081
Cash and bank balances 9,349 839
Debtors and deposits 27,055 17,283
Stocks 5,702 1,658
Bank loans and other borrowings (258,007) (409,552)
Creditors, deposits received and accruals (157,356) (51,249)
Taxation (10,838) (7,930)
Deferred taxation 4,096 (1,400)
Minority interests (72,530) Ð
Release of investment property revaluation reserve Ð (25,234)
Release of exchange reserve 27,126 Ð
Release of capital reserve 18,700 Ð
680,487 2,889,447
Profit/(loss) on disposal 13,923 (131,339)
694,410 2,758,108
Reclassification of carrying value of interests in
subsidiaries disposed of as interests in
associated companies Ð (204,456)
694,410 2,553,652
Satisfied by:
Cash 529,202 1,453,652
Promissory note Ð 1,100,000
Receivables 165,208 Ð
694,410 2,553,652
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
102
Notes to Financial Statements
32. N O T E S T O T H E C O N S O L I D A T E D C A S H F L O W S T A T E M E N T ( c o n t i n u e d )
(f) Disposal of subsidiaries (continued)
The subsidiaries disposed of during the year utilised HK$13,346,000 (1998 : contributed HK$10,017,000)
of the Group's net operating cash flows, paid HK$1,537,000 (1998 : HK$28,234,000) in respect of returns
on investments and servicing of finance, paid HK$13,640,000 (1998 : HK$1,115,000) in respect of taxation,
utilised HK$28,924,000 (1998 : HK$54,466,000) for investing activities and utilised HK$9,207,000 (1998 :
contributed HK$396,075,000) for financing activities.
Analysis of net inflow of cash and cash equivalents in respect of the disposal of subsidiaries:
1999 1998
HK$'000 HK$'000
Cash consideration received 529,202 1,453,652
Cash and bank balances disposed of (9,349) (839)
Net inflow of cash and cash equivalents in respect of the disposal of
subsidiaries 519,853 1,452,813
(g) Subsidiary excluded from consolidation
1999 1998
HK$'000 HK$'000
Net assets excluded from consolidation:
Fixed assets Ð 7,923
Cash Ð 20,633
Debtors and deposits Ð 4,553
Stocks Ð 2,924
Creditors, deposits received and accruals Ð (6,021)
Minority interests Ð (10,101)
Ð 19,911
Satisfied by:
Reclassification to interests in associated companies Ð 19,911
Analysis of the net outflow of cash and cash equivalents in respect of exclusion of the subsidiary from
consolidation:
1999 1998
HK$'000 HK$'000
Cash balances being excluded from consolidation and the net outflow of
cash and cash equivalents in respect of the exclusion of the subsidiary
from consolidation Ð 20,633
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
103
Notes to Financial Statements
33. L I T I G A T I O N
An action was commenced in December 1998 against certain Group companies and the other shareholders
of Hotel 57 LLC (the `̀ Shareholders'') by Art 57 Properties, Inc. (the `̀ Plaintiff'') in the Supreme Court of the
state of New York (the `̀ New York Court''), alleging breach of contract, fraud and promissory estoppel. The
Plaintiff's case was based on a claim that it had made a down payment of US$2 million and signed a letter of
intent to purchase the Four Seasons Hotel, New York (`̀ FSNY''). By way of relief, the Plaintiff sought specific
performance requiring the sale of shares (the ``FSNY Shares'') in the ownership entities, the effect of which
would convey beneficial ownership of the FSNY to the Plaintiff or, in the alternative, damages in an amount
of not less than US$80 million. Simultaneously, the Plaintiff filed a motion for a preliminary injunction
seeking to prevent the sale of the FSNY Shares, or to attach the proceeds from any sale of the FSNY Shares
pending final disposition of the case.
In early 1999, the Plaintiff applied to discontinue the New York proceedings and commenced a separate suit
in the United States District Court in Texas (the `̀ Texas Court'') against Milewood International Inc.
(``Milewood''), a subsidiary of the Group, the other shareholders of FSNY and 57 BB Property, LLC, the
purchaser of FSNY, for similar claims as above.
In February 1999, the New York Court denied the motion to discontinue the New York proceedings and
dismissed all claims against the companies of the Group, except for Milewood and certain shareholders of
FSNY. In March 1999, the Texas Court dismissed all claims against all defendants. An appeal has been filed
by the Plaintiff.
In March 1999, the Group's interest in FSNY was disposed of to 57 BB Property LLC.
Having regard to the advice from legal counsel, the directors consider that the Group has substantive
defences to the current litigation such that they consider the remaining claims should be dismissed and that
the litigation should have no material adverse effect on the Group.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
104
Notes to Financial Statements
34. C O M M I T M E N T S
Commitments not provided for in the financial statements at the balance sheet date were as follows:
(a)
Group Company
1999 1998 1999 1998
HK$'000 HK$'000 HK$'000 HK$'000
Authorised capital expenditure:Contracted, but not provided for
Subsidiaries 692,175 1,053,796 Ð Ð
Jointly controlled entities 141,816 151,381 Ð Ð
833,991 1,205,177 Ð Ð
Not contracted for
Subsidiaries 138,211 Ð Ð Ð
972,202 1,205,177 Ð Ð
Annual commitments payable in the following year
under non-cancellable operating leases in
respect of land and buildings expiring:
Within one year 107 1,147 Ð Ð
Within two to five years 257 550 Ð Ð
After five years 1,587 1,588 Ð Ð
1,951 3,285 Ð Ð
(b) Pension commitments
The Group operates a defined benefit retirement scheme for the eligible employees of Furama which is non-
contributory. The assets of the scheme are held separately from those of the Group in an independently
administered fund.
The contributions to the scheme are determined with the advice of independent, qualified actuaries on the
basis of triennial valuations, being the minimum requirement under the Occupational Retirement Schemes
Ordinance, using the aggregate method. Based on the most recent valuation carried out on 30th September,
1998 by Watson Wyatt Hong Kong Limited, qualified consulting actuaries, the level of funding ranges from
0% to 8.3% of employee costs with no material surplus or deficiency.
The principal assumption used by the actuaries was that the average salary inflation and the average return
on investments would be 8% and 9% per annum, respectively. The differences between the market value of
the scheme's assets and the present value of the past service liabilities on an on-going basis at the date of the
actuarial valuation, are taken into consideration when determining future funding rates in order to ensure
that the scheme will be able to meet these liabilities as they become due. The current funding rates are those
recommended by the actuaries to ensure that the scheme will be able to meet its future liabilities.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
105
Notes to Financial Statements
34. C O M M I T M E N T S ( c o n t i n u e d )
(c) Grant of put options
Upon the completion of the sales and purchase agreement of Fortune Sign (the `̀ Completion'') as further
detailed in note 22, Furama entered into an option deed (the ``Option Deed'') with the Majestic Purchasers,
pursuant to which Furama granted a share put option and a loan put option (together the ``Put Options'') to
the Majestic Purchasers to require Furama to acquire the entire issued share capital of Fortune Sign and the
related shareholder's loan owing from Fortune Sign, respectively, at a total consideration of approximately
HK$1,930 million. The Put Options cannot be exercised by the Majestic Purchasers unless they are
exercised simultaneously.
The Put Options are each for a term of approximately 3 years commencing from the date of the Completion
and expiring on 28th February, 2001 (both dates inclusive) (the ``Option Period'') and may be exercised at
any time and from time to time, during the period from 1st February, 2001 to 28th February, 2001 (both
dates inclusive) (the `̀ Exercise Period''), by the Majestic Purchasers giving notice in writing to Furama of
their intention to do so.
At any time before the Exercise Period, upon the occurrence of certain events specified in the Option Deed,
inter alia, the Lim Family ceases to beneficially own, whether directly or indirectly, at least 35% of the issued
share capital of LSG from time to time, or LSG, together with the Lim Family, cease to beneficially own,
whether, directly or indirectly, at least 35% of the issued share capital of the Company from time to time,
the Majestic Purchasers shall be entitled to exercise the Put Options by giving notice in writing to Furama of
their intention to do so within one month after the occurrence of such events.
The Put Options will lapse automatically and will not be exercisable upon the earlier of the expiry of the
Option Period, or the occurrence of certain events specified in the Option Deed.
Furama will be entitled to set off the outstanding principal amount of the Note against the total
consideration payable to the Majestic Purchasers upon exercise of the Put Options.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
106
Notes to Financial Statements
35. C O N T I N G E N T L I A B I L I T I E S
Contingent liabilities not provided for in the financial statements at the balance sheet date were as follows:
Group Company
1999 1998 1999 1998
HK$'000 HK$'000 HK$'000 HK$'000
Guarantees given to banks in connection with
facilities granted to:
Subsidiaries Ð Ð 3,261,269 4,403,800
Associated companies 295,935 631,600 295,935 679,300
Investee companies 278,613 307,900 278,613 307,900
574,548 939,500 3,835,817 5,391,000
Guarantee given in connection with
the issue of convertible bonds Ð Ð 1,161,375 1,161,375
Guarantees given in connection with
the issue of bonds Ð Ð 891,250 1,814,985
574,548 939,500 5,888,442 8,367,360
In additions to the above, as at 31st July, 1999, the Group has the following contingent liabilities:
(1) A guarantee of HK$771,000 (1998 : HK$1,531,000) has been given to third parties in connection with
the Group's restaurant operations.
(2) A guarantee of interest payment has been given to banks on attributable share of bank loans in the
amount of US$25,662,000 (1998 : US$76,900,000) in an associated company.
(3) Guaranteed rental returns (`̀ Rental Guarantees'') of 13% per annum, calculated based on the sale
consideration, have been given to certain purchasers of the Hong Kong Plaza office and serviced
apartment units. The Rental Guarantees are effective for two years commencing in the fourth month
after the month in which the notice of occupation of the Hong Kong Plaza is issued.
(4) Under a mortgage loan facility provided by a bank to the end-buyers of the office and apartment units
of the Hong Kong Plaza, Lai Fung had agreed to guarantee up to 95% of the liability of Li Xing for the
due performance of its undertaking to buy back the relevant properties in case of default by the
borrowers.
(5) Under a mortgage loan facility provided by another bank to the end-buyers of Eastern Place Phase I
and Phase II, the Group has agreed to provide guarantees to the bank to buy back the relevant
properties in case of default by the borrowers.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
107
Notes to Financial Statements
36. R E S T R I C T E D C A S H A N D B A N K B A L A N C E S
As at 31st July, 1999, approximately HK$8,055,000 (1998 : HK$45,256,000) included in the Group's cash
and bank balances were pledged to banks to secure mortgage loans granted by banks to certain end-buyers
of the Group's completed properties for sale. The pledge of such balance will be released upon the
completion of the relevant mortgage arrangements.
37. P O S T B A L A N C E S H E E T E V E N T S
On 14th October, 1999, Lai Fung announced the following matters which constitute connected transactions
and required the approval by the independent shareholders.
(1) Li Xing entered into a conditional loan agreement (``Loan Arrangement'') with BOC on 30th September,
1999, whereby BOC agreed to extend a loan in an amount of RMB80,000,000 to Li Xing for its
repayment of bank borrowings and settlement of construction costs. The Loan Arrangement is secured
by the first four floors of the North Tower of Hong Kong Plaza, which is valued at approximately
RMB407,000,000.
Such security is provided with the intention that a new bank loan of approximately RMB150,000,000
will be granted by BOC in replacement of the said loan of RMB80,000,000 in the near future.
(2) BOC, being one of the principal banks of Lai Fung, is expected to continue to provide secured loan
financing (the ``Financing Transaction'') and other financial and banking services (the `̀ Other
Transactions'') to Lai Fung. Such transactions, if entered into, may constitute connected transactions
for Lai Fung in accordance with the Listing Rules (by reasons detailed below), and may need full
disclosure and/or prior approval of the shareholders of the Company, Lai Fung and LSG.
On this basis, it is proposed that Lai Fung's entering into any future Financing Transactions or Other
Transactions with BOC which are expected to be entered into in the ordinary course of business of Lai
Fung and on normal commercial terms, to be subject to the following maximum limits:
(i) the aggregate amount of all loans outstanding under any Financing Transactions not to exceed
70% of the consolidated net tangible assets of Lai Fung as published in its latest audited
accounts; and
(ii) the aggregate amount of all fees payable by Lai Fung in respect of any Other Transactions in any
financial year of Lai Fung not to exceed 3% of the consolidated net tangible assets of Lai Fung as
published in its latest audited accounts.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
108
Notes to Financial Statements
37. P O S T B A L A N C E S H E E T E V E N T S ( c o n t i n u e d )
On 7th April, 1999, the Company entered into an option agreement with Sun Chung, a wholly-owned
subsidiary of BOC, which was supplemented by a supplemental agreement dated 12th April, 1999 (the
`̀ Option Agreement''). Pursuant to the Option Agreement, the Company granted the right (the
`̀ Option'') to Sun Chung to purchase 230,000,000 shares in Lai Fung held by the Company. As
detailed in note 31, Lai Fung issued the Convertible Note to the Sunny Group. Upon the exercise in
full, the Convertible Note is convertible into approximately 969,000,000 shares in Lai Fung. As Sun
Chung and the Sunny Group are both wholly-owned subsidiaries of BOC, in the opinion of the
directors, the BOC Group is deemed to be a connected person of the Company, Lai Fung and LSG.
Accordingly, the above transactions constitute connected transactions for the Company, Lai Fung and
LSG pursuant to the Listing Rules.
The above two matters were approved by independent shareholders in the respective extraordinary
meetings of the Company, Lai Fung and LSG on 30th October, 1999.
38. C O M P A R A T I V E A M O U N T S
Certain comparative amounts have been reclassified to conform with the current year's presentation. In
particular, as detailed in note 2 under `̀ Jointly controlled entities'', the jointly controlled entities were
accounted for as subsidiaries or associated companies in previous years.
39. U L T I M A T E H O L D I N G C O M P A N Y
In the opinion of the directors, the ultimate holding company is Lai Sun Garment (International) Limited,
which is incorporated in Hong Kong.
40. A P P R O V A L O F T H E F I N A N C I A L S T A T E M E N T S
The financial statements were approved by the board of directors on 12th November, 1999.
31st July, 1999
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
109
Notes to Financial Statements
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Members of the Company will be held
at Victoriana Room, 4th Floor, Furama Hotel, Hong Kong, 1 Connaught Road, Central, Hong Kong on
Thursday, 23rd December, 1999 at 11 : 00 a.m. for the following purposes:
1. To receive and consider the audited Financial Statements and the Reports of the Directors and of the
Auditors for the year ended 31st July, 1999;
2. To re-elect retiring Directors and to fix Directors' remuneration;
3. To appoint Auditors and to authorise the Directors to fix their remuneration; and
4. As special business, to consider and, if thought fit, pass with or without amendments, the following
resolutions as Ordinary Resolutions:
(A) ``THAT:
(a) subject to paragraph (b) of this Resolution, the exercise by the Directors during the
Relevant Period (as hereinafter defined) of all the powers of the Company to purchase
ordinary shares of HK$0.50 each in the ordinary share capital of the Company on The
Stock Exchange of Hong Kong Limited (`̀ the Stock Exchange'') or on any other stock
exchange on which the ordinary shares of the Company may be listed and recognised by
the Securities and Futures Commission and the Stock Exchange for this purpose, subject to
and in accordance with all applicable laws and the requirements of the Rules Governing the
Listing of Securities on the Stock Exchange or any other stock exchange as amended from
time to time, be and is hereby generally and unconditionally approved;
(b) the aggregate nominal amount of the ordinary shares to be purchased pursuant to the
approval in paragraph (a) of this Resolution shall not exceed 10% of the aggregate nominal
amount of the ordinary share capital of the Company in issue as at the date of this
Resolution, and the said approval shall be limited accordingly;
(c) for the purposes of this Resolution, `̀ Relevant Period'' means the period from the passing of
this Resolution until whichever is the earlier of:
(i) the conclusion of the next Annual General Meeting of the Company;
(ii) the revocation or variation of the authority given under this Resolution by an
ordinary resolution of the shareholders of the Company in general meeting; or
(iii) the expiration of the period within which the next Annual General Meeting of the
Company is required by law to be held.''
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
110
Notice of Annual General Meeting
(B) ``THAT:
(a) subject to paragraph (c) of this Resolution, the exercise by the Directors during the
Relevant Period (as hereinafter defined) of all the powers of the Company to issue, allot
and deal with additional ordinary shares in the Company, and to make or grant offers,
agreements and options (including warrants, bonds, debentures, notes and any securities
which carry rights to subscribe for or are convertible into ordinary shares in the Company)
which would or might require the exercise of such power be and is hereby generally and
unconditionally approved;
(b) the approval in paragraph (a) of this Resolution shall authorise the Directors during the
Relevant Period to make or grant offers, agreements and options (including warrants,
bonds, debentures, notes and any securities which carry rights to subscribe for or are
convertible into ordinary shares in the Company) which would or might require the
exercise of such power after the end of the Relevant Period;
(c) the aggregate nominal amount of ordinary share capital allotted or agreed conditionally or
unconditionally to be allotted (whether pursuant to an option or otherwise) and issued by
the Directors pursuant to the approval in paragraph (a) of this Resolution, otherwise than
pursuant to (i) a Rights Issue (as hereinafter defined); or (ii) an issue of ordinary shares in
the Company upon the exercise of rights of subscription or conversion under the terms of
any of the warrants or securities of the Company; or (iii) an issue of ordinary shares in the
Company as scrip dividends pursuant to the Articles of Association of the Company from
time to time; or (iv) an issue of ordinary shares in the Company under any option scheme
or similar arrangement for the grant or issue to employees of the Company and/or any of its
subsidiaries of ordinary shares in the Company or rights to acquire ordinary shares in the
Company, shall not exceed 20% of the aggregate nominal amount of the issued ordinary
share capital of the Company at the date of this Resolution, and the said approval shall be
limited accordingly; and
(d) for the purposes of this Resolution:
``Relevant Period'' shall have the same meaning as those ascribed to it under paragraph (c)
of the Ordinary Resolution No. 4(A) in the Notice convening this Meeting; and
``Rights Issue'' means an offer of ordinary shares of the Company, open for a period fixed by
the Directors to the holders of ordinary shares, whose names appear on the Register of
Members of the Company on a fixed record date in proportion to their then holdings of
such ordinary shares as at that date (subject to such exclusions or other arrangements as
the Directors may deem necessary or expedient in relation to fractional entitlements or
having regard to any restrictions or obligations under the laws of, or the requirements of
any recognised regulatory body or any stock exchange in, any territory applicable to the
Company).''
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
111
Notice of Annual General Meeting
(C) ``THAT subject to the passing of the Ordinary Resolutions Nos. 4(A) and 4(B) in the Notice
convening this Meeting, the general mandate granted to the Directors and for the time being in
force to exercise the powers of the Company to allot ordinary shares and to make or grant offers,
agreements and options which might require the exercise of such powers be and is hereby
extended by addition thereto of an amount representing the aggregate nominal amount of
ordinary shares in the capital of the Company which has been purchased by the Company since
the granting of such general mandate pursuant to the exercise by the Directors of the powers of
the Company to purchase such ordinary shares, provided that such amount shall not exceed 10%
of the aggregate nominal amount of the ordinary share capital of the Company in issue as at the
date of this Resolution.''
By Order of the Board
Yeung Kam Hoi
Company Secretary
Hong Kong, 12th November, 1999
Notes:
1. A Member entitled to attend and vote at the Annual General Meeting is entitled to appoint one or more
proxies to attend and, on a poll, vote on his behalf. A proxy need not be a Member of the Company.
2. To be valid, a form of proxy and the power of attorney or other authority, if any, under which it is
signed, or a notarially certified copy of such power or authority, must be lodged with the Company's
Registrars, Tengis Limited, at 1601 Hutchison House, 10 Harcourt Road, Central, Hong Kong, not less
than 48 hours before the time appointed for holding the Annual General Meeting or adjourned
meeting (as the case may be). Completion and return of the form of proxy shall not preclude members
from attending and voting in person at the Annual General Meeting or at any adjourned meeting
should they so wish.
3. A circular containing details regarding the Ordinary Resolutions Nos. 4(A) to 4(C) above will be sent
to shareholders together with the 1998/1999 Annual Report.
LAI SUN DEVELOPMENT ANNUAL REPORT 1998±99
112
Notice of Annual General Meeting
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