IMPORTANT NOTICE

NOT FOR DISTRIBUTION TO ANY PERSON OR ADDRESS IN THE UNITED STATES

IMPORTANT: You must read the following before continuing. The following applies to the offeringcircular following this page (the “Offering Circular”), and you are therefore advised to read this carefullybefore reading, accessing or making any other use of the Offering Circular. In accessing the OfferingCircular, you agree to be bound by the following terms and conditions, including any modifications tothem any time you receive any information from us as a result of such access.

NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF SECURITIESFOR SALE IN THE UNITED STATES OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFULTO DO SO. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THEUNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THESECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION ANDTHE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES, EXCEPTPURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THEREGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE ORLOCAL SECURITIES LAWS.

THIS OFFERING CIRCULAR MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHERPERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND INPARTICULAR, MAY NOT BE FORWARDED TO ANY ADDRESS IN THE UNITED STATES. ANYFORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR INPART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN AVIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.

Confirmation of your Representation: In order to be eligible to view this Offering Circular or make aninvestment decision with respect to the securities, investors must not be located in the United States. ThisOffering Circular is being sent at your request and by accepting the e-mail and accessing this OfferingCircular, you shall be deemed to have represented to us that the electronic mail address that you gave usand to which this e-mail has been delivered is not located in the United States and that you consent todelivery of such Offering Circular by electronic transmission.

You are reminded that this Offering Circular has been delivered to you on the basis that you are a personinto whose possession this Offering Circular may be lawfully delivered in accordance with the laws of thejurisdiction in which you are located and you may not, nor are you authorised to, deliver this OfferingCircular to any other person.

The materials relating to the offering of securities to which this Offering Circular relates do notconstitute, and may not be used in connection with, an offer or solicitation in any place where offers orsolicitations are not permitted by law. If a jurisdiction requires that the offering be made by a licensedbroker or dealer and the underwriters or any affiliate of the underwriters is a licensed broker or dealer inthat jurisdiction, the offering shall be deemed to be made by the underwriters or such affiliate on behalfof the Issuer in such jurisdiction.

This Offering Circular has been sent to you in an electronic form. You are reminded that documentstransmitted via this medium may be altered or changed during the process of electronic transmission andconsequently none of the Issuer, the Guarantor, The Hongkong and Shanghai Banking CorporationLimited, Mizuho Securities Asia Limited, DBS Bank Ltd., and Natixis (the “Arrangers”), The Hongkongand Shanghai Banking Corporation Limited, Mizuho Securities Asia Limited, DBS Bank Ltd., Natixis,BNP Paribas and Credit Agricole Corporate and Investment Bank (the “Dealers”), any person whocontrols the Arranger or the Dealers, any director, officer, employee nor agent of the Issuer or theGuarantor or the Arranger or the Dealers, or affiliate of any such person accepts any liability orresponsibility whatsoever in respect of any difference between the Offering Circular distributed to you inelectronic format and the hard copy version available to you on request from the Arrangers or the Dealers.

You are responsible for protecting against viruses and other destructive items. Your use of this e-mail is atyour own risk and it is your responsibility to take precautions to ensure that it is free from viruses andother items of a destructive nature.

(incorporated in the Cayman Islands with limited liability)

(as “Issuer”)

U.S.$2,000,000,000Medium Term Note Programme

Unconditionally and Irrevocably Guaranteed by

(incorporated in Hong Kong with limited liability)

(Stock Code: 00017)(as “Guarantor”)

Under the US$2,000,000,000 Medium Term Note Programme described in this Offering Circular (the “Programme”), New World China Land Limited (the “Issuer”,“NWCL” or the “Company”), subject to compliance with all relevant laws, regulations and directives, may from time to time issue medium term notes (the“Notes”). The payments of all amounts due in respect of the Notes will be unconditionally and irrevocably guaranteed by the holding company of the Issuer, NewWorld Development Company Limited (the “Guarantor” or “NWD”). Notes may be issued in bearer or registered form. The aggregate nominal amount of Notesoutstanding will not at any time exceed U.S.$2,000,000,000 (or its equivalent in other currencies). The Notes may be issued on a continuing basis to one or more ofthe Dealers specified under “Summary of the Programme” or any additional Dealer appointed under the Programme from time to time by the Issuer (each a “Dealer”and together the “Dealers”), which appointment may be for a specific issue or on an ongoing basis. References in this Offering Circular to the “relevant Dealer”shall, in the case of an issue of Notes being (or intended to be) subscribed for by more than one Dealer, be to all Dealers agreeing to subscribe for such Notes.

Application has been made to The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange” or “HKSE”) for the listing of the Programme by wayof debt issues to professional investors (as defined in Chapter 37 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited andin the Securities and Futures Ordinance (Cap. 571) of Hong Kong (the “SFO”)) (together, “Professional Investors”) only during the 12-month period from the dateof this Offering Circular on the Hong Kong Stock Exchange. This Offering Circular is for distribution to Professional Investors only. Investors should not purchasethe Notes in the primary or secondary markets unless they are Professional Investors and understand the risks involved. The Notes are only suitable forProfessional Investors.

The Hong Kong Stock Exchange has not reviewed the contents of this Offering Circular, other than to ensure that the prescribed form disclaimer andresponsibility statements, and a statement limiting distribution of this Offering Circular to Professional Investors only have been reproduced in thisOffering Circular. Listing of the Programme and the Notes on the Hong Kong Stock Exchange is not to be taken as an indication of the commercial meritsor credit quality of the Programme, the Notes, the Issuer or the Guarantor, or the quality of disclosure in this Offering Circular. Hong Kong Exchanges andClearing Limited and the Hong Kong Stock Exchange take no responsibility for the contents of this Offering Circular, make no representation as to its accuracy orcompleteness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of thisOffering Circular.

The relevant Pricing Supplement in respect of the issue of any Notes will specify whether or not such Notes will be listed on the Hong Kong Stock Exchange or anyother stock exchange.

The Notes of each Series issued in bearer form (“Bearer Notes”) will be represented on issue by a temporary global note in bearer form (each a “Temporary GlobalNote”) or a permanent global note in bearer form (each a “Permanent Global Note”) (collectively, the “Global Note”). Notes in registered form (“RegisteredNotes”) will be represented by registered certificates (each a “Note Certificate”), one Certificate being issued in respect of each Noteholder’s entire holding ofNotes in registered form of one Series (a “Global Note Certificate”). Global Notes and Note Certificates may be deposited on the relevant issue date with a commondepositary on behalf of Euroclear Bank S.A./N.V. (“Euroclear”) and/or Clearstream Banking, S.A. (“Clearstream, Luxembourg”), or with a sub-custodian for theCentral Money Markets Unit Service (the “CMU Service”) operated by the Hong Kong Monetary Authority (the “HKMA”). The provisions governing the exchangeof interests in Global Notes for other Global Notes and definitive Notes are described in “Summary of Provisions Relating to the Notes while in Global Form”.

The Notes have not been and will not be registered under the United States Securities Act of 1933, as amended or with any securities regulatory authority of any stateor other jurisdiction of the United States, and the Notes may include Bearer Notes (as defined herein) that are subject to U.S. tax law requirements. Subject to certainexceptions, the Notes may not be offered, sold, or, in the case of Bearer Notes, delivered within the United States. Registered Notes are subject to certain restrictionson transfer, see “Subscription and Sale”.

The Issuer and the Guarantor may agree with any Dealer that Notes may be issued in a form not contemplated by the Terms and Conditions of the Notes herein, inwhich event a supplementary Offering Circular, if appropriate, will be made available which will describe the effect of the agreement reached in relation to suchNotes.

Investing in Notes issued under the Programme involves certain risks and may not be suitable for all investors. Investors should have sufficient knowledge andexperience in financial and business matters to evaluate the information contained in this Offering Circular and in the applicable Pricing Supplement and the meritsand risks of investing in a particular issue of Notes in the context of their financial position and particular circumstances. Investors also should have the financialcapacity to bear the risks associated with an investment in Notes. Investors should not purchase Notes unless they understand and are able to bear risks associatedwith Notes. The principal risk factors that may affect the ability of the Issuer and the Guarantor to fulfil their obligations in respect of the Notes are discussed under“Risk Factors” below.

MiFID II product governance/target market – The Pricing Supplement in respect of any Notes may include a legend entitled “MiFID II Product Governance”which will outline the target market assessment in respect of the Notes and which channels for distribution of the Notes are appropriate. Any person subsequentlyoffering, selling or recommending the Notes (a “distributor”) should take into consideration the target market assessment; however, a distributor subject toDirective 2014/65/EU (as amended, “MiFID II”) is responsible for undertaking its own target market assessment in respect of the Notes (by either adopting orrefining the target market assessment) and determining appropriate distribution channels.

A determination will be made in relation to each issue about whether, for the purpose of the MiFID Product Governance rules under EU Delegated Directive2017/593 (the “MiFID Product Governance Rules”), any Dealer subscribing for any Notes is a manufacturer in respect of such Notes, but otherwise neither theArrangers nor the Dealers nor any of their respective affiliates will be a manufacturer for the purpose of the MiFID Product Governance Rules.

IMPORTANT – EEA RETAIL INVESTORS –The Notes are not intended to be offered, sold or otherwise made available to and should not be offered, sold orotherwise made available to any retail investor in the European Economic Area (“EEA”). For these purposes, a retail investor means a person who is one (or more)of: (i) a retail client as defined in point (11) of Article 4(1) of MiFID II; (ii) a customer within the meaning of Directive 2002/92/EC (as amended or superseded, the“IMD”), where that customer would not qualify as a professional client as defined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as definedin Directive 2003/71/EC (as amended or superseded, the “Prospectus Directive” ). Consequently no key information document required by Regulation (EU) No1286/2014 (the “PRIIPs Regulation”) for offering or selling the Notes or otherwise making them available to retail investors in the EEA has been prepared andtherefore offering or selling the Notes or otherwise making them available to any retail investor in the EEA may be unlawful under the PRIIPS Regulation.

ArrangersHSBC Mizuho Securities

DBS Bank Ltd. NATIXIS

DealersHSBC Mizuho Securities

DBS Bank Ltd. NATIXISBNP PARIBAS Crédit Agricole CIB

This Offering Circular is dated 12 November 2018

IMPORTANT NOTICE

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limitedtake no responsibility for the contents of this Offering Circular, make no representation as toits accuracy or completeness and expressly disclaim any liability whatsoever for any losshowsoever arising from or in reliance upon the whole or any part of the contents of thisOffering Circular.

This Offering Circular includes particulars given in compliance with the Rules Governing theListing of Securities on The Stock Exchange of Hong Kong Limited (the “HKSE Rules” or“Listing Rules”) for the purpose of giving information with regard to the Issuer andGuarantor. The Issuer and Guarantor accept full responsibility for the accuracy of theinformation contained in this Offering Circular and confirms, having made all reasonableenquiries, that to the best of its knowledge and belief there are no other facts the omission ofwhich would make any statement herein misleading.

The Issuer and the Guarantor, having made all reasonable enquiries, confirms that to the bestof its knowledge and belief (i) this Offering Circular contains all information with respect tothe Issuer, the Guarantor and their respective subsidiaries taken as a whole (the “Group”) andthe Notes, which is material in the context of the issue and offering of the Notes; (ii) thestatements contained herein relating to the Issuer, the Guarantor, the Group and the Notes arein every material respect true and accurate and not misleading; (iii) the statements ofintentions, opinions, belief or expectation contained in this Offering Circular with regard tothe Issuer, the Guarantor and the Group are honestly and reasonably made or held, have beenreached after considering all relevant circumstances; (iv) there are no other facts in relation tothe Issuer, the Guarantor, the Group or the Notes, the omission of which would, in the contextof the issue and offering of the Notes, make any statement in this Offering Circular misleadingin any material respect; and (v) all reasonable enquiries have been made by the Issuer toascertain such facts and to verify the accuracy of all such information and statements.

Each Tranche (as defined herein) of Notes will be issued on the terms set out herein under“Terms and Conditions of the Notes” (the “Conditions”) as amended and/or supplemented bythe Pricing Supplement specific to such Tranche. This Offering Circular must be read andconstrued together with any amendments or supplements hereto and with any informationincorporated by reference herein and, in relation to any Tranche of Notes, must be read andconstrued together with the relevant Pricing Supplement.

The distribution of this Offering Circular and any Pricing Supplement and the offering, saleand delivery of the Notes in certain jurisdictions may be restricted by law. Persons into whosepossession this Offering Circular comes are required by the Issuer, the Arrangers and theDealers to inform themselves about and to observe any such restrictions. None of the Issuer,the Arrangers, the Dealers or the Trustee represents that this Offering Circular or any PricingSupplement may be lawfully distributed, or that any Notes may be lawfully offered, incompliance with any applicable registration or other requirements in any such jurisdiction, orpursuant to an exemption available thereunder, or assumes any responsibility for facilitatingany such distribution or offering. In particular, no action has been taken by the Issuer, theGuarantor, the Arrangers, the Dealers or the Trustee which would permit a public offering ofany Notes or distribution of this Offering Circular or any Pricing Supplement in anyjurisdiction where action for such purposes is required. Accordingly, no Notes may be offeredor sold, directly or indirectly, and none of this Offering Circular, any Pricing Supplement orany advertisement or other offering material may be distributed or published in anyjurisdiction, except under circumstances that will result in compliance with any applicablelaws and regulations.

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There are restrictions on the offer and sale of the Notes and the circulation of documentsrelating thereto, in certain jurisdictions including, but not limited to, the United States ofAmerica, the European Economic Area, the United Kingdom, Hong Kong, the CaymanIslands, the PRC, Japan and Singapore, and to persons connected therewith. The Notes havenot been and will not be registered under the United States Securities Act of 1933, as amended(the “Securities Act”) or with any securities regulatory authority of any state or otherjurisdiction of the United States and may include Notes in bearer form that are subject to U.S.tax law requirements. Subject to certain exceptions, the Notes may not be offered, sold or, inthe case of bearer notes, delivered within the United States. The Notes are being offered andsold outside the United States in reliance on Regulation S under the Securities Act. For adescription of certain restrictions on offers, sales and transfers of Notes and on thedistribution of this Offering Circular, see “Subscription and Sale”.

This Offering Circular is to be read in conjunction with all documents which are deemed to beincorporated herein by reference (see “Information Incorporated by Reference”). ThisOffering Circular shall be read and construed on the basis that such documents areincorporated and form part of this Offering Circular.

Listing of the Notes on the Hong Kong Stock Exchange is not to be taken as an indication ofthe merits of the Issuer, the Guarantor, the Group or the Notes. In making an investmentdecision, investors must rely on their own examination of the Issuer, the Guarantor, the Groupand the terms of the offering, including the merits and risks involved. See “Risk Factors” fora discussion of certain factors to be considered in connection with an investment in the Notes.

No person has been authorised by the Issuer, the Guarantor or the Trustee (as defined herein)to give any information or to make any representation not contained in or not consistent withthis Offering Circular or any other document entered into in relation to the Programme and thesale of Notes and, if given or made, such information or representation should not be reliedupon as having been authorised by the Issuer, the Guarantor, the Arrangers, any Dealer or theTrustee.

Neither the delivery of this Offering Circular or any Pricing Supplement nor the offering, saleor delivery of any Note shall, in any circumstances, create any implication that theinformation contained in this Offering Circular is true subsequent to the date hereof or thedate upon which this Offering Circular has been most recently amended or supplemented orthat there has been no adverse change, or any event reasonably likely to involve any adversechange, in the prospects or financial or trading position of the Issuer and the Guarantor sincethe date thereof or, if later, the date upon which this Offering Circular has been most recentlyamended or supplemented or that any other information supplied in connection with theProgramme is correct at any time subsequent to the date on which it is supplied or, if different,the date indicated in the document containing the same.

Neither this Offering Circular nor any Pricing Supplement constitutes an offer or an invitationto subscribe for or purchase any Notes and should not be considered as a recommendation bythe Issuer, the Guarantor, the Arrangers, the Dealers or the Trustee, or any director, officer,employee, agent or affiliate of any such person or any of them that any recipient of thisOffering Circular or any Pricing Supplement should subscribe for or purchase any Notes. Eachrecipient of this Offering Circular or any Pricing Supplement shall be taken to have made itsown investigation and appraisal of the condition (financial or otherwise) of the Issuer, theGuarantor and the Group.

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The maximum aggregate principal amount of Notes outstanding at any one time under theProgramme will not exceed U.S.$2,000,000,000 (and for this purpose, any Notes denominatedin another currency shall be translated into U.S.$ at the date of the agreement to issue suchNotes calculated in accordance with the provisions of the Dealer Agreement). The maximumaggregate principal amount of Notes which may be outstanding at any one time under theProgramme may be increased from time to time, subject to compliance with the relevantprovisions of the Dealer Agreement as defined under “Subscription and Sale”.

Singapore SFA Product Classification: In connection with Section 309B of the Securities andFutures Act (Chapter 289) of Singapore (the “SFA”) and the Securities and Futures (CapitalMarkets Products) Regulations 2018 of Singapore (the “CMP Regulations 2018”), unlessotherwise specified before an offer of Notes, the Issuer has determined, and hereby notifies allrelevant persons (as defined in Section 309A(1) of the SFA), that the Notes are ‘prescribedcapital markets products’ (as defined in the CMP Regulations 2018) and Excluded InvestmentProducts (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Productsand MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

In connection with the issue of any Tranche of Notes, the Dealer or Dealers (if any)named as the stabilising manager(s) (the “Stabilising Manager(s)”) (or persons acting onbehalf of a Stabilising Manager) in the applicable Pricing Supplement may, to the extentpermitted by applicable laws and rules, over allot the Notes or effect transactions with aview to supporting the market price of the Notes at a level higher than that which mightotherwise prevail. However, there is no assurance that the Stabilising Manager(s) (orpersons acting on behalf of a Stabilising Manager) will undertake stabilisation action.Any stabilisation action may begin on or after the date on which adequate publicdisclosure of the terms of the offer of the relevant Tranche of Notes is made and, if begun,may be ended at any time, but it must end no later than the earlier of 30 days after theissue date of the relevant Tranche of Notes and 60 days after the date of the allotment ofthe relevant Tranche of Notes. Any stabilisation or over allotment must be conducted bythe relevant Stabilising Manager (or any person acting on behalf of the relevantStabilising Manager) in accordance with all applicable laws and rules.

The Arrangers, the Dealers and the Trustee have not separately verified the informationcontained in this Offering Circular. To the fullest extent permitted by law, none of theArrangers, the Dealers, the Trustee, or any director, officer, employee, agent or affiliate of anysuch person makes any representation, warranty or undertaking, express or implied, or acceptsany responsibility, with respect to the accuracy or completeness of any of the information inthis Offering Circular. To the fullest extent permitted by law, none of the Arrangers, theDealers, the Trustee, or any director, officer, employee, agent or affiliate of any such personaccept any responsibility for the contents of this Offering Circular or for any other statementmade or purported to be made by the Arrangers, any Dealer, the Trustee or Agent, or anydirector, officer, employee, agent or affiliate of any such person or on its behalf in connectionwith the Issuer, the Guarantor, the Group or the issue and offering of the Notes. The Arrangers,each Dealer and the Trustee accordingly disclaim all and any liability whether arising in tortor contract or otherwise (save as referred to above) which it might otherwise have in respect ofthis Offering Circular or any such statement.

This Offering Circular does not describe all of the risks and investment considerations(including those relating to each investor’s particular circumstances) of an investment inNotes of a particular issue. Each potential purchaser of Notes should refer to and considercarefully the relevant Pricing Supplement for each particular issue of Notes, which maydescribe additional risks and investment considerations associated with such Notes. The risksand investment considerations identified in this Offering Circular and the applicable Pricing

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Supplement are provided as general information only. Investors should consult their ownfinancial and legal advisers as to the risks and investment considerations arising from aninvestment in an issue of Notes and should possess the appropriate resources to analyse suchinvestment and the suitability of such investment in their particular circumstances. Neitherthis Offering Circular nor any other information provided or incorporated by reference inconnection with the Programme are intended to provide the basis of any credit or otherevaluation and should not be considered as a recommendation by any of the Issuer, theArrangers, the Dealers or the Trustee, or any director, officer, employee, agent or affiliate ofany such person that any recipient, of this Offering Circular or of any such information,should purchase the Notes. Each potential purchaser of Notes should make its ownindependent investigation of the financial condition and affairs, and its own appraisal of thecreditworthiness, of the Issuer, the Guarantor and the Group. Each potential purchaser ofNotes should determine for itself the relevance of the information contained in this OfferingCircular and its purchase of Notes should be based upon such investigation as it deemsnecessary. None of the Arrangers, Dealers or the Trustee, nor any agent or affiliate of any suchperson undertakes to review the financial condition or affairs of the Issuer, the Guarantor orthe Group during the life of the arrangements contemplated by this Offering Circular nor toadvise any investor or potential investor in the Notes of any information coming to theattention of any of the Arrangers, Dealers or the Trustee.

FORWARD-LOOKING STATEMENTS

Certain statements under “Risk Factors”, “Description of the Issuer”, “Description of theGuarantor”, and elsewhere in this Offering Circular constitute “forward-looking statements”.Words such as “believe”, “expect”, “plan”, “anticipate”, “schedule”, “estimate” and similarwords or expressions identify forward-looking statements. In addition, all statements otherthan statements of historical facts included in this Offering Circular, including, but withoutlimitation, those regarding the financial position, business strategies, prospects, capitalexpenditure and investment plans of the Group and the plans and objectives of the Group’smanagement for its future operations (including development plans and objectives relating tothe Group’s operations), are forward-looking statements. Such forward-looking statementsinvolve known and unknown risks, uncertainties and other factors which may cause actualresults or performance of the Group to differ materially from those expressed or implied bysuch forward-looking statements. Such forward-looking statements are based on numerousassumptions regarding the Group’s present and future business strategies and the environmentin which the Group will operate in the future. Each of the Issuer and the Guarantor expresslydisclaims any obligation or undertaking to release any updates or revisions to anyforward-looking statements contained herein to reflect any change in the Issuer’s or theGuarantor’s expectations with regard thereto or any change of events, conditions orcircumstances, on which any such statements were based. This Offering Circular discloses,under “Risk Factors” and elsewhere, important factors that could cause actual results to differmaterially from the Issuer’s or the Guarantor’s expectations. All subsequent written andforward-looking statements attributable to the Issuer or the Guarantor or persons acting onbehalf of the Issuer or the Guarantor are expressly qualified in their entirety by suchcautionary statements.

INFORMATION INCORPORATED BY REFERENCE

This Offering Circular should be read and construed in conjunction with each relevant PricingSupplement, the most recently published audited annual financial statements and any interimfinancial statements (whether audited or unaudited) published subsequently to such annualfinancial statements of the Issuer and the Guarantor from time to time (if any) and allamendments and supplements from time to time to this Offering Circular, which shall be

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deemed to be incorporated in, and to form part of, this Offering Circular and which shall bedeemed to modify or supersede the contents of this Offering Circular to the extent that astatement contained in any such document is inconsistent with such contents.

Copies of all such documents which are so deemed to be incorporated in, and to form part of,this Offering Circular will be available free of charge during usual business hours on anyweekday (Saturdays and public holidays excepted) from the specified office of the PrincipalPaying Agent (as defined under “Summary of the Programme”) set out at the end of thisOffering Circular upon prior written request and satisfactory proof of holding and subject tothe Principal Paying Agent having been provided with copies of such documents by the Issuerand Guarantor.

CERTAIN TERMS AND CONVENTIONS

Unless indicated otherwise, in this Offering Circular all references to the “NWCL Group” areto the Issuer, its subsidiaries, associated companies and joint ventures, all references to“NWD” are to New World Development Company Limited and to the “Group” are to theGuarantor, its subsidiaries (including the Issuer), associated companies and joint ventures.

Unless otherwise specified or the context otherwise requires, references to “Hong Kong” areto the Hong Kong Special Administrative Region of the People’s Republic of China.References to “PRC “and “China” are to the People’s Republic of China (excluding, for thepurposes of this Offering Circular only, Hong Kong, the Macau Special Administrative Regionof the PRC (“Macau”) and Taiwan). “PRC Government”, “Central Government” or “State”means the central government of the PRC, including all political subdivisions (includingprovincial, municipal and other regional or local governments) and instrumentalities thereof,or, where the context requires, any of them. “U.S.” or “United States” are to the United Statesof America, “Hong Kong dollars”, “HK dollars” and “HK$” are to the lawful currency ofHong Kong, “CNY”, “RMB” or “Renminbi” are to the lawful currency of the PRC andreferences to “US dollar” or “US$” are to the lawful currency of the United States.

In this Offering Circular:

• “GFA” means gross floor area;

• “pa” means per annum;

• “sq.ft.” means square feet; and

• “sq.m.” means square metres.

In this Offering Circular where information has been presented in thousands or millions ofunits, amounts may have been rounded up or down. Accordingly, totals of columns or rows ofnumbers in tables may not be equal to the apparent total of the individual items and actualnumbers may differ from those contained herein due to rounding. References to information inbillions of units are to the equivalent of a thousand million units.

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TABLE OF CONTENTS

Page

SUMMARY OF THE PROGRAMME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SUMMARY FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

TERMS AND CONDITIONS OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

FORMS OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

SUMMARY OF PROVISIONS RELATING TO THE NOTES WHILEIN GLOBAL FORM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

CAPITALISATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

DESCRIPTION OF THE ISSUER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

DESCRIPTION OF THE GUARANTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140

SUBSTANTIAL SHAREHOLDERS’ AND DIRECTORS’ INTERESTS . . . . . . . . . . 151

PRC CURRENCY CONTROLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

SUBSCRIPTION AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

FORM OF PRICING SUPPLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168

GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . F-1

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SUMMARY OF THE PROGRAMME

This summary must be read as an introduction to this Offering Circular and any decision to

invest in the Notes should be based on a consideration of the Offering Circular as a whole,

including any information incorporated by reference. Words and expressions defined in the

“Terms and Conditions of the Notes” below or elsewhere in this Offering Circular have the

same meanings in this summary.

Issuer . . . . . . . . . . . . . . . . . . . New World China Land Limited.

Guarantor . . . . . . . . . . . . . . . . New World Development Company Limited.

Programme Size . . . . . . . . . . Up to U.S.$2,000,000,000 (or the equivalent in othercurrencies calculated as described in the Dealer Agreement)outstanding at any time. The Issuer and the Guarantor mayincrease the amount of the Programme in accordance with theterms of the Dealer Agreement.

Risk Factors . . . . . . . . . . . . . Investing in Notes issued under the Programme involvescertain risks. The principal risk factors that may affect theability of the Issuer and Guarantor to fulfil its obligations inrespect of the Notes are discussed under the section “RiskFactors” below.

Arrangers . . . . . . . . . . . . . . . . The Hongkong and Shanghai Banking Corporation Limited,Mizuho Securities Asia Limited, DBS Bank Ltd. and Natixis.

Dealers . . . . . . . . . . . . . . . . . . The Hongkong and Shanghai Banking Corporation Limited,Mizuho Securities Asia Limited, DBS Bank Ltd., Natixis, BNPParibas and Crédit Agricole Corporate and Investment Bankand any other Dealer appointed from time to time by the Issuereither generally in respect of the Programme or in relation to aparticular Tranche of Notes.

Trustee . . . . . . . . . . . . . . . . . . The Hongkong and Shanghai Banking Corporation Limited.

Principal Paying Agentand Transfer Agent . . . . . The Hongkong and Shanghai Banking Corporation Limited.

Registrar . . . . . . . . . . . . . . . . . The Hongkong and Shanghai Banking Corporation Limited.

CMU Lodgingand Paying Agent . . . . . . . The Hongkong and Shanghai Banking Corporation Limited.

1

Method of Issue . . . . . . . . . . The Notes will be issued on a syndicated or non-syndicatedbasis. The Notes will be issued in series (each a “Series”)having one or more issue dates and on terms otherwiseidentical (or identical other than in respect of the first paymentof interest), the Notes of each Series being intended to beinterchangeable with all other Notes of that Series. EachSeries may be issued in tranches (each a “Tranche”) on thesame or different issue dates. The specific terms of eachTranche (which will be completed, where necessary, with therelevant terms and conditions and, save in respect of the issuedate, issue price, first payment date of interest and nominalamount of the Tranche, will be identical to the terms of otherTranches of the same Series) will be completed in the PricingSupplement.

Clearing Systems . . . . . . . . . Clearstream, Luxembourg, Euroclear and/or the CMU Serviceand, in relation to any Tranche, such other clearing system asselected by the Issuer, the Guarantor and the relevant Dealerand approved by the Trustee, the Principal Paying Agent or theCMU Lodging Agent (as the case may be) and, where relevant,the Registrar.

Form of Notes . . . . . . . . . . . . Notes may be issued in bearer form (“Bearer Notes”) or inregistered form (“Registered Notes”). Registered Notes willnot be exchangeable for Bearer Notes and vice versa.

Each Tranche of Bearer Notes will initially be in the form ofeither a Temporary Global Note or a Permanent Global Note,in each case as specified in the relevant Pricing Supplement.

Each Global Note will be deposited on or around the relevantissue date with a common depositary or sub-custodian forClearstream, Luxembourg, Euroclear and/or as the case maybe, the CMU Service and/or any other relevant clearingsystem. Each Temporary Global Note will be exchangeable fora Permanent Global Note or, if so specified in the relevantPricing Supplement, for Definitive Notes. If the TEFRA DRules are specified in the relevant Pricing Supplement asapplicable, certification as to non-U.S. beneficial ownershipwill be a condition precedent to any exchange of an interest ina Temporary Global Note or receipt of any payment of interestin respect of a Temporary Global Note. Each PermanentGlobal Note will be exchangeable for Definitive Notes inaccordance with its terms. Definit ive Notes will , ifinterest-bearing, have Coupons attached and, if appropriate, aTalon for further Coupons. Registered Notes will initially berepresented by a Global Note Certificate. The Global NoteCertificate representing Registered Notes will be registered inthe name of a nominee for one or more of Euroclear,Clearstream, Luxembourg and the CMU Service.

2

Currencies . . . . . . . . . . . . . . . Notes may be denominated in any currency or currencies,subject to compliance with all applicable legal and/orregulatory and/or central bank requirements. Payments inrespect of Notes may, subject to such compliance, be made inand/or linked to, any currency or currencies other than thecurrency in which such Notes are denominated.

Status of the Notes . . . . . . . The Notes constitute direct, general and unconditionalobligations of the Issuer and shall at all times rank pari passuand without any preference or priority among themselves. Thepayment obligations of the Issuer under the Notes shall, savefor such obligations as may be preferred by provisions of lawthat are both mandatory and of general application, at all timesrank at least equally with all of its other present and futureunsecured and unsubordinated obligations as described in“Terms and Conditions of the Notes — Status”.

Issue Price . . . . . . . . . . . . . . . Notes may be issued at their nominal amount or at a discountor premium to their nominal amount. Partly Paid Notes may beissued, the issue price of which will be payable in two or moreinstalments.

Maturities . . . . . . . . . . . . . . . Any maturity, subject, in relation to specific currencies, tocompliance with all applicable legal and/or regulatory and/orcentral bank requirements.

Redemption . . . . . . . . . . . . . . Notes may be redeemable at par or at such other RedemptionAmount (detailed in a formula, index or otherwise) as may bespecified in the relevant Pricing Supplement. Notes may alsobe redeemable in two or more instalments on such dates and insuch manner as may be specified in the relevant PricingSupplement. Unless permitted by then current laws andregulations, Notes (including Notes denominated in sterling)which have a maturity of less than one year and in respect ofwhich the issue proceeds are to be accepted by the Issuer in theUnited Kingdom or whose issue otherwise constitutes acontravention of section 19 of the Financial Services andMarkets Act 2000 must have a minimum redemption amount of£100,000 (or its equivalent in other currencies).

Optional Redemption . . . . . Notes may be redeemed before their stated maturity at theoption of the Issuer (either in whole or in part) and/or theNoteholders to the extent (if at all) specified in the relevantPricing Supplement.

3

Tax Redemption,Redemption for Changeof Control and MakeWhole Redemption . . . . .

Except as described in “Optional Redemption” above, earlyredemption will only be permitted (i) for tax reasons asdescribed in Condition 10(b) (Redemption and Purchase —Redemption for tax reasons), (ii) following a Change ofControl as described in Condition 10(f) (Redemption andPurchase — Redemption for Change of Control), and (iii) ifthe Call Option (Make Whole Redemption) is specified in thePricing Supplement as being applicable, as described inCondition 10(d) (Redemption at the option of the Issuer (MakeWhole Redemption)).

Interest . . . . . . . . . . . . . . . . . . Notes may be interest-bearing or non-interest bearing. Interest(if any) may accrue at a fixed rate or a floating rate or othervariable rate or be index-linked and the method of calculatinginterest may vary between the issue date and the maturity dateof the relevant Series. All such information will be set out inthe relevant Pricing Supplement.

Fixed Rate Notes . . . . . . . . . Fixed interest will be payable in arrear on such date or dates asmay be agreed between the Issuer and the relevant Dealer(s)and on redemption and will be calculated on the basis of suchDay Count Fraction as may be agreed between the Issuer andthe relevant Dealer(s).

Floating Rate Notes . . . . . . . Floating Rate Notes will bear interest determined separatelyfor each Series as follows:

(i) on the same basis as the floating rate under a notionalinterest rate swap transaction in the relevant SpecifiedCurrency governed by an agreement incorporating the2006 ISDA Definitions (as published by the InternationalSwaps and Derivatives Association, Inc. and as amendedand updated as at the Issue Date of the first Tranche of theNotes of the relevant Series); or

(ii) by reference to LIBOR, EURIBOR or HIBOR (or suchother benchmark as may be specified in the relevantPricing Supplement) as adjusted for any applicablemargin; or

(iii) on such other basis as may be agreed between the Issuerand the relevant Dealer(s). Interest periods will bespecified in the relevant Pricing Supplement.

Zero Coupon Notes . . . . . . . Zero Coupon Notes (as defined in “Terms and Conditions ofthe Notes”) may be issued at their nominal amount or at adiscount to it and will not bear interest.

4

Dual Currency Notes . . . . . . Payments (whether in respect of principal or interest andwhether at maturity or otherwise) in respect of Dual CurrencyNotes (as defined in “Terms and Conditions of the Notes”) willbe made in such currencies, and based on such rates ofexchange as the Issuer and the relevant Dealer(s) may agreeand as may be specified in the relevant Pricing Supplement.

Index Linked Notes . . . . . . . Payments of principal or interest in respect of Index LinkedNotes (as defined in “Terms and Conditions of the Notes”) willbe calculated by reference to such index and/ or formula or tochanges in prices of securities or commodities or to such otherfactors as the Issuer and the relevant Dealer(s) may agree andas may be specified in the relevant Pricing Supplement.

Interest Periods andInterest Rates . . . . . . . . . .

The length of the interest periods for the Notes and theapplicable interest rate or its method of calculation may differfrom time to time or be constant for any Series. Floating RateNotes and Index Linked Interest Notes may also have amaximum interest rate, a minimum interest rate, or both. Theuse of interest accrual periods permits the Notes to bearinterest at different rates in the same interest period. All suchinformation will be set out in the relevant Pricing Supplement.

Denominations . . . . . . . . . . . Notes will be issued in such denominations as may bespecified in the relevant Pricing Supplement, subject tocompliance with all applicable legal and/or regulatory and/orcentral bank requirements.

Negative Pledge . . . . . . . . . . The Notes will contain a negative pledge provision as furtherdescribed in Condition 5 (Negative Pledge).

Cross Default . . . . . . . . . . . . The Notes will contain a cross default provision as furtherdescribed in Condition 14 (Events of Default).

Withholding Tax . . . . . . . . . . All payments in respect of Notes will be made free and clear ofwithholding taxes of the Cayman Islands and Hong Kong, asthe case may be, unless the withholding is required by law. Inthat event, the Issuer will (subject to certain customaryexceptions as described in Condition 13 (Taxation)) pay suchadditional amounts as will result in the Noteholders receivingsuch amounts as they would have received in respect of suchNotes, had no such withholding been required.

Listing and Trading . . . . . . . Application has been made to the Hong Kong Stock Exchangefor the listing of the Programme for the 12- month period afterthe date of this Offering Circular on the Hong Kong StockExchange by way of debt issues to Professional Investors only.

5

However, unlisted Notes and Notes to be listed, traded orquoted on or by any other competent authority, stock exchangeor quotation system may be issued pursuant to the Programme.The relevant Pricing Supplement in respect of the issue of anyNotes will specify whether or not such Notes will be listed onthe Hong Kong Stock Exchange or listed, traded or quoted onor by any other competent authority, exchange or quotationsystem.

Notes listed on the Hong Kong Stock Exchange will be tradedon the Hong Kong Stock Exchange in a board lot size of atleast HK$500,000 (or its equivalent in other currencies).

Governing Law . . . . . . . . . . . The Notes and any non-contractual obligations arising out ofor in connection with the Notes will be governed by, andconstrued in accordance with, English law.

Selling Restrictions . . . . . . . For a description of certain restrictions on offers, sales anddeliveries of Notes and on the distribution of offering materialin the United States of America, the European Economic Area,the United Kingdom, Hong Kong, the Cayman Islands, thePRC, Japan and Singapore, see “Subscription and Sale” below.

Initial Delivery of Notes . . On or before the issue date for each Tranche, the Global Noterepresenting Bearer Notes or the Global Note Certificaterepresenting Registered Notes may be deposited with acommon depositary for Euroclear and Clearstream,Luxembourg or deposited with a sub-custodian for the CMUService or any other clearing system or may be deliveredoutside any clearing system provided that the method of suchdelivery has been agreed in advance by the Issuer, the Trustee,the Agents and the relevant Dealers. Registered Notes that areto be credited to one or more clearing systems on issue will beregistered in the name of, or in the name of nominees or acommon nominee or a sub-custodian for, such clearingsystems.

Issuer Legal EntityIdentifier (LEI) . . . . . . . . . 549300X7767HIID3YE28.

6

SUMMARY FINANCIAL INFORMATION

The Issuer

The following tables present the summary consolidated financial information of the NWCLGroup as at and for the years ended 30 June 2018 and 30 June 2017. The summaryconsolidated financial information of the NWCL Group is derived from and should be read inconjunction with the audited consolidated financial statements of the Issuer and the notesthereto as of and for the year ended 30 June 2018, which have been audited byPricewaterhouseCoopers included elsewhere in this Offering Circular.

The Issuer’s audited consolidated financial statements as of and for the year ended 30 June2018 have been prepared and presented in accordance with HKFRS.

In preparing the audited consolidated financial statements for the year ended 30 June 2018,the Issuer has early adopted Hong Kong Financial Reporting Standard 15 “Revenue fromContracts with Customers” (“HKFRS 15”) with effect from 1 July 2017 and has not restatedprior years’ consolidated financial statements. Therefore, the audited consolidated financialinformation for the year ended 30 June 2018 is not comparable with the audited consolidatedfinancial information for the year ended 30 June 2017. For the impact on the adoption ofHKFRS 15, please refer to Note 4 to the Issuer’s audited consolidated financial statements asof, and for, the year ended 30 June 2018.

Consolidated Income Statement

For the year ended 30 June

2018 2017

HK$ Million HK$ Million

(Audited) (Audited)

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,997.2 18,996.5Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,921.6) (11,917.7)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,075.6 7,078.8Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 234.5Other gains/(losses), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 784.6 (162.7)Changes in fair value of investment properties . . . . . . . . 1,261.6 (182.7)Selling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (486.7) (630.1)Administrative and other operating expenses . . . . . . . . . (1,369.5) (1,434.3)

Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,265.6 4,903.5Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675.7 1,107.6Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (318.5) (202.4)Share of results of associated companies . . . . . . . . . . . . . (34.6) 36.4Share of results of joint ventures . . . . . . . . . . . . . . . . . . . . . 165.1 221.3

Profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,753.3 6,066.4Taxation charge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,752.2) (3,477.0)

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,001.1 2,589.4

Profit attributable to:Equity holders of the Company . . . . . . . . . . . . . . . . . . . . . . 3,862.9 2,405.8Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 138.2 183.6

4,001.1 2,589.4

7

Consolidated Statement of Financial Position

As at 30 June

2018 2017

HK$ Million HK$ Million

(Audited) (Audited)

ASSETSNon-current assetsProperty, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . 6,815.6 6,250.0Investment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,017.7 36,147.0Land use rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162.7 419.4Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.4 49.7Properties held for development . . . . . . . . . . . . . . . . . . . . . 7,089.9 9,215.4Associated companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,397.7 6,280.4Joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,610.8 15,044.4

66,121.8 73,406.3

Current assetsProperties under development . . . . . . . . . . . . . . . . . . . . . . . 22,265.1 21,426.5Completed properties held for sale . . . . . . . . . . . . . . . . . . . 18,150.1 11,311.0Hotel inventories, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . – 1.8Prepayments, debtors and other receivables . . . . . . . . . . . 6,988.1 12,568.7Contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.5 –Amounts due from related companies . . . . . . . . . . . . . . . . 2,080.1 382.3Cash and bank balances, unrestricted . . . . . . . . . . . . . . . . 32,424.5 32,337.4

81,983.4 78,027.7Assets of disposal group classified as held for sale . . . . 1,890.9 –

83,874.3 78,027.7

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,996.1 151,434.0

EQUITYCapital and reserves attributable

to the Company’s equity holdersShare capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 870.2 870.2Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,765.2 64,123.1

71,635.4 64,993.3Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . 4,238.9 3,854.8

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,874.3 68,848.1

8

As at 30 June

2018 2017

HK$ Million HK$ Million

(Audited) (Audited)

LIABILITIESNon-current liabilitiesLong-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,035.1 29,708.2Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,587.3 3,432.6

31,622.4 33,140.8

Current liabilitiesCreditors and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,422.4 9,771.2Deposits received on sale of properties . . . . . . . . . . . . . . . – 14,118.9Contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,042.3 –Amounts due to related companies . . . . . . . . . . . . . . . . . . . 4,592.3 4,516.1Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944.9 1,303.9Current portion of long term borrowings . . . . . . . . . . . . . 2,767.8 13,570.3Amounts due to non-controlling interests . . . . . . . . . . . . . 123.0 121.2Taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,597.9 6,043.5

42,490.6 49,445.1Liabilities of disposal group classified as held for sale 8.8 –

42,499.4 49,455.1

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,121.8 82,585.9

Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 149,996.1 151,434.0

9

The Guarantor

The following tables present the summary consolidated financial information of the Group asat and for the years ended 30 June 2018 and 30 June 2017. The summary consolidatedfinancial information is derived from and should be read in conjunction with the auditedconsolidated financial statements of the Guarantor and the notes thereto as of and for the yearended 30 June 2018, which have been audited by PricewaterhouseCoopers included elsewherein this Offering Circular.

The Guarantor’s audited consolidated financial statements as of and for the year ended 30June 2018 have been prepared and presented in accordance with HKFRS.

In preparing the audited consolidated financial statements for the year ended 30 June 2018,the Guarantor has early adopted HKFRS 15 with effect from 1 July 2017 and has not restatedprior years’ consolidated financial statements. Therefore, the audited consolidated financialinformation for the year ended 30 June 2018 is not comparable with the audited consolidatedfinancial information for the year ended 30 June 2017. For the impact on the adoption ofHKFRS 15, please refer to Note 4 to the Guarantor’s audited consolidated financial statementsas of, and for, the year ended 30 June 2018.

Consolidated Income Statement

For the year ended 30 June

2018 2017

HK$ million HK$ million(Audited) (Audited)

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,688.7 56,628.8Cost of sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,125.3) (38,413.2)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,563.4 18,215.6Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137.3 528.8Other gains, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,133.4 428.6Selling and marketing expenses . . . . . . . . . . . . . . . . . . . . . (1,083.8) (1,376.6)Administrative and other operating expenses . . . . . . . . . (8,142.1) (7,408.9)Changes in fair value of investment properties . . . . . . . . 15,367.1 1,363.8

Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,975.3 11,751.3Financing income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,475.2 1,705.9Financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,179.5) (2,152.0)

30,271.0 11,305.2Share of results of joint ventures . . . . . . . . . . . . . . . . . . . . 1,886.2 2,029.7Share of results of associated companies . . . . . . . . . . . . . 1,196.4 1,895.4

Profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,353.6 15,230.3Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,272.4) (4,755.6)

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,081.2 10,474.7

Attributable to:Shareholders of the Company . . . . . . . . . . . . . . . . . . . . . . . 23,338.1 7,675.7Holders of perpetual capital securities . . . . . . . . . . . . . . . 536.6 395.9Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,206.5 2,403.1

27,081.2 10,474.7

Earnings per shareBasic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$2.34 HK$0.80Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$2.33 HK$0.80

10

Consolidated Statement of Financial Position

As at 30 June

2018 2017

HK$ million HK$ million

(Audited) (Audited)

AssetsNon-current assetsInvestment properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,727.7 105,760.4Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . 29,940.2 30,807.8Land use rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,064.0 1,715.0Intangible concession rights . . . . . . . . . . . . . . . . . . . . . . . . . 11,403.5 11,841.9Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,782.0 3,423.8Interests in joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,135.8 49,317.4Interests in associated companies . . . . . . . . . . . . . . . . . . . . 24,708.2 26,401.8Available-for-sale financial assets . . . . . . . . . . . . . . . . . . . 11,778.8 6,540.9Held-to-maturity investments . . . . . . . . . . . . . . . . . . . . . . . 46.0 44.4Financial assets at fair value through profit or loss . . . . 684.3 574.5Derivative financial instruments . . . . . . . . . . . . . . . . . . . . . 88.6 9.8Properties for development . . . . . . . . . . . . . . . . . . . . . . . . . . 19,656.2 18,284.1Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 749.3 740.9Other non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,635.1 2,612.6

309,399.7 258,075.3

Current assetsProperties under development . . . . . . . . . . . . . . . . . . . . . . . 37,171.0 48,530.0Properties held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,301.2 34,530.9Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 831.5 756.1Debtors, prepayments and contract assets . . . . . . . . . . . . 25,519.6 27,864.4Financial assets at fair value through profit or loss . . . . – 0.1Derivative financial instruments . . . . . . . . . . . . . . . . . . . . . 19.5 62.3Restricted bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.7 120.5Cash and bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,388.4 66,986.0

169,298.9 178,850.3Non-current assets classified as assets held for sale . . . 2,756.2 130.7

172,055.1 178,981.0

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481,454.8 437,056.3

EquityShare capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,525.9 73,233.6Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,724.0 112,857.6

Shareholders’ funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216,249.9 186,091.2

Perpetual capital securities . . . . . . . . . . . . . . . . . . . . . . . . . . 9,451.8 9,451.8Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,480.2 25,401.5

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,181.9 220,944.5

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As at 30 June

2018 2017

HK$ million HK$ million

(Audited) (Audited)

LiabilitiesNon-current liabilitiesLong-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,123.6 125,895.3Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,287.9 9,327.2Derivative financial instruments . . . . . . . . . . . . . . . . . . . . . 365.6 631.3Other non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 806.5 757.4

131,583.6 136,611.2

Current liabilitiesCreditors, accrued charges and contract liabilities . . . . . 65,059.0 50,735.2Current portion of long-term borrowings . . . . . . . . . . . . . 11,851.5 14,857.9Derivative financial instruments . . . . . . . . . . . . . . . . . . . . . – 36.1Short-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,777.6 6,366.7Current tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,992.4 7,504.7

94,680.5 79,500.6Liabilities directly associated with non-current

assets classified as assets held for sale . . . . . . . . . . . . . 8.8 –

94,689.3 79,500.6

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226,272.9 216,111.8

Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 481,454.8 437,056.3

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RISK FACTORS

Prior to making any investment decision, prospective investors should consider carefully allof the information in this Offering Circular, including the risks and uncertainties describedbelow and any documents incorporated by reference herein. The business, financial conditionor results of operations of the Issuer, the Guarantor or the Group could be materiallyadversely affected by any of these risks.

The Issuer and the Guarantor believe that the following factors may affect their respectiveability to fulfil their obligations under the Notes. All of these factors are contingencies whichmay or may not occur and the Issuer and the Guarantor are not in a position to express a viewon the likelihood of any such contingency occurring.

Factors which the Issuer and the Guarantor believe may be material for the purpose ofassessing the market risks associated with the Notes are also described below. The Issuer andthe Guarantor believe that the factors described below represent the principal risks inherentin investing in the Notes, but the inability of the Issuer or the Guarantor to pay principal,interest (if any) or other amounts on or in connection with the Notes may occur for otherreasons which may not be considered significant risks by the Issuer and the Guarantor basedon information currently available to them or which it may not currently be able to anticipate.The Issuer and the Guarantor do not represent that the statements below regarding the risks ofholding the Notes are exhaustive.

Risks Relating to the Group and its Businesses

Hong Kong property market risks

The Group derives a substantial portion of its revenue and operating profits from its HongKong property development and investment activities and is consequently dependent on thestate of the Hong Kong property market. Historically, the Hong Kong property market hasbeen cyclical and Hong Kong property values have been affected by supply and demand ofcomparable properties, the rate of economic growth in Hong Kong, political and economicdevelopments in the PRC and the condition of the global economy.

Hong Kong property prices and rents for residential, commercial and industrial properties,after reaching record highs in the mid-1990s, declined significantly in and after the fourthquarter of 1997 as a result of the general economic downturn in Asia and the local economicenvironment. The property market showed some improvement during the period from 2004 tothe end of the first half of 2008, while property prices and rents in Hong Kong declined in thesecond half of 2008. Property prices remained substantially flat during 2009, but havegenerally increased from 2010 onwards. Factors such as the prospect of economic downturnand the tightening of liquidity can create negative sentiments for the property market, and thedemand for, and rental rates of, prime office buildings and residential, commercial andindustrial properties can consequently reduce. At the end of 2010, the Hong Kong governmentand the Hong Kong Monetary Authority (“HKMA”) introduced residential property coolingmeasures, such as Special Stamp Duty (“SSD”) for residential property that is disposed of bythe seller within 24 months of the date of acquisition, and reduced loan-to-value borrowingslimits. The size of the prospective purchaser base in the Hong Kong residential propertymarket has shrunk since these measures were introduced in 2010, but has picked up morerecently, with the total transaction amount of first-hand sales and purchasers of privateresidential units in 2014 representing an all-time high since 1996.

To counteract the downside risk arising from excessive pace of development and to safeguardthe stability of the banking system, the Hong Kong government has introduced numerousresidential property cooling measures (including the SSD and reduced loan-to-valueborrowings limits).

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The Residential Properties (First-hand Sales) Ordinance became law on 29 April 2013. Thisordinance sets out detailed requirements in relation to sales brochures, price lists, show flats,disclosure of transaction information, advertisements, sales arrangements and the mandatoryprovisions of preliminary agreement for sale and purchase and agreement for sale andpurchase for the sales of first-hand residential properties.

The Stamp Duty (Amendment) Ordinance 2014 (the “Amendment Ordinance”) became lawon 28 February 2014 and was deemed to have come into operation on 27 October 2012. Underthe Amendment Ordinance, any residential property acquired on or after 27 October 2012,either by an individual or a company (regardless of where it is incorporated), and resoldwithin 36 months, is subject to SSD. Residential properties acquired by any person (includinga company incorporated) except a Hong Kong permanent resident, will also be subject to aBuyer’s Stamp Duty (the “BSD”), to be charged at a flat rate of 15 per cent., on top of theexisting stamp duty and the SSD, if applicable.

The Stamp Duty (Amendment) (No. 2) Ordinance 2014 (“Amendment Ordinance No. 2”)was gazetted on 25 July 2014. Amendment Ordinance No.2 provides that the ad valorem stampduty (“AVD”) payable on certain instruments dealing with immovable properties executed onor after 23 February 2013 (the “Effective Date”) shall be computed at higher rates (“Scale 1rates”). It also advanced the timing for charging AVD on non-residential property transactionsfrom the conveyance on sale to the agreement for sale executed on or after the Effective Date.Under Amendment Ordinance No. 2, any residential property and non-residential propertyacquired on or after the Effective Date, either by an individual or a company, is subject to theScale 1 rates, except that acquired by a Hong Kong permanent resident acting on his/her ownbehalf who does not own any other residential property in Hong Kong at the time ofacquisition.

The Stamp Duty (Amendment) Ordinance 2018 (the “2018 Amendment Ordinance”) wasgazetted on 19 January 2018. Under the 2018 Amendment Ordinance, the AVD at Scale 1 ratesenacted under the Amendment Ordinance No. 2 are further divided into Part 1 (a flat rate of15%) and Part 2 (original Scale 1 rates under the Amendment Ordinance (No. 2)) with effectfrom 5 November 2016. Part 1 of the Scale 1 rates applies to instruments of residentialproperty and Part 2 of the Scale 1 rates applies to instruments of non-residential property. The2018 Amendment Ordinance provides, amongst others, that any instrument of residentialproperty executed on or after 5 November 2016 for the sale and purchase or transfer ofresidential property, unless specifically exempted or provided otherwise, will be subject toAVD at the rate under Part 1 of the Scale 1 rates, i.e. a flat rate of 15 per. cent of theconsideration or value of the residential property, whichever is the higher.

On 29 June 2018, the Hong Kong government proposed a tax on vacant first-hand privateresidential units at two times the annual rateable value of the units (the “Vacancy Tax”) toencourage developers to release residential units more quickly into the market. Under theproposal, developers of first-hand private residential units with an occupation permit issuedfor 12 or more months will be required to make annual returns disclosing the occupancy statusof their units. Units that have not been occupied or rented out for more than six of the past 12months will be considered vacant and subject to the Vacancy Tax, which will be collectedannually. The Hong Kong government plans to introduce an amendment bill to implement theproposed Vacancy Tax at the Legislative Council in 2019. If implemented, the Vacancy Taxmay present a financial burden to the Group that may have an adverse effect on its business,operating results and financial condition.

There can be no assurance that the Hong Kong government will not implement further coolingmeasures or extend the scope, application and rate level of the existing measures. These and

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any further measures may adversely impact the Hong Kong property market which may in turnadversely impact the Group’s business, operating results, financial condition and prospects.

In the event of economic decline, the Group may experience market pressures that affect allHong Kong property companies, such as pressures from tenants or prospective tenants toprovide rent reductions or reduced market prices for sale properties. Rental values andproperty prices are also affected by factors such as local, regional and global economicdownturns, political developments, governmental regulations and changes in planning or taxlaws, interest rate levels and inflation. In particular, recent focus on the timing for interest ratehikes in the United States has affected the Hong Kong property market.

In addition, from time to time, and especially during economic downturns, the Group hasexperienced pressure from existing and prospective commercial tenants to provide rentreductions or longer rent free periods than previously given. This has had a negative impact onthe Group’s rental income from its commercial property investments in the past and therecurrence of such market conditions in the future may have an adverse effect on the Group’sbusiness, operating results, financial condition and prospects. In particular, for the leasing ofretail shops, the retail market of Hong Kong has reached a critical point of structuraladjustment, following a period of stable development of local consumption under favourableeconomic sentiment and low unemployment rate, and occupancy rates of retail shops at coreretail areas have been rising.

There can be no assurance that rents and property values will not decline, tightening of creditprovided by banks will not increase or that interest rates will not rise in the future. Thesecould have an adverse effect on the Group’s business, operating results, financial conditionand prospects.

Volatility in the Hong Kong property market also impacts the timing for both the acquisition(or modification of land use terms) of sites and the sale of completed development properties.This volatility, combined with the lead time required for completion of projects and the sale ofexisting properties, means that the Group’s results from its property development activitiesmay be susceptible to significant fluctuations from year to year.

PRC property market risks

The Group has substantial property development and investment interests in the PRC throughthe NWCL Group and expects to continue to develop and invest in properties in the PRC. TheGroup is therefore subject to risks usually associated with property development andinvestment in the PRC.

The NWCL Group’s property development business depends significantly on the performanceof the property market, particularly in major cities such as Beijing, Shanghai, Wuhan,Shenyang, Ningbo, Shenzhen and Guangzhou, where it has made substantial investments.Accordingly, the NWCL Group is dependent, to a significant extent, on the overall state of thePRC property market, a deterioration of which would adversely affect its business andfinancial condition.

Private ownership of property in the PRC is still at an early stage of development. The growthof the private property market has been and will continue to be affected by social, political,government policy, economic and legal factors which may inhibit demand for residentialproperties. For example, the PRC property market has in the past experienced weakness indemand due to the lack of a mature and active secondary market for private properties and thelimited availability of mortgage loans to individuals in the PRC as a result of government

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interventions. If as a result of any one or more of these or similar factors, demand forresidential property or market prices decline significantly, the NWCL Group’s business,results of operations and financial condition may be materially and adversely affected.

Historically, the PRC property market has been a cyclical market. The rapid expansion of theproperty markets in certain major cities in the PRC, including Shanghai and Beijing in theearly 1990s, culminated in an oversupply in the mid-1990s and a corresponding fall inproperty values and rentals in the second half of that decade. Since the late 1990s, privateresidential property prices and the number of residential property development projects haveincreased significantly in major cities as a result of increase in demand driven by domesticeconomic growth. In particular, prices of residential properties in certain major PRC citiessuch as Beijing, Shanghai, Guangzhou and Shenzhen have experienced rapid and significantgrowth. However, residential property prices have experienced some correction since the endof 2007 and in response to the cooling measures taken since 2010. There can be no assurancethat the problems of oversupply and falling property prices will not recur in the PRC propertymarket. The PRC property market is also susceptible to the volatility of global economicconditions. In addition, the cyclical property market in the PRC affects the optimal timing forboth the acquisition of sites and the sale of completed development properties. Thiscyclicality, combined with the lead time required for the completion of projects and the sale ofproperties, means that the Group’s business and financial condition relating to propertydevelopment activities may be susceptible to significant fluctuations from year to year.

The Group’s revenue and profit during any given period reflect the quantity of propertiesdelivered during that period and are affected by any peaks or troughs in its property deliveryschedule and may not be indicative of the actual demand for its properties, sales orprofitability achieved during that period. The Group’s revenue and profit during any givenperiod generally reflect property investment decisions made by purchasers at some significanttime in the past, typically at least in the prior fiscal period. As a result, the Group’s operatingresults for any period are not necessarily indicative of results that may be expected for anyfuture period, and make it difficult to predict the Group’s future performance.

To the extent that supply in the overall property market significantly exceeds demand, theGroup may be subject to significant downturns and disruptions in the market for a sustainedperiod. Alternatively, if a serious downturn in regional or global market conditions shouldoccur, akin to the Asian financial crisis in 1997 and the global financial crisis of 2008 and2009, this may seriously affect and disrupt the property market in the PRC. If any of theseevents were to occur, the Group’s financial condition and results of operations would beadversely affected.

PRC central and local governments also frequently adjust monetary and other economicpolicies to prevent and curtail the overheating of the national and local economies, and sucheconomic adjustments may affect the PRC property market. For example, in 2011 the PRCcentral government introduced additional measures to cool the property market and to tightenmarket liquidity and curb property speculation. Further, many cities have promulgatedmeasures to restrict the number of properties a household is allowed to purchase and similarrestrictive measures could be introduced in the near future. Given that central and local PRCgovernments are expected to continue to exercise a substantial degree of control and influenceover the PRC economy and property market, any form of government control or newlyimplemented laws and regulations, in particular decisions taken by PRC regulators concerningeconomic policies or goals that are inconsistent with the Group’s interests, may, depending onthe nature and extent of such changes and the Group’s ability to make correspondingadjustments, negatively impact the Group’s future expansion plans in the PRC and have anadverse effect on the Group’s business, operating results, financial condition and prospects.

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There is no assurance that the PRC central government will not take further action, whether inthe form of new austerity measures, regulations or policy adjustments, which would adverselyaffect the PRC property market. See also “Risks Relating to the PRC”.

In addition, development projects in the PRC are dependent on obtaining the approval of avariety of governmental authorities at different levels, receipt of which cannot be assured.These development projects have been and may in the future be subject to certain risks,including those associated with the cyclical nature of property markets, changes ingovernmental regulations and economic policies (including regulations and policiesrestricting construction of properties and buildings and related limitations on pre-sales andextensions of credit), building material shortages, increases in labour and material costs,changes in general economic and credit conditions and the illiquidity of land and otherproperties. In particular, the Group has interests in development projects which requireresettlement of the original occupants of the sites of the project. Resettlement is costly andmay result in delays in the development schedule. Any restriction on the Group’s ability tocarry out pre-sale of its properties or any restriction on the use of pre-sale proceeds couldextend the time required to recover its capital outlay and could have an adverse effect on itsbusiness, operating results, financial condition and prospects, and in particular its cash flowposition. There can be no assurance that required approvals will be obtained or that the cost ofthe Group’s developments will not exceed projected costs. These factors could adverselyaffect the Group’s business, operating results, financial condition and prospects.

Global economic factors

Economic developments outside Hong Kong and the PRC could adversely affect the property,transportation, hotel and retail sectors in Hong Kong and the PRC. The global economicslowdown and turmoil in the global financial markets beginning in the second half of 2008have had a negative impact on the global economy. In 2011, the global economy wasovershadowed by the wide-ranging and complex effects arising from the worsening Europeansovereign debt crisis, the continued slow recovery of the United States economy, and theescalating political instability in the Middle East and North Africa. More recently, theuncertainty arising from the United Kingdom voting in a national referendum to withdrawfrom the European Union, political instability in the Korean Peninsula, a slump in commodityprices, fears of a slowdown in the PRC economy and interest rate hikes in the United Stateshave resulted in instability and volatility in the capital markets. Furthermore, fears over atrade war between the United States and the PRC, with the United States imposing tariffs onPRC products from July 2018 and retaliatory tariffs imposed by the PRC, have caused greatervolatility in global markets. These events have had and continue to have a significant adverseimpact on the global credit and financial markets as a whole.

Any deterioration in the financial markets may contribute to a slowdown in the globaleconomy, including in the growth forecasts, and may lead to significant declines inemployment, household wealth, consumer demand and lending. These events have had, ormay have, a significant adverse impact on economic growth in Hong Kong, the PRC andelsewhere. An economic downturn may also have a negative impact on the overall level ofbusiness and leisure travel to Hong Kong and the PRC. There can be no assurance that theseconditions will not lead to oversupply and reduced property prices and rentals, reduced hoteloccupancy levels and rates and reduced consumer spending in Hong Kong and the PRC. Therecan be no assurance that the stimulus measures implemented or proposed by a number ofgovernments as at the date of this Offering Circular, including any quantitative easing, willimprove economic growth or consumer sentiment in these countries. Hong Kong stock marketprices have also experienced significant volatility which may continue to affect the value, andany return from the sale of the Group’s investments in companies listed on the HKSE.

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In addition, changes in the global credit and financial markets have recently significantlydiminished the availability of credit and led to an increase in the cost of financing. The Groupmay face difficulty accessing the financial markets, which could make it more difficult orexpensive to obtain funding in the future. There can be no assurance that the Group will beable to raise finance at a reasonable cost.

Lease renewals

The leases that the Group has granted are typically for two to three years for office and retailtenants occupying relatively small commercial floor space and longer lease periods for thosetenants occupying relatively large commercial floor space. Some of the Group’s leases aresubject to pre-determined rental escalation or rent review every two to three years while someof the Group’s leases are up for renewal each year and the rents charged are typically adjustedbased upon prevailing market rates. Accordingly, it is possible to have a concentration ofrenewal of leases or rent adjustments in a given year, and that a slowdown in the rental marketin a given year could adversely affect the rental income of the Group.

Changes to local, regional and global economic conditions may cause companies to downsizeand even close their operations in Hong Kong and the demand and rental rates of prime officebuildings and retail space may greatly reduce. Should the economy weaken, a more cautiousview may be taken by tenants towards the size of leased space and the rental rates uponrenewal of commercial tenancies, which could have an adverse effect on the Group’s business,operating results, financial condition and prospects.

Property ownership and development considerations

Investment in property is generally illiquid, limiting the ability of an owner or a developer toconvert property assets into cash at short notice or requiring a substantial reduction in theprice that might otherwise be sought for such assets to ensure a quick sale. Such illiquidityalso limits the Group’s ability to manage its portfolio in response to changes in economic orother conditions. Moreover, it may face difficulties in securing timely and commerciallyfavourable financing in asset-based lending transactions secured by real estate due to suchilliquidity.

The Group is subject to risks incidental to the ownership and operation of residential,industrial, office and related retail properties including, among other things: competition fortenants; changes in market rents; inability to renew leases or re-let space as existing leasesexpire; inability to collect rent from tenants due to bankruptcy or insolvency of tenants orotherwise; inability to dispose of major investment properties for the values at which they arerecorded in the financial statements; increase in operating costs and the need to renovate,repair and re-let space periodically and to pay the associated costs.

The Group’s property development business involves significant risks distinct from thoseinvolved in the ownership and operation of established properties, among other things: therisk that financing for development may not be available on favourable terms; thatconstruction may not be completed on schedule or within budget (for reasons includingshortages of equipment, material and labour, work stoppages, interruptions resulting frominclement weather, unforeseen engineering, environmental and geological problems andunanticipated cost increases); that development may be affected by governmental regulations(including changes in building and planning regulations and delays or failure to obtain therequisite construction and occupancy approvals); that developed properties may not be leasedor sold on profitable terms and that purchasers and/or tenants will default.

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Restrictions on the payment terms for land use rights

In the PRC for the NWCL Group, restrictions on the payment terms for land use rights mayadversely affect the NWCL Group’s financial condition. Fiscal and other measures adopted bythe PRC government from time to time may limit the NWCL Group’s flexibility and ability touse bank loans to finance its property developments and therefore may require the NWCLGroup to maintain a relatively high level of internally-sourced cash.

In November 2009, the PRC government raised the minimum down payment of land premiumto 50%. In March 2010, this requirement was further tightened. The PRC government set theminimum land premium at no less than 70% of the benchmark price of the locality where theparcel of land is granted, and the bidding deposit at not less than 20% of the minimum landpremium. Additionally, a land grant contract is required to be entered into within 10 workingdays after a land grant deal is closed, and the down payment of 50% of the land premium is tobe paid within one month of the signing of the land grant contract, with the remaining to bepaid in full within one year of the date of the land grant contract in accordance with provisionsof such land grant contract, subject to limited exceptions. Such change of policy mayconstrain the NWCL Group’s cash otherwise available for additional land acquisitions andconstruction works. There is no assurance that the NWCL Group will have adequate resourcesto fund land acquisitions (including any unpaid land premiums for past acquisitions), orproperty developments.

On 28 September 2007, the Ministry of Land and Resources issued revised Rules regardingthe Grant of State-owned Land Use Rights for Construction by Way of Tender, Auction andListing-for-sale (Announcement No. 39) (招標拍賣掛牌出讓國有建設用地使用權規定),which provide that property developers must fully pay the land premium for the entire parcelunder the land grant contract before they can receive a land use right certificate and commencedevelopment on the land. This regulation became effective on 1 November 2007. As a result,property developers are not allowed to bid for a large piece of land, make partial payment, andthen apply for a land use right certificate for the corresponding portion of land in order tocommence development, which had been the practice in many Chinese cities. In addition, on 8March 2010, the Ministry of Land and Resources issued the Circular on Strengthening RealEstate Land Supply and Supervision (Guo Tu Zi Fa [2010] No. 34) (關於加強房地產用地供應和監管有關問題的通知), under which property developers are required to pay 50% of theland premium as a down payment within one month of the signing of a land grant contract, andthe total amount of the land premium is to be paid in full within one year of the date of the landgrant contract. These regulations require property developers to maintain a higher level ofworking capital. The implementation of these regulations may have a material adverse effecton the NWCL Group’s cash flow position, financial condition and business plans.

Further, in September 2010, the Ministry of Land and Resources and The Ministry of Housingand Urban-Rural Development jointly issued the Notice on Further Strengthening theAdministration and Control of Real Estate Use and Construction (關於進一步加強房地產用地和建設管理調控的通知) (Guo Tu Zi Fa [2010] No. 151), which stipulates, among otherthings, that the planning and construction conditions and land use standards should bespecified when a parcel of land is to be granted, and the restrictions on the area of any parcelof land granted for commodity properties should be strictly implemented. The developmentand construction of large low-density residential properties should be strictly restricted, andthe plot ratio for residential land is required to be more than 1:1. In addition, a propertydeveloper and its shareholders are prohibited from participating in any bidding to acquireadditional land until any illegal behaviour in which it has engaged, such as leaving its landidle for more than one year, has been completely rectified. On 23 May 2012, the Ministry ofLand and Resources issued the Catalogue of Restricted Use of Land (2012 Version) (限制用地項目目錄（2012年本）) which specifies that (i) the area of a parcel of land granted forcommodity housing development may not exceed seven hectares in small cities (towns), 14hectares in medium size cities or 20 hectares in large cities; and (ii) the plot ratio should not beless than one.

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If changes in government policy lead to a reduction in land supply for the NWCL Group’sfuture projects, or the NWCL Group is not successful in tendering for land or obtaining theland use rights certificates or the other necessary PRC government approvals for the NWCLGroup’s projects, the NWCL Group’s business, financial condition and results of operationsmay be materially and adversely affected.

Resettlement costs associated with property developments

Resettlement costs associated with property developments may also substantially increase theNWCL Group’s property development costs. In accordance with the Urban Housing Clearanceand Resettlement Administration Regulations (城市房屋拆遷管理條例), effective from 1November 2001, and the applicable local regulations, where a property developer in the PRCis responsible for the demolition of existing properties on a site for development and therelocation of existing residents, the property developer is required to enter into a writtenagreement with the owners or residents of existing buildings subject to demolition fordevelopment, directly or indirectly through the local government, to provide compensation fortheir relocation and resettlement. The compensation payable by the property developer iscalculated in accordance with pre-set formulae provided by the relevant provincialauthorities. If parties fail to reach an agreement, any party may apply for a ruling or initiateproceedings in the People’s Court in the relevant province, which may cause a delay to thedevelopment schedule for the project. Such proceedings and delays to the developmentschedule, if they eventuate, may lead to increased costs, which may in turn adversely affectthe business and financial position of the NWCL Group.

Governmental approvals

The PRC property market is heavily regulated by the PRC government. PRC propertydevelopers must comply with various requirements mandated by laws and regulations,including the policies and procedures established by local authorities designed for theimplementation of such laws and regulations. Property developers in the PRC must obtain aformal qualification certificate in order to engage in a property development business in thePRC. According to the Provisions on Administration of Qualification Certificates of PropertyDevelopers (房地產開發企業資質管理規定), effective on 29 March 2000, newly establisheddevelopers must first apply for a provisional qualification certificate valid for one year, whichcan be renewed for a maximum of two additional one-year periods. If a newly establishedproperty developer fails to commence property development within one-year of theprovisional qualification certificate becoming effective, it will not be allowed to extend itsprovisional qualification certificate.

In order to develop and complete a property development project, the NWCL Group mustobtain various permits, licences, certificates and other approvals from the relevantadministrative authorities at various stages of the property development, including land useright certificates, planning permits, construction permits, pre-sale permits and certificates orconfirmation of completion and acceptance, and each of these approvals is dependent on thesatisfaction of certain conditions. Although the NWCL Group has not experienced anymaterial delays in obtaining such governmental approvals in respect of its propertydevelopments, there can be no assurance that the NWCL Group will not encounter majorproblems in fulfilling the conditions precedent to the approvals required, or that it will be ableto adapt to new laws, regulations or policies that may come into effect from time to time withrespect to the property market in general or the particular processes with respect to thegranting of approvals. There may also be delays on the part of the administrative bodies inreviewing the NWCL Group’s applications and granting approvals. If the NWCL Group failsto obtain the relevant approvals for its property developments, these developments may notproceed on schedule, and its business and financial condition may be adversely affected.

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In addition, property developers in the PRC, such as the NWCL Group’s individual projectcompanies, are required to present a valid qualification certificate when they apply for apresale permit. If a newly established property developer fails to commence propertydevelopment within one year of the provisional qualification certificate becoming effective, itwill not be allowed to extend its provisional qualification certificate. It is mandatory undergovernment regulations that property developers fulfill all statutory requirements beforeobtaining or renewing their qualification certificates. In reviewing the renewal of aqualification certificate, the local authority takes into account the property developer’sregistered capital, property development investments, history of property development,quality of property construction, expertise of the developer’s management, as well as whetherthe property developer has any illegal or inappropriate operations. Each of the NWCL Group’sproject companies is responsible for, and monitors, the submission of its annual renewalapplication. If any of the NWCL Group’s project companies is unable to meet the relevantrequirements, and is therefore unable to obtain or renew its qualification certificate, thatproject company will typically be given a grace period to rectify any insufficiency ornon-compliance, subject to a penalty of between RMB50,000 and RMB100,000. Failure tomeet the requirements within the specified time frame could result in the revocation of thequalification certificate and the business licence of such project company. There is noassurance that the qualification certificates of any of the NWCL Group’s project companieswill continue to be renewed or that formal qualification certificates will be obtained in atimely manner, or at all, as and when they expire. If the NWCL Group’s project companies orproject management companies are unable to obtain or renew their qualification certificates,they may not be permitted to continue their businesses, which could materially and adverselyaffect the NWCL Group’s business, financial condition and results of operations.

Entities engaged in property management should also obtain qualification certificationsbefore commencing their businesses, pursuant to the Measures on Administration ofQualification Certificates of Property Service Enterprises (物業服務企業資質管理辦法),effective on 1 May 2004 and subsequently revised on 26 November 2007. If any of the NWCLGroup’s property management companies is unable to meet the relevant requirements andtherefore unable to obtain or maintain the qualification certificates, the NWCL Group’sbusiness and financial condition could be materially and adversely affected.

In addition to the above, there is no assurance that the NWCL Group will not encountersignificant problems in making payment of the registered capital in a timely manner or at all,or satisfying other conditions necessary for the issuance of other licences, certificates,permits or approvals. If the NWCL Group fails to obtain the necessary licences, certificates,permits or approvals for any of the NWCL Group’s PRC subsidiaries or property projects, itsbusiness, results of operations and financial condition may be materially and adverselyaffected.

Competition

Hong Kong properties in the office, retail, residential and carpark sectors are highlycompetitive. New properties and facilities built in Hong Kong may compete with the Groupfor tenants and occupants, which may affect the Group’s ability to maintain high occupancyand utilisation levels, rental rates and carpark charges in respect of its investment properties,and buyers, which may affect the Group’s ability to sell its development properties. The Groupmay be under pressure to lower rental rates, carpark charges and incur additional capitalexpenditure to effect improvements or offer additional concessions to tenants to avoid fallingoccupancy or utilisation levels and to reduce sale prices on its development properties, all ofwhich may have a negative impact on the Group’s profit. For the retail properties sector, thecompetitive business environment among retailers in Hong Kong may also have a detrimental

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effect on tenants’ businesses and, consequently, their ability to pay rent. Any of the abovecould have an adverse effect on the Group’s business, operating results, financial conditionand prospects.

Increasing competition in the PRC property market may adversely affect the NWCL Group’sand therefore the Group’s profitability. The NWCL Group’s property development operationsface competition from both international and local property developers with respect to factorssuch as location, facilities and supporting infrastructure, services and pricing. The NWCLGroup competes with both local and international companies in capturing new businessopportunities in the PRC. In addition, some local companies have extensive local knowledgeand business relationships and/or a longer operational track record in the relevant localmarkets than the NWCL Group while international companies are able to capitalise on theiroverseas experience to compete in the PRC markets. Intensified competition between propertydevelopers may result in increased costs for land acquisition and an over-supply of properties,both of which may adversely affect the NWCL Group’s business and financial conditions.There can be no assurance that the NWCL Group will be able to compete successfully in thefuture against its existing or potential competitors or that increased competition with respectto its activities (including the high-end property market) may not have an adverse effect on theNWCL Group’s business and financial condition.

Availability of mortgages

The terms on which mortgages are available, if at all, to purchasers of the Group’s and NWCLGroup’s properties may affect its sales. An increasing number of purchasers of the Group’sresidential properties in Hong Kong and NWCL’s residential properties in the PRC arrangemortgages to fund their purchases. An increase in interest rates may increase the cost ofmortgage financing, thus reducing the attractiveness of mortgages as a source of financing forproperty purchases and adversely affecting the affordability of residential properties.

Specifically, in the PRC, in line with macroeconomic policies and policies intended toregulate and cool down the property market, the PRC government has taken a number ofmeasures to regulate the availability, terms and pricing of mortgage financing for propertypurchasers. In addition, the PRC government and commercial banks may also increase thedown payment requirement, impose other conditions or otherwise change the regulatoryframework in a manner which would make mortgage financing unavailable or unattractive topotential property purchasers. Further, any increase in interest rates including the People’sBank of China (“PBoC”) benchmark rate, will adversely affect the affordability andattractiveness of mortgage financing to potential purchasers of the NWCL Group’s properties.

If the availability or attractiveness of mortgage financing is reduced or limited, some of theNWCL Group’s potential purchasers may not be able to purchase its developed properties and,as a result, the NWCL Group’s business, liquidity and results of operations could be adverselyaffected.

Guarantees to banks

The NWCL Group has provided guarantees to secure obligations of purchasers of itsproperties for repayment. A default by a significant number of purchasers would adverselyaffect the NWCL Group’s financial condition.

In line with market practice in the PRC, the NWCL Group has provided pre-registrationguarantees in favour of banks which have provided mortgage facilities for purchasers of theNWCL Group’s properties to secure such purchasers’ repayment obligations. A

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pre-registration guarantee will lapse upon the registration of the mortgage by the relevantpurchaser is completed. Under the terms of the pre-registration guarantees, if, during the termof the guarantee (from the date of the mortgage up to the delivery of title certificates to thebank and the completion of the registration of the mortgage, typically ranging from 20 to 36months), a purchaser defaults on his repayment obligation, the NWCL Group will be liable topay to the bank the amount owing to it from the purchaser, but the NWCL Group will have theright to take possession of and re-sell the mortgaged property. In the event of a default by asignificant number of purchasers for whom the NWCL Group has provided guarantees suchdefaults may adversely affect the NWCL Group’s business and financial condition.

In addition, if there are changes in laws, regulations, policies and practices that would prohibitproperty developers from providing guarantees to banks in respect of mortgages offered toproperty purchasers and these banks do not accept any alternative guarantees from other thirdparties, or if no third party is available in the market to provide such guarantees, it maybecome more difficult for property purchasers to obtain mortgages from banks duringpre-sales. Such difficulties in financing could result in a substantially lower rate of pre-sale ofproperties, which may adversely affect the NWCL Group’s business and financial condition.

In line with industry practice, the NWCL Group does not conduct independent credit checkson purchasers but rely on the credit checks conducted by the mortgagee banks. Although theNWCL Group has historically experienced a low rate of default on mortgage loans guaranteedby it, there can be no assurance that defaults will not occur in the future or that it will notsuffer any losses due to such defaults. If a significant number of purchasers default on theirmortgages and the NWCL Group’s guarantees are called upon, the NWCL Group’s business,results of operations and financial condition may be materially and adversely affected to theextent that there is a material depreciation in the value of the relevant properties from theprices paid by the purchasers or that the NWCL Group cannot sell such properties due tounfavourable market conditions or other reasons.

Effects of property revaluations

In accordance with HKFRS, the Group values its investment properties at every reportingfinancial statement date at their open market value on the basis of an external professionalvaluation. Any change in the valuation is charged or credited, as the case may be, to theincome statement. The fair value of each of the Group’s investment properties is likely tofluctuate in the future, and the Group’s historic results, including fair value gains or losses,should not be regarded as an indicator of its future profit. The fair value of the Group’sinvestment properties increased for the financial year ended 30 June 2018, though there is noassurance that the fair value will not decrease in the future. Any such decrease in the fair valueof the Group’s investment properties will reduce its profit and equity for that year and wouldincrease the gearing ratio of the Group. The Group may not be able to obtain financing onfavourable terms. These factors could have an adverse effect on the Group’s business,operating results, financial condition and prospects.

Further, the NWCL Group’s results may fluctuate substantially due to revaluation gains orlosses on its investment properties. The NWCL Group reassesses the fair value of itsinvestment properties upon their completion, and at every reported balance sheet datethereafter. The NWCL Group’s valuations are based on prevailing market prices or alternatevaluation methods, such as through discounted cash flow analysis based on estimated futurecash flows. In accordance with HKAS 40, which was introduced in Hong Kong with respect tofinancial years commencing on or after 1 January 2005 to govern the accounting of investmentproperties, the NWCL Group recognises changes to the fair value of its investment propertiesas a gain or loss (as applicable) in its income statements. However, there is no cash flow

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impact arising from any fair value gain or loss as long as the relevant investment property isheld by the NWCL Group. For the years ended 30 June 2018 and 30 June 2017, the Issuer andits subsidiaries recognised fair value gain in investment properties of approximatelyHK$1,261.6 million and fair value loss in investment properties of HK$182.7 million,respectively. The fair value of each of the NWCL Group’s investment properties is likely tofluctuate further in the future, and the NWCL Group’s historic results, including the fair valuegains should not be regarded as an indicator of its future profit. There is no assurance that thefair value of the NWCL Group’s investment properties will not decrease in the future. Anysuch decrease in the fair value of the NWCL Group’s investment properties may reduce itsprofits.

Land for Hong Kong property development and investment

The Group’s business and results from operations are dependent, in part, on the availability ofland, buildings and hotels suitable for development or investment and the Group’s ability toreplenish its land bank at favourable costs. The limited supply of, and competition for, land inHong Kong has, in the past, made it increasingly difficult to locate suitable property to acquireat economical prices for development. Government policies seeking to increase land supplyand increases in borrowing costs could affect the Group’s ability to maintain historicaloperating margin levels, and profits from property development activities could be adverselyaffected. Although the Group has a significant agricultural land reserve, it is required to obtaingovernment approval for the modification of land usage rights to residential, commercial orother appropriate use before such agricultural land can be used for development purposes.There can be no assurance, however, that such applications will be successful. If theapplications are granted, they are likely to be subject to conditions, including the payment ofland modification premiums which are typically greater than the cost of acquisition of theland. Approvals of applications may also be subject to restrictions on the area of a piece ofland that may be developed for residential or commercial use. This could have an adverseeffect on the Group’s business, operating results, financial condition and prospects.

Land for PRC property development

The NWCL Group’s land may be forfeited by the PRC government if it fails to comply withthe terms of the land grant contracts. Under PRC law, if a developer fails to develop a plot ofland according to the terms of the land grant contract (including those relating to payment offees, designated use of land, time for commencement and completion of the development ofthe land), the relevant government authorities may issue a warning to or impose a penalty onthe developer or require the developer to forfeit the land.

Any violation of the land grant terms may also restrict a developer’s ability to participate, orprevent it from participating, in future land bidding. Specifically, under the Law of the PRC onthe Administration of Urban Real Estates (中華人民共和國城市房地產管理法), effective on1 January 1995 and subsequently revised on 30 August 2007, and other PRC laws andregulations, if the NWCL Group fails to commence development for more than one year fromthe commencement date stipulated in any land grant contract, the relevant PRC land bureaumay serve a warning notice on the NWCL Group and impose an idle land fee on the land of upto 20% of the land premium. If the NWCL Group fails to commence development for morethan two years from the commencement date stipulated in the land grant contract, the PRCgovernment may forfeit the land use rights unless the delay in development is caused bygovernment actions or force majeure. Moreover, even if the time of commencement of the landdevelopment is in line with the land grant contract, if (i) the developed GFA on the land is lessthan one-third of the total GFA of the project under the land grant contract or the total capitalinvested is less than one-fourth of the total estimated investment of the project under the landgrant contract; and (ii) the development of the land has been suspended for over one yearwithout government approval, the land will be treated as idle land.

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Although the NWCL Group has not experienced any cases or received any warnings relatingto the forfeiture of land by the government authorities, there can be no assurance thatcircumstances leading to forfeiture of land or delays in the completion of a propertydevelopment will not arise in the future. If the land is forfeited by the government authorities,the NWCL Group will not be able to continue property development on the forfeited land orrecover the costs incurred for the initial acquisition of the forfeited land or recoverdevelopment costs incurred up to the date of forfeiture, which may have an adverse effect onthe business and financial condition of the NWCL Group.

Reliance on independent contractors and sub-contractors

The Group engages independent third-party contractors and sub-contractors to providevarious services in connection with its property development and its infrastructure businessincluding design, construction, piling and foundation, building and property fitting-out work,interior decoration, gardening and landscaping works, installation of air conditioning unitsand elevators, and transportation of materials by air, sea and road. There is no assurance thatthe services rendered by any independent third-party contractor or sub-contractor engaged bythe Group will be satisfactory or match the quality standards required by the Group. TheGroup is also exposed to the risk that its contractors and sub-contractors may requireadditional capital to complete an engagement in excess of the price originally tendered and theGroup may have to bear additional costs as a result. Furthermore, in view of the tightening ofcredit facilities provided by banks, there is a risk that the Group’s major contractors andsub-contractors may experience financial or other difficulties which may affect their ability todischarge their obligations, thus delaying the completion of the Group’s development projectsor resulting in additional costs for the Group. The timely performance by these contractorsand sub-contractors may also be affected by natural and human factors such as naturaldisasters, strikes and other industrial or labour disturbances, terrorisms, restraints ofgovernment, civil disturbances, accidents or breakages of machinery or equipment, failure ofsuppliers, interruption of delays in transportation, all of which are beyond the control of theGroup. Any of these factors may have an adverse effect on the Group’s business, operatingresults, financial condition and prospects.

In addition to the above, under the Regulations on the Administration of Quality ofConstruction Works (建設工程質量管理條例) issued by State Council of the PRC, effectiveon 10 January 2000, all property development companies in the PRC must provide certainquality warranties for the properties they construct or sell. The NWCL Group is required toprovide these warranties to its customers. The NWCL Group relies on its main contractors toobtain the requisite construction permits to commence construction of its sites. As adeveloper, the NWCL Group may be liable for administrative penalties if its contractors fail toobtain all of the requisite construction permits.

Cost of construction materials

Construction costs are one of the main components of the Group’s cost of sales. Constructioncosts encompass all costs for the design and construction of a project, including payments tothird-party contractors, costs of construction materials, foundation and substructure, fittings,facilities for utilities and related infrastructure such as roads and pipelines. Historically,construction material costs have been the principal driver of the construction costs of theGroup’s property development projects and its infrastructure business, with the cost ofthird-party contractors remaining relatively stable. A general trend in the economy ofincreased inflationary risk may also have an impact on the construction costs and a widerimpact on other costs.

Construction costs may fluctuate as a result of the volatile price movement of constructionmaterials such as steel and cement. The Group manages the cost of outsourced construction

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work through a process of tenders which, among other things, takes into account procurementof supplies of principal construction materials such as steel and cement for the Group’sproperty development projects at fixed prices. In line with industry practice, if there is asignificant price fluctuation (depending on the specific terms of each contract), the Group willbe required to re-negotiate, top up or refund, depending on the price movement, existingconstruction contracts. Additionally, should existing contractors fail to perform under theircontracts, the Group may be required to pay more to contractors under replacement contracts.Therefore, the Group’s profit margin is sensitive to changes in the market prices forconstruction materials and these profit margins will be adversely affected if the Group cannotpass all of the increased costs onto its customers.

Construction delays

The Group is exposed to risks associated with project delays and cost overruns. Projectsundertaken by the Group typically require substantial capital expenditures during theconstruction phase and usually take many months, sometimes years, before cash proceeds aregenerated. The time taken and the costs involved in completing construction can be adverselyaffected by many factors, including shortages of construction materials, equipment or labour,adverse weather conditions, natural disasters, labour disputes, disputes with subcontractors,accidents, difficulties in obtaining necessary governmental approvals, changes ingovernmental priorities and other unforeseen circumstances. Any of these circumstancescould give rise to construction delays and/or cost overruns.

Construction delays may result in the loss of revenues. Since the Group outsources themajority of its construction work to third-party contractors, it relies on its contractors tocomplete projects according to the agreed completion schedules and does not exercise anydirect control over materials sourcing or the construction schedule of such projects. Under theGroup’s pre-sale contracts, it is liable to the purchasers for default payments if it fails todeliver the completed properties in accordance with the delivery schedule in these contracts,and in the case of a prolonged delay, the purchasers will be entitled to terminate the pre-salecontracts and require a refund of the purchase price in addition to the default payments. Inaddition, the failure to complete construction according to its specifications may result inliabilities, reduced efficiency and lower financial returns. Although most of the Group’sprojects have been completed on schedule and the Group has not incurred any material defaultliabilities due to construction delays, there can be no assurance that this will remain the caseor that future projects will be completed on time, or at all, and generate satisfactory returns.

Investment properties and hotels

The NWCL Group has significant construction and capital expenditure requirements inrelation to its investment properties and hotels. Unlike properties developed for sale whichcan be pre-sold and the payments received used to finance other developments (subject toapplicable PRC laws relating to pre-sales), the NWCL Group’s investment properties andhotels require significant upfront capital expenditures but generate no cash inflow until thedevelopment has been completed and the relevant properties commence operation.Construction and other delays can extend the duration of this period. In addition, the NWCLGroup’s operating investment properties and hotels, and all of its future investment propertiesand hotels, will need renovations and other capital improvements, including replacements,from time to time. Some of these capital improvements are mandated by health, safety or otherregulations or by the standards of the hotel management partners. The cost of construction andcapital improvements could have a material adverse effect on the NWCL Group’s business,financial condition and results of operations.

In addition, the NWCL Group’s investment properties and hotels have certain fixed costs thatit may not be able to adjust in a timely manner in response to a reduction in demand. The fixed

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costs associated with owning hotels and retail units, including committed maintenance costs,property taxes and other associated payments may be significant. The NWCL Group may beunable to reduce these fixed costs in a timely manner in response to changes in demand for itsservices, and any failure to adjust its fixed costs may adversely affect its business, financialcondition and results of operations. Moreover, the NWCL Group’s properties, and anyproperties in which it may acquire interests in the future, may be subject to increases inoperating and other expenses due to adverse changes in contractual terms and increases inproperty and other tax rates, utility costs, operating expenses, insurance costs, repairs andmaintenance and administrative expenses, which may materially adversely affect its business,financial condition and results of operations.

Moreover, the illiquidity of investment properties and the lack of alternative uses of hotel andretail properties could significantly limit the NWCL Group’s ability to respond to adversechanges in the performance of its properties.

As investment properties in general are relatively illiquid, the NWCL Group’s ability topromptly sell one or more of its properties in response to changing economic, financial andinvestment conditions is limited. The property market is affected by many factors, such asgeneral economic conditions, availability of financing, interest rates and other factors,including supply and demand, that are beyond the NWCL Group’s control. The NWCL Groupcannot predict whether it will be able to sell any of its properties for the prices or on the termsset by it, or whether any prices or other terms offered by prospective purchasers would beacceptable to it. It also cannot predict the length of time needed to find willing purchasers andto close the sale of its properties. Should the NWCL Group decide to sell a property during theterm of that property’s management agreement or tenancy agreement, it may have to paytermination fees to its hotel management partners or its anchored retail tenants.

In addition, hotel and retail properties may not be readily converted to alternative uses if theywere to become unprofitable due to competition, age, decreased demand or other factors. Theconversion of hotel and retail properties to alternative uses would generally requiresubstantial capital expenditures. In particular, the NWCL Group may be required to expendfunds to correct defects or to make improvements before a property can be sold. There is noassurance that the NWCL Group will have funds available to correct defects or to makeimprovements. These factors and any others that would impede the NWCL Group’s ability torespond to adverse changes in the performance of its properties could affect its ability tocompete against its competitors and results of operations.

Infrastructure business

The Group, through its subsidiary NWS Holdings Limited (“NWSH”), has substantialinvestments in infrastructure projects in the PRC. In addition to the typical political risksassociated with other investments in the PRC, there are a number of construction, financing,operating and other risks associated with infrastructure investments in the PRC. Infrastructureprojects of the types undertaken by the Group typically require substantial capitalexpenditures during the construction phase and usually take many months, sometimes years,before they become operational and generate revenue. The time taken and the costs involved incompleting construction can be adversely affected by many factors, including shortages ofmaterials, equipment and labour, adverse weather conditions, natural disasters, labourdisputes, disputes with sub-contractors, accidents, changes in government priorities and otherunforeseen circumstances. Any of these could give rise to delays in the completion ofconstruction and/or to cost overruns. In relation to certain of the Group’s infrastructureprojects in the PRC, certain government approvals, permits, licences or consents may not yetbe obtained. Delays in the process of obtaining or failure to obtain the requisite licences,

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permits or approvals from government agencies or authorities can also increase the cost ordelay or prevent the commercial operation of a business, which could adversely affect thefinancial performance of the Group’s PRC infrastructure business. Construction delays mayresult in the loss of revenues. The failure to complete construction according to itsspecifications may result in liabilities, reduced efficiency, delay in commencement ofoperations and thus lower financial returns. There can be no assurance that infrastructureprojects undertaken by the Group will be completed on time, or at all, or that they willgenerate satisfactory returns.

Hotel business

The hotel business is sensitive to changes in global and national economies in general. Therecent economic downturn has had, and any further economic downturn could have, a negativeimpact on the level of business and leisure travel to Hong Kong, the PRC and elsewhere inSoutheast Asia where the Group operates its hotels, which in turn has had, and may continueto have, a negative impact on the hotel industry in the region. In particular, a decline inbusiness and leisure travel will have a negative impact on occupancy and room rates of theGroup’s hotels. A prolonged downturn in the hotel industry may have an adverse effect on theGroup’s business, operating results, financial condition and prospects.

The hotel industry may also be unfavourably affected by other factors such as governmentregulations, changes in local market conditions, competition in the industry, excess hotelsupply or reduced international or local demand for hotel rooms and associated services,foreign exchange fluctuations, interest rate environment, the availability of finance and socialfactors.

Additionally, the Group’s hotel operations may be adversely impacted by occupancy and roomrates achieved by the Group’s hotels as well as the Group’s ability to control costs, includingincreases in wage levels, energy, healthcare, insurance costs and other operating expenses.This may result in lower operating profit margins or even losses and the relative mix of owned,leased and managed properties and the success of its food and beverage operations may beadversely affected.

Department store business

The Group, through its subsidiary New World Department Store China Limited (“NWDS”),operates a network of department stores in the PRC. The success of the department storebusiness depends to a significant extent on NWDS’ relationships with its concessionaires,which contribute a substantial amount of NWDS’ revenue through the payment ofcommissions. NWDS also relies on its concessionaires to provide a variety of products andbrands. In the event that a significant number of major brand concessionaires terminate or failto renew their contracts with NWDS and NWDS fails to find other suitable brandconcessionaires as replacements, or if the commission rate of concessionaire sales decrease,financial results of the department store business could also be adversely affected.

Most of the department stores are subject to lease agreements, and there can be no assurancethat the landlord of each department store will renew the respective lease upon its expiry. Inthe event that NWDS ceases to occupy the leased properties, NWDS will be required torelocate or close down the relevant department store may have an adverse effect on theGroup’s business, operating results, financial condition and prospects.

NWDS and its concessionaires source merchandise worldwide. The standard agreement withconcessionaires requires that neither the names of concessionaire stores nor the merchandise

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sold by them may infringe intellectual property rights, or in any other way be unlawful. Inaddition, the concessionaires may neither display nor sell any prohibited or illegalmerchandise. The standard supply agreement with direct sales suppliers also provides that themerchandise sold by them do not infringe intellectual property rights. In the event that NWDSdirectly, or indirectly through its concessionaires, sells infringing goods at the departmentstores, NWDS may be found liable for infringement of intellectual property rights and becompelled to pay damages or penalties. Although NWDS’s concessionaires and direct salessuppliers provide it with written indemnities covering the full extent of any third partyliability that NWDS may incur through their operations and sales made in NWDS’ departmentstores, there can be no assurance that NWDS can successfully obtain any such indemnitypayment or that the indemnity payment will fully cover all of NWDS’s costs associated withthe original liability. If any claims alleging infringement of intellectual property rights arebrought against NWDS or its concessionaires, the reputation of NWDS and the Group mayalso be damaged.

There are general risks associated with the retail business, including changing customerpreferences, seasonal fluctuations, adverse weather conditions, suitable sites for expansion,sufficient human resources, obtaining and retaining direct sales suppliers, concessionairesand personnel, labour disputes and government approvals, some of which are beyond NWDS’and the Group’s control. Failure to manage such risks may have an adverse effect on theGroup’s business, operating results, financial condition and prospects.

The imposition of new accounting standards could impact the Group

The HKICPA has from time to time issued a number of new and revised HKFRS andinterpretation. In addition, interpretations on the application of the HKFRS will continue todevelop. These factors may require the Group to adopt new accounting policies. The adoptionof new accounting policies or new HKFRS could have a significant impact on the Group’sfinancial position or results of operations.

Risks relating to accidents or other hazards

The Group maintains insurance coverage in respect of all of its properties under construction,third-party liabilities and employer’s liabilities in accordance with what it believes to beindustry standards. However, the Group may become subject to liability for hazards which itcannot insure against or which it may elect not to insure against because of high premiumcosts or other reasons. In particular, the Group’s insurance policies generally do not covercertain types of losses incurred due to hazards such as war, civil disorder, acts of terrorism,and other natural disasters. Any losses may significantly affect the Group’s business operationand the Group may not have sufficient funds to replace any property destroyed as a result ofsuch hazards. In addition, any payments the Group makes to cover any losses, damages orliabilities may have an adverse effect on its business, operating results, financial conditionand prospects. Further, notwithstanding the Group’s insurance coverage, any damage to theGroup’s buildings, facilities, equipments, or other properties as a result of occurrences such asfires, floods, water damage, explosions, power losses, typhoons and other natural disastersmay have a material adverse effect on the Group’s business, financial condition and results ofoperations.

Furthermore, whilst every care is taken by the Group and its employees in the selection andsupervision of its independent contractors, accidents and other incidents, such as theft, mayoccur from time to time. Such accidents or incidents may expose the Group to liability or otherclaims by its customers and other third parties. Although the Group believes that it hasadequate insurance arrangements in place to cover such eventualities, it is possible that

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accidents or incidents could occur which are not covered by these arrangements. Theoccurrence of any such accidents or incidents which are not covered by insurance may have anadverse effect on the Group’s business, operating results, financial condition and prospects. Itis also possible that litigants may seek to hold the Group responsible for the actions of itsindependent contractors.

General legal and regulatory considerations

The operations of the Group are subject to various laws and regulations of Hong Kong, thePRC and other jurisdictions in which the Group’s operations are located. The Group’sactivities on its investment and development properties are limited by zoning ordinances andother regulations enacted by the authorities. Developing properties, refurbishment and otherre-development projects require government permits, some of which may take longer to obtainthan others. From time to time, the authorities may impose new regulations on landlords suchas mandatory retrofitting of upgraded safety and fire systems in all buildings. The Group’sproperties are subject to routine inspections by the authorities with regard to various safetyand environmental issues. There can be no assurance that the Group will be able to complywith such regulations or pass such inspections.

From time to time, changes in law and regulations or the implementation thereof may requirethe Group to obtain additional approvals and licences from the relevant authorities for theconduct of its operations. In such event, the Group may incur additional expenses to complywith such requirements. This will in turn affect the Group’s financial performance as itsbusiness costs will increase.

Furthermore, there can be no assurance that such approvals or licences will be granted to theGroup promptly or at all. If the Group experiences delays in obtaining, or is unable to obtain,such required approvals or licences, it may have an adverse effect on the Group’s business,operating results, financial condition and prospects.

PRC legal and regulatory considerations

The performance of the NWCL Group’s property development business may be adverselyaffected by legal and regulatory changes introduced by the PRC Government. The NWCLGroup’s business is subject to extensive governmental regulation. As with other PRC propertydevelopers, the NWCL Group must comply with various requirements mandated by PRC lawsand regulations, including the policies and procedures established by local authoritiesdesigned to implement such laws and regulations. In particular, the PRC government exertsconsiderable direct and indirect influence on the PRC property sector by imposing industrypolicies and other economic measures, such as control over the supply of land for propertydevelopment, foreign exchange, property financing, taxation and foreign investment. Fromtime to time, the PRC government also adjusts its monetary and economic policies to adjustthe rate of growth of the PRC economy and economies of local areas within the PRC.

Moreover, the NWCL Group has historically sold a number of its residential properties tooverseas customers. Actions taken by the PRC government may adversely affect the NWCLGroup’s ability to continue to sell residential properties to overseas customers in the futureand adversely affect the NWCL Group’s results of operations.

The fiscal and credit-tightening measures adopted by the PRC government in the past yearshave had differing effects on the property markets of different cities in the PRC. Although theNWCL Group’s business has not been materially and adversely affected by the austeritymeasures, the PRC government and local governments in the PRC will continue to exercise a

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substantial degree of control and influence over the PRC economy and property market. Anyform of additional government control or newly implemented laws and regulations, dependingon the nature and extent of such changes and the NWCL Group’s ability to makecorresponding adjustments, may result in a material adverse effect on its business, financialcondition and results of operations, as well as on its future expansion plans in the PRC. Inparticular, decisions taken by regulators concerning economic policies or goals that areinconsistent with the NWCL Group’s interests could adversely affect its prospects and resultsof operations.

There can be no assurance that the PRC government will not adopt more stringent policies,regulations and measures in the future. If the NWCL Group fails to adapt its operations to newpolicies, regulations and measures that may come into effect from time to time with respect tothe real property industry, or such policy changes disrupt the NWCL Group’s business orcause the NWCL Group to incur additional costs, its business, financial condition, results ofoperations and prospects may be materially and adversely affected.

Government’s control over foreign investments

The PRC government has in the past imposed restrictions on foreign investments in theproperty sector to curtail the overheating of the property sector by, among other things,increasing the capital and other requirements for establishing foreign-invested real estateenterprises, tightening foreign exchange control and imposing restrictions on purchases ofproperties in China by foreign persons.

Restrictions imposed by the PRC government on foreign investment in the property sectormay affect the NWCL Group’s ability to make further investments in the NWCL Group’s PRCsubsidiaries and as a result may limit its business growth and have a material adverse effect onits business, financial condition and results of operations.

Governmental approvals

The NWCL Group’s results of operations may also be adversely affected if it fails to obtain, orthere are material delays in obtaining, requisite governmental approvals for its propertydevelopments. Property developers in the PRC must obtain a formal qualification certificatein order to engage in a property development business in the PRC and they are required topresent a valid qualification certificate when they apply for a pre-sale permit. In addition, inorder to develop and complete a property development project, the NWCL Group must obtainvarious permits, licences, certificates and other approvals from the relevant administrativeauthorities at various stages of the property development, including land use right certificates,planning permits, construction permits, pre-sale permits and certificates or confirmation ofcompletion and acceptance, and each of these approvals is dependent on the satisfaction ofcertain conditions. Entities engaged in property management should also obtain qualificationcertifications before commencing their businesses.

There is no assurance that the NWCL Group will not encounter problems in fulfilling theconditions precedent required for the issuance of any necessary licences, certificates, permitsor approvals such as making payment of the registered capital in a timely manner or at all, orsatisfying other conditions or relevant requirements necessary for the issuance of anynecessary licences, certificates, permits or approvals. There is also no assurance that theNWCL Group will be able to adapt to new laws, regulations or policies that may come intoeffect from time to time with respect to the property market in general or the particularprocesses with respect to the granting of the licences, certificates, permits or approvals.Further there may also be delays on the part of the administrative bodies in reviewing the

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NWCL Group’s applications and granting the licences, certificates, permits or approvals.There is also no assurance that the licences, certificates, permits or approvals of the NWCLGroup will continue to be renewed or that the licences, certificates, permits or approvals willbe obtained in a timely manner, or at all, as and when they expire. If the NWCL Group fails toobtain the necessary licences, certificates, permits or approvals for any of the NWCL Group’sPRC subsidiaries or property projects, its business, results of operations and financialcondition may be materially and adversely affected.

Pre-sale

Changes in laws and regulations with respect to pre-sale may also adversely affect the NWCLGroup’s cash flow position and performance. The NWCL Group uses proceeds from thepre-sale of its properties as a source of financing for its construction costs. Under current PRClaws and regulations, property developers must fulfil certain conditions before they cancommence the pre-sale of their property development projects and may use pre-sale proceedsto finance their developments. There can be no assurance that the PRC governmental authoritywill not ban the practice of pre-selling uncompleted properties or implement furtherrestrictions on the pre-sale of properties, such as imposing additional conditions for a pre-salepermit or further restrictions on the use of pre-sale proceeds. Proceeds from the pre-sale of theNWCL Group’s properties are an important source of financing for its property developments.Consequently, any restriction on the NWCL Group’s ability to pre-sell its properties,including any increase in the amount of up-front expenditure the NWCL Group must incurprior to obtaining the pre-sale permit or any restriction on the use of pre-sale proceeds, wouldextend the time period required for recovery of the NWCL Group’s capital outlays and wouldresult in its needing to seek alternative means to finance the various stages of its propertydevelopments. This, in turn, could have an adverse effect on the NWCL Group’s business,cash flow results of operations and financial condition.

Liability to customers

In addition, the NWCL Group may be liable to its customers for damages if it does not deliverindividual property ownership certificates in a timely manner.

Under PRC law and regulations, property developers are required to deliver to purchasers therelevant individual property ownership certificates within 90 days after delivery of theproperty or within a time frame set out in the relevant sale agreement. Property developers,including the NWCL Group, generally elect to specify a deadline for the delivery of theindividual property ownership certificates in the sale agreements to allow sufficient time forthe application and approval processes. Under current regulations, the NWCL Group isrequired to submit requisite governmental approvals in connection with its propertydevelopments, including land use right documents and planning and construction permits, tothe local bureau of land resources and housing administration within three months after thereceipt of the completion and acceptance certificates for the relevant properties and apply forthe general property ownership certificates in respect of these properties. The NWCL Group isthen required to submit within regulated periods after delivery of the properties, the relevantproperty sale agreements, identification documents of the purchasers, proof of payment ofdeed tax, together with the general property ownership certificate, for the bureau’s review andthe issuance of the individual property ownership certificates in respect of the propertiespurchased by the purchasers. Delays by the various administrative authorities in reviewing theapplication and granting approval and certain other factors may affect timely delivery of thegeneral and individual property ownership certificates. Therefore, the NWCL Group may notbe able to deliver individual property ownership certificates to purchasers on time as a resultof delays in the administrative approval processes or for any other reason beyond its control,

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which may result in it having to pay default payments and, in the case of a prolonged delay, thepurchasers terminating the sale agreements. If the NWCL Group becomes liable to asignificant number of purchasers for late delivery of the individual property ownershipcertificates, the NWCL Group’s business and financial condition may be adversely affected.

Environmental problems

The NWCL Group is subject to a variety of laws and regulations concerning the protection ofhealth and the environment. The particular environmental laws and regulations which apply toany given project development site vary greatly according to the site’s location, the site’senvironmental condition, the present and former uses of the site, as well as the nature of theadjoining properties. Environmental laws and conditions, may cause the NWCL Group toincur substantial compliance and other costs and can prohibit, delay, or severely restrictproject development activity in environmentally sensitive regions or areas.

Outbreaks of contagious diseases

The outbreak of Severe Acute Respiratory Syndrome (“SARS”) that began in the PRC andHong Kong in early 2003 and spread elsewhere had an adverse effect on all levels of businessin Hong Kong and the PRC. The outbreak of SARS led to a significant decline in travelvolumes and business activities throughout most of the Asian region including Hong Kong andthe PRC.

The occurrence of another outbreak of SARS or of any highly contagious disease or of othernatural disasters, epidemics or other acts of God which are beyond the Group’s control mayresult in another economic downturn and may have an adverse effect on the overall level ofbusiness and travel in the affected areas. It may also disrupt and have an adverse effect on theGroup’s business and financial condition.

External risks

A natural disaster, catastrophe or other event could result in severe personal injury, propertydamage and environmental damage, which may curtail the Group’s operations, cause delays inestimated completion dates for projects and materially adversely affect its cash flows and,accordingly, adversely affect its ability to service debt. The Group’s operations are based injurisdictions which are exposed to potential natural disasters including, but not limited to,typhoons, storms, floods and earthquakes. If any of the Group’s developments are damaged bysevere weather or any other disaster, accident, catastrophe or other event, the Group’soperations may be significantly interrupted. The occurrence or continuance of any of these orsimilar events could increase the costs associated with the Group’s operations and reduce itsability to operate its businesses at their intended capacities, thereby reducing revenues. Risksof substantial costs and liabilities are inherent in the Group’s principal operations and therecan be no assurance that significant costs and liabilities will not be incurred, including thoserelating to claims for damages to property or persons.

Limited availability of funds

The Group’s businesses require substantial capital investment. The Group will requireadditional financing to fund working capital and capital expenditures, to support the futuregrowth of its business and/or to refinance existing debt obligations. The Group’s corebusinesses will require substantial capital investment, particularly for its propertydevelopment and investment, hotel, infrastructure and department store businesses. TheGroup has historically required and expects to continue to require external financing to fund

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its working capital and capital expenditure requirements in the future. The Group’s ability toarrange external financing and the cost of such financing are dependent on numerous factors,including general economic and capital market conditions, interest rates, credit availabilityfrom banks or other lenders, investor confidence in the Group, the success of its businesses,provisions of tax and securities laws that may be applicable to the Group’s efforts to raisecapital and political and economic conditions in Hong Kong and the PRC. There can be noassurance that additional financing, either on a short-term or a long-term basis, will be madeavailable or, if available, that such financing will be obtained on favourable terms. Anyincrease in interest rates would increase the cost of borrowing and adversely affect theGroup’s result of operations.

For example, a substantial portion of the NWCL Group’s borrowings are linked to benchmarklending rates published by the PBoC. The PBoC has adjusted the benchmark one-year lendingrate a number of times in the past in response to the changing PRC and global financial andeconomic conditions. There can be no assurance that the PBoC will decrease the benchmarklending rate. Any increase in the interest rates will increase the NWCL Group’s cost ofborrowing, which may, in turn, adversely affect its business, financial condition and results ofoperations.

Joint venture risks

Co-operation and agreement among the Group and its joint venture partners on its existing orany future projects is an important factor for the smooth operation and financial success ofsuch projects. The Group’s joint ventures may involve risks associated with the possibilitythat the joint venture partners may (i) have economic or business interests or goals that areinconsistent with those of the Group, (ii) take actions contrary to the Group’s instructions orrequests, or contrary to the Group’s policies or objectives, (iii) be unable or unwilling to fulfilltheir obligations under the relevant joint venture or other agreements, (iv) experiencefinancial or other difficulties, or (v) have disputes with the Group as to the scope of theirresponsibilities and obligations. Further, the Group may not be able to control thedecision-making process of the joint ventures without reference to the joint venture partnersand, in some cases, it does not have majority control of the joint venture. In most cases, theGroup does, however, through contractual provisions or representatives appointed by it, havethe ability to control or influence most material decisions. Although the Group does notcurrently experience any significant problems with its joint venture partners, no assurance canbe given that disputes among the Group and its joint venture partners or among the partnerswill not arise in the future that could adversely affect such projects.

In addition to the above, in particular, the NWCL Group has, and expects to have in the future,interests in PRC joint venture entities in connection with its property development plans. Incertain circumstances, the NWCL Group’s existing joint venture entities have relied onfinancial support from it, and it expects they will continue to do so. In addition, in accordancewith PRC law, certain matters relating to a joint venture require the consent of all parties tothe joint venture.

Franchise and licence risks

The Group and its associated companies and joint ventures operate and manage certainfranchise businesses such as providing facilities services in respect of the Hong KongConvention and Exhibition Centre (the “HKCEC”), operating public bus transportationservices in Hong Kong, operating ferry transportation services in Hong Kong and operatingduty free tobacco and alcohol sales under franchise and licence agreements. There can be noassurance that renewals of franchise and licence periods can be obtained or that if renewed,that the terms of such franchise and licence will not be on terms less favourable than currentlyobtained by the Group.

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Intellectual property considerations

The Group has registered, or applied for registration of, various classes of the “New World”trademark for use in Hong Kong, the PRC, several other Asian countries, the USA and Canadaand the “New World” trademark in Chinese (新世界) in some of these jurisdictions. Althoughthe Group has not been subject to any intellectual property dispute in respect of the use of the“New World” trademark (both in English and Chinese), there can be no assurance that thirdparties will not assert trademark or other intellectual property infringement claims against theGroup. Any such claims against the Group, with or without merit, as well as claims initiatedby the Group against third parties, could be time consuming and expensive to defend orprosecute and resolve. If third party claims are successful, the Group may have to paydamages and legal costs, and may be restricted from using the “New World” trademark (bothin English and Chinese), which may have a negative impact on the Group’s reputation. Therelated costs or potential disruption to the Group’s operations could have an adverse effect onthe Group.

NWDS does not own the “新世界” (New World) trade name in Shanghai. The “新世界” (NewWorld) trade name has been registered by an independent third party in Shanghai whichoperates a department store in Shanghai under such trade name. Although NWDS is neitherrelated to nor associated with the owner of the “新世界” (New World) trade name in Shanghaior the store which it operates, negative publicity concerning such store may have an adverseimpact on the image and brand recognition of NWDS, NWD or the Group. In order to avoidconfusion with the department store operated in Shanghai by the independent third party,NWDS has relied on the “巴黎春天” (Ba Li Chun Tian) trade name for its Shanghai operationssince 2001 pursuant to an exclusive and non-transferable licence granted by Shanghai YiminDepartment Stores Joint Stock Company Limited. If the licence for the “巴黎春天” (Ba LiChun Tian) trade name is terminated and NWDS is required to cease using the “巴黎春天” (BaLi Chun Tian) trade name, NWDS will have to undertake measures, including the use of othertrade marks or names for its stores in Shanghai. This may lead to additional marketing andadvertising expenses for the purpose of promotion of a new trade mark or brand for stores inShanghai and there can be no assurance that the use of other trade names or marks will be ableto generate a level of reputation similar to that of the “巴黎春天” (Ba Li Chun Tian) tradename.

Generally, a deterioration in the Group’s brand image, or any failure to protect the Group’sbrand and intellectual property rights, could have a negative impact on the Group’s business.The Group’s images play an integral role in all of the business operations. Any negativeincident or negative publicity concerning the Group could adversely affect the Group’sreputation and business. Brand value is based largely on subjective consumer perceptions andcan be damaged even by isolated incidents that degrade consumer trust. Consumer demand forthe Group’s products and the Group’s brand value could diminish significantly if the Groupfails to preserve the quality of the products, or fail to deliver a consistently positive consumerexperience, or if the Group is perceived to act in an unethical or socially irresponsible manner.In addition, any unauthorised use of the Group’s brands, trademarks and other intellectualproperty rights could harm the Group’s competitive advantages and business. Historically,China has not protected intellectual property rights to the same extent as certain othercountries, and infringement of intellectual property rights continues to pose a serious risk ofdoing business in China. Monitoring and preventing unauthorised use is difficult. Themeasures the Group take to protect the Group’s intellectual property rights may not beadequate. If the Group is unable to adequately protect the brand, trademarks and otherintellectual property rights, the Group may lose these rights and the Group’s business maysuffer materially.

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The NWCL Group may not be able to use the NWD trademarks in the PRC

Pursuant to an agreement dated 3 July 1999 between the Issuer and NWD, NWD agreed togrant the Issuer a non-exclusive licence to use certain NWD trademarks as the marks andlogos of the Issuer for the business of property development and property investment in thePRC, subject to certain conditions. The “New World” trademark, however, has not beenregistered for use by NWD in the PRC as it has been previously registered in the PRC byvarious third parties. NWD has registered “New World China Land” trademark for use in thePRC. Although the NWCL Group has not been subject to any intellectual property dispute inthe PRC in respect of the use of the NWD trademark, to the extent that the NWCL Group usesthe “New World” trademark in the PRC and such third party brings a claim as to trademarkinfringement or passing off in the PRC and succeeds, the NWCL Group may have to paydamages and legal costs, and may be restricted from using the “New World” trademark, whichmay have a negative impact on the NWCL Group’s reputation and may adversely affect itsbusiness and financial condition.

Disputes, administrative, legal and other proceedings

The Group may be involved from time to time in disputes, administrative, legal and otherproceedings arising out of its operations and may face significant liabilities as a result. TheGroup may be involved in disputes with various parties involved in the construction,development and the sale of its properties, including contractors, suppliers, constructionworkers, original owners and residents, joint-venture partners and purchasers. These disputesmay lead to protests, legal or other proceedings and may result in damage to the Group’sreputation, incurrence of substantial costs and the diversion of resources and management’sattention. As most of the Group’s projects are comprised of multiple phases, purchasers of itsproperties in earlier phases may file legal actions against the Group if its subsequent planningand development of the relevant project is perceived to be inconsistent with its representationsand warranties made to them. These disputes and any ensuing legal proceedings maymaterially and adversely affect its reputation, business, results of operations and financialcondition. In addition, the Group may have compliance issues with regulatory bodies in thecourse of its operations, which may subject it to administrative proceedings and unfavourabledecrees that result in liabilities and cause delays to its property developments. If the Groupfails to comply with any applicable laws or regulations, its reputation and business, results ofoperations and financial condition may be materially and adversely affected.

Control of NWD

The major shareholder of NWD is Chow Tai Fook Enterprises Limited (“CTFEL”) which,together with its subsidiaries, held approximately 44.41% of the issued share capital of NWDas at 30 June 2018. CTFEL is a private company ultimately owned as to approximately 81.03%by Chow Tai Fook Capital Limited which is controlled by the family members of the lateDato’ Dr. Cheng Yu-Tung, one of the founders and the ex-chairman of NWD. CTFEL, theCheng family members are therefore able to exert considerable influence over themanagement and affairs of the Group, and are able to influence the Group’s corporate policies,appoint directors and officers and vote on corporate actions requiring shareholders’ approval.The strategic goals and interests of CTFEL, the Cheng family members may not always bealigned with the Group’s strategy and interests and could reduce the level of managementflexibility that would otherwise exist with a more diversified shareholder base. The interestsof the Group’s controlling shareholder may also differ from those of the Noteholders.Transactions between NWD and other companies in which the family has an interest,including Chow Tai Fook Capital Limited, Chow Tai Fook (Holding) Limited, Cheng Yu TungFamily (Holdings) Limited and Cheng Yu Tung Family (Holdings II) Limited, are also subject

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to the rules of the HKSE which, in certain circumstances may require disclosure to, andapproval from, the shareholders, excluding CTFEL, of NWD. NWD believes that alltransactions between the Group and CTFEL are carried out on an arm’s length basis. As aresult of the above, the Group may lose some of its competitive advantage, which could havean adverse effect on the Group’s business, operating results, financial condition andprospects.

Control of NWCL

As at 30 June 2018, NWD together with its subsidiaries held an effective interest of 100% inthe Issuer’s issued share capital. By maintaining such ownership, NWD is able to influencethe Issuer’s corporate policies, appoint its directors and officers and vote on corporate actionsrequiring shareholders’ approval. In particular, the strategic goals of NWD may not be alignedwith the NWCL Group’s strategies and could reduce the level of management flexibility thatwould otherwise exist with a more diversified shareholder base.

Management of the Issuer and the Guarantor

The Issuer’s and Guarantor’s sustainable success depends heavily on its controllingshareholder, and its current management team. The Issuer and the Guarantor depend on thecontinued service of its executive officers and other skilled managerial and technicalpersonnel. Competition in the industry for qualified personnel is intense. The Issuer’s and theGuarantor’s business and financial condition may suffer if it loses the services of a number ofkey personnel and is not able to recruit quality replacements. Furthermore, as the Issuer’s andthe Guarantor’s business continues to grow, it will need to recruit and train additionalqualified personnel. If the Issuer or the Guarantor fails to attract and retain qualifiedpersonnel, their business and financial condition may also be adversely affected.

Risks Relating to the PRC

The Group is subject to the political and economic risks of doing business in the PRC

A significant portion of the Group’s operations are located in the PRC. NWD expects that theGroup will make further investments in the PRC, and that the Group’s assets in the PRC willcontinue to account for a sizeable share of its overall income base. NWD’s trading andfinancial condition, results of operations and future prospects depend to a large extent on thesuccess of the Group’s operations in the PRC and are subject, to a significant degree, to thepolitical and economic situation and legal developments in the PRC.

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The PRC economy differs from the economies of most developed countries in many respects,including, but not limited to:

• extent of government involvement;

• level of development;

• growth rate;

• economic and political structure;

• control of foreign exchange;

• allocation of resources; and

• regulation of capital reinvestment.

While the PRC economy has experienced significant growth in the past 20 years, growth hasbeen uneven, both geographically and among the various sectors of the economy. The PRCgovernment has implemented various measures to encourage economic growth and guide theallocation of resources. Some of these measures benefit the overall PRC economy but mayalso have a negative effect on the Group’s operations. For example, the Group’s business andfinancial condition may be adversely affected by the PRC government’s control over capitalinvestments or any changes in tax regulations or foreign exchange controls that are applicableto it.

The PRC economy has been transitioning from a planned economy to a more market-orientedeconomy. Although in recent years the PRC government has implemented measuresemphasising the utilisation of market forces for economic reform, the reduction of stateownership of productive assets and the establishment of sound corporate governance inbusiness enterprises, a substantial portion of productive assets in the PRC is still owned by thePRC government. In addition, the PRC government continues to play a significant role inregulating the development of industries in the PRC by imposing top-down policies. It alsoexercises significant control over PRC economic growth through the allocation of resources,controlling the payment of foreign currency-denominated obligations, setting monetarypolicy and providing preferential treatment to particular industries or companies. There is noassurance that future changes in the PRC’s political, economic and social conditions, laws,regulations and policies will not have a material adverse effect on the Group’s current orfuture business and financial condition.

The NWCL Group’s engagement as the provider of property management services may beterminated

The NWCL Group derives ongoing revenue from charging property management fees to itsdeveloped properties. For the years ended 30 June 2018 and 30 June 2017, the Issuer’s and itssubsidiaries’ consolidated revenue derived from property management services amounted toHK$629.8 million and HK$535.0 million, respectively. Pursuant to the PRC Regulations forProperty Management (2007 Amendment) (《物業管理條例》（2007修訂）), an assembly ofproperty owners shall be convened with the quorum of over 50% of the property ownersrepresenting over 50% of the total construction area of the property (excluding commonareas). The assembly is empowered to decide whether to hire or dismiss the propertymanagement service provider when an agreement has been reached by over 50% of theproperty owners representing over 50% of the total construction area of the property

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(excluding common areas). If for any reason such an assembly of property owners choose toterminate the NWCL Group’s property management services, the NWCL Group’s business,financial condition, results of operation and prospects may be adversely affected. Where thereis only one property owner or where there are relatively few property owners and theyunanimously agree not to establish an assembly of property owners, in which case thefunctions assigned to both the assembly of property owners and committee of property ownersshall be carried out by said property owner(s).

The legal system in the PRC is less developed than in certain other countries and laws in thePRC may not be interpreted and enforced in a consistent manner

The PRC legal system is a civil law system. Unlike the common law system, the civil lawsystem is based on written statutes in which decided legal cases have little value asprecedents. Since 1979, the PRC Government has begun to promulgate a comprehensivesystem of laws and has introduced many new laws and regulations to provide general guidanceon economic and business practices in the PRC and to regulate foreign investment. Progresshas been made in the promulgation of laws and regulations dealing with economic matterssuch as corporate organisation and governance, foreign investment, commerce, taxation andtrade. The promulgation of new changes to existing laws and the abrogation of localregulations by national laws could have a negative impact on the business and prospects of theGroup. In addition, as these laws, regulations and legal requirements are relatively recent,their interpretation and enforcement may involve significant uncertainty. The interpretation ofPRC laws may be subject to policy changes, which reflect domestic political changes. As thePRC legal system develops, the promulgation of new laws, changes to existing laws and thepre-emption of local regulations by national laws may have an adverse effect on the Group’sbusiness and financial condition.

Real estate is a highly regulated sector in Mainland China

The supply of land in Mainland China is controlled and regulated by the PRC government. Theland supply policies adopted by the PRC government directly impact the Group’s ability toacquire land use rights for development and the costs of such acquisitions. For example, inrecent years, the PRC government has introduced a series of measures (and may implementfurther measures) to curb its overheating economy, including policies to prevent excessiverises in property prices in certain cities and sectors such as taxing capital gains to discouragespeculation, restricting purchases of real estate by foreigners, limiting the amount of luxuryvilla developments and tightening of credit available to real estate developers and individualpurchasers. Property developers must comply with various national and local regulatoryrequirements promulgated by different tiers of regulators. From time to time, the PRCgovernment adjusts its macroeconomic policies to encourage or restrict property developmentwhich may have a direct impact on the Group’s business.

The PRC government’s restrictive measures to control the property development industry’srate of growth could limit the Group’s access to capital resources, reduce market demand andincrease the Group’s operating costs. The PRC government may adopt additional and morestringent measures in the future, which may further slow the development of the industry andmaterially and adversely affect the Group’s business and result of operations. In particular,any additional or more stringent measures imposed by the PRC government in the future tocurb high-end residential/mixed use real estate projects may materially and adversely affectthe Group’s business and results of operations.

The Group may, under certain land clearance agreements with relevant land authorities, berequired to assist local governments with clearing land and relocating original residents withrespect to some of its development property projects in accordance with the relevant PRC lawsand regulations.

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The complicated administrative process and possibility of unfavourable settlement regardingthe amount of compensation may increase the cost of the development and materiallyadversely affect the Group’s cash flow, business operations and financial condition. UnderPRC law, if a developer fails to develop land according to the terms of the land grant contract(including those relating to payment of fees, land use or the time for commencement andcompletion of the development of the land), the relevant local government authority may givea warning to or impose a penalty on the developer or forfeit the land granted to the developer.Under the current PRC laws and regulations, if a developer fails to pay any outstanding landpremium by the stipulated deadline, it may be subject to a late payment penalty calculated ona per-day basis. In addition, if a developer fails to commence development of a propertyproject within the stipulated period as required under the current PRC laws without theapproval from the relevant PRC land bureau, the relevant PRC land bureau may serve awarning notice on the developer and impose an idle land fee of up to 20% of the land premiumunless such failure is caused by a government action or a force majeure event. Even if thecommencement of the land development complies with the land grant contract, if thedeveloped GFA on the land is less than one-third of the total GFA of the project or if the totalcapital expenditure is less than 25% of the total investment of the project and the suspensionof the development of the land is more than one year without government approval, the landwill still be treated as idle land. The Notice on Promoting Economisation of Land Use issuedby the State Council in January 2008 further confirmed the idle land fee at 20% of the landpremium. If a developer fails to commence such development for more than two years, theland is subject to forfeiture without compensation to the PRC government unless the delay indevelopment is caused by government actions or force majeure. In addition, a developer withidle land together with its shareholders may be restricted from participating in future landbidding.

Although the Group has never been subject to any such penalties or required to pay idle fees orforfeit any of its land in the PRC, there can be no assurance that circumstances leading topossible forfeiture of land or delays in the completion of a project may not arise in the future.

Further, the Group must obtain various permits, certificates, relevant approvals from therelevant administrative authorities at various stages of development, including land use rightsdocument, planning permits, construction permits and confirmation of completion andacceptance. Each approval is dependent on the satisfactory compliance with certainrequirements or conditions. The Group can give no assurance that it will not encountermaterial delays or other impediments in fulfilling the conditions precedent to obtain theseapprovals.

These measures have to date focused on tier-one and tier-two cities, there is a risk that similarmeasures will be introduced in tier-three and tier-four cities which would have an adverseimpact on the Group’s developments in such cities.

Policy initiatives in the financial sector to further tighten lending requirements for propertydevelopers may limit the Group’s flexibility and ability to use bank loans or other forms offinancing to finance the Group’s development properties and therefore may require theGroup to maintain a relatively high level of internally sourced cash

The Group’s ability to arrange adequate financing for land acquisitions or developmentproperties on terms that will allow it to earn reasonable returns depends on a number offactors, many of which are beyond the Group’s control. The PRC government has in recentyears taken a number of policy initiatives in the financial sector to further tighten lendingrequirements for property developers, which, among other things:

• forbid PRC commercial banks from extending loans to property developers to financeland premiums;

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• restrict PRC commercial banks from extending loans for the development of luxuryresidential properties;

• restrict the grant or extension of revolving credit facilities to property developers thathold a large amount of idle land and vacant commodity properties;

• prohibit commercial banks from taking commodity properties that have been vacant formore than three years as security for mortgage loans;

• forbid property developers from using borrowings obtained from any local banks tofund property developments outside that local region; and

• increased the regulation of trust companies including the imposition of enlarged capitaladequacy requirements.

The PBoC adjusts the reserve requirement ratio for commercial banks to curtail overheating ofthe property sector, or, as the case may be, in order to stimulate the PRC economy. The reserverequirement refers to the amount of funds that banks must hold in reserve with the PBoCagainst deposits (including margin deposits such as acceptances, letters of credit and letters ofguarantee) made by their customers. Further increases in the bank reserve requirement ratiomay negatively impact the amount of funds available to lend to businesses, including to theGroup, by commercial banks in Mainland China. The China Banking Regulatory Commission(the “CBRC”) also regulates the provision of ‘shadow finance’ in the form of wealthmanagement products by banks and trust companies to curtail overheating of the propertysector and to protect investors. The regulations include limitations on the pooling of assets, onthe proportion of wealth management products relative to other assets, on proprietary tradingand on the disclosure associated with the marketing of wealth management products.

The Group cannot assure investors that the PRC government will not introduce otherinitiatives which may limit the Group’s access to capital resources. The foregoing and otherinitiatives introduced by the PRC government may limit the Group’s flexibility and ability touse bank loans or other forms of financing to finance the Group’s development properties andtherefore may require the Group to maintain a relatively high level of internally sourced cash.As a result, the Group’s business, financial condition and results of operations may bematerially and adversely affected.

Substantially all of the NWCL Group’s revenue is denominated in Renminbi, which is notfreely convertible

Substantially all of the NWCL Group’s revenue is denominated in Renminbi and must beconverted to pay dividends or make other payments in freely convertible currencies. Under thePRC’s foreign exchange regulations, payments of current account items, including profitdistributions, interest payments and expenditures from trade, may be made in foreigncurrencies without prior approval, subject to certain procedural requirements. However, strictforeign exchange controls continue to be implemented in respect of capital accounttransactions, including repayment of loan principal and return of direct capital investmentsand investments in negotiable securities. In the past, there have been shortages of US dollarsor other foreign currencies available for conversion of Renminbi in the PRC, and it is possiblethat such shortages could recur, or that restrictions on conversion could be re-imposed.

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The NWCL Group is exposed to foreign exchange rate fluctuations

Substantially all of the NWCL Group’s revenue is denominated in Renminbi. The value ofRenminbi is subject to changes in PRC governmental policies and to international economicand political developments. There can be no assurance that the exchange rate of Renminbi willremain stable against foreign currencies in the market. As the NWCL Group’s financialstatements are reported in Hong Kong dollars, fluctuations in exchange rates may adverselyaffect the value, translated into Hong Kong dollars, of our net assets, earnings and anydeclared dividends.

Inflation risks

In recent years, the PRC economy has experienced periods of rapid expansion and highlyfluctuating rates of inflation. During the past ten years, the rate of inflation in China has beenas high as 5.9% and as low as –0.7%, and as at June 2018, the consumer price index in Chinaincreased by 2.0% year over year, according to the National Bureau of Statistics of China.That has led to the adoption by the PRC government, from time to time, of various correctivemeasures designed to restrict the availability of credit or regulate growth and containinflation. High inflation may in the future cause the PRC government to impose controls oncredit or prices, or to take other action, which could inhibit economic activity in China, whichcould materially and adversely affect our business, financial condition and results ofoperations.

In particular, such inflation in the PRC may result in increased construction and funding costsfor the Group. The PRC government uses various measures to control inflation, includingincreasing benchmark lending rates and reserve ratios on several occasions. As commercialbanks in Mainland China link the interest rates on their loans to benchmark lending ratespublished by the PBoC, any increase in such benchmark lending rates will increase thefunding costs for the Group. The PRC government is expected to continue to manage liquidity,cool down the real estate market and use price controls when needed. The Group’s business,financial condition and results of operations in Mainland China may be adversely affected byincreased construction and funding costs.

The PRC tax authorities may challenge the basis on which the Group calculates its landappreciation tax (“LAT”) obligations

Under PRC tax laws and regulations, the Group’s properties developed for sale or transfer aresubject to LAT, which is collected by local tax authorities. All income from the sale or transferof land use rights relating to state-owned land, buildings and their attached facilities in thePRC is subject to LAT at progressive rates ranging from 30% to 60% of the appreciation valueas defined by the relevant tax laws, with certain exceptions available for the sale of ordinaryresidential properties if the appreciation values do not exceed 20% of the total deductibleitems as defined in the relevant tax laws. In May 2010, the State Administration of Taxationissued the Notice on Strengthening the Collection of Land Appreciation Tax that requires thatthe minimum LAT prepayment rate must be no less than 2% for provinces in eastern China,1.5% for provinces in central and northeastern China and 1% for provinces in western China.If the LAT is calculated based on the authorized taxation method (核定徵收), the minimumtaxation rate shall be 5% in principle. On 28 December 2006, the State Administration ofTaxation issued the Notice on the Administration of the Settlement of Land Appreciation Taxof Property Development Enterprises which came into effect on 1 February 2007 (the “LATNotice”). Under the LAT Notice, local tax authorities can formulate their own implementationrules according to the notice and local situations and there are uncertainties as to how theywill enforce this notice. In the event that relevant tax authorities change their requirements as

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to the amount or timing of payment of provisional LAT, the Group’s cash flow may bematerially and adversely affected.

The Group’s management believes that it estimates and makes provision for the full amount ofapplicable LAT in accordance with the relevant PRC tax laws and regulations, but only pays aportion of such provision each year as required by the local tax authorities. Although theGroup’s management believes that such provisions are sufficient, there can be no assurancethat the tax authorities will agree with the basis on which the Group calculates its LATobligations. In the event that the local tax authorities believe a higher rate of LAT should bepaid, the financial position of the Group may be adversely affected.

Specifically, in respect of development projects which have been completed and are eligiblefor tax audit, the NWCL Group has estimated and made provisions for the full amount ofapplicable LAT in accordance with the requirements set forth in the relevant PRC tax laws andregulations. In the event that the tax authorities collect the LAT that the NWCL Group hasprovided for in its accounts, the NWCL Group’s will incur a cash outlay. Furthermore, in theevent that LAT eventually collected by the tax authorities upon completion of the tax auditexceeds the amount that the NWCL Group has provided for, its net profits after tax may alsobe adversely affected. In respect of property developments that have not met the tax auditeligibility criteria, the NWCL Group has paid and will continue to pay provisional LAT asrequired by the tax authorities. The LAT that is ultimately payable upon completion of the taxaudit of such projects in the future may be greater than the provisional LAT incurred by theNWCL Group which may adversely affect the business and financial condition of the NWCLGroup.

Profits from the NWCL Group’s PRC operating subsidiaries available for distribution aredetermined under PRC Generally Accepted Accounting Principles

The NWCL Group derives substantially all of its profits from the property developmentactivities of its operating subsidiary companies established in the PRC. The profits availablefor distribution by it are therefore dependent on, to a significant extent, the profits availablefor distribution by the PRC subsidiaries to it. In turn, profits available for distribution bycompanies established in the PRC are determined in accordance with the Generally AcceptedAccounting Principles and financial regulations in the PRC, and such profits differ fromprofits determined in accordance with HKFRS in certain significant respects, including theuse of different bases of recognition of revenues and expenses. In addition, under the relevantPRC financial regulations, profits available for distribution are determined after transfers tostatutory reserve funds.

Risks Relating to the Notes

The Notes may not be a suitable investment for all investors

Each potential investor in the Notes must determine the suitability of investment in light of itsown circumstances. In particular, each potential investor should:

(i) have sufficient knowledge and experience to make a meaningful evaluation of theNotes, the merits and risks of investing in the Notes and the information contained orincorporated by reference in this Offering Circular or any applicable supplement;

(ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the contextof its particular financial situation, an investment in the Notes and the impact suchinvestment will have on its overall investment portfolio;

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(iii) have sufficient financial resources and liquidity to bear all of the risks of an investmentin the Notes, including where the currency for principal or interest payments is differentfrom the potential investor’s currency;

(iv) understand thoroughly the terms of the Notes and be familiar with the behaviour of anyrelevant indices and financial markets; and

(v) be able to evaluate (either alone or with the help of a financial adviser) possiblescenarios for economic, interest rate and other factors that may affect its investment andits ability to bear the applicable risks.

The Notes are complex financial instruments and such instruments may be purchased as a wayto reduce risk or enhance yield with an understood, measured, appropriate addition of risk totheir overall portfolios. A potential investor should not invest in the Notes which are complexfinancial instruments unless it has the expertise (either alone or with the help of a financialadviser) to evaluate how the Notes will perform under changing conditions, the resultingeffects on the value of the Notes and the impact this investment will have on the potentialinvestor’s overall investment portfolio.

Modification and waivers

The Conditions of the Notes contain provisions for calling meetings of Noteholders toconsider matters affecting their interests generally. These provisions permit definedmajorities to bind all Noteholders including Noteholders who did not attend and vote at therelevant meeting and Noteholders who voted in a manner contrary to the majority.

The Conditions of the Notes also provide that the Trustee may, without the consent ofNoteholders, agree to (i) any modification of, or to the waiver or authorisation of any breachor proposed breach of, any of the provisions of the Notes or (ii) determine without the consentof the Noteholders that any Event of Default or Notification Event shall not be treated as such.

The liquidity and price of the Notes following the offering may be volatile

The price and trading volume of the Notes may be highly volatile. Factors such as variations inthe Group’s and the NWCL Group’s revenues, earnings and cash flows and proposals for newinvestments, strategic alliances and/or acquisitions, interest rates, fluctuations in price forcomparable companies and government regulations and changes thereof applicable to theGroup’s industry and general economic conditions nationally or internationally could causethe price of the Notes to change. Any such developments may result in large and suddenchanges in the trading volume and price of the Notes. There is no assurance that thesedevelopments will not occur in the future.

The Notes will be effectively subordinated to all of the liabilities of the Issuer’s and theGuarantor’s subsidiaries and affiliates

Each of the Issuer and the Guarantor is primarily a holding company that operates through itssubsidiaries. As a result, (i) each of the Issuer’s and the Guarantor’s obligations under theNotes and the Guarantee of the Notes respectively will be effectively subordinated to allexisting and future obligations of the existing or future subsidiaries and affiliates; and (ii) allclaims of creditors of the existing or future subsidiaries and affiliates, including tradecreditors, lenders and all other creditors, and the rights of holders of preference shares of suchentities (if any) will have priority as to the assets of such entities over the Issuer’s or the

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Guarantor’s claims and those of its creditors, including the holders of the Notes. As a result,all of the existing and future liabilities of the Issuer’s or the Guarantor’s subsidiaries andaffiliates, including any claims of trade creditors and preference shareholders, will beeffectively senior to the Notes.

The Issuer’s and the Guarantor’s subsidiaries and affiliates may be restricted from payingdividends or repaying intercompany loans or advances

As a holding company, each of the Issuer and the Guarantor depends upon the receipt ofdividends and the repayment of intercompany loans or advances from its subsidiaries andaffiliates to satisfy its obligations, including obligations under the Notes. The ability of itssubsidiaries and affiliates to pay dividends and repay intercompany loans or advances to theirshareholders (including the Issuer and the Guarantor) is subject to applicable law, relevantshareholders’ agreements or constitutive documents and restrictions contained in debtinstruments of such subsidiaries and affiliates.

The Group’s subsidiaries and affiliates are separate legal entities and will have no obligation,contingent or otherwise, to pay any dividends or make any distributions to the Issuer or theGuarantor or to otherwise pay amounts due with respect to its indebtedness, including theNotes, or to make funds available for such payments. Accordingly, there can be no assurancethat the Issuer or the Guarantor will have sufficient cash flows from distributions by itssubsidiaries and affiliates to satisfy its obligations in respect of the Notes. Although the Groupbelieves that it will be able to meet its obligations in respect of the Notes, any shortfall wouldhave to be made up from other sources of cash, such as sales of investments or any financingsavailable to it.

The insolvency laws of Cayman Islands and other local insolvency laws may differ fromthose of another jurisdiction with which the holders of the Notes are familiar

As the Issuer is incorporated under the laws of Cayman Islands, any insolvency proceedingrelating to the Issuer would likely involve Cayman Islands insolvency laws, the proceduraland substantive provisions of which may differ from comparable provisions of the localinsolvency laws of jurisdictions with which the holders of the Notes are familiar.

Developments in the international financial markets may adversely affect the market priceof the Notes

The market price of the Notes may be adversely affected by declines in the internationalfinancial markets and worldwide economic conditions. The market for securities of entitieswith PRC operations is, to varying degrees, influenced by economic and market conditions inother markets, especially those in Asia. Although economic conditions are different in eachcountry, investors’ reactions to developments in one country can affect the securities marketsand the securities of issuers in other countries, including the PRC. Since the global financialcrisis of 2008 and 2009, the international financial markets have experienced significantvolatility. If similar developments occur in the international financial markets in the future,the market price of the Notes could be adversely affected.

The investment in the Notes is subject to interest rate risks

The Notes will carry a fixed interest rate. Consequently, the trading price of the Notes willvary with the fluctuations in the US Dollar interest rates. If a Noteholder tries to sell suchNotes before their maturity, he may receive an offer that is less than the Noteholder’sinvestment.

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Majority interests in Noteholder meetings

The Conditions contain provisions for calling meetings of Noteholders to consider mattersaffecting their interests generally. These provisions permit defined majorities to bind allNoteholders including Noteholders who did not attend and vote at the relevant meeting andNoteholders who voted in a manner contrary to the majority.

A change in English law which governs the Notes may adversely affect Noteholders

The Conditions of the Notes are governed by English law in effect as at the date of issue of theNotes. No assurance can be given as to the impact of any possible judicial decision or changeto English law or administrative practice after the date of issue of the Notes.

The Notes may be represented by Global Notes or Global Certificates and holders of abeneficial interest in a Global Note or Global Certificate must rely on the procedures of therelevant Clearing System(s)

The Notes may be represented by one or more Global Notes or Global Certificates. SuchGlobal Notes or Global Certificates will be deposited with a common depositary for Euroclearand Clearstream, Luxembourg (each of Euroclear and Clearstream, Luxembourg, a “ClearingSystem”). Except in the circumstances described in the relevant Global Note or GlobalCertificate, investors will not be entitled to receive definitive Notes. The relevant ClearingSystem(s) will maintain records of the beneficial interests in the Global Notes or GlobalCertificates. While the Notes are represented by one or more Global Notes or GlobalCertificates, investors will be able to trade their beneficial interests only through the ClearingSystems.

While the Notes are represented by one or more Global Notes or Global Certificates, theIssuer, or failing which, the Guarantor will discharge its payment obligations under the Notesby making payments to the relevant Clearing System for distribution to their account holders.

A holder of a beneficial interest in a Global Note or Global Certificate must rely on theprocedures of the relevant Clearing System(s) to receive payments under the relevant Notes.Neither the Issuer nor the Guarantor has any responsibility or liability for the records relatingto, or payments made in respect of, beneficial interests in the Global Notes and GlobalCertificates. Holders of beneficial interests in the Global Notes and Global Certificates willnot have a direct right to vote in respect of the relevant Notes. Instead, such holders will bepermitted to act only to the extent that they are enabled by the relevant Clearing System(s) toappoint appropriate proxies.

Noteholders should be aware that definitive Notes which have a denomination that is not anintegral multiple of the minimum Authorised Denomination may be illiquid and difficult totrade

In relation to any issue of Notes which have a denomination consisting of a minimumSpecified Denomination (as defined in the Conditions) plus a higher integral multiple ofanother smaller amount, it is possible that the Notes may be traded in amounts in excess of theminimum Specified Denomination that are not integral multiples of such minimum SpecifiedDenomination. In such a case a Noteholder who, as a result of trading such amounts, holds aprincipal amount of less than the minimum Specified Denomination will not receive adefinitive Note in respect of such holding (should definitive Notes be printed) and would needto purchase a principal amount of Notes such that it holds an amount equal to one or moreSpecified Denominations. If definitive Notes are issued, holders should be aware that

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definitive Notes which have a denomination that is not an integral multiple of the minimumSpecified Denomination may be illiquid and difficult to trade.

Payments in respect of the Notes will only be made in the manner specified in the Notes

All payments in respect of the Notes will be made solely by (i) whilst the Notes arerepresented by a global certificate, transfer to a US Dollar bank account maintained in HongKong in accordance with prevailing Clearing System rules and procedures, or (ii) whilst theNotes are in definitive form, transfer to a US Dollar bank account maintained in Hong Kong inaccordance with prevailing rules and regulations. The Group cannot be required to makepayment by any other means (including in bank notes, by cheque or draft or any other currencyor by transfer to a bank account in the U.S.).

Gains on the transfer of the Notes may become subject to income taxes under PRC tax laws

Under the Enterprise Income Tax Law of the PRC (the “EIT Law”), the Individual Income TaxLaw of the PRC (the “IIT Law”) and the relevant implementing rules, as amended from timeto time, any gain realised on the transfer of the Notes by non-PRC resident enterprise orindividual holders may be subject to EIT or individual income tax (“IIT”) if such gain isincome derived from sources within the PRC. However, uncertainty remains as to whether thegain realised from the transfer of the Notes by non-PRC resident enterprise or individualholders would be treated as income derived from sources within the PRC and be subject to anyEIT or IIT. This will depend on how the PRC tax authorities interpret, apply or enforce the EITLaw, the IIT Law and the relevant implementing rules.

According to the arrangement between the PRC and Hong Kong for the avoidance of doubletaxation, Noteholders who are residents of Hong Kong, including enterprise holders andindividual holders, will not be subject to any EIT or IIT on capital gains derived from a sale orexchange of the Notes. Therefore, if a non-PRC resident enterprise or individual residentholders are required to pay PRC income tax on gains derived from the transfer of the Notes(such EIT is currently levied at the rate of 10 per cent of gains realised and such IIT iscurrently levied at the rate of 20 percent of gains realised (with deduction of reasonableexpenses), unless there is an applicable tax treaty between PRC and the jurisdiction in whichsuch non-PRC resident enterprise or individual resident holders of the Notes reside thatreduces or exempts the relevant EIT or IIT), the value of their investment in the Notes may bematerially and adversely affected.

Risks related to the structure of a particular issue of Notes

A wide range of Notes may be issued under the Programme. A number of these Notes mayhave features which contain particular risks for potential investors. Set out below is adescription of certain such features:

Notes subject to optional redemption by the Issuer

Unless in the case of any particular tranche of Notes the relevant Pricing Supplement specifiesotherwise, in the event that the Issuer would be obliged to increase the amounts payable inrespect of any Notes due to any withholding or deduction for or on account of, any present orfuture taxes, duties, assessments or governmental charges of whatever nature imposed, levied,collected, withheld or assessed by or on behalf of the Cayman Islands or Hong Kong or anypolitical subdivision thereof or any authority therein or thereof having power to tax, the Issuermay redeem all outstanding Notes in accordance with the Conditions.

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An optional redemption feature is likely to limit the market value of Notes. During any periodwhen the Issuer may elect to redeem Notes, the market value of those Notes generally will notrise substantially above the price at which they can be redeemed. This also may be true priorto any redemption period.

The Issuer may be expected to redeem Notes when its cost of borrowing is lower than theinterest rate on the Notes. At those times, an investor generally would not be able to reinvestthe redemption proceeds at an effective interest rate as high as the interest rate on the Notesbeing redeemed and may only be able to do so at a significantly lower rate. Potential investorsshould consider reinvestment risk in light of other investments available at that time.

Index Linked Notes and Dual Currency Notes

The Issuer may issue Notes with principal or interest determined by reference to an index orformula, to changes in the prices of securities or commodities, to movements in currencyexchange rates or other factors (each, a “Relevant Factor”). In addition, the Issuer may issueNotes with principal or interest payable in one or more currencies which may be differentfrom the currency in which the Notes are denominated. Potential investors should be awarethat:

• the market price of such Notes may be volatile;

• they may receive no interest;

• payment of principal or interest may occur at a different time or in a different currencythan expected;

• the amount of principal payable at redemption may be less than the nominal amount ofsuch Notes or even zero;

• a Relevant Factor may be subject to significant fluctuations that may not correlate withchanges in interest rates, currencies or other indices;

• if a Relevant Factor is applied to Notes in conjunction with a multiplier greater than oneor contains some other leverage factor, the effect of changes in the Relevant Factor onprincipal or interest payable likely will be magnified; and

• the timing of changes in a Relevant Factor may affect the actual yield to investors, evenif the average level is consistent with their expectations. In general, the earlier thechange in the Relevant Factor, the greater the effect on yield.

Partly-paid Notes

The Issuer may issue Notes where the issue price is payable in more than one instalment.Failure to pay any subsequent instalment could result in an investor losing all of itsinvestment.

Variable rate Notes with a multiplier or other leverage factor

Notes with variable interest rates can be volatile investments. If they are structured to includemultipliers or other leverage factors, or caps or floors, or any combination of those features orother similar related features, their market values may be even more volatile than those forsecurities that do not include those features.

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Inverse Floating Rate Notes

Inverse Floating Rate Notes have an interest rate equal to a fixed rate minus a rate based upona reference rate. The market values of such Notes typically are more volatile than marketvalues of other conventional floating rate debt securities based on the same reference rate (andwith otherwise comparable terms). Inverse Floating Rate Notes are more volatile because anincrease in the reference rate not only decreases the interest rate of the Notes, but may alsoreflect an increase in prevailing interest rates, which further adversely affects the market valueof these Notes.

Fixed/Floating Rate Notes

Fixed/Floating Rate Notes may bear interest at a rate that the Issuer may elect to convert froma fixed rate to a floating rate, or from a floating rate to a fixed rate. The Issuer’s ability toconvert the interest rate will affect the secondary market and the market value of such Notessince the Issuer may be expected to convert the rate when it is likely to produce a lower overallcost of borrowing. If the Issuer converts from a fixed rate to a floating rate, the spread on theFixed/Floating Rate Notes may be less favourable than then prevailing spreads on comparableFloating Rate Notes tied to the same reference rate. In addition, the new floating rate at anytime may be lower than the rates on other Notes. If the Issuer converts from a floating rate toa fixed rate, the fixed rate may be lower than then prevailing rates on its Notes.

The regulation and reform of “benchmark” rates of interest and indices may adverselyaffect the value of Notes linked to or referencing such “benchmarks”

Interest rates and indices which are deemed to be or used as “benchmarks”, have been thesubject of recent international regulatory guidance and proposals for reform. Some of thesereforms are already effective while others have yet to be implemented. These reforms maycause such benchmarks to perform differently than in the past or to disappear entirely, or haveother consequences which cannot be predicted. Any such consequence could have a materialadverse effect on any Note linked to or referencing such a benchmark.

More broadly, any of the international reforms or the general increased regulatory scrutiny ofbenchmarks, could increase the costs and risks of administering or otherwise participating inthe setting of a benchmark and complying with any such regulations or requirements. Forexample, the sustainability of the London interbank offered rate (“LIBOR”) has beenquestioned as a result of the absence of relevant active underlying markets and possibledisincentives (including as a result of regulatory reforms) for market participants to continuecontributing to such benchmarks. On 27 July 2017, the United Kingdom Financial ConductAuthority announced that it will no longer persuade or compel banks to submit rates for thecalculation of the LIBOR benchmark after 2021 (the “FCA Announcement”). The FCAAnnouncement indicated that the continuation of LIBOR on the current basis cannot and willnot be guaranteed after 2021. The potential elimination of the LIBOR benchmark or any otherbenchmark, or changes in the manner of administration of any benchmark, could require anadjustment to the terms and conditions, or result in other consequences, in respect of anyNotes linked to such benchmark. Such factors may have the following effects on certainbenchmarks: (i) discourage market participants from continuing to administer or contribute tothe benchmark; (ii) trigger changes in the rules or methodologies used in the benchmark or(iii) lead to the disappearance of the benchmark Any of the above changes or any otherconsequential changes as a result of international reforms or other initiatives orinvestigations, could have a material adverse effect on the value of and return on any Noteslinked to or referencing a benchmark.

Investors should consult their own independent advisers and make their own assessment aboutthe potential risks imposed by any international reforms in making any investment decisionwith respect to any Notes linked to or referencing a benchmark.

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Notes issued at a substantial discount or premium

The market values of securities issued at a substantial discount or premium to their principalamount tend to fluctuate more in relation to general changes in interest rates than do prices forconventional interest-bearing securities. Generally, the longer the remaining term of thesecurities, the greater the price volatility as compared to conventional interest-bearingsecurities with comparable maturities.

Risks relating to the market generally

Set out below is a brief description of certain market risks, including liquidity risk, exchangerate risk, interest rate risk and credit risk:

The secondary market generally

Notes may have no established trading market when issued, and one may never develop. If amarket does develop, it may not be liquid. Therefore, investors may not be able to sell theirNotes easily or at prices that will provide them with a yield comparable to similar investmentsthat have a developed secondary market. This is particularly the case for Notes that areespecially sensitive to interest rate, currency or market risks, are designed for specificinvestment objectives or strategies or have been structured to meet the investmentrequirements of limited categories of investors. These types of Notes generally would have amore limited secondary market and more price volatility than conventional debt securities.Illiquidity may have a severely adverse effect on the market value of Notes.

Exchange rate risks and exchange controls

The Issuer will pay principal and interest on the Notes in the specified currency. This presentscertain risks relating to currency conversions if an investor’s financial activities aredenominated principally in a currency or currency unit (the “Investor’s Currency”) otherthan the specified currency. These include the risk that exchange rates may significantlychange (including changes due to devaluation of the specified currency or revaluation of theInvestor’s Currency) and the risk that authorities with jurisdiction over the Investor’sCurrency may impose or modify exchange controls. An appreciation in the value of theInvestor’s Currency relative to the specified currency would decrease (1) the Investor’sCurrency-equivalent yield on the Notes, (2) the Investor’s Currency equivalent value of theprincipal payable on the Notes and (3) the Investor’s Currency equivalent market value of theNotes.

Government and monetary authorities may impose (as some have done in the past) exchangecontrols that could adversely affect an applicable exchange rate. As a result, investors mayreceive less interest or principal than expected, or no interest or principal.

Interest rate risks

Investment in fixed rate notes involves the risk that subsequent changes in market interestrates may adversely affect the value of fixed rate notes.

Credit ratings may not reflect all risks

One or more independent credit rating agencies may assign credit ratings to an issue of Notes.The ratings may not reflect the potential impact of all risks related to structure, market,additional factors discussed above, and other factors that may affect the value of the Notes. A

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credit rating is not a recommendation to buy, sell or hold securities and may be revised orwithdrawn by the rating agency at any time.

Legal investment considerations may restrict certain investments

The investment activities of certain investors are subject to legal investment laws andregulations, or review or regulation by certain authorities. Investors should consult their legaladvisers to determine whether and to what extent (i) the Notes are legal investments for them,(ii) the Notes can be used as collateral for various types of borrowing and (iii) otherrestrictions apply to purchases or pledges of any Notes. Financial institutions should consulttheir legal advisers or the appropriate regulators to determine the appropriate treatment of theNotes under any applicable risk-based capital or similar rules.

Risks relating to Notes denominated in Renminbi

A description of risks which may be relevant to an investor in Notes denominated in Renminbi(“Renminbi Notes”) is set out below.

Renminbi is not freely convertible and there are significant restrictions on the remittance ofRenminbi into and out of the PRC which may adversely affect the liquidity of RenminbiNotes

Renminbi is not freely convertible at present. The government of the PRC (the “PRCGovernment”) continues to regulate conversion between Renminbi and foreign currencies,including the Hong Kong dollar.

However, there has been significant reduction in control by the PRC Government in recentyears, particularly over trade transactions involving import and export of goods and servicesas well as other frequent routine foreign exchange transactions. These transactions are knownas current account items.

On the other hand, remittance of Renminbi into and out of the PRC for the settlement ofcapital account items, such as capital contributions, debt financing and securities investment,is generally only permitted upon obtaining specific approvals from, or completing specificregistrations or filings with, the relevant authorities on a case-by-case basis and is subject to astrict monitoring system. Regulations in the PRC on the remittance of Renminbi into and outof the PRC for settlement of capital account items are being developed.

Although Renminbi was added to the Special Drawing Rights basket created by theInternational Monetary Fund in 2016 and policies further improving accessibility to Renminbito settle cross-border transactions in foreign currencies were implemented by the PBoC in2018, there is no assurance that the PRC Government will continue to gradually liberalisecontrol over cross-border remittance of Renminbi in the future, that the schemes for Renminbicross-border utilisation will not be discontinued or that new regulations in the PRC will not bepromulgated in the future which have the effect of restricting or eliminating the remittance ofRenminbi into or out of the PRC. Despite Renminbi internationalisation pilot programme andefforts in recent years to internationalise the currency, there can be no assurance that the PRCGovernment will not impose interim or long-term restrictions on the cross-border remittanceof Renminbi. In the event that funds cannot be repatriated out of the PRC in Renminbi, thismay affect the overall availability of Renminbi outside the PRC and the ability of the Issuer tosource Renminbi to finance its obligations under Notes denominated in Renminbi.

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There is only limited availability of Renminbi outside the PRC, which may affect theliquidity of the Renminbi Notes and the Issuer’s ability to source Renminbi outside the PRCto service Renminbi Notes

As a result of the restrictions by the PRC Government on cross-border Renminbi fund flows,the availability of Renminbi outside the PRC is limited. While the PBoC has entered intoagreements (the “Settlement Arrangements”) on the clearing of Renminbi business withfinancial institutions (the “Renminbi Clearing Banks”) in a number of financial centres andcities, including but not limited to Hong Kong, has established the Cross-Border Inter-BankPayments System (CIPS) to facilitate cross-border Renminbi settlement and is further in theprocess of establishing Renminbi clearing and settlement mechanisms in several otherjurisdictions, the current size of Renminbi denominated financial assets outside the PRC islimited.

There are restrictions imposed by PBoC on Renminbi business participating banks in respectof cross-border Renminbi settlement, such as those relating to direct transactions with PRCenterprises. Furthermore, Renminbi business participating banks do not have direct Renminbiliquidity support from PBoC, although PBoC has gradually allowed participating banks toaccess the PRC’s onshore inter-bank market for the purchase and sale of Renminbi. TheRenminbi Clearing Banks only have limited access to onshore liquidity support from PBoCfor the purpose of squaring open positions of participating banks for limited types oftransactions and are not obliged to square for participating banks any open positions resultingfrom other foreign exchange transactions or conversion services. In cases where theparticipating banks cannot source sufficient Renminbi through the above channels, they willneed to source Renminbi from outside the PRC to square such open positions.

Although it is expected that the offshore Renminbi market will continue to grow in depth andsize, its growth is subject to many constraints as a result of PRC laws and regulations onforeign exchange. There is no assurance that new PRC regulations will not be promulgated orthe Settlement Arrangements will not be terminated or amended in the future which will havethe effect of restricting availability of Renminbi outside the PRC. The limited availability ofRenminbi outside the PRC may affect the liquidity of the Renminbi Notes. To the extent theIssuer is required to source Renminbi in the offshore market to service its Renminbi Notes,there is no assurance that the Issuer will be able to source such Renminbi on satisfactoryterms, if at all.

Investment in the Renminbi Notes is subject to exchange rate risks

The value of Renminbi against other foreign currencies fluctuates from time to time and isaffected by changes in the PRC and international political and economic conditions as well asmany other factors. Recently, the PBoC implemented changes to the way it calculates theRenminbi’s daily mid-point against the U.S. dollar to take into account market-maker quotesbefore announcing such daily mid-point. This change, and others that may be implemented,may increase the volatility in the value of the Renminbi against foreign currencies. Allpayments of interest and principal will be made in Renminbi with respect to Renminbi Notesunless otherwise specified. As a result, the value of these Renminbi payments may vary withthe changes in the prevailing exchange rates in the marketplace. If the value of Renminbidepreciates against another foreign currency, the value of the investment made by a holder ofthe Renminbi Notes in that foreign currency will decline.

Payments with respect to the Renminbi Notes may be made only in the manner designated inthe Renminbi Notes

All payments to investors in respect of the Renminbi Notes will be made solely (i) for so longas the Renminbi Notes are represented by global certificates held with the common depositary

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for Clearsteam Banking S.A. and Euroclear Bank S.A./N.V. or any alternative clearingsystem, by transfer to a Renminbi bank account maintained in Hong Kong, (ii) for so long asthe Renminbi Notes are represented by global certificates lodged with a sub-custodian for orregistered with the CMU, by transfer to a Renminbi bank account maintained in Hong Kong inaccordance with prevailing CMU rules and procedures or/, (iii) for so long as the RenminbiNotes are in definitive form, by transfer to a Renminbi bank account maintained in Hong Kongin accordance with prevailing rules and regulations. The Issuer cannot be required to makepayment by any other means (including in any other currency or by transfer to a bank accountin the PRC).

Gains on the transfer of the Renminbi Notes may become subject to income taxes underPRC tax laws

Under the PRC Enterprise Income Tax Law, the PRC Individual Income Tax Law and therelevant implementing rules, as amended from time to time, any gain realised on the transferof Renminbi Notes by non-PRC resident enterprise or individual Holders may be subject toPRC enterprise income tax (“EIT”) or PRC individual income tax (“IIT”) if such gain isregarded as income derived from sources within the PRC. The PRC Enterprise Income Tax

Law levies EIT at the rate of 20 per cent. of the PRC-sourced gains derived by such non-PRCresident enterprise from the transfer of Renminbi Notes but its implementation rules havereduced the EIT rate to 10 per cent. The PRC Individual Income Tax Law levies IIT at a rate of20 per cent. of the PRC-sourced gains derived by such non-PRC resident individual Holderfrom the transfer of Renminbi Notes.

However, uncertainty remains as to whether the gain realised from the transfer of RenminbiNotes by non-PRC resident enterprise or individual Holders would be treated as incomederived from sources within the PRC and thus become subject to EIT or IIT. This will dependon how the PRC tax authorities interpret, apply or enforce the PRC Enterprise Income TaxLaw, the PRC Individual Income Tax Law and the relevant implementing rules. According tothe arrangement between the PRC and Hong Kong, for avoidance of double taxation, Holderswho are residents of Hong Kong, including enterprise Holders and individual Holders, willnot be subject to EIT or IIT on capital gains derived from a sale or exchange of the Notes.

Therefore, if enterprise or individual resident Holders which are non-PRC residents arerequired to pay PRC income tax on gains derived from the transfer of Renminbi Notes, unlessthere is an applicable tax treaty between PRC and the jurisdiction in which such non-PRCenterprise or individual Holders of Renminbi Notes reside that reduces or exempts the relevantEIT or IIT, the value of their investment in Renminbi Notes may be materially and adverselyaffected.

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TERMS AND CONDITIONS OF THE NOTES

The following is the text of the terms and conditions which, as supplemented, amended and/orreplaced by the relevant Pricing Supplement, will be endorsed on each Note in definitive formissued under the Programme. The terms and conditions applicable to any Note in global formwill differ from those terms and conditions which would apply to the Note were it in definitiveform to the extent described under “Summary of Provisions Relating to the Notes while inGlobal Form” below.

1. Introduction

(a) Programme: New World China Land Limited (the “Issuer”) has established aMedium Term Note Programme (the “Programme”) for the issuance of up toU.S.$2,000,000,000 in aggregate principal amount of notes (the “Notes”)guaranteed by New World Development Company Limited (the “Guarantor”).

(b) Pricing Supplement: Notes issued under the Programme are issued in series (eacha “Series”) and each Series may comprise one or more tranches (each a“Tranche”) of Notes. Each Tranche is the subject of a pricing supplement (the“Pricing Supplement”) which supplements these terms and conditions (the“Conditions”). The terms and conditions applicable to any particular Tranche ofNotes are these Conditions as supplemented, amended and/or replaced by therelevant Pricing Supplement. In the event of any inconsistency between theseConditions and the relevant Pricing Supplement, the relevant Pricing Supplementshall prevail.

(c) Trust Deed: The Notes are constituted by, are subject to, and have the benefit of,a trust deed dated 12 November 2018 (as further amended, restated and/orsupplemented from time to time, the “Trust Deed”) between the Issuer, theGuarantor and The Hongkong and Shanghai Banking Corporation Limited astrustee (the “Trustee”, which expression includes, where the context requires, allpersons for the time being trustee or trustees appointed under the Trust Deed).

(d) Agency Agreement: The Notes are the subject of an issue and paying agencyagreement dated 12 November 2018 (as amended, restated and/or supplementedfrom time to time, the “Agency Agreement”) between the Issuer, the Guarantor,The Hongkong and Shanghai Banking Corporation Limited as principal payingagent (the “Principal Paying Agent”, which expression includes any successorprincipal paying agent appointed from time to time in connection with the Notes),The Hongkong and Shanghai Banking Corporation Limited as CMU lodging andpaying agent (the “CMU Lodging and Paying Agent”, which expressionincludes any successor CMU lodging and paying agent appointed from time totime in connection with the Notes), The Hongkong and Shanghai BankingCorporation Limited as registrar (the “Registrar”, which expression includes anysuccessor registrar appointed from time to time in connection with the Notes), thepaying agents named therein (together with the Principal Paying Agent, the“Paying Agents”, which expression includes any successor or additional payingagents appointed from time to time in connection with the Notes) and the transferagents named therein (together with the Registrar and the CMU Lodging andPaying Agent, the “Transfer Agents”, which expression includes any successoror additional transfer agents appointed from time to time in connection with theNotes) and the Trustee. In these Conditions references to the “Agents” are to thePaying Agents and the Transfer Agents and any reference to an “Agent” is to any

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one of them. For the purposes of these Conditions, all references (other than inrelation to the determination of interest and other amounts payable in respect ofthe Notes) to the Principal Paying Agent shall, with respect to a Series of Notes tobe held in the CMU Service (as defined below), be deemed to be a reference to theCMU Lodging and Paying Agent and all such references shall be construedaccordingly.

(e) The Notes: All subsequent references in these Conditions to “Notes” are to theNotes which are the subject of the relevant Pricing Supplement. Copies of therelevant Pricing Supplement are available for viewing and copies may beobtained from the Specified Office of each of the Paying Agents and TransferAgents.

(f) Summaries: Certain provisions of these Conditions are summaries of the TrustDeed and the Agency Agreement are subject to their detailed provisions.Noteholders and the holders of the related interest coupons, if any, (the“Couponholders” and the “Coupons”, respectively) are bound by, and aredeemed to have notice of, all the provisions of the Trust Deed and the AgencyAgreement applicable to them. Copies of the Trust Deed and the AgencyAgreement are available for inspection upon reasonable prior written request andsatisfactory proof of holding by Noteholders during normal business hours at theSpecified Offices of each of the Agents, the initial Specified Offices of which areset out below.

2. Interpretation

(a) Definitions: In these Conditions the following expressions have the followingmeanings:

“Accrual Yield” has the meaning given in the relevant Pricing Supplement;

“Additional Business Centre(s)” means the city or cities specified as such in therelevant Pricing Supplement;

“Additional Financial Centre(s)” means the city or cities specified as such inthe relevant Pricing Supplement;

“Business Day”, other than in Conditions 3(g) (Registration and delivery of NoteCertificates) and 10(d) (Redemption at the option of the Issuer (Make WholeRedemption)) means:

(a) in relation to any sum payable in euro, a TARGET Settlement Day and aday other than a Saturday or a Sunday on which commercial banks andforeign exchange markets settle payments generally in each (if any)Additional Business Centre;

(b) in relation to any sum payable in a currency other than euro and Renminbi,a day on which commercial banks and foreign exchange markets settlepayments generally, in the Principal Financial Centre of the relevantcurrency and in each (if any) Additional Business Centre; and

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(c) for the purposes of Notes denominated in Renminbi only, any day (otherthan a Sunday or a Saturday) on which commercial banks and foreignexchange markets are open for business and settle Renminbi payments inHong Kong and are not authorised or obligated by law or executive order tobe closed;

“Business Day Convention”, in relation to any particular date, has the meaninggiven in the relevant Pricing Supplement and, if so specified in the relevantPricing Supplement, may have different meanings in relation to different datesand, in this context, the following expressions shall have the following meanings:

(a) “Following Business Day Convention” means that the relevant date shallbe postponed to the first following day that is a Business Day;

(b) “Modified Following Business Day Convention” or “Modified BusinessDay Convention” means that the relevant date shall be postponed to thefirst following day that is a Business Day unless that day falls in the nextcalendar month in which case that date will be the first preceding day thatis a Business Day;

(c) “Preceding Business Day Convention” means that the relevant date shallbe brought forward to the first preceding day that is a Business Day;

(d) “FRN Convention”, “Floating Rate Convention” or “EurodollarConvention” means that each relevant date shall be the date whichnumerically corresponds to the preceding such date in the calendar monthwhich is the number of months specified in the relevant Pricing Supplementas the Specified Period after the calendar month in which the precedingsuch date occurred provided, however, that:

(i) if there is no such numerically corresponding day in the calendarmonth in which any such date should occur, then such date will bethe last day which is a Business Day in that calendar month;

(ii) if any such date would otherwise fall on a day which is not a BusinessDay, then such date will be the first following day which is aBusiness Day unless that day falls in the next calendar month, inwhich case it will be the first preceding day which is a Business Day;and

(iii) if the preceding such date occurred on the last day in a calendarmonth which was a Business Day, then all subsequent such dates willbe the last day which is a Business Day in the calendar month whichis the specified number of months after the calendar month in whichthe preceding such date occurred; and

(e) “No Adjustment” means that the relevant date shall not be adjusted inaccordance with any Business Day Convention;

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“Calculation Agent” means the Principal Paying Agent or such other Personspecified in the relevant Pricing Supplement as the party responsible forcalculating the Rate(s) of Interest and Interest Amount(s) and/or such otheramount(s) as may be specified in the relevant Pricing Supplement;

“Calculation Amount” has the meaning given in the relevant PricingSupplement;

“CMU Service” means the Central Moneymarkets Unit Service, operated by theHong Kong Monetary Authority;

“Coupon Sheet” means, in respect of a Note, a coupon sheet relating to the Note;

“Day Count Fraction” means, in respect of the calculation of an amount for anyperiod of time (the “Calculation Period”), such day count fraction as may bespecified in these Conditions or the relevant Pricing Supplement and:

(a) if “Actual/Actual (ICMA)” is so specified, means:

(i) where the Calculation Period is equal to or shorter than the RegularPeriod during which it falls, the actual number of days in theCalculation Period divided by the product of (1) the actual number ofdays in such Regular Period and (2) the number of Regular Periods inany year; and

(ii) where the Calculation Period is longer than one Regular Period, thesum of:

(A) the actual number of days in such Calculation Period falling inthe Regular Period in which it begins divided by the product of(1) the actual number of days in such Regular Period and (2)the number of Regular Periods in any year; and

(B) the actual number of days in such Calculation Period falling inthe next Regular Period divided by the product of (a) the actualnumber of days in such Regular Period and (2) the number ofRegular Periods in any year;

(iii) if “Actual/Actual (ISDA)” is so specified, means the actual numberof days in the Calculation Period divided by 365 (or, if any portion ofthe Calculation Period falls in a leap year, the sum of (A) the actualnumber of days in that portion of the Calculation Period falling in aleap year divided by 366 and (B) the actual number of days in thatportion of the Calculation Period falling in a non-leap year dividedby 365);

(iv) if “Actual/365 (Fixed)” is so specified, means the actual number ofdays in the Calculation Period divided by 365;

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(v) if “Actual/360” is so specified, means the actual number of days inthe Calculation Period divided by 360;

if “30/360” is so specified, the number of days in the CalculationPeriod divided by 360, calculated on a formula basis as follows

Day Count Fraction =[360x(Y2-Y1)] + [30x(M2-M1)] + (D2-D1)

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where:

“Y1” is the year, expressed as a number, in which the first day of theCalculation Period falls;

“Y2” is the year, expressed as a number, in which the dayimmediately following the last day included in the CalculationPeriod falls;

“M1” is the calendar month, expressed as a number, in which the firstday of the Calculation Period falls;

“M2” is the calendar month, expressed as number, in which the dayimmediately following the last day included in the CalculationPeriod falls;

“D1” is the first calendar day, expressed as a number, of theCalculation Period, unless such number would be 31, in which caseD1 will be 30; and

“D2” is the calendar day, expressed as a number, immediatelyfollowing the last day included in the Calculation Period, unless suchnumber would be 31 and D1 is greater than 29, in which case D2 willbe 30;

if “30E/360”or”Eurobond Basis” is so specified, means the numberof days in the Calculation Period divided by 360, calculated on aformula basis as follows:

Day Count Fraction =[360x(Y2-Y1)] + [30x(M2-M1)] + (D2-D1)

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where:

“Y1” is the year, expressed as a number, in which the first day of theCalculation Period falls;

“Y2” is the year, expressed as a number, in which the dayimmediately following the last day included in the CalculationPeriod falls;

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“M1” is the calendar month, expressed as a number, in which the firstday of the Calculation Period falls;

“M2” is the calendar month, expressed as a number, in which the dayimmediately following the last day included in the CalculationPeriod falls;

“D1” is the first calendar day, expressed as a number, of theCalculation Period, unless such number would be 31, in which caseD1 will be 30; and

“D2” is the calendar day, expressed as a number, immediatelyfollowing the last day included in the Calculation Period, unless suchnumber would be 31, in which case D2 will be 30; and

(vi) if “30E/360 (ISDA)” is so specified, means the number of days in theCalculation Period divided by 360, calculated on a formula basis asfollows:

Day Count Fraction =[360x(Y2-Y1)] + [30x(M2-M1)] + (D2-D1)

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where:

“Y1” is the year, expressed as a number, in which the first day of theCalculation Period falls;

“Y2” is the year, expressed as a number, in which the dayimmediately following the last day included in the CalculationPeriod falls;

“M1” is the calendar month, expressed as a number, in which the firstday of the Calculation Period falls;

“M2” is the calendar month, expressed as a number, in which the dayimmediately following the last day included in the CalculationPeriod falls;

“D1” is the first calendar day, expressed as a number, of theCalculation Period, unless (i) that day is the last day of February or(ii) such number would be 31, in which case D1 will be 30; and

“D2” is the calendar day, expressed as a number, immediatelyfollowing the last day included in the Calculation Period, unless (i)that day is the last day of February but not the Maturity Date or (ii)such number would be 31, in which case D2 will be 30,

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provided, however, that in each such case the number of days in theCalculation Period is calculated from and including the first day of theCalculation Period to but excluding the last day of the Calculation Period;

“Early Redemption Amount (Change of Control)” means, in respect of anyNote, its principal amount or such other amount as may be specified in, ordetermined in accordance with, the relevant Pricing Supplement;

“Early Redemption Amount (Tax)” means, in respect of any Note, its principalamount or such other amount as may be specified in, or determined in accordancewith, the relevant Pricing Supplement;

“Early Termination Amount” means, in respect of any Note, its principalamount or such other amount as may be specified in, or determined in accordancewith, these Conditions or the relevant Pricing Supplement;

“Extraordinary Resolution” has the meaning given in the Trust Deed;

“Final Redemption Amount” means, in respect of any Note, its principal amountor such other amount as may be specified in, or determined in accordance with,the relevant Pricing Supplement;

“First Interest Payment Date” means the date specified in the relevant PricingSupplement;

“Fixed Coupon Amount” has the meaning given in the relevant PricingSupplement;

“Guarantee of the Notes” means the guarantee of the Notes given by theGuarantor in the Trust Deed;

“Holder”, in the case of Bearer Notes, has the meaning given in Condition 3(b)(Form, Denomination, Title and Transfer - Title to Bearer Notes) and, in the caseof Registered Notes, has the meaning given in Condition 3(d) (Form,

Denomination, Title and Transfer - Title to Registered Notes);

“Hong Kong” means the Hong Kong Special Administrative Region of thePeople’s Republic of China;

“Interest Amount” means, in relation to a Note and an Interest Period, theamount of interest payable in respect of that Note for that Interest Period;

“Interest Commencement Date” means the Issue Date of the Notes or such otherdate as may be specified as the Interest Commencement Date in the relevantPricing Supplement;

“Interest Determination Date” has the meaning given in the relevant PricingSupplement;

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“Interest Payment Date” means the First Interest Payment Date and any date ordates specified as such in, or determined in accordance with the provisions of, therelevant Pricing Supplement and, if a Business Day Convention is specified in therelevant Pricing Supplement:

(a) as the same may be adjusted in accordance with the relevant Business DayConvention; or

(b) if the Business Day Convention is the FRN Convention, Floating RateConvention or Eurodollar Convention and an interval of a number ofcalendar months is specified in the relevant Pricing Supplement as beingthe Specified Period, each of such dates as may occur in accordance withthe FRN Convention, Floating Rate Convention or Eurodollar Conventionat such Specified Period of calendar months following the InterestCommencement Date (in the case of the first Interest Payment Date) or theprevious Interest Payment Date (in any other case);

“Interest Period” means each period beginning on (and including) the InterestCommencement Date or any Interest Payment Date and ending on (but excluding)the next Interest Payment Date;

“ISDA Definitions” means the 2006 ISDA Definitions (as amended and updatedas at the date of issue of the first Tranche of the Notes of the relevant Series (asspecified in the relevant Pricing Supplement) as published by the InternationalSwaps and Derivatives Association, Inc.) unless otherwise specified in therelevant Pricing Supplement;

“Issue Date” has the meaning given in the relevant Pricing Supplement;

“Listed Material Subsidiary” means any Material Subsidiary, the shares ofwhich are at the relevant time listed on The Stock Exchange of Hong KongLimited, or any other stock exchange;

“Margin” has the meaning given in the relevant Pricing Supplement;

“Material Subsidiary” means any Subsidiary of the Issuer or the Guarantor:

(a) whose gross revenue (consolidated in the case of a Subsidiary which itselfhas consolidated Subsidiaries) or whose gross assets (consolidated in thecase of a Subsidiary which itself has consolidated Subsidiaries) representnot less than 10 per cent. of the consolidated gross revenue, or, as the casemay be, the consolidated gross assets of the Issuer or the Guarantor (as thecase may be) and its Subsidiaries taken as a whole, all as calculatedrespectively by reference to the latest audited or reviewed financialstatements (consolidated or, as the case may be, unconsolidated) of theSubsidiary and the then latest audited or reviewed consolidated financialstatements of the Issuer or the Guarantor (as the case may be), providedthat:

(i) in the case of a Subsidiary acquired after the end of the financialperiod to which the then latest audited or reviewed consolidatedfinancial statements of the Issuer or the Guarantor relate for thepurpose of applying each of the foregoing tests, the reference to the

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Issuer’s or the Guarantor’s latest audited or reviewed consolidatedfinancial statements shall be deemed to be a reference to suchaudited or reviewed financial statements as if such Subsidiary hadbeen shown therein by reference to its then latest relevant audited orreviewed financial statements, adjusted as deemed appropriate by theauditor for the time being, after consultation with the Issuer or theGuarantor;

(ii) if at any relevant time in relation to the Issuer or the Guarantor or anySubsidiary no financial statements are prepared and audited, its grossrevenue and gross assets (consolidated, if applicable) shall bedetermined on the basis of pro forma consolidated financialstatements (consolidated, if applicable) prepared for this purpose;and

(iii) if the financial statements of any Subsidiary (not being a Subsidiaryreferred to in proviso (i) above) are not consolidated with those ofthe Issuer or the Guarantor, then the determination of whether or notsuch Subsidiary is a Material Subsidiary shall be based on a proforma consolidation of its financial statements (consolidated, ifappropriate) with the consolidated financial statements (determinedon the basis of the foregoing) of the Issuer or the Guarantor; or

(b) to which is transferred all or substantially all of the business, undertakingand assets of another Subsidiary which immediately prior to such transferis a Material Subsidiary, whereupon (a) in the case of a transfer by aMaterial Subsidiary, the transferor Material Subsidiary shall immediatelycease to be a Material Subsidiary and (b) the transferee Subsidiary shallimmediately become a Material Subsidiary, provided that on or after thedate on which the relevant financial statements for the financial periodcurrent at the date of such transfer are published, whether such transferorSubsidiary or such transferee Subsidiary is or is not a Material Subsidiaryshall be determined pursuant to the provisions of sub-paragraph (a) above.

A report by a director of the Issuer or, as the case may be, the Guarantor that in hisor her opinion (making such adjustments (if any) as they shall deem appropriate)a Subsidiary is or is not or was or was not at any particular time or during anyparticular period a Material Subsidiary shall, in the absence of manifest error, beconclusive and binding on the Issuer, the Guarantor and the Noteholders.

“Maturity Date” has the meaning given in the relevant Pricing Supplement;

“Maximum Redemption Amount” has the meaning given in the relevant PricingSupplement;

“Minimum Redemption Amount” has the meaning given in the relevant PricingSupplement;

“Noteholder”, in the case of Bearer Notes, has the meaning given in Condition3(b) (Form, Denomination, Title and Transfer - Title to Bearer Notes) and, in thecase of Registered Notes, has the meaning given in Condition 3(d) (Form,Denomination, Title and Transfer - Title to Registered Notes);

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“Optional Redemption Amount (Call)” means, in respect of any Note, itsprincipal amount or such other amount as may be specified in, or determined inaccordance with, the relevant Pricing Supplement;

“Optional Redemption Amount (Put)” means, in respect of any Note, itsprincipal amount or such other amount as may be specified in, or determined inaccordance with, the relevant Pricing Supplement;

“Optional Redemption Date (Call)” has the meaning given in the relevantPricing Supplement;

“Optional Redemption Date (Put)” has the meaning given in the relevantPricing Supplement;

“Participating Member State” means a Member State of the EuropeanCommunities which adopts the euro as its lawful currency in accordance with theTreaty;

“Payment Business Day” means:

(a) if the currency of payment is euro, any day which is:

(i) a day on which (a) banks in the relevant place of presentation areopen for presentation and payment of bearer debt securities and fordealings in foreign currencies; and (b) a day on which commercialbanks are open for general business (including dealing in foreigncurrencies) in the city where the Principal Paying Agent, or as thecase may be, the CMU Lodging and Paying Agent has its SpecifiedOffice; and

(ii) in the case of payment by transfer to an account, (a) a TARGETSettlement Day and (b) a day on which dealings in foreign currenciesmay be carried on in each (if any) Additional Financial Centre; or

(b) if the currency of payment is not euro, any day which is:

(i) a day on which (a) banks in the relevant place of presentation areopen for presentation and payment of bearer debt securities and fordealings in foreign currencies and (b) a day on which commercialbanks are open for general business (including dealings in foreigncurrencies) in the city where the Principal Paying Agent, or as thecase may be, the CMU Lodging and Paying Agent has its SpecifiedOffice; and

(ii) in the case of payment by transfer to an account, a day on whichdealings in foreign currencies (including, in the case of Notesdenominated in Renminbi, settlement of Renminbi payments) maybe carried on in the Principal Financial Centre of the currency ofpayment and in each (if any) Additional Financial Centre;

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“Permitted Security Interest” means (i) any Security Interest over any assets (orrelated documents of title) purchased by the Issuer, the Guarantor or any MaterialSubsidiary as security for all or part of the purchase price of such assets and anysubstitute Security Interest created on those assets in connection with therefinancing (together with interest, fees and other charges attributable to suchrefinancing) of the indebtedness secured on those assets; and (ii) any SecurityInterest over any assets (or related documents of title) purchased by the Issuer,the Guarantor or any Material Subsidiary subject to such Security Interest andany substitute Security Interest created on those assets in connection with therefinancing (together with interest, fees and other charges attributable to suchrefinancing) of the indebtedness secured on those assets;

“Person”, other than in Condition 10(g) (Redemption for Change of Control),means any individual, company, corporation, firm, partnership, trust, jointventure, association, organisation, state or agency of a state or other entity,whether or not having separate legal personality;

“Principal Financial Centre” means, in relation to any currency, the principalfinancial centre for that currency provided, however, that:

(a) in relation to euro, it means the principal financial centre of such MemberState of the European Communities as is selected (in the case of a payment)by the payee or (in the case of a calculation) by the Calculation Agent;

(b) in relation to Australian dollars, it means Sydney or Melbourne and inrelation to New Zealand dollars, it means either Wellington or Auckland, ineach case as is selected (in the case of a payment) by the payee or (in thecase of a calculation) by the Calculation Agent; and

(c) in relation to Renminbi, it means Hong Kong or the principal financialcentre as is specified in the applicable Pricing Supplement;

“Put Option Notice” means a notice which must be delivered to a Paying Agentby any Noteholder wanting to exercise a right to redeem a Note at the option ofthe Noteholder;

“Put Option Receipt” means a receipt issued by a Paying Agent to a depositingNoteholder upon deposit of a Note with such Paying Agent by any Noteholderwanting to exercise a right to redeem a Note at the option of the Noteholder;

“Rate of Interest” means the rate or rates (expressed as a percentage per annum)of interest payable in respect of the Notes specified in the relevant PricingSupplement or calculated or determined in accordance with the provisions ofthese Conditions and/or the relevant Pricing Supplement;

“Redemption Amount” means, as appropriate, the Final Redemption Amount,the Early Redemption Amount (Tax), the Early Redemption Amount (Change ofControl), the Optional Redemption Amount (Call), the Optional RedemptionAmount (Put), the Early Termination Amount or such other amount in the natureof a redemption amount as may be specified in, or determined in accordance withthe provisions of, the relevant Pricing Supplement;

“Reference Banks” has the meaning given in the relevant Pricing Supplement or,if none, four major banks selected by the Issuer in the market that is most closelyconnected with the Reference Rate;

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“Reference Price” has the meaning given in the relevant Pricing Supplement;

“Reference Rate” has the meaning given in the relevant Pricing Supplement;

“Register” has the meaning set out in Clause 5 (Transfer of Registered Notes) ofthe Trust Deed;

“Regular Period” means:

(a) in the case of Notes where interest is scheduled to be paid only by means ofregular payments, each period from and including the InterestCommencement Date to but excluding the first Interest Payment Date andeach successive period from and including one Interest Payment Date to butexcluding the next Interest Payment Date;

(b) in the case of Notes where, apart from the first Interest Period, interest isscheduled to be paid only by means of regular payments, each period fromand including a Regular Date falling in any year to but excluding the nextRegular Date, where “Regular Date” means the day and month (but not theyear) on which any Interest Payment Date falls; and

(c) in the case of Notes where, apart from one Interest Period other than thefirst Interest Period, interest is scheduled to be paid only by means ofregular payments, each period from and including a Regular Date falling inany year to but excluding the next Regular Date, where “Regular Date”means the day and month (but not the year) on which any Interest PaymentDate falls other than the Interest Payment Date falling at the end of theirregular Interest Period.

“Relevant Date” means, in relation to any payment, whichever is the later of (a)the date on which the payment in question first becomes due and (b) if the fullamount payable has not been received in the Principal Financial Centre of thecurrency of payment by the Principal Paying Agent or the Trustee on or prior tosuch due date, the date on which (the full amount having been so received) noticeto that effect has been given to the Noteholders;

“Relevant Financial Centre” has the meaning given in the relevant PricingSupplement;

“Relevant Indebtedness” means any indebtedness in the form of and representedby debentures, loan stock, bonds, notes, bearer participation certificates,depository receipts, certificates of deposit or other similar securities orinstruments or by bills of exchange drawn or accepted for the purpose of raisingmoney which are, or are issued with the intention on the part of the issuer thereofthat they should be, quoted, listed, ordinarily dealt in or traded on any stockexchange or over the counter or on any other securities market (whether or notinitially distributed by way of private placement) having an original maturity ofmore than one year from its date of issue but shall not include indebtedness underany secured transferable loan facility (which term shall, for the avoidance ofdoubt, mean any agreement for or in respect of indebtedness for borrowed moneyentered into with one or more banks and/or financial institutions whereunderrights and (if any) obligations may be assigned and/or transferred);

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“Relevant Screen Page” means the page, section or other part of a particularinformation service (including, without limitation, Reuters) specified as theRelevant Screen Page in the relevant Pricing Supplement, or such other page,section or other part as may replace it on that information service or such otherinformation service, in each case, as may be nominated by the Person providingor sponsoring the information appearing there for the purpose of displaying ratesor prices comparable to the Reference Rate;

“Relevant Time” has the meaning given in the relevant Pricing Supplement;

“Reserved Matter” means any proposal to change any date fixed for payment ofprincipal or interest in respect of the Notes, to reduce the amount of principal orinterest payable on any date in respect of the Notes, to alter the method ofcalculating the amount of any payment in respect of the Notes or the date for anysuch payment, to change the currency of any payment under the Notes or tochange the quorum requirements relating to meetings or the majority required topass an Extraordinary Resolution;

“Security Interest” means any mortgage, charge, pledge, lien or other securityinterest including, without limitation, anything analogous to any of the foregoingunder the laws of any jurisdiction;

“Specified Currency” has the meaning given in the relevant Pricing Supplement;

“Specified Denomination(s)” has the meaning given in the relevant PricingSupplement;

“Specified Office” has the meaning given in the Trust Deed;

“Specified Period” has the meaning given in the relevant Pricing Supplement;

“Subsidiary” in relation to any person, means any company or other businessentity of which that person owns or controls (either directly or through one ormore other Subsidiaries) more than 50 per cent. of the issued share capital orother ownership interest having ordinary voting power to elect directors,managers or trustees of such company or other business entity or any company orother business entity which at any time has its accounts consolidated with thoseof that person or which, under the laws, regulations or generally acceptedaccounting principles of the Hong Kong Special Administrative Region of thePeople’s Republic of China (“Hong Kong”) from time to time, should have itsaccounts consolidated with those of that person;

“Talon” means a talon for further Coupons;

“TARGET Settlement Day” means any day on which TARGET2 is open for thesettlement of payments in euro;

“TARGET2” means the Trans-European Automated Real-Time Gross SettlementExpress Transfer payment system which utilises a single shared platform andwhich was launched on 19 November 2007;

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“Treaty” means the Treaty establishing the European Communities, as amended;and

“Zero Coupon Note” means a Note specified as such in the relevant PricingSupplement;

(b) Interpretation: In these Conditions:

(i) if the Notes are Zero Coupon Notes, references to Coupons andCouponholders are not applicable;

(ii) if Talons are specified in the relevant Pricing Supplement as being attachedto the Notes at the time of issue, references to Coupons shall be deemed toinclude references to Talons;

(iii) if Talons are not specified in the relevant Pricing Supplement as beingattached to the Notes at the time of issue, references to Talons are notapplicable;

(iv) any reference to principal shall be deemed to include the RedemptionAmount, any additional amounts in respect of principal which may bepayable under Condition 13 (Taxation), any premium payable in respect ofa Note and any other amount in the nature of principal payable pursuant tothese Conditions;

(v) any reference to interest shall be deemed to include any additional amountsin respect of interest which may be payable under Condition 13 (Taxation)and any other amount in the nature of interest payable pursuant to theseConditions;

(vi) references to Notes being “outstanding” shall be construed in accordancewith the Trust Deed;

(vii) if an expression is stated in Condition 2(a) (Definitions) to have themeaning given in the relevant Pricing Supplement, but the relevant PricingSupplement gives no such meaning or specifies that such expression is “notapplicable” then such expression is not applicable to the Notes; and

(viii) any reference to the Trust Deed or the Agency Agreement shall beconstrued as a reference to the Trust Deed or the Agency Agreement, as thecase may be, as amended and/or supplemented up to and including theIssue Date of the Notes.

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3. Form, Denomination, Title and Transfer

(a) Bearer Notes: Bearer Notes are in the Specified Denomination(s) with Couponsand, if specified in the relevant Pricing Supplement, Talons attached at the time ofissue. In the case of a Series of Bearer Notes with more than one SpecifiedDenomination, Bearer Notes of one Specified Denomination will not beexchangeable for Bearer Notes of another Specified Denomination.

(b) Title to Bearer Notes: Title to Bearer Notes and the Coupons will pass bydelivery. In the case of Bearer Notes, “Holder” means the holder of such BearerNote and “Noteholder” and “Couponholder” shall be construed accordingly.

(c) Registered Notes: Registered Notes are in the Specified Denomination(s), whichmay include a minimum denomination specified in the relevant PricingSupplement and higher integral multiples of a smaller amount specified in therelevant Pricing Supplement.

(d) Title to Registered Notes: The Registrar will maintain a register outside theUnited Kingdom in accordance with the provisions of the Trust Deed. Acertificate (each, a “Note Certificate”) will be issued to each Holder ofRegistered Notes in respect of its registered holding. Each Note Certificate willbe numbered serially with an identifying number which will be recorded in theRegister. In the case of Registered Notes, “Holder” means the person in whosename such Registered Note is for the time being registered in the Register (or, inthe case of a joint holding, the first named thereof) and “Noteholder” shall beconstrued accordingly.

(e) Ownership: The Holder of any Note or Coupon shall (except as otherwiserequired by law) be treated as its absolute owner for all purposes (whether or notit is overdue and regardless of any notice of ownership, trust or any other interesttherein, any writing thereon or, in the case of Registered Notes, on the NoteCertificate relating thereto (other than the endorsed form of transfer) or anynotice of any previous loss or theft thereof) and no Person shall be liable for sotreating such Holder. No person shall have any right to enforce any term orcondition of any Note under the Contracts (Rights of Third Parties) Act 1999.

(f) Transfers of Registered Notes: Subject to paragraphs (i) (Closed periods) and (j)(Regulations concerning transfers and registration) below, a Registered Notemay be transferred upon surrender of the relevant Note Certificate, with theendorsed form of transfer duly completed, at the Specified Office of the Registraror any Transfer Agent, together with such evidence as the Registrar or (as the casemay be) such Transfer Agent may reasonably require to prove the title of thetransferor and the authority of the individuals who have executed the form oftransfer; provided, however, that a Registered Note may not be transferredunless the principal amount of Registered Notes transferred and (where not all ofthe Registered Notes held by a Holder are being transferred) the principal amountof the balance of Registered Notes not transferred are Specified Denominations.Where not all the Registered Notes represented by the surrendered NoteCertificate are the subject of the transfer, a new Note Certificate in respect of thebalance of the Registered Notes will be issued to the transferor.

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(g) Registration and delivery of Note Certificates: Within five business days of thesurrender of a Note Certificate in accordance with paragraph (f) (Transfers of

Registered Notes) above, the Registrar will register the transfer in question anddeliver a new Note Certificate of a like principal amount to the Registered Notestransferred to each relevant Holder at its Specified Office or (as the case may be)the Specified Office of any Transfer Agent or (at the request and risk of any suchrelevant Holder) by uninsured first class mail (airmail if overseas) to the addressspecified for the purpose by such relevant Holder. In this paragraph, “businessday” means a day on which commercial banks are open for general business(including dealings in foreign currencies) in the city where the Registrar or (asthe case may be) the relevant Transfer Agent has its Specified Office.

(h) No charge: The transfer of a Registered Note will be effected without charge byor on behalf of the Issuer or the Registrar or any Transfer Agent but against suchindemnity or payment as the Registrar or (as the case may be) such TransferAgent may require in respect of any tax or other duty of whatsoever nature whichmay be levied or imposed in connection with such transfer.

(i) Closed periods: Noteholders may not require transfers to be registered:

(i) during the period of 15 days ending on (and including) the due date for anypayment of principal or interest in respect of the Registered Notes;

(ii) during the period of 15 days ending on (and including) any date on whichNotes may be called for redemption by the Issuer at its option pursuant toCondition 10(b) (Redemption for taxation reasons), Condition 10(c)(Redemption at the option of the Issuer) or Condition 10(d) (Redemption at

the option of the Issuer (Make Whole Redemption));

(iii) after a Put Option Notice has been delivered in respect of the relevantNote(s) in accordance with Condition 10(f) (Redemption at the option of

Noteholders);

(iv) after a Change of Control Put Exercise Notice has been delivered in respectof the relevant Note(s) in accordance with Condition 10(g) (Redemption for

Change of Control); and

(v) during the period of seven days ending on (and including) any Record Date(as defined in Condition 12(f) (Record Date).

(j) Regulations concerning transfers and registration: All transfers of RegisteredNotes and entries on the Register are subject to the detailed regulationsconcerning the transfer of Registered Notes scheduled to the Trust Deed. Theregulations may be changed by the Issuer with the prior written approval of theRegistrar. A copy of the current regulations will be made available for inspectionby the Registrar to any Noteholder upon reasonable prior written request andsatisfactory proof of holding.

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4. Status and Guarantee

(a) Status of the Notes: The Notes constitute direct, general and unconditionalobligations of the Issuer which will at all times rank pari passu amongthemselves and at least pari passu with all other present and future unsecuredobligations of the Issuer, save for such obligations as may be preferred byprovisions of law that are both mandatory and of general application.

(b) Guarantee of the Notes: The Guarantor has in the Trust Deed unconditionally andirrevocably guaranteed the due and punctual payment of all sums from time totime payable by the Issuer in respect of the Notes. This Guarantee of the Notesconstitutes direct, general and unconditional obligations of the Guarantor whichwill at all times rank at least pari passu with all other present and futureunsecured obligations of the Guarantor, save for such obligations as may bepreferred by provisions of law that are both mandatory and of general application.

5. Negative Pledge

So long as any Note remains outstanding (as defined in the Trust Deed), neither theIssuer nor the Guarantor shall, and the Issuer and the Guarantor shall procure that theMaterial Subsidiaries (other than Listed Material Subsidiaries) will not, create orpermit to subsist any Security Interest, other than Permitted Security Interest upon thewhole or any part of its present or future undertaking, assets or revenues (includinguncalled capital) to secure any Relevant Indebtedness or guarantee of RelevantIndebtedness without (a) at the same time or prior thereto securing the Notes equallyand rateably therewith to the satisfaction of the Trustee or (b) providing such othersecurity for the Notes as the Trustee may in its absolute discretion consider to be notmaterially less beneficial to the interests of the Noteholders or as may be approved byan Extraordinary Resolution (as defined in the Trust Deed) of Noteholders.

6. Fixed Rate Note Provisions

(a) Application: This Condition 6 is applicable to the Notes only if the Fixed RateNote Provisions are specified in the relevant Pricing Supplement as beingapplicable.

(b) Accrual of interest: The Notes bear interest from the Interest CommencementDate at the Rate of Interest payable in arrear on each Interest Payment Date,subject as provided in Conditions 11 (Payments - Bearer Notes) and 12 (Payments

- Registered Notes). Each Note will cease to bear interest from the due date forfinal redemption unless, upon due presentation, payment of the RedemptionAmount is improperly withheld or refused, in which case it will continue to bearinterest in accordance with this Condition 6 (as well after as before judgment)until whichever is the earlier of (i) the day on which all sums due in respect ofsuch Note up to that day are received by or on behalf of the relevant Noteholderand (ii) the day which is seven days after the Principal Paying Agent or theTrustee has notified the Noteholders that it has received all sums due in respect ofthe Notes up to such seventh day (except to the extent that there is any subsequentdefault in payment).

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(c) Fixed Coupon Amount: The amount of interest payable in respect of each Note forany Interest Period shall be the relevant Fixed Coupon Amount and, if the Notesare in more than one Specified Denomination, shall be the relevant Fixed CouponAmount in respect of the relevant Specified Denomination.

(d) Calculation of interest amount: The amount of interest payable in respect of eachNote for any period for which a Fixed Coupon Amount is not specified shall becalculated by applying the Rate of Interest to the Calculation Amount,multiplying the product by the relevant Day Count Fraction, rounding theresulting figure to the nearest sub-unit of the Specified Currency (half a sub-unitbeing rounded upwards) and multiplying such rounded figure by a fraction equalto the Specified Denomination of such Note divided by the Calculation Amount.For this purpose a “sub-unit” means, in the case of any currency other than euro,the lowest amount of such currency that is available as legal tender in the countryof such currency and, in the case of euro, means one cent.

7. Floating Rate Note and Index-Linked Interest Note Provisions

(a) Application: This Condition 7 is applicable to the Notes only if the Floating RateNote Provisions or the Index-Linked Interest Note Provisions are specified in therelevant Pricing Supplement as being applicable.

(b) Accrual of interest: The Notes bear interest from the Interest CommencementDate at the Rate of Interest payable in arrear on each Interest Payment Date,subject as provided in Conditions 11 (Payments - Bearer Notes) and 12 (Payments

- Registered Notes). Each Note will cease to bear interest from the due date forfinal redemption unless, upon due presentation, payment of the RedemptionAmount is improperly withheld or refused, in which case it will continue to bearinterest in accordance with this Condition (as well after as before judgment) untilwhichever is the earlier of (i) the day on which all sums due in respect of suchNote up to that day are received by or on behalf of the relevant Noteholder and (ii)the day which is seven days after the Principal Paying Agent or the Trustee hasnotified the Noteholders that it has received all sums due in respect of the Notesup to such seventh day (except to the extent that there is any subsequent default inpayment).

(c) Screen Rate Determination: If Screen Rate Determination is specified in therelevant Pricing Supplement as the manner in which the Rate(s) of Interest is/areto be determined, the Rate of Interest applicable to the Notes for each InterestPeriod will be determined by the Calculation Agent on the following basis:

(i) if the Reference Rate is a composite quotation or customarily supplied byone entity, the Calculation Agent will determine the Reference Rate whichappears on the Relevant Screen Page as of the Relevant Time on therelevant Interest Determination Date;

(ii) in any other case, the Calculation Agent will determine the arithmetic meanof the Reference Rates which appear on the Relevant Screen Page as of theRelevant Time on the relevant Interest Determination Date;

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(iii) if, in the case of (i) above, such rate does not appear on that page or, in thecase of (ii) above, fewer than two such rates appear on that page or if, ineither case, the Relevant Screen Page is unavailable:

(A) the Issuer will request the principal Relevant Financial Centre officeof each of the Reference Banks to provide a quotation of theReference Rate at approximately the Relevant Time on the InterestDetermination Date to prime banks in the Relevant Financial Centreinterbank market in an amount that is representative for a singletransaction in that market at that time and the Issuer shall providesuch quotations in writing to the Calculation Agent; and

(B) the Calculation Agent shall determine the arithmetic mean of suchquotations; and

(iv) if fewer than two such quotations are provided as requested, theCalculation Agent will determine the arithmetic mean of the rates (beingthe nearest to the Reference Rate, as determined by the Issuer) quoted bymajor banks in the Principal Financial Centre of the Specified Currency,selected by the Calculation Agent, at approximately 11.00 a.m. (local timein the Principal Financial Centre of the Specified Currency) on the first dayof the relevant Interest Period for loans in the Specified Currency for aperiod equal to the relevant Interest Period and in an amount that isrepresentative for a single transaction in that market at that time,

and the Rate of Interest for such Interest Period shall be the sum of the Marginand the rate or (as the case may be) the arithmetic mean so determined; provided,however, that if the Calculation Agent is unable to determine a rate or (as thecase may be) an arithmetic mean in accordance with the above provisions inrelation to any Interest Period, the Rate of Interest applicable to the Notes duringsuch Interest Period will be the sum of the Margin and the rate or (as the case maybe) the arithmetic mean last determined in relation to the Notes in respect of apreceding Interest Period.

(d) ISDA Determination: If ISDA Determination is specified in the relevant PricingSupplement as the manner in which the Rate(s) of Interest is/are to bedetermined, the Rate of Interest applicable to the Notes for each Interest Periodwill be the sum of the Margin and the relevant ISDA Rate where “ISDA Rate” inrelation to any Interest Period means a rate equal to the Floating Rate (as definedin the ISDA Definitions) that would be determined by the Calculation Agentunder an interest rate swap transaction if the Calculation Agent were acting asCalculation Agent for that interest rate swap transaction under the terms of anagreement incorporating the ISDA Definitions and under which:

(i) the Floating Rate Option (as defined in the ISDA Definitions) is asspecified in the relevant Pricing Supplement;

(ii) the Designated Maturity (as defined in the ISDA Definitions) is a periodspecified in the relevant Pricing Supplement; and

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(iii) the relevant Reset Date (as defined in the ISDA Definitions) is either (A) ifthe relevant Floating Rate Option is based on (x) the London inter-bankoffered rate (LIBOR), (y) the Eurozone inter-bank offered rate (EURIBOR)or (z) the Hong Kong inter-bank offered rate (HIBOR) for a currency, thefirst day of that Interest Period or (B) in any other case, as specified in therelevant Pricing Supplement;

(e) Index-Linked Interest: If the Index-Linked Interest Note Provisions are specifiedin the relevant Pricing Supplement as being applicable, the Rate(s) of Interestapplicable to the Notes for each Interest Period will be determined in the mannerspecified in the relevant Pricing Supplement.

(f) Maximum or Minimum Rate of Interest: If any Maximum Rate of Interest orMinimum Rate of Interest is specified in the relevant Pricing Supplement, thenthe Rate of Interest shall in no event be greater than the maximum or be less thanthe minimum so specified.

(g) Calculation of Interest Amount: The Calculation Agent will, as soon aspracticable after the time at which the Rate of Interest is to be determined inrelation to each Interest Period, calculate the Interest Amount payable in respectof each Note for such Interest Period. The Interest Amount will be calculated byapplying the Rate of Interest for such Interest Period to the Calculation Amount,multiplying the product by the relevant Day Count Fraction, rounding theresulting figure to the nearest sub-unit of the Specified Currency (half a sub-unitbeing rounded upwards) and multiplying such rounded figure by a fraction equalto the Specified Denomination of the relevant Note divided by the CalculationAmount. For this purpose a “sub-unit” means, in the case of any currency otherthan euro, the lowest amount of such currency that is available as legal tender inthe country of such currency and, in the case of euro, means one cent.

(h) Calculation of other amounts: If the relevant Pricing Supplement specifies thatany other amount is to be calculated by the Calculation Agent, the CalculationAgent will, as soon as practicable after the time or times at which any suchamount is to be determined, calculate the relevant amount. The relevant amountwill be calculated by the Calculation Agent in the manner specified in the relevantPricing Supplement.

(i) Publication: The Calculation Agent will cause each Rate of Interest and InterestAmount determined by it, together with the relevant Interest Payment Date, andany other amount(s) required to be determined by it together with any relevantpayment date(s) to be notified to the Paying Agents and the Trustee as soon aspracticable after such determination but (in the case of each Rate of Interest,Interest Amount and Interest Payment Date) in any event not later than the firstday of the relevant Interest Period. Notice thereof shall also promptly be given bythe Issuer to the Noteholders and each competent authority, stock exchangeand/or quotation system (if any) by which the Notes have been admitted to listing,trading and/or quotation. The Calculation Agent will be entitled to recalculateany Interest Amount (on the basis of the foregoing provisions) without notice inthe event of an extension or shortening of the relevant Interest Period. If theCalculation Amount is less than the minimum Specified Denomination theCalculation Agent shall not be obliged to publish each Interest Amount but

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instead may publish only the Calculation Amount and the Interest Amount inrespect of a Note having the minimum Specified Denomination.

(j) Notifications etc: All notifications, opinions, determinations, certificates,calculations, quotations and decisions given, expressed, made or obtained for thepurposes of this Condition by the Calculation Agent will (in the absence ofmanifest error) be binding on the Issuer, the Guarantor, the Paying Agents, theNoteholders and the Couponholders and (subject as aforesaid) no liability to anysuch Person will attach to the Calculation Agent in connection with the exerciseor non-exercise by it of its powers, duties and discretions for such purposes.

8. Zero Coupon Note Provisions

(a) Application: This Condition 8 is applicable to the Notes only if the Zero CouponNote Provisions are specified in the relevant Pricing Supplement as beingapplicable.

(b) Late payment on Zero Coupon Notes: If the Redemption Amount payable inrespect of any Zero Coupon Note is improperly withheld or refused, theRedemption Amount shall thereafter be an amount equal to the sum of:

(i) the Reference Price; and

(ii) the product of the Accrual Yield (compounded annually) being applied tothe Reference Price on the basis of the relevant Day Count Fraction from(and including) the Issue Date to (but excluding) whichever is the earlier of(i) the day on which all sums due in respect of such Note up to that day arereceived by or on behalf of the relevant Noteholder and (ii) the day which isseven days after the Principal Paying Agent has notified the Noteholdersthat it has received all sums due in respect of the Notes up to such seventhday (except to the extent that there is any subsequent default in payment).

9. Dual Currency Note Provisions

(a) Application: This Condition 9 is applicable to the Notes only if the Dual CurrencyNote Provisions are specified in the relevant Pricing Supplement as beingapplicable.

(b) Rate of Interest: If the rate or amount of interest falls to be determined byreference to an exchange rate, the rate or amount of interest payable shall bedetermined in the manner specified in the relevant Pricing Supplement.

10. Redemption and Purchase

(a) Scheduled redemption: Unless previously redeemed, or purchased and cancelled,the Notes will be redeemed at their Final Redemption Amount on the MaturityDate, subject as provided in Conditions 11 (Payments - Bearer Notes) and 12(Payments - Registered Notes).

(b) Redemption for tax reasons: The Notes may be redeemed at the option of theIssuer in whole, but not in part:

(i) at any time (if neither the Floating Rate Note Provisions or theIndex-Linked Interest Note Provisions are specified in the relevant PricingSupplement as being applicable); or

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(ii) on any Interest Payment Date (if the Floating Rate Note Provisions or theIndex-Linked Interest Note Provisions are specified in the relevant PricingSupplement as being applicable),

on giving not less than 30 nor more than 60 days’ notice to the Noteholders,or such other period(s) as specified in the relevant Pricing Supplement, theTrustee, the Registrar and the Principal Paying Agent (which notice shallbe irrevocable), at their Early Redemption Amount (Tax), together withinterest accrued (if any) to the date fixed for redemption, if:

(A) (1) the Issuer has or will become obliged to pay additional amountsas provided or referred to in Condition 13 (Taxation) as a result ofany change in, or amendment to, the laws or regulations of theCayman Islands or Hong Kong or any political subdivision or anyauthority thereof or therein having power to tax, or any change in theapplication or official interpretation of such laws or regulations(including a holding by a court of competent jurisdiction), whichchange or amendment becomes effective on or after the date onwhich agreement is reached to issue the first Tranche of the Notes;and (2) such obligation cannot be avoided by the Issuer takingreasonable measures available to it; or

(B) (1) the Guarantor has or (if a demand was made under the Guaranteeof the Notes) would become obliged to pay additional amounts asprovided or referred to in Condition 13 (Taxation) or the Guaranteeof the Notes, or the Guarantor has or will become obliged to makeany such withholding or deduction as is referred to in Condition 13(Taxation) or the Guarantee of the Notes, as the case may be, fromany amount paid by it to the Issuer in order to enable the Issuer tomake a payment or principal or interest in respect of the Notes, ineither case as a result of any change in, or amendment to, the laws orregulations of Hong Kong or any political subdivision or anyauthority thereof or therein having power to tax, or any change in theapplication or official interpretation of such laws or regulations(including a holding by a court of competent jurisdiction), whichchange or amendment becomes effective on or after the date onwhich agreement is reached to issue the first Tranche of the Notesand (2) such obligation cannot be avoided by the Guarantor takingreasonable measures available to it,

provided, however, that no such notice of redemption shall be givenearlier than:

(1) where the Notes may be redeemed at any time, 90 days or suchother period(s) as specified in the relevant PricingSupplement, prior to the earliest date on which the Issuer orthe Guarantor, as the case may be, would be obliged to paysuch additional amounts if a payment in respect of the Noteswere then due or (as the case may be) a demand under theGuarantee of the Notes were then made; or

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(2) where the Notes may be redeemed only on an Interest PaymentDate, 60 days, or such other period(s) as specified in therelevant Pricing Supplement, prior to the Interest PaymentDate occurring immediately before the earliest date on whichthe Issuer or the Guarantor, as the case may be, would beobliged to pay such additional amounts if a payment in respectof the Notes were then due or (as the case may be) a demandunder the Guarantee of the Notes were then made.

Prior to the publication of any notice of redemption pursuant to thisparagraph, the Issuer shall deliver or procure that there is deliveredto the Trustee (1) a certificate signed by two directors of the Issuer(or the Guarantor, as the case may be) stating that the Issuer isentitled to effect such redemption and setting forth a statement offacts showing that the conditions precedent to the right of the Issuerso to redeem have occurred and (2) an opinion of independent legaladvisers or other professional advisers, in each case of recognisedstanding to the effect that the Issuer or (as the case may be) theGuarantor has or will become obliged to pay such additional amountsas a result of such change or amendment. The Trustee shall beentitled to accept and rely upon such certificate and opinion withoutfurther investigation or enquiry as sufficient evidence of thesatisfaction of the circumstances set out above, in which event theyshall be conclusive and binding on the Noteholders. Upon the expiryof any such notice as is referred to in this Condition 10(b), the Issuershall be bound to redeem the Notes in accordance with this Condition10(b).

(c) Redemption at the option of the Issuer: If the Call Option is specified in therelevant Pricing Supplement as being applicable, the Notes may be redeemed atthe option of the Issuer in whole or, if so specified in the relevant PricingSupplement, in part on any Optional Redemption Date (Call) at the relevantOptional Redemption Amount (Call) on the Issuer’s giving not less than 30 normore than 60 days’ notice to the Noteholders, the Trustee, the Registrar and thePrincipal Paying Agent, or such other period(s) as specified in the relevantPricing Supplement (which notice shall be irrevocable and shall oblige the Issuerto redeem the Notes or, as the case may be, the Notes specified in such notice onthe relevant Optional Redemption Date (Call) at the Optional RedemptionAmount (Call) plus accrued and unpaid interest (if any) to such date).

(d) Redemption at the option of the Issuer (Make Whole Redemption): If the CallOption (Make Whole Redemption) is specified in the relevant PricingSupplement as being applicable, the Notes may be redeemed at the option of theIssuer in whole and not in part, at any time (if neither the Floating Rate NoteProvisions or the Index-Linked Interest Note Provisions are specified in therelevant Pricing Supplement as being applicable), or on any Interest PaymentDate (if the Floating Rate Note Provisions or the Index-Linked Interest NoteProvisions are specified in the relevant Pricing Supplement as being applicable),at the relevant Make Whole Redemption Amount (Call), on the Issuer’s giving notless than 30 nor more than 60 days’ notice to the Noteholders, the Trustee, theRegistrar and the Principal Paying Agent (which notice shall be irrevocable and

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shall oblige the Issuer to redeem the Notes at the Make Whole RedemptionAmount (Call) plus accrued and unpaid interest (if any) to such date).

For the purposes of this Condition 10(d):

“business day” means any day on which banks are open for general business(including dealings in foreign currencies) in London and New York City;

“Comparable Treasury Price” means, with respect to any redemption date, theaverage of three, or such lesser number as is obtained by the DeterminationAgent, Reference Treasury Dealer Quotations for the relevant date fixed forredemption of the Notes;

“Determination Agent” means an independent investment bank of internationalrepute, appointed by the Issuer and the Guarantor (and notice thereof is given toNoteholders and the Trustee by the Issuer in accordance with Condition 21(Notices)) for the purposes of performing any of the functions expressed to beperformed by it under these Conditions;

“Make Whole Redemption Amount (Call)” means in respect of each Note,either (i) the amount specified in, or determined in the manner specified in, theapplicable Pricing Supplement or (ii) (x) the principal amount of such Note or, ifthis is higher (y) the amount equal to the sum of the present value of the principalamount of such Note, together with the present values of the interest payable forthe relevant Interest Periods from the relevant date fixed for redemption to theMaturity Date, in each case, discounted to such redemption date on a basisspecified in the applicable Pricing Supplement at the adjusted US Treasury Rateor such other benchmark rate as specified in the applicable Pricing Supplementplus the Make Whole Redemption Margin, all as determined by theDetermination Agent;

“Reference Treasury Dealer” means each of the three nationally recognisedinvestment banking firms selected by the Determination Agent that are primaryUS Government securities dealers;

“Reference Treasury Dealer Quotations” means with respect to each ReferenceTreasury Dealer and any date fixed for redemption of the Notes, the average, asdetermined by the Determination Agent, of the bid and asked prices for theComparable Treasury Issue, expressed in each case as a percentage of itsprincipal amount, quoted in writing to the Determination Agent by suchReference Treasury Dealer at 5:00 p.m., New York City time on the third businessday immediately preceding such due date for redemption; and

“U.S. Treasury Rate” means either (a) the rate per annum equal to the yield, thatrepresents the average for the week immediately preceding that in which the thirdbusiness day prior to the relevant date fixed for redemption falls, appearing in themost recently published statistical release designated “H.15(519)” or anysuccessor publication that is published weekly by the Board of Governors of theFederal Reserve System and that establishes yields on actively traded UnitedStates Treasury securities adjusted to constant maturity under the caption“Treasury Constant Maturities” for the maturity corresponding to theComparable Treasury Issue provided that (a) if no maturity appears that iswithin three months before or after the Maturity Date, yields for the two

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published maturities most closely corresponding to the Comparable TreasuryIssue shall be determined and the US Treasury Rate shall be interpolated orextrapolated from such yields on a straight-line basis, and (b) if such release (orany successor release) is not published during the week preceding that in whichthe third business day prior to the relevant date falls or such release (or successorrelease) does not contain such yields, the rate per annum equal to the semi-annualequivalent yield to maturity of the Comparable Treasury Issue (expressed as apercentage of its principal amount) equal to the Comparable Treasury Price forthe relevant date fixed for redemption, in each case calculated on the thirdbusiness day immediately preceding the relevant date fixed for redemption.

(e) Partial redemption: If the Notes are to be redeemed in part only on any date inaccordance with Condition 10(c) (Redemption at the option of the Issuer), in thecase of Bearer Notes, the Notes to be redeemed shall be selected by the drawingof lots in such place as the Trustee approves and in such manner as the Trusteeconsiders appropriate, subject to compliance with applicable law, the rules ofeach competent authority, stock exchange and/or quotation system (if any) bywhich the Notes have then been admitted to listing, trading and/or quotation andthe notice to Noteholders referred to in Condition 10(c) (Redemption at theoption of the Issuer) shall specify the serial numbers of the Notes so to beredeemed, and, in the case of Registered Notes, each Note shall be redeemed inpart in the proportion which the aggregate principal amount of the outstandingNotes to be redeemed on the relevant Optional Redemption Date (Call) bears tothe aggregate principal amount of outstanding Notes on such date. If anyMaximum Redemption Amount or Minimum Redemption Amount is specified inthe relevant Pricing Supplement, then the Optional Redemption Amount (Call)shall in no event be greater than the maximum or be less than the minimum sospecified.

(f) Redemption at the option of Noteholders: If the Put Option is specified in therelevant Pricing Supplement as being applicable, the Issuer shall, at the option ofthe Holder of any Note redeem such Note on the Optional Redemption Date (Put)specified in the relevant Put Option Notice at the relevant Optional RedemptionAmount (Put) together with interest (if any) accrued to such date. In order toexercise the option contained in this Condition 10(f), the Holder of a Note must,not less than 30 nor more than 60 days before the relevant Optional RedemptionDate (Put), or such other period(s) as specified in the relevant PricingSupplement, deposit with any Paying Agent such Note together with allunmatured Coupons relating thereto and a duly completed Put Option Notice inthe form obtainable from any Paying Agent. The Paying Agent with which a Noteis so deposited shall deliver a duly completed Put Option Receipt to thedepositing Noteholder. No Note, once deposited with a duly completed PutOption Notice in accordance with this Condition 10(f), may be withdrawn;provided, however, that if, prior to the relevant Optional Redemption Date(Put), any such Note becomes immediately due and payable or, upon duepresentation of any such Note on the relevant Optional Redemption Date (Put),payment of the redemption moneys is improperly withheld or refused, therelevant Paying Agent shall mail notification thereof to the depositing Noteholderat such address as may have been given by such Noteholder in the relevant PutOption Notice and shall hold such Note at its Specified Office for collection bythe depositing Noteholder against surrender of the relevant Put Option Receipt.For so long as any outstanding Note is held by a Paying Agent in accordance withthis Condition 10(f), the depositor of such Note and not such Paying Agent shallbe deemed to be the Holder of such Note for all purposes.

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(g) Redemption for Change of Control: At any time following the occurrence of aChange of Control, the holder of each Note will have the right, at such holder’soption, to require the Issuer to redeem all but not some only of that holder’s Noteson the Change of Control Put Date at their Early Redemption Amount (Change ofControl), together with accrued and unpaid interest (if any) up to, but excludingthe Change of Control Put Date. To exercise such right, the holder of the relevantNote must deposit at the specified office of any Paying Agent a duly completedand signed notice of redemption, in the form for the time being current,obtainable from the specified office of any Paying Agent (a “Put ExerciseNotice”), together with the Note or the Note Certificate (in the case of RegisteredNotes) evidencing the Notes to be redeemed by not later than 60 days following aChange of Control, or, if later, 60 days following the date upon which noticethereof is given to Noteholders by the Issuer in accordance with Condition 21(Notices). The “Change of Control Put Date” shall be the fourteenth day afterthe expiry of such period of 60 days as referred to above.

A Put Exercise Notice, once delivered, shall be irrevocable and the Issuer shallredeem the Notes subject to the Put Exercise Notices delivered as aforesaid on theChange of Control Put Date.

The Issuer shall give notice to Noteholders, the Principal Paying Agent and theTrustee in accordance with Condition 21 (Notices) by not later than 14 daysfollowing the first day on which it becomes aware of the occurrence of a Changeof Control, which notice shall specify the procedure for exercise by holders oftheir rights to require redemption of the Notes pursuant to this Condition 10(g).

For the purposes of this Condition 10(g):

A “Change of Control” occurs when:

(i) any Person or Persons acting together acquires Control of the Guarantor ifsuch Person or Persons does not or do not have, and would not be deemed tohave, Control of the Issuer or the Guarantor on the Issue Date;

(ii) the Issuer or the Guarantor consolidates with or merges into or sells ortransfers all or substantially all of its assets to any other Person, unless theconsolidation, merger, sale or transfer will not result in the other Person orPersons acquiring Control over the Issuer or the Guarantor or the successorentity; or

(iii) one or more Persons acquires the beneficial ownership of all orsubstantially all of the Issuer’s or the Guarantor’s issued share capital;

“Control” means the acquisition or control of more than 50 per cent. of the votingrights of the issued share capital of the Issuer or the Guarantor (as the case maybe) or the right to appoint and/or remove all or the majority of the members of theIssuer’s or the Guarantor’s (as the case may be) board of directors or othergoverning body, whether obtained directly or indirectly, and whether obtained byownership of share capital, the possession of voting rights, contract or otherwiseand the terms “Controlling” and “Controlled” shall have meanings correlative tothe foregoing; and

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A “Person”, as used in this Condition 10(g), includes any individual, company,corporation, firm, partnership, joint venture, undertaking, association,organisation, trust, state or agency of a state (in each case whether or not being aseparate legal entity) but does not include (i) the Issuer’s or, as the case may be,the Guarantor’s board of directors or any other governing board, (ii) the Issuer’sor, as the case may be, the Guarantor’s wholly-owned direct or indirectsubsidiaries; (iii) the late Dato’ Dr. Cheng Yu-Tung, his relatives and/or extendedfamily and/or companies which are controlled by any of them and/or trusts inwhich the late Dato’ Dr. Cheng Yu-Tung, his relatives and/or extended familyand/or companies which are controlled by any of them are beneficiaries and/orinterests associated with any or some of them; and (iv) Chow Tai FookEnterprises Limited (“CTFEL”) and its Affiliates. For this purpose, “Affiliates”of CTFEL means any Person directly or indirectly Controlling, Controlled by orunder common control with CTFEL.

(h) No other redemption: The Issuer shall not be entitled to redeem the Notesotherwise than as provided in paragraphs (a) to (g) above.

(i) Early redemption of Zero Coupon Notes: Unless otherwise specified in therelevant Pricing Supplement, the Redemption Amount payable on redemption ofa Zero Coupon Note at any time before the Maturity Date shall be an amountequal to the sum of:

(i) the Reference Price; and

(ii) the product of the Accrual Yield (compounded annually) being applied tothe Reference Price from (and including) the Issue Date to (but excluding)the date fixed for redemption or (as the case may be) the date upon whichthe Note becomes due and payable.

Where such calculation is to be made for a period which is not a whole number ofyears, the calculation in respect of the period of less than a full year shall be madeon the basis of such Day Count Fraction as may be specified in the PricingSupplement for the purposes of this Condition 10(i) or, if none is so specified, aDay Count Fraction of 30/360.

(j) Purchase: The Issuer, the Guarantor or any of their respective Subsidiaries may atany time purchase Notes in the open market or otherwise and at any price,provided that all unmatured Coupons are purchased therewith.

(k) Cancellation: All Notes so redeemed or purchased by the Issuer, the Guarantor orany of their respective Subsidiaries and any unmatured Coupons attached to orsurrendered with them shall be cancelled and may not be reissued or resold.

(l) Calculations: Neither the Trustee nor any of the Agents shall be responsible forcalculating or verifying the calculations of any amount payable under any noticeof redemption and shall not be liable to the Noteholders or any other person fornot doing so.

(m) No duty to monitor: The Trustee shall not be obliged to take any steps to ascertainwhether a Change of Control, Potential Event of Default (as defined in the TrustDeed) or Event of Default has occurred or to monitor the occurrence of anyChange of Control, Potential Event of Default or Event of Default, and shall notbe liable to the Noteholders or any other person for not doing so.

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11. Payments - Bearer Notes

This Condition 11 is only applicable to Bearer Notes.

(a) Principal: Payments of principal shall be made only against presentation and(provided that payment is made in full) surrender of Bearer Notes at theSpecified Office of any Paying Agent outside the United States by transfer to anaccount denominated in that currency (or, if that currency is euro, any otheraccount to which euro may be credited or transferred) and maintained by thepayee with, a bank in the Principal Financial Centre of that currency.

(b) Interest: Payments of interest shall, subject to paragraph (h) below, be made onlyagainst presentation and (provided that payment is made in full) surrender of theappropriate Coupons at the Specified Office of any Paying Agent outside theUnited States in the manner described in paragraph (a) above.

Payments of principal and interest in respect of Bearer Notes held in the CMU

Service will be made to the person(s) for whose account(s) interests in the

relevant Bearer Note are credited as being held with the CMU Service in

accordance with the CMU Rules (as defined in the Agency Agreement) at the

relevant time as notified to the CMU Lodging and Paying Agent by the CMU

Service in a relevant CMU Instrument Position Report (as defined in the Agency

Agreement) or any other relevant notification by the CMU Service, which

notification shall be conclusive evidence of the records of the CMU Service (save

in the case of manifest or proven error) and payment made in accordance thereof

shall discharge the obligations of the relevant Issuer, or, as the case may be, the

Guarantor, in respect of that payment.

(c) Payments in New York City: Payments of principal or interest may be made at theSpecified Office of a Paying Agent in New York City if (i) the Issuer hasappointed Paying Agents outside the United States with the reasonableexpectation that such Paying Agents will be able to make payment of the fullamount of the interest on the Notes in the currency in which the payment is duewhen due, (ii) payment of the full amount of such interest at the offices of all suchPaying Agents is illegal or effectively precluded by exchange controls or othersimilar restrictions and (iii) payment is permitted by applicable United Stateslaw.

(d) Payments subject to fiscal laws: All payments in respect of the Bearer Notes aresubject in all cases to (i) any fiscal or other laws and regulations applicablethereto in the place of payment, but without prejudice to the provisions ofCondition 13 (Taxation) and (ii) any withholding or deduction required pursuantto an agreement described in Section 1471(b) of the U.S. Internal Revenue Codeof 1986, as amended (the “Code”) or otherwise imposed pursuant to Sections1471 through 1474 of the Code, any regulations or agreements thereunder, anyofficial interpretations thereof, or (without prejudice to the provisions ofCondition 13 (Taxation) any law implementing an intergovernmental approachthereto. No commissions or expenses shall be charged to the Noteholders orCouponholders in respect of such payments.

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(e) Deductions for unmatured Coupons: If the relevant Pricing Supplement specifiesthat the Fixed Rate Note Provisions are applicable and a Bearer Note is presentedwithout all unmatured Coupons relating thereto:

(i) if the aggregate amount of the missing Coupons is less than or equal to theamount of principal due for payment, a sum equal to the aggregate amountof the missing Coupons will be deducted from the amount of principal duefor payment; provided, however, that if the gross amount available forpayment is less than the amount of principal due for payment, the sumdeducted will be that proportion of the aggregate amount of such missingCoupons which the gross amount actually available for payment bears tothe amount of principal due for payment;

(ii) if the aggregate amount of the missing Coupons is greater than the amountof principal due for payment:

(A) so many of such missing Coupons shall become void (in inverseorder of maturity) as will result in the aggregate amount of theremainder of such missing Coupons (the “Relevant Coupons”)being equal to the amount of principal due for payment; provided,however, that where this sub-paragraph would otherwise require afraction of a missing Coupon to become void, such missing Couponshall become void in its entirety; and

(B) a sum equal to the aggregate amount of the Relevant Coupons (or, ifless, the amount of principal due for payment) will be deducted fromthe amount of principal due for payment; provided, however, that,if the gross amount available for payment is less than the amount ofprincipal due for payment, the sum deducted will be that proportionof the aggregate amount of the Relevant Coupons (or, as the case maybe, the amount of principal due for payment) which the gross amountactually available for payment bears to the amount of principal duefor payment.

Each sum of principal so deducted shall be paid in the manner provided inparagraph (a) above against presentation and (provided that payment ismade in full) surrender of the relevant missing Coupons.

(f) Unmatured Coupons void: If the relevant Pricing Supplement specifies that thisCondition 11(f) is applicable or that the Floating Rate Note Provisions, or theIndex-Linked Interest or Dual Currency Note Provisions are applicable, on thedue date for final redemption of any Note or early redemption in whole of suchNote pursuant to Condition 10(b) (Redemption for tax reasons), Condition 10(f)(Redemption at the option of Noteholders), Condition 10(c) (Redemption at the

option of the Issuer), Condition 10(d) (Redemption at the option of the Issuer

(Make Whole Redemption)), Condition 10(g) (Redemption for Change of Control)or Condition 14 (Events of Default), all unmatured Coupons relating thereto(whether or not still attached) shall become void and no payment will be made inrespect thereof.

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(g) Payments on business days: If the due date for payment of any amount in respectof any Bearer Note or Coupon is not a Payment Business Day in the place ofpresentation, the Holder shall not be entitled to payment in such place of theamount due until the next succeeding Payment Business Day in such place andshall not be entitled to any further interest or other payment in respect of any suchdelay.

(h) Payments other than in respect of matured Coupons: Payments of interest otherthan in respect of matured Coupons shall be made only against presentation of therelevant Bearer Notes at the Specified Office of any Paying Agent outside theUnited States (or in New York City if permitted by paragraph (c) above).

(i) Partial payments: If a Paying Agent makes a partial payment in respect of anyBearer Note or Coupon presented to it for payment, such Paying Agent willendorse thereon a statement indicating the amount and date of such payment.

(j) Exchange of Talons: On or after the maturity date of the final Coupon which is (orwas at the time of issue) part of a Coupon Sheet relating to the Bearer Notes, theTalon forming part of such Coupon Sheet may be exchanged at the SpecifiedOffice of the Principal Paying Agent for a further Coupon Sheet (including, ifappropriate, a further Talon but excluding any Coupons in respect of whichclaims have already become void pursuant to Condition 15 (Prescription). Uponthe due date for redemption of any Bearer Note, any unexchanged Talon relatingto such Note shall become void and no Coupon will be delivered in respect ofsuch Talon.

12. Payments - Registered Notes

This Condition 12 is only applicable to Registered Notes.

(a) Principal: Payments of principal shall be made by transfer to an accountdenominated in that currency (or, if that currency is euro, any other account towhich euro may be credited or transferred) and maintained by the payee with, abank in the Principal Financial Centre of that currency and (in the case ofredemption) upon surrender (or, in the case of part payment only, endorsement) ofthe relevant Note Certificates at the Specified Office of any Paying Agent.

(b) Interest: Payments of interest shall be made by transfer to an accountdenominated in that currency (or, if that currency is euro, any other account towhich euro may be credited or transferred) and maintained by the payee with, abank in the Principal Financial Centre of that currency and (in the case of interestpayable on redemption) upon surrender (or, in the case of part payment only,endorsement) of the relevant Note Certificates at the Specified Office of anyPaying Agent.

Payments of principal and interest in respect of Registered Notes held in the CMUService will be made to the person(s) for whose account(s) interests in therelevant Registered Note are credited as being held with the CMU Service inaccordance with the CMU Rules (as defined in the Agency Agreement) at therelevant time as notified to the CMU Lodging and Paying Agent by the CMUService in a relevant CMU Instrument Position Report (as defined in the AgencyAgreement) or any other relevant notification by the CMU Service, which

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notification shall be conclusive evidence of the records of the CMU Service (save

in the case of manifest or proven error) and payment made in accordance thereof

shall discharge the obligations of the relevant Issuer, or, as the case may be, the

Guarantor, in respect of that payment.

(c) Payments subject to fiscal laws: All payments in respect of the Registered Notesare subject in all cases to (i) any fiscal or other laws and regulations applicablethereto in the place of payment, but without prejudice to the provisions ofCondition 13 (Taxation) and (ii) any withholding or deduction required pursuantto an agreement described in Section 1471(b) of the Code or otherwise imposedpursuant to Sections 1471 through 1474 of the Code, any regulations oragreements thereunder, any official interpretations thereof, or (without prejudiceto the provisions of Condition 13 (Taxation) any law implementing anintergovernmental approach thereto. No commissions or expenses shall becharged to the Noteholders or Couponholders in respect of such payments.

(d) Payments on business days: Where payment is to be made by transfer to anaccount, payment instructions (for value the due date, or, if the due date is notPayment Business Day, for value the next succeeding Payment Business Day)will be initiated (i) (in the case of payments of principal and interest payable onredemption) on the later of the due date for payment and the day on which therelevant Note Certificate is surrendered (or, in the case of part payment only,endorsed) at the Specified Office of a Paying Agent and (ii) (in the case ofpayments of interest payable other than on redemption) on the due date forpayment. A Holder of a Registered Note shall not be entitled to any interest orother payment in respect of any delay in payment resulting from the due date fora payment not being a Payment Business Day.

(e) Partial payments: If a Paying Agent makes a partial payment in respect of anyRegistered Note, the Issuer shall procure that the amount and date of suchpayment are noted on the Register and, in the case of partial payment uponpresentation of a Note Certificate, that a statement indicating the amount and thedate of such payment is endorsed on the relevant Note Certificate.

(f) Record date: Each payment in respect of a Registered Note will be made to theperson shown as the Holder in the Register at the close of business in the place ofthe Registrar’s Specified Office on the fifteenth day before the due date for suchpayment (the “Record Date”).

So long as the Notes are represented by a Global Note or a Global Note

Certificate held by a common depositary for Euroclear and Clearstream,

Luxembourg, the Record Date shall be the Clearing System Business Day

immediately prior to the date for payment, where Clearing System Business Day

means Monday to Friday inclusive except 25 December and 1 January.

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13. Taxation

(a) Gross up: All payments of principal and interest in respect of the Notes and theCoupons by or on behalf of the Issuer or the Guarantor shall be made free andclear of, and without withholding or deduction for or on account of, any presentor future taxes, duties, assessments or governmental charges of whatever natureimposed, levied, collected, withheld or assessed by or on behalf of the CaymanIslands or Hong Kong or any political subdivision therein or any authority thereinor thereof having power to tax, unless the withholding or deduction of such taxes,duties, assessments, or governmental charges is required by law. In that event, theIssuer or (as the case may be) the Guarantor shall pay such additional amounts aswill result in receipt by the Noteholders and the Couponholders after suchwithholding or deduction of such amounts as would have been received by themhad no such withholding or deduction been required, except that no suchadditional amounts shall be payable in respect of any Note or Coupon:

(i) held by or on behalf of a Holder which is liable to such taxes, duties,assessments or governmental charges in respect of such Note or Coupon byreason of its having some connection with the jurisdiction by which suchtaxes, duties, assessments or charges have been imposed, levied, collected,withheld or assessed other than the mere holding of the Note or Coupon; or

(ii) where the relevant Note or Coupon or Note Certificate is presented orsurrendered for payment more than 30 days after the Relevant Date exceptto the extent that the Holder of such Note or Coupon would have beenentitled to such additional amounts on presenting or surrendering suchNote or Coupon or Note Certificate for payment on the last day of suchperiod of 30 days.

(b) Taxing jurisdiction: If the Issuer or the Guarantor becomes subject at any time toany taxing jurisdiction other than the Cayman Islands or Hong Kong respectively,references in these Conditions to the Cayman Islands or Hong Kong shall beconstrued as references to the Cayman Islands or (as the case may be) Hong Kongand/or such other jurisdiction.

(c) Trustee and Agents: Neither the Trustee nor any Agent shall be responsible forpaying any tax, duty, charges, withholding or other payment referred to in thisCondition 13 or for determining whether such amounts are payable or the amountthereof, and none of them shall be responsible or liable for any failure by theIssuer, the Guarantor, any Noteholder or any third party to pay such tax, duty,charges, withholding or other payment in any jurisdiction or to provide any noticeor information to the Trustee or any Agent that would permit, enable or facilitatethe payment of any principal, premium (if any), interest or other amount under orin respect of the Notes without deduction or withholding for or on account of anytax, duty, charge, withholding or other payment imposed by or in any jurisdiction.

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14. Events of Default

If any of the following events occurs, then the Trustee at its discretion may and, if sorequested in writing by Noteholders of at least one quarter of the aggregate principalamount of then outstanding Notes or if so directed by an Extraordinary Resolution, shall(subject to the Trustee having been indemnified and/or provided with security and/orpre-funded to its satisfaction) give written notice to the Issuer declaring the Notes to beimmediately due and payable, whereupon they shall become immediately due andpayable at their principal amount together with accrued interest without further actionor formality:

(a) Non payment: the Issuer fails to pay any amount of principal in respect of theNotes within seven (7) days after the due date for payment thereof or fails to payany amount of interest in respect of the Notes within fourteen (14) days of the duedate for payment thereof; or

(b) Breach of other obligations: the Issuer or the Guarantor defaults in theperformance or observance of any of its other obligations under or in respect ofthe Notes or the Trust Deed and such default (i) is incapable of remedy or (ii)being a default which is capable of remedy, remains unremedied for 30 days afterthe Trustee has given written notice thereof to the Issuer and the Guarantor; or

(c) Cross-default of Issuer, Guarantor or Subsidiary:

(i) any indebtedness of the Issuer, the Guarantor or any of their respectiveSubsidiaries is not paid when due or (as the case may be) within anyoriginally applicable grace period;

(ii) any indebtedness of the Issuer, the Guarantor or any of their respectiveSubsidiaries becomes (or becomes capable of being declared) due andpayable prior to its stated maturity otherwise than at the option of theIssuer, the Guarantor or (as the case may be) the relevant Subsidiary or anyperson entitled to such indebtedness; or

(iii) the Issuer, the Guarantor or any of their respective Subsidiaries fails to paywhen due any amount payable by it under any guarantee of anyindebtedness;

provided that the amount of indebtedness referred to in sub paragraph (i) and/orsub paragraph (ii) above and/or the amount payable under any guarantee referredto in sub paragraph (iii) above, individually or in the aggregate, exceedsUS$30,000,000 (or its equivalent in any other currency or currencies on the basisof the middle spot rate for the relevant currency against the US dollar as quotedby any leading bank on the day on which a calculation is made under thisCondition 14(c) (Cross default of Issuer, Guarantor or Subsidiary)); or

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(d) Unsatisfied judgment: one or more judgment(s) or order(s) is rendered against amaterial part of the property, assets or turnover of the Issuer, the Guarantor or anyMaterial Subsidiary and continue(s) unsatisfied and unstayed for a period of 30days after the date(s) thereof or, if later, the date therein specified for payment; or

(e) Security enforced: a secured party takes possession, or a receiver, manager orother similar officer is appointed, of the whole or a material part of theundertaking, assets and revenues of the Issuer, the Guarantor or any MaterialSubsidiary and such possession or appointment continues for a period of 30 daysafter the date thereof; or

(f) Insolvency etc: (i) the Issuer, the Guarantor or any Material Subsidiary becomesinsolvent or is unable to pay its debts as they fall due, (ii) an administrator orliquidator of the Issuer, the Guarantor or any Material Subsidiaries or the wholeor a substantial part of the undertaking, assets and revenues of the Issuer, theGuarantor or any Material Subsidiaries is appointed (or application for any suchappointment is made) or (iii) the Issuer, the Guarantor or any MaterialSubsidiaries takes any action for a readjustment or deferment of any of itsobligations or makes a general assignment or an arrangement or composition withor for the benefit of its creditors or declares a moratorium in respect of all or asubstantial part of its indebtedness or any guarantee of any indebtedness given byit; or

(g) Winding up etc: an order is made or an effective resolution is passed for thewinding up, liquidation or dissolution of the Issuer, the Guarantor or any MaterialSubsidiary (otherwise than, in the case of a Subsidiary of the Issuer or aSubsidiary of the Guarantor, for the purposes of or pursuant to an amalgamation,reorganisation or restructuring whilst solvent) or the Issuer, the Guarantor or anyof the Material Subsidiaries ceases to carry on all or the substantial part of itsbusiness (otherwise than, in the case of a Subsidiary of the Issuer or a Subsidiaryof the Guarantor, for the purposes of or pursuant to an amalgamation,reorganisation or restructuring whilst solvent or as a result of disposal on arm’slength terms or as approved by an Extraordinary Resolution of the Noteholders);or

(h) Analogous event: any event occurs which under the laws of the Cayman Islands orHong Kong has an analogous effect to any of the events referred to in Conditions14(d) (Unsatisfied judgment) to 14(g) (Winding up, etc.); or

(i) Failure to take action etc: any action, condition or thing at any time required to betaken, fulfilled or done in order (i) to enable the Issuer and the Guarantor lawfullyto enter into, exercise their respective rights and perform and comply with theirrespective obligations under and in respect of the Notes, the Coupons or the TrustDeed, (ii) to ensure that those obligations are legal, valid, binding andenforceable and (iii) to make the Note, the Coupons or the Trust Deed admissiblein evidence in the courts of the Cayman Islands and Hong Kong is not taken,fulfilled or done; or

(j) Unlawfulness: it is or will become unlawful for the Issuer or the Guarantor toperform or comply with any of its obligations under or in respect of the Notes orthe Trust Deed; or

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(k) Guarantee not in force: the Guarantee of the Notes is not (or is claimed by theGuarantor not to be) in full force and effect.

15. Prescription

Claims for principal in respect of Bearer Notes shall become void unless the relevantBearer Notes are presented for payment within ten years of the appropriate RelevantDate. Claims for interest in respect of Bearer Notes shall become void unless therelevant Coupons are presented for payment within five years of the appropriateRelevant Date. Claims for principal and interest on redemption in respect of RegisteredNotes shall become void unless the relevant Note Certificates are surrendered forpayment within ten years of the appropriate Relevant Date.

16. Replacement of Notes and Coupons

If any Note, Note Certificate or Coupon is lost, stolen, mutilated, defaced or destroyed,it may be replaced at the Specified Office of the Principal Paying Agent, in the case ofBearer Notes, or the Registrar, in the case of Registered Notes (and, if the Notes arethen admitted to listing, trading and/or quotation by any competent authority, stockexchange and/or quotation system which requires the appointment of a Paying Agent orTransfer Agent in any particular place, the Paying Agent or Transfer Agent having itsSpecified Office in the place required by such competent authority, stock exchangeand/or quotation system), subject to all applicable laws and competent authority, stockexchange and/or quotation system requirements, upon payment by the claimant of theexpenses incurred in connection with such replacement and on such terms as toevidence, security, indemnity and otherwise as the Issuer may reasonably require.Mutilated or defaced Notes, Note Certificates or Coupons must be surrendered beforereplacements will be issued.

17. Trustee and Agents

Under the Trust Deed, the Trustee is entitled to be indemnified, provided with securityand/or pre-funded to its satisfaction and relieved from responsibility in certaincircumstances and to be paid its fees, costs and expenses in priority to the claims of theNoteholders or Couponholders. In addition, the Trustee is entitled to enter into businesstransactions with the Issuer and any entity relating to the Issuer without accounting forany profit. Each Noteholder shall be solely responsible for making and continuing tomake its own independent appraisal and investigation into the financial condition,creditworthiness, condition, affairs, status and nature of the Issuer, the Guarantor, andthe Trustee shall not at any time have any responsibility for the same and eachNoteholder shall not rely on the Trustee in respect thereof.

In the exercise of its powers and discretions under these Conditions and the Trust Deed,the Trustee will have regard to the interests of the Noteholders as a class and will not beresponsible for any consequence for individual Holders of Notes or Coupons as a resultof such Holders being connected in any way with a particular territory or taxingjurisdiction.

In acting under the Agency Agreement and in connection with the Notes and theCoupons, the Agents act solely as agents of the Issuer and the Guarantor and (to theextent provided therein) the Trustee and do not assume any obligations towards orrelationship of agency or trust for or with any of the Noteholders or Couponholders.

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The initial Agents and their initial Specified Offices are listed below. The initialCalculation Agent (if any) is specified in the relevant Pricing Supplement. The Issuerand the Guarantor reserve the right (with the prior approval of the Trustee) at any timeto vary or terminate the appointment of any Agent and to appoint a successor principalpaying agent or registrar or Calculation Agent and additional or successor payingagents; provided, however, that:

(a) the Issuer and the Guarantor shall at all times maintain a principal paying agentand a registrar; and

(b) if a Calculation Agent is specified in the relevant Pricing Supplement, the Issuerand the Guarantor shall at all times maintain a Calculation Agent; and

(c) if and for so long as the Notes are admitted to listing, trading and/or quotation byany competent authority, stock exchange and/or quotation system which requiresthe appointment of a Paying Agent and/or a Transfer Agent in any particularplace, the Issuer and the Guarantor shall maintain a Paying Agent and/or aTransfer Agent having its Specified Office in the place required by suchcompetent authority, stock exchange and/or quotation system.

Notice of any change in any of the Agents or in their Specified Offices shall promptly begiven by the Issuer to the Noteholders.

18. Meetings of Noteholders; Modification and Waiver

(a) Meetings of Noteholders: The Trust Deed contains provisions for conveningmeetings of Noteholders to consider matters relating to the Notes, including themodification of any provision of these Conditions or the Trust Deed. Any suchmodification may be made if sanctioned by an Extraordinary Resolution. Such ameeting may be convened by the Issuer and the Guarantor (acting together) or bythe Trustee and shall be convened by the Trustee upon the request in writing ofNoteholders holding not less than 10 per cent. of the aggregate principal amountof the outstanding Notes. The quorum at any meeting convened to vote on anExtraordinary Resolution will be two or more Persons holding or representing 50per cent. of the aggregate principal amount of the outstanding Notes or, at anyadjourned meeting, two or more Persons being or representing Noteholderswhatever the principal amount of the Notes held or represented; provided,however, that Reserved Matters may only be sanctioned by an ExtraordinaryResolution passed at a meeting of Noteholders at which two or more Personsholding or representing not less than 66 per cent. or, at any adjourned meeting, 33per cent. of the aggregate principal amount of the outstanding Notes form aquorum. Any Extraordinary Resolution duly passed at any such meeting shall bebinding on all the Noteholders and Couponholders, whether present or not.

In addition, a resolution in writing signed by or on behalf of Noteholders orCouponholders of not less than 90 per cent. of the aggregate principal amount ofNotes outstanding who for the time being are entitled to receive notice of meetingof Noteholders will take effect as if it were an Extraordinary Resolution. Such aresolution in writing may be contained in one document or several documents inthe same form, each signed by or on behalf of one or more Noteholders.

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(b) Modification and waiver: The Trustee may, without the consent of theNoteholders, agree to any modification of these Conditions or the Trust Deed(other than in respect of a Reserved Matter) which is, in the opinion of theTrustee, proper to make if, in the opinion of the Trustee, such modification willnot be materially prejudicial to the interests of Noteholders and to anymodification of the Notes or the Trust Deed which is of a formal, minor ortechnical nature or is to correct a manifest error.

In addition, the Trustee may, without the consent of the Noteholders orCouponholders, authorise or waive any proposed breach or breach of the Notes orthe Trust Deed (other than a proposed breach or breach relating to the subject ofa Reserved Matter) if, in the opinion of the Trustee, the interests of theNoteholders will not be materially prejudiced thereby.

Unless the Trustee agrees otherwise, any such authorisation, waiver ormodification shall be binding on the Noteholders and shall be notified to theNoteholders by the Issuer as soon as practicable thereafter.

(c) Directions from Noteholders: Notwithstanding anything to the contrary, theNotes, the Trust Deed and/or the Agency Agreement, whenever the Trustee isrequired or entitled by the terms or the conditions of the Notes, the Trust Deedand/or the Agency Agreement to exercise any discretion or power, take anyaction, make any decision or give any direction or certification, the Trustee isentitled, prior to exercising any such discretion or power, taking any such action,making any such decision, or giving any such direction or certification, to seekdirections from the Noteholders by way of an Extraordinary Resolution and shallhave been indemnified and/or provided with security and/or pre-funded to itssatisfaction against all action, proceedings, claims and demands to which it maybe or become liable and all costs, charges, damages expenses (including but notlimited to legal expenses) and liabilities which may be incurred by it inconnection therewith, and the Trustee is not responsible for any loss or liabilityincurred by any person as a result of any delay in it exercising such discretion orpower, taking such action, making such decision, or giving such direction orcertification where the Trustee is seeking such directions.

(d) Certificates and reports: The Trustee may rely, without liability to Noteholders,on a report, confirmation, opinion or certificate or any advice of any lawyers,accountants, financial advisers, financial institution or any other expert, whetheror not addressed to it and whether their liability in relation thereto is limited (byits terms or by any engagement letter relating thereto or in any other manner) byreference to a monetary cap, methodology or otherwise. The Trustee may acceptand shall be entitled to rely (without further investigation or enquiry) on any suchreport, confirmation, opinion or certificate or advice and such report,confirmation or certificate or advice shall be binding on the Issuer, the Guarantor,the Trustee and the Noteholders.

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19. Enforcement

The Trustee may at any time, at its discretion and without notice, institute such actions,steps or proceedings as it thinks fit to enforce its rights under the Trust Deed in respectof the Notes, but it shall not be bound to do so unless:

(i) it has been so requested in writing by the Noteholders of at least one quarter ofthe aggregate principal amount of the outstanding Notes or has been so directedby an Extraordinary Resolution; and

(ii) it has been indemnified and/or pre-funded or provided with security to itssatisfaction.

No Noteholder may proceed directly against the Issuer or the Guarantor unless theTrustee, having become bound to do so, fails to do so within a reasonable time and suchfailure is continuing.

20. Further Issues

The Issuer may from time to time, without the consent of the Noteholders or theCouponholders and in accordance with the Trust Deed, create and issue further noteshaving the same terms and conditions as the Notes in all respects (or in all respectsexcept for the first payment of interest) so as to form a single series with the Notes. TheIssuer may from time to time create and issue other series of notes having the benefit ofthe Trust Deed.

21. Notices

(a) Bearer Notes: Notices to the Holders of Bearer Notes shall be valid if publishedin a leading English language daily newspaper published in Hong Kong or, if suchpublication is not practicable, in a leading English language daily newspaperhaving general circulation in Asia. Any such notice shall be deemed to have beengiven on the date of first publication (or if required to be published in more thanone newspaper, on the first date on which publication shall have been made in allthe required newspapers). Couponholders shall be deemed for all purposes tohave notice of the contents of any notice given to the Holders of Bearer Notes.

(b) Registered Notes: Notices to the Holders of Registered Notes shall be sent to themby first class mail (or its equivalent) or (if posted to an overseas address) byairmail at their respective addresses on the Register or, if such publication is notpracticable, in a leading English language daily newspaper having generalcirculation in Asia (which is expected to be the Asian Wall Street Journal). Anysuch notice shall be deemed to have been given on the fourth day after the date ofmailing.

So long as the Notes are represented by a Global Note or a Global Note Certificate andsuch Global Note or Global Note Certificate is held on behalf of (i) Euroclear orClearstream, Luxembourg, or any other clearing system (except as provided in (ii)below), notices to the holders of Notes of that Series may be given by delivery of therelevant notice to that clearing system for communication by it to entitledaccountholders in substitution for publication as required by the Conditions or (ii) theCMU, notices to the holders of Notes of that Series may be given by delivery of the

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relevant notice to the Persons shown in a CMU Instrument Position Report issued by theHong Kong Monetary Authority on the business day preceding the date of despatch ofsuch notice.

22. Currency Indemnity

If any sum due from the Issuer in respect of the Notes or the Coupons or any order orjudgment given or made in relation thereto has to be converted from the currency (the“first currency”) in which the same is payable under these Conditions or such order orjudgment into another currency (the “second currency”) for the purpose of (a) makingor filing a claim or proof against the Issuer, (b) obtaining an order or judgment in anycourt or other tribunal or (c) enforcing any order or judgment given or made in relationto the Notes, the Issuer shall indemnify each Noteholder, on the written demand of suchNoteholder addressed to the Issuer and delivered to the Issuer or to the Specified Officeof the Principal Paying Agent, against any loss suffered as a result of any discrepancybetween (i) the rate of exchange used for such purpose to convert the sum in questionfrom the first currency into the second currency and (ii) the rate or rates of exchange atwhich such Noteholder may in the ordinary course of business purchase the firstcurrency with the second currency upon receipt of a sum paid to it in satisfaction, inwhole or in part, of any such order, judgment, claim or proof.

This indemnity constitutes a separate and independent obligation of the Issuer and shallgive rise to a separate and independent cause of action.

23. Rounding

For the purposes of any calculations referred to in these Conditions (unless otherwisespecified in these Conditions or the relevant Pricing Supplement), (a) all percentagesresulting from such calculations will be rounded, if necessary, to the nearest onehundred-thousandth of a percentage point (with 0.000005 per cent. being rounded up to0.00001 per cent.), (b) all United States dollar amounts used in or resulting from suchcalculations will be rounded to the nearest cent (with one half cent being rounded up),(c) all Japanese Yen amounts used in or resulting from such calculations will be roundeddownwards to the next lower whole Japanese Yen amount, and (d) all amountsdenominated in any other currency used in or resulting from such calculations will berounded to the nearest two decimal places in such currency, with 0.005 being roundedupwards.

24. Governing Law and Jurisdiction

(a) Governing law: The Notes and the Trust Deed and any non-contractualobligations arising out of or in connection with the Notes and the Trust Deed aregoverned by English law.

(b) English courts: The courts of England have exclusive jurisdiction to settle anydispute (a “Dispute”) arising out of or in connection with the Notes (including adispute relating to the existence, validity or termination or the Notes or anynon-contractual obligation arising out of or in connection with them) or theconsequences of its nullity.

(c) Appropriate forum: The Issuer agrees that the courts of England are the mostappropriate and convenient courts to settle any Dispute and, accordingly, that itwill not argue to the contrary.

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(d) Rights of the Noteholders to take proceedings outside England: Condition 24(b)(English courts) is for the benefit of the Trustee and Noteholders only. As a result,nothing in this Condition 23 (Rounding) prevents the Trustee or any Noteholderfrom taking proceedings relating to a Dispute (“Proceedings”) in any othercourts with jurisdiction. To the extent allowed by law, the Trustee or any of theNoteholders may take concurrent Proceedings in any number of jurisdictions.

(e) Process agent: Each of the Issuer and the Guarantor has irrevocably appointedLaw Debenture Corporate Services Limited to receive service of process in anyProceedings in England. If for any reason such process agent shall cease to beable to act as such or no longer has an address in England, each of the Issuer andthe Guarantor shall appoint a new process agent acceptable to the Trustee andshall immediately notify the Trustee of such appointment. Nothing shall affectthe right to serve process in any other manner permitted by law.

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FORMS OF THE NOTES

Bearer Notes

The Issuer may make applications to Euroclear and Clearstream, Luxembourg for acceptancein their respective book-entry systems in respect of any Series of Bearer Notes. The Issuermay also apply to have Bearer Notes accepted for clearance through the CMU Service. Inrespect of Bearer Notes, a temporary Global Note and/or a permanent Global Note will bedeposited with a common depositary for Euroclear and Clearstream, Luxembourg or asub-custodian for the CMU Service. Transfers of interests in a temporary Global Note or apermanent Global Note will be made in accordance with the normal market debt securitiesoperating procedures of the CMU Service, Euroclear and Clearstream, Luxembourg. EachGlobal Note will have an International Securities Identification Number (“ISIN”) and aCommon Code or a CMU Instrument Number, as the case may be. Investors in Notes of suchSeries may hold their interests in a Global Note only through Euroclear or Clearstream,Luxembourg or the CMU Service, as the case may be.

Registered Notes

The Issuer may make applications to Euroclear and Clearstream, Luxembourg for acceptancein their respective book-entry systems in respect of the Notes to be represented by a GlobalCertificate. The Issuer may also apply to have Notes represented by a Global Certificateaccepted for clearance through the CMU Service. Each Global Certificate will have an ISINand a Common Code or a CMU Instrument Number. Investors in Notes of such Series mayhold their interests in a Global Certificate only through Euroclear or Clearstream,Luxembourg or the CMU Service, as the case may be.

Individual Certificates

Registration of title to Registered Notes in a name other than a depositary or its nominee forEuroclear and Clearstream, Luxembourg or the CMU Service will be permitted only in thecircumstances set forth in “Summary of Provisions Relating to the Notes while in GlobalForm”. In such circumstances, the Issuer will cause sufficient individual Certificates to beexecuted and delivered to the Registrar for completion, authentication and despatch to therelevant Noteholder(s). A person having an interest in a Global Certificate must provide theRegistrar with a written order containing instructions and such other information as the Issuerand the Registrar may require to complete, execute and deliver such Individual Certificates.

Clearance and Settlement

The information set out below is subject to any change in or reinterpretation of the rules,regulations and procedures of Euroclear, Clearstream, Luxembourg or the CMU Service(together, the “Clearing Systems”) currently in effect. The information in this sectionconcerning the Clearing Systems has been obtained from sources that the Issuer believes to bereliable, but neither the Issuer nor the Arrangers nor any Agent nor any Dealer takes anyresponsibility for the accuracy thereof. Investors wishing to use the facilities of any of theClearing Systems are advised to confirm the continued applicability of the rules, regulationsand procedures of the relevant Clearing System. Neither the Issuer nor any other party to theAgency Agreement will have any responsibility or liability for any aspect of the recordsrelating to, or payments made on account of, beneficial ownership interests in the Notes heldthrough the facilities of any Clearing System or for maintaining, supervising or reviewing anyrecords relating to, or payments made on account of, such beneficial ownership interests.

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The Clearing Systems

The relevant Pricing Supplement will specify the Clearing System(s) applicable for eachSeries.

Euroclear and Clearstream, Luxembourg

Euroclear and Clearstream, Luxembourg each holds securities for participating organisationsand facilitates the clearance and settlement of securities transactions between their respectiveparticipants through electronic book-entry changes in accounts of such participants. Euroclearand Clearstream, Luxembourg provide to their respective participants, among other things,services for safekeeping, administration, clearance and settlement of internationally-tradedsecurities and securities lending and borrowing. Euroclear and Clearstream, Luxembourgparticipants are financial institutions throughout the world, including underwriters, securitiesbrokers and dealers, banks, trust companies, clearing corporations and certain otherorganisations. Indirect access to Euroclear or Clearstream, Luxembourg is also available toothers, such as banks, brokers, dealers and trust companies which clear through or maintain acustodial relationship with a Euroclear or Clearstream, Luxembourg participant, eitherdirectly or indirectly.

Distributions of principal with respect to book-entry interests in the Notes held throughEuroclear or Clearstream, Luxembourg will be credited, to the extent received by any payingagent, to the cash accounts of Euroclear or Clearstream, Luxembourg participants inaccordance with the relevant system’s rules and procedures.

CMU Service

The CMU Service is a central depositary service provided by the Central Moneymarkets Unitof the HKMA for the safe custody and electronic trading between the members of this service(“CMU Members”) of capital markets instruments (“CMU Notes”) which are specified in theCMU Reference Manual as capable of being held within the CMU Service.

The CMU Service is only available to CMU Notes issued by a CMU Member or by a personfor whom a CMU Member acts as agent for the purposes of lodging instruments issued by suchpersons. Membership of the CMU Service is open to all members of the Hong Kong CapitalMarkets Association and “authorised institutions” under the Banking Ordinance (Cap. 155) ofHong Kong.

Compared to clearing services provided by Euroclear and Clearstream, Luxembourg, thestandard custody and clearing service provided by the CMU Service is limited. In particular(and unlike Euroclear and Clearstream, Luxembourg), the HKMA does not as part of thisservice provide any facilities for the dissemination to the relevant CMU Members of payments(of interest or principal) under, or notices pursuant to the notice provisions of, the CMUNotes. Instead, the HKMA advises the lodging CMU Member (or a designated paying agent)of the identities of the CMU Members to whose accounts payments in respect of the relevantCMU Notes are credited, whereupon the lodging CMU Member (or the designated payingagent) will make the necessary payments of interest or principal or send notices directly to therelevant CMU Members. Similarly, the HKMA will not obtain certificates of non-U.S.beneficial ownership from CMU Members or provide any such certificates on behalf of CMUMembers. The CMU Lodging Agent will collect such certificates from the relevant CMUMembers identified from an instrument position report obtained by request from the HKMAfor this purpose.

An investor holding an interest through an account with either Euroclear or Clearstream,Luxembourg in any Notes held in the CMU Service will hold that interest through therespective accounts which Euroclear and Clearstream, Luxembourg each have with the CMUService.

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SUMMARY OF PROVISIONS RELATINGTO THE NOTES WHILE IN GLOBAL FORM

Clearing System Accountholders

In relation to any Tranche of Notes represented by a Global Note in bearer form, references inthe Terms and Conditions of the Notes to “Noteholder” are references to the bearer of therelevant Global Note which, for so long as the Global Note is held by a depositary or acommon depositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevantclearing system, and/or a sub-custodian for the CMU Service, will be that depositary, commondepositary or sub-custodian, as the case may be.

In relation to any Tranche of Notes represented by a Global Registered Note, references in theTerms and Conditions of the Notes to “Noteholder” are references to the person in whosename such Global Registered Note is for the time being registered in the Register which, for solong as the Global Registered Note is held by or on behalf of a depositary or a commondepositary for Euroclear and/or Clearstream, Luxembourg and/or any other relevant clearingsystem, and/or a sub-custodian for the CMU Service, will be such sub-custodian, suchdepositary or common depositary, or a nominee for such depositary or common depositary, asthe case may be.

Each of the persons shown in the records of Euroclear and/or Clearstream, Luxembourgand/or any other relevant clearing system as being entitled to an interest in a Global Note or aGlobal Registered Note (each an “Accountholder”) must look solely to Euroclear and/orClearstream, Luxembourg and/or such other relevant clearing system (as the case may be) forsuch Accountholder’s share of each payment made by the Issuer or the Guarantor to the holderof such Global Note or Global Registered Note and in relation to all other rights arising undersuch Global Note or Global Registered Note. The extent to which, and the manner in which,Accountholders may exercise any rights arising under the Global Note or Global RegisteredNote will be determined by the respective rules and procedures of Euroclear and Clearstream,Luxembourg and any other relevant clearing system from time to time. For so long as therelevant Notes are represented by a Global Note or Global Registered Note, Accountholdersshall have no claim directly against the Issuer or the Guarantor in respect of payments dueunder the Notes and such obligations of the Issuer and the Guarantor will be discharged bypayment to the holder of such Global Note or Global Registered Note.

If a Global Note or a Global Registered Note is lodged with a sub custodian for or registeredwith the CMU Service, the person(s) for whose account(s) interests in such Global Note orGlobal Registered Note are credited as being held in the CMU Service in accordance with theCMU Rules as notified by the CMU Service to the CMU Lodging and Paying Agent in arelevant CMU Instrument Position Report or any other relevant notification by the CMUService (which notification, in either case, shall be conclusive evidence of the records of theCMU Service save in the case of manifest error) shall be the only person(s) entitled or in thecase of Registered Notes, directed or deemed by the CMU Service as entitled to receivepayments in respect of Notes represented by such Global Note or Global Registered Note andthe Issuer will be discharged by payment to, or to the order of, such person(s) for whoseaccount(s) interests in such Global Note or Global Certificate are credited as being held in theCMU Service in respect of each amount so paid. Each of the persons shown in the records ofthe CMU Service, as the beneficial holder of a particular nominal amount of Notesrepresented by such Global Note or Global Registered Note must look solely to the CMULodging and Paying Agent for his share of each payment so made by the Issuer in respect ofsuch Global Note or Global Registered Note.

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Conditions applicable to Global Notes

Each Global Note and Global Registered Note will contain provisions which modify the Termsand Conditions of the Notes as they apply to the Global Note or Global Registered Note. Thefollowing is a summary of certain of those provisions:

Payments: All payments in respect of the Global Note or Global Registered Note which,according to the Terms and Conditions of the Notes, require presentation and/or surrender ofa Note, Note Certificate or Coupon will be made against presentation and (in the case ofpayment of principal in full with all interest accrued thereon) surrender of the Global Note orGlobal Registered Note to or to the order of any Paying Agent and will be effective to satisfyand discharge the corresponding liabilities of the Issuer in respect of the Notes. On eachoccasion on which a payment of principal or interest is made in respect of the Global Note, theIssuer shall procure that the payment is noted in a schedule thereto.

Payment Business Day: In the case of a Global Note, or a Global Registered Note, shall be, ifthe currency of payment is euro, any day which is a TARGET Settlement Day and a day onwhich dealings in foreign currencies may be carried on in each (if any) Additional FinancialCentre; or, if the currency of payment is not euro, any day which is a day on which dealings inforeign currencies may be carried on in the Principal Financial Centre of the currency ofpayment and in each (if any) Additional Financial Centre.

Payment Record Date: Each payment in respect of a Global Registered Note will be made tothe person shown as the Holder in the Register at the close of business (in the relevant clearingsystem) on the Clearing System Business Day before the due date for such payment (the“Record Date”) where “Clearing System Business Day” means any week day (Monday toFriday inclusive) within any given calendar year, except 25 December and 1 January.

Exercise of put option: In order to exercise the option contained in Condition 10(f)(Redemption at the option of Noteholders) the bearer of the Temporary Global Note orPermanent Global Note or the holder of a Global Registered Note must, within the periodspecified in the Conditions for the deposit of the relevant Note and put notice, give writtennotice of such exercise to the Principal Paying Agent specifying the principal amount of Notesin respect of which such option is being exercised. Any such notice will be irrevocable andmay not be withdrawn.

Exercise of change of control option: In order to exercise the option contained in Condition10(g) (Redemption for Change of Control), the bearer of the Temporary Global Note orPermanent Global Note or the holder of a Global Registered Note must, within the periodspecified in the Conditions for the deposit of the relevant Note and the Change of Control PutExercise Notice, give written notice of such exercise to the Principal Paying Agent. Any suchnotice shall be irrevocable and may not be withdrawn.

Partial exercise of call option: In connection with an exercise of the option contained inCondition 10(c) (Redemption at the option of the Issuer) in relation to some only of the Noteswhere such Notes are held with Euroclear and/or Clearstream, Luxembourg, the TemporaryGlobal Note or Permanent Global Note or Global Registered Note may be redeemed in part inthe principal amount specified by the Issuer in accordance with the Conditions and the Notesto be redeemed will not be selected as provided in the Conditions but in accordance with therules and procedures of Euroclear and Clearstream, Luxembourg (to be reflected in therecords of Euroclear and Clearstream, Luxembourg as either a pool factor or a reduction inprincipal amount, at their discretion).

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Notices: Notwithstanding Condition 21 (Notices), while all the Notes are represented by aPermanent Global Note (or by a Permanent Global Note and/or a Temporary Global Note) ora Global Registered Note and the Permanent Global Note is (or the Permanent Global Noteand/or the Temporary Global Note are), or the Global Registered Note is, (i) deposited with adepositary or a common depositary for Euroclear and/or Clearstream, Luxembourg and/or anyother relevant clearing system (other than the CMU Service, in respect of which see (ii)below), notices to Noteholders may be given by delivery of the relevant notice to Euroclearand/or Clearstream, Luxembourg and/or any other relevant clearing system and, in any case,such notices shall be deemed to have been given to the Noteholders in accordance withCondition 21 (Notices) on the date of delivery to Euroclear and/or Clearstream, Luxembourgand/or any other relevant clearing system or (ii) deposited with the CMU Service, notices tothe holders of Notes of the relevant Series may be given by delivery of the relevant notice tothe persons shown in a CMU Instrument Position Report issued by the CMU on the secondbusiness day preceding the date of despatch of such notice as holding interests in the relevantGlobal Note or Global Registered Note.

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USE OF PROCEEDS

The net proceeds from each issue of the Notes will be used for general working capital andcorporate purposes of the NWCL Group. If, in respect of any particular issue, there is aparticular identified use of proceeds, this will be stated in the applicable Pricing Supplement.

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CAPITALISATION AND INDEBTEDNESS

Capitalisation and Indebtedness of the Issuer

As at 30 June 2018, the Issuer has an authorised share capital of HK$3,000,000,000 consistingof 30,000,000,000 ordinary shares of HK$0.1 each and an issued and fully paid-up sharecapital of approximately HK$870,229,000 consisting of 8,702,292,242 ordinary shares ofHK$0.1 each.

The following table sets forth the audited consolidated capitalisation of the NWCL Group asat 30 June 2018. This table should be read in conjunction with the consolidated financialinformation and the accompanying notes in relation to the NWCL Group included in thisOffering Circular.

As at 30 June2018

Actual

HK$ Million

(Audited)

Total borrowings – current portionShort-term borrowings and current portion of long-term borrowings . . . . . 3,712.7

Total borrowings – non-current portionLong-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,035.1

Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,747.8

Shareholders’ fundsShare capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 870.2Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,765.2

71,635.4

Total capitalisation(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,670.5

Current portion of total borrowings andtotal capitalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,383.2

Notes:

(1) Total capitalisation consists of non-current portion of total borrowings and shareholders’ funds.

There has been no material change in the capitalisation and indebtedness of the Issuer since 30June 2018.

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Capitalisation and Indebtedness of the Guarantor

As at 30 June 2018, the issued share capital of the Guarantor was approximately 10,214.1million ordinary shares.

The following table sets forth the audited consolidated capitalisation of the Guarantor as at 30June 2018. This table should be read in conjunction with the consolidated financialinformation and the accompanying notes in relation to the Guarantor included in this OfferingCircular.

As at 30 June2018

Actual

HK$ Million

(Audited)

Total borrowings – current portionShort-term borrowings and current portion of long-term borrowings . . . . . 20,629.1

Total borrowings – non-current portionLong-term borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,123.6

Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140,752.7

Shareholders’ fundsShare capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,525.9Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,724.0

216,249.9

Total capitalisation(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336,373.5

Current portion of total borrowings and total capitalisation . . . . . . . . . . . . . 357,002.6

Notes:

(1) Total capitalisation represents long-term borrowings (net of current portion) and shareholders’ funds.

There has been no material change in the capitalisation and indebtedness of the Guarantorsince 30 June 2018.

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DESCRIPTION OF THE ISSUER

OVERVIEW

The NWCL Group is a leading integrated national property developer in the PRC. The NWCLGroup focuses on the development of large-scale, multi-phase residential property projects aswell as the development of complementary commercial, office and hotel projects in the PRC.

Property development and sales are the most significant source of income for the NWCLGroup. To date, the NWCL Group has made significant investments in and has interests in asignificant number of property development projects in over 17 cities in the PRC includingBeijing, Wuhan, Shenyang, Ningbo, Guangzhou and Shenzhen where the respective propertymarkets have experienced considerable growth in the last decade. It has also developedprojects in second- and third-tier cities in the PRC such as Changsha, Foshan, Anshan,Langfang, Yiyang, Jinan and Tangshan. Its property development portfolio covers the PearlRiver Delta, the Yangtze River Delta, Central Area and the Bohai Coastal Area, which are themost developed areas with the fastest economic growth in the PRC. As at 30 June 2018, theNWCL Group had a total GFA of approximately 9.29 million sq.m., of which a total GFA ofapproximately 3.79 million sq.m. were under development. Some of the NWCL Group’sproperty development projects occupy more than one parcel of land and require multiple landuse right certificates during the course of their development.

The NWCL Group has residential property projects targeting primarily at middle- tohigh-income households in each of its regions of operation which are typically large-scalemulti-phase developments in prime urban locations. The NWCL Group typically seeks toidentify large sites in areas with significant long-term development potential and strategicimportance at an early stage, and therefore is able to acquire land in such areas at competitiveprices. Due to the scale of its projects, the NWCL Group typically develops its residentialproperty projects in several phases over a span of three to ten years.

In addition to property development, the NWCL Group is also involved in a number ofcomplementary property-related businesses, including property investment, hotel operationsand property management.

• Property investment: the NWCL Group derives rental income and other related proceedsfrom its investment property portfolio in the PRC, comprising primarily retail shoppingarcade and office premises within the property projects developed by the NWCL Group.

• Hotel operations: the NWCL Group has interests in four completed hotel properties inthe PRC with aggregate capacity of 1,313 rooms. All four hotel properties are locatedwithin property projects developed by the NWCL Group with a view to enhancing thevalue of such property projects.

• Property management: the NWCL Group derives management fees from the provisionof property management services in respect of properties developed by it.

For the year ended 30 June 2018, the Issuer’s and its subsidiaries’ consolidated revenue wasapproximately HK$17,997.2 million and its consolidated net profit for the year wasapproximately HK$3,862.9 million, representing a 5.3% decrease and 60.6% increaserespectively from the corresponding period in 2017. As at 30 June 2018, the Issuer’s and itssubsidiaries’ consolidated total assets were approximately HK$149,996.1 million and theconsolidated capital and reserves were approximately HK$71,635.4 million, representing a0.95% decrease and 10.2% increase respectively from 30 June 2017.

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On 6 January 2016, NWD and Easywin Enterprises Corporation Limited (the “Offeror”), awholly owned subsidiary of NWD, announced a voluntary conditional cash offer by theOfferor to acquire all of the issued shares of NWCL, an indirect non wholly owned subsidiaryof NWD incorporated in the Cayman Islands, other than those shares already held by theOfferor and NWD (the “Offered Shares”).

On 5 April 2016, the Offeror received acceptances of approximately 98.65% of the OfferedShares, allowing the Offeror the option to exercise its rights, pursuant to section 88 of theCompanies Law of the Cayman Islands, to compulsorily acquire those remaining OfferedShares.

On 28 June 2016, the Offeror despatched the compulsory acquisition notices to theshareholders of the remaining Offered Shares. Based on a search of the Cayman IslandsRegister of Writs and Other Originating Process maintained by the Grand Court, no remainingoffer shareholder has filed an objection to the compulsory acquisition with the Grand Court ofthe Cayman Islands by 28 July 2016. Accordingly, the Offeror became entitled and bound tocompulsorily acquire the remaining Offered Shares at HK$7.80 per remaining Offered Sharein accordance with the terms of the share offer and as set out in the compulsory acquisitionnotice. On 3 August 2016, the compulsory acquisition was completed. As a result of and witheffect from the completion of the compulsory acquisition, NWCL has become an indirectwholly owned subsidiary of NWD and the listing of NWCL shares on HKSE was withdrawnon 4 August 2016.

Corporate Information

The Issuer was incorporated in the Cayman Islands as an exempted company under theCompanies Law, on 28 August 1996 and had been listed on the HKSE from 16 July 1999 to 3August 2016. It has withdrawn the listing of its shares from the HKSE with effect on 4 August2016 and has become a private company since then. The registered office of the Issuer is atP.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands, and its principaloffice is at 9/F., New World Tower 1, 18 Queen’s Road Central, Hong Kong.

Business Organisation

The Issuer is an investment holding company which undertakes its business primarily throughsubsidiaries, associated companies and joint ventures. The NWCL Group holds its propertydevelopment and investment interests in the PRC through either wholly-owned or non-whollyowned intermediate holding companies incorporated in Hong Kong or the British VirginIslands. Each of these intermediate holding companies participates in the PRC propertydevelopment, property investments or hotel projects through the PRC incorporated whollyforeign owned enterprises, co-operative joint ventures and equity joint ventures.

Recent Developments

Set out below are highlights of recent initiatives undertaken by the Group:

• October 2017: NWCL held topping-out ceremony for Tianjin Chow Tai Fook FinanceCentre, with a height of 530 metres, it is the second skyscraper NWCL Group developedin mainland China, spearheading future urban development.

• October 2017: NWCL obtained the land use rights for the eastern transportation hubparcel in Guangzhou for RMB2.085 billion, setting its sights on developing a sub-centreof the city with the government to forge a commercial and residential complex.

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• December 2016: NWD entered into a joint-development arrangement for four desirableparcels of land in Prince Bay, Shenzhen. A joint venture formed by NWCL and ChinaMerchants Shekou Industrial Zone Holdings Co., Ltd. is responsible for the projectdevelopment upon the completion of acquisitions and capital injections.

• August 2016: NWD and Chow Tai Fook Enterprises Ltd. (CTFE) acquired an area ofland in Guiwan area, the business district in Qianhai, Shenzhen. A joint- venture formedby NWCL and CTFE is responsible for the project development.

The following chart sets forth an overview of the NWCL Group’s organisational structure as atthe date of this Offering Circular:

新世界發展有限公司New World Development Company Limited

(Place of incorporation : Hong Kong)

(Stock Code : 17)

義榮企業有限公司Easywin Enterprises Corporation Limited

(Place of incorporation : Hong Kong)

新世界中國地產有限公司New World China Land Limited

(Place of incorporation : Cayman Islands)

(Place of registration : Hong Kong)

100% (beneficial)

34.25%

65.75%

* For details of principal subsidiaries, associated companies and joint ventures which materially affect theresults for the year and/or assets of the NWCL Group as at 30 June 2018, please refer to note 43 to theconsolidated financial statements of the Issuer for the year ended 30 June 2018 as set out in this OfferingCircular.

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Competitive Strengths

Ownership by NWD

On 3 August 2016, the Issuer became an indirect wholly-owned subsidiary of NWD, one of thelargest Hong Kong-based property developers listed on the SEHK in terms of marketcapitalisation. With the support of NWD, the Issuer will benefit from greater synergy. Thesynergy is created from the ability to fund larger property development projects throughleveraging NWD’s greater financial strength, including NWD’s access to more competitivefinancing terms for raising bank borrowings and to facilitate provision of intra-group fundingfrom NWD to NWCL.

High quality and diversified land bank acquired at competitive cost

With market foresight and well-timed land acquisitions at competitive prices, the NWCLGroup is able to sustain its growth with ample land reserves held for development whichamounted to 9.29 million sq.m. of which is currently under development as at 30 June 2018.These collective resources provide the NWCL Group with adequate foundation and attractivepipeline for growth opportunities in the coming decade. These land reserves are locatednationwide in the PRC, either in cities of major hubs or second- and third-tier cities with solideconomic growth and strong market potential. The wide-spectrum of geographical diversity ofthe NWCL Group’s land reserves allows it to shelter from exposure to market fluctuations andreduce business risk from over-concentration in a single locality.

Large-scale, multi-phase integrated development

The NWCL Group’s land bank comprises of sizable parcels of land which facilitateslarge-scale integrated development. The NWCL Group believes integrated development ofresidential, commercial, hotel properties with comprehensive leisure facilities and amenitieswill enhance the overall value of the land. Such integrated development will also provide theNWCL Group with sustainable economic benefit throughout the multi-phase development ofthe projects while a multi-phasing approach will enable the NWCL Group to benefit fromeconomies of scale, better market positioning and efficient quality monitoring.

Stable recurring income from investment property portfolio

It is the NWCL Group’s business strategy to secure development of premium-quality rentalproperties including Grade-A office premises, shopping malls and serviced apartments inprime city locations. As at 30 June 2018, the NWCL Group has a completed investmentproperty portfolio with GFA of over 2.7 million sq.m. This long-term rental portfolio furtherenhances the NWCL Group’s stable recurring income and assures sustainability with stablecash flow which, as a result enables the NWCL Group to leverage the susceptibility to marketfluctuation.

Access to diversified funding sources

The NWCL Group is well-supported by both onshore and offshore banks. The NWCL Groupmaintains a close relationship with more than 15 banks in Hong Kong for arranging of cleanbilateral facilities with tenors ranging from one to five years and more than 17 local banks inChina for project and mortgage loan facilities with tenors ranging from one to 15 years.

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The NWCL Group issued USD900 million in aggregate principal amount of 5.375 per centnotes due 2019 on 6 November 2014, HK$0.8 billion in aggregate principal amount of 5 percent notes due 2022 on 28 January 2015 and HK$0.271 billion in aggregate principal amountof 4.75 per cent notes due 2022 on 30 March 2015 and USD600 million in aggregate principalamount of 4.75 per cent notes due 2027 on 23 January 2017.

Strong credit profile

The NWCL Group is able to maintain strong cash flows and healthy leverage position. As at30 June 2018, the Issuer’s and its subsidiaries’ consolidated cash and cash equivalentsamounted to HK$32.5 billion and has a net cash position and the unutilised available bankingfacilities reached HK$5.9 billion. Such well established liquidity position enables the NWCLGroup to expand steadily and sustain its business plans.

Established brand name and experienced management team

The NWCL Group has established a consistent “New World China” brand across citiesthroughout the PRC and a loyalty club programme “NW Club”. The NWCL Group has alsoestablished its brands through its trophy projects at city centres, its top quality offices andretail facilities.

The NWCL Group’s business is led by experienced management team members comprisingindustry veterans with extensive experience. The senior management team, having an averageof at least over 20 years of experience in the property market, is experienced in real estatedevelopment and project management in Hong Kong and the PRC, some of the team membersare equipped with architectural and engineering experience and provided valuable advice andsupport to the execution of the NWCL Group’s projects. The key directors of the Issuer havebuilt a deep knowledge and a thorough understanding of the business and the operation of theNWCL Group. As a result, the NWCL Group’s core management team is able to workefficiently as a team and deliver many of the NWCL Group’s development projectssuccessfully over the years.

Business Strategies

The NWCL Group’s key business objective is to increase its market share and expand itsbusiness in selective areas in the PRC by focusing on its core property development businessand leveraging on its experience and position as a leading integrated national propertydeveloper in the PRC. The NWCL Group intends to achieve this objective and to enhance itsprofitability by pursuing the following strategies:

• Expand the NWCL Group’s operations in the PRC to position itself as one of the leadingnational property developers and investors in the PRC;

• The NWCL Group aims to maintain its position as a leading national propertydeveloper in the PRC. Although the NWCL Group has traditionally focused onproperty development in Beijing, Wuhan, Shenyang, Ningbo, Guangzhou andPearl River Delta region, the NWCL Group has since expanded its businessoperations into other cities in the PRC, including Changsha, Foshan, Anshan,Langfang, Ningbo and Tangshan, with significant growth potential. The NWCLGroup will continue its selective expansion of its market share nationally in thePRC.

• The NWCL Group believes that the property industry in the Guangdong-HongKong-Macao Greater Bay Area development has promising growth potential andthe NWCL Group will continue to focus its expansion in this market.

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• The NWCL Group also believes that a geographical diversification will enable itto alleviate the risks associated with having too much of its operationconcentrated in one particular city or region in the PRC, strengthen its regionalproperty portfolios and maintain its position as a leading national propertydeveloper in the PRC.

• Focus on mid-size to large-scale property developments and the middle- to high-endresidential property market to maintain a reasonable development pace;

• Through a series of selective acquisitions over the years, the NWCL Group hassecured a sizable and quality land bank in prime locations at competitive prices.As at 30 June 2018, the NWCL Group had a property development portfoliowhich, if fully developed, would amount to a total GFA of approximately 9.29million sq.m. spreading across over 17 major city hubs in the PRC. The NWCLGroup’s primary focus is to expedite its development pace with a view torealising the development potential of its existing land bank and enhancing itsfinancial return.

• Optimize its project development and investment portfolio by putting increasingresources in key cities and premium project with good development potential;

• Leveraging on its existing land bank, the NWCL Group intends to continue tofocus on the development of large-scale multi-phase residential projects.Large-scale developments enable the NWCL Group to enjoy the benefits ofeconomies of scale in its design and construction process, sourcing of rawmaterials and services, construction quality control, cost management and brandenhancement. In the medium term, the NWCL Group will also seek to replenishits land bank, primarily focusing on mid-sized projects with gross buildable areaof less than 500,000 sq.m., preferably located within cities in which the NWCLGroup has established operations so that it will be able to leverage existingresources in developing such sites. That said, the NWCL Group will continue toreview acquisition opportunities for large-scale development sites at competitiveprices that may arise from time to time in a prudent and selective manner, with aview to replenish its land bank for its long-term development needs.

• The NWCL Group believes its focus on mid-size to large-scale qualitydevelopments will enable it to capture the substantial housing demand from theemerging middle-to-high income households, and to capitalise on the strongeconomic growth of major cities in the PRC. The NWCL Group believes that themiddle-to-high end residential property market still has significant growthpotential since demand for such properties will continue to increase as a result ofthe rapid development of the PRC economy, the corresponding urbanisation andincrease in income, and the improvement in living standards of the urbanpopulation.

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• Enhance the NWCL Group’s brand recognition in the PRC; and

• To enhance the NWCL Group’s competitive position in its key markets, theNWCL Group intends to further strengthen public recognition of “New WorldChina” as a national brand standing for quality property projects byimplementing a nationwide brand building campaign in the PRC. The “NewWorld China Land” brand was awarded the “2017 TOP 10 Brands of China

Commercial Real Estate Companies” awarded by China Real Estate TOP 10Research Team and “China Top 100 Players of The Commercial Real Estate”

awarded by Guandian Index Institute. The NWCL Group seeks to maintain highstandards in the properties it develops in terms of design, quality of materials andfinishing in order to maintain its reputation as a property developer of quality indeveloping middle-to-high end projects. Shenyang New World Expo won the“Commendation Merit” in the Structural Excellence Award 2017” and the NWCLGroup was listed fourth on the “2017 Non-mainland Best Real Estate Enterprise

Ranking List” by Guandian.

• Implement cost control measures and improve its operational and capital efficiencies.

• The NWCL Group intends to continue to improve its profitability byimplementing cost control measures in order to manage its development andoperating costs as well as other efficiency strategies. The NWCL Group hasbegun to implement various initiatives including:

• formulating and executing centralised corporate procurement strategies tomaximise its collective material procurement power;

• establishing its own loyalty club programme to enhance its customerinformation database and coordinate its cross-selling efforts;

• reviewing its construction outsourcing strategy with a view to realisepotential savings on LAT liabilities; and

• standardising the design and layout plans of residential propertydevelopment projects across China.

• In addition, the NWCL Group seeks to further optimise its capital structure toprovide shareholders with a competitive return and at the same time continue toinvest in new projects to achieve further growth. In particular, the NWCL Groupwill continue to review appropriate opportunities in a selective manner to:

• partner with other investors and participate in joint ventures to reducecapital costs and minimise risks; and

• dispose certain non-core but matured investment properties to realise thecapital value of such properties and enhance its cashflow.

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• Sustainable property development

• As a major PRC property developer, the NWCL Group is well aware of the benefitof incorporating sustainable design principals into property developments.NWCL places great importance on its environmental responsibilities, andactively promotes the application and innovation of green building design, andencourages contractors, staff, residents and tenants to employ green practices onconstruction sites, in offices, and in the communities respectively, so as tominimise the adverse impact of a building life cycle on the environment. TheNWCL Group strive to achieve U.S. LEED certification and China GreenBuilding Evaluation Standard for projects in Mainland China, as part of thecommitment to New World Group’s Sustainable Building Policy.

• As a large-scale property developer, the most cost effective way to consider greenbuilding rests on the early design stage, and this can improve the overallenvironmental performance of the whole construction lifecycle. Therefore, inaddition to achieving green building certification at international and nationallevels, NWCL also stipulated Green Building Design Guidelines (residential,office, commercial and hotel building types) in 2015 for internal reference, so asto vigorously promote green architectural designs. The guidelines comprisedifferent aspects and include environmental performance in terms of site, energy,water resources, materials, indoor environment and operational management, andadopt best practices to minimise negative effects on the environment. In 2018, theNWCL Group have updated the guidelines and covered specifications pertinent tohealthy and smart living, social integration and climate change adaptation fordifferent property types.

• The NWCL Group’s long-term philosophy includes a sustainable approach to theenvironment, as well as proper consideration of social and economicresponsibilities to the wider community. Optimising the sustainability potentialin new property developments through green design initiatives, positions aproperty well to minimise its environmental impacts and provide long-termbenefits for customers and the local community. On the environmental front,mixed use developments reduce customers’ need for private transportation andresulting greenhouse gas emissions.

• NWCL Group attained the Green Office Awards label and Eco-healthy Workplacelabel awarded by World Green Organisation.

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The PRC – Property overview

The Group entered the PRC property market in the early nineties and has since then expandedits business operations to over 17 major cities. The Group is now one of the largest foreignproperty developers and investors in the PRC. The Group is engaged in property developmentand investment in the PRC principally through its solely-owned subsidiary, the NWCL.

As at 30 June 2018, the NWCL Group had a total land bank held for property development ofapproximately 9.29 million square metres (“sq.m.”) of which, residential GFA amounted toapproximately 4.33 million sq.m. These projects, most of which are situated at locations withsubstantial development potential in such cities, have been making increasing profitcontributions to the NWCL Group’s property sales. Looking forward, the NWCL Groupintends to continue to adhere to the strategy of diversified property development and tocontinue to launch quality products suiting both the luxury market and the general public. Bysuch dual development, the NWCL Group aims to satisfy the requirements of home purchasersin the market.

During the year ended 30 June 2018, the NWCL Group’s completed property developmentprojects for sale in Mainland China amounted to a total GFA of 771,125 sq.m., of whichresidential GFA amounted to 638,332 sq.m.

Businesses

The NWCL Group’s core business is the development and sale of mid-sized to large-scaleresidential projects. The NWCL Group is also engaged in other complementaryproperty-related businesses such as land preparatory work, property investment, hoteloperations and property management services.

The following tables set forth the segment revenues of the Issuer and its subsidiaries andattributable operating profit before finance costs and taxation charge (“AOP”) from theprincipal businesses of the Issuer’s consolidated subsidiaries and the Issuer’s share of resultsof associated companies and joint ventures from such businesses for the years indicated:

Year ended 30 June

2018 2017

HK$ Million HK$ Million

Segment revenuesProperty sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,213.7 17,381.2Rental operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 807.9 702.9Hotel operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179.1 287.2Property management services . . . . . . . . . . . . . . . . . . . . . . 629.8 535.0Contracting services income . . . . . . . . . . . . . . . . . . . . . . . . 119.2 29.8Other operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47.5 60.4

17,997.2 18,996.5

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Year ended 30 June

2018 2017

HK$’ Million HK$’ Million

Segment results – AOPProperty sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,249.4 2,651.2Rental operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158.8 254.8Hotel operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115.4 (154.2)Property management services . . . . . . . . . . . . . . . . . . . . . . (150.1) (117.6)Other operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (142.3) (40.5)

3,231.2 2,593.7

Below is a summary of the NWCL Group’s businesses:

Property Development

Overview: The NWCL Group has extensive experience in property development in Beijing,Wuhan, Shenyang, Tianjin, Guangzhou, Shenzhen and the Pearl River Delta region and hasexpanded into other major cities in the PRC including Changsha, Foshan, Anshan, Langfang,Yiyang, Ningbo and Tangshan. Development of the NWCL Group’s properties usually entailsseven phases: land acquisition, project planning, financing, design, project construction,pre-sales and sales, and after-sales services. For the years ended 30 June 2018 and 30 June2017, the Issuer’s and its subsidiaries’ consolidated revenue derived from propertydevelopment amounted to approximately HK$16,213.7 million and HK$17,381.2 million,respectively.

Properties under development: As at 30 June 2018, the NWCL Group has a total GFA of 9.29million sq.m. of properties under development, which comprise residential, commercial,office, hotel properties and car park spaces in the Pearl River Delta region and top-tier andsecond-tier cities in the PRC, including Guangzhou & Foshan, Shenyang, Wuhan, Beijing,Changsha, Anshan, Ningbo, Yiyang, Langfang, Jinan and Tangshan.

Completed property held for sale: As at 30 June 2018, the NWCL Group had approximately1,544,682 sq.m. of completed properties in the PRC that were held for sale. During the yearended 30 June 2018, the NWCL Group delivered 1,062,798 sq.m. of completed properties anda total GFA of 771,125 sq.m. of properties were sold generating over RMB13,822.2 milliongross sales proceeds.

Land bank: On 28 September 2007, the Ministry of Land and Resources issued revised Rulesregarding the Grant of State-owned Land Use Rights for Construction by Way of Tender,Auction and Listing-for-sale (招標拍賣掛牌出讓國有建設用地使用權規定), which providesthat property developers must fully pay the land premium for the entire parcel under the landgrant contract before they can receive a land use right certificate and commence developmenton the land. This regulation became effective on 1 November 2007. As a result, propertydevelopers are not allowed to bid for a large piece of land, make partial payment, and thenapply for a land use right certificate for the corresponding portion of land in order tocommence development, which had been the practice in many Chinese cities.

As at 30 June 2018, the total GFA of the NWCL Group’s land bank held for propertydevelopment amounted to 9.29 million sq.m. of which 59.1% has yet to be developed, whileproperties under development accounted for 40.9% of the NWCL Group’s land bank.

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The following table sets forth a breakdown of the NWCL Group’s land bank by developmentstage and usage as at 30 June 2018:

Total GFA Residential Commercial Office HotelCarpark and

others

(sq.m.)

Properties under development . . . 3,797,767 1,596,325 327,897 717,008 277,463 879,074Properties under planning. . . . . . 5,495,973 2,737,115 793,552 485,604 111,530 1,368,172

Total . . . . . . . . . . . . . . . . . . . . 9,293,740 4,333,441 1,121,448 1,202,613 388,993 2,247,245

The following table sets forth a breakdown of the NWCL Group’s land bank by usage andlocation as at 30 June 2018:

Total GFA Residential Commercial Office HotelCarpark and

others

(sq.m.)

RegionBeijing . . . . . . . . . . . . . . . . . . 916,895 236,590 266,672 26,671 – 386,962Langfang . . . . . . . . . . . . . . . . . 172,830 68,360 7,249 – 40,192 57,029Jinan . . . . . . . . . . . . . . . . . . . . 80,837 – 5,697 37,162 19,545 18,433Shenyang . . . . . . . . . . . . . . . . . 1,763,185 1,054,319 82,235 240,636 99,675 286,320Anshan . . . . . . . . . . . . . . . . . . 552,886 449,189 37,441 – – 66,256Wuhan . . . . . . . . . . . . . . . . . . . 664,934 39,631 64,244 323,672 – 237,387Changsha . . . . . . . . . . . . . . . . . 551,487 377,677 16,717 – – 157,093Yiyang . . . . . . . . . . . . . . . . . . 472,423 322,547 64,614 – – 85,262Shenzhen . . . . . . . . . . . . . . . . . 562,100 55,000 272,087 227,949 – 7,064Foshan . . . . . . . . . . . . . . . . . . . 1,228,648 837,195 – – 84,891 306,562Guangzhou . . . . . . . . . . . . . . . . 1,024,247 598,748 132,873 – 63,494 229,132Ningbo . . . . . . . . . . . . . . . . . . 824,237 138,582 152,174 211,719 54,557 267,205Pearl River Delta . . . . . . . . . . . 479,031 155,603 19,445 134,804 26,639 142,540

Total . . . . . . . . . . . . . . . . . . . . 9,293,740 4,333,441 1,121,448 1,202,613 388,993 2,247,245

Land acquisition strategy: The NWCL Group has an established land acquisition strategywhich takes into account its short-, medium- to long-term development requirements. TheNWCL Group focuses on acquiring land in prime urban locations of key top-tier cities with asizable population of middle to high income households.

The NWCL Group places a strong emphasis on its land acquisition strategy and considers itfundamental to the success of a property development project. The NWCL Group typicallyprefers to acquire interests in land through cooperative investment or acquisition of existinginterests as opposed to acquisition through public tenders. The major considerations theNWCL Group applies are:

• location and population demographics: focus on acquiring land in prime urban locationswith a sizable population of middle to high income households;

• cost, investment and financial returns;

• site area: focus on sites with a GFA of less than 500,000 sq.m.;

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• accessibility of the site and availability of infrastructure support; and

• synergies with other existing projects located within the same region.

Financing of property developments: The NWCL Group has three main sources of funding forits property developments: internal resources, bank loans and proceeds from pre-sales. TheNWCL Group’s financing methods vary from property to property. Nevertheless, the NWCLGroup’s policy is to seek to obtain maximum external financing of property developments tothe extent practicable and pre-sell the development where the regulatory requirements forpre-sale have been met and where market conditions allow, in order to maximise its capitalefficiency and the return-on-equity of its projects. The NWCL Group supplements externalfinancing with internal resources to the extent necessary.

The NWCL Group continually reviews its current and expected future funding requirementsand engages in discussions with financial institutions and other market participants, from timeto time, and to evaluate proposals regarding different sources of funding, including the use ofsyndicated bank loans.

When the NWCL Group’s subsidiaries obtain bank loans to fund their property developments,the banks will typically require guarantees from their affiliates, security over bank depositsand/or mortgages over the assets of such subsidiaries.

Project management

The NWCL Group has implemented a three-tier organisation structure to manage its projects.

Headquarters

The NWCL Group’s headquarters oversee and supervise the major steps of all of its propertydevelopments, including NWCL Group strategic plans development, project identification,site acquisition, establishing project companies financing, technical support and budgetcontrol. The NWCL Group’s headquarters include, among others, its human resourcesdivision and its accounts and finance division.

Regional offices

In order to enhance the management and co-ordination of its property developments, theNWCL Group’s regional offices are responsible for overseeing the following functions: (i)implementation of strategic plans, (ii) provision of project information and assessments toheadquarters, (iii) operational decisions for each property development; (iv) liaison withproject partners and government authorities and (v) implementation of cost control measures.Senior management staff with local knowledge are appointed as regional chief executives whoreport to the Issuer’s senior management.

Project companies

Apart from its headquarters and regional offices, the NWCL Group also has directmanagement control over its projects through the general managers of its project companies.All of the general managers of the project companies in which the NWCL Group has amajority or controlling interest are nominated by the NWCL Group and are responsible for theday-to-day operations and project management of each individual project. Each individual

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project company is responsible for implementing infrastructure, engineering and supervisingof day-to-day construction work.

Feasibility studies which include market analyses of prospective projects to assist the NWCLGroup’s management in deciding whether to develop a particular site are prepared by itsproject companies and approved by the NWCL Group’s headquarters. During the constructionphase, the NWCL Group’s project companies are responsible for managing site progress.They work closely with the contractors to control costs and to ensure the quality of theconstruction work. The NWCL Group believes that by actively supervising constructionworks, it can enhance the quality while monitoring the costs of its projects.

Through budgetary control and comparison procedures, the NWCL Group seeks to controldevelopment costs at an early stage of the project development process. The NWCL Groupengages quality surveying consultants at an early stage to determine the detailed constructioncosts budget which constitutes the fundamental base parameter for tender assessment andconstantly monitors the construction costs throughout the construction processes of theprojects. The NWCL Group also establishes necessary procedures for reporting and approvingsubsequent variation of construction works and construction cost budget throughout theconstruction cycle.

Design

All architectural, engineering and interior designs are undertaken by either local orinternational designers to ensure the highest quality designs and a variety of design stylesacross the NWCL Group’s property portfolio. The NWCL Group has an experienced anddedicated in-house design team to oversee and supervise the entire design process to ensurethe design is consistent with the NWCL Group’s overall development plan for a particularproperty development project.

Construction

The NWCL Group engages third-party contractors to provide various services, includingconstruction, building and property fitting-out work, interior decoration and elevators, andlandscaping and gardening services. Contractors are selected by way of negotiated tender, inaccordance with the relevant local regulations, on the basis of their previous track records,demonstrated expertise, pricing and completion schedule. While the NWCL Group directlyengages suppliers for some of its projects, the NWCL Group participates in, and closelymonitors its main contractors’ selection of suppliers of key construction materials, such ascement and steel. For purchase of certain commonly used building materials, such as lifts andescalators, kitchen cabinets, sanitary fittings, bricks and tiles, the NWCL Group hasestablished a regional centralised procurement system which coordinates the purchases of thebuilding materials for property projects located in close proximity and arranges directpurchases from suppliers. This enables the NWCL Group to negotiate and secure mastercontracts for supplying particular building materials in bulk with discount. The selection ofthese suppliers has gone through the normal tender processes.

The construction contracts contain warranties from the construction companies in respect ofquality and timely completion of the construction. The NWCL Group requires constructioncompanies to comply with the PRC laws and regulations on the quality of constructionproducts as well as its own standards and specifications. The contractors are also subject to theNWCL Group’s quality control procedures, including examination of materials and supplies,on-site inspection and production of progress reports. Construction payments are determinedprimarily on the basis of the estimated labour and material costs and fitting requirements andare usually computed on a per sq.m. basis.

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Contractor’s fees are paid by instalments according to the progress of construction. The firstinstalment typically represents 10% to 30% of the contractor’s fees and is usually paid whenconstruction commences. A series of progress payments are then made as and whencompletion schedule targets are satisfied. However, a percentage of the contractor’s fee willbe retained by the NWCL Group as a retention fund for a period of one to three years after theproject’s completion. In the event of delay in construction or unsatisfactory quality ofworkmanship, the NWCL Group may withhold construction payments or require theconstruction companies to pay a penalty or provide other remedies under the PRC law and itscontracts to recover any loss.

The NWCL Group has not had any major disputes with any of its construction contractors. Allpayments are made in Renminbi.

Quality management system

The NWCL Group places a strong emphasis on quality control to ensure that the quality of itsproperty developments complies with relevant regulations and conforms to internal andmarket standards. Quality control procedures have been established by the NWCL Group andare executed by various functional departments, regional offices as well as each projectcompany to ensure that each property development meets the relevant quality requirements. Inaddition, although the NWCL Group outsources all of its construction works to third-partycontractors, it maintains a team of architects, engineers and site supervisors to oversee andsupervise the day-to-day construction works of each property development.

Internal guidelines have been established and are implemented in respect of the followingareas: documentation control, record-keeping, internal audit, service standards, remedialactions, preventive actions, management control, construction standards, staff quality,recruitment standards, staff training, construction supervision, supervisory inspection,monitoring and surveillance, information exchange and data analysis.

Sales and marketing

Pre-sales

The NWCL Group aims to pre-sell its properties (i.e. selling property in advance ofconstruction being completed) as soon as such property developments have satisfied theprescribed conditions required to obtain pre-sale permits from the relevant PRC governmentauthorities. The majority of the NWCL Group’s property developments are sold on a pre-salebasis.

Under the PRC Law of the Administration of Urban Real Estate (中華人民共和國城市房地產管理法) and the Administrative Measures Governing the Pre-sale of Urban Real Estate (城市商品房預售管理辦法), the NWCL Group must meet the following conditions before thepre-sale of a particular property can commence:

• the land premium must have been paid in full and the relevant land use right certificatemust have been obtained;

• the construction planning permit and the construction permit must have been obtained;

• the funds earmarked for the development of a property development must not be lessthan 25% of the total amount to be invested in the project and the progress and theexpected completion date of the construction work must have been confirmed; and

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• the pre-sale permit must have been issued.

In addition, the local authorities in the cities in which the NWCL Group operates havepromulgated certain local requirements in respect of the issuance of pre-sale permits. Therelevant local authorities may from time to time waive compliance with such conditions.

On 6 July 2006, the Ministry of Construction, the National Development and ReformCommission and the State Administration for Industry and Commerce promulgated the Noticeto Further Rationalise and Standardise Transactions in the Real Estate Market which requiresreal estate developers to commence the sale of properties within 10 days of receipt of thepre-sale permit for the project.

Pre-sales are conducted in accordance with the terms of the land bureau of the localauthorities. Typical regulations on pre-sale include regulations relating to delivery times,termination events, and guaranteed GFA of the unit sold. The NWCL Group is typicallyrequired to provide warranties with respect to minimum GFA for a unit, repairs andmaintenance for one to three years, construction in accordance with approved plans,satisfactory inspection upon completion of the unit and approval of all necessary land userights. The NWCL Group does not make any provision for warranty claims since (i) it hasobtained similar warranties from its contractors who are required to remedy any warrantyclaims by its customers and (ii) it also retains a portion of the contractor’s fee as a retentionfund for a period of one to three years after completion of the construction works whichaffords it protection in the event that the contractor fails to remedy any warranty claims. If anycustomer fails to pay the balance of the purchase price, the NWCL Group is entitled to resellthe property and retain the pre-sale proceeds previously received in respect of that property.

Sales and marketing network

The NWCL Group had a nationwide sales and marketing distribution network throughout itsoffices. Overall sales and marketing strategy is generally coordinated from the NWCLGroup’s headquarters in Hong Kong. However, in cities where the NWCL Group has a numberof projects under development, the NWCL Group may establish a central sales and marketingteam to oversee the sales and marketing of individual property developments and tocoordinate joint marketing campaigns across a number of property developments.

The NWCL Group’s customer base is predominantly individual residents in the PRC, whomainly purchase their properties with the aim of occupying the properties. During projectevaluation and before commencement of construction of a property development, the NWCLGroup’s sales and marketing team usually carries out substantial market research for suchdevelopments, including the identification of property trends, prospects and market potential.By identifying the potential demand for, and the strengths and weaknesses of, a propertydevelopment at an early stage, the NWCL Group is able to formulate its marketing andpromotion strategies at the planning stage of each property development and target its salesefforts at potential classes of customers early on in the development process. The NWCLGroup’s sales and marketing team is also responsible for the production of videos, projectbrochures, sales documents, price lists, payment terms, floor plans and project models. TheNWCL Group also markets through advertising campaigns in print media and on television toincrease public awareness of the “New World China” brand and new development projects.Currently, the majority of the NWCL Group’s property sales are conducted through its ownsales force.

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After-sales services

The NWCL Group provides its customers with information relating to financing, includinginformation on potential mortgagee banks and the mortgage terms that they offer. It alsoassists its customers in various title registration procedures relating to the properties.Customer surveys are normally conducted after the delivery of possession to seek customerfeedback on the design and quality of the properties and the quality of its customer andmanagement services. Such data is then taken into account when developing and planning newprojects. The NWCL Group also has regional teams devoted to handle customer complaintsand maintenance and repair requests. The NWCL Group believes that such services promotecustomer confidence and are effective in enhancing its brand name and encouraging customersto purchase, or recommend others to purchase, the properties that it develops.

Property Investment

The NWCL Group’s investment property portfolio comprises completed residential,commercial and office properties and car park spaces held for long-term investment, and as at30 June 2018, amounted to 2.7 million sq.m. in total GFA. For the years ended 30 June 2018and 30 June 2017, the Issuer’s and its subsidiaries’ consolidated revenue derived fromproperty investment amounted to HK$807.9 million and HK$702.9 million, respectively. TheNWCL Group’s investment property portfolio (including those held by joint ventures andassociated companies) as of 30 June 2018 comprise property projects in the Pearl River Deltaregion and top-tier and second-tier cities in the PRC, including Beijing, Guangzhou,Shenyang, Wuhan, Tianjin, Dalian, Anshan, Tangshan, Foshan, Nanjing, Jinan, Zhaoqing,Langfang and Changsha. Such investment properties are typically developed by the NWCLGroup and are located within its property developments. Developments of investmentproperties are conducted in accordance with the specific requirements of the approved masterdesign plans. It is the NWCL Group’s policy to commence the development of the commercialproperties at the early stage of the property development. Since a well-equipped livingenvironment is of utmost importance in formulating the NWCL Group’s marketing strategyand promoting the overall image of its quality property projects, the NWCL Group believesthat the provision of commercial facilities for residents at an early stage of its residentialcommunity project could enhance the value of the project.

The NWCL Group’s rents are generally quoted per sq.m. of lettable area. In most cases, therents that it quotes do not include property management charges and rates payable by itstenants. Commercial and office leases are typically entered into for two to three year terms,some of which have the option to renew. In connection with longer term leases, the tenancyagreements usually contain rent review clauses or rent adjustment provisions.

The majority of the completed investment properties of the NWCL Group are being managedby the NWCL Group’s own property management companies for the purposes of providingpremier estate management services and maintaining high quality and conditions of thepremises, only some of the investment properties of the NWCL Group are managed byoutsourced management companies.

Notwithstanding that such commercial facilities are classified as investment properties, theNWCL Group will evaluate offers from potential purchasers and may dispose of certain of itsinvestment properties if the price offered is competitive.

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Set forth below is a brief description of some of the NWCL Group’s major investmentproperty projects in the PRC:

Beijing New World Centre, Phases I and II

Beijing New World Centre comprises joint ventures between the NWCL and local partners,providing the Issuer with a 70% and 100% attributable interest for the development of PhasesI and II respectively. Phase I, which has approximately 93,988 sq.m. of total GFA, comprisesa large retail shopping arcade and two levels of basement parking. Phase II, which hasapproximately 76,293 sq.m. of total GFA, mainly comprises a large retail shopping arcade andbasement parking facilities.

Tianjin Xin An New World Plaza

Tianjin Xin An New World Plaza is owned by a wholly-owned subsidiary of the NWCL. Theproject, which was completed in June 1997, is among the PRC’s largest shopping arcades,comprising retail and commercial space of approximately 98,337 sq.m. of total GFA.

Tangshan New World Centre

Tangshan New World Centre is fully owned by the NWCL Group. The project, which isadjacent to 150,000 sq.m. Dazhao Park, comprises offices, retail shops and serviceapartments.

Wuhan New World International Trade Towers, Tower I and II

The NWCL Group holds a 100% attributable interest in Wuhan New World International TradeTower for the development of Towers I and II. Towers I and II have in aggregate approximately131,833 sq.m. of total GFA and primarily comprises office space.

Wuhan New World Centre

Wuhan New World Centre is a mixed development complex which comprises retail, office andcar park spaces of approximately 82,365 sq.m. of total GFA.

Wuhan Guanggu New World

The NWCL Group holds a 100% attributable interest in Wuhan Guanggu New World. Theproject is divided into commercial and residential sections, including hotel, shops and grade Aoffice and space for innovative enterprises which offer attractive rental rates.

Langfang New World Centre

The NWCL Group holds a 100% attributable interest in Langfang New World Centre. Theproject is located in the commercial district of Zhougezhuang. This project compriseshigh-end offices, hotel and retail shops.

Guangzhou Park Paradise

The NWCL Group holds a 100% attributable interest in Guangzhou Park Paradise. The projectcomprises seven high-rise buildings complemented by a 500,000 sq.m mixed-use complexthat includes service apartments, retail shops and recreational facilities.

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The table below sets out the NWCL Group’s major property investment projects in the PRC asat 30 June 2018:

No. Name of Property ProjectAccounting

ClassificationAttributable

Interest Total GFA Residential Commercial OfficeCar park

and others

(sq. m.) (sq. m.) (sq. m.) (sq. m.) (sq. m.)

COMPLETED INVESTMENTPROPERTIES

1 Beijing New World Centre Phase I . . . Joint venture 70% 93,988 74,032 19,9562 Beijing New World Centre Phase II . . Subsidiary 100% 76,293 47,345 28,9483 Beijing Zhengren Building . . . . . . Subsidiary 100% 16,415 16,4154 Beijing New World Garden . . . . . . Subsidiary 100% 43,195 43,1955 Beijing Xin Yang Commercial Building Subsidiary 100% 3,439 3,4396 Beijing Xin Cheng Commercial

Building . . . . . . . . . . . . . . .Subsidiary 100% 8,051 8,051

7 Beijing Xin Yi Garden . . . . . . . . . Joint venture 70% 43,708 43,7088 Beijing New View Garden . . . . . . . Joint venture 70% 11,398 11,3989 Beijing Xin Yu Garden . . . . . . . . . Joint venture 70% 24,800 3,603 21,19710 Beijing Xin Kang Garden . . . . . . . Joint venture 70% 40,195 12,010 28,18511 Beijing Baoding Building Shopping

Arcade . . . . . . . . . . . . . . .Subsidiary 100% 62,286 40,286 22,000

12 Tianjin Xin An New World Plaza . . . Subsidiary 100% 98,337 80,439 6,614 11,28413 Tianjin Xin Hui Hua Ting . . . . . . . Subsidiary 100% 25,876 25,87614 Jinan New World Sunshine Garden . . Subsidiary 100% 15,396 4,971 10,42515 Shenyang New World Garden . . . . . Subsidiary 100% 335,828 25,981 2,003 307,84416 Shenyang New World Garden

Commercial Building . . . . . . . .Subsidiary 100% 753 753

17 Shenyang New World CommercialCentre Phase 1 . . . . . . . . . . .

Subsidiary 100% 8,710 8,710

18 Shenyang New World Centre . . . . . Subsidiary 100% 237,934 237,93419 Anshan New World Garden . . . . . . Subsidiary 100% 137,972 4,789 133,18320 Dalian New World Plaza . . . . . . . . Subsidiary 88% 69,196 49,413 19,78321 Dalian New World Tower . . . . . . . Subsidiary 100% 104,316 29,153 75,16322 Wuhan New World International

Trade Tower I . . . . . . . . . . . .Subsidiary 100% 121,828 104,556 17,272

23 Wuhan New World InternationalTrade Tower II . . . . . . . . . . .

Subsidiary 100% 10,005 10,005

24 Wuhan New World Centre . . . . . . . Subsidiary 100% 76,164 45,766 2,504 27,89425 New World Wuhan Hotel . . . . . . . . Joint Venture 60% 6,201 563 5,63826 Wuhan K11 Gourmet Tower . . . . . . Subsidiary 100% 20,947 10,367 10,58027 Wuhan Guanggu New World . . . . . . Subsidiary 100% 165,194 2,521 81,771 80,90228 Changsha La Ville New World

Phase I . . . . . . . . . . . . . . .Subsidiary 95% 4,694 4,694

29 Nanjing New World Centre . . . . . . Subsidiary 100% 52,794 41,712 11,08230 Guangzhou Dong Yi Garden . . . . . . Subsidiary 100% 11,877 8,033 3,84431 Guangzhou New World

Oriental Garden . . . . . . . . . . .Subsidiary 100% 32,297 25,997 6,300

32 Guangzhou Central Park-view . . . . . Subsidiary 91% 121,643 29,869 26,705 65,06933 Guangzhou Covent Garden . . . . . . Subsidiary 100% 89,321 23,752 65,56934 Guangzhou Park Paradise . . . . . . . Subsidiary 100% 72,361 22,112 14,244 36,00535 Guangzhou Park Paradise Area 6 . . . Subsidiary 100% 4,898 4,898

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No. Name of Property ProjectAccounting

ClassificationAttributable

Interest Total GFA Residential Commercial OfficeCar park

and others

(sq. m.) (sq. m.) (sq. m.) (sq. m.) (sq. m.)

36 Guangzhou Xintang New WorldGarden . . . . . . . . . . . . . . .

Joint venture 63% 70,000 27,463 42,537

37 Shenzhen New World Yi ShanGarden . . . . . . . . . . . . . . .

Subsidiary 100% 38,925 38,925

38 Shenzhen New World Signature Hill . . Subsidiary 100% 8,017 8,01739 Shunde New World Centre . . . . . . . Joint venture 42% 48,517 33,577 14,94040 Zhaoqing New World Garden . . . . . Subsidiary 100% 15,062 15,06241 Huizhou Changhuyuan . . . . . . . . . Joint venture 63% 19,444 354 19,09042 Haikou New World Garden

Phase III . . . . . . . . . . . . . . .Subsidiary 100% 4,286 4,286

43 Langfang New World CentreDistrict B . . . . . . . . . . . . . .

Subsidiary 100% 7,016 7,016

44 Tangshan New World CentrePhase II . . . . . . . . . . . . . . .

Subsidiary 100% 86,060 37,775 48,285

45 Canton First Estate CF19A . . . . . . Subsidiary 85% 15,737 11,043 4,695

Total . . . . . . . . . . . . . . . . . . 2,561,375 51,981 729,285 256,301 1,523,808

Hotel Operations

The NWCL Group develops its hotel operations primarily with a view to complementing andenhancing the value of its property development projects. The NWCL Group currently ownsfour hotels including New World Beijing Hotel, New World Wuhan Hotel, pentahotel Beijingand New World Shunde Hotel with a room capacity of over 1,313 rooms. In addition, theNWCL Group currently has four hotel projects under construction which are located invarious land sites where there are property projects under development.

For the years ended 30 June 2018 and 30 June 2017, the Issuer’s and its subsidiaries’consolidated revenue derived from hotel operations amounted to HK$179.1 million andHK$287.2 million, respectively.

The following table sets forth certain information in relation to the NWCL Group’sinvestments in hotels (including those being held by joint ventures) as at 30 June 2018:

HotelAttributable

interest Total area No. of rooms GradeAccounting

classification

(sq.m.)

北京新世界酒店(New World Beijing Hotel) . . . . . 70% 53,998 309 5-star Joint venture武漢新世界酒店

(New World Wuhan Hotel) . . . . . 60% 29,411 327 5-star Joint venture北京貝爾特酒店

(pentahotel Beijing) . . . . . . . . . . 55% 23,988 307 4-star Joint venture順德新世界酒店

(New World Shunde Hotel) . . . . . 33% 36,524 370 4-star Joint venture

Total . . . . . . . . . . . . . . . . . . . . . . . 143,921 1,313

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Property Management

The NWCL Group derives recurring property management fees from the provision of propertymanagement services in respect of properties developed by it. The NWCL Group believes thatthe provision of quality and value-added management services of an international standardcomplements its property development business and enables it to enhance recognition of itsbrand and maintain its reputation as a developer of high quality properties.

For the years ended 30 June 2018 and 30 June 2017, the Issuer’s and its subsidiariesconsolidated revenue derived from property management services amounted to HK$629.8million and HK$535.0 million respectively.

Competition

The NWCL Group believes that the property market in the PRC is fragmented and that there isno single dominant market player. Competition is primarily based on factors such as location,facilities and supporting infrastructure, services and pricing. In recent years, a large numberof property developers have begun to undertake property development and investment projectsin the PRC. These include overseas property developers, including a number of propertydevelopers from Hong Kong and Singapore. In addition, some local companies have extensivelocal knowledge and business relationships and/or a longer operational track record in therelevant local markets than the NWCL Group. Intensified competition among propertydevelopers may result in increased costs for land acquisition and an over-supply of properties.

The NWCL Group believes that the extensive experience built up by its senior management inproperty development, investment, leasing and management will enable it to competeeffectively. Furthermore, the NWCL Group believes that its strategy of site acquisition atcompetitive prices, its continuous focus on the development of quality properties and theprovision of premium customer service will enable it to maintain its reputation as a developerof quality properties.

Intellectual Property Rights

The NWCL Group has entered into an agreement dated 3 July 1999 with NWD in which NWDagreed to grant the Issuer a non-exclusive licence to use certain NWD trademarks, includingthe “New World” trademark as the marks and logos of the Issuer for its business of propertydevelopment and property investment in the PRC. The NWCL Group has also registered thetrademarks “御豪會”, “Club Royale”, “會萃會 The Cultural Club”, “The Ultimate Club ofElite” and the hotel brand “the Carlyle” in Hong Kong or the PRC as part of its corporatebranding strategy for its resident club, resort operation and hotel management services. TheNWCL Group is also the owner of the domain name “www.nwcl.com.hk”.

Insurance

The NWCL Group carries third-party liability, fire insurance and contractor-all-risk insuranceon its property developments, which are in addition to the insurance cover provided by itsthird-party contractors and which provide coverage for the period beyond completion anddelivery. In addition, the NWCL Group maintains insurance policies for certain officeproperties, including property-all-risks, office contents, public liability, money and personalassault, business interruption, employees’ compensation, staff fraud liability andmedical/hospitalisation schemes. However there are certain types of losses, such as lossesfrom forces of nature, that are generally not insured because they are either uninsurable orbecause insurance cannot be obtained on commercially reasonable terms. This practice is

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consistent with what the NWCL Group believes to be the industry practice in the PRC. Shouldan uninsured loss or a loss in excess of the insured limits occur, the NWCL Group could losecapital invested in its property and anticipated future revenue therefrom while the NWCLGroup remains liable for any mortgage indebtedness or other financial obligations related tothe relevant property. See the section headed “Risk Factors – Risks Relating to the Group’sBusinesses”.

Employees

As at 30 June 2018, the Issuer and its subsidiaries had 6,771 employees in total. The NWCLGroup continues to maintain good relationships with its employees and has not experiencedany material labour disruption.

The NWCL Group places great emphasis on the training and development of its employeesand provides a wide range of training programmes for them. In addition to providing internalcourses, the NWCL Group also engages external professionals and consultants to organiseseminars and training courses to equip its employees with new knowledge in the industry. TheNWCL Group also sponsors its employees to attend external training programmes organisedby various institutions to acquire advanced knowledge and skills.

The Issuer has established a defined contribution retirement scheme under the OccupationalRetirement Scheme Ordinance for all employees in Hong Kong since September 1999. Thecontributions to the scheme are based on a percentage of the employees’ salaries ranging from5% to 10%, depending upon the length of service of the employees. The Issuer’s contributionsto the scheme are expensed as incurred and are not forfeited in respect of those employees wholeave the scheme prior to vesting fully in the contributions.

With the implementation of the Mandatory Provident Fund (“MPF”) Scheme Ordinance sinceDecember 2000, the Issuer established a new MPF scheme. Except for employees whocommenced employment after 1 October 2000, all the existing employees were given anoption to select between the existing defined contribution retirement scheme and the MPFscheme. The employees who commenced employment after 1 October 2000 are required tojoin the MPF scheme. The Issuer’s contributions to the MPF scheme are based on fixedpercentages of members’ salaries, ranging from 5% of MPF relevant income to 10% of thebasic salary. Members’ mandatory contributions are fixed at 5% of MPF relevant income.

The NWCL Group also contributes to retirement plans for its employees in the PRC at apercentage in compliance with the requirements of the respective municipal government in thePRC.

Environmental and Safety Matters

The NWCL Group is subject to the PRC national environmental laws and regulations as wellas environmental regulations promulgated by the municipal governments. These includeregulations on air pollution, noise emissions and water and waste discharge. Each propertydeveloped by the NWCL Group needs to undergo environmental assessments and anenvironmental impact study report needs to be submitted to the relevant governmentauthorities before approval is granted for commencement of the property development exceptfor some early property developments which were approved before the applicableenvironmental laws were promulgated. At the completion of each property, the relevantgovernment authorities will also need to inspect the site to ensure that applicableenvironmental standards have been complied with, and the resulting report is then presentedtogether with other specified documents to the local construction administration authoritiesfor their record.

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The NWCL Group’s operations are also subject to inspections by government officials withregard to various safety and environmental issues. The Issuer believes that the NWCL Groupis in compliance in all material respects with applicable governmental regulations in thejurisdictions in which the NWCL Group operates. Compliance with such laws has not had, andin the NWCL Group’s opinion, is not expected to have, a material adverse effect on the NWCLGroup’s capacity, expenditures, earnings or competitive positions. The Issuer is not aware ofany governmental proceedings or investigations to which it or any member of the NWCLGroup is or might become a party and which may have a material adverse effect on itsproperties and operations.

Legal Proceedings

As at the date of this Offering Circular, neither the Issuer nor any of its subsidiaries wasengaged in any litigation or arbitration of material importance and no litigation or claim ofmaterial importance was known to the directors of the Issuer to be pending or threatenedagainst the Issuer or any of its subsidiaries.

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DESCRIPTION OF THE GUARANTOR

Introduction

NWD is the holding company of one of the largest Hong Kong-based property developerslisted on the HKSE in terms of market capitalisation. Established in 1970, NWD was listed onthe HKSE in 1972 and its shares are currently a constituent stock of the Hang Seng Index. Asat 30 June 2018, based on the closing price of its shares on the HKSE, NWD had a marketcapitalisation of approximately HK$112,763.7 million.

The Group is engaged principally in its core businesses of property development andinvestment, service, infrastructure and department store operations. The Group’s operationsare based primarily in Hong Kong, Macau and the PRC.

The principal business activities of the Group are as follows:

• Property: The Group is one of the major property developers and investors in HongKong and the PRC and is primarily engaged in the development and sale of residentialand commercial properties. In addition, the Group owns and manages an investmentproperty portfolio comprising shopping malls, offices, hotels and serviced apartments.The Group undertakes its property development and investment businesses in the PRCprimarily through the NWCL Group.

• Service: The Group, through NWSH and its subsidiaries, associated companies andjoint ventures (the “NWSH Group”), is engaged in a diversified range of servicebusinesses including facilities management, construction and transport and strategicinvestments in Hong Kong, Macau and the PRC.

• Infrastructure: The Group is one of the largest foreign investors and operators ofinfrastructure projects in Hong Kong, Macau and the PRC. Its infrastructure portfoliocomprises roads, environment, logistics and aviation. The Group undertakes itsinfrastructure businesses primarily through the NWSH Group.

• Hotels: As at 30 June 2018, the Group operated 15 hotels in Hong Kong, MainlandChina and Southeast Asia with 6,600 guest rooms.

• Department Stores: As 30 June 2018, the Group, through NWDS and its subsidiaries,operated and managed 35 department stores and two shopping malls in the PRC.

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The following sets forth an overview of the Group’s organisation structure showing itsprincipal functional units and business activities as at the date of this Offering Circular:

The Guarantor(Incorporated in Hong Kong)

The Issuer(Incorporated in the

Cayman Islands)

NWSH(HK stock code: 0659)

(Incorporated in Bermuda)

NWDS(HK stock code: 0825)

(Incorporated in theCayman Islands)

Infrastructureand

services

Mainland Chinaproperty development

& investment

Mainland Chinadepartment

store operation

Hong KongProperty

Investment

Hong KongProperty

Development

75%100%61%

For the year ended 30 June 2018, the Guarantor’s and its subsidiaries’ consolidated revenuesamounted to HK$60,688.7 million. Profit attributable to shareholders of the Guarantoramounted to HK$23,338.1 million and the Guarantor’s and its subsidiaries’ consolidatedunderlying profit amounted to HK$7,977.6 million, up 11.8% year-on-year.

Strategy

NWD’s overall strategic objective is to enhance shareholders’ value by focusing ondeveloping and expanding its core businesses of property development and investment,service, infrastructure and department store operations in Hong Kong, Macau and the PRC. Inparticular:

• In Hong Kong, the Group’s strategy is to maintain its core position as a comprehensiveproperty developer. The Group has continued to replenish its land bank through variousmeans, including public auction and tender, old building redevelopment as well asagricultural land conversion. Resources consumed in its current development werereplenished to provide the Group with a steady pipeline of land supply in the comingyears and to plan for property development and strategies in the long term. Throughthese means, the Group will be able to maintain a stable level of quality land bank andthus establish a solid foundation for the Group’s property development business inHong Kong.

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• In order to strengthen the profit contributions from the Group’s investment propertyportfolio in Hong Kong, the Group proactively reviews its assets and investments with aview to achieving better returns through enhancing product quality and service delivery.

• In the PRC, the Group’s strategy is to maintain a reasonable development pace to realisethe capital value of its substantial land bank in the PRC with particular focus on thedevelopment of mid-scale and large-scale mixed-use projects with varyingcombinations of residential, office and retail spaces. As one of the largest and earliestforeign investors in the PRC with over 30 years of experience, NWD believes it hasdeveloped strong relationships and operating experience in the PRC that give it acompetitive advantage. NWD believes that an increasing proportion of the Group’srevenues and profits will, over the next few years, be generated from the PRC activitiesas the Group’s PRC projects continue to mature and will seek to maintain a balancebetween revenues from property development and property investment. The Group willcontinue to develop properties in top-tier cities whilst focusing on geographicaldiversification into emerging second-tier cities. NWD believes that the Group’sgeographical diversification will enable it to benefit from the stable economic growth oftop-tier cities as well as the emerging infrastructure development in high growthsecond-tier cities, alleviate the risks associated with having too much of its operationconcentrated in one particular city or region in the PRC, strengthen its regional propertyportfolios and position the Group as one of the leading national property developers andinvestors in the PRC.

• The Group’s strategy in relation to its service businesses is to continue its focus on theconstruction, facilities management, strategic investment and transportation aspects ofthe business. The Group is looking to continue to benefit from stable income generatedby its service operations.

• The Group’s strategy is to maintain operations within its current range of infrastructureprojects, particularly toll roads, environment, logistics and aviation, and water projects,which provide steady and diversified sources of income to the Group. The Group investsin airport and commercial aircraft leasing investments given their strong earnings andgrowth potential. This stable income stream is expected to help fund the Group’sorganic growth.

• In relation to hotel operations, the Group aims to continue to achieve better returns fromthe hotels in terms of both occupancy and average room rate.

• In relation to department store operations, the Group will continue to deepencategorised management of its stores. Based on the categories of “novel departmentstore”, “quasi-shopping mall”, “industry-benchmark store” and “urban outlet”, theGroup will further categorise its stores into four types, namely competitive,breakthrough, strengthened and turnaround resolutions, depending on the location,scale and merchandise appeal of stores, etc. Targeted strategies will then be formulatedto improve operating efficiency. The Group will also continue to foster its operationsstrategy of “One Store, One Strategy”, starting from sound protection measuresdeveloped by the headquarters, to ensure the implementation of the Group’s strategies.Through multi-dimensional categorised operations and targeted marketing strategies,the Group will motivate stores to explore their way of innovation and at the same time,seek breakthroughs in ambience innovation, operations efficiency enhancement,innovative marketing, and Internet strategies, etc.

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Business

The following tables set forth the revenues and results for the business segments of theGuarantor and its subsidiaries for the periods indicated:

For the year ended30 June 2018

For the year ended30 June 2017

HK$ million % HK$ million %

RevenueProperty sales . . . . . . . . . . . . . . . . . . . 23,380.8 38.5 25,968.0 45.9Rental . . . . . . . . . . . . . . . . . . . . . . . . . . 3,109.9 5.1 2,410.9 4.3Contracting . . . . . . . . . . . . . . . . . . . . . 15,488.2 25.5 11,201.0 19.8Provision of services . . . . . . . . . . . . . 10,423.5 17.2 9,354.5 16.5Infrastructure operations . . . . . . . . . . 2,814.6 4.7 2,410.6 4.2Hotel operations . . . . . . . . . . . . . . . . . 1,479.0 2.5 1,422.2 2.5Department store operations . . . . . . 3,670.9 6.0 3,389.0 6.0Others . . . . . . . . . . . . . . . . . . . . . . . . . . 321.8 0.5 472.6 0.8

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,688.7 100.0 56,628.8 100.0

Note: Revenue breakdown shown above reflects the Group’s Executive Committee Categorisation, and differsslightly from the announced segmental results.

For the year ended30 June 2018

For the year ended30 June 2017

HK$ million % HK$ million %

Segment results (including shareof results of joint ventures andassociated companies)

Property development . . . . . . . . . . . . 9,475.5 60.1 7,506.8 49.8Property investment . . . . . . . . . . . . . . 2,452.2 15.5 1,974.4 13.1Service . . . . . . . . . . . . . . . . . . . . . . . . . 858.4 5.4 2,028.0 13.5Infrastructure . . . . . . . . . . . . . . . . . . . . 3,201.4 20.3 3,313.0 22.0Hotel operations . . . . . . . . . . . . . . . . . (76.5) (0.5) (79.4) (0.5)Department stores . . . . . . . . . . . . . . . . 232.4 1.5 220.0 1.5Others . . . . . . . . . . . . . . . . . . . . . . . . . . (369.9) (2.3) 94.6 0.6

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,773.5 100.0 15,057.4 100.0

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The following tables set forth the Guarantor and its subsidiaries’ share of results of itsassociated companies (those over which the Guarantor and its subsidiaries may exertinfluence through representations on the board of directors of such companies) and jointventures (those over which the Guarantor and its subsidiaries exercise joint control along withits partners pursuant to contractual arrangements), by business segments for the fiscal yearsindicated:

For the year ended30 June 2018

For the year ended30 June 2017

HK$ million % HK$ million %

Share of results of joint venturesProperty development . . . . . . . . . . . . 264.7 14.0 (26.3) (1.3)Property investment . . . . . . . . . . . . . . 451.0 23.9 428.8 21.1Service . . . . . . . . . . . . . . . . . . . . . . . . . 152.8 8.1 269.9 13.3Infrastructure . . . . . . . . . . . . . . . . . . . . 1,183.4 62.8 1,546.3 76.2Hotel operations . . . . . . . . . . . . . . . . . 32.8 1.7 (27.4) (1.3)Department stores . . . . . . . . . . . . . . . . – – – –Others . . . . . . . . . . . . . . . . . . . . . . . . . . (198.5) (10.5) (161.6) (8.0)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,886.2 100.0 2,029.7 100.0

For the year ended30 June 2018

For the year ended30 June 2017

HK$ million % HK$ million %

Share of results of associatedcompanies

Property development . . . . . . . . . . . . 46.8 3.9 113.5 6.0Property investment . . . . . . . . . . . . . . 373.2 31.2 167.9 8.8Service . . . . . . . . . . . . . . . . . . . . . . . . . 60.1 5.0 983.2 51.9Infrastructure . . . . . . . . . . . . . . . . . . . . 708.9 59.3 600.1 31.7Hotel operations . . . . . . . . . . . . . . . . . – – – –Department stores . . . . . . . . . . . . . . . . (0.6) (0.1) – –Others . . . . . . . . . . . . . . . . . . . . . . . . . . 8.0 0.7 30.7 1.6

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,196.4 100.0 1,895.4 100.0

Recent Developments

Property

Hong Kong – Property overview

The Group is one of the major property developers in Hong Kong and is engaged in thedevelopment of residential, retail, office and hotel properties. As at 30 June 2018, the Grouppossessed a landbank with attributable gross floor area (“GFA”) of around 11.97 million sq.ft.for immediate development. Of which, attributable residential GFA amounted toapproximately 3.96 million sq.ft. Meanwhile, the Group had a total of approximately 17.00million sq.ft. of attributable agricultural land area in the New Territories pending for usageconversion, which are mainly located in Yuen Long. Sales of property in Hong Konghistorically have been a significant source of the Group’s operating profits.

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Amidst uncertainty in international economic sentiment, the potential for further interest ratehikes in the United States and the Hong Kong government’s policies with respect to theproperty market, Hong Kong’s residential property transaction volume experienced volatilityin the calendar year 2017. In 2017, primary private residential transactions reached 18,645units at an aggregate value of HK$240 billion, representing a year-on-year increase of 11.0%and 28.9% from 2016 respectively. Stepping into 2018, a number of key projects werelaunched in the second quarter. Most developers offered attractive incentive schemes for homepurchases, which stimulated sales and in turn positive market sentiment for home purchases,as record-breaking prices of various project were achieved. During the first half of 2018,primary private residential transactions reached 7,682 units at an aggregate value of HK$110billion. With the more prudent attitude taken by potential home-buyers as well as the ongoinginadequacy of supply on the market, buyers’ resources tend to be steered towards premiumbrands and products with superior quality at prime locations, enabling high-quality projects tostand out from the crowd.

In light of the following favourable factors, namely supply and demand imbalance, stable highemployment rate, solid economic fundamentals of Hong Kong and the financial strengths ofhome buyers in this user-dominated market, it is anticipated that the local residential marketwill have a stable development.

Through its subsidiaries, NWD oversees and largely performs all aspects of its developmentoperations, including the selection and purchase of sites, the preparation of feasibility studies,the obtaining of government approvals for zoning and modifications, the design andconstruction of development projects, and the marketing, leasing and management ofcompleted projects. The typical development cycle for vacant land in Hong Kong fromacquisition of the site and preparation of architectural plans until expected completion date isapproximately three to five years. However, if there is a variance of land usage required, theprocess may take longer and may involve the payment to the government of substantial landpremiums in connection with the modification of the land use restrictions. The developmentcycle for urban property may also be longer, since such sites generally are not vacant andfrequently contiguous multiple sites or separate units within a site must be assembled beforedevelopment can begin.

In general, the Group’s practice is to pre-sell its developments before completion and thegranting of occupation permits by government authorities in order to improve its financialliquidity and reduce market risk. Revenues and profits from such sales are only recognisedwhen or as the control is transferred to the customer. Deposits and instalments received onproperties sold prior to their completion are included in current liabilities.

Hong Kong – Property investment

The completed investment property portfolio of the Group in Hong Kong amounted toapproximately 16.7 million sq.ft. of total GFA (approximately 9.0 million sq.ft. of totalattributable GFA) as at 30 June 2018. The business segment continues to be a key source ofincome for the Group in the medium to long term.

The portfolio consists of retail shopping centres and office buildings which collectivelyaccounted for approximately 34.0% of the Group’s completed investment properties inattributable GFA terms, with the balance being luxury serviced apartments and hotels (whichtogether accounted for approximately 30.2% of the Group’s completed investmentproperties), logistic centres and carparks.

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For offices, driven by promising economic environment, corporates plan for their Hong Kongoperations in a more positive way, the buoyance of fundraising and listing together with themarket expansion by co-working space operators in Hong Kong have raised additionaldemand in the office leasing market. Premium office spaces in core commercial districts inHong Kong are highly sought after by Chinese enterprises, which have accounted 41% of allnew leases in the first half of 2018 and increasing year by year according to property agencies.Backed by multiple factors, the overall office vacancy recorded 5.1% and vacancy ratedropped to 1.1% for the core area of Central. While supply fell short of demand, office rentalrates rose by 4.6% in the first half of 2018 on average.

For retail shops, driven by factors including the continuous growth of tourist arrivals, buoyantlocal job market and prospects of income growth, the retail sector of Hong Kong saw twilightsof recovery in 2017, after more than three years of adjustment. In 2017, total retail salesincreased by 2.2% with substantial growth in luxury goods and other consumer goodsincluding medicines and cosmetics, which rose by 4% and 5.7% respectively. In the first halfof 2018, retail performance further augmented with an increase of 12% in total retail sales inJune, which was the 16th consecutive months of positive growth.

The Group performs the rental management and marketing of most of its investmentproperties through a division of NWD and a subsidiary, K11 Concepts Limited. The Groupproactively reviews its investment assets with a view to enhancing its product quality andservice delivery including performing periodic property renovations.

The leases the Group has granted are typically for two or three years for office and retailtenants occupying relatively small commercial floor space and longer lease periods can begranted for those tenants occupying relatively large commercial floor space. The rentalincome from the investment portfolio is expected to continue to provide a stable and recurrentincome base to the Group. Notwithstanding that such properties are classified as investmentproperties, the Group will evaluate offers from potential purchasers and may dispose ofcertain of its investment properties if the price offered is competitive.

In accordance with HKFRS, the Group values its investment properties at every reportingbalance sheet date at their fair market value determined by professional valuation. Any changein the valuation is charged or credited, as the case may be, to the consolidated incomestatement. The Group’s financial performance is therefore subject to fluctuation from periodto period in light of the movements in property value in Hong Kong, which has been cyclicalin the past and could result in a significant accounting profit or loss for the Group.

The Group’s rents in Hong Kong are generally quoted in sq.ft. per lettable area. In most cases,the rents quoted by the Group do not include property management charges or governmentrates payable by its tenants.

The table below sets out the Group’s major property investment and other projects in HongKong as at 30 June 2018.

No.Name of Property Investment andother Projects Total GFA

TotalAttributable

GFA Retail Office Hotel Residential Others

TotalNumber of

CarparkLand Lease

Expiry

(sq. ft.) (sq. ft.) (sq. ft.) (sq. ft.) (sq. ft.) (sq. ft.) (sq. ft.)

COMPLETEDHONG KONG ISLAND

1 Manning House, Central . . . . 110,040 110,040 63,383 46,657 28432 New World Tower, Central . . . 640,135 640,135 77,948 562,187 385 28633 Shun Tak Centre, Shopping

Arcade, Sheung Wan . . . .214,336 96,451 96,451 85 2055

4 Hong Kong Convention andExhibition Centre, ShoppingArcade, Wan Chai . . . . . .

87,999 87,999 69,173 18,826(2) 1,070 2060

5 Grand Hyatt Hong Kong . . . . 524,928 262,464 262,464 2060

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No.Name of Property Investment andother Projects Total GFA

TotalAttributable

GFA Retail Office Hotel Residential Others

TotalNumber of

CarparkLand Lease

Expiry

(sq. ft.) (sq. ft.) (sq. ft.) (sq. ft.) (sq. ft.) (sq. ft.) (sq. ft.)6 Renaissance Harbour View

Hotel . . . . . . . . . . . .544,518 272,259 272,259 2060

7 Pearl City, Causeway Bay –Ground Floor to 4th Floor . .

53,691 21,476 21,476 2868

Pearl City, Causeway Bay –Ground Floor to Basement . .

24,682 24,682 24,682 2868

8 EIGHT KWAI FONG, HappyValley . . . . . . . . . . .

65,150 57,965 57,965 2079

9 Methodist House, Wan Chai(1) . 40,813 40,405 40,405 2084KOWLOON

10 K11 ATELIER of VictoriaDockside, Tsim Sha Tsui . .

435,145 435,145 435,145 2052

Rosewood Hotel & RosewoodResidences of VictoriaDockside, Tsim Sha Tsui . .

1,105,644 1,105,644 1,105,644 2052

11 Telford Plaza, Kowloon Bay(1) . 335,960 335,960 335,960 136 204712 K11, Tsim Sha Tsui(1) . . . . . 335,939 334,259 334,259 240 2057

Hyatt Regency Hong Kong,Tsim Sha Tsui . . . . . . .

277,877 138,939 138,939 2057

13 pentahotel Hong Kong,Kowloon . . . . . . . . . .

285,601 285,601 285,601 2057

14 KOHO, Kwun Tong . . . . . . 204,514 204,514 1,567 202,947 28 204715 THE FOREST, Mong Kok(1) . . 53,337 26,669 26,669 7 2062

NEW TERRITORIES16 ATL Logistic Centre, Kwai

Chung . . . . . . . . . . .9,329,000 3,190,518 3,190,518(3) 2047

17 D∙Park, Tsuen Wan . . . . . . 466,400 466,400 466,400 1,000 204718 PopCorn II, Tseung Kwan O(1) . 125,730 88,011 88,011 50 204719 Hyatt Regency Hong Kong,

Sha Tin(1) . . . . . . . . .538,000 538,000 538,000 100 2047

20 Citygate, Tung Chung(4) . . . . 659,003 131,801 99,697 32,104 1,231 2047Novotel Citygate

Hong Kong . . . . . . . . .236,758 47,352 47,352 7 2047

21 PARK SIGNATURE, Yuen Long 24,155 24,155 24,155 2058

Grand Total . . . . . . . . . . 16,719,355 8,966,844 1,729,831 1,319,445 2,650,259 57,965 3,209,344 4,339

TO BE COMPETED/UNDERDEVELOPMENT/ALTERATIONAND ADDITIONALWORK(5)

22 Remaining portion of VictoriaDockside, Tsim Sha Tsui(6) .

1,536,076 1,536,076 2052

23 TCTL 11, Tung Chung . . . . 474,617 94,923 206324 704–730 King’s Road, North

Point . . . . . . . . . . . .487,500 487,500 2083/2088/

209025 9 Luk Hop Street, San Po Kong 65,787 65,787 204726 21 Luk Hop Street, San Po

Kong . . . . . . . . . . . .100,800 100,800 2047

27 New Kowloon Inland Lot No.6505, King Lam Street,Cheung Sha Wan . . . . . .

998,210 998,210 2067

28 SKYCITY Project(1) . . . . . . 3,767,389 3,767,389 2066

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Notes:

(1) Properties in which the Group has a development interests: other parties provide the land whilst the Groupfinances the construction costs and occasionally land costs, and is entitled to a share of the rental income ora share of the development profits in accordance with the terms and conditions of the respective jointdevelopment agreements after completion

(2) Meeting rooms

(3) Logistics centre

(4) Including Tung Chung Crescent

(5) GFA breakdown by usage of the project to be completed/under development/alteration and additional workis to be determined

(6) Including 12 Salisbury Road

Set forth below is a brief description of selected rental property:

Located in the centre of Tsuen Wan, D•PARK positions itself as a multiple intelligence forchildren mall. Its prime location and diversified tenant mix have successfully enhancedfootfall and leasing performance. During the year ended 30 June 2018, it recorded anoccupancy rate of 94.4% with an average monthly footfall of approximately 3.4 million.

Hong Kong K11 recorded an average monthly footfall of approximately 1.4 million.Celebrating K11 10th anniversary this year, a HK$200 million major renovation for HongKong K11 will commence in phases, targeting end of 2019 for completion. The renovation isaimed to redesign interior zoning to optimise the flexibility of retail space. Upon completion,further enhancement in both footfall and sales is expected in 2020.

THE FOREST in Mong Kok had its grand opening during the year ended 30 June 2018 andattained an occupancy rate of 95.9%. Modelled on the characteristic architecture ofDaikanyama in Tokyo, THE FOREST is a shopping mall with brand new concept thatintegrates nature, sports, and culture.

The development of Victoria Dockside, a new global landmark located at the core area of TsimSha Tsui waterfront in Kowloon, was progressing well. This commercial complex with a totalGFA of approximately 3 million sq.ft. will accommodate Grade A offices namely K11ATELIER, K11 ARTUS serviced apartments, a luxury hotel Rosewood Hong Kong, RosewoodResidences, and K11 MUSEA that offers unparalleled novel experience of art, design andleisure, commanding a panoramic view of Victoria Harbour and Hong Kong Island from a newperspective. Victoria Dockside will grand open in the third quarter in 2019.

K11 ATELIER, the Grade A offices in Victoria Dockside, was completed and became availablefor use during the year ended 30 June 2018. The first batch of multinational corporationsmoved in during the fourth quarter of 2017. Occupancy rate was over 70% as at the end offinancial year ended 30 June 2018.

K11 MUSEA, an ambitious project situated in the heart of Victoria Dockside, will be unveiledin the third quarter of 2019. Entailing an innovative experiential museum-retail concept, theproject is set to turn over a new leaf for the retail industry of Hong Kong. K11 MUSEA hasbeen designed to offer world-class experience in retail, art, culture, entertainment and diningto global millennials who see experiencing and travel as parts of an indulgent lifestyle andaimed to be the destination of travel gurus. The 10-storey K11 MUSEA will house anextensive selection of international brands, many of which are pop-up stores and flagshipstores that are setting their first presence in Hong Kong.

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K11 ARTUS is the first hospitality extension of K11, a global high-end lifestyle brand thatbrings together three essential elements of art, people and nature. K11 ARTUS comprises 287suites spanning 4-storey, offering flexible rental plans from short to long-term stays toaccommodate the needs of guests, is scheduled to open in summer 2019.

For office buildings, New World Tower and Manning House, both being Grade A officebuildings located in the traditional prime commercial area in Central, achieved satisfactoryperformance in terms of occupancy and rental rates.

In terms of the occupancy of the investment properties portfolio in Hong Kong, the offices ofNew World Tower and Manning House in Central has close to 100% occupancy whereas themalls including Hong Kong K11, D•PARK, Pearl City and THE FOREST have an occupancyranging from 94% to 100%.

The gross rental income in Hong Kong has increased by 16.5%, attributable to the satisfactoryoccupancy rates of major projects, together with the commencement of operation in K11ATELIER at Victoria Dockside and THE FOREST in Mong Kok.

Hong Kong – Property development

Hong Kong saw strong momentum in its economic growth, bringing ample room fordevelopment of all sectors. Stable high employment rate and appreciation of assets value,together with the continuous shortage of land supply in the market in the near future,contributed positively to the pace of home purchases by potential buyers in the residentialmarket.

In view of surging residential prices, on 29 June 2018, the Hong Kong government announcedthree objectives and six housing initiatives, which included the introduction of “SpecialRates” on vacant primary private residential units, and amendment of the “Lands DepartmentConsent Scheme” to improve sales practices. Such policies are seen by the market as driversfor faster project launch by property developers, which would in turn curtail price soarsotherwise underpinned by inadequate supply.

The contributions from property sales was mainly attributable to the sales of residential unitscompleted and recognised within the financial year ended 30 June 2018, including MOUNTPAVILIA in Clear Water Bay, The Masterpiece in Tsim Sha Tsui, THE PAVILIA HILL inNorth Point, PARK VILLA in Yuen Long and the Double Cove series in Ma On Shan, togetherwith the sales of residential projects completed in previous financial years.

During the year ended 30 June 2018, the Group’s attributable contracted sales in Hong Kongamounted to HK$24.7 billion, being mainly contributions from residential projects includingMOUNT PAVILIA in Clear Water Bay, ARTISAN HOUSE in Sai Ying Pun, FLEUR PAVILIAin North Point, THE PARKVILLE in Tuen Mun, PARK HILLCREST and PARK VILLA inYuen Long, THE PAVILIA BAY in Tsuen Wan, The Masterpiece in Tsim Sha Tsui and theDouble Cove series in Ma On Shan.

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The table below sets out the Group’s major property development projects in Hong Kong as at30 June 2018:

No. Name of Property Development Projects Site Area Total GFA

TheGroup’sInterest Residential Retail Office Industrial Others

TotalAttributable

GFAStage of

Completion(1)

(sq.ft.) (sq.ft.) % (sq.ft.) (sq.ft.) (sq.ft.) (sq.ft.) (sq.ft.) (sq.ft.)

Central and Western District1 23 Babington Path, Mid Levels . . . . . . . . 13,294 66,470 10.00% 6,647 6,647 C2 ARTISAN HOUSE, 1 Sai Yuen Lane,

Western District . . . . . . . . . . . . . . .7,812 90,913 100.00% 82,934 7,979 90,913 C

3 4A-4P Seymour Road, Mid-levels . . . . . . 52,466 472,186 35.00% 165,265 165,265 FEastern District

4 FLEUR PAVILIA, 1 Kai Yuen Street,North Point . . . . . . . . . . . . . . . . .

72,000 573,301 40.00% 229,320 229,320 S

Yau Tsim Mong District5 74 Waterloo Road, Ho Man Tin . . . . . . . . 11,256 94,972 51.00% 43,051 5,385 48,436 F

Kowloon City District andKwun Tong District

6 Kowloon City Road/Sheung Heung RoadProject, Ma Tau Kok(2) . . . . . . . . . . .

14,897 111,730 100.00% 111,730 111,730 S

7 Yau Tong Redevelopment Project,Kowloon East . . . . . . . . . . . . . . . .

810,454 3,992,604 10.88% 423,683 10,793 434,476 LE

8 43-45 Tsun Yip Street, Kwun Tong . . . . . . 9,169 100,840 100.00% 100,840 100,840 S9 46 Tsun Yip Street, Kwun Tong . . . . . . . 5,530 60,830 100.00% 60,830 60,830 F

Sham Shui Po District10 New Kowloon Inland Lot No. 6582,

Cheung Shun Street, Cheung Sha Wan(3) .44,897 524,766 100.00% 152 488,256 36,358 524,766 F

11 New Kowloon Inland Lot No. 6572,Wing Hong Street, Cheung Sha Wan . . . .

30,925 363,094 100.00% 5,234 357,860 363,094 SP

Sha Tin District and Sai Kung District12 Tai Wai Station Property Development,

STTL No. 520, Sha Tin(2) . . . . . . . . .521,107 2,050,327 100.00% 2,050,327 2,050,327 S

13 DD221, Sha Ha, Sai Kung . . . . . . . . . . 618,220 927,330 76.00% 704,770 704,770 PTsuen Wan District

14 THE PAVILIA BAY – West Rail Tsuen WanWest Station (TW6), TWTLNo. 402, Tsuen Wan(2) . . . . . . . . . . .

148,586 675,021 80.00% 540,017 540,017 C

Yuen Long District and Tuen Mun District15 PARK HILLCREST, Lot No.2131 in DD121,

Tong Yan San Tsuen (Phase 1 – Site A),Yuen Long . . . . . . . . . . . . . . . . .

78,502 78,502 100.00% 78,502 78,502 S

16 THE PARKVILLE, No.76-92 Tuen MunHeung Sze Wui Road, Tuen Mun . . . . .

8,000 84,046 100.00% 70,106 13,940 84,046 C

17 Park Reach, YLTL 527, Tai Tong Road,Yuen Long . . . . . . . . . . . . . . . . .

6,131 21,453 20.97% 4,014 485 4,499 S

18 YLTL 524, Tai Tong Road, Yuen Long . . . . 48,933 171,265 20.97% 35,914 35,914 S19 Lung Tin Tsuen (Phase 3), Yuen Long . . . . 24,230 121,148 100.00% 121,148 121,148 F20 Lung Tin Tsuen (Phase 2), Yuen Long . . . . 88,157 440,785 100.00% 440,785 440,785 LE21 Tong Yan San Tsuen (Phase 3),

Yuen Long . . . . . . . . . . . . . . . . .88,658 88,658 100.00% 88,658 88,658 LE

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No. Name of Property Development Projects Site Area Total GFA

TheGroup’sInterest Residential Retail Office Industrial Others

TotalAttributable

GFAStage of

Completion(1)

(sq.ft.) (sq.ft.) % (sq.ft.) (sq.ft.) (sq.ft.) (sq.ft.) (sq.ft.) (sq.ft.)

22 Tong Yan San Tsuen (Phase 4),Yuen Long . . . . . . . . . . . . . . . . .

193,591 193,591 100.00% 193,591 193,591 NA

23 Sha Po North, Yuen Long . . . . . . . . . . . TBC 373,240 34.81% 129,925 129,925 NA24 DD110, Kam Tin, Yuen Long . . . . . . . . . 170,577 68,231 100.00% 68,231 68,231 LE

Grand Total . . . . . . . . . . . . . . . . . . 11,745,303 5,588,618 43,968 846,116 161,670 36,358 6,676,730

Remarks:

(1) P=Planning; D=Demolition; SP=Site Preparation; F=Site Formation / Foundation; S=Superstructure;C=Completed (OP Issued); LE=Land Exchange; NA=Not Applicable; TBC=To be confirmed

(2) Property in which the Group is entitled to a share of development profits in accordance with the terms andconditions of the respective development agreements

(3) Others include public carpark, but exclude government accommodations (i.e., children care centre andelderly care centre)

Hong Kong – Land bank

It is the Group’s policy to use various channels to replenish its Hong Kong land bank. Apartfrom public auction and tender, the Group has also pursued diversified means, including oldbuilding acquisitions and agricultural land usage conversion, to secure a stable supply of landresources for development. As at 30 June 2018, the Group possessed a landbank withattributable GFA of around 11.97 million sq.ft. for immediate development. Of which,attributable residential GFA amounted to approximately 3.96 million sq.ft. Meanwhile, theGroup had a total of approximately 17 million sq.ft. of attributable agricultural land areareserve in the New Territories pending for usage conversion, which are mainly located in YuenLong.

Landbank by districtAttributable total

GFA

(sq.ft.’000)

Hong Kong Island . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 980Kowloon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,217New Territories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,777

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,974

Agricultural landbank by district Total site areaAttributable site

area

(sq.ft.’000) (sq.ft.’000)

Yuen Long District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,593 11,594Northern District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,601 2,246Sha Tin District and Tai Po District . . . . . . . . . . . . . . . . . . 1,975 1,975Sai Kung District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,359 1,161Tuen Mun District . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 19

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,547 16,995

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In furtherance of the Group’s strategy of development in the Guangdong-Hong Kong-MacaoGreater Bay Area (the “Greater Bay Area”), on 2 May 2018, the Group won a successful bidfor an iconic world-class commercial development in SKYCITY at Hong Kong InternationalAirport (“HKIA”). Situated next to HKIA, the development will involve total investment ofHK$20 billion and take up a GFA of approximately 3.77 million sq.ft., comprising 2.1 millionsq.ft. for dinning and retail outlets and 570,000 sq.ft. each for experience-based entertainmentfacilities and office space. The remaining floor area will be used for public facilities andcarparks. The project is scheduled to be completed in phases from 2023 to 2027.

The Group will be responsible for the design, development and management of the entireproject, aiming to build this strategically located project into a commercial and entertainmenthub in Hong Kong and the Greater Bay Area at large, offering high-tech experientialentertainment, making it a new landmark in Hong Kong for locals and visitors from overseasand a population of more than 60 million people of the Greater Bay Area.

The Group acquired Wing Hong Street project in Cheung Sha Wan, Kowloon in August 2017.The project will develop into a Grade A office building with a GFA of approximately 370,000sq.ft. Together with the winning bids for King Lam Street project and Cheung Shun Streetproject, both located in Cheung Sha Wan, the Group currently has three Grade A officeprojects under development in that district with a total GFA of 1.9 million sq.ft.

Further to the successful land use conversions of two agricultural land plots located in YuenLong in 2016, the Group converted the land usage of another land plot Lung Tin Tsuen Phase3 farmland in Yuen Long town centre in August 2017. Total GFA is approximately 121,100sq.ft. and the total land premium amounted to approximately HK$460 million.

Hotel operations

NWD is engaged in hotel investment through various subsidiaries and joint ventures. As at 30June 2018, the Group owned a total of 15 completed and operating hotels over 6,600 guestrooms in Hong Kong, the PRC and Southeast Asia.

The Group’s premium hotel projects in Hong Kong primarily serving business travellers arethe main source of income of its hotel operations. During the year ended 30 June 2018, theaverage occupancy rate of Grand Hyatt Hong Kong significantly increased to 83.2% followingthe full completion of guest room renovations. Adjacent to the Hong Kong Convention andExhibition Centre, Renaissance Harbour View Hotel continued to enjoy the benefits from thegrowing number of conferences and exhibitions, with the average occupancy rate rising to87.1%. The Hyatt Regency Hong Kong, located in a prime spot of Tsim Sha Tsui, Kowloon,achieved an average occupancy rate of 91.8%.

In Mainland China, the three hotels of different segments operated by the Group in Beijinghave all recorded satisfactory performance with average occupancy rates ranging from 75.6%to 84.4% during the year ended 30 June 2018.

On 27 October 2017, the Group disposed of the entire interest in Ramada Property Ltd. at theconsideration of RMB1.85 billion. The main assets of Ramada Property Ltd. comprise NewWorld Shanghai Hotel and Pentahotel Shanghai. The disposal enables the Group to realisecash resources and unlock value of its lowyielding assets at fair market value.

Rosewood Phuket, Thailand officially commenced operation with soft opening on 20November 2017 with 41 villas. At an exquisite location along a 600-meter beachfront atEmerald Bay, the project is a beach hideaway with full opening of 71 villas in June 2018.

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Rosewood Hong Kong, as part of the multi-use tower of Victoria Dockside located at Tsim ShaTsui, Hong Kong, is scheduled to open in the first quarter of 2019. The hotel will have 413guest rooms, eight dining options and a fitness centre, swimming pool and the first urbansetting for Asaya, Rosewood’s innovative holistic wellness concept. The Manor Clubexecutive lounge will provide an array of exclusive privileges for its guests and The Pavilionthat embodies the Rosewood’s signature, high-end residential-style meeting and event spaces.Rosewood Residences – 186 luxury accommodations for longer stays – will offer a dedicatedlounge, indoor swimming pool and fitness centre along with special services and amenities forresidents.

The table below sets forth the number of rooms and the Group’s effective interest in its hotelproperties as at 30 June 2018:

No. Name of Hotels

Total Number ofRooms as at30 June 2018

The Group’seffective interest

HONG KONG1 Renaissance Harbour View Hotel . . . . . . . . . . 861 50%2 Grand Hyatt Hong Kong . . . . . . . . . . . . . . . . 542 50%3 Hyatt Regency Hong Kong, Sha Tin . . . . . . . . 562 (1)4 Hyatt Regency Hong Kong, Tsim Sha Tsui . . 381 50%5 Novotel Citygate Hong Kong . . . . . . . . . . . . . 440 20%6 pentahotel Hong Kong, Kowloon . . . . . . . . . . 695 100%

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,481

MAINLAND CHINA7 pentahotel Beijing . . . . . . . . . . . . . . . . . . . . . 307 55%8 New World Shunde Hotel . . . . . . . . . . . . . . . . 370 33%9 New World Wuhan Hotel . . . . . . . . . . . . . . . . 327 60%10 New World Beijing Hotel . . . . . . . . . . . . . . . . 309 70%11 Rosewood Beijing . . . . . . . . . . . . . . . . . . . . . 283 82%

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,596

SOUTHEAST ASIA12 New World Makati Hotel, The Philippines . . . 584 62%13 New World Saigon Hotel, Vietnam . . . . . . . . . 533 67.5%14 Renaissance Riverside Hotel Saigon,

Vietnam . . . . . . . . . . . . . . . . . . . . . . . . . . .336 72%

15 Rosewood Phuket, Thailand . . . . . . . . . . . . . . 71 100%

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,524

Grand Total . . . . . . . . . . . . . . . . . . . . . . . . . . 6,601

Opening in financial year ended30 June 2019

16 Rosewood Hong Kong . . . . . . . . . . . . . . . . . . 599 100%

Note:

(1) Hotel properties in which the Group has development interests. The Group financed the construction costs(occasionally land costs) whilst the corresponding land are provided by other parties. The Group is entitledto share of operation and development profits in accordance with terms and conditions of the respective jointdevelopment agreements.

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Services

The Group is engaged in a diversified range of services businesses, including facilitiesmanagement, construction & transport and strategic investments covering mainly Hong Kongand primarily through its 61.09%-owned subsidiary, NWSH, the shares of which are listed onthe HKSE with a total market capitalisation of HK$52,914.6 million as at 30 June 2018. TheNWSH Group’s services businesses generate recurring cash flows and have a strong trackrecord in Hong Kong.

Department Stores

The Group’s department store development and management operations are undertaken byNWD’s retail arm, New World Development Store, NWDS. As at 30 June 2018, NWDSoperated and managed a total of 35 stores and two shopping malls in Mainland China withtotal GFA of over 1,455,780 sq.m. The department store business operates primarily on aconcessionary basis, and commission income from concessionaire sales contribute asubstantial amount of NWDS’ revenue.

Insurance

The Group is covered by insurance policies arranged with reputable insurance agents whichcover loss of rental, fire, flood, riot, strike, malicious damage, other material damage toproperty and development sites, business interruption and public liability.

The Group believes that its properties are covered with adequate insurance provided byreputable independent insurance companies and with commercially reasonable deductiblesand limits on coverage. Notwithstanding the Group’s insurance coverage, damage to theGroup’s buildings, facilities, equipment, or other properties as a result of occurrences such asfire, floods, water damage, explosion, power loss, typhoons and other natural disasters couldnevertheless have a material adverse effect on the Group’s financial condition and results ofoperations.

Government Regulations

The operations of the Group are subject to various laws and regulations of Hong Kong, thePRC and the other countries and regions in which it has operations. The Group’s activitiesconducted on its investment and development properties are limited by zoning ordinances andother regulations. Developing properties, refurbishment and other re-development projectsrequire government permits, some of which may take longer to obtain than others. From timeto time, new regulations may be imposed on landlords such as mandatory retrofitting ofupgraded safety and fire systems in all buildings. The Group’s properties are subject to routineinspections by government officials with regard to various safety and environmental issues.NWD believes that the Group is in compliance in all material respects with government safetyregulations currently in effect. The Group has not experienced significant problems with anyregulation with regard to these issues, and is not aware of any pending legislation that mighthave a material adverse effect on its properties.

Environmental Matters

NWD believes that the Group is in compliance in all material respects with applicableenvironmental regulations in Hong Kong and the PRC. NWD is not aware of anyenvironmental proceedings or investigations to which it is or might become a party.

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Legal Proceedings

The Group is involved in litigation as part of its day to day business and neither NWD nor anyof its subsidiaries is involved in any litigation which would have a material adverse effect onthe business or financial position of the Group.

Employees

As at 30 June 2018, over 45,000 employees were employed by entities under the Group’smanagement. Remuneration policies are reviewed annually. Remuneration and bonuses areawarded to employees based on individual performances and are in line with market practices.Education subsidies are granted to employees who are taking job-related courses. Periodicin-house training programs are also offered. Under the share options schemes of the Guarantorand all the listed subsidiaries of the Group, options may be granted to certain Directors of theGuarantor and certain employees of the Group to subscribe for shares in the Guarantor and/orthe respective subsidiaries.

The Group has not experienced any strikes or disruptions due to labour disputes. NWDconsiders its relations with its employees to be good.

Principal subsidiaries, joint ventures and associated companies

The principal subsidiaries, principal joint ventures and principal associated companies ofNWD as at 30 June 2018 are set out in notes 49, 50 and 51, respectively of the auditedconsolidated financial statements of NWD for the year ended 30 June 2018.

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BOARD OF DIRECTORS

DIRECTORS OF THE ISSUER

The board of the Issuer is responsible and has general powers for the management and conductof the Issuer’s business. The table below shows certain information in respect of the membersof its board:

Directors

Dr. Cheng Kar-Shun, Henry GBM GBS (Chairman and Managing Director)

Mr. Cheng Kar-Shing, Peter

Dr. Cheng Chi-Kong, Adrian JP

Ms. Cheng Chi-Man, Sonia

Mr. Cheng Chi-Him, Conrad

Mr. Fong Shing-Kwong, Michael

Mr. So Chung-Keung, Alfred

Ms. Huang Shao-Mei, Echo

Mr. Chan Lai-Man, Raymond

Chairman and Managing Director

Dr. Cheng Kar-Shun, Henry GBM GBS (Aged 71)

Dr. Cheng became the Chairman and Managing Director of the Issuer in 1999. He is also adirector of certain subsidiaries of the Issuer. Dr. Cheng is the chairman, the managing directorand the executive director of the Guarantor, the ultimate sole shareholder of the Issuer. He alsoacts as the chairman and executive director of NWS Holdings Limited and Chow Tai FookJewellery Group Limited, the chairman and non-executive director of New World DepartmentStore China Limited and FSE Services Group Limited, the vice-chairman and non-executivedirector of i-CABLE Communications Limited, as well as a non-executive director of SJMHoldings Limited, all being listed public companies in Hong Kong. In addition, Dr. Cheng isthe chairman of New World Hotels (Holdings) Limited and a director of several substantialshareholders of the Guarantor, namely Cheng Yu Tung Family (Holdings) Limited, Cheng YuTung Family (Holdings II) Limited, Chow Tai Fook Capital Limited, Chow Tai Fook(Holding) Limited and Chow Tai Fook Enterprises Limited. He is the chairman of theAdvisory Council for The Better Hong Kong Foundation. In 2001 and 2017, Dr. Cheng wasawarded the Gold Bauhinia Star and the Grand Bauhinia Medal respectively by theGovernment of the Hong Kong Special Administrative Region. Dr. Cheng is the brother of Mr.Cheng Kar-Shing, Peter, the father of Dr. Cheng Chi-Kong, Adrian and Ms. Cheng Chi-Man,Sonia, and the uncle of Mr. Cheng Chi-Him, Conrad.

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Director

Mr. Cheng Kar-Shing, Peter (Aged 66)

Mr. Cheng was appointed as an Executive Director of the Issuer in June 1999. He is also adirector of certain subsidiaries of the Issuer. Mr. Cheng also acts as a non-executive director ofthe Guarantor, the ultimate sole shareholder of the Issuer, and an independent non-executivedirector of King Fook Holdings Limited, a listed public company in Hong Kong. In addition,he is a director of several substantial shareholders of the Guarantor, namely Cheng Yu TungFamily (Holdings) Limited, Cheng Yu Tung Family (Holdings II) Limited, Chow Tai FookCapital Limited, Chow Tai Fook (Holding) Limited and Chow Tai Fook Enterprises Limited.He is also a director of New World Hotels (Holdings) Limited and NWS Service ManagementLimited. Mr. Cheng is committed to community services and is serving as the chairman ofChow Tai Fook Charity Foundation, the chairman of Chow Tai Fook Medical FoundationLimited, the chairman of The Welfare Fund Limited, the vice-chairman of Hong KongEconomic Exchange and a director of Green Council. Mr. Cheng is the University Assemblymember of University of Macau. He is a Fellow of The Hong Kong Institution of Engineers,Hong Kong Institute of Arbitrators, Hong Kong Construction Arbitration Centre and TheChartered Institute of Arbitrators. He is a CEDR Accredited Mediator and on the lists of theMediators of Hong Kong Mediation Accreditation Association Limited, Hong KongInternational Arbitration Centre, Hong Kong Mediation Centre and Financial DisputeResolution Centre. He is on the Panel of Arbitrators of South China International Economicand Trade Arbitration Commission/Shenzhen Court of International Arbitration and anArbitrator of Huizhou Arbitration Commission as well as a member of Society of ConstructionLaw Hong Kong. He is the brother of Dr. Cheng Kar-Shun, Henry, the father of Mr. ChengChi-Him, Conrad as well as the uncle of Dr. Cheng Chi-Kong, Adrian and Ms. ChengChi-Man, Sonia.

Director

Dr. Cheng Chi-Kong, Adrian JP (Aged 39)

Dr. Cheng was appointed as an Executive Director of the Issuer in March 2007. He is adirector of certain subsidiaries of the Issuer. Dr. Cheng is also an Executive Vice-chairmanand the General Manager of the Guarantor, the ultimate sole shareholder of the Issuer, anexecutive director of New World Department Store China Limited and Chow Tai FookJewellery Group Limited, and a non-executive director of Giordano International Limited,i-Cable Communications Limited and New Century Healthcare Holding Co. Limited, all beinglisted public companies in Hong Kong. In addition, he is a director of Chow Tai Fook(Holding) Limited and Chow Tai Fook Enterprises Limited, both being substantialshareholders of the Guarantor. He is also the chairman of New World Group CharityFoundation Limited. Dr. Cheng worked in a major international bank prior to joining theGroup in September 2006 and has substantial experience in corporate finance. Dr. Chengholds a Bachelor of Arts Degree (cum laude) from Harvard University, and was conferred theHonorary Doctorate of Humanities by the Savannah College of Art and Design. He is thevice-chairman of All-China Youth Federation, a member of the Tianjin Municipal Committeeof The Chinese People’s Political Consultative Conference, the chairman of China YoungLeaders Foundation, the honorary chairman of K11 Art Foundation and a member of Board ofthe West Kowloon Cultural District Authority. Dr. Cheng is the son of Dr. Cheng Kar-Shun,Henry and the nephew of Mr. Cheng Kar-Shing, Peter. He is also the brother of Ms. ChengChi-Man, Sonia and the cousin of Mr. Cheng Chi-Him, Conrad.

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Director

Ms. Cheng Chi-Man, Sonia (Aged 37)

Ms. Cheng was appointed as an Executive Director of the Issuer in January 2010. She joinedthe Group in 2008 and is currently a director of certain subsidiaries of the Issuer. Ms. Chengis an executive director of the Guarantor, the ultimate sole shareholder of the Issuer. Shecurrently oversees the hotel division as well as the project management division of the Group.Before joining the Group, she had worked in a major international investment bank and aglobal US private equity firm specialising in real estate investments. Ms. Cheng holds aBachelor of Arts Degree with a concentration in Applied Mathematics from HarvardUniversity in the U.S.A. Ms. Cheng is the chief executive officer of Rosewood Hotel Group,chairperson of the advisory committee of the School of Hotel and Tourism Management at TheChinese University of Hong Kong and member of the advisory committee of the School ofHotel & Tourism Management Industry at The Hong Kong Polytechnic University. She is amember of the Y. Elites Association, the Young Presidents’ Organization and the Hong KongUnited Youth Association, and a non-official member of the Family Council and the AdvisoryCommittee on Gifted Education. She is the daughter of Dr. Cheng Kar-Shun, Henry and theniece of Mr. Cheng Kar-Shing, Peter. She is also the sister of Dr. Cheng Chi-Kong, Adrian andthe cousin of Mr. Cheng Chi-Him, Conrad.

Director

Mr. Cheng Chi-Him, Conrad (Aged 40)

Mr. Cheng was appointed as an Executive Director of the Issuer in January 2010 and is actingas director of certain subsidiaries of the Issuer. He graduated from University of Toronto inCanada with a Bachelor’s Degree majoring in Statistics and has been specialising in projectmanagement of property projects in China since 2005. He is currently a non-executive directorand non-executive chairman of Greenheart Group Limited, a listed public company in HongKong. He is the son of Mr. Cheng Kar-Shing, Peter and the nephew of Dr. Cheng Kar-Shun,Henry. He is also the cousin of Dr. Cheng Chi-Kong, Adrian and Ms. Cheng Chi-Man, Sonia.

Director

Mr. Fong Shing-Kwong, Michael (Aged 70)

Mr. Fong was appointed as an Executive Director of the Issuer in January 2003. He is also adirector of certain subsidiaries of the Issuer. Mr. Fong is an Independent Non-ExecutiveDirector of Chuang’s Consortium International Limited, a listed public company in HongKong, and a Director of several unlisted companies, including NWS Service ManagementLimited, New World Hotels (Holdings) Limited and Kiu Lok Property Services (China) Ltd.Mr. Fong joined the New World Group in 1978 and was appointed as an Executive Director ofNew World Hotels International Limited from 1983 to 1997. He is responsible for hotelcorporate management and project development of the Issuer and the Group. Besides his over40 years of experience in the hospitality industry, Mr. Fong has extensive experience inproperty development, asset and facility management as well as investment business in thePRC.

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Director

Mr. So Chung-Keung, Alfred (Aged 69)

Mr. So was appointed as the Chief Executive Officer of the Issuer in January 2016 and becamea Director of the Issuer in January 2017. He is also an Executive Director of the Guarantor anda director of certain subsidiaries of the Group. Prior to joining the Group, Mr. So worked witha listed company in Hong Kong for over 30 years, having been appointed as a member of itsexecutive committee, and also served as an executive director and a non-executive director ofits subsidiaries. He was also appointed as adviser to a mainland China property developerlisted in Hong Kong. Mr. So has extensive experience in the business world as a veteranproperty development professional, having played pivotal roles in launching a host ofsignificant projects in both Hong Kong and mainland China. Mr. So holds a Master of Sciencedegree in Mathematics from the University of Toronto and is a member of the Hong KongInstitute of Real Estate Administrators. He was also a member of The Community ChestCorporate & Employee Contribution Programme Organising Committee.

Director

Ms. Huang Shao-Mei, Echo (Aged 49)

Ms. Huang was appointed as the Deputy Chief Executive Officer of the Issuer in January 2016and became a Director of the Issuer in January 2017. Ms. Huang has over 20 years ofexperience in the real estate sector, having served in consulting and advisory capacity forinvestment and planning of large-scale property projects in Guangzhou, China for extensiveperiods. These projects include the planning of the underground space along the central axisof Guangzhou Zhujiang New Town and Guangzhou TV Tower for which she has provided thelocal government with professional recommendations on property development and urbanplanning. Prior to joining the Issuer, Ms. Huang held a number of senior positions with aninternational consulting firm. She was appointed as general manager (Southern China) of aHong Kong-listed company overseeing its business development and expansion throughoutthe southern China region. She has proven experience in China’s real estate sector. Ms. Huangis a member of Guangdong Provincial Committee of the Chinese People’s PoliticalConsultative Conference (CPPCC), and a Deputy Secretary-General of Silk Road Chamber ofInternational Commerce.

Director

Mr. Chan Lai-Man, Raymond (Aged 55)

Mr. Chan was appointed as the Deputy Chief Executive Officer of the Issuer in August 2016and became a Director of the Issuer in January 2017. Mr. Chan is currently the head ofmainland China projects for the Group. He oversees and manages all of the Group’s propertydevelopment projects in mainland China with individual GFA up to 10 million sq. ft. Mr. Chanhas been active in the real estate sector for over 30 years. Backed by his extensive experiencein project management, he has participated in various major real estate developments in HongKong and mainland China cities including Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin,Shenyang, Wuhan and others. Prior to joining the Issuer, Mr. Chan worked with a listedcompany in Hong Kong for over 15 years, managing its large-scale projects in Hong Kong andmainland China. Mr. Chan holds a MBA degree and is currently a member of The Hong KongInstitution of Engineers, The Hong Kong Institute of Surveyors, Hong Kong Institute ofConstruction Managers and The Chartered Institute of Buildings.

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DIRECTORS OF THE GUARANTOR

The following table sets forth the names of the directors of NWD (the “Directors”) and theirpositin within NWD:

Executive Directors

Dr. Cheng Kar-Shun, Henry GBM GBS (Chairman)

Dr. Cheng Chi-Kong, Adrian JP (Executive Vice-chairman and General Manager)

Mr. Cheng Chi-Heng

Ms. Cheng Chi-Man, Sonia

Mr. Au Tak-Cheong

Mr. Sitt Nam-Hoi

Mr. So Chung-Keung, Alfred

Non-executive Directors

Mr. Doo Wai-Hoi, William JP (Non-executive Vice-chairman)

Mr. Cheng Kar-Shing, Peter

Ms. Ki Man-Fung, Leonie GBS SBS JP

Independent Non-executive Directors

Mr. Yeung Ping-Leung, Howard

Ms. Cha Mou-Sing, Payson JP

Mr. Cha Mou-Zing, Victor (alternate director to Mr. Cha Mou-Sing, Payson)

Mr. Ho Hau-Hay, Hamilton

Mr. Lee Luen-Wai, John BBS JP

Mr. Liang Cheung-Biu, Thomas

Mr. Ip Yuk-Keung

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Certain additional information in relation to the Directors of NWD is set out below:

Dr. Cheng Kar-Shun, Henry GBM GBS, aged 71, was appointed as Director in October 1972,Executive Director in 1973, became Managing Director from 1989 and Chairman from March2012. Dr. Cheng is a member of the Remuneration Committee and the chairman of theNomination Committee and Executive Committee of the Board of Directors of NWD. Dr.Cheng is the chairman and managing director of the Issuer. He is also the chairman andexecutive director of NWS Holdings Limited and Chow Tai Fook Jewellery Group Limited,the chairman and non-executive director of New World Department Store China Limited andFSE Services Group Limited, the vice-chairman and non-executive director of i-CABLECommunications Limited, and a non-executive director of SJM Holdings Limited, all of themare listed public companies in Hong Kong. Dr. Cheng is also the chairman of New WorldHotels (Holdings) Limited and a director of certain subsidiaries of the Group. He is a directorof Cheng Yu Tung Family (Holdings) Limited, Cheng Yu Tung Family (Holdings II) Limited,Chow Tai Fook Capital Limited, Chow Tai Fook (Holding) Limited and Chow Tai FookEnterprises Limited, all of them are substantial shareholders of NWD. Dr. Cheng is thechairman of the Advisory Council for The Better Hong Kong Foundation, Dr. Cheng wasawarded the Gold Bauhinia Star and the Grand Bauhinia Medal in 2001 and 2017 respectivelyby the Government of the Hong Kong Special Administrative Region. Dr. Cheng is the fatherof Dr. Cheng Chi-Kong, Adrian and Ms. Cheng Chi-Man, Sonia, the brother-in-law of Mr. DooWai-Hoi, William, the brother of Mr. Cheng Kar-Shing, Peter and the uncle of Mr. ChengChi-Heng.

Dr. Cheng Chi-Kong, Adrian JP, aged 39, was appointed as an Executive Director in March2007, and became Executive Director and Joint General Manager from March 2012,re-designated to Executive Vice-chairman and Joint General Manager from April 2015 andre-designated as Executive Vice-chairman and General Manager from March 2017. Dr. Chengis a member of the Executive Committee of the Board of Directors of NWD. Dr. Cheng is anexecutive director of the Issuer. He is also an executive director of New World DepartmentStore China Limited and Chow Tai Fook Jewellery Group Limited, and a non-executivedirector of Giordano International Limited, i-CABLE Communications Limited and NewCentury Healthcare Holding Co. Limited, all being listed public companies in Hong Kong. Heis a director of Chow Tai Fook (Holding) Limited and Chow Tai Fook Enterprises Limited,both are substantial shareholders of NWD. He is also the chairman of New World GroupCharity Foundation Limited and a director of certain subsidiaries of the Group. Dr. Chengworked in a major international bank prior to joining the Group in September 2006 and hassubstantial experience in corporate finance. Dr. Cheng holds a Bachelor of Arts Degree (cum

laude) from Harvard University, and was conferred the Honorary Doctorate of Humanities bythe Savannah College of Art and Design. He is the vice-chairman of All-China YouthFederation, a member of the Tianjin Municipal Committee of The Chinese People’s PoliticalConsultative Conference, the chairman of China Young Leaders Foundation, the honorarychairman of K11 Art Foundation and a member of Board of the West Kowloon CulturalDistrict Authority. He is the son of Dr. Cheng Kar-Shun, Henry, the brother of Ms. ChengChi-Man, Sonia, the nephew of Mr. Doo Wai-Hoi, William and Mr. Cheng Kar-Shing, Peter,and the cousin of Mr. Cheng Chi-Heng.

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Mr. Cheng Chi-Heng, aged 41, was appointed as an Executive Director in June 2010. Mr.Cheng is a member of the Executive Committee of the Board of Directors of NWD. He alsoacts as director of certain subsidiaries of the Group. Mr. Cheng is an executive director ofChow Tai Fook Jewellery Group Limited, a listed public company in Hong Kong. Mr. Cheng isa director of Chow Tai Fook (Holding) Limited and Chow Tai Fook Enterprises Limited, bothare substantial shareholders of NWD. Mr. Cheng worked in Yu Ming Investment ManagementLimited from 1999 to 2000 as a corporate finance executive. He obtained his Bachelor of ArtsDegree majoring in Economics from the University of Western Ontario, Canada in 1999. He isthe son of Mr. Cheng Kar-Shing, Peter, the nephew of Dr. Cheng Kar-Shun, Henry and Mr.Doo Wai-Hoi, William, and the cousin of Dr. Cheng Chi-Kong, Adrian and Ms. ChengChi-Man, Sonia.

Ms. Cheng Chi-Man, Sonia, aged 37, was appointed as an Executive Director in March 2012.Ms. Cheng is a member of the Executive Committee of the Board of Directors of NWD. Shecurrently oversees the hotel division as well as the project management division of the Group.She is also an executive director of the Issuer and a director of certain subsidiaries of theGroup. Before joining the Group in 2008, Ms. Cheng worked in a major internationalinvestment bank and a global US private equity firm specialising in real estate investments.Ms. Cheng holds a Bachelor of Arts Degree with a concentration in Applied Mathematics fromHarvard University in the U.S.A.. Ms. Cheng is the chief executive officer of Rosewood HotelGroup, chairperson of the advisory committee of the School of Hotel and TourismManagement at The Chinese University of Hong Kong and member of the advisory committeeof the School of Hotel & Tourism Management Industry at The Hong Kong PolytechnicUniversity. She is a member of the Y. Elites Association, the Young Presidents’ Organizationand the Hong Kong United Youth Association, and a non-official member of the FamilyCouncil and the Advisory Committee on Gifted Education. Ms. Cheng is the daughter of Dr.Cheng Kar-Shun, Henry, the sister of Dr. Cheng Chi-Kong, Adrian, the niece of Mr. DooWai-Hoi, William and Mr. Cheng Kar-Shing, Peter, and the cousin of Mr. Cheng Chi-Heng.

Mr. Au Tak-Cheong, aged 67, was appointed as an Executive Director in July 2013. Mr. Au isa member of the Executive Committee of the Board of Directors of NWD. Mr. Au joined NWDin 1975. He is currently the Head of the Finance and Accounts and senior management ofNWD and is responsible for overseeing compliance of policy and procedures in relation toaccounting matters of the Group. He possesses over 40 years of experience in finance andaccounting and treasury. He is also a non-executive director of New World Department StoreChina Limited, a listed public company in Hong Kong, and a director of certain subsidiaries ofthe Group.

Mr. Sitt Nam-Hoi, aged 64 was appointed as an Executive Director in June 2018. Mr. Sitt is amember of the Executive Committee of the Board of Directors of NWD. Mr. Sitt joined theGroup and was appointed as Head of Projects (Hong Kong) of NWD in February 2011. He iscurrently the senior director of the Project Management Department of NWD and director ofcertain subsidiaries of the Group. Before joining NWD, he was the project director of a listedpublic company in Hong Kong which he worked for over 25 years. Before that, Mr. Sitt hadbeen working in Buildings Department of the Government of the Hong Kong SpecialAdministrative Region. Mr. Sitt obtained his Bachelor of Architecture and Bachelor of Arts inArchitectural Studies from the University of Hong Kong. He is a Registered Architect, anAuthorised Person and is responsible for overseeing all project management matters for allproperty development projects of the Group in Hong Kong. He has extensive projectmanagement experience and participated in various significant projects in Hong Kong andmainland China.

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Mr. So Chung-Keung, Alfred, aged 69, was appointed as an Executive Director in June 2018.Mr. So is a member of the Executive Committee of the Board of Directors of NWD. Mr. Sojoined the Group as the chief executive officer of the Issuer in January 2016. He is currently adirector and chief executive officer of the Issuer and director of certain subsidiaries of theGroup. Prior to joining the Group, Mr. So worked with a listed group in Hong Kong for over30 years. Mr. So previously served as executive director and non-executive director of a HongKong listed public company and was appointed as adviser to a Hong Kong listed mainlandChina property developer. He is currently a member of the Hong Kong Institute of Real EstateAdministrators and a member of The Community Chest Corporate & Employee ContributionProgramme Organising Committee. Mr. So received a Master of Science degree inMathematics from the University of Toronto. He has extensive experience in the businessworld as a veteran property development professional, having played pivotal roles inlaunching a host of significant projects in both Hong Kong and mainland China.

Mr. Doo Wai-Hoi, William JP, aged 74, was appointed as the Vice-chairman andNon-executive Director in July 2013. Mr. Doo is also a non-executive director of LifestyleInternational Holdings Limited upon redesignation from executive director on 11 June 2015and an independent non-executive director of Shanghai Industrial Urban Development GroupLimited, both being listed public companies in Hong Kong. Mr. Doo is also a director ofcertain subsidiaries of the Group. He is the chairman and director of Fungseng ProsperityHoldings Limited. Mr. Doo is a Justice of the Peace appointed by the Government of the HongKong Special Administrative Region. He is also the Honorary Consul General of the Kingdomof Morocco in Hong Kong and Macau, and a Governor of the Canadian Chamber of Commercein Hong Kong. He was awarded the Chevalier de la Légion d’Honneur by the Republic ofFrance in 2008. Mr. Doo is the brother-in-law of Dr. Cheng Kar-Shun, Henry and Mr. ChengKar-Shing, Peter, and the uncle of Dr. Cheng Chi-Kong, Adrian, Ms. Cheng Chi-Man, Soniaand Mr. Cheng Chi-Heng.

Mr. Cheng Kar-Shing, Peter, aged 66, was appointed as a Director in October 1994. Mr.Cheng is also an executive director of the Issuer. He is also an independent non-executivedirector of King Fook Holdings Limited, a listed public company in Hong Kong. Also, he is adirector of Cheng Yu Tung Family (Holdings) Limited, Cheng Yu Tung Family (Holdings II)Limited, Chow Tai Fook Capital Limited, Chow Tai Fook (Holding) Limited and Chow TaiFook Enterprises Limited, all of them are substantial shareholders of NWD. Mr. Cheng is adirector of New World Hotels (Holdings) Limited, NWS Service Management Limited andcertain subsidiaries of the Group. Mr. Cheng is committed to community services and isserving as the chairman of Chow Tai Fook Charity Foundation, the chairman of Chow TaiFook Medical Foundation Limited, the chairman of The Welfare Fund Limited, thevice-chairman of Hong Kong Economic Exchange and a director of Green Council. He is theUniversity Assembly member of University of Macau. He is a Fellow of The Hong KongInstitution of Engineers, Hong Kong Institute of Arbitrators, Hong Kong ConstructionArbitration Centre and The Chartered Institute of Arbitrators. He is a CEDR AccreditedMediator and on the lists of the Mediators of Hong Kong Mediation Accreditation AssociationLimited, Hong Kong International Arbitration Centre, Hong Kong Mediation Centre andFinancial Dispute Resolution Centre. He is on the Panel of Arbitrators of South ChinaInternational Economic and Trade Arbitration Commission/Shenzhen Court of InternationalArbitration and an Arbitrator of Huizhou Arbitration Commission as well as a Member ofSociety of Construction Law Hong Kong. Mr. Cheng is the brother of Dr. Cheng Kar-Shun,Henry, the brother-in-law of Mr. Doo Wai-Hoi, William, the father of Mr. Cheng Chi-Heng,and the uncle of Dr. Cheng Chi-Kong, Adrian and Ms. Cheng Chi-Man, Sonia.

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Ms. Ki Man-Fung, Leonie GBS, SBS, JP, aged 71, was appointed as a Non-executive Directorin December 2008 and was re-designated as Executive Director in March 2012 andre-designated as Non-executive Director in June 2018. Ms. Ki has been the managing directorof New World China Enterprises Projects Limited (a subsidiary of NWD) since 1997 and isalso a director of certain subsidiaries of the Group. Ms. Ki is an independent non-executivedirector of Clear Media Limited and Sa Sa International Holdings Limited, both are listedpublic companies in Hong Kong. Ms. Ki is also a director of Chow Tai Fook CharityFoundation. Ms. Ki has more than 30 years’ experience in integrated communication andmarketing services. She was the founder, partner and chairman/chief executive officer of GreyHong Kong Advertising Limited and Grey China Advertising Limited. Ms. Ki is committed tothe community and public services. She was the first chief executive of The Better Hong KongFoundation. She is currently a director of PMQ Management Company Limited, founder andhonorable president of Wu Zhi Qiao Charitable Foundation, a member of the Asian AdvisoryBoard of Cheng Yu Tung Management Institute, Richard Ivey School of Business (Universityof Western Ontario, Canada), vice chairman of the Committee of Overseers of MorningsideCollege at the Chinese University of Hong Kong, a member of the Advisory Board of theEMBA Programme of The Chinese University of Hong Kong, a member of the executivecommittee of Youth Outreach, vice-chairperson, council of the Musicus Society, a councilmember of The University of Hong Kong and a member of Hong Kong Institute ofConstruction Management Board. Ms. Ki is a recipient of Honorary University Fellowshipfrom The Open University of Hong Kong and The University of Hong Kong. She has beenawarded the honour of Beta Gamma Sigma by the Faculty of Business Administration of TheChinese University of Hong Kong, and Justice of the Peace, the Silver Bauhinia Star and theGold Bauhinia Star by the Government of the Hong Kong Special Administrative Region.

Mr. Yeung Ping-Leung, Howard, aged 61, was appointed as a Director in November 1985. Mr.Yeung is a member of the Audit Committee and the Remuneration Committee of the Board ofDirectors of NWD. He is also an independent non-executive director of Miramar Hotel andInvestment Company, Limited, a listed public company in Hong Kong.

Mr. Cha Mou-Sing, Payson JP, aged 76, was appointed as a Director in April 1989. Mr. Cha isa member of the Audit Committee and the Remuneration Committee of the Board of Directorsof NWD. Mr. Cha is also the chairman of HKR International Limited and the non-executivechairman of Hanison Construction Holdings Limited, both of them are listed publiccompanies in Hong Kong. He is also an independent non-executive director of Eagle AssetManagement (CP) Limited — Manager of Champion Real Estate Investment Trust which islisted on The Stock Exchange of Hong Kong Limited, the chairman of Mingly Corporationand an independent non-executive director of Hong Kong International Theme Parks Limited.

Mr. Cha Mou-Zing, Victor (Alternate Director to Mr. Cha Mou-Sing, Payson), aged 69, wasappointed as an Alternate Director in September 2000. Mr. Cha is the deputy chairman andmanaging director of HKR International Limited, and an independent non-executive directorof SOHO China Limited, both are listed public companies in Hong Kong. He has extensiveexperience in the textile manufacturing and real estate businesses.

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Mr. Ho Hau-Hay, Hamilton, aged 67, was appointed as a Non-executive Director in August2004 and was re-designated as Independent Non-executive Director in November 2007. Mr.Ho was an Alternate Director of NWD from 7 January 2004 to 29 August 2004. Mr. Ho is thechairman of the Remuneration Committee and a member of the Audit Committee of the Boardof Directors of NWD. He is also an independent non-executive director of King FookHoldings Limited (a listed public company in Hong Kong), and an executive director ofHonorway Investments Limited and Tak Hung (Holding) Company Limited.

Mr. Lee Luen-Wai, John BBS, JP, aged 69, was appointed as an Independent Non-executiveDirector in August 2004. Mr. Lee is the chairman of the Audit Committee, and a member of theRemuneration Committee and the Nomination Committee of the Board of Directors of NWD.Mr. Lee is also the managing director and chief executive officer of Lippo Limited, anexecutive director and the chief executive officer of Lippo China Resources Limited andHongkong Chinese Limited as well as an independent non-executive director of UMPHealthcare Holdings Limited, all being listed public companies in Hong Kong. Mr. Lee is alsoa non-executive non-independent chairman of Healthway Medical Corporation Limited, acompany listed on the sponsor-supervised listing platform of the Singapore ExchangeSecurities Trading Limited. Mr. Lee is a Fellow of The Institute of Chartered Accountants inEngland and Wales, the Association of Chartered Certified Accountants and the Hong KongInstitute of Certified Public Accountants. He was a partner of Price Waterhouse (nowPricewaterhouseCoopers) in Hong Kong and has extensive experience in corporate financeand capital markets. Mr. Lee is an Honorary Fellow of the City University of Hong Kong anda Justice of Peace in Hong Kong. He serves as a member on a number of Public Boards andCommittees including the Chairman of the Investment Committee of the Hospital AuthorityProvident Fund Scheme, a member of the Public Service Commission and the Chairman of theHospital Governing Committee of Hong Kong Children’s Hospital.

Mr. Liang Cheung-Biu, Thomas, aged 71, was appointed as a Non-executive Director inAugust 2004 and was re-designated as Independent Non-executive Director in March 2012.Mr. Liang is a member of the Audit Committee and the Nomination Committee of the Board ofDirectors of NWD. Mr. Liang is an independent non-executive director of Miramar Hotel andInvestment Company, Limited (a listed public company in Hong Kong) and the group chiefexecutive of Wideland Investors Limited. Mr. Liang is a member of the Council of TheChinese University of Hong Kong, a member of the Court of the Hong Kong BaptistUniversity and a member of the Board of Governors, Hang Seng Management College. He hasextensive experience in financial management, corporate finance, banking, real estatedevelopment and equity investment.

Mr. Ip Yuk-Keung, aged 66, was appointed as an Independent Non-executive Director in June2018. Mr. Ip is a member of the Audit Committee and the Nomination Committee of the Boardof Directors of NWD. Mr. Ip is an independent non-executive director of Hopewell HoldingsLimited, TOM Group Limited, Power Assets Holdings Limited and Lifestyle InternationalHoldings Limited, all being listed public companies in Hong Kong. He is also the executivedirector and chief executive officer of LHIL Manager Limited which is the trustee-manager ofLangham Hospitality Investments (a listed fixed single investment trust) and LanghamHospitality Investments Limited, and a non-executive director of Eagle Asset Management(CP) Limited, as manager of Champion Real Estate Investment Trust (a listed real estateinvestment trust). Mr. Ip is an international banking and real estate executive with 33 years ofexperience at Citigroup, First National Bank of Chicago, Wells Fargo and Merrill Lynch inHong Kong, Asia and the United States. His areas of expertise are in real estate, corporatebanking, risk management, transaction banking and wealth management. Mr. Ip is anHonorary Professor of Business of Lingnan University, a Professor of Practice (InternationalBanking and Real Estate) at The Hong Kong Polytechnic University, an Adjunct Professor of

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City University of Hong Kong, The Hong Kong University of Science and Technology andHang Seng Management College, an Adjunct Distinguished Professor in Practice ofUniversity of Macau, a Council Member of The Hong Kong University of Science andTechnology, a trustee of the Board of Trustees at Washington University in St. Louis, and aVice Chairman of the Board of Governors of World Green Organization Limited. He is amember of the Committee on Certification for Principalship under the Education Bureau ofthe Government of the Hong Kong Special Administrative Region. Mr. Ip holds a Bachelor ofScience degree at Washington University in St. Louis (summa cum laude) and Master ofScience degrees at Cornell University and Carnegie-Mellon University. He is an HonoraryFellow of Vocational Training Council.

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SUBSTANTIAL SHAREHOLDERS’ AND DIRECTORS’ INTERESTS

DIRECTORS’ INTERESTS IN SECURITIES

As at 30 June 2018, the interests of the Directors and their associates in shares, underlyingshares and debentures of NWD or any of its associated corporations which were recorded inthe register required to be kept by NWD under Section 352 of the SFO were as follows:

(I) Long positions in shares

Number of shares

Approximate% to therelevant

issued sharecapital as at30 June 2018

Personalinterests

Familyinterests

Corporateinterests Total

NWD(Ordinary shares)Mr. Doo Wai-Hoi, William . . . . . . . . . — 13,137,116 16,136,692(1) 29,273,808 0.29Dr. Cheng Chi-Kong, Adrian . . . . . . . . 700,000 — — 700,000 0.01Mr. Cheng Kar-Shing, Peter . . . . . . . . . — 566,567 — 566,567 0.01Mr. Ho Hau-Hay, Hamilton . . . . . . . . . — — 878,353(2) 878,353 0.01Mr. Liang Cheung-Biu, Thomas . . . . . . 10,429 — — 10,429 0.00Ms. Ki Man-Fung, Leonie . . . . . . . . . . 90,000 — — 90,000 0.00New World Department Store

China Limited(Ordinary shares of HK$0.10 each)Ms. Ki Man-Fung, Leonie . . . . . . . . . . 20,000 — — 20,000 0.00Ms. Cheng Chi-Man, Sonia . . . . . . . . . 92,000 — — 92,000 0.01NWS Holdings Limited(Ordinary shares of HK$1.00 each)Dr. Cheng Kar-Shun, Henry . . . . . . . . . 18,349,571 — 12,000,000(3) 30,349,571 0.78Mr. Doo Wai-Hoi, William . . . . . . . . . — — 6,802,903(4) 6,802,903 0.17Mr. Cheng Kar-Shing, Peter . . . . . . . . . 320,097 — 6,463,227(5) 6,783,324 0.17Ms. Ki Man-Fung, Leonie . . . . . . . . . . 15,000 — — 15,000 0.00Sun Legend Investments Limited(Ordinary shares)Mr. Cheng Kar-Shing, Peter . . . . . . . . . — — 500(6) 500 50.00

Notes:

(1) These shares are beneficially owned by companies which are wholly-owned by Mr. Doo Wai-Hoi,William.

(2) These shares are beneficially owned by a company in which Mr. Ho Hau-Hay, Hamilton owns 40.0%of its issued share capital.

(3) These shares are beneficially owned by a company which is wholly-owned by Dr. Cheng Kar-Shun,Henry.

(4) These shares are beneficially owned by a company which is wholly-owned by Mr. Doo Wai-Hoi,William.

(5) These shares are beneficially owned by a company which is wholly-owned by Mr. Cheng Kar-Shing,Peter.

(6) These shares are beneficially owned by a controlled corporation of Mr. Cheng Kar-Shing, Peter.

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(II) Long positions in share options

(i) NWD

Name of Director Date of grantExercisable

PeriodNumber of

share options

Exercisableprice per

share

(Note) HK$

Dr. Cheng Kar-Shun, Henry . . . . . . . . 10 June 2016 (1) 10,675,637 7.5403 July 2017 (2) 2,000,000 10.036

Mr. Doo Wai-Hoi, William . . . . . . . . . 3 July 2017 (2) 100,000 10.036Dr. Cheng Chi-Kong, Adrian . . . . . . . 9 March 2016 (3) 3,800,000 7.200

10 June 2016 (1) 3,736,471 7.5403 July 2017 (2) 2,000,000 10.036

Mr. Yeung Ping-Leung, Howard . . . . . 10 June 2016 (1) 533,779 7.5403 July 2017 (2) 100,000 10.036

Mr. Cha Mou-Sing, Payson . . . . . . . . . 10 June 2016 (1) 533,779 7.5403 July 2017 (2) 100,000 10.036

Mr. Cheng Kar-Shing, Peter . . . . . . . . 10 June 2016 (1) 533,779 7.5403 July 2017 (2) 100,000 10.036

Mr. Ho Hau-Hay, Hamilton . . . . . . . . . 10 June 2016 (1) 333,779 7.5403 July 2017 (2) 100,000 10.036

Mr. Lee Luen-Wai, John . . . . . . . . . . . 10 June 2016 (1) 533,779 7.5403 July 2017 (2) 100,000 10.036

Mr. Liang Cheung-Biu, Thomas . . . . . 10 June 2016 (1) 533,779 7.5403 July 2017 (2) 100,000 10.036

Ms. Ki Man-Fung, Leonie . . . . . . . . . . 10 June 2016 (4) 1,602,016 7.5403 July 2017 (2) 100,000 10.036

Mr. Cheng Chi-Heng . . . . . . . . . . . . . . 10 June 2016 (1) 533,779 7.5403 July 2017 (2) 100,000 10.036

Ms. Cheng Chi-Man, Sonia . . . . . . . . . 10 June 2016 (1) 3,202,688 7.5403 July 2017 (2) 100,000 10.036

Mr. Au Tak-Cheong . . . . . . . . . . . . . . . 10 June 2016 (1) 866,693 7.5403 July 2017 (2) 300,000 10.036

Mr. Sitt Nam-Hoi . . . . . . . . . . . . . . . . . 10 June 2016 (1) 767,827 7.5403 July 2017 (2) 300,000 10.036

Mr. So Chung-Keung, Alfred . . . . . . . 3 July 2017 (2) 2,300,000 10.036

36,087,785

Notes:

(1) Divided into 4 tranches, exercisable from 10 June 2016, 10 June 2017, 10 June 2018 and 10June 2019 respectively to 9 June 2020.

(2) Dividend into 4 tranches, exercisable from 3 July 2017, 3 July 2018, 3 July 2019 and 3 July2020 respectively to 2 July 2021.

(3) Divided into 4 tranches, exercisable from 9 March 2016, 9 March 2017, 9 March 2018 and 9March 2019 respectively to 8 March 2020.

(4) Divided into 3 tranches, exercisable from 10 June 2017, 10 June 2018 and 10 June 2019respectively to 9 June 2020.

(5) The cash consideration paid by each Director for each grant of share options is HK$10.0.

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(ii) NWS Holdings Limited

Name of Director Date of grantExercisable

PeriodNumber of

share options

Exercisableprice per

share

(Note) HK$

Dr. Cheng Kar-Shun, Henry . . . . . . . 9 March 2015 (1) 7,420,739 14.120

Notes:

(1) 60% of the share options are exercisable from 9 May 2015 to 8 March 2020 while theremaining 40.0% of the share options are divided into two tranches, exercisable from 9March 2016 and 9 March 2017, respectively to 8 March 2020.

(2) The cash consideration paid by the above Director for grant of the share options is HK$10.0.

(III) Long positions in debentures

(i) the Issuer

Amount of debentures issued by the Issuer

Approximate% to the total

amount ofdebentures in

issue as at30 June 2018Name of Director

Personalinterests

Familyinterests

Corporateinterests Total

HK$ HK$ HK$ HK$

Mr. Doo Wai-Hoi, William . . — 54,600,000(1) 892,620,000(2) 947,220,000 9.25Mr. Cheng Kar-Shing, Peter . — 15,600,000(3) — 15,600,000 0.15Mr. Ip Yuk-Keung . . . . . . . . — 3,900,000(4) — 3,900,000 0.04

— 74,100,000 892,620,000 966,720,000

Notes:

(1) These debentures are held by the spouse of Mr. Doo Wai-Hoi, William, all of which wereissued in US$ and had been translated into HK$ using the rate of US$1.0 = HK$7.8.

(2) These debentures are held by companies which are wholly-owned by Mr. Doo Wai-Hoi,William, of which HK$744,120,000 debentures were issued in US$ and had been translatedinto HK$ using the rate of US$1.0 = HK$7.8.

(3) These debentures are jointly-held by Mr. Cheng Kar-Shing, Peter and his spouse, all of whichwere issued in US$ and had been translated into HK$ using the rate of US$1.0 = HK$7.8.

(4) These debentures are jointly-held by Mr. Ip Yuk-Keung and his spouse, all of which were

issued in US$ and had been translated into HK$ using the rate of US$1.0 = HK$7.8.

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(ii) Fita International Limited (“Fita”)

Amount of debentures issued by Fita

Approximate% to the total

amount ofdebentures in

issue as at30 June 2018Name of Director Personal interests Family interests Corporate interests Total

US$ US$ US$ US$

Mr. Doo Wai-Hoi, William . . — 2,900,000 12,890,000(1) 15,790,000 2.11Mr. Lee Luen-Wai, John . . . . 1,000,000 1,000,000 — 2,000,000 0.27

1,000,000 3,900,000 12,890,000 17,790,000

Note:

(1) These debentures are beneficially owned by companies which are wholly-owned by Mr. DooWai-Hoi, William.

(iii) NWD (MTN) Limited (“NWD (MTN)”)

Amount of debentures issued by NWD (MTN)

Approximate% to the total

amount ofdebentures in

issue as at30 June 2018Name of Director

Personalinterests

Familyinterests

Corporateinterests Total

HK$ HK$ HK$ HK$

Mr. Doo Wai-Hoi, William . . — 23,400,000(1) 156,000,000(2) 179,400,000 0.82Ms. Ki Man-Fung, Leonie . . 11,800,000(3) — — 11,800,000 0.05

11,800,000 23,400,000 156,000,000 191,200,000

Notes:

(1) These debentures were issued in US$ and had been translated into HK$ using the rate ofUS$1.0 = HK$7.8.

(2) These debentures are beneficially owned by a company which is wholly-owned by Mr. DooWai-Hoi, William and were issued in US$ and had been translated into HK$ using the rate ofUS$1.0 = HK$7.8.

(3) This amount includes HK$7,800,000 debentures which were issued in US$ and had beentranslated into HK$ using the rate of US$1.0 = HK$7.8.

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(iv) NWD Finance (BVI) Limited (“NWD Finance”)

Amount of debentures issued by NWD Finance

Approximate% to the total

amount ofdebentures in

issue as at30 June 2018Name of Director

Personalinterests

Familyinterests

Corporateinterests Total

US$ US$ US$ US$

Mr. Doo Wai-Hoi, William . . — — 21,550,000(1) 21,550,000 1.80Ms. Ki Man-Fung, Leonie . . 1,000,000 — — 1,000,000 0.08

1,000,000 — 21,550,000 22,550,000

Note:

(1) These debentures are beneficially owned by companies which are wholly-owned by Mr. DooWai-Hoi, William.

Substantial Shareholders’ Interests in Securities

As at 30 June 2018, the interests or short positions of substantial shareholders (as defined inthe Listing Rules) in the shares and underlying shares of NWD as recorded in the registerrequired to be kept under Section 336 of the SFO were as follows:

Long positions in the shares of NWD

Number of shares of NWDApproximate %of shareholding

as at30 June 2018Name

Beneficialinterests

Interests ofcontrolled

corporation Total

Cheng Yu Tung Family (Holdings)Limited (“CYTFH”)(1) . . . . . . . . . — 4,535,634,444 4,535,634,444 44.41

Cheng Yu Tung Family (Holdings II)Limited (“CYTFH-II”)(2) . . . . . . . — 4,535,634,444 4,535,634,444 44.41

Chow Tai Fook CapitalLimited (“CTFC”)(3) . . . . . . . . . . . — 4,535,634,444 4,535,634,444 44.41

Chow Tai Fook (Holding)Limited (“CTFHL”)(4) . . . . . . . . . — 4,535,634,444 4,535,634,444 44.41

Chow Tai Fook EnterprisesLimited (“CTFE”)(5) . . . . . . . . . . . 4,123,491,293 412,143,151 4,535,634,444 44.41

Notes:

(1) CYTFH holds 48.98% direct interest in CTFC and is accordingly deemed to have an interest in the shares ofNWD deemed to be interested by CTFC.

(2) CYTFH-II holds 46.65% direct interest in CTFC and is accordingly deemed to have an interest in the sharesof NWD deemed to be interested by CTFC.

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(3) CTFC holds 81.03% direct interest in CTFHL and is accordingly deemed to have an interest in the shares ofNWD deemed to be interested by CTFHL.

(4) CTFHL holds 100% direct interest in CTFE and is accordingly deemed to have an interest in the shares ofNWD interested by or deemed to be interested by CTFE.

(5) CTFE together with its subsidiaries.

Save as disclosed above, no other person was recorded in the register kept pursuant to Section336 of the SFO having an interest in 10.0% or more of the issued share capital of NWD as at30 June 2018.

Other Person’s Interests in Securities

As at 30 June 2018, the interests or short positions of persons (other than Directors or chiefexecutive or substantial shareholders (as defined in the Listing Rules) of NWD) in the sharesor underlying shares of NWD as recorded in the register required to be kept under Section 336of the SFO were as follows:

Long positions in Shares

Name Capacity

Number ofshares/

underlyingshares held Total

Approximate% of

shareholdingas at

30 June 2018

BlackRock, Inc. . . . . Interest of controlledcorporation 538,886,286 538,886,286(1) 5.28

Short positions in Shares

Name Capacity

Number ofshares/underlying

shares held Total

Approximate% of

shareholdingas at

30 June 2018

BlackRock, Inc. . . . . Interest of controlledcorporation 18,531,618 18,531,618(2) 0.18

Notes:

(1) The interests included interests in 661,000 underlying shares through its holding of certain cash settledunlisted derivatives.

(2) The interests included interests in 7,649,431 underlying shares through its holding of certain cash settledunlisted derivatives.

Save as disclosed above, there is no other interest recorded in the register that is required to bekept under section 336 of the SFO as at 30 June 2018.

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PRC CURRENCY CONTROLS

The following is a general description of certain currency controls in the PRC and is based onthe law and relevant interpretations thereof in effect as at the date of this Offering Circular,all of which are subject to change, and does not constitute legal advice. It does not purport tobe a complete analysis of all applicable currency controls in the PRC relating to the Notes.Prospective holders of Notes who are in any doubt as to PRC currency controls are advised toconsult their own professional advisers.

Remittance of Renminbi into and outside the PRC

Renminbi is not a freely convertible currency. The remittance of Renminbi into and outsidethe PRC is subject to controls imposed under PRC law.

Current Account Items

Under PRC foreign exchange control regulations, current account items refer to anytransaction for international receipts and payments involving goods, services, earnings andother frequent transfers.

Prior to July 2009, all current account items were required to be settled in foreign currencieswith limited exceptions. Following progressive reforms, Renminbi settlement of imports andexports of goods and of services and other current account items became permissiblenationwide in 2012.

Since July 2013, the procedures for cross-border Renminbi trade settlement under currentaccount items have been simplified and trades through e-commerce can also be settled underin Renminbi under the current regulatory regime. A cash pooling arrangement for qualifiedmultinational enterprise group companies was introduced in late 2014, under which amultinational enterprise group can process cross-border Renminbi payments and receipts forcurrent account items on a collective basis for eligible member companies in the group. Inaddition, the eligibility requirements for multinational enterprise groups have been loweredand the cap for net cash inflow has been increased in September 2015.

The PBoC also permit enterprises in the China (Shanghai) Free Trade Pilot Zone (“ShanghaiFTZ”) to establish an additional cash pool in the local scheme in the Shanghai FTZ, but eachonshore company within the group may only elect to participate in one cash poolingprogramme. In November 2016, PBoC Shanghai Headquarters further allowed banks inShanghai to provide multinational enterprise groups with services of full-function onshorecash pooling, which will enable broader scope for utilising pooled cash.

The regulations referred to above are subject to interpretation and application by the relevantPRC authorities. Local authorities may adopt different practices in applying these regulationsand impose conditions for settlement of current account items.

Capital Account Items

Under PRC foreign exchange control regulations, capital account items include cross-bordertransfers of capital, direct investments, securities investments, derivative products and loans.Capital account payments are generally subject to approval of, and/or registration or filingwith, the relevant PRC authorities.

Until recently, settlement of capital account items, for example, the capital contribution offoreign investors to foreign invested enterprises in the PRC, were generally required to be

157

made in foreign currencies. Under progressive reforms, foreign enterprises are now permitteduse Renminbi to settle all capital account items that can be settled in foreign currencies.Cross-border Renminbi payment infrastructure and trading facilities are being improved.Approval, registration and filing requirements specifically for capital account payments inRenminbi are being removed gradually.

PRC entities are also permitted to borrow Renminbi-denominated loans from foreign lenders(which are referred to as “foreign debt”) and lend Renminbi-denominated loans to foreignborrowers (which are referred to as “outbound loans”), as long as such PRC entities have thenecessary quota, approval or registration. PRC entities may also denominate security orguarantee arrangements in Renminbi and make Renminbi payments thereunder to parties inthe PRC as well as other jurisdictions (which is referred to as “cross-border security”). Undercurrent rules promulgated by the State Administration of Foreign Exchange of the PRC(“SAFE”) and PBoC, foreign debts borrowed, outbound loans extended, and the cross-bordersecurity provided by a PRC onshore entity (including a financial institution) in Renminbishall, in principle, be regulated under the current PRC foreign debt, outbound loan andcross-border security regimes applicable to foreign currencies. After piloting in the free tradezones, PBoC and SAFE launched a nation-wide system of macro-prudential management oncross-border financing in 2016, which provides for a unified regime for financingsdenominated in both foreign currencies and Renminbi.

Since September 2015, qualified multinational enterprise groups can extendRenminbi-denominated loans to, or borrow Renminbi-denominated loans from, eligibleoffshore member entities within the same group by leveraging the cash pooling arrangements.The Renminbi funds will be placed in a special deposit account and may not be used to investin stocks, financial derivatives, or non-self-use real estate assets, or purchase wealthmanagement products or extend loans to enterprises outside the group. Enterprises within theShanghai FTZ may establish another cash pool under the Shanghai FTZ rules to extendinter-company loans, although Renminbi funds obtained from financing activities may not bepooled under this arrangement.

The securities markets, specifically the Renminbi Qualified Foreign Institutional Investor(“RQFII”) regime and the China Interbank Bond Market (“CIBM”), have been furtherliberalised for foreign investors. PBoC has relaxed the quota control for RQFII, and has alsoexpanded the list of eligible foreign investors in CIBM, removed quota restriction, andgranted more flexibility for the settlement agents to provide the relevant institutions withmore trading facilities (for example, in relation to derivatives for hedging foreign exchangerisk).

Interbank foreign exchange market is also opening-up. In January 2016, CFETS set forthqualifications, application materials and procedure for foreign participating banks (whichneeds to have a relatively large scale of Renminbi purchase and sale business and internationalinfluence) to access the inter-bank foreign exchange market.

Recent reforms introduced were aimed at controlling the remittance of Renminbi for paymentof transactions categorised as capital account items. There is no assurance that the PRCGovernment will continue to gradually liberalise the control over Renminbi payments ofcapital account item transactions in the future. The relevant regulations are relatively new andwill be subject to interpretation and application by the relevant PRC authorities. Further, ifany new PRC regulations are promulgated in the future which have the effect of permitting orrestricting (as the case may be) the remittance of Renminbi for payment of transactionscategorised as capital account items, then such remittances will need to be made subject to thespecific requirements or restrictions set out in such rules.

158

TAXATION

The following summary of certain Cayman Islands, Hong Kong and PRC tax consequences ofthe purchase, ownership and disposition of the Notes is based upon applicable laws,regulations, rulings and decisions in effect as of the date of this Offering Circular, all of whichare subject to change (possibly with retroactive effect). This discussion does not purport to bea comprehensive description of all the tax considerations that may be relevant to a decision topurchase, own or dispose of the Notes and does not purport to deal with consequencesapplicable to all categories of investors, some of which may be subject to special rules.Neither these statements nor any other statements in this Offering Circular are to be regardedas advice on the tax position of any holder of the Notes or any persons acquiring, selling orotherwise dealing in the Notes or on any tax implications arising from the acquisition, sale orother dealings in respect of the Notes. Persons considering the purchase of the Notes shouldconsult their own tax advisers concerning the possible tax consequences of buying, holding orselling any Notes under the laws of their country of citizenship, residence or domicile.

Cayman Islands

Cayman Islands Taxation

The following is a discussion on certain Cayman Islands income tax consequences of aninvestment in the Notes. The discussion is a general summary of present law, which is subjectto prospective and retroactive change. It is not intended as tax advice, does not consider anyinvestor’s particular circumstances, and does not consider tax consequences other than thosearising under Cayman Islands law.

Payments of interest and principal on the Notes will not be subject to taxation in the CaymanIslands and no withholding will be required on the payment of interest and principal to anyholder of the Notes, nor will gains derived from the disposal of the Notes be subject toCayman Islands income or corporation tax. The Cayman Islands currently have no income,corporation or capital gains tax and no estate duty, inheritance tax or gift tax.

No stamp duty is payable in respect of the issue of the Notes and the Note Certificate. Aninstrument of transfer in respect of a Note or the Note Certificate is stampable if executed inor brought into the Cayman Islands.

The Issuer has been incorporated under the laws of the Cayman Islands as an exemptedcompany with limited liability and, as such, may obtain an undertaking from the Governor inCabinet of the Cayman Islands that, in accordance with section 6 of the Tax Concessions Law(2011 Revision) of the Cayman Islands, for a period of 20 years from the date of theundertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied onprofits, income, gains or appreciations shall apply to the Issuer or its operations and that inaddition, no tax is to be levied on profits, income, gains or appreciations or which is in thenature of estate duty or inheritance tax shall be payable on or in respect of the shares,debentures or other obligations of the Issuer.

Hong Kong

Withholding tax

No withholding tax is payable in Hong Kong in respect of payments of principal or interest onthe Notes or in respect of any capital gains arising from the sale of the Notes.

159

Profits tax

Hong Kong profits tax is chargeable on every person carrying on a trade, profession orbusiness in Hong Kong in respect of profits arising in or derived from Hong Kong from suchtrade, profession or business (excluding profits arising from the sale of capital assets).

Interest on the Notes may be deemed to be profits arising in or derived from Hong Kong froma trade, profession or business carried on in Hong Kong in the following circumstances:

(i) interest on the Notes is derived from Hong Kong and is received by or accrues to acorporation carrying on a trade, profession or business in Hong Kong;

(ii) interest on the Notes is derived from Hong Kong and is received by or accrues to aperson, other than a corporation, carrying on a trade, profession or business in HongKong and is in respect of the funds of that trade, profession or business;

(iii) interest on the Notes is received by or accrues to a financial institution (as defined in theInland Revenue Ordinance (Cap. 112) of Hong Kong (the “IRO”)) and arises through orfrom the carrying on by the financial institution of its business in Hong Kong; or

(iv) interest on the Notes is received by or accrues to a corporation, other than a financialinstitution, and arises through or from the carrying on in Hong Kong by the corporationof its intra-group financing business (within the meaning of section 16(3) of the IRO).

Sums received by or accrued to a financial institution by way of gains or profits arisingthrough or from the carrying on by the financial institution of its business in Hong Kong fromthe sale, disposal and redemption of Notes will be subject to Hong Kong profits tax. Sumsreceived by or accrued to a corporation, other than a financial institution, by way of gains orprofits arising through or from the carrying on in Hong Kong by the corporation of itsintra-group financing business (within the meaning of section 16(3) of the IRO) from the sale,disposal or other redemption of Notes will be subject to Hong Kong profits tax.

Sums derived from the sale, disposal or redemption of Notes will be subject to Hong Kongprofits tax where received by or accrued to a person, other than a corporation, who carries ona trade, profession or business in Hong Kong and the sum has a Hong Kong source unlessotherwise exempted. The source of such sums will generally be determined by having regardto the manner in which the Notes are acquired and disposed of.

Stamp duty

Stamp duty will not be payable on the issue of Bearer Notes provided that either:

(i) such Bearer Notes are denominated in a currency other than the currency of Hong Kongand are not repayable in any circumstances in the currency of Hong Kong; or

(ii) such Bearer Notes constitute loan capital (as defined in the Stamp Duty Ordinance(Cap. 117) of Hong Kong (the “SDO”)).

If stamp duty is payable, it is payable by the Issuer on the issue of Bearer Notes at a rate of 3per cent. of the market value of the Bearer Notes at the time of issue. No stamp duty will bepayable on any subsequent transfer of Bearer Notes.

160

No stamp duty is payable on the issue of Registered Notes. Stamp duty may be payable on anytransfer of Registered Notes if the relevant transfer is required to be registered in Hong Kong.Stamp duty will, however, not be payable on any transfer of Registered Notes provided thateither:

(i) such Registered Notes are denominated in a currency other than the currency of HongKong and are not repayable in any circumstances in the currency of Hong Kong; or

(ii) such Registered Notes constitute loan capital (as defined in the SDO).

If stamp duty is payable in respect of the transfer of Registered Notes it will be payable at therate of 0.2 per cent. (of which 0.1 per cent. is payable by the seller and 0.1 per cent. is payableby the purchaser) normally by reference to the consideration or its value, whichever is higher.In addition, stamp duty is payable at the fixed rate of HK$5 on each instrument of transferexecuted in relation to any transfer of the Registered Notes if the relevant transfer is requiredto be registered in Hong Kong.

The PRC

The following summary describes the principal PRC tax consequences of ownership of theNotes by beneficial owners who, or which, are not residents of mainland China for PRC taxpurposes. These beneficial owners are referred to as non-PRC Noteholders in this section. Inconsidering whether to invest in the Notes, potential purchasers should consult theirindividual tax advisers with regard to the application of PRC tax laws to their particularsituations as well as any tax consequences arising under the laws of any other tax jurisdiction.Reference is made to PRC taxes from the taxable year beginning on or after 1 January 2008.

Pursuant to the EIT Law and its implementation regulations, enterprises that are establishedunder laws of foreign countries and regions (including Hong Kong, Macau and Taiwan) butwhose “de facto management bodies” are within the territory of the PRC shall be PRC taxresident enterprises for the purpose of the EIT Law and they shall pay enterprise income tax atthe rate of 25% in respect of their income sourced from both within and outside the PRC. Ifrelevant PRC tax authorities decide, in accordance with applicable tax rules and regulations,that the “de facto management body” of the Issuer is within the territory of the PRC, the Issuermay be held to be a PRC tax resident enterprise for the purpose of the EIT Law and be subjectto enterprise income tax at the rate of 25% for its income sourced from both within and outsidePRC. As confirmed by the Issuer, as at the date of this Offering Circular, the Issuer has notbeen notified or informed by the PRC tax authorities that it is considered as a PRC tax residententerprise for the purpose of the EIT Law. On that basis, holders of the Notes will not besubject to withholding tax, income tax or any other taxes or duties (including stamp duty)imposed by any governmental authority in the PRC in respect of the holding of the Notes orany repayment of principal and payment of interest made thereon.

However, there is no assurance that the Issuer will not be treated as a PRC tax residententerprise under the EIT Law and related implementation regulations in the future. Pursuant tothe EIT Law and its implementation regulations, any non-resident enterprise withoutestablishment within the PRC or its income has no actual connection to its establishmentinside the PRC shall pay enterprise income tax at the rate of 10% on the incomes sourcedinside the PRC, and such income tax shall be withheld at source by the PRC entity makingpayment, who shall be obliged to withhold the tax amount from each payment or payment due.Accordingly, in the event the Issuer is deemed to be a PRC tax resident enterprise by the PRCtax authorities in the future, the Issuer shall withhold income tax from the payments of interestin respect of the Notes for any non-PRC enterprise Noteholder. However, notwithstanding the

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potential withholding of PRC tax by the Issuer, the Issuer has agreed to pay additionalamounts to holders of the Notes so that holders of the Notes would receive the full amount ofthe scheduled payment, as further set out in the Terms and Conditions of the Notes.

Non-PRC Noteholders will not be subject to the PRC tax on any capital gains derived from asale or exchange of Notes consummated outside mainland China between non-PRCNoteholders, except however, if the Issuer is treated as a PRC tax resident enterprise under theEIT Law and related implementation regulations in the future, any gain realised by thenon-PRC enterprise Noteholders from the transfer of the Notes may be regarded as beingderived from sources within the PRC and accordingly would be subject to up to 10% of PRCwithholding tax.

No PRC stamp duty will be chargeable upon the issue or transfer (for so long as the register ofNoteholders is maintained outside the PRC) of a Note.

Foreign Account Tax Compliance Act (“FATCA”)

Pursuant to certain provisions of the U.S. Internal Revenue Code of 1986, commonly knownas FATCA, a “foreign financial institution” may be required to withhold on certain paymentsit makes (“foreign passthru payments”) to persons that fail to meet certain certification,reporting, or related requirements. The issuer may be a foreign financial institution for thesepurposes. A number of jurisdictions have entered into, or have agreed in substance to,intergovernmental agreements with the United States to implement FATCA (“IGAs”), whichmodify the way in which FATCA applies in their jurisdictions. Certain aspects of theapplication of the FATCA provisions and IGAs to instruments such as the Notes, includingwhether withholding would ever be required pursuant to FATCA or an IGA with respect topayments on instruments such as the Notes, are uncertain and may be subject to change. Evenif withholding would be required pursuant to FATCA or an IGA with respect to payments oninstruments such as the Notes, such withholding would not apply prior to 1 January 2019.

Noteholders should consult their own tax advisors regarding how these rules may apply totheir investment in the Notes.

The proposed financial transactions tax (“FTT”)

On 14 February 2013, the European Commission published a proposal (the “Commission’sproposal”) for a Directive for a common FTT in Belgium, Germany, Estonia, Greece, Spain,France, Italy, Austria, Portugal, Slovenia and Slovakia (the “participating Member States”).However, Estonia has since stated that it will not participate.

The Commission’s proposal has very broad scope and could, if introduced, apply to certaindealings in the Notes (including secondary’ market transactions) in certain circumstances.

Under the Commission’s proposal, FTT could apply in certain circumstances to persons bothwithin and outside of the participating Member States. Generally, it would apply to certaindealings in the Notes where at least one party is a financial institution, and at least one partyis established in a participating Member State. A financial institution may be, or be deemed tobe, “established” in a participating Member State in a broad range of circumstances, including(a) by transacting with a person established in a participating Member State or (b) where thefinancial instrument which is subject to the dealings is issued in a participating Member State.

However, the FTT proposal remains subject to negotiation between participating MemberStates. It may therefore be altered prior to any implementation, the timing of which remainsunclear. Additional EU Member States may decide to participate.

Prospective holders of the Notes are advised to seek their own professional advice in relationto the FTT.

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SUBSCRIPTION AND SALE

Summary of Dealer Agreement

The Dealers have in a dealer agreement (as amended and restated or supplemented from timeto time (the “Dealer Agreement”)) dated 12 November 2018, agreed with the Issuer and theGuarantor a basis upon which they or any of them may from time to time agree to purchaseNotes. Any such agreement will extend to those matters stated under “Forms of the Notes” and“Terms and Conditions of the Notes”. The Issuer (failing which, the Guarantor) will pay eachrelevant Dealer a commission as agreed between them in respect of Notes subscribed by it.Where the Issuer agrees to sell to the Dealer(s), who agree to subscribe and pay for, or toprocure subscribers to subscribe and pay for, Notes at an issue price (the “Issue Price”), anysubsequent offering of those Notes to investors may be at a price different from such IssuePrice. The Issuer (failing which, the Guarantor) has agreed to reimburse the Dealers forcertain of its expenses incurred in connection with the establishment, and any future update,of the Programme and for certain of their activities in connection with the Programme. Thecommissions in respect of an issue of Notes on a syndicated basis may be stated in the relevantPricing Supplement.

The Issuer has agreed to indemnify the Dealers against certain liabilities in connection withthe offer and sale of the Notes. The Dealer Agreement entitles the Dealers to terminate anyagreement that they make to subscribe Notes in certain circumstances prior to payment forsuch Notes being made to the Issuer.

In order to facilitate the offering of any Tranche of the Notes, certain persons participating inthe offering of the Tranche may engage in transactions that stabilise, maintain or otherwiseaffect the market price of the relevant Notes during and after the offering of the Tranche.Specifically such persons may over-allot or create a short position in the Notes for their ownaccount by selling more Notes than have been sold to them by the Issuer. Such persons mayalso elect to cover any such short position by purchasing Notes in the open market. Inaddition, such persons may stabilise or maintain the price of the Notes by bidding for orpurchasing Notes in the open market and may impose penalty bids, under which sellingconcessions allowed to syndicate members or other broker-dealers participating in theoffering of the Notes are reclaimed if Notes previously distributed in the offering arerepurchased in connection with stabilisation transactions or otherwise. The effect of thesetransactions may be to stabilise or maintain the market price of the Notes at a level above thatwhich might otherwise prevail in the open market. The imposition of a penalty bid may alsoaffect the price of the Notes to the extent that it discourages resales thereof. No representationis made as to the magnitude or effect of any such stabilising or other transactions. Suchtransactions, if commenced, may be discontinued at any time. Stabilising activities may onlybe carried on by the Stabilising Manager(s) named in the applicable Pricing Supplement (orpersons acting on behalf of any Stabilising Manager(s)) and only for a limited periodfollowing the Issue Date of the relevant Tranche of Notes.

In connection with each Tranche of Notes issued under the Programme, the Dealers or certainof their affiliates may purchase Notes and be allocated Notes for asset management and/orproprietary purposes but not with a view to distribution. Further, the Dealers or theirrespective affiliates may purchase Notes for its or their own account and enter intotransactions, including credit derivatives, such as asset swaps, repackaging and credit defaultswaps relating to such Notes and/or other securities of the Issuer or its subsidiaries oraffiliates at the same time as the offer and sale of each Tranche of Notes or in secondarymarket transactions. Such transactions would be carried out as bilateral trades with selectedcounterparties and separately from any existing sale or resale of the Tranche of Notes to which

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a particular Pricing Supplement relates (notwithstanding that such selected counterpartiesmay also be purchasers of such Tranche of Notes).

United States

The Notes have not been and will not be registered under the Securities Act and may not beoffered or sold within the United States or to, or for the account or benefit of, U.S. personsexcept in accordance with Regulation S under the Securities Act pursuant to an exemptionfrom the registration requirements of the Securities Act. Each Dealer has represented,warranted and agreed, and each further Dealer appointed under the Programme will berequired to represent, warrant and agree, that it has not offered or sold, and will not offer orsell, any Notes constituting part of its allotment except in accordance with Rule 903 ofRegulation S under the Securities Act. Terms used in this paragraph have the meanings givento them by Regulation S under the Securities Act.

The Notes in bearer form are subject to U.S. tax law requirements and may not be offered, soldor delivered within the United States or its possessions or to a United States person, except incertain transactions permitted by U.S. tax regulations. Terms used in this paragraph have themeanings given to them by the U.S. Internal Revenue Code of 1986 and regulationsthereunder.

Prohibition of Sales to EEA Retail Investors

Each Dealer has represented and agreed, and each further Dealer appointed under theProgramme will be required to represent and agree, that it has not offered, sold or otherwisemade available and will not offer, sell or otherwise make available any Notes which are thesubject of the offering contemplated by this Offering Circular as completed by the PricingSupplement in relation thereto to any retail investor in the European Economic Area. For thepurposes of this provision:

(a) the expression retail investor means a person who is one (or more) of the following:

(i) a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU (asamended, MiFID II); or

(ii) a customer within the meaning of Directive 2002/92/EC (as amended andsuperseded, the IMD), where that customer would not qualify as a professionalclient as defined in point (10) of Article 4(1) of MiFID II; or

(iii) not a qualified investor as defined in Directive 2003/71/EC (as amended andsuperseded, the Prospectus Directive); and

(b) the expression offer includes the communication in any form and by any means ofsufficient information on the terms of the offer and the Notes to be offered so as toenable an investor to decide to purchase or subscribe the Notes.

United Kingdom

Each Dealer has represented, warranted and agreed, and each further Dealer appointed underthe Programme will be required to represent, warrant and agree, that:

(i) in relation to any Notes which have a maturity of less than one year, (i) it is a personwhose ordinary activities involve it in acquiring, holding, managing or disposing of

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investments (as principal or agent) for the purposes of its business and (ii) it has notoffered or sold and will not offer or sell any Notes other than to persons whose ordinaryactivities involve them in acquiring, holding, managing or disposing of investments (asprincipal or as agent) for the purposes of their businesses or who it is reasonable toexpect will acquire, hold, manage or dispose of investments (as principal or agent) forthe purposes of their businesses where the issue of the Notes would otherwise constitutea contravention of Section 19 of the Financial Services and Markets Act 2000 (the“FSMA”) by the Issuer;

(ii) it has only communicated or caused to be communicated and will only communicate orcause to be communicated any invitation or inducement to engage in investment activity(within the meaning of Section 21 of the FSMA) received by it in connection with theissue or sale of any Notes in circumstances in which Section 21(1) of the FSMA doesnot apply to the Issuer or the Guarantor; and

(iii) it has complied and will comply with all applicable provisions of the FSMA withrespect to anything done by it in relation to the Notes in, from or otherwise involvingthe United Kingdom.

Hong Kong

(i) In relation to each Tranche of Notes issued by the Issuer, each Dealer has representedand agreed that: it has not offered or sold and will not offer or sell in Hong Kong, bymeans of any document, any Notes except for Notes which are a “structured product” asdefined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong other than (a)to “professional investors” as defined in the Securities and Futures Ordinance (Cap.571) of Hong Kong and any rules made under that Ordinance; or (b) in othercircumstances which do not result in the document being a “prospectus” as defined inthe Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) ofHong Kong or which do not constitute an offer to the public within the meaning of thatOrdinance; and

(ii) it has not issued or had in its possession for the purposes of issue, and will not issue orhave in its possession for the purposes of issue, whether in Hong Kong or elsewhere,any advertisement, invitation or document relating to the Notes, which is directed at, orthe contents of which are likely to be accessed or read by, the public of Hong Kong(except if permitted to do so under the securities laws of Hong Kong) other than withrespect to Notes which are or are intended to be disposed of only to persons outsideHong Kong or only to “professional investors” as defined in the Securities and FuturesOrdinance and any rules made under that Ordinance.

Singapore

Each Dealer has acknowledged, and each further Dealer appointed under the Programme willbe required to acknowledge, that this Offering Circular has not been and will not be registeredas a prospectus with the Monetary Authority of Singapore (the “MAS”). Accordingly, eachDealer has represented, warranted and undertaken, and each further Dealer appointed underthe Programme will be required to represent and agree, that it has not offered or sold anyNotes or caused such Notes to be made the subject of an invitation for subscription orpurchase and will not offer or sell such Notes or cause such Notes to be made the subject of aninvitation for subscription or purchase, and will not offer and or sell any Notes or cause theNotes to be the subject of an invitation for subscription or purchase, and has not circulated ordistributed, nor will it circulate or distribute, this Offering Circular or any other document or

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material in connection with the offer or sale, or invitation for subscription or purchase, of theNotes, whether directly or indirectly, to any person in Singapore other than:

(i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act(Chapter 289) of Singapore, as modified or amended from time to time including by anysubsidiary legislation as may be applicable at the relevant time (together, the “SFA”))pursuant to Section 274 of the SFA;

(ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1)of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordancewith the conditions specified in Section 275, of the SFA; or

(iii) otherwise pursuant to, and in accordance with the conditions of, any other applicableprovision of the SFA.

Where the Notes are subscribed or purchased under Section 275 of the SFA by a relevantperson which is:

(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA))the sole business of which is to hold investments and the entire share capital of which isowned by one or more individuals, each of whom is an accredited investor; or

(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to holdinvestments and each beneficiary of the trust is an individual who is an accreditedinvestor,

securities or securities-based derivatives contracts (each term as defined in Section 2(1) of theSFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in thattrust shall not be transferred within 6 months after that corporation or that trust has acquiredthe Notes pursuant to an offer made under Section 275 of the SFA except:

(1) to an institutional investor or to a relevant person defined in Section 275(2) of the SFA,or to any person arising from an offer referred to in Section 275(1 A) or Section276(4)(i)(B) of the SFA;

(2) where no consideration is or will be given for the transfer;

(3) where the transfer is by operation of law; or

(4) as specified in Section 276(7) of the SFA.

Singapore SFA Product Classification: In connection with Section 309B of the Securities andFutures Act (Chapter 289) of Singapore (the “SFA”) and the Securities and Futures (CapitalMarkets Products) Regulations 2018 of Singapore (the “CMP Regulations 2018”), unlessotherwise specified before an offer of Notes, the Issuer has determined, and hereby notifies allrelevant persons (as defined in Section 309(A) of the SFA), that the Notes are ‘prescribedcapital markets products’ (as defined in the CMP Regulations 2018) and Excluded InvestmentProducts (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Productsand MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

Japan

The Notes have not been and will not be registered under the Financial Instruments andExchange Act of Japan (Act No. 25 of 1948) (as amended) (the “FIEA”) and disclosure under

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the FIEA has not been, and will not be, made with respect to the Notes. Accordingly, eachDealer has represented, warranted and agreed that it has not, directly or indirectly, offered orsold and will not, directly or indirectly, offer or sell any Notes in Japan or to, or for the benefitof, any resident of Japan (which term as used herein means any person resident in Japan,including any corporation or other entity organised under the laws of Japan) or to others forre-offering or resale, directly or indirectly, in Japan or to, or for the benefit of, any resident ofJapan except pursuant to an exemption from the registration requirements of, and otherwise incompliance with, the FIEA, and other relevant laws and regulations of Japan.

Cayman Islands

No offer of the Notes will be made directly or indirectly to the public in the Cayman Islands.

General

Each Dealer has represented, warranted and agreed that it has complied and will comply withall applicable laws and regulations in each country or jurisdiction in or from which itpurchases, offers, sells or delivers Notes or possesses, distributes or publishes this OfferingCircular or any Pricing Supplement or any related offering material, in all cases at its ownexpense. Other persons into whose hands this Offering Circular or any Pricing Supplementcomes are required by the Issuer and the Dealers to comply with all applicable laws andregulations in each country or jurisdiction in or from which they purchase, offer, sell ordeliver Notes or possess, distribute or publish this Offering Circular or any PricingSupplement or any related offering material, in all cases at their own expense.

The Dealer Agreement provides that the Dealers shall not be bound by any of the restrictionsrelating to any specific jurisdiction (set out above) to the extent that such restrictions shall, asa result of change(s) or change(s) in official interpretation, after the date hereof, of applicablelaws and regulations, no longer be applicable but without prejudice to the obligations of theDealers described in the paragraph headed “General” above.

Selling restrictions may be supplemented or modified with the agreement of the Issuer orGuarantor. Any such supplement or modification may be set out in the relevant PricingSupplement (in the case of a supplement or modification relevant only to a particular Trancheof Notes) or in a supplement to this Offering Circular.

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FORM OF PRICING SUPPLEMENT

[The Pricing Supplement in respect of each Tranche of Notes will be substantially in the

following form, duly supplemented (if necessary), amended (if necessary) and completed to

reflect the particular terms of the relevant Notes and their issue.]

Pricing Supplement dated [●]

[PROHIBITION OF SALES TO EEA RETAIL INVESTORS — The Notes are not intendedto be offered, sold or otherwise made available to and should not be offered, sold or otherwisemade available to any retail investor in the European Economic Area (“EEA”). For thesepurposes, a retail investor means a person who is one (or more) of: (i) a retail client as definedin point (11) of Article 4(1) of Directive 2014/65/EU (as amended, “MiFID II”); (ii) acustomer within the meaning of Directive 2002/92/EC (as amended, the “InsuranceMediation Directive”), where that customer would not qualify as a professional client asdefined in point (10) of Article 4(1) of MiFID II; or (iii) not a qualified investor as defined inDirective 2003/71/EC (as amended, the “Prospectus Directive”). Consequently no keyinformation document required by Regulation (EU) No 1286/2014 (as amended the “PRIIPsRegulation”) for offering or selling the Notes or otherwise making them available to retailinvestors in the EEA has been prepared and therefore offering or selling the Notes orotherwise making them available to any retail investor in the EEA may be unlawful under thePRIIPs Regulation.]

MiFID II product governance/target market — [appropriate target market legend to be

included]

Legend for issuances involving one or more MiFID Firm manufacturers.

[MiFID II product governance/Professional investors and ECPs only target market —Solely for the purposes of [the/each] manufacturer’s product approval process, the targetmarket assessment in respect of the Notes has led to the conclusion that: (i) the target marketfor the Notes is eligible counterparties and professional clients only, each as defined in[Directive 2014/65/EU (as amended, “MiFID II”)][MiFID II]; and (ii) all channels fordistribution of the Notes to eligible counterparties and professional clients are appropriate.Any person subsequently offering, selling or recommending the Notes (a “distributor”)should take into consideration the manufacturer[‘s/s’] target market assessment; however, adistributor subject to MiFID II is responsible for undertaking its own target market assessmentin respect of the Notes (by either adopting or refining the manufacturer[‘s/s’] target marketassessment) and determining appropriate distribution channels.]

Legend for issuances where there are no MiFID Firm manufacturers.

[MiFID II product governance/Professional investors and ECPs only target market —For the purposes of Directive EU 2014/65/EU (as amended, “MiFID II”), the target market inrespect of the Notes is expected to be eligible counterparties and professional clients only,each as defined in MiFID II. Any person offering, selling or recommending the Notes (a“distributor”) should take into consideration such target market; however, a distributorsubject to MiFID II is responsible for undertaking its own target market assessment in respectof the Notes and determining appropriate distribution channels.]

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Legend for issuances where there is a sole manager that is a MiFID Firm manufacturer (i.e. nosyndicate) and none of the Issuer, the Guarantor or other credit provider is a MiFID regulatedentity.

[MiFID II product governance/Professional investors and ECPs only target market —Solely for the purposes of [the/each] manufacturer’s product approval process, the targetmarket assessment in respect of the Notes has led to the conclusion that: (i) the target marketfor the Notes is eligible counterparties and professional clients only, each as defined in[Directive 2014/65/EU (as amended, “MiFID II”)][MiFID II]; and (ii) all channels fordistribution of the Notes to eligible counterparties and professional clients are appropriate.Any person subsequently offering, selling or recommending the Notes (a “distributor”)should take into consideration the manufacturer[‘s/s’] target market assessment; however, adistributor subject to MiFID II is responsible for undertaking its own target market assessmentin respect of the Notes (by either adopting or refining the manufacturer[‘s/s’] target marketassessment) and determining appropriate distribution channels.]

[(Include when the Notes are to be listed on the Hong Kong Stock Exchange)

This document is for distribution to professional investors (as defined in Chapter 37 of theRules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the“Hong Kong Stock Exchange”) and in the Securities and Futures Ordinance (Cap. 571) ofHong Kong) (together, “Professional Investors”) only. Investors should not purchase theNotes in the primary or secondary markets unless they are Professional Investors andunderstand the risks involved. The Notes are only suitable for Professional Investors.

The Hong Kong Stock Exchange has not reviewed the contents of this document, otherthan to ensure that the prescribed form disclaimer and responsibility statements, and astatement limiting distribution of this document to Professional Investors only have beenreproduced in this document. Listing of the Programme and the Notes on the Hong KongStock Exchange is not to be taken as an indication of the commercial merits or creditquality of the Programme, the Notes or the Issuer and the Guarantor (as defined below)or quality of disclosure in this document. Hong Kong Exchanges and Clearing Limited andthe Hong Kong Stock Exchange take no responsibility for the contents of this document, makeno representation as to its accuracy or completeness and expressly disclaims any liabilitywhatsoever for any loss howsoever arising from or in reliance upon the whole or any part ofthe contents of this document.

This document together with the Offering Circular includes particulars given in compliancewith the Rules Governing the Listing of Securities on The Stock Exchange of Hong KongLimited for the purpose of giving information with regard to the Issuer and the Guarantor.Each of the Issuer and the Guarantor accepts full responsibility for the accuracy of theinformation contained in this document and confirms, having made all reasonable enquiries,that to the best of its knowledge and belief there are no other facts the omission of whichwould make any statement herein misleading.]

[Singapore Securities and Futures Act Product Classification — Solely for the purposes ofits obligations pursuant to sections 309B(1)(a) and 309B(1)(c) of the Securities and FuturesAct (Chapter 289 of Singapore) (the “SFA”), the Issuer has determined, and hereby notifies allrelevant persons (as defined in Section 309A(1) of the SFA that the Notes are “prescribedcapital markets products” (as defined in the Securities and Futures (Capital Markets Products)Regulations 2018 (the “SF (CMP) Regulations”)) and Excluded Investment Products (asdefined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MASNotice FAA-N16: Notice on Recommendations on Investment Products).)]

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New World China Land Limited

Issue of [Aggregate Nominal Amount of Tranche] [Title of Notes]

Guaranteed by

New World Development Company Limited

under the U.S.$2,000,000,000 Medium Term Note Programme

The document constitutes the Pricing Supplement relating to the issue of Notes describedherein.

Terms used herein shall be deemed to be defined as such for the purposes of the Conditions(the “Conditions”) set forth in the Offering Circular dated [original date]. This PricingSupplement contains the final terms of the Notes and must be read in conjunction with suchOffering Circular dated [current date] [and the supplemental Offering Circular dated [date]][,save in respect of the Conditions which are extracted from the Offering Circular dated[original date] and are attached hereto].

[Include whichever of the following apply or specify as “Not Applicable” (N/A). Note that thenumbering should remain as set out below, even if “Not Applicable” is indicated forindividual paragraphs or sub-paragraphs. Italics denote guidance for completing the PricingSupplement.]

1. (i) Issuer: New World China Land Limited

(ii) Guarantor: New World Development CompanyLimited

2. [(i) Series Number:] [●]

[(ii) Tranche Number: [●]

(If fungible with an existing Series,details of that Series, including the dateon which the Notes become fungible).]

3. Specified Currency or Currencies: [●]

4. Aggregate Nominal Amount: [●]

[(i)] [Series]: [●]

[(ii) Tranche: [●]]

5. (i) Issue Price: [●] per cent. of the Aggregate NominalAmount [plus accrued interest from[insert date] (in the case of fungibleissues only, if applicable)]

(ii) Net Proceeds [●] (Required only for listed issues)]

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6. (i) Specified Denominations12: [●]

(ii) Calculation Amount: [●]

7. (i) Issue Date: [●]

(ii) Interest Commencement Date: [Specify/Issue Date/Not Applicable]

8. Maturity Date: [Specify date or (for Floating RateNotes) Interest Payment Date falling inor nearest to the relevant month andyear]3

9. Interest Basis: [[●] per cent. Fixed Rate]

[[Specify reference rate] +/– [●] percent. Floating Rate]

[Zero Coupon]

[Index Linked Interest]

[Other (Specify)]

(further particulars specified below)

10. Redemption/Payment Basis: [Redemption at par]

[Index Linked Redemption]

[Dual Currency]

[Partly Paid]

[Instalment]

[Other (Specify)]

1 Notes (including Notes denominated in sterling) in respect of which the issue proceeds are to be accepted bythe Issuer in the United Kingdom or whose issue otherwise constitutes a contravention of section 19 of theFSMA and which have a maturity of less than one year and must have a minimum redemption value of£100,000 (or its equivalent in other currencies).

2 If the specified denomination is expressed to be €100,000 or its equivalent and multiples of a lower principalamount (for example €1,000), insert the additional wording as follows: 100,000 and integral multiples of€1,000 in excess thereof up to and including €199,000. No notes in definitive form will be issued with adenomination above €199,000.

3 Note that for Renminbi or Hong Kong dollar denominated Fixed Rate Notes where Interest Payment Datesare subject to modification it will be necessary to use the second option here.

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11. Change of Interest orRedemption/Payment Basis:

[Specify details of any provision forconvertibility of Notes into anotherinterest or redemption/payment basis]

12. Put/Call Options: [Investor Put]

[Issuer Call]

[(further particulars specified below)]

13. Listing: [Hong Kong/Other (specify)/None] (ForNotes to be listed on the [Hong KongStock Exchange], insert the expectedeffective listing date of the Notes)

14. Method of distribution: [Syndicated/Non-syndicated]

PROVISIONS RELATING TO INTEREST (IF ANY) PAYABLE

15. Fixed Rate Note Provisions [Applicable/Not Applicable]

(If not applicable, delete the remainingsub-paragraphs of this paragraph)

(i) Rate[(s)] of Interest: [●] per cent. per annum [payable[annually/semi-annually/quarterly/monthly/other(specify)] in arrear]

(ii) Interest Payment Date(s): [●] in each year [adjusted inaccordance with [specify Business DayConvention and any applicableBusiness Centre(s) for the definition of“Business Day”]/not adjusted]4

(iii) Fixed Coupon Amount[(s)]: [●] per Calculation Amount5

4 Note that for certain Hong Kong dollar denominated Fixed Rate Notes and Renminbi denominated FixedRate Notes, the Interest Payment Dates are subject to modification and the following words should be added:“provided that if any Interest Payment Date falls on a day which is not a Business Day, the Interest PaymentDate will be the next succeeding Business Day unless it would thereby fall in the next calendar month inwhich event the Interest Payment Date shall be brough forward to the immediately preceding Business Day.For these purposes, “Business Day” means a day, other than a Saturday or a Sunday on which commercialbanks and foreign exchange markets settle payments and are open for general business (including dealing inforeign exchange and currency deposits) in Hong Kong [and [•]].”

5 For Renminbi or Hong Kong dollar denominated Fixed Rate Notes where the Interest Payment Dates aresubject to modification the following alternative wording is appropriate: “Each Fixed Coupon Amount shallbe calculated by multiplying the product of the Rate of Interest and the Calculation Amount by the DayCount Fraction and rounding the resultant figure to the nearest CNY0.01, CNY0.005 for the case ofRenminbi denominated Fixed Rate Notes to the nearest HK$0.01, HK$0.005 for the case of Hong Kongdollar denominated Fixed Rate Notes, being rounded upwards.

172

(iv) Broken Amount(s): [●] per Calculation Amount, payableon the Interest Payment Date falling[in/on] [●]

(v) Day Count Fraction: [30/360/Actual/Actual (ICMA/ISDA)/other]

(vi) ther terms relating to the methodof calculating interest for FixedRate Notes:

[Not Applicable/give details]

16. Floating Rate Note Provisions [Applicable/Not Applicable]

(If not applicable, delete the remainingsub-paragraphs of this paragraph)

(i) Interest Period(s): [●]

(ii) Specified Period: [●]

(Specified Period and Specified InterestPayment Dates are alternatives. ASpecified Period, rather than SpecifiedInterest Payment Dates, will only berelevant if the Business Day Conventionis the FRN Convention, Floating RateConvention or Eurodollar Convention.Otherwise, insert “Not Applicable”)

(iii) Specified Interest Payment Dates: [●]

(Specified Period and Specified InterestPayment Dates are alternatives. If theBusiness Day Convention is the FRNConvention, Floating Rate Conventionor Eurodollar Convention, insert “NotApplicable”)

(iv) Business Day Convention: [Floating Rate Convention/FollowingBusiness Day Convention/ModifiedFollowing Business Day Convention/Preceding Business Day Convention/other (give details)]

(v) Additional Business Centre(s): [Not Applicable/give details]

(vi) Manner in which the Rate(s) ofInterest is/are to be determined:

[Screen Rate Determination/ISDADetermination/other (give details)]

173

(vii) Party responsible for calculatingthe Rate(s) of Interest and/orInterest Amount(s) (if not thePrincipa Paying Agent):

[[Name] shall be the Calculation Agent(no need to specify if the PrincipalPaying Agent is to perform thisfunction)]

(viii) Screen Rate Determination:

• Reference Rate: [For example, LIBOR or EURIBOR]

• Interest DeterminationDate(s):

[●]

• Relevant Screen Page: [For example, Reuters LIBOR 01/EURIBOR 01]

• Relevant Time: [For example, 11.00 a.m. Londontime/Brussels time]

• Relevant Financial Centre: [For example, London/Euro-zone(where Euro-zone means the regioncomprised of the countries whoselawful currency is the euro]

(ix) ISDA Determination:

• Floating Rate Option: [●]

• Designated Maturity: [●]

• Reset Date: [●]

(x) Margin(s): [+/-][●] per cent. per annum

(xi) Minimum Rate of Interest: [●] per cent. per annum

(xii) Maximum Rate of Interest: [●] per cent. per annum

(xiii) Day Count Fraction: [●]

(xiv) Fall back provisions, roundingprovisions, denominator and anyother terms relating to themethod of calculating interest onFloating Rate Notes, if differentfrom those set out in theConditions:

[●]

174

17. Zero Coupon Note Provisions [Applicable/Not Applicable]

(If not applicable, delete the remainingsub-paragraphs of this paragraph)

(i) Accrual Yield: [●] per cent. per annum

(ii) Reference Price: [●]

(iii) Any other formula/basis ofdetermining amount payable:

[Consider whether it is necessary tospecify a Day Count Fraction for thepurposes of Condition [10(i)]]

18. Index-Linked Interest Note/othervariable-linked interest Note Provisions

[Applicable/Not Applicable]

(If not applicable, delete the remainingsub-paragraphs of this paragraph)

(i) Index/Formula/other variable: [give or annex details]

(ii) Calculation Agent responsible forcalculating the interest due:

[●]

(iii) Provisions for determiningCoupon where calculated byreference to Index and/orFormula and/or other variable:

[●]

(iv) Interest Determination Date(s): [●]

(v) Provisions for determiningCoupon where calculation byreference to Index and/orFormula and/or other variable isimpossible or impracticable orotherwise disrupted:

[●]

(vi) Interest or calculation period(s): [●]

(vii) Specified Period: [●]

(Specified Period and Specified InterestPayment Dates are alternatives. ASpecified Period, rather than SpecifiedInterest Payment Dates, will only berelevant if the Business Day Conventionis the FRN Convention, Floating RateConvention or Eurodollar Convention.Otherwise, insert “Not Applicable”)

175

(viii) Specified Interest Payment Dates: [●]

(Specified Period and Specified InterestPayment Dates are alternatives. If theBusiness Day Convention is the FRNConvention, Floating Rate Conventionor Eurodollar Convention, insert “NotApplicable”)

(ix) Business Day Convention: [Floating Rate Convention/ FollowingBusiness Day Convention/ModifiedFollowing Business DayConvention/Preceding Business DayConvention/other (give details)]

(x) Additional Business Centre(s): [●]

(xi) Minimum Rate/Amount ofInterest:

[●] per cent. per annum

(xii) Maximum Rate/Amount ofInterest:

[●] per cent. per annum

(xiii) Day Count Fraction: [●]

19. Dual Currency Note Provisions [Applicable/Not Applicable]

(If not applicable, delete the remainingsub-paragraphs of this paragraph)

(i) Rate of Exchange/method ofcalculating Rate of Exchange:

[give details]

(ii) Calculation Agent, if any,responsible for calculating theprincipal and/or interest due:

[●]

(iii) Provisions applicable wherecalculation by reference to Rateof Exchange impossible orimpracticable:

[●]

(iv) Person at whose option SpecifiedCurrency(ies) is/are payable:

[●]

176

PROVISIONS RELATING TO REDEMPTION

20. Call Option [Applicable/Not Applicable]

(If not applicable, delete the remainingsub-paragraphs of this paragraph)

(i) Optional Redemption Date(s): [●]

(ii) Optional Redemption Amount(s)of each Note and method, if any,of calculation of such amount(s):

[●] per Calculation Amount

(iii) If redeemable in part:

(a) Minimum RedemptionAmount:

[●] per Calculation Amount

(b) Maximum RedemptionAmount

[●] per Calculation Amount

(iv) Notice period: [●]

21. Put Option [Applicable/Not Applicable]

(If not applicable, delete the remainingsub-paragraphs of this paragraph)

(i) Optional Redemption Date(s): [●]

(ii) Optional Redemption Amount(s)of each Note and method, if any,of calculation of such amount(s):

[●] per Calculation Amount

(iii) Notice period: [●]

22. Final Redemption Amount of eachNote

[●] per Calculation Amount

In cases where the Final RedemptionAmount is Index-Linked or othervariable-linked:

(i) Index/Formula/variable: [give or annex details]

(ii) Calculation Agent responsible forcalculating the Final RedemptionAmount:

[●]

177

(iii) Provisions for determining FinalRedemption Amount wherecalculated by reference to Indexand/or Formula and/or othervariable:

[●]

(iv) Date for determining FinalRedemption Amount wherecalculation by reference to Indexand/or Formula and/or othervariable:

[●]

(v) Provisions for determining FinalRedemption Amount wherecalculation by reference to Indexand/or Formula and/or othervariable is impossible orimpracticable or otherwisedisrupted:

[●]

(vi) [Payment Date]: [●]

(vii) Minimum Final RedemptionAmount:

[●] per Calculation Amount

(viii) Maximum Final RedemptionAmount:

[●] per Calculation Amount

23. Early Redemption Amount [Not Applicable

Early Redemption Amount(s) perCalculation Amount payable onredemption for taxation reasons, on achange of control or on event of defaultor other early redemption and/or themethod of calculating the same (ifrequired or if different from that set outin the Conditions):

(If each of the Early RedemptionAmount (Tax), the Early RedemptionAmount (Change of Control) and theEarly Termination Amount are theprincipal amount of the Notes/specifythe Early Redemption Amount (Tax),the Early Redemption Amount (Changeof Control) and/or the EarlyTermination Amount if different fromthe principal amount of the Notes)]

GENERAL PROVISIONS APPLICABLE TO THE NOTES

24. Form of Notes: Bearer Notes:

[Temporary Global Note exchangeablefor a Permanent Global Note which isexchangeable for Definitive Notes on[●] days’ notice/at any time/in thelimited circumstances specified in thePermanent Global Note]

178

[Temporary Global Note exchangeablefor Definitive Notes on [●] days’notice]6

[Permanent Global Note exchangeablefor Definitive Notes on [●] days’notice/at any time/in the limitedcircumstances specified in thePermanent Global Note]

Registered Notes:

[Global Note Certificate exchangeablefor Individual Note Certificates on [●]days’ notice/at any time/in the limitedcircumstances described in the GlobalNote Certificate]

25. Additional Financial Centre(s) or otherspecial provisions relating to paymentdates:

[Not Applicable/give details.

Note that this paragraph relates to thedate and place of payment, and notinterest period end dates, to which subparagraphs 16(v) and 18(x) relate]

26. Talons for future Coupons or Receiptsto be attached to Definitive Notes (anddates on which such Talons mature):

[Yes/No. If yes, give details]

27. Details relating to Partly Paid Notes:amount of each payment comprising theIssue Price and date on which eachpayment is to be made [andconsequences (if any) of failure to pay,including any right of the Issuer toforfeit the Notes and interest due onlate payment]:

[Not Applicable/give details]

28. Details relating to Instalment Notes:amount of each instalment, date onwhich each payment is to be made:

[Not Applicable/give details]

29. Redenomination, renominalisation andreconventioning provisions:

[Not Applicable/The provisionsannexed to this Pricing Supplementapply]

6 if the Specified Denominations of the Notes in paragraph 6 includes language substantially to the followingeffect: “€100,000 and integral multiples of €1,000 in excess thereof up to and including €199,000”, theTemporary Global Note shall not be exchangeable on [•] days notice.

179

30. Consolidation provisions: The provisions in Condition 19(Further Issues)] [annexed to thisPricing Supplement] apply]

31. Any applicable currencydisruption/fallback provisions:

[Not Applicable/give details]

32. Other terms or special conditions: [Not Applicable/give details]

DISTRIBUTION

33. (i) If syndicated, names ofManagers:

[Not Applicable/give names]

(ii) Stabilising Manager(s) (if any): [Not Applicable/give name]

34. If non-syndicated, name and address ofDealer:

[Not Applicable/give name andaddress]

35. Total commission and concession: [●] per cent. of the Aggregate NominalAmount

36. Private banking commission [Not Applicable/[●]]

37. U.S. Selling Restrictions: Reg. S Category [1/2];

(In the case of Bearer Notes) - [TEFRAC/TEFRA D/ TEFRA not applicable]

(In the case of Registered Notes) - NotApplicable

38. Additional selling restrictions [Not Applicable/give details]

39. Prohibition of Sales to EEA RetailInvestors:

[Applicable/Not Applicable]

(If the Notes clearly do not constitute“packaged” products, “NotApplicable” should be specified. If theNotes may constitute “packaged”products and no KID will be prepared,“Applicable” should be specified.)

OPERATIONAL INFORMATION

40. ISIN Code: [●]

41. Common Code: [●]

42. CMU Instrument Number [●]

180

43. Any clearing system(s) other thanEuroclear/Luxembourg and the CMUService and the relevant identificationnumber(s):

[Not Applicable/give name(s) andnumber(s)]

44. Delivery: Delivery [against/free of] payment

45. Additional Paying Agent(s) (if any): [●]

GENERAL

46. The aggregate principal amount ofNotes issued has been translated intoUS dollars at the rate of [●], producinga sum of (for Notes not denominated in[US dollars]):

[Not Applicable/US$]

47. [Ratings: The Notes to be issued have been rated:

[S&P:[●]]

[Moody’s: [●]]

[[Other:[●]]

(The above disclosure should reflect therating allocated to Notes of the typebeing issued under the Programmegenerally or, where the issue has beenspecifically rated, that rating.)]

[USE OF PROCEEDS

Give details if different from the “Use of Proceeds” section in the Offering Circular.]

[STABILISING

In connection with this issue, [insert name of Stabilising Manager(s)] (the “StabilisingManager(s)”) (or persons acting on behalf of any Stabilising Manager) may over-allot Notesor effect transactions with a view to supporting the market price of the Notes at a level higherthan that which might otherwise prevail. However, there is no assurance that the StabilisingManager(s) (or persons acting on behalf of a Stabilising Manager) will undertake stabilisationaction. Any stabilisation action may begin on or after the date on which adequate publicdisclosure of the terms of the offer of the Notes is made and, if begun, may be ended at anytime, but it must end no later than the earlier of 30 days after the issue date of the Notes and 60days after the date of the allotment of the Notes. Any stabilisation action or over-allotmentmust be conducted by the relevant Stabilising Manager (or persons acting on behalf of anyStabilising Manager) in accordance with all applicable laws and rules.]

181

PURPOSE OF PRICING SUPPLEMENT

This Pricing Supplement comprises the final terms required for issue and admission to tradingon the Hong Kong Stock Exchange of the Notes described herein pursuant to theU.S.$2,000,000,000 Medium Term Note Programme.

RESPONSIBILITY

The Issuer and the Guarantor accept responsibility for the information contained in thisPricing Supplement.

Signed on behalf of New World China Land Limited:

By:Duly authorised

Signed on behalf of New World Development Company Limited:

By:Duly authorised

182

GENERAL INFORMATION

1. Listing: Application has been made to the Hong Kong Stock Exchange for the listing ofthe Programme by way of debt issues to Professional Investors only for the 12 monthperiod after the date of this Offering Circular. The issue price of Notes to be issuedunder the Programme and listed on the Hong Kong Stock Exchange will be expressed asa percentage of their nominal amount. Transactions will normally be effected forsettlement in the relevant specified currency and for delivery by the end of the secondtrading day after the date of the transaction. It is expected that dealings will, ifpermission is granted to deal in and for the listing of such Notes, commence on or aboutthe next business day following the date of listing of the relevant Notes.

2. Authorisations: The establishment of the Programme and the issue of the Notesthereunder were authorised by resolutions of the board of directors of the Issuer passedon 8 November 2018 and by the executive committee of the board of directors of theGuarantor on 8 November 2018. The Issuer and Guarantor have obtained or will obtainfrom time to time all necessary consents, approvals and authorisations in connectionwith the issue and performance of the Notes. The Legal Entity Identifier of New WorldChina Land Limited is 549300X7767HIID3YE28.

3. No Material Adverse Change: There has been no material adverse change in thefinancial or trading position or prospects of the Group since 30 June 2018.

4. Litigation: None of the Issuer, the Guarantor and any other member of the Group is orhas been involved in any governmental, legal or arbitration proceedings, (including anysuch proceedings which are pending or threatened, of which the Issuer or Guarantor isaware), which may have, or have had during the 12 months prior to the date of thisOffering Circular, a significant effect on the financial position or profitability of theIssuer, the Guarantor or the Group.

5. Available Documents: Copies of the Issuer’s annual audited consolidated financialstatements and the Guarantor’s annual report for the year ended 30 June 2018 may beobtained free of charge, and copies of the Agency Agreement, the Deed of Covenant andthe Deed of Guarantee will be available for inspection from the Issue Date, at theprincipal place of business of the Issuer at 9/F, New World Tower 1, 18 Queen’s RoadCentral, Hong Kong during normal business hours, so long as any of the Notes isoutstanding.

6. Audited Consolidated Financial Statements: PricewaterhouseCoopers, the Issuer’sand the Guarantor’s independent auditor, has audited and rendered an unqualifiedauditor’s reports, as stated in its reports as incorporated in this Offering Circular, on theconsolidated financial statements of the Issuer and the Guarantor for the year ended 30June 2018. As the Issuer was privatised on 4 August 2016, it no longer has an obligationto publish the audited consolidated financial statements after 30 June 2016. Thefinancial information of the Issuer is incorporated in the consolidated financialstatements of the Guarantor.

183

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

For the year ended 30 June 2018 (the Issuer)

Independent Auditor’s Report(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Consolidated Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10

Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . F-11

Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12

Consolidated Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-14

Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-15

Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-17

For the year ended 30 June 2018 (the Guarantor)

Independent Auditor’s Report(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-102

Consolidated Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-108

Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . F-109

Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-110

Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-112

Consolidated Statement of Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-114

Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-116

Note:

(1) The Independent Auditor’s Reports on the consolidated financial statements of the Issuer and the Guarantorset out herein are reproduced from the Issuer’s consolidated financial statements and the Guarantor’s annualreport for 2018 respectively, and page references included in the Independent Auditor’s Reports refer topages in such consolidated financial statements and annual report respectively.

F-1

- 1 -

INDEPENDENT AUDITOR’S REPORT TO THE BOARD OF DIRECTORS OF NEW WORLD CHINA LAND LIMITED (incorporated in Cayman Islands with limited liability) Opinion What we have audited The consolidated financial statements of New World China Land Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages 9 to 100, which comprise: the consolidated statement of financial position as at 30 June 2018; the consolidated income statement for the year then ended; the consolidated statement of comprehensive income for the year then ended; the consolidated statement of changes in equity for the year then ended; the consolidated cash flow statement for the year then ended; and the notes to the consolidated financial statements, which include a summary of

significant accounting policies.

Our opinion In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 30 June 2018, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). Basis for Opinion We conducted our audit in accordance with Hong Kong Standards on Auditing (“HKSAs”) issued by the HKICPA. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the HKICPA’s Code of Ethics for Professional Accountants (the “Code”), and we have fulfilled our other ethical responsibilities in accordance with the Code.

F-2

INDEPENDENT AUDITOR’S REPORT TO THE BOARD OF DIRECTORS OF NEW WORLD CHINA LAND LIMITED (CONTINUED) (incorporated in Cayman Islands with limited liability) Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters identified in our audit are summarised as follows:

Valuation of investment properties held by the Group and its associated companies and joint ventures; and

Recoverability of properties held for/under development and completed properties held for sale held by the Group and its associated companies and joint ventures.

Key Audit Matter How our audit addressed the

Key Audit Matter

Valuation of investment properties held by the Group and its associated companies and joint ventures Refer to notes 6(b), 16, 20 and 21 to the consolidated financial statements.

As at 30 June 2018, the investment properties held by the Group and its associated companies and joint ventures were significant to the Group and were stated at fair value. Changes in fair value were recognised in the consolidated income statement. Independent external valuer was engaged to determine the fair value of investment properties held by the Group and its associated companies and joint ventures as at 30 June 2018.

Our procedures in relation to the valuation of investment properties included:

• We assessed the competence, capability and objectivity of the independent external valuer;

• We obtained the valuation report and met

the independent external valuer to discuss the valuation methodologies and key assumptions;

F-3

INDEPENDENT AUDITOR’S REPORT TO THE BOARD OF DIRECTORS OF NEW WORLD CHINA LAND LIMITED (CONTINUED) (incorporated in Cayman Islands with limited liability) Key Audit Matters (Continued) Key Audit Matter How our audit addressed the

Key Audit Matter

Valuation of investment properties held by the Group and its associated companies and joint ventures (Continued)

For completed investment properties, fair value was generally derived by the income approach and where appropriate, by market approach. Income approach was based on the capitalisation of the net income and reversionary income potential by adopting appropriate capitalisation rates and prevailing market rents. Market approach was based on comparable market transactions, as adjusted by the property-specific qualitative factors. For investment properties under construction, fair value was derived using the residual method by deducting development costs together with developer’s profit and risk margins from the estimated capital value of the proposed development assuming completed as at the date of valuation. We focused on this area due to the fact that there are significant judgements and estimates involved in the valuation of investment properties.

• We involved our in-house valuation

experts and assessed the valuation methodologies and the reasonableness of the key assumptions used in the valuation of investment properties, based on our knowledge of the property industry, research evidence of capitalisation rates, prevailing market rents and comparable market transactions for similar properties, where applicable; and

• We tested, on a sample basis, the data

used in the valuation of investment properties, including rental rates from existing tenancies and estimated cost to complete, by agreeing them to the underlying agreements with the tenants and approved budgets, respectively. We also compared the estimated developer’s profit and risk margins to historical records, where appropriate.

Based on the procedures performed, we found the methodologies used in preparing the valuations were appropriate and the key assumptions were supportable in light of available evidence.

F-4

INDEPENDENT AUDITOR’S REPORT TO THE BOARD OF DIRECTORS OF NEW WORLD CHINA LAND LIMITED (CONTINUED) (incorporated in Cayman Islands with limited liability) Key Audit Matters (Continued) Key Audit Matter How our audit addressed the

Key Audit Matter

Recoverability of properties held for/under development and completed properties held for sale held by the Group and its associated companies and joint ventures Refer to notes 6(c), 19, 20, 21, 23 and 24 to the consolidated financial statements.

As at 30 June 2018, the carrying values of the Group’s properties held for development, properties under development and completed properties held for sale amounted to HK$7,090 million, HK$22,265 million and HK$18,150 million respectively. The Group also has significant property development projects for sale held by its associated companies and joint ventures. Management assessed the recoverability of the property portfolios held for sale by the Group and its associated companies and joint ventures based on estimates of the net realisable values of the underlying properties. These involve the estimation of selling prices of the properties based on current market prices of properties of comparable locations and conditions and the construction costs to complete the properties held for/under development based on the existing development plans. Management concluded that the current level of provision for the properties held for/under development and completed properties held for sale as at 30 June 2018 was appropriate.

Our procedures in relation to management’s assessment of recoverability of properties held for/under development and completed properties held for sale included:

• We evaluated and tested the operating effectiveness of key controls around the property development cycle with particular focus on, but not limited to, controls over cost budgeting for estimated costs to completion, where applicable;

• We evaluated management’s assessment

on the recoverability of property portfolios, with particular focus on properties with relatively low gross profit margins or those with cost exceeding the net realisable value; and

• We assessed the reasonableness of key

assumptions and estimates in management’s assessment including:

F-5

INDEPENDENT AUDITOR’S REPORT TO THE BOARD OF DIRECTORS OF NEW WORLD CHINA LAND LIMITED (CONTINUED) (incorporated in Cayman Islands with limited liability) Key Audit Matters (Continued) Key Audit Matter How our audit addressed the

Key Audit Matter

Recoverability of properties held for/under development and completed properties held for sale held by the Group and its associated companies and joint ventures (Continued) If the estimated net realisable values of the underlying properties were significantly different from their carrying values as a result of changes in market conditions and/or significant variation in the budgeted development costs, material reversal or impairment provision for properties held for/under development and completed properties held for sale may result. Accordingly, the existence of significant estimates warrants specific audit focus and attention on this area.

(i) For the estimated selling prices, we compared, on a sample basis, to the contracted selling prices of the underlying properties or current market prices of properties of comparable locations and conditions, where applicable; and

(ii) For the estimated costs to completion, we assessed the reasonableness of the latest budgets of total construction costs and tested, on a sample basis, the construction costs to committed contracts and other supporting documentation.

Based on the procedures performed, we found the key assumptions in the recoverability assessment were supportable in light of available evidence.

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

F-6

INDEPENDENT AUDITOR’S REPORT TO THE BOARD OF DIRECTORS OF NEW WORLD CHINA LAND LIMITED (CONTINUED) (incorporated in Cayman Islands with limited liability) Responsibilities of Directors for the Consolidated Financial Statements (Continued) In preparing the consolidated financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. We report our opinion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with HKSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with HKSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

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

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

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

F-7

INDEPENDENT AUDITOR’S REPORT TO THE BOARD OF DIRECTORS OF NEW WORLD CHINA LAND LIMITED (CONTINUED) (incorporated in Cayman Islands with limited liability) Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements (Continued)

Conclude on the appropriateness of the directors’ use of the going concern basis of

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

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

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

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

F-8

INDEPENDENT AUDITOR’S REPORT TO THE BOARD OF DIRECTORS OF NEW WORLD CHINA LAND LIMITED (CONTINUED) (incorporated in Cayman Islands with limited liability) Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements (Continued) From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. The engagement partner on the audit resulting in this independent auditor’s report is Chan Ka Yee. PricewaterhouseCoopers Certified Public Accountants Hong Kong, 31 October 2018

F-9

- 9 -

NEW WORLD CHINA LAND LIMITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2018 2018 2017 Note HK$’000 HK$’000 Revenues 7 17,997,187 18,996,498 Cost of sales (9,921,577) (11,917,737) ────────── ────────── Gross profit 8,075,610 7,078,761 Other income 8 - 234,484 Other gains/(losses), net 9 784,628 (162,690) Changes in fair value of investment properties 16 1,261,542 (182,680) Selling expenses (486,713) (630,104) Administrative and other operating expenses (1,369,488) (1,434,343) ────────── ────────── Operating profit 10 8,265,579 4,903,428 Finance income 11 675,730 1,107,618 Finance costs 12 (318,499) (202,456) Share of results of associated companies 20 (34,619) 36,449 Share of results of joint ventures 21 165,125 221,329 ────────── ────────── Profit before taxation 8,753,316 6,066,368 Taxation charge 14 (4,752,216) (3,477,008) ────────── ────────── Profit for the year 4,001,100 2,589,360

══════════ ══════════

Profit attributable to: Equity holders of the Company 3,862,878 2,405,770 Non-controlling interests 138,222 183,590

────────── ────────── 4,001,100 2,589,360 ══════════ ══════════

F-10

- 10 -

NEW WORLD CHINA LAND LIMITED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018 2018 2017 HK$’000 HK$’000 Profit for the year 4,001,100 2,589,360 --------------- --------------- Other comprehensive income: Item that will not be reclassified to profit or loss:

Revaluation of investment property upon reclassification from property, plant and equipment and land use right, net of deferred taxation - 275,277

Items that had been reclassified/may be reclassified subsequently

to profit or loss: Translation differences 2,956,258 (1,097,122) Release of reserves upon disposal of available-for-sale financial

assets - 63,902 Share of other comprehensive income of associated companies 99,923 95,759 Share of other comprehensive income of joint ventures 9,667 (26,804) Release of exchange reserve upon disposal of subsidiaries (162,986) (34,542) Release of exchange reserve upon disposal of joint ventures (172,103) - ────────── ──────────

Other comprehensive income for the year 2,730,759 (723,530) ---------------- ---------------- Total comprehensive income for the year 6,731,859 1,865,830 ══════════ ══════════ Total comprehensive income attributable to:

Equity holders of the Company 6,480,774 1,623,243 Non-controlling interests 251,085 242,587 ────────── ────────── 6,731,859 1,865,830 ══════════ ══════════

F-11

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NEW WORLD CHINA LAND LIMITED

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018 2018 2017 Note HK$’000 HK$’000 ASSETS Non-current assets

Property, plant and equipment 15 6,815,623 6,250,021 Investment properties 16 32,017,652 36,146,980 Land use rights 17 162,715 419,423 Intangible assets 18 27,436 49,749 Properties held for development 19 7,089,916 9,215,363 Associated companies 20 6,397,651 6,280,369 Joint ventures 21 13,610,845 15,044,359 ────────── ────────── 66,121,838 73,406,264 ---------------- ----------------

Current assets Properties under development 23 22,265,097 21,426,530 Completed properties held for sale 24 18,150,144 11,310,961 Hotel inventories, at cost - 1,765 Prepayments, debtors and other receivables 25 6,988,100 12,568,726 Contract assets 26 75,467 - Amounts due from related companies 27 2,080,069 382,289 Cash and bank balances, unrestricted 22 32,424,521 32,337,418 ────────── ────────── 81,983,398 78,027,689 Assets of disposal group classified as held for sale 28 1,890,867 - ────────── ────────── 83,874,265 78,027,689

---------------- ---------------- Total assets 149,996,103 151,433,953 ══════════ ══════════ EQUITY Capital and reserves attributable to the Company’s equity holders

Share capital 29 870,229 870,229 Reserves 30 70,765,237 64,123,060 ────────── ────────── 71,635,466 64,993,289

Non-controlling interests 4,238,878 3,854,768 ────────── ────────── Total equity 75,874,344 68,848,057 ---------------- ----------------

F-12

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NEW WORLD CHINA LAND LIMITED

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED) AS AT 30 JUNE 2018 2018 2017 Note HK$’000 HK$’000 LIABILITIES Non-current liabilities

Long-term borrowings 31 28,035,127 29,708,237 Deferred tax liabilities 32 3,587,288 3,432,532 ────────── ────────── 31,622,415 33,140,769 ---------------- ----------------

Current liabilities Creditors and accruals 33 13,422,447 9,771,217 Deposits received on sale of properties - 14,118,866 Contract liabilities 34 14,042,259 - Amounts due to related companies 27 4,592,276 4,516,133 Short-term borrowings 31 944,866 1,303,935 Current portion of long-term borrowings 31 2,767,776 13,570,285 Amounts due to non-controlling interests 35 123,043 121,156 Taxes payable 36 6,597,892 6,043,535 ────────── ────────── 42,490,559 49,445,127 Liabilities of disposal group classified as held for sale 28 8,785 - ────────── ────────── 42,499,344 49,445,127 ---------------- ----------------

Total liabilities 74,121,759 82,585,896 ---------------- ---------------- Total equity and liabilities 149,996,103 151,433,953 ══════════ ══════════ ──────────────────── ──────────────────── Mr So Chung Keung, Alfred Ms Huang Shaomei Director Director

F-13

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NEW WORLD CHINA LAND LIMITED CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2018 2018 2017 Note HK$’000 HK$’000 Operating activities

Net cash generated from operations 40(a) 8,624,776 12,505,641 Tax paid (4,455,507) (3,992,507) ────────── ──────────

Net cash from operating activities 4,169,269 8,513,134 ---------------- ---------------- Investing activities

Interest received 447,404 250,775 Dividend income from perpetual securities - 234,484 Dividend income from joint ventures - 60,446 Additions to property, plant and equipment and

investment properties (1,901,082) (8,585,988) Acquisition of intangible assets (385) - Increase in investments in associated companies (51,978) (6,197,094) Increase in investments in joint ventures (826,647) (2,276,309) Decrease in investments in joint ventures - 551,096 Acquisition of a subsidiary 40(b) (163,266) 234,676 Disposal of subsidiaries and joint ventures 40(d) 6,583,215 5,434,188 Disposal of property, plant and equipment, land use

rights and investment properties 2,729,857 776,385 Disposal of available-for-sale financial assets and

derivative financial instruments - 3,496,500 ────────── ──────────

Net cash from/(used in) investing activities 6,817,118 (6,020,841) ---------------- ---------------- Financing activities

Interest paid (1,479,723) (1,788,108) Increase in long-term borrowings 40(e) 1,956,801 5,460,079 Issue of notes, net of transaction costs - 4,605,728 Repayment of long-term borrowings 40(e) (8,335,780) (8,479,146) Repayment of fixed rate bonds 40(e) (3,750,000) (2,654,007) Capital contribution from non-controlling interests 130,179 2,868,052 ────────── ──────────

Net cash (used in)/from financing activities (11,478,523) 12,598 ---------------- ---------------- Net (decrease)/increase in cash and cash

equivalents (492,136) 2,504,891 Cash and cash equivalents at beginning of the year 32,337,418 30,155,328 Exchange differences on cash and cash equivalents 635,727 (322,801) ────────── ────────── Cash and cash equivalents at end of the year 32,481,009 32,337,418 ══════════ ══════════ Analysis of cash and cash equivalents Unrestricted cash and bank balances 22 32,424,521 32,337,418 Unrestricted cash and bank balances included in the

assets of disposal group classified as held for sale 28 56,488 - ────────── ────────── 32,481,009 32,337,418

══════════ ══════════

F-14

- 14 -

NEW WORLD CHINA LAND LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018 Attributable to equity holders of

the Company

Share

capital Reserves

Shareholders’

funds

Non-controlling

interests

Total

equity

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Balance as at 1 July 2017 870,229 64,123,060 64,993,289 3,854,768 68,848,057

Adjustment on adoption of HKFRS 15, net

of taxation (note 4(a)) - 155,140 155,140 2,846 157,986

──────── ──────── ──────── ──────── ────────

Restated balance as at 1 July 2017 870,229 64,278,200 65,148,429 3,857,614 69,006,043

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

Translation differences - 2,843,395 2,843,395 112,863 2,956,258

Share of other comprehensive income of

associated companies - 99,923 99,923 - 99,923

Share of other comprehensive income of

joint ventures - 9,667 9,667 - 9,667

Release of exchange reserve upon disposal

of subsidiaries - (162,986) (162,986) - (162,986)

Release of exchange reserve upon disposal

of joint ventures - (172,103) (172,103) - (172,103)

──────── ──────── ──────── ──────── ────────

Other comprehensive income for the year - 2,617,896 2,617,896 112,863 2,730,759

Profit for the year - 3,862,878 3,862,878 138,222 4,001,100

──────── ──────── ──────── ──────── ────────

Total comprehensive income for the year - 6,480,774 6,480,774 251,085 6,731,859

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

Transactions with owners

Capital contribution from non-controlling

interests - - - 130,179 130,179

Share-based payment expenses - 6,263 6,263 - 6,263

──────── ──────── ──────── ──────── ────────

Total transactions with owners - 6,263 6,263 130,179 136,442

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

Balance as at 30 June 2018 870,229 70,765,237 71,635,466 4,238,878 75,874,344

════════ ════════ ════════ ════════ ════════

F-15

- 15 -

NEW WORLD CHINA LAND LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2018 Attributable to equity holders of

the Company

Share

capital Reserves

Shareholders’

funds

Non-controlling

interests

Total

equity

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Balance as at 1 July 2016 870,229 62,313,565 63,183,794 1,882,153 65,065,947

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

Translation differences - (1,156,119) (1,156,119) 58,997 (1,097,122)

Revaluation of investment property upon

reclassification from property, plant

and equipment and land use right, net

of deferred taxation - 275,277 275,277 - 275,277

Share of other comprehensive income of

associated companies - 95,759 95,759 - 95,759

Share of other comprehensive income of

joint ventures - (26,804) (26,804) - (26,804)

Release of reserves upon disposal of

available-for-sale financial assets - 63,902 63,902 - 63,902

Release of exchange reserve upon disposal

of a subsidiary - (34,542) (34,542) - (34,542)

──────── ──────── ──────── ──────── ────────

Other comprehensive income for the year - (782,527) (782,527) 58,997 (723,530)

Profit for the year - 2,405,770 2,405,770 183,590 2,589,360

──────── ──────── ──────── ──────── ────────

Total comprehensive income for the year - 1,623,243 1,623,243 242,587 1,865,830

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

Transactions with owners

Capital contribution from

non-controlling interests - - - 2,846,881 2,846,881

Acquisition of additional interest in

subsidiaries - 186,252 186,252 (1,116,853) (930,601)

──────── ──────── ──────── ──────── ────────

Total transactions with owners - 186,252 186,252 1,730,028 1,916,280

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

Balance as at 30 June 2017 870,229 64,123,060 64,993,289 3,854,768 68,848,057

════════ ════════ ════════ ════════ ════════

F-16

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 General information New World China Land Limited (the “Company”) and its subsidiaries (together the “Group”) are principally engaged in investment and development of property projects in the People’s Republic of China (the “PRC”). The Company is a limited liability company incorporated in the Cayman Islands. The address of its registered office is P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. The address of its principal place of business in Hong Kong is 9/F., New World Tower 1, 18 Queen’s Road Central, Hong Kong. The immediate and ultimate holding company is New World Development Company Limited (“NWD”), a company incorporated and listed in Hong Kong. The Company’s shares were listed on The Stock Exchange of Hong Kong Limited. Upon NWD’s acquisition of all the Company’s issued shares not yet held by NWD Group, the Company became a wholly-owned subsidiary of NWD since April 2016 and the Company’s shares were withdrawn from listing with effect from 4 August 2016. The Company’s bonds and notes continue to be listed on The Stock Exchange of Hong Kong Limited. These consolidated financial statements have been approved for issue by the Board of Directors on 31 October 2018.

2 Basis of preparation The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties which have been measured at fair value. The preparation of consolidated financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 6 below. (a) Adoption of amendments to standards

The Group has adopted the following amendments to standards which are relevant to the Group’s operations and are mandatory for the financial year ended 30 June 2018:

Amendments to HKAS 7 Disclosure Initiative Amendments to HKAS 12 Recognition of Deferred Tax Assets for Unrealised Losses HKFRSs Amendments Annual Improvements to HKFRSs 2014 – 2016 Cycle The adoption of these amendments to standards does not have any significant effect on the results and financial position of the Group.

F-17

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 Basis of preparation (Continued) (b) Early adoption of Hong Kong Financial Reporting Standard 15 “Revenue from Contracts with

Customers” (“HKFRS 15”)

HKFRS 15 as issued by the HKICPA is effective for the financial year beginning on or after 1 January 2018. The Group has elected to early adopt HKFRS 15 for the year ended 30 June 2018 because the new accounting standard provides more reliable and relevant information for users to assess the amounts, timing and uncertainty of revenue and cash flows. The Group has also elected to apply the “cumulative catch-up” transitional method whereby the effects of adopting HKFRS 15 for uncompleted contracts with customers as at 30 June 2017 are adjusted at the opening balance of equity as at 1 July 2017 and prior period comparatives are not restated. The effects of the adoption of HKFRS 15 are set out in note 4 below. HKFRS 15 establishes a comprehensive framework for determining when to recognise revenue and how much revenue to be recognised through a 5-step approach: (i) identify the contract(s) with customer; (ii) identify separate performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognise revenue when a performance obligation is satisfied. The core principle is that a company should recognise revenue when the control of goods or services transfers to a customer. From 1 July 2017 onwards, the Group has adopted the following accounting policies on revenues: Revenues are recognised when or as the control of the goods or services is transferred to the customer. Depending on the terms of the contract and the laws that apply to the contract, the control of the goods or services may be transferred over time or at a point in time. Control of the goods or services is transferred over time if the Group’s performance: • provides all of the benefits received and consumed simultaneously by the customer; • creates or enhances an asset that the customer controls as the Group performs; or • does not create an asset with an alternative use to the Group and the Group has an

enforceable right to payment for performance completed to date. If control of the asset transfers over time, revenue is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation. Otherwise, revenue is recognised at a point in time when the customer obtains control of the asset. The progress towards complete satisfaction of the performance obligation is measured based on one of the following methods that best depict the Group’s performance in satisfying the performance obligation: • direct measurements of the value transferred by the Group to the customer; or • the Group’s efforts or inputs to the satisfaction of the performance obligation relative to

the total expected efforts or inputs. Incremental costs incurred to obtain a contract, if recoverable, are capitalised as contract acquisition cost and subsequently amortised when the related revenue is recognised. Please refer to the accounting policy in relation to revenue recognition in note 3(ab).

F-18

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 Basis of preparation (Continued)

(c) Standards, amendments to standards and interpretations which are not yet effective The following new standards, amendments to standards and interpretations are mandatory for accounting periods beginning on or after 1 July 2018 or later periods but which the Group has not early adopted: HKFRS 9 Financial Instruments HKFRS 16 Leases HKFRS 17 Insurance Contracts Amendments to HKFRS 2 Classification and Measurement of Share-based Payment

Transactions Amendments to HKFRS 4

Applying HKFRS 9 Financial Instruments with HKFRS 4 – Insurance Contracts

Amendments to HKFRS 9 Prepayment Features with Negative Compensation Amendments to HKFRS 10

and HKAS 28 Sale or Contribution of Assets between an Investor and its

Associate or Joint Venture Amendments to HKAS 19 Employee Benefits Amendments to HKAS 28 Long-term Interests in Associates and Joint Ventures Amendments to HKAS 40 Transfers of Investment Property HK(IFRIC)– Interpretation 22 Foreign Currency Transactions and Advance Consideration HK(IFRIC)– Interpretation 23 Uncertainty over Income Tax Treatments HKFRSs Amendments Annual Improvements to HKFRSs 2014-2016 Cycle and

Annual Improvements to HKFRSs 2015–2017 Cycle The Group has already commenced an assessment of the likely impact of adopting the above new standards, amendments to standards and interpretations, in which the preliminary assessment of HKFRS 9 and HKFRS 16 is detailed below. (i) HKFRS 9 “Financial Instruments”

HKFRS 9 replaces the multiple classification and measurement models in HKAS 39 “Financial Instruments: Recognition and Measurement” with a single model that has three classification categories: amortised cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit or loss (“FVPL”). Classification of debt assets will be driven by the Group’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. A debt instrument is measured at amortised cost if (i) the objective of the business model is to hold the financial asset for the collection of the contractual cash flows, and (ii) the contractual cash flows under the instrument solely represent payments of principal and interest. All other debt and equity instruments, including investments in complex debt instruments and equity investments, must be recognised at fair value and their gains and losses will either be recorded in consolidated income statement or consolidated statement of other comprehensive income. For investment in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investments at FVOCI.

F-19

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 Basis of preparation (Continued)

(c) Standards, amendments to standards and interpretations which are not yet effective (Continued)

(i) HKFRS 9 “Financial Instruments” (Continued)

The new hedge accounting rules align hedge accounting more closely with common risk management practices. As a general rule, it will be easier to apply hedge accounting going forward. The new standard also introduces expanded disclosure requirements and changes in presentation. The Group does not expect a significant impact on the accounting for hedging relationship. A new expected credit loss (“ECL”) impairment model has been introduced which involves a three-stage approach whereby financial assets move through the three stages as their credit quality changes. The stage dictates how the Group measures impairment losses and applies the effective interest rate method. A simplified approach is permitted for trade debtors and contract assets that do not have a significant financing component. On initial recognition, entities will record a day-1 loss equal to the 12 month ECL (or lifetime ECL for trade debtors and contract assets with no significant financing components), unless the assets are considered credit impaired. The Group expects to apply the simplified approach to recognise lifetime ECL for its trade debtors and contract assets and considers the remaining financial assets to have low credit risk and hence expects to recognise 12 month ECL. The new accounting standard will be effective for the year ending 30 June 2019. As allowed in the transitional provisions in HKFRS 9 (2014), comparative figures will not be restated. The Group will continue to assess its impact in more details.

(ii) HKFRS 16 “Leases”

HKFRS 16 addresses the definition of a lease, recognition and measurement of leases and establishes principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from HKFRS 16 is that most operating leases will be accounted for on the consolidated statements of financial position for lessees. The Group is a lessee of certain premises and properties which are currently classified as operating leases. HKFRS 16 provides a new provision for the accounting treatment of leases when the Group is the lessee, almost all leases should be recognised in the form of an asset (for the right-of-use) and a financial liability (for the payment obligation). Short-term leases of less than twelve months and leases of low-value assets are exempt from the reporting obligation. The new standard will therefore result in an increase in assets and financial liabilities in the consolidated statements of financial position. As for the financial performance impact in the consolidated income statement, straight-line depreciation expense on the right-of-use asset and the interest expenses on the financial liability are recognised and no rental expenses will be recognised. The combination of a straight-line depreciation of the right-of-use asset and the effective interest rate method applied to the financial liability will result in a higher total charge to consolidated income statements in the initial years of the lease, and decreasing expenses during the latter part of the lease term. The Group conducted preliminary assessment and estimated that the adoption of HKFRS 16 would result in recognition of right-of-use assets and financial liabilities from the Group’s leases of premises and properties. The Group will continue to assess the impact in more details.

F-20

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NEW WORLD CHINA LAND LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

2 Basis of preparation (Continued)

(c) Standards, amendments to standards and interpretations which are not yet effective (Continued)

The Group has already commenced an assessment of the impact of the other new standards, amendments to standards and interpretations, certain of which may be relevant to the Group’s operations and may give rise to changes in accounting policies, changes in disclosures and remeasurement of certain items in the consolidated financial statements.

3 Principal accounting policies The principal accounting policies adopted for the preparation of these financial statements, which have been consistently applied to all the years presented, unless otherwise stated, are set out below: (a) Consolidation

The consolidated financial statements incorporate the financial statements of the Company and all of its subsidiaries made up to 30 June. (i) Subsidiaries

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

The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owner of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement at the acquisition date. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. There is a choice, on the basis of each acquisition to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the recognised amount of acquiree’s identifiable net assets. If the business combination is achieved in stages, the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree at the date of acquisition over the fair value of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the consolidated income statement. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

F-21

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NEW WORLD CHINA LAND LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued)

(a) Consolidation (Continued)

(i) Subsidiaries (Continued) When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as associated companies, joint ventures or financial assets. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. It means that amounts previously recognised in other comprehensive income are reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable HKFRSs. The Company’s investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.

(ii) Joint ventures Investments in joint arrangements are classified either as joint operations or joint ventures, depending on the contractual rights and obligations each investor has rather than the legal structure of the joint arrangement. The Group has assessed the nature of its joint arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method. Under the equity method of accounting, interests in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in other comprehensive income based on the relevant profit sharing ratios which vary according to the nature of the joint ventures set out as follows: Equity joint ventures/joint ventures in wholly foreign owned enterprises Equity joint ventures/joint ventures in wholly foreign owned enterprises are joint ventures in respect of which the capital contribution ratios of the venturers are defined in the joint venture contracts and the profit sharing ratios and share of net assets of the venturers are in proportion to the capital contribution ratios. Co-operative joint ventures Co-operative joint ventures are joint ventures in respect of which the profit sharing ratios of the venturers and share of net assets upon the expiration of the joint venture periods are not in proportion to their capital contribution ratios but are as defined in the joint venture contracts. Joint venture companies limited by shares Joint venture companies limited by shares are limited liability companies in respect of which each shareholder’s beneficial interests therein is in accordance with the amount of the voting share capital held thereby.

F-22

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued) (a) Consolidation (Continued)

(ii) Joint ventures (Continued)

Joint venture companies limited by shares (Continued) The Group's investments in joint ventures include goodwill identified on acquisition. Upon the acquisition of the ownership interest in a joint venture, any difference between the cost of the joint venture and the Group’s share of the net fair value of the joint venture’s identifiable assets and liabilities is accounted for as goodwill. The Group’s investment in a joint venture includes the loans and advances to the joint venture which, in substance, form part of the Group’s investment in the joint venture. The loans and advances to the joint venture are a form of commercial arrangement between the parties to the joint venture to finance the development of projects and viewed as a means by which the Group invests in the relevant projects. These loans and advances have no fixed repayment terms and will be repaid when the relevant joint venture has surplus cash flow. When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in substance, form part of the Group’s investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures. Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

(iii) Associated companies An associated company is a company other than a subsidiary and a joint venture, in which the Group has significant influence, but not control, through representatives on the board of directors. Investments in associated companies are accounted for by the equity method of accounting and are initially recognised at cost. The Group’s investments in associated companies include goodwill (net of any accumulated impairment loss) identified on acquisition. The interests in associated companies also include long-term interest that, in substance, form part of the Group’s investments in associated companies. The share of post-acquisition profits or losses of associated companies is recognised in the consolidated income statement, and the share of post-acquisition movements in the associate company’s statement of comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. When the share of losses in an associated company equals or exceeds its interest in the associated company, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred legal and constructive obligations or made payments on behalf of the associated company.

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued)

(a) Consolidation (Continued)

(iii) Associated companies (Continued) Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. For equity accounting purpose, accounting policies of associated companies have been changed where necessary to ensure consistency with the policies adopted by the Group.

(iv) Transactions with non-controlling interests

Non-controlling interests is the equity in a subsidiary which is not attributable, directly or indirectly, to a parent. The Group treats transactions with non-controlling interests (namely, acquisitions of additional interests and disposals of partial interests in subsidiaries that do not result in a change of control) as transactions with equity owners of the Group, instead of transactions with parties not within the Group. For purchases of additional interests in subsidiaries from non-controlling shareholders, the difference between the fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals of partial interests to non-controlling interests are also recorded in equity.

(b) Intangible assets

(i) Goodwill

Goodwill arising on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisitions of joint ventures and associated companies is included in interests in joint ventures and associated companies respectively and is tested for impairment as part of overall balance. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of all or part of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of testing for impairment. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

(ii) Licences Licences acquired in a business combination are recognised at fair value at the date of acquisition. Licences have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of licences over their estimated useful lives of 5 years.

(c) Assets classified as assets held for sale

Assets are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use. Investment properties classified as non-current assets held for sale are stated at fair value at the end of the reporting period.

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued)

(d) Leases (i) Finance leases

Leases that transfer to the Group substantially all the risks and rewards of ownership of assets are accounted for as finance leases. Finance leases are capitalised at the lease’s commencement date at the lower of the fair value of the leased assets and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in liabilities. The finance charges are charged to the consolidated income statement over the lease periods so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Assets held under finance leases are depreciated on the basis described in note 3(g)(ii) below.

(ii) Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor), are charged to the consolidated income statement on a straight-line basis over the period of the lease.

(e) Land use rights The upfront prepayments made for the land use rights held under operating lease are expensed in the consolidated income statement on a straight-line basis over the period of the lease or when there is impairment, the impairment is expensed in the consolidated income statement.

(f) Investment properties

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the Group, is classified as investment property. Investment property also includes property that is being constructed or developed for future use as investment property. Investment property comprises land held under operating leases and buildings held under finance leases. Land held under operating leases are classified and accounted for as investment property when the rest of the definition of investment property is met. The operating lease is accounted for as if it was a finance lease. Investment property is measured initially at its cost, including related transaction costs. After initial recognition, investment property is carried at fair value. Fair value is determined by professional qualified valuers on an open market value basis at the end of each reporting period. Changes in fair value are recognised in the consolidated income statement. Subsequent expenditure is included in the carrying amount of the asset only when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. All other repairs and maintenance costs are expensed in the consolidated income statement during the financial period in which they are incurred.

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued) (f) Investment properties (Continued)

If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment, and its fair value at the date of reclassification becomes its cost for accounting purposes. Where an investment property undergoes a change in use, evidenced by commencement of development with a view to sale, the property is transferred to properties for/under development. The property’s deemed cost for subsequent accounting as properties for/under development is its fair value at the date of change in use. If an owner-occupied property becomes an investment property because its use has changed, any difference resulting between the carrying amount and the fair value of this property at the date of transfer is recognised in equity as a revaluation of property, plant and equipment. However, if the fair value of the property at the date of transfer which results in a reversal of the previous impairment loss, the write-back is recognised in the consolidated income statement. For a transfer from properties for/under development or property held for sale to investment properties that will be carried at fair value, any difference between the fair value of the property at that date and its previous carrying amount shall be recognised in the consolidated income statement. Transfers to investment properties shall be made when, and only when, there is a change in use. The inception of an operating lease to another party is generally an evidence of a change in use. A change in use has occurred based on an assessment of all relevant facts and circumstances. The relevant facts include but not limited to the Group’s business plan, financial resources and legal requirements.

(g) Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of assets. Subsequent costs are included in the carrying amount of the assets or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognised. All other repair and maintenance costs are charged to the consolidated income statement during the financial period in which they are incurred. The carrying amount of an asset is written down immediately to its recoverable amount if the carrying value of an asset is greater than its estimated recoverable amount.

(i) Assets under construction

All direct costs relating to the construction of property, plant and equipment, including borrowing costs during the construction period are capitalised as the costs of the assets.

(ii) Depreciation

No depreciation is provided on assets under construction until such time when the relevant assets are completed and available for intended use.

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued) (g) Property, plant and equipment (Continued)

(ii) Depreciation (Continued)

Depreciation of other property, plant and equipment is calculated to allocate their cost to their estimated residual values over their estimated useful lives using the straight-line method. Estimated useful lives are summarised as follows: Other properties 20 - 40 years Leasehold improvements 5 - 10 years or over the relevant lease period Furniture, fixtures and equipment 5 - 8 years Motor vehicles 3 years The residual values and useful lives of the assets are reviewed, and adjusted if appropriate, at the end of each reporting period.

(iii) Gain or loss on disposal

The gain or loss on disposal of property, plant and equipment is determined by comparing the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the consolidated income statement.

(h) Impairment of investments in subsidiaries, joint ventures, associated companies and non-financial assets Non-financial assets that have an indefinite useful life, for example goodwill, or have not yet been available for use are not subject to amortisation and are tested annually for impairment. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying amount of an asset is written down immediately to its recoverable amount if the carrying amount of the asset is greater than its estimated recoverable amount. An impairment loss is recognised in the consolidated income statement for the amount by which the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the higher of its fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped as cash-generating units for which there are separately identifiable cash flows. Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the end of each reporting period. Impairment testing of the investments in subsidiaries, joint ventures or associated companies in separate financial statement is required upon receiving dividends from these investments if the dividend exceeds the total comprehensive income of the subsidiary, joint venture or associated company in the period the dividend is declared or if the carrying amount of the investment in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.

(i) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable and are included in current assets, except for those with maturities of more than 12 months after the end of the reporting period, which are classified as non-current assets.

Loans and receivables are carried at amortised cost using the effective interest method.

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued) (j) Impairment of financial assets carried at amortised cost

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial assets or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include: • Significant financial difficulty of the issuer or obligor; • A breach of contract, such as a default or delinquency in interest or principal payments; • The Group, for economic or legal reasons relating to the borrower’s financial difficulty,

granting to the borrower a concession that the lender would not otherwise consider; • It becomes probable that the borrower will enter bankruptcy or other financial

reorganisation; • The disappearance of an active market for that financial asset because of financial

difficulties; or • Observable data indicating that there is a measurable decrease in the estimated future cash

flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:

(1) adverse changes in the payment status of borrowers in the portfolio; (2) national or local economic conditions that correlate with defaults on the assets in the

portfolio.

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

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

(k) Properties held for/under development

Properties held for/under development comprise land use rights, development expenditure and borrowing costs capitalised, and are carried at the lower of cost and net realisable value. Net realisable value takes into account the proceeds ultimately expected to be realised, less applicable variable selling expenses and the anticipated costs to complete. Upon completion, the properties are transferred to properties held for sale. Properties under development included in the current assets are expected to be realised in, or is intended for sale in the Group’s normal operating cycle.

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued) (l) Properties held for sale

Properties held for sale are initially measured at the carrying amount of the property at the date of reclassification from properties under development. Subsequently, properties held for sale are carried at the lower of cost and net realisable value. Net realisable value is determined by reference to management estimates based on prevailing market conditions.

(m) Hotel inventories Hotel inventories primarily comprise food, beverages and operating supplies and are stated at the lower of cost and net realisable value. Cost is calculated on the weighted average basis. Net realisable value is determined on the basis of anticipated sales proceeds less estimated selling expenses.

(n) Contracts in progress Contracts in progress comprise contract cost incurred, plus recognised profits (less recognised losses) less progress billing. Cost comprises materials, direct labour and overheads attributable to bringing the work in progress to its present condition. Variations in contract work, claims and incentive payments are included in contract revenue to the extent that may have been agreed with the customer and are capable of being reliably measured.

For fixed price construction service contract, the Group make reference to the progress towards complete satisfaction of that performance obligation to determine the appropriate amount to recognise in a given period. The progress is measured by reference to the contract costs incurred up to the end of the reporting period as a proportion of total estimated costs for each contract. Costs incurred in the year in connection with future activity on a contract and costs not attributable to progress are excluded from contract costs in determining the progress. If the value of the services provided exceed the net payments received, a contract asset is recognised. If the payment exceed the value of the services provided, a contract liability is recognised.

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

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued)

(p) Contract related assets and contract liabilities Upon entering into a contract with a customer, the Group obtains rights to receive consideration from the customer and assumes performance obligations to transfer goods or provide services to the customer. The combination of those rights and performance obligations gives rise to a net contract asset or a net contract liability depending on the relationship between the remaining rights and the performance obligations. The contract is an asset and recognised as contract assets if the cumulative revenue recognised in profit or loss exceeds cumulative payments made by customers. Conversely, the contract is a liability and recognised as contract liabilities if the cumulative payments made by customers exceeds the revenue recognised in profit or loss. Contract assets are assessed for impairment under the same approach adopted for impairment assessment of financial assets carried at amortised cost. Contract liabilities are recognised as revenue when the Group transfer the goods or services to the customers and therefore satisfied its performance obligation. The incremental costs of obtaining a contract with a customer are capitalised and presented as contract related assets, if the Group expects to recover those costs, and are subsequently amortised on a systematic basis that is consistent with the transfer to the customers of the goods or services to which the assets relates. The Group recognises an impairment loss in the consolidated income statement to the extent that the carrying amount of the contract related assets recognised exceeds the remaining amounts of consideration that the Group expects to receive less the costs that relate directly to providing those goods or services that have not been recognised as expenses.

(q) Cash and cash equivalents Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings under current liabilities in the consolidated statement of financial position.

(r) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(s) Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued)

(t) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

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

(u) Contingent liabilities and contingent assets A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably. A contingent liability, other than that assumed in a business combination, is not recognised but is disclosed in the notes to the consolidated financial statements. When a change in the probability of an outflow occurs so that outflow is probable, it will then be recognised as a provision. A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain events not wholly within the control of the Group. A contingent asset is not recognised but is disclosed in the notes to the consolidated financial statements when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.

(v) Current and deferred taxation

The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current taxation is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Group, joint ventures and associated companies operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued)

(v) Current and deferred taxation (Continued) Deferred taxation is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill, the deferred taxation is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred taxation is determined using tax rates and laws that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, joint ventures and associated companies, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in consolidated income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

(w) Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated income statement over the period of the borrowings using the effective interest method or capitalised on the basis set out in note 3(x), where appropriate. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

(x) Borrowing costs

Borrowing costs incurred for the construction of any qualifying assets are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. Other borrowing costs are expensed as incurred.

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued)

(x) Borrowing costs (Continued)

Borrowing costs included interest expense and exchange differences arising from foreign borrowings to the extent that they are regarded as an adjustment to interest costs. The exchange gains and losses that are an adjustment to interest costs include the interest rate differential between borrowing costs that would be incurred if the entity had borrowed funds in its functional currency, and the borrowing costs actually incurred on foreign currency borrowings. Such amounts are estimated based on forward currency rates at the inception of the borrowings. When the construction of the qualifying assets takes more than one accounting period, the amount of foreign exchange differences eligible for capitalisation is determined on a cumulative basis based on the cumulative amounts of interest expenses that would have been incurred had the entity borrowed in its functional currency. The total amount of foreign exchange differences capitalised cannot exceed the amount of total net foreign exchange differences incurred on a cumulative basis at the end of the reporting period.

(y) Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period. Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Bonus plans

Provision for bonus plans are recognised when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.

(iii) Defined contribution plans The Group’s contributions to defined contribution retirement plans, including the Mandatory Provident Fund Scheme and employee pension schemes established by municipal government in the PRC are expensed as incurred. Contributions are reduced by contributions forfeited by those employees who leave the schemes prior to vesting fully in the contributions, where applicable.

(iv) Equity-settled share-based compensation

The Group does not operate an equity-settled, share-based compensation plan on its own. Rather, the parent company of the Company has extended its equity-settled, share-based compensation plans to the employees of its subsidiary undertakings. The fair value of the employee services received in exchange for the grant of share options is recognised over the vesting period as an expense in the subsidiaries undertaking’s income statement. The grant by the parent’s options over its equity instruments to the employees of subsidiary undertakings is treated as a capital contribution.

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued)

(z) Foreign currencies

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The Company’s functional currency is Hong Kong dollar. The consolidated financial statements are presented in Hong Kong dollars to facilitate analysis of financial information by the holding company.

(ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the exchange rates ruling at the end of the reporting period are recognised in the consolidated income statement.

(iii) Group companies The results and financial position of all the Group’s entities that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (1) assets and liabilities for each consolidated statement of financial position presented

are translated at the closing rate at the date of the end of that reporting period; (2) income and expenses for each consolidated income statement are translated at

average exchange rates; (3) all resulting translation differences are recognised as a separate component of equity;

and (4) on the disposal of the Group’s entire interest in a foreign operation, or a disposal

involving loss of control over a subsidiary that includes a foreign operation, all of the translation differences accumulated in equity in respect of that operation attributable to the equity holders of the Company are reclassified to profit or loss.

In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated translation differences are reattributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (that is, reductions in the Group’s ownership interest in associated companies or joint ventures that do not result in the Group losing significant influence or joint control) the proportionate share of the accumulated translation difference is reclassified to profit or loss. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate ruling at the end of reporting period.

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued)

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

(ab) Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services rendered in the ordinary course of the Group’s activities. Revenue is shown net of returns, rebates and discounts, allowances for credit and other revenue reducing factors. Revenue is recognised when it is probable that future economic benefits will flow to the Group and specific criteria for each of the activities have been met. Estimates are based on historical results, taking into consideration the type of customers, the type of transactions and the specifics of each arrangement. (i) Property sales

Revenue is recognised when or as the control of the asset is transferred to the customer. Depending on the terms of the contract and the laws that apply to the contract, control of the asset may be transferred over time or at a point in time. If properties have no alternative use to the Group contractually and the Group has an enforceable right to payment from the customers for performance completed to date, the Group satisfies the performance obligation over time and therefore, recognises revenue over time in accordance with the input method for measuring progress. Otherwise, revenue is recognised at a point in time when the customer obtains control of the completed property. The progress towards complete satisfaction of the performance obligation is measured based on the Group’s efforts or inputs to the satisfaction of the performance obligation, by reference to the contract costs incurred up to the end of reporting period as a percentage of total estimated costs for each contract. For property development and sales contract for which the control of the property is transferred at a point in time, revenue is recognised when the customer obtains the physical possession or the legal title of the completed property and the Group has present right to payment and the collection of the consideration is probable. In determining the transaction price, the Group adjusts the promised amount of consideration for the effect of a financing component if it is significant.

(ii) Rental income Rental income from properties leased out under an operating lease is recognised in the consolidated income statement on a straight-line basis over the lease term. Contingent rents, such as turnover rents, are recorded as income in the periods in which they are earned.

(iii) Hotel operation income Hotel operation income is recognised when services are rendered.

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

3 Principal accounting policies (Continued)

(ab) Revenue recognition (Continued)

(iv) Property management services fee income

Property management services fee income is recognised when services are rendered.

(v) Project management fee income

Project management fee income is recognised when services are rendered.

(vi) Interest income Interest income is recognised on a time proportion basis using the effective interest method to the extent that interest income can be reliably measured and it is probable that future economic benefit will flow to the Group.

(vii) Construction income

Revenue from construction service contract is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation using input method.

(viii) Dividend income

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

(ac) Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the period in which the dividends are approved by the Company’s shareholders/directors, where appropriate.

(ad) Insurance contracts The Group assesses at the end of each reporting period the liabilities under its insurance contracts using current estimates of future cash flows. If the carrying amount of the relevant insurance liabilities is less than the best estimate of the expenditure required to settle the relevant insurance liabilities at the end of the reporting period, the Group recognises the entire difference in the consolidated income statement. These estimates are recognised only when the outflow is probable and the estimates can be reliably measured. The Group regards its financial guarantee contracts in respect of mortgage facilities provided to certain property purchasers and guarantees provided to its related parties as insurance contracts.

4 Change in accounting policy

As explained in note 2(b) above, the Group has early adopted HKFRS 15 from 1 July 2017, which resulted in changes in accounting policies and adjustments to the amounts recognised in the consolidated financial statements. In accordance with the transitional provisions in HKFRS 15, comparative figures have not been restated. The accounting policies were changed to comply with HKFRS 15, which replaced both the provisions of HKAS 18 Revenue (“HKAS 18”) and HKAS 11 Construction contracts (“HKAS 11”) and the related interpretations for the recognition, classification and measurement of revenue and costs.

F-36

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4 Change in accounting policy (Continued) The effects of the adoption of HKFRS 15 are as follows: Presentation of contract assets and liabilities Reclassifications were made as at 1 July 2017 to be consistent with the terminology used under HKFRS 15: • Contract liabilities for progress billings recognised in relation to property development

activities were previously presented as deposits received on sale of properties. Accounting for property development activities In prior reporting periods, the Group accounted for property development activities when significant risks and rewards of ownership of properties have been transferred to the customers. Under HKFRS 15, revenue from pre-sale of properties is recognised when or as the control of the asset is transferred to the customer. Depending on the terms of the contracts and the laws that are applicable to the contracts, control of the properties under development may transfer over time or at a point in time. If properties have no alternative use to the Group contractually and the Group has an enforceable right to payment from the customers for performance completed to date, the Group satisfies the performance obligation over time and therefore, recognises revenue over time, in accordance with the input method for measuring progress. Otherwise, revenue is recognised at a point in time when the customer obtains control of the completed property. Revenue for pre-sale of certain properties is accounted for differently and recognised earlier over time, instead of at a single point in time under HKAS 18. The Group currently offers different payment schemes to customers, the transaction price and the amount of revenue for the sale of property will be adjusted when significant financing component exists in that contract. The excess of cumulative revenue recognised in profit or loss over the cumulative payments made by customers is recognised as contract assets. The excess of cumulative payments made by customers over the cumulative revenue recognised in profit or loss is recognised as contract liabilities. (a) The impact on the Group’s financial position by the application of HKFRS 15 as compared to

HKAS 18 and HKAS 11 that were previously in effect before the adoption of HKFRS 15 is as follows:

As at 1 July 2017

Consolidated statement of financial position (extract)

As previously

stated

Effects of the early adoption of

HKFRS 15

As

restated HK$’000 HK$’000 HK$’000

Joint ventures 15,044,359 2,203 15,046,562 Properties under development 21,426,530 (359,649) 21,066,881 Prepayments, debtors and other receivables 12,568,726 (77,219) 12,491,507 Contract assets - 30,103 30,103 Contract liabilities - 13,476,851 13,476,851 Deposits received on sale of properties 14,118,866 (14,118,866) - Taxes payable 6,043,535 79,468 6,123,003 Retained profits 36,374,146 153,210 36,527,356 Exchange reserve 171,494 1,930 173,424 Non-controlling interests 3,854,768 2,846 3,857,614

════════ ════════ ════════

F-37

- 37 -

NEW WORLD CHINA LAND LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

4 Change in accounting policy (Continued)

(b) The amount by each financial statements line items affected in the current year by the

application of HKFRS 15 as compared to HKAS 18 and HKAS 11 that were previously in effect before the adoption of HKFRS 15 is as follows:

As at 30 June 2018

Without the

early adoption of HKFRS 15

Effects of the early adoption of

HKFRS 15

As

reported HK$’000 HK$’000 HK$’000

Consolidated statement of financial

position (extract)

Joint ventures 13,530,394 80,451 13,610,845 Properties under development 22,588,908 (323,811) 22,265,097 Completed properties held for sale 18,560,487 (410,343) 18,150,144 Prepayments, debtors and other receivables 7,067,774 (79,674) 6,988,100 Contract assets - 75,467 75,467 Contract liabilities - 14,042,259 14,042,259 Creditors and accruals 13,483,727 (61,280) 13,422,447 Deposits received on sale of properties 15,288,316 (15,288,316) - Taxes payable 6,292,619 305,273 6,597,892 Retained profits 40,042,113 348,121 40,390,234 Exchange reserve 2,800,624 (9,304) 2,791,320 Non-controlling interests 4,233,540 5,338 4,238,878

════════ ════════ ════════

Year ended 30 June 2018

Without the

early adoption of HKFRS 15

Effects of the early adoption of

HKFRS 15

As

reported HK$’000 HK$’000 HK$’000

Consolidated income statement

(extract)

Revenue 17,330,397 666,790 17,997,187 Cost of sales 9,582,051 339,523 9,921,577 Share of results of joint ventures 85,782 79,343 165,125 Taxation charge 4,543,012 209,207 4,752,216 Non-controlling interests 135,730 2,492 138,222

════════ ════════ ════════

Consolidated statement of cash flows (extract)

Net cash generated from operations Operating profit before working capital

changes 6,063,623 327,267 6,390,890 Changes in working capital: - Decrease in properties held for sale 1,360,095 348,538 1,708,633 - (Increase)/decrease in prepayments,

debtors and other receivables (229,386) 68,506 (160,880) - Increase in contract assets - (74,712) (74,712) - Decrease in deposits received on sale of

properties - (14,118,823) (14,118,823) - Increase/(decrease) in creditors and

accruals 3,642,203 (170,236) 3,471,967 - Increase in contract liabilities - 13,619,460 13,619,460 ════════ ════════ ════════

The early adoption of HKFRS 15 has no impact to the investing and financing activities on the consolidated statement of cash flows.

F-38

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5 Financial risk management and fair value estimation

The Group conducts its operation in the PRC and accordingly is subject to special consideration and risk exposure under a unique political, economic and legal environment. The Group’s activities expose it to a variety of financial risks and the Group’s overall risk management policy seeks to minimise potential adverse effects on the Group’s financial performance. The Group continues to control financial risk in a conservative approach to safeguard the interest of shareholders. (a) Market risk

(i) Foreign exchange risk

The Group’s operations are mainly conducted in the PRC. Entities within the Group are exposed to foreign exchange risk from future commercial transactions and monetary assets and liabilities that are denominated in a currency that is not the entity’s functional currency.

The Group currently does not have a foreign currency hedging policy. It manages its foreign currency risk by closely monitoring the movement of the foreign currency rates and will consider to enter into forward foreign exchange contracts to reduce the exposure should the need arise. As at 30 June 2018, the Group’s entities with functional currency of Renminbi had net monetary assets denominated in Hong Kong dollar of HK$353,254,000 (2017: net monetary assets denominated in Hong Kong dollar of HK$330,217,000) and net monetary assets denominated in United States dollar of HK$22,450,000 (2017: HK$111,572,000) respectively. If Hong Kong dollar and United States dollar had strengthened/weakened by 5% against Renminbi respectively with all other variables unchanged, the Group’s profit before taxation would have been HK$18,785,000 (2017: HK$22,089,000) higher/lower respectively. As at 30 June 2018, the Group’s entities with functional currency of Hong Kong dollar had net monetary assets denominated in Renminbi of HK$3,014,614,000 (2017: net monetary assets denominated in Renminbi of HK$211,857,000). If Renminbi had strengthened/weakened by 5% against Hong Kong dollar with all other variables unchanged, the Group’s profit before taxation would have been HK$150,731,000 (2017: HK$10,593,000) higher/lower respectively.

This sensitivity analysis ignores any offsetting foreign exchange factors and has been determined assuming that the change in foreign exchange rates had occurred at the end of the reporting period. The stated change represents management’s assessment of reasonably possible changes in foreign exchange rates at the end of the reporting period. Currency risks as defined by HKFRS 7 arise on account of monetary assets and liabilities being denominated in a currency that is not the functional currency; differences resulting from the translation of financial statements into the Group’s presentation currency are not taken into consideration.

F-39

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5 Financial risk management and fair value estimation (Continued)

(a) Market risk (Continued)

(ii) Interest rate risk The Group is exposed to interest rate risk through the impact of rate changes on interest bearing liabilities and assets. Cash flow interest rate risk is the risk that changes in market interest rates will impact cash flows arising from variable rate financial instruments. The Group’s interest bearing assets mainly include bank deposits. The Group’s floating rate borrowings will be affected by fluctuation of prevailing market interest rates and will expose the Group to cash flow interest rate risk. Fair value interest rate risk is the risk that the value of a financial asset or liability will fluctuate because of changes in market interest rates. The Group’s borrowings issued at fixed rates expose the Group to fair value interest rate risk. To mitigate the risk, the Group has maintained fixed and floating rate debts. The level of fixed rate debt for the Group is decided after taking into consideration the potential impact of higher interest rates on profit or loss, interest cover and the cash flow cycles of the Group’s businesses and investments. If interest rates had been 100 (2017: 100) basis points higher/lower with all other variables held constant, the Group’s profit before taxation would have been HK$35,760,000 (2017: HK$77,344,000) higher/lower. The sensitivity analysis has been determined assuming that the change in interest rates had occurred throughout the year and had been applied to the exposure to interest rate risk for financial instruments in existence at the end of the reporting period. The 100 (2017: 100) basis point increase or decrease represents management’s assessment of a reasonably possible change in those interest rates which have the most impact on the Group at the end of the reporting period. Changes in market interest rates affect the interest income or expense of non-derivative variable-interest financial instruments. As a consequence, they are included in the calculation of profit before taxation sensitivities.

(b) Credit risk

The credit risk of the Group mainly arises from deposits with bank, trade and other receivables, contract assets and balances receivable from related companies. The exposures to these credit risks are closely monitored on an ongoing basis by established credit policies in each of its core businesses. Deposits are mainly placed with high-credit-quality financial institutions. Trade receivables and amounts due from related companies mainly include receivables from sale and lease of properties, property and project management services and other services. The Group carries out regular review and follow-up action on any overdue amounts to minimise exposures to credit risk. There is no concentration of credit risk with respect to trade receivables from third party customers as there are a large number of customers. In addition, the Group monitors the exposure to credit risk in respect of the financial assistance provided to subsidiaries, associated companies and joint ventures through exercising control or influence over their financial and operating policy decisions and reviewing their financial positions on a regular basis.

F-40

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5 Financial risk management and fair value estimation (Continued)

(b) Credit risk (Continued) The Group provides guarantees to banks in connection with certain property purchasers’ mortgage loans for financing their purchase of the properties until the issuance of the official property title transfer certificates by the relevant authority in the PRC. If a purchaser defaults on the payment of its mortgage during the term of the guarantee, the bank holding the mortgage may demand the Group to repay the outstanding amount of the loan and any accrued interest thereon. Under such circumstances, the Group is able to retain the purchasers’ deposits and sell the properties to recover any amounts paid by the Group to the bank. Therefore the Group’s credit risk is significantly reduced. Nevertheless, the net realisable values of the relevant properties are subject to the fluctuation of the property market in general, the Group assesses at the end of each reporting period the potential liabilities based on the current estimates of future cash flows. As at 30 June 2018, no provision has been made in the consolidated financial statements (2017: Nil).

(c) Liquidity risk

Prudent liquidity risk management includes managing the profile of debt maturities and funding sources, maintaining sufficient cash, and ensuring the availability of funding from an adequate amount of committed credit facilities. It is the policy of the Group to regularly monitor current and expected liquidity requirements and to ensure that adequate funding is available for operating, investing and financing activities. The Group also maintains undrawn committed credit facilities to further reduce liquidity risk in meeting funding requirements. As at 30 June 2018, the Group’s unutilised committed bank loan facilities amounted to HK$5,917 million (2017: HK$9,020 million). The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted cash flow.

Carrying

amount

Total

contractual

undiscounted

cash flow

Within

1 year

Over 1 year

but

within 5

years

After 5

years

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 30 June 2018

Creditors and accruals 12,110,933 12,110,933 11,758,758 347,185 4,990

Amounts due to associated

companies and joint

ventures 2,521,242 2,521,242 2,521,242 - -

Amounts due to group

companies 2,068,534 2,068,534 2,068,534 - -

Amounts due to companies

owned by a director of the

ultimate holding company 2,500 2,500 2,500 - -

Amounts due to non-

controlling interests 123,043 123,043 123,043 - -

Short-term borrowings 944,866 964,767 964,767 - -

Long-term borrowings 30,802,903 35,413,895 4,076,456 25,465,864 5,871,535

════════ ════════ ════════ ════════ ════════

F-41

- 41 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5 Financial risk management and fair value estimation (Continued)

(c) Liquidity risk (Continued)

Carrying

amount

Total

contractual

undiscounted

cash flow

Within

1 year

Over 1 year

but

within 5

years

After 5

years

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 30 June 2017

Creditors and accruals 9,659,236 9,659,236 9,276,669 373,586 8,981

Amounts due to associated

companies and joint

ventures 2,296,168 2,296,168 2,296,168 - -

Amounts due to group

companies 2,217,552 2,217,552 2,217,552 - -

Amounts due to companies

owned by a director of the

ultimate holding company 2,413 2,413 2,413 - -

Amounts due to non-

controlling interests 121,156 121,156 121,156 - -

Short-term borrowings 1,303,935 1,354,602 1,343,230 11,372 -

Long-term borrowings 43,278,522 48,810,989 14,707,417 27,856,862 6,246,710

════════ ════════ ════════ ════════ ════════

(d) Capital management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Group generally obtains long-term financing to on-lend or contribute as equity to its subsidiaries, joint ventures and associated companies to meet their funding needs in order to provide more cost-efficient financing. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue or repurchase shares, raise new debt financing or sell assets to reduce debt. The Group monitors capital on the basis of the Group’s gearing ratio. The gearing ratio is calculated as net debt divided by total equity. Net debt is calculated as total borrowings less cash and bank balances. The gearing ratios as at 30 June 2018 and 2017 were as follows:

2018 2017 HK$’000 HK$’000 Consolidated total borrowings 31,747,769 44,582,457 Less: cash and bank balances (32,424,521) (32,337,418) ───────── ───────── Consolidated (net cash)/net debt (676,752) 12,245,039 ═════════ ═════════ Total equity 75,874,344 68,848,057 ═════════ ═════════ Gearing ratio N/A 17.8% ═════════ ═════════

F-42

- 42 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5 Financial risk management and fair value estimation (Continued)

(d) Capital management (Continued) The net cash position as at 30 June 2018 was primarily due to repayment in borrowings and increase in cash and bank balances generated from operating activities.

6 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant effect on carrying amounts of assets and liabilities are as follows: (a) Revenue recognition

Revenue from property development activities is recognised over time when the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date; otherwise, revenue is recognised at a point in time when the buyer obtains control of the completed property. The properties contracted for pre-sale to customers have generally no alternative use for the Group due to contractual restrictions. However, whether there is an enforceable right to payment and hence the related contract revenue should be recognised over time, depends on the terms of each contract and the relevant laws that apply to that contract. To assess the enforceability of right to payment, the Group has reviewed the terms of its contracts and the relevant local laws, considered the local regulators’ views and obtained legal advice, where necessary. For property development revenue that is recognised over time, the Group recognises such property development revenue by reference to the progress of satisfying the performance obligation at the reporting date. This is measured based on the Group’s costs incurred up to the reporting date and budgeted costs which depict the Group’s performance towards satisfying the performance obligation. Significant estimates and judgements are required in determining the accuracy of the budgets, the extent of the costs incurred and the allocation of costs to each property unit. In making the above estimation, the Group conducts periodic review on the budgets and make reference to past experience and work of contractors and surveyors. For property development and sales contracts for which the control of the property is transferred at a point in time, revenue is recognised when the underlying completed property unit is legally and/or physically transferred to the customer.

(b) Valuation of completed investment properties and investment properties under development

The fair value of each investment property is individually determined at the end of each reporting period by independent valuers based on a market value assessment. The valuers have relied on the income approach, and where appropriate, by the market approach. These methodologies are based upon estimates of future results and a set of assumptions specific to each property to reflect its tenancy and cashflow profile. The fair value of each investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions. The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the property.

F-43

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6 Critical accounting estimates and judgements (Continued)

(b) Valuation of completed investment properties and investment properties under development

(Continued) The fair values of investment properties under development are determined by reference to independent valuations. For majority of the Group’s investment properties under development, their fair value reflects the expectations of market participants of the value of the properties when they are completed, less deductions for the costs required to complete the projects and appropriate adjustments for profit and risk. The valuation and all key assumptions used in the valuation should reflect market conditions at the end of each reporting period. The key assumptions include value of completed properties, period of development, outstanding construction costs, finance costs, other professional costs, risk associated with completing the projects and generating income after completion and investors’ return as a percentage of value or cost. At 30 June 2018, if the market value of investment properties had been 5% (2017: 5%) higher/lower with all other variables held constant, the carrying value of the Group’s investment properties would have been HK$1,600.9 million (2017: HK$1,807.3 million) higher/lower.

(c) Provision for properties held for/under development and completed properties held for sale

The Group assesses the carrying amounts of properties held for/under development and completed properties held for sale according to their estimated net realisable value based on the realisability of these properties, taking into account costs to completion based on past experience and net sales value based on prevailing market conditions. Provision is made when events or changes in circumstances indicate that the carrying amounts may not be realised. The assessment requires the use of judgement and estimates.

(d) Estimated useful lives and impairment of property, plant and equipment

Property, plant and equipment are long-lived but may be subject to technical obsolescence. The annual depreciation charges are affected by the estimated useful lives that the Group allocates to each type of property, plant and equipment. Management performs annual reviews to assess the appropriateness of the estimated useful lives. Such reviews take into account the technological changes, prospective economic utilisation and physical condition of the assets concerned. Management also regularly reviews whether there are any indications of impairment and will recognise an impairment loss if the carrying amount of an asset is higher than its recoverable amount which is the greater of its net selling price or its value in use. In determining the value in use, management assesses the present value of the estimated future cash flows expected to arise from the continuing use of the asset and from its disposal at the end of its useful life. Estimates and judgements are applied in determining these future cash flows and the discount rate. Management estimates the future cash flows based on certain assumptions, such as market competition and development and the expected growth in business.

(e) Recoverability of prepayments, debtors and other receivables The Group assesses whether there is objective evidence as stated in note 3(j) that prepayments, debtors and other receivables are impaired. It recognises impairment based on estimates of the extent and timing of future cash flows using applicable discount rates. The final outcome of the recoverability and cash flows of these prepayments, debtors and other receivables will impact the amount of impairment required.

F-44

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

6 Critical accounting estimates and judgements (Continued)

(f) Distinction between property development projects, investment properties and owner-occupied properties When the Group determines whether a property qualifies as an investment property, the Group considers whether the property generates cash flows largely independently of the other assets held by an entity. Owner-occupied properties generate cash flows that are attributable not only to property but also to other assets used in the production or supply process. Properties held for/under development and completed properties held for sale are assets under development and held for sale in the ordinary course of business. The Group shall reclassifies a property when, and only when, there is evidence of a change in use. Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions can be sold or leased out separately, the Group accounts for the portions separately. If the portions cannot be sold separately, the property is accounted as an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is applied in determining whether ancillary services are so significant that a property does not qualify as investment property. The Group considers each property separately in making its judgement.

7 Revenues and segment information (a) The Group is principally engaged in investment in and development of property projects in the

PRC. Revenues include gross proceeds from sale of properties, revenue from rental and hotel operation, property management services fee income, project management fee income and others.

2018 2017 HK$’000 HK$’000 Sale of properties 16,213,665 17,381,220 Rental income 807,887 702,932 Income from hotel operation 179,114 287,154 Property management services fee income 629,775 535,026 Project management fee income 36,029 49,996 Others 130,717 40,170 ───────── ───────── 17,997,187 18,996,498 ═════════ ═════════

For the year ended 30 June 2018, the Group recognised revenue from contracts with customers (including sales of properties, income from hotel operation, property management service fee income, project management fee income and others) over time except for revenue from property sales of HK$14,391,673,000 and hotel operation of HK$50,276,000 which were recognised at a point in time.

(b) The chief operating decision-maker has been identified as the Board of Directors. This Board of Directors reviews the Group’s internal reporting in order to assess performance and allocate resources. Management has determined the operating segments based on these reports. The Board of Directors considers the business from the perspective of the services and products. The management assesses the performance of property sales, rental operation, hotel operation and property management services operations. Other operations include contracting services and ancillary services in property projects.

F-45

- 45 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7 Revenues and segment information

(b) (Continued)

The Board of Directors assesses the performance of the operating segments based on a measure of attributable operating profit (“AOP”) before finance costs and after taxation charge (including subsidiaries, associated companies and joint ventures). This measurement basis excludes the effects of changes in fair value of investment properties, net foreign exchange gains/(losses), amortisation and impairment of intangible assets acquired from business combinations, income and expenses at corporate office and deferred taxation on undistributed profits. Interest income is included in the result of each operating segment that is reviewed by the Board of Directors. Sales between segments are carried out in accordance with terms agreed by the parties involved. The revenue from external parties reported to the Board of Directors is measured in a manner consistent with that in the consolidated income statement. Segment assets consist primarily of property, plant and equipment, investment properties, land use rights, properties held for/under development, intangible assets, prepayments, debtors and other receivables, contract assets, amounts due from related companies and completed properties held for sale. They exclude cash and bank balances and prepayment for proposed development projects held and managed at corporate office. These are part of the reconciliation to total assets on the consolidated statement of financial position. Segment liabilities comprise mainly creditors and accruals, deposits received on sale of properties, contract liabilities and amounts due to related companies. They exclude bank and other borrowings, deferred tax liabilities, taxes payable and other creditors and accruals at corporate office. These are part of the reconciliation to total liabilities on the consolidated statement of financial position. The majority of the assets and operations of the Group are located in the PRC. Revenues are mainly derived from the PRC. Non-current assets other than financial instruments are mainly located in the PRC.

(c) For the year ended 30 June 2018, there was no revenue derived from a single external customer exceeding 10% of total revenue (2017: Same).

F-46

- 46

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F-50

- 50 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

7 Revenues and segment information (Continued) Reconciliations of reportable segment revenues to revenues of the Group and reportable AOP before finance costs and after taxation charge to profit before taxation:

2018 2017 HK$’000 HK$’000 (i) Revenues

Total segment revenues 18,894,437 19,840,866 Less:

Revenues of associated companies and joint ventures,

attributable to the Group (897,250) (844,368) ───────── ─────────

Revenues as presented in consolidated income

statement 17,997,187 18,996,498 ═════════ ═════════

(ii) Profit before taxation AOP before finance costs and after taxation charge 3,231,137 2,593,714

Bank and other interest income and dividend income –

corporate 213,893 238,855 Imputed interest income from consideration receivable 187,838 857,946 Deferred taxation on undistributed profits (98,110) (159,437) Corporate administrative expenses (298,521) (305,546) Finance costs, net (297,293) (212,445) ───────── ───────── AOP after corporate items 2,938,944 3,013,087 --------------- ---------------

Realised gain on fair value of derivative financial

instruments - 48,775 Loss on disposal of available-for-sale financial assets - (106,994)

Changes in fair value of investment properties, net of

deferred taxation 882,993 (200,249) Net foreign exchange gains/(losses) 40,941 (348,849) ───────── ───────── 923,934 (607,317) --------------- --------------- Profit attributable to equity holders of the Company 3,862,878 2,405,770 Taxation charge 4,752,216 3,477,008 Profit attributable to non-controlling interests 138,222 183,590 ───────── ───────── Profit before taxation 8,753,316 6,066,368 ═════════ ═════════

F-51

- 51 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

8 Other income

2018 2017 HK$’000 HK$’000 Dividend income from perpetual securities - 234,484 ───────── ───────── - 234,484 ═════════ ═════════

9 Other gains/(losses), net

2018 2017 HK$’000 HK$’000 Gain on disposal of investment properties (note 10) 277,762 145,366 Gain on disposal of land use rights - 22,636 Gain on disposal of properties held for development - 19,274 Loss on disposal of available-for-sale financial assets - (106,994) Gain on disposal of subsidiaries and joint ventures

(note 40(c)) 87,237 33,863 Gain from bargain purchase in business combinations

(note 39) - 18,630 Gain on remeasuring previously held equity interests of a

joint venture at fair value upon further acquisition as a subsidiary 17,582

Reversal of other liabilities 430,966 - Realised gain on disposal of derivative financial instruments - 48,775 Impairment of intangible assets - (14,227) Net foreign exchange losses (11,337) (347,595) ───────── ───────── 784,628 (162,690) ═════════ ═════════

F-52

- 52 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

10 Operating profit

2018 2017 HK$’000 HK$’000 Operating profit is arrived at after crediting:

Gross rental income from investment properties 756,619 648,291 Gain on disposal of investment properties (note 9) 277,762 145,366 Gain on disposal of property, plant and equipment 8,685 - ═════════ ═════════

and after charging: Cost of properties sold 8,536,282 10,707,389 Staff costs (note 13) 816,859 691,775 Depreciation of property, plant and equipment (note 15) 151,509 122,572 Outgoings in respect of investment properties 357,686 288,372 Rental expense for leased premises 58,582 43,139 Loss on disposal of property, plant and equipment - 9,458 Amortisation of land use rights (note 17) 8,863 17,045 Impairment of intangible assets (note 18) - 14,227 Amortisation of intangible assets (note 18) 13,531 13,526 Auditors’ remuneration 11,912 11,526

═════════ ═════════ Contingent rent included in revenue amounted to HK$37,813,000 (2017: HK$12,728,000) for the year.

11 Finance income

2018 2017 HK$’000 HK$’000 Bank and other interest income 450,471 246,962 Imputed interest income from consideration receivable

(note 25(c)) 187,838 857,946 Interest income from joint ventures, net of withholding tax

(note) 37,421 2,710 ───────── ─────────

675,730 1,107,618 ═════════ ═════════ Note: The property projects of the Group’s joint ventures have been partly financed by the

Group in the form of equity capital and unsecured shareholder’s advances. The interest income from joint ventures is recognised when the payment of interest has been approved by the Group’s joint ventures. The Group’s attributable share of shareholders’ loan interest expenses of joint ventures is included in the share of results of joint ventures as follows:

2018 2017

HK$’000 HK$’000

Share of shareholders’ loan interest expenses of joint ventures (26,190) (2,743)

═════════ ═════════

F-53

- 53 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

12 Finance costs

2018 2017 HK$’000 HK$’000 Borrowing cost on bank borrowings and loans from other

financial institutions 1,059,046 1,256,798 Interest on loans from fellow subsidiaries 16,817 16,903 Interest on loans from non-controlling interests 18,483 11,883 Borrowing cost on fixed rate bonds and notes payable 596,222 695,890 Interest on advances from participating interest - 8,508 ───────── ───────── 1,690,568 1,989,982 Amounts capitalised in property, plant and equipment,

investment properties and properties held for/under development (1,372,069) (1,787,526)

───────── ───────── 318,499 202,456 ═════════ ═════════ Note: To the extent funds are borrowed generally and used for the purpose of financing certain

property, plant and equipment, investment properties and properties held for/under development, the capitalisation rate used to determine the amounts of borrowing costs eligible for the capitalisation is 4.55% (2017: 3.82%) for the year.

13 Staff costs

2018 2017

HK$’000 HK$’000 Wages, salaries and other benefits 1,496,198 1,505,742 Pension costs - defined contribution plans (note) 20,405 19,968 Share-based payments 6,263 - Less: amounts capitalised in investment properties under

development and properties held for/under development

(587,062)

(704,906) Less: recharge to a fellow subsidiary (note 41(a)(xv)) (118,945) (129,029) ───────── ───────── 816,859 691,775 ═════════ ═════════ Note: The Group has established a defined contribution retirement scheme under the

Occupational Retirement Scheme Ordinance for all employees in Hong Kong since September 1999. The contributions to the scheme are based on a percentage of the employees’ salaries ranging from 5% to 10%, depending upon the length of service of the employees. The Group’s contributions to the scheme are expensed as incurred.

With the implementation of the Mandatory Provident Fund (“MPF”) Scheme Ordinance on 1 December 2000, the Group established a new MPF Scheme. Except for employees who commenced employment after 1 October 2000, all the existing employees were given an option to select between the existing defined contribution retirement scheme and the MPF Scheme. The employees who commenced employment after 1 October 2000 are required to join the MPF Scheme. The Group’s contributions to the MPF scheme are based on fixed percentages of members’ salaries, ranging from 5% of MPF relevant income to 10% of the basic salary. Members’ mandatory contributions are fixed at 5% of MPF relevant income.

F-54

- 54 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

13 Staff costs (Continued)

Note: (Continued)

The Group also contributes to retirement plans for its employees in the PRC at a percentage in compliance with the requirements of the respective municipal governments in the PRC.

The assets of all retirement schemes are held separately from those of the Group in independently administered funds. The total pension costs charged to the consolidated income statement for the year amounted to HK$10,407,000 (2017: HK$11,085,000).

14 Taxation charge

2018 2017

HK$’000 HK$’000 Current taxation

PRC corporate income tax and withholding tax 1,406,275 1,027,443 PRC land appreciation tax 3,186,122 2,084,284

Deferred taxation (note 32) 159,819 365,281 ───────── ───────── 4,752,216 3,477,008 ═════════ ═════════ Share of taxation of associated companies for the year ended 30 June 2018 was tax credits of HK$11,266,000 (2017: tax charge of HK$12,361,000). Share of taxation of joint ventures for the year ended 30 June 2018 was HK$70,071,000 (2017: HK$172,199,000). They are included in the consolidated income statement as share of results of associated companies and joint ventures. The taxation on the Group’s profit before taxation differs from the theoretical amount that would arise using the rate of taxation prevailing in the PRC in which the Group operates as follows:

2018 2017 HK$’000 HK$’000 Profit before taxation 8,753,316 6,066,368 Share of results of associated companies and joint ventures (130,506) (257,778) ───────── ─────────

8,622,810 5,808,590 Calculated at a taxation rate of 25% (2017: 25%) 2,155,703 1,452,148 Income not subject to taxation (546,151) (703,823) Expenses not deductible for taxation purposes 527,475 571,249 Tax losses not recognised 183,621 154,156 Deduction from PRC land appreciation tax (796,531) (521,071) Utilisation of previously unrecognised tax losses (49,906) (37,422) Temporary differences not recognised (8,605) 376,204 Recognition of temporary differences (1,058) (58,458) Deferred taxation on undistributed profits 101,546 159,741 ───────── ───────── 1,566,094 1,392,724 PRC land appreciation tax 3,186,122 2,084,284 ───────── ───────── 4,752,216 3,477,008 ═════════ ═════════

F-55

- 55 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

14 Taxation charge (Continued) No provision for Hong Kong profits tax has been made as the Group has no estimated assessable profits in Hong Kong for the year (2017: Nil). PRC corporate income tax (“CIT”) has been provided on the estimated assessable profits of subsidiaries, associated companies and joint ventures operating in the PRC at 25% (2017: 25%). PRC land appreciation tax (“LAT”) is provided at progressive rates ranging from 30% to 60% on the appreciation of land value, being the proceeds of sale of properties less deductible expenditures including costs of land use rights and property development expenditures.

15 Property, plant and equipment

Other

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Leasehold

improvements

Furniture,

fixtures and

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Motor

vehicles

Assets under

construction Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Cost

As at 1 July 2017 2,177,026 658,755 557,934 44,143 4,212,832 7,650,690

Translation differences 142,510 28,848 41,667 9,860 139,590 362,475

Additions 204,003 26,534 47,533 2,577 768,118 1,048,765

Transfer from assets

under construction 2,114,145 - - - (2,170,266) (56,121)

Disposal of subsidiaries

(note 40(c)) (668,719) (564,827) (304,364) (2,467) - (1,540,377)

Transfer to assets held for

sale - - (619) (1,053) - (1,672)

Disposals/write off (13,327) - (65,147) (8,891) - (87,365)

───────── ───────── ───────── ───────── ───────── ─────────

As at 30 June 2018 3,955,638 149,310 277,004 44,169 2,950,274 7,376,395

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

Accumulated depreciation

and impairment

As at 1 July 2017 474,288 443,534 448,605 34,242 - 1,400,669

Translation differences 50,812 13,642 37,074 5,682 - 107,210

Charge for the year

(note 10) 99,595 24,179 22,870 4,865 - 151,509

Disposal of subsidiaries

(note 40(c)) (357,946) (403,405) (261,741) (2,389) - (1,025,481)

Transfer to assets held for

sale - - (127) (182) - (309)

Disposals/write off (4,990) - (59,511) (8,325) - (72,826)

───────── ───────── ───────── ───────── ───────── ─────────

As at 30 June 2018 261,759 77,950 187,170 33,893 - 560,772

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

Net book value

As at 30 June 2018 3,693,879 71,360 89,834 10,276 2,950,274 6,815,623

════════ ════════ ════════ ════════ ════════ ════════

F-56

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

15 Property, plant and equipment (Continued)

Other

properties

Leasehold

improvements

Furniture,

fixtures and

equipment

Motor

vehicles

Assets under

construction Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

Cost

As at 1 July 2016 2,024,205 597,884 637,881 62,124 4,027,890 7,349,984

Translation differences (38,639) (7,755) (13,618) (537) (56,217) (116,766)

Additions 2,268 68,626 27,886 2,273 241,159 342,212

Transfer from properties

under development 1,066,772 - - - - 1,066,772

Acquisition of a

subsidiary (note 40(b)) 33,331 - 14 298 - 33,643

Transfer to investment

properties (870,349) - (53,515) - - (923,864)

Disposals/write off (40,562) - (40,714) (20,015) - (101,291)

───────── ───────── ───────── ───────── ───────── ─────────

As at 30 June 2017 2,177,026 658,755 557,934 44,143 4,212,832 7,650,690

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

Accumulated depreciation

and impairment

As at 1 July 2016 936,500 400,401 478,158 46,533 - 1,861,592

Translation differences (17,108) (5,833) (6,711) (135) - (29,787)

Charge for the year

(note 10) 44,062 48,966 24,368 5,176 - 122,572

Transfer to investment

properties (448,604) - (27,793) - - (476,397)

Disposals/write off (40,562) - (19,417) (17,332) - (77,311)

───────── ───────── ───────── ───────── ───────── ─────────

At as at 30 June 2017 474,288 443,534 448,605 34,242 - 1,400,669

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

Net book value

As at 30 June 2017 1,702,738 215,221 109,329 9,901 4,212,832 6,250,021

════════ ════════ ════════ ════════ ════════ ════════

As at 30 June 2018, certain other properties and furniture, fixtures and equipment with carrying amount of HK$5,150,183,000 (2017: HK$4,803,553,000) were pledged as securities for the Group’s long-term borrowings.

F-57

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

16 Investment properties

2018 2017 HK$’000 HK$’000 Completed investment properties 23,533,128 23,697,210 Investment properties under development 8,484,524 12,449,770 ───────── ───────── 32,017,652 36,146,980 ═════════ ═════════

Completed investment properties

Investment properties

under development Total

HK$’000 HK$’000 HK$’000 As at 1 July 2017 23,697,210 12,449,770 36,146,980 Translation differences 838,359 441,289 1,279,648 Additions 19,394 832,923 852,317

Transfer from/(to) properties under development 28,269 (3,933,143) (3,904,874)

Transfer from completed properties held for sale 51,330 - 51,330

Disposals (2,692,541) - (2,692,541) Disposal of subsidiaries (note 40(c)) (976,750) - (976,750) Changes in fair value 980,418 281,124 1,261,542 Transfer upon completion 1,587,439 (1,587,439) - ──────── ──────── ──────── As at 30 June 2018 23,533,128 8,484,524 32,017,652 ════════ ════════ ════════ As at 1 July 2016 16,935,231 5,977,544 22,912,775 Translation differences (275,659) (115,172) (390,831) Additions 82,239 8,161,537 8,243,776 Acquisition of a subsidiary (note 40(b)) 1,800,883 - 1,800,883

Transfer from properties under development 3,300,266 69,204 3,369,470

Transfer from completed properties held for sale 68,675 - 68,675

Transfer from property, plant and equipment and land use right 936,782 - 936,782

Disposals (593,347) - (593,347) Disposal of a subsidiary (note 40(c)) (18,523) - (18,523) Changes in fair value 1,251,981 (1,434,661) (182,680) Transfer upon completion 208,682 (208,682) - ──────── ──────── ──────── As at 30 June 2017 23,697,210 12,449,770 36,146,980 ════════ ════════ ════════

F-58

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

16 Investment properties (Continued) Valuation processes of the Group The Group measures its investment properties at fair value. The investment properties were revalued by Knight Frank Petty Limited, independent qualified valuer, who holds a recognised relevant professional qualification and has recent experience in the locations and segments of the investment properties valued, as at 30 June 2018 on an open market value basis. For all investment properties, their current use equates to the highest and best use. The Group’s finance department includes a team that reviews the valuation performed by the independent valuer for financial reporting purposes. This team reports directly to the senior management. Discussions of valuation processes and results are held between the management and valuer at least once every six months, in line with the Group’s interim and annual reporting dates. As at each financial year end, the finance department verifies all major inputs to the independent valuation report; assesses property valuation movements when compared to the prior year valuation report; and holds discussions with the independent valuer. Valuation techniques Fair value of completed commercial and residential properties in the PRC is generally derived using the income approach and wherever appropriate, by the market approach. Income approach is based on the capitalisation of the net income and reversionary income potential by adopting appropriate capitalisation rates, which are derived from analysis of sale transactions and valuers’ interpretation of prevailing investor requirements or expectations. The prevailing market rents adopted in the valuation referenced to recent lettings of the subject properties and other comparable properties. Market approach is based on comparing the property to be valued directly with other comparable properties, which have recently been transacted. However, given the heterogeneous nature of real estate properties, appropriate adjustments are usually required to allow for any qualitative differences that may affect the price likely to be achieved by the property under consideration. Fair value of commercial and carparks properties under development in the PRC is generally derived using the residual method. This valuation method is essentially a means of valuing the completed properties by reference to its development potential by deducting development costs together with developer’s profit and risk from the estimated capital value of the proposed development assuming completed as at the date of valuation. As at 30 June 2018, all investment properties are included in level 3 fair value hierarchy. There were no changes to the valuation techniques during the year and there were no transfers between fair value hierarchies during the year. As at 30 June 2018, certain investment properties with an aggregate carrying value of HK$5,229,524,000 (2017: HK$10,271,149,000) were pledged as securities for the Group’s long-term borrowings.

F-59

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

16 Investment properties (Continued) Information about fair value measurements using significant unobservable inputs:

2018 Range of significant unobservable inputs

Fair value

Valuation

technique

Prevailing market

rents per month Unit price

Capitalisation

rate

HK$’000

Completed

investment

properties

Residential 1,809,167 Income

approach

HK$121 – HK$214

per square metre

N/A 4.25% - 15.0%

Commercial 9,662,858 Income

approach

HK$13 – HK$261

per square metre

N/A 2.0% - 12.0%

260,595 Market

approach

N/A HK$19,000 –

HK$21,000

per square metre

N/A

Office 4,832,738 Income

approach

HK$40 – HK$140

per square metre

N/A 4.0% - 7.5%

Carparks 6,967,770 Market

approach

N/A HK$143,000 –

HK$690,000

per carpark space

N/A

────────

Total 23,533,128

════════

2018 Range of significant unobservable inputs

Fair value

Valuation

technique

Unit price

Estimated developer’s profit

and risk margins

HK$’000

Investment

properties

under

development

Commercial 986,905 Residual HK$23,000

per square metre

0.8%

6,666,667 Market

approach

HK$29,000

per square metre

N/A

Carparks 830,952 Residual HK$226,000 – HK$381,000

per carpark space

0.5% - 0.7%

────────

Total 8,484,524

════════

F-60

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

16 Investment properties (Continued) Information about fair value measurements using significant unobservable inputs: (Continued)

2017 Range of significant unobservable inputs

Fair value

Valuation

technique

Prevailing market

rents per month Unit price

Capitalisation

rate

HK$’000

Completed

investment

properties

Residential 1,688,046 Income

approach

HK$115 – HK$207

per square metre

N/A 4.25% - 15.0%

Commercial 9,707,099 Income

approach

HK$28 – HK$325

per square metre

N/A 2.0% - 9.0%

1,603,103 Market

approach

N/A HK$11,700 –

HK$24,100

per square metre

N/A

Office 3,173,103 Income

approach

HK$55 – HK$133

per square metre

N/A 5.5% - 7.5%

1,668,966 Market

approach

N/A HK$20,100

per square metre

N/A

Carparks 5,856,893 Market

approach

N/A HK$75,000 –

HK$517,000

per carpark space

N/A

────────

Total 23,697,210

════════

2017 Range of significant unobservable inputs

Fair value

Valuation

technique

Unit price

Estimated developer’s profit

and risk margins

HK$’000

Investment

properties

under

development

Commercial 4,066,666 Residual HK$14,000 – HK$21,000

per square metre

1% - 5%

6,356,322 Market

approach

HK$28,000

per square metre

N/A

Carparks 2,026,782 Residual HK$218,000 – HK$264,000

per carpark space

1% - 3%

────────

Total 12,449,770

════════

F-61

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

17 Land use rights

2018 2017

HK$’000 HK$’000 At beginning of the year 419,423 554,348 Translation differences 30,563 (9,710) Transfer from assets under construction 56,121 - Transfer from properties under development - 14,623 Transfer to investment properties - (122,279) Disposal of subsidiaries (note 40(c)) (333,451) - Disposals (1,078) (514) Amortisation (note 10) (8,863) (17,045) ───────── ───────── At end of the year 162,715 419,423 ═════════ ═════════ As at 30 June 2018, land use rights with carrying amount of HK$71,267,000 (2017: HK$206,851,000) were pledged as securities for the Group’s long-term borrowings.

18 Intangible assets

Goodwill Others Total HK$’000 HK$’000 HK$’000 As at 30 June 2016 Cost 225,945 67,636 293,581 Accumulated amortisation - (13,528) (13,528) Accumulated impairment (202,551) - (202,551) ───────── ───────── ───────── Net book value 23,394 54,108 77,502 ═════════ ═════════ ═════════ Year ended 30 June 2017 Opening net book value 23,394 54,108 77,502 Amortisation (note 10) - (13,526) (13,526) Impairment (note 10) (14,227) - (14,227) ───────── ───────── ───────── Closing net book value 9,167 40,582 49,749 ═════════ ═════════ ═════════ As at 30 June 2017 Cost 225,945 67,636 293,581 Accumulated amortisation - (27,054) (27,054) Accumulated impairment (216,778) - (216,778) ───────── ───────── ───────── Net book value 9,167 40,582 49,749 ═════════ ═════════ ═════════

F-62

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

18 Intangible assets (Continued)

Goodwill Others Total HK$’000 HK$’000 HK$’000 Year ended 30 June 2018 Opening net book value 9,167 40,582 49,749 Additons - 385 385 Amortisation (note 10) - (13,531) (13,531) Disposal of a subsidiary (note 40(c)) (9,167) - (9,167) ───────── ───────── ───────── Closing net book value - 27,436 27,436 ═════════ ═════════ ═════════ As at 30 June 2018 Cost 188,524 68,021 256,545 Accumulated amortisation - (40,585) (40,585) Accumulated impairment (188,524) - (188,524) ───────── ───────── ───────── Net book value - 27,436 27,436 ═════════ ═════════ ═════════

Goodwill is allocated to the Group’s cash generating units identified according to business segment. As at 30 June 2017, goodwill of HK$9,167,000 was allocated to the cash generating units in the segment of hotel operation. For the purpose of impairment test, the recoverable amount of the business unit is determined based on value-in-use calculations, which use cash flow projections based on financial budgets and a pre-tax discount rate.

19 Properties held for development

2018 2017 HK$’000 HK$’000 Land use rights 2,599,714 4,343,527 Development and incidental costs 3,726,618 4,151,169 Interest capitalised 763,584 720,667 ───────── ───────── 7,089,916 9,215,363 ═════════ ═════════ As at 30 June 2018, there was no properties held for development pledged as securities for long-term borrowings (2017: Same).

F-63

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

20 Associated companies 2018 2017 HK$’000 HK$’000 Associated companies Group’s share of net assets 4,888,312 4,757,944 Amounts due by associated companies Non-interest bearing (note i) 1,509,339 1,522,425

───────── ─────────

Aggregate carrying amounts of the Group’s interests in associated companies 6,397,651 6,280,369

═════════ ═════════

Notes:

(i) The amounts receivable are unsecured and interest free. The amounts receivable form part of the Group’s investments in associated companies.

(ii) There is no associated company that is individually significant to the Group. The Group’s

share of results of the associated companies are as follows:

2018 2017 HK$’000 HK$’000 (Loss)/profit for the year (34,619) 36,449 Other comprehensive income for the year 99,923 95,759 ───────── ───────── Total comprehensive income for the year 65,304 132,208 ═════════ ═════════

(iii) Details of principal associated companies are given in note 43.

21 Joint ventures

2018 2017 HK$’000 HK$’000

Equity joint ventures/joint ventures in wholly foreign owned

enterprises Group’s share of net assets 101,430 2,522,525 Amounts due by joint ventures

Interest bearing (note ii) 397,726 354,747 Non-interest bearing (note i) 2,962,708 2,538,675

───────── ───────── 3,461,864 5,415,947

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

F-64

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

21 Joint ventures (Continued) 2018 2017 HK$’000 HK$’000 Co-operative joint ventures Cost of investments 3,118,624 2,906,124 Goodwill 12,704 12,704 Share of undistributed post-acquisition results and reserves 206,868 324,038 ───────── ───────── 3,338,196 3,242,866 Amounts due by joint ventures, net of provision Interest bearing (note iii) 5,652,866 5,364,922 Non-interest bearing (note i) 679,051 548,711 ───────── ───────── 9,670,113 9,156,499 -------------- -------------- Joint venture companies limited by shares Group’s share of net assets (58,436) (69,277) Amounts due by joint ventures, net of provision Interest bearing (note ii) 84,997 88,818 Non-interest bearing (note i) 452,307 452,372 ───────── ───────── 478,868 471,913 -------------- -------------- Aggregate carrying amount of the Group’s interests in joint

ventures 13,610,845 15,044,359 ═════════ ═════════

Notes: (i) The amounts receivable are unsecured and interest free. The amounts receivable form part of

the Group’s investment in joint ventures. (ii) The amounts receivable are unsecured and carry interest at 10% (2017: 10%) per annum. The

amounts receivable form part of the Group’s investments in joint ventures. (iii) The amounts receivable are unsecured and carry interest ranging from Hong Kong prime

rate to 5.13% (2017: Hong Kong prime rate to 8.5%) per annum. The amounts receivable form part of the Group’s investments in joint ventures.

(iv) There is no joint venture that is individually significant to the Group. The Group’s share of

results of the joint ventures are as follows:

2018 2017 HK$’000 HK$’000 Profit for the year 165,125 221,329 Other comprehensive income for the year 9,667 (26,804) ───────── ───────── Total comprehensive income for the year 174,792 194,525 ═════════ ═════════

(v) Details of principal joint ventures are given in note 43.

F-65

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

22 Cash and bank balances

2018 2017 HK$’000 HK$’000 Unrestricted balances 32,424,521 32,337,418 ═════════ ═════════ The effective interest rate on bank deposits ranges from 0.85% to 2.46% (2017: 0.03% to 4.86%). These deposits have maturity dates ranging from 7 to 90 days (2017: 6 to 90 days). The carrying amounts of the cash and bank balances of the Group are denominated in the following currencies:

2018 2017 HK$’000 HK$’000 Hong Kong dollar 704,023 4,643,746 Renminbi 30,444,712 20,961,439 United States dollar 1,275,786 6,732,233 ───────── ───────── 32,424,521 32,337,418 ═════════ ═════════ The conversion of Renminbi denominated balances into foreign currencies and the remittance of such foreign currencies denominated bank balances and cash out of the PRC are subject to relevant rules and regulations of foreign exchange control promulgated by the PRC government.

23 Properties under development

2018 2017 HK$’000 HK$’000 Land use rights 6,862,768 6,645,527 Development and incidental costs 12,507,345 12,176,102 Interest capitalised 2,894,984 2,604,901 ───────── ───────── 22,265,097 21,426,530 ═════════ ═════════ Properties under development with an aggregate carrying value of HK$2,274,942,000 (2017: HK$3,640,052,000) were pledged as securities for the Group’s long-term borrowings.

2018 2017 HK$’000 HK$’000 Properties under development for sale:

Expected to be completed and available for sale after more than 12 months 7,797,158 10,115,748

Expected to be completed and available for sale within 12 months 14,467,939 11,310,782

───────── ───────── 22,265,097 21,426,530

═════════ ═════════

F-66

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

24 Completed properties held for sale

2018 2017

HK$’000 HK$’000 Land use rights 2,561,710 1,471,491 Development costs 14,035,603 9,223,319 Interest capitalised 1,552,831 616,151 ───────── ───────── 18,150,144 11,310,961 ═════════ ═════════ Completed properties held for sale with an aggregate carrying value of HK$4,447,015,000 (2017: Nil) were pledged as securities for the Group’s long-term borrowings.

25 Prepayments, debtors and other receivables

2018 2017 HK$’000 HK$’000 Trade debtors (note a) 414,108 278,755 Prepaid land preparatory cost (note b) 867,924 837,996 Deposits for purchase of land (note b) 236,575 228,417 Prepayment for proposed development projects (note b) 1,432,278 199,632 Prepaid taxes (note b) 2,456,833 2,027,610 Other prepayments, deposits and receivables (note c) 1,580,382 8,996,316 ───────── ───────── 6,988,100 12,568,726 ═════════ ═════════

Notes:

(a) Trade debtors mainly include rental receivables and property management services fee receivables. Monthly rental in respect of rental properties are payable in advance by tenants in accordance with the lease agreements. Monthly property management services fees are payable in advance in accordance with the agreements. The carrying amounts of the trade debtors are mainly denominated in Renminbi.

(b) The carrying amounts are mainly denominated in Renminbi and Hong Kong dollar.

(c) The carrying amounts are mainly denominated in Renminbi. The balances include consideration receivable from China Evergrande Group (formerly known as Evergrande Real Estate Group Limited) of HK$64 million (2017: HK$7,178 million) in relation to the disposal of subsidiaries and joint ventures during the year ended 30 June 2016, which would be settled by instalments within 2 years after the end of the reporting period of 2016 and therefore it was stated at its fair value using a discount rate of 12% at the end of the reporting period. The consideration to be received is subject to adjustment based on the actual amount required by the Group to settle the obligations stipulated in the sale and purchase agreements. The contracted consideration of RMB20,800 million includes the imputed interest of HK$1,674 million, of which HK$188 million (2017: HK$858 million) was recognised as finance income.

F-67

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

25 Prepayments, debtors and other receivables (Continued) Notes: (Continued)

(d) As at 30 June 2018, trade debtors of HK$393,923,000 (2017: HK$277,766,000) were past

due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of these trade receivables is as follows:

2018 2017 HK$’000 HK$’000 0 to 30 days 205,028 105,134 31 to 60 days 31,442 18,969 61 to 90 days 17,163 9,417 Over 90 days 140,290 144,246

───────── ───────── 393,923 277,766

═════════ ═════════

(e) During the year, no impairment loss has been made on trade debtors recognised in the consolidated income statement (2017: Same).

(f) The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.

26 Contract assets

As at 30 As at 1 June 2018 July 2017

HK$’000 HK$’000 Contract assets related to property sales 13,274 30,103 Contract assets related to construction services 62,193 - ───────── ───────── 75,467 30,103 ═════════ ═════════

27 Amounts due from/(to) related companies

Related companies include group companies, joint ventures and associated companies of the Group and companies owned by a director of the ultimate holding company.

2018 2017 HK$’000 HK$’000 Amounts due from group companies (note a) 1,909,748 333,692 Amounts due from joint ventures (note b) 170,321 48,597 ───────── ───────── 2,080,069 382,289 --------------- ---------------

F-68

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

27 Amounts due from/(to) related companies (Continued)

2018 2017 HK$’000 HK$’000 Amounts due to group companies (note c) (2,068,534) (2,217,552) Amounts due to associated companies (note d) (2,152,926) (2,076,900) Amounts due to joint ventures (note d) (368,316) (219,268) Amounts due to companies owned by a director of the

ultimate holding company (note e) (2,500) (2,413) ───────── ───────── (4,592,276) (4,516,133) --------------- --------------- (2,512,207) (4,133,844) ═════════ ═════════

Notes: (a) The amounts due from group companies are unsecured, interest free and repayable on

demand. The carrying amounts of amounts due from group companies are denominated in the following currencies:

2018 2017 HK$’000 HK$’000

Hong Kong dollar 1,663,895 219,566 Renminbi 245,853 114,126

───────── ───────── 1,909,748 333,692 ═════════ ═════════

(b) For interest free amounts due from joint ventures of HK$140,011,000 (2017:

HK$18,287,000), they are unsecured and repayable on demand. For interest bearing amounts due from a joint venture of HK$30,310,000 (2017: HK$30,310,000), they are unsecured, carry interest at 10% (2017: 10%) per annum and are repayable on demand. The carrying amounts of amounts due from joint ventures are mainly denominated in Renminbi.

(c) The amounts due to group companies are unsecured, interest free and repayable on demand. The carrying amounts of amounts due to group companies are denominated in Renminbi.

(d) The amounts payable are unsecured, interest free and repayable on demand. The amounts

payable are mainly denominated in Renminbi.

(e) The amounts due to companies owned by a director of the ultimate holding company are unsecured, interest free and repayable on demand. The carrying amounts of amounts due to companies owned by a director of the ultimate holding company are denominated in Renminbi.

F-69

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NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

28 Assets/liabilities of disposal group classified as held for sale Assets of disposal group classified as held for sale

2018 HK$’000 Property, plant and equipment 1,363 Properties held for development 1,352,599 Properties under development 472,602 Prepayments, debtors and other receivables 7,815 Cash and bank balances, unrestricted 56,488 ───────── 1,890,867 ═════════

Liabilities of disposal group classified as held for sale

2018 HK$’000 Creditors and accruals 1,418 Amounts due to related companies 7,247 Taxes payables 120 ─────────

8,785

═════════

Note: On 1 August 2017, New World Development (China) Limited (“NWDC”), a wholly owned subsidiary of the Group, entered into a sale and purchase agreement with Hainan Xin Zhong Investment Co., Ltd. to dispose of its entire interest in a 85% owned subsidiary, namely Xin Zhong Real Estate Yangzhou Co., Ltd, which is engaged in property development in Yangzhou, PRC, at a consideration of approximately RMB1,348,000,000.

29 Share capital

2018 2017

HK$’000 HK$’000 Authorised: 30,000,000,000 shares of HK$0.1 each 3,000,000 3,000,000 ═════════ ═════════

Issued and fully paid: 8,702,292,242 (2017: 8,702,292,242) shares of HK$0.1 each 870,229 870,229 ═════════ ═════════

F-70

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F-72

- 72 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 Borrowings

2018 2017 HK$’000 HK$’000 Long-term borrowings

Bank loans (note i) Secured 2,373,845 3,720,060 Unsecured 13,712,265 18,613,772 Loans from fellow subsidiaries (note ii) - 2,674,007 Loans from non-controlling interests (note iii) 411,261 398,888 Fixed rate bonds and notes payable (note iv) 10,019,818 13,733,864 Loans from other financial institutions (note i) Secured 2,976,190 2,873,563 Unsecured 1,309,524 1,264,368

───────── ───────── 30,802,903 43,278,522 Current portion of long-term borrowings (2,767,776) (13,570,285) ───────── ───────── 28,035,127 29,708,237 -------------- -------------- Short-term borrowings

Unsecured bank loans (note i) 944,866 1,303,935 Current portion of long-term borrowings 2,767,776 13,570,285 ───────── ───────── 3,712,642 14,874,220 -------------- -------------- Total borrowings 31,747,769 44,582,457 ═════════ ═════════

Notes:

(i) The loans from banks and other financial institutions are repayable as follows:

Secured Unsecured Total 2018 2017 2018 2017 2018 2017 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 Within one year 1,515,971 1,429,924 1,837,858 7,022,899 3,353,829 8,452,823 Between one

and two years 250,731 1,386,431 7,808,297 1,691,307 8,059,028 3,077,738 Between two

and five years 3,284,523 3,408,509 6,320,500 12,467,869 9,605,023 15,876,378 After five years 298,810 368,759 - - 298,810 368,759 ──────── ──────── ──────── ──────── ──────── ──────── 5,350,035 6,593,623 15,966,655 21,182,075 21,316,690 27,775,698 ════════ ════════ ════════ ════════ ════════ ════════

(ii) The loans from fellow subsidiaries were repayable within one year, unsecured and bore interest

at three months Hong Kong Interbank Offered Rate (“HIBOR”) per annum.

(iii) The loans from non-controlling interests are unsecured, have repayment terms as specified in the loan agreement and are interest free except for HK$358,813,000 (2017: HK$346,440,000) which bears interest at 4.75% per annum (2017: 4.75% per annum).

F-73

- 73 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 Borrowings (Continued) Notes: (Continued)

(iv) On 6 February 2013, the Company issued 5.5% bonds in the aggregate amounts of RMB3,000 million (equivalent to approximately HK$3,750 million). The bonds were issued at a price of 100 per cent of the principal amount, and bore interest at a coupon rate of 5.5% per annum, payable semi-annually in arrears on the 6 February and 6 August each year. The bonds were listed on The Stock Exchange of Hong Kong Limited. The bonds were redeemed on the maturity date on 6 February 2018 at the principal amount.

As at 30 June 2017, the fair value of the bonds amounted to RMB3,015.0 million (equivalent to approximately HK$3,465.6 million).

On 6 November 2014, the Company issued 5.375% notes in the aggregate amounts of USD900 million (equivalent to approximately HK$6,993 million). The notes were issued at a price of 99.676 per cent of the principal amount, and bear interest at a coupon rate of 5.375% per annum, payable semi-annually in arrears on 6 November and 6 May each year. The notes are listed on The Stock Exchange of Hong Kong Limited. On 23 January 2017, USD324.6 million was redeemed. The remaining notes will be redeemed on the maturity date on 6 November 2019 at the principal amount.

As at 30 June 2018, the fair value of the notes amounted to USD584.6 million (equivalent to approximately HK$4,542.6 million) (2017: USD605.4 million (equivalent to approximately HK$4,704.1 million)).

On 28 January 2015, the Company issued 5% notes in the aggregate amounts of HK$800 million. The notes were issued at a price of 100 per cent of the principal amount, and bear interest at a coupon rate of 5% per annum, payable semi-annually in arrears on 28 January and 28 July each year. The notes will be redeemed on the maturity date on 28 January 2022 at the principal amount.

As at 30 June 2018, the fair value of the notes amounted to HK$812.9 million (2017: HK$841.8 million). On 30 March 2015, the Company issued 4.75% notes in the aggregate amounts of HK$271 million. The notes were issued at a price of 98.839 per cent of the principal amount, and bear interest at a coupon rate of 4.75% per annum, payable annually in arrears on 30 March each year. The notes will be redeemed on the maturity date on 30 March 2022 at the principal amount.

As at 30 June 2018, the fair value of the notes amounted to HK$275.4 million (2017: HK$285.2 million). On 23 January 2017, the Company issued 4.75% notes in the aggregate amounts of USD600 million. The notes were issued at a price of 100 per cent of principal amount, and bear interest at a coupon rate of 4.75% per annum, payable semi-annually in arrears on 23 January and 23 July each year. The notes are listed on The Stock Exchange of Hong Kong Limited. The notes will be redeemed on the maturity date on 23 January 2027 at the principal amount. At the same time, USD324.6 million (equivalent to approximately HK$2,516.0 million) of the abovementioned 5.375% notes was refinanced by these newly issued 4.75% notes. As at 30 June 2018, the fair value of the notes amounted to USD593.6 million (equivalent to approximately HK$4,612.5 million (2017: USD622.2 million (equivalent to approximately HK$4,834.3 million).

F-74

- 74 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 Borrowings (Continued) Notes: (Continued)

(v) The effective interest rates of borrowings are as follows: 2018 2017 Hong

Kong United States

Hong Kong

United States

dollar Renminbi dollar dollar Renminbi dollar Bank loans 3.15% 5.11% - 1.70% 5.28% - Loans from fellow subsidiaries - - - 0.59% - 0.59%

Loans from non-controlling interests - 4.75% - - 4.75% -

Fixed rate bonds and notes payable 4.94% - 5.06% 4.94% 5.50% 5.06%

Loans from other financial institutions - 6.12% - - 6.42% -

════════ ════════ ════════ ════════ ════════ ════════

(vi) The fair value of bank loans, loans from fellow subsidiaries, loans from non-controlling interest and loans from other financial institutions are based on cash flows discounted using the incremental borrowing rates and are within level 2 of the fair value hierarchy.

(vii) The carrying amounts of the borrowings are denominated in the following currencies:

2018 2017 HK$’000 HK$’000 Hong Kong dollar 11,991,255 18,305,763 Renminbi 10,803,153 17,143,368 United States dollar 8,953,361 9,133,326 ───────── ───────── 31,747,769 44,582,457 ═════════ ═════════

(viii) For the interest-bearing borrowings, except for the notes payable of HK$4,493,191,000 (2017: HK$4,476,635,000) which reprice in more than five years, the rest of the borrowings reprice or mature (whichever is earlier) in five years or less.

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F-76

- 76 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 32 Deferred tax liabilities (Continued)

Deferred tax assets are recognised for tax losses carried forward to the extent that realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred tax assets of HK$646,154,000 (2017: HK$665,377,000) in respect of losses amounting to HK$2,584,615,000 (2017: HK$2,661,507,000) to carry forward against future taxable income. These tax losses will expire at various dates up to and including 2023 (2017: 2022).

As at 30 June 2018, the aggregate amount of temporary differences associated with investments in subsidiaries and joint ventures for which deferred tax liabilities have not been recognised amounting to approximately HK$10,523,335,000 (2017: HK$6,717,787,000), as the directors consider that the timing of reversal of the related temporary differences can be controlled and the temporary differences will not be reversed in the foreseeable future.

33 Creditors and accruals 2018 2017 HK$’000 HK$’000 Trade creditors (note i) 9,285,873 5,736,639 Other creditors and accruals (note ii) 4,136,574 4,034,578 ───────── ───────── 13,422,447 9,771,217 ═════════ ═════════

Notes: (i) The carrying amounts of the trade creditors are mainly denominated in Renminbi. (ii) Other creditors and accruals included retention payables of construction costs, other payables

and various accruals. The carrying amounts of other creditors and accruals are mainly denominated in Renminbi.

34 Contract liabilities

As at 30 As at 1 June 2018 July 2017

HK$’000 HK$’000 Contract liabilities related to property sales 13,980,979 13,476,851 Contract liabilities related to construction services 61,280 - ───────── ───────── 14,042,259 13,476,851 ═════════ ═════════ The Group receives payments from customers based on billing schedule as established in contracts. Payments are usually received in advance of the performance under the contracts.

F-77

- 77 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 34 Contract liabilities (Continued)

The following table shows how much of the revenue recognised in the current reporting period relates to contract liabilities and how much relates to performance obligations that were satisfied in a prior year.

2018 HK$’000 Revenue recognised that was included in the contract liability

balance at the beginning of the year

Property sales 8,682,731 ═════════ The following table shows unsatisfied performance obligations resulting from property sales and construction services for contracts with an original expected duration of one year or more:

2018 HK$’000 Expected to be recognised within one year 20,726,096 Expected to be recognised after one year 944,187 ───────── 21,670,283 ═════════ All other contracts with an original expected duration of one year or less are billed based on time incurred, as permitted under HKFRS 15, the transaction price allocated to theses unsatisfied contracts is not disclosed.

35 Amounts due to non-controlling interests

The amounts due to non-controlling interests are unsecured, interest free and repayable on demand. The carrying amounts of the balances are mainly denominated in Hong Kong dollar as at 30 June 2018 approximate their fair values (2017: Same).

36 Taxes payable 2018 2017 HK$’000 HK$’000 Corporate income tax payable 549,020 723,043 Withholding tax payable 85,068 219,726 Land appreciation tax payable 5,753,402 4,888,269 Other PRC taxes payable 210,402 212,497 ───────── ───────── 6,597,892 6,043,535 ═════════ ═════════

F-78

- 78 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 37 Guarantees (a) Corporate guarantees for banking facilities

The Group has corporate guarantees of approximately HK$579,541,000 (2017: HK$819,107,000) given in respect of bank loan facilities extended to certain joint ventures. As at 30 June 2018, the Group’s attributable portion of the outstanding amount under these bank loan facilities granted to the joint ventures was approximately HK$415,159,000 (2017: HK$565,402,000).

(b) Guarantees in respect of mortgage facilities

As at 30 June 2018, the Group had provided guarantees in respect of mortgage facilities granted by certain banks relating to the mortgage loans arranged for certain purchasers of properties developed by certain subsidiaries of the Group and the Group’s attributable portion of outstanding mortgage loans under these guarantees amounted to HK$4,477,885,000 (2017: HK$3,015,921,000). Pursuant to the terms of the guarantees, upon default in mortgage payments by these purchasers, the Group is responsible to repay the outstanding mortgage principals together with accrued interest owed by the defaulted purchasers to the banks and the Group is entitled to take over the legal title and possession of the related properties.

38 Commitments (a) Capital expenditure commitments

The capital expenditure commitments of the Group are as follows:

2018 2017 HK$’000 HK$’000 Contracted but not provided for Property, plant and equipment 521,257 912,150 Investment properties 610,097 1,333,558 ───────── ───────── 1,131,354 2,245,708 ═════════ ═════════ (b) Lease commitments 2018 2017 HK$’000 HK$’000 Future aggregate minimum lease payments under

non-cancellable operating leases in respect of land and buildings are as follows:

Within one year 62,877 21,138 Between two and five years 90,918 11,911 Beyond five years 76,895 38,816 ───────── ───────── 230,690 71,865 ═════════ ═════════

F-79

- 79 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 39 Business combination

In May 2017, the Group completed the acquisition of 30% interests in a 70%-owned joint venture, Beijing Chongyu Real Estate Development Company Limited, for a consideration of HK$155,844,000. As a result, it became a wholly-owned subsidiary of the Group. Details of consideration paid and the fair value of the assets acquired and liabilities assumed at the acquisition date were as follows:

2017 HK$’000 Cash consideration paid - Consideration to be paid 155,844 Fair value of equity interest held in Beijing Chongyu Real Estate Development

Company Limited before the business combination 1,746,341 ───────── Total consideration 1,902,185 ═════════

Recognised amounts of identifiable assets acquired and liabilities assumed

2017 HK$’000 Investment properties 1,800,883 Property, plant and equipment 33,643 Completed properties held for sale 70,690 Prepayments, debtors and other receivables 101,919 Amounts due from group companies 123,964 Cash and balance balances, unrestricted 234,676 Creditors and accruals (13,901) Amounts due to group companies (26,903) Taxes payable (50,061) Deferred tax liabilities (66,739) Long-term borrowings (287,356) ───────── Total identifiable net assets 1,920,815 Gain from bargain purchase (note 9) (18,630) ───────── 1,902,185 ═════════

Since the date of acquisition, Beijing Chongyu Real Estate Development Company Limited had contributed revenue and net profit of approximately HK$4,908,000 and HK$8,514,000 respectively. If the acquisition had occurred on 1 July 2016, the Group’s revenue and profit for the year ended 30 June 2017 would have increased by HK$42,577,000 and decreased by HK$143,956,000 respectively. The Group had benefited from the appreciation of the fair value of the acquired net assets over the years as the completion of the acquisition took place 4 years after the sale and purchase agreement was signed. As a result, a gain on bargain purchase of HK$18,630,000 was recognised. For the purpose of the business combination, the Group recognised a gain of HK$17,582,000 as a result of remeasuring at fair value of its equity interests held in Beijing Chongyu Real Estate Development Company Limited before the business combination.

F-80

- 80 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 39 Business combination (Continued)

No acquisition-related costs were charged to administrative and other operating expenses in the consolidated income statement for the year ended 30 June 2017. The fair value of prepayments, debtors and other receivables was HK$101,919,000 and included trade receivables with a fair value of HK$15,562,000.

40 Notes to consolidated cash flow statement (a) Reconciliation of operating profit to net cash generated from operations

2018 2017 HK$’000 HK$’000 Operating profit 8,265,579 4,903,428 Depreciation and amortisation 173,903 153,143 Dividend income from perpetual securities - (234,484) Reversal of other liabilities (430,966) - Net gain on disposal of investment properties, land use rights

and property, plant and equipment (286,447) (158,544) Gain on disposal of properties held for development - (19,274) Gain on disposal of subsidiaries and joint ventures (87,237) (33,863) Gain from bargain purchase in business combinations - (18,630) Gain on remeasuring previously held equity interests of joint

ventures at fair value upon further acquisition as a subsidiary - (17,582)

Impairment of intangible assets - 14,227 Changes in fair value of investment properties (1,261,542) 182,680 Net foreign exchange losses 11,337 347,595 Loss on disposal of available-for-sale financial assets - 106,994 Realised gain on disposal of derivative financial instruments - (48,775) Share-based payment 6,263 - ───────── ───────── Operating profit before working capital changes 6,390,890 5,176,915 Decrease/(increase) in properties held for/under

development and completed properties held for sale 1,708,633 (2,691,337) (Increase)/decrease in prepayments, debtors and other

receivables (160,880) 86,190 Changes in balances with related companies (2,211,759) 926,454 (Decrease)/increase in deposits received on sale of properties (14,118,823) 5,605,828 Increase in creditors and accruals 3,471,967 3,401,591 Increase in contract assets (74,712) - Increase in contract liabilities 13,619,460 - ───────── ───────── Net cash generated from operations 8,624,776 12,505,641 ═════════ ═════════

F-81

- 81 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 40 Notes to consolidated cash flow statement (Continued) (b) Analysis of net outflow of cash and cash equivalents in respect of acquisition of a subsidiary

The Group acquired a subsidiary in the year ended 30 June 2017. 2017 HK$’000 Investment properties 1,800,883 Property, plant and equipment 33,643 Completed properties held for sale 70,690 Prepayments, debtors and other receivables 101,919 Amounts due from group companies 123,964 Cash and bank balances, unrestricted 234,676 Creditors and accruals (13,901) Amounts due to group companies (26,903) Taxes payable (50,061) Deferred tax liabilities (66,739) Long-term borrowings (287,356) ───────── Fair value of net identifiable assets acquired 1,920,815 Interest originally held by the Group as a joint venture (1,728,759) ───────── 192,056 Gain on remeasuring previously held equity interest of a joint venture at fair

value upon further acquisition as a subsidiary (note 9) (17,582) Gain from bargain purchase in business combinations (note 9) (18,630) ───────── Consideration to be paid (note) 155,844 ═════════ 2017 HK$’000 Cash consideration - Cash and bank balances acquired 234,676 ───────── Cash paid for acquisition of a subsidiary, net of cash and bank balances acquired 234,676 ═════════

Note: The consideration was settled by the Group during the year at the exchange rate on the payment date at HK$163,266,000.

F-82

- 82 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 40 Notes to consolidated cash flow statement (Continued) (c) Disposal of subsidiaries and joint ventures

2018 2017 HK$’000 HK$’000 Net assets disposed of

Property, plant and equipment (note 15) 514,896 - Investment properties (note 16) 976,750 18,523 Land use rights (note 17) 333,451 - Joint ventures 2,457,002 - Goodwill (note 18) 9,167 - Hotel inventories, at cost 1,510 - Properties under development - 454,212 Completed properties held for sale - 7,955 Prepayments, debtors and other receivables 78,889 109,881 Amounts due from related companies 588,853 - Taxes recoverable 1,215 90,085 Cash and bank balances, unrestricted 65,450 206,646 Creditors and accruals (90,277) (28,148) Deposits received on sale of properties (41) (853,559) Amounts due to related companies (580,042) - Taxes payable (20,641) (395) Long-term borrowings (586,548) - Deferred tax liabilities (99,289) (4,520) Amount due to immediate holding company (91,205) -

───────── ───────── 3,559,140 680 Realisation of exchange reserve upon disposal (335,089) (34,543) Gain on disposal of subsidiaries and joint ventures (note 9) 87,237 33,863 ───────── ───────── Consideration (note) 3,311,288 - ═════════ ═════════

Note: The consideration of HK$3,298,262,000 was received by group companies on behalf of the

Group during the year. (d) Analysis of net inflow of cash and cash equivalents in respect of disposal of subsidiaries and joint

ventures

2018 2017 HK$’000 HK$’000 Cash consideration received 13,026 - Cash consideration received from disposal in prior year 6,635,639 5,640,834 Cash and bank balances disposed of (65,450) (206,646) ───────── ───────── Cash received from disposal of subsidiaries and joint

ventures, net of cash and bank balances disposed of 6,583,215 5,434,188 ═════════ ═════════

F-83

- 83 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 40 Notes to consolidated cash flow statement (Continued) (e) Reconciliation of liabilities arising from financing activities

Loans from banks and

other financial institutions

Fixed rate bonds and

notes payable Total HK$’000 HK$’000 HK$’000 As at 1 July 2017 27,775,698 13,733,864 41,509,562 Changes from cash flows

Drawdown of bank loans 1,956,801 - 1,956,801 Repayment of bank loans (8,335,780) - (8,335,780) Repayment of fixed rate bonds - (3,750,000) (3,750,000) Other changes Amortisation of transactions costs 42,228 331,563 373,791 Translation differences 464,291 (295,609) 168,682 Disposal of subsidiaries and joint

ventures (586,548) - (586,548) ────────── ──────────- ──────────

As at 30 June 2018 21,316,690 10,019,818 31,336,508 ══════════ ══════════ ══════════

41 Related party transactions (a) Transactions with related parties

The following is a summary of significant related party transactions carried out by the Group during the year in the normal course of its business: 2018 2017 Note HK$’000 HK$’000 Interest expenses on loans from fellow subsidiaries (i) 16,817 16,903 Rental expense for leased premises to fellow

subsidiaries and related companies (ii) 40,555 17,165 Property agency fee to fellow subsidiaries (iii) 15,054 16,667 Purchase of goods from fellow subsidiaries and a

related company (iv) 1,357 8,517 Hotel management services fee expense to related

companies (v) 28,443 25,091 Interest income from joint ventures (vi) 44,327 3,918 Property management services fee income from

fellow subsidiaries, joint ventures and related companies (vii) 24,499 28,333

Rental income from fellow subsidiaries, a joint venture and a related company (viii) 91,583 69,381

Project management fee income from joint ventures and related companies

(ix) 44,675 67,133

Contracting services income from related companies (x) 86,465 2,291

══════════ ══════════

F-84

- 84 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 41 Related party transactions (a) Transactions with related parties (Continued)

Notes: (i) Interest is charged at rates as specified in note 31(ii) on the outstanding balances due to

certain fellow subsidiaries. (ii) The rental is charged at fixed monthly fees in accordance with the terms of the tenancy

agreements.

(iii) The property agency fee is charged by the fellow subsidiaries in accordance with the terms of the property agency agreements.

(iv) This represents purchases of goods by means of presenting various cash equivalent gift

coupons, gift cards and stored value shopping cards to the stores operated by the fellow subsidiaries and a related company. Such fee is charged in accordance with the terms of the agreements.

(v) The hotel management services fee expense is charged in accordance with the terms of the

management service agreements. (vi) This represents interest income in respect of loan financing provided to joint ventures. These

loans are unsecured and carry interest at rates as specified in note 21.

(vii) The property management services fees are charged at fixed amounts to fellow subsidiaries, certain joint ventures and related companies as specified in the management contracts.

(viii) The rental income is charged at fixed monthly fees in accordance with the terms of the

tenancy agreements.

(ix) The project management fee income is charged in accordance with the terms of the agreements.

(x) The contracting services income is charged in accordance with the terms of the agreements. (xi) Total fees for the provision of project management, construction and engineering consultancy

services in respect of certain of the Group’s property projects paid and payable to certain fellow subsidiaries and related companies for the year amounted to HK$67,992,000 (2017: HK$296,139,000). Such fees are charged at fixed amounts in accordance with the terms of the respective contracts.

(xii) On 8 October 2017, New World China Property Limited (“NWCP”), a wholly owned

subsidiary of the Group, entered into the sale and purchase agreement with K11 Shanghai Properties Company Limited, a fellow subsidiary of the Group, whereby NWCP agreed to sell its entire interest in Shanghai New World Huai Hai Property Development Co. Ltd., which owns properties in Shanghai, including certain portion of office areas and car parking spaces as prescribed in the agreement, for a consideration of RMB1,700,000,000. The disposal was completed on 30 November 2017.

(xiii) On 9 October 2017, New World Goodtrade (Wuhan) Limited (“NWG”), a wholly owned

subsidiary of the Group, entered into the sale and purchase agreement with K11 Concepts (Wuhan) Limited, a fellow subsidiary of the Group, whereby NWG agreed to sell properties in Wuhan, including certain portion of office areas and car parking spaces as prescribed in the agreement, for a consideration of RMB1,700,000,000. The disposal was completed on 31 December 2017.

F-85

- 85 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 41 Related party transactions (Continued) (a) Transactions with related parties (Continued)

Notes: (Continued) (xiv) On 27 October 2017, NWDC entered into a sale and purchase agreement with Oriental

Triumph Inc. (“Oriental Triumph”), a company wholly owned by Mr. Doo Wai-Hoi, William who is a director of the ultimate holding company of the Company, and under which NWDC agreed to sell, and Oriental Triumph agreed to purchase the entire issued share capital of Ramada Property Ltd., which together with its subsidiaries owns and operates the Shanghai Ramada Plaza, New World Shanghai Hotel and pentahotel Shanghai, at a consideration of RMB1.85 billion (equivalent to approximately HK$2.2 billion), subject to customary closing adjustment (the “Disposal”). The Disposal was completed on 28 March 2018 at a total consideration of RMB1,034,886,000.

(xv) During the year ended 30 June 2018, the Group charged staff costs of NW Project

Management (HK) Limited, a fellow subsidiary HK$118,945,000 (2017: HK$129,029,000) on an actual reimbursement basis.

(xvi) In May 2018, New World (Shenyang) Property Development Limited (“NWSY”), a wholly

owned subsidiary of the Group, entered into the sale and purchase agreement with Shenyang Sheng Xin Yi Le Property Company Limited, a fellow subsidiary of the Group, whereby NWSY agreed to sell certain properties in Shenyang as prescribed in the agreement, for a consideration of RMB4,620,000,000. As at 30 June 2018, a deposit received of HK$3,571,429,000 was included in contract liabilities.

(b) Key management compensation

2018 2017 HK$’000 HK$’000 Salaries and other short-term employee benefits 77,317 77,787 Pension costs 3,678 3,978 Share-based payment 6,263 -

───────── ───────── 87,258 81,765 ═════════ ═════════

Key management includes executive directors, financial controller and regional executives.

(c) Balances with related parties

Balances with associated companies, joint ventures, group companies and companies owned by a director of the ultimate holding company are disclosed in notes 20, 21 and 27.

F-86

- 86 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 42 Statement of financial position and reserve movement of the Company Note (a) Statement of financial position of the Company

2018 2017 Note HK$’000 HK$’000 ASSETS Non-current assets Property, plant and equipment 30 -

Subsidiaries 40,118,348 42,887,159 -------------- -------------- 40,118,348 42,887,159 -------------- --------------

Current assets Prepayments, debtors and other receivables 48,884 27,470 Amount due from a subsidiary - 7,784,996 Cash and bank balances, unrestricted 3,477,693 777,563

───────── ───────── 3,526,577 8,590,029 -------------- -------------- Total assets 43,644,955 51,477,188 ═════════ ═════════ EQUITY Capital and reserves attributable to the

Company’s equity holders

Share capital 870,229 870,229 Reserves (b) 28,002,165 28,282,156

───────── ───────── Total equity 28,872,394 29,152,385 -------------- -------------- LIABILITIES Non-current liability

Long-term borrowings 13,974,063 13,770,063 -------------- --------------

Current liabilities Creditors and accruals 142,229 282,024 Amounts due to related companies 381,884 1,170,675 Short-term borrowings - 249,468 Current portion of long-term borrowings 225,000 6,800,307 Taxes payable 49,385 52,266 ───────── ─────────

798,498 8,554,740 -------------- -------------- Total liabilities 14,772,561 22,324,803 -------------- -------------- Total equity and liabilities 43,644,955 51,477,188 ═════════ ═════════

F-87

- 87 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 42 Statement of financial position and reserve movement of the Company (Continued)

Note (b) Reserve movement of the Company Share

Contributed Share Exchange option Accumulated

surplus premium reserve reserve losses Total

HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 HK$’000

As at 1 July 2017 10,706,444 16,387,927 7,968,810 - (6,781,025) 28,282,156

Loss for the year - - - - (286,254) (286,254)

Share-based payment - - - 6,263 - 6,263

───────── ───────── ───────── ───────── ───────── ─────────

As at 30 June 2018 10,706,444 16,387,927 7,968,810 6,263 (7,067,279) 28,002,165

═════════ ═════════ ═════════ ═════════ ═════════ ═════════

As at 1 July 2016 10,706,444 16,387,927 7,968,810 - (7,615,779) 27,447,402

Loss for the year - - - - (238,383) (238,383)

Contribution from ultimate

holding company - - - - 1,073,137 1,073,137

───────── ───────── ───────── ───────── ───────── ─────────

As at 30 June 2017 10,706,444 16,387,927 7,968,810 - (6,781,025) 28,282,156

═════════ ═════════ ═════════ ═════════ ═════════ ═════════

The contributed surplus of the Company represents the excess of the consolidated net asset value of the subsidiaries acquired over the nominal value of the share capital of the Company issued in exchange thereof as a result of a reorganisation that took place in 1999, less distributions in subsequent years.

F-88

- 88 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43 Particulars of principal subsidiaries, associated companies and joint ventures

Details of the principal subsidiaries, associated companies and joint ventures are set out below:

Company name

Issued and fully paid

up share capital/paid

up registered capital

Attributable interest held

(note 1)

Principal

activities

By the Company By the Group

2018 2017 2018 2017

Subsidiaries

Incorporated and operating

in Hong Kong

Able Kingdom Limited HK$1

1 ordinary share

- - - 100% Investment holding

Allied City Investments

Limited

HK$1

1 ordinary share

- - 100% 100% Investment holding

Best Goal International

Limited

HK$1

1 ordinary share

- - 100% 100% Investment holding

Billion Huge

(International) Limited

HK$950,001

950,001 ordinary

shares

- - 100% 100% Investment holding

Billion Park Investment

Limited

HK$1,000,000

1,000,000 ordinary

shares

- - 78.6% 78.6% Investment holding

China Joy International

Limited

HK$2

2 ordinary shares

- - 100% 100% Investment holding

Four Treasure Limited HK$1

1 ordinary share

- - 100% 100% Investment holding

Global Hero Holdings

Limited

HK$1

1 ordinary share

- - 100% 100% Investment holding

Lingal Limited HK$2,000

1,800 ordinary shares

200 non-voting

deferred shares

- - 100% 100% Investment holding

Login SCM Hong Kong

Limited

HK$1

1 ordinary share

- - 100% - Supply chain

management

Max Charm Investment

Limited

HK$2

2 ordinary shares

- - 100% 100% Investment holding

Million Noble Investments

Limited

HK$1

1 ordinary share

- - 100% - Investment holding

F-89

- 89 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43 Particulars of principal subsidiaries, associated companies and joint ventures

(Continued)

Company name

Issued and fully paid

up share capital/paid

up registered capital

Attributable interest held

(note 1)

Principal

activities

By the Company By the Group

2018 2017 2018 2017

Subsidiaries (Continued)

Incorporated and operating

in Hong Kong (Continued)

New World China

Construction Limited

HK$1

1 ordinary share

- - 100% 100% Investment holding

(Formerly Ultra Surplus

Limited)

New World China Estate

Agents Limited

HK$1

1 ordinary share

- - 100% 100% Estate agency

New World China Property

Limited

HK$2

2 ordinary shares

100% 100% 100% 100% Investment holding

New World Development

(China) Limited

HK$4

2 ordinary shares

100% 100% 100% 100% Investment holding

New World Project

Management (China)

Limited

HK$1

1 ordinary share

- - 100% 100% Project

management

Pacific Great Investment

Limited

HK$50,000,000

50,000,000 ordinary

shares

- - 100% 100% Investment holding

Riviera Quin International

Limited

HK$10,000

10,000 ordinary shares

- - 51% 51% Investment holding

Riviera Hexa International

Limited

HK$10,000

10,000 ordinary shares

- - 51% 51% Investment holding

Silver World H.K.

Development Limited

HK$1

1 ordinary share

- - 100% 100% Investment holding

Sunny Trend Development

Limited

HK$2

2 ordinary shares

- - 100% 100% Investment holding

Super Gain Limited HK$1

1 ordinary share

- - - 100% Investment holding

Wing Shan International

Country Club Co.

Limited

HK$1,000,000

1,000,000 ordinary

shares

- - 89.2% 89.2% Investment holding

F-90

- 90 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43 Particulars of principal subsidiaries, associated companies and joint ventures

(Continued)

Company name

Issued and fully paid

up share capital/paid

up registered capital

Attributable interest held

(note 1)

Principal

activities

By the Company By the Group

2018 2017 2018 2017

Subsidiaries (Continued)

Incorporated in the British

Virgin Islands

Allied Win Investments

Limited

US$1

1 share of US$1

- - 100% - Investment holding

Art Pak Investment

Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

Art Shadow Limited US$1

1 share of US$1

- - 100% 100% Investment holding

Banyan Developments

Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

Brilliant Alpha Investment

Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

Esteemed Sino Limited US$1

1 share of US$1

- - 100% 100% Investment holding

Ever Brisk Limited US$1

1 share of US$1

- - 100% 100% Investment holding

Ever Reliance Enterprises

Limited

US$1

1 share of US$1

- - 51% 51% Investment holding

Express Fortune Property

Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

Fortune Star Worldwide

Limited

US$100

100 shares of

US$1 each

- - 100% 100% Investment holding

Fu Hong Investments

Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

Gao Li Enterprises Limited US$1

1 share of US$1

- - 51% 51% Investment holding

Goodtrade Enterprises

Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

Keen Link Enterprises

Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

F-91

- 91 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43 Particulars of principal subsidiaries, associated companies and joint ventures

(Continued)

Company name

Issued and fully paid

up share capital/paid

up registered capital

Attributable interest held

(note 1)

Principal

activities

By the Company By the Group

2018 2017 2018 2017

Subsidiaries (Continued)

Incorporated in the British

Virgin Islands (Continued)

K Fai Investments Limited US$1

1 share of US$1

- - 100% 100% Investment holding

Keep Bright Limited US$1

1 share of US$1

- - 100% 100% Investment holding

Login SCM (BVI) Limited US$1

1 share of US$1

- - 100% 100% Investment holding

Lucky Win Development

Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

Magic Chance Limited US$1

1 share of US$1

- - 100% 100% Investment holding

New World Anderson

Development Company

Limited

US$100

100 shares of US$1 each

- - 100% 100% Investment holding

New World China

Construction (BVI)

Limited (formerly Xie

Xiang Engineering

Limited)

US$1

1 share of US$1

- - 100% 100% Investment holding

New World Project

Management (BVI)

Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

Radiant Glow Limited US$1

1 share of US$1

- - 100% 100% Investment holding

Ramada Property Ltd. US$103,271,870

103,271,870 shares of

US$1 each

- - - 100% Investment holding

Sparkling Rainbow

Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

Stand Fame Enterprises

Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

F-92

- 92 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43 Particulars of principal subsidiaries, associated companies and joint ventures

(Continued)

Company name

Issued and fully paid

up share capital/paid

up registered capital

Attributable interest held

(note 1)

Principal

activities

By the Company By the Group

2018 2017 2018 2017

Subsidiaries (Continued)

Incorporated in the British

Virgin Islands (Continued)

Superb Wealthy Group

Limited

US$1

1 share of US$1

- - 100% 100% Financing

Sweet Prospects

Enterprises Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

Total Partner Holdings

Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

Triumphant Ally

Investments Limited

US$100

100 shares of US$1

- - 51% 51% Investment holding

True Blue Developments

Limited

US$1

1 share of US$1

- - 100% 100% Investment holding

Incorporated in the PRC

Beijing Chongyu Real

Estate Development

Co., Ltd.

US$171,840,000 - - 100% 100% Property

investment and

development

Beijing Dongfang Huamei

Real Estate

Development Co., Ltd.

RMB200,000,000 - - 75% 75%

Land development

Beijing Lingal Real Estates

Development Co., Ltd. US$13,000,000 - - 100% 100% Property

investment

Dalian New World Plaza

International Co., Ltd. RMB58,000,000 - - 88% 88% Property

investment and

development

Dalian New World Tower

Co., Ltd. US$197,324,700 - - 100% 100% Property

investment and

development

F-93

- 93 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43 Particulars of principal subsidiaries, associated companies and joint ventures

(Continued)

Company name

Issued and fully paid

up share capital/paid

up registered capital

Attributable interest held

(note 1)

Principal

activities

By the Company By the Group

2018 2017 2018 2017

Subsidiaries (Continued)

Incorporated and

operating in the PRC

(Continued)

Fengshi Trading

(Shanghai) Co., Ltd.

US$2,170,000 - - - 100% Property investment

Foshan International

Country Club Company

Ltd.

US$52,923,600 - - 84.8% 84.8% Golf club operation

Foshan Da Hao Hu Real

Estate Development Co.,

Ltd.

RMB1,364,500,500 - - 84.8% 84.8% Property

development

Guangzhou Fong Chuen –

New World Property

Development Ltd.

RMB330,000,000 - - 100% 100% Property

development

Guangzhou Jixian Zhuang

New World City Garden

Development Limited

US$24,000,000 - - 100% 100% Property

development

Guangzhou Xin Hua Chen

Real Estate Co., Ltd.

RMB200,000,000 - - 100% 100% Property

development

Guangzhou Xin Hua Jian

Real Estate Co., Ltd.

RMB244,000,000 - - 100% 100% Property

development

Guangzhou Xinpei

Enterprises Management

Co., Ltd.

RMB50,000,000 - - 100% 100% Investment holding

Guangzhou Xinpei

Investment Co., Ltd.

RMB200,000,000 - - 100% 100% Investment holding

Guangzhou Xin Sui

Tourism Centre Ltd.

HK$350,000,000 - - 100% 100% Property

development

F-94

- 94 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43 Particulars of principal subsidiaries, associated companies and joint ventures

(Continued)

Company name

Issued and fully paid

up share capital/paid

up registered capital

Attributable interest held

(note 1)

Principal

activities

By the Company By the Group

2018 2017 2018 2017

Subsidiaries (Continued)

Incorporated and

operating in the PRC

(Continued)

Guangzhou Xin Yi

Development Limited

HK$286,000,000 - - 90.5% 90.5% Property investment

and development

Guangzhou Yao Ce

Enterprises Management

Consultancy Co., Ltd.

RMB10,000,000 - - 100% 100% Investment holding

Guangzhou Yibo Real

Estate Development Co.,

Ltd.

RMB392,500,000 - - 100% 100% Property

development

Guangzhou Yongpei Real

Estate Development Co.,

Ltd.

RMB2,300,000,000 - - 100% - Property

development

Huamei Wealth (Beijing)

Technology Co., Ltd.

RMB640,000,000 - - 100% 100% Property investment

Hunan Fortune Lake

Property Development

Co., Ltd.

RMB255,724,318 - - 100% 100% Property

development

Hunan Success New

Century Investment

Company Limited

RMB980,000,000 - - 95% 95%

Property

development

Jinan New World

Sunshine Development

Limited

US$69,980,000 - - 100% 100% Property

development

Langfang New World

Properties Development

Co., Ltd.

US$145,300,000 - - 100% 100% Property

development

Langfang Xin Zhong

Properties Development

Co., Ltd.

US$98,200,000 - - 100% 100% Property

development

Login SCM (Shenzhen)

Co., Ltd.

RMB50,000,000 - - 100% - Supply chain

management

F-95

- 95 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43 Particulars of principal subsidiaries, associated companies and joint ventures

(Continued)

Company name

Issued and fully paid

up share capital/paid

up registered capital

Attributable interest held

(note 1)

Principal

activities

By the Company By the Group

2018 2017 2018 2017

Subsidiaries (Continued)

Incorporated and

operating in the PRC

(Continued)

Nanjing New World Real

Estate Co., Ltd.

US$45,339,518 - - 100% 100% Property investment

New World Anderson

(Tianjin) Development

Co., Ltd.

US$5,500,000 - - 100% 100% Property investment

New World (Anshan)

Landscape Engineering

Limited

RMB10,000,000 - - 100% 100% Landscape

engineering

New World (Anshan)

Property Development

Co., Ltd.

RMB1,420,000,000 - - 100% 100% Property

development

New World China Land

Investments Company

Limited

US$80,000,000 100% 100% 100% 100% Investment holding

New World Development

(Wuhan) Co., Ltd.

US$128,500,000 - - 100% 100% Property investment

and development

New World Development

(Wuhan) Landscape

Engineering Limited

US$1,800,000 - - 100% 100% Landscape

engineering

New World Enterprises

(Wuhan) Ltd.

US$16,000,000 - - 100% 100% Property

development

New World Goodtrade

(Wuhan) Limited

US$219,500,000 - - 100% 100% Property investment

and development

New World HHC

Construction Limited

(formerly HHC

Construction Co., Ltd)

RMB53,000,000 - - 100% 100% Construction

New World New Land Real

Estate (Wuhan) Co.,

Ltd.

US$590,900,000 - - 100% 100% Property

development

F-96

- 96 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43 Particulars of principal subsidiaries, associated companies and joint ventures

(Continued)

Company name

Issued and fully paid

up share capital/paid

up registered capital

Attributable interest held

(note 1)

Principal

activities

By the Company By the Group

2018 2017 2018 2017

Subsidiaries (Continued)

Incorporated and

operating in the PRC

(Continued)

New World Project

Management

(Shenzhen) Limited

RMB10,000,000 - - 100% - Project Management

New World (Shenyang)

Property Development

Limited

RMB5,647,800,000 - - 100% 100% Property investment

and development

Shanghai Ramada Plaza

Ltd.

US$42,000,000 - - -

100% Property investment

and hotel operation

Shanghai Trio Property

Development Co., Ltd.

US$81,000,000 - - 100% 100% Property investment

Shang Ji Properties

(Shenzhen) Co. Ltd.

RMB150,000,000 - - 51% 51% Property

development

Shang Shun Properties

(Shenzhen) Co. Ltd.

RMB130,000,000 - - 51% 51% Property

development

Shenyang New World Xin

Hui Properties Co.,

Ltd.

RMB501,520,000 - - 100% 100% Property

development

Shenzhen Top One Real

Estate Development

Co., Ltd.

HK$150,000,000 - - 100% 100% Property

development

Shenzhen Topping Real

Estate Development

Co., Ltd.

HK$294,000,000 - - 100% 100% Property

development

Taiding Trading

(Shanghai) Co., Ltd. US$7,800,000 - - 100% Property

investment

Tang Shan New World

Property Development

Co., Ltd.

US$162,000,000 - - 100% 100% Property

development

F-97

- 97 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43 Particulars of principal subsidiaries, associated companies and joint ventures

(Continued)

Company name

Issued and fully paid

up share capital/paid

up registered capital

Attributable interest held

(note 1)

Principal

activities

By the Company By the Group

2018 2017 2018 2017

Subsidiaries (Continued)

Incorporated and

operating in the PRC

(Continued)

Tianjin New World

Properties

Development Co., Ltd.

US$91,000,000 - - 100% 100% Property

development

Tianjin Xin Guang

Development Co., Ltd.

US$4,500,000 - - 100% 100% Property investment

Wuhan New Eagle

Enterprises Co.,

Limited

US$2,830,000 - - 100% 100% Property investment

Wuhan Xinhan

Development Co., Ltd.

US$16,000,000 - - 100%

(note 2)

100%

(note 2)

Property

development

Zhaoqing New World

Property Development

Limited

US$16,500,000 - - 100% 100% Property

development

Zhuhai New World

Housing Development

Limited

US$8,000,000 - - 100% 100% Property

development

Associated companies

Incorporated and

operating in Hong

Kong

Sky Treasure Development

Limited

HK$10

10 ordinary shares

- - 30% 30% Investment holding

Sun Legend Investments

Limited

HK$1,000

1,000 ordinary

shares

- - 50% 50% Investment holding

F-98

- 98 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43 Particulars of principal subsidiaries, associated companies and joint ventures

(Continued)

Company name

Issued and fully paid

up share capital/paid

up registered capital

Attributable interest held

(note 1)

Principal

activities

By the Company By the Group

2018 2017 2018 2017

Associated companies (Continued)

Incorporated and

operating in the PRC

Shenzhen City Prince Bay

Shangding Properties

Co., Ltd.

RMB2,007,909,020 - - 49% 49% Property

development

Shenzhen City Prince Bay

Lewan Properties Co.,

Ltd.

RMB2,119,052,550 - - 49% 49% Property

development

Shenzhen Tiande Property

Development Co., Ltd.

RMB4,400,000,000 - - 30% 30% Property

development

Joint ventures

Incorporated and operating

in Hong Kong

Eminent Elite Limited HK$1

1 ordinary share

- - 49% 49% Investment holding

Gain Path Investments

Limited

HK$1

1 ordinary share

- - 40% - Investment holding

Global Perfect

Development Limited

HK$1,000,000

1,000,000 ordinary

shares

- - 50% 50% Investment holding

Incorporated in the

British Virgin Islands

Blaze Flourish Holdings

Limited

US$1

1 ordinary share

- - 40% - Investment holding

Concord Properties

Holding (Guangzhou)

Limited

US$10

10 ordinary shares of

US$1 each

- - 40% 40% Investment holding

Silvery Yield Development

Limited

US$100

100 ordinary shares of

US$1 each

- - 49% 49% Investment holding

F-99

- 99 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43 Particulars of principal subsidiaries, associated companies and joint ventures

(Continued)

Company name

Issued and fully paid

up share capital/paid

up registered capital

Attributable interest held

(note 1)

Principal

activities

By the Company By the Group

2018 2017 2018 2017

Joint ventures (Continued)

Incorporated in the

British Virgin Islands

(Continued)

Unite Profit Holdings

Limited

US$100

100 ordinary shares of

US$1 each

- - 40% - Investment holding

Incorporated and operating

in the PRC

(i) Equity joint venture

Beijing New World

Huamei Real Estate

Development Co., Ltd.

RMB748,000,000 - - 75%

(note 3)

75%

(note 3)

Property

development

(ii) Co-operative joint ventures

Beijing Chong Wen‧New

World Properties

Development Co., Ltd.

US$225,400,000 - - 70%

(note 3)

70%

(note 3)

Property investment,

development and

hotel operation

Beijing Xin Kang Real Estate

Development Co., Ltd.

US$12,000,000 - - 70%

(note 3)

70%

(note 3)

Property investment

Beijing Xin Lian Hotel Co.,

Ltd.

US$12,000,000 - - 55%

(note 3)

55%

(note 3)

Hotel operation

China New World Electronics

Ltd.

US$57,200,000 - - 70%

(note 3)

70%

(note 3)

Property Investment

and development

Huizhou New World Housing

Development Limited

RMB80,000,000 - - 62.5%

(note 3)

62.5%

(note 3)

Property

development

Wuhan Wuxin Hotel Co. Ltd. US$49,750,000 - - 60%

(note 3)

60%

(note 3)

Hotel operation

(iii) Wholly foreign owned

enterprises

Guangzhou Bosson Real

Estate Co., Ltd.

RMB50,003,000 - - 62.5%

(note 3)

62.5%

(note 3)

Property

development

Guangzhou Hemsell Real

Estate Development Co.,

Ltd.

RMB79,597,000 - - 62.5%

(note 3)

62.5%

(note 3)

Property

development

F-100

- 100 -

NEW WORLD CHINA LAND LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 43 Particulars of principal subsidiaries, associated companies and joint ventures

(Continued)

Company name

Issued and fully paid

up share capital/paid

up registered capital

Attributable interest held

(note 1)

Principal

activities

By the Company By the Group

2018 2017 2018 2017

Joint ventures (Continued)

(iii) Wholly foreign owned

enterprises (Continued)

Guangzhou Shengpei

Enterprises Co., Ltd.

RMB500,000,000 - - 40% - Property

development

Ningbo Gong Tai Properties

Co., Ltd.

RMB235,000,000 - - 49% 49% Property

development

Ningbo Xin Li Real Estate Co.

Ltd.

US$856,000,000 - - 49% 49% Property

development

Shanghai New World Huai Hai

Property Development Co.,

Ltd.

US$108,500,000 - - - 50% Property investment

Wuhan New World Hotel

Properties Co., Ltd.

RMB83,507,110 - - 60%

(note 3)

60%

(note 3)

Property investment

Notes: 1. Represent equity interest in case of companies incorporated outside the PRC or the percentage

of equity interest in case of equity joint ventures or profit sharing ratio in accordance with the joint venture contracts in case of co-operative joint ventures in the PRC.

2. Represent profit sharing ratio of the Group in accordance with the contractual arrangement between the shareholders.

3. The Group does not control these companies even though the attributable interest held by the

Group is more than 50% as the decisions about the relevant activities required the unanimous consent of the parties sharing the control in accordance with the contractual arrangement.

F-101

New World Development Company Limited Annual Report 2018122

Independent Auditor’s Report

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF NEW WORLD DEVELOPMENT COMPANY LIMITED(incorporated in Hong Kong with limited liability)

OPINION

What we have auditedThe consolidated financial statements of New World Development Company Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages 128 to 238, which comprise:

• the consolidated statement of financial position as at 30 June 2018;

• the consolidated income statement for the year then ended;

• the consolidated statement of comprehensive income for the year then ended;

• the consolidated statement of changes in equity for the year then ended;

• the consolidated statement of cash flows for the year then ended; and

• the notes to the consolidated financial statements, which include a summary of significant accounting policies.

Our opinionIn our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 30 June 2018, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”) and have been properly prepared in compliance with the Hong Kong Companies Ordinance.

BASIS OF OPINION

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

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

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

F-102

New World Development Company LimitedAnnual Report 2018 123

I n d e p e n d e n t A u d i t o r ’ s R e p o r t

KEY AUDIT MATTERS

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters identified in our audit are summarised as follows:

• Valuation of investment properties held by the Group and its joint ventures and associated companies;

• Recoverability of properties for/under development and properties held for sale held by the Group and its joint ventures; and

• Impairment of the Group’s interests in joint ventures and associated companies.

Key Audit Matter How our audit addressed the Key Audit Matter

Valuation of investment properties held by the Group and its joint ventures and associated companies

Refer to notes 6(b), 7 and 17 to the consolidated financial statements.

As at 30 June 2018, the investment properties held by the Group and its joint ventures and associated companies were significant to the Group and were stated at fair value. Changes in fair value were recognised in the consolidated income statement.

Independent external valuers were engaged to determine the fair value of investment properties held by the Group and its joint ventures and associated companies as at 30 June 2018.

For completed investment properties, fair value was generally derived by the income capitalisation method and where appropriate, by direct comparison method. Income capitalisation method was based on the capitalisation of the net income and reversionary income potential by adopting appropriate capitalisation rates and prevailing market rents. Direct comparison method was based on comparable market transactions, as adjusted by the property-specific qualitative factors.

For investment properties under construction, fair value was derived using the residual method by deducting development costs together with developer’s profit and risk margins from the estimated capital value of the proposed development assuming completed as at the date of valuation.

We focused on this area due to the fact that there are significant judgements and estimates involved in the valuation of investment properties.

Our procedures in relation to the valuation of investment properties included:

• We assessed the competence, capability and objectivity of the independent external valuers;

• We obtained the valuation reports and met the independent external valuers to discuss the valuation methodologies and key assumptions;

• We involved our in-house valuation experts and assessed the valuation methodologies and the reasonableness of the key assumptions used in the valuation of investment properties, based on our knowledge of the property industry, research evidence of capitalisation rates, prevailing market rents and comparable market transactions for similar properties, where applicable; and

• We tested, on a sample basis, the data used in the valuation of investment properties, including rental rates from existing tenancies and estimated cost to complete, by agreeing them to the underlying agreements with the tenants and approved budgets, respectively. We also compared the estimated developer’s profit and risk margins to historical records, where appropriate.

Based on the procedures performed, we found the methodologies used in preparing the valuations were appropriate and the key assumptions were supportable in light of available evidence.

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I n d e p e n d e n t A u d i t o r ’ s R e p o r t

Key Audit Matter How our audit addressed the Key Audit Matter

Recoverability of properties for/under development and properties held for sale held by the Group and its joint ventures

Refer to notes 6(c) and 29 to the consolidated financial statements.

As at 30 June 2018, the carrying values of the Group’s properties for development, properties under development and properties held for sale amounted to HK$19,656.2 million, HK$37,171.0 million and HK$42,301.2 million respectively. The Group also has significant property development projects for sale held by its joint ventures.

Management assessed the recoverability of the property portfolios held for sale by the Group and its joint ventures based on estimates of the net realisable values of the underlying properties. These involve the estimation of selling prices of the properties based on current market prices of properties of comparable locations and conditions and the construction costs to complete the properties for/under development based on the existing development plans. Management concluded that the current level of provision for the properties for/under development and properties held for sale as at 30 June 2018 was appropriate.

If the estimated net realisable values of the underlying properties were significantly different from their carrying values as a result of changes in market conditions and/or significant variation in the budgeted development costs, material reversal or impairment provision for properties for/under development and properties held for sale may result. Accordingly, the existence of significant estimates warrants specific audit focus and attention on this area.

Our procedures in relation to management’s assessment of recoverability of properties for/under development and properties held for sale included:

• We evaluated and tested the operating effectiveness of key controls around the property development cycle with particular focus on, but not limited to, controls over cost budgeting for estimated costs to completion, where applicable;

• We evaluated management’s assessment on the recoverability of property portfolios, with particular focus on properties with relatively low gross profit margins or those with cost exceeding the net realisable value; and

• We assessed the reasonableness of key assumptions and estimates in management’s assessment including:

(i) For the estimated selling prices, we compared, on a sample basis, to the contracted selling prices of the underlying properties or current market prices of properties of comparable locations and conditions, where applicable; and

(ii) For the estimated costs to completion, we assessed the reasonableness of the latest budgets of total construction costs and tested, on a sample basis, the construction costs to committed contracts and other supporting documentation.

Based on the procedures performed, we found the key assumptions in the recoverability assessment were supportable in light of available evidence.

KEY AUDIT MATTERS (CONTINUED)

F-104

New World Development Company LimitedAnnual Report 2018 125

I n d e p e n d e n t A u d i t o r ’ s R e p o r t

Key Audit Matter How our audit addressed the Key Audit Matter

Impairment of the Group’s interests in joint ventures and associated companies

Refer to notes 6(d), 22 and 23 to the consolidated financial statements.

As at 30 June 2018, the carrying values of the Group’s interests in joint ventures and associated companies amounted to HK$49,135.8 million and HK$24,708.2 million respectively. Management reviewed regularly whether there are any indicators of impairment of the investments by reference to the requirements under HKAS 28 (2011) “Investments in Associates and Joint Ventures” and HKAS 36 “Impairment of Assets”.

For investments where impairment indicators exist, management estimated the recoverable amounts of those investments, being higher of value in use or fair value less costs of disposal. The value in use is determined based on the discounted cash flow projections. Significant judgements are required to determine the key assumptions used in the discounted cash flow models, such as revenue growth, unit price and discount rates. Independent external valuers were also involved in certain value in use assessments, where management considered necessary. Based on the results of these impairment assessments, impairment losses were recognised for the underlying assets of certain joint ventures and the Group’s share of such impairment losses, in aggregate, of HK$600 million, which have been included in the Group’s share of results of joint ventures for the year ended 30 June 2018 and the Group considered no further impairment is required in respect of the carrying values of the Group’s interests in joint ventures and associated companies.

The Group has certain associated companies, whose assets principally included available-for-sale financial assets and loans and receivables. Management carried out impairment assessments on the underlying available-for-sale financial assets and loans and receivables held by these associated companies. Based on the results of the impairment assessments, management concluded that no impairment provision is needed.

As the impairment assessment involves s ignif icant judgements and estimates, we regard this as a key audit matter.

Our procedures in assessing the management’s judgement for the impairment assessments of the Group’s interests in joint ventures and associated companies included:

• We evaluated the competence, capabil it ies and objectivity of the independent external valuers, where applicable;

• With the support of our in-house valuation experts, we assessed the appropriateness of the valuation methodology and the reasonableness of the key assumptions adopted in the cash flow projections;

• We assessed the reasonableness of the discount rates applied by the management in the discounted cash flow models by comparing to external market data and publicly available information;

• We checked the key assumptions to external market data or other supporting evidence where available;

• We performed sensitivity analysis on the key assumptions adopted in the impairment assessments to understand the impact of reasonable changes in assumptions on the estimated recoverable amounts; and

• We eva luated management ’s assessments on impairment of underlying available-for-sale financial assets and the recoverability assessment on underlying loans and receivables held by the Group’s associated companies which take into account the repayment histories of the borrowers, credit worthiness, value of the pledged assets and subsequent settlement of loans and receivables, if applicable.

Based on the p rocedure s pe r fo rmed , we found management’s impairment assessments relating to the Group’s interests in joint ventures and associated companies were supported by available evidence.

KEY AUDIT MATTERS (CONTINUED)

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New World Development Company Limited Annual Report 2018126

I n d e p e n d e n t A u d i t o r ’ s R e p o r t

OTHER INFORMATION

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

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

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

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

RESPONSIBILITIES OF DIRECTORS AND AUDIT COMMITTEE FOR THE CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

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

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I n d e p e n d e n t A u d i t o r ’ s R e p o r t

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

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

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

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

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

The engagement partner on the audit resulting in this independent auditor’s report is Mr. Ho Chi Keung.

PricewaterhouseCoopersCertified Public Accountants

Hong Kong, 20 September 2018

F-107

New World Development Company Limited Annual Report 2018128

Consolidated Income StatementFor the year ended 30 June 2018

2018 2017Note HK$m HK$m

Revenues 7 60,688.7 56,628.8

Cost of sales (40,125.3) (38,413.2)

Gross profit 20,563.4 18,215.6

Other income 8 137.3 528.8

Other gains, net 9 4,133.4 428.6

Selling and marketing expenses (1,083.8) (1,376.6)

Administrative and other operating expenses (8,142.1) (7,408.9)

Changes in fair value of investment properties 17 15,367.1 1,363.8

Operating profit 10 30,975.3 11,751.3

Financing income 1,475.2 1,705.9

Financing costs 11 (2,179.5) (2,152.0)

30,271.0 11,305.2

Share of results of

Joint ventures 1,886.2 2,029.7

Associated companies 1,196.4 1,895.4

Profit before taxation 33,353.6 15,230.3

Taxation 12 (6,272.4) (4,755.6)

Profit for the year 27,081.2 10,474.7

Attributable to:

Shareholders of the Company 39 23,338.1 7,675.7

Holders of perpetual capital securities 536.6 395.9

Non-controlling interests 3,206.5 2,403.1

27,081.2 10,474.7

Earnings per share 13

Basic HK$2.34 HK$0.80

Diluted HK$2.33 HK$0.80

F-108

New World Development Company LimitedAnnual Report 2018 129

Consolidated Statement of Comprehensive IncomeFor the year ended 30 June 2018

2018 2017HK$m HK$m

Profit for the year 27,081.2 10,474.7

Other comprehensive income

Items that will not be reclassified to profit or loss

Revaluation of investment properties upon reclassification from property, plant and equipment and land use rights 3,539.5 554.9

— deferred tax arising from revaluation thereof (4.0) (92.2)

Remeasurement of post employment benefit obligation 24.7 24.0

Items that had been reclassified/may be reclassified subsequently toprofit or loss

Fair value changes of available-for-sale financial assets (846.9) 501.6

Release of investment revaluation deficit to the consolidated income statement upon impairment of available-for-sale financial assets 7.1 60.2

Release of reserve upon disposal of available-for-sale financial assets (78.9) 73.5

Release of reserve upon disposal of subsidiaries (155.9) (35.4)

Release of reserve upon deemed disposal of interests in joint ventures – 5.7

Release of reserves upon remeasurement of previously held equity interest in a joint venture – 35.6

Release of reserve upon deregistration of subsidiaries (60.6) (15.3)

Release of reserve upon return of registered capital of a subsidiary (22.5) –

Release of reserves upon disposal of interests in joint ventures andassociated companies 36.3 (135.4)

Release of reserves upon reclassification of an associated company toan available-for-sale financial asset 53.6 –

Share of other comprehensive income of joint ventures and associated companies 872.3 (344.4)

Cash flow hedges 83.9 253.8

Translation differences 3,964.4 (1,576.8)

Other comprehensive income for the year 7,413.0 (690.2)

Total comprehensive income for the year 34,494.2 9,784.5

Attributable to:

Shareholders of the Company 30,454.8 7,145.2

Holders of perpetual capital securities 536.6 395.9

Non-controlling interests 3,502.8 2,243.4

34,494.2 9,784.5

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New World Development Company Limited Annual Report 2018130

Consolidated Statement of Financial PositionAs at 30 June 2018

2018 2017Note HK$m HK$m

Assets

Non-current assets

Investment properties 17 149,727.7 105,760.4

Property, plant and equipment 18 29,940.2 30,807.8

Land use rights 19 1,064.0 1,715.0

Intangible concession rights 20 11,403.5 11,841.9

Intangible assets 21 3,782.0 3,423.8

Interests in joint ventures 22 49,135.8 49,317.4

Interests in associated companies 23 24,708.2 26,401.8

Available-for-sale financial assets 24 11,778.8 6,540.9

Held-to-maturity investments 25 46.0 44.4

Financial assets at fair value through profit or loss 32 684.3 574.5

Derivative financial instruments 26 88.6 9.8

Properties for development 19,656.2 18,284.1

Deferred tax assets 27 749.3 740.9

Other non-current assets 28 6,635.1 2,612.6

309,399.7 258,075.3

Current assets

Properties under development 29 37,171.0 48,530.0

Properties held for sale 42,301.2 34,530.9

Inventories 30 831.5 756.1

Debtors, prepayments and contract assets 31 25,519.6 27,864.4

Financial assets at fair value through profit or loss 32 – 0.1

Derivative financial instruments 26 19.5 62.3

Restricted bank balances 33 67.7 120.5

Cash and bank balances 33 63,388.4 66,986.0

169,298.9 178,850.3

Non-current assets classified as assets held for sale 35 2,756.2 130.7

172,055.1 178,981.0

Total assets 481,454.8 437,056.3

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C o n s o l i d a t e d S t a t e m e n t o f F i n a n c i a l P o s i t i o nAs at 30 June 2018

2018 2017Note HK$m HK$m

Equity

Share capital 36 77,525.9 73,233.6

Reserves 39 138,724.0 112,857.6

Shareholders’ funds 216,249.9 186,091.2

Perpetual capital securities 37 9,451.8 9,451.8

Non-controlling interests 38 29,480.2 25,401.5

Total equity 255,181.9 220,944.5

Liabilities

Non-current liabilities

Long-term borrowings 40 120,123.6 125,895.3

Deferred tax liabilities 27 10,287.9 9,327.2

Derivative financial instruments 26 365.6 631.3

Other non-current liabilities 41 806.5 757.4

131,583.6 136,611.2

Current liabilities

Creditors, accrued charges and contract liabilities 42 65,059.0 50,735.2

Current portion of long-term borrowings 40 11,851.5 14,857.9

Derivative financial instruments 26 – 36.1

Short-term borrowings 40 8,777.6 6,366.7

Current tax payable 8,992.4 7,504.7

94,680.5 79,500.6

Liabilities directly associated with non-current assets classified as assets held for sale 35 8.8 –

94,689.3 79,500.6

Total liabilities 226,272.9 216,111.8

Total equity and liabilities 481,454.8 437,056.3

Dr. Cheng Kar-Shun, Henry Dr. Cheng Chi-Kong, AdrianDirector Director

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New World Development Company Limited Annual Report 2018132

Consolidated Statement of Changes in EquityFor the year ended 30 June 2018

Sharecapital

Retainedprofits

Otherreserves

Share-holders’

funds

Perpetualcapital

securities

Non-controlling

interests TotalHK$m HK$m HK$m HK$m HK$m HK$m HK$m

At 30 June 2017 73,233.6 104,696.7 8,160.9 186,091.2 9,451.8 25,401.5 220,944.5

Adjustment on adoption of HKFRS 15,net of taxation (Note 4) – 251.6 – 251.6 – 27.2 278.8

Restated balance as at 1 July 2017 73,233.6 104,948.3 8,160.9 186,342.8 9,451.8 25,428.7 221,223.3

Profit for the year – 23,338.1 – 23,338.1 536.6 3,206.5 27,081.2

Other comprehensive income

Fair value changes of available-for-salefinancial assets – – (432.6) (432.6) – (414.3) (846.9)

Release of reserve upon disposal ofavailable-for-sale financial assets – – (72.3) (72.3) – (6.6) (78.9)

Release of investment revaluation deficit to the consolidated income statement upon impairment of available-for-sale financial assets – – 7.1 7.1 – – 7.1

Release of reserve upon disposal of subsidiaries – – (163.0) (163.0) – 7.1 (155.9)

Release of reserve upon deregistration of subsidiaries – – (27.9) (27.9) – (32.7) (60.6)

Release of reserve upon return of registered capital of a subsidiary – – (9.8) (9.8) – (12.7) (22.5)

Release of reserves upon disposal of interests in joint ventures and associated companies – – 18.2 18.2 – 18.1 36.3

Release of reserves upon reclassification of an associated company to an available-for-sale financial asset – – 32.8 32.8 – 20.8 53.6

Revaluation of investment properties upon reclassification from property, plant and equipment and land use rights, net of taxation – – 3,521.9 3,521.9 – 13.6 3,535.5

Share of other comprehensive income of joint ventures and associated companies – (4.8) 586.3 581.5 – 290.8 872.3

Remeasurement of post employment benefit obligation – 15.1 – 15.1 – 9.6 24.7

Cash flow hedges – – 51.3 51.3 – 32.6 83.9

Translation differences – – 3,594.4 3,594.4 – 370.0 3,964.4

Other comprehensive income for the year – 10.3 7,106.4 7,116.7 – 296.3 7,413.0

Total comprehensive income for the year – 23,348.4 7,106.4 30,454.8 536.6 3,502.8 34,494.2

Transactions with owners

Contributions by/(distributions to) owners

Dividends – (4,660.4) – (4,660.4) – (2,250.4) (6,910.8)

Contributions from non-controlling interests – – – – – 140.5 140.5

Issue of new shares as scrip dividends 3,802.1 – – 3,802.1 – – 3,802.1

Issue of new shares upon exercise of share options 490.2 – – 490.2 – – 490.2

Employees’ share-based payments – – 57.2 57.2 – – 57.2

Share options lapsed – 47.3 (47.3) – – – –

Distribution to perpetual capital securities holders – – – – (536.6) – (536.6)

Buyback of shares – (130.9) – (130.9) – – (130.9)

Transfer of reserves – 139.1 (139.1) – – – –

Repayment of capital to a non-controlling shareholder – – – – – (40.4) (40.4)

4,292.3 (4,604.9) (129.2) (441.8) (536.6) (2,150.3) (3,128.7)

Changes in ownership interests in subsidiaries

Acquisition of subsidiaries – – – – – 2,570.1 2,570.1

Acquisition of additional interests in subsidiaries – 59.0 – 59.0 – (152.0) (93.0)

Deemed disposal of interests in subsidiaries – (164.9) – (164.9) – 280.9 116.0

– (105.9) – (105.9) – 2,699.0 2,593.1

Total transactions with owners 4,292.3 (4,710.8) (129.2) (547.7) (536.6) 548.7 (535.6)

At 30 June 2018 77,525.9 123,585.9 15,138.1 216,249.9 9,451.8 29,480.2 255,181.9

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C o n s o l i d a t e d S t a t e m e n t o f C h a n g e s i n E q u i t yFor the year ended 30 June 2018

Sharecapital

Retainedprofits

Otherreserves

Share-holders’

funds

Perpetualcapital

securities

Non-controlling

interests TotalHK$m HK$m HK$m HK$m HK$m HK$m HK$m

At 1 July 2016 69,599.8 101,296.6 8,677.0 179,573.4 – 21,321.9 200,895.3

Profit for the year – 7,675.7 – 7,675.7 395.9 2,403.1 10,474.7

Other comprehensive income

Fair value changes of available-for-sale financial assets – – 432.9 432.9 – 68.7 501.6

Release of reserve upon disposal of available-for-sale financial assets – – 79.3 79.3 – (5.8) 73.5

Release of investment revaluation deficit to the consolidated income statement upon impairment of available-for-sale financial assets – – 54.1 54.1 – 6.1 60.2

Release of reserve upon disposal of subsidiaries – – (34.5) (34.5) – (0.9) (35.4)

Release of reserve upon deemed disposal of interests in joint ventures – – 3.5 3.5 – 2.2 5.7

Release of reserves upon remeasurement of previously held equity interest in a joint venture – – 21.9 21.9 – 13.7 35.6

Release of reserve upon deregistration of a subsidiary – – (9.4) (9.4) – (5.9) (15.3)

Release of reserves upon disposal of interests in joint ventures and associated companies – – (82.8) (82.8) – (52.6) (135.4)

Revaluation of investment properties upon reclassification from property, plant and equipment and land use rights, net of taxation – – 462.3 462.3 – 0.4 462.7

Share of other comprehensive income of joint ventures and associated companies – (4.5) (177.2) (181.7) – (162.7) (344.4)

Remeasurement of post employment benefit obligation – 15.1 (0.7) 14.4 – 9.6 24.0

Cash flow hedges – – 155.7 155.7 – 98.1 253.8

Translation differences – – (1,446.2) (1,446.2) – (130.6) (1,576.8)

Other comprehensive income for the year – 10.6 (541.1) (530.5) – (159.7) (690.2)

Total comprehensive income for the year – 7,686.3 (541.1) 7,145.2 395.9 2,243.4 9,784.5

Transactions with owners

Contributions by/(distributions to) owners

Dividends – (4,171.1) – (4,171.1) – (1,077.0) (5,248.1)

Contributions from non-controlling interests – – – – – 2,847.3 2,847.3

Issue of new shares as scrip dividends 3,426.0 – – 3,426.0 – – 3,426.0

Issue of new shares upon exercise of share options 207.8 – – 207.8 – – 207.8

Employees’ share-based payments – – 53.3 53.3 – 3.3 56.6

Share options lapsed – 29.2 (29.2) – – – –

Issuance of perpetual capital securities – – – – 9,324.0 – 9,324.0

Distribution to perpetual capital securities holders – – – – (268.1) – (268.1)

Transaction costs in relation to the issuance of perpetual capital securities – (111.7) – (111.7) – – (111.7)

Transfer of reserves – (0.9) 0.9 – – – –

Repayment of capital to a non-controlling shareholder – – – – – (19.3) (19.3)

3,633.8 (4,254.5) 25.0 (595.7) 9,055.9 1,754.3 10,214.5

Changes in ownership interests in subsidiaries

Acquisition of additional interests in subsidiaries – (40.8) – (40.8) – (246.1) (286.9)

Deemed disposal of interests in subsidiaries – 9.1 – 9.1 – 328.0 337.1

– (31.7) – (31.7) – 81.9 50.2

Total transactions with owners 3,633.8 (4,286.2) 25.0 (627.4) 9,055.9 1,836.2 10,264.7

At 30 June 2017 73,233.6 104,696.7 8,160.9 186,091.2 9,451.8 25,401.5 220,944.5

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New World Development Company Limited Annual Report 2018134

Consolidated Statement of Cash FlowsFor the year ended 30 June 2018

2018 2017Note HK$m HK$m

Cash flows from operating activities

Net cash generated from operations 46(a) 12,978.1 8,432.4

Hong Kong profits tax paid (544.0) (591.0)

Mainland China and overseas taxation paid (4,758.4) (4,685.1)

Net cash from operating activities 7,675.7 3,156.3

Cash flows from investing activities

Interest received 1,246.7 831.9

Dividends received from

Joint ventures 2,267.5 1,735.2

Associated companies 643.9 2,104.5

Available-for-sale financial assets, perpetual securities and financial assets at fair value through profit or loss 137.3 690.5

Additions of investment properties, property, plant and equipment and intangible concession rights (9,969.9) (16,158.2)

Increase in interests in joint ventures (2,469.2) (3,477.8)

Increase in interests in associated companies (587.0) (8,292.2)

Increase in long-term loans and receivables and deposit paid for a proposed commercial development project (684.1) (1,278.8)

Decrease/(increase) in short-term bank deposits maturing after more than three months 4,374.8 (4,542.3)

Acquisition of subsidiaries (net of cash and cash equivalents) 46(d) 339.2 (1,169.5)

Purchase of available-for-sale financial assets and financial assets at fair value through profit or loss (4,276.1) (1,683.7)

Proceeds from disposal of

Associated companies 2,428.0 512.5

Available-for-sale financial assets, perpetual securities and financial assets at fair value through profit or loss 883.9 7,702.3

Investment properties, property, plant and equipment, land use rights and intangible concession rights 1,232.0 864.8

Joint ventures – 197.1

Non-current assets classified as assets held for sale 75.9 4,031.1

Subsidiaries (net of cash and cash equivalents) 46(f) 11,176.7 5,847.5

Net cash from/(used in) investing activities 6,819.6 (12,085.1)

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C o n s o l i d a t e d S t a t e m e n t o f C a s h F l o w sFor the year ended 30 June 2018

2018 2017Note HK$m HK$m

Cash flows from financing activities

Issue of fixed rate bonds and notes payable, net of transaction costs – 6,415.9

Redemption of fixed rate bonds and notes payable (3,614.5) (6,539.0)

Drawdown of bank and other loans 18,977.6 34,319.0

Repayment of bank and other loans (21,377.7) (23,073.7)

(Decrease)/increase in loans from non-controlling shareholders (777.3) 430.7

Decrease in restricted bank balances 52.8 85.2

Increase in interests in subsidiaries (133.4) (306.3)

Issue of shares 490.2 207.8

Contributions from non-controlling interests 130.2 2,847.3

Interest paid (4,264.1) (4,914.7)

Dividends paid to shareholders of the Company (858.3) (745.1)

Dividends paid to non-controlling shareholders (2,134.4) (739.8)

Proceeds from perpetual capital securities, net of transaction costs 37 – 9,212.3

Distribution to holders of perpetual capital securities (536.6) (268.1)

Buyback of shares (130.9) –

Net cash (used in)/from financing activities (14,176.4) 16,931.5

Net increase in cash and cash equivalents 318.9 8,002.7

Cash and cash equivalents at beginning of the year 61,763.6 54,297.5

Translation differences 514.8 (536.6)

Cash and cash equivalents at end of the year 62,597.3 61,763.6

Analysis of cash and cash equivalents

Cash at banks and on hand 33 35,027.8 32,115.5

Short-term bank deposits maturing within three months 33 27,513.0 29,648.1

Cash and bank balances of a subsidiary reclassified as non-current assets classified as assets held for sale 56.5 –

62,597.3 61,763.6

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Notes to the Financial Statements

1 GENERAL INFORMATION

New World Development Company Limited (the “Company”) is a limited liability company incorporated in Hong Kong. The address of its registered office is 30/F, New World Tower, 18 Queen’s Road Central, Hong Kong. The shares of the Company are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The Company and its subsidiaries (together the “Group”) are principally engaged in property development and investment, construction, provision of services (including property and facility management, transport and other services), infrastructure operations (including the operation of roads, environment projects, commercial aircraft leasing as well as ports and logistic facilities), hotel operations, department store operations, media, technology and other strategic businesses.

These consolidated financial statements have been approved by the Board of Directors on 20 September 2018.

2 BASIS OF PREPARATION

The consolidated financial statements have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, certain financial assets and financial liabilities (including available-for-sale financial assets, financial assets at fair value through profit or loss and derivative financial instruments), which have been measured at fair value.

The preparation of consolidated financial statements in conformity with HKFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 6 below.

(a) Adoption of amendments to standardsThe Group has adopted the following amendments to standards which are relevant to the Group’s operations and are mandatory for the financial year ended 30 June 2018:

Amendments to HKAS 7 Disclosure Initiative

Amendments to HKAS 12 Recognition of Deferred Tax Assets for Unrealised Losses

HKFRSs Amendments Annual Improvements to HKFRSs 2014-2016 Cycle

The adoption of these amendments to standards does not have significant effect on the results and financial position of the Group.

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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

2 BASIS OF PREPARATION (CONTINUED)

(b) Early adoption of Hong Kong Financial Reporting Standard 15 “Revenue from Contracts with Customers” (“HKFRS 15”)HKFRS 15 as issued by the HKICPA is effective for the financial year beginning on or after 1 January 2018.

The Group has elected to early adopt HKFRS 15 for the year ended 30 June 2018 because the new accounting standard provides more reliable and relevant information for users to assess the amounts, timing and uncertainty of revenue and cash flows. The Group has also elected to apply the “cumulative catch-up” transitional method whereby the effects of adopting HKFRS 15 for uncompleted contracts with customers as at 30 June 2017 are adjusted at the opening balance of equity as at 1 July 2017 and prior period comparatives are not restated. The effects of the adoption of HKFRS 15 are set out in note 4 below.

HKFRS 15 establishes a comprehensive framework for determining when to recognise revenue and how much revenue to be recognised through a 5-step approach: (i) identify the contract(s) with customer; (ii) identify separate performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations; and (v) recognise revenue when a performance obligation is satisfied. The core principle is that a company should recognise revenue when control of goods or services transfers to a customer.

From 1 July 2017 onwards, the Group has adopted the following accounting policies on revenues:

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

Control of the goods or services is transferred over time if the Group’s performance:

• provides all of the benefits received and consumed simultaneously by the customer;

• creates or enhances an asset that the customer controls as the Group performs; or

• does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date.

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

The progress towards complete satisfaction of the performance obligation is measured based on one of the following methods that best depict the Group’s performance in satisfying the performance obligation:

• direct measurements of the value transferred by the Group to the customer; or

• the Group’s efforts or inputs to the satisfaction of the performance obligation relative to the total expected efforts or inputs.

Incremental costs incurred to obtain a contract, if recoverable, are capitalised as contract acquisition cost and subsequently amortised when the related revenue is recognised.

Please refer to the accounting policy in relation to revenue recognition in note 3(y).

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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

2 BASIS OF PREPARATION (CONTINUED)

(c) Standards, amendments to standards and interpretations which are not yet effectiveThe following new standards, amendments to standards and interpretations are mandatory for accounting periods beginning on or after 1 July 2018 or later periods but which the Group has not early adopted:

HKFRS 9 Financial Instruments

HKFRS 16 Leases

HKFRS 17 Insurance Contracts

Amendments to HKFRS 2 Classification and Measurement of Share-based Payment Transactions

Amendments to HKFRS 4 Applying HKFRS 9 Financial Instruments with HKFRS 4 – Insurance Contracts

Amendments to HKFRS 9 Prepayment Features with Negative Compensation

Amendments to HKFRS 10 and HKAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Amendments to HKAS 19 Employee Benefits

Amendments to HKAS 28 Long-term Interests in Associates and Joint Ventures

Amendments to HKAS 40 Transfers of Investment Property

HK (IFRIC) — Interpretation 22 Foreign Currency Transactions and Advance Consideration

HK (IFRIC) — Interpretation 23 Uncertainty over Income Tax Treatments

HKFRSs Amendments Annual Improvements to HKFRSs 2014–2016 Cycle and Annual Improvements to HKFRSs 2015–2017 Cycle

The Group has already commenced an assessment of the likely impact of adopting the above new standards, amendments to standards and interpretations, in which the preliminary assessment of HKFRS 9 and HKFRS 16 is detailed below.

HKFRS 9 “Financial Instruments”HKFRS 9 replaces the multiple classification and measurement models in HKAS 39 Financial Instruments: Recognition and Measurement with a single model that has three classification categories: amortised cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit or loss (“FVPL”).

Classification of debt assets will be driven by the Group’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. A debt instrument is measured at amortised cost if (i) the objective of the business model is to hold the financial asset for the collection of the contractual cash flows, and (ii) the contractual cash flows under the instrument solely represent payments of principal and interest. All other debt and equity instruments, including investments in complex debt instruments and equity investments, must be recognised at fair value and their gains and losses will either be recorded in consolidated income statement or consolidated statement of comprehensive income. For investment in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investments at FVOCI.

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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

2 BASIS OF PREPARATION (CONTINUED)

(c) Standards, amendments to standards and interpretations which are not yet effective (continued)HKFRS 9 “Financial Instruments” (continued)Certain financial assets of the Group that are currently classified as available-for-sale equity securities will be classified and measured as FVOCI or as FVPL under the new standard. Under the prevailing accounting policies, changes in fair value of available-for-sale financial assets are recognised in other comprehensive income, and upon disposal, the accumulated fair value adjustments are included in the consolidated income statement. Upon adoption of HKFRS 9, for investments that are measured as FVPL, changes in fair value are included in the consolidated income statement; while for investments that are measured at FVOCI, changes in fair value are included in consolidated statement of comprehensive income and accumulated fair value adjustments will not be transferred to the consolidated income statement upon disposal. As a result, depending on the classification of and timing of disposal of the investments, there may be impact on the profit or loss of the Group.

For financial liabilities that are measured under the fair value option, the Group will need to recognise a part of the fair value change that is due to changes in its own credit risk in consolidated statement of comprehensive income rather than consolidated income statement.

The new hedge accounting rules align hedge accounting more closely with common risk management practices. As a general rule, it will be easier to apply hedge accounting going forward. The new standard also introduces expanded disclosure requirements and changes in presentation. The Group does not expect a significant impact on the accounting for hedging relationship.

A new expected credit loss (“ECL”) impairment model has been introduced which involves a three-stage approach whereby financial assets move through the three stages as their credit quality changes. The stage dictates how the Group measures impairment losses and applies the effective interest rate method. A simplified approach is permitted for trade debtors and contract assets that do not have a significant financing component. On initial recognition, entities will record a day-1 loss equal to the 12 month ECL (or lifetime ECL for trade debtors and contract assets with no significant financing components), unless the assets are considered credit impaired. The Group expects to apply the simplified approach to recognise lifetime ECL for its trade debtors and contract assets and considers the remaining financial assets have low credit risk and hence expects to recognise 12-month ECL.

The new accounting standard will be effective for the year ending 30 June 2019. As allowed in the transitional provisions in HKFRS 9 (2014), comparative figures will not be restated.

The Group will continue to assess its impact in more details.

HKFRS 16 “Leases”HKFRS 16 addresses the definition of a lease, recognition and measurement of leases and establishes principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from HKFRS 16 is that most operating leases will be accounted for on the consolidated statements of financial position for lessees. The Group is a lessee of certain premises and properties which are currently classified as operating leases. HKFRS 16 provides a new provision for the accounting treatment of leases when the Group is the lessee, almost all leases should be recognised in the form of an asset (for the right-of-use) and a financial liability (for the payment obligation). Short-term leases of less than twelve months and leases of low-value assets are exempt from the reporting obligation. The new standard will therefore result in an increase in assets and financial liabilities in the consolidated statements of financial position. As for the financial performance impact in the consolidated income statement, straight-line depreciation expense on the right-of-use asset and the interest expenses on the financial liability are recognised and no rental expenses will be recognised. The combination of a straight-line depreciation of the right-of-use asset and the effective interest rate method applied to the financial liability will result in a higher total charge to consolidated income statements in the initial years of the lease, and decreasing expenses during the latter part of the lease term.

The Group conducted preliminary assessment and estimated that the adoption of HKFRS 16 would result in recognition of right-of-use assets and financial liabilities primarily arising from leases of premises and properties in relation to the Group’s various businesses. The Group will continue to assess the impact in more details.

The Group has already commenced an assessment of the impact of other new standards, amendments to standards and interpretations, certain of which may be relevant to the Group’s operations and may give rise to changes in accounting policies, changes in disclosures and remeasurement of certain items in the consolidated financial statements.

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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

2 BASIS OF PREPARATION (CONTINUED)

(d) Hong Kong Companies Ordinance (Cap.622)The consolidated financial statements comply with the applicable requirements of Hong Kong Companies Ordinance (Cap. 622), with the exception of section 381 which requires a company to include all its subsidiary undertakings (within the meaning of Schedule 1 to Cap. 622) in the company’s annual consolidated financial statements. Section 381 is inconsistent with the requirements of HKFRS 10 Consolidated Financial Statements so far as Section 381 applies to subsidiary undertakings which are not controlled by the Group in accordance with HKFRS 10. For this reason, under the provisions of section 380(6), the Company has departed from section 381 and has not treated such companies as subsidiaries but they are accounted for in accordance with the accounting policies in notes 3(a)(ii) and 3(a)(iii). Those excluded subsidiary undertakings of the Group are disclosed in notes 50 and 51.

3 PRINCIPAL ACCOUNTING POLICIES

The principal accounting policies adopted for the preparation of these consolidated financial statements, which have been consistently applied to all the years presented, unless otherwise stated, are set out as below:

(a) ConsolidationThe consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries made up to 30 June.

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

The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement at the acquisition date. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. There is a choice, on the basis of each acquisition to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the recognised amount of acquiree’s identifiable net assets. If the business combination is achieved in stages, the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any previous equity interest in the acquiree at the date of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If this consideration is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the consolidated income statement.

Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the carrying amount for the purposes of subsequently accounting for the retained interest as associated companies, joint ventures or financial assets. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. It means the amounts previously recognised in other comprehensive income are reclassified to profit or loss or transferred to another category of equity as specified/permitted by applicable HKFRSs.

The Company’s investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted for by the Company on the basis of dividend received and receivable.

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(a) Consolidation (continued)(ii) Joint arrangements

Under HKFRS 11, investments in joint arrangements are classified as either joint ventures or joint operations depending on the contractual rights and obligations each investor.

(1) Joint venturesThe Group recognises its interests in joint ventures using equity method of accounting. Interests in joint ventures are stated in the consolidated financial statements at cost (including goodwill on acquisition) plus the share of post-acquisition results and movements in other comprehensive income less provision for impairment losses. Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired joint ventures at the date of acquisition.

The Group’s interests in joint ventures include the loans and advances to the joint ventures which, in substance, form part of the Group’s interests in the joint ventures. The loans and advances to the joint ventures are a form of commercial arrangement between the parties to the joint ventures to finance the development of projects and viewed as a mean by which the Group invests in the relevant projects. These loans and advances have no fixed repayment terms and will be repaid when the relevant joint venture has surplus cash flow.

The share of post-acquisition results and other comprehensive income is based on the relevant profit sharing ratios which vary according to the nature of the joint ventures set out as follows:

(a) Equity joint ventures/joint ventures in wholly foreign owned enterprisesEquity joint ventures/joint ventures in wholly foreign owned enterprises are joint ventures in respect of which the capital contribution ratios of the venturers are defined in the joint venture contracts and the profit sharing ratios and share of net assets of the venturers are in proportion to the capital contribution ratios.

(b) Co-operative joint venturesCo-operative joint ventures are joint ventures in respect of which the profit sharing ratios of the venturers and share of net assets upon the expiration of the joint venture periods are not in proportion to their capital contribution ratios but are as defined in the joint venture contracts.

(c) Companies limited by sharesCompanies limited by shares are limited liability companies in respect of which each shareholder’s beneficial interests therein is in accordance with the amount of the voting share capital held thereby.

When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.

The Group recognises the portion of gains or losses on the sale of assets by the Group to the joint venture that is attributable to the other venturers. The Group does not recognise its share of profits or losses from the joint venture that result from the purchase of assets from the joint venture until it resells the assets to an independent party. However, a loss on the transaction is recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets, or an impairment loss.

For equity accounting purpose, accounting policies of joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.

The Company’s interests in joint ventures are stated at cost less provision for impairment losses. The results of joint ventures are accounted for by the Company on the basis of dividend received and receivable.

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(a) Consolidation (continued)(ii) Joint arrangements (continued)

(2) Joint operationsThe assets that the Group has the rights and the liabilities that the Group has the obligations in relation to the joint operations are recognised in the consolidated statement of financial position on an accrual basis and classified according to the nature of the item. The share of expenses that the Group incurs and its share of income that it earns from the joint operations are included in the consolidated income statement.

(iii) Associated companiesAn associated company is a company other than a subsidiary and a joint venture, in which the Group has significant influence, but not control, exercised through representatives on the board of directors.

Interests in associated companies are accounted for by the equity method of accounting and are initially recognised at cost. The Group’s interests in associated companies include goodwill (net of any accumulated impairment loss) identified on acquisition. Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired associated companies at the date of acquisition. The interests in associated companies also include long-term interest that, in substance, form part of the Group’s net investment in the associated companies.

The Group’s share of its associated companies’ post acquisition profits or losses is recognised in the consolidated income statement, and the share of post-acquisition movements in other comprehensive income is recognised in the consolidated statement of comprehensive income. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the share of losses in an associated company equals or exceeds its interests in the associated company, including any other unsecured receivable, the Group does not recognise further losses, unless it has incurred legal and constructive obligations or made payments on behalf of the associated company.

Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the Group’s interests in the associated companies. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. For equity accounting purpose, accounting policies of associated companies have been changed where necessary to ensure consistency with the policies adopted by the Group.

The Company’s interests in associated companies are stated at cost less provision for impairment losses. The results of associated companies are accounted for by the Company on the basis of dividend income received and receivable.

Gains or losses on deemed disposal on dilution arising from interests in associated companies are recognised in the consolidated income statement.

The cost of an associated company acquired in stages is measured as the sum of consideration paid for each purchase plus a share of investee’s profits and other equity movements.

The Group ceases to use the equity method from the date an investment ceases to be an associated company that is the date on which the Group ceases to have significant influence over the associated company or on the date it is classified as held for sale.

(iv) Transactions with non-controlling interestsNon-controlling interests is the equity in a subsidiary which is not attributable, directly or indirectly, to a parent. The Group treats transactions with non-controlling interests (namely, acquisitions of additional interests and disposals of partial interests in subsidiaries that do not result in a loss of control) as transactions with equity owners of the Group. For purchases of additional interests in subsidiaries from non-controlling shareholders, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals of partial interests to non-controlling shareholders are also recorded in equity.

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(b) Intangible assets(i) Goodwill

Goodwill arising on acquisitions of subsidiaries is included in intangible assets. Goodwill arising on acquisitions of joint ventures and associated companies is included in interests in joint ventures and associated companies respectively and is tested for impairment as part of overall balance. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains or losses on the disposal of all or part of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of testing for impairment. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

(ii) TrademarksSeparately acquired trademarks are initially recognised at initial cost. Trademarks acquired in a business combination are recognised at fair value at the date of acquisition. Trademarks have a finite useful life and are subsequently carried at cost less accumulated amortisation and impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of trademarks over their estimated useful lives.

(iii) Operating rightOperating right primarily resulted from the acquisition of right to operate facilities rental and other businesses. Separately acquired operating rights are initially recognised at cost. Operating rights acquired in a business combination are initially recognised at fair value at the acquisition date. Operating right is carried at cost less accumulated amortisation and impairment. Amortisation is calculated using the straight-line method to allocate the cost over the period of the operating right.

(iv) Intangible concession rightsThe Group has entered into various service arrangements (“Service Concessions”) with local government authorities for its participation in the development, financing, operation and maintenance of various infrastructures for public services, such as toll roads and bridges, power plants and water treatment plants (the “Infrastructures”). The Group carries out the construction or upgrade work of Infrastructures from the granting authorities in exchange for the right to operate the Infrastructures concerned and the right to change users of the respective Infrastructures. The fees collected during the operating periods are attributable to the Group. The relevant Infrastructures are required to be returned to the local government authorities upon the expiry of the operating rights without significant compensation to the Group.

The Group applies the intangible asset model to account for the Infrastructures where they are paid by the users of the Infrastructures and the concession grantors (the respective local governments) have not provided any contractual guarantees in respect of the amounts of construction costs incurred to be recoverable. The consideration to be received during the construction or the upgrade period is classified as contract assets and reclassified as intangible concession rights upon completion.

Land use rights acquired in conjunction with the Service Concessions which the Group has no discretion or latitude to deploy for other services other than the use in the Service Concessions are treated as intangible assets acquired under the Service Concessions.

Amortisation of intangible concession rights is calculated to write off their costs, where applicable, on an economic usage basis for roads and bridges whereby the amount of amortisation is provided based on the ratio of actual volume compared to the total projected volume or on a straight-line basis for water treatment plants over the periods which the Group is granted the rights to operate these Infrastructures. The total projected volume of the respective Infrastructures is reviewed regularly with reference to both internal and external sources of information and appropriate adjustments will be made should there be a material change.

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(c) Non-current assets classified as assets held for saleNon-current assets or disposal group are classified as assets held for sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell if their carrying amount is to be recovered principally through a sale transaction rather than through continuing use.

(d) Land use rightsThe upfront prepayments made for the land use rights held under operating leases are expensed in the consolidated income statement on a straight-line basis over the period of the lease or when there is impairment, the impairment is expensed in the consolidated income statement.

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

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

Investment property is measured initially at its cost, including related transaction costs and where applicable borrowing costs. After initial recognition, investment property is carried at fair value. Fair value is determined by professional qualified valuers on an open market value basis at the end of each reporting period. Changes in fair value are recognised in the consolidated income statement.

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

If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment, and its fair value at the date of reclassification becomes its cost for accounting purposes.

Where an investment property undergoes a change in use, evidenced by commencement of development with a view to sale, the property is transferred to properties for/under development. The property’s deemed cost for subsequent accounting as properties for/under development is its fair value at the date of change in use.

If an owner-occupied property becomes an investment property because its use has changed, any difference resulting between the carrying amount and the fair value of this property at the date of transfer is recognised in equity as a revaluation of property, plant and equipment. However, if the fair value of the property at the date of transfer which results in a reversal of the previous impairment loss, the write-back is recognised in the consolidated income statement.

For a transfer from properties for/under development or property held for sale to investment properties that will be carried at fair value, any difference between the fair value of the property at that date and its previous carrying amount shall be recognised in the consolidated income statement. Transfers to investment properties shall be made when, and only when, there is a change in use. The inception of an operating lease to another party is generally an evidence of a change in use. A change in use has occurred is based on an assessment of all relevant facts and circumstances. The relevant facts include but not limited to the Group’s business plan, financial resources and legal requirements.

(f) Property, plant and equipmentProperty, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of assets. Subsequent costs are included in the carrying amount of the assets or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognised. All other repair and maintenance costs are charged in the consolidated income statement during the financial period in which they are incurred. The carrying amount of an asset is written down immediately to its recoverable amount if the carrying value of an asset is greater than its estimated recoverable amount.

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(f) Property, plant and equipment (continued)(i) Assets under construction

All direct costs relating to the construction of property, plant and equipment, including borrowing costs during the construction period are capitalised as the costs of the assets.

(ii) DepreciationNo depreciation is provided on assets under construction until such time when the relevant assets are completed and available for intended use.

Leasehold land classified as finance lease commences amortisation from the time when the land interest becomes available for its intended use. Amortisation on leasehold land classified as finance lease and depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

Leasehold land classified as finance lease

Shorter of remaining lease term of 10 to over 50 years or useful life

Buildings 20 to 40 years

Other assets 2 to 25 years

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

(iii) Gain or loss on disposalThe gain or loss on disposal of property, plant and equipment is determined by comparing the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the consolidated income statement.

(g) Impairment of investments in subsidiaries, joint ventures, associated companies and non-financial assetsNon-financial assets that have an indefinite useful life, for example goodwill, or have not yet been available for use are not subject to amortisation and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The carrying amount of an asset is written down immediately to its recoverable amount if the carrying amount of the asset is greater than its estimated recoverable amount. An impairment loss is recognised in the consolidated income statement for the amount by which the carrying amount of an asset exceeds its recoverable amount. The recoverable amount is the higher of its fair value less costs of disposal and value in use. For the purpose of assessing impairment, assets are grouped as cash-generating units for which there are separately identifiable cash flows. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

Impairment testing of the interests in subsidiaries, joint ventures or associated companies is required upon receiving dividends from these interests if the dividend exceeds the total comprehensive income of the subsidiaries, joint ventures or associated companies in the period the dividend is declared or if the carrying amount of the interest in the separate financial statements exceeds the carrying amount in the consolidated financial statements of the investee’s net assets including goodwill.

(h) InvestmentsThe Group classifies its investments in the categories of financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. Management determines the classification of its investments at initial recognition depending on the purpose for which the investments are acquired.

(i) Financial assets at fair value through profit or lossThe Group classifies financial assets held for trading and those designated as at fair value through profit or loss at inception under certain circumstances as financial assets at fair value through profit or loss. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term or if so designated by management. They are presented as current assets if they are expected to be settled within 12 months after the end of the reporting period; otherwise, they are classified as non-current.

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(h) Investments (continued)(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable and are included in current assets, except for those with maturities more than 12 months after the end of the reporting period, which are classified as non-current assets.

(iii) Held-to-maturity investmentsHeld-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that management has the positive intention and ability to hold to maturity. Held-to-maturity financial assets are included in non-current assets, except for those with maturities less than 12 months from the end of the reporting period, which are classified as current assets.

(iv) Available-for-sale financial assetsInvestments are designated as available-for-sale financial assets if they do not have fixed maturities and fixed or determinable payments, and management intends to hold them for the medium to long-term. Financial assets that are not classified into any of the other categories are also included in the available-for-sale category.

The financial assets are presented as non-current assets unless they mature, or management intends to dispose of them within 12 months of the end of the reporting period.

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

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method.

Gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss are included in the consolidated income statement in the financial period in which they arise. Changes in the fair value of available-for-sale financial assets are recognised in other comprehensive income. When available-for-sale financial assets are sold, the accumulated fair value adjustments are included in the consolidated income statement as gains or losses from financial assets. Changes in the fair value of monetary financial assets denominated in a foreign currency and classified as available-for-sale are analysed between translation differences resulting from changes in amortised cost of the financial asset and other changes in the carrying amount of the financial asset. The translation differences on monetary financial assets are recognised in the consolidated income statement; translation differences on non-monetary financial assets are recognised in other comprehensive income.

Financial assets and liabilities are offset and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

The fair values of listed investments are based on quoted bid prices at the end of the reporting period. If the market for a financial asset is not active and for unlisted financial assets, the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs.

(i) Derivative financial instrumentsA derivative is initially recognised at fair value on the date a derivative contract is entered into and is subsequently remeasured at its fair value at the end of each reporting period. The change in the fair value is recognised in the consolidated income statement.

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(j) Impairment of financial assets(i) Assets carried at amortised cost

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

The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

• Significant financial difficulty of the issuer or obligor;

• A breach of contract, such as a default or delinquency in interest or principal payments;

• The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;

• It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

• The disappearance of an active market for that financial asset because of financial difficulties; or

• Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:

(1) adverse changes in the payment status of borrowers in the portfolio;

(2) national or local economic conditions that correlate with defaults on the assets in the portfolio.

The Group first assesses whether objective evidence of impairment exists.

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

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

(ii) Assets classified as available-for-saleIf there is objective evidence of impairment for available-for-sale financial assets, the cumulative loss — measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the consolidated income statement — is removed from equity and recognised in the consolidated income statement. Impairment losses recognised in the consolidated income statement on equity instruments are not reversed through the consolidated income statement. If the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in consolidated income statement, the impairment loss is reversed through the consolidated income statement.

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(k) Properties for/under developmentProperties for/under development comprise leasehold land and land use rights, development expenditure and borrowing costs capitalised, and are carried at the lower of cost and net realisable value. Net realisable value takes into account the proceeds ultimately expected to be realised, less applicable variable selling expenses and the anticipated costs to complete. Upon completion, the properties are transferred to properties held for sale. Properties under development included in the current assets are expected to be realised in, or is intended for sale in the Group’s normal operating cycle.

(l) Properties held for saleProperties held for sale are initially measured at the carrying amount of the property at the date of reclassification from properties under development. Subsequently, properties held for sale are carried at the lower of cost and net realisable value. Net realisable value is determined by reference to management estimates based on prevailing market conditions.

(m) InventoriesInventories are stated at the lower of cost and net realisable value. Cost is calculated on the weighted average basis. Net realisable value is determined on the basis of anticipated sales proceeds less estimated selling expenses.

(n) Contracts in progressContracts in progress comprise contract cost incurred, plus recognised profits (less recognised losses) less progress billing. Cost comprises materials, direct labour and overheads attributable to bringing the work in progress to its present condition.

Variations in contract works, claims and incentive payments are included in contract revenue to the extent that may have been agreed with the customer and are capable of being reliably measured.

For fixed price construction service contract, the Group make reference to the progress towards complete satisfaction of that performance obligation to determine the appropriate amount to recognise in a given period. The progress is measured by reference to the contract costs incurred up to the end of the reporting period as a proportion of total estimated costs for each contract. Costs incurred in the year in connection with future activity on a contract and costs not attributable to progress are excluded from contract costs in determining the progress.

If the value of the services provided exceed the net payments received, a contract asset is recognised. If the payment exceed the value of the services provided, a contract liability is recognised.

(o) Trade and other debtorsTrade and other debtors are amounts due from customers for merchandise sold or services performed in the ordinary course of business. If collection of trade and other debtors is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.

Trade and other debtors are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

(p) Contract related assets and contract liabilitiesUpon entering into a contract with a customer, the Group obtains rights to receive consideration from the customer and assumes performance obligations to transfer goods or provide services to the customer.

The combination of those rights and performance obligations gives rise to a net contract asset or a net contract liability depending on the relationship between the remaining rights and the performance obligations. The contract is an asset and recognised as contract assets if the cumulative revenue recognised in profit or loss exceeds cumulative payments made by customers. Conversely, the contract is a liability and recognised as contract liabilities if the cumulative payments made by customers exceeds the revenue recognised in profit or loss.

Contract assets are assessed for impairment under the same approach adopted for impairment assessment of financial assets carried at amortised cost. Contract liabilities are recognised as revenue when the Group transfers the goods or services to the customers and therefore satisfies its performance obligation.

The incremental costs of obtaining a contract with a customer are capitalised and presented as contract related assets, if the Group expects to recover those costs, and are subsequently amortised on a systematic basis that is consistent with the transfer to the customers of the goods or services to which the assets relate. The Group recognises an impairment loss in the consolidated income statement to the extent that the carrying amount of the contract related assets recognised exceeds the remaining amounts of consideration that the Group expects to receive less the costs that directly relate to those goods or services and have not been recognised as expenses.

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(q) Cash and cash equivalentsIn the consolidated statement of cash flows, cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are shown within borrowings under current liabilities in the consolidated statement of financial position.

(r) Share capitalOrdinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(s) Perpetual capital securitiesPerpetual capital securities with no contracted obligation to repay its principal or to pay any distribution are classified as part of equity.

(t) Trade and other payablesTrade and other payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade and other payables are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

(u) ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.

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

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

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

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

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

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

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(w) Current and deferred income taxThe income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

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

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

The deferred tax liability in relation to investment property that is measured at fair value is determined assuming the property will be recovered entirely through sale.

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

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, joint ventures and associated companies, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in consolidated income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

(x) BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the consolidated income statement or capitalised on the basis set out in note 3(aa) over the period of the borrowings using the effective interest method where appropriate.

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

(y) Revenue recognitionRevenue comprises the fair value of the consideration received or receivable for the sale of goods and services rendered in the ordinary course of the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts, allowances for credit and other revenue reducing factors after eliminating sales within the Group.

Revenue is recognised when it is probable that future economic benefits will flow to the Group and specific criteria for each of the activities have been met. Estimates are based on historical results, taking into consideration the type of customers, the type of transactions and the specifics of each arrangement.

(i) RentalRental is recognised in the consolidated income statement on a straight-line basis over the lease term.

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(y) Revenue recognition (continued)(ii) Property sales

Revenue is recognised when or as the control of the asset is transferred to the customer. Depending on the terms of the contract and the laws that apply to the contract, control of the asset may be transferred over time or at a point in time. If properties have no alternative use to the Group contractually and the Group has an enforceable right to payment from the customers for performance completed to date, the Group satisfies the performance obligation over time and therefore, recognises revenue over time in accordance with the input method for measuring progress. Otherwise, revenue is recognised at a point in time when the customer obtains control of the completed property.

The progress towards complete satisfaction of the performance obligation is measured based on the Group’s efforts or inputs to the satisfaction of the performance obligation, by reference to the contract costs incurred up to the end of reporting period as a percentage of total estimated costs for each contract.

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

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

(iii) Construction revenue Revenue from construction service contract is recognised over the period of the contract by reference to the progress towards complete satisfaction of that performance obligation using input method.

(iv) Service feesProperty and facilities management service fees, property letting agency fee are recognised when services are rendered.

(v) Infrastructure operationsToll revenue from road and bridge operations, port revenue from cargo, container handling and storage are recognised when services are rendered.

(vi) Sales of goodsIncome from sales of goods is recognised at a point in time when the goods are delivered to customers and title has passed.

(vii) Fare revenueFare revenue from bus and ferry services is recognised at a point in time when the services are rendered.

(viii) Hotel operationsRevenue from hotel and restaurant operations is recognised upon provision of the services.

(ix) Department store operationsRevenue from sale of goods to retail customers is recognised when the Group sells the product to the customers and the revenue from sale of goods to wholesalers is recognised when control of the products has transferred, being when the products are delivered to the wholesaler. The Group recognises commission income from concessionaire sales upon sale of goods or provision of services by counter suppliers. Payments received in advance that are related to sales of goods or provision of services not yet delivered to customers are deferred and recognised as contract liabilities. Revenue is recognised when goods or services are delivered to customers.

Marketing or promotional offer made to customers at the time of the sale of goods is a separate performance obligation, and the likelihood of settlement of the outstanding performance obligation must be estimated and allocated to the consideration received.

(x) InterestInterest is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired receivables is recognised using the original effective interest rate.

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(y) Revenue recognition (continued)(xi) Dividend

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

(z) Leases(i) Finance leases

Leases that transfer to the Group, as lessee, substantially all the risks and rewards of ownership of assets are classified as finance leases. Finance leases are capitalised at the lease’s inception at the fair value of the leased assets or, if lower, the present value of minimum lease payments. Each lease payment is allocated between the liability and finance cost so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in liabilities, as creditors, accrued charges and contract liabilities. The finance charges are charged to the consolidated income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

Assets held under finance leases are depreciated on the basis described in note 3(f)(ii) above.

(ii) Operating leasesLeases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated income statement on a straight-line basis over the period of the lease.

(aa) Borrowing costBorrowing costs incurred for the construction of any qualifying assets are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are expensed as incurred.

Borrowing costs include interest expense, finance charges in respect of finance lease and exchange differences arising from foreign currency borrowings to the extent that they are regarded as an adjustment to interest costs. The exchange gains and losses that are an adjustment to interest costs include the interest rate differential between borrowing costs that would be incurred if the entity had borrowed funds in its functional currency, and the borrowing costs actually incurred on foreign currency borrowings. Such amounts are estimated based on forward currency rates at the inception of the borrowings.

When the construction of the qualifying assets takes more than one accounting period, the amount of foreign exchange differences eligible for capitalisation is determined on a cumulative basis based on the cumulative amounts of interest expenses that would have been incurred had the entity borrowed in its functional currency. The total amount of foreign exchange differences capitalised cannot exceed the amount of total net foreign exchange differences incurred on a cumulative basis at the end of the reporting period.

(ab) Employee benefits(i) Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the end of the reporting period. Employee entitlements to sick leave and maternity leave are not recognised until the time of leave.

(ii) Bonus plansProvision for bonus plans are recognised when the Group has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made.

(iii) Defined contribution plansA defined contribution plan is a pension plan under which the Group pays contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. Contributions to defined contribution plans, including the Mandatory Provident Fund Scheme and employee pension schemes established by municipal government in The People’s Republic of China (“PRC”) are expensed as incurred. Contributions are reduced by contributions forfeited by those employees who leave the schemes prior to vesting fully in the contributions, where applicable.

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(ab) Employee benefits (continued)(iv) Defined benefit plans

Defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the consolidated statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. In countries where there is no deep market in such bonds, the market rates on government bonds are used.

Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past-service costs are recognised immediately in the consolidated income statement.

(v) Share-based compensationThe Group operates a number of equity-settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of share options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted at the date of grant, excluding the impact of any non-market vesting conditions. At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest. It recognises the impact of the revision of original estimates, if any, in the consolidated income statement, with a corresponding adjustment to equity.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) when the options are exercised.

On lapse of share options according to the plan, corresponding amount recognised in employees’ share-based compensation reserve is transferred to retained profits.

The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.

(ac) Foreign currencies(i) Functional and presentation currency

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

(ii) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the exchange rates ruling at the end of the reporting period are recognised in the consolidated income statement.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of fair value gain or loss. For example, translation differences on financial assets and liabilities held at fair value through profit or loss are reported as part of the fair value gain or loss. Translation differences on non-monetary available-for-sale financial assets are included in equity.

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(ac) Foreign currencies (Continued)(iii) Group companies

The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(1) assets and liabilities for each consolidated statement of financial position presented are translated at the exchange rate ruling at the date of that consolidated statement of the financial position;

(2) income and expenses for each consolidated income statement are translated at the average exchange rate during the period covered by the consolidated income statement;

(3) all resulting translation differences are recognised as a separate component of equity; and

(4) on the disposal of the Group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary that includes a foreign operation, all of the translation differences accumulated in equity in respect of that operation attributable to the equity holders of the company are reclassified to profit or loss.

In the case of a partial disposal that does not result in the Group losing control over a subsidiary that includes a foreign operation, the proportionate share of accumulated translation differences are re-attributed to non-controlling interests and are not recognised in profit or loss. For all other partial disposals (that is, reductions in the Group’s ownership interest in associated companies or joint ventures that do not result in the Group losing significant influence or joint control), the proportionate share of the accumulated translation difference is reclassified to profit or loss.

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the exchange rate ruling at the end of the reporting period.

(ad) Insurance contractsThe Group assesses at the end of each reporting period the liabilities under its insurance contracts using current estimates of future cash flows. If the carrying amount of the relevant insurance liabilities is less than the best estimate of the expenditure required to settle the relevant insurance liabilities at the end of the reporting period, the Group recognises the entire difference in profit or loss. These estimates are recognised only when the outflow is probable and the estimates can be reliably measured.

The Group regards its financial guarantee contracts in respect of mortgage facilities provided to certain property purchasers, guarantees provided to its related parties and tax indemnity provided to its non-wholly owned subsidiary as insurance contracts.

(ae) Segment reportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The Board of Directors of the Company has appointed an Executive Committee which assess the financial performance and position of the Group, and makes strategic decisions. The Executive Committee, which has been identified as being the chief operating decision-maker, consists of executive directors of the Company.

Segment assets consist primarily of property, plant and equipment, land use rights, investment properties, intangible concession rights, intangible assets, available-for-sale financial assets, held-to-maturity investments, financial assets at fair value through profit or loss, properties for development, other non-current assets, properties under development, properties held for sale, inventories and receivables and exclude derivative financial instruments, deferred tax assets, restricted bank balances and cash and bank balances. Segment liabilities comprise operating liabilities and exclude items such as taxation and borrowings.

(af) Dividend distributionDividend distribution to the Company’s shareholders is recognised as a liability in the financial statements in the financial period when the dividends are approved by the Company’s shareholders/directors, where appropriate.

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4 CHANGE IN ACCOUNTING POLICY

As explained in note 2(b) above, the Group has early adopted HKFRS 15 from 1 July 2017, which resulted in changes in accounting policies and adjustments to the amounts recognised in the consolidated financial statements. In accordance with the transitional provisions in HKFRS 15, comparative figures have not been restated.

The accounting policies were changed to comply with HKFRS 15, which replaces both the provisions of HKAS 18 Revenue (“HKAS 18”) and HKAS 11 Construction Contracts (“HKAS 11”) and the related interpretations that relate to the recognition, classification and measurement of revenue and costs.

The effects of the adoption of HKFRS 15 are as follows:

Presentation of contract assets and liabilitiesReclassifications were made as at 1 July 2017 to be consistent with the terminologies used under HKFRS 15:

• Contract liabilities for progress billing recognised in relation to property development activities were previously presented as deposits received on sale of properties within creditors and accrued charges.

• Contract liabilities in relation to prepayments from customers and customer loyalty programme under department stores operation were previously presented as other creditors and accrued charges within creditors and accrued charges.

• Contract liabilities recognised in relation to contracting activities were previously presented as amounts due to customers for contract works within creditors and accrued charges.

• Contract assets recognised in relation to contracting activities were previously presented as amounts due from customers for contract works within debtors and prepayment.

Accounting for property development activitiesIn prior reporting periods, the Group accounted for property development activities when significant risks and rewards of ownership of properties have been transferred to the customers.

Under HKFRS 15, revenue from pre-sales of properties is recognised when or as the control of the asset is transferred to the customer. Depending on the terms of the contracts and the laws that are applicable to the contracts, control of the properties under development may transfer over time or at a point in time. If properties have no alternative use to the Group contractually and the Group has an enforceable right to payment from the customers for performance completed to date, the Group satisfies the performance obligation over time and therefore, recognises revenue over time in accordance with the input method for measuring progress. Otherwise, revenue is recognised at a point in time when the customer obtains control of the completed property.

Revenue for certain pre-sale properties transactions will be accounted for differently and recognised earlier over time, instead of at a single point in time under HKAS 18.

The timing of revenue recognition for sale of certain completed properties, which is currently based on whether significant risks and rewards of ownership of properties have been transferred, may be recognised at a later point in time when the underlying property is legally or physically transferred to the customer.

The Group currently offers different payment schemes to customers, the transaction price and the amount of revenue for the sale of property will be adjusted when significant financing component exists in that contract.

The excess of cumulative revenue recognised in profit or loss over the cumulative payments made by customers is recognised as contract assets.

The excess of cumulative payments made by customers over the cumulative revenue recognised in profit or loss is recognised as contract liabilities.

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Accounting for department stores operationUnder HKFRS 15, revenue from sale of goods to retail customers is recognised when the Group sells the product to the customers and the revenue from sale of goods to wholesalers is recognised when control of the products has transferred, being when the products are delivered to the wholesaler. The Group recognises commission income from concessionaire sales upon sale of goods or provision of services by counter suppliers. Payments received in advance that are related to sales of goods or provision of services not yet delivered to customers are deferred and recognised as contract liabilities. Revenue is recognised when goods or services are delivered to customers.

Marketing or promotional offer made to customers at the time of the sale of goods is a separate performance obligation, and the likelihood of settlement of the outstanding performance obligation must be estimated and allocated to the consideration received.

Accounting for costs incurred to obtain a contractFollowing the adoption of HKFRS 15, stamp duty, sales commissions and other costs only incurred if the contract is obtained, if recoverable, are capitalised as contract acquisition cost and subsequently amortised when the related revenue is recognised.

(a) The impact on the Group’s financial position by the application of HKFRS 15 as compared to HKAS 18 and HKAS 11 that was previously in effect before the adoption of HKFRS 15 is as follows:

As at 1 July 2017

As previously stated

Effects of the early adoption of

HKFRS 15 As restatedHK$m HK$m HK$m

Consolidated statement of financial position (extract)

Interests in joint ventures 49,317.4 2.2 49,319.6

Deferred tax assets 740.9 (33.3) 707.6

Properties under development 48,530.0 (359.6) 48,170.4

Debtors, prepayments and contract assets 27,864.4 158.2 28,022.6

— Trade debtors, deposits, prepayments and other debtors 27,317.2 (79.1) 27,238.1

— Amounts due from customers for contract works 547.2 (547.2) –

— Contract assets – 784.5 784.5

Retained profits 104,696.7 251.6 104,948.3

Non-controlling interests 25,401.5 27.2 25,428.7

Deferred tax liabilities 9,327.2 0.9 9,328.1

Creditors, accrued charges and contract liabilities 50,735.2 (591.7) 50,143.5

— Trade creditors, other creditors and accrued charges 33,262.5 (280.0) 32,982.5

— Amounts due to customers for contract works 2,297.3 (2,297.3) –

— Deposits received on sale of properties 15,175.4 (15,175.4) –

— Contract liabilities – 17,161.0 17,161.0

Current tax payable 7,504.7 79.5 7,584.2

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(b) The amount by each financial statement line item affected in the current year by the application of HKFRS 15 as compared to HKAS 18 and HKAS 11 that was previously in effect before the adoption of HKFRS 15 is as follows:

As at 30 June 2018

Without the early adoption

of HKFRS 15

Effects of the early adoption

of HKFRS 15 As reportedHK$m HK$m HK$m

Consolidated statement of financial position (extract)

Interests in joint ventures 49,055.3 80.5 49,135.8

Deferred tax assets 766.5 (17.2) 749.3

Properties under development 37,494.8 (323.8) 37,171.0

Properties held for sale 29,582.8 12,718.4 42,301.2

Debtors, prepayments and contract assets 33,404.0 (7,884.4) 25,519.6

— Trade debtors, deposits, prepayments and other debtors 33,035.6 (8,837.0) 24,198.6

— Amounts due from customers for contract works 368.4 (368.4) –

— Contract assets – 1,321.0 1,321.0

Retained profits 127,225.6 (3,639.7) 123,585.9

Non-controlling interests 30,622.4 (1,142.2) 29,480.2

Deferred tax liabilities 10,288.7 (0.8) 10,287.9

Creditors, accrued charges and contract liabilities 54,986.5 10,072.5 65,059.0

— Trade creditors, other creditors and accrued charges 39,795.1 (279.3) 39,515.8

— Amounts due to customers for contract works 2,626.3 (2,626.3) –

— Deposits received on sale of properties 12,565.1 (12,565.1) –

— Contract liabilities – 25,543.2 25,543.2

Current tax payable 9,708.7 (716.3) 8,992.4

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(b) (continued)

For the year ended 30 June 2018

Without the early adoption

of HKFRS 15

Effects of the early adoption

of HKFRS 15 As reportedHK$m HK$m HK$m

Consolidated income statement (extract)

Revenues 80,242.2 (19,553.5) 60,688.7

Cost of sales 52,858.0 (12,732.7) 40,125.3

Selling and marketing expenses 1,935.1 (851.3) 1,083.8

Share of results of joint ventures 1,806.9 79.3 1,886.2

Taxation 7,101.9 (829.5) 6,272.4

Non-controlling interests 4,375.9 (1,169.4) 3,206.5

Consolidated statement of cash flows (extract)

Net cash generated from operations

Operating profit before working capital changes 19,847.7 (5,969.5) 13,878.2

Changes in working capital:

— Decrease/(increase) in properties for/under development and properties held for sale 2,743.2 (12,754.2) (10,011.0)

— (Increase)/decrease in debtors, prepayments and contract assets and long-term prepayments and deposits (12,811.9) 8,042.6 (4,769.3)

— Increase in creditors, accrued charges and contract liabilities 3,271.9 10,681.1 13,953.0

The early adoption of HKFRS 15 has no impact to the investing and financing activities on the consolidated statement of cash flows.

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5 FINANCIAL RISK MANAGEMENT AND FAIR VALUE ESTIMATION

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group has centralised treasury function for all of its subsidiaries except for listed subsidiaries which arrange their financial and treasury affairs on a stand-alone basis and in a manner consistent with the overall policies of the Group.

(a) Market risk(i) Foreign exchange risk

The Group’s operations are mainly in Hong Kong and Mainland China. Entities within the Group are exposed to foreign exchange risk from future commercial transactions and monetary assets and liabilities that are denominated in a currency that is not the entity’s functional currency.

The Group manages its foreign currency risk by closely monitoring the movement of the foreign currency rates and will consider to enter into foreign exchange forward contracts and foreign exchange swaps to reduce the exposure should the need arises.

At 30 June 2018, the Group’s entities with functional currency of Hong Kong dollar had aggregate United States dollar net monetary liabilities of HK$12,175.4 million (2017: HK$3,825.5 million). Under the Linked Exchange Rate System in Hong Kong, Hong Kong dollar is pegged to the United States dollar, management therefore considers that there are no significant foreign exchange risk with respect to the United States dollar.

At 30 June 2018, the Group’s entities with functional currency of Hong Kong dollar had aggregate Renminbi net monetary assets of HK$3,064.8 million (2017: HK$690.8 million). If Hong Kong dollar had strengthened/weakened by 5% (2017: 5%) against Renminbi with all other variables unchanged, the Group’s profit before taxation would have been HK$153.2 million (2017: HK$34.5 million) lower/higher.

At 30 June 2018, the Group’s entities with functional currency of Renminbi had aggregate United States dollar net monetary assets of HK$188.3 million (2017: HK$253.9 million). If Renminbi had strengthened/weakened by 5% (2017: 5%) against United States dollar with all other variables unchanged, the Group’s profit before taxation would have been HK$9.4 million (2017: HK$12.7 million) lower/higher.

At 30 June 2018, the Group’s entities with functional currency of Renminbi had aggregate Hong Kong dollar net monetary liabilities of HK$423.1 million (2017: net monetary assets of HK$87.4 million). If Renminbi had strengthened/weakened by 5% (2017: 5%) against Hong Kong dollar with all other variables unchanged, the Group’s profit before taxation would have been HK$21.2 million higher/lower (2017: HK$4.4 million lower/higher).

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(a) Market risk (continued)(i) Foreign exchange risk (continued)

This sensitivity analysis ignores any offsetting foreign exchange factors and has been determined assuming that the change in foreign exchange rates had occurred at the end of the reporting period. The stated change represents management’s assessment of reasonably possible changes in foreign exchange rates over the period from the end of the reporting period until the end of next reporting period. There are no other significant monetary balances held by group companies at 30 June 2018 and 2017 that are denominated in a non-functional currency. Currency risks as defined by HKFRS 7 arise on account of monetary assets and liabilities being denominated in a currency that is not the functional currency, differences resulting from the translation of financial statements into the Group’s presentation currency are not taken into consideration.

(ii) Interest rate riskThe Group is exposed to interest rate risk through the impact of rate changes on interest bearing assets and liabilities. Cash flow interest rate risk is the risk that changes in market interest rates will impact cash flows arising from variable rate financial instruments. The Group’s interest bearing assets mainly include deposits at bank and amounts due from joint ventures and associated companies. The Group’s floating rate borrowings will be affected by fluctuation of prevailing market interest rates and will expose the Group to cash flow interest rate risk. The Group’s borrowings issued at fixed rates exposed the Group to fair value interest rate risk.

To mitigate the risk, the Group has maintained fixed and floating rate debts. To match with underlying risk faced by the Group, the level of fixed rate debt for the Group is decided after taking into consideration the potential impact of higher interest rates on profit or loss, interest cover and the cash flow cycles of the Group’s businesses and investments.

If interest rates had been 100 basis points (2017: 100 basis points) higher/lower with all other variables held constant, the Group’s profit before taxation would have been HK$231.4 million higher or HK$233.9 million lower respectively (2017: HK$259.3 million lower or HK$256.8 million higher). The sensitivity analysis has been determined assuming that the change in interest rates had occurred throughout the year and had been applied to the exposure to interest rate risk for financial instruments in existence at the end of the reporting period. The 100 basis points (2017: 100 basis points) increase or decrease represents management’s assessment of a reasonably possible change in those interest rates which have the most impact on the Group over the period until the end of next reporting period. Changes in market interest rates affect the interest income or expense of non-derivative variable-interest financial instruments. As a consequence, they are included in the calculation of profit before taxation sensitivities.

(iii) Price riskThe Group is exposed to securities price risk arising from the listed and unlisted investments held by the Group. Gains or losses arising from changes in the fair value of available-for-sale financial assets and financial assets at fair value through profit or loss are dealt with in equity and the consolidated income statement respectively. The performance of the Group’s listed and unlisted investments are monitored regularly, together with an assessment of their relevance to the Group’s strategic plans. The Group is also exposed to other price risk arising from fair value of certain interest rate swaps which is determined based on the in-house indexes of banks. Changes in fair value of these interest rate swaps are dealt with in the consolidated income statement. The Group is not exposed to commodity price risk.

At 30 June 2018, if the price of listed and unlisted investments in available-for-sale financial assets had been 25% (2017: 25%) higher with all other variables held constant, the Group’s investment revaluation reserve would have been HK$2,944.7 million (2017: HK$1,635.1 million) higher. If the price of listed and unlisted investments in available-for-sale financial assets had been 25% (2017: 25%) lower with all other variables held constant, the Group’s profit before taxation and investment revaluation reserve would have been HK$370.0 million and HK$2,574.7 million (2017: HK$345.0 million and HK$1,290.1 million) lower respectively. The sensitivity analysis has been determined based on a reasonable expectation of possible valuation volatility over the next 12 months.

At 30 June 2018, if the price of listed and unlisted investments in financial assets at fair value through profit or loss had been 25% (2017: 25%) higher/lower with all other variables held constant, the Group’s profit before taxation would have been HK$171.1 million (2017: HK$143.6 million) higher/lower. The sensitivity analysis has been determined based on a reasonable expectation of possible valuation volatility over the next 12 months.

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5 FINANCIAL RISK MANAGEMENT AND FAIR VALUE ESTIMATION (CONTINUED)

(b) Credit riskThe credit risk of the Group mainly arises from deposits with banks, trade and other debtors and balances receivable from investee companies, joint ventures, associated companies and debt securities. The exposures to these credit risks are closely monitored on an ongoing basis by established credit policies in each of its core businesses.

Bank deposits are mainly placed with high-credit-quality financial institutions. Trade debtors mainly include receivables from sale and lease of properties and other services. Loans receivable included in other non-current assets normally carry interest at rates with reference to prevailing market interest rate and are secured by collaterals. The Group carry out regular reviews and follow-up actions on any overdue amounts to minimise exposures to credit risk. There is no concentration of credit risk with respect to trade debtors from third party customers as the customer bases are widely dispersed in different sectors and industries.

In respect of credit exposures to the mortgage loans receivable, similar to other financial institutions, credit assessments are part of the normal process before approving loans to applicants. Regular review is carried out and stringent monitoring procedures are in place to deal with overdue debts. At the end of each reporting period, the Group reviews the recoverable amount of each individual receivable to ensure that adequate provisions for impairment are made for irrecoverable amounts, if any.

In addition, the Group monitors the exposure to credit risk in respect of the financial assistance provided to subsidiaries, joint ventures and associated companies through exercising control, joint control or significant influence over their financial and operating policy decisions and reviewing their financial positions on a regular basis. Investment in debt securities are limited to financial institutions or investment counterparty with high quality.

The Group provides guarantees to banks in connection with certain property purchasers’ borrowing of mortgage loans to finance their purchase of the properties until the issuance of the official property title transfer certificates by the relevant authority in the Mainland China. If a purchaser defaults on the payment of its mortgage during the term of the guarantee, the bank holding the mortgage may demand the Group to repay the outstanding amount under the loan and any accrued interest thereon. Under such circumstances, the Group is able to retain the purchaser’s deposit and sell the property to recover any amounts paid by the Group to the bank. Therefore the Group’s credit risk is significantly reduced. Nevertheless, the net realisable values of the relevant properties are subject to the fluctuation of the property market in general, the Group assesses at the end of each reporting period the liabilities based on the current estimates of future cash flows. As at 30 June 2018 and 2017, no provision on the above guarantees to banks had been made in the consolidated financial statements.

(c) Liquidity riskPrudent liquidity risk management includes managing the profile of debt maturities and funding sources, maintaining sufficient cash and marketable securities, and ensuring the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions. It is the policy of the Group to regularly monitor current and expected liquidity requirements and to ensure that adequate funding is available for operating, investing and financing activities. The Group also maintain adequate undrawn committed credit facilities to further reduce liquidity risk in meeting funding requirements.

The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period to the contractual maturity dates. The amounts disclosed in the table are the contractual undiscounted cash flows.

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(c) Liquidity risk (continued)Non-derivative financial liabilities:

Carrying amount

Total contractual

undiscounted cash flow

Within 1 year or on demand

Over 1 year but within

5 years After 5 yearsHK$m HK$m HK$m HK$m HK$m

At 30 June 2018

Creditors and accrued charges 35,790.6 35,790.6 33,749.4 2,036.2 5.0

Short-term borrowings 8,777.6 8,955.1 8,955.1 – –

Long-term borrowings 131,975.1 144,098.7 15,737.8 111,024.2 17,336.7

At 30 June 2017

Creditors and accrued charges 27,874.1 27,874.1 25,889.3 1,975.8 9.0

Short-term borrowings 6,366.7 6,499.3 6,499.3 – –

Long-term borrowings 140,753.2 157,920.5 18,803.4 112,190.9 26,926.2

Derivative financial liabilities:

Total contractual

undiscounted cash flow

Within 1 year or

on demand

Over 1 year but within

5 years After 5 yearsHK$m HK$m HK$m HK$m

At 30 June 2018

Derivative financial instruments (net settled) 152.5 91.3 11.3 49.9

At 30 June 2017

Derivative financial instruments (net settled) 298.9 139.0 126.7 33.2

There are no gross settled derivative financial liabilities as at 30 June 2018.

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

The Group generally obtains long-term financing to on-lend or contribute as equity to its subsidiaries, joint ventures and associated companies to meet their funding needs in order to provide more cost efficient financing. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, issue or repurchase shares, raise new debt financing or sell assets to reduce debt.

The Group monitors capital on the basis of the Group’s gearing ratio and makes adjustments to it in light of changes in economic conditions and business strategies. The gearing ratio is calculated as net debt divided by total equity. Net debt is calculated as total borrowings (excluding loans from non-controlling shareholders) less cash and bank balances.

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5 FINANCIAL RISK MANAGEMENT AND FAIR VALUE ESTIMATION (CONTINUED)

(d) Capital management (continued)The gearing ratios at 30 June 2018 and 2017 were as follows:

2018 2017HK$m HK$m

Consolidated total borrowings (excluding loans from non-controlling shareholders) 138,315.1 143,976.7

Less: cash and bank balances (63,456.1) (67,106.5)

Consolidated net debt 74,859.0 76,870.2

Total equity 255,181.9 220,944.5

Gearing ratio 29.3% 34.8%

(e) Fair value estimationThe Group’s financial instruments that are measured at fair value are disclosed by levels of the following fair value measurement hierarchy:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

Management determined the fair value of these available-for-sale financial assets within level 2 and level 3 as follows:

• For investments in investment funds, management discussed with the respective fund managers to understand the performance of the underlying investments and fair value measurement basis conducted by the respective fund managers in order to evaluate whether the fair values as stated in the fund statements at the end of reporting period is appropriate;

• For investments in unlisted equity and debt securities with recent transactions, management determined the fair value at the end of reporting period with reference to recent transaction prices of these financial assets; and

• For investments in unlisted equity and debt securities without recent transactions, management has established fair values of these investments by using appropriate valuation techniques. Independent external valuer has been involved in determining the fair value, where appropriate.

The carrying amounts of the financial instruments of the Group are as follows. See note 17 for disclosure relating to the investment properties which are measured at fair value.

Listed investments are stated at market prices. The quoted market price used for financial assets held by the Group is the bid price at the end of the reporting period. They are included in level 1.

Unlisted investments are stated at fair values which are estimated using other prices observed in recent transactions or valuation techniques when the market price is not readily available. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. If all significant inputs required to estimate the fair value of an instrument are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.

The fair value of long-term financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

The carrying amounts of mortgage loans receivables, which carry interest rates with reference to bank’s lending rates, approximate their fair values that are determined based on the discounted cash flow projections with reference to the lending rates from financial institutions.

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5 FINANCIAL RISK MANAGEMENT AND FAIR VALUE ESTIMATION (CONTINUED)

(e) Fair value estimation (continued)The following table presents the Group’s financial instruments that are measured at fair value at 30 June 2018:

Level 1 Level 2 Level 3 TotalHK$m HK$m HK$m HK$m

Available-for-sale financial assets 4,158.8 1,907.4 5,712.6 11,778.8

Financial assets at fair value through profit or loss – – 684.3 684.3

Derivative financial instruments

Derivative financial assets – 108.1 – 108.1

4,158.8 2,015.5 6,396.9 12,571.2

Derivative financial instruments

Derivative financial liabilities – (352.5) (13.1) (365.6)

The following table presents the Group’s financial instruments that are measured at fair value at 30 June 2017:

Level 1 Level 2 Level 3 TotalHK$m HK$m HK$m HK$m

Available-for-sale financial assets 2,558.5 1,422.5 2,559.9 6,540.9

Financial assets at fair value through profit or loss 0.1 – 574.5 574.6

Derivative financial instruments

Derivative financial assets – 13.3 58.8 72.1

2,558.6 1,435.8 3,193.2 7,187.6

Derivative financial instruments

Derivative financial liabilities – (648.5) (18.9) (667.4)

There were no significant transfer of financial assets between level 1 and level 2 fair value hierarchy classifications.

The following table presents the changes in level 3 instruments for the year ended 30 June 2018:

Available-for-sale

financial assets

Financial assets at

fair value through

profit or loss

Derivative financial

assets

Derivative financial liabilities

HK$m HK$m HK$m HK$m

At 1 July 2017 2,559.9 574.5 58.8 (18.9)

Additions 2,780.4 452.6 – –

Transfer from level 2 instruments 352.5 – – –

Net gain/(loss) recognised in the consolidated statement of comprehensive income/income statement 144.2 (109.4) 80.5 5.8

Disposals (124.4) (233.4) (139.3) –

At 30 June 2018 5,712.6 684.3 – (13.1)

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(e) Fair value estimation (continued)The following table presents the changes in level 3 instruments for the year ended 30 June 2017:

Available-for-sale financial

assets

Financial assets at fair value through

profit or loss

Derivative financial

assets

Derivative financial liabilities

HK$m HK$m HK$m HK$m

At 1 July 2016 9,688.6 695.1 58.8 (122.1)

Acquisition of subsidiaries 7.3 – – –

Additions 187.8 90.2 – –

Net gain/(loss) recognised in the consolidated statement of comprehensive income/income statement 10.5 (172.2) – 5.7

Reclassification (54.2) – – –

Disposals (7,280.1) (38.6) – 97.5

At 30 June 2017 2,559.9 574.5 58.8 (18.9)

The following unobservable inputs were used to determine the fair value of the available-for-sale financial assets included in level 3.

2018 Fair value

2017 Fair value

Valuation techniques

Unobservable inputs

Range of unobservable

inputsHK$m HK$m

Property investment industry 1,803.0 1,716.1 Net asset value (note 1) N/A N/A

Others 3,909.6 843.8 note 2

5,712.6 2,559.9

Notes:

1 The Group has determined that the reported net asset value represents fair value at the end of the reporting period.

2 Given majority of the level 3 instruments were newly acquired by the Group within six months from the end of reporting period, the fair value is determined primarily based on the purchase price paid by the Group and taking into account of the analysis of the investees’ financial position and results, risk profile, prospects, industry trend and other factors, it is not practical to quote a range of key unobservable inputs.

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6 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated by the Group and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstance.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant effect on carrying amounts of assets and liabilities are as follows:

(a) Revenue recognitionRevenue from property development activities is recognised over time when the Group’s performance does not create an asset with an alternative use to the Group and the Group has an enforceable right to payment for performance completed to date; otherwise, revenue is recognised at a point in time when the buyer obtains control of the completed property. The properties contracted for pre-sale to customers have generally no alternative use for the Group due to contractual restrictions. However, whether there is an enforceable right to payment and hence the related contract revenue should be recognised over time, depends on the terms of each contract and the relevant laws that apply to that contract. To assess the enforceability of right to payment, the Group has reviewed the terms of its contracts and the relevant local laws, considered the local regulators’ views and obtained legal advice, where necessary.

For property development revenue that is recognised over time, the Group recognises such property development revenue by reference to the progress of satisfying the performance obligation at the reporting date. This is measured based on the Group’s costs incurred up to the reporting date and budgeted costs which depict the Group’s performance towards satisfying the performance obligation. Significant estimates and judgements are required in determining the accuracy of the budgets, the extent of the costs incurred and the allocation of costs to each property unit. In making the above estimation, the Group conducts periodic review on the budgets and make reference to past experience and work of contractors and surveyors.

For property development and sales contracts for which the control of the property is transferred at a point in time, revenue is recognised when the underlying completed property unit is legally and/or physically transferred to the customer.

(b) Valuation of investment propertiesThe fair value of each completed investment property is individually determined at the end of each reporting period by independent valuers or by management based on a market value assessment. The valuers have relied on the capitalisation of income approach as their primary methods, supported by the direct comparison method. Management also determines fair value based on active market prices and adjusted if necessary for any difference in nature, location or conditions of the specific asset, and uses alternative valuation methods such as recent prices on less active markets. These methodologies are based upon estimates of future results and a set of assumptions specific to each property to reflect its tenancy and cashflow profile. The fair value of each investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in light of current market conditions. The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the property.

The fair values of investment properties under development are determined by reference to independent valuations. For majority of the Group’s investment properties under development, their fair value reflects the expectations of market participants of the value of the properties when they are completed, less deductions for the costs required to complete the projects and appropriate adjustments for profit and risk. The valuation and all key assumptions used in the valuation should reflect market conditions at the end of each reporting period. The key assumptions include value of completed properties, period of development, outstanding construction costs, finance costs, other professional costs, risk associated with completing the projects and generating income after completion and investors’ return as a percentage of value or cost.

At 30 June 2018, if the market value of investment properties had been 5% (2017: 5%) higher/lower with all other variables held constant, the carrying value of the Group’s investment properties would have been HK$7,486.4 million (2017: HK$5,288.0 million) higher/lower.

(c) Recoverability of properties for/under development and properties held for saleThe Group assesses the carrying amounts of properties for/under development and properties held for sale according to their estimated net realisable value based on the realisability of these properties, taking into account construction costs to completion based on the existing development plans and the estimation of selling prices of the properties of comparable locations and conditions. Provision is made when events or changes in circumstances indicate that the carrying amounts may not be realised. The assessment requires the use of significant estimates.

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(d) Impairment of interests in joint ventures and associated companiesThe Group determines whether interests in joint ventures and associated companies are impaired by regularly review whether there are any indicators of impairment of the investments by reference to the requirements under HKAS 28 (2011) “Investments in Associates and Joint Ventures” and HKAS 36 “Impairment of Assets”.

For investments where impairment indicators exist, management estimated the recoverable amounts of the investments, being higher of fair value less costs of disposal and value in use. The value in use of the underlying businesses is determined based on the discounted cash flow projections. Significant judgements are required to determine the key assumptions used in the discounted cash flow models, such as revenue growth, unit price and discount rates. Independent external valuers were also involved in the fair value and value in use assessments, where appropriate. For the strategic investment funds held by the Group’s associated companies, management carried out impairment assessments of available-for-sale financial assets and loans and receivables held by these associated companies. Based on the results of these impairment assessments, impairment losses were recognised for the underlying assets of those joint ventures and the Group’s share of such impairment losses, in aggregate, of HK$600.0 million, which have been included in the Group’s share of results of joint ventures for the year ended 30 June 2018 (2017: nil).

(e) Impairment of assetsThe Group tests annually whether goodwill has suffered any impairment according to their recoverable amounts determined by the cash-generating units based on value in use calculations. These calculations require the use of estimates which are subject to change of economic environment in future. Details are set out in note 21.

The Group determines whether an available-for-sale financial asset is impaired by evaluating whether there is significant or prolonged decline in the fair value below its cost.

The Group assesses whether there is objective evidence as stated in note 3(j) that deposits, loans and receivables are impaired. It recognises impairment based on estimates of the extent and timing of future cash flows using applicable discount rates. The final outcome of the recoverability and cash flows of these receivables will impact the amount of impairment required.

(f) Fair value of available-for-sale financial assets and financial assets at fair value through profit or lossThe fair value of available-for-sale financial assets and financial assets at fair value through profit or loss that are not traded in an active market is determined by using valuation techniques. The Group uses its judgement to select a variety of methods and evaluates, among other factors, whether there is significant or prolonged decline in the fair value below the cost of an investment; and the financial health and short-term business outlook for the investee and historical price volatility of these investments. The key assumptions adopted on projected cashflow are based on management’s best estimates.

(g) Estimate of revenue for construction contractsFor revenue from construction work that is recognised over time, the Group recognised such revenue by reference to the progress of satisfying the performance obligation at the reporting date. This is measured based on the Group’s costs incurred up to the reporting date and budgeted costs which depict the Group’s performance towards satisfying the performance obligation. Significant estimates and judgements are required in determining the accuracy of the budgets. In making the above estimation, the Group conducts periodic review on the budgets and makes reference to past experience and work of internal quantity surveyors.

(h) Estimated volume of infrastructures of public servicesThe amortisation for intangible concession rights and impairment assessment of infrastructures for public services using discounted cash flow model are affected by the estimated volume for public services, such as toll roads. Management performs annual reviews to assess the appropriateness of estimated volume by making reference to independent professional studies, if necessary.

The traffic volume is directly and indirectly affected by a number of factors, including the availability, quality, proximity and toll rate differentials of alternative roads and the existence of other means of transportation. The growth of the traffic flow is also highly tied to the future economic and transportation network development of the area in which the infrastructures serve. The growth in future traffic flow projected by the management is highly dependent on the realisation of the aforementioned factors.

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(i) Distinction between property development projects, investment properties and owner-occupied propertiesWhen the Group determines whether a property qualifies as an investment property, the Group considers whether the property generates cash flows largely independently of the other assets held by an entity. Owner-occupied properties generate cash flows that are attributable not only to property but also to other assets used in the production or supply process. Properties for/under development and properties held for sale are assets under development and held for sale in the ordinary course of business. The Group shall reclassifies a property when, and only when, there is evidence of a change in use.

Some properties comprise a portion that is held to earn rentals or for capital appreciation and another portion that is held for use in the production or supply of goods or services or for administrative purposes. If these portions can be sold or leased out separately, the Group accounts for the portions separately. If the portions cannot be sold separately, the property is accounted as an investment property only if an insignificant portion is held for use in the production or supply of goods or services or for administrative purposes. Judgement is applied in determining whether ancillary services are so significant that a property does not qualify as investment property. The Group considers each property separately in making its judgement.

7 REVENUES AND SEGMENT INFORMATION

Revenues recognised during the year are as follows:

2018 2017HK$m HK$m

Revenues

Property sales 23,380.8 25,968.0

Rental 3,109.9 2,410.9

Contracting 15,488.2 11,201.0

Provision of services 10,423.5 9,354.5

Infrastructure operations 2,814.6 2,410.6

Hotel operations 1,479.0 1,422.2

Department store operations 3,670.9 3,389.0

Others 321.8 472.6

Total 60,688.7 56,628.8

The Executive Committee of the Company, being the chief operating decision-maker, determines and reviews the Group’s internal reporting in order to assess performance and allocate resources. The operating segments are determined based on the afore-mentioned internal reporting and are reviewed occasionally. The Executive Committee considers the business from product and service perspectives, which comprises property development, property investment, service (including facilities management, construction & transport and strategic investments), infrastructure (including roads, environment, logistics and aviation), hotel operations, department stores and others (including media and technology and other strategic businesses) segments.

The Executive Committee assesses the performance of the operating segments based on each segment’s operating profit. The measurement of segment operating profit excludes the effect of unallocated corporate expenses. In addition, financing income, financing costs and taxation are not allocated to segments.

Sales between segments are carried out in accordance with terms agreed by the parties involved.

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Property development

Property investment Service

Infra-structure

Hotel operations

Department stores Others Consolidated

HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m

2018

Total revenues 23,949.6 3,312.5 34,449.0 2,814.6 1,479.0 3,671.3 450.0 70,126.0

Inter-segment (568.8) (202.6) (8,537.3) – – (0.4) (128.2) (9,437.3)

Revenues – external 23,380.8 3,109.9 25,911.7 2,814.6 1,479.0 3,670.9 321.8 60,688.7

Revenues from contracts with customers:

— Recognised at a point in time 22,783.8 – 7,763.3 2,814.6 544.6 3,670.9 216.4 37,793.6

— Recognised over time 597.0 – 18,148.4 – 934.4 – 105.4 19,785.2

23,380.8 – 25,911.7 2,814.6 1,479.0 3,670.9 321.8 57,578.8

Revenues from other source:

— Rental income – 3,109.9 – – – – – 3,109.9

23,380.8 3,109.9 25,911.7 2,814.6 1,479.0 3,670.9 321.8 60,688.7

Segment results 9,164.0 1,628.0 645.5 1,309.1 (109.3) 233.0 (179.4) 12,690.9

Other gains, net (note (a)) 1,804.6 364.6 (38.7) 1,959.8 216.4 (153.5) (19.8) 4,133.4

Changes in fair value of investment properties – 15,273.5 93.6 – – – – 15,367.1

Unallocated corporate expenses (1,216.1)

Operating profit 30,975.3

Financing income 1,475.2

Financing costs (2,179.5)

30,271.0

Share of results of

Joint ventures (note (b)) 264.7 451.0 152.8 1,183.4 32.8 – (198.5) 1,886.2

Associated companies 46.8 373.2 60.1 708.9 – (0.6) 8.0 1,196.4

Profit before taxation 33,353.6

Taxation (6,272.4)

Profit for the year 27,081.2

Segment assets 113,922.6 156,462.2 22,982.2 18,000.8 15,824.5 5,093.5 11,011.5 343,297.3

Interests in joint ventures 14,835.6 10,639.1 3,511.8 11,668.2 5,622.5 – 2,858.6 49,135.8

Interests in associated companies 6,360.3 4,412.5 5,618.0 8,084.6 – 1.6 231.2 24,708.2

Unallocated assets 64,313.5

Total assets 481,454.8

Segment liabilities 42,945.1 2,947.4 13,440.7 781.0 477.5 3,443.6 1,839.0 65,874.3

Unallocated liabilities 160,398.6

Total liabilities 226,272.9

Additions to non-current assets (note (d)) 4,989.4 15,336.5 829.7 23.7 2,692.2 659.1 109.5 24,640.1

Depreciation and amortisation 71.8 31.2 787.6 904.2 362.5 280.6 45.6 2,483.5

Impairment charge and provision – – 80.4 – – 153.0 303.2 536.6

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Property development

Property investment Service

Infra-structure

Hotel operations

Department stores Others Consolidated

HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m(note (c))

2017

Total revenues 26,134.1 2,585.9 30,249.4 2,410.6 1,422.2 3,391.1 564.4 66,757.7

Inter-segment (166.1) (175.0) (9,693.9) – – (2.1) (91.8) (10,128.9)

Revenues – external 25,968.0 2,410.9 20,555.5 2,410.6 1,422.2 3,389.0 472.6 56,628.8

Segment results 7,419.6 1,377.7 774.9 1,166.6 (52.0) 220.0 225.5 11,132.3

Other gains, net (40.8) 213.5 314.3 663.3 – (97.7) (624.0) 428.6

Changes in fair value of investment properties – 1,246.7 117.1 – – – – 1,363.8

Unallocated corporate expenses (1,173.4)

Operating profit 11,751.3

Financing income 1,705.9

Financing costs (2,152.0)

11,305.2

Share of results of

Joint ventures (26.3) 428.8 269.9 1,546.3 (27.4) – (161.6) 2,029.7

Associated companies 113.5 167.9 983.2 600.1 – – 30.7 1,895.4

Profit before taxation 15,230.3

Taxation (4,755.6)

Profit for the year 10,474.7

Segment assets 117,055.7 108,476.1 18,048.9 15,191.8 17,549.5 5,182.7 11,912.9 293,417.6

Interests in joint ventures 11,754.9 13,271.9 3,308.7 11,957.4 5,873.4 – 3,151.1 49,317.4

Interests in associated companies 5,979.4 3,996.0 6,819.9 9,373.1 – – 233.4 26,401.8

Unallocated assets 67,919.5

Total assets 437,056.3

Segment liabilities 31,902.8 1,108.9 12,058.8 618.9 474.7 3,488.2 1,840.3 51,492.6

Unallocated liabilities 164,619.2

Total liabilities 216,111.8

Additions to non-current assets (note (d)) 2,845.8 14,295.1 5,301.2 37.6 2,963.6 164.5 919.1 26,526.9

Depreciation and amortisation 58.5 31.6 390.8 822.1 276.3 294.1 79.1 1,952.5

Impairment charge and provision 101.2 – 34.1 – – 90.3 243.1 468.7

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7 REVENUES AND SEGMENT INFORMATION (CONTINUED)

RevenuesNon-current

assetsHK$m HK$m

(note (d))

2018

Hong Kong 33,397.2 132,470.3

Mainland China 26,234.0 82,742.2

Others 1,057.5 1,385.3

60,688.7 216,597.8

2017

Hong Kong 29,978.6 97,141.0

Mainland China 25,958.8 74,391.1

Others 691.4 300.9

56,628.8 171,833.0

Notes:

(a) On 11 January 2018, Fortland Ventures Limited (an indirect wholly owned subsidiary of NWS Holdings Limited (“NWSH”), a subsidiary of the Group) entered into a placing agreement for the placing of 208,000,000 issued H shares of Beijing Capital International Airport Co., Ltd (“BCIA”) at the placing price of HK$11.35 per share (the “Placing”). Closing of the Placing took place on 16 January 2018 and thereafter, the NWSH’s interest in BCIA’s total issued H shares reduced from approximately 23.86% to approximately 12.79%. A gain on disposal under the Placing of HK$783.8 million was recognised during the year. Subsequently, an executive director of NWSH resigned as a non-executive director and a member of the strategy committee of BCIA on 2 February 2018. As a result, NWSH ceased to exercise significant influence on BCIA and its interest in BCIA was reclassified from investment in an associated company to an available-for-sale financial asset with effect from 2 February 2018 with its carrying value marked to its market value on 2 February 2018. Pursuant to HKAS 39 “Financial Instruments: Recognition and Measurement”, a gain on the remeasurement at fair value upon reclassification amounting to HK$1,095.5 million was recognised during the year.

(b) For the year ended 30 June 2018, the share of results of joint ventures in the infrastructure segment included share of impairment losses for the underlying assets for Guangzhou City Nansha Port Expressway of HK$300.0 million, share of impairment losses for the underlying assets for Guangzhou Dongxin Expressway of HK$100.0 million and share of impairment losses for the underlying assets for Guodian Chengdu Jintang Power Generation Co., Ltd of HK$200.0 million.

(c) For the year ended 30 June 2017, the segment results of the service segment included gain on disposal of the entire interest in Tricor Holdings Limited of HK$932.8 million, and losses in relation to the Group’s interest in Newton Resources Ltd including share of impairment loss of HK$204.0 million, loss on partial disposal of HK$52.3 million and loss on remeasurement of HK$34.3 million.

(d) Non-current assets represent non-current assets other than financial instruments, interests in joint ventures, interests in associated companies and deferred tax assets.

(e) For the year ended 30 June 2018, the operating profit before depreciation and amortisation, changes in fair value of investment properties and other gains, net and after net exchange difference amounted to HK$13,894.0 million, of which HK$4,450.5 million was attributable to Hong Kong and HK$9,443.5 million was attributable to Mainland China and others.

8 OTHER INCOME

2018 2017HK$m HK$m

Dividend income from available-for-sale financial assets, perpetual securities and financial assets at fair value through profit or loss 137.3 528.8

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9 OTHER GAINS, NET

2018 2017HK$m HK$m

Gain/(loss) on remeasurement of an available-for-sale financial asset retained at fair value upon reclassification from an associated company (note 7(a)) 1,095.5 (34.3)

Gain on deemed disposal of interests in joint ventures – 546.9

Gain on remeasurement of previously held interests of joint ventures at fair value upon further acquisition to become subsidiaries – 374.2

Net gain/(loss) on fair value of financial assets at fair value through profit or loss 91.3 (236.7)

Net gain/(loss) on disposal of

Associated companies (note 7(a)) 850.1 74.2

Available-for-sale financial assets 114.9 110.2

Financial assets at fair value through profit or loss 7.8 69.2

Investment properties, property, plant and equipment and intangible concession rights 232.4 167.8

Joint ventures – 133.7

Non-current assets classified as assets held for sale – 244.2

Perpetual securities – (116.4)

Subsidiaries (note (a)) 1,821.0 (127.2)

Write back of provision for loans and other receivables 90.3 124.8

Reversal of other payables 431.0 –

Impairment loss on

Available-for-sale financial assets (27.3) (139.2)

Intangible assets (192.9) (48.4)

Loans and other receivables (220.3) (231.3)

Property, plant and equipment (96.1) (49.8)

Net exchange losses (64.3) (433.3)

4,133.4 428.6

Notes:

(a) The subsidiaries being disposed during the year were mainly engaged in property development, property investment and hotel operations.

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10 OPERATING PROFIT

Operating profit of the Group is arrived at after crediting/(charging) the following:

2018 2017HK$m HK$m

Gross rental income from investment properties 3,018.3 2,244.4

Outgoings (921.1) (629.5)

2,097.2 1,614.9

Cost of inventories sold (16,203.6) (19,706.7)

Cost of services rendered (21,978.3) (17,239.4)

Depreciation of property, plant and equipment (1,503.4) (1,035.3)

Amortisation

Land use rights (50.5) (64.4)

Intangible concession rights (877.8) (802.2)

Intangible assets (51.8) (50.6)

Operating lease rental expense

Land and buildings (1,524.3) (1,258.6)

Staff costs (note 15(a)) (8,812.2) (6,810.7)

Auditors’ remuneration

Audit services (64.1) (59.2)

Non-audit services (8.8) (8.6)

11 FINANCING COSTS

2018 2017HK$m HK$m

Interest on bank loans and overdrafts 3,059.1 2,897.9

Interest on fixed rate bonds and notes payable 2,105.5 2,335.1

Interest on loans from non-controlling shareholders 27.5 19.0

Total borrowing costs incurred 5,192.1 5,252.0

Capitalised as (note):

Cost of properties for/under development (1,851.2) (2,319.4)

Cost of assets under construction and investment properties under development (1,161.4) (780.6)

2,179.5 2,152.0

Note:

To the extent funds are borrowed generally and used for the purpose of financing certain properties for/under development, assets under construction and investment properties under development, the capitalisation rate used to determine the amounts of borrowing costs eligible for the capitalisation is 3.9% (2017: 3.6%) per annum.

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12 TAXATION

2018 2017HK$m HK$m

Current taxation

Hong Kong profits tax 751.9 704.1

Mainland China and overseas taxation 2,370.3 1,606.3

Mainland China land appreciation tax 3,187.1 2,085.5

Deferred taxation (note 27)

Valuation of investment properties 206.8 246.3

Other temporary differences (243.7) 113.4

6,272.4 4,755.6

Hong Kong profits tax has been provided at the rate of 16.5% (2017: 16.5%) on the estimated assessable profit for the year.

Taxation on Mainland China and overseas profits has been calculated on the estimated taxable profit for the year at the rates of taxation prevailing in the countries in which the Group operates. These rates range from 12% to 25% (2017: 12% to 25%).

Mainland China land appreciation tax is provided at progressive rates ranging from 30% to 60% (2017: 30% to 60%) on the appreciation of land value, being the proceeds of sale of properties less deductible expenditures including costs of land use rights and property development expenditures.

Share of results of joint ventures and associated companies is stated after deducting the share of taxation of joint ventures and associated companies of HK$626.0 million and HK$161.3 million (2017: HK$779.5 million and HK$263.0 million) respectively.

The taxation on the Group’s profit before taxation differs from the theoretical amount that would arise using the taxation rate of Hong Kong as follows:

2018 2017HK$m HK$m

Profit before taxation and share of results of joint ventures and associated companies 30,271.0 11,305.2

Calculated at a taxation rate of 16.5% (2017: 16.5%) 4,994.7 1,865.4

Effect of different taxation rates in other countries 941.6 742.8

Income not subject to taxation (3,131.4) (1,200.2)

Expenses not deductible for taxation purposes 903.8 955.6

Tax losses not recognised 311.9 374.9

Temporary differences not recognised 40.1 400.2

Utilisation of previously unrecognised tax losses (56.0) (67.0)

Deferred taxation on undistributed profits 201.4 292.6

Recognition of previously unrecognised temporary differences 8.7 2.5

Recognition of previously unrecognised tax losses (124.3) (125.8)

Over-provision in prior years (210.7) (44.5)

Land appreciation tax deductible for calculation of income tax purposes (796.5) (521.1)

Others 2.0 (5.3)

3,085.3 2,670.1

Mainland China land appreciation tax 3,187.1 2,085.5

Taxation charge 6,272.4 4,755.6

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13 EARNINGS PER SHARE

The calculation of basic and diluted earnings per share for the year is based on the following:

2018 2017HK$m HK$m

Profit attributable to shareholders of the Company for calculating basic earnings per share 23,338.1 7,675.7

Adjustment on the effect of dilution in the results of subsidiaries (2.1) –

Profit attributable to shareholders of the Company for calculating diluted earnings per share 23,336.0 7,675.7

Number of shares (million)2018 2017

Weighted average number of shares for calculating basic earnings per share 9,974.0 9,553.2

Effect of dilutive potential ordinary shares upon the exercise of share options 24.7 10.9

Weighted average number of shares for calculating diluted earnings per share 9,998.7 9,564.1

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares (2017: Same).

14 DIVIDENDS

2018 2017HK$m HK$m

Interim dividend of HK$0.14 (2017: HK$0.13) per share 1,414.1 1,258.8

Final dividend proposed of HK$0.34 (2017: HK$0.33) per share 3,470.4 3,244.7

4,884.5 4,503.5

Of which the following were settled by the issue of scrip:

Interim dividend 1,175.4 1,056.3

Final dividend # 2,626.7

# Full amount had been set aside from retained profits for the 2018 proposed final dividend on the basis that all shareholders would elect to receive cash being the alternative to their entitlements to the scrip dividends.

At a meeting held on 20 September 2018, the Directors recommended a final dividend of HK$0.34 per share. This proposed dividend was not reflected as a dividend payable in these financial statements, but will be reflected as an appropriation of retained profits for the year ending 30 June 2019.

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15 STAFF COSTS

(a) Staff costs

2018 2017HK$m HK$m

Wages, salaries and other benefits 10,180.0 8,283.8

Pension costs – defined benefit plans 24.0 4.0

Pension costs – defined contribution plans 353.6 296.2

Share options (note (b)) 57.2 56.6

10,614.8 8,640.6

Less: Amounts capitalised in investment properties under development, assets under construction and properties for/under development (1,802.6) (1,829.9)

8,812.2 6,810.7

Staff costs include directors’ remuneration.

(b) Share optionsDuring the year, the Company and its subsidiary, NWSH, operate share option schemes whereby options may be granted to eligible employees and directors, to subscribe for shares of the Company and NWSH respectively.

Details of share options are as follows:

Grantor Date of grant Exercise price HK$

At 1 July 2017

Granted Exercised Lapsed/cancelled

At 30 June 2018

Number of share options

exercisable as at

30 June 2018

Note

The Company 22 January 2014 to 3 July 2017 7.2 to 10.4 129,691,419 53,450,000 (53,197,038) (4,658,690) 125,285,691 63,522,436 (i)

Weighted average exercise price of each category (HK$) – 8.486 10.036 9.214 9.187 8.812 8.427

NWSH 9 March 2015 14.120 49,455,830 – (8,214,363) (74) 41,241,393 41,241,393 (ii)

Weighted average exercise price of each category (HK$) – 14.120 – 14.120 14.120 14.120 14.120

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15 STAFF COSTS (CONTINUED)

(b) Share options (continued)Notes:

(i) A share option scheme was adopted by the Company on 24 November 2006 and amended on 13 March 2012 which will be valid and effective for a period of ten years from the date of adoption. On 22 January 2014, 27 October 2014, 7 July 2015, 9 March 2016 and 10 June 2016, 30,100,000, 34,400,000, 20,100,000, 20,200,000 and 68,037,928 share options were granted to Directors and certain eligible participants at the exercise price of HK$10.400, HK$9.510, HK$9.976, HK$7.200 and HK$7.540 per share respectively.

A share option scheme was adopted by the Company on 22 November 2016 which will be valid and effective for a period of ten years from the date of adoption. On 3 July 2017, 53,450,000 share options were granted to Directors and certain eligible participants at the exercise price of HK$10.036 per share.

The share options granted on 22 January 2014 were divided into 4 tranches exercisable from 22 January 2014, 22 January 2015, 22 January 2016 and 22 January 2017 respectively to 21 January 2018.

The share options granted on 27 October 2014 were divided into 4 tranches exercisable from 27 October 2014, 27 October 2015, 27 October 2016 and 27 October 2017 respectively to 26 October 2018.

The share options granted on 7 July 2015 were divided into 4 tranches exercisable from 7 July 2015, 7 July 2016, 7 July 2017 and 7 July 2018 respectively to 6 July 2019.

The share options granted on 9 March 2016 were divided into 4 tranches exercisable from 9 March 2016, 9 March 2017, 9 March 2018 and 9 March 2019 respectively to 8 March 2020.

The share options granted on 10 June 2016 were divided into 4 tranches exercisable from 10 June 2016, 10 June 2017, 10 June 2018 and 10 June 2019 respectively to 9 June 2020.

The share options granted on 3 July 2017 were divided into 4 tranches exercisable from 3 July 2017, 3 July 2018, 3 July 2019 and 3 July 2020 respectively to 2 July 2021.

For the year ended 30 June 2018, the weighted average share price at the time of exercise was HK$11.571 per share (2017: HK$10.128 per share).

(ii) The share option scheme of NWSH, which was adopted on 21 November 2011, is valid and effective for a period of ten years from the date of adoption. The Board may, at their discretion, grant options to any eligible participant as defined under the share option scheme to subscribe for the shares of NWSH. The total number of shares which may be issued upon exercise of all options to be granted under the share option scheme must not in aggregate exceed 10% of the share capital of NWSH in issue as at 21 November 2011, i.e. 3,388,900,598 shares.

On 9 March 2015, 55,470,000 share options were granted to directors and certain eligible participants at the exercise price of HK$14.160 per share, which represents the average closing price of NWSH’s shares in the daily quotations sheets of the Hong Kong Stock Exchange for the five trading days immediately preceding 9 March 2015. Such share options will expire on 8 March 2020.

Pursuant to the Share Option Scheme, the number of unexercised share options and the exercise price may be subject to adjustment in case of alteration in the capital structure of NWSH. Due to the distribution of dividends of NWSH in scrip form, several adjustments had been made to the number and the exercise price of outstanding share options in accordance with the Share Option Scheme in prior years. With effect from 15 May 2017, the exercise price per share for the share options granted was adjusted to HK$14.120.

The share options were vested according to the Share Option Scheme and the terms of grant provided that for the vesting to occur the grantee has to remain as an eligible participant on such vesting date.

(iii) The Binomial pricing model requires input of subjective assumptions such as the expected stock price volatility. Change in the subjective input may materially affect the fair value estimates.

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15 STAFF COSTS (CONTINUED)

(c) Five highest paid individualsThe five individuals whose emoluments were the highest in the Group for the year include 4 directors (2017: 3 directors) whose emoluments are reflected in the analysis shown in Note 16(a). The emoluments to the remaining 1 (2017: 2) individual during the year are as follows:

2018 2017HK$m HK$m

Salaries and other emoluments 15.5 31.7

Employer’s contributions to retirement benefit schemes 0.6 1.2

Share options 0.7 0.2

16.8 33.1

The emoluments of the individuals fell within the following bands:

Number of individuals2018 2017

Emolument band (HK$)

15,500,001–16,000,000 – 1

16,500,001–17,000,000 1 –

17,000,001–17,500,000 – 1

1 2

(d) Emoluments of senior managementOther than the emoluments of directors and five highest paid individuals disclosed in note 16(a) and note 15(c) respectively, the emoluments of the senior management whose profiles are included in Directors’ Profile/Senior Management Profile sections of this report fell within the following bands:

Number of individuals2018 2017

Emolument band (HK$)

5,000,001–5,500,000 – 3

5,500,001–6,000,000 2 –

11,500,001–12,000,000 – 1

2 4

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16 BENEFITS AND INTERESTS OF DIRECTORS

(a) Directors’ emoluments

As director (note(i))

Name of Directors

Fees SalariesDiscretionary

bonuses

Estimated money value

of other benefits

(note (iii))

Employer’s contribution to

a retirement benefit scheme

As management (note (ii)) Total

HK$m HK$m HK$m HK$m HK$m HK$m HK$m

Year ended 30 June 2018

Dr. Cheng Kar-Shun, Henry 1.7 – – 3.1 – 52.5 57.3

Mr. Doo Wai-Hoi, William 0.3 – – 0.1 – – 0.4

Dr. Cheng Chi-Kong, Adrian 0.5 – – 2.6 – 36.1 39.2

Mr. Yeung Ping-Leung, Howard 0.6 – – 0.2 – – 0.8

Mr. Cha Mou-Sing, Payson 0.7 – – 0.2 – – 0.9

Mr. Cheng Kar-Shing, Peter 0.4 7.3 1.6 0.2 0.7 – 10.2

Mr. Ho Hau-Hay, Hamilton 0.7 – – 0.2 – – 0.9

Mr. Lee Luen-Wai, John 0.7 – – 0.2 – – 0.9

Mr. Liang Cheung-Biu, Thomas 0.6 – – 0.2 – – 0.8

Mr. Ip Yuk-Keung 0.1 – – – – – 0.1

Ms. Ki Man-Fung, Leonie 0.3 – – 0.8 – 7.8 8.9

Mr. Cheng Chi-Heng 0.3 – – 0.2 – 2.2 2.7

Ms. Cheng Chi-Man, Sonia 0.3 – – 0.8 – 14.8 15.9

Mr. Au Tak-Cheong 0.5 – – 0.3 – 8.6 9.4

Mr. Sitt Nam-Hoi 0.1 – – 0.3 – 13.6 14.0

Mr. So Chung-Keung, Alfred 0.1 – – 0.5 – 16.8 17.4

Total 7.9 7.3 1.6 9.9 0.7 152.4 179.8

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16 BENEFITS AND INTERESTS OF DIRECTORS (CONTINUED)

(a) Directors’ emoluments (continued)

As director (note(i))

Name of Directors

Fees SalariesDiscretionary

bonuses

Estimated money value

of other benefits

(note (iii))

Employer’s contribution to

a retirement benefit scheme

As management (note (ii)) Total

HK$m HK$m HK$m HK$m HK$m HK$m HK$m

Year ended 30 June 2017

Dr. Cheng Kar-Shun, Henry 1.5 – – 3.7 – 50.0 55.2

Mr. Doo Wai-Hoi, William 0.3 – – 0.2 – – 0.5

Dr. Cheng Chi-Kong, Adrian 0.5 – – 2.1 – 30.6 33.2

Mr. Yeung Ping-Leung, Howard 0.7 – – 0.1 – – 0.8

Mr. Cha Mou-Sing, Payson 0.8 – – 0.1 – – 0.9

Mr. Cheng Kar-Shing, Peter 0.3 7.0 1.6 0.1 0.7 – 9.7

Mr. Ho Hau-Hay, Hamilton 0.7 – – 0.1 – – 0.8

Mr. Lee Luen-Wai, John 0.8 – – 0.1 – – 0.9

Mr. Liang Cheung-Biu, Thomas 0.6 – – 0.1 – – 0.7

Ms. Ki Man-Fung, Leonie 0.4 – – 0.8 – 7.2 8.4

Mr. Cheng Chi-Heng 0.4 – – 0.1 – 2.1 2.6

Mr. Chen Guanzhan 0.4 – – 0.9 – 5.4 6.7

Ms. Cheng Chi-Man, Sonia 0.4 – – 0.8 – 12.7 13.9

Mr. Au Tak-Cheong 0.5 – – 0.5 – 7.9 8.9

Total 8.3 7.0 1.6 9.7 0.7 115.9 143.2

Notes:

(i) The amounts represented emoluments paid or receivable in respect of a person’s services as a director, whether of the Company or its subsidiary undertakings.

(ii) The amounts represented emoluments paid or receivable in respect of a person’s other services in connection with the management of the affairs of the Company or its subsidiary undertakings and included salaries, discretionary bonuses, employer’s contributions to retirement benefit schemes and housing allowance.

(iii) Other benefits represented share options. The value of the share options granted to the directors of the Company under the share option schemes of the Company and its subsidiaries represents the fair value of these options charged to the consolidated income statement for the year in accordance with HKFRS 2.

(iv) No director waived or agreed to waive any emoluments during the year.

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16 BENEFITS AND INTERESTS OF DIRECTORS (CONTINUED)

(b) Directors’ material interests in transactions, arrangements or contractsOn 10 April 2017, a master services agreement (the “Mr. Doo MSA”) was entered into between the Company and Mr. Doo Wai-Hoi, William, Non‐executive Vice-chairman (“Mr. Doo”) for a term of three years commencing from 1 July 2017 up to and including 30 June 2020 in respect of the provision of the operational and rental services by companies owned by Mr. Doo to the Group, and vice versa. Subject to compliance with the relevant requirements under the Listing Rules, upon expiration of the initial term or subsequent renewal term, the Mr. Doo MSA will be automatically renewed for a successive period of three years thereafter (or such other period permitted under the Listing Rules). The Mr. Doo MSA and the annual caps set for each of the three financial years ending 30 June 2020 were approved by the independent shareholders of the Company on 26 May 2017. For the year ended 30 June 2018, the aggregate amount of the transactions amounted to approximately HK$1,728.3 million (2017: HK$1,419.7 million).

On 27 October 2017, New World Development (China) Limited (“NWD (China)”), an indirectly wholly owned subsidiary of the Group, entered into a Sales and Purchase Agreement with Oriental Triumph Inc. (“Oriental Triumph”), a wholly owned company of Mr. Doo, with regards to the sales of the entire issue share capital of Ramada Property Ltd., which together with its subsidiaries own and operate the Shanghai Ramada Plaza, New World Shanghai Hotel and pentahotel Shanghai, from NWD (China) to Oriental Triumph, at a consideration of RMB1.85 billion (equivalent to approximately HK$2.2 billion), subject to customary closing adjustment, which was completed on 28 March 2018.

Save as mentioned above, no other significant transactions, arrangements or contracts in relation to the Group’s business to which the Company was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.

17 INVESTMENT PROPERTIES

2018 2017HK$m HK$m

Completed investment properties 86,254.8 61,936.3

Investment properties under development 63,472.9 43,824.1

149,727.7 105,760.4

Completed investment properties

Investment properties

under development Total

HK$m HK$m HK$m

At 1 July 2017 61,936.3 43,824.1 105,760.4

Translation differences 1,042.2 441.3 1,483.5

Acquisition of subsidiaries 7,083.5 – 7,083.5

Disposal of subsidiaries (539.6) – (539.6)

Additions 387.5 6,761.4 7,148.9

Transfer between investment properties, property, plant and equipment and land use rights 134.5 7,255.0 7,389.5

Transfer between investment properties, properties under development and properties held for sale 79.6 7,712.5 7,792.1

Transfer between investment properties and non-current assets classified as assetsheld for sale (252.5) (568.2) (820.7)

Disposals (937.0) – (937.0)

Changes in fair value 4,586.9 10,780.2 15,367.1

Transfer upon completion 12,733.4 (12,733.4) –

At 30 June 2018 86,254.8 63,472.9 149,727.7

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17 INVESTMENT PROPERTIES (CONTINUED)

Completed investment properties

Investment properties

under development Total

HK$m HK$m HK$m

At 1 July 2016 53,385.3 33,211.7 86,597.0

Translation differences (362.5) (115.1) (477.6)

Acquisition of a subsidiary 1,800.9 – 1,800.9

Disposal of subsidiaries (297.1) – (297.1)

Additions 740.1 11,833.9 12,574.0

Transfer between investment properties, property, plant and equipment and land use rights 1,487.2 – 1,487.2

Transfer between investment properties, properties under development and properties held for sale 3,368.9 69.2 3,438.1

Transfer between investment properties and non-current assets classified as assets held for sale (130.7) – (130.7)

Disposals (595.2) – (595.2)

Changes in fair value 2,330.7 (966.9) 1,363.8

Transfer upon completion 208.7 (208.7) –

At 30 June 2017 61,936.3 43,824.1 105,760.4

Valuation processes of the GroupThe Group measures its investment properties at fair value. The investment properties were revalued by Jones Lang LaSalle Corporate Appraisal and Advisory Limited, Savills Valuation and Professional Services Limited, and Knight Frank Petty Limited, independent qualified valuers, who hold recognised relevant professional qualification and have recent experience in the locations and segments of the investment properties valued, at 30 June 2018 on an open market value basis. For all investment properties, their current use equates to the highest and best use.

The Group’s finance department includes a team that reviews the valuation performed by the independent valuers for financial reporting purposes. This team reports directly to the senior management and the Audit Committee. Discussions of valuation processes and results are held between the management and valuers at least once every six months, in line with the Group’s interim and annual reporting dates.

At each financial year end, the finance department verifies all major inputs to the independent valuation reports; assesses property valuation movements when compared to the prior year valuation reports; and holds discussions with the independent valuers.

Valuation techniquesFair value of completed investment properties for commercial, residential and carparks in Hong Kong and Mainland China is generally derived using the income capitalisation method and wherever appropriate, by direct comparison method. Income capitalisation method is based on capitalisation of the net income and reversionary income potential by adopting appropriate capitalisation rates, which are derived from analysis of sale transactions and valuers’ interpretation of prevailing investor requirements or expectations. The prevailing market rents adopted in the valuation have reference to recent lettings, within the subject properties and other comparable properties.

Direct comparison method is based on comparing the property to be valued directly with other comparable properties, which have recently transacted. However, given the heterogeneous nature of real estate properties, appropriate adjustments are usually required to allow for any qualitative differences that may affect the price likely to be achieved by the property under consideration.

Fair value of commercial properties and carpark under development is generally derived using the residual method and wherever appropriate, by direct comparison method. Residual method is essentially a means of valuing the completed properties by reference to its development potential by deducting development costs together with developer’s profit and risk from the estimated capital value of the proposed development assuming completed as at the date of valuation.

As at 30 June 2018 and 2017, all investment properties are included in level 3 in the fair value hierarchy.

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17 INVESTMENT PROPERTIES (CONTINUED)

Valuation techniques (Continued)There were no changes to the valuation techniques during the year and there were no transfers among the fair value hierarchy during the year.

Information about fair value measurements using significant unobservable inputs:

Range of significant unobservable inputs

2018 Fair value

HK$mValuation

techniquesPrevailing market

rent per month Unit priceCapitalisation

rate

Completed investment properties

Hong Kong

Commercial 45,399.8 Income capitalisation

HK$23 – HK$400 per square feet

N/A 1.5% – 5.3%

Carparks 2,862.0 Income capitalisation

HK$2,730 – HK$6,500 per carpark space

N/A 3.5% – 4.2%

Mainland China and others

Commercial 29,166.0 Income capitalisation

HK$13 – HK$261 per square metre

N/A 2.0% – 12.0%

260.6 Direct comparison

N/A HK$19,000 – HK$21,000

per square metre

N/A

Carparks 6,757.2 Direct comparison

N/A HK$143,000 – HK$690,000

per carpark space

N/A

Residential 1,809.2 Income capitalisation

HK$121 – HK$214per square metre

N/A 4.25% – 15.0%

Total 86,254.8

Range of significant unobservable inputs

2018 Fair value

HK$mValuation

techniques Unit price

Estimated developer’s

profit and risk margins

Investment properties under development

Commercial 55,975.2 Residual HK$2,130 – HK$63,000 per square feet

0.8% – 15.0%

6,666.7 Direct comparison

HK$29,000per square metre

N/A

Carparks 831.0 Residual HK$226,000 – HK$381,000 per carpark space

0.5% – 0.7%

Total 63,472.9

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17 INVESTMENT PROPERTIES (CONTINUED)

Valuation techniques (Continued)

Range of significant unobservable inputs

2017Fair value

HK$mValuation

techniquesPrevailing market

rent per month Unit priceCapitalisation

rate

Completed investment properties

Hong Kong

Commercial 31,379.2 Income capitalisation

HK$22 – HK$400 per square feet

N/A 1.5%–5.3%

Carparks 2,441.0 Income capitalisation

HK$2,400 – HK$6,700 per carpark space

N/A 4.3%-4.5%

Mainland China

Commercial 17,299.1 Income capitalisation

HK$28 – HK$325 per square metre

N/A 2.0%-9.0%

3,272.1 Direct comparison

N/A HK$11,700 – HK$24,100

per square metre

N/A

Carparks 5,856.9 Direct comparison

N/A HK$75,000–HK$517,000

per carpark space

N/A

Residential 1,688.0 Income capitalisation

HK$115 – HK$207 per square metre

N/A 4.3%-15.0%

Total 61,936.3

Range of significant unobservable inputs

2017 Fair value

HK$mValuation

techniques Unit price

Estimated developer’s

profit and risk margins

Investment properties under development

Commercial 35,441.0 Residual HK$1,300 – HK$60,000 per square feet

0.5%-15.0%

6,356.3 Direct comparison

HK$28,000 per square metre

N/A

Carparks 2,026.8 Residual HK$218,000 – HK$264,000 per carpark space

0.5%-2.8%

Total 43,824.1

Prevailing market rents are estimated based on independent valuers’ view of recent lettings, within the subject properties and other comparable properties. The higher the rents, the higher the fair value.

Capitalisation rates and developer’s profit and risk margins are estimated by independent valuers based on the risk profile of the properties being valued and the market conditions. The lower the rates and the margins, the higher the fair value.

At 30 June 2018, the aggregate fair value of completed investment properties and investment properties under development pledged as securities for the Group’s borrowings amounted to HK$44,509.6 million (2017: HK$29,169.8 million) and HK$7,800.0 million (2017: HK$5,440.0 million) respectively.

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18 PROPERTY, PLANT AND EQUIPMENT

Leasehold land BuildingsOthers

(note (a))Assets under construction Total

HK$m HK$m HK$m HK$m HK$m

Cost

At 1 July 2017 2,284.9 11,226.1 11,621.1 13,468.8 38,600.9

Translation differences – 219.7 362.8 157.3 739.8

Acquisition of subsidiaries – 53.4 59.6 2.7 115.7

Additions – 397.9 1,009.0 2,384.4 3,791.3

Transfer between property, plant and equipment, land use rights and investment properties (298.1) (33.3) (85.6) (3,642.3) (4,059.3)

Transfer between property, plant and equipment, and properties for/under development 265.0 810.9 – – 1,075.9

Transfer between property, plant and equipment and non-current assets classified as assets held for sale – – (1.9) – (1.9)

Transfer upon completion – 2,114.1 165.3 (2,279.4) –

Disposal of subsidiaries – (813.4) (874.3) – (1,687.7)

Disposals – (15.9) (303.2) – (319.1)

At 30 June 2018 2,251.8 13,959.5 11,952.8 10,091.5 38,255.6

Accumulated depreciation and impairment

At 1 July 2017 102.1 2,112.4 5,578.6 – 7,793.1

Translation differences – 118.5 294.0 – 412.5

Transfer between property, plant and equipment, land use rights and investment properties (159.3) (10.6) (4.4) – (174.3)

Transfer between property, plant and equipment and non-current assets classified as assets held for sale – – (0.3) – (0.3)

Depreciation 171.6 323.6 1,008.2 – 1,503.4

Impairment – – 96.1 – 96.1

Disposal of subsidiaries – (387.6) (670.0) – (1,057.6)

Disposals – (7.1) (250.4) – (257.5)

At 30 June 2018 114.4 2,149.2 6,051.8 – 8,315.4

Net book value (note (b)) At 30 June 2018 2,137.4 11,810.3 5,901.0 10,091.5 29,940.2

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18 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Leasehold land BuildingsOthers

(note (a))Assets under construction Total

HK$m HK$m HK$m HK$m HK$m

Cost

At 1 July 2016 2,379.8 10,921.3 7,664.3 10,500.7 31,466.1

Translation differences – (131.5) (65.0) (62.1) (258.6)

Acquisition of subsidiaries – 1,083.6 2,891.6 192.5 4,167.7

Additions – 99.9 1,274.9 2,991.0 4,365.8

Transfer between property, plant and equipment and investment properties (94.9) (1,203.7) (38.2) – (1,336.8)

Transfer between property, plant and equipment, properties for/under development and properties held for sale – 540.3 – – 540.3

Transfer upon completion – – 153.3 (153.3) –

Disposals – (83.8) (259.8) – (343.6)

At 30 June 2017 2,284.9 11,226.1 11,621.1 13,468.8 38,600.9

Accumulated depreciation and impairment

At 1 July 2016 103.2 2,434.8 5,055.6 – 7,593.6

Translation differences – (49.2) (27.4) – (76.6)

Transfer between property, plant and equipment and investment properties (18.5) (489.0) (29.2) – (536.7)

Depreciation 17.4 258.8 759.1 – 1,035.3

Impairment – – 49.8 – 49.8

Disposals – (43.0) (229.3) – (272.3)

At 30 June 2017 102.1 2,112.4 5,578.6 – 7,793.1

Net book value (note (b)) At 30 June 2017 2,182.8 9,113.7 6,042.5 13,468.8 30,807.8

Notes:

(a) Others mainly represented leasehold improvements for department stores, plant and machinery, buses, vessels, motor vehicles, furniture and fixtures, office equipment and computer.

(b) As at 30 June 2018, the aggregate net book value of property, plant and equipment pledged as securities for the Group’s borrowings amounted to HK$6,649.7 million (2017: HK$6,836.4 million).

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19 LAND USE RIGHTS

2018 2017HK$m HK$m

At beginning of the year 1,715.0 1,932.2

Translation differences 62.7 (34.7)

Transfer between land use rights and properties under development – 14.6

Transfer between land use rights, property, plant and equipment and investment properties 35.0 (132.2)

Disposals (1.0) (0.5)

Disposal of subsidiaries (697.2) –

Amortisation (50.5) (64.4)

At end of the year 1,064.0 1,715.0

Interests in land use rights represent prepaid operating lease payments.

As at 30 June 2018, the aggregate net book value of land use rights pledged as securities for the Group’s borrowings amounted to HK$128.6 million (2017: HK$270.8 million).

20 INTANGIBLE CONCESSION RIGHTS

2018 2017HK$m HK$m

Cost

At beginning of the year 16,528.9 16,945.2

Translation differences 657.7 (324.7)

Additions 3.5 –

Disposals – (91.6)

At end of the year 17,190.1 16,528.9

Accumulated amortisation and impairment

At beginning of the year 4,687.0 4,038.8

Translation differences 221.8 (92.4)

Amortisation 877.8 802.2

Disposals – (61.6)

At end of the year 5,786.6 4,687.0

Net book value At end of the year 11,403.5 11,841.9

As at 30 June 2018, no intangible concession rights pledged as securities of the Group’s borrowings (2017: aggregate net book value of HK$11,697.8 million).

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21 INTANGIBLE ASSETS

Goodwill Trademarks

Operating right and

others TotalHK$m HK$m HK$m HK$m

Cost

At 1 July 2017 3,222.9 73.6 705.5 4,002.0

Translation differences 68.1 – – 68.1

Acquisition of subsidiaries 488.6 – 54.1 542.7

Disposal of subsidiaries (40.5) – – (40.5)

At 30 June 2018 3,739.1 73.6 759.6 4,572.3

Accumulated amortisation and impairment

At 1 July 2017 287.3 3.9 287.0 578.2

Translation differences (1.3) – – (1.3)

Amortisation – 5.3 46.5 51.8

Impairment 192.9 – – 192.9

Disposal of subsidiaries (31.3) – – (31.3)

At 30 June 2018 447.6 9.2 333.5 790.3

Net book value

At 30 June 2018 3,291.5 64.4 426.1 3,782.0

Goodwill Trademarks

Operating right and

others TotalHK$m HK$m HK$m HK$m

Cost

At 1 July 2016 2,579.4 – 636.3 3,215.7

Translation differences (30.1) – – (30.1)

Acquisition of subsidiaries 707.8 73.6 69.2 850.6

Amount written off (34.2) – – (34.2)

At 30 June 2017 3,222.9 73.6 705.5 4,002.0

Accumulated amortisation and impairment

At 1 July 2016 273.1 – 240.3 513.4

Amortisation – 3.9 46.7 50.6

Impairment 14.2 – – 14.2

At 30 June 2017 287.3 3.9 287.0 578.2

Net book value

At 30 June 2017 2,935.6 69.7 418.5 3,423.8

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21 INTANGIBLE ASSETS (CONTINUED)

Impairment test for goodwillAn operating segment level summary of the goodwill allocation is presented below:

2018

Hong KongMainland

China TotalHK$m HK$m HK$m

Property development 2.5 – 2.5

Property investment – 270.7 270.7

Service and infrastructure 1,342.7 – 1,342.7

Department stores – 1,478.4 1,478.4

Others 197.2 – 197.2

1,542.4 1,749.1 3,291.5

2017

Hong KongMainland

China TotalHK$m HK$m HK$m

Property development 2.5 – 2.5

Property investment – 257.6 257.6

Service and infrastructure 1,211.9 – 1,211.9

Hotel operations – 9.2 9.2

Department stores – 1,046.7 1,046.7

Others 407.7 – 407.7

1,622.1 1,313.5 2,935.6

Goodwill is allocated to the Group’s cash generating units identified according to country of operation and business segment.

For the purpose of impairment test for goodwill, the recoverable amount of the business unit is determined based on either fair value less costs of disposal or value in use calculations whichever is higher. The key assumptions adopted on growth rates and discount rates used in the value in use calculations are based on management best estimates and past experience.

For the segment of property investment, growth rates are determined by considering both internal and external factors relating to the relevant segments. Discount rate used also reflect specific risks relating to the relevant segment, which was 12.4% (2017: 12.4%).

For the segment of service and infrastructure, goodwill amounted to HK$849.3 million (2017: HK$849.3 million) was determined based on the fair value less costs of disposal. Goodwill amounted to HK$362.6 million (2017: HK$362.6 million) was determined based on value in use calculations, among which, annual growth rates being 3.0-11.0% (2017: 0.0-7.0%) for the first five years and terminal growth rate of 2.0% (2017: 2.0%) are determined by considering both internal and external factors relating to the relevant segment. Discount rate used also reflect specific risks relating to the relevant segment, which was 8.5% (2017: 8.5%).

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21 INTANGIBLE ASSETS (CONTINUED)

Impairment test for goodwill (Continued)For the segment of department stores, the recoverable amount is determined based on fair value less cost of disposal. The estimated long-term growth rate of 5.0% (2017: 5.0%) is determined by considering both internal and external factors relating to the relevant segment. Discount rate used is post-tax and reflect specific risks relating to the relevant segment, which was 12.4% (2017: 12.4%).

For the segment of others, annual growth rates of 3.0-5.5% (2017: 3.0-5.5%) for the first five years and terminal growth rate of 3.0% (2017: 3.0%) of a business unit are determined by considering both internal and external factors relating to the relevant segment. Discount rate used is post-tax and reflect specific risks relating to the relevant segment, which was 10.4% (2017: 11.1%).

22 INTERESTS IN JOINT VENTURES

2018 2017HK$m HK$m

Equity joint ventures/joint ventures in wholly foreign owned enterprises

Group’s share of net assets 5,019.4 7,041.2

Goodwill on acquisition 2.2 2.2

Amounts receivable less provision (note (a)) 3,359.4 2,892.4

8,381.0 9,935.8

Co-operative joint ventures

Cost of investments less provision 5,366.3 5,228.8

Share of undistributed post-acquisition results 1,846.0 2,077.9

Amounts receivable less provision (note (a)) 6,624.0 6,207.7

13,836.3 13,514.4

Companies limited by shares

Group’s share of net assets 7,109.2 7,376.8

Goodwill on acquisition 1,330.4 1,330.4

Amounts receivable less provision (note (a)) 18,478.9 17,160.0

26,918.5 25,867.2

49,135.8 49,317.4

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22 INTERESTS IN JOINT VENTURES (CONTINUED)

Notes:

(a) Amounts receivable less provisions are analysed as follows:

2018 2017HK$m HK$m

Interest bearing

Fixed rates (note (i)) 664.1 661.2

Floating rates (note (ii)) 10,535.5 6,772.4

Non-interest bearing 17,262.7 18,826.5

28,462.3 26,260.1

note (i) Carry interest rates ranging from 8.5% to 10.0% (2017: 8.5% to 10.0%) per annum.

note (ii) Carry interest rates ranging from 0.9% over Hong Kong interbank offered rates (“HIBOR”) to 1.0% over Hong Kong prime rate (2017: 2.0% over HIBOR to People’s Bank of China rate) per annum.

The amounts are unsecured. Their carrying amounts are not materially different from their fair values.

The amounts receivable form part of the Group’s interests in joint ventures.

(b) There is no joint venture that is individually material to the Group. The Group’s share of results of the joint ventures are as follows:

2018 2017HK$m HK$m

For the year ended 30 June

Profit for the year 1,886.2 2,029.7

Other comprehensive income for the year 375.6 (307.0)

Total comprehensive income for the year 2,261.8 1,722.7

(c) Management regularly reviews whether there are any indications of impairments of the Group’s interests in joint ventures based on value in use calculations, as detailed in note 6(d). The Group shared impairment loss amounted to HK$600.0 million for the Group’s interests in joint ventures for the year ended 30 June 2018 (2017: nil).

(d) Details of principal joint ventures are stated in note 50.

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23 INTERESTS IN ASSOCIATED COMPANIES

2018 2017HK$m HK$m

Group’s share of net assets

Hong Kong listed shares 2,303.2 4,118.5

Overseas listed shares 1,050.5 1,069.9

Unlisted shares 16,605.5 16,435.3

19,959.2 21,623.7

Goodwill 396.2 721.7

Amounts receivable less provision (note (a)) 4,352.8 4,056.4

24,708.2 26,401.8

Market value of listed shares (note (b)) 1,995.1 6,822.5

Notes:

(a) Amounts receivable less provision are analysed as follows:

2018 2017HK$m HK$m

Interest bearing

Fixed rate (note (i)) 109.7 109.7

Floating rate (note (ii)) 1,600.0 1,600.0

Non-interest bearing 2,643.1 2,346.7

4,352.8 4,056.4

note (i) Carry interest rate of 8.0% (2017: 8.0%) per annum.

note (ii) Carry interest rate of 1.3% over HIBOR (2017: 1.3% over HIBOR) per annum.

The amounts were unsecured and not repayable within 12 months. Their carrying amounts were not materially different from their fair values.

The amounts receivable form part of the Group’s interests in associated companies.

(b) The market value of the Group’s listed associated companies in Hong Kong and overseas amounted to HK$1,995.1 million (2017: HK$6,822.5 million). Management regularly reviews whether there are any indications of impairments of the Group’s interests in associated companies based on value in use calculations, as detailed in note 6(d). The Group shared no impairment loss (2017: HK$204.0 million) for the Group’s interests in associated companies for the year ended 30 June 2018.

(c) There is no associated company that is individually material to the Group. The Group’s share of results of the associated companies are as follows:

2018 2017HK$m HK$m

For the year ended 30 June

Profit for the year 1,196.4 1,895.4

Other comprehensive income for the year 496.7 (37.4)

Total comprehensive income for the year 1,693.1 1,858.0

(d) Details of principal associated companies are stated in note 51.

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24 AVAILABLE-FOR-SALE FINANCIAL ASSETS

2018 2017HK$m HK$m

Non-current

Equity securities

Unlisted shares and investments, at fair value (note (a)) 6,699.4 3,113.7

Listed shares, at market value

Hong Kong 3,881.4 2,188.4

Overseas 43.2 130.3

Debt securities

Unlisted investments, at fair value (note (a)) 920.6 868.7

Listed debentures in Hong Kong, at market value 234.2 239.8

11,778.8 6,540.9

Notes:

(a) Unlisted investments are stated at fair values which are either estimated using back-solve method and calibration technique, or assessed the reasonableness with reference to market comparables, with the assistance of external valuers.

(b) The available-for-sale financial assets are denominated in the following currencies:

2018 2017HK$m HK$m

Hong Kong dollar 5,966.0 3,969.8

United States dollar 4,489.8 1,709.8

Renminbi 1,272.8 795.8

Others 50.2 65.5

11,778.8 6,540.9

25 HELD-TO-MATURITY INVESTMENTS

2018 2017HK$m HK$m

Debt securities

Unlisted debentures 46.0 44.4

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26 DERIVATIVE FINANCIAL INSTRUMENTS

2018 2017HK$m HK$m

Non-current assets

Foreign currency and interest rate swaps 88.6 9.8

Current assets

Foreign currency forward contracts and fuel price swaps 19.5 3.5

Others – 58.8

19.5 62.3

108.1 72.1

Current liabilities

Foreign currency forward contracts, foreign currency and fuel price swaps – (36.1)

Non-current liabilities

Foreign currency and interest rate swaps (365.6) (631.3)

(365.6) (667.4)

The total notional principal amounts of the outstanding derivative financial instruments as at 30 June 2018 was HK$22,710.7 million (2017: HK$18,385.5 million).

27 DEFERRED TAXATION

Deferred income tax assets and liabilities are offset when taxes relate to the same taxation authority and where offsetting is legally enforceable. The following amounts, determined after appropriate offsetting, are shown separately on the consolidated statement of financial position.

2018 2017HK$m HK$m

Deferred tax assets 749.3 740.9

Deferred tax liabilities (10,287.9) (9,327.2)

(9,538.6) (8,586.3)

At beginning of the year (8,586.3) (7,768.3)

Adjustment on adoption of HKFRS 15 (note 4) (34.2) –

Restated balance at beginning of the year (8,620.5) (7,768.3)

Translation differences (176.4) 211.4

Acquisition of subsidiaries (889.9) (587.4)

Disposal of subsidiaries 107.6 4.5

Transferred to current tax payable 7.7 5.4

Credited/(charged) to consolidated income statement 36.9 (359.7)

Charged to reserves (4.0) (92.2)

At end of the year (9,538.6) (8,586.3)

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27 DEFERRED TAXATION (CONTINUED)

The movement in deferred tax assets and liabilities (prior to offsetting balances within the same taxation jurisdiction) during the year was as follows:

Deferred tax assets

Provisions

Accelerated accounting

depreciation Tax lossesUnrealised intra-

group profit Other items Total2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017

HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m

At beginning of the year 14.0 13.9 15.5 11.3 461.0 372.1 51.3 40.4 208.5 215.4 750.3 653.1

Adjustment on adoption of HKFRS 15 (note 4) – – – – (33.3) – – – – – (33.3) –

Restated balance at beginning of the year 14.0 13.9 15.5 11.3 427.7 372.1 51.3 40.4 208.5 215.4 717.0 653.1

Translation differences 0.5 (0.3) 0.4 3.7 4.2 (9.6) – – 7.2 (5.9) 12.3 (12.1)

Acquisition of subsidiaries – – – – – 0.5 – – – – – 0.5

Disposal of subsidiaries – – – – (23.2) – – – – – (23.2) –

(Charged)/credited to consolidated income statement (0.6) 0.4 8.8 0.5 (14.3) 98.0 32.6 10.9 (24.4) (1.0) 2.1 108.8

At end of the year 13.9 14.0 24.7 15.5 394.4 461.0 83.9 51.3 191.3 208.5 708.2 750.3

Deferred tax liabilities

Accelerated tax depreciation

Valuation of properties

Fair value adjustments of properties on acquisitions

Amortisation of intangible

concession rights

Undistributed profits of

subsidiaries, joint ventures and associated

companies Other items Total2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017

HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m HK$m

At beginning of the year (3,284.6) (2,649.4) (1,773.8) (1,453.7) (1,352.2) (1,370.3) (1,744.3) (1,883.8) (1,015.7) (873.3) (166.0) (190.9) (9,336.6) (8,421.4)

Adjustment on adoption of HKFRS 15 (note 4) (0.9) – – – – – – – – – – – (0.9) –

Restated balance at beginning of the year (3,285.5) (2,649.4) (1,773.8) (1,453.7) (1,352.2) (1,370.3) (1,744.3) (1,883.8) (1,015.7) (873.3) (166.0) (190.9) (9,337.5) (8,421.4)

Translation differences (21.6) 25.6 (24.8) 18.4 (50.1) 22.5 (70.4) 35.1 (17.8) 111.6 (4.0) 10.3 (188.7) 223.5

Acquisition of subsidiaries (17.2) (521.2) (887.6) – – (66.7) – – – – 14.9 – (889.9) (587.9)

Disposal of subsidiaries 31.5 – 46.4 – 51.5 4.5 – – 1.4 – – – 130.8 4.5

Transferred to current tax payable – – – – – – – – 7.7 5.4 – – 7.7 5.4

Credited/(charged) to consolidated income statement 76.6 (139.6) (206.8) (246.3) 114.5 57.8 124.8 104.4 (65.9) (259.4) (8.4) 14.6 34.8 (468.5)

Charged to reserves – – (4.0) (92.2) – – – – – – – – (4.0) (92.2)

At end of the year (3,216.2) (3,284.6) (2,850.6) (1,773.8) (1,236.3) (1,352.2) (1,689.9) (1,744.3) (1,090.3) (1,015.7) (163.5) (166.0) (10,246.8) (9,336.6)

Deferred tax assets are recognised for tax loss carried forward to the extent that realisation of the related tax benefit through the future taxable profits is probable. The Group has unrecognised tax losses of HK$15,125.4 million (2017: HK$16,052.7 million) to carry forward for offsetting against future taxable income. These tax losses have no expiry dates except for the tax losses of HK$4,620.9 million (2017: HK$4,392.1 million) which will expire at various dates up to and including 2023 (2017: 2022).

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27 DEFERRED TAXATION (CONTINUED)

Deferred tax liabilities (Continued)For the investment properties that are located outside Hong Kong, they are held by certain subsidiaries with a business model to consume substantially all the economic benefits embodied in the investment properties over time, rather than through sale, the presumption is rebutted and related deferred tax continues to be determined based on recovery of use. For the remaining investment properties, the tax consequence is on the presumption that they are recovered entirely by sale.

As at 30 June 2018, the aggregate amount of temporary differences associated with investments in subsidiaries and joint ventures for which deferred tax liabilities have not been recognised totalled approximately HK$11.0 billion (2017: HK$7.1 billion), as the directors consider that the timing of reversal of the related temporary differences can be controlled and the temporary differences will not be reversed in the foreseeable future.

28 OTHER NON-CURRENT ASSETS

2018 2017HK$m HK$m

Long-term loans and receivables (note (a)) 4,344.7 1,452.7

Long-term prepayments and deposits 1,266.2 1,159.9

Deposit paid for a proposed commercial development project 1,024.2 –

6,635.1 2,612.6

Notes:

(a)

2018 2017HK$m HK$m

Mortgage loans receivable (note (i)) 4,462.2 1,483.4

Mortgage loans receivable within one year included in debtors, prepayments and contract assets (147.4) (65.7)

Other receivables 29.9 35.0

4,344.7 1,452.7

note (i) Mortgage loans receivables are advances to purchasers of development projects of the Group in Hong Kong and are secured by first or second mortgages on the related properties. The balance included first mortgage loans of HK$3,768.9 million (2017: HK$1,193.9 million).

The mortgage loans receivables are repayable by monthly instalments with various tenors not more than 30 years (2017: not more than 30 years) at the balance sheet date and carrying interest at rates with reference to banks’ lending rates.

During the year ended 30 June 2018, the cash inflow in relation to the repayment of mortgage loans by the property purchasers amounted to HK$340.1 million (2017: HK$84.0 million).

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29 PROPERTIES UNDER DEVELOPMENT

2018 2017HK$m HK$m

Properties under development

Expected to be completed after 12 months 22,286.8 30,256.7

Expected to be completed within 12 months 14,884.2 18,273.3

37,171.0 48,530.0

At 30 June 2018, the aggregate carrying value of properties under development pledged as securities for the Group’s borrowings amounted to HK$2,035.3 million (2017: HK$8,808.5 million).

30 INVENTORIES

2018 2017HK$m HK$m

Raw materials 121.7 27.3

Finished goods 709.8 728.8

831.5 756.1

31 DEBTORS, PREPAYMENTS AND CONTRACT ASSETS

2018 2017HK$m HK$m

Trade debtors (note (a)) 3,456.0 3,161.9

Amounts due from customers for contract works (note 34) – 547.2

Retention receivable for contract works 1,723.2 1,246.8

Contract assets (note (e)) 1,321.0 –

Prepayment for purchase of land and land preparatory costs 1,105.0 1,066.4

Deposits, prepayments and other debtors (note (g)) 13,684.0 18,621.6

Amounts due from associated companies (note (h)) 51.3 88.1

Amounts due from joint ventures (note (i)) 4,179.1 3,132.4

25,519.6 27,864.4

Notes:

(a) The Group has different credit policies for different business operations depending on the requirements of the markets and businesses in which the subsidiaries operate. Sales proceeds receivable from sale of properties and retention receivable in respect of construction and engineering services are settled in accordance with the terms of respective contracts.

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31 DEBTORS, PREPAYMENTS AND CONTRACT ASSETS (CONTINUED)

Notes: (continued)

(a) (continued)

Aging analysis of trade debtors based on invoice date is as follows:

2018 2017HK$m HK$m

Current to 30 days 2,675.8 2,441.8

31 to 60 days 282.7 341.5

Over 60 days 497.5 378.6

3,456.0 3,161.9

There is no concentration of credit risk with respect to trade debtors as the customer bases are widely dispersed in different sectors and industries.

(b) At 30 June 2018, trade debtors of HK$848.8 million (2017: HK$800.6 million) were past due but not impaired. These relate to a number of independent customers for whom there is no recent history of default. The aging analysis of these trade debtors is as follows:

2018 2017HK$m HK$m

Current to 30 days 456.9 197.5

31 to 60 days 74.8 254.5

Over 60 days 317.1 348.6

848.8 800.6

At 30 June 2018, trade debtors of HK$72.0 million (2017: HK$57.2 million) were impaired. The aging analysis of these debtors is as follows:

2018 2017HK$m HK$m

Current to 30 days – –

31 to 60 days – –

Over 60 days 72.0 57.2

72.0 57.2

(c) Movements on the provision for impairment of trade debtors are as follows:

2018 2017HK$m HK$m

At beginning of the year 57.2 64.4

Translation differences 0.9 (0.7)

Increase in provision recognised in consolidated income statement 17.1 12.9

Amounts recovered (1.0) (1.1)

Written off during the year (2.2) (18.3)

At end of the year 72.0 57.2

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31 DEBTORS, PREPAYMENTS AND CONTRACT ASSETS (CONTINUED)

Notes: (continued)

(d) The carrying amounts of the debtors, prepayments and contract assets, which approximate their fair values, are denominated in the following currencies:

2018 2017HK$m HK$m

Hong Kong dollar 12,961.3 10,786.1

Renminbi 7,778.5 13,493.5

United States dollar 4,658.6 3,378.3

Others 121.2 206.5

25,519.6 27,864.4

(e) The Group has recognised the following revenue-related contract assets:

At 30 June 2018 At 1 July 2017HK$m HK$m

Contract acquisition cost related to property sales (note (i)) 952.6 237.3

Contract assets related to construction services (note (ii)) 368.4 547.2

1,321.0 784.5

note (i) Contract acquisition cost related to property sales consists of sales commissions incurred directly attributable to obtaining contract.

note (ii) Contract assets related to construction services consist of unbilled amount resulting from construction when the cost-to-cost method of revenue recognised exceeds the amount billed to the customer.

(f) Except for certain collaterals held as securities for other debtors, the Group does not hold other collateral as securities for the debtors and prepayments. The maximum exposure to credit risk at the end of the reporting period is the carrying value mentioned above.

(g) As at 30 June 2018, the balances included the current portion of consideration receivable of HK$64.3 million (2017: HK$7,178.0 million) in relation to the disposal of subsidiaries.

(h) As at 30 June 2018, the amounts due from associated companies of the Group are interest free, unsecured and repayable on demand.

(i) As at 30 June 2018, the amounts due from joint ventures of the Group are interest free, unsecured and repayable on demand except for an aggregate amount of HK$279.7 million (2017: HK$310.0 million) due from joint ventures which carries interest at London Interbank Offered Rate (“LIBOR”) plus a margin of 12.2% (2017: 10.0% to LIBOR plus a margin of 12.2%) per annum.

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32 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

2018 2017HK$m HK$m

Non-current

Unlisted equity securities, at fair value 684.3 574.5

Current

Unlisted equity securities, at fair value – 0.1

684.3 574.6

Representing:

Held for trading – 0.1

Designated as financial assets at fair value through profit or loss 684.3 574.5

684.3 574.6

The financial assets at fair value through profit or loss are denominated in the following currencies:

2018 2017HK$m HK$m

United States dollar 641.3 481.3

Renminbi 27.2 77.5

Others 15.8 15.8

684.3 574.6

33 CASH AND BANK BALANCES

2018 2017HK$m HK$m

Cash at banks and on hand 35,027.8 32,115.5

Bank deposits – unrestricted and maturing within three months 27,513.0 29,648.1

62,540.8 61,763.6

Bank deposits – unrestricted and maturing after more than three months 847.6 5,222.4

63,388.4 66,986.0

Bank deposits – restricted 67.7 120.5

63,456.1 67,106.5

The effective interest rates on bank deposits range from 0.02% to 5.00% (2017: 0.0083% to 4.9%) per annum and these deposits have maturities ranging from 2 to 365 days (2017: 3 to 365 days).

As at 30 June 2018, the aggregate carrying value of restricted bank deposits pledged as securities for the Group’s borrowing amounted to HK$67.7 million (2017: HK$60.2 million).

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33 CASH AND BANK BALANCES (CONTINUED)

The carrying amounts of the cash and bank balances are denominated in the following currencies:

2018 2017HK$m HK$m

Renminbi 35,722.7 26,333.3

Hong Kong dollar 15,418.2 19,174.6

United States dollar 12,020.9 21,205.1

Others 294.3 393.5

63,456.1 67,106.5

The conversion of Renminbi denominated balances into foreign currencies and the remittance of foreign currencies denominated bank balances and cash out of the Mainland China are subject to relevant rules and regulations of foreign exchange control promulgated by the PRC government.

34 AMOUNTS DUE FROM/TO CUSTOMERS FOR CONTRACT WORKS

2018 2017HK$m HK$m

Contract assets related to construction service (note 31(e)) 368.4 –

Amounts due from customers for contract works (note 31) – 547.2

Contract liabilities related to construction service (note 42(b)) (2,626.3) –

Amounts due to customers for contract works (note 42) – (2,297.3)

(2,257.9) (1,750.1)

As at 30 June 2017, the net amount due to customers for contract works recognised under HKAS11 represented contract costs incurred plus attributable profits less foreseeable losses amounted to HK$12,807.0 million, netted off with progress payments received and receivable amounted to HK$14,557.1 million.

35 NON-CURRENT ASSETS CLASSIFIED AS ASSETS HELD FOR SALE/LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS CLASSIFIED AS ASSETS HELD FOR SALE

Non-current assets classified as assets held for sale

2018 2017HK$m HK$m

Investment properties 875.5 130.7

Properties for/under development and other assets classified as held for sale (note) 1,880.7 –

2,756.2 130.7

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35 NON-CURRENT ASSETS CLASSIFIED AS ASSETS HELD FOR SALE/LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS CLASSIFIED AS ASSETS HELD FOR SALE (CONTINUED)

Liabilities directly associated with non-current assets classified as assets held for sale

2018 2017HK$m HK$m

Liabilities classified as held for sale (note) 8.8 –

8.8 –

Note:

On 1 August 2017, an agreement was entered into by NWCL in respect of the disposal of its 85% owned subsidiary, Xin Zhong Real Estate Yangzhou Company Limited (“Xin Zhong”, engaged in the property development in Yangzhou, PRC). The transaction has not yet been completed as at year end and legal procedures are still in progress.

As at 30 June 2018, the assets and liabilities of Xin Zhong were reclassified to assets held for sale and liabilities directly associated with assets held for sale.

36 SHARE CAPITAL

2018 2017Number of

sharesNumber of

shares(million) HK$m (million) HK$m

Issued and fully paid:

At beginning of the year 9,815.2 73,233.6 9,388.4 69,599.8

Issue of new shares as scrip dividends (note (a)) 357.2 3,802.1 402.4 3,426.0

Buyback of shares (note (b)) (11.5) – – –

Issue of new shares upon exercise of share options 53.2 490.2 24.4 207.8

At end of the year 10,214.1 77,525.9 9,815.2 73,233.6

Notes:

(a) Issue of new shares as scrip dividends

During the year ended 30 June 2018, 246,520,387 and 110,705,802 new shares were issued by the Company at HK$10.6552 and HK$10.6172 per share respectively for the settlement of 2017 final scrip dividends and 2018 interim scrip dividends.

(b) Buyback of shares

During the year ended 30 June 2018, the Company bought back and cancelled a total of 11,460,000 shares at an aggregate cost of HK$130,537,760 on the Hong Kong Stock Exchange at share price ranging from HK$10.88 to HK$11.96.

During the year ended 30 June 2018, the Company bought back its shares through the Hong Kong Stock Exchange as follows:

Month Number of shares

Price per share Aggregateconsideration

(excluding expenses)Highest LowestHK$ HK$ HK$m

September 2017 4,000,000 11.24 11.02 44.5

October 2017 2,000,000 11.96 11.80 23.8

November 2017 1,797,000 11.80 11.70 21.1

December 2017 1,663,000 10.98 10.88 18.2

June 2018 2,000,000 11.50 11.28 22.9

11,460,000 130.5

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37 PERPETUAL CAPITAL SECURITIES

On 6 October 2016, a wholly owned subsidiary of the Company (the “Issuer”) issued US$1,200.0 million 5.75% perpetual capital securities with the aggregate net proceeds after transaction cost of HK$9,212.3 million.

The perpetual capital securities issued by the Issuer are guaranteed by the Company. There is no maturity of the securities and the payments of distribution can be deferred at the discretion of the Issuer, and there is no limit as to the number of times of deferral of distribution. The perpetual capital securities are callable. When the Company elects to declare dividends to its ordinary shareholders, the Issuer shall make distribution to the holders of perpetual capital securities at the distribution rate as defined in the subscription agreement.

38 NON-CONTROLLING INTERESTS

The total non-controlling interests as at 30 June 2018 is HK$29,480.2 million (2017: HK$25,401.5 million), of which HK$19,435.6 million (2017: HK$18,834.1 million) is attributable to NWSH. The total comprehensive income attributable to non-controlling interests for the year ended 30 June 2018 is HK$3,502.8 million (2017: HK$2,243.4 million), of which HK$2,573.9 million (2017: HK$1,974.3 million) is attributable to NWSH. The non-controlling interests in respect of other subsidiaries are not material to the Group.

Set out below is the summarised financial information for NWSH which is a subsidiary with material non-controlling interest to the Group.

Summarised consolidated statement of financial position of NWSH as at 30 June 2018 and 2017 are as follows:

2018 2017HK$m HK$m

Non-current assets 55,507.4 55,001.3

Current assets 19,267.2 20,724.6

Assets held for sale 3,364.0 –

Total assets 78,138.6 75,725.9

Current liabilities (12,995.0) (14,328.8)

Non-current liabilities (11,806.7) (12,122.1)

Liabilities directly associated with assets held for sale (3,213.1) –

Net assets 50,123.8 49,275.0

Non-controlling interests (173.8) (217.9)

Net assets after non-controlling interests 49,950.0 49,057.1

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38 NON-CONTROLLING INTERESTS (CONTINUED)

Summarised consolidated statement of comprehensive income of NWSH for the year ended 30 June 2018 and 2017 are as follows:

2018 2017HK$m HK$m

Revenues 35,114.8 31,385.0

Profit before taxation 6,865.6 6,330.4

Taxation (745.0) (685.2)

Profit for the year 6,120.6 5,645.2

Other comprehensive income for the year 265.5 (330.2)

Total comprehensive income for the year 6,386.1 5,315.0

Non-controlling interests (39.3) (8.6)

Total comprehensive income after non-controlling interests 6,346.8 5,306.4

Dividends paid to non-controlling interests 43.0 10.9

Summarised consolidated statement of cash flows of NWSH for the year ended 30 June 2018 and 2017 are as follows:

2018 2017HK$m HK$m

Net cash from operation activities 4,428.8 2,958.3

Net cash from investing activities 1,506.9 2,403.6

Net cash used in financing activities (5,114.5) (7,742.5)

Net increase/(decrease) in cash and cash equivalents 821.2 (2,380.6)

Translation differences 38.7 (75.5)

Cash and cash equivalents at beginning of the year 6,436.8 8,892.9

Cash and cash equivalents at end of the year 7,296.7 6,436.8

The information above represents balances before inter-company eliminations, reclassification of assets and remeasurement of assets on Group level.

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39 RESERVES

Property revaluation

reserve

Investment revaluation

reserveGeneral reserve

Employees’ share-based

compensation reserve

Exchange reserve

Retained profits Total

HK$m HK$m HK$m HK$m HK$m HK$m HK$m

At 30 June 2017 4,198.7 1,966.3 991.2 260.4 744.3 104,696.7 112,857.6

Adjustment on adoption of HKFRS 15, net of taxation (note 4) – – – – – 251.6 251.6

Restated balance as at 1 July 2017 4,198.7 1,966.3 991.2 260.4 744.3 104,948.3 113,109.2

Fair value changes of available-for-sale financial assets – (432.6) – – – – (432.6)

Release of reserve upon disposal of available-for-sale financial assets – (72.3) – – – – (72.3)

Release of investment revaluation deficit to the consolidated income statement upon impairment of available-for-sale financial assets – 7.1 – – – – 7.1

Employees’ share-based payments – – – 57.2 – – 57.2

Share options lapsed – – – (47.3) – 47.3 –

Acquisition of additional interests in subsidiaries – – – – – 59.0 59.0

Deemed disposal of interests in subsidiaries – – – – – (164.9) (164.9)

Release of reserve upon reclassification of an associated company to an available-for-sale financial asset – – (4.6) – 37.4 – 32.8

Release of reserve upon deregistration of subsidiaries – – – – (27.9) – (27.9)

Release of reserve upon return of registered capital of a subsidiary – – – – (9.8) – (9.8)

Release of reserves upon disposal of interests in joint ventures and associated companies – – (4.1) – 22.3 – 18.2

Release of reserve upon disposal of subsidiaries – – – – (163.0) – (163.0)

Profit attributable to shareholders – – – – – 23,338.1 23,338.1

Share of other comprehensive income of joint ventures and associated companies – (0.4) 10.1 – 576.6 (4.8) 581.5

Cash flow hedges – – 51.3 – – – 51.3

Remeasurement of post employment benefit obligation – – – – – 15.1 15.1

Transfer of reserves (163.8) – 24.7 – – 139.1 –

Revaluation of investment properties upon reclassification from property, plant and equipment and land use rights, net of taxation 3,521.9 – – – – – 3,521.9

Translation differences – – – – 3,594.4 – 3,594.4

2017 final dividend – – – – – (3,246.3) (3,246.3)

2018 interim dividend – – – – – (1,414.1) (1,414.1)

Buyback of shares – – – – – (130.9) (130.9)

At 30 June 2018 7,556.8 1,468.1 1,068.6 270.3 4,774.3 123,585.9 138,724.0

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39 RESERVES (CONTINUED)

Property revaluation

reserve

Investment revaluation

reserveGeneral reserve

Employees’ share-based

compensation reserve

Exchange reserve

Retained profits Total

HK$m HK$m HK$m HK$m HK$m HK$m HK$m

At 1 July 2016 3,736.4 1,395.4 798.1 236.3 2,510.8 101,296.6 109,973.6

Fair value changes of available-for-sale financial assets – 432.9 – – – – 432.9

Release of reserve upon disposal of available-for-sale financial assets – 79.3 – – – – 79.3

Release of investment revaluation deficit to the consolidated income statement upon impairment of available-for-sale financial assets – 54.1 – – – – 54.1

Employees’ share-based payments – – – 53.3 – – 53.3

Share options lapsed – – – (29.2) – 29.2 –

Acquisition of additional interests in subsidiaries – – – – – (40.8) (40.8)

Release of reserves upon disposal of subsidiaries – – – – (34.5) – (34.5)

Release of reserve upon deemed disposal of interests in joint ventures – – – – 3.5 – 3.5

Release of reserves upon remeasurement of previously held equity interest in a joint venture – – 29.6 – (7.7) – 21.9

Release of reserve upon deregistration of a subsidiary – – – – (9.4) – (9.4)

Release of reserves upon disposal of interests in joint ventures and associated companies – – (13.2) – (69.6) – (82.8)

Deemed disposal of interests in subsidiaries – – – – – 9.1 9.1

Profit attributable to shareholders – – – – – 7,675.7 7,675.7

Share of other comprehensive income of joint ventures and associated companies – 4.6 20.8 – (202.6) (4.5) (181.7)

Cash flow hedges – – 155.7 – – – 155.7

Remeasurement of post employment benefit obligation – – (0.7) – – 15.1 14.4

Transfer of reserves – – 0.9 – – (0.9) –

Revaluation of investment properties upon reclassification from property, plant and equipment and land use rights, net of taxation 462.3 – – – – – 462.3

Translation differences – – – – (1,446.2) – (1,446.2)

2016 final dividend – – – – – (2,912.3) (2,912.3)

2017 interim dividend – – – – – (1,258.8) (1,258.8)

Transaction costs in relation to the issuance of perpetual capital securities – – – – – (111.7) (111.7)

At 30 June 2017 4,198.7 1,966.3 991.2 260.4 744.3 104,696.7 112,857.6

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39 RESERVES (CONTINUED)

Note:

Effect on net transfer to the non-controlling interests of the Group:

2018 2017HK$m HK$m

Total comprehensive income for the year attributable to the shareholders of the Company 30,454.8 7,145.2

Transfer between shareholders’ funds and non-controlling interests

Acquisition of additional interests in subsidiaries 59.0 (40.8)

Deemed disposal of interests in subsidiaries (164.9) 9.1

Net transfer to the non-controlling interests (105.9) (31.7)

Total comprehensive income for the year attributable to the shareholders of the Company and net transfer to the non-controlling interests 30,348.9 7,113.5

40 BORROWINGS

2018 2017HK$m HK$m

Long-term borrowings

Secured bank loans 18,134.4 19,703.3

Unsecured bank loans 70,754.0 73,594.4

Other secured loans 2,976.2 2,873.6

Other unsecured loans 1,309.5 1,264.4

Fixed rate bonds and notes payable 38,280.0 41,959.7

Loans from non-controlling shareholders (note (b)) 521.0 1,357.8

131,975.1 140,753.2

Current portion of long-term borrowings (11,851.5) (14,857.9)

120,123.6 125,895.3

Short-term borrowings

Unsecured bank loans 6,856.0 4,576.3

Other unsecured loans 5.0 5.0

Loans from non-controlling shareholders (note (b)) 1,916.6 1,785.4

8,777.6 6,366.7

Current portion of long-term borrowings 11,851.5 14,857.9

20,629.1 21,224.6

Total borrowings 140,752.7 147,119.9

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40 BORROWINGS (CONTINUED)

Notes:

(a) Bank loans, other loans and fixed rate bonds and notes payable are repayable as follows:

Bank loans Other loansFixed rate bonds and

notes payable 2018 2017 2018 2017 2018 2017

HK$m HK$m HK$m HK$m HK$m HK$m

Within one year 18,707.5 15,721.4 5.0 5.0 – 3,712.8

In the second year 16,931.1 15,260.9 1,309.7 – 10,213.5 –

In the third to fifth year 56,515.8 63,560.2 2,976.0 4,138.0 15,029.8 17,362.4

After the fifth year 3,590.0 3,331.5 – – 13,036.7 20,884.5

95,744.4 97,874.0 4,290.7 4,143.0 38,280.0 41,959.7

(b) Loans from non-controlling shareholders

Except for the loans of HK$380.7 million (2017: HK$367.6 million) and the loans of HK$42.1 million (2017: HK$90.0 million) that are interest bearing at 4.75% (2017: 4.75%) per annum and interest bearing at 2.0% (2017: 2.0%) per annum respectively, the remaining loans are interest free. All the loans from non-controlling shareholders are unsecured. A total amount of HK$521.0 million (2017: HK$1,357.8 million) is not repayable within the next 12 months and the remaining balances have no specific repayment term. The loans of HK$558.9 million that are interest bearing at 2.2% over HIBOR per annum were fully repaid during the year.

(c) Effective interest rates

2018 2017 Hong Kong dollar Renminbi

United States dollar Others

Hong Kong dollar Renminbi

United States dollar Others

Bank loans 2.2% 5.1% 4.1% 2.6% 1.9% 5.2% 2.2% 2.6%

Fixed rate bonds and notes payable 5.3% – 5.4% – 5.3% 5.5% 5.4% –

Loans from non-controlling shareholders 2.0% 4.8% – – 2.8% 4.8% – –

Other secured loans – 6.2% – – – 6.5% – –

Other unsecured loans 3.0% 6.0% – – 3.0% 6.3% – –

(d) Carrying amounts and fair values of the borrowings

The fair value of the fixed rate bonds and notes payable at the end of the reporting period is HK$40,111.5 million (2017: HK$44,610.9 million). The carrying amounts of other borrowings approximate their fair values.

(e) Currencies

The carrying amounts of the borrowings are denominated in the following currencies:

2018 2017HK$m HK$m

Hong Kong dollar 100,185.1 99,788.5

United States dollar 28,182.5 28,148.1

Renminbi 12,237.5 19,048.6

Others 147.6 134.7

140,752.7 147,119.9

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40 BORROWINGS (CONTINUED)

Notes: (continued)

(f) The contractual repricing dates or maturity dates (whichever is earlier) of the interest-bearing borrowings are as follows:

Bank loans Other loans

Loans from non-controlling

shareholders

Fixed rate bonds and

notes payable TotalHK$m HK$m HK$m HK$m HK$m

2018

Within five years 92,154.4 4,290.7 422.9 25,243.3 122,111.3

After the fifth year 3,590.0 – – 13,036.7 16,626.7

95,744.4 4,290.7 422.9 38,280.0 138,738.0

2017

Within five years 97,874.0 4,143.0 1,016.5 21,211.2 124,244.7

After the fifth year – – – 20,748.5 20,748.5

97,874.0 4,143.0 1,016.5 41,959.7 144,993.2

41 OTHER NON-CURRENT LIABILITIES

2018 2017HK$m HK$m

Deferred income 170.6 180.4

Provision for long service payments 44.2 30.8

Long-term accounts payable 591.7 546.2

806.5 757.4

42 CREDITORS, ACCRUED CHARGES AND CONTRACT LIABILITIES

2018 2017HK$m HK$m

Trade creditors (note (a)) 13,040.9 8,693.9

Amounts due to customers for contract works (note 34) – 2,297.3

Deposits received on sale of properties – 15,175.4

Contract liabilities (note (b)) 25,543.2 –

Amounts due to joint ventures (note (e)) 1,813.6 1,369.7

Amounts due to associated companies (note (e)) 2,431.3 2,334.2

Other creditors and accrued charges 22,230.0 20,864.7

65,059.0 50,735.2

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42 CREDITORS, ACCRUED CHARGES AND CONTRACT LIABILITIES (CONTINUED)

Notes:

(a) Aging analysis of trade creditors based on invoice date is as follows:

2018 2017HK$m HK$m

Current to 30 days 9,974.4 6,098.0

31 to 60 days 366.5 875.7

Over 60 days 2,700.0 1,720.2

13,040.9 8,693.9

(b) The Group has recognised the following revenue-related contract liabilities:

At 30 June 2018 At 1 July 2017HK$m HK$m

Contract liabilities related to property sales (note) 22,583.9 14,533.4

Contract liabilities related to construction services (note) 2,626.3 2,297.3

Contract liabilities related to department store operations 333.0 330.3

25,543.2 17,161.0

Note:

The Group receives payments from customers based on billing schedule as established in contracts. Payments are usually received in advance of the performance under the contracts which are mainly from sales of properties and construction services.

(c) The following table shows the amount of the revenue recognised in the current reporting period relates to contract liability balance at the beginning of the year and the amount relates to performance obligations that were satisfied in a prior year.

2018HK$m

Revenue recognised that was included in the contract liability balance at the beginning of the year

— Property sales 9,558.4

— Construction services 2,162.2

— Department store operations 191.4

11,912.0

Revenue recognised from performance obligations satisfied/partially satisfied in previous periods

— Construction services 190.9

(d) The following table shows the amount unsatisfied performance obligations resulting from property sales, construction services and department store operations for contracts with an original expected duration of one year or more:

2018HK$m

Expected to be recognised within one year 58,485.0

Expected to be recognised after one year 11,422.4

69,907.4

For all other contracts with an original expected duration of one year or less or are billed based on time incurred, as permitted under HKFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed.

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42 CREDITORS, ACCRUED CHARGES AND CONTRACT LIABILITIES (CONTINUED)

Notes: (continued)

(e) The amounts payable are interest free, unsecured and have no fixed terms of repayment.

(f) The carrying amounts of creditors and accrued charges, which approximate their fair values, are denominated in the following currencies:

2018 2017HK$m HK$m

Hong Kong dollar 34,051.0 22,303.1

Renminbi 29,895.8 27,447.1

United States dollars 709.4 519.0

Macau Pataca 189.1 199.6

Others 213.7 266.4

65,059.0 50,735.2

43 FINANCIAL INSTRUMENTS BY CATEGORY

In accordance with HKFRS 7, the financial assets and financial liabilities of the Group as shown in the consolidated statements of financial position are classified as follows:

(a) Financial assets at fair value through profit or loss and derivative financial instruments are categorised as financial assets/financial liabilities at fair value through profit or loss and carried at fair value;

(b) Available-for-sale financial assets are categorised as available-for-sale financial assets and carried at fair value;

(c) Held-to-maturity investments are categorised as held-to-maturity investments and carried at amortised cost using the effective interest method;

(d) Long-term loans and receivables, long-term deposits, restricted bank balances, trade and other debtors, and cash and bank balances are categorised as loans and receivables and carried at amortised cost using the effective interest method; and

(e) Borrowings, trade and other creditors are categorised as financial liabilities and carried at amortised cost using the effective interest method.

44 COMMITMENTS

(a) Operating lease receivableThe future minimum rental receivable under non-cancellable operating leases are as follows:

2018 2017HK$m HK$m

In the first year 3,196.6 1,953.5

In the second to fifth year 4,343.2 2,789.2

After the fifth year 1,974.9 614.2

9,514.7 5,356.9

The Group’s operating leases are for terms ranging from 1 to 16 years (2017: 1 to 17 years).

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44 COMMITMENTS (CONTINUED)

(b) Other commitments(i) Capital expenditure contracted for at the end of the year but not yet provided for is as follows:

2018 2017HK$m HK$m

Contracted but not provided for

Property, plant and equipment 957.5 1,235.3

Investment properties 5,271.5 3,530.4

Joint ventures and associated companies 2,977.6 1,689.5

Other investments 1,702.5 1,153.1

10,909.1 7,608.3

The Group’s share of capital commitments of the joint ventures not included above are as follows:

2018 2017HK$m HK$m

Contracted but not provided for 9,703.7 3,789.5

(ii) Future aggregate lease payments under non-cancellable operating leases are as follows:

2018 2017HK$m HK$m

Land and buildings

In the first year 1,202.3 918.4

In the second to fifth year 3,903.9 3,241.1

After the fifth year 3,283.2 3,028.0

8,389.4 7,187.5

The Group leases various retail outlets under non-cancellable operating lease agreements. The leases have varying terms ranging from 1 to 19 years (2017: 1 to 17 years). Certain of these leases have escalation clauses and renewal rights.

(iii) The Group was awarded a contract for the design, construction, financing and management of a proposed commercial development, of which the Group was granted a lease in respect of the development for a term up to 2066. The development cost is estimated at approximately HK$20 billion. The Group will pay the higher of a guaranteed rent or revenue rent which represents 20% of the gross revenue derived from the development (subject to subsequent adjustment to 30%) throughout the lease term.

45 FINANCIAL GUARANTEE AND CONTINGENT LIABILITIES

2018 2017HK$m HK$m

Financial guarantee contracts:

Mortgage facilities for certain purchasers of properties 4,477.9 3,015.9

Guarantees for credit facilities granted to

Joint ventures 4,171.6 3,994.1

Associated companies 1,824.8 1,938.2

10,474.3 8,948.2

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46 NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS

(a) Reconciliation of operating profit to net cash generated from operations

2018 2017HK$m HK$m

Operating profit 30,975.3 11,751.3

Depreciation 1,503.4 1,035.3

Amortisation 980.1 917.2

Changes in fair value of investment properties (15,367.1) (1,363.8)

Write back of provision for loans and other receivables (90.3) (124.8)

Reversal of other payables (431.0) –

Gain on deemed disposal of interests in joint ventures – (546.9)

(Gain)/loss on remeasurement of an available-for-sale financial asset retained at fair value upon reclassification from an associated company (1,095.5) 34.3

Gain on remeasurement of previously held interest of joint ventures at fair value upon further acquisition to become subsidiaries – (374.2)

Net (gain)/loss on fair value of financial assets at fair value through profit or loss (91.3) 236.7

Net (gain)/loss on disposal of

Associated companies (850.1) (74.2)

Available-for-sale financial assets (114.9) (110.2)

Financial assets at fair value through profit or loss (7.8) (69.2)

Investment properties, property, plant and equipment and intangible concession rights (232.4) (167.8)

Joint ventures – (133.7)

Non-current assets classified as assets held for sale – (244.2)

Perpetual securities – 116.4

Subsidiaries (1,821.0) 127.2

Impairment loss on

Available-for-sale financial assets 27.3 139.2

Intangible assets 192.9 48.4

Loans and other receivables 220.3 231.3

Property, plant and equipment 96.1 49.8

Dividend income from available-for-sale financial assets, perpetual securities and financial assets at fair value through profit or loss (137.3) (528.8)

Share options expenses 57.2 56.6

Net exchange losses 64.3 433.3

Operating profit before working capital changes 13,878.2 11,439.2

Increase in inventories (72.8) (4.2)

Increase in properties for/under development and properties held for sale (10,011.0) (14,282.3)

Increase in debtors, prepayments and contract assets and long-term prepayments and deposits (4,769.3) (1,753.2)

Increase in creditors, accrued charges and contract liabilities 13,953.0 13,032.9

Net cash generated from operations 12,978.1 8,432.4

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46 NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

(b) Reconciliation of liabilities arising from financing activities is as follow:

Borrowings

Long-term borrowings

Short-term borrowings Total

HK$m HK$m HK$m

At 1 July 2017 140,753.2 6,366.7 147,119.9

Changes from cash flows

Proceeds from new borrowings 13,631.5 5,546.0 19,177.5

Repayment of borrowings (22,762.7) (3,206.7) (25,969.4)

Other changes

Acquisition of subsidiaries 272.3 – 272.3

Disposal of subsidiaries (586.5) – (586.5)

Translation differences 166.3 63.6 229.9

Amortisation of front-end fee 501.0 8.0 509.0

At 30 June 2018 131,975.1 8,777.6 140,752.7

(c) Acquisition of subsidiaries

2018 2017HK$m HK$m

Net assets acquired

Investment properties 7,083.5 1,800.9

Property, plant and equipment 115.7 4,167.7

Intangible assets, other than goodwill 54.1 142.8

Deferred tax assets – 0.5

Other non-current assets 22.5 –

Properties held for sale – 70.7

Available-for-sale financial assets – 7.3

Inventories 4.1 86.2

Debtors, prepayments and contract assets 112.2 575.6

Cash and bank balances 468.0 699.0

Creditors, accrued charges and contract liabilities (1,325.8) (787.8)

Current tax payable (500.3) (85.6)

Deferred tax liabilities (889.9) (587.9)

Other non-current liabilities (0.8) (57.6)

Borrowings (272.3) (589.3)

Net assets 4,871.0 5,442.5

Interests originally held by the Group as a joint venture (2,660.7) (3,751.8)

Non-controlling interests (2,570.1) –

(359.8) 1,690.7

Goodwill on acquisition 488.6 707.8

Gain on remeasurement of previously held interests of joint ventures at fair value upon further acquisition to become subsidiaries – (374.2)

Cash consideration 128.8 2,024.3

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46 NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

(d) Analysis of net outflow of cash and cash equivalents in respect of acquisition of subsidiaries

2018 2017HK$m HK$m

Cash consideration (128.8) (2,024.3)

Cash consideration to be paid – 155.8

Cash and cash equivalents acquired 468.0 699.0

339.2 (1,169.5)

(e) Disposal of subsidiaries

2018 2017HK$m HK$m

Net assets disposed

Investment properties 539.6 297.1

Property, plant and equipment 630.1 –

Land use rights 697.2 –

Goodwill 9.2 –

Deferred tax assets 23.2 –

Properties for development 27.3 40.4

Properties under development 1,892.0 717.0

Properties held for sales – 8.0

Inventories 1.5 –

Debtors, prepayments and contract assets 638.6 211.2

Cash and bank balances 65.5 206.6

Creditors, accrued charges and contract liabilities (844.5) (882.1)

Current tax payable (20.9) (6.5)

Borrowings (586.5) (11.3)

Deferred tax liabilities (130.8) (4.5)

Net assets 2,941.5 575.9

Release of reserve upon disposal (155.9) (35.4)

Net gain/(loss) on disposal of subsidiaries 1,821.0 (127.2)

Cash consideration 4,606.6 413.3

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46 NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

(f) Analysis of net inflow of cash and cash equivalents in respect of disposal of subsidiaries

2018 2017HK$m HK$m

Cash consideration 4,606.6 413.3

Cash consideration received for disposal in prior year 6,635.6 5,640.8

Cash and cash equivalents disposed (65.5) (206.6)

11,176.7 5,847.5

47 RELATED PARTY TRANSACTIONS

In addition to those disclosed in other sections of the consolidated financial statements, the following significant related party transactions have been entered into by the Group during the year:

2018 2017HK$m HK$m

Joint ventures

Provision of construction work services (note (a)) 915.7 1,129.9

Interest income (note (b)) 237.5 177.0

Rental expenses (note (c)) 216.8 237.3

Management services fee income (note (d)) 52.2 97.3

2018 2017HK$m HK$m

Related companies (note (i))

Provision of construction work services (note (a)) 48.0 24.6

Rental income (note (c)) 157.2 144.9

Concessionaires commissions (note (e)) 79.0 67.4

Sales of goods, prepaid shopping cards and vouchers (note (f)) 34.5 22.3

Engineering and mechanical services (note (g)) 1,433.1 1,300.6

Management fee expenses (note (h)) 64.9 58.9

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47 RELATED PARTY TRANSACTIONS (CONTINUED)

Notes:

(a) Revenue from provision of construction work services is principally charged in accordance with relevant contracts.

(b) Interest income is charged at interest rates as specified in note 22(a) on the outstanding amounts.

(c) Rental income and expenses are charged in accordance with respective tenancy agreements.

(d) Management services fee income is charged in accordance with the terms of respective management service agreements.

(e) The income is charged in accordance with concessionaire counter agreements with Chow Tai Fook Jewellery Group Limited (“CTFJ”) and its subsidiaries (collectively “CTFJ Group”). The commission is mainly calculated by pre-determined percentages of gross sales value in accordance with respective agreements.

(f) This represents the amounts received in respect of the sales of goods, prepaid shopping cards and vouchers to the Group as payment of purchase of goods and settlement of the relevant value CTF and its subsidiaries (collectively “CTF Group”), CTFJ Group and companies owned by Mr. Doo.

(g) Engineering and mechanical services are charged in accordance with relevant contracts.

(h) Management fee expenses are charged at rates in accordance with relevant contracts.

(j) Related companies are subsidiaries and joint ventures of CTF Group, CTFJ Group and companies owned by Mr. Doo.

(j) The balances with joint ventures and associated companies are disclosed in notes 22, 23, 31 and 42.

(k) No significant transactions have been entered with the Directors of the Company (being the key management personnel) during the year other than the emoluments paid to them as disclosed in note 16 and note (l).

(l) On 27 October 2017, New World Development (China) Limited (“NWD (China)”), an indirect wholly owned subsidiary of the Company, entered into a sale and purchase agreement with Oriental Triumph Inc. (“Oriental Triumph”), a company wholly owned by Mr. Doo, and under which NWD (China) agreed to sell, and Oriental Triumph agreed to purchase the entire issued share capital of Ramada Property Ltd., which together with its subsidiaries owns and operates the Shanghai Ramada Plaza, New World Shanghai Hotel and pentahotel Shanghai, at a consideration of RMB1.85 billion (equivalent to approximately HK$2.2 billion), subject to customary closing adjustment (the “Disposal”). The Disposal was completed on 28 March 2018.

(m) On 29 September 2017, CTF, Healthcare Ventures Holdings Limited (“Healthcare Ventures”, a direct wholly owned subsidiary of CTF), New World Strategic Investment Limited (“New World Strategic”, a direct wholly owned subsidiary of NWD), Smart Future Investments Limited (“Smart Future”, an indirect wholly owned subsidiary of New World Strategic), NWS Service Management Limited (“NWS Service”, a direct wholly owned subsidiary of the Company), Dynamic Ally Limited (“Dynamic Ally”, an indirect wholly owned subsidiary of NWS Service) and Healthcare Assets Management Limited (“Healthcare Assets”) entered into an amended and restated joint venture agreement to regulate the respective rights and obligations of Healthcare Ventures, Smart Future and Dynamic Ally towards the management of Healthcare Assets, following the subscription of shares in Healthcare Assets by Smart Future. Upon completion of the subscription, the entire issued share capital of Healthcare Assets is owned as to 30%, 40% and 30% by Healthcare Ventures, Smart Future and Dynamic Ally respectively. The Group ceased its joint control in Healthcare Assets. Accordingly, the investment in Healthcare Assets was thereafter accounted for as an associated company. Pursuant to the amended and restated joint venture agreement, Healthcare Ventures, Smart Future and Dynamic Ally intend to invest an aggregate amount of up to HK$780 million in Healthcare Assets.

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48 COMPANY STATEMENT OF FINANCIAL POSITION

2018 2017HK$m HK$m

Assets

Non-current assets

Investment property 153.0 130.0

Property, plant and equipment 8.1 9.5

Interests in subsidiaries 69,168.3 48,567.9

Interests in joint ventures 1,440.4 1,087.5

Interests in associated companies 7.4 7.4

Available-for-sale financial assets 3.3 3.4

Deferred tax assets 55.4 55.4

70,835.9 49,861.1

Current assets

Properties held for sale 1,012.1 1,110.0

Debtors, prepayments and contract assets 173.8 214.9

Amounts receivable from subsidiaries 73,363.1 82,500.1

Cash and bank balances 496.6 1,730.4

75,045.6 85,555.4

Total assets 145,881.5 135,416.5

Equity

Share capital 77,525.9 73,233.6

Reserves (note) 24,335.3 23,335.8

Total equity 101,861.2 96,569.4

Liabilities

Current liabilities

Creditors, accrued charges and contract liabilities 473.1 369.5

Amounts payable to subsidiaries 43,547.2 38,477.6

Total liabilities 44,020.3 38,847.1

Total equity and liabilities 145,881.5 135,416.5

Dr. Cheng Kar-Shun, Henry Dr. Cheng Chi-Kong, AdrianDirector Director

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48 COMPANY STATEMENT OF FINANCIAL POSITION (CONTINUED)

Note:

Reserves

Investment revaluation

reserve

Employees’ share-based

compensation reserve

Retained profits Total

HK$m HK$m HK$m HK$m

At 1 July 2017 (6.8) 184.2 23,158.4 23,335.8

Employees’ share-based payment – 57.2 – 57.2

Share options lapsed – (47.3) 47.3 –

Buyback of shares – – (130.9) (130.9)

Fair value changes of available-for-sale financial assets (0.1) – – (0.1)

Release of investment revaluation deficit to income statement upon impairment of available-for-sale financial assets 7.1 – – 7.1

Profit for the year – – 5,726.6 5,726.6

2017 final dividend – – (3,246.3) (3,246.3)

2018 interim dividend – – (1,414.1) (1,414.1)

At 30 June 2018 0.2 194.1 24,141.0 24,335.3

Investment revaluation

reserve

Employees’ share-based

compensation reserve

Retained profits Total

HK$m HK$m HK$m HK$m

At 1 July 2016 (6.7) 165.3 21,344.3 21,502.9

Employees’ share-based payment – 48.1 – 48.1

Share options lapsed – (29.2) 29.2 –

Fair value changes of available-for-sale financial assets (0.1) – – (0.1)

Profit for the year – – 5,956.0 5,956.0

2016 final dividend – – (2,912.3) (2,912.3)

2017 interim dividend – – (1,258.8) (1,258.8)

At 30 June 2017 (6.8) 184.2 23,158.4 23,335.8

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49 PRINCIPAL SUBSIDIARIES

As at 30 June 2018

Share capital issued#

Number of shares

Issued and paid up

share capital

Attributable interest to the Group Principal activities

HK$ (%)

Incorporated and operate in Hong Kong

Ace Island Limited 1 1 100 Property investment

Addlight Investments Limited 9,9982 ¹

9,9982

6363

Property development

Adwin Top Limited 2 2 100 Property investment

All Speed Investment Limited 2 2 100 Property investment

Anway Limited 1 1 61 Duty free operation and general trading

Billion Huge (International) Limited 950,001 950,001 100 Investment holding

Billion Park Investment Limited 1,000,000 1,000,000 80 Investment holding

Billionoble Investment Limited 4,9982 ¹

4,9982

6161

Investment holding

Bonson Holdings Limited 1 1 100 Property investment

Bounty Gain Limited 1 1 61 Investment holding

Bright Moon Company, Limited 100,000 1,000,000 75 Property investment

Cheer Best Enterprises Limited 2 2 100 Property investment

Cheering Step Investments Limited 1 1 61 Investment holding

Cheong Sing Company Limited 10,000 10,000 100 Property investment

Cheong Yin Company Limited 30,000 3,000,000 100 Property investment

Chi Lam Investment Company Limited 7,000 700,000 100 Investment holding

Chinese Future Limited 1,300,000,000 1,300,000,000 61 Investment holding

CiF Solutions Limited 10160,000 ¹

1,00016,000,000

6161

Provision of information technology solutions

Citybus Limited 37,500,000 376,295,750 61 Provision of franchised and non-franchised bus services

Come City Limited 2 2 100 Property investment

Discovery Park Commercial Services Limited 2 2 100 Property management

DP Properties Limited 4,000 1,000 100 Property investment

Dynamic Ally Limited 1 1 61 Investment holding

Easywin Enterprises Corporation Limited 2,000 200,000 100 Investment holding

Fook Hang Trading Company Limited 100 10,000 85 Property development

Fook Hong Enterprises Company, Limited 10,000 1,000,000 100 Property investment

Fortune Kingdom Development Limited 2 2 100 Property development

Fortune Land Development Limited 1 1 100 Property investment

Full Asset Enterprises Limited 1 1 100 Property investment

Good Sense Development Limited 1 1 100 Property investment

Grace Crystal Limited 1 1 61 Investment holding

Grace Sky Creation Limited 10,000 10,000 100 Investment holding

Gracejoy Investments Limited 1 1 100 Property development

Grand Express International Limited 1 1 61 Investment holding

Guidetone Investments Limited 100,000 100,000 80 Property investment

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Share capital issued#

Number of shares

Issued and paid up

share capital

Attributable interest to the Group Principal activities

HK$ (%)

Incorporated and operate in Hong Kong (continued)

Happy Champion Limited 2 2 100 Investment holding

Head Step Limited 2 2 100 Hotel operation

Healthcare Assets Management Limited 10 20,177,194 58 Healthcare

Highness Land Investment Company Limited

10 100 60 Property investment

Hip Hing Builders Company Limited 40,00010,000 ¹

40,000,00010,000,000

6161

Construction

Hip Hing Construction Company Limited 400,000600,000 ¹

40,000,00060,000,000

6161

Construction and civil engineering

Hip Hing Engineering Company Limited 2,000,000 200,000,000 61 Building construction

Hip Seng Builders Limited 20,000 20,000,000 61 Construction

Hip Seng Construction Company Limited 1 1 61 Construction

Hong Kong Convention and Exhibition Centre (Management) Limited

31 ¹

31

6161

Management of Hong Kong Convention and Exhibition Centre (“HKCEC”)

Hong Kong Exhibition and Convention Venue Management China Limited

1 1 61 Investment holding

Hong Kong Island Development Limited 33,400,000 167,000,000 100 Property investment

Hong Kong Jing-Guang Development Limited 100,000 1,000,000 82 Investment holding

Hong Kong Multiple Intelligence Education Company Limited

1 1 100 Provision of training courses

Honour Shares Limited 100 100 100 Investment holding

Housing Finance Limited 2 2 100 Financial services

Istaron Limited 4 4 100 Investment holding

Jade Gain Enterprises Limited 100 100 70 Property investment

Join Base Development Limited 1 1 100 Property investment

Joint Profit Limited 2 2 100 Property investment

K11 (China) Limited 1 1 100 Investment holding

K11 Concepts Limited 1 1 100 Provision of property management consultancy services

K11 Cultural & Creation Company Limited 1 1 100 Cultural & Creation

K11 Sales & E-Commerce Company Limited 1 1 100 Retail & Corporate Sales

Kin Kiu Enterprises, Limited 10,000 10,000,000 100 Investment holding

King Lee Investment Company Limited 300 300,000 100 Investment holding

Kiu Lok Property Services (China) Limited 22 ¹

22

6161

Property agency management and consultancy

La Tune Limited 2 200 100 Property investment

Land Chain Limited 2 2 100 Property investment

Land Source Investment Limited 2 2 100 Property investment

49 PRINCIPAL SUBSIDIARIES (CONTINUED)

As at 30 June 2018

F-201

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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

Share capital issued#

Number of shares

Issued and paid up

share capital

Attributable interest to the Group Principal activities

HK$ (%)

Incorporated and operate in Hong Kong (continued)

Lingal Limited 1,800200 ¹

1,800200

100–

Investment holding

Legarleon Finance Limited 4,400,000 44,000,000 100 Financing

Login SCM Hong Kong Limited 1 1 100 Supply chain management

Lucrative Venture Limited 1,500,000 15,000,000 100 Property development

Magic Sign Limited 2 2 100 Property development

Million Noble Investments Limited 1 1 100 Investment holding

Million World Development Limited 100 100 100 Property investment

New Advent Limited 1 1 61 Property investment

New World China Construction Limited 1 1 100 Investment holding

New World Construction Company Limited 1 1 61 Construction

New World Construction Management Company Limited

1 1 61 Construction

New World Department Store (Investment) Limited 3 410,045,794 75 Investment holding

New World Department Stores Limited 2 2 75 Provision of management services to department stores

New World Development (China) Limited 2 4 100 Investment holding

New World Dynamics Holdings Limited 100 100 70 Sales of LED lighting products and systems

New World Facade Engineering Company Limited 1 1 61 Facade operation

New World Finance Company Limited 200,000 20,000,000 100 Financial services

New World-Guangdong Highway Investments Co. Limited

999,900100 ¹

99,990,00010,000

6181

Investment holding

New World Hotels (Holdings) Limited 576,000,000 510,795,731 100 Investment holding

New World Loyalty Programme Limited 1 1 100 Loyalty programme

New World Port Investments Limited 2 2 61 Investment holding

New World Project Management (China) Limited 1 1 100 Project management

New World Property Management Company Limited

1 1 100 Property management

New World Real Estate Agency Limited 2 2 100 Estate agency

New World Tower Company Limited 2 20 100 Property investment

New World (Xiamen) Port Investments Limited 2 2 61 Investment holding

NW Project Management (HK) Limited 1 1 100 Project management

NW Project Management Limited 2 2 100 Project management

NWS (Finance) Limited 2 2 61 Financial services

NWS Holdings (Finance) Limited 1 1 61 Financing

NWS Hong Kong Investment Limited 1 1 61 Investment holding

49 PRINCIPAL SUBSIDIARIES (CONTINUED)

As at 30 June 2018

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Share capital issued#

Number of shares

Issued and paid up

share capital

Attributable interest to the Group Principal activities

HK$ (%)

Incorporated and operate in Hong Kong (continued)

NWS Ports Management (Tianjin) Limited 1 1 61 Investment holding

Pacific Great Investment Limited 50,000,000 50,000,000 100 Investment holding

Paterson Plaza Properties Limited 10,000 10,000 100 Property investment

Pearls Limited 100 100 92 Property development

Peterson Investment Company Limited 10,000 10,000 100 Property investment

Pine Harvest Limited 1 1 80 Property development

Polytown Company Limited 2100,000 ¹

201,000,000

6161

Property investment, operation, marketing, promotion and management of HKCEC

Polyworth Limited 10 10 92 Property development

Pontiff Company Limited 10,000,000 10,000,000 100 Property development

Pridemax Limited 2 2 100 Property investment

Profit Now Limited 1 1 61 Investment holding

Queen’s Land Investment Limited 1,000 1,000 100 Property development

Realray Investments Limited 2 2 100 Property investment

Regent Star Investment Limited 1,000 1,000 100 Property development

Richglows Limited 2 2 100 Property investment

Riviera Quin International Limited 10,000 10,000 51 Investment holding

Riviera Hexa International Limited 10,000 10,000 51 Investment holding

Rosy Page Lmited 15,000,000 15,000,000 100 Property development

Roxy Limited 1 1 100 Construction and operation of Skycity

Scienward Fashion and Luxury Limited 10,000 10,000 75 Investment holding and fashion trading

Scienward Sports and Casual Limited 100 100 75 Provision of management services

Seaworthy Investments Limited 1 1 100 Property investment

Silver Grow Investment Limited 1 1 75 Investment holding

Silver Rich Holdings Limited 2 2 85 Property development

Silver World H.K. Development Limited 1 1 100 Investment holding

Sky Connection Limited 100 100 61 Duty free operation and general trading

Speed Star Development Limited 2 2 100 Property investment

Spotview Development Limited 10 10 100 Financial services

Super Memory Limited 2 2 100 Property investment

Super Record Limited 1 1 100 Property investment

Super Value Development Limited 10,000 10,000 100 Property investment

Tao Yun Company Limited 2 20 100 Property investment

Top Flash Investments Limited 10,000 10,000 100 Property investment

49 PRINCIPAL SUBSIDIARIES (CONTINUED)

As at 30 June 2018

F-203

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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

Share capital issued#

Number of shares

Issued and paid up

share capital

Attributable interest to the Group Principal activities

HK$ (%)

Incorporated and operate in Hong Kong (continued)

True Hope Investment Limited 299,999,9982 ¹

299,999,9982

6161

Investment holding

Twinic International Limited 1 1 61 Investment holding

Ultimate Vantage Limited 100 100 80 Property development

Up Fair Limited 2 2 100 Property development

Urban Parking Limited 15,000,000 15,000,000 61 Carpark management

Vibro Construction Company Limited 1,630,00020,000 ¹

163,000,0002,000,000

6161

Civil engineering

Vibro (H.K.) Limited 20,000,004 60,328,449 61 Piling, ground investigation and civil engineering

Waygent Investment Limited 2 2 100 Property investment

Winpo Development Limited 2 2 100 Property investment

Wisemec Enterprises Limited 2 2 61 Investment holding

World Empire Property Limited 2 2 100 Property investment

Share capital issued# Attributable interest to the Group

Number of shares

Par value per share Principal activities

(%)

Incorporated in the Cayman Islands

Chinese Future Corporation 1,000,000 US$0.01 61 Investment holding

Incorporated in the Cayman Islands and operate in Hong Kong

New World China Land Limited 8,702,292,242 HK$0.1 100 Investment holding

New World Department Store China Limited

1,686,145,000 HK$0.1 75 Investment holding

New World TMT Limited 952,180,007 HK$1 100 Investment holding

NWS Service Management Limited 1,323,943,165 HK$0.1 61 Investment holding

Incorporated and operates in the Philippines

New World International Development Philippines, Inc

6,988,016 Peso100 62 Hotel operation

Incorporated and operates in Malaysia

Taipan Eagle Sdn. Bhd. 1,000,000 MYR1 71 Property development

# Represented ordinary share capital, unless otherwise stated

1 Non-voting deferred shares

49 PRINCIPAL SUBSIDIARIES (CONTINUED)

As at 30 June 2018

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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

49 PRINCIPAL SUBSIDIARIES (CONTINUED)

As at 30 June 2018

Registered/fully paid capital

Attributableinterestø

to the Group Principal activities(%)

Incorporated and operate in the PRC

Anshan New World Department Store Co., Ltd. RMB25,000,000W 75 Department store operation

Beijing Chong Yu Real Estate Development Co., Ltd. US$171,840,000W 100 Property investment and development

Beijing Dongfang Huamei Real Estate Development Co., Ltd.

RMB200,000,000E 75 Land development

Beijing Lingal Real Estates Development Co., Ltd. US$13,000,000W 100 Property investment

Beijing New World Huamei Real Estate Development Co., Ltd.

RMB748,000,000E 75 Property development

Beijing New World Liying Department Store Co., Ltd. RMB18,000,000W 75 Department store operation

Beijing New World Qianzi Department Store Co., Ltd. HK$60,000,000W 75 Department store operation

Beijing New World Trendy Department Store Co., Ltd. RMB25,000,000W 75 Department store operation

Beijing NW Project Management Consultancy Services Limited

RMB1,000,000W 100 Project management and consultancy

Beijing Xintong Media & Advertising Co., Ltd. RMB100,000,000E 83 Provision of advertising and media related services

Beijing Yixi New World Department Store Co., Ltd. RMB65,000,000W 75 Department store operation

Changsha New World Trendy Plaza Co., Ltd. RMB60,000,000W 75 Department store operation

Chaoming (Chongqing) Investment Company Limited US$78,000,000W 61 Investment holding

Chengdu New World Department Store Co., Ltd. RMB70,000,000W 75 Department store operation

Chongqing New World Department Store Co., Ltd. RMB100,000,000W 75 Department store operation

Dalian New World Plaza International Co., Ltd. RMB58,000,000E 88 Property investment and development

Dalian New World Tower Co., Ltd. US$197,324,700W 100 Property investment and development

Foshan International Country Club Company Ltd. US$52,923,600C 85 Golf club operation

Foshan Da Hao Hu Real Estate Development Co., Ltd. RMB1,364,500,500W 85 Property development

Guangdong Xin Chuan Co., Ltd. RMB714,853,600W 61 Investment holding

Guangzhou Fong Chuen-New World Property Development Ltd.

RMB330,000,000C 100 Property development

Guangzhou Jixian Zhuang New World City Garden Development Limited

US$24,000,000C 100 Property development

Guangzhou Metropolitan Properties Co., Ltd. HK$140,000,000W 100 Property investment

Guangzhou New World Properties Development Co., Ltd.

HK$220,000,000W 100 Property investment

Guangzhou Xin Hua Chen Real Estate Co., Ltd. RMB200,000,000C 100 Property development

Guangzhou Xin Hua Jian Real Estate Co., Ltd. RMB244,000,000C 100 Property development

Guangzhou Xin Sui Tourism Centre Ltd. HK$350,000,000W 100 Property development

Guangzhou Xin Yi Development Limited HK$286,000,000C 90 Property investment and development

Guangzhou Xinpei Enterprises Management Co., Ltd. RMB50,000,000W 100 Investment holding

Guangzhou Xinpei Investment Co. Ltd. RMB200,000,000W 100 Investment holding

Guangzhou Yao Ce Enterprises Management Consultancy Co. Ltd.

RMB10,000,000W 100 Investment holding

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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

Registered/fully paid capital

Attributableinterestø

to the Group Principal activities(%)

Incorporated and operate in the PRC (continued)

Guangzhou Yibo Real Estate Development Co., Ltd. RMB392,500,000W 100 Property development

Guangzhou Yong Pei Properties Development Co., Ltd. RMB2,300,000,000W 100 Property development

Hangzhou Guoyi Expressway and Bridge Management Co., Ltd.

US$320,590,000E 61 Operation of toll road

Harbin New World Department Store Co., Ltd. RMB126,000,000W 75 Department store operation

Huamei Wealth (Beijing) Technology Co., Ltd. RMB640,000,000W 100 Property investment

Hunan Fortune Lake Property Development Co., Ltd. RMB255,724,318W 100 Property development

Hunan Success New Century Investment Company Limited

RMB980,000,000E 95 Property development

Jiangsu New World Department Store Co., Ltd. RMB16,000,000W 75 Department store operation

Jinan New World Sunshine Development Ltd. US$69,980,000W 100 Property development

K11 Concepts (Beijing) Limited RMB8,000,000W 100 Business consultancy

K11 Concepts (Shanghai) Limited RMB16,000,000W 100 Business consultancy

Langfang New World Properties Development Co., Ltd. US$145,300,000W 100 Property development

Langfang Xin Zhong Properties Development Co., Ltd. US$98,200,000W 100 Property development

Lanzhou New World Department Store Co., Ltd. RMB30,000,000W 75 Department store operation

Login SCM (Shenzhen) Co. Ltd. RMB50,000,000W 100 Supply chain management

Mianyang New World Department Store Co., Ltd. RMB14,000,000W 75 Department store operation

Nanjing New World Real Estate Co., Ltd. US$45,339,518W 100 Property investment

New World Anderson (Tianjin) Development Co., Ltd. US$5,500,000W 100 Property investment

New World (Anshan) Property Development Co., Ltd. RMB1,420,000,000W 100 Property development

New World (China) Investment Limited US$130,000,000W 100 Investment holding

New World China Land Investments Company Limited US$80,000,000W 100 Investment holding

New World Department Store (China) Co., Ltd. RMB50,000,000W 75 Department store operation

New World Department Stores Investment (China) Co., Ltd.

US$150,000,000W 75 Investment holding

New World Development (Wuhan) Co., Ltd US$128,500,000W 100 Property investment and development

New World Dynamics (Shenzhen) Company Limited RMB18,880,000W 70 Sales of LED lighting products and systems

New World Goodtrade (Wuhan) Limited US$219,500,000W 100 Property investment and development

New World HHC Construction Limited RMB53,000,000W 100 Construction

New World New Land Real Estate (Wuhan) Co., Ltd. US$590,900,000W 100 Property development

New World Project Management (Shenzhen) Limited RMB10,000,000W 100 Project management

New World (Shenyang) Property Development Limited RMB5,647,800,000W 100 Property investment and development

New World Strategic (Beijing) Investment Consultancy Limited

US$2,400,000W 100 Investment consultancy

49 PRINCIPAL SUBSIDIARIES (CONTINUED)

As at 30 June 2018

F-206

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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

Registered/fully paid capital

Attributableinterestø

to the Group Principal activities(%)

Incorporated and operate in the PRC (continued)

Ningbo Firm Success Consulting Development Co., Ltd. US$5,000,000W 75 Investment holding and provision of consultancy services

Peak Moral High Commercial Development (Shanghai) Co., Ltd.

US$40,000,000W 75 Property investment and shopping mall operation

Scienward Fashion and Luxury (Shanghai) Co., Ltd. US$6,460,000W 75 Fashion retailing and trading

Shang Ji Properties (Shenzhen) Co. Ltd. RMB150,000,000W 51 Property development

Shang Shun Properties (Shenzhen) Co. Ltd. RMB130,000,000W 51 Property development

Shanghai Luxba Trading Ltd. US$7,150,000W 75 Properties investment and fashion trading

Shanghai New World Caixuan Department Store Co., Ltd.

RMB30,000,000W 75 Department store operation

Shanghai New World Caizi Department Store Co., Ltd. RMB50,000,000W 75 Department store operation

Shanghai New World Department Store Co., Ltd. RMB18,000,000W 75 Department store operation

Shanghai New World Huiya Department Store Co., Ltd. RMB240,000,000W 75 Department store operation

Shanghai New World Huiyan Department Store Co., Ltd RMB85,000,000W 75 Property investment and shopping mall operation

Shanghai New World Huiying Department Store Co., Ltd.

RMB93,970,000W 75 Department store operation

Shanghai New World Huizi Department Store Co., Ltd RMB5,000,000W 75 Department store operation

Shanghai New World Xinying Department Store Co., Ltd.

HK$100,000,000W 75 Department store operation

Shanghai Trio Property Development Co., Ltd. US$81,000,000W 100 Property investment

Shanxi Xinda Highways Ltd. RMB49,000,000C 37 Operation of toll road

Shanxi Xinhuang Highways Ltd. RMB56,000,000C 37 Operation of toll road

Shenyang New World Department Store Ltd. RMB30,000,000W 75 Property investment and department store operation

Shenyang New World Xin Hui Properties Co., Ltd. RMB501,520,000W 100 Property development

Shenyang Trendy Property Company Limited RMB27,880,000W 75 Property investment

Shenzhen New World Xianglong Network Technology Company Limited

RMB447,708,674C 100 Exploration of wireless telecommunication network

Shenzhen Top One Real Estate Development Co., Ltd. HK$150,000,000C 100 Property development

Shenzhen Topping Real Estate Development Co., Ltd. HK$294,000,000W 100 Property development

Tang Shan New World Property Development Co., Ltd. US$162,000,000W 100 Property development

Tianjin New World Department Store Co., Ltd. US$5,000,000W 75 Department store operation

49 PRINCIPAL SUBSIDIARIES (CONTINUED)

As at 30 June 2018

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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

Registered/fully paid capital

Attributableinterestø

to the Group Principal activities(%)

Incorporated and operate in the PRC (continued)

Tianjin New World Properties Development Co., Ltd. US$91,000,000W 100 Property development

Tianjin New World Trendy Plaza Co., Ltd. RMB30,000,000W 75 Department store operation

Tianjin Xin Guang Development Co., Ltd. US$4,500,000W 100 Property investment

Wuhan New Eagle Enterprises Co., Limited US$2,830,000W 100 Property investment

Wuhan New World Caixuan Department Store Co., Ltd. RMB75,000,000W 75 Department store operation

Wuhan New World Department Store Co., Ltd. US$15,630,000W 75 Property investment and department store operation

Wuhan New World Trendy Department Store Co., Ltd. RMB80,000,000W 75 Department store operation

Wuhan New World Trendy Plaza Co., Ltd. RMB50,000,000W 75 Department store operation

Wuhan Xinhan Development Co., Ltd. US$16,000,000C 100 Property development

Wuzhou Xinwu Highways Limited RMB72,000,000C 32 Operation of toll road

Xiamen NWS Management Consultancy Limited US$500,000W 61 Management consultation

Xi’an New World Department Store Co., Ltd. RMB40,000,000W 75 Department store operation

Yantai New World Department Store Co., Ltd RMB80,000,000W 75 Department store operation

Yunnan New World Department Store Co., Ltd. RMB10,000,000W 75 Department store operation

Zhaoqing New World Property Development Limited US$16,500,000W 100 Property development

Zhengzhou New World Department Store Co., Ltd. RMB50,000,000W 75 Department store operation

Incorporated and operate in Macau

Hip Hing Engineering (Macau) Company Limited MOP100,000 61 Construction

Vibro (Macau) Limited MOP1,000,000 61 Foundation works

The Group indirectly holds equity interest in these subsidiaries through non-wholly owned subsidiaries, and has control over each of these subsidiaries

ø Profit or cash sharing percentage was adopted for certain PRC entities

W Registered as wholly foreign owned enterprise under PRC law

E Registered as sino-foreign equity joint venture under PRC law

C Registered as sino-foreign co-operative joint venture under PRC law

49 PRINCIPAL SUBSIDIARIES (CONTINUED)

As at 30 June 2018

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49 PRINCIPAL SUBSIDIARIES (CONTINUED)

As at 30 June 2018

Share capital issued# Attributableinterest to the Group

Number of shares

Par value per share Principal activities

(%)

Incorporated in Bermuda and operates in Hong Kong

NWS Holdings Limited 3,896,506,451 HK$1 61 Investment holding

Incorporated in the British Virgin Islands

Allied Win Investments Limited 1 US$1 100 Investment holding

Beauty Ocean Limited 1 US$1 61 Investment holding

Brilliant Alpha Investment Limited 1 US$1 100 Investment holding

Crown Success Limited 100 US$1 100 Investment holding

Eagle Eyes Development Limited 1 US$1 100 Investment holding

Ease Kind Development Limited 1 US$1 100 Property development

Esteemed Sino Limited 1 US$1 100 Investment holding

Ever Brisk Limited 1 US$1 100 Investment holding

Ever Reliance Enterprises Limited 1 US$1 51 Investment holding

Fine Reputation Incorporated 10,000 US$1 100 Investment holding

Flying Gravity Limited 1 US$1 61 Investment holding

Fortland Ventures Limited 1 US$1 61 Investment holding

Fortune Star Worldwide Limited 100 US$1 100 Investment holding

Fotoland Limited 1 US$1 100 Investment holding

Gao Li Enterprises Limited 1 US$1 51 Investment holding

Gigantic Global Limited 2 US$1 100 Investment holding

Goodtrade Enterprises Limited 1 US$1 100 Investment holding

Gravy Train Investments Limited 1 US$1 61 Investment holding

HH Holdings Corporation 600,000 HK$1 61 Investment holding

Hing Loong Limited 20,010,000 US$1 100 Investment holding

Ideal Global International Limited 1 US$1 61 Investment holding

K11 Group Limited 1 HK$1 100 Investment holding

K11 Investment Company Limited 1 US$1 100 Investment holding

Kee Shing Investments Limited 1,000 US$1 100 Investment holding

Keen Link Enterprises Limited 1 US$1 100 Investment holding

Lotsgain Limited 100 US$1 100 Investment holding

F-209

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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

Share capital issued# Attributableinterest to the Group

Number of shares

Par value per share Principal activities

(%)

Incorporated in the British Virgin Islands (continued)

Login SCM (BVI) Limited 1 US$1 100 Investment holding

Magic Chance Limited 1 US$1 100 Investment holding

Moscan Developments Limited 1 US$1 61 Investment holding

Natal Global Limited 1 US$1 61 Investment holding

New World China Construction (BVI) Limited 1 US$1 100 Investment holding

New World Project Management (BVI) Limited

1 US$1 100 Investment holding

New World Hotels Corporation Limited 1 US$1 100 Investment holding

NWS CON Limited 1 HK$1 61 Investment holding

NWS Construction Limited 190,0008,125

R

6,791

S

US$0.1US$0.1US$0.1

61––

Investment holding

NWS Infrastructure Bridges Limited 1 US$1 61 Investment holding

NWS Infrastructure Power Limited 1 US$1 61 Investment holding

NWS Infrastructure Water Limited 1 US$1 61 Investment holding

Penta Enterprises Limited 1 US$1 100 Investment holding

Pure Cosmos Limited 1 US$1 61 Investment holding

Radiant Glow Limited 1 US$1 100 Investment holding

Right Choice International Limited 200 US$1 52 Property investment

Right Heart Associates Limited 4 US$1 61 Investment holding

Righteous Corporation 1 US$1 61 Investment holding

Sparkling Rainbow Limited 1 US$1 100 Investment holding

Steadfast International Limited 2 US$1 100 Investment holding

Stockfield Limited 1 US$1 61 Investment holding

Superb Wealthy Group Limited 1 US$1 100 Financing

Sweet Prospects Enterprises Limited 1 US$1 100 Investment holding

Total Partner Holdings Limited 1 US$1 100 Investment holding

Triumphant Ally Investments Limited 100 US$1 51 Investment holding

True Blue Developments Limited 1 US$1 100 Investment holding

Winner World Group Limited 10 US$1 100 Investment holding

49 PRINCIPAL SUBSIDIARIES (CONTINUED)

As at 30 June 2018

F-210

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N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

Share capital issued# Attributableinterest to the Group

Number of shares

Par value per share Principal activities

(%)

Incorporated in the British Virgin Islands and operate in Hong Kong

Bellwood Group Limited 100 US$1 61 Investment holding

Best Star (BVI) Investments Limited 1 US$1 61 Investment holding

China Sincere Limited 1 – 75 Financing

Citiplus Investment Limited 1 US$1 100 Investment holding

Creative Profit Group Limited 1 US$1 61 Investment holding

Economic Velocity Limited 1 US$1 61 Investment holding

Fita International Limited 1 – 100 Bond issuer

Great Start Group Corporation 1 US$1 61 Investment holding

Hetro Limited 101 US$1 61 Investment holding

Lucky Strong Limited 1 US$1 61 Investment holding

New World Capital Finance Limited 1 US$1 100 Bond issuer

New World First Bus Services Limited 200,000,000 HK$1 61 Provision of franchised bus services

New World First Ferry Services Limited 1 US$1 61 Provision of ferry services

New World Strategic Investment Limited 1 US$1 100 Investment holding

Noonday Limited 100 US$1 61 Investment holding

NWD Finance (BVI) Limited 1 US$1 100 Bond issuer

NWD (MTN) Limited 1 US$1 100 Bond issuer

NWS Financial Management Services Limited 1 US$1 61 Investment holding

NWS Infrastructure Management Limited 2 US$1 61 Investment holding

NWS Infrastructure Roads Limited 1 US$1 61 Investment holding

NWS Ports Management Limited 2 US$1 61 Investment holding

NWS Transport Services Limited 500,000,016 HK$1 61 Investment holding

Park New Astor Hotel Limited 101 US$1 100 Property investment

South Scarlet Limited 1 US$1 100 Hotel operation

Well Metro Group Limited 14,000 US$1 75 Investment holding

Incorporated in the British Virgin Islands and operates in the PRC

Nacaro Developments Limited 2 US$1 100 Property Investment

Incorporated and operates in Thailand

Emerald Bay Resort Co., Ltd. 7,380,000 THB100 100 Hotel operation

# Represented ordinary share capital, unless otherwise stated

R Redeemable, non-convertible and non-voting A preference shares

S Redeemable, non-convertible and non-voting B preference shares

49 PRINCIPAL SUBSIDIARIES (CONTINUED)

As at 30 June 2018

F-211

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50 PRINCIPAL JOINT VENTURES

As at 30 June 2018

Registered/fully paid capital

Attributable interest

to the Group

Ω

Principal activities(%)

Equity joint ventures

Incorporated and operate in the PRC

China United International Rail Containers Co., Limited

RMB4,200,000,000 18 Operation of rail container terminals and related business

Chongqing Suyu Business Development Company Limited

RMB650,000,000 31 Investment holding

Guangzhou Oriental Power Co., Ltd. RMB990,000,000 15 Generation and supply of electricity

Guangzhou Pearl River Electric Power Fuel Co., Ltd.

RMB613,361,800 21 Wholesale, assembling and storage of fuel

Guodian Chengdu Jintang Power Generation Co., Ltd.

RMB924,000,000 21 Generation and supply of electricity

Co-operative joint ventures

Incorporated and operate in the PRC

Beijing-Zhuhai Expressway Guangzhou-Zhuhai Section Company Limited

RMB580,000,000 15 Operation of toll road

Beijing Chong Wen • New World Properties Development Co., Ltd.

US$225,400,000 70s Property investment, development and hotel operation

Beijing Xin Kang Real Estate Development Co., Ltd.

US$12,000,000 70s Property investment

Beijing Xin Lian Hotel Co., Ltd. US$12,000,000 55s Hotel operation

China New World Electronics Ltd. US$57,200,000 70s Property investment and development

Guangzhou Northring Freeway Company Limited

US$19,255,000 40s Operation of toll road

Huizhou City Huixin Expressway Company Limited

RMB34,400,000 31 Investment holding

Huizhou New World Housing Development Limited

RMB80,000,000 62s Property development

Tianjin Xinzhan Expressway Company Limited

RMB2,539,100,000 37@s Operation of toll road

Wuhan Wuxin Hotel Co., Ltd. US$49,750,000 60s Hotel operation

F-212

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50 PRINCIPAL JOINT VENTURES (CONTINUED)

As at 30 June 2018

Registered/fully paid capital

Attributable interestΩ

to the Group Principal activities(%)

Wholly foreign owned enterprises

Incorporated and operate in the PRC

Guangzhou Bosson Real Estate Co., Ltd.

RMB50,003,000 62s Property development

Guangzhou Hemsell Real Estate Development Co., Ltd.

RMB79,597,000 62s Property development

Guangzhou Shengpei Enterprises Co. Ltd.

RMB500,000,000 40 Property development

Ningbo Gong Tai Properties Co., Ltd. RMB235,000,000 49 Property development

Ningbo Xin Li Real Estate Co., Ltd. US$856,000,000 49 Property development

Wuhan New World Hotel Properties Co., Ltd.

RMB83,507,110 60s Property investment

Ω Percentage of equity interest, in the case of equity joint ventures or profit sharing percentage, in the case of co-operative joint ventures

@ Represented cash sharing ratio

s The Group through its subsidiaries holds more than 50% interests in these joint ventures. These joint ventures are considered as subsidiary undertakings under the Hong Kong Companies Ordinance (Cap. 622). However, under the respective contractual agreements, the Group does not control these joint ventures as the decisions about relevant activities require the unanimous consent of the parties sharing the control.

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50 PRINCIPAL JOINT VENTURES (CONTINUED)

As at 30 June 2018

Share capital issued#

Number of shares

Issued and paid up

share capital

Attributable interest

to the Group Principal activitiesHK$ (%)

Companies limited by shares

Incorporated and operate in Hong Kong

ATL Logistics Centre Hong Kong Limited

100,000’A’20,000’B’ 2

54,918 1

100,00020,00054,918

34&

49100

Operation of cargo handling and storage facilities

Calpella Limited 2 20 50 Property investment

China Aerospace New World Technology Limited

30,000,000 165,000,000 50 Investment holding

Chow Tai Fook Qianhai Investments Company Limited

700 700 29 Shopping mall operation

Earning Yield Limited 1 1 51& Property development

Eminent Elite Limited 1 1 49 Investment holding

First Star Development Limited 100 100 31 Property development

Gain Path Investments Limited 1 1 40 Investment holding

GH Hotel Company Limited 1,001 64,109,750 50 Hotel operation

Global Perfect Development Limited 1,000,000 1,000,000 50 Investment holding

Golden Kent International Limited 1 1 40 Property development

Great TST Limited 2 863,878,691 50 Hotel operation

Hotelier Finance Limited 1 1 50 Financing

Loyalton Limited 2 20 50 Property investment

New World Harbourview Hotel Company Limited

1,001 109,109,750 50 Hotel operation

Supertime Holdings Limited 100 100 31 Property development

Tate’s Cairn Tunnel Investment Holdings Company Limited

1,100,000 1,100,000 18 Investment holding

Wincon International Limited 300,000,000 300,000,000 31 Investment holding

Wise Come Development Limited 30 30 50 Property investment

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New World Development Company LimitedAnnual Report 2018 235

N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

50 PRINCIPAL JOINT VENTURES (CONTINUED)

As at 30 June 2018

Share capital issued#

Number of shares

Par value per share

Attributable interest

to the Group Principal activities(%)

Incorporated in the British Virgin Islands and operate in the PRC

Holicon Holdings Limited 2 US$1 50 Property Investment

Jaidan Profits Limited 2 US$1 50 Property Investment

Jorvik International Limited 2 US$1 50 Property Investment

Orwin Enterprises Limited 2 US$1 50 Property Investment

Incorporated in the British Virgin Islands

Blaze Flourish Holdings Limited 1 US$1 40 Investment holding

DP World New World Limited 2,000 US$1 31 Investment holding

Great Hotels Holdings Limited 6 US$1 50 Investment holding

Group Program Limited 1 US$1 40 Loyalty programme

Landso Investment Limited 100 – 35 Investment holding

Newfoundworld Investment Holdings Limited

5 US$1 20 Investment holding

Silverway Global Limited 2 US$1 31 Investment holding

Silvery Yield Development Limited 100 US$1 49 Investment holding

Success Concept Investments Limited

1,000 US$1 55& Investment holding

Unite Profit Holdings Limited 100 US$1 40 Investment holding

Incorporated and operates in the Netherlands

Hyva I B.V. 19,000 EUR1 31 Manufacturing and supply of components used in hydraulic loading and unloading systems

Incorporated in the Cayman Islands and operate globally

Goshawk Aviation Limited 362,026,264*** US$0.001 31 Commercial aircraft leasing

Goshawk Management Holdings (Cayman) Limited

100 US$1 31 Commercial aircraft leasing management

Incorporated and operates in Singapore

FEC Skyline Pte. Ltd. 4,000,000 – 30 Property development

# Represented ordinary share capital, unless otherwise stated

1 Non-voting deferred shares

2 Non-voting preference shares

*** Preference shares

& The directors of the Company considered the Group does not have unilateral control governing the financial and operating activities over these joint ventures

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New World Development Company Limited Annual Report 2018236

N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

51 PRINCIPAL ASSOCIATED COMPANIES

As at 30 June 2018

Share capital issued#

Number of shares

Issued and paid up

share capital

Attributable interest

to the Group Principal activitiesHK$ (%)

Incorporated and operate in Hong Kong

Conduit Road Development Limited 100 10,000 30 Property development

Ever Light Limited 1,000 1,000 40 Property investment

GHK Hospital Limited 10 10 24 Healthcare

Joy Fortune Investments Limited 10,000 10,000 31 Investment holding

Pure Jade Limited 1,000,000 1,000,000 27 Property investment

Quon Hing Concrete Company Limited

200,000 20,000,000 31 Production and sales of ready-mixed concrete

Ranex Investments Limited 100 100 10^ Property investment

Shougang Concord International Enterprises Company Limited

18,963,723,510 7,576,945,623 6^ Investment holding

Shun Tak Centre Limited 1,000’A’450’B’550’C’

100,0004,5005,500

45100

–

Property investment

Sky Treasure Development Limited 10 10 30 Investment holding

Incorporated in Hong Kong and operates in Hong Kong, Macau and Mainland China

SUEZ NWS Limited 20,256,429 5,134,005,207 26 Investment holding and operation of water, wastewater and waste management business

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New World Development Company LimitedAnnual Report 2018 237

N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

51 PRINCIPAL ASSOCIATED COMPANIES (CONTINUED)

As at 30 June 2018

Share capital issued# Attributable interest

to the Group Principal activitiesNumber

of sharesPar value per share

(%)

Incorporated in the British Virgin Islands

VMS Private Investment Partners II Limited

2,500*

1,745**

US$0.01US$0.01

–61^^

Securities investment

Incorporated in the British Virgin Islandsand operates in Hong Kong

VMS Private Investment Partners III Limited

1,500*

611**

US$0.01US$0.01

–61^^

Securities investment

Incorporated in Bermuda and operates in Hong Kong

Wai Kee Holdings Limited 793,124,034 HK$0.1 17 Construction

Incorporated in the Cayman Islands and operates in Hong Kong and Mainland China

UMP Healthcare China Limited 100 US$0.01 12 Healthcare

Incorporated in the Cyprus andoperates in South Africa

Tharisa plc 260,240,839 US$0.001 10^ Platinum group metals and chrome mining, processing and trading

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New World Development Company Limited Annual Report 2018238

N o t e s t o t h e F i n a n c i a l S t a t e m e n t s

51 PRINCIPAL ASSOCIATED COMPANIES (CONTINUED)

As at 30 June 2018

Registered/fully paid capital

AttributableinterestΩ

to the Group Principal activities(%)

Incorporated and operate in the PRC

Chongqing Silian Optoelectronics Science And Technology Co., Ltd.

RMB500,000,000 12 Manufacturing and sale of sapphire substrate and wafer, LED packaging and application

Hangzhou Ring Road Expressway Petroleum Development Co., Ltd.

RMB10,000,000 24 Operation of gasoline station

Hubei Suiyuenan Expressway Co., Ltd. RMB1,770,000,000 18 Operation of toll road

Shenzhen City Prince Bay Lewan Properties Co. Ltd.

RMB2,119,052,550 49 Property development

Shenzhen City Prince Bay Shangding Properties Co. Ltd.

RMB2,007,909,020 49 Property development

Shenzhen Tiande Property Development Co. Ltd.

RMB4,400,000,000 30 Property development

Tianjin Five Continents International Container Terminal Co., Ltd.

RMB1,145,000,000 11^ Operation of container terminal

Xiamen Container Terminal Group Co., Ltd.

RMB2,436,604,228 12^ Operation of container terminals

Zhaoqing Yuezhao Expressway Co., Ltd.

RMB818,300,000 15 Operation of toll road

# Represented ordinary share capital, unless otherwise stated

Ω Percentage of equity interest, in the case of equity joint ventures or profit sharing percentage, in the case of co-operative joint ventures

* Voting, non-participating, non-redeemable management shares

** Non-voting, redeemable participating shares

^ The directors of the Company considered the Group has significant influence over these companies through its representatives on the board of directors of each of these companies

^^ The directors of the Company considered the Group has significant influence over these companies through its representative on the investment committee which governs the relevant activities

F-218

ISSUER

New World China Land Limited(Principal Place of Business)

9th Floor, New World Tower 118 Queen’s Road Central

Hong Kong

GUARANTOR

New World Development Company Limited(Registered Office)

30th Floor, New World Tower18 Queen’s Road Central

Hong Kong

AUDITOR OF THE ISSUER AND GUARANTOR

PricewaterhouseCoopersCertified Public Accountants

22nd FloorPrince’s Building

CentralHong Kong

TRUSTEE PRINCIPAL PAYING AGENT,TRANSFER AGENT AND REGISTRAR

The Hongkong and Shanghai BankingCorporation Limited

Level 30, HSBC Main Building1 Queen’s Road Central

Hong Kong

The Hongkong and Shanghai BankingCorporation Limited

Level 30, HSBC Main Building1 Queen’s Road Central

Hong Kong

LEGAL ADVISERS

To the Issueras to Cayman Islands law

To the Issuer and the Guarantoras to Hong Kong law and English Law

Conyers Dill & Pearman29/F One Exchange Square

8 Connaught PlaceCentral

Hong Kong

Linklaters10/F Alexandra House

Chater RoadHong Kong

To the Arrangers and Dealersas to Hong Kong law and English law

To the Trusteeas to English law

Clifford Chance27th Floor, Jardine House

One Connaught PlaceCentral

Hong Kong

Clifford Chance27th Floor, Jardine House

One Connaught PlaceCentral

Hong Kong