CONTENTS Directors and Corporate Information 2 Executive Directors and Senior Management s Profi le 3 Report of the Directors 8 Consolidated Income St

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2 CONTENTS Directors and Corporate Information 2 Executive Directors and Senior Management s Profi le 3 Report of the Directors 8 Consolidated Income Statement 13 Consolidated Statement of Comprehensive Income 14 Consolidated Statement of Financial Position 15 Statement of Financial Position 16 Consolidated Statement of Changes in Equity 17 Consolidated Statement of Cash Flows 19 Notes to the Financial Statements 20 Unaudited Supplementary Financial and Other Information 228 Independent Auditor's Report 269 Lists of Branches 271

3 DIRECTORS AND CORPORATE INFORMATION DAH SING BANK, LIMITED BOARD OF DIRECTORS David Shou-Yeh Wong Chairman Hon-Hing Wong (Derek Wong) Vice Chairman Harold Tsu-Hing Wong Vice Chairman Robert Tsai-To Sze Independent Non-Executive Director Andrew Kwan-Yuen Leung Independent Non-Executive Director Lon Dounn Independent Non-Executive Director Seng-Lee Chan Independent Non-Executive Director Yuen-Tin Ng Independent Non-Executive Director Gary Pak-Ling Wang Managing Director and Chief Executive Nicholas John Mayhew Executive Director and Deputy Chief Executive Eddie Shing-Tat Lau Executive Director and Alternate Chief Executive Phoebe Mei-Chun Wong Executive Director and Alternate Chief Executive DSBAHKHH REGISTERED OFFICE 36th Floor, Dah Sing Financial Centre 108 Gloucester Road, Hong Kong Tel: Fax: S.W.I.F.T.: DSBAHKHH Website: 2

4 EXECUTIVE DIRECTORS AND SENIOR MANAGEMENT S PROFILE EXECUTIVE DIRECTORS Mr. David Shou-Yeh Wong Chairman (1976) 45 Mr. Wong, aged 74, was appointed as the Chairman of the Bank in He is currently the Chairman of Dah Sing Financial Holdings Limited ( DSFH ), Dah Sing Banking Group Limited ( DSBG ), Banco Comercial de Macau, S.A., Dah Sing Life Assurance Company Limited ( DSLA ), Dah Sing Insurance Company (1976) Limited, Macau Insurance Company Limited, Macau Life Insurance Company Limited, New Asian Shipping Company, Limited and various other companies. He serves as a member of the Nomination and Remuneration Committee of both DSFH and DSBG. Mr. Wong is the Honorary President of Guangdong Chamber of Foreign Investors, a Vice President of The Hong Kong Institute of Bankers and a Vice Chairman of The Chamber of Hong Kong Listed Companies. Mr. Wong has over 45 years of experience in banking and finance. He is the father of Mr. Harold Tsu-Hing Wong, the Managing Director and Chief Executive of DSBG, Vice Chairman of the Bank and DSLA, and an Executive Director of the Group s other key operating banking and fellow insurance subsidiaries. Mr. Hon-Hing Wong (Derek Wong) Vice Chairman H 17% 35 Mr. Wong, aged 62, joined the Bank in 1977 and has served and managed various departments before appointed as a Director in 1989 and was promoted as its Managing Director in 2000 and Vice Chairman in April He was appointed as the Managing Director of Dah Sing Banking Group Limited ( DSBG ) in 2004 and promoted as Vice Chairman in April He was appointed as Director of Dah Sing Financial Holdings Limited ( DSFH ) in 1993 and promoted as its Managing Director in January He ceased to be a member of the Nomination and Remuneration Committee of both DSBG and DSFH in September Mr. Wong is the Chairman of Dah Sing Bank (China) Limited and a director of various major subsidiaries of the Group. He is a Director of Great Wall Life Insurance Company Limited, and a Non- Executive Director and Vice Chairman of Bank of Chongqing Co., Ltd. in which the Group has a 17% equity interest in its H shares listed in Hong Kong. Mr. Wong is an Associate of The Institute of Bankers (U.K.) and a Founder Member of The Hong Kong Institute of Bankers and The International Retail Banking Council of the U.K. Mr. Wong has over 35 years of experience in banking. DAH SING BANK, LIMITED ANNUAL REPORT

5 EXECUTIVE DIRECTORS AND SENIOR MANAGEMENT S PROFILE Mr. Harold Tsu-Hing Wong Vice Chairman Mr. Wong, aged 45, joined the Bank in 2000, and was appointed as an Executive Director in 2005 and a Vice Chairman in March He was appointed as an Executive Director of Dah Sing Banking Group Limited ( DSBG ) in 2004 and promoted as the Managing Director and Chief Executive in April He is also a Vice Chairman of Dah Sing Life Assurance Company Limited, and a Director of Dah Sing Bank (China) Limited and Banco Comercial de Macau, S.A. Mr. Wong was appointed as a member of The EFAC Financial Infrastructure Sub- Committee, a sub-committee under the Exchange Fund Advisory Committee ( EFAC ) of the Hong Kong Monetary Authority, in October He is a qualified solicitor in England and Wales and in Hong Kong. Mr. Wong is a son of Mr. David Shou-Yeh Wong, the Chairman of the Boards of Dah Sing Financial Holdings Limited and DSBG. Mr. Gary Pak-Ling Wang Managing Director and Chief Executive Mr. Wang, aged 54, joined the Bank as the Group Financial Controller in 1995 and was promoted as a Director in 1997, responsible for the overall financial management and control, operations and IT functions of the Group for a number of years since then. He was promoted as the Managing Director and Chief Executive of the Bank in May Mr. Wang was appointed as an Executive Director of Dah Sing Banking Group Limited in He is also a Director of Dah Sing Financial Holdings Limited, Banco Comercial de Macau, S.A., Dah Sing Bank (China) Limited and Dah Sing Life Assurance Company Limited. Mr. Wang is a qualified accountant, a Fellow of The Association of Chartered Certified Accountants of the U.K. and a member of the Hong Kong Institute of Certified Public Accountants. Mr. Wang has over 25 years of experience in financial management and banking. Mr. Nicholas John Mayhew Executive Director and Deputy Chief Executive Mr. Mayhew, aged 47, joined the Bank in 1998, and was appointed as an Executive Director in 2007 and as the Deputy Chief Executive in August He is currently an Executive Director of Dah Sing Financial Holdings Limited, Dah Sing Life Assurance Company Limited, Macau Insurance Company Limited, Macau Life Insurance Company Limited and Dah Sing Bank (China) Limited. He serves as Head of Treasury and Corporate Finance of the Bank, responsible for its treasury and corporate finance activities. Mr. Mayhew has over 25 years of experience in financial services both in the U.K. and Hong Kong. 4

6 EXECUTIVE DIRECTORS AND SENIOR MANAGEMENT S PROFILE Mr. Eddie Shing-Tat Lau Executive Director and Alternate Chief Executive Mr. Lau, aged 52, joined the Bank in 1992, and was appointed as an Executive Director in May 2012 and an Alternate Chief Executive in May He is currently the Head of Commercial Banking Division, responsible for overseeing and supervising commercial banking business. He was also a committee member of SME Standing Committee of The Chinese Manufacturers Association of Hong Kong in Mr. Lau has over 25 years of experience in commercial banking. Ms. Phoebe Mei-Chun Wong Executive Director and Alternate Chief Executive Ms. Wong, aged 48, joined the Bank as the Head of Retail Banking business in February 2012, responsible for the development and management of overall retail banking, bancassurance, retail brokerage, wealth management businesses, private banking and vehicle financing. She was appointed as an Executive Director in May 2012 and an Alternate Chief Executive in May Ms. Wong has over 25 years of experience in retail and personal banking business with other banks operating in Hong Kong, including Standard Chartered Bank and CITIC Bank International. DAH SING BANK, LIMITED ANNUAL REPORT

7 EXECUTIVE DIRECTORS AND SENIOR MANAGEMENT S PROFILE SENIOR MANAGEMENT Mr. Hau-Tak Li (Gary Li) Chief Credit Officer and Head of Group Risk Division Mr. Li, aged 54, joined the Bank in He has been the Chief Credit Officer since September 2009 and assumed the role of Head of Group Risk Division since February Mr. Li graduated from the University of Hong Kong with a Bachelor of Science degree and the Chinese University of Hong Kong with a Master of Business Administration degree. He is a member of the Chartered Professional Accountants of Canada. Mr. Li has over 25 years of experience in banking. Mr. Edmund Yue-Yeung Poon Chief Operating Officer Mr. Poon, aged 55, joined as the Chief Operating Officer of the Bank in July 2013, and is responsible for overseeing operations and IT functions of the Group. He graduated from the University of Waterloo in Canada with a Bachelor Degree in Mathematics and a Master of Mathematics (Computer Science) Degree. Mr. Poon has 30 years of extensive experience in operations, IT and project management mainly covering retail and corporate banking. He has the experience in managing both operations and IT functions of banking in Hong Kong in a senior capacity for many years. Mr. Clement Poon General Manager and Group Financial Controller Mr. Poon, aged 45, joined the Bank in January 2003 as the Head of Financial Accounting Department and was appointed as a General Manager and the Group Financial Controller of the Bank in December He graduated from The Hong Kong Polytechnic University and attained a Degree of Bachelor of Arts in Accountancy. He is a Fellow of The Association of Chartered Certified Accountants of the U.K. and an Associate of the Hong Kong Institute of Certified Public Accountants. Mr. Poon has over 20 years of experience in accounting and financial management in the banking industry. 6

8 EXECUTIVE DIRECTORS AND SENIOR MANAGEMENT S PROFILE Ms. Florence Siu-Wai Lee General Manager and Group Head of Human Resources Ms. Lee, aged 50, joined the Bank in 2000 and has been the General Manager and Group Head of Human Resources since 2005, responsible for human resources strategies and management of the Bank. She graduated from the Chinese University of Hong Kong with a Bachelor of Arts degree and obtained from The University of Hull, U.K., a Master degree in Business Administration. Ms. Lee has over 25 years of experience in human resources. Mr. Eddie Yiu-Fai Kong Chief Executive Officer and Director of Banco Comercial de Macau, S.A Mr. Kong, aged 52, joined the Bank and was appointed as the Chief Executive Officer and Director of Banco Comercial de Macau, S.A. (incorporated in Macau) in July Mr. Kong has over 25 years of experience in banking and finance business with other banks in Hong Kong including Daiwa Bank, Standard Chartered Bank, and with particular focus in corporate and institutional banking business management for the last 12 years in DBS Bank (Hong Kong) Limited. Mr. Vincent Ho-Wing Yau Chief Executive Officer and Director of Dah Sing Bank (China) Limited Mr. Yau, aged 52, joined the Bank and was appointed as the Alternate Chief Executive Officer and Head of Business Development of Dah Sing Bank (China) Limited ( DSB China ), a key operating subsidiary of the Bank, in September He was appointed as an Executive Director of DSB China in December 2014 and the Chief Executive Officer of DSB China in February Mr. Yau has 28 years of experience in the banking industry in China and Hong Kong, and had assumed various senior executive positions in Standard Chartered Bank before joining the Bank. DAH SING BANK, LIMITED ANNUAL REPORT

9 REPORT OF THE DIRECTORS The Directors submit their report together with the audited financial statements for the year ended 31 December PRINCIPAL ACTIVITIES 32 The principal activities of Dah Sing Bank, Limited (the Bank ) are the provision of banking, financial and other related services. The principal activities of the subsidiaries are shown in Note 32 to the financial statements. RESULTS AND APPROPRIATIONS The results of the Bank and its subsidiaries (the Group ) for the year ended 31 December 2014 are set out in the consolidated income statement on page 13. The Directors do not recommend the payment of a final dividend. SHARE CAPITAL 44 Movements in the share capital of the Bank during the year are shown in Note 44 to the financial statements. RESERVES 45 Movements in the reserves of the Group and of the Bank during the year are set out in Note 45 to the financial statements. DONATIONS 1,693,000 During the year, the Group made charitable and other donations amounting to HK$1,693,000. FIXED ASSETS 33 Movements in the fixed assets of the Group and of the Bank during the year are shown in Note 33 to the financial statements. 8

10 REPORT OF THE DIRECTORS DIRECTORS The Directors during the year and up to the date of this report are: David Shou-Yeh Wong Chairman Hon-Hing Wong (Derek Wong) Vice Chairman Harold Tsu-Hing Wong Vice-Chairman * Robert Tsai-To Sze* * Andrew Kwan-Yuen Leung* * Lon Dounn* * Seng-Lee Chan* * Yuen-Tin Ng* Gary Pak-Ling Wang Managing Director and Chief Executive Nicholas John Mayhew Executive Director and Deputy Chief Executive Eddie Shing-Tat Lau Executive Director and Alternate Chief Executive Phoebe Mei-Chun Wong Executive Director and Alternate Chief Executive * * Independent Non-Executive Directors There being no provision in the Bank s Articles of Association for retirement by rotation, all Directors continue in office. DAH SING BANK, LIMITED ANNUAL REPORT

11 REPORT OF THE DIRECTORS (9) (i) (ii) 5 (iii) DIRECTORS INTERESTS IN SHARE OPTION SCHEMES Pursuant to the Share Option Schemes (the Schemes ) as approved by the shareholders of Dah Sing Financial Holdings Limited ( DSFH ) and Dah Sing Banking Group Limited ( DSBG ), the Bank s ultimate and immediate holding companies respectively, eligible participants may be granted options at a consideration of HK$1 per option to subscribe for shares of DSFH or DSBG. The exercise price per option share is varied by tranches of grant, which is concluded on the basis no less exacting than the requirement set out in Rule 17.03(9) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the Listing Rules ) being determined as no less than the highest of (i) the closing price of the relevant shares traded on The Stock Exchange of Hong Kong Limited (the SEHK ) on the date of grant; and (ii) the average closing price of the relevant shares traded on the SEHK for the 5 business days immediately preceding the date of grant; and (iii) for options granted before the commencement of the Companies Ordinance (Cap. 622), the nominal value of the shares in the capital of DSFH and DSBG. (The Companies Ordinance (Cap. 622), which came into force on 3 March 2014, adopts a mandatory system of no nominal value for all Hong Kong incorporated companies having a share capital and abolishes the concept of nominal value for all shares. With effect from 3 March 2014, the shares of DSFH and DSBG have no nominal value.) The options granted can be exercised in varying amounts between the first and fifth anniversaries from the date of grant in general. The following were arrangements which subsisted at the end of the year or at any time during the year which enabled the Directors of the Bank to acquire benefits by means of the acquisition of shares in its holding companies. Directors interests in the Schemes during the year are described below: (a) (a) Dah Sing Financial Holdings Limited Share Option Scheme (the DSFH Scheme ) Dah Sing Financial Holdings Limited ( DSFH ), the Bank s ultimate holding company, operates the DSFH Scheme whereby certain directors and employees of its subsidiaries were granted options to subscribe shares in DSFH. During the year, Mr. Harold Tsu-Hing Wong, Director of the Bank, had outstanding options granted under the DSFH Scheme. During the year, no options were granted to Directors of the Bank and none of the Directors had acquired shares in DSFH by exercising options granted under the DSFH Scheme. 10

12 REPORT OF THE DIRECTORS DIRECTORS INTERESTS IN SHARE OPTION SCHEMES (Continued) (b) (b) Dah Sing Banking Group Limited Share Option Schemes (the Old DSBG Scheme and the New DSBG Scheme ) On 12 June 2004, Dah Sing Banking Group Limited ( DSBG ), the Bank s immediate holding company, adopted a share option scheme (the Old DSBG Scheme ) whereby certain directors and employees of its subsidiaries were granted options to subscribe shares in DSBG On 27 May 2014, the shareholders of DSBG approved the termination of the Old DSBG Scheme in anticipation of its expiry on 11 June 2014 and the adoption of a new share option scheme (the New DSBG Scheme ) whereby eligible participants may be granted options to subscribe shares in DSBG. No further options can be offered under the Old DSBG Scheme after its termination but the provisions of the Old DSBG Scheme shall remain in all other respects in full force and effect in respect of any options granted prior to such termination but not yet exercised at the time of termination. During the year, Mr. Harold Tsu-Hing Wong, Mr. Gary Pak-Ling Wang, Mr. Nicholas John Mayhew, Mr. Eddie Shing-Tat Lau and Ms. Phoebe Mei-Chun Wong, Directors of the Bank, had outstanding options granted under the Old DSBG Scheme. During the year, no options were granted to Directors of the Bank under the Old DSBG Scheme (before its termination) or the New DSBG Scheme (since its commencement). Save for Mr. Eddie Shing-Tat Lau who had acquired shares in DSBG by exercising options granted under the Old DSBG Scheme, no other Directors had acquired shares in DSBG by exercising options granted under the Old DSBG Scheme or the New DSBG Scheme. Apart from the above, at no time during the year was the Bank, its subsidiaries, its fellow subsidiaries or its holding companies a party to any arrangement to enable the Directors of the Bank to acquire benefits by means of the acquisition of shares in, or debentures of, the Bank or any other body corporate. DAH SING BANK, LIMITED ANNUAL REPORT

13 REPORT OF THE DIRECTORS DIRECTORS SERVICE CONTRACTS The Directors do not have any service contracts with the Bank. DIRECTORS INTERESTS IN CONTRACTS No contracts of significance in relation to the Bank s business to which the Bank, its subsidiaries, its fellow subsidiaries or its holding companies was a party and in which a Director of the Bank had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year. MANAGEMENT CONTRACTS No contracts concerning the management and administration of the whole or any substantial part of the business of the Bank were entered into or existed during the year. CONNECTED TRANSACTIONS Details of transactions with related parties of the Group for the year ended 31 December 2014 have been set out in Note 48 to the financial statements. STATEMENT OF COMPLIANCE A In preparing the financial statements for the year ended 31 December 2014, the Bank has fully complied with the requirements set out in the Banking (Disclosure) Rules issued by the Hong Kong Monetary Authority under section 60A of the Hong Kong Banking Ordinance. The Bank has fully complied with such disclosure requirements. AUDITORS The financial statements have been audited by PricewaterhouseCoopers who retire and, being eligible, offer themselves for re-appointment. On behalf of the Board David Shou-Yeh Wong Chairman Hong Kong, 24 March

14 CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2014 Note Interest income 4,932,721 4,363,880 Interest expense (1,940,224) (1,562,212) Net interest income 6 2,992,497 2,801,668 Fee and commission income 1,061, ,902 Fee and commission expense (229,567) (233,989) Net fee and commission income 7 831, ,913 Net trading income 8 214, ,172 Other operating income 9 59,586 53,109 Operating income 4,098,224 3,798,862 Operating expenses 10 (2,150,366) (2,008,276) Operating profit before impairment losses 1,947,858 1,790,586 Loan impairment losses and other credit provisions 12 (472,962) (309,806) Operating profit after impairment losses 1,474,896 1,480,780 Net loss on disposal of other fixed assets 13 (2,579) (2,715) Net gain on fair value adjustment of investment properties 14 41,127 18,415 Net gain/(loss) on disposal of investments in securities 15 17,036 (100,341) Loss on deemed disposal of investment in an associate (56,971) Share of results of an associate 602, ,556 Share of results of jointly controlled entities 20,657 17,311 Profit before taxation 2,153,436 1,935,035 Taxation 16 (226,179) (235,558) Profit for the year attributable to shareholders of the Bank 18 1,927,257 1,699,477 Dividends Interim dividend paid ,000 Proposed final dividend , The notes on pages 20 to 227 are an integral part of these consolidated financial statements. DAH SING BANK, LIMITED ANNUAL REPORT

15 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December Profit for the year 1,927,257 1,699,477 Other comprehensive income for the year Items that will not be reclassified to the consolidated income statement: Premises Reserves arising from reclassification of premises to investment properties 36, ,248 Items that may be reclassified subsequently to the consolidated income statement: Investments in securities Fair value gains on available-for-sale securities recognised in equity 258,976 47,691 Fair value (gain)/loss realised and transferred to income statement upon: Disposal of available-for-sale securities (21,692) (107,287) Disposal of held-to-maturity securities and investments in securities included in the loans and receivables category which were previously reclassified from the available-for-sale category 3, ,647 Deferred income tax on movements in investment revaluation reserve (33,934) (19,998) 243, ,301 Exchange differences arising on translation of the financial statements of foreign entities (108,599) 105,918 Other comprehensive income for the year, net of tax 135, ,219 Total comprehensive income for the year, net of tax 2,062,297 1,983, The notes on pages 20 to 227 are an integral part of these consolidated financial statements. 14

16 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2014 Note ASSETS Cash and balances with banks 20 14,838,111 8,270,012 Placements with banks 21 5,324,811 4,101,293 Trading securities 22 6,850,362 6,335,788 Financial assets designated at fair value through profit or loss 22 9,821 4,248 Derivative financial instruments , ,069 Advances and other accounts ,858, ,202,738 Available-for-sale securities 26 23,351,747 27,119,818 Held-to-maturity securities 27 10,832,940 5,669,289 Investment in an associate 29 3,746,918 3,304,993 Investments in jointly controlled entities 30 65,694 59,657 Goodwill , ,690 Intangible assets 31 61,844 66,242 Premises and other fixed assets 33 2,728,208 1,705,350 Investment properties , ,540 Deferred income tax assets 41 80,591 22,975 Total assets 186,063, ,961,702 LIABILITIES Deposits from banks 1,572,467 1,995,297 Derivative financial instruments 23 1,146,825 1,117,256 Trading liabilities 36 5,597,614 3,362,473 Deposits from customers ,234, ,945,133 Certificates of deposit issued 38 6,109,777 6,132,561 Issued debt securities ,385 Subordinated notes 40 5,432,378 3,762,471 Other accounts and accruals 2,645,717 2,602,907 Current income tax liabilities 206, ,072 Deferred income tax liabilities 41 55,056 21,268 Total liabilities 166,000, ,914,823 EQUITY Share capital 44 6,200,000 5,000,000 Other reserves (including retained earnings) 45 13,862,930 11,796,879 Proposed final dividend ,000 Total equity 20,062,930 17,046,879 Total equity and liabilities 186,063, ,961, Approved and authorised for issue by the Board of Directors on 24 March David Shou-Yeh Wong Director Harold Tsu-Hing Wong Director Hon-Hing Wong Director Gary Pak-Ling Wang Managing Director The notes on pages 20 to 227 are an integral part of these consolidated financial statements. DAH SING BANK, LIMITED ANNUAL REPORT

17 STATEMENT OF FINANCIAL POSITION As at 31 December 2014 Note ASSETS Cash and balances with banks 20 13,778,437 6,277,902 Placements with banks 21 4,652,611 4,067,212 Trading securities 22 6,850,362 6,335,788 Derivative financial instruments , ,805 Advances and other accounts 24 96,910,623 89,945,740 Available-for-sale securities 26 23,075,378 27,064,108 Held-to-maturity securities 27 7,078,817 3,017,495 Investment in an associate 29 1,213,057 1,213,057 Investments in jointly controlled entities 30 20,000 20,000 Intangible assets 31 1,000 Investments in and loans to subsidiaries 32 3,694,389 3,501,138 Premises and other fixed assets 33 2,279,787 1,232,737 Investment properties , ,456 Total assets 161,073, ,985,438 LIABILITIES Deposits from banks 2,612,806 3,149,653 Derivative financial instruments 23 1,141,386 1,109,217 Trading liabilities 36 5,597,614 3,362,473 Deposits from customers ,865, ,410,652 Certificates of deposit issued 38 6,209,781 6,727,134 Issued debt securities ,385 Subordinated notes 40 5,432,378 3,762,471 Other accounts and accruals 2,215,292 2,294,433 Current income tax liabilities 168, ,879 Deferred income tax liabilities 41 47,204 19,934 Total liabilities 144,290, ,765,231 EQUITY Share capital 44 6,200,000 5,000,000 Other reserves (including retained earnings) 45 10,582,082 8,970,207 Proposed final dividend ,000 Total equity 16,782,082 14,220,207 Total equity and liabilities 161,073, ,985, Approved and authorised for issue by the Board of Directors on 24 March David Shou-Yeh Wong Director Harold Tsu-Hing Wong Director Hon-Hing Wong Director Gary Pak-Ling Wang Managing Director The notes on pages 20 to 227 are an integral part of these consolidated financial statements. 16

18 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2014 Attributable to the shareholders of the Bank Share Other Retained Total capital reserves earnings equity Balance at 1 January ,000,000 1,224,061 10,822,818 17,046,879 Total comprehensive income for the year 135,040 1,927,257 2,062,297 Issue of ordinary shares 1,200,000 1,200,000 Provision for equity-settled share-based compensation 3,754 3, final dividend (250,000) (250,000) Balance at 31 December ,200,000 1,362,855 12,500,075 20,062, Year ended 31 December Proposed final dividend included in retained earnings 250,000 DAH SING BANK, LIMITED ANNUAL REPORT

19 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2014 (Continued) Attributable to the shareholders of the Bank Share Other Retained Total capital reserves earnings equity Balance at 1 January ,000, ,601 9,473,341 15,408,942 Total comprehensive income for the year 284,219 1,699,477 1,983,696 Provision for equity-settled share-based compensation 4,241 4, final dividend (240,000) (240,000) interim dividend (110,000) (110,000) Balance at 31 December ,000,000 1,224,061 10,822,818 17,046, The notes on pages 20 to 227 are an integral part of these consolidated financial statements. 18

20 CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2014 Note Cash flows from operating activities Net cash from/(used in) operating activities 46(a) 6,442,760 (4,128,166) Cash flows from investing activities Additional investment in associate company (330,000) Purchase of premises, investment properties and other fixed assets (1,242,556) (227,923) Proceeds from disposal of premises, investment properties and other fixed assets 178 2,897 Net cash used in investing activities (1,242,378) (555,026) Cash flows from financing activities Issue of subordinated notes 1,731,250 Interest paid on subordinated notes and debt securities issued (246,560) (258,211) Debt securities redeemed (775,285) (1,938,463) Issue of ordinary shares 1,200,000 Dividends paid on ordinary shares (250,000) (350,000) Net cash from/(used in) financing activities 1,659,405 (2,546,674) Net increase/(decrease) in cash and cash equivalents 6,859,787 (7,229,866) Cash and cash equivalents at beginning of the year 9,305,124 16,501,531 Effect of foreign exchange rate changes (84,345) 33,459 Cash and cash equivalents at end of the year 46(b) 16,080,566 9,305, The notes on pages 20 to 227 are an integral part of these consolidated financial statements. DAH SING BANK, LIMITED ANNUAL REPORT

21 1. 1. GENERAL INFORMATION Dah Sing Bank, Limited (the Bank ) and its subsidiaries (together the Group ) provide retail banking, commercial banking and related financial services in Hong Kong, Macau, and the People s Republic of China The Bank is a financial institution incorporated in Hong Kong. The address of its registered office is 36th Floor, Dah Sing Financial Centre, 108 Gloucester Road, Wanchai, Hong Kong. The ultimate holding company is Dah Sing Financial Holdings Limited, a listed company in Hong Kong These consolidated financial statements are presented in thousands of Hong Kong dollars (HK$ 000), unless otherwise stated. These consolidated financial statements have been approved for issue by the Board of Directors on 24 March SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the reporting years presented, unless otherwise stated Basis of preparation The consolidated financial statements of the Group have been prepared in accordance with Hong Kong Financial Reporting Standards ( HKFRSs is a collective term which includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards ( HKASs ) and Interpretations) issued by the Hong Kong Institute of Certified Public Accountants ( HKICPA ), accounting principles generally accepted in Hong Kong and the requirements of the Hong Kong Companies Ordinance In accordance with the transitional and saving arrangements for Part 9 of the new Hong Kong Companies Ordinance (Cap. 622) ( NCO ), Accounts and Audit as set out in sections 76 to 87 of Schedule 11 to the NCO, the consolidated financial statements are prepared in accordance with the applicable requirements of the predecessor Companies Ordinance (Cap. 32) for this financial year and the comparative period. 20

22 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.1 Basis of preparation (Continued) These consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, available-for-sale financial assets, fair valuehedged loans and receivables, financial assets and financial liabilities held for trading, and financial assets and financial liabilities (including derivative instruments) designated at fair value through profit or loss, which are carried at fair value. 4 The preparation of financial statements in conformity with HKFRSs 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. Changes in assumptions may have a significant impact on the financial statements in the period the assumptions changed. Management believes that the underlying assumptions are appropriate and that the Group s financial statements therefore present the financial position and results fairly. 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 4. (a) New and amended standards adopted by the Group The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 January 2014: (2011) 10 Amendments to HKFRS 10, HKFRS 12 and HKAS 27 (2011), Investment entities, provide consolidation relief to those parents which qualify to be an investment entity as defined in the amended HKFRS 10. Investment entities are required to measure their subsidiaries at fair value through profit or loss. These amendments do not have impact to the financial statements of the Group Amendments to HKAS 32, Offsetting financial assets and financial liabilities, clarifies the requirements for offsetting financial instruments and addressed inconsistencies in current practice when applying the offsetting criteria in HKAS 32, Financial Instruments: Presentation. There is no material impact to the financial statements of the Group as a result of this amendment. DAH SING BANK, LIMITED ANNUAL REPORT

23 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.1 Basis of preparation (Continued) (a) New and amended standards adopted by the Group (Continued) Amendments to HKAS 36, Impairment of assets Recoverable amount disclosures for non-financial assets, removes certain disclosures of the recoverable amount of cash generating units which had been included in HKAS 36 by the issue of HKFRS 13. There is no material impact to the financial statements of the Group as a result of this amendment. 39 Amendments to HKAS 39, Novation of derivatives and continuation of hedge accounting, provides relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. These amendments do not have impact to the financial statements of the Group. 21 HK(IFRIC) 21, Levies, sets out the accounting for an obligation to pay a levy that is not income tax. The interpretation addresses what the obligating event is that gives rise to the payment of a levy and when should a liability be recognised. The Group is not currently subject to significant levies so the impact on the Group is not material. 22

24 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.1 Basis of preparation (Continued) (b) New standards and interpretations not yet adopted A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2014, and have not been early adopted in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the Group, except the following set out below: HKFRS 9, Financial instruments, addresses the classification, measurement and recognition of financial assets and financial liabilities and hedge accounting. HKFRS 9 was issued in November 2009 and October It replaces the parts of HKAS 39 that relate to the classification and measurement of financial instruments. HKFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the HKAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity s own credit risk is recorded in other comprehensive income rather than in the income statement, unless this creates an accounting mismatch. In December 2013, HKFRS 9 was further amended when the requirements related to hedge accounting (other than specific accounting for open portfolios on macro hedging) were added In July 2014, the International Accounting Standards Board published the full and final version of IFRS 9 (which is closely followed by HKFRS 9) and set the effective date of IFRS 9 as 1 January 2018 although earlier adoption of the new standard is permitted. The final IFRS 9 sets out, amongst other things, the classification and measurement requirements for financial instruments as described above, the requirement for a new, expected-loss impairment model that will require more timely recognition of expected credit losses, and a substantiallyreformed model for hedge accounting that aligns the accounting treatment with risk management activities. DAH SING BANK, LIMITED ANNUAL REPORT

25 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.1 Basis of preparation (Continued) (b) New standards and interpretations not yet adopted (Continued) The Group has already commenced the assessment of the full impact and so far has not decided to early adopt the standard, which shall be effective for the financial year beginning on 1 January (c) New Hong Kong Companies Ordinance (Cap. 622) The NCO came into effect on 3 March On this effective date, the concepts of nominal (par) value, share premium and authorised share capital for all shares of Hong Kong incorporated companies are abolished. Any amount received for issuing equity shares of a company on or after 3 March 2014 should be recorded as part of share capital. The effect of this transition on the Company is to subsume balance in the share premium account into share capital as set out in section 37 of Schedule 11 of the NCO. There is no impact on the number of shares in issue or the relative entitlement of any of the shareholders In addition, the requirements of Part 9 Accounts and Audit of the NCO came into operation as from the Company s first financial year commencing on or after 3 March 2014 in accordance with section 358 of the NCO. The Group is in the process of making an assessment of expected impact of the changes in the NCO on the consolidated financial statements in the period of initial application of Part 9 of the NCO. So far the Group has concluded that the impact is unlikely to be significant and only the presentation and the disclosure of information in the consolidated financial statements will be affected. 24

26 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.2 Consolidation The consolidated financial statements include the financial statements of the Bank and all its subsidiaries made up to 31 December. (a) Subsidiaries A subsidiary is an entity (including a structured entity) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. 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 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. 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. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest s proportionate share of the acquiree s net assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the Group s share of the identifiable net assets acquired is recorded as goodwill. If the total of consideration transferred, non-controlling interest recognised and previously held interest measured 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 statement of comprehensive income. DAH SING BANK, LIMITED ANNUAL REPORT

27 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.2 Consolidation (Continued) (a) Subsidiaries (Continued) 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 asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. In the Bank s statement of financial position the investments in subsidiaries are stated at cost less allowances for impairment. The results of subsidiaries are accounted for by the Bank on the basis of dividend received and receivable. (b) Transactions with non-controlling interests The Group treats transactions with non-controlling interests as transactions with equity holders of the Bank. For purchases from non-controlling interests, 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 to non-controlling interests are also recorded in equity. When the Group ceases to have control, any retained interest in the entity is remeasured to its fair value, 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 an associate, joint venture or financial asset. 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. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. 26

28 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.2 Consolidation (Continued) (c) Associates 20% 50% Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group s investments in associates include goodwill (net of any accumulated impairment loss) identified on acquisition. The Group s share of its associates post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associates. The Group determines at each reporting date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount adjacent to share of results of an associate in the income statement. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. DAH SING BANK, LIMITED ANNUAL REPORT

29 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.2 Consolidation (Continued) (c) Associates (Continued) Dilution gains and losses in associate are recognised in the income statement. In the Bank s statement of financial position, the investments in associates are stated at cost less provision for impairment losses. The results of associates are accounted for by the Bank on the basis of dividend received and receivable. (d) Jointly controlled entities A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity, which is subject to joint control and none of the participating parties has unilateral control over the economic activity. The results and assets and liabilities of jointly controlled entities are accounted for using equity method of accounting. The consolidated income statement includes the Group s share of the results of jointly controlled entities for the year, and the consolidated statement of financial position includes the Group s share of the net assets of the jointly controlled entities. 28

30 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.3 Interest income and expense Interest income and expense are recognised in the income statement for all instruments measured at amortised cost, available-for-sale securities and certain financial assets/liabilities designated at fair value through profit or loss using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. When calculating the effective interest rate, the Group estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss Fee and commission income and expense Fees and commissions are generally recognised on an accrual basis when the service has been provided. Loan syndication fees are recognised as revenue when the syndication has been completed and the Group retained no part of the loan package for itself or retained a part at the same effective interest rate as the other participants. Wealth management, financial planning and custody services that are continuously provided over an extended period of time are recognised rateably over the period the service is provided Dividend income Dividends are recognised in the income statement when the Group s right to receive payment is established. DAH SING BANK, LIMITED ANNUAL REPORT

31 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.6 Financial assets Classification The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition, except for subsequent reclassification meeting specified definition of relevant asset reclassification. (a) Financial assets at fair value through profit or loss This category has two sub-categories: financial assets held for trading, and those designated at fair value through profit or loss at inception. A financial asset is classified as held for trading if it is acquired principally for the purpose of selling in the short term or if so designated by management. Derivatives are also categorised as held for trading unless they are designated as hedges. The Group designates a financial asset upon initial recognition as designated at fair value through profit or loss (fair value option) if the following criteria are met: (i) (i) It eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an accounting mis-match ) that would otherwise arise from measuring assets or recognising the gains and losses on them on different bases; 30

32 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 2.6 Financial assets (Continued) Classification (Continued) (a) Financial assets at fair value through profit or loss (Continued) (ii) (ii) A group of financial assets is managed and its performance is evaluated on a fair value basis, in accordance with a documented risk management or investment strategy, and this is the basis on which information about the assets is provided internally to the key management personnel such as the Board of Directors and Chief Executive Officer; or (iii) (iii) Financial assets with embedded derivatives where the characteristics and risks of the embedded derivatives are not closely related to the host contracts. Financial assets for which the fair value option is applied are recognised in the statement of financial position as Financial assets designated at fair value through profit or loss. (b) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than: (a) those that the Group intends to sell immediately or in the short term, which are classified as held for trading, and those that the Group upon initial recognition designates as at fair value through profit or loss; (b) those that the Group upon initial recognition designates as availablefor-sale; or (c) those for which the Group may not recover substantially all of its initial investment, other than because of credit deterioration. (c) Available-for-sale Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. Available-for-sale investments are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices. DAH SING BANK, LIMITED ANNUAL REPORT