Annual Financial Report

18 March 2011

Asian Growth Properties Limited

Immediate Release

Results for the year ended 31 December 2010

Asian Growth Properties Limited (the "Company") (AIM Stock Code: AGP), the Hong Kong based China property development and investment company, announces its audited consolidated results for the year ended 31 December 2010 as follows:

Financial Highlights

n Profit attributable to the Company's shareholders of HK$824.2 million (£68.5 million) (2009: HK$1,206.2 million (£96.5 million))

n Earnings per share for profit attributable to the Company's shareholders of HK93 cents (7.7 pence) (2009: HK136 cents (10.9 pence))

n Net asset value per share attributable to the Company's shareholders as at 31 December 2010 of HK$10.0 (83.0 pence) (31 December 2009: HK$9.0 (71.7 pence))

n Geographical location of the Group's property assets were as follow:

n Gearing ratio, calculated on the basis of net interest bearing debts minus cash and restricted and pledged deposits as a percentage of total property assets, of 10.0% (31 December 2009: 10.2%)

Operational Highlights

n Gross rental income of Dah Sing Financial Centre in Hong Kong was maintained with a high level of occupancy.

n Hotel operation results of Crowne Plaza Hong Kong Causeway Bay were satisfactory.

n Major land acquisitions in Chengdu and Kaifeng in Mainland China with a total site area of about 288,000 square metres and 735,000 square metres respectively for mixed use development.

Notes:

1. Figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting years. The relevant exchange rates adopted are stated as follows:-

2. For Shareholders' information, the exchange rate on 16 March 2011 was £1 = HK$12.5464

Miscellaneous

The results included in this announcement are extracted from the audited consolidated financial statements of the Company for the year ended 31 December 2010, which have been approved by the Board of Directors on 18 March 2011.

The 2010 Annual Report is expected to be posted to shareholders and holders of depositary interests in mid April 2011.

For further information, please contact:

Attached:-

1. Chairman's Review;

2. Executive Directors' Review;

3. Consolidated Income Statement;

4. Consolidated Statement of Comprehensive Income;

5. Consolidated Statement of Financial Position;

6. Consolidated Statement of Changes in Equity;

7. Consolidated Statement of Cash Flows; and

8. Notes to the Consolidated Financial Statements.

CHAIRMAN'S REVIEW

I am pleased to present the consolidated results of Asian Growth Properties Limited ("AGP" or the "Company") for the year 2010 to the shareholders of the Company.

Results

AGP reported a profit attributable to the Company's shareholders of HK$824.2 million (£68.5 million) for the year ended 31 December 2010 (2009: HK$1,206.2 million (£96.5 million)). The reported profit included a revaluation surplus on investment properties net of deferred taxation. By excluding the net effect of such surplus, the Group's net profit attributable to the Company's shareholders was HK$59.3 million (£4.9 million) (2009: HK$81.0 million (£6.5 million)). 

As at 31 December 2010, the Group's equity attributable to the Company's shareholders amounted to HK$8,854.3 million (£735.5 million), representing an increase of HK$909.5 million (£75.6 million) over 31 December 2009. The net asset value per share as at 31 December 2010 was HK$10.0 (83.0 pence) as compared with HK$9.0 (71.7 pence) as at 31 December 2009.

Figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting years.

Operations

During 2010, the Group has continued the development of various property projects in Hong Kong and Mainland China.

The rental income from the investment properties situated in both Hong Kong and Mainland China continue to provide stable returns to the Group. For developed properties, units in residential developments continue to be marketed with steady sales results. Turnover for the year mainly represented the sale of certain remaining units of The Forest Hills and Royal Green.

The Crowne Plaza Hong Kong Causeway Bay commenced operations in November 2009 and its performance improved during the year. The hotel operation generated positive cash flow from its operation, though after depreciation of the hotel property was taken into account an accounting loss was recorded.

The Group has eventually won the planning appeal of the large mixed use retail and residential development in Fo Tan, Hong Kong in 2010 and the necessary building plan approvals and the land exchange application are now being sought.

For details of the Group's operations, please refer to the Executive Directors' Review.

Outlook

In 2011, the Group will commence its substantial development programme in Chengdu, Sichuan and Kaifeng, Henan, the People's Republic of China and will also pursue full building approval for the Fo Tan mixed-use development in Hong Kong.

Inflation continues to grow at a worrying pace in Mainland China and the growth of bank lending in the first quarter of 2011 is unprecedented. The rapid growth in food prices is having a wide ranging effect and the Chinese government may be pressured to reign in lending and to raise interest rates. It is expected that there will be some consolidation in real estate prices in Mainland China and the rapid acceleration in prices in the recent past may abate. In Hong Kong, with the continuous effect of low interest rates and shortage of supply of both residential and commercial units, it is believed that the current pricing levels may persist in 2011.

The political uncertainty in North Africa and the Middle East poses a signal which may have far reaching effects, while the consequence of the recent terrible disaster in Japan are yet to be fully reflected. The Group will remain cautious in monitoring its property projects in Hong Kong and Mainland China closely and will continue to adhere to its conservative policy of low gearing and significant cash reserves such that it is in a position to fund these developments and expand its property portfolio at an opportune time. Meanwhile, the Board is confident that the Group will be able to generate satisfactory returns from the development sites which were acquired in recent years.

Dividend

The Board does not propose the payment of a final dividend for the year ended 31 December 2010 (2009: Nil).

Acknowledgement

The Board would like to take this opportunity to thank the executive and management team for the execution of the Board's strategy and their ongoing support.

Richard Prickett

Non-Executive Chairman

England, 18 March 2011

executive directors' Review

FINANCIAL SUMMARY

Turnover for the year ended 31 December 2010 amounted to HK$706.8 million (£58.7 million) (2009: HK$516.6 million (£41.3 million)). The turnover was principally attributable to the recognition of the sales of residential units in The Forest Hills, rental incomes from investment properties and revenue from hotel operation.

Profit attributable to the Company's shareholders for the year amounted to HK$824.2 million (£68.5 million) (2009: HK$1,206.2 million (£96.5 million)), equivalent to a basic earnings per share of HK93 cents (7.7 pence) (2009: HK136 cents (10.9 pence)). The reported profit included a revaluation surplus on investment properties net of deferred taxation. By excluding the effect of such surplus, the Group's net profit attributable to the Company's shareholders was HK$59.3 million (£4.9 million) (2009: HK$81.0 million (£6.5 million)), equivalent to HK7 cents (0.6 pence) (2009: HK9 cents (0.7 pence)) per share. 

As at 31 December 2010, the Group's equity attributable to the Company's shareholders amounted to HK$8,854.3 million (£735.5 million) (31 December 2009: HK$7,944.8 million (£635.5 million)). The net asset value per share attributable to the Company's shareholders as at 31 December 2010 was HK$10.0 (83.0 pence) as compared with HK$9.0 (71.7 pence) as at 31 December 2009.

For Shareholders' information, figures in Pounds Sterling are translated from Hong Kong dollars based upon the exchange rates prevailing on the latest practicable business day of the respective accounting years and the relevant exchange rates adopted are stated as follows:-

For 31 December 2010 : £1 = HK$12.0382; and

For 31 December 2009 : £1 = HK$12.5018

BUSINESS REVIEW

Property Investment and Development

All of the Group's property development and investment projects are located in Hong Kong and Mainland China and are as listed below:

Hong Kong

1. Dah Sing Financial Centre, Gloucester Road, Wanchai

The 39-storey commercial building includes offices and shops (total gross floor area of about 37,200 square metres) with ancillary car-parking facilities for 137 covered and 27 open car-parking spaces. Rental income generated from Dah Sing Financial Centre has been stable and satisfactory. The occupancy rate remains at a high level and was approximately 99% as at 31 December 2010.

2. The Forest Hills, Diamond Hill

With a total gross floor area of approximately 18,800 square metres, the property has been developed as a 48-storey residential and commercial composite building, comprising 304 residential units above a 7-level retail podium, a club-house and car parks. The development was completed in April 2008 and delivery of the residential units to buyers commenced in May 2008. Up to 31 December 2010, about 97% of the residential units and 60 out of 76 residents' car-parking spaces have been sold while all the non-residents' car-parking spaces have been leased to a car-park operator at satisfactory rentals until the end of February 2012.

Marketing for the remaining residential units and residents' car-parking spaces and the leasing activities for the retail podium are continuing.

3. The Morrison, Wanchai

The property is a 30-storey residential and commercial composite building, with a total gross floor area of approximately 5,800 square metres, comprising 104 residential units above a club-house floor and a 3-storey commercial podium. The development was completed in October 2007 and has won the Best Interior Design Award of the CNBC Asia Pacific Property Awards 2008 organised by the International Homes Magazine and the Best Environmental Design Award 2008 organised by The Hong Kong Institute of Surveyors.

Marketing for the remaining 5 residential units (which are presently leased) is continuing. In December 2009, the Group entered into an agreement for sale and purchase with an independent party for the disposal of the entire commercial podium of The Morrison at a consideration of HK$245 million. The transaction was completed in late March 2010 and the profit generated was included in the fair value changes on investment properties in the consolidated financial statements of the Company for the year ended 31 December 2009.

4. Royal Green, Sheung Shui

The Group has a 55% interest in this private residential development comprising 922 residential units contained in three 40-storey residential towers with ancillary recreational and car-parking facilities. During the year, the 2 remaining duplex residential units and 5 car-parking spaces were sold.

5. Fo Tan, Sha Tin

Rezoning applications with several master layout plans and design schemes have been submitted to the Town Planning Board and relevant parties for consideration. The proposed development envisages, among other facilities, residential units, car parks, educational facilities and a bus terminus. The Town Planning Board rejected the Group's town planning application in July 2008 due to a number of outstanding environmental, traffic and urban design issues. The appeals submitted by the Group were allowed by the Town Planning Appeal Board in October 2010. In December 2010, General Building Plan was submitted to the Building Department for approval. A land exchange application has been submitted for confirmation on land lease condition and land premium. The Group is awaiting the comments from the Building Department for further progress.

Mainland China

6. Plaza Central, Chengdu, Sichuan Province

Plaza Central comprises two 30-storey office blocks erected on a common podium of six commercial/retail floors and two car-parking floors with a total gross floor area of approximately 91,500 square metres. During the year, the aggregate occupancy rate for the two office towers improved marginally and leasing activities for the remaining areas are continuing. The retail podium with a gross floor area of about 29,000 square metres has been fully let principally to Chengdu New World Department Store on a long-term lease. As at 31 December 2010, the aggregate occupancy rate for the two office towers and the retail podium was approximately 74%.

7. New Century Plaza, Chengdu, Sichuan Province

The Group's property is a shopping arcade with a gross floor area of about 16,300 square metres and two car-parking basement floors in a commercial development known as New Century Plaza. The arcade has been fully let since the Group's renewal of the tenancy with a furniture retailer commencing from 1 September 2009 for a further term of five years at a rental commensurate with the economic conditions then.

8. Westmin Plaza Phase II, Guangzhou, Guangdong Province

The Westmin Plaza Phase II project, which has a total gross floor area of about 119,000 square metres, comprises four residential blocks of 646 units and one office block erected on a 5-storey commercial/car-parking podium. The residential units were fully sold in February 2009 and the Group retains ownership of the office and commercial units. The development has won the Best Mixed Use Development - China Award of the CNBC Asia Pacific Commercial Property Awards 2009.

The 14-storey office tower has a total gross floor area of about 16,100 square metres. As at 31 December 2010, the tower was fully leased with more than one-third of the total office space being leased with naming rights to AIA, an international insurer, for a term of six years from April 2008. Leasing activities for the 3-storey shopping arcade with a total gross floor area of about 26,400 square metres are in progress.

9. Huangshan, Anhui Province

In March 2010, the Group completed its acquisition from the joint venture partner of the remaining 9% equity interest not owned by it in the project company which has the right to develop tourist leisure facilities on land located in the famous scenic and most visited tourist Huangshan (Yellow Mountain) area. The project is presently wholly-owned by the Group.

The land to be developed by the Group has a site area of about 333,500 square metres, comprising about 66,700 square metres owned by the project company and about 266,800 square metres leased from the local authority for development. An overall development plan for a hotel and villas in the integrated resort site has been prepared for the Board's consideration and a renowned landscape architect in Japan has been retained to oversee the development.

10. Chi Shan, Nanjing, Jiangsu Province

Through the establishment/acquisition of two 51%-owned joint venture companies, the Group started its investment projects in Chi Shan. The joint venture companies are currently participating in the excavation, tenant relocation arrangements and infrastructure works on certain pieces of lands in that locality. Negotiations with the joint-venture partners about the size and scope of this luxury villa development are continuing.

11. Leiyang, Hunan Province

The 50/50 joint venture was established in March 2009 for the development project known as The Redbud City in Leiyang. The superstructure work for eleven blocks of link-house, seven high-rise apartment buildings and eight bungalows with a total gross floor area of approximately 117,000 square metres and two blocks of club-house and commercial buildings has been progressing as scheduled. The pre-sale campaign for Phase I development was launched in May 2009 and so far, 544 out of 860 residential units and 1 out of 8 bungalows have been sold. Delivery of the first batch of units has commenced in August 2010 and the remaining units are expected to be delivered to the purchasers at different completion stages up to and until the end of 2011.

New Development Projects

During the year under review, the Group was active in pursuing new development opportunities and has increased its land bank in attractive second-tier cities in Mainland China because the land prices are lower and their economies are likely to grow even when there is a slow-down in the primary cities.

In late June, 2010, the Group acquired eight pieces of land in Kaifeng, Henan Province with a total site area of about 675,000 square metres for residential and commercial development for RMB399.8 million. In mid August 2010, the Group made a successful bid in a public tender for acquisition of two additional pieces of land, which are adjacent to the abovementioned land, with a total site area of about 60,000 square metres for residential and commercial development for RMB47.5 million. The land costs and related taxes were fully settled in June and September 2010.

During the year, the Group also acquired two pieces of land in Longquan, Chengdu, Sichuan Province with a total site area of about 288,000 square metres for residential development for RMB190 million. The negotiation for the acquisition of the third piece of adjacent land of 218,000 square metres is close to conclusion.

Research and feasibility study in respect of the above projects' market positioning are in progress. Preliminary site works is proceeding.

Hotel Operation

Crowne Plaza Hong Kong Causeway Bay

The project has been developed into a 29-storey five-star hotel comprising 263 guest rooms (gross floor area of approximately 14,945 square metres) with ancillary facilities. The operation of the hotel is under the name "Crowne Plaza Hong Kong Causeway Bay", which commenced operations in early November 2009, and is presently managed by a member of the InterContinental Hotels Group ("IHG"). So far, the room occupancy and room rates have been satisfactory and the hotel has proved popular with a wide range of guests and increasing up-scale business travellers. Progress is being made in further improving its food and beverages operation and turnover.

In April 2010, the hotel won three awards of the International Property Awards in association with Bloomberg Television, namely:

1. the Best Hotel Construction & Design Hong Kong - 5-star Award;

2. the Architecture (Leisure & Hospitality) Hong Kong - 5-star Award; and

3. the Best Interior Design Hong Kong - Highly Commended Award.

In July 2010, it won two other awards, namely:

a) the "Best New Hotel Award" amongst the Crowne Plaza Hotels for Greater China opened in 2009 conferred by the IHG; and

b) the "Golfers' Choice Awards 2010 - Choice New Hotel" conferred by Golf Vacations, a magazine distributed in Mainland China, Hong Kong and Macau.

WORKING CAPITAL AND LOAN FACILITIES

As at 31 December 2010, the Group's total cash balance was HK$1,993.5 million (2009: HK$1,880.4 million) and unutilized facilities were HK$830.0 million (2009: HK$495.5 million).

Gearing ratio as at 31 December 2010, calculated on the basis of net interest bearing debts minus cash and restricted and pledged deposits as a percentage of total property assets, was 10.0% (2009: 10.2%). 

As at 31 December 2010, maturity of the Group's outstanding borrowings was as follows:

Pledge of Assets

For the Company's subsidiaries operating in Hong Kong and Mainland China, the total bank loans drawn as at 31 December 2010 amounted to HK$3,028.1 million (2009: HK$2,798.6 million), which were secured by properties valued at HK$8,683.5 million (2009: HK$7,163.8 million) and fixed deposits of HK$264.1 million (2009: HK$325.3 million). 

Treasury Policies

The Group adheres to prudent treasury policies. As at 31 December 2010, all of the Group's borrowings were raised through its wholly-owned or substantially controlled subsidiaries on a non-recourse basis.

International Financial Reporting Standards ("IFRS")

The Group has adopted IFRS and the audited consolidated financial statements accompanying this Review have been prepared in accordance with IFRS.

OUTLOOK

The economic recovery that started to manifest itself in 2010 appears to be gathering some forward momentum particularly in the US where first quarter results have been encouraging. However there is still much to be concerned about with huge government deficits in the more mature economies having to be addressed by slashing public expenditure and with the knock on effect on employment yet to be felt. The recovery is still fragile and interest rates are likely to remain at relatively low levels for some time.

The nuclear plant crisis in quake-hit Japan may continue to deteriorate and may have unseen repercussions. The ongoing political developments in North Africa and the Middle East also raise the concern of the world. The people power revolutions in Tunisia and Egypt are spreading. If this results in more radical anti western governments coming to power, the consequences for the world economy could be significant.

In Mainland China, the property market has continued to boom against a background of increasing loan growth. With few investment alternatives, this loan growth may not be continued. In order to address rampant inflation, the Chinese government may further increase interest rates. With the intention on getting inflation under control, it is expected that the Chinese government may implement further measures such as increasing taxation and restricting the lending to control pricing appreciation in the real estate markets. These measures may result in a slowdown and possible decrease in prices of properties in 2011.

The Group however is well balanced with a mixture of income generating assets as well as high potential development projects. The development projects in Mainland China, which were acquired over the past two years, are all progressing with planning at advanced stages and we anticipate breaking ground on projects located in Chengdu, Sichuan and Kaifeng, Henan during the year. These two projects were located in second tier cities of Mainland China and were bought at attractive terms. Even with a slowdown in end sale prices, it is believed that the projects will generate reasonably good returns for the shareholders of the Company. However, these two projects require significant investments in early years for commercial development and the returns will not be apparent until stabilised rental income and occupancy are achieved some time in future. 

With strong demand for office spaces in Hong Kong, Dah Sing Financial Centre will continue to generate more rental income with several leases coming up for renewal at increased market rates. Our hotel in Causeway Bay is now well established and is projected to have higher revenue for the coming year.

The Group has eventually won the planning appeal of our large mixed use retail and residential development in Fo Tan, Hong Kong and the necessary building plan approvals are now being sought. It is anticipated that there will be further developments in this respect in the coming financial year.

As in previous years, the Group will continue to explore new investment and development opportunities which have potential for long term growth. Meanwhile, the Group's top priority is to consolidate the existing development strategy and monitor their progress carefully.

On behalf of Executive Directors

Lu Wing Chi

Executive Director

Hong Kong, 18 March 2011

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31 December 2010

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 December 2010

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 December 2010

CONSOLIDATED STATEMENT OF FINANCIAL POSITION  - continued

AS AT 31 December 2010

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 December 2010

Other reserves comprise (i) a discount on acquisition/assumption, in prior years, of certain assets and liabilities from the intermediate holding company, S E A Holdings Limited ("SEA") and the excess of the consideration over the market closing price of the shares issued for the acquisition. The amounts attributable to those assets and liabilities derecognised in subsequent years will be recognised in profit or loss; and (ii) the excess of the consideration paid for acquisition of additional interest in a subsidiary from non-controlling shareholder over the carrying amount of non-controlling interests.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 December 2010

CONSOLIDATED STATEMENT OF CASH FLOWS - continued

FOR THE YEAR ENDED 31 December 2010

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 December 2010

1. GENERAL

The Company is a public limited company incorporated in the British Virgin Islands ("B.V.I.") with limited liability and its shares are admitted for trading on the AIM market of London Stock Exchange plc. ("AIM"). The Company's immediate holding company is Charm Action Holdings Limited, a company incorporated in the B.V.I.. One of the Company's intermediate holding companies is S E A Holdings Limited ("SEA"), the shares of which are listed on The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). The directors of the Company consider that the Company's ultimate holding company is JCS Limited. Both SEA and JCS Limited are companies incorporated in Bermuda as exempted companies with limited liability. The addresses of the registered office and principal place of business of the Company are Portcullis TrustNet Chambers, P.O. Box 3444, Road Town, Tortola, B.V.I. and 25th Floor, Dah Sing Financial Centre, 108 Gloucester Road, Wanchai, Hong Kong, respectively.

The consolidated financial statements are presented in Hong Kong dollars, which is also the functional currency of the Company.

The Company acts as an investment holding company. The activities of its principal subsidiaries are set out in note 43.

2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS

In the current year, the Group has applied the following new and revised standards, amendments and interpretations ("new and revised IFRSs") issued by the International Accounting Standards Board ("the IASB").

IFRSs (Amendments) Amendment to IFRS 5 as part of Improvements to

IFRSs 2008

IFRSs (Amendments) Improvements to IFRSs 2009

IAS 27 (revised in 2008) Consolidated and Separate Financial Statements

IAS 39 (Amendments) Eligible Hedged Items

IFRS 2 (Amendments) Group Cash-settled Share-based Payment Transactions

IFRS 3 (revised in 2008) Business Combinations

IFRIC 17 Distributions of Non-cash Assets to Owners

Except as disclosed below, the adoption of the new and revised IFRSs in the current year has had no material effect on the consolidated financial statements of the Group for the current or prior accounting periods.

IFRS 3 (revised in 2008) Business Combinations and IAS 27 (revised in 2008) Consolidated and Separate Financial Statements

The Group applied IFRS 3 (revised in 2008) Business Combinations prospectively to business combinations for which the acquisition date is on or after 1 January 2010. The requirements in IAS 27 (revised in 2008) Consolidated and Separate Financial Statements in relation to accounting for changes in ownership interests in a subsidiary after control is obtained and for loss of control of a subsidiary are also applied prospectively by the Group on or after 1 January 2010.

As no business combination occurred during the current year, the application of IFRS 3 (revised in 2008) had no effect on the consolidated financial statements of the Group for the current or prior accounting periods. Results of the Group in future periods may be affected by future transactions for which IFRS 3 (revised in 2008) is applicable.

2. APPLICATION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS - continued

In respect of the Group's acquisition of additional interest in a subsidiary during the current year, the application of IAS 27 (revised in 2008) has resulted in recognition of the difference between the consideration received and the decrease in the carrying amount of the non-controlling interests of HK$391,000 in equity. In addition, cash consideration of HK$900,000 paid to the non-controlling shareholders is presented as cash flow used in financing activities.

Amendment to IAS 17 Leases

As part of Improvements to IFRSs issued in 2009, IAS 17 Leases has been amended in relation to the classification of leasehold land. Before the amendment to IAS 17, the Group was required to classify leasehold land as operating leases and to present leasehold land as prepaid lease payments in the consolidated statement of financial position. The amendment has removed such a requirement. The amendment requires that the classification of leasehold land should be based on the general principles set out in IAS 17, that is, whether or not substantially all the risks and rewards incidental to ownership of a leased asset have been transferred to the lessee.

In accordance with the transitional provisions set out in the amendment to IAS 17, the Group reassessed the classification of unexpired leasehold land as at 1 January 2010 based on information that existed at the inception of leases. Leasehold lands that qualified for finance lease classification have been reclassified from prepaid lease payment to property, plant, and equipment retrospectively. As a result of the reclassification of prepaid lease payment with previous carrying amount of HK$607,117,000 and HK$591,995,000 as at 1 January 2009 and 31 December 2009 respectively to property, plant and equipment, the carrying amount of property, plant and equipment is increased by HK$607,117,000 and HK$591,995,000 from HK$389,936,000 and HK$680,226,000 as at 1 January 2009 and 31 December 2009 to HK$997,053,000 and HK$1,272,221,000 respectively. The carrying amount of such leasehold land at 31 December 2010 of HK$576,873,000 has been included in property, plant and equipment. The application of the amendments to IAS17 has had no impact on the reported profit or loss for the current and prior years.

The Group has not early applied the new and revised standards, amendments or interpretations that have been issued but are not yet effective. Except as disclosed below, the directors of the Company anticipate that the application of the other new and revised standards, amendments or interpretations will have no material impact on the consolidated financial statements of the Group.

IAS 12 (Amendments) Deferred Tax: Recovery of Underlying Assets

The amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets mainly deal with the measurement of deferred tax for investment properties that are measured using the fair value model in accordance with IAS 40 Investment Property. Based on the amendments, for the purposes of measuring deferred tax liabilities and deferred tax assets for investment properties measured using the fair value model, the carrying amounts of the investment properties are presumed to be recovered through sale, unless the presumption is rebutted in certain circumstances. The directors of the Company anticipate that the application of the amendments to IAS 12 may have a significant impact on deferred tax recognised for investment properties that are measured using the fair value method. Had the amendments been adopted for the year ended 31 December 2010, the deferred tax liabilities for investment properties would have been decreased and the profit for the current year and prior year would have been increased.

3. SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared on the historical cost basis except for investment properties, which are measured at fair values, as explained in the accounting policies set out below.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries). Control is achieved where the Company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition and up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Allocation of total comprehensive income to non-controlling interests

Total comprehensive income and expense of a subsidiary is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. Prior to 1 January 2010, losses applicable to the non-controlling interests in excess of the non-controlling interests in the subsidiary's equity were allocated against the interests of the Group except to the extent that the non-controlling interests had a binding obligation and were able to make an additional investment to cover the losses.

Changes in the Group's ownership interests in existing subsidiaries on or after 1 January 2010

Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control over the subsidiaries are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.

3. SIGNIFICANT ACCOUNTING POLICIES - continued

When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. Where certain assets of the subsidiary are measured at revalued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Group had directly disposed of the related assets (i.e. reclassified to profit or loss or transferred directly to retained earnings). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 Financial Instruments: Recognition and Measurement or, when applicable, the cost on initial recognition of an investment in an associate or a jointly controlled entity.

Changes in the Group's ownership interests in existing subsidiaries prior to 1 January 2010

Increases in interests in existing subsidiaries were treated in the same manner as the acquisition of subsidiaries, with goodwill or a bargain purchase gain being recognised where appropriate. For decreases in interests in subsidiaries, regardless of whether the disposals would result in the Group losing control over the subsidiaries, the difference between the consideration received and the adjustment to the non-controlling interests was recognised in profit or loss.

Jointly controlled entities

Joint venture arrangements that involve the establishment of a separate entity in which venturers have joint control over the economic activity of the entity are referred to as jointly controlled entities.

The results and assets and liabilities of jointly controlled entities are incorporated in the consolidated financial statements using the equity method of accounting. Under the equity method, investments in jointly controlled entities are initially recognised in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group's share of the profit or loss and other comprehensive income of the jointly controlled entities. When the Group's share of losses of a jointly controlled entity equals or exceeds its interest in that jointly controlled entity (which includes any long-term interests that, in substance, form part of the Group's net investment in the jointly controlled entity), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of that jointly controlled entity.

Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of a jointly controlled entity recognised at the date of acquisition is recognised as goodwill, which is included within the carrying amount of the investment.

Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

The requirements of IAS 39 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group's investment in a jointly controlled entity. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with IAS 36 Impairment of Assets as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with IAS 36 to the extent that the recoverable amount of the investment subsequently increases.

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Jointly controlled entities - continued

When a group entity transacts with its jointly controlled entity, profits and losses resulting from the transactions with the jointly controlled entity are recognised in the Group's consolidated financial statements only to the extent of interests in the jointly controlled entity that are not related to the Group.

Non-current assets held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset is available for immediate sale in its present condition. Management must be committed to the sale, which should

be expected to qualify for recognition as a completed sale within one year from the date of classification.

Investment properties that are classified as held for sale are measured at their fair values at the end of the reporting period. Other non-current assets classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods sold and services provided in the normal course of business, net of discounts and sales related taxes.

Sales of properties

Revenue from sale of properties in the ordinary course of business is recognised when the respective properties have been completed and delivered to the buyers. Deposits and instalments received from purchasers prior to meeting the revenue recognition criteria are recorded as sales deposits received under current liabilities.

Others

Rental income is recognised on a straight-line basis over the term of the relevant lease. In the event that lease incentives are received to enter into operating leases, such incentives are recognised as an asset. The aggregate benefit of incentives is recognised as a reduction of rental income on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

Hotel operation and other service income are recognised when services are provided.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest income from a financial asset is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

Investment properties

investment properties, which are properties held to earn rentals and/or for capital appreciation, are measured initially at costs, including any directly attributable expenditure. Subsequent to initial recognition, investment properties are measured at their fair values using the fair value model. Gains or losses arising from changes in the fair value of investment properties are included in profit or loss for the period in which they arise.

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Investment properties - continued

An investment property is derecognised upon disposal or when the investment property is permanently withdrawn from use and no future economic benefits are expected from its disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the profit or loss in the period in which the item is derecognised.

Property, plant and equipment

Property, plant and equipment other than properties under development and crockery, utensils and linens are stated at cost less subsequent accumulated depreciation and accumulated impairment losses, if any.

Depreciation is recognised so as to write off the cost of items of property, plant and equipment, other than properties under development and crockery, utensils and linens, less their residual values over their estimated useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Initial expenditure incurred for crockery, utensils and linens is capitalised and no depreciation is provided thereon. The cost of subsequent replacement for these items is recognised in profit or loss when incurred.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss.

Properties for development

Properties for development represents consideration and other direct costs for acquisition of leasehold interest in land held for future development.

Properties for development are stated at cost and amortised to profit or loss on a straight-line basis over the term of the relevant lease until the commencement of development, upon which the remaining carrying value of the properties will be transferred to the appropriate categories according to the management's intention of use of the properties after completion of development.

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Properties under development

When buildings are in the course of development for hotel operation or for administrative purposes, the amortisation of prepaid lease payments provided during the construction period is included as part of the cost of the building under construction. Buildings under construction are carried at cost, less any identified impairment losses. Cost comprises development costs including attributable borrowing costs, prepaid lease payments and directly attributable costs capitalised during the development period. Depreciation of buildings commences when they are available for use (i.e. when they are in the condition necessary for them to be capable of operating in the manner intended by management).

When leasehold land is intended for sale in the ordinary course of business after completion of development, the leasehold land component is included within the carrying amount of the properties and is classified under current assets.

Inventories

Properties for sale

Completed properties for sale in the ordinary course of business are stated at the lower of cost and net realisable value. Net realisable value is determined by reference to estimated selling price less selling expenses.

Properties for or under development intended for sale after completion of development are stated at the lower of cost and net realisable value. Net realisable value is determined by reference to estimated selling price less anticipated costs to completion of the development and costs to be incurred in marketing and selling the completed properties.

Cost of properties comprises land cost, development costs and other direct costs attributable to the development and borrowing costs capitalised during the development period that have been incurred in bringing the properties to their present condition.

Other inventories

Other inventories comprising food and beverage are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average method.

Impairment of assets

At the end of the reporting period, the Group reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Financial instruments

Financial assets and financial liabilities are recognised in the consolidated statement of financial position when a group entity becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition.

Financial assets

The Group's financial assets are all classified as loans and receivables.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. At the end of each reporting period subsequent to initial recognition, loans and receivables (including loans receivable, other receivable, loans to jointly controlled entities, amounts due from non-controlling shareholders, bank deposits and cash) are carried at amortised cost using the effective interest method, less any identified impairment losses.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial asset, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest income is recognised on an effective interest basis.

Impairment of financial assets

Financial assets are assessed for indicators of impairment at the end of each reporting period. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the financial assets have been affected.

objective evidence of impairment could include:

·; significant financial difficulty of the issuer or counterparty; or

·; breach of contract, such as default or delinquency in interest and principal payments; or

·; it becoming probable that the borrower will enter bankruptcy or financial re-organisation; or

·; the disappearance of an active market for that financial asset because of financial difficulties.

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Financial instruments - continued

Financial assets - continued

Impairment of financial assets - continued

Financial assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Group's past experience of collecting payments, as well as observable changes in national or local economic conditions that correlate with default on receivables.

An impairment loss is recognised in profit or loss when there is objective evidence that the asset is impaired, and is measured as the difference between the asset's carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly with the exception of loans receivable, other receivable and trade receivables, where the carrying amount is reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in profit or loss. When a receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss.

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 loss was recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that the carrying amount of the asset at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.

Financial liabilities and equity

Financial liabilities and equity instruments issued by a group entity are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.

An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period to the net carrying amount on initial recognition.

Interest expense is recognised on an effective interest basis.

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Financial instruments - continued

Financial liabilities and equity - continued

financial liabilities

financial liabilities including payables, amounts due to non-controlling shareholders and bank borrowings are subsequently measured at amortised cost, using the effective interest method.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Derecognition

Financial assets are derecognised when the rights to receive cash flows from the assets expire or, the financial assets are transferred and the Group has transferred substantially all the risks and rewards of ownership of the financial assets.

On derecognition of a financial asset in its entirety, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other comprehensive income and accumulated in equity is recognised in profit or loss.

Financial liabilities are derecognised when the obligation specified in the relevant contract is discharged, cancelled or expires. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in profit or loss.

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at management's best estimate of the expenditure required to settle the present obligation at the end of the reporting period, and are discounted to present value where the effect of the time value of money is material.

Leasing

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lessor

Rental income from operating leases is recognised in profit or loss on a straight-line basis over the term of the relevant lease.

The Group as lessee

Rentals payable under operating leases are recognised as an expense on a straight-line basis over the lease term, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Leasing - continued

Leasehold land and building

When a lease includes both land and building elements, the Group assesses the classification of each element as a finance or an operating lease separately based on the assessment as to whether substantially all the risks and rewards incidental to ownership of each element have been transferred to the Group. Specifically, the minimum lease payments (including any lump-sum upfront payments) are allocated between the land and the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element of the lease at the inception of the lease.

To the extent the allocation of the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as "prepaid lease payments" in the consolidated statement of financial position and is amortised over the lease term on a straight-line basis except for those that are classified and accounted for as investment properties under the fair value model.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those assets. Capitalisation of such borrowing costs ceases when the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

Foreign currencies

In preparing the financial statements of each individual group entity, transactions in currencies other than the functional currency of that entity (foreign currencies) are recorded in the respective functional currency (i.e. the currency of the primary economic environment in which the entity operates) at the rates of exchanges prevailing on the dates of the transactions. At the end of the reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are recognised in profit or loss in the period in which they arise, except for exchange differences arising on a monetary item that forms part of the Company's net investment in a foreign operation, in which case, such exchange differences are recognised in other comprehensive income and accumulated in equity (translation reserve) and will be reclassified from equity to profit or loss on disposal of the foreign operation.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated into the presentation currency of the Group (i.e. Hong Kong dollars) at the rate of exchange prevailing at the end of the reporting period, and their income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the period, in which case, the exchange rates prevailing at the dates of transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (translation reserve).

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Equity-settled share-based payment transactions

The fair value of services received determined by reference to the fair value of share options granted under the share option scheme of holding company at the grant date is expensed on a straight-line basis over the vesting period, with a corresponding increase in retained profits.

At the end of each reporting period, the Group revises its estimates of the number of options that are expected to ultimately vest. The impact of the revision of the estimates during the vesting period, if any, is recognised in profit or loss, with a corresponding adjustment to retained profits.

At the time when the share options are exercised, forfeited after the vesting date or are still not exercised at the expiry date, the amount previously recognised will continue to be held in retained profits.

Retirement benefit costs

Payments to defined contribution retirement benefit plans, including state-managed retirement benefit scheme and the Mandatory Provident Fund Scheme, are charged as an expense when employees have rendered service entitling them to the contributions.

Taxation

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

3. SIGNIFICANT ACCOUNTING POLICIES - continued

Taxation - continued

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

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

The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is recognised in profit or loss, except when it relates to items that are recognised in other comprehensive income or directly in equity, in which case the deferred tax is also recognised in other comprehensive income or directly in equity respectively.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group's accounting policies which are described in note 3, management has made judgements and estimation that have a significant risk of causing a material adjustment to the carrying amounts of assets within next financial year.

Income tax

No deferred tax asset has been recognised in respect of tax losses and deductible temporary differences of HK$399,866,000 and HK$4,188,000 (2009: HK$160,521,000 and HK$7,043,000) respectively as it is not probable that taxable profit will be available due to the unpredictability of future profit streams. The realisability of the deferred tax asset mainly depends on whether sufficient future profits or taxable temporary differences will be available in the future. In cases where the actual future profits generated are more than expected, additional recognition of deferred tax assets may arise, which would be recognised in the consolidated income statement for the period in which it takes place.

Impairment of property, plant and equipment

The Group performs a review annually to determine whether hotel property with aggregate carrying amount of HK$1,083,173,000 (2009: HK$1,111,354,000) has any indication of impairment by considering the recoverable amount of hotel building which has been determined based on value in use. The calculation of value in use requires an estimation of future profit generated from hotel operating cash flows discounted to arrive at the present value of the asset. Where the actual future cash flows are less than expected, a material impairment loss may arise.

Fair value of investment properties

Investment properties with carrying amount of HK$7,252,223,000 (2009: HK$6,267,362,000) are stated at fair value based on the valuation performed by independent professional valuers. In determining the fair value, the valuers have used a method of valuation which involves certain assumption of market conditions. In relying on the valuation report or making their own valuation, the directors of the Company have exercised their judgment and are satisfied that the method of valuation is reflective of the current market conditions.

4. KEY SOURCES OF ESTIMATION UNCERTAINTY - continued

Valuation of properties held for sale

Management's assessment of properties held for sale with aggregate carrying amount of HK$1,202,357,000 (2009: HK$1,297,348,000) is based on an estimation of the net realisable value of these properties which involves, inter-alia, considerable analyses of the recent transacted prices of the respective properties held for sale, the current market price of properties of comparable standard and location, the estimated costs to complete the development, where appropriate, and a forecast of future sales based on available market data and statistics. If the actual net realisable values of the properties held for sale are (more) less than expected as a result of change in market condition and/or significant variation in the budgeted development cost, material adjustment for (reversal of) write-down of the properties held for sale may result.

Impairment of other receivable

In determining whether there is any impairment loss on the carrying amount of the other receivable of HK$350,726,000 (2009: HK$349,765,000) in relation to cost incurred on certain pieces of land as detailed in note 23, the Group takes into consideration objective evidences in the estimation of future cash flows. Where the actual future cash flows are less than expected, a material impairment loss, which is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows, may arise.

5. CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and equity balances. The Group's overall strategy remains unchanged from prior year.

The capital structure of the Group consists of bank borrowings and equity attributable to the Company's shareholders, comprising issued capital, retained profits and reserves.

The directors of the Company review the capital structure periodically. As part of this review, the directors consider the cost of capital and the risks associated with the capital. The Group will balance its overall capital structure through the payment of dividends, new share issues as well as raising of new debts or repayment of existing debts.

6. REVENUE

The following is an analysis of the Group's revenue from its major business activities:

7. SEGMENT INFORMATION

Information reported to the executive directors of the Company, being the chief operating decision maker, for the purposes of resource allocation and assessment of segment performance are as follows:

Property investment and development activities are in Hong Kong and the People's Republic of China (the "PRC") whereas the hotel in Hong Kong commenced operation in November 2009.

7. SEGMENT INFORMATION - continued

The following is an analysis of the Group's revenue and results by reportable segment:

Segment revenues and results

For the year ended 31 December 2010

For the year ended 31 December 2009