092 / /15 BALANCE SHEET AS AT 31 MARCH 3 31 BALANCE SHEET (CONTINUED) AS AT 31 MARCH 3 31 Note Note Non-current assets Property, plant and equip

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1 090 / /15 PROFIT AND LOSS ACCOUNT 3 31 STATEMENT OF COMPREHENSIVE INCOME 3 31 Note Income Income from placements with the Exchange Fund 593, ,592 Bank interest income 249, ,452 Other investment income / (loss) / (23,889) Net fair value (loss) / gain on forward foreign exchange contracts / (12,213) 56,240 Net exchange losses (1,234) (66,316) Other income 6,764 11,393 Profit for the year 584, ,920 Other comprehensive income Items that may be reclassified subsequently to profit or loss: Changes in fair value of available-for-sale investments Total comprehensive income for the year 585, , , ,472 Expenses Staff costs 4 (108,192) (83,790) Other operating expenses 7 (143,702) (160,762) (251,894) (244,552) Profit for the year 584, ,920 The notes on pages 97 to 121 form part of the statement of accounts The notes on pages 97 to 121 form part of the statement of accounts

2 092 / /15 BALANCE SHEET AS AT 31 MARCH 3 31 BALANCE SHEET (CONTINUED) AS AT 31 MARCH 3 31 Note Note Non-current assets Property, plant and equipment 9 1,129, ,900 Museum collections , ,616 Intangible assets 11 6,852 6,437 Placements with the Exchange Fund 12(a) 7,917,275 14,539,548 Other financial assets 13 54,681 10,109 Equity 17 Capital Endowment from the Government of HKSAR 21,600,000 21,600,000 Reserves 3,450,808 2,865,631 25,050,808 24,465,631 9,478,185 15,293,610 Current assets Placements with the Exchange Fund 12(a) 7,215,645 Other financial assets 13 10,051 Bank interest receivables 84, ,391 Income receivables from other financial assets Other receivables, prepayments and deposits 14 25,872 21,772 Forward foreign exchange contracts 12(b) 7,640 50,189 Cash and bank balances 15 8,525,605 9,093,199 15,870,023 9,266,722 Current liabilities Forward foreign exchange contracts 12(b) 6,650 Other liabilities ,709 90, ,359 90,476 Net current assets 15,579,664 9,176,246 Total assets less current liabilities 25,057,849 24,469,856 Non-current liabilities Accrued contract gratuity 7,041 4,225 Approved and authorised for issue by the Board of the Authority on 23 June Net assets 25,050,808 24,465,631 Mrs Carrie Lam Cheng Yuet-ngor, GBS, JP GBSJP Chairman of the Board Mr Michael Lynch CBE AM CBE AM Chief Executive Officer The notes on pages 97 to 121 form part of the statement of accounts

3 094 / /15 STATEMENT OF CHANGES IN EQUITY 3 31 Capital Endowment from the Government of HKSAR Fair value reserve Retained profits Total Balance at 1 April ,600,000 2,288,590 23,888,590 Profit for the year 576, ,920 Other comprehensive income Changes in fair value of available-for-sale investments Total comprehensive income for the year , ,041 Balance at 31 March ,600, ,865,510 24,465,631 Profit for the year 584, ,773 Other comprehensive income Changes in fair value of available-for-sale investments Total comprehensive income for the year , ,177 Balance at 31 March ,600, ,450,283 25,050,808 CASH FLOW STATEMENT 3 31 Note Operating activities Profit for the year 584, ,920 Adjustments for: Depreciation and amortisation 7,648 7,045 Income from placements with the Exchange Fund (593,372) (594,592) Bank interest income (249,179) (249,452) Net fair value loss / (gain) on forward foreign exchange contracts / 12,213 (56,240) Other investment (income) / loss / (799) 23,889 Net exchange losses 1,234 66,316 Changes in working capital: Increase in other receivables, prepayments and deposits (4,100) (2,041) Increase in other liabilities 9,657 33,663 Increase in non-current liabilities 2, Net cash used in operating activities (229,109) (194,064) Investing activities Purchases / Construction of property, plant and equipment and intangible assets / (473,198) (422,499) Purchases of museum collections (114,150) (68,756) Restricted cash donations received 1,000 Increase in restricted cash (593) Placement with the Exchange Fund (2,044,000) Purchases of investments in bond funds (162,206) Proceeds from disposal of investments in bond funds 837,033 Purchases of other financial assets (54,195) Proceeds from sale or redemption of other financial assets 424,863 Net receipt from time deposits with original maturities over three months 638,932 1,293,110 Interest received 243, ,191 Dividends received from investments in bond funds 4,942 Net cash inflow from investing activities 241, ,678 Net increase in cash and cash equivalents 12,244 1,614 Cash and cash equivalents at beginning of year 5,083 3,024 Effect of exchange rate changes (1,130) 445 Cash and cash equivalents at end of year 15 16,197 5,083 The notes on pages 97 to 121 form part of the statement of accounts

4 096 / /15 CASH FLOW STATEMENT (CONTINUED) NOTES TO THE Major non-cash transactions: 1 General information 1 The Authority entered into the following non-cash transactions in respect of the placements with the Exchange Fund, of which the detailed arrangement is disclosed in note 12(a): The Authority did not withdraw but reinvested the interest income of HK$519 million (: HK$612 million) which was earned from the placements with the Exchange Fund for January to December. The interest amount will be repaid by Hong Kong Monetary Authority ( HKMA ) together with the principal amount on the maturity dates in 2016 or 2019 unless the Authority gives notice to HKMA for withdrawal of the interest amount prior to maturity dates. 12(a) The West Kowloon Cultural District Authority (the Authority ) was established as a body corporate in Hong Kong under the West Kowloon Cultural District Authority Ordinance (the WKCDA Ordinance ), Cap. 601, which was enacted on 11 July Its office address is at 29/F, Tower 6, The Gateway, 9 Canton Road, Kowloon, Hong Kong. The functions and objectives of the Authority are stipulated in Sections (4)(1) and (4)(2) of the WKCDA Ordinance respectively. In brief, the principal activities of the Authority are the planning, development, operation and maintenance of the arts and cultural facilities, related facilities or ancillary facilities of the West Kowloon Cultural District ( WKCD ) (1) 4(2) (ii) During the year ended 31 March, the Authority made an additional placement with the Exchange Fund by utilising the accrued interest of HK$1,756 million as at 31 December 2012 together with a cash placement of HK$2,044 million for a period of six years to mature in (ii) The WKCD Development Plan ( DP ) was approved by the Chief Executive in Council on 8 January The approved DP provides a statutory land use planning framework to guide the development and redevelopment of land within the WKCD. Subsequently, the Authority applied for a 15% increase in the total gross floor areas of the WKCD site under section 16 of the Town Planning Ordinance. The planning application was approved by the Town Planning Board on 14 November. Related land grants based on the development parameters of the approved section 16 application are being processed accordingly % Significant accounting policies 2 (a) Statement of compliance (a) The statement of accounts has been prepared in accordance with all applicable Hong Kong Financial Reporting Standards ( HKFRS ), which collective term includes all applicable individual HKFRS, Hong Kong Accounting Standards ( HKAS ) and Interpretations issued by the Hong Kong Institute of Certified Public Accountants (the HKICPA ), and the requirements of the WKCDA Ordinance. The significant accounting policies applied in the preparation of this statement of accounts are set out below. These policies have been consistently applied to both years presented, unless otherwise stated. (b) Basis of preparation (b) The statement of accounts has been prepared under the historical cost convention, as modified by the revaluation of financial assets or liabilities at fair value through profit or loss and available-for-sale investments, which are carried at fair value. The preparation of the statement of accounts in conformity with HKFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenditure. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The notes on pages 97 to 121 form part of the statement of accounts The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the year in which the estimates are revised if the revisions affect only that year, or in the year of the revision and future years if the revisions affect both current and future years.

5 098 / /15 NOTES TO THE (CONTINUED) 3 31 NOTES TO THE (CONTINUED) Significant accounting policies (Continued) 2 2 Significant accounting policies (Continued) 2 (b) Basis of preparation (Continued) (b) (c) Foreign currency translation (Continued) (c) Standards, amendments and interpretations which are effective on or after 1 April The HKICPA has issued a number of new HKFRS and amendments to HKFRS that are effective in the current year. Of these, the following developments are relevant to the statement of accounts: Amendments to HKAS 32: Presentation Offsetting Financial Assets and Financial Liabilities (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account. (ii) The amendments to HKAS 32 clarify the requirements for offsetting financial instruments. These amendments do not have an impact on the statement of accounts as they are consistent with the policies already adopted by the Authority. Amendments to HKAS 36: Recoverable Amount Disclosures for Non-Financial Assets The amendments to HKAS 36 modify the disclosure requirements for impaired non-financial assets. Among them, additional information is required to be disclosed when the recoverable amount of impaired assets is based on fair value less costs of disposal. These amendments do not have an impact on the statement of accounts / (d) Property, plant and equipment Property, plant and equipment, other than assets under construction, are stated in the balance sheet at historical cost less accumulated depreciation and any impairment losses. The historical cost of an item of property, plant and equipment comprises its purchase price and any directly attributable costs of bringing the asset to the location and condition necessary for its intended use. Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Authority and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit and loss account during the year in which they are incurred. (d) (ii) Standards, amendments and interpretations which are not yet effective The following standards, which are relevant to the Authority, have been published and are mandatory for accounting years of the Authority beginning on or after 1 April or later years and have not been early adopted: Amendments to HKAS 16 and HKAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation Amendments to HKAS 1: Disclosure Initiative HKFRS 9 (): Financial Instruments HKFRS 15: Revenue from Contracts with Customers The Authority has commenced an assessment of the impact of the new or revised standards but is not yet in a position to state whether these standards would have an impact on the results of operations and financial position of the Authority. (ii) () 15 Depreciation is calculated on a straight-line basis to write off the cost of each item of property, plant and equipment over its estimated useful life, as follows: Building Motor vehicles Leasehold improvements, furniture and equipment Computer equipment 7 years 5 years 3 years 3 years Construction in progress is stated at cost less any accumulated impairment loss. Costs comprise direct costs of construction, such as materials, direct staff costs, production overheads, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located. Capitalisation of these costs ceases and the asset concerned is transferred to the appropriate property, plant and equipment category when substantially all the activities necessary to prepare the asset for its intended use are completed (c) Foreign currency translation (c) No depreciation is provided for construction in progress. Functional and presentation currency The estimated useful life of an asset is reviewed annually. Items included in the statement of accounts of the Authority are measured using the currency of the primary economic environment in which the Authority operates (the functional currency ). The statement of accounts is presented in Hong Kong dollar ( HK$ ), which is the Authority s functional and presentation currency. The gain or loss arising from the retirement or disposal of an item of property, plant and equipment is determined as the difference between the net disposal proceeds and the carrying amount of the item and is recognised as income or expenditure in the profit and loss account on the date of retirement or disposal.

6 100 / /15 NOTES TO THE (CONTINUED) NOTES TO THE (CONTINUED) Significant accounting policies (Continued) 2 2 Significant accounting policies (Continued) 2 (e) Museum collections (e) (h) Available-for-sale investments (h) Museum collections acquired by purchase are stated at cost less any impairment losses while those acquired by donation are stated at nominal value. Capitalised artworks are not depreciated because they are deemed to have indefinite lives, but are subject to impairment reviews where damage or deterioration is reported. (f) Intangible assets Intangible assets are stated in the balance sheet at historical cost less accumulated amortisation and any impairment charges. Identifiable intangible assets with a finite useful life are amortised on a straight-line basis over their expected useful lives as follows: Computer software, licences and systems 3 years (f) 3 Available-for-sale investments are non-derivative financial assets that are either designated at this category or not classified in any of the other categories of financial assets. Available-for-sale investments are initially recognised at fair value. Transaction costs that are directly attributable to the acquisition of such assets are added to the initial fair value. If an available-for-sale financial asset has fixed or determinable payments and does not have an indefinite life, the transaction costs are amortised to profit or loss using the effective interest method. They are measured at fair value with changes in value recognised as a separate component of equity until the assets are sold, collected or otherwise disposed of, or until the assets are determined to be impaired, at which time the cumulative gain or loss previously reported in other comprehensive income shall be reclassified to profit or loss as a reclassification adjustment. Computer software, licences and systems in progress are stated at cost less any accumulated impairment loss. Costs mainly comprise system development expenditure and other direct costs attributable to the development of the system. Capitalisation of these costs ceases and the asset concerned is transferred to the appropriate intangible assets category when substantially all the activities necessary to prepare the asset for its intended use are completed. No amortisation is provided for computer software, licences and systems in progress. Investments are recognised or derecognised on the date the Authority commits to purchase or sell the investments or they expire. Bank interest receivables and other receivables, prepayments and deposits Bank interest receivables and other receivables, prepayments and deposits are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method, less any provision for impairment. (j) Leases (j) The estimated useful life of an intangible asset is reviewed annually. (g) Financial assets or liabilities at fair value through profit or loss (g) A lease is classified as a finance lease 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 Authority has designated the placements with the Exchange Fund and has included the forward foreign exchange contracts under financial assets or liabilities at fair value through profit or loss. The Authority determines the classification of its financial assets or liabilities at initial recognition, and such classification depends on the purpose for which the financial assets or liabilities are acquired. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. (k) Impairment of assets Property, plant and equipment, intangible assets and museum collections (k) Financial assets or liabilities at fair value through profit or loss are recognised when and only when the Authority becomes a party to the contractual provisions of the instruments and on a trade date basis. Financial assets or liabilities carried at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed to the profit and loss account. Financial assets or liabilities are derecognised when the rights to receive cash flows have expired or have been transferred and the Authority has transferred substantially all risks and rewards of ownership. Financial assets or liabilities at fair value through profit or loss are subsequently carried at fair value. Changes in fair value of financial assets or liabilities at fair value through profit or loss are recognised in the profit and loss account in the year in which they arise. Internal and external sources of information are reviewed at each balance sheet date to identify indications that the property, plant and equipment and intangible assets may be impaired or an impairment loss previously recognised no longer exists or may have decreased. The carrying amount of each item of museum collections is reviewed where there is an indication of impairment, for example where it has suffered physical deterioration or breakage or new doubts arise as to its authenticity. If any such indication exists, the assets recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount.

7 102 / /15 NOTES TO THE (CONTINUED) NOTES TO THE (CONTINUED) Significant accounting policies (Continued) 2 2 Significant accounting policies (Continued) 2 (k) Impairment of assets (Continued) (k) (l) Cash and cash equivalents (l) (ii) Property, plant and equipment, intangible assets and museum collections (Continued) The recoverable amount of an asset is the greater of its net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of time value of money and the risks specific to the asset. Where the assets do not generate cash inflows largely independent of those from other assets, the recoverable amount is determined only for the cash-generating unit which is the smallest group of assets that includes the asset and generates cash inflows independently. An impairment loss is reversed if there has been a positive change in the estimates used to determine the recoverable amount. A reversal of impairment losses is limited to the assets carrying amount that would have been determined had no impairment loss been recognised in previous years. Reversals of impairment losses are credited to the profit and loss account in the year in which the reversals are recognised. Available-for-sale investments (ii) Cash and cash equivalents represent short-term highly liquid investments which are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Cash and cash equivalents comprise cash at bank and in hand, and time deposits with original maturities of three months or less (other than restricted cash). (m) Other liabilities Payables and accruals are initially recognised at fair value and thereafter stated at amortised cost using the effective interest method unless the effect of discounting would be immaterial, in which case they are stated at cost. Restricted cash donations are recognised as liabilities initially when the donations are received. Donations that compensate the Authority for expenses incurred are recognised as income in profit or loss on a systematic basis in the same periods in which the expenses are incurred. Donations that compensate the Authority for the cost of an asset are deducted from the carrying amount of the asset. (n) Income recognition Interest income from bank deposits and other financial assets is recognised on a time-apportioned basis using the effective interest method. (m) (n) Available-for-sale investments are reviewed at each balance sheet date to determine whether there is objective evidence of impairment. If such evidence exists, the cumulative loss that has been recognised in the fair value reserve is reclassified to profit or loss as a reclassification adjustment. The amount of the cumulative loss that is recognised in profit or loss is the difference between the acquisition cost and current fair value, less any impairment loss on that asset previously recognised in profit or loss. Impairment losses in respect of available-for-sale debt securities investments are reversed through profit or loss if the subsequent increase in fair value can be objectively related to an event occurring after the impairment loss was recognised in profit or loss. (iii) Bank interest receivables and other receivables, prepayments and deposits (iii) Dividend income from investments in bond funds ( fund investments ) is recognised when the right to receive the dividend is established. Changes in fair value of the placements with the Exchange Fund, fund investments and forward foreign exchange contracts, which are designated as financial assets or liabilities at fair value through profit or loss, are recognised as income or loss in the profit and loss account in the year in which they arise. (o) Employee benefits Salaries, contract gratuity and annual leave entitlements are accrued in the year in which the employees render the associated services. Contributions to Mandatory Provident Fund ( MPF ) scheme are charged as expenditure on an accrual basis in the year in which the related employees render the associated services. (o) A provision for impairment is established when there is objective evidence that the Authority will not be able to collect all amounts due according to the original terms of receivables. The amount of provision is the difference between the carrying amount of the financial asset and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the profit and loss account. (p) Provisions and contingent liabilities Provisions are recognised in the balance sheet when the Authority has a legal or constructive obligation of uncertain timing or amount as a result of a past event, and it is probable that the Authority will require an outflow of economic benefits to settle the obligation and the amount can be estimated reliably. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation. (p) Such impairment loss is reversed in subsequent periods through the profit and loss account when an increase in the asset s recoverable amount can be related objectively to an event occurring after the impairment was recognised, subject to a restriction 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. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.

8 104 / /15 NOTES TO THE (CONTINUED) 3 31 NOTES TO THE (CONTINUED) Other investment income / (loss) 3 / 5 Board / Committee / Consultation Panel members remuneration The Chairman and members of the Board of the Authority, its Committees and the Consultation Panel of the Authority were not entitled to any remuneration for their services rendered to the Authority. 5 / / Fund investments (note a) a Dividend income from fund investments 4,942 Net fair value loss on fund investments (33,092) (28,150) 6 Remuneration of Chief Executive Officer and Executive Directors Remuneration received and receivable by Chief Executive Officer and Executive Directors are as follows: 6 Bond investments (note b) Interest income from held-to-maturity investments Interest income from available-for-sale investments Net losses on disposal of held-to-maturity investments b 4, (261) Chief Executive Officer (note a) a Executive Directors (note b) b Total 799 4, (23,889) Salaries and other emoluments 5,433 15,485 20,918 Contract gratuity 328 2,186 2,514 Contributions to MPF scheme Notes: (a) During the year ended 31 March, the Authority disposed of all its fund investments. (b) During the year ended 31 March, held-to-maturity investments of HK$137 million and HK$283 million matured and were sold before maturity respectively. The remaining investment of HK$10 million, which is a debt security with original maturity period of three years and is denominated in HK$, was reclassified from held-to-maturity investments to available-for-sale investments. 4 Staff costs Staff costs for employees directly hired by the Authority and a secondee from the Government of HKSAR are as follows: (a) 3 31 (b) ,779 17,757 23,536 Salaries and other emoluments 5,333 16,920 22,253 Contract gratuity 1,050 2,286 3,336 Contributions to MPF scheme Notes: (a) Chief Executive Officer was entitled to contract gratuity up to 24 July. (b) Executive Directors comprise Chief Operating Officer (from 6 October ), Executive Directors Communications & Marketing (up to 1 August 2013), Finance, Human Resources, M+, Performing Arts, Project Delivery and General Counsel. 6,398 19,299 25,697 (a) 7 24 (b) M+ Salaries, contract gratuity and other benefits 153, ,659 Contributions to MPF scheme 2,858 1,986 Total staff costs 156, ,645 Less: Direct staff costs capitalised (note 2(d)) 2(d) (48,456) (39,855) 108,192 83,790 Representing: Salaries, contract gratuity and other benefits 106,180 82,426 Contributions to MPF scheme 2,012 1, ,192 83,790

9 106 / /15 NOTES TO THE (CONTINUED) Remuneration of Chief Executive Officer and Executive Directors (Continued) The remuneration of Chief Executive Officer and Executive Directors are shown in the ranges as follows: 6 Number of individuals Number of individuals HK$6,000,001 HK$6,500,000 6,000,001 6,500,000 1 HK$5,500,001 HK$6,000,000 5,500,001 6,000,000 1 HK$3,500,001 HK$4,000,000 3,500,001 4,000,000 1 HK$3,000,001 HK$3,500,000 3,000,001 3,500, HK$2,500,001 HK$3,000,000 2,500,001 3,000, HK$2,000,000 or below 2,000, NOTES TO THE (CONTINUED) Property, plant and equipment Building Motor vehicles 9 Leasehold improvements, furniture and equipment Computer equipment Construction in progress (note) Total Cost At 1 April ,299 6, , ,519 Additions , , ,733 Transfers 29, (30,713) Disposals / (90) (90) 7 Other operating expenses 7 At 31 March , ,307 8,156 1,096,964 1,148,162 Programming and activities costs 22,260 25,799 Consultancy fees 24,361 48,549 Operating lease payments 23,205 18,209 Site facility management 9,161 15,847 Depreciation and amortisation 7,648 7,045 Audit fee Others (note) 56,968 45,219 Accumulated depreciation At 1 April ,035 4,245 14,619 Charge for the year 2, ,052 1,311 4,615 Written back on disposals / (90) (90) At 31 March , ,087 5,466 19,144 Net book value At 31 March , ,220 2,690 1,096,964 1,129,018 Note: The expenses included mainly storage and conservation facilities costs for museum collections, advertising and promotion expenses, recruitment costs and legal fees. 8 Taxation Pursuant to Section 41(1) of the WKCDA Ordinance, the Authority is exempt from taxation under the Inland Revenue Ordinance, Cap Pursuant to Section 41(2) of the WKCDA Ordinance, the Authority is also exempt from stamp duty under the Stamp Duty Ordinance, Cap. 117 in respect of any instrument relating to (a) the conveyance of any immovable property under which the beneficial interest of the property passes by way of gift to the Authority; or (b) the transfer of any stock within the meaning of the Stamp Duty Ordinance, under which the beneficial interest of the stock passes by way of gift to the Authority. 143, , (1) 11241(2) 117 (a) (b) Cost At 1 April ,670 5,404 60,332 76,902 Additions , ,617 Transfers (796) At 31 March ,299 6, , ,519 Accumulated depreciation At 1 April ,434 2,973 9,646 Charge for the year 100 3,601 1,272 4,973 At 31 March ,035 4,245 14,619 Net book value At 31 March ,264 2, , ,900 Note: The net book value of construction in progress included mainly the costs incurred for the design and construction of Xiqu Centre, M+ Museum and the Park. M+

10 108 / /15 NOTES TO THE (CONTINUED) NOTES TO THE (CONTINUED) Museum collections Intangible assets 11 Cost At 1 April , ,860 Additions 113,743 68,756 Computer software, licences and systems Computer software, licences and systems in progress Total At 31 March , ,616 Accumulated impairment At 1 April 4 1 Charge for the year At 31 March 3 31 Cost At 1 April 4 1 7,787 1,434 9,221 Additions 1,983 1,465 3,448 Transfers 1,977 (1,977) At 31 March , ,669 Net book value At 31 March , ,616 Accumulated amortisation At 1 April 4 1 2,784 2,784 Charge for the year 3,033 3,033 Notes: (a) The Authority is in the process of establishing the M+ Collections Trust (the Collections Trust ) to hold the legal interest in the M+ Museum s collection of artworks. Among the acquisitions made in the year ended 31 March 2013, the Authority entered into a transaction with two agreements signed, one agreement to acquire 47 pieces of contemporary Chinese artworks (the Purchased Works ) at a cost of around HK$180 million from Dr. Ulrich Adolf Sigg (the Seller or Donor ) and another agreement to receive a donation of 1,463 pieces of contemporary Chinese artworks (the Donated Works ) as a gift from Stiftung für Chinesische Gegenwartskunst ( Chinese Contemporary Art Foundation ) & Dr. Ulrich Adolf Sigg. This is treated as a single transaction upon the contemporaneous completion of the Deed of Sale and Purchase and Deed of Gift. The transaction includes a condition that the Seller / Donor may at his sole discretion upon demand require the Authority or the Trustees of the Collections Trust to re-sell the Purchased Works to the Seller at the price paid by the Authority / transfer the ownership and possession of the Donated Works to the Donor in the event that the opening of the M+ facility in its major part shall be delayed beyond the year 2019 or that either or both the Authority or the Collections Trust is / are terminated or dissolved for any purpose other than reorganisation of any of the Authority, the Collections Trust or the M+ Museum. (b) The Donated Works were valued at around HK$1.3 billion with reference to a valuation report prepared by an independent valuer in May During the year, restricted cash donations of HK$1.0 million (: HK$Nil) were received from a donor for acquisition of museum collections. As at 31 March, an amount of HK$0.4 million (: HK$Nil) was utilised for acquisition of museum collections and the remaining donations of HK$0.6 million (: HK$Nil) was recognised in other liabilities as disclosed in note 16. The carrying amount of such museum collections are stated at nominal value in accordance with the accounting policy in note 2(e). (a) M+ M ,463 M+2019 / M+ / / (b) (e) At 31 March ,817 5,817 Net book value At 31 March , ,852 Cost At 1 April , ,339 Additions 119 3,763 3,882 Transfers 2,723 (2,723) At 31 March ,787 1,434 9,221 Accumulated amortisation At 1 April Charge for the year 2,072 2,072 At 31 March ,784 2,784 Net book value At 31 March ,003 1,434 6,437

11 110 / /15 NOTES TO THE (CONTINUED) NOTES TO THE (CONTINUED) Financial assets / (liabilities) at fair value through profit or loss 12 / 12 Financial assets / (liabilities) at fair value through profit or loss (Continued) 12 / Note Assets Non-current portion Placements with the Exchange Fund (a) 7,917,275 14,539,548 Current portion Placements with the Exchange Fund (a) 7,215,645 Forward foreign exchange contracts (b) 7,640 50,189 7,223,285 50,189 15,140,560 14,589,737 Liabilities Current portion Forward foreign exchange contracts (b) (6,650) (b) Forward foreign exchange contracts The Authority has entered into a number of forward foreign exchange contracts. The net aggregate fair value loss (: gain) on such contracts was mostly equal to the decrease (: increase) in the net aggregate exchange loss and increase (: decrease) in interest income on bank deposits made in the swap deposit transactions. The notional principal amounts of outstanding forward foreign exchange contracts were equivalent to HK$2,949 million (: HK$3,445 million) in total when translating foreign currency amounts using spot rates at the balance sheet date. The maturities of the contracts fall within one year subsequent to the balance sheet date. As at 31 March, the fair value of the forward foreign exchange contracts was calculated as the present value of expected future cash flows relating to the difference between the contract rates and the market forward rates at the balance sheet date. 13 Other financial assets As at 31 March, the fair value of the available-for-sale investments was HK$64.7 million (: HK$10.1 million), which was based on the valuation provided by the custodians. (b) (a) Placements with the Exchange Fund As at 31 March, the balance of the placements with the Exchange Fund amounted to HK$15,133 million (: HK$14,540 million), being the total principal sums of HK$13,800 million (: HK$13,800 million) plus interests credited but not yet withdrawn at the balance sheet date. The placements, by way of credit facilities entered into between the Authority and Hong Kong Monetary Authority ( HKMA ), have a term of six years from the respective dates of placements, during which time the Authority would not be able to withdraw the principal amounts. The principal amounts of HK$6,500 million, HK$3,500 million and HK$3,800 million will be repaid by HKMA in January 2016, July 2016 and October 2019 respectively. The rate of return on the placements, which is determined annually in January and payable annually in arrears on 31 December, is calculated on the basis of the average annual rate of return on the Investment Portfolio of the Exchange Fund over the past six years or the average annual yield of three-year Exchange Fund Notes in the previous year (subject to a minimum of zero percent), whichever is the higher. This rate has been fixed at 5.0%, 3.6% and 5.5% per annum for January to December 2013, and respectively. The Authority has designated the placements with the Exchange Fund as financial assets at fair value through profit or loss. The financial assets are denominated in HK$. (a) % % 3.6% 5.5% Available-for-sale debt securities Listed in Hong Kong 54,681 Unlisted 10,051 10,109 64,732 10,109 Current portion 10,051 Non-current portion 54,681 10,109 64,732 10,109

12 112 / /15 NOTES TO THE (CONTINUED) NOTES TO THE (CONTINUED) Other receivables, prepayments and deposits Other liabilities 16 Amount due from the Government of HKSAR (note) 20,047 14,815 Rental deposits 4,670 4,792 Others 1,155 2,165 Note: The Authority entered into several agreements with the Government for carrying out government entrustment works. The Authority agreed with the Government to receive reimbursements from the Government or entrust some WKCDA construction works to offset the balance. 15 Cash and bank balances 25,872 21, Payables and accruals for construction contracts 225,370 42,387 Provision for annual leave entitlements and MPF contributions 2,920 2,364 Accrued contract gratuity 9,499 9,487 Deposits received 1,081 1,403 Restricted cash donations received 593 Other payables and accruals 44,246 34, Capital and reserves (a) Capital 17 (a) 283,709 90,476 On 4 July 2008, the Finance Committee of the Legislative Council of HKSAR approved an upfront endowment of HK$21.6 billion to the Authority for developing WKCD Time deposits with original maturities over three months 8,508,815 9,088,116 Time deposits with original maturities of three months or less 13,000 2,250 Cash at bank and in hand 3,790 2,833 Cash and bank balances 8,525,605 9,093,199 Less: Time deposits with original maturities over three months (8,508,815) (9,088,116) Restricted cash (note) (593) Cash and cash equivalents 16,197 5,083 Note: As at 31 March, restricted cash donations of HK$0.6 million (: HK$Nil) included in bank balances were designated by the donor for the purpose of collection acquisition Pursuant to Section 22(2) of the WKCDA Ordinance, the Authority shall (a) manage its finances (including resources) with due care and diligence; and (b) ensure the financial sustainability of the operation and management of arts and cultural facilities, related facilities and ancillary facilities. (b) Fair value reserve The fair value reserve comprises the cumulative net change in the fair value of available-for-sale investments held at balance sheet date and is dealt with in accordance with the accounting policies in notes 2(h) and 2(k)(ii). 18 Banking facilities The Authority has uncommitted money market line facilities of HK$250 million (: HK$250 million). Interest is payable on amounts drawn down at a rate related to Hong Kong Inter-bank Offered Rate. There was no outstanding balance as at 31 March and 31 March. 22(2)(a) (b) (b) 2(h) 2(k)(ii)

13 114 / /15 NOTES TO THE (CONTINUED) NOTES TO THE (CONTINUED) Commitments Material related party transactions 20 (a) Operating lease commitments Commitments for total future minimum lease payments under noncancellable operating leases are as follows: (a) Land and buildings within one year 18,250 17,310 in the second to fifth years 13,238 29,124 31,488 46,434 Other assets within one year Parties are considered to be related to the Authority if the parties have the ability, directly or indirectly, to control the Authority or exercise significant influence over the Authority in making financial and operating decisions, or vice versa. For the purpose of the statement of accounts, transactions between the Authority and Government departments, agencies or Government controlled entities, other than those transactions such as the payment of government rent and rates, fees etc. that arise in the normal dealings between the Government and the Authority, are considered to be related party transactions. Related parties also include key management personnel having authority and responsibility for planning, directing and controlling the activities of the Authority. During the year, the Authority had the following transactions with related parties: (a) Key management personnel remuneration Remuneration of Chief Executive Officer and Executive Directors is as follows: (a) 31,518 46,673 (b) Capital commitments (b) Commitments in respect of capital expenditures on property, plant and equipment, intangible assets and museum collections are as follows: Chief Executive Officer and Executive Directors remuneration (note 6) 6 23,536 25,697 (b) Other related party transactions (b) Contracted but not provided for Property, plant and equipment 3,382, ,428 Museum collections 2,865 5,071 Intangible assets 487 1,428 3,386, ,927 Authorised but not contracted for Property, plant and equipment 107,151 Museum collections 115,063 48,581 Intangible assets 11, ,450 48,581 Income from placements with the Exchange Fund (note 12(a)) Salaries and related costs of a secondee from the Government of HKSAR Reimbursements received from the Government of HKSAR for carrying out some government entrusted works 21 Financial risk management (a) Financial risk factors 12(a) 593, , , (a) Risk management is carried out by the Authority under approved policies. The Authority identifies and evaluates financial risks, and provides written principles for overall risk management. A treasury team in Finance Department is dedicated to the day-to-day management and investment of the funds.

14 116 / /15 NOTES TO THE (CONTINUED) NOTES TO THE (CONTINUED) Financial risk management (Continued) Financial risk management (Continued) 21 (a) Financial risk factors (Continued) (a) (a) Financial risk factors (Continued) (a) Foreign currency risk (ii) Interest rate risk (ii) The Authority s functional and presentation currency is HK$. Its foreign currency risk arises mainly from its financial assets or liabilities denominated in currencies other than HK$. The Authority s foreign currency risk exposure arises from its bank deposits and investments in debt securities that are denominated in foreign currencies, and forward foreign exchange contracts. A set of investment guidelines covering investment limits, risk management and controls is used to manage the Authority s foreign currency risk. The following table details the Authority s exposure at the balance sheet date to currency risk arising from significant financial assets denominated in foreign currencies including United States Dollar ( USD ) and Renminbi ( RMB ). Other than the items set out in the table below, all financial assets and liabilities at the balance sheet date are denominated in HK$. USD RMB USD RMB Time deposits with original maturities over three months and cash and cash equivalents 4,945 1,021 1,705 6,836 Bank interest receivables Available-for-sale investments 55 5,037 1,052 1,725 6,911 The Authority s interest-bearing assets include the placements with the Exchange Fund, bank deposits and investments in debt securities. Apart from the placements with the Exchange Fund, the return of which is determined annually (see note 12(a)), most of these assets bear interest at fixed rates. As regards to bank deposits, since they are all stated at amortised cost, their carrying amounts and the Authority s profit for the year will not be affected by changes in market interest rates. (iii) Credit risk The Authority s credit risk is the risk that counterparties may default on its placements with the Exchange Fund, bank deposits, debt securities and forward foreign exchange contracts. The Authority believes it is prudent to place part of the funds with the Exchange Fund and expects HKMA to meet its contractual obligations to the Authority in respect of the placements. The Authority sets limits on its exposure to the approved list of banks / institutions. To ensure that there is no significant concentration of credit risk to a single counterparty, balance with each bank / institution is subject to a maximum exposure limit based on factors such as overall deposit base and capital base of the bank / institution and total funds under management. In addition, based on the prevailing economic and financial development, the approved list of banks / institutions and the exposure limits are regularly monitored, revised and updated. The Authority s investments in debt securities were of a minimum issuer / issue credit rating of A3 or above by Moody s or equivalent rating by Standard and Poor s as at 31 March. 12(a) (iii) / / / / 3 31 A3 Taking into account the effects of forward foreign exchange contracts, the overall net exposures at the balance sheet date in USD and RMB were equivalent to HK$2,424.4 million (: HK$3,257.1 million) and HK$2,974.8 million (: HK$3,974.0 million) respectively. The Authority manages its foreign currency risk in RMB by closely monitoring the movement of RMB exchange rate against HK$ as compared to the weighted average conversion rate. In the event that the RMB is expected to depreciate, the Authority may consider either immediate disposal in the market and / or using forward hedge contracts to mitigate the currency risk. It is assumed that the pegged rate between the USD and HK$ would not give rise to significant foreign currency risk in USD / (iv) Liquidity risk The Authority s policy is to regularly monitor current and expected liquidity requirements to ensure that the Authority maintains sufficient reserves of cash and adequate undrawn uncommitted banking facilities to meet its liquidity requirements in the short and long terms. Accrued contract gratuity is payable without interest upon satisfactory completion of the employment contract or each successive period as specified in individual employment contract. Other financial liabilities of the Authority at the balance sheet date do not bear interest and are payable within one year or on demand. (iv)

15 118 / /15 NOTES TO THE (CONTINUED) NOTES TO THE (CONTINUED) Financial risk management (Continued) Financial risk management (Continued) 21 (a) Financial risk factors (Continued) (a) (b) Capital risk management (b) (v) Sensitivity analysis Foreign currency risk The Authority is exposed to foreign currency risk due to primarily fluctuations in the RMB exchange rates (see note 21(a)). As at 31 March, if there were a 3% (: 3%) increase / decrease in the RMB exchange rate against the HK$ on the same date, it is estimated that, with all other variables held constant, it would increase / decrease the Authority s profit for the year by approximately HK$89.2 million (: HK$119.2 million). (v) 21(a) 3 31 / 3%3% / The Authority s objectives when managing capital are to safeguard the Authority s ability to continue as a going concern and ensure the financial sustainability of the operation and management of the arts and cultural facilities, related facilities or ancillary facilities of WKCD. The Authority s working capital is mainly financed by the Government s upfront endowment. Under the WKCDA Ordinance, the Authority is required to manage its finances with due care and diligence and invest the capital of the Authority in a financially prudent manner. (c) Fair value estimation (c) The sensitivity analysis has been determined assuming that the change in foreign exchange rates had occurred at the balance sheet date and had been applied to the Authority s exposure to currency risk for the RMB denominated financial assets in existence at that date, and that all other variables, in particular interest rates, remain constant. The stated changes in foreign currency represent the Authority s assessment of reasonable possible changes in foreign exchange rates over the period until the next balance sheet date. Financial assets / (liabilities) carried at fair value The following presents the assets and liabilities measured at fair value or required to disclose their fair value in these financial statements on a recurring basis at 31 March across the three levels of the fair value hierarchy defined in HKFRS 13: Fair Value Measurement, with the fair value measurement categorised in its entirety based on the lowest level input that is significant to the entire measurement. The levels of inputs are defined as follows: / Interest rate risk The Authority is exposed to interest rate risk due to the fluctuation of the prevailing market interest rate on bank deposits. Based on the time deposits balance as at 31 March, if there were a general increase / decrease of 0.1% (or 10 basis points) in the annual interest rates on the same date, it is estimated that, with all other variables held constant, it would increase / decrease the Authority s profit for the year by approximately HK$8.5 million (: HK$9.1 million) a year / 0.1%10 / Level 1 (highest level): quoted prices (unadjusted) in active markets for identical assets or liabilities that the Authority can access at the measurement date; Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; Level 3 (lowest level): unobservable inputs for the asset or liability The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the balance sheet date and had been applied to the time deposits in existence at that date. Fixed rate debt securities, which are available-for-sale investments carried at fair value, are excluded from this analysis. The Authority is also exposed to financial risk arising from changes in the rate of return on the placements with the Exchange Fund, which is set annually in January. Based on the balance of the placements with the Exchange Fund as at 31 March, if there were an increase / decrease of 0.1% (or 10 basis points) in the current year rate of return, it is estimated that, with all other variables held constant, the Authority s income from the placements with the Exchange Fund would have increased / decreased by approximately HK$14.9 million (: HK$14.4 million) a year on an annualised basis / 0.1%10 /