122 Report of the Directors The directors submit their annual report together with the audited financial statements for the year ended 31 March

Transcription

1 FINANCIAL REPORT Report of the Directors Independent Auditor s Report Financial Statements Notes to the Financial Statements

2 122 Report of the Directors The directors submit their annual report together with the audited financial statements for the year ended 31 March Principal activities Details of the principal activities of Hong Kong Cyberport Management Company Limited (the Company ) are set out in note 1 to the financial statements. 1 Financial statements The results of the Company for the year ended 31 March 2013 and the state of the Company s affairs at that date are set out in the financial statements on pages 127 to Transfer to reserves Loss attributable to shareholders of 134,374,672 (2012: 134,532,727) has been transferred to reserves. Other movements in reserves are set out in the statement of changes in equity. 134,374,672 ( ,532,727 The directors do not recommend the payment of a final dividend. Property, plant and equipment Details of the movement in property, plant and equipment of the Company are set out in note 13 to the financial statements. 13 Share capital Details of the share capital of the Company are set out in note 22 to the financial statements. There were no movements during the year. 22 Annual Report 2012/13

3 123 Directors The directors during the year and up to the date of this report were: Paul CHOW Man-yiu (Chairman) George HONGCHOY Kwok-lung Herman HU Shao-ming LEE Shing-see Elizabeth TSE Man-yee Douglas SO Cheung-tak Peter YAN King-shun Alfred WONG Kwok-kuen Rosanna CHOI Yi-tak (appointed on 5 June 2012) Gabriel PANG Tsz-kit (appointed on 5 June 2012) Jeny YEUNG Mei-chun (appointed on 5 June 2012) HO Shuk-yee (appointed on 8 October 2012) Edwin LEE Kan-hing (appointed on 5 June 2013) Anthony AU Wai-hung (retired on 4 June 2012) Winnie J NG (retired on 4 June 2012) YING Yiu-hong (resigned on 25 July 2012) WONG Sau-ying (retired on 4 June 2013) Daniel LAI (alternate director to Elizabeth TSE Man-yee until resignation on 25 July 2012; appointed as director on 25 July 2012 and resigned on 8 October 2012; appointed as alternate director to HO Shuk-yee on 8 October 2012) Mable CHAN (alternate director to Elizabeth TSE Man-yee, appointed on 25 July 2012) Cathy CHU Man-ling (alternate director to YING Yiu-hong, resigned on 19 June 2012) Ophelia TSANG Oi-lin (alternate director to YING Yiu-hong, appointed on 19 June 2012 and resigned on 25 July 2012) Joey LAM Kam-ping (alternate director to Daniel LAI, appointed on 25 July 2012 and resigned on 8 October 2012) There being no provision in the Company s Articles of Association for retirement by rotation, all present directors continue in office. 2012/13

4 124 Report of the Directors Directors interests in contracts No contracts of significance in relation to the Company s business to which the Company, its fellow subsidiaries or its immediate holding company was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year. At no time during the year was the Company, its fellow subsidiaries or its immediate holding company a party to any arrangements to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate. Management contracts Save for the management agreement of Le Méridien Cyberport, the facilities management agreement and the system operation contract, no other contracts concerning the management and administration of the whole or any substantial part of the business of the Company were entered into or existed during the year. Auditors KPMG was appointed as auditors of the Company upon the retirement of PricewaterhouseCoopers. KPMG retire and, being eligible, offer themselves for re-appointment. A resolution for the re-appointment of KPMG as auditors of the Company is to be proposed at the forthcoming Annual General Meeting. By order of the board Chairman Hong Kong, 26 September Annual Report 2012/13

5 Independent Auditor s Report 125 Independent auditor s report to the shareholders of (Incorporated in Hong Kong with limited liability) We have audited the financial statements of Hong Kong Cyberport Management Company Limited (the Company ) set out on pages 127 to 164, which comprise the balance sheet as at 31 March 2013, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information Directors responsibility for the financial statements The directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the Hong Kong Companies Ordinance and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. This report is made solely to you, as a body, in accordance with section 141 of the Hong Kong Companies Ordinance, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report /13

6 126 Independent Auditor s Report Auditor s responsibility (continued) We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the state of the Company s affairs as at 31 March 2013, and of its loss and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the Hong Kong Companies Ordinance. KPMG Certified Public Accountants 8th Floor, Prince s Building 10 Chater Road Central, Hong Kong 26 September Annual Report 2012/13

7 127 Statement of Comprehensive Income For the year ended 31 March Note Revenue 5 405,526, ,350,746 Other income 5 15,796,254 28,322, ,322, ,673,307 Building management expenses 131,267, ,889,427 Staff costs 6 92,683,234 86,907,181 Information technology facilities maintenance fee 19,031,834 23,014,667 Government rent and rates 9 12,664,674 10,779,479 Other operating expenses 10 91,946,799 95,851,643 Operating expenses before depreciation 347,594, ,442,397 Operating profit before depreciation 73,728,219 76,230,910 Depreciation 13 (208,102,891) (210,763,637) Income tax expense 11 Loss and total comprehensive income for the year 12 (134,374,672) (134,532,727) The notes on pages 131 to 164 form part of these financial statements /13

8 128 Balance Sheet As at 31 March Note Non-current assets Property, plant and equipment 13 3,287,995,028 3,447,980,108 Deferred rental receivable 8,148,959 6,250,265 Held-to-maturity investments ,920, ,283,521 3,544,064,000 3,729,513,894 Current assets Inventories, at cost 533, ,768 Trade and other receivables 15 24,631,037 24,763,670 Amounts due from fellow subsidiaries 16 3,070,876 1,938,579 Held-to-maturity investments ,118, ,713,926 Cash and bank balances ,609, ,917, ,964, ,867,521 Current liabilities Trade and other payables 18 76,500,547 66,979,642 Rental and other deposits 62,323,441 57,501,078 Amount due to immediate holding company ,210, ,278, ,034, ,758,926 Net current assets 420,929, ,108,595 Total assets less current liabilities 3,964,993,574 4,105,622,489 Non-current liabilities Development maintenance fund ,104, ,000,000 Facilities maintenance fund 20 50,000,000 50,000,000 Deferred income ,058 6,762, ,613, ,762,301 NET ASSETS 3,476,380,567 3,597,860,188 CAPITAL AND RESERVES Share capital Capital reserve 5,274,743,441 5,261,848,390 Accumulated losses (1,798,362,876) (1,663,988,204) TOTAL EQUITY 3,476,380,567 3,597,860,188 Approved and authorised for issue by the board of directors on 26 September Directors The notes on pages 131 to 164 form part of these financial statements. Directors Annual Report 2012/13

9 129 Statement of Changes in Equity For the year ended 31 March Share capital Capital reserve Accumulated losses Total equity Balance at 1 April ,261,848,390 (1,529,455,477) 3,732,392,915 Change in equity for the year: Loss and total comprehensive income for the year Balance at 31 March 2012 and 1 April 2012 (134,532,727) (134,532,727) ,261,848,390 (1,663,988,204) 3,597,860,188 Changes in equity for the year: Transfer from development maintenance fund to capital reserve (note 19) Loss and total comprehensive income for the year 19 12,895,051 12,895,051 (134,374,672) (134,374,672) Balance at 31 March ,274,743,441 (1,798,362,876) 3,476,380,567 The notes on pages 131 to 164 form part of these financial statements /13

10 130 Statement of Cash Flows For the year ended 31 March Cash flows from operating activities Note Net cash generated from operations 23 63,527,007 73,944,113 Cash flows from investing activities Purchase of property, plant and equipment (37,499,784) (25,147,879) Proceeds from disposal of property, plant and equipment 6,786 Purchase of held-to-maturity investments (166,990,775) (258,287,562) Redemption of held-to-maturity investments 185,500, ,000,000 Decrease in designated bank balance 142,948,186 Decrease/(increase) in bank deposits longer than three months 76,244,395 (282,092,022) Interest income from held-to-maturity investments received 13,488,102 15,341,087 Interest income on designated bank balance received 1,216,243 Interest income on bank deposits received 5,179,110 1,243,320 Net cash generated from/(used in) investing activities Cash flows from financing activities Decrease in amount due to immediate holding company Government grants and sponsorship (refunded)/received, net Payment on settlement of development maintenance fund 75,927,834 (100,778,627) (67,377) (17,844) 21 (5,450,722) 8,431, (49,000,000) Net cash used in financing activities (5,518,099) (40,585,878) Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 133,936,742 (67,420,392) 146,878, ,298, ,815, ,878,598 The notes on pages 131 to 164 form part of these financial statements Annual Report 2012/13

11 131 Notes to the Financial Statements 1 General information The principal activity of Hong Kong Cyberport Management Company Limited (the Company ) is to support and promote innovation and technology development in Hong Kong through the creation of a strategic cluster of information and communications technology ( ICT ) based companies as well as encouraging the building of a critical mass of professional talent in the territory. With a vision to establish itself as a leading ICT hub in the Asia-Pacific region, Cyberport is committed to facilitating the local economy by nurturing ICT industry start-ups and entrepreneurs, driving collaboration to pool resources and create business opportunities, and accelerating ICT adoption through strategic initiatives and partnerships. 1 In order to fulfill the vision, the Company established five centres namely Technology Centre, Entrepreneurship Centre, Collaboration Centre, Knowledge Centre and Campus Development Centre (the five centres collaterally named Operating Centres ). The Company is a limited liability company incorporated in Hong Kong. The address of its registered office is Units , Level 11, Cyberport 2, 100 Cyberport Road, Hong Kong The Company is wholly owned by the Government of the Hong Kong Special Administrative Region ( HKSAR ) via Financial Secretary Incorporated. These financial statements have been approved for issue by the board of directors on 26 September Significant accounting policies The significant accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated /13

12 132 Notes to the Financial Statements 2 Significant accounting policies (continued) (a) Basis of preparation The financial statements of the Company have been prepared in accordance with Hong Kong Financial Reporting Standards ( HKFRSs ). The financial statements have been prepared under the historical cost convention. 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 Company s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4. (b) Adoption of new/revised HKFRSs (i) New and revised standards and amendments effective for the year ended 31 March 2013 During the year, the Company has adopted the new and revised standards and amendments of HKFRSs which are effective for the year ended 31 March 2013 and are relevant to its operations. The Company has assessed the impact of the adoption of these new and revised standards and amendments and considered that there has been no significant impact on the Company s results and financial position nor any substantial changes in the Company s accounting policies. (ii) Standards and amendments to existing standards that are not yet effective for the year ended 31 March 2013 The HKICPA has issued the following new or revised HKFRSs standards and amendments to existing standards which are not yet effective for the year ended 31 March 2013 and have not been early adopted by the Company: 2 (a) 4 (b) (i) (ii) Annual Report 2012/13

13 133 2 Significant accounting policies (continued) 2 (b) Adoption of new/revised HKFRSs (continued) New or revised standards and amendments Amendments to HKAS 1, Presentation of financial statements Presentation of items of other comprehensive income 1 (b) Effective for accounting periods beginning on or after 1 July HKFRS 13, Fair value measurement 1 January Revised HKAS 19, Employee benefits 1 January Amendments to HKFRS 7, Financial instruments: Disclosures Offsetting financial assets and financial liabilities 7 Amendments to HKAS 32, Financial instruments: Presentation Offsetting financial assets and financial liabilities 32 1 January January HKFRS 9, Financial instruments 1 January The Company is in the process of making an assessment of the impact of these new standards and amendments to standards and is not yet in a position to state whether they would have a significant impact on the Company s results and financial position. (c) Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the items. (c) 2012/13

14 134 Notes to the Financial Statements 2 Significant accounting policies (continued) (c) Property, plant and equipment (continued) 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 Company and the cost of the item can be measured reliably. All other repairs and maintenance are expensed in the statement of comprehensive income during the financial period in which they are incurred. Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives. The principal annual rates in use are as follows: 2 (c) Buildings Over the period of the lease Building services and support facilities 10% 10% Information technology facilities 20% 20% Operating Centres equipment 20%-33 1 /3% 20%-33 1 /3% Leasehold improvements 10% 10% Furniture and equipment 10%-20% 10%-20% Motor vehicles 20% 20% The assets residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount (note 2(e)). 2(e) The gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant asset, and is recognised in the statement of comprehensive income. Annual Report 2012/13

15 135 2 Significant accounting policies (continued) (d) Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company s management has the positive intention and ability to hold to maturity. They are included in non-current assets, except for those with maturities less than 12 months from the balance sheet date, which are classified as current assets. Held-to-maturity investments are stated in the balance sheet at cost plus/less any discount/premium amortised to date. The discount or premium is amortised over the period to maturity and included as interest income/expense in the statement of comprehensive income. Provision is made when there is a diminution in value other than temporary. The carrying amounts of individual held-to-maturity investments or holdings of the same investments are reviewed at the balance sheet date in order to assess the credit risk and whether the carrying amounts are expected to be recovered. Provisions are made when carrying amounts are not expected to be recovered and are recognised in the statement of comprehensive income as expense immediately. (e) Impairment of assets Assets that have an indefinite useful life are not subject to depreciation/amortisation and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Nonfinancial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each balance sheet date. 2 (d) 12 (e) 2012/13

16 136 Notes to the Financial Statements 2 Significant accounting policies (continued) (f) Government grant or sponsorship A government grant or sponsorship is recognised at fair value when there is reasonable assurance that the Company will comply with the conditions attaching with it and that the grant will be received. Government grants and sponsorships relating to income are deferred and recognised in the statement of comprehensive income over the period necessary to match them with the costs they are intended to compensate. Government grants and sponsorships relating to the purchase of property, plant and equipment are credited to the statement of comprehensive income on a straight-line basis over the expected lives of the related assets. (g) Inventories Inventories, comprising food, beverage and operating supplies, are stated at the lower of cost and net realisable value. Costs are calculated using the weighted average costing method. Net realisable value is determined on the basis of anticipated sales proceeds less estimated selling expenses. (h) Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade and other receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the statement of comprehensive income. 2 (f) (g) (h) Annual Report 2012/13

17 137 2 Significant accounting policies (continued) (i) Cash and cash equivalents Cash and cash equivalents comprise cash in hand, deposits held at call with banks, investments with a maturity of three months or less from the date of investment. (j) Trade and other payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using effective interest method. (k) Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. (l) Employee benefits (i) Employee leave entitlements Employee entitlements to annual leave and long service leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the balance sheet date. Employee entitlements to sick leave and maternity leave are not recognised until the time of leave. 2 (i) (j) (k) (l) (i) 2012/13

18 138 Notes to the Financial Statements 2 Significant accounting policies (continued) (l) Employee benefits (continued) (ii) Retirement scheme obligations The Company operates a defined contribution retirement scheme, the Mandatory Provident Fund, and pays contributions to a publicly administered retirement benefit plan on a mandatory basis. The Company has no further payment obligations once the contributions have been paid. (iii) Bonus entitlements The expected cost of bonus payments are recognised as a liability when the Company has a present legal or constructive obligation as a result of services rendered by employees and a reliable estimate of the obligation can be made. Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled. (m) Current and deferred income tax The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the country where the Company operates and generates taxable income. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. 2 (l) (ii) (iii) 12 (m) Deferred income tax is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Annual Report 2012/13

19 139 2 Significant accounting policies (continued) (n) Revenue and other income recognition Revenue and other income comprise the fair value of the consideration received or receivable for the sale of services in the ordinary course of the Company s activities. Revenue and other income are recognised as follows: 2 (n) (i) Rental income is recognised on a straight-line basis over the terms of the lease. (i) (ii) Management fee income is recognised when the services are rendered. (ii) (iii) Income from hotel operation is recognised upon provision of services. (iii) (iv) Car park fee and information technology facilities income are recognised when the services are rendered and the facilities are utilised. (iv) (v) Income from leasing of centre facilities is recognised when the facilities are utilised. (v) (vi) Other incidental income and services income are recognised when the Company is entitled to the income and the services are rendered. (vi) (vii) Interest income is recognised on a time proportion basis, using the effective interest method. (o) Operating lease Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, net of any incentives received from the lessor, are charged to the statement of comprehensive income on a straight-line basis over the period of the lease. (vii) (o) 2012/13

20 140 Notes to the Financial Statements 2 Significant accounting policies (continued) (p) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the Company operates (the functional currency ). The financial statements are presented in Hong Kong dollar, which is the Company s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income. (q) Contingent liabilities A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Company. It can also be a present obligation arising from past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot be measured reliably. A contingent liability is not recognised but is disclosed in the notes to the financial statements. When a change in the probability of an outflow occurs so that outflow is probable, they will then be recognised as a provision. 2 (p) (i) (ii) (q) Annual Report 2012/13

21 141 3 Financial risk management (a) Financial risk factors The Company s activities expose to a variety of financial risks: interest rate risk, credit risk and liquidity risk. The Company s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects of these risks on the Company s financial performance. Risk management is carried out by the Company s management under policies approved by the Board. The Company s management identifies, evaluates and manages significant financial risks in the Company s business units. The Board provides guidance for overall risk management. 3 (a) (i) Interest rate risk (i) Interest rate risk is the risk that changes in market interest rates will impact the earnings of the Company. The Company s major interest-bearing assets comprise bank deposits and held-to-maturity investments (collectively interest bearing assets ) and are primarily issued at fixed rates which therefore do not expose the Company to cash flow interest rate risk. The Company has no significant borrowings other than the non interest-bearing advance from its immediate holding company. (ii) Credit risk Credit risk arises from the potential failure of the Company s counterparties to meet their obligations under financial contracts. The Company is exposed to credit risk on cash and bank balances, held-to-maturity investments, as well as trade and other receivables and amounts due from fellow subsidiaries. The Company s bank deposits are deposited with banks of high credit quality in Hong Kong. For held-to-maturity investments, the Company adopts a prudent policy to invest in securities only with very strong investment-grade credit ratings and limit exposure to any single investment. The exposures to these credit risks are monitored on an ongoing basis. (ii) 2012/13

22 142 Notes to the Financial Statements 3 Financial risk management (continued) (a) Financial risk factors (continued) (ii) Credit risk (continued) For rent receivable from tenants, credit checks are part of the normal leasing process and stringent monitoring procedures are in place to deal with overdue debts. In addition, the Company reviews the recoverable amount of each individual balance outstanding at each balance sheet date to ensure that adequate provision for impairment losses is made for irrecoverable amounts. The Company normally receives rents in advance from tenants on a monthly basis and also has policies in place to obtain rental deposits or bank guarantees from tenants prior to commencement of leases. For other trade receivables and amounts due from fellow subsidiaries, a credit policy is in place and the exposure to these credit risks are monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. These receivables are due ranging from 30 to 60 days from the date of billing. Debtors with balances that are more than 60 days overdue are generally required to settle all outstanding balances before any further credit is granted. Normally, the Company does not obtain collateral from customers and the utilisation of credit limits is regularly monitored. The Company has no significant concentrations of credit risk. 3 (a) (ii) (iii) Liquidity risk Liquidity risk is the risk that the Company is unable to meet its current obligations when they fall due. Prudent liquidity risk management includes maintaining sufficient cash and the availability of funding through operating cash flows and advance from immediate holding company. The Company s policy is to regularly monitor its current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term. (iii) Annual Report 2012/13

23 143 3 Financial risk management (continued) (a) Financial risk factors (continued) (iii) Liquidity risk (continued) The table below analyses the Company s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. 3 (a) (iii) Less than 1 year Between 1 and 2 years More than 2 years At 31 March Trade and other payables 76,500,547 Rental and other deposits 25,434,971 13,637,039 23,251,431 Amount due to immediate holding company 254,210,829 At 31 March Trade and other payables 66,979,642 Rental and other deposits 30,234,240 11,798,501 15,468,337 Amount due to immediate holding company 254,278,206 (b) Capital risk management The Company s objectives when managing capital are to safeguard the Company s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Company s strategy remains unchanged for the year ended 31 March (b) Management reviews the capital structure periodically and manages its overall capital structure if necessary. As at 31 March 2013 and 2012, the Company was in net cash position /13

24 144 Notes to the Financial Statements 3 Financial risk management (continued) (b) Capital risk management (continued) The carrying value less impairment provision of trade and other receivables and payables, balances with group companies are a reasonable approximation of their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments. 4 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 3 (b) 4 The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant effect on the carrying amounts of assets and liabilities are discussed below: (a) Impairment of the non-financial assets The Company performs review for impairment of non-financial assets whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company reviews certain indicators of potential impairment such as reported sale and purchase prices, market demand and general market conditions. The Company considers the Cyberport Portion (comprising Cyberport 1, Cyberport 2, Cyberport 3, Cyberport 4, the Arcade and the Hotel but excluding Information Technology facilities) as a portfolio of asset and identifies the cash-generating unit to which the portfolio of asset belongs referring to the valuation performed by external valuers. (a) Based on the Company s best estimates, no provision for impairment loss on the non-financial assets including the Cyberport Portion is necessary. Annual Report 2012/13

25 145 4 Critical accounting estimates and judgements (continued) (b) Held-to-maturity investments The Company follows the guidance of HKAS 39 on classifying non-derivative financial assets with fixed or determinable payments and fixed maturity as held-to-maturity. This classification requires significant judgement. In making this judgement, the Company evaluates its intention and ability to hold such investments to maturity. If the Company fails to keep these investments to maturity other than for the specific circumstances for example, selling an insignificant amount close to maturity it will be required to reclassify the entire class as available-for-sale. The investments would, therefore, be measured at fair value not at amortised cost. (c) Impairment of trade and other receivables Management determines the provision for impairment of trade and other receivables based on the credit history or the financial position of its customers and the current market condition. Management will assess the adequacy of provision for impairment of trade and other receivables at each balance sheet date and significant level of judgement is required in determining the adequacy of such provision. (d) Income taxes The Company is subject to income taxes in Hong Kong. Significant judgement is required in determining the provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the year in which such determination is made. 4 (b) 39 (c) (d) Recognition of deferred tax asset, which principally relates to tax losses of the Company, depends on the management s expectation of future taxable profit that will be available against which the tax losses can be utilised. The outcome of their actual utilisation may be different. 2012/13

26 146 Notes to the Financial Statements 5 Revenue and other income Revenue and other income recognised during the year are as follows: 5 Revenue Rental income 172,130, ,642,796 Building management income Management fee income 72,597,415 75,214,861 Car park fee income 8,129,533 7,770,475 Other facilities income 19,258,435 17,275,603 99,985, ,260,939 Income from hotel operation 124,742, ,429,597 Information technology facilities income 4,183,815 3,709,063 Fees for usage of Technology Centre equipment and services 2,809,317 3,272,332 Other incidental income 1,674,302 2,036, ,526, ,350,746 Other income Realisation of deferred income (note 21) ,521 13,366,749 Services income from fellow subsidiaries (note) 4,201,654 4,201,654 Interest income from held-to-maturity investments, net of amortisation of premium of 8,449,290 (2012: 6,199,974) 8,449, ,199,974 5,300,934 7,266,212 Interest income on designated bank balance 1,691,275 Interest income on bank deposits 5,490,145 1,796,671 15,796,254 28,322,561 Note: Pursuant to the services agreement dated 25 October 2003 entered into between the Company and Hong Kong Cyberport (Ancillary Development) Limited ( HKCAD ), its fellow subsidiary, a fixed monthly services income of 125,600 was received from HKCAD commencing from November 2003 for the provision of services by the Company to facilitate the operation of the private residential buildings (the Residential Portion ) of the Cyberport. The fee was revised to 200,000 commencing from April 2006 and to 261,000 commencing from May Total amount received during the year was 3,132,000 (2012: 3,132,000) HKCAD HKCAD125, , ,000 3,132, ,132,000 Annual Report 2012/13

27 147 5 Revenue and other income (continued) Note: (continued) Pursuant to the services agreement dated 12 March 2005 entered into between the Company and Skillful Limited, its fellow subsidiary, a monthly services income was received for the provision of information technology and telecommunications services to the Residential Portion of the Cyberport. Total amount received during the year was 1,069,654 (2012: 1,069,654) Skillful Limited 1,069, ,069,654 6 Staff costs 6 Salaries and allowances 87,008,017 82,640,561 Unutilised annual leave 2,231,694 1,821,296 Contributions to Mandatory Provident Fund 3,443,523 2,445,324 92,683,234 86,907,181 Analysed into: Hotel 53,479,460 50,488,840 Operating Centres 10,671,665 9,443,651 Corporate office 28,532,109 26,974,690 92,683,234 86,907, /13

28 148 Notes to the Financial Statements 7 Directors remuneration The Directors, who represent key management personnel of the Company, having authority and responsibility for planning, directing and controlling the activities of the Company, did not receive or will not receive any fees or emoluments in respect of their services to the Company during the year (2012: Nil) Five highest paid individuals The emoluments payable to the five individuals whose emoluments were the highest in the Company during the year are as follows: 8 Salaries and allowances 10,669,321 10,027,356 Contributions to Mandatory Provident Fund 91,250 60,000 10,760,571 10,087,356 The emoluments fell within the followings bands: 1,000,001 to 1,500,000 1,500,001 to 2,000,000 2,000,001 to 2,500,000 2,500,001 to 3,000,000 1,000,001 1,500,000 1,500,001 2,000, ,000,001 2,500, ,500,001 3,000, Annual Report 2012/13

29 149 9 Government rent and rates 9 Hotel 1,161,200 1,165,200 Operating Centres 395, ,640 Other Cyberport Portion 11,108,314 9,473,639 12,664,674 10,779, Other operating expenses 10 Insurance Hotel 320, ,800 Other Cyberport Portion 1,840,193 1,726,295 2,160,573 1,943,095 Professional fees 5,597,871 7,363,019 Marketing, promotion and project expenses 13,597,406 13,369,767 Travelling expenses 434, ,164 Transportation 1,877, ,000 Other hotel operation expenses 49,217,167 48,687,619 Other operation expenses on Operating Centres 16,538,542 21,512,299 Other miscellaneous expenses 2,523,927 1,761,680 91,946,799 95,851, /13

30 150 Notes to the Financial Statements 11 Income tax expense (a) No Hong Kong Profits Tax has been provided as the Company has no assessable profit for the year (2012: Nil). (b) The tax on the Company s loss for the year differs from the theoretical amount that would arise using the tax rate of Hong Kong as follows: 11 (a) 2012 (b) Loss for the year (134,374,672) (134,532,727) Calculated at a tax rate of 16.5% (2012: 16.5%) 16.5% % (22,171,821) (22,197,900) Income not subject to tax (1,045,494) (807,834) Tax losses not recognised 23,217,315 23,005,734 (c) Deferred income tax (assets)/liabilities recognised The movements of deferred income tax (assets)/liabilities during the year are as follows: (c) Tax losses Depreciation allowance in excess of related depreciation Deferred income tax arising from: At 1 April (35,166,169) 35,711,868 (545,699) Charged/(credited) to profit or loss (281,463) 994,352 (712,889) Others Total At 31 March 2012 and 1 April (35,447,632) 36,706,220 (1,258,588) Charged/(credited) to profit or loss (4,394,688) 4,218, ,788 At 31 March (39,842,320) 40,925,120 (1,082,800) Annual Report 2012/13

31 Income tax expense (continued) (d) Deferred income tax assets are not recognised for remaining temporary differences arising from tax losses carried forwards due to uncertainty of realisation of the related tax benefit through the future taxable profits. As at 31 March 2013, the Company has unrecognised temporary differences arising from tax losses of 1,828 million (2012: 1,693 million). The tax losses have no expiry date and are yet to be agreed by the Inland Revenue Department. 11 (d) Loss for the year Loss for the year is stated after crediting and charging the following: 12 Crediting: Rental income less outgoings of 11,108,314 (2012: 9,473,639) Reversal of provision for impairment of receivables Charging: 11,108, ,473, ,022, ,169, , ,840 Cost of inventories 16,164,415 15,164,924 Auditor s remuneration 385, ,000 Provision for impairment of receivables 5,066,248 4,327,628 Loss on disposals of property, plant and equipment, net 813, /13

32 152 Notes to the Financial Statements 13 Property, plant and equipment 13 Buildings held for rental Hotel Building Building services and support facilities Information technology facilities 2013 Centres equipment (Note c) c Leasehold Improvements Furniture and equipment Motor Vehicles Total Cost At 1 April ,557,123, ,937,912 1,152,971, ,296,401 60,886,254 23,860,639 64,568,373 1,018,019 5,369,662,872 Additions 14,125,014 7,404,853 27,408,019 48,937,886 Disposals (3,250,834) (9,924,833) (576,254) (1,509,864) (15,261,785) At 31 March ,557,123, ,937,912 1,149,720, ,496,582 60,886,254 30,689,238 90,466,528 1,018,019 5,403,338,973 Accumulated depreciation At 1 April ,136,564 47,642, ,096, ,924,190 59,822,896 8,400,174 27,080, ,477 1,921,682,764 Charge for the year 77,142,965 5,955, ,580,820 3,471, ,501 2,492,493 8,697, , ,102,891 Written back on disposals (2,816,937) (9,924,833) (422,997) (1,276,943) (14,441,710) At 31 March ,279,529 53,598,006 1,041,859, ,470,402 60,463,397 10,469,670 34,501, ,478 2,115,343,945 Net book value At 31 March ,864,844, ,339, ,860,731 17,026, ,857 20,219,568 55,964, ,541 3,287,995,028 Buildings held for rental Hotel Building Building services and support facilities Information technology facilities 2012 Centres equipment (Note c) c Leasehold Improvements Furniture and equipment Motor Vehicles Total Cost At 1 April ,557,123, ,937,912 1,152,971, ,540,348 59,935,404 19,217,690 49,094, ,882 5,344,619,167 Additions 3,860, ,850 4,642,949 15,473, ,137 25,147,879 Disposals (104,174) (104,174) At 31 March ,557,123, ,937,912 1,152,971, ,296,401 60,886,254 23,860,639 64,568,373 1,018,019 5,369,662,872 Accumulated depreciation At 1 April ,993,596 41,687, ,798, ,997,053 59,003,981 6,383,340 20,679, ,490 1,711,023,301 Charge for the year 77,142,968 5,955, ,297,150 3,031, ,915 2,016,834 6,401,141 99, ,763,637 Written back on disposals (104,174) (104,174) At 31 March ,136,564 47,642, ,096, ,924,190 59,822,896 8,400,174 27,080, ,477 1,921,682,764 Net book value At 31 March ,941,987, ,295, ,875,448 6,372,211 1,063,358 15,460,465 37,487, ,542 3,447,980,108 Annual Report 2012/13

33 Property, plant and equipment (continued) Notes: 13 (a) On 22 May 2000, the Government of the HKSAR granted the Inland Lot No at Telegraph Bay, Pokfulam to the immediate holding company for a term of 50 years at a lump sum initial premium of 1,000. (a) , On 24 May 2000, the Company entered into a sub-lease agreement ( Sub-lease Agreement ) with the immediate holding company whereby a portion of the Inland Lot No at Telegraph Bay, Pokfulam ( Cyberport Portion ) is sub-leased to the Company from the immediate holding company at nil rental (b) The buildings are situated in Hong Kong and held on a sublease from the immediate holding company for a term of 50 years less the last 3 days thereof commencing from 22 May (b) (c) Centres equipment represents equipment of Entrepreneurship Centre and Technology Centre funded by government grant and used for the purpose of the designated projects. (c) (d) As at 31 March 2013, the fair value of the buildings held for rental (including the associated building services and support facilities with their carrying value of 97 million (2012: 195 million)) amounted to 6,043 million (2012: 5,730 million). The aggregate carrying value of such assets amounted to 2,962 million (2012: 3,137 million). The fair value of the buildings held for rental (including the associated building services and support facilities) as at 31 March 2013 was determined based on a valuation carried out by Colliers International (Hong Kong) Limited, an independent professional valuer. (d) , ( /13

34 154 Notes to the Financial Statements 14 Held-to-maturity investments 14 Listed fixed interest debt securities: in Hong Kong, at cost 126,934, ,039,500 Amortisation of premium (2,862,457) (3,178,319) 124,072, ,861,181 Unlisted debt securities, at cost 309,871, ,313,500 Amortisation of premium (5,904,886) (4,177,234) 303,966, ,136,266 Net book amount 428,038, ,997,447 The net book amount is analysed as follows: Maturing within one year 180,118, ,713,926 Maturing over one year 247,920, ,283, ,038, ,997,447 Market value of listed debt securities 123,763, ,652,182 Market value of unlisted debt securities 304,157, ,978, ,921, ,631,065 The held-to-maturity investments represent bonds with maturities ranging from 6 to 27 months (2012: 3 to 32 months) and are denominated in Hong Kong dollars. The market values of listed and unlisted held-to-maturity investments are based upon the market price of the debt securities quoted over-the-counter. The maximum exposure to credit risk at the balance sheet date is the carrying amount of held-to-maturity investments. The Company has not reclassified any financial assets measured at amortised cost during the year (2012: Nil) Annual Report 2012/13